RC 2176

UNAUDITED FINANCIAL STATEMENTS

31 DECEMBER 2019

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Table of contents

Statement of directors' responsibilities 2

Certification Pursuant to Section 60(2) of Investment and Securities Act No.27 of

2007

3

Statement of significant accounting policies 4

Statement of financial position 29

Statement of Comprehensive income 30

Statement of changes in equity – Group 31

Statement of changes in equity – Company 32

Statement of cash flows

33

Notes to the financial statements 34

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Statement of Directors’ Responsibilities in Relation to the unaudited Financial Statements The Directors of African Alliance Insurance plc are responsible for the preparation of financial statements that give a true and fair view of the financial position of the company as at 31 December 2019, and the results of its operations, Consolidated and Separate cash flows and changes in equity for the period ended, in compliance with International Financial Reporting Standards ("IFRS"), and in the manner required by the Companies and Allied Matters Act of Nigeria, the Insurance Act, CAP I17 LFN 2004, relevant guidelines and circulars issued by the National Insurance Commission (NAICOM) and Financial Reporting Council Act 2011. In preparing the financial statements, the Directors are responsible for: x Properly selecting and applying accounting policies x Presenting information, including accounting policies, in a manner that provides relevant, reliable, comparable and

understandable information; x Providing additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable

users to understand the impact of particular transactions, other events and conditions on the Group’s and Company’s financial position and financial performance; and

x Making an assessment of the Group’s and Company’s ability to continue as a going concern.

The Directors are responsible for: x Designing, implementing and maintaining an effective and sound system of internal controls throughout the Group and

Company; x Maintaining adequate accounting records that are sufficient to show and explain the company's transactions and

disclose with reasonable accuracy at any time the financial position of the Group and Company, and which enable them to ensure that the Consolidated and Separate financial statements of the company comply with IFRS;

x Maintaining statutory accounting records in compliance with the legislation of Nigeria and IFRS; x Taking such steps as are reasonably available to them to safeguard the assets of the Group and Company; and

x Preventing and detecting fraud and other irregularities

By order of the Board _____________________________ _____________________________ Funmi Omo Olabisi Adekola Managing Director Chief Financial Officer FRC/2014/CIIN/00000008645 FRC/2013/ICAN/00000001179

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CERTIFICATION PURSUANT TO SECTION 60(2) OF INVESTMENT AND SECURITIES ACT NO.27 OF 2007 We the undersigned hereby certify the following with regards to our unaudited report for the period ended 31 December 2019 that: a. We have reviewed the report: b. To the best of our knowledge, the report does not contain:

i. Any untrue statement of a material fact, or ii. Omit to state a material fact, which would make the statements, misleading in the light of circumstances

under which such statements were made;

c. To the best of our knowledge, the financial statement and other financial information included in the report fairly present in all material respects the financial condition and results of operation of the company as of, and for the periods presented in the report.

d. We;

(i) Are responsible for establishing and maintaining internal controls. (ii) Have designed such internal controls to ensure that material information relating to the company and its

consolidated subsidiary is made known to such officers by others within those entries particularly during the period in which the periodic reports are being prepared

(iii) Have evaluated the effectiveness of the company’s internal controls as of date within 90 days prior to the report;

(iv) Have, present in the report our conclusions about the effectiveness of our internal controls based on our evaluation as of that date;

e. We have disclosed to the auditors of the company and audit committee: i. All significant deficiency in the design or operation of internal controls which would adversely affect the

company’s ability to record, process, summarise and report financial data and have identified for the company’s auditors any material weakness in internal controls, and

ii. Any fraud, whether or not material, that involves management or other employees who have significant role in the company’s internal controls.

f. We have identified in the report whether or not there were significant changes in internal controls or other factors that could significantly affect internal controls subsequent to the date of our evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

On behalf of the Directors of the Group and Company ____________________________ _____________________________ Funmi Omo Olabisi Adekola Managing Director Chief Financial Officer FRC/2014/CIIN/00000008645 FRC/2013/ICAN/00000001179

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Statement of significant accounting policies

1. General Information

African Alliance Insurance Company is a public limited company incorporated and domiciled in Nigeria. The

registered office is located at 54 Awolowo Road, Ikoyi, Lagos.

The company is principally engaged in the business of providing risk underwriting for life, related financial and

pension services, aviation services to its customers.

1.2 Principal Activities

The principal business of the company is providing risk underwriting and related financial and activation services to

its customers. Such services include provision of life insurance services to both corporate and individual customers.

The Subsidiaries activities are:

• Ghana Life Insurance Company Limited, a Life assurance company in Ghana.

• Axiom Air Limited, a cargo airline company

1.3 Components of Financial Statements

The Financial statements comprise the Consolidated and Separate Statements of Comprehensive income,

Consolidated and Separate statements of Financial Position, Consolidated and Separate Statement of Changes in

Equity, Consolidated and Separate Statements of Cash Flows, and the accompanying Notes.

Income and expenses (excluding the components of other comprehensive income) are recognised in the profit or

loss segment of comprehensive income to arrive at the profit for the year.

Other comprehensive income is recognised in the other comprehensive segment of the statement of other

comprehensive income and comprises items of income and expenses that are not recognised in the statement of

profit or loss as required or permitted by IFRS.

The addition of the loss for the year and the other comprehensive income gives the total comprehensive income for

the year.

Reclassification adjustments are amounts reclassified to statement of comprehensive income in the current year

that were recognised in other comprehensive income in the current or previous years. Transactions with the owners

of the Group in their capacity as owners are recognised in the statement of changes in equity.

1.4 Basis of preparation and measurement

The financial statements are prepared in compliance with International Financial Reporting Standards (IFRS) and

the requirements of the Companies and Allied Matters Act, Insurance Act CAP I17 LFN 2004, the Financial Reporting

Council of Nigeria Act 2011 and regulatory guidelines as pronounced from time to time by National Insurance

Commission (NAICOM). Historical cost basis was used in preparation of the financial statements as modified by the

measurement of certain items at revalued amounts as stated below:

- Property, plant and equipment at valuation

- Investment property at fair value

- Investment at fair value

- Impaired assets at their recoverable amounts

1.5 Compliance with IFRS

These financial statements have been prepared in accordance with the International Financial Reporting Standards

(IFRS) and IFRS Interpretations Committee (IFRIC) Interpretations applicable to companies reporting under IFRS as

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

regulations have been included where appropriate

1.6 Going Concern status

As at the end of the financial period 31 December 2019, the company’s solvency margin is below the regulatory

requirement as stated in the Insurance Act CAP I17, LFN 2004.

The board of directors and management performed an assessment of its ability to continue as a going concern and

is satisfied that it has the resources to continue in business for the foreseeable future. This conclusion is based on

the board and executive management’s plan of restructuring the assets of the Group, divesting from some of the

subsidiary companies and injecting fresh capital to improve the liquidity position and upturn the current negative

indices in the financials statement with respect to shareholders fund, asset cover and solvency margin to positive

position in the shortest time.

1.7 Significant judgements and key sources of estimation uncertainty

In the process of applying the accounting policies adopted by the Group, the Directors make certain judgements

and estimates that may affect the carrying values of assets and liabilities in the next financial period. Such

judgements and estimates are based on historical experience and other factors, including expectations of future

events that are believed to be reasonable under the current circumstances. The directors evaluate these at each

financial reporting date to ensure that they are still reasonable under the prevailing circumstances based on the

information available.

The preparation of the Group's financial statements requires management to make judgements, estimates and

assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of

contingent liabilities, at the reporting date. However, uncertainty about these assumptions and estimates could

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result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected

in the future. These factors should include:

The judgements made by the directors in the process of applying the Group's accounting policies that have the

most significant effect on the amounts recognised in the financial statements include:

- Claims arising from insurance contracts

Liabilities for unpaid claims are estimated on a case by case basis. The liabilities recognised for claims fluctuate

based on the nature and severity of the claim reported. Claims incurred but not reported are determined

using statistical analyses and the Group deems liabilities reported as adequate.

- Fair value of unquoted equity financial instruments

The fair value of financial instruments where no active market exists or where quoted prices are not otherwise

available are determined by using valuation techniques. In these cases, the fair values are estimated from

observable data using valuation models.

- Property, Plant and equipment

Property, Plant and equipment represent one of the most significant proportion of the asset base of the Group,

accounting for about 4% of the Group's total assets. Therefore, the estimates and assumptions made to

determine their carrying value and related depreciation are critical to the Group's financial position and

performance.

The charge in respect of periodic depreciation is derived after determining an estimate of an asset's expected

useful life and the expected residual value at the end of its life. Increasing an asset's expected life or its

residual value would result in the reduced depreciation charge in the statement of comprehensive income.

The useful lives and residual values of the property, plant and equipment are determined by management

based on historical experience as well as anticipation of future events and circumstances which may impact

their useful lives.

- Taxation

Whether it is probable that future taxable profits will be available against which temporary differences can be

utilized; and

1.8 Functional and presentation currency

The financial statements are presented in Nigerian Naira (Naira), rounded to the nearest thousand, this is also the

functional currency of the Group.

1.9 Presentation of financial statements

The Group presents its statements of financial position broadly in order of liquidity. An analysis regarding recovery

or settlement within twelve months after the reporting date (current) and more than 12 months after the reporting

date (non-current) is presented in the Notes.

2.0 Changes in accounting policy and disclosures

2.1 Changes in accounting policy and disclosures

African Alliance Insurance Company plc has fully adopted IFRS 9 as issued by the IASB in July 2014 with a date of

transition of 1 January 2018, which resulted in changes in accounting policies and adjustments to the amounts

previously recognised in the financial statements. African Alliance Insurance Company plc did not early adopt any

of IFRS 9 in previous periods.

2.2 New and amended standards and interpretations not yet adopted by the company

(a) New and amended standards and interpretations not yet adopted by the Company

A number of new standards, interpretations and amendments are effective for annual period beginning after

1 January 2018 and earlier application is permitted; however, the Company has not early adopted the

following new or amended standards in preparing these financial statements:

IFRS 15

IFRS 15 was issued in May 2014 and applies to an annual reporting period beginning on or after 1 January

2018.

The standard contains a single model that applies to contracts with customers and two approaches to

recognising revenue: at a point in time or over time. The core principle of IFRS 15 is that an entity will

recognise revenue to depict the transfer of promised goods or services to customers in an amount that

reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

This core principle is delivered in a five-step model framework:

• Identify the contract(s) with a customer

• Identify the performance obligations in the contract

• Determine the transaction price

• Allocate the transaction price to the performance obligations in the contract

• Recognise revenue when (or as) the entity satisfies a performance obligation.

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The adoption of IFRS 15 did not impact the timing or amount of fee and commission income from contracts

with customers and the related assets and liabilities recognised by the Group. Interest and fee income

integral to financial instruments and leases is accounted for using the applicable standards.

Application of this guidance will depend on the facts and circumstances present in a contract with a customer

and will require the exercise of judgment.

Adoption of this standard does not have any significant impact on the Group

IFRS 16 Leases

IFRS 16 replaces existing leases guidance, including IAS 17 Leases, IFRIC 4 Determining whether an

arrangement contains a lease, SIC- 15 Operating leases- Incentives and SIC -27 Evaluating the substance

of Transactions involving the legal form of a lease.

The standard is effective for annual periods beginning on or after 1 January 2019. Early adoption is permitted

for entities that apply IFRS 15 at or before the date of initial application of IFRS 16.

IFRS 16 introduces a single, on balance sheet accounting model for leases. A leasee recognises a right-of-

use asset representing its right to use the underlying asset and a lease liability representing its obligation

to make lease payments. There are recognition exemptions for short term leases and leases of low value

items. Lessor accounting remains similar to the current standard, i.e., lessors continue to classify leases as

finance or operating leases.

The Company has completed an initial assessment of the potential impact on its financial statements but

has not yet completed its detailed assessment. The actual impact of applying IFRS 16 on the financial

statements in the period of initial application will depend on future economic conditions.

No significant impact is expected for the Company's finance leases as the Company has a few offices under

operating leases.

New or amended standards

and effective date

Summary of the requirements Possible impact on financial

statements

Amendments to IFRS 10 and IAS

28 (Sept 2014)

Sale or Contribution of Assets

between an Investor and its

Associate or Joint Venture

The IAS 28 was amended so that

a. The current requirements

regarding the partial gain or loss

recognition for transactions

between an investor and its

associate or joint venture only

apply to the gain or loss resulting

from the sale or contribution of

assets that do not constitute a

business as defined in IFRS 3

Business Combinations

The entity does not have any form

of joint venture agreement.

Hence, this amendment is not

applicable to the entity.

IFRIC 23 IFRIC 23 clarifies the accounting for

uncertainties in income taxes.

The interpretation is to be applied

to the determination of taxable

profit (tax loss), tax bases, unused

tax losses, unused tax credits and

tax rates, when there is uncertainty

over income tax treatments under

IAS 12.

IFRIC 23 is effective for annual

reporting periods beginning on or

after 1 January 2019. Earlier

application is permitted.

'IFRIC 23 clarifies the accounting

for uncertainties in income taxes.

The interpretation is to be applied

to the determination of taxable

profit (tax loss), tax bases, unused

tax losses, unused tax credits and

tax rates, when there is uncertainty

over income tax treatments under

IAS 12.

IFRIC 23 is effective for annual

reporting periods beginning on or

after 1 January 2019. Earlier

application is permitted.

Uncertainty over Income Tax

Treatments

Amendments to IFRS 9 (Oct

2017)

Prepayment Features with

Negative Compensation

The amendments in Prepayment

Features with Negative

Compensation (Amendments to

IFRS 9) are:

1. Changes regarding symmetric

prepayment options

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Under the current IFRS 9

requirements, the SPPI condition is

not met if the lender has to make a

settlement payment in the event of

termination by the borrower (also

referred to as early repayment

gain).

Prepayment Features with Negative

Compensation amends the existing

requirements in IFRS 9 regarding

termination rights in order to allow

measurement at amortised cost

(or, depending on the business

model, at fair value through other

comprehensive income) even in the

case of negative compensation

payments.

'2. Clarification regarding the

modification of financial liabilities

The final amendments also contain

(in the Basis for Conclusions) a

clarification regarding the

accounting for a modification or

exchange of a financial liability

measured at amortised cost that

does not result in the de-

recognition of the financial liability.

The IASB clarifies that an entity

recognises any adjustment to the

amortised cost of the financial

liability arising from a modification

or exchange in profit or loss at the

date of the modification or

exchange. A retrospective change

of the accounting treatment may

therefore become necessary if in

the past the effective interest rate

was adjusted and not the amortised

cost amount.

Amendments to IAS 28 (Oct

2017)

Long-term Interests in

Associates and Joint Ventures

The amendments in Long-term

Interests in Associates and Joint

Ventures (Amendments to IAS 28)

are:

• Paragraph 14A has been added to

clarify that an entity applies IFRS 9

including its impairment

requirements, to long-term

interests in an associate or joint

venture that form part of the net

investment in the associate or joint

venture but to which the equity

method is not applied.

• Paragraph 41 has been deleted

because the Board felt that it

merely reiterated requirements in

IFRS 9 and had created confusion

about the accounting for long-term

interests.

The amendments are accompanied

by an illustrative example.

The amendments are effective for

periods beginning on or after 1

January 2019. Earlier application is

permitted

The entity does not have any form

of joint venture agreement.

Hence, this amendment is not

applicable to the entity.

Annual Improvements to IFRS

Standards 2015–2017 Cycle

(Dec 2017)

IFRS 3, IFRS 11, IAS 12 and IAS

23 Amendments

In December 2017, the IASB

published Annual Improvements to

IFRS Standards 2015–2017 Cycle,

containing the following

amendments to IFRSs:

• IFRS 3 Business Combinations

and IFRS 11 Joint Arrangements —

The amendments to IFRS 3 clarify

that when an entity obtains control

of a business that is a joint

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operation, it re-measures

previously held interests in that

business. The amendments to IFRS

11 clarify that when an entity

obtains joint control of a business

that is a joint operation, the entity

does not re-measure previously

held interests in that business.

• IAS 12 Income Taxes — The

amendments clarify that the

requirements in the former

paragraph 52B (to recognise the

income tax consequences of

dividends where the transactions or

events that generated distributable

profits are recognised) apply to all

income tax consequences of

dividends by moving the paragraph

away from paragraph 52A that only

deals with situations where there

are different tax rates for

distributed and undistributed

profits.

• IAS 23 Borrowing Costs — The

amendments clarify that if any

specific borrowing remains

outstanding after the related asset

is ready for its intended use or sale,

that borrowing becomes part of the

funds that an entity borrows

generally when calculating the

capitalisation rate on general

borrowings.

Amendments to IAS 19)

(February 2018) Plan

Amendment, Curtailment or

Settlement

On 7 February 2018, the IASB

published Plan Amendment,

Curtailment or Settlement

(Amendments to IAS 19) to

harmonise accounting practices

and to provide more relevant

information for decision-making.

An entity applies the amendments

to plan amendments, curtailments

or settlements occurring on or after

the beginning of the first annual

reporting period that begins on or

after 1 January 2019.

Amendments to References to

the Conceptual Framework in

IFRS Standards

The Conceptual Framework for

Financial Reporting (Conceptual

Framework) describes the objective

of and concepts for general purpose

financial reporting. It is a practical

tool that helps the IASB to develop

requirements in IFRS® Standards

based on consistent concepts.

Consideration of these concepts, in

turn, should result in the IASB

developing IFRS Standards that

require entities to provide financial

information that is useful to

investors, lenders and other

creditors.

The IASB decided to revise the

Conceptual Framework because

some important issues were not

covered and some guidance was

unclear or out of date. The revised

Conceptual Framework, issued by

the IASB in March 2018, includes:

• A new chapter on measurement;

• Guidance on reporting financial

performance;

• Improved definitions of an asset

and a liability, and guidance

supporting these definitions; and

• Clarifications in important areas,

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such as the roles of stewardship,

prudence and measurement

uncertainty in financial reporting.

The IASB also updated references

to the Conceptual Framework in

IFRS Standards by issuing

Amendments to References to the

Conceptual Framework in IFRS

Standards. This was done to

support transition to the revised

Conceptual Framework for

companies that develop accounting

policies using the Conceptual

Framework when no IFRS Standard

applies to a particular transaction.

'IFRS 17 IFRS 17 establishes the principles

for the recognition, measurement,

presentation and disclosure of

insurance contracts within the

scope of the standard. The

objective of IFRS 17 is to ensure

that an entity provides relevant

information that faithfully

represents those contracts. This

information gives a basis for users

of financial statements to assess

the effect that insurance contracts

have on the entity's financial

position, financial performance and

cash flows.

IFRS 17 was issued in May 2017

and applies to annual reporting

periods beginning on or after 1

January 2021.

Insurance Contracts

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2.3 Foreign currencies

Foreign currency transactions are translated into the functional currency using the

exchange rates prevailing at the dates of the transactions. Foreign exchange gains and

losses resulting from the settlement of such transactions and from the translation at

year-end exchange rates of monetary assets and liabilities denominated in foreign

currencies are recognised in the income statement, except when deferred in equity as

qualifying cash flow hedges and qualifying net investment hedges. Foreign exchange

gains and losses that relate to borrowings and cash and cash equivalents are presented

in the income statement within 'other income'.

All other foreign exchange gains and losses are presented in the income statement

within ‘Other income’ or ‘other expenses’. Changes in the fair value of monetary

securities denominated in foreign currency classified as fair value through Other

Comprehensive Income are analysed between translation differences resulting from

changes in the amortised cost of the security, and other changes in the carrying

amount of the security.

Translation differences related to changes in amortised cost are recognised in profit or

loss; other changes in carrying amount are recognised in equity. Translation

differences on financial assets and liabilities held at fair value through profit and loss

are reported as part of the fair value gain or loss. Translation differences on non-

monetary financial assets such as equities classified as fair value through other

comprehensive income financial assets are included in the fair value reserve in equity.

2.4 Cash and cash equivalents

Cash and cash equivalents include cash in hand and at bank, call deposits and short

term highly liquid financial assets with original maturities of three months or less from

the acquisition date, which are subject to insignificant risk of changes in their fair

value, and are used by the Company in the management of its short-term

commitments. Cash and cash equivalents include cash on hand, cash balances and

fixed deposits.

2.5 Financial assets

The Group classifies its financial assets into the following categories: fair value through

profit or loss, fair value through other comprehensive income and amortized cost. The

classification is determined by management at initial recognition and depends on the

objective of the business model.

2.5.1 Classification and Measurements

Financial assets are classified and measured at initial recognition at fair value,

including directly attributable transaction cost. Subsequent measurement is based on

the business model objective of managing the assets as well as the cashflow

characteristics of the asset.

Business model assessment involves determining if financial assets are managed in

order to generate cash flows from collection of contractual cash flows, selling financial

assets or both. The Group assesses business model at a portfolio level which reflects

how the assets are managed together to achieve a particular business objective.

Financial assets at fair value through profit or loss

Financial assets will be measured at fair value through the income statement if they

do not meet the business model criteria of either “Hold to collect” or “Hold to collect

and sell”. All equity instruments and similar securities (unless designated at inception

to fair value through other comprehensive income); and all derivatives are measured

at fair value through profit or loss. An entity have the option to designate a financial

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asset as measured at fair value through profit or loss if doing so eliminates or

significantly reduces an accounting mismatch. The Group has undertaken an

assessment to determine the potential impact of changes in classification and

measurement of financial assets. The assessment indicated that the adoption of IFRS

9 will not result in significant changes to existing asset measurement bases.

Financial assets at fair value through other comprehensive income

Financial assets will be measured at fair value through other comprehensive income if

they are held within a business model where the objective is achieved by both

collecting contractual cash flows and selling financial assets (“Hold to collect and sell”),

and their contractual cash flows represent solely payments of principal and interest.

Financial assets measured at amortized cost

Financial assets are measured at amortized cost if they are held within a business

model whose objective is to hold for collection of contractual cash flows where those

cash flows represent solely payments of principal and interest. After initial

measurement, debt instruments in this category are carried at amortized cost using

the effective interest rate method. Amortized cost is calculated taking into account any

discount or premium on acquisition, transaction costs and fees that are an integral

part of the effective interest rate. Amortization is included in Interest income in the

Consolidated Statement of Income. Impairment on financial assets measured at

amortized cost is calculated using the expected credit loss approach.

2.5.2 Recognition and measurement

Financial assets are initially recognised at fair value plus, in the case of all financial

assets not carried at fair value through profit and loss, transaction costs that are

directly attributable to their acquisition. Financial assets carried at fair value through

profit and loss are initially recognised at fair value, and transaction costs are expensed

in the statement of comprehensive income. Financial assets are derecognised when

the rights to receive cash flows from them have expired or where they have been

transferred and the Company has also transferred substantially all risks and rewards

of ownership.

Financial assets at fair value through other comprehensive income and financial assets

at fair value through profit and loss are subsequently carried at fair value. Other

financial assets are carried at amortised cost using the effective interest method.

Gains and losses arising from changes in the fair value of the ‘financial assets at fair

value through profit and loss’ category are included in the income statement in the

period in which they arise. Dividend income from financial assets at fair value through

profit and loss is recognised in the statement of comprehensive income as part of

Investment income when the Company’s right to receive payments is established.

Interest on financial assets fair value through other comprehensive income calculated

using the effective interest method is recognised in the income statement. Dividends

on equity instruments fair value through other comprehensive income are recognised

in the income statement when the Company’s right to receive payments is established.

Both are included in the investment income line.

2.5.3 Determination of fair value

For financial instruments traded in active markets, the determination of fair values of

financial assets and financial liabilities is based on quoted market prices or dealer price

quotations. This includes listed equity securities and quoted debt instruments on major

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exchanges. The quoted market price used for financial assets held by the Company is

the current bid price.

A financial instrument is regarded as quoted in an active market if quoted prices are

readily and regularly available from an exchange, dealer, broker, industry, company,

pricing service or regulatory agency, and those prices represent actual and regularly

occurring market transactions on an arm’s length basis. If the above criteria are not

met, the market is regarded as being inactive. Indications that a market is inactive are

when there is a wide bid - offer spread or significant increase in the bid - offer spread

or there are few recent transactions.

For all other financial instruments, fair value is determined using valuation techniques.

In these techniques, fair values are estimated from observable data in respect of

similar financial instruments, using models to estimate the present value of expected

future cash flows or other valuation techniques, using inputs (for example, NIBOR,

MPR etc.) existing at the dates of the statement of financial position.

The Company uses widely recognised money market rates in determining fair values

of non-standardised financial instruments of lower complexity like placements, and

treasury bills. These financial instruments models are generally market observable.

The carrying value less impairment provision of trade receivables and payables are

assumed to approximate their fair values.

The fair value of financial liabilities for disclosure purposes is estimated by discounting

the future contractual cash flows at the current market interest rate that is available

to the Company for similar financial instruments. In cases where the fair value of

unlisted equity instruments cannot be determined reliably, the instruments are carried

at cost less any impairments. The fair value for loans and receivables as well as

liabilities to banks and customers are determined using a present value model on the

basis of contractually agreed cash flows, taking into account credit quality, liquidity

and costs. The fair values of contingent liabilities and irrevocable loan commitments

correspond to their carrying amounts.

2.5.4 De-recognition of financial instruments

The Company derecognises a financial asset only when the contractual rights to the

cash flows from the asset expire or it transfers the financial asset and substantially all

the risks and rewards of ownership of the asset to another entity. If the Company

neither transfers nor retains substantially all the risks and rewards of ownership and

continues to control the transferred asset, the Company recognises its retained

interest in the asset and an associated liability for amounts it may have to pay. If the

Company retains substantially all the risks and rewards of ownership of a transferred

financial asset, the Company continues to recognise the financial asset and also

recognises a collateralised borrowing for the proceeds received.

2.5.5 Reclassification of financial assets

Reclassification of financial assets is determined by The Entity's senior management,

and is done as a result of external or internal changes which are significant to The

Entity's operations and demonstrable to external parties.

Reclassification of financial assets occurs when The Entity changes its business model

for managing financial assets.

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Investments in equity instruments that are designated as at FVTOCI at initial

recognition cannot be reclassified because the election to designate as at FVTOCI is

irrevocable.

For financial assets, reclassification is required between FVTPL, FVTOCI and amortised

cost; if and only if the entity’s business model objective for its financial assets changes

so its previous business model assessment would no longer apply.

IFRS 9 does not allow reclassification:

• when the fair value option has been elected in any circumstance for a financial

asset;

• or equity investments (measured at FVTPL or FVTOCI); or

• for financial liabilities.

If an entity reclassifies a financial asset, it is required to apply the reclassification

prospectively from the reclassification date, defined as the first day of the first

reporting period following the change in business model that results in the entity

reclassifying financial assets. Previously recognised gains, losses (including

impairment gains or losses) or interest are not restated.

All impairment losses are recognized through profit or loss. If any loss on the financial

asset was previously recognized directly in equity as a reduction in fair value, the

cumulative net loss that had been recognized in equity is transferred to the income

statement and is recognized as part of the impairment loss. The amount of the loss

recognized in the income statement is the difference between the acquisition cost and

the current fair value, less any previously recognized impairment loss.

2.5.6 Impairment of financial assets

Financial assets carried at amortized cost and FVTOCI

The impairment model under IFRS 9 reflects expected credit losses, as opposed to

incurred credit losses under IAS 39. Under the impairment approach in IFRS 9, it is no

longer necessary for a credit event to have occurred before credit losses are

recognised. Instead, an entity always accounts for expected credit losses and changes

in those expected credit losses. The amount of expected credit losses should be

updated at each reporting date to reflect changes in credit risk since initial recognition.

The Entity recognizes loss allowances for Expected Credit Losses (ECL) on the following

financial instruments that are not measured at FVTPL:

Financial assets that are debt instruments, Lease receivables, Loan and advances to

customers, Other Loans and receivables, financial guarantee contracts issued; and

Loan commitments issued. The Entity measures expected credit losses and recognizes

interest income on risk assets based on the following stages:

Stage 1: Assets that are performing. If credit risk is low as of the reporting date or

the credit risk has not increased significantly since initial recognition, The Entity

recognize a loss allowance at an amount equal to 12-month expected credit losses.

This amount of credit losses is intended to represent lifetime expected credit losses

that will result if a default occurs in the 12 months after the reporting date, weighted

by the probability of that default occurring.

14

Stage 2: Assets that have significant increases in credit risk. In instances where credit

risk has increased significantly since initial recognition, The Entity measures a loss

allowance at an amount equal to full lifetime expected credit losses. That is, the

expected credit losses that result from all possible default events over the life of the

financial instrument. For these debt instruments, interest income recognition will be

based on the EIR multiplied by the gross carrying amount.

Stage 3: Credit impaired. For debt instruments that have both a significant increase

in credit risk plus observable evidence of impairment

The Entity’s process to assess changes in credit risk is multi-factor and has three main

elements;

I. Quantitative element, a quantitative comparison of PD at the reporting date and

PD at initial recognition

II. Qualitative elements

III. Backstop indicators

For individually significant exposures such as corporate and commercial risk assets,

the assessment is driven by the internal credit rating of the exposure and a

combination of forward-looking information that is specific to the individual borrower

and forward-looking information on the macro economy, commercial sector (to the

extent such information has not been already reflected in the rating process).

For other exposures, significant increases in credit risk is made on a collective basis

that incorporates all relevant credit information, including forward-looking

macroeconomic information. For this purpose, The Entity groups its exposures on the

basis of shared credit risk characteristics.

No impairment reserve is set on financial assets measured at fair value through profit

and loss.

2.5.7 Significant increase in credit risk

The Entity decision on whether expected credit losses are based on 12-month expected

credit losses or lifetime expected credit losses depends on whether there has been a

significant increase in credit risk since initial recognition. An assessment of whether

credit risk has increased significantly is made at each reporting date. When making

the assessment, The Entity uses the change in the risk of a default occurring over the

expected life of the financial instrument instead of the change in the amount of

expected credit losses. The forms the basis of stage 1, 2 and 3 classification and

subsequent migration.

The Entity applies qualitative and quantitative criteria for stage classification and for

its forward and backward migration

i) Assets carried at amortised cost

The amount of the loss is measured as the difference between the asset’s

carrying amount and the present value of estimated future cash flows (excluding

future credit losses that have not been incurred) discounted at the financial

asset’s original effective interest rate. The carrying amount of the asset is

reduced through the use of an allowance account and the amount of the loss is

recognised in income statement. If a financial instrument has a variable interest

rate, the discount rate for measuring any impairment loss is the current effective

interest rate determined under the contract.

15

The calculation of the present value of the estimated future cash flows of a

collateralised financial asset reflects the cash flows that may result from disposal

less costs for obtaining and selling the collateral, whether or not disposal is

probable.

For the purposes of a collective evaluation of impairment, financial assets are

grouped on the basis of similar credit risk characteristics (i.e. on the basis of

The Entity’s grading process that considers asset type, industry, geographical

location, collateral type, past-due status and other relevant factors). Those

characteristics are relevant to the estimation of future cash flows for groups of

such assets by being indicative of the debtors’ ability to pay all amounts due

according to the contractual terms of the assets being evaluated.

Future cash flows in a group of financial assets that are collectively evaluated

for impairment are estimated on the basis of the contractual cash flows of the

assets in the group and historical loss experience for assets with credit risk

characteristics similar to those in the group. Historical loss experience is

adjusted on the basis of current observable data to reflect the effects of current

conditions that did not affect the period on which the historical loss experience

is based and to remove the effects of conditions in the historical period that do

not currently exist.

Estimates of changes in future cash flows for groups of assets are reflected and

directionally consistent with changes in related observable data from period to

period (for example, changes in unemployment rates, property prices, payment

status, or other factors indicative of changes in the probability of losses in the

group and their magnitude). The methodology and assumptions used for

estimating future cash flows are reviewed regularly by The Entity to reduce any

differences between loss estimates and actual loss experience.

When a loan is uncollectible, it is written off against the related allowance for

loan impairment. Such loans are written off after all the necessary procedures

have been completed and the amount of the loss has been determined.

Impairment charges relating to loans and advances to Insurance entity’s and

loans and advances to customers are classified in 'impairment charge for credit

losses' whilst impairment charges relating to investment securities (loans and

receivables categories) are classified in 'Net gains/ (losses) on investment

securities'.

If, in a subsequent period, the amount of the impairment loss decreases and the

decrease can be related objectively to an event occurring after the impairment

was recognised (such as an improvement in the debtor’s credit rating), the

previously recognised impairment loss is reversed by adjusting the allowance

account. The amount of the reversal is recognised in profit or loss.

ii) Assets classified as fair value through other comprehensive income

The Entity can choose to make an irrevocable election at initial recognition for

investments in equity instruments that do not meet the definition of held for

trading, which would otherwise be measured at fair value through profit or loss,

to present changes in fair value in other comprehensive income.

Reclassification of amounts recognised in other comprehensive income and

accumulated in equity to profit or loss is not done. This applies throughout the

life of the instrument and also at de-recognition; such investments will not be

subject to the impairment requirements.

16

Dividends on investments in equity instruments with gains and losses

irrevocably presented in other comprehensive income are recognised in profit or

loss if the dividend is not a return on investment (like dividends on any other

holdings of equity instrument) when:

a. the entity's right to receive payment of the dividend is established;

b. it is probable that the economic benefits associated with the dividend will

flow to the entity; and

c. the amount of the dividend can be measured reliably.

For debt instruments measured at FVTOCI, changes in fair value is recognised

in other comprehensive income, except for: interest calculated using the

effective interest rate method, foreign exchange gains or losses and;

impairment gains or losses until the financial asset is derecognised or

reclassified.

When the financial asset is derecognised, the cumulative gain or loss previously

recognised in other comprehensive income is reclassified from equity to profit

or loss as a reclassification adjustment. Also, when a debt instrument asset is

measured at fair value through other comprehensive income, the amounts that

are recognised in profit or loss are the same as the amounts that would have

been recognised in profit or loss if the financial asset had been measured at

amortised cost.

2.5.8 Financial liabilities

Classification and subsequent measurement

i. Fair Value through Profit or Loss (FVTPL)

ii. Amortized cost,

Financial Liabilities at fair value through profit or loss

Fair value is the price that would be received to sell an asset or paid to transfer a

liability in an orderly transaction between market participants at the measurement

date. At initial recognition, the best evidence of the fair value of a financial instrument

is the transaction price (i.e. the fair value of the consideration paid or received), unless

the fair value of that instrument is evidenced by comparison with other observable

current market transactions in the same instrument, without modification or

repackaging, or based on valuation techniques such as discounted cash flow models

and option pricing models whose variables include only data from observable markets.

Subsequent to initial recognition, for financial instruments traded in active markets,

the determination of fair values of financial assets and financial liabilities is based on

quoted market prices or dealer price quotations. This includes listed equity securities

and quoted debt instruments on major exchanges (for example, Nigerian Stock

Exchange (NSE) and Financial Markets Dealers Quotation (FMDQ)).

A financial instrument is regarded as quoted in an active market if quoted prices are

readily and regularly available from an exchange, dealer, broker, industry group,

pricing service or regulatory agency, and those prices represent actual and regularly

occurring market transactions on an arm’s length basis. If the above criteria are not

met, the market is regarded as being inactive. Indications that a market is inactive are

17

when there is a wide bid-offer spread or significant increase in the bid-offer spread or

there are few recent transactions.

For all other financial instruments, fair value is determined using valuation techniques.

In these techniques, fair values are estimated from observable data in respect of

similar financial instruments, using models to estimate the present value of expected

future cash flows or other valuation techniques, using inputs existing at the dates of

the statement of financial position.

Forward-Looking Information

In the context of IFRS 9, is an enhanced information set that includes credit

information pertaining to future developments (including for example macroeconomic

developments). The inclusion of forward-looking information along with traditional past

due (realized, historical) information is considered to produce comprehensive credit

risk information.

The inclusion of forward-looking information is a distinctive feature of an IFRS 9 ECL

model. Incorporating economically stressed states of the world and their potential

impact on credit performance is critical for the timely recognition of credit losses."

Financial Liabilities at amortized cost

The amortised cost of a financial asset or liability is the amount at which the financial

asset or liability is measured at initial recognition, minus principal repayments, plus or

minus the cumulative amortisation using the effective interest method of any

difference between the initial amount recognised and the maturity amount, minus any

reduction for impairment.

2.5.9 Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the statement

of financial position only when there is a legally enforceable right to offset the

recognised amounts and there is an intention to settle on a net basis, or to realise the

asset and settle the liability simultaneously.

2.6 Trade receivables

Trade, reinsurance and other receivables are non-derivative financial assets with fixed

or determinable payments that are not quoted in an active market. After initial

recognition these are measured at amortised cost using the effective interest method,

less provision for impairment. Discounting is omitted where the effect of discounting

is immaterial.

Individually significant receivables are considered for impairment when they are past

due or when other objective evidence is received that a specific counterparty will

default. Trade receivables arising from insurance contracts are stated after deducting

allowance made for specific debts considered doubtful of recovery. Impairment of trade

receivables are presented within other operating expenses.

Trade and Other receivables amounts are short-term. The net carrying value of trade

receivables is considered a reasonable approximation of fair value. Trade receivables

are reviewed at every reporting period for impairment.

2.7 Trade receivables and payables related to insurance contracts

Receivables and payables are recognised when due. These include amounts due to and

from agents, brokers and insurance contract holders.

18

If there is objective evidence that the insurance receivable is impaired, the Group

reduces the carrying amount of the insurance receivable accordingly and recognises

that impairment loss in the income statement.

2.8 Reinsurance contracts

Contracts entered into with reinsurers under which the Group is compensated for

losses on one or more long-term policy contracts issued by the Group and that meet

the classification requirements for insurance contracts are classified as long-term

reinsurance contracts. The expected claims and benefits to which the Group is entitled

under these contracts are recognised as assets where material.

If there is objective evidence that the reinsurance asset is impaired, the carrying

amount is reduced to a recoverable amount, and the impairment loss is recognised in

the statement of comprehensive income.

2.8.1 Reinsurance asset

Reinsurance assets consist of short - term balances due from reinsurers, as well as

longer term receivables that are dependent on the expected claims and benefits arising

under the related reinsured insurance contracts. Amounts recoverable from or due to

reinsurers are measured consistently with the amounts associated with the reinsured

insurance contracts and with the terms of each reinsurance contract.

The reinsurance asset is reviewed quarterly for impairment. Where there are objective

evidence that the insurance asset is impaired, the Group reduces the carrying amount

of the insurance asset to its recoverable amount and recognises that impairment loss

in the statement of comprehensive income. Evidence that the reinsurance asset is

impaired is gathered where the reinsurance Group has refused payment of any

balance.

2.8.2 Reinsurance liabilities

Liabilities are valued gross before taking into account reinsurance. Reinsurance

liabilities are primarily premiums payable for reinsurance contracts and are recognised

as an expense when due.

2.9 Other receivables and prepayment

Other receivables are stated after deductions of amounts considered bad or doubtful

recovery. These are receivables other than investment securities, trade receivables

and reinsurance assets. When a debt is deemed not collectible, it is written off against

the related provision or directly to profit or loss account to the extent not previously

provided for. Any subsequent recovery of written-off debts is credited to profit or loss.

Prepayments represents prepaid expenses and are carried at cost less amortisation

expensed in profit or loss.

2.10 Deferred acquisition costs (DAC)

Acquisition costs comprise all direct and indirect costs arising from the writing of

insurance contracts (life and non-life contracts). Deferred acquisition costs represent

a proportion of commission which are incurred during a financial year and are deferred

to the extent that they are recoverable out of future revenue margins. It is calculated

by applying to the acquisition expenses the ratio of unearned premium to written

premium.

Commissions and other acquisition costs that vary with and are related to securing

new contracts and renewing existing contracts are capitalised as an intangible asset.

All other costs are recognised as expenses when incurred. The DAC is subsequently

amortised over the life of the contracts as follows:

19

For short-duration life insurance contracts, deferred acquisition cost is amortised over

the terms of the policies as premium is earned.

For long-term insurance contracts with fixed and guaranteed terms, deferred

acquisition cost is amortised in line with premium revenue using assumptions

consistent with those used in calculating future policy benefit liabilities; and

For long-term insurance contracts without fixed terms and investment contracts,

deferred acquisition cost is amortised over the expected total life of the contract as a

constant percentage of estimated gross profit margins (including investment income)

arising from these contracts. The resulting change to the carrying value of the DAC is

charged to statement of comprehensive income.

2.11 Investment properties

Investment property comprises investment in land or buildings held primarily to earn

rentals or capital appreciation or both.

Investment property is initially recognized at cost including transaction costs. The

carrying amount includes the cost of replacing part of an existing investment property

at the time that cost is incurred if the recognition criteria are met; and excludes cost

of day to day servicing of an investment property.

An investment property is subsequently measured at fair value with any change

therein recognised in profit or loss. Fair values are determined individually, on a basis

appropriate to the purpose for which the property is intended and with regard to recent

market transactions for similar properties in the same location.

Fair values are reviewed annually by independent valuer, holding a recognized and

relevant professional qualification and with relevant experience in the location and

category of investment property being valued. Any gain or loss arising from a change

in the fair value is recognized in the income statement.

Subsequent expenditure on investment property is capitalized only if future economic

benefit will flow to the Company; otherwise they are expensed as incurred.

2.12 Intangible assets

Software license costs and computer software that is not an integral part of the related

hardware are initially recognised at cost, and subsequently carried at cost less

accumulated amortization and accumulated impairment losses. Costs that are directly

attributable to the production of identifiable computer software products controlled by

the Group are recognised as intangible assets.

Amortization is calculated using the straight line method to write down the cost of each

license or item of software to its residual value over its estimated useful life.

Amortization begins when the asset is available for use, i.e. when it is in the location

and condition necessary for it to be capable of operating in the manner intended by

management, even when idle. Amortization ceases at the earlier date that the asset

is classified as held for sale and the date that the asset is derecognized and ceases

temporarily, while the residual value exceeds or is equal to the carrying value.

Gains or losses arising from derecognition of an intangible asset are measured as the

difference between the net disposal proceeds and the carrying amount of the asset

and are recognised in the income statement when the asset it derecognized.

Intangibles recognised as assets are amortized over their useful lives, which does not

exceed five years.

20

2.13 Property, plant and equipment

Property and equipment are reflected at historical cost less accumulated depreciation

and any accumulated impairment losses in value, where appropriate. Land is not

depreciated. Depreciation is provided for on a straight-line basis, taking into account

the residual value and estimated useful lives of the assets as follows:

Asset class Depreciation rate

Buildings 2%

Motor Vehicles 25%

Computer Equipment 20%

Furniture and Fittings 10%

Office Equipment 20%

Plant and Machinery 10%

Aircraft (Componentized)

• Aircraft Engines 4%

• Airframes (Body) 3%

• Landing gears 10%

• APU, Avionic and

Other electronic parts 15%

If the expected residual value is equal to or greater than the carrying value, no

depreciation is provided for. The residual values, estimated useful lives of the assets

and depreciation methods are reviewed at each statement of financial position date

and adjusted as appropriate.

Cost prices include costs directly attributable to the acquisition of property and

equipment, as well as any subsequent expenditure when it is probable that future

economic benefits associated with the item will flow to the Group and the expenditure

can be measured reliably. All other expenditure is recognised in the statement of

comprehensive income when incurred.

Property and equipment are derecognised at disposal date or at the date when it is

permanently withdrawn from use without the ability to be disposed of. The differences

between the carrying amounts at the date of de-recognition and any disposal proceeds,

as applicable, is recognised in 'other income' in the statement of comprehensive

income.

2.14 Impairment of other non-financial assets

Assets that are subject to amortisation are reviewed for impairment whenever events

or changes in circumstances indicate that the carrying amount may not be recoverable.

Additionally, assets that have an indefinite useful life are not subject to amortisation

and are tested annually for impairment. An impairment loss is recognised for the

amount by which the asset’s carrying amount exceeds its recoverable amount. The

recoverable amount is the higher of an asset’s fair value less costs to sell and value in

use. For the purposes of assessing impairment, assets are stated at the lowest levels

for which there are separately identifiable cash flows (cash-generating units).

The impairment test also can be performed on a single asset when the fair value less

cost to sell or the value in use can be determined reliably. Non-financial asset other

than goodwill that suffered impairment are reviewed for possible reversal of the

impairment at each reporting date.

21

Impairment losses recognised in prior periods are assessed at each reporting date for

any indications that the loss has decreased or no longer exists. An impairment loss is

reversed if there has been a change in the estimates used to determine the recoverable

amount. An impairment loss is reversed only to the extent that the asset's carrying

amount does not exceed the carrying amount that would have been determined, net

of depreciation or amortisation, if no impairment loss had been recognised. An

impairment loss in respect of goodwill is not reversed.

2.15 Statutory deposit

The Group maintains a statutory deposit with the Central Bank of Nigeria which

represents 10% of the minimum capitalisation in compliance with the Insurance Act.

This balance is not available for the day to day operations of the Group. Statutory

deposit is measured at cost.

2.16 Insurance contracts

The Group issues contracts that transfer insurance risk or financial risk or both.

Insurance contracts are those contracts that transfer significant insurance risk. Such

contracts may also transfer financial risk.

2.16.1 Classification of contracts

A contract is classified as an insurance contract where the Group accepts significant

insurance risk by agreeing with the policyholder to pay benefits if a specified uncertain

future event (the insured event) adversely affects the policyholder or other beneficiary.

Significant insurance risk exists where it is expected that for the duration of the policy

or part thereof, policy benefits payable on the occurrence of the insured event will

exceed the amount payable on early termination, before allowance for expense

deductions at early termination. Once a contract has been classified as an insurance

contract, the classification remains unchanged for the remainder of its lifetime, even

if the insurance risk reduces significantly during this period.

2.16.2 Recognition and measurement

(a) Short-term insurance contracts

Short-duration life insurance contracts protect the Group’s customers from the

consequences of events (such as death or disability) that would affect the ability

of the customer or his/her dependents to maintain their current level of income.

They are usually short-duration life insurance contracts ranging between 12 to

24 months period of coverage. Guaranteed benefits paid on occurrence of the

specified insurance event are either fixed or linked to the extent of the economic

loss suffered by the policyholder.

For all these contracts, premiums are recognised as revenue (earned premiums)

proportionally over the period of coverage. The portion of premium received on

in-force contracts that relates to unexpired risks at the balance sheet date is

reported as the unearned premium liability. Premiums are shown before

deduction of commission and are gross of any taxes or duties levied on

premiums.

Claims and loss adjustment expenses are charged to income as incurred based

on the estimated liability for compensation owed to contract holders or third

parties damaged by the contract holders. They include direct and indirect claims

settlement costs and arise from events that have occurred up to the end of the

reporting period even if they have not yet been reported to the Group. The Group

does not discount its liabilities for unpaid claims. Liabilities for unpaid claims are

estimated using the input of assessments for individual cases reported to the

22

Group and statistical analyses for the claims incurred but not reported (IBNR),

and to estimate the expected ultimate cost of more complex claims that may be

affected by external factors.

The liability reserve on short term insurance contract is made up of an unexpired

premium reserve (UPR) and reserve for ‘Incurred but not reported’ claims (IBNR).

The UPR are calculated after adjusting for acquisition expenses. IBNR reserves

are required to take account of the delay in reporting claims. These are

determined by considering ultimate claims ratios for the life schemes on the

Group’s books. The ratios differ by industry and have been determined following

a historical analysis of portfolio claims experience. The IBNR reserves are

calculated by adjusting the ultimate claims amounts to allow for claims already

paid and those outstanding for payment, and again adjusted to allow for the

holding of a separate UPR reserve. As the short term insurance contract

experience of FBN in builds up we will be able to adjust for Group-specific claims

settlement patterns.

(b) Long-term insurance contracts with fixed and guaranteed terms

These contracts insure events associated with human life (for example, death or

survival) over a long duration. Premiums are recognised as revenue when they

become payable by the contract holder. Premiums are shown before deduction

of commission. Benefits are recorded as an expense when they are incurred.

A liability for contractual benefits that are expected to be incurred in the future

is recorded when the premiums are recognised. The liability is determined as the

sum of the expected discounted value of the benefit payments and the future

administration expenses that are directly related to the contract, less the

expected discounted value of the theoretical premiums that would be required to

meet the benefits and administration expenses based on the valuation

assumptions used (the valuation premiums). The liability is based on

assumptions as to mortality, persistency, maintenance expenses and investment

income that are established at the time the contract is issued. A margin for

adverse deviations is included in the assumptions.

Where insurance contracts have a single premium or a limited number of

premium payments due over a significantly shorter period than the period during

which benefits are provided, the excess of the premiums payable over the

valuation premiums is deferred and recognised as income in line with the

decrease of unexpired insurance risk of the contracts in force or, for annuities in

force, in line with the decrease of the amount of future benefits expected to be

paid. The liabilities are recalculated at each end of the reporting period using the

assumptions established at inception of the contracts.

The long term insurance contracts insure events associated with human life. They

include individual insurance contracts.

Individual insurance contracts

The reserve has been calculated using the gross premium valuation approach.

This reserving methodology adopts a cash flow approach taking into account all

expected future cash flows including premiums, expenses and benefit payments

to satisfy the liability adequacy test. The test also considers current estimates of

all contractual cash flows, and of related cash flows such as claims handling costs,

as well as cash flows resulting from embedded options and guarantees (where

23

applicable

2.16.3 Insurance contract liabilities

Life insurance policy claims received up to the last day of each financial period

and claims incurred but not reported (IBNR) are provided for and included in the

policy liabilities. Past claims experience is used as the basis for determining the

extent of the IBNR claims.

Income from reinsurance policies is recognised concurrently with the recognition

of the related policy benefit. Insurance liabilities are presented without offsetting

them against related reinsurance assets.

Insurance liabilities are retained in the statement of financial position until they

are discharged or cancelled and/or expire. The Group performs a liability

adequacy test to determine the recognised insurance liabilities and an

impairment test for reinsurance assets held at each reporting date.

2.17 Technical reserves

These are the reserves computed in compliance with the provision of Section 20,

21, and 22 of the Insurance Act 2003. They are:

(a) General insurance contracts

Reserves for unearned premium

In compliance with Section 20 (1) (a) of Insurance Act 2003, the reserve for

unearned premium is calculated on a time apportionment basis in respect of the

risks accepted during the year.

Reserves for outstanding claims

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

outstanding claims incurred and reported plus claims incurred but not reported

("IBNR") as at the reporting date. The IBNR is based on the liability adequacy

test.

Reserves for unexpired risk

A provision for additional unexpired risk reserve (AURR) is recognized for an

underwriting year where it is envisaged that the estimated cost of claims and

expenses would exceed the unearned premium reserve (UPR).

(b) Life business

Life fund

This is made up of net liabilities on policies in force as computed by the actuaries

at the time of the actuarial valuation.

Liability adequacy test

At the end of the reporting period, liability adequacy tests are performed by an

Actuary to ensure the adequacy of the contract liabilities. In performing these

tests, current best estimates of future contractual cash flows including office

premiums, expenses and benefit payments satisfying the liability adequacy test,

are used. Any deficiency is immediately charged to statement of comprehensive

income.

24

2.18 Financial liabilities

The Group's holding in financial liabilities represents mainly other financial liabilities.

Such financial liabilities are initially recognised at fair value and subsequently

measured at amortised cost. Financial liabilities are derecognised when extinguished.

Financial liabilities are reported as trade payables, short term bank overdraft and other

liabilities in the financial statement. The carrying values of financial liabilities are

considered to be a reasonable approximation of fair value.

2.19 Trade payables

Trade and other payables are non-derivative financial liabilities with fixed or

determinable payments that are not quoted in an active market. Trade payables

represent liabilities to agents, brokers and re-insurer on insurance contracts as at year

end.

2.20 Other payables and accruals

Other payables and accruals are recognised initially at fair value and subsequently

measured at amortised cost using the effective interest method. The fair value of a

non-interest bearing liability is its discounted repayment amount. If the due date of

the liability is less than one year discounting is omitted.

2.21 Taxation

2.21.1 Company income tax

Current income tax liabilities comprise those obligations to, or claims from, fiscal

authorities relating to the current or prior reporting periods, that are unpaid at the

reporting date. Current tax is payable on taxable profit, which differs from profit or

loss in the financial statements. Calculation of current tax is based on tax rates and

tax laws that have been enacted or substantively enacted by the end of the reporting

period.

Management periodically evaluates positions taken in tax returns with respect to

situations in which applicable tax regulation is subject to interpretation and establishes

provisions where appropriate.

Tax expense recognised in profit or loss comprises the sum of deferred tax and current

tax not recognised in other comprehensive income or directly in equity. Management

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

applicable tax regulation is subject to interpretation and establishes provisions where

appropriate.

Current income tax is assessed at 30% and is tax payable on the taxable profit for the

period determined in accordance with the Company Income Tax Act (CITA). Education

tax is assessed at 2% of the chargeable profit. Where tax on dividend paid exceeds

the current income tax assessed on the preceding basis, tax payable will be computed

as 30% of dividend paid.

2.21.2 Deferred income tax

Deferred income tax is provided for on all temporary differences between the tax bases

of assets and liabilities and their carrying values for financial reporting purposes using

the liability method.

The principal temporary differences arise from depreciation of property and

equipment, provisions for trade receivables and tax losses carried forward (where

deemed as recoverable). The rates enacted or substantively enacted at the balance

25

sheet date are used to determine deferred income tax. However, deferred income tax

is not accounted for if it arises from initial recognition of an asset or liability in a

transaction other than a business combination that at the time of the transaction

affects neither accounting nor taxable profit nor loss.

Deferred income tax is determined using tax rates (and laws) that have been enacted

or substantively enacted by the end of the reporting period and are expected to apply

when the related deferred income tax asset is realisable or the deferred income tax

liability is payable. Deferred income tax assets are recognised only to the extent that

it is probable that future taxable profits will be available against which the temporary

difference can be utilised.

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

right to offset current tax assets against current tax liabilities and when the deferred

income taxes on assets and liabilities relate to income taxes levied by the same

taxation authority on either the taxable entity or different taxable entities where there

is an intention to settle the balances on a net basis.

The tax effects of carry-forwards of unused losses or unused tax credits are recognised

as an asset when it is probable that future taxable profits will be available against

which these losses can be utilised. Deferred tax related to fair value re-measurement

of investments, which are charged or credited directly in other comprehensive income

or to equity, is also credited or charged directly to equity and subsequently recognised

in the statement of comprehensive income together with the deferred gain or loss.

2.22 Share capital

Share capital is classified as equity where the Group has no obligation to deliver cash

or other assets to shareholders. Incremental costs attributable to the issue or

cancellation of equity instruments are recognised directly in equity, net of tax if

applicable.

2.23 Contingency reserve

Life business

Contingency reserve is calculated at the higher of 1% of gross premium and 10% of

net profits. This reserve is expected to be accumulated until it amounts to the minimum

paid-up capital for a life insurance Group in accordance with section 22(1)(b) of the

Insurance Act.

2.24 Provisions

Provisions for restructuring costs and legal claims are recognised when: the Group has

a present legal or constructive obligation as a result of past events; it is more likely

than not that an outflow of resources will be required to settle the obligation; and the

amount can be reliably estimated. Restructuring provisions comprise lease termination

penalties and employee termination payments. Provisions are not recognised for future

operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be

required in settlement is determined by considering the class of obligations as a whole.

A provision is recognised even if the likelihood of an outflow with respect to any one

item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be

required to settle the obligation using a pre-tax rate that reflects current market

assessments of the time value of money and the risks specific to the obligation. The

26

increase in the provision due to passage of time is recognised as interest expense.

2.25 Contingent liabilities and assets

Possible obligations of the Group, the existence of which will only be confirmed by the

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

of the Group and present obligations of the Group where it is not probable that an

outflow of economic benefits will be required to settle the obligation or where the

amount of the obligation cannot be measured reliably, are not recognised in the Group

statement of financial position but are disclosed in the notes to the financial

statements.

Possible assets of the Group, the existence of which will only be confirmed by the

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

of the Group, are not recognised in the Group statement of financial position and are

only disclosed in the notes to the annual financial statements where an inflow of

economic benefits is probable.

2.26 Earnings per share

The Group presents basic earnings per share for its ordinary shares. Basic earnings

per share (EPS) are calculated by dividing the net profit attributable to shareholders

by the weighted average number of ordinary shares in issue during the year. The

adjusted EPS is calculated using the number of shares in issue at the balance sheet

date. Diluted earnings per share is calculated by adjusting the weighted average

number ordinary shares outstanding to assume conversion of all dilutive potential

ordinary shares.

2.27 Revenue recognition

Revenue comprises the fair value for services, net of value-added tax. Revenue is

recognised as follows:

2.27.1 Premium income

Short term insurance contract

Premium income are recognised as revenue (earned premiums) proportionally over

the period of coverage. The portion of premium received on in-force contracts that

relates to unexpired risks at the balance sheet date is reported as the unearned

premium liability. Premiums are shown before deduction of commission and are gross

of any taxes or duties levied on premiums.

Long term insurance contract

Premiums are recognised as revenue when they become payable by the contract

holder. Premiums are shown before deduction of commission. Premium income from

individual contracts is recognised as an increase in long-term policy liabilities when

receivable. The unearned portion of accrued premium income is included within long-

term policy liabilities. Group life insurance, mortgage insurance and credit life

premiums are accounted for when receivable.

2.27.2 Interest income and expenses

Interest income and expenses for all interest-bearing financial instruments, including

financial instruments measured at fair value through profit and loss, are recognised

within investment income in the income statement using the effective interest rate

method. When a receivable is impaired, the Group reduces the carrying amount to its

recoverable amount, being the estimated future cash flow discounted at the original

effective interest rate of the instrument, and continues unwinding the discount as

27

interest income. Interest income is accounted for on a time proportionate basis that

takes into account the effective interest rate on the asset.

These services comprise the activity of trading financial assets in order to reproduce

the contractual returns that the Group’s customers expect to receive from their

investments. Such activities generate revenue that is recognised by reference to the

stage of completion of the contractual services.

2.28 Insurance premium ceded to reinsurers

Insurance premium ceded to reinsurers also described as reinsurance expenses

represents outward premium paid to reinsurance companies less the unexpired portion

as at the end of the accounting year.

2.29 Claims

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

estimated liability for compensation owed to policyholders and/or beneficiaries. They

include direct and indirect claims settlement costs and arise from events that have

occurred up to the end of the reporting period even if they have not yet been reported

to the Group.

The Group does not discount its liabilities for unpaid claims. Liabilities for unpaid claims

are estimated using the input of assessments for individual cases reported to the Group

and statistical analyses for the claims incurred but not reported, and to estimate the

expected ultimate cost of more complex claims that may be affected by external

factors. No provisions has been made for possible claims under contracts that are not

in existence at the end of the reporting period.

2.30 Underwriting expenses

Underwriting expenses comprise acquisition costs and other underwriting expenses.

Acquisition costs comprise all direct and indirect costs arising from the writing of

insurance contracts. Examples of these costs include, but are not limited to,

commission expense, and other technical expenses. Other underwriting expenses are

those incurred in servicing existing policies/contract. These expenses are charged in

the statement of comprehensive income.

2.31 Employee benefit expense

2.31.1 Defined contribution plan

A defined contribution plan is a pension plan under which the company pays fixed

contributions into a separate entity. The company has no legal or constructive

obligations to pay further contributions if the fund does not hold sufficient assets to

pay all employees the benefits relating to employee service in the current and prior

periods.

The company pays contributions to publicly or privately administered pension insurance

plans on a mandatory, contractual or voluntary basis. The company has no further

payment obligations once the contributions have been paid. The contributions are

recognised as employee benefit expense when they are due. Prepaid contributions are

recognised as an asset to the extent that a cash refund or a reduction in the future

payments is available.

In accordance with the provisions of the Pension Reform Act 2014, the company

contribute 8% and 10% respectively each qualifying staff’s salary in line with the

provisions of the Pension Reform Act 2014.

28

The company pays contribution to pension fund administrators on a mandatory basis.

The company has no further payment obligations once the contributions have been

paid. The contributions are recognised as employee benefits expenses when they are

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

or a reduction in the future payments is available

2.31.2 Defined benefit plan

A defined benefit plan is a pension plan that defines an amount of pension benefit that

an employee will receive on retirement, usually dependent on one or more factors,

such as age, years of service and compensation.

The liability recognised in the statement of financial position in respect of the defined

benefit pension plan is the present value of the defined benefit obligation at the date

of the statement of financial position less the fair value of plan assets, together with

adjustments for unrecognised actuarial gains or losses and past service costs.

2.31.3 Short term benefit

Short-term employee benefit obligations are measured on an undiscounted basis and

are expensed as the related service is provided.

A liability is recognised for the amount expected to be paid under short-term cash

bonus or profit sharing plans if the company has a present legal or constructive

obligation to pay this amount as a result of past service provided by the employee and

obligation can be estimated reliably.

2.32 Other operating and administrative expenses

Other operating and administrative expenses are expenses other than claims,

investment expenses, and employee’s benefit, expenses for marketing and

administration and supervisory levies. They include professional fee, depreciation

expenses and other non- technical expenses. Other operating and administrative

expenses are accounted for on accrual basis and recognized in the income statement

upon utilization of the service or at the date of their origin.

AFRICAN ALLIANCE INSURANCE PLC STATEMENT OF FINANCIAL POSITION

Note

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18ASSETS N’000 N’000 N’000 N’000

Cash and cash equivalents 6 2,180,301 3,680,801 1,975,288 3,173,108 Financial assets 7 22,920,092 21,162,075 22,889,719 21,153,916 Trade receivables 8 223,556 135,927 - - Reinsurance assets 9 52,322 144,052 52,322 144,052 Other receivables and prepayments 10 298,296 1,612,595 1,231,364 2,093,878 Deferred acquisition costs 11 - - - - Investment properties 12 10,335,895 10,258,314 8,791,171 8,620,913 Investment in subsidiary 13 - - 542,729 542,729 Investment in Associate 14 1,349,172 1,804,083 1,349,172 1,804,083 Retirement benefit assets 22 - - - - Defferred Tax Asset 25b 147,948 148,195 146,476 146,476 Intangible assets 15 65,461 57,343 21,775 19,776 Property plant and equipment 16 1,749,500 2,008,239 528,030 829,046 Statutory deposit 17 354,871 358,182 200,000 200,000

Total assets 39,677,414 41,369,806 37,728,047 38,727,976

LIABILITIESInsurance contract liabilities 18 38,192,590 35,110,631 36,609,105 33,149,205 Investment contract liabilities 19 5,651,966 5,841,759 5,651,966 5,841,759 Trade payable 20 858,296 1,106,999 554,103 850,178 Other payables and accruals 21 613,536 679,591 444,478 461,659 Employee benefit liabilities 22 66,746 42,690 66,746 42,690 Borrowings 23 991,293 507,077 934,160 482,145 Tax payable 24 990,967 826,742 942,838 774,245 Deferred tax liability 25 379,755 428,182 92,107 92,107

Total liabilities 47,745,149 44,543,672 45,295,503 41,693,987

EQUITYShare capital 26 10,292,500 10,292,500 10,292,500 10,292,500 Share premium 26 14,365,133 14,365,133 14,365,133 14,365,133 Contingency reserves 27 1,074,410 975,947 966,336 891,345 Retained earnings 28 (37,147,341) (30,218,535) (35,712,229) (28,940,682)Translation reserve 43 77,489 237,295 - - Non-controlling interest 44 9,522 8,354 Fair value reserves 29 3,260,552 1,165,441 2,520,803 425,693

Total equity (8,067,735) (3,173,867) (7,567,456) (2,966,012)

Total equities and liabilities 39,677,414 41,369,806 37,728,047 38,727,976

Funmi Omo Olabisi AdekolaManaging Director Chief Financial OfficerFRC/2014/CIIN/00000008645 FRC/2013/ICAN/000000001179

FOR THE PERIOD ENDED 31 DECEMBER 2019

Group Company

Signed on behalf of the Board of Directors on '29 December, 2019 by:

29

AFRICAN ALLIANCE INSURANCE PLC STATEMENT OF COMPREHENSIVE INCOME

31-Dec-19 31-Dec-19 31-Dec-18 31-Dec-18 31-Dec-19 31-Dec-19 31-Dec-18 31-Dec-18

3 months 12 months 3 months 12 months 3 months 12 months 3 months 12 months

N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000

Gross premium written 30 2,761,495 8,987,063 2,760,416 6,795,577 2,370,699 7,499,083 2,119,921 5,166,396 Unearned premium 30 (100,034) (248,341) 312,386 62,685 (100,034) (248,341) 312,386 62,685

Gross premium income 2,661,462 8,738,722 3,072,802 6,858,262 2,270,666 7,250,742 2,432,307 5,229,081 Insurance premium ceded to reinsurers 31 28,708 (464,852) (16,972) (169,405) (134,749) (456,092) (10,283) (160,946)

Net premium income 2,690,170 8,273,870 3,055,830 6,688,857 2,135,917 6,794,650 2,422,025 5,068,135

Fees and commission income 32 37,790 149,630 332 43,922 37,790 149,630 332 43,922

Net underwriting income 2,727,960 8,423,500 3,056,162 6,732,779 2,173,706 6,944,280 2,422,356 5,112,057

33

3,213,194 10,529,905 2,993,847 9,669,652 2,957,614 9,476,364 2,648,181 8,784,295

33 - (55,562) - (203,837) 28,532 (55,562) - (203,837)

Underwriting expenses 34 383,605 1,357,322 217,708 992,290 324,946 1,178,148 123,280 804,83235 3,814,056 2,865,888 (149,994) (1,150,204) 3,677,231 2,709,902 (240,047) (1,381,616)

Net underwriting expenses 7,410,854 14,697,554 3,061,561 9,307,901 6,988,323 13,308,852 2,531,413 8,003,674

Net underwriting profit (4,682,894) (6,274,053) (5,399) (2,575,122) (4,814,617) (6,364,572) (109,056) (2,891,617)

Other income 36 16,975 68,044 238,432 297,972 16,786 67,408 223,322 295,247

Impairment charges 38 - 2,926 (5,437) (5,638) - 2,926 4,484 (5,638)

Fair value gain/(loss) on investment properties 12 - - - 544,686 - - - 323,662 Fair value through profit or loss 7.1 - (19,893) - (1,168,898) - (19,893) - (1,168,898)Investment income 37 517,834 2,906,665 790,820 3,241,798 350,762 2,670,902 774,145 3,168,218 Loss from investment contracts 37a (17,278) (99,942) (54,406) (137,947) (17,278) (99,942) (54,406) (137,947)

Share of profit of equity accounted investee 14 - 461,389 - 710,728 - 461,389 - 710,728

Employee benefit expenses 39 (302,653) (1,142,989) (363,025) (1,171,447) (224,770) (889,927) (217,897) (899,952)

Other operating and administrative expenses 40 (571,544) (2,500,633) (691,655) (2,065,419) (486,893) (2,209,373) (504,305) (1,757,238)

Impairment loss Allowance (ECL) 41 (3,121) 54,417 (33,370) (74,667) (17,129) 9,828

Finance cost 42 (33,161) (90,699) (15,244) (60,296) (33,161) (90,699) (17,457) (60,296)

Loss before tax (5,075,842) (6,634,768) (105,915) (2,422,954) (5,283,839) (6,488,911) 98,831 (2,413,904)

Income tax expense 45 (77,250) (207,670) 282,277 (273,662) (77,250) (207,645) 47,458 (244,662)

Loss for the year (5,153,093) (6,842,438) 176,362 (2,696,616) (5,361,089) (6,696,556) 146,288 (2,658,566)

Loss attributable to:– Owners of the parent (5,150,766) (6,828,903) 131,082 (2,696,157) – Non-controlling interests (2,327) (13,535) 45,280 (459)

(5,153,093) (6,842,438) 176,362 (2,696,616)

Other comprehensive income:Items that may be subsequently reclassified to profit or loss

29 500 600 4,510 (650) - 600 - (650) Foreign exchange translation

gain/(loss) 43 (133,198) (159,806) (175,412) 51,529 2,508,352 (132,698) (159,206) (170,902) 50,879 - 2,508,952 - (650)

Items that will not be subsequently reclassfied to profit or loss

29 - 100,226 - 162,418 - - - 23,145

Deferred tax on revaluation

gain(loss) 29 - - - (34,818) - -

Remeasurement of net defined

benefit liability/(asset) 35,336 - - 35,336 - 100,226 - 162,936 - - - 58,481

Other comprehensive income for the year (132,698) (58,980) (170,902) 213,815 - 2,508,952 - 57,831

Total comprehensive income for the year (5,285,790) (6,901,418) 5,460 (2,482,801) (5,361,089) (4,187,604) 146,288 (2,600,735)

Total comprehensive income attributable to:– Owners of the parent (5,180,075) (6,763,390) 42,702 (2,484,513) (5,361,089) (4,187,604) 146,288 (2,600,735) – Non-controlling interests (105,716) (138,028) (37,242) 1,712

(5,285,790) (6,901,418) 5,460 (2,482,801) (5,361,089) (4,187,604) 146,288 (2,600,735)

FOR THE PERIOD ENDED 31 DECEMBER 2019

Group Company

Insurance claims incurred recovered from

reinsurers

Changes in long term insurance contracts

Change in value of available for sale financial

assets (net of taxes)

Insurance claims incurred and loss adjustments

expenses

Note

(Loss)/Gain on revaluation of property, plant and

equipment (net of taxes)

30

AFRICAN ALLIANCE INSURANCE PLC STATEMENT OF CHANGES IN EQUITY - GROUP

FOR THE PERIOD ENDED 31 DECEMBER 2019

Share capital Share premium

Fair value

reserve

Contingency

reserve

Translation

reserve Retained earnings

Non-controlling

interest Total equityN'000 N'000 N'000 N'000 N'000 N'000

Balance at 1 January 2019 10,292,500 14,365,133 1,165,442 975,947 237,295 (30,218,535) 8,354 (3,173,864) Total comprehensive income for the yearProfit for the year - - - - - (6,828,903) (13,535) (6,842,438)

Other comprehensive income for the period - - 2,508,952 - (159,806) - 13,264 2,362,410

- - 2,508,952 - (159,806) (6,828,903) (271) (4,480,028)

- - Transfer to contingency reserve - - - 98,463 - (99,903) 1,439 (0) Transfer from properties revaluation reserve (413,842) (413,842)

Total transactions with owners, recognised directly in equity - - (413,842) 98,463 - (99,903) 1,439 (413,843)

Balance at 31 December 2019 10,292,500 14,365,133 3,260,552 1,074,410 77,489 (37,147,341) 9,522 (8,067,735)

Balance at 1 January 2018 10,292,500 14,365,133 1,004,524 908,259 186,441 (27,275,850) 7,816 (511,177)

Day 1 IFRS 9 adjustment - - - - - (178,627) (1,260) (179,887)

Adjusted balance at 1 January 2018 10,292,500 14,365,133 1,004,524 908,259 186,441 (27,454,477) 6,556 (691,064) Total comprehensive income for the yearProfit for the year - - - - - (2,696,156) (459) (2,696,615) Changes in fair value of FVOCI Investments (650) (650) Remeasurement of the net defined benefit liability 35,336 35,336 Gain on revaluation of PPE 160,594 1,824 162,418 Deferred tax on revaluation (34,362) (456) (34,818)

Other comprehensive income for the year - - - 50,854 - 675 51,529

- - 160,918 - 50,854 (2,696,156) 1,584 (2,482,800)

Disposal of interest in Frenchies and Africa Realty - - Transfer to contingency reserve 67,688 (67,902) 214 - Transfer from properties revaluation reserve - - - - - - Total transactions with owners, recognised directly in equity - - - 67,688 - (67,902) 214 -

- - - - -

Balance at 31 December 2018 10,292,500 14,365,133 1,165,442 975,947 237,295 (30,218,535) 8,354 (3,173,867)

Transactions with owners, recorded directly in equity Contributions by and distributions to owners

Total Comprehensive income for the year

Total Comprehensive income for the year

31

AFRICAN ALLIANCE INSURANCE PLC STATEMENT OF CHANGES IN EQUITY - COMPANY

Share capital Share premium

Contingency

reserve

Fair value

reserve

Retained

earnings TotalN'000 N'000 N'000 N'000 N'000 N'000

Balance at 1 January 2019 10,292,500 14,365,133 891,345 425,693 (28,940,681) (2,966,010)

Total comprehensive income for the year

Profit for the year - (6,696,556) (6,696,556)

Other comprehensive income for the year - 2,095,110 2,095,110

- - - 2,095,110 (6,696,556) (4,601,446)

Transactions with owners, recorded directly in equity

Transfer to contingency reserve - 74,991 (74,991) -

- - 74,991 - (74,991) -

Balance at 31 December 2019 10,292,500 14,365,133 966,336 2,520,803 (35,712,228) (7,567,456)

Share capital Share premium

Contingency

reserve

Fair value

reserve

Retained

earnings TotalN'000 N'000 N'000 N'000 N'000 N'000

Balance at 1 January 2018 10,292,500 14,365,133 839,681 367,862 (26,146,738) (281,562) Day 1 IFRS 9 adjustment (83,713) (83,713)

10,292,500 14,365,133 839,681 367,862 (26,230,451) (365,275) Total comprehensive income for the periodPPE Revaluation 57,831 57,831

Profit for the year (2,658,566) (2,658,566)

- - - 57,831 (2,658,566) (2,600,735)

Transactions with owners, recorded

directly in equity Transfer to contingency reserve 51,664 (51,664) -

- - 51,664 - (51,664) -

Balance at 31 December 2018 10,292,500 14,365,133 891,345 425,693 (28,940,681) (2,966,010)

FOR THE PERIOD ENDED 31 DECEMBER 2019

Total Comprehensive income for the

period

Total Comprehensive income for the

period

Total transactions with owners, recognised directly in

equity

Total transactions with owners, recognised directly in

equity

32

AFRICAN ALLIANCE INSURANCE PLC

STATEMENT OF CASH FLOWS

FOR THE PERIOD ENDED 31 DECEMBER 2019

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18

Cash flows from operating activities N’000 N’000 N’000 N’000

Cash premium received 8,987,063 6,883,995 7,499,083 5,107,165

Cash received from deposit contract liabilities 867,283 1,234,093 867,283 1,234,092

Cash withdrawals from deposit contract liabilities (1,157,604) (458,757) (1,157,604) (458,757)

Cash Claims recovered 55,562 - 55,562 -

Dividend received 21,407 12,711 21,407 12,711

Claims paid (10,028,249) (9,612,514) (8,974,709) (8,727,157)

Cash paid to reinsurers/ coinsurers (464,852) (184,563) (547,823) (176,104)

Commission received 149,630 43,922 149,630 43,922

Maintenance expenses paid (842,451) (574,325) (663,276) (574,323)

Acquisition costs (514,871) (417,965) (514,871) (230,507)

Employee benefits paid (1,142,989) (1,171,447) (889,927) (899,952)

Other operating expenses paid (2,848,924) (2,019,118) (2,112,639) (1,945,043)

Other income received 68,044 55,537 67,408 52,812

Interest received 2,885,258 3,229,086 2,649,495 3,155,507

Income tax paid (39,051) (18,665) (39,051) (15,703)

Net cash from operating activities (4,004,744) (2,998,010) (3,590,032) (3,421,337)

Cash flow from investing activities:

Purchases of plant and equipment (196,508) (318,288) (183,786) (315,887)

Purchase of intangible assets 16,641 (10,271) (10,522) (15,937)

Capital injection made to subsidiary (475,551) - (475,551)

Capital Improvement of investment properties - -

Proceeds from disposal of property and equipment 2,428 2,428

Proceeds from disposal of investment properties 1,241,064 1,241,064

Purchase of investment properties (170,258) (170,258)

Sale of investment in shares

Sale of investment in subsidiaries

Purchase of financial assets - AFS - -

Purchase of financial assets- HTM - (340,581) (340,581)

Proceed from disposal of financial asset - AFS - -

Principal repayment of finanacial assets- HTM 981,997 981,997

Purchase of financial asstes- loan and receivable 23,713 (10,390) 9,058 (10,390)

proceed of disposal of financial assets 944,463 944,463

Proceeds from disposal of quoted equities

Net cash used in investing activities 1,602,477 85,983 1,573,380 82,718

Cash flow from financing activities:

Repayment of borrowings (102,483) (336,335) (134,684) (256,328)

Proceeds from borrowings 500,000 500,880 500,000 500,880

Net cash used in financing activities 397,517 164,545 365,316 244,552

Net increase/(decrease) in cash and cash equivalents (2,004,750) (2,747,482) (1,651,336) (3,094,067)

Cash and cash equivalent at beginning of year 3,193,759 5,941,241 2,705,401 5,799,468

Net increase/decrease in cash and cash equivalents (2,004,750) (2,747,482) (1,651,336) (3,094,067)

Cash and cash equivalent at end of period 1,189,009 3,193,759 1,054,065 2,705,401

CompanyGroup

33

AFRICAN ALLIANCE INSURANCE PLC

NOTES TO THE FINANCIAL STATEMENTS

1.       General Information

1(a) Security Trading Policy

2.   Summary of significant accounting policies

3 Solvency

2019 2018 2019 2018

N000 N000 N000 N000

21,781,572 19,994,820 21,781,572 19,994,820

2,180,301 3,680,801 1,975,288 3,173,108

994,129 1,014,023 994,129 1,014,023

Total 24,956,001 24,689,644 24,750,988 24,181,951

4 Management of Financial risk

i)       

ii)      

iii)     

iv)     

i)       

ii)      

iii)     

4.1 Market risk

4.1.1 Foreign exchange risk

The Company has in place a Securities Trading Policy in compliance with Rule 17.15 Disclosure of Dealings in issuers' shares, Rule Book of The Nigerian Stock

Exchange, 2015. This policy can be found on the Company's website: www.africanallianceplc.com. All directors have complied with the policy as at date.

The acquisition of policyholders’ assets is based on the design of the product and marketing descriptions. Within these parameters, investments

are managed with the aim of maximising policyholder returns while limiting risk to acceptable levels within the framework of statutory

requirements. The focus of risk measurement and management is to ensure that the potential risks inherent in an investment are reasonable for

the future potential reward, exposure to investment risk is limited to acceptable levels, premium rates are adequate to compensate for

investment risk and an adequate reserving policy is applied for long-term policy liabilities. The diverse product range requires a variety of

approaches to the management of risk; these range from portfolio management practices and techniques such as optimization of expected risks

and rewards based on investment objectives, to asset-liability matching in support of statement of financial position obligations.

Foreign exchange risk is the risk associated with movement in the foreign exchange prices from foreign currency denominated transactions which

the Group is exposed to.

The Group is exposed to foreign exchange currency risk primarily through certain transactions denominated in foreign currency. The Group is

exposed to foreign currency denominated in dollars and Pound through bank balances in other foreign currencies.

The principal accounting policies applied in the preparation of these financial statements are disclosed under General information on the Reporting Entity and

Summary of Significant Accounting Policies. These policies have been consistently applied to all the years presented unless otherwise stated.

The assets backing the life funds are as follows:

Government Bonds

Cash and bank balances

Group Company

African Alliance Insurance Company is a public limited company incorporated and domiciled in Nigeria. The registered office is located at 54 Awolowo Raod, Ikoyi,

Lagos.

The company is principally engaged in the business of providing risk underwriting for life, related financial and pension services, aviation and hospitality services to

its customers.

The Group manages its exposure to foreign exchange risk using sensitivity analysis to assess potential changes in the value of foreign exchange

positions and impact of such changes on the Group's income. There have been no major changes from the previous year in the exposure to risk

or policies, procedures and methods used to measure the risk.

the implementation and monitoring of the asset management process to ensure that the risks arising from trading positions are effectively

managed within the pre-determined risk parameters.

The Group is exposed to various financial risks in connection with its current operating activities, such as foreign currency risk, interest rate risk,

credit risk, market risk and liquidity risk. These risks contribute to the key financial risk that the proceeds from the Group's financial assets are

insufficient to fund the obligations arising from insurance policy contracts.

The Company manages these risks through the activities of the Audit Committee and the Investment Committee. Each committee meets at least

four times per annum to discuss financial risk issues. Management is responsible for implementing recommendations that have been agreed and

reporting back to the relevant committee.

The Audit Committee is a committee of the Board of African Alliance Insurance Plc and is responsible for the implementation and monitoring of

overall risk management, internal financial controls and financial and actuarial reporting within the Group. The main responsibilities of this

Committee are:

Setting and overseeing the overall standard for financial and actuarial reporting, risk management and internal controls within the Group;

Monitoring the effectiveness of business risk management processes in the Group;

Reviewing and assessing the quality of the work done by professionals responsible for financial and actuarial reporting, risk management and

internal control;

Engaging in discussions with external and internal auditors on the quality and acceptability of the control environment and reporting

structures.

The Investment Committee is a management committee and is responsible for

ensuring that insurance and investment contract liabilities are matched with appropriate supporting assets based on the type of benefits payable

to the contract holders;

ensuring that the long-term investment return on assets supporting policy liabilities are sufficient to fund policyholders' reasonable benefit

expectations and the shareholders' profit entitlement;

Investment in quoted equity

The business's operations are exposed to market risk. Market risk is the risk of adverse financial impact as a consequence of market movements

such as currency exchange rates, interest rates and other price changes. Market risks arises due to flunctuations in both value of assets and

liabilities. The company has established policies and procedures in order to manage market risk.

34

AFRICAN ALLIANCE INSURANCE PLCNOTES TO THE FINANCIAL STATEMENTS

4.1.2 Interest-rate risk

Interest rate risk is the risk that the value of a fixed income security will fall as a result

of movement in market interest rates. Interest rate risk also arises from fluctuations in

future cash flows of a financial instrument because of changes in market interest rates.

The company is exposed to interest rate risk as the company invest in short term

investments at fixed interest rates. Interest rate risk also exists in products sold by the

company. The company manages this risk by adopting close asset/liability matching

criteria, to minimise the impact of mismatches between asset and liability values arising

from interest rate movements. Interest rate risk exposures from guarantees embedded

in insurance liabilities. The company's insurance contracts and investment contracts • options to surrender the insurance contract or the investment contract with DPF where

the surrender value (i.e. the strike price of the option) is either a fixed amount or a fixed

amount plus interest depending on the year in which the contract was issued;

• guaranteed annuity options where the company has guaranteed at the inception of

certain contracts that it will be paying a life annuity to the surviving policyholders at their

retirement dates which will be calculated using the higher of the current annuity rate at

that date or the guaranteed annuity rate set in the contract. The guaranteed rate has

fixed at inception both the level of mortality risk and the interest rate that will be used to

calculate the annuity payments.

35

AFRICAN ALLIANCE INSURANCE PLCNOTES TO THE FINANCIAL STATEMENTS

4.2 Credit risk

Key areas where the Group is exposed to credit risk are:

4.2.1 Maximum exposure to credit risk before collateral and other credit enhancements.

2019 2018 2019 2018

N'000 N'000 N'000 N'000

Cash and bank balances 2,180,301 3,680,801 1,975,288 3,173,108

Investment securities 22,920,092 21,162,075 22,889,719 21,153,916

Trade receivables 223,556 135,927 - -

Reinsurance assets 52,322 144,052 52,322 144,052

Other receivables 298,296 1,612,595 1,231,364 1,502,991

Statutory deposit 354,871 358,182 200,000 200,000

Staff loan 46,510 95,374 43,122 89,316

Due from policy holders 219,971 225,564 152,136 143,074

26,295,918 27,414,570 26,543,951 26,406,456

Group Company

The Company manages its exposure to credit risk through counterparty risk using established limits as approved

by the Board. These limits are determined based on credit ratings of the counterparty amongst other factors.

The investments portfolio are monitored on a monthly basis.

• Amounts due from loans and receivables;

• Amounts due from money market and cash positions

The Company structures the levels of credit risk it accepts by placing limits on its exposure to a single

counterparty, or groups of counterparties. Such risks are subject to an annual or more frequent review. Limits on

the level of credit risk by category and territory are approved by the Management Committee.

Reinsurance is used to manage insurance risk. This does not, however, discharge the Group’s liability as primary

insurer. If a reinsurer fails to pay a claim for any reason, the Group remains liable for the payment to the

policyholder. The creditworthiness of reinsurers is considered on an annual basis by reviewing their financial

strength prior to finalisation of any contract.

The Company’s financial instruments do not represent a concentration of credit risk because the business deals

with a variety of reinsurers and its premiums receivable and loans are spread among a number of major

industries, customers and geographic areas. Amounts receivable in terms of long-term insurance business are

secured by the underlying value of the unpaid policy benefits in terms of the policy contract. An appropriate level

of provisioning is maintained.

• Amounts due from insurance intermediaries;

Credit risk arises from the inability or unwillingness of a counter party to a financial instrument to discharge its

contractual obligations. The Company determines counter-party credit quality by reference to ratings from

independent ratings agencies or, where such ratings are not available, by internal analysis. The Company seeks

to avoid unacceptable concentration of credit risk to groups of counter-parties, to business sectors, product

types, etc.

• Reinsurers’ share of insurance liabilities;

• Amounts due from reinsurers in respect of claims already paid;

• Amounts due from insurance contract holders;

36

4.3 Liquidity risk

Group

31 December 2019 Carrying amount 0-3 months 3 to 9 months 9 months to 1

year

1 to 5 years > 5 years Total

N'000 N'000 N'000 N'000 N'000 N'000 N'000

Trade payables 858,296 85,830 214,574 300,404 128,744 128,744.36 858,296

Other liabilities 2,662,542 266,254 665,636 931,890 399,381 399,381.34 2,662,542

5,651,966 565,197 1,412,992 1,978,188 847,795 847,794.91 5,651,966

Total financial liabilities 9,172,804 917,280 2,293,201 3,210,481 1,375,921 1,375,921 9,172,804

Cash and bank balances 2,180,301 218,030 545,075 763,105 327,045 327,045.19 2,180,301

Marketable investment securities 22,920,092 1,146,005 687,603 1,604,406 1,146,005 18,336,073 22,920,092

Trade receivables 223,556 223,556 - - - - 223,556

Reinsurance assets 52,322 - - 52,322 - - 52,322

Other receivables 298,296 29,830 74,574 104,404 44,744 44,744.36 298,296

Total financial assets 25,674,567 1,617,421 1,307,252 2,524,238 1,517,795 18,707,864 25,674,567

Net financial assets and liabilities 16,501,763 700,141 (985,949) (686,243) 141,874 17,331,943 16,501,763

(38,192,590) (1,909,629) (954,815) (954,815) (3,153,242) (31,089,889) (38,062,391)

Net policyholders assets and liabilities (21,690,827) (1,209,489) (1,940,764) (1,641,058) (3,011,368) (13,757,946) (21,560,628)

Group

31 December 2018 Carrying amount 0-3 months 3 to 9 months 9 months to 1

year

1 to 5 years > 5 years Total

N'000 N'000 N'000 N'000 N'000 N'000 N'000

Trade payables 1,106,999 332,100 387,450 387,450 - - 1,106,999

Other liabilities 2,056,101 411,220 514,025 616,830 514,025 - 2,056,101

5,841,759 876,264 1,460,440 876,264 2,628,792 - 5,841,759

Total financial liabilities 9,004,859 1,619,584 2,361,915 1,880,544 3,142,817 - 9,004,859

Cash and bank balances 3,680,801 736,160 920,200 736,160 552,120 736,160 3,680,800

Marketable investment securities 21,109,127 - - 1,101,733 2,817,497 17,189,898 21,109,127

Trade receivables 135,927 135,927 - - - - 135,927 Reinsurance assets 144,052 - - 144,053 - - 144,053

Other receivables 1,665,543 333,109 416,386 333,109 249,831 333,109 1,665,543

Total financial assets 26,735,450 1,205,196 1,336,586 2,315,055 3,619,448 18,259,167 26,735,450

Liquidity risk is the risk that the Company is unable to meet its obligations when they fall due as a result of policyholder benefit payments, cash requirements from contractual

commitments, or other cash outflows, such as debt maturities. Such outflows would deplete available cash resources for operational, trading and investments activities. In extreme

circumstances, lack of liquidity could result in reductions in the consolidated balance sheet and sales of assets, or potentially an inability to fulfil policyholder commitments. The

risk that the Group will be unable to do so is inherent in all insurance operations and can be affected by a range of institution-specific and market-wide events including, but not

limited to, credit events, merger and acquisition activity, systemic shocks and natural disasters.

Monitoring and reporting take the form of cash flow measurement and projections for the next day, week and month respectively, as these are key periods for liquidity

management. The starting point for those projections is an analysis of the undiscounted contractual cashflow at maturity of the financial liabilities and the expected collection date

of the financial assets.

All policyholder funds are invested in appropriate assets to meet the reasonable benefit expectations of policyholders, which include the expectation that funds will be available to

pay out benefits as required by the policy contract. The disclosure in note 6 demonstrate that the Group has significant liquid resources. The value for policyholders' liabilities and

the assets backing them are as per the carrying amount in the statement of the financial position.

The maturity profile of the total policyholders' liabilities and assets backing them is shown below:

Investment linked contract liabilities

Insurance contract liabilities - Life fund

Investment linked contract liabilities

Net financial assets and liabilities 17,730,591 (414,388) (1,025,329) 434,511 476,631 18,259,167 17,730,591

Insurance contract liabilities - Life fund (35,110,631) (1,768,523) (1,650,200) (1,822,242) (1,755,837) (28,113,829) (35,110,631)

Net policyholders assets and liabilities (17,380,040) (2,182,911) (2,675,529) (1,387,731) (1,279,206) (9,854,662) (17,380,040)

Company

31 December 2019 Carrying amount 0-3 months 3 to 9 months 9 to 1 year 1 to 5 years > 5 years Total

N'000 N'000 N'000 N'000 N'000 N'000 N'000

Trade payables 554,103 55,410 138,526 193,936 83,116 83,115.51 554,103

Other liabilities 2,388,222 238,822 597,056 835,878 358,233 358,233.33 2,388,222

5,651,966 565,197 1,412,992 1,978,188 847,795 847,794.91 5,651,966

Total financial liabilities 8,594,292 859,429 2,148,573 3,008,002 1,289,144 1,289,144 8,594,292

Cash and bank balances 1,975,288 197,529 493,822 691,351 296,293 296,293.20 1,975,288

Marketable investment securities 22,889,719 1,144,486 686,692 1,602,280 1,144,486 18,311,775 22,889,719

Trade receivables - - - - - - -

Reinsurance assets 52,322 - - 52,322 - - 52,322

Other receivables 1,231,364 123,136 307,841 430,977 184,705 184,704.60 1,231,364

Total financial assets 26,148,693 1,465,151 1,488,355 2,776,930 1,625,484 18,792,773 26,148,693

Net financial assets and liabilities 17,554,402 605,722 (660,219) (231,072) 336,340 17,503,628 17,554,401

Insurance contract liabilities - Life fund (36,609,105) (1,108,730) (151,862) (677,658) (3,580,963) (31,089,889) (36,609,105)

Net policyholders assets and liabilities (19,054,703) (503,008) (812,081) (908,730) (3,244,623) (13,586,261) (19,054,704)

Investment linked contract liabilities

31 December 2018 Carrying amount 0-3 months 3 to 9 months 9 to 1 year 1 to 5 years > 5 years Total

N'000 N'000 N'000 N'000 N'000 N'000 N'000

Trade payables 850,178 255,053 297,562 297,563 - 850,178

Other liabilities 1,760,738 352,148 528,384 480,112 400,094 1,760,738

5,841,759 876,264 1,460,440 876,264 2,628,791 5,841,759

Total financial liabilities 8,452,675 1,483,465 2,286,386 1,653,939 3,028,885 - 8,452,675

Cash and bank balances 3,173,108 634,622 793,277 634,622 475,966 634,622 3,173,109

Marketable investment securities 21,100,968 422,019 633,029 844,039 1,055,048 18,146,832 21,100,967

Trade receivables - -

Reinsurance assets 144,052 144,053 - - 144,053

Other receivables 2,146,825 429,365 536,706 429 750,960 429,365 2,146,825

Total financial assets 26,564,953 1,486,006 1,963,012 1,623,143 2,281,974 19,210,819 26,564,954

Net financial assets and liabilities 18,112,278 2,541 (323,374) (30,796) (746,912) 19,210,819 18,112,278

(33,149,205) (662,984) (994,484) (1,720,447) (1,657,461) (28,113,829) (33,149,205)

Net policyholders assets and liabilities (15,036,928) (660,443) (1,317,858) (1,751,243) (2,404,373) (8,903,010) (15,036,928)

4.4 Capital management policies and procedures

2019 2018 2019 2018

N'000 N'000 N'000 N'000

Share capital 10,292,500 10,292,500 10,292,500 10,292,500

Share premium 14,365,133 14,365,133 14,365,133 14,365,133

Contingency reserves 1,074,410 975,947 966,336 891,345

Fair value reserves 3,260,552 1,165,441 2,520,803 425,693

Translation reserve 77,489 237,295 - -

Retained earnings (37,147,341) (30,218,535) (35,712,229) (28,940,682)

(8,077,257) (3,182,219) (7,567,456) (2,966,011)

The Company's policy is to maintain a strong capital base to maintain investor, creditor and market confidence and to sustain the future development of the business. Management

uses regulatory capital ratios to monitor its capital base. Capital is allocated between specific operations and activities and to a large extent driven by optimisation of the return

achieved on the capital allocated. The amount of caiptal allocated to each activity is based primarily on the regulatory capital. In some cases the regulatory requirements do not

fully reflect the varying degree of risk associated with different activities. In such cases, the capital requirements may be flexed to reflect differing risk profiles, subject to the

overall level of capital to support a particular operation not falling below the minimum required for regulatory purposes. The process of allocating capital to specific operations or

activities is undertaken independently of those responsible for the operation by a committee.

The National Insurance Commission (NAICOM) specifies the minimum amount and type of capital that must be held by the company to cover the insurance liabilities. The regulator

measures the financial strenght of insurance companies using the capital adequacy requirements for the category of company. This test compares insurer's capital against the risk

profile.

Insurance contract liabilities - Life fund

The maturity of non-derivative financial liabilities and financial assets have been compiled based on undiscounted cash flows, which include estimated interest payments.

The Company manages its capital to ensure that the company will be able to continue as going concern and comply with the regulators' capital requirements while maximising the

return to stakeholders through the optimsation of the debt and equity balance. The capital structure of the company consists of equity attributable to equity holders of the parent,

comprising issued capital, reserves and retained earnings.

The Company’s Authorized share capital as at 31 December, 2019 is N10,292,500 (2018:N10,292,500). The company is in compliance with the minimum capital requirement of N2

billion as stipulated by the Insurance Act.

Group Company

Investment linked contract liabilities

Life Annuity Investment Contract

Total

(Admissible)

6,937,335 31,089,889 - 38,027,224

- 5,651,966 5,651,966

6,937,335 31,089,889 5,651,966 43,679,190

Less

Reinsurance Receivables

1 Reinsurance expenses prepaid - -

2 Reinsurers' share of Claims expense paid - - -

3 Reinsurers' share of Unearned premium reserve - - -

4 Reinsurers' share of Incurred but not reported claims (52,321) - (52,321)

5 Others (specify) - - - -

Net Insurance Funds 6,885,013 31,089,889 5,651,966 43,626,869

Admissible Assets

1 Cash and Cash Equivalents 532,565 1,176,881 470,855 2,180,301

2 Treasury bills and Government Bonds 5,087,910 15,044,195 2,283,837 22,415,942

3 Corporate Bonds & Debenture - 504,150 - 504,150

4 Quoted Shares 85,328 - 908,801 994,129

5 Unquoted Shares 100,884 - - 100,884

6 Loan to Policy holders 48,452 - - 48,452

7 Investment Properties 1,004,558 2,162,259 1,988,473 5,155,290

Total Admissible Assets 6,859,697 18,887,485 5,651,966 31,399,148

(25,316) (12,202,404) (0) (12,227,721)

0

-

Life Annuity Investment Contract

Total

(Admissible)

5,519,216 31,089,889 36,609,105

- 5,651,966 5,651,966

5,519,216 31,089,889 5,651,966 42,261,071

Less

Reinsurance Receivables

1 Reinsurance expenses prepaid - -

2 Reinsurers' share of Claims expense paid - - -

3 Reinsurers' share of Unearned premium reserve - - -

4 Reinsurers' share of Incurred but not reported claims (52,321) - (52,321)

5 Others (specify) - - - -

Net Insurance Funds 5,466,894 31,089,889 5,651,966 42,208,750

Admissible Assets

1 Cash and Cash Equivalents 178,331 1,326,102 470,855 1,975,288

2 Treasury bills and Government Bonds 4,098,611 14,894,974 2,283,837 21,277,422

3 Corporate Bonds & Debenture 504,150 504,150

4 Quoted Shares 85,328 - 908,801 994,129

5 Unquoted Shares 92,725 - 92,725

6 Loan to Policy holders 21,294 - 21,294

7 Investment Properties 990,605 2,162,259 1,988,473 5,141,337

Total Admissible Assets 5,466,894 18,887,485 5,651,966 30,006,345

(0) (12,202,404) (0) (12,202,405)

Gross Insurance Funds

SURPLUS(DEFICIT ) IN ASSETS COVER

Group Hypothecation

Company Hypothecation

Item

Insurance Contract Liabilities

Investment Contract Liabilities

Item

Insurance Contract Liabilities

Investment Contract Liabilities

Gross Insurance Funds

SURPLUS(DEFICIT ) IN ASSETS COVER

40

NOTES TO THE FINANCIAL STATEMENTS

4.5 Minimum Capital requirement

The Solvency Margin for African Alliance Insurance Plc. as at 31 December

2019 is as follows:N'000 N'000

Admissible Assets

Cash & Cash Equivalent 1,975,288

Financial assets 22,868,425

Trade Receivable -

Reinsurance Assets 52,322

Other Receivable & Prepayment 43,122

Investment properties 8,791,171

Investment in Subsidiary -

Investment in Associate 1,349,172

Defferred Tax Asset -

Intangible assets -

Property Plant & Equipment 466,030

Statutory Deposit 200,000

Total Admissible Assets (a) 35,745,529

Insurance Contract Liabilities 36,609,105

Investment Contract Liabilities 5,651,966

Employee Benefit 66,746

Borrowing 934,160

Trade Payable 554,103

Provision & Other Payables 444,478

Dividend Payable 0

Provision for Current Tax 942,838

Total Admissible Liabilities (b) 45,203,396

SOLVENCY MARGIN (a-b) (9,457,868)

Subject to Higher of:

15% of Net premium income 1,019,198

or

Minimum Capital Requirement 2,000,000 2,000,000

Gross Solvency ratio -473%

Net Solvency ratio -573%

Precisely, the company has adopted the following capital management policies:

(i) Maintenance, as a minimum, of capital sufficient to meet the statutory requirement.

(ii)

(iii)

31-Dec-19 31-Dec-18

N'000 N'000

Shareholders’ equity (7,567,456) (2,966,010)

Capital requirement on regulatory basis 2,000,000 2,000,000

Shortfall in Solvency Margin (9,457,868) (6,085,508)

Shortfall in Asset cover for contract liabilities (12,202,405) (10,384,344)

An Economic Capital at Risk (ECaR) approach is also used by the management and the board to ensure that obligations to

policyholders can be met in adverse circumstances

Maintenance of an appropriate level of liquidity at all times. The company further ensures that it can meet its expected capital

and financing needs at all times, having regard to business plans to guarantee its going concern status, forecast and any strategic

initiatives

The company did not meet the minimum capital requirement of N2 billion as stipulated by the Insurance Act

The minimum capital required is compared with the equity maintained during the period in the table below:

Company

41

5 Critical accounting estimates and judgements

5.1 The ultimate liability arising from claims made under insurance contracts

5.2

The insurance liabilities have been made on the following principles:-

5.2.1

5.2.2

5.2.3

Reserves for the supplementary life cover and expenses for individual deposit based business will be calculated using a gross

premium cash flow approach as described in above. This is the present value of future guaranteed risk related benefit costs and

expenses, less future risk premiums

Group life

No separate reserve is proposed for claims handling costs for Group Life business as these are typically insignificant in size. Any costs

incurred are absorbed as part of the general business management costs.

Individual Deposit Based business

Group Life

Group Deposit Administration

Individual business

A gross premium method is adopted for individual traditional risk business. This is a

monthly cash flow approach taking into account the incidence of all expected future

cash flows including office premiums, expenses and benefit payments, satisfying the

Liability Adequacy Test. This implies that no further testing is required as a result of

the implementation of the IFRS; or in other words the liability adequacy test has been

met implicitly and a separate liability calculation will not be required for accounting

purposes.

Deposit reserve: Account balance at val. Date

Negative reserves will be zeroised at the valuation date.

Reserves for Group Life business will comprise an unexpired premium reserve (UPR)

and where necessary, a reserve for Incurred But Not Reported Claims (IBNR) to make

an allowance for the delay in reporting of claims.

The UPR will represent the unexpired portion of the premium for each scheme, net of an expense margin reflecting

the acquisition cost loadings. The adequacy of the UPR will be tested by comparing against an Additional Unexpired

Risk Reserve (AURR), which will be calculated using pooled industry claims data for the underlying assumptions. An

AURR will be held in cases where the UPR is deemed insufficient to meet claims in respect of the unexpired period.

A loss ratio approach will be used for IBNR reserving, where the underlying claim rates are based on an analysis of historical group

life claims experience, with judgement adopted where required.

Individual Deposit Based business

A reserve for the Individual and group deposit-based business (Deposit Plus Plan)

will be maintained being the amount standing to the credit of the policyholders (account balance) at the valuation

date.

Claims on contracts are payable on a claims-occurrence basis. The Group is liable for all insured events that occurred during the term of

the contract, even if the loss is discovered after the end of the contract term. As a result, liability claims are settled over a long period of

time, and a larger element of the claims provision relates to incurred but not reported claims (IBNR).

Uncertainty in the estimation of future benefits payments and premium receipts for insurance contracts arises from the unpredictability of

long-term changes in variables such as the overall levels of mortality, accident level and the variability in policyholder behavior.

Type of Business

Individual Risk Business

Valuation Method

Gross premium

Deposit reserve: Account balance at val. Date

Risk reserve: Gross premium

UPR + IBNR

When preparing the financial statements management undertakes a number of judgements, estimates and assumptions about

recognition and measurement of assets, liabilities, income and expenses. The actual results are likely to differ from the judgements,

estimates and assumptions made by management, and will seldom equal the estimated results. Information about the significant

judgements, estimates and assumptions that have the most significant effect on the recognition and measurement of assets,

liabilities, income and expenses are discussed below.

The estimation of the ultimate liability arising from claims made under insurance contracts is the Group’s most critical accounting

estimate. There are several sources of uncertainty that need to be considered in the estimate of the liability that the Group will

ultimately pay for such claims.

Sources of uncertainty in the estimation of future claim payments

AFRICAN ALLIANCE INSURANCE LIMITED

NOTES TO THE FINANCIAL STATEMENTS

6 Cash and cash equivalent

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000

Cash in bank (note 6.2) 710,505 746,326 689,126 720,813 Short-term bank deposits 1,469,796 2,934,475 1,286,162 2,452,295

2,180,301 3,680,801 1,975,288 3,173,108

6.1 Short Term Bank Deposit

Short Term Bank Deposit 1,474,559 2,954,509 1,299,099 2,466,733 ECL Impairment 01 January 2019 (20,034) (29,134) (14,438) (23,854) Additional ECL Impairment during the year 15,271 9,100 1,501 9,416

1,469,796 2,934,475 1,286,162 2,452,295

6.2 Cash and cash equivalent for the purpose of cashflow

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000

Cash in bank 710,505 746,326 689,126 720,813 Short-term bank deposits 1,469,796 2,954,509 1,299,099 2,466,733 Bank overdraft (991,293) (507,076) (934,160) (482,145)

1,189,009 3,193,759 1,054,065 2,705,401

7 Financial assets

7.1 Financial assets at fair value through profit and loss

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000

Quoted equity securities 994,129 1,014,023 994,129 1,014,023

994,129 1,014,023 994,129 1,014,023

7.1i Movement in FVTPL - Quoted equities

At 1 January 1,014,023 2,182,921 1,014,023 2,182,921

Addition - - - -

Disposal (2) - (2) -

Fair value changes (19,893) (1,168,898) (19,893) (1,168,898)

At 31 Dec 994,129 1,014,023 994,129 1,014,023

7.2 Unquoted Equities FVOCI

Equity securities 97,089 100,284 92,725 92,125

97,089 100,284 92,725 92,125

7.2i Movement in unquoted equities FVOCI

At 1 January 100,284 111,998 92,125 91,525

Additions - - -

Impairment (charge)/write back - 1,250 - 1,250

Reclassification from other receivables - -

Disposal (3,795) (12,314) - -

Fair value changes 600 (650) 600 (650)

At 31 Dec 97,089 100,284 92,725 92,125

FOR THE PERIOD ENDED 31 DECEMBER 2019

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original

maturities of three months or less. They include:

Group Company

Company

Group Company

These are quoted equities in the Nigerian Stock Exchange, the fair value were determined by reference to the quoted closing bid

price at the end of the reporting year derived as follows:

Group

43

AFRICAN ALLIANCE INSURANCE LIMITED

NOTES TO THE FINANCIAL STATEMENTS

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-187.3

Financial Assets-Amortised costN’000 N’000 N’000 N’000

Government and corporate bonds 19,308,477 20,032,596 19,308,477 20,032,596 ECL Impairment 01 January (37,776) (38,143) (37,776) (38,143) Additional ECL Impairment during the year 2,518 367 2,518 367 Reclassification to FVOCI (19,273,220) (19,273,220)

(0) 19,994,820 (0) 19,994,820

7.3(i)Financial Assets-FVOCI

Government and corporate bonds 19,308,477 19,308,477 ECL Impairment 01 January (37,776) (37,776) Additional ECL Impairment during the year 2,518 2,518 Fair value changes 2,508,352 2,508,352

21,781,572 - 21,781,572 -

7.4 Loans and receivablesLong term loans - 3,000 - 3,000 Mortgage loans - 15,120 - 15,120 Mortgage loans-Staff 73,838 74,656 73,838 74,656 Policy loans 219,971 225,564 152,136 143,074 Short term loans - 60,384 - 60,384

293,809 378,724 225,974 296,234 Impairment allowance (7.4i) (246,506) (325,776) (204,680) (243,286)

47,302 52,948 21,294 52,948

7.4i Impairment allowance in loans and receivableThe movement in impairment allowance is as detailed below

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18

N’000 N’000 N’000 N’000

At 1 January-IAS 39 specific impairment 226,838 198,820 226,838 198,820 Reclassification-Mortgage loans 32,206 - 32,206 Specific provision no longer required (58,385) (4,188) (58,385) (4,188) ECL Impairment 01 January 98,938 83,035 16,448 16,222 ECL Impairment during the year (20,885) 15,903 19,779 226

At 31 Dec 246,506 325,776 204,680 243,286

8 Trade receivables

223,556 135,927 - - 58,159 58,159

Impairment allowance (58,159) (58,159)

223,556 135,927

Movement in impairments of trade receivables

58,159 58,159 - - Additional charge during the year - - - -

At 31 Dec 58,159 58,159 - -

9 - -

52,321 122,904 52,321 122,904

Prepaid reinsurance (note 9(ii)) - 21,148 21,148

52,321 144,052 52,321 144,052

FOR THE PERIOD ENDED 31 DECEMBER 2019

Group Company

At 1 January

Reinsurance assets: This is analysed as

follows

Reinsurance share of claims Incurred But Not

Reported (IBNR) (note 9 (i))

Group Company

Premium receivablesTrade debtors

44

NOTES TO THE FINANCIAL STATEMENTS

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18

9 (i) N’000 N’000 N’000 N’000

122,904 47,726 122,904 47,726

(70,583) 75,178 (70,583) 75,178

52,321 122,904 52,321 122,904

9 (ii) Prepaid reinsurance

21,148 5,991 21,148 5,991

- 15,157 - 15,157

(21,148) - (21,148) -

- 21,148 - 21,148

10

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18

N’000 N’000 N’000 N’000

71,685 77,736 70,182 73,528

20,653 71,090 - 26,121

240,638 189,980 240,638 189,980

158,840 174,490 150,233 165,329

46,510 95,374 43,122 89,316

0 120,061 506,116 626,177

1,191,928 1,608,522 1,600,267 2,016,861

Deposit for aircraft - -

Long outstanding placement - 50,375 - 50,375

8,127 8,748 2,519 3,187

2,131,790 2,131,790 2,131,790 2,131,790

269,200 1,926,201 262,520 1,123,300

4,139,371 6,454,367 5,007,387 6,495,965

(3,841,076) (4,841,772) (3,776,023) (4,402,087)

298,296 1,612,595 1,231,364 2,093,878

Current (1,314,299) 1,348,551 (862,514) 1,838,870

Non-current 1,612,595 264,044 2,093,878 255,008

298,296 1,612,595 1,231,364 2,093,878

Company

Due from agents

FOR THE PERIOD ENDED 31 DECEMBER 2019

Group Company

At 1 January

Changes during the year

At 31 Dec

Movement in reinsurance share of

claims Incurred But Not Reported

(IBNR)

At 1 January

Additions in the year

Amortised in the year-reinsurance expense

(see note 30)

At 31 Dec

Other receivables and prepayments Group

Stock of raw materials & consumables

Staff share loans

Other receivables

Impairment allowance (note 10.1)

Investment Income Recievable

Prepayment Rent

Prepayment - Others

Staff Loans & Receivables

Deposit for Investment (note 10.2)

Due from related company (note 10.3)

45

NOTES TO THE FINANCIAL STATEMENTS

10.1a Staff Share Loan:

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18

N’000 N’000 N’000 N’00010.1b The Movement in impairment allowance

is as follow

At 1 January 4,785,263 4,817,469 4,396,864 4,429,070Impairment charge/(written back) for the year (975,739) - (627,435) - Reclassification to loans and receivables (32,206) - (32,206)ECL impairment 01 January 56,509 29,575 5,223 5,494 Additional ECL impairment during the year (24,958) 26,934 1,371 (271)At 31 Dec 3,841,076 4,841,772 3,776,023 4,402,087

10.1b The Movement in impairment allowance

is as follow

Due from Agents 32,751

This relates to advances granted

agents for marketing, recovery is

ongoing

Receivables 4,621This amount represents outstanding

loan for exited staff

Due to related Company 1,600,267

This relates to advances granted

subsidiaries and related companies of

the company.

Staff share loans 2,131,790

This amount is made up of African

Alliance Company Plc share purchased

during the private placement exercise

on behalf of staff of the company

ECL Impairment 6,594

This represents ECL impairment

allowance on Other receivables on the

implementation of IFRS 9

3,776,023

30-Sep-19 31-Dec-18 30-Sep-19 31-Dec-18N’000 N’000 N’000 N’000

10.2 Deposits for shares/InvestmentFirst Ghana Buidling Company Limited,

Ghana0 120,000 0 120,000

Paramount Hotel,Ghana

Fountian Trust Limited - 36 - 36 Golden Securities Limited - 25 - 25 Ghana Life Insurance Limited 506,116 506,116

- 120,061 506,116 626,177

10.3 Due from related companyAfrican Alliance Holding Limited - 8,150 - 8,150 Universal Insurance Company Plc 1,600,267 1,600,267 1,600,267 1,600,267 Frenchies Foods Limited - - - -

Axiom Air Limited - - - 408,339

Ghana Life Insurance - - - -

African Alliance Trustees Limited - 105 - 105

1,600,267 1,608,522 1,600,267 2,016,861

10.4 Movement in impairment allowanceAt 1 January 1,608,522 1,608,522 2,019,787 2,019,787Impairment charge/(written back) for

the year (8,255) (419,520) -

At 31 Dec 1,600,267 1,608,522 1,600,267 2,019,787

This represents impairment allowance on other receivables balances assessed as past due the settlement dates and determined to be individually impaired as at 31

December 2019

CompanyGroup

FOR THE PERIOD ENDED 31 DECEMBER 2019

Group Company

This amount is made up of African Alliance Company Plc share purchased during the private placement exercise on behalf of staff of the company and this

has been fully impaired.

46

AFRICAN ALLIANCE INSURANCE LIMITED

NOTES TO THE FINANCIAL STATEMENTS

11

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000

Group Life - - -

Current - - - -

(ii) Movement in Deferred Acquisition CostBalance at beginning of period - - - - Acquisition cost during the period - - - -

- - - -

At 31 Dec - - - -

12 Investment properties

At 1 January 10,258,314 10,794,603 8,620,913 9,285,488 Acquisition / (Disposal) 313,520 (988,237) 170,258 (988,238)Exchange difference adjustment (235,938) (92,738)Acquisition through disposal of subsidiaries - - - - Fair value gain on revaluation - 544,686 - 323,662

At 31 Dec 10,335,895 10,258,314 8,791,171 8,620,913

Of the investment properties, the following relates to insurance Funds:

Insurance funds 5,141,337 4,135,542 5,141,337 4,135,542 Shareholders funds 5,194,558 6,122,771 3,649,834 4,485,370

10,335,895 10,258,313 8,791,171 8,620,913

12.1

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000

12.2 A brief descriptions of the properties held by Company are as follows

1,937,180 1,937,180 1,937,180 1,937,180

2,821,000 2,821,000 2,821,000 2,821,000

899,099 793,170 899,099 793,170 874,806 845,370 874,806 845,370 22,552 22,552 22,552 22,552

- - - - - - - -

91,608 91,608 91,608 91,608 - - - -

116,091 91,032 116,091 91,032

828,833 819,000 828,833 819,000 112 Broad Street, Lagos 1,200,000 1,200,000 1,200,000 1,200,000

1,544,725 1,637,401 - -

10,335,895 10,258,314 8,791,171 8,620,913

A brief descriptions of the properties held by the company in its name are as follows:

1,937,180 1,937,180 1,937,180 1,937,180 91,608 91,609 91,608 91,608

- - - - 116,091 91,032 116,091 91,032 22,552 22,552 22,552 22,552

- - - - - - - -

112 Broad Street, Lagos 1,200,000 1,200,000 1,200,000 1,200,000

Sani Abacha Estate, Abuja 874,806 874,806

899,099 793,170 899,099 793,170

5,141,337 4,135,543 5,141,337 4,135,542

2,821,000 2,821,000 2,821,000 2,821,000

1,544,725 1,637,401

29A, Akin Adesola Street, Victoria Island828,833 819,000 828,833 819,000

Sani Abacha Estate, Abuja - 845,370 - 845,370

5,194,558 6,122,771 3,649,833 4,485,370

Total investment property 10,335,895 10,258,314 8,791,171 8,620,913

Land & Residential properties held in Ghana Life

Insurance

Group Company

The properties were valued by A.C. Otegbulu & Partners Estate surveyors & Valuers, a registered member of Financial Reporting Council of Nigeria

(FRCN/2013/NIESV/0000001582), in December, 2018 on the basis of determining the open market value of the investment properties. The open

market value of all the properties were determined using recent comparable market prices.

The properties are held for long term capital appreciation and rental income.

73 Oyemekun street, AkureProperty at Lekki Phase 1Property at Lekki SeagateProperty at Millennium Housing estate34 Marple street, London4 bedroom duplex, Ajah road, Ajah, Lagos

Land & Residential properties held in Ghana Life

Insurance

Breadfruit Street Marina LagosProperty at Millennium Housing estate

FOR THE PERIOD ENDED 31 DECEMBER 2019

Deferred acquisition costs Group Company(i) Analysis by

Amortised in the period-acquisition expenses (see note

34)

Breadfruit Street Marina Lagos

Land at Pankere Village, Abijo, Ibeju Lekki

Plot C4, Rumuogba Layout, Aba road, Port Harcourt

Sani Abacha Estate, Abuja

34 Marple street, London

29A Akin Adesola Street, Victoria Island, Lagos

A brief descriptions of the properties held by

the company in the name of Conau Limited are as

follows:

Land at Pankere Village, Abijo, Ibeju Lekki

4 bedroom duplex, Ajah road, Ajah, Lagos73 Oyemekun street, AkureProperty at Lekki Phase 1Property at Lekki Seagate

Plot C4, Rumuogba Layout, Aba road, Port Harcourt

47

PROPERTIES TITLE OF DOCUMENTS

DATE OF

ACQUISITI

ON

TIITLE

DOCUM

ENT NO

LOCATION

CARRYING

AMOUNT

N'000

Land at Pankere Village, Abijo, Ibeju Lekki

Deed of Assignment & Governor's Consent

for Application to assignment between Land

Owner and Conau Limited

Year 2008  N/A

Abijo GRA Ibeju

Lekki, Lagos

state

2,821,000

Building At 29a Akin

Adesola Street, VI,

Lagos

Lagos State Government Land

Certificate and Deed of Assignment

Year 2017 -

By transfer

from

Subsidiary

Lagos

State

Land

Registry

L07425

29a Akin

Adesola Street,

VI, Lagos

828,833

PROPERTIES TITLE OF DOCUMENTS DATE OF

ACQUISITION

TIITLE

DOCUMEN

T NO

LOCATIONCARRYING

AMOUNT N'000

Property Breadfruit Street Marina LagosLagos State Government Land Certificate and Deed

of AssignmentYear 1960 L03746

13/17 Breadfruit

Street, Lagos1,937,180

Property Rumuogba

Layout, Aba road, Port

Harcourt

Deed of Assignment & Certificate of Occupancy Year 2008  N/A

Plot C4,

Rumuogba Layout,

Aba road, Port

Harcourt

899,099

73 Oyemekun street, Akure Certificate of Right of Occupancy Year 1983  N/A73 Oyemekun

street, Akure22,552

Duplex at Sani Abacha Estate, Abuja

Deed of Assignment between Federal

Republic of Nigeria represented by EFCC and

Conau Limited

Year 2008 N/A

2220 Suez Canal

Crescent Sani

Abacha Estate,

874,806

Property at Millennium Housing estateLagos State Government Allocation Letter Year 2004  N/A

Block B House 9B

Oba Adeyinka

Oyekan Housing

Estate Lekki, Lagos

91,608

4 bedroom duplex, Ajah road, Ajah, LagosDeed of Assignment Year 2009 N/A 

Lekki Epe

Expressway, Ajah

Town, Lagos

116,091

Property 112 Broad Street, LagosLagos State Government Land Certificate and Deed

of AssignmentYear 1961 L03990 112 Broad Street, Lagos 1,200,000

12.3 INVESTMENT PROPERTIES NOT IN THE NAME OF AFRICAN ALLIANCE

INVESTMENT PROPERTIES IN THE NAME OF AFRICAN ALLIANCE

FOR THE PERIOD ENDED 31 DECEMBER 2019

FOR THE PERIOD ENDED 31 DECEMBER 2019

48

NOTES TO THE FINANCIAL STATEMENTS

13 Investment in subsidiaryThe company's investment in subsidiary is as stated below:

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000

- - - 3,000,000

- - 1,770,741 1,770,741

- - 1,770,741 4,770,741 Impairment allowance (note 13e) - - (1,228,012) (4,228,012)

- - 542,729 542,729

13a Axiom Air Limited:-

13b Ghana Life Insurance Company Limited

Movement in the investment in Ghana life is as follows

31-Dec-19 31-Dec-18

N’000 N’000

At 1 January 1,770,741 1,770,741

- -

-

At 31 Dec 1,770,741 1,770,741

13c Movement in impairment allowance in investment

At 1 January 4,228,012 4,216,936Impairment charge/(written back) for the year - 11,076 At 31 Dec 4,228,012 4,228,012

Movement in impairment charge

At 1 Jan

2019

Additional

charge

31-Dec-19

African Alliance Realty Company Limited - - - Axiom Air Limited 3,000,000 (3,000,000) -

Ghana Life Insurance company 1,228,012 - 1,228,012

4,228,012 (3,000,000) 1,228,012

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000

14 Investment In associate

Investment in Pension Alliance Limited 1,349,172 1,804,083 1,349,172 1,804,083

The movement in investment in associate is as follow:

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000

At 1 January 1,804,083 1,605,405 1,804,084 1,605,405 Effect of prior year errorsShare of profit after taxation: @ 49% 461,389 710,728 461,389 710,728 Less: Dividend received (916,300) (512,050) (916,300) (512,050)At 31 Dec 1,349,172 1,804,083 1,349,172 1,804,083

This represents the Company's 49% holding in Pensions Alliance Limited. The associated company is engaged in the provision of pension services in accordance with the Pension

Reform Act. The financial year end of the company is 31 December.

Company

The company was incorporated on 17 July 2008 to carry on the business of airline owners and management, provide air transport for public use; to provide all necessary and or

desirable services incidental to this objective, including booking, reservation, routing and ticketing services, baggage management, flight catering and entertainment and provision

of hotel accommodation. The company is wholly owned.

The company is a subsidiary of African Alliance Insurance Plc. The company is domiciled in Ghana and is permitted by its regulation to carry on the business of life insurance.

Company

Group

Group Company

FOR THE PERIOD ENDED 31 DECEMBER 2019

Company Group

Axiom Air Limited (Note 13c)

Ghana Life Insurance Company Limited (Note 13d)

49

NOTES TO THE FINANCIAL STATEMENTS

15 Intangible assets

Software in

Progress

Computer

Software

Total Computer

Software

Total

N’000 N’000 N’000 N’000CostAt 1 January 2019 12,626 128,369 140,995 98,975 98,975 Additions 16,641 16,641 10,522 10,522

At 31 December 2019 12,626 145,010 157,636 109,496 109,496

AmortisationAt 1 January 2019 - 83,652 83,652 79,199 79,199 Charge for the period 8,522 8,522 8,522 8,522

At 31 December 2019 - 92,174 92,174 87,721 87,721

Net book amount

At 31 December 2019 12,626 52,835 65,461 21,775 21,775 At 31 December 2018 12,626 44,717 57,343 19,776 19,776

15.1 Intangible asset

Software in

Progress

Computer

Software

Total Computer

Software

Total

N’000 N’000 N’000 N’000CostAt 1 January 2018 12,626 118,097 130,723 83,038 83,038 Additions - 10,272 10,272 15,937 15,937 At 31 December 2018 12,626 128,369 140,995 98,975 98,975

AmortisationAt 1 January 2018 - 66,578 66,578 62,125 62,125 Charge for the year - 17,074 17,074 17,074 17,074

At 31 December 2018 - 83,652 83,652 79,199 79,199

Net book amountAt 31 December 2018 12,626 44,717 57,343 19,776 19,776 At 31 December 2017 12,626 51,519 64,145 20,913 20,913

FOR THE PERIOD ENDED 31 DECEMBER 2019

Group Company

Group Company

50

NOTES TO THE FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 31 DECEMBER 2019

16 Property and equipment

Group

Land Building Motor Furniture Computer Office Plant & Aircraft Total

Vehicles & Fittings Equipment Equipment Machinery

N'000 N'000 N'000 N'000 N'000 N'000

Cost

At 1 January 2019 62,000 1,493,112 402,095 224,357 209,922 246,933 9,171 2,281,122 4,928,711

Additions - 2,751 26,694 87,662 79,401 - - 196,508

Disposal - - (29,995) (3,211) (1,762) (8,238) - - (43,206)

Derecognition (383,115) (383,115)

Exchange adjustment (15,219) (15,219)

Elimination of accum depreciation (10,004) (10,004)

Revaluation - 90,222 - 90,222

At 31 December 2019 62,000 1,177,747 372,100 247,840 295,822 318,095 9,171 2,281,122 4,763,896

Depreciation and impairment

At 1 January 2019 - - 304,740 104,215 140,942 80,282 9,171 2,281,122 2,920,472

Charge for the year - 10,004 52,385 18,727 33,882 27,184 - - 142,183

Disposal - - (29,995) (3,211) (1,041) (4,007) - - (38,254)

Exchange adjustment -

- -

Elimination of accum depreciation - (10,004) (10,004)

- -

At 31 December 2019 - - 327,130 119,731 173,784 103,459 9,171 2,281,122 3,014,397

Net book amount

At 31 December 2019 62,000 1,177,747 44,971 128,109 122,038 214,637 - - 1,749,500

At 31 December 2018 62,000 1,493,112 97,355 120,142 68,980 166,651 - - 2,008,239

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2018

Property and equipment Land Building Motor Furniture Computer Office Plant & Aircraft Total

Vehicles & Fittings Equipment Equipment Machinery

N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000

Cost

At 1 January 2018 62,000 1,351,101 460,969 153,782 179,616 125,079 9,171 2,281,122 4,622,839

Additions - - 92,510 71,955 31,872 121,951 - - 318,288

Disposal - - (151,384) (1,380) (1,566) (97) - - (154,427)

Liquidation of subsidiaries - - - - -

Exchange adjustment 23,615 23,615

Revaluation - 162,418 - - - - - - 162,418

Elimination of accum. Depreciation at revaluation - (44,022) (44,022)At 31 December 2018 62,000 1,493,112 402,095 224,357 209,922 246,933 9,171 2,281,122 4,928,711

Depreciation

At 1 January 2018 - 26,310 369,503 90,641 116,271 63,713 9,171 2,281,122 2,956,731

Charge for the year - 17,712 80,046 14,954 26,237 16,666 - - 155,615

Disposal - - (144,809) (1,380) (1,566) (97) - - (147,852)

Exchange adjustment - -

Liquidation of subsidiaries - - - - - -

Elimination of accum. Depreciation at revaluation - (44,022) - (44,022)

- - - - - - - - -

At 31 December 2018 - - 304,740 104,215 140,942 80,282 9,171 2,281,122 2,920,472

Net book amount

At 31 December 2018 62,000 1,493,112 97,355 120,142 68,980 166,651 - - 2,008,239

At 31 December 2017 62,000 1,324,791 91,466 63,141 63,345 61,366 - - 1,666,108

NOTES TO THE FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 31 DECEMBER 2019

Property and equipment

Company

Motor Furniture Computer Office Total

Land Building Vehicles & Fittings Equipment Equipment

N'000 N'000 N'000 N'000 N'000 N'000

Cost

At 1 January 2019 62,000 383,115 253,716 169,377 165,886 246,934 1,281,028 Additions - - 23,612 80,774 79,401 183,786 Disposal - - (29,995) (3,211) (1,762) (8,238) (43,206)Derecognition (383,115) (383,115)Revaluation - - - - - -

At 31 December 2019 62,000 - 223,721 189,778 244,898 318,096 1,038,493

Depreciation

At 1 January 2019 - - 194,724 69,962 107,014 80,282 451,983

Charge for the year - - 24,036 16,125 29,389 27,184 96,734

Disposal - (29,995) (3,211) (1,041) (4,007) (38,254)Elimination of accum dep on revaluation - - - Revaluation - - -

At 31 December 2019 - - 188,766 82,876 135,362 103,459 510,463

Net book amount

At 31 December 2019 62,000 - 34,955 106,901 109,536 214,637 528,030

At 31 December 2018 62,000 383,115 58,991 99,415 58,872 166,651 829,045

The only property of the Company under property plant and equipment located in 34 Association Avenue Ilupeju was demolished as a result of sudden structural defects. The

Company intend to rebuild it at a possible short period.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 31 DEC 2018

Property and equipment Motor Furniture Computer Office Total

Land Building Vehicles & Fittings Equipment Equipment

N'000 N'000 N'000 N'000 N'000 N'000

Cost

At 1 January 2018 62,000 394,308 306,014 99,748 137,036 125,079 1,124,186 Additions - - 92,510 71,009 30,416 121,951 315,887 Disposal - - (144,809) (1,380) (1,566) (97) (147,852)Elimination of accum dep on revaluation (34,338) (34,338)Revaluation - 23,145 - - - - 23,145

- - - - - At 31 December 2018 62,000 383,115 253,716 169,377 165,886 246,934 1,281,028

Depreciation

At 1 January 2018 - 26,308 260,904 59,216 86,764 63,713 496,905

Charge for the year - 8,030 67,065 12,124 21,816 16,666 125,702

Disposal - (133,245) (1,378) (1,566) (97) (136,286)

Arising on liquidation -

Elimination of accum dep on revaluation - (34,338) - (34,338)

At 31 December 2018 - - 194,724 69,962 107,014 80,282 451,983

Net book amount

At 31 December 2018 62,000 383,115 58,991 99,415 58,872 166,651 829,045

At 31 December 2017 62,000 368,000 45,110 40,532 50,272 61,366 627,281

NOTES TO THE FINANCIAL STATEMENTSFOR THE PERIOD ENDED 31 DECEMBER 2019

17 Statutory deposit

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000

Statutory deposit 354,871 358,182 200,000 200,000

Non-current 354,871 358,182 200,000 200,000

18 Insurance contract liabilities

GROSS

Outstanding claims (see note i) 58,380 65,967 58,380 65,967

Unearned premiums (see note ii) 429,227 180,885 429,227 180,885

1,600,006 1,090,763 1,600,006 1,090,763

Liability on annuity fund (see note iv) 31,089,889 28,113,829 31,089,889 28,113,829

5,015,088 5,659,187 3,431,603 3,697,761

Total Insurance liabilities (Gross) 38,192,590 35,110,631 36,609,105 33,149,205

Current 3,081,959 (1,267,820) 3,459,900 (1,387,161)Non-current 35,110,631 36,378,451 33,149,205 34,536,366

38,192,590 35,110,631 36,609,105 33,149,205

Recoverable from reinsurers

- -

Unearned premiums - 21,149 - 21,148

IBNR on Short term insurance contract 52,321 122,904 52,321 122,904

52,321 144,053 52,321 144,052

NET

58,380 65,967 58,380 65,967

429,227 180,885 429,227 180,885

1,600,006 1,090,763 1,600,006 1,090,763 31,089,889 28,113,829 31,089,889 28,113,829

5,015,088 5,659,187 3,431,603 3,697,761

Total Insurance liabilities (Net) 38,192,590 35,110,631 36,609,105 33,149,205

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000

At 1 January 65,967 52,446 65,967 52,446

8,967,121 8,740,678 8,967,121 8,740,678

- (8,974,709) (8,727,157) (8,974,709) (8,727,157)

At 31 Dec 58,380 65,967 58,380 65,966

Liability on long term insurance

contract - Life fund

Claims reported and loss adjustment

expenses

Total reinsurers’ share of insurance

liabilities

Claims reported and loss adjustment

expenses

Unearned premiums

This represents 10% of the regulatory minimum share capital deposited with the Central Bank of Nigeria as at 31

December 2019 in accordance with the requirement of section a(i) and section 10(3) of Insurance Act. Interest Income

earned on this deposit is included in investment income

Claims paid during the period

Liability on annuity fundLiability on long term insurance contract

(Life fund )

(i) The movement in outstanding claims during the year was as follows:

Group Company

Additions claims incurred during the

period (see note 32)Exchange difference arising from

translation

Claims incurred but not reported on Short

term insurance contract

Group Company

Short term insurance contract - Claims

incurred but not reported (IBNR) (see

note iii)

55

NOTES TO THE FINANCIAL STATEMENTSFOR THE PERIOD ENDED 31 DECEMBER 2019

(ii) The movement in unearned premium during the year was as follows:

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000

At 1 January 180,885 243,570 180,885 243,570 Change during the year 248,341 (62,685) 248,341 (62,685)

At 31 Dec 429,227 180,885 429,227 180,885

(iii) The movement in IBNR claims on Short term insurance during the year was as follows:

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000

At 1 January 1,090,763 1,047,146 1,090,763 1,047,146 Change during the year 509,243 43,617 509,243 43,617

At 31 Dec 1,600,006 1,090,763 1,600,006 1,090,763

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18

N’000 N’000 N’000 N’000

At 1 January 28,113,829 30,092,990 28,113,829 30,092,990

Change during the year 2,976,060 (1,979,161) 2,976,060 (1,979,161)

At 31 Dec 31,089,889 28,113,829 31,089,889 28,113,829

Group Company

Group Company

Group Company

(iv) The movement in annuity fund during the year was as follows:

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000

At 1 January 5,659,187 4,942,301 3,697,761 3,100,216 Exchange difference from translation - (112,071)

Change during the year (644,099) 828,957 (266,158) 597,545

At 31 Dec 5,015,088 5,659,187 3,431,603 3,697,761

(vi) Insurance contract liabilities at the end of the period were as follows:

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000

58,380 65,967 58,380 65,967 429,227 180,885 429,227 180,885 1,600,006 1,090,763 1,600,006 1,090,763

Liability on Annuity contract 31,089,889 28,113,829 31,089,889 28,113,829

5,015,088 5,659,187 3,431,603 3,697,761

38,192,590 35,110,631 36,609,104 33,149,205

(v) The movement in life fund contract (excluding annuity) during the year was as follows:

Group Company

Group Company

Outstanding claims Unearned premiums

Short term insurance contract- IBNR

Liability on long term insurance contract - Life

fund

NOTES TO THE FINANCIAL STATEMENTSFOR THE PERIOD ENDED 31 DECEMBER 2019 -

19 Investment contract liabilities

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000

At 1 January 5,841,759 4,927,104 5,841,759 4,927,104

Deposits received during the year 867,283 1,234,095 867,283 1,234,095

Withdrawals during the year (1,157,604) (458,757) (1,157,604) (458,757)

Guaranteed interest in the year 100,528 139,317 100,528 139,317

At 31 Dec 5,651,966 5,841,759 5,651,966 5,841,759

Non-current 5,651,966 5,841,759 5,651,966 5,841,759

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000

19.1 Liabilities on administered deposits

At 1 January 2,892,757 3,242,415 2,892,757 3,242,415

Deposits received during the year 628 513 628 513

Withdrawals during the year (807,552) (420,852) (807,552) (420,852)

Guaranteed interest in the year 61,228 70,680 61,228 70,680

At 31 Dec 2,147,061 2,892,757 2,147,061 2,892,757

19.2 Investment linked fundAt 1 January 2,949,003 1,684,689 2,949,003 1,684,689 Deposits received during the year 866,655 1,233,582 866,655 1,233,582

Withdrawals during the year (350,052) (37,905) (350,052) (37,905)

Guaranteed interest in the year 39,299 68,637 39,299 68,637

At 31 Dec 3,504,905 2,949,003 3,504,905 2,949,003

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000

20 Trade payable

Unallocated premium deposits 422,900 861,873 406,620 859,302

Due to co-insurance - - - -

Due To/from Reinsurance 147,148 (9,460) 147,148 (9,460)

Trade creditors 288,248 254,586 336 336

858,296 1,106,999 554,103 850,178

Current 858,296 1,106,999 554,103 850,178

The investment contract liabilities comprise interest-linked guaranteed investment funds. The movement in the investment contract

liabilities is shown below:Group Company

Investment contract liabilities consist of group deposit adminstered funds and account balance of policy holders under investment linked

insurance funds. Movement in the relevant funds are detailed below

Group Company

Group Company

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18

N’000 N’000 N’000 N’000

21 Other payables and accruals

Due to related party 139,024 - - -

Agent savings 154,050 175,047 145,075 131,744 PAYE and other witholding taxes payable 90,193 259,123 89,763 84,494 Provisions and accruals 48,099 13,219 27,469 13,219 Rent receivable 4,531 40,110 4,531 40,110 Due to Conau Limited - 140,365 - 140,365 Other creditors 177,640 51,727 177,640 51,727

Current (Payable within the period) 613,536 679,591 444,478 461,659

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000

22.1 Retirement benefit asset - -

22.2 Retirement benefit liabilities

Staff pension scheme 37,832 30,880 37,832 30,880 Staff defined benefit plan 28,914 11,810 28,914 11,810

66,746 42,690 66,746 42,690

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000

23 Borrowings

Secured -at amortised costBank overdraft (i) - Overdraft Facility (note ii) 991,293 507,077 934,160 482,145

- -

991,293 507,077 934,160 482,145

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000

At 1 January 507,077 287,652 482,145 182,714 Additions 500,000 500,881 500,000 500,880 Transaction cost (4,000) (5,417) (4,000) (5,417)Interest expense 90,699 60,296 90,699 60,296 Repayment (102,483) (336,335) (134,684) (256,328)

At 31 Dec 991,293 507,077 934,160 482,145

24 Tax payable

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000

Company income tax payable:At 1 January 826,742 594,024 774,245 545,285 Charge to profit and loss 207,670 273,662 207,645 244,662 Transfer of liabilities upon liquidation - - - -

(4,394) (22,279)

Tax paid in the year (39,051) (18,665) (39,051) (15,702)

At 31 Dec 990,967 826,742 942,838 774,245

Current 990,967 826,742 942,838 774,245

Movement in overdraft facility

and term loan

(i)       Bank overdraft represents current accounts held with banks which was overdrawn as at the financial reporting date.

Group Company

Group Company

(ii)    Overdraft facility represents the sum of N450.88 Million granted to the company by Fidelity Bank plc, the sum of N300Million

from FCMB and the sum of N250Million from Sterling Bank to meet working capital requirements. The facility has a tenor of 12

months with a nominal interest rate of 19% (effective interest rate of 19.33%). The repayment term is quarterly repayment of

principal and interest.

Foreign exchange difference arising

from translation

Group Company

Group Company

Group Company

NOTES TO THE FINANCIAL STATEMENTSFOR THE PERIOD ENDED 31 DECEMBER 2019 -

25 Deferred tax liability31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18

N’000 N’000 N’000 N’000The analysis of deferred tax liabilities is as follows:

- -

379,755 428,182 92,107 92,107

379,755 428,182 92,107 92,107

The movement on the deferred tax liabilities account is as follows:

25a At 1 January 428,182 384,873 92,107 92,107

- -

- - - -

(48,427) (41,359)

Income statement charge (note 38) - 84,668 - -

At 31 Dec 379,755 428,182 92,107 92,107

Non- current 379,755 428,182 92,107 92,107

25b Deferred tax assetThe movement on the deferred tax asset account is as follows:At 1 January 148,195 148,195 146,476 146,476 Exch

(248) -

Income statement charge (note 42) - - - -

At 31 Dec 147,947 148,195 146,476 146,476

Non- current 147,947 148,195 146,476 146,476

26 Share capitalOrdinary Shares 31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18

Number Number Number Number

30,000,000 30,000,000 30,000,000 30,000,000

N’000 N’000 N’000 N’000

10,292,500 10,292,500 10,292,500 10,292,500

Number of shares 31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-1820,585,000 20,585,000 20,585,000 20,585,000

Paid up during the year ('000): - - - -

At 31 Dec 20,585,000 20,585,000 20,585,000 20,585,000

Share premium

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18

N’000 N’000 N’000 N’000

14,365,133 14,365,133 14,365,133 14,365,133 - - - -

At 31 Dec 14,365,133 14,365,133 14,365,133 14,365,133

27 Contingency reserves

At 1 January 975,947 908,259 891,345 839,681

Transfer from retained earnings 98,463 67,688 74,991 51,664

At 31 Dec 1,074,410 975,947 966,336 891,345

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000

28At 1 January (30,218,534) (27,275,850) (28,940,682) (26,146,738)Liquidation of subsidiaries - - - -

Opening ECL Adjustment (178,627) - (83,716)Transfer to contingency reserves (99,903) (67,901) (74,991) (51,664)

- - -

Profit for the period (6,828,904) (2,696,156) (6,696,556) (2,658,564)

(37,147,341) (30,218,534) (35,712,229) (28,940,682)

Company

Deferred tax liability to be incurred within 12

Deferred tax liability to be incurred after more than 12

months

Tax charge recognised in other comprehensive income

Shares at the beginning of the year('000)

Authorised share capital ('000)

Transfer of liabilities upon liquidation of subsidiaries

Foreign exchange difference arising from translation

Foreign exchange difference arising from translation

Group

Group Company

Paid up share capital of 20.585 billion ordinary shares of

50 kobo each

At 31 Dec

At 1 January

Retained earnings

In accordance with the insurance act, a contingency reserve is credited with the greater of 1% of total premiums or 10% of net profit. This shall

accumulate until it reaches the amount of greater of minimum paid-up capital or 50 percent of net premium

Group Company

Fair value reserves on properties of subsidiaries

liquidated

60

NOTES TO THE FINANCIAL STATEMENTSFOR THE PERIOD ENDED 31 DECEMBER 2019

29 Fair value reserves

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18

N’000 N’000 N’000 N’000

1,165,442 1,004,524 425,693 367,862

(413,842) 160,594 (413,842) 23,145

600 (650) 600 (650)

Deferred tax - (34,362)

Remeasurement of the net defined benefit liability(asset) - 35,336 - 35,336

- -

Fair value changes - Financial Assets FVOCI 2,508,352 2,508,352

3,260,552 1,165,442 2,520,803 425,693

29a Fair value changes-statement of comprehensive income

31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18

N’000 N’000 N’000 N’000

(413,842) 160,594 (413,842) 23,145

600 (650) 600 (650)

Fair value cahnges - Financial Asset FVOCI 2,508,352

2,508,352

- (34,362)

- 35,336 - 35,336

2,095,110 160,918 2,095,110 57,831

3 months 12 months 3 months 12 months 3 months 12 months 3 months 12 months

N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000

30 Gross premium income

Individual life 1,064,946 4,091,576 1,398,917 3,756,235 698,456 2,650,880 824,370 2,127,054 Group life 406,163 2,328,513 164,920 915,838 381,857 2,281,228 98,972 915,838 Annuity 6,356 40,659 10,211 544,011 6,356 40,659 10,211 544,011 Takaful 84,947 430,788 65,177 240,600 84,947 430,788 65,177 240,600 Esusu 1,199,083 2,095,528 1,121,192 1,338,893 1,199,083 2,095,528 1,121,192 1,338,893

Gross premium written 2,761,495 8,987,063 2,760,416 6,795,577 2,370,699 7,499,083 2,119,921 5,166,396

Unearned premium

Group life (100,034) (248,341) 312,386 62,685 (100,034) (248,341) 312,386 62,685

2,661,462 8,738,722 3,072,802 6,858,262 2,270,666 7,250,742 2,432,307 5,229,081

31

Gross reinsurance expense 28,708 (464,852) (16,972) (184,563) (134,749) (547,823) (10,283) (176,104)Changes in prepaid reinsurance - - 15,158 91,731 15,158

28,708 (464,852) (16,972) (169,405) (134,749) (456,092) (10,283) (160,946)

32 Fees and commission income

Group Life 37,314 147,530 332 41,663 37,314 147,530 332 41,663 Individual Life 476 2,100 2,259 476 2,100 2,259

37,790 149,630 332 43,922 37,790 149,630 332 43,922

Change in value of available for sale

financial assets (net of taxes)

Insurance premium ceded to

reinsurers

Gain on revaluation on land and

building

Group Company

At 1 January

Gain/(Derecognition) on revaluation

on land and building

At 31 Dec

Change in value of available for sale

financial assets (net of taxes)

CompanyGroup

Group Company

31-Dec-2018 31-Dec-2019 31-Dec-2018

Income tax on items that will not be

subsequently reclassfied to profit or

loss

Remeasurement of the net defined

benefit liability(asset)

31-Dec-2019

61

NOTES TO THE FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 31 DECEMBER 2019

33 Insurance claims and loss adjustment expenses

a Group

12 months

N’000 N’000 N’000

Gross Reinsurance Net

Individual life 2,397,782 2,397,782

Group life 574,914 574,914

Annuity 4,474,468 4,474,468

Takaful 404,240 404,240

Esusu 2,176,846 2,176,846

10,028,249 10,028,249

-

(7,587) (7,587)

Claims incurred during the period 10,020,662 - 10,020,662

IBNR on Short term insurance contract 509,243 (55,562) 453,681

10,529,905 (55,562) 10,474,343

3 months

N’000 N’000 N’000

Gross Reinsurance Net

Individual life 601,760 601,760

Group life 30,833 30,833

Annuity 1,097,866 1,097,866

Takaful 73,735 73,735

Esusu 1,201,157 1,201,157

3,005,351 3,005,351

-

(207,535) (207,535)

Claims incurred during the period 2,797,816 - 2,797,816

IBNR on Short term insurance contract 415,378 26,025 441,403

3,213,194 26,025 3,239,219

12 months

N’000 N’000 N’000

Gross Reinsurance Net

Individual life 2,076,755 - 2,076,755

Group life 921,892 921,892

Annuity 4,532,002 4,532,002

Takaful 284,689 284,689

Esusu 1,797,176 - 1,797,176

9,612,514 9,612,514

13,521 13,521

Claims incurred during the period 9,626,035 - 9,626,035

IBNR on Short term insurance contract 43,617 (203,837) (160,220)

9,669,652 (203,837) 9,465,815

3 months

N’000 N’000 N’000Gross Reinsurance Net

Individual life 675,798 - 675,798Group life 107,929 107,929Annuity 1,125,152 1,125,152Takaful 55,523 55,523Esusu 1,156,434 - 1,156,434

3,120,837 3,120,837 (459,309) (459,309)

Claims incurred during the period 2,661,528 - 2,661,528 IBNR on Short term insurance contract 332,319 - 332,319

2,993,847 - - 2,993,847

31-Dec-19

Increase in the expected cost of claims for unexpired risks

31-Dec-18

Increase in the expected cost of claims for unexpired risks

31-Dec-19

Increase in the expected cost of claims for unexpired risks

31-Dec-18

Increase in the expected cost of claims for unexpired risks

Insurance claims and loss adjustment expenses

b Company

12 months

N’000 N’000 N’000Gross Reinsurance Net

Individual life 1,344,242 - 1,344,242 Group life 574,914 574,914 Annuity 4,474,468 4,474,468 Takaful 404,240 404,240 Esusu 2,176,846 2,176,846

8,974,709 8,974,709

(7,587) -

(7,587)

Claims incurred during the year 8,967,121 - 8,967,121 IBNR on Short term insurance contract 509,243 (55,562) 453,681

9,476,364 (55,562) 9,420,802

Insurance claims and loss adjustment expenses

b Company

3 months

N’000 N’000 N’000Gross Reinsurance Net

Individual life 346,180 - 346,180 Group life 30,833 30,833 Annuity 1,097,866 1,097,866 Takaful 73,735 73,735 Esusu 1,201,157 1,201,157

2,749,772 2,749,772 (207,535) - (207,535)

Claims incurred during the year 2,542,236 - 2,542,236 IBNR on Short term insurance contract 415,378 28,532 443,910

2,957,614 28,532 2,986,147

12 months

N’000 N’000 N’000Gross Reinsurance Net

Individual life 1,191,398 - 1,191,398 Group life 921,892 921,892 Annuity 4,532,002 4,532,002 Takaful 284,689 284,689 Esusu 1,797,176 - 1,797,176

8,727,157 8,727,157

13,521

-

13,521

Claims incurred during the period 8,740,678 - 8,740,678 IBNR on Short term insurance contract 43,617 (203,837) (160,220)

8,784,295 (203,837) 8,580,458

3 months

N’000 N’000 N’000

Gross Reinsurance Net

Individual life 333,898 - 333,898

Group life 104,163 104,163

Annuity 1,125,152 1,125,152

Takaful 55,523 55,523

Esusu 1,156,434 - 1,156,434

2,775,171 2,775,171

(459,309) - (459,309)

Claims incurred during the period 2,315,862 - 2,315,862

IBNR on Short term insurance contract 332,319 - 332,319

2,648,181 0 2,648,181

34 Underwriting expenses

3 months 12 months 3 months 12 months 3 months 12 months 3 months 12 months

N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000

Acquisition cost (see note 33.1) 171,443 514,871 36,624 417,965 171,443 514,871 36,624 230,507

Maintenance cost 212,162 842,451 181,084 574,325 153,502 663,276 86,656 574,325

383,605 1,357,322 217,708 992,290 324,946 1,178,148 123,280 804,832

31-Dec-2019 31-Dec-2018 31-Dec-2019 31-Dec-2018

31-Dec-19

31-Dec-18

Increase in the expected cost of claims for unexpired risks

CompanyGroup

Increase in the expected cost of claims for unexpired risks

31-Dec-19

Increase in the expected cost of claims for unexpired risks

31-Dec-18

Increase in the expected cost of claims for unexpired risks

NOTES TO THE FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 31 DECEMBER 2019

3 months 12 months 3 months 12 months 3 months 12 months 3 months 12 months

N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000

34.1 Acquisition costCommission paid 171,443 514,871 36,624 417,965 171,443 514,871 36,624 230,507 Changes in deferred acquisition cost - - - - -

171,443 514,871 36,624 417,965 171,443 514,871 36,624 230,507

35 Changes in long term insurance contracts

2,581,306 2,976,060 (250,188) (1,979,161) 2,581,306 2,976,060 (250,188) (1,979,161)

1,232,750 (110,172) 100,194 828,957 1,095,925 (266,158) 10,140 597,545

3,814,056 2,865,888 (149,994) (1,150,204) 3,677,231 2,709,902 (240,047) (1,381,616)

36 Other income

Rental income 12,775 50,077 8,200 32,745 12,775 50,077 8,200 30,020 Gain upon disposal of investment properties - - 209,126 - - - 209,126 - Gain on disposal of PPE (1,687) 2,428 200 (10,390) (1,687) 2,428 200 (10,390)Sundry charges on investment linked products 4,608 9,214 3,865 15,173 4,608 9,214 3,865 15,173 Gain on disposal of investment - 43 - 252,826 - 43 - 252,826 Sundry( loss)/ income 1,279 6,282 17,042 7,618 1,090 5,646 1,932 7,618

16,975 68,044 238,432 297,972 16,786 67,408 223,322 295,247

37

3 months 12 months 3 months 12 months 3 months 12 months 3 months 12 months

N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000 206,596 445,404 101,642 553,578 39,524 209,642 84,967 479,998 309,138 2,394,739 686,427 2,590,217 309,138 2,394,739 686,427 2,590,217

- - - 39,115 - - - 39,115

2,048 21,407 993 12,711 2,048 21,407 993 12,711 - 27,873 - 33,037 - 27,873 - 33,037

Interest income on loans and receivables 52 17,241 1,759 13,140 52 17,241 1,759 13,140

517,834 2,906,665 790,820 3,241,798 350,762 2,670,902 774,145 3,168,218

37a Loss from investment contract:

182 585 246 1,370 182 585 246 1,370 Excess reserve on deposit administration - - - - Shortfall in deposit administration (note 36b) - - Guaranteed interest (17,460) (100,528) (54,652) (139,317) (17,460) (100,528) (54,652) (139,317)

(17,278) (99,942) (54,406) (137,947) (17,278) (99,942) (54,406) (137,947)

38 Impairment on assets

3 months 12 months 3 months 12 months 3 months 12 months 3 months 12 months

N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000 - - - - -

- - 5,437 (1,250)

- - (4,484) (1,250)

Impairment on trade receivables (8.1) - - - -

-

(2,926) - -

- (2,926)

-

Specific impairment no longer required - (4,188) - (4,188)

- - 11,076 - 11,076

- (2,926) 5,437 5,638 - (2,926) (4,484) 5,638

31-Dec-201831-Dec-201931-Dec-201831-Dec-2019

CompanyGroup

Impairment on investment in subsidiary (see note 13e)

Impairment on other receivables and prepayments (see note

10.1)

Impairment on unquoted equities (see note 7.2)

Impairment on loans and receivables (see note 7.4)

Changes in annuity fund

Changes in individual life fund excluding annuity

Interest income on cash and bank balances

Interest income on bonds

Dividend IncomeInterest income on statutory deposit

Investment income

Group Company

Investment income from investment contract liabilities

Investment income on planned asset

Group Company

31-Dec-201831-Dec-201931-Dec-201831-Dec-2019

31-Dec-201831-Dec-201931-Dec-201831-Dec-2019

64

NOTES TO THE FINANCIAL STATEMENTSFOR THE PERIOD ENDED 31 DECEMBER 2019

39

3 months 12 months 3 months 12 months 3 months 12 months 3 months 12 months

N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000

Wages and salaries 244,311 853,090 261,977 881,544 178,086 659,085 168,467 610,050 Other Staff Cost 38,636 213,373 74,095 133,076 33,308 178,922 22,730 133,075 Defined contribution pension costs 13,419 53,296 14,520 92,670 8,299 36,390 8,407 92,670 Defined benefit pension cost 6,287 23,230 12,433 64,157 5,077 15,530 18,292 64,157

302,653 1,142,989 363,025 1,171,447 224,770 889,927 217,897 899,952

40 Other operating and administrative expenses

3 months 12 months 3 months 12 months 3 months 12 months 3 months 12 months

N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000

Directors’ emoluments 29,222 87,115 29,322 12,500 10,000 62,546 5,250 12,500 Bank Charges 658 90,335 40,304 54,916 4,122 59,469 15,571 54,916 Auditors' remuneration 17,500 17,500 17,500 17,500 17,500 17,500 - 17,500 Depreciation 73,277 142,183 49,525 125,700 40,323 96,734 28,564 125,700 Amortisation 3,157 8,522 2,975 17,074 3,157 8,522 2,975 17,074 Consultancy expenses 57,830 396,484 122,630 296,051 57,170 381,772 112,712 296,051 Security 11,653 29,365 21,594 14,328 3,827 13,587 6,066 14,328 Rent and rates 52,740 162,043 38,858 438,925 55,095 151,581 31,933 130,760 General maintenance and running costs 43,872 208,420 93,519 128,337 30,253 144,721 40,395 128,337 Advert and Publicity 98,810 452,984 113,197 219,588 98,292 448,517 109,102 219,588 Telecommunications 6,607 31,373 15,836 24,201 3,045 17,519 8,654 24,201 Dues and Subscription 519 9,006 3,212 27,873 354 7,277 1,959 27,873 Travels and accomodation 86,965 323,282 67,354 307,076 79,269 293,057 89,368 307,076 Insurance supervision fees 2,510 72,624 0 62,230 - 64,005 - 62,230 Insurance expenses 4,878 29,226 6,598 10,746 4,483 25,718 2,070 10,746

Printing and stationeries 11,696 67,624 2,595 13,275 11,202 58,906 2,175 13,275 Industrial training fund - 6,578 0 3,441 - 6,578 - 3,441 Entertainment 9,362 34,810 15,107 18,765 9,179 30,818 5,596 18,765 Regulatory levies 607 12,011 9,899 34,700 - 9,195 75 34,700 Penalties - 0 0 18,410 - - - 18,410 Lease 12,029 41,524 8,140 25,851 12,029 41,524 8,140 25,851 Office ICT expenses 20,310 126,107 20,736 113,651 20,311 126,046 20,701 113,651 Donation - 150 700 900 - 150 700 900 Office cleaning expenses 8,361 26,567 3,817 9,759 8,361 26,567 3,817 9,759 Medical expenses 1,942 6,289 9,566 2,309 167 1,975 435 2,309 Cost of sales restaurant - - 0

- - Other Adminstrative Expenses 17,040 118,511 -1,328 67,314 18,754 115,089 8,048 67,298

571,544 2,500,633 691,655 2,065,419 486,893 2,209,373 504,305 1,757,238

41 ECL Allowance on cash and cash equivalents and Financial AssetsIFRS 9 Opening

ECL

Movement during

the year Balance c/d IFRS 9 Opening ECL

Movement during

the year Balance c/d

N’000 N’000 N’000 N’000 N’000 N’000Cash & Cash Equivalents 20,034 (2,333) 17,701 14,438 (1,501) 12,937 Amortised Cost-bonds 37,776 (2,518) 35,258 37,776 (2,518) 35,258 Agency Loans 89,279 (19,915) 69,364 37,992 1,370 39,362 Loans and Receivables 325,776 (29,650) 296,126 243,286 19,779 263,065

472,865 (54,417) 418,448 333,492 17,129 350,621

3 months 12 months 3 months 12 months 3 months 12 months 3 months 12 monthsN’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000

42 Finance cost

Interest expense on borrowings 33,161 90,699 15,244 60,296 33,161 90,699 17,457 60,296

43 Translation reserve

Balance at beginning of year 237,295 186,441

(159,806) 50,854 Balance at end of year 77,489 237,295

44 Non-controlling interestBalance at beginning of year 8,353 7,816 Opening ECL Adjustment (1,260) Share of profit/(loss) (13,535) (459) Share of contingency reserve 1,439 213

1,032 675

12,232 1,368 9,521 8,353

3 months 12 months 3 months 12 months 3 months 12 months 3 months 12 monthsN’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000

45 Income tax expenseCurrent tax on profits for the year (note 24) 77,250 207,670 (282,277) 273,662 77,250 207,645 (47,458) 244,662 Deferred tax charge for the year (note 25) - - - - - -

77,250 207,670 (282,277) 273,662 77,250 207,645 (47,458) 244,662

31-Dec-201831-Dec-201931-Dec-201831-Dec-2019

31-Dec-201831-Dec-201931-Dec-201831-Dec-2019

Group Company

The movement in translation reserve during the year is shown below:

Exchange difference arising on translating the foreign operation

Share of foreign exchange translation difference

Share of gain on revaluation of land and building

31-Dec-201831-Dec-201931-Dec-201831-Dec-2019

31-Dec-201831-Dec-201931-Dec-201831-Dec-2019

Employee benefit expenses

Group Company

Group Company

CompanyGroup

65