Annual Report & Accounts 2018
01
Connected round-the-clock Obligated to discomforts Exchanging contingencies with assurances. Vision To be a leading brand, providing insurance and financial services of global standards.
Mission To enhance the everyday life
Annual Report of our Customers through & Accounts 2018 innovative insurance and financial services while creating exceptional value for our Shareholders. 02 CORE VALUES Superior Customer Service Innovation Professionalism Integrity Empathy Team Spirit
Annual Report & Accounts 2018
03 Annual Report & Accounts 2018
04 Inside
COMPANY OVERVIEW 06 Business History 10 Notice of Annual General Meeting 14 Corporate Information 18 Financial Highlights 19 Chairman’s Statement
SETUPS 27 Board of Directors 33 Management 44 Report of the Directors 54 Report of the Audit Committee 55 Statement of Directors’ Responsibilities in Relation to the Preparation of the Financial Statements 56 Certification Pursuant to Section 60 (2) of Investment and Securities Act No. 29 of 2007 STRATEGIES 57 Independent Auditors’ Report 62 Summary of Significant Accounting Policies
FACTS & FIGURES 98 Statement of Profit or Loss 99 Statement of Other Comprehensive Income 100 Statement of Financial Position 101 Statement of Changes in Equity
102 Statement of Cash Flows Annual Report & Accounts 2018 KEY STATISTCS 103 Notes to the Financial Statements 156 Statement of Value Added 157 Five-Year Financial Summary 05 158 Share Capital History
PROCESSES 161 E-Dividend Mandate Form 163 Proxy Form 165 Admission Slip 168 Unclaimed Dividend List Annual Report & Accounts 2018 BUSINESS HISTOR Y 06 BUSINESS HISTORY
Sovereign Trust Insurance Plc commenced PRODUCTS AND SERVICES business in January 1995 following the Sovereign Trust Insurance Plc is presently restructuring and recapitalization of the operating as a non-life insurance company then Grand Union Assurance Limited. The and has a wide range of insurance products Company went into operation with an and services that are tailored to meet the authorized and paid up capital of N30 million specific needs of the company's clients. Annual Report and N20 million respectively. The Company, Some of our products amongst others & Accounts 2018 currently having its Corporate Head Office at include: Marine & Aviation, Motor Insurance 17, Adetokunbo Ademola Street, Victoria (Third Party & Comprehensive), Special Island, Lagos with 17 other Branches spread Risks, Energy Risks, Builders Liability, across major cities and commercial centers Healthcare Professional Indemnity, in Nigeria, became a Public Limited Occupiers' Liability and Sovereign Wellbeing 07 Company (PLC) on the 7th of April 2004, and Insurance Scheme for the Family (SWIS-F) to was listed on the Nigerian Stock Exchange mention a few. on 29th November, 2006. Our products and services have been The Board of Directors of the Company is packaged for marketing to the public sector made up of reputable individuals who have as well as various manufacturing, industrial distinguished themselves in different fields and commercial concerns. Financial of endeavour. BUSINESS
HISTORY Cont.
institutions such as banks, mortgage and consolidation which ended on February 28, stock broking firms are also being offered 2007; Sovereign Trust Insurance Plc was some of these products. among the licensed companies to underwrite general insurance business Sovereign Trust Insurance Plc also provides h a v i n g c o n s u m m a t e d a m e r g e r comprehensive risk management services. arrangement with the erstwhile Confidence The company carries out various risk surveys Insurance Plc, Coral International Insurance Annual Report & Accounts 2018 and makes appropriate recommendations Company Limited and Prime Trust Insurance towards risk improvement and minimization Company Limited. of loss impacts. INTERNATIONAL RATING Currently, our authorized share capital is Just as the dust of recapitalization was 08 N5.25Billion divided into 10.5billion units of settling down, Sovereign Trust Insurance Plc 50 kobo per share. We have a total equity of submitted itself to a thorough solvency and over N5Billion. The ownership of the liquidity examination to ascertain the level of company is made up of diverse shareholders its capacity in the industry. At the end of the from wide range of individuals and exercise, the company was rated A- by the institutional investors with a robust Board of international rating agency, the Global Directors of distinguished personalities. Credit Rating, GCR, in 2007, 2008, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016 and Following the Federal Government's 2017 respectively. d i r e c t i v e o n r e c a p i t a l i z a t i o n a n d BUSINESS
HISTORY Cont.
The considerations for the rating were based From inception, the company moved from an on the high claims paying ability, the good average industry rating to a leading position, mix of business across the risk classes, high investing in the best of people and
profile of the multinational oil and technology, improving on processes, Annual Report & Accounts 2018 downstream clients, increased underwriting growing market share at an average annual capacity strengthened by the new capital growth rate of 10%, and thereby expanding base and geographical spread of the its balance sheet size. branches. Sovereign Trust Insurance Plc continues to REINSURANCE TREATY COVER be the lead underwriter for most of the major 09 We h a v e a r r a n g e d v e r y a d e q u a t e oil and gas projects in Nigeria. The company reinsurance treaties to enable us continuously strives to be amongst the top accommodate risks with high sums insured five insurance companies in Nigeria. and to provide us with the necessary support in the event of large claims. Our treaties are arranged with some of the renowned international and reputable reinsurance companies. NOTICE OF 24TH ANNUAL GENERAL MEETING
Annual Report & Accounts 2018
10 Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the 24th Annual General Meeting of Sovereign (b) “That the Directors be and are Trust Insurance PLC will take place at the h e r e b y a u t h o r i z e d t o r a i s e Grand Banquet Hall, The Civic Centre, additional equity capital for the Ozumba Mbadiwe Street, Victoria Island, Company up to the maximum limit Lagos on Thursday 25th day of July 2019 at of the authorized share capital, 11.00 a.m. to transact the following w h e t h e r b y w a y o f S p e c i a l businesses: Placement or Public Offer with or without a preferential allotment/or ORDINARY BUSINESS: Rights issue or a combination of any o f t h e m , e i t h e r l o c a l l y o r 1. To lay before the Meeting the Audited internationally and upon such Financial Statements for the year ended terms and conditions as the December 31, 2018, and the Reports of Directors may deem fit in the the Directors, the Auditors and the Audit interest of the Company and subject Committee thereon. to the approval of the Regulatory 2. To re-elect Directors. Authorities.” 3. To authorise the Directors to fix the remuneration of the Auditors. (c) “ T h a t i n t h e e v e n t o f 4. To e l e c t t h e S h a r e h o l d e r s ’ oversubscription of the offer/issue r e p r e s e n t a t i v e s o n t h e A u d i t to capitalize the excess money and Committee. allot additional shares to the extent that can be accommodated by the SPECIAL BUSINESS Company’s unissued share capital subject to the approval of the 5. To fix the Directors’ fees for the year Regulatory Authorities and that the e n d i n g D e c e m b e r 3 1 , 2 0 1 9 a t proceeds should be used for the N3,800,000.00. same purpose as the offer/issue.”
Annual Report & Accounts 2018 6. To consider and if deemed fit to pass the (d) That the Company’s Memorandum following resolutions: and Articles of Association be amended to reflect the increase in (a) That the amount forming the its authorised capital. authorised share-capital of the c o m p a n y b e a n d i s h e r e b y DATED THIS 24th DAY OF JUNE 2019 11 increased from N10,000,000,000.00 ( T e n B i l l i o n N a i r a ) t o BY ORDER OF THE BOARD N15,000,000,000.00 (Fifteen Billion N a i r a ) b y t h e c r e a t i o n o f 10,000,000,000 (Ten Billion) ordinary shares of 50 kobo each ranking pari Yetunde Martins passu in all respects with the FRC/2013/NBA/0000003399 existing ordinary shares of the Equity Union Limited company. (Company Secretaries) Notice of Annual General Meeting Cont.
NOTES Audit Committee should have basic financial literacy and be knowledgeable in internal PROXIES control processes.
Only a member of the Company entitled to Furthermore, in line with the Financial attend and vote at the General Meeting is Reporting Council of Nigeria (FRCN) Rules, entitled to appoint a proxy in his/her stead. All the Chairman of the Statutory Audit valid instruments of proxy should be Committee must be a professional member completed, stamped and deposited at the of an accounting body established by Act of office of the Company’s Registrars, Meristem the National Assembly in Nigeria. Registrars Limited, 213, Herbert Macaulay way, Adekunle, Yaba Lagos State, not less In line with the above, nominations to the than 48 hours before the time fixed for the Statutory Audit Committee should be meeting. supported by the Curricula Vitae of the nominees in order to confirm eligibility. CLOSURE OF REGISTER RE-ELECTION OF DIRECTORS The Register of members will be closed from 24th day of June 2019 to 28th day of June In accordance with the provisions of the 2019 (both days inclusive) to enable the Articles of Association, the directors to retire Registrars make necessary preparations for by rotation at the 24th Annual General the Annual General Meeting. Meeting are Ms. Omozusi Iredia and Col. Musa Shehu (Rtd)(OFR). The retiring
Annual Report STATUTORY AUDIT COMMITTEE directors, being eligible, have offered & Accounts 2018 themselves for re-election. In accordance with Section 359(5) of the Companies & Allied Matters Act Cap C20 The profiles of the directors retiring by Laws of the Federation of Nigeria 2004, a rotation are available in the Annual Report. shareholder may nominate another 12 shareholder for appointment to the Audit and RIGHTS OF SECURITIES’ HOLDERS TO ASK Compliance Committee. Such nomination QUESTIONS should be in writing and reach the Company Secretary not less than 21 days before the Securities’ Holders have a right to ask Annual General Meeting. questions not only at the Meeting, but also in writing prior to the Meeting, and such Kindly note that the provision of the Code of questions must be submitted to the Company Corporate Governance issued by the not later than 7 days to the date of the Securities & Exchange Commission (SEC) meeting. stipulates that members of the statutory LEVERAGING TECH TRENDS
We celebrate our strengths Boldly employing tech trends for dynamism Annual Report & Accounts 2018
13 Directors Mr. Oluseun O. Ajayi Chairman Mr. Olaotan Soyinka Managing Director/CEO Mrs. Ugochi Odemelam Executive Director Mr. Jude Modilim Executive Director Mr. Oduniyi Odusi Executive Director Ms. Emi Faloughi Non Executive Director Ms. Omozusi Iredia Corporate Non Executive Director Mr. Abimbola Oguntunde Information Non Executive Director Mr. Samuel Egube Non Executive Director Col. Musa Shehu (Rtd), OFR Company’s Registration number Independent Director RC 31962 Reporting Actuary Logic Professional Services Head Office Rear Wing 4th Floor, Oshopey Plaza 17, Adetokunbo Ademola Street, 17/19 Allen Avenue Victoria Island, Lagos. Ikeja, Lagos. Tel:01-4611237, Website: www.stiplc.com Auditors 08099929157, 08033076114 Ernst & Young E-mail: [email protected] 10th & 13th Floors UBA House Company Secretary 57, Marina Equity Union Limited P.O. Box 2442, Marina Lagos. (Company Secretaries & Nominees) Equity Union House, 11, IPM Avenue Reinsurers Central Business District, Alausa Aveni Reinsurance Company Limited Ikeja, Lagos, Nigeria. African Reinsurance Corporation Continental Reinsurance Limited Registered Office WAICA Reinsurance Pool Annual Report & Accounts 2018 17, Adetokunbo Ademola Street Victoria Island, Lagos. Bankers +234 1 461 5006 – 9 First Bank of Nigeria Limited Standard Chartered Bank Registrar Zenith Bank Plc 14 Meristem Registrars Limited Access Bank Plc 213, Herbert Macaulay Way, Guaranty Trust Bank Plc Adekunle, Yaba, Lagos State, Nigeria Diamond Bank Plc Ecobank Plc Solicitors Providus Bank Limited Citipoint Chambers (Legal Practitioners) First City Monument Bank Limited Equity Union House, 11, IPM Avenue Fidelity Bank Plc Central Business District, Alausa Unity Bank Plc Ikeja, Lagos, Nigeria Heritage Bank Plc Sterling Bank Plc Wema Bank Plc Corporate Information Cont.
Business Information
ED, Marketing and Business ED, Technical Operations Development Contact: Jude Modilim Contact: Ugochi Odemelam 08033191759 08099929134
CORPORATE INFORMATION Contact: Segun Bankole Corporate Communications & Brand Management Tel: 08099929157
Our Branch Network
ABA BRANCH OFFICE APAPA AREA OFFICE Contact: Adaeze Egbechuo Contact: Kola Azeez 97, Azikwe Road, 20, Commercial Road, Aba, Abia State. Apapa, Lagos. Annual Report Tel:08035084848, 08182980620 Tel:08099929181 & Accounts 2018
ABUJA AREA OFFICE ENUGU BRANCH OFFICE Contact: Lucas Durojaiye Contact: Ikechukwu Onoh 4th Floor, Nusaiba Towers, 112, Ogui Road, Plot 117, Ahmadu Bello Way, Enugu State. 15 Jahi, Abuja. Tel:08035444837 Tel: 08023805681 IBADAN AREA OFFICE AKURE BRANCH OFFICE Contact: Adu Makinde Contact: Niyi Aiyenimelo 87, Obafemi Awolowo Road, 3, Alagbaka Junction Oke-Ado, Ibadan, Akure, Ondo State. Oyo State. Tel:08099928084 Tel:08178654951 Corporate Information Cont.
Business Information Cont.
IKEJA AREA OFFICE Plot 1217, Ibiyinka Olorunnibe Contact: Deborah Ugbaje Street, Victoria Island, 11, IPM Avenue, Off Lagos State. Obafemi Awolowo Way, Tel:08099928102 Alausa, Ikeja, Lagos State. PORT-HARCOURT AREA OFFICE Tel:08099929184 Contact: Angela Uche-Onochie Plot 11, Peter Odili Road, ILORIN BRANCH OFFICE By Maxwell Adoki Street, Contact: Tejumade Emmanuel Trans-Amadi Industrial Layout, Plot 20, IrewoledeYidi Road, Port- Harcourt, Rivers State. Ilorin, Kwara State. Tel:08186690234 Tel:08099929137 SURULERE AREA OFFICE KADUNA BRANCH OFFICE Contact: Victoria Eze Contact: Yusuf Dawodu 12B, Ogunlana Drive CB Finance House, Surulere, Lagos. 16E, Ahmadu Bello Way, Tel:08099929180 Kaduna, Kaduna State. Tel:09031546863 WARRI BRANCH OFFICE Contact: Emmanuel Akporotu KANO BRANCH OFFICE 2 Waico Street Behind Airtel Contact: Suleiman Bazza Office Effurun, Delta State 4C, Muritala Mohammed Way, Tel: 08036991436 Kano State. Tel:08099928125 YENAGOA BRANCH OFFICE Contact: Chiajulam Anyatonwu
Annual Report & Accounts 2018 LAGOS CENTRAL 53, Mbiama-Yenagoa Road, Contact: Oluwatoyin Olayinka Abraka House, Yenagoa, 21, Boyle Street, (8th Floor) Bayelsa State. Onikan, Lagos State. Tel: 08033821451 Tel:08033008339 TRADE FAIR OFFICE 16 LEKKI AGENCY OFFICE Contact: Loretta Eze Contact: Olatunji Olayinka Yobe Plaza, C 311, Road 5, Ikota Shopping Shop B002,001,041,42 Complex, Lekki-Ajah, International Centre for Lagos State. Commerce, Tel:08099928058 Trade Fair Complex (BBA), Badagry Express Way, MARKETING AND BUSINESS Lagos State. DEVELOPMENT DIVISION Tel: 08077720646 Contact: Emmanuel Anikibe Corporate Information Cont. Management Team
Olaotan Soyinka Managing Director/CEO
Ugochi Odemelam Executive Director, Marketing & Business Development
Jude Modilim Executive Director, Technical Operations
Oduniyi Odusi Executive Director, Branch Operations & Business Development
Kayode Adigun General Manager/Divisional Head, Finance & Corp. Services
Sanni Oladimeji DGM/Head, Risk Management & Compliance
Segun Bankole AGM Corporate Communications & Brand Management
Olalekan Oguntunde AGM/Head, ICT
Emmanuel Anikibe AGM/Head, Brokers' Department
Samuel Oseni AGM/Head, Internal Audit
TAJUDEEN RUFAI AGM Technical Operations Annual Report & Accounts 2018 Angela Uche-Onochie AGM/Head, Eastern Area Operations
Lucas Durojaiye AGM/Head, Northern Area 17 Operations
Abisola Asaju AGM, General Internal Services
Niyi Olaitan AGM, Finance & Accounts
Victoria Eze AGM//Head, Lagos Area Offices
Akinwunmi Akinrinmade AGM/Head, Energy Department FINANCIAL HIGHLIGHTS For the year ended 31 December 2018
in thousands of Nigerian Naira 2018 2017 % Change
STATEMENT OF TOTAL COMPREHENSIVE INCOME
Gross premium written 10,513,078 8,513,503 23%
Net premium income 5,061,377 3,852,522 31%
Net claims expense 1,787,492 1,303,145 37%
Profit before income tax 540,554 202,694 167%
Profit after income tax 344,236 157,869 118%
STATEMENT OF FINANCIAL POSITION
Total assets 11,321,427 10,817,675 5%
Total liabilities 5,501,072 5,345,771 -3%
Annual Report Total equity 5,820,355 5,471,904 6% & Accounts 2018 Insurance contract liabilities 3,088,838 3,260,519 5%
Per Share data:
Basic earnings per share (kobo) 4.13 1.89 118% 18 Annual Report & Accounts 2018
Chairman’s Statement 19 Annual Report & Accounts 2018
20
MR. OLUSEUN O. AJAYI Chairman Chairman’s S t a t e m e n t
INTRODUCTION The world economy experienced a broad- based upturn and global growth reached Distinguished Shareholders, Invited Guests, 3.1% in 2017—the fastest pace since Representatives of the various Regulatory 2011.The global growth momentum was Bodies here present, Members of the Press sustained in 2018, buoyed by a strong fiscal Corp, Ladies and Gentlemen, it gives me great expansion in the United States of America, pleasure to welcome you all to the 24th which has largely offset slower growth in Annual General Meeting of our dear some other large economies. The review of company, Sovereign Trust Insurance Plc and global economic indicators suggests that to present the Annual Reports and Accounts growth has remained steady, exceeding 3% in for the period ended December 31, 2018 for annualized terms over the first 6–9 months of your consideration. 2018. However, expectations over the following 6–12 months point to some Our industry continues to be influenced by softening in economic momentum. These various global and national factors; disruptive expectations are closely associated with technological innovations coupled with other heightened uncertainty captured both by continental economic decisions. These financial market volatility and global require continuous review of our strategies economic policy uncertainty. and competitive strides to align our products more to the yearnings of our customers. The In October 2018, global financial markets proactive quality of our company has made it experienced renewed sharp twist resulting in possible to weather the storm despite all and large equity sell-offs in several major improve our performance as much as we countries. This recent development could during the year under review. reinforced expectations that investors’ sentiments will likely remain highly fragile Permit me to take a brief look at both the over a period. A protracted period of elevated global and domestic environments and how uncertainty would act as a drag on household these impacted our operations during the and business confidence, with a pass- year under review. through to investment and consumer Annual Report spending decisions. & Accounts 2018 THE GLOBAL ENVIRONMENT But there are growing signs that global Global economic growth continued to cool off growth may have peaked. Estimates of global in the fourth quarter of 2018 with aggregated industrial production and merchandise trade growth hitting the lowest mark in two years. growth have been tapering since the The global economy accelerated a bit by 3.0% beginning of 2018, especially in trade- 21 in the fourth quarter over the same period in intensive capital and intermediate goods the previous year. Looking at the economic sectors, pointing to weaker investment performance of the G7 economies, the prospects. The annualized momentum of slowdown in Q4 was mostly led by a sharp global industrial production has averaged deceleration in the Euro-Zone, which just 2.2% since January 2018 compared to expanded at the weakest pace in over four 3.5% growth in 2017. World merchandise years in annual terms. trade growth averaged 3.1% in the 8 months to August 2018 compared to 4.6% growth in 2017. Chairman’s Statement Cont.
Leading indicators of economic activity—that Hopes that the United Kingdom could is, measures that are indicative of economic orchestrate an orderly divorce from the developments in forthcoming time European Union (EU) faded. While the two periods—suggest that global economic sides reached a deal, British Prime Minister, growth is expected to moderate over the Theresa May could not persuade the House of coming quarters. The Organization for Commons to endorse it. Whether Britain is Economic Cooperation and Development headed toward a hard Brexit, a soft Brexit, or (OECD) composite leading indicator for the no Brexit at all is anyone’s guess. French 36 members of the OECD plus 6 large non- President Emmanuel Macron saw his public member countries (Brazil, Russia, India, approval ratings tumble into the mid-twenties Indonesia, China and South Africa) has in the face of the gilets-jaunes, or yellow-vest, drifted down since the end of 2017. According p r o t e s t s . T h e s o m e t i m e s v i o l e n t to Moody’s Analytics Survey of Business demonstrations diminished Macron’s ability Confidence, expectations about business to push ahead with his ambitious plans to conditions and investment intentions over the reform the French economy. next six months have weakened. Overall, global economy in 2018, was A lot of political happenings continue to characterized by a lot of upheavals and influence the world order and 2018 was no resurgence in different parts of the world. exception. Quite several nations went to the However, there is a sense of optimism that polls to elect their leaders-Russia, South 2019 will be more stabilizing economically, Sudan, Zimbabwe, DR Congo, Mali and politically and socially if all the indices are Palestine. Likewise, the Democrats won back rightly prioritized. the US House of Representatives in November 2018 mid-term elections. Although DOMESTIC BUSINESS ENVIRONMENT Democrats secured the bigger victory, Republicans picked up two seats in the The 2019 general election came on the heels Senate to continue to have the final say on of recently released national accounts data President Trump’s judicial and cabinet which revealed the economy gathered Annual Report & Accounts 2018 appointments. momentum in the final quarter of 2018, with growth hitting a three-year high on the back of In another development, President Trump a broad-based expansion within the non-oil subsequently imposed tariffs on $50 billion sector. The all-important oil and gas sector worth of Chinese imports, which was later however, remained in the doldrums and raised to $250 billion. Despite tweeting that contracted further in Q4 amid lower oil 22 “Trade wars are good, and easy to win,” production and reducing global crude prices, Trump’s tariffs had by year end hurt weighing on overall activity. Americans more than helped them. The stock market sold off, the overall US trade deficit The political landscape of Nigeria witnessed widened, and America’s trading partners lots of apprehensions prior to the general slapped retaliatory tariffs on US exports, election scheduled for February and March causing American farmers to lose overseas 2019. This resulted in a lot of uncertainty in the markets and some leading US manufacturers economy which culminated in huge selloffs in cut jobs as higher input costs adversely the capital market as the bear consistently affected their bottom lines. ruled. However, the election was successfully Chairman’s Statement Cont.
conducted but not without reservations in main driver of growth in 2018. While some quarters. The incumbent government agriculture slowed down significantly due to of President Buhari has been re-elected and conflict and weather events, non-oil growth given another 4-year mandate to deliver on its which remained negative up to the third political promises and agenda. quarter of 2017 strengthened through 2018 - but remained weak – with services (primarily The National Bureau of Statistics (NBS) i n f o r m a t i o n a n d c o m m u n i c a t i o n s released its final report on the performance of technology) resuming as the key drivers. the Nigerian economy in 2018 ahead of the Presidential election. The report shows that World crude oil demand and supply were the Nigerian economy has continued to estimated at 99.98 mbd and 99.99 mbd recover. The economy expanded by 1.93% in respectively, in the fourth quarter of 2018. Full Year (FY) 2018, higher than 0.82% Nigeria’s crude oil production, including recorded in 2017. The Nigerian economy is condensates and natural gas liquids was growing slower than the growth rate in its estimated at an average of 1.86 mbd or 171.12 population, an indication of economic inertia. million barrels (mb) in the quarter under This means that the economy is not review. The average price of Nigeria’s expanding in such a way that can create reference crude, the Bonny Light (370 API), enough job opportunities for the unemployed was US$69.89 per barrel compared with population. US$76.50 per barrel in the third quarter of 2018. In the NBS report for Q4 2018, Nigeria’s Gross Domestic Product (GDP) grew by 2.38% in Global Oil prices fell by more than 11% in the real terms (year-on-year). This represents an last week of December 2018, its lowest since increase of 0.27% points when compared to mid-2017 with London futures closing at the fourth quarter of 2017 which recorded a $53.82 and New York at $45.59 respectively. growth rate of 2.11%. It also indicates a rise of There was much debate as to whether the 0.55% points when compared with the growth rapid fall in prices is due to oversupply or fears rate recorded in Q3 2018. On a quarter on of a global economic recession slowing the Annual Report quarter basis, real GDP aggregate growth demand for oil. Forecasts of rapidly growing & Accounts 2018 was 5.31%. The fourth quarter growth US shale oil production next year could offset performance implies that real GDP grew at an much of OPEC’s production cut and growing annual growth rate of 1.93% in 2018, political chaos in places like Washington, compared to 0.82% recorded in 2017, an London, Paris, and other world capitals is increase of 1.09% points. adding to concerns about the future. 23 Nigeria emerged from recession in 2017, with However, Nigeria’s crude oil daily production a growth rate of 0.8%, driven mainly by the oil recorded an upward swing of about 2.09 sector. Growth was higher in 2018 (at 1.9%) million bbl. in 2018, translating to a 9% and more broad-based; however, it still fell increment, compared with the 2017 average b e l o w t h e p o p u l a t i o n g r o w t h r a t e , daily production of 1.86 million bbl. Pitched government projections and pre-recession against the low-level daily crude oil levels. The oil and gas sector reverted to production in 2016 and what obtains now, contraction from the second quarter of the Nigerian National Petroleum Corporation year and the non-oil economy was thus the (NNPC) Group Managing Director, Dr. Chairman’s Statement Cont.
Maikanti Baru, said the nation had recapitalize took the center stage in the year. maintained a line of consistent year-on-year The National Insurance Commission issued a improvement. The crude oil increment and circular introducing the Tier Based Minimum other milestones recorded by NNPC in the Solvency Capital (TBMSC) in the course of the past year was hinged on the new business year which grouped the industry into three models being adopted by the group. tiers of capital requirement for operations. The Commission later issued another circular According to NBS report, Nigeria’s cancelling the guidelines in compliance with unemployment rate rose to 23.1% of the the extant rules and injunction issued by the workforce by the end of September 2018, up Federal High Court regarding the Tier-Based from 18.1% in 2017. According to the Labour Minimum Solvency Capital policy, which was Force Statistics – Volume I, the total number to take effect from October 1, 2018. of people classified as unemployed rose from 17.6 million in Q4 2017 to 20.9 million in Q3 However, in a new twist of event, the National 2018. On a positive note, the economically Insurance Commission on May 20, 2019 active or working age population (15 – 64 issued another circular to all insurance and years) increased from 111.1 million in Q3, reinsurance companies in the country 2017 to 115.5 million in Q3, 2018. informing them of the new minimum paid-up share capital requirement for the Insurance The Consumer Price Index which measures industry which will become fully effective by inflation increased to 11.44% (year-on-year) in June 30, 2020. The new paid-up share capital December 2018 from 11.28% recorded in policy stipulates that, the minimum paid-up November 2018. The urban inflation rate share capital for Life Insurance companies increased to 11.73% (year-on-year) in Dec. move from N2b to N8b, General Insurance 2018 from 11.61% recorded in November of moves from N3b to N10b, Composite the same year. While the rural inflation rate Insurance companies now require N18b to also increased to 11.18% in December 2018 play in that space from the hitherto N5b while from 10.99% in November 2018 on a month- Reinsurance companies now require N20b as on-month basis. The urban index rose by against the former N10b. Annual Report & Accounts 2018 0.76% in the period under review, showing a decline of 0.07% from 0.83% recorded in May I humbly state here that our company is November 2018. poised and strategically positioned to continue to play in our space as a General The economy is still being described as fragile Insurance Company as we have already set but continues to experience relative growth the machinery in motion to ensure that we 24 and it is believed that better policy measures meet up with the N10b requirement as of the government to promoting strong stipulated by the Commission. We are infrastructural base will take it to an committed to that agenda and it is hoped that unprecedented leap. This obviously will by the end of this year, we would have met the improve the disposable income which usually requirement. impact insurance premium generation. In a recent report released by NAICOM, the INSURANCE INDUSTRY REVIEW insurance industry recorded 22% increase in gross premium income, year-on-year, to The directive for companies in the industry to N315billion in the third quarter (Q3’18) from Chairman’s Statement Cont.
N258 billion recorded in the corresponding representing over 167% increase. Profit after period of 2017 (Q3’17). Also, gross claim tax also stood at N344million, a 118% figure for the period under review increased increase when compared with the sum of by 30% to N143billion from N110billion in N158million recorded in 2017. This indicates 2017. While one may not disagree that the the commitment to sustain the growth of both industry is performing less than optimal, the revenue and profitability. Consequently, the insurance industry has not been static. All our Return on Capital Employed (ROCE) recorded indices have grown steadily though at a slow a positive performance of 9.29% as against pace over the past few years. 1.87% achieved in the corresponding year of 2017. Similarly, the Earning per share In a move to deepen nationwide insurance improved by 118% from 1.89kobo in 2017 to awareness, the National Insurance 4.13kobo in 2018. Commission (NAICOM) released guidelines for Micro Insurance operation that would The size and quality of our balance sheet guide operators in the sector. The guidelines improved by this performance for the year. established uniform set of rules, regulations While our Total Assets rose from N10.8b to and standards for conduct of micro insurance N11.3billion representing 5% increase, the business across Nigeria from January 1, shareholders’ fund increased by 6% from 2018. It described that the release of the N5.5b in 2017 to N5.8b in 2018. In all, the revised micro-Insurance guidelines 2018, company recorded a modest financial constitute part of the Commission’s performance in the year under review. determination to improve financial inclusion in Nigeria, particularly to the underserved and The increasing competition in our industry excluded segment of the populace. has consistently re-engineered our strategies and we will not rest on our oars. Our OPERATING RESULTS commitment to continuously take leadership in all our product lines remains unperturbed. Despite the challenging business The efforts of the tenacious Sovereign Trust environment in the year 2018, I am delighted team in achieving aggressive revenue Annual Report to report that your company returned to generation is saluted. & Accounts 2018 achieving steady revenue growth and continue our profit drive. Our company was Our dear company has continued to affirm its able to record Gross Premium Written of commitment and capacity to honour all N10.5billion representing a 23% increase over genuine claims as and when due. The the N8.5billion recorded in 2017. The Net company, in the past year settled claims premium income equally grew by 31% to totaling N4.2b to various insured spread 25 N5.5billion over the sum of N3.85billion across the country. recorded in the corresponding year as we continue to improve on our business BOARD CHANGES retention strategy. Resignation In the same vein, the company recorded a Profit Before Tax of N540million as against Mr. Niyi Odusi resigned his appointment as a N202million recorded in year 2017 member of the Board on December 19, 2018. Chairman’s Statement Cont.
We thank him for his contributions while he Our company is well abreast of the was with us and we equally wish him well in happenings in the economy as well as the his future pursuits. industry and has proactively followed up on its plan to ensure its target to be amongst the Retirement by Rotation top five by year 2022 is achieved. This program is tagged T522. Col. Musa Shehu (Rtd), OFR and Ms. Omozusi Iredia would be retiring by rotation CONCLUSION and are eligible for re-appointment as non- executive directors. We believe that the changes in our business e n v i r o n m e n t p r e s e n t u n c o m m o n FUTURE OUTLOOK opportunities for operators. We shall continue to deploy several initiatives and The mandate to scale up our capital base is strategies to address any industry challenges already at an advanced stage. Our program while harnessing the inherent opportunities. for capitalization will take off with the Issuance of Rights to existing shareholders of I acknowledge and salute the unrelenting the company. According to the schedule, we effort and courage of our team amidst the will be issuing a total of 4,170,411,648 various ups and downs post by Nigerian o r d i n a r y s h a r e s t o o u r e s t e e m e d economy in the course of the financial year shareholders. This is expected to be finalized ended. by the third quarter of 2019. I urge our esteemed shareholders to pick up your Rights Distinguished shareholders, I want to thank to have a successful program. our various stakeholders for their confidence in the company and assure you that I see a However, other capital raising options as very promising and rewarding future before advised by our financial advisors will be us. Importantly, my unreserved appreciation considered in the course of the Year. This is goes to our customers whose loyalty and basically to ensure that our company is set on patronage has blazed us into the lead position Annual Report & Accounts 2018 a very solid and competitive platform in the in our chosen market. industry. To my colleagues on the Board, I extend my The New minimum wage bill recently passed sincere gratitude for your dedication and wise and accented to by the Federal Government counsel which have contributed to making will to a great extent increase demand and 2018 a remarkable success. To our 26 supply in the economy. Insurance service is unrelenting shareholders, I cannot but expected to benefit by the law in terms of reassure you of the great aspiration of our premium generation as disposable income company to take the position of leadership in improves. In this regard, a few bespoke the industry. We believe that the actualization products will be introduced to the market in of this objective is most crucial, and we would the course of the year. The products are take nothing for granted in achieving this expected to be affordable and deepen the goal. retail end of our product lines.
OLUSEUN O. AJAYI FRC/2013/CIIN/00000003373 CHAIRMAN Annual Report & Accounts 2018
27 BOARD OF DIRECTORS Board of Directors
MR OLUSEUN O. AJAYI MS. EMI FALOUGHI Chairman Director
Mr. Oluseun O. Ajayi is a Chartered Insurer with M s . E m i Fa l o u g h i i s a s e a s o n e d over 30 years of experience in the insurance professional with vast years of experience industry. He is a graduate of History and Politics in the Oil and Gas Industry ranging from from the University of Ibadan and also an developing system solutions in support of Associate of the Chartered Insurance Institute of Contracting and Procurement processes. London (ACII) and Nigeria (ACIIN) respectively. Over the years, she has successfully put He is an astute professional who has devoted his together and managed an ever evolving entire working life to the practice of insurance. cross functional global network of IT specialists, Contracting & procurement He has attended various Management and experts and SAP Business Improvement Leadership Development Programmes at Analysts. different times in the course of his career including the Management Programme at the S h e h o l d s a f i r s t d e g r e e i n London School of Insurance. He is also an Communications and Spanish from alumnus of the Lagos Business School having London Guildhall University, United completed the Chief Executive Programme. Mr. Kingdom and a Masters in Urban Planning Ajayi has also attended leadership programmes from Hunter College, New York, United at the IESE Business School of the University of States of America. She is currently the Vice Annual Report & Accounts 2018 Navarra, Spain, the University of Nottingham President of TEEOF Holdings Ltd; a Business School and the London Business company with a diverse portfolio spanning School. Under his leadership, the company the entertainment and realty sectors. consistently experienced steady and remarkable accomplishments. One of his greatest accomplishment as the pioneer MD/CEO of the 28 company was the successful transition of the company from a Limited Liability underwriting firm to a Publicly Quoted Company in November 2006. He was a member of the vision 2020 Business Support Group, BSG, inaugurated by the Federal Government of Nigeria. Board of Directors Cont.
