AFRICAN ALLIANCE INSURANCE PLCafricanallianceplc.com/download/financials_2018.pdf · 2019-06-26 ·...

AFRICAN ALLIANCE INSURANCE PLC

CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS 31 DECEMBER 2018


Consolidated and separate financial statements

For the year ended 31 December 2018

Table of contents

Page

Corporate information

1

Vision, Mission and Values

3

Certification by company secretary 4

Statement of directors' responsibilities 5

Risk management declaration

6

Certification Pursuant to Section 60(2) of Investment and Securities Act No.27 of 2007 7

Directors' report 8

Audit Committee Report

12

Enterprise risk management

13

Management's discussion and analysis 17

Corporate governance

18

Result at a glance

25

Independent auditor

26

Statement of significant accounting policies 31

Consolidated Statement of financial position 66

Consolidated Statement of Comprehensive income 67

Statement of changes in equity – Group 68

Statement of changes in equity – Company 69

Statement of cash flows

70

Notes to the financial statements 71

Other national disclosure

135




1

Corporate information

Membership of the Board of Directors during the year ended 31 December, 2018

1 Anthony Okocha Non-Executive Director Acting Chairman

2 Abayomi Mumuni Non-Executive Director Member Resigned May 2018

3 Funmi Omo Managing Director Member

4 Olabisi Adekola Executive Director Member

COMPANY SECRETARY

Tope Adebayo LLP

FRC/2013/NBA/0000000001586

RE-INSURERS

African Reinsurance Corporation

WAICA Reinsurance Corporation Plc

REGISTERED OFFICE

54, Awolowo Road, Ikoyi

Lagos.

RC NO: 2176

[email protected]

HEAD OFFICE

54 Awolowo way, Ikoyi

Lagos

ACTUARIES

Ernst & Young

FRC/2012/NAS/00000000738

(Consulting Actuaries & Chartered Insurers)

10th & 13th Floors, UBA House

57, Marina

Lagos, Nigeria

REGISTRARS

Carnation Registrars Limited

2a Gbagada Expressway

Anthony Village

Lagos.

ESTATE SURVEYOR AND VALUER

A. C Otegbulu & co

FRC/2013/NIESV/00000001582




2

BANKERS

EcoBank Nigeria Limited

Guaranty Trust Bank Plc.

First Bank of Nigeria Limited

Fidelity Bank Plc

Access Bank Plc

Keystone Bank Limited

Sterling Bank Plc

Union Bank of Nigeria Plc

First City Monument Bank Plc

AUDITORS

Deloitte & Touche

(Chartered Accountants)

Civic Towers

Ozumba Mbadiwe Avenue,

Victoria Island,

Lagos.

REGULATORY AUTHORITY

National Insurance Commission




3

Mission, Vision and Core Values

VISION

‘’To be the most preferred life insurance specialist’’

MISSION

’We improve the quality of life of our clients using cutting edge technology and competent personnel

to add value to our stakeholders’’

CORE VALUES

Accountability

We are responsible

Accessibility

We are within your reach

Integrity

We keep our words

Professionalism

We provide quality service

Loyalty

We are committed to our stakeholders

Creativity

We are innovative




8

DIRECTORS' REPORT

The directors submit their report together with the audited consolidated and separate financial

statements for the year ended 31 December 2018, which disclose the state of affairs of the Group.

(a) Legal Form

The company was incorporated as a private limited liability company in 1960 under the

provisions of the Companies and Allied Matters Act CAP C20 LFN 2004 with RC No 2176. The

Company became a public liability company following the successful completion of the private

placement exercise undertaken by the company in June 2008, On 17 September 2009, the

Company became listed on the Nigerian Stock exchange. African Alliance Insurance Plc owns

100% equity of Axiom Air Limited, a cargo airline Company and 98% in Ghana Life Insurance

Company Limited, a Life Company in Ghana.

(b) Principal activities

The principal activity of the Group is the provision of life business risk management solutions

to corporate and retail customers in Nigeria.

(c) Operating Results

The Group’s results for the 12-months period are set out on pages 66 and 67. The loss after

tax for the year of N2.7bn for the Group and N2.6bn for the Company in 2018 and a loss

after tax of N6.3bn and N3.7bn in 2017 has been transferred to retained earnings.

Group Company

31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

N'000 N'000 N'000 N'000

Gross premium written 6,795,577 7,626,710

5,166,396 6,335,448

Net Underwriting income 6,732,779 7,533,138 5,112,057 6,251,479

Loss before tax (2,422,953) (6,726,979)

(2,413,904) (4,167,907)

Taxation (273,662) 475,924

(244,662) 455,316

Loss after tax (2,696,615) (6,251,055) (2,658,566) (3,712,591)

(d) Dividends

No dividend was proposed for year ended 31st December 2018

(e) Directors

The directors who held office during the year and to the date of this report were:

Mrs Funmi Omo - Managing Director

Mrs Olabisi Adekola - Executive Director

Mr Anthony Okocha - Non Executive

Amb. Abayomi Mumuni - Non Executive- resigned 15th May 2018

Appointment of Directors

No new director was appointed during the year.

(f) Directors' shareholding

The direct and indirect interests of the Directors in the issued share capital of the company

as recorded in the Register of Directors' shareholding and/or as notified by the Directors for

the purpose of section 275 and 276 of the Companies and Allied Matters Act and the listing

requirements of the Nigerian Stock Exchange as at 31 December, 2018 are as follows:




9

Names Direct

Shareholding

Indirect

Shareholding

Anthony Okocha 50,000 Nil

Funmi Omo 500,000 Nil

Olabisi Adekola 500,000 Nil

(g) Directors interests in contracts

None of the directors has notified the Group for the purpose of section 277 of the Companies

and Allied Matters Act, of their direct or indirect interest in contracts or proposed contracts

with the Group during the year.

(h) Shareholding

The shares of the company were fully owned by Nigerian Citizens and associations.

The range of shareholding as at 31 December 2018 is as follows:

Range of Holdings

Numbers of

Shareholders

Numbers of

Shares held

%

Holding

1 – 7,000,000 1139 842,525,538 4.09

7,000,001 – 15,000,000 58 578,525,499 2.81

15,000,001 – 40,000,000 13 316,116,282 1.54

40,000,000 and Above 34 18,847,832,681 91.56

Total 1244 20,585,000,00 100

(i) Major Shareholding

The following shareholders held more than 5% of shares of the company according to the

Register of members as at 31 December 2018:

2018

2017

Number of shares('000)

Percentage held (%)

Number of shares('000)

Percentage held

Conau Limited 11,814,700,000 57.39 11,814,700,000 57.39

Universal Insurance Plc 1,200,000,000 5.83 1,200,000,000 5.83

13,014,700,000 63.22 13,014,700,000 63.22

(j) Donations and gifts

Contributions to charity and non-government organisations during the year amounts to

N900, 000 (2017: Nil)

2018 2017

N'000 N’000

Wesley School for the Blind

300 -

Nurah Foundation 100 -

Laspec

50 -

David & Mariam Agbeja Foundation

50 -

Junior Textile Union

400 -

900 -




10

(k) Post Balance Sheets Events

There are no other significant post balance events which have not been provided for in these

financial statements.

(l) Human Resources

Employment of Disabled Persons

The Group continues to maintain a policy of giving fair consideration to the application for

employment made by disabled persons with due regard to their abilities and aptitudes. The

Group’s policy prohibits discrimination against disabled persons in the recruitment, training

and career development of its employees. In the event of members of staff becoming

disabled, efforts will be made to ensure that their employment with the Group continues and

appropriate training arranged to ensure that they fit into the Group’s working environment.

As at 31 December 2018, the Group had no disabled persons in its employment.

Health, Safety and Welfare at Work

The Group enforces strict health and safety rules and practices at the work environment,

which are reviewed and tested regularly. The Group retains top-class private hospitals where

medical facilities are provided for staff and their immediate families at the Group’s expense.

Fire prevention and fire-fighting equipment are installed in strategic locations within the

Group’s premises. The Group operates a Workmen’s Compensation Insurance covers for the

benefit of its employees. It also operates a contributory pension plan in line with the Pension

Reform Act, 2004.

Employee Involvement and Training

The Group ensures, through various fora, that employees are informed on matters

concerning them. Formal and informal channels are also employed in communication with

employees with an appropriate two-way feedback mechanism. In addition, employees of the

Group are nominated to attend both locally and internationally organized courses. These are

complemented by on-the job training. All officers of the Group attend meetings and retreats

where members of staff critically discuss the Group's performance and recommend solutions

to identified challenges.

Gender Analysis

The number and percentage of women employed in the company during the financial year

Vis-a- Vis total workforce is as follows:

Male

Number

Female

Number

Male

%

Female

%

Employees 46 51 47% 53% Gender analysis of Board and Top

Management is as follows:

Board 2 2 50% 50%

Top Management 4 5 44% 56% Detailed analysis of the Board and Top

Management is as follows:

Senior Manager 2 3 40% 60%

Assistant General Manager 2 0 100% 0%

Executive Director 0 1 0% 100%

Chief Executive Officer 0 1 0% 100%

Non-Executive Director 2 0 100% 0%




13

ENTERPRISE RISK MANAGEMENT

Enterprise risk management philosophy

Our business provides financial guarantee to our clients and this is also linked to their longevity.

Hence, the management of our business strongly focuses on mortality studies and investment

performance.

A key business objective is meeting client claims as and when they occur, achieving this objective

involves us in many activities including:

• Correctly pricing the insurance risks,

• ensuring our business contracts are adequately written, optimally investing both Insurance

and Shareholder Funds,

• timely reporting our financial activities internally and externally, deploying adequate

operating and having adequate processes/people/systems"

The Board is committed to ensuring ERM is embraced by all the staff of the Group and also ensure

that our processes reflect our strategic objectives.

Our Risk Culture

The Group is building a risk culture whereby there is an adequate level of risk awareness across all

business units and amongst all employees.

Risks faced by the Group are communicated across the Group. The Risk Management Committee

(RMC) ensures that the business units develop a risk culture where all Heads of Departments /Units

are aware of the Group’s strategy objectives and risk Appetite and limits. The business process

adheres to the stipulated risk limits and if they are likely to be exceeded, the information is

escalated to the Risk Officer/RMC.

Risk management framework

We have robust and effective Group management framework which seeks to protect our company's

capital base and earnings without hindering our business growth:

We operate and maintain three lines of defence for the management and oversight of risk to ensure

adherence to guiding principles and control. The lines of defence are

First Line – Board and Management

The Board of Directors set the tone for Risk Management through approving the Strategic objectives

of the Group and the Group's risk appetite and tolerance limits. The Risk Management Committee

has the oversight role of ensuring that the business units adhere to the Boards directives and ensure

the business units develop a risk culture where all leaders are aware of the company's strategy.

The Risk Management Committee through the Chairman reports on risk matters to the Board. The

Chief Risk Officer collates quarterly enterprise reports to the Risk Management Committee.

Second Line – Risk Management Unit

The company’s risk management department is responsible for designing risk framework

methodologies and tools which supports the business in analysing and managing risks and providing

early warning of adverse trends. The department reports to the Board, management and staff on

risk identification, control and mitigation.




14

Third Line – Internal Audit Function

This line of defence provides independent and objective assurance on the effectiveness of internal

controls established by the Board, management and Risk Unit in the Group.

Risk appetite

The Group has low appetite for taking risk. The Group intends at all times ensure that it is solvent

and ensure that all obligations are met as at when due.

The Group intends to always be in compliance with applicable laws and regulations and be within

its set tolerance limit.

Risk management policies and procedures

The Group has a risk management policy and procedural manual which sets out the Group's risk

governance framework. The document is implemented by the Risk Management Committee, and

the committee reports on risk matters to the Board. The Chief Risk Officer collates quarterly

enterprise - wide reports to the Risk Management Committee.

Risk classification

Operational risk

This is the risk of loss from inadequate or failed internal processes, people and systems or from

external events which arises from the potential that inadequate information systems, operational

problems, breaches in internal controls, fraud, or unforeseen catastrophes will result in unexpected

losses. The Group has policies that cover risk that may arise from people, systems and internal

process failures. The policies include staff recruitment, training, retention plans, succession plans,

remuneration and welfare benefits, designing standard operating procedure and policies, driving

compliance culture, process automation, Information Technology support systems, data integrity,

IT systems access, etc.

Liquidity risk

Liquidity risk exist when there is insufficient cash flow to meet the Group’s operational and financial

obligations and is usually associated with inability to liquidate assets or obtain funding from external

sources to pay claims and other liabilities when due. The Company manages its liquidity risk through

appropriate assets and liability management strategy through the Investment Management

Committee. Monthly reports and review of liquidity gaps is conducted to assess the level of liquidity

risk.

Reinsurance risk

This is the risk of inadequate reinsurance cover to mitigate underwriting risk. It usually occurs when

there is insolvency of a reinsurer, discovery of exposures without current reinsurance coverage, or

exhaustion of reinsurance covers through multiple losses. The Group has documented reinsurance

policies for adequate reinsurance arrangements and treaties for all categories of insurance business

transacted. The policies include the process for Reinsurer selection, monitoring, claims recovery,

etc.

Underwriting risk

Underwriting is the process by which an insurer determines the conditions necessary and suitable

to accept insurance risk. The risk crystallises when there is severe and frequent claims against the

Group’s projected capacity. The Group has embedded internal control processes to guide its

insurance business and guide against the risk of unexpected losses and capital erosion. There is

well documented underwriting policies and procedure and are enforced throughout the organisation.




15

Business risk

The Group’s business risk is associated with gaining market shares and remains profitable. This risk

is considered through documented process for product development and launch, business segment

profitability analysis, stakeholder’s engagement as well as being embedded in our brand promise.

Reputational risk

This is the risk of events that could cause public distrust and damages to the Group’s integrity,

reputation and goodwill especially in the eyes of the customers, regulators, competitors, and the

general public. We manage reputational risk through a structured approach for defining and

implementing core values and acceptable standard of behaviour which the staff are expected to

follow while conducting the day to day business of the Group. The Group risk assessment and

monitoring process has embedded controls for testing reputational risk and the outcome of such

exercise is communicated to the Board Risk Committee on a quarterly basis.

Legal/compliance risk management

The Group has procedures to ensure that all statutory regulations are completely adhered to by the

business unit at all time. These regulations include those set by NAICOM and other relevant

agencies of government. There are internal control processes that identify potential breaches to the

regulations and are promptly mitigated. Some of the control processes include:

a) Know -your-customer (KYC) procedure

b) Anti-money laundering/combating the financing of terrorism (AML/CFT)

c) Anti-bribery and corruption measures

d) Guidelines for adherence to Corporate Governance principles

e) Gift policies

f) Whistle blowing policies

Risk report and risk map

Issues arising from risk assessment process are collated and presented in a report called the Risk

Report which forms the basis of constructing the risk map. The risk map draws senior management's

attention to the critical risk factors as well as the adequacy of existing controls to mitigate the risk.

The risk map provides a snap short summary of the significant risk and the ratings and probability

of occurrence within a specific period. This forms the basis for estimating the potential operational

loss.

Risk control self-assessment (RCSA)

The Group has a mechanism for risk assessment on periodic basis and this is known as Risk control

self-assessment (RCSA) principle. It involves the tests and procedures or assessments that need

to be performed periodically to assure that key controls are in place and are working effectively as

designed. The control requirements are proactively assessed through Process risk analysis and

review of policy requirements, loss events, and audit findings. The Group then set controls required

to comply with policy requirements and test these processes for adequacy and risk mitigation

capability. Risk Champions are engaged in each business or risk unit and facilitates the process of

risk control self-assessment in the Group.

Key risk indicators

The key risk indicator (KRI) provides trend analysis of risk exposures or deviation from standard

processes. This helps the Risk Officers and Risk owners to promptly identify increasing threat to

business activities and escalate to the appropriate senior levels for control and to probably review

the risk appetite. The trend analysis is one of the sources of data for the risk report and risk map

documented by the Group.




16

Loss events reporting

The Group has a Loss Event Register that captures all actual loss sustained during operational

processes.

Health and safety management

The Health and Safety Management has been instituted to provide and maintain safe healthy

working conditions, work equipment and systems for all staff. This responsibility also extends to

visitors, contractors and others who may potentially be affected by our activities. The Health and

Safety Policy framework underpins the policy statements, roles and responsibilities of HSE officer

with "Safety First" culture and zero tolerance for near misses approach.

Business Continuity Plan (BCP)

The business continuity plan (BCP) has been designed to promote resilience against operational

threats especially with regards to continuity of critical operations, in the event of a disaster or

disruption to critical operations. The BCP framework also addresses adherence to contingency

planning procedures, in the event of emergencies. We aim to continually improve on inherent gaps

identified during each simulation exercise.




17

MANAGEMENT DISCUSSION AND ANALYSIS

The Management Discussion and Analysis (MD&A) presents management’s view of the financial

results of the company’s operations and cash flows of African Alliance Insurance Plc and its

subsidiaries for the year ended 31st December 2018.

The nature of the business

African Alliance Insurance Plc was incorporated as a Private Limited Liability Company on May 6th

1960 and was the first indigenous insurance company to carry out the business of Life Assurance

in Nigeria. In 2005, African Alliance Insurance Plc. pioneered the sale of Takaful (Islamic Insurance)

in Nigeria through a robust selection of Sharia compliant insurance and investment products, also

in the same year, the company went into a joint venture with First Securities Discount House Limited

(FSDH) to set up Pension Alliance Limited (PAL), a licenced Pension Fund Administrator.

Management objectives and strategies

The Group has established a solid reputation for excellent customer service and prompt claims

settlement. Our marketing efforts are co-ordinated through a network of 18 Branches manned by

experienced managers and highly motivated sales personnel for effective field coverage. Other

recent and on-going capacity building efforts and performance enhancers embarked on by the

Company’s management include information technology infrastructure to link our offices nationwide

for more excellent standard of service delivery through improved on-line, real-time customer claims

and policy handling processes.

Result of operations:-(in thousands of Nigerian Naira) Group Company

2018 2017 % 2018 2017 %

Gross premium written 6,795,577 7,626,710 (11%) 5,166,396 6,335,448 (18%)

Net underwriting income

6,732,779 7,533,138 (11%) 5,112,057 6,251,479 (18%)

Underwriting loss (2,575,122) (7,176,234) 64% (2,891,617) (7,099,647) 59%

Investment income 3,241,798 3,224,550 1% 3,168,217 3,133,558 1%

Admin/Operating expenses (2,065,419) (1,675,814) 23% (1,757,238) (1,118,933) 57%

Loss after tax (2,696,615) (6,251,055) 57% (2,658,566) (3,712,591) 28%

Critical performance measures and indicators

Gross Premium Written – The Group premium income reduced by 11% during the current year

under review over previous year 2017. This is attributable to the decision of the Company to

downplay annuity business and also stiff operating environment.

Net Premium Revenue – The net underwriting income reduced by 11% when compared with

previous year due to above reasons.

Underwriting Loss – The Group result showed a negative amount of N2.5billion during the year

against a result of N7.1billion in the previous year due to changes instituted by the Company as

mentioned above.

Investment Income – This increased by 1% as at 31 December 2018. This could be attributable

to changes in investment decisions by the Group.

Operating Expenses – The operating expenses of the Group increased by 23% as at 31st

December 2018 when compared with previous year 31 December 2017.

Loss after tax – The Group made a loss before tax of N2.6billion as against N6.2billion in the

previous year. This is as a result of changes introduced by the Company to reposition its activities.




18

CORPORATE GOVERNANCE

The Group is committed to high standards of Corporate Governance. Corporate Governance practice

in the Group is drawn from various applicable codes of corporate governance issued by NAICOM

and the Code of Governance codes available in the Country. This ensures compliance with

regulatory requirements as well as the core values on which the Group was established.

The Group has developed corporate policies and standards to encourage good and transparent

corporate governance framework to avoid potential conflicts of interest between all stakeholders

whilst promoting ethical business practices.

The activities of the Group are at all times conducted with high standards of professionalism,

accountability and integrity with due regard to the genuine interests of all our stakeholders. This is

the foundation of our history, values and culture as a Group for building and sustaining an endurable

institution that guarantees profitability and professionalism whilst enhancing shareholders’ value.

African Alliance Insurance Plc is committed to the continuous management of its business

operations by identifying and implementing key governance indicators which aid sustainable

development and guarantee shareholders excellent return on investment.

Governance Structure

The governance of the Group resides with the Board of Directors who are accountable to

shareholders for creating and delivering sustainable value through the management of the Group’s

business. The Board of Directors is responsible for the efficient operation of the Group and to ensure

the Group fully discharges its legal, financial and regulatory responsibilities.

The membership of the Board is a mix of executive and non-executive directors based on integrity,

professionalism, career success, recognition and the ability to add value to the organisation. In

reviewing Board composition, the Board ensures a mix with representatives from different industry

sectors.

The Group’s financial performance is reviewed at each Board meeting. The Board reviews all

financial reports before they are released. The effectiveness of the process for assessing risks and

the execution of control activities are monitored continuously at various levels. This involves reviews

of results in comparison with budgets and plans. Responsibility for maintaining an effective control

environment and operating the system for risk management and internal control of financial

reporting is delegated to the Chief Executive Officer (CEO)

The Group has a compliance program. Standard requirements have been defined for internal control

over financial reporting. The management expects all employees to maintain high moral and ethical

standards and those expectations are communicated to the employees through internal channels.

The Board monitors the effectiveness of its governance practices, manages potential conflict and

provides general direction to management. These oversight functions of the Board of Directors are

exercised through its various Committees. In the course of the period under review, the Board has

three (3) Committees to ensure the proper management and direction of the Group via interactive

dialogue on a regular basis.

The Board comprises of 4 (Four) members led by a Chairperson who is a Non-Executive Director. 2

(Two) Executive Directors, the Managing Director and Chief Executive Officer and Executive Director

for Finance, 1 (One) Non-Executive Director.

The Board derives its effectiveness from the various skills and vast experiences of each Director.




19

The members of the Board bring various and varied competencies to bear on all Board deliberations.

The Directors have attained the highest pinnacle of their various professions. The Board meets

quarterly and other meetings are convened when necessary and is responsible for the effective

control and monitoring of the Group's strategies.

The Directors are provided with comprehensive information at each of the quarterly Board meetings

and are also briefed on business developments monthly.

The primary responsibility of the Board of Directors is to build long-term shareholders value and

ensure oversight of management. The Board ensures that adequate systems, policies and

procedures are in place to safeguard the assets of the Group. The Board is also responsible to

shareholders for creating and delivering sustainable shareholders value through the management

of the Group’s business.

Responsibilities of the Board

1. The Board determines the Group's objectives and strategies and plans to achieve them.

2. The Board approves mergers and acquisitions, equity investments, branch expansion and

establishment of subsidiaries; approval of remuneration policy and packages of the Board

members.

3. The Board considers and approves the annual budget, monitors performance and ensures that

the Group remains a going concern.

4. The Board approves resolutions and corresponding documentation for shareholders in general

meeting(s), shareholders circulars, prospectus and principal regulatory filings with the

regulators.

5. The Board ensures that a risk culture and effective risk management process exists and is

maintained.

6. The Board approves changes to the Group’s corporate structure and changes relating to the

Group capital structure.

7. The Board approves yearly audited financial statements.

8. The Board monitors the statutory audit of the financial statements, evaluates the

independence of the statutory auditor or audit firm, particularly the provision of related

services to the Group and prepares the proposal for resolution on the election of the auditor.

It performs this function through the Board Audit Committee.

9. The Board determines the terms of reference and procedures of the Board committees,

including reviewing and approving the reports of such committees where appropriate.

10. The Board ensures that an adequate budgetary and planning process exists such that

performance is measured against budgets and plans.

11. The Board reviews annually the description of the main features of the internal control and

risk management systems in relation to the financial reporting process.

12. The Board ensures evaluation, compensation and succession for Key Management Roles

13. The Board performs oversight of the Management of Risks and the Implementation of Internal

Controls.

Composition of the Board

Anthony Okocha - Acting Chairman

Funmi Omo - Managing Director/CEO

Olabisi Adekola - Executive Director

Abayomi Mumuni - Non-Executive Director resigned 15th May 2018




20

Board Meetings

The Board of Directors meetings are held every quarter or as the need arises to consider the

Financial Statement of the Group for the period, review of management accounts for the quarter,

consider the reports and minutes of Board committees, consider the report of risk assessment and

resolution and any other reports pertaining to issues within the purview of the Board’s

responsibilities.

Board Committees

The Board discharges its responsibilities through the different committees and is regularly informed

about the work of the committees by their respective chairpersons.

The Board has three standing (3) Committees, namely:

(1) Audit and Compliance Committee,

(2) Board Finance, Investment Committee,

(3) Board Enterprise Risk Management and Governance Committee

The Committees make recommendations to the Board, which retains responsibility for final decision

making.

All Committees report to the Board and as such must conform to the regulations laid down by the

Board, with well-defined terms of reference contained in the charter of each Committee. The

Committees render reports to the Board at the Board’s quarterly meetings.

A summary of the functions of each committee is stated below:

Audit and Compliance Committee

The Committee held five meetings during the year. Section 359(6) of the Companies and Allied

Matters Act Cap C20, Laws of the Federation of Nigeria, 2004 provides for the functions of this

committee. In addition, the 2011 Securities and Exchange Commission (SEC) Code of Corporate

Governance also assigns responsibilities to the Committee. In addition to this, a Board Audit

Committee is constituted to further ensure compliance to the statutory requirements.

The Committee provides oversight responsibility for the audit, regulatory, compliance and risk

functions of the Group. The Committee also discusses the quarterly compliance reports and takes

delivery of the audit reports and statements by the external auditor. The Committee monitors the

effectiveness of the Group's internal control system, risk management system, compliance system

and internal audit system. The committee recommends the appointment of external auditors and

monitors its independence and quality and review audit fee of the external auditor.

Core responsibilities of the Committee include:

1. Monitoring the effectiveness of internal control and processes in the Group

2. Setting and overseeing the overall standard for financial reporting and internal controls within

the Group

3. Reviewing and assessing the quality of the work done by the professionals responsible for

financial reporting

4. Engaging in discussions with external and internal auditor on the quality and acceptability of

the control environment and reporting structure.




21

Board Finance, Investment and General Purpose Committee

The Finance, Investment and General Purpose Committee monitors and reviews the Group's

investment policies, it ensures at all times that the Group's investment policies reflect the objectives

of safety and maintenance of fair returns on investments. The Committee equally establishes

standards, rules and guidelines for the Group's investment management operations while also

reviewing the Group's Investment strategy with a view to sustaining medium to long term

competitive edge. The value of the Group’s marked-to-market portfolios is also evaluated by this

Committee.

Objectives of the Committee include:

1. Assist the Board to oversee the overall management of the company’s finances

2. Support the Board in overseeing the company’s investment strategy and portfolios to ensure

consistency and compliance with set objectives

3. Advise the Board on its oversight responsibilities in relation to human capital issues in general,

and in specific, the recruitment, compensation and benefits

4. Provide broad guidance to the Board on other generic but strategic matters including but not

limited to customer satisfaction, corporate communications etc.

5. Assess the company’s financial statements including the income statement, statement of

financial position, statement of changes in equity and the statement of cash flow

6. Review the quality of the company’s investment portfolio with a view to appraising performance

and recommending necessary improvements.

7. Review the process for determining provision for investment losses and the adequacy of

provisions made.


1. The committee reviews and recommends for the board’s approval the company’s annual

operating budget

2. The committee reviews the capital adequacy and requirements of the company and make

recommendations.

3. Ensure that the Company’s Investment Portfolio is structured to meet the minimum

requirement for Investments as per Insurance Act 2003

4. Review and make recommendations to the Board regarding investment strategy, policy and

guidelines, its implementation and compliance with those policies and guidelines

5. Ensure that the liability of insurance contracts are adequately matched against their maturity

Profiles

6. Periodically review the performance of the major securities and financial instruments relative

to the investment portfolio of the company.

7. The committee annually reviews the company’ policies with respect to financial risk assessment

and financial risk management

The Committee met four times during the year to review the financial performance of Group and

approve the management and performance of the investment portfolio for the Group.

Board Enterprise Risk Management and Governance Committee

The Enterprise Risk Management and Governance Committee assist the Board in the development

and implementation of a comprehensive Enterprise Risk Management framework in line with

NAICOM’s risk management guidelines. It reviews and monitors the Enterprise Risk Management

practices of the Company. The Committee also ensures the development and implementation of an

appropriate corporate governance framework for the Company while it also reviews and monitors

the corporate governance practices and the implementation of the corporate strategy in the context

of prevailing trends in the business landscape.




22

Objectives of the Committee include:

1. The development and implementation of a comprehensive enterprise risk management

framework in line with NAICOM’s risk management guidelines, and where possible,

international best practices on risk management.

2. Reviewing and monitoring of the enterprise risk management practices of the Company and

providing improvement recommendations where necessary.

3. Overseeing the development and implementation of a Business Continuity Plan for the

Company relative to existing and emerging risks.

4. Ensuring the development and implementation of an appropriate corporate governance

framework for the Company in line with NAICOM’s code of corporate governance and

international best practices.

5. Reviewing and monitoring the corporate governance practices and providing improvement

recommendations where necessary.

