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TAKAFUL PAKISTAN LIMITED
ANNUAL REPORT 2015
2
CONTENTS
Corporate Information 03
Vision, Mission and Ambition 05
Management Team 06
Branches 06
Director’s Report 07
Six years Glance 11
Pattern of Shareholding 12
Review Report to the Members on Compliance with Code of Corporate Governance 13
Statement of Compliance with the Code of Corporate Government 15
Auditor’s Report to the Members 18
Financial Statements 20
3
CORPORATE INFORMATION
Chairman of Board of Directors Mr. Tahir Naz Siddique
Directors Syed Tariq Husain
Syed Abdul Razzaq
Mr. Ahmad Shuja Kidwai
Mr. Haseeb Ahmed
Dr. Mumtaz A. Hashmi
Mr. Aadil Saleh
Chief Executive Officer Dr. Syed Arif Hussain
Chief Finance Officer and
Company Secretary
Jamil Ahmed
Shariah Advisor Mufti Imtaiz Alam
Auditor M.Yousuf Adil Saleem & Co.
Chartered Accountants
Legal Advisors Surridge & Beecheno
Advocates, Consultants, Attorneys
Mohsin Tayebaly & Co.
Corporate Legal Consultants, Barristers &
Advocates High Courts & Supreme Court
Head office 6th floor, Business Centre,
Plot No 19-1-A, Block -6, P.E.C.H.S.,
Shahrah-e-Faisal, Karachi-75400, Pakistan.
UAN : (021) 111-875-111
Tel : (+92-21) 34373171-80
(10 Lines)
Fax : (+92-21) 34373195-6
E-mail : [email protected]
Website : www.takaful.com.pk
4
Bankers Meezan Bank Limited
Bank Islami Pakistan Limited
Dubai Islamic Bank Limited
Burj Bank Limited
Al Baraka Bank (Pakistan) Limited
Habib Bank Limited (Islamic Banking Division)
Faysal Bank Limited (Islamic Banking Division)
Askari Bank Limited ( Islamic Banking Division)
Bank AlFalah Limited (Islamic Banking Division)
Habib Metropolitan Bank (Islamic Banking Division)
National Bank of Pakistan (Islamic Banking Division)
Bank of Khyber (Islamic Banking Division)
UBL (Islamic Banking Division)
BOARD COMMITTEES
Audit Committee
Syed Tariq Husain (Chairman) Dr. Mumtaz A. Hashmi Syed Abdul Razzaq
Risk Management Committee Tahir Naz Siddique (Chairman) Syed Tariq Hussain Dr. Mumtaz A. Hashmi
Human Resource Committee Syed Tariq Hussain (Chairman) Ahmed Shuja Kidwai Dr. Mumtaz A. Hashmi
5
OUR VISION
To spread Takaful benefits beyond borders, beyond Time!
OUR MISSION
To deliver Takaful as a viable alternative to conventional insurance.
To become the ‘top-of-the-mind’ Takaful brand for our Participants in terms of competitiveness,
service standards and business ethics
To give value for money to our shareholders and make Takaful Pakistan their prized asset.
To become an ideal organization for our employees that encourages them to achieve self-actualization
and growth.
To contribute positively and proactively for the welfare of our society at large as well as for the
preservation of our environment.
OUR AMBITION
To be a role model for the contemporary insurance industry and eventually bring it in conformity with
the Shariah compliant Takaful mode of insurance.
6
MANAGEMENT TEAM Dr. Syed Arif Hussain Chief Executive Officer
Jamil Ahmed General Manager, Chief Financial Officer and Company Secretary
Kashif Masood Deputy General Manager and Head of Operations
Dr. Muhammad Saadat Senior Manager and Head of Marketing
Muhammad Adnan Sharif Deputy General Manager (Marketing)
Moeen ud Din Assistant General Manager (Marketing)
Jawwad Bin Yousuf Senior Manager & Head of Accident Underwriting
Abdul Haseeb Fakih Senior Manager & Head of Risk Management
Muhammad Irfan Senior Manager Finance
Muhammad Saeed Senior Manager & Head of Information Technology
Shaikh Azeemuddin Senior Manager & Head of Human Resources & Administration
BRANCHES / OFFICES
Branch Branch Address
Karachi 6th floor, Business Centre,
Plot No 19-1-A, Block -6, P.E.C.H.S.,
Shahrah-e-Faisal, Karachi.
UAN: (021) 111-875-111
Fax: (021) 34373195-6
Lahore 130-E/1, Main Boulevard
Gulberg-III, Lahore.
UAN: (042) 111-875-111
Fax: (042) 35716790
Peshawar 6th Floor, State Life Building,
34-The Mall, Peshawar Cantt,
Peshawar.
UAN: (091) 111-875-111
Fax: (091) 5260107
Faisalabad Office # 3, 2nd floor, Wahab
Centre, Main Susan Road,
Faislabad.
UAN: (041) 111-875-111
Fax: (041) 8720063
7
Abbottabad Al-Fateh Plaza
Opposite Radio Station, Jhangi
Abbottabad.
099-2343112
Multan 95D Shah Ruknay Alam Colony
Multan
Hyderabad Plot No. A/2616, Ward –A
Noor Muhammad High School
Hyderabad
022-2636962-4
TAKAFUL PAKISTAN LIMITED
Plot No 19-1-A, 6th Floor, Business Centre,
Block-6, P.E.C.H.S., Shahrah-e-Faisal,
Karachi- 75400 (Pakistan)
UAN: (+92-21) 111-875-111
Fax: (+92-21) 34373195-6
www.takaful.com.pk
TAKAFUL PAKISTAN LIMITED
DIRECTOR’S REPORT TO THE MEMBERS
The Directors are pleased to present the Annual Report for the Year ended December 31, 2015.
PERFORMANCE
PARTICIPANT’S TAKAFUL FUND “PTF”
During the year 2015, your Company has achieved a business growth of 22%. The gross
contribution during the year stands increased from Rs. 274 million to Rs. 334 million. Net
Contribution Revenue increased from Rs. 169 million to Rs. 264 million. Net Investment and
Other Income of the Fund increased from Rs. 12 million to Rs. 18 million. Net Claims increased
from Rs. 94 million to Rs. 134 million. As such net the Fund ended up with the net deficit of Rs.
9 million as against Rs. 16 million during the previous year.
SHAREHOLDER’S FUND “SHF”
Wakala Fee earned during the year stands increased from Rs. 94 million to Rs. 131 million,
recording a growth of 39% over the corresponding year. Commission expense increased from
Rs. 17 million to Rs. 18 million while Management and Administration expenses increased from
Rs. 75 million to Rs. 90 million (excluding the amount of penalty paid to SECP amounting to Rs.
5 million). Resultantly, operational profit increased from Rs. 2 million to Rs. 19 million.
Investment and Other Income increased from Rs. 9 million to Rs. 15 million. Consequently Profit
before tax increased from Rs. 11 million to Rs. 34 million while Profit after tax increased from
Rs. 9 million to Rs. 30 million.
Earnings per Share increased from 0.29 per share to Rs. 1.01 per share.
7
TAKAFUL PAKISTAN LIMITED
Plot No 19-1-A, 6th Floor, Business Centre,
Block-6, P.E.C.H.S., Shahrah-e-Faisal,
Karachi- 75400 (Pakistan)
UAN: (+92-21) 111-875-111
Fax: (+92-21) 34373195-6
www.takaful.com.pk
BOARD MEETINGS
In 2015 the Board of Directors held eight (8) meetings, at least one meeting was held in each
quarter. The attendance record of the Directors is as follows:
Name of Director Attendance
Mr. Tahir Naz Siddiqui 8
Syed Tariq Husain 5
Mr. Ahmed Shuja Kidwai 7
Dr. Mumtaz A Hashmi 7
Mr. Haseeb Ahmed 1
Mr. Nadeem Rafi 4
Mr. Abdul Razzaq 7
During the year, Mr. Shafqaat Ahmed resigned from the Board and Mr. Abdul Razzaq was
appointed in his place. The Board recorded its appreciation of the services rendered by Mr.
Shafqaat Ahmed and welcomed Mr. Abdul Razzaq and looks forward to his valuable
contribution and guidance. Leave of absences were granted to those directors who could not
attend the meetings.
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
In compliance with the Corporate and Financial Reporting Framework under the Code of
Corporate Governance, the Directors confirm the following:
a. The Financial Statements prepared by the Company, fairly present its state of affairs,
the results of its operations, cash flows and changes in equity;
b. Proper books of accounts have been maintained by the Company;
c. Appropriate accounting policies have been applied consistently in preparation of the
Financial Statements except as disclosed in the audited accounts, if any, and accounting
estimates are based on reasonable and prudent judgment;
8
TAKAFUL PAKISTAN LIMITED
Plot No 19-1-A, 6th Floor, Business Centre,
Block-6, P.E.C.H.S., Shahrah-e-Faisal,
Karachi- 75400 (Pakistan)
UAN: (+92-21) 111-875-111
Fax: (+92-21) 34373195-6
www.takaful.com.pk
d. International Accounting Standards, as applicable in Pakistan, have been followed in
preparation of Financial Statements and departure, if any, there from has been
adequately disclosed;
e. The system of internal control is sound in design and has been effectively implemented
and monitored;
f. There are no significant doubts on the ability of the Company to continue as a going
concern;
g. There is no material departure from the best practices of corporate governance.
h. The key operational and financial data for the last six years is annexed.
i. The value of investments in Employees Provident Fund and Employees Gratuity Fund
maintained for employees at the close of the year were as follows:
2015 2014
Employees Provident Fund Rs. 13,105,718 Rs. 8,700,000
Employees Gratuity Fund Rs. 5,161,391 Rs. 2,800,000
j. The statement of pattern of Shareholding in the Company is annexed.
MATERIAL CHANGES DURING THE YEAR AFFECTING FINANCIAL POSITION OF THE COMPANY
1. Securities and Exchange Commission of Pakistan (SECP) reduced the fine of Rs. 10 million
imposed by it in May 2010 to Rs. 5 million and the same was duly paid by the Company.
2. Legal cases lodged against the Company by various parties amounting to Rs. 86 million
have been decided in favor of the Company.
PROPOSED SUBSEQUENT EVENT
The Board of Directors has approved a step wise plan for capital enhancement of the Company to comply with the minimum requirement set by the Securities and Exchange Commission of Pakistan. The Board has approved that a total of Rs. 100,000,000/- (Pak Rupees One Hundred Million) shall be raised as ordinary share capital over a period expiring 31st December 2016 based on the following schedule:
9
TAKAFUL PAKISTAN LIMITED
Plot No 19-1-A, 6th Floor, Business Centre,
Block-6, P.E.C.H.S., Shahrah-e-Faisal,
Karachi- 75400 (Pakistan)
UAN: (+92-21) 111-875-111
Fax: (+92-21) 34373195-6
www.takaful.com.pk
Issue Amount Deadline for Completion
1st Tranche Rs. 50,000,000/- 30th June 2016 2nd Tranche Rs. 50,000,000/- 31st December 2016
The issue price for each tranche would be determined based on the Book Value per share of the
latest available audited accounts at the time of approval of the issue by the shareholders. Price
of 1st tranche of right issue based on the audited Financial Statements is determined at Rs.
5.74/- per share (i.e., at a discount of Rs. 4.26/- per share).
AUDITORS;
In compliance with the circular # 24 of 2005 issued by Securities and Exchange Commission of
Pakistan, the Board on the suggestion of the Audit Committee recommends appointment of
M/s Riaz Ahmed and Company Chartered Accountants for the audit of the Company for the
year 2016.
ACKNOWLEDGEMENT
We thank our valued customers and re-takaful operators for their continued patronage and
support and we are also thankful to Insurance Association of Pakistan and to our regulator
Securities and Exchange Commission of Pakistan for their guidance and assistance.
It is a matter of deep gratification for your Directors to place on record their appreciation of the
efforts made by the officers, field force and staff who had contributed to the growth of the
Company and the continued success of its operations.
For and on behalf of Board of Directors
Dr. Syed Arif Hussain
Chief Executive Officer
10
(Rupees in thousands)
2 0 1 5 2 0 1 4 2 0 1 3 2 0 1 2 2 0 1 1 2 0 1 0
BALANCE SHEET
Paid up capital 300,000 300,000 300,000 300,000 300,000 300,000
Accumulated Profit/(Loss) (107,391) (136,878) (142,971) (158,799) (166,216) (169,459)
Qard-e-hasna (20,239) (11,211) - - - -
Shareholders’ Equity 172,370 151,911 157,029 141,201 133,784 130,541
Participants’ Takaful Fund - - 5,015 33,773 43,094 8,545
Cash and Bank Balances PTF 148,869 182,212 184,737 176,768 176,658 138,547
Cash and Bank Balances SHF 178,885 105,068 97,282 73,884 62,537 92,891
Investments PTF 47,196 10,008 4,316 4,671 9,881 -
Investments SHF 20,773 25,517 34,671 35,499 47,890 49,071
Total Assets PTF 334,416 355,537 304,313 302,929 304,486 245,315
Total Assets SHF 243,026 221,639 209,328 195,170 179,416 218,534
Total Liabilities PTF 334,416 355,536 304,810 270,781 257,333 236,770
Total Liabilities SHF 70,657 69,728 52,299 53,969 44,968 87,993
REVENUE
Gross Contribution Revenue 333,568 274,350 220,515 212,218 165,283 232,815
Net Contribution Revenue 262,210 169,408 160,723 151,066 148,768 168,480
Net Claims 134,056 93,986 101,788 78,292 73,584 102,391
Gross Wakala Fee 133,427 109,740 88,206 84,887 66,113 93,126
Earned Wakala Fee 131,099 93,529 89,222 77,295 72,074 74,140
Underwriting Result PTF (27,162) (27,769) (38,910) (22,268) (6,112) (40,209)
Investment Income PTF (Net) 9,970 11,549 10,009 13,001 10,516 8,392
Investment Income SHF 10,450 4,766 9,947 6,521 12,619 11,266
Surplus/(Deficit) PTF (9,028) (16,226) (28,758) (9,322) 4,321 12,052
Profit/(loss) Before Tax 33,704 10,970 17,758 9,529 6,003 (33,377)
Profit/(loss) After Tax 30,426 8,632 15,527 8,448 3,907 (35,441)
Total Comprehensive income / (loss) 29,486 6,093 15,828 7,417 3,243 (35,441)
Earnings Per Share 1.01 0.29 0.52 0.15 0.13 (1.18)
Dividend % 0% 0% 0% 0% 0% 0%
Bonus % 0% 0% 0% 0% 0% 0%
Key Financial Data
11
From To
1 100 -
101 500 4,500
501 600000 504,500
600001 2100000 2,044,500
2100001 2600000 2,550,000
2600001 3000000 5,999,500
3000001 6000000 10,197,500
6000001 9000000 8,699,500
0
1
2
2
1
8
1
1
Shares Held
Pattern of Shareholding
As at 31 December 2015
Number of
shareholders
Shareholdings
Categories of shareholders Shareholders Shares held Percentage
%
Associated Companies, Undertakings and Related Parties
House Building Finance Company Limited 8,699,500
Al Baraka Bank Pakistan Limited 5,098,500
Sitara Chemical Industries Limited 2,999,500
Emirates Investment Group 2,044,500
4 18,842,000 62.81
Directors
Dr. Mumtaz Ahmed Hashmi 500
Haseeb Ahmed 500
Ahmed Shuja Kidwai 500
Syed Abdul Razzaq 500
Syed Tariq Husain 500
5 2,500 0.01
Joint Stock Company 2 3,504,500 11.68
Foreign Investors 2 7,649,000 25.50
Individuals/Others 4 2,000 0.01
Total 17 30,000,000 100
Shareholder holding 5% or more voting interest
House Building Finance Company Limited 8,699,500
Al Baraka Bank Pakistan Limited 5,098,500
Al-Buhaira National Insurance Company Limited 5,099,000
Arif Habib Corporation Limited 3,000,000
Sitara Chemical Industries Limited 2,999,500
Mal-Alkhaleej Investments 2,550,000
Emirates Investment Group 2,044,500
29,491,000
12
13
14
TAKAFUL PAKISTAN LIMITED
Plot No 19-1-A, 6th Floor, Business Centre, Block-6, P.E.C.H.S., Shahrah-e-Faisal,
Karachi- 75400 (Pakistan) UAN: (+92-21) 111-875-111
Fax: (+92-21) 34373195-6 www.takaful.com.pk
TAKAFUL PAKISTAN LIMITED
STATEMENT OF COMPLIANCE WITH THE BEST PRACTICES OF
THE CODE OF CORPORATE GOVERNANCE
FOR THE YEAR ENDED 31 DECEMBER 2015
This statement is being presented to comply with the Code of Corporate Governance (the Code) applicable on unlisted insurance companies prescribed under Section B of S.R.O 68(1) /2003 dated January 21, 2003 for the purpose of establishing a framework of good governance, whereby Insurance Company/Takaful Operator is managed in compliance with the best practices of corporate governance.
