o n t e n t s - Royal Exchange Group - Nigeria's Foremost

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A n n u a l R e p o r t & A c c o u n t s 2 0 1 2

o n t e n t sC

Who we areConsolidated Account FormRequest for E-Dividend & Change of Address Form Proxy/Authority to Admit FormImportant NoticeCorporate ProfileThe Notice of Annual General MeetingChairman’s Statement and ReportsReport of Corporate GovernanceRisk Management StatementOur Board of DirectorsBrief Particulars of our DirectorsExecutive Management TeamExecutive Management Team’s ProfileTeam of Directors & Regional DirectorsReport of the DirectorsReport of Audit CommitteeFinancial StatementsReport of the Independent AuditorsConsolidated Statement of Financial PositionConsolidated Statement of Profit or Loss and Other Comprehensive IncomeConsolidated Statement of Change in Equity - GroupConsolidated Statement of Change in Equity - CompanyConsolidated Statement of Cash FlowsNotes to the Consolidated Financial StatementsReconciliation of Statement of Financial PositionStatement of Profit or Loss and Other Comprehensive IncomeStatement of Cash FlowsExplanatory notes on IFRS reclassification & adjustmentsStatement of Value AddedFinancial Summary - GroupManagement (Group and Subsidiaries)Branch/Office Network cum DirectoryFriendship Centre NetworkBuild up of Share Capital History

23-45-67-8

9-1011-12

13-1416-19

20-2526-2930-3133-34

3536-38

3940-46

4748495051

525354

55-136137-140

141

142143-158

159160-161162-168169-170

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ho we areW

Vision Statement“To responsibly and efficiently mobilize and utilize human, financial and technological capital to exceed stakeholders’ expectations”

Mission Statement“To attain leadership in the financial sector and provide the highest quality services in accordance with ethical practices and norms to our clients while ensuring adequate returns to our stakeholders”

Our ValuesC - Customer orientationC- CreativityI - IntegrityL - Learning organisationP - ProfessionalismT - Teamwork

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onsolidation of Account FormCDear Shareholders:

Records with our registrars and as revealed by the Register of Members, show that some members have more than one account in their names.

This situation may have arisen as a result of multiple applications made during new issues or as a result of purchases made through the Nigerian Stock Exchange (NSE).

Servicing these accounts is posing significant administrative difficulties as well as incurring otherwise avoidable costs in respect of postage, maintenance, issuance of certificates, etc.

These ultimately have an impact on the profit of the company.

CONSOLIDATION OF ACCOUNTS FORM

S/N Name Address Units of Certificate A/C Date Shares Number Number Issued

1.2.3.4.5.6.7.8.9.10.

Shareholder’s Signature: Date:




The NSE has decided that efforts be made to consolidate multiple accounts, Certificates should not be forwarded more especially to facilitate the operations of the Central Securities and Clearing System (CSCS).

We ask for your co-operation in this regard.

At the next section of this notice, kindly complete the consolidation request form and mail it to the Registrar, City Securities (Registrars) Limited, 358, Herbert Macauley Street, Yaba, Lagos.

Please state in your request for consolidation the names/addresses of those persons you bought for during public offers and at the secondary market besides yourself i.e. family members.

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onsolidation of Account FormC

Please AffixPostage Stamp

Here

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The Registrar,City Securities (Registrars) Limited,358, Herbert Macauley Street, Yaba, Lagos.


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equest for E-Dividend & Change of Address FormRTo All ShareholdersRoyal Exchange Plc

Dear Shareholders,

Your board and management are concerned about the unhealthy state of the unclaimed dividends balance. The shareholders and registrars share the burden of ensuring that the balance on the unclaimed dividends is kept well reduced.

To this end, shareholders with unclaimed dividends are urged to come forward and claim their dividends.

COMPANY SECRETARY

Date:

The Registrars, Please state your formerCity Securities (Registrars) Limited address here and the new358, Herbert Macauley Street address (if any) in theYaba, space provided in the bodyLagos of this letter

ROYAL EXCHANGE PLCREQUEST FOR E-DIVIDEND AND CHANGE OF ADDRESS

Kindly direct my/our dividend payment in respect of all my/our shares in the above Company into my/our account stated below:

BANK DETAILS:

Name of BankBranch and Sort Code Stamp of BankAddress of BranchAccount Number (Current or Savings)Signature of ShareholderBank Authorized Signatory

Please note my/our change of address as follows:

Yours faithfully,Signature: ) Corporate shareholdersName: ) ) of Shareholder should please affix seal here and state RC No.

For Joint ShareholdersSignature: ) Name: ) ) of ShareholderSignature: ) Name: ) ) of ShareholderSignature: ) Name: ) ) of Shareholder

IMPORTANT NOTICE

Shareholders are also encouraged to:

• inform the registrars promptly of any change ofaddress and to follow up to ensure rectification.

• havetheiraccountsmandatedfore-dividend.

To forestall a situation where complaints are made of non-payment, the registrars will, contemporaneously with remittance to the various banks for the mandated account of Shareholders, forward advice slips to such shareholders.

We do solicit your co-operation in this regard.

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equest for E-Dividend & Change of Address FormR

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roxy FormP

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The Annual General Meeting of ROYAL EXCHANGE Plc to be held at the Banquet Hall, Civic Centre, Victoria Island, Lagos State, on Wednesday, November 27, 2013 at 11.00 am in the forenoon.

I/We………………………………. being a member/members of ROYAL EXCHANGE PLC hereby appoint

…….…….……………………………………………………………or failing him the chairman of the meeting as my/our proxy to vote for me/us and on my/our behalf at the 44th Annual General Meeting of that company to be held on November 27, 2013 and at every adjournment thereof.

Dated this ………………… day of ……………………… 2013.

……………………………...........Shareholder’s Signature

NOTES:

1. Please indicate with an ‘X’ in the appropriate squares how you wish your votes to be cast on the resolutions set out above.

2. A member (shareholder) who is unable to attend the Annual General Meeting is allowed to vote by proxy. The above proxy form has been prepared to enable you to exercise your right to vote in case you cannot personally attend the meeting. Members wishing to vote by proxy should please ensure that the appropriate stamp duties due on the proxy form are paid. The proxy must produce the “Authority to Admit”, attached to this form to obtain entrance to the Meeting.

3. Provision has been made on this form for the chairman of the meeting to act as your proxy. However, if you so wish, you may insert in the space provided on the form the name of any person whether a member of the company or not who will attend the Meeting and vote on your behalf.

4. Please sign the above proxy form and post it so as to reach the registrars, City Securities Limited, 358, Herbert Macauley Street, Yaba Lagos, not later than 48 hours before the appointed time for holding the meeting. If executed by a corporation, the proxy form must bear the common seal of such corporation.

FOR REGISTRAR/COMPANY USE ONLY

NAME OF SHAREHOLDER:

NUMBER OF SHARES:

Nos. RESOLUTIONS FOR AGAINST

1. To declare a dividend

2. To re-elect Mr. Kenneth Odogwu 3. To re-elect Alhaji R. M. Gwarzo OON

4. To re-elect Mr. Adeyinka Ojora

5. To fix the Remuneration of directors 6. To authorize the directors to fix the Remuneration of Auditors 7. To elect members of the Audit Committee

AUTHORITY TO ADMIT

Please admit …………………………………………………………. at the 44th Annual General Meeting of ROYAL EXCHANGE Plc to be held at the Banquet Hall, Civic Centre, Victoria Island, Lagos State on November 27, 2013 11.00 am in the forenoon.

SHEILA EZEUKOCOMPANY SECRETARY/GH (LEGAL SERVICES)FRC/2013/NBA/00000004059

NOTES:

1. This authority to admit must be produced by the shareholder or his/her proxy in order to gain entry to the venue of the Annual General Meeting

2. Shareholders or their proxies must sign this authority for admission before attending the Meeting.

………………………………….............…Signature of person attending

CAUTION: TO BE VALID THIS FORM MUST BE STAMPED ACCORDINGLY

BEFORE POSTING THE ABOVE CARD PLEASE TEAR OFF THIS PART AND RETAIN IT.


roxy/Authority to AdmitP

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mportant NoticeITo:

The Registrar, City Securities (Registrars) Limited, 358, Herbert Macauley StreetYaba, Lagos.

ROYAL EXCHANGE PLCREQUEST FOR E-BONUS

I/We hereby request that henceforth all bonuses due to me/us with respect to my/our shareholding in ROYAL EXCHANGE Plc be paid directly to my CSCS/stock broker account stated below:

Account Details:

Shareholder Account No: (Please look on the left hand corner of our certificate for your shareholder account number)

Name of Shareholder:

Address of Shareholder:

Investor’s Account No:

CSCS Account No. (CHN):

GSM No:

E-mail Address:

Yours faithfully,

Signature: ) Corporate shareholders ) should please affix sealName: ) here and state RC No. For Joint Shareholders

Signature: ) Name: ) ) of Shareholder



Official stamp and authorized signatures of stockbroker

1. Signatory: Seal of stockbroker

2. Signatory:

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mportant NoticeI


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orporateinformationC

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orporate ProfileCIn 1918 our company started operations in Nigeria represented by Barclays Bank DCO and on February 28, 1921 converted to a full branch of its then parent company, Royal Exchange Assurance, London.Royal Exchange Assurance, London was originally founded in 1720 and was one of the first two insurance companies in Britain to receive legal status via Royal Charter. Originally established for marine business, it expanded within a year to include fire and life insurance as well, thereby becoming Britain’s first composite insurer. The establishment of its branch in Nigeria was the result of an overseas expansion drive in the early 20th century.

Some notable figures in the local insurance industry have headed our company, which was, for over twenty years, the only insurance company operating in Nigeria. Thus, our company can be said to be the beginning of insurance in Nigeria and today, has one of the largest branch networks in its sector, with twenty–nine branches and seven regional offices nationwide.

Pursuant to section 396(2) of then companies Act of 1968, our company was on December 29, 1969, reconstituted and incorporated as a private limited liability company, Royal Exchange Assurance (Nigeria) Limited. The company went public July 18, 1989 and was duly listed on the Nigerian Stock Exchange on December 3, 1990.

In June 2007, our company entered into a merger with African Prudential Insurance Company and Phoenix of Nigeria Assurance Company Plc. The merger brought about a significant stronger company, better positioned to serve the needs of its clientele in the financial services sector.

In June 2008, our company was re-organized into a Group Structure, whereby our company assumed the role of a group holding and asset management company to execute its strategic vision for financial services, namely insurances, funds management, finance and banking, through its five wholly owned subsidiaries namely:• Royal Exchange General Insurance Company Limited

established in January 2008 to carry on the non-life insurance business of the group;

• Royal Exchange Prudential Life Plc, established in February 2007 to carry on life assurance business of the group;

• Royal Exchange Finance and Investment Limited established in May 2006 to provide a wide range of professional services in the areas of finance and financial advisory services;

• Royal Exchange Healthcare Limited, established in May 2006 to provide health management services and healthcare insurance.

• Royal Exchange Microfinance Bank Limited established in July 2009 and licensed to carry on the business

of assisting all enterprises engaged in small scale industries, micro economic activities and co-operative related endeavors.

All subsidiaries are properly licensed by their respective regulators and are structured to fully exploit the significant opportunities that are available in the Nigerian economy.

The Royal Exchange brand is a significant brand in Nigeria especially in the field of insurance. The company will ensure its continued relevance in the environment in which it operate by continuously re-inventing its products and services.

OUR DIRECTORS:

ROYAL EXCHANGE PLC 1. Mr. Kenneth Ezenwani Odogwu - Chairman2. Chief Anthony Ikemefuna Idigbe (SAN) - Director 3. Mr. Daniel Magerle (Swiss) - Director4. Chief Uwadi. Okpa-Obaji - Director5. Alhaji Ahmed Rufa’i Mohammed - Director6. Alhaji Rabiu Muhammad Gwarzo, OON - Director 7. Mr. Adeyinka Ojora - Director 8. Mr. Charles Momoh - Independent Director 9. Mr. Chike Mokwunye - Group Managing Director10. Alhaji Auwalu Muktari - Group Executive Director

ROYAL EXCHANGE GENERAL INSURANCE COMPANY LIMITED1. Mr. Chike Mokwunye - Chairman2. Alhaji Auwalu Muktari - Vice Chairman3. Chief Gilbert Grant - Independent Director 4. Mr. Donald Nosiri - Director5. Mr. Richard Borokini - Managing Director

ROYAL EXCHANGE PRUDENTIAL LIFE PLC1. Mr. Chike Mokwunye - Chairman2. Alhaji Auwalu Muktari - Vice Chairman3. Alhaji Sani Mohammed Hamid - Independent Director4. Mr. Donald Nosiri - Director5. Mr. Oluwale Banmore - Managing Director

ROYAL EXCHANGE HEALTHCARE LIMITED1. Mr. Chike Mokwunye - Chairman2. Alhaji Auwalu Muktari - Vice Chairman3. Dr. Nicholas Azinge - Independent Director4. Mr. Donald Nosiri - Director5. Dr. Pius Ofulue - Managing Director

ROYAL EXCHANGE FINANCE AND INVESTMENT LIMITED1. Mr. Chike Mokwunye - Chairman2. Alhaji Auwalu Muktari - Vice Chairman3. Mr. Danladi Verheijen - Independent Director4. Mr. Hosea Boman - Managing Director

ROYAL EXCHANGE MICROFINANCE BANK LIMITED1. Mr. Chike Mokwunye - Chairman2. Alhaji Auwalu Muktari - Vice Chairman3. Mr. Ben Azih - Independent Director4. Mr. Hosea Boman - Director5. Mrs. Elizabeth Elghoche - Managing Director

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he Notice of Annual General MeetingTNOTICE is hereby given that the Forty-Fourth Annual General Meeting of ROYAL EXCHANGE Plc will be held at the Banquet Hall, Civic Centre, Ozumba Mbadiwe, Victoria Island, Lagos State on Wednesday, November 27, 2013 at 11.00 o’clock in the forenoon to transact the following business:A. Ordinary Business:

1. To receive and consider the Reports of the Directors and the Audit Committee, the Financial Statements for the period ended December 31, 2012 and the Report of the Auditors thereon.

2. To declare a dividend.

3. To elect / re-elect directors.

4. To approve the remuneration of the directors.

5. To authorize the directors to fix the remuneration of the auditors.

6. To elect shareholders as members of the statutory Audit Committee.

By Order of the Board

SHEILA EZEUKO COMPANY SECRETARY/GH (LEGAL SERVICES)FRC/2013/NBA/00000004059

New Africa House31, Marina, Lagos

November 1, 2013

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he Notice of Annual General MeetingTNOTES

• Proxy

A member of the company entitled to attend and vote is entitled to appoint a proxy to attend and vote in his stead. A proxy need not be a member of the company. A proxy form is contained in the Annual Report and Accounts. If it is to be valid for the purpose of the meeting, it must be completed, detached, duly stamped at the office of the Commissioner for Stamp Duties and deposited at the office of the registrars, City Securities (Registrars) Limited, 358, Herbert Macauley Street, Yaba, Lagos not later than 48 hours before the time appointed for holding the meeting.

• DividendWarrants

If the dividend recommended by the directors is approved by members at the Annual General meeting, the dividend warrants will be posted on 2nd December, 2013 to members whose names appear in the Register of Members at the close of business on 14th November, 2013.

• ClosureofRegisterofMembersandTransferBooks

The Register of Members and the Transfer Books will be closed from 15th November, 2013 to 18th November, 2013 both dates inclusive for the purposes of dividend.

• AppointmentofMembersoftheAuditCommittee

Any member may nominate a shareholder as a member of the Audit Committee of the company, by giving notice in writing of such nomination to the Company Secretary, at least 21 (Twenty- One) days before the Annual General Meeting.

• UnclaimedShareCertificatesandDividendWarrants

The company notes that some share certificates have been returned marked “unclaimed”. The company notes further that some dividend warrants sent to shareholders are yet to be presented for payment.

Therefore, all shareholders with unclaimed share certificates should write to the Registrars, City Securities (Registrars) Limited, the Company Secretary or call at the registered office of the company during normal working hours.

Furthermore, all shareholders with unclaimed dividend warrants Nos. 1-9 should address their claims to the Company Secretary or call at the registered office of the company during normal working hours for processing of their claims or assistance. Shareholders, with unclaimed dividends Nos. 10-14 should address their claims to the registrars, City Securities (Registrars) Limited.

Members are urged to advise the Registrars or the Company Secretary of any change of address or situation particularly as it relates to share certificates and warrants.

• E–Dividend/Bonus

Notice is hereby given to all shareholders to open bank and stock broking accounts or CSCS accounts for the purpose of dividends and bonuses. A detachable application form for e-bonus and e-dividend is attached to this Annual Report and Accounts to enable all shareholders to furnish particulars of their accounts to the registrars as soon as possible.


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tatementand report

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Kenneth Ezenwani OdogwuChairman

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hairman’s StatementCDistinguished fellow shareholders, members of the board of directors, ladies and gentleman.

It is with great pleasure that I welcome you all to the 44th Annual General Meeting of your company, holding this 27th Day of November, 2013 here in Lagos. I shall be presenting to you for your consideration, among other issues, the annual report and financial statements for the year ended December 2012.

TheOperatingEnvironmentThe global economy remained fragile in 2012. Still enmeshed in the effect of the 2007-2009 economic meltdown and the lingering sovereign debt crisis in the euro zone, the global economy was characterized by heightened uncertainty and the fear of a double dip recession in 2012. The result of the European Central Bank (ECB) initiatives to stimulate growth with the launch of its unlimited bond-buying programme and EUR500bn permanent bailout fund for debt-stricken European Union (EU) member states was not impressive as output in the 17-country region fell by 0.6% at the close of the year; marking the currency bloc’s first full year in which no quarter experienced growth. The UK economy shrank by 0.3% in the same period from weaker trade flows to the euro zone. In the United States, real GDP contracted in the last quarter of 2012 by 0.1%, its lowest performance after the 2009 recession; despite improved employment statistics and President Barack Obama’s re-election.

Elsewhere, the BRIC countries experienced sluggish growth in 2012. The Chinese policymakers embarked on expansionary monetary and fiscal policies to stimulate their economy and this translated in GDP growth of 7.9% in the fourth quarter, up from 7.4% posted in the third quarter. India’s economic growth slowed to 5.3% year on year in the third quarter on account of shrinking exports to the euro zone, the US and other major emerging markets. The Russian economy grew by 2.9% in the same period, after growing by 5.0% in the corresponding quarter in 2011, while Brazil’s economy grew marginally by 0.9% in 2012.

On the home front, provisional data from the National Bureau of Statistics indicated that the Nigerian economy grew by 6.61% in 2012; lower than 7.36% posted in 2011, but surpassing Sub-Saharan Africa’s 5% average growth in 2012. The non-oil sector remained the key driver of the economy, growing at 7.55% year on year in 2012. This robust growth was due largely to President Jonathan’s renewed focus on the Agenda for National Transformation (ANT) - targeting wholesale reforms across a range of economic sectors. The agenda was designed to complement the Vision 20:2020 development strategy and maintain real GDP growth at around 7-8%. Other targets include reducing the federal government’s deficit to 1.5% of GDP by 2015 from 3.5% in 2010, removing a costly fuel subsidy, increasing capital spending and boosting non-oil revenues.

The removal of the gasoline subsidy by the Federal Government in January triggered a nationwide strike, leading to a partial reversal of the decision. Inflationary pressure, which surged earlier in the first month of the year from the fuel subsidy debacle, receded faster than expected. Headline inflation averaged 12.3% in 2012, while money market rates moved southwards as Open Buy Back (OBB) and overnight rates closed at 10.25% and 10.50% respectively from 15.50% and 16.25% respectively in 2011. The drop in money market rates were occasioned by attractive macro-economic and growth fundamentals; thereby realigning Nigeria’s position as Africa’s top investment destination and pulling foreign direct investments (FDI) of $8.9bn into our financial markets. The naira regained stability against the United States dollar appreciating by approximately N2 to N156.35 from N158.2/US$ in 2011. External reserve also grew by 34.2% to close at USD44.18bn at end of year (about 10 months import cover) supporting sustained exchange rate stability.

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hairman’s Statement contd.CNigeria’s petroleum sector recorded higher production over the year as a result of the relative peace in the Niger Delta environs and the re-entry of oil majors into previously abandoned fields. According to the Central Bank, crude oil production averaged 2.26m barrels per day (bpd) in third-quarter 2012, representing a year-on-year increase of 6.1%. Average OPEC basket price stayed above USD100 per barrel in 2012, representing a 1.82 % increase over 2011 figure whilst Bonny Light (Nigeria’s crude) averaged USD113.01 per barrel in 2012.

Efforts to address weaknesses in the banking industry also paid dividends in 2012. Remedial measures, which included bail-outs, acquisitions and the purchasing of $11bn in non-performing loans by the Asset Management Corporation of Nigeria (AMCON), resulted in an improved sector performance. Third-quarter results of Nigeria’s banks reflected the sector’s shift onto a sounder footing, with significant gains in net profit posted by most of the banks. The nation’s capital market also indicated similar buoyancy over the year as foreign interest in the Nigerian Stock Exchange (NSE) remained strong. International investors accounted for 70% of stock ownership, while a year-on-year rise to 30% from 20% in domestic ownership was viewed as resurging market confidence from local equity investors. The All Share Index (ASI) of the NSE ended 34% higher than its performance in 2011, at 28,079 points, with market capitalization of N8.97trn from opening levels in January 2012 of N6.5trn. Total domestic and external debt rose to NGN6.54 trillion and USD6.53 billion respectively as at 31st December 2012, 15% higher than the previous year’s figure. This increase was prompted by the need to finance the 2012 budget deficit but remains reasonably below the acceptable 40% threshold. Sounder fiscal management from the Federal government and stronger international confidence in the domestic economy influenced S&P’s decision to raise Nigeria’s ratings to BB- (outlook - stable) in Dec. 2012; reversing the Aug. 2009 downgrade. The BB- rating was first assigned to Nigeria in early 2006 – in the pre global economic meltdown era and now ranks Nigeria with Angola and above Kenya and Vietnam.

For the Nigerian Insurance industry, Gross Premium Income (GPI) maintained its annual average growth rate of 25% since 2008 and was estimated to hit N300 billion in 2012 according to Agusto & Co report. Specifically, the industry’s premium income grew by 19% to N240 billion in 2011, supported by the National Insurance Commission (NAICOM’s) Market Reconstruction and Development Initiative (MRDI).

Although the MDRI initiative was meant to achieve a N1.2 trillion premium income in 2012, consumer apathy in the market lowered prospects of actualization of the target and has continually hampered measures to deepen insurance penetration levels locally.

Notwithstanding the outcome of the MDRI initiatives, the outlook for the nation’s insurance industry remains positive as changes in demographics and the current low level of insurance penetration present the right blend of opportunities necessary for business growth and market development.

OperatingResultsIn spite of the hostile operating environment experienced by the insurance sub-sector and the finance industry in general, Royal Exchange Group remained resilient in its performance, exploiting new opportunities and maintaining a strong hold on its existing business in 2012.

During the period under review, your company generated gross written premium of N7.61 billion, while that of the preceding year was N6.82 billion, an increase of 11.58%. Claims expenses during the year amounted to N1.63 billion similar to N1.64 billion spent in 2011. However, in relative terms, the claims ratio dropped from 35% in 2011 to 30% in 2012. Underwriting expenses increased by 15.13% from N1.85 billion in 2011 to N2.13 billion in 2012. This translated into net income before overhead expenses of N3.54 billion, as against N3.17 billion of 2011, an increase of 11.91%

Investment income increased significantly by 35.10% from N475.21 million in 2011 to N642.02 million in 2012. The appreciable recovery of the

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hairman’s Statement contd.Ccapital market and pricing of money market instruments enhanced the ability of your company to maximize returns from our quoted equities and cash portfolios within the year.

Management expenses were N1.90 billion in comparison to N2.16 billion recorded in 2011 showing a decrease of 11.73%. This reduction in overheads was due to the convergence of stringent cost control measures deployed group-wide to enhance our operational efficiency without impacting negatively on productivity.

The group achieved a profit before tax of N743 million for the year. This result was credited to marked improvements in the performances of our subsidiaries, except for Royal Exchange Prudential Life Plc which posted a loss of N223 million. The loss recorded was due largely to provisionings made on premium receivables from Group Life Polices taken out by the Federal Government. We expect payments on these receivables in 2013 which will impact positively on the company’s profitability for that year.

FutureOutlookThe proposed enforcement of the “No Premium, No cover” policy by NAICOM in 2013 and the on-going sensitization programmes on compulsory insurance regulation driven under the MDRI initiative is expected to eliminate premium receivables, boost premium production and enhance insurers’ profitability on one side, while also improving insurance penetration and giving players the necessary leverage to re-strategize and capture new clientele through prompt service delivery and product innovation. In addition, the regulator’s plan to introduce the micro-insurance and Takaful insurance frameworks in 2013 is viewed as another excellent development which, we believe, should help insurance companies deepen their market reach going forward.

As expected, our company intends to be at the forefront of the industry, fine-tuning its products, structures and channels to remain nimble and competitive. Our Three-year Strategic Plan is still on course and in 2013 we would be embarking on several strategic recruitments and

appointments to reinforce our human capital and capacity. Our primary focus would be building a formidable insurance retail business, an enduring asset management franchise and aligning our group-shared services platform to reinforce our objectives.

Your Board is confident about the future and foresees that our company will in no distant time be transformed into a world class financial services conglomerate with the transformation initiatives currently being adopted.

DividendsThe Board of Directors recommended a dividend of 4k per 50k ordinary share to members for the year ended Dec 31, 2012.

Board ChangesThere were no changes in your board since the last Annual General Meeting.

ConclusionIn conclusion, I wish to thank our distinguished shareholders, clients, brokers, agents, advisors, and other shareholders for your unflinching support.

I extend our utmost gratitude to the entire staff and management for being loyal ambassadors to the great Royal Exchange brand and commend their continued support in the on-going transformation process being instituted to provide for a more promising future.

I am confident about the prospects of our company as we forge ahead in 2013 in doing what we do best. Our future is bright and we are on course to delivering value in the years ahead.Thank You.

Kenneth Ezeanwani OdogwuChairman

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eport of Corporate GovernanceRRoyal Exchange as a public quoted company is committed to effective governance for the purpose of improving all stakeholders’ value through best business practices of disclosure and transparency. It has over the years achieved laudable status through well articulated structures, charters, policies and processes designed to provide the organization with a sound and effective governance structure in line with its Vision, Mission and Core values of Creativity, Integrity, Professionalism, Learning Organization and Customer Orientation.

Royal Exchange’s understanding that good corporate governance is essential to earning and retaining the confidence and trust of its stakeholders as well as achieving its vision, provides structures upon which the objective of the Group are set and the means of attaining those objectives. These structures define the power and responsibilities of its corporate bodies and employees and are reviewed periodically, to ensure that proper organization and conduct of the business remain consistent within the Royal Exchange Group. In line with its vision, Royal Exchange is committed to growing its profits and market share in a professional and ethical manner consistent with all applicable governance standards. Thus, the Group complies with all applicable laws and regulations such as the Security and Exchange Commission (SEC) Code of Best Practices on Corporate Governance in Nigeria (2003), the National Insurance Commission (NAICOM) Code of Corporate Governance (2009); the Central Bank of Nigeria (CBN) Code of Corporate Governance (2003) as well as the Companies and Allied Matters Act in relation to its activities.

The Board monitors compliance with the Code of Corporate Governance by receiving periodic management reports.

The Group is committed to continually pursue a disciplined approach to corporate governance in every facet of its business and cares about how profits are obtained, not just profits. The Board corporate governance committee which oversees the Group governance regularly measures governance against best practices and ensure compliance with all corporate governance requirements.

There is an effective structure for cooperation amongst the Board of Directors, Management and Internal Control functions in Royal Exchange. The structure establishes checks and balances and ensures that appropriate controls are in place to provide institutional independence of Board of Directors from the Group Managing Director and the Executive Committee (EXCO), responsible for managing the Group on a day to day basis.

The Board of Directors of Royal Exchange Plc is composed of eight (8) Non -Executive directors and two (2) Executive directors. The roles of the chairman of the Board and CEO are separate thus providing separation of powers between the two functions and ensuring autonomy of the Board.

BoardCodeofEthicsThe Group has a Code of Business Ethics approved by the Board. The policy provides guidance to members on how to avoid conflict of interest in any business relationship with the company.

Evaluation of Process and Summary of Evaluation Results:In accordance with the provisions contained in the SEC Code of Corporate Governance, the Board has established a system to undertake a formal and rigorous annual evaluation of its performance, that of its committees, the chairman and individual directors.

Groupstructureandshareholders

OperationalGroupStructure

Royal Exchange Plc is managed on a matrix depicting lines of business and functionalities which reflect in the area of responsibilities. The Executive Management Committee is headed by the Group

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eport of Corporate Governance contd.RManaging Director and includes the Group Executive Director (Marketing & Sales), Group Head, (Finance & Accounts), Group Head, (Asset Management) and the Group Head, (Human Resources).

This management structure leads to the reporting of the Group based on the following primary business segments:

• General insurance serves the property andcasualty insurance (inclusive of oil and gas business) needs of a wide range of customers, from individual to small and medium sized businesses, commercial enterprises and multinational corporations.

• PrudentialLifepursuesastrategywithmarket–leading proposition in investment linked and protection products through global distribution and proposition pillars to develop leadership position in its chosen segment.

• Microfinance Bank provides services to theeconomically active low-income earners, low income households, the unbanked and under-served people, in particular, vulnerable groups such as women, physically challenged, youths, micro-entrepreneurs, informal sector operators, subsistence farmers in urban and rural areas.

• Finance and investment provides financialservices to the Group and the public. It pursues a strategy of generating income in the course of garnering borrowings from the public and disbursing credits to the public, individuals and corporate entities.

• Healthcare provides qualitative healthcareservices to individuals’ and organizations. Their major strategy is to pursue blue chip companies that have large numbers of staff. The main benefits of the service is that apart from the easy access to healthcare delivery system, the enormous cash outlay needed by the organizations to settle medical bills of staff is significantly reduced.

• Other operating business predominatelyconsist of the Group’s holding and certain alternative investment position not allocated to

core operating segments are carried out in the division.

TheGroupManagementExecutiveCommittee (GMEC)

The GMEC is headed by the Group Managing Director and includes the Executive Director, Managing Directors of the subsidiaries and Group Heads of Departments.

The GMEC is responsible for:

• ThedaytodayrunningoftheGrouponbehalfof the Board

• The development and implementation of allBoard approved initiatives

• Theachievementofallbusinessandoperationalplans, targets, strategies and objectives within the company’s risk management framework; and

• The development of advanced reportingprocedures to ensure the Board is fully informed at all times.

The GMEC also ensures that the processes, policies, procedures and controls within the Group are effective and regularly reviewed to deliver financial and operational accountability and success.

Shareholders

In line with Royal Exchange articles of association and existing statutory and regulatory requirements, shareholders’ meetings are properly arranged, held in an open manner and ample time given to shareholders to deliberate on issues affecting the Group. Furthermore, representatives of Corporate Affairs Commission (CAC), Nigerian Stock Exchange (NSE), Securities and Exchange Commission (SEC), and members of the press normally observe the proceedings at the meeting. In 2012 the Annual General Meeting (AGM) was held and attendance was open to shareholders and their proxies.

22


eport of Corporate Governance contd.RIn the financial year 2012, the members met in one general meeting as follows:

S/N Forum Dateof Noof

Meeting shareholders

includingproxies

1 Annual Sept General 20 Meeting 2012 508

Cross Shareholdings

Royal Exchange has no interest in any other company exceeding 5 percent of the voting rights of that other company, where that other company has an interest in Royal Exchange Plc exceeding 5 percent of the voting rights in Royal Exchange Plc.

InformationtoShareholders

Royal Exchange Plc is committed to continually disclose all material information in a timely and transparent manner to its shareholders. In the light of the above, the Group posts all issues that might be of interest to shareholders in its web portal, including but not limited to its annual reports. Also, there is a blog where shareholders can post in their comments and communicate with other shareholders.

BoardofDirectors

The Board through the chairman directs the affairs of Royal Exchange. The directors’ fiduciary duty is to exercise their business judgment in the best interest of Royal Exchange shareholders. All the current non executive directors served on the Board throughout 2012. In compliance with regulatory provisions, Mr. Charles Momoh whose appointment was ratified at the annual general meeting 2012 joined the Board as the independent director. The size of the Board provides for sufficient diversity among non executive directors while facilitating substantial discussions in which each director can participate meaningfully. The Board met four (4) times during the year under review as follows:• March21,2012• June27,2012

• September24,2012• December12,2012

Internal Organization Structure

The Board is chaired by the chairman. Board members are also subject to standards of business conduct policies, rules and regulations to avoid conflict of interest and use of insider information. The Board appoints committees to help carry out its duties. Given the separation of roles of the chairman and the Chief Executive Officer, the Board appoints non executive directors as chairmen of Board committees. Board committees work on key issues in greater details than would be possible at full Board meetings. Each committee reviews the results of its meeting with the full Board. The recommendations of these committees are either ratified or amended by the Group Board.

The Board is required to meet at least four times each year. The Board met five times in 2012 and the average attendance was 88 percent. The members of the Board spent additional times participating in Board committee meetings and preparing for meetings with the full Board.

Board Committees

The Board appointed committees for specific areas from among its members and established terms of reference and rules with respect to delegated authority and reporting to the Board. The Board has the following standing committees which regularly report to it and submit proposal for resolutions to the Board.

EstablishmentandGovernanceCommittee

The committee which is composed of six members oversees the Group’s governance and measures its governance program against best practice to ensure that the rights of the shareholders are fully protected. It also evaluates and proposes to the Board, the principles for remunerations, nominations, compositions and performance appraisal and particularly senior management staff for the Group and the Board. It proposes respective amendments to the Board which is responsible for

23


eport of Corporate Governance contd.Rthe design, implementation and monitoring of the Group’s remuneration architecture.

The establishment and governance committee is entrusted with succession planning with respect to the Board, the CEO, and members of EXCO. It also proposes directors’ remunerations to the Board for approval and reviews performance relating to senior management’s short term and long term incentive plans. To assist in the review of the compensation structures and practices, the committee has retained its own independent advisor – Leading Edge Consultants.

The committee met five (5) times on the following dates: • February20,2012• March20,2012• May7,2012• September4,2012• December9,2012With attendance of 90%. The following directors served on the committee.• ChiefA.I.Idigbe–Chairman• AlhajiR.M.Gwarzo,OON• Mr.D.Magerle• ChiefU.I.Okpa–Obaji• Mr.C.U.A.Mokwunye• AlhajiA.Muktari

Audit committee

The committee is established to perform the functions stated in section 359 (6) of the Companies and Allied Matter Act and it is composed of six members made up of three non executive directors and three representatives of the shareholders; all of whom met the relevant requirements with respect to independence and qualification.

The committee serves as a focal point for the communication and oversight regarding Financial Accounting Reporting, Internal Control and Compliance among Management. The Audit committee, at least annually reviews the standards of internal control, including the activities, Plans, Organization and Quality of Internal Audit and Group Compliance.

In demonstration of the Board’s on-going commitment to independence and the highest standards of corporate governance one of the three representatives of the shareholders is the chairman of the committee. Mr. Kayode Ayanwamide who was part of the committee till the third quarter 2012 was replaced by Mr. Bekunmi Akinsolu who was elected as the representative of the shareholders at the annual general meeting held in 2012.

The following non executive directors and representative of the shareholders served on the committee in 2012:

NonExecutiveDirectors

Alhaji A. R. Mohammed Chief U. I. Okpa–ObajiMr. A. A. Ojora

RepresentativesofShareholders

Alhaja A. S. Kudaisi – (Chairman) Mr. T. OlawuyiMr. B. Akinsolu

The committee met four (4) times on the following dates: • February21,2012• June25,2012• September3,2012• November27,2012With an attendance for non executive directors at 81%.

RiskManagementCommittee

The committee oversees the Group risk management framework. In particular, the Group risk tolerance, including agreed limits that the Board regards as acceptable for Royal Exchange Plc to bear, the aggregation of agreed limits across the Group, the measurement of adherence to agreed risk limit, and the Group risk tolerance in relation to anticipated capital levels. It further oversees the Group wide risk governance framework, including risk management and control, risk policies and their implementation as well as the risk strategy and monitoring of operational risks. It reviews the

24


business management and Group risk management function, the Group general policies and procedures and satisfies itself that the effective systems of risk management are established and maintained.

The committee met four (4) times on the following dates:• February20,2012• May7,2012• September3,2012• November26,2012With average attendance of 80%. The following directors served on the committee.• AlhajiA.R.Mohammed–Chairman• ChiefU.Okpa–Obaji• AlhajiR.M.Gwarzo,OON• Mr.C.U.A.Mokwunye• AlhajiA.Muktari

FinanceandGeneralPurposesCommittee

The committee assists the board in fulfilling its financial oversight responsibilities with specific reference to corporate finance, resources and assets utilization, capital structure, cash management, equity and debt financing, capital structure, financial planning and reporting as well as the overall financial performance of the group.

The committee met four (4) times on the following dates:• February21,2012• May8,2012• September4,2012• November27,2012With average attendance of 89%. The following directors served on the committee.• AlhajiR.M.Gwarzo,OON–Chairman• ChiefA.I.Idigbe(SAN)• ChiefU.Okpa–Obaji• AlhajiA.R.Mohammed• Mr.A.Ojora• Mr.C.U.A.Mokwunye

Investmentcommittee:

The committee assists the board in its oversight functions with respect to investment strategies, investment portfolio performance, investment mix

and the overall investment performance of the group. The committee consists of eight members and met four (4) times on the following dates:• February 22, 2012• May 9, 2012• September 5, 2012• November 28, 2012With average attendance of 96%. The following directors served on the committee in 2012. • ChiefU.Okpa–Obaji –Chairman• ChiefA.I.Idigbe(SAN)• AlhajiA.R.Mohammed• Mr.A.Ojora• Mr.C.U.A.Mokwunye• AlhajiA.Muktari• Mr.R.O.Borokini• Mr.O.Banmore

Board Strategy Committee

In line with the vision of Royal Exchange Plc and in accordance with its Board Charter, the board established the Board Strategy Committee whose primary responsibility includes but not limited to advising and assisting the board in carrying out(i) the development, articulation, and execution of

the company’s long-term strategic plan, and(ii) its advisory oversight responsibilities relating

to potential mergers, acquisitions and other key strategic transactions outside the ordinary course of the Company’s business.

The committee met four (4) times on the following dates:• October 9, 2012• October 17, 2012• November 11, 2012• December 3, 2012With attendance of 70%. The following directors served in the committee.• Mr.K.E.Odogwu-Chairman• ChiefA.I.Idigbe(SAN)• AlhajiA.R.Mohammed• Mr.D.Verheijen

eport of Corporate Governance contd.R

25


eport of Corporate Governance contd.RDIRECTORS FREQUENCY OF MEETINGS/ATTENDANCE BOARD BIC E&GC F&GPC RMC AC BSC AGM

4 4 4 4 4 4 4 1

Mr. K. E. Odogwu, Chairman 4 N/A N/A N/A N/A N/A 4 1Chief A. I. Idigbe (SAN)* 4 4 5 4 N/A N/A 4 1Mr. D. Magerle 4 N/A 2 N/A N/A N/A N/A N/AChief U. Okpa-Obaji 3 4 5 3 3 3 N/A 1Alhaji A. R. Mohammed 3 4 N/A 4 4 3 4 1Alhaji R. M. Gwarzo, OON 4 N/A 5 3 3 N/A N/A 1Mr. Adeyinka Ojora* 4 3 N/A 3 N/A 3 N/A 1Mr. Charles Momoh* 1 N/A N/A N/A N/A N/A 1 1Mr. Chike Mokwunye 4 4 5 4 3 4 4 1Alhaji Auwalu Muktari 4 4 5 4 4 N/A N/A 1

Average attendance 88% 96% 90% 89% 90% 81% 70%

Note:

1. Mr. Kayode Ayanmide who was part of the committee till the third quarter 2012 was replaced by Mr. Bekunmi Akinsolu who was elected as the representative of the shareholders at the annual general meeting held in 2012.

2. It is the policy of the company that any director who will be absent from any meeting shall send his alternate to attend the meeting. In compliance with the above, every director ab-initio has named and presented his permanent alternate details with the board.

3. During the year, the Group contravened certain sections of regulatory provisions of the National Insurance Commission (NAICOM) regulations and Nigerian Stock Exchange (NSE) rules and paid various penalties in the sum of One Million, One hundred and Ninety Five thousand naira and Two Million, Six hundred thousand naira respectively.

4. Directors with asterixes were represented by their alternates where they could not attend the meetings due to circumstances beyond their control.