6. Monitoring the implementation of the corporate strategy in the context of prevailing trends in

the business landscape.

7. Supervising the strategic activities and initiatives of key operational functions of the Company.


1. Oversee the development, and when necessary, the review of the enterprise risk management

framework, policies and procedures.

2. Review the adequacy of the risk control activities and provide additional control measures

where necessary.

3. Ensure that the enterprise risk management framework includes processes for the

identification, assessment, control and mitigation of all categories of risks.

4. Escalate high impact risks to the Board as deemed necessary for further consideration with a

view to promptly intervening in the mitigation of such risks.

5. Support the Board and Management in the process of defining short to medium term strategic

aspirations and objectives for the Company.

6. Review the implementation status of key strategic initiatives as defined in the approved

corporate strategy and make necessary recommendations.

7. Continuously monitor conflict of interests within Management and Board Members and advise

the Board on addressing same.

8. Work in conjunction with the Management and other relevant board committees in ensuring

that the integrity of the Companies’ accounting and reporting systems are maintained.

The composition of the committees are as follows:

Audit and Compliance Committee

Alhaji Tunde Kabir Sarumi - Chairman

Mr Fidelis Ijoma Opia - Member

Dr Raphael Naji Attu - Member

Mr Anthony Okocha - Member

Board Finance, Investment and General Purpose Committee

Anthony Okocha - Chairman

Abayomi Mumuni - Member resigned 15th May 2018

Funmi Omo - Member

Olabisi Adekola - Member




23

Board Enterprise Risk Management and Governance Committee

Anthony Okocha - Chairman

Abayomi Mumuni - Member resigned 15th May 2018

Funmi Omo - Member

Olabisi Adekola - Member

Attendance of Board and Committee meetings

2018

Board Meetings

Composition

No of meetings

attended 24 May 25 June 17 Jul

18 Oct

Anthony Okocha Chairperson 4 * * * *

Abayomi Mumuni Member Nil Resigned

Funmi Omo Member 4 * * * *

Olabisi Adekola Member 4 * * * *

Audit and Compliance Committee Composition

No of meetings attended 15 Feb 3 May 17 Jul 9 Aug 22 Nov

Alhaji Tunde Kabir Sarumi Chairperson 5 * * * * *

Mr Fidelis Ijoma Opia Member 4 * - * * *

Dr Attu Naji Raphael Member 5 * * * * *

Mr Anthony Okocha Member 5 * * * * *

Board Finance, Investment and General Purpose Committee Composition

No of meetings attended 13 Feb 02 May 09 Aug 10 Oct

Anthony Okocha Chairman 4 * * * *

Abayomi Mumuni Member 1 * Resigned



Board Enterprise Risk

Management and Governance Committee Composition

No of

meetings attended 13 Feb 02 May 09 Aug 21 Nov

Anthony Okocha Chairperson 4 * * * *

Abayomi Mumuni Member 1 * Resigned



*connotes present

-connotes absent




24

Support Committees

Executive Management Committee (ExCo)

This Committee reports to the Board on activities of the Group. The Committee Members are staff

on executive management level. The Committee meets regularly to deliberate on various activities.

The Committee is responsible for the following:

i) ensuring alignment of Group's strategy and plan with operations activities.

ii) reviewing strategic and business performance against approved plans and budget of the

Group, and agreeing recommendations and corrective actions.

iii) discussing and monitoring compliance with policies.

Management Executive Committee

This committee reports to the Board Investment Committee on investment activities of the Group.

The Committee meets weekly to discuss and review the portfolio of the Group. The Committee

members are:

MD/ CEO - Chairman

Chief Financial Officer - Member

Head, Group Life Marketing - Member

Head, Agency Operations - Member

Head, Information Technology - Member

Head, Risk Management - Member

Head, Internal Audit & Control - Member

Head HC & Admin - Member

Whistle blowing procedures

The whistle-blowing process involves steps that should be taken by the whistle-blower in reporting

a reportable misconduct, and steps required for the investigation of the reported misconduct. The

Company has a procedure that encourages staff and other relevant stakeholders to report perceived

unethical or illegal conduct of employees, management, directors and other stakeholders across

the Group to appropriate authorities in a confidential manner without any fear of harassment,

intimidation, victimization or reprisal of anyone for raising concern(s) under this policy.

The Board of Directors and Management is committed towards promoting a culture of openness,

accountability and Integrity, and will not tolerate any harassment, victimization or discrimination

of the whistle blower provided such disclosure is made in good faith with reasonable belief that

what is being reported is fact. The company has dedicated email address and telephone numbers

through which staff are encouraged to raise any concern or unethical conduct.




25

RESULTS AT A GLANCE

Group Company

31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

COMPREHENSIVE INCOME

STATEMENT N'000 N'000 N'000 N'000

Gross premium written 6,795,577 7,626,710 5,166,396 6,335,448

Gross premium income 6,858,262 7,586,932 5,229,081 6,295,670

Net premium income 6,688,857 7,527,926 5,068,135 6,246,267

Investment income 3,241,798 3,224,550 3,168,217 3,133,558

Loss before tax (2,422,953) (6,726,979) (2,413,904) (4,167,907)

Loss profit after tax (2,696,615) (6,251,055) (2,658,566) (3,712,591)

Group Company

31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

STATEMENT OF FINANCIAL

POSITION N'000 N'000 N'000 N'000

Total assets 41,369,807 43,830,647 38,727,978 41,289,651

Insurance and investment contract

liabilities 40,952,389 41,305,557 38,990,964 39,463,472

Total liabilities 44,543,671 44,341,823 41,693,988 41,571,213

Total Equity (3,173,864) (511,178) (2,966,010) (281,562)

(Loss) per share (basic) - in kobo (13) (30) (13) (18)




31

Statement of significant accounting policies

1. General Information

African Alliance Insurance Company is a public limited company incorporated and domiciled

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

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

related financial and pension services, aviation services to its customers.

1.2 Principal Activities

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

and activation services to its customers. Such services include provision of life insurance

services to both corporate and individual customers.

The Subsidiaries activities are:

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

• Axiom Air Limited, a cargo airline company

1.3 Components of Financial Statements

The Financial statements comprise the Consolidated and Separate Statements of

Comprehensive income, Consolidated and Separate statements of Financial Position,

Consolidated and Separate Statement of Changes in Equity, Consolidated and Separate

Statements of Cash Flows, and the accompanying Notes.

Income and expenses (excluding the components of other comprehensive income) are

recognised in the profit or loss segment of comprehensive income to arrive at the profit for

the year.

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

statement of other comprehensive income and comprises items of income and expenses

that are not recognised in the statement of profit or loss as required or permitted by IFRS.

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

comprehensive income for the year.

Reclassification adjustments are amounts reclassified to statement of comprehensive

income in the current year that were recognised in other comprehensive income in the

current or previous years. Transactions with the owners of the Group in their capacity as

owners are recognised in the statement of changes in equity.

1.4 Basis of preparation and measurement

The financial statements are prepared in compliance with International Financial Reporting

Standards (IFRS) and the requirements of the Companies and Allied Matters Act, Insurance

Act CAP I17 LFN 2004, the Financial Reporting Council of Nigeria Act 2011 and regulatory

guidelines as pronounced from time to time by National Insurance Commission (NAICOM).

Historical cost basis was used in preparation of the financial statements as modified by the

measurement of certain items at revalued amounts as stated below:

- Property, plant and equipment at valuation

- Investment property at fair value

- Investment at fair value

- Impaired assets at their recoverable amounts




32

1.5 Compliance with IFRS

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

Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRIC) Interpretations

applicable to companies reporting under IFRS as issued by the International Accounting

Standards Board (IASB). Additional information required by national regulations have been

included where appropriate

1.6 Going Concern status

As at the end of the financial year 31 December 2018, the following negative regulatory

indicators were identified:

1. The company’s solvency margin is below the regulatory requirement as stated in the

Insurance Act CAP I17, LFN 2004. The company reported a solvency margin deficit of

N14 billion for the year ended 31 December, 2018.

2. The total admissible assets of the company less net insurance and investment contract

liabilities amounted to a deficit of N10.3billion as at 31 December 2018.

3. Negative shareholders’ fund amounted to N2.9billion as at the end of 31 December 2018.

4. The company reported an after tax loss position of N2.6 billion (Group – N2.7billion).

The Board of Directors hereby confirm that the following action plans have been set forth

whose implementation have commenced. Overall, the directors believe that these actions will

mitigate the entity’s going concern issues. However, please refer to different factors for

different actions noted below.

1. Disposal of relevant investments. Firm commitment of offer and acceptance has been

made. However, this is subject to the consent and approval of the regulators (NAICOM).

In respect of the disposal of the relevant investments, material uncertainty exists relating

to the timing of the cash flow.

2. The company is currently conducting due diligence and working with appointed

consultants on plans to sought the approval of shareholders and investors to inject

additional capital into the company. However, the success of the capital raising is

dependent on the shareholders and the timing for the conclusion of the exercise is

subject to several factors that might be beyond the expectations of the company.

3. A cash flow projection has also been prepared by management factoring the above into

the liquidity assessment of the entity as well as the operational requirements of the

entity over the next 12 to 18 months. This projection was however premised on a

projected share of the market and year-on-year growth expectations of the company.

There is material uncertainty relating to the company achieving the market share to

support the projected increase in cash flows.

These indicators, based on the performance and financial statements of the company,

including the deficit in the solvency margin as well as the failure of the regulatory admissible

assets of the entity to cover the insurance liabilities, all indicate that a material uncertainty

exists that may cast significant doubt on the company's ability to continue as a going concern.




33

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

a going concern and is satisfied that it has the resources to continue in business for the

foreseeable future.

Following extensive appraisal of the current situation of the company at various Board

Committee meetings as well as at the Board Meeting, the following plans were agreed to by

the Board in turning around the company.

• Capital Raise by way of Rights Issue

The Board at its meeting approved the raising of additional equity capital via a rights

issue to existing shareholders in order to shore up the company’s existing capital base

as well as finance other strategic initiatives. In order to achieve this, the Board has

approved the engagement of consultants to act as the financial adviser and issuing house

to the transaction. This process is at an advanced stage of conclusions with meetings

and obtaining necessary approvals from regulators.

• Other Issues

Disposal of Associates

Discussions are at an advanced stage for the regulatory approval on the disposal of our

interest in the associate entity. Management already has a firm interest and commitment

on this.

There is however a material uncertainty relating to the approval by the regulators on the

disposal of the associate as well as the timing of this approval and the expected cash

inflow from the disposal.

Balance Sheet and Capital Restructuring

We shall speedily pursue conclusion of the ongoing balance sheet and capital

restructuring exercise. The ‘no objection’ approvals of NAICOM and FRCN have been

obtained. The timelines below represents the projected timelines to achieve the

turnaround of the entity. Material uncertainty also exists in this respect as to what level

of restructuring will be required and the probability that the restructure program will

eventually bring the company to expected results.

S/N ACTION PLAN TIMELINE

1. Offer for subscription – Rights issue 12 November 2019

2. Disposal of interest in associate company 31 August 2019

3. Balance Sheet & Capital Restructuring 12 October 2019

In conclusion, based on the executive management’s plan of restructuring the assets of the

Group, divesting from some of the subsidiary companies and injecting fresh capital to

improve the liquidity position and upturn the current negative indices in the financials

statement with respect to shareholders fund, asset cover and solvency margin to positive

position in the shortest time. This is however premised on the ability of all of the plans to

be achieved at the stated period attached to each of the events. Material uncertainty exists

for each of these plans, as a result of events that might be beyond expectations.




34

1.7 Significant judgements and key sources of estimation uncertainty

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

certain judgements and estimates that may affect the carrying values of assets and liabilities

in the next financial period. Such judgements and estimates are based on historical

experience and other factors, including expectations of future events that are believed to be

reasonable under the current circumstances. The directors evaluate these at each financial

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

based on the information available.

The preparation of the Group's financial statements requires management to make

judgements, estimates and assumptions that affect the reported amounts of revenues,

expenses, assets and liabilities and the disclosure of contingent liabilities, at the reporting

date. However, uncertainty about these assumptions and estimates could result in outcomes

that could require a material adjustment to the carrying amount of the asset or liability

affected in the future. These factors should include:

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

policies that have the most significant effect on the amounts recognised in the financial

statements include:

- Claims arising from insurance contracts

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

recognised for claims fluctuate based on the nature and severity of the claim reported.

Claims incurred but not reported are determined using statistical analyses and the

Group deems liabilities reported as adequate.

- Fair value of unquoted equity financial instruments

The fair value of financial instruments where no active market exists or where quoted

prices are not otherwise available are determined by using valuation techniques. In

these cases, the fair values are estimated from observable data using valuation

models.

- Property, Plant and equipment

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

asset base of the Group, accounting for about 4% of the Group's total assets.

Therefore, the estimates and assumptions made to determine their carrying value and

related depreciation are critical to the Group's financial position and performance.




35

The charge in respect of periodic depreciation is derived after determining an estimate

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

Increasing an asset's expected life or its residual value would result in the reduced

depreciation charge in the statement of comprehensive income.

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

determined by management based on historical experience as well as anticipation of

future events and circumstances which may impact their useful lives.

- Taxation

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

temporary differences can be utilized; and

1.8 Functional and presentation currency

The financial statements are presented in Nigerian Naira (Naira), rounded to the nearest

thousand, this is also the functional currency of the Group.

1.9 Presentation of financial statements

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

analysis regarding recovery or settlement within twelve months after the reporting date

(current) and more than 12 months after the reporting date (non-current) is presented in

the Notes.

2.0 Changes in accounting policy and disclosures

2.1 Changes in accounting policy and disclosures

African Alliance Insurance Company plc has fully adopted IFRS 9 as issued by the IASB in

July 2014 with a date of transition of 1 January 2018, which resulted in changes in

accounting policies and adjustments to the amounts previously recognised in the financial

statements. African Alliance Insurance Company plc did not early adopt any of IFRS 9 in

previous periods.

As permitted by the transitional provisions of IFRS 9, African Alliance Insurance Company

plc elected not to restate comparative figures. Any adjustments to the carrying amounts of

financial assets and liabilities at the date of transition were recognised in the opening

retained earnings and other reserves of the current year. African Alliance Insurance

Company plc does not currently apply hedge accounting.

The adoption of IFRS 9 has resulted in changes in the accounting policies for recognition,

classification and measurement of financial assets and financial liabilities and impairment of

financial assets. IFRS 9 also significantly amends other standards dealing with financial

instruments such as IFRS 7 'Financial Instruments: Disclosures'.

Set out below are disclosures relating to the impact of the adoption of IFRS 9 on African

Alliance Insurance Company plc. Further details of the specific IFRS 9 accounting policies

applied in the current period are described in the accounting policies section.




36

IFRS 9 IMPACT ANALYSIS AND RECONCILIATION-GROUP

The effect of adopting IFRS 9 on the statement of financial position and the statement of Profit or loss and other comprehensive income is,

as follows:

(i)

IAS 39

Carrying

Amount

1/1/2018

(ii)

Re-

classificatio

ns

(iii)

Remeasurem

ent

(iv)

Expected

credit losses

(iv) =

(i)+(ii)+(iii)

IFRS 9

Carrying

amount

1/1/2018

N’000

Adj. ₦'000 ₦'000 ₦'000 ₦'000 ₦'000

Assets Cash and cash equivalents A 6,006,807 - - (29,134) 5,977,673

Financial assets - - - -

Fair Value through Profit or Loss 2,182,921 - - - 2,182,921

Available-for-sale 111,998 (111,998) - - -

Fair value through OCI 111,998 - - 111,998

Held-to-maturity B 20,373,177 (20,373,177) - - -

Amortised cost B 20,373,177 (38,143) 20,335,034

Loans and receivables C 84,944 42,450 - (83,035) 44,359

Trade receivables 41,918 - - - 41,918

Reinsurance assets 53,717 - - - 53,717

Other receivables and prepayments D 341,178 (42,450) - (29,575) 269,153

Investment properties 10,794,603 - - - 10,794,603

Investment in Subsidiaries - - - - -

Investment in Associate 1,605,405 - - - 1,605,405

Retirement benefit Asset 7,063 - - - 7,063

Deferred tax Asset 147,881 - - - 147,881

Intangible assets 63,959 - - - 63,959

Property, plant and equipment 1,666,110 - - - 1,666,110

Statutory deposits 348,965 - - - 348,965

Total assets 43,830,646 - - (179,887) 43,650,759




37

Liabilities and equity Insurance contract liabilities 36,378,453 - - - 36,378,453

Investment contract liabilities 4,927,104 - - - 4,927,104

Trade payables 1,177,117 - - - 1,177,117

Other payables and accruals 563,265 - - - 563,265

Employee benefit liabilities 29,335 - - - 29,335

Borrowings 287,652 - - - 287,652

Tax Payable 594,024 - - - 594,024

Deferred tax liabilities 384,874 - - - 384,874

Total liabilities 44,341,824 - - 44,341,824

Equity Issued and paid-up share capital 10,292,500 - - - 10,292,500

Share premium 14,365,133 - - - 14,365,133

Statutory contingency reserve 908,259 - - - 908,259

Retained earnings (27,275,850) - - (179,887) (27,455,737)

Translation reserves 186,441 - - 186,441

Fair Value Reserves 1,004,524 - - 1,004,524

Equity attributable to owners of

the company (518,993) - - (179,887) (698,880)

Non-Controlling Interest 7,815 7,815

Total equities (511,178) - (691,065)

Total equities and liabilities 43,830,646 - - - 43,650,759




38

IFRS 9 IMPACT ANALYSIS AND RECONCILIATION-COMPANY

The effect of adopting IFRS 9 on the statement of financial position and the statement of Profit or loss and other comprehensive income is,

as follows:

Measurement Category

(i)

IAS 39

Carrying

Amount

1/1/2018

(ii)

Re-

classifications

(iii)

Remeasureme

nt

(iv)

Expected

credit

losses

(iv) =

(i)+(ii)+(iii

)

IFRS 9

Carrying

amount

1/1/2018

N’000

Adj ₦'000 ₦'000 ₦'000 ₦'000 ₦'000

Assets Cash and cash equivalents A 5,799,468 - - (23,854) 5,775,614

Financial assets - - - -

-Fair Value through Profit or Loss 2,182,921 - - - 2,182,921

-Available-for-sale B 91,525 (91,525) - - -

-Fair value through OCI - 91,525 - - 91,525

-Held-to-maturity C 20,373,177 (20,373,177) - - -

-Amortised cost - 20,373,177 - (38,143) 20,335,034

-Loans and receivables 63,059 42,450 - (16,222) 89,287

Trade receivables - - - - -


Other receivables and prepayments D 279,358 (42,450) - (5,494) 231,414

Investment properties 9,285,488 - - - 9,285,488

Investment in Subsidiaries 553,805 - - - 553,805

Investment in Associate 1,605,405 - - - 1,605,405

Retirement benefit Asset 7,063 - - - 7,063

Deferred tax Asset 146,476 - - - 146,476

Intangible assets 20,913 - - - 20,913

Property, plant and equipment 627,276 - - - 627,276

Statutory deposits 200,000 - - - 200,000

Total assets 41,289,651 - - (83,713) 41,205,938




39

Liabilities and equity Insurance contract liabilities 34,536,368 - - - 34,536,368

Investment contract liabilities 4,927,104 - - - 4,927,104

Trade payables 914,215 - - - 914,215

Other payables and accruals 344,085 - - - 344,085

Employee benefit liabilities 29,335 - - - 29,335

Borrowings 182,714 - - - 182,714

Tax Payable 545,285 - - - 545,285

Deferred tax liabilities 92,107 - - - 92,107

Total liabilities 41,571,213 - - 41,571,213

Equity Issued and paid-up share capital 10,292,500 - - - 10,292,500

Share premium 14,365,133 - - - 14,365,133

Statutory contingency reserve 839,681 - - - 839,681

Retained earnings (26,146,738) - - (83,713) (26,230,451)

Translation reserves - - - - -

Fair Value Reserves 367,862 - - - 367,862

Total equity attributable to

Owners (281,562) - - (83,713) (365,275)

Total equities and liabilities 41,289,651 - (83,713) 41,205,938

Contingent liabilities and

Commitments - - - - -




40

Group Company

IAS 39 as

at 31 Dec,

2017

IFRS 9 as

at 1

Jan,2018

IAS 39 as

at 31 Dec,

2017

IFRS 9 as

at 1

Jan,2018

A Cash and Cash Equivalents N'000 N'000 N'000 N'000

Balance as at Dec. 2017 (IAS 39) 6,006,807 - 5,799,468 -

Reclassification to Amortized cost 6,006,807 6,006,807 (5,799,468) 5,799,468

Impairment (ECL Model) - (29,134) - (23,854)

Balance as at Jan. 1, 2018 (IFRS 9)

- 5,977,673

- 5,775,614

B Financial Assets

Held to Maturity (HTM)/Amortized Cost

Balance as at 31 Dec, 2017 (IAS 39) 20,373,177 - 20,373,177 -

Reclassification to Amortized cost (20,373,177) 20,373,177 (20,373,177) 20,373,177


Balance as at 1 Jan, 2018 (IFRS 9)

- 20,335,034

- 20,335,034

C Loans and Receivables

Balance as at 31 Dec, 2017 (IAS 39) 84,944 63,059

Reclassification from Other Receivables 42,450 42,450



- 44,359

- 89,287

D Other receivables and prepayments

Balance as at 31 Dec 2017 (IAS 39) 341,178 279,358

Reclassification to AC (42,450) (42,450)



- 269,153

- 231,414

E Retained earnings

Closing balance 31 Dec/

Opening balance I Jan - (27,275,850)

- (26,146,738

Impairment (ECL model)-AC - (179,887) - (83,713)

- 27,455,737 - 26,230,451

a) The group has assessed the classification of its financial instruments and conclude that the business model has

not changed significantly compared with the classification under IAS 39

b) As of 1 January 2018, the group’s analysis highlighted the components of its cash and cash equivalents as

including short term deposit (i.e. call and termed deposits), bank accounts balances held with banks and cash in

hand. The balances meet the SPPI criterion and were carried classified as financial assets carried at cost. The

group further assessed for ECL based on the counterparty credit ratings adjusted to reflect current and forward-

looking information on macroeconomic factors affecting the ability of the Banks to settle the balances and the

National Deposit Insurance Company's insurance cover policy and this resulted in a loss allowance provision of

N29.134million.

c) The group has elected the option to irrevocably designate all its previous AFS equity instruments as equity

instruments at FVOCI. All AFS equity instruments previously carried at cost under IAS 39 were revalued to report

the fair values based on relevant valuation approaches (Market, Income and Adjusted net asset) with one or

more significant inputs based on unobservable market data as inputs.

d) The group also assessed its other receivables balances and concluded that the payments meet the SPPI criterion

and based on the group’s business model for holding the balances, concluded that they remain valued at

amortised cost as was the case under IAS 39. The balances were assessed for impairment and the ECL recognised

amounted to N29.575million.

Impact on the statement of profit or loss (increase/(decrease)):

Group Company

1-Jan-18 1-Jan-18

₦'000 ₦'000

Opening ECL Impairment 179,887 83,713

Deferred tax - -

Profit for the year (179,887) (83,713)




41

The following table reconciles the aggregate opening loan loss provision allowances under IAS 39 to ECL allowances

under IFRS 9. The company had no loan commitments and financial guarantee contracts in accordance with IAS

37 Provisions Contingent Liabilities and Contingent Assets as at 31 December 2017 to assess for ECL allowances

under IFRS 9.

Group

Impairment

IAS 39

Re-

measurement

ECL

IFRS 9

31-Dec-17 1-Jan-18

₦'000 ₦'000 ₦'000

ECL Impairment - 179,887 179,887

Company

Impairment

IAS 39

Re-

measurement

ECL

IFRS 9

31-Dec-17 1-Jan-18

₦'000 ₦'000 ₦'000

ECL Impairment - 83,713 83,713

The ECL impairment adjustment is based on individual assessment of the cash and cash equivalents, debt

instruments, trade and other receivables. The table below shows the credit quality and the maximum exposure to

credit risk based on the Company’s internal assessment and year-end stage classification.

Group

Impairment

charges Gross impairment allowance

Stage 1 Stage 1 Stage 2 Stage 3 Total

₦'000 ₦'000 ₦'000 ₦'000 ₦'000

Loans and receivables 112,610 112,610 - - 112,610

Cash and cash equivalents 29,134 29,134 - - 29,134

Financial Assets-AC 38,143 38,143 - - 38,143

179,887 179,887 - - 179,887

Company

Impairment

charges Gross impairment allowance

Total

Stage 1 Stage 1 Stage 2 Stage 3 Total

₦'000 ₦'000 ₦'000 ₦'000 ₦'000

Loans and receivables 21,716 21,716 - - 21,716

Cash and cash equivalents 23,854 23,854 - - 23,854

Financial Assets-AC 38,143 38,143 - - 38,143

83,713 83,713 - - 83,713

Impact of IFRS 9 Adoption on solvency Margin

The impact of IFRS 9 on the company’s solvency position is two-fold. As the standard covers classification and

measurement of both financial assets and liabilities:

• Changes in the measurement of financial assets in scope for IFRS 9 and defined as admissible under the risk

based capital as detailed in the prudential guidelines set by the NAICOM may result in a decline in the asset

value.

• Changes in the impairment of financial instruments in scope for IFRS 9 and defined as admissible liabilities

under the NAICOM prudential guidelines have resulted in an increase in allowance provisions and consequently

admissible liabilities/ decrease in admissible assets.

The changes in measurement of financial instruments have also affected the amount of capital available to meet

the regulator’s minimum capital requirement. This will probably have an adverse effect on the insurer’s solvency

position. See detail in total equity attributable to owners as detailed in statement of financial position as at 1 January

2018




42

Assets

IAS 39

Admissible

assets

IFRS 9

Impact

Adjusted

IFRS 9

Admissible

assets

Cash & Cash Equivalents 5,799,921 (23,854) 5,776,067

Financial Assets:

-Held to Maturity 20,373,177 (20,373,177) -

-Amortised cost 20,335,034 20,335,034

-Fair Value Through Profit or Loss 2,182,921 - 2,182,921

-Available for Sales 91,525 (91,525) -

-Fair value OCI - 91,525 91,525

Reinsurance Assets 53,717 - 53,717

Other Receivable & Prepayment 163,207 - 163,207

Investment properties 4,860,238 - 4,860,238

Investment in Associate 1,605,405 - 1,605,405

Property Plant & Equipment 627,276 - 627,276

Statutory Deposit 200,000 - 200,000

Total assets

35,957,387 (61,997) 35,895,390

Total liabilities

41,479,106 - 41,479,106

Solvency margin

(5,521,719) (5,583,716)

Minimum Capital requirement 2,000,000 2,000,000

Solvency margin achieved

(5,521,719) (5,583,716)

Solvency ratio

(276%) (279%)




43

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

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

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

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

following new or amended standards in preparing these financial statements:

IFRS 15

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

2018.

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

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

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

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

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

• Identify the contract(s) with a customer

• Identify the performance obligations in the contract

• Determine the transaction price

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

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

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

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

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

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

and will require the exercise of judgment.

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

IFRS 16 Leases

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

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

of Transactions involving the legal form of a lease.

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

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

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

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

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

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

finance or operating leases.

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

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

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

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

operating leases.

New or amended standards

and effective date

Summary of the requirements Possible impact on financial

statements

Amendments to IFRS 10 and IAS

28 (Sept 2014)

Sale or Contribution of Assets

between an Investor and its

Associate or Joint Venture

The IAS 28 was amended so that

a. The current requirements

regarding the partial gain or loss

recognition for transactions

between an investor and its

associate or joint venture only

apply to the gain or loss resulting

from the sale or contribution of

assets that do not constitute a

business as defined in IFRS 3

Business Combinations

The entity does not have any form

of joint venture agreement.

Hence, this amendment is not

applicable to the entity.

IFRIC 23 IFRIC 23 clarifies the accounting for

uncertainties in income taxes.

The interpretation is to be applied

to the determination of taxable

profit (tax loss), tax bases, unused

tax losses, unused tax credits and

tax rates, when there is uncertainty

Uncertainty over Income Tax

Treatments




44

over income tax treatments under

IAS 12.

IFRIC 23 is effective for annual

reporting periods beginning on or

after 1 January 2019. Earlier

application is permitted.

'IFRIC 23 clarifies the accounting

for uncertainties in income taxes.

The interpretation is to be applied

to the determination of taxable

profit (tax loss), tax bases, unused

tax losses, unused tax credits and

tax rates, when there is uncertainty

over income tax treatments under

IAS 12.

IFRIC 23 is effective for annual

reporting periods beginning on or

after 1 January 2019. Earlier

application is permitted.

Amendments to IFRS 9 (Oct

2017)

Prepayment Features with

Negative Compensation

The amendments in Prepayment

Features with Negative

Compensation (Amendments to

IFRS 9) are:

1. Changes regarding symmetric

prepayment options

Under the current IFRS 9

requirements, the SPPI condition is

not met if the lender has to make a

settlement payment in the event of

termination by the borrower (also

referred to as early repayment

gain).

Prepayment Features with Negative

Compensation amends the existing

requirements in IFRS 9 regarding

termination rights in order to allow

measurement at amortised cost

(or, depending on the business

model, at fair value through other

comprehensive income) even in the

case of negative compensation

payments.

