ANNUAL REPORT 2014 - Guardian...

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ANNUAL REPORT2014

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ANNUAL REPORT2014

CONTENTS

Corporate Information 2Notice of Annual Meeting 4Notes to the Notice of Annual Meeting 5Business Segments 6Consolidated Financial Highlights 7Key Performance Indicators 8Report of the Directors 9Interests in Shares of the Company 10Chairman’s and CEO’s Statement 12Board of Directors 16Group Executive 18Management Discussion and Analysis 19Corporate Governance Report 29Independent Auditor’s Report 37Consolidated Statement of Financial Position 38Consolidated Income Statement 39Consolidated Statement of Comprehensive Income 40Consolidated Statement of Changes in Equity 41Consolidated Statement of Cash Flows 42Notes to the Consolidated Financial Statements 43Financials expressed in US dollars 119Consolidated Statement of Financial Position (US$) 119Consolidated Income Statement (US$) 120Consolidated Statement of Comprehensive Income (US$) 121Management Proxy Circular 122Form of Proxy 123

Guardian Holdings LimitedHead Office: 1 Guardian Drive, Westmoorings, TrinidadTel: 1-868-632-5433Fax: 1-868-632-5695

Email: [email protected]: www.myguardiangroup.com

Annual Report 2014Guardian Holdings Limited

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Corporate Information

DIRECTORS Mr. Arthur Lok Jack (Chairman)Mr. Peter Ganteaume (Deputy Chairman)Mr. Ravi Tewari (CEO)Mr. Imtiaz AhamadMr. Douglas CamachoMr. Richard EspinetMr. Philip Hamel-SmithMr. Antony LancasterMrs. Marianne LonerMr. Maxim RochesterMr. Selby Wilson

SECRETARY Mrs. Fé Lopez-Collymore

ASSISTANT SECRETARY Mrs. Kathryn Abdulla

REGISTERED OFFICE 1 Guardian Drive WestmooringsTrinidad

REGISTRAR & TRANSFER OFFICEGuardian Holdings Limited1 Guardian Drive WestmooringsTrinidad

AUDITORS Ernst & Young5-7 Sweet Briar Road St. Clair, Trinidad

PRINCIPAL BANKERSRBC Royal Bank (Trinidad and Tobago) Limited,19-21 Park Street, Port of Spain, Trinidad

Citibank (Trinidad & Tobago) Limited12 Queen’s Park WestPort of Spain, Trinidad

COMMITTEES:GHL AUDIT COMMITTEE Mr. Selby Wilson (Chairman) Mr. Arthur Lok JackMr. Imtiaz AhamadMr. Peter Ganteaume

GHL RISK & COMPLIANCE COMMITTEE Mr. Antony Lancaster (Chairman)Mr. Imtiaz AhamadMr. Philip Hamel-SmithMr. Ravi Tewari

GHL REMUNERATION COMMITTEEMr. Arthur Lok Jack (Chairman) Mr. Antony LancasterMr. Peter GanteaumeMr. Philip Hamel-Smith

GHL CORPORATE GOVERNANCE COMMITTEEMr. Philip Hamel-Smith (Chairman)Mr. Antony LancasterMr. Arthur Lok Jack Mr. Peter Ganteaume

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LIVE FOR TODAY ...PLAN FOR TOMORROW


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Notice of Annual Meeting

Notice is hereby given that the Annual Meeting of Shareholders of Guardian Holdings Limited for 2015 will be held at The Atrium, Guardian Corporate Centre, 1 Guardian Drive, Westmoorings, on May 11, 2015 at 4:30 in the afternoon for the following purposes:

1. To review and consider the Consolidated Financial Statements of the Company for the year ended December 31, 2014 and the Reports of the Directors and Auditors thereon and for such purpose and (if thought fit) to pass the following resolution.

“BE IT RESOLVED THAT the Consolidated Financial Statements of the Company for the year ended 31st December 2014 and Reports of the Directors and the Auditors thereon be received and adopted.”

2. To elect Directors for specified terms and for such purpose and (if thought fit) to pass the following resolutions:

(a) “That Mr. Imtiaz Ahamad be and is hereby re-elected a Director of the Company for a term expiring at the close of the third Annual Meeting of the Company following this appointment subject to the provisions of Regulation 4.5 of By-law No. 1;

(b) “That Mrs. Marianne Loner be and is hereby re-elected a Director of the Company for a term expiring at the close of the third Annual Meeting of the Company following this appointment subject to the provisions of Regulation 4.5 of By-law No. 1;”

3. To appoint Auditors and to authorise the Directors to fix their remuneration for the ensuing year and for such purpose and (if thought fit) to pass the following resolution.

“BE IT RESOLVED THAT Ernst & Young be reappointed as auditors of the Company and that the Directors be authorized to fix their remuneration for the ensuing year.”

By Order of the Board

Fé Lopez-Collymore

Corporate Secretary

Date: March 11, 2015

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Notes to the Notice of Annual Meeting

1. MEETING REQUIREMENTSMembers are asked to observe the following requirements of the By-Laws for attendance and voting at the Annual Meeting.

Proxies

Members of the Company entitled to attend and vote at the Meeting are entitled to appoint one or more proxies to attend and vote instead of them. A proxy need not also be a member. Where a proxy is appointed by a corporate member, the form of proxy should be executed under seal or be signed by its attorney.

Members who return completed proxy forms are not precluded, if subsequently they so wish, from attending the Meeting instead of their proxies and voting in person.

Representatives of Corporations

Corporate members are entitled to attend and vote by a duly authorised representative who need not himself be a member. Such appointment must be by resolution of the Board of Directors of the corporate member.

Delivery to the Company

Any instrument appointing a proxy (including an instrument evidencing the authority pursuant to which it is executed) or evidencing the authority of a representative of a corporate member, must be completed and deposited with the Secretary at the Company’s Registered Office, 1 Guardian Drive, Westmoorings, Trinidad not less than 48 hours before the time for holding the meeting or adjourned meeting.

Proof of Identity

Members are also reminded that the By-Laws provide that the Directors may require that any member, proxy or duly authorised representative provide satisfactory proof of his identity before being admitted to the Annual Meeting.

Persons Entitled to Notice

In accordance with section 110(2) of the Companies Act Ch. 81:01 the Directors of the Company have fixed March 25, 2015 as the Record Date for the determination of shareholders who are entitled to receive Notice of the Annual Meeting. Only shareholders on record at the close of business on March 25, 2015 are therefore entitled to receive Notice of the Annual Meeting. A list of such shareholders will be available for examination by shareholders at the Company’s Registered Office during usual business hours and at the Annual Meeting.

2. DIRECTORS’ CONTRACTSThere are no contracts during or at the end of the year ended December 31, 2014 in which a Director of the Company is or was materially interested and which is or was significant in relation to the Company’s business.

There are no service contracts between a Director and the Company or any subsidiary company which has a term of 10 years or more and cannot be determined without payment of compensation.


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Business Segments

Fatum General Insurance

Aruba N.V. (100%)

Royal & Sun Alliance (Antilles)

N.V. (100%)

Life Heal� and Pension

Guardian Life of �e Caribbean

Limited (100%)

Guardian General Insurance Limited

(100%)

Guardian Asset Management

Limited (100%)

Guardian Asset Management

and Investment Services Limited

(100%)

RGMLimited (33%)

Eastern Caribbean Gas Pipeline

Company Limited (15%)

Laevulose Inc Limited

(100%)

Guardian Life Limited

(100%)

Fatum Life N.V. (100%)

Fatum Heal� N.V. (100%)

Fatum Life Aruba N.V.

(100%)

Guardian Re (S.A.C.)

Limited (100%)

Fatum General Insurance N.V.

(100%)

Guardian General Insurance Jamaica

Limited (100%)

Trans-Nemwil Insurance (Grenada)

Limited (54%)

RoyalStar Assurance

Limited (26%)

Thoma Exploitatie B.V.

(100%)

Kruit en VenemaAssuradeuren B.V.

(100%)

CaribbeanProperty &Casualty

InternationalProperty &

Casualty

StrategicAlternativeInvestments

Asset Management

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Consolidated Financial Highlights

Revenue 2014 2013 Life, health and pensions business net premiums written $2,649 million $2,612 million Property and casualty business net premiums written $834 million $822 million Revenue from insurance operations $3,841 million $3,748 million Revenue from investment activities $996 million $930 million Total revenue $4,837 million $4,678 million

Results Profi t attributable to equity holders of th e parent $401 million $46 million Profi t attributable to equity holders of th e parent from continuing operations $375 million $21 million Earnings per ordinary share on continuing operations $1.62 $ 0.09

Financial position as at December 31 Total capital & reserves $2,956 million $2,896 million Shareholders’ equity $2,933 million $3,097 million Net Asset Value per share 12.65 13.35

Dividend Total dividend for th e year per ordinary share on continuing operations 57 cents 52 cents Dividend cover 3.12 0.17

Conversion Rates 2014 2014 Average rate Year end rate Trinidad & Tobago dollar to one US Dollar 6.3824 6.3585 Trinidad & Tobago dollar to one British Pound 10.5331 9.9345 Trinidad & Tobago dollar to one Euro 8.4508 7.6979 Trinidad & Tobago dollar to one Jamaican Dollar 0.0566 0.0548 Trinidad & Tobago dollar to one Neth erlands Antillean Guilder 3.5556 3.5423

Total Revenue ($ million) Financial Position ($ billion)

3,38

31,

242

3,09

51,

136

3,44

41,

004

3,74

893

0

Insurance activities Investing activities

5,000

4,000

3,000

2,000

1,000

0

4,2314,448

4,6784,625

2010 2011 2012 2013 2014

3,84

199

6

4,837Total assets Liabilities Net equity

25

20

15

10

5

0 2010 2011 2012 2013 2014

20.5

17.4

21.0

17.8

22.0

18.8

22.1

19.2

3.1

3.2

3.2

2.9

22.6

19.6

3.0


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Key Performance Indicators

$

0.50

$0

.52

$0

.52

$0

.52

$0.

57

0.6

0.5

0.4

0.3

0.2

0.1

02010 2011 2012 2013 2014

3

,567

4

,007

4

,365

4,91

1

5,

011

2010 2011 2012 2013 2014

5,000

4,000

3,000

2,000

1,000

0

Dividends per share ($)

Geographic Distribution of Revenue (Excluding Realised and Unrealised Gains/Losses)

Consolidated Investment Mix

Gross Premiums Written ($ million)

Trinidad & O�er Caribbean

Jamaica

Dutch Caribbean

O�er

52%23%

22%

3%

54%20%

23%

3%

Investment Properties

Government Securities

Debentures & Corporate Bonds

O�er

Equities

Term Deposits

Cash & Cash Equivalents

47%

12%

14%

12%

9%

5%

44%

12%

10%

14%

14%

1%

6%

2013 - $4.7 billion

2013

2014 - $4.8 billion

2014

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Report of the Directors

The Directors have pleasure in submitting their Report for the year ended December 31, 2014.

FINANCIAL HIGHLIGHTS 2014 2013 $’000 $’000 Net income from insurance underwriting activities 545,978 580,573 Net income from investing activities 923,341 857,890 Net income from all activities 1,469,319 1,438,463 Operating profit before fair value adjustment on Pointe Simon 433,764 393,165 Profit/(loss) before taxation 455,500 (35,296) Taxation (90,815) (101,642) Profit/(loss) for the year from continuing operations 362,592 (154,056) Profit/(loss) for the year 388,245 (129,752) Profit attributable to equity holders of the parent 400,516 45,569

Total assets 22,576,926 22,057,404 Insurance contract liabilities 13,510,217 13,081,517 Equity attributable to owners of the parent 2,933,055 3,096,512

DIVIDENDSAn interim dividend of Seventeen (17) cents per share was paid in 2014. At their meeting on March 11, 2015 the Directors declared a Final Dividend of Forty (40) cents per share which will be paid on April 20, 2015 to shareholders on the Register as at March 25, 2015. The total dividend for 2014 therefore amounts to Fifty Seven (57) cents per share.

DIRECTORSMr. Jemal-ud-din Kassum resigned from the Board on August 7, 2014. The Board acknowledges and thanks Mr. Kassum for his invaluable contribution and dedication to the Board during his terms of office. Mrs. Marianne Loner was appointed a Director on August 7, 2014 to fill the vacancy and so retires at this Annual Meeting but is eligible and has offered herself for election.

Mr. Imtiaz Ahamad having been elected for a term expiring at the close of this Annual Meeting retires and offers himself for re-election.

DIRECTORS AND SIGNIFICANT INTERESTSThese are shown on pages 10–11 and should be read as part of this report.

AUDITORSThe Auditors, Ernst & Young, retire and being eligible, offer themselves for re-appointment.

By Order of the Board

Fé Lopez-Collymore

Corporate SecretaryDate: March 11, 2015


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Interests in Shares of the Company

TOP TEN SHAREHOLDERS December 31, 2014 February 13, 2015 Ordinary Ordinary Shareholder Name Shares % Shares %

1 Tenetic Limited 35,841,859 15.46% 35,841,859 15.46%2 RBC Royal Bank (Trinidad & Tobago) Limited (formerly RBC Insurance Holdings Limited) 22,334,254 9.63% 22,334,254 9.63%3 International Finance Corp. 22,271,485 9.60% 22,271,485 9.60%4 Arthur Lok Jack 14,590,771 6.29% 14,590,771 6.29%5 RBC Trust (Trinidad & Tobago) Limited 11,490,554 4.99% 11,575,283 4.99%6 IFC ALAC GHL Holding Co. Ltd. 7,423,828 3.20% 7,423,828 3.20%7 Trinidad and Tobago Unit Trust Corporation 7,137,044 3.07% 7,137,044 3.07%8 Republic Bank Limited 7,667,719 3.30% 7,667,719 3.30%9 RBC Nominee Services (Caribbean) Limited 5,783,053 2.54% 5,783,053 2.54%10 First Citizens Trust and Asset Management Ltd. 5,201,452 2.24% 5,201,452 2.24%

DIRECTORS’ AND SENIOR MANAGERS’ INTERESTS Ordinary Shares as at December 31, February 13, Name Position 2014 2015Mr. Arthur Lok Jack Director 14,590,771 14,590,771Mr. Ravi Tewari Director/Senior Manager 116,044 116,044Mr. Peter Ganteaume Director 645,000 645,000Mr. Imtiaz Ahamad Director 4,813,763 4,813,763Mr. Douglas Camacho Director/Senior Manager 572,384 572,384Mr. Richard Espinet Director/Senior Manager 124,758 124,758Mr. Philip Hamel-Smith Director 295,124 295,124Mr. Antony Lancaster Director 3,517 3,517Mr. Maxim Rochester Director 0 0Mrs. Marianne Loner Director from August 7, 2014 0 0Mr. Selby Wilson Director 60,000 60,000Mr. Brent Ford Senior Manager 268,417 268,417Ms. Fé Lopez-Collymore Senior Manager 272,358 272,358Mr. Keston Nancoo Senior Manager 72,678 72,678Mr. Paul Traboulay Senior Manager 67,387 67,387Ms. Prabha Siewrattan Senior Manager 30,895 30,895Mr. Steven Martina Senior Manager 47,113 47,113Mr. Kerri Maharaj Senior Manager 36,188 36,188Mr. Larry Olton Senior Manager 21,285 21,285Mr. Wendell Mitchell Senior Manager 31,943 31,943

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SUBSTANTIAL SHAREHOLDERS December 31, 2014 February 13, 2015 Ordinary Ordinary Shareholder Name Shares % Shares %

1 Tenetic Limited 35,841,859 15.46% 35,841,859 15.46% Note: Mr. A. Lok Jack has a beneficial interest in Tenetic Limited

EMPLOYEE SHARE OWNERSHIP PLAN (ESOP) December 31, 2014 February 13, 2015Ordinary Shares held 3,960,306 3,956,447

NOTESNote 1: The interests of Directors and Senior Managers include the interests of “connected persons.” Persons

deemed to be connected with a Director/Senior Manager are:

A. The Director’s/Senior Manager’s husband or wife.

B. The Director’s/Senior Manager’s minor children (these include step-children and adopted children) and dependents, and their spouses.

C. The Director’s/Senior Manager’s partners.

D. Bodies corporate of which the Director/Senior Manager and/or persons connected with him/her together have control. Control of a corporation is the holding of shares which carry 50% or more of the voting rights in the corporation.

Note 2: There are no non-beneficial interests held by the Directors other than the interests of Mr. Selby Wilson, Mr. Douglas Camacho and Mr. Brent Ford as trustees of the Guardian Holdings Limited Employee Share Ownership Plan (ESOP). The holdings of the ESOP are shown above.

Note 3: A substantial interest means one-tenth or more of the issued share capital of the Company.


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Chairman’s and CEO’s Statement

Arth ur Lok Jack, Chairman

Dear Fellow Shareholders,

Over th e past few years th e Guardian Group has been engaged in two streams of activities. Under one stream we have worked assiduously to eliminate any adverse impact from non-core activities th at have plagued th e overall performance of th e Group in recent years. Under th e oth er stream we have strength ened th e capabilities of our powerful portfolio of core business units to ensure effi cient and steady growth in revenues and profi ts. As we alluded in th e 2013 Chairman’s and CEO’s statement, 2014 marks th e re-emergence of th e performance of th e core businesses as th e key driver in th e fortunes of th e Group.

The Group’s performance for th e year 2014 resulted in a Net Profi t Aft er Tax Attributable to Shareholders of $400.5 million, an increase of 779%, as compared to 2013 when we wrote down our Pointe Simon asset. Consequently, earnings per share for 2014 are $1.73 as compared to $0.20 in 2013.

POINTE SIMON

I am pleased to report we have had many successes in commercialising Pointe Simon over 2014. The specifi cs of th e diff erent aspects of th e development are set out below:

• We have concluded sales transactions for 35 of th e 45 condominium units. This includes th e sale of 25 units under a block transaction, taking advantage of an incentive available under th e French tax regime. We expect to secure outright sales of th e remaining units during 2015.

• The rental of th e offi ce tower is progressing according to our marketing plan. Having closed a number of leases we expect to move towards full occupancy by th e end of 2015.

• The hotel, which is scheduled to open in th e last quarter of 2015, was sold to a Martinique incorporated company known as SAS Compagnie Hôtelière de la

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Ravi Tewari, CEO

Chairman’s and CEO’s Statement

Pointe Simon (CHPS) for €21.16 million generating a profi t of €1.1 million. The Group provided vendor fi nancing for th e sale while retaining a 24% interest. The vendor fi nancing is interest bearing and is fully secured by th e hotel. It has already been reduced by €3.5 million and will be reduced by a furth er €3.8 million before th e end of 2015.

• Negotiations for th e rental of th e retail space are progressing well. We expect near full occupancy by premiere retail and entertainment brands to coincide with th e opening of th e hotel.

Given th at Pointe Simon has no th ird-party debt its commercialisation creates a new profi t-centre for th e Group, positively impacting our bottom line.

LEGACY LLOYD’S BUSINESS

Apart from Pointe Simon, our only non-core activity is th e one remaining Lloyd’s Syndicate th at has been closed to new business since 2011. When Lloyd’s Syndicates are closed to new business th eir existing liabilities “run-off ” (shrink to zero) over time. This Syndicate is very near to th e end of its run-off . Its residual exposure is small. Our intention was to enter into a reinsurance transaction during 2014 to remove all residual exposure from our books th ereby bringing th e “run-off ” to an end. However, having analysed th e strength of our reserving, we are comfortable th at given th e level of reserves th ere is strong statistical certainty th at th e run-off of th is Syndicate will continue to be favourable to th e Group and th at any downside risk is small in relation to th e overall level of profi ts of th e Group. We will th erefore allow th e Syndicate to run-off for anoth er year and again explore a reinsurance transaction near th e end of 2015.

INSURANCE ACTIVITIES

Following double-digit growth in revenue over both 2012 and 2013, Gross Premium Income grew by a

Chairman’s and CEO’s Statement (continued)


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disappointing 2% from $4.9 billion to $5.0 billion. This is as a result of a change in our approach to sales as we tactically refocused the sales force within the Life division to protection products by limiting our intake of investment products. These protection products have higher profit margins that more than compensate for the reduction in gross premiums. Further, during 2013 we received significant one-off annuity premium income from our Jamaican operations that was not repeated in 2014. In 2015 we expect to return to our normal levels of strong growth.

Net Income from Insurance Underwriting Activities fell from $580.6 million in 2013 to $546.0 million in 2014 as a result of adverse claims experience in our health and general insurance business as well as actuarial strengthening of reserves in some lines. It should be noted that neither of these factors is structural and we expect that they would have no material impact on performance going forward as they resulted from normal statistical volatility in our business.

Operating Profits before fair value adjustment on Pointe Simon totaled $433.8 million, an increase of $40.6 million or 10% over the 2013 figure of $393.2 million. Operating Expenses have reduced from $917.9 million in 2013 to $905.1 million in 2014. This is despite an additional $27 million of expenses in 2014 due to the accounting standards relating to commercialising Pointe Simon. Robust effort is being made to further reduce operating expenses across all areas. Major projects to enhance our IT backbone, streamline our revenue collecting capabilities and enrich our customer experience are currently in progress and would have a favourable impact on our operating efficiency.

Guardian Group consists of a very strong portfolio of non-bank financial institutions spanning the English and Dutch Caribbean. Trinidad is the largest insurance market in the English and Dutch Caribbean and it is investment grade. In Trinidad we hold the number one market position in every line of insurance business through Guardian Life of the Caribbean Limited and Guardian General Insurance Limited which both continue to be A- Excellent (Stable) rated. Guardian Life of the Caribbean Limited has once again written the majority of business sold in the Trinidad

and Tobago individual life and pensions market as well as the occupational health market. Guardian General Insurance Limited continues to dominate its general-insurance market segments in Trinidad and Tobago and holds very strong market positions through its branches and agencies in almost every English speaking Caribbean island.

Further, in the majority of our other markets, including Curaçao, Aruba, Barbados and Jamaica, we hold either the number-one or number-two market position in the key business lines. Despite the challenges facing the Jamaican economy, Guardian Life Limited, our Jamaican life and health insurer, has contributed very favourably to the Group’s bottom-line. Guardian General Insurance Jamaica Limited continues to perform well having fully consolidated with our 2012 acquisition of Globe Insurance Company of Jamaica Limited. Our Dutch Caribbean operations have had an excellent year, delivering very solid results to the Group. Operating collectively as Guardian Group Fatum, our Dutch Caribbean operations continue to hold leading market positions in all key lines of business, delivering a steady stream of profits in a stable currency.

While no acquisitions have been concluded in 2014, we have judiciously explored a number of opportunities in our core markets and expect to conclude a transaction early in 2015.

INVESTMENTS

Despite the dearth of long-term government securities we continue to hold a diversified investment portfolio by asset class, currency and country. Through this diversification we aim to strike a balance between mark-to-market movements, currency fluctuations and attractive returns despite the low interest rate environment.

Fair Value Gains were offset by unfavourable currency movements and persistent low interest rates, producing total contribution from Investing Activities of $923.3 million, an overall increase of $65.5 million over 2013.

Our asset management subsidiary, Guardian Asset Management Limited, has had another year of solid profitability, growing assets under management 4% from $9.3 billion to $9.7 billion.

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OUR IMPACT ON SOCIETY

Having been part of the pan-Caribbean landscape for over 165 years, we take our social responsibility very seriously. Throughout the region we provide direct employment to 2,700 employees and we pay over $90 million in taxes to various governments. However, we see our social responsibility as going beyond normal business activity. Under the umbrella and single brand, Guardian Group, our policy has been to take a more streamlined and focused approach to Corporate Social Responsibility (CSR) across the region and in each of the markets that we serve.

In 2014, in keeping with the overarching Group CSR theme of Health and Wellness and the promotion of healthy lifestyles, the Group companies undertook several initiatives and projects that supported social causes relevant to their respective markets. This included support for the Olympic Committee in Trinidad, 5K runs in Jamaica and Curaçao, youth cricket in Barbados, sponsoring UWI’s Premier Teaching Awards, road safety campaigns and supporting a multitude of activities representing the diverse cultures that comprise our Caribbean. We also play a strong role in the fight against breast cancer by providing a programme of world-class, early detection services through our involvement with Pink Hibiscus Breast Health Specialists.

At Guardian Group it is our firm belief and philosophy that strong, stable and productive communities are essential to business success and ultimately to increasing shareholder value.

SUMMARY

Our portfolio of financial service companies diversified across lines of insurance and geographies together with our diversified investment portfolio has withstood operating volatility and provided strong overall performance generating a Return on Equity of 13.7%. Pointe Simon is progressing as planned and will provide an additional source of profits for the Group. Having addressed volatility in non-core activities, management is now able to put renewed focus on growing our core businesses by leveraging our strong insurance franchises to increase revenue and profits.

Confident in the fact that our negative legacy issues which have plagued us over recent years have been resolved, and given our solid business franchises and significant market positions throughout the region, your Board of Directors after many years of flat dividend payment have decided to increase the total dividend per share by 9.6% to fifty-seven (57) cents. Consequently, further to the interim dividend of seventeen (17) cents, the final dividend will be forty (40) cents.

We would like to thank the shareholders, customers and our valued employees who have demonstrated loyalty to the Group over the years. This year has been of special significance to the Group as it sets the tone for a future of solid, increasing performance.

Arthur Lok Jack Ravi TewariChairman of the Board Group Chief Executive Officer

Board of Directors

Arth ur Lok JackGroup Chairman Ravi Tewari

Group Chief Executive Offi cerPeter GanteaumeDeputy Chairman

Fé Lopez-CollymoreCorporate Secretary


Antony LancasterPhillip Hamel-Smith Douglas Camacho

Imtiaz Ahamad

Marianne LonerSelby Wilson Maxim Rochester

Richard Espinet

For more information about our Board of Directors, please refer to: www.myguardiangroup.com/about-guardian-holdings-limited/board-of-directors/

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GET YOUR DREAMS OFF THE GROUND ...TALK TO US!

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Ravi Tewari – Group Chief Executive Offi cerRichard Espinet – Executive Director/Group President, Caribbean Property & Casualty

Brent Ford – Group Chief Investment Offi cer/Group President, Asset ManagementSteven Martina – Chief Administration Offi cer, Insurance Administration Services

Kerri Maharaj - Group Chief Financial Offi cer

Group Executive

Douglas Camacho – Executive Director/Group President, Strategic Investments & ProjectsPaul Traboulay – Group Chief Risk Offi cer

Fé Lopez-Collymore – General Counsel & Company SecretaryLarry Olton – Group Vice President, Integrated Marketing Communications

Keston Nancoo – Group Vice President, Human Resource Services

Wendell Mitchell – Group Chief Information Offi cerKaren Bhoorasingh – President, Guardian General Insurance Jamaica Limited

Anand Pascal – President, Guardian Life of th e Caribbean LimitedEric Hosin – President, Guardian Life Limited

Benedict Bito – Head of Internal Audit, Guardian Holdings LimitedPrabha Siewrattan – Group Head, Compliance

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19

Management Discussion and Analysis

This Management Discussion and Analysis contains detailed information important to understanding th e Company’s results and fi nancial condition and should th erefore be read in its entirety.

FORWARD LOOKING STATEMENTS – CAUTIONARY LANGUAGEThe report reviews th e Company’s fi nancial condition and results of operations including its liquidity and capital resources. Historical information is presented and discussed. Where appropriate, factors th at may aff ect future fi nancial performance are also identifi ed and discussed. Certain statements made in th is report include “forward-looking statements”. Forward-looking statements include any statement th at may predict, forecast, indicate or imply future results, performance or achievements instead of historical facts and may contain words like “believe”, “expect”, “estimate”, “project”, “budget”, “forecast”, “anticipate”, “plan”, “will”, “shall”, “may” and oth er words, phrases or expressions with similar meaning. Forward-looking statements involve risks and uncertainties th at may cause actual results to diff er materially from th e results contained in th e forward-looking statements and th e Company cannot give assurances th at such statements will prove to be correct. Given th ese risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

OVERVIEWGuardian Holdings Limited (GHL) is a holding company formed in 1982 and became a publicly listed company in Trinidad & Tobago on June 18, 1996. GHL’s subsidiaries provide fi nancial services th rough th e production, distribution, and administration of insurance and investment products. GHL’s principal operations are conducted th roughout th e Caribbean. There are th ree main business segments: Life and Health Insurance, and Pensions; Property and Casualty Insurance; and Asset Management. Services are primarily distributed and sold th roughout th e Caribbean, however reinsurance cover is selectively provided on a worldwide basis th rough th e Group’s international property and casualty business segment.

CRITICAL ACCOUNTING POLICIES AND ESTIMATESThe Group’s accounting policies require th e use of judgments relating to a variety of assumptions and estimates, in particular, expectations of current and future mortality, morbidity, persistency, expenses and interest rates. Because of th e inherent uncertainty when using th e assumptions and estimates, th e eff ect of certain accounting policies under diff erent conditions or assumptions could be materially diff erent from th ose reported in th e consolidated fi nancial statements. The Group’s signifi cant accounting policies and critical accounting estimates are disclosed in Notes 2 and 3 respectively to th e Consolidated Financial Statements.

SUMMARY OF FINANCIAL PERFORMANCE

LIFE, HEALTH & PENSIONSGuardian Group’s Life, Health and Pensions (LHP) business is underwritten and serviced by fi ve (5) companies in th e English and Dutch-speaking Caribbean, th at have consistently held th e number one or number two positions in th eir respective markets. The companies are Guardian Life of th e Caribbean (GLOC) and Bancassurance Limited (BANC) domiciled in Trinidad, Guardian Life Limited (GLL) domiciled in Jamaica and Fatum Life and Fatum Health (FATUM) domiciled in Curaçao and Aruba.

There were many challenges in 2014, most of which revolved around th e slow recovery of th e global economy and th e weak growth of regional economies, particularly th e Jamaican economy, which continued to suff er from high debt, low productivity and high unemployment.

The LHP business segment was neith er daunted by th e global or regional social and economic realities nor local competitive forces and achieved Net Profi t of $422 million, surpassing th e previous year by 32%. Net Income from insurance and investment activities totalling $953 million exceeded 2013 results by 6%.

The overall Net Result from Insurance activities of $144 million was 80% of th e 2013 fi gure; GLOC and GLL accounted for majority of th is result. The decline from 2013 resulted from higher commissions paid on new


20

business and higher net claims incurred by GLOC for 2014. During 2014, GLOC focused on th e provision of more protection products, which carry larger commissions. Net Underwriting Revenue of $2.83 billion increased year-on-year by 3% while Underwriting Expenses of $2.68 billion increased by 5%. On th e short term portfolios, continued emphasis was placed on profi table pricing and claims management which contributed to improved results over 2013 for GLL and FATUM.

Of th e total Net Underwriting Revenue, Net Premium Income of $2.66 billion grew by 1% in 2014 driven by strong business retention and new business sales. GLOC surpassed prior year earnings by 4% and contributed 63% of th e premiums earned for th e LHP segment with ordinary life and annuities contracts accounting for 75% and health 21%. GLOC also ended th e year with a persistency rate of 93.63%.

FATUM grew premium income by 5%, particularly on th e Pensions business. For GLL all major lines of business showed revenue growth . However, th ere were lower bulk annuity purchases in 2014 and th is led to th e 12% decline in premium income earned by GLL, exacerbated by th e impact of th e 7.22% devaluation of th e Jamaican dollar.

The LHP Individual Life sales team settled annualised premium income of $452 million, 91% of th e record results set in 2013. GLOC accounted for $278 million or 62% and continues to be th e market leader in Trinidad. FATUM contributed $116 million or 26%, which was 97% of th eir 2013 achievement.

The following table shows th e individual-lines new business annualised premium income by territory for th e past fi ve years.

In Jamaica, business confi dence recorded its highest levels for th e fi rst th ree quarters of 2014, since 2007. Consumer confi dence, however, declined in tandem with purchasing power and job opportunities amid devaluation, 6.73% infl ation and fi xed wages. These factors contributed to GLL settling JA$1.03 billion in new business premium (JA$1.063 billion: 2013). Alth ough th e second highest in th e fi ft een-year history of th e company, it was 82% of 2013 results in TT$ terms.

Net Income from Investing Activities of $809 million increased over prior year by 12% due to increased investment income earned by GLOC and th e signifi cant reduction in realised losses posted by GLL and fair value losses by both GLL and Fatum when compared to 2013. These increases were partially off set by th e $62 million reduction in Oth er Income mainly caused by lower foreign exchange gains on invested assets with th e strength ening of th e local currencies of th e LHP segment against major currencies. In 2014, bond maturities were re-invested in short term instruments at lower rates due to th e paucity of long term securities on th e primary markets.

