TAKAFUL PAKISTAN LIMITED
ANNUAL REPORT 2016
Takaful Pakistan Limited Annual Report 2016
CONTENTS
Corporate Information 03
Vision, Mission and Ambition 05
Management Team 06
Branches 06
Director’s Report 07
Six Years Glance 11
Pattern of Shareholding 12
Shariah Audit Report 13
Review Report to the Members on Compliance with Code of Corporate Governance 16
Statement of Compliance with the Code of Corporate Governance 18
Auditor’s Report to the Members 23
Financial Statements 25
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Takaful Pakistan Limited Annual Report 2016
CORPORATE INFORMATION
Directors Syed Abdul Razzaq (Chairman) Syed Tariq Husain Mr. Ahmad Shuja Kidwai Dr. Mumtaz A. Hashmi Mr. Aadil Saleh Mr. Ashraf Ali Velji Mr. Haseeb Ahmed Chief Executive Officer Syed Tariq Husain
Chief Financial Officer and Muhammad Irfan Company Secretary
Shariah Advisor Mufti Sajjad Ashraf Usmani
Auditor Riaz Ahmed & Co. Chartered Accountants
Legal Advisors K- Legal Advocates, Consultants, Attorneys
Mohsin Tayebaly & Co. Corporate Legal Consultants, Barristers & Advocates High Courts & Supreme Court
Head office 6th floor, Business Centre, Plot No 19-1-A, Block -6, P.E.C.H.S., Shahrah-e-Faisal, Karachi-75400, Pakistan. UAN : (021) 111-875-111 (+92-21) 34373171-80 Tel : (10 Lines) Fax : (+92-21) 34373195-6 E-mail : [email protected] Website : www.takaful.com.pk
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Takaful Pakistan Limited Annual Report 2016
Bankers Meezan Bank Limited Bank Islami Pakistan Limited Dubai Islamic Bank Limited Al Baraka Bank (Pakistan) Limited
Habib Bank Limited (Islamic Banking Division) Faysal Bank Limited (Islamic Banking Division) Askari Bank Limited ( Islamic Banking Division) Bank AlFalah Limited (Islamic Banking Division)
Habib Metropolitan Bank (Islamic Banking Division) National Bank of Pakistan (Islamic Banking Division) Bank of Khyber (Islamic Banking Division) UBL (Islamic Banking Division) NRSP Micro Finance Bank Limited (Islamic Banking Division)
BOARD COMMITTEES
Audit Committee
Syed Abdul Razzaq (Chairman) Dr. Mumtaz A. Hashmi Mr. Ashraf Ali Velji
Human Resource Committee
Aadil Saleh (Chairman) Ahmed Shuja Kidwai Dr. Mumtaz A. Hashmi
Investment Committee
Mr. Ashraf Ali Velji (Chairman) Syed Tariq Husain Syed Abdul Razzaq
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Takaful Pakistan Limited Annual Report 2016 OUR VISION
To spread Takaful benefits beyond borders, beyond Time!
OUR MISSION
To deliver Takaful as a viable alternative to conventional insurance. To become the ‘top-of-the-mind’ Takaful brand for our Participants in terms of competitiveness, service standards and business ethics To give value for money to our shareholders and make Takaful Pakistan their prized asset. To become an ideal organization for our employees that encourages them to achieve self-actualization and growth. To contribute positively and proactively for the welfare of our society at large as well as for the preservation of our environment.
OUR AMBITION
To be a role model for the contemporary insurance industry and eventually bring it in conformity with the Shariah compliant Takaful mode of insurance.
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Takaful Pakistan Limited Annual Report 2016
MANAGEMENT TEAM Syed Tariq Husain Chief Executive Officer Muhammad Irfan Chief Financial Officer and Company Secretary Moeen ud Din Branch Head – Lahore Raza Ali Branch Head – Peshawar Ghulam Mustafa Branch Head – Faisalabad Jawwad Bin Yousuf Head of Motor & Accident Underwriting Muhammad Ayaz Head of Fire / Engineering and Administration Shaikh Azeemuddin Head of Human Resources Ikram Ullah Khan Head of Marine Underwriting Rana Muhammad Javed Head of Claims Tahera Fatima Head of Retakaful
BRANCHES / OFFICES
Branch Branch Address Karachi 6th floor, Business Centre, Plot No 19-1-A, Block -6, P.E.C.H.S., Shahrah-e-Faisal, Karachi. UAN: (021) 111-875-111 Fax: (021) 34373195-6
Lahore 130-E/1, Main Boulevard Gulberg-III, Lahore. UAN: (042) 111-875-111 Fax: (042) 35716790
Peshawar 6th Floor, State Life Building, 34-The Mall, Peshawar Cantt, Peshawar. UAN: (091) 111-875-111 Fax: (091) 5260107
Faisalabad Office # 3, 2nd floor, Wahab Centre, Main Susan Road, Faislabad. UAN: (041) 111-875-111 Fax: (041) 8720063
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7 8 9 10 Takaful Pakistan Limited Annual Report 2016
TAKAFUL PAKISTAN LIMITED Key Financial Data (Rupees in thousands)
2 0 1 6 2 0 1 5 2 0 1 4 2 0 1 3 2 0 1 2 2 0 1 1 BALANCE SHEET Paid up capital 300,000 300,000 300,000 300,000 300,000 300,000 Accumulated Profit/(Loss) (85,630) (107,391) (136,878) (142,971) (158,799) (166,216) Qard-e-hasna (34,835) (20,239) (11,211) - - - Shareholders’ Equity 179,534 172,370 151,911 157,029 141,201 133,784 Participants’ Takaful Fund 500 - - 5,015 33,773 43,094 Cash and Bank Balances PTF 118,782 148,869 182,212 184,737 176,768 176,658 Cash and Bank Balances SHF 119,350 178,885 105,068 97,282 73,884 62,537 Investments PTF 63,328 47,196 10,008 4,316 4,671 9,881 Investments SHF 75,478 20,773 25,517 34,671 35,499 47,890 Total Assets PTF 310,453 334,416 355,537 304,313 302,929 304,486 Total Assets SHF 248,859 243,026 221,639 209,328 195,170 179,416 Total Liabilities PTF 309,953 334,416 355,536 304,810 270,781 257,333 Total Liabilities SHF 69,325 70,657 69,728 52,299 53,969 44,968 REVENUE Gross Contribution Revenue 219,457 333,568 274,350 220,515 212,218 165,283 Net Contribution Revenue 239,063 262,210 169,408 160,723 151,066 148,768 Net Claims 128,690 134,056 93,986 101,788 78,292 73,584 Gross Wakala Fee 87,783 133,427 109,740 88,206 84,887 66,113 Earned Wakala Fee 115,760 131,099 93,529 89,222 77,295 72,074 Underwriting Result PTF (23,001) (27,162) (27,769) (38,910) (22,268) (6,112) Investment Income PTF (Net) 8,889 9,970 11,549 10,009 13,001 10,516 Investment Income SHF 9,196 10,450 4,766 9,947 6,521 12,619 Surplus/(Deficit) PTF (14,096) (9,028) (16,226) (28,758) (9,322) 4,321 Profit/(loss) Before Tax 24,092 33,704 10,970 17,758 9,529 6,003 Profit/(loss) After Tax 21,198 30,426 8,632 15,527 8,448 3,907 Total Comprehensive income / (loss) 21,760 29,486 6,093 15,828 7,417 3,243 Earnings Per Share 0.71 1.01 0.29 0.52 0.15 0.13 Dividend % 0% 0% 0% 0% 0% 0% Bonus % 0% 0% 0% 0% 0% 0%
11 Takaful Pakistan Limited Annual Report 2016
Pattern of Shareholding As at 31 December 2016
Number of Shareholdings Shares Held shareholders From To
1 100 - 7 101 500 3,500 1 501 5000 4,500 1 5001 600000 500,500 1 600001 2100000 2,044,500 1 2100001 2600000 2,550,000 2 2600001 3000000 5,999,500 2 3000001 6000000 10,198,000 1 6000001 9000000 8,699,500
Categories of shareholders Shareholders Shares held Percentage % Associated Companies, Undertakings and Related Parties House Building Finance Company Limited 8699500 Al Baraka Bank Pakistan Limited 5099000 Sitara Chemical Industries Limited 2999500 3 16,798,000 55.99
Directors
Dr. Mumtaz Ahmed Hashmi 500 Haseeb Ahmed 500 Ahmed Shuja Kidwai 500 Syed Abdul Razzaq 500 Syed Tariq Husain 500500 5 502,500 1.68
Joint Stock Company 2 3004500 10.02
Foreign Investors 3 9693500 32.31
Individuals/Others 3 1500 0.01
Total 16 30,000,000 100
Shareholder holding 5% or more voting interest
House Building Finance Company Limited 8,699,500 Al Baraka Bank Pakistan Limited 5,099,000 Al-Buhaira National Insurance Company Limited 5,099,000 Arif Habib Corporation Limited 3,000,000 Sitara Chemical Industries Limited 2,999,500 Mal-Alkhaleej Investments 2,550,000 Emirates Investment Group 2,044,500 12 29,491,500 13 14 15 16 17 18 19 20 21 22 23 24 Takaful Pakistan Limited Annual Report 2016
TAKAFUL PAKISTAN LIMITED BALANCE SHEET AS AT 31 DECEMBER 2016
2016 2015 Shareholders' Participants' Aggregate Aggregate Note Fund Takaful Fund ------(Rupees)------SHARE CAPITAL AND RESERVES Authorised share capital 70,000,000 (31 December 2015: 50,000,000) ordinary shares of Rs. 10 each 3.1 700,000,000 - 700,000,000 500,000,000
Issued, subscribed and paid-up share capital 3.2 300,000,000 - 300,000,000 300,000,000 Accumulated losses (85,630,516) - (85,630,516) (107,391,175) Qarda-e-hasna to waqf (34,835,319) - (34,835,319) (20,238,961) 179,534,165 - 179,534,165 172,369,864
WAQF / PARTICIPANTS' TAKAFUL FUND (PTF) Ceded money - 500,000 500,000 500,000 Accumulated deficit - (34,835,319) (34,835,319) (20,738,961) Qard-e-hasna from Shareholders' Fund - 34,835,319 34,835,319 20,238,961 - 500,000 500,000 -
Underwriting provisions Provision for outstanding claims (including IBNR) - 111,271,947 111,271,947 96,859,677 Provision for unearned contributions - 73,195,413 73,195,413 143,138,661 Contribution deficiency reserve - 2,305,153 2,305,153 4,684,834 Unearned re-takaful rebate - 3,345,497 3,345,497 3,212,086 Total underwriting provisions - 190,118,010 190,118,010 247,895,258
Creditors and accruals Contributions received in advance - 1,073,312 1,073,312 509,893 Amounts due to takaful/re-takaful companies - 84,398,303 84,398,303 59,684,818 Taxation - provision less payment - - - Unearned wakala fees 29,278,165 - 29,278,165 57,255,465 Wakala fees payable and other account balances - 23,612,843 23,612,843 10,137,095 Mudarib fees payable - 3,452,972 3,452,972 2,051,097 Accrued expenses 961,485 - 961,485 1,352,615 Other creditors and accruals 4 39,085,751 7,297,541 46,383,292 26,186,569 69,325,401 119,834,971 189,160,372 157,177,552
69,325,401 309,952,981 379,278,382 405,072,810
TOTAL EQUITY AND LIABILITIES 248,859,566 310,452,981 559,312,547 577,442,674
CONTINGENCIES AND COMMITMENTS 5 (Continued) 25 Takaful Pakistan Limited Annual Report 2016
TAKAFUL PAKISTAN LIMITED BALANCE SHEET AS AT 31 DECEMBER 2016
2016 2015 Shareholders' Participants' Aggregate Aggregate Note Fund Takaful Fund ------(Rupees)------Cash and bank deposits Cash and other equivalents 98,337 433,510 531,847 191,146 Current and saving accounts 6,871,379 17,619,748 24,491,127 21,953,312 Deposits maturing within 12 months 112,380,000 100,729,000 213,109,000 305,610,000 6 119,349,716 118,782,258 238,131,974 327,754,458
Long term deposits 7 1,718,034 - 1,718,034 1,523,034
Investments 8 75,477,669 63,328,452 138,806,121 67,969,401
Current assets - others Contributions due but unpaid 9 - 19,345,273 19,345,273 28,104,385 Amounts due from other takaful / retakaful companies 10 - 3,272,859 3,272,859 3,121,043 Salvage recoveries accrued - 750,000 750,000 250,000 Taxation - payment less provision 7,893,844 - 7,893,844 8,695,445 Accrued investment income 11 3,698,417 2,888,309 6,586,726 5,392,810 Re-takaful recoveries against outstanding claims - 26,177,730 26,177,730 19,214,059 12 23,612,843 - 23,612,843 10,137,095 Wakala fees receivable and other account balances Mudarib fees receivable 3,452,972 - 3,452,972 2,051,094 Deferred wakala fees - 29,278,165 29,278,165 57,255,465 Deferred commission expense 3,722,575 - 3,722,575 5,833,341 Prepayments 13 1,375,634 17,523,747 18,899,381 29,033,921 Sundry receivables 14 1,136,298 29,106,188 30,242,486 873,155 44,892,583 128,342,271 173,234,854 169,961,813
Fixed assets 15 Tangibles Leasehold improvements 1,540,377 - 1,540,377 1,564,094 Furniture and fixtures 2,046,388 - 2,046,388 3,323,553 Office equipment 2,038,785 - 2,038,785 2,415,088 Computers 767,114 - 767,114 1,167,553 Motor vehicles 1,028,900 - 1,028,900 1,763,680 7,421,564 - 7,421,564 10,233,968
TOTAL ASSETS 248,859,566 310,452,981 559,312,547 577,442,674
The annexed notes from 1 to 30 form an integral part of these financial statements.
26 Takaful Pakistan Limited Annual Report 2016
TAKAFUL PAKISTAN LIMITED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2016
Fire and Marine, 2016 2015 property aviation and Motor Health Miscellaneous Aggregate Aggregate damage transport Note ------(Rupees)------
PARTICIPANTS' TAKAFUL FUND (PTF)
Net contribution revenue 8,745,295 7,848,342 174,685,935 47,428,612 354,904 239,063,088 262,209,880 Net claims (1,458,546) (316,104) (80,253,927) (46,507,532) (154,023) (128,690,132) (134,055,900) Wakala fee (11,911,785) (9,567,585) (74,986,775) (18,971,446) (322,614) (115,760,205) (131,098,929) Direct expenses 16 (595,447) (918,178) (29,976,207) 708,369 (55,702) (30,837,165) (35,018,344) Retakaful rebate earned 5,788,871 4,889,691 4,572 - 160,524 10,843,658 12,485,563 Contribution deficiency reversal/(charge) - - - 2,379,681 - 2,379,681 (1,684,834) Net underwriting results 568,388 1,936,166 (10,526,402) (14,962,316) (16,911) (23,001,075) (27,162,564) Investment income 11,853,040 13,293,752 Less: Mudarib's share (2,963,260) (3,323,438) Net investment income 8,889,780 9,970,314 Other income 17 37,494 8,196,986 Bank charges (22,557) (32,563) Deficit before tax (14,096,358) (9,027,827) Provision for taxation - - Total deficit transferred to balance of Waqf / Participants' Takaful Fund (14,096,358) (9,027,827)
SHAREHOLDERS' FUND (SHF)
Wakala fee 115,760,205 131,098,929 Commission expense (13,181,272) (17,545,784) Management expenses 18 (57,656,288) (56,207,945) 44,922,645 57,345,200 Mudarib's share of PTF investment income 2,963,260 3,323,438 Investment income 9,196,273 10,450,111 Gain/(loss) on sale of fixed assets 15,000 (5,390) GainOther on income sale of Fixed Assets 19 1,140,793 - 932,570 General and administration expenses 20 (34,145,660) (38,341,971) Profit for the year before taxation 24,092,311 33,703,958 Provision for taxation - Current 21 (2,894,005) (3,277,473) Profit after tax 21,198,306 30,426,485
Earnings per share-basic and diluted 0.71 1.01
The annexed notes from 1 to 30 form an integral part of these financial statements.