The Company has applied the principles contained in the Code in the following manner:
1. The directors have confirmed that none of them is serving as a director in ten
or more listed companies.
2. All the directors of the Company are registered as tax payers and none of
them has defaulted in payment of any loan to a banking company, a DFI or an NBFI or, being a member of stock exchange, has been declared as a defaulter by a stock exchange.
3. During the year, Mr. Shafqaat Ahmed resigned from the Board and Mr. Abdul
Razzaq was appointed in his place.
4. The Company has prepared a ‘Statement of Ethics and Business Practices’
which has been signed by all the directors and employees of the Company.
5. The Board has developed a vision/mission statement, overall corporate
strategy and significant policies of the Company. A complete record of particulars of significant policies along with the dates on which they were approved or amended has been maintained.
6. All the powers of the Board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration and terms and conditions of employment of the CEO and other executive directors, have been taken by the Board.
7. The meetings of the Board were presided over the Chairman and the Board
met at least once in every quarter. Written notices of the Board meetings, along with agenda and working papers, were circulated at least seven days before the meetings. The minutes of the meetings were appropriately recorded and circulated.
15
TAKAFUL PAKISTAN LIMITED
Plot No 19-1-A, 6th Floor, Business Centre, Block-6, P.E.C.H.S., Shahrah-e-Faisal,
Karachi- 75400 (Pakistan) UAN: (+92-21) 111-875-111
Fax: (+92-21) 34373195-6 www.takaful.com.pk
8. The Board has established a system of sound internal control, which is effectively implemented at all levels within the company. The company includes all the necessary aspects of internal control given in the code.
9. No orientation course was conducted for directors during the year. However directors are well conversant with the legal requirements and operational imperatives of the Company and as such fully aware of their duties and responsibilities. Regular update on corporate requirements is taken care of.
10. There was no fresh appointment of Chief Financial Officer, Company Secretary and Head of Internal Audit during the year.
11. The directors’ report for this year has been prepared in compliance with the requirements of the Code and fully describes the salient matters required to be disclosed.
12. The financial statements of the Company were duly endorsed by CEO and
CFO before approval of the Board.
13. The directors, CEO and executives do not hold any interest in the shares of the Company other than that disclosed in the pattern of shareholding.
14. The Company has complied with all the corporate and financial reporting requirements of the Code.
15. Although Underwriting Committee, Claim Settlement Committee, Retakaful and Co-Takaful Committee were not in place during the year as required by clause xxvii, xxviii and xxix of Section B of the Code, however, the Board has formed a Risk Management Committee to look after Underwriting, Claim Settlement, Retakaful & Co-takaful and other matters of the Company.
16. The Board has formed an audit committee. It comprises three members all of whom are non-executive directors including the chairman of the committee.
17. The meetings of the committees were held at least once every quarter prior to
approval of interim and final results of the Company and as required by the Code. The terms of reference of the audit committee have been formed and advised to the audit committee for compliance.
18. The Board has outsourced the internal audit function to a firm of Chartered Accountants who are considered suitably qualified and experienced for the purpose and are conversant with the policies and procedures of the Company and they (or their representatives) are involved in the internal audit
16
TAKAFUL PAKISTAN LIMITED
Plot No 19-1-A, 6th Floor, Business Centre, Block-6, P.E.C.H.S., Shahrah-e-Faisal,
Karachi- 75400 (Pakistan) UAN: (+92-21) 111-875-111
Fax: (+92-21) 34373195-6 www.takaful.com.pk
function on a full time basis.
19. The statutory auditors of the Company have confirmed that they have been given a satisfactory rating under the Quality Control Review program of the Institute of Chartered Accountants of Pakistan, that they or any of the partners of the firm, their spouses and minor children do not hold shares of the company and that the firm and all its partners are in compliance with International Federation of Accountants (IFAC) guidelines on code of ethics as adopted by Institute of Chartered Accountants of Pakistan.
20. The statutory auditors or the persons associated with them have not been
appointed to provide other services and the auditors have confirmed that they have observed IFAC guidelines in this regard.
21. The actuary appointed by the company has confirmed that he or his spouse and minor children do not hold shares of the company.
22. The Board ensures that the appointed actuary complied with the
requirements set out for him in the code.
23. We confirm that all other material principles contained in the Code have been
complied.
On behalf of the Board of Directors
_____________________ Dr.Syed Arif Hussain Chief Executive Officer Date: 29th March, 2016
17
18
19
TAKAFUL PAKISTAN LIMITED
BALANCE SHEET
AS AT DECEMBER 31, 2015
2014
Shareholders' Participants' Aggregate Aggregate
Fund Takaful Fund
Note
SHARE CAPITAL AND RESERVES
Authorised share capital
50,000,000 (2015: 50,000,000)
ordinary shares of Rs. 10 each 500,000,000 - 500,000,000 500,000,000
Issued, subscribed and paid-up
30,000,000 ordinary shares of Rs. 10 each
fully paid in cash 5 300,000,000 - 300,000,000 300,000,000
Accumulated loss (107,391,175) - (107,391,175) (136,877,696)
Qard-e-hasna to Waqf (20,238,961) - (20,238,961) (11,211,134)
172,369,864 - 172,369,864 151,911,170
PARTICIPANTS' TAKAFUL FUND (PTF)
WAQF / PARTICIPANTS' TAKAFUL FUND
Cede money - 500,000 500,000 500,000
Accumulated deficit - (20,738,961) (20,738,961) (11,711,134)
Qard-e-hasna from Shareholders' Fund - 20,238,961 20,238,961 11,211,134
- - - -
UNDERWRITING PROVISIONS
Provision for outstanding claims (including IBNR) - 96,859,677 96,859,677 99,377,655
Provision for unearned contribution - 143,138,661 143,138,661 137,318,047
Contribution deficiency reserve - 4,684,834 4,684,834 3,000,000
Unearned retakaful rebate - 3,212,086 3,212,086 5,644,186
Total underwriting provisions - 247,895,258 247,895,258 245,339,888
CREDITORS AND ACCRUALS
Contribution received in advance - 509,893 509,893 2,203,314
Amounts due to takaful / re-takaful companies - 59,684,818 59,684,818 37,418,436
Unearned wakala fees 57,255,465 - 57,255,465 54,927,216
Wakala fees payable and other account balances - 10,137,095 10,137,095 54,310,030
Mudarib fees payable - 2,051,097 2,051,097 1,841,660
Accrued expenses 1,352,615 - 1,352,615 1,575,777
Other creditors and accruals 6 12,048,707 14,137,862 26,186,569 27,648,303
70,656,787 86,520,765 157,177,552 179,924,736
70,656,787 334,416,023 405,072,810 425,264,624
TOTAL EQUITY AND LIABILITIES 243,026,651 334,416,023 577,442,674 577,175,794
CONTINGENCIES AND COMMITMENTS 7
The annexed notes 1 to 32 form an integral part of these financial statements.
Chairman Chief Executive Officer Director Director
2015
-------------------------------------------------------------(Rupees)-------------------------------------------------------------
TAKAFUL PAKISTAN LIMITED
BALANCE SHEET
AS AT DECEMBER 31, 2015
2014
Shareholders' Participants' Aggregate Aggregate
Fund Takaful Fund
Note
CASH AND BANK DEPOSITS 8
Cash and other equivalents 91,891 99,255 191,146 404,910
Current and other accounts 7,893,428 14,059,884 21,953,312 35,375,349
Deposits maturing within 12 months 170,900,000 134,710,000 305,610,000 251,500,000
178,885,319 148,869,139 327,754,458 287,280,259
LONG TERM DEPOSITS 9 1,523,034 - 1,523,034 1,523,034
INVESTMENTS 10 20,773,075 47,196,326 67,969,401 35,525,121
CURRENT ASSETS - OTHERS
Contributions due but unpaid 11 - 28,104,385 28,104,385 37,698,199
Amounts due from other takaful / re-takaful companies 12 - 3,121,043 3,121,043 2,326,333
Salvage recoveries accrued - 250,000 250,000 500,000
Taxation - payment less provision 8,695,445 - 8,695,445 9,013,031
Accrued investment income 13 2,779,293 2,613,517 5,392,810 11,409,556
Re-takaful recoveries against outstanding claims - 19,214,059 19,214,059 27,002,169
Wakala fees receivable and other account balances 14 10,137,095 - 10,137,095 49,799,258
Mudarib fees receivable 2,051,094 - 2,051,094 1,841,660
Deferred Wakala fees - 57,255,465 57,255,465 54,927,216
Deferred commission expense 5,833,341 5,833,341 7,900,924
Prepayments 15 1,675,715 27,358,206 29,033,921 35,494,437
Sundry receivables 16 439,272 433,884 873,156 1,251,613
31,611,255 138,350,559 169,961,814 239,164,396
FIXED ASSETS
Tangibles and Intangibles 17
Leasehold improvements 1,564,094 - 1,564,094 1,979,708
Furniture and fixtures 3,323,553 - 3,323,553 4,291,043
Office equipment 2,415,088 - 2,415,088 2,930,139
Computers 1,167,553 - 1,167,553 1,941,770
Vehicles 1,763,680 - 1,763,680 2,540,324
10,233,968 - 10,233,968 13,682,984
TOTAL ASSETS 243,026,651 334,416,024 577,442,675 577,175,794
The annexed notes 1 to 32 form an integral part of these financial statements.
Chairman Chief Executive Officer Director Director
2015
----------------------------------------------(Rupees)-------------------------------------------------------------------
TAKAFUL PAKISTAN LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED DECEMBER 31, 2015
2014
Fire and Marine, Motor Health Miscellaneous Aggregate Aggregate
property aviation and
damage transport
Note
PARTICIPANTS' TAKAFUL FUND (PTF)
- Net contribution revenue 8,133,020 6,912,351 187,890,035 59,199,307 75,167 262,209,880 169,408,132
Net claims 407,722 158,552 (83,237,009) (51,779,592) 394,427 (134,055,900) (93,986,199)
Wakala fee (15,009,359) (8,441,697) (83,481,121) (23,679,722) (487,030) (131,098,929) (93,529,417)
Direct expenses 18 (103,027) (235,126) (32,917,764) (1,762,033) (394) (35,018,344) (21,600,737)
Retakaful rebate 7,854,079 4,405,642 19,317 - 206,525 12,485,563 13,973,222
Contribution deficiency reversal/(charge) - - - (1,684,834) - (1,684,834) (2,034,200)
Net underwriting results before
participants' investment income 1,282,435 2,799,722 (11,726,542) (19,706,874) 188,695 (27,162,564) (27,769,199)
Investment income 13,293,752 15,398,180
Modarib's share (3,323,438) (3,849,545)
Net investment income 9,970,314 11,548,635
Other income 19 8,196,986 42,832
Bank charges (32,563) (48,217)
Deficit before taxation (9,027,827) (16,225,949)
Provision for taxation - -
Total deficit transferred to balance of
Waqf / Participants' Takaful Fund (9,027,827) (16,225,949)
SHAREHOLDERS' FUND (SHF)
Wakala fee 131,098,929 93,529,417
Commission expense (17,545,784) (17,310,291)
Management expenses 20 (56,207,945) (45,860,566)
57,345,200 30,358,560
Modarib's share of PTF investment income 3,323,438 3,849,545
Investment income 10,450,111 4,765,515
Other income 21 932,570 708,221
(Loss)/gain on sale of fixed assets (5,390) (2,892)
General and administration expenses 22 (38,341,971) (28,708,697)
Profit before taxation 33,703,959 10,970,252
Provision for taxation 23 (3,277,473) (2,338,235)
Net profit after tax 30,426,486 8,632,017
Earnings per share - Basic and diluted 24 1.01 0.29
The annexed notes 1 to 32 form an integral part of these financial statements.
Chairman Chief Executive Officer Director Director
2015
------------------------------------------------------------------- (Rupees) -------------------------------------------------------------------
TAKAFUL PAKISTAN LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2015
2015 2014
Rupees Rupees
SHAREHOLDERS' FUND (SHF)
Net profit after tax 30,426,486 8,632,017
Other comprehensive income
Items that will not be reclassified to profit or loss
Actuarial loss on defined benefit plan for the year (939,964) (2,538,888)
Total comprehensive income for the year 29,486,522 6,093,129
The annexed notes 1 to 32 form an integral part of these financial statements.
Chairman Chief Executive Officer Director Director
TAKAFUL PAKISTAN LIMITED
STATEMENT OF CHANGES IN EQUITY / FUND
FOR THE YEAR ENDED DECEMBER 31, 2015
Issued,
subscribed and
paid-up
capital
Balance as at January 01, 2014 300,000,000 (142,970,825) - 157,029,175
Total comprehensive income for the year ended December 31, 2014
Profit for the year - 8,632,017 - 8,632,017
Other comprehensive income - recognition of actuarial loss for the year - (2,538,888) - (2,538,888)
- 6,093,129 - 6,093,129
Transaction with owners
Qard-e-hasna contributed to Waqf * - - (11,211,134) (11,211,134)
Balance as at December 31, 2014 300,000,000 (136,877,696) (11,211,134) 151,911,170
Total comprehensive income for the year ended December 31, 2015
Profit for the year - 30,426,486 - 30,426,486
Other comprehensive income - recognition of actuarial loss for the year - (939,964) - (939,964)
- 29,486,522 - 29,486,522
Transaction with owners
Qard-e-hasna contributed to Waqf * - - (9,027,827) (9,027,827)
Balance as at December 31, 2015 300,000,000 (107,391,175) (20,238,961) 172,369,864
--------------------------------------(Rupees)--------------------------------------
Balance as at January 01, 2014 500,000 4,514,815 - 5,014,815
Deficit for the year ended December 31, 2014 - (16,225,949) - (16,225,949)
Qard-e-hasna contributed by Shareholders' fund * - - 11,211,134 11,211,134
Balance as at December 31, 2014 500,000 (11,711,134) 11,211,134 -
Deficit for the year ended December 31, 2015 - (9,027,827) - (9,027,827)
Qard-e-hasna contributed by Shareholders' fund * - - 9,027,827 9,027,827
Balance as at December 31, 2015 500,000 (20,738,961) 20,238,961 -
* In compliance of Rule 20 of Takaful Rules, 2012
The annexed notes 1 to 32 form an integral part of these financial statements.
Chairman Chief Executive Officer Director Director
Cede
money
Accumulated
(deficit) /
surplus
Qard-e-
hasna Total
SHAREHOLDERS' FUND
Accumulated
loss
Qard-e-
hasna Total
--------------------------------------(Rupees)--------------------------------------
WAQF / PARTICIPANTS' TAKAFUL FUND
TAKAFUL PAKISTAN LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2015
2015 2014
Rupees Rupees
Operating activities
(a) Takaful activities
Contributions received 342,926,484 263,929,287
Net re-takaful paid (1,245,547) (12,285,089)
Claims paid (165,879,957) (158,041,782)
Commissions paid (16,321,817) (17,828,136)
Other takaful payments (23,132,878) (10,213,332)
Net cash generated from underwriting activities 136,346,285 65,560,948
(b) Other operating activities
Income tax paid (2,959,887) (2,359,526)
Payment of retirement benefits (2,390,718) (1,500,000)
General administrative and management expenses paid (86,705,049) (70,748,073)
Other operating receipts 600,712 1,378,184
Advances to employees and agents - net (248,948) (224,452)
Net cash used in other operating activities (91,703,890) (73,453,867)
Total cash generated/(used) in all operating activities 44,642,396 (7,892,919)
Investment activities
Profit / return received 28,418,339 22,483,575
Dividend received 388,448 -
Investments made (58,800,000) (6,000,000)
Proceeds from disposal of investments 27,630,320 2,038,554
Maturity of term deposits 3,400,000 85,000,000
Fixed capital expenditure (646,605) (4,203,285)
Proceeds from disposal of fixed assets 96,560 90,189
Net cash generated from investing activities 487,062 99,409,033
Financing activities
Ijarah rentals paid (1,255,260) (1,255,260)
Total cash used in financing activities (1,255,260) (1,255,260)
Net cash generated from all activities 43,874,198 90,260,854
Cash and cash equivalents at beginning of the year 242,280,259 152,019,405
Cash and cash equivalents at end of the year 286,154,458 242,280,259
2015 2014
(Rupees) (Rupees)
Reconciliation to profit and loss account
Operating cash flows 44,642,396 (7,892,919)
Depreciation (3,993,671) (3,426,903)
Amortisation of intangibles - (38,994)
Loss on disposal of fixed assets (5,390) (2,892)
Impairment of Ijara Sukuks 1,000,000 -
Ijarah rentals (1,255,260) (1,255,260)
Provision for taxation (3,277,473) (2,338,235)
Provision for staff retirement benefits (1,877,894) (1,027,945)
Investment income 22,727,773 27,667,758
Decrease in assets other than cash (63,336,028) (56,437,056)
Increase in liabilities other than running finance 26,287,145 (62,250,519)
Cash generated from investing activities 487,062 99,409,033
Loss after taxation 21,398,661 (7,593,932)
Breakup of profit / (loss) after tax
Participant's Takaful Fund (9,027,827) (16,225,949)
Shareholders' Fund 30,426,486 8,632,017
21,398,659 (7,593,932)
Definition of cash and cash equivalents
Cash and other equivalents 191,146 404,910
Current and other accounts 21,953,312 35,375,349
Deposits maturing within 3 months 264,010,000 206,500,000
286,154,458 242,280,259
The annexed notes 1 to 32 form an integral part of these financial statements.