Re-engineering and re-structuring initiatives continued in 2014 and resulted in a cost to income ratio of 18.7% (2013: 19.2%). This contributed to th e segment’s increased profi tability as LHP companies incurred Operating Expenses of $497 million, which was slightly below prior year.

Management Discussion and Analysis (continued)

Net Premium Income ($ million)GLOC GLL Fatum

1,18

7

1,25

8

1,34

8

1,62

0

5

20

531

6

11

53

9

436

381

483

4

73

3,000

2,500

2,000

1,500

1,000

0

2,170

2,4422,632

2,143

2010 2011 2012 2013 2014

2,656

495

474

1,68

7

66 6

5

68

71

190

2

25

207

3

03

GLOC GLL Fatum

500

400

300

200

100

0

376410 398

494

452

2010 2011 2012 2013 2014

120

1

20

12

3

1

20

278

5811

6

Annualised Premium Income ($ million)

21

The LHP segment closed th e year with Total Assets of $17 billion, increasing by 4% over 2013. This was based on 5% growth in Financial Assets and 13% increase in th e Value of th e in force life insurance business.

LHP companies maintained capital signifi cantly over th e regulatory minimum solvency requirements. GLOC has developed a solid reputation based on its fi nancial stability, consistently earning an A.M. Best rating of A- Excellent over a number of years. This rating was re-affi rmed during 2014. GLL has also demonstrated consistent, strong fi nancial performance and prudence with a Minimum Continuing Capital and Surplus Requirements (MCCSR) ratio of 214% (2013:191%), above th e international standard of a strong insurance company. Fatum once again also signifi cantly exceeded th eir minimum regulatory solvency requirements for 2014.

Despite th e challenges of 2014, we are pleased th at th e LHP segment was able to overcome th e various challenges to emerge with higher profi tability, increased operational effi ciencies, increased Shareholder’s equity, stronger asset base and improved solvency while maintaining eff ective corporate governance and risk management procedures.

Over th e past year, Jamaica and Trinidad and Tobago have implemented multiple regulatory reforms aimed at improving th e ease of doing business in th ese jurisdictions. This is a step in th e right direction to attract increased foreign direct investment and to grow micro, small and medium-sized enterprises. The LHP segment is poised to take advantage of th is growth by leveraging its fi nancial

strength , market leadership, technological innovations, risk management capabilities and customer service excellence to increase shareholders’ value.

CARIBBEAN PROPERTY & CASUALTYGross Premiums of $2.115 billion grew by $74.0 million from $2.041 billion. This is on th e backdrop of pro-longed soft market conditions which have largely been driven by benign hurricane seasons in recent years, compounded by an infl ux of capital to th e reinsurance market which is driving th e reinsurance pricing downwards.

In order to enhance premium income growth during th ese adverse market conditions, th e Group will continue to focus on mergers and acquisition opportunities, th e deepening of our relationships with our global network partners, th e diversifi cation of our product off erings and th e enhancement of our customer service experience.

During th e year we completed th e integration of Royal & Sun Alliance (Antilles) N.V. into Fatum General N.V. and acquired anoth er brokerage in th e Neth erlands which has since been fully integrated into our existing brokerage operations in th at country.

This 3.6% growth in gross premiums is refl ected in increases in th e major classes of business with Property being th e lead.

The 2014 Atlantic hurricane season was even quieter th an 2013 and much quieter th an predicted, with th e fewest hurricanes since 1982. There were eight (8) named


6.7

7

.1

7.9

8.6

2.8

3.1

3.2

3

.1 4

.2

4.5

4.8

4.9

GLOC GLL Fatum

18

16

14

12

10

8

6

4

2

0

13.714.7

15.916.6

17.3

2010 2011 2012 2013 2014

9.0

3.1

5.2

Total Assets ($ billion)

GGIL Fatum GGIJL

2,500

2,000

1,500

1,000

500

0

2,041

2010 2011 2012 2013 2014

1,272

1,634

1,761

1,0

09

1

,347

1,

501

1,4

64

263

2

87

23

8

401 22

1

76

2,115

1,38

743

129

7

Gross Premiums Written ($ million)


22

storms; two (2) of which developed into major (category 3+) hurricanes, with no major losses arising from eith er th e hurricane season or earth quakes in th e region.

Profi t aft er tax of $103.7 million decreased by 10.0% from $115.2 million in 2013. In 2013 we benefi ted from high net fair value gains on fi nancial instruments of $14.4 million which unfortunately did not recur th is year. Our Technical Profi ts, howeve,r increased by $13.4 million over last year to somewhat ease th e shortfall in fair value gains. The Net Claims ratio of 40.7% was just above th e 2013 ratio of 38.3%, however, th e overall combined ratio for claims, expenses and commissions decreased to 85.6% from 87.5% due to th e non-recurrence of th e integration expenses incurred in 2013 from our th ree 2012 acquisitions.

Once again th is division continues to produce excellent technical results with combined ratios consistently below 90%.

A. M. Best affi rmed Guardian General Insurance Limited’s (GGIL) rating of A- Excellent with a stable outlook in th e Financial Size Category VII, th e highest size category for any indigenous Caribbean property & casualty insurer.

Once again, all companies with in th e Division have maintained solvency margins substantially in excess of th e minimum regulatory requirements of th e various jurisdictions in which th ey operate.

Guardian Group’s Caribbean Property and Casualty Business remains th e market leader in th e region, with market leading positions in a number of countries and

with operations spanning twenty one countries it off ers th e widest range of products and geographical service to our clients. Supported by its robust capital structure, reputational claims expertise and fi nancial strength , it continues to focus on growth opportunities while strategically strength ening relationships with global network partners, representing th em in all th e major Caribbean territories.

In th is highly competitive environment, which is furth er aggravated by a low yielding investment climate, th e Group is intently focused on its long established tradition of maintaining sound underwriting discipline, backed by robust reinsurance programmes provided by only “A” rated reinsurers. Additionally, with its proven regulatory compliance track record and supported by a strong internal structure, th e Group is in th e best position to conform to any new and pending local and regional legislation.

INTERNATIONAL PROPERTY & CASUALTYThis segment of th e Group’s business comprises th e reinsurance underwritten by its wholly owned subsidiary Guardian Re (SAC) Limited; a Bermuda registered Class 3A reinsurer. Guardian Re’s business is primarily captive business, including a minor share of treaties from non-Caribbean th ird party cedants.

Gross Premiums Written declined by 10.3% to $165.5 million from $184.6 million, and Net Premiums refl ected a slight decrease of 3.7% to $94.2 million from $97.8 million as a result of lower net retained property sums insured


2014 2013

134 132 75 77

1,600

1,400

1,200

1,000

800

600

400

200

0Property Motor Casualty O�er

480

491

1,35

3

1,41

5

Gross Premiums by Class of Business ($ million)

1,35

3

Property67%

O�er 4%Casualty 6%

Motor23%

Gross Premiums by Business Mix for 2014

23

with in th e Group and lower reinsurance pricing caused by th e soft market conditions.

The technical performance showed improvements over last year. The Net Claims ratio of 73.3% was slightly below th e 2013 ratio of 73.9%, and th e overall combined ratio for claims, expenses and commissions decreased to 83.7% from 89.4%. However, th e Profi t aft er Tax of $54.5 million decreased by 6.2% from $58.2 million in 2013 as a result of lower investment income.

The Group had expected to transfer all liabilities on th e remaining Lloyd’s Syndicate to th ird parties during 2014, however, aft er substantial negotiations, a decision was made to continue th e run off for anoth er year due to external advice indicating th at th ere was a substantial surplus in th e reserves held.

ASSET MANAGEMENTGuardian Asset Management (GAM) continued to show its resilience in 2014 despite th e challenge of an environment characterised by low interest rates and volatile investment markets.

Several macro events weighed heavily on th e investment climate. In th e local market, th e persistence of high levels of liquidity continued to stifl e local interest rates, with 10 year yields averaging close to 2.50%. The local equity market also provided subdued returns with th e TTSE Composite Index declining 2.88% in 2014. The steep

decline in oil and gas prices in th e second half of th e year dampened th e economic climate and investor confi dence both locally and globally. Given th e signifi cance of th e energy sector to th e local economy, th ere were and continues to be concerns about th e resulting impact on Government fi nances and local growth . Brent crude, th e international benchmark for oil prices, declined 48% over th e year on concerns of a glut in th e market from US shale deposits and OPEC’s decision not to cut production levels. GAM was able to adjust to th e situation and make tactical decisions to minimise th e volatility posed by th ese declining prices.

Oth er oil and gas producing countries were also aff ected by th e decline in oil prices, such as Russia and Nigeria. The Russian economy was also severely impacted by sanctions imposed on it by Western countries over its involvement in th e annexation of Crimea in eastern Ukraine. In addition to th is, political instability in Greece and a general slowdown in economic activity in th e Eurozone resulted in poor performance for European equities. Alth ough th e Fed ended its bond purchasing programme, global volatility took th e spotlight and yields on th e US 10 year Treasury fell from 3.03% to 2.17% over th e year 2014. As US markets are currently viewed as th e most stable developed economy, a ‘fl ight to quality’ by investors resulted in th ese lower yields. US equity markets fared well as th e S&P 500 Index was up over 11% in 2014 amidst optimism fuelled by accelerating US growth . The US dollar also strength ened and gained over 12% against


48.2 40.9 38.2 38.3 40.7

87.7 80.9 82.9 87.5 85.6

100

80

60

40

20

02010 2011 2012 2013 2014

Combined Ratio

Net Losses Ratio

Combined and Net Loss Ratios (%)

0.4

0.5

GGIL GGIJLFatum

3.0

2.5

2.0

1.5

1.0

0.5

0

2.2 2.3

2.8 2.8

2010 2011 2012 2013 2014

0.7

0.

7

0

.7

0.

9

1.5

1

.6

1.7

1.4

2.8

1.4

0.9

0.5

Total Assets ($ billion)


24

th e basket of foreign currencies. Developed markets in general as measured by th e MSCI World Index returned just 2.9% in US Dollar terms as currency depreciation in major regions would have impacted global returns.

Assets Under Management (AUM) grew 4.1% to $9.7 billion over th e year 2014, th is growth came mainly on account of th e increase in th e captive portfolio. The Guardian Life of th e Caribbean portfolio rose by over $400 million from a combination of net infl ows and positive portfolio returns. Oth er lines also contributed to th e rise in AUM, namely non-discretionary private wealth business which grew 26%, as clients were attracted by th e competitive fee structure and capital market products off ered by GAM.

GAM’s revenues declined slightly to $58.9 million in 2014, from $60.4 million mainly as a result of th e limited market opportunities given th e investment climate and interest rate environment. The diversifi cation of its revenue streams continue to benefi t GAM as th is shortfall was off set by an increase in revenues from th ird party funds under management.

Through strict cost discipline, GAM was able to hold profi t aft er tax levels in line with prior year. Over th e year, GAM was able to reduce its expenses whilst still providing quality service, a testament of our ability to be more effi cient in th is increasingly competitive environment.

As we have mentioned in th e past, th e existing company GAM will be divided into two entities, a Trust Company focusing on Trust Services and an Asset Management Company which will handle th e investment management and services aspect of th e business. The offi cial split is carded for completion with in th e fi rst half of 2015 once th e requisite regulatory approvals have been received. This change is being made to improve governance and transparency as th ere will be a clear demarcation of roles. The provision of Trust Services which is a business line th at has been largely untapped by th e Group will be a strategic focus of th e organisation going forward.

Alth ough 2014 proved to be a diffi cult year for markets as th ey were plagued by high levels of volatility, GAM Mutual Funds performed well, delivering health y returns. The two Income Funds – th e TT and US Month ly Income Funds, were also able to maintain competitive payout rates th roughout th e entire year and remains a market leader in rates on off er.

As pioneers in off ering locally managed international mutual funds, GAM continues to off er investment opportunities to both retail and institutional clients. We cover all asset classes in an eff ort to meet all th e investment needs of a client. GAM also remains a leader in providing customised private wealth management services to high net worth clients off ering portfolios managed to a client’s specifi c risk profi le.


Captive Funds GAM Mutual Funds

O er Funds

10

8

6

4

2

0

7.3

8.28.9

9.3

2010 2011 2012 2013 2014

9.7

1.

3

1.3

1.3

1.

2

1

.1

0.

2

0

.4

0.

5

0.5

0.6

5.8

6.5

7

.1

7.6

8

.0

GAM Total AUM ($ billion)

Revenue Profit a�er Tax

80

60

40

20

02010 2011 2012 2013 2014

54.

5

6

0.0

61.

9

60.4

58.9

18.

1

19.

7

2

3.1

20

.6

2

0.7

GAM Financial Performance ($ million)

25

ALTERNATIVE INVESTMENTS RGM

RGM’s objective is to provide sound financial investments with long term cash flows, backed by real estate appropriate for the portfolios of the shareholders. The company’s aim is to develop state-of-the-art commercial properties, designed to meet international standards for finish, function, services, safety and convenience for A-class local and multinational tenants.

The company currently manages seven (7) buildings comprised of over 500,000 square feet. Listed among its’ clients are a number of multinational corporations, occupying in excess of a 100,000 square feet across multiple locations, to small professional and service-oriented firms occupying as little as 5,000 square feet.


In addition to these commercial buildings in its’ portfolio, RGM also constructed four (4) stadia and renovated the existing Hasely Crawford Stadium for the Government of the Republic of Trinidad and Tobago (GORTT).

The newest addition to the portfolio will be a grade ‘A’ commercial building on the eastern side of the Queen’s Park Savannah comprising 78,000 square feet which is seven (7) storeys high. This building is designed to be the most efficient, modern and environmentally responsible property in the region. It will also be the first LEED certified building in Trinidad & Tobago. It is expected that prospective tenants will be able to begin outfitting at the beginning of the second half of 2015.


26

Partnering for a Better Tomorrow

Guardian Group continues to partner with the communities which it serves, throughout the Caribbean, and 2014 was no exception. Our contribution to the spheres of health and wellness, youth development and education, are matched

only by the passion shown by our staff for voluntary work to assist society’s less fortunate. We believe that hands-on involvement in our communities is the only way to truly demonstrate our core values as an organisation, especially that of serving people.

Health & Wellness

One of the major charity events for the year came through our LHP operations in Jamaica, Guardian Life Limited, which with the University Hospital of the West Indies (UHWI) hosted the inaugural Keep it Alive 5K Night Run on June 21, 2014.

The race achieved record success with over 6,000 participants in its inaugural year. In Jamaica, Guardian Group also engaged the staff of the Northern Caribbean University Department of Health and Wellness with the 10,000 Step Programme.

In Curaçao, Guardian Group registered the highest number of participants in the ‘My Guardian Group Walk and Run’

community event in October with over 10,000 participants who partnered to not only raise money for several causes but raise awareness of healthy lifestyle.

Across Aruba, we lent support to the Aruba Triathlon Association, Aruba Kanker Fonds, Cancer Foundation, Fund Aua di Visualmente Incapacita (FAVI), Autism Foundation.

In Barbados, Guardian Group was again the title sponsor of Guardian Group Herman Griffith Primary School’s Cricket Tournament. 2014 was the 34th year of the competition and we have partnered with the National Sports Council for the past 16 years.

In Trinidad and Tobago, Guardian Group contributed to the production of the Caribbean Medical series. This impactful half hour television programme covered topics which included Breast Cancer, Diabetes, Heart Disease, Prostate Cancer, High Cholesterol/Nutrition for a Healthy diet, HIV, Stroke/High Blood Pressure, Orthopaedic and Asthma and provided valuable insight from some of the best medical minds in the field from within the region and North America.

Focus on safety

In Trinidad and Tobago, Guardian Group renewed its partnership with Arrive Alive for the Upgrade of School’s Crosswalks and a Road Safety Awareness Project. The objective was to raise awareness of the need to create safer walking and crossing spaces, as well as promote and encourage safer crossing practices by pedestrians.

SOCIAL RESPONSIBILITY

27

Volunteerism

As part of our response to a call by United Way (Trinidad & Tobago) for Corporate T&T to support a National Day of Caring, Guardian Group intervened in the lives of the families and wider community of

Kernaham, on the southeast coast of Trinidad. Guardian Group conducted several projects within the community including laying tiles, reconstructing flooring, stairs and walls, building outdoor drainage, painting, sorting and packing clothing, furnishing rooms and other countless activities.

Academic Leadership Development

In Jamaica, our Grade Six Achievement Test (GSAT) scholarships rewarded students who performed outstandingly in the GSAT examinations with a five year JA$50,000 scholarship to finance their secondary education. At the tertiary level, we teamed up with The University of the West Indies for the 15th year to host the Premium Teaching Open Lecture Series. This event alternates annually with the Premium Teaching Awards in the Trinidad and Tobago and Jamaica campuses of the UWI.

Winners of Guardian Group Herman Griffith Primary School’s Cricket Tournament.


28

THE CHOICES YOU MAKE TODAYCAN ENSURE TOMORROW’S FUTURE

29

Corporate Governance Report

FRAMEWORK FOR EFFECTIVE GOVERNANCEThe GHL Board acknowledges its collective responsibility for the long term success of the Company and has adopted a number of policies and procedures to support its effective discharge of this responsibility.

Prominent among these policies is the Corporate Governance Policy which has established a formal mandate for stewardship of the Company including oversight of:

• Strategy and the achievement of its strategic plans;• Succession planning, training and an induction

programme for Board members and senior management;

• Risk management;• Internal controls;• Material transactions; • Corporate governance;• Financial reporting;• Compliance;• Stakeholder communication.

Specific responsibilities and authorities are delegated by the Board to the CEO. The primary objectives of the role of the CEO are to lead the management of the Company’s business and affairs, and to lead the implementation of the resolutions and policies of the Board of Directors.

The Board is also assisted in carrying out its functions by the operation of Committees formed from among its members. The Committees currently in effect are:

• Corporate Governance Committee • Audit Committee• Risk and Compliance Committee • Remuneration Committee

Each Committee is governed by a Charter that sets out its responsibilities. The composition of each Committee is reviewed on an annual basis by the Corporate Governance Committee which makes recommendations to the Board. Each Charter is reviewed annually by the Board, and each Committee makes an annual report to the Board of Directors. The Committee reports are included in this report.

ADOPTION OF TRINIDAD & TOBAGO CORPORATE GOVERNANCE CODE (TTCGC)As a company with public accountability as defined in the TTCGC, GHL has adopted the TTCGC on an “apply or explain basis” and its adherence to the TTCGC is outlined in this report.

Board Information & Decision Making

The Corporate Governance Policy sets the standard for information made available to Directors and requires that information submitted is relevant, concise and timely, well organised and supported by any necessary background or historical information, designed to inform Directors of material aspects of the Company’s business, performance and prospects and provided in due time to encourage thoughtful reflection and meaningful participation.

The Board meets at least quarterly to deal with routine business and meetings are convened as necessary for special business such as strategic planning or major transactions. Guardian Group is committed to managing its lines of business in a socially conscious way, maintaining ethical corporate governance practices in all territories in which it operates and taking into account the legitimate interests and expectations of all stakeholders.

Commitment of Time

Every Non-Executive Director is required to sign terms of engagement under which the commitment is acknowledged to attend Board meetings and devote such time and attention as is necessary for the proper discharge of duties and responsibilities as a Director.

Conflicts of Interests

All Directors and employees of the Company are subject to the Conflict of Interest Policy which requires disclosure of conflicts of interest and includes provisions for the management of any such disclosed conflicts. Compliance with the policy is monitored by the Corporate Governance Committee.

THE CHOICES YOU MAKE TODAYCAN ENSURE TOMORROW’S FUTURE


30

Corporate Governance Report (continued)

BOARD COMPOSITION, COMMITTEES, NON-EXECUTIVE DIRECTORS & CHAIRMANThe Board comprises eleven (11) Directors of whom eight (8) are Non-Executive. The Chairman, Mr. Arthur Lok Jack is a Non-Executive Director but, as a significant shareholder, does not meet the independence criteria of the Company’s by-laws. Mr. Peter Ganteaume has been identified as the Lead Independent Director in keeping with the recommendations of the TTCGC.

The Corporate Governance Committee annually reviews the composition of the Boards of all Guardian Group member companies and their committees and makes recommendations to the respective Boards with respect to changes thereof. The Committee also reviews all candidates for election or appointment as Directors and makes recommendations thereon to the Boards of respective Group companies.

The Committee is satisfied that the membership of the Group Boards collectively provides appropriate years of experience and diversity of age and gender as well as strong skill sets in the areas of general management, international business, finance & accounting, corporate finance, mergers & acquisitions, corporate law, banking, asset management, insurance, risk management, information technology and property management and development. The Committee is satisfied that the current composition provides the required balance of independence and diversity of skills, knowledge, experience, perspectives and gender among Directors to facilitate high quality decision-making. A process for formalising the evaluation of the Board and its members is currently being developed.

Board Changes

Since the date of our last Annual Report Mr. Jemal-ud-din Kassum resigned as a Director of the Company on August 7, 2014. Mr. Kassum had been appointed to the Board on February 1, 2011 and resigned for personal reasons to rotate his activities in emerging markets. The Board thanks Mr. Kassum for his contributions and service.

On the same date Mrs. Marianne Loner was appointed to fill the vacancy created by his resignation. Mrs. Loner is a highly respected financial professional and brings to

the GHL Board more than thirty (30) years of banking experience in international locations. She also has a background in asset management, investment and commercial banking. Mrs. Loner earned both an MBA and Bachelor of Arts (cum laude) from New York University. Having been appointed to fill a casual vacancy Mrs. Loner retires at the 2015 Annual Meeting, is eligible and has been nominated for re-election.

Independent Directors

It is provided in Regulation 4.1 of By-Law No. 1 of the Company that at least thirty per cent (30%) of the Board be comprised of Directors who satisfy the following criteria for independence contained in Regulation lA):

“Independent Director” means a Director who has no direct or indirect material relationship with the Company other than membership on the Board and who:

1. is not, and has not been in the past five (5) years, employed by the Company or its affiliates;

2. does not have, and has not had in the past five (5) years, a material business relationship with the Company or its affiliates (either directly or as a partner, shareholder (other than to the extent to which shares are held by such Director pursuant to a requirement of applicable law to which the Company is subject relating to Directors generally), and is not a Director, officer or senior employee of a person that has or had such a relationship);

3. is not affiliated with any non-profit organisation that receives significant funding from the Company or its affiliates;

4. does not receive and has not received in the past five (5) years any additional remuneration from the Company or its affiliates other than his or her Director’s fee and such Director’s fee does not constitute a significant portion of his or her annual income;

5. is not employed as an executive officer of another company where any of the Company’s executives serve on that company’s Board of Directors;

6. is not, nor has been at any time during the past three (3) years, affiliated with or employed by a present or former auditor of the Company or any of its affiliates;

31

7. does not hold a material interest in the Company or its affiliates (either directly or as a partner, shareholder, Director, officer or senior employee of a person that holds such an interest);

8. is not a member of the immediate family (and is not the executor, administrator or personal representative of any such person who is deceased or legally incompetent) of any individual who would not meet any of the tests set out in (i) to (vi) (were he or she a Director of the Company);

9. is identified in the annual report of the Company distributed to the shareholders of the Company as an Independent Director.

For purposes of this definition, “material interest” means a direct or indirect ownership of voting shares representing at least three percent (3%) of the outstanding voting power or equity of the Company or any of its affiliates.

The Board has identified the following five (5) Directors (being forty-five per cent (45%) of the Board) as meeting such independence criteria:

• Mr. Peter Ganteaume (Lead Independent Director)• Mr. Antony Lancaster• Mr. Maxim Rochester• Mr. Philip Hamel-Smith• Mr. Selby Wilson

Director Tenure

It is provided in the by-laws of the Company that Directors must be elected or appointed for stated terms and may not be elected or appointed for terms in excess of three years but on the expiration of such term will be eligible for re-election. Upon the expiration of his term of office the performance of a Director is reviewed by the Corporate Governance Committee prior to a recommendation being made on his nomination for re-election.

RELATIONSHIPS WITH SHAREHOLDERSThe GHL Board has adopted a formal Disclosure Policy designed to provide for accurate, timely and balanced disclosure of all material matters concerning the Company.

The GHL Board is committed to facilitating the ownership rights of all shareholder Groups, including minority and

foreign shareholders and institutional investors. Provision is made for shareholders to have the opportunity to engage with the Company and participate effectively in annual and special meetings through the provision of proxies. External auditors and members of senior management and the Board are available at meetings with shareholders to respond to shareholder questions. In addition to the statutory reporting requirements each quarter’s review is accompanied by a comprehensive report from the Chairman dealing with both the strategic and operational aspects of the Group’s business.

COMMITTEE REPORTSREPORT OF THE AUDIT COMMITTEEThe Audit Committee (the Committee) is comprised of four (4) Non-Executive Directors two (2) of whom also meet the criteria specified for independence in the Company’s by-laws:

• Mr. Selby Wilson (Chairman)• Mr. Arthur Lok Jack• Mr. Peter Ganteaume• Mr. Imtiaz Ahamad

The Committee’s Charter sets out its responsibilities in respect of the financial statements, internal controls, the internal audit function and external audit.

Meetings

The Committee held seven (7) meetings in 2014 to discharge its responsibilities. Following each meeting of the Committee the Chairman certifies to the Board the Committee’s reasonable satisfaction that internal controls are functioning properly in those areas reviewed by Group Internal Audit and that risk corrective actions identified by management for implementation have been taken or identifies any exceptions thereto and management’s committed remedial actions.

Structure of Internal Audit

The Group Head Internal Audit is responsible for the overall Group Internal Audit Function. Under a co-sourcing arrangement, PricewaterhouseCoopers was engaged to work alongside GHL’s own Internal Audit Department



32

with the objective of providing the Group with access to international best practices in internal audit and expanded training opportunities. Internal Audit has unfettered access to the GHL Audit Committee. The Group Head Internal Audit reports administratively to the Group Chief Executive Officer.

Independence of Internal Audit

The Committee is satisfied that the Internal Audit function has been discharged in an objective and transparent manner. Further, the Committee has satisfied itself that the performance of the function is not subject to management’s undue influence.

Internal Control and the Internal Audit Function

The ongoing assessment of the adequacy and effectiveness of the Group’s internal control systems is the primary responsibility of Internal Audit. During the year under review, weaknesses in internal controls noted by the internal auditors and management’s risk corrective actions were presented to the Committee at its quarterly meetings. The Committee members have satisfied themselves that approved risk corrective actions have remedied the weaknesses in internal controls that were highlighted in the internal audit reports.

External Audit

The Committee has assessed whether any circumstance existed that may reasonably be thought to bear on the external auditors’ independence. The external auditors have not been engaged to perform any non-audit related work that could impair their independence. Furthermore, the Committee has confirmed with the external auditors that there were no known relationships between the external auditors and the Group or its staff that could impact the external auditors’ independence.

The Committee has reviewed and approved the external auditors’ approach to and scope of their examination of the financial statements for the 2014 financial year. The members are satisfied that the external auditors have planned the audit to obtain reasonable assurance that the financial statements are free of material misstatement and

present a fair view of the financial position of the Group as at December 31, 2014 and the results of its operations and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

Financial Statements

During 2014, the interim unaudited financial statements were presented to the Committee at its quarterly meetings for review and recommendation for adoption by the Board. The Committee is satisfied that the audited financial statements contained in this Annual Report are complete, consistent with information known to its members and in conformity with appropriate accounting principles that have been consistently applied.

Re-tendering of External Audit Engagement

At the annual meeting of the Company held on May 13, 2009 shareholders accepted a proposal by the Directors that the Company review its external auditor engagement at five (5) year intervals commencing with the audit appointment for the year ending December 31, 2009. In accordance with that proposal the Board engaged in a tendering process under the auspices of the Audit Committee as a result of which Ernst & Young are being recommended for appointment as auditors of the Company for the 2015 examination.

REPORT OF THE RISK & COMPLIANCE COMMITTEEThe Risk & Compliance Committee is comprised of four (4) Directors of which three (3) are Non-Executive Directors two (2) of whom also meet the criteria specified for independence in the Company’s by-laws:

• Mr. Antony Lancaster (Chairman)• Mr. Imtiaz Ahamad• Mr. Philip Hamel-Smith• Mr. Ravi Tewari

The Committee is governed by a Charter which sets out its responsibilities in respect of compliance and risk matters and is a key element of the Group’s corporate governance framework. The Committee acts in a review and advisory capacity to the Board of Directors by providing leadership,


33

direction and oversight of the Group’s management of risk and compliance.

The Committee met on four (4) occasions in 2014. The Group Chief Risk Officer and the Group Head Compliance attend all meetings of the Committee and provide comprehensive reports on all aspects of risk management and compliance and their impact on both the financial and non-financial objectives of the Group. The Chairman of the Group Audit Committee normally attends all meetings of the Committee by invitation to ensure that risk related issues are considered in decisions of that Committee.

Risk Management

The primary objective of the Enterprise Risk Management function is to provide value to our shareholders by:-

• Maintaining a comprehensive perspective on risk reduction as it relates to the erosion of critical sources of shareholder value through our focus on earnings volatility reduction and the avoidance of earnings related surprises;

• Optimising risk and increasing the efficiency and effectiveness through which capital and other resources are allocated by robust assessment of the risk and reward trade-off;

• Building and sustaining our competitive advantage through increasing our knowledge of the risk environments in which we operate and assuring an adequate pricing of risk;

• Increasing our resistance to financial contagion and resilience to the impact of external events.

During the year the Committee focused on the following areas:

Strengthening risk management across the Group: the Committee approved a comprehensive Risk Plan for 2014 intended to further embed the ERM framework and to lead standards of risk management at all levels of the business. The Group’s risk appetite was thoroughly reviewed by the Committee based on performance against set targets and the Board approved a Group risk appetite statement which is cascaded throughout the Group. The Chief Risk Officer has overall responsibility for the Plan and reports regularly to the Committee on progress against the Plan.

The Committee received regular reports on key risk exposures, the drivers of risk in the Group, emerging and potential risks, and actions taken to mitigate any risks that were out of appetite. The Committee also monitored the adequacy of the Group control framework in collaboration with the Audit Committee. In particular, the Committee focused on assessing the Group’s capital and liquidity positions against risk appetite and emerging regulatory based risk based capital models, and the drivers of financial and insurance risks.

The Committee continued its focus on business continuity and IT security risks as well as assessment of strategic and business risks associated with the Group’s strategic initiatives and projects including Merger & Acquisition activity.

The Committee received regular reports on regulatory and other public policy developments. In particular, it monitored the actions being taken by management in response to risk based Insurance supervisory enquiries as well as overall readiness for the passage of new legislation.

Compliance

The remit of the Group Compliance Unit is to provide assurance to the Board that the GHL Group of Companies complies with all applicable laws, regulations, and internal policies, codes of conduct and standards of good practice in those jurisdictions in which the Group’s businesses operate. The Unit is vested with the authority to formulate and establish procedures to facilitate the implementation and enforcement of the Group’s Anti-Money Laundering Compliance Policy and the Group Compliance Policy adopted by the Board of Guardian Holdings Limited in 2004.

The Unit has established a compliance reporting framework throughout the Group and receives periodic compliance reports from the business units on compliance with applicable laws and regulations, regulatory developments and compliance issues. During the year under review, the Unit reported to the Committee on the status of each business unit’s compliance with applicable laws and regulations, regulatory developments and the follow up and resolution of compliance issues. The Committee is satisfied that compliance issues raised during the year have been properly followed up and resolved and that



34

there are no material issues remaining unresolved at the year end.

Following each meeting of the Risk and Compliance Committee the Chairman certifies to the Board the Committee’s reasonable satisfaction that compliance management systems are operating effectively; material compliance issues identified have been satisfactorily resolved; risk management systems are operating effectively and risk management strategies have been consistently applied to minimise exposures to risk or identifies any exceptions thereto and action being taken to address.

REPORT OF THE REMUNERATION COMMITTEE The Remuneration Committee is comprised of four (4) Non-Executive Directors three (3) of whom also meet the criteria specified for independence in the Company’s by-laws. The members of the Committee are:

• Mr. Arthur Lok Jack (Chairman)• Mr. Peter Ganteaume• Mr. Philip Hamel-Smith • Mr. Antony Lancaster

The Board is satisfied that as currently composed the Committee demonstrates the required level of independent thought in its deliberations.