27 Takaful Pakistan Limited Annual Report 2016
TAKAFUL PAKISTAN LIMITED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2016
2016 2015 ………. (Rupees) ………
SHAREHOLDERS' FUND (SHF)
Profit for the year 21,198,306 30,426,485
Other comprehensive income Items that will not be reclassified to profit or loss Actuarial gain / (loss) on defined benefit plan for the year 562,353 (939,964)
Total comprehensive income for the period 21,760,659 29,486,521
The annexed notes from 1 to 30 form an integral part of these financial statements.
28 Takaful Pakistan Limited Annual Report 2016
TAKAFUL PAKISTAN LIMITED STATEMENT OF CHANGES IN EQUITY / FUND FOR THE YEAR ENDED 31 DECEMBER 2016
SHAREHOLDERS' FUND Issued, subscribed and Accumulated loss Qard-e-Hasna Total paid up share capital ------(Rupees)------
Balance as at 31 December 2014 300,000,000 (136,877,696) (11,211,134) 151,911,170 Total comprehensive income for the year ended 31 December 2015 Profit after tax for the year - 30,426,485 - 30,426,485 Other compreshensive loss - (939,964) - (939,964) Total comprehensive income - 29,486,521 - 29,486,521 Transaction with owners - Qard-e-Hasna contributed to Waqf* - - (9,027,827) (9,027,827) Balance as at 31 December 2015 300,000,000 (107,391,175) (20,238,961) 172,369,864 Total comprehensive income for the year ended 31 December 2016 Profit after tax for the year - 21,198,306 - 21,198,306 Other compreshensive income - 562,353 - 562,353 Total comprehensive income - 21,760,659 - 21,760,659 Transaction with owners - Qard-e-Hasna contributed to Waqf* - - (14,596,358) (14,596,358) Balance as at 31 December 2016 300,000,000 (85,630,516) (34,835,319) 179,534,165
WAQF / PARTICIPANTS' TAKAFUL FUND Accumulated Cede money Qard-e-Hasna Total deficit ------(Rupees)------
Balance as at 31 December 2014 500,000 (11,711,134) 11,211,134 - Deficit for the year ended 31 December 2015 - (9,027,827) - (9,027,827) Qard-e-Hasna contributed by Shareholders' fund 9,027,827 9,027,827 Balance as at 31 December 2015 500,000 (20,738,961) 20,238,961 - Deficit for the year ended 31 December 2016 - (14,096,358) - (14,096,358) Qard-e-Hasna contributed by Shareholders' fund* - - 14,596,358 14,596,358 Balance as at 31 December 2016 500,000 (34,835,319) 34,835,319 500,000
* In compliance of Rule 20 of Takaful Rules, 2012 The annexed notes from 1 to 30 form an integral part of these financial statements.
29 Takaful Pakistan Limited Annual Report 2016
TAKAFUL PAKISTAN LIMITED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2016
31 December 2016 2015 ------Rupees ------OPERATING ACTIVITIES a) Takaful activities Contributions received 227,695,995 342,926,484 Net re-takaful payments (26,179,345) (1,245,547) Claims paid (148,841,569) (165,879,957) Retakaful and other recoveries 27,100,036 - Commissions paid (11,300,924) (16,321,817) Commissions received 10,977,069 - Other takaful payments (88,493,453) (23,132,878) Net cash (used in) / flows from takaful activities (9,042,191) 136,346,285 b) Other operating activities Income tax paid (2,092,404) (2,959,887) Payment of retirement benefits (3,500,000) (2,390,718) General administrative and management expenses paid (25,373,695) (86,705,049) Other operating payments / receipts (967,116) 600,712 Advances to employees and agents (250,600) (248,948) Net cash used in other operating activities (32,183,815) (91,703,890) Total cash (used in) / flows from all operating activities (41,226,006) 44,642,396
INVESTING ACTIVITIES Profit / return received 21,402,559 28,806,787 Other income 1,174,844 - Investments made (417,649,624) (58,800,000) Proceeds from disposal of investments 349,103,511 27,630,320 Net payments / proceeds from encashment of term deposits (171,508,998) 3,400,000 Fixed capital expenditure (992,509) (646,605) Proceeds from disposal of fixed assets 15,000 96,560 Total cash (used in) / flow from all investing activities (218,455,217) 487,062 FINANCING ACTIVITIES Security deposits paid (195,000) - Ijarah rentals paid (1,255,260) (1,255,260) Total cash used in all financing activities (1,450,260) (1,255,260) Net cash (used in) / flows from all activities (261,131,483) 43,874,198 Cash and cash equivalents at the beginning of year 286,154,457 242,280,259 Cash and cash equivalents at end of the period 25,022,974 286,154,457 (Continued) 30 Takaful Pakistan Limited Annual Report 2016
2016 2015 ------Rupees ------Reconciliation to profit and loss account Operating cash flows (41,226,006) 44,642,396 Depreciation (3,804,913) (3,993,671) Gain / (loss) on disposal of fixed assets 15,000 (5,390) Impairment of Sukuks 3,841,278 1,000,000 Ijarah rentals (1,255,260) (1,255,260) Income tax paid 2,092,404 2,959,887 Provision for staff retirement benefits (2,025,930) (1,877,894) Investment income 21,414,559 22,727,773 Increase in assets other than cash 3,972,106 (69,086,327) Decrease in liabilities other than running finance 25,794,428 26,287,145 Other Income 1,178,287 - Profit before taxation 9,995,953 21,398,659
Breakup of profit / (loss) after tax Participant's Takaful Fund (14,096,358) (9,027,827) Shareholders' Fund 24,092,311 30,426,486 9,995,953 21,398,659 Definition of cash and cash equivalents Cash and cash equivalents for the purpose of Statement of Cash Flows consist of cash and stamps in hand,balances with banks,short term deposits with maturities of three months or less from balance sheet date and highly liquid short term investments that are convertible to known amount of cash are subject to insignificant risk of change in value Cash for the purpose of the statement of cash flows consists of: Cash and other equivalents 531,847 191,146 Current and other accounts 24,491,127 21,953,312 Deposits maturing within 3 months - 264,010,000 25,022,974 286,154,458 The annexed notes from 1 to 30 form an integral part of these financial statements.
31 Takaful Pakistan Limited Annual Report 2016
TAKAFUL PAKISTAN LIMITED STATEMENT OF CONTRIBUTIONS FOR THE YEAR ENDED 31 DECEMBER 2016
Business underwritten inside Pakistan
Prepaid re-takaful contribution Net contribution revenue Contribution Unearned contribution reserve Contribution Re-takaful Re-takaful Class ceded written earned ceeded expense 2016 2015 Opening Closing Opening Closing a b c d=a+b-c e f g h=e+f-g ------(Rupees) ------Direct and facultative
Fire and property damage 30,637,261 12,095,010 12,952,807 29,779,464 21,408,219 7,508,489 7,882,539 21,034,169 8,745,295 8,133,020 Marine, aviation and transport 24,115,802 4,200,552 4,397,392 23,918,962 16,192,846 2,493,674 2,615,900 16,070,620 7,848,342 6,912,351 Motor 126,220,676 109,711,381 48,465,117 187,466,940 12,735,283 45,722 - 12,781,005 174,685,935 187,890,035 Health 37,703,812 16,691,374 6,966,574 47,428,612 - - - - 47,428,612 59,199,307 Miscellaneous 779,713 440,344 413,523 806,534 408,109 225,307 181,786 451,630 354,904 75,167 Sub Total 219,457,264 143,138,661 73,195,413 289,400,512 50,744,457 10,273,192 10,680,225 50,337,424 239,063,088 262,209,880 Treaty Proportional / non proportional ------Grand total 219,457,264 143,138,661 73,195,413 289,400,512 50,744,457 10,273,192 10,680,225 50,337,424 239,063,088 262,209,880
Note: The Company does not underwrite business outside Pakistan. The annexed notes from 1 to 30 form an integral part of these financial statements.
32 Takaful Pakistan Limited Annual Report 2016
TAKAFUL PAKISTAN LIMITED STATEMENT OF CLAIMS FOR THE YEAR ENDED 31 DECEMBER 2016
Business underwritten inside Pakistan
Re-takaful and other recoveries Re-takaful and Re-takaful and Net claims expense Outstanding claims in respect of outstanding claims other Class Claims paid Claims expense other recoveries recoveries received 2016 2015 Opening Closing Opening Closing revenue a b c d=a-b+c e f g h=e-f+g i=d-h ------(Rupees)------
Direct and Facultative
Fire and property damage 1 3,588,617 13,659,414 15,749,181 5,678,384 3,073,974 11,953,601 13,099,465 4,219,838 1,458,546 (407,722) Marine, aviation and transport 1,413,672 4,331,157 6,086,823 3,169,338 798,076 1,479,215 3,534,373 2,853,234 316,104 (158,552) Motor 99,408,539 69,672,226 77,757,064 107,493,377 23,112,000 5,796,750 9,924,200 27,239,450 80,253,927 83,237,009 Health 44,203,931 8,335,894 10,639,495 46,507,532 - - - - 46,507,532 51,779,592 Miscellaneous 226,810 860,986 1,039,384 405,208 115,986 234,493 369,692 251,185 154,023 (394,427) Sub Total 148,841,569 96,859,677 111,271,947 163,253,839 27,100,036 19,464,059 26,927,730 34,563,707 128,690,132 134,055,900 Treaty . Proportional / non proportional ------Grand total 148,841,569 96,859,677 111,271,947 163,253,839 27,100,036 19,464,059 26,927,730 34,563,707 128,690,132 134,055,900
Note: The Company does not underwrite business outside Pakistan. The annexed notes from 1 to 30 form an integral part of these financial statements.
33 Takaful Pakistan Limited Annual Report 2016
TAKAFUL PAKISTAN LIMITED STATEMENT OF EXPENSES - PARTICIPANTS' TAKAFUL FUND FOR THE YEAR ENDED 31 DECEMBER 2016
Business underwritten inside Pakistan
Rebate from Net underwriting expense Deferred wakala fee Wakala fee Other direct Class Gross wakala fee retakaful expired expenses 2016 2015 Opening Closing operators * a b c d=a+b-c e f g=d+e-f ------(Rupees)------
Direct and Facultative
Fire and property damage 12,254,904 4,838,004 5,181,123 11,911,785 595,447 5,788,871 6,718,361 7,258,307 Marine, aviation and transport 9,646,321 1,680,221 1,758,957 9,567,585 918,178 4,889,691 5,596,072 4,271,181 Motor 50,488,270 43,884,552 19,386,047 74,986,775 29,976,207 4,572 104,958,410 116,379,568 Health 15,081,525 6,676,550 2,786,629 18,971,446 (708,369) - 18,263,077 25,441,755 Miscellaneous 311,885 176,138 165,409 322,614 55,702 160,524 217,792 280,899 Total 87,782,905 57,255,465 29,278,165 115,760,205 30,837,165 10,843,658 135,753,712 153,631,710 Treaty - Proportional / non proportional ------Grand total 87,782,905 57,255,465 29,278,165 115,760,205 30,837,165 10,843,658 135,753,712 153,631,710
* Rebate from retakaful operators is arrived at taking impact of opening and closing unearned rebate Note: The Company does not underwrite business outside Pakistan. The annexed notes from 1 to 30 form an integral part of these financial statements.
34 Takaful Pakistan Limited Annual Report 2016
TAKAFUL PAKISTAN LIMITED STATEMENT OF EXPENSES - SHAREHOLDERS' FUND FOR THE YEAR ENDED 31 DECEMBER 2016
Business underwritten inside Pakistan
Other Net underwriting expense Commission paid Deferred commission Net commission Class management or payable expense 2016 2015 Opening Closing expense a b c d = a+b-c e f = d+e ------(Rupees) ------
Direct and Facultative Fire and property damage 3,678,341 1,482,660 1,763,785 3,397,216 8,049,088 11,446,304 9,675,330 Marine, aviation and transport 3,116,217 587,206 562,172 3,141,251 6,335,756 9,477,007 6,763,353 Motor 3,312,679 3,093,593 1,196,862 5,209,410 33,160,970 38,370,380 45,813,043 Health 887,479 627,142 158,941 1,355,680 9,905,626 11,261,306 11,250,500 Miscellaneous 75,790 42,740 40,815 77,715 204,848 282,563 251,504 Total 11,070,506 5,833,341 3,722,575 13,181,272 57,656,288 70,837,560 73,753,730 Treaty Proportional / non proportional ------Grand total 11,070,506 5,833,341 3,722,575 13,181,272 57,656,288 70,837,560 73,753,730
Note: The Company does not underwrite business outside Pakistan. The annexed notes from 1 to 30 form an integral part of these financial statements.
35 Takaful Pakistan Limited Annual Report 2016
TAKAFUL PAKISTAN LIMITED STATEMENT OF INVESTMENT INCOME FOR THE YEAR ENDED 31 DECEMBER 2016 2016 2015 ------Rupees ------Income from non-trading investments PARTICIPANTS' TAKAFUL EQUITY (PTF)
Profit on bank deposits and placement 7,125,830 10,881,214
Available for sale
Gain on sale of Islamic mutual fund units 4,448,507 2,024,090 Dividend income 278,703 388,448 4,727,210 2,412,538
Less: Mudarib's fee (2,963,260) (3,323,438)
Net investment income 8,889,780 9,970,314
SHAREHOLDERS' FUND (SHF)
Profit on bank deposits and placement 10,513,542 9,992,612
Available for sale Gain on sale of Islamic mutual fund units 1,830,777 - Dividend income 544,323 - 2,375,100 - Held to maturity
Return on government securities - 737,486 Return on other securities 232,854 728,013 Amortization of premium on sukuk (71,945) - Provision for impairment of sukuk (3,841,278) (1,000,000) (3,680,369) 465,499
Less: Investment related expenses (12,000) (8,000)
Net investment income 9,196,273 10,450,111
The annexed notes from 1 to 30 form an integral part of these financial statements.
36 Takaful Pakistan Limited Annual Report 2016
TAKAFUL PAKISTAN LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016
1 THE COMPANY AND ITS OPERATIONS
1.1 Takaful Pakistan Limited ("the Company / Takaful operator") is an unlisted public limited company incorporated in Pakistan on 02 June 2006 under the Companies Ordinance, 1984. The Company is established with the objective to carry out General Takaful Business as specified under the Insurance Ordinance, 2000, Insurance Rules, 2002 and Takaful Rules, 2012. The Company commenced commercial operations from 12 March 2007. The registered office of the Company is at 6th Floor, Business Centre, 19-1-A, Block-6, P.E.C.H.S, Shahrah-e- Faisal, Karachi, in the province of Sindh. The Company operates with 5 (2015: 5) branches in Pakistan.