Chairman Chief Executive Officer Director Director
Cash and cash equivalents for the purposes of Statement of Cash Flows consist of cash and stamps in hand, balances with
banks, short term deposits with maturities of three months or less from balance sheet date and highly liquid short-term
investments that are convertible to known amount of cash and are subject to insignificant risk of change in value.
TAKAFUL PAKISTAN LIMITED
STATEMENT OF CONTRIBUTIONS
FOR THE YEAR ENDED DECEMBER 31, 2015
Business underwritten inside Pakistan
2014
Gross Contribution Re-takaful Re-takaful Net Net
Class written Opening Closing earned ceded expense contribution contribution
contribution Opening Closing revenue revenue
A B C D=A+B-C E F G H=E+F-G I=D-H
Direct and Facultative
Fire and property damage 27,845,965 21,772,442 12,095,010 37,523,397 20,901,641 15,997,225 7,508,489 29,390,377 8,133,020 10,422,632
Marine, aviation and transport 22,545,934 2,758,861 4,200,552 21,104,243 14,708,888 1,976,678 2,493,674 14,191,892 6,912,351 5,081,133
Motor 229,562,542 88,851,644 109,711,381 208,702,805 20,858,492 - 45,722 20,812,770 187,890,035 109,134,722
Health 52,806,644 23,084,037 16,691,374 59,199,307 - - - - 59,199,307 44,568,945
Miscellaneous 806,858 851,063 440,344 1,217,577 921,632 446,085 225,307 1,142,410 75,167 200,700
Total 333,567,943 137,318,047 143,138,661 327,747,329 57,390,653 18,419,988 10,273,192 65,537,449 262,209,880 169,408,132
Treaty
Proportional / non proportional - - - - - - - - - -
Grand total 333,567,943 137,318,047 143,138,661 327,747,329 57,390,653 18,419,988 10,273,192 65,537,449 262,209,880 169,408,132
The annexed notes 1 to 32 form an integral part of these financial statements.
Chairman Chief Executive Officer Director Director
2015
Unearned contribution Prepaid re-takaful
contribution ceded
----------------------------------------------------------------------------------------------------------------------- (Rupees) --------------------------------------------------------------------------------------------------------------
TAKAFUL PAKISTAN LIMITED
STATEMENT OF CLAIMS
FOR THE YEAR ENDED DECEMBER 31, 2015
Business underwritten inside Pakistan
2014
Class Claims Claims Re-takaful Re-takaful Net claims Net claims
paid Opening Closing expense and other and other expense expense
recoveries recoveries
received Opening Closing revenue
A B C D=A-B+C E F G H=E-F+G I=D-H
Direct and Facultative
Fire and property damage 7,535,412 20,273,170 13,659,414 921,656 5,294,403 15,918,626 11,953,601 1,329,378 (407,722) 5,862,675
Marine, aviation and transport 125,861 5,333,589 4,331,157 (876,571) 84,010 2,281,244 1,479,215 (718,019) (158,552) 209,243
Motor 83,225,108 55,844,209 69,672,226 97,053,125 15,782,116 7,762,750 5,796,750 13,816,116 83,237,009 43,932,886
Health 58,526,289 15,082,591 8,335,894 51,779,592 - - - - 51,779,592 43,988,061
Miscellaneous 575,253 2,844,096 860,986 (1,407,857) 291,626 1,539,549 234,493 (1,013,430) (394,427) (6,666)
Total 149,987,923 99,377,655 96,859,677 147,469,945 21,452,155 27,502,169 19,464,059 13,414,045 134,055,900 93,986,199
Treaty .
Proportional / non proportional - - - - - - - - - -
Grand total 149,987,923 99,377,655 96,859,677 147,469,945 21,452,155 27,502,169 19,464,059 13,414,045 134,055,900 93,986,199
The annexed notes 1 to 32 form an integral part of these financial statements.
Chairman Chief Executive Officer Director Director
------------------------------------------------------------------------------------------------------------(Rupees)-------------------------------------------------------------------------------------------------------
2015
Outstanding claims Re-takaful and other
recoveries in respect of
outstanding claims
TAKAFUL PAKISTAN LIMITED
STATEMENT OF EXPENSES - PARTICIPANTS' TAKAFUL FUND
FOR THE YEAR ENDED DECEMBER 31, 2015
Business underwritten inside Pakistan
2014
Rebate from Net Net
Class Gross Wakala fee Other direct retakaful operators underwriting underwriting
wakala fee Opening Closing expired expenses earned * expenses expenses
A B C D=A+B-C E F G=D+E-F
Direct and Facultative
Fire and property damage 11,138,386 8,708,977 4,838,004 15,009,359 103,027 7,854,079 7,258,307 8,362,073
Marine, aviation and transport 9,018,374 1,103,544 1,680,221 8,441,697 235,126 4,405,642 4,271,181 3,406,781
Motor 91,825,017 35,540,656 43,884,552 83,481,121 32,917,764 19,317 116,379,568 71,289,337
Health 21,122,658 9,233,614 6,676,550 23,679,722 1,762,033 - 25,441,755 17,827,578
Miscellaneous 322,743 340,425 176,138 487,030 394 206,525 280,899 271,163
Total 133,427,178 54,927,216 57,255,465 131,098,929 35,018,344 12,485,563 153,631,710 101,156,932
Treaty
Proportional / non proportional - - - - - - - -
Grand total 133,427,178 54,927,216 57,255,465 131,098,929 35,018,344 12,485,563 153,631,710 101,156,932
* Rebate from retakaful operators is arrived at taking impact of opening and closing unearned rebate.
The annexed notes 1 to 32 form an integral part of these financial statements.
Chairman Chief Executive Officer Director Director
2015
Deferred wakala fee
--------------------------------------------------------------------------(Rupees)--------------------------------------------------------------------------
TAKAFUL PAKISTAN LIMITED
STATEMENT OF EXPENSES - SHAREHOLDERS' FUND
FOR THE YEAR ENDED DECEMBER 31, 2015
Business underwritten inside Pakistan
2014
Commission Net Other Net Net
Class paid or commission management SHF SHF
payable Opening Closing expense expenses expenses expenses
A B C D=A+B-C E F=D+E
Direct and Facultative
Fire and property damage 3,173,957 3,291,843 1,482,660 4,983,140 4,692,190 9,675,330 13,726,330
Marine, aviation and transport 3,171,197 380,254 587,206 2,964,245 3,799,108 6,763,353 6,119,948
Motor 7,041,134 3,183,008 3,093,593 7,130,549 38,682,494 45,813,043 32,025,758
Health 2,014,792 964,656 627,142 2,352,306 8,898,194 11,250,500 10,967,344
Miscellaneous 77,122 81,163 42,740 115,544 135,959 251,504 331,477
Total 15,478,202 7,900,924 5,833,341 17,545,784 56,207,945 73,753,730 63,170,857
Treaty
Proportional / non proportional - - - - - - -
Grand total 15,478,202 7,900,924 5,833,341 17,545,784 56,207,945 73,753,730 63,170,857
The annexed notes 1 to 32 form an integral part of these financial statements.
Chairman Chief Executive Officer Director Director
2015
Deferred commission
-------------------------------------------------------------------------------- (Rupees) --------------------------------------------------------------------------------
TAKAFUL PAKISTAN LIMITED
STATEMENT OF INVESTMENT INCOME
FOR THE YEAR ENDED DECEMBER 31, 2015
2015 2014
Rupees Rupees
Income from non-trading investments
Participants' Takaful Fund (PTF)
Profit on bank deposits and placements 10,881,214 15,322,424
Dividend Income 388,448 -
Available-for-sale
Gain on redemption of Islamic Fund units 2,024,090 75,756
13,293,752 15,398,180
Modarib's fee (3,323,438) (3,849,545)
Net investment income 9,970,314 11,548,635
Shareholders' Fund (SHF)
Profit on bank deposits and placements 9,992,612 9,429,182
Held to maturity
Return on government securities 737,486 1,002,288
Return on other securities 728,013 1,838,108
Provision for impairment of sukuk (1,000,000) (7,499,063)
465,499 (4,658,667)
Investment related expenses (8,000) (5,000)
Net investment income 10,450,111 4,765,515
The annexed notes 1 to 32 form an integral part of these financial statements.
Chairman Chief Executive Officer Director Director
TAKAFUL PAKISTAN LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2015
1. STATUS AND NATURE OF BUSINESS
1.1
1.2
1.3
By December 31st, 2017
2. BASIS OF PREPARATION
2.1 Statement of compliance
400 million
By June 30th
, 2017 450 million
500 million
Takaful Pakistan Limited ("the Company / Takaful operator") is an unlisted public limited company incorporated in
Pakistan on June 2, 2006 under the Companies Ordinance, 1984. The Company is established with the objective to
carry out General Takaful Business as specified under the Insurance Ordinance, 2000, Insurance Rules, 2002 and
Takaful Rules, 2012.The registered office of the Company is at 6th Floor, Business Centre, 19-1-A, Block-6,
P.E.C.H.S., Shahrah-e-Faisal, Karachi, in the province of Sindh. The Company operates with 5 (December 31, 2014:
2) branches in Pakistan.
For the purpose of carrying on the takaful business, the Company has formed a Waqf for Participants' equity. The
Waqf, namely Takaful Pakistan Waqf (hereinafter referred to as the Participants' Takaful Fund or PTF) was formed
on January 22, 2007 under the Trust deed executed by the Company with a ceded money of Rs. 500,000. The cede
money is required to be invested in Shariah compliant investments and profit thereon is utilized to pay benefits to
participants or defray PTF expenses. The accounts of the Waqf are maintained by the Company in a manner that the
assets and liabilities of the Waqf remain separately identifiable. These financial statements have been prepared such
that the financial position and results of operations of the Waqf and the Company are shown separately. Waqf deed
also governs the relationship of shareholders and participants for management of takaful operations, investment of
participants' funds and investment of shareholders' funds approved by the Shariah Board established by the Company.
These financial statements have been prepared in line with the format of financial statements issued by Securities and
Exchange Commission of Pakistan (SECP) through Securities and Commission (Insurance) Rules, 2002 [SEC
(Insurance) Rules, 2002], vide S.R.O. 938 dated December 12, 2002, with appropriate modifications based on the
advice of the Shariah Board of the Company.
These financial statements have been prepared in accordance with approved accounting standards as applicable in
Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued
by International Accounting Standards Board (IASB) and Islamic Financial Accounting Standards (IFAS) issued by
the Institute of Chartered Accountants of Pakistan (ICAP), as are notified under the Companies Ordinance, 1984,
the requirements of Companies Ordinance, 1984, the Insurance Ordinance, 2000, the SEC (Insurance) Rules,
2002.
Securities and Exchange Commission of Pakistan (SECP) vide its SRO dated 18th August 2015 increased the
Minimum Paid up Capital Requirement for Non-Life Insurance/Takaful Companies from Rs. 300 million to Rs. 500
million as per the following schedule:
Rupees
By June 30th
, 2016
The Board of directors in meeting held on March 29, 2016 have decided to meet the increased Paid up Capital
Requirement through issue of right shares at discount after obtaining the approval of shareholders and SECP. Further,
the sponsors support will continue to be available to the Company to meet any eventuality from pending litigations
(refer note 7.1).
350 million
By December 31st, 2016
2.2 Basis of measurement
These financial statements have been prepared under the historical cost convention.
2.3 Functional and presentation currency
2.4 Use of estimates and judgements
- Provision against doubtful receivables (note 4.2)
- Re-takaful recoveries against outstanding claims (note 4.3)
- Provision for outstanding claims including IBNR (note 4.4)
- Contribution deficiency reserve (note 4.6)
- Staff retirement benefits - defined benefit plan (note 4.10)
- Classification and valuation of investments (note 4.14)
- Taxation (note 4.15)
- Useful lives of assets and methods of depreciation and amortisation (note 4.16)
- Impairment of other assets (note 4.17)
3.
3.1
IFRS 10 – Consolidated Financial Statements January 1, 2015
The estimates and judgments that have a significant effect on the financial statements are in respect of the following:
ADOPTION OF NEW AND AMENDED INTERNATIONAL FINANCIAL REPORTING STANDARDS AND
IFRS INTERPRETATIONS
Takaful Rules, 2012 and directives issued by the SECP. Wherever the requirements of Companies Ordinance, 1984,
the Insurance Ordinance, 2000, the SEC (Insurance) Rules, 2002, Takaful Rules, 2012 and directives issued by the
SECP differ with the requirement of IFRS/IFAS, the requirements of Companies Ordinance, 1984, the Insurance
Ordinance, 2000, the SEC (Insurance) Rules, 2002, Takaful Rules, 2012 or said directives shall prevail.
These financial statements are presented in Pak Rupees which is the Company's functional and presentation currency.
The following standards, amendments and interpretations are effective for the year ended December 31, 2015. These
standards, interpretations and the amendments are either not relevant to the Company's operations or are not expected
to have significant impact on the Company's financial statements other than certain additional disclosures.
Effective from accounting
period beginning on or after
The SECP has allowed the insurance / takaful companies to defer the application of International Accounting
Standard (IAS-39) "Financial Instruments: Recognition and Measurement" in respect of valuation of investments
classified as available for sale. Accordingly, the requirements of IAS-39 to the extent allowed by the SECP as
aforesaid have not been considered in the preparation of these financial statements.
The preparation of financial statements in conformity with approved accounting standards as applicable in Pakistan
requires management to make judgments, estimates and assumptions that affect the application of policies and
reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based
on historical experience and various other factors that are believed to be reasonable under the circumstances, the
result of which form the basis of making the judgments about carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying
assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognized 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.
3.2 Standards and amendments to the published standards that are not yet effective
January 1, 2015
January 1, 2015
IFRS 13 – Fair Value Measurement January 01, 2016
Certain annual improvements have also been made to a number of IFRSs, which do not have effect on the financial
reporting of the company.
Amendments to IFRS 10 and IAS 28 Sale or contribution of assets January 01, 2016
Amendments to IFRS 10, IFRS 12 and IAS 28 Investment January 01, 2016
IFRS 12 – Disclosure of Interests in Other Entities January 01, 2016
Amendments to IAS 16 and IAS 38 Clarification of acceptable January 01, 2016
Amendments to IAS 16 and IAS 41 Agriculture: Bearer plants January 01, 2016
Amendments to IAS 27 - Equity method in separate financial statements January 01, 2016
The following standards and amendments are only effective for accounting periods, beginning on or after the date
mentioned against each of them. These standards and the amendments are either not relevant to the Company's
operations or are not expected to have significant impact on the Company's financial statements other than certain
additional disclosures.
Effective from accounting
period beginning on or after
Amendments to IFRS 11 - Accounting for acquisitions of interests
in joint operations
January 01, 2016
Amendments to IAS 1 - Disclosure initiative January 01, 2016
The above amendments and interpretations do not have any impact on the Company's financial statements and
therefore have not been discussed in detail.