'2. Clarification regarding the

modification of financial liabilities

The final amendments also contain

(in the Basis for Conclusions) a

clarification regarding the

accounting for a modification or

exchange of a financial liability

measured at amortised cost that

does not result in the de-

recognition of the financial liability.

The IASB clarifies that an entity

recognises any adjustment to the

amortised cost of the financial

liability arising from a modification

or exchange in profit or loss at the

date of the modification or

exchange. A retrospective change

of the accounting treatment may

therefore become necessary if in

the past the effective interest rate

was adjusted and not the amortised

cost amount.

Amendments to IAS 28 (Oct

2017)

Long-term Interests in

Associates and Joint Ventures

The amendments in Long-term

Interests in Associates and Joint

Ventures (Amendments to IAS 28)

are:

• Paragraph 14A has been added to

clarify that an entity applies IFRS 9

including its impairment

requirements, to long-term

interests in an associate or joint

The entity does not have any form

of joint venture agreement.

Hence, this amendment is not

applicable to the entity.




45

venture that form part of the net

investment in the associate or joint

venture but to which the equity

method is not applied.

• Paragraph 41 has been deleted

because the Board felt that it

merely reiterated requirements in

IFRS 9 and had created confusion

about the accounting for long-term

interests.

The amendments are accompanied

by an illustrative example.

The amendments are effective for

periods beginning on or after 1

January 2019. Earlier application is

permitted

Annual Improvements to IFRS

Standards 2015–2017 Cycle

(Dec 2017)

IFRS 3, IFRS 11, IAS 12 and IAS

23 Amendments

In December 2017, the IASB

published Annual Improvements to

IFRS Standards 2015–2017 Cycle,

containing the following

amendments to IFRSs:

• IFRS 3 Business Combinations

and IFRS 11 Joint Arrangements —

The amendments to IFRS 3 clarify

that when an entity obtains control

of a business that is a joint

operation, it re-measures

previously held interests in that

business. The amendments to IFRS

11 clarify that when an entity

obtains joint control of a business

that is a joint operation, the entity

does not re-measure previously

held interests in that business.

• IAS 12 Income Taxes — The

amendments clarify that the

requirements in the former

paragraph 52B (to recognise the

income tax consequences of

dividends where the transactions or

events that generated distributable

profits are recognised) apply to all

income tax consequences of

dividends by moving the paragraph

away from paragraph 52A that only

deals with situations where there

are different tax rates for

distributed and undistributed

profits.

• IAS 23 Borrowing Costs — The

amendments clarify that if any

specific borrowing remains

outstanding after the related asset

is ready for its intended use or sale,

that borrowing becomes part of the

funds that an entity borrows

generally when calculating the

capitalisation rate on general

borrowings.

Amendments to IAS 19)

(February 2018) Plan

Amendment, Curtailment or

Settlement

On 7 February 2018, the IASB

published Plan Amendment,

Curtailment or Settlement

(Amendments to IAS 19) to

harmonise accounting practices

and to provide more relevant

information for decision-making.

An entity applies the amendments

to plan amendments, curtailments

or settlements occurring on or after

the beginning of the first annual

reporting period that begins on or

after 1 January 2019.

The Conceptual Framework for

Financial Reporting (Conceptual




46

Amendments to References to

the Conceptual Framework in

IFRS Standards

Framework) describes the objective

of and concepts for general purpose

financial reporting. It is a practical

tool that helps the IASB to develop

requirements in IFRS® Standards

based on consistent concepts.

Consideration of these concepts, in

turn, should result in the IASB

developing IFRS Standards that

require entities to provide financial

information that is useful to

investors, lenders and other

creditors.

The IASB decided to revise the

Conceptual Framework because

some important issues were not

covered and some guidance was

unclear or out of date. The revised

Conceptual Framework, issued by

the IASB in March 2018, includes:

• A new chapter on measurement;

• Guidance on reporting financial

performance;

• Improved definitions of an asset

and a liability, and guidance

supporting these definitions; and

• Clarifications in important areas,

such as the roles of stewardship,

prudence and measurement

uncertainty in financial reporting.

The IASB also updated references

to the Conceptual Framework in

IFRS Standards by issuing

Amendments to References to the

Conceptual Framework in IFRS

Standards. This was done to

support transition to the revised

Conceptual Framework for

companies that develop accounting

policies using the Conceptual

Framework when no IFRS Standard

applies to a particular transaction.

'IFRS 17 IFRS 17 establishes the principles

for the recognition, measurement,

presentation and disclosure of

insurance contracts within the

scope of the standard. The

objective of IFRS 17 is to ensure

that an entity provides relevant

information that faithfully

represents those contracts. This

information gives a basis for users

of financial statements to assess

the effect that insurance contracts

have on the entity's financial

position, financial performance and

cash flows.

IFRS 17 was issued in May 2017

and applies to annual reporting

periods beginning on or after 1

January 2021.

Insurance Contracts




47

2.3 Foreign currencies

Foreign currency transactions are translated into the functional currency using the exchange

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

from the settlement of such transactions and from the translation at year-end exchange

rates of monetary assets and liabilities denominated in foreign currencies are recognised in

the income statement, except when deferred in equity as qualifying cash flow hedges and

qualifying net investment hedges. Foreign exchange gains and losses that relate to

borrowings and cash and cash equivalents are presented in the income statement within

'other income'.

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

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

denominated in foreign currency classified as fair value through Other Comprehensive

Income are analysed between translation differences resulting from changes in the

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

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

other changes in carrying amount are recognised in equity. Translation differences on

financial assets and liabilities held at fair value through profit and loss are reported as part

of the fair value gain or loss. Translation differences on non-monetary financial assets such

as equities classified as fair value through other comprehensive income financial assets are

included in the fair value reserve in equity.

2.4 Cash and cash equivalents

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

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

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

used by the Company in the management of its short-term commitments. Cash and cash

equivalents include cash on hand, cash balances and fixed deposits.

2.5 Financial assets

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

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

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

objective of the business model.

2.5.1 Classification and Measurements

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

directly attributable transaction cost. Subsequent measurement is based on the business

model objective of managing the assets as well as the cashflow characteristics of the asset.

Business model assessment involves determining if financial assets are managed in order to

generate cash flows from collection of contractual cash flows, selling financial assets or both.

The Group assesses business model at a portfolio level which reflects how the assets are

managed together to achieve a particular business objective.

Financial assets at fair value through profit or loss

Financial assets will be measured at fair value through the income statement if they do not

meet the business model criteria of either “Hold to collect” or “Hold to collect and sell”. All

equity instruments and similar securities (unless designated at inception to fair value

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

through profit or loss. An entity have the option to designate a financial asset as measured

at fair value through profit or loss if doing so eliminates or significantly reduces an

accounting mismatch. The Group has undertaken an assessment to determine the potential




48

impact of changes in classification and measurement of financial assets. The assessment

indicated that the adoption of IFRS 9 will not result in significant changes to existing asset

measurement bases.

Financial assets at fair value through other comprehensive income

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

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

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

contractual cash flows represent solely payments of principal and interest.

Financial assets measured at amortized cost

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

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

represent solely payments of principal and interest. After initial measurement, debt

instruments in this category are carried at amortized cost using the effective interest rate

method. Amortized cost is calculated taking into account any discount or premium on

acquisition, transaction costs and fees that are an integral part of the effective interest rate.

Amortization is included in Interest income in the Consolidated Statement of Income.

Impairment on financial assets measured at amortized cost is calculated using the expected

credit loss approach.

2.5.2 Recognition and measurement

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

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

attributable to their acquisition. Financial assets carried at fair value through profit and loss

are initially recognised at fair value, and transaction costs are expensed in the statement of

comprehensive income. Financial assets are derecognised when the rights to receive cash

flows from them have expired or where they have been transferred and the Company has

also transferred substantially all risks and rewards of ownership.

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

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

are carried at amortised cost using the effective interest method.

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

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

they arise. Dividend income from financial assets at fair value through profit and loss is

recognised in the statement of comprehensive income as part of Investment income when

the Company’s right to receive payments is established.

Interest on financial assets fair value through other comprehensive income calculated using

the effective interest method is recognised in the income statement. Dividends on equity

instruments fair value through other comprehensive income are recognised in the income

statement when the Company’s right to receive payments is established. Both are included

in the investment income line.

2.5.3 Determination of fair value

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

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

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

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

current bid price.




49

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

and regularly available from an exchange, dealer, broker, industry, company, pricing service

or regulatory agency, and those prices represent actual and regularly occurring market

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

regarded as being inactive. Indications that a market is inactive are when there is a wide

bid - offer spread or significant increase in the bid - offer spread or there are few recent

transactions.

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

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

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

flows or other valuation techniques, using inputs (for example, NIBOR, MPR etc.) existing at

the dates of the statement of financial position.

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

standardised financial instruments of lower complexity like placements, and treasury bills.

These financial instruments models are generally market observable. The carrying value less

impairment provision of trade receivables and payables are assumed to approximate their

fair values.

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

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

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

instruments cannot be determined reliably, the instruments are carried at cost less any

impairments. The fair value for loans and receivables as well as liabilities to banks and

customers are determined using a present value model on the basis of contractually agreed

cash flows, taking into account credit quality, liquidity and costs. The fair values of

contingent liabilities and irrevocable loan commitments correspond to their carrying

amounts.

2.5.4 De-recognition of financial instruments

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

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

and rewards of ownership of the asset to another entity. If the Company neither transfers

nor retains substantially all the risks and rewards of ownership and continues to control the

transferred asset, the Company recognises its retained interest in the asset and an

associated liability for amounts it may have to pay. If the Company retains substantially all

the risks and rewards of ownership of a transferred financial asset, the Company continues

to recognise the financial asset and also recognises a collateralised borrowing for the

proceeds received.

2.5.5 Reclassification of financial assets

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

done as a result of external or internal changes which are significant to The Entity's

operations and demonstrable to external parties.

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

managing financial assets.

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

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




50

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

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

previous business model assessment would no longer apply.

IFRS 9 does not allow reclassification:

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

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

• for financial liabilities.

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

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

period following the change in business model that results in the entity reclassifying financial

assets. Previously recognised gains, losses (including impairment gains or losses) or interest

are not restated.

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

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

loss that had been recognized in equity is transferred to the income statement and is

recognized as part of the impairment loss. The amount of the loss recognized in the income

statement is the difference between the acquisition cost and the current fair value, less any

previously recognized impairment loss.

2.5.6 Impairment of financial assets

Financial assets carried at amortized cost and FVTOCI

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

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

necessary for a credit event to have occurred before credit losses are recognised. Instead,

an entity always accounts for expected credit losses and changes in those expected credit

losses. The amount of expected credit losses should be updated at each reporting date to

reflect changes in credit risk since initial recognition.

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

financial instruments that are not measured at FVTPL:

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

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

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

income on risk assets based on the following stages:

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

credit risk has not increased significantly since initial recognition, The Entity recognize a loss

allowance at an amount equal to 12-month expected credit losses. This amount of credit

losses is intended to represent lifetime expected credit losses that will result if a default

occurs in the 12 months after the reporting date, weighted by the probability of that default

occurring.

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

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

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

that result from all possible default events over the life of the financial instrument. For these

debt instruments, interest income recognition will be based on the EIR multiplied by the

gross carrying amount.

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

risk plus observable evidence of impairment




51

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

elements;

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

initial recognition

II. Qualitative elements

III. Backstop indicators

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

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

forward-looking information that is specific to the individual borrower and forward-looking

information on the macro economy, commercial sector (to the extent such information has

not been already reflected in the rating process).

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

incorporates all relevant credit information, including forward-looking macroeconomic

information. For this purpose, The Entity groups its exposures on the basis of shared credit

risk characteristics.

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

loss.

2.5.7 Significant increase in credit risk

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

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

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

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

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

life of the financial instrument instead of the change in the amount of expected credit losses.

The forms the basis of stage 1, 2 and 3 classification and subsequent migration.

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

forward and backward migration

i) Assets carried at amortised cost

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

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

losses that have not been incurred) discounted at the financial asset’s original effective

interest rate. The carrying amount of the asset is reduced through the use of an

allowance account and the amount of the loss is recognised in income statement. If a

financial instrument has a variable interest rate, the discount rate for measuring any

impairment loss is the current effective interest rate determined under the contract.

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

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

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

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

on the basis of similar credit risk characteristics (i.e. on the basis of The Entity’s

grading process that considers asset type, industry, geographical location, collateral

type, past-due status and other relevant factors). Those characteristics are relevant

to the estimation of future cash flows for groups of such assets by being indicative of

the debtors’ ability to pay all amounts due according to the contractual terms of the

assets being evaluated.




52

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

impairment are estimated on the basis of the contractual cash flows of the assets in

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

similar to those in the group. Historical loss experience is adjusted on the basis of

current observable data to reflect the effects of current conditions that did not affect

the period on which the historical loss experience is based and to remove the effects

of conditions in the historical period that do not currently exist.

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

directionally consistent with changes in related observable data from period to period

(for example, changes in unemployment rates, property prices, payment status, or

other factors indicative of changes in the probability of losses in the group and their

magnitude). The methodology and assumptions used for estimating future cash flows

are reviewed regularly by The Entity to reduce any differences between loss estimates

and actual loss experience.

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

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

completed and the amount of the loss has been determined. Impairment charges

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

customers are classified in 'impairment charge for credit losses' whilst impairment

charges relating to investment securities (loans and receivables categories) are

classified in 'Net gains/ (losses) on investment securities'.

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

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

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

recognised impairment loss is reversed by adjusting the allowance account. The

amount of the reversal is recognised in profit or loss.

ii) Assets classified as fair value through other comprehensive income

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

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

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

changes in fair value in other comprehensive income.

Reclassification of amounts recognised in other comprehensive income and

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

the instrument and also at de-recognition; such investments will not be subject to the

impairment requirements.

Dividends on investments in equity instruments with gains and losses irrevocably

presented in other comprehensive income are recognised in profit or loss if the

dividend is not a return on investment (like dividends on any other holdings of equity

instrument) when:

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

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

the entity; and

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

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

comprehensive income, except for: interest calculated using the effective interest rate




53

method, foreign exchange gains or losses and; impairment gains or losses until the

financial asset is derecognised or reclassified.

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

recognised in other comprehensive income is reclassified from equity to profit or loss

as a reclassification adjustment. Also, when a debt instrument asset is measured at

fair value through other comprehensive income, the amounts that are recognised in

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

or loss if the financial asset had been measured at amortised cost.

2.5.8 Financial liabilities

Classification and subsequent measurement

i. Fair Value through Profit or Loss (FVTPL)

ii. Amortized cost,

Financial Liabilities at fair value through profit or loss

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

an orderly transaction between market participants at the measurement date. At initial

recognition, the best evidence of the fair value of a financial instrument is the transaction

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

instrument is evidenced by comparison with other observable current market transactions

in the same instrument, without modification or repackaging, or based on valuation

techniques such as discounted cash flow models and option pricing models whose variables

include only data from observable markets.

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

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

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

debt instruments on major exchanges (for example, Nigerian Stock Exchange (NSE) and

Financial Markets Dealers Quotation (FMDQ)).

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

and regularly available from an exchange, dealer, broker, industry group, pricing service or

regulatory agency, and those prices represent actual and regularly occurring market

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

regarded as being inactive. Indications that a market is inactive are when there is a wide

bid-offer spread or significant increase in the bid-offer spread or there are few recent

transactions.

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

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

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

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

financial position.

Forward-Looking Information

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

pertaining to future developments (including for example macroeconomic developments).

The inclusion of forward-looking information along with traditional past due (realized,

historical) information is considered to produce comprehensive credit risk information.




54

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

Incorporating economically stressed states of the world and their potential impact on credit

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

Financial Liabilities at amortized cost

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

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

cumulative amortisation using the effective interest method of any difference between the

initial amount recognised and the maturity amount, minus any reduction for impairment.

2.5.9 Offsetting financial instruments

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

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

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

the liability simultaneously.

2.6 Trade receivables

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

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

these are measured at amortised cost using the effective interest method, less provision for

impairment. Discounting is omitted where the effect of discounting is immaterial.

Individually significant receivables are considered for impairment when they are past due or

when other objective evidence is received that a specific counterparty will default. Trade

receivables arising from insurance contracts are stated after deducting allowance made for

specific debts considered doubtful of recovery. Impairment of trade receivables are

presented within other operating expenses.

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

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

reviewed at every reporting period for impairment.

2.7 Trade receivables and payables related to insurance contracts

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

agents, brokers and insurance contract holders.

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

the carrying amount of the insurance receivable accordingly and recognises that impairment

loss in the income statement.

2.8 Reinsurance contracts

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

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

requirements for insurance contracts are classified as long-term reinsurance contracts. The

expected claims and benefits to which the Group is entitled under these contracts are

recognised as assets where material.

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

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

of comprehensive income.

2.8.1 Reinsurance asset

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

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

related reinsured insurance contracts. Amounts recoverable from or due to reinsurers are




55

measured consistently with the amounts associated with the reinsured insurance contracts

and with the terms of each reinsurance contract.

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

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

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

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

gathered where the reinsurance Group has refused payment of any balance.

2.8.2 Reinsurance liabilities

Liabilities are valued gross before taking into account reinsurance. Reinsurance liabilities are

primarily premiums payable for reinsurance contracts and are recognised as an expense

when due.

2.9 Other receivables and prepayment

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

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

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

provision or directly to profit or loss account to the extent not previously provided for. Any

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

Prepayments represents prepaid expenses and are carried at cost less amortisation

expensed in profit or loss.

2.10 Deferred acquisition costs (DAC)

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

contracts (life and non-life contracts). Deferred acquisition costs represent a proportion of

commission which are incurred during a financial year and are deferred to the extent that

they are recoverable out of future revenue margins. It is calculated by applying to the

acquisition expenses the ratio of unearned premium to written premium.

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

contracts and renewing existing contracts are capitalised as an intangible asset. All other

costs are recognised as expenses when incurred. The DAC is subsequently amortised over

the life of the contracts as follows:

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

terms of the policies as premium is earned.

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

cost is amortised in line with premium revenue using assumptions consistent with those

used in calculating future policy benefit liabilities; and

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

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

percentage of estimated gross profit margins (including investment income) arising from

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

statement of comprehensive income.

2.11 Investment properties

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

or capital appreciation or both.




56

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

amount includes the cost of replacing part of an existing investment property at the time

that cost is incurred if the recognition criteria are met; and excludes cost of day to day

servicing of an investment property.

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

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

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

transactions for similar properties in the same location.

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

professional qualification and with relevant experience in the location and category of

investment property being valued. Any gain or loss arising from a change in the fair value

is recognized in the income statement.

Subsequent expenditure on investment property is capitalized only if future economic benefit

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

2.12 Intangible assets

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

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

amortization and accumulated impairment losses. Costs that are directly attributable to the

production of identifiable computer software products controlled by the Group are recognised

as intangible assets.

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

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

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

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

even when idle. Amortization ceases at the earlier date that the asset is classified as held

for sale and the date that the asset is derecognized and ceases temporarily, while the

residual value exceeds or is equal to the carrying value.

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

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

recognised in the income statement when the asset it derecognized.

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

five years.




57

2.13 Property, plant and equipment

Property and equipment are reflected at historical cost less accumulated depreciation and

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

Depreciation is provided for on a straight-line basis, taking into account the residual value

and estimated useful lives of the assets as follows:

Asset class Depreciation rate

Buildings 2%

Motor Vehicles 25%

Computer Equipment 20%

Furniture and Fittings 10%

Office Equipment 20%

Plant and Machinery 10%

Aircraft (Componentized)

• Aircraft Engines 4%

• Airframes (Body) 3%

• Landing gears 10%

• APU, Avionic and

Other electronic parts 15%

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

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

methods are reviewed at each statement of financial position date and adjusted as

appropriate.

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

as well as any subsequent expenditure when it is probable that future economic benefits

associated with the item will flow to the Group and the expenditure can be measured reliably.

All other expenditure is recognised in the statement of comprehensive income when

incurred.

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

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

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

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

2.14 Impairment of other non-financial assets

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

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

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

are tested annually for impairment. An impairment loss is recognised for the amount by

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

is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of

assessing impairment, assets are stated at the lowest levels for which there are separately

identifiable cash flows (cash-generating units).

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

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

that suffered impairment are reviewed for possible reversal of the impairment at each

reporting date.

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

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




58

if there has been a change in the estimates used to determine the recoverable amount. An

impairment loss is reversed only to the extent that the asset's carrying amount does not

exceed the carrying amount that would have been determined, net of depreciation or

amortisation, if no impairment loss had been recognised. An impairment loss in respect of

goodwill is not reversed.

2.15 Statutory deposit

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

10% of the minimum capitalisation in compliance with the Insurance Act. This balance is not

available for the day to day operations of the Group. Statutory deposit is measured at cost.

2.16 Insurance contracts

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

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

also transfer financial risk.

2.16.1 Classification of contracts

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

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

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

insurance risk exists where it is expected that for the duration of the policy or part thereof,

policy benefits payable on the occurrence of the insured event will exceed the amount

payable on early termination, before allowance for expense deductions at early termination.

Once a contract has been classified as an insurance contract, the classification remains

unchanged for the remainder of its lifetime, even if the insurance risk reduces significantly

during this period.

2.16.2 Recognition and measurement

(a) Short-term insurance contracts

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

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

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

usually short-duration life insurance contracts ranging between 12 to 24 months period

of coverage. Guaranteed benefits paid on occurrence of the specified insurance event

are either fixed or linked to the extent of the economic loss suffered by the policyholder.

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

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

force contracts that relates to unexpired risks at the balance sheet date is reported as

the unearned premium liability. Premiums are shown before deduction of commission

and are gross of any taxes or duties levied on premiums.

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

estimated liability for compensation owed to contract holders or third parties damaged

by the contract holders. They include direct and indirect claims settlement costs and

arise from events that have occurred up to the end of the reporting period even if they

have not yet been reported to the Group. The Group does not discount its liabilities for

unpaid claims. Liabilities for unpaid claims are estimated using the input of

assessments for individual cases reported to the Group and statistical analyses for the

claims incurred but not reported (IBNR), and to estimate the expected ultimate cost of

more complex claims that may be affected by external factors.




59

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

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

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

to take account of the delay in reporting claims. These are determined by considering

ultimate claims ratios for the life schemes on the Group’s books. The ratios differ by

industry and have been determined following a historical analysis of portfolio claims

experience. The IBNR reserves are calculated by adjusting the ultimate claims amounts

to allow for claims already paid and those outstanding for payment, and again adjusted

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

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

settlement patterns.

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

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

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

payable by the contract holder. Premiums are shown before deduction of commission.

Benefits are recorded as an expense when they are incurred.

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

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

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

expenses that are directly related to the contract, less the expected discounted value

of the theoretical premiums that would be required to meet the benefits and

administration expenses based on the valuation assumptions used (the valuation

premiums). The liability is based on assumptions as to mortality, persistency,

maintenance expenses and investment income that are established at the time the

contract is issued. A margin for adverse deviations is included in the assumptions.

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

payments due over a significantly shorter period than the period during which benefits

are provided, the excess of the premiums payable over the valuation premiums is

deferred and recognised as income in line with the decrease of unexpired insurance

risk of the contracts in force or, for annuities in force, in line with the decrease of the

amount of future benefits expected to be paid. The liabilities are recalculated at each

end of the reporting period using the assumptions established at inception of the

contracts.

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

include individual insurance contracts.

Individual insurance contracts

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

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

future cash flows including premiums, expenses and benefit payments to satisfy the

liability adequacy test. The test also considers current estimates of all contractual cash

flows, and of related cash flows such as claims handling costs, as well as cash flows

resulting from embedded options and guarantees (where applicable

2.16.3 Insurance contract liabilities

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

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

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

IBNR claims.




60

Income from reinsurance policies is recognised concurrently with the recognition of the

related policy benefit. Insurance liabilities are presented without offsetting them

against related reinsurance assets.

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

discharged or cancelled and/or expire. The Group performs a liability adequacy test to

determine the recognised insurance liabilities and an impairment test for reinsurance

assets held at each reporting date.

2.17 Technical reserves

These are the reserves computed in compliance with the provision of Section 20, 21,

and 22 of the Insurance Act 2003. They are:

(a) General insurance contracts

Reserves for unearned premium

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

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

during the year.

Reserves for outstanding claims

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

claims incurred and reported plus claims incurred but not reported ("IBNR") as at the

reporting date. The IBNR is based on the liability adequacy test.

Reserves for unexpired risk

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

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

would exceed the unearned premium reserve (UPR).

(b) Life business

Life fund

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

the time of the actuarial valuation.

Liability adequacy test

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

to ensure the adequacy of the contract liabilities. In performing these tests, current

best estimates of future contractual cash flows including office premiums, expenses

and benefit payments satisfying the liability adequacy test, are used. Any deficiency is

immediately charged to statement of comprehensive income.

2.18 Financial liabilities

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

financial liabilities are initially recognised at fair value and subsequently measured at

amortised cost. Financial liabilities are derecognised when extinguished.

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

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

to be a reasonable approximation of fair value.




61

2.19 Trade payables

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

payments that are not quoted in an active market. Trade payables represent liabilities to

agents, brokers and re-insurer on insurance contracts as at year end.

2.20 Other payables and accruals

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

at amortised cost using the effective interest method. The fair value of a non-interest bearing

liability is its discounted repayment amount. If the due date of the liability is less than one

year discounting is omitted.

2.21 Taxation

2.21.1 Company income tax

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

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

Current tax is payable on taxable profit, which differs from profit or loss in the financial

statements. Calculation of current tax is based on tax rates and tax laws that have been

enacted or substantively enacted by the end of the reporting period.

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

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

where appropriate.

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

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

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

regulation is subject to interpretation and establishes provisions where appropriate.

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

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

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

income tax assessed on the preceding basis, tax payable will be computed as 30% of

dividend paid.

2.21.2 Deferred income tax

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

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

liability method.

The principal temporary differences arise from depreciation of property and equipment,

provisions for trade receivables and tax losses carried forward (where deemed as

recoverable). The rates enacted or substantively enacted at the balance sheet date are used

to determine deferred income tax. However, deferred income tax is not accounted for if it

arises from initial recognition of an asset or liability in a transaction other than a business

combination that at the time of the transaction affects neither accounting nor taxable profit

nor loss.

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

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

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

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

that future taxable profits will be available against which the temporary difference can be

utilised.




62

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

to offset current tax assets against current tax liabilities and when the deferred income taxes

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

either the taxable entity or different taxable entities where there is an intention to settle the

balances on a net basis.

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

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

losses can be utilised. Deferred tax related to fair value re-measurement of investments,

which are charged or credited directly in other comprehensive income or to equity, is also

credited or charged directly to equity and subsequently recognised in the statement of

comprehensive income together with the deferred gain or loss.

2.22 Share capital

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

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

equity instruments are recognised directly in equity, net of tax if applicable.

2.23 Contingency reserve

Life business

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

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

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

Act.

2.24 Provisions

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

present legal or constructive obligation as a result of past events; it is more likely than not

that an outflow of resources will be required to settle the obligation; and the amount can be

reliably estimated. Restructuring provisions comprise lease termination penalties and

employee termination payments. Provisions are not recognised for future operating losses.

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

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

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

included in the same class of obligations may be small.

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

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

time value of money and the risks specific to the obligation. The increase in the provision

due to passage of time is recognised as interest expense.

2.25 Contingent liabilities and assets

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

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

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

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

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

financial position but are disclosed in the notes to the financial statements.

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

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

not recognised in the Group statement of financial position and are only disclosed in the

notes to the annual financial statements where an inflow of economic benefits is probable.




63

2.26 Earnings per share

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

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

average number of ordinary shares in issue during the year. The adjusted EPS is calculated

using the number of shares in issue at the balance sheet date. Diluted earnings per share is

calculated by adjusting the weighted average number ordinary shares outstanding to

assume conversion of all dilutive potential ordinary shares.

2.27 Revenue recognition

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

as follows:

2.27.1 Premium income

Short term insurance contract

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

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

unexpired risks at the balance sheet date is reported as the unearned premium liability.

Premiums are shown before deduction of commission and are gross of any taxes or duties

levied on premiums.

Long term insurance contract

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

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

contracts is recognised as an increase in long-term policy liabilities when receivable. The

unearned portion of accrued premium income is included within long-term policy liabilities.

Group life insurance, mortgage insurance and credit life premiums are accounted for when

receivable.

2.27.2 Interest income and expenses

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

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

investment income in the income statement using the effective interest rate method. When

a receivable is impaired, the Group reduces the carrying amount to its recoverable amount,

being the estimated future cash flow discounted at the original effective interest rate of the

instrument, and continues unwinding the discount as interest income. Interest income is

accounted for on a time proportionate basis that takes into account the effective interest

rate on the asset.

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

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

Such activities generate revenue that is recognised by reference to the stage of completion

of the contractual services.

2.28 Insurance premium ceded to reinsurers

Insurance premium ceded to reinsurers also described as reinsurance expenses represents

outward premium paid to reinsurance companies less the unexpired portion as at the end of

the accounting year.