MS. OMOZUSI IREDIA MR. ABIMBOLA OGUNTUNDE Director Director
Omozusi holds a Master ’s Degree in Mr. Abimbola (Abi) Oguntunde is the International Business Management from Managing Partner of Devtage Consulting & Demonfort University, Leicester and a BSc. CEO of the Devtage Group, a global (Banking & Finance), University of Maiduguri, management consulting, technology, and Nigeria. corporate training & development company with offices in North America She is an Investment Manager with over a and EMEA (including Lagos, Nigeria). He decade experience in the financial services currently serves as a non-executive specializing in equities & money markets with director of Sovereign Trust Insurance Plc specific focus on sales, trading and dedicated with specific responsibilities for capital client relationship management. raising, business transformation & reorganization. Abimbola, an experienced She has held leadership positions with Banker, economist and certified Project companies such as Afrinvest West Africa, Manager, with over 30 years experience in Standard Chartered Bank and Coronation the banking industry, management Merchant Bank. consulting and the international public sector, has held top management Prior to founding CERTARI Partners, Omozusi positions at leading institutions (UBA, Annual Report worked as the Group Executive of Coronation Sterling and Diamond Bank) in the & Accounts 2018 Securities –a subsidiary of Coronation financial services industry. Merchant Bank where she was responsible for driving sales, positioning and overall He has also acquired international working profitability of the business as well as aiding exposure, having a stint with the Ministry of clients in providing liquidity solutions, raising Government Services, Ontario Public capital with a core focus on driving growth and Services (OPS). He studied Economics at 29 establishing successful partnerships across the the University of Lagos where he graduated region. with a First Class and subsequently obtained a master’s degree in Economics She is passionate about sustainable from the same institution. He also holds an development and strategies geared at changing MBA in International Banking and Finance lives. She brings to bear her wealth of with Distinction from the University of experience in the Nigerian Financial landscape Birmingham, United Kingdom. in strengthening the composition of the Board of Directors of Sovereign Trust Insurance Plc. Board of Directors Cont.
MR. SAMUEL EGUBE COL. MUSA SHEHU (RTD.) Director Independent Director
Samuel Egube is an Angel investor and adviser on the Col. Musa Shehu (Rtd.) retired from Expert in residence program of the Entrepreneur Nigeria Army in 1999 after several years of Development Center (EDC) of the Pan Atlantic meritorious service in Nigeria. He was on University Lagos, Nigeria. He is CEO at Harbourpoint the country's entourage on several military Partners; a Business Consulting and Financial peace keeping and observer missions Advisory services company focused on Financial outside Nigeria at different times during services, Technology, Agriculture and the garment the course of his military career. Some of industries. the countries include Chad, Iran and Iraq.
Samuel Egube is a director at Sovereign Trust In the course of his military career, he also Insurance Plc and Interbau Construction Ltd. He is served as Military Administrator of Rivers also Chairman CeLD Innovations Ltd, a technology State between 1996 and 1998 and of driven consumer Loyalty Company and Africa’s first Plateau State from 1998 to 1999 unified cash reward service company. His over twenty- respectively. Col. Musa Shehu (Rtd.) is a nine years post qualification experience, twenty of non-executive director on the Board of which in senior management banking roles has been Sovereign Trust Insurance Plc. Currently; in various sectors of the economy, including Banking & he is the Secretary-General of the Arewa financial advisory, Business consulting and Consultative Forum. Annual Report & Accounts 2018 Engineering. These experiences were acquired in very strong institutions that include Arthur Andersen & Company (now KPMG professionals in Nigeria), United Bank for Africa Plc, First Bank Nigeria Plc and Diamond Bank Plc where he was the Corporate 30 Banking Director and Head of Directorate. He holds an Executive MBA from the prestigious International School of Management (IESE), University of Navarra Barcelona having initially held a Bachelors’ degree in Engineering from the University of Benin. He is a Fellow of the Institute of Credit Administration (FICA), an Associate member of the Nigerian Institute of Management (AMNIM), A Corporate member of the Nigerian Society of Engineers (MNSE), Registered member of the Council for regulation of Engineering in Nigeria (COREN), and Honorary Senior member of Chartered Institute of Bankers. He has attended various local and international courses including management/leadership programs at IESE (Spain), INSEAD (France), Wharton (USA) and Columbia (USA). Board of Directors Cont.
MR. OLAOTAN SOYINKA MRS. UGOCHI ODEMELAM Managing Director/CEO ED, Marketing & Business Development
Mr. Olaotan Soyinka is an erudite and well Mrs. Ugochi Odemelam graduated from grounded Underwriter with over 20 years the Federal Polytechnic, Nassarawa. She cognate experience. He is an Associate of holds an MBA from ESUT Business School. the Chartered Insurance Institute of She is also a member of the Nigerian Nigeria. He is a Graduate of Insurance from Institute of Management (NIM), a University of Lagos and also holds an M.Sc registered member of the Chartered degree in Marketing from the same Insurance Institute of Nigeria (CIIN) and University. He joined Sovereign Trust Chartered Insurance Institute of London Insurance Plc in March 1998. A seasoned (CII London). She is an Alumnus of the Professional who has plied his trade in both L a g o s B u s i n e s s S c h o o l h a v i n g Marketing and Technical Divisions of the successfully completed the Senior organization, he is bringing to bear his Management Programme (SMP), and the overwhelming wealth of experience in Advanced Management Programme providing instructive leadership to the (AMP), of the Institution respectively. She company while taking it to the next phase of has also attended series of management its growth stage. Soyinka is an alumnus of and development programmes both at the Lagos Business School having local and international levels. She is an successfully completed the Senior Alumnus of the Kellogg School of Annual Report M a n a g e m e n t Pr o g r a m m e o f t h e Management, Chicago, USA. & Accounts 2018 Institution. He is also a member of the prestigious Ikoyi Club 1938. She joined Sovereign Trust Insurance Plc in April 1995. Her cognate working experience of over 20 years cut across the banking and insurance profession. Her experience at Sovereign Trust spans 31 several divisions, Area office operations and other committee works. Board of Directors Cont.
MR. JUDE A. MODILIM MR. ODUNIYI ODUSI ED, Technical Operations ED, Branch Operations & Business Development
He was until his appointment as Executive A dynamic Insurance Industry Practitioner with Director, Technical, the Assistant General over two decades hands-on-experience Manager/Group Head, Business Development spanning across brokerage, underwriting (Life & with International Energy Insurance Plc, IEI. Non-Life), business development, reinsurance, While in IEI, he carried out various functions in operations and leadership management. different capacities. Niyi obtained a Bachelor of Science Degree Between 2007 and 2008, he was the Group (BSc) in Insurance from University of Lagos, Head, Retail for Insurance PHB, (Now KBL). He Akoka and an MSc in Marketing from the same had a short stint with Industrial and General Institution in 1991 and 1995 respectively. Insurance Company Limited as a Manager in charge of Telecommunications Marketing. He is an Associate Member of the Chartered Jude equally had a long spell with NICON Insurance Institute of Nigeria, CIIN. He is an Insurance Plc totaling 15 years where he held alumnus of University of Texas, USA and the various positions within the organization. Lagos Business School having successfully completed the Advanced Management Jude Modilim is coming on Board with a Programme, (AMP 23) of the School. considerable wealth of experience that has Annual Report & Accounts 2018 traversed various facets of Insurance and it is Before joining Sovereign Trust Insurance Plc, hoped that same will be utilized in galvanizing Niyi was the Managing Director/CEO of LIBRA the organization to the next level of its growth Insurance Brokers, a position he held for four agenda. years. He was at a time, a Deputy General Manager with Glanvill Enthoven in charge of Business Development. He was the Assistant 32 General Manager in charge of Branch Operations at AIICO between 2007 and 2009.
He had also worked with Leadway Assurance Nigeria Limited, Atlantic Insurance Company Limited, Lozinger Insurance Brokers and Hogg Robinson Nigeria Limited where his journey in insurance all began.
Niyi Odusi brings to bear his enormous wealth of experience in the Insurance Landscape in Nigeria to help propel the organisation to its next phase of growth. MANAGEMENT KNIT. STRONG. SECURE.
Annual Report & Accounts 2018
33 Management
Mr. Olaotan Soyinka is an erudite and well grounded Underwriter with over 20 years cognate experience. He is an Associate of the Chartered Insurance Institute of Nigeria. He is a Graduate of Insurance from University of Lagos and also holds an M.Sc degree in Marketing from the same University. He joined Sovereign Trust Insurance Plc in March 1998. A seasoned Professional who has plied his trade in both Marketing and Technical Divisions of the organization, he is bringing to bear his overwhelming wealth of experience in providing instructive leadership to the company while taking it to the next phase of its growth stage. Soyinka is an alumnus of the Lagos Business School having successfully completed the Senior M a n a g e m e n t Pr o g r a m m e o f t h e Institution. He is also a member of the OLAOTAN SOYINKA prestigious Ikoyi Club 1938. Managing Director/CEO
Mrs. Ugochi Odemelam graduated from the Federal Polytechnic, Nassarawa. She holds an MBA from ESUT Business School. She is also a member of the Nigerian Institute of Management (NIM), a registered member of the Chartered Insurance Institute of Nigeria (CIIN) and Chartered Insurance Institute of London (CII London). She is an Alumnus of the L a g o s B u s i n e s s S c h o o l h a v i n g successfully completed the Senior Management Programme (SMP), and the
Annual Report Advanced Management Programme & Accounts 2018 (AMP), of the Institution respectively. She has also attended series of management and development programmes both at local and international levels. She is an Alumnus of the Kellogg School of 34 Management, Chicago, USA. She joined Sovereign Trust Insurance Plc in April 1995. Her cognate working UGOCHI ODEMELAM experience of over 20 years cut across the banking and insurance profession. Her ED, Marketing and Business Development experience at Sovereign Trust spans several divisions, Area office operations and other committee works. Management Cont.
Mr. Jude A. Modilim is a seasoned Insurance and Risk Management Practitioner with considerable exposure and experience in Marketing & Business Development, Underwriting, Claims Administration and Management. Jude's personality resonates positivity and self-confidence.
He graduated from University of Lagos in 1990, having read Insurance with a B.Sc Degree and also obtained an MSc D e g r e e i n 1 9 9 5 i n B u s i n e s s Administration from his alma mater where he majored in Marketing.
He is an Associate member of the Chartered Insurance Institute, London, (ACII) and also an Associate of the Chartered Insurance Institute of Nigeria, (ACIIN) respectively. Jude is a member of the Nigerian Institute of Management and an Associate of the JUDE A. MODILIM Nigerian Council of Registered ED, Technical Operations Insurance Brokers, NCRIB.
A dynamic Insurance Industry Practitioner with over two decades hands-on- experience spanning across brokerage, underwriting (Life & Non-Life), business development, reinsurance, operations and leadership management.
Niyi obtained a Bachelor of Science Degree (BSc) in Insurance from University of Lagos, Akoka and an MSc in Marketing from the same Institution in 1991 and 1995 respectively.
He is an Associate Member of the Annual Report Chartered Insurance Institute of Nigeria, & Accounts 2018 CIIN. He is an alumnus of University of Texas, USA and the Lagos Business School having successfully completed the Advanced Management Programme, (AMP 23) of the School. 35 Before joining Sovereign Trust Insurance Plc, Niyi was the Managing Director/CEO of LIBRA Insurance Brokers, a position he ODUNIYI ODUSI held for four years. He was at a time, a Deputy General Manager with Glanvill ED, Branch Operations Enthoven in charge of Business & Business Development Development. He was the Assistant General Manager in charge of Branch Operations at AIICO between 2007 and 2009. Management Cont. Kayode Adigun is a Fellow of both the Institute of Chartered Accountants of Nigeria and The Chartered Institute of Taxation of Nigeria respectively. He holds a M a s t e r o f S c i e n c e D e g r e e i n Governance and Finance from Liverpool John Moore University United Kingdom and an additional Master Degree in Business Administration from the Obafemi Awolowo University, Ile-Ife. He is an alumnus of University of Jos, where he graduated with a Bachelor of Science degree in Geography. He is an Alumnus of Howard University, Washington D.C, USA.
He joined Sovereign Trust Insurance Plc in 1997 and has over 20 years of experience in treasury, corporate finance, a c c o u n t i n g , t a x , i n v e s t m e n t s , administration and human resources functions. He is also an expert in corporate governance structure and framework. Kayode is an Alumnus of the Lagos Business School having completed KAYODE ADIGUN the Advanced Management Programme General Manager/Divisional Head, (AMP), of the Institution. Finance & Corp. Services
Sanni Oladimeji is a graduate of Accountancy from the Federal Polytechnic Ilaro and he is charged with the responsibility of planning, developing and implementing an overall risk management process geared at protecting and controlling the capital, resources and assets of the company.
He is a Fellow of Institute of Chartered Accountants of Nigeria, the Risk Managers Society of Nigeria and the Chartered Institute of Taxation of Nigeria. He is also Annual Report & Accounts 2018 an Associate member of Nigerian Institute of Management. He holds a Masters degree in Business Administration, specializing in Marketing Management. He is a professional member of the Institute of Operational Risk, UK, Certified 36 ISO 31000 Risk Management Professional and also a certified business professional in Leadership. He is an alumnus of the L a g o s B u s i n e s s S c h o o l h a v i n g successfully completed the Advanced SANNI OLADIMEJI M a n a g e m e n t Pr o g r a m m e o f t h e Deputy General Manager/Head, Institution. Risk Management & Compliance He joined Sovereign Trust in March 1995. He has over 25 years of working experience in Finance & Administration and Enterprise Risk Management. Management Cont.
Segun Bankole graduated from the Obafemi Awolowo University, Ile-Ife, (OAU). He holds a Masters Degree in Business Administration from the University of Calabar. He has over 20 years of work experience in the Nigerian Private and Public Sectors with a keen interest in Media, Public Relations, Marketing Communications, Human Relations, and Business Development. He is an Alumnus of the Lagos Business School having completed the Advanced Management Programme of the Institution.
Bankole is a member of the Nigerian Institute of Management (NIM) and an Associate Member of the Advertising Practitioners Council of Nigeria (APCON). He is a member of the Global Development Network (GDN), an international non- governmental organization in the pursuit of global manpower development. He is a Fe l l o w o f t h e I n s t i t u t e o f B r a n d SEGUN BANKOLE Management of Nigeria, IBMN. He joined Assistant General Manager/Corporate Sovereign Trust Insurance Plc in Communications & Brand Management November 2007.
A 1993 Computer Science Graduate from the University of Lagos and a Masters Degree holder in Business Administration from the University of Port Harcourt. Lekan O g u n t u n d e i s c h a r g e d w i t h t h e responsibility of providing seamless, c u t t i n g - e d g e I n f o r m a t i o n a n d Communication Technology interventions for the organization.
He is a Microsoft Certified Professional, MCP and also a Microsoft Certified System Administrator, MCSA. He is a professional Annual Report Member of the Business Process & Accounts 2018 Transformation Group, BPTG, in the United Kingdom. Lekan is an Alumnus of the Lagos Business School having completed the Advanced Management Programme of the Institution. He is also an associate of the Chartered Insurance Institute of 37 Nigeria.
He has worked with some notable OLALEKAN OGUNTUNDE insurance companies in time past, before Assistant General Manager/Head, ICT joining Sovereign Trust Insurance Plc in 2006. He has at various times attended both local and international management and Leadership courses in the course of his career. Management Cont.
Emmanuel Anikibe is charged with the responsibility of super vising and coordinating the operations of the Brokers Department. He is a graduate of Insurance f r o m t h e F a c u l t y o f B u s i n e s s administration, University of Lagos. He also holds an MBA, from Obafemi Awolowo University, Ile-Ife, with specialty in Marketing Management. He is an Associate of the Chartered Insurance Institute of Nigeria (CIIN) and an alumnus of the prestigious Lagos Business School having completed the Senior Management Programme (SMP) in 2009. He has at various times attended several technical, management and Leadership courses in the course of his career.
His cognate 20 years of work experience includes working as an underwriter at Lion of Africa Insurance Company Limited and Sovereign Trust Insurance Plc where he has held several positions spanning, EMMANUEL ANIKIBE Underwriting, Reinsurance & Claims Assistant General Manager/Head, Administration, Branch Operations, Retail Brokers Department and Business Development.
Samuel Oseni, (SO), as he is fondly called by colleagues, is an all-around experienced professional with over 20 years hands-on experience in marketing, underwriting and administration. Samuel is an Associate of the Institute of Chartered Accountants of Nigeria, (ICAN) and the Chartered Insurance Institute of Nigeria, (CIIN) respectively.
He is an Insurance graduate from the Lagos State Polytechnic and also holds an Annual Report MBA from Obafemi Awolowo University, & Accounts 2018 Ile-Ife. He heads the Internal Audit Department.
He is an Alumnus of Lagos Business School having completed the Senior 38 M a n a g e m e n t Pr o g r a m m e o f t h e Institution. He is equally a member of the Prestigious Ikoyi Club 1938.
SAMUEL OSENI Assistant General Manager/ Head, Internal Audit Management Cont.
A Chartered Insurer of repute with over two decades work experience garnered from years of working for both Insurance and Reinsurance companies. Has attended several insurance and management courses locally and internationally. An Associate of the Chartered Insurance Institute of London, (CII London). An Associate of the Chartered Insurance Institute of Nigeria, (CIIN). Brings his wealth of experience to bear as Head, Technical in the organization.
TAJUDEEN RUFAI Assistant General Manager, Technical Operations
Angela Uche-Onochie is charged with the responsibility of coordinating and super vising the operations of the Company’s Branch Network in the Eastern Region.
She graduated from the University of Calabar with a Bachelor of Science degree
in Zoology and has virtually traversed all Annual Report the major divisions in the organization, & Accounts 2018 namely; Technical, Human Resources, Administration and Marketing.
Angela who joined the company at inception holds a Postgraduate Diploma in Management from the University of 39 Calabar and she is an associate of the Chartered Insurance Institute of Nigeria, CIIN. She has attended series of management courses.
ANGELA UCHE-ONOCHIE Assistant General Manager/ Head, Eastern Area Operations Management Cont. Lucas as he is fondly called by colleagues and friends is a Graduate of Insurance from Lagos State Polytechnic, (LASPOTECH). He holds a Post Graduate Diploma in Business Strategy and an MBA from Anglia Ruskin University, London, United Kingdom.
His foray in Insurance spans over 19 years with varied cognate experience which cuts a c r o s s , I n s u r a n c e A d m i n i s t r a t i o n (Brokerage Services, Underwriting, General Insurance, Investment/Life Operations, Technical/ Claims, Risk management, Business Development as well as Public Relations.
A charismatic motivator and team player, Lucas’ latent managerial ability is hinged on effective leadership, sound communication and decision-making skills coupled with interpersonal and problem-solving abilities with a corporate focus and result-driven attitude.
He is both an Associate Member of the LUCAS DUROJAIYE Chartered Insurance Institute of Nigerian, Assistant General Manager/ Head, AIIN and the Nigerian Council of Registered Northern Area Operations Insurance Brokers, NCRIB, respectively. He is also a Chartered Fellow of the Institute of Credit Administration of Nigeria and the Institute of Loan & Risk Management as well. He is an alumnus of the Lagos Business School.
Bisola Asaju graduated from Obafemi Awolowo University, Ile-Ife with a B.A (Hons) in English Studies from the Faculty of Humanities. She also holds an MBA from Ladoke Akintola University, Ogbomosho, Oyo State.
She is an alumnus of Lagos Business Annual Report & Accounts 2018 School having completed the Senior Management Programme (SMP) of the School. An Associate Member of the Nigerian Institute of Management (NIM).
She joined the Company as one of the 40 pioneer staff in 1995 and has traversed some of the Divisions in the Organization r a n g i n g f r o m Te c h n i c a l , H u m a n ABISOLA ASAJU Resources and Administration. Assistant General Manager/General Bisola is charged with the responsibility of Internal Services super vising and coordinating the operations of the General Internal Services Department for Sovereign Trust Insurance Plc. Management Cont.
Gbeminiyi Olaitan is a Fellow of the Institute of Chartered Accountants of Nigeria (ICAN) and the Chartered Institute of Taxation of Nigeria respectively.
He holds a Higher National Diploma in Food Science and Technology from Yaba College of Technology.
His sojourn in the accounting profession started with Okay Consult before joining Sovereign Trust Insurance Plc in 1999 where he has risen through the ranks to his current position as an Assistant General Manager (Finance and Accounts) in the Finance and Corporate Services Division.
GBEMINIYI OLAITAN Assistant General Manager/Head, Finance & Accounts Victoria Eze is charged with supporting the attainment of strategic corporate goals through developing plans and leading the marketing and business growth efforts of the Lagos Area offices in accordance with STI strategic business plans.
She is a graduate of both the Institute of Management Technology, Enugu and Federal Polytechnic, Oko. She also holds a m a s t e r ’ s d e g r e e i n B u s i n e s s Administration with specialty in Marketing from ESUT Business School. She is a member of the Nigerian Institute of Annual Report Management (NIM), and an associate of & Accounts 2018 the Chartered Insurance Institute of Nigeria (CIIN). She has attended numerous leadership, management and executive courses in the duration of her career. 41 Victoria joined the organization in 1995. Her cognate 24 years work experience cuts across administration, brokerage, VICTORIA EZE underwriting, administration, Retail and Assistant General Manager/Head, Lagos B u s i n e s s D e v e l o p m e n t , B r a n c h Area Offices Operations and Marketing. Management Cont.
Akin Akinrinmade is a Chartered Insurer with specialty in Special Risks/Exploration and Production Insurance. He is the Head of Energy Department of Sovereign Trust Insurance Plc. He started his Insurance career over 17 years ago as Claims Officer at Alliance & General Insurance Co. Limited and rose through the ranks working between Technical and Marketing arms of the company until his resignation in 2006. He worked briefly in the Marine Department of Leadway Assurance Co. Ltd before joining Sovereign Trust Insurance Plc in 2007.
He obtained his first degree in Accounting from Lagos State University, Ojo (LASU) and holds a Master of Science (MSc) degree in Marketing from University of Lagos. He is an Associate of the Chartered Insurance Institute of Nigeria (CIIN) and h a s a t t e n d e d s e v e r a l t e c h n i c a l , management and Leadership courses AKINWUNMI AKINRINMADE both at home and abroad. Assistant General Manager/Head, Energy Dept.
Annual Report & Accounts 2018
42 Annual Report & Accounts 2018
43 Report of the Directors for the year ended 31 December 2018
1 LEGAL FORM AND PRINCIPAL million and a fully paid up share capital ACTIVITY of N20 million following the acquisition In compliance with the relevant and recapitalization of the then Grand provisions of the Companies and Allied Union Assurance Limited. Matters Act, CAP C20 Laws of the Federation of Nigeria 2004, the The Company which was licensed to Insurance Act 2003, relevant policy carry out business in all classes of Non- guidelines issued by the National Life insurance and as special risk Insurance Commission (NAICOM) and insurers currently has authorized share the Financial Reporting Council of capital of N5.25 billion divided into 10.5 Nigeria Act No. 6, 2011, the Directors billion units of 50kobo per share with a have pleasure in submitting to the paid up capital of N4.1 billion divided members their report together with the into 8.3 billion units of 50kobo per share. audited financial statements of Sovereign Trust Insurance Plc ("the The Company's Corporate Head Office is Company") for the year ended 31 at Victoria Island, Lagos with 17 other December 2018. branches spread across major cities and commercial centers in Nigeria. The The Company was incorporated as a Company became a Public Limited limited liability company on 26 February Company (PLC) on 7 April 2004, and was 1980 and commenced business on 2 listed on the Nigerian Stock Exchange January 1995 as a non-life insurer with on 29 November 2006. an authorized share capital of N30
2 OPERATING RESULTS
in thousands of Nigerian Naira 2018 2017
Gross premium written 10,513,078 8,513,503
Net premium income 5,061,377 3,852,522
Net claims expenses (1,787,492) (1,303,145)
Annual Report & Accounts 2018 Profit before income tax 540,554 202,694 Income tax expense (196,318) (44,825) Profit after income tax 344,236 157,869 44 3 DIVIDEND No dividend is proposed in respect of the current year (2017: Nil).
4 BUSINESS REVIEW AND FUTURE DEVELOPMENT The Company carried out insurance activities in accordance with its Memorandum and Articles of Association. A comprehensive review of the business for the year and prospects for the ensuing year will be contained in the Managing Director's Report in the Annual Report. Report of the Directors Cont. for the year ended 31 December 2018
5 DIRECTORS The names of the Directors at the date of this report and of those who held offices during the year are as follows:
Mr. Oluseun O. Ajayi Chairman Mr. Olaotan Soyinka Managing Director/CEO Mrs. Ugochi Odemelam Executive Director Mr. Jude Modilim Executive Director Mr. Oduniyi Odusi Executive Director Ms. Emi Faloughi Non Executive Director Ms. Omozusi Iredia Non Executive Director Mr. Abimbola Oguntunde Non Executive Director Mr. Samuel Egube Non Executive Director Col. Musa Shehu (Rtd),OFR Independent Director
6 DIRECTORS' INTERESTS The names of the Directors and their interests in the issued and paid up share capital of the Company as recorded in the Register of Directors' shareholdings as at 31 December 2018 are as follows:
Number of Number of Name direct Ordinary Indirect Ordinary Total Total Indirect Shares held in Shares held in 31 Dec 2018 31 Dec 2017 Representation 2018 2018 on the Board Mr. Oluseun O. Ajayi 244,104,573 318,483,523 562,588,096 562,588,096 Sovereign Investments Ltd Mr. Olaotan Soyinka 1,532,640 - 1,532,640 1,532,640 Mrs. Ugochi Odemelam 4,490,321 - 4,490,321 4,490,321 Ms. Emi Faloughi 27,024,097 821,572,742 848,596,839 848,596,839 TEEOF Holdings Ltd Ms. Omozusi Iredia - 392,282,401 392,282,401 392,282,401 TWSN Limited Mr. Abimbola Oguntunde 642,496 - 642,496 642,496 Mr. Samuel Egube - 1,575,000,000 1,575,000,000 1,575,000,000 Morning Side Capital Partners Limited Mr. Jude Modilim 2,205,990 - 2,205,990 240 Mr. Oduniyi Odusi - - - - Col. Musa Shehu (Rtd),OFR - - - -
None of the Directors has notified the Company for the purposes of Section 277 of the Annual Report Companies and Allied Matters Act, CAP C20 Laws of the Federation Nigeria 2004 of any & Accounts 2018 disclosable interests in contracts in which the Company was involved as at 31 December 2018.
7 COMPLAINT MANAGEMENT POLICY In compliance with the Securities and Exchange Commission (SEC) rules relating to the 45 Complaints Management Framework of the Nigerian Capital Market, Sovereign Trust Insurance Plc has adopted a Complaints Management Policy. The Company shall receive and entertain all Shareholders' complaints arising out of issues covered under the Investments and Securities Act (ISA), 2007 the Rules and Regulations made pursuant to the ISA, the rules and regulations of Securities Exchanges and guidelines of recognised trade associations as directed. Report of the Directors Cont. for the year ended 31 December 2018
8 ACQUISITION OF OWN SHARES personnel do not make improper use of The Company did not purchase any of its "price sensitive information" gained own shares during the year. through their position or engagement in the Company. 9 COMPANY'S DISTRIBUTORS The Company's products are marketed 13 SUSTAINABILITY ISSUES by insurance brokers and agents throughout the country. The Company Code of Business & Ethical Conduct also employs the direct marketing In line with our vision of maintaining and method to source for insurance promoting good corporate governance, business. the company established and enforce a Code of Business & Ethical Conduct. 10 I N S U R A N C E T E C H N I C A L This Code is applicable to and must be AGREEMENTS complied with by the Company’s The Company had reinsurance treaty Directors, Employees, Term Contract arrangements with the following Staff, Third Party Personnel, as well as companies during the year: the Company’s Business Partners. Ÿ African Reinsurance Corporation Ÿ Aveni Reinsurance Company The objective of this Code of Business Limited and Ethical Conduct is to promote a Ÿ Continental Reinsurance Plc culture of Ethics and Compliance in our Ÿ WAICA Reinsurance Corporation Company and to define the way and manner we shall conduct our business 11 CORPORATE GOVERNANCE in a way that truly reflects the values we The Company maintains corporate profess. policies and standards designed to encourage good and transparent Integrity is one of our core values as a corporate governance, avoid potential Company. Others include, Superior conflicts of interest and promote ethical C u s t o m e r S e r v i c e , I n n o v a t i o n, business practices. The business of the Professionalism, Team Spirit and Company is conducted with integrity Empathy. By acting with integrity, we which pays due regard to the legitimate reflect positively on the image and interests of our stakeholders. reputation of our Company and our Brand. 12 SECURITIES TRADING POLICY
Annual Report In line with the Nigerian Stock Exchange & Accounts 2018 Sovereign Trust Insurance Plc’s amended rules, Sovereign Trust operations are conducted in an open Insurance Plc has policy guiding and transparent manner in accordance Directors, officers, key management with the provisions of the relevant laws, personnel, contractors and all other ethical and professional standards. employees dealing in the securities of 46 the Company. Health Safety and Welfare at Work The Company strictly observes all health The policy aims to ensure that the and safety regulations. The Company reputation of the Company is not maintains business premises designed adversely impacted by perceptions of with a view to guaranteeing the safety trading in the Company's securities at and healthy living conditions of its i n a p p r o p r i a t e t i m e s o r i n a n employees and customers alike. inappropriate manner. Employees are adequately insured against occupational and other hazards. The policy's intention is to ensure that Fire prevention and fire fighting Directors, officers and other Company equipment are installed in strategic Report of the Directors Cont. for the year ended 31 December 2018
locations within the Company’s based on gender distribution are as premises. follows: Male Female Male Female In addition, free medical services are Number Number % % provided for the Company’s employees Employees 117 63 65 35 and their families through a reliable Health Management Organization Gender distribution of Board and Senior (HMO). Financial provision is made for Management is as follows: a l l e m p l o y e e s i n r e s p e c t o f Male Female Male Female transportation, housing and meals. The No. No. % % Company also operates a contributory Board 7 3 70 30 pension plan in line with the Pension Senior Reform Act 2014. Management 13 4 76 24
Employee Involvement and Training Detailed analysis of the Board and Senior The Company is committed to keeping Management is as follows: employees fully informed as much as Male Female Male % Female % possible regarding the Company’s Number Number performance and progress. Views of Assistant e m p l o y e e s a r e s o u g h t w h e r e General p r a c t i c a b l e o n m a t t e r s w h i c h Manager 8 3 73 27 particularly affect them as employees. Deputy The Company runs an open-door General management policy. Professionalism Manager 1 0 100 0 and technical expertise are the General C o m p a n y ’ s m a j o r a s s e t s , a n d Manager 1 0 100 0 investment in developing such skills is Executive continuous. The Company’s expanding Director 2 1 67 33 skills base is being brought about by a Chief wide range of in-house and external Executive training. Our diversity and inclusion Officer 1 0 100 0 practices are a competitive advantage to Non- our business. We always aim to provide Executive equal opportunities that will enable all Director 4 2 67 33 our employees to learn, grow and build Employment of Physically Challenged Annual Report successful careers for themselves. We & Accounts 2018 ensure that all our employees are Persons treated fairly, and with respect It is the policy of the Company that there is regardless of their nationality, tribe, no discrimination in considering sexual orientation or religious beliefs. applications for employment including those of physically challenged persons. All Incentive schemes designed to meet the employees whether physically challenged 47 circumstances of ever yone are or not are given equal opportunities to implemented wherever appropriate and develop their knowledge and to qualify for some of these schemes include staff promotion in furtherance of their career. retirement benefit, productivity bonus, promotion and salary review. Social Investment Policy The adoption of a Corporate Social Gender Distribution Responsibility agenda as a corporate The number and percentage of strategy in advancing the course of employees as at 31 December 2018 Sovereign Trust Insurance Plc Brand in the Report of the Directors Cont. for the year ended 31 December 2018
c o m i t y o f N i g e r i a n b u s i n e s s Nigerian populace. The Company shall on organizations is geared at making an annual basis commit both human and enduring and progressive changes for financial resources to initiatives that will the advancement of the public with help in emancipating the citizenry from particular regards to our operating life-threatening health challenges at all environment both at local and national levels of the country’s social strata with a levels. As a responsible Corporate view to advancing the Human Capital Citizen, the company places high Resources of the Nigerian Economy premium on ethical, legal and moral thereby projecting the organization as a e l e m e n t s i n p r o v i d i n g Pioneering Leader in Health-related intervention/support to any organization concerns. or community when the need to do so arises. Sports As it has been identified that sports is a Focus Area common unifying denominator for the Three major areas of concentration as country, our intervention in this area will be regards our intervention both on short focused on using this human activity to and long-term basis shall be on Health, promote, advance and reinforce the unity Sports and the Environment, HSE. of Nigeria by collaborating from time to The company shall from time to time time with various sporting organizations evaluate these areas of focus based on and professionals by committing a portion inside-out and outside-in approach. This of the company’s resources to the basically suggest that CSR projects or development of sports in the country at all initiatives can be internally identified strata of the country’s government a n d e x e c u t e d , a n d i t c a n a l s o structure with a view to generating mass collaborate with external organizations, appeal awareness for the STI Brand consultants and intervention agencies through this platform. on proposals that are considered to promote good, equitable and healthy Environment (Community) society in line with our identified CSR Our role here will be to play an active part in platforms. the development and enhancement of the Nation’s environment by supporting key The company shall not discriminate or infrastructural projects solely or in be biased in adopting CSR initiatives on partnership with any level of the the basis of gender, religion or social Government structures, Civil Societies and Annual Report & Accounts 2018 class. However, initiatives with political Private Organizations across the country. colouration as a matter of policy will not Fundamentally, the main objective for the be entertained by the organization company in this regard will be to amplify regardless of the proponents of such the campaign against degradation and initiatives. depletion of our environment in any form. 48 All other progressive human endeavours Sovereign Trust Insurance Plc’s ranging from Arts, Science, Social Corporate Social Responsibility Sciences and Humanities et al shall springboard is categorized under the benefit from the company ’s CSR following thematic schemes namely; machinery under the Environmental platform. Health The Company’s focus in this regard is Sustainability Mode intended to foster and support initiatives In accentuating the company’s set out in the Health Sector geared towards CSR initiatives and to effectively engage all improving the quality of lives of the stakeholders in providing sustainable Report of the Directors Cont. for the year ended 31 December 2018
intervention for its entire programme on entrepreneurial leadership within a a year-on-year basis, The Company shall framework of prudent and effective deliberately set aside a portion of its controls which enables risk to be annual operating budget for the assessed and managed while deploying execution of same. the Company’s resources to profitable use. The Board is responsible for The aspiration of the Company in the determining the Company's objectives, years ahead is to put in place a pool of corporate strategy, core values and funds to be managed under the yet-to- standards to ensure that the necessary be-established STI Foundation with well- financial and human resources are in meaning and credible Nigerians place to assist management in the day to providing trusteeship support to the day running of the Company. Foundation. Director Nomination Process Compliance with Laws, Rules and T h e B o a r d ’ s E n t e r p r i s e R i s k Regulations M a n a g e m e n t a n d G o v e r n a n c e Obeying the law, both in letter and in Committee is charged with the spirit, is the foundation on which our responsibility of leading the process for Company’s ethical standards are built. Board appointments and for identifying and nominating suitable candidates for All employees must respect and obey the approval of the Board. the laws, rules and regulations of the states and countries in which the With respect to new appointments, the C o m p a n y o p e r a t e s . A l t h o u g h Board Enterprise Risk Management and employees are not expected to know the Governance Committee identifies, details of each of these laws, rules and reviews and recommends candidates for regulations, it is important to know potential appointment as Directors. In enough to determine when to seek identifying suitable candidates, the advice from line managers or other Committee considers candidates on appropriate personnel. Employees are merit against objective criteria and with reminded that ignorance of the law is due regard for the benefit of diversity on not a defense. This fundamental the Board, including gender as well as principle applies in all jurisdictions. the balance and mix of appropriate skills and experience. We do not condone bribery or corruption Annual Report in any form. We are proud of our Shareholding in the Company is not & Accounts 2018 reputation as a trusted and respected c o n s i d e r e d a c r i t e r i o n f o r t h e business with integrity. We do not nomination or appointment of a Director. tolerate any form of corruption whether The appointment of Directors is subject directly by employees or indirectly to the approval of the National Insurance through business partners who act on C o m m i s s i o n ( N A I C O M ) a n d 49 our behalf. shareholders at the Annual General Meeting. The Board Sovereign Trust Insurance Plc is headed Induction and Continuous Training by an effective Board of Directors, which of Board members is collectively responsible for the On appointment to the Board and to successful management of the Board Committees, all Directors receive Company. The traditional role of an induction tailored to meeting their Sovereign Trust Insurance Plc’s Board is individual requirements. The new t o p r o v i d e t h e C o m p a n y w i t h Directors go through an orientation Report of the Directors Cont. for the year ended 31 December 2018
focusing on the Company and its them informed of new developments in operations with a view to acquiring a the insurance industry and operating detailed understanding of the Company’s environment. operations, its strategic plan, its business environment, the key issues the Company 14 EVENTS AFTER THE REPORTING DATE faces and to introduce Directors to their There were no events after the reporting fiduciary duties and responsibilities. date which could have a material effect on the financial position of the Company The training and education of Directors on as at 31 December 2018 or its financial issues pertaining to their oversight performance for the year then ended functions is a continuous process, to that have not been adequately provided update their knowledge and skills and keep for or disclosed.