January 1, 2015
Amendments to IAS 19 Employee Benefits: Employee
contributions
IAS 27 (Revised 2011) – Separate Financial Statements
IAS 28 (Revised 2011) – Investments in Associates and Joint
Ventures
July 1, 2014
IFRS 13 – Fair Value Measurement
January 1, 2015IFRS 11 – Joint Arrangements
Effective from accounting
period beginning on or after
IFRS 12 – Disclosure of Interests in Other Entities January 1, 2015
- IFRS 1 – First Time Adoption of International Financial Reporting Standards
- IFRS 9 – Financial Instruments
- IFRS 14 – Regulatory Deferral Accounts
- IFRS 15 – Revenue from Contracts with Customers
- IFRS 16 – Leases
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
4.1 Takaful contracts
The terms of the takaful contracts are in accordance with the generally accepted principles and norms of insurance
business suitably modified with guidance by the Shariah Board of the Takaful operator.
Contracts under which the Participant Takaful Fund (PTF) accepts significant takaful risk from another party (the
policy holder) by agreeing to compensate the policyholder if a specified uncertain future event (the takaful event)
adversely affects the policy holder, are classified as takaful contracts. Takaful risk is significant if a takaful event
could cause the PTF to pay significant benefits due to the happening of the takaful event compared to its non-
happening. Once a contract has been classified as a takaful contract, it remains a takaful contract for the remainder of
its lifetime even if the takaful risk reduces significantly during this period, unless all rights and obligations are
extinguished or expire.
The PTF underwrites non-life takaful contracts that can be categorised into Fire, Property and Damage, Marine,
Aviation and Transport, Motor, Health and Miscellaneous contracts. Contracts may be concluded for a fixed term of
one year, less than one year and in some cases for more than one year. However, most of the contracts are for twelve
months duration. Takaful contracts entered into by the PTF under which the contract holder is another takaful
operator / insurer (inward retakaful / reinsurance) of a facultative nature are included within the individual category of
takaful contracts, other than those which fall under the Treaty.
Fire takaful provides coverage against damages caused by fire, riot and strike, explosion, earthquake, atmospheric
damage, flood, electric fluctuation and other related perils.
Marine, aviation and transport takaful provides coverage against cargo risk, terminals, damages occurred in between
the points of origin and final destination and other related perils.
Motor takaful provides comprehensive car coverage, indemnity against third party loss and other related covers.
Health takaful provides basic hospital care and major medical care including maternity care and outpatient care.
Miscellaneous takaful provides cover against burglary, loss of cash in safe and cash in transit, money, engineering
losses, travel and other coverage.
Other than the aforesaid standards, interpretations and amendments, the International Accounting Standards Board
(IASB) has also issued the following standards which have not been adopted locally by the Securities and Exchange
Commission of Pakistan:
The principal accounting policies applied in the preparation of these financial statements are stated below. These are
consistent with those of the previous financial year.
The takaful contracts are based on the principles of Wakala. The takaful contracts so agreed usually inspire concept of
tabarru (to donate for benefit of others) and mutual sharing of losses with the overall objective of eliminating the
element of uncertainty.
4.2 Contribution
i) For direct business, evenly over the period of the policy.
ii) For proportional re-takaful business, evenly over the period of the underlying takaful policies.
4.3 Re-takaful
Amount due from other takaful / re-takaful companies are carried at cost less provision for impairment, if any. Cost
represents the fair value of consideration to be received in the future.
The unearned portion of contribution written net of wakala is set aside as a reserve and is recognized as a liability.
Such reserve is calculated according to the ratio of the unexpired period of the policy and the total period, both
measured to the nearest day. The Unearned portion of Health Takaful is calculated in accordance with the advice of
Actuary.
The Company cedes retakaful in the normal course of business for the purpose of limiting its net loss potential
through the diversification of its risks. Assets, liabilities, income and expense arising from ceded retakaful contracts
are presented separately from the assets, liabilities, income and expense from the related takaful contracts because the
retakaful arrangements do not relieve the PTF from its direct obligations to its policyholders. These retakaful
contracts include both facultative and treaty arrangements contracts and are classified in same categories of takaful
contracts for the purpose of these financial statements.
Re-takaful contribution is recognised evenly as expense after taking into account the proportion of deferred
contribution expense which is calculated using 1/365 method other than marine business in which it is calculated
using 1/120 method. The deferred portion of contribution expense is recognised as a prepayment.
Claim recoveries receivable from the re-takaful are recognised as an asset at the same time as the claims which give
rise to the right of recoveries are recognised as a liability and are measured at the amount expected to be received,
after considering impairment relating thereto.
Amount due to takaful / re-takaful companies represent the balance due to re-takaful companies. Amounts due to /
from retakaful operators are carried at cost less provision for impairment, if any. Cost represents the fair value of the
consideration to be received / paid in the future for services rendered.
Revenue from contribution is recognised after taking into account the unearned portion of contribution which is
calculated using the 1/365 method for all classes except for marine class where marine class earned contribution is
calculated using 1/120 method. The unearned portion of contribution income is recognised as a liability.
Administrative surcharge recovered from insurer is recognised as part of contribution in the case of co-takaful
policies (Leader Follower case) on proportionate basis.
Contribution due but unpaid represents the amount due from participants on account of takaful contracts. These are
recognised at cost, which is the fair value of the consideration to be received less provision for impairment, if any.
If there is an objective evidence that any contribution due but unpaid is impaired, the Company reduces the carrying
amount of that contribution receivable and recognizes the loss in profit and loss account.
Provision for impairment in contribution receivables is estimated on a systematic basis after analyzing the receivables
as per their ageing.
Contributions including administrative surcharge received / receivable (if any) under a takaful policy are recognised
as written at the time of issuance of policy. Contributions are stated gross of commission payable to intermediaries
and exclusive of taxes and duties levied on contributions.
Contribution income under a policy is recognised over the period of takaful from the date of inception of the policy to
which it relates to its expiry as follows:
4.4 Claims
4.5 Commission
4.6 Contribution deficiency reserve
4.7 Takaful surplus
4.8 Wakala and Mudarib fees
The Company is required as per Takaful Rules, 2012 to maintain a provision in respect of contribution deficiency for
the class of business where the unearned contribution reserve is not adequate to meet the expected future liability,
after re-takaful from claims, and other supplementary expenses expected to be incurred after the reporting date in
respect of the unexpired policies in that class of business at the reporting date. The movement in the contribution
deficiency reserve is recorded as an expense in the profit and loss account.
The Company determines adequacy of liability of contribution deficiency by carrying out analysis of its loss ratio of
expired periods. For this purpose average loss ratio of last few years inclusive of claim settlement cost but excluding
major exceptional claims are taken into consideration to determine ultimate loss ratio to be applied on unearned
contribution. The liability of contribution deficiency in relation to Health takaful is calculated in accordance with the
advice of the actuary.
Takaful surplus attributable to the participants is calculated after charging all direct costs and setting aside various
reserves and charity. Allocation to participants, if applicable, is made after deducting the claims paid to them during
the year.
The Takaful Operator manages the general takaful operations for the participant and charges 40% of gross
contribution as wakala fee to meet the general and administrative expenses of the Company.
The Takaful Operator also manages the participants' investment as Mudarib and charges 25% of the general takaful
investment income as Modarib's share earned by the Participants' Takaful Fund.
Re-takaful assets or liabilities are derecognised when the contractual rights are extinguished or expired.
Rebate income from retakaful is spread and recognised as revenue in accordance with the pattern of recognition of
retakaful contribution to which it relates.
Claims expense include all claims occurring during the year, whether reported or not, related internal and external
claim handling costs that are directly related to the processing and settlement of claims, a reduction for the value of
salvage and other recoveries, and any adjustments to claims outstanding from previous years.
Outstanding claims comprise the estimated cost of claims incurred but not settled at the reporting date, whether
reported or not. Provisions for reported claims not paid as at the balance sheet date are made on the basis of
individual case estimates. In addition, a provision based on management’s judgment and the Company’s prior
experience is maintained for the cost of settling claims incurred but not reported (IBNR) at the reporting date, by
taking into account the claims intimated in the month following the reporting date.
Any difference between the provisions at the reporting date and settlements in the following year is included in the
financial statement of that year.
Commission incurred in obtaining and recording policies is deferred and recognised as an asset. These costs are
charged to profit and loss account based on the pattern of recognition of contribution revenue.
4.9 Qard-e-Hasna
4.10 Staff retirement benefits
4.10.1 Defined contribution plan
4.10.2 Defined benefit plan
4.10.3 Employees' compensated absences
4.11 Provisions
4.12 Appropriations
Appropriations of profit, if any, are recognised in the period in which these are approved.
4.13 Cash and cash equivalents
4.14 Investments
Investments are recognised and classified as follows:
All investments are initially recognised at cost being the fair value of the consideration given and include transaction
costs, except for held for trading investments in which case transaction costs are charged to profit and loss account.
All purchase and sale of investments that require delivery within the required time frame established by regulations or
market convention are accounted for at the trade date. Trade date is the date when the Company commits to purchase
or sell the investment.
All investments are de-recognised when the rights to receive cash flows from the investments have expired or have
been transferred and the Company has transferred substantially all risks and rewards of ownership.
When the PTF including reserves are insufficient to meet their current payments less receipts, the deficit is funded by
way of interest free loan (Qard-e-Hasna) from the Shareholders' fund.
The Company maintains an approved contributory provident fund scheme for all its permanent employees.
Contributions are made by both the Company and the employees to the fund at the rate of 10 percent per annum of
basic salary. Contributions made by the Company are recognised as an expense.
The Company operates an approved defined gratuity scheme for all its permanent employees who attain the minimum
qualification period for entitlement to gratuity. Contributions to the scheme are made in accordance with actuarial
valuation using Projected Unit Credit Actuarial Cost Method.
The Company accounts for the liability in respect of employees' compensated absences in the period in which these
are earned.
Provisions are recognised when the Company has a legal or constructive obligation as a result of past events, it is
probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount
can be made. Provisions are reviewed at each reporting date and are adjusted to reflect the current best estimate.
For the purpose of statement of cash flows, cash and cash equivalents consist of cash and stamps in hand, balances
with banks, short term deposits with maturities of three months or less from balance sheet date and highly liquid short-
term investments that are convertible to known amount of cash and are subject to insignificant risk of change in
value.
Wakala fee and Mudarib fee is recognised on the same basis on which related revenue is recognised. Unexpired
portion of wakala fee is disclosed as a liability of Shareholders' Fund (SHF) and an asset of Participants' Takaful
Fund (PTF).
4.14.1 Held to maturity (HTM)
Profit on held to maturity investment is recognized on a time proportion basis.
4.14.2 Available-for-sale (AFS)
Quoted
Unquoted
4.14.3 Fair values
4.15 Taxation
4.15.1 Current
Income tax expense comprises current and deferred tax. Income tax expense is recognised in the profit and loss
account, except to the extent that it relates to items recognised directly in other comprehensive income or equity, in
which case it is recognised in other comprehensive income or equity respectively.
Provision for current taxation is based on the taxable income for the year determined in accordance with the
prevailing law for taxation on income using prevailing tax rates after taking into account available tax credits and
rebates, if any. The charge for current tax includes adjustments to charge for prior years, if any.
These are reviewed for impairment and any losses arising from impairment in values are charged to the profit and loss
account.
Investments which are intended to be held for an undefined period of time but may be sold in response to the need for
liquidity, changes in interest rates, equity prices or exchange rates are classified as available-for-sale. Any permanent
decline recognized in profit and loss account is not reversed through profit and loss account.
Subsequent to initial recognition at cost, quoted investments are stated at the lower of cost or market value (market
value on an individual investment basis being taken as lower if the fall is other than temporary) in accordance with
the requirements of the SEC (Insurance) Rules, 2002. The Company uses Mutual Funds Association of Pakistan
(MUFAP) quotations at the reporting date to determine the market value.
A fall in market value of a security is treated as “other than temporary (i.e. impaired)”, if there is a significant or
prolonged decline in fair value of security below its cost. Reversals due to subsequent increase in the market value of
these securities upto its original cost is recognised as income in the profit and loss account.
Unquoted investments are stated at cost less accumulated impairment (if any), in the value of such investments.
The fair value of financial assets at fair value through profit or loss, held to maturity investments and available-for-
sale financial assets is determined by reference to their quoted closing bid price at the reporting date.
Investments with fixed maturity, where management has both the intent and the ability to hold to maturity, are
classified as held to maturity.
Investments classified as held to maturity are recognized initially at fair value being the cost, plus attributable
transaction costs.
Subsequently, these are measured at amortized cost less impairment loss, if any. Any premium paid or discount
availed on acquisition of held to maturity investment is deferred and amortized over the term of investment using the
effective yield.
4.15.2 Deferred
4.16 Fixed assets
Tangibles
Annual rates
of depreciation
(%)
Leasehold improvements 10
Furniture and fixtures 10
Office equipments 10
Computers 33.33
Vehicles 20
Intangibles
Capital work-in-progress
Normal repairs and maintenance are charged to income as and when incurred. Subsequent costs are included in the
asset's carrying amount or recognised as a separate asset, as appropriate, only when it is possible that the future
economic benefits associated with the item will flow to the Company and the cost of the item can be measured
reliably.
The assets residual values and useful lives are reviewed, at each reporting date.
An item of fixed assets is derecognised upon disposal or when no future economic benefits are expected from its use
or disposal.
Gain or loss on disposal of the assets is recognised in the profit and loss account in the period of disposal.
The assets residual values and useful lives are reviewed, at each reporting date.
Capital work-in-progress is stated at cost less any impairment in value. It includes advances made to suppliers in
respect of tangible and intangible assets.
Intangible assets comprise software licenses, and are stated at cost less accumulated amortisation and impairment in
value, if any. Amortisation is charged over the useful life of the asset on a systematic basis to profit and loss account
by applying the straight line method.
Deferred tax is recognised using the balance sheet method, providing for all temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying
amount of assets and liabilities, using the rate enacted or substantively enacted at the reporting date.
The Company recognises a deferred tax asset to the extent that it is probable that taxable profits in the foreseeable
future will be available against which the related tax losses and deductible temporary differences can be utilised.
Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Tangible fixed assets are stated at cost less accumulated depreciation and impairment in value, if any. Depreciation is
calculated on a straight line basis, whereby the depreciable amount of an operating asset is written off over its
estimated useful life, using the following rates:
Depreciation on acquisitions during the year is charged from the date on which the assets is available for use whereas
on disposals, depreciation is charged upto the date of disposal.
4.17 Impairment
4.18 Ijarah
Ijarah rentals are recognised as an expense on accrual basis as and when the rentals become due.
4.19 Financial instruments
4.20 Creditors, accruals and provisions
4.21 Off setting the financial assets and liabilities
4.22 Earnings / (loss) per share
4.23 Business segment
The fire and engineering takaful segment provides takaful covers against damages caused by fire, riot and strike,
explosion, earthquake, atmospheric damage, flood, engineering losses, electric fluctuation and impact.
Marine takaful segment provides coverage against cargo risk, war risk and damages occurring in inland transit and
other related perils.
Financial assets and financial liabilities other than those arising out of takaful contracts are recognized at the time
when the Company becomes a party to the contractual provisions of the instrument. At the time of initial recognition,
financial assets and liabilities are measured at fair values which is the cost of consideration given or received for it.
Financial assets are derecognized when the contractual right to receive future cash flows from the asset expires or is
transferred along with the risk and reward of the asset. Financial liabilities are derecognized when obligation
specified in the contract is discharged, cancelled or expired. Any gains or losses on derecognition of the financial
assets and liabilities are recognized in the profit and loss account of the current period.
Liabilities for creditors and other amounts payable are carried at cost which is fair value of the consideration to be
paid in future for goods and / or services received, whether or not billed to the Company.
Financial assets and liabilities other than those relating to takaful contracts are only off-set and the net amount is
reported in the balance sheet when the Company has a legally enforceable right to set-off the recognized amounts and
it intends either to settle on net basis, or to realise the asset and settle the liability simultaneously.
Earnings/ (loss) per share is calculated by dividing the profit / (loss) after tax attributable to ordinary shareholders for
the year by the weighted average number of shares outstanding during the year.
A business segment is a group of assets and operations engaged in providing products or services that are subject to
risks and returns that are different from those of other business segments. The Company accounts for segment
reporting using the classes or sub classes of business (Takaful Business Statutory Funds) as specified under the
Insurance Ordinance, 2000 and SEC (Insurance) Rules, 2002 as the primary reporting format.
The Company has five primary business segments for reporting purposes namely fire, marine, motor, health and
miscellaneous.
The assets residual values and useful lives are to be reviewed, at each reporting date.
The carrying amount of assets (other than deferred tax asset) are reviewed at each reporting date to determine whether
there is any indication of impairment in carrying amount of any asset or group of assets. If such indication exists, the
recoverable amount of the asset is estimated in order to determine the extent of impairment loss, if any. An
impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. Impairment
losses are recognised in profit and loss account. An impairment loss is reversed if the reversal can be objectively
related to an event occurring after the impairment loss was recognised.
