SOVEREIGN TRUST INSURANCE PLC REPORT OF THE DIRECTORS AND AUDITED FINANCIAL STATEMENTS CONTENTS PAGE Corporate Information 2 Financial Highlights 4 Report of the Directors 5 Report of the Audit Committee 13 Statement of Directors’ Responsibilities in Relation to the Preparation of the Financial Statements 14 Certification Pursuant to Section 60 (2) of Investment and Securities Act No. 29 of 2007 15 Independent Auditors’ Report 16 Summary of Significant Accounting Policies 20 Statement of Profit or Loss 47 Statement of Other Comprehensive Income 48 Statement of Financial Position 49 Statement of Changes in Equity 50 Statement of Cash Flows 51 Notes to the Financial Statements 52 Other National Disclosures Statement of Value Added 103 Five-Year Financial Summary 104 SOVEREIGN TRUST INSURANCE PLC CORPORATE INFORMATION FOR THE YEAR ENDED 31 DECEMBER 2018 Chairman Mr. Oluseun O. Ajayi Chairman Directors 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), OFRIndependent Director Company Secretary Equity Union Limited Register Office 17, Adetokunbo Ademola Street Victoria Island, Lagos, Nigeria www.stiplc.com Auditors Ernst & Young 10th & 13th Floors UBA House 57 Marina, Lagos Bankers First Bank of Nigeria Limited Standard Chartered Bank Zenith Bank Plc Access Bank Plc Guaranty Trust Bank Plc Diamond Bank Plc Ecobank Plc Providus Bank Limited First City Monument Bank Limited Fidelity Bank Plc Unity Bank Plc Heritage Bank Plc Sterling Bank Plc Wema Bank Plc RC No. 31962 Solicitors Citipoint Chambers Registrar Meristem Registrars Limited Reporting Actuary Logic Professional Services 2 SOVEREIGN TRUST INSURANCE PLC CORPORATE INFORMATION - Continued FOR THE YEAR ENDED 31 DECEMBER 2018 Reinsurers Aveni Reinsurance Company Limited African Reinsurance Corporation Continental Reinsurance Plc WAICA Reinsurance Corporation Management Team Olaotan Soyinka Managing Director/CEO Ugochi Odemelam Executive Director, Marketing & Business Development Jude Modilim Executive Director, Technical Division Oduniyi Odusi Executive Director, Branch Operation & Business Development Kayode Adigun GM/Divisional Head, Finance & Administration Sanni Oladimeji DGM/Head, Risk Management & Compliance Segun Bankole AGM/Head, Brokers' Department 1 Olalekan Oguntunde AGM/Head, ICT Emmanuel Anikibe AGM/Head, Brokers' Department 2 Mohammed Alfa AGM/Head, Northern Area Operations Samuel Oseni AGM/Head, Internal Audit Angela Uche-Onochie AGM/Head, Eastern Area Operations 3 SOVEREIGN TRUST INSURANCE PLC 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% Total equity 5,820,355 5 ,471,904 6% Insurance contract liabilities 3,088,838 3 ,260,519 -5% Per Share data: Basic earnings per share (kobo) 4.13 1.89 118% 4 SOVEREIGN TRUST INSURANCE PLC REPORT OF THE DIRECTORS FOR THE YEAR ENDED 31 DECEMBER 2018 1 LEGAL FORM AND PRINCIPAL ACTIVITY IncompliancewiththerelevantprovisionsoftheCompaniesandAlliedMattersAct,CAPC20LawsoftheFederationofNigeria2004,the InsuranceAct2003,relevantpolicyguidelinesissuedbytheNationalInsuranceCommission(NAICOM)andtheFinancialReporting CouncilofNigeriaActNo.6,2011,theDirectorshavepleasureinsubmittingtothememberstheirreporttogetherwiththeaudited financial statements of Sovereign Trust Insurance Plc ("the Company") for the year ended 31 December 2018. TheCompanywasincorporatedasalimitedliabilitycompanyon26February1980andcommencedbusinesson2January1995asanon- lifeinsurerwithanauthorizedsharecapitalof ₦30millionandafullypaidupsharecapitalof ₦20millionfollowingtheacquisitionand recapitalization of the then Grand Union Assurance Limited. TheCompanywhichwaslicensedtocarryoutbusinessinallclassesofNon-Lifeinsuranceandasspecialriskinsurerscurrentlyhas authorizedsharecapitalof ₦5.25billiondividedinto10.5billionunitsof50kobopersharewithapaidupcapitalof ₦4.1billiondivided into 8.3 billion units of 50kobo per share. TheCompany'scorporateheadofficeisatVictoriaIsland,Lagoswith17otherbranchesspreadacrossmajorcitiesandcommercial centersinNigeria.TheCompanybecameaPublicLimitedCompany(PLC)on7April2004,andwaslistedontheNigerianStockExchange on 29 November 2006. 