15 EQUITY RANGE ANALYSIS The range of shareholding as at 31 December 2018 is as follows:
Range No. of Holders Percent Unit Percent 1 - 1,000 897 10% 416,903 0% 1,001 - 5,000 1,670 18% 4,956,734 0% 5,001 - 10,000 1,066 12% 7,950,161 0% 10,001 - 50,000 2,853 31% 72,150,524 1% 50,001 - 100,000 964 11% 68,800,220 1% 100,001 - 500,000 1,173 13% 242,701,459 3% 500,001 - 1,000,000 192 2% 139,391,953 2% 1,000,001 - 5,000,000 207 2% 432,014,949 5% 5,000,001 - 10,000,000 35 0% 271,029,788 3% 10,000,001 - Above 70 1% 7,101,410,605 85% 9,127 100% 8,340,823,296 100%
Substantial interest in shares According to the register of members as 31 December 2018, no shareholder held more than 5% of the issued share capital of the Company excepts as disclosed as follows:
SHAREHOLDERS WITH 5% SHAREHOLDING AND ABOVE Annual Report & Accounts 2018 2018 2017 NAME No. of Holding % of Holding No. of Holding % of Holding Morning Side Capital Partners Ltd 1,575,000,000 18.88% 1,575,000,000 18.88% Bayelsa State Ministry of Finance 900,000,000 10.79% 900,000,000 10.79% TEEOF Holding Ltd 821,572,742 9.85% 821,572,742 9.85% 50 Other 5,044,250,554 60.48% 5,044,250,554 60.48% 8,340,823,296 100% 8,340,823,296 100% Report of the Directors Cont. for the year ended 31 December 2018
16 DONATIONS AND SPONSORSHIP The tax allowable donations and sponsorship made during the year was N1,750,000 (2017: N1,850,000).
For the year ended 31 December 2018 2018 2017
Chartered Insurance Institute of Nigeria 1,250,000 450,000 Teenage Life 300,000 - Autism Awareness 200,000 - Igbobi College Old Boys Association - 1,000,000 Institute Of Chartered Accountants Of Nigeria - 250,000 Actuarial Science & Insurance Students Association - 100,000 Lagos State University College of Medicine - 50,000 1,750,000 1,850,000
17 PROPERTY, PLANT AND EQUIPMENT 4. Mr. Samuel Egube Member Information relating to the Company's 5. Mr. Abimbola Oguntunde Member property, plant and equipment is 6. Mr. Jude Modilim Member detailed in the Note 24 to the financial statements. c Audit Committee Pursuant to Section 359(3) of the 18 BOARD COMMITTEES Companies and Allied Matters Act, CAP The Board, in compliance with the C20 Laws of the Federation of Nigeria guidelines of the National Insurance 2004, the Company has in place an Audit Commission carried out its oversight C o m m i t t e e c o m p r i s i n g t w o f u n c t i o n t h r o u g h i t s s t a n d i n g shareholders and two Directors as committees, each of which has a follows: charter that clearly defines its purpose, 1. Mr. Babatunde Adaramaja composition and structure, frequency of Shareholder Representative - meeting, duties, tenure and reporting Chairman Appointed lines to the Board. 27 September 2018 2. Otunba Femi Dina The Board functions through these Shareholder Representative - committees, whose membership are as Chairman Retired 27 September 2018 follows: 3. Mr. Emmanuel Oluwadare Annual Report Shareholder Representative & Accounts 2018 a Enterprise Risk Management and Appointed 27 September 2018 Governance Committee 4. Ms. Emi Faloughi 1. Colonel Musa Non-Executive Director Shehu (Rtd)(OFR) Chairperson 5. Ms. Omozusi Iredia 2. Ms. Emi Faloughi Member Non-Executive Director 51 3. Mr. Abimbola Oguntunde Member 4. Mr. Samuel Egube Member The functions of the Audit Committee 5. Mrs. Ugochi Odemelam Member are as laid down in Section 359(6) of the 6. Mr. Niyi Odusi Member Companies and Allied Matters Act, CAP C20 Laws of the Federation of Nigeria b Finance, Investment and General 2004. Purposes Committee 1. Ms. Omozusi Iredia Chairperson All the committees endeavoured to 2. Ms. Emi Faloughi Member perform their duties competently during 3. Mr. Olaotan Soyinka Member the year ended 31 December 2018. Report of the Directors Cont. for the year ended 31 December 2018
19 RECORD OF COMMITTEES ATTENDANCE a Record of attendance at board meetings for the year 2018
DIRECTORS 26-Mar-18 14-Jun-18 26-Sep-18 14-Dec-18 Mr. Oluseun O. Ajayi Yes Yes Yes Yes Mr. Olaotan Soyinka Yes Yes Yes Yes Mrs. Ugochi Odemelam Yes Yes Yes Yes Mr. Jude Modilim Yes Yes Yes Yes Mr. Oduniyi Odusi Yes Yes Yes Yes Ms. Emi Faloughi Yes Yes Yes Yes Ms. Omozusi Iredia Yes Yes Yes Yes Mr. Abimbola Oguntunde Yes Yes Yes Yes Mr. Samuel Egube Yes Yes Yes Yes Col. Musa Shehu (Rtd), OFR Yes Yes Yes Yes
b Record of attendance at the Finance, Investment & General Purposes Committee meetings for 2018 MEMBERS 11-May-18 27-Jul-18 26-Oct-18 12-Dec-18 Ms. Omo Iredia Yes Yes Yes Yes Ms. Emi Faloughi Yes Yes Yes Yes Mr. Abimbola Oguntunde No Yes Yes Yes Mr. Samuel Egube Yes Yes Yes Yes Mr. Olaotan Soyinka Yes Yes Yes Yes Mr. Jude Modilim Yes Yes Yes Yes
c Record of attendance at the Enterprise Risk Management & Governance Committee meetings for 2018 MEMBERS 13-Jun-18 25-Sep-18 13-Dec-18 Col. Musa Shehu (rtd) (OFR) Yes Yes Yes Ms. Emi Faloughi Yes Yes Yes Mr. Abimbola Oguntunde Yes Yes Yes Mr. Samuel Egube Yes No Yes Mrs. Ugochi Odemelam Yes Yes Yes Mr. Oduniyi Odusi Yes Yes Yes
Annual Report & Accounts 2018 d Record of attendance at the Audit Committee meetings in 2018 MEMBERS 23-Mar-18 8-Jun-18 12-Dec-18 Otunba Olufemi Dina Yes Yes Retired Mr. Babatunde Aderamaja Yes Yes Yes Mr. Emmanuel Oluwadare N/A N/A Yes 52 Ms. Emi Faloughi Yes Yes Yes Ms. Omozusi Iredia Yes Yes Yes Report of the Directors Cont. for the year ended 31 December 2018
20 AUDITORS The Auditors, Messrs. Ernst & Young, have expressed their willingness to continue in office as auditors in accordance with Section 357(2) of the Companies and Allied Matters Act, CAP C20 Laws of the Federation of Nigeria 2004.
BY ORDER OF THE BOARD
______Yetunde Martins FRC/2013/NBA/0000003399
Equity Union Limited Company Secretary Lagos, Nigeria
Date: 15 | 03 | 2019
Annual Report & Accounts 2018
53 Report of Audit Committee for the year ended 31 December 2018
In compliance with Section 359 (6) of the statutory audit and we are satisfied with Companies and Allied Matters Act Cap the management’s response to the C20 LFN 2004 (“CAMA”), we, the external auditors’ recommendations on members of the Statutory Audit accounting and internal control matters Committee of Sovereign Trust Insurance and with the effectiveness of the Plc (“the company”), hereby report as Company’s system of accounting and follows: internal control.
• We have exercised our statutory functions under Section 359(6) of the Companies and Allied Matters Act, CAP Mr. Babatunde Adaramaja C20, Laws of the Federation of Nigeria Chairman, Audit Committee 2004 and we acknowledge the co- FRC/2012/ICAN/000000350 operation of management and staff in the conduct of these responsibilities. Date: 14 |3|2019
• We confirm that the accounting and Members of the Audit Committee are: reporting policies of the Company are in accordance with legal requirements 1 Mr. Babatunde Adaramaja Chairman and agreed ethical practices and that Appointed 27 September 2018 the scope and planning of both the 2 Otunba Femi Dina Chairman external and internal audits for the year Retired 27 September 2018 ended 31 December 2018 were 3 Emmanuel Oluwadare Member satisfactor y, and reinforce the Appointed 27 September 2018 Company’s internal control systems. 4 Ms. Emi Faloughi Member 5 Ms. Omozusi Iredia Member • We have deliberated with the external auditors, who have confirmed that necessary co-operation was received Secretary to the Committee from management in the course of their Yetunde Martins
Annual Report & Accounts 2018
54 Statement of Directors’ Responsibilities in Relation to the Preparation of the Financial Statements for the year ended 31 December 2018
The Companies and Allied Mattes Act, of the Companies and Allied Matters CAP C20 Laws of the Federation of Act, CAP C20 Laws of the Federation of Nigeria 2004, requires the Directors to Nigeria 2004, the Insurance Act 2003, prepare financial statements for each relevant policy guidelines and circulars financial year that present fairly, in all issued by the National Insurance material respects, the state of financial Commission (NAICOM) and the affairs of the Company at the end of the Financial Reporting Council of Nigeria year and its financial performance. The Act No. 6, 2011. responsibilities include ensuring that the Company: The Directors are of the opinion that the financial statements present fairly, in all a keeps proper accounting records that material respects, the state of the financial disclose, with reasonable accuracy, the affairs of the Company and of its financial financial position of the Company and performance. The Directors further accept comply with the requirements of responsibility for the maintenance of International Financial Reporting accounting records that may be relied upon Standards, and the provisions of the in the preparation of financial statements, as relevant policy guidelines and circulars well as adequate systems of internal issued by the National Insurance financial control. Commission (NAICOM) and the Financial Reporting Council of Nigeria Nothing has come to the attention of the Act No.6, 2011; Directors to indicate that the Company will b establishes adequate internal controls not remain a going concern for at least to safeguard its assets and to prevent twelve months from the date of this a n d d e t e c t f r a u d a n d o t h e r statement. irregularities; and c prepares its financial statements using suitable accounting policies supported Annual Report by reasonable and prudent judgments Mr. Oluseun O. Ajayi & Accounts 2018 and estimates, and are consistently FRC/2013/CIIN/00000003373 applied. Chairman d The Directors accept responsibility for Date: 14|03|19 the annual financial statements, which have been prepared using appropriate accounting policies supported by 55 reasonable and prudent judgments and Mr. Olaotan Soyinka estimates, in conformity with the FRC/2013 /CIIN/00000002671 International Financial Reporting Managing Director/CEO Standards, and the relevant provisions Date: 14|03|19 Certification Pursuant to Section 60 (2) of the Investment and Securities Act No. 29 of 2007 for the year ended 31 December 2018
We the undersigned hereby certify the evaluation as of that date; following with regards to our Audited Financial Statements for the year ended Ÿ We have disclosed to the auditors of 31 December 2018 that: t h e C o m p a n y a n d t h e A u d i t Committee: Ÿ We have reviewed the report; Ÿ To the best of our knowledge; the Ø All significant deficiencies in the report does not contain: design or operation of internal controls which would adversely Ø Any untrue statement of a material affect the Company’s ability to fact, or record, process, summarize and Omit to state a material fact, which report financial date and have w o u l d m a k e t h e s t a t e m e n t s identified for the Company’s auditors m i s l e a d i n g i n t h e l i g h t o f any material weakness in internal circumstances under which such controls, and statements were made: Ø Any fraud, whether or not material, Ÿ To the best of our knowledge, the that involves management or other financial statements and other employees who have significant role financial information included in this in the Company’s internal controls; report fairly present in all material respects the financial condition and We have identified in the report whether or results of operation of the company not there were significant changes in as of, and for the years presented in internal controls or other factors that could this report. significantly affect internal controls subsequent to the date of our evaluation, Ÿ We: including any corrective actions with regard Ø Are responsible for establishing and to significant deficiencies and material maintaining internal controls weaknesses. Ø Have designed such internal controls to ensure that material information relating to the Company Annual Report & Accounts 2018 is made known to such officers by Mr. Olaotan Soyinka o t h e r s w i t h i n t h o s e e n t i t i e s FRC/2013 /CIIN/00000002671 particularly during the period in Managing Director/CEO which the periodic reports are being Date: 14|03|19 prepared; 56 Ø Have evaluated the effectiveness of the Company’s internal controls as of date within 90days prior to the report; Mr. Kayode Adigun Ø Have presented in the report our FRC/2013/ICAN/00000002652 conclusions about the effectiveness Chief Financial Officer of our internal controls based on our Date: 14|03|19 Ernst & Young 10th Floor Tel: +234 (01) 631 4500 UBA House Fax: +234 (01) 463 0481 57, Marina Email: [email protected] P.O. Box 2442, Marina www.ey.com Lagos.
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF SOVEREIGN TRUST INSURANCE PLC
Report on the audit of the Financial Statements
Opinion We have audited the financial statements of Sovereign Trust Insurance Plc, (“the Company”) which comprise the statement of financial position as at 31 December 2018, and the statement of profit or loss, statement of other comprehensive income, the statement of changes in equity and the statement of cash flows for the year ended, and a summary of significant accounting policies and other explanatory notes.
In our opinion, the financial statements present fairly, in all material respects, the financial position of Sovereign Trust Insurance Plc as at 31 December 2018 and of its financial performance and its cash flows for the year ended in accordance with International Financial Reporting Standards and the provisions of the Companies and Allied Matters Act , CAP C20 Laws of the Federation of Nigeria 2004, the Insurance Act 2003 and relevant policy guidelines issued by the National Insurance Commission (NAICOM) and the Financial Reporting Council of Nigeria Act No. 6, 2011.
Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountant’s Code of Ethics for Professional Accountants (IESBA Code) and other independence requirements applicable to performing the audit of Sovereign Trust Insurance Plc. We have fulfilled our other ethical responsibilities in accordance with the IESBA Code, and in accordance with other ethical requirements applicable to performing the audit of Sovereign Trust Insurance Plc. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Annual Report & Accounts 2018 Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current year. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. 57
We have fulfilled the responsibilities described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial statements. Independent Auditors’ Report to the Members of Sovereign Trust Insurance Plc - Cont.
Report on the audit of the financial statements – continued
Key Audit Matters – continued
Key Audit Matters How the matter was addressed in the audit
Impairment losses on financial assets carried at amortised costs The Company’s investments in this class of financial We reviewed the IFRS 9 ECL models and assets include cash and short-term deposits, debt documentation prepared by the management for instruments as well as loans and receivables carried at the computation of impairment losses on amortised costs. This totaled N5.43 billion as at 31 financial assets carried at amortised costs in line December 2018 (2017: N3.6 billion) representing 48% with the requirements of IFRS 9. (2017: 33%) of the Company’s total assets and the associated expected credit loss (ECL) is significant to the We gained an understanding of how the client financial statements. derived the risk parameters (i.e. PDs and LGDs) by performing a walkthrough exercise. We also This was considered a Key Audit Matter as IFRS 9 is a new challenged all the assumptions considered in and complex accounting standard which requires the estimation of recovery cash flows, the significant judgement to determine the impairment loss discount factor, collateral valuation and timing of reserve. realization, the forecast, and assigned probability weight to the scenarios. The general approach to ECL was adopted. This approach involves identification of significant changes in We challenged management assumptions by re- credit risks using a multi factor model, for the purpose of computing the cash flows to determine the determining whether financial assets will be classified as recoverable amounts and all other parameters stage 1, stage 2 or stage 3. used.
While twelve months ECLs are computed for financial We focused on the most significant model assets in stage 1, lifetime ECLs are computed for financial assumptions including probability of default and assets in stage 2 and 3. Calculating ECL for these class of loss given default. We performed detailed financials assets also involves determination of risk procedures on the completeness and accuracy parameters such as probability of default (PD), loss given of the information used. default (LGD) and exposure at default (EAD). Lastly, we reviewed the qualitative and The approach involves considerable level of judgements quantitative disclosures for reasonableness to and estimation in determining inputs for ECL calculation ensure conformity with the IFRS 7 – Financial such as: Instruments: Disclosures. Ÿ Determination of PD and LGD Ÿ Adjusting the PD for forward looking information Ÿ Annual Report Selecting macroeconomics variables & Accounts 2018 Ÿ Incorporating multiple scenarios Ÿ Considered cash flow estimation including timing and amount as well as Ÿ Collateral valuation
Adopting IFRS 9 for the first time also requires some 58 judgements in taking certain key decisions which will impact the transitional disclosures as at 1 January 2018 (Refer to Note 5 to the summary of significant accounting policies).
See Notes 15.1 and 16.2 for the disclosures on Impairment losses on financial assets carried at amortised costs Independent Auditors’ Report to the Members of Sovereign Trust Insurance Plc - Cont.
Report on the audit of the financial statements – continued
Key Audit Matters – continued
Key Audit Matters How the matter was addressed in the audit
Adequacy of valuation of Insurance Contract Liabilities
The Company has insurance contract liabilities of We used our in-house actuarial specialist to assist us N3.09 billion (2017: N3.3 billion) out of which in performing the audit procedures in the area of outstanding claims of N935 million (2017:1.3 billion) reviewing the Client’s Independent Actuary’s reports as at 31 December 2018 representing 17% (2017:24%) on general business which included among others: of the Company’s total liabilities. This an area that involves significant judgement over uncertain future i. Review of the appropriateness of assumptions outcomes and therefore we considered it a key audit used in the valuation of the insurance contracts matter for our audit. by reference to Company and industry data and expectations. Consistent with the insurance industry practice, the ii. Review of the appropriateness of non-economic Company engages an independent actuary to test the assumptions used in the valuation of the adequacy of the valuation of non-life business as at insurance contracts in relation to lapse or year end. The complexity of the valuation models may extension assumptions by reference to give rise to errors as a result of company specific and industry data. inadequate/incomplete data or the design or application of the models. Economic assumptions Other Key audit procedures are: such as interest rates and future inflation rates and actuarial assumptions such as customer behaviour i. We reviewed and documented management’s and uniform risk occurrence throughout the period process for estimating insurance contracts are key inputs used to determine these liabilities. ii. Performed file review of specific underwriting Significant judgement is applied in setting these contracts in order to maximize our assumptions. understanding of the book business and validate initial loss estimates. Insurance contract liabilities are disclosed in Note iii. Performed subsequent year claim payments to 27.1 to the financial statements. confirm the reasonableness of initial loss estimates.
Other Information The Directors are responsible for the other information. The other information comprises the Report of Annual Report the Directors, Statement of Value Added and Five-Year Financial Summary as required by the Companies & Accounts 2018 and Allied Matters Act, CAP C20 Laws of the Federation of Nigeria 2004. The other information does not include financial statements and our auditors’ report thereon.
Our opinion on the financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon. 59 In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, if we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Independent Auditors’ Report to the Members of Sovereign Trust Insurance Plc - Cont.
Directors’ Responsibility for the Financial Statements The Directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards (IFRS), and the provisions of the Companies and Allied Matters Act, CAP C20 Laws of the Federation of Nigeria 2004, the Insurance Act 2003, relevant policy guidelines issued by the National Insurance Commission (NAICOM), and the Financial Reporting Council of Nigeria Act No 6, 2011 and for such internal control as the Directors determines necessary to enable the preparation of financial statements that are free from material misstatements, whether due to fraud or error.
In preparing the financial statement, the Directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
Ÿ Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Ÿ Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
Ÿ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. Annual Report & Accounts 2018 Ÿ Conclude on the appropriateness of directors’ use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to 60 modify our opinion. Our conclusions are base on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Ÿ Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Independent Auditors’ Report to the Members of Sovereign Trust Insurance Plc - Cont.
Auditors’ Responsibilities for the Audit of the Financial Statements – continued We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the directors with a statement that we have compiled with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements In accordance with the requirements of Schedule 6 of the Companies and Allied Matters Act, CAP C20 Laws of the Federation of Nigeria 2004 and Section 28(2) of the Insurance Act 2003, we confirm that: i) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit; ii) in our opinion, proper books of account have been kept by the Company, in so far as it appears from our examination of those books; iii) the Company’s statement of financial position, statement of profit or loss and statement of other comprehensive income are in agreement with the books of account; iv) in accordance with the provisions of Section 28(2) of the Insurance Act 2003, the statement of financial position, statement of profit or loss and statement of other comprehensive income gives a true and fair view of financial position and financial performance of the Company.
Contraventions The Company incurred penalties in 2018 in respect of late filing of the year 2017 Audited Financial Statements with Nigeria Stock Exchange. The details of the contraventions and penalties are disclosed in Note 40 of the financial statements.
...... Oluwasayo Elumaro, FCA Annual Report FRC/2012/ICAN/00000000139 & Accounts 2018
For Ernst & Young Lagos, Nigeria Date: 22 March 2019 61 Summary of Significant Accounting Policies
1 Corporate Information the net total of the plan assets plus Sovereign Trust Insurance Plc ("The unrecognized past service cost and Company") was incorporated as a unrecognized actuarial loss, less limited liability company on 26 February unrecognized actuarial gains and the 1980, but was reorganized and present value of the Defined benefit commenced business as a reorganized obligation. non-life insurance company on 2 - Financial instrument measured at Fair January 1995 with an authorized share value capital of N30 million and a fully paid up - Loans and advances are at amortised capital of the N20 million following the cost. acquisition and recapitalization of the - Inventory is measured at net realisable then Grand Union Assurance Limited. value. The Company was listed on the Nigerian - Land and Building are carried at Stock Exchange on 29 November 2006. revalued amount.
Sovereign Trust Insurance Plc is Statement of compliance with IFRS regulated by the National Insurance These financial statements have been Commission of Nigeria. prepared in accordance with the International Financial Reporting The principal activity of the Company Standards (IFRS) issued by the continues to be the provision of all International Accounting Standards classes of non-life insurance and Board and IFRS Interpretations special risk insurance, settlement of Committee (IFRIC) for Interpretations claims and Insurance of Policy Holders’ applicable to companies reporting Fund. The Company Head Office is at 17, under IFRS. Additional information Adetokunbo Ademola Street, Victoria required by national regulations has Island, Lagos with 17 other branches been included where appropriate. spread across major cities. In accordance with IFRS 4 Insurance 2 Summary of significant accounting Contracts, the Company has applied policies existing accounting policies for Non-life insurance contracts, modified as 2.1 I n t ro d u c t i o n t o s u m m a r y o f appropriate to comply with the IFRS significant accounting policies framework. The principal accounting policies Annual Report & Accounts 2018 applied in the preparation of these The preparation of financial statements financial statements are set out below. in conformity with IFRS requires the These policies have been consistently Company’s Board of Directors to applied to all the periods presented, exercise its judgment in applying the unless otherwise stated. Company’s accounting policies. The 62 areas involving a higher degree of 2.2 Basis of presentation judgments or complexity, or areas The preparation of these financial where assumptions or estimates are statements have been based on the significant to the financial statements historical cost basis except for the under are as disclosed in Note 3. mention areas which are mentioned as indicated: The financial statements of Sovereign - Investment properties measured at fair Trust Insurance Plc have been prepared value on a going concern basis. The Directors - Available for sale financial assets are of the Company have a reasonable measured at Fair value. expectation that the Company has - Defined benefit asset is recognized as adequate resources to continue in Summary of Significant Accounting Policies Cont.
o p e r a t i o n a l e x i s t e n c e f o r t h e 2.5 Changes in accounting policies and foreseeable future. disclosures
2.3 Presentation currency New and amended standards and The financial statements are presented interpretations in Nigerian Naira (N) and are rounded to In these financial statements, the the nearest thousand (‘000) unless Company has applied IFRS9 and IFRS otherwise stated. 7R and IFRS 15 effective for annual periods beginning on or after 1 January 2.4 Foreign currencies 2018, for the first time. The Company has not early adopted any other standard, Transactions and balances interpretation or amendment that has Transactions in currencies other than been issued but is not yet effective. the entity's functional currency (foreign currencies) are recognized at the rates IFRS 9 Financial instruments of exchange prevailing at the dates of The Company has adopted as issued by the transactions. At the end of each the IASB with a transition date of 1 reporting period, monetary items January 2018. IFRS 9 replaces IAS 39 for denominated in foreign currencies are annual periods on or after 1 January translated at the rates prevailing at that 2018. The Company has not restated date. comparative information for 2017 for financial instruments in the scope of Non-monetary items that are measured IFRS 9. Therefore, the comparative in terms of historical cost in a foreign information for 2017 is reported under currency are translated using the IAS 39 and is not comparable to the exchange rate as at the date of the initial information presented for 2018. transaction and are not subsequently Differences arising from the adoption of r e s t a t e d . N o n - m o n e t a r y i t e m s IFRS 9 have been recognised directly in measured at fair value in a foreign retained earnings as of 1 January 2018 currency are translated using the and are disclosed in Note 5. exchange rates at the date when the fair value is determined. The gain or loss Changes to classification and arising on translation of non-monetary measurement items measured at fair value is treated in To determine their classification and line with the recognition of a gain or loss measurement category, IFRS 9 requires Annual Report on change in fair value of the item (i.e., all financial assets, except equity & Accounts 2018 translation differences on items whose instruments and derivatives, to be fair value gain or loss is recognised in assessed based on a combination of the other comprehensive income (OCI) or entity’s business model for managing profit or loss are also recognised in OCI the assets and the instruments’ or profit or loss, respectively). contractual cash flow characteristics. 63 Functional currency The IAS 39 measurement categories of Items included in the financial financial assets (fair value through profit statements of the Company are or loss (FVPL), available for sale (AFS), measured using the currency of the held-to -maturity and loans and primary economic environment in receivables) have been replaced by: which the Company operates (the • Debt instruments at amortised cost “functional currency”). The Company is • Debt instruments at fair value through incorporated in Nigeria and has adopted other comprehensive income (FVOCI), the Naira as its functional currency. with gains or losses recycled to profit or loss on derecognition Summary of Significant Accounting Policies Cont.
• Equity instruments at FVOCI, with no quantitative information about the ECL recycling of gains or losses to profit or calculations such as the assumptions loss on derecognition and inputs used are set out in Note 3 • Financial assets at FVTPL (note on significant estimates) and Note 42 to the financial statements. The accounting for financial liabilities remains largely the same as it was under Reconciliations from opening to closing IAS 39. ECL allowances are presented in Notes 5 (Transitional disclosures). The Company’s classification of its financial assets and liabilities is IFRS 15 Revenue from contracts with explained in Notes 2.7. The quantitative customers impact of applying IFRS 9 as at 1 The Company adopted IFRS 15 Revenue January 2018 is disclosed in Note 5. from contracts with customers on its effective date of 1 January 2018. IFRS 15 IFRS 9 Financial instruments r e p l a c e s I A S 1 8 R e v e n u e a n d establishes a five-step model to account C h a n g e s t o t h e i m p a i r m e n t for revenue arising from contracts with calculation customers. It applies to all contracts T h e a d o p t i o n o f I F R S 9 h a s with customers except leases, financial fundamentally changed the Company’s instruments and insurance contracts. accounting for loss impairments by replacing IAS 39’s incurred loss The standard establishes a more approach (with the exception of systematic approach for revenue insurance related assets which is not measurement and recognition by within the scope of IFRS 9 just yet) with a introducing a five-step model governing forward-looking expected credit loss revenue recognition. The five-step (ECL) approach. IFRS 9 requires the model requires the Company to (i) Company to record an allowance for identify the contract with the customer, ECLs for loans and other debt financial (ii) identify each of the performance assets not held at FVPL. The allowance is obligations included in the contract, (iii) based on the ECLs associated with the determine the amount of consideration probability of default in the next twelve in the contract, (iv) allocate the months unless there has been a consideration to each of the identified significant increase in credit risk since performance obligations and (v) Annual Report & Accounts 2018 origination. recognise revenue as each performance obligation is satisfied. Details of the Company’s impairment method are disclosed in Note 2.7.8 The There are no significant impacts from quantitative impact of applying IFRS 9 the adoption of IFRS 15 in relation to the 64 as at 1 January 2018 is disclosed in Note timing of when the Company recognises 5. revenues or when revenue should be recognised gross as a principal or net as IFRS 7R an agent. Therefore, Sovereign Trust To reflect the differences between IFRS 9 Insurance Plc will continue to recognise a n d I A S 3 9 , I F R S 7 F i n a n c i a l fee and commission income charged for Instruments: Disclosures was updated services provided by the Company as and the Company has adopted it, the services are provided (for example together with IFRS 9, for the year on completion of the underlying beginning 1 January 2018. Changes transaction). Revenue recognition for include transition disclosures as shown trading income and net investment in Note 5, detailed qualitative and income are recognised based on Summary of Significant Accounting Policies Cont.
requirements of IFRS 9. In addition, Contracts, which replaces IFRS 4. The guidance on interest and dividend amendments introduce two options for income have been moved from IAS 18 to entities issuing insurance contracts: a IFRS 9 without significant changes to temporary exemption from applying the requirements. IFRS 9 and an overlay approach. Since the Company is adopting IFRS 9 prior to IFRIC Interpretation 22 Foreign IFRS 4 insurance contracts, these Currency Transactions and Advance amendments are not relevant to the Considerations Company. The Interpretation clarifies that, in determining the spot exchange rate to Other standards that became use on initial recognition of the related effective during the year but have no asset, expense or income (or part of it) impact on the Company’s financial on the derecognition of a non-monetary statements asset or non-monetary liability relating Amendments to IFRS 2 Classification to advance consideration, the date of the and Measurement of Share-based transaction is the date on which an Payment Transactions Amendments to entity initially recognises the non- IAS 28 Investments in Associates and monetary asset or non-monetary liability Joint Ventures - Clarification that arising from the advance consideration. measuring investees at fair value If there are multiple payments or through profit or loss is an investment- receipts in advance, then the entity must by-investment choice. determine the date of the transactions for each payment or receipt of advance Amendments to IFRS 1 First-time consideration. This Interpretation does Adoption of International Financial not have any impact on the Company’s Reporting Standards - Deletion of financial statements. short-term exemptions for first-time adopters Amendments to IAS 40 Transfers of Short-term exemptions in paragraphs Investment Property E3–E7 of IFRS 1 were deleted because The amendments clarify when an entity they have now served their intended should transfer property, including purpose. These amendments do not property under construction or have any impact on the Company's development into, or out of investment financial statements. property. The amendments state that a Annual Report change in use occurs when the property 2.6 Cash and cash equivalents & Accounts 2018 meets, or ceases to meet, the definition Cash and cash equivalents include cash of investment property and there is on hand, deposits held at call with banks evidence of the change in use. A mere and other short term highly liquid change in management’s intentions for investments with original maturities of the use of a property does not provide three months or less. These assets are 65 evidence of a change in use. These readily convertible into known amounts amendments do not have any impact on of cash. the Company’s financial statements. 2.6.1 Cash and cash equivalents for the Amendments to IFRS 4 Applying purpose of Statement of Cash IFRS 9 Financial Instruments with Flow IFRS 4 Insurance Contracts The cash and cash equivalents for the The amendments address concerns purpose of the statement of cash flow arising from implementing the new comprises of cash on hand, deposits financial instruments standard, IFRS 9, held at call with banks and other short before implementing IFRS 17 Insurance term highly liquid investments with Summary of Significant Accounting Policies Cont.
original maturities of three months or for trading or it is designated as at less and bank overdraft. FVTPL.