2.29 Claims

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

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

direct and indirect claims settlement costs and arise from events that have occurred up to

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




64

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

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

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

ultimate cost of more complex claims that may be affected by external factors. No provisions

has been made for possible claims under contracts that are not in existence at the end of

the reporting period.

2.30 Underwriting expenses

Underwriting expenses comprise acquisition costs and other underwriting expenses.

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

contracts. Examples of these costs include, but are not limited to, commission expense, and

other technical expenses. Other underwriting expenses are those incurred in servicing

existing policies/contract. These expenses are charged in the statement of comprehensive

income.

2.31 Employee benefit expense

2.31.1 Defined contribution plan

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

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

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

benefits relating to employee service in the current and prior periods.

The company pays contributions to publicly or privately administered pension insurance plans

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

obligations once the contributions have been paid. The contributions are recognised as

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

asset to the extent that a cash refund or a reduction in the future payments is available.

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

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

Pension Reform Act 2014.

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

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

contributions are recognised as employee benefits expenses when they are due. Prepaid

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

the future payments is available

2.31.2 Defined benefit plan

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

employee will receive on retirement, usually dependent on one or more factors, such as age,

years of service and compensation.

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

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

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

for unrecognised actuarial gains or losses and past service costs.




65

2.31.3 Short term benefit

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

expensed as the related service is provided.

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

profit sharing plans if the company has a present legal or constructive obligation to pay this

amount as a result of past service provided by the employee and obligation can be estimated

reliably.

2.32 Other operating and administrative expenses

Other operating and administrative expenses are expenses other than claims, investment

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

supervisory levies. They include professional fee, depreciation expenses and other non-

technical expenses. Other operating and administrative expenses are accounted for on

accrual basis and recognized in the income statement upon utilization of the service or at

the date of their origin.




67

Statement of comprehensive income

Group

Company

31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17 Note N’000 N’000 N’000 N’000

Gross premium written

30 6,795,577 7,626,710 5,166,396 6,335,448

Unearned premium

30 62,685 (39,778) 62,685 (39,778) Gross premium income

6,858,262 7,586,932 5,229,081 6,295,670

Insurance premium ceded to reinsurers 31 (169,405) (59,006) (160,946) (49,403) Net premium income

6,688,857 7,527,926 5,068,135 6,246,267

Fees and commission income

32 43,922 5,212 43,922 5,212

Net underwriting income

6,732,779 7,533,138 5,112,057 6,251,479 Insurance claims incurred and loss

adjustments expenses 33a 9,669,652 9,725,184 8,784,295 8,687,549

Insurance claims incurred recovered from

reinsurers 33a (203,837) 23,515 (203,837) 23,515

Underwriting expenses

34 992,290 980,993 804,832 839,041

Changes in long term insurance contracts 35 (1,150,204) 3,979,680 (1,381,616) 3,801,021

Net underwriting expenses

9,307,901 14,709,372 8,003,674 13,351,126

Net underwriting loss

(2,575,122) (7,176,234) (2,891,617) (7,099,647) Other income

36 297,972 135,929 295,247 131,300

Net (loss)/gain on liquidated subsidiaries - (335,149) - 607,924

Fair value gain/(loss) on investment

properties 12 544,686 1,127,970 323,662 909,239

Fair value through profit or loss

7.1 (1,168,898) 73,235 (1,168,898) 73,235

Investment income

37 3,241,798 3,224,550 3,168,217 3,133,558

Loss from investment contracts

37a (137,947) (115,222) (137,947) (115,222)

Share of profit of equity accounted investee 14 710,728 641,546 710,728 641,546

Employee benefit expenses

39 (1,171,447) (1,014,139) (899,952) (669,373)

Other operating and administrative expenses 40 (2,065,419) (1,675,814) (1,757,238) (1,118,933)

Specific Impairment 38 (5,638) (1,608,472) (5,638) (656,355)

Impairment loss allowance (ECL)

41 (33,370) - 9,828 -

Finance cost

44 (60,296) (5,179) (60,296) (5,179) Loss before tax

(2,422,953) (6,726,979) (2,413,904) (4,167,907)

Income tax expense

45 (273,662) 475,924 (244,662) 455,316 Loss for the year

(2,696,615) (6,251,055) (2,658,566) (3,712,591) Loss attributable to: – Owners of the parent (2,696,156) (6,244,850) – Non-controlling interests (459) (6,205)

(2,696,615) (6,251,055) Other comprehensive income: Items that may be subsequently reclassified

to profit or loss Change in value of available for sale financial

assets (net of taxes) 29 (650) 650 (650) 650

Foreign exchange translation gain 51,529 76,375 - -

50,879 77,025 (650) 650

Items that will not be subsequently

reclassified to profit or loss Gain on revaluation of property, plant

and equipment (net of taxes) 162,418 (96,046) 23,145 48,908

Premeasurement of the net defined benefit

liability (asset 35,336 - 35,336 -

Deferred tax on revaluation loss (34,818) (38,675) -

162,936 (134,721) 58,481 48,908 Other comprehensive income/(loss) for

the year

213,815 (57,696) 57,831 49,558 Total comprehensive loss for the year (2,482,800) (6,308,751) (2,600,735) (3,663,033) Total comprehensive loss attributable to: – Owners of the parent (2,484,512) (6,305,075) (2,600,735) (3,663,033)

– Non-controlling interests 1,712 (3,676) - -

(2,482,800) (6,308,751) (2,600,735) (3,663,033)




68

Statement of changes in equity – group


Share capital Share

premium Fair value reserve

Contingency reserve

Translation reserve

Retained earnings

Non-controlling

interest Total equity

N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000

Balance at 1 January 2018 10,292,500 14,365,133 1,004,524 908,259 186,441 (27,275,850) 7,816 (511,177) Day 1 IFRS 9 adjustment (note 2.2 and 41) - - - - - (178,627) (1,260) (179,887)

Adjusted balance 1 January 2018 10,292,500 14,365,133 1,004,524 908,259 186,441 (27,454,477) 6,556 (691,064) Total comprehensive loss for the year Loss for the year - - - - - (2,696,156) (459) (2,696,615) Changes in fair value of FVOCI Investments (650) (650)

Foreign exchange translation 50,854 675 51,529

Re-measurement of the net defined benefit liability 35,336 35,336 Gain on revaluation of PPE 160,594 1,824 162,418 Deferred tax on revaluation (34,362) (456) (34,818) Other comprehensive loss for the year - - - - - - -

Total Comprehensive income for the year

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

Transactions with owners, recorded directly in equity Dividend paid to equity holders - - - - - - - - Transfer to contingency reserve - - - 67,688 - (67,901) 213 -

Total transactions with owners, recognised directly in equity - - - 67,688 - (67,901) 213 -

Balance at 31 December 2018 10,292,500

14,365,133

1,165,442 975,947

237,295

(30,218,534)

8,353

(3,173,864)

Balance at 1 January 2017 10,292,500 14,365,133 2,083,193 832,162 111,070 (22,232,954) 11,321 5,462,425

Total comprehensive income for the year Profit for the year - - - - - (6,244,850) (6,205) (6,251,055) Other comprehensive income for the period - - (135,596) - 75,371 - 2,529 (57,696)


- - (135,596) - 75,371 (6,244,850) (3,676) (6,308,751)

Disposal of interest in Frenchies and Africa Realty - - - - - 335,149 - 335,149

Transfer to contingency reserve - - - 76,097 - (76,268) 171 - Transfer from properties revaluation reserve (943,073) 943,073 - Total transactions with owners, recognised directly in equity

- - (943,073) 76,097 - 1,201,954 171 335,149

Balance at 31 December 2017 10,292,500 14,365,133 1,004,524 908,259 186,441 (27,275,850) 7,816 (511,177)




69

Statement of changes in equity – company


Share

capital

Share

premium

Contingency

reserve

Fair

value

reserve

Retained

earnings Total

N'000 N'000 N'000 N'000 N'000 N'000

Balance at 1 January 2018 10,292,500 14,365,133 839,681 367,862 (26,146,738) (281,562)

Day 1 IFRS 9 adjustment (note 2.2) - - - - (83,713) (83,713)

Adjusted balance 1 January 2018 10,292,500 14,365,133 839,681 367,862 (26,230,451) (365,275) Total comprehensive loss for the year loss for the year - - - - (2,658,566) (2,658,566)

Other comprehensive loss for the year - - - 57,831 - 57,831


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

Transactions with owners, recorded directly in equity Transfer to contingency reserve - - 51,664 - (51,664) -

Total transactions with owners, recognised directly in equity

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

Balance at 31 December 2018

10,292,500 14,365,133 891,345 425,693 (28,940,681) (2,966,010)

Share

capital

Share

premium

Contingency

reserve

Fair

value

reserve

Retained

earnings Total

N'000 N'000 N'000 N'000 N'000 N'000

Balance at 1 January 2017 10,292,500 14,365,133 776,327 318,304 (22,370,793) 3,381,471

10,292,500 14,365,133 776,327 318,304 (22,370,793) 3,381,471

Total comprehensive income for the period PPE Revaluation 49,558 49,558

Profit for the year

(3,712,591) (3,712,591)

Total Comprehensive income for the period

- - - 49,558 (3,712,591) (3,663,033)

Transactions with owners, recorded directly in equity

Transfer to contingency reserve 63,354 (63,354) -

Total transactions with owners, recognised directly in equity - - 63,354 - (63,354) - Balance at 31 December 2017 10,292,500 14,365,133 839,681 367,862 (26,146,738) (281,562)




70

Statement of cash flows

Group Company

Notes 31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

Cash flows from operating activities

N’000 N’000 N’000 N’000

Cash premium received 30 6,883,995 7,698,973 5,107,165 6,324,416

Cash received from deposit contract

liabilities 1,234,093 350,617 1,234,092 350,617

Cash withdrawals from deposit contract

liabilities (458,757) (950,525) (458,757) (950,525)

Dividend received 37 12,711 391,285 12,711 391,285

Claims paid 33a&b (9,612,514) (9,147,094) (8,727,157) (8,096,505)

Cash paid to reinsurers/ co-insurers 31 (184,563) (58,529) (176,104) (48,926)

Commission received 32 43,922 5,212 43,922 5,212

Maintenance expenses paid 34 (574,325) (608,226) (574,325) (608,226)

Acquisition costs 34 (417,965) (357,050) (230,507) (215,098)

Employee benefits paid 39 (1,171,447) (1,019,072) (899,952) (674,306)

Other operating expenses paid (2,019,118) (1,318,855) (1,945,041) (1,107,002)

Other income received 55,537 66,680 52,812 83,980

Interest received 3,229,086 3,210,470 3,155,507 3,085,747

Income tax paid (18,665) (50,231) (15,703) (50,231)

Net cash from operating activities (2,998,010) (1,786,345) (3,421,337) (1,509,562)

Cash flow from investing activities:

Purchases of plant and equipment 16 (318,288) (35,904) (315,887) (27,608)

Purchase of intangible assets 15 (10,271) (30,199) (15,937) (9,588)

Capital Improvement of investment properties - (2,000) - (2,000)

Proceeds from disposal of property and equipment - 646 - 646

646

Proceed from disposal of investment

properties 988,238 - 988,238 -

Capital injection made to National

Insurance Commission - (38,987) - -

Capital Injection to Subsidiary (475,551) - (475,551) -

Purchase of financial assets - AFS - (32,500) - (32,500)

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

Proceed from disposal of financial asset -

AFS - 85,594 - 85,594

85,594

Principal repayment of financial assets-

HTM - 757,158 - 757,158

757,158

proceed from disposal of investment 252,826 - 252,826 -

Proceeds from disposal of property, plant

and Equipment (10,390) - (10,390) -

Net cash used in investing activities 85,983 703,808 82,718 771,702

Cash flow from financing activities:

Repayment of borrowings (336,335) (21,236) (256,328) (21,236)

Proceeds from borrowings 500,880 238,143 500,880 198,771

Net cash used in financing activities 164,545 216,907 244,552 177,535

Net increase/(decrease) in cash and cash

equivalents (2,747,482) (865,630) (3,094,067)

(560,325)

Cash and cash equivalent at beginning of

year 5,941,241 6,806,871 5,799,468 6,359,793

6,359,793

Net increase/decrease in cash and cash

equivalents (2,747,482) (865,630) (3,094,067)

(560,325)

Cash and cash equivalent at end of

period 6.2

3,193,759 5,941,241 2,705,401 5,799,468




Notes to the financial statements

71

1. General Information

African Alliance Insurance Company is a public limited company incorporated and domiciled

in Nigeria. The registered office is located at 54 Awolowo Way Ikoyi, Lagos.

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

related financial and pension services, aviation services to its customers.

2. Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated and separate

financial statements are disclosed under General information on the Reporting Entity and

Summary of Significant Accounting Policies. These policies have been consistently applied to

all the years presented unless otherwise stated.

3 Solvency

The solvency level at the valuation date was (702%) for the Company (2017: (276%)). The

company’s assets do not match liabilities (see note 4.4). Hence, asset admissibility

requirements and localization rules in section 25 of Insurance Act CAP I17 LFN 2004 were

not met. The life fund shows a deficit of N10.3billion as at 31 December 2018.

The assets backing the life funds are as follows:

Group Company 2018 2017 2018 2017 N’000 N’000 N’000 N’000

Government Bonds 19,994,820 20,373,177 19,994,820 20,373,177 Cash and bank balances 3,680,801 6,006,807 3,173,108 5,799,468 Investment in quoted equity 1,014,023 2,182,921 1,014,023 2,182,921

Total

24,689,644 28,562,905 24,181,951 28,355,566

4 Management of Financial risk

The Group is exposed to various financial risks in connection with its current operating

activities, such as foreign currency risk, interest rate risk, credit risk, market risk and liquidity

risk. These risks contribute to the key financial risk that the proceeds from the Group's

financial assets are insufficient to fund the obligations arising from insurance policy contracts.

The Company manages these risks through the activities of the Audit Committee and the

Investment Committee. Each committee meets at least four times per annum to discuss

financial risk issues. Management is responsible for implementing recommendations that

have been agreed and reporting back to the relevant committee.

The Audit Committee is a committee of the Board of African Alliance Insurance Plc and is

responsible for the implementation and monitoring of overall risk management, internal

financial controls and financial and actuarial reporting within the Group. The main

responsibilities of this Committee are:

i) Setting and overseeing the overall standard for financial and actuarial reporting, risk

management and internal controls within the Group;

ii) Monitoring the effectiveness of business risk management processes in the Group;

iii) Reviewing and assessing the quality of the work done by professionals responsible for

financial and actuarial reporting, risk management and internal control;

iv) Engaging in discussions with external and internal auditors on the quality and

acceptability of the control environment and reporting structures.





72

The Investment Committee is a management committee and is responsible for

i) ensuring that insurance and investment contract liabilities are matched with

appropriate supporting assets based on the type of benefits payable to the contract

holders;

ii) ensuring that the long-term investment return on assets supporting policy liabilities

are sufficient to fund policyholders' reasonable benefit expectations and the

shareholders' profit entitlement;

iii) the implementation and monitoring of the asset management process to ensure that

the risks arising from trading positions are effectively managed within the pre-

determined risk parameters.

4.1 Market risk

The business's operations are exposed to market risk. Market risk is the risk of adverse

financial impact as a consequence of market movements such as currency exchange rates,

interest rates and other price changes. Market risks arises due to fluctuations in both value

of assets and liabilities. The company has established policies and procedures in order to

manage market risk.

The acquisition of policyholders’ assets is based on the design of the product and marketing

descriptions. Within these parameters, investments are managed with the aim of maximising

policyholder returns while limiting risk to acceptable levels within the framework of statutory

requirements. The focus of risk measurement and management is to ensure that the

potential risks inherent in an investment are reasonable for the future potential reward,

exposure to investment risk is limited to acceptable levels, premium rates are adequate to

compensate for investment risk and an adequate reserving policy is applied for long-term

policy liabilities. The diverse product range requires a variety of approaches to the

management of risk; these range from portfolio management practices and techniques such

as optimization of expected risks and rewards based on investment objectives, to asset-

liability matching in support of statement of financial position obligations.





73

4.1.1 Foreign exchange risk

Foreign exchange risk is the risk associated with movement in the foreign exchange prices from foreign currency denominated

transactions which the Group is exposed to.

The Group is exposed to foreign exchange currency risk primarily through certain transactions denominated in foreign currency. The

Group is exposed to foreign currency denominated in dollars and Pound through bank balances in other foreign currencies.

The Group manages its exposure to foreign exchange risk using sensitivity analysis to assess potential changes in the value of foreign

exchange positions and impact of such changes on the Group's income. There have been no major changes from the previous year in

the exposure to risk or policies, procedures and methods used to measure the risk.

The carrying amounts of the Group’s foreign currency-denominated assets as at end of the year are as follows:

Group Company

Currency 2018 2017 2018 2017

N'000 N'000 N'000 N'000

Cash and bank balances Dollars 16,065 37,866 16,065 33,082

- Pounds - 379 - -

The table below shows the effect on the profit as at 31 December 2018 from N 306.5 /$1 (2017 December: N305.5/$) and N

390.7/GBP (2017 December: N412.9 /GBP) closing rate unfavourable/favourable change in USD/GBP against the naira with all other

variables held constant.

Group Company

Changes in USD exchange rate Impact on PBT

2018 2017 2018 2017

N'000 N'000 N'000 N'000

Increase/(decrease) by 10% (+/-) 1,607 3,787 1,607 3,308 Increase/(decrease) by 15% (+/-) 2,411 5,680 2,411 4,962

Changes in POUNDS exchange rate

Increase/(decrease) by 10% (+/-) - 42 - - Increase/(decrease) by 15% (+/-) - 63 - -





74

4.1.2 Interest-rate risk

Interest rate risk is the risk that the value of a fixed income security will fall as a result of

movement in market interest rates. Interest rate risk also arises from fluctuations in future

cash flows of a financial instrument because of changes in market interest rates.

The company is exposed to interest rate risk as the company invest in short term

investments at fixed interest rates. Interest rate risk also exists in products sold by the

company. The company manages this risk by adopting close asset/liability matching criteria,

to minimise the impact of mismatches between asset and liability values arising from interest

rate movements. Interest rate risk exposures from guarantees embedded in insurance

liabilities. The company's insurance contracts and investment contracts with DPF have

certain options and guarantees that transfer interest rate risk to the company. These are:

• options to surrender the insurance contract or the investment contract with DPF where

the surrender value (i.e. the strike price of the option) is either a fixed amount or a

fixed amount plus interest depending on the year in which the contract was issued;

• guaranteed annuity options where the company has guaranteed at the inception of

certain contracts that it will be paying a life annuity to the surviving policyholders at

their retirement dates which will be calculated using the higher of the current annuity

rate at that date or the guaranteed annuity rate set in the contract. The guaranteed

rate has fixed at inception both the level of mortality risk and the interest rate that

will be used to calculate the annuity payments. "

4.2 Credit risk

Credit risk arises from the inability or unwillingness of a counter party to a financial

instrument to discharge its contractual obligations. The Group determines counter-party

credit quality by reference to ratings from independent ratings agencies or, where such

ratings are not available, by internal analysis. The Group seeks to avoid unacceptable

concentration of credit risk to groups of counter-parties, to business sectors, product types,

etc.

Key areas where the Group is exposed to credit risk are:

• Reinsurers’ share of insurance liabilities;

• Amounts due from reinsurers in respect of claims already paid;

• Amounts due from insurance contract holders;

• Amounts due from insurance intermediaries;

• Amounts due from loans and receivables;

• Amounts due from money market and cash positions

The Group structures the levels of credit risk it accepts by placing limits on its exposure to

a single counterparty, or groups of counterparties. Such risks are subject to an annual or

more frequent review. Limits on the level of credit risk by category and territory are

approved by the Management Committee.

Reinsurance is used to manage insurance risk. This does not, however, discharge the

Group’s liability as primary insurer. If a reinsurer fails to pay a claim for any reason, the

Group remains liable for the payment to the policyholder. The creditworthiness of reinsurers

is considered on an annual basis by reviewing their financial strength prior to finalisation of

any contract.





75

The Group’s financial instruments do not represent a concentration of credit risk because

the business deals with a variety of reinsurers and its premiums receivable and loans are

spread among a number of major industries, customers and geographic areas. Amounts

receivable in terms of long-term insurance business are secured by the underlying value of

the unpaid policy benefits in terms of the policy contract. An appropriate level of provisioning

is maintained.

The Group manages its exposure to credit risk through counterparty risk using established

limits as approved by the Board. These limits are determined based on credit ratings of the

counterparty amongst other factors. The investments portfolio is monitored on a monthly

basis.

4.2.1 Maximum exposure to credit risk before collateral and other credit enhancements.

Group Company

2018 2017 2018 2017 N'000 N'000 N'000 N'000

Cash and bank balances 3,680,801 6,006,807 3,173,108 5,799,468 Investment securities

21,109,127 22,668,096 21,100,968 22,647,623

Trade receivables

135,927 41,918 - - Reinsurance assets 144,052 53,717 144,052 53,717 Other receivables

918,439 170,470 1,502,991 161,079

Statutory deposit

358,182 348,965 200,000 200,000 Staff loans

95,374 170,708 89,316 163,207

Due from policy holders 225,564 283,764 143,074 216,951

26,667,466 29,744,445 26,353,509 29,242,045

4.2.2 Credit quality of financial assets

All assets are classified as “Neither past due nor impaired”. Credit quality of trade receivables

is summarised as follows:

Group Company

2018 2017 2018 2017 N'000 N'000 N'000 N'000

Neither past due nor impaired 25,428,089 29,119,503 24,618,128 28,700,808 Individually impaired

1,239,377 624,942 1,735,381 541,237

Gross

26,667,466 29,744,445 26,353,509 29,242,045 Less: allowance for impairment (440,444) (395,744) (248,509) (690,601)

Net 26,227,022 29,348,701 26,105,000 28,551,444

No trade receivable balance was past due but not impaired. The risk associated with other

receivables are low.

4.2.3 Credit quality of financial assets neither past due nor impaired

The credit quality of financial assets that are neither past due nor impaired can be assessed

by reference to internal credit ratings or to historical information about counterparty default

rates.





76

4.2.4 Management of credit risk

The Board of Directors is responsible for oversight of the Entity's credit risk, including:

• Formulating credit policies for The Entity, covering collateral requirements, credit

assessment, risk grading and reporting, documentary and legal procedures, and

compliance with regulatory and statutory requirements.

• Establishing the authorisation structure for the approval and renewal of credit facilities.

Authorisation limits are allocated to the Board of Directors as appropriate.

• Reviewing and assessing credit risk in all credit exposures prior to making commitment

to customers. Renewals and reviews of facilities are subject to the same review process

• Developing and maintaining The Entity's criteria for categorising exposures, and to focus

management on the attendant risks. The responsibility for approving and reviewing the

Risk Assets Acceptance Criteria and Credit Risk Policy lies with the Board of Directors

• Reviewing compliance of with exposure and concentration limits, and promotion of best

practices throughout the entity in the management of credit risk.

Credit Risk Measurement

The Entity acknowledges that there are diverse intrinsic risks inherent in the vagaries of its

business segments and, as a result, applies different parameters to adequately dimension

the risks in each business segments.

The Entity’s rating grades as defined by the Board of Directors, covering all the entity's credit

exposure to corporate, commercial, conglomerates and multinationals. Obligor rating in the

entity is handled by Relationship Managers with further review by Risk Management and

Control before it goes through the approval process.

The Entity's external rating system (Moody’s.) is shown below:

Moody’s PD AAIC Definition

Aaa 0.02%

AAA

Superior asset quality. Asset will be recovered in full. Risk of loss is remote.

Aa1 0.03%

AA

Aa2 0.05%

AA-

Aa3 0.09%

A+

A1 0.14%

A

A2 0.18%

A-

A3 0.22%

BBB+ Asset quality is reliable, but with considerable risk. Risk of loss is doubtful.

Baa1 0.28%

BBB

Baa2 0.43%

BBB-

Baa3 0.66%

BB+

Ba1 1.10%

BB

Ba2 1.65%

BB-

Ba3 2.48%

CCC+ The quality of the Asset is acceptable with

some potential weakness. While the asset is currently protected, it is considered potentially weak.

B1 3.71%

CCC

B2 5.57%

CCC-

B3 8.35%

CC+ Asset quality is unreliable with strong tendency for failure/loss. Imminent

weakness with slim chance of survival.

Caa1 10.20%

CC

Caa2 13.80%

CC-

Caa3 100.00%

C+

Ca

C Asset recovery is of great concern. The risk of loss is more imminent and pronounced.

C-





77

The Entity's operational measurements for credit risk are in conformity with the impairment allowances required under the applicable

reporting standard – IFRS 9, and are based on expected losses at the date of entering the contract.

The estimation of credit exposure is complex and requires the use of models, as the value of a product varies with changes in market

variables, expected cash flows and the passage of time. The assessment of credit risk of a portfolio of assets entails further estimations

as to the likelihood of defaults occurring, of the associated loss ratios and of default correlations between counterparties.

The Entity has developed models to support the quantification of the credit risk. These rating and scoring models are in use for all

key credit portfolios and form the basis for measuring default risks. In measuring credit risk, the Group considers three components:

(i) the ‘probability of default’ (PD) by the client or counterparty on its contractual obligations; (ii) current exposures to the counterparty

and its likely future development, from which the Group derive the ‘Exposure At Default’ (EAD); and (iii) the likely recovery ratio on

the defaulted obligations (the ‘Loss Given Default’) (LGD). The models are reviewed regularly to monitor their robustness relative to

actual performance and amended as necessary to optimise their effectiveness.

For debt securities, external ratings are used by Risk Management department for managing of the credit risk exposures as

supplemented by The Entity's own assessment through the use of internal ratings tools.

Group

31 December 2018 AAA AA A BB CC Total

Policyholder Portfolio (N'000) (N'000) (N'000) (N'000) (N'000) (N'000) Cash and bank balances 3,680,801 - - - - 3,680,801

Marketable investment securities - 21,109,127 - - - 21,109,127

Total 3,680,801

3,680,801 21,109,127 - - - 24,789,928

Shareholder Portfolio Cash and bank balances - - - - - -

Marketable investment securities - - - - -


Statutory deposit 358,182 - - - - 358,182

Due from policy holders - - - 225,564 - 225,564

Total 502,235

502,235

- - 225,564 - 727,799





78


Policyholder Portfolio Cash and bank balances 6,006,807 - - - - 6,006,807

Marketable investment securities - 22,668,096 - - - 22,668,096

Total 6,006,807

6,006,807

22,668,096 - - - 28,674,903


Marketable investment securities - - - - -



Due from policy holders - 170,708 - - - 170,708

Staff loans - - - 283,764 - 283,764

Total 402,682

402,682

170,708 - 283,764 - 857,154

Company 31 December 2018 AAA AA A BB CC Total

Policyholder Portfolio (N'000) (N'000) (N'000) (N'000) (N'000) (N'000) Cash and cash equivalents 3,173,108 - - - - 3,173,108

Marketable investment securities 21,100,968 - - - - 21,100,968

Total 24,274,076 - - - - 24,274,076

Shareholder Portfolio Cash and cash equivalents - - - - - -

Marketable investment securities - - - - - -

Reinsurance assets 144,053 - - - - 144,053


Due from policy holders - - 143,074 - 143,074

Total 344,053 - - 143,074 - 487,127





79


Policyholder Portfolio Cash and cash equivalents 5,799,468 - - - - 5,799,468

Marketable investment securities 22,647,623 - - - - 22,647,623

Total 28,447,091 - - - - 28,447,091


Marketable investment securities - - - - - -

Reinsurance assets 53,717 - - - - 53,717


Staff loans - - 163,207 - - 163,207

Due from policy holders - - - 216,951 - 216,951

Total 253,717 - 163,207 216,951 - 633,875





80

4.2.5 Concentration of credit risk exposure

a. Geographical sectors

The concentration of credit risk exposure are all in Nigeria.

b. Industry Sector

The following table breaks down the Group’s credit exposure at carrying amounts, as categorised by the industry sectors of the Group’s counterparties.

Group 31 December 2018 31 December 2017

Premium

Receivable

Investment

securities

Other

receivable Total

Premium

Receivable

Investment

securities

Other

receivable Total

N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000

Finance and insurance - 24,789,928 - 24,789,928 28,674,903 28,674,903

General commerce - - - - - - -

Manufacturing - - - - - - -

Oil and gas - - - - - - -

Public sector - - 358,182 358,182 - - 348,965 348,965

Retail 135,927 - 918,439 1,054,366 41,918 - 678,659 720,577

135,927 24,789,928 1,276,621 26,202,476 41,918 28,674,903 1,027,624 29,744,445

Company 31 December 2018 31 December 2017

Premium

Receivable

Investment

securities

Other

receivable Total

Premium

Receivable

Investment

securities

Other

receivable Total

N'000 N'000 N'000 N'000 Communication - - - - - - - -

Construction - - - - - - - -

Education - - - - - - - -

Finance and insurance - 24,274,076 - 24,274,076 - 28,447,091 - 28,447,091

General commerce - - - - - - - -

Manufacturing - - - - - - - -

Oil and gas - - - - - - - -

Oil and gas - - - - - - - -

Public sector - - 200,000 200,000 - - 200,000 200,000

Transportation - - - - - - - -

Retail - - 52,948 52,948 - - 594,954 594,954

- 24,274,076 252,948 24,527,024 - 28,447,091 794,954 29,242,045





81

4.2.6 Offsetting financial assets and financial liabilities

The disclosures set out in the tables below include financial assets and financial liabilities that are subject to an enforceable master netting arrangement or similar agreement that

covers similar financial instruments, irrespective of whether they are offset in the statement of financial position. As at year end, none of these agreement arrangements met the

criteria for offsetting in the statement of financial position.