5. Full names of Committees (a) E&GC - Establishment and Governance Committee (b) BIC - Board Investment Committee (c) F&GPC - Finance and General Purpose Committee (d) RMC - Risk Management Committee (e) AC - Audit Committee (f) BSC - Board Strategy Committee (g) AGM - Annual General Meeting

26


isk Management StatementRIn line with our Vision and Mission statements, the Group, understanding the turbulent and challenging business environment within which it operates has fully imbibed risk management as a key concept to the achievement of its objective.

The Group is thus committed to continually embrace the culture, processes and structures that are directed towards realizing potential business and growth opportunities, whilst managing the adverse effects of all the enterprise risk faced by the Group.

Our key Enterprise Risk Managementobjectives

• ProtecttheGroup’scapitalbasebymonitoringand ensuring that risks are not taken beyond the Groups tolerance limit

• Enhancevaluecreationandcontributetoanoptimal risk return profile by providing the basis for efficient capital deployment

• SupporttheGroupdecisionmakingprocessesby providing consistent, reliable and timely risk information

• Protect our reputation and brand bypromoting a sound culture of risk awareness and disciplined and informed risk taking.

Our key Enterprise Risk Managementframework

Risk management has been effectively imbedded into the system through clearly articulated roles for the Board of Directors, Chief Executive Officer, business and functional areas. Our risk management framework is centered round a robust risk governance process with assigned responsibilities for identifying, managing, monitoring and reporting risk within the Group.

The Board risk management committee charter and the enterprise risk management policy are the Group’s main risk governance documents. They specify authorities, reporting requirements,

procedure to approve any exceptions and methods of referring any risk issues to senior management and the Board of directors.

To support the governance process, the Group relies on documented policies and guidelines with regular reporting of the Group risk profile, current risk issues and adherence to risk policies and improvement actions within subsidiaries and on a Group level.

Risk management is not only embedded in our business but is also aligned within the Group strategic and operational planning process. Risks are assessed systematically from a strategic perspective through identification and evaluation of the probability of a risk scenario occurring and the severity of the consequences should it occur. Similarly, the Group regularly measures and quantifies material risk to which it is exposed. These processes are performed annually, reviewed regularly and closely tied to the planning processes.

RiskCulture

The Board and management sustained the promotion of risk awareness across the Group to manage products, market, portfolio, liquidity credit and interest rate risks where the associated risk are deemed unacceptable and higher than the residual risk target.

In addition, the Board of directors and management ensured that the long term survival and reputation of the company are not at risk. The Group objective is to have Enterprise Risk Management (ERM) rooted in the Group’s individual culture, management processes and strategic vision leading to enhanced risk based decisions.

The company continually exposes the staff to training on principles and practice of ERM which has enhanced the skill level of staff.

RiskAppetite

The Board of directors established the Group risk attitude statement to guide the Group

27


isk Management Statement contd.Rto effectively discharge its functions. The management is thus guided to take decisions on managing different categories of risks within the purview of the risk appetite statement. Also, the risk appetite level such as prudential limits were set by the Board of directors to guide the management’s decision on the amount of risk they are prepared to accept, when decisions are taken to manage any mitigating measures. In line with the Group appetite statement, the subsidiaries risk appetite were scaled down from that of the Group to reflect the respective subsidiary’s need.

RiskGovernance

The primary objective of the Company’s risk and financial management framework is to protect the Company’s stakeholders from events that hinder the sustainable achievement of financial performance objectives, including failing to exploit opportunities.

The Company’s strategy for managing risk exposures is to establish and maintain a robust Enterprise Risk Management (ERM) programme that is embedded in all processes and driven by technology with emphasis on protection from unwanted risk while maintaining stakeholders’ value.

To this end, the Board established the Group’s corporate risk management framework. The ERM programme will help structure and coordinate all direct and indirect risk management activities within the company, while eliminating redundancies and ensuring consistency in the risk management process.

The risk management committee of the Board serves as the focal point for oversight regarding risk management. It reviews the risk management methodologies, policies, models, reporting and risk strategies.

CapitalManagementApproach

The Company’s operations are subject to regulatory requirements of the National Insurance Commission (NAICOM), Central Bank of Nigeria

(CBN), Nigerian Stock Exchange (NSE), National Health Insurance Scheme (NHIS) and Securities Exchange Commission (SEC). Such regulations not only prescribe approval and monitoring of activities, but also impose certain restrictive provisions (e.g. capital adequacy) to minimize the risk of default and insolvency on the part of the financial service companies and to meet unforeseen liabilities as these arise.

The Company’s capital management policy is therefore to hold sufficient capital to cover the statutory requirements based on regulators directives, including any additional amounts required by the regulator.

The Company has established the following capital management objectives, policies and approach to managing the risks that affect its capital position:• Maintain the required level of stability of

the Company thereby providing a degree of security to policyholders;

• Allocate capital efficiently and supportthe development of business by ensuring that returns on capital employed meet the requirements of its capital providers and of its shareholders;

• Retain financial flexibility by maintainingstrong liquidity and access to a range of capital markets;

• Aligntheprofileofassetsandliabilities,takingaccount of risks inherent in the business;

• Maintain financial strength to support newbusiness growth and satisfy the requirements of the policyholders, regulators and other stakeholders.

In reporting financial strength, capital and solvency are measured using the rules prescribed by NAICOM. These regulatory tests are based upon required levels of solvency, capital and a series of prudent assumptions in respect of the type of assets held.

The capital management process is governed by the Board of directors who have the ultimate responsibility for the capital management process. The Board of directors is supported by the Board risk management committee and Board

28


isk Management Statement contd.Rcredit committee all of whom have various inputs into the capital management process.

RegulatoryFramework

Regulators are primarily interested in protecting the rights of policyholders and depositors’ funds and monitoring them closely to ensure that the Company is satisfactorily managing affairs for their benefit. At the same time, regulators are also interested in ensuring that the Company maintains an appropriate solvency position to meet unforeseen liabilities arising from economic shocks or natural disasters.

The operations of the Company are thus subject to regulatory requirements. Such regulations not only prescribe approval and monitoring of activities, but also impose certain restrictive reserves e.g. contingency reserve, limits on recognition of revaluation reserves for solvency purposes, Limit of investment in fixed assets, Permissible level of portfolio at risk and distribution to shareholders of actuarial surpluses to minimize the risk of default and insolvency on the part of the companies to meet unforeseen liabilities as these arise.

AssetandLiabilityManagementFramework

The Assets and Liability Management framework is integrated in the overall risk management policy of the company be it directly or indirectly associated with insurance and investment liabilities. Our insurance risk management policy is to ensure, in each period, sufficient cash flow is available to meet liabilities arising from insurance and investment contracts.

RiskManagement

The Group operations cut across the financial sector thus, the Group operations is exposed varied form of risk such as Operational Risk, Insurance Risk, Credit Risk, Liquidity Risk, and Market Risk. To mitigate against all of these risks, the company has put in place approved policies, procedures and guideline to identifying, measuring and control of these risks.

OperationalRisk

The company recognizing it cannot completely eliminate the Group operational risk, such as human error, system failure fraud and external events, has put in place adequate controls to ensure that the impact does not lead to damage to the reputation of the company, financial loss or legal and regulatory implication.

Controls such as segregation of duties, access control, authorization and reconciliation procedures, staff education and assessment processes including the use of internal audit have been put in place. Business risks such as changes in environment, technology and industry are monitored through the company strategic planning and budgeting process.

InsuranceRisk

Insurance business being the central part of the Group business exposes the company to the risk of timing and expectations of claims and benefit payments. This is influenced by the frequency of claims, severity of claims, actual benefits paid and subsequent development of long-term claims.

The risk exposure is mitigated by diversification across a large portfolio of insurance contracts and ensuring that sufficient reserves are available to cover these liabilities. The variability of risks is also improved by careful selection and implementation of underwriting strategy guidelines, as well as the use of reinsurance arrangements.

Underwriting risk appetite is defined based on underwriting objectives, business acceptance guidelines, retention guidelines, net retention capacity, annual treaty capacity, regulatory guidelines, other operational considerations and the judgment of the Board and senior management.

CreditRisk

The company’s credit risk appetite is in line with the company’s strategic objectives, available

29


isk Management Statement contd.Rresources and the provisions of the regulators’ operational guidelines. The Group credit risk policy is to ensure that an appropriate, adequate and effective system of risk management and internal control which addresses credit control is established and maintained.

The company thus ensures the establishment of principles, policies and processes and structure for the management of risk exposure arising from direct default, counter-party and concentration risks are properly managed within the Groups risk appetite.

In setting this appetite limits, the corporate solvency level, risk capital and liquidity level, level of investments, reinsurance and coinsurance arrangements, nature and categories of its clients, are taken into consideration.

The following risk mitigation and control activities are in place to effectively manage exposures to default risk: client evaluation, credit analysis, credit limit setting, credit approval, security management, and provision for impairment.

Similarly, the quality and performance of credit portfolios is monitored to identify early signs of decline in credit quality. Such activities include the review of ageing report, credit portfolio quality and delinquency management.

Reinsurance is placed with counterparties that have a good credit rating and concentration of risk is avoided by following policy guidelines in respect of counterparties’ limits that are set each year by the Board of directors and are subject to regular reviews. At each reporting date, management performs an assessment of creditworthiness of reinsurers and updates the reinsurance purchase strategy, ascertaining suitable allowance for impairment.

LiquidityRisk

The Group continues to be proactive and implementing adequate risk management measures to mitigate all liquidity risks. The liquidity risk management governance structure

comprises the Board, Management and Internal audit department.

Our strategy is to continually maintain a good optimum balance between having a stock of liquid assets, profitability and investment needs. Additionally, credit control and approval limits, effective management of receivables and contingency account to meet all claims payment are put in place.

MarketRisk

An unfavorable change in the market conditions exposes the Group to the possibility of loss of income or investment hence the Group has adopted a cautious and prudent approach to investment and trading activities.

The Group investment policy is that except waived by the Board investment committee (BIC), investment/trading transaction that do not fall within the Group risk appetite, are not undertaken no matter how profitable the transaction may seem.

Additionally, the company does not enter into any transaction that is illegal, unethical or contravenes any applicable law, regulations, and professional code of conduct or is capable of damaging the company’s corporate image or key officers.

The company does not enter into any transaction with any organization with perceived likelihood of failure or showing signs of going concern challenges.


30

oardBof Directors

1

6

1. Mr. Kenneth Ezenwani Odogwu Chairman2. Chief Anthony Ikemefuna Idigbe (SAN) Director3. Mr. Daniel Maegerle Director4. Chief Uwadi Okpa-Obaji Director5. Alhaji Ahmed Rufa’i Mohammed Director

2

7 8


31

6. Alhaji Rabi’u Muhammad Gwarzo, OON Director 7. Mr. Adeyinka Ojora Director8. Mr. Charles Momoh Independent Director9. Mr. Chike Mokwunye Group Managing Director10. Alhaji Auwalu Muktari Group Executive Director (Marketing & Sales)11. Ms. Sheila Ezeuko Company Secretary/Group Head, Legal Services

3

9

4

10

5

11


32

rief Particularsof our Directors

B

33


ur DirectorsOMR.KENNETHEZENWANIODOGWUHe is a Legal Practitioner. He was called to the Nigerian Bar in 1990, and was engaged as a counsel in the firm of Sofunde Osakwe Ogundipe & Belgore. He also worked as the Head (Legal Department) of Perfecta Investments Limited, a capital market operator and as CEO of Siotel, an IT company. He is currently on the Board of several publicly quoted and private companies and was the last Chairman of IMB Bank, before it merged into First Inland Bank. He is also the Chief Executive of the Odogwu Group of Companies. He was appointed to the Board of the company on September 1, 1997 and became Chairman on July 26, 2007.

CHIEF ANTHONY IKEMEFUNA IDIGBE (SAN) He is a Legal Practitioner and Senior Advocate of Nigeria. He was called to the Nigerian Bar in 1983. He is the principal partner, Punuka Attorneys and Solicitors, which incorporates the legal firm of Idigbe & Idigbe. He is a Notary Public of the Federal Republic of Nigeria, Chairman, Capital Market Solicitors Association, Vice President, International Debt Management Association, Member, Nigerian Bar Association and Member, Faculty of ESUT Business School, Enugu, Enugu State. He was appointed to the Board of the company on August 20, 2002.

MR. DANIEL MAEGERLE He is a Swiss national and holds a Degree in Law from the University of Zurich. He was called to the Zurich Bar in 1998. He is a Partner in the firm of Streiff Pellegrini & Von Kaenel, Switzerland; a firm established in 1962 and engaged in a broad range of legal activities both nationally and internationally. He is an Attorney at Law and was appointed to the Board of the company on November 24, 2004.

CHIEFUWADIOKPA-OBAJIHe is a graduate of the University of Lagos, Lagos State and holds a Certificate in Macro-Economic Policy and Management, Harvard University, Massachusetts, USA. He holds an M.Sc. from the University of Abuja and is a Fellow of the Chartered Institute of Management Accountants, UK as well as the Institute of Chartered Secretaries and

Administrators. He is also an Associate Member of the Institute of Chartered Accountants of Nigeria and an Authorized Dealing Clerk (Stockbroker) of The Nigerian Stock Exchange. He was a founding staff of the Bureau for Public Enterprise and is an Executive Consultant to the Odogwu Group of Companies. He was appointed to the Board of the company on March 15, 2007.

ALHAJIAHMEDRUFAIMOHAMMEDHe is a graduate of the Ahmadu Bello University, Zaria, Kaduna State. He holds a Certificate in Banking and Development Finance from the Manchester Business School and is a Fellow of the Institute of Public Administration. He has undertaken several national assignments and is currently on the Board of several publicly quoted and private companies. He is a recipient of various national and international awards and honours. He was appointed to the Board of the company on May 16, 2007.

ALHAJIRABIUMUHAMMADGWARZO,OONHe is an Associate of the British Society of Commerce. He holds a Certificate in Accounting and Finance for Developing countries from the University of Strathclyde, Glasgow, Scotland Business School and Certificate in Wheat Marketing & Processing from Kansas State University, USA. He is an Associate of the institute of Industrialists and Corporate Administrators (AIICA) and a Fellow of the Institute of Industrialists and Corporate Administrators (FIIC). He has undertaken several national assignments and is currently on the Board of several publicly quoted and private companies. He was appointed to the Board of the company on November 21, 2008.

MR.ADEYINKAOJORAHe is a businessman. He started his business pursuits in 1992 when he joined Nigerlink from AT&T Global Information Services where he was a marketer support specialist for the MICR implementation for the Central Bank of Nigeria. He worked with Eco Securities Limited as an assistant registrar and broker from 1996-1998 and was later appointed managing director with specific responsibility for power generation. He also heads the defence procurement division of Nigerlink Industries Limited. He serves as

34


ur Directors contd.Oa director on boards of different companies as well as advisor to numerous companies seeking entry into the Nigerian market place. As a philanthropist, he is a trustee of the Well Being foundation, whose goal is the reduction of maternal and infant mortality in Nigeria.

He is a director, Ojora group and was appointed to the board of Royal Exchange on June 6, 2011.

MR.CHIKEMOKWUNYEHe is a graduate of the Ahmadu Bello University, Zaria, and the University of Benin. He holds a B.A. (Hons.) degree in Education/Economics and an M.Sc. in Banking and Finance respectively. He is an Associate Member of the Certified Pension Institute of Nigeria (ACIP). He has acquired immense expertise in banking and finance having spent seventeen years in the industry. Prior to his appointment as an Executive Director in 2009, he was the Managing Director of Royal Exchange Finance & Investment Ltd, a wholly- owned subsidiary of Royal Exchange Plc. He was appointed the Group Managing Director with effect from April 14, 2011.

ALHAJIAUWALUMUKTARIHe was born in Bichi town, Bichi Local Government Area of Kano State, on the 10th July, 1962. He attended Hagagawa Primary School, Bichi and completed his secondary education at Kano Community Commercial College in 1981. He proceeded to Ahmadu Bello University Zaria where he obtained Diploma in Insurance at Credit Level in 1993. He completed his 1st degree in Business Administration and Masters degree in banking and Finance at Bayero University Kano in 1993 and 1999 respectively.

He started his working career with Kano based insurance company called Kapital Insurance and rose through the ranks to become Head of Re-insurance Department before joining Royal Exchange Assurance in 1995 as a branch manager in Kano, and overseeing the activities of Bauchi, Maiduguri and Yola office. In 2003, he became the Regional Director, Abuja. He resigned from Royal Exchange to become the Managing Director/Chief Executive Officer of Yankari insurance Co. Ltd in 2008, now called Fin Insurance to Co. Ltd.

He returned to Royal Exchange as the Group Executive Director, Marketing and Sales In 2010.

Alhaji Muktari was elected in 2010 as an associate member of the Institute of Directors, Nigeria; he is also a professional member of the following bodies:

• Associatemember InstituteofManagementSpecialist, UK.

• Member Chartered Institute of insurance ofNigeria.

• AssociateMember,InstituteofManagement.

MR. CHARLES MOMOHHe is a graduate of the University of Lagos where he obtained a Bachelor of Arts degree. He also holds an IHRDC in Petroleum Law & Finance, and Petroleum Business Management respectively from Boston, USA. He has attended several Management as well as Oil & Gas courses both home and abroad. He has immense expertise in the Nigerian Oil and Gas industry both in the up and down-stream sectors having spent over twenty years in the industry. He is currently the Managing Director/CEO of Atlantic Meridean. He was appointed an Independent Director to the Board of Royal Exchange Plc on June 27, 2012.


35

xecutiveEManagement

Team

1. Mr. Chike Mokwunye Group Managing Director2. Alhaji Auwalu Mukari Group Executive Director (Marketing & Sales)3. Mr. Richard Borokini Managing Director (Royal Exchange General)4. Dr. Pius Ofulue Managing Director (Royal Exchange Healthcare)5. Mr. Wale Banmore Managing Director (Royal Exchange Prudential Life)6. Mr. Hosea Boman Managing Director (Royal Finance)7. Mrs. Lizzy Elghoche Managing Director (Royal Exchange Microfinance Bank)8. Mr. Abiola Sanni Group Head (Asset Management)

1 2

10

13

9 12

7

3

8

14

6

15

11

54

9. Mr. Philip Ashinze Group Head (Finance & Accounts)10. Ms. Sheila Ezeuko Group Head (Legal/Secretariat Services) 11. Mr. Donald Nosiri Group Head (Human Resources)12. Mr. Ejike Osisioma Group Head (Information Technology) 13. Mr. Bashir Babajo Group Head (Facilities Management)14. Mr. Amos Okoroh Group Head (Audit & Control)15. Mr. Austin Agbareh Group Head (Corporate Communications)

36


xecutive Management Team’s ProfileEMR.CHIKEMOKWUNYEHe is a graduate of the Ahmadu Bello University, Zaria, and the University of Benin. He holds a B.A. (Hons.) degree in Education/Economics and an M.Sc. in Banking and Finance respectively. He is an Associate Member of the Certified Pension Institute of Nigeria (ACIP). He has acquired immense expertise in banking and finance having spent seventeen years in the industry. Prior to his appointment as an Executive Director in 2009, he was the Managing Director of Royal Exchange Finance & Investment Ltd, a wholly- owned subsidiary of Royal Exchange Plc. He was appointed the Group Managing Director with effect from April 14, 2011. He is an alumnus of the Harvard Business School and Lagos Business School.

ALHAJIAUWALUMUKTARIHe was born in Bichi town, Bichi Local Government Area of Kano State, on the 10th July, 1962. He attended Hagagawa Primary School, Bichi and completed his secondary education at Kano Community Commercial College in 1981. He proceeded to Ahmadu Bello University Zaria where he obtained Diploma in Insurance at Credit Level in 1993. He completed his 1st degree in Business Administration and Masters degree in banking and Finance at Bayero University Kano in 1993 and 1999 respectively. He is an alumnus of the Harvard Business School.

He started his working career with Kano based insurance company called Kapital Insurance and rose through the ranks to become Head of Re-insurance Department before joining Royal Exchange Assurance in 1995 as a branch manager in Kano, and overseeing the activities of Bauchi, Maiduguri and Yola office. In 2003, he became the Regional Director, Abuja. He resigned from Royal Exchange to become the Managing Director/Chief Executive Officer of Yankari insurance Co. Ltd in 2008, now called Fin Insurance to Co. Ltd. He returned to Royal Exchange as the Group Executive Director.

MR. RICHARD BOROKINI He is a graduate of the University of Ife, now Obafemi Awolowo University, Ile Ife, where he bagged a degree in the social Sciences. He is also a barrister & solicitor of the Supreme Court of Nigeria. An Associate member of the Chartered Insurance Institute of London and Nigeria, he has worked in senior Technical positions in some notable insurance companies and was the Deputy General Manager (Technical) for the former Phoenix of Nigeria Assurance which has now merged with Royal Exchange General Insurance Company Limited. He was the Deputy General

Manager(Technical Services) coordinating the activities of the technical division of the Company. He was appointed the Managing Director of Royal Exchange General Insurance Company Limited on 26, July, 2010. He is an alumnus of the Harvard Business School and Lagos Business School.

DR. PIUS OFULUEHe is the Managing Director/Chief Executive Officer of Royal Exchange Healthcare Limited, a wholly owned subsidiary of Royal Exchange Plc.

He graduated from the University of Ibadan with MBSS in 1986 and holds an MBA in insurance and Risk Management from Enugu State University. He is also an alumnus of the Lagos Business School.

A medical practitioner of over twenty-five years and an active player in the Health Maintenance Organization (HMO) industry with fifteen years cognate experience, he was the Chief Executive Officer of Managed Healthcare Services Limited and the Group Practice Manager of Critical Rescue International (CRI). Dr. Ofulue is the pioneer Managing Officer of Royal Exchange Healthcare Limited, a position he assumed in 2006.

MR.WALEBANMOREHe is a graduate of the University of Ibadan, Oyo State. He holds a Bachelor of Science degree in Sociology and a Master degree in Managerial Psychology from the same institution. He is an associate of the Chartered Insurance Institute of Nigeria (ACIIN). He started his career in 1987 with Odips Fishing Industries and later joined UNIC insurance Plc in 1992 as a Management Trainee where he rose to become the Group Head (Operations). Prior to joining Royal Exchange in 2003, he was the Regional Director (West) of First Chartered Insurance Company Limited.

He was promoted Assistant General Manager in 2007 and was redeployed to the Technical Services Division as Head (Technical Services) in 2010. He had attended various courses both within and outside the country. He was appointed Managing Director of Royal Exchange Prudential Life Plc, a subsidiary of Royal Exchange Plc in 2011. He is also an alumnus of the Lagos Business School.

MR. HOSEA BOMANHe is a Chartered Accountant, a Chartered Stockbroker as well as a member of the Chartered Institute of Taxation of Nigeria with over 25 years experience spanning through publishing,

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xecutive Management Team’s Profile contd.Ebanking, finance, stock broking and a brief stint in the media. He joined Royal Exchange Finance Ltd. in 2005 as the pioneer Head of Finance and Administration and was appointed Managing Director/CEO in 2009. He is also an alumnus of the Lagos Business School and IESE Business School, Barcelona, Spain. He is currently the Group Head (ERM) since June 2013.

MRS. ELIZABETH ELGOCHEShe is a graduate of the University of Lagos with a B.Sc in Education, a M.ED Educational Administration well as an MBA. She is multi-faceted professional with over 20years cognate experience spanning Banking & Finance, Manufacturing and Bureau de Change where she served as Chief Operating Officer of two Companies before joining Royal Exchange Microfinance Bank (REMFB). She is a Fellow of the Chartered Institute of Bankers of Nigeria (ACIB), and the Chartered Institute of Marketing (ACIM). She was appointed Managing Director of Royal Exchange Microfinance Bank (REMFB) in 2010.

MR. PHILIP ASHINZEHe is a graduate of Accounting of the University of Benin. He holds an MBA from the University of Lagos and passed his professional accounting examinations in 1988 and was admitted to associate membership of the Institute of Chartered Accountants of Nigeria in 1991 and the Chartered Institute of Taxation of Nigeria in 2003. He is also a Certified Information Systems Auditor. Before joining Royal Exchange Plc in September 2010 as Group Head (Finance & Accounts), he had worked in various sectors of the economy spanning manufacturing, banking, consulting and the public service. A former Special Assistant in the Government of Delta State, his last engagement before joining Royal Exchange was as the Managing Consultant of a Finance and Information Technology consulting firm. He is also an alumnus of the Lagos Business School.

MS. SHEILA EZEUKO She is a graduate of the University of Nigeria, Nsukka, Enugu State. She holds a Bachelor of Arts in History and a Bachelor of Law from the same university, and was called to the Nigerian Bar in 1999. She worked in the Chambers of G.E. Ezeuko (SAN) before going into corporate practice. She has served as Company Secretary to General Cotton Mill Limited and, also Sosoliso Airlines Limited. She has undergone various management and professional courses. She was appointed Company Secretary of Royal Exchange Plc in 2007 and is currently the Group Head (Company Secretariat/Legal Services) with responsibility for

the management and execution of Legal Services and Company Secretariat across the Group. She is also an alumna of the Lagos Business School having undergone the Advanced Management Programme (AMP 24). She is an associate member of the Institute of Chartered Arbitrators, Nigeria. She is a member of some professional bodies notably the International Bar Association and the Nigerian Bar Association. She is currently pursuing her LLM at the Queen Mary’s College, University of London, England.

MR. NNAMDI MELIEHe is a graduate of insurance from the University of Lagos, Akoka, Lagos State. He is a Fellow of the Chartered Insurance Institute of London. He also has an MBA from the IESE Business School, Barcelona, Spain. He worked in broking and consulting with special emphasis on sales, performance, marketing and strategy. He is the pioneer Group Head of Strategic planning, business improvement and product development. He is currently the regional director, south east.

MR. DONALD NOSIRIHe is a graduate of the University of Nigeria, Nsukka, Enugu State. He holds a Bachelor of Science and Masters degree in Mass Communication from the same institution and the University of Lagos respectively. He holds a Certificate in Personnel Practice from the Chartered Institute of Personnel and Development in London. He is an alumnus of the Lagos Business School (LBS) having undergone the Senior Management Programme (SMP24). He is also an Associate Member of the Chartered Institute of Personnel Management of Nigeria (CIPM), Associate Member of the Chartered Institute of Personnel and Development (CIPD) London and Honorary Senior Member (HCIB) of the Chartered Institute of Bankers of Nigeria. He joined Royal Exchange as a Group Head (Human Resources) in 2012. He also serves as a director on three subsidiary boards within the Group.

MR.EJIKEOSISIOMAHe is a highly experienced IT professional and is a Microsoft Certified Professional (MCP), Member, Nigeria Computer Society (MNCS) and Computer Professionals Registration Council of Nigeria (MCPN). He holds a first degree in computer science from the University of Nigeria, Nsukka (1995) and an MBA from the ESUT Business School (2005).

Prior to joining Royal Exchange, he was managing an IT organization and was a Consultant/Resource person on Basel II to banks and other financial institutions. He was at various

38


xecutive management Team’s Profile contd.Etimes with Data Links Nigeria Limited as Head, Software/IT consulting and later AGM, Technical Services where he was responsible for all technical matters, business generation, project management, software development and banking software implementation from start to finish. He is a highly skilled IT professional with expertise in database design, implementation and management, software design and development, amongst others. He joined Royal Exchange Plc in 2011 as Group Head, Information Technology.

MR. ABIOLA SANNIHe is a graduate of the Obafemi Awolowo University, Ile-Ife and holds a Bachelor of Science (honours) degree in Accounting and a Masters degree in Finance (Economic Policy) from the University of London, UK. He started his professional career in the Lagos office of Arthur Andersen now, (KPMG Professional Services). He acquired immense expertise in Investment Banking at IBTC Limited now Stanbic Bank, where he gained a wealth of experience across a broad spectrum of Investment Banking and Asset Management functions. He headed the asset management team responsible for structuring investment portfolios for HNIs and the biggest of Nigeria’s corporate benefits and pension funds.

A Nigerian Certified Public Accountant; he is an authorized dealing clerk of the Nigerian Stock Exchange and a graduate member (2011) of the Chartered Institute of Stockbrokers. He is also a Chartered Banker and an associate member of the National Institute of Marketing of Nigeria (Chartered). He joined Royal Exchange in February, 2013 as the Group Head, Asset Management.

MR. AMOS OKOROHHe is a seasoned Internal Auditor and joined Royal Exchange Plc in 2002. In 2010, he was appointed the Group Head Internal Auditor. Amos has an MBA from the University of Calabar and a PGD in Financial Management from Ladoke Akintola University of Technology.

He is an Associate of both the Institute of Chartered Accountants of Nigeria (ICAN) and the Chartered Institute of Taxation of Nigeria (CITN), and has garnered over 25 years cognate working experience spanning manufacturing industry, insurance and financial institutions.

MR. AUSTIN AGBAREHHe is a graduate of the University of Lagos in 1980 and obtained an MBA from the University of Benin in 1989, specializing in corporate branding and integrated marketing communications.

For over 30 years, he has been closely associated with the media, starting from Bendel Radio and Television where he began his journalism career in 1981. At various times, he held both editorial and management positions in some national newspapers, and as a consultant to several government ministries and agencies, he was pivotal to the success of UNICEF sponsored campaign projects in Nigeria.

He joined Royal exchange in 2010 as Group Head, Corporate Communications and is the editor-in-chief of the group’s in house magazine ‘Royal News’.

MALLAMBASHIRBABAJOHe is a graduate of the Ahmadu Bello University, Zaria. He holds a Bachelor of Science degree in Business Administration and an MBA from the same institution. He started his career in 1988 in the Public sector and has over the years served in various capacities before joining Royal Exchange in May 2008. He is currently the Group Head, Facilities Management. He is also an alumnus of the Lagos Business School.


irectors &DRegional Directors

5

2

6

3

7

4

8

1

39

1. Mr. Austin Nwankwo Director (Lagos/West Directorate)2. Mr. Ben Agili Director (South-South/South-East Directorate) 3. Mr. Nnamdi Melie Regional Director (South-East)4. Mr. Nelson Akerele Regional Director (Lagos-South)5. Mrs. Jane Ekomwereren Regional Director (Lagos-Central)6. Mr. Steve Okoh Regional Director (North-West)7. Mrs. Vivian Elueme Ag. Regional Director (South-South)8. Mr. Rotimi Ajana Regional Director (West)

40


eport of the DirectorsRThe directors are pleased to submit to the members of the company, their forty-fourth annual report, together with the audited financial statements for the year ended December 31, 2012.

1. LEGAL FORM AND PRINCIPAL ACTIVITIES: The company was incorporated as a private limited liability company on December 29, 1969,

converted to a public limited liability company on July 15, 1989 and was listed on the Nigerian Stock Exchange on December 3, 1990.

The principal activities of the company include life, healthcare and general insurance, financing and micro finance banking services.

2. RESULTS FOR THE YEAR: The highlights of the company’s trading results for the year ended December 31, 2012.

2012 2011 N’000 N’000

Profit before taxation and exceptional items 743,208 210,428

Taxation (119,273) (259,895)

Profit/(loss) after taxation: 623,935 (49,467)

Total assets 16,301,795 15,506,071

Shareholders fund 8,128,664 7,850,852

3. REVIEWOFBUSINESSDEVELOPMENTS: 2012 proved to be an eventful business year, closing with a relatively healthy domestic economy

which registered significant growth attributable to government and regulatory reforms. In like fashion, our company’s fortunes continued its ascendancy, reinforcing the board and management’s commitment towards driving broad-based transformational measures across the length and breadth of the group with a mandate of delivering superior returns and maximizing value for all stakeholders.

Industry fundamentals stayed robust in 2012 placing Nigeria as the most promising insurance market in Africa by sheer population size and a docile insurance penetration thrust. The apex regulator – National Insurance Commission (NAICOM) - continued its advocacy for compulsory insurance regulations and intensified the implementation of its Market Development and Restructuring Initiative (MDRI) by discontinuing issuance of single annual operating guidelines; replacing it with series of circulars to regulate the conduct of insurance business, one of which culminated in the announcement of the ‘No Premium, No Cover’ policy effective 1st January 2013. In addition, the adoption of International Financial Reporting standards (IFRS) by insurers further laid foundation for credible corporate reporting though adversely affecting timely releases of financials by industry participants.

For the Year Ended 31 December 2012

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eport of the Directors contd.RFor the Year Ended 31 December 2012

Despite the consequences of these reforms, the year proved to be a period of consolidation for the group; beginning with steady growth in performances of majority of our subsidiaries to harnessing of evolving synergies inherent in our risk and asset management businesses. These results were most evident in three of our subsidiaries i.e. Royal Exchange General Insurance Company Limited posted strong numbers in 2012 while the combined efforts of Royal Exchange HealthCare Limited and Royal Exchange Finance and Investments Limited contributed significantly to overall profitability thereby reinforcing the benefits of our group-holding structure.

Furthermore, we were able to strengthen the Group’s premium-generating capacity by leveraging on our expanded branch network ensuing from the successful 2011 branch expansion exercise. New offices were opened in Enugu and Sokoto in the year bringing total branch network to 29, whilst renovations were carried out on existing branches in adherence to our business strategy. We also expanded the scope of our operations laying emphasis on the discharge of our retail business mandate as part of our revenue diversification drive.

During the period, retail operations and administration were re-assigned to a strategic business unit (SBU) under the Group Shared Services (GSS) structure to handle all oversight functions and responsibilities and as well, grow our retail business value chain. To guarantee peak performance and service delivery targets in this area, major upgrades on our IT infrastructures, payment portal and product distribution channels were undertaken to stimulate customer traffic across our mobile and electronic platforms. The full effect of this initiative will become more visible in 2013 upon activation of the various strings of retail businesses and insurance policy bundles targeted at impacting on group-wide sales and profitability.

Our call center has continued to deliver on its invaluable customer complaint resolution mechanism; significantly contributing to the effectiveness of our payment solutions and playing a pivotal role in assisting the Group attain critical mass in the retail segment of the insurance market. We have accelerated works at enhancing its capacity by incorporating a robust Customer Relationship Management (CRM) system aimed at delighting customers’ experience whilst making enquiries, suggestions or giving feedbacks about our various products and services through this channel.

Royal Exchange, in furthering its long-standing heritage as a socially responsible corporate citizen, would continue to champion insurance education and advocacy in a bid to shore up insurance penetration at the grass root level. Part of these initiatives will form the crux of our retail business initiatives and is expected to have meaningful impact in the socio-economic well being of citizens and small and medium scale enterprises. Processes have also been put in place to catalyze partnerships and sponsorships of programmes targeted at improving insurance literacy vis-a -vis deepening our foot-prints in the lower and informal segment of the insurance market in 2013 - which happens to be the least served insurance market.

Looking ahead, we see potential for further growth in the insurance industry and across its value chain thanks to the on-going reforms set in motion by NAICOM. We believe the Group is well positioned to drive businesses and extract value across the diverse product lines leveraging on our superior human capital and extensive distribution network. With the full implementation of our Three-year Strategic Plan which will take full swing in 2013, we are confident of its far-reaching benefits to the organization and excited at the prospects it presents in redefining the DNA of our company; hence reinvigorating our brand and repositioning Royal Exchange Plc as a formidable game changer in our quest to reclaim industry leadership position.

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4. DIVIDEND AND SCRIP:

4.1 The directors recommended a dividend payment of per 4k ordinary share to members for the year ended, December 31, 2012.

5. DIRECTORS’ INTEREST AND SHAREHOLDING: A board of 10 directors determined the general strategy and policy of the company in the year

under review.

5.1 The names of directors who served during the year were: Mr. K.E. Odogwu Chief A.I. Idigbe (SAN) Mr. D. Maegerle Chief U. Okpa-Obaji Mr. A.A. Ojora Alhaji A. R. Mohammed Alhaji R. M. Gwarzo OON Mr. C. Momoh Mr. C.U.A. Mokwunye Alhaji A. Muktari

5.2 In accordance with the Articles of Association, Mr. K. E. Odogwu, Alhaji R. M. Gwarzo OON and Mr. Adeyinka Ojora are the directors retiring by rotation. Mr. K. E Odogwu, Alhaji R. M. Gwarzo OON and Mr. Adeyinka Ojora being eligible offer themselves for re-election.

5.3 The directors’ interests in the issued share capital of the company as recorded in the Register of Members and in the Register of Directors’ Holdings and Contracts, as notified by them for the purposes of Section 276 and 277 of The Listing Requirements of the Nigerian Stock Exchange, are as follows:

Number of 50k Number of 50k Number of 50k Ordinary Shares Ordinary Shares Ordinary Shares Holdings as at Held as at Holdings as at Held as at Holdings as at Held as at September 30, September 30, December 31, December 31, December 31, December 31, 2013 2013 2012 2012 2011 2011 Number Number Number Number Number Number Direct Indirect Direct Indirect Direct Indirect

Mr. K.E. Odogwu Nil 2,013,119,834 Nil 2,013,119,834 Nil 2,013,119,834Chief A.I. Idigbe (SAN) Nil 970,276 Nil 970,276 Nil 862,468Mr. D. Maegerle Nil Nil Nil -Nil Nil NilChief U. Okpa-Obaji 645,468 Nil 645,468 Nil 100,000 NilAlhaji A.R. Mohammed Nil Nil Nil Nil Nil NilAlhaji R. M. Gwarzo, OON 3,782,319 Nil 3,782,319 Nil 612,500 NilMr. C.U.A Mokwunye 590,644 Nil 590,644 Nil 458,617 NilMr. A. A. Ojora Nil 183,529,858 Nil 183,529,858 Nil 163,137,652Alhaji A. Muktari 546,410 Nil 546,410 Nil Nil NilMr. C. Momoh Nil Nil Nil Nil Nil Nil

Grand Total 5,564,841 2,197,619,968 5,564,841 2,197,619,968 1,171,117 2,177,119,954

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6. SHARE CAPITAL AND SHAREHOLDING: The company did not purchase its own shares during the year.

6.1 Authorized Share Capital: The authorized share capital of the company is N5billion made up of 10,000,000,000 ordinary

shares of 50k each.

6.2 Called Up, Issued and Fully Paid Share Capital:

6.2.1 The issued and paid-up share capital of the company is currently N2,572,685.037 made up of 5,145,370,074 ordinary shares of 50k each.

No. of % No. of % No of % Ordinary Holdings Ordinary Holdings Ordinary Holdings Shares Held as at Shares Held as at Shares held as at as at September September as at December December as at December December 30, 2013 30, 2013 31, 2012 31, 2012 31, 2011 31, 2011

Spennymoor Limited, Jersey C.I: 2,013,119,834 39.12 2,013,119,834 39.12 1,789,439,853 39.12Royal Exchange Assurance (U.K): 3,776 0.0001 3,776 0.00 3,357 0.00Nigerian Government: 20,654,487 0.4041 9,364,555 0.18 8,324,051 0.19Dantata Investments & SecuritiesCompany Limited: 921,833,885 17.9158 966,810,596 18.79 859,397,197 18.78Chief (Dr.) S. I. Odogwu, OFR 266,870,509 5.1866 266,870,509 5.19 237,218,231 5.19Decanon Investment Limited (Under Litigation - Suit No FHCL/CS/547908) 159,388,632 3.0977 157,321,235 3.06 139,841,099 5.91Phoenix Holdings Limited: 207,350,952 4.0299 183,529,858 3.57 163,137,652 3.57Other Nigerian Citizens & Associations: 1,556,147,999 30.2437 1,548,349,712 30.09 1,573,662,288 27.24

Grand Total 5,145,370,074 100 5,145,370,074 100 4,573,662,288 100

6.3 Share Range Analysis:

Share Range Analysis No. of % of Units % of as at December 31, 2012 Holders Units Held Held Units Held

1 - 500 774 5.1251 186,631 0.0036501 - 1000 625 4.1385 461,882 0.0091001 - 5000 5,047 33.4194 14,107,312 0.27425001 - 10000 2,811 18.6134 19,472,028 0.378410001 - 50000 3,845 25.4602 85,418,274 1.660150001 - 100000 795 5.2642 57,455,679 1.1166100001 - 500000 885 5.8602 183,350,984 3.5634500001 - 1000000 136 0.9005 94,148,980 1.82981000001 - 5000000 136 0.9005 282,927,383 5.49875000001 - 10000000 23 0.1523 155,876,721 3.029510000001 - 5145370074 25 0.1655 4,251,964,200 82.6367

Grand Total 15,102 100 5,145,370,074 100

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eport of the Directors contd.R7. RECORDS OF DIRECTORS ATTENDANCE: Further to the provisions of Section 258 (2) of the Companies and Allied Matters Act, Cap C20,

Laws of the Federation of Nigeria 2004, the Record of Directors’ Attendance at Board Meetings held in 2012 is available at the annual general meeting and is contained in the Report on Corporate Governance.