2.7 Financial assets Financial assets held for trading include equity securities which are acquired Policy applicable before 1 January principally for the purpose of generating 2018 a profit from short-term fluctuation in price. 2.7.1 I n i t i a l r e c o g n i t i o n a n d measurement Financial assets at FVTPL are stated at Prior to the adoption of IFRS 9, the fair value, with any gains or losses Company designates financial assets to arising on re-measurement recognized the following IAS 39 categories: in statement of profit or loss. The net financial assets at fair value through gain or loss recognized in statement of profit or loss; held-to -maturity profit or loss incorporates any dividend investments; available-for-sale financial or interest earned on the financial asset assets and loans and receivables. and is included in the ‘other operating M a n a g e m e n t d e t e r m i n e s t h e income' line item in the statement of c l a s s i f i c a t i o n o f i t s f i n a n c i a l profit or loss. instruments at initial recognition. 2.7.3 Held-to-maturity investments The classification of financial assets Held-to-maturity investments are non- depends on the nature and purpose of derivative financial assets with fixed or the financial assets and is determined at determinable payments and fixed the time of initial recognition. All regular maturity dates that the Company has way purchases or sales of financial the positive intent and ability to hold to assets are recognized and derecognized maturity. Held-to-maturity investments on a trade date basis. Regular way include investment in debt securities purchases or sales are purchases or (bonds) issued by federal government, sales of financial assets that require state governments and other corporate delivery of assets within the time frame entities. established by regulation or convention in the marketplace. Subsequent to initial recognition, held- to-maturity investments are measured All financial assets are recognised at amortized cost using the effective Annual Report & Accounts 2018 initially at fair value plus, in the case of interest method less any impairment. financial assets not recorded at fair Gains and losses are recognised in the value through profit or loss, transaction statement of profit or loss when the costs that are attributable to the investments are derecognised or acquisition of the financial asset. impaired, as well as through the 66 amortisation process. Effective interest method Income is recognized on an effective 2.7.4 Available-for-sale financial assets interest basis for debt instruments other (AFS financial assets) than those financial assets classified as AFS financial assets are non-derivatives Fair Value Through Profit or Loss that are either designated as AFS or are (FVTPL). not classified as (a) loans and receivables, (b) held-to-maturity 2.7.2 Financial assets at fair value investments or (c) financial assets at fair through profit or loss (FVTPL) - value through profit or loss. Equity securities Financial assets are classified as FVTPL The Company holds investments in when the financial asset is either held unlisted shares that are not traded in an Summary of Significant Accounting Policies Cont.
active market but classified as AFS quoted in an active market. Loans and financial assets and stated at cost less receivables are measured at amortized accumulated impairment. Changes in cost using the effective interest method, the carrying amount of AFS monetary less any impairment. These investments financial assets relating to changes in are initially recognised at cost, being the foreign currency rates, interest income fair value of the consideration paid for calculated using the effective interest the acquisition of the investment. All method and dividends on AFS equity transaction costs directly attributable to investments are recognized in the acquisition are also included in the statement of profit or loss. Other cost of the investment. After initial changes in the carrying amount of measurement, loans and receivables available-for-sale financial assets are are measured at amortised cost, using recognized in statement of other the effective interest rate method (EIR) c o m p r e h e n s i v e i n c o m e a n d less impairment. Amortised cost is accumulated under the heading of calculated by taking into account any available for sale reserve. When the discount or premium on acquisition and investment is disposed of or is fee or costs that are an integral part of determined to be impaired, the the EIR. The EIR amortisation is cumulative gain or loss previously included in the statement of profit or accumulated in the Available-for-sale loss. Gains and losses are recognised in reserve is reclassified to statement of the profit or loss also when loans and profit or loss. receivables are derecognised or impaired, as well as through the Dividend on AFS equity instruments are amortisation process. recognized in profit or loss when the Company's right to receive the dividends 2.7.6 Trade receivables is established. Receivables include amounts due from agents, contractual brokers and The fair value of AFS monetary financial i n s u r a n c e c o n t r a c t h o l d e r s . assets denominated in a foreign Receivables arising under insurance currency is determined in that foreign contracts are measured on initial currency and translated at the spot rate recognition at the fair value of the prevailing at the end of the reporting consideration received or receivable. period. The foreign exchange gains and Subsequent to initial recognition, losses that are recognized in statement insurance receivables are measured at Annual Report of profit or loss are determined based on amortised cost, using the effective & Accounts 2018 the amortized cost of the monetary interest rate method. The carrying value asset. Other foreign exchange gains of insurance receivables is reviewed for and losses are recognized in statement impairment whenever events or of other comprehensive income. circumstances indicate that the c a r r y i n g a m o u n t m a y n o t b e 67 AFS equity investments that do not have recoverable, with the impairment loss a quoted market price in an active recorded in the statement of profit or market and whose fair value cannot be loss. reliably measured are measured at cost less any identified impairment losses at 2.7.7 Impairment of financial assets the end of each reporting period. Financial assets, other than those at FVTPL, are assessed for indicators of 2.7.5 Loans and receivables impairment at the end of each reporting Loans and receivables are non- period. Financial assets are considered derivative financial assets with fixed or to be impaired when there is objective determinable payments that are not evidence that, as a result of one or more Summary of Significant Accounting Policies Cont.
events that occurred after the initial discounted at the financial asset's recognition of the financial asset, the original effective interest rate. estimated future cash flows of the investment have been affected. The carrying amount of the financial asset is reduced by the impairment loss Fo r A F S e q u i t y i n v e s t m e n t s , a directly for all financial assets with the significant or prolonged decline in the exception of trade receivables, where fair value of the security below its cost is the carrying amount is reduced through considered to be objective evidence of the use of an allowance account. When impairment. For AFS debt instrument, a trade receivable is considered the Company treats ‘significant’ uncollectible, it is written off against the generally as 20% and ‘prolonged’ allowance account. generally as greater than twelve months. Subsequent recoveries of amounts previously written off are credited For all other financial assets, objective against the allowance account. evidence of impairment could include: Changes in the carrying amount of the * Significant financial difficulty of the allowance account are recognized in issuer or counterparty; or statement of profit or loss. * Breach of contract, such as a default or delinquency in interest or principal For financial assets measured at payments; or amortized cost, if, in a subsequent * It becoming probable that the borrower period, the amount of the impairment will enter bankruptcy or financial re- loss decreases and the decrease can be organisation; or related objectively to an event occurring * The disappearance of an active market after the impairment was recognized, for that financial asset because of the previously recognized impairment financial difficulties. loss is reversed through profit or loss to the extent that the carrying amount of For certain categories of financial the investment at the date the assets, such as trade receivables, impairment was reversed does not assets that are assessed not to be exceed what the amortized cost would impaired individually are, in addition, have been had the impairment not been assessed for impairment on a collective recognized. basis. Objective evidence of impairment Annual Report & Accounts 2018 for a portfolio of receivables could Available for sale financial assets include the Company's past experience When an available for sale financial of collecting payments, an increase in asset is considered to be impaired, the number of delayed payments in the cumulative gains or losses previously portfolio past the average credit period recognized in statement of other 68 of 30 days, as well as observable comprehensive income are reclassified changes in national or local economic to profit or loss in the period. conditions that correlate with default on receivables. In respect of AFS equity securities, i m p a i r m e n t l o s s e s p r e v i o u s l y Financial asset carried at amortised recognized in profit or loss are not cost reversed through profit or loss. Any For financial assets carried at amortized increase in fair value subsequent to an cost, the amount of the impairment loss impairment loss is recognized in recognized is the difference between the statement of other comprehensive asset's carrying amount and the present income and accumulated under the value of estimated future cash flows, heading of available-for-sale reserve. In Summary of Significant Accounting Policies Cont.
respect of AFS debt securities, carrying amount allocated to the part impairment losses are subsequently that is no longer recognized and the reversed through statement of profit or sum of the consideration received for loss if an increase in the fair value of the the part no longer recognized and any investment can be objectively related to cumulative gain or loss allocated to it an event occurring after the recognition that had been recognized in statement of the impairment loss. of other comprehensive income is recognized in statement of profit or loss. 2.7.8 Derecognition of financial assets The Company derecognizes a financial A cumulative gain or loss that had been asset only when the contractual rights recognized in other comprehensive to the cash flows from the asset expire, income is allocated between the part or when it transfers the financial asset that continues to be recognized and the and substantially all the risks and part that is no longer recognized on the rewards of ownership of the asset to basis of the relative fair values of those another entity. If the Company neither parts. transfers nor retains substantially all the risks and rewards of ownership and 2.7.9 Policy applicable with effect from continues to control the transferred 1 January 2018 asset, the Company recognizes its retained interest in the asset and an Initial recognition and measurement associated liability for amounts it may Financial assets are classified, at initial have to pay. If the Company retains recognition, as subsequently measured substantially all the risks and rewards of at amortised cost, fair value through ownership of a transferred financial other comprehensive income (OCI), and asset, the Company continues to fair value through profit or loss. recognize the financial asset and also recognizes a collateralized borrowing The classification of financial assets at for the proceeds received. initial recognition depends on the financial asset’s contractual cash flow On derecognition of a financial asset in characteristics and the Company’s its entirety, the difference between the business model for managing them. asset's carrying amount and the sum of With the exception of trade receivables the consideration received and that do not contain a significant receivable and the cumulative gain or financing component or for which the Annual Report loss that had been recognized in Company has applied the practical & Accounts 2018 statement of other comprehensive expedient, the Company initially income and accumulated in equity is measures a financial asset at its fair recognized in statement of profit or loss. value plus, in the case of a financial asset not at fair value through profit or On derecognition of a financial asset l o s s , t r a n s a c t i o n c o s t s . Tr a d e 69 other than in its entirety (e.g. when the receivables that do not contain a C o m p a n y r e t a i n s a n o p t i o n t o significant financing component or for repurchase part of a transferred asset), which the Company has applied the the Company allocates the previous practical expedient are measured at the carrying amount of the financial asset transaction price determined under between the part it continues to IFRS 15. Refer to the accounting policies r e c o g n i z e u n d e r c o n t i n u i n g on Revenue from non-insurance involvement, and the part it no longer contracts with customers. recognizes on the basis of the relative fair values of those parts on the date of In order for a financial asset to be the transfer. The difference between the classified and measured at amortised Summary of Significant Accounting Policies Cont.
cost or fair value through OCI, it needs to model and the financial assets held give rise to cash flows that are ‘solely within the business model. In particular, payments of principal and interest the way in which those risks are (SPPI)’ on the principal amount managed; and how management outstanding. This assessment is received returns on the assets (i.e. referred to as the SPPI test and is whether the returns are based on fair performed at an instrument level. value of the assets managed or on contractual cash flows collected). The Company’s business model for managing financial assets refers to how Solely Payments of principal and it manages its financial assets in order Interest (SPPI) to generate cash flows. The business If a financial asset is held in either a Hold model determines whether cash flows to Collect or Hold to Collect and Sell will result from collecting contractual model, then an assessment is cash flows, selling the financial assets, determined whether contractual cash or both. flows are solely payments of principal and interest on principal amount Purchases or sales of financial assets outstanding at initial recognition is that require delivery of assets within a required to determine the classification. time frame established by regulation or convention in the market place (regular Contractual cash flows that are SPPI on way trades) are recognised on the trade the principal amount outstanding are date, i.e., the date that the Company c o n s i d e r e d a s b a s i c l e n d i n g commits to purchase or sell the asset. a r r a n g e m e n t w i t h i n t e r e s t a s consideration for the time value of Business model assessment money and the credit risk associated There are three business models with the principal amount outstanding available under IFRS 9: during the tenor of the agreed • Hold to collect Financial assets with arrangement. Other basic lending risks objective to collect contractual cash l i k e L i q u i d i t y r i s k a n d c o s t o f flows. administration associated with holding • Hold to Collect and sell (Financial assets the financial asset for the specified held with the objective of both collecting tenor and the profit margin that is contractual cash flows and selling consistent with a basic lending financial assets). arrangement. Annual Report & Accounts 2018 • Other Financial Assets held with trading intent or that do not meet the criteria of Subsequent measurement either "Hold to Collect" or "Hold to Collect F o r p u r p o s e s o f s u b s e q u e n t and sell. measurement, financial assets are classified in four categories: 70 The Assessment of the business model • Financial assets at amortised cost (debt requires judgment based on the facts instruments) and circumstances as at the date of the • Financial assets at fair value through assessment. Sovereign Trust Insurance OCI with recycling of cumulative gains Plc has considered quantitative factors and losses (debt instruments) (e.g. expected frequency and volume of • Financial assets designated at fair value sales) and qualitative factors such as through OCI with no recycling of how the performance of the business cumulative gains and losses upon model and financial assets held within derecognition (equity instruments) the business model are evaluated and • Financial assets at fair value through reported to management; the risk that profit or loss affect the performance of the business, Summary of Significant Accounting Policies Cont.
Financial assets at amortised cost recognised in OCI. Upon derecognition, (debt instruments) the cumulative fair value change This category is the most relevant to the recognised in OCI is recycled to profit or Company. The Company measures loss. financial assets at amortised cost if both of the following conditions are met: During the year under consideration, • The financial asset is held within a the Company does not have any debt business model with the objective to instruments at fair value through OCI. hold financial assets in order to collect contractual cash flows Financial assets designated at fair • The contractual terms of the financial v a l u e t h r o u g h O C I ( e q u i t y asset give rise on specified dates to instruments) cash flows that are solely payments of Upon initial recognition, the Company principal and interest on the principal can elect to classify irrevocably its equity amount outstanding investments as equity instruments designated at fair value through OCI Financial assets at amortised cost are when they meet the definition of equity subsequently measured using the under IAS 32 Financial Instruments: effective interest (EIR) method and are Presentation and are not held for subject to impairment. Gains and losses trading. The classification is determined are recognised in profit or loss when the on an instrument-by-instrument basis. asset is derecognised, modified or impaired. Gains and losses on these financial assets are never recycled to profit or The Company’s financial assets at loss. Dividends are recognised as other a m o r t i s e d c o s t i n c l u d e s d e b t income in profit or loss when the right of instruments (bonds), treasury bills, payment has been established, except fixed deposits with banks and other. when the Company benefits from such proceeds as a recovery of part of the cost Financial assets at fair value through of the financial asset, in which case, OCI (debt instruments) such gains are recorded in OCI. Equity T h e C o m p a n y m e a s u r e s d e b t instruments designated at fair value instruments at fair value through OCI if through OCI are not subject to both of the following conditions are met: impairment assessment. The Company • The financial asset is held within a elected to classify irrevocably its non- Annual Report business model with the objective of listed equity investments under this & Accounts 2018 both holding to collect contractual cash category. flows and selling and • The contractual terms of the financial Financial assets at fair value through asset give rise on specified dates to cash profit or loss flows that are solely payments of Financial assets at fair value through 71 principal and interest on the principal profit or loss include financial assets amount outstanding. held for trading, financial assets designated upon initial recognition at For debt instruments at fair value fair value through profit or loss, or through OCI, interest income, foreign financial assets mandatorily required to exchange revaluation and impairment be measured at fair value. Financial losses or reversals are recognised in assets are classified as held for trading if profit or loss and computed in the same they are acquired for the purpose of manner as for financial assets selling or repurchasing in the near term. measured at amortised cost. The Financial assets with cash flows that are remaining fair value changes are not solely payments of principal and Summary of Significant Accounting Policies Cont.
interest are classified and measured at When the Company has transferred its fair value through profit or loss, rights to receive cash flows from an irrespective of the business model. asset or has entered into a pass-through Notwithstanding the criteria for debt arrangement, it evaluates if, and to what instruments to be classified at extent, it has retained the risks and amortised cost or at fair value through rewards of ownership. When it has O C I , a s d e s c r i b e d a b o v e , d e b t neither transferred nor retained instruments may be designated at fair substantially all of the risks and rewards value through profit or loss on initial of the asset, nor transferred control of recognition if doing so eliminates, or the asset, the Company continues to significantly reduces, an accounting recognise the transferred asset to the mismatch. extent of its continuing involvement. In that case, the Company also recognises Financial assets at fair value through an associated liability. The transferred profit or loss are carried in the statement asset and the associated liability are of financial position at fair value with net measured on a basis that reflects the changes in fair value recognised in profit rights and obligations that the Company or loss. has retained.
This category includes listed equity Continuing involvement that takes the investments which the Company had form of a guarantee over the transferred not irrevocably elected to classify at fair asset is measured at the lower of the value through OCI. Dividends on listed original carrying amount of the asset equity investments are also recognised a n d t h e m a x i m u m a m o u n t o f as other income in profit or loss when consideration that the Company could the right of payment has been be required to repay. established. Impairment of financial assets Derecognition The Company recognises an allowance A financial asset (or, where applicable, a for expected credit losses (ECLs) for all part of a financial asset or part of a debt instruments not held at fair value Company of similar financial assets) is through profit or loss. ECLs are based on primarily derecognised (i.e., removed the difference between the contractual from the Company’s statement of cash flows due in accordance with the financial position) when: contract and all the cash flows that the Annual Report & Accounts 2018 C o m p a n y e x p e c t s t o r e c e i v e , • The rights to receive cash flows from discounted at an approximation of the the asset have expired Or original effective interest rate. The • The Company has transferred its rights expected cash flows will include cash to receive cash flows from the asset or flows from the sale of collateral held or 72 has assumed an obligation to pay the other credit enhancements that are received cash flows in full without integral to the contractual terms. material delay to a third party under a ‘pass-through’ arrangement; and either ECLs are recognised in two stages. For (a) the Company has transferred credit exposures for which there has not substantially all the risks and rewards of been a significant increase in credit risk the asset, or (b) the Company has since initial recognition, ECLs are neither transferred nor retained provided for credit losses that result substantially all the risks and rewards of from default events that are possible the asset, but has transferred control of within the next 12-months (a 12-month the asset. ECL). For those credit exposures for Summary of Significant Accounting Policies Cont.
which there has been a significant The Company considers a financial increase in credit risk since initial asset in default when contractual recognition, a loss allowance is required payments are 90 days past due. for credit losses expected over the However, in certain cases, the Company remaining life of the exposure, may also consider a financial asset to be irrespective of the timing of the default in default when internal or external (a lifetime ECL). information indicates that the Company is unlikely to receive the outstanding For debt instruments at amortised cost, contractual amounts in full before the Company applies the low credit risk taking into account any credit simplification. At every reporting date, enhancements held by the Company. A the Company evaluates whether the financial asset is written off when there debt instrument is considered to have is no reasonable expectation of low credit risk using all reasonable and recovering the contractual cash flows. supportable information that is available without undue cost or effort. In Further disclosures relating to making that evaluation, the Company impairment of financial assets are also reassesses the credit rating of the debt provided in the following instrument by international credit rating • Disclosures for significant estimates agencies like S&P, Moodys and Fitch as Judgements and assumptions - Note 3 well as local ratings by Agusto and Co. It • Financial assets at amortised cost - is the Company’s policy to measure Notes 1.3 and 2.3 to the financial ECLs on such instruments on a 12- statements month basis. Where the credit risk of • Other receivables and prepayments - any bond deteriorates, the Company will Note 6.2 sell the bond and purchase bonds meeting the required investment grade. Write off Financial assets are written off when The Company’s debt instruments at there is no reasonable expectation of amortised cost comprise solely of recovery, such as a debtor failing to quoted bonds that are graded in the top engage in a repayment plan with the investment category and the credit company. The Company categorises its ratings are tracked by the finance and receivables for write off when a debtor investment teams via publications by fails to make contractual payments International Credit Rating Agencies greater than 360 days past due. Where Annual Report and trading exchange platforms. financial assets have been written off, & Accounts 2018 the company continues to engage in The Company's fixed income investment enforcement activity to attempt to portfolio consists of Investment grade recover the receivable due. Where and high speculative bonds and, recoveries are made, these are therefore, are considered to be low recognised in profit or loss. 73 credit risk investments. It is the Company’s policy to measure ECLs on The gross carrying amount of an asset is such instruments on a 12-month basis. written off (either fully or partially) to the However, when there has been a extent that there is no realistic prospect significant increase in credit risk since of recovery. This is generally the case origination, the allowance will be based when the Company determines that the on the lifetime ECL. The Company uses counterparty does not have assets or the ratings from the International Credit sources of income that could generate Rating Agencies both to determine sufficient cashflows to repay the whether the debt instrument has amount subject to write off. However, significantly increased in credit risk and the financial assets that are subjected to to estimate ECLs. write off could still be subject to Summary of Significant Accounting Policies Cont.
enforcement activities in other to The effective interest method is a comply with the Company's procedures method of calculating the amortized for recovery of amount due. cost of a financial liability and of allocating interest expense over the 2.8 Financial liabilities and equity relevant period. The effective interest instruments rate is the rate that exactly discounts estimated future cash payments 2.8.1 Classification as debt or equity (including all fees and points paid or Debt and equity instruments issued by received that form an integral part of the the Company are classified as either effective interest rate, transaction costs financial liabilities or as equity in and other premiums or discounts) accordance with the substance of the through the expected life of the financial contractual arrangements and the liability, or (where appropriate) a shorter definitions of a financial liability and an period, to the net carrying amount on equity instrument. initial recognition.
2.8.2 Equity Instruments 2.8.5 D e r e c o g n i t i o n o f f i n a n c i a l An equity instrument is any contract liabilities that evidences a residual interest in the The Company derecognises financial assets of an entity after deducting all of liabilities when, and only when, the its liabilities. Equity instruments issued C o m p a n y ' s o b l i g a t i o n s a r e by the Company are recognised as the extinguished- ie when the obligation proceeds received, net of direct issue specified in the contract is discharged, costs. Repurchase of the Company's cancelled or they expire. The difference own equity instruments is recognised between the carrying amount of the and deducted directly in equity. No gain financial liability derecognised and the or loss is recognised in profit or loss on consideration paid and payable is the purchase, sale, issue or cancellation recognised in profit or loss. o f t h e C o m p a n y ' s o w n e q u i t y instruments. The difference between the carrying amount of a financial liability (or part of a 2.8.3 Financial liabilities financial liability) extinguished or Initial recognition and measurement transferred to another party and the All financial liabilities are recognised consideration paid, including any non- initially at fair value and, in the case of cash assets transferred or liabilities Annual Report & Accounts 2018 loans and borrowings and payables, net assumed, is be recognised in profit or of directly attributable transaction loss. costs. An exchange between an existing The Company does not have any borrower and lender of debt instruments 74 financial liability that is measured at fair with substantially different terms is be value through profit or loss during the accounted for as an extinguishment of period under review. the original financial liability and the recognition of a new financial liability. 2.8.4 Other financial liabilities Similarly, a substantial modification of the terms of an existing financial liability Subsequent measurement or a part of it (whether or not attributable Other financial liabilities (including to the financial difficulty of the debtor) b o r r o w i n g s ) a r e s u b s e q u e n t l y s h a l l b e a c c o u n t e d f o r a s a n measured at amortized cost using the extinguishment of the original financial effective interest method. liability and the recognition of a new financial liability. Summary of Significant Accounting Policies Cont.
2.8.6 Offsetting of financial instruments (b) that event has a reliably measurable Financial assets and financial liabilities impact on the amounts that the cedant are offset and the net amount is will receive from the reinsurer. reported in the statement of financial position if there is a currently The carrying amount is reduced to its enforceable legal right to offset the recoverable amount when there is an recognised amounts and there is an impairment loss. The impairment loss is intention to settle on a net basis, to recognised as an expense in the profit or realise the assets and settle the loss. The asset is impaired if objective liabilities simultaneously. evidence is available to suggest that it is probable that the Company will not be 2.9 Other assets able to collect the amounts due from Other receivables principally consist of reinsurers. prepayments, accrued income and sundry debtors and are carried at 2.10.2 Reinsurance recoveries amortised cost. Reinsurance assets are subject to impairment testing when and only 2.10 Reinsurance contracts when; The Company enters into reinsurance (a) there is objective evidence, as a contracts in the normal course of result of an event that occurred after business in order to limit the potential initial recognition of the reinsurance for losses arising from certain asset, that the cedant may not receive all exposures. Outwards reinsurance amounts due to it under the terms of the premiums are accounted for in the contract; and same period as the related premiums (b) that event has a reliably measurable for the direct or inwards reinsurance impact on the amounts that the cedant business being reinsured. will receive from the reinsurer.
2.10.1 Reinsurance assets The carrying amount is reduced to its Reinsurance assets include balances recoverable amount when there is an due from reinsurance companies for impairment loss. The impairment loss is paid and unpaid losses and ceded policy recognised as an expense in the profit or claims. Reinsurance assets are loss. The asset is impaired if objective measured consistently with the evidence is available to suggest that it is amounts associated with the underlying probable that the Company will not be Annual Report insurance contracts and in accordance able to collect the amounts due from & Accounts 2018 with the terms of the reinsurance reinsurers. contract. Reinsurance is recorded as an asset unless a right of set-off exists, in 2.10.2 Reinsurance recoveries which case the associated liabilities are Reinsurance recoveries in respect of reduced to take account of reinsurance. Incurred but not reported (IBNR) claims 75 are assumed to be consistent with the Reinsurance assets are subject to historical recoveries on paid and impairment testing when and only outstanding claims, adjusted to reflect when; changes in the nature and extent of the Company’s reinsurance programmes. (a) there is objective evidence, as a result of An assessment is made of the an event that occurred after initial recoverability of reinsurance having recognition of the reinsurance asset, regard to available data on the financial that the cedant may not receive all strength of the reinsurance companies. amounts due to it under the terms of the contract; and Summary of Significant Accounting Policies Cont.
Gains or losses on buying reinsurance fair value. Gains and losses arising from are recognised in income at the date of changes in the fair value of investment purchase and are not amortised. properties are included in statement of profit or loss in the period in which they 2.10.3 Reinsurance liabilities arise. Fair values are determined based Reinsurance liabilities comprise on an annual evaluation performed by premiums payable for outwards an accredited independent external reinsurance contracts and are valuer applying a valuation model. recognised as an expense when due. An investment property is derecognized Reinsurance liabilities are derecognized upon disposal or when the investment w h e n , a n d o n l y w h e n , i t i s property is permanently withdrawn from extinguished—i.e. when the obligation use and no future economic benefits are specified in the contract is discharged expected from the disposal. Any gain or or cancelled or expires. loss arising on derecognition of the property (calculated as the difference 2.11 Deferred acquisition costs between the net disposal proceeds and The incremental costs directly the carrying amount of the asset) is attributable to the acquisition of new included in statement of profit or loss in business are deferred by recognising an the period in which the property is asset. For other insurance contracts, derecognized. acquisition costs including both incremental acquisition costs and other If an investment property becomes indirect costs of acquiring and owner-occupied, it is reclassified as processing new business are deferred. property, plant and equipment, and its fair value at the date of reclassification Where such business is reinsured the becomes its cost for subsequent reinsurers’ share is carried forward as accounting purposes. deferred income. If a property initially classified as Deferred acquisition costs and deferred property, plant and equipment becomes origination costs are amortized an investment property because its use systematically over the life of the has changed, any difference arising contracts and tested for impairment at between the carrying amount and the each reporting date. Any amount not fair value of this item at the date of Annual Report & Accounts 2018 recoverable is expensed. They are transfer is recognised in statement of derecognized when the related other comprehensive income as a contracts are settled or disposed of. revaluation of property, plant and equipment. However, if a fair value gain Deferred income - Reinsurance reverses a previous impairment loss, the 76 commissions gain is recognised in profit or loss. Upon The Company recognises commissions the disposal of such investment receivable on outwards reinsurance property, any surplus previously contracts as a deferred income and recorded in equity is transferred to amortised over the average term of the retained earnings; the transfer is not expected premiums payable. made through profit or loss.
2.12 Investment properties 2.13 Intangible assets Investment properties are measured initially at cost, including transaction Software costs. Subsequent to initial recognition, The amount initially recognized for investment properties are measured at intangible assets is the sum of the Summary of Significant Accounting Policies Cont.
expenditure incurred from the date 2.14 Property, plant and equipment when the intangible asset first meets the Property, plant and equipment are those recognition criteria. Where no owned and used by the Company, and internally-generated intangible asset are stated in the statement of financial can be recognized, development position at cost except for building expenditure is recognized in profit or which are at revalued amount, less any loss in the period in which it is incurred. subsequent accumulated depreciation and accumulated impairment. Costs associated with maintaining computer software programmes are Property, plant and equipment in the recognised as an expense as incurred. course of construction for production, supply or administrative purposes are Directly attributable costs that are carried at cost, less any recognized capitalised as part of the software impairment. Cost includes professional p r o d u c t i n c l u d e t h e s o f t w a r e fees and, for qualifying assets, development employee costs and an borrowing costs capitalized in appropriate portion of directly accordance with the Company's a t t r i b u t a b l e o v e r h e a d s . O t h e r accounting policy. Such properties are development expenditures that do not classified to the appropriate categories meet these criteria are recognised as an of property, plant and equipment when expense as incurred. completed and ready for intended use.
Subsequent to initial recognition, Depreciation of these assets, on the intangible assets are reported at cost same basis as other property assets, less accumulated amortization and commences when the assets are accumulated impairment losses, on the available for their intended use. same basis as intangible assets that are acquired separately. Its estimated Depreciation is recognized so as to write useful life typically varies between 3 and off the cost or valuation of assets (other 5 years. than freehold land and properties under construction) less their residual values Intangible assets with indefinite useful over their useful lives, using the lives are not amortised, but are tested straight-line method. The estimated for impairment annually, either useful lives, residual values and individually or at the cash-generating depreciation method are reviewed at the Annual Report unit level. The assessment of indefinite end of each reporting period, with the & Accounts 2018 life is reviewed annually to determine effect of any changes in estimate whether the indefinite life continues to accounted for on a prospective basis. be supportable. If not, the change in Freehold land is not depreciated. useful life from indefinite to finite is made on a prospective basis. Property, plant and equipment 77 (excluding building) is stated at cost, An intangible asset is derecognised excluding the costs of day to day upon disposal or when no future s e r v i c i n g , l e s s a c c u m u l a t e d economic benefits are expected from its depreciation and accumulated use or disposal. Any gain or loss arising impairment losses. Replacement or upon derecognition of the asset major inspection costs are capitalised (calculated as the difference between when incurred and if it is probable that the net disposal proceeds and the future economic benefits associated carrying amount of the asset) is with the item will flow to the entity and included in the statement of profit or the cost of the item can be measured loss. reliably. Summary of Significant Accounting Policies Cont.
Building is measured at fair value less continued use of the asset. Any gain or accumulated depreciation and loss arising on the disposal or impairment losses recognised after the retirement of an item of property, plant date of the revaluation. Valuations are and equipment is determined as the performed frequently to ensure that the difference between the sales proceeds fair value of a revalued asset does not and the carrying amount of the asset differ materially from its carrying and is recognized in profit or loss. The amount. residual values, useful lives and methods of depreciation of property, Any revaluation surplus is recorded in plant and equipment are reviewed at statement of other comprehensive each financial year end and adjusted income and hence, credited to the asset prospectively, if appropriate. revaluation reserve in equity, except to the extent that it reverses a revaluation 2.15 Statutory deposit decrease of the same asset previously Statutory deposit represents a deposit of recognised in the statement of profit or 10% of the regulatory share capital kept loss, in which case, the increase is with the Central Bank of Nigeria. The recognised in the profit or loss. A amount held will increase or decrease in revaluation deficit is recognised in the relation to the amount of paid up share profit or loss, except to the extent that it capital in issue. The cash amount held is offsets an existing surplus on the same considered to be a restricted cash a s s e t r e c o g n i s e d i n t h e a s s e t balance. revalaution 2.16 Insurance contract liabilities Accumulated depreciation as at the revaluation date is eliminated against 2.16.1 Pr ovision for Outstanding the gross carrying amount of the asset claims and Incurred but not and the net amount is restated to the reported (IBNR) claims revalued amount of the asset. Upon Provision for liabilities of insurance disposal, any revaluation reserve contracts is made for outstanding relating to the particular asset being claims and settlement expenses sold is transferred to retained earnings. incurred at the reporting date including an estimate for the cost of claims Depreciation is calculated on a straight incurred but not reported (IBNR) at that line method to write down the cost of date. Included in the provision is an Annual Report & Accounts 2018 assets in equal installments over their estimate of the internal and external estimated useful lives, at the following costs of handling the outstanding annual rates: claims. Land - Building 2% M a t e r i a l s a l v a g e a n d o t h e r 78 Leasehold improvements 10% recoveries including reinsurance Motor vehicles 25% recoveries are presented as assets. Furniture and fittings 15% Computer and equipment 33.3% Significant delays are experienced in the Office equipment 20% notification and settlement of certain Plant and machinery 15% types of general insurance claims, particularly in respect of liability An item of property, plant and business, environmental and pollution equipment is derecognized upon exposures, the ultimate cost of which disposal or when no future economic may vary from the original assessment. benefits are expected to arise from the Adjustments to the amounts of claims Summary of Significant Accounting Policies Cont.
provisions established in prior years are assessed in aggregate for business reflected in the financial statements for classes which are managed together. the period in which the adjustments are made and disclosed separately, if 2.17 Earnings per share material. The liability for Incurred but not Reported (IBNR) claims is The Company presents basic earnings calculated at the end of the reporting per share (EPS) data for its ordinary period, using a range of standard shares. Basic EPS is calculated by actuarial claim projection techniques, dividing the profit or loss attributable to based on empirical data and current ordinary shareholders of the Company assumptions that may include a margin by the weighted average number of for adverse deviation. The liability was ordinary shares outstanding during the not discounted for time value of money; period excluding treasury shares held and no further provision was made for by the Company. equalisation or catastrophe reserves (as Diluted earnings per share amounts are prohibited by IFRS 4). calculated by dividing the net profit by the weighted number of ordinary shares These liabilities are derecognised when outstanding during the year plus the the obligation to pay a claim is weighted number of ordinary shares extinguished (i.e. expired, discharged or that would be issued on conversion of all cancelled). the dilutive potential ordinary shares into ordinary shares. 2.16.2 P r o v i s i o n f o r u n e a r n e d premiums and unexpired risks 2.18 Trade payables The provision for unearned premiums Trade payables are recognised initially at represents that part of written fair value and subsequently measured premiums, gross of commission at amortised cost using the effective payable to intermediaries that is interest method. The fair value of a non- estimated to be earned in subsequent interest bearing liability is its discounted periods. The change in the provision is repayment amount. If the due date is recorded in the profit or loss to recognize less than one year, discounting is revenue over the period of the risk. omitted.
2.16.3 Liability adequacy 2.19 Other payables At each reporting date the Company Other payables are initially recognised Annual Report performs a liability adequacy test on its at fair value, fair value represents & Accounts 2018 insurance liabilities less related transaction price and subsequently deferred acquisition cost to ensure that measured at amortised cost. the carrying value is adequate, using current estimates of future cash flows, 2.20 Taxation taking into account the relevant Income tax expense represents the sum 79 investment return. of the tax currently payable and deferred If that assessment shows that the tax. carrying amount of the liabilities is 2.20.1 Current tax i n a d e q u a t e , a n y d e f i c i e n c y i s The tax currently payable is based on recognised as an expense in the profit or taxable profit for the year. Taxable profit loss and subsequently by recognising differs from profit as reported in the an additional liability for claims statement of profit or loss because of provisions or recognising a provision for items of income or expense that are unexpired risks. taxable or deductible in other years and The unexpired risks provision is items that are never taxable or deductible. Summary of Significant Accounting Policies Cont.
The Company's liability for current tax is interests are only recognized to the calculated using tax rates that have extent that it is probable that there will been enacted or substantively enacted be sufficient taxable profits against by the end of the reporting period. which to utilise the benefits of the temporary differences and they are The current taxes include: Company expected to reverse in the foreseeable Income Tax at 30% of taxable profit; future. Education Tax at 2% of assessable profit; Capital Gain The carrying amount of deferred tax assets is reviewed at the end of each Tax at 10% of chargeable gains; and reporting period and reduced to the Information Technology Development extent that it is no longer probable that Levy at 1% of accounting profit. sufficient taxable profits will be available Minimum tax may be computed based to allow all or part of the asset to be on CITA. recovered.
2.20.2 Deferred tax Deferred tax liabilities and assets are Deferred tax is recognized on temporary measured at the tax rates that are differences between the carrying expected to apply in the period in which amounts of assets and liabilities in the the liability is settled or the asset f i n a n c i a l s t a t e m e n t s a n d t h e realized, based on tax rates (and tax corresponding tax bases used in the laws) that have been enacted or computation of taxable profit. substantively enacted by the end of the reporting period. The measurement of Deferred tax liabilities are generally deferred tax liabilities and assets recognized for all taxable temporary reflects the tax consequences that differences. Deferred tax assets are would follow from the manner in which generally recognized for all deductible the Company expects, at the end of the temporary difference, unutilised tax loss reporting period, to recover or settle the and unutilised tax credits. carrying amount of its assets and liabilities. Such deferred tax assets and liabilities are not recognized if the temporary 2.20.3 Current and deferred tax for the difference arises from goodwill or from year the initial recognition (other than in a Current and deferred tax are recognized Annual Report & Accounts 2018 business combination) of other assets in statement of profit or loss, except and liabilities in a transaction that when they relate to items that are affects neither the taxable profit nor the recognized in statement of other accounting profit. Deferred tax liabilities comprehensive income or directly in are recognized for taxable temporary equity, in which case, the current and 80 d i f f e r e n c e s a s s o c i a t e d w i t h deferred tax are also recognized in investments in subsidiaries and statement of other comprehensive associates, and interests in joint income or directly in equity respectively. ventures, except where the Company is able to control the reversal of the Where current tax or deferred tax arises temporary difference and it is probable from the initial accounting for a that the temporary difference will not business combination, the tax effect is reverse in the foreseeable future. included in the accounting for the business combination. Deferred tax assets arising from deductible temporary differences An entity shall offset deferred tax assets associated with such investments and and deferred tax liabilities if, and only if: Summary of Significant Accounting Policies Cont.