Reinsurance payable and receivables create for the parties to the agreement a right of set-off on recognised amounts that is enforceable only following a predetermined events as

stipulated within the treaty agreements. Under the requirements of 'IFRS 4 - Insurance contract', reinsurance assets and liabilities are disclosed gross. Each party to the agreement

will have the option to settle all such amounts on a net basis in the event of default of the other party. An event of default includes a failure by a party to make payment when due.

Group

31 December 2018

Related amounts not offset in the

statement of financial position

Financial assets subject to offsetting, enforceable master

netting arrangements and similar agreements

Gross

amount of

recognised

financial

asset

Gross amount of

financial liabilities

offset in the

statement of

financial position

Net amounts of

financial assets

presented in the

statement financial

of position

Financial

instruments

(including

non-cash

collateral

Cash

collateral

received Net amount

N'000 N'000 N'000 N'000 N'000 N'000

Reinsurance receivables 144,052 - 144,052 - - 144,052

31 December 2018



Financial liabilities subject to offsetting, enforceable master


Gross

amount of

recognised

financial

liabilities

Gross amount of

financial assets

offset in the

statement of

financial position

Net amounts of


presented in the

statement financial

of position

Financial

instruments

(including

non-cash

collateral

Cash

collateral

received Net amount

N'000 N'000 N'000 N'000 N'000 N'000

Reinsurance Payables - - - -

31 December 2017





Gross

amount of

recognised

financial

asset

Gross amount of


offset in the

statement of

financial position

Net amounts of

financial assets

presented in the

statement financial

of position

Financial

instruments

(including

non-cash

collateral

Cash

collateral

received Net amount

N'000 N'000 N'000 N'000 N'000 N'000






82

4.2.6 Offsetting financial assets and financial liabilities

31 December 2017



Financial liabilities subject to offsetting, enforceable

master netting arrangements and similar agreements

Gross

amount of

recognised

financial

liabilities

Gross amount of

financial assets

offset in the

statement of

financial position

Net amounts of


presented in the

statement financial

of position

Financial

instruments

(including

non-cash

collateral

Cash

collateral

received Net amount

N'000 N'000 N'000 N'000 N'000 N'000

Reinsurance Payables - -

Company

31 December 2018





Gross

amount of

recognised

financial

asset

Gross amount of


offset in the

statement of

financial position

Net amounts of

financial assets

presented in the

statement financial

of position

Financial

instruments

(including

non-cash

collateral

Cash

collateral

received Net amount

N'000 N'000 N'000 N'000 N'000 N'000


31 December 2018





Gross

amount of

recognised

financial

liabilities

Gross amount of

financial assets

offset in the

statement of

financial position

Net amounts of


presented in the

statement financial

of position

Financial

instruments

(including

non cash

collateral

Cash

collateral

received Net amount

N'000 N'000 N'000 N'000 N'000 N'000

Reinsurance payables - - - - -

31 December 2017





Gross

amount of

recognised

financial

asset

Gross amount of


offset in the

statement of

financial position

Net amounts of

financial assets

presented in the

statement financial

of position

Financial

instruments

(including

non cash

collateral

Cash

collateral

received Net amount

N'000 N'000 N'000 N'000 N'000 N'000

Reinsurance receivables 53,717 - - - - -





83

4.2.6 Offsetting financial assets and financial liabilities (cont’d) 31 December 2017





Gross

amount of

recognised

financial

asset

Gross amount of


offset in the

statement of

financial position

Net amounts of

financial assets

presented in the

statement financial

of position

Financial

instruments

(including

non cash

collateral

Cash

collateral

received Net amount

N'000 N'000 N'000 N'000 N'000 N'000

Reinsurance payables - - - - - -

4.2.7 Impairment model

Premium debtors are measured at amortized cost, less provision for impaired receivables. Under IFRS, an asset is impaired if the carrying amount is greater than the recoverable

amount. IAS 39 favours the use of the incurred loss model in estimating the impairment of its receivables. However, with the inception of IFRS 9 which became effective for annual

periods beginning on/after 1 January 2018, the Expected Credit Losses (ECL) method of impairment calculation will be in force.

Based on NAICOM’s “No Premium No Cover” guidelines which state that “all insurance covers shall be provided on a strict ‘no premium no cover’ basis”, only cover for which payment

has been received shall be booked. However, brokers have a 30 day period to make payments from the date of the credit notes.

After analysing this financial instrument based on NAICOM “No Premium No Cover” guidelines, a nil impairment standpoint was taken.

The impairment requirements of IFRS 9 apply to all debt instruments that are measured at amortised cost or FVOCI, and to off-balance sheet lending commitments such as loan

commitments and financial guarantees (hereafter collectively referred to as financial assets). This contrasts to the IAS 39 impairment model which was not applicable to loan

commitments and financial guarantee contracts, as there were instead covered by International Accounting standards 37: ""Provisions, contingent liabilities and contingent assets

(IAS 37).

The determination of impairment loss and allowance moves from the incurred credit loss model whereby credit losses are recognized when a defined loss event occurs under IAS 39,

to expected credit loss model under IFRS 9, where provisions are recognised upon initial recognition of the financial asset based on expectation of potential credit losses at the time

of initial recognition. Under IFRS 9, The Company first evaluates individually whether objective evidence of impairment exists for loans that are individually significant and then

collectively assess the loan and other receivables that are not significant and those which are significant but for which there is no objective evidence of impairment available under

the individual assessment

Staged Approach to the Determination of Expected Credit Losses

IFRS 9 outlines a three-stage model for impairment based on changes in credit quality since initial recognition. These stages are as outlined below:





84

Stage 1: The Company recognises a credit loss allowance at an amount equal to the 12 month expected credit losses. This represents the portion of lifetime expected credit losses

from default events that are expected within 12 months of the reporting date, assuming that credit risk has not increased significantly after the initial recognition.

Stage 2: The Company recognises a credit loss allowance at an amount equal to the lifetime expected credit losses (LTECL) for those financial assets that are considered to have

experienced a significant increase in credit risk since initial recognition. This requires the computation of ECL based on Lifetime probabilities of default that represents the probability

of a default occurring over the remaining lifetime of the financial assets. Allowance for credit losses is higher in this stage because of an increase in credit risk and the impact of a

longer time horizon being considered compared to 12 months in stage 1.

Stage 3: The Company recognises a loss allowance at an amount equal to life-time expected credit losses, reflecting a probability of default (PD) of 100% via the recoverable cash

flows for the asset. For those financial assets that are credit impaired. The Company's definition of default is aligned with the regulatory definition. The treatment of the loans and

other receivables in stage 3 remains substantially the same as the treatment of impaired financial assets under IAS 39 except for the portfolios of assets purchased or originated as

credit impaired

The Company does not originate or purchase credit impaired loans or receivables

Impairment Methodology

Calculation of Expected Credit Losses

Calculation of the expected credit loss is based on the key risk parameters of PD, LGD and ED according to the formular set below:

*Except for purchased or originated credit impaired assets

Interest revenue

Change in credit quality since initial recognition

Recognition of expected credit losses

Lifetime

expected credit

losses

Lifetime expected

credit losses

12 month

expected

credit losses

Stage 1 Stage 2 Stage 3

Effective interest

on amortised

cost carrying

amount (i.e. net

of credit

allowance)

Effective interest

on gross carrying

amount

Effective

interest on

gross carrying

amount

Non-performing

(Credit impaired

assets)

Underperforming

(Assets with

significant

increase in credit

risk since

initial recognition*)

Performing (Initial

recognition*)

= PD X EAD X

Probability of

default

Exposure at

default

Loss Given

Default (after

consideration

of collaterals

and recoveries)

LGDECL

12 -month

/ lifetime

Expected

Credit Loss

(ECL)





85

The calculation of ECL incorporates forward-looking information in all the ECL components. This forward-looking information will impact the various ECL components as follows:

• Probability of default – The PDs will vary during various stages of an economic cycle. It is based on the likelihood that a borrower will default within one year (PD), assessment

of the creditworthiness of the counterparty and transformation of 1 Year horizon into lifetime of the asset.

• Loss Given Default – Collateral values will vary based on the stage of an economic cycle.

• Exposure at default – Change in interest rates may affect the EAD e.g. higher interest rates may result in longer terms for loans causing a change in the EAD.

Loss Given Default

The Company applies historical experience to determine the expected loss given default ratios for each class of financial instruments. Where internal historical experience is not

available, other sources, e.g. data available from rating companies as well as professional judgments are used to determine the LGD ratios that will apply. Collateral that is held

against the financial assets is also considered in determining the LGD.

The Company management has resolved to use the recovery rates as published by Moodys credit analytics for all credit exposures to sovereign denominated in foreign currencies

and all corporate exposures.

For sovereign exposures denominated in Naira which are assessed as low credit risk exposures, we have resolved to use LGDs within the rage of 5-10% based on the Central banks

of Nigeria’s Revised Guidance Notes on Credit risk. Section 3.1 of the document addresses exposure to sovereigns and Central banks and states that financial institutions should

assign a risk weight of 0% to the following:

• Exposures to Federal Government of Nigeria (FGN) and Central Bank of Nigeria (CBN);

• Instruments issued by other entities backed by express guarantee of the FGN;

• Inter-bank transactions guaranteed by the FGN or CBN; and

Inter-bank transactions among supervised institutions collateralized by FGN Bonds, Treasury Bills or other similar sovereign bills.

4.3 Liquidity risk

Liquidity risk is the risk that the Company is unable to meet its obligations when they fall due as a result of policyholder benefit payments, cash requirements from contractual

commitments, or other cash outflows, such as debt maturities. Such outflows would deplete available cash resources for operational, trading and investments activities. In extreme

circumstances, lack of liquidity could result in reductions in the consolidated balance sheet and sales of assets, or potentially an inability to fulfil policyholder commitments. The risk

that the Group will be unable to do so is inherent in all insurance operations and can be affected by a range of institution-specific and market-wide events including, but not limited

to, credit events, merger and acquisition activity, systemic shocks and natural disasters.

Monitoring and reporting take the form of cash flow measurement and projections for the next day, week and month respectively, as these are key periods for liquidity management.

The starting point for those projections is an analysis of the undiscounted contractual cashflow at maturity of the financial liabilities and the expected collection date of the financial

assets.

All policyholder funds are invested in appropriate assets to meet the reasonable benefit expectations of policyholders, which include the expectation that funds will be available to

pay out benefits as required by the policy contract. The disclosure in note 6 demonstrate that the Group has significant liquid resources. The value for policyholders' liabilities and

the assets backing them are as per the carrying amount in the statement of the financial position.





86

4.3 Liquidity risk (cont’d)

The maturity profile of the total policyholders' liabilities and assets backing them is shown below:

Group

31 December 2018 Carrying

amount 0-3 months

3 to 9

months

9 months to

1 year 1 to 5 years > 5 years Total

N'000 N'000 N'000 N'000 N'000 N'000 N'000

Trade payables 1,106,999 332,100 387,450 387,450 - - 1,106,999

Other liabilities 2,056,101 411,220 514,025 616,830 514,025 - 2,056,101

Investment linked contract liabilities 5,841,757 876,264 1,460,440 876,264 2,628,791 - 5,841,757

Total financial liabilities 9,004,858 1,619,584 2,361,914 1,880,544 3,142,816 - 9,004,858

Cash and bank balances 3,680,801 736,160 920,200 736,160 552,120 736,160 3,680,801

Marketable investment securities 21,109,127 - - 1,101,733 2,817,497 17,189,898 21,109,127

Trade receivables 135,927 135,927 - - - - 135,927

Reinsurance assets 144,052 - - 144,053 - - 144,053

Other receivables 1,665,543 333,109 416,386 333,109 249,831 333,109 1,665,543

Total financial assets 26,735,450 1,627,378 1,969,860 2,057,687 1,857,408 19,223,118 26,735,451

Net financial assets and liabilities 17,730,593 7,795 (392,055) 177,143 (1,285,408) 19,223,118 17,730,593

Insurance contract liabilities - Life fund (35,110,631) (1,768,523) (1,650,200) (1,822,245) (1,755,837) (28,113,829) (35,110,633)

Net policyholders assets and liabilities (17,380,038) (1,760,728) (2,042,255) (1,645,102) (3,041,245) (8,890,711) (17,380,040)

Group 31 December 2017 Carrying

amount 0-3 months

3 to 9

months

9 months to

1 year 1 to 5 years > 5 years Total

N'000 N'000 N'000 N'000 N'000 N'000 N'000

Trade payables 1,177,117 353,135 411,991 411,991 - - 1,177,117




Cash and cash equivalents 6,006,807 6,006,807 - - - - 6,006,807


Trade receivables 41,918 41,918 - - - - 41,918


Statutory deposit - - -

Other receivables 426,122 102,269 63,918 76,702 85,224 98,008 426,122

Total financial assets 29,196,660 6,150,994 63,918 1,232,152 2,902,721 18,846,874 29,196,660

Net financial assets and liabilities

21,618,162 4,763,938 (1,948,418) (361,188) 316,955 18,846,874 21,618,162

Insurance contract liabilities - Life fund (36,378,453) (1,325,734) (2,225,932) (953,971) (1,779,827) (30,092,990) (36,378,454)

Net policyholders assets and liabilities (14,760,291) 3,438,204 (4,174,350) (1,315,159) (1,462,872) (11,246,116) (14,760,292)





87

4.3 Liquidity risk (cont’d)

Company 31 December 2018

Carrying

amount 0-3 months

3 to 9

months 9 to 1 year 1 to 5 years > 5 years Total

N'000 N'000 N'000 N'000 N'000 N'000 N'000

Trade payables 850,179 255,053 297,562 297,562 - - 850,178




Cash and cash equivalents 3,173,108 634,622 793,277 634,622 475,966 634,622 3,173,109

Marketable investment securities 21,100,968 422,019 633,029 844,039 1,055,048 18,146,832 21,100,968

Trade receivables - - - - - - -


Other receivables 2,146,825 429,365 536,706 429 750,960 429,365 2,146,825

Total financial assets 26,564,953 1,486,006 1,963,012 1,623,143 2,281,974 19,210,819 26,564,953

Net financial assets and liabilities 18,112,279 2,541 (323,374) (30,796) (746,911) 19,210,819 18,112,279

Insurance contract liabilities - Life fund (33,149,205) (662,984) (994,484) (1,720,447) (1,657,460) (28,113,829) (33,149,205)

Net policyholders assets and liabilities (15,036,926) (660,443) (1,317,858) (1,751,243) (2,404,371) (8,903,010) (15,036,926)

31 December 2017

Carrying

amount 0-3 months

3 to 9

months 9 to 1 year 1 to 5 years > 5 years Total

N'000 N'000 N'000 N'000 N'000 N'000 N'000

Trade payables 914,215 274,265 319,975 319,975 - - 914,215




Cash and bank balances 5,799,468 5,799,468 - - - - 5,799,468


Trade receivables - - - - - - -


Other receivables 342,417 82,180 51,363 61,635 68,483 78,756 247,152

Total financial assets 28,843,225 5,881,648 51,363 1,217,085 2,885,980 18,807,149 28,843,226

Net financial assets and liabilities 21,900,487 4,648,367 (1,775,327) (171,882) 392,180 18,807,149 21,900,487

Insurance contract liabilities - Life fund (34,536,368) (957,317) (1,581,202) (677,658) (1,227,201) (30,092,990) (34,536,368)

Net policyholders assets and liabilities (12,635,881) 3,691,050 (3,356,529) (849,540) (835,021) (11,285,841) (12,635,881)

The maturity of non-derivative financial liabilities and financial assets have been compiled based on undiscounted cash flows, which include estimated interest payments.





88

4.4 Capital management policies and procedures

The Company manages its capital to ensure that the company will be able to continue as going concern and comply

with the regulators' capital requirements while maximising the return to stakeholders through the optimisation of

the debt and equity balance. The capital structure of the company consists of equity attributable to equity holders

of the parent, comprising issued capital, reserves and retained earnings.

The Group and the company’s Authorized share capital as at 31 December, 2018 is N10, 292,500 (2017:N10,

292,500). The group and the company are in compliance with the minimum capital requirement of N2 billion as

stipulated by the Insurance Act.

Group Company

2018 2017 2018 2017

N'000 N'000 N'000 N'000

Share capital 10,292,500 10,292,500 10,292,500 10,292,500

Share premium 14,365,133 14,365,133 14,365,133 14,365,133

Contingency reserves 975,947 908,259 891,345 839,681

Fair value reserves 1,165,442 1,004,524 425,693 367,862

Translation reserve 237,295 186,441 - -

Retained earnings (30,218,534) (27,275,850) (28,940,681) (26,146,738)

(3,182,217) (518,993) (2,966,010) (281,562)

The group's policy is to maintain a strong capital base to maintain investor, creditor and market confidence and to

sustain the future development of the business. Management uses regulatory capital ratios to monitor its capital

base. Capital is allocated between specific operations and activities and to a large extent driven by optimisation of

the return achieved on the capital allocated. The amount of capital allocated to each activity is based primarily on

the regulatory capital. In some cases the regulatory requirements do not fully reflect the varying degree of risk

associated with different activities. In such cases, the capital requirements may be flexed to reflect differing risk

profiles, subject to the overall level of capital to support a particular operation not falling below the minimum

required for regulatory purposes. The process of allocating capital to specific operations or activities is undertaken

independently of those responsible for the operation by a committee.

The National Insurance Commission (NAICOM) specifies the minimum amount and type of capital that must be held

by the company to cover the insurance liabilities. The regulator measures the financial strength of insurance

companies using the capital adequacy requirements for the category of company. This test compares insurer's

capital against the risk profile.

During the year, the company recorded a negative shareholders fund and Solvency Margin of ₦2.9 Billion and

₦14.04 Billion respectively. This is below the minimum regulatory capital of ₦2 Billion required by the National

Insurance Commission (NAICOM) for life insurance business. These constitute non-compliance with the regulatory

capital requirements. The continuation of the Company’s operation is dependent on the ability to meet its regulatory

capital requirement and generate sufficient cash flows to meet its obligation as they fall due.





89

Minimum Capital requirement

The Group’s Authorized share capital as at 31 December, 2018 is N10, 292,500 (2017:N10, 292,500).

The company did not meet the minimum capital requirement of N2 billion as stipulated by the Insurance Act

The Solvency Margin for African Alliance Insurance Plc. as at 31

December 2018 is as follows: N'000 N'000

Admissible Assets

Cash & Cash Equivalents 3,173,108

Amortized Cost 19,994,820

Fair Value Through Profit or Loss 1,014,023

FVOCI 92,125

Loans and Receivable – Assets -

Trade Receivable -

Reinsurance Assets 144,053

Other Receivable & Prepayment 89,316

Investment properties 667,000

Investment in Subsidiary -

Investment in Associate 1,804,083

Deferred Tax Asset -

Intangible assets -

Property Plant & Equipment 383,933

Statutory Deposit 200,000

Total Admissible Assets (a) 27,562,461

Insurance Contract Liabilities 33,149,205

Investment Contract Liabilities 5,841,757

Employee Benefit 42,690

Borrowing 482,146

Trade Payable 850,178

Provision & Other Payables 461,659

Dividend Payable -

Provision for Current Tax 774,244

Total Admissible Liabilities (b) 41,601,879

SOLVENCY MARGIN (a-b) (14,039,418)

Subject to Higher of:

15% of Net premium income or 760,220

Minimum Capital Requirement 2,000,000 2,000,000

Gross Solvency ratio (702%)

Net Solvency ratio (802%)





90

Group Hypothecation

Item Life Annuity

Investment

Contract

Total

(Admissible)

N’000 N’000 N’000 N’000

Insurance Contract Liabilities 6,996,804 28,113,829 - 35,110,633

Investment Contract Liabilities - - 5,841,758 5,841,758

Gross Insurance Funds 6,996,804 28,113,829 5,841,758 40,952,391

Less Reinsurance Receivables

1 Reinsurers' share of Unearned premium reserve (21,149) - - (21,149)

2 Reinsurers' share of Incurred but not reported claims (122,904) - - (122,904)

3 Others (specify) - - - -

Net Insurance Funds 6,852,751 28,113,829 5,841,758 40,808,338

Admissible Assets 1 Cash and Cash Equivalents 1,185,533 2,075,735 419,533 3,680,801

2 Treasury bills and Government Bonds 2,391,659 14,326,065 2,771,468 19,489,192

3 Placement with Financial Institutions - - - -

4 Corporate Bonds & Debenture - 505,628 - 505,628

5 Quoted Shares 418,623 - 595,400 1,014,023

6 Unquoted Shares 100,284 - - 100,284

7 Loan to Policy holders 52,948 - - 52,948

8 Investment Properties 1,258,128 822,057 2,055,357 4,135,542

Total Admissible Assets 5,407,175 17,729,485 5,841,758 28,978,418

SURPLUS(DEFICIT) IN ASSETS COVER (1,445,576) (10,384,344) - (11,829,920)





91

Company Hypothecation

Item Life Annuity

Investment

Contract

Total

(Admissible)

N’000 N’000 N’000 N’000

Insurance Contract Liabilities 5,035,376 28,113,829 - 33,149,205

Investment Contract Liabilities - 5,841,758 5,841,758

Gross Insurance Funds 5,035,376 28,113,829 5,841,758 39,990,963

Less Reinsurance Receivables

1 Reinsurers' share of Unearned premium reserve (21,149) - (21,149)

2 Reinsurers' share of Incurred but not reported claims (122,904) - (122,904)

3 Others (specify) - - - -

Net Insurance Funds 4,891,323 28,113,829 5,841,758 38,846,910

Admissible Assets 1 Cash and Cash Equivalents 677,841 2,075,735 419,533 3,173,108

2 Treasury bills and Government Bonds 2,391,659 14,326,065 2,771,468 19,489,192

3 Corporate Bonds & Debenture 505,628 505,628

4 Quoted Shares 418,623 - 595,400 1,014,23

5 Unquoted Shares 92,125 - 92,125

6 Loan to Policy holders 52,948 - 52,948

7 Investment Properties 1,258,128 822,057 2,055,357 4,135,542

Total Admissible Assets 4,891,323 17,729,485 5,841,758 28,462,566

SURPLUS(DEFICIT ) IN ASSETS COVER - (10,384,344) - (10,384,344)

The minimum capital required is compared with the equity maintained during the year in the table below:

31-Dec-18 31-Dec-17

N'000 N'000

Shareholders’ equity (2,966,010) (281,562)

Capital requirement on regulatory basis 2,000,000 2,000,000

Shortfall in Solvency Margin (14,039,418) (5,521,719)

Shortfall in Asset cover for contract liabilities (10,384,344) (6,084,295)





92

4.5 Measurement basis of financial assets and liabilities

Group

31 December 2018 31 December 2017

Fair Value

Amortised

Cost Total Fair Value

Amortised

Cost Total N'000 N'000 N'000 N'000 N'000 N'000

Cash and cash equivalents

3,680,801 - 3,680,801 - 6,006,807 6,006,807

Investment securities

21,109,127 - 21,109,127 2,294,919 20,373,177 22,668,096 Trade receivables

- 135,927 135,927 - 41,918 41,918

Reinsurance assets

- 144,053 144,053 - 53,717 53,717 Other asset

- 1,612,595 1,612,595 - 426,122 426,122

Statutory deposit

- 358,182 358,182 - 348,965 348,965

Total Financial assets

24,789,928 2,250,757 27,040,685 2,294,919 27,250,706 29,545,625

Financial liabilities

Bank overdraft

- - - - - -

Trade payable

- 1,106,999 1,106,999 - 1,177,117 1,177,117 Other payables and accruals

- 2,056,101 2,056,1001 - 1,474,277 1,474,277

Investment linked contract liabilities

- - - - 4,927,104 4,927,104

Total Financial liabilities

- 3,163,100 3,163,100 - 7,578,498 7,578,498





93

Company

31-Dec-18 31 December 2017

Fair Value

Amortised

Cost Total Fair Value

Amortised

Cost Total N'000 N'000 N'000 N'000 N'000 N'000

Cash and cash equivalents

- 3,173,108 3,173,108 - 5,799,468 5,799,468 Investment securities

1,014,023 19,994,820 21,008,843 2,274,446 20,373,177 22,647,623

Trade receivables

- - - - - - Reinsurance assets

- 144,053 144,053 - 53,717 53,717

Other asset

- 548,294 548,294 - 342,417 342,417 Statutory deposit

- 200,000 200,000 - 200,000 200,000

Total Financial assets

1,014,023 24,060,275 25,074,298 2,274,446 26,768,778 29,043,224


Bank overdraft

- - - - - -

Trade payable

- 850,178 850,178 - 914,215 914,215 Other payables and accruals

- 1,760,739 1,760,739 - 1,101,419 1,101,419

Investment linked contract liabilities

- 5,841,758 5,841,758 - 4,927,104 4,927,104

Total Financial liabilities

- 8,452,675 8,452,675 - 6,942,738 6,942,738

4.6 Measurement of financial assets and liabilities at fair value

The Group measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used in making

the measurements:

Level 1: inputs that are quoted market prices (unadjusted) in active markets for identical instruments.

Level 2: inputs other than quoted prices included within Level 1 that are observable either directly (i.e. as prices) or indirectly (i.e.

derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments;

quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques in

which all significant inputs are directly or indirectly observable from market data. All level 2 valuation were derived using either the

net present value and discounted cash flow models or comparison with similar instruments for which market observable prices exist.

Level 3: inputs that are unobservable. This category includes all instruments for which the valuation technique includes inputs not

based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. This category includes

instruments that are valued based on quoted prices for similar instruments for which significant unobservable adjustments or

assumptions are required to reflect differences between the instruments.

There were no transfers from Level 1 to Level 2 or between level 2 or level 3 of the fair value hierarchy during the year.





94

4.6.1 Fair value of financial assets and liabilities

The table below summarises the carrying amounts and fair values of the financial assets and liabilities.

Group Company

31-Dec-18 31 December 2017 31-Dec-18 31 December 2017

Carrying

value Fair value

Carrying

value Fair value

Carrying

value Fair value

Carrying

value Fair value N '000 N '000 N '000 N '000 N '000 N '000 N '000 N '000

Financial assets Statutory deposits 358,182 358,182 348,965 348,965 200,000 200,000 200,000 200,000 Cash and bank balances 3,680,801 3,680,801 6,006,807 6,006,807 3,173,108 3,173,108 5,799,468 5,799,468 Investment securities:

-Amortized cost 19,994,820 19,994,820 - - 19,994,820 19,994,820 - - -Held-to-maturity

- - 20,373,177 20,373,177 - - 20,373,177 20,373,177

-FVOCI 100,284 100,284 - - 92,125 92,125 -Available for sale

- - 111,998 111,998 - - 91,525 91,525

-Financial assets designated at fair value through profit or loss 1,014,023 1,014,023 2,182,921 2,182,921 1,014,023 1,014,023 2,182,921 2,182,921 Loans and receivables 52,948 52,948 162,078 162,078 52,948 52,948 95,267 95,267 Trade receivables

135,927 135,927 41,918 41,918 - - - -

Reinsurance assets 144,053 144,053 53,717 53,717 144,053 144,053 53,717 53,717 Other receivables

626,055 626,055 264,044 264,044 548,294 548,294 247,152 247,152

TOTAL

26,107,093 27,107,093 29,545,675 29,545,675 25,219,371 25,219,371 29,043,227 29,043,227

Financial liabilities Trade payables

1,106,999 1,106,999 1,177,117 1,177,117 850,178 850,178 914,215 914,215

Other liabilities

2,056,101 2,056,101 1,474,277 1,474,277 1,600,377 1,600,377 1,101,419 1,101,419 Dividend payable

- - - - - - Investment linked contract liabilities 5,841,758 5,841,758 4,927,104 4,927,104 5,841,757 5,841,757 4,927,104 4,927,104 TOTAL

9,004,858 9,004,858 7,578,498 7,578,498 8,292,312 8,292,312 6,942,738 6,942,738





95

4.6.1 Fair value of financial assets and liabilities (cont’d)

During the year the solvency margin was -702% (2017: -276%).

The company’s capital objectives are to ensure that the company is properly capitalized and funded at all times,

having regard to its regulatory needs, prudent management and the needs of all stakeholders

Precisely, the company has adopted the following capital management policies:

(i) Maintenance, as a minimum, of capital sufficient to meet the statutory requirement.

(ii) An Economic Capital at Risk (ECaR) approach is also used by the management and the board to ensure that

obligations to policyholders can be met in adverse circumstances

(iii) Maintenance of an appropriate level of liquidity at all times. The company further ensures that it can meet

its expected capital and financing needs at all times, having regard to business plans to guarantee its going

concern status, forecast and any strategic initiatives

Sensitivities

The company has both qualitative and quantitative risk management procedures to monitor the key risks and

sensitivities of the business. This is achieved through scenario analysis and risk assessments. From an

understanding of the principal risks, appropriate risk limits and control are defined. The Enterprise Risk Management

committee plays a major role here.