8. FIXED ASSET: Information relating to fixed assets during the year is shown in note 16 on page 85 for intangible

assets and note 18 on page 88 for property, plant and equipment. In the opinion of the directors, the market value of the company’s properties is not less than the value shown in the financial statements.

9. DONATIONS: The company made a donation of N100,000.00 (One hundred thousand naira only) to the

Augustine University/Catholic Archdiocese of Lagos in 2012. 10. POST BALANCE SHEET EVENTS: Save as disclosed, there were no significant post balance sheet events, which could have had a

material effect on the financial statements for the year ended December 31, 2012 which have not been adequately provided for.

11. AGENTS, BROKERS AND INTERMEDIARIES: The group maintains a network of licensed agents, brokers as well as other intermediaries

throughout the country.

12. EMPLOYEES’INVOLVEMENT,TRAININGANDWELFARE:

12.1 Employment of physically challenged persons: It is the policy of the company that there be no discrimination in the consideration of all

applications for employment, including physically challenged persons.

All employees whether physically challenged or not, are given equal opportunities to develop their expertise and knowledge and qualify for promotion in furtherance of their careers. In the event of members of staff becoming physically challenged, every effort is made to ensure that their employment with the Company continues and that appropriate training is arranged. It is the policy of the Company that training, career development and promotion of physically challenged persons should, as far as possible, be identical with that of other employees.

12.2 Health and safety at work and welfare of employees: The company is concerned about the health, safety and welfare of its employees. Therefore the

company, through its subsidiary, Royal Exchange Healthcare Limited provides health insurance for all group staff.

For the Year Ended 31 December 2012

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12.3 Employees’ involvement and consultation: The company’s consultation machinery was fully utilized in the year to disseminate management

policies and encourage employee involvement in its affairs.

Employee representatives are consulted regularly on a wide range of matters affecting their current and future interests.

Circulars and newsletters on significant corporate issues are published. In order to facilitate the exchange of information, a house journal titled “Royal News” is published featuring contributions from and about employees of the Company.

12.4 Training: The company recognizes that the acquisition of knowledge is ongoing. The company also

recognizes that to foster commitment, its employees need to hone their awareness of factors economic, financial or otherwise, that affect the company. To this end, the company, in the execution of its training programs, encourages and provides the opportunity for its staff to develop and enhance their skills awareness and horizons.

13. AUDIT COMMITTEE: The members of the statutory Audit Committee appointed at the annual general meeting held on

September 20, 2012, in accordance with S359 (3) of the Companies and Allied Matters Decree Cap C20, Laws of the Federation of Nigeria 2004, were:

A. Alhaja A.S.Kudaisi B. Mr. T. Olawuyi C. Mr. B. Akinsolu D. Chief U. Okpa-Obaji E. Alhaji A.R. Mohammed F. Mr. A. A. Ojora

The committee met in accordance with the provisions of S359 of the Companies and Allied Matters Act, Cap C20, Laws of Federation of Nigeria 2004 and will present their report.

14. AUDITORS: A resolution will be proposed authorizing the directors to appoint the auditors and to determine

their remuneration at the annual general meeting.

BY ORDER OF THE BOARD

SHEILAIFEYINWAEZEUKOCOMPANY SECRETARY/ GH (LEGAL SERVICES)FRC/2013/NBA/00000004059

LAGOS, NIGERIA

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DIRECTORS’ RESPONSIBILITIES

In accordance with the provisions of the Companies and Allied Matters Act, Cap 20, Laws of the Federation of Nigeria, 2004, and the Insurance Decree 1997, the directors’ are responsible for the preparation of financial statements which give a true and fair view of the financial position of the company at the end of the financial period and of the operating results for the year then ended. 1997.

In so doing they ensure that:

• Properaccountingrecordsaremaintained;• Applicableaccountingstandardsarefollowed;• Suitableaccountingpoliciesareadoptedandconsistentlyapplied;• Judgmentsandestimatesmadearereasonableandprudent;• The going concern basis is used, unless it is inappropriate to presume that the companywill

continue in business; and• Internalcontrolproceduresareinstituted,whichasfarasisreasonablypossible,safeguardthe

assets and prevent and detect fraud and other irregularities.

The directors accept responsibility for the annual financial statements, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgments and estimates in conformity with Nigeria Statements of Accounting Standards and the requirements of the Companies and Allied Matters Act, Cap 20, Laws of the Federation, 2004

The directors are of the opinion that the financial statements give a true and fair view of the financial position of the company and of its operating results.

The directors further accept responsibility for the maintenance of accounting records that may be relied upon in the preparation of 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 (12) months from the date of this statement.

KENNETHEZENWANIODOGWU CHIKEMOKWUNYEChairman Managing DirectorFRC/2013/NBA/00000004195 FRC/2013/IODN/00000004071


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eport of Audit CommitteeRTo the Members of Royal Exchange Plc

CSLD/SIE/C05

In compliance with Section 359 (6) of the Companies and Allied Matters Act Cap C20 Laws of the Federation of Nigeria 2004, (“The Act”) WE, the Members of the Audit Committee have reviewed and considered the financial statements of the Company, for the year ended December 31, 2012 and the reports thereon and confirm as follows:

a) The accounting and reporting policies of the company are in accordance with legal requirements and agreed ethical practices.

b) The scope and planning of audit requirement were, in our opinion, adequate.

c) We have reviewed the findings on management matters, in conjunction with the external auditors and are satisfied with the response of management thereon.

d) The company’s systems of accounting and internal controls were adequate.

e) We have made the recommendation required to be made in respect of the auditors.

DATED THIS 28TH DAY OF OCTOBER 2013

ALHAJAA.KUDAISICHAIRMAN OF THE AUDIT COMMITTEE

OTHER MEMBERSMR. T. OLAWUYIMR. A. BEKUNMICHIEF U. OKPA-OBAJIALHAJI A. R. MOHAMMEDMR. A. A. OJORA


48

he FinancialStatements

T

49


ndependent Auditor’s ReportIto the Members of Royal Exchange Plc

ReportontheFinancialStatementsWe have audited the accompanying consolidated financial statements of Royal Exchange Plc and its subsidiaries which comprise the consolidated statements of financial position as at 31 December 2012, 31 December, 2011 and 1 January, 2011, the consolidated statement of profit or loss and other comprehensive income, statement of changes in equity, statement of cash flows for the year ended 31 December 2012 and 31 December, 2011, a summary of significant accounting policies and other explanatory information set out on pages 50 to 158.

Directors’responsibilityfortheconsolidatedfinancialstatementsThe Directors are responsible for the preparation and fair presentation of these consolidated financial statements in accordance with the International Financial Reporting Standards , the Companies and Allied Matters Act CAP C20 LFN 2004, the Insurance Act, Cap I17 LFN 2004, the Bank and Other Financial Institutions Act CAP 33 LFN 2004, the Financial Reporting Council of Nigeria Act No 6, 2011, and for such internal control as the Directors determine are necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’sresponsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal controls relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Directors, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Royal Exchange Plc and its subsidiaries as at 31 December 2012, 31 December 2011 and 1 January, 2011 and the financial performance and cash flows for the year then ended 31 December 2012 and 31 December 2011 in accordance with the International Financial Reporting Standards, the Companies and Allied Matters Act Cap C20 LFN 2004, the Insurance Act, CAP I17, the Bank and Other Financial Institutions Act CAP 33 LFN 2004 and the Financial Reporting Council of Nigeria Act No 6, 2011.

Chartered AccountantsLagos, Nigeria1 November 2013FRC/2013/ICAN/00000000845

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Group Company 31-Dec-12 31-Dec-11 1-Jan-11 31-Dec-12 31-Dec-11 1-Jan-11 Note N’000 N’000 N’000 N’000 N’000 N’000

ASSETS Cash and Cash Equivalents 6 1,338,057 1,266,680 1,123,235 579 2,669 13,696Loans and Advances 7 435,830 285,401 136,681 - - -Advance under finance lease 8 412,961 240,639 295,785 - - -Financial assets 9 2,937,965 2,789,403 3,021,115 - - -Investment in Subsidiaries 10 - - - 7,620,464 7,620,464 13,638,644Deferred acquisition cost 11 171,965 110,156 84,019 - - -Trade receivables 12 418,381 327,406 250,294 - - -Other receivables 13 188,533 363,918 287,323 46,135 47,128 134,379Reinsurance assets 14 1,584,733 1,590,172 557,250 - - -Statutory deposits 15 555,000 555,000 555,000 - - -Intangible assets 16 38,035 41,210 65,882 1,875 3,750 5,625Investment properties 17 6,356,474 6,169,307 5,728,940 - - -Property, Plant and Equipment 18 1,379,719 1,438,620 1,039,584 20,641 16,193 461,487Employees retirement benefits 19 49,370 26,839 26,002 - - -Deferred tax assets 27.2 434,772 301,320 252,228 - - -

Total Assets 16,301,795 15,506,071 13,423,338 7,689,694 7,690,204 14,253,831

EQUITY & LIABILITIES Share capital & reserves: Ordinary share capital 29 2,572,685 2,572,685 2,286,831 2,572,685 2,572,685 2,286,831Share premium 29 2,690,936 2,690,936 2,976,790 2,690,936 2,690,936 2,976,790Contingency reserve 29.1 722,231 525,193 787,307 - - 445,786Retained earnings 29.2 2,695,350 2,474,268 2,717,694 1,606,162 1,647,142 7,140,726Treasury shares 29.3 (500,000) (500,000) (500,000) - - -Other Component of Equity 29.4 (52,538) 87,770 - (2,200) 4,367 -

Total Equity 8,128,664 7,850,852 8,268,622 6,867,583 6,915,130 12,850,133

Liabilities: Bank overdrafts 20 - - 152,137 1,688 - -Deferred income 21 48,192 67,194 8,071 - - -Trade payables 22 369,863 641,530 78,130 - - -Provisions and Other Payables 23 635,069 754,108 724,231 436,014 463,003 1,337,271Depositors’ funds 24 593,225 403,231 274,697 - - -Insurance contract liabilities 25 4,878,504 4,387,131 2,645,664 - - -Investment contract liabilities 26 573,494 530,960 591,603 - - -Income tax 27 519,109 501,333 213,376 289,039 300,603 53,282Dividend payable 28 80,525 - - 80,525 Employees retirement benefit obligations 19.3 475,150 369,732 466,807 14,845 11,468 13,145

Total Liabilities 8,173,131 7,655,219 5,154,716 822,111 775,074 1,403,698

Total Equity & Liabilities 16,301,795 15,506,071 13,423,338 7,689,694 7,690,204 14,253,831

Approved by the Board of Directors on 28 October 2013 and signed on its behalf by:

KennethEzenwaniOdogwu ChikeMokwunye PhilipAshinzeFRC/2013/NBA/00000004195 FRC/2013/IODN/00000004071 FRCN/2012/ICAN/00000000394Chairman Chief Executive Officer Chief Financial Officer

onsolidated Statement of Financial PositionCFor the Year Ended 31 December 2012

51


onsolidated Statement of Profit or Loss and Other Comprehensive IncomeCFor the Year Ended 31 December 2012

Group Company 31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-11 Note N’000 N’000 N’000 N’000

GrossWrittenPremium 30 7,614,209 6,822,383 228,548 226,988

Gross Premium Income 7,123,538 6,476,253 - -Reinsurance Expenses 30.1 (1,755,446) (1,793,000) - -

Net Premium Income 5,368,092 4,683,253 - -Fees and commission income 30.2 195,973 394,132 - -

Underwriting Income 5,564,065 5,077,385 - -

Insurance claims and benefits incurred – Gross 31 2,246,100 2,797,271 - -Insurance claims and benefits incurred - Recoverable from reinsurers 31 (613,774) (1,153,283) - -

Claims expense 1,632,326 1,643,988 - -Underwriting Expenses 32 2,128,016 1,852,575 - -

Total Underwriting Expenses 3,760,342 3,496,563 - -

Underwriting profit 1,803,723 1,580,822 - -Net interest income 33.1 110,331 23,004 - -Investment and other income 33.2 642,027 475,219 133,800 -Net fair value gain or (loss) on financial assets 33.3 732,753 (56,745) - -Other operating income 33.4 241,089 1,144,752 228,548 1,085,575Foreign exchange gains/(losses) 13,967 (292) - -

Net Income 3,543,890 3,166,760 362,348 1,085,575

Allowance for impairment 34 896,821 799,351 - 80,923Management expenses 35 1,903,861 2,156,981 152,373 379,445

TotalExpenses 2,800,682 2,956,332 152,373 460,368

Profitbeforetax 743,208 210,428 209,975 625,207Income tax 27 (119,273) (259,895) (45,140) (90,321)

Profit/(loss)aftertaxation 623,935 (49,467) 164,835 534,886

OtherComprehensiveIncome: Items that will not be reclassified subsequentlyto profit or loss: Net Actuarial Gains/(Losses) of Defined Benefit Obligations 29.4 (140,308) 87,770 (6,567) 4,367Tax Effects on Other Comprehensive Income - - - -Items that may be reclassified subsequently to profit or loss: Changes in fair value of AFS Investments - - - -Tax Effects on Other Comprehensive Income - - - -

OtherComprehensiveIncome,netoftaxes (140,308) 87,770 (6,567) 4,367

TotalComprehensiveIncomefortheyear 483,627 38,303 158,268 539,253

Earnings Per Share- Basic and diluted (Naira) 36 0.12 (0.01) 0.03 0.10

52


onsolidated Statement of Changes in Equity – GroupCFor the Year Ended 31 December 2012

Sha

re

Sha

re C

onti

ngen

cy

Ret

aine

d Tre

asur

y A

ctua

rial

O

ther

capi

tal

prem

ium

re

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eea

rnin

gs

Sha

res

gain

/los

s

com

pone

nt

Tota

l

re

serv

e

ofe

quity

Equ

ity

N’0

00

N

’00

0

N’0

00

N

’00

0

N’0

00

N

’00

0

N’0

00

N

’00

0

Asat

1J

anua

ry2

012

2

,572,6

852,6

90,9

365

25,1932,4

74,2

68

(500,0

00)87,77087,7707,

850,8

52

Pro

fit fo

r th

e ye

ar

- -

- 6

23,9

35

-

- -

6

23,9

35O

ther

Com

preh

ensi

ve In

com

e:

- -

- -

- - -

-

-

Net

act

uari

al g

ains

/los

ses

- -

- -

- (

140

,30

8)

(14

0,3

08

) (1

40,3

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)

Tota

lCom

preh

ensive

Inc

ome

forth

eye

ar-

--

623,9

35

-(140,3

08)(14

0,3

08)

483,6

27

Tran

sact

ions

wit

hin

Equi

ty:

Div

iden

d pa

id

- -

- (2

05,

815

) -

-

-

205,

815

Tran

sfer

to

cont

inge

ncy

rese

rve

- -

197,

038

(1

97,

038

) -

- -

-Tr

ansf

er t

o re

gula

tory

res

erve

-

- -

- -

-

-

-

As

at 3

1 D

ecem

ber

2012

2,57

2,68

5

2,

690,

936

7

22,2

31

2,69

5,35

0

(50

0,0

00

)

(52

,538

)

(

52,5

38)

8,12

8,6

64

Asat

1J

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2,2

86

,83

1 2

,976

,79

0

787,

30

7

2,7

17,6

95

(5

00

,00

0)

- -

8,2

68

,62

2

Pro

fit fo

r th

e ye

ar

- -

- (4

9,4

67)

- -

- (4

9,46

7)O

ther

Com

preh

ensi

ve In

com

e:

N

et A

ctua

rial

Gai

ns/L

osse

s -

- -

- -

87,

770

8

7,77

0

87,

770

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lCom

preh

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ome

forth

eye

ar

- -

- (4

9,4

67)

- 8

7,7

70

87,

770

3

8,3

03

Tran

sact

ions

wit

hin

Equi

ty:

Div

iden

d pa

id

- -

- -

- -

- -

Tran

sfer

to

Con

ting

ency

Res

erve

-

- 18

3,67

2 (1

83,

672)

-

-

-

-

Ari

sing

fro

m t

he c

apit

al r

educ

tion

of

subs

idia

ries

-

- (4

45,

786

) 4

45,

786

-

-

-

-

Tr

ansf

er o

f po

rtio

n of

Rev

alua

tion

R

eser

ve t

o R

etai

ned

Earn

ings

-

- -

(45

6,0

74)

- -

-

(

45

6,0

74)

Bon

us c

apit

alis

atio

n is

sue

285,

85

4

(28

5,8

54

) -

- -

-

-

-

As

at 3

1 D

ecem

ber

20

11

2,5

72,6

85

2

,69

0,9

36

5

25

,193

2

,474

,26

8

(50

0,0

00

) 8

7,7

70

87,

770

7

,85

0,8

52

53


onsolidated Statement of Changes in Equity – CompanyCFor the Year Ended 31 December 2012

Sha

re

Sha

re C

onti

ngen

cy

Ret

aine

d Tre

asur

y A

ctua

rial

O

ther

capi

tal

prem

ium

re

serv

eea

rnin

gs

Sha

res

gain

/los

s

com

pone

nt

Tota

l

re

serv

e

ofe

quity

Equ

ity

N’0

00

N

’00

0

N’0

00

N

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0

N’0

00

N

’00

0

N’0

00

N

’00

0

Asat

1J

anua

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012

2,5

72,6

85

2,6

90,9

36

-1,647,14

2

-4,3

67

4,3

67

6,9

15,130

Pro

fit fo

r th

e ye

ar

16

4,8

35

-

- 16

4,8

35O

ther

Com

preh

ensi

ve In

com

e:

- -

Cha

nges

in fa

ir v

alue

of

AFS

Inve

stm

ents

-

-R

eval

uati

on S

urpl

us o

n P

PE

- -

Shar

e of

gai

n (lo

ss)

on p

rope

rty

reva

luat

ion

of a

ssoc

iate

s/JV

-

-N

et A

ctua

rial

Gai

ns/L

osse

s

(6,5

67)

(6,5

67)

(6,5

67)

Tota

lco

mpr

ehen

sive

inc

ome

forth

eye

ar

--

-16

4,8

35

-(6

,567)

(6,5

67)

158,2

68

Tran

sact

ions

wit

hin

Equi

ty:

D

ivid

end

paid

(20

5,8

15)

- (2

05,

815

)

As

at 3

1 D

ecem

ber

20

12

2,5

72

,68

5

2,6

90

,93

6

- 1,

60

6,1

62

-

(2,2

00

) (2

,20

0)

6,8

67,

58

3

Asat

1J

anua

ry2

011

2,2

86,8

31

2,9

76,7

90

445,7

86

7,14

0,7

26

--

-12

,850,133

Pro

fit fo

r th

e ye

ar

- -

- 53

4,8

86

-

4,3

67

4,3

67

539,

253

Oth

er C

ompr

ehen

sive

Inco

me:

Net

Act

uari

al G

ains

/Los

ses

- -

- -

- -

- -

Tota

lCom

preh

ensive

Inc

ome

forth

eye

ar-

--

534,8

86

-4,3

67

4,3

67

539,2

53

Tran

sact

ions

wit

hin

Equi

ty:

D

ivid

end

paid

-

- -

- -

- -

-A

risi

ng f

rom

the

cap

ital

red

ucti

on

of s

ubsi

diar

ies

- -

(44

5,78

6)

(6,0

28,4

70)

- -

- (6

,474

,256

)Tr

ansf

er t

o C

onti

ngen

cy R

eser

ve

-

-

- -

- -

Bon

us c

apit

alis

atio

n is

sue

285,

85

4

(28

5,8

54

) -

- -

- -

-

As

at 3

1 D

ecem

ber

20

11

2,5

72

,68

5

2,6

90

,93

6

- 1,

64

7,14

2

- 4

,367

4

,367

6

,915

,13

0

54


onsolidated Statement of Cash FlowsCFor the Year Ended 31 December 2012

Group Company 2012 2011 2012 2011 Note N’000 N’000 N’000 N’000

CashflowsfromOperatingActivities Premium income 6,987,926 6,050,609 - -Interest received 251,748 187,969 - -Interest paid (51,637) (19,114) - -Claims recovered from reinsurance 588,504 147,345 - -Depositors Fund Increase 287,865 126,963 - -Commission income 190,217 245,388 - -Commission expense (767,774) (520,384) - -Reinsurance premium paid (1,755,447) (1,107,898) - -Net VAT input/output (16,152) (69,340) - -Other operating cash payments (3,338,421) (3,026,753) (217,364) (235,586)Loans and Advances (192,261) (307,688) - -Claims paid (2,185,511) (1,789,874) - -Other income 233,452 294,749 260,855 226,988

CashflowsfromOperatingActivities 232,509 211,972 43,491 (8,598)Tax and IT Levy paid 27 (234,949) (178,030) (56,704)

NetcashflowsprovidedbyOperatingActivities 38 (2,440) 33,942 (13,213) (8,598)

CashflowsfromInvestingActivities:Proceeds from disposal of fixed assets 2,444 10,022 1,566 -Investment properties additions 17 (7,990) (3,100) - -Purchase of fixed assets 18 (153,852) (126,021) (641) (2,429)Proceeds from disposal of investments 467,948 274,467 - -Dividend income 97,023 241,397 133,800 -Rental income from investment properties 33.4 34,563 81,568 - -Interest income 90 2,532 - -Financial assets investment (241,119) (219,225) - -

Netcashflowsfrominvestingactivities 199,107 261,640 134,725 (2,429)

CashflowsfromInvestingActivities: Dividend paid (125,290) - (125,290) -

NetcashflowsfromFinancingactivities (125,290) - (125,290) - Netincrease/(decrease)incashandcashequivalents 71,377 295,582 (3,778) (11,027)Cashandcashequivalentsatbeginningoftheyear 1,266,680 971,098 2,669 13,696

Cashandcashequivalentsatendoftheyear 6 1,338,057 1,266,680 (1,109) 2,669

55


otes to the Consolidated Financial StatementsNFor the Year Ended 31 December 2012

1. ReportingEntity The Company was incorporated as Royal Exchange Assurance (Nigeria) Plc, a private limited liability company on

29 December 1969. It was converted to a public limited company on 15 July 1989 and then listed on the Nigerian Stock Exchange on 3 December 1990. On 28 July 2008, the Company changed its name to Royal Exchange Plc and transferred its life and general insurance businesses tonewly incorporated subsidiaries, Royal Exchange General Insurance Company Limited and Royal Exchange Prudential Life Plc.

The Group currently comprises Royal Exchange Plc (Parent Entity), Royal Exchange General Insurance Company, Royal Exchange Prudential Life Assurance Plc, Royal Exchange Finance and Investment Ltd, Royal Exchange Micro-Finance Bank and Royal Exchange Healthcare.

The principal activities of the Group are general and health insurance, life assurance, asset management, credit financing and microfinance banking.

The financial statements of the Group are as at and for the year ended 31 December 2012.

The registered office address of the group is New Africa House, 31, Marina, Lagos, Nigeria.

2. BasisofPreparationandStatementofCompliancewithIFRS

StatementofCompliance The separate and consolidated financial statements have been prepared and approved by the Directors, in

accordance with International Financial Reporting Standards (“IFRS”s) and IFRS interpretations Committee (IFRIC), including Accounting Standards (IAS) issued by the International Accounting Standards Board (IASB) prevailing as at December 31, 2012.

The financial statements include the statement of financial position, statement of comprehensive income, the

statement of cash flows, the statement of changes in equity and the notes to the account.

These are the first financial statements prepared in accordance with IFRSs, and IFRS1: First-time adoption of International Financial Reporting Standards has been applied.

Reconciliations and explanations are provided in Notes 47 to the accounts of how the transition from Nigerian Generally Accepted Accounting Standards (NGAAP) to IFRS has affected the reported:

• Financialpositionat thedateof transition to IFRSandat theendof the latestperiodpresented in thegroup’s most recent annual financial statements in accordance with NGAAP; and,

• Financialperformanceandcashflowsofthegroupinitsmostrecentannualfinancialstatement.

The explanatory Notes in 48 show reconciliations of equity and profit or loss for comparative periods reported under Nigerian GAAP (previous GAAP) to those reported for this period under IFRS.

BasisofPreparation The separate and consolidated financial statements were prepared on the historical cost basis except the

following:

Carriedatfairvalue: • Available-for-salefinancialassets, • FairValuethroughProfitorLoss(FVTPL)financialassets • Investmentproperty

Carriedatadifferentmeasurementbasis • Retirementbenefitobligationsaremeasuredintermsoftheprojectedunitcreditmethod; • ImpairmentofTradeReceivablesismeasuredontheincurredlossbasis. Going Concern The financial statements have been prepared using appropriate accounting policies, supported by reasonable

judgments and estimates. The directors have a reasonable expectation, based on an appropriate assessment of a comprehensive range of factors, that the company and the group have adequate resources to continue as going concern for the foreseeable future.

Presentation Currency The financial statements are prepared in Nigerian Naira (=N=), which is the presentation currency, and rounded to

the nearest thousand (=N=000) unless otherwise indicated.

56


otes to the Consolidated Financial Statements contd.NFor the Year Ended 31 December 2012

2.1 ExplanationoftransitiontoIFRS–Firstadoption The group has prepared financial statements which comply with IFRS applicable for periods ended on 31

December 2012, together with the comparative period data as at and for the period ended 31 December 2011, as described both in the accounting policies and in the first-time IFRS reconciliations done in note 48 to the financial statement.

In preparing these financial statements, the company and group’s opening statement of financial position were prepared as at 1 January, 2011 – the date of transition to IFRS.

IFRS Transition Elections In preparing these financial statements in accordance with IFRS 1, the group has applied the mandatory exceptions

from full retrospective application of IFRS. The optional exemptions from full retrospective application selected by the group are summarised below:

Fairvalueorrevaluationasdeemedcost(IAS16andIAS38) The group applied the mandatory exemption to measure individual items of property, plant and equipment at fair

value at the date of transition.

Employeebenefits(IAS19) The group recognized all cumulative unamortized actuarial gains and losses in equity at the date of transition on

all its employee benefit plans

Designationofpreviouslyrecognizedfinancialinstruments(IAS39) The mandatory exemptions to designate previously recognized financial instruments was adopted as at the date

of transition

Insurance contracts (IFRS 4) Instead of full retrospective application of IFRS 4, the Company applied the less onerous transitional provisions

of IFRS 4 which permitted the continued use of previously applied NGAAP. 3 New Standards and Amendments The following new and revised IFRS have been applied in the current year and have affected the amounts

reported in these financial statements.

AmendmentstoIAS1PresentationofItemsofOtherComprehensiveIncome The group has applied the amendments to IAS 1: Presentation of Items of Other Comprehensive Income in

advance of the effective date (annual periods beginning on or after 1 July 2012). The amendments introduce new terminology for the statement of comprehensive income and income statement. Under the amendments to IAS 1, the ‘statement of comprehensive income’ is renamed the ‘statement of profit or loss and other comprehensive income’ and the ‘income statement’ is renamed the ‘statement of profit or loss’. The amendments to IAS 1 retain the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements. However, the amendments to IAS 1 require items of other comprehensive income to be classified into two categories in the other comprehensive income section: (a) items that will not be reclassified subsequently to profit or loss and (b) items that may be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis – the amendments do not change the option to present items of other comprehensive income either before tax or net of tax. The amendments have been applied retrospectively, and hence the presentation of items of other comprehensive income has been modified to reflect the changes. Other than the above mentioned presentation changes, the application of the amendments to IAS 1 does not result in any impact on profit or loss, other comprehensive income and total comprehensive income

AmendmentstoIFRS7Disclosures–TransfersofFinancialAssets The Group has applied the amendments to IFRS 7 Disclosures – Transfers of Financial Assets in the current year.

The amendments increase the disclosure requirements for transactions involving the transfer of financial assets in order to provide greater transparency around risk exposures when financial assets are transferred.

AmendmentstoIAS12DeferredTax:RecoveryofUnderlyingAssets The Group has applied the amendments to IAS 12 Deferred Tax: Recovery of Underlying Assets in the current year.

Under the amendments, investment properties that are measured using the fair value model in accordance with IAS 40 Investment Property are presumed to be recovered entirely through sale for the purposes of measuring deferred taxes unless the presumption is rebutted.

The directors have determined that the amendments have no effect to on the Group financial statements as the Group does not engage in such activities.

57



New and revised IFRSs in issue but not yet effective

The group has not applied the following new and revised IFRSs that have been issued but are not yet effective:

IFRS 9 - Financial Instruments3

IFRS 10 - Consolidated Financial Statements1

IFRS 11 - Joint Arrangements1 IFRS 12 - Disclosure of Interest in Other Entities1

IFRS 13 - Fair Value Measurement1

Amendments to IFRS 7 - Disclosures - Offsetting Financial Assets and Financial Liabilities1

Amendments to IFRS 9 and IFRS 7 - Mandatory Effective Date of IFRS 9 and Transition Disclosures3

Amendments to IFRS 10, IFRS 11 and IFRS 12 - Consolidated Financial Statements, Joint Arrangements and Disclosure of Interest in Other Entities: Transition Guidance1

IAS 19 (as revised in 2011) - Employee Benefits1 IAS 27 (as revised in 2011) - Separate Financial Statements1

IAS 28 (as revised in 2011) - Investments in Associates and Joint Ventures1

Amendments to IAS 32 - Offsetting Financial Assets and Financial Liabilities2

IFRIC 20 - Stripping Costs in the Production Phase of a Surface Mine1

1Effective for annual periods beginning on or after 1 January 2013 2Effective for annual periods beginning on or after 1 January 2014 3Effective for annual periods beginning on or after 1 January 2015

IFRS 9 - Financial Instruments IFRS 9, issued in November 2009, introduced new requirements for the classification and measurement

of financial assets. IFRS 9 was amended in October 2010 to include requirements for the classification and measurement of financial liabilities and for de recognition.

All recognised financial assets that are within the scope of IAS 39 Financial Instruments are to be subsequently measured at amortised cost or fair value. Any debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair value at the end of subsequent accounting periods. In addition, under IFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.

With regard to the measurement of financial liabilities designated as at fair value through profit or loss, IFRS 9 requires that the amount of change in the fair value of the financial liability, that is attributable to changes in the credit risk of that liability, is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Previously, under IAS 39, the entire amount of the change in the fair value of the financial liability designated as fair value through profit or loss was presented in profit or loss

The directors anticipate that it is highly likely that financial instrument classification will be influenced by the final IFRS 4 standard on insurance measurement currently under development. This is because the majority of the group’s financial instruments are held to meet obligations of currently designated insurance contract liabilities. It will be important to minimize the accounting mismatches in the income statement that may occur on application of the two future standards (IFRS 9 and IFRS 4).

IFRS 13 - Fair Value Measurements IFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value

measurements. The Standard defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements.

58



The scope of IFRS 13 is broad; it applies to both financial instrument items and non-financial instrument items for which other IFRSs require or permit fair value measurements and disclosures about fair value measurements, except in specified circumstances. In general, the disclosure requirements in IFRS 13 are more extensive than those required in the current standards.

For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy currently required for financial instruments only under IFRS 7 Financial Instruments: Disclosures will be extended by IFRS 13 to cover all assets and liabilities within its scope.

IFRS 13 is effective for annual periods beginning on or after 1 January 2013, with earlier application permitted. The group will implement the standard when it becomes effective.

The significant majority of the group’s assets are measured at fair value. The application of IFRS 13 may result in changes to the measurement of certain of the company’s assets and liabilities as well as enhanced disclosure requirement on fair value will be required; however, there are indications that these changes will have limited overall impact to the group’s net asset value or earnings.

IFRS19-EmployeeBenefits The amendments to IAS 19 change the accounting for defined benefit plans and termination benefits. The most

significant change relates to the accounting for changes in defined benefit obligations and plan assets. The amendments require the recognition of changes in defined benefit obligations and in fair value of plan assets when they occur, and hence eliminate the ‘corridor approach’ permitted under the previous version of IAS 19 and accelerate the recognition of past service costs.

The amendments require all actuarial gains and losses to be recognised immediately through other comprehensive income in order for the net pension asset or liability recognised in the statement of financial position to reflect the full value of the plan deficit or surplus. Furthermore, the interest cost and expected return on plan assets used in the previous version of IAS 19 are replaced with a ‘net-interest’ amount, which is calculated by applying the discount rate to the net defined benefit liability or asset.

The directors anticipate that, although the application of the new Standard will result in more enhanced disclosures in the financial statements, it is unlikely that the application of the amendments to IAS 19 will result in significant measurement changes to the group’s employee benefit liabilities.

IFRS 10, IFRS 11, IFRS 12, IAS 27, and IAS 28 In May 2011, a package of five Standards on consolidation, joint arrangements, associates and disclosures

was issued, including IFRS 10, IFRS 11, IFRS 12, IAS 27 (as revised in 2011) and IAS 28 (as revised in 2011). Key requirements of these five Standards are described below:

IFRS 10 - Consolidated Financial Statements IFRS 10 replaces the parts of IAS 27 Consolidated and Separate Financial Statements that deal with consolidated

financial statements. SIC-12 Consolidation – Special Purpose Entities will be withdrawn upon the effective date of IFRS 10. Under IFRS 10, there is only one basis for consolidation, that is, control. In addition, IFRS 10 includes a new definition of control that contains three elements: (a) power over an investee, (b) exposure, or rights, to variable returns from its involvement with the investee, and (c) the ability to use its power over the investee to affect the amount of the investor’s returns. Extensive guidance has been added in IFRS 10 to deal with complex scenarios.

IFRS11-JointArrangements IFRS 11 replaces IAS 31 Interests in Joint Ventures. IFRS 11 deals with how a joint arrangement of which two or more

parties have joint control should be classified. SIC-13 Jointly Controlled Entities – Non-monetary Contributions by Venturers will be withdrawn upon the effective date of IFRS 11. Under IFRS 11, joint arrangements are classified as joint operations or joint ventures, depending on the rights and obligations of the parties to the arrangements.

In contrast, under IAS 31, there are three types of joint arrangements: jointly controlled entities, jointly controlled assets and jointly controlled operations. In addition, joint ventures under IFRS 11 are required to be accounted for using the equity method of accounting, whereas jointly controlled entities under IAS 31 can be accounted for using the equity method of accounting or proportional consolidation.

IFRS12-DisclosureofInterestinOtherEntities IFRS 12 is a disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements,

associates and/or unconsolidated structured entities. In general, the disclosure requirements in IFRS 12 are more extensive than those in the current standards.

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Amendments to IFRS 10, IFRS 11 and IFRS 12 In June 2012, the amendments to IFRS 10, IFRS 11 and IFRS 12 were issued to clarify certain transitional guidance

on the application of these IFRSs for the first time.

These five standards together with the amendments regarding the transition guidance are effective for annual periods beginning on or after 1 January 2013, with earlier application permitted provided all of these standards are applied at the same time. The directors anticipate that the application of these five standards will have an insignificant impact on amounts reported in the consolidated financial statements.

AmendmentstoIFRS7andIAS32OffsettingFinancialAssetsandFinancialLiabilitiesandtherelateddisclosures

The amendments to IAS 32 clarify existing application issues relating to the offset of financial assets and financial liabilities requirements. Specifically, the amendments clarify the meaning of ‘currently has a legally enforceable right of set-off’ and ‘simultaneous realisation and settlement’.

The amendments to IFRS 7 require entities to disclose information about rights of offset and related arrangements (such as collateral posting requirements) for financial instruments under an enforceable master netting agreement or similar arrangement.

The amendments to IFRS 7 are effective for annual periods beginning on or after 1 January 2013 and interim periods within those annual periods. The disclosures should be provided retrospectively for all comparative periods. However, the amendments to IAS 32 are not effective until annual periods beginning on or after 1 January 2014, with retrospective application required.

The directors anticipate that the application of these amendments to IAS 32 and IFRS 7 may result in more disclosures being made with regard to offsetting financial assets and financial liabilities in the future.

AnnualImprovementstoIFRSs2009-2011CycleissuedinMay2012 The Annual Improvements to IFRSs 2009 – 2011 Cycle include a number of amendments to various IFRSs. The

amendments are effective for annual periods beginning on or after 1 January 2013. Amendments to IFRSs include:

· amendments to IAS 1 Presentation of Financial Statements · amendments to IAS 16 Property, Plant and Equipment; and · amendments to IAS 32 Financial Instruments: Presentation.

Amendments to IAS 1 The amendments to IAS 1 clarify that an entity is required to present a statement of financial position as at the

beginning of the preceding period (third statement of financial position) only when the retrospective application of an accounting policy, restatement or reclassification has a material effect on the information in the third statement of financial position and that the related notes are not required to accompany the third statement of financial position.

The amendments also clarify that additional comparative information is not necessary for periods beyond the minimum comparative financial statement requirements of IAS 1. However, if additional comparative information is provided, the information should be presented in accordance with IFRSs, including related note disclosure of comparative information for any additional statements included beyond the minimum comparative financial statement requirements. Presenting additional comparative information voluntarily would not trigger a requirement to provide a complete set of financial statements. The directors do not anticipate that the amendments to IAS 1 will have a significant effect on the Group’s consolidated financial statements.

Amendments to IAS 16 The amendments to IAS 16 clarify that spare parts, stand-by equipment and servicing equipment should be

classified as property, plant and equipment when they meet the definition of property, plant and equipment in IAS 16 and as inventory otherwise. The directors do not anticipate that the amendments to IAS 16 will have a significant effect on the Group’s consolidated financial statements.

Amendments to IAS 32 The amendments to IAS 32 clarify that income tax relating to distributions to holders of an equity instrument and

to transaction costs of an equity transaction should be accounted for in accordance with IAS 12 Income Taxes. The directors anticipate that the amendments to IAS 32 will have no effect on the Group’s consolidated financial statements as the Group has already adopted this treatment.

IFRIC20StrippingCostsintheProductionPhaseofaSurfaceMine IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine applies to waste removal costs that are

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incurred in surface mining activity during the production phase of the mine (production stripping costs). Under the Interpretation, the costs from this waste removal activity (stripping) which provide improved access to ore is recognised as a non-current asset (stripping activity asset) when certain criteria are met, whereas the costs of normal on-going operational stripping activities are accounted for in accordance with IAS 2 Inventories. The stripping activity asset is accounted for as an addition to, or as an enhancement of, an existing asset and classified as tangible or intangible according to the nature of the existing asset of which it forms part.

IFRIC 20 is effective for annual periods beginning on or after 1 January 2013. Specific transitional provisions are provided to entities that apply IFRIC 20 for the first time. However, IFRIC 20 must be applied to production stripping costs incurred on or after the beginning of the earliest period presented.

The directors anticipate that IFRIC 20 will have no effect to the Group’s financial statements as the Group does not engage in such activities.

4. SummaryofSignificantaccountingpolicies 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.

4.1 Basisofconsolidation The consolidated financial statements incorporate the financial statements of the Company and entities

(including special purpose entities) controlled by the Company (its subsidiaries).

Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidate statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

4.2 ChangesintheGroup’sownershipinterestinexistingsubsidiaries Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control

over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries.

Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to owners of the Company.

When the Group loses control of a subsidiary, a gain or loss is recognized in profit or loss and is calculated as the difference between: (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and; (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests.

When assets of the subsidiary are carried at revalued amounts or fair values and the related cumulative gain or loss has been recognized in other comprehensive income and accumulated in equity, the amounts previously recognized in other comprehensive income and accumulated in equity are accounted for as if the Group had directly disposed of the relevant assets (i.e. reclassified to profit or loss or transferred directly to retained earnings as specified by applicable IFRSs).

The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IAS 39 Financial Instruments: Recognition and Measurement, or when applicable, the cost on initial recognition of an investment in an associate or a jointly controlled entity.

4.3 Business combinations Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a

business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are generally recognized in profit or loss as incurred.

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At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their fair value, except that:

*Deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognized and measured in accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively;

*Liabilities or equity instruments related to share-based payment arrangements of the acquiree are measured in accordance with IFRS 2 Share-based Payment at the acquisition date (see note); an

*Assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that standard.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. Of, after assessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognized immediately in profit or loss as a bargain purchase gain.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share of the recognized amounts of the acquiree’s identifiable net assets.

The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in another IFRS.

When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination.

Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjustments that arise from additional information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.

The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an assets or a liability is remeasured at subsequent reporting dates in accordance with IAS 39, or IAS 37 provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss being recognized in profit or loss.

When a business combination is achieved in stages, the Group’s previously held equity interest in the acquiree is

remeasured to fair value at the acquisition date (i.e. the date when the Group obtains control) and the resulting gain or loss, if any, is recognized in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognized in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognized at that date.

The policy described is applied to all business combinations that take place on or after 1 January 2010. 4.4 Goodwill Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the

business less accumulated impairment losses, if any.