4.24 Revenue recognition
PTF
i)
SHF
i)
ii)
PTF / SHF
i) Profit on Islamic investment products is recognised on accrual basis.
ii) Dividend income is recognised when the right to receive dividend is established.
iii) Gain or loss on sale of investments is included in the profit and loss account in the period of disposal.
iv)
4.25 Expenses
4.26 Foreign currency translations
Contribution income under a policy is recognised over the period of takaful. Administrative surcharge recovered
from insurer is recognised as part of contribution in the case of co-takaful policies (Leader Follower case) on
proportionate basis.
The Takaful Operator manages the general takaful operations for the participants and charges 40% of the gross
contribution written net of administrative surcharge on co-takaful inward as wakala fee against the services. It is
recognized upfront on the issue of takaful policy.
The Takaful Operator also manages the participants' investment as Modarib and charges 25% of the investment
income earned by the participants' fund as Modarib's fee. It is recognized on the same basis on which related
revenue is recognised.
Motor takaful provides comprehensive vehicle coverage and indemnity against third party loss and other related
covers.
Health takaful provides basic hospital care and major medical care including maternity care and outpatient care.
Miscellaneous takaful provides cover against burglary, loss of cash in safe and cash in transit, personal accident,
money, travel and other coverages.
Assets and liabilities are allocated to particular segments on the basis of contribution earned. Those assets and
liabilities which cannot be allocated to a particular segment on a reasonable basis are reported as unallocated corporate
assets and liabilities.
Income on held to maturity investments is recognised on time proportionate basis using effective interest method.
Expenses allocated to the takaful business represent only directly attributable expenses. Expenses not directly
allocable to takaful business are charged to Shareholders' Fund. All indirect and common expenses are allocated
between management expense and general and administrative expenses in the ratio of 70% and 30% respectively.
Foreign currency transactions are translated into Pak Rupees (functional currency) using the exchange rates prevailing
at the date of transaction. Monetary assets and liabilities in foreign currencies are translated into Pak Rupees using the
exchange rate at the reporting date. Foreign exchange gains and losses resulting from the settlement of such
transactions and from translation at the year end exchange rates of monetary assets and liabilities denominated in
foreign currencies are recognized in the profit and loss account.
5. ISSUED, SUBSCRIBED AND PAID UP CAPITAL
2015 2014 2015 2014
30,000,000 30,000,000 300,000,000 300,000,000
5.1 Shareholders of the Company are:
Holding Holding
% %
House Building Finance Company Limited 8,700,000 29 8,700,000 29
Al-Bhuaira National Insurance Company 5,100,000 17 5,100,000 17
Al Baraka Bank (Pakistan) Limited 5,100,000 17 5,100,000 17
Sitara Chemical Industries Limited 3,000,000 10 3,000,000 10
Arif Habib Corporation Limited 3,000,000 10 3,000,000 10
Mal Al Khaleej Investment LLC 2,550,000 8.5 2,550,000 8.5
Emirates Investment Group LLC 2,045,500 6.8 2,045,500 6.8
Trust Securities and Brokerage Limited 504,500 1.7 504,500 1.7
30,000,000 30,000,000
6. OTHER CREDITORS AND ACCRUALS
2014
Note Shareholders' Participants' Aggregate Aggregate
Fund Takaful Fund
Commission payable to agents 7,322,111 - 7,322,111 8,165,726
Federal excise duty - 2,254,058 2,254,058 3,377,497
Federal insurance fee - 212,952 212,952 267,177
Withholding tax - 211,233 211,233 295,625
Contribution due to other co-takaful /
insurance companies - 4,588,189 4,588,189 2,335,331
Payable to staff gratuity fund 6.1 2,817,858 - 2,817,858 2,390,718
Provision for compensated absences 256,054 - 256,054 256,054
Security deposit 539,325 - 539,325 1,352,039
Tracker installation fee payable - 4,670,490 4,670,490 6,348,015
Other payables 1,113,359 2,200,940 3,314,299 2,860,121
12,048,707 14,137,862 26,186,569 27,648,303
6.1 Staff gratuity fund
The following significant assumptions were used for valuation of this scheme:
2015 2014
Discount rate 11% 11.75%
Expected rate of increase in salary of employees 10% 10%
Expected rate of return on plan assets 11% 11.75%
Normal retirement age 60 years 60 years
The Company operates an approved funded gratuity scheme for all permanent employees. Latest actuarial valuation was carried out as at
December 31, 2015.
Rate per annum
2015 2014
Number of shares Number of
shares
2015
--------------------------------------------(Rupees)-----------------------------------------
(Number of shares) Issued subscribed and paid up (Rupees)
Ordinary shares of Rs. 10 each fully paid in cash
6.1.1
Salary increase risk
Discount rate risk
Mortality / withdrawal risk
This is the risk that the actual mortality/withdrawal experience is different than that assumed by the Company.
Investment risk
This is the risk that the assets are underperforming and are not sufficient to meet the liabilities.
6.1.2 Number of employees under the scheme
The number of employees covered under the scheme is 62 (2014: 57).
6.1.3
2015 2014
Rupees Rupees
Liability recognised in the balance sheet
Present value of defined benefit obligation 8,189,605 5,376,516
Fair value of plan assets (5,371,747) (2,985,798)
Liability recognised in the balance sheet 2,817,858 2,390,718
6.1.4 Movement in liability during the year
Opening balance 2,390,718 323,885
Charge for the year 427,140 2,066,833
Closing balance 2,817,858 2,390,718
6.1.5 Reconciliation of present value of defined benefit obligation
Opening balance of defined benefit obligation 5,376,516 3,696,348
Current service cost 1,551,995 916,866
Interest cost 764,855 584,868
Actuarial loss on defined benefit obligation 724,821 2,121,945
Benefits paid during the year (228,582) (1,943,511)
Closing balance of defined benefit obligation 8,189,605 5,376,516
6.1.6 Reconciliation of fair value of plan assets
Opening balance of fair value of plan assets 2,985,798 3,372,463
Expected return on plan assets 438,956 473,789
Contribution received 2,390,718 1,500,000
Benefits paid (228,582) (1,943,511)
Actuarial loss on plan assets (215,143) (416,943)
Closing balance of fair value of plan assets 5,371,747 2,985,798
The scheme typically exposes the Company to actuarial risks such as: salary increase risk, discount rate risk, mortality/withdrawal risk and
investment risk defined as follow:
This is the risk that the salary at the time of cessation of service is higher than that assumed. This is a risk to the Company because the
benefits are based on the final salary; if the final salary is higher than what we have assumed, the benefits will also be higher.
The discount rate is based on the yield on government bonds. If the market yield of bonds varies, the discount rate would vary in the same
manner and would affect the present value of obligation and fair value of assets.
The fair value of the scheme's assets and liabilities for past services of the employees at the latest valuation date are as follows:
2015 2014
Note Rupees Rupees
6.1.7 Charge for the year
Recognised through profit and loss account
Current service cost 1,551,995 916,866
Interest on obligation 764,855 584,868
Expected return on plan assets (438,956) (473,789)
1,877,894 1,027,945
Recognised through other comprehensive income
Actuarial loss for the year 939,964 2,538,888
Total gratuity expense for the year 2,817,858 3,566,833
6.1.8 Gratuity cost allocation
Management expenses 20.1 1,314,526 719,562
General and administrative expenses 22.1 563,367 308,383
1,877,893 1,027,945
6.1.9 Composition of fair value of plan assets
Fair Value Percentage Fair Value Percentage
(Rupees) (%) (Rupees) (%)
Unitised Fund 5,161,391 96.1 - -
Term Deposit Certificates - - 2,812,967 94.2
Cash 210,356 3.9 172,831 5.8
5,371,747 2,985,798
6.1.10 Sensitivity analysis
(Rupees)
Base 8,189,605
Discount rate Increase by 0.5% 7,610,646 -7.07%
Decrease by 0.5% 8,827,125 7.78%
Salary growth rate Increase by 0.5% 8,826,838 7.78%
Decrease by 0.5% 7,606,154 -7.12%
Mortality rate 50% of base assumption 8,184,362 -0.06%
150% of base assumption 8,195,135 0.07%
Withdrawal rate 50% of base assumption 8,157,891 -0.39%
150% of base assumption 8,219,036 0.36%
6.1.11 The estimated gratuity cost for the year ending December 31, 2016 before allowing for the impact of net actuarial loss or gain is Rs.
2,229,205.
2015 2014
Significant actuarial assumptions for the determination of the defined obligation are discount rate, and expected rate of salary increase. The
sensitivity analysis below have been determined based on reasonably possible changes of the respective assumptions occurring at the end
of the reporting period, while holding all other assumptions constant:
Present value of
obligation
% change from
base
7. CONTINGENCIES AND COMMITMENTS
CONTINGENCIES
7.1
7.2
COMMITMENTS
7.3 Commitments under Ijarah arrangements and the period in which these payments will become due are:
2015 2014
Rupees Rupees
Not later than one year 1,255,260 1,255,260
Later than one year but not later than five years 2,301,840 3,557,100
3,557,100 4,812,360
8. CASH AND BANK DEPOSITS
2014
Shareholders' Participants' Aggregate Aggregate
Fund Takaful Fund
Note
Cash and other equivalents
Cash 91,891 - 91,891 49,010
Policy stamps and bond papers in hand - 99,255 99,255 355,900
91,891 99,255 191,146 404,910
Current and other accounts
Current accounts 3,105 191,307 194,412 1,628,567
PLS savings accounts 8.1 7,890,323 13,868,577 21,758,900 33,746,782
7,893,428 14,059,884 21,953,312 35,375,349
Deposits maturing within 12 months
Term deposits 8.2 170,900,000 134,710,000 305,610,000 251,500,000
178,885,319 148,869,139 327,754,458 287,280,259
Travel Agents Association of Pakistan (TAAP) raised a demand for distribution of surplus in Amaan Travel Participation
Takaful Fund (PTF) and the profit thereon aggregating to Rs. 120,000,000. TAAP filed a case on October 10, 2012 in the
Insurance Tribunal of Sindh for recovery of Rs. 546,534,125 inclusive of compensation/ damages for premature
termination of the agreement of Rs. 386,534,125 in respect of Amaan Travel and Health Takaful Package. A commission
was appointed for recording evidences of the parties which is yet to issue its report to Tribunal along-with evidence based
on which the case shall be disposed off by the Tribunal. The management, based on the advice of its legal counsel, is
confident that the Company has good defence in the case and as such no loss is likely to arise from this litigation and
accordingly, no provision has been made in these financial statements.
There are few cases filed by policy holders against the Company before Insurance Tribunals at Lahore for the recovery of
claims, contribution amounts and liquidated damages aggregating Rs. 14,986,318 (2014: Rs 101,039,546) . These claims
are not acknowledged by the Company as the management, based on the advice of its legal advisors, is confident that the
Company has good defence in these cases and as such no loss is likely to arise from these litigations and accordingly, no
provision has been made in these financial statements.
2015
--------------------------------------- (Rupees) ---------------------------------------
8.1
8.2
2015 2014
Note Rupees Rupees
9. LONG TERM DEPOSITS
Deposits against
Ijarah 517,900 517,900
Rent 73,590 73,590
Others 9.1 931,544 931,544
1,523,034 1,523,034
9.1
10. INVESTMENTS
2014
Shareholders' Participants' Aggregate Aggregate
Fund Takaful Fund
Note
Held to maturity
GoP Ijarah sukuk - - - 10,000,000
Other sukuk 10.1 19,963,645 - 19,963,645 30,515,368
19,963,645 - 19,963,645 40,515,368
Less: Provision for impairment (15,998,125) - (15,998,125) (14,998,125)
3,965,520 - 3,965,520 25,517,243
Available-for-sale
Quoted - units of Islamic Fund 10.2 16,807,555 47,196,326 64,003,881 10,007,878
20,773,075 47,196,326 67,969,401 35,525,121
These represent term deposits maintained with Islamic commercial banks under profit and loss sharing basis having
maturity upto 1 year and carry expected profit at rates ranging from 5.0% to 10.78% (2014: 8% to 9.97%) per annum.
These include term deposits amounting to Rs. 30,000,000 maintained with Dubai Islamic Bank (Pakistan) Limited on
which lien is marked in favour of State Bank of Pakistan in compliance of section 29 of Insurance Ordinance, 2000 and
Takaful Rules, 2012.
This include deposits amounting to Rs. 875,000 (2014: Rs. 875,000) in respect of enlistment of hospitals and other medical
institutes on panel.
2015
------------------------------------------ (Rupees) ----------------------------------------------
These represent balances maintained with Islamic commercial banks under profit and loss sharing basis carrying expected
profit rates ranging from 2.60% to 7.3% (2014: 3.51% to 6.92%) per annum.
10.1 Other Sukuk Certificates
Number of Credit Effective yield Profit Face value Net carrying Market Maturity
Certificates Rating % payment (Rupees) Value Value date
Agritech Limited - Sukuk Certificate (note 10.1.1) 3,000 NPA* 6 months Semi-annually 15,000,000 - NPA* August 06,
KIBOR + 2% 2019
Quetta Textile Mills Limited - Sukuk Certificates (note 10.1.2) 2,000 NPA* 6 months Quarterly 10,000,000 3,965,520 NPA* March 26,
KIBOR + 1.75% 2020
10.1.1
10.1.2
* Non performing assets
10.2 Units of Islamic Fund - Available for sale
Sector / name of investee scheme As at Purchased Bonus Redeemed As at Cost Market Cost Market
January 1, during the during the December 31, value value
2015 year year 2015
------------------------------------(Rupees)-------------------------------------
Participants' Takaful Fund
United Composite Islamic Fund - - - - - - Alfalah GHP Islamic Fund - - - - - - Nafa Islamic Multi Assets Fund - - - - - -
ABL Islamic Principal Preservation Fund II 601,391 - 20,927 (622,318) - - - 6,000,000 6,496,111
Meezan Sovereign Fund 99,986 - - (99,986) - - - 4,007,878 5,178,287
Meezan Cash Fund - 103,654 - - 103,654 5,193,043 5,313,281 - -
NAFA Riba Free Saving Funds - 6,225,957 - (3,229,437) 2,996,520 30,602,197 31,313,930 - -
NAFA Islamic Stock Fund - 1,965,902 7,665 (957,694) 1,015,873 11,401,086 11,198,181 - -
47,196,326 47,825,392 10,007,878 11,674,398
Shareholders' Fund
ABL Islamic Financial Planning Fund - 67,925 - - 67,925 6,800,000 6,799,694 - -
Meezan Capital Preservation Plan II - 201,450 151 - 201,601 10,007,555 10,269,556 - -
16,807,555 17,069,250 - -
-
This represents investment aggregating to Rs. 15,000,000 (2014: 15,000,000) in sukuks issued by Agritech Limited (the investee company) against which the investee company had not made payments at the contractual dates i.e.
August 06, 2010 and February 06, 2011. In 2011, a restructuring agreement was signed between the investee company and the Investment Agent of the sukuk certificates, whereby, certain terms included in the original trust deed
dated July 22, 2008 were amended, including the repayment period which was extended from August 06, 2015 to August 06, 2019. Further, in lieu of accrued overdue profit, zero coupon Term Finance Certificates (TFCs) were issued
by Agritech Limited on October 17, 2011 which were to be repaid by the investee company within three and a half years from the date of issuance of such TFCs. However, the investee company defaulted on the instalment due based
on the restructuring agreement as well as in making payments in respect of zero coupon term finance certificates. Therefore, the management has neither recorded TFCs in the books of accounts nor accrued any profit on outstanding
principal amount and is fully provided, on prudence basis.
An agreement for restructuring of these sukuks was executed between the Investment Agent of these sukuks and Quetta Textile Mills Limited on June 24, 2013. According to the restructuring terms, repayment of principal of Rs. 8
million will be made to the Company over a period of 7 years till March 26, 2020 in twenty nine quarterly instalments whereas the profit shall be received by the Company at the rate of 6 monthly KIBOR and a spread of 1.75% with
effect from March 26, 2013. During the year, four instalments became due out of which three instalments of Principal and two instalments of Profit are still outstanding as at December 31, 2015.
Number of units 2015 2014
2015 2014
Note Rupees Rupees
11. CONTRIBUTION DUE BUT UNPAID
Unsecured
Considered good 28,104,385 37,698,199
Considered doubtful 1,580,780 8,431,428
29,685,165 46,129,627
Provision against contribution due but unpaid 11.1 (1,580,780) (8,431,428)
28,104,385 37,698,199
11.1 Movement of provision against contribution due but unpaid
Opening balance 8,431,428 8,431,428
Charge for the year 764,362 -
Bad debts written off (7,615,010) -
Closing balance 1,580,780 8,431,428
12.