The risk types affecting the surplus capital of the company are market risk, credit risk, liquidity risk, liability risk,

business risk and operational risk.

4.6.2 Financial instruments measured at fair value - Fair value hierarchy

The following table analyses financial instruments measured at fair value at the reporting date, by the level in the

fair value hierarchy into which the fair value measurement is categorised. The amounts are based on the values

recognised in the statement of financial position.

Group

31 December 2018

Level 1 Level 2 Level 3

Total fair

value N '000 N '000 N '000 N '000

Financial assets

Investment securities:

Financial assets designated at fair value through P o L 1,014,023 - - 1,014,023

FVOCI

- - 100,284 100,284

1,014,023 - 100,284 1,114,307

31 December 2017


Total fair

value N '000 N '000 N '000 N '000

Financial assets



Available for sale investment

- - 111,998 111,998

2,182,921 - 111,998 2,294,919

Company

31 December 2018


Total fair

value N '000 N '000 N '000 N '000

Financial assets



FVOCI

- - 92,125 92,125

1,014,023 - 92,125 1,106,148

31 December 2017


Total fair

value N '000 N '000 N '000 N '000

Financial assets


Financial assets designated at fair value 2,182,921 - - 2,182,921

Available for sale investment

- - 91,525 91,525

2,182,921 - 91,525 2,274,446





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4.6.3 Financial instruments not measured at fair value

The following table sets out the fair values of financial instruments not measured at fair value and analyses them

by the level in the fair value hierarchy into which each fair value measurement is categorised:

Group

31 December 2018


Total fair

value

Total

carrying

amount N '000 N '000 N '000 N '000 N '000

Financial assets

Cash and bank balances

3,680,801 - 3,680,801 3,680,801

Investment securities: Fair value through profit or loss - - - -

FVOCI

- - -

Amortized Cost

19,994,820 19,994,820 19,994,820

Loans and receivables

134,250 - 134,250 134,250

Trade receivables

- - - - -

Reinsurance assets

- 144,053 - 144,053 144,053

Other receivables

- 626,055 - 1,612,595 1,612,595

Statutory deposit

- 358,182 - 358,182 358,182

19,994,820 4,943,341 - 25,924,701 25,924,701


Trade payables

- 1,106,999 1,106,999 1,106,999

Other liabilities

- 2,056,101 2,056,101 2,056,101

Investment linked contract liabilities - 5,841,757 5,841,757 5,841,757

- 9,004,858 9,004,858 9,004,858

Group

31 December 2017


Total fair

value

Total

carrying

amount N '000 N '000 N '000 N '000 N '000

Financial assets


6,006,807 - 6,006,807 6,006,807


- -

Fair value through profit or loss - - - -

Available for sale

- - -

Held to Maturity

20,373,177 20,373,177 20,373,177


84,944 - 84,944 84,944

Trade receivables

- - - - -

Reinsurance assets

- 53,717 - 53,717 53,717

Other receivables

- 341,178 - 341,178 341,178

Statutory deposit

- 348,965 - 348,965 348,965

20,373,177

20,373,177 6,835,611 - 27,208,788 27,208,788


Trade payables

- 1,177,117 1,177,117 1,177,117

Other liabilities

- 1,474,277 1,474,277 1,474,277


- 7,578,498 7,578,498 7,578,498





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4.6.3 Financial instruments not measured at fair value (cont’d)

Company

31 December 2018


Total fair

value

Total

carrying

amount N '000 N '000 N '000 N '000 N '000

Financial assets


3,173,108 - 3,173,108 3,173,108


-


FVOCI

- - -

Amortized Cost

19,994,820 19,994,820 19,994,820


52,948 - 52,948 52,948

Trade receivables

- - - - -

Reinsurance assets

- 144,053 - 144,053 144,053

Other receivables

- 548,294 - 548,294 548,294

Statutory deposit

- 200,000 - 200,000 200,000

19,994,820

19,994,820 4,118,403 - 24,113,223 24,113,223


Trade payables

- 850,178 850,178 850,178

Other liabilities

- 1760,739 1,760,739 1,760,739


-

- 8,452,675 8,452,675 8,452,675

31 December 2017


Total fair

value

Total carrying

amount N '000 N '000 N '000 N '000 N '000

Financial assets


5,799,468 - 5,799,468 5,799,468


- -


Available for sale

- - -

Held to Maturity

20,373,177 20,373,177 20,373,177


95,267 - 95,267 95,267

Trade receivables

- - - - -

Reinsurance assets

- 53,717 - 53,717 53,717

Other receivables

- 247,152 - 247,152 247,152

Statutory deposit

- 200,000 - 200,000 200,000

20,373,177 6,395,604 - 26,768,781 26,768,781


Trade payables

- - 914,215 914,215 914,215

Other liabilities

- - 1,101,419 1,101,419 1,101,419

Investment linked contract liabilities - - 4,927,104 4,927,104 4,927,104

- - 6,942,738 6,942,738 6,942,738

There was no transfer between levels during the year under review.

Financial instruments in level 3

The financial instruments in level 3 above comprise unquoted equity instruments. The following table shows a

reconciliation from the beginning balances to the ending balances for financial instruments in level 3 of the fair

value hierarchy. Group Company

2018 2017 2018 2017 N’000 N’000 N’000 N’000

Balance at 1 January

111,998 237,478 91,525 217,005 Acquisitions

- 32,500 - 32,500

Impairment (charge)/write back

1,250 (114,287) 1,250 (114,287) Reclassification

- -

Disposal

(12,314) (44,343) - (44,343) Fair value changes

(650) 650 (650) 650

At 31 December

100,284 111,998 92,125 91,525

The unquoted equity instruments are carried at fair value (2017: carried at fair value) using market approach. The

company has engaged the services of an investment manager for the purpose of disposing of the investments.





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4.6.4 Fair valuation methods and assumptions

i. Cash & cash equivalents

This represents cash held in various bank accounts at the end of the period. The fair value of this amount is

the carrying amount.

ii. Loans and receivables

Loans and receivables relate to commercial papers which have less than 6 months recycle period and as such

the fair values approximate their carrying amount.

iii. Other receivables

Other assets represent amount due from reinsurers and other related parties which usually have a short recycle

period and as such the fair values of these balances approximate their carrying amount.

iv. Statutory deposit

This represents the deposit held by Central bank of Nigeria. I.e. 10% of the minimum capitalisation in

compliance with the Insurance Act. The fair value of this balance is approximately its carrying amount.

v. Trade payables

These represent amount payable to reinsurers and other creditors which have a short recycle period and as

such the fair values of these balances approximate their carrying amount.

vi. Other liabilities

These are amounts outstanding and are payable within a period of one year. Amount outstanding are assumed

to approximate their respective fair values.

vii. Insurance contract liabilities

These are amounts payable to policyholders in the event of a claim. The carrying amount have been calculated

by the actuary and the carrying amount represents the fair value as at 31 December, 2018.

5 Critical accounting estimates and judgements

When preparing the financial statements management undertakes a number of judgements, estimates and

assumptions about recognition and measurement of assets, liabilities, income and expenses. The actual results are

likely to differ from the judgements, estimates and assumptions made by management, and will seldom equal the

estimated results. Information about the significant judgements, estimates and assumptions that have the most

significant effect on the recognition and measurement of assets, liabilities, income and expenses are discussed

below.

5.1 The ultimate liability arising from claims made under insurance contracts

The estimation of the ultimate liability arising from claims made under insurance contracts is the Group’s most

critical accounting estimate. There are several sources of uncertainty that need to be considered in the estimate of

the liability that the Group will ultimately pay for such claims.





99

5.2 Sources of uncertainty in the estimation of future claim payments

Claims on contracts are payable on a claims-occurrence basis. The Group is liable for all

insured events that occurred during the term of the contract, even if the loss is discovered

after the end of the contract term. As a result, liability claims are settled over a long period

of time, and a larger element of the claims provision relates to incurred but not reported

claims (IBNR).

Uncertainty in the estimation of future benefits payments and premium receipts for

insurance contracts arises from the unpredictability of long-term changes in variables such

as the overall levels of mortality, accident level and the variability in policyholder behaviour.

The insurance liabilities have been made on the following principles:-

Type of Business Valuation Method

Individual Risk Business Gross premium

Individual Deposit Based business Deposit reserve: Account balance at valuation

date

Risk reserve: Gross premium

Group Life UPR + IBNR

Group Deposit Administration Account balance at valuation date

5.2.1 Individual business

A gross premium method is adopted for individual traditional risk business. This is a monthly

cash flow approach taking into account the incidence of all expected future cash flows

including office premiums, expenses and benefit payments, satisfying the Liability Adequacy

Test. This implies that no further testing is required as a result of the implementation of the

IFRS; or in other words the liability adequacy test has been met implicitly and a separate

liability calculation will not be required for accounting purposes.

Negative reserves will be zeroed at the valuation date.

5.2.2 Individual Deposit Based business

A reserve for the Individual and group deposit-based business (Deposit Plus Plan) will be

maintained being the amount standing to the credit of the policyholders (account balance)

at the valuation date.

Reserves for the supplementary life cover and expenses for individual deposit based

business will be calculated using a gross premium cash flow approach as described in above.

This is the present value of future guaranteed risk related benefit costs and expenses, less

future risk premiums

5.2.3 Group life

Reserves for Group Life business will comprise an unexpired premium reserve (UPR) and

where necessary, a reserve for Incurred But Not Reported Claims (IBNR) to make an

allowance for the delay in reporting of claims.

The UPR will represent the unexpired portion of the premium for each scheme, net of an

expense margin reflecting the acquisition cost loadings. The adequacy of the UPR will be

tested by comparing against an Additional Unexpired Risk Reserve (AURR), which will be

calculated using pooled industry claims data for the underlying assumptions. An AURR will

be held in cases where the UPR is deemed insufficient to meet claims in respect of the

unexpired period.





100

A loss ratio approach will be used for IBNR reserving, where the underlying claim rates are

based on an analysis of historical group life claims experience, with judgement adopted

where required.

No separate reserve is proposed for claims handling costs for Group Life business as these

are typically insignificant in size. Any costs incurred are absorbed as part of the general

business management costs.

5.3 Process used to decide on assumptions

5.3.1 Valuation interest rate:

The valuation interest rate is based on current market risk-free yields with adjustments. The

use of a risk-free rate also implies that future investment margins (in excess of the risk-free

return) will not be capitalised upon, which satisfies paragraph 27 of IFRS 4. Further the

result is a "fair value" liability calculation which aids the comparability of accounts between

insurers.

Valuation interest rate of 14.87% & 14.2% PA were adopted for annuity and other long term

businesses, which has been applied as a single long term rate of return.

The valuation interest rates for the individual risk products are as follows:

Type of Business Current Valuation Previous valuation

Risk products 14.2% 13%

Risk reserves for deposit-based policies 14.2% 13%

Pension Annuity 14.87% 13.5%

5.3.2 Expenses

The Group makes provisions for expenses in its mathematical reserves of an amount which

is not less than the amount expected to be incurred in fulfilling its long-term insurance

contracts. IFRS 4 explicitly requires the consideration of claims handling expenses.

Future maintenance expenses

The regulatory maintenance expenses are derived from the best estimate maintenance

expenses plus a prudence margin for adverse deviations. The best estimate maintenance

expenses are calculated using the sum of the following:

(1) Per policy maintenance charges

(2) Allocated operating expenses

The valuation expense assumptions are as follows:

Type of Business

Current

Valuation

Previous

valuation

N'per

policy

N'per

policy

Individual Life 13,550 12,200

Deposit Based Policies 13,550 12,200

Annuities 13,550 12,200





101

5.3.3 Expense Inflation

The above expenses are subject to inflation at 11.0% PA. Consumer Price Inflation at 30

November 2018 was 11.28%. Both the expense inflation and expense assumption will be

actively reviewed in subsequent valuations once more experience data and an expense

analysis is made available.

5.3.4 Mortality

An appropriate base table of standard mortality is chosen depending on the type of contract.

An investigation into Group’s experience over the most recent three years is performed, and

statistical methods are used to adjust the rates reflected in the table to a best estimate of

mortality for that year.

The A67/70 (Assured Lives 1967-70) mortality table without adjustment was adopted in the

valuation.

For annuity, we have adopted the UK Pensioner table PA (90) with age rating of -1.

5.3.5 Withdrawals

Surrenders are acceptable under the Endowment life assurance portfolio after policies have

been in force for a pre-defined length of time (at which policies become eligible to receive a

surrender value payout).

5.3.6 Group life businesses

Unexpired premium reserves (UPR) are reduced by a margin representing acquisition

expenses, as these have been loaded into rates yet they have already been incurred. The

acquisition expense ratio of 20% of gross premium was adopted. Group Life commission is

currently paid at 9% of premium and a NAICOM (regulatory) fee is payable at 1% of

premium. The remaining 10% of premium reflects the loading for additional acquisition

expenses.

5.3.7 Reinsurance agreements

Reinsurance is allowed for in the valuation by having gross and reinsurance ceded records

in the policy files. All reserves have been reported gross of reinsurance, with the value of

the reinsurance asset reported separately.

5.3.8 Changes in assumptions

The Group did not change its assumptions for the insurance contracts.

5.4 Insurance and Market risk sensitivities

The sensitivity analysis of insurance and market risk is used as it provides a detailed

understanding of the risks inherent in the business and to help develop a risk monitoring

and management framework to ensure the risks remain within limits, taking into account

the available capital and shareholder risk tolerance levels.





102

SEGMENT REPORTING

Identification of reportable segments

The business activities of African Alliance Insurance Plc. Group are first organized by product and type of service: life

insurance activities, and air freight activities.

Information regarding the results of each reportable segment is included below. Performance is measured based on

segment profit (or loss) before income taxes, as included in the internal management reports that are reviewed by the

Group’s CEO. Segment profit is used to measure performance as management believes that such information is the most

relevant in evaluating the results of certain segments relative to other entities that operate within this industry. Inter-

segment pricing is determined on an arm’s length basis.

Information reported to the chief operating decision maker (the CEO) for the purposes of resource allocation and

assessment of segment performance focuses on types of goods or services delivered or provided. The Company's

reportable segments under IFRS 8 are therefore as follows:

- Life business

- Air freight business

Life Business

The Life reportable segment offers a wide variety of insurance products for both personal and corporate customers. The

products offer range from provision of group life policies, traditional life policies with a segment of investment linked and

annuity policies. The main source of income in this segment is the premium received from the insured on risk covered by

the entity and the investment income earned on placements and deposit with financial institutions.

Air Freight

This reportable segment is a private company who provides cargo air transportation through relevant leasing arrangement.

Segment revenues and results

The following is an analysis of the group revenue and results from continuing operations by reportable segment

Segment revenue Segment profit /(loss)

31- Dec-18

31-Dec-17 31- Dec-18

31-Dec-17

N’000

N’000 N’000

N’000

Life business 6,795,577

7,626,710 (2,572,120) (8,318,488)

Catering - - - -

Air Freight - - (3,003) (143,969)

Property and real estate management - - - -

6,795,577 7,626,710 (2,575,123) (8,462,457)

Other income 297,972 135,929

Impairment charges (5,638) (1,608,472)

Net (loss)/ gain on liquidated subsidiaries - (335,149)

Fair value gain/(loss) on investment properties 544,686 1,127,970

Fair value through profit or loss (1,168,898) 73,235

Investment income 3,241,798 3,224,550

Loss from investment contracts

(137,947) (115,222)

Share of profit of equity accounted investee 710,728 641,546

Other operating and administrative expenses

(3,236,865) (1,531,845)

Impairment loss allowance ECL

Finance cost

(33,370)

(60,296)

-

(5,179)

Profit before tax (continuing operations) (2,422,953) (6,855,094)

Segment revenue reported above represents revenue generated from external customers. There were no inter-segment

sales in the current year.

The accounting policies of the reportable segments are the same as the Group's accounting policies. Segment profit

represents the profit before tax carried by each segment without allocation of other operating administration costs and

director's salaries, share of profit of associates, investment income, other gains and losses as well as finance costs. This is

the measure reported to the chief operating decision maker for the purposes of resource allocation and assessment of

segment performance.





103

Segment assets

31-Dec-18

31-Dec-17

N’000

N’000

Life business

41,361,712

43,822,536

Catering

-

-

Air Freight

8,095

8,110

Property and real estate management

-

-

41,369,807

43,830,646

Segment liabilities

Life business

44,080,192

44,007,984

Catering

-

85,447

Air Freight

463,479

461,955

Property and real estate management

-

-

44,543,671 44,469,939

Other segment information Depreciation and

amortisation

Additions to non-

current assets Year

ended

31 Dec

2018

Year

ended

31 Dec

2017

Year

ended

31 Dec

2018

Year

ended

31 Dec

2017 N’000

N’000 N’000

N’000

Life business 142,772 154,252 371 66,103

Catering - 4,985 - -

Air Freight - 143,969 - -

Property and real estate management - 26,383 - -

142,772 329,589 371 66,103





104

Group Company

31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

N’000 N’000 N’000 N’000

6 Cash and cash equivalents

Cash in bank 746,326 1,566,445 720,813 1,499,757 Short-term bank deposits 2,934,475 4,440,362 2,452,295 4,299,711

3,680,801 6,006,807 3,173,108 5,799,468

6.1 Short-term bank deposits Short-term bank deposits 2,954,509 4,440,362 2,466,733 4,299,711 ECL Impairment 01 January 2018 (29,134) - (23,854) -

Additional ECL Impairment during the year 9,100 - 9,416 -

2,934,475 4,440,362 2,452,295 4,299,711

6.2 Cash and cash equivalents for cashflow

Cash in bank 746,326 1,566,445 720,813 1,499,757

Short-term bank deposits (note 6.1) 2,954,509 4,440,362 2,466,733 4,299,711

Bank Overdraft (507,076) (65,566) (482,145) -

3,193,759 5,941,241 2,705,401 5,799,468

6.3 Cash and cash equivalent for the purpose of cashflow

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid

investments with original maturities of three months or less.

7 Financial assets

7.1 Financial assets at fair value through profit and loss

These are quoted equities in the Nigerian Stock Exchange, the fair value were determined by reference to the

quoted closing bid price at the end of the reporting year derived as follows:

Group Company

31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

N’000 N’000 N’000 N’000

Quoted equity securities

1,014,023 2,182,921 1,014,023 2,182,921

7.1i Movement in FVTPL - Quoted equities

At 1 January

2,182,921 2,109,686 2,182,921 2,109,686

Additions

- - - -

Disposal

- - - -

Fair value changes

(1,168,898) 73,235 (1,168,898) 73,235

At 31 December

1,014,023 2,182,921 1,014,023 2,182,921

7.2 Unquoted Equities FVOCI

Equity Securities 100,284 - 92,125 -

7.2i Movement in unquoted equities FVOCI

Reclassification from AFS-Unquoted equities

(note 7.3i) 111,998 - 91,525 - Additions - - - Impairment (charge)/write back 1,250 - 1,250 - Fair value changes (650) - (650) - Disposal (12,314) - - - Impairment - - - -

At 31 December 100,284 92,125 -

7.3 Unlisted Equities at Available for-sale

Equity securities -

- 111,998 - 91,525





105

Group Company

31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

N’000 N’000 N’000 N’000

7.3i Movement in AFS-Equity securities At 1 January

111,998 237,478 91,525 217,005

Additions

32,500 - 32,500 Impairment (charge)/write back - (114,287) (114,287) Disposal

- (44,343) (44,343)

Fair value changes - 650 650

Reclassification to FVOCI (111,998) - (91,125) -

At 31 December

- 111,998 - 91,525

7.4 Financial Assets-Amortized cost Government and corporate bonds 20,032,596 - 20,032,596 - ECL Impairment 01 January (38,143) - (38,143) -

Additional ECL Impairment during the year 367 - 367 -

19,994,820 - 19,994,820 -

7.5 Financial Assets-Held to Maturity Government and corporate bonds 20,373,177 20,373,177 20,032,596 20,373,177 Reclassification to Amortized cost (20,373,177) - (20,032,596) -

- 20,373,177 - 20,373,177

7.6 Loans and receivables

Long term loans 3,000 3,000 3,000 3,000 Mortgage loans 15,120 15,120 15,120 15,120

Reclassification Mortgage Loans 74,656 - 74,656 - Policy loans 225,564 199,872 143,074 133,059 Short term loans 60,384 65,772 60,384 65,772

378,724 283,764 296,234 216,951

ECL Impairment allowance (note 7.6i) (325,776) (198,820) (243,286) (198,820)

52,948 84,944 52,948 18,131

7.6i Impairment allowance in loans and receivables

The movement in impairment allowance is as detailed below:

Group Company

31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

N’000 N’000 N’000 N’000

At 1 January –IAS 39 specific impairment 198,820 79,024 198,820 79,024

Reclassification-Mortgage loans 32,206 119,796 32,206 119,796

Specific provision no longer required (4,188) - (4,188) -

ECL Impairment 01 January 2018 83,035 - 16,222 -

ECL Impairment during the year 15,903 - 226 -

At 31 December 325,776 198,820 243,286 198,820

8 Trade receivables

Premium receivables 135,927 41,918 - - Trade debtors 58,159 58,159 - - Impairment allowance (58,159) (58,159) - -

135,927 41,918 - -

Movement in impairments of trade receivables

At 1 January 58,159 10,775 - - Additional charge during the year - 47,384 - -

At 31 December 58,159 58,159 - -





106

9 Reinsurance assets: This is analysed as follows

Group Company

31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

N’000 N’000 N’000 N’000 Reinsurance share of claims Incurred But Not

Reported (IBNR) (note 9 (i)) 122,904 47,726 122,904 47,726 Prepaid reinsurance (note 9(ii)) 21,148 5,991 21,148 5,991

144,052 53,717 144,052 53,717

9 (i) Movement in reinsurance share of claims

Incurred But Not Reported (IBNR)

At 1 January 47,726 71,241 47,726 71,241 Changes during the year 75,178 (23,515) 75,178 (23,515)

At 31 December 122,904 47,726 122,904 47,726

9 (ii) Prepaid reinsurance

At 1 January 5,991 5,531 5,991 5,531 Additions in the year 15,157 49,863 15,157 49,863 Amortised in the year-reinsurance expense (see

note 30) - (49,403) - (49,403) At 31 December 21,148 5,991 21,148 5,991

10 Other receivables and prepayments Due from agents 77,736 63,343 73,528 60,290 Investment Income Receivable 71,090 43,295 26,121 26,121 Prepayment Rent 189,980 46,892 189,980 46,892 Prepayment - Others 174,490 88,235 165,329 26,305 Staff Loans & Receivables 95,374 170,708 89,316 163,207 Deposit for Investment (note 10.2) 120,061 120,061 626,177 150,626 Due from related company (note 10.3) 1,608,522 1,608,522 2,016,861 2,016,861 Deposit for aircraft - 737,200 - - Long outstanding placements 50,375 50,375 50,375 50,375 Stock of raw materials & consumables 8,748 8,165 3,187 1,149 Staff share loans (note 10.1b) 2,131,790 2,131,790 2,131,790 2,131,790 Other receivables 1,926,201 90,061 1,123,300 79,740

6,454,367 5,158,647 6,495,964 4,753,356 Impairment allowance (note 10.1B) (4,841,772) (4,817,469) (4,402,087) (4,429,070)

1,612,595 341,178 2,093,877 324,286

Current 1,348,551 324,286 1,838,869 - Non-current 264,044 16,892 255,008 324,286

1,612,595 341,178 2,093,877 324,286

10.1a Staff Share Loan:

This amount is made up of African Alliance Company Plc share purchased during the private placement exercise

on behalf of staff of the company and this has been fully impaired.

Group Company

31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

N’000 N’000 N’000 N’000

10.1b The Movement in impairment allowance is as

follow At 1 January 4,817,469 4,678,704 4,429,070 3,937,289 Impairment charge for the year - 138,765 - 491,781

Reclassification to loans & receivables (32,206) - (32,206) -

ECL Impairment 01 January 2018 29,575 - 5,494 -

Additional ECL Impairment during the year 26,934 - (271) -

At 31 December

4,841,772 4,817,469 4,402,087 4,429,070





107

10.1b The Movement in impairment allowance is as follows:

This represents impairment allowance on other receivables balances assessed as past due the settlement dates and

determined to be individually impaired as at 31 December 2018

Due from Agents 32,751

This relates to advances granted agents for marketing,

recovery is ongoing Investment Income receivables 26,121 This relates to accrued interest on Investment

Receivables 15,979 This amount represents outstanding loan for exited staff

Deposit for Investment 120,061

This relates to investment in First Ghana Building company

limited (N120million), Fountain trust limited (N36000), Golden

securities limited (N25,000)

Due to related Company 2,019,787

This relates to advances granted subsidiaries and related

companies of the company.

Long Outstanding placement 50,375

This relates to unpaid interest for which the company is

pursuing recovery

Staff share loans 2,131,790

This amount is made up of African Alliance Company Plc share

purchased during the private placement exercise on behalf of

staff of the company

ECL Impairment 01 January

2018 5,223

This represents ECL impairment allowance on Other

receivables on the implementation of IFRS 9 4,402,087

Group Company 31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

N’000 N’000 N’000 N’000

10.2 Deposits for shares/Investment

First Ghana Building Company Limited, Ghana 120,000 120,000 120,000 120,000 Fountain Trust Limited 36 36 36 36 Golden Securities Limited 25 25 25 25 Ghana Life Insurance Limited - - 506,116 30,565 120,061 120,061 626,177 150,626

10.3 Due from related company African Alliance Holding Limited 8,150 8,150 8,150 8,150 Universal Insurance Company Plc 1,600,267 1,600,267 1,600,267 1,600,267 Frenchies Foods Limited - - - - Axiom Air Limited - - 408,339 408,339 Ghana Life Insurance - - - - African Alliance Trustees Limited 105 105 105 105

1,608,522 1,608,522 2,016,861 2,016,861

10.4 Movement in impairment allowance At 1 January 1,608,522 1,608,417 2,019,787 1,608,417 Impairment charge/(written back) for the year - 105 - 411,370

At 31 December 1,608,522 1,608,522 2,019,787 2,019,787

11 Deferred acquisition costs

Balance at beginning of year - 15,717 - 15,717 Acquisition cost during the period - 215,097 - 215,097 Amortised in the period-acquisition expenses (see

note 34) - (230,814) - (230,814)

At 31 December - - - -





108

Group Company

31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

12 Investment properties N’000 N’000 N’000 N’000

At 1 January 10,794,603 7,772,882 9,285,488 6,616,999

Acquisition / (Disposal) (988,237) 2,000 (988,237) 2,000

Exchange difference adjustment (92,738) 134,501

Acquisition through disposal of subsidiaries - 1,757,250 - 1,757,250

Fair value gain on revaluation 544,686 1,127,970 323,662 909,239

At 31 December 10,258,313 10,794,603 8,620,913 9,285,488

Of the investment properties, the following

relates to insurance Funds:

Insurance funds 4,135,542 4,860,238 4,135,542 4,860,238

Shareholders’ funds 6,122,771 5,934,365 4,485,370 4,425,250

10,258,313 10,794,603 8,620,913 9,285,488

12.1

A brief descriptions of the properties held

by Company are as follows

Breadfruit Street Marina Lagos 1,937,180 1,918,000 1,937,180 1,918,000

Land at Pankere Village, Abijo, Ibeju Lekki 2,821,000 2,821,000 2,821,000 2,821,000

Plot C4, Rumuogba Layout, Aba road, Port

Harcourt 793,170 763,000 793,170 763,000

Sani Abacha Estate, Abuja 845,370 837,000 845,370 837,000

73 Oyemekun street, Akure 22,552 22,000 22,552 22,000

Property at Lekki Phase 1 - 140,300 - 140,300

Property at Lekki Seagate - 86,000 - 86,000

Property at Millennium Housing estate 91,608 91,000 91,608 91,000

34 Marple street, London - 761,938 - 761,938

4 bedroom duplex, Ajah road, Ajah, Lagos 91,032 88,000 91,032 88,000

29A Akin Adesola Street, Victoria Island, Lagos 819,000 767,250 819,000 767,250

112 Broad Street, Lagos 1,200,000 990,000 1,200,000 990,000

Land & Residential properties held in Ghana

Life Insurance 1,637,401 1,509,115 - -

10,258,313 10,794,603 8,620,913 9,285,488

A brief descriptions of the properties held by

the company in its name are as follows:

Breadfruit Street Marina Lagos 1,937,180 1,918,000 1,937,180 1,918,000

Property at Millennium Housing estate 91,608 91,000 91,608 91,000

34 Marple street, London - 761,938 - 761,938

4 bedroom duplex, Ajah road, Ajah, Lagos 91,032 88,000 91,032 88,000

73 Oyemekun street, Akure 22,552 22,000 22,552 22,000

Property at Lekki Phase 1 - 140,300 - 140,300

Property at Lekki Seagate - 86,000 - 86,000

112 Broad Street, Lagos 1,200,000 990,000 1,200,000 990,000

Plot C4, Rumuogba Layout, Aba road, Port

Harcourt 793,170 763,000 793,170 763,000

4,135,542 4,860,238 4,135,542 4,860,238

Investment properties are carried at fair value as at 31 December 2018, which has been determined by an

independent professional valuer, A.C. Otegbulu & Partners Estate surveyors & Valuers, a registered member of

Financial Reporting Council of Nigeria (FRCN/2013/NIESV/0000001582). Valuations are performed on an annual

basis and the fair value gains and losses are recognised in the profit or loss are recognised in the profit or loss

account.