For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is

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less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognized directly in profit or loss in the consolidated [statement of comprehensive income/ income statement]. An impairment loss recognized for goodwill is not reversed in subsequent periods.

On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

4.5 Investmentsinassociates An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor

interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of accounting, except when the investment is classified as held for dale, in which case it is accounted for in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.

Under the equity method, an investment in an associate is initially recognized in the consolidated statement of financial position at cost and adjusted thereafter to recognize the Group’s share of the profit or loss and other comprehensive income of the associate. When the Group’s share of losses of an associate exceeds the Group’s net investment in the associate), the Group discontinues recognizing its share of further losses. Additional losses are recognized only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of an associate recognized at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss.

The requirements of IAS 39 are applied to determine whether it is necessary to recognize any impairment loss with respect to the Group’s investment in an associate. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with IAS 36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with it carrying amount.

Any impairment loss recognized forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases.

Upon disposal of an associate that results in the Group losing significant influence over that associate, any retained investment is measured at fair value at that date and the fair value is regarded as its fair value on initial recognition as a financial asset in accordance with IAS 39. The difference between the previous carrying amount of the associate attributable to the retained interest and its fair value is included in the determination of the gain or loss on disposal of the associate. In addition, the Group accounts for all amounts previously recognized in other comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognized in other comprehensive income by that associate would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when it loses significant influence over that associate.

When a group entity transacts with its associate, profits and losses resulting from the transactions with the

associate are recognized in the Group’ consolidated financial statements only to the extent of interests in the associate that are not related to the Group.

4.6 Foreign Currency In preparing the financial statements of each individual group entity, transactions in currencies other than the

entity’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined.

Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

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Exchange differences on monetary items are recognized in profit or loss in the period in which they arise except for:

* Exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings;

* Exchange differences on transactions entered into in order to hedge certain foreign currency risks (below for hedging accounting policies); and

* Exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognized initially in other comprehensive income and reclassified from equity to profit or loss on repayment of the monetary items.

For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into Currency Units using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognized in other comprehensive income and accumulated in equity (attributed to non-controlling interests as appropriate).

On the disposal of a foreign operation (i.e. a disposal of the Group’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, a disposal involving loss of joint control over a jointly controlled entity that includes a foreign operation, or a disposal involving loss of significant influence over an associate that includes a foreign operation), all of the exchange differences accumulated in equity in respect of that operation attributable to the owners of the Company are reclassified to profit or loss.

In addition, in relation to a partial disposal of a subsidiary that does not result in the Group losing control over the subsidiary, the proportionate share of accumulated exchange differences are re-attributed to non-controlling interests and are not recognized in profit or loss. For all other partial disposals (i.e. partial disposals of associates or jointly controlled entities that do not result in the Group losing significant influence or joint control), the proportionate share of the accumulated exchange differences is reclassified to profit or loss.

Goodwill and fair value adjustments on identifiable assets and liabilities acquired arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Exchange differences arising are recognized in equity.

4.7. Productclassification The Group’s products are classified at inception, for accounting purposes, as either Insurance contracts or

Investment contracts. A contract that is classified as insurance contract remains an insurance contract for the remainder of its lifetime, even if the insurance risk reduces significantly during this period; unless all rights and obligations are extinguished or expire. Investment contracts can, however, be reclassified as insurance contracts after inception if insurance risk becomes significant.

Insurance contracts are those contracts when the Group (the insurer) has accepted significant insurance risk from another party (the policyholders) by agreeing to compensate the policyholders if a specified uncertain future event (the insured event) adversely affects the policyholders. As a general guideline, the Group determines whether it has significant insurance risk, by comparing benefits paid with benefits payable if the insured event did not occur. Insurance contracts can also transfer financial risk.

Investment contracts are those contracts that transfer significant financial risk. Financial risk is the risk of a possible future change in one or more of a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of price or rates, credit rating or credit index or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract.

Some insurance contracts and investment contracts contain discretionary participation features (DPF) which is

a contractual right to receive, as a supplement to the standard guaranteed benefits, additional benefits that are:

· Likely to be a significant portion of the total contractual benefits; · The amount or timing is contractually at the discretion of the insurer; and · That are contractually based on:

i. the performance of a specified pool of contracts or a specified type of contract; ii. realized and or unrealized investment returns on a specified pool of assets held by the issuer; or iii. the profit or loss of the company, fund or other entity that issues the contract.

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In some insurance contracts or investment contracts, the financial risk is borne by the policyholders. Such products are unit-linked contracts.

Insurance contracts and investment contracts with DPF continue to be measured and accounted for under the existing accounting practices of each subsidiary prior to the date of transition to IFRS.

4.8 CashandCashEquivalents Cash and cash equivalents include cash in hand, bank and call deposits and other short-term highly liquid

investments with original maturities of three months or less at the end of the reporting period.

4.9 Borrowings Borrowings by way of bank overdrafts that are repayable on demand and form an integral part of the company’s

cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

Borrowing costs comprise interest payable on loans and bank overdrafts. They are charged to profit or loss as

incurred, except those that relate to qualifying assets. Arrangement fees in respect of financing arrangements are charged to borrowing costs over the life of the related facility.

4.10 Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and

rewards of ownership to the lessee. All other leases are classified as operating leases.

TheGroupasalessor Amounts due from lessees under finance leases are recognized as receivables at the amount of the Group’s net

investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group’s net investment outstanding in respect of the leases.

Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease.

Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized on a straight-line basis over the lease term.

TheGroupasalessee Assets held under finance leases are initially recognized as assets of the Group at their fair value at the inception

of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated statement of financial position as a finance lease obligation.

Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognized immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Group’s general policy on borrowing costs. Contingent rentals are recognized as expenses in the periods in which they are incurred.

Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognized as an expense in the period in which they are incurred.

In the event that lease incentives are received to enter into operating leases, such incentives are recognized as a liability. The aggregate benefit of incentives is recognized as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

4.11 Provisions Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past

event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

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4.12 Financial Assets All financial assets of the group have been recognized in the statement of financial position and measured in

accordance with their assigned classifications.

Effectiveinterestmethod The effective interest method is a method of calculating the amortized cost of a debt instrument and of

allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Income is recognized on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL.

(i) ClassificationofFinancialAssets The group’s financial assets are classified into the following specified categories:

• Fairvaluethroughprofitorloss(FVTPL), • Available-for-sale’(AFS)financialassets,and • Loansandreceivables.

The classification, which is determined by management, depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

FairValuethroughProfitorLoss(FVTPL) Financial assets are classified at FVTPL when the financial asset is either held for trading or it is designated as

at FVTPL. Financial assets at FVTPL are stated at fair value.

Available-for-salefinancialassets(AFS) Available-for-sale financial assets are non-derivatives that are either designated as AFS or are not classified as

(a) loans and receivables, (b) held-to-maturity investments or (c) financial assets at fair value through profit or loss.

Listed redeemable notes held by the group that are traded in an active market are classified as AFS and are stated at fair value at the end of each reporting period. The group also has investments in unlisted shares that are not traded in an active market but that are also classified as AFS financial assets.

Dividends on AFS equity instruments are recognized in profit or loss when the Group’s right to receive the dividends is established.

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

quoted in an active market. Loans and receivables are measured at amortized cost using the effective interest method, less any impairment.

(ii) Initial recognition and measurement Regular way purchases and sales of financial assets are recognized on the date on which the company commits

to purchase or sell the asset.

Financial assets are initially recognized at fair value. Transaction costs except for transaction costs on financial assets fair valued through profit or loss are recognized as part of the carrying amount of the asset.

(iii) Subsequent measurement

FairValuethroughProfitorLoss(FVTPL) Financial assets at FVTPL are stated at fair value. Any gains or losses arising on re-measurement are recognized

in income statement in the period in which they arise. The net gain or loss recognized in income statement incorporates any dividend or interest earned on the financial asset and is included in the ‘investment income’ line item in the company’s income statement.

Available-for-salefinancialassets(AFS) The fair value of financial assets traded on active liquid markets is determined by reference to regulated exchange

quoted ruling prices. If quoted market prices are not available, reference is also made to readily and regularly available broker or dealer price quotations.

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If a market for a financial asset is not active, the company establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to the current market value of other instruments that are substantially the same and discounted cash flow analysis. Where the fair value of financial assets is determined using discounted cash flow techniques, estimated future cash flows are based on management’s best estimates and the discount rate used is a market-related rate for a similar instrument.

Changes in the carrying amount of available-for-sale financial assets are recognized in other comprehensive income statement and accumulated in the statement of financial position as a separate component of equity under the heading of fair value reserves.

When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the investments revaluation reserve is reclassified to profit or loss.

Dividends on AFS equity instruments are recognized in profit or loss when the group’s right to receive the dividends is established.

AFS equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity investments are measured at cost less any identified impairment losses at the end of each reporting period.

Loansandreceivables Loans and receivables, after initial measurement, are measured at amortized cost, using the effective interest

rate method less any impairment (if any). Amortized cost is calculated by taking into account any discount or premium on acquisition and fee or costs that are an integral part of the effective interest rate.

The estimated fair values of the loans and receivables exceeding 12 months are the discounted amount of the estimated future cash flows expected to be received; expected cash flows are discounted at current market rates to determine fair value. No discounting was applied on loans and receivables with maturity period of below 12 months.

Loans and receivables on the statement of financial position comprise mortgage loans and other receivables. Interest on loans and receivables are included in profit and loss and reported as “other operating income”

When the asset is impaired, they are carried on the statement of financial position as a deduction from the carrying amount of the loans and receivables and recognized in the profit or loss as “impairment losses”.

(iv) Impairmentoffinancialassets The group assesses its financial assets, other than those at FVTPL, for indicators of impairment at the end of

each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For Available-for-sale (AFS) equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

Objective evidence that a financial asset or group of financial assets is impairment could include:

• Significantfinancialdifficultyoftheissuerorcounterparty; • Breachofcontract,suchasadefaultordelinquencyininterestorprincipalpayments; • Itbecomingprobablethattheborrowerwillenterbankruptcyorotherfinancialre-organization; • Thedisappearanceofanactivemarketforthatfinancialassetbecauseoffinancialdifficulties. For loans and receivables, the amount of the impairment loss recognized is the difference between the asset’s

carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate. 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 recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 60 days, as well as observable changes in national or local economic conditions that correlate with default on receivables.

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For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account.

Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss.

Available-for-sale financial assets When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously

recognized in other comprehensive income are reclassified to profit or loss in the period.

In respect of available-for-sale equity securities, impairment losses previously recognized in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income and accumulated under the heading of investments revaluation reserve. In respect of AFS debt securities, impairment losses are subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

(v) De-recognitionoffinancialassets The Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire,

or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognize the financial asset and financial liability separately.

On de-recognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss.

On de-recognition of a financial asset other than in its entirety (e.g. when the Group retains an option to repurchase part of a transferred asset), the Group allocates the previous carrying amount of the financial asset between the part it continues to recognize under continuing involvement, and the part it no longer recognizes on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognized and the sum of the consideration received for the part no longer recognized and any cumulative gain or loss allocated to it that had been recognized in other comprehensive income is recognized in profit or loss. A cumulative gain or loss that had been recognized in other comprehensive income is allocated between the part that continues to be recognized and the part that is no longer recognized on the basis of the relative fair values of those parts.

4.13 Financial liabilities and equity instruments

Classificationasdebtorequity Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in

accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity Instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting

all of its liabilities. Equity instruments issued by the Group are recognized at the proceeds received, net of direct issue costs. Repurchase of the group’s own equity instruments is recognized and deducted directly in equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments.

CompoundInstruments The component parts of compound instruments (convertible notes) issued by the Group are classified separately

as financial liabilities and equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. Conversion option that will be settled by the exchange of a fixed amount of cash or another financial asset for a fixed number of the Group’s own equity instruments is an equity instrument.

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At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible instruments. This amount is recorded as a liability on an amortized cost basis using the effective interest method until extinguished upon conversion or at the instrument’s maturity date.

The conversion option classified as equity is determined by deducting the amount of the liability component from

the fair value of the compound instrument as a whole. This is recognized and included in equity, net of income tax effects, and is not subsequently remeasured. In addition, the conversion option classified as equity will remain in equity until the conversion option is exercised.

Transaction costs that relate to the issue of the convertible notes are allocated to the liability and equity components in proportion to the allocation of the gross proceeds. Transaction costs relating to the equity component are recognized directly in equity. Transaction costs relating to the liability component are included in the carrying amount of the liability component and are amortized over the lives of the convertible notes using the effective interest method.

Financial liabilities Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other financial liabilities’. Financial liabilities at FVTPL Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated

as at FVTPL.

A financial liability is classified as held for trading if:

* It has been acquired principally for the purpose of repurchasing it in the near term; or * On initial recognition it is part of a portfolio of identified financial instruments that the Group

manages together and has a recent actual pattern of short-term profit-taking; or * It is a derivative that is not designated and effective as a hedging instrument.

A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if:

* such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise; or

* the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

* it forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL.

Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any interest paid on the financial liability and is included in the ‘other gains and losses’ line item in the consolidated [statement of comprehensive income/income statement].

Otherfinancialliabilities Other financial liabilities (including borrowings and trade and other payables) are subsequently measured at

amortized cost using the effective interest method.

The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

Financial guarantee contracts A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the

holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.

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Financial guarantee contracts issued by the Group are initially measured at their fair values and, if not designated as at FVTPL, are subsequently measured at the higher of:

* The amount of the obligation under the contract, as determined in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets; and

* The amount initially recognized less, where appropriate, cumulative amortization recognized in accordance with the revenue recognition policies

Derecognitionoffinancialliabilities The Group derecognizes financial liabilities when, and only when, the Group’s obligations are discharged,

cancelled or they expire. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.

EmbeddedDerivatives Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives

when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at fair value with changes in fair value recognized in profit or loss. The Group does not separate, and measure at fair value, a policyholder’s option to surrender an insurance contract for a fixed amount (or an amount based on a fixed amount and interest rate).

Embedded derivatives that meet the definition of insurance contracts are measured as insurance contracts.

FairValueoffinancialinstruments The fair value of non-derivative financial assets and liabilities with standard terms and conditions and traded

an active liquid markets are determined by reference to quoted market prices. Financial assets in this category include listed equities, listed debt securities and mortgages. Financial liabilities include borrowing, net asset value attributable to unit-holders and liabilities for investment contracts without DPF.

The fair value of other non-derivative financial assets and liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions and dealer quotes for similar instruments

(i) Impairmentofothernon-financialassets At the end of each reporting period, the company reviews the carrying amounts of its tangible and intangible

assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest Company of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. 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 for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

4.14 DeferredAcquisitionCost The incremental costs directly attributable to the acquisition of new business are deferred by recognising an

asset. For both Life and Non-Life Insurance contracts, acquisition costs including both incremental acquisition costs and other indirect costs of acquiring and processing new business are deferred.

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Deferred acquisition costs are amortised systematically over the life of the contracts at each reporting date.

For all deferred charges under an insurance contracts and investment contracts (with or without DPF), an impairment review is performed at the end of each reporting period, or more frequently, when an indication of impairment arises. When the recoverable amount is less that the carrying amount, an impairment loss is recognised in profit or loss.

4.15TradeReceivables Trade receivables arising under insurance contracts and investment contracts with DPF are recognized when due.

These include amounts due from agents, brokers, co-assurers and insurance contract holders. Trade receivables are stated at cost less impairment.

A provision for impairment is established when there is objective evidence that, as a result of one or more events that occurred after the initial recognition, the estimated future cash flows have been impaired. The carrying amount of the financial asset is reduced by the impairment loss through the use of an allowance account and recognized as impairment loss in income statement.

The Group’s allowance for impairment is based on incurred loss model for each customer; the probability of default and the age of the debts are also taken into account in arriving at the impairment amount.

When a trade receivable is considered uncollectible, it is written off against the impairment allowance account.

4.16 OtherReceivablesandPrepayments Other receivables balances include staff loans, dividends, accrued investment income and security holding trust

account. The Group has an internal system of assessing the credit quality of other receivables through established policies and approval systems. The Group constantly monitors its exposure to these receivables via periodic review.

Prepayments are essentially prepaid rents and staff up-front payments. Other receivables and prepayments are carried at cost less impairment losses.

4.17. Reinsurance Assets The Group enters into reinsurance contracts in the normal course of business in order to limit the potential for

losses arising from certain exposures. Outwards reinsurance premiums are accounted for in the same period as the related premiums for the direct or inwards reinsurance business being reinsured. Reinsurance arrangements do not relief the company from its direct obligation to its policy holders.

Reinsurance assets include balances due from reinsurance companies for paid losses. Reinsurance assets are

measured consistently with the amounts associated with the underlying insurance contracts and in accordance with the terms of the reinsurance contract. The company has the right to set off reinsurance payables against amounts due from reinsures and brokers, in line with the agreed arrangement between both parties.

Reinsurance assets are subject to impairment testing and the carrying amount is reduced to its recoverable amount. The impairment loss is recognised as an expense in the income statement. The asset is impaired if objective evidence is available to suggest that it is probable that the Group will not be able to collect the amounts due from reinsurers

4.18 StatutoryDeposits Statutory deposits are cash balances held with the Central Bank of Nigeria (CBN) in compliance with the Insurance

Act, CAP 117, LFN 2004 for the Group’s Non-Life and Life Insurance businesses. The deposits are only available as a last resort to the Group if the Non-Life and / or Life company goes into

liquidation. Statutory deposits are measured at cost.

4.19 Intangible Assets

Softwareexpenditure An internally-generated intangible asset arising from the Group’s software development is recognized if and only

if all of the following conditions are met:

* The technical feasibility of completing the intangible asset so that it will be available for use or sale; * The intention to complete the intangible asset and use or sell it; * The ability to use or sell the intangible asset; * How the intangible asset will generate probable future economic benefits; * The availability of adequate technical, financial and other resources to complete the development and to use

or sell the intangible asset; and * The ability to measure reliably the expenditure attributable to the intangible asset during its development.

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The amount initially recognized for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognized, development expenditure is recognized in profit or loss in the period in which it is incurred.

Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortization and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.

Acquiredcomputersoftware Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use

the specific software. Computer software is stated at cost less amortization and impairment losses.

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. Costs associated with maintaining computer software programmes are recognized as an expense as incurred.

Amortization Computer software costs, whether developed or acquired, are amortized for a period of five years using the

straight line method.

4.20InvestmentProperties Investment properties are properties held to earn rentals or for capital appreciation (including property under

construction for such purposes) or for both purposes, but not for sale in the ordinary course of business.

Recognition and measurement Investment properties are measured initially at cost, including all transaction costs. Subsequent to initial

recognition, investment properties are measured at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair value of investment properties are included in the income statement in the period in which they arise.

De-recognition An investment property is derecognized upon disposal or when the investment property is permanently

withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the period in which the property is derecognized.

Transfers 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. If owner-occupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under property and equipment up to the date of change. Subsequently, the property is re-measured to fair value and reclassified as investment property.

4.21 Property,PlantandEquipment

Recognition and measurement The group recognizes items of property, plant and equipment at the time the cost is incurred. These costs

include costs incurred initially to acquire or construct an item of property, plant and equipment. It also includes the costs of its dismantlement, removal or restoration, the obligation for which an entity incurs as a consequence of using the item during a particular period.

Items of property and equipment are measured at cost less accumulated depreciation and impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset.

When parts of an item of property or equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment.

The assets’ carrying values and useful lives are reviewed, and written down if appropriate, at each date of the Statements of financial position. Assets are impaired whenever events or changes in circumstances indicate that the carrying amount is less than the recoverable amount.

Subsequent costs The cost of replacing a part of an item of property or equipment is recognized 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

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cost can be reliably measured. The costs of the day-today servicing of property and equipment are recognized in income statement as incurred.

Depreciation Depreciation is recognized in the income statement on a straight-line basis to write down the cost of each asset

(other than freehold land), to their residual values over the estimated useful lives of each item of property and equipment. Leased assets under finance lease 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 derecognized or classified as held for sale in accordance with IFRS 5. A non-current asset or disposal group is not depreciated while it is classified as held for sale.

Capital work in progress is not depreciated. Upon completion it is transferred to the relevant asset category. Depreciation methods, useful lives and residual values are reassessed at each reporting date.

Freehold land is not depreciated The estimated useful lives for the current and comparative periods are as follows: Years Buildings 50 Furniture and office equipment 5 Motor vehicles - New 4 - Salvage 3 Computer hardware 4 Computer Software 5 Land is not depreciated.

De-recognition An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits

are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in the income statement of the year that the asset is de-recognized.

4.22Employeeretirementbenefit/Longserviceawards

Definedcontributionplans The Group operates a defined contribution plan in accordance with the provisions of the Pension Reform Act

2004. The contribution of the Group is 7.5% of the qualifying monthly emoluments (i.e. basic, housing and transport) of employees. The Group’s obligations for contributions to the plan are recognised as an expense in profit or loss when due.

Gratuity The Group operates a defined benefit gratuity scheme for some of its employees. The gratuity liability is valued by

an actuary using the projected unit credit method with discount rate used being the market yield on government bonds. Net actuarial gains and loss are recognised immediately in “other comprehensive income”. Past service cost is recognised immediately in the statement of profit or loss for all qualified employees.

The plan is unfunded and payments are made on a pay-as- you-go- basis. Only staff of the Group as at 1 June 2008 are eligible for the staff gratuity scheme. Benefits accrue after a minimum of five years of service.

Pension The Group operated a funded pension scheme for its employees prior to the Pension Reform Act 2004. It

therefore has continuing pension obligation to its staff who had either retired prior to commencement of the contributory pension scheme or who had qualified for pension but whose accrued pension amounts were neither shared to them nor transferred to their Pension Fund Managers.

Pensioners are entitled to 3% annual increment. Entitlements of staff who are qualified for pension were

actuarially valued as at 1 June 2008 and attract 12% annual interest. Over 90% of the pension assets are being managed by a pension fund administrator while the balance is invested in marketable securities and bank placement.

Longserviceawards The Group operates a long service award scheme for its employees. Qualification for long service awards are:

10years, 15years, 20years, 25year, 30years & 35years.

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4.23DeferredTaxAssets Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the

company’s financial statements and the corresponding tax bases used in the computation of taxable profit.

Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets are not recognized if the temporary difference arises from goodwill (arising in a business combination) or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets are measured at the tax rate that is expected to apply in the period in which the asset is realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax assets reflects the tax consequences that would follow from the manner in which the company expects, at the end of the reporting period, to recover the carrying amount of its assets.

4.24Ordinarysharecapital The issued ordinary shares of the Holdco are classified as equity instruments. Incremental costs directly

attributable to the issue of an equity instrument are deducted from the initial measurement of the equity instruments.

4.25Sharepremium This represents the excess amount paid by shareholders on the nominal value of the shares. This amount is

distributable to the shareholders at their discretion. The share premium is classified as an equity instrument in the statement of financial position.

4.26Contingencyreserve The Group maintains contingency reserves in respect of its insurance businesses in line with the provisions of

S. 21 of the Insurance Act 2003. For the Non-life business, annual transfer to the contingency reserve is at the rate equal to the higher of 3% of total premium or 20% of the total profit after taxation until the reserve reaches the greater of the minimum paid up capital or 50% of net premium while, for the Life business, it is the higher of 1% of gross premium or 10% of the net profit after taxation until it reaches the amount of the minimum paid up capital.

4.27RetainedEarnings(Generalreserve) The reserve comprises undistributed profit/(loss) from previous years and the current year. Retained earnings is

classified as equity in the statement of financial position

4.28OthercomponentsofEquity Fairvaluereserve The fair value reserve comprises the cumulative net change in the fair value of available for-sale financial assets

until the investment are derecognised or impaired. Assetrevaluationreserve The revaluation reserve relates to the surplus on revaluation of land and building at the end of the financial

period. Increases in the value of these assets are recognised in other comprehensive income and accumulated in asset revaluation reserve until the assets are derecognized.

4.29 Borrowings Borrowings relate to overdraft facilities with a financial institution at mutually agreed terms. The facilities are to

ensure that any delay in the clearing or transfer of financial instrument into the Group’s bank accounts do not have any adverse effects on any instrument issued to settle obligations.

4.30Deferredincome Deferred income relates to payments received in advance. deferred incomes are amortised and transferred to

the statement of comprehensive income over the periods that they relate.

4.31 Trade Payables Trade payables are recognized when due. These include amounts due to agents, brokers and insurance contract

holders. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. The fair value of a non-interest bearing liability is its discounted repayment amount. If the due date is less than one year, discounting is omitted.

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4.32Provisionsandotherpayables Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past

event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognized as a provision is the best estimate of the consideration required to settle the present

obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

4.33 Finance lease obligations These are the corresponding liabilities on assets acquired under finance lease. Lease payments are apportioned

between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability.

Finance expenses are recognized immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Group’s general policy on borrowing costs.

4.34 Insurance contracts Liabilities This represents the Group’s liability to policy holders. It comprises the unearned premium, unexpired risk,

outstanding claims and the incurred but not reported claims. At the end of each accounting period, this liability is reflected as determined by an actuarial valuation report.

(i) Unearnedpremiumprovision The provision for unearned premiums represents the proportion of premiums written in the periods up to

the accounting date that relates to the unexpired terms of policies in force at the end of reporting date. This is estimated to be earned in subsequent financial periods, computed separately for each insurance contract using a time apportionment basis.

(ii)Reserveforunexpiredrisk A provision for additional unexpired risk reserve is recognised for an underwriting year where it is envisaged

that the estimated cost of claims and expenses exceed the unearned premium provision.

(iii)Reserveforoutstandingclaims Outstanding claims represent the estimated ultimate cost of settling all claims arising from incidents

occurring prior to the end of reporting date, but not settled at that date.

(iv)Reserveforincurredbutnotreportedclaims(IBNR) A provision is made for claims incurred but not yet reported as at the end of the financial year. This provision

is based on the liability adequacy test report by an actuary.

Liability Adequacy Test At the end of each reporting period, Liability Adequacy Tests are performed by a qualified actuary to ensure

that material and reasonably foreseeable losses arising from existing contractual obligations are recognised. In performing these tests, current best estimates of future contractual cash flows, claims handling and administration expenses, investment income backing such liabilities are considered. Long-term insurance contracts are measured based on assumptions set out at the inception of the contract. Any deficiency is charged to the statement of profit or loss and other comprehensive income by increasing the carrying amount of the related insurance liabilities.

4.35Investmentcontractliabilities Investment contracts are those contracts that transfer significant financial risk. Financial risk is the risk of a

possible future change in one or more of a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of price or rates, credit rating or credit index or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract. The investment contract comprises the Royal Policy Product, (RPP), the Royal Insurance Savings Account (ISA) and the Deposit Administration (DA).

Interest accruing to the assured from investment of the savings is recognised in the income statement in the period it is earned while interest paid and due to depositors is recognised as an expense. The net result of the deposit administration revenue account is transferred to the income statement.

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Liability Adequacy Test At each reporting date, an assessment is made of whether the recognized long-term business, short-term

business and investment contract provisions are adequate, using current estimates of future cash flows. If that assessment shows that the carrying amount of the liabilities (less related assets) is insufficient in light of the estimated future cash flows, the deficiency is recognized in the profit or loss by setting up an additional provision in the statement of financial provision.

The Liability Adequacy Test (LAT) on the investment contract liabilities was carried out by HR Nigeria Limited

(Consultant Actuaries).

4.36IncomeTaxes Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported

in the Group’s Statement of comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

The current taxes include: Company Income Tax @ 30% of taxable profit; Education Tax @ 2% of assessable

profit; Capital Gains Tax @ 10% of chargeable gains; and Information Technology Development Levy @ 1% of accounting profit.

Currentanddeferredtaxfortheyear Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in

other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination

4.37Deferredtaxliabilities Deferred tax liabilities are recognized for taxable temporary differences associated with investments in

subsidiaries and associates, and interests in joint ventures, except where the company is able to control the reversal of the temporary differences and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to settle the carrying amount of its liabilities.

4.38Grosswrittenpremium Written premiums for both life and non-life (general) insurance business comprise the premiums on contracts

incepting in the financial year. Written premiums are stated gross of commission payable to intermediaries and exclusive of taxes and duties levied on premiums.

4.39Grosspremiumincome This is the premium recognised as revenue (earned premium) proportionately over the period of coverage.

The portion of premium written on in-force contracts that relates to unexpired risk after balance sheet date is reported as the unearned premium liability. Unearned premiums are calculated on time apportionment basis of the periods of risk after the reporting date.

4.40Reinsuranceexpenses Reinsurance cost represents outward premium paid/payable to reinsurance companies less the unexpired portion

as at the end of the accounting year.

4.41 Fees and commission income Fee and commission income consists primarily of Insurance agency and brokerage commission, reinsurance

and profit commissions, policyholder administration fees and other contract fees. Reinsurance commissions receivable are deferred in the same way as acquisition costs. All other fee and commission income is recognized as the services are provided.

4.42Claimsexpenses Claims expenses consist of insurance claims and benefits incurred within the reporting period, less the amount

recoverable from the reinsurance companies.

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Insuranceclaimsandbenefitsincurred Gross benefits and claims consist of benefits and claims paid / payable to policyholders, which include changes in

the gross valuation of insurance contract liabilities, except for gross change in the unearned premium provision which are recorded in premium income. It further includes internal and external claims handling costs that are directly related to the processing and settlement of claims. Amounts receivable in respect of salvage and subrogation are also considered.

Salvage Some non-life insurance contracts permit the company to sell (usually damaged) property acquired in the process

of settling a claim.

Subrogation Subrogation is the right of an insurer to pursue a third party that caused an insurance loss to the insured. This is

done as a means of recovering the amount of the claim paid to the insured for the loss.

4.43Underwritingexpenses Underwriting expenses include acquisition costs and maintenance expense. Acquisition costs comprise all

direct and indirect costs associated with the writing of insurance contracts. These include commission expenses and other technical expenses. Maintenance expenses are expenses incurred in servicing existing policies. All underwriting expenses are charged in consonance with the period of insurance cover from which they accrue.

4.44Investmentincome Investment income consists of dividend, interest and rent receivables and realized gains and losses on fair value

assets. Interest income Interest income for interest bearing financial instruments is recognized within investment income in the

statement of comprehensive income as it accrues and is calculated by using the effective interest rate method.

Dividendincome Dividend income is recognised, within investment income, when the right to receive payment is established. For

listed securities, this is the date the security is listed as ex dividend.

Realized gains and losses Realised gains and losses on investments include gains and losses on financial assets and investment properties.

Gains and losses on the sale of investments are calculated as the difference between net sales proceeds and the original or amortised cost and are recorded on occurrence of the sale transaction.

4.45Netgainorlossarisingonvaluationoffinancialassets Gain or loss on valuation of financial assets consists of unrealized gains and losses on fair value assets and

movements in amortized cost on debt securities and other loans and receivables.

Unrealised gains and losses Unrealized gains or losses represent the difference between the carrying value at the year end and the carrying

value at the previous year end or purchase value during the year, less the reversal of previously recognized unrealized gains and losses in respect of disposals during the year.

4.46Otheroperatingincome Other income represents income generated from sources other than premium revenue and investment income. It

includes rental income, profit on disposal of fixed assets and interest on loan and advances. It is recognised when payment is received.

4.47Foreignexchangegainorloss Foreign exchange gain or loss arises from the translation of transactions into the functional currency using the

rate prevailing at the dates of the transactions, while the monetary assets and liabilities denominated in foreign currencies are translated at year end exchange rates.

4.48Allowanceforimpairmentontradereceivables Allowance for impairment represents the reduction in value of the carrying amount of the trade receivables

(premium receivables and reinsurance receivables) as a result of impairment (see 6.14).

4.49Managementexpenses Management expenses are charged to profit or loss when the underlying goods are received or services rendered.

They are expenses other than claims and underwriting expenses and include employee benefits, depreciation charges and other operating expenses.

77



5 Judgments,estimatesandassumptions In the application of the Group’s accounting policies, the directors are required to make judgements, estimates

and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates

are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

The key areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates

are significant to the financial statements are disclosed in Notes 40 to 42.2 to the accounts.

Group Company 31-Dec-12 31-Dec-11 1-Jan-11 31-Dec-12 31-Dec-11 1-Jan-11 N’000 N’000 N’000 N’000 N’000 N’000

6 Cashandcashequivalents Cash 190,545 338,241 544,103 579 2,669 13,696 Short-term deposits (including demand and time deposits) 891,964 843,185 498,398 - - - Due from other financial institutions 255,548 85,254 80,734 - - -

Cash and cash equivalents (as per statement of financial position) 1,338,057 1,266,680 1,123,235 579 2,669 13,696 Bank Overdrafts - - (152,137) (1,688) - -

Cash and cash equivalents (as per statement of cash flows) 1,338,057 1,266,680 971,098 (1,109) 2,669 13,696

Short–term deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the group. All deposits are subject to an average variable interest rate of 13% (2011: 11%).

The carrying amounts disclosed above reasonably approximate fair value at the reporting date.

7 Loansandadvances Group 31-Dec-12 31-Dec-11 1-Jan-11 N’000 N’000 N’000

Term loans 481,080 314,622 141,674 Specific impairment (21,349) (14,443) 2,775 Collective impairment (23,901) (14,778) (7,767)

435,830 285,401 136,682

7.1 Allowanceforimpairment Impairment balance (29,221) (4,992) - Charge for the year (16,029) (24,229) (4,992)

(45,250) (29,221) (4,992)

78



Group 31-Dec-12 31-Dec-11 1-Jan-11 N’000 N’000 N’000

7.2 Sectorialanalysisofloan Agriculture 533 - - Manufacturing 19,362 - - Trade and commerce 325,919 196,206 141,674 Real estate and construction 130,285 117,280 - Education 4,981 1,136 -

Total 481,080 314,622 141,674

7.3 Analysisofloanbymaturity 1-30 days 18,680 5,709 3,293 31-60 days 98,205 56,398 9,933 61-90 days 117,208 95,780 21,736 91-180 days 46,061 123,973 26,274 181-360 days 200,926 32,762 80,438

481,080 314,622 141,674

7.4 Analysisofloansbysecurity Secured against real estates 203,923 127,589 85,104 Otherwise secured 231,765 159,887 43,445 Not secured 45,392 27,146 13,125

481,080 314,622 141,674

8 Advancesunderfinancelease Gross investment 420,419 262,270 350,530 Allowance for impairment (Note 8.3) (7,458) (21,631) (54,745)

412,961 240,639 295,785

8.1 Analysis by maturity 0 - 30 days - - - 1- 3 months 43,689 38,097 35,234 3 - 6 months 56,159 48,971 45,256 6 - 12 months 38,270 33,372 30,840 Over 12 months 282,301 120,199 184,455

420,419 240,639 295,785

8.2 Current 138,129 120,449 111,330 Long term 282,290 120,190 184,455

420,419 240,639 295,785

8.3 Allowanceforimpairment At 1 January 21,631 54,745 15,589 Additional impairment / (write back) (14,173) (33,114) 39,156

7,458 21,631 54,745

79




9 Financial assets

9a Classification–carryingamount Available-for-sale investments (AFS) 310,823 307,437 338,876 Fair value through profit or loss carried at fair value (FVTPL) 2,107,399 2,166,211 2,463,275 Loans and receivables carried at amortised cost (Loans) 519,743 315,755 218,964

2,937,965 2,789,403 3,021,115

9.b Carrying amount at 31 December 2012

FINANCIAL INSTRUMENTS CLASSIFICATION BUCKETS Fair Value Amortised Cost Available Fairvalue forsale through Held profitor to loss maturity Loans Total N’000 N’000 N’000 N’000 N’000

Debt securities - Federal Government - 205,417 - - 205,417 - State Government - - - 68,166 68,166 - Corporate - - - 122,797 122,797 - Debenture (unlisted) - - - 16,246 16,246 - Treasury bills - 205,893 - - 205,893

Loans and receivables - Individual Loans - - - 273,532 273,532 - Mortgage Loans - - - 39,002 39,002

- 411,310 - 519,743 931,053

Equities - Listed - 1,696,089 - - 1,696,089 - Unlisted 310,823 - - - 310,823

310,823 1,696,089 - - 2,006,912

Total financial assets 310,823 2,107,399 - 519,743 2,937,965

Within one year - 205,893 - - 205,893 More than one year 310,823 1,901,506 - 519,743 2,732,072

310,823 2,107,399 - 519,743 2,937,965

80



9.b Carrying amount at 31 December 2011 (Continued)


Debt securities - Federal Government - 24,893 - - 24,893 - State Government - - - 80,357 80,357 - Treasury bills - 242,618 - - 242,618 Loans and receivables - Individual Loans - - - 2,201 2,201 - Mortgage Loans - - - 233,198 233,198

- 267,511 - 315,755 583,266

Equities - Listed - 1,898,700 - - 1,898,700 - Unlisted 307,437 - - - 307,437

307,437 1,898,700 - - 2,206,137

Totalfinancialassets 307,437 2,166,211 - 315,755 2,789,403

Within one year - 242,618 - - 242,618 More than one year 307,437 1,923,593 - 315,755 2,546,785

307,437 2,166,211 - 315,755 2,789,403

Carryingamountat1January2011


Debt securities - Federal Government - 168,817 - - 168,817 - State Government - - - 68,759 68,759 - Treasury bills - 15,988 - - 15,988 Loans and receivables - Individual Loans - - - 150,205 150,205 - Mortgage Loans - - - - -

- 184,805 - 218,964 403,769

Equities - Listed 2,278,470 2,278,470 - Unlisted 338,876 338,876

338,876 2,278,470 - - 2,617,346

Totalfinancialassets 338,876 2,463,274 - 218,964 3,021,115

Within one year 168,817 168,817 More than one year 338,876 2,294,458 - 218,964 2,852,298

338,876 2,463,274 - 218,964 3,021,115

81



10 Investmentinsubsidiaries

Company 31-Dec-12 31-Dec-11 1-Jan-11 N’000 N’000 N’000

Royal Exchange General Insurance Company Ltd 4,129,404 4,129,404 7,798,273 Royal Exchange Prudential Life Assurance Plc 2,565,833 2,565,833 4,834,221 Royal Exchange Finance And Investment Company Ltd 667,353 667,353 748,276 Royal Exchange Healthcare Company Ltd 151,669 151,669 151,669 Royal Exchange Microfinance Bank Ltd 106,205 106,205 106,205

7,620,464 7,620,464 13,638,644

Movement in Investment in Subsidiaries

(i) RoyalExchangeGeneralInsuranceCompanyLtd At 1 January 4,129,404 7,798,273 7,798,273 Additions - - - Disposals - - - Impairment losses - (3,668,869) -

At 31 December 4,129,404 4,129,404 7,798,273

(ii) RoyalExchangePrudentialLifeAssurancePlc At 1 January 2,565,833 4,834,221 4,834,221 Additions - - - Disposals - - - Impairment losses - (2,268,388) -

At 31 December 2,565,833 2,565,833 4,834,221

(iii) RoyalExchangeFinanceAndInvestmentCompanyLtd At 1 January 667,353 748,276 748,276 Additions - - - Disposals - - - Impairment losses - (80,923) -

At 31 December 667,353 667,353 748,276

82



10 Investmentinsubsidiaries(continued)

Company 31-Dec-12 31-Dec-11 1-Jan-11 N’ 000 N’ 000 N’000

(iv) RoyalExchangeHealthcareCompanyLimited At 1 January 151,669 151,669 151,669 Additions - - - Disposals - - - Impairment losses - - -

At 31 December 151,669 151,669 151,669

(v) RoyalExchangeMicrofinanceBankLtd At 1 January 106,205 106,205 106,205 Additions - - - Disposals - - - Impairment losses - - -

At 31 December 106,205 106,205 106,205

7,620,464 7,620,464 13,638,644

(i) This represents the Company’s 99.9% (2011: 99.9%) shareholdings in Royal Exchange General Company Limited. In 2011, the subsidiary did a capital reduction to clear deficit reserve in the company’s book to the tune of N3,668,869,000. This reduction was sanctioned by the Court on 7th December 2011.

(ii) This represents the Company’s 99.9% (2011: 99.9% shareholdings in Royal Exchange Prudential Life Plc. In 2011, the subsidiary did a capital reduction to clear deficit reserve in the company’s book to the tune of N2,565,833,000. This was sanctioned by the Court on the 7th December 2011.

(iii) Royal Exchange Finance and Investments Limited is a Nigerian registered company involved in the business of finance, financial advisory, fund management, leasing and investment management. Royal Exchange Finance and Investment Limited is owned 99.9% (2011: 99.9%) by the Company. The investment which has been carried at cost was impaired, based on management judgement, in the sum of N80,923,000 in 2011.

(iv) Royal Exchange Healthcare Limited is a Nigerian registered company involved in the business of healthcare insurance service. Royal Exchange Healthcare Limited is owned 30% (2011: 99.9%) by the Company. The balance of 70% is owned by two fully owned subsidiaries of the Company.