1.2 For the purpose of carrying on the takaful business, the Company has formed a Waqf for Participants' equity. The Waqf, namely Takaful Pakistan Waqf (hereinafter referred to as the Participants' Takaful Fund or PTF) was formed on 22 January 2007 under the Trust deed executed by the Company with a cede money of Rs. 500,000. The cede money is required to be invested in Shariah compliant investments and profit thereon is utilized to pay benefits to participants or defray PTF expenses. The accounts of the Waqf are maintained by the Company in a manner that the assets and liabilities of the Waqf remain separately identifiable. These financial statements have been prepared such that the financial position and results of operations of the Waqf and the Company are shown separately. Waqf deed also governs the relationship of shareholders and participants for management of takaful operations, investment of participants' funds (PTF) and investment of shareholders' funds (SHF) approved by the Shariah Board established by the Company.
1.3 Securities and Exchange Commission of Pakistan (SECP) vide its SRO no. 828(1)/2015 dated 18th August 2015 increased the minimum paid up capital requirement for Non-Life Insurance/Takaful Companies from Rs. 300 million to Rs. 500 million as per the following schedule: Rupees
By 30 June 2016 350 million By 31 December 2016 400 million By 30 June 2017 450 million By 31 December 2017 500 million
As at 31 December 2016, the Company is short by Rupees 100 million with the minimum capital requirement. The Company in its 10th Annual General Meeting (AGM) held on 29th April 2016 has resolved to increase the paid up capital by Rupees 50 million through issuance of 8,710,802 ordinary shares of Rupees 10 each at a discount of Rupees 4.26/share by way of right issue under section 86 of the Companies Ordinance, 1984, for which the approval from the SECP has been granted through letter No. ID/OSM/Takaful/2016/7926 dated 27
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December2016. The Companycould not undergo the process for such right issue of shares within the prescribed timeline. On Company’s request, SECP has granted extension of sixty days (i.e. till 30thApril 2017) vide letter no. ID/OSM/Takaful/Pak/2017/8608 dated 24 February 2017. The Company expects to issue such capital within the extended timelines.
After such issues of right shares, the increased paid up capital of the Company would be Rupees 350 millionwhereby the Company would still be short by Rupees 50 million with minimum capital requirement. The Company is currently negotiating with the certain potential investors to raise paid up capital by way other than right issue of shares to meet the gradually increasing minimum capital requirements and intends to seek approval from shareholders in its forthcoming AGM in this respect.Moreover the Company has a commitment of financial support from sponsors, in case of any adverse financial implications arising from the ultimate outcome of pending litigations disclosed in note 5 to the financial statements.
1.4 The admissible assets of the Participations’ Takaful Fund (PTF)are not in excess of its total liabilities as at 31 December 2016 as required under Takaful Rules, 2012. The management believes that the requirement of having PTF’s admissible assets in excess of its total liabilities is confined to the Window Takaful Operations only and the Company being dedicated Takaful Company is not subject to such requirement. The Company has approached SECP for clarification in respect of this matter, the response to which is awaited.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these financial statements are set out below. These accounting policies have been consistently applied during the year unless otherwise stated.
2.1 BASIS OF PREPARATION a) Statement of compliance
These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance, 1984, the Insurance Ordinance, 2000, Securities and Exchange Commission (Insurance) Rules, 2002 {SEC (Insurance) Rules, 2002} and Takaful Rules, 2012. In case requirements differ, the provisions or directives of the Companies Ordinance, 1984, Insurance Ordinance, 2000, SEC (Insurance) Rules, 2002 and Takaful Rules, 2012 shall prevail. b) Basis of presentation
These financial statements have been prepared on the format of financial statements issued by the SECP through SEC (Insurance) Rules, 2002 vide SRO 938 dated 12 December 2002, with
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appropriate modifications based on the advice of the Shariah Board of the Company. These financial statements reflect the financial position and results of operations of both the SHF and PTF in a manner that the assets, liabilities, income and expenses of the SHF and PTF remain separately identifiable. c) Accounting convention
These financial statements have been prepared under the historical cost convention except certain investments which are stated at lower of cost and market value. Accrual basis of accounting has been used except for cash flow information. d) Functional and Presentation Currency
Items included in these financial statements are measured using the currency of primary economic environment in which the Company operates. These financial statements are presented in Pakistani Rupees, which is the Company's functional and presentation currency. e) Critical accounting estimates and judgments
The preparation of these financial statements in conformity with approved accounting standards requires the Operations to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Estimates, assumptions and judgments are continually evaluated and are based on historical experience and other factors, including reasonable expectations of future events. Revisions to accounting estimates are recognized prospectively commencing from period of revision.
In particular, information about judgments made by the management in the application of approved accounting standards, as applicable in Pakistan, that have significant effect on the financial statements, and estimates that have a significant risk of resulting in a material adjustment in the subsequent years is included in following notes:
(i) classification of takaful contracts (note 2.2); (ii) provision for unearned contribution (note 2.2.1); (iii) provision for contribution due but unpaid and amount due from other takaful / re-takaful operators (note 2.2.2); (iv) provision for outstanding claims including IBNR (note 2.2.3); (v) contribution deficiency reserve (note 2.2.4); (vi) provision for unearned wakala fee (note 2.4); (vii) classification of investments (note 2.7); (viii) taxation (note 2.9); (ix) residual values and useful lives of fixed assets (note 2.10); (x) allocation of management expenses (note 2.11); (xi) impairment (note 2.18); and (xii) segment reporting (note 2.19)
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Takaful Pakistan Limited Annual Report 2016 f) Amendments to published approved standards that are effective in current year and are relevant to the Company
The following amendments to published approved standards and interpretation are mandatory for the Company's accounting periods beginning on or after 01 January 2016:
- IAS 1 – Presentation of Financial Statements - Disclosure Initiative (Amendment)
Annual Improvements 2012-2014 cycles (amendments are effective for annual periods beginning on or after 1 January 2016). The new cycle of improvements contain amendments to the following standards:
- IFRS 5–Non-current Assets Held for Sale and Discontinued Operations
- IFRS 7–Financial Instruments - Disclosures
- IAS 19– Employee Benefits
- IAS 34– Interim Financial Reporting
There is no financial impact of such amendments on these financial statements. g) Amendments to published approved standards that are effective in current year and are not relevant to the Company
There are other amendments to published standards that are mandatory for accounting periods beginning on or after 01 January 2016 but are considered not to be relevant or do not have any significant impact on the Company's financial statements and are therefore not detailed in these financial statements. h) Standards and amendments to published approved standards that are not yet effective but relevant to the Company
Following standards and amendments to existing standards have been published and are mandatory for the Company's accounting periods beginning on or after 01 January 2017 or later periods:
Effective date (accounting periods beginning on or after)
- IFRS 9 'Financial Instruments 01 January 2018 - IFRS 15 ‘Revenue from Contracts with Customers’ 01 January 2017 - IFRS 16 ‘Leases’ 01 January 2017
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- IAS 12 (Amendments), 'Income Taxes' 01 January 2017 - IAS 7 (Amendments), ‘Statement of Cash Flows’ 01 January 2017 - IFRS 15 (Amendments), ‘Revenue from Contracts with 01 January 2018 Customers
The above amendments are not likely to have an impact on the Company’s financial statements. i) Standards, interpretations and amendments to published approved accounting standards that are not effective in current year and not considered relevant to the Company
There are other standards and amendments to published approved standards that are mandatory for accounting periods beginning on or after 01 January 2017 but are considered not to be relevant or do not have any significant impact on the Company's financial statements and are therefore not detailed in these financial statements.
2.2 TAKAFUL CONTRACTS
The takaful contracts are based on the principles of Wakala. The takaful contracts so agreed usually inspire concept of tabarru (to donate for benefit of others) and mutual sharing of losses with the overall objective of eliminating the element of uncertainty.
Contracts under which the Participant Takaful Fund (PTF) accepts significant takaful risk from another party (the policy holder) by agreeing to compensate the policyholder if a specified uncertain future event (the takaful event) adversely affects the policy holder, are classified as takaful contracts. Takaful risk is significant if a takaful event could cause the PTF to pay significant benefits due to the happening of the takaful event compared to its non-happening. Once a contract has been classified as a takaful contract, it remains a takaful contract for the remainder of its lifetime even if the takaful risk reduces significantly during this period, unless all rights and obligations are extinguished or expire.
The PTF underwrites non-life takaful contracts that can be categorized into Fire, Property and Damage, Marine, Aviation and Transport, Motor, Health and Miscellaneous contracts. Contracts may be concluded for a fixed term of one year, less than one year and in some cases for more than one year. However, most of the contracts are for twelve months duration. Takaful contracts entered into by the PTF under which the contract holder is another takaful operator / insurer (inward retakaful / reinsurance) of a facultative nature are included within the individual category of takaful contracts, other than those which fall under the Treaty.
Fire takaful provides coverage against damages caused by Fire, riot and strike, explosion, earthquake, atmospheric damage, flood, electric fluctuation and other related perils.
Marine, aviation and transport takaful provides coverage against cargo risk, terminals, damagesoccurred in between the points of origin and final destination and other related perils. 41
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Motor takaful provides comprehensive car coverage, indemnity against third party loss and other related covers.
Health takaful provides basic hospital care and major medical care including maternity care and outpatient care.
Miscellaneous takaful provides cover against burglary, loss of cash in safe and cash in transit, money, engineering losses, travel and other coverage.
The terms of the takaful contracts are in accordance with the generally accepted principles and norms of insurance business suitably modified with guidance by the Shariah Board of the Takaful operator.
2.2.1 CONTRIBUTION
Contributions including administrative surcharge received / receivable (if any) under a takaful policy are recognised as written at the time of issuance of policy. Contributions are stated gross of commission payable to intermediaries and exclusive of taxes and duties levied on contributions.
Contribution income under a policy is recognised over the period of takaful from the date of inception of the policy to which it relates to its expiry as follows:
i) For direct business, evenly over the period of the policy. ii) For proportional re-takaful business, evenly over the period of the underlying takaful policies.
Revenue from contribution is recognised after taking into account the unearned portion of contribution which is calculated using the 1/365 method for all classes except for marine class where marine class earned contribution is calculated using 1/120 method. The unearned portion of contribution income is recognised as a liability.
Administrative surcharge recovered from insurer is recognised as part of contribution in the case of co-takaful policies (Leader Follower case) on proportionate basis.
Contribution due but unpaid represents the amount due from participants on account of takaful contracts. These are recognised at cost, which is the fair value of the consideration to be received less provision for impairment, if any.
If there is an objective evidence that any contribution due but unpaid is impaired, the Company reduces the carrying amount of that contribution receivable and recognizes the loss in profit and loss account.
Provision for impairment in contribution receivables is estimated on a systematic basis after analyzing the receivables as per their ageing.
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Amount due from other takaful / re-takaful companies are carried at cost less provision for impairment, if any. Cost represents the fair value of consideration to be received in the future.
The unearned portion of contribution written net of wakala is set aside as a reserve and is recognized as a liability. Such reserve is calculated according to the ratio of the unexpired period of the policy and the total period, both measured to the nearest day.
2.2.2 Re-takaful
The Company cedes retakaful in the normal course of business for the purpose of limiting its net loss potential through the diversification of its risks. Assets, liabilities, income and expense arising from ceded retakaful contracts are presented separately from the assets, liabilities, income and expense from the related takaful contracts because the retakaful arrangements do not relieve the PTF from its direct obligations to its policyholders. These retakaful contracts include both facultative and treaty arrangements contracts and are classified in same categories of takaful contracts for the purpose of these financial statements.
Re-takaful contribution is recognised evenly as expense after taking into account the proportion of deferred contribution expense which is calculated using 1/365 method other than marine business in which it is calculated using 1/120 method. The deferred portion of contribution expense is recognised as a prepayment.
Claim recoveries receivable from the re-takaful are recognised as an asset at the same time as the claims which give rise to the right of recoveries are recognised as a liability and are measured at the amount expected to be received, after considering impairment relating thereto.
Amount due to takaful / re-takaful companies represent the balance due to re-takaful companies. Amounts due to / from retakaful operators are carried at cost less provision for impairment, if any. Cost represents the fair value of the consideration to be received / paid in the future for services rendered.
Re-takaful assets or liabilities are derecognised when the contractual rights are extinguished or expired.
Rebate income from retakaful is spread and recognised as revenue in accordance with the pattern of recognition of retakaful contribution to which it relates.
2.2.3 Claims
Claims expense include all claims occurring during the year, whether reported or not, related internal and external claim handling costs that are directly related to the processing and settlement of claims, a reduction for the value of salvage and other recoveries, and any adjustments to claims outstanding from previous years.
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Outstanding claims comprise the estimated cost of claims incurred but not settled at the reporting date, whether reported or not. Provisions for reported claims not paid as at the balance sheet date is made on the basis of individual case estimates. In addition, a provision based on management’s judgment and the Company’s prior experience is maintained for the cost of settling claims incurred but not reported (IBNR) at the reporting date, by taking into account the claims intimated in the month following the reporting date.
Any difference between the provisions at the reporting date and settlements in the following year is included in the financial statement of that year.
2.2.4 Contribution deficiency reserve
The Company is required as per Takaful Rules, 2012 to maintain a provision in respect of contribution deficiency for the class of business where the unearned contribution reserve is not adequate to meet the expected future liability, after re-takaful from claims, and other supplementary expenses expected to be incurred after the reporting date in respect of the unexpired policies in that class of business at the reporting date. The movement in the contribution deficiency reserve is recorded as an expense in the profit and loss account.
The Company determines adequacy of liability of contribution deficiency by carrying out analysis of its loss ratio of expired periods. For this purpose average loss ratio of last few years inclusive of claim settlement cost but excluding major exceptional claims are taken into consideration to determine ultimate loss ratio to be applied on unearned contribution. The liability of contribution deficiency in relation to Health takaful is calculated in accordance with the advice of the actuary.
2.3 TAKAFUL SURPLUS
Takaful surplus attributable to the participants is calculated after charging all direct costs and setting aside various reserves and charity. Allocation to participants, if applicable, is made after deducting the claims paid to them during the year.
2.4 WAKALA AND MUDARIB FEES
The Takaful Operator manages the general takaful operations for the participant and charges 40% of gross contribution as wakala fee to meet the general and administrative expenses of the Company.
The Takaful Operator manages the participants' investment as Mudarib and charges 25% of the general takaful investment income as Modarib's share earned by the Participants' Takaful Fund.
Wakala and Mudarib fee is recognised on the same basis on which related revenue is recognised. Unexpired portion of wakala fee is disclosed as a liability of Shareholders' Fund (SHF) and an asset of Participants' Takaful Fund (PTF).
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2.5 QARD-E-HASNA
When the PTF including reserves are insufficient to meet their current payments less receipts, the deficit is funded by way of interest free loan (Qard-e-Hasna) from the Shareholders' fund.