The properties have been valued using the fair value basis. The fair value of all the properties were determined

using recent comparable market prices i.e. the highest price in terms of money, which the subject property assets

will fetch in an open and competitive market under all conditions requisite to a fair sale.

None of the assets above are encumbered or pledged as security for loan.





109

12.2 A brief descriptions of the properties held by Company are as follows

A brief descriptions of the properties held by the company in the name of Conau Limited are as follows:

Group Company

31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

N’000 N’000 N’000 N’000

Land at Pankere Village, Abijo, Ibeju Lekki 2,821,000 2,821,000 2,821,000 2,821,000

Land & Residential properties held in Ghana Life

Insurance 1,637,401 1,509,115 - -

29A, Akin Adesola Street, Victoria Island 819,000 767,250 819,000 767,250

Sani Abacha Estate, Abuja 845,370 837,000 845,370 837,000

6,122,771 5,934,365 4,485,370 4,425,250

Total investment property 10,258,313 10,794,603 8,620,913 9,285,488

12.3 Further analysis and details of the investment properties are stated below. This includes the cost,

carrying amount and the corresponding fair value adjustments recognised in the income statement.

2018

Description of properties Status Initial Cost

At 1 January

Addition Disposal

Fair value adjustmen

ts

At 31 Decembe

r

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

Breadfruit Street Marina

Lagos Perfected 250,000 1,918,000

-

- 19,180 1,937,180

Land at Pankere Village,

Abijo, Ibeju Lekki Not Perfected 2,000,000 2,821,000

-

- - 2,821,000

Plot C4, Rumuogba Layout,

Aba road, Port Harcourt Perfected 500,000 763,000

-

- 30,170 793,170

Sani Abacha Estate, Abuja Not Perfected 600,000 837,000 - - 8,370 845,370

73 Oyemekun street, Akure Perfected 2,343 22,000 - - 552 22,552

Property at Lekki Phase 1 Perfected 1,928 140,300 - (140,300) - -

Property at Lekki Seagate Perfected 1,709 86,000 - (86,000) - -

Property at Millennium

Housing estate Perfected 17,720 91,000

-

- 608 91,608

34 Marple street, London Perfected 360,000 761,938 - (761,938) - -

4 bedroom duplex, Ajah

road, Ajah, Lagos Perfected 44,000 88,000

-

- 3,032 91,032

29A Akin Adesola Street,

Victoria Island, Lagos Not Perfected 1,000,000 767,250

-

- 51,750 819,000

112 Broad Street, Lagos Perfected 407,950 990,000 210,000 1,200,000

5,185,650 9,285,488 - (988,237) 323,662 8,620,913





110

12.4 INVESTMENT PROPERTIES NOT IN THE NAME OF AFRICAN ALLIANCE

FOR THE YEAR ENDED 31 DECEMBER 2018 PROPERTIES TITLE OF DOCUMENTS DATE OF

ACQUISITION

TIITLE

DOCUMENT NO

LOCATION CARRYING

AMOUNT

N'000

Land at Pankere Village, Abijo, Ibeju Lekki Deed of Assignment & Governor's Consent for

Application to assignment between Land Owner and

Conau Limited

Year 2008 N/A Abijo GRA Ibeju Lekki, Lagos

state

2,821,000

Duplex at Sani Abacha Estate, Abuja Deed of Assignment between Federal Republic of

Nigeria represented by EFCC and Conau Limited

Year 2008 N/A 2220 Suez Canal Crescent

Sani Abacha Estate, Abuja 845,370

Building At 29a Akin Adesola Street, VI, Lagos Lagos State Government Land Certificate and Deed

of Assignment

Year 2017 - By transfer

from Subsidiary

Lagos State Land

Registry L07425

29a Akin Adesola Street, VI,

Lagos 819,000

PROPERTIES TITLE OF DOCUMENTS DATE OF

ACQUISITION

TIITLE

DOCUMENT NO LOCATION

CARRYING

AMOUNT

N'000

Property Breadfruit Street Marina Lagos Lagos State Government Land Certificate and Deed

of Assignment Year 1960 L03746

13/17 Breadfruit Street,

Lagos 1,937,180

Property Rumuogba Layout, Aba road, Port

Harcourt Deed of Assignment & Certificate of Occupancy Year 2008 N/A

Plot C4, Rumuogba Layout,

Aba road, Port Harcourt 793,170

73 Oyemekun street, Akure Certificate of Right of Occupancy Year 1983 N/A 73 Oyemekun street, Akure 22,552

Land at Lekki Phase 1 Certificate of Occupancy Year 1991 N/A Lekki Peninsular, CBD,

Phase 1 Lekki 0

Land at Lekki Seagate Deed of Sub-Lease Year 1991 60/60/990 AK

Plot 15 & 17 Seagate estate

Phase 1 Lekki Peninsula Eti-

Osa Lagos 0

Property at Millennium Housing estate Lagos State Government Allocation Letter Year 2004 N/A

Block B House 9B Oba

Adeyinka Oyekan Housing

Estate Lekki, Lagos 91,608

4 bedroom duplex, Ajah road, Ajah, Lagos Deed of Assignment Year 2009 N/A Lekki Epe Expressway, Ajah

Town, Lagos 91,032

Property 112 Broad Street, Lagos Lagos State Government Land Certificate and Deed

of Assignment Year 1961 L03990

112 Broad Street, Lagos

1,200,000





111

13 Investment in subsidiary

The company's investment in subsidiary is as stated below:

Group Company

31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

N’000 N’000 N’000 N’000

Axiom Air Limited (Note 13a) - - 3,000,000 3,000,000

Ghana Life Insurance Company Limited (Note 13b) - - 1,770,741 1,770,741

- - 4,770,741 4,770,741

Impairment allowance (note 13c) - - (4,228,012) (4,216,936)

- - 542,729 553,805

13a Axiom Air Limited:-

The company was incorporated on 17 July 2008 to carry on the business of airline owners and management, provide

air transport for public use; to provide all necessary and or desirable services incidental to this objective, including

booking, reservation, routing and ticketing services, baggage management, flight catering and entertainment and

provision of hotel accommodation. The company is wholly owned.

13b Ghana Life Insurance Company Limited

The company is a subsidiary of African Alliance Insurance Plc. The company is domiciled in Ghana and is permitted

by its regulation to carry on the business of life insurance.

Movement in the investment in Ghana life is as follows Company

31-Dec-18 31-Dec-17 N’000 N’000

At 1 January

1,770,741 1,770,741 Reclassification from due from deposit of investments - - Capital injection

- -

At 31 December

1,770,741 1,770,741

13c Movement in impairment allowance in investment At 1 January

4,216,936 4,286,445 Impairment charge/(written back) for the year 11,076 (69,509)

At 31 December

4,228,012 4,216,936

Movement in impairment charge

1-Jan-18

Additional

charge 31-Dec-18 Axiom Air Limited

3,000,000 - 3,000,000

Ghana Life Insurance company

1,216,936 11,076 1,228,012

4,216,936 11,076 4,228,012

Group Company

31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

N’000 N’000 N’000 N’000

14 Investment In associate Investment in Pension Alliance Limited 1,804,083 1,605,405 1,804,083 1,605,405

The movement in investment in associate is as follow:

At 1 January

1,605,405 1,341,159 1,605,405 1,341,159

Share of profit after taxation: @ 49%

710,728 641,546 710,728 641,546

Less: Dividend received

(512,050) (377,300) (512,050) (377,300)

At 31 December

1,804,083

1,605,405

1,804,083

1,605,405

This represents the Company's 49% holding in Pensions Alliance Limited. The associated company is engaged in

the provision of pension services in accordance with the Pension Reform Act. The financial year end of the company

is 31 December.





112

Group Company 31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17 N’000 N’000 N’000 N’000 Pension Alliance Limited

Current assets 3,040,855 3,155,413 3,040,855 3,155,413

Non-current assets 1,506,661 1,215,642 1,506,661 1,215,642

Current liabilities (553,824) (520,902) (553,824) (520,902)

Non-current liabilities (311,889) (573,815) (311,889) (573,815)

Company

Pension Alliance Limited

Revenue 4,855,745 4,303,148 4,855,745 4,303,148

Profit for the year 1,469,275

1,469,275 1,309,278 1,469,275 1,309,278

Other comprehensive income -

-

- - -

Total comprehensive income for the year 1,469,275 1,309,278 1,469,275 1,309,278

Dividend received from the associate during the year (512,050) (377,300) (512,050) (377,300)

Reconciliation of the above summarised financial information to the carrying amount of the interest in Pension

Alliance Limited recognised in the consolidated financial statements

Group Company

31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17 N’000 N’000 N’000 N’000

Net assets of the associate 3,681,803 3,276,338 3,681,803 3,276,338 Proportion of the Group’s ownership interest in

Pensions Alliance Limited 49% 49% 49% 49%

Carrying amount of the net assets

1,804,083 1,605,406 1,804,083 1,605,405

15 Intangible assets Group Company

Software

in

Progress

Computer

Software Total

Computer

Software Total

N’000 N’000 N’000 N’000 N’000

Cost

At 1 January 2018 12,626 118,097 130,723 83,038 83,038

Additions

- 10,272 10,272 15,937 15,937

At 31 December 2018 12,626 128,369 140,995 98,975 98,975

Amortisation

At 1 January 2018 - 66,578 66,578 62,125 62,125

Charge for the period

17,074 17,074 17,074 17,074

At 31 December 2018

- 83,652 83,652 79,199 79,199

Net book amount

At 31 December 2018

12,626 44,717 57,343 19,776 19,776





113

15 Intangible assets Group Company

Software

in

Progress

Computer

Software Total

Computer

Software Total

N’000 N’000 N’000 N’000 N’000

Cost

At 1 January 2017 12,626 87,898 111,776 73,450 73,450

Additions

-

30,199

30,199 9,588 9,588

At 31 December 2017

12,626 118,097 141,975 83,038 83,038

Amortisation

At 1 January 2017 - 49,653 55,646 45,427

45,427

Charge for the year

18,507 22,370 16,698

16,698

At 31 December 2017 - 68,160 78,016 62,125 62,125

Net book amount

At 31 December 2017 12,626 49,937 63,959 20,913 20,913





114

16. Property and equipment Group

Freehold

Land Building Motor Furniture Computer Office Plant & Aircraft Total Vehicles & Fittings Equipment Equipment Machinery N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000

Cost At 1 January 2018 62,000 1,351,101 460,970 153,782 179,616 125,079 9,171 2,281,122 4,622,841 Additions - 92,510 71,955 31,872 121,951 - 318,288 Disposal - - (151,384) (1,380) (1,566) (97) - - (154,427) Exchange adjustment - 23,615 - - - - - - 23,615

Elimination of accum. depreciation at revaluation (44,022) - - - - - - (44,022)

Revaluation - 162,418 - - - - - - 162,418

At 31 December 2018 62,000 1,493,112 402,096

224,357

209,922

246,933

9,171

2,281,122 4,928,714

Depreciation and impairment At 1 January 2018 - 26,310 369,503 90,641 116,271 63,713 9,171 2,281,122 2,956,731 Charge for the year - 17,712 80,046 14,954 26,237

26,237 16,666 - - 155,615

Disposal - - -

(144,809) (1,380) (1,566) (97) - - (147,852) Elimination of accum. depreciation at revaluation - (44,022) - - - - - - (44,022)

At 31 December 2018 - - 304,740 104,215 140,942 80,282 9,171 2,281,122 2,920,472

At 31 December 2018 62,000 1,493,112 97,356 120,142 68,980 166,651 - - 2,008,241

Property and equipment Group Land Building Motor Furniture Computer Office Plant & Aircraft Total Vehicles & Fittings Equipment Equipment Machinery N'000 N'000 N'000 N'000 N'000 N'000 N'000 Cost At 1 January 2017 62,000 3,319,487 478,541 155,789 164,097 121,617 16,022 2,281,122 6,598,675 Additions - 472 - 7,030 24,301 4,101 - - 35,904 Disposal - - (15,480) (2,778) (8,782) (639) - - (27,679) Arising on liquidation of subsidiaries (note 12.1) (1,757,250) (2,091) (6,259) (6,851) (1,772,451) Exchange adjustment 78,160 78,160 Revaluation - (289,768) - - - - - - (289,768)

At 31 December 2017 62,000 1,351,101 460,970 153,782 179,616 125,079 9,171 2,281,122 4,622,841

Depreciation and impairment At 1 January 2017 - 173,399 314,604 88,499 102,576 53,453 16,022 948,913 1,697,466 Charge for the year - 46,228 72,470 11,179 22,474 10,899 - 143,969 307,219

Disposal - - (15,480) (2,778) (8,779) (639) - - (27,676) Exchange adjustment 405 - - 405 Liquidation of subsidiaries - - (2,091) (6,259) (6,851) (15,201) Revaluation (193,722) - - (193,722) At 31 December 2017 - - - - 1,188,240 1,188,240

At 31 December 2017 - 26,310 369,503 90,641 116,271 63,713 9,171 2,281,122 2,956,731

Net book amount At 31 December 2017 62,000 1,324,791 91,467 63,141 63,345 61,366 - - 1,666,110





115

Property and equipment 16b. Company

Motor

Vehicles

Furniture

&

Fittings

Computer

Equipment

Office

Equipment

Land Building Total

N'000 N'000 N'000 N'000 N'000 N'000 N'000

Cost At 1 January 2018 62,000 394,308 306,013 99,747 137,036 125,079 1,124,183

Additions - - 92,510 71,010 30,416 121,951 315,886

Disposal - - (144,808) (1,380) (1,565) (97) (147,852)

Arising on liquidation -

Elimination of accum depreciation on revaluation (34,338) (34,338)

Revaluation - 23,145 - - - - 23,145

At 31 December 2018 62,000 383,115 253,715 169,377 165,887 246,933 1,281,026

Depreciation At 1 January 2018 - 26,308 260,904 59,216 86,764 63,713 496,905

Charge for the year - 8,030 67,065 12,123 21,816 16,666 125,700

Disposal - (133,245) (1,380) (1,566) (97) (136,288)

Elimination of accum depreciation on revaluation - (34,338) - (34,338)

At 31 December 2018 - - 194,724 69,962 107,014 80,282 451,979

Net book amount At 31 December 2018 62,000 383,115 58,990 99,414 58,872 166,651 829,048

At 31 December 2017 62,000 368,000 45,109 40,531 50,272 61,366 627,277





116

Property and equipment Motor

Vehicles

Furniture

&

Fittings

Computer

Equipment

Office

Equipment

Total Land Building

N'000 N'000 N'000 N'000 N'000 N'000

Cost At 1 January 2017 62,000 345,400 323,584 104,454 126,641 121,617 1,083,696

Additions - - - 4,330 19,177 4,101 27,608

Disposal - - (15,480) (2,778) (8,782) (639) (27,680)

Arising on liquidation - (2,091) (6,259) (8,350)

Revaluation 48,908 - - - - 48,908

At 31 December 2017 62,000 394,308 306,013 99,747 137,036 125,079 1,124,182

Depreciation At 1 January 2017 - 19,400 225,109 60,052 78,369 53,453 436,383

Charge for the year - 6,908 53,366 8,201 17,174 10,899 96,548

Disposal - (15,480) (2,778) (8,779) (639) (27,676)

Arising on liquidation - (2,091) (6,259) (8,350)

At 31 December 2017 - 26,308 260,904 59,216 86,764 63,713 496,905

Net book amount At 31 December 2017 62,000 368,000 45,109 40,531 50,272 61,366 627,277

At 31 December 2016 62,000 326,000 98,475 44,402 48,272 68,164 647,313

The properties were valued by Austin C. Otegbulu surveyors & Valuers, a registered member of Financial Reporting Council of Nigeria (FRCN/2013/00000001582) in December, 2018

on the basis of determining the fair value of property. The fair value of all the properties was determined using recent comparable market prices i.e. the highest price in terms of

money, which the subject property assets will fetch in an open and competitive market under all conditions requisite to a fair sale. The next valuation is schedule for 31st December

2019.

The property is held for long term capital appreciation and rental income. There is no rental income arising from a property owned by the company in 2018 (2017: nil). No

administrative charge in 2018. 2017 (nil).

None of the assets above are encumbered or pledged as security for loan.





117

17 Statutory deposit

This represents 10% of the regulatory minimum share capital deposited with the Central Bank of Nigeria as at 31 December 2018 in

accordance with the requirement of section a (i) and section 10(3) of Insurance Act. Interest Income earned on this deposit is included

in investment income

Group Company

31-Dec-18

31-Dec-17 31-Dec-18

31-Dec-17 N’000

N’000 N’000

N’000

Statutory deposit

358,182

348,965

200,000

200,000

Non-current

358,182

348,965

200,000

200,000

18 Insurance contract liabilities

GROSS

Outstanding claims (see note i) 65,967 52,446 65,967 52,446

Unearned premiums (see note ii) 180,885 243,570 180,885 243,570

Short term insurance contract - Claims incurred but not

reported (IBNR) (see note iii) 1,090,763 1,047,146 1,090,763 1,047,146

Liability on annuity fund (see note iv) 28,113,829 30,092,990 28,113,829 30,092,990

Liability on long term insurance contract - Life fund 5,659,187 4,942,301 3,697,761 3,100,216

Total Insurance liabilities (Gross) 35,110,631 36,378,453 33,149,205 34,536,368

Current (1,267,820) 1,343,162 (1,387,161) 4,559,958

Non-current 36,378,451 35,035,291 34,536,366 29,976,410

35,110,631 36,378,453 33,149,205 34,536,368

-

Recoverable from reinsurers

Claims reported and loss adjustment expenses - -

Unearned premiums 21,149 5,991 21,149 5,991

IBNR on Short term insurance contract 122,904 47,726 122,904 47,726

Total reinsurers’ share of insurance liabilities 144,053 53,717 144,053 53,717





118

Group Company

31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

N’000 N’000 N’000 N’000

NET

Claims reported and loss adjustment expenses 65,967 52,446 65,967 52,446


Claims incurred but not reported on Short term insurance contract 1,090,763 999,420 1,090,763 999,420

Liability on annuity fund 28,113,829 30,092,990 28,113,829 30,092,990

Liability on long term insurance contract (Life fund) 5,659,187 4,942,301 3,697,761 3,100,216

Total Insurance liabilities (Net) 35,110,631

35,110,631 36,324,736 33,149,205 34,482,651

(i) The movement in outstanding claims during the year

was as follows:

At 1 January 52,446 44,949 52,446 32,652

Additions claims incurred during the year (see note 33b) 8,740,678 9,153,934 8,740,678 8,116,299

Claims paid during the year (8,727,157) (9,146,437) (8,727,157) (8,096,505)

At 31 December 65,967 52,446 65,967 52,446

(ii) The movement in unearned premium during the year was as follows:

Group Company

31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

N’000 N’000 N’000 N’000

At 1 January 243,570 203,792 243,570 203,792

Change during the year (62,685) 39,778 (62,685) 39,778

At 31 December 180,885 243,570 180,885 243,570





119

(iii) The movement in IBNR claims on Short term insurance during the year was as follows:

Group Company

31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

N’000 N’000 N’000 N’000

At 1 January 1,047,146 475,896 1,047,146 475,896

Change during the year 43,617 571,250 43,617 571,250

At 31 December 1,090,763 1,047,146 1,090,763 1,047,146

(iv) The movement in annuity fund during the year was as follows:

Group Company

31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

N’000 N’000 N’000 N’000

At 1 January 30,092,990 27,264,774 30,092,990 27,264,774

Change during the year (1,979,161) 2,828,216 (1,979,161) 2,828,216

At 31 December 28,113,829 30,092,990 28,113,829 30,092,990

The Company had 7,347 (2017: 7,351) PRA regulated annuity policies with annual annuity payments of N4, 310,369,919 (2017: N4,

309,316,838). Each annuity policy was valued using a monthly discounted cash flow method with the reserves set to equal the present

value of future annuity payments and attending expenses. We have recognised the annuity guaranteed minimum payment period in

our calculations.

Valuation interest rate used is based on current market risk-free yields with adjustments. This is in line with the requirements of IFRS

4 (Paragraph 24). The use of a risk-free rate implies that future investment margins (in excess of the risk-free return) will not be

capitalised upon, which satisfies paragraph 27 of IFRS 4.





120

Illustrated below is the movement of the annuity portfolio for the group and company for the year 2018 and 2017


Number of

annuity

policies

Annual

Annuity

premium

Number

of

annuity

policies

Annual

Annuity

premium

N’000 N’000

At 1 January 7,261 4,281,909 7,164 4,229,731

Additions 124 51,962 257 117,775

Deaths (64) (32,976) (70) (39,197)

Maturity - - - -

Forfeiture or lapse - - - -

Adjustment on opening annual annuity 26 9,475 - 1,008

At 31 December 7,347 4,310,370 7,351 4,309,317

Mortality Assumptions

The following sample average expectation of life were assumed.


Age Expectation of life (in years) Expectation of life (in years)

Male Female Male Female

50 29 34 29 34

60 20 25 20 25

70 14 17 14 17

80 8 10 8 10

(v) The movement in life fund contract (excluding annuity) during the year was as follows:

Group Company

31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

N’000 N’000 N’000 N’000

At 1 January 4,942,301 3,622,183 3,100,216 2,127,411

Exchange difference from translation (112,071) 168,654 - -

Change during the year 828,957 1,151,464 597,545 972,805

At 31 December 5,659,187 4,942,301 3,697,761 3,100,216

(vi) Insurance contract liabilities at the end of the year were as follows:

Group Company

31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

N’000 N’000 N’000 N’000

Outstanding claims 65,967 52,446 65,967 52,446


Short term insurance contract- IBNR 1,090,763 1,047,146 1,090,763 1,047,146

Liability on Annuity contract 28,113,829 30,092,990 28,113,829 30,092,990

Liability on long term insurance contract -

Life fund 5,659,187 4,942,301 3,697,761 3,100,216

35,110,631 36,378,453 33,149,205 34,536,368

Estimates of incurred but not reported (IBNR) claims liability for short term insurance contract, calculation of

unearned premium, estimates on liability on annuity fund and long term insurance contract for life business was

developed by the management of the company with the use of a professional actuary (Ernst & Young), certified

firm of actuaries. The valuation report was authorised by Mr. Okpaise Olurotimi with FRC Registration Number:

FRC/2012/NAS/00000000738





121

19 Investment contract liabilities

The investment contract liabilities comprise interest-linked guaranteed investment funds. The movement in the

investment contract liabilities is shown below:

Group Company

31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

N’000 N’000 N’000 N’000

At 1 January 4,927,104 5,411,398 4,927,104 5,411,398

Shortfall in deposit administration (note 19.1) - (59) - (59)

Deposits received during the year 1,234,094 350,617 1,234,094 350,676

Withdrawals during the year (458,757) (950,525) (458,757) (950,584)

Guaranteed interest in the year 139,317 115,673 139,317 115,673

At 31 December 5,841,758 4,927,104 5,841,758 4,927,104

Non-current

5,841,758 4,927,104 5,841,758 4,927,104

Investment contract liabilities consist of group deposit administered funds and account balance of policy holders

under investment linked insurance funds. Movement in the relevant funds are detailed below

19.1 The shortfall in deposit administration is as a result of errors in data after necessary reconciliation was done. The

shortfall was observed after necessary review by the actuaries and thus was adjusted for in profit or loss.

Group Company

31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

N’000 N’000 N’000 N’000

19.2 Liabilities on administered deposits

At 1 January 3,242,415 4,074,884 3,242,415 4,074,884

(Excess)/Shortfall in deposit administration

(note 19.1) - (59) - (59)

Deposits received during the year 513 19,580 513 19,580



At 31 December 2,892,756 3,242,415 2,892,756 3,242,415 19.3 Investment linked fund

At 1 January 1,684,689 1,336,514 1,684,689 1,336,514

Deposits received during the year 1,233,581 331,096 1,233,581 331,096



At 31 December 2,949,003 1,684,689 2,949,003 1,684,689

20 Trade payable

Unallocated premium deposits (Note 20a)

861,873 921,594 859,302 912,942

Due to co-insurance

- 937 - 937

Due from Reinsurance

(9,460) - (9,459) -

Trade creditors

254,586 254,586 336 336

1,106,999

1,106,999 1,177,117 850,179 914,215

Current

1,106,999

1,106,999 1,177,117 850,179 914,215

20a. The amount represents premium deposits for which policy holders are yet to be identified due to inadequate

information. The Company has already set up a committee to review it and make recommendations to management.

Please see below the age analysis of the payables . 31-Dec-18 31-Dec-17

S/N Age of Premium Deposit

N'000 N'000

1 0 - 90 days

-

2 91- 180 days

-

3 181-270 days

-

4 271 -365 days

859,302 912,942

5 366 days and above





122

Group Company

31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

N’000 N’000 N’000 N’000

21 Other payables and accruals

Due to related party - 105,442 - 13,758

Agent savings 175,047 127,228 131,744 121,003

PAYE and other withholding taxes payable 259,123 111,195 84,494 73,342

Provisions and accruals 13,219 80,051 13,219 10,719

Rent receivable 40,110 60,763 40,110 57,392

Due to Conau Limited (note 21.1) 140,365 30,565 140,365 30,565

Other creditors 51,727 48,021 51,727 37,306

Current (Payable within the period) 679,592 563,265 461,659 344,085

21.1 Due to Conau Limited

This amount represents a short bridged loan of $400,000 borrowed from Conau Limited. The amount was

borrowed and subsequently transferred to Ghana Life Insurance Plc as capital injection. The amount was recorded

in the company's books as deposit for shares in Ghana Life

Group Company

31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

N’000 N’000 N’000 N’000

22 Retirement benefit asset - (7,063) - (7,063)

22.1 Retirement benefit liabilities

Staff pension scheme 30,880 29,335 30,880 29,335

Staff defined benefit plan 11,810 - 11,810 -

42,690 29,335 42,690 29,335

22.2 Staff defined benefit plan

The amounts recognised in the balance sheet are as follows

Company

31-Dec-18 31-Dec-17

N’000 N’000

Defined benefit obligation

385,169 281,368

Fair value of plan assets

(373,359) (288,431)

Net (asset)/liability

11,810

11,810 (7,063)

Reconciliation of Obligation

At 1 January 281,368 277,007

Current service cost

24,976 100,182

Interest cost

39,181 -

Re-measurement (gains)/losses 57,933 -

Contribution from plan participants

- 10,919

Benefits paid (18,289) (106,740)

At 31 December

385,169

385,169 281,368

Reconciliation of Plan Assets

At 1 January 280,893 245,320

Contributions from the employer 18,350 9,524

Contributions from plan participants 12,403 9,369

Return on assets 39,115 34,218

Re-measurement (gains)/losses 22,598

Benefits paid by Association - -10,000

At 31 December 373,359

373,359 288,431

Income Statement

Current service cost 24,976 100,182

Interest cost 39,181 -

Return on assets (39,115) -

25,042

25,042 100,182





123

Amount recognised in other comprehensive income are as follows: 31-Dec-18 31-Dec-17

N’000 N’000

Re-measurement (gains)/losses arising on planned asset 57,933 -

Re-measurement (gains)/losses arising on defined benefit obligations (22,597) -

Re-measurement of the net defined benefit liability (asset) 35,336

35,336 -

The assets of the African Alliance Insurance Gratuity Scheme were invested as follows: Bank balances 4% -

Fixed Deposit 56% 44%

Treasury Bills 40% 56%

100%

100% 100%





124


Valuation methodology

Accrued liability

IAS19 requires that entities should have provided for their post-employment liabilities by the time that the employee

and/or their dependants become entitled to receive the post-employment benefits, which is usually the date of

withdrawal, retirement or death-in- service.

Under the Projected Unit Credit method, the liability accrues uniformly whilst the member is in service. In this way,

the liability may be divided into two parts for each current in-service member:

- the accrued (past service) liability, based on service to date relative to total potential service, and

- the future service liability, which relates to service not yet completed.

Net annual cost

The accrued liability in excess of any plan assets is expected to change each year, as a result of:

- The liability accrual in respect of an additional year of service for in-service members (resulting in the current

service cost);

- The unwinding of the discount rate as the discounting period reduces (resulting in the interest cost);

- The interest income on any plan assets (offsetting the interest cost); and

- The employer benefit payments during the year that serve to reduce the liability (since the liability is a provision

for future benefit payments).

As the current service cost is calculated at the beginning of the year, one should allow for one year’s interest using

the discount rate at the start of the year.

The interest cost on the liabilities and interest income on plan assets are based on the discount rate at the start of

the year and are calculated allowing for expected benefit payments during the year.

A gain or loss arises in a particular year as a result of a change in actuarial assumptions and/or a difference between

expected experience and actual experience.

Ignoring any gains or losses, the employer’s net annual cost is the current service cost plus the interest cost on the

liabilities minus the interest income on any plan assets. From the equation above, one can see that this corresponds

to the change in the accrued liability in excess of plan assets plus the employer benefit payments.