(v) Royal Exchange Microfinance Bank Limited is a Nigerian registered company involved in the business of microfinance banking. Royal Exchange Microfinance Bank Limited is owned 99.9% (2011: 99.9%) by the Company.

83



11 Deferredacquisitioncosts

Group Non-Life Life Healthcare Insurance Assurance Insurance Contracts Contracts Contracts Total Notes N’ 000 N’ 000 N’ 000 N’ 000

At 1 January 2010 62,056 - - 62,056 Expenses Deferred 432,896 3,433 - 436,329 Charged to profit or loss (414,366) - - (414,366)

At 1 January 2011 80,586 3,433 - 84,019 Expenses Deferred 683,176 6,470 9,000 698,646 Charged to profit or loss (669,076) (3,433) (672,509)

At 1 January 2012 94,686 6,470 9,000 110,156 Expenses Deferred 808,889 3,499 4,500 816,888 Charged to profit or loss (739,609) (6,470) (9,000) (755,079)

At 31 December 2012 163,966 3,499 4,500 171,965

12 Tradereceivables Group 31-Dec-12 31-Dec-11 1-Jan-11 N’000 N’000 N’000

Due from intermediaries (note 12.1) 384,746 293,644 53,559 Due from reinsurers (note 12.2) 33,635 33,762 196,735

418,381 327,406 250,294

Within one year 154,533 100,471 175,846 More than one year 263,848 226,935 74,448

418,381 327,406 250,294

The carrying amount is a reasonable approximation of fair value

12.1 Duefromintermediaries Trade Receivables 2,576,954 1,794,848 912,431 Less: Impairment (2,192,208) (1,501,204) (858,872)

384,746 293,644 53,559

12.2 Duefromreinsurers Reinsurance Receivables 170,424 59,959 196,735 Less: Impairment (136,789) (26,197) -

33,635 33,762 196,735

13 Otherreceivablesandprepayment Group Company 31-Dec-12 31-Dec-11 1-Jan-1131-Dec-12 31-Dec-11 1-Jan-11 N’000 N’000 N’000 N’000 N’000 N’000 Prepayment staff (note 13.1) 169,625 192,290 189,696 12,699 14,715 23,008 Due from related parties (note 13.2) - - - 33,436 15,505 11,656 Accrued Investment Income 18,908 52,289 23,389 - - - Other receivables - 119,339 74,238 - 16,908 99,715

188,533 363,918 287,323 46,135 47,128 134,379

84



13 Otherreceivablesandprepayment(continued) Group Company 31-Dec-12 31-Dec-11 1-Jan-11 31-Dec-11 31-Dec-12 1-Jan-11 N’000 N’000 N’000 N’000 N’000 N’000

Within one year 188,533 244,580 213,085 34,120 35,472 122,723 More than one year - 119,338 74,238 12,015 11,656 11,656

188,533 363,918 287,323 46,135 47,128 134,379

13.1 Prepayment Prepaid furniture allowance 103,848 103,677 145,385 12,699 14,715 23,008 Prepaid rent allowance 52,306 60,722 32,673 - Prepaid expenses 13,471 27,891 11,638

169,625 192,290 189,696 12,699 14,715 23,008

13.2 Duefromrelatedparties Royal Exchange General Insurance Co - - - - 3,490 - Royal Exchange Healthcare Ltd - - - 27,303 12,015 11,656 Royal Exchange Microfinance Bank Ltd - - - 6,133 - -

- - - 33,436 15,505 11,656

Group 31-Dec-12 31-Dec-11 1-Jan-11 N’000 N’ 000 N’ 00014 Reinsurance assets Non-life business reinsurance share of insurance liabilities Business classes Fire 682,548 713,727 183,662 General Accident 116,586 124,963 54,215 Motor 105,915 290,984 67,356 Marine 149,270 117,601 100,340 Oil & Gas 347,738 208,375 80,358 Engineering 87,210 67,343 41,737 Bonds 2,864 1,215 2,208

1,492,131 1,524,208 529,876

14.1 Non-lifebusinessreinsuranceshareof insurance liabilities Unearned premiums 394,359 414,357 172,032 Claims outstanding 574,734 839,722 232,452 Incurred but not reported 523,038 270,129 125,392

Total non-life 1,492,131 1,524,208 529,876

14.2 Lifebusinessreinsuranceshareofinsuranceliabilities Short-term Insurance Contract 42,038 32,224 5,851 Long-term Insurance Contract 2,247 621 -

44,285 32,845 5,851

14.3 JLTreinsurance–profitcommission 48,317 33,119 21,523

Total reinsurance recoverable 1,584,733 1,590,172 557,250

Within one year 1,032,901 1,215,927 305,608 More than one year 551,832 374,245 251,642

1,584,733 1,590,172 557,250

85



15 StatutoryDeposits Group 31-Dec-12 31-Dec-11 1-Jan-11 N’000 N’ 000 N’ 000

Non-Life Business 340,000 340,000 340,000 Life Business 215,000 215,000 215,000

Deposits with CBN 555,000 555,000 555,00

In line with section 10 (3) of the Insurance Act of Nigeria, a deposit of 10% of the regulatory share capital is kept with the Central Bank of Nigeria. The amount held will increase or decrease in relation to the amount of paid up share capital in issue. The cash amount held is considered to be a restricted cash balance.

16 Intangible assets

Group Company 2012 2011 2010 2012 2011 2010 N’000 N’000 N’000 N’000 N’000 N’000

Cost: At January 187,604 181,348 181,348 9,375 9,375 9,375 Additions 18,702 6,256 - - - -

At 31 December 206,306 187,604 181,348 9,375 9,375 9,375

Amortisation: At January 146,394 115,466 102,050 5,625 3,750 1,875 Additions 21,877 30,928 13,416 1875 1,875 1,875

At 31 December 168,271 146,394 115,466 7,500 5,625 3,750

Net book value 38,035 41,210 65,882 1,875 3,750 5,625

The intangible assets of the company comprises of computer software. The computer software is accounted for using the cost model less accumulated amortization and accumulated impairment. The amortization is charged to the income statements in accordance with the Company’s policy. As at 31 December 2012, these assets were tested for impairment, and management has determined that no impairment is required of these intangibles.

86



17 InvestmentProperties

Group 31-Dec-12 31-Dec-11 1-Jan-11 N’000 N’ 000 N’ 000

At 1 January 6,169,307 5,728,940 5,145,467 Additions during the year 7,990 3,100 14,452 Fair value Gains 179,177 437,267 569,021

At 31 December 6,356,474 6,169,307 5,728,940

InvestmentpropertiesLocation Nameofvaluer FRCNOS.

2 Storey Building Located At Kano Yayok Associates Estate Surveyor & Valuer FRC/2013/NIESV/00000000834 A-1277 236,477 229,400 214,400 2 Storey Building Located At Kaduna Yayok Associates Estate Surveyor & Valuer FRC/2013/NIESV/00000000834 A-1277 168,241 160,430 145,430 No. 7,Usuma Crescent Maitama Abuja Emeka Orji Partnership FRC/2013/NIESV/00000000976 A-1672 403,766 382,486 316,553 No 6a/6b Usuma Crescent, Maitama, Abuja. Emeka Orji Partnership FRC/2013/NIESV/00000000976 A-1672 414,375 406,088 324,870 No 1, Eleko Close ,1koyi,Lagos Saibu Makinde & Associates FRC/2013/NIESV/00000000730 A-1878 375,000 360,000 349,200 No. 2,Eleko Close Ikoyi Lagos Saibu Makinde & Associates FRC/2013/NIESV/00000000730 A-1878 450,000 445,000 443,000 No. 26, Abduraman Okene Crescent, Victoria Island, Lagos Saibu Makinde & Associates FRC/2013/NIESV/00000000730 A-1878 370,000 320,000 316,600 Land At Odonla In Odogunyan Area of Ikorodu, Lagos Saibu Makinde & Associates FRC/2013/NIESV/00000000730 A-1878 40,000 40,000 27,500 29, Degel Road, Kaduna Diran Adetunji & Associates - 29,655 29,655 12, Post Office Road, Kano Yayok Associates Estate Surveyor & Valuer FRC/2013/NIESV/00000000834 A-1277 201,600 196,760 181,600 8, Bank Street, Jos. Yayok Associates Estate Surveyor & Valuer FRC/2013/NIESV/00000000834 A-1277 129,358 114,488 99,582 Rean Oshodi West Saibu Makinde & Associates FRC/2013/NIESV/00000000730 A-1878 650,000 630,000 594,000 Abuja Commercial Emeka Orji Partnership FRC/2013/NIESV/00000000976 A-1672 911,087 893,000 759,050 10, Bayo Kuku Ikoyi. Saibu Makinde & Associates FRC/2013/NIESV/00000000730 A-1878 1,590,000 1,570,000 1,548,000 15a Asa Rd Aba Uma Uma & Company FRC/2013/NIESV/00000004050 73,000 72,000 70,000 Garki II Commercial Emeka Orji Partnership FRC/2013/NIESV/00000000976 A-1672 303,570 290,000 282,000 4, Hectar Of Land At Odonginyan Saibu Makinde & Associates FRC/2013/NIESV/00000000730 A-1878 40,000 30,000 27,500

6,356,474 6,169,307 5,728,940

Investment properties are stated at fair values as determined by valuations performed by professional estate valuers as at 31 December 2012, 31 December 2011 and 1 January 2011. They are industry specialists in valuing these types of investment properties. The fair value is supported by market evidence and represents the amount at which the assets could be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing seller in an arm’s length transaction at the date of valuation, in accordance with standards issued by the International Valuation Standards Committee. Valuations are performed on an annual basis and the fair value gains and losses are reported in profit or loss. The profits or losses on disposal are also reported in profit or loss as they occurred.

87



17 InvestmentProperties

Group 31-Dec-12 31-Dec-11 1-Jan-11 N’000 N’ 000 N’ 000

At 1 January 6,169,307 5,728,940 5,145,467 Additions during the year 7,990 3,100 14,452 Fair value Gains 179,177 437,267 569,021

At 31 December 6,356,474 6,169,307 5,728,940

InvestmentpropertiesLocation Nameofvaluer FRCNOS.

2 Storey Building Located At Kano Yayok Associates Estate Surveyor & Valuer FRC/2013/NIESV/00000000834 A-1277 236,477 229,400 214,400 2 Storey Building Located At Kaduna Yayok Associates Estate Surveyor & Valuer FRC/2013/NIESV/00000000834 A-1277 168,241 160,430 145,430 No. 7,Usuma Crescent Maitama Abuja Emeka Orji Partnership FRC/2013/NIESV/00000000976 A-1672 403,766 382,486 316,553 No 6a/6b Usuma Crescent, Maitama, Abuja. Emeka Orji Partnership FRC/2013/NIESV/00000000976 A-1672 414,375 406,088 324,870 No 1, Eleko Close ,1koyi,Lagos Saibu Makinde & Associates FRC/2013/NIESV/00000000730 A-1878 375,000 360,000 349,200 No. 2,Eleko Close Ikoyi Lagos Saibu Makinde & Associates FRC/2013/NIESV/00000000730 A-1878 450,000 445,000 443,000 No. 26, Abduraman Okene Crescent, Victoria Island, Lagos Saibu Makinde & Associates FRC/2013/NIESV/00000000730 A-1878 370,000 320,000 316,600 Land At Odonla In Odogunyan Area of Ikorodu, Lagos Saibu Makinde & Associates FRC/2013/NIESV/00000000730 A-1878 40,000 40,000 27,500 29, Degel Road, Kaduna Diran Adetunji & Associates - 29,655 29,655 12, Post Office Road, Kano Yayok Associates Estate Surveyor & Valuer FRC/2013/NIESV/00000000834 A-1277 201,600 196,760 181,600 8, Bank Street, Jos. Yayok Associates Estate Surveyor & Valuer FRC/2013/NIESV/00000000834 A-1277 129,358 114,488 99,582 Rean Oshodi West Saibu Makinde & Associates FRC/2013/NIESV/00000000730 A-1878 650,000 630,000 594,000 Abuja Commercial Emeka Orji Partnership FRC/2013/NIESV/00000000976 A-1672 911,087 893,000 759,050 10, Bayo Kuku Ikoyi. Saibu Makinde & Associates FRC/2013/NIESV/00000000730 A-1878 1,590,000 1,570,000 1,548,000 15a Asa Rd Aba Uma Uma & Company FRC/2013/NIESV/00000004050 73,000 72,000 70,000 Garki II Commercial Emeka Orji Partnership FRC/2013/NIESV/00000000976 A-1672 303,570 290,000 282,000 4, Hectar Of Land At Odonginyan Saibu Makinde & Associates FRC/2013/NIESV/00000000730 A-1878 40,000 30,000 27,500

6,356,474 6,169,307 5,728,940

Investment properties are stated at fair values as determined by valuations performed by professional estate valuers as at 31 December 2012, 31 December 2011 and 1 January 2011. They are industry specialists in valuing these types of investment properties. The fair value is supported by market evidence and represents the amount at which the assets could be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing seller in an arm’s length transaction at the date of valuation, in accordance with standards issued by the International Valuation Standards Committee. Valuations are performed on an annual basis and the fair value gains and losses are reported in profit or loss. The profits or losses on disposal are also reported in profit or loss as they occurred.

88



18 Property,Plant&Equipment

Group Land& Computer Furniture, Motor buildings equipment fittings& vehicles Total equipment N’000 N’000 N’000 N’000 N’000

Cost

Balanceasat1January2011 707,094 251,800 397,831 435,960 1,792,685 Revaluation 460,417 - - - 460,417 Additions - 22,165 26,730 77,126 126,021 Reclassifications - 40 (40) - - Disposals - (1,275) (7,971) (58,210) (67,456)

Balanceasat1January2012 1,167,511 272,730 416,550 454,876 2,311,667

Revaluation (24,928) - - - (24,928) Additions 6,258 18,475 38,621 90,498 153,852 Disposals - (1,598) (4,008) (8,191) (13,797)

Balance as at 31 December 2012 1,148,841 289,607 451,163 537,183 2,426,794

Accumulated depreciation:

Balanceasat1January2011 36,082 201,235 268,644 247,140 753,101 Charge 27,177 34,913 45,433 86,509 194,032 Reclassifications - 14 (14) - - Disposals (20,044) (1,275) (6,668) (46,099) (74,086)

Balanceasat1January2012 43,215 234,887 307,395 287,550 873,047

Charge 23,466 24,083 48,547 90,495 186,591 Disposals - (1,310) (3,068) (8,185) (12,563)

Balance as at 31 December 2012 66,681 257,660 352,874 369,860 1,047,075

Netbookvalue 31 December 2012 1,082,160 31,947 98,289 167,323 1,379,719

31 December 2011 1,124,296 37,843 109,155 167,326 1,438,620

1January2011 671,012 50,565 129,187 188,820 1,039,584

89



18 Property,Plant&Equipment(continued)

Company Land& Computer Furniture, Motor buildings equipment fittings& vehicles Total equipment N’000 N’000 N’000 N’000 N’000

Cost Balanceasat1January2011 456,919 11,035 18,251 8,000 494,205 Revaluation 460,417 - - - 460,417 Additions - 1,098 1,331 - 2,429 Reclassifications - - - - - Disposals (917,336) - - - (917,336)

Balanceasat1January2012 - 12,133 19,582 8,000 39,715

Revaluation - - - - - Additions - 340 3,135 14,500 17,975 Reclassifications - - - - - Disposals - - (1,566) - (1,566)

Balance as at 31 December 2012 - 12,473 21,151 22,500 56,124

Accumulateddepreciation

Balanceasat1January2011 20,044 2,537 6,137 4,000 32,718 Charge - 4,909 3,940 2,000 10,849 Reclassifications - - - - - Disposals (20,044) - - - (20,044)

Balanceasat1January2012 - 7,446 10,077 6,000 23,523

Charge - 3,118 3,843 5,625 12,586 Reclassifications - - - - - Disposals - - (626) - (626)

Balance as at 31 December 2012 - 10,564 13,294 11,625 35,483

Netbookvalue 31 December 2012 - 1,909 7,857 10,875 20,641

31 December 2011 - 4,687 9,505 2,000 16,193

1January2011 436,875 8,498 12,114 4,000 461,487

19 Employees’RetirementBenefits/LongServiceAward


19.1 Pensions net assets 49,370 26,839 26,002

Gratuity: At January (298,360) (373,417) - Net Gratuity Expense for the reporting period (66,821) 75,057 (373,417)

Gross Retirement Obligations (Gratuity) (365,181) (298,360) (373,417)

Fair value of plan assets - - -

Gratuity (outstanding liability) (365,181) (298,360) (373,417)

Net Employees’ Retirement Obligations (315,811) (271,521) (347,415)

90




19.2 Company’s Asset for:- – Pension benefits (Note 13.4) 49,370 26,839 26,002 - - - – Gratuity (Note 13.5) – Long Service Award (Note 13.6)

Total 49,370 26,839 26,002 - - -

19.3 Company’s obligations for:- – Pension benefits - - - - - - – Gratuity 437,319 335,291 428,813 13,684 10,336 11,978 – Long Service Award 37,831 34,441 37,994 1,161 1,132 1,167

Total in the Statement of financial position 475,150 369,732 466,807 14,845 11,468 13,145

Income statement charge for:- – Pension benefits (7,034) (4,361) - (7,034) (4,361) - – Gratuity 70,066 80,804 - 70,066 80,804 - – Long Service Award 7,441 7,910 - 7,441 7,910 -

Total 70,473 84,353 - 70,473 84,353 -

The Company operates defined contribution pension plan based on the New Pension Act 2004, and a defined benefit gratuity plan based on employee’s pensionable and other post-employment remuneration and length of service

19.4 Pensionbenefits The amounts recognised in the statement of financial position are determined as follows:

31-Dec-12 31-Dec-11 1-Jan-11 N’000 N’000 N’000

Present value of funded obligations (302,326) (278,733) (293,643) Fair value of plan assets 351,696 305,572 319,645

49,370 26,839 26,002

Present value of unfunded obligations

Asset in the statement of financial position 49,370 26,839 26,002

Current - - -

Non-current 49,370 26,839 26,002

Asset in the statement of financial position 49,370 26,839 26,002

The movement in the defined benefit obligation over the year is as follows:

At 1 January 278,733 293,643 - Current service cost - - 293,643 Interest cost 35,746 33,997 - Past Service Cost (including Curtailments) - - - Benefits paid (27,639) (27,073) - Settlements (Transfer of plan liabilities) - - - Actuarial losses/(gains) 15,487 (21,834) -

At 31 December 302,327 278,733 293,643

91



19.4 Pensionbenefit(continued) The movement in the fair value of plan assets of the year is as follows:

31-Dec-12 31-Dec-11 1-Jan-11 N’000 N’000 N’000

At 1 January 305,572 319,645 - Expected return on plan assets 42,780 38,358 - Employer contributions 41,945 32,455 - Employees’ contributions - - - Benefits paid (27,639) (27,073) - Settlements (Transfer of plan assets) - - - Actuarial Gains/(Losses) (10,961) (57,813) -

At 31 December 351,697 305,572 319,645

The amounts recognised in the profit or loss are as follows: Current service costs Net interest costs/income: - Interest costs 35,746 33,997 - - Expected Return on plan asset (42,780) (38,357) - Past service costs (including curtailment) - - - Gains/losses on settlement - - - Net actuarial gains/losses recognised during the year: - Actuarial Gains/Loss on Defined Benefit Obligations - - - - Return on plan assets - - -

At 31 December (7,034) (4,361) -

The periodic pension and gratuity costs are included in the staff costs (note 31.1) for the reporting period and treated as a single line item.

The principal actuarial assumptions used were as follows: 31-Dec-12 31-Dec-11 1-Jan-11

Discount rate 14% 14% 12% Future pension increases 3% 3% 3% Inflation rate 10% 10% 10% Staff turnover rate(average) N/A N/A N/A Average staff promotion rate N/A N/A N/A Average Mortality rate Average Salary increase N/A N/A N/A The average life expectancy in years of a pensioner retiring at age 65, at the end of the reporting period

is as follows:

31-Dec-12 31-Dec-11 1-Jan-11

Male 80 80 80 Female 84 84 84 The average life expectancy in years of a pensioner retiring at age 65, 20 years after the end of the

reporting period, is as follows:

31-Dec-12 31-Dec-11 1-Jan-11

Male 80 80 80 Female 84 84 84

92



19.4 Pensionbenefit(continued) The sensitivity of overall pension liability to changes in the weighted principal assumptions is:

31-Dec-12 Changeinassumption Impactonoverallliability

Discount rate -0.50% 0.50% 5,708 (5,410)


Discount rate -0.50% 0.50% 5,453 (5,162)

19.5 GratuityBenefits The amounts recognised in the statement of financial position are determined as follows:

31-Dec-12 31-Dec-11 1-Jan-11 N’000 N’000 N’000

Present value of funded obligations - - - Fair value of plan assets - - - Present value of unfunded obligations 437,319 335,291 428,813

Liability in the statement of financial position (437,319) (335,291) (428,813)

Current - - - Non-current (437,319) (335,291) (428,813)

Liability in the statement of financial position (437,319) (335,291) (428,813)

The movement in the defined benefit obligation over the year is as follows: Group Company 31-Dec-12 31-Dec-11 1-Jan-11 31-Dec-12 31-Dec-11 1-Jan-11 N’000 N’000 N’000 N’000 N’000 N’000

At 1 January 335,291 428,813 - 10,336 11,978 - Current service cost 36,021 47,510 - 1,966 2,563 - Interest cost 46,220 49,288 - 1,434 1,424 - Past Service Cost (including Curtailments) - - 428,813 - - 11,978 Benefits paid (42,091) (65,024) - (1,135) (1,647) - Settlements (Transfer of plan liabilities) - - - - - - Actuarial losses/(gains) 61,878 (125,296) - 1,083 (3,982) -

At 31 December 437,319 335,291 428,813 13,684 10,336 11,978

The amounts recognised in the profit or loss are as follows: 31-Dec-12 31-Dec-11 1-Jan-11 N’000 N’000 N’000

Current service costs 36,021 47,510 Net interest costs/income: - Interest costs 46,220 49,288 - - Expected Return on plan asset - - - Past service costs (including curtailment) - - -

At 31 December 82,241 96,798 -

93



19.5 Gratuitybenefits(continued) The principal actuarial assumptions used were as follows:

31-Dec-12 31-Dec-11 1-Jan-11

Discount rate 13% 14% 12% Future salary increases 12% 12% 12% Inflation rate 10% 10% 10% Staff turnover rate(average) Average staff promotion rate N/A N/A N/A Average Mortality rate Average Salary increase N/A N/A N/A The average life expectancy in years of a pensioner retiring at age 65, at the end of the reporting period

is as follows: 31-Dec-12 31-Dec-11 1-Jan-11

Male N/A N/A N/A Female N/A N/A N/A The average life expectancy in years of a pensioner retiring at age 65, 20 years after the end of the

reporting period, is as follows: 31-Dec-12 31-Dec-11 1-Jan-11

Male N/A N/A N/A Female N/A N/A N/A The periodic pension and gratuity costs are included in the staff costs (note 31.1) for the reporting period

and treated as a single line item.

The sensitivity of overall pension liability to changes in the weighted principal assumptions is:


Discount rate -0.50% 0.50% 20,617 (19,157) Future salary increases -0.50% 0.50% (20,178) 21,572


Discount rate -0.50% 0.50% 17,092 (15,886) Future salary increases -0.50% 0.50% (16,859) 18,033

19.6 LongServiceAwards

31-Dec-12 31-Dec-11 1-Jan-11 N’000 N’000 N’000

Present value of funded obligations - - - Fair value of plan assets - - - - - -

Present value of unfunded obligations (37,831) (34,441) (37,994)

Liability in the statement of financial position 37,831 34,441 37,994

Current - - - Non-current 37,831 34,441 37,994

Liability in the statement of financial position 37,831 34,441 37,994

94



19.6 Longserviceawards(continued) The movement in the defined benefit obligation over the year is as follows:

31-Dec-12 31-Dec-11 1-Jan-11 N’000 N’000 N’000

At 1 January 34,441 37,994 - Current service cost 4,771 5,777 - Interest cost 4,552 4,371 - Past Service Cost (including Curtailments) - - 37,994 Benefits paid (5,053) (2,086) - Settlements (Transfer of plan liabilities) - - - Actuarial losses/(gains) (880) (11,615) -

At 31 December 37,831 34,441 37,994

The amounts recognised in the profit or loss are as follows:

Current service costs 4,771 5,777 Net interest costs/income: - Interest costs 4,552 4,371 - - Expected Return on plan asset - - - Past service costs (including curtailment) - - - Gains/losses on settlement - - - Net actuarial gains/losses recognised during the year: - Actuarial Gains/Loss on Defined Benefit Obligations - - - - Return on plan assets - - -

At 31 December 9,323 10,148 -

The principal actuarial assumptions used were as follows:

31-Dec-12 31-Dec-11 1-Jan-11

Discount rate 13% 14% 12% Future salary increases 12% 12% 12% Inflation rate 10% 10% 10% Staff turnover rate(average) Average staff promotion rate N/A N/A N/A Average Mortality rate Average Salary increase N/A N/A N/A The average life expectancy in years of a pensioner retiring at age 65, at the end of the reporting period

is as follows:

31-Dec-12 31-Dec-11 1-Jan-11

Male N/A N/A N/A Female N/A N/A N/A The average life expectancy in years of a pensioner retiring at age 65, 20 years after the end of the

reporting period, is as follows:

31-Dec-12 31-Dec-11 1-Jan-11

Male N/A N/A N/A Female N/A N/A N/A

95



19.6 Longserviceawards(continued) The sensitivity of overall pension liability to changes in the weighted principal assumptions is:

2012 Changeinassumption Impactonoverallliability Discount rate -0.50% 0.50% 1,113 (1,048) Future salary increases -0.50% 0.50% (607) 637 Inflation rate -0.50% 0.50% (530) 563

2011 Changeinassumption Impactonoverallliability Discount rate -0.50% 0.50% 1,009 (952) Future salary increases -0.50% 0.50% (541) 566 Inflation rate -0.50% 0.50% (505) 534


20.1 Borrowings Bank overdrafts - - 152,137 1,688 - -

- - 152,137 1,688 - -

Current - - 152,137 1,688 - - Non-current - - - - - -

- - 152,137 1,668 - -

20.2 Borrowings by currency 31-Dec-12 Naira Sterling Euro US dollars Pounds Total N’000 N’000 N’000 N’000 N’000 N’000

At 31 December 2012: Bank overdraft - - - - - -

- - - - - -

31-Dec-11 Naira Sterling Euro US dollars Pounds Total N’000 N’000 N’000 N’000 N’000 N’000

At 31 December 2011: Bank overdraft - - - - - -

- - - - - -

1-Jan-11 Naira Sterling Euro US dollars Pounds Total N’000 N’000 N’000 N’000 N’000 N’000

At 31 December 2010: Bank overdraft 152,137 - - - - 152,137

152,137 - - - - 152,137

96



20.3 Other Features Bank overdrafts are repayable on demand. The average interest rate on bank overdrafts approximate 25%

(2011: 25%) per annum.

The average interest rates paid during the year were as follows:

31-Dec-12 31-Dec-11 1-Jan-11

Bank overdraft 25% 25% 25%

At 31 December 2012, the Group had available N22 million (2011: N6.7 million) of undrawn committed borrowing facilities in respect of which all conditions precedent had been met.

21 Deferredincome Group 31-Dec-12 31-Dec-11 1-Jan-11 N’000 N’000 N’000

At 1 January 67,194 8,071 - Additions during the year - 59,123 8,071 Amortised for the year (19,002) - -

At 31 December 48,192 67,194 8,071

22 Tradepayables Due to reinsurers 358,744 585,337 41,644 Individual life payables - 9,888 - Deposit for premium (note 22.1) - 37,189 36,486 Premium payables to co-insurer 11,119 9,116 -

369,863 641,530 78,130

Within one year 244,355 147,053 76,540 More than one year 125,508 494,477 1,590

369,863 641,530 78,130

22.1 Deposit for premium represents premium collected in advance at the reporting date that are yet to be recognised as at year end. The carrying amount disclosed above approximate fair value at the reporting date. All amounts are payable within one year.

23 Provisionsandotherpayables Group Company 31-Dec-12 31-Dec-11 1-Jan-11 31-Dec-12 31-Dec-11 1-Jan-11 N’000 N’000 N’000 N’000 N’000 N’000

Due to related parties - - - 45,443 159,233 1,040,580 Other liabilities (note 23.1) 635,069 754,108 724,231 390,571 303,770 296,691

635,069 754,108 724,231 436,014 463,003 1,337,271

Within one year 576,313 475,531 609,761 198,482 165,747 1,043,811 More than one year 58,756 278,578 114,470 237,532 297,256 293,460

635,069 754,108 724,231 436,014 463,003 1,337,271

97




23.1 Other liabilities Deferred Income 6,569 6,913 4,888 - - - Accruals 67,185 185,219 76,739 - - - PAYE and Withholding tax payables 64,303 68,861 36,263 5,861 6,514 3,231 NAICOM Levy 39,681 38,483 32,951 - - - Staff payables 2,314 2,100 - - - Dividend payable held as collateral (note 23.1a) 237,193 237,193 237,193 237,193 237,193 237,193 Other payables 217,824 215,339 336,197 147,517 60,063 56,267

635,069 754,108 724,231 390,571 303,770 296,691

23.1a These are dividends due to the three major shareholders of the company - Spennymoor Limited, Dantata Investments and Securities and Phoenix Holdings Limited- which were pledged as collateral on the staff share ownership scheme under Security Holding Trusts (note 29.2) which is a subject of litigation in suit FHC/L/CS/5479/09.


24 Depositors’funds Customers’deposits Call borrowings 24,009 13,670 14,127 Royal Exchange investment notes 55,000 12,000 11,818 High yield investment papers 278,258 303,838 178,062 Savings 21,194 12,835 12,307 Demand deposit 98,168 31,825 30,515 Term deposit 116,596 29,063 27,868

593,225 403,231 274,697

Analysis by maturity Up to 1 month 349,714 190,147 21,815 3 - 6 months 112,573 168,990 209,852 6 - 12 months 130,938 44,094 43,030

593,225 403,231 274,697

25 Insurance contract liabilities Non-life general Insurance (note 25.1) 3,764,306 3,625,853 1,932,018 Healthcare Insurance (note 25.2) 115,989 184,444 112,570 Life insurance (note 25.3) 998,209 576,834 601,076

Total 4,878,504 4,387,131 2,645,664

98



25.1 Insurance contract liabilities

Gross Reinsurers’ asset Net 31-Dec-12 31-Dec-11 1-Jan-11 31-Dec-12 31-Dec-11 1-Jan-11 31-Dec-12 31-Dec-11 1-Jan-11 N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000

Non-life: Unearned premiums 1,437,549 1,324,071 847,372 394,359 414,357 172,032 1,043,190 909,714 675,340 Unexpired risks - 40,038 10,943 - - - - 40,038 10,943 Claims outstanding 1,209,953 1,385,491 760,721 574,734 839,722 232,452 635,219 545,769 528,269 Incurred but not reported 1,116,804 876,253 312,982 523,038 270,129 125,392 593,766 606,124 187,590

Total non-life 3,764,306 3,625,853 1,932,018 1,492,131 1,524,208 529,876 2,272,175 2,101,645 1,402,142

Within one year 2,655,899 2,710,502 1,108,129 940,299 1,149,962 278,234 1,715,600 1,560,540 829,896 More than one year 1,108,407 915,351 823,889 551,832 374,246 251,642 556,575 541,105 572,247

3,764,306 3,625,853 1,932,018 1,492,131 1,524,208 529,876 2,272,175 2,101,645 1,402,143

The carrying amount is a reasonable approximation of fair value.

31-Dec-12 31-Dec-11 1-Jan-11 N’000 N’000 N’000 Outstanding Claims Balance as at start of the year 1,385,491 760,721 1,987,780 Claims paid during year (1,764,858) (2,291,316) (514,273) Additional claims incurred during the year 1,589,320 2,916,086 (712,786)

Balance as at year end 1,209,953 1,385,491 760,721

IBNR as at start of the year 876,253 312,982 198,778 Increase/(decrease) in IBNR 240,551 563,271 114,204

Balance, end of year 1,116,804 876,253 312,982

Total claims, end of the year 2,326,757 2,261,744 1,073,703

99



25.1 Insurance contract liabilities (continued)

31-Dec-12 31-Dec-11 1-Jan-11 N’000 N’000 N’000 Outstanding Claims per class Fire 820,907 760,171 366,599 General Accident 419,456 256,928 201,183 Motor 456,194 718,596 229,629 Marine 191,274 169,620 162,278 Oil & Gas 137,104 102,479 51,036 Engineering 298,250 252,771 61,457 Bonds 3,572 1,179 1,521

Total 2,326,757 2,261,744 1,073,703

31-Dec-12 Movement 31-Dec-11 Movement 1-Jan-11 N’000 N’000 N’000 N’000 N’000 Unexpired Risk Movement per class Fire 118,534 (9,201) 127,735 5,678 122,057 General Accident 128,565 (1,452) 130,017 13,824 116,193 Motor 462,736 26,407 436,329 158,203 278,126 Marine 69,418 (153,266) 222,684 29,358 193,326 Oil & Gas 499,603 176,755 322,848 191,612 131,236 Engineering 153,273 31,826 121,447 106,774 14,673 Bonds 5,420 2,371 3,049 345 2,704

1,437,549 73,440 1,364,109 505,794 858,315

25.2 Healthcare insurance liabilities Insurance fund movement Platinum 10,332 (6,672) 17,004 3,356 13,648 Gold 18,116 (11,698) 29,814 1,585 28,229 Silver 18,284 (11,805) 30,089 2,966 27,123 Bronze 3,070 (1,982) 5,052 1,640 3,412 49,802 (32,157) 81,959 9,547 72,412

Outstanding claims 66,187 - 102,485 - 40,158

Total liabilities on healthcare insurance fund 115,989 - 184,444 - 112,570

31-Dec-12 31-Dec-11 1-Jan-11 N’000 N’000 N’00025.3LifeInsuranceLiabilities Group life Outstanding claims (note 25.3a) 178,905 129,587 81,392 Individual life Outstanding claims 7,327 4,028 12,242 Life fund 811,977 443,219 507,442

998,209 576,834 601,076

25.3aProvisionforoutstandingclaims-GroupLife Movement in the provision for outstanding claims during the year was as follows: At 1 January 129,586 81,392 139,419 Increase/(decrease) during the year 49,318 48,194 (58,027)

At 31 December 178,904 129,586 81,392

100



25.3aProvisionforoutstandingclaims-GroupLife(continued)

31-Dec-12 31-Dec-11 1-Jan-11 N’000 N’000 N’000 Provision for outstanding claims - Individual Life Movement in the provision for outstanding claims during the year was as follows: At 1 January 4,028 12,242 10,021 Increase/(decrease) during the year 3,299 (8,214) 2,221

At 31 December 7,327 4,028 12,242

Insurance Life Liability The movement on the Life Funds account during the year was as follows: At 1 January 443,219 507,442 637,449 Increase/(decrease) during the year 368,758 (64,223) (130,007)

At 31 December 811,977 443,219 507,442

26 Investmentcontractliabilities Deposit administered funds (note 26.1) 427,454 349,352 410,820 Investment managed funds (note 26.2) 146,040 181,608 180,783

573,494 530,960 591,603

26.1 Depositadministeredfunds At 1 January 349,352 410,820 473,904 Deposits received in the year 83,172 71,923 116,363 Interest Paid 24,146 22,496 30,838 Withdrawals (29,216) (155,887) (210,285)

427,454 349,352 410,820

Current 29,216 155,887 210,285 Non-Current 398,238 193,465 200,535

427,454 349,352 410,820

26.2Investmentmanagedfunds At 1 January 181,608 180,783 262,477 Deposits 145,214 196,675 246,934 Interest accrued thereon 2,493 4,918 5,309 Withdrawals (183,275) (200,768) (333,937)

146,040 181,608 180,783

Current 72,105 51,905 62,079 Non-Current 73,935 129,703 118,704

146,040 181,608 180,783

101




27 Incometax a) Per Statement of Profit or Loss and Other Comprehensive Income: - Recognised in profit or loss:

Income tax based on the taxable profit/loss for the year 249,609 195,302 46,470 37,587 - - Education tax 18,565 17,990 1,120 1,692 - 447 Information technology development levy(NITDA) 13,566 6,279 - 5,861 6,279 - Overprovision in prior years (33,868) 5,374 (123,257) - - - Capital gain tax 4,853 84,042 - - 84,042 -

Current tax charge/(Income) for the year 252,725 308,987 (75,667) 45,140 90,321 447 Deferred taxation (133,452) (49,092) (252,228) - - -

Income tax expense 119,273 259,895 (327,895) 45,140 90,321 447

b) Current Tax Liabilities/(Assets) as per Statement of Financial Position: At 1 January 501,333 213,376 386,676 300,603 53,282 111,094 Charge for the year 252,725 308,987 (75,667) 45,140 90,321 447 Payment during the year (221,699) (181,378) (101,266) (50,425) - (58,259) Prior year adjustment - 157,000 - - 157,000 - Information technology development levy(NITDA) Paid (13,250) 3,348 3,633 (6,279) - -

At 31 December 519,109 501,333 213,376 289,039 300,603 53,282

The charge for income tax in these financial statements is based on the provisions of the Companies Income Tax Act, CAP C21 LFN 2004 as amended and Education Tax Act, CAP E4 LFN 2004.

102



27.1 DeferredTaxation 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 offset amounts are as follows:

31-Dec-12 31-Dec-12 31-Dec-11 31-Dec-11 1-Jan-11 1-Jan-1127.2 N’000 N’000 N’000 N’000 N’000 N’000

Capital allowances in advance of depreciation Net book value of fixed assets 1,200,105 1,218,726 383,565 Difference in net book value due to IFRS conversion 26,054 21,732 34,496 Tax written down value (761,488) (851,752) (182,358) Accelerated capital allowances 464,671 388,706 235,703 Unutilised capital allowances - - (96,376) OnFixedAssets 464,671 388,706 139,327

OnImpairment: Impairment of staff loans (494) (494) (302) Impairment allowance on premium receivables (1,675,035) (1,292,170) (762,984) Impairment allowance on reinsurance receivables (136,789) (26,197) Accrued interest on statutory deposits - (4,125) - (1,812,318) (1,322,986) (763,286)

OnEmployeebenefits: Scheme 1 - Gratuity (424,025) (394,721) (373,417) Scheme 1 - Long service award (42,779) (38,881) (33,057) (466,804) (433,602) (406,474) Total timing differences (1,814,451) (1,367,882) (1,030,433) Standard tax rate 30% 30% 30% Deferredtaxbalance (544,335) (410,365) (309,130) OnInvestmentproperty: 883,783 773,321 569,021 Standard tax rate 10% 10% 10% Deferred Tax balance on Investment property 88,378 77,332 56,902 Totaldeferredtaxbalance (455,957) (333,032) (252,228 Deferred Tax relating to other comprehensive income Scheme 1 - Gratuity 58,844 96,361 - Scheme 1 - Long service award 11,771 9,348 - 70,615 105,709 - Standard tax rate 30% 30% 30% Deferred tax on OCI 21,185 31,713 - Totaldeferredtaxbalance (434,772) (301,320) (252,228)

103



28 Dividendpayable


Dividend payable 80,525 - - 80,525 - -

The dividend payable represents part of the dividends declared for the year ended 31 December, 2011 but unpaid as at the end of the year.

29 Ordinarysharecapitalandsharepremium

Group Company Ordinary Ordinary Share Share Share Share Capital Premium Capital Premium N’000 N’000 N’000 N’000

Balance at 1 January 2011 2,286,831 2,976,790 2,286,831 2,976,790 Treasury stock - - - - Share issue costs - - - - Bonus capitalization 285,854 (285,854) 285,854 (285,854)

Balance at 1 January 2012 2,572,685 2,690,936 2,572,685 2,690,936 Additional paid in capital - - - -

Balance at 31 December 2012 2,572,685 2,690,936 2,572,685 2,690,936

29.1 Statutorycontingencyreserve In accordance with the Insurance Act, the contingency reserve is credited with the greater of 3% of total

premium or 20% of profits for general business.