(a) the entity has a legally enforceable right liability), are recognised immediately in to set off current tax assets against the statement of financial position with a current tax liabilities; and corresponding debit or credit to retained (b) the deferred tax assets and the deferred earnings through OCI in the period in tax liabilities relate to income taxes which they occur. Remeasurements are levied by the same taxation authority on not reclassified to profit or loss in either: subsequent periods.
(i) the same taxable entity; or Past service costs are recognised in different taxable entities which intend profit or loss on the earlier of the date of either to settle current tax liabilities and the plan amendment or curtailment or assets on a net basis, or to realise the the date that the Company recognises assets and r e l a t e d r e s t r u c t u r i n g c o s t s o r (ii) settle the liabilities simultaneously, in termination benefits. each future period in which significant amounts of deferred tax liabilities or Net interest is calculated by applying the assets are expected to be settled or discount rate to the net defined benefit recovered. liability or asset. The Company recognises the following changes in the 2.21 Employee benefit costs net defined benefit obligation under ‘Other operating and administrative Defined contribution pension expenses’ in the statement of profit or scheme loss: Payments to defined contribution retirement benefit plans are recognised 4Service costs comprising current as an expense when employees have service costs, past service costs, and rendered service entitling them to the non-routine settlements contributions. 4 Net interest expense or income
This is done in line with the Pension 2.22 Borrowings Reform Act 2014, whereby the minimum Finance cost comprise interest payable rate of Pension Contribution is 18% of on loans and bank overdrafts. They are monthly emolument, where 8% will be charged to profit or loss as incurred, contributed by employee and 10% by the except those that relate to qualifying employer. assets. Annual Report Short-term benefits & Accounts 2018 Wages, salaries, paid annual leave, After initial recognition, interest bearing bonuses and non-monetary benefits are loans and borrowings are subsequently recognised as employee benefit measured at amortised cost using the expenses when the associated services effective interest rate method. Gains and are rendered by the employees of the losses are recognised in the profit or 81 Company. l o s s w h e n t h e l i a b i l i t i e s a r e derecognised as well as through the Defined benefit plan effective interest rate (EIR) amortisation The Company operates a defined benefit process. Amortised cost is calculated by plan to employees who are qualified as taking into account any discount or at the period it was discontinued. premium on acquisition and fee or costs that is an integral part of the EIR. The EIR Remeasurements, comprising actuarial amortisation is included in finance cost gains and losses and the return on plan in the profit or loss. assets (excluding amounts included in net interest on the net defined benefit Summary of Significant Accounting Policies Cont.
2.23 Share capital obligor in all the revenue arrangements, Shares are classified as equity when has pricing latitude, and is also exposed there is no obligation to transfer cash or to inventory and credit risks. The other assets. Incremental external costs specific recognition criteria described that are directly attributable to the issue below must also be met before revenue of these shares are recognised in equity, is recognised. net of tax. 2.26.1 Gross written premium 2.24 Statutory contingency reserve Written premiums comprise the The Company maintains Statutory premiums on contracts incepted in the contingency reserve in accordance with financial year. Written premiums are the provision of Section 21(2) of the stated gross of commissions that are Insurance Act CAP I17, LFN 2004 to payable to intermediaries and exclusive cover fluctuations in securities and of taxes and duties on premiums. variations in statistical estimates at a rate equal to greater of 3% of gross Unearned premiums are those premium or 20% of net profits until the proportions of the premium which relate accumulated amount reaches the to periods of risk after the reporting date. greater of the minimum paid-up capital or 50% of the net premium. Unearned premiums are calculated on a time apportionment basis. 2.25 Dividends Dividend to the shareholders of the 2.26.2 Fees and commission income Company is recognised in the period in Fees and commission income consists which the dividend are declared as a first primarily of agency and brokerage interim dividend approved by the Board commission, reinsurance and profit of Directors or a second interim dividend c o m m i s s i o n s , p o l i c y h o l d e r a p p r o v e d b y t h e C o m p a n y ’ s administration fees and other contract shareholders at the Company’s annual fees. Reinsurance commission general meeting. receivables are deferred in the same way as acquisition costs. All other fees and Final dividend for the year that are commission income are recognized as approved after the reporting date are the services are provided. dealt with as event after the reporting d a t e . T h i s i s a p p r o v e d b y t h e 2.26.3 Investment income Annual Report & Accounts 2018 shareholders at the Annual General Investment income consists of dividend, Meeting. interest and rent received, movements in amortized cost on debt securities and 2.26 Revenue recognition other loans and receivables, realized Revenue is recognised to the extent that gains and losses, and unrealized gains 82 it is probable that the economic benefits and losses on fair value assets. will flow to the Company and the revenue can be reliably measured, Interest income regardless of when the payment is Interest income is recognized in the received. Revenue is measured at the statement of profit or loss as it accrues fair value of the consideration received and is calculated by using the effective or receivable, taking into account interest rate method. Fees and contractually defined terms of payment commissions that are an integral part of and excluding taxes or duty. The the effective yield of the financial asset Company has concluded that it is the or liability are recognized as an p r i n c i p a l i n a l l o f i t s r e v e n u e adjustment to the effective interest rate arrangements since it is the primary of the instrument. Summary of Significant Accounting Policies Cont.
Dividend income that are applicable to the servicing of net Dividend income from investments is premiums written. These expenses recognized when the shareholders’ encompass all that are incurred by an rights to receive payment have been insurance company. established. Underwriting expenses for insurance Rental income contracts are recognised as expense Rental income is recognized on an when incurred, with the exception of accrual basis. acquisition costs which are recognised on a time apportionment basis in Realized gains and losses respect of risk. Gains and losses on the sale of investments are calculated as the Acquisition costs comprise all direct difference between net sales proceeds and indirect costs arising from the and the original or amortized cost and writing of insurance contracts. are recorded on occurrence of the sale transaction. Other underwriting expenses are those i n c u r r e d i n s e r v i c i n g e x i s t i n g Unrealised gains and losses policies/contract. These expenses are Unrealized gains or losses represent the charged in the accounting period in difference between the carrying value at which they are incurred. the year end and the carrying value at the previous year end or purchase value 2.27.3 Other expenses during the year, less the reversal of All other operating expenses are previously recognized unrealized gains recognized directly in profit or loss and and losses in respect of disposals when incurred.rred. during the year. 3 Critical accounting judgments and 2.27 Benefits, claims and expenses k e y s o u r c e s o f e s t i m a t i o n recognition uncertainty In the application of the Company’s 2.27.1 Insurance Benefits and claims accounting policies, the Directors are Insurance claims include all claims required to make judgments, estimates occurring during the year, whether and assumptions about the carrying reported or not, related internal and amounts of assets and liabilities that are Annual Report external claims handling costs that are not readily apparent from other sources. & Accounts 2018 directly related to the processing and T h e e s t i m a t e s a n d a s s o c i a t e d settlement of claims, a reduction for the assumptions are based on historical value of salvage and other recoveries, experience and other factors that are and any adjustments to claims considered to be relevant. Actual results outstanding from previous years. may differ from these estimates. 83 Reinsurance claims T h e e s t i m a t e s a n d u n d e r l y i n g The Company recognises reinsurance assumptions are reviewed on an claims when the related gross ongoing basis. Revisions to accounting insurance claims are recognised estimates are recognised in the period according to the terms of the relevant in which the estimate is revised if the contracts. revision affects only that period or in the period of the revision and future periods 2.27.2 Underwriting expenses if the revision affects both current and Underwriting expenses refer to all future periods. expenses, inclusive of net commissions, Summary of Significant Accounting Policies Cont.
Critical judgments in applying the contracts. As permitted by IFRS 4, Company’s accounting policies assets and liabilities of these contracts The following are the critical judgments, are accounted for under previously apart from those involving estimations applied GAAP. (which are dealt with separately below), that the directors have made in the Insurance contracts are those contracts process of applying the Company’s when the Company (the insurer) has accounting policies and that have the accepted significant insurance risk most significant effect on the amounts from another party (the policyholders) recognized in financial statements. by agreeing to compensate the policyholders if a specified uncertain Going Concern future event (the insured event) The financial statements have been adversely affects the policyholders. As a prepared on the going concern basis general guideline, the Company and there is no intention to curtail determines whether it has significant business operations. Capital adequacy, insurance risk, by comparing benefits profitability and liquidity ratios are paid with benefits payable if the insured continuously reviewed and appropriate event did not occur. Insurance contracts action taken to ensure that there are no can also transfer financial risk. Once a going concern threats to the operation contract has been classified as an of the Company. insurance contract, it remains an insurance contract for the remainder of The Directors have made assessment of its lifetime, even if the insurance risk the Company's ability to continue as a reduces significantly during this period, going concern and have no reason to unless all rights and obligations are believe that the Company will not extinguished or expire. Investment remain a going concern in the years contracts can, however, be reclassified ahead. as insurance contracts after inception if insurance risk becomes significant. Property lease classification – Company as lessor K e y s o u r c e s o f e s t i m a t i o n The Company has entered into uncertainty commercial property leases on its The key assumptions concerning the investment property portfolio. The future, and other key sources of Company has determined, based on an estimation uncertainty at the reporting Annual Report & Accounts 2018 evaluation of the terms and conditions date, that have a significant risk of of the arrangements, such as the lease causing a material adjustment to the term not constituting a major part of the carrying amounts of assets and economic life of the commercial liabilities within the next financial year, property and the present value of the are discussed below: 84 m i n i m u m l e a s e p a y m e n t s n o t amounting to substantially all of the fair Valuation of liabilities of non-life value of the commercial property, that it insurance contracts retains all the significant risks and Estimates are made for both the rewards of ownership of these expected ultimate cost of claims properties and accounts for the reported and claims incurred but not contracts as operating leases. reported (IBNR) at the statement of financial position date. The estimate of Product classification and contract IBNR is generally subject to a greater liabilities degree of uncertainty than that for The Company’s Non-life insurance reported claims. The ultimate cost of contracts are classified as insurance outstanding claims is estimated by Summary of Significant Accounting Policies Cont.
using a range of standard actuarial basis other than time apportionment. claims projection techniques, such as the Chain Ladder, Stochastic reserving The carrying amount for non-life (Bootstrap) and Bornheutter-Ferguson insurance contract liabilities at the methods. reporting date is N3.089 billion (2017: N3.261 billion). The main assumption underlying these techniques is that a Company’s past Fair value of financial instruments claims development experience can be using valuation techniques u s e d t o p r o j e c t f u t u r e c l a i m s The Directors use their judgment in development and hence ultimate claims selecting an appropriate valuation costs. As such, these methods technique. Where possible, financial extrapolate the development of paid and instruments are marked at prices incurred losses, average costs per claim quoted in active markets. In the current and claim numbers based on the market environment, such price observed development of earlier years information is typically not available for and expected loss ratios. Historical all instruments and the company uses claims development is mainly analysed valuation techniques to measure such by accident years, but can also be instruments. These techniques use further analysed by geographical area, “market observable inputs” where as well as by significant business lines available, derived from similar assets in and claim types. Large claims are similar and active markets, from recent usually separately addressed, either by transaction prices for comparable items being reserved at the face value of loss or from other observable market data. adjuster estimates or separately For positions where obser vable projected in order to reflect their future reference data are not available for development. Additional qualitative some or all parameters the company judgement is used to assess the extent estimates the non-market observable to which past trends may not apply in inputs used in its valuation models. future, (e.g., to reflect one- off occurrences, changes in external or Other financial instruments are valued market factors such as public attitudes using a discounted cash flow analysis to claiming, economic conditions, levels based on assumptions supported, of claims inflation, judicial decisions where possible, by observable market and legislation, as well as internal prices or rates although some Annual Report factors such as portfolio mix, policy assumptions are not supported by & Accounts 2018 f e a t u r e s a n d c l a i m s h a n d l i n g observable market prices or rates. procedures) in order to arrive at the estimated ultimate cost of claims that Impairment under IFRS 9 present the likely outcome from the The impairment requirements of IFRS 9 range of possible outcomes, taking apply to all debt instruments that are 85 account of all the uncertainties measured at amortised cost. involved. The determination of impairment loss Similar judgements, estimates and and allowance moves from the incurred assumptions are employed in the credit loss model whereby credit losses assessment of adequacy of provisions are recognised when a defined loss for unearned premium. Judgement is event occurs under IAS 39, to expected also required in determining whether credit loss model under IFRS 9, where the pattern of insurance service expected credit losses are recognised provided by a contract requires upon initial recognition of the financial amortisation of unearned premium on a asset based on expectation of potential Summary of Significant Accounting Policies Cont.
credit losses at the time of initial 39 except for the portfolios of assets recognition. purchased or originated as credit impaired. S t a g e d A p p r o a c h t o t h e Determination of Expected Credit The determination of whether a Losses financial asset is credit impaired IFRS 9 outlines a three-stage model for focuses exclusively on default risk, impairment based on changes in credit without taking into consideration the quality since initial recognition. These effect of credit risk mitigants such as stages are as outlined below: collateral or guarantees. Specifically, the financial asset is credit impaired Stage 1: The Company recognises a and in stage 3 when: the Group credit loss allowance at an amount considers the obligor is unlikely to pay equal to the 12 month expected credit its credit obligations to the company. losses. This represents the portion of T h e t e r m i n a t i o n m a y i n c l u d e lifetime expected credit losses from f o r b e a r a n c e a c t i o n s , w h e r e a default events that are expected within concession has been granted to the 12 months of the reporting date, borrower or economic or legal reasons assuming that credit risk has not that a qualitative indicators of credit increased significantly after the initial impairment; or contractual payments of recognition. either principal or interest by the obligor are pass due by more than 90 days. Stage 2: The Company recognises a credit loss allowance at an amount For financial assets considered to be equal to the lifetime expected credit credit impaired, the ECL allowance losses (LTECL) for those financial assets covers the amount of loss the Company that are considered to have experienced is expected to suffer. The estimation of a significant increase in credit risk since ECLs is done on a case by case basis for initial recognition. This requires the non-homogenous portfolios, or by computation of ECL based on Lifetime applying portfolio based parameters to probabilities of default that represents individual financial assets in this the probability of a default occurring portfolios by the Company’s ECL model over the remaining lifetime of the for homogenous portfolios. financial assets. Allowance for credit losses is higher in this stage because of Forecast of future economic conditions Annual Report & Accounts 2018 an increase in credit risk and the impact when calculating ECLs are considered. of a longer time horizon being The lifetime expected losses are considered compared to 12 months in estimated based on the probability – stage 1. weighted present value of the difference between: 86 Stage 3: The Company recognises a loss 1) The contractual cash flows that are allowance at an amount equal to life- due to the Company under the contract; time expected credit losses, reflecting a and probability of default (PD) of 100% via 2) The cash flows that the Company the recoverable cash flows for the asset. expects to receive. For those financial assets that are credit impaired. The Company's definition of Elements of ECL models that are default is aligned with the regulatory considered accounting judgements and definition. The treatment of the loans estimates include: and other receivables in stage 3 remains • The Company’s criteria for assessing substantially the same as the treatment if there has been a significant increase of impaired financial assets under IAS in credit risk and so allowances for Summary of Significant Accounting Policies Cont.
financial assets should be measured on presentation and disclosure of leases a LTECL basis and the qualitative and requires lessees to account for all assessment leases under a single on-balance sheet • The development of ECL models, model similar to the accounting for including the various formulas and the finance leases under IAS 17. The choice of inputs standard includes two recognition Determination of associations between exemptions for lessees – leases of ’low- macroeconomic scenarios and, value’ assets (e.g., personal computers) e c o n o m i c i n p u t s , s u c h a s and shortterm leases (i.e., leases with a unemployment levels, interest rate, lease term of 12 months or less). At the Gross Domestic Product (GDP) and commencement date of a lease, a lessee collateral values, and the effect on will recognise a liability to make lease Probability of Default (Pds), Exposure at payments (i.e., the lease liability) and an Defaults (EADs) and Lost Given Defaults asset representing the right to use the (LGDs). underlying asset during the lease term • Selection of for ward-looking (i.e., the right-of-use asset). Lessees will macroeconomic scenarios and their be required to separately recognise the probability weightings, to derive the interest expense on the lease liability economic inputs into the ECL models. and the depreciation expense on the right-of-use asset. Expected lifetime: The expected life time of a financial Lessees will also be required to asset is a key factor in determine the life remeasure the lease liability upon the time expected credit losses. Lifetime occurrence of certain events (e.g., a expected credit losses represents change in the lease term, a change in default events over the expected life of a future lease payments resulting from a financial asset. The company measures change in an index or rate used to expected credit losses considering the determine those payments). The lessee risk of default over the maximum will generally recognise the amount of contractual period (including any the remeasurement of the lease liability borrower’s extension option) over which as an adjustment to the right-of-use it is exposed to credit risk. asset.
4 Standards issued but not yet Lessor accounting under IFRS 16 is effective substantially unchanged from today’s Annual Report The standards and interpretations that accounting under IAS 17. Lessors will & Accounts 2018 are issued, but not yet effective, up to the continue to classify all leases using the date of issuance of the Company’s same classification principle as in IAS financial statements are disclosed 17 and distinguish between two types of below. The Company intends to adopt leases: operating and finance leases. these standards, if applicable, when 87 they become effective. IFRS 16 also requires lessees and lessors to make more extensive IFRS 16 – Leases disclosures than under IAS17. IFRS 16 was issued in January 2016 and it replaces IAS 17 Leases, IFRIC 4 IFRS 16 is effective for annual periods Determining whether an Arrangement beginning on or after 1 January 2019. A contains a Lease, SIC-15 Operating lessee can choose to apply the standard L e a s e s - I n c e n t i v e s a n d S I C - 2 7 using either a full retrospective or a E v a l u a t i n g t h e S u b s t a n c e o f modified retrospective approach. The Transactions Involving the Legal Form of standard’s transition provisions permit a Lease. IFRS 16 sets out the principles certain reliefs. for the recognition, measurement, Summary of Significant Accounting Policies Cont.
In applying IFRS 16 for the first time, the • A Contractual Service Margin (CSM) Company will use the following practical that is equal and opposite to any day one expedients permitted by the standard: gain in the fulfilment cashflows of a • the accounting for operating leases group of contracts. The CSM represents with a remaining lease term of less than the unearned profitability of the 12 months as at 1 January 2018 as short- insurance contracts and is recognised term leases. in profit or loss over the service period (i.e., coverage period). The Company plans to adopt IFRS 16 • Certain changes in the expected using modified retrospective approach. present value of future cash flows are The Company has also elected not to adjusted against the CSM and thereby apply IFRS 16 to contracts that were not recognised in profit or loss over the identified as containing a lease under remaining contractual service period. IAS 17 and IFRIC 4 Determining whether • The effect of changes in discount rates an Arrangement contains a Lease. will be reported in either profit or loss or o t h e r c o m p r e h e n s i v e i n c o m e , Thus, the adoption of IFRS 16 in 2019 will determined by an accounting policy not have any material impact on the choice. Company. • The recognition of insurance revenue and insurance service expenses in the IFRS 17 Insurance Contracts statement of comprehensive income In May 2017, the IASB issued IFRS 17 based on the concept of services Insurance Contracts, a comprehensive provided during the period. new accounting standard for insurance • Amounts that the policyholder will contracts covering recognition and always receive, regardless of whether an measurement, presentation and insured event happens (non-distinct disclosure, which replaces IFRS 4 investment components) are not Insurance Contracts. presented in profit or loss, but are recognised directly on the statement of In contrast to the requirements in IFRS financial position. 4 , w h i c h a r e l a r g e l y b a s e d o n • Insurance services results (earned g r a n d f a t h e r i n g p r e v i o u s l o c a l revenue less incurred claims) are accounting policies for measurement presented separately from the p u r p o s e s , I F R S 1 7 p r o v i d e s a insurance finance income or expense. comprehensive model (the general • Extensive disclosures to provide Annual Report & Accounts 2018 model) for insurance contracts, information on the recognised amounts supplemented by the variable fee from insurance contracts and the approach for contracts with direct nature and extent of risks arising from participation features that are these contracts. substantially investment-related service 88 contracts, and the premium allocation IFRS 17 is effective for annual reporting approach mainly for short- duration periods beginning on or after 1 January which typically applies to certain non- 2022, with comparative figures required. life insurance contracts. Early application is permitted, provided the entity also applies IFRS 9 and IFRS T h e m a i n f e a t u r e s o f t h e n e w 15 on or before the date it first applies accounting model for insurance IFRS 17. Retrospective application is contracts are, as follows: required. However, if full retrospective • The measurement of the present value application for a group of insurance of future cash flows, incorporating an contracts is impracticable, then the explicit risk adjustment, remeasured entity is required to choose either a every reporting period (the fulfilment modified retrospective approach or a cash flows). fair value approach. Summary of Significant Accounting Policies Cont.
The Company started a project to A m e n d m e n t s t o I F R S 9 : implement IFRS 17 and has been Prepayment Features with Negative per forming a high-level impact Compensation assessment of IFRS 17. The Company Under IFRS 9, a debt instrument can be expects that the new standard will result measured at amortised cost or at fair in an important change to the value through other comprehensive accounting policies for insurance income, provided that the contractual contract liabilities of the Company and cash flows are ‘solely payments of is likely to have a significant impact on principal and interest on the principal profit and total equity together with amount outstanding’ (the SPPI presentation and disclosure. criterion) and the instrument is held within the appropriate business model IFRIC Interpretation 23 Uncertainty for that classification. The amendments over Income Tax Treatment to IFRS 9 clarify that a financial asset The Interpretation addresses the passes the SPPI criterion regardless of accounting for income taxes when tax the event or circumstance that causes treatments involve uncertainty that the early termination of the contract and affects the application of IAS 12 and irrespective of which party pays or does not apply to taxes or levies outside receives reasonable compensation for the scope of IAS 12, nor does it the early termination of the contract. specifically include requirements relating to interest and penalties The amendments should be applied a s s o c i a t e d w i t h u n c e r t a i n t a x retrospectively and are effective from 1 t r ea t m en t s . T h e I n t er p r et at i o n January 2019, with earlier application specifically addresses the following: permitted. These amendments have no • Whether an entity considers uncertain impact on the financial statements of tax treatments separately the Company. • The assumptions an entity makes about the examination of tax treatments Amendments to IFRS 10 and IAS 28: by taxation authorities Sale or Contribution of Assets • How an entity determines taxable between an Investor and its profit (tax loss), tax bases, unused tax Associate or Joint Venture losses, unused tax credits and tax rates The amendments address the conflict • How an entity considers changes in between IFRS 10 and IAS 28 in dealing facts and circumstances with the loss of control of a subsidiary Annual Report that is sold or contributed to an & Accounts 2018 An entity has to determine whether to associate or joint venture. The consider each uncertain tax treatment amendments clarify that the gain or loss separately or together with one or more resulting from the sale or contribution of other uncertain tax treatments. The assets that constitute a business, as approach that better predicts the defined in IFRS 3, between an investor 89 resolution of the uncertainty should be and its associate or joint venture, is followed. The interpretation is effective recognised in full. Any gain or loss for annual reporting periods beginning resulting from the sale or contribution of on or after 1 January 2019, but certain assets that do not constitute a business, transition reliefs are available. The however, is recognised only to the extent C o m p a n y d o e s n o t e x p e c t t h e of unrelated investors’ interests in the application of this interpretation to associate or joint venture. The IASB has affect its financial statements as from deferred the effective date of these its effective date since the Company amendments indefinitely, but an entity does not operate in a complex that early adopts the amendments must multinational tax environment. apply them prospectively. The Company Summary of Significant Accounting Policies Cont.
will apply these amendments when they These amendments will not apply to the become effective. Company as it does not have any employee benefit that include future Amendments to IAS 19: Plan plan amendments, curtailments, or A m e n d m e n t , C u r t a i l m e n t o r settlements as the current plan is Settlement already winding down and no longer The amendments to IAS 19 address the active. accounting when a plan amendment, curtailment or settlement occurs during Amendments to IAS 28: Long-term a reporting period. The amendments interests in associates and joint specify that when a plan amendment, ventures curtailment or settlement occurs during The amendments clarify that an entity the annual reporting period, an entity is applies IFRS 9 to long-term interests in required to: an associate or joint venture to which • Determine current service cost for the the equity method is not applied but remainder of the period after the plan that, in substance, form part of the net amendment, curtailment or settlement, investment in the associate or joint using the actuarial assumptions used to venture (long-term interests). This remeasure the net defined benefit clarification is relevant because it liability (asset) reflecting the benefits implies that the expected credit loss offered under the plan and the plan model in IFRS 9 applies to such long- assets after that event. term interests. • Determine net interest for the remainder of the period after the plan The amendments also clarified that, in amendment, curtailment or settlement applying IFRS 9, an entity does not take using: the net defined benefit liability account of any losses of the associate or (asset) reflecting the benefits offered joint venture, or any impairment losses under the plan and the plan assets after on the net investment, recognised as that event; and the discount rate used to adjustments to the net investment in the remeasure that net defined benefit associate or joint venture that arise from liability (asset). applying IAS 28 Investments in Associates and Joint Ventures. The amendments also clarify that an entity first determines any past service The amendments should be applied cost, or a gain or loss on settlement, retrospectively and are effective from 1 Annual Report & Accounts 2018 without considering the effect of the January 2019, with early application asset ceiling. This amount is recognised permitted. Since the Company does not in profit or loss. An entity then have such long-term interests in its determines the effect of the asset associate and joint venture, the ceiling after the plan amendment, amendments will not have an impact on 90 curtailment or settlement. Any change its financial statements. in that effect, excluding amounts included in the net interest, is Annual Improvements 2015-2017 recognised in other comprehensive Cycle (issued in December 2017) income. These improvements include: • IFRS 3 Business combinations - The amendments apply to plan Previously held interest in a joint a m e n d m e n t s , c u r t a i l m e n t s , o r operation settlements occurring on or after the The amendments clarify that, when an beginning of the first annual reporting entity obtains control of a business that period that begins on or after 1 January is a joint operation, it applies the 2019, with early application permitted. r e q u i r e m e n t s f o r a b u s i n e s s Summary of Significant Accounting Policies Cont.
combination achieved in stages, An entity applies those amendments for including remeasuring previously held annual reporting periods beginning on interests in the assets and liabilities of or after 1 January 2019, with early the joint operation at fair value. In doing application is permitted. When an entity so, the acquirer remeasures its entire first applies those amendments, it previously held interest in the joint applies them to the income tax operation. consequences of dividends recognised on or after the beginning of the earliest An entity applies those amendments to comparative period. Since the business combinations for which the Company’s current practice is in line acquisition date is on or after the with these amendments, the Company beginning of the first annual reporting does not expect any effect on its period beginning on or after 1 January financial statements. 2019, with early application permitted. These amendments will not have an • IAS 23 Borrowing Costs impact on the Company’s financial The amendments clarify that an entity statements. treats as part of general borrowings any borrowing originally made to develop a • IFRS 11 Joint Arrangements qualifying asset when substantially all of A party that participates in, but does not the activities necessary to prepare that have joint control of, a joint operation asset for its intended use or sale are might obtain joint control of the joint complete. operation in which the activity of the joint operation constitutes a business An entity applies those amendments to as defined in IFRS 3. The amendments borrowing costs incurred on or after the clarify that the previously held interests beginning of the annual reporting in that joint operation are not period in which the entity first applies remeasured. those amendments. An entity applies those amendments for annual reporting An entity applies those amendments to periods beginning on or after 1 January transactions in which it obtains joint 2019, with early application permitted. control on or after the beginning of the Since the Company’s current practice is first annual reporting period beginning in line with these amendments, the on or after 1 January 2019, with early Company does not expect any effect on a p p l i c a t i o n p e r m i t t e d . T h e s e its financial statements. Annual Report amendments are currently not & Accounts 2018 applicable to the Company but may The following are other pronouncement apply to future transactions. that are issued as of December 2018 with effective date of 1 January 2020. • IAS 12 Income Taxes The amendments clarify that the • D e f i n i t i o n o f a B u s i n e s s - 91 income tax consequences of dividends Amendments to IFRS 3 are linked more directly to past • Definition of Material - Amendments transactions or events that generated to IAS 1 and IAS 8 d i s t r i b u t a b l e p r o f i t s t h a n t o • Amendments to The Conceptual distributions to owners. Therefore, an Framework for Financial Reporting entity recognises the income tax consequences of dividends in profit or 5 IFRS 9 Transition disclosures loss, other comprehensive income or i IFRS 9 Financial Instruments replaces equity according to where the entity I A S 3 9 Fi n a n c i a l I n s t r u m e n t s : originally recognised those past Recognition and Measurement for transactions or events. annual periods beginning on or after 1 Summary of Significant Accounting Policies Cont.
January 2018, bringing together all three aspects of the accounting for financial instruments: classification and measurement; impairment; and hedge accounting.
T h e C o m p a n y a p p l i e d I F R S 9 prospectively, with an initial application date of 1 January 2018. The Company has not restated the comparative information, which continues to be reported under IAS 39. Differences arising from the adoption of IFRS 9 have been recognised directly in retained earnings and other components of equity.
A reconciliation between the carrying amounts under IAS 39 to the balances reported under IFRS 9 as of 1 January 2018 is, as follows:
Annual Report & Accounts 2018
92 IAS 39 Measurement Re- Remeasurement IFRS 9 in thousands of Nigerian Naira Rf Category Amount classification ECL Other Amount Category Summar
Cash and cash equivalents L&R 3,400,291 - (8,898) - 3,391,393 AC
Debt instruments at amortised cost - 677,937 (24,201) 7,117 660,853 AC
From: financial instruments - HTM A - 160,601 (771) - y ofSignificantAccountingP From: Financial instrument - AFS (listed debt instrument) C 477,080 (4,170) 7,117 From: Loans and advance A 40,256 (19,260) -
Financial instrument - AFS (unlisted equity investment) AFS 62,091 (62,091) - - - Financial instrument - AFS (listed equity investment) AFS 70,206 (70,206) - - - To: Equity instruments at fair value through OCI B - (132,297) - -
Equity instruments at fair value through OCI - 132,297 - 2,269 134,566 FVOCI From: AFS (unlisted equity investment) B - 62,091 - 2,269 From: AFS (listed equity investment) B - 70,206 - -
Financial instrument - HTM 160,601 (160,601) - To: Debt instruments at amortised cost A - (160,601) - -
Financial instrument - AFS (listed debt investment) AFS 477,080 (477,080) - - -
To: Debt instruments at amortised cost A - (477,080) - - olicies
Loans and advances 40,256 (40,256) - - - To: Debt instruments at amortised cost A - (40,256) - - Cont. Equity held for trading FVTPL 165,188 - - - 165,188 *FVTPL 4,375,713 - (33,099) 9,387 4,186,812
FVOCI - Fair value through Other Comprehensive Income AC - Amortised costs *FVTPL (mandatory) - Fair value through profit or loss L&R - Loans and Receivables AFS - Available for sale & Accounts2018 Annual R 93 eport Summary of Significant Accounting Policies Cont.
5 Transition disclosures - Continued
A As of 1 January 2018, the Company did not have any debt instruments that did not meet the SPPI criterion within its held-to- maturity portfolio. Therefore, it elected to classify all of these instruments as debt instruments measured at amortised cost. B. The Company has elected the option to irrevocably designate some if its previous AFS equity instruments as Equity instruments at FVOCI.
C As of 1 January 2018, the Company has classified a portion of its previous AFS portfolio as debt instruments at amortised cost. These instruments met the SPPI criterion, were not actively traded and were held with the intention to collect cash flows and without the intention to sell. The fair value of these instruments that Bank still held at 31 December 2018 was N477,080,000. Their change in fair value over 2018, that would have been recorded in OCI had these instruments continued to be revalued through OCI is Nil, since there is no such intruments at year end.
The impact of transition to IFRS 9 on reserves and retained earnings is, as follows: Accumulared Fair value in thousands of Nigerian Naira earning reserve
Closing balance under IAS 39 (31 December 2017) (1,402,651) 4,949 Re-measurement impact of unquoted equity instruments initially at cost to fair value - 2,269 Reversal of fair value loss on treasury bills reclassification to debt instruments at fair value to - 7,117 amortised cost from available-for-sale Recognition of IFRS 9 ECLs on amortised instrument (see below) (33,099) - Deferred tax in relation to the above 8,447 - Opening balance under IFRS 9 (1 January 2018) (1,427,303) 14,336
Total change in equity due to adopting IFRS 9 (24,652) 9,387
ii IFRS 9 Transition disclosures The following table reconciles the aggregate opening provision allowances under IAS 39 and provisions for debt instruments at amotised cost to the ECL allowances under IFRS 9. Impact of recognition of IFRS 9 ECLs ECLs under Provision Re- IFRS 9
Annual Report in thousands of Nigerian Naira under IAS 39 measurement 1 Jan 2018 & Accounts 2018 Loans and trade receivables and held to maturity securities per IAS 39/financial assets at amortised cost under IFRS 9 Short-term deposits - 8,898 8,898 Debt instrument at amortised cost under IFRS 9 Bonds - 771 771 94 Treasury bills - 4,170 4,170 Corporate loan - 10,000 10,000 Mortgage loan - 9,260 9,260 - 33,099 33,099 DCSL Corporate Services Limited 235, Ikorodu Road Abuja Office: Ilupeju 4th Floor, Bank of Industry Building P.O.Box 965, Marina Central Business District Lagos, Nigeria. Abuja, Nigeria Tel: +234 9 4614902-5
Tel: +234 1 2727800 Port Harcourt Office: Fax: +234 1 2717801 15, Emeyal Street, GRA www.dcsl.com.ng Phase II, Port Harcourt. RC No. 352393
June 19, 2019
REPORT OF THE EXTERNAL CONSULTANTS ON THE PERFORMANCE OF THE BOARD OF DIRECTORS OF SOVEREIGN TRUST INSURANCE PLC (“STI”) FOR THE YEAR ENDED 31 DECEMBER 2018
In accordance with the provisions of Section 5.07(iv) of the NAICOM Code of Corporate Governance for the Insurance Industry in Nigeria (“the Code”), Section 15 of the Securities Exchange Commission (SEC) Code of Corporate Governance, as well as Section 9 of the Nigerian Code of Corporate Governance (NCCG), DCSL Corporate Services Limited was appointed to undertake an appraisal of the Board of Directors of Sovereign Trust Insurance Plc (“STI”) for the year-ended 31st December 2018. The evaluation involved a thorough review of the Company’s corporate and statutory documents, the Minutes of Board and Committee meetings, policies currently in place and other ancillary documents made available to us, questionnaires administered as well as information derived from our interaction with Directors. Board and Peer Review Surveys were also administered on the Directors.