Unsecured
Considered good 3,121,043 2,326,333
Considered doubtful 4,686,950 4,667,878
7,807,993 6,994,211
Provision against amount due from other takaful companies 12.1 (4,686,950) (4,667,878)
3,121,043 2,326,333
12.1 Movement of provision against amounts due from other takaful companies
Opening balance 4,667,878 4,667,878
Charge for the year 19,072 -
Closing balance 4,686,950 4,667,878
13. ACCRUED INVESTMENT INCOME
2015 2014
Shareholders' Participants' Aggregate Aggregate
Fund Takaful Fund
Return on term deposits 2,779,293 2,613,517 5,392,810 10,350,226
Return on Sukuk certificates - - - 1,059,330
2,779,293 2,613,517 5,392,810 11,409,556
AMOUNTS DUE FROM OTHER TAKAFUL COMPANIES / RETAKAFUL COMPANIES
------------------------------------- (Rupees) -------------------------------------
2015 2014
Note Rupees Rupees
14. WAKALA FEE RECEIVABLE AND OTHER ACCOUNT BALANCES
Considered good 14,647,867 49,799,258
Considered doubtful - 4,510,772
14,647,867 54,310,030
Provision for doubtful balances 14.1 (4,510,772) (4,510,772)
10,137,095 49,799,258
14.1 Movement of provision for doubtful balances
Opening balance 4,510,772 4,510,772
Reversal during the year - -
Closing balance 4,510,772 4,510,772
15. PREPAYMENTS
2015 2014
Shareholders' Participants' Aggregate Aggregate
Fund Takaful Fund
Prepaid re-takaful ceded - 10,273,192 10,273,192 18,419,988
Prepaid expenses 1,675,715 17,085,014 18,760,729 17,074,449
1,675,715 27,358,206 29,033,921 35,494,437
16. SUNDRY RECEIVABLES
2015 2014
Shareholders' Participants' Aggregate Aggregate
Fund Takaful Fund
Return on bank balances and deposits 8,844 61,417 70,261 140,529
Advances to employees and agents 171,344 - 171,344 420,292
Others 259,084 372,467 631,551 690,792
439,272 433,884 873,156 1,251,613
----------------------------------(Rupees)--------------------------------------
----------------------------------(Rupees)--------------------------------------
17. FIXED ASSETS
17.1 Tangibles Assets
Written Depreciation
At the Additions/ At the end At the For the At the end down value rate
beginning (disposals) of the year beginning year / of the year December 31
of the year of the year (disposals) (%)
Leasehold improvements 4,156,141 - 4,156,141 2,176,433 415,614 2,592,047 1,564,094 10
Furniture and fixtures 12,465,495 306,155 12,771,650 8,174,452 1,273,645 9,448,097 3,323,553 10
Office equipment 5,952,119 112,850 5,990,449 3,021,980 580,652 3,575,361 2,415,088 10
(74,520) (27,271)
Computers 17,527,982 227,600 17,641,074 15,586,212 947,116 16,473,521 1,167,553 33.33
(114,508) (59,807)
Vehicles 4,134,278 - 4,134,278 1,593,954 776,644 2,370,598 1,763,680 20
44,236,015 646,605 44,693,592 30,553,031 3,993,671 34,459,624 10,233,968
(189,028) (87,078)
17.1.1 It includes fully depreciated assets having cost of Rs 15,570,733 (2014: 14,932,670).
17.1.2 Tangibles Assets (for comparative period)
Written Depreciation
At the Additions/ At the end At the For the At the end down value at rate
beginning (disposals) of the year beginning year / of the year December 31
of the year of the year (disposals) (%)
Leasehold improvements 4,156,141 - 4,156,141 1,761,955 414,478 2,176,433 1,979,708 10
Furniture and fixtures 12,364,595 100,900 12,465,495 6,933,654 1,240,798 8,174,452 4,291,043 10
Office equipments 5,578,869 485,900 5,952,119 2,515,804 576,136 3,021,980 2,930,139 10
(112,650) (69,960)
Computers 15,828,279 1,802,485 17,527,982 15,004,246 634,357 15,586,212 1,941,770 33.33
(102,782) (52,391)
Vehicles 2,320,278 1,814,000 4,134,278 1,032,820 561,134 1,593,954 2,540,324 20
40,248,162 4,203,285 44,236,015 27,248,479 3,426,903 30,553,031 13,682,984
(215,432) (122,351)
-------------------------------------------------------------- (Rupees) --------------------------------------------------------------
2015
Cost Accumulated depreciation
-------------------------------------------------------------- (Rupees) --------------------------------------------------------------
2014
Cost Accumulated depreciation
2015 2014
Note Rupees Rupees
18. DIRECT EXPENSES - PTF
Tracker fees 33,918,488 21,179,028
Inspection fees 44,000 109,900
Doubtful debts 783,434 -
Others 272,422 311,809
35,018,344 21,600,737
19. OTHER INCOME - PTF
Liabilities no longer payable written back 3,686,214 42,832
Wakala fee no longer payable written back 4,510,772 -
8,196,986 42,832
20. MANAGEMENT EXPENSES - SHF
Salaries, wages and benefits 20.1 42,198,385 32,748,676
Rent, rates and taxes 4,430,497 3,859,481
Utilities 1,185,026 1,181,042
Communications 1,187,615 885,762
Printing and stationery 1,133,937 1,190,097
Travelling and entertainment 1,226,467 828,901
Repairs and maintenance 1,035,862 879,032
Vehicles running and maintenance 941,485 1,023,039
Advertisement and promotions 342,671 647,925
Ijarah rentals 878,682 878,682
Fees and subscription 723,238 1,233,401
Other expenses 924,080 504,528
56,207,945 45,860,565
20.1
2015 2014
Note
21. OTHER INCOME - SHF
Income from non - financial assets 929,195 708,221
Other income 3,375 -
932,570 708,221
These include Rs. 1,750,118 (2014: Rs.1,395,316) in respect of employees provident fund and Rs. 1,314,526 (2014:
Rs. 719,562) in respect of staff retirement gratuity.
(Rupees)
2015 2014
Note Rupees Rupees
22. GENERAL AND ADMINISTRATION EXPENSES - SHF
Salaries, wages and benefits 22.1 18,085,022 14,035,147
Depreciation 17.1 3,993,671 3,426,903
Amortization of intangibles - 38,994
Shariah board honorarium 1,511,270 2,115,768
Legal and professional 2,486,417 2,371,802
Rent, rates and taxes 1,898,785 1,654,063
Utilities 507,868 506,161
Communications 508,978 379,612
Printing and stationery 485,973 510,041
Travelling and entertainment 525,629 355,243
Repairs and maintenance 443,941 376,728
Vehicles running and maintenance 403,494 438,446
Advertisement and promotions 146,859 277,682
Ijarah rentals 376,578 376,578
Fees and subscription 309,959 528,601
Takaful expense 472,455 437,718
Auditors' remuneration 22.2 709,176 655,192
Bank charges 9,862 7,792
Donation 70,000 -
Penalty 22.3 5,000,000 -
Other expenses 396,034 216,226
38,341,971 28,708,697
22.1
2015 2014
22.2 Auditors' remuneration
Audit fee 306,000 280,000
Half yearly review fee 144,000 120,000
Other certification 150,000 100,000
Out of pocket expenses 109,176 155,192
709,176 655,192
22.3
(Rupees)
These include Rs. 750,050 (2014: Rs. 597,993) in respect of employee provident fund and Rs. 563,367 (2014: Rs.
308,383) in respect of retirement gratuity.
This represents penalty imposed by the Securities and Exchange Commission of Pakistan on default of Insurance
Ordinance, 2000 in respect of its Amaan Travel & Health Takaful Package, a takaful scheme for travellers in operation
prior to year 2009.
2015 2014
Note Rupees Rupees
23. TAXATION
Current - for the year 23.1 3,277,473 2,338,235
23.1
23.2
24. EARNINGS PER SHARE - Basic and diluted
2015 2014
Rupees Rupees
Profit for the year
after taxation 30,426,486 8,632,017
(Number of shares)
Weighted average number of shares outstanding during the year 30,000,000 30,000,000
Earnings per share 1.01 0.29
The relationship between tax expense and accounting profit has not been presented in these financial statements as the
income of the Company is subject to tax under section 113 and section 149 of Income Tax Ordinance, 2001.
As a matter of prudence the Company has not recognised deferred tax asset amounting to Rs. 35,154,231 as at
December 31, 2015 on net deductible temporary differences aggregating to Rs. 109,856,971 as at December 31, 2015
which include unused tax losses and tax depreciation/amortization amounting to Rs. 32,830,741 and Rs. 50,153,950
respectively.
Earning per share is calculated by dividing the Earning / loss for the year by the weighted average number of shares
outstanding during the year:
25. REMUNERATION OF DIRECTORS, CHIEF EXECUTIVE OFFICER AND OTHER EXECUTIVES
Chief
Executive
Officer
Directors Executives Total
Managerial remuneration 2,438,710 - 12,387,086 14,825,796
Directors' fee for attending meetings - 1,100,000 - 1,100,000
Retirement benefits 447,097 - 2,315,403 2,762,500
Utilities 243,871 - 1,238,709 1,482,580
Medical expenses 102,000 - 593,900 695,900
Others 252,000 - 5,037,668 5,289,668
4,581,098 1,100,000 27,146,956 32,828,053
Number of persons 1 7 13 21
Chief
Executive
Officer
Directors Executives Total
Managerial remuneration 2,322,577 - 10,137,627 12,460,204
Directors' fee for attending meetings - 490,000 - 490,000
Retirement benefits 425,808 - 1,922,632 2,348,440
House rent 1,045,164 - 4,561,921 5,607,085
Utilities 232,260 - 1,013,764 1,246,024
Medical expenses 102,000 - 421,217 523,217
Leave passage / assistance - - - -
Others 252,000 - 4,348,814 4,600,814
4,379,809 490,000 22,405,975 27,275,784
Number of persons 1 6 14 21
25.1
2015
--------------------------------------------------------------------(Rupees)--------------------------------------------------------------------
2014
--------------------------------------------------------------------(Rupees)--------------------------------------------------------------------
The Chief Executive Officer and some other executives are provided with free use of Company maintained cars in
accordance with their entitlements.
26. SEGMENT REPORTING
Marine, aviation and transport
2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
SEGMENT ASSETS
Segment assets 30,852,695 57,426,107 15,307,745 13,315,025 80,252,338 103,595,149 21,932,293 31,934,008 624,410 2,871,594 148,969,480 209,141,883
Unallocated corporate assets 428,473,195 368,033,911
Consolidated total assets 577,442,675 577,175,794
SEGMENT LIABILITIES
Segment liabilities 69,885,444 86,271,094 30,790,850 34,009,348 270,470,014 214,563,860 36,965,872 65,645,361 4,071,461 5,353,412 412,183,641 405,843,075
Unallocated corporate liabilities (7,110,831) 19,421,549
Consolidated total liabilities 405,072,810 425,264,624
-------------------------------------------------------------------------------------------------------------------------------------------(Rupees)-------------------------------------------------------------------------------------------------------------------------------------------
Class of business wise revenue and results have been disclosed in the profit and loss account prepared in accordance with the requirement of Insurance Ordinance, 2000, SEC (Insurance) Rules, 2002 and Takaful Rules 2012.
The following table presents information regarding segment assets and liabilities as at December 31, 2014 and December 31, 2013:
Fire and property damage Motor Health Miscellaneous Total
27. RELATED PARTIES TRANSACTIONS AND BALANCES
Transactions with related parties during the year and comparatives are as follows:
December December
31, 2015 31, 2014
Status
Contribution written Associate 15,003,072 14,764,600
Contribution written Director 52,275 -
Contribution received Associate 15,516,476 15,158,137
Claims incurred / (Reversed) Associate (2,849,839) 2,675,745
Claims paid Associate 17,680 869,138
Profit on bank deposit Associate 140,566 3,138,369
Contribution to provident fund Associate 2,500,168 1,993,309
Contribution to Gratuity fund Associate 2,390,718 1,500,000
December December
31, 2015 31, 2014
Status
Balances with related parties as at 31 Decmber are as follows:
Contribution receivable Associate 2,849,166 1,749,516
Contribution receivable Director 52,275 -
Claims outstanding Associate 2,903,022 5,770,541
Payabele to Gratuity fund Associate (2,817,858) (2,390,718)
Bank deposits Associate 272,764 984,056
----------(Rupees)----------
----------(Rupees)----------
28. MANAGEMENT OF TAKAFUL AND FINANCIAL RISK
28.1 Takaful risk management
Takaful risk
(a) Frequency and severity of claims
-
-
The underwriting strategy attempts to ensure that the underwritten risks are well diversified in terms of type
and amount of risk, industry and geography. The Company has the right to re-price the risk on renewal. It also
has the ability to impose deductibles and reject fraudulent claims. Takaful contracts also entitle the Company
to pursue third parties for payment of some or all costs (for example, subrogation). The claims payments are
limited to the extent of sum covered on occurrence of the covered event.
The company has entered into re-takaful cover / arrangements, with local and foreign re-takaful operators
having good credit rating by reputable rating agencies, to reduce its exposure to risks and resulting claims.
Keeping in view the maximum exposure in respect of key zone aggregates, a number of proportional and non-
proportional facultative re-takaful arrangements are in place to protect the net account in case of a major
catastrophe. The effect of such re-takaful arrangements is that the Company recovers the share of claims from
re-takaful companies thereby reducing its exposure to risk. Apart from the adequate event limit which is a
multiple of the treaty capacity or the primary recovery from the proportional re-takaful arrangements, any
loss over and above the said limit would be recovered under non-proportional treaty which is very much in line
with the risk management philosophy of the Company.
The risk under any one takaful contract is the possibility that the covered event occurs and the uncertainty of the
amount of the resulting claim. By the very nature of a takaful contract, this risk is random and therefore unpredictable.
The principal risk that the Company faces under its takaful contracts is that the actual claims exceed the carrying
amount of the takaful liabilities. This could occur because the frequency or severity of claims is greater than estimated
takaful events are random, and the actual number and amount of claims will vary from year to year from the level
established.
Experience shows that the larger the portfolio of similar takaful contracts, the smaller the relative variability about the
expected outcome will be. In addition, a more diversified portfolio is less likely to be affected by a change in any
subset of the portfolio. The Company has developed its takaful underwriting strategy to diversify the type of takaful
risks accepted and within each of these categories to achieve a sufficiently large population of risks to reduce the
variability of the expected outcome.
Factors that aggravate takaful risk include lack of risk diversification in terms of type and amount of risk, geographical
location and type of industry covered.
Political, environmental, economical and climatic changes give rise to more frequent and severe extreme events
(for example, fire, theft, steal, riot and strike, explosion, earthquake, atmospheric damage, hurricanes, typhoons,
river flooding, electric fluctuation, terrorism, war risk, damages occurring in inland transit, burglary, loss of cash in
safe and cash in transit, travel and personal accident, money losses, engineering losses and other events) and their
consequences (for example, subsidence claims). For certain contracts, the Company has also limited the number of
claims that can be paid in any policy year or introduced a maximum amount payable for claims in any policy year.
Takaful contracts which is divided into direct and facultative arrangements are further subdivided into five
segments: fire, marine, motor, health and miscellaneous. The takaful risk arising from these contracts is
concentrated in the territories in which the Company operates, and there is a balance between commercial and
personal properties / assets in the overall portfolio of covered properties / assets. The Company underwrites takaful
contracts in Pakistan.
The Company manages these risks through its underwriting strategy, adequate re-takaful arrangements and
proactive claims handling.
-
(b) Sources of uncertainty in the estimation of future claim payments
Assumed net
loss ratio
Assumed net
loss ratio
Class 2015 2014
% %
Fire and property damage 5.01 60.89
Marine, aviation and transport 2.29 3.03
Motor (44.30) 40.26
Health (87.47) 98.70
Miscellaneous 524.73 (8.87)
(c) Process used to decide on assumptions
Liability in respect of outstanding claims is based on the best estimate of the claims intimated or assessed. In
calculating the estimated cost of unpaid claims (both reported and not), the Company estimation techniques are a
combination of loss-ratio-based estimates (where the loss ratio is defined as the ratio between the ultimate cost of
takaful claims and takaful contribution earned in prior financial years in relation to such claims) and an estimate
based upon actual claims experience using predetermined basis where greater weight is given to actual claims
experience as time passes.