At the beginning of the year 525,193 787,307 660,646 - 445,786 445,786 Arising from capital reduction of subsidiaries - (445,786) - (445,786) Transfer from profit and loss 197,038 183,672 126,661 - - -

At end of the year 722,231 525,193 787,307 - - 445,786

29.2 Retained earnings General reserve consists of undistributed profits from previous years.

At the beginning of the year 2,474,268 2,717,695 2,087,927 1,647,142 7,140,726 7,190,306 Transfer from profit and loss 623,935 (49,467) 756,429 164,835 534,886 (36,435) Transfer to contingency reserve (197,038) (183,672) (126,661) - - - Dividend paid during the year (205,815) - - (205,815) - - Reclassification adjustments - (10,288) - - (6,028,470) (13,145)

At end of the year 2,695,350 2,474,268 2,717,695 1,606,163 1,647,142 7,140,726

104



29.3 Treasury shares


At 31 December (500,000) (500,000) (500,000)

Treasury shares represent the cost of the 250,000,000 ordinary shares of the company held by the Security holding trust Ltd as share ownership scheme for staff of a subsidiary as at 31December 2012.

29.4 Othercomponentofequity


At the beginning of the year 87,770 - - 4,367 - - Actuarial gains/(losses) in gratuity scheme (140,308) 87,770 - (6,567) 4,367 -

At end of the year (52,538) 87,770 - (2,200) 4,367 -

30 Underwriting Income

2012 2011 N’000 N’000

Gross written premiums 7,614,209 6,822,383

Net insurance premium income (note 30.1) 5,368,092 4,683,253 Fee and commission income (note 30.2) 195,973 394,132

5,564,065 5,077,385

30.1 Premium written 2012 2011 Non-life Health Non-life Health insurance Life care Total insurance Life care Total N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000

Gross written premiums 6,197,230 1,206,148 210,831 7,614,209 5,887,382 611,100 323,900 6,822,382 Change in unearned premiums (113,478) (377,193) - (490,671) (476,698) 130,569 - (346,129)

Gross earned premiums 6,083,752 828,955 210,831 7,123,538 5,410,684 741,669 323,900 6,476,253

Non-lifereinsurancepremiums: Gross written reinsurance premiums 1,671,922 63,525 - 1,735,447 1,971,522 63,803 - 2,035,325 Change in reinsurance unearned premiums 19,999 - - 19,999 (242,325) - - (242,325)

Reinsurers’ share of gross earned premiums 1,691,921 63,525 - 1,755,446 1,729,197 63,803 - 1,793,000

Netinsurancepremiumincome 4,391,831 765,430 210,831 5,368,092 3,681,487 677,866 323,900 4,683,253

105



30.2 Fee and commission income

2012 2011 N’000 N’000

Reinsurance commissions Non-life Business 187,038 378,477 Reinsurance commissions Life Business 8,935 15,655

195,973 394,132

31 InsuranceClaimsandbenefitspaid

2012 Gross Reinsurance’s Net share N’000 N’000 N’000

Non-life business Motor and Accident 456,189 (103,150) 559,339 Fire and IAR 742,827 416,955 325,872 Marine 163,060 107,600 55,460 Engineering 256,249 69,182 187,067 Bond 2,451 1,879 572 Special Risk 144,082 96,037 48,045

1,764,858 588,503 1,176,355

Lifebusiness Short term insurance contract 286,590 25,271 261,319 Long term insurance contract 28,576 - 28,576 Increase in Outstanding claims short term insurance contract 49,318 - 49,318 Increase in Outstanding claims long term insurance contract 3,299 - 3,299

367,783 25,271 342,512

Healthcare business Short term insurance contract 105,487 - 105,487 Increase in Outstanding claims short term insurance contract 7,972 - 7,972

113,459 - 113,459

ClaimsExpense 2,246,100 613,774 1,632,326

2011 Non-life business Motor and Accident 1,107,951 430,169 677,782 Marine 70,873 15,355 55,518 Engineering 380,173 36,394 343,779 Fire & IAR 676,442 608,265 68,177 Bond (342) (650) 308 Special Risk 56,219 4,833 51,386

2,291,316 1,094,366 1,196,950

Life business Short term insurance contract 250,522 58,917 191,605 Long term insurance contract 19,091 - 19,091 Increase in outstanding claims short term insurance contract 48,194 - 48,194 Increase/ Decrease in Outstanding claims long term insurance contract (8,213) - (8,213)

309,594 58,917 250,677

Healthcare business Short term insurance contract 191,481 - 191,481 Increase/ Decrease in Outstanding claims short term insurance contract 4,880 - 4,880

196,361 - 196,361

Claimsexpense 2,797,271 1,153,283 1,643,988

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32 Underwritingexpenses

2012 2011 N’000 N’000

Salaries & allowances - underwriting employees 967,626 770,465 Acquisition costs: Non-life 739,609 669,076 Acquisition costs: Life 83,719 55,531 Acquisition costs: Healthcare 28,165 14,449 Guaranteed interest on life products 26,639 27,416 Other commissions 282,258 315,638

2,128,016 1,852,575

33.1 Net interest income

Group 2012 2011 Interest Interest Net Interest Interest Net income expenses interest income expenses interest N’000 N’000 N’000 N’000 N’000 N’000

Interest earned placement with local banks 12,914 142 12,772 8,182 123 8,059 Interest on loans and receivables 111,198 51,495 59,703 31,476 19,391 12,085 Interest on advances under finance lease 37,856 - 37,856 2,860 - 2,860

161,968 51,637 110,331 42,518 19,514 23,004

33.2Investmentandotherincome

Group Company 2012 2011 2012 2011 Realised Realised Investment gains Investment gains Investment Investment income and losses Total income and losses Total income income

N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000

Debt securities: *Available-for-sale - - - 9,305 - 9,305 - - *At fair value through profit/loss 211,181 - 211,181 137,571 - 137,571 - - *Loans & receivables (amortised cost) 31,475 - 31,475 22,033 - 22,033 - - Equity Securities: - - *Available-for-sale 38,710 - 38,710 27,383 - 27,383 133,800 - *At fair value through profit/loss 58,312 106,526 164,838 69,823 63,651 133,474 - - Derivative financial instruments: - - - - - - - - Investment properties 24,476 - 24,476 35,350 - 35,350 - - Cash and cash equivalents - - Deposits with credit institutions 171,112 - 171,112 110,103 - 110,103 - - Investment management income 235 - 235 - - - - -

535,501 106,526 642,027 411,568 63,651 475,219 133,800 -

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33.3Netfairvaluegainor(loss) Group 2012 2011 Changes Impairment Changes Impairment infair on infair on value investments Total value investments Total N’000 N’000 N’000 N’000

Debt securities: *At fair value through profit/loss 33,819 - 33,819 (10,981) - (10,981) *Loans & receivables (amortised cost) - (1,085) (1,085) - - - Equity securities: *At fair value through profit/loss 420,714 - 420,714 (314,337) - (314,337) Investment properties 277,410 - 277,410 268,573 - 268,573 Cash and cash equivalents 1,895 - 1,895 -

733,838 (1,085) 732,753 (56,745) - (56,745)

33.4Otheroperatingincome Group Company 2012 2011 2012 2011 N’000 N’000 N’000 N’000

Rental Income 34,563 81,568 - - Profit on disposal of furniture & vehicles 788 1,565 - - Interest on loan & advances 755 383 - - Incentive bonus 39,692 86,849 - - Management income - - 228,548 226,790 Other income 19,799 39,340 - 198 Other commission income 48,316 33,119 - - Gain on property sold - 858,587 - 858,587 Derecognized items 54,462 - - - Fees for services rendered 42,714 43,341 - -

241,089 1,144,752 228,548 1,085,575

34 Allowanceforimpairment Allowance on premium receivables 691,004 642,331 - - Allowance on reinsurance receivables 110,592 26,197 - - Allowance on Loans and advances 6,524 (27,694) - - Allowance on subsidiaries - 80,923 - 80,923 Allowance on other receivables 50,201 - - - Allowance on investment receivables 38,500 77,594 - -

896,821 799,351 - 80,923

35 Managementexpenses Salaries and allowances of other employees 498,022 687,740 73,573 94,322 Audit fees 16,321 12,711 5,070 4,161 Amortization and impairment charges 195,902 150,874 13,835 (7,320) Promotional and advert expense 83,554 75,187 28,277 32,884 Rent and rates 50,316 40,590 17,300 16,616 Directors’ fees 15,932 15,486 - 12,168 Donations 2,196 398 100 318 Bank charges 59,776 55,033 869 763 Legal fee 15,116 44,452 5,480 6,598 Insurance premium 38,449 37,802 46 Accounting consultancy fee 17,688 15,139 4,045 11,551 Investment expenses 50,940 22,882 - - Power charges 88,504 95,192 - 3,306 Government charges 95,415 99,154 - - Stationaries 14,002 15,212 - - Printing 66,318 73,273 - - Repairs and maintenance 87,115 90,185 - 31,041 Transportation expenses 84,954 74,247 - 20,400 Subscriptions and journals 12,855 19,465 - - Software expenses 19,745 80,648 - - Fine paid (Contravention) 1,195 1,625 925 - Other administrative expenses 389,546 449,686 2,853 152,637

1,903,861 2,156,981 152,373 379,445

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36 Earningspershare The earnings and weighted average number of ordinary shares used in the calculation of basic earnings

per share are as follows:

Group Company 2012 2011 2012 2011 N’000 N’000 N’000 N’000

Profit/ (loss) for the year attributable to owners of the Company 623,935 (49,467) 158,268 539,253

Weighted average number of ordinary shares for the purpose of basic earnings per share (thousands) 5,145,370 5,145,370 5,145,370 5,145,370

Basicearningspershare(kobo) 12k (1k) 3k 10k

Dilutedearningspershare(kobo) 12k (1k) 3k 10k

37 Profitfortheyear Profit for the year has been arrived at after charging/(crediting) Net foreign exchange losses/(gains) (13,967) 292 - - Depreciation of property and equipment 186,591 194,032 11,960 (7,458) Amortisation of intangible assets 21,877 30,928 1,875 1,875 Staff costs and other expenses 1,903,243 2,156,982 133,468 382,865 Auditors’ remuneration - - 5,070 3,900 Impairment on receivables 779,705 718,428 - - Impairment on loans receivable carried at amortised cost - 494 - - Change in fair value of FVTPL (Quoted equities (420,714) 314,337 - - Change in fair value of investment property (277,410) (268,573) - -

38 Notes to the cash flows statement Premium income 6,987,926 6,050,609 - - Claims recovered from reinsurance 588,504 147,345 - - Interest received less expense 200,111 168,855 - Commission income 190,217 245,388 - - Commission expense (767,774) (520,384) - - Reinsurance premium paid (1,755,447) (1,107,898) - - Input VAT - (37,541) - - Output VAT (16,152) (31,799) - - Other operating cash payments (3,338,421) (3,026,753) (217,364) (235,586) Depositors Fund Increase 287,865 126,963 Loans and Advances (192,261) (307,688) Claims paid (2,185,511) (1,789,874) - - Other income 233,452 294,749 260,855 226,988

Cash generated by operations 232,509 211,972 28,624 (8,598) Income taxes and IT levy paid (234,949) (178,030) (56,704) -

Net cash from operating activities (2,440) 33,942 (13,213) (8,598)

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39 CapitalManagement The group manages its capital to ensure that it will be able to continue as a going concern and comply

with the regulators’ capital requirements for every of its subsidiaries whose capital is regulated, while maximising return to stakeholders through the optimisation of the equity balance.

The capital structure of the group consists of only equity attributable to equity holders of the company, comprising issued capital, reserves and retained earnings.

The regulatory capitals of the subsidiaries in insurance and banking and asset management have been

maintained and preserved over the reporting periods. The regulatory capital within the Insurance Industry in Nigeria, in which the entity has its major operations, is N3billion and N2 billion for Non-life and Life businesses respectively. Also, the regulatory capital for a unit microfinance bank is N20m, same as for the group’s finance house business.

The insurance industry regulator, NAICOM, measures the financial strength of Non-life underwriters through a solvency margin model. The Insurance Act, under Section 24, defines Solvency Margin of a Non-life underwriter as the difference between the admissible assets and liabilities which shall not be less than 15% of Net Premium income or the minimum capital base of N3billion, whichever is higher. The regulation requires non-life underwriters to maintain a minimum of 100% solvency margin. The Non-Life company’s computed solvency margin met the required minimum margin.

40. Valuations,estimatesandassumptions

40.1 Valuationofliabilitiesofnon-lifeinsurancecontracts Estimates are made for both the expected ultimate cost of claims reported and claims incurred but not

reported (IBNR) at the balance sheet date. The estimate of IBNR is generally subject to a greater degree of uncertainty than that for reported claims. In calculating the estimated liability, the Group uses a variety of estimation techniques based upon statistical analyses of historical experience which assumes past trends can be used to project future developments. The carrying amount for non- life insurance contract liabilities at the reporting date is N3.764 billion (2011: N3.625 billion).

40.2.Valuationoflifeinsurancecontracts The liability for life insurance contracts and investment contracts is based on certain assumptions including

mortality, persistency, longevity, interest rate, morbidity, expense (including inflation) variations, lapses and investment returns.

All contracts are subject to liability adequacy test which is carried periodically by an actuary.

The Group’s life company’s mortality valuation is based on the industry standard rate of Mortality of Assured Lives 1967-70 (A6770).

ValuationAssumptions

The assumptions used for the insurance contracts disclosed in this note include:

(i) The rate of interest used in the valuation is 9%, with the exception of annuity business for which a valuation interest of 12% was used;

(ii) Expenses for individual life business were reserved for explicitly at N8,500 p.a. increasing with inflation at 8% p.a.;

(iii) Reversionary bonuses are allotted in respect of each full year’s premium paid; reversionary bonuses vest on the policy anniversary;

(iv) The solvency level of the company at the valuation date was 100%; (v) The investment yields (including capital appreciation and depreciation) allocated into the Life

Insurance (with participation in profit) and Deposit Administration Funds during the inter-valuation period are illustrated below:

Year Rate 2010 5.8 2011 2.9 2012 15.2 Mean 7.9

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VALUATION METHODS The Group’s life business uses the industry acceptable Mortality Table of standard measures determined

by the Actuary according to the type of contract written.

(a) IndividualBusiness A gross premium method is used for individual risk business. This is a monthly cash flow projection

approach taking into account the incidence of all expected future cash flows including office premiums, expenses and benefit payments.

Individual risk business comprises whole life insurance, endowments of various descriptions and term assurances including mortgage protection.

Reserves were calculated via a cash flow projection approach, taking into account future office premiums, expenses and benefit payments including an allowance for rider benefits. Future cash flows were discounted back to the valuation date at the valuation rate of interest. Where policies are entitled to surrender, reserves have been calculated such that they are at least as high as the surrender value.

The reserve for the individual deposit based policies has been taken as the amount standing to the credit of the policyholder at the valuation date. Where policies have active insurance cover (and the corresponding risk premiums where applicable), reserves have been calculated using a cash flow projection approach similar to other individual risk business.

Under the deposit-based products a variable rate of return is allocated to policyholder accounts in

accordance with the terms and conditions of each product.

(b) GroupLifeBusiness The valuation of the life insurance contract liability as well as the investment contract liabilities was

done by HR Nigeria Limited (Consultant Actuaries) using the gross premium method of valuation for the former and the amount standing to the credit of the policyholder at the valuation date for the latter.

An unexpired premium reserve was included for Group Life business, after allowing for acquisition expenses at a ratio of 12% premium. The UPR was tested against an Additional Unexpired Risk Reserve (AURR), using pooled industry claims data for the underlying assumptions. The resulting AURR was zero, giving comfort that the UPR is sufficient.

An allowance was made for IBNR (Incurred But Not Reported) claims in Group Life to take care of the delay in reporting claims. This was based on a Basic Chain Ladder (BCL) approach, which uses historical claims experience to estimate the pattern of future emerging claims, from which the IBNR portion is determined.

The gross carrying amount for long term life insurance contract liabilities at the reporting date is N439.9 million (2011: N215.5 million) and of investment contract liabilities is N573.5 million (2011: N531 million).

Short-term insurance contract The liability adequacy test (LAT), which was based on Basic Chain Ladder (BCL), was also carried out

by HR Nigeria Ltd (Consultant Actuaries).

The carrying amount at the reporting date for short-term contract liabilities is N372.1 million (2011: N227.8 million).

(c) Annuities Annuities were reserved for by using a discounted cash flow approach. Here reserves are set equal

to the present value of future annuity payments plus expenses, with allowance being made for any guaranteed periods as required by the terms of the contract.

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40.3ValuationofinvestmentcontractsliabilitieswithoutDPF The liability for non-participating investment contracts is measured either at fair value or amortized

cost. Most non- participating contracts measured at fair value are unit linked and the fair value liability is determined by reference to the assets backing the liabilities. A deferred acquisition cost asset and deferred income liability are recognized in respect of transaction costs and front end fees respectively, that relate to the provision of investment management services, and are amortized over the contract term.

40.4Valuationofpost-employmentbenefitobligation The cost and the present value of gratuity plan and the long service award are determined periodically. The

valuation involves making assumptions about discount rates, future salary increases, and expected years in employment. The valuation of the benefit obligations is highly sensitive to changes in these underlying assumptions. All assumptions are reviewed at each reporting date.

The valuation of the gratuity and long service awards scheme was carried out by HR Nigeria Limited

(Consultants Actuaries) for each period reported in the financial statement.

The principal actuarial assumptions used were as follows: Gratuity Scheme 31Dec2012 31Dec2011 1Jan2011 Discount rate 13% 14% 12% Inflation rate 10% 10% 10% Future salary increase 12% 12% 12% Average Liability duration 19.18 years 20.07 years -

LongServiceAward 31Dec2012 31Dec2011 1Jan2011 Discount rate 13% 14% 12% Inflation rate 10% 10% 10% Future salary increase 12% 12% 12% Average Liability duration 15.24 years 13.16 years -

The mortality rates assumed for the employees are the rates published in the A67/70 Ultimate Tables published jointly by the Institute and Faculty of Actuaries in the UK. The carrying value at the reporting date of the employee benefits obligation is N475.1 million (2011: N369.7

million).

40.5Deferredtaxassetsandliabilities Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities

in the company’s financial statements and the corresponding tax bases used in the computation of taxable profit.

Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from goodwill (arising in a business combination) or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

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Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

40.6Measurementoffinancialassets The directors use their judgment in selecting an appropriate valuation technique for some financial

assets. Where possible, financial instruments are marked at prices quoted in active markets. In the current market environment, such price information is typically not available for all instruments and the Group uses valuation techniques to measure such instruments. These techniques use “market observable inputs” where available, derived from similar assets in similar and active markets, from recent transaction prices for comparable items or from other observable market data. For positions where observable reference data are not available for some or all parameters the Group estimates the non-market observable inputs used in its valuation models. For derivative financial instruments, assumptions are made based on quoted market rates adjusted for specific features of the instrument.

Other financial instruments are valued using a discounted cash flow analysis based on assumptions supported, where possible, by observable market prices or rates although some assumptions are not supported by observable market prices or rates.

40.7Impairmentoffinancialandnon-financialassets Management judgment is required to assess and determine the amount of impairment for financial assets

carried at amortized costs as well as the amount of impairment for trade receivables. 41 Financialriskmanagement The Group monitors and manages the financial risks relating to the operations of the Group through

internal risk reports which analyse exposures by degree and magnitude of risks. These risks include market risk (currency risk, interest rate risk and price risk), credit risk and liquidity risk.

The Group may seek to minimize the effects of these risks by using derivative financial instruments to hedge risk exposures.

The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

41.1 Valuation bases Fair value is the amount for which an asset could be exchanged or liability being settled between

knowledgeable, willing parties in an arm’s length transaction.

Fair values are determined at prices quoted in active markets. In the current environment, such price information is typically not available for all instruments and the Group applies valuation techniques to measure such instruments. These valuation techniques make maximum use of market observable data but in some cases management estimate other than observable market inputs within the valuation model. There is no standard model and different assumptions would generate different results.

Fair values are subject to a control framework designed to ensure that input variables and output are assessed independent of the risk taker. These inputs and outputs are reviewed and approved by a valuation committee. The Group has minimal exposure to financial assets which are valued at other than quoted prices in an active market.

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41.1 Valuation bases (continued) The table below shows financial assets carried at fair value through profit or loss by valuation method.

2012 2011 N’000 N’000

Quoted prices in active markets (level 1) 1,696,089 1,898,700 Valuation technique: Market observable data (level 2) 205,417 24,893 Other than observable market data (level 3) 205,893 242,618

2,107,399 2,166,211

Fair value measurements recognised in the consolidated statement of financial position.

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.

· Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets

for identical assets or liabilities. · Level 2 fair value measurements are those derived from inputs other than quoted prices included

within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

· Level 3 fair value measurements are those derived from valuation techniques that include inputs for

the asset or liability that are not based on observable market data (unobservable inputs).

2012 Level1 Level2 Level3 Total N’000 N’000 N’000 N’000 FINANCIAL ASSETS Financial Assets at FVTPL: Federal government bonds - 205,417 - 205,417 Equity Shares 1,696,089 - - 1,696,089 Bonds/Debentures - - 205,893 205,893

Redeemable Notes - - - - 1,696,089 205,417 205,893 2,107,399

Financial Assets at AFS: Equity Shares - 310,823 - 310,823 Bonds/Debentures - - - - Redeemable Notes - - - -

- 310,823 - 310,823

Held to Maturity (HTM) Bonds/Debentures - - - - Redeemable Notes - - - -

- - - -

Loans and Receivables (L&R) Bonds/Debentures - 207,209 - 207,209 Redeemable Notes - - 312,534 312,534

- 207,209 312,534 519,743

Total Financial Assets 1,696,089 723,449 518,427 2,937,965

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41.1 Valuation bases (continued)

2012 Level1 Level2 Level3 Total N’000 N’000 N’000 N’000 FINANCIAL LIABILITIES Financial Liabilities at FVTPL: Derivative financial liabilities - - - - Bonds/Debentures - - 697,792 697,792 Other derivative financial liabilities - - - -

- - 697,792 697,792

Financial Liabilities at Amortised Cost: Bank Loans - - - - Bank Overdrafts 60,146 - - 60,146 Bonds/Debentures - - 79,802 79,802

60,146 - 79,802 139,948

Total Financial Liabilities 60,146 - 777,594 837,740

2011 Level1 Level2 Level3 Total N’000 N’000 N’000 N’000

FINANCIAL ASSETS Financial Assets at FVTPL: Derivative financial assets - - - - Equity Shares 1,898,700 - - 1,898,700 Bonds/Debentures - 24,893 - 24,893 Redeemable Notes - - 242,618 242,618

1,898,700 24,893 242,618 2,166,211

Financial Assets at AFS: Equity Shares 307,437 - - 307,437 Bonds/Debentures - - - - Redeemable Notes - - - -

307,437 - - 307,437

Held to Maturity (HTM) Bonds/Debentures - - - - Redeemable Notes - - - -

- - - -

Loans and Receivables (L&R) Bonds/Debentures 80,357 80,357 Redeemable Notes 235,398 235,398

- 80,357 235,398 315,755

Total Financial Assets 2,206,137 105,250 478,016 2,789,403

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41.1 Valuation bases (continued)

2011 Level1 Level2 Level3 Total N’000 N’000 N’000 N’000

FINANCIAL LIABILITIES Financial Liabilities at FVTPL: Derivative financial liabilities - Bonds/Debentures 403,231 403,231 Other derivative financial liabilities -

- - 403,231 403,231

Financial Liabilities at Amortised Cost: Bank Loans - Bank Overdrafts 87,832 117,163 204,995 Bonds/Debentures -

87,832 - 117,163 204,995

Total Financial Liabilities 87,832 - 520,394 608,226

41.2 Marketrisk Market risk is the risk of adverse financial impact as a consequence of market movements such as currency

exchange rates, interest rates and other price changes. Market risk arises due to fluctuations in both the value of assets held and the value of liabilities.

The Group has established policies and procedures in order to manage market risk.

Foreigncurrencyriskmanagement The Group undertakes certain transactions denominated in foreign currencies. Hence, exposures to

exchange rate fluctuations arise.

The Group has minimal exposure to currency risk as the Group’s financial assets are primarily matched to the same currencies as its insurance and investment contract liabilities. As a result, foreign exchange risk arises from other recognised assets and liabilities denominated in other currencies.

Carrying amounts of the Group’s foreign currency denominated assets and liabilities:

2012 Naira Sterling Euro US dollars Others Total N’000 N’000 N’000 N’000 N’000 N’000

Assets 2,045 1,626 220,434 224,105 Liabilities -

- 2,045 1,626 220,434 - 224,105

2011 Naira Sterling Euro US dollars Others Total =N= N’000 N’000 N’000 N’000 N’000

Assets 7,206 12,801 50,337 70,344 Liabilities -

- 7,206 12,801 50,337 - 70,344

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41.2 Marketrisk(continued)

Foreigncurrencysensitivityanalysis The following table details the Group’s sensitivity to a 10% increase and decrease in the Sterling against

the relevant foreign currencies. A 10% sensitivity rate is used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. For each sensitivity the impact of change in a single factor is shown, with other assumptions unchanged.

2012 Sterling Euro US dollars N N’000 N’000 N’000 N’000

10% increase 204 163 22,043 22,411 Pretax profit 877,008 Shareholders’ equity 899,419


10% decrease (204) (163) (22,043) (22,411) Pretax profit 877,008 Shareholders’ equity 854,598


10% increase 721 1,280 5,034 7,034 Pretax profit 210,428 Shareholders’ equity 217,463


10% decrease (721) (1,280) (5,034) (7,034) Pretax profit 210,428 Shareholders’ equity 203,394

The Group’s method for sensitivity to currency rate fluctuations has not changed significantly over the year

Interestrateriskmanagement Interest rate risk is the risk that the value of future cash flows of a financial instrument will fluctuate

because of changes in market interest rates.

The Group is exposed to interest rate risk as entities in the Group invest in fixed income and money market instruments. Interest rate risk is managed through monitoring interest rate movements and sensitivity analyses.

The Group has no significant concentration of interest rate risk.

Interestratesensitivityanalysis The sensitivity analyses below have been determined based on the exposure to interest rates for both

derivative and non-derivative instruments at the balance sheet date. A 0.5% increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

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41.2Marketrisk(continued)

2012 2011 N’000 N’000

0.5% increase 5,738 4,642

Pretax profit 882,746 215,071

Shareholders’ equity 8,119,535 7,855,494

0.5% decrease (5,738) (4,642)

Pretax profit 871,271 205,786

Shareholders’ equity 8,108,060 7,846,209

The Group’s method for sensitivity to interest rate fluctuations has not changed significantly over the

year.

Otherpriceriskmanagement The Group is exposed to equity price risks arising from equity investments primarily from investments not

held for unit-linked business. The shares included in financial assets represent investments in listed and unlisted securities that present the Group with opportunity for return through dividend income and capital appreciation. Equity investments designated as available-for- sale are held for strategic rather than trading purposes.

The Group has no significant concentration of price risk.

Equitypricesensitivityanalysis The sensitivity analyses set out below show the impact of a 10% increase and decrease in the value of

equities on profit before tax and shareholders’ equity based on the exposure to equity price risk at the reporting date.

2012 2011 N’000 N’000

10% increase 169,609 189,870

Impact on pretax profit 1,046,617 400,298

Impact on shareholders’ fund 8,283,406 8,040,721

10% decrease (169,609) (189,870)

Impact on pretax profit 707,399 20,558

Impact on shareholders’ fund 7,944,188 7,660,982

41.3 Creditrisk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in

financial loss to the Group. The key areas of exposure to credit risk for the Group are in relation to its investment portfolio, reinsurance programme and to a lesser extent amounts due from policyholders and intermediaries.

The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group only transacts with entities that are rated the equivalent to investment grade and above.

This information is supplied by independent rating agencies where available and if not available the Group uses other publicly available financial information and its own trading records to rate its major policyholders and reinsurers.

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41.3Creditrisk(continued) The Group’s exposure and the credit ratings of its counterparties are continuously monitored and the

aggregate value of transactions concluded is spread amongst approved counterparties. Credit exposure is controlled by counterparty limits that are reviewed and approved by the risk management committee annually.

Receivables consist of a large number of policyholders, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable.

The Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties. Concentration of credit did not exceed 5% of gross monetary assets at any time during the year. The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.

Except as detailed in the following table, the carrying amount of financial assets and reinsurance assets recorded in the financial statements, which is net of impairment losses, represents the Group’s maximum exposure to credit risk without taking account of the value of any collateral obtained:

2012 AAA AA A BBB Not rated Carrying Amount N’000 N’000 N’000 N’000 N’000 N’000

Debt securities - Federal Government 347,897 347,897 - State Government 136,165 15,683 151,848 - Corporate 13,378 13,378

Loansandreceivables - Corporate Loans 52,538 15,628 68,166 - Individual Loans 17,346 17,346 - Mortgage Loans 160,686 160,686 - Mutual Funds/Unit Trusts - Reinsurance Receivables - Reinsurance Assets 44,285 44,285 Insurance receivables 102,611 102,611 Tenor Deposits (> 90 days) 183,127 183,127 Cash and cash equivalents 2,371 904,494 906,865

531,024 188,703 31,311 149,267 1,095,904 1,996,209

2011 AAA AA A BBB Not rated Carrying Amount N’000 N’000 N’000 N’000 N’000 N’000

Debt securities - Federal Government 29,447 29,447 - State Government 104,819 17,791 11,455 134,065 - Corporate -

Loansandreceivables - Corporate Loans - - Individual Loans 33,145 33,145 - Mortgage Loans 167,666 167,666 - Mutual Funds/Unit Trusts - Reinsurance Receivables - Reinsurance Assets 32,845 32,845 Insurance receivables - Tenor Deposits (> 90 days) 29,313 29,313 Cash and cash equivalents 9,262 997,204 1,006,466

163,579 17,791 - 42,107 1,209,470 1,432,947

The following table shows the carrying value of assets that are neither past due nor impaired, the ageing of assets that are past due but not impaired and assets that have been impaired.

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41.3Creditrisk(continued)

Unit linked assets are excluded from this analysis.

2012 Neither Past due Past due Past due Past due Carrying pastdue less 31to more and Amount nor than 90days than impaired impaired 30days 90days N’000 N’000 N’000 N’000 N’000 N’000

Debt securities - Federal Government 260,451 260,451 - State Government 220,014 220,014 - Corporate 13,378 13,378

Loans and receivables - Corporate Loans - - Individual Loans 14,070 3,276 17,346 - Mortgage Loans 160,686 160,686 - Mutual Funds/Unit Trusts - Reinsurance Receivables 44,285 44,285 Reinsurance Assets - Insurance receivables 102,611 478,968 581,579 Tenor Deposits (> 90 days) 504,466 504,466 Cash and cash equivalents 672,972 672,972

1,846,037 102,611 - 47,561 478,968 2,475,177

2011 Neither Past due Past due Past due Past due Carrying pastdue less 31to more and Amount nor than 90days than impaired impaired 30days 90days N’000 N’000 N’000 N’000 N’000 N’000


Loans and receivables - Corporate Loans - - Individual Loans 5,749 339 11,240 17,328 - Mortgage Loans 159,870 23,413 183,283 - Mutual Funds/Unit Trusts - Reinsurance Receivables 32,845 32,845 Reinsurance Assets - Insurance receivables - Tenor Deposits (> 90 days) 77,475 77,475 Cash and cash equivalents 958,304 958,304

1,364,911 - 33,184 11,240 23,413 1,432,748

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41.4 Liquidityrisk Liquidity risk is the risk that the Group cannot meet its obligations associated with financial liabilities as

they fall due. The Group has adopted an appropriate liquidity risk management framework for the management of

the Group’s liquidity requirements. The Group manages liquidity risk by maintaining banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of assets and liabilities. The Group is exposed to liquidity risk arising from clients on its insurance and investment contracts. In respect of catastrophic events there is liquidity risk from a difference in timing between claim payments and recoveries thereon from reinsurers.

Liquidity management ensures that the Group has sufficient access to funds necessary to cover insurance claims, surrenders, withdrawals and maturing liabilities. In practice, most of the Group’s assets are marketable securities which could be converted to cash when required.

The following table shows details of the expected maturity profile of the Group’s undiscounted obligations with respect to its financial liabilities and estimated cash flows of recognised insurance and participating investment contract liabilities. Unit- linked liabilities and unearned premiums are excluded from this analysis. The table includes both interest and principal cash flows.

< 1 month 1 - 3 3 - 12 1 - 5 years > 5 years Total months months N’000 N’000 N’000 N’000 N’000 N’000

Insurance contract liabilities - - Life 15,000 25,001 81,678 379,905 496,624 998,208 - Non-life 362,986 241,991 241,991 241,991 120,995 1,209,954 Investment contract liabilities - - With DPF 578 10,000 25,913 145,129 391,876 573,496 - Without DPF - Unallocated divisible surplus - Borrowings 60,146 60,146 Derivative liabilities - Trade and other liabilities 128,187 149,891 108,299 621,352 62,357 1,070,086

566,897 426,883 457,881 1,388,377 1,071,852 3,911,890

2011 < 1 month 1 - 3 3 - 12 1 - 5 years > 5 years Total months months N’000 N’000 N’000 N’000 N’000 N’000

Insurance contract liabilities - - Life 5,311 19,750 159,182 173,064 219,527 576,834 - Non-life 415,647 277,098 277,098 277,098 138,549 1,385,490 Investment contract liabilities - - With DPF 3,165 3,751 35,520 206,168 282,356 530,960 - Without DPF - Unallocated divisible surplus - Borrowings 87,832 87,832 Derivative liabilities - Trade and other liabilities 576,297 183,923 227,019 345,315 162,725 1,495,278

1,088,252 484,522 698,819 1,001,645 803,157 4,076,394

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41.4Liquidityrisk(continued) The following table details the Group’s expected maturity for its non-derivative assets. The tables below

have been drawn up based on the undiscounted contractual maturities of the assets including interest that will be earned on those assets except where the Group anticipates that the cash flow will occur in a different period.

Unit-linked assets and reinsurers’ share of unearned premiums are excluded from this analysis.

2012 < 1 month 1 - 3 months 3 - 12 months 1 - 5 years > 5 years Total N’000 N’000 N’000 N’000 N’000 N’000

Debt securities - Federal Government 20,547 130,000 120,284 270,831 - State Government 133,166 133,166 - Corporate 13,378 109,419 122,79

Loansandreceivables - Corporate Loans - - Individual Loans 1,555 3,276 4,831 - Mortgage Loans 186,812 186,812 - Mutual Funds/Unit Trusts - Reinsurance Receivables - Reinsurance Assets 44,284 44,284 Insurance receivables 102,611 102,611 Tenor Deposits (> 90 days) 513,872 513,872 Cash and cash equivalents 601,226 154,042 755,268

621,773 155,597 571,534 665,284 120,284 2,134,472



Loansandreceivables - Corporate Loans - - Individual Loans 1,862 339 11,420 13,621 - Mortgage Loans 163,686 163,686 - Mutual Funds/Unit Trusts - Reinsurance Receivables 32,845 32,845 Reinsurance Assets 12,170 363,415 220,849 166,949 763,383 Insurance receivables 68,162 68,162 Tenor Deposits (> 90 days) 111,357 124,595 235,952 Cash and cash equivalents 992,103 228 1,005 993,336

1,004,273 476,862 346,788 620,151 - 2,448,074

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41.4Liquidityrisk(continued)

Although the Group has access to financing facilities, the Group expects to meet its other obligations from operating cash flows and proceeds of maturing financial assets.

LiquidityGapAnalysis


Financial & Insurance Assets 693,563 325,921 696,744 763,643 990,415 3,470,286 Financial & Insurance Liabilities 607,587 461,705 588,382 529,612 1,030,644 3,217,930

85,976 (135,784) 108,362 234,031 (40,229) 252,356


Financial & Insurance Assets 1,010,761 490,300 555,300 609,991 531,810 3,198,162 Financial & Insurance Liabilities 731,378 483,189 668,272 635,295 760,357 3,278,491

279,383 7,111 (112,972) (25,304) (228,547) (80,329)

42 Insuranceriskmanagement The Group accepts insurance risk through its insurance contracts and certain investments contracts where

it assumes the risk of loss from persons or organisations that are directly subject to the underlying loss. The Group is exposed to the uncertainty surrounding the timing, frequency and severity of claims under these contracts.

The Group manages its risk via its underwriting and reinsurance strategy within an overall risk management

framework. Pricing is based on assumptions which have regard to trends and past experience. Exposures are managed by having documented underwriting limits and criteria. Reinsurance is purchased to mitigate the effect of potential loss to the Group from individual large or catastrophic events and also to provide access to specialist risks and to assist in managing capital. Reinsurance policies are written with approved reinsurers on either a proportional or excess of loss treaty basis.

Regulatory capital is also managed (though not exclusively) by reference to the insurance risk to which the

Group is exposed. 42.1 Non-lifeinsurance The Group writes property, liability and motor risks primarily over twelve month duration. The most

significant risks arise from natural disasters, climate change and other catastrophes (i.e. high severity, low frequency events). A concentration of risk may also arise from a single insurance contract issued to a particular demographic type of policyholder, within a geographical location or to types of commercial business. The relative variability of the outcome is mitigated if there is a large portfolio of similar risks.

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42.1Non-lifeinsurance(continued)

The concentration of non-life insurance by the location of the underlying risk is summarised below by reference to liabilities.

Gross Reinsurance Net 2012 2011 2012 2011 2012 2011 N’000 N’000 N’000 N’000 N’000 N’000

- Within Nigeria 3,764,306 3,625,853 1,492,131 1,524,208 2,272,175 2,101,645 - Outside Nigeria - -

3,764,306 3,625,853 1,492,131 1,524,208 2,272,175 2,101,645

The concentration of non-life insurance by type of contract is summarised below by reference to liabilities.


Property 939,441 887,906 682,548 713,727 256,893 174,179 Motor 918,930 1,154,925 105,915 290,985 813,015 863,940 Liability 548,021 386,945 116,586 124,963 431,435 261,982 Others 1,357,914 1,196,077 587,082 394,533 770,832 801,544

3,764,306 3,625,853 1,492,131 1,524,208 2,272,175 2,101,645

Assumptionsandsensitivities The risks associated with the non-life insurance contracts are complex and subject to a number of variables

which complicate quantitative sensitivity analysis. The Group uses several statistical and actuarial techniques based on past claims development experience. This includes indications such as average claims cost, ultimate claims numbers and expected loss ratios. The key methods used by the Group for estimating liabilities are:

• chainladder; • expectedlossratio; • benchmarking;and • Bornhuetter-Ferguson. Included within the insurance contract liabilities are provisions for asbestos and environmental related

claims arising from policies written many years ago. The Group has minimal exposure to these risks, the exposure of which is determined by the number of claims filed and the Court process.

The Group considers that the liability for non-life insurance claims recognised in the balance sheet is adequate. However, actual experience will differ from the expected outcome.

Some results of sensitivity testing are set out below, showing the impact on profit before tax and shareholders’ equity gross and net of reinsurance. For each sensitivity the impact of a unchanged. Change in a single factor is shown, with other assumptions.

124




Pretaxprofit Shareholders’equity 2012 2011 2012 2011 N’000 N’000 N’000 N’000

Non-Life Insurance: Group profit/shareholders’ fund 871,765 204,149 8,613,797 8,350,851 5% increase in loss ratios - Gross(2012-(88243) & 2011-(114566)) 783,522 89,583 8,525,554 8,236,286 - Net (2012-(58818) & 2011-(59847)) 812,947 144,302 8,554,979 8,291,004 5% decrease in loss ratios - Gross(2012-88243 & 2011-114566) 960,008 318,715 8,702,040 8,465,417 - Net (2012-58818 & 2011-59847) 930,583 263,997 8,672,615 8,410,699 10% increase in expenses - Gross(2012-151736 &2011-143911 720,029 60,238 8,462,062 8,206,940 - Net 10% decrease in expenses - Gross(2012+151736 &2011+143911 1,023,501 348,060 8,765,533 8,494,763 - Net

The Group’s method for sensitivity testing has not changed significantly from the prior year.

Claimsdevelopmenttables The following tables show the development of claims over a period of time on both a gross and net of

reinsurance basis. In 2012, in the year of adoption of IFRS, only 5 years were required to be disclosed. This will be increased in each succeeding year, until 8 - 10 years of information is presented. The top half of the table shows how the estimates of total claims for each accident year develop over time. The lower half of the table reconciles the cumulative claims to the amount appearing in the Statement of Financial Position.

The cumulative claims estimates and payments for each accident year are translated into Nigerian Naira at the year rates that applied at the end of each accident year.