In undertaking the appraisal which was premised on confirming the level of the Board’s compliance with corporate governance practices with particular reference to the provisions of the NAICOM, SEC and NCCG Codes, we considered the following seven key corporate governance themes: 1. Board Structure and Composition 2. Strategy and Planning 3. Board Operations and Effectiveness 4. Measuring and Monitoring of Performance 5. Risk Management and Compliance 6. Corporate Citizenship; and 7. Transparency and Disclosure.
Having reviewed the policies and processes put in place by the Board, we confirm that Board is committed to the sustenance of best corporate governance practices and ensuring adherence to the provisions of the NAICOM, SEC and NCCG Codes of Corporate Governance, as well as globally accepted best practices. The Board is also committed to enthroning the highest ethical standards and transparency in the conduct of the Company’s business. The Peer Assessment and Chairman’s Leadership Assessment undertaken indicate that individual Directors performed creditably against
the parameters used for the appraisal and continue to demonstrate strong commitment to enhancing Annual Report the Company’s growth. The Board paid particular attention to its oversight of Risk Management, & Accounts 2018 compliance and internal control.
Details of our key findings and recommendations are contained in our Report. Yours faithfully, 95 For: DCSL Corporate Services Ltd
Bisi Adeyemi Managing Director FRC/2013/NBA/00000002716 DCSL Directors: Abel Ajayi (Chairman) Obi Ogbechi Adeniyi Obe Adebisi Adeyemi (Managing Director) DCSL Corporate Services Limited ...FIRMLY KNITTED, PROVIDING SECURITIES IN OUR WORLD OF EVER-EVOLVING ASSETS.
Annual Report Annual Report & Accounts 2018 & Accounts 2018
96 97 STATEMENT OF PROFIT OR LOSS For the year ended 31 December 2018
in thousands of Nigerian Naira Notes 2018 2017
Gross premium written 6 10,513,078 8,513,503
Gross premium income 6 10,338,077 8,300,968 Premiums ceded to reinsurers 6 (5,276,700) (4,448,446)
Net premium income 5,061,377 3,852,522
Commission income 7 362,602 301,587
Net underwriting income 5,423,979 4,154,109
Net claims expenses 8 (1,787,492) (1,303,145) Underwriting expenses 9 (1,713,520) (1,640,653)
Underwriting profit 44 1,922,967 1,210,311
Investment income 10 334,495 326,676 Fair value gain on quoted equities 16.3 13,666 40,549 Realised loss on investment property (7,000) - Realised loss on equities (1,001) - Share of profit from associate 20.1 10,256 4,321 Fair value gain on investment properties 21 39,057 34,826 Other operating income 11 1,000 239,402 Management expenses 12 (1,659,542) (1,531,911)
Result of operating activities 653,898 324,174
Finance costs Interest on borrowing 28 (88,487) (78,356) Interest on bank overdraft (24,857) (43,124)
Annual Report Profit before income tax 540,554 202,694 & Accounts 2018 Income tax expense 13 (196,318) (44,825)
Profit after income tax 344,236 157,869
98 Earnings per share:
Basic and diluted (kobo) 14 4.13 1.89
The accompanying summary of significant accounting policies and notes to the financial statements are an integral part of these financial statements. STATEMENT OF OTHER COMPREHENSIVE INCOME For the year ended 31 December 2018 in thousands of Nigerian Naira Notes 2018 2017
Profit after income tax 344,236 157,869
Other comprehensive income:
Net other comprehensive income to be reclassified to profit or loss in subsequent periods Net gain arising from available for sale financial assets 16.3 - 8,933 - 8,933
Other comprehensive income not to be reclassified to profit or loss in subsequent periods
Actuarial gain in defined gratuity scheme 32.2 19,175 28,370 Effect of tax at 30% 25.2 (5,753) (8,511) 13,422 19,859
Revaluation gain on building 24 - 71,164 Effect of tax at 30% 25.2 - (21,349) - 49,815
Net gain on unquoted equity instruments at fair value through other comprehensive income 16.3 6,058 - 6,058 -
Net other comprehensive income not to be reclassified to profit or loss in subsequent periods 19,480 69,674
Total other comprehensive income for the year, net of tax 19,480 78,607
Total comprehensive income for the year, net of tax 363,716 236,476
The accompanying summary of significant accounting policies and notes to the financial Annual Report statements are an integral part of these financial statements. & Accounts 2018
99 STATEMENT OF FINANCIAL POSITION For the year ended 31 December 2018
in thousands of Nigerian Naira Notes 2018 2017
Assets Cash and cash equivalents 15 5,241,513 3,400,291 Investment securities 16 499,471 975,422 Trade receivables 17 380,632 329,648 Reinsurance assets 18 1,872,344 2,500,761 Deferred acquisition costs 23 226,893 439,068 Other receivables and prepayments 19 94,584 100,455 Investment in associate 20 81,434 71,178 Investment properties 21 1,128,638 1,161,581 Intangible assets 22 12,239 15,505 Property, plant and equipment 24 1,468,679 1,386,862 Deferred tax assets 25.2 - 121,904 Statutory deposit 26 315,000 315,000 Total assets 11,321,427 10,817,675
Liabilities and Equity Liabilities Insurance contract liabilities 27 3,088,841 3,260,519 Borrowing 28 973,360 861,919 Bank overdrafts 29 327,941 78,897 Trade payables 30 759,078 710,333 Other payables and accruals 31 128,910 180,132 Current income tax payable 25.1 108,451 71,739 Retirement benefit obligation 32 105,569 182,232 Deferred tax liabilities 25.2 8,922 - Total liabilities 5,501,072 5,345,771
Equity Issued and paid-up share capital 33.1 4,170,412 4,170,412 Share premium 33.2 116,843 116,843 Contingency reserve 33.3 2,647,988 2,332,596
Annual Report Revaluation reserve 33.4 225,103 225,103 & Accounts 2018 Fair value reserve 33.5 20,394 4,949 Accumulated losses 33.6 (1,360,385) (1,377,999) Total equity 5,820,355 5,471,904 100 Total liabilities and equity 11,321,427 10,817,675 The financial statements and accompanying summary of accounting policies and notes to the financial statements were approved and authorised for issue by the Board of Directors on 14 March 2019 and were signed on its behalf by:
Mr. Oluseun O. Ajayi (Chairman)______FRC/2013/00000003373
Mr. Olaotan Soyinka (Managing Director/CEO)______FRC/2013/00000002671
Mr. Kayode Adigun (Chief Financial Officer)______FRC/2013/ICAN/00000002652
The accompanying summary of significant accounting policies and notes to the financial statements are an integral part of these financial statements. ST A TEMENT OFCHANGESINEQUITY
Issued and paid up Share Contingency Revaluation Fair value Accumulated Total in thousands of Nigerian Naira Note share capital premium reserve reserve reserve losses equity
As at 1 January 2017 4,170,412 116,843 2,077,191 175,288 (3,984) (1,300,322) 5,235,428
Profit after income tax for the year - - - - - 157,869 157,869 Other comprehensive income - - - 49,815 8,933 19,859 78,607 Total comprehensive income for the year - - - 49,815 8,933 177,728 236,476
Transfer to contingency reserve 33.3 - - 255,405 - - (255,405) - As at 31 December 2017 4,170,412 116,843 2,332,596 225,103 4,949 (1,377,999) 5,471,904
Impact of adopting IFRS 9 5 - - - - 9,387 (24,652) (15,265) Restated opening balance under IFRS 9 4,170,412 116,843 2,332,596 225,103 14,336 (1,402,651) 5,456,639
Profit after income tax for the year - - - - - 344,236 344,236 Other comprehensive income - - - - 6,058 13,422 19,480 Total comprehensive income for the year - - - - 6,058 357,658 363,716
Transfer to contingency reserve 33.3 - - 315,392 - - (315,392) -
As at 31 December 2018 4,170,412 116,843 2,647,988 225,103 20,394 (1,360,385) 5,820,355
The accompanying summary of significant accounting policies and notes to the financial statements are an integral part of these financial statements. 101 & Accounts2018 Annual R eport STATEMENT OF CASH FLOWS For the year ended 31 December 2018
in thousands of Nigerian Naira Notes 2018 2017
Operating activities: Premium received from policy holders 10,462,094 8,492,283 Claims recovered from to reinsurers 8 2,495,575 425,725 Cash paid to and on behalf of employees 12.1 (892,184) (870,763) Reinsurance premium paid (5,077,729) (4,098,040) Fees and commission Income 7 362,602 301,587 Commission paid 9 (1,208,025) (1,148,514) Other operating cash payments (804,529) (1,035,499) Investment income 10 334,495 326,109 Claims paid 27.1 (4,243,641) (1,990,761) Gratuity benefit paid to employees 32.2 (82,806) (2,173) Company income tax paid 25.1 (26,086) (19,244) Net cash flows from operating activities 35 1,319,766 380,710
Investing activities: Purchase of property, plant and equipment 24 (244,508) (169,903) Purchase of intangible assets 22 (6,347) (12,000) Receipts from loans 2,696 14,183 Purchase of debt instrument at amortised cost 16.3 (66,903) (20,000) Proceeds from bonds maturity 28,099 1,736 Proceeds on sale of property, plant and equipment 1,000 379,999 Purchase of investment properties 21 - (5,301) Proceeds from disposal of investment properties 65,000 60,000 Purchase of quoted stock 16.3 (105,458) (22,456) Proceeds from disposal of quoted stock 114,637 97,698 Purchase of treasury bills 16.3 - (433,899) Proceed on treasury bill maturity 484,197 21,380 Net cash flows from/(used in) in investing activities 272,413 (88,563)
Net increase in cash and cash equivalents 1,592,179 292,147 Net foreign exchange difference - 122,557
Annual Report & Accounts 2018 Cash and cash equivalents at 1 January 34 3,321,394 2,906,690 Cash and cash equivalents at 31 December 34 4,913,572 3,321,394
The accompanying summary of significant accounting policies and notes to the financial 102 statements are an integral part of these financial statements. NOTES TO THE FINANCIAL STATEMENTS
6 Net premium income
Premium earned by principal class of business
2018 2017 in thousands of Nigerian Naira Premium Reinsurance Net Premium Reinsurance Net Motor 1,591,681 (5,604) 1,586,077 1,393,997 (31,097) 1,362,900 Fire and property 1,720,061 (765,008) 955,053 1,536,506 (540,044) 996,462 General accident 1,071,432 (410,824) 660,608 793,698 (258,580) 535,118 Marine and aviation 574,468 (211,882) 362,586 881,705 (475,579) 406,126 Oil and gas 3,851,335 (2,783,835) 1,067,500 3,348,894 (2,584,322) 764,572 Car and engineering 1,704,101 (857,237) 846,864 558,703 (265,040) 293,663 Gross premium written 10,513,078 (5,034,390) 5,478,688 8,513,503 (4,154,661) 4,358,842
Change in unearned premium (175,001) (242,310) (417,311) (212,535) (293,785) (506,320)
Total premium income 10,338,077 (5,276,700) 5,061,377 8,300,968 (4,448,446) 3,852,522
7 Commission income
in thousands of Nigerian Naira 2018 2017 Oil and gas 175,067 142,576 Fire and property 53,195 59,872 General accident 44,356 51,658 Marine and aviation 30,104 27,471 Car and engineering 59,880 19,640 Motor - 370 362,602 301,587
Commission income represents commission received on direct business and transactions ceded to re-insurance during the year. It is recognised over the life of the contract.
Annual Report & Accounts 2018
103 NOTES TO THE FINANCIAL STATEMENTS Cont.
8 Net claims expenses
in thousands of Nigerian Naira Notes 2018 2017
Gross claims paid 27.1 4,243,641 1,990,761 Changes in outstanding claims provision 27.1 (346,682) 209,384 3,896,959 2,200,145
Re-insurance recoverable: Claims recoveries (2,495,575) (425,725) Changes in outstanding claims due from reinsurers 386,108 (471,275) 1,787,492 1,303,145
9 Underwriting expenses
Acquisition costs incurred: Commission paid 1,208,025 1,148,514 Changes in deferred acquisition costs 212,175 57,227 Commission incurred 1,420,200 1,205,741
Maintenance cost 293,320 434,912 1,713,520 1,640,653
Maintenance costs comprise of underwriting survey, Motor tracking expenses and other related underwriting expenses other than commission payable on premium income.
10 Investment income
in thousands of Nigerian Naira Notes 2018 2017
Interest income 325,286 311,813 Dividend income 3,406 14,296 Rental income on investment properties 5,803 567
Annual Report 334,495 326,676 & Accounts 2018 Included in interest income is N6 million (2017: N1.7 million) interest accrued on loans to corporate organisation. 104 11 Other operating income Gain on disposal of property, plant and equipment 1,000 56,838 Net foreign exchange gain - 122,557 Sundry income 11.1 - 60,007 1,000 239,402
11.1 Sundry income Sundry income in prior year represent Stamp duty that was previously over charged by Federal Inland Revenue Services now recovered by NAICOM. NOTES TO THE FINANCIAL STATEMENTS Cont.
12 Management expenses
in thousands of Nigerian Naira Notes 2018 2017
Employee benefits expense 12.1 892,184 870,763 Other expenses 12.3 542,918 433,892 Depreciation on property, plant and equipment 24 162,691 151,516 Exchange difference on Daewoo Bond 28 22,954 33,107 Credit loss expenses 12.2 1,325 - Directors fee and allowance 17,857 15,346 Amortisation of intangible assets 22 9,613 17,287 Auditors' remunerations 10,000 10,000 1,659,542 1,531,911
12.1 Employee benefits expense Wages and salaries 808,594 803,839 Defined contribution pension costs 12.1.1 58,272 38,555 Defined benefit plan - Interest cost 32.1 25,318 28,369 892,184 870,763
12.1.1 The total contribution pension charged to profit or loss during the year is ₦92.8 million (2017: N69.4million).
12.2 Credit loss expenses
in thousands of Nigerian Naira Notes Stage 1 Stage 2 Stage 3 Total
2018
Cash in banks and short-term deposits 15.b 2,934 - - 2,934
Debt instruments at amortised cost: Annual Report Treasury bills (4,170) - - (4,170) & Accounts 2018 Bonds 41 - - 41 Loans and advances (1,348) 3,868 - 2,520 16.2b (5,477) 3,868 - (1,609)
(2,543) 3,868 - 1,325 105
There is no credit loss expenses recognised for 2017, this is due to the fact that the Company adopted Modified Retrospective Approach of the adoption of IFRS 9. The impact of the IFRS 9 in respect of expected credit loss as at 1 January 2018 is recognised in retained earnings. See the details in Note 5. NOTES TO THE FINANCIAL STATEMENTS Cont.
12.3 Other expenses
in thousands of Nigerian Naira Notes 2018 2017
Advertising 106,387 26,416 NAICOM Levy 61,247 59,984 Rent and rate 50,694 40,114 Forms and printing expenses 10,525 38,721 Bank charges 15,987 30,897 Professional fees 13,965 30,703 Fuel, electricity & energy 39,317 24,037 Insurance 31,808 19,010 Office building maintenance and security 23,941 19,622 Automobile expenses 18,576 17,499 Staff training & education 20,597 16,477 Transport and travelling expenses 24,007 14,676 Gifts 25,194 13,680 Data processing 18,279 12,986 Security Exchange Commission and Nigerian Stock Exchange expenses 3,499 10,200 Telephone expenses 10,730 8,022 Annual general meeting expenses 13,260 8,926 Equipment maintenance & repairs 5,252 6,287 Contribution to I.T.F levy 9,358 7,331 Contribution to NHF 2,101 - Office and stationery expenses 5,788 6,817 Hotel accommodation 4,849 3,947 Contribution to NSITF 4,449 3,768 Local government dues 2,249 1,837 Entertainment 3,372 2,783 Courier and postages expenses 3,667 2,667 Periodicals & books 2,720 1,978 Contribution & donation 2,386 1,850
Annual Report Tax consultancy expenses 3,096 1,550 & Accounts 2018 Club membership & subscriptions 4,973 1,107 Staff uniforms 645 - 542,918 433,892 106 NOTES TO THE FINANCIAL STATEMENTS Cont.
13 Income tax expense The major components of income tax expenses for the year ended 31 December 2018 are:
13.1 Current tax year charge
in thousands of Nigerian Naira Notes 2018 2017
Current year tax: Minimum tax - 37,114 Company income tax 45,820 - Capital gain tax - 5,684 Education tax 9,164 - Information technology levy 7,814 2,027 62,798 44,825
Deferred taxation: Origination of temporary differences 133,520 - 133,520 -
Total income tax expense 196,318 44,825
13.2 Reconciliation of tax charge
Profit before income tax 540,554 202,694
Tax at Nigerian's statutory income tax rate of 30% 162,166 60,808
Tax exempt income (665,011) (60,808) Information Technology 7,814 2,027 Non-deductable expenses 682,185 - Capital gain tax - 5,684 Education tax @ 2% of assessable profit 9,164 - Minimum tax - 37,114
196,318 44,825 Annual Report & Accounts 2018
107 NOTES TO THE FINANCIAL STATEMENTS Cont.
14 Earnings per share
Basis earnings per share amounts is calculated by dividing the net profit for the year attributable to ordinary shareholders by the weighted average number of ordinary share outstanding at the reporting date.
The following reflects the income and share data used in the basic earnings per share computations:
in thousands of Nigerian Naira Notes 2018 2017
Net profit attributable to ordinary shareholders for basic earnings 344,236 157,869
Weighted average number of ordinary shares for basic earnings per share 8,340,824 8,340,824
Basic earnings per ordinary share (kobo) 4.13 1.89
Diluted earnings per ordinary share (kobo) 4.13 1.89
There have been no other transactions involving ordinary share or potential ordinary share between the reporting date and financial statements.
15 Cash and cash equivalents As at 31 December 31 December in thousands of Nigerian Naira Notes 2018 2017
Cash in banks 2,798,018 1,634,675 Short-term deposits 2,455,327 1,765,616
Annual Report a 5,253,345 3,400,291 & Accounts 2018 Allowance for expected credit loss b (11,832) - 5,241,513 3,400,291
Short-term deposits are made for varying periods of between one day and three months, 108 depending on the immediate cash requirements of the Company. All short-term deposits are subject to an average variable interest rate of 11% per annum (2017: 11%). NOTES TO THE FINANCIAL STATEMENTS Cont.
15.1 Impairment allowance for current account with bank and short-term deposits measure at amortised cost
a The table below shows the credit quality and the maximum exposure to credit risk based on the Company’s internal credit rating system and year-end stage classification. The amounts presented are gross of impairment allowances.
in thousands of Nigerian Naira Notes Stage 1 Stage 2 Stage 3 Total
Performing High grade - - - - Standard grade 5,253,345 - - 5,253,345 Sub-standard grade - - - - Past due but not impaired - - - - Non-performing Individually impaired - - - - 5,253,345 - - 5,253,345
b An analysis of changes in the gross carrying amount and the corresponding ECL allowances is, as follows:
in thousands of Nigerian Naira Notes Stage 1 Stage 2 Stage 3 Total
Gross carrying amount as at 1 January 2018 3,400,291 - - 3,400,291
New assets originated or purchased 3,618,670 - - 3,618,670 Assets derecognised or repaid (1,765,616) - - (1,765,616) Amount written off - - - - At 31 December 2018 5,253,345 - - 5,253,345
in thousands of Nigerian Naira Notes Stage 1 Stage 2 Stage 3 Total
ECL allowances as Annual Report at 1 January 2018 8,898 - - 8,898 & Accounts 2018 New assets originated or purchased 11,832 - - 11,832 Assets derecognised or repaid (8,898) - - (8,898) Credit loss expenses 12.2 2,934 - - 2,934 109
At 31 December 2018 11,832 - - 11,832
Credit analysis as at 31 December 2017 Current account Short-term in thousands of Nigerian Naira with bank deposit Total
Performing High grade - - - Standard grade 1,634,675 1,765,616 3,400,291 Sub-standard grade - - - Past due but not impaired - - - Non-performing Individually impaired - - - 1,634,675 1,765,616 3,400,291 NOTES TO THE FINANCIAL STATEMENTS Cont.
16 Investment securities
As at 31 December 31 December in thousands of Nigerian Naira Notes 2018 2017
Quoted equities at fair value through profit or loss - 165,188 Equity instruments at fair value through profit or loss 173,300 - Equity instrument at fair value through other comprehensive income 16.1 135,999 - Debt securities at amortised cost 16.2 190,172 - Available-for-sale financial assets - 609,378 Held-to-maturity securities instruments - 160,600 Loans and receivables at amortised cost - 40,256 499,471 975,422
16.1 Equity instrument at fair value through other comprehensive income
Pinewood Limited 8,000 - Waica Reinsurance Corp 53,462 - Citrans Global Limited 278 - Interconnect Limited 2,621 - OTC quoted equities 71,638 - 135,999 -
16.2 Debt securities at amortised cost
Federal Government bonds 79,139 - State Government bonds 54,106 - Corporate bonds 35,959 - Mortgage loan 15,824 - Loans to corporate 27,736 - Gross amount a 212,764 -
Annual Report & Accounts 2018 Expected credit loss b (22,592) - 190,172 -
110 NOTES TO THE FINANCIAL STATEMENTS Cont.
16.2 Impairment allowance for debt instruments at amortised cost a The table below shows the credit quality and the maximum exposure to credit risk based on the Company’s internal credit rating system and year-end stage classification. The amounts presented are gross of impairment allowances.
in thousands of Nigerian Naira Notes Stage 1 Stage 2 Stage 3 Total
Performing High grade 169,204 - - 169,204 Standard grade 15,824 - - 15,824 Sub-standard grade - - - - Past due but not impaired - - - - Non-performing Individually impaired - 27,736 - 27,736 185,028 27,736 - 212,764 b An analysis of changes in the gross carrying amount and the corresponding ECL allowances is, as follows:
in thousands of Nigerian Naira Notes Stage 1 Stage 2 Stage 3 Total
Gross carrying amount as at 1 January 2018 639,117 21,736 - 660,853
New assets originated or purchased 60,903 6,000 - 66,903 Assets derecognised or repaid (514,992) - - (514,992) At 31 December 2018 185,028 27,736 - 212,764
in thousands of Nigerian Naira Notes Stage 1 Stage 2 Stage 3 Total
ECL allowances as at 1 January 2018 14,201 10,000 - 24,201
New assets originated or purchased - 3,868 - 3,868 Annual Report Assets derecognised or repaid (5,477) - - (5,477) & Accounts 2018 Credit loss expenses 12.2 (5,477) 3,868 - (1,609)
At 31 December 2018 8,724 13,868 - 22,592
Credit analysis as at 31 December 2017 Corporate 111 Available-for Total sale financial Mortgage in thousands of Nigerian Naira assets Bonds loans loan
Performing High grade 547,287 160,600 - - 707,887 Standard grade - - 18,520 - 18,520 Sub-standard grade 112,391 - - - 112,391 Past due but not impaired - - - - - Non-performing - Individually impaired - - - 21,736 21,736 659,678 160,600 18,520 21,736 860,534 NOTES TO THE FINANCIAL STATEMENTS Cont.
16.3 Movement in investment securities Fair value through Available- Held-to Loans and in thousands of Nigerian Naira profit or loss for-sale Maturity Receivables Total
At 1 January 2017 199,881 187,926 142,336 32,703 562,846
Purchases/interest 22,456 433,899 20,000 21,736 498,091 Fair value gain 40,549 - - - 40,549 Maturities/repayments - (21,380) (1,736) (14,183) (37,299) Disposals (97,698) - - - (97,698) Fair value gain recorded in other comprehensive income - 8,933 - - 8,933 At 31 December 2017 165,188 609,378 160,600 40,256 975,422
16.3 Movement in investment securities Equity at Equity at fair Debt fair value through other instrument through profit comprehensive at amortised in thousands of Nigerian Naira or loss income cost Total
At 1 January 2018 165,188 134,567 660,853 960,608
Purchases/interest 105,458 - 66,903 172,361 Disposals (111,012) (4,626) - (115,638) Maturities/repayments - - (514,992) (514,992) Fair value gain recognised in profit or loss 13,666 - - 13,666 Fair value gain recorded in other comprehensive income - 6,058 - 6,058 173,300 135,999 212,764 522,063 Expected credit losses - - (22,592) (22,592) 173,300 135,999 190,172 499,471
Annual Report & Accounts 2018
112 NOTES TO THE FINANCIAL STATEMENTS Cont.
16.4 Determination of fair value and fair value hierarchy
The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by value technique:
Level 1: Quoted (unadjusted) prices in active markets for identical assets Level 2: Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly, and Level 3: Techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
Carrying in thousands of Nigerian Naira amount Level 1 Level 2 Level 3 Total
31 December 2018 Equity instruments at fair value through profit or loss 173,300 173,300 - - 173,300 Equity instrument at fair value through other comprehensive income 135,999 - 71,638 64,361 135,999 Debt securities at amortised cost 190,172 - 209,189 - 209,189
Reconciliation of level 3 items At 1 January 2018 129,941 Gain recognised through other comprehensive income 6,058 At 31 December 2018 135,999
31 December 2017 Available for sale: Treasury bill 547,287 - 547,287 - 547,287 Held-to-maturity: debt securities 160,600 - 156,659 - 156,659 Fair value through profit or loss 165,188 165,188 - - 165,188
During the year ended 31 December 2018 and comparative year 31 December 2017, there were no transfers between level 1 and level 2 and in and out of level 1 and 3.
Annual Report & Accounts 2018
113 NOTES TO THE FINANCIAL STATEMENTS Cont.
16.4 Determination of fair value and fair value hierarchy
Level 3 fair value measurement
a Unobservable inputs used in measure fair value
The table below sets out information about significant unobservable inputs used at 31 December 2018 and 31 December 2017 in measuring financial instruments categorized as level 3 in the fair value hierarchy
Significant Type of instrument Fair value Valuation unobservable Range of estimates technique input N'000 Unquoted equity investment 64,361 Equity DCF -Discount rate Risk premium of 11.5-12.5% model (2017: 11.5 - 12.5%) above risk-free interest rate of 12% (2017: 12%)
-Estimate 5-years Compound Annual cashflow Growth Rate (CAGR) of cashflow of 5% (2017: 5%).
b The effect of unobservable inputs on fair value measurements Although the Company believes that its estimate of fair value are appropriate, the use of different methodologies or assumptions could lead to different measurements of fair value. For fair value measurement in Level 3, changing one or more of the assumptions would have the following effects.
Effect on OCI 31 December 31 December in thousands of Nigerian Naira 2018 2017
Disount rate + 5% (696) (696)
Annual Report - 5% 900 900 & Accounts 2018 Compund Annual Growth Rate + 5% 2,592 2,592 - 5% (2,592) (2,592)
The fair value of the unquoted equity holding in WAICA Re is determined using dividend discounted 114 cashflow model. Inputs into the model included estimated future dividend cashflows to equity, valuation horizon and Capital Assets Pricing Model (CAPM) discount rate (Risk free rate plus risk premium). NOTES TO THE FINANCIAL STATEMENTS Cont.
16.4 Determination of fair value and fair value investments have been estimated using hierarchy a DCF model. The valuation requires m a n a g e m e n t t o m a k e c e r t a i n c F a i r v a l u a t i o n m e t h o d s a n d assumptions about the model inputs, assumptions including forecast cash flows, the discount rate. The probabilities of the Fair value of financial assets and various estimates within the range can liabilities be reasonably assessed and are used in Below are the methodologies and management’s estimate of fair value for assumptions used to determine fair these non-listed equity investments. values for those financial instruments in the financial statements: Debt instrument at amortised cost - Federal, State Government and Corporate Assets for which fair value approximates bonds carrying value Certain unquoted investments for For financial assets and financial which fair values could not be reliably liabilities that have a short-term estimated have been carried at cost less maturity (less than three months), impairment. There are no active demand deposits and savings accounts m a r k e t s f o r t h e s e f i n a n c i a l without a specified maturity, the instruments, fair value information are carrying amounts approximate to their therefore not available, this makes it fair value. The carrying amounts of impracticable for the Company to fair loans and receivables as disclosed value these investments. They have above approximate fair value at the therefore been disclosed at cost less reporting date. impairment. The carrying amount is the expected recoverable amounts on these Equity instruments at fair value through investments. This investment can be profit or loss - Quoted disposed through private placement. The fair values of the quoted equity instruments are derived from quoted Debt instrument at amortised cost - market prices in active market, the Loans and advances Nigerian Stock Exchange (NSE). The fair value of loans and advances was estimated using the maximum
Equity instruments at fair value through lending rate quoted on Central Bank of Annual Report OCI - Unquoted Nigeria website as at year end. & Accounts 2018 The fair values of the non-listed equity
115 NOTES TO THE FINANCIAL STATEMENTS Cont.
17 Trade receivables
As at 31 December 31 December in thousands of Nigerian Naira Notes 2018 2017
Insurance receivables 380,632 329,648
The carrying amounts disclosed above approximate fair value at the reporting date.
17.1 Analysis of insurance receivables by counter party
31 December 31 December in thousands of Nigerian Naira Notes 2018 2017
Gross Due from insurance brokers 380,632 329,658 380,632 329,658
18 Reinsurance assets
31 December 31 December in thousands of Nigerian Naira Notes 2018 2017
Reinsurance share of outstanding claims 369,814 755,921 Prepaid reinsurance 18.1 1,502,530 1,744,840 1,872,344 2,500,761
Included as part of the prepaid reinsurance asset in 2017 of N606.8 million is an advance reinsurance payment for 2018 reinsurance policies that are yet to commence.
At 31 December 2018, the Company conducted an impairment review of the reinsurance assets but no impairment loss resulted from this exercise. The carrying amounts disclosed above approximate the fair value at the reporting date.
Annual Report & Accounts 2018 18.1 The movement in prepaid reinsurance
31 December 31 December in thousands of Nigerian Naira Notes 2018 2017
116 At 1 January 1,744,840 1,448,669 Additions during the year 5,034,390 4,744,617 Recognised in profit or loss 6 (5,276,700) (4,448,446) At 31 December 1,502,530 1,744,840
19 Other receivables and prepayments Contribution to Nigerian Insurance Association risk pool 50,300 50,300 Staff debtors 7,936 6,510 Prepayments 36,348 43,645 94,584 100,455
The carrying amounts disclosed above approximate the fair value at the reporting date. All other receivable amounts are collectible within one year and the prepayment utilisable within one year. NOTES TO THE FINANCIAL STATEMENTS Cont.
20 Investment in associate 31 December 31 December in thousands of Nigerian Naira Notes 2018 2017
Investment in STI Leasing 74,200 74,200 Share of retained earning/(accumulated loss) in STI Leasing 20.1 7,234 (3,022) 81,434 71,178
20.1 Analysis of share of associate loss Opening balance (3,022) (7,343) Share of profit during the year 10,256 4,321 7,234 (3,022)
The Company has 43% interest in STI Leasing Limited, which is involved in Leasing services to private and public sector contributors. STI Leasing Limited was incorporated as a Limited Liability Company under the Companies and Allied Matters Act, CAP C20 Laws of the Federation 2004 and licensed as a Leasing Company. STI Leasing Limited is domiciled in Nigeria and its registered office is at 22 Keffi Street Ikoyi Lagos. Sovereign Trust Insurance Plc does not have control but only has significant influence as it does not control the Board of Directors.
21 Investment properties 31 December 31 December in thousands of Nigerian Naira 2018 2017
At the beginning of the year 1,161,581 1,181,454 Additions - 5,301 Disposal (72,000) (60,000) Fair value gain 39,057 34,826 At the end of the year 1,128,638 1,161,581
Investment properties are stated at fair value, which has been determined based on
valuations performed by Gerry Iputu & Partners. (FRC/2013/NIESV/0000000402), J. Ajayi Annual Report Pa t u n o l a & C o ( F R C / 2 0 1 3 / 0 0 0 0 0 0 0 0 0 6 7 9 ) , R o g b a O r i m o l a d e & C o . & Accounts 2018 (FRC/2012/NIESV/0000000017), Amos Jolaoye & Co., Sumbo Iluyemi & Co. and Barin Epega & Company (FRC/2012/NIESV/00000000597) accredited independent valuers as at 31 December 2018. The valuers are specialists in valuing these types of investment properties. The determination of fair value of the investment property was supported by market evidence. The modalities and process of valuation utilized extensive analysis of 117 market data and other sectors specific percularities corroborated with available data derived from previous experiences.
Valuations are performed on an annual basis and the fair value gains and losses were recorded within the Statement of profit or loss.
There are no restrictions on the realisability of investment property or remittance of income and proceeds of disposal. The Company has no contractual obligations to purchase, construct or develop investment property or for repairs or enhancement. NOTES TO THE FINANCIAL STATEMENTS Cont.
21 Investment properties - Continued 31 December 31 December in thousands of Nigerian Naira 2018 2017
Rental income derived from investment properties 5,803 567 Investment properties related expenses - - Net profit arising from investment properties carried at fair value 5,803 567
The fair value disclosure for investment properties is as follow
Fair value measurement using Quoted prices in Significant Significant active observable unobservable market inputs inputs Level 1 Level 2 Level 3 Total
Date of valuation:
31 December 2018 Investment properties - - 1,128,638 1,128,638
31 December 2017
Investment properties - - 1,161,581 1,161,581
During the reporting year ended 31 December 2018, there were no transfers between level 1 and level 2 and in and out of level 3.
Description of valuation techniques used and key inputs to valuation on investment properties: The valuation of the properties is based on the price for which comparable land and properties are being exchanged and/or are being marketed for sale. Therefore, the market-
Annual Report approach Method of Valuation was used & Accounts 2018 This means that valuations performed by the valuer are based on active market prices, significantly adjusted for differences in the nature, location or condition of the specific property. 118 NOTES TO THE FINANCIAL STATEMENTS Cont.
21 Investment properties - Continued
The items of investment properties are as shown below: Name of Valuer 31 December 31 December in thousands of Nigerian Naira 2018 2017
May fair gardens Rogba Orimolade & Co 30,000 30,000 Ibeshe properties J. Ajayi Patuola & Co 72,000 63,147 Agbara Estate Properties - 203,707 203,707 Sunrise Estate Ipaja Amos Jolaoye & Co 44,000 37,388 Solteby Apartment Amos Jolaoye & Co 41,000 36,572 Investment Properties along Epie Swali Road Yenagoa Gerry Iputu & Partners 78,231 70,317 Investment Properties at Alagbaka Junction Akure J. Ajayi Patuola & Co 399,700 398,450 Investment Properties along Awolowo Road Ikoyi Amos Jolaoye & Co 260,000 250,000 Emerald Court - - 72,000 1,128,638 1,161,581
The movement in investment properties is shown as below:
31 December 2018 31 Dec Fair value 31 Dec in thousands of Nigerian Naira 2017 Additions Disposal gain 2018
May fair gardens 30,000 - - - 30,000 Ibeshe properties 63,147 - - 8,853 72,000 Agbara Estate Properties 203,707 - - - 203,707 Sunrise Estate Ipaja 37,388 - - 6,612 44,000 Solteby Apartment 36,572 - - 4,428 41,000 Investment Properties along Epie Swali Road Yenagoa 70,317 - - 7,914 78,231
Emerald Court 72,000 - (72,000) - - Annual Report Investment Properties at & Accounts 2018 Alagbaka Junction Akure 398,450 - - 1,250 399,700 Investment Properties along Awolowo Road Ikoyi 250,000 - - 10,000 260,000 1,161,581 - (72,000) 39,057 1,128,638 119 NOTES TO THE FINANCIAL STATEMENTS Cont.