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) Profit before income tax 540,554 202,694 Income tax expense (196,318) (44,825) Profit after income tax 344,236 157,869 3 DIVIDEND No dividend is proposed in respect of the current year (2017: Nil). 4 BUSINESS REVIEW AND FUTURE DEVELOPMENT TheCompanycarriedoutinsuranceactivitiesinaccordancewithitsMemorandumandArticlesofAssociation.Acomprehensivereviewof the business for the year and prospects for the ensuing year will be contained in the Managing Director's Report in the Annual Report. 5 SOVEREIGN TRUST INSURANCE PLC REPORT OF THE DIRECTORS - Continued 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 ThenamesoftheDirectorsandtheirinterestsintheissuedandpaidupsharecapitaloftheCompanyasrecordedintheRegisterof Directors' shareholdings as at 31 December 2018 are as follows: Number of Number of indirect direct Ordinary Total Total Indirect Representation on Name Ordinary Shares Shares held in 31 Dec 2018 31 Dec 2017 the Board held in 2018 2018 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 Morning Side Capital Mr. Samuel Egube - 1,575,000,000 1 ,575,000,000 1,575,000,000 Partners Limited Mr. Jude Modilim 2,205,990 - 2,205,990 240 Mr. Oduniyi Odusi - - - - Col. Musa Shehu (Rtd), OFR - - - - NoneoftheDirectorshasnotifiedtheCompanyforthepurposesofSection277oftheCompaniesandAlliedMattersAct,CAPC20Laws of the Federation Nigeria 2004 of any disclosable interests in contracts in which the Company was involved as at 31 December 2018. 7 COMPLAINT MANAGEMENT POLICY IncompliancewiththeSecuritiesandExchangeCommission(SEC)rulesrelatingtotheComplaintsManagementFrameworkofthe NigerianCapitalMarket,SovereignTrustInsurancePlchasadoptedaComplaintsManagementPolicy.TheCompanyshallreceiveand entertainallShareholders'complaintsarisingoutofissuescoveredundertheInvestmentsandSecuritiesAct(ISA),2007theRulesand RegulationsmadepursuanttotheISA,therulesandregulationsofSecuritiesExchangesandguidelinesofrecognisedtradeassociations as directed. 6 SOVEREIGN TRUST INSURANCE PLC REPORT OF THE DIRECTORS - Continued FOR THE YEAR ENDED 31 DECEMBER 2018 8 ACQUISITION OF OWN SHARES The Company did not purchase any of its own shares during the year. 9 COMPANY'S DISTRIBUTORS TheCompany'sproductsaremarketedbyinsurancebrokersandagentsthroughoutthecountry.TheCompanyalsoemploysthedirect marketing method to source for insurance business. 10 INSURANCE TECHNICAL AGREEMENTS The Company had reinsurance treaty arrangements with the following companies during the year: ● African Reinsurance Corporation ● Aveni Reinsurance Company Limited ● Continental Reinsurance Plc ● WAICA Reinsurance Corporation 11 CORPORATE GOVERNANCE TheCompanymaintainscorporatepoliciesandstandardsdesignedtoencouragegoodandtransparentcorporategovernance,avoid potentialconflictsofinterestandpromoteethicalbusinesspractices.ThebusinessoftheCompanyisconductedwithintegritywhichpays due regard to the legitimate interests of our stakeholders. 12 SECURITIES TRADING POLICY InlinewiththeNigerianStockExchangeamendedrules,SovereignTrustInsurancePlchaspolicyguidingDirectors,officers,key management personnel, contractors and all other employees dealing in the securities of the Company. ThepolicyaimstoensurethatthereputationoftheCompanyisnotadverselyimpactedbyperceptionsoftradingintheCompany's securities at inappropriate times or in an inappropriate manner. Thepolicy'sintentionistoensurethatDirectors,officersandotherCompanypersonnelsdonotmakeimproperuseof"pricesensitive information" gained their position or engagement in the Company. 13 EMPLOYMENT AND EMPLOYEES a Employee Involvement and Training TheCompanyiscommittedtokeepingemployeesfullyinformedasmuchaspossibleregardingtheCompany’sperformanceandprogress. Viewsofemployeesaresought,wherepracticable,onmatterswhichparticularlyaffectthemasemployees.TheCompanyrunsanopen