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42.1 Non-lifeinsurance(continued)

Analysisofclaimsdevelopment–2012

2007 2008 2009 2010 2011 2012 Total N’000 N’000 N’000 N’000 N’000 N’000 N’000

Estimate of ultimates: - End of accident year: - 1 year later 52,238 97,283 210,082 310,968 274,752 420,616 1,365,939 2 years later 61,157 71,005 123,937 234,506 438,537 - 929,142 3 years later 32,325 7,600 147,677 55,712 - - 243,315 4 years later 10,458 7,466 32,241 - - - 50,166 5 years later 14,994 27,193 - - - - 42,187 6 years later 3,289 - - - - - 3,289 7 years later -

Current estimate of ultimate claims 174,463 210,547 513,937 601,186 713,289 420,616 2,634,038 Cumulative payments (174,463) (210,547) (630,080) (719,182) (1,048,592) (2,177,931) (4,960,795)

- - (116,143) (117,996) (335,303) (1,757,315) (2,326,757)

Analysisofclaimsdevelopment–2011 Estimate of ultimates: - End of accident year - 1 year later 46,663 168,445 232,650 351,041 645,747 - 1,444,547 2 years later 83,925 263,158 124,869 302,141 - - 774,093 3 years later 23,587 6,079 156,863 - - - 186,529 4 years later 9,941 6,185 - - - - 16,126 5 years later 13,941 - - - - - 13,941 6 years later - - - - - - - 7 years later -

Current estimate of ultimate claims 178,057 443,867 514,383 653,181 645,747 - 2,435,235 Cumulative payments (178,057) (488,225) (634,542) (1,111,723) (2,284,433) (4,696,980)

- (44,358) (120,159) (458,542) (1,638,685) - (2,261,744)

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Analysisofclaimsdevelopment–Gross(2010)

2007 2008 2009 2010 2011 2012 Total N’000 N’000 N’000 N’000 N’000 N’000 N’000

Estimate of ultimates: End of accident year - 1 year later 46,206 130,921 106,719 310,782 - 594,627 2 years later 63,547 223,749 30,121 - - 317,417 3 years later 7,780 2,145 - - 9,925 4 years later 7,639 - - - 7,639 5 years later - - - - - 6 years later - - - - - 7 years later -

Cumulative payments 125,172 356,815 136,840 310,782 - - 929,608 Current estimate of ultimate claims (125,172) (421,593) (203,507) (1,253,040) (2,003,311)

- (64,778) (66,667) (942,258) - - (1,073,703)

42.2LifeinsuranceandinvestmentcontractswithDPF The Group writes life, pensions and annuities business with or without discretionary participating features. The most

significant risks arise from mortality, persistency, longevity, morbidity, expense variations and investment returns.

Concentration of risk may arise from geographic regions, epidemics, accumulation of risks and market risk. The

concentration of life insurance and investment contracts with DPF by location of the underlying risk is summarised below by reference to liabilities.

Gross Reinsurance Net 2012 2011 2012 2011 2012 2011 N’000 N’000 N’000 N’000 N’000 N’000 Life insurance: - Within Nigeria 998,208 576,834 19,014 27,449 979,194 549,385 - Outside Nigeria - -

998,208 576,834 19,014 27,449 979,194 549,385


Investment contracts with DPF: - Within Nigeria 573,494 530,960 - - 573,494 530,960 - Outside Nigeria - - - - - -

573,494 530,960 - - 573,494 530,960

The concentration of life insurance and investment contracts with DPF by type of contract is summarised below by reference to liabilities.

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42.2LifeinsuranceandinvestmentcontractswithDPF(continued)


Protection 997,328 576,049 19,014 27,449 978,314 548,600 Pensions - - - - - - Annuities 880 785 - - 880 785 Healthcare 49,802 81,959 - - 49,802 81,959

Life insurance 1,048,010 658,793 19,014 27,449 1,028,996 631,344

Investment contracts with DPF 573,494 530,960 573,494 530,960

Assumptionsandsensitivities The risks associated with the life insurance and investment contracts with DPF are complex and subject to a number of

variables which complicate quantitative sensitivity analysis. The key assumptions in quantifying these liabilities include mortality, persistency, longevity, morbidity, expense variations, investment return and discount rates.

Some results of sensitivity testing are set out below showing the impact on profit before tax and shareholders’ equity before and after reinsurance. For each sensitivity the impact of a change in a single factor is shown, with other assumptions unchanged.

Pretaxprofit Shareholders’equity 2012 2011 2012 2011 N’000 N’000 N’000 N’000

Life insurance: Group profit/shareholders’ fund 877,008 204,149 8,613,797 8,350,851 5% increase in mortality/morbidity - Gross(2012-16795 & 2011-14936) 854,970 189,213 8,597,002 8,335,916 - Net(2012-15532 & 2011-11990) 856,233 192,159 8,598,265 8,338,862 5% increase in longevity - Gross(2012-16795 & 2011-14936) 888,560 219,085 8,632,186 8,366,331 - Net(2012-15532 & 2011-11990) 887,297 216,139 8,630,923 8,363,385 10% increase in expenses -increase (2012=-58,250 & 2011-39,901) 813,515 164,248 8,555,548 8,310,950 -decrease (2012=58,250 & 2011 39,901) 930,014 244,050 8,672,047 8,390,753

Investment contracts with DPF: Group profit/shareholders’ fund 877,008 210,428 8,613,797 8,350,851 5% increase in mortality/morbidity - Gross(2012-1594 & 2011-544) 870,171 203,605 8,612,203 8,350,308 - Net(2012-1594 & 2011-544) 870,171 203,605 8,612,203 8,350,308 5% increase in longevity - Gross(2012+1594 & 2011-544) 873,359 204,693 8,615,391 8,351,395 - Net(2012+1594 & 2011-544) 873,359 204,693 8,615,391 8,351,395 10% increase in expenses -increase (2012-58,250 & 2011-39,901) 813,515 164,248 8,555,548 8,310,950 -decrease (2012-58,250 & 2011 39,901) 930,014 244,050 8,672,047 8,390,753 1% increase in interest rates - Gross (2012-2664 & 2011-2742) 869,101 201,407 8,611,133 8,348,109 - Net

The Group’s method for sensitivity testing has not changed significantly from the prior year.

128



43 Contingencies and commitments

43.1 Commitmentsforexpenditure The Directors are of the opinion that all known liabilities and commitments have been taken into

consideration in the preparation of these consolidated financial statements under review. These liabilities are relevant in assessing the company’s state of affairs.

43.2 Contingent liabilities and Contingent Assets

43.2.1 Contingent liabilities There are certain pending litigations in some courts of law in Nigeria involving the Group and the

Company either as plaintiff or defendant amounting to N1.6 billion (2011: N404 million). However, in the opinion of the Directors, there are no significant grounds to warrant any provision in respect thereof.

The Company issued a letter of guarantee to the National Insurance Commission (NAICOM) undertaking that in the event of the inability of one of its subsidiaries, Royal Exchange Prudential Life Plc, being unable to meet policy holders’ liabilities, it shall assume and discharge those liabilities. The undertaking shall remain in force until the regularization of the transfer of investment properties from the Company to the subsidiary, which though had commenced, was yet to be concluded.

43.2.2 Contingent assets The Company has no contingent assets as at the reporting date.

44 Contraventions During the year, the Group contravened certain sections of Insurance Act Cap 117 LFN 2004, NAICOM

Guideline 2010 and the CBN Guideline for Microfinance banks in Nigeria as detailed below:

Company Description Penalty paid Penalty paid (N’000) 2012 (N’000) 2011 Regulatory Authority

Royal Exchange General Insurance Company Limited NAICOM Non-disclosure of penalties - 500 NAICOM Re-statement of 2010 financial statement - 100 NAICOM Late submission of returns for 4th quarter 2010 - 225 NAICOM Late submission of returns for 3rd quarter 2011 225 - NAICOM Late submission of returns for 2nd quarter 2012 45 -

Royal Exchange Prudential Life Plc NAICOM Non-disclosure of penalty for late submission of 2012 Reinsurance Treaty Arrangement - 500 Late submission of returns for 1st and 4th quarter 2010 - 25 Penalty for inadequate staff training on AML/CFT training - 250

Royal Exchange Microfinance Bank Limited CBN Failure to submit the Guideline 2010 audited accounts for within the stipulate time - 25 Microfinance banks

129



45 Relatedparties Balances and transactions between the Company and its subsidiaries, which are related parties of the

Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.

45.1 Transactionswithrelatedparties The Group enters into transactions with its subsidiaries, associates, joint ventures and its key management

personnel in the normal course of business. The transactions with related parties are made at normal market prices and conducted at arms length.

2012 2011 Relationship N’000 N’000

Bankbalances Royal Exchange Microfinance Bank Ltd Subsidiary (1,688) 1,875 Payables Royal Exchange General Insurance Company Limited Subsidiary 39,810 Royal Exchange Prudential Plc Subsidiary 1,969 80,871 Royal Exchange Finance and Investment Subsidiary 3,665

Receivables Royal Exchange General Insurance Company Limited Subsidiary - 3,490 Royal Exchange Healthcare Ltd Subsidiary 27,303 - Royal Exchange Microfinance Bank Ltd Subsidiary 6,133 -

Premium Paid Royal Exchange General Insurance Company Limited Subsidiary 7,360 6,057

Loans Royal Exchange Finance and Investment Subsidiary 71,324 77,123

Finance Lease Royal Exchange Finance and Investment Subsidiary 20,203 2,444

Managementfeesreceived Royal Exchange General Insurance Company Limited Subsidiary 121,806 119,590 Royal Exchange Prudential Plc Subsidiary 104,657 102,753 Royal Exchange Finance and Investment Subsidiary - 1,724 Royal Exchange Healthcare Ltd Subsidiary - 2,722

Solicitor’sfeepaid Punuka Attorneys and solicitors Director 3,200 4,133

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45.1 Transactionswithrelatedparties

2012 2011 N’000 N’000

Royal Exchange General Insurance Company Ltd Cashbook Balance Royal Exchange Microfinance Bank 8,695 - Deposit fund Royal Exchange Prudential Plc 45,187 - Deposit fund Royal Exchange Finance and Investment 24,771 - Deposit fund Royal Exchange Microfinance Bank Ltd 49,815 -

Royal Exchange Prudential Plc Cashbook Balance Royal Exchange Microfinance Bank 4,094 -

Royal Exchange Finance and Investment Cashbook Balance Royal Exchange Microfinance Bank 16,945 -

Royal Exchange Healthcare Ltd Cashbook Balance Royal Exchange Microfinance Bank (9,471) -

The group considered the outstanding balances at the reporting date as unsecured and non-interest bearing. The settlements will involve physical delivery of cash.

46 Operatingsegments The Group has adopted IFRS 8 Operating Segments in advance of its effective date. IFRS 8 requires

operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief Executive to allocate resources to the segments and to assess their performance. In contrast, the predecessor standard (IAS 14 Segment Reporting) required the Group to identify two sets of segments (business and geographical), using a risks and rewards approach.

Following adoption of IFRS 8, the Group’s reportable segments have not changed as the business segments reported to the monthly executive committee follow clear business lines with distinct risk and rewards which formed the basis under IAS 14.

The Group’s reportable segments under IFRS 8 are therefore identified as follows:

• Non-lifeinsurance; • Lifeinsurance; • Financialservices; • Healthcare;and • Assetmanagement;

The accounting policies of the reportable segments are the same as the Group’s accounting policies. Segment profit represents the profit earned by each segment without allocation of central corporate expenses, certain finance costs and tax expense. This is the measure reported to the Group’s Chief Executive for the purposes of resource allocation and assessment of segment performance.

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46.1 ThefollowingisananalysisoftheGroup’srevenueandresultbyreportablesegmentin2012.

2012 Financial Non-life Asset Services Insurance Healthcare Life managementAdjustments Group N’000 N’000 N’000 N’000 N’000 N’000 N’000

Gross Premium Income 6,083,752 210,831 828,955 7,123,538 Reinsurance Expenses (1,691,921) - (63,525) (1,755,446) Fees and commission income 187,038 - 8,935 195,973

Gross Income - 4,578,869 210,831 774,365 - - 5,564,065 Insurance claims and benefits incurred - Gross (1,764,858) (113,459) (367,783) (2,246,100) Insurance claims and benefits incurred - Recoverable from reinsurers 588,504 25,271 613,775 Changes in Insurance Contract Liabilities - - Total Underwriting Expenses (1,517,356) (28,165) (582,495) (2,128,016)

Underwriting Profit - 1,885,159 69,207 (150,642) - - 1,803,723 Net Interest Income 133,952 (22,925) 110,331 Investment and other income - 345,067 107,695 189,265 133,800 (133,800) 642,027 Net fair value gain or (loss) on financial assets 37,264 537,373 88,287 69,829 732,753 Other income 52,385 142,302 58,464 228,548 (226,464) 255,056

223,601 2,909,901 265,189 166,916 362,348 3,543,890 Expenses Management Expenses (175,691) (1,555,702) (180,795) (89,564) (152,373) 250,264 (1,903,861) Allowance for impairment (6,524) (589,180) (301,117) (896,821)

Segment profit before tax 41,386 765,019 84,394 (223,765) 209,975 - 743,208

Unallocated finance costs - Tax attributable: (3,971) (45,720) - (24,442) (45,140) (119,273) - Shareholders’ profits - - Policyholders’ returns -

Profitfortheyear 37,415 719,299 84,394 (248,207) 164,835 - 623,935

The accounting policies of the reportable segments are the same as the Group’s accounting policies.

Segment result represents the result of each segment without allocation of certain expenses, finance costs and income tax. This is the measure reported to the Group’s Chief Executive for the purpose of resource allocation and assessment of segment performance.

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ThefollowingisananalysisoftheGroup’srevenueandresultbyreportablesegmentin2011.

2011 Financial Non-life Asset Services Insurance Healthcare Life managementAdjustments Group N’000 N’000 N’000 N’000 N’000 N’000 N’000

Gross Premium Income 5,410,684 323,900 741,669 6,476,253 Reinsurance Expenses (1,729,197) - (63,803) (1,793,000) Fees and commission income 378,477 - 15,655 394,132

Gross Income - 4,059,964 323,900 693,521 - - 5,077,385 Insurance claims and benefits incurred - Gross (2,291,316) (196,361) (309,594) (2,797,271) Insurance claims and benefits incurred - Recoverable from reinsurers 1,094,366 58,917 1,153,283 Changes in Insurance Contract Liabilities - - Total Underwriting Expenses (1,439,113) (14,449) (399,013) (1,852,575)

Underwriting Profit - 1,423,901 113,090 43,831 - - 1,580,822 Earned Interest Income 68,410 (45,406) 23,004 Investment and other income - 288,743 52,140 134,336 - 475,219 Net fair value gain or (loss) on financial assets (85,698) (35,321) - 64,274 (56,745) Gain on property sold 858,785 (198) 858,587 Other income 43,341 230,401 - 12,131 226,790 (226,790) 285,872

26,053 1,907,724 165,230 254,572 1,085,575 (272,394) 3,166,760

Expenses Management Expenses (166,474) (1,469,538) (170,977) (242,941) (379,445) 272,394 (2,156,981) Allowance for impairment 27,695 (628,610) (117,513) (80,923) (799,351)

Segment profit before tax (112,726) (190,424) (5,747) (105,882) 625,207 - 210,428

Unallocated expenses Unallocated finance costs - Tax attributable: (4,039) (150,212) - (15,323) (90,321) - (259,895) - Shareholders’ profits - - Policyholders’ returns

Profitfortheyear (116,765) (340,636) (5,747) (121,205) 534,886 - (49,467)

133



The accounting policies of the reportable segments are the same as the Group’s accounting policies.

Segment result represents the result of each segment without allocation of certain expenses, finance costs and income tax. This is the measure reported to the Group’s Chief Executive for the purpose of resource allocation and assessment of segment performance.

Segment assets, liabilities and other information The following is an analysis of the Group’s net assets, capital expenditure, impairment losses and depreciation and amortisation by reportable segment in 2012.

2012 Financial Non-life Asset Services Insurance Healthcare Life management EliminationsConsolidated N’000 N’000 N’000 N’000 N’000 N’000 N’000

Segment assets 1,426,376 10,624,734 708,567 5,267,453 7,689,694 (9,415,029) 16,301,795 Segment liabilities (764,373) (5,011,495) (228,006) (2,180,578) (822,111) 833,432 (8,173,131)

Segment net assets 662,003 5,613,239 480,561 3,086,875 6,867,583 (8,581,597) 8,128,664

Unallocated assets -

Total net assets 662,003 5,613,239 480,561 3,086,875 6,867,583 (8,581,597) 8,128,664

For the purposes of monitoring segment performance and allocating resources between segments, the Group’s Chief Executive monitors the tangible, intangible and financial assets and liabilities attributable to each segment. All assets and liabilities are allocated to reportable segments with the exception of tax assets and certain borrowings.

The following is an analysis of the Group’s net assets, capital expenditure, impairment losses and depreciation and amortisation by reportable segment in 2011.

134


2011 Financial Non-life Asset Services Insurance Healthcare Life management EliminationsConsolidated N’000 N’000 N’000 N’000 N’000 N’000 N’000

Segment assets 1,084,293 10,444,794 227,045 5,053,660 7,690,204 (8,993,925) 15,506,071 Segment liabilities (457,868) (5,272,518) (305,261) (1,717,961) (775,074) 873,463 (7,655,219)

Segment net assets 626,425 5,172,276 (78,216) 3,335,700 6,915,130 (8,120,462) 7,850,852

Unallocated assets -

Total net assets 626,425 5,172,276 (78,216) 3,335,700 6,915,130 (8,120,462) 7,850,852

For the purposes of monitoring segment performance and allocating resources between segments, the Group’s Chief Executive monitors the tangible, intangible and financial assets and liabilities attributable to each segment. All assets and liabilities are allocated to reportable segments with the exception of tax assets and certain borrowings.

46.4Geographicalinformation The Group’s revenue and information about its segment net assets by geographical location are as follows: Revenue Netassets 2012 2011 2012 2011 N’000 N’000 N’000 N’000 N N N N

Within Nigeria 3,677,690 3,166,760 8,128,644 7,850,852 Outside Nigeria - - - -

3,677,690 3,166,760 8,128,644 7,850,852

46.5Informationaboutmajorcustomers The Group does not derive revenue from an individual policyholder or intermediary that represents 10% or

more of the group’s total revenue.


135


47 Compensationofkeymanagementpersonnel Key management personnel of the Group include all directors, executive and non-executive, and senior

management. The summary of compensation of key management personnel for the year is as follows:

.1 Staff Average number of persons employed in the financial year and the related staff cost were as follows:

Group Company 2012 2011 2012 2011 Number Number Number Number

Managerial 27 35 1 2 Senior staff 197 198 5 5 Junior staff 81 71 - -

305 304 6 7

N’000 N’000 N’000 N’000

Staff costs Salaries , wages and allowances 1,425,840 1,369,361 73,573 94,322 Pension cost 39,808 88,844 - -

1,465,648 1,458,205 73,573 94,322

.2 Pension Scheme At January 1 14,969 15,497 - - Provision in the year 113,523 117,454 - - Remittance to pension fund administrators (113,523) (117,982) - -

At December 31 14,969 14,969 - -


136


47 Compensationofkeymanagementpersonnel(continued)

3. Employees

.1 Employeesremuneratedathigherrates The number of employees in receipt of emoluments including allowances within the following ranges

were: Group Company 2012 2011 2012 2011 N N Number Number Number Number

170,001 - 210,000 - 7 - - 210,001 240,000 240,001 - 250,000 10 2 - - 250,001 - 500,000 4 9 - - 500,001 - 600,000 7 5 - - 600,001 - 700,000 - - - - 700,001 - 800,000 4 10 - - 800,001 - 900,000 8 8 - - 900,001 - 1,000,000 20 16 - - 1,000,001 - 1,500,000 53 81 1 - 1,500,001 - 3,000,000 77 68 2 2 3,000,001 - 4,000,000 46 36 1 2 4,000,001 - 5,000,000 20 22 1 1 5,000,001 - 6,000,000 23 20 - - 6,000,001 - 7,000,000 12 12 - - 7,000,001 - 8,000,000 8 1 - - 8,000,001 - 9,000,000 4 3 - - 9,000,001 - 10,000,000 6 1 - - 10,000,001 - 20,000,000 3 3 1 2

305 304 6 7

Group Company 2012 2011 2012 2011 N’000 N’000 N’000 N’000

.4 Chairman and directors’ emoluments

.1 Emoluments Chairman 6,282 5,486 6,282 5,486 Other directors 59,652 54,344 59,652 54,344

65,934 59,830 65,934 59,830

As directors’ fees 3,008 2,730 3,008 2,730 Emoluments as executive 62,926 57,100 62,926 52,100

65,934 59,830 65,934 54,830

The highest paid director 23,079 33,512 23,079 33,512

The prior year figures have been restated to include directors’ allowances.

.2 Number of directors (excluding the chairman) within the following emolument range

Group Company 2012 2011 2012 2011 N N Number Number Number Number

400,000 - 500,000 4 4 - - 500,000 - 600,000 1 1 - - 2,000,001 - 5,000,000 8 8 6 6 Above - N5,000,000 6 6 2 2

48. ExplanationoftransitiontoIFRSs Explanations of the transition to IFRSs have been provided in the statement of significant accounting

policies of the company. The analysis below represents a reconciliation of the statement of financial position and comprehensive income from the previous Nigerian GAAP to IFRS:


137


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139


StatementofProfitorLossandOtherComprehensiveIncome(Group)

NGAAP IFRS IFRS Reclassifications&Adjustments

Reclassi- Remeasu- 31-Dec-11 fications rement 31-Dec-11 Note N’000 N’000 N’000 N’000

Underwriting profit/loss ao 1,927,024 (239,994) (106,208) 1,580,822(Loss)/Profit from life business ap (239,994) 239,994 -Net interest income aq 96,740 (96,740) -Earned interest income ar 23,004 23,004Investment and other income as 280,420 194,799 475,219Foreign exchange gain/(loss) at - (292) - (292)Other income au 311,408 (311,408) - -Other operating income av 1,144,752 1,144,752Gain on property sold aw 855,836 (855,836) -Net fair value gain or loss on financial assets ax - - (56,745) (56,745)

Net Income 3,231,434 98,279 (162,953) 3,166,760

Provision for Doubtful Balances ay 400,314 (400,314) Allowance for impairment on Trade Receivable az - 400,314 399,037 799,351Management expenses ba 1,856,717 98,279 201,985 2,156,981Impairment of Goodwill bb 12,924 - (12,924) (0)

TotalExpenses 2,269,955 98,279 588,098 2,956,332

Resultsofoperatingactivities 961,479 - (751,051) 210,428

Finance costs - - - -

Profit(loss)beforetax 961,479 - (751,051) 210,428

Income taxes bc (302,708) - 42,813 (259,895)

Profit(loss)aftertaxation 658,771 - (708,238) (49,467)

OtherComprehensiveIncome:Items that will not be reclassified subsequently to profit or loss:Revaluation Surplus on PPE - - - -Net Actuarial Gains/Losses of Defined Benefit Obligations bd - - 87,770 87,770Tax Effects on Other Comprehensive Income - - - -Others - - - -

Items that may be reclassified subsequently to profit or loss: Changes in fair value of AFS Investments - - - -Fair value changes on Effective Portion of a Cash flow Hedge - - - -Tax Effects on Other Comprehensive Income - - - -Others (describe) - - - -

OtherComprehensiveIncome,netoftaxes - - 87,770 87,770

TotalComprehensiveIncomefortheyear 658,771 - (620,468) 38,303

140


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StatementofProfitorLossandOtherComprehensiveIncome

NGAAP IFRSReclassifications&Adjustments IFRS Reclassi- Remeasu- 31-Dec-11 fications rement Error 31-Dec-11 Note N’000 N’000 N’000 N’000 N’000

PremiumWritten: Gross Premium Income - - - - -Reinsurance Expense - - - - -

Netinsurancepremiumrevenue - - - - -

Fees and commission income - - - - -

Net Underwriting Income - - - - -

Insurance claims and claims expenses - Gross - - - - -Insurance claims and claims expenses - Recoveries from reinsurers - - - - -

Netinsurancebenefitsandclaims - - - - -Underwriting Expenses - - - - -

TotalUnderwritingExpenses - - - - -

Underwriting Results - - - - -Investment and other income 8 226,988 858,587 - - 1,085,575Exceptional Items 858,587 (858,587) - - -Allowance for impairment on doubtful balances (80,923) - - - (80,923)Management expenses 9 (383,034) - (2,690) - (385,724)

Netoperatingincome 621,618 - (2,690) - 618,928Finance costs - - - - -

Profitbeforetax 621,618 - (2,690) - 618,928

Income tax expense (84,042) - - - (84,042)

Profitfortheyear 537,576 - (2,690) - 534,886

OtherComprehensiveIncome:Items that will not be reclassified subsequently to profit or loss: Revaluation Surplus on PPE - - - - -Net Actuarial Gains/Losses of Defined Benefit Obligations 10 - - 4,367 - 4,367Tax Effects on Other Comprehensive Income - - - - -Others - - - - -Items that may be reclassified subsequently to profit or loss: Changes in fair value of AFS Investments - - - - -Fair value changes on Effective Portion of a Cash flow Hedge - - - - -Tax Effects on Other Comprehensive Income - - - - -Others (describe) - - - - -

OtherComprehensiveIncome,netoftaxes - - 4,367 - 4,367

TotalComprehensiveIncomefortheyear 537,576 - 1,677 - 539,253

142


StatementofCashFlows

IFRSReclassifications&Adjustments NGAAP Measurement IFRS 31-Dec-11 31-Dec-11 N’000 N’000 N’000 N’000

CashflowsfromOperatingActivities:Insurance Premium Received - - - -Claims paid - - - -Claims reimbursed by Reinsurers - - - -ommission received - - -Commission paid - - - -Reinsurance premium paid - - - -Input VAT - - - -Output VAT - - - -Other operating cash payments (235,586) - - (235,586)Other income received 226,988 - - 226,988

CashflowsfromOperatingActivities (8,598) - - (8,598)Tax paid - - - -

NetcashflowsprovidedbyOperatingActivities (8,598)-- (8,598)

CashflowsfromInvestingActivities:Proceeds from disposal of property and equipment - - - -Additional purchase of Investment properties - - - -Purchase of property and equipment (2,429) - - (2,429)Proceeds from disposal of financial asset investments - - - -Dividend received - - - -Rental income from investment properties received - - - -Interest received - - - - - Realisation of Investments in Debt Securities - - - -

NetcashflowsfromInvestingactivities (2,429)-- (2,429)

CashflowsfromFinancingActivities:Issues of Shares - - - -Dividend Paid - - - -

NetcashflowsfromFinancingActivities - -- -

Netincreaseincashandcashequivalents (11,027)-- (11,027)Cashandcashequivalentsatbeginningoftheyear 13,696-- 13,696

Cashandcashequivalentsatendoftheyear 2,669-- 2,669

143


ExplanatorynotestoIFRSreclassification&adjustments

31-Dec-11 1-Jan-11 N’000 N’000

a CashandBankDeposits NGAAP balance of Cash and Bank Deposits 403,982 422,450 Reclassification as Cash and Cash Equivalents (403,982) (422,450)

- -

b CashandCashEquivalents: Cash and cash equivalents include cash in hand and at bank, call deposits and short term highly liquid

financial assets with original maturities of three months or less from the acquisition date, which are subject to insignificant risk of changes in their fair value, and are used by the Company in the management of its short-term commitments.

IFRS Adjustments to Cash and Cash Equivalent are as follows:

31-Dec-11 1-Jan-11 N’000 N’000

RECLASSIFICATIONADJUSTMENT(S): Reclassification of Cash and Bank Deposits 403,982 422,450 Reclassification of Short-term investments 866,841 714,574 Reclassification of Interest Receivables on Short-term Placements from other receivable and prepayment (4,143) (13,789)

Balance per IFRS 1,266,680 1,123,235

c Short-TermInvestments NGAAP balance of Short term Deposits 866,841 714,574 Reclassification as Cash and Cash Equivalents (866,841) (714,574)

- -

d Loansandadvances NGAAP balance of Loans and advances 329,141 32,481 Reclassification to Trade receivables and other receivables and prepayment (19,548) 104,200 Adjustment on loans and advances impairment (24,192) -

285,401 136,681

e Advancesunderfinancelease NGAAP balance of Advances under finance Leases 325,672 263,289 Reclassification to Trade receivables and other receivables and prepayment (63,448) 32,496 Adjustment to Advances under finance Leases impairment (21,585)

240,639 295,785

f Long-TermInvestments NGAAP balance of Long-term investments 2,772,085 2,963,145 Reclassification as Financial Assets (2,772,085) (2,963,145)

- -

g Financial Assets: Financial assets are classified into the following specified categories: financial assets ‘at fair value

through profit or loss’ (FVTPL), ‘held-to-maturity’ investments, ‘available-for-sale’ (AFS) financial assets and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

144


ExplanatorynotestoIFRSreclassification&adjustments(Continued)

IFRSAdjustmentstoFinancialAssetsareasfollows:

31-Dec-11 1-Jan-11 N’000 N’000

RECLASSIFICATION ADJUSTMENT(S): NGAAP BALANCES

Reclassification of Quoted Equities measured at FVTPL 1,898,699 2,394,965 Reclassification of Unquoted Equities - AFS Financial Assets 307,437 338,876 Reclassification of FGN Bonds measured at Fair Value 259,722 30,000 Reclassification of State Government Bonds measured at Amortised Costs 142,053 188,926 Reclassification of Staff Mortgage Loans measured at Amortised Costs 166,370 3,997

2,774,282 2,962,710

RECLASSIFICATION Reclassification of Accrued Interests on FGN Bonds measured at FVTPL 5,056 5,297 Reclassification of Accrued Interests on State Government Bonds measured at amortised cost 11,232 2,971 Reclassification of Accrued Interests on Staff Mortgage Loans measured at amortised cost 7,514 54

23,801 8,322

MEASUREMENTADJUSTMENT(S): Adjustments for impairment on staff loans (1,686) Adjustments on measurement of FGN Bonds at fair value (5,774) 892 Adjustments on measurement of State & Corporate Bonds at amortised cost (1,215) 4,620

44,570

(8,676) 50,082

IFRS BALANCE 2,789,404 3,021,115

h Deferredacquisitioncost NGAAP balance of Deferred acquisition cost 94,686 80,586 Reclassification to Trade receivables and other receivables and prepayment 9,000 - Adjustment on deferred acquisition cost 6,470 3,433

110,156 84,019

i DebtorsandPrepayments NGAAP balance of Debtors and Prepayments 1,766,136 1,382,223 Reclassification to Trade receivables and other receivables and prepayment (1,766,136) (1,382,223)

- -

j TradeReceivables Receivables arising under insurance contracts and investment contracts with DPF are recognised when

due and measured at amortised cost, using the effective interest rate method (where applicable). An allowance for impairment is established when there is objective evidence that, as a result of one or more events that occurred after the initial recognition, the estimated future cash flows have been impacted.

In transitioning to IFRS, we have reclassified the individual line items relating to the insurance business receivables in the NGAAP Financial Statements as at transition date and the comparative date (as shown below) and equally there has been adjustment for impairment allowance based on the principle of IAS 39.

145



IFRSAdjustmentstoTradeReceivablesareasfollows:

31-Dec-11 1-Jan-11 N’000 N’000

RECLASSIFICATIONADJUSTMENT(S): Debtors and prepayments 608,016 244,055 Adjustments for impairment allowances for Insurance & Reinsurance Receivables (280,610) 6,240

327,406 250,295

k OtherReceivablesandPrepayment Other receivables and prepayments are recognised when due and unexpired respectively, and measured

at amortised cost, using the effective interest rate method (where applicable). An allowance for impairment is established when there is objective evidence that, as a result of one or more events that occurred after the initial recognition, the estimated future cash flows have been impacted.

IFRS Adjustments to Other Receivables are as follows:

31-Dec-11 1-Jan-11 N’000 N’000

RECLASSIFICATIONADJUSTMENT(S): Reclassification from Debtors and Prepayments 1,158,120 1,138,168 Adjustments for Gratuity Paid - As per Actuaries report (129,112) (69,612) Reclassification of balance from other payables (141,105) (253,634) Reclassification of Accrued Interests to Cash and cash equivalents (4,639) (8,709) Reclassification of Deferred Acquisition cost (9,000) Reclassification of Accrued Interests on FGN Bonds (4,037) (18,700) Reclassification of Accrued Interests on State Government Bonds (4,519) (3,571) Reclassification of Accrued Interests on Staff Mortgage Loans (11) (54)

865,698 783,888

MEASUREMENTADJUSTMENT(S): Adjustments on Treasury shares (500,000) (500,000) Adjustments on accrued interests on Statutory Deposits (4,125) Adjustments on accrued interests on Statutory Deposits 2,345 3,432

(501,780) (496,568)

IFRS BALANCE 363,918 287,322

l PrepaidInsurancePremium NGAAP balance of Prepaid Insurance Premium 414,357 172,032 Reclassification to Reinsurance assets (414,357) (172,032)

- -

m ReinsuranceClaimsRecoverable NGAAP balance of Reinsurance Claims Recoverables 839,723 232,452 Reclassification to Reinsurance assets (839,723) (232,452)

- -

n Reinsurance Assets The company cedes insurance risk in the normal course of business for all of its businesses. Reinsurance

assets represent balances due from reinsurance companies. Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision or settled claims associated with the reinsurer’s policies and are in accordance with the related reinsurance contract.

As at transition date and the comparative date to the first IFRS Reporting Date, the individual items that constitute reinsurance assets, such as reinsurance recoveries and prepaid reinsurance premium have been reclassified as Reinsurance Assets and likewise the necessary adjustments regarding the share of insurance liabilities based on the requirement of IFRS 4, to meet the minimum requirement of Liability Adequacy Test (LAT) has equally been effected (as shown below).

146



IFRSAdjustmentstoReinsuranceAssetsareasfollows:

31-Dec-11 1-Jan-11 N’000 N’000 RECLASSIFICATIONADJUSTMENT(S): Reclassification of Deferred Reinsurance Costs (i.e. Share of Unearned Premium ceded to Reinsurers) 414,357 172,032 Reclassification of recoverable from reinsurers being share of Claims Outstanding (net of IBNR) 839,723 232,452 Reclassification of recoverable from reinsurers being share of Incurred but not Reported (IBNR) 38,515 21,523

1,292,595 426,007

MEASUREMENTADJUSTMENT(S): Adjustments for Incurred but not Reported Claims recoverable from Reinsurers 297,577 131,243 Adjustments for Additional Unexpired Risk Reserves recoverable from Reinsurers - -

297,577 131,243

IFRS BALANCE 1,590,172 557,250

o Goodwill Goodwill is initially measured at cost, being the excess of the fair value of the consideration transferred

over the acquirer’s share in the net identifiable assets acquired and liabilities assumed and net of the fair value of any previously held equity interest in the acquiree. Subsequently, Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any. For the purposes of impairment testing, goodwill is allocated to each of the Company’s cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination.

As at transition date, it was evidenced that the goodwill cannot be specifically allocated to any Cash-Generating Unit(s) - CGU, and evidence has also shown as confirmed by the management of the entity that the Goodwill is considered fully impaired as the original synergy expected of the business combination cannot be considered to have been achieved. In this vein, the Goodwill was fully written-off as at Transition date.

IFRS Adjustments to Goodwill is shown below:

31-Dec-11 1-Jan-11 N’000 N’000 RECLASSIFICATIONADJUSTMENT(S): NGAAP balance of Goodwill 528,622 541,546 Adjustment for write-off of Goodwill as an impairment on transition to IFRS (528,622) (541,546)

IFRS BALANCE - -

p IntangibleAssets The company’s identifiable intangible assets are stated at cost less accumulated amortization and

include internally generated patented technology and acquired computer software with finite useful lives.

The entity has only software cost as what constitutes its intangible assets as at transition date, which under NGAAP was grouped as part of Property and Equipment, under the nomenclature of Fixed Assets. This item has now been reclassified to Intangible Assets as at Transition date and the Comparative Date to the first IFRS Reporting Date.

IFRS Adjustments to Intangible Assets is shown below:

31-Dec-11 1-Jan-11 N’000 N’000 RECLASSIFICATIONADJUSTMENT(S): Reclassification from Fixed Assets to Intangible Assets (Software Costs) 41,210 65,882

IFRS BALANCE 41,210 65,882

147



q InvestmentProperties Investment properties are properties held to earn rentals and/or for capital appreciation (including

property under construction for such purposes). Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured at fair value. Gains and losses arising from changes in the fair value of investment properties are included in profit or loss in the period in which they arise.

The company adopted fair value model for its investment properties, and thereby influencing the requirement to at least on an annual basis fair value its investment properties, with the fair value changes reported directly in profit or loss. This basis has made the entity to fair value its investment properties as at transition date and the comparative date to the first IFRS reporting date for the purpose of being compliant with the requirement of IAS 40, as opposed to the NGAAP requirement of every 3 years revaluation.

IFRS Adjustments to Investment Properties is shown below:

31-Dec-11 1-Jan-11 N’000 N’000

MEASUREMENTADJUSTMENT(S): NGAAP balance of Investment Properties 5,676,299 4,612,230 Fair value adjustment for Investment Properties 493,008 1,116,710

IFRS BALANCE 6,169,307 5,728,940

r FixedAssets NGAAP balance of Fixed Assets 1,483,486 1,110,270 Reclassification to Property and Equipment and Intangible assets (1,483,486) (1,110,270)

- -

s PropertyandEquipment Property, plant and equipment are stated at cost less accumulated depreciation and accumulated

impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the company and the cost can be measured reliably.

Furthermore, there were not measurement difference such as impairment losses on the property and equipment, as the management of the entity based on its assessment of impairment have found no evidence to justify the requirement of impairment test or that any of its assets within the component of property and equipment has been considered impaired.

IFRS Adjustments to Property and Equipment is shown below:

31-Dec-11 1-Jan-11 N’000 N’000

RECLASSIFICATIONADJUSTMENT(S): Reclassification of Fixed Assets to Property and Equipment 1,442,276 1,044,388

(3,656) (4,803)

IFRS BALANCE 1,438,620 1,039,585

t EmployeesRetirementBenefitObligations The Company operates a defined contribution and defined benefit pension plan, which requires

contributions to be made to a separately administered fund. The cost of providing benefits under the defined benefit plan was determined based on the requirement of NGAAP. In transitioning to IFRS, the Defined Benefit Plan, operated by the entity is required to be measured with regards to IAS 19 which spelt-out the use of “Projected Unit Credit Method”.

The entity has the following schemes operating under “Defined Benefit Schemes”, which include: Pensions, Gratuity and Long-Service Awards to its employees.

The necessary measurement was carried out by the management of the company with the use of a professional actuary (HR Nigeria) for valuation of all its defined benefit schemes as at transition date, the comparative date and as at the end of the first IFRS Reporting date, and necessary adjustments are recognised as shown below:

148



IFRSAdjustmentstoRetirementBenefitObligations/(Assets)isshownbelow:

31-Dec-11 1-Jan-11 N’000 N’000

(i) Pensions MEASUREMENTADJUSTMENT(S): Adjustment for present value of funded obligations (278,734) (293,643) Adjustment for fair value of plan assets 305,572 319,645

Adjustments for Net Pension Assets 26,838 26,002

(ii)GratuityandLong-ServiceAwards MEASUREMENTADJUSTMENT(S): Adjustments for Gratuity Obligations 335,291 428,813 Adjustments for Long-Service Award Obligations 34,441 37,994

IFRS BALANCE 369,732 466,807

u DeferredTaxLiabilities/Assets IAS 12 requires the measurement of deferred taxes on the basis of full provisioning; the use of balance

sheet approach as compared to income statement approach, the measurement of deferred taxes based on temporary differences and based on applicable tax rate(s), subject to exceptions to the principle of recognition of deferred taxes.

