Metropolitan Life Insurance Nigeria Limited …METROPOLITAN LIFE INSURANCE NIGERIA LIMITED FINANCIAL...
Transcript of Metropolitan Life Insurance Nigeria Limited …METROPOLITAN LIFE INSURANCE NIGERIA LIMITED FINANCIAL...
Metropolitan Life Insurance Nigeria Limited
Financial Statementsfor the year ended 31 December 2018
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
Table of Contents
Page
Corporate information 1
Directors' report 2
Corporate governance report 6
Management commentary and analysis 19
Statement of directors' responsibilities 21
Audit committee report 22
Certificate of actuaries 23
Certification by company secretary 24
Independent auditor's report 25
Significant accounting policies 29
Statement of financial position 42
Statement of comprehensive income 43
Statement of changes in equity 44
Statement of cash flows 45
Notes to the financial statements 46
Statement of value added 87
Five year financial summary 88
METROPOLITAN LIFE INSURANCE NIGERIA LIMITEDFINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
Corporate information
Directors
Mr. Phillip Matlakala Chairman Mr. Olufemi Olasupo Adeyemo Non-Executive Director / Independent Director
Mr. Charles Egan Non-Executive Director Mrs. Beatrice Ofei Non-Executive Director Mr. Philip Du Preez Non-Executive Director Mr. Dumo Mbethe Non-Executive Director Mr. Livingstone Magorimbo Managing Director / Chief Executive OfficerMr. Henry Ationu Executive Director (resigned, effective 30 June 2018)
Registered office 205B Ikorodu RdObanikoroLagos, Nigeria
Independent auditors PricewaterhouseCoopersLandmark Towers,5B Water Corporation Road, Victoria Island, Lagos
Tel: +234 1 271 1700 www.pwc.com/ng
Company secretary A & O Secretarial Services1 Murtala Muhammed DriveIkoyi
Lagos, Nigeria
Bankers First Bank Nigeria LimitedFirst City Monument Bank PlcGuaranty Trust Bank PlcHeritage Bank PlcProvidus Bank LtdSkye Bank PlcSterling Bank PlcUnited Bank for