In estimating the liability for the cost of reported claims not yet paid, the Company considers any information
available from surveyor's assessment and information on the cost of settling claims with similar characteristics in
previous periods. Claims are assessed on a case-by-case basis separately.
The principal assumption underlying the liability estimation of IBNR and Contribution Deficiency Reserves is that
the company's future claim development will follow similar historical pattern for occurrence and reporting. The
management uses qualitative judgement to assess the extent to which past occurrence and reporting pattern will not
apply in future. The judgement includes external factors e.g. treatment of one-off occurrence claims, changes in
market factors, economic conditions etc. The internal factors such as portfolio mix, policy conditions, and claims
handling procedures are further used in this regard.
The assumed net of retakaful loss ratios for each class of business is as follows:
The risks associated with takaful contracts are complex and subject to a number of variables that complicate
quantitative sensitivity analysis. This exposure is geographically concentrated in Pakistan only.
In compliance of the regulatory requirement, the re-takaful agreements are duly submitted with Securities and
Exchange Commission of Pakistan (SECP) on an annual basis.
The Company has claim department dealing with the mitigation of risks surrounding claims incurred whether
reported or not. This department investigates and settles all claims based on surveyor's report / assessment. The
unsettled claims are reviewed individually at least semi-annually and adjusted to reflect the latest information
on the underlying facts, contractual terms and conditions, and other factors. The Company actively manages
and pursues early settlements of claims to reduce its exposure to unpredictable developments.
Claims reported and otherwise are analysed separately. The development of large losses / catastrophes is analysed
separately. The shorter settlement period for claims allows the Company to achieve a higher degree of certainty
about the estimated cost of claims including IBNR. However, the longer time needed to assess the emergence of a
subsidence claim makes the estimation process more uncertain for these claims.
The estimated cost of claims includes direct expenses to be incurred in settling claims, net of the expected
subrogation value, re-takaful and other recoveries. The Company takes all reasonable steps to ensure that it has
appropriate information regarding its claims exposures. However, given the uncertainty in establishing claims
provisions, it is likely that the final outcome may be different from the original liability established. The liability
comprises amount in relations to unpaid reported claims, claims incurred but not reported (IBNR), expected claims
settlement costs and a provision for unexpired risks at the end of the reporting period.
(d) Changes in assumptions
(e) Sensitivity analysis
2015 2014 2015 2014
10% increase in deficit
Fire and property damage 40,772 (276,856) 40,772 (276,856)
Marine, aviation and transport 15,855 (231,461) 15,855 (231,461)
Motor (8,323,701) (4,930,776) (8,323,701) (4,930,776)
Health (5,177,959) (4,634,285) (5,177,959) (4,634,285)
Miscellaneous 39,443 (105,400) 39,443 (105,400)
(13,405,590) (10,178,778) (13,405,590) (10,178,778)
10% decrease in deficit
Fire and property damage (40,772) 276,856 (40,772) 276,856
Marine, aviation and transport (15,855) 231,461 (15,855) 231,461
Motor 8,323,701 4,930,776 8,323,701 4,930,776
Health 5,177,959 4,634,285 5,177,959 4,634,285
Miscellaneous (39,443) 105,400 (39,443) 105,400
13,405,590 10,178,778 13,405,590 10,178,778
Concentration of takaful risk
Underwriting results Balance of Waqf
--------------------------------------- (Rupees) ---------------------------------------
A concentration of risk may also arise from a single takaful contract issued to a particular type of participant, within a geographical location or to a particular types
of commercial business. In order to minimise the financial exposure arising from large claims, the Company, in the normal course of business, enters into agreement
with other re-takaful operators, who are dispersed over several geographical regions.
The Company uses assumptions based on a mixture of internal and market data to measure its related claims liabilities. Internal data is derived mostly from
the Company’s monthly claims reports, surveyor's report for particular claim and screening of the actual takaful contracts carried out to derive data for the
contracts held. The Company has reviewed the individual contracts and in particular the industries in which the participant companies operate and the actual
exposure years of claims. This information is used to develop related provision for outstanding claims (both reported and non-reported).
The choice of selected results for each accident year of each class of business depends on an assessment of the technique that has been most appropriate to
observe historical developments. Through this analysis, the Company determines the need for an IBNR or an unexpired risk liability to be held at each
reporting date.
The Company has not changed its assumptions for the takaful contracts as disclosed in above (b) and (c).
The analysis of exposure described in paragraph (c) above is also used to test the sensitivity of the selected assumptions to changes in the key underlying
factors. Assumptions of different levels have been used to assess the relative severity of subsidence claims given past experience. The key material factor in
the Company’s exposure to subsidence claims is the risk of more permanent changes in geographical location in which Company is exposed.
The risks associated with the takaful contracts are complex and subject to a number of variables which complicate quantitative sensitivity analysis. The
Company makes various assumptions and techniques based on past claims development experience. This includes indications such as average claims cost,
ultimate claims numbers and expected loss ratios. The Company considers that the liability for takaful claims recognised in the balance sheet is adequate.
However, actual experience may differ from the expected outcome.
As the Company enters into short term takaful contracts, it does not assume any significant impact of changes in market conditions on unexpired risks. However,
results of sensitivity testing assuming 10% change in the claim incidence net of recoveries showing effect on underwriting results and balance of waqf fund is set
out below:
The maximum class wise risk exposure (in a single policy) is as follows:
2015 2014 2015 2014 2015 2014
Fire and property and damage 630,000,000 700,000,000 628,000,000 698,000,000 2,000,000 2,000,000
Marine, aviation and transport 109,983,000 73,645,000 107,983,000 71,645,000 2,000,000 2,000,000
Motor 14,000,000 7,040,000 13,500,000 6,540,000 500,000 500,000
Health 700,000 700,000 - - 700,000 700,000
Miscellaneous 1,000,000 1,920,000 550,000 1,470,000 450,000 450,000
755,683,000 783,305,000 750,033,000 777,655,000 5,650,000 5,650,000
Claims development table
Analysis on gross basis
Accident year 2011 2012 2013 2014 2015 Total
and before
Estimate of ultimate claims cost:
At the end of accident year 261,990,547 50,824,208 57,227,095 51,476,770 65,199,986 486,718,606
One year later 51,315,093 7,362,069 19,559,603 4,567,165 - 82,803,930
Two years later 26,302,252 5,704,009 14,374,301 - - 46,380,562
Three years later 18,507,805 3,635,249 - - - 22,143,054
Four years later 12,590,002 - - - - 12,590,002
Estimate of cumulative claims 510,054,984 105,397,826 137,603,435 159,558,011 174,536,393 1,087,150,649
Cumulative payments to date (500,972,008) (101,762,577) (123,229,134) (154,990,846) (109,336,407) (990,290,972)
Liability recognised in the balance sheet 9,082,976 3,635,249 14,374,301 4,567,165 65,199,986 96,859,677
------------------------------------------------------(Rupees )--------------------------------------------------------
The following table shows the development of claims over a period of time on gross basis. The disclosure goes back to the period when the earliest material claim
arose for which there is still uncertainty about the amount and timing of the claims payments. For each class of business, the uncertainty about the amount and
timings of claims payment is usually resolved within a year. Further, claims with significant uncertainties are not outstanding as at December 31, 2015.
-------------------------------------------------- (Rupees) -----------------------------------------------------
Gross sum insured Re-takaful Net
28.2 FINANCIAL RISK MANAGEMENT
28.3 Risk management framework
28.4 Credit risk
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure, as specified below:
The Company's activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (including
currency risk, interest rate risk and price risk). The Company's overall risk management policy focuses on the
unpredictability of financial markets and seeks to minimize potential adverse effects on the Company's financial
performance. In particular, the key financial risk is that in the long-term its investment proceeds are not sufficient to
fund the obligations arising from its takaful and investment contracts.
The Board of Directors has overall responsibility for establishment and oversight of the Company's risk management
framework. The Board is responsible for developing and monitoring the Company’s risk management policies.
The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set
appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and
systems are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Company,
through its training and management standards and procedures, aims to develop a disciplined and constructive control
environment in which all employees understand their roles and obligations.
The audit committee oversees compliance by management with the Company’s risk management policies and
procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company.
The Audit Committee is assisted in its oversight role by an outsourced Internal Audit function. Internal Audit
undertakes both regular and adhoc reviews of risk management controls and procedures, the results of which are
reported to the Audit Committee.
Credit risk is the risk, which arises with the possibility that one party to a financial instrument will fail to discharge its
obligation and cause the other party to incur a financial loss. The Company attempts to control credit risk by monitoring
credit exposures by undertaking transactions with a large number of counterparties in various industries and by
continually assessing the creditworthiness of counterparties.
The Company structures the levels of credit risk it accepts by placing limits on its exposure to a single counter party, or
groups of counterparties, and to geographical and industry segments. Such risks are subject to an annual or more
frequent review. Limits on the level of credit risk by category and territory are approved regularly by the Board of
Directors.
Re-takaful is used to manage takaful risk. This does not, however, discharge the Company’s liability as primary takaful
operator. If a Re-takaful operator fails to pay a claim for any reason, the Company remains liable for the payment to the
participant. The creditworthiness of Re-takaful operators is considered on an annual basis by reviewing their financial
strength prior to finalisation of any contract.
Exposures to individual participants and groups of participants are collected within the ongoing monitoring of the
controls associated with regulatory solvency. Where there exists significant exposure to individual participants, or
homogenous groups of participants, a financial analysis equivalent to that conducted for Re-takaful operators is carried
out by the Company's risk department.
2015 2014
Note Rupees Rupees
Financial assets
Held to maturity
GoP Ijarah Sukuks - 10,000,000
Other sukuks 3,965,520 15,517,243
3,965,520 25,517,243
Available-for-sale
Quoted - units of Islamic Fund 64,003,881 10,007,878
Other financial assets at amortised cost
Bank deposits 327,563,312 286,875,349
Long term deposits 1,523,034 1,523,034
Contributions due but unpaid 28,104,385 37,698,199
Amounts due from other takaful / re-takaful companies 3,121,043 2,326,333
Accrued investment income 5,392,810 11,409,556
Re-takaful recoveries against outstanding claims 19,214,059 27,002,169
Wakala fee receivable and other account balances 10,137,095 49,799,258
Mudarib fee receivable 2,051,094 1,841,660
Sundry receivables 873,156 1,251,613
397,979,988 419,727,171
465,949,389 455,252,292
Financial assets
Secured 28.4.1 19,214,059 37,002,169
Unsecured 446,735,330 418,250,123
465,949,389 455,252,292
Not past due 415,509,902 388,225,591
Past due 28.4.1 50,439,487 67,026,701
465,949,389 455,252,292
The age analysis of financial assets is as follows:
Gross value Impairment Carrying value Gross value Carrying value
Not past due 416,509,902 (1,000,000) 415,509,902 388,225,591 - 388,225,591
Past due
Upto 1 year 36,722,513 - 36,722,513 49,260,993 - 49,260,993
1-2 years 12,650,938 (2,231,180) 10,419,758 20,072,949 (7,726,127) 12,346,822
Over 2 years 22,331,890 (19,034,674) 3,297,216 30,300,962 (24,882,076) 5,418,886
Total 488,215,243 (22,265,854) 465,949,389 487,860,495 (32,608,203) 455,252,292
28.4.1 It comprises retakaful recoveries against outstanding claims amounting to Rs. 19,214,059 which are past due but not
impaired and are secured against amount due to re-takaful companies.
Impairment
-----------------------------------------------------------(Rupees)------------------------------------------------------------------
2015 2014
Rating 2015 2014
Short term Long term Agency Rupees Rupees
Al Baraka Bank (Pakistan) Limited A-1 A JCR-VIS 272,765 984,056
Askari Bank Limited ( Islamic Banking) A1+ AA PACRA 5,084 9,184
Bank AlFalah Limited (Islamic Banking) A1+ AA PACRA 241,169 1,427,811
Bank Islami Pakistan Limited A1 A+ PACRA 30,119,865 25,010,416
Burj Bank Pakistan Limited A-2 A- JCR-VIS 50,010,285 69,882
Dubai Islamic Bank Limited A-1 A+ JCR-VIS 136,051,895 106,628,932
Faysal Bank Limited (Islamic Banking) A1+ AA PACRA 12,547 35,079,841
Habib Bank Limited (Islamic Banking) A-1+ AAA JCR-VIS 4,968 55,005,965
Habib Metropolitan Bank (Islamic Banking) A1+ AA+ PACRA 516,056 1,326,180
Meezan Bank Limited A-1+ AA JCR-VIS 109,802,781 60,316,388
National Bank of Pakistan (Islamic Banking) A-1+ AAA JCR-VIS 11,605 11,188
The Bank of Khyber (Islamic Banking) A-1 A JCR-VIS 512,161 924,733
UBL Ameen A-1+ AA+ JCR-VIS 2,131 80,773
327,563,312 286,875,349
28.5 Concentration of credit risk
Industry
(Rupees) % (Rupees) %
Textiles 17,157,256 45.8% 19,974,326 37.6%
Banks 10,565,738 28.2% 17,329,370 32.6%
Automobiles 220,438 0.6% 261,136 0.5%
Cement 5,211 0.0% 243,493 0.4%
Chemical and fertilizer 621,050 1.7% 1,817,111 3.4%
Distribution 162,674 0.4% 688,190 1.3%
Education 928,665 2.5% 1,261,441 2.4%
NGOs 1,040,238 2.8% 2,008,307 3.8%
Petroleum 1,013,188 2.7% 250,128 0.5%
Food and allied 860,091 2.3% 469,814 0.9%
Leather 26,447 0.1% 746,349 1.4%
Engineering 180,746 0.5% 2,160,063 4.1%
Housing 33,035 0.1% 251,178 0.5%
Pharmaceuticals 553,276 1.5% 880,491 1.6%
Takaful 50,970 0.1% 68,980 0.1%
NBFIs 268,879 0.7% 140,888 0.3%
Individual 329,208 0.9% 1,019,357 1.9%
Paper 1,136,116 3.0% 387,602 0.7%
IT Industry 548,074 1.5% 300,420 0.6%
Oil mills 296,705 0.8% 1,198,077 2.3%
Others 1,495,153 4.0% 1,667,117 3.1%
37,493,158 100% 53,123,838 100%
The credit quality of the Company's bank balances and deposits can be assessed with reference to external credit ratings as follows:
Rating
The Company has made investment in other sukuk certificates and units of Islamic fund.
Concentration of credit risk occurs when a number of counterparties have a similar type of business activities. As a result, any change in
economic, political or other conditions would effect their ability to meet contractual obligations in similar manner. Sector-wise analysis
of gross "contribution due but unpaid" and "amount due from other takaful companies" at the reporting date is as follows:
2015 2014
The management monitors exposure to credit risk through regular review of credit exposure, assessing creditworthiness of counterparties
and prudent estimates of provision for doubtful debts.
28.5.1 The age analysis of "contributions due but unpaid" at the reporting date is as follows:
Note Gross Impairment Gross Impairment
Upto 1 year 28.5.2 28,104,386 - 37,698,199 -
1-2 years 1,580,779 1,580,779 711,649 711,649
Over 2 years - - 7,719,779 7,719,779
Total 29,685,165 1,580,779 46,129,627 8,431,428
2015 2014
Rupees Rupees
28.5.2 This includes following amounts due from related patries which are past due but not impaired:
Name Status
House Building Finance Company Limited Associate 30,250 -
Al Baraka Bank (Pakistan) Limited Associate 1,122,788 1,547,471
Sitara Chemical Industries Limited Associate 1,696,128 202,045
Syed Tariq Hussain Director 52,275 -
2,901,441 1,749,516
28.5.3
Gross Impairment Gross Impairment
Upto 1 year 3,121,041 - 2,326,333 -
1-2 years 650,403 650,401 2,503,706 2,503,706
Over 2 years 4,036,549 4,036,549 2,164,172 2,164,172
Total 7,807,993 4,686,950 6,994,211 4,667,878
Amount due from other takaful companies, re-takaful recoveries against outstanding claims
Amount due
from re-
takaful
companies
Re-takaful
recoveries
against
outstanding
claims
Prepaid re-
takaful
contribution
ceded
Total
A or above - 6,148,499 3,287,421 9,435,920
BBB or above - 13,065,560 6,985,771 20,051,331
- 19,214,059 10,273,192 29,487,251
---------------------------------------(Rupees)---------------------------------------
2015 2014
Re-takaful agreement does not relieve the Company from its obligation to participants and as a result the Company remains liable for the
portion of outstanding claims covered by re-takaful to the extent that re-takaful fails to meet the obligation under the re-takaful
agreements.