21 Investment properties - Continued
31 December 2017 31 Dec Fair value 31 Dec in thousands of Nigerian Naira 2016 Additions Disposal gain 2017
May fair gardens 32,000 - - (2,000) 30,000 Ibeshe properties 50,000 1,300 - 11,847 63,147 Agbara Estate Properties 203,706 - - - 203,706 Sunrise Estate Ipaja 37,000 - - 388 37,388 Solteby Apartment 32,433 - - 4,139 36,572 Investment Properties along Epie Swali Road Yenagoa 60,670 - - 9,648 70,318 Emerald Court 125,000 - (60,000) 7,000 72,000 Investment Properties at Alagbaka Junction Akure 390,645 - - 7,805 398,450 Investment Properties along Awolowo Road Ikoyi 250,000 4,001 - (4,001) 250,000 1,181,454 5,301 (60,000) 34,826 1,161,581
22 Intangible assets 31 December 31 December in thousands of Nigerian Naira 2018 2017
Computer software
Cost: At the beginning of the year 66,404 54,404 Additions 6,347 12,000 At the end of the year 72,751 66,404
Accumulated amortization: At the beginning of the year 50,899 33,612 Amortisation charge 9,613 17,287
Annual Report At the end of the year 60,512 50,899 & Accounts 2018 Carrying amount 12,239 15,505
120 NOTES TOTHEFINANCIALST
23 Deferred acquisition costs
This represents commission paid to brokers on unearned premium relating to the unexpired tenure of risk.
General Engi- Marine & Oil and in thousands of Nigerian Naira Notes Fire Motor accident neering aviation gas Total
At 1 January 2017 61,708 29,338 72,698 27,410 44,057 261,083 496,295
Commission paid 302,010 158,606 148,329 102,886 171,052 265,629 1,148,513
Amortisation 9 (261,948) (140,568) (154,433) (87,752) (180,087) (380,953) (1,205,741) At 31 December 2017 101,770 47,376 66,594 42,545 35,023 145,760 439,068
Commission paid 382,319 168,745 208,736 213,159 111,046 124,020 1,208,025 A TEMENTS Amortisation 9 (360,885) (210,577) (244,867) (209,525) (128,980) (265,366) (1,420,200) At 31 December 2018 123,204 5,544 30,463 46,179 17,089 4,414 226,893
Current 123,204 5,544 30,463 46,179 17,089 4,414 226,893
Non-current ------Cont. 121 & Accounts2018 Annual R eport 122 & Accounts2018 Annual R eport
24 Property, plant and equipment NOTES TOTHEFINANCIALST
Leasehold Office Furniture & Plant & Motor Work in Computer & in thousands of Nigerian Naira Land Building improvements equipment fittings machinery vehicles progress equipment Total
Cost/Revaluation At 1 January 2017 67,302 1,082,094 135,564 82,233 110,941 75,424 874,624 255,859 202,189 2,886,230 Additions - 3,450 - 2,135 673 5,097 150,980 - 7,568 169,903 Disposal (67,302) ------(255,859) - (323,161) Revaluation adjustment - 71,164 ------71,164 At 31 December 2017 - 1,156,708 135,564 84,368 111,614 80,521 1,025,604 - 209,757 2,804,136 Additions - - 280 4,457 3,586 540 225,075 - 10,570 244,508 Disposal ------(53,395) - - (53,395) At 31 December 2018 - 1,156,708 135,844 88,825 115,199 81,061 1,197,284 - 220,328 2,995,249
Accummulated depreciation At 1 January 2017 - 53,998 70,577 76,208 97,234 49,426 723,747 - 194,567 1,265,758 Charge - 21,711 13,556 3,016 4,722 6,527 93,246 - 8,738 151,516 At 31 December 2017 - 75,709 84,134 79,224 101,956 55,953 816,993 - 203,305 1,417,273
Charge - 23,134 13,584 2,669 5,067 6,564 104,953 - 6,720 162,691 A
Disposal ------(53,395) - - (53,395) TEMENTS At 31 December 2018 - 98,843 97,718 81,893 107,022 62,517 868,551 - 210,025 1,526,570
Carrying amount
At 31 December 2018 - 1,057,865 38,126 6,932 8,177 18,544 328,733 - 10,303 1,468,679
At 31 December 2017 - 1,080,999 51,430 5,144 9,658 24,568 208,611 - 6,453 1,386,862 Cont.
i No leased assets are included in the above property, plant and equipments (2017: Nil). ii There were no capital commitment contracted or authorised as at the reporting date (2017: Nil). iii There were not capitalised borrowing cost related to the acquisition of property, plant and equipment during the year (2017: Nil). iv None of the assets are pledged during the year (2017: Nil). NOTES TO THE FINANCIAL STATEMENTS Cont.
24 Property, plant and equipment - Continued
The Building at 17, Adetokunbo Ademola, Victoria Island, Lagos (with initial cost of N600 million) was valued on the basis of an open market valuation for existing use as of 31 December 2017 for N850,000,000 by Amos Jolaoye & Co. Chartered Surveyors (FRC/2012/NIESV/00000000597), Valuers and Real Estate Consultants. Also, the Company building at 1707A Olugbose Close, Victoria Island, Lagos with (initial cost of N224 million) was valued on the basis of an open market valuation for existing use as at 31 December 2017 for N231,000,000 by Amos Jolaoye & Co. Chartered Surveyors, Valuers and Real Estate Consultants.
This means that valuations performed by the valuer are based on active market prices, significantly adjusted for differences in the nature, location or condition of the specific property.
The fair value hierarchy for the fair valuation of the building is in level 3.
If building were measured using the cost model, the carrying amounts would be as follows: 31 December 31 December in thousands of Nigerian Naira 2018 2017
Cost 906,296 906,296
Accumulated depreciation (101,943) (83,817) 804,353 822,479
Annual Report & Accounts 2018
123 NOTES TO THE FINANCIAL STATEMENTS Cont.
25 Taxation
25.1 Current income tax payable
As at 31 December 31 December in thousands of Nigerian Naira Notes 2018 2017
At the beginning of the year 71,739 46,158 Amounts recorded in the profit or loss 13.1 62,798 44,825 Payments made during the year (26,086) (19,244) 108,451 71,739
25.2 Deferred tax (liabilities)/assets
Deferred tax asset (8,922) 121,904
Movement in deferred tax (liabilities)/assets At the beginning of the year 121,904 151,764 IFRS 9 ECL deferred tax impact 8,447 - Amounts recorded in OCI in respect of revaluation surplus - (21,349) Amounts recorded in OCI in respect of gain on gratuity (5,753) (8,511) Amounts recorded in the profit or loss 13.1 (133,520) - (8,922) 121,904
Deferred tax (liabilities)/assets is attributable to the following:
Property, plant and equipment (53,121) 79,552 Investment property (8,366) (4,460) Defined benefit obligation 52,565 46,812 (8,922) 121,904
26 Statutory deposit
Annual Report The statutory deposit of N315,000,000 represents the amount deposited with the Central & Accounts 2018 Bank of Nigeria as at 31 December 2018 (31 December 2017: N315,000,000) in accordance with Section 10 (3) of Insurance Act 2003. The deposit has been tested for adequacy as at 31 December 2018 and found to be adequate.
Interest income earned at annual average rate of 15.32% per annum (2017: 15.32%) and this 124 is included within investment income. However, access to the deposit is restricted. NOTES TO THE FINANCIAL STATEMENTS Cont.
27 Insurance contract liabilities
As at 31 December 31 December in thousands of Nigerian Naira Notes 2018 2017
Claims reported by policyholders 481,362 858,832
Claims incurred but not reported (IBNR) 453,593 422,805 Outstanding claims provisions 27.1 934,955 1,281,637
Unearned premiums 27.3 2,153,883 1,978,882 3,088,838 3,260,519
Current 3,088,838 3,260,519
The Company engaged Logic Professional Services (FRC/2017/NAS/00000017548) to perform an Insurance liability valuation as at 31 December 2018 for its Insurance business.
27.1 Outstanding claims provisions
At 1 January 1,281,637 1,072,253 Claims incurred in the current year 8 3,896,959 2,200,145 Claims paid during the year 8 (4,243,641) (1,990,761) 934,955 1,281,637
The aging analysis for claims reported and losses adjusted
Days 0 - 90 90,300 105,730 91 - 180 84,015 64,678 181 - 270 32,001 51,248 271 - 360 33,560 54,450
361 and above 241,486 582,726 Annual Report Incurred but not reported (IBNR) 453,593 422,805 & Accounts 2018 934,955 1,281,637
Outstanding claims arise as a result of incomplete documentation by the claimants, claims under investigation as well as claims that are being disputed. 125 Analysis of reported claims per class of insurance
Motor 73,592 108,093 Fire and property 80,567 170,649 Marine and Aviation 79,173 56,551 General accidents 100,473 108,093 C.A.R. Engineering 65,607 80,204 Energy 81,950 335,242 481,362 858,832 NOTES TO THE FINANCIAL STATEMENTS Cont.
27.2 Claims incurred but not reported
This represents additional provision as a result of actuarial valuation as at year end.
27.3 The movement in unearned premium during the year
As at 31 December 31 December in thousands of Nigerian Naira Notes 2018 2017
At 1 January 1,978,882 1,766,347 Premiums written in the year 6 10,513,078 8,513,503 Premiums earned during the year 6 (10,338,077) (8,300,968) 2,153,883 1,978,882
28 Borrowing
At 1 January 861,919 750,456 Interest 88,487 78,356 Foreign exchange difference 22,954 33,107 973,360 861,919
This represents zero coupon JPY846,000,000 direct, unconditional, unsubordinated and unsecured European Bond with options issued to Daewoo Securities Europe Limited in 2008. The underlying Bond had a put period of 30 months with a yield to put of 4.25% per annum while the tenor of the convertible option is valid up to year 2024. The purpose for which the Bond was issued relates to Expansion of Branch Network, Upgrade of Information and Communication Technology and Working Capital. However, the Company has secured the consent and agreement of Daewoo Securities (Europe) Limited to restructure the bond for a period of 5 years commencing from year 2013 to 2017 under a new interest rate (10%) arrangement which incorporate any previous default interest.
The Company is currently engaging Daewoo Securities to restructure the balance for another five year.
Annual Report & Accounts 2018
126 NOTES TO THE FINANCIAL STATEMENTS Cont.
29 Bank overdrafts
As at 31 December 31 December in thousands of Nigerian Naira Notes 2018 2017
Bank overdrafts 327,941 78,897
These represent the outstanding balance on bank account which overdraft facilities were agreed on in the prior year. These facilities were obtained to augment working capital for the Company. They are at interest rates ranging between 17% to 21% per annum. The carrying value of bank overdraft at year end reasonably approximates its fair value.
30 Trade payables
As at 31 December 31 December in thousands of Nigerian Naira Notes 2018 2017
Due to insurance companies 4,271 154,494 Due to reinsurance companies 754,810 555,839 759,081 710,333
Current 759,081 710,333
This represents the amount payable to insurance and reinsurance companies as at year end. The carrying amounts of trade payable as disclosed above approximate their fair value at the reporting date.
31 Other payables and accruals
As at 31 December 31 December in thousands of Nigerian Naira Notes 2018 2017
Lease creditors 25,937 55,690
Sundry creditors 51,957 69,931 Annual Report Unclaimed dividends 51,016 54,511 & Accounts 2018 128,910 180,132
Current 128,910 180,132
Included in sundry creditors above are accrued expenses, pension deductions and other 127 levies.
The carrying amounts disclosed above approximate the fair value at the reporting date. All other payable are due within one year. NOTES TO THE FINANCIAL STATEMENTS Cont.
32 Retirement benefit obligation
Defined contribution plan The defined contribution plan is a pension plan under which the Company pays fixed contributions in line with the Pension Reform Act 2014. There is no legal or constructive obligation to pay further contributions. The assets of the plan are held separately from those of the Company.
Defined benefit plan A defined benefit plan is a gratuity plan that defines an amount of gratuity benefit that an employee is entitled to receive on retirement, dependent on one or more factors such as age, years of service and salary. A full actuarial valuation by a qualified independent actuary is carried out every year.
The plan liability is measured on an actuarial basis using the projected unit credit method, adjusted for unrecognised actuarial gains and losses. The defined benefit plan liability is discounted using rates equivalent to the market yields at the reporting date of high–quality corporate/government bonds that are denominated in the currency in which benefits will be paid, and that have a maturity approximating to the terms of the related pension liability.
As at 31 December 31 December in thousands of Nigerian Naira Notes 2018 2017
Retirement benefit obligation 105,569 182,232
32.1 Net benefit expense (recognised in statement of profit or loss)
Interest cost 25,318 28,369
32.2 Movement of gratuity At 1 January 182,232 184,406 Interest cost 32.1 25,318 28,369 Actuarial gain (19,175) (28,370)
Annual Report Benefits paid (82,806) (2,173) & Accounts 2018 105,569 182,232
The Company's gratuity plan is on a winding down basis. The Company stopped the scheme in 2013 and only staff who are qualified at the end of 2013 are qualified to benefit from the 128 scheme. The Company engaged Logic Professional Services (FRC/2017/NAS/00000017548) to perform an actuary valuation of the retirement benefit plan as at 31 December 2018.
The principal assumptions used in determining defined benefit obligations for the Company’s plans are shown below:
2018 2017 % % Discount rate 15.50 14.25 Rate of salary increases na na NOTES TO THE FINANCIAL STATEMENTS Cont.
32 Retirement benefit obligation - Continued
Mortality in Service
The rates of mortality assumed for employees are the rates published in the A67/70 Ultimate Tables, published jointly by the Institute and Faculty of Actuaries in the UK.
Sample age Number of deaths in year out of 10,000 lives 25 7 30 7 35 9 40 14 45 26
Withdrawal from Service Age Band Rate Less than or equal to 300% 31 – 39 6% 40 – 44 31% 45 – 50 41% 51 – 55 19% 56 – 59 3%
The following payments are expected contributions to the defined benefit plan in the future:
As at 31 December 31 December in thousands of Nigerian Naira Notes 2018 2017
Between 10 and 15 years - 28,919 Between 15 and 20 years 100,512 151,634 Between 20 and 25 years 104,991 174,184 205,503 354,736
33 Equity
Annual Report 33.1 Authorised and Issued and paid-up share capital & Accounts 2018
Authorised share capital 15billion (2017: 10.5billion) units of ordinary share of N0.50k each As at 1 January 5,250,000 5,250,000 Increase during the year 2,250,000 - 129 As at 31 December 7,500,000 5,250,000
Ordinary shares issued and fully paid
8,340,823,296 Ordinary share of N0.50k each 4,170,412 4,170,412
33.2 Share premium
As at year end 116,843 116,843 NOTES TO THE FINANCIAL STATEMENTS Cont.
33.3 Contingency reserve
As at 31 December 31 December in thousands of Nigerian Naira Notes 2018 2017
At 1 January 2,332,596 2,077,191 Transfer from accumulated losses 315,392 255,405 2,647,988 2,332,596
Contingency reserve in respect of non-life business is the higher of 20% of net profit and 3% of total premium as specified in Section 21 (2) of the Insurance Act 2003.
33.4 Revaluation reserve This is revaluation surplus in respect of building in line with the Company's accounting policy.
As at 31 December 31 December in thousands of Nigerian Naira Notes 2018 2017
Opening balance 225,103 175,288 Additional revaluation in the year 24 - 71,164 Effect of tax at 30% 25.2 - (21,349) 225,103 225,103
33.5 Fair value reserve The Fair value reserve represents the net cumulative change in the fair value of equity instrument measured at fair value through other comprehensive income until the investment is derecognised or impaired.
33.6 Accumulated losses Accumulated losses is the carried forward recognised income net of expenses plus current period profit or loss attributable to shareholders.
Annual Report 34 Cash and cash equivalents for the purpose of statements of cash flows consist of the & Accounts 2018 following:
As at 31 December 31 December in thousands of Nigerian Naira Notes 2018 2017 130 Cash and cash equivalents per statement of financial position 15 5,241,513 3,400,291 Bank overdrafts 29 (327,941) (78,897) 4,913,572 3,321,394 NOTES TO THE FINANCIAL STATEMENTS Cont.
35 Reconciliation of profit before tax to cash flows provided by operating activities:
in thousands of Nigerian Naira Notes 2018 2017
Profit before income tax 540,554 202,694
Adjustments for non-cash items: Fair value gain on quoted equities 16.3 (13,666) (40,549) Interest on borrowing cost 28 88,487 78,356 Interest income on loans (6,000) (21,736) Loss on disposal of investment properties 7,000 - Profit from sale of property and equipment 11 (1,000) (56,838) Depreciation of property, plant and equipment 24 162,691 151,516 Amortisation of intangible assets 22 9,613 17,287 Fair value gain on investment properties 21 (39,057) (34,826) Share of profit in associate 20.1 (10,256) (4,321) Interest cost on retirement benefit 32.2 25,318 28,369 Credit loss expenses 12.2 1,325 - Foreign exchange gain on cash and cash equivalents - (122,557) Unrealised exchange loss foreign borrowing 28 22,954 33,107 Cash flow from operating profit before changes in operating assets and liabilities 787,963 230,502
Changes in operating assets and liabilities Increase in trade receivables (50,984) (21,220) Decrease/(increase) in re-insurance assets 655,193 (767,446) Decrease in deferred acquisition costs 212,175 57,227 Decrease/(increase) in other receivables and prepayments 5,871 (61,449) Increase in trade payables 15,649 484,380 (Decrease)/increase in other payables and accruals (51,222) 58,214 (Decrease)/increase in outstanding claims (346,682) 209,384 Increase in unearned premium 200,695 212,535 Gratuity paid (82,806) (2,173)
Income tax paid (26,086) (19,244) Annual Report Net cash flows from operating activities 1,319,766 380,710 & Accounts 2018
131 NOTES TO THE FINANCIAL STATEMENTS Cont.
36 Related party disclosures
36.1 Transactions with related parties
The company did not have any related parties transactions in the year.
36.2 Compensation of key management personnel:
Key management personnel is defined as members of the Board of Directors of the Company, including their close members of family and any entity over which they exercise control. Close members of family are those family members who may be expected to influence, or be influenced by that individual in the dealings with Company.
in thousands of Nigerian Naira Notes 2018 2017
Short term employee benefits 84,552 73,816 Post employment pension benefits 4,268 1,853 Total compensation of key management personnel 88,820 75,669
37 Risk management framework
a. Governance framework The primary objective of the Company’s risk and financial management framework is to protect the Company’s shareholders from events that hinder the sustainable achievement of financial performance objectives, including failing to exploit opportunities. Key management recognises the critical importance of having efficient and effective risk management systems in place.
The Company has established a risk management function with clear terms of reference from the board of directors, its committees and the associated executive management committees. This is supplemented with a clear organisational structure with documented delegated authorities and responsibilities from the board of directors to executive management committees and senior managers. Lastly, a Company policy framework which
Annual Report sets out the risk profiles for the Company, risk management, control and business conduct & Accounts 2018 standards for the Company’s operations has been put in place. Each policy has a member of senior management charged with overseeing compliance with the policy throughout the Company.
The board of directors approves the Company risk management policies and meets regularly 132 to approve any commercial, regulatory and organisational requirements of such policies. These policies define the Company’s identification of risk and its interpretation, limit structure to ensure the appropriate quality and diversification of assets, align underwriting and reinsurance strategy to the corporate goals, and specify reporting requirements. NOTES TO THE FINANCIAL STATEMENTS Cont.
37 Risk management framework - Continued b Capital management objectives, policies and approach
The Company has established the following capital management objectives, policies and approach to managing the risks that affect its capital position:
1 To maintain the required level of stability of the Company thereby providing a degree of security to policyholders; 2 To allocate capital efficiently and support the development of business by ensuring that returns on capital employed meet the requirements of its capital providers and of its shareholders; 3 To retain financial flexibility by maintaining strong liquidity and access to a range of capital markets; 4 To align the profile of assets and liabilities taking account of risks inherent in the business; 5 To maintain financial strength to support new business growth and to satisfy the requirements of the policyholders, regulators and stakeholders; 6 To maintain strong credit ratings and healthy capital ratios in order to support its business objectives and maximise shareholders value.
In reporting financial strength, capital and solvency are measured using the rules prescribed by the National Insurance Commission. These regulatory capital tests are based upon required levels of solvency, capital and a series of prudent assumptions in respect of the type of business written.
The Company's capital management policy for its insurance business is to hold sufficient capital to cover the statutory requirements based on the NAICOM directives, including any additional amounts required by the regulator.
The Company seeks to optimise the structure and sources of capital to ensure that it consistently maximises returns to the shareholders and policyholders.
The Company has had no significant changes in its policies and processes to its capital
structure during the past year from previous years. Annual Report & Accounts 2018 As at 31 December 31 December in thousands of Nigerian Naira 2018 2017 Available capital resources as at 31 December 133 Total shareholders' funds per financial statements 5,820,355 5,471,904 Regulatory adjustments (1,299,602) (231,354)
Available capital resources 4,520,753 5,240,550
Minumum capital based required by regulator 3,000,000 3,000,000 Excess in solvency margin 1,520,753 2,240,550
The regulatory adjustments represent assets inadmissible for regulatory reporting purpose. However, current year available capital resources are subject to the Regulators commission review and approval. NOTES TO THE FINANCIAL STATEMENTS Cont.
37 Risk management framework - Continued The Solvency Margin for the Company as at 31 December 2018 is as follows:
in thousands of Nigerian Naira Admissible Inadmissible Total 2017
Admissible assets Cash and cash equivalents 5,241,513 - 5,241,513 3,400,291 Available for sale - - 609,378 Fair value through profit and loss 173,300 - 173,300 165,188 Held to maturity - - 160,600 Loan and receivables - - 40,256 Equity instrument at fair value through other comprehensive income 135,999 - 135,999 - Debt securities at amortised cost 190,172 - 190,172 - Trade receivables 380,632 - 380,632 329,648 Reinsurance assets 1,872,344 - 1,872,344 2,500,761 Deferred acquisition cost 226,893 - 226,893 439,068 Other receivables and prepayments 7,936 86,648 94,584 6,510 Investments in associates 81,434 - 81,434 71,178 Investment properties 1,000,000 128,638 1,128,638 1,161,581 Property, plant and equipment 387,680 1,080,999 1,468,679 1,386,862 Statutory deposits 315,000 - 315,000 315,000 10,012,903 1,296,285 11,309,188 10,586,321
Admissible liabilities Insurance liabilities 3,088,838 - 3,088,838 3,260,519 Borrowing 973,360 - 973,360 861,919 Bank overdraft 327,941 - 327,941 78,897 Trade payables 759,081 - 759,081 710,333 Other payables and accruals 128,910 - 128,910 180,132 Retirement benefit obligations 105,569 - 105,569 182,232 Current income tax payable 108,451 - 108,451 71,739 Deferred tax liabilities - 8,922 8,922 -
Annual Report 5,492,150 5,501,072 5,345,771 & Accounts 2018 Solvency margin 4,520,753 5,240,550
The higher of 15% of Net premium 134 income and Shareholders funds 3,000,000 3,000,000 Solvency ratio (%) 1.51 1.75
c Regulatory framework Regulators are primarily interested in protecting the rights of policyholders and monitor them closely to ensure that the Company is satisfactorily managing affairs for their benefit. At the same time, regulators are also interested in ensuring that the Company maintains an appropriate solvency position to meet unforeseen liabilities arising from economic shocks or natural disasters. NOTES TO THE FINANCIAL STATEMENTS Cont.
37 Risk management framework - part of its risks mitigation programme. Continued Reinsurance ceded is placed on both a proportional and non–proportional d Asset liability management (ALM) basis. The majority of proportional framework reinsurance is quota–share reinsurance which is taken out to reduce the overall The principal technique of the exposure of the Company to certain Company’s ALM is to match assets to classes of business. Non–proportional the liabilities arising from insurance reinsurance is primarily excess–of–loss contracts by reference to the type of reinsurance designed to mitigate the benefits payable to contract holders. For Company’s net exposure to catastrophe each category of liabilities, a separate losses. Retention limits for the portfolio of assets is maintained. excess–of–loss reinsurance vary by product line and territory. The Company's ALM is: Amounts recoverable from reinsurers An integral part of the insurance risk are estimated in a manner consistent management policy, to ensure in each with the outstanding claims provision period sufficient cash flows is available and are in accordance with the to meet liabilities arising from insurance reinsurance contracts. Although the contracts. C o m p a n y h a s r e i n s u r a n c e arrangements, it is not relieved of its 38 Insurance and financial risks direct obligations to its policyholders and thus a credit exposure exists with a Insurance risk respect to ceded insurance, to the The principal risk the Company faces extent that any reinsurer is unable to under insurance contracts is that the meet its obligations assumed under actual claims and benefit payments or such reinsurance agreements. The the timing thereof, differ from Company’s placement of reinsurance is expectations. This is influenced by the diversified such that it is neither frequency of claims, severity of claims, dependent on a single reinsurer nor are actual benefits paid and subsequent the operations of the Company development of long–term claims. substantially dependent upon any Therefore, the objective of the Company single reinsurance contract. There is no Annual Report is to ensure that sufficient reserves are single counterparty exposure that & Accounts 2018 available to cover these liabilities. exceeds 20% of total reinsurance assets at the reporting date. The risk exposure is mitigated by diversification across a large portfolio of The Company principally issues the insurance contracts and geographical following types of general insurance 135 areas. The variability of risks is also contracts: fire, motor, general accident, improved by careful selection and engineering, marine and aviation and oil implementation of underwriting and gas. Risks under non–life insurance strategy guidelines, as well as the use of policies usually cover twelve months reinsurance arrangements. duration. For general insurance contracts, the most significant risks The Company purchases reinsurance as arise from climate changes, natural NOTES TO THE FINANCIAL STATEMENTS Cont.
disasters and terrorist activities. For approximately 50% of shareholders’ longer tail claims that take some years equity on a gross basis and 10% on a net to settle, there is also inflation risk basis. In the event of such a catastrophe, counterparty exposure to a single The Company has also limited its reinsurer is estimated not to exceed 2% exposure by imposing maximum claim of shareholders’ equity. The Board may amounts on certain contracts as well as decide to increase or decrease the the use of reinsurance arrangements in maximum tolerances based on market order to limit exposure to catastrophic conditions and other factors. events (e.g., hurricanes, earthquakes and flood damage). Key assumptions The principal assumption underlying The above risk exposure is mitigated by the liability estimates is that the diversification across a large portfolio of Company’s future claims development insurance contracts and geographical will follow a similar pattern to past areas. The variability of risks is improved claims development experience. This by careful selection and implementation includes assumptions in respect of loss of underwriting strategies, which are ratio, discount rate and claim handling designed to ensure that risks are costs of claim paid for each accident diversified in terms of type of risk and year. Additional qualitative judgments level of insured benefits. This is largely are used to assess the extent to which achieved through diversification across past trends may not apply in the future, industry sectors and geography. for example: once–off occurrence, Furthermore, strict claim review policies changes in market factors such as to assess all new and ongoing claims, public attitude to claiming, economic regular detailed review of claims conditions, as well as internal factors handling procedures and frequent such as portfolio mix, policy conditions investigation of possible fraudulent and claims handling procedures. claims are all policies and procedures Judgment is further used to assess the put in place to reduce the risk exposure extent to which external factors such as of the Company. The Company further judicial decisions and government enforces a policy of actively managing legislation affect the estimates. and promptly pursuing claims, in order to reduce its exposure to unpredictable Other key circumstances affecting the Annual Report & Accounts 2018 future developments that can negatively reliability of assumptions include impact the business. Inflation risk is variation in interest rates, delays in mitigated by taking expected inflation settlement and changes in foreign i n t o a c c o u n t w h e n e s t i m a t i n g currency rates. insurance contract liabilities. 136 Claims development table The purpose of these underwriting and The following tables show the estimates reinsurance strategies is to limit of cumulative incurred claims, exposure to catastrophes based on the including both claims notified and Company’s risk appetite as decided by incurred but not reported (IBNR) for management. The overall aim is each successive accident year at each currently to restrict the impact of a reporting date, together with cumulative s i n g l e c a t a s t r o p h i c e v e n t t o payments to date. NOTES TO THE FINANCIAL STATEMENTS Cont.
In general, the uncertainty associated with the ultimate claims experience in an accident year is greatest when the accident year is at an early stage of development and the margin necessary to provide the necessary confidence in the provisions adequacy is relatively at its highest. As claims develop, and the ultimate cost of claims becomes more certain, the relative level of margin maintained should decrease. However, due to the uncertainty inherited in the estimation process, the actual overall claim provision may not always be in surplus.
The development of insurance liabilities provides a measure of the Company’s ability to estimate the ultimate value of claims. The top half of each below illustrates how the Company’s estimate of total claims outstanding for each year has changed at successive year-ends.
Annual Report & Accounts 2018
137 NOTES TO THE FINANCIAL STATEMENTS Cont.
38 Insurance and financial risk - Continued
a Insurance risk - continued
Claims Paid Triangulations as at 31 December 2018
in thousands of Nigerian Naira 1 2 3 4 5 6 7 8 9 Motor
Accident Year 2007 161,220 116,717 4,485 311 49 - - - - 2008 169,900 107,836 13,187 3,384 3,405 800 - - - 2009 181,552 146,736 15,858 801 704 - 1,143 - - 2010 225,016 122,872 10,143 693 414 551 - 117 - 2011 292,165 126,133 8,335 670 1,392 - 59 - - 2012 209,066 153,520 1,135 28 1 166 - - - 2013 253,325 56,039 11,951 - 745 16 - - - 2014 448,185 151,855 90 1,208 10 - - - - 2015 419,353 164,457 11,856 554 - - - - - 2016 339,042 119,370 12,595 ------2017 400,840 144,144 ------2018 409,781 ------
Fire
Accident Year
2007 23,548 14,921 551 495 409 18 - - - 2008 145,426 25,404 19,337 1,418 275 2,350 - - - Annual Report & Accounts 2018 2009 38,671 30,029 7,095 17,130 1,133 - 1,352 - - 2010 48,683 170,025 14,642 169 404 69 - - - 2011 40,147 87,855 14,687 296 1,689 - 543 615 - 2012 34,801 71,849 3,309 1,185 92 31 - - - 2013 96,493 28,388 24,664 45 8,988 - - - - 138 2014 269,309 209,095 5 28,604 1,509 - - - - 2015 99,928 190,574 83,970 4,547 - - - - - 2016 139,327 202,455 28,427 ------2017 318,536 309,344 ------2018 319,792 ------NOTES TO THE FINANCIAL STATEMENTS Cont.
38 Insurance and financial risks - Continued
Insurance risk - continued
Claims Paid Triangulations as at 31 December 2018
in thousands of Nigerian Naira 1 2 3 4 5 6 7 8 9 General accident
Accident Year 2007 78,870 51,047 21,990 5,149 1,109 382 1,342 - - 2008 107,762 62,614 20,556 4,291 436 - - 10 - 2009 71,177 74,274 42,344 2,061 2,567 197 899 - - 2010 56,380 75,169 12,276 13,467 805 1,787 34 - - 2011 64,532 83,603 16,555 687 3,155 257 824 1,927 - 2012 134,451 133,618 3,124 7,988 - 1,972 1,249 - - 2013 62,941 23,864 19,583 - 1,522 978 - - - 2014 193,012 103,077 - 15,204 2,295 - - - - 2015 96,443 208,591 15,673 45,911 - - - - - 2016 129,179 97,502 15,083 ------2017 73,628 121,245 ------2018 14,382 ------
Engineering
Accident Year
2007 8,083 6,958 3,892 205 - - - - - 2008 6,219 13,466 ------Annual Report 2009 4,035 6,349 424 516 531 - 57 669 & Accounts 2018 2010 14,206 26,429 1,836 1,194 113 - - - - 2011 33,165 33,090 19,933 48 18 - 72 - - 2012 41,347 20,691 343 48 - - - - - 2013 3,266 6,191 6,193 - - 206 - - - 2014 14,750 19,161 - 401 6 - - - - 139 2015 8,635 18,349 3,453 2,887 - - - - - 2016 14,981 28,519 787 ------2017 10,823 25,078 ------2018 12,771 ------NOTES TO THE FINANCIAL STATEMENTS Cont.
38 Insurance and financial risks - Continued
Insurance risk - continued
Claims Paid Triangulations as at 31 December 2018
in thousands of Nigerian Naira 1 2 3 4 5 6 7 8 9 Marine
Accident Year 2007 12,088 28,812 7,852 60 30,370 6 - - - 2008 648 7,468 97 ------2009 2,312 22,297 338 6,912 - 200 - - - 2010 14,527 19,225 9,547 6,423 25 46 - - - 2011 35,171 25,574 30,244 190 7,084 - - - - 2012 30,164 116,629 - 491 - - - - - 2013 32,653 7,113 23,178 - 3 1,567 - - - 2014 142,076 112,097 - 605 1,574 - - - - 2015 44,911 37,147 31,554 571 - - - - - 2016 35,286 57,357 39,507 ------2017 36,911 273,961 ------2018 160,327 ------
The table below sets out the concentration of non–life insurance contract liabilities by type of contract:
31 December 2018 31 December 2017
Gross Reinsurance Net Gross Reinsurance Net share share liabilities of liabilities liabilities liabilities of liabilities liabilities Annual Report & Accounts 2018 Accident 170,622 (73,001) 97,621 241,800 (150,145) 91,655 Engineering 110,153 (55,441) 54,712 59,802 (38,828) 20,974 Fire 217,103 (156,964) 60,139 279,791 (178,994) 100,797 Marine 150,404 (84,408) 65,996 122,717 (99,860) 22,857 140 Motor 115,779 - 115,779 190,098 - 190,098 Oil & Gas 170,894 - 170,894 387,429 (288,094) 99,335 934,955 (369,814) 565,141 1,281,637 (755,921) 525,716 NOTES TO THE FINANCIAL STATEMENTS Cont.
38 Insurance and financial risks - persist during the grace period specified Continued in the policy document until expiry, when the policy is either paid or fully b Financial risk - continued provided for and Commission paid to intermediaries is netted off against i Credit risk amounts receivable from them to reduce the risk of doubtful debts. Credit risk is the risk that one party to a financial instrument will cause a 4 Net exposure limits are set for each financial loss to the other party by failing counterparty i.e limits are set for to discharge an obligation. investments and cash deposits, foreign exchange trade exposures and The following policies and procedures minimum credit ratings for investments are in place to mitigate the Company’s that may be held. exposure to credit risk: 5 A Company credit risk policy which sets 1 R e i n s u r a n c e i s p l a c e d w i t h out the assessment and determination counterparties that have a good credit of what constitutes credit risk for the rating and concentration of risk is Company. Compliance with the policy is avoided by following policy guidelines in monitored and exposures and breaches respect of counterparties’ limits that are are reported to the Company’s risk set each year by the board of director committee. The policy is regularly and are subject to regular reviews. At reviewed for pertinence and for changes each reporting date, management in the risk environment. p e r f o r m s a n a s s e s s m e n t o f creditworthiness of reinsurers and Credit exposure updates the reinsurance purchase The Company’s maximum exposure to strategy, ascertaining suitable credit risk for the components of the allowance for impairment. statement of financial position at 31 December 2018 and 2017 is the carrying 2 The Company sets the maximum amounts as presented below. amounts and limits that may be advances to corporate counterparties by The credit risk analysis below is
reference to their long-term credit presented in line with how the Company Annual Report ratings. manages the risk. The Company & Accounts 2018 manages its credit risk exposure based 3 The credit risk in respect of customer on the carrying value of the financial balances incurred on non-payment of instruments. premiums or contributions will only 141 NOTES TO THE FINANCIAL STATEMENTS Cont.