The Committee is responsible for making recommendations pertaining to:

• The compensation of the Chairman and members of the Boards of Directors of all Group Companies;

• The remuneration, performance and incentive awards of senior executives of all Group Companies as identified from time to time by the Committee;

• The recruitment, engagement and promotion of senior executives of the Group as identified from time to time by the Committee.

Remuneration Policy for Directors and Executives

The Company’s Remuneration Policy is designed to provide competitive remuneration designed to attract outstanding talent taking into account market conditions and the long-term interest of the Company.

Non-Executive Directors

Non-Executive Directors are remunerated by means of a fixed annual retainer with a separate annual retainer payable for service on standing committees. Fees for service on ad hoc committees are established on the formation of any such committee and take into account the responsibilities and time commitments expected by Directors serving on such committees. The Chairman of the Board and the Chairmen of committees receive an additional annual retainer in recognition of the responsibilities attached to this office. The Board may also approve special fees, in addition to the annual retainer, for Directors who undertake any special services on the Company’s behalf other than the routine work ordinarily required of a Director.

Directors are provided with insurance cover under the Company’s D&O policy and are also reimbursed for special expenses incurred in attending Board meetings such as airfare, hotel and meals.

The remuneration of the Board of Directors is determined on the basis of standards in the market, the required competencies and time commitments.

Executives (including Executive Directors)

The Group’s executive remuneration systems are designed to attract, retain, and motivate exceptional professionals focused on the attainment of the strategic objectives of the Group.

Executive remuneration includes fixed salary and benefits as well as variable components. The fixed salary takes into account standards in the market, the desired competencies and needs of the Group from time to time. Standard benefits include membership of Group life and health insurance plans and pension plans as well as the provision of a motor vehicle. The variable component of the Group’s executive remuneration is designed to reward and recognise excellent performance. It is linked to the achievement of specific, quantifiable, pre-established objectives that are closely aligned with the Group’s strategic goals and objectives.

Executives who are Directors on the Board of GHL receive the same fees as Non-Executive Directors for such service. However, executives who serve as Directors on Group subsidiary companies receive no fees for such service.


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Committee Meetings

During 2014 the Committee held three (3) meetings. In the course of these, the Committee considered the following matters on which it made recommendations to the Board:

• Review of Directors fees taking into consideration the results of the 2014 Corporate Directors fees survey conducted by independent consultants;

• Review of CEO performance and setting of 2014 targets;

• Consideration of remuneration arrangements for the new Group CEO and other executives whose positions had changed as well as exit arrangements for the retired Group CEO;

• Review and approval of performance metrics relevant to the determination of Short and Long Term Executive Incentive Awards;

• Continuing review of the rules governing the Long term Executive Incentive Plan.

Following its 2014 review of Director fees no changes were recommended by the Committee save for the alignment of Directors fees for subsidiaries and the approval of a special fee for one (1) Director undertaking additional responsibilities in respect of one of the Group’s investments. The Committee is satisfied that the remuneration of Directors and senior management is fair and reasonable.

REPORT OF THE CORPORATE GOVERNANCE COMMITTEE The Corporate Governance Committee is comprised of four (4) Non-Executive Directors three (3) of whom also meet the criteria specified for independence in the Company’s by-laws. The members of the Committee are:

• Mr. Philip Hamel-Smith (Chairman) • Mr. Arthur Lok Jack • Mr. Peter Ganteaume • Mr. Antony Lancaster

The objectives of the Corporate Governance Committee are to develop, implement and periodically review guidelines for appropriate corporate governance of the GHL Group of Companies. The Corporate Governance Committee’s responsibilities include:

• Regularly reviewing the Corporate Governance Policy adopted by the Board and recommending revisions as appropriate;

• Making recommendations to the Board of Directors of GHL on the composition of the Board and its Committees;

• Identifying and nominating, for the approval of the GHL Board, suitable candidates to fill vacancies on the Boards of Directors and Board Committees of GHL and its major operating subsidiaries;

• Developing and implementing processes to assess Board and Committee effectiveness;

• Implementing a system to prevent any improper influence, or the perception of any improper influence, on the decision-making of the Directors, officers and employees of the GHL Group by outside interests, including those of related parties.

The Committee held two (2) meetings during 2014 in the course of which the following were accomplished:

• Review of the Committee’s Charter;

• Review of schedule of rotation of Directors, confirmation of Independent Directors and recommendation on presentation of candidates for appointment at annual shareholders meeting;

• Review of succession management and human capital development plans for executives and key managers across the Guardian Group;

• Continuing review of the structure of Boards and Committees across the Guardian Group;

• Recommending procedures for recruitment, selection, orientation, development and evaluation of Board members and the conduct of their activities.



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PROVIDING COVERAGETO MAKE YOU FEEL AT HOME

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Independent Auditor’s Report

TO THE SHAREHOLDERS OF GUARDIAN HOLDINGS LIMITED

We have audited the consolidated financial statements of Guardian Holdings Limited and its subsidiaries (“the Group”) which comprise the consolidated statement of financial position as at December 31, 2014 and the related consolidated statements of income, comprehensive income, changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes.

MANAGEMENT’S RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatements, whether due to fraud or error.

AUDITORS’ RESPONSIBILITY

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate for the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OPINION

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as at December 31, 2014, and of its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards.

Port of SpainTRINIDAD:March 11, 2015


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Assets Property, plant and equipment 5 536,670 537,030 Investment properties 6 904,257 803,495 Intangible assets 7 399,292 396,233 Investment in associated companies 8 194,925 222,601 Financial assets 9 12,853,201 12,442,154 Financial assets of mutual fund unit holders 9 1,080,154 1,110,918 Loans and receivables 10 1,799,373 1,677,589 Properties for development and sale 11 170,887 360,321 Pension plan assets 12 87,750 91,267 Value of inforce life insurance business 13 1,046,314 924,743 Deferred tax assets 14 23,633 21,909 Reinsurance assets 15 695,642 710,674 Deferred acquisition costs 16 87,491 90,728 Taxation recoverable 152,874 157,815 Cash and cash equivalents 17 2,233,973 2,031,559 Cash and cash equivalents of mutual fund unit holders 17 105,714 157,972 Assets held for sale 18 204,776 320,396 Total assets 22,576,926 22,057,404 Equity and liabilities Share capital 19 2,038,936 2,041,882 Reserves 20 (582,155) (396,473)Retained earnings 1,476,274 1,451,103Equity attributable to owners of the parent 2,933,055 3,096,512 Non-controlling interests in subsidiaries 21 23,163 (200,184) Total equity 2,956,218 2,896,328 Liabilities Insurance contracts 22 13,510,217 13,081,517 Financial liabilities 23 2,159,942 1,915,926 Investment contract liabilities 24 1,622,521 1,579,528 Third party interests in mutual funds 25 992,350 1,010,021 Pension plan liabilities 12 99,711 161,517 Post retirement medical benefit obligations 26 73,200 74,518 Deferred tax liabilities 14 215,308 229,783 Provision for taxation 48,900 72,232 Other liabilities 27 716,393 731,514 Liabilities related to assets held for sale 18 182,166 304,520 Total liabilities 19,620,708 19,161,076 Total equity and liabilities 22,576,926 22,057,404

The accompanying notes form an integral part of these consolidated financial statements. On March 11, 2015, the Board of Directors of Guardian Holdings Limited authorised these financial statements for issue.

Director: ____________________ Director: ____________________

Consolidated Statement of Financial Position

2014 2013 Notes $’000 $’000

Expressed in Trinidad & Tobago Dollars • as at December 31, 2014

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Consolidated Income Statement

2014 2013 Notes $’000 $’000

Expressed in Trinidad & Tobago Dollars • for the year ended December 31, 2014

Insurance activities Insurance premium income 28 (a) 5,033,254 4,969,547 Insurance premium ceded to reinsurers 28 (b) (1,541,929) (1,492,655)Reinsurance commission income 195,662 187,103

3,686,987 3,663,995 Change in “Value of inforce life insurance business” 13 154,386 83,844

Net underwriting revenue 3,841,373 3,747,839

Policy acquisition expenses 29 (623,607) (616,682)Net insurance benefits and claims 30 (2,671,788) (2,550,584)

Underwriting expenses (3,295,395) (3,167,266)

Net result from insurance activities 545,978 580,573

Investing activities Investment income 31 770,322 807,361 Net realised losses on financial instruments 32 (742) (37,546)Net fair value gains/(losses) on financial instruments 33 63,268 (26,591)Fee income 34 98,619 82,236 Other income 35 64,902 104,792 Investment contract benefits (73,028) (72,362)

Net income from investing activities 923,341 857,890

Net income from all activities before fair value adjustment on Pointe Simon 1,469,319 1,438,463 Operating expenses 36 (905,114) (917,850)Finance charges 37 (130,441) (127,448)

Operating profit before fair value adjustment on Pointe Simon 433,764 393,165 Fair value adjustment on Pointe Simon 6 – (457,092)Share of profit of associated companies 8 21,736 28,631

Profit/(loss) before taxation 455,500 (35,296)Taxation 38 (90,815) (101,642)

Profit/(loss) after taxation 364,685 (136,938)Amount attributable to participating policyholders 22.1(d) (2,093) (17,118)

Profit/(loss) from continuing operations 362,592 (154,056)Net gain on discontinued operations 18 25,653 24,304

Profit/(loss) for the year 388,245 (129,752)Loss attributable to non-controlling interests 12,271 175,321

Profit attributable to equity holders of the parent 400,516 45,569

Earnings per share - Basic 39 $ 1.73 $ 0.20 - Basic - for continuing operations 39 $ 1.62 $ 0.09

The accompanying notes form an integral part of these consolidated financial statements.


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Profit/(loss) for the year 388,245 (129,752) Other comprehensive income/(loss) Items that may be reclassified subsequently to profit or loss: Exchange differences on translating foreign operations (215,264) (95,249)Other reserve movements – (14)Net other comprehensive loss that may be reclassified subsequently to profit or loss (215,264) (95,263) Items that will not be reclassified subsequently to profit or loss: Gains on property revaluation 9,321 35,232 Remeasurement of pension plans 12 52,682 (41,759)Actuarial gains on post retirement medical benefit obligations 26 895 36,914 Other reserve movements (12,714) 2,986 Income tax (charge)/credit (3,943) 5,995 Net other comprehensive income that will not be reclassified subsequently to profit or loss 46,241 39,368 Other comprehensive loss for the year, net of tax (169,023) (55,895) Total comprehensive income/(loss) for the year, net of tax 219,222 (185,647) Comprehensive (income)/loss attributable to non-controlling interests (17,147) 186,398 Comprehensive income attributable to equity holders of the parent 202,075 751


2014 2013 Notes $’000 $’000

Consolidated Statement of Comprehensive Income Expressed in Trinidad & Tobago Dollars • for the year ended December 31, 2014

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At 1 January 2014 2,041,882 (396,473) 1,451,103 3,096,512 (200,184) 2,896,328 Unallocated shares movement 61 – – 61 – 61 Total comprehensive income/(loss) – (235,524) 437,599 202,075 17,147 219,222 Acquisition of non-controlling interests (Note 21) – – (241,305) (241,305) 207,121 (34,184)Transfer to/from retained earnings – 49,842 (49,842) – – – Share option scheme - value of services provided (Note 19) 936 – – 936 – 936 Share option scheme - value of lapsed options (Note 19) (3,943) – 3,943 – – – Dividends (Note 40) – – (125,224) (125,224) (921) (126,145) Balance at 31 December 2014 2,038,936 (582,155) 1,476,274 2,933,055 23,163 2,956,218 At 1 January 2013 2,036,381 (344,604) 1,547,684 3,239,461 (41,204) 3,198,257 Total comprehensive income/(loss) – (53,772) 54,523 751 (186,398) (185,647)Decrease in non-controlling interests – – (28,615) (28,615) 28,615 – Transfer to/from retained earnings – 1,903 (1,903) – – – Share option scheme - value of services provided (Note 19) 5,501 – – 5,501 – 5,501 Dividends (Note 40) – – (120,586) (120,586) (1,197) (121,783) Balance at 31 December 2013 2,041,882 (396,473) 1,451,103 3,096,512 (200,184) 2,896,328


Consolidated Statement of Changes in Equity

Total ordinary Non- Share Reserves Retained shareholders’ controlling Total capital (Note 20) earnings equity interests equity $’000 $’000 $’000 $’000 $’000 $’000


Attributable to equity holders of the parent


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Cash flows from operating activities Profit/(loss) before taxation from continuing operations 455,500 (35,296)Profit before taxation from discontinued operations 18 25,653 24,304 Adjustment for specific items included on the accruals basis: - Finance charges 130,441 127,448 - Investment income (771,331) (807,361)Adjustment for non-cash items 41 81,518 739,274 Interest received 721,278 814,234 Dividends received 46,431 35,580

Operating profit before changes in operating assets/liabilities 689,490 898,183 Net increase in insurance liabilities 452,050 448,019 Net increase in reinsurance assets 15,032 69,170 Net increase/(decrease) in investment contracts 46,732 (29,551)Purchase of financial assets (4,713,774) (6,746,899)Proceeds from sale of other financial assets 4,036,536 6,004,535 Purchase of/additions to investment properties (62,783) (61,608)Proceeds from sale of investment property 442 2,618 Net increase in loans and receivables (20,924) (107,503)Net increase in other operating assets/liabilities (53,185) (31,388)

Cash provided by operating activities 389,616 445,576 Interest paid (139,888) (144,720)Net taxation paid (133,665) (111,001)

Net cash provided by operating activities 116,063 189,855

Cash flows from investing activities Acquisition of subsidiary 46 (17,294) (72,054)Purchase of non-controlling interests’ shares in subsidiaries 21 (34,184) – Investment in associated company 2 – Proceeds on sale of associated companies – 2,955 Purchase of property, plant and equipment 5 (52,572) (63,021)Proceeds on sale of property, plant and equipment 1,150 555 Loans granted to related parties – 162 Loan repayments received from related parties – (65)Purchase of intangible assets 7 (4,162) (882)

Net cash used in investing activities (107,060) (132,350)

Cash flows from financing activities Proceeds from borrowings 299,386 241,636 Repayments of borrowings (50,772) (101,956)Dividends paid to equity holders of the parent 40 (125,224) (120,586)Dividends paid to non-controlling interests (921) (1,197)Redemptions from mutual funds (302,313) (210,319)Subscriptions to mutual funds 332,713 272,611

Net cash provided by financing activities 152,869 80,189

Net increase in cash and cash equivalents 17 161,872 137,694


Consolidated Statement of Cash Flows

2014 2013 Notes $’000 $’000


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Notes to the Consolidated Financial Statements Expressed in Trinidad & Tobago Dollars • for the year ended December 31, 2014

1. INCORPORATION AND PRINCIPAL ACTIVITIES OF THE GROUP

Guardian Holdings Limited (the ‘Parent’ and ultimate parent) was incorporated in the Republic of Trinidad and Tobago on 8 November 1982. It is a public limited liability holding company. The address of the registered office is 1 Guardian Drive, Westmoorings S.E., Trinidad and Tobago.

Guardian Holdings Limited and its subsidiaries (the ‘Group’) is a diversified financial services group engaged in underwriting all classes of long-term, property and casualty business, the provision of pension and asset management services and property development. The Group conducts its operations through subsidiaries and associated companies.

The ordinary shares of the parent company are listed on the Trinidad and Tobago Stock Exchange.

2. SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Basis of preparation

These consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS). They have been prepared under the historical cost convention, as modified by the revaluation of land and buildings, investment properties, derivative financial instruments and financial assets at fair value through profit or loss which are carried at fair value.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in Note 3.

(a) New standards and amendments/revisions to published standards and interpretations effective in 2014

The following amendments to published standards are mandatory for the Group’s accounting periods beginning on or after 1 January 2014:

IFRS 10, IFRS 12 and IAS 27 Investment Entities - Amendments

The investment entities amendments apply to investments in subsidiaries, joint ventures and associates held by a reporting entity that meet the definition of an investment entity.

The key amendments include:

• Investment entity is defined

• An investment entity must meet three elements of the definition and consider four typical characteristics, in order to qualify as an investment entity

• An entity must consider all facts and circumstances, including its purpose and design, in making its assessment

• An investment entity accounts for its investments in subsidiaries, associates and joint ventures at fair value through profit or loss in accordance with IFRS 9 (or IAS 39, as applicable), except for investments in subsidiaries, associates and joint ventures that provide services that relate only to the investment entity, which must be consolidated (investments in subsidiaries) or accounted for using the equity method (investments in associates or joint ventures)

• An investment entity must measure its investment in another controlled investment entity at fair value

• A non-investment entity parent of an investment entity is not permitted to retain the fair value accounting that the investment entity subsidiary applies to its controlled investees

• For venture capital organisations, mutual funds, unit trusts and others that do not qualify as investment entities, the existing option in IAS 28, to measure investments in associates and joint ventures at fair value through profit or loss, is retained

These amendments have no impact on the Group, since none of the entities in the Group qualifies to be an investment entity under IFRS 10.


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Notes to the Consolidated Financial Statements (continued) Expressed in Trinidad & Tobago Dollars • for the year ended December 31, 2014

IAS 32 Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32

The amendments to IAS 32 clarify the following:

• The meaning of “currently has a legally enforceable right to set-off”.

• The application of the IAS 32 offsetting criteria to settlement systems (such as central clearing house systems), which apply gross settlement mechanisms that are not simultaneous.

• Rights of set-off must not only be legally enforceable in the normal course of business, but must also be enforceable in the event of default and the event of bankruptcy or insolvency of all of the counterparties to the contract, including the reporting entity itself. Rights of set-off must not be contingent on a future event.

• Only gross settlement mechanisms with features that eliminate or result in insignificant credit and liquidity risk and that process receivables and payables in a single settlement process or cycle would be, in effect, equivalent to net settlement and therefore, meet the net settlement criterion.

The amendments have no impact on the Group’s financial position or performance.

IAS 36 Recoverable Amount Disclosures for Non-Financial Assets - Amendments to IAS 36

The following are the amendments to IAS 36:

• Removal of the requirement to disclose recoverable amount for cash generating units (CGU) that contain goodwill or indefinite useful life intangible assets when there has been no impairment.

• Disclosure of the recoverable amount of an asset or CGU when an impairment loss has been recognised or reversed.

• Detailed disclosure of how the fair value less cost of disposal has been measured when an impairment loss has been recognised or reversed.

The amendments only affect disclosures and have no impact on the Group.

IFRIC 21 Levies

IFRIC 21 is applicable to all levies imposed by governments under legislation, other than outflows that are within the scope of other standards (e.g., IAS 12 Income Taxes) and fines or other penalties for breaches of legislation.

The interpretation clarifies that an entity recognises a liability for a levy no earlier than when the activity that triggers payment, as identified by the relevant legislation, occurs. It also clarifies that a levy liability is accrued progressively only if the activity that triggers payment occurs over a period of time, in accordance with the relevant legislation. For a levy that is triggered upon reaching a minimum threshold, no liability is recognised before the specified minimum threshold is reached.

IFRIC 21 did not have a material impact on the financial position or performance of the Group.

(b) New standards and amendments/revisions to published standards and interpretations effective in 2014 but not applicable to the Group

The following new and revised IFRS that has been issued does not apply to the activities of the Group:

• IAS 39 Novation of Derivatives and Continuation of Hedge Accounting - Amendments to IAS 39 - Effective January 1 2014

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.1 Basis of preparation (continued)

(a) New standards and amendments/revisions to published standards and interpretations effective in 2014 (continued)

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(c) New interpretations and revised or amended standards that are not yet effective and have not been early adopted by the Group

• IAS 16 and IAS 38 - Amendments - Clarification of acceptable methods of depreciation and amortisation - Effective 1 January 2016

• IAS 16 and IAS 41 - Amendments - Agriculture: Bearer Plants - Effective 1 January 2016

• IAS 19 Defined Benefit Plans: Employee Contributions - Amendments to IAS 19 - Effective 1 January 2015

• IAS 27 - Amendments - Equity method in separate financial statements - Effective 1 January 2016

• IFRS 9 Financial Instruments - Classification and Measurement - Effective 1 January 2018

• IFRS 11 - Amendments - Accounting for acquisitions of interests in joint operations - Effective 1 January 2016

• IFRS 14 Regulatory Deferral Accounts - Effective 1 January 2016

• IFRS 15 Revenue from Contracts with Customers - Effective 1 January 2017

• Annual improvements to IFRSs 2010 - 2012 Cycle - Effective 1 January 2015

• IFRS 2 Shared Based Payment• IFRS 3 Business Combinations• IFRS 8 Operating Segments• IFRS 13 Fair Value Measurement• IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets• IAS 24 Related Party Disclosures

• Annual improvements to IFRSs 2011 - 2013 Cycle - Effective 1 January 2015

• IFRS 1 First time adoption of International Financial Reporting Standards• IFRS 3 Business Combinations• IFRS 13 Fair Value Measurement• IAS 40 Investment Property

2.2 Consolidation

(a) Subsidiaries

Subsidiaries are all entities over which the Group has control. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:

• Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee),

• Exposure, or rights, to variable returns from its involvement with the investee, and• The ability to use its power over the investee to affect its returns.

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

• The contractual arrangement with the other vote holders of the investee.• Rights arising from other contractual arrangements.• The Group’s voting rights and potential voting rights.

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of income and other comprehensive income from the date the Group gains control until the date when the Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.


2.1 Basis of preparation (continued)


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The Group uses the purchase method of accounting for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill (see Note 2.7). If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised in the consolidated income statement.

All intra-group transactions and balances are eliminated on consolidation. Subsidiaries’ accounting policies have been changed where necessary to ensure consistency with the policies adopted by the Group.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it:

• Derecognises the assets (including goodwill) and liabilities of the subsidiary• Derecognises the carrying amount of any non-controlling interests• Derecognises the cumulative translation differences recorded in equity• Recognises the fair value of the consideration received• Recognises the fair value of any investment retained• Recognises any surplus or deficit in profit or loss• Reclassifies the parent’s share of components previously recognised in other comprehensive income to profit or

loss or retained earnings, as appropriate, as would be required if the Group had directly disposed of the related assets or liabilities.

A listing of the Group’s subsidiaries and associated companies is set out in Note 47.

(b) Associated companies

The Group’s investment in associated companies is accounted for using the equity method of accounting. An associate is an entity in which the Group has significant influence and which is neither a subsidiary nor a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies.

Under the equity method, the investment in associates is carried in the consolidated statement of financial position at cost plus post acquisition changes in the Group’s share of net assets of the associates. Goodwill relating to associates is included in the carrying amount of the investment and is not amortised. The consolidated income statement reflects the share of the results of operations of the associates. When there has been a change recognised directly in the equity of the associates, the Group recognises its share of any changes and discloses this, when applicable, in the statement of changes in equity.

The financial statements of the associates are prepared for the same reporting period as the parent company. Where necessary, adjustments are made to bring their accounting policies in line with the Group.

After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on the Group’s investment in associates. The Group determines at each consolidated statement of financial position date, whether there is any objective evidence that the investment in associates is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associates and its carrying value and recognises the amount in the consolidated income statement.

The Group discontinues the use of the equity method from the date when the investment ceases to be an associate or when the investment is classified as held for sale.

A listing of the Group’s associates is set out in Note 47.

(c) Mutual funds

The Group manages and controls certain mutual funds through its asset management subsidiary, Guardian Asset Management Limited, in which it also has a beneficial ownership interest. These funds have been consolidated in these financial statements in accordance with IFRS 10. Refer to note 2.2 (a) where control has been defined and when consolidation begins and ceases.


2.2 Consolidation (continued)

(a) Subsidiaries (continued)

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2.3 Segment reporting

A business segment is a group of assets and operations engaged in providing products and services that are subject to risks and returns that are different from those of other business segments. For management purposes, the Group is organised into business units based on their products and services and has three reportable operating segments:

(i) Life, health and pension insurance(ii) Property and casualty insurance(iii) Asset management

Transfer prices between operating segments are set on an arm’s length basis in a manner similar with third parties. Segment income, expenses and results will include those transfers between segments, which will then be eliminated on consolidation.

2.4 Foreign currency translation

(a) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the ‘functional currency’). The consolidated financial statements are presented in thousands of Trinidad and Tobago dollars, which is also the Parent’s functional currency.

(b) Transactions and balances in the consolidated financial statements

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 consolidated income statement.

(c) Group companies

The results and financial position of all the Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(i) assets and liabilities for each consolidated statement of financial position presented are translated at the closing rate at the end of the reporting period.

(ii) income and expenses for each consolidated income statement are translated at average exchange rates; and

(iii) all resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities are taken to the consolidated statement of comprehensive income. When a foreign operation is sold, liquidated or wound up, such exchange differences are recognised in the consolidated income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as the foreign entity’s assets and liabilities and are translated at the closing rate.

2.5 Property, plant and equipment

Freehold properties comprise mainly offices occupied by the Group and are shown at fair value, based on periodic, but at least triennial, valuations by external independent appraisers, less subsequent depreciation for buildings. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset, and the net amount is restated to the revalued amount of the asset. All other property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the consolidated income statement during the financial period in which they are incurred.

Increases in the carrying amount arising on revaluation of land and buildings are recognised in the consolidated statement of comprehensive income. Decreases that offset previous increases of the same asset are charged against fair value reserves directly in the consolidated statement of comprehensive income; all other decreases are charged to the consolidated income statement.



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Land is not depreciated. Depreciation on other assets is charged over the estimated useful lives of the assets using the following rates and methods:

Freehold building - straight-line method, 2% per annum Leasehold property - over the period of the leaseAir-conditioning equipment - declining balance method, 20% per annum Motor vehicles - straight-line method, 20% per annum and reducing balance basis, 25% per annum Other plant, machinery, office furniture & equipment - straight line method, 10 to 40% per annum

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (Note 2.10).

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the consolidated income statement. When revalued assets are sold, the amounts included in the revaluation surplus account are transferred to retained earnings.

2.6 Investment properties

Freehold or leasehold properties held for long-term rental yields that are not occupied by the Group are classified as investment properties. Investment properties comprise freehold land and buildings. They are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value. Fair value is based on active market prices, adjusted, as necessary for any difference in the nature, location or condition of the specified asset. Fair value is determined annually by accredited external independent valuators. Investment properties are not subject to depreciation. Any appreciation or diminution in value is recognised in the consolidated income statement.

If investment properties become owner-occupied, they are reclassified as property, plant and equipment, and their fair value at the date of reclassification becomes its cost for subsequent accounting periods. Alternatively, where properties classified as property under IAS 16 become investment properties because of a change in use, these properties are accounted for as investment properties and any differences arising between the carrying amount and the fair value of these items at the date of transfer are recognised in equity as a revaluation of property. However, if a fair value gain reverses a previous impairment loss, the gain is recognised in the consolidated income statement.

Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposal. Upon disposal, any surplus previously recorded in the property revaluation reserve in equity is transferred to retained earnings.

Properties under construction that are intended for sale, are classified as properties for development and sale. These balances are carried at the lower of cost and net realisable values (Note 2.8)

2.7 Intangible assets

(a) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary/associate at the acquisition date. Goodwill on acquisition of subsidiaries is reported on the consolidated statement of financial position. Goodwill on acquisition of associates is included in investments in associates. Goodwill has an indefinite useful life and is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. Each of those cash-generating units represents the Group’s investment in each country of operation by each primary segment.

(b) Customer related intangibles

Customer related intangibles comprise renewal rights and relationships acquired in a business combination. They are recognised separately from goodwill and are initially recognised at their fair value at the acquisition date (which is regarded as their cost).


2.5 Property, plant and equipment (continued)

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Subsequent to initial recognition, customer related intangibles are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is calculated using the straight line method to allocate the cost of the customer lists over their useful lives, which range between 7 and 15 years.

(c) Brands

Brands acquired through direct purchase or through a business combination are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of brands over their estimated useful lives, which range between 3 and 5 years.

(d) Computer software and website development costs

Acquired computer software licenses and website development costs are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. Costs that are directly associated with the development of identifiable and unique software products controlled by the Group, and that will probably generate economic benefits exceeding costs beyond one year, are also recognised as intangible assets. These costs are amortised over their estimated useful lives.

Costs associated with developing or maintaining computer software programmes are recognised as an expense as incurred.

2.8 Properties for development and sale

Properties for sale or under construction that are intended for sale, are classified as properties for development and sale. These balances are carried at the lower of cost and net realisable values. These properties include office and retail spaces, and condominiums.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated selling expenses. An independent valuation specialist was engaged in determining the net realisable value for the office and retail spaces, and a discounted cash flow model was used as there is a lack of comparable data because of the nature of the property. For the condominiums, Management prepared an analysis using data from binding sales transactions to assess the net realisable value.

Impairment losses on properties for development and sale are recognised in the consolidated statement of income when the net realisable value is lower than cost. Subsequently, where cost is less than the net realisable value, a reversal of any prior impairment losses is recognised in the consolidated statement of income. This cannot exceed original cost.

2.9 Financial assets

(a) Initial recognition and measurement

Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, or held-to-maturity investments as appropriate. The Group determines the classification of its financial assets at initial recognition. The classification depends on the purpose for which the investments were acquired or originated.

Financial assets are recognised initially at fair value plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the settlement date.

The Group’s financial assets include cash and short-term deposits, debt securities, equity securities, interest receivable, receivables arising from insurance contracts and reinsurance contracts and other loans and receivables.

(b) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held-for-trading and those designated at fair value through profit or loss at inception. Investments typically bought with the intention to sell in the near future are classified as held-for-trading. The Group’s subsidiaries, with the exception of its asset management company, do not engage in trading financial assets. For investments designated at fair value through profit or loss, the following criteria must be met:


2.7 Intangible assets (continued)

(b) Customer related intangibles (continued)


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2.9 Financial assets (continued)

(b) Financial assets at fair value through profit or loss (continued)• The designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from

measuring the assets or liabilities or recognising gains or losses on a different basis; or

• The assets and liabilities are part of a group of financial assets, financial liabilities or both which are managed and their performance evaluated on a fair value basis, in accordance with a documented risk management or investment strategy.

These investments are initially recorded at fair value. Subsequent to initial recognition, these investments are remeasured at fair value. Fair value adjustments and realised gains and losses are recognised in the consolidated income statement.

(c) Held-to-maturity financial assets

Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held-to-maturity when the Group has the positive intention and ability to hold until maturity. These investments are initially recognised at cost, being the fair value of the consideration paid for the acquisition of the investment. All transaction costs directly attributable to the acquisition are also included in the cost of the investment. After initial measurement, held-to-maturity financial assets are measured at amortised cost, using the effective interest rate method. Gains and losses are recognised in the consolidated income statement when the investments are derecognised or impaired, as well as through the amortisation process.

(d) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. The investments are initially recognised at cost, being the fair value of the consideration paid for the acquisition of the investment. All transaction costs directly attributable to the acquisition are included in the cost of the investment. After initial measurement, loans and receivables are measured at amortised cost, using the effective interest rate method. Gains and losses are recognised in the consolidated income statement when the investments are derecognised or impaired, as well as through the amortisation process.

(e) Fair value of financial assets

The fair value of quoted investments (primarily equity securities) are based on current bid prices at the consolidated statement of financial position date. If the market for a financial asset is not active (primarily government securities, debentures and corporate bonds), the Group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same and discounted cash flow analysis making maximum use of market inputs and relying as little as possible on entity-specific inputs.

If the fair value of unquoted equities cannot be measured reliably, these financial assets are measured at cost, being the fair value of the consideration paid for the acquisition of the investment. All transaction costs directly attributable to the acquisition are also included in the cost of the investment.

(f) Derecognition of financial assets

A financial asset (or when applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:

• The rights to receive cash flows from the asset have expired.

• The Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass-through’ arrangement.

• The Group has transferred its rights to receive cash flows from the asset and either:

• has transferred substantially all the risk and rewards of the asset, or • has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred

control of the asset.

When the Group has transferred its right to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

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2.9 Financial assets (continued)

(f) Derecognition of financial assets (continued)When continuing involvement takes the form of a written and/or purchased option (including a cash settled option or similar provision) on the transferred asset, the extent of the Group’s continuing involvement is the amount of the transferred asset that the Group may repurchase, except that, in the case of a written put option (including a cash settled option or similar provision) on an asset measured at fair value, the extent of the Group’s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.

2.10 Impairment of assets

(a) Financial assets carried at amortised cost

If there is objective evidence that an impairment loss on assets carried at amortised cost has been incurred, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows (excluding future expected 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 and the loss is recognised in the consolidated income statement.