NGAAP Deferred tax recognition and measurement bases are slightly different from that of IFRS (IAS 12), but do not necessarily have immense impact on the financial statements of the entity on transitioning because of the nature of the assets and liabilities of the entity. Whereas, the relevant deferred income tax liabilities(assets) have been adjusted to give effect to adjustments as follows:

IFRS Adjustments to Deferred Tax Liabilities/Assets are as shown below:

31-Dec-11 1-Jan-11 N’000 N’000

(i)DeferredTaxAssets MEASUREMENTADJUSTMENT(S): 301,320 252,228

301,320 252,228

v TreasuryShares IFRS Adjustments to Treasury Shares:

RECLASSIFICATIONADJUSTMENT(S): Adjustment to reflect Treasury Shares (500,000) (500,000 - -

(500,000) (500,000)

w RetainedEarnings(GeneralReserve) The transitional adjustments are effectively to impact the retained earnings directly as at the transition

date, while subsequent transition adjustments of the comparative date is to be reelected in profit or loss and other comprehensive income (as can be seen in reconciliation statements to profit or loss and other comprehensive income), but invariably as at comparative date the cummulative effect of transition adjustment still have impact in retained earnings (except for those such like Actuarial Gains/Loss that is reflected in a separate component of equity), as shown below:

149



IFRS Adjustments to Retained Earnings are as shown below:

31-Dec-11 1-Jan-11 N’000 N’000 NGAAPbalanceofRetainedEarnings(GeneralReserve) 1,254,021 (6,484,074)

RECLASSIFICATIONADJUSTMENT(S): Reclassification of Quoted Equity Valuation Reserve to Retained Earnings - 228,639 Reclassification of general reserve fund to retain earnings - 193,493 Reclassification of capital reserve to retained earnings - 5,210,716 Reclassification of investment properties revaluation reserve 2,278,761 3,167,792

2,278,761 8,800,640

REMEASUREMENTADJUSTMENT(S): Adjustment for write-off of Goodwill as an impairment on transition to IFRS (528,623) (541,545) Adjustments for Gratuity Paid - As per Actuaries report (129,112) (69,612) Adjustments for impairment on staff loans (494) (302) Adjustments on measurement of FGN Bonds at fair value (5,774) 1,078 Adjustments on measurement of State & Corporate Bonds at amortised cost (1,213) 2,749 Adjustments for impairment allowances for Insurance & Reinsurance Receivables (280,614) 6,240 Adjustments for Incurred but not Reported Claims on Gross Insurance Liabilities (737,704) (236,910) Adjustments for Additional Unexpired Risk Reserves on Gross Insurance Liabilities (40,038) (10,943) Adjustments for Incurred but not Reported Claims Recoverable from Reinsurers 376,128 310,878 Adjustments for Deferred Taxes 301,320 252,228 Adjustments on other receivables (19,849) 26,883 Adjustments on loan receivables impairment (52,438) (11,366) Adjustments on Deferred acquisition cost 6,470 3,433 Adjustments on accrued interests on Statutory Deposits (8,917) (7,588) Fair value adjustment for Investment Properties 493,007 1,116,710 Adjustments for Net Pension Assets 26,838 26,002 Adjustments for Gratuity Obligations (335,291) (428,813) Adjustments for Long-Service Awards Obligations (34,441) (37,994) Adjustments for Gratuity Obligations - Portion regarding Actuarial Gains/(Loss) in OCI (87,770) -

(1,058,515) 401,128

IFRSbalanceofRetainedEarnings(GeneralReserve) 2,474,267 2,717,694

x InvestmentPropertiesrevaluationreserve NGAAP balance of Investment Properties revaluation reserve - 3,167,792 Reclassification of investment properties revaluation reserve to Retained Earnings - (3,167,792)

- -

y CapitalReserve NGAAP balance of Capital reserve - 5,210,716 Reclassification of Capital reserve - (5,210,716)

- -

150



31-Dec-11 1-Jan-11 N’000 N’000 z GeneralReserveFund NGAAP balance of General reserve fund - 193,493 Reclassification of General reserve fund - (193,493)

- -

aa Quotedequitiesrevaluationreserve NGAAP balance of Investment Properties revaluation reserve - 228,639 Reclassification of Quoted Equity Valuation Reserve to Retained Earnings - (228,639)

- -

ab OtherComponentofEquity This reserve warehouses other component of equity that are not shown separately as a line item within

Equity in the Statement of Financial Position. In this context, Actuarial Gains/(Losses) resulting from Employees’ Retirement Benefits that is a component of this reserve pending when other reserves are created as a result of measurements resulting from items like revaluation surplus on property and equipment, Available for Sale Financial Asset Reserve, etc.)

IFRS Adjustments to Other Component of Equity are as shown below:

31-Dec-11 1-Jan-11 N’000 N’000

MEASUREMENTADJUSTMENT(S): Adjustments for Gratuity Obligations - Portion regarding Actuarial Gains/(Loss) in OCI 87,770 -

87,770 -

ac Borrowings IFRS Adjustments to Other Component of Equity are as shown below:

MEASUREMENTADJUSTMENT(S): 57,832 121,767 Reclassification of creditors to borrowings (57,832) 30,370

- 152,137

ad CustomersDeposit NGAAP balance 400,089 273,125 Reclassification of customers’ deposit to depositors fund (400,089) (273,125)

- -

ae DepositorsFund Reclassification of customers’ deposit to depositors fund 400,089 273,125 Reclassification from provision and other payables 3,042 1,572

403,131 274,697

af DeferredIncome Initial and other front-end fees received for rendering providing other services, apart from insurance

businesses, such as rent , are deferred and recognised as revenue when the related services are rendered.

151



IFRSAdjustmentstoDeferredIncomeareasshownbelow:

31-Dec-11 1-Jan-11 N’000 N’000

RECLASSIFICATIONADJUSTMENT(S): Reclassification of Rent Received in Advance from Creditors and Accruals 67,194 8,071

67,194 8,071

ag Creditors and accruals NGAAP balance of Creditors and accruals 1,577,288 849,040 Reclassification of Creditors and accruals to Provision and other payables (1,577,288) (849,040)

- -

ah Trade Payables Reclassification of premium and reinsurance payables to Trade payables

ai ProvisionsandOtherpayables IFRS Adjustments to Provision and Other Payables are as shown below:

Reclassification of Creditors and accruals to Provision and other payables 935,758 770,910 Reclassification of Information Technology Development Levy (5,861) (6,972) Offset of contra-entry against Trade & Other Receivables (118,578) (130,002) Reclassification of Rent Received in Advance (67,194) (8,071) Reclassified from Deposits for shares 9,983 98,366

IFRS BALANCE 754,108 724,231

aj DepositforShares NGAAP balance of Deposit for Shares 9,983 98,366 Reclassified to Provision and Other Payables (9,983) (98,366)

- -

ak InsuranceFunds NGAAP balance of Insurance Fund 4,201,168 3,164,167 Reclassification of Insurance Fund to Insurance Contract Liabilities (4,201,168) (3,164,167)

- -

al Insurance Contract Liabilities IFRS 4 requires the entire component of Insurance Liabilities (in the case of non-life insurance: claims

outstanding, incurred but not reported claims, provisions for unearned premium, and provision for additional unexpired risk) should at least meet the minimum requirement of Liability Adequacy Test (“LAT”) in accordance with IFRS 4 or the minimum requirement for provisioning as consistent with the requirement of IAS 37.

In this context, the entity has equally reclassified all contents of Insurance Liabilities reported under NGAAP in separate heads or as a separate line items,; and furthermore, carried out a full liability measurement of its insurance liabilities based on Actuarial Methods, which has now confirmed with the minimum requirement of its Liability Adequacy.

152



al Insurance Contract Liabilities (continued)

IFRS Adjustments to Insurance Liabilities Obligations are as shown below:

31-Dec-11 1-Jan-11 N’000 N’000

RECLASSIFICATIONADJUSTMENT(S): Reclassification of Insurance Fund 4,201,168 3,164,167 Reclassification of investment contract liabilities (530,960) (591,602)

3,670,208 2,572,565

MEASUREMENTADJUSTMENT(S): Adjustments for Incurred but not Reported Claims on Gross Insurance Liabilities 737,704 236,910 Adjustments for Additional Unexpired Risk Reserves on Gross Insurance Liabilities 44,919 10,943 Adjustments for Reinsurance Risk Reserves on Gross Insurance Liabilities (65,699) (174,754)

716,924 73,099

IFRS BALANCE 4,387,132 2,645,664

am InvestmentContractLiabilities

MEASUREMENTADJUSTMENT(S): Reclassification of investment contract from Insurance Fund 530,960 591,603

530,960 591,603

an TaxPayable Under NGAAP, the tax related component described as a levy - “Information Technology Development

Levy” has been reported as a component of Trade Payables (Creditors), whereas, the requirement of IAS 12 qualified such levies or taxes on taxable profit as a component of Current Tax Liabilities. Hence, the balances standing as liability for Information Technology Development Levy is now a component of Current Tax Liabilities.

IFRS Adjustments to Current Tax Liabilities are as shown below:

31-Dec-11 1-Jan-11 N’000 N’000

NGAAP balance 488,073 208,319 Reclassification of Information Technology Development Levy 13,260 5,057

IFRS BALANCE 501,333 213,376

ao UnderwritingProfit NGAAP balance 1,927,024 Reclassification of life business profit (239,994)

1,687,030 -

MEASUREMENTADJUSTMENT(S): Adjustments of insurance liabilities on underwriting profit (106,208)

IFRS balance 1,580,822

Underwriting Income 5,077,386 Less gross Insurance Claims paid (2,797,271) Add Reinsurance’s share 1,153,283 Less underwriting Expenses (1,852,575)

1,580,822 -

153



31-Dec-11 N’000

ap (Loss)/profitfromlifebusiness RECLASSIFICATIONADJUSTMENT(S):

NGAAP balance (239,994) Reclassification to earned interest income 239,994

-

aq Net interest income NGAAP balance 96,740 Reclassification of underwriting profit (96,740)

-

ar Earned interest income NGAAP balance 96,740 Reclassification to expenses as related party transactions (73,736)

23,004

as Investmentandotherincome NGAAP balance 280,420 Reclassification from other income 194,799

475,219

at Foreignexchangegain/(loss) Adjustment to reflect foreign exchange loss (292)

au Other income NGAAP Balance 311,408 Reclassification to Other operating income (311,408)

-

av Otheroperatingincome NGAAP Balance

Reclassification of other income 288,916 Reclassification of gain on sales of property 855,836

1,144,752

aw Gainonpropertysold NGAAP Balance

855,836 Reclassification to Other operating income (855,836)

-

154



31-Dec-11 N’000

ax Netfairvaluegainorlossonfinancialassets Re-measurement adjustment to Investment Properties and Equity Stock 268,573 Re-measurement adjustment to Equity Stock (314,337) Net Fair Value Changes on FGN Bonds and Treasury Bills measured at FVTPL (5,203) Net Adjustments on Amortised Costs on State and Corporate Bonds measured at Amortised Cost (1,653) Reversal on accrued interests income on statutory deposits (4,125)

(56,745)

ay ProvisionforDoubtfulBalances NGAAP Balance

400,314 Reclassification Provision for Doubtful balances to Allowance for Impairment on Premium receivables (400,314)

-

az AllowanceforimpairmentonPremiumReceivables The resulting effect of the measurement adjustments as it impact Allowance for impairment on trade

receivables and staff mortgage loans are as shown below:

IFRS Adjustments to Allowance for impairment on assets are as follows:

31-Dec-11 N’000

Reclassification Provision for Doubtful balances to Impairment 400,314 Adjustments for impairment of trade receivables 399,037

IFRS BALANCE 799,351

ba Managementexpenses The resulting effect of the measurement adjustments as it impact Management Expenses are as shown

below:

IFRS Adjustments to Allowance for management expenses are as follows:

31-Dec-11 N’000

NGAAP balance 1,856,717 Reclassification of Expenses 98,279

1,954,996

MEASUREMENTADJUSTMENT(S): Adjustments for Net Expenses on various accounts 201,985

201,985

IFRS BALANCE 2,156,981

bb ImpairmentofGoodwill The resulting effect of the measurement adjustments as it impact Impairment of Goodwill is as shown

below:

IFRS Adjustments to impairment of goodwill is as follows:

31-Dec-11 N’000

NGAAP balance 12,924 MEASUREMENTADJUSTMENT(S): Reversal of Impairment on Goodwill Recognised as it has already be wrritten-off at Transition date (12,924)

-

155



bc Incometaxes IFRS Adjustments to Allowance for management expenses are as follows:

31-Dec-11 N’000 NGAAP balance (302,708) Adjustments for Net of tax 42,813

(259,895)

bd NetActuarialGains/LossesofDefinedBenefitObligations The resulting effect of the measurement adjustments as it impact Net Actuarial Gains/Losses of Defined

Benefit Obligations are as shown below:

IFRS Adjustments to Net Actuarial Gains/Losses of Defined Benefit Obligations are as follows:

31-Dec-11 N’000

MEASUREMENTADJUSTMENT(S): Adjustments for Net Pension Assets (35,979) Adjustments for Gratuity Obligations 112,749 Adjustments for Long-Service Awards Obligations 11,000

87,770

1 Trade&OtherReceivables Receivables arising under insurance contracts and investment contracts with DPF are recognised when

due and measured at amortised cost, using the effective interest rate method (where applicable). An allowance for impairment is established when there is objective evidence that, as a result of one or more events that occurred after the initial recognition, the estimated future cash flows have been impacted.

In transitioning to IFRS, we have reclassified the individual line items relating to the insurance business receivables in the NGAAP Financial Statements as at transition date and the comparative date as a whole component of Trade and Other Payables (as shown below) and equally there has been adjustment for impairment allowance based on the principle of IAS 39.

IFRS Adjustments to Trade and Other Receivables are as follows:

31-Dec-11 1-Jan-11 N’000 N’000

RECLASSIFICATIONADJUSTMENT(S): Reclassification of Trade Debtors 16,908 99,715 Reclassification of Due from related companies 15,505 11,656

32,413 111,371

2 Other Assets In accordance with paragraph 55 of IAS 1, an entity shall present additional line items, headings and

subtotals in the statement of financial position when such presentation is relevant to an understanding of the entity’s financial position. The requirement of the class “Other Assets” is a worldwide acceptable class for some group of assets such as deposits, prepayments, short-term advances (non-interest bearing) etc. that do not conform with other identified classifies (as spelt-out in IAS 1 paragraph 54).

In this context, the management has reclassified all its prepayments from Trade and Other Payables (i.e., under NGAAP was included as Debtors and Prepayments) to other assets, as shown below:

IFRS Adjustments to Other Assets are as shown below:

31-Dec-11 1-Jan-11 N’000 N’000

RECLASSIFICATIONADJUSTMENT(S): Reclassification of Prepayment 14,715 23,008

14,715 23,008

156



3 RetainedEarnings(GeneralReserve) The transitional adjustments are effectively to impact the retained earnings directly as at the transition

date, with subsequent transition adjustments of the comparative date is to be reelected in profit or loss and other comprehensive income (as can be seen in reconciliation statements to profit or loss and other comprehensive income), but invariably as at comparative date the cummulative effect of transition adjustment still have impact in retained earnings (except for those such like Actuarial Gains/Loss that is reflected in a separate component of equity), as shown below:

IFRS Adjustments to Retained Earnings are as shown below: 31-Dec-11 1-Jan-11 N’000 N’000

NGAAP Balance 1,662,977 (200,338) RECLASSIFICATIONADJUSTMENT(S): Reclassification of Capital Reserve to Retained Earnings - 5,210,716 Reclassification of revaluation reserve - 1,950,000 Reclassification of General Reserve Fund to Retained Earnings - 193,493

1,662,977 (7,153,871)

MEASUREMENTADJUSTMENT(S): Adjustments for Gratuity Obligations (10,336) (11,978) Adjustments for Long-Service Award Obligations (1,132) (1,167) Adjustments for Deferred Taxes - - Adjustments for Gratuity Obligations - Portion regarding Actuarial Gains/(Loss) in OCI (3,982) - Adjustments for Long-Service Awards Obligations - Portion regarding Actuarial Gains/(Loss) in OCI (385) -

(15,835) (13,145)

IFRS Balance 1,647,142 7,120,726

4 OtherComponentofEquity This reserve warehouses other component of equity that are not shown separately as a line item within

Equity in the Statement of Financial Position. In this context, Actuarial Gains/(Losses) resulting from Employees’ Retirement Benefits that is a component of this reserve pending when other reserve are created as a result of measurements resulting from items like revaluation surplus on property and equipment, Available for Sale Financial Asset Reserve, etc.).

IFRS Adjustments to Other Component of Equity are as shown below: 31-Dec-11 1-Jan-11 N’000 N’000

MEASUREMENTADJUSTMENT(S): Adjustments for Gratuity Obligations - Portion regarding Actuarial Gains/(Loss) in OCI 3,982 - Adjustments for Long-Service Awards Obligations - Portion regarding Actuarial Gains/(Loss) in OCI 385 -

4,367 -

5 Trade & Other Payables Receivables arising under insurance contracts and other business activities of the entity are recognised

when due and measured at amortised cost, using the effective interest rate method (where applicable).

Items of liabilities such as due to related companies and other trade liabilities that are recognised separately under NGAAP as a distinct line items have now been reclassified as components of Trade and Other Payables, except for those that constitute a component of Other Liabilities in line with the requirement of IAS 1 paragraph 55. Likewise, are some other items of liabilities reclassified to the appropriate class of liabilities.

IFRS Adjustments to Trade and Other Payables are as shown below: 31-Dec-11 1-Jan-11 N’000 N’000 RECLASSIFICATIONADJUSTMENT(S): Reclassification to Creditors to Trade and Other Payables 303,770 296,691 Reclassification of Due to related companies

159,233 1,040,580

463,003 1,337,271

157



6 IncomeTaxPayable Under NGAAP, the tax related component described as a levy - “Information Technology Development

Levy” has been reported as a component of Trade Payables (Creditors), whereas, the requirement of IAS 12 qualified such levies or taxes on taxable profit as a component of Current Tax Liabilities. Hence, the balances standing as liability for Information Technology Development Levy is now a component of Current Tax Liabilities.

IFRS Adjustments to Current Tax Liabilities are as shown below:

31-Dec-11 1-Jan-11 N’000 N’000

NGAAP Balance 294,324 53,282 RECLASSIFICATIONADJUSTMENT(S):

Reclassification of Information Technology Development Levy 6,279 -

6,279 -

IFRS Balance 300,603 53,282

7 EmployeesRetirementBenefitObligations The Company operates a defined contribution and defined benefit pension plan, which requires

contributions to be made to a separately administered fund. The cost of providing benefits under the defined benefit plan was determined based on the requirement of NGAAP. In transitioning o IFRS, the Defined Benefit Plan operated by the entity is required to be measured with regards to IAS 19 which spelt-out the use of “Projected Unit Credit Method”.

The entity has the following schemes operating under “Defined Benefit Schemes”, which include: Gratuity and Long-Service Awards to its employees.

The necessary measurement was carried out by the management of the company with the use of a professional actuary (HR Nigeria) for valuation of all its defined benefit schemes as at transition date, the comparative date and as at the end of the first IFRS Reporting date, and necessary adjustments are recognised as shown below:

IFRS Adjustments to Retirement Benefit Obligations/(Assets) is shown below:

31-Dec-11 1-Jan-11 N’000 N’000

Gratuity and Long-Service Awards

MEASUREMENTADJUSTMENT(S): Adjustments for Gratuity Obligations 10,336 11,978 Adjustments for Long-Service Award Obligations 1,132 1,167

11,468 13,145

8 Investmentandotherincome The resulting effect of the reclassification adjustment as it impact investment and other income

(including the fair value gains on investment properties) is as shown below:

IFRS Adjustments to Investment Income are as follows:

31-Dec-11 N’000

NGAAP Balance 226,988 RECLASSIFICATIONADJUSTMENT(S): Reclassification of Exceptional Items 858,587

858,587

IFRS Balance 1,085,575

158



9 Managementexpenses The resulting effect of the measurement adjustments as it impact Management Expenses are as shown

below:

IFRS Adjustments to Allowance for management expenses are as follows:

31-Dec-11 N’000

NGAAP Balance (383,034) MEASUREMENTADJUSTMENT(S): Adjustments for Gratuity Obligations (2,340) Adjustments for Long-Service Awards Obligations (350)

(2,690)

IFRS Balance (385,724)

10 NetActuarialGains/LossesofDefinedBenefitObligations The resulting effect of the measurement adjustments as it impact Net Actuarial Gains/Losses of Defined

Benefit Obligations are as shown below:

IFRS Adjustments to Net Actuarial Gains/Losses of Defined Benefit Obligations are as follows:

31-Dec-11 N’000

MEASUREMENTADJUSTMENT(S): Adjustments for Gratuity Obligations 3,982 Adjustments for Long-Service Awards Obligations 385

4,367

159


tatement of Value AddedSYear Ended 31 December 2012

Group Company Dec-12 Dec-11 Dec-12 Dec-11 N’000 % N’000 % N’000 % N’000 %

Underwriting income 5,564,065 5,077,385 - - Investment income 642,027 475,219 133,800 - interest income 110,331 23,004 - - Net fair value gain or (loss) on financial assets 732,753 (56,745) - - Other income 255,056 1,144,460 228,548 1,085,575 Claims, reinsurance, commission and other overheads (4,322,088) (4,331,256) (64,965) (292,443)

Value added 2,982,144 100 2,332,067 100 297,383 100 793,132 100

Appliedasfollows:Employees:Salaries, pensions, gratuities and other employee benefits 1,146,213 38 1,252,337 54 73,573 25 94,322 12

Government: Taxation 252,724 8 308,987 13 45,140 15 90,321 11

Retainedforreplacementofassetandexpansionofbusiness: Deferred taxation (133,452) (4) (49,092) (2) - - - -Impairment and Amortisation 1,092,724 37 869,302 37 13,835 5 73,603 9Contingency reserve 197,038 7 183,673 8 Transfer to general reserve 426,897 14 (233,140) (10) 164,835 55 534,886 68

2,982,144 100 2,332,067 100 297,383 100 793,132 100

160


ive - Year Financial Summary - GroupFFor the Year Ended 31 December 2012

IFRS SUMMARY NGAAP SUMMARY 2012 2011 2010 2009 2008 N’000 N’000 N’000 N’000 N’000

ASSETSCash and cash equivalent 1,338,057 1,266,680 1,123,235 910,027 1,716,892Loans and advances 435,830 285,401 136,681 161,754 106,250Advances under finance lease 412,961 240,639 295,785 308,603 437,283Financial assets 2,937,965 2,789,403 3,021,115 2,566,251 3,015,809Trade Receivables 418,381 327,406 250,294 1,797,718 694,854Other Receivables 188,533 363,918 287,323 - -Deferred acquisition costs 171,965 110,156 84,019 62,057 77,393Reinsurance assets 1,584,733 1,590,172 557,250 1,820,294 600,998Investment properties 6,356,474 6,169,307 5,728,940 4,583,326 3,449,368Statutory deposit with CBN 555,000 555,000 555,000 555,000 605,000Goodwill - - - 541,546 993,313Intangible Assets: 38,035 41,210 65,882 - -Property, Plant and Equipment 1,379,719 1,438,620 1,039,584 1,095,899 610,093Employees Retirement Benefits Assets 49,370 26,839 26,002 - -Deferred Tax Assets 434,772 301,320 252,228 - -

Total assets 16,301,795 15,506,071 13,423,338 14,402,475 12,307,253

LIABILITIESBorrowings - - 152,137 119,208 239,838Deferred Income 48,192 67,194 8,071 Depositors’ funds 593,225 403,231 274,697 244,593 105,661Trade Payables 369,863 641,530 78,130 1,185,137 1,077,663Provisions and Other Payables 635,069 754,108 724,231 - -Insurance Contract Liabilities 4,878,504 4,387,131 2,645,664 4,418,561 3,300,600Investment Contract Liabilities 573,494 530,960 591,603 130,226 130,226Income Tax 519,109 501,333 213,376 385,253 1,056,189Dividend payable 80,525 - - - 237,193Employees Retirement Benefit Obligations 475,150 369,732 466,807Deferred taxation - - - 54,047 75,549

8,173,131 7,655,219 5,154,716 6,537,025 6,222,919

161


ive - Year Financial Summary - GroupFFor the Year Ended 31 December 2012

IFRS SUMMARY NGAAP SUMMARY 2012 2011 2010 2009 2008 N’000 N’000 N’000 N’000 N’000

CAPITAL AND RESERVESShare capital 2,572,685 2,572,685 2,286,831 2,032,738 1,847,944Contingency reserve 722,231 525,193 787,307 662,435 547,922General reserve 2,695,350 2,474,268 2,717,694 (6,646,089) (2,014,922)General reserve fund - - - 206,975 206,975Share premium account 2,690,936 2,690,936 2,976,790 3,230,883 3,415,677Capital reserve - - - 5,210,716 -Investment properties’ revaluation reserve - - - 3,167,792 2,080,738Treasury shares (500,000) (500,000) (500,000) - -Other Component of Equity (52,538) 87,770 - - -

Shareholders’ funds 8,128,664 7,850,852 8,268,622 7,865,450 6,084,334

16,301,795 15,506,071 13,423,338 14,402,475 12,307,253

TURNOVER AND PROFIT - -Gross income/premium 7,614,209 6,822,383 3,267,304 3,645,594 -

Profit/ (loss) before taxation and exceptional items 743,208 210,428 143,692 337,122 (119,391)Exceptional item - - - (451,767) (1,374,540)Profit/(loss) after taxation 623,935 (49,467) 273,406 160,070 (2,435,646)Dividend - - - -Earnings per 50k share (basic) 0.12 (0.01) 0.05 0.04 (0.66)Earnings per 50k share (diluted) 0.12 (0.01) 0.05 0.04 (0.25)Net asset per share 1.58 1.53 1.81 1.93 1.65

NOTE:Earnings per share are based on (loss)/profit after tax and the number of issued ordinary share capital at 31 December of each year.

Net assets per share are based on the number of issued ordinary share capital at 31 December of each year

162


anagement Groupand Subsidiaries

M162

163


anagement Group and SubsidiariesMREGIONAL DIRECTORS

South-EastMr. N. MelieBSc., MBA, FCII

Lagos-SouthMr. N. S. AkereleHND, CIIN, ACII

Lagos-CentralMrs. J. EkomwererenB.A., ACII

North-WestMr. S. T. OkohACII, MBA

WestMr. R. A. AjanaBSc., MMP

South-SouthMrs. V. O. EluemeHND, MBA

EXECUTIVE GROUP

ROYAL EXCHANGE PLC

GroupManagingDirectorMr. C. MokwunyeB.A., MSc., ACIP

ExecutiveDirector(MarketingandSales)Alhaji A. MuktariBSc., MSc., AIoD, AMIN

General ManagerMr. P. AshinzeBSc., MBA, ACA, ACTI, CISA

DeputyGeneralManagerMr. D. NosiriBA, MSc, CIPD

Assitant General Managers

LegalandCompanySecretariatServicesMs. S. I. EzeukoB.Ed., LLB, BL, ACIARB

EnterpriseRiskManagementMr. H. Y. BomanBSc., FCA, ACTI, ACS, ACPIN, MIoD

InformationTechnologyMr. E. J. OsisiomaBSc., MBA

Senior Managers

Facilities ManagementMr. B. T. BabajoBSc., MBA

Audit and ControlMr. A. E. OkorohPGD, ACA, MBA

LegalandCompanySecretariatServicesMrs. N. S. OnyemeLLB, BL, ACIARB

EXECUTIVE (SUBSIDIARIES)

RoyalExchangeGeneralInsuranceCompanyLimited

Managing DirectorMr. R. O. BorokiniBSc., LLB, BL, ACII

Director(Lagos&West)Mr. A. A. NwankwoHND, ACII, MBA

Director South-South & South-EastMr. B. C. AgiliHND, MBA, FCII, FIIM

Senior ManagerMr. H. A. NwosuACIIN, MBA

RoyalExchangePrudentialLifePlcManaging DirectorMr. B. O. BanmoreBSc., MMP, ACII

Assistant General ManagerFinance and AccountsMr. F. C. OkoliBSc., ACIB, FCA, FCIT

RoyalExchangeFinanceandInvestmentLimitedManaging DirectorMr. Abiola SanniBSc., ACIA, NIMN, ACIB

RoyalExchangeHealthcareManaging DirectorDr. C. P. OfulueMBBS, MBA

Senior ManagerMrs. A. OlatawuraMSc., BSc.

RoyalExchangeMicrofinanceBankManaging DirectorMrs. E. O. ElgbocheBSc., (Ed.), MBA, ACIB, ACIM

164


oyal Exchange GeneralR

Mr.RichardBorokiniManaging Director

(Royal Exchange General)

Royal Exchange General Insurance Company Limited is a wholly owned subsidiary of Royal Exchange Plc, licensed by the National Insurance Commission to offer the full range of general and special risks insurance products. With over 90 years in the Nigerian market, Royal Exchange General Insurance has an enviable reputation for reliability, integrity, professionalism, technical competence and financial strength.

The company operates from twenty nine branches country wide to ensure maximum outreach and complete accessibility to its customer base. The recent implementation of a web-enabled backbone IT system will further enhance its ability to provide incomparable service. The company’s capacity to underwrite oil and gas risks is widely acknowledged throughout the industry and its oil and gas treaty is widely recognized to be one of the best in the market.

With its slavish dedication to its core values, the company continues to maintain its lead on many of the major corporate risks in Nigeria.

165


Royal Exchange Healthcare Limited is a nationwide accredited NHIS health maintenance organization, providing financial intermediation within the health industry. We therefore act as a fulcrum between the enrollees and the healthcare providers selected purely on the quality of their services.

Royal Exchange Healthcare Limited’s primary function is the design of medical health plans that are both flexible and accommodating. Our provider network is spread across the country and through rigorous continuous quality auditing, we strive to ensure the highest possible standards in medical services to our clients.

We utilize the principle of risk pooling and managed care in controlling and hedging risks associated with our business.

In performing these functions, the risk bearing responsibility and its innovative management have been the distinguishing factor of the Royal Exchange Healthcare brand in the health insurance industry.

Royal Exchange Healthcare Limited will, in the long term, create a one-stop health solution for its customers.

oyal Exchange HealthcareR

Dr.PiusOfulueManaging Director

(Royal Exchange Healthcare)

166


Royal Exchange Prudential Life Plc is a wholly owned subsidiary of Royal Exchange Plc and is licensed to underwrite life insurance and related risks. Following the re-organization of the erstwhile Royal Exchange Assurance (Nigeria) Plc into a group holding company in April 2007, Royal Exchange Prudential Life Plc emerged as the subsidiary providing a variety of life and investment linked savings products to cater for individual and corporate needs.

Royal Exchange Prudential Life has pioneered the use of a GSM based electronic platform which enables some of our products to be purchased and activated via scratch cards. This platform, which is user friendly, has also aided the accessibility of our products to all branches, friendship centers and other outlets nationwide.

As part of our efforts aimed at adding value to the growing needs of our customers, we have also introduced a number of new products namely:• AnnuityPolicies(withfourdifferentvariants)• FuneralPolicies(BasicandCommonwealth)

In the coming months, our clients will also be able to enjoy new additions to our product bouquet covering medical health annuity schemes, disability benefit cover and dreaded illness cover.

At the corporate level, we are also at the forefront of providing cover under Compulsory Group Life Schemes for employees of both private and public sectors of the economy as required by the Pension Reform Act, 2004. We presently enjoy the partnership and collaboration of brokers and related organizations in providing quality services to the insuring public, in line with professional best practices.

oyal Exchange Prudential LifeR

Mr.WaleBanmoreManaging Director

(Royal Exchange Prudential Life)

167


Royal Exchange Finance & Investment Ltd was incorporated as a wholly-owned subsidiary of Royal Exchange Plc in October 2004 and licensed in April 2005 by Central Bank of Nigeria to provide a wide range of professional services in the areas of credit-finance, funds mobilization and financial advisory services. The company is also licensed by Security and Exchange Commission to provide portfolio and fund management services.

We adopt a customer-centric approach to fill the service delivery gaps evident in Nigerian financial sector in the area of financing businesses, especially small and medium scale enterprises. We are also excellent team players.

Royal Exchange Finance & Investment Ltd recognizes the indispensability of technology to straight-through processing and rapid turnaround times. We are at the verge of upgrading our system to a more advanced multi-functional financial software package to execute large-scale business transactions without hitches.

The technical expertise of Royal Exchange Finance & Investment Ltd is reflected in our creative approach to financing engagements. Our in-depth transaction knowledge and customer-centric approach allow us develop mutually beneficial long-term relationship with our clients. Our variety of personalized products meets specific needs. These products include:

• HighYieldInvestmentPaper(HYIP)• RoyalInvestmentNote(RIN)• InvestmentPlan(I-Plan)• Leasing• Loans• MortgageFinancing• ProjectandL.P.OFinancing• FinancialAdvisoryServices

oyal Exchange Finance & InvestmentR

Mr. Hosea BomanManaging Director

(Royal Finance)

168


Royal Exchange Microfinance Bank Limited is a wholly owned subsidiary of Royal Exchange Plc., licensed by the Central Bank of Nigeria on October, 15, 2009 to provide comprehensive micro financial services to the unbanked and under banked in urban, semi-urban and rural areas of Nigeria. We commenced business on October 19, 2009.

In line with the vision of Royal Exchange Plc to be a one-stop financial service shop and with its passion to alleviate poverty, Royal Exchange Microfinance Bank was set up to provide micro finance services to improve the lives of the common people, alleviating poverty and building a better society. Our focus is on micro, small, medium and retail markets, leveraging on state of the art technology to deliver superior and quality services.

The corporate head office of Royal Exchange Microfinance Bank is located at 34/36 Apapa-Oshodi Expressway, Oshodi. The bank is a unit microfinance bank.

oyal Exchange Microfinance BankR

Mrs. E. O. ElghocheManaging Director

(Royal Exchange Microfinance Bank)

169


169

ranch/OfficeNetwork Cum Directory

B

170


ranch/Office Network Cum DirectoryBHeadOfficeNew Africa House, 31, Marina, P.O. Box 112, Lagos, Nigeria.E_mail: [email protected]: www.royalexchangeplc.com ControlOfficePlot 34/36, Apapa-Oshodi Expressway, Charity Bus-stop, Oshodi, P.M.B. 1804, Ikeja, Lagos.Tel: 234-1-7397281, 7404158, 8832470 Aba1, Asa Road, Aba, P.O. Box 604, Abia StateTel: 08037763428

Abeokuta16C, Lalubu, Oke-Ilewo, Abeokuta, Ogun State. Tel: 08023275603 AbujaWing A 2nd Floor, U.L.O. Plaza Sokode Crescent, Zone 5, AbujaTel: 08176746732 AkureOld National Bank Building 34, Oyemekunb Road, P.M.B. 771, AkureTel: 0803353006 ApapaTop Floor, Front Building1A, Pleateau Road, Apapa, LagosP.O.Box 636 Apapa Tel: 08055266886

Alaba123, Olodi Drive, Ojo Alaba Int’l Market Road, LagosTel: 08029314777, 0129661 Asaba14, Dennis Osadebey Way,Asaba Delta State. Tel: 08034456720, 08053112096 AwkaNifson Millennim Plaz, Opposite Federal Prison, Along Ziks Avenue, Amawbia Anambra StateTel: 08034456720, 08053112096

Benin113, New Lagos Road, Benin City, Benin.Tel: 08068044177

Berger 1Agha Park Oshodi/Apapa Expressway, Berger, Lagos. Tel: 08033254262, 01-8115661 Berger 2The Lord Reigaeth Plaza, 2nd Floor 8, Apapa / Oshodi ExpresswaySunrise Bus-Stop Trinity ApapaTel: 08033254262

Calabar103, Ndidem Usang Iso RoadEffio-ete Junction, Calabar Tel: 08037248052 EnuguCanute House, 19/25 Ogui Road, Enugu State.Tel: 04-2291080, 08023133497 IbadanOld Sketch Building (First Floor).Dugbe, Ibadan. P.O.Box 1370, Dugbe Tel: 08023131682, 08028853897 Ikeja29, Adeniyi Jones Avenue, Off Oba Akran,Ikeja Lagos P.O.Box 1803, IkejaTel: 01-8973858, 08033438683

IsoloPlot 34/36 Oshodi - Apapa ExpresswayCharity Bus-Stop, Oshodi, Lagos.Tel: 01-8737079, 08023207102

Jos1B, Richard Road, Muritala Mohammed Way, Jos.Tel: 08023634873

Kaduna2, Muritala Mohammed Square/Independence Way, P.O. Box 261.Tel: 08028555554, 08037037031

Kano 2B, Post Office Road, KanoP.O.Box 301, KanoTel: 08028555554, 08037037031

Lagos Main Branch (Marina)New African House,31, Marina, Lagos. P.O.Box 112, LagosTel:014181750, 2711968, 08033327946Fax: 01-2713248

GroupRetailOffice103/7, Allen Avenue,4th Floor, Mosesola House,Opposite Alade Market, Ikeja,Tel: 01-2955662

LekkiRoyal Exchange (Phoenix House) 26E Abdul-Rahman Okene Close,Off Ligali Ayorinde Street,Victoria Island, Lagos.Tel: 01-8428234, 08023405365

Owerri21 Wetheral Road, Owerri, Imo State.Tel: 08039297271, 08032386610

Port Harcourt42,Evo Road, GRA Phase 11, Port Harcourt Tel: 084-234664,462207, 08033105143

Sokoto3, Abdullahi Fodio Road,Opp. Zenith Bank Sokoto.Tel: 08023577896, 08079991695

Uyo130, Atiku Abubakar Avenue, Uyo, Akwa-Ibom StateTel: 08039141275, 08024688689

Victoria IslandLagos Royal Exchange (Phoenix House)26E Abdul-Rahaman Okene Close,Off Ligali Ayorinde Street,Victoria Island, LagosTel: 01-7418620, 08033160496

WarriOgun House, 107, Effurun/Sapele Road,Effurun, Warri.Tel:08023533062

YabaElectricare House (First Floor)385, Herbert Macaulay Way, Yaba, LagosP.O.Box 1804, Ikeja.Tel: 01-2956805, 08055517419

YolaModibbo Raji House,2, Lamido Aliu Way, Jimeta, Yola.Tel: 08037468679

171


riendship Centre NetworkF

RoyalExchangePrudentialLifeFriendshipCentres

Alaba Int.Market Ibadan (Gbaji) Ibadan (Aleshinloye)123, Olojo Drive, Block C52, New Gbaji Market, AC 29B, Aleshinloye Market,Ojo Alaba. Behind Texaco Petrol Station, Ibadan, 08034298343 Ibadan. 08034398160 Oyo State. 08050875140

Owode Onirin (Ikorodu) Line 7, Oluwanibasiri Motor Garage, Owode Onirin, Ikorodu, Lagos. 08056628959

Royal Prudential Sales Outlets

S/N NameofUnitManager Location Tel.

1 Ijeoma Anorue Regic Office Apapa 8025952430 2 Amobi Clara Regic Office Yaba 8054179487 3 Victor Omoniyi Regic Office Ibadan 8066617706 4 Omolade Agbelusi Regic Office Akure 8064945360 5 Lukman Baderinwa Regic Office Abuja 8038557974 6 Eric Koko Regic Office P/H 8033856963 7 Chinedu Micah Regic Office Aba 7033447846 8 Kennedy Ohiri Regic Office Enugu 8037711700 9 Emeka Ngwu Regic Office Awka 7061905562 10 Philomena Regic Office Calabar 8139208056

172


uild Up of Share Capital HistoryB1. SHARE CAPITAL HISTORY

YEAR SHARE CAPITAL MODE OF ACTION

1990 21,600,000 INITIAL SHARE CAPITAL 1991 27,000,000 BONUS 1991 5,400,000 SHARES 1992 33,750,000 BONUS 1992 6,750,000 SHARES 1995 50,625,000 BONUS 1995 16,875,000 SHARES 1996 75,937,500 BONUS 1996 25,312,500 SHARES 1997 227,812,500 RIGHT OFFER 151,875,000 SHARES 2000 341,718,750 BONUS 2000 113,906,250 SHARES 2001 512,578,125 BONUS 2001 170,859,375 SHARES 2003 683,437,500 RIGHTS OFFER 170,859,375 SHARES 2003 854,296,875 BONUS 2003 170,859,375 SHARES 2004 1,067,871,094 BONUS 2004 213,574,218 SHARES 2005 1,601,806,641 BONUS 2005 533,935,547 SHARES 2006 2,818,608,785 RIGHTS OFFER 1,216,802,144 SHARES 2007 3,359,898,835 SCHEME SHARES 541,290,050 SHARES 2008 3,695,888,719 BONUS 2008 335,989,884 SHARES 2009 4,065,477,591 BONUS 2009 369,588,872 SHARES 2010 4,573,662,289 BONUS 2010 508,184,698 SHARES 2011 5,145,370,074 BONUS 2011 571,707,786 SHARES

2. BONUS HISTORY

YEAR BONUS ISSUES

1991 5,400,000 1992 6,750,000 1995 16,875,000 1996 25,312,500 2000 113,906,250 2001 170,859,375 2003 170,859,375 2004 213,574,218 2005 533,935,547 2008 335,989,884 2009 369,588,872 2010 508,184,698 2011 571,707,786

TOTAL BONUS 3,042,943,505

3. RIGHTS ISSUES

YEAR RIGHTS ISSUES

1997 151,875,000 2003 170,859,375 2006 1,216,802,144

TOTAL RIGHTS 1,539,536,519

4. SUMMARY

INITIAL SHARE CAPITAL 21,600,000 BONUS ISSUES 3,042,943,505 RIGHTS ISSUES 1,539,536,519 SCHEME SHARES 541,290,050 PAID UP CAPITAL 5,145,370,074

Documents

o n t e n t s - Royal Exchange Group - Nigeria's Foremost