38 Insurance and financial risks - Continued
Industry analysis
As at 31 December 2018 Financial in thousands of Nigerian Naira services Government Others Other
Debt securities (Loans) - - 43,560 43,560 Other receivables - - 58,236 58,236 Statutory deposit - 315,000 - 315,000 - Debt securities 35,959 133,245 - 169,204 35,959 448,245 101,796 586,000
Trade receivables 380,632 - - 380,632 Cash and cash equivalents 5,241,513 - - 5,241,513 5,658,104 448,245 101,796 6,208,145
As at 31 December 2017
Loans and receivables 40,256 - - 4 0,256 Other receivables - - 56,810 56,810 Statutory deposit - 315,000 - 315,000 Held-to-maturity - Debt securities 20,418 140,182 - 160,600 60,674 455,182 56,810 572,666
Trade receivables 329,648 - - 329,648 Cash and cash equivalents 3,400,291 - - 3,400,291 3,790,613 455,182 56,810 4,302,605
Annual Report & Accounts 2018
142 NOTES TO THE FINANCIAL STATEMENTS Cont.
38 Insurance and financial risks - Continued
The table below provides information regarding the credit risk exposure of the Company by classifying assets according to the Company's credit ratings of counter parties:
Neither past-due not impaired As at 31 December 2018 Investment Non-investment Non-investment Past-due grade grade grade but not in thousands of Nigerian Naira satisfactory unsatisfactory impaired Total
Other receivables - 58,236 - - 58,236 Statutory deposit 315,000 - - - 315,000 - Debt securities 169,204 - 43,560 - 212,764 Trade receivables 380,632 - - - 380,632 Cash and cash equivalents 5,241,513 - - - 5,241,513 6,106,349 58,236 43,560 - 6,208,145
As at 31 December 2017
Loans and receivables 40,256 - - - 40,256 Other receivables - 56,810 - - 56,810 Statutory deposit 315,000 - - - 315,000 Held-to-maturity - Debt securities 160,600 - - - 160,600 Trade receivables 329,648 - - - 329,648 Cash and cash equivalents 3,400,291 - - - 3,400,291 4,245,795 56,810 - - 4,302,605
Annual Report & Accounts 2018
143 NOTES TO THE FINANCIAL STATEMENTS Cont.
38 Insurance and financial risks - Continued
Age analysis of financial assets past due but not impaired Total past 31 to 60 61 to 90 due but in thousands of Nigerian Naira < 30 days days days not impaired
At 31 December 2018 Trade receivables 380,632 - 380,632 380,632 - - 380,632
At 31 December 2017 Trade receivables 329,648 - 329,648 329,648 - - 329,648
Collateral The amount and type of collateral required depends on an assessment of the credit risk of the counterparty. Guidelines are implemented regarding the acceptability of types of collateral and the valuation parameters. Credit risk is also mitigated by entering into collateral agreements. Management monitors the market value of the collateral, requests additional collateral when needed and performs an impairment valuation when applicable.
ii Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial instruments. In respect of catastrophic events there is also a liquidity risk associated with the timing differences between gross cash out–flows and expected reinsurance recoveries.
The following policies and procedures are in place to mitigate the Company’s exposure to liquidity risk:
1 Guidelines are set for asset allocations, portfolio limit structures and maturity profiles of assets, in order to ensure sufficient funding available to meeting insurance and investment contracts obligations.
2 The Company’s catastrophe excess-of-loss reinsurance contracts contain clauses permitting the
Annual Report immediate draw down of funds to meet claim payments should claim events exceed a certain size. & Accounts 2018 3 Contingency funding plans are in place, which specify minimum proportions of funds to meet emergency calls well as specifying events that would trigger such plans. 144 NOTES TO THE FINANCIAL STATEMENTS Cont.
38 Insurance and financial risks - Continued
Maturity profiles The table that follows summarises the maturity profile of the financial assets and financial liabilities of the Company based on remaining undiscounted contractual obligations, including interest payable and receivable.
For insurance contracts liabilities and reinsurance assets, maturity profiles are determined based on estimated timing of net cash outflows from the recognised insurance liabilities. Unearned premiums and the reinsurers’ share of unearned premiums have been excluded from the analysis as they are not contractual obligations.
The Company maintains a portfolio of highly marketable and diverse assets that can be easily liquidated in the event of an unforeseen interruption of cash flow. The Company also has committed lines of credit that it can access to meet liquidity needs to assist users in understanding how assets and liabilities have been matched. Reinsurance assets have been presented on the same basis as insurance liabilities. Loans and receivables include contractual undiscounted interest receivable.
Maturity analysis (contractual undiscounted cash flows basis)
As at 31 December 2018 Carrying Up to 1 Over 5 No maturity in thousands of Nigerian Naira amount year 1-3 years 3-5 years years date Total
Financial assets: Loans and receivables 43,560 46,827 - - - - 46,827 Other receivables 58,236 58,236 - - - - 58,236 Available-for-sale financial assets ------Debt securities at amortised cost ------Statutory deposit 315,000 - - - - 315,000 315,000 Trade receivables 380,632 380,632 - - - - 380,632 Cash and cash equivalents 5,241,513 6,115,099 - - - - 6,115,099 Total financial assets 6,038,941 6,600,794 - - - 315,000 6,915,794
Financial liabilities Insurance contract liabilities 934,955 934,955 - - - - 934,955
Borrowing 973,360 1,070,696 - - - - 1,070,696 Annual Report Trade payables 759,081 759,081 - - - - 759,081 & Accounts 2018 Bank overdraft 327,941 347,617 - - - - 347,617 Other payables and accruals 128,910 128,910 - - - - 128,910 Total financial liabilities 3,124,247 3,241,259 - - - - 3,241,259
Total liquidity gap 2,914,694 3,359,534 - - - 315,000 3,674,534 145 NOTES TO THE FINANCIAL STATEMENTS Cont.
38 Insurance and financial risks - Continued
Maturity analysis (contractual undiscounted cash flows basis)
As at 31 December 2017 Carrying Up to 1 Over 5 No maturity in thousands of Nigerian Naira amount year 1-3 years 3-5 years years date Total
Financial assets: Loans and receivables 40,256 40,256 - - - - 40,256 Other receivables 50,155 50,155 - - - - 50,155 Available-for-sale financial assets 659,678 659,678 - - - - 659,678 Held-to-maturity 160,600 2,064 - - - - 2,064 Trade receivables 329,648 329,648 - - - - 329,648 Cash and cash equivalents 3,400,291 3,400,291 - - - - 3,400,291 Total financial assets 4,640,628 4,482,092 - - - - 4,482,092
Financial liabilities Insurance contract liabilities 1,281,637 1,281,637 - - - - 1,281,637 Borrowing 861,919 53,198 156,712 907,168 - - 1,117,078 Trade payables 710,333 710,333 - - - - 710,333 Bank overdraft 78,897 83,631 - - - - 83,631 Other payables and accruals 180,132 180,132 - - - - 180,132 Total financial liabilities 3,112,918 2,308,930 156,712 907,168 - - 3,372,810
Total liquidity gap 1,527,710 2,173,162 (156,712) (907,168) - - 1,109,282
Annual Report & Accounts 2018
146 NOTES TO THE FINANCIAL STATEMENTS Cont.
38 Insurance and financial risks - Continued The table below summarises the expected utlisation or settlement of assets and liabilities.
31 December 2018 31 December 2017 in thousands of Nigerian Naira Current Non-current Total Current Non-current Total
Assets Cash and cash equivalents 5,241,513 - 5,241,513 3,400,291 - 3,400,291 Investment securities 499,471 - 499,471 975,422 975,422 Trade receivables 380,632 - 380,632 329,648 - 329,648 Reinsurance assets 1,872,344 - 1,872,344 2,354,496 146,265 2,500,761 Deferred acquisition costs 226,893 - 226,893 439,068 - 439,068 Other receivables and prepayments 94,584 - 94,584 50,155 50,300 100,455 Investment in associate - 81,434 81,434 - 71,178 71,178 Investment properties - 1,128,638 1,128,638 - 1,161,581 1,161,581 Intangible assets - 12,239 12,239 - 15,505 15,505 Property, plant and equipment - 1,468,679 1,468,679 - 1,386,862 1,386,862 Deferred tax assets - - - - 121,904 121,904 Statutory deposit - 315,000 315,000 - 315,000 315,000 Total assets 8,315,437 3,005,990 11,321,427 6,573,658 4,244,017 10,817,675
Liabilities Insurance contract liabilities 3,088,838 - 3,088,838 3,260,519 - 3,260,519 Borrowing 973,360 - 973,360 - 861,919 861,919 Bank overdrafts 327,941 - 327,941 78,897 - 78,897 Trade payables 759,081 - 759,081 710,333 - 710,333 Other payables and accruals 128,910 - 128,910 180,132 - 180,132 Current income tax payable 108,451 - 108,451 71,739 - 71,739 Retirement benefit obligation - 105,569 105,569 - 182,232 182,232 Deferred tax liabilities - 8,922 8,922 - - - Total liabilities 5,386,581 105,569 5,501,072 4,301,620 1,044,151 5,345,771
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in market prices. Market risk comprises three types of risk: foreign exchange rates (currency risk), Annual Report market interest rates (interest rate risk) and market prices (price risk). The risk management frameworks for & Accounts 2018 each of its components are discussed below:
147 NOTES TO THE FINANCIAL STATEMENTS Cont.
38 Insurance and financial risks - Continued
iii Foreign exchange risk Sovereign Trust Insurance Plc is exposed to foreign exchange currency risk primarily through certain transactions denominated in foreign currency. The company is exposed to foreign currency through bank balances in other foreign currencies.
The carrying amounts of the company’s foreign currency-denominated balances as at end of the year are as follows:
2018 2017 Cash & cash Cash & cash in thousands of Nigerian Naira equivalents equivalents Dollars 2,655,233 1,492,007 Pounds 996 1,387 Euros 11,084 12,618
iv Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fixed interest rate instruments expose the Company to fair value interest risk. Company does no expose to cash flow interest risk.
The Company has no significant concentration of interest rate risk.
v Equity Price risk Equity price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market.
The Company’s equity price risk exposure relates to financial assets and financial liabilities whose values will fluctuate as a result of changes in market prices, principally investment securities. Annual Report & Accounts 2018 The risks arising from change in price of our investment securities is managed through our investment desk and in line with the investment risk policy.
The Company’s management of equity price risk is guided by the following: 148 - Investment quality and limit Analysis
Investment quality and limit analysis The Board through its Board Investment Committee set approval limits for taking investment decision approval limits are illustrated using an approval hierarchy that establishes different levels of authority necessary to approve investment decisions of different naira amounts. The approval limits system sets a personal discretionary limit for the Chief Executive Officer; requires that investment decisions above this personal discretionary limit requires approval by the Board of Directors and sets out lower limits for the Chief Finance Officer (CFO) and, or provides the CFO with the authority to assign limits to subordinates. NOTES TO THE FINANCIAL STATEMENTS Cont.
38 Insurance and financial risks - Continued v Equity Price risk - continued
The Company has no significant concentration of price risk.
The analysis below is performed for reasonably possible movements in key variables (share price) with all other variables held constant, showing the impact on profit before tax (due to changes in fair value of financial assets and liabilities whose fair values are recorded in the profit or loss) and equity (that reflects adjustments to profit before tax and changes in fair value of available–for–sale financial assets). The correlation of variables will have a significant effect in determining the ultimate impact on price risk, but to demonstrate the impact due to changes in variables, variables had to be changed on an individual basis.
31 December 2018 31 December 2017 Change Impact Impact in thousands of Nigerian Naira in variable on equity on equity -5% ( 8,665) ( 8,259) Nigerian Stock 5% 8,665 8 ,259 Exchange -10% (17,330) (16,519) 10% 17,330 16,519 vi Operational risks
Our operational risk exposure arises from inadequately controlled internal processes or systems, human error or non-compliance as well as from external events. Operational risk management framework includes strategic, reputation and compliance risks. When controls fail to perform, operational risks can cause damage to reputation, have legal or regulatory implications or can lead to financial loss. The Company cannot expect to eliminate all operational risks, but by initiating a rigorous control framework and by monitoring and responding to potential risks, the Company is able to manage the risks. Controls include
effective segregation of duties, access controls, authorisation and reconciliation Annual Report procedures, staff education and assessment processes, including the use of internal audit. & Accounts 2018 Business risks such as changes in environment, technology and the industry are monitored through the Company’s strategic planning and budgeting process.
The table below sets out the concentration of non–life insurance contract liabilities by type of contract: 149
31 December 2018 31 December 2017 in thousands of Nigerian Naira Re-insurance Re-insurance Gross share of Net liabilities Gross share of Net liabilities liabilities liabilities liabilities liabilities
Accident 170,622 (73,001) 97,621 241,800 (150,145) 91,655 Engineering 110,153 (55,441) 54,712 59,802 (38,828) 20,974 Fire 217,103 (156,964) 60,139 279,791 (178,994) 100,797 Marine 150,404 ( 84,408) 6 5,996 1 22,717 ( 99,860) 2 2,857 Motor 115,779 - 115,779 190,098 - 190,098 Oil & Gas 170,894 - 170,894 387,429 (288,094) 99,335 934,955 (369,814) 565,141 1,281,637 (755,921) 525,716 150 & Accounts2018 Annual R eport
38 Insurance and financial risks - Continued
Sensitivity analysis The non–life insurance claim liabilities are sensitive to the key assumptions that follow. It has not been possible to quantify the sensitivity of certain NOTES TOTHEFINANCIALST assumptions such as legislative changes or uncertainty in the estimation process.
The following analysis is performed for reasonably possible movements in key assumptions with all other assumptions held constant, showing the impact on gross and net liabilities, profit before tax and equity. The correlation of assumptions will have a significant effect in determining the ultimate claims liabilities, but to demonstrate the impact due to changes in assumptions, assumptions had to be changed on an individual basis.
It should be noted that movements in these assumptions are non–linear.
31 December 2018 31 December 2017 Change in Impact on gross Impact on net Impact on profit Impact on Impact on net Impact on in thousands of Nigerian Naira assumptions liabilities liabilities before tax gross liabilities liabilities profit before tax
Loss percentage +5% 46,748 18,491 (28,257) 53,613 22,559 (31,054) Loss percentage -5% (46,748) (18,491) 28,257 (53,613) (22,559) 31,054 Inflation rate +1% 9,350 3,698 (5,651) 10,723 4,512 (6,211) Inflation rate -1% (9,350) (3,698) 5,651 (10,723) (4,512) 6,211 Discount rate +1% 9,350 3,698 (5,651) 10,723 4,512 (6,211) Discount rate -1% (9,350) (3,698) 5,651 (10,723) (4,512) 6,211
39 Contingencies and commitments A TEMENTS a Contingencies proceedings and regulations
The Company operates in the insurance industry and is subject to legal proceedings in the normal course of business. While it is not practicable to forecast or determine the final results of all pending or threatened legal proceedings, management does not believe that such proceedings (including litigation) will have a material effect on its results and financial position.
The Company is also subject to insurance solvency regulations of NAICOM. There are no contingencies associated with the Company's compliance or lack Cont. of compliance with such regulations. b Capital commitments and operating leases
The Company has no capital commitments at the reporting date.
The Company has entered into commercial property leases on its investment property portfolio and the Company's surplus office buildings. These non- cancellable leases have remaining terms of between one and five years. All leases include a clause to enable upward revision of the rental charge on an annual basis according to prevailing market conditions. NOTES TO THE FINANCIAL STATEMENTS Cont.
39 Contingencies and commitments
Capital commitments and operating leases
Future minimum lease rentals receivable under non-cancellable operating leases as at 31 December are as follows:
31 December 31 December in thousands of Nigerian Naira 2018 2017
Within one year 25,937 23,577 After one year but not more than five years - 32,113 25,937 55,690
40 Contravention of the NAICOM and other guidelines: Number of in thousands of Nigerian Naira infractions Penalty Nature of contravention Late submission of annual report to NSE in 2018 1 2,100
41 Events after the reporting date No significant event has occurred since the reporting date which requires adjustment of, or further disclosure in the financial statements.
42 Reclassification Certain reclassifications were made to the recorded figures of prior year to conform to this year's presentation. Below are the reclassifications.
As at 31 December in thousands of Nigerian Naira 2017 i. Other receivables and prepayments Amount previously reported 50,155 Reclassification of Contribution to Nigerian Insurance Association risk pool from
Available-for-Sale (see note ii below) 50,300 Annual Report At 31 December 2018 100,455 & Accounts 2018
As at 31 December in thousands of Nigerian Naira 2017 ii. Investment securities 151 Amount previously reported 1,025,722 Reclassification of Contribution to Nigerian Insurance Association risk pool to Other receivables and prepayments (see note i above) (50,300) At 31 December 2018 975,422 NOTES TO THE FINANCIAL STATEMENTS Cont.
43 Admissible assets
The admissible assets representing insurance funds are included in the Statement of Financial Position as follows:
Total assets representing insurance funds
2018 2017 Carrying Policy holders Total in thousands of Nigerian Naira amount Funds
Insurance Contract liabilities 3,088,838 3,088,838 3,088,838 3,260,519 Trade payales 759,081 759,081 759,081 710,333
Deduct: Reinsurance assets (1,872,344) (1,872,344) (1,872,344) (2,500,761)
Net Insurance Fund 1,975,575 1,975,575 1,975,575 1,470,091
Represented by:
Cash and cash equivalents: - Cash in bank 2,798,018 2,798,018 2,798,018 1,634,675 - Short term deposit 2,443,495 2,443,495 2,443,495 1,765,616
Equity instruments at fair value through profit or loss 173,300 173,300 173,300 165,188 Equity instrument at fair value through other comprehensive income 135,999 135,999 135,999 - Debt securities at amortised cost 190,172 190,172 190,172 - Financial asset held to maturity - - - 160,600 Treasury bills - - - 477,080
Annual Report Total Admissible Assets 5,740,984 5,740,984 5,740,984 4,203,159 & Accounts 2018 Surplus 3,765,409 3,765,409 3,765,409 2,733,068
152 NOTES TO THE FINANCIAL STATEMENTS Cont.
44 Segment information
For the year ended 31 December 2018 Fire and General Marine and Oil and Car and in thousands of Nigerian Naira Motor property accident aviation gas engineering Total
Gross premium written 1,591,681 1,720,061 1,071,432 574,468 3,851,335 1,704,101 10,513,078 Changes in unexpired premium 233,056 (145,069) 49,565 49,703 (557,449) 195,193 (175,001) Gross premium earned 1,824,737 1,574,992 1,120,997 624,171 3,293,886 1,899,294 10,338,077
Outward re-insurance premium (5,604) (765,008) (410,824) (211,882) (2,783,835) (857,237) (5,034,390) Changes in unexpired outward premium 2,163 6,302 52,493 (7,909) (776,573) 481,214 (242,310) Net premium earned 1,821,296 816,286 762,666 404,380 (266,522) 1,523,271 5,061,377 Commission received - 53,195 44,356 30,104 175,067 59,880 362,602
Total underwriting income 1,821,296 869,481 807,022 434,484 (91,455) 1,583,151 5,423,979
Gross claims paid 511,926 714,711 338,139 477,507 2,159,622 41,736 4,243,641 Gross liabilities at 31 December 2018 109,956 221,877 170,486 144,359 177,976 110,301 934,955 621,882 936,588 508,625 621,866 2,337,598 152,037 5,178,596 Gross liabilities at 1 January 2018 (190,098) (279,791) (241,800) (122,717) (387,429) (59,802) (1,281,637) Gross claim incurred 431,784 656,797 266,825 499,149 1,950,169 92,235 3,896,959
Reinsurance recoveries - 318,394 112,998 170,694 1,874,918 18,571 2,495,575 Due from re-insurers at 31 December 2018 - 161,065 81,245 81,493 - 46,012 369,814 - 479,459 194,243 252,186 1,874,918 64,583 2,865,389 Due from re-insurers at 1 January 2018 - (178,995) (150,145) (99,860) (288,094) (38,828) (755,922) Gross recoveries - 300,464 44,098 152,326 1,586,824 25,755 2,109,467
Annual Report Net benefits and claims 431,784 356,333 222,727 346,823 363,345 66,480 1,787,492 & Accounts 2018
Net income 1,389,512 513,148 584,295 87,661 (454,800) 1,516,670 3,636,487
Underwriting expenses Amortised deferred acquisition costs (210,578) (360,885) (244,866) (128,980) (265,367) (209,525) (1,420,201) 153 Other underwriting expenses (41,094) (30,990) (50,502) (47,402) (36,076) (87,256) (293,319) (251,672) (391,875) (295,368) (176,382) (301,443) (296,781) (1,713,520)
Underwriting profit 1,137,841 121,273 288,927 (88,721) (756,243) 1,219,889 1,922,967 NOTES TO THE FINANCIAL STATEMENTS Cont.
For the year ended 31 December 2017 Fire and General Marine and Oil and Car and in thousands of Nigerian Naira Motor property accident aviation gas engineering Total
Gross premium written 1,393,997 1,536,506 793,698 881,705 3,348,894 558,703 8,513,503 Changes in unexpired premium (208,514) (347,397) (132,675) (76,452) 660,603 (108,100) (212,535) Gross premium earned 1,185,483 1,189,109 661,023 805,253 4,009,497 450,603 8,300,968
Outward re-insurance premium (31,097) (540,044) (258,580) (475,579) (2,584,322) (265,040) (4,154,661) Changes in unexpired outward premium (78,194) 166,972 173,042 (82,003) (797,001) 323,399 (293,785) Net premium earned 1,076,192 816,037 575,485 247,671 628,174 508,962 3,852,522 Commission received 370 59,872 51,658 27,471 142,576 19,640 301,587
Total underwriting income 1,076,562 875,909 627,143 275,142 770,750 528,602 4,154,109
Gross claims paid 534,608 644,407 206,324 126,429 436,952 42,041 1,990,761 Gross liabilities at 31 December 2017 190,098 279,791 241,800 122,717 387,429 59,802 1,281,637 724,706 924,198 448,124 249,146 824,381 101,843 3,272,398 Gross liabilities at 1 January 2017 (137,289) (287,023) (232,370) (83,250) (298,640) (33,681) (1,072,253) Gross claim incurred 587,417 637,175 215,754 165,896 525,741 68,162 2,200,145
Reinsurance recoveries 3,235 301,742 47,119 70,444 - 3,185 425,725 Due from re-insurers at 31 December 2017 - 178,994 150,145 99,860 288,094 38,828 755,921 3,235 480,736 197,264 170,304 288,094 42,013 1,181,646 Due from re-insurers at 1 January 2017 - (115,044) (102,340) (39,728) - (27,534) (284,646) Gross recoveries 3,235 365,692 94,924 130,576 288,094 14,479 897,000
Net benefits and claims 584,182 271,483 120,830 35,320 237,647 53,683 1,303,145
Net income 492,380 604,426 506,313 239,822 533,103 474,919 2,850,964 Annual Report & Accounts 2018 Underwriting expenses Amortised deferred acquisition costs (140,568) (261,948) (154,433) (180,087) (380,953) (87,752) (1,205,741) Other underwriting expenses (90,119) (79,514) (70,098) (52,588) (81,969) (60,625) (434,912) (230,687) (341,462) (224,531) (232,675) (462,922) (148,377) (1,640,653) 154 Underwriting profit 261,693 262,964 281,782 7,147 70,180 326,542 1,210,311 NATIONAL DISCLOSURES
Annual Report & Accounts 2018
155 Statement of Value Added For the year ended 31 December 2018
For the year ended in thousands of Nigerian Naira 2018 % 2017 %
Gross premium written 10,513,078 8,513,503 Net claims expenses (1,787,492) (1,303,145) Premium ceded to reinsurance (5,276,700) (4,448,446) Other charges and expenses (2,345,647) (1,872,651) Fees and commission 362,602 301,587 Investment income 334,495 326,676 Value added 1,800,336 1,517,524
Applied as follow:
In payment to employees Employee benefits expense 892,184 50% 870,763 57%
In payment to Government As taxes 62,798 3% 44,825 3%
Retained in the business
Depreciation 162,691 9% 151,516 10% Amortization 9,613 1% 17,287 1% Contingency reserve 315,392 18% 255,405 17% Profit for the year 357,658 20% 177,728 12% Value added 1,800,336 100 1,517,524 100
Value added statement represents the wealth created by the efforts of the company and its employees' efforts based on ordianry activities and the allocation of that wealth being created between employees, shareholders, government and that retained for the future creation of more wealth.
Annual Report & Accounts 2018
156 Five-Year Financial Summary
Statement Of Financial Position As at 31 December 31 December 31 December 31 December 31 December in thousands of Nigerian Naira 2018 2017 2016 2015 2014
Assets Cash and cash equivalents 5,241,513 3,400,291 3,015,331 2,582,695 2,236,083 Investment securities 499,471 975,422 562,846 929,904 866,956 Trade receivables 380,632 329,648 308,428 115,751 57,551 Reinsurance assets 1,872,344 2,500,761 1,733,315 1,822,099 2,011,841 Deferred acquisition costs 226,893 439,068 496,295 567,819 568,819 Other receivables and prepayments 94,584 100,455 39,006 430,493 158,711 Investment in associate 81,434 71,178 66,857 58,104 49,202 Investment properties 1,128,638 1,161,581 1,181,454 1,358,256 1,339,084 Intangible assets 12,239 15,505 20,792 29,424 25,775 Property, plant and equipment 1,468,679 1,386,862 1,620,472 842,381 783,098 Deferred tax assets - 121,904 151,764 212,945 80,725 Statutory deposit 315,000 315,000 315,000 315,000 315,000 Total assets 11,321,427 10,817,675 9,511,560 9,264,871 8,492,845
Liabilities and Equity Liabilities Insurance contract liabilities 3,088,838 3,260,519 2,838,600 3,046,784 3,073,723 Borrowing 973,360 861,919 750,456 531,976 806,590 Bank overdrafts 327,941 78,897 108,641 - - Trade payables 759,081 710,333 225,953 313,403 140,147 Other payables and accruals 128,910 180,132 121,918 119,916 37,905 Current income tax payable 108,451 71,739 46,158 17,108 32,936 Retirement benefit obligation 105,569 182,232 184,406 210,488 240,689 Deferred tax liabilities 8,922 - - - - Deposit for shares - - - - 410,284 Total liabilities 5,501,072 5,345,771 4,276,132 4,239,675 4,742,274
Equity Issued and paid-up share capital 4,170,412 4,170,412 4,170,412 4,170,412 3,435,879 Annual Report Share premium 116,843 116,843 116,843 116,843 116,843 & Accounts 2018 Contingency reserve 2,647,988 2,332,596 2,077,191 1,885,195 1,671,227 Revaluation reserve 225,103 225,103 175,288 - - Fair value reserve 20,394 4,949 (3,984) 1,171 13,416 Accumulated losses (1,360,385) (1,377,999) (1,300,322) (1,148,425) (1,486,794) Total equity 5,820,355 5,471,904 5,235,428 5,025,196 3,750,571 157 Total liabilities and equity 11,321,427 10,817,675 9,511,560 9,264,871 8,492,845
Statement Of Profit Or Loss
Gross premium written 10,513,078 8,513,503 6,399,854 7,132,224 7,286,511
Premium earned 10,338,077 8,300,968 6,763,129 3,934,235 4,606,041
Profit before income tax 540,554 202,694 44,975 430,486 326,021
Profit after income tax 344,236 157,869 23,592 557,849 294,943
Per 50k share data (kobo)
Earnings per share - Basic & diluted 4.13 1.89 0.28 7.11 4.29 Share Capital History
The changes to the Company’s authorized and issued share capital since incorporation are summarized below:
Year Authorised (N) Issued & Fully Paid-up(N) Consideration
Date Increase Cumulative Increase Cumulative Cash/Bonus Cash 1980 0 1,500,000 0 1,500,000 1988 500,000 2,000,000 500,000 2,000,000 - 1994 28,000,000 30,000,000 18,000,000 20,000,000 Cash 1995 0 30,000,000 0 20,000,000 - 20,000,000 50,000,000 0 20,000,000 - 1996 1997 50,000,000 100,000,000 14,000,000 34,000,000 Cash & Bonus
1998 0 100,000,000 36,000,000 70,000,000 Cash & Bonus 100,000,000 3,500,000 Bonus 1999 0 73,500,000 2000 50,000,000 150,000,000 23,375,000 96,875,000 Cash & Bonus 2001 50,000,000 200,000,000 9,375,000 106,250,000 Cash & Bonus 2002 0 200,000,000 45,250,000 151,500,000 Bonus 300,000,000 500,000,000 2003 202,000,000 353,500,000 Cash & Bonus 2004 500,000,000 1,000,000,000 80,229,342 433,729,342 Cash & Bonus 2005 0 1,000,000,000 77,266,023 510,995,365 Cash & Bonus 1,000,000,000 510,995,365 Stock Split 2006 2,000,000,000 0 2006 5,000,000,000 7,000,000,000 610,588,243 1,121,583,608 Private Placement /Cash 2007 0 7,000,000,000 1,046,648,587 2,168,232,195 Merger with Coral, Confidence & Prime trust Insurance Ltd/Cash 2008 0 7,000,000,000 433,646,438 2,601,878,633 Cash & Bonus 2009 0 7,000,000,000 0 2,601,878,633 - 2010 0 7,000,000,000 0 2,601,878,633 - 2011 0 7,000,000,000 834,000,064 3,435,878,697 Cash
Annual Report & Accounts 2018 2012 0 7,000,000,000 0 3,435,878,697 - 2013 0 7,000,000,000 0 3,435,878,697 - 2014 3,500,000,000 10,500,000,000 0 3,435,878,697 - 2015 0 10,500,000,000 734,532,951 4,170,411,648 Cash 158 2016 0 10,500,000,000 0 4,170,411,648 - 2017 0 10,500,000,000 0 4,170,411,648 - 2018 0 10,500,000,000 0 4,170,411,648 -
Unissued Shares of STI Authorised Shares - 10,500,000,000 Issued Shares - 8,292,103,394 Balance Unissued - 2,207,896,606 Annual Report & Accounts 2018
159 Annual Report & Accounts 2018
160 Affix Current Passport
Annual Report & Accounts 2018
161 THE REGISTRAR No:489092
MERISTEM RC REGISTRARS LIMITED 213, Herbert Macaulay Way, Adekunle, Yaba, Lagos State. P.O.Box 51585, Falomo-Ikoyi, Lagos. Phone: 01-8920491,8920492 Fax: 01-2702361 e-Mail:[email protected] website: www.meristemregistrars.com
Annual Report & Accounts 2018
162 PROXY FORM I/we……………………………………...... ………………………………………………………….
Of……………………………………………………...... ……………………………………………
In Nigeria, being a member/members of the above named Company hereby appoint
…………………………………………………………...... …………………… Or failing him, the Chairman, MR. OLUSEUN AJAYI as my/our proxy to vote for me/ us/ on my/ our behalf at the Annual General Meeting of the Company to be held on Thursday, 25th day of July 2019 and at any adjournment therefore. I/we desire this proxy to be used in favour of/or against the resolution as indicated below*
RESOLUTION FOR AGAINST
1. To lay before the Meeting the Audited Financial Statements for the year ended December 31, 2018, and the Reports of the Directors, the Auditors and the Audit Committee thereon. 2. To re-elect Directors. 3. To authorise the Directors to fix the remuneration of the Auditors. 4. To elect the Shareholders’ representatives on the Audit Committee.
SPECIAL BUSINESS
5. To fix the Directors’ fees for the year ending December 31, 2019 at N3,800,000.00.
6. To consider and if deemed fit to pass the following resolutions:
(a) That the amount forming the authorised share-capital of the company be and is hereby increased from N10,000,000,000.00 (Ten Billion Naira) to N15,000,000,000.00 (Fifteen Billion Naira) by the creation of 10,000,000,000 (Ten Billion) ordinary shares of 50 kobo each ranking pari passu in all respects with the existing ordinary shares of the company.
(b) “That the Directors be and are hereby authorized to raise additional equity capital for the Company up to the maximum limit of the authorized share capital, whether by way of Special Placement or Public Offer with or without a preferential allotment/or Rights issue or a combination of Annual Report any of them, either locally or internationally and upon such terms and & Accounts 2018 conditions as the Directors may deem fit in the interest of the Company and subject to the approval of the Regulatory Authorities.”
(c) “That in the event of oversubscription of the offer/issue to capitalize the excess money and allot additional shares to the extent that can be 163 accommodated by the Company’s unissued share capital subject to the approval of the Regulatory Authorities and that the proceeds should be used for the same purpose as the offer/issue.”
(d) That the Company’s Memorandum and Articles of Association be amended to reflect the increase in its authorised capital.
SIGNED______DATED THIS_____ DAY OF______2019
NOTES: Only a member of the Company entitled to attend and vote at the General Meeting is entitled to appoint a proxy in his/her stead. All valid instruments of proxy should be completed, stamped and deposited at the office of the Company’s Registrars, Meristem Registrars Limited, 213, Herbert Macaulay Way, Adekunle, Yaba, Lagos State, not less than 48 hours before the time fixed for the meeting. THE REGISTRAR No:489092
MERISTEM RC REGISTRARS LIMITED 213, Herbert Macaulay Way, Adekunle, Yaba, Lagos State. P.O.Box 51585, Falomo-Ikoyi, Lagos. Phone: 01-8920491,8920492 Fax: 01-2702361 e-Mail:[email protected] website: www.meristemregistrars.com
Annual Report & Accounts 2018
164 (24TH ANNUAL GENERAL MEETING)
ADMISSION SLIP
PLEASE admit only the Shareholder named on this slip or his duly appointed proxy to the Annual General Meeting being held at the Grand Banquet Hall, Civic Centre, Victoria Island, Lagos on Thursday, 25th day of July 2019, at 11.00a.m.
NAME OF SHAREHOLDER...... …..……………………………………..…….…
NAME OF PROXY……...... …………………………………………..……….… .
*SIGNATURE ..…..………...... ……………………………………………..……...
Annual Report (*You are requested to sign this admission slip at the entrance to the venue of the meeting.) & Accounts 2018
165 THE REGISTRAR No:489092
MERISTEM RC REGISTRARS LIMITED 213, Herbert Macaulay Way, Adekunle, Yaba, Lagos State. P.O.Box 51585, Falomo-Ikoyi, Lagos. Phone: 01-8920491,8920492 Fax: 01-2702361 e-Mail:[email protected] website: www.meristemregistrars.com
Annual Report & Accounts 2018
166