The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and that group of financial assets is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment. The impairment assessment is performed at each consolidated statement of financial position date.

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, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the consolidated income statement, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.

(b) Impairment of non-financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs to sell and its value in use. The recoverable amount is determined on an individual asset basis, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset or CGU is considered impaired and written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.

The Group bases its impairment calculations on detailed budgets and forecast calculations, which are prepared separately for each of the Group’s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of three years. For longer periods, a long-term growth rate is determined by management and applied to project future cash flows after the third year.

Impairment losses of continuing operations are recognised in the consolidated income statement in those expense categories consistent with the function of the impaired asset.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such an indication exists, the Group makes an estimate of the recoverable amount. A previous impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the consolidated income statement unless the asset is carried at the revalued amount, in which case the reversal is treated as a revaluation increase.


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2.10 Impairment of assets (continued)

(b) Impairment of non-financial assets (continued)Goodwill and intangible assets are tested for impairment annually as at 31 December and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods.

2.11 Fair value measurement

The Group measures financial instruments and non-financial assets at fair value at each balance sheet date.

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. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

• In the principal market for the asset or liability, or• In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in either its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

• Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities.

• Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.

• Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable. Assets and liabilities, with the exception of freehold and investment properties, included in level 3 are held at cost, being the fair value of the consideration paid on acquisition and are regularly assessed for impairment. Freehold and investment properties included in level 3 are held at fair value which is currently the replacement value.

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

External valuers are involved for valuation of certain assets such as investment properties, freehold and leasehold properties and properties for development and sale. Involvement of external valuers is decided annually and selection criteria include market knowledge, reputation, independence and whether professional standards are maintained.

2.12 Offsetting financial instruments

Financial assets and financial liabilities are offset and the net amount reported in the consolidated 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.

2.13 Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts when they arise, are shown within borrowings in current financial liabilities on the consolidated statement of financial position.

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2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)2.14 Share capital

Shares are classified as equity when there is no obligation to transfer cash or other assets. Incremental costs directly attributable to the issue of equity instruments are shown in equity as a deduction from the proceeds.

2.15 Insurance and investment contracts

(a) Classification

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. As a general guideline, the Group defines as significant insurance risk the possibility of having to pay benefits on the occurrence of an insured event that are at least 10% more than the benefits payable if the insured event did not occur.

Investment contracts are those contracts that transfer financial risk with no significant insurance risk.

A number of insurance contracts contain a discretionary participation feature (”DPF”). This feature entitles the holder to receive, as a supplement to guaranteed benefits, additional benefits or bonuses:

a) that are likely to be a significant portion of the total contractual benefits;

b) whose amount or timing is contractually at the discretion of the Group;

c) and that are contractually based on:

(i) the performance of a specified pool of contracts or a specified type of contract;

(ii) realised and/or unrealised investment returns on a specified pool of assets held by the Group; or

(iii) the profit or loss of the Group, fund or other entity that issues the contract.

The terms and conditions of these contracts set out the bases for the determination of the amounts on which discretionary benefits are based and within which the Group may exercise its discretion as to the quantum and timing of their payments to contract holders, which will be subject to the advice of the Group’s actuary or a locally appointed actuary.

(b) Recognition and measurement

Insurance contracts are classified into four main categories, depending on the duration of risk and whether or not the terms and conditions are fixed.

(i) Short-term insurance contracts

These contracts are principally property, motor, casualty (employers’ liability, public liability), marine, group life and health insurance contracts. Health insurance contracts include both group and individual health insurance.

Property insurance contracts indemnify the Group’s customers in the event of a loss from a specified insured peril such as fire, windstorm or earthquake (not limited to these perils) up to the insured amount and within the terms of the policy conditions. These contracts are issued for both private and commercial risks. Customers who undertake commercial activities on their premises could also receive compensation for consequential loss/business interruption caused by the insured perils.

Motor insurance contracts indemnify the Group’s customers for their legal requirement under the respective country’s road traffic legislation which in certain instances stipulate unlimited coverage for third party liability. These contracts may be extended for additional coverage such as physical damage, theft and personal accident.

Casualty insurance contracts provide coverage for liability exposures that indemnify the Group’s customers against actions from third parties which are subject to the policy limits and conditions. The typical protection offered is designed for employers who become legally liable to pay compensation to injured employees (employers’ liability) and employers who become liable to pay compensation to third parties for bodily harm or property damage (public liability).

Marine insurance contracts indemnify the Group’s customers for loss or damage to their insured cargo, commercial hull and pleasure craft vessels. Third party coverage is also provided.

Group life contracts protect the Group’s customers from the consequences of events (such as death or critical illness) that would affect on the ability of the customer or his/her dependents to maintain their current level of income. Health insurance contracts provide for both unexpected and preventative medical treatment and drugs. On these contracts, the 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. There are no maturity or surrender benefits.


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2.15 Insurance and investment contracts (continued)

(b) Recognition and measurement (continued)

(i) Short-term insurance contracts (continued)For all these contracts, premiums are recognised as revenue (earned premiums) proportionally over the period of coverage. The portion of premiums received on inforce contracts that relate to unexpired risks at the consolidated statement of financial position date is reported as an unearned premium liability. Premiums are shown before deduction of commissions payable to agents and brokers and exclude any taxes or duties levied on such premiums. Premium income includes premiums collected by agents and brokers not yet received by the Group.

Unearned premiums represent the portion of premiums written in the current year which relate to periods of insurance subsequent to the consolidated statement of financial position date, calculated using either the three hundred and sixty-fifths method or the twenty-fourths method. Unearned premiums relating to marine cargo are calculated using 180 days after the first date of sailing. Unearned premiums relating to group life are calculated based on 25% of net premiums written.

Claims and loss adjustment expenses are charged to income as incurred based on the estimated liability for compensation owed to contract holders. They arise from events that have occurred up to the consolidated statement of financial position date even if they have not yet been reported to the Group. The Group does not discount its liabilities for unpaid claims other than for disability claims. Liabilities for unpaid claims are estimated using techniques such as the input of assessments for individual cases reported to the Group and statistical analyses for the claims incurred but not reported (“IBNR”), and the estimate of the expected ultimate cost of more complex claims that may be affected by external factors such as court decisions. Estimates are continually revised as more information becomes available and for the effects of anticipated inflation. Adjustments arising on these revisions are recognised within claims expense in the current year.

(ii) Long-term insurance contracts with fixed and guaranteed terms and without DPF

These contracts insure events associated with human life over a long duration. Premiums are recognised as revenue when they become payable by the policyholder. Premiums are shown before deduction of commission. Benefits are recorded as an expense when incurred.

A liability for policyholders’ benefits that are expected to be incurred in the future is recorded when the premiums are recognised. Typically, the liability is determined as the sum of the expected discounted value of the benefit payments less the expected discounted value of the theoretical premiums that would be required to meet the benefits based on the valuation assumptions used (the valuation premiums). In particular, the liability is based on assumptions as to mortality and investment income. A margin for adverse deviations is included in the assumptions.

The liabilities are recalculated at each consolidated statement of financial position date and the change in the liability is recognised as an expense in the consolidated income statement.

For the Trinidad and Tobago life insurance subsidiaries, reserves held are calculated based on the Zillmerised Net Premium Method. A gross premium method is used for some lines of business.

For the Jamaican life insurance subsidiary, reserves are calculated using the Policyholder Premium Method as required under the Insurance Act 2001 of Jamaica.

For the Dutch Caribbean life insurance subsidiary, reserves are calculated on a Modified Net Premium Method in accordance with the requirements of the Central Banks of the Netherlands Antilles and of Aruba.

Unit linked and interest sensitive insurance contracts

The premiums paid for these contracts contain an element that covers the insured event and another which is used to accumulate cash values available for withdrawal at the option of the policyholder. These cash values earn interest.

Unit linked insurance contracts

For the Jamaican life insurance subsidiary, the portion of the premium covering the insured risk is recorded as premium income. The portion of the premium which accumulates a cash value for the policyholder is recorded as a liability and is credited to the account of the policyholder in the respective segregated fund to which the contract is linked.

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(b) Recognition and measurement (continued)

(ii) Long-term insurance contracts with fixed and guaranteed terms and without DPF (continued)The liabilities arising from the unit linked contracts comprise the liability for the insured risk and the accumulated cash value. The liability for the insured risk is determined in a manner identical to the liability for contracts with fixed and guaranteed terms and is included in the policyholders’ liability balance while the liability for the accumulated cash value is carried at fair value of the assets which fund the liabilities. The liabilities for the accumulated cash values are included in the segregated funds’ liability balance. The Group bears no risk in relation to segregated funds’ liability. With the adoption of IFRS 10 the Group no longer recognises the segregated funds assets and liabilities of these unit linked contracts.

The change in the liability arising from the insurance risk is recognised as an expense in the consolidated income statement.

Interest sensitive insurance contracts

The Jamaican life insurance subsidiary issues interest sensitive policies for which the entire premium is recorded as premium income and there is no unbundling of the premium receipt between the insurance and investment components. The liability for the interest sensitive policies is determined as the sum of the liability for the insured risk (as determined above for unit linked policies) and the liability for the accumulated cash values. The entire liability for the interest sensitive policies is recorded in insurance contracts.

The change in the overall liability for the interest sensitive policies is recognised as an expense in the consolidated income statement.

(iii) Long-term insurance contracts without fixed terms

Unit linked insurance contracts

For the Trinidad and Tobago life insurance subsidiary, the entire premium on these contracts is recorded as premium income. The liabilities held for these contracts are the contract holders’ notional account balances. The mortality charges deducted in each period from the contract holders as a group are considered adequate to cover the expected total death benefit claims in excess of the contract holders’ notional account balances in each period; no additional liability is therefore established for these claims other than a small provision for incurred but not reported claims. Some of the Group’s unit-linked annuity contracts contain a guarantee that entitles the holders to a minimum guaranteed crediting rate over the life of the policy. A reserve is held for this guarantee.

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

In addition to death or life benefits, these contracts contain a DPF that entitles the holders to a bonus or dividend declared by the company from time to time. The discretionary element of the benefits payable under these policies, as well as the guaranteed elements are treated as liabilities and any changes in the total benefits due are recognised as charges in the consolidated income statement and form part of increases in reserves for future benefits of policyholders.

(v) Investment contracts

The Group issues investment contracts including deposit administration contracts and individual deferred annuity contracts. Insurance premiums are recognised directly as liabilities. These liabilities are increased by credited interest or change in the unit prices and are decreased by policy administration fees, mortality and surrender charges and any withdrawals. Revenue consists of investment income and interest credited is treated as an expense.

(c) Outstanding claims

Provision for outstanding claims and the related costs of settlement are based on incidents reported before the end of the financial year and include appropriate provisions for claims incurred but not yet reported. Estimates are continually revised as more information becomes available and for the effects of anticipated inflation. Adjustments arising on these revisions are included with claims expense in the current year.

(d) Policyholders’ benefits

Maturities and annuities are accounted for when due.

Death and disability claims and surrenders are recognised in the financial statements in the year in which they have been notified.


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(d) Policyholders’ benefits (continued)Differences between the estimated claims and subsequent settlements are recognised in the consolidated income statement in year of settlement.

(e) Value to shareholders of inforce long-term business

Besides estimating the insurance liabilities, the Group estimates the present value of future profits to be earned on its long-term lines of business. This value to shareholders of inforce long-term business is included on the consolidated statement of financial position and changes in it flow through the consolidated income statement. The value to shareholders of inforce long-term business is calculated as the present value of free cash flow produced by the insurance contracts and their associated reserves that are inforce as at the statement of financial position date.

(f) Deferred acquisition costs (“DAC”)

Commissions paid to agents and brokers for property, casualty and short-duration life insurance contracts that are related to securing new contracts and renewing existing contracts are expensed over the terms of the policies as premium is earned. All other costs are recognised as expenses when incurred.

(g) Liability adequacy test

At each consolidated statement of financial position date, the Group assesses whether its recognised insurance liabilities are adequate, using current estimates of future cash flows under its insurance contracts. If that assessment shows that the carrying amount of its insurance liabilities is inadequate, the deficiency is recognised in the consolidated income statement and the amount of the relevant insurance liabilities is increased.

(h) Reinsurance contracts held

Contracts entered into by the Group with reinsurers under which the Group is compensated for losses on one or more contracts issued by the Group and that meet the classification requirements for insurance contracts are classified as reinsurance contracts held.

Contracts that do not meet these classification requirements are classified as financial assets. Insurance contracts entered into by the Group under which the contract holder is another insurer (inward reinsurance) are included with insurance contracts.

The benefits to which the Group is entitled under its reinsurance contracts held are recognised as reinsurance assets. These assets consist of short-term balances due from reinsurers, as well longer term receivables that are dependent on the expected claims and benefits arising under the related reinsured insurance contracts. Amounts recoverable from or due to reinsurers are measured consistently with the amounts associated with the reinsured insurance contracts and in accordance with the terms of each reinsurance contract. Reinsurance liabilities are primarily premiums payable for reinsurance contracts and are recognised as an expense when due.

The Group assesses its reinsurance assets for impairment on a quarterly basis. If there is objective evidence that the reinsurance asset is impaired, the Group reduces the carrying amount of the reinsurance asset to its recoverable amount and recognises that impairment loss in the consolidated income statement.

(i) Receivables and payables related to insurance contracts and investment 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 consolidated income statement.

(j) Salvage and subrogation reimbursements

Some insurance contracts permit the Group to sell (usually damaged) property acquired in settling a claim (salvage). The Group may also have the right to pursue third parties for payment of some or all costs (subrogation). The estimated cost of claims includes a deduction for the expected value of salvage and other recoveries.

2.16 Borrowings

Borrowings are recognised initially at fair value, plus directly attributable transaction costs. After initial recognition, interest bearing loans are subsequently measured at amortised cost using the effective interest rate (EIR) method. Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the EIR amortisation process.

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2.16 Borrowings (continued)Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the income statement.

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset (i.e. an asset that necessarily takes a substantial period of time to get ready for its intended use or sale) are capitalised.

2.17 Derivative financial instruments

Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at their fair value. All derivative financial instruments are recorded in the consolidated statement of financial position at fair value as assets when favourable to the Group and liabilities when unfavourable. Realised and unrealised gains and losses on trading derivatives are reflected in income and recognised as trading gains or losses.

2.18 Taxation

Tax on the profit or loss for the year comprises current tax and the change in deferred tax. Current tax comprises tax payable calculated on the basis of the taxable income for the year using the prevailing tax rate and any adjustment of tax payable for previous years.

Deferred tax is provided, using the liability method, on all temporary differences between the carrying amounts for financial reporting purposes and the amounts used for taxation purposes, except differences relating to the initial recognition of assets or liabilities which affect neither accounting nor taxable profit. Deferred tax assets are taxes recoverable in future periods in respect of deductible temporary differences and tax losses carried forward. Net deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Tax on the profit is charged at varying rates depending on the type of business that the individual entities are engaged in and the country in which they reside.

2.19 Employee benefits

(a) Pension plans

The Group operates a number of defined benefit and defined contribution plans, the assets of which are held in separate trustee-administered funds. The plans are generally funded by payments from employees and by the relevant Group companies after taking account of the recommendations of the independent qualified actuaries.

The plans are governed by trust/fund deeds and rules and are administered in accordance with the laws of the jurisdiction in which the plan resides. Responsibility for the governance of the plans including investment strategies lies with the Board of Trustees/Foundation.

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. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group 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 or prior periods.

The asset or liability recognised in the consolidated statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the consolidated statement of financial position date less the fair value of plan assets. Plan assets exclude any insurance contracts issued by the Group.

For defined benefit plans, the pension accounting costs are assessed using the projected unit credit method. Under this method, the cost of providing pensions is charged to the consolidated income statement so as to spread the regular cost over the service lives of employees in accordance with the advice of a qualified actuary, who carries out full valuations of the plans every three years. The pension obligation is measured as the present value of the estimated future cash outflows using interest rates of government securities which have terms to maturity approximating the terms of the related liability. Remeasurements of the net defined benefit liability, which comprise of actuarial gains and losses and the return on plan assets (excluding interest), are recognised immediately through other comprehensive income in the consolidated statement of comprehensive income.

The defined benefit plans mainly exposes the Group to actuarial risks such as investment risk, interest rate risk and longevity risk.


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2.19 Employee benefits (continued)

(a) Pension plans (continued)The Group’s contributions to the defined contribution pension plans are charged to the consolidated income statement in the year to which they relate.

(b) Post retirement medical benefit obligations

The Group’s subsidiaries in Trinidad and the Dutch Caribbean provide post-retirement medical benefits to its permanent employees who retire from active service, their spouses and their dependents. The entitlement to these benefits is based on the employee remaining in service up to retirement age or leaving service due to ill health. The expected costs of these benefits are accrued over the period of employment, using a methodology similar to that for defined benefit plans. All actuarial gains and losses are recognised immediately through other comprehensive income in the consolidated statement of comprehensive income. Independent qualified actuaries carry out a valuation of these obligations.

(c) Share-based compensation

The Group operates an equity-settled share-based compensation plan. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted. At each consolidated statement of financial position date, the entity revises its estimates of the number of options that are expected to become exercisable. It recognises the impact of the revision of original estimates, if any, in the consolidated income statement, and a corresponding adjustment to equity over the remaining vesting period. The proceeds received net of any directly attributable transaction costs are credited to share capital when the options are exercised.

(d) Employee share ownership plan (“ESOP”)

The employees of subsidiaries incorporated in Trinidad and Tobago have the option to receive their bonuses in cash and/or ordinary shares of the parent company purchased on the open market, in accordance with the terms outlined in the Trust Deed governing an approved ESOP. The Group recognises an expense within staff costs when bonuses are awarded.

(e) Profit sharing and bonus plans

The Group recognises a liability and an expense for bonuses and profit sharing based on a formula that takes into consideration the profit attributable to the Group’s shareholders after certain adjustments. The Group recognises a provision where contractually obligated or where there is a past practice that has created a constructive obligation.

2.20 Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, for which is more likely than not that an outflow of resources will be required to settle the obligation, and the amount has been reliably estimated. 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.

2.21 Revenue recognition

Revenue comprises the fair value for services rendered after eliminating revenue within the Group. Revenue is recognised as follows:

(a) Premium income

Premium income is recognised on the accrual basis in accordance with the terms of the underlying contracts as outlined in Note 2.15.

(b) Investment income

Interest income is recognised using the effective interest method. Rental income is recognised in the consolidated income statement on the accrual basis. Dividend income is recognised when the right to receive payment is established. Realised and unrealised investment gains and losses are recognised in the consolidated income statement in the period in which they arise.

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2.21 Revenue recognition(continued)

(c) Commission income

Commissions are recognised on the accrual basis when the services have been provided.

(d) Fee income

Fees are earned from the management of the assets of the segregated funds and deposit administration funds and from general policy administration and surrenders. Fees are recognised in the period in which the services are rendered.

For the asset management company in the Group, portfolio, asset management fees and other management advisory and service fees are recognised based on the applicable service contracts over the period the service is provided. Management fees and commissions arising from negotiating, or participating in the negotiation of a transaction for a third party are recognised on completion of the underlying transaction.

2.22 Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the consolidated income statement on a straight-line basis over the period of the lease.

2.23 Dividend distribution

Dividend distribution to the Company’s shareholders is recognised as an appropriation in the Group’s consolidated financial statements in the period in which the dividends are approved by the Group’s Board of Directors.

2.24 Finance charges

Finance charges are recognised as an expense in the period in which they are incurred except to the extent that they are capitalised when directly attributable to the acquisition, construction or production of an investment property or in developing properties for sale.

2.25 Earnings per share

Basic earnings per share is calculated by dividing profit or loss attributable to ordinary equity holders of the parent entity by the weighted average number of ordinary shares outstanding during the period.

For the diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares, such as convertible debt and share options granted to employees. Potential or contingent share issuances are treated as dilutive when their conversion to shares would decrease net earnings per share.

2.26 Assets under management

The Group provides custody and trustee discretionary investment management services to third parties. Such assets under management represent the managed funds administered by the asset management company.

2.27 Subscriptions and redemptions on mutual funds portfolio

(a) Subscriptions - Units relating to the various pools of mutual funds consolidated in the Group’s financial statements could be subscribed based on the net asset value per unit of the underlying funds determined on each business day.

(b) Distributions - The net income and net realised capital gains of the various pools of mutual funds are calculated and accrued to the investor daily and distributed monthly. Investors have the option either to receive a cash distribution or to reinvest income distributions into units at the prevailing subscription price as at the date of distribution.

(c) Redemptions - Units relating to the various pools of mutual funds consolidated in the Group’s financial statements are redeemed at a price per unit based on the net asset value of the underlying funds published on the date that the request is made.


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2.28 Comparative information

Where necessary, comparative data has been adjusted to conform with changes in presentation in the current year.

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS IN APPLYING ACCOUNTING POLICIES

The Group makes estimates and assumptions that may affect the reported amounts of assets and liabilities during the succeeding financial year. Estimates and judgments are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

(a) The ultimate liability arising from claims made under insurance contracts

The estimation of the ultimate liability arising from claims made under insurance contracts is an important 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 in particular, the claims arising from motor, casualty and health insurance contracts. At 31 December 2014, the carrying amount of short term insurance contracts (claims) was $1.0 billion (2013: $1.1 billion).

(b) Estimate of future benefit payments and premiums arising from long-term insurance contracts

The determination of the liabilities under long-term insurance contracts is dependent on estimates made by the Group. Estimates are made as to the expected number of deaths for each of the years in which the Group is exposed to risk. The Group bases these estimates on standard mortality tables adjusted where appropriate to reflect the Group’s own experience or expectations. For contracts that insure the risk of longevity, no allowance is made for expected mortality improvements. The estimated number of deaths determines the value of the benefit payments and the value of the valuation premiums. The main source of uncertainty is that epidemics (such as AIDS) and wide-ranging lifestyle changes, such as eating, smoking and exercise habits, could result in future mortality being significantly worse than in the past for the age groups in which the Group has significant exposure to mortality risk.

However, continuing improvements in medical care and social conditions could result in improvements in longevity in excess of those allowed for in the estimates used to determine the liability for contracts where the Group is exposed to longevity risk.

Estimates are also made as to future investment income arising from the assets backing long-term insurance contracts. These estimates are based on current market returns as well as expectations about future economic and financial developments. See Note 4.1.4 (e) for the sensitivity of the value of insurance liabilities to changes in assumptions used to value these liabilities.

The carrying amount of long term insurance contracts (claims) as at 31 December 2014 was $11.7 billion (2013: $11.1 billion).

(c) Value of inforce life insurance business

In determining this value, assumptions relating to future mortality, persistence and the level of expenses are based on experience of the type of business concerned. The assumptions made and methods employed are reviewed each year in light of the actual experience and data available. Any significant changes made to these can create a source of profit or loss. At 31 December 2014, the carrying amount of value of inforce insurance business was $1,046 million (2013: $925 million). The following tables present the effect on the profit or loss to changes in the assumptions used in the estimation of value to shareholders of inforce long term business.

Change in Negative effect on variable consolidated income 2014 2013For the Trinidadian life insurance subsidiaries: $’000 $’000VariableWorsening of mortality + 1.0% 6,666 6,026 Improvement of annuitant mortality + 0.5% 10,436 9,109 Lowering of investment returns - 1.0% 70,854 63,806 Worsening of base renewal expense level + 5.0% 19,230 19,794 Worsening of expense inflation rate + 1.0% 23,336 26,855

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3. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS IN APPLYING ACCOUNTING POLICIES (CONTINUED)

(c) Value of inforce life insurance business (continued)

Change in Negative effect on variable consolidated income 2014 2013For the Jamaican life insurance subsidiaries: $’000 $’000VariableWorsening of mortality + 10.0% 4,878 5,083 Lowering of investment returns - 2.0% 90,557 93,101 Worsening of base renewal expense level + 5.0% 3,789 4,055 Worsening of expense inflation rate + 1.0% 18,502 19,178

(d) Fair valuation of financial assets

The fair value of financial assets that are not traded in an active market is determined by using an internally developed bond valuation model. Assumptions used in this model are validated and periodically reviewed internally by qualified personnel. Where applicable, data is calibrated to ensure that outputs reflect actual data and comparative market prices. Changes in assumptions used in valuations could affect reported fair value of financial assets. Key assumptions are based on current market yields. At 31 December 2014, the carrying amount of financial assets that were fair valued using an internally developed bond valuation model was $2.7 billion (2013: $2.9 billion).The following shows the effect on the profit or loss to changes in the market yields. Effect on consolidated income 2014 2013 $’000 $’000 $’000 $’000For the Trinidadian subsidiaries: Decrease/(increase) in market yields (+ / - 1%) (37,722) 38,721 (30,938) 31,964

For the Jamaican subsidiaries: Decrease/(increase) in market yields (+ / - 2%) (18,073) 18,073 (20,521) 20,521

(e) Impairment losses on loans and receivables The Group reviews its asset portfolios to assess impairment on a periodic basis. In determining whether an impairment loss should be recognised in the consolidated income statement, the Group makes judgments as to whether there is any observable data indicating that there is a measurable decrease in the estimated future cash flows from the underlying portfolios. The methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience.

The carrying amount of impairment provisions on loans and receivables as at 31 December 2014 was $54 million (2013: $50 million).

(f) Income taxes The Group is subject to income taxes in numerous jurisdictions. Estimates are required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

(g) Held-to-maturity investments The Group follows the IAS 39 guideline on classifying non-derivative financial assets with fixed or determinable payments and fixed maturity dates as held to maturity. This classification requires significant judgment. In making this judgment, the Group evaluates its intention and ability to hold such investments to maturity. If the Group fails to keep these investments to maturity other than for specific circumstances, for example, selling an insignificant amount close to maturity, it will be required to reclassify the entire category. The investments would therefore be measured at fair value not amortised cost. The carrying amount of held-to-maturity investments as at 31 December 2014 was $7.6 billion (2013: $7.3 billion). If the entire class of held to maturity investments is tainted, the carrying value would increase by $617 million as at 31 December 2014 (as at 31 December 2013: increase of $633 million) with a corresponding entry in the fair value reserve in shareholders’ funds.


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3. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS IN APPLYING ACCOUNTING POLICIES (CONTINUED)

(h) Impairment of non-financial assets

An impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from binding sales transactions in an arm’s length transaction of similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from approved budgets and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the asset’s performance of the cash generating unit being tested. The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes. The carrying amount of impairment provisions on non financial assets as at 31 December 2014 was $196 million (2013: $142 million).

(i) Post employment benefits

In conducting valuation exercises to measure the effect of all post employment benefit plans throughout the Group, the company’s independent actuaries use judgement and assumptions in determining discount rates, salary increases, pension increases and health care costs. These are detailed in Note 12 and Note 26.

4. MANAGEMENT OF INSURANCE AND FINANCIAL RISK

The Group issues contracts that transfer insurance risk or financial risk or both. This section summarises these risks and the way the Group manages them.

4.1 Insurance risk The risk under any one insurance contract is the possibility that the insured event occurs and the uncertainty of the amount of the resulting claim. By the very nature of an insurance contract, this risk is random and therefore unpredictable.

For a portfolio of insurance contracts where the theory of probability is applied to pricing and provisioning, the principal risk that the Group faces under its insurance contracts is that the actual claims and benefit payments exceed the carrying amount of the insurance liabilities. This could occur because the frequency or severity of claims and benefits are greater than estimated. Insurance events are random and the actual number and amount of claims and benefits will vary from year to year from the level established using statistical techniques.

Experience shows that the larger the portfolio of similar insurance contracts, the smaller the relative variability about the expected outcome will be. In addition, a more diversified portfolio is less likely to be affected across the board by a change in any subset of the portfolio. The Group has developed its insurance underwriting strategy to diversify the type of insurance risks accepted and within each of these categories to achieve a sufficiently large population of risks to reduce the variability of the expected outcome.

Factors that aggravate insurance risk include lack of risk diversification in terms of type and amount of risk, geographical location and type of industry covered.

4.1.1 Casualty insurance risks (a) Frequency and severity of claims

The frequency and severity of claims can be affected by several factors. The Group manages these risks through its underwriting strategy, adequate reinsurance arrangements and proactive claims handling.

The underwriting strategy attempts to ensure that the underwritten risks are well diversified in terms of type and amount of risk, industry and geography.

Underwriting limits are in place to enforce appropriate risk selection criteria. For example, the Group has the right not to renew individual policies, it can impose deductibles and it has the right to reject the payment of a fraudulent claim. Insurance contracts also entitle the Group to pursue third parties for payment of some or all costs (subrogation).

The Group’s reinsurance arrangements include non proportional excess of loss placements on a per claimant and a per occurrence basis.

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4. MANAGEMENT OF INSURANCE AND FINANCIAL RISK (CONTINUED)4.1 Insurance risk (continued)

4.1.1 Casualty insurance risks (continued)(b) Sources of uncertainty in the estimation of future claim payments

Claims on casualty 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 large element of the claims provision relates to claims incurred but not reported (IBNR). There are several variables that affect the amount and timing of cash flows from these contracts. These mainly relate to the inherent risks of the business activities carried out by individual contract holders and the risk management procedures they adopted. The compensation paid on these contracts is the monetary awards granted for bodily injury suffered by employees (for employer’s liability cover) or members of the public (for public liability cover). Such awards are lump-sum payments that are calculated as the present value of the lost earnings and rehabilitation expenses that the injured party will incur as a result of the accident.

The estimated cost of claims includes direct expenses to be incurred in settling claims. The Group takes all reasonable steps to ensure that it has appropriate information regarding its claims exposures. However, given the uncertainty in establishing claims provisions, it is likely that the final outcome will prove to be different from the original liability established. The liability for these contracts comprises a provision for IBNR and a provision for reported claims not yet paid at the consolidated statement of financial position date.

In calculating the estimated cost of unpaid claims (both reported and IBNR), the Group’s estimation techniques are a combination of loss-ratio-based estimates (where the loss ratio is defined as the ratio between the ultimate cost of insurance claims and insurance premiums earned in a particular financial year in relation to such claims) and an estimate based upon actual claims experience using predetermined formulae where greater weight is given to actual claims experience as time passes.

The initial loss-ratio estimate is an important assumption in the estimation technique and is based on previous years’ experience, adjusted for factors such as premium rate changes, anticipated market experience and historical claims inflation.

The estimation of IBNR is generally subject to a greater degree of uncertainty than the estimation of the cost of settling claims already notified to the Group, where information about the claim event is available. IBNR claims may not be apparent to the insurer until many years after the event that gave rise to the claims has happened. For casualty contracts, the IBNR proportion of the total liability is high and will typically display greater variability between initial estimates and final outcomes because of the greater degree of difficulty of estimating these liabilities.

In estimating the liability for the cost of reported claims not yet paid the Group considers any information available from loss adjusters and information on the cost of settling claims with similar characteristics in previous periods. Large claims are assessed on a case-by-case basis or projected separately in order to allow for the possible distortive effect of their development and incidence on the rest of the portfolio.

Where possible, the Group adopts multiple techniques to estimate the required level of provisions. This provides a greater understanding of the trends inherent in the experience being projected. The projections given by the various methodologies also assist in estimating the range of possible outcomes. The most appropriate estimation technique is selected taking into account the characteristics of the business class and the extent of the development of each accident year.

Note 22.2 presents the development of the estimate of ultimate claim cost for claims notified in a given year. This gives an indication of the accuracy of the Group’s estimation technique for claims payments.

4.1.2 Short duration life insurance contracts (a) Frequency and severity of claims ‘

Short-duration life insurance contracts are contracts that are typically of a short tenure, with the tenure being often determined by the length of an individual’s time in employment. These contracts are mainly issued to employers to insure their commitments to their employees. The risk is affected by the nature of the industry in which the employer operates. The risk of death and disability will vary by industry.


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4. MANAGEMENT OF INSURANCE AND FINANCIAL RISK (CONTINUED)4.1 Insurance risk (continued)

4.1.2 Short duration life insurance contracts (continued) (a) Frequency and severity of claims (continued)

The Group attempts to manage this risk through its underwriting and claims handling. Additionally there is reinsurance on short-duration life insurance contracts. For the Jamaican life insurance subsidiary, there is concentration of risk in the services sector. For the Trinidadian life insurance subsidiaries, there is concentration of risk in the banking/finance sector and the retail/services sector.

(b) Sources of uncertainty in the estimation of future claim payments There is no need to estimate mortality rates or morbidity rates for future years because these contracts have short duration. However, for incurred disability income claims, it is necessary to estimate the rates of recovery from disability for future years. The Group currently does so using conservative assumptions.