ASSUMPTIONS USED:

IAS19 requires that assumptions be based on market data as at the valuation date. The economic assumptions

used in this valuation are therefore based on market information as at 31 December 2018.

31-Dec-18 31-Dec-17

Rate of return on assets 11% 11%

Rate of increase in remuneration 13% 12%

Discount Rate 15.5% 14%





125


MAJOR CLASSES OF PLAN ASSETS

Defined contribution scheme

The company and its employees make a joint contribution of 10% and 8% respectively of the basic salary, housing

and transport allowance to each employee's retirement savings account maintained with their nominated pension

fund administrators

Gratuity scheme

The Company has a gratuity scheme for employees who have spent 5 years and above in its employment. There

was an outstanding liability of N385 million as at year end (2017: 281million). The plan asset amounting to N373

million is managed by a Fund Administrator, Association of African Alliance Insurance Staff Welfare. The valuation

for the year resulted into a ‘Funded’ status of N11.0million (2017: (N7, 064m)

The defined benefit valuation was developed by the management of the company with the use of a professional

actuary (Ernst & Young), certified firm of actuaries. The valuation report was authorised by Mr. Okpaise Olurotimi

with FRC Registration Number: FRC/2012/NAS/00000000738

Group Company

31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

23 Borrowings N’000 N’000 N’000 N’000

Secured -at amortised cost

Bank overdraft - 65,566

Overdraft Facility (note ii) 507,077 39,372 482,146

Term loan - 182,714 182,714

507,077 287,652 482,146 182,714

(i) Overdraft facility is the summation of the following facilities

• N300.88 Million granted to the company by Fidelity Bank plc to meet working capital requirements. The over

daft facility has a tenor of 12 months with a nominal interest rate of 19%

• Overdraft facility lines of N200 Million from First City Monument Bank at an interest rate of 20% for 12

months.

(ii) Included in the group is an overdraft facility of GH¢500,000 with Zenith bank to finance early redemption of

maturing obligations and other operating expenses. Interest rate is at 28.8% per annum. The overdraft is secured

with lien over an amount of GH¢500,000 deposit account with Zenith Bank.

Group Company

31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

Movement in overdraft facility and

term loan N’000 N’000 N’000 N’000

At 1 January 287,652 67,110 182,714 -

Additions 500,881 238,708 500,881 200,880

Transaction cost (5,417) (2,109) (5,417) (2,109)

Interest expense 60,296 5,179 60,296 5,179

Repayment (336,335) (21,236) (256,328) (21,236)

At 31 December

507,077 287,652 482,146 182,714

24 Tax payable

Company income tax payable:

At 1 January 594,024 363,544 545,285 285,240

Charge to profit and loss 273,662 278,885 244,662 271,172

Transfer of liabilities

upon liquidation - - - 39,104

Foreign exchange difference arising from

translation (22,279) 1,826

Tax paid in the year (18,665) (50,231) (15,703) (50,231)

At 31 December

826,742 594,024 774,244 545,285

Current

826,742 594,024 774,244 545,285

Deferred income taxes are calculated an all temporary differences under the liability method may the enacted tax

rate of 30 %( 2017:30%).





126

25 Deferred tax liability Group Company

31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

N’000 N’000 N’000 N’000

The analysis of deferred tax liabilities is as follows:

Deferred tax liability to be incurred within 12

months - - - -

Deferred tax liability to be incurred after more than 12

months 428,182 384,874 92,107 92,107

428,182 384,874 92,107 92,107

The movement on the deferred tax liabilities account

is as follows:

25a At 1 January 384,873 953,540 92,107 695,696

Tax charge recognised in other comprehensive income - 38,675 - -

Foreign exchange difference arising from translation (41,359) 25,970 - -

Income statement charge (note 38) 84,668 (633,311) - (604,563)

At 31 December 428,182 384,873 92,107 92,107

Non- current 428,182 384,873 92,107 92,107

25b Deferred tax asset

The movement on the deferred tax asset account is as

follows:

At 1 January 148,195 26,226 146,476 24,551

Exchange difference adjustment

Foreign exchange difference arising from translation - 157

Income statement charge (note 42) - 121,498 - 121,925

At 31 December 148,195 147,881 146,476 146,476

Non- current 148,195 147,881 146,476 146,476

26 Share capital

Ordinary Shares

Authorised share capital ('000) 30,000,000 30,000,000 30,000,000 30,000,000

N’000 N’000 N’000 N’000

Paid up share capital of 20.585 billion ordinary shares

of 50 kobo each 10,292,500 10,292,500 10,292,500 10,292,500

Number of shares

31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

At 31 December

20,585,000 20,585,000 20,585,000 20,585,000

Share premium

At 31 December 14,365,133 14,365,133 14,365,133 14,365,133

27 Contingency reserves

At 1 January

908,259 832,162 839,681 776,327 Transfer from retained earnings 67,688 76,097 51,664 63,354

At 31 December

975,947 908,259 891,345 839,681

In accordance with the insurance act, a contingency reserve is credited with the greater of 1% of total premiums or

10% of net profit. This shall accumulate until it reaches the amount of greater of minimum paid-up capital or 50

percent of net premium.





127

Group Company

31-Dec-18

31-Dec-17 31-Dec-18

31-Dec-17

N’000

N’000 N’000

N’000

28 Retained earnings

At 1 January (27,275,850)

(22,232,954) (26,146,738)

(22,370,793)

Opening ECL Adjustment (178,627) - (83,713) - Arising on liquidation of subsidiaries -

335,149 -

-

Transfer to contingency reserves (67,901)

(76,268) (51,664)

(63,354) Fair value reserves on properties of

subsidiaries liquidated

-

943,073

943,073 -

-

Profit for the year

(2,696,156)

(6,244,850 (2,658,566)

(3,712,738)

At 31 December (30,218,534

)

(27,275,850) (28,940,681

)

(26,146,738

)

29 Fair value reserves

At 1 January 1,004,524 2,083,193 367,862 318,304 Gain on revaluation on land and building 160,594 (97,571) 23,145 48,908 Change in value of FVOCI financial assets

(net of taxes) (650)

650 (650)

650 Remeasurement of the net defined benefit

liability (asset) 35,336

- 35,336

- Deferred tax

(34,362) (38,675) - -

Disposal of subsidiaries

- (943,073) - -

At 31 December 1,165,442 1,004,524 425,693 367,862

29a Fair value changes-statement of

comprehensive income

N’000 N’000 N’000 N’000

Gain on revaluation on land and

building 160,594

(97,571) 23,145

48,908 Change in value of FVOCI financial assets

(net of taxes) (650)

650 (650)

650

Remeasurement of the net defined benefit

liability 35,336

- 35,336

- Income tax on items that will not be

subsequently reclassified to profit or loss (34,362)

(38,675) -

- Disposal of Subsidiaries - (943,073) - -

160,918

(1,078,669) 57,831

49,558

30 Gross premium income

Individual life

3,756,235 2,791,882 2,127,054 1,500,620

Group life

915,838 2,257,510 915,838 2,257,510 Annuity

544,011 1,005,119 544,011 1,005,119

Takaful

240,600 338,829 240,600 338,829 Esusu

1,338,893 1,233,370 1,338,893 1,233,370

Gross premium written

6,795,577

7,626,710 5,166,396 6,335,448

Unearned premium

Group life

62,685 (39,778) 62,685 (39,778)

6,732,892

6,858,262

7,586,932 5,229,081 6,295,670

31 Insurance premium ceded to reinsurers

Gross reinsurance expense

(184,563) 59,466 (176,104) 49,863

Changes in prepaid reinsurance

15,158 (460) 15,158 (460)

(169,405) 59,006 (160,946) 49,403

32 Fees and commission income

Group Life

41,663 1,177 41,663 1,177

Individual Life

2,259 4,035 2,259 4,035

43,922 5,212 43,922 5,212





128

33 Insurance claims and loss adjustment expenses

a Group

31-Dec-18

Gross Reinsurance Net

N’000 N’000 N’000

Current period claims and loss adjustment expenses

9,612,514 - 9,612,514 Increase in the expected cost of claims for unexpired risks

13,521 - 13,521

Claims incurred during the period

9,626,035 - 9,626,035 IBNR on Short term insurance contract

43,617 (203,837) (160,220)

9,669,652 (203,837) 9,465,815

31-Dec-17 Gross Reinsurance Net N’000 N’000 N’000

Current period claims and loss adjustment expenses 9,146,437 - 9,146,437 Increase in the expected cost of claims for unexpired risks

7,497 7,497 Claims incurred during the period 9,153,934 - 9,153,934 IBNR on Short term insurance contract 571,250 23,515 594,765 9,725,184 23,515 9,748,699

33 Insurance claims and loss adjustment expenses

b Company

31-Dec-18

N’000 N’000 N’000 Gross Reinsurance Net

Individual life

1,191,398 - 1,191,398 Group life

921,892 921,892

Annuity

4,532,002 4,532,002 Takaful

284,689 284,689

Esusu

1,797,176 1,797,176

8,727,157 8,727,157 Increase in the expected cost of claims for unexpired risks

13,521 - 13,521

Claims incurred during the year

8,740,678 - 8,740,678 IBNR on Short term insurance contract

43,617 (203,837) (160,220)

8,784,295 (203,837) 8,580,458

Insurance claims and loss adjustment expenses

Company

31-Dec-17

N’000 N’000 N’000 Gross Reinsurance Net

Current year claims and loss adjustment expenses 8,096,505 8,096,505 Increase in the expected cost of claims for unexpired risks 19,794 19,794 8,116,299 8,116,299 Claims incurred during the year 8,116,299 - 8,116,299 IBNR on Short term insurance contract 571,250 23,515 594,765 8,687,549 23,515 8,711,064





129

34 Underwriting expenses Group Company 31-Dec-18

31-Dec-17 31-Dec-18

31-Dec-17

N’000

N’000

N’000

N’000 Acquisition cost 417,965 372,767 230,507 230,815 Maintenance cost

574,325 608,226 574,325 608,226

992,290 980,993 804,832 839,041

35 Changes in long term insurance contracts

Changes in annuity fund (1,979,161) 2,828,216 (1,979,161) 2,828,216 Changes in individual life fund excluding annuity 828,957 1,151,464 597,545 972,805

(1,150,204)

3,979,680 (1,381,616) 3,801,021

36 Other income

Rental income

32,745 26,685 30,020 23,836

Gain upon disposal of investment 252,826 41,251 252,826 41,251 Gain on disposal of PPE (10,390) 642 (10,390) 642 Sundry charges on investment linked products 15,173 28,328 15,173 28,328 Sundry income

7,618 39,023 7,618 37,243

297,972 135,929 295,247 131,300

37 Investment income

Interest income on cash and bank balances 553,578 633,895 479,998 554,038

Unearned Premium - 333,87 Interest income on bonds 2,590,217 2,498,886 2,256,350 2,498,886 Investment income on planned asset 39,115 34,218 39,115 34,218 Dividend Income 12,711 13,985 12,711 13,985 Interest income on statutory deposit 33,037 32,431 33,037 32,431 Interest income on loans and receivables 13,140 11,135 13,140 -

3,241,798 3,224,550 3,168,218 3,133,558

37a Loss from investment contract:

Investment income from investment contract

liabilities 1,370

392 1,370 392 Excess reserve on deposit administration - 59 - 59 Shortfall in deposit administration - - - - Guaranteed interest

(139,317) (115,673) (139,317) (115,673)

(137,947) (115,222) (137,947) (115,222)

38 Impairment on assets

Impairment on unquoted equities (see note 7.2) - 114,287 - 114,287 Impairment on loans and receivables (see note

7.4) -

119,796 - 119,796 Impairment on trade receivables (8.1) - 47,384 - - Impairment on other receivables and prepayments

(see note 10.1) -

138,765 - 491,781 Impairment on aircraft(note 16) - 1,188,240 - -

Impairment on investment in subsidiary (see note

13e) 11,076

- 11,076 (69,509)

Impairment allowance on unquoted securities no

longer required (1,250)

(1,250)

Specific provision on loans and receivables no

longer required (note 7.6i) (4,188)

- (4,188)

5,638

1,608,472 5,638 656,355





130

39 Employee benefit expenses

The number of persons employed excluding directors in the Group and in the Company during the year and at the

end of the year ended 31 December, 2018 were 152 and 95, respectively.

The staff cost for the above persons was:

Group Company 31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

N’000 N’000 N’000 N’000 Wages and salaries

881,544 757,125 610,050 492,937

Other Staff Cost

133,076 104,876 133,075 52,587 Defined contribution pension costs

92,670 51,956 92,670 23,667

Defined benefit pension cost

64,157 100,182 64,157 100,182

1,171,447 1,014,139 899,952 669,373

40 Other operating and administrative expenses

Directors’ emoluments

12,500 56,056 12,500 27,875

Bank Charges

54,916 76,580 54,916 34,591 Auditors' remuneration

17,500 22,829 17,500 17,500

Depreciation

125,700 307,219 125,700 96,548 Amortisation

17,074 22,370 17,074 16,698

Consultancy expenses

296,051 109,613 296,051 91,139 Security

14,328 27,726 14,328 13,744

Rent and rates

438,925 80,075 130,760 65,792 General maintenance and running costs

128,338 209,553 128,338 117,094

Advert and Publicity

219,588 93,757 219,588 74,447 Telecommunications

24,201 27,084 24,201 15,554

Dues and Subscription

27,873 12,311 27,873 9,903 Travels and accommodation

307,076 253,931 307,076 222,186

Insurance supervision fees

62,230 141,066 62,230 132,000 Insurance expenses

10,746 20,170 10,746 14,648

Printing and stationeries

13,275 37,244 13,275 25,692 Industrial training fund

3,441 5,674 3,441 5,674

Entertainment

18,765 32,441 18,765 19,559 Regulatory levies

34,702 5,145 34,702 5,145

Penalties

18,410 4,060 18,410 4,060 Lease

25,851 8,231 25,851 8,231

Office ICT expenses

113,651 67,415 113,651 67,415 Donation

900 - 900 -

Office cleaning expenses

9,759 8,874 9,759 8,874 Medical expenses

2,309 13,333 2,309 1,773

Other Administrative Expenses

67,314 33,057 67,298 22,791

2,065,419 1,675,814 1,757,238 1,118,933

41a ECL Allowance on cash and cash equivalents and Financial Assets -Group

IAS 39

IFRS 9

opening

ECL

Movement

during the

year

Balance

c/d

N’000 N’000 N’000 N’000

Cash & Cash Equivalents - 29,134 (9,100) 20,034

Amortized Cost-bonds

- 38,143

(367) 37,776

Agency Loans 32,769 29,575 26,934 89,279

Loan and Receivables 226,838 83,035 15,903 325,776

259,607 179,887 33,370 472,865





131

41b ECL Allowance on cash and cash equivalents and Financial Assets –Company

IAS 39

IFRS 9

opening

ECL

Movement

during the

year

Balance

c/d

N’000 N’000 N’000 N’000 Cash & Cash Equivalents

- 23,854 (9,416) 14,438 Amortized Cost-bonds

- 38,143 (367) 37,776

Agency Loans

32,769 5,494 (271) 37,992 Loan and Receivables

226,838 16,222 226 243,286

259,607 83,713 (9,828) 333,492

42 Auditor's remuneration

The audit remuneration represent audit fee for the statutory audit ended 31 December 2018. The external auditor

did not provide any non-audit service to the company

43 Contraventions

31-Dec-18 31-Dec-17

N’000 N’000

Nature of Penalties

Outstanding penalty for late submission to NAICOM

660 5

Penalty for late submission to Nigeria Stock Exchange

17,750 4,055

18,410

4,060

The staff cost for the above persons was:

Group Company 31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17 N’000 N’000 N’000 N’000

44 Finance cost

Interest expense on borrowings 60,296 5,179 60,296 5,179

45 Income tax expense

Current tax on profits for the year (note 24) 273,662 278,885 244,662 271,172

Deferred tax charge for the year (note 25) - (754,809) - (726,488)

273,662 (475,924) 244,662 (455,316)

46 Translation reserve

The movement in translation reserve during the year is shown below:

Balance at beginning of year 186,441 111,070

Exchange difference arising on translating the foreign operation 50,854 75,371

Balance at end of year

237,295 186,441 47 Non-controlling interest

Balance at 1 January 7,816 11,321 Opening ECL Adjustment (1,260) -

Share of loss (459) (6,205)

Share of contingency reserve 213 171

Share of foreign exchange translation difference 675 1,004

Share of gain on revaluation of land and

building 1,368 1,525

8,353 7,816





132

48 Other income statement information: Staff and directors cost

Employee costs during the year amounted to: Group Company

31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

N’000 N’000 N’000 N’000

Wages & salaries 881,545 757,125 610,051 492,937

Pension cost 92,669 51,956 92,670 23,667

Other staff cost 133,075 104,875 133,075 52,586

Staff defined benefit 64,157 100,183 64,157 100,183

1,171,44

6

1,014,13

9

899,953 669,373

The exit bonus become payable when employee exit the group at the age of 60 and satisfies performance criteria

The number of employees of the company, other than directors, who received emoluments in the following ranges

was:

Group Company

31-Dec-17 31-Dec-16 31-Dec-17 31-Dec-16

Number Number Number Number

N1,000,001 - N1,500,000 57 60 0 5

N1,500,001 - N2,000,000 5 10 5 10

N2,000,001 - N2,500,000 9 5 9 5

N2,500,001 - N3,000,000 3 41 3 41

N3,000,001 - N3,500,000 33 2 33 2

N3,500,001 - N4,000,000 15 11 15 11

Above N4,000,000 30 20 30 20

152 149 95 94

iii. The average number of full time persons employed by the Company during the year per level were as followed:

Executive director

3 4 2 2

Management staff 9 9 7 6

Non-management staff 143 140 88 88

155 153 97 96

Directors’ remuneration:

i. Remuneration paid to the directors of the Company were as follows:

Group Company

31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

N’000 N’000 N’000 N’000

Short term benefits:

- Directors fees 12,500 20,000 12,500 20,000

- Directors sitting allowances 3,250 5,375 3,250 5,375

- Executive compensation 25,058 37,921 25,058 37,921

- Other directors costs and expenses - - - 2,500

40,808 65,796 40,808 65,796

Fees and other emoluments disclosed above include

amounts paid to :

The Chairman - 20,000 - 20,000

The highest paid director 14,400 19,033 14,400 19,033





133

The number of directors who received fees and other emoluments (excluding pension contributions) in the following

ranges was:

Group Company

31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

Number Number Number Number

Below N5,000,000 - - - -

N5,000,000- N10,000,000 - - - -

N10,000,000 and above 2 3 2 3

2 3 2 3

49 Related parties

Shareholders 31-Dec-18 31-Dec-17

Conau Limited 57.39% 57.39%

Universal Insurance Plc 5.83% 5.83%

Nature of the balance Related party 2018 2017

N’000 N’000

intercompany receivables Axiom Air Ltd 408,339 408,339

Intercompany receivable African Alliance Holding Limited 8,150 8,150

intercompany receivables Universal Insurance

Company Plc 1,600,267 1,600,267

intercompany receivables African Alliance Trustees

Limited 105 105

Premium receivable - -

Due to related party - -

Intercompany payable - -





134

50 Contingent liabilities and commitments

(a) Legal proceedings

There were no legal proceedings outstanding against the company at 31 December 2018 (2017 Nil).

(b) Capital commitments

At 31 December 2018, the Group has no capital commitments in respect of buildings and equipment

purchases.

51 Loss per share

Basic earnings per share is calculated by dividing the loss attributable to equity holders of the company by the

weighted average number of ordinary shares in issues.

Group Company

31-Dec-18 31-Dec-17 31-Dec-18 31-Dec-17

Loss for the year N’000 (2,696,615) (6,251,055) (2,658,566) (3,712,591)

Weighted number of shares at the end of the year

('000) 20,585 20,585

20,585 20,585

Loss per share (basic) - in Kobo (13) (30) (13) (18)

52 Proposed dividend

There was no propose dividend during the year (2017: N.0000)

53 Post balance sheet events

There were no post balance sheet events which could have a material effect on the financial position of the Group

as at 31 December 2018 or the profit for the twelve month ended 31 December 2018.




135

Other National Disclosures




136

OTHER NATIONAL DISCLOSURES (a) Value Added Statement

Group Company

2018 2017 2018 2017

N'000 % N'000 % N'000 % N'000 %

Gross Premium Income 6,688,857 7,533,138 5,068,135 6,251,479

Fee and Commission Income 43,922 5,212 43,922 5,212

Net Investment Income 3,190,367 5,205,238 2,895,762 4,890,878

Other income 297,972 - 295,247 -

10,221,118 12,743,588 8,303,066 11,147,569 Claims Incurred, commission paid and

other operating expenses

(11,269,556) (18,402,332) (9,613,948) (14,813,380)

Value added (1,048,438) 100 (5,658,744) 100 (1,310,884) 100 (3,665,811) 100

Applied as follows:

In payment of employees:

- Salaries, wages and other benefits 1,171,447 (112) 1,014,139 (18) 899,952 (69) 669,373 (18)

In payment to providers of capital:

- Interest on loan 60,296 (6) 5,179 (1) 60,296 (4) 5,179 (1)

In payment to Government

- Taxation 273,662 (26) 50,231 (1) 244,662 (19) 50,231 (1)

For future replacement of assets,

expansion of business and payment

of dividend to shareholders: - Deferred Taxation - (754,809) 14 - - (726,488) 20

- Depreciation & Amortisation 142,772 (13) 329,589 (6) 142,772 (11) 113,246 (3)

- Contingency reserve - 76,097 (1) - - 63,354 (2)

- Loss for the year (2,696,615) 257 (6,379,170) 113 (2,658,566) 203 (3,840,706) 105

(1,048,438) 100 (5,658,744)

100 (1,310,884) 100 (3,665,811) 100




137

Financial Summary

Group 31-Dec 31-Dec 31-Dec 31-Dec 31-Dec

2018 2017 2016 2015 2014

ASSETS ₦'000 ₦'000 ₦'000 ₦'000 ₦'000 Cash and Cash equivalents 3,680,801 6,006,807 6,873,981 4,161,876 2,434,395

Financial Assets 21,109,127 22,753,040 23,665,513 18,574,910 11,209,586

Trade Receivables 135,927 41,918 168,658 59,962 74,213

Reinsurance Assets 144,052 53,717 76,772 34,339 917

Loans and receivables 52,948 - - - -

Other Receivables and Prepayments 1,612,595 341,178 439,945 861,111 25,869

Deferred Acquisition Cost - - 15,717 7,392 377,852

Investment Properties 10,258,313 10,794,603 7,772,882 6,785,365 6,610,976

Investment in Subsidiary - - - - -

Investment in Associate 1,804,083 1,605,405 1,341,159 1,234,148 1,229,554

Retirement benefit asset - 7,063 - - -

Deferred Tax Asset 148,195 147,881 26,226 27,871 34,305

Intangible Assets 57,343 63,959 56,130 66,412 48,597

Property and Equipment 2,008,241 1,666,110 4,901,209 4,698,386 4,551,019

Statutory Deposit 358,182 348,965 309,978 222,597 219,144

Total Assets 41,369,807 43,830,646 45,648,170 36,734,369 26,816,429

LIABILITIES Insurance Contract Liabilities 35,110,631 36,378,453 31,611,594 26,620,780 13,000,434

Investment Contract Liabilities 5,841,758 4,927,104 5,411,398 4,408,274 4,446,262

Trade payables 1,106,999 1,177,117 1,183,273 1,594,059 436,367

Other payables and Accruals 679,592 563,265 535,742 487,495 472,456

Employee benefit liabilities 42,690 29,335 59,544 72,378 121,821

Borrowings 507,077 287,652 67,110 25,564 34,452

Tax payable 826,742 594,024 363,544 294,254 204,462

Deferred tax Liabilities 428,182 384,874 953,540 659,904 592,666

Total Liabilities 44,543,671 44,341,824 40,185,745 34,162,708 19,308,829




138

31-Dec 31-Dec 31-Dec 31-Dec 31-Dec

2018 2017 2016 2015 2014

₦'000 ₦'000 ₦'000 ₦'000 ₦'000

Share Capital 10,292,500 10,292,500 10,292,500 10,292,500 10,292,500

Share Premium 14,365,133 14,365,133 14,365,133 14,365,133 14,365,133

Contingency Reserve 975,947 908,259 832,162 467,349 317,966

Retained Earnings (30,218,534) (27,275,850) (22,232,954) (24,314,881) (19,606,612)

Translation Reserve 237,295 186,441 111,070 (65,938) (49,699)

Non-Controlling Interest 8,353 7,816 11,321 11,202 -

Fair Value Reserve 1,165,442 1,004,524 2,083,193 1,816,296 2,188,312

Total Equity (3,173,864) (511,177) 5,462,425 2,571,661 7,507,600

Total Liabilities & Equity 41,369,807 43,830,646 45,648,170 36,734,369 26,816,429

INCOME STATEMENTS Gross Premium written 6,795,777 7,626,710 14,068,406 14,442,436 10,802,772

Gross Premium income 6,858,262 7,586,932 14,523,181 14,400,292 10,732,198

Loss before tax (2,422,953) (6,726,979) 2,774,855 (4,744,063) 710,930

Income tax expense (273,662) 475,924 (330,817) (197,236) (224,957)

Loss after tax (2,696,615) (6,251,055) (2,444,038) (4,744,063) 485,973

Other Comprehensive income 213,815 (57,696) 446,727 (197,236) -

Total comprehensive income (2,482,800) (6,308,751) 2,890,765 (4,941,299) 485,973




139

Company 31-Dec-18 31-Dec-17 31-Dec-16 31-Dec-15 31-Dec-14

ASSETS ₦'000 ₦'000 ₦'000 ₦'000 ₦'000

Cash and Cash equivalents 3,173,108 5,799,468 6,359,793 3,771,636 2,409,614

Financial Assets 21,153,916 22,665,754 23,584,248 18,529,386 10,806,897

Reinsurance Assets 144,052 53,717 76,772 34,339 25,869

Other Receivables and Prepayments 2,093,877 324,286 700,236 1,142,935 596,257

Deferred Acquisition Cost - 15,717 7,392 917

Investment Properties 8,620,913 9,285,488 6,616,999 6,058,586 5,868,188

Investment in Subsidiary 542,729 553,805 1,538,299 1,357,558 1,357,558

Investment in Associate 1,804,083 1,605,405 1,341,159 1,234,148 1,229,864

Retirement benefit asset - 7,063 - - -

Deferred Tax Asset 146,476 146,476 24,551 24,551 24,551

Intangible Assets 19,776 20,913 28,023 33,636 30,296

Property and Equipment 829,048 627,276 647,313 662,963 639,347

Statutory Deposit 200,000 200,000 200,000 200,000 200,000

Total Assets 38,727,978 41,289,651 41,133,110 33,057,130 23,189,358 LIABILITIES Insurance Contract Liabilities 33,149,205 34,536,368 30,104,525 25,774,605 12,243,182

Investment Contract Liabilities 5,841,758 4,927,104 5,411,398 4,408,274 4,446,262

Trade payables 850,179 914,215 923,974 1,413,614 322,880

Other payables and Accruals 461,659 344,085 291,182 275,966 172,812

Employee benefit liabilities 42,690 29,335 39,624 52,458 73,695

Borrowings 482,146 182,714 - - -

Tax payable 774,244 545,285 285,240 224,970 149,069

Deferred tax Liabilities 92,107 92,107 695,696 515,418 449,594

Total Liabilities 41,693,988 41,571,213 37,751,639 32,665,305 17,857,493 EQUITY Share Capital 10,292,500 10,292,500 10,292,500 10,292,500 10,292,500

Share Premium 14,365,133 14,365,133 14,365,133 14,365,133 14,365,133

Contingency Reserve 891,345 839,681 776,327 422,588 280,482

Retained Earnings (28,940,681) (26,146,738) (22,370,793) (24,962,673) (19,841,945)

Fair Value Reserve 425,693 367,862 318,304 274,277 235,695

Total Equity (2,966,010) (281,562) 3,381,471 391,825 5,331,865 Total Liabilities & Equity 38,727,978 41,289,651 41,133,110 33,057,130 23,189,358




140

31-Dec-18 31-Dec-17 31-Dec-16 31-Dec-15 31-Dec-14 ₦'000 ₦'000 ₦'000 ₦'000 ₦'000

INCOME STATEMENTS Gross Premium written 5,166,396 6,335,448 12,963,414 13,672,443 10,078,060

Gross Premium income 5,229,081 6,295,670 13,418,189 13,631,533 10,011,954

(loss)/Profit before tax (2,413,904) (4,167,907) 3,216,247 (4,596,819) 764,481

Income tax expense (244,662) 455,316 (270,628) (160,520) (134,320)

Profit after tax (2,658,566) (3,712,591) 2,945,619 (4,757,340) 630,161

Other Comprehensive income 57,831 49,558 44,027 38,582 55,675 Total comprehensive income (2,600,735) (3,663,033) (2,989,646) (4,718,758) 685,836

AFRICAN ALLIANCE INSURANCE PLCafricanallianceplc.com/download/financials_2018.pdf · 2019-06-26 ·...

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