2.6 CASH AND CASH EQUIVALENTS
For the purpose of statement of cash flows, cash and cash equivalents consist of cash and stamps in hand, balances with banks, short term deposits with maturities of three months or less from balance sheet date and highly liquid short term investments that are convertible to known amount of cash and are subject to insignificant risk of change in value.
2.7 INVESTMENTS
All investments are initially recognized at cost being the fair value of the consideration given and include any transaction costs, except for held for trading investments in which case transaction costs are charged to profit and loss account..
All purchases and sales of investments that require delivery within the time frame established by regulations or market convention are accounted for at the trade date. Trade date is the date when the Company commits to purchase or sell the investment.
All investments are de-recognised when the rights to receive cash flows from the investments have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership
These investments are recognised and classified as follows:
Held-to-maturity
Investments with fixed maturity, where management has both the intent and ability to hold to maturity, are classified as 'held-to-maturity'.
Investments classified as held to maturity are recognized initially at fair value being the cost, plus attributable transaction costs.
Subsequently, these are measured at amortized cost less provision for impairment, if any. Any contribution paid or discount availed on acquisition of 'held-to-maturity' investments is deferred and amortized over the term of investment using the effective yield.
Profit on held to maturity investment is recognized on a time proportion basis.
These are reviewed for impairment at year end and any losses arising from impairment are charged to the profit and loss account.
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Available-for-sale
Investments which are intended to be held for an undefined period of time but may be sold in response to the need for liquidity, changes in interest rates, equity prices or exchange rates are classified as available-for-sale.
Quoted
Subsequent to initial recognition at cost, quoted investments are stated at the lower of cost or market value (market value on an individual investment basis being taken as lower if the fall is other than temporary) in accordance with the requirements of the SEC (Insurance) Rules, 2002. The Company uses Mutual Funds Association of Pakistan (MUFAP) quotations at the reporting date to determine the market value.
A fall in market value of a security is treated as “other than temporary (i.e. impaired)”, if there is a significant or prolonged decline in fair value of security below its cost. Reversals due to subsequent increase in the market value of these securities upto its original cost is recognised as income in the profit and loss account.
Unquoted
Unquoted investments are stated at cost less accumulated impairment (if any), in the value of such investments.
2.8 FAIR VALUES
The fair value of financial assets at fair value through profit or loss, held to maturity investments and available-for-sale financial assets is determined by reference to their quoted closing bid price at the reporting date.
2.9 TAXATION
Income tax expense comprises current and deferred tax. Income tax expense is recognised in the profit and loss account, except to the extent that it relates to items recognised directly in other comprehensive income or equity, in which case it is recognised in other comprehensive income or equity respectively.
2.9.1 Current
Provision for current taxation is based on the taxable income for the year determined in accordance with the prevailing law for taxation on income using prevailing tax rates after taking into account available tax credits and rebates, if any. The charge for current tax includes adjustments to charge for prior years, if any
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2.9.2 Deferred
Deferred tax is recognised using the balance sheet method, providing for all temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using the rate enacted or substantively enacted at the reporting date
The Company recognises a deferred tax asset to the extent that it is probable that taxable profits in the foreseeable future will be available against which the related tax losses and deductible temporary differences can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
2.10 FIXED ASSETS
2.10.1 Tangible
Tangible fixed assets are stated at cost less accumulated depreciation and impairment in value, if any. Depreciation is calculated on a straight line basis, whereby the depreciable amount of an operating asset is written off over its estimated useful life, using the following rates:
Annual ratesof depreciation (%) Leasehold improvements 10 Furniture and fixtures 10 Office equipments 10 Computers 33.33 Vehicles 20
Depreciation on acquisitions during the year is charged from the date on which the assets is available for use whereas on disposals, depreciation is charged upto the date of disposal.
Normal repairs and maintenance are charged to income as and when incurred. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is possible that the future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably.
The assets residual values and useful lives are reviewed, at each reporting date.
An item of fixed assets is derecognised upon disposal or when no future economic benefits are expected from its use or disposal.
Gain or loss on disposal of the assets is recognised in the profit and loss account in the period of disposal. 47
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2.10.2 Intangible
Intangible assets comprise software licenses, and are stated at cost less accumulated amortisation and impairment in value, if any. Amortisation is charged over the useful life of the asset on a systematic basis to profit and loss account by applying the straight line method.
2.10.3 Capital work-in-progress
Capital work-in-progress is stated at cost less any impairment in value. It includes advances made to suppliers in respect of tangible and intangible assets.
The assets residual values and useful lives are to be reviewed, at each reporting date.
2.11 EXPENSES
Expenses allocated to the takaful business represent only directly attributable expenses. Expenses not directly allocable to takaful business are charged to Shareholders' Fund. All indirect and common expenses are allocated between management expense and general and administrative expenses in the ratio of 70% and 30% respectively.
2.12 COMMISSION
Commission incurred in obtaining and recording policies is deferred and recognised as an asset. These costs are charged to profit and loss account based on the pattern of recognition of contribution revenue.
2.13 REVENUE RECOGNITION
2.13.1 Participants Takaful Fund (PTF)
Contribution income under a policy is recognised over the period of takaful contract. Administrative surcharge recovered from insurer is recognised as part of contribution in the case of co-takaful policies (Leader Follower case) on proportionate basis.
2.13.2 Shareholders Fund (SHF)
The Takaful Operator manages the general takaful operations for the participants and charges 40% of the gross contribution written net of administrative surcharge on co-takaful inward as wakala fee against the services. It is recognized upfront on the issue of takaful policy.
The Takaful Operator also manages the participants' investment as Modarib and charges 25% of the investment income earned by the participants' fund as Modarib's fee. It is recognized on the same basis on which related revenue is recognized.
PTF / SHF ( i ). Profit on Islamic investment products is recognised on accrual basis. ( ii ). Dividend income is recognised when the right to receive dividend is established.
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( iii ). Gain or loss on sale of investments is included in the profit and loss account in the period of disposal. ( iv ). Income on held to maturity investments is recognised on time proportionate basis using effective interest method.
2.14 IJARAH
Ijarah rentals are recognised as an expense on accrual basis as and when the rentals become due.
2.15 FOREIGN CURRENCY TRANSACTIONS
Foreign currency transactions are translated into Pak Rupees (functional currency) using the exchange rates prevailing at the date of transaction. Monetary assets and liabilities in foreign currencies are translated into Pak Rupees using the exchange rate at the reporting date. Foreign exchange gains and losses resulting from the settlement of such transactions and from translation at the year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the profit and loss account
2.16 FINANCIAL INSTRUMENTS
Financial assets and financial liabilities other than those arising out of takaful contracts are recognized at the time when the Company becomes a party to the contractual provisions of the instrument. At the time of initial recognition, financial assets and liabilities are measured at fair values which is the cost of consideration given or received for it. Financial assets are derecognized when the contractual right to receive future cash flows from the asset expires or is transferred along with the risk and reward of the asset. Financial liabilities are derecognized when obligation specified in the contract is discharged, cancelled or expired. Any gains or losses on derecognition of the financial assets and liabilities are recognized in the profit and loss account of the current period.
2.17 OFF SETTING OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
Financial assets and liabilities other than those relating to takaful contracts are only off-set and the net amount is reported in the balance sheet when the Company has a legally enforceable right to set-off the recognized amounts and it intends either to settle on net basis, or to realise the asset and settle the liability simultaneously.
2.18 IMPAIRMENT
The carrying amounts of assets (other than deferred tax asset) are reviewed at each balance sheet date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount of such asset is estimated. An impairment loss is recognized wherever the carrying amount of the asset exceeds its recoverable amount. Impairment losses are recognized in profit and loss account. A previously recognized impairment loss is reversed only
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if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in profit and loss account.
2.19 BUSINESS SEGMENT
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. The Company accounts for segment reporting using the classes or sub classes of business (Takaful Business Statutory Funds) as specified under the Insurance Ordinance, 2000 and SEC (Insurance) Rules, 2002 as the primary reporting format.
The Company has five primary business segments for reporting purposes namely fire, marine, motor, health and miscellaneous.
The fire and engineering takaful segment provides takaful covers against damages caused by fire, riot and strike, explosion, earthquake, atmospheric damage, flood, engineering losses, electric fluctuation and impact.
Marine takaful segment provides coverage against cargo risk, war risk and damages occurring in inland transit and other related perils.
Motor takaful provides comprehensive vehicle coverage and indemnity against third party loss and other related covers.
Health takaful provides basic hospital care and major medical care including maternity care and outpatient care.
Miscellaneous takaful provides cover against burglary, loss of cash in safe and cash in transit, personal accident, money, travel and other coverages.
Assets and liabilities are allocated to particular segments on the basis of contribution earned. Those assets and liabilities which cannot be allocated to a particular segment on a reasonable basis are reported as unallocated corporate assets and liabilities.
2.20 STAFF RETIREMENT BENEFITS
2.20.1 Defined Contribution Plan
The Company maintains an approved contributory provident fund scheme for all its permanent employees. Contributions are made by both the Company and the employees to the fund at the rate of 10 percent per annum of basic salary. Contributions made by the Company are recognised as an expense. 50
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2.20.2 Defined Benefit Plan
The Company operates an approved defined gratuity scheme for all its permanent employees who attain the minimum qualification period for entitlement to gratuity. Contributions to the scheme are made in accordance with actuarial valuation using Projected Unit Credit Actuarial Cost Method.
2.20.3 Employees’ Compensated Absences
The Company accounts for the liability in respect of employees' compensated absences in the period in which these are earned.
2.21 Appropriations
Appropriations of profit, if any, are recognised in the period in which these are approved.
2.22 CREDITORS, ACCRUALS AND PROVISIONS
Liabilities for creditors and other amounts payable are carried at cost which is the fair value of the consideration to be paid for the goods and / or services received, whether or not billed to the Company.
2.23 PROVISIONS
Provisions are recognized when the Company has a present, legal or constructive obligation as a result of past events and, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount can be made. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.
2.24 EARNING PER SHARE
The Company presents basic and diluted earnings per share (EPS) for its shareholders. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share are calculated if there is any potential dilutive effect on the Company's reported net profits.
51
Takaful Pakistan Limited Annual Report 2016
3. SHARE CAPITAL
3.1 Authorized share capital
2016 2015 Note 2016 2015 Number of shares ------Rupees ------
70,000,000 50,000,000 Ordinary shares of Rs. 10 each 700,000,000 500,000,000
3.1.1 The authorized capital has been increased from 50 million ordinary shares of Rupees 10 each to 70 million of ordiary shares of Rupees 10 each under the authority of special resolution duly passed in the 10th Annual General Meeting of the Company held on 29th April 2016.
3.2 Issued, subscribed and paid - up share capital 2016 2015 Note 2016 2015 Number of shares ------Rupees ------
30,000,000 30,000,000 Ordinary shares of Rs. 10 each, fully paid in cash 300,000,000 300,000,000
3.3 Shareholders of the Company are: 2016 2015 Number of Holding Number of Holding shares % shares %
House Building Finance Company Limited 8,700,000 29.00 8,700,000 29.00 Al-Bhuaira National Insurance Company 5,100,000 17.00 5,100,000 17.00 Al Baraka Bank (Pakistan) Limited 5,100,000 17.00 5,100,000 17.00 Sitara Chemical Industries Limited 3,000,000 10.00 3,000,000 10.00 Arif Habib Corporation Limited 3,000,000 10.00 3,000,000 10.00 Mal Al Khaleej Investment LLC 2,550,000 8.50 2,550,000 8.50 Emirates Investment Group LLC 2,045,500 6.82 2,045,500 6.82 Syed Tariq Husain 500,000 1.67 - - Trust Securities and Brokerage Limited 4,500 0.01 504,500 1.68 30,000,000 100 30,000,000 100
4. OTHER CREDITORS AND ACCRUALS 2016 2015 Notes Shareholders' Participants' Aggregate Aggregate Fund Takaful Fund ------Rupees ------
Commission payable to agents 7,091,693 - 7,091,693 7,322,111 Federal excise duty - 380,279 380,279 2,254,058 Federal insurance fee - 106,610 106,610 212,952 Withholding tax - 164,521 164,521 211,233 Contribution due to other re-takaful / insurance companies - 359,665 359,665 4,588,189 Payable to staff gratuity fund 4.1 781,435 - 781,435 2,817,858 Provision for compensated absences 256,054 - 256,054 256,054 Security deposit 960,381 - 960,381 539,325 Tracker installation fee payable - 3,651,726 3,651,726 4,670,490 Other payables 1,093,973 2,634,740 3,728,713 3,314,299 Payable to PTF 28,902,215 - 28,902,215 - 39,085,751 7,297,541 46,383,292 26,186,569 52 Takaful Pakistan Limited Annual Report 2016
4.1 Staff gratuity fund
The Company operates an approved funded gratuity scheme for all permanent employees. Latest actuarial valuation was carried out as at 31 December 2016.
The following significant assumptions were used for valuation of this scheme: 2016 2015 Rate per annum
Discount rate 9.50% 11% Expected rate of increase in salary of employees 8.50% 10% Expected rate of return on plan assets 9.50% 11% Normal retirement age 60 years 60 years
4.1.1 The scheme typically exposes the Company to actuarial risks such as: salary increase risk, discount rate risk, mortality/ withdrawal risk and investment risk defined as follow: Salary increase risk This is the risk that the salary at the time of cessation of service is higher than that assumed. This is a risk to the Company because the benefits are based on the final salary; if the final salary is higher than what we have assumed, the benefits will also be higher.
Discount rate risk The discount rate is based on the yield on government bonds. If the market yield of bonds varies, the discount rate would vary in the same manner and would affect the present value of obligation and fair value of assets.
Mortality / withdrawal risk This is the risk that the actual mortality/withdrawal experience is different than that assumed by the Company.
Investment risk This is the risk that the assets are underperforming and are not sufficient to meet the liabilities.