(c) Changes in assumptions The Group’s assumptions in respect of short duration life insurance contracts have not changed from the prior year.

4.1.3 Property insurance contracts (a) Frequency and severity of claims

For property insurance contracts, climatic changes give rise to more frequent and severe extreme weather events (for example, river flooding and hurricanes) and their consequences (for example, subsidence claims). For certain contracts, the Group has also limited the number of claims that can be paid in any policy year or introduced a maximum amount payable for claims in any policy year.

The Group has the right to re-price the risk on renewal. It also has the ability to impose deductibles and reject fraudulent claims. These contracts are underwritten by reference to the commercial replacement value of the properties and contents insured, and claims payment limits are always included to cap the amount payable on occurrence of the insured event. The cost of rebuilding properties, of replacement or indemnity for contents and the time taken to restart operations for business interruption are the key factors that influence the level of claims under these policies. The greatest likelihood of significant losses on these contracts arises from storm or flood damage. The Group analyses the property exposures using in-house and external modelling tools and purchases sufficient reinsurance protection to cover its perceived liabilities.

The Group’s reinsurance arrangements include proportional quota share and surplus arrangements and non proportional excess of loss placements on a per claimant and a per occurrence basis.

(b) Sources of uncertainty in the estimation of future claim payments Property claims are analysed separately for subsidence and non-subsidence claims. The development of large losses/catastrophes is analysed separately. Non-subsidence claims can be estimated with greater reliability, and the Group’s estimation processes reflect all the factors that influence the amount and timing of cash flows from these contracts. The shorter settlement period for these claims allows the Group to achieve a higher degree of certainty about the estimated cost of claims and relatively little IBNR is held at year end. The longer time needed to assess the emergence of a subsidence claim makes the estimation process more uncertain.

4.1.4 Long-term insurance contracts (a) Frequency and severity of claims

For contracts where death is the insured risk, the most significant factors that could increase the overall frequency of claims are epidemics (such as AIDS) or wide spread changes in lifestyle, such as eating, smoking and exercise habits, resulting in earlier or more claims than expected. For contracts where survival is the insured risk, the most significant factor is continued improvement in medical science and social conditions that would increase longevity.

At present, these risks do not vary significantly in relation to the location of the risk insured by the Group. However, undue concentration could have an impact on the severity of benefit payments on a portfolio basis.

For contracts with fixed and guaranteed terms, there are no mitigating terms and conditions that reduce the insurance risk accepted. For contracts, without fixed terms, a significant portion of the insurance risk is shared with the insured party. The Group charges for mortality risk on a monthly basis for most life and critical insurance

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4. MANAGEMENT OF INSURANCE AND FINANCIAL RISK (CONTINUED)

4.1 Insurance risk (continued) 4.1.4 Long-term insurance contracts (continued)

(a) Frequency and severity of claims (continued)

contracts without fixed terms. It has the right to alter these charges based on its mortality experience and hence minimise its exposure to mortality risk.

The Group manages these risks through its underwriting strategy and reinsurance arrangements. Medical selection is included in the Group’s underwriting procedures with premiums varied to reflect the health condition and family medical history of the applicants. The Group uses excess of loss reinsurance contracts with retention limits that vary by product.

The table below presents the concentration of insured benefits across five bands per individual life assured. The benefit insured figures are shown gross and net of the reinsurance contracts described above. These tables do not include annuity contracts, for which a separate analysis is reported further below.

For the Jamaican life insurance subsidiary: 2014 - Total benefits insured Before After reinsurance reinsurance Benefits assured per life TT$’000 % TT$’000 %$’000 J$1,000 - 5,000 (TT$70 - TT$350) 11,075,414 84.9% 11,014,611 90.0%J$5,001 - 10,000 (TT$350 - TT$699) 1,165,404 8.9% 962,114 7.9%J$10,001 - 15,000 (TT$699 - TT$1,049) 270,648 2.1% 134,529 1.1%J$15,001 - 20,000 (TT$1,049 - TT$1,398) 165,211 1.3% 58,043 0.5%J$20,001 and over (TT$1,398 and over) 368,066 2.8% 65,070 0.5%

Total 13,044,743 100.0% 12,234,367 100.0% The risk is concentrated in the lower value bands. This has not changed from last year. 2013 - Total benefits insured Before After reinsurance reinsurance Benefits assured per life TT$’000 % TT$’000 %$’000 J$1,000 - 5,000 (TT$70 - TT$350) 11,353,651 85.2% 11,283,404 90.3%J$5,001 - 10,000 (TT$350 - TT$699) 1,173,560 8.8% 957,255 7.7%J$10,001 - 15,000 (TT$699 - TT$1,049) 262,923 2.0% 129,342 1.0%J$15,001 - 20,000 (TT$1,049 - TT$1,398) 164,734 1.2% 56,793 0.5%J$20,001 and over (TT$1,398 and over) 379,299 2.8% 65,785 0.5%

Total 13,334,167 100.0% 12,492,579 100.0%

For the Trinidadian life insurance subsidiaries: 2014 - Total benefits insured Before After reinsurance reinsurance Benefits assured per life TT$’000 % TT$’000 %$’000 0 - 250 (TT$) 12,675,968 26.3% 12,109,315 36.7%251 - 500 (TT$) 4,995,503 10.3% 4,333,410 13.2%501 -1,000 (TT$) 14,622,317 30.3% 10,162,562 30.8%1,001 - 3,000 (TT$) 12,792,003 26.5% 5,504,172 16.7%3,001 and over (TT$) 3,185,719 6.6% 841,720 2.6%

Total 48,271,510 100.0% 32,951,179 100.0% The risk is concentrated in the lower value bands. This has not changed from last year.


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(a) Frequency and severity of claims (continued)For the Trinidadian life insurance subsidiaries: 2013 - Total benefits insured Before After reinsurance reinsurance Benefits assured per life TT$’000 % TT$’000 %$’000 0 - 250 (TT$) 12,506,495 28.0% 11,917,726 42.7%251 - 500 (TT$) 4,578,284 10.3% 3,872,773 13.9%501 -1,000 (TT$) 13,214,615 29.6% 8,366,583 30.0%1,001 - 3,000 (TT$) 11,276,473 25.3% 3,300,259 11.8%More than 3,000 (TT$) 3,055,545 6.8% 438,740 1.6%

Total 44,631,412 100.0% 27,896,081 100.0% For the Dutch Caribbean life insurance subsidiaries: 2014 - Total benefits insured Before After reinsurance reinsurance Benefits assured per life TT$’000 % TT$’000 %$’000 NAF$0 - 500 (TT$0 - TT$1,769) 6,324,816 89.0% 6,169,917 92.6%NAF$501 - 1,000 (TT$1,769 - TT$3,538) 529,420 7.4% 351,708 5.3%NAF$1,001 - 1,500 (TT$3,538 - TT$5,307) 166,366 2.3% 103,344 1.5%NAF$1,501 - 2,000 (TT$5,307 - TT$7,075) 46,437 0.7% 36,451 0.5%More than NAF$2,000 (TT$7,075) 41,913 0.6% 7,333 0.1%

Total 7,108,952 100.0% 6,668,753 100.0%

The risk is concentrated in the lower value bands. This has not changed from last year. 2013 - Total benefits insured Before After reinsurance reinsurance Benefits assured per life TT$’000 % TT$’000 %$’000 NAF$0 - 500 (TT$0 - TT$1,769) 5,623,572 90.2% 5,495,011 94.4%NAF$501 - 1,000 (TT$1,769 - TT$3,538) 401,597 6.4% 232,707 4.0%NAF$1,001 - 1,500 (TT$3,538 - TT$5,307) 143,273 2.3% 68,633 1.2%NAF$1,501 - 2,000 (TT$5,307 - TT$7,075) 41,023 0.7% 24,682 0.4%More than NAF$2,000 (TT$7,075) 26,035 0.4% – 0.0%

Total 6,235,500 100.0% 5,821,033 100.0%

The following tables for annuity insurance contracts illustrate the concentration of risk based on five bands that group these contracts in relation to the amount payable per annum, as if the annuity were in payment at the year end. The Group does not hold any reinsurance contracts against the liabilities carried for these contracts.

Insurance risk for contracts disclosed in this note is also affected by the contract holders’ right to pay reduced or no future premiums, to terminate the contract completely, or to exercise a guaranteed annuity option. As a result, the amount of insurance risk is also subject to contract holder behaviour.

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(a) Frequency and severity of claims (continued)For the Jamaican life insurance subsidiary: Total annuities payable per annum 2014 2013Annuity payable per annum per life TT$’000 % TT$’000 %$’000 J$0 - 200,000 (TT$0 - TT$13,980) 73,538 33.9% 75,549 35.0%J$200,001 - 300,000 (TT$13,980 - TT$20,970) 24,757 11.4% 26,829 12.4%J$300,001 - 400,000 (TT$20,970 - TT$27,960) 19,837 9.1% 19,199 8.9%J$400,001 - 500,000 (TT$27,960 - TT$34,950) 12,902 6.0% 12,661 5.9%More than J$500,000 (More than TT$34,950) 85,772 39.6% 81,424 37.8%

Total 216,806 100.0% 215,662 100.0% The greatest risk concentration remains at the highest band and lowest band which is consistent with the prior year. For the Trinidadian life insurance subsidiaries: Total annuities payable per annum 2014 2013Annuity payable per annum per life TT$’000 % TT$’000 %$’000 0 - 5,000 (TT$) 6,471 6.0% 6,706 6.8%5,001 - 10,000 (TT$) 26,637 24.6% 14,697 14.8%10,001 - 20,000 (TT$) 16,049 14.8% 24,675 24.9%More than 20,000 (TT$) 58,974 54.6% 52,990 53.5%

Total 108,131 100.0% 99,068 100.0% The greatest concentration remains at the highest band, which is consistent with the prior year. For the Dutch Caribbean life insurance subsidiaries: Total annuities payable per annum 2014 2013Annuity payable per annum per life TT$’000 % TT$’000 %$’000 NAF$0 - 10 (TT$0 - TT$35) 30,253 35.1% 24,491 31.7%NAF$11 - 20 (TT$35 - TT$71) 21,829 25.3% 19,542 25.3%NAF$21 - 30 (TT$71 - TT$106) 12,146 14.1% 11,032 14.3%NAF$31 - 40 (TT$106 - TT$142) 7,580 8.8% 7,104 9.2%NAF$41 - 50 (TT$142 - TT$177) 4,384 5.1% 4,618 6.0%More than NAF$50 (More than TT$177) 10,006 11.6% 10,413 13.5%

Total 86,198 100.0% 77,200 100.0% The risk is spread over all the bands which is consistent with the prior year.

(b) Sources of uncertainty in the estimation of future benefit payments and premium receipts Uncertainty in the estimation of future benefit payments and premium receipts for long-term insurance contracts arises from the unpredictability of long-term changes in overall levels of mortality and the variability in contract holder behaviour.

The Group uses appropriate base tables of standard mortality according to the type of contract being written and the territory in which the insured person resided. An investigation into the actual experience for the Group is carried out periodically and the results compared to that used in the policyholder liability and value to shareholders of inforce long-term business figures. No adjustment for future mortality improvements is made for contracts that insure survival.


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(c) Process used to decide on assumptionsFor long term insurance contracts, the Group determines assumptions in relation to future deaths, voluntary termination, investment returns, administrative expenses and other items that are appropriate to the policies, their location and the local statutory reserving requirements. In the case of Jamaica, the assumptions are best estimate assumptions with appropriate provisions for adverse deviations, consistent with the use of a Policy Premium Method valuation. For other territories, the assumptions used are those appropriate for traditional net premium valuation methods.

The assumptions used for the insurance contracts disclosed in this note are as follows:

● Mortality An appropriate base table of standard mortality is chosen depending on the type of contract. For contracts

insuring survivorship, no allowance is made for future mortality improvements.

● Morbidity Estimates of the future incidence of critical illness is made using the reinsurance terms available to the Group

as a guide.

● Persistency An investigation into the Group’s experience is performed to determine an appropriate persistency rate.

Persistency rates vary by product type and policy duration.

● Investment returns The Group sets the investment return assumption based on the total expected return available on suitable

investment asset classes.

● Renewal expense level and inflation The current level of expenses is taken as an appropriate expense base with allowance for future expense

inflation.

● Tax It has been assumed that current tax legislation and rates for long-term insurance companies continue

unaltered.

(d) Change in assumptions

2014 2013 $’000 $’000

Determination of liabilities: For the Jamaican life insurance subsidiary: Changes in expense assumptions (6,803) 3,996 Changes in lapse assumptions – 4,773 Changes in investment returns (19,232) (39,376)Other assumptions (8,325) 5,848 For the Trinidadian life insurance subsidiaries: No changes have been made to the assumptions used to determine the value of long-term insurance liabilities.

For the Dutch Caribbean insurance subsidiaries: No changes have been made to the assumptions used to determine the value of long-term insurance liabilities.

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(e) Sensitivity analysis

The following tables present the sensitivity of the value of insurance liabilities disclosed in this note to movements in the assumptions used in the estimation of insurance liabilities.

Change in Change in Change in Change in Variable liability Variable liability 2014 2014 2013 2013

$’000 $’000Long-term insurance contracts with fixed and guaranteed terms and without DPF:

Variable

For the Jamaican life insurance subsidiary: Worsening of mortality + 10.0% 70,175 + 10.0% 73,008 Lowering of investment returns - 2.0% 299,964 - 2.0% 306,269 Worsening of base renewal expense level + 5.0% 29,071 + 5.0% 31,137 Worsening of expense inflation rate + 1.0% 85,041 + 1.0% 86,249

For the Trinidadian life insurance subsidiaries: Worsening of mortality + 1.0% 1,993 + 1.0% 1,769 Improvement of annuitant mortality + 0.5% 22,688 + 0.5% 20,827 Lowering of investment returns - 1.0% 84,559 - 1.0% 83,397 Worsening of base renewal expense level + 5.0% 617 + 5.0% 500 Worsening of expense inflation rate + 1.0% 2,065 + 1.0% 1,658 For the Dutch Caribbean life insurance subsidiaries: Worsening of mortality + 10.0% 37,576 + 10.0% 34,564 Improvement of annuitant mortality + 10.0% 23,842 + 10.0% 14,244 Lowering of investment returns - 10.0% 130,028 - 10.0% 118,968 Worsening of base renewal expense level + 10.0% 20,383 + 10.0% 20,975

Long-term insurance contracts with fixed and guaranteed terms and without DPF:

Variable

For the Jamaican life insurance subsidiary: Worsening of mortality + 10.0% 139 + 10.0% 159 Lowering of investment returns - 2.0% 5,188 - 2.0% 3,087 Worsening of base renewal expense level + 5.0% 555 + 5.0% 591 Worsening of expense inflation + 1.0% 903 + 1.0% 840

For the Dutch Caribbean life insurance subsidiaries: Worsening of mortality + 10.0% 4,102 + 10.0% 4,536 Lowering of investment returns - 10.0% 21,574 - 10.0% 32,166 Worsening of base renewal expense level + 10.0% 7,286 + 10.0% 11,867 The above analyses are based on a change in assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated.


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4. MANAGEMENT OF INSURANCE AND FINANCIAL RISK (CONTINUED)4.2 Financial risk

The Group is exposed to financial risk through its financial assets, financial liabilities (investment contracts and borrowings), reinsurance assets and insurance liabilities. In particular the key financial risk is that the proceeds from its financial assets are not sufficient to fund the obligations arising from its insurance and investment contracts. The components of this financial risk are interest rate risk, equity price risk, foreign currency risk, liquidity risk and credit risk. These risks arise from open positions in interest rate, currency and equity products, all of which are exposed to general and specific market movements.

Risk management is carried out by Executive Investment Committees and Actuarial departments of operating units under policies approved by the Group’s board of directors. The Group identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units. The board provides principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk and investment of excess liquidity.

4.2.1 Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk - currency risk, interest rate risk and other price risk, each of which are considered below.

(a) Currency risk The Group takes on exposure to effects of fluctuations in the prevailing foreign currency rates on its financial position and cash flows. The Group has operations in the Caribbean as well as operations at Lloyd’s which underwrites risks on a worldwide basis. The main exposure to risks are in respect to the US dollar, Antillean Guilder, Jamaican dollar, Euro and the Sterling. The Group’s strategy for dealing with foreign exchange risk is to offset, as far as possible, foreign currency liabilities with assets denominated in the same currency.

Each subsidiary has an Executive Investment Committee which has oversight for the management of currency risk. The Trinidad insurance subsidiaries’ exposure to currency risk is also mitigated by the requirements of the Insurance Act 1980, which does not allow more than 20% of the assets supporting policyholder liabilities to be held in currencies other than the currency of the liability.

The tables below summarises the Group’s exposure to foreign currency exchange rate risk as at 31 December. The Group’s assets and liabilities at carrying amounts are included in the table categorised by currency positions expressed in TT$ equivalents.

TT US NAF JMD GBP Euro Other Total $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000As at 31 December 2014 Total Assets 8,549,723 4,654,546 3,773,862 2,951,384 515,025 1,121,280 1,011,106 22,576,926 Total Liabilities 10,203,162 1,446,433 4,270,828 2,399,716 387,149 328,891 584,529 19,620,708

(1,653,439) 3,208,113 (496,966) 551,668 127,876 792,389 426,577 2,956,218 As at 31 December 2013 Total Assets 8,019,275 4,653,196 3,711,775 3,094,905 749,589 950,915 877,749 22,057,404 Total Liabilities 9,388,765 1,704,079 4,102,070 2,527,952 598,496 274,771 564,943 19,161,076

(1,369,490) 2,949,117 (390,295) 566,953 151,093 676,144 312,806 2,896,328

The analysis below is performed for reasonable possible movements in foreign currency exchange rates with all other variables held constant, showing the impact on the consolidated income statement and equity at the reporting date. Change in variables US NAF JMD GBP Euro Other 2014 1.4% 1.4% -3.5% 4.7% 1.0% -2.6% to 2.8%2013 -0.4% -0.4% -4.7% -6.6% -8.3% -5.9% to 0.7% US NAF JMD GBP Euro Other Total $’000 $’000 $’000 $’000 $’000 $’000 $’000Impact on income statement 2014 10,546 (1,123) (886) 2,819 279 4,726 16,361 2013 16,887 (915) (1,806) (3,523) 710 (1,782) 9,571Impact on equity 2014 20,072 8,508 (51,063) 2,635 6,930 2,045 (10,873)2013 (1,180) (4,403) (59,639) (7,210) (52,699) 631 (124,500)

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4.2 Financial risk (continued) 4.2.1 Market risk (continued)

(b) Interest rate risk

The Group is exposed to various risks associated with the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows. The major element of interest rate risk within the Group is the risk that the interest earned on the Group’s investments is insufficient to meet the interest rates credited or guaranteed to policyholders. This applies to traditional life insurance policies and the deposit administration plans.

Exposure is managed largely by the use of natural hedges that arise by matching interest sensitive assets with liabilities of a similar nature. The Group also mitigates the effect of interest rate risk of the investment portfolio through the functioning of an Executive Investment Committee and the pricing of products by the actuarial function. The investment portfolio return is continually monitored by the Investment Committees. The results of these reviews inform the pricing of products and interest rates to be credited to the respective policies and plans.

The sensitivity analysis for interest rate risk illustrates how changes in the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates at the reporting date. For the sensitivity analyses, a 1% movement in interest rates was used for 2014 for the Trinidad market (2013 - 1%), a 2% movement was used for 2014 for the Jamaica market (2013 - 2%) and a 1% movement for 2014 was used for the Dutch Caribbean (2013 - 0.58%). The effect of an increase in the above rates would result in a decrease in the consolidated income statement and equity of $199,418,000 for 2014 (2013: decrease of $106,185,000). The effect of a decrease in the above rates would result in an increase in the consolidated income statement and equity of $199,102,000 for 2014 (2013: increase of $106,015,000).

(c) Other price risk

Price risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices, whether those changes are caused by factors specific to the individual instrument or its issuer or factors affecting all instruments traded in the market. The Group is exposed to equity securities price risk because of investments held by the Group and classified on the consolidated statement of financial position as fair value through profit or loss. The Group manages its price risk by limiting the amount of its investments in equities and by monitoring movements in equity prices.

The sensitivity analysis for equity price risk illustrates how changes in the fair value of equity securities will fluctuate because of changes in market prices at the reporting date. For the sensitivity analysis, a 5% movement in prices of local equities was used for 2014 for the Trinidad market (2013: 10%), a 10% movement in prices of local equities was used for 2014 for the Jamaica market (2013: 10%) and a 1% movement for 2014 was used for Dutch Caribbean (2013: 0.08%). The effect of an increase/decrease in the above rates would result in an increase/decrease in the consolidated income statement and equity of $96,778,000 for 2014 (2013: $144,748,000).

4.2.2 Liquidity risk Liquidity risk is the risk that cash may not be available to pay obligations when due, at a reasonable cost. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities, and the ability to close out market positions.

Certain of the Group’s contracts have features that allow them to be terminated at short notice creating a potential liquidity exposure. The Group monitors liquidity on a regular basis. An internally constituted Executive Investment Committee set limits on the minimum proportion of maturing funds available to meet such calls and on the minimum level of borrowing facilities that should be in place to cover claims.

There are no individual contracts or policyholders who have the potential to influence the withdrawal of a significant amount of liabilities.

The following tables analyze the reinsurance and financial assets and insurance and financial liabilities of the Group into relevant maturity groupings based on the remaining period to the contractual or expected maturity date. Financial liabilities are at contractual undiscounted cash flows, and insurance contracts and investment contracts are at expected undiscounted cash flows. Reinsurance and financial assets are at contractual or expected discounted cash flows.


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4.2 Financial risk (continued) 4.2.2 Liquidity risk (continued)

Contractual/expected undiscounted cash flows

Carrying No stated Less than One to Over amount maturity one year five years five years Insurance and financial liabilities $’000 $’000 $’000 $’000 $’000As at 31 December 2014Long-term insurance contracts 11,719,507 3,711,491 454,915 2,118,187 17,349,318 Short-term insurance contracts 1,790,710 – 1,412,918 362,383 15,409 Investment contracts 1,622,521 1,611,193 11,328 – – Medium term borrowings 1,795,303 – 129,183 1,358,965 960,892 Short-term borrowings 319,444 – 328,197 – – Derivative financial instruments 8,379 – 7,759 620 – Mutual fund holders’ liabilities 992,350 992,350 – – – Interest payable 36,816 – 36,816 – – Other Liabilities 716,393 75,980 640,413 – –

Total 19,001,423 6,391,014 3,021,529 3,840,155 18,325,619 As at 31 December 2013 Long-term insurance contracts 11,111,867 2,253,733 422,190 3,055,334 16,772,823 Short-term insurance contracts 1,969,650 – 1,433,822 517,680 18,148 Investment contracts 1,579,528 1,566,427 13,101 – – Medium term borrowings 1,331,488 – 89,159 787,737 1,087,688 Short-term borrowings 531,364 – 545,667 – – Derivative financial instruments 17,418 – – 17,418 – Mutual fund holders’ liabilities 1,010,021 1,010,021 – – – Interest payable 35,656 – 35,656 – – Other liabilities 731,514 77,738 653,776 – –

Total 18,318,506 4,907,919 3,193,371 4,378,169 17,878,659

Contractual/expected discounted cash flows

Carrying No stated Less than One to Over amount maturity one year five years five yearsReinsurance and financial assets $’000 $’000 $’000 $’000 $’000As at 31 December 2014Financial assets at fair value through profit and loss 5,291,075 1,653,630 774,301 1,060,646 1,802,498 Held to maturity financial assets 7,562,126 – 1,671,598 2,001,436 3,889,092 Financial assets of mutual fund unit holders 1,080,154 151,192 76,948 392,746 459,268 Loans and receivables 1,799,373 9 928,472 322,967 547,925 Long-term reinsurance assets 68,260 48,485 1,736 15,631 2,408 Short-term reinsurance assets 627,382 – 466,534 156,577 4,271 Cash and cash equivalents 2,233,973 – 2,233,973 – – Cash and cash equivalents of mutual fund unit holders 105,714 – 105,714 – –

Total 18,768,057 1,853,316 6,259,276 3,950,003 6,705,462

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4.2 Financial risk (continued) 4.2.2 Liquidity risk (continued)

Contractual/expected discounted cash flows

Carrying No stated Less than One to Over amount maturity one year five years five yearsAs at 31 December 2013 $’000 $’000 $’000 $’000 $’000Financial assets at fair value through profit and loss 5,173,490 1,458,179 703,054 953,447 2,058,810 Held to maturity financial assets 7,268,664 – 1,602,540 1,830,553 3,835,571 Financial assets of mutual fund unit holders 1,110,918 140,471 155,988 278,531 535,928 Loans and receivables 1,677,589 32,677 922,262 209,452 513,198 Long-term reinsurance assets 67,231 46,210 1,799 16,733 2,489 Short-term reinsurance assets 643,443 – 498,694 140,975 3,774 Cash and cash equivalents 2,031,559 – 2,031,559 – – Cash and cash equivalents of mutual fund unit holders 157,972 – 157,972 – –

Total 18,130,866 1,677,537 6,073,868 3,429,691 6,949,770

4.2.3 Credit risk

Credit risk is defined as the potential for loss that can occur as a result of an individual, counterparty or issuer being unable or unwilling to honour its contractual obligations to us. Each subsidiary in the various jurisdictions, has an Executive Investment Committee (EIC) that sets credit limits and monitors exposure by constraining the magnitude and tenor of the exposure to counterparties and issuers. Some of the credit risk mitigation techniques include, where appropriate, the right to require initial collateral or margin, the right to terminate transactions, or to obtain collateral (including guarantees) should unfavorable events occur.

Collateral held as security for mortgage loans and other loans includes physical or tangible residential and commercial edifices as well as legal rights to insurance portfolio and other assets of the respective borrowers. The EIC initiates regular portfolio reviews, monitors counterparty creditworthiness, and evaluates potential transaction risks with a view towards early problem identification and protection against unacceptable credit-related losses.

The Group actively monitors the financial status of its reinsurers both by reference to publicly available information and the Financial Strength Ratings of A.M. Best. All of the Group’s reinsurers are rated superior by A.M. Best. A rating of superior is assigned to reinsurance companies that have, in the opinion of A.M. Best, a superior ability to meet their ongoing obligations to the primary insurer.

(a) Assets bearing credit risk Below is an analysis of assets bearing credit risk.

Neither past Past due due nor but not impaired impaired Impaired Total $’000 $’000 $’000 $’000

As at 31 December 2014 Debt securities 8,861,591 14,772 732 8,877,095 Financial assets of mutual fund unit holders 926,743 – 2,931 929,674 Deposits with financial institutions (more than 90 days) 2,267,978 2,021 2,536 2,272,535 Other financial assets 23,456 – – 23,456 Interest receivable 196,384 2,564 – 198,948 Loans and receivables 1,566,632 51,452 88,508 1,706,592 Reinsurance assets 695,642 – – 695,642 Deferred acquisition costs 87,491 – – 87,491 Cash and cash equivalents 2,339,687 – – 2,339,687

16,965,604 70,809 94,707 17,131,120


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4.2 Financial risk (continued)4.2.3 Credit risk (continued)

(a) Assets bearing credit risk (continued)

Neither past Past due due nor but not impaired impaired Impaired Total $’000 $’000 $’000 $’000

As at 31 December 2013 Debt securities 8,990,163 6,909 910 8,997,982 Financial assets of mutual fund unit holders 966,530 – 3,917 970,447 Deposits with financial institutions (more than 90 days) 1,888,769 3,153 2,546 1,894,468 Other financial assets 78,368 – – 78,368 Interest receivable 210,811 1,242 – 212,053 Loans and receivables 1,480,862 37,023 94,703 1,612,588 Reinsurance assets 710,674 – – 710,674 Deferred acquisition costs 90,728 – – 90,728 Cash and cash equivalents 2,189,531 – – 2,189,531

16,606,436 48,327 102,076 16,756,839

(b) Credit quality of financial assets The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings if available or to a rating assigned by the investment manager using an approach consistent with that used by Standard and Poor’s. The table below provides information regarding the credit risk exposure of the Group by classifying assets according to the Standard & Poor’s issued credit rating.

AAA

An obligation rated ‘AAA’ has the highest rating assigned by Standard & Poor’s. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong.

AA

An obligation rated ‘AA’ differs from the highest-rated obligations only to a small degree. The obligor’s capacity to meet its financial commitment is very strong.

A

An obligation rated ‘A’ is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation is still strong.

BBB

An obligation rated ‘BBB’ exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

Below BBB Obligations rated ‘Below BBB’ are regarded as having significant speculative characteristics. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.

Not Rated This indicates that there is insufficient information on which to base a rating. These balances are current and are monitored regularly for impairment. This classification includes obligations due from individuals, short term securities and receivables arising under contracts of insurance underwritten in the international property and casualty business of the Group.

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4.2 Financial risk (continued) 4.2.3 Credit risk (continued)

(b) Credit quality of financial assets (continued)

The concentration of credit risk is substantially unchanged compared to prior year.

Below Not Total AAA AA A BBB BBB Rated 2014 $’000 $’000 $’000 $’000 $’000 $’000 $’000As at 31 December 2014 Debt securities 70,972 235,400 3,846,205 2,093,297 2,450,050 165,667 8,861,591 Financial assets of mutual fund unit holders – – 571,109 243,788 106,133 5,713 926,743 Deposits with financial institutions (more than 90 days) – – 57,998 1,397,793 146,501 665,686 2,267,978 Other financial assets – – 6,974 7,212 4,756 4,514 23,456 Interest receivable 537 1,677 87,237 53,549 30,784 22,600 196,384 Loans and receivables – – 199,813 27,300 17,609 1,321,910 1,566,632 Reinsurance assets – – 474,324 – – 221,318 695,642 Deferred acquisition costs – – 3,952 – – 83,539 87,491 Cash and cash equivalents – 7,828 177,929 933,052 277,644 943,234 2,339,687

71,509 244,905 5,425,541 4,755,991 3,033,477 3,434,181 16,965,604 As at 31 December 2013Debt securities 57,457 296,189 3,861,892 2,047,533 2,524,986 202,106 8,990,163 Financial assets of mutual fund unit holders – – 579,828 213,222 163,339 10,141 966,530 Deposits with financial institutions (more than 90 days) – – 114,670 1,066,251 123,747 584,101 1,888,769 Other financial assets – 5,170 28,139 7,861 20,639 16,559 78,368 Interest receivable 482 2,287 88,868 63,583 30,304 25,287 210,811 Loans and receivables – – 195,199 – 17,419 1,268,244 1,480,862 Reinsurance assets – – 457,582 – – 253,092 710,674 Deferred acquisition costs – – – – – 90,728 90,728 Cash and cash equivalents – – 204,487 733,802 271,373 979,869 2,189,531

57,939 303,646 5,530,665 4,132,252 3,151,807 3,430,127 16,606,436

(c) Assets that are past due but not impaired Carrying Value $’000 Less than Between Between Between More than 3 months 3 and 6 months 6 and 9 months 9 and 12 months 12 monthsAs at 31 December 2014 Debt securities 12,767 – – 230 1,775 Deposits with financial institutions (more than 90 days) – 1,212 – 784 25 Interest receivable 441 34 – 736 1,353 Loans and receivables 27,805 16,074 8,509 550 (1,486)

41,013 17,320 8,509 2,300 1,667As at 31 December 2013 Debt securities 2,956 1,686 1,610 – 657 Deposits with financial institutions (more than 90 days) 3,130 – – – 23 Interest receivable 102 440 666 – 34 Loans and receivables 16,161 19,738 1,892 (215) (553)

22,349 21,864 4,168 (215) 161


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(d) Collateral held in respect of assets that are past due but not impaired Fair value of collateral held 2014 2013 $’000 $’000

Loans and receivables - 1,430

- 1,430

Carrying Value 2014 2013 $’000 $’000

(e) Financial assets that are impairedDebt securities 732 910 Deposits with financial institutions (more than 90 days) 2,536 2,546 Loans and receivables 88,508 94,703 Financial assets of mutual fund unit holders 2,931 3,917

94,707 102,076

(f) Allowance for impairment Loans and Receivables

Premiums and Other reinsurance loans and Financial receivables receivables assets Total $’000 $’000 $’000 $’000

Balance at 1 January 2014 43,139 6,902 2,814 52,855 Exchange differences (504) (504) (10) (1,018)Provision for loan impairment 6,479 2,947 – 9,426 Amounts recovered/released during the year (3,803) (380) – (4,183)

Balance at 31 December 2014 45,311 8,965 2,804 57,080 Balance at 1 January 2013 20,677 5,224 2,792 28,693 Exchange differences 117 (594) 22 (455)Provision for loan impairment 26,758 2,272 – 29,030 Amounts written off during the year as uncollectible (734) – – (734)Amounts recovered/released during the year (3,679) – – (3,679)

Balance at 31 December 2013 43,139 6,902 2,814 52,855

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(g) Concentrations of risks of financial assets with credit risk exposureConcentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Group’s performance to developments affecting a particular industry.

The following table breaks down the Group’s main credit risk exposure at their carrying amounts, as categorised by the industry sectors of counterparties.

Wholesale & Financial Manu- Real retail Public Other institutions facturing estate trade sector industries Individuals Total $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000As at 31 December 2014 Debt securities 616,564 8,043 170,873 48,468 7,124,198 908,682 267 8,877,095 Financial assets of mutual fund unit holders 143,799 – 46,427 18,058 606,339 115,051 – 929,674 Deposits with financial institutions 2,208,291 – – – 64,244 – – 2,272,535 Other financial assets – – – – – 23,456 – 23,456 Interest receivable 35,378 84 1,439 89 149,010 12,948 – 198,948 Loans and receivables 1,397 – 339,516 – 23,219 997,587 344,873 1,706,592 Reinsurance assets – – – – – 687,155 8,487 695,642 Deferred acquisition costs – – – – – 87,491 – 87,491 Cash and cash equivalents 2,328,723 – – – 10,964 – – 2,339,687

5,334,152 8,127 558,255 66,615 7,977,974 2,832,370 353,627 17,131,120 As at 31 December 2013 Debt securities 701,548 9,459 123,190 33,725 7,231,386 898,406 268 8,997,982 Financial assets of mutual fund unit holders 204,776 – 22,087 17,928 605,482 120,174 – 970,447 Deposits with financial institutions 1,772,221 – – – 122,247 – – 1,894,468 Other financial assets 30,210 – – – 2,740 45,418 – 78,368 Interest receivable 44,908 89 55 112 155,975 10,914 – 212,053 Loans and receivables 706 – 143,926 – 23,771 1,088,912 355,273 1,612,588 Reinsurance assets – – – – – 701,347 9,327 710,674 Deferred acquisition costs – – – – – 90,728 – 90,728 Cash and cash equivalents 2,151,911 – – – 3,021 34,599 – 2,189,531

4,906,280 9,548 289,258 51,765 8,144,622 2,990,498 364,868 16,756,839


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4.2 Financial risk (continued) 4.2.4 Capital management

The Group’s capital includes share capital, reserves and retained earnings.

The Group’s objectives when managing capital are as follows:

● to comply with the capital requirements required by the regulators of the markets where the Group operates;

● to safeguard the Group’s ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders; and

● to provide an adequate return to shareholders by pricing insurance and investment contracts commensurately with the level of risk.

In each country in which the Group operates, the local insurance regulator indicates the required minimum amount and type of capital that must be held by each of the subsidiaries in addition to their insurance liabilities. The Group is also subject to insurance solvency regulations in all the territories in which it issues insurance and investment contracts. The minimum required capital must be maintained at all times throughout the year. The Group monitors these requirements throughout the year to ensure compliance.

The table below summarises the minimum required capital across the main territories in the Group. The Group has complied with these minimum capital requirements. These figures are an aggregate number, being the sum of the statutory capital and surplus for each insurance subsidiary in each country subject to local regulatory requirements, which may differ from jurisdiction to jurisdiction.

Guardian Re Trans-Nemwil Guardian Jamaica General Jamaica Trinidad Life Dutch Caribbean (SAC) Insurance General Insurance Life Insurance Insurance Insurance Limited Grenada Ltd Insurance Ltd Companies Company Companies Companies Group $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

2014Minimum regulatory capital 31,333 11,687 71,623 148,473 208,039 848,366 245,774 1,565,295

2013 Minimum regulatory capital 52,615 11,730 73,081 126,838 218,147 781,650 225,445 1,489,506

The Trinidadian asset management subsidiary holds a license under the Financial Institutions Act 2008 and as such the subsidiary is required to have a minimum paid up share capital of $15 million. Also the Act requires the subsidiary to transfer a minimum of 10% of its profit after tax to a Statutory Reserve Fund until the balance in the Fund is not less than the paid up capital of the subsidiary as well as the subsidiary’s qualifying capital shall be no less than 8% of its risk adjusted assets. The subsidiary has complied with these requirements.

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5. PROPERTY, PLANT AND EQUIPMENT

Freehold Office and furniture leasehold and Motor Work in properties equipment vehicles progress Total $’000 $’000 $’000 $’000 $’000

Year ended 31 December 2014Opening net book amount 413,756 89,462 9,264 24,548 537,030 Exchange rate adjustments (7,830) (2,203) (370) (1,521) (11,924)Revaluation surplus 9,321 – – – 9,321 Additions 16,332 20,745 7,344 8,152 52,573 Assets on acquisition of subsidiary – 145 463 – 608 Disposals and adjustments 505 (6,460) (1,246) (689) (7,890)Transfers 4,565 13,523 985 (19,073) – Transfer to assets held for sale (1,924) (136) – – (2,060)Depreciation charge (13,915) (23,002) (4,071) – (40,988)

Closing net book amount 420,810 92,074 12,369 11,417 536,670 At 31 December 2014 Cost or valuation 488,797 461,399 28,337 11,417 989,950 Accumulated depreciation (67,987) (369,325) (15,968) – (453,280)

Closing net book amount 420,810 92,074 12,369 11,417 536,670 Year ended 31 December 2013 Opening net book amount 393,221 82,589 9,914 11,418 497,142 Exchange rate adjustments (10,647) (2,341) (492) (884) (14,364)Revaluation surplus 42,724 – – – 42,724 Additions 8,662 36,575 3,390 14,395 63,022 Assets on acquisition of subsidiary – 2,680 1,266 – 3,946 Disposals and adjustments (1,190) (2,290) (1,320) (373) (5,173)Transfers – 8 – (8) – Transfer to assets held for sale (6,216) – – – (6,216)Depreciation charge (12,798) (27,759) (3,494) – (44,051)

Closing net book amount 413,756 89,462 9,264 24,548 537,030 At 31 December 2013 Cost or valuation 471,357 440,933 23,467 24,548 960,305 Accumulated depreciation (57,601) (351,471) (14,203) – (423,275)

Closing net book amount 413,756 89,462 9,264 24,548 537,030

The following are the dates of the last valuations of land and buildings in the Group: Guardian Life of the Caribbean Limited - September 2014 Bancassurance Caribbean Limited - September 2014 Guardian Life Limited - December 2014 Fatum Holding NV - November 2013 Guardian General Insurance Limited - September 2014 Guardian Shared Services Limited - September 2014

Valuations were made on the basis of open market value by external independent valuators. All valuators are accredited in the territory that they serve, specialising in the valuation of commercial, residential and mixed use properties. The valuations performed by the valuer are based on active market prices, adjusted for any difference in the nature, location or condition of the specific property.

Depreciation expense of $40,988,000 (2013: $44,051,000) has been charged in other operating expenses.


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5. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

If freehold and leasehold properties were stated on a historical cost basis, the amounts would be as follows:

2014 2013 $’000 $’000

Cost 379,196 360,310 Accumulated depreciation (72,541) (63,455)

Net book amount 306,655 296,855

6. INVESTMENT PROPERTIES

Investment properties (excluding Pointe Simon) 583,872 553,256 Pointe Simon 320,385 250,239

904,257 803,495

Investment properties (excluding Pointe Simon)Balance at beginning of year 553,256 529,144 Exchange rate adjustments (8,619) (2,137)Additions 9,841 21,893 Fair value adjustments (Note 33) 28,235 8,849 Disposals (441) (2,343)Fair value adjustments directly related to the unit linked funds 1,600 (2,150)

Balance at end of year 583,872 553,256

Rental income 36,990 32,492

Direct operating expenses incurred in respect of investment property that generated rental income during the year 2,901 2,632

Direct operating expenses incurred in respect of investment property that did not generate rental income during the year 170 317

Pointe Simon Investment property 320,385 250,239 Properties for development and sale (Note 11) 170,887 360,321

491,272 610,560

Balance at beginning of year 610,560 976,049 Exchange rate adjustments (77,592) 32,766 Additions 118,451 78,423 Disposals (160,147) (19,586)Fair value adjustment/provision for impairment – (457,092)


The Group has both commercial and residential investment properties in the following territories: Jamaica, Barbados, Trinidad & Tobago, Grenada and Martinique.

Valuations are conducted by external valuators. All valuators are accredited in the territory that they serve specialising in the valuation of commercial, residential and mixed use properties.

Residential Properties are mainly revalued using the comparable sales approach, which estimates the fair value based on sale prices of properties of similar nature or in similar locations with price adjustments being made for any notable differences between the sample and subject properties.

Commercial Properties are primarily valued using the income and sales comparison approaches, which involves determining the value of the properties by applying an appropriate valuation model to convert the expected future cash flows into present values. Discount rates applied to the model throughout the Group range from 5% to 10.5% (2013: 5.0% to 12.5%) as deemed most appropriate by the valuators in the respective territories.

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6. INVESTMENT PROPERTIES (CONTINUED)No investment property in the group is subject to any liens or mortgages and the Group has no curtailments with regard to the transfer, resale or other use of its investment properties. The Group is not under any contractual obligation with regard to significant development, enhancement, repair or maintenance of any investment properties.

7. INTANGIBLE ASSETS

Customer- related Goodwill intangibles Other Total $’000 $’000 $’000 $’000

Year ended 31 December 2014 Balance at beginning of year 335,549 56,282 4,402 396,233Exchange rate adjustments (9,272) (1,099) (850) (11,221)Acquisition of subsidiary (Note 46) 18,679 2,813 – 21,492Additions – – 4,162 4,162 Amortisation – (9,289) (2,085) (11,374)

Balance at end of year 344,956 48,707 5,629 399,292 At 31 December 2014 Cost 344,956 69,648 20,417 435,021 Accumulated amortisation – (20,941) (14,788) (35,729)

Net carrying value 344,956 48,707 5,629 399,292 Year ended 31 December 2013 Balance at beginning of year 361,304 – 5,697 367,001Exchange rate adjustments (1,902) 1,093 (231) (1,040)Acquisition of subsidiary (Note 46) 25,495 17,560 – 43,055Additions – – 882 882Adjustments (4,097) – – (4,097)Transfers (45,251) 45,251 – –Amortisation – (7,622) (1,946) (9,568)

Balance at end of year 335,549 56,282 4,402 396,233 At 31 December 2013 Cost 335,549 63,829 18,265 417,643 Accumulated amortisation – (7,547) (13,863) (21,410)

Net carrying value 335,549 56,282 4,402 396,233

Other intangible assets represent brand costs, computer software costs and website development costs.

Goodwill

Goodwill is assigned to the Group’s cash generating units on acquisition. In accordance with IFRS 3, all assets that gave rise to goodwill were reviewed for impairment at year end using the ‘value in use’ method. In each case, the cash flow projections were based on financial budgets for a three-year period approved by senior management with a growth assumption applied for later years.


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7. INTANGIBLE ASSETS (CONTINUED)Goodwill (continued)

A summary of the goodwill for each cash-generating unit is presented below: 2014 2013 $’000 $’000

Guardian General Insurance Limited 97,459 97,459 Guardian Insurance Limited 153,977 153,977 Globe Holdings Limited 6,204 5,387 Thoma Exploitatie B.V. 46,467 53,231 Royal & Sun Alliance Insurance (Antilles) N.V. 25,109 25,495 Kruit en Venema Assuradeuren B.V. 15,740 –

344,956 335,549

The key assumptions used for value-in-use calculations are as follows:

Discount Rate Growth Rate Cash generating unit 2014 2013 2014 2013

Guardian General Insurance Limited 12.8% 11.9% 5.0% 4.0%Guardian Insurance Limited (Trinidad based subsidiaries) 13.4% 11.7% 5.0% 5.0%Guardian Insurance Limited (Jamaica based subsidiary) 17.9% 18.4% 5.0% 5.0%Globe Holdings Limited 17.4% 15.9% 5.0% 2.0%Thoma Exploitatie B.V. 11.2% 10.6% 2.0% 2.0%Royal & Sun Alliance Insurance (Antilles) N.V. 10.3% 10.8% 2.0% 3.0%Kruit en Venema Assuradeuren B.V. 11.2% 0.0% 0.0% 0.0% Discount rates: Discount rates represent the current market assessment of the risks specific to each cash generating unit, taking into consideration the time value of money and individual risks of the underlying assets that have not been incorporated in the cash flow estimates. The discount rate calculation is based on the specific circumstances of the Group and its operating segments and is derived from its weighted average cost of capital (WACC).

Growth rates: Rates are based on published industry research and management’s expected performance of each cash generating unit.

Based on the results of the above review, no impairment expense was required for goodwill.

8. INVESTMENT IN ASSOCIATED COMPANIES

2014 2013 $’000 $’000

Balance at beginning of year 222,601 206,235 Exchange rate adjustments (758) 687 Investment in associated company 2 – Share of profit after tax 21,736 28,631 Dividends received (50,219) (8,644)Reserve and other movements 1,563 (142)Carrying value of associated company disposed of – (4,166)


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8. INVESTMENT IN ASSOCIATED COMPANIES (CONTINUED)The Group’s interests in its associates, which are unlisted, are as follows: Proportion of ownership interest and voting Country of power held Name Principal activity incorporation 2014 2013 RoyalStar Assurance Limited Property and Casualty Insurer Bahamas 25.8% 25.6%

Ocho Rios Beach Resorts Limited (Note 18) Commercial Real Estate Jamaica 24.0% 24.0%

RGM Limited Property Development & Republic of Facilities Management Trinidad & Tobago 33.3% 33.3%

Sas Compagnie Hoteliere de la Pointe Simon Hotel Operations Martinique 24.0% 0.0%

Summarised financial information in respect of each of the Group’s associates is set out below. The summarised financial information below represents amount shown in the associate’s financial statements prepared in accordance with IFRSs (adjusted by the Group for equity accounting purposes).

RoyalStar Assurance Limited RGM Limited 2014 2013 2014 2013 $’000 $’000 $’000 $’000

Total assets 404,528 418,396 859,815 913,454 Total liabilities (167,159) (183,291) (458,551) (426,495)

Equity 237,369 235,105 401,264 486,959

Carrying amount of the investment 61,170 60,281 133,755 162,320

Revenue 176,819 178,537 202,922 188,328

Profit for the year 19,351 23,447 50,330 67,599

Other comprehensive income – – 1,831 1,416

Total comprehensive income 19,351 23,447 52,160 69,015

Dividends received during the year 3,191 3,207 47,028 5,437

The associated companies had no contingent liabilities at 31 December 2013 or 2014.

RGM Limited has capital commitments in respect of a property development in progress in the amount of $73,424,000 (2013: $98,968,000). RoyalStar Assurance Limited has no capital commitments at 31 December 2013 or 2014.

9. FINANCIAL ASSETS

2014 2013 Carrying value Fair value Carrying value Fair value $’000 $’000 $’000 $’000

Financial assets 12,853,201 13,470,229 12,442,154 13,074,838 Financial assets of mutual fund unit holders 1,080,154 1,080,154 1,110,918 1,110,918

13,933,355 14,550,383 13,553,072 14,185,756

Financial assets at fair value through profit or loss 6,371,229 6,371,229 6,284,408 6,284,408 Held to maturity financial assets 7,562,126 8,179,154 7,268,664 7,901,348

Total financial assets 13,933,355 14,550,383 13,553,072 14,185,756


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9. FINANCIAL ASSETS (CONTINUED)

Carrying value 2014 2013Financial assets at fair value through profit or loss $’000 $’000

Equity securities: - Listed 1,752,195 1,477,534 - Unlisted 29,313 40,075

1,781,508 1,517,609

Debt securities: - Government securities 2,381,625 2,550,984 - Debentures and corporate bonds 1,479,259 1,546,787

3,860,884 4,097,771 Deposits with financial institutions (more than 90 days) 600,328 486,257 Other 23,456 78,368

623,784 564,625

6,266,176 6,180,005 Interest receivable 105,053 104,403

6,371,229 6,284,408

Current 851,249 892,113 Non-current 5,519,980 5,392,295

6,371,229 6,284,408

The carrying amount of financial assets above that were pledged as collateral for liabilities was $22,037,000 (2013: $10,051,000).

2014 2013 Carrying value Fair value Carrying value Fair value $’000 $’000 $’000 $’000Held-to-maturity financial assetsDebt securities: - Government securities 5,231,766 5,811,748 5,149,183 5,751,998 - Debentures and corporate bonds 497,385 534,431 513,379 543,248

5,729,151 6,346,179 5,662,562 6,295,246 Deposits with financial institutions (more than 90 days) 1,696,291 1,696,291 1,460,939 1,460,939

7,425,442 8,042,470 7,123,501 7,756,185 Interest receivable 136,684 136,684 145,163 145,163

7,562,126 8,179,154 7,268,664 7,901,348

Carrying value 2014 2013 $’000 $’000

Current 1,671,598 1,649,025 Non-current 5,890,528 5,619,639

7,562,126 7,268,664

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9. FINANCIAL ASSETS (CONTINUED)

The table below illustrates the movements in financial assets:

Financial Held to assets at fair maturity value through financial income statement assets Total $’000 $’000 $’000

At beginning of 2014 6,180,005 7,123,501 13,303,506 Exchange differences (141,848) (139,873) (281,721)Additions 1,912,710 3,103,377 5,016,087 Disposals/maturities (1,733,998) (2,648,966) (4,382,964)Fair value adjustments 32,854 – 32,854 Capitalised interest 16,453 127 16,580 Transfer to assets held for sale – (12,724) (12,724)

At the end of 2014 6,266,176 7,425,442 13,691,618 At beginning of 2013 6,311,140 6,634,213 12,945,353 Exchange differences (110,371) (146,500) (256,871)Additions 3,609,249 3,347,969 6,957,218 Disposals/maturities (3,659,400) (2,716,354) (6,375,754)Fair value adjustments 39,818 – 39,818 Assets on acquisition of subsidiary – 4,036 4,036 Impairment losses (10,572) – (10,572)Capitalised interest 141 137 278

At the end of 2013 6,180,005 7,123,501 13,303,506

10. LOANS AND RECEIVABLES

2014 2013 $’000 $’000

Debt securities:- Government securities 12,334 24,609 - Debentures and corporate bonds 134,723 90,434

147,057 115,043

Premiums receivable 318,646 321,580 Deposits with / due from reinsurers 207,171 245,615 Provision for impairment of premium and reinsurance receivables (45,311) (43,139)Mortgages 405,525 393,363 Policy loans 57,855 62,583 Other loans and receivables 694,617 565,138 Provision for impairment of other loans and receivables (8,965) (6,902)

1,629,538 1,538,238 Interest receivable 22,778 24,308

1,799,373 1,677,589

Current 928,472 1,065,830 Non-current 870,901 611,759

1,799,373 1,677,589

The carrying amounts of loans and receivables (excluding debt securities) are reasonable approximations of their fair values. The fair value of debt securities amounted to $167,691,000 (2013: $171,534,000). There were no loans and receivables pledged as collateral for liabilities at year end (2013: nil).


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11. PROPERTIES FOR DEVELOPMENT AND SALE

2014 2013 $’000 $’000

Properties for development and sale (Note 6) 170,887 360,321

Properties for development and sale comprise the Group’s investment in one component of a mixed use commercial and residential urban re-development project in Fort De France, Martinique, which is for sale.

The French government provides incentives for qualifying property developments in France’s overseas territories. During 2013 and 2014, the Group availed itself of the programme and received funds based upon agreed valuations of twenty-five condominium units (2013 – three units). The sums received have been recorded as other income.

While legal title has been transferred to third parties, the arrangement contemplates that at the expiration of a six-year period (2019 and 2020), the units will return to the Group’s legal ownership, and will be available for disposal to third parties at the prevailing market price. Accordingly, the Group has not derecognised these assets, and continues to account for these units within properties for development and sale.

During 2014, the Group sold the hotel property at a gross consideration of TT$178,819,000 (€21,160,000), resulting in a profit of TT$8,901,000 (€1,053,240), to a Martinique incorporated company known as Sas Compagnie Hoteliere de la Pointe Simon (CHPS). As part of the sale negotiation, the Group acquired a 24% interest in CHPS for nominal consideration, and accordingly, will account for the company as an associate (Note 8). At 31 December 2014, the assets and liabilities of CHPS were approximately equal at TT$177 million (€23 million).

The Group financed the sale to CHPS, which will partially be repaid in identified blocks during 2015 to 2017. The remaining balance due at the end of 2017 will be payable in 20 biannual instalments, with a bullet payment at maturity.

12. PENSION PLAN ASSETS / LIABILITIES

The following information explains the quantification of the assets and liabilities recognised in the consolidated statement of financial position and the net income for the year in accordance with the provisions of IAS 19. Net Pension plan asset Pension plan liability pension plan liability 2014 2013 2014 2013 2014 2013 $’000 $’000 $’000 $’000 $’000 $’000 Fair value of pension plan assets 369,684 341,024 414,843 399,037 784,527 740,061 Less: Present value of funded obligations (281,934) (249,757) (513,601) (559,504) (795,535) (809,261)

87,750 91,267 (98,758) (160,467) (11,008) (69,200)Less: Present value of unfunded obligations – – (953) (1,050) (953) (1,050)

IAS 19 Consolidated statement of financial position assets/(liabilities) 87,750 91,267 (99,711) (161,517) (11,961) (70,250)

The amount in the consolidated income statement is made up as follows:- 2014 2013 $’000 $’000

Net interest expense (2,105) (841)Current service cost (23,797) (23,159)Adjustment in value of recognisable assets 332 164

Net loss for the year (Note 35) (25,570) (23,836)

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12. PENSION PLAN ASSETS / LIABILITIES (CONTINUED)

The remeasurement of pension plan obligations in other comprehensive income is made up as follows:-

2014 2013 $’000 $’000

Actuarial gains and losses arising during the period: - from changes in demographic assumptions (13,821) (13,694)- from changes in financial assumptions 10,572 (20,996)- from experience adjustment 55,931 (7,069)

52,682 (41,759)

The movement in the fair value of pension plan assets of the year is as follows: Balance at beginning of year 740,061 701,145 Exchange rate adjustments (4,584) 1,016 Benefit payments (29,963) (21,435)Company contributions 32,573 25,208 Contributions by plan participants 1,494 1,132 Remeasurement arising from changes in demographic assumptions – (10,349)Remeasurement arising from experience adjustment 11,649 7,914 Interest income 33,297 35,430


The movement in the obligation to plan members over the year is as follows:Balance at beginning of year 810,311 730,976 Exchange rate adjustments (3,395) 1,012 Current service cost 23,797 23,159 Interest cost 35,402 36,138 Past service cost – 109 Contributions by plan participants 1,369 1,028 Remeasurement arising from changes in demographic assumptions 13,821 3,345 Remeasurement arising from changes in financial assumptions (10,572) 20,996 Remeasurement arising from experience adjustment (44,282) 14,983 Benefits paid (29,963) (21,435)


The principal actuarial assumptions used for accounting purposes were:

2014 2013

Discount rates 4.1% - 7.8% 4.0% - 8.0% Future salary increases 0.0% - 5.0% 2.0% - 5.0% Post retirement mortality GAM 94/ GAM 94/ GBM/GBV2000 - 2005 GBM/GBV2000 - 2005 Pre-retirement mortality GAM 94 GAM 94 Withdrawal from service Yes Yes Future pension increases 0.0% - 3.5% 0.0% - 3.5% Proportion of employees opting for early retirement Nil Nil Life expectation of pensioners at the age of 65 -male 16.6 to 18.3 years 15.3 to 18.3 years Life expectation of pensioners at the age of 65 -female 20.3 to 21.8 years 19 to 21.8 years The actual return on plan assets was $18,215,000 (2013: $42,635,000).


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12. PENSION PLAN ASSETS / LIABILITIES (CONTINUED)

Pension plan assets are comprised as follows: 2014 2013 $’000 % $’000 %

Quoted investmentsEquity securities - Republic of Trinidad and Tobago 134,348 17.1% 141,935 19.2%- Non Caribbean 7,580 1.0% 7,941 1.1%Government securities - Republic of Trinidad and Tobago 77,691 9.9% 81,947 11.1%- Other Caribbean 166,267 21.2% 139,859 18.9%- Non Caribbean 20,730 2.6% 18,578 2.5%Corporate bonds - Republic of Trinidad and Tobago 29,239 3.7% 26,161 3.5%- Non Caribbean 120,978 15.4% 113,246 15.3% Cash and cash equivalents 7,166 0.9% 29,862 4.0%Property 14,300 1.8% 14,500 2.0%Other 206,228 26.4% 166,032 22.4%

784,527 100.0% 740,061 100.0% The defined benefit plan assets as at 31 December 2014 include the Group’s financial instruments of $14,478,000 (2013: $22,815,000). Included in the plan assets is a property with fair value $14,500,000 (2013: $14,500,000) which is not occupied by the Group.

Contributions from the defined contribution plan are invested in a deposit administration contract. The deposit administration contract is part of a general fund which is managed by a Group subsidiary.

The Group’s expected contributions to its defined benefit pension plans for the year ending 31 December 2015 are $30,006,000.

The average duration of the defined benefit plans obligation at the end of the reporting period is 14.6 to 25.7 years (2013: 13.1 to 25.5 years).

A quantitative sensitivity analysis for significant assumptions as at 31 December 2014 is shown below:

Impact on the net defined benefit obligation Increase Decrease 1% increase/decrease in discount rate (108,727) 139,759 1% increase/decrease in future salary increases 29,855 (25,660)1% increase in future pension increases 48,555 (40,746)Life expectancy increase/decrease by 1 year - male 4,544 (4,404)Life expectancy increase/decrease by 1 year - female 3,503 (3,659) The sensitivity analyses above have been determined based on a method that extrapolates the impact on net defined benefit obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period.

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13. VALUE OF INFORCE LIFE INSURANCE BUSINESS

2014 2013 $’000 $’000

Balance at beginning of year 924,743 879,080 Exchange rate adjustments (25,018) (38,181)Transfer to assets held for sale (7,797) – Increase for the year (Note 41) 154,386 83,844

Balance at end of year 1,046,314 924,743

Changes in assumptions during the year: For the Jamaican life insurance subsidiary: Changes in expense assumptions 80 1,192 Changes in lapse assumptions – 10,788 Changes in investment returns (3,940) (6,525)Changes in other assumptions – (479)

Total change (3,860) 4,976 For the Trinidad life insurance subsidiaries: Changes in expense assumptions 70,140 – Changes in other assumptions – –

Total change 70,140 – There were no changes in the assumptions used for the life insurance subsidiaries in the Dutch Caribbean.

14. DEFERRED TAXATION

The following amounts are shown in the consolidated statement of financial position:

Deferred tax assets: - To be recovered after more than 12 months 13,918 15,989 - To be recovered within 12 months 9,715 5,920

23,633 21,909

Deferred tax liabilities: - Crystallising after more than 12 months (209,421) (214,449)- Crystallising within 12 months (5,887) (15,334)

(215,308) (229,783)

Net deferred tax liability (191,675) (207,874) Deferred income tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax benefit through the future taxable profits is probable.

The movement on the net deferred tax account is as follows: Balance at beginning of year (207,874) (175,534)Exchange rate adjustments 4,005 3,088 Credit/(charge) for the year (Note 38) 18,425 (29,636)Tax charged to equity in respect of revaluation of properties (158) (3,289)Acquisition of subsidiary (Note 46) (2,292) – Other movements (3,781) (2,503)

Balance at end of year (191,675) (207,874)


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The movement in the net deferred tax assets and liabilities during the year is attributable to the following items:

Balance at Exchange Credit/ Revaluation Acquisition beginning rate (charge) for of Other of Balance at of year adjustment the year properties movements subsidiary Dec 2014 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Future distributions (133,605) 1,003 9,933 – – – (122,669) Zero coupon bonds (13,716) – 9,659 – – – (4,057) Pension plan assets 14,693 28 (876) – (5,202) – 8,643 Accelerated tax depreciation (16,217) 368 (1,518) – – – (17,367) Tax losses carried forward 4,580 (372) 2,726 – – – 6,934 Investments at fair value through profit or loss (24,376) 1,098 (3,963) – 1,350 – (25,891) Intangibles (10,680) 1,070 2,073 – – (2,292) (9,829) Revaluation of properties (12,919) 830 (161) (158) – – (12,408) Post retirement medical benefit obligation 2,636 (20) 188 – 71 – 2,875 Catastrophe reserve (18,270) – 364 – – – (17,906)

(207,874) 4,005 18,425 (158) (3,781) (2,292) (191,675)

Balance at Exchange Credit/ Revaluation Acquisition beginning rate (charge) for of Other of Balance at of year adjustment the year properties movements subsidiary Dec 2013 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Future distributions (130,130) 1,349 (4,816) – (8) – (133,605) Zero coupon bonds (12,977) – (739) – – – (13,716) Pension plan assets 3,052 – 1,003 – 10,638 – 14,693 Accelerated tax depreciation (13,463) 237 (3,152) – 161 – (16,217) Tax losses carried forward 11,853 20 (7,052) – (241) – 4,580 Investments at fair value through profit or loss (8,025) 1,004 (16,005) – (1,350) – (24,376) Intangibles – (250) 1,465 – (11,895) – (10,680) Revaluation of properties (10,467) 811 26 (3,289) – – (12,919) Post retirement medical benefit obligation 3,016 (83) (489) – 192 – 2,636 Catastrophe reserve (18,393) – 123 – – – (18,270)

(175,534) 3,088 (29,636) (3,289) (2,503) – (207,874)

There are tax losses relating to subsidiaries that are available for set off against future chargeable profits of $325,141,000 (2013 - $284,208,000). These tax losses expire over varying periods. No deferred tax asset has been recognised on tax losses carried forward of $318,027,000 (2013 - $284,208,000), due to the uncertain timing of their recovery. Some of these losses have not yet been agreed with the respective tax authorities.

14. DEFERRED TAXATION (CONTINUED)

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15. REINSURANCE ASSETS

2014 2013 $’000 $’000

This represents the Group’s net contractual rights under reinsurance contracts:

Long term insurance contracts: With fixed and guaranteed terms 41,669 44,180 Without fixed terms 26,591 23,051

68,260 67,231

Short term insurance contracts: Claims reported and loss adjustment expenses (Note 22.1(e)) 268,624 310,503 Claims incurred but not reported (Note 22.1(e)) 68,406 24,745 Unearned premiums (Note 22.1(f)) 290,352 308,195

627,382 643,443

Total reinsurers’ share of insurance liabilities 695,642 710,674

Current 466,534 482,528 Non-current 229,108 228,146

Total reinsurers’ share of insurance liabilities 695,642 710,674

16. DEFERRED ACQUISITION COSTS

Short-term insurance contracts: Balance at beginning of year 90,728 79,354 Acquisition of subsidiary – 16,915 Exchange rate adjustments (5,042) (1,392)Increase in the year 94,031 68,721 Release in the year (92,226) (72,870)


Current 87,491 90,728 Non-current – –

87,491 90,728

17. CASH AND CASH EQUIVALENTS

Cash at bank and in hand 1,588,481 1,281,768 Short term deposits (90 days or less) 645,492 749,791

Cash and cash equivalents 2,233,973 2,031,559 Cash and cash equivalents in mutual funds 105,714 157,972

Net cash and cash equivalents 2,339,687 2,189,531

At beginning of year 2,189,531 2,025,761 Exchange rate adjustments (11,123) (21,037)Transfer to assets held for sale (2,368) – Acquisition of subsidiary 1,775 47,113

2,177,815 2,051,837 At end of year 2,339,687 2,189,531

Net increase in cash used in cash flow 161,872 137,694


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17. CASH AND CASH EQUIVALENTS (CONTINUED)

Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates.

The carrying amount of cash and cash equivalents pledged as collateral for financial liabilities was nil as at 31 December 2014 (2013: $13,960,000).

18. ASSETS AND LIABILITIES HELD FOR SALE

Assets and liabilities held for sale

In accordance with the requirements of IFRS 5, the Group classified its investment in Ocho Rios Beach Resorts Limited, its Belize branch life insurance portfolio and its Lloyd’s syndicate operations as “Assets held for sale” and “Liabilities related to assets held for sale”. Details are as follows:

Ocho Rios Beach Resorts Limited

In January 2013, the Group accepted an offer to sell its investment in Ocho Rios Beach Resorts Limited and on this basis has reclassified their interest as held for sale in the consolidated statement of financial position. The Group is in the process of finalising the share purchase agreement and the sale is expected to be completed in early 2015.

Guardian Life Limited - Belize Branch

On 4 September, 2014, the Group entered into an agreement for the transfer of all contracted life insurance policies in Belize subject to regulatory approval. The transaction received conditional regulatory approval on 17 December, 2014 and has an effective date of 1 January, 2015. The assets supporting the life insurance and pension liabilities of the Group’s Belize branch have been presented as held for sale following the approval of the Board of Directors prior to the year end to sell the insurance and pension portfolios of the Belize branch.

Lloyd’s Syndicates

The Group’s reinsurance subsidiary Guardian Re (SAC) Limited provided proportional quota share reinsurance on an international property book and incidental life book written in the Lloyd’s market up to 30 September 2011. After this date, the Group ceased underwriting any new risks at Lloyd’s or offering renewal at expiry, and is actively seeking to dispose of its residual interest in these treaties. Consequently, the Group’s residual interests in these treaties have been classified as a disposal group held for sale and as a discontinued operation.

The net results of the disposal group have been consolidated into one line on the Statement of Income as Net loss on Discontinued Operations. These results are presented below:

2014 2013 $’000 $’000

Revenue 57,843 (9,677)Expenses (32,190) 33,981

Net gain on discontinued operations (attributable to equity holders of the parent) 25,653 24,304

The major classes of assets and liabilities classified as held for sale are as follows:

Assets held for sale Financial assets 28,771 53,899 Reinsurance assets 11,602 35,353 Value of inforce life insurance business 7,797 – Deferred acquisition cost 30,837 55,558 Investment in associated company 9,135 9,660 Cash and cash equivalents 2,368 – Loans and receivables 114,266 165,926

204,776 320,396

Liabilities related to assets held for saleLong term insurance contracts 22,721 – Short term insurance contracts 151,732 304,520 Investment contract liabilities 3,743 – Other liabilities 3,970 –

182,166 304,520

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19. SHARE CAPITAL

2014 2013 $’000 $’000

Authorised An unlimited number of ordinary shares of no par value An unlimited number of preferred shares of no par value Issued and fully paid 231,899,986 ordinary shares of no par value (2013: 231,899,986 ordinary shares) 2,038,936 2,041,882 Number of shares Share capital Share option plan Total (thousands) $’000 $’000 $’000 Balance at 1 January 2014 231,897 1,967,556 74,326 2,041,882 Movement in unallocated shares 3 61 – 61 Executive share option plan: - value of services provided – – 936 936 - value of lapsed options – – (3,943) (3,943)

Balance at 31 December 2014 231,900 1,967,617 71,319 2,038,936

Balance at 1 January 2013 231,897 1,967,556 68,825 2,036,381 Executive share option plan: - value of services provided – – 5,501 5,501

Balance at 31 December 2013 231,897 1,967,556 74,326 2,041,882

Performance share option plan

The Group operates a Stock Option Plan for its Executives. A total of 33,890,023 shares have been allocated to this plan since inception inclusive of bonus issues and stock dividends. Increases were approved at the Annual Meetings in 1999, 2004 and in 2011.

The current status of options inclusive of bonus issues and stock dividends to date is as follows (in thousands): 2014 2013

Total shares allocated to the plan 33,890 33,890 Issued pursuant to exercise of options (9,586) (9,586)Outstanding options (17,266) (18,907)

Remaining shares allocated to plan in respect of which options have not been granted 7,038 5,397

The movement in the number of share options outstanding for the year is as follows:

2014 2014 2013 2013 Average Options Average Options exercise (thousands) exercise (thousands) price price At beginning of year $ 21.06 18,907 $ 21.06 18,907 Lapsed $ 18.00 (1,641) – –

At end of year $ 21.34 17,266 $ 21.06 18,907 The exercise price of the options granted up to 2008 is equal to the average market price of the shares on the three dealing days preceding the date of the grant. The exercise price of the options granted from 2011 is the greater of $18.00 and the adjusted reference price. The vesting period is 2 years. Options are exercisable starting two years from the grant date up to the eighth anniversary of the date of grant. The Group has no legal or constructive obligation to repurchase or settle the options in cash.


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19. SHARE CAPITAL (CONTINUED)

Share options outstanding at the end of the year have the following expiry dates and exercise prices:

Number of shares Expiry Exercise (thousands) date price 2014 2013

14 Sep 2015 $21.40 243 243 31 Mar 2016 $33.17 763 763 3 Apr 2017 $43.33 695 695 28 May 2018 $27.73 1,398 1,398 2 Apr 2019 $19.99 1,511 1,511 31 Mar 2020 $24.51 1,694 1,694 5 Sep 2021 $18.00 4,276 5,085 12 Apr 2022 $18.00 6,686 7,518

17,266 18,907

20. RESERVES

Property revaluation Statutory Translation reserve reserves reserves Total $’000 $’000 $’000 $’000

Balance at 1 January 2014 129,771 14,503 (540,747) (396,473)Other comprehensive income/(loss) 9,158 – (244,682) (235,524)Transfer to/from retained earnings 40,466 9,376 – 49,842

Balance at 31 December 2014 179,395 23,879 (785,429) (582,155)

Balance at 1 January 2013 98,022 12,564 (455,190) (344,604)Other comprehensive income/(loss) 31,749 (14) (85,507) (53,772)Transfer to/from retained earnings – 1,953 (50) 1,903

Balance at 31 December 2013 129,771 14,503 (540,747) (396,473) A statutory reserve is maintained by general insurance companies in Trinidad and Tobago. This is in accordance with the provisions of Section 171 of the Insurance Act 1980 of Trinidad and Tobago, where companies are required to appropriate towards statutory reserve at least 25% of the prior year’s profit until the excess of assets over liabilities equals or exceeds the reserve in respect of its unearned premiums. The general insurance companies in Trinidad and Tobago comply with this requirement. The Financial Institutions Act 1993 requires a financial institution in Trinidad and Tobago to transfer annually a minimum of 10% of its profit after taxation to a reserve fund until the balance on this reserve is not less than the paid up capital of the institution. The asset management company in Trinidad and Tobago complies with this requirement.

21. NON-CONTROLLING INTERESTS IN SUBSIDIARIES

At the end of the year, the non-controlling interest balance represents a 46% (2013: 46%) effective shareholding in Trans-Nemwil Insurance (Grenada) Limited. During the year, the Group acquired all of the outstanding non-controlling interests’ shares in Laevulose Inc. Limited (“LIL”) Group for EUR4,378,000 (TTD34,184,000). TTD13,115,000 of the purchase price was paid to a related party of the Group. The following summarises the additional interest acquired in LIL Group: $’000 Cash consideration paid to non-controlling shareholders 34,184 Carrying value of the additional interest in Laevulose Inc. Limited Group 207,121

Additional interest acquired - recognised in retained earnings within equity 241,305

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21. NON-CONTROLLING INTERESTS IN SUBSIDIARIES (CONTINUED)

The summarised financial information of these subsidiaries are provided below. This information is based on amounts before inter-company adjustments.

Trans-Nemwil Insurance Laevulose (Grenada) Limited Inc. Limited Group 2014 2013 2014 2013 $’000 $’000 $’000 $’000

(a) Summarised statement of financial positionInvestment properties 2,576 2,585 – 250,239 Financial assets 44,375 41,267 – 1,808 Properties for development and sale – – – 360,321 Other assets 27,759 28,263 – 24,311

Total assets 74,710 72,115 – 636,679

Total equity 50,349 47,462 – (657,773)

Insurance contracts 20,988 22,271 – – Other liabilities 3,373 2,382 – 1,294,453

Total liabilities 24,361 24,653 – 1,294,453

Total equity and liabilities 74,710 72,115 – 636,680

Carrying amount of non-controlling interests 23,163 21,832 – (222,016)

Dividends paid to non-controlling interests 921 1,197 – –

(b) Summarised statement of income/(loss)Net result from insurance activities 11,514 10,510 – – Net income from investing activities 1,395 934 – (499,775)

Net income/(loss) from all activities 12,909 11,444 - (499,775)Operating expenses (5,893) (6,025) – (7,943)

Operating profit/(loss) 7,016 5,419 - (507,718)Taxation (1,912) (253) – (34)

Profit/(loss) after taxation 5,104 5,166 – (507,752)

Total comprehensive income/(loss) 4,891 5,470 – (533,170)

Profit/(loss) allocated to non-controlling interests 2,348 2,377 (14,619) (177,698)Total comprehensive income/(loss) allocated to non-controlling interests 2,250 2,516 14,897 (188,914)

(c) Summarised statement of cash flows Cash flows from operating activities 2,088 1,708 – 83,935 Cash flows from investing activities (332) (63) – (77,441)Cash flows from financing activities (2,003) (2,602) – –

Net (decrease)/increase in cash and cash equivalents (247) (957) – 6,494


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22. INSURANCE CONTRACTS

2014 2013 $’000 $’000

Long term insurance contracts: With fixed and guaranteed terms and without DPF (Note 22.1(a)) 6,557,805 6,338,557 With fixed and guaranteed terms and with DPF (Note 22.1 (b)) 38,961 51,179 Without fixed terms (Note 22.1(c)) 4,648,852 4,246,797

11,245,618 10,636,533 Participating policyholders’ share of the surplus from long-term insurance business (Note 22.1(d)) 473,889 475,334

11,719,507 11,111,867

Short term insurance contracts: Claims reported and loss adjustment expenses (Note 22.1(e)) 845,872 1,055,841 Claims incurred but not reported (Note 22.1(e)) 156,494 75,776 Unearned premiums (Note 22.1(f)) 788,344 838,033

1,790,710 1,969,650

Total gross insurance liabilities 13,510,217 13,081,517

Current 1,412,918 1,433,815 Non-current 12,097,299 11,647,702

13,510,217 13,081,517 22.1 Movements in insurance liabilities and reinsurance assets (a) Long term insurance contracts with fixed and guaranteed terms and without DPF

At beginning of year 6,338,557 6,149,370 Net exchange differences (179,454) (154,849)Valuation premiums received 329,979 312,819 Liabilities released for payments on death, surrender and other terminations in the year (218,426) (287,950)Accretion of interest 225,118 216,100 Cash paid for claims settled in the year (339,195) (228,011)Increase in liabilities 342,912 231,141 Other movements 74,505 99,937 Transfer to liabilities related to assets held for sale (16,191) –

At end of year 6,557,805 6,338,557

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

At beginning of year 51,179 58,015 Net exchange differences (4,435) (7,087)Change in lapse rates – (123)Change in interest rates 2,169 1,514 Change in expenses (29) 28 Transfer to liabilities related to assets held for sale (6,530) – Normal decrease due to the passage of time (3,393) (1,168)

At end of year 38,961 51,179

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22. INSURANCE CONTRACTS (CONTINUED)

22.1 Movements in insurance liabilities and reinsurance assets (continued) 2014 2013 $’000 $’000

(c) Long term insurance contracts without fixed terms

At beginning of year 4,246,797 3,740,578 Net exchange differences (612) 700 Premiums received 769,590 861,481 Fees deducted from account balances (261,379) (273,890)Liabilities released for payments on death, surrender and other terminations in the year (375,241) (329,360)Changes in unit prices 118,570 219,620 Cash paid for claims settled in the year (364,507) (342,428)Increase in liabilities 386,172 349,522 Other movements 129,462 20,574

At end of year 4,648,852 4,246,797

(d) Participating policyholders’ share of the surplus from long-term insurance business

At beginning of year 475,334 462,764 Surplus arising from operations 2,093 17,118 Translation reserve (3,538) (4,548)

At end of year 473,889 475,334

Short term insurance contracts:(e) Claims and loss adjustment expenses/claims incurred but not reported

2014 2013 Gross Reinsurance Net Gross Reinsurance Net $’000 $’000 $’000 $’000 $’000 $’000

Year ended 31 DecemberNotified claims 1,055,841 (310,503) 745,338 1,129,693 (320,021) 809,672 Incurred but not reported 75,776 (24,745) 51,031 152,551 (30,686) 121,865

Total at beginning of year 1,131,617 (335,248) 796,369 1,282,244 (350,707) 931,537 Acquisition of subsidiary – – – 28,700 (16,118) 12,582 Cash paid for claims settled in the year (1,196,604) 211,486 (985,118) (1,158,609) 142,904 (1,015,705)Increase in liabilities 1,097,196 (212,180) 885,016 994,710 (110,293) 884,417 Net exchange differences (29,843) (1,088) (30,931) (15,428) (1,034) (16,462)

Total at end of year 1,002,366 (337,030) 665,336 1,131,617 (335,248) 796,369

Notified claims 845,872 (268,624) 577,248 1,055,841 (310,503) 745,338 Incurred but not reported 156,494 (68,406) 88,088 75,776 (24,745) 51,031

1,002,366 (337,030) 665,336 1,131,617 (335,248) 796,369


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22.1 Movements in insurance liabilities and reinsurance assets (continued)

Short term insurance contracts (continued):(f) Provisions for unearned premiums 2014 2013

Gross Reinsurance Net Gross Reinsurance Net $’000 $’000 $’000 $’000 $’000 $’000

Year ended 31 DecemberTotal at beginning of year 838,033 (308,195) 529,838 832,901 (303,604) 529,297 Acquisition of subsidiary – – – 75,592 (35,321) 40,271 Increase in the period 804,434 (291,525) 512,909 687,359 (239,895) 447,464 Release in the period (826,573) 305,039 (521,534) (746,065) 255,795 (490,270)Net exchange differences (27,550) 4,329 (23,221) (11,754) 14,830 3,076

Total at end of year 788,344 (290,352) 497,992 838,033 (308,195) 529,838

22.2 Development claim tables - short term insurance contracts

The development of insurance liabilities provides a measure of the Group’s ability to estimate the ultimate value of claims. Claims development tables are disclosed on an accident year basis (where the reference is to the actual date of the event that caused the claim), with the exception of international property and casualty claims which is disclosed by underwriting year account.

The top half of each table below illustrates how the Group’s estimate of total claims outstanding for each accident year / underwriting year has changed at successive year ends. The bottom half of the table reconciles the cumulative claims to the amount appearing on the consolidated statement of financial position as per summary below.

Total $’000Insurance claims - gross - By accident year 695,938 - By underwriting year 306,428

Total liability (Note 22.1 (e)) 1,002,366 Insurance claims - net - By accident year 529,838 - By underwriting year 135,498

Total liability (Note 22.1 (e)) 665,336

Insurance claims - gross Accident year 2010 2011 2012 2013 2014 Total $’000 $’000 $’000 $’000 $’000 $’000Estimate of ultimate claims costs: - at end of accident year 933,889 817,958 879,264 1,047,841 1,060,410 – - one year later 864,920 749,726 788,952 1,002,147 – – - two years later 882,818 828,251 798,090 – – – - three years later 870,429 817,987 – – – – - four years later 859,664 – – – – –

Current estimate of cumulative claims 859,664 817,987 798,090 1,002,147 1,060,410 4,538,298 Cumulative payments to date (823,458) (739,585) (744,263) (882,830) (751,307) (3,941,443)

Liability recognised in the consolidated statement of financial position 36,206 78,402 53,827 119,317 309,103 596,855 Liability in respect of prior years 99,083

Total liability 695,938

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22.2 Development claim tables - short term insurance contracts (continued)

Insurance claims - gross Underwriting year 2010 2011 2012 2013 2014 Total $’000 $’000 $’000 $’000 $’000 $’000Estimate of ultimate claims costs: - at end of underwriting year 36,247 32,638 9,722 59,683 34,370 – - one year later 44,550 40,004 13,293 68,642 – – - two years later 45,323 38,265 13,454 – – – - three years later 44,337 38,465 – – – – - four years later 44,229 – – – – –

Current estimate of cumulative claims 44,229 38,465 13,454 68,642 34,370 199,160 Cumulative payments to date (39,335) (34,390) (7,385) (34,932) (6,129) (122,171)Liability recognised in the consolidated statement of financial position 4,894 4,075 6,069 33,710 28,241 76,989 Liability in respect of prior years 229,439


Insurance claims - net Accident year 2010 2011 2012 2013 2014 Total $’000 $’000 $’000 $’000 $’000 $’000Estimate of ultimate claims costs: - at end of accident year 778,897 780,340 764,898 791,062 866,473 – - one year later 698,659 666,690 636,788 720,992 – – - two years later 715,861 697,426 667,296 – – – - three years later 715,875 694,694 – – – – - four years later 702,722 – – – – –

Current estimate of cumulative claims 702,722 694,694 667,296 720,992 866,473 3,652,177 Cumulative payments to date (659,398) (629,819) (613,533) (649,054) (631,882) (3,183,686)



Insurance claims - net Underwriting year 2010 2011 2012 2013 2014 Total $’000 $’000 $’000 $’000 $’000 $’000Estimate of ultimate claims costs: - at end of underwriting year 36,247 32,638 9,722 59,683 34,370 – - one year later 44,550 40,004 13,293 68,642 – – - two years later 45,323 38,265 13,454 – – – - three years later 44,337 38,465 – – – – - four years later 44,229 – – – – –

Current estimate of cumulative claims 44,229 38,465 13,454 68,642 34,370 199,160 Cumulative payments to date (39,335) (34,390) (7,385) (34,932) (6,129) (122,171)




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23. FINANCIAL LIABILITIES

2014 2013 $’000 $’000

Non-current portion of financial liabilities Medium-term borrowings (Note 23.1) 1,738,032 1,296,387 Derivative financial instrument 620 17,418

1,738,652 1,313,805 Current portion of financial liabilities Medium-term borrowings 57,271 35,101 Short-term borrowings 319,444 531,364

Total current portion of borrowings (Note 23.1) 376,715 566,465 Derivative financial instrument 7,759 – Interest payable 36,816 35,656

421,290 602,121

Total 2,159,942 1,915,926 The derivative financial instrument relates to an interest rate swap that matures on December 15, 2015. The derivative financial instrument is recorded at fair value and the corresponding loss included in net fair value gains/(losses) on financial instruments in the consolidated income statement. The notional amount of this instrument is US$37.5 million (2013: US$42.5 million).

The fair value of medium term borrowings amounted to $1,789,357,000 (2013: $1,377,800,000). These fair value of borrowings are determined by applying a discounted cash flow model for the remaining term to maturity using a current yield curve for a similar debt instrument. The discount rate used in the valuation technique is based on the borrowing rates of 5.80% - 7.36% (2013: 7.03%) for Trinidad and Tobago debt and 7.77% (2013: 8.68%) for Jamaica debt. For short term debt, the carrying amounts approximate their fair value.

The Group has not had any defaults of principal, interest or other breaches with respect to their borrowings during the period (2013 - Nil).

23.1 Borrowings

2014 2013 $’000 $’000

Parent company 1,745,191 1,499,778 Subsidiaries 369,556 363,074

2,114,747 1,862,852

Current 376,715 566,465 Non-current 1,738,032 1,296,387

2,114,747 1,862,852

Details of total current and non-current bank loans are as follows:

Parent company Facility 1 - $1 billion This is a fixed rate 12-year bond ending in December 2023 and comprises two series. Interest is charged at 7.975% per annum and is paid semi-annually. Series 1 principal is repayable, commencing on 27 July 2011, by 7 equal half-yearly installments of $3,375,000, 16 equal half-yearly installments of $18,750,000 and a final balloon installment of $576,375,000. Series 2 principal is repayable, commencing 27 January 2012, by 6 equal half-yearly installments of $375,000, 16 equal half-yearly installments of $2,083,333 and a final balloon installment of $64,416,667.

Facility 2 - $517 million This is a fixed rate 5-year bond ending in December 2019. Interest is charged at 4.25% per annum and is payable in 10 half yearly installments commencing June 2015. The principal is to be repaid at maturity.

Facility 1 and 2 are secured by a debenture creating a charge over the fixed and floating assets of Guardian Holdings Limited.

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23. FINANCIAL LIABILITIES (CONTINUED)

23.1 Borrowings (continued)

Parent company (continued)

Facility 3 - $233 million This is an unsecured 1-year fixed rate loan ending in December 2015. Interest is charged at 3.11% per annum. Both the principal and interest are to be repaid at maturity.

Subsidiaries

Loan 1 - US$50 million

This is a secured floating rate 5-year loan ending in June 2016. Interest is charged at LIBOR plus 4.8% and is payable semi-annually. The principal is to be repaid at maturity. The loan is secured by the shares of a subsidiary.

Loan 2 - J$1.8 billion

This is an unsecured fixed rate 7-year loan ending in October 2019. Interest is charged at 8.75% and is payable quarterly in arrears. The principal is repayable by 21 equal quarterly payments of J$79,600,000 and a final payment of J$80,400,000 commencing 31 July 2014. This loan is guaranteed by Guardian Holdings Limited.

24. INVESTMENT CONTRACT LIABILITIES

2014 2013 $’000 $’000

The movements in the liabilities arising from investment contracts are summarised below:

At beginning of year 1,579,528 1,609,081 Premiums received 226,049 229,092 Fees deducted from account balances (13,753) (25,716)Account balances paid on surrender and other terminations in the year (176,857) (217,498)Interest credited through income 71,315 69,707 Other movements 4,449 6,965 Transfer to liabilities related to assets held for sale (3,743) – Exchange rate adjustments (64,467) (92,103)

At end of year 1,622,521 1,579,528 Investment contract liabilities carry floating rates of interest and therefore the carrying amounts approximate their fair values.

25. THIRD PARTY INTEREST IN MUTUAL FUNDS

Balance at beginning of year 1,010,021 1,051,040 Change in liability for interest in consolidated funds (Note 33) 10,092 17,491 Unrealised gains 1,772 3,760 Net change in mutual fund holder balances (17,848) (48,829)Distributions (11,687) (13,441)

992,350 1,010,021


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26. POST RETIREMENT MEDICAL BENEFIT OBLIGATIONS

2014 2013 $’000 $’000

The amounts recognised in the consolidated statement of financial position are as follows:

Present value of obligations 73,200 74,518

The amount in the consolidated income statement is made up as follows: Interest cost 3,454 4,325 Current service cost 3,023 3,884 Adjustment in value of recognisable assets (4,153) (2,064)

Expense for the year (Note 36) 2,324 6,145

The movement in the liability is as follows:Balance at beginning of year 74,518 98,868 Exchange rate adjustments (779) (142)Acquisition of subsidiary – 11,453 Actuarial losses (895) (36,914)Employer contributions (1,968) (4,892)Expense as per above 2,324 6,145


2014 2013The principal actuarial assumptions used were as follows: Discount rate 4.8% - 9.5% 4.0% - 9.5%Healthcare cost escalation 3.0% - 8.5% 2.0% - 8.5%Retiree premium escalation: Existing retirees 0.0% 0.0% Future retirees 0.0% 0.0%Pre-retirement mortality GBM/ GBM/ GBV2000-2005 GBV2000-2005Post retirement mortality GAM94 GAM94 Impact on the obligation

Increase Decrease $’000 $’000

1% increase/decrease in discount rate (10,614) 13,672 1% increase/decrease in medical cost trend rate 13,052 (10,285)

Expected contributions to post-employment benefit plans for the year ending 31 December 2015 are $2,318,000.

27. OTHER LIABILITIES

2014 2013 $’000 $’000

Deposits and premiums received in advance 121,236 95,096 Amount due to reinsurers 114,559 198,301 Sundry payables 480,598 438,117

716,393 731,514

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28. NET PREMIUM INCOME 2014 2013 $’000 $’000

(a) Insurance premium income Long-term insurance contracts with fixed and guaranteed terms 2,027,394 2,008,715 Short-term insurance contracts: - premiums receivable 2,983,721 2,902,126 - change in unearned premium provision 22,139 58,706

5,033,254 4,969,547(b) Insurance premium ceded to reinsurers

Long-term reinsurance contracts (107,459) (103,971)Short-term reinsurance contracts: - premiums payable (1,420,956) (1,372,783) - change in unearned premium provision (13,514) (15,901)

(1,541,929) (1,492,655)

29. POLICY ACQUISITION EXPENSES

Commissions 573,383 569,472 Other expenses for the acquisition of insurance and investment contracts 50,224 47,210

623,607 616,682

30. NET INSURANCE BENEFITS AND CLAIMS

Insurance benefits - gross 1,848,008 1,715,079 Insurance benefits - recovered from reinsurers (61,236) (48,912)Insurance claims and loss adjustment expenses - gross 1,097,196 994,710 Insurance claims and loss adjustment expenses - recovered from reinsurers (212,180) (110,293)

2,671,788 2,550,584 Gross Reinsurance Net2014 $’000 $’000 $’000Insurance benefitsLong-insurance contracts with fixed and guaranteed terms and without DPF: - death, maturity and surrender benefits 627,658 (23,380) 604,278 - increase in liabilities 413,667 547 414,214 Long-term insurance contracts without fixed terms: - death, maturity and surrender benefits 362,345 (37,933) 324,412 - change in unit prices 427,253 – 427,253 Long-term insurance contracts with fixed and guaranteed terms and with DPF: - death, maturity and surrender benefits 2,255 – 2,255 - increase in liabilities 237 – 237 Short term insurance contracts - life 14,593 (470) 14,123

Total cost of policyholder benefits 1,848,008 (61,236) 1,786,772


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Gross Reinsurance Net2013 $’000 $’000 $’000Insurance benefitsLong-term insurance contracts with fixed and guaranteed terms and without DPF: - death, maturity and surrender benefits 535,709 (28,815) 506,894 - increase in liabilities 337,261 1,227 338,488 Long-term insurance contracts without fixed terms: - death, maturity and surrender benefits 342,741 (17,484) 325,257 - change in unit prices 475,555 – 475,555 Long-term insurance contracts with fixed and guaranteed terms and with DPF: - death, maturity and surrender benefits 2,698 – 2,698 - increase in liabilities 263 – 263 Short term insurance contracts - life 20,852 (3,840) 17,012

Total cost of policyholder benefits 1,715,079 (48,912) 1,666,167

31. INVESTMENT INCOME

2014 2013 $’000 $’000 Fair value through profit or loss assets - interest income 227,170 259,137 Fair value through profit or loss assets - dividend income 43,257 32,379 Held-to-maturity assets - interest income 422,635 436,060 Loans and receivables - interest income 53,053 62,065 Cash and cash equivalents - interest income 24,207 17,720

770,322 807,361

32. NET REALISED GAINS/(LOSSES) ON FINANCIAL INSTRUMENTS

Equity securities (3,490) (6,400)Debt securities 2,748 (29,893)Loss on disposal of associated company – (1,253)

(742) (37,546)

33. NET FAIR VALUE GAINS/(LOSSES) ON FINANCIAL INSTRUMENTS

Net fair value gains on financial assets at fair value through profit or loss 48,980 (2,281)Provision for impairment (3,855) (15,668)Change in liability for mutual funds (Note 25) (10,092) (17,491)Fair value adjustment on investment properties (Note 6) 28,235 8,849

63,268 (26,591)

34. FEE INCOME

Policy administration and asset management services: - Insurance contracts 5,064 5,028 - Investment contracts without a discretionary participation feature 20,157 22,148 Surrender charges – insurance contracts 15,935 8,872 Other 57,463 46,188

98,619 82,236

30. NET INSURANCE BENEFITS AND CLAIMS (CONTINUED)

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35. OTHER INCOME 2014 2013 $’000 $’000 Rental income 35,883 31,575 Foreign exchange gains 15,761 71,280 Net loss for the year on pension plan assets (Note 12) (25,570) (23,836)Other income 38,828 25,773

64,902 104,792

36. OPERATING EXPENSES

Staff cost 462,814 501,670 Depreciation and amortisation 52,361 53,619 Auditors’ remuneration 13,062 12,119 Directors’ fees 7,630 7,901 Other expenses 369,247 342,541

905,114 917,850 Staff cost includes: Wages, salaries and bonuses 349,005 359,182 Health and medical 14,764 12,786 Staff training 4,383 3,741 National Insurance 30,560 28,087 Pension costs 19,028 18,254 Post retirement medical benefit obligations (Note 26) 2,324 6,145 Termination benefits 4,800 6,684 Other 37,950 66,791

462,814 501,670 Average number of employees 2,839 2,745

37. FINANCE CHARGES

Interest on borrowings from financial institutions 130,441 127,448

38. TAXATION

Current tax 100,652 93,860 Business levy/green fund levy 2,299 2,368 Prior year taxation adjustment 6,289 (24,222)Deferred tax (Note 14) (18,425) 29,636

90,815 101,642


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38. TAXATION (CONTINUED)

2014 2013 $’000 $’000 The tax on the profit before taxation differs from the theoretical amount that would arise using the basic tax rate of the parent as follows: Profit/(loss) before taxation 455,500 (35,296) Prima facie tax calculated at domestic corporation tax rate of 25% 113,875 (8,824)Effect of different tax rate of life insurance companies (36,415) (29,489)Effect of different tax rate in other countries (21,782) (52,694)Income not subject to tax (216,544) (214,854)Expenses not deductible for tax purposes 242,248 438,415 Net adjustment to recognised and unrecognised tax losses (1,242) (1,443)Tax reliefs and deductions (9,043) (11,650)Business levy/green fund levy 2,299 2,368 Prior year taxation adjustment 6,289 (24,222)Tax on dividend 7,636 12,674 Other 3,494 (8,639)

Tax charge for the period 90,815 101,642

39. EARNINGS PER SHARE

Basic earnings per share amounts are calculated by dividing the net profit for the year attributable to ordinary shareholders of the parent by the weighted average number of ordinary shares outstanding at the consolidated statement of financial position date. For the diluted earnings per share, the weighted average number of ordinary shares outstanding during the year is adjusted for the weighted number of share options granted to the Executives.

Net profit attributable to ordinary shareholders 400,516 45,569 Net profit attributable to ordinary shareholders from continuing operations 374,863 21,265 Net profit attributable to ordinary shareholders from discontinued operations 25,653 24,304

(‘000) (‘000)Number of Shares Weighted average number of ordinary shares in issue (thousands) 231,898 231,897

$ $Basic earningsPer ordinary share 1.73 0.20 Per ordinary share from continuing operations 1.62 0.09 Per ordinary share from discontinued operations 0.11 0.10

40. DIVIDENDS

$’000 $’000

Final dividend for 2013 - 37¢ per share (2012 - 37¢ per share) 85,801 85,802 Interim dividend for 2014 - 17¢ per share (2013 - 15¢ per share) 39,423 34,784

125,224 120,586 On 11 March 2015, the Board of Directors declared a final dividend of 40 cents per share (2013 - 37 cents), a total dividend to be paid of $93 million (2013: $86 million). These financial statements do not reflect the final dividend which will be accounted for as an appropriation of retained earnings in the year ending 31 December 2015.

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41. ADJUSTMENT FOR NON-CASH ITEMS IN OPERATING PROFIT

2014 2013 $’000 $’000 Share of profit from associated companies (Note 8) (21,736) (28,631)Increase in the value to shareholders of inforce long-term business (Note 13) (154,386) (83,844)Net fair value gains on financial and other assets (48,026) 12,514 Change in liability for interest in consolidated funds (Note 25) 10,092 17,491 Net realised gains on financial and other assets 742 37,829 Impairment of financial assets 2,900 5,435 Net loss for the year on post employment benefits 27,893 29,981 Depreciation and amortisation 52,416 53,619 Loss on disposal of property, plant & equipment 1,538 5,148 Change in fair value of other investment properties (Note 6) (28,235) (8,849)Change in fair value adjustment on Pointe Simon (Note 6) – 457,092 Gain on disposal of investment property (1) (275)Foreign exchange losses 237,594 235,824 Other non-cash expense 727 5,940

81,518 739,274

42. FAIR VALUE MEASUREMENT

The following table provides the fair value measurement of the Group’s assets and liabilities that are disclosed at fair value in the statement of financial position.

Total fair Level 1 Level 2 Level 3 value $’000 $’000 $’000 $’000At 31 December 2014Assets measured at fair value: Freehold properties – 285,407 104,291 389,698 Investment properties – 896,513 7,744 904,257 Financial assets at fair value through P&L:

Equity securities 1,742,657 7,553 31,298 1,781,508 Government securities 860,379 1,501,874 19,372 2,381,625 Debentures & corporate bonds 278,305 1,196,299 4,655 1,479,259 Other 2,647 9,320 11,489 23,456

Assets held for sale 15,242 – – 15,242

2,899,230 3,896,966 178,849 6,975,045

Liabilities measured at fair value: Derivatives – 8,379 – 8,379

At 31 December 2013 Assets measured at fair value: Freehold properties – 284,050 100,407 384,457 Investment properties – 793,972 9,523 803,495 Financial assets at fair value through P&L:

Equity securities 1,474,248 10,884 32,477 1,517,609 Government securities 926,825 1,595,996 28,163 2,550,984 Debentures & corporate bonds 269,162 1,271,568 6,057 1,546,787 Other 58,214 9,198 10,956 78,368

Assets held for sale 52,202 – – 52,202

2,780,651 3,965,668 187,583 6,933,902

Liabilities measured at fair value: Derivatives – 17,418 – 17,418

There were no transfers between level 1 and level 2 during the period.


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42. FAIR VALUE MEASUREMENT (CONTINUED)

Reconciliation of movements in level 3 financial instruments measured at fair value

The following table shows a reconciliation of the opening and closing recorded amount of Level 3 assets and which are recorded at fair value.

Assets measured at fair value:

Total Transfer Exchange gain/(loss) into/ At 1 rate in income (out of) Other January adjustment statement Purchases Sales Level 3 movements Total $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

2014Freehold properties 100,407 (1,521) – 7,929 – – (2,524) 104,291 Investment properties 9,523 (143) (999) (198) (439) – – 7,744 Financial assets at fair value through P&L: Equity securities 32,477 (157) (5,613) 955 (3,971) 7,607 – 31,298 Government securities 28,163 303 – 16,808 (26,752) 850 – 19,372 Debentures & corporate bonds 6,057 (8) (1,199) – (195) – – 4,655 Other 10,956 (28) (414) 1,150 (175) – – 11,489

187,583 (1,554) (8,225) 26,644 (31,532) 8,457 (2,524) 178,849

2013Freehold properties 83,182 245 – 5,615 – – 11,365 100,407 Investment properties 8,657 28 537 2,644 (2,343) – – 9,523 Financial assets at fair value through P&L:

Equity securities 41,513 31 (10,920) 1,923 – (70) – 32,477 Government securities 19,463 100 – 11,465 (13,136) 10,271 – 28,163 Debentures & corporate bonds 6,122 – 15 – (1,619) 1,539 – 6,057 Other 10,356 33 352 450 (235) – – 10,956

169,293 437 (10,016) 22,097 (17,333) 11,740 11,365 187,583

Total gains/(losses) for the period included in income statement for assets and liabilities held at end of period:

2014 2013 $’000 $’000Assets measured at fair value: Investment properties (999) (1,100)Financial assets at fair value through P&L Equity securities (5,613) (10,844) Debentures & corporate bonds (1,939) (1,017) Other 326 1,384

(8,225) (11,577)

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42. FAIR VALUE MEASUREMENT (CONTINUED)

Gains or losses (realised and unrealised) for the period are presented in the consolidated statement of income as follows: Realised Fair value gains losses Total $’000 $’000 $’0002014Total gains/(losses) included in the consolidated income statement for the period – (8,225) (8,225)Total gains/(losses) included in the consolidated income statement for the period for assets and liabilities held at the end of the year – (8,225) (8,225) 2013 Total gains/(losses) included in the consolidated income statement for the period – (10,016) (10,016)Total gains/(losses) included in the consolidated income statement for the period for assets and liabilities held at the end of the year – (11,577) (11,577) The Group does not regard that any reasonable change in the valuation assumptions of Level 3 assets and liabilities will have any significant impact on the financial statements.

The following table provide the fair value measurement of the group’s assets and liabilities that are not measured at fair value in the statement of financial position but where fair values are disclosed in the notes to the accounts.

Total fair Level 1 Level 2 Level 3 value $’000 $’000 $’000 $’000At 31 December 2014Assets for which fair values are disclosed: Held to maturity financial assets:

Government securities 107,906 5,703,842 – 5,811,748 Debentures & corporate bonds 16,222 518,209 – 534,431

Loans and receivables (debt securities) – 167,691 – 167,691

124,128 6,389,742 – 6,513,870

Liabilities for which fair values are disclosed: Medium term borrowings – 1,789,357 – 1,789,357

At 31 December 2013 Assets for which fair values are disclosed: Held to maturity financial assets:

Government securities 1,096,113 2,605,640 2,050,245 5,751,998 Debentures & corporate bonds – 412,623 130,625 543,248

Loans and receivables (debt securities) – 171,534 – 171,534

1,096,113 3,189,797 2,180,870 6,466,780

Liabilities for which fair values are disclosed: Medium term borrowings – 1,377,800 – 1,377,800


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43. SEGMENT INFORMATION

The segment results for the year ended 31 December 2014 are as follows: Life, health Property Other including and pension and casualty Asset consolidation business business Management adjustments Group $’000 $’000 $’000 $’000 $’000Year ended 31 December 2014 Insurance activities Insurance premium income 2,827,663 2,205,591 – – 5,033,254 Insurance premium ceded to reinsurers (172,190) (1,369,739) – – (1,541,929)Commission income 15,193 180,469 – – 195,662

2,670,666 1,016,321 – – 3,686,987 Change in “Value of inforce life insurance business” 154,386 – – – 154,386

Net underwriting revenue 2,825,052 1,016,321 – – 3,841,373

Policy acquisition expenses (380,484) (243,123) – – (623,607)Net insurance benefits and claims (2,300,703) (371,085) – – (2,671,788)

Underwriting expenses (2,681,187) (614,208) – – (3,295,395)

Net result from underwriting activities 143,865 402,113 – – 545,978

Investing activities Investment income 725,306 83,875 57,527 (96,386) 770,322 Net realised gains/(losses) on financial instruments (2,258) (2,116) 3,236 396 (742)Net fair value gains/(losses) on financial instruments 76,334 (46) (17,602) 4,582 63,268 Fee income 25,267 52,513 25,141 (4,302) 98,619 Other income/(loss) 57,859 (8,285) (2,772) 18,100 64,902 Investment contract benefits (73,028) – – – (73,028)

Net income/(loss) from investing activities 809,480 125,941 65,530 (77,610) 923,341

Net income/(loss) from all activities before fair value adjustment on Pointe Simon 953,345 528,054 65,530 (77,610) 1,469,319 Operating expenses (496,842) (323,781) (34,504) (49,987) (905,114)Finance charges (663) (27,048) (259) (102,471) (130,441)

Operating profit/(loss) before fair value adjustment on Pointe Simon 455,840 177,225 30,767 (230,068) 433,764 Fair value adjustment on Pointe Simon – – – – – Share of profit of associated companies – 4,962 – 16,774 21,736

Profit/(loss) before taxation 455,840 182,187 30,767 (213,294) 455,500 Taxation (30,427) (51,081) (7,180) (2,127) (90,815)

Profit/(loss) after taxation 425,413 131,106 23,587 (215,421) 364,685 Amount attributable to participating policyholders (2,093) – – – (2,093)

Profit/(loss) from continuing operations 423,320 131,106 23,587 (215,421) 362,592 Net gain/(loss) on discontinued operations (1,482) 27,135 – – 25,653

Profit/(loss) for the year 421,838 158,241 23,587 (215,421) 388,245

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43. SEGMENT INFORMATION (CONTINUED)

The segment results for the year ended 31 December 2013 are as follows: Life, health Property Other including and pension and casualty Asset consolidation business business Management adjustments Group $’000 $’000 $’000 $’000 $’000Year ended 31 December 2013 Insurance activities Insurance premium income 2,820,098 2,149,449 – – 4,969,547 Insurance premium ceded to reinsurers (187,793) (1,304,862) – – (1,492,655)Commission income 16,866 170,237 – – 187,103

2,649,171 1,014,824 – – 3,663,995 Change in “Value of inforce life insurance business” 83,844 – – – 83,844

Net underwriting revenue 2,733,015 1,014,824 – – 3,747,839

Policy acquisition expenses (362,162) (254,520) – – (616,682)Net insurance benefits and claims (2,191,889) (358,695) – – (2,550,584)

Underwriting expenses (2,554,051) (613,215) – – (3,167,266)

Net result from underwriting activities 178,964 401,609 – – 580,573

Investing activities Investment income 702,575 93,500 69,535 (58,249) 807,361 Net realised gains/(losses) on financial instruments (26,168) (8,135) 487 (3,730) (37,546)Net fair value gains/(losses) on financial instruments (22,169) 10,111 (17,768) 3,235 (26,591)Fee income 20,897 42,331 24,880 (5,872) 82,236 Other income/(loss) 119,515 5,049 346 (20,118) 104,792 Investment contract benefits (72,362) – – – (72,362)

Net income/(loss) from investing activities 722,288 142,856 77,480 (84,734) 857,890

Net income/(loss) from all activities before fair value adjustment on Pointe Simon 901,252 544,465 77,480 (84,734) 1,438,463 Operating expenses (501,464) (333,135) (36,924) (46,327) (917,850)Finance charges (1,630) (26,934) (99) (98,785) (127,448)

Operating profit/(loss) before fair value adjustment on Pointe Simon 398,158 184,396 40,457 (229,846) 393,165 Fair value adjustment on Pointe Simon – – – (457,092) (457,092)Share of profit of associated companies – 6,118 – 22,513 28,631

Profit/(loss) before taxation 398,158 190,514 40,457 (664,425) (35,296)Taxation (62,668) (41,445) (6,213) 8,684 (101,642)

Profit/(loss) after taxation 335,490 149,069 34,244 (655,741) (136,938)Amount attributable to participating policyholders (17,118) – – – (17,118)

Profit/(loss) from continuing operations 318,372 149,069 34,244 (655,741) (154,056)Net gain on discontinued operations – 24,304 – – 24,304

Profit/(loss) for the year 318,372 173,373 34,244 (655,741) (129,752)


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The segment assets and liabilities are as follows: Life, health Property Other including and pension and casualty Asset consolidation business business Management adjustments Group $’000 $’000 $’000 $’000 $’000Year ended 31 December 2014AssetsIntangible assets 137,712 34,661 – 226,919 399,292 Investment in associated companies – 61,169 – 133,756 194,925 Financial assets 11,614,381 1,305,484 81,648 (148,312) 12,853,201 Financial assets of mutual fund unit holders 73,218 – 1,159,805 (152,869) 1,080,154 Loans and receivables 1,159,290 382,779 31,181 226,123 1,799,373 Properties for development and sale – – – 170,887 170,887 Reinsurance assets 80,149 615,493 – – 695,642 Value of inforce life insurance policies 1,042,687 – – 3,627 1,046,314 Deferred acquisition costs 3,156 84,340 – (5) 87,491 Cash and cash equivalents of mutual fund unit holders 264,719 9,002 105,712 (273,719) 105,714 Assets held for sale 47,367 157,409 – – 204,776 Other assets 2,799,375 1,331,024 158,411 (349,653) 3,939,157

Total assets 17,222,054 3,981,361 1,536,757 (163,246) 22,576,926

Liabilities Insurance liabilities 11,913,517 1,603,196 – (6,496) 13,510,217 Liabilities related to assets held for sale 30,434 151,732 – – 182,166 Other liabilities 2,308,219 795,315 1,365,999 1,458,792 5,928,325

Total liabilities 14,252,170 2,550,243 1,365,999 1,452,296 19,620,708

Capital expenditure 39,933 24,741 208 130,269 195,151

Year ended 31 December 2013Assets Intangible assets 136,933 23,151 – 236,149 396,233 Investment in associated companies – 60,277 – 162,324 222,601 Financial assets 11,089,425 1,463,303 66,748 (177,322) 12,442,154 Financial assets of mutual fund unit holders 73,443 – 1,189,464 (151,989) 1,110,918 Loans and receivables 1,265,042 383,234 30,365 (1,052) 1,677,589 Properties for development and sale – – – 360,321 360,321 Reinsurance assets 120,251 655,693 – (65,270) 710,674 Value of inforce life insurance policies 921,062 – – 3,681 924,743 Deferred acquisition costs 2,731 101,654 – (13,657) 90,728 Cash and cash equivalents of mutual fund unit holders 316,465 9,004 157,976 (325,473) 157,972 Assets held for sale 9,660 310,736 – – 320,396 Other assets 2,671,283 1,272,191 166,254 (466,653) 3,643,075

Total assets 16,606,295 4,279,243 1,610,807 (438,941) 22,057,404

Liabilities Insurance liabilities 11,434,176 1,764,795 – (117,454) 13,081,517 Liabilities related to assets held for sale – 304,520 – – 304,520 Other liabilities 2,338,049 817,624 1,441,074 1,178,292 5,775,039

Total liabilities 13,772,225 2,886,939 1,441,074 1,060,838 19,161,076

Capital expenditure 53,097 54,654 232 96,080 204,063 Inter-segment revenues are eliminated upon consolidation and reflected in the ‘consolidation adjustments’ column.

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Capital expenditure consist of additions of property, plant and equipment, investment properties, intangible assets, investment in associated companies and properties for development and sale.

Total revenue from external customers Non-current assets 2014 2013 2014 2013 $’000 $’000 $’000 $’000

Trinidad and Tobago 1,998,300 1,824,529 826,334 841,013 Jamaica 991,448 1,020,110 529,795 507,534 Barbados 156,310 137,973 49,340 46,264 Dutch Caribbean 1,078,051 968,665 230,018 259,029 Latin America 140,662 131,135 – – Other Countries 472,971 595,679 570,544 665,840

4,837,742 4,678,091 2,206,031 2,319,680 The total revenue information above consists of net underwriting revenue, investment income, net realised gains/losses on financial instruments, net fair value gains/losses on financial instruments, fee income and other income. Revenue is based on locations of the customer and there are no transactions with a single customer that amount to more that 10% of total revenue.

Non current assets for this purpose consist of property, plant and equipment, investment properties, intangible assets, investment in associated companies and properties for development and sale.

44. CONTINGENT LIABILITIES

Legal proceedings

Group companies are defendants in various legal actions. In the opinion of the directors, after taking appropriate legal advice, the outcome of such actions will not give rise to any significant loss.

45. COMMITMENTS

2014 2013 $’000 $’000Capital commitmentsAs at the year end, a development contract and agreement have been entered into in respect of a property project. The commitments not provided for in these financial statements are as follows:

Property development 68,511 141,098

Operating lease commitments – where a Group company is the lessee The future aggregate minimum lease payments under operating leases are as follows:

Not later than one year 17,585 25,786 Later than one year and no later than five years 58,080 60,509

75,665 86,295

Rental expense under these leases amounted to $24,853,000 for the year ended 31 December 2014 (2013 - $24,976,000).


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46. ACQUISITIONS

Acquisition that occurred during 2014

Effective 1 January 2014, the Group acquired 100% of the shares of Kruit en Venema Assuradeuren B.V. (“Kruit”) through its subsidiary Fatum Holdings N.V., for consideration of EUR2,000,000 (TT$17,294,000). Kruit is an insurance brokerage firm incorporated under the laws of the Netherlands.

The fair value and gross amount of loans and receivables on Kruit’s statement of financial position was $2,412,000. None of the loans and receivables has been impaired and it is expected that the full contractual amounts can be collected.

During the year, the Group was able to measure the fair value of the identifiable assets and liabilities at the acquisition date.

Recognised amounts of identifiable assets acquired and liabilities assumed

Kruit $’000Net assets acquired: Property, plant and equipment 608 Intangible assets - customer related intangibles 2,813 Loans and receivables 2,412 Cash and cash equivalents 1,775 Deferred tax liability (2,292)Other liabilities (6,701)

Identifiable net assets (1,385)Goodwill 18,679

Total consideration 17,294

Satisfied by: Cash consideration 17,294

Cash consideration 17,294 Cash and cash equivalent balances acquired (1,775)

Net cash flow on acquisitions 15,519

Acquisition related costs included in the consolidated statement of income 526

None of the goodwill recognised is expected to be deductible for taxation purposes.

Acquisition that occurred during 2013

Effective 1 April 2013, the Group acquired 100% of the shares of Royal & Sun Alliance Insurance (Antilles) N.V. (“RSA”) through its subsidiary Fatum Holdings N.V., for consideration of ANG20,032,000 (TT$72,054,000) in order to obtain a leading market share in the Dutch Caribbean. RSA is a property and casualty insurer, incorporated under the laws of Curaçao.

The fair value and gross amount of loans and receivables on RSA’s statement of financial position was $55,720,000. Loans and receivables of $3,597,000 was impaired and has been fully provided for.

During the year, the Group measured the fair value of the identifiable assets and liabilities at the acquisition date.

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46. ACQUISITIONS (CONTINUED)

Recognised amounts of identifiable assets acquired and liabilities assumed

RSA $’000Net assets acquired: Property, plant and equipment 3,946 Intangible assets - customer related intangibles 17,560 Financial assets 4,036 Loans and receivables 52,123 Reinsurance assets 51,439 Cash and cash equivalents 47,113 Other assets 34,361 Insurance contracts (104,292)Other liabilities (59,727)

Identifiable net assets 46,559 Goodwill 25,495

Total consideration 72,054

Satisfied by: Cash consideration 72,054

Cash consideration 72,054 Cash and cash equivalent balances acquired (47,113)

Net cash flow on acquisitions 24,941

Acquisition related costs included in the consolidated statement of income 3,291 None of the goodwill recognised is expected to be deductible for taxation purposes.


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47. RELATED PARTY DISCLOSURES

The financial statements include the financial statements of GHL and its subsidiaries and associated companies listed in the following table: Effective % Name Country of incorporation of interest held 2014

Guardian General Insurance Limited Republic of Trinidad & Tobago 100.0Guardian Life of the Caribbean Limited Republic of Trinidad & Tobago 100.0Guardian Insurance Limited Republic of Trinidad & Tobago 100.0Guardian Asset Management Limited Republic of Trinidad & Tobago 100.0Guardian Asset Management & Investment Services Limited Republic of Trinidad & Tobago 100.0Bancassurance Caribbean Limited Republic of Trinidad & Tobago 100.0Laevulose Inc. Limited Republic of Trinidad & Tobago 100.0Guardian Shared Services Limited Republic of Trinidad & Tobago 100.0RGM Limited Republic of Trinidad & Tobago 33.3Fatum Holding N.V. Curaçao 100.0Fatum Accident & Health N.V. Curaçao 100.0Fatum General Insurance Aruba N.V. Aruba 100.0Fatum General Insurance N.V. Curaçao 100.0Fatum Life Aruba N.V. Aruba 100.0Fatum Life N.V. Curaçao 100.0Homes & Properties N.V. Curaçao 100.0Royal & Sun Alliance Insurance (Antilles) N.V. Curaçao 100.0Thoma Exploitatie B.V. Netherlands 100.0Kruit en Venema Assuradeuren B.V. Netherlands 100.0Guardian Life Limited Jamaica 100.0Ocho Rios Beach Resorts Limited Jamaica 24.0Guardian General Insurance Jamaica Limited Jamaica 100.0West Indies Alliance Insurance Limited Jamaica 100.0GL Investments Limited Jamaica 100.0Guardian Resorts (Jamaica) Limited Jamaica 100.0Guardian Re (SAC) Limited Bermuda 100.0Nemwil Corporate Capital Limited United Kingdom 100.0Appleclaim Investment Holdings Limited United Kingdom 39.2Royal Star Assurance (Bahamas) Limited Bahamas 25.8Guardian Group St. Lucia Holdings Limited St. Lucia 100.0Globe Holdings Limited St. Lucia 100.0Guardian Resorts International Inc St. Lucia 100.0Trans-Nemwil Insurance (Grenada) Limited Grenada 54.0T.M.D.C. Limited Barbados 100.0Guardian International Inc. Barbados 100.0Gamay Investments Limited Malta 100.0

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47. RELATED PARTY DISCLOSURES (CONTINUED)

A number of transactions are entered into with related parties in the normal course of business. These transactions are carried out on commercial terms and conditions at market rates.

The following transactions were carried out with related parties: 2014 2013 $’000 $’000(a) Sales of insurance contracts and other services: - Key management personnel 3,596 3,010 (b) Interest income from: - Key associates 9,207 9,547 (c) Financial assets of: - Key associates 297,001 253,183 (d) Key management personnel compensation: - Salaries and other short-term employee benefits 80,458 92,276 - Termination benefits 1,782 – - Post-employment benefits 18,927 17,792 - Share-based payments 1,729 17,835

(e) Loans to related parties:Loans to key management of the Group: Balance at beginning of year 34,184 34,356 Exchange rate adjustments (62) 6 Loans advanced during the year 9,334 4,987 Loan repayments received (10,165) (5,160)Interest charged 1,529 1,383 Interest received (1,521) (1,388)

33,299 34,184 Loans to key associates: Balance at beginning of year – – Loan advanced to CHPS 177,037 –

177,037 –

There was no provision for doubtful debts at the reporting date and no bad debt expense in the year (2013: Nil).

Financial assets of key associates comprise multiple corporate bonds plus interest receivable and preference shares issued by RGM to the Group. The preference shares held by the Group are cumulative, non-convertible and redeemable. The corporate bonds carry fixed interest rates and principal and interest are payable semi-annually. All bonds are secured by mortgages on various properties.

Loans to key management of the Group are secured and settlement occurs in cash. The details of the loan advanced to CHPS are disclosed in Note 11.

(f) Guarantees

The Group is the guarantor of an unsecured 7 year loan, ending October 2019, to its subsidiary, Guardian Group St. Lucia Holdings Limited. Proceeds from this loan was used to finance the acquisition of 100% of the shares of Globe Holdings Limited.


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48. SUBSEQUENT EVENTS

In February 2015, the Group signed a Share Purchase Agreement for the acquisition of Boogaard Group, an insurance broker, in order to further consolidate its market leadership in the Dutch Caribbean. The total consideration is ANG22,000,000 and the final approval from the respective Central Banks is expected before the end of the second quarter of 2015.

48. ASSETS UNDER MANAGEMENT

Assets under management, which are not beneficially owned by the Group, but which are managed by them on behalf of investors are listed below: Carrying amount 2014 2013 $’000 $’000Amounts not included in the consolidated statement of financial position Cash and short-term investments 412,158 332,143 Investments 1,898,815 1,898,039 Interest and other receivables 97,582 99,860

2,408,555 2,330,042

50. PLEDGED ASSETS

The Group had deposited certain assets with the regulatory authorities in the countries in which it is authorised to conduct business as security for its policyholders. The type and values of these assets are in accordance with the legal requirements of the countries concerned. The carrying value of pledged assets is: Statutory deposits / funds 7,556,353 7,327,949

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Financials expressed in US dollarsExpressed in United States Dollars • for the year ended December 31, 2014

Assets Property, plant and equipment 84,402 84,459 Investment properties 142,212 126,365 Intangible assets 62,797 62,315 Investment in associated companies 30,656 35,008 Financial assets 2,021,420 1,956,775 Financial assets of mutual fund unit holders 169,876 174,714 Loans and receivables 282,987 263,834 Properties for development and sale 26,875 56,668 Pension plan assets 13,800 14,354 Value of inforce life insurance business 164,554 145,434 Deferred tax assets 3,717 3,446 Reinsurance assets 109,403 111,768 Deferred acquisition costs 13,760 14,269 Taxation recoverable 24,042 24,820 Cash and cash equivalents 351,336 319,503 Cash and cash equivalents of mutual fund unit holders 16,626 24,844 Assets held for sale 32,205 50,389

Total assets 3,550,668 3,468,965

Equity and liabilities Share capital 320,663 321,126 Reserves (91,556) (62,352)Retained earnings 232,173 228,215

Equity attributable to owners of the parent 461,280 486,989 Non-controlling interests in subsidiaries 3,643 (31,483)

Total equity 464,923 455,506

Liabilities Insurance contracts 2,124,749 2,057,328 Financial liabilities 339,694 301,317 Investment contract liabilities 255,174 248,412 Third party interests in mutual funds 156,067 158,846 Pension plan liabilities 15,682 25,402 Post retirement medical benefit obligations 11,512 11,719 Deferred tax liabilities 33,861 36,138 Provision for taxation 7,690 11,360 Other liabilities 112,667 115,045 Liabilities related to assets held for sale 28,649 47,892

Total liabilities 3,085,745 3,013,459

Total equity and liabilities 3,550,668 3,468,965

Consolidated Statement of Financial Position

2014 2013 US$’000 US$’000

The Group’s Consolidated Statement of Financial Position and Consolidated Income Statement expressed in US dollars appears below. The purpose of this publication is to provide readers of the Group’s Annual Report, a number of whom are from jurisdictions outside of Trinidad and Tobago, with a quick and convenient overview of the Group’s financial performance, referenced against a major international currency. The exchange rate used for this purpose is TT$6.3585 to US$1.00.


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2014 2013 US$’000 US$’000

Consolidated Income Statement

Insurance activities Insurance premium income 791,579 781,560 Insurance premium ceded to reinsurers (242,499) (234,750)Reinsurance commission income 30,772 29,426

579,852 576,236 Change in “Value of inforce life insurance business” 24,280 13,186

Net underwriting revenue 604,132 589,422

Policy acquisition expenses (98,075) (96,985)Net insurance benefits and claims (420,192) (401,130)

Underwriting expenses (518,267) (498,115)

Net result from insurance activities 85,865 91,307

Investing activities Investment income 121,148 126,974 Net realised losses on financial instruments (117) (5,905)Net fair value gains/(losses) on financial instruments 9,950 (4,182)Fee income 15,510 12,933 Other income 10,207 16,481 Investment contract benefits (11,485) (11,380)

Net income from investing activities 145,213 134,921

Net income from all activities before fair value adjustment on Pointe Simon 231,078 226,228 Operating expenses (142,347) (144,350)Finance charges (20,514) (20,044)

Operating profit before fair value adjustment on Pointe Simon 68,217 61,834 Fair value adjustment on Pointe Simon – (71,887)Share of profit of associated companies 3,418 4,503

Profit/(loss) before taxation 71,635 (5,550)Taxation (14,282) (15,985)

Profit/(loss) after taxation 57,353 (21,535)Amount attributable to participating policyholders (329) (2,692)

Profit/(loss) from continuing operations 57,024 (24,227)Net gain on discontinued operations 4,034 3,822

Profit/(loss) for the year 61,058 (20,405)Loss attributable to non-controlling interests 1,930 27,573

Profit attributable to equity holders of the parent 62,988 7,168

Earnings per share - Basic $ 0.27 $ 0.03 - Basic - for continuing operations $ 0.25 $ 0.01

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Consolidated Statement of Comprehensive Income

Profit/(loss) for the year 61,058 (20,405)

Other comprehensive income/(loss) Items that may be reclassified subsequently to profit or loss: Exchange differences on translating foreign operations (33,855) (14,980)Other reserve movements – (2)

Net other comprehensive loss that may be reclassified subsequently to profit or loss (33,855) (14,982)

Items that will not be reclassified subsequently to profit or loss: Gains on property revaluation 1,466 5,541 Remeasurement of pension plans 8,285 (6,567)Actuarial gains on post retirement medical benefit obligations 141 5,805 Other reserve movements (2,000) 470 Income tax (charge)/credit (620) 943

Net other comprehensive income that will not be reclassified subsequently to profit or loss 7,272 6,192

Other comprehensive loss for the year, net of tax (26,583) (8,790)

Total comprehensive income/(loss) for the year, net of tax 34,475 (29,195)Comprehensive (income)/loss attributable to non-controlling interests (2,697) 29,315

Comprehensive income attributable to equity holders of the parent 31,778 120

2014 2013 US$’000 US$’000


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Management Proxy Circular

I. Name of Company: GUARDIAN HOLDINGS LIMITED

Company No. G - 967 (C)

II. Particulars of Meeting: Annual Meeting of the Company to be held at The Atrium, Guardian Corporate Centre, 1 Guardian Drive,

Westmoorings on Monday 11th May, 2015 at 4:30 in the afternoon.

III. Solicitation: It is intended to vote the proxy solicited hereby (unless the shareholder directs otherwise) in favour of all resolutions

specified therein.

IV. Any Director’s statement submitted pursuant to section 76 (2): No statement has been received from any Director pursuant to Section 76 (2) of the Companies Act, Ch 81:01

V. Any auditor’s statement submitted pursuant to section 171 (1): No statement has been received from the Auditors of the Company pursuant to Section 171 (1) of the Companies

Act, Ch 81:01

VI. Any shareholder’s proposal submitted pursuant to sections 116 (a) and 117 (2): No proposal has been received from any Shareholder pursuant to Sections 116 (a) and 117 (2) of the Companies

Act, Ch 81:01

Date Name and Title SignatureMarch 11, 2015 Fé Lopez-Collymore

Corporate Secretary

REPUBLIC OF TRINIDAD AND TOBAGO

THE COMPANIES ACT. CH 81:01 [SECTION 144]

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REPUBLIC OF TRINIDAD AND TOBAGO THE COMPANIES ACT 1995,[SECTION 143 (1)]

1. Name of Company: GUARDIAN HOLDINGS LIMITED Company No. G - 967 (C)

2. Particulars of Meeting: Annual Meeting of the Company to be held at 4:30 in the afternoon on Monday 11th May, 2015.

I/We (block capitals please) _______________________________________being Shareholder(s) in the above Company (or in the case of an owner whose shares are held in a Clearing Agency being authorised by the Clearing Agency to do so) appoint (s) the Chairman of the Meeting, or failing him, ______________________of _______________________________________________________________________________

to be my/our Proxy to attend and vote for me/us on my/our behalf at the above meeting and any adjournment thereof as indicated below on the Resolutions to be proposed in the same manner, to the same extent and with the same powers as if I/we were present at the said meeting or such adjournment or adjournments thereof.

Please indicate with an “X” in the spaces below how you wish your Proxy to vote on the resolutions referred to. If no such indication is given the Proxy will exercise his discretion as to how he votes or whether he abstains from voting.

RESOLUTION 1:

BE IT RESOLVED THAT the Consolidated Financial Statements of the Company for the year ended December 31, 2014 and Reports of the Directors and the Auditors thereon be received and adopted.

RESOLUTION 2:

2 (a) BE IT RESOLVED THAT Mr. Imtiaz Ahamad be and is hereby re-elected a Director of the Company for a term expiring at the close of the third Annual Meeting of the Company following this appointment subject to the provisions of Regulation 4.5 of By-law No. 1; and

2 (b) BE IT RESOLVED THAT Mrs. Marianne Loner be and is hereby re-elected a Director of the Company for a term expiring at the close of the third Annual Meeting of the Company following this appointment subject to the provisions of Regulation 4.5 of By-law No. 1.

RESOLUTION 3:

BE IT RESOLVED THAT Ernst & Young be reappointed as auditors of the Company and that the Directors be authorised to fix their remuneration for the ensuing year.

Signature(s): _______________________________

Date: _____________________________________

Form of Proxy

For Against

FOR OFFICIAL USE ONLY:Folio Number ___________________

No. of Shares ___________________


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NOTES:

1. If it is desired to appoint a proxy other than the Chairman of the Meeting, the necessary deletion must be made and initialed and the name inserted in the space provided.

2. In the case of joint holders the signature of any holder is sufficient but the names of all joint holders should be stated.

3. If the appointor is a corporation this form must be under its common seal or under the hand of its attorney in fact.

Mail or deliver to: The Corporate Secretary

Guardian Holdings Limited

P.O. Box 88

1 Guardian Drive, Westmoorings, 110612

Trinidad

Form of Proxy (continued)

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Design and Artwork: Paria Publishing Co. Ltd. • Printing: Caribbean Print Technologies Ltd.Photography of Directors and Management: Garth Murrell, Alice Besson, Abigail Hadeed • Other photos: Dreamstime/Shutterstock

Guardian H

oldings Limited • A

nnual Report 2014

Live easy.

Live easyAs many of us would have experienced, living easy takes planning, determination, hard work, and a positive attitude.We at Guardian Group go the extra mile so our stake-holders can live a little easier. For us, to live easy is to live secure and our Life and Health insurance products are perfectly designed for that purpose. To live easy is to live safe, that’s why we provide insurance for your home, car, business, travel, marine and so much more. With a secure retirement plan and fund, our clients can be assured of a comfortable future, as you live long – the essence of living easy. But perhaps the most important ingredient in living easy, is living well, that is, a healthy, active and balanced lifestyle, and that is why our corporate social responsibility focus is on promoting health and wellness among all the communities that we serve, across the Caribbean. It is only by coming together that we can all live easier, and be the Guardians of each other’s tomorrows. The strength of One Group, One Team, with One Vision: that is the Guardian promise.

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