In common with other takaful companies, in order to minimise the financial exposure arising from large claims, the Company, in the
normal course of business, enters into agreement with re-takaful companies.
The Company enters into re-takaful / co-takaful arrangements with re-takaful and takaful companies having sound credit ratings
accorded by reputed credit rating agencies. The Company is required to comply with the requirements of circular No. 24 / 2010 dated
October 27,2010 issued by SECP which requires a takaful operator to place at least 80% of their outward treaty cessions with re-takaful
companies rated 'A' or above by Standard & Poors or equivalent rating by any other reputed international rating agency, with the
balance (20%) being placed with entities rated at least 'BBB' by Standard & Poors or equivalent rating by any other reputed
international rating agency. An analysis of all re-takaful assets relating to outward treaty cessions recognised by the rating of the entity
from which it is due is as follows:
2015
------------------------------------------------(Rupees )------------------------------------------------
-----------------------------------------(Rupees)-----------------------------------------
The age analysis of "amount due from other takaful companies" at the reporting date is as follows:
2015 2014
Amount due
from re-
takaful
companies
Re-takaful
recoveries
against
outstanding
claims
Prepaid re-
takaful
contribution
ceded
Total
A or above - 6,583,456 6,434,096 13,017,552
BBB or above - 20,418,714 11,949,035 32,367,749
- 27,002,170 18,383,131 45,385,301
Gross Impairment Gross Impairment
Upto 1 year 5,497,086 - 9,236,461 -
1-2 years 10,419,758 - 12,346,822 -
Over 2 years 3,297,216 - 5,418,886 -
Total 19,214,060 - 27,002,169 -
28.6 Liquidity risk
--------------------------------------------(Rupees)--------------------------------------------
In respect of the aforementioned takaful and re-takaful assets, the Company takes into account its track record of
recoveries and financial position of the counterparties while creating provision for impairment. Further, re-takaful
recoveries are made when corresponding liabilities are settled.
Liquidity risk is the risk that the Company will encounter difficulty in meeting its financial obligations as they fall
due. Liquidity risk arises because of the possibility that the Company could be required to pay its liabilities earlier
than expected or difficulty in raising funds to meet commitments associated with financial liabilities as they fall due.
The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient
liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable
losses or risking damage to the Company's reputation. The diversified funding sources and assets of the Company
are managed with liquidity in mind, maintaining a healthy balance of cash and cash equivalents and readily
marketable securities.
2014
------------------------------------------------(Rupees )------------------------------------------------
The age analysis of "re-takaful recoveries against outstanding claims" at the reporting date is as follows:
2015 2014
Carrying
amount
Contractual
cash flows
Less than one
year
1-2 years 2-3 years 3-5 years
Financial liabilities at amortised cost
Provision for outstanding claims 88,471,003 88,471,003 88,471,003 - - -
Amount due to re-takaful companies 59,684,818 59,684,818 59,684,818 - - -
Accrued expenses 1,352,615 1,352,615 1,352,615 - - -
Wakala fee payable and other account balances 10,137,095 10,137,095 10,137,095 - - -
Mudarib fee payable 2,051,097 2,051,097 2,051,097 - - -
Other creditors and accruals 20,434,414 20,434,414 20,434,414 - - -
182,131,042 182,131,042 182,131,042 - - -
Carrying
amount
Contractual
cash flows
Less than one
year
1-2 years 2-3 years 3-5 years
Financial liabilities at amortised cost
Provision for outstanding claims 91,931,551 83,998,771 83,998,771 - - -
Amount due to Re-takaful companies 37,418,436 52,015,920 52,015,920 - - -
Accrued expenses 1,575,777 3,661,376 3,661,376 - - -
Wakala fee payable and other account balances 54,310,030 46,128,623 46,128,623 - - -
Mudarib fee payable 1,841,660 438,616 438,616 - - -
Other creditors and accruals 21,061,232 16,570,393 16,570,393 - - -
208,138,686 202,813,699 202,813,699 - - -
28.7 Market risk
28.8 Currency risk
28.9 Profit rate risk
At the balance sheet date, the profit rate profile of the Company’s significant halal profit-bearing financial instruments is:
2015 2014 2015 2014
Note (Rupees)
Financial assets
Variable rate instruments
- Term deposits 8.2 305,610,000 251,500,000 5.0 - 10.78 8.0 - 9.97
- PLS savings accounts 8.1 21,758,900 33,746,782 2.6 - 7.30 3.51 - 6.92
- GoP Ijarah sukuk certificates - 10,000,000 9.47 - 9.98
- Other sukuk certificates 10.1 19,963,645 30,515,368
Cash flow sensitivity analysis for variable rate instruments
Shareholders' Fund
The table below analyses the Company's financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the
maturity date.
2015
-------------------------------------------------------------------- (Rupees) --------------------------------------------------------------------
2014
-------------------------------------------------------------------- (Rupees) --------------------------------------------------------------------
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company's income or value
of its financial instruments. The objective of market risk management is to manage and control market risk exposures with acceptable parameters, while
optimising the return. The Company is exposed to currency risk, interest rate risk and other price risk.
The Company is exposed to cash flow profit rate risk in respect of its deposits with banks and investment in sukuk certificates. In case of 100 basis points (bp)
increase / decrease in profit rates at year end, assuming that all other variables remain constant, the net income before tax would have been higher / lower by
Rs. 1,434,250 (2014: Rs. 1,328,338).
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Currency
risk arises mainly where receivables and payables exist due to transactions based on currencies other than Pak Rupees. The Company is not exposed to
currency risk as there are no assets or liabilities recoverable/repayable in foreign currencies.
Profit rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market halal profit rates.
Majority of the profit rate exposure arises from balances held in profit and loss sharing accounts and term deposits with reputable banks.
Gross Carrying amount Effective halal profit rate
(in Percent)
6 months KIBOR+1.5% - 2%
Participant's Takaful Fund
Cash flow sensitivity analysis for fixed rate instruments
28.10 Other price risk
2015 2014
Rupees Rupees
Effect on 5 percent increase / decrease
in market value of mutual fund units
Investment in Islamic Funds 3,244,732 583,720
Investment in Islamic Funds 64,003,881 4,315,504
The sensitivity analysis presented is based upon the portfolio position as at year end. Accordingly, the sensitivity
analysis is not necessarily indicative of the effect on the Company's assets of future movements in the market value of
mutual fund units held by the Company. The carrying values of units that are subject to other price risk are as follows:
The sensitivity change will not have an effect on the Company's reported results and financial position as these
investments are classified as available for sale and carried at lower of cost or market value. Currently, the cost of these
investments is lower by Rs. 890,761 to its market value of Rs. 64,894,642 as at December 31, 2015.
The Company is exposed to cash flow profit rate risk in respect of its deposits with banks. In case 100 basis points (bp)
increase / decrease in profit rates at year end on bank deposits, assuming that all other variables remain constant, the
net deficit and balance of Waqf would have been higher / lower by Rs. 1,470,317 (2014: Rs. 1,821,427).
The Company does not have any fixed rate financial assets and liabilities at fair value through profit or loss, therefore a
change in interest rates at the reporting date would not affect profit or loss.
The sensitivity analysis prepared is not necessarily indicative of the effects on loss for the year and assets / liabilities of
the Company.
Other price risk is the risk of changes in the fair value of securities as the result of changes in the levels of net asset
value of units listed on Pakistan Stock Exchange Limited held by the Company. The equity price risk exposure arises
from the investment in equity securities. This arises from investments held by the Company for which prices in the
future are uncertain.
The Company manages equity price risk by limiting exposure to equity securities to 50% of the equity. The limit set
for exposure to any single investee company is 10% of the equity with overall limit to 25% to a single industrial sector.
The Company also manages price risk by continuously reviewing portfolio allocation and monitoring developments in
market. A summary analysis of equity investments is disclosed in note 10.2 to these financial statements.
The table below summarises the sensitivity of listed mutual fund units held by the Company as at year end. The
analysis is based on the assumption that market price increase / decrease by 5% (2014: 5%) with all other variables
held constant. This represents management's best estimate of a reasonable possible shift in the market value of listed
equity securities held by the Company.
28.11 Mismatch of interest rate sensitive assets and liabilities / yield / interest rate risk
Effective rate %
per annum
Upto one
month
Over one
month to three
months
Over three
months to six
months
Over six months
to one year
Over one year to
five years
Over five years Sub Total Non profit
bearing
Total
Financial assets
Cash and bank deposits 2.6% - 4.58% 175,258,900 110,510,000 21,600,000 20,000,000 - - 327,368,900 385,558 327,754,458
Investments 5.0 % - 10.78% - - - - 3,965,520 - 3,965,520 64,003,881 67,969,401
Contribution due but unpaid - - - - - - - 28,104,385 28,104,385
Amounts due from other
takaful companies - - - - - - - 3,121,043 3,121,043
Accrued investment income - - - - - - - 5,392,810 5,392,810
Re-takaful recoveries against
outstanding claims - - - - - - - 19,214,059 19,214,059
Wakala fee receivable - - - - - - - 10,137,095 10,137,095
Security deposit - - - - - - - 1,523,034 1,523,034
Mudarib fee receivable - - - - - - - 2,051,094 2,051,094
Sundry receivables - - - - - - - 873,156 873,156
175,258,900 110,510,000 21,600,000 20,000,000 3,965,520 - 331,334,420 134,806,115 466,140,535
Financial liabilities
Outstanding claims - - - - - - - 88,471,003 88,471,003
Amounts due to takaful /
re-takaful companies - - - - - - - 59,684,818 59,684,818
Accrued expenses - - - - - - - 1,352,615 1,352,615
Wakala fee payable - - - - - - - 10,137,095 10,137,095
Mudarib fee payable - - - - - - - 2,051,097 2,051,097
Other creditors and accruals - - - - - - - 20,434,414 20,434,414
- - - - - - - (182,131,042) (182,131,042)
Inter risk sensitivity gap 175,258,900 110,510,000 21,600,000 20,000,000 3,965,520 - 331,334,420 (47,324,927) 284,009,493
Cumulative halal profit rate
risk sensitivity gap-2015 175,258,900 285,768,900 307,368,900 327,368,900 331,334,420 331,334,420
Effective rate %
per annum
Upto one
month
Over one
month to three
months
Over three
months to six
months
Over six months
to one year
Over one year to
five years
Over five years Sub Total Non profit
bearing
Total
Financial assets
Cash and bank deposits 3.51% - 6.92% 145,246,782 95,000,000 5,000,000 40,000,000 - - 285,246,782 2,033,477 287,280,259
Investments 9.47 % - 11.92% - 275,862 10,275,862 10,551,724 - 4,413,795 25,517,243 10,007,878 35,525,121
Contribution due but unpaid - - - - - - - 37,698,199 37,698,199
Amounts due from other
takaful companies - - - - - - - 2,326,333 2,326,333
Accrued investment income - - - - - - - 11,409,556 11,409,556
Re-takaful recoveries against
outstanding claims - - - - - - - 27,002,169 27,002,169
Wakala fee receivable - - - - - - - 49,799,258 49,799,258
Security deposit - - - - - - - 1,523,034 1,523,034
Mudarib fee receivable - - - - - - - 1,841,660 1,841,660
Sundry receivables - - - - - - - 1,251,613 1,251,613
145,246,782 95,275,862 15,275,862 50,551,724 - 4,413,795 310,764,025 144,893,177 455,657,202
Financial liabilities
Outstanding claims - - - - - - - 91,931,551 91,931,551
Amounts due to takaful /
re-takaful companies - - - - - - - 37,418,436 37,418,436
Accrued expenses - - - - - - - 1,575,777 1,575,777
Wakala fee payable - - - - - - - 54,310,030 54,310,030
Mudarib fee payable - - - - - - - 1,841,660 1,841,660
Other creditors and accruals - - - - - - - 21,061,232 21,061,232
- - - - - - - (208,138,686) (208,138,686)
Inter risk sensitivity gap 145,246,782 95,275,862 15,275,862 50,551,724 - 4,413,795 310,764,025 (63,245,509) 247,518,516
Cumulative halal profit rate
risk sensitivity gap-2014 145,246,782 240,522,644 255,798,506 306,350,230 306,350,230 310,764,025
----------------------------------------------------------------------------------------------------------(Rupees)----------------------------------------------------------------------------------------------------------
2015
Profit bearing
----------------------------------------------------------------------------------------------------------(Rupees)----------------------------------------------------------------------------------------------------------
2014
Profit bearing
28.12 Fair value of financial instruments
Level 1:
Level 2:
Level 3:
Financial assets Level 1 Level 2 Level 3 Total
Units of Islamic Funds 64,894,642 - - 64,894,642
28.13 Operational risk
-
- requirements for the reconciliation and monitoring of transactions;
- compliance with regulatory and other legal requirements;
Fair value is an amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing
parties in an arm’s length transaction. Consequently, differences may arise between the carrying values and the fair
value estimates.
The fair values of all the financial instruments are estimated to be not significantly different from their carrying values
except units of Islamic Funds, fair value of which have been stated in notes 10.1, 10.2 and 10.3 respectively.
The Company’s accounting policy on fair value measurements of its investments is discussed in note 4.14.3 to these
financial statements.
The Company measures fair values using the following fair value hierarchy that reflects the significance of the inputs
used in making the measurements:
Fair value measurements using 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).
Fair value measurements using inputs for the asset or liability that are not based on observable market data
(i.e. unobservable inputs).
Fair value measurements using quoted prices (unadjusted) in active markets for identical assets or liabilities.
requirements for appropriate segregation of duties between various functions, roles and responsibilities;
The table below analyses financial instruments measured at fair value at the end of the reporting period by the level of
the fair value hierarchy into which its fair value measurement is categorised:
----------------------------------------- (Rupees) -----------------------------------------
Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the
processes, technology and infrastructure supporting the Company’s operations, either internally within the Company
or externally at the Company’s service providers, and from external factors other than credit, market and liquidity
risks such as those arising from legal and regulatory requirements and generally accepted standards of investment
management behaviour. Operational risks arise from all of the Company’s activities.
The Company’s objective is to manage operational risk so as to balance limiting of financial losses and damage to its
reputation with achieving its objective of generating returns for stakeholders.
The primary responsibility for the development and implementation of controls over operational risk rests with the
board of directors. This responsibility encompasses the controls in the following areas:
- documentation of controls and procedures;
-
- ethical and business standards; and
- risk mitigation, including insurance, where this is effective.
28.14 Capital risk management
29. PROVIDENT FUND
2015 2014
Rupees Rupees
Size of the fund- net assets 12,231,433 9,898,205
Cost of investments made 13,587,692 10,292,613
Percentage of investments made 111.09% 103.98%
Fair value of investments made 13,381,000 10,292,613
Fair Value Percentage Fair Value Percentage
(Rupees) (%) (Rupees) (%)
Bank balances 294,831 2% 1,592,613 15%
Term deposit certificates 7,000,000 52% 8,700,000 85%
Mutual Funads 6,105,718 46% - 0%
requirements for the periodic assessment of operational risks faced, and the adequacy of controls and procedures to
address the risks identified;
Senior management ensures that the Company's staff have adequate training and experience and fosters effective
communication related to operational risk management.
The Company's objective when managing capital is to safeguard the Company's ability to continue as a going concern
so that it can continue to provide returns for shareholders and benefits for other stakeholders; and to maintain a strong
capital base to support the sustained development of its businesses.
The Company manages its capital structure by monitoring return on net assets and makes adjustments to it in the light
of changes in economic conditions. In order to maintain or adjust the capital structure, the Company may adjust the
amount of dividend paid to shareholders or issue new shares. Currently, the Company has paid up capital of Rs. 300
million which is in compliance with the minimum paid up capital requirement set by SECP for insurance companies/
takaful operators for the year ended December 31, 2015.
The Company operates approved funded contributory provident fund (the Fund) for its employees. Detail of net assets
and investments of the fund, based on their audited financial statements as at December 31, 2015, are as follows:
The breakup of fair value of investments, based on audited financial statements of the Fund, is as under:
2015 2014
30. NUMBER OF EMPLOYEES
31. DATE OF AUTHORISATION
32. GENERAL
Figures have been rounded off to nearest Rupee unless otherwise mentioned.
Chairman Chief Executive Officer Director Director
These financial statements have been authorised for issue by the Board of Directors on 29 March, 2016
The investment out of provident funds have been made in accordance with the provision of section 227 of the
Companies Ordinance, 1984 and the rules formulated for the purpose.
The average number of employees for the year ended December 31, 2015 were 73 (2014: 65) and number of employees
as at December 31, 2015 were 75 (2014: 68).