4.1.2 Number of employees under the scheme The number of employees covered under the scheme is 59 (2015: 62). 4.1.3 The fair value of the scheme's assets and liabilities for past services of the employees at the latest valuation date are as follows:
2016 2015 Note Rupees Rupees Liability recognised in the balance sheet Present value of defined benefit obligation 4.1.5 6,795,142 8,189,605 Fair value of plan assets 4.1.6 (6,013,707) (5,371,747) Liability recognised in the balance sheet 781,435 2,817,858 4.1.4 Movement in liability during the year Opening balance 2,817,858 2,390,718 Charge for the year (2,036,423) 427,140 Closing balance 781,435 2,817,858 4.1.5 Reconciliation of present value of defined benefit obligation Opening balance of defined benefit obligation 8,189,605 5,376,516 Current service cost 1,911,659 1,551,995 Interest cost 694,921 764,855 Actuarial (Gain) / loss on defined benefit obligation (314,826) 724,821 Benefits paid during the year (3,686,217) (228,582) Closing balance of defined benefit obligation 6,795,142 8,189,605 4.1.6 Reconciliation of fair value of plan assets Opening balance of fair value of plan assets 5,371,747 2,985,798 Expected return on plan assets 580,650 438,956 Contribution received 3,500,000 2,390,718 Benefits paid (3,686,217) (228,582) Actuarial gain/(loss) on plan assets 247,527 (215,143) Closing balance of fair value of plan assets 6,013,707 5,371,747 53 Takaful Pakistan Limited Annual Report 2016
2016 2015 Note Rupees Rupees 4.1.7 Charge for the year Recognised through profit and loss account Current service cost 1,911,659 1,551,995 Interest on obligation 694,921 764,855 Expected return on plan assets (580,650) (438,956) 2,025,930 1,877,894 Recognised through other comprehensive income Actuarial (gain) / loss for the year (562,353) 939,964 Total gratuity expense for the year 1,463,577 2,817,858
4.1.8 Gratuity cost allocation Management expenses 18.1 1,418,151 1,314,526 General and administrative expenses 20.1 607,779 563,367 2,025,930 1,877,893 4.1.9 Composition of fair value of plan assets 2016 2015 Fair Value Percentage Fair Value Percentage (Rupees) (%) (Rupees) (%)
Unitised Fund 5,925,517 99.5% 5,161,391 96.1% Cash 30,128 0.5% 210,356 3.9% 5,955,645 5,371,747
4.1.10 Sensitivity analysis Significant actuarial assumptions for the determination of the defined obligation are discount rate, and expected rate of salary increase. The sensitivity analysis below have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant: Present value % change from of obligation base
(Rupees) (Percentage) Base 6,795,142 Discount rate Increase by 1% 5,987,095 -11.89% Decrease by 1% 7,634,477 12.35% Salary growth rate Increase by 1% 7,647,788 12.55% Decrease by 1% 5,963,144 -12.24% 4.1.11 The estimated gratuity cost for the year ending 31 December 2017 before allowing for the impact of net actuarial loss or gain is Rs.1,303,098 (2015:Rs. 2,229,205). 5. CONTINGENCIES AND COMMITMENTS 5.1 Contingencies 5.1.1 Travel Agents Association of Pakistan (TAAP) raised a demand for distribution of surplus in Amaan Travel Participation Takaful Fund (PTF) and the profit thereon aggregating to Rs. 120,000,000. TAAP filed a case on October 10, 2012 in the Insurance Tribunal of Sindh for recovery of Rs. 546,534,125 inclusive of compensation/ damages for premature termination of the agreement of Rs. 386,534,125 in respect of Amaan Travel and Health Takaful Package. A commission was appointed for recording evidences of the parties which is yet to issue its report to Tribunal along-with evidence based on which the case shall be disposed off by the Tribunal. The management, based on the advice of its legal counsel, is confident that the Company has good defence in the case and as such no loss is likely to arise from this litigation and accordingly, no provision has been made in these financial statements.
5.1.2 There are few cases filed by policy holders against the Company before Insurance Tribunals at Lahore for the recovery of claims, contribution amounts and liquidated damages aggregating Rupees 23,560,845 (2015: Rs 14,986,318). These claims are not acknowledged by the Company as the management, based on the advice of its legal advisors, is confident that the Company has good defence in these cases and as such no loss is likely to arise from these litigations and accordingly, no provision has been made in these financial statements. 54 Takaful Pakistan Limited Annual Report 2016
5.1.4 Assistant Commissioner (Sindh Revenue Board) [AC-SRB] issued a show cause notice to the Company alleging that the Company had received re-insurance services liable to Sindh Sales Tax @ 16% during the period from July 2011 to June 2014 and required the Company to show cause as to why not the tax of Rs. 31,561,209 should be levied and recovered from the Comapny. The Company vide C.P No. 1330 of 2016 had challenged the aforesaid SCN before the Honorable Sindh High Court [SHC]. The SHC restrained the AC-SRB from any coercive action till the next date of hearing. The management, based on the advice of its legal counsel, is confident that the Company has good defence in the case and as such no loss is likely to arise from this litigation and accordingly, no provision has been made in these financial statements.
5.2 Commitments Commitments under Ijarah arrangements and the period in which these payments will become due are: 2016 2015 Rupees Rupees Not later than one year 1,255,260 1,255,260 Later than one year but not later than five years 1,046,580 2,301,840 2,301,840 3,557,100
6. CASH AND BANK DEPOSITS 2016 2015 Note Shareholders' Participants' Aggregate Aggregate Fund Takaful Fund ------(Rupees)------Cash and other equivalents - Cash in hand 98,337 - 98,337 91,891 - Policy stamps and bond papers - 433,510 433,510 99,255 98,337 433,510 531,847 191,146 Current and other accounts - Current accounts 3,467 40,842 44,309 194,412 - PLS savings accounts 6.1 6,867,912 17,578,906 24,446,818 21,758,900 6,871,379 17,619,748 24,491,127 21,953,312 Deposits maturing within 12 months -Term deposits 6.2 112,380,000 100,729,000 213,109,000 305,610,000 119,349,716 118,782,258 238,131,974 327,754,458
6.1 These represent balances maintained with Islamic commercial banks under profit and loss sharing basis carrying expected profit rates ranging from 1.76% to 2.65% (2015: 2.6% to 7.3%) per annum.
6.2 These represent term deposits maintained with Islamic commercial banks under profit and loss sharing basis having maturity upto 1 year and carry expected profit at rates ranging from 5.0% to 10.0% (2015: 5% to 10.78%) per annum. These include term deposits amounting to Rs. 30,000,000 maintained with Dubai Islamic Bank (Pakistan) Limited on which lien is marked in favour of State Bank of Pakistan in compliance of section 29 of Insurance Ordinance, 2000 and Takaful Rules, 2012.
2016 2015 7. LONG TERM DEPOSITS Note Rupees Rupees Deposits against : Ijarah 517,900 517,900 Rent 268,590 73,590 Others 7.1 931,544 931,544 1,718,034 1,523,034 7.1 This include deposits amounting to Rs. 875,000 (2015: Rs. 875,000) in respect of enlistment of hospitals and other medical institutes on panel.
8. INVESTMENTS 2016 2015 Shareholders' Participants' Aggregate Aggregate Note Fund Takaful Fund ------(Rupees)------Held to maturity Sukuks Certificates 8.1 44,327,458 - 44,327,458 19,963,645 Less: Provision for impairment (19,839,403) - (19,839,403) (15,998,125) 24,488,055 - 24,488,055 3,965,520 Available for sale Quoted - Units Of Islamic Funds 8.2 50,989,614 63,328,452 114,318,066 64,003,881 75,477,669 63,328,452 138,806,121 67,969,401 55 Takaful Pakistan Limited Annual Report 2016
8.1 Sukuk Certificates Number of Note Maturity date Effective yield Profit Payment Market value Face value 2016 2015 certificates ------Rupees ------Agritech Limited - Sukuk Certificate 8.1.1 3,000 06 August 2019 6 months Semi-annually NPA* 15,000,000 - - KIBOR + 2% Quetta Textile Mills Limited - Sukuk Certificates 8.1.2 2,000 26 March 2020 6 months Quarterly NPA* 10,000,000 - 3,965,520 KIBOR + 1.75% TPL Trakkar Limited - Sukuk Certificates 10 13 April 2021 12 months Quarterly 10,700,000 10,000,000 10,330,555 - KIBOR + 3% Pak Elektron Limited - Sukuk Certificates 14 25 November 2017 3 months Quarterly 14,280,000 14,000,000 14,157,500 - KIBOR + 2.5% 8.1.1 This includes investment aggregated to Rs. 15 million (31 December 2015: Rs. 15 million) in sukuks issued by Agritech Limited (the investee company) against which the investee company had not made payments at the contractual dates i.e. 06 August 2010 and 06 February 2011. In 2011, a restructuring agreement was signed between the investee company and the Investment Agent of the sukuk certificates, whereby, certain terms included in the original trust deed dated 22 July 2008 were amended, including the repayment period which was extended from 06 August 2015 to 06 August 2019. Further, in lieu of accrued overdue profit, zero coupon Term Finance Certificates (TFCs) were issued by Agritech Limited on 17 October 2011 which were to be repaid by the investee company within three and a half years from the date of issuance of such TFCs. However, the investee company defaulted on the installment due based on the restructuring agreement as well as in making payments in respect of zero coupon term finance certificates. Therefore, the management has neither recorded TFCs issued in lieu of profit in the books of accounts nor accrued any profit on outstanding principal amount and has fully provided for the outstanding principal, on prudence basis.
8.1.2 An agreement for restructuring of these sukuks was executed between the Investment Agent of these sukuks and Quetta Textile Mills Limited on 24 June 2013. According to the restructuring terms, repayment of principal of Rs. 8 million will be made to the Company over a period of 7 years till 26 March 2020 in twenty nine quarterly installments whereas the profit shall be received by the Company at the rate of 6 monthly KIBOR and a spread of 1.75% with effect from 26 March 2013.However, the investee company defaulted on the installment on due dates under restructuring agreement. Therefore, outstanding balance of Rupees 3,841,278 has been fully provided for on prudence basis.
* Non performing assets 8.2 Units of Islamic Fund - Available for sale Purchased during Redeemed 2016 2015 2015 2016 Sector / name of investee scheme the year during the year Cost Market value Cost Market value Number of Units ------Rupees ------Participants' Takaful Fund Meezan Cash Fund 103,654 - (103,654) - - - 5,193,043 5,313,281 NAFA - Islamic Stock Fund 1,015,874 847,551 (1,863,425) - - - 11,401,086 11,198,181 Meezan Asset Allocation Plan II - 108,990 - 108,990 5,526,454 7,193,331 - - Al-Ameen Islamic Aggressive Income Fund - 199,426 (196,824) 2,602 264,095 265,618 - - Meezan Islamic Income fund - 433,505 - 433,505 22,682,426 22,798,031 - - NAFA - Aggressive Income Fund - 5,702,036 (5,702,036) - - - - - NAFA Islamic Asset Allocation funds - 2,717,684 (2,717,684) - - - - - Al Ameen Islamic Asset Allocation Fund - 170,004 (170,004) - - - - - NAFA - Riba Free Savings Fund 2,996,520 7,845,447 (7,491,347) 3,350,620 34,855,477 35,024,691 30,602,197 31,313,930 4,116,048 18,024,642 (18,244,974) 3,895,717 63,328,452 65,281,671 47,196,326 47,825,392 Shareholders' Fund ABL Islamic Financial Planning Fund 67,925 65,531 (133,455) - - - 6,800,000 6,799,694 ABL Islamic Income Fund - 1,412,391 (697,287) 715,104 7,324,093 7,384,520 - - Meezan Islamic Income fund - 443,632 (190,404) 253,228 13,249,724 13,317,253 - - Meezan Asset Allocation Fund - 382,827 (382,827) - - - - - MCB Islamic Income Fund - 155,187 155,187 16,000,000 16,048,232 - - NAFA - Riba Free Savings Fund - 2,819,598 (2,819,598) - - - - - Al-Ameen Islamic Aggressive Income Fund - 103,158 (103,158) - - - - - Al Ameen Islamic Asset Allocation Fund (UBL) - 87,939 (87,939) - - - - - MCB Pakistan Islamic Stock Fund - 306,513 306,513 4,000,000 4,110,345 - - Meezan Capital Preservation Plan II 201,601 8,044 - 209,645 10,415,797 11,792,542 10,007,555 10,269,556 269,526 5,784,820 (4,414,668) 1,639,677 50,989,614 52,652,892 16,807,555 17,069,250 8.2.1 Had the Company followed International Accounting Standard (IAS) 39 “Financial Instruments: Recognition and Measurement” in respect of recognition of gain / (loss) on measurement of available for sale securities directly into equity, the investments of the Company would have been increased by Rs. 1.663 million (2015: increased by Rs. 0.89 million) and the net equity would have increased by the same amount. 56 Takaful Pakistan Limited Annual Report 2016
9. CONTRIBUTION DUE BUT UNPAID Note 2016 2015 ------Rupees ------Unsecured Considered good 19,345,273 28,104,385 Considered doubtful 2,664,580 1,580,780 22,009,853 29,685,165 Provision against contribution due but unpaid 9.1 (2,664,580) (1,580,780) 19,345,273 28,104,385
9.1 Movement of provision against contribution due but unpaid: Opening balance 1,580,780 8,431,428 Charge for the year 1,083,800 764,362 Bad debts written off - (7,615,010) Closing balance 2,664,580 1,580,780 10. AMOUNTS DUE FROM OTHER TAKAFUL COMPANIES / RETAKAFUL COMPANIES Unsecured Considered good 3,272,859 3,121,043 Considered doubtful 4,683,507 4,686,950 7,956,366 7,807,993 Provision against amount due from other takaful companies 10.1 (4,683,507) (4,686,950) 3,272,859 3,121,043 10.1 Movement of provision against amount due from other takaful companies: Opening balance 4,686,950 4,667,878 Charge for the year - 19,072 Reversal during the year (3,443) - Closing balance 4,683,507 4,686,950
11. ACCRUED INVESTMENT INCOME 2016 2015 Shareholders' Participants' Aggregate Aggregate Fund Takaful Fund ------(Rupees) ------
Return on term deposits 3,465,563 2,888,309 6,353,872 5,392,810 Return on Sukuk certificates 232,854 - 232,854 - 3,698,417 2,888,309 6,586,726 5,392,810
12. WAKALA FEE RECEIVABLE AND OTHER ACCOUNT BALANCES 2016 2015 Note Rupees Rupees (Restated) Considered good 23,612,843 10,137,095 Considered doubtful - - 23,612,843 10,137,095 Provision for doubtful balances 12.1 - - 23,612,843 10,137,095
57 Takaful Pakistan Limited Annual Report 2016
2016 2015 12.1 Movement of provision for doubtful balances Rupees Rupees (Restated) Opening balance - 4,510,772 Reversal during the year - (4,510,772) Closing balance - - 13. PREPAYMENTS 2016 2015 Shareholders' Participants' Aggregate Aggregate Fund Takaful Fund ------(Rupees) ------
Prepaid re-takaful ceded - 10,680,225 10,680,225 10,273,192 Prepaid expenses 1,375,634 6,843,522 8,219,156 18,760,729 1,375,634 17,523,747 18,899,381 29,033,921
14. SUNDRY RECEIVABLES 2016 2015 Shareholders' Participants' Aggregate Aggregate Fund Takaful Fund ------(Rupees) ------
Return on bank balances and deposits 18,204 156,004 174,208 70,261 Advances to employees and agents 421,944 - 421,944 171,344 Others 696,150 47,969 744,119 631,550 Inter account balance - 28,902,215 28,902,215 - 1,136,298 29,106,188 30,242,486 873,155
58 Takaful Pakistan Limited Annual Report 2016
15. FIXED ASSETS 15.1 Tangibles Assets 2016 Cost Accumulated depreciation Written Down At the Additions / At the end of At the For the year At the end of the Depreciation Value 31 beginning of disposal the year beginning of charge / year Rate December year year (disposal) ------(Rupees) ------(%)
Leasehold improvements 4,156,141 426,000 4,582,141 2,592,047 449,717 3,041,764 1,540,377 10 - Furniture and fixtures 12,771,650 12,771,650 9,448,097 1,277,165 10,725,262 2,046,388 10 - Office equipment 5,990,449 228,020 6,218,469 3,575,361 604,323 4,179,684 2,038,785 10 - - Computers 17,641,074 338,489 17,910,403 16,473,521 738,928 17,143,289 767,114 33.33 (69,160) - (69,160) Vehicles 4,134,278 - 4,134,278 2,370,598 734,780 3,105,378 1,028,900 20
44,693,592 992,509 45,616,941 34,459,624 3,804,913 38,195,377 7,421,564 (69,160) (69,160)
15.1.1 It includes fully depreciated assets having cost of Rupees 16,894,307 (2015: Rupees 15,570,733).
15.1.2 Tangibles Assets 2015 Cost Accumulated depreciation Written Down At the Additions / At the end of At the For the year At the end of the Depreciation Value 31 beginning of disposal the year beginning of charge / year Rate December year year (disposal) ------(Rupees) ------(%)
Leasehold improvements 4,156,141 - 4,156,141 2,176,433 415,614 2,592,047 1,564,094 10
Furniture and fixtures 12,465,495 306,155 12,771,650 8,174,452 1,273,645 9,448,097 3,323,553 10
Office equipments 5,952,119 112,850 5,990,449 3,021,980 580,652 3,575,361 2,415,088 10 (74,520) (27,271) Computers 17,527,982 227,600 17,641,074 15,586,212 947,116 16,473,521 1,167,553 33.33 (114,508) (59,807) Vehicles 4,134,278 - 4,134,278 1,593,954 776,644 2,370,598 1,763,680 20
44,236,015 646,605 44,693,592 30,553,031 3,993,671 34,459,624 10,233,968 (189,028) (87,078)
15.2 Intangibles Assets
Intangible assets in use having cost of Rupees 13,841,107 (2015: Rupees 13,841,107) are fully amortized. 59 Takaful Pakistan Limited Annual Report 2016
Note 2016 2015 16. DIRECT EXPENSES - PTF ------Rupees------Tracker fees 29,283,649 33,918,488 Inspection fees 111,750 44,000 Doubtful debts 1,083,800 783,434 Others 357,966 272,422 30,837,165 35,018,344 17 OTHER INCOME - PTF Liabilities no longer payable written back - 3,686,214 Reversal of provision for doubtful debt 10.1 3,443 - Wakala fee no longer payable written back - 4,510,772 Others 34,051 - 37,494 8,196,986 18. MANAGEMENT EXPENSES - SHF Salaries, wages and benefits 18.1 42,414,131 42,198,385 Rent, rates and taxes 4,919,030 4,430,497 Utilities 1,351,069 1,185,026 Communications 1,323,744 1,187,615 Printing and stationery 910,933 1,133,937 Travelling and entertainment 1,027,929 1,226,467 Repairs and maintenance 1,199,822 1,035,862 Vehicles running and maintenance 815,842 941,485 Advertisement and promotions 251,063 342,671 Ijarah rentals 878,682 878,682 Fees and subscription 953,396 723,238 Other expenses 1,610,647 924,080 57,656,288 56,207,945 18.1 These include Rupees 1,579,950 (2015: Rupees 1,750,118 ) in respect of employees provident fund and Rupees 1,418,150 (2015: Rupees 1,314,526) in respect of staff retirement gratuity. 19. OTHER INCOME - SHF Income from non - financial assets 942,759 929,195 Other income 198,034 3,375 1,140,793 932,570 20. GENERAL AND ADMINISTRATION EXPENSES - SHF Salaries, wages and benefits 20.1 18,177,485 18,085,022 Depreciation 15.1 3,804,913 3,993,671 Shariah board honorarium 1,519,975 1,511,270 Legal and professional 2,866,142 2,486,417 Rent, rates and taxes 2,108,156 1,898,785 Utilities 579,029 507,868 Communications 567,319 508,978 Printing and stationery 390,400 485,973 Travelling and entertainment 440,541 525,629 Repairs and maintenance 514,209 443,941 Vehicles running and maintenance 349,646 403,494 Advertisement and promotions 107,599 146,859 Ijarah rentals 376,578 376,578 Fees and subscription 408,598 309,959 Takaful expense 449,881 472,455 Auditors' remuneration 20.2 790,126 709,176 Bank charges 4,786 9,862 Donation 15,000 70,000 Penalty - 5,000,000 Other expenses 675,277 396,034 34,145,660 38,341,971 20.1 These include Rupees 677,121 (2015: Rupees 750,050) in respect of employee provident fund and Rupees 607,779 (2015: Rupees 563,367) in respect of retirement gratuity. 60 Takaful Pakistan Limited Annual Report 2016
Note 2016 2015 20.2 Auditors' remuneration ------Rupees------Audit fee 306,000 306,000 Half yearly review fee 144,000 144,000 Other certification 192,000 150,000 Out of pocket expenses 148,126 109,176 790,126 709,176 21. TAXATION Current - for the year 21.2 2,894,005 3,277,473 21.1 The relationship between tax expense and accounting profit has not been presented in these financial statements as the income of the Company is subject to tax under section 113 of Income Tax Ordinance, 2001. 21.2 The Company files a consolidated return in respect of PTF and SHF in line with the practice followed by other takaful companies in Pakistan and hence a single charge in SHF has been recorded in these financial statements. The Company has filed income tax returns up to tax year 2015 which are deemed to be assessed under the provisions of section 120 of the Income Tax Ordinance, 2001. 21.3 The Company has not recognised deferred tax asset amounting to Rupees 8.625 million as at 31 December 2016 on net deductible temporary differences aggregating to Rupees 27.824 million as at 31 December 2016 as a matter of prudence. The net deductible temporary difference includes unabsorbed tax depreciation/amortization amounting to Rupees 12.693 million respectively. 2016 2015 22 EARNINGS PER SHARE - BASIC AND DILUTED ------Rupees------There is no dilutive effect on the basic earnings per share which is based on: Net profit after tax for the period - Rupees 21,198,306 30,426,485 Weighted average number of ordinary shares - Number 30,000,000 30,000,000 Basic earnings per share - Rupees 0.71 1.01 23. REMUNERATION OF DIRECTORS, CHIEF EXECUTIVE OFFICER AND OTHER EXECUTIVES 2016 Chief Executive Directors Executives Total Officer ------(Rupees)------Managerial remuneration 2,307,582 - 8,978,961 11,286,543 Directors' fee for attending meetings - 1,585,300 - 1,585,300 Retirement benefits 477,584 - 1,789,841 2,267,425 House rent 1,038,414 4,040,544 5,078,958 Utilities 230,754 - 897,885 1,128,639 Medical expenses 76,500 - 416,500 493,000 Others 919,500 - 4,987,732 5,907,232 5,050,334 1,585,300 21,111,463 27,747,097 Number of persons 2 7 9 18 2015 Chief Executive Directors Executives Total Officer ------(Rupees)------
Managerial remuneration 2,438,710 - 12,387,086 14,825,796 Directors' fee for attending meetings - 1,100,000 - 1,100,000 Retirement benefits 447,097 - 2,315,403 2,762,500 House rent 1,097,419 - 5,574,189 6,671,608 Utilities 243,871 - 1,238,709 1,482,580 Medical expenses 102,000 - 593,900 695,900 Others 252,000 - 5,037,668 5,289,668 4,581,097 1,100,000 27,146,955 32,828,052 Number of persons 1 7 13 21 * This includes remuneration to the outgoing Chief Executive Officer amounting to Rupees 3,578,084 61 Takaful Pakistan Limited Annual Report 2016
23.1 The Chief Executive Officer and some other executives are provided with free use of Company maintained cars in accordance with their entitlements. 24. RELATED PARTIES TRANSACTIONS AND BALANCES Related parties comprise of associated companies, entities under common control, entities with common Directors, major shareholders and key management personnel of the Company. Transactions with related parties are carried out at arm's length prices determined under "Comparable controlled price method". Transactions and balances with related parties have been disclosed in relevent notes to the financial statements. Other transactions and balances not elsewhere disclosed are summarized as follows:
Transactions with related parties during the year and comparatives are as follows:
Status 2016 2015 ------(Rupees)------
Contribution written Associate 26,318,973 15,003,072
Contribution written Director 87,469 52,275
Contribution received Associate 22,107,378 15,516,476
Contribution received Director 104,550 -
Claims incurred / (Reversed) Associate 3,268,822 (2,849,839)
Claims incurred Director 104,550 -
Claims paid Associate 2,748,435 17,680
Claims paid Director 67,955 -
Profit on bank deposit Associate 128,385 140,566
Contribution to provident fund Associate 2,257,071 2,500,168
Contribution to gratuity fund Associate 3,500,000 2,390,718
Status 2016 2015 ------(Rupees)------
Balances with related parties as at 31 December are as follows:
Contribution receivable Associate 7,060,761 2,849,166
Contribution receivable Director - 52,275
Claims outstanding Associate 3,423,409 2,903,022
Claims outstanding Director 25,000 -
Payable to Gratuity fund Associate (781,435) (2,817,858)
Provident fund asset / (liability) - -
Bank deposits Associate 77,151 272,765
62 Takaful Pakistan Limited Annual Report 2016
25. SEGMENT REPORTING
Class of business wise revenue and results have been disclosed in the profit and loss account prepared in accordance with the requirement of Insurance Ordinance, 2000 and the SEC (Insurance) Rules, 2002 and Takaful Rules 2012. The following table presents information regarding segment assets, liabilities as at 31 December 2016 and 31 December 2015, unallocated capital expenditures and non-cash expenses during the current and last period:
Fire & Property Damage Marine, Aviation & Transport Motor Health Miscellaneous Total
2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 ------Rupees ------
SEGMENT ASSETS
Segment assets 21,739,382 30,852,695 17,111,929 15,307,745 89,562,820 80,252,338 26,753,618 21,932,293 553,264 624,410 155,721,013 148,969,481
Unallocated corporate assets 403,591,534 428,473,193
Total assets 559,312,547 577,442,674
SEGMENT LIABILITIES
Segment liabilities 42,880,503 69,885,444 33,752,943 30,790,850 176,660,899 270,470,014 52,770,984 36,965,872 1,091,301 4,071,461 307,156,630 412,183,641
Unallocated corporate liabilities 252,155,917 165,259,033
Total liabilities 559,312,547 577,442,674
63 Takaful Pakistan Limited Annual Report 2016
26. MANAGEMENT OF TAKAFUL AND FINANCIAL RISK 26.1 Takaful risk management Takaful risk The risk under any one takaful contract is the possibility that the covered event occurs and the uncertainty of the amount of the resulting claim. By the very nature of a takaful contract, this risk is random and therefore unpredictable. The principal risk that the Company faces under its takaful contracts is that the actual claims exceed the carrying amount of the takaful liabilities. This could occur because the frequency or severity of claims is greater than estimated takaful events are random, and the actual number and amount of claims will vary from year to year from the level established.
Experience shows that the larger the portfolio of similar takaful contracts, the smaller the relative variability about the expected outcome will be. In addition, a more diversified portfolio is less likely to be affected by a change in any subset of the portfolio. The Company has developed its takaful underwriting strategy to diversify the type of takaful risks accepted and within each of these categories to achieve a sufficiently large population of risks to reduce the variability of the expected outcome.
Factors that aggravate takaful risk include lack of risk diversification in terms of type and amount of risk, geographical location and type of industry covered.
(a) Frequency and severity of claims
Political, environmental, economical and climatic changes give rise to more frequent and severe extreme events (for example, fire, theft, steal, riot and strike, explosion, earthquake, atmospheric damage, hurricanes, typhoons, river flooding, electric fluctuation, terrorism, war risk, damages occurring in inland transit, burglary, loss of cash in safe and cash in transit, travel and personal accident, money losses, engineering losses and other events) and their consequences (for example, subsidence claims). For certain contracts, the Company has also limited the number of claims that can be paid in any policy year or introduced a maximum amount payable for claims in any policy year.
Takaful contracts which is divided into direct and facultative arrangements are further subdivided into five segments: fire, marine, motor, health and miscellaneous. The takaful risk arising from these contracts is concentrated in the territories in which the Company operates, and there is a balance between commercial and personal properties / assets in the overall portfolio of covered properties / assets. The Company underwrites takaful contracts in Pakistan. The Company manages these risks through its underwriting strategy, adequate re-takaful arrangements and proactive claims handling. - The underwriting strategy attempts to ensure that the underwritten risks are well diversified in terms of type and amount of risk, industry and geography. The Company has the right to re-price the risk on renewal. It also has the ability to impose deductibles and reject fraudulent claims. Takaful contracts also entitle the Company to pursue third parties for payment of some or all costs (for example, subrogation). The claims payments are limited to the extent of sum covered on occurrence of the covered event.
- The Company has entered into re-takaful cover / arrangements, with foreign re-takaful operators having good credit rating by reputable rating agencies, to reduce its exposure to risks and resulting claims. Keeping in view the maximum exposure in respect of key zone aggregates, a number of proportional and non-proportional facultative re-takaful arrangements are in place to protect the net account in case of a major catastrophe. The effect of such re-takaful arrangements is that the Company recovers the share of claims from re-takaful companies thereby reducing its exposure to risk. Apart from the adequate event limit which is a multiple of the treaty capacity or the primary recovery from the proportional re-takaful arrangements, any loss over and above the said limit would be recovered under non-proportional treaty which is very much in line with the risk management philosophy of the Company. In compliance of the regulatory requirement, the re-takaful agreements are duly submitted with Securities and Exchange Commission of Pakistan (SECP) on an annual basis. - The Company has claim department dealing with the mitigation of risks surrounding claims incurred whether reported or not. This department investigates and settles all claims based on surveyor's report / assessment. The unsettled claims are reviewed individually at least semi-annually and adjusted to reflect the latest information on the underlying facts, contractual terms and conditions, and other factors. The Company actively manages and pursues early settlements of claims to reduce its exposure to unpredictable developments. (b) Sources of uncertainty in the estimation of future claim payments Claims reported and otherwise are analysed separately. The development of large losses / catastrophes is analysed separately. The shorter settlement period for claims allows the Company to achieve a higher degree of certainty about the estimated cost of claims including IBNR. However, the longer time needed to assess the emergence of a subsidence claim makes the estimation process more uncertain for these claims.
64 Takaful Pakistan Limited Annual Report 2016
The estimated cost of claims includes direct expenses to be incurred in settling claims, net of the expected subrogation value, re- takaful and other recoveries. The Company takes all reasonable steps to ensure that it has appropriate information regarding its claims exposures. However, given the uncertainty in establishing claims provisions, it is likely that the final outcome may be different from the original liability established. The liability comprises amount in relations to unpaid reported claims, claims incurred but not reported (IBNR), expected claims settlement costs and a provision for unexpired risks at the end of the reporting period.
Liability in respect of outstanding claims is based on the best estimate of the claims intimated or assessed. In calculating the estimated cost of unpaid claims (both reported and not), the Company estimation techniques are a combination of loss-ratio-based estimates (where the loss ratio is defined as the ratio between the ultimate cost of takaful claims and takaful contribution earned in prior financial years in relation to such claims) and an estimate based upon actual claims experience using predetermined basis where greater weight is given to actual claims experience as time passes. In estimating the liability for the cost of reported claims not yet paid, the Company considers any information available from surveyor's assessment and information on the cost of settling claims with similar characteristics in previous periods. Claims are assessed on a case-by-case basis separately. The principal assumption underlying the liability estimation of IBNR and Contribution Deficiency Reserves is that the Company's future claim development will follow similar historical pattern for occurrence and reporting. The management uses qualitative judgement to assess the extent to which past occurrence and reporting pattern will not apply in future. The judgement includes external factors e.g. treatment of one-off occurrence claims, changes in market factors, economic conditions etc. The internal factors such as portfolio mix, policy conditions, and claims handling procedures are further used in this regard.
The assumed net of retakaful loss ratios for each class of business is as follows: Assumed net loss ratio Assumed net loss ratio Class 2016 2015 % % Fire and property damage 16.68 5.01 Marine, aviation and transport 4.03 2.29 Motor 45.94 (44.30) Health 98.06 (87.47) Miscellaneous 43.40 524.73 (c) Process used to decide on assumptions The risks associated with takaful contracts are complex and subject to a number of variables that complicate quantitative sensitivity analysis. This exposure is geographically concentrated in Pakistan only.
The Company uses assumptions based on a mixture of internal and market data to measure its related claims liabilities. Internal data is derived mostly from the Company’s monthly claims reports, surveyor's report for particular claim and screening of the actual takaful contracts carried out to derive data for the contracts held. The Company has reviewed the individual contracts and in particular the industries in which the participant companies operate and the actual exposure years of claims. This information is used to develop related provision for outstanding claims (both reported and non-reported).
The choice of selected results for each accident year of each class of business depends on an assessment of the technique that has been most appropriate to observe historical developments. Through this analysis, the Company determines the need for an IBNR or an unexpired risk liability to be held at each reporting date. (d) Changes in assumptions The Company has not changed its assumptions for the takaful contracts as disclosed in above (b) and (c). (e) Sensitivity analysis The analysis of exposure described in paragraph (c) above is also used to test the sensitivity of the selected assumptions to changes in the key underlying factors. Assumptions of different levels have been used to assess the relative severity of subsidence claims given past experience. The key material factor in the Company’s exposure to subsidence claims is the risk of more permanent changes in geographical location in which Company is exposed. The risks associated with the takaful contracts are complex and subject to a number of variables which complicate quantitative sensitivity analysis. The Company makes various assumptions and techniques based on past claims development experience. This includes indications such as average claims cost, ultimate claims numbers and expected loss ratios. The Company considers that the liability for takaful claims recognised in the balance sheet is adequate. However, actual experience may differ from the expected outcome. As the Company enters into short term takaful contracts, it does not assume any significant impact of changes in market conditions on unexpired risks. However, results of sensitivity testing assuming 10% change in the claim incidence net of recoveries showing effect on underwriting results and balance of waqf fund is set out below: 65 Takaful Pakistan Limited Annual Report 2016
Underwriting results Balance of Waqf 2016 2015 2016 2015 ------(Rupees) ------10% increase in deficit Fire and property damage (145,855) 40,772 (145,855) 40,772 Marine, aviation and transport (31,610) 15,855 (31,610) 15,855 Motor (8,025,393) (8,323,701) (8,025,393) (8,323,701) Health (4,650,753) (5,177,959) (4,650,753) (5,177,959) Miscellaneous (15,402) 39,443 (15,402) 39,443 (12,869,013) (13,405,590) (12,869,013) (13,405,590) 10% decrease in deficit Fire and property damage 145,855 (40,772) 145,855 (40,772) Marine, aviation and transport 31,610 (15,855) 31,610 (15,855) Motor 8,025,393 8,323,701 8,025,393 8,323,701 Health 4,650,753 5,177,959 4,650,753 5,177,959 Miscellaneous 15,402 (39,443) 15,402 (39,443) 12,869,013 13,405,590 12,869,013 13,405,590
Concentration of takaful risk A concentration of risk may also arise from a single takaful contract issued to a particular type of participant, within a geographical location or to a particular types of commercial business. In order to minimise the financial exposure arising from large claims, the Company, in the normal course of business, enters into agreement with other re-takaful operators, who are dispersed over several geographical regions.
The maximum class wise risk exposure (in a single policy) is as follows: Gross sum insured Re-takaful Net 2016 2015 2016 2015 2016 2015 ------(Rupees )------
Fire and property and damage 630,000,000 630,000,000 628,000,000 628,000,000 2,000,000 2,000,000
Marine, aviation and transport 208,714,000 109,983,000 206,714,000 107,983,000 2,000,000 2,000,000
Motor 9,900,000 14,000,000 9,400,000 13,500,000 500,000 500,000 Health 700,000 700,000 - - 700,000 700,000
Miscellaneous 1,500,000 1,000,000 1,050,000 550,000 450,000 450,000
850,814,000 755,683,000 845,164,000 750,033,000 5,650,000 5,650,000
Claims development table
The following table shows the development of claims over a period of time on gross basis. The disclosure goes back to the period when the earliest material claim arose for which there is still uncertainty about the amount and timing of the claims payments. For each class of business, the uncertainty about the amount and timings of claims payment is usually resolved within a year. Further, claims with significant uncertainties are not outstanding as at 31 December 2016.
Analysis on gross basis
Accident year 2012 2013 2014 2015 2016 Total and before ------(Rupees) ------Estimate of ultimate claims cost: At the end of accident year 312,814,755 57,227,095 51,476,770 60,999,342 70,484,997 553,002,959
One year later 58,677,162 19,559,603 4,567,165 11,366,394 - 94,170,324
Two years later 32,006,261 14,374,301 6,090,688 - - 52,471,250
Three years later 22,143,054 11,874,430 - - - 34,017,484
Four years later 11,455,438 - - - - 11,455,438
Estimate of cumulative claims 614,414,167 136,408,320 161,686,586 166,138,755 171,756,660 1,250,404,488 Cumulative payments to date (602,958,729) (124,533,890) (155,595,898) (154,772,361) (101,271,663) (1,139,132,541)
Liability recognised in the 11,455,438 11,874,430 6,090,688 11,366,394 70,484,997 111,271,947 balance sheet 66 Takaful Pakistan Limited Annual Report 2016 26.2 Fair value of financial instruments \ The carrying values of all financial assets and liabilities reflected in these financial statements approximate to their fair values except for available-for-sale investments which are stated at lower of cost and market value in accordance with the requirements of the SEC (Insurance) Rules, 2002. The carrying and fair value of these investments have been disclosed in note 10 to the financial statements. Since the financial assets are not stated at exact fair values, therefore, analysis under following groups from level 1 to level 3 based on the degree to which fair value is observable is not produced: Level 1: Quoted Market prices Level 2: Valuation techniques (market observable) Level 3: Valuation techniques (non market observable) The Company’s accounting policy on fair value measurements of its investments is discussed in note 2.8 to these financial statements.
26.3 Financial instruments by categories Loans and Held-to- Available-for- As at 31 December 2016 Total receivables maturity sale Rupees Rupees Rupees Rupees Financial assets - Participants' Takaful Fund Cash and bank balances 118,782,258 - - 118,782,258 Contribution due but unpaid 19,345,273 - - 19,345,273 Amounts due from other takaful/ re-takaful operators 3,272,859 - - 3,272,859 Salvage recoveries accrued 750,000 - - 750,000 Accrued investment income - - 2,888,309 2,888,309 Re-takaful recoveries against outstanding claims 26,177,730 - - 26,177,730 Investments - - 63,328,452 63,328,452 Sundry receivable 156,004 - - 156,004 168,484,124 - 66,216,761 234,700,885
Financial assets - Shareholder's Fund Cash and bank balances 119,349,716 - - 119,349,716 Accrued investment income - - 3,698,417 3,698,417 Wakala and modarib fee receivable 27,065,815 - - 27,065,815 Investments - 24,488,055 50,989,614 75,477,669 Long term deposits 1,718,034 - - 1,718,034 Sundry receivables 440,148 - - 440,148 148,573,713 24,488,055 54,688,031 227,749,799
As at 31 December 2016 At amortized cost Participants' Shareholder's Takaful Fund Fund Rupees Rupees Financial liabilities Provision for outstanding claims (including IBNR) 111,271,947 - Contribution received in advance 1,073,312 - Amounts due to other takaful / re-takaful operators 84,398,303 - Wakala and modarib fee payable 27,065,815 - Other creditors and accruals 7,297,541 10,107,532 231,106,918 10,107,532 26.4 Operational risk Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the processes, technology and infrastructure supporting the Company’s operations, either internally within the Company or externally at the Company’s service providers, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of investment management behaviour. Operational risks arise from all of the Company’s activities.
The Company’s objective is to manage operational risk so as to balance limiting of financial losses and damage to its reputation with achieving its objective of generating returns for stakeholders. The primary responsibility for the development and implementation of controls over operational risk rests with the board of directors. This responsibility encompasses the controls in the following areas: - requirements for appropriate segregation of duties between various functions, roles and responsibilities; - requirements for the reconciliation and monitoring of transactions; - compliance with regulatory and other legal requirements; 67 Takaful Pakistan Limited Annual Report 2016
- documentation of controls and procedures;
- requirements for the periodic assessment of operational risks faced, and the adequacy of controls and procedures to address the risks identified;
- ethical and business standards; and
- risk mitigation, including insurance, where this is effective.
Senior management ensures that the Company's staff have adequate training and experience and fosters effective communication related to operational risk management. 26.5 FINANCIAL RISK MANAGEMENT The Company's activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (including currency risk, interest rate risk and price risk). The Company's overall risk management policy focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company's financial performance. In particular, the key financial risk is that in the long-term its investment proceeds are not sufficient to fund the obligations arising from its takaful and investment contracts.
26.6 Risk management framework The Board of Directors has overall responsibility for establishment and oversight of the Company's risk management framework. The Board is responsible for developing and monitoring the Company’s risk management policies.
The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Company, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.
The audit committee oversees compliance by management with the Company’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Audit Committee is assisted in its oversight role by an outsourced Internal Audit function. Internal Audit undertakes both regular and adhoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.
26.7 Credit risk Credit risk is the risk, which arises with the possibility that one party to a financial instrument will fail to discharge its obligation and cause the other party to incur a financial loss. The Company attempts to control credit risk by monitoring credit exposures by undertaking transactions with a large number of counterparties in various industries and by continually assessing the creditworthiness of counterparties.
Exposure to credit risk The Company structures the levels of credit risk it accepts by placing limits on its exposure to a single counter party, or groups of counterparties, and to geographical and industry segments. Such risks are subject to an annual or more frequent review. Limits on the level of credit risk by category and territory are approved regularly by the Board of Directors.
Re-takaful is used to manage takaful risk. This does not, however, discharge the Company’s liability as primary takaful operator. If a Re-takaful operator fails to pay a claim for any reason, the Company remains liable for the payment to the participant. The creditworthiness of Re-takaful operators is considered on an annual basis by reviewing their financial strength prior to finalisation of any contract.
68 Takaful Pakistan Limited Annual Report 2016
Exposures to individual participants and groups of participants are collected within the ongoing monitoring of the controls associated with regulatory solvency. Where there exists significant exposure to individual participants, or homogenous groups of participants, a financial analysis equivalent to that conducted for Re-takaful operators is carried out by the Company's risk department.
The carrying amount of financial assets represents the maximum credit exposure, as specified below: 2016 2015 Note Rupees Rupees Financial assets Held to maturity Sukuk certificates 24,488,055 3,965,520 24,488,055 3,965,520 Available-for-sale Quoted - units of Islamic fund 114,318,066 64,003,881 Other financial assets at amortised cost Bank deposits 237,600,127 327,563,312 Long term deposits 1,718,034 1,523,034 Contributions due but unpaid 19,345,273 28,104,385 Amounts due from other takaful / re-takaful companies 3,272,859 3,121,043 Accrued investment income 6,586,726 5,392,810 Re-takaful recoveries against outstanding claims 26,177,730 19,214,059 Wakala fee receivable and other account balances 23,612,843 10,137,095 Mudarib fee receivable 3,452,972 2,051,094 Sundry receivables 30,242,486 873,155 352,009,050 397,979,987 490,815,171 465,949,388 Financial assets
Secured 26.7.1 26,177,730 19,214,059 Unsecured 464,637,441 446,735,329 490,815,171 465,949,388
Not past due 442,019,309 415,509,902 Past due 26.7.1 51,670,189 50,439,487 493,689,498 465,949,389 The age analysis of financial assets is as follows: 2016 2015
Gross value Impairment Carrying value Gross value Impairment Carrying value ------(Rupees)------
Not past due 442,019,309 - 442,019,309 416,509,902 (1,000,000) 415,509,902
Past due Upto 1 year 32,361,765 - 32,361,765 36,722,513 - 36,722,513 1-2 years 5,035,419 - 5,035,419 12,650,938 (2,231,180) 10,419,758 Over 2 years 39,470,549 (25,197,544) 14,273,005 22,331,890 (19,034,674) 3,297,216 Total 518,887,042 (25,197,544) 493,689,498 488,215,243 (22,265,854) 465,949,389 26.7.1 It comprises retakaful recoveries against outstanding claims amounting to Rs.26,177,730 which are past due but not impaired and are secured against amount due to re-takaful companies. 69 Takaful Pakistan Limited Annual Report 2016
The credit quality of the Company's bank balances and deposits can be assessed with reference to external credit ratings as follows: Rating Rating 2016 2015 Short term Long term Agency Rupees Rupees
Al Baraka Bank (Pakistan) Limited A-1 A JCR-VIS 77,151 272,765 Askari Bank Limited ( Islamic Banking) A-1+ AA+ PACRA 5,084 5,084 Bank AlFalah Limited (Islamic Banking) A-1+ AA PACRA 72,940 241,169 Bank Islami Pakistan Limited A-1 A+ PACRA 50,048,605 30,119,865 Burj Bank Pakistan Limited A-1 A JCR-VIS - 50,010,285 Dubai Islamic Bank Limited A-1 A+ JCR-VIS 80,007,509 136,051,895 Faysal Bank Limited (Islamic Banking) A-1+ AA PACRA 9,986,895 12,547 Habib Bank Limited (Islamic Banking) A-1+ AAA JCR-VIS 4,968 4,968 Habib Metropolitan Bank (Islamic Banking) A-1+ AA+ PACRA 965,261 516,056 Meezan Bank Limited A-1+ AA JCR-VIS 76,374,477 109,802,781 National Bank of Pakistan (Islamic Banking) A-1+ AAA PACRA 11,746 11,605 The Bank of Khyber (Islamic Banking) A A1 PACRA 43,296 512,161 UBL Ameen A-1+ AAA JCR-VIS 2,197 2,131 NRSP MicroFinance Bank Limited A-1 A PACRA 20,000,000 - 237,600,129 327,563,312 The Company has made investment in other sukuk certificates and units of Islamic fund. 26.8 Concentration of credit risk Concentration of credit risk occurs when a number of counterparties have a similar type of business activities. As a result, any change in economic, political or other conditions would effect their ability to meet contractual obligations in similar manner. Sector-wise analysis of gross "contribution due but unpaid" and "amount due from other takaful companies" at the reporting date is as follows:
Industry 2016 2015 (Rupees) % (Rupees) % Textiles 12,421,680 41.5% 17,157,256 37.6% Banks 6,603,676 22.0% 10,565,738 32.6% Automobiles 230,137 0.8% 220,438 0.5% Cement - 0.0% 5,211 0.4% Chemical and fertilizer 524,709 1.8% 621,050 3.4% Distribution 794,012 2.6% 162,674 1.3% Education 178,889 0.6% 928,665 2.4% NGOs 43,954 0.1% 1,040,238 3.8% Petroleum 209,578 0.7% 1,013,188 0.5% Food and allied 974,671 3.3% 860,091 0.9% Leather 3,147 0.0% 26,447 1.4% Engineering 1,243,037 4.1% 180,746 4.1% Housing 497,801 1.7% 33,035 0.5% Pharmaceuticals 7,545 0.0% 553,276 1.6% Takaful 1,056,448 3.5% 50,970 0.1% NBFIs 198,248 0.7% 268,879 0.3% Individual 241,071 0.8% 329,208 1.9% Paper 1,214,135 4.1% 1,136,116 0.7% IT Industry 260,569 0.9% 548,074 0.6% Oil mills 2,420,674 8.1% 296,705 2.3% Others 842,238 2.8% 1,495,153 3.1% 29,966,219 100% 37,493,158 100% 70 Takaful Pakistan Limited Annual Report 2016
The management monitors exposure to credit risk through regular review of credit exposure, assessing creditworthiness of counterparties and prudent estimates of provision for doubtful debts.
26.8.1 The age analysis of "contributions due but unpaid" at the reporting date is as follows:
2016 2015 Note Gross Impairment Gross Impairment ------(Rupees)------
Upto 1 year 26.8.2 19,345,273 - 28,104,386 - 1-2 years 1,989,946 1,989,946 1,580,779 1,580,779 Over 2 years 674,634 674,634 - - Total 22,009,853 2,664,580 29,685,165 1,580,779
26.8.2 This includes following amounts due from related patries which are past due but not impaired: 2016 2015 Name Status ------(Rupees)------
Contribution receivable Associate 7,060,761 2,849,166 Contribution receivable Director - 52,275 7,060,761 2,901,441 26.8.3 The age analysis of "amount due from other takaful companies" at the reporting date is as follows: 2016 2015 Gross Impairment Gross Impairment ------(Rupees)------
Upto 1 year 2,216,411 - 3,121,041 - 1-2 years 1,940,829 - 650,403 650,401 Over 2 years 4,683,507 4,683,507 4,036,549 4,036,549 Total 8,840,747 4,683,507 7,807,993 4,686,950
Amount due from other takaful companies, re-takaful recoveries against outstanding claims Re-takaful agreement does not relieve the Company from its obligation to participants and as a result the Company remains liable for the portion of outstanding claims covered by re-takaful to the extent that re-takaful fails to meet the obligation under the re-takaful agreements. In common with other takaful companies, in order to minimise the financial exposure arising from large claims, the Company, in the normal course of business, enters into agreement with re-takaful companies. The Company enters into re-takaful / co-takaful arrangements with re-takaful and takaful companies having sound credit ratings accorded by reputed credit rating agencies. The Company is required to comply with the requirements of circular No. 24 / 2010 dated October 27, 2010 issued by SECP which requires a takaful operator to place at least 80% of their outward treaty cessions with re- takaful companies rated 'A' or above by Standard & Poors or equivalent rating by any other reputed international rating agency, with the balance (20%) being placed with entities rated at least 'BBB' by Standard & Poors or equivalent rating by any other reputed international rating agency. An analysis of all re-takaful assets relating to outward treaty cessions recognised by the rating of the entity from which it is due is as follows: 2016 Re-takaful Amount due Prepaid re- recoveries from re- takaful against Total takaful contribution outstanding companies ceded claims ------(Rupees )------A or above - 3,864,804 - 3,864,804 BBB or above - 22,312,926 10,680,225 32,993,151 - 26,177,730 10,680,225 36,857,955
71 Takaful Pakistan Limited Annual Report 2016
2015 Re-takaful Prepaid re- Amount due recoveries takaful from re-takaful against Total contribution companies outstanding ceded claims ------(Rupees )------A or above - 6,148,499 3,287,421 9,435,920 BBB or above - 13,065,560 6,985,771 20,051,331 - 19,214,059 10,273,192 29,487,251 The age analysis of "re-takaful recoveries against outstanding claims" at the reporting date is as follows: 2016 2015 Gross Impairment Gross Impairment ------(Rupees)------Upto 1 year 10,800,081 - 5,497,086 - 1-2 years 1,104,644 - 10,419,758 - Over 2 years 14,273,005 - 3,297,216 - Total 26,177,730 - 19,214,060 - In respect of the aforementioned takaful and re-takaful assets, the Company takes into account its track record of recoveries and financial position of the counterparties while creating provision for impairment. Further, re-takaful recoveries are made when corresponding liabilities are settled.
26.9 Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting its financial obligations as they fall due. Liquidity risk arises because of the possibility that the Company could be required to pay its liabilities earlier than expected or difficulty in raising funds to meet commitments associated with financial liabilities as they fall due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation. The diversified funding sources and assets of the Company are managed with liquidity in mind, maintaining a healthy balance of cash and cash equivalents and readily marketable securities. The table below analyses the Company's financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the maturity date: 2016 Carrying Contractual cash Less than one 1-2 years 2-3 years 3-5 years amount flows year ------(Rupees) ------Financial liabilities at amortised cost Provision for outstanding claims 111,271,947 111,271,947 111,271,947 - - - Amount due to re-takaful companies 84,398,303 84,398,303 84,398,303 - - - Accrued expenses 961,485 961,485 961,485 - - - Wakala fee payable and other account balances 23,612,843 23,612,843 23,612,843 - - - Mudarib fee payable 3,452,972 3,452,972 3,452,972 - - - Other creditors and accruals 46,383,292 46,383,292 46,383,292 - - -
270,080,842 270,080,842 270,080,842 - - - 2015 Carrying Contractual cash Less than one 1-2 years 2-3 years 3-5 years amount flows year ------(Rupees) ------Financial liabilities at amortised cost Provision for outstanding claims 88,471,003 88,471,003 88,471,003 - - - Amount due to Re-takaful companies 59,684,818 59,684,818 59,684,818 - - - Accrued expenses 1,352,615 1,352,615 1,352,615 - - - Wakala fee payable and other account balances 10,137,095 10,137,095 10,137,095 - - - Mudarib fee payable 2,051,097 2,051,097 2,051,097 - - - Other creditors and accruals 20,434,414 20,434,414 20,434,414 - - - 182,131,042 182,131,042 182,131,042 - - - 26.10 Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company's income or value of its financial instruments. The objective of market risk management is to manage and control market risk exposures with acceptable parameters, while optimising the return. The Company is exposed to currency risk, interest rate risk and other price risk. 26.11 Currency risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Currency risk arises mainly where receivables and payables exist due to transactions based on currencies other than Pak Rupees. The Company is not exposed to currency risk as there are no assets or liabilities recoverable/repayable in foreign currencies. 72 Takaful Pakistan Limited Annual Report 2016
26.12 Profit rate risk Profit rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market halal profit rates. Majority of the profit rate exposure arises from balances held in profit and loss sharing accounts and term deposits with reputable banks. At the balance sheet date, the profit rate profile of the Company’s significant halal profit-bearing financial instruments is: 2016 Profit bearing Over three Non profit Effective rate % Over one month Over six months Over one year to Total Upto one month months to six Over five years Sub Total bearing per annum to three months to one year five years months ------(Rupees)------Financial assets Cash and bank deposits 1.76 - 15 79,426,818 96,529,000 41,600,000 20,000,000 - - 237,555,818 576,156 238,131,974 Investments 7 - 8.25 - - - 14,157,500 10,330,555 - 24,488,055 114,318,066 138,806,121 Contribution due but unpaid ------19,345,273 19,345,273 Amounts due from other takaful companies ------3,272,859 3,272,859 Accrued investment income ------6,586,726 6,586,726 Re-takaful recoveries against outstanding claims ------26,177,730 26,177,730 Wakala fee receivable ------23,612,843 23,612,843 Long term deposits ------1,718,034 1,718,034 Mudarib fee receivable ------3,452,972 3,452,972 Sundry receivables ------30,242,486 30,242,486 79,426,818 96,529,000 41,600,000 34,157,500 10,330,555 - 262,043,873 229,303,145 491,347,018 Financial liabilities
Outstanding claims ------111,271,947 111,271,947 Amounts due to takaful / re-takaful companies ------84,398,303 84,398,303 Accrued expenses ------961,485 961,485 Wakala fee payable ------23,612,843 23,612,843 Mudarib fee payable ------3,452,972 3,452,972 Other creditors and accruals ------46,383,292 46,383,292 ------(270,080,842) (270,080,842) Inter risk sensitivity gap 79,426,818 96,529,000 41,600,000 34,157,500 10,330,555 - 262,043,873 (40,777,697) 221,266,176 Cumulative halal profit rate risk sensitivity gap-2016 79,426,818 175,955,818 217,555,818 251,713,318 262,043,873 262,043,873 73 Takaful Pakistan Limited Annual Report 2016
2015 Profit bearing Over three Non profit Effective rate % Over one month Over six months Over one year to Total Upto one month months to six Over five years Sub Total bearing per annum to three months to one year five years months
------(Rupees)------Financial assets
Cash and bank deposits 2.6% - 10.78% 175,258,900 110,510,000 21,600,000 20,000,000 - - 327,368,900 385,558 327,754,458 Investments 5.0 % - 10.78% - - - - 3,965,520 - 3,965,520 64,003,881 67,969,401 Contribution due but unpaid ------28,104,385 28,104,385 Amounts due from other takaful companies ------3,121,043 3,121,043 Accrued investment income ------5,392,810 5,392,810 Re-takaful recoveries against outstanding claims ------19,214,059 19,214,059 Wakala fee receivable ------10,137,095 10,137,095 Security deposit ------1,523,034 1,523,034 Mudarib fee receivable ------2,051,094 2,051,094 Sundry receivables ------873,155 873,155 175,258,900 110,510,000 21,600,000 20,000,000 3,965,520 - 331,334,420 134,806,114 466,140,534
Financial liabilities Outstanding claims ------88,471,003 88,471,003 Amounts due to takaful / re-takaful companies ------59,684,818 59,684,818 Accrued expenses ------1,352,615 1,352,615 Wakala fee payable ------10,137,095 10,137,095 Mudarib fee payable ------2,051,097 2,051,097 Other creditors and accruals ------20,434,414 20,434,414 ------(182,131,042) (182,131,042) Inter risk sensitivity gap 175,258,900 110,510,000 21,600,000 20,000,000 3,965,520 - 331,334,420 (47,324,928) 284,009,492
Cumulative halal profit rate risk sensitivity gap-2015 175,258,900 285,768,900 307,368,900 327,368,900 331,334,420 331,334,420
Cash flow sensitivity analysis for variable rate instruments Shareholders' Fund The Company is exposed to cash flow profit rate risk in respect of its deposits with banks and investment in sukuk certificates. In case of 100 basis points (bp) increase / decrease in profit rates at year end, assuming that all other variables remain constant, the net income before tax would have been higher / lower by Rs. 1,455,892 (2015: Rs. 1,434,250). 74 Takaful Pakistan Limited Annual Report 2016
Participant's Takaful Fund The Company is exposed to cash flow profit rate risk in respect of its deposits with banks. In case 100 basis points (bp) increase / decrease in profit rates at year end on bank deposits, assuming that all other variables remain constant, the net deficit and balance of Waqf would have been higher / lower by Rs. 1,119,097 (2015: Rs. 1,470,317).
Cash flow sensitivity analysis for fixed rate instruments The Company does not have any fixed rate financial assets and liabilities at fair value through profit or loss, therefore a change in interest rates at the reporting date would not affect profit or loss. The sensitivity analysis prepared is not necessarily indicative of the effects on loss for the year and assets / liabilities of the Company.
26.13 Other price risk Price risk is the risk of changes in the fair value of mutual funds units as a result of change in the net asset value of the units of funds. The Company is exposed to price risk since it has investment in Islamic funds amounting to Rupees 114.318 million (2015: Rupees. 64.004 million) at the reporting date. The Company policy is to manage price risk through diversification and selection of securities within specified limits set by internal risk management guidelines and ensuring compliance with the requirements of Takaful Rules, 2012.
The Management monitors the fluctuations of prices of mutual funds on regular basis. The Company also has necessary skills for monitoring and managing the units of mutual funds in line with fluctuations of the market.
The carrying value of available for sale investments subject to price risk is based on net asset values as of the balance sheet date and are stated at lower of cost or market value ( market value being taken as lower if fall is other than temporary) in accordance with the requirement of the S.R.O. 938 issued by the Securities and Exchange Commission of Pakistan (SECP) in December 2002.
Sensitivity analysis As the entire investment portfolio of mutual funds has been classified in the AFS category, a 10% decrease in redemption values of investment in SHF and PTF at the reporting date would have decreased investment value by Rupees 11.793 million ( 31 December 2015: Rupees 6.489 million) and equity would have been lower by the same amount.
However, a 10% increase in redemption values of investment in SHF at the reporting date would not have an impact on investment values as any increases are restricted to the amount of lower of cost or market value (if the fall is other than temporary) as per the Company’s policy and the requirement of the S.R.O. 938 issued by the Securities and Exchange Commission of Pakistan (SECP) in December 2002. The sensitivity analysis prepared is not necessarily indicative of the effects on profit / equity and assets of the Company.
26.14 Capital risk management The Company's objective when managing capital is to safeguard the Company's ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders; and to maintain a strong capital base to support the sustained development of its businesses.
The Company manages its capital structure by monitoring return on net assets and makes adjustments to it in the light of changes in economic conditions. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividend paid to shareholders or issue new shares. Currently, the Company is not in compliance with the minimum paid up capital requirement set by the Securities and Exchange Commission of Pakistan (SECP) through its S.R.O. 828(1)/2015 dated 18 August 2015 for insurance companies / takaful operator for the year ended 31 December 2016. The Company is in the process of raising capital through right issue more fully disclosed in note 1.3 to these financial statements.The Company manages its capital structure by monitoring return on net assets and makes adjustments to it in the light of changes in economic conditions. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividend paid to shareholders or issue new shares.
75 Takaful Pakistan Limited Annual Report 2016
27. PROVIDENT FUND
The Company operates approved funded contributory provident fund (the Fund) for its employees. Detail of net assets and investments of the fund, based on their un-audited financial statements as at 31 December 2016 are as follows:
2016 2015 Rupees Rupees (Un-audited) (Audited)
Size of the fund- net assets 8,858,751 12,231,433
Cost of investments made 9,000,000 13,587,692
Percentage of investments made 101.59% 111.09%
Fair value of investments made 9,732,221 13,381,000
The breakup of fair value of investments, based on un-audited financial statements of the Fund, is as under: 2016 2015 (Un-audited) (Audited) Fair Value Percentage Fair Value Percentage (Rupees) (%) (Rupees) (%)
Bank balances 285,871 3% 294,831 15%
Term deposit certificates 7,000,000 78% 7,000,000 85%
Mutual Funds 2,446,350 25% 6,105,718 0%
The investment out of provident funds have been made in accordance with the provision of section 227 of the Companies Ordinance, 1984 and the rules formulated for the purpose.
28. NUMBER OF EMPLOYEES
The average number of employees for the year ended 31 December 2016 were 67 (2015: 73) and number of employees as at 31 December 2016 were 60 (2015: 75).
29. DATE OF AUTHORISATION
These financial statements have been approved and authorised for issue by the Board of Directors on ______.
30. GENERAL
Figures have been rounded off to nearest Rupee unless otherwise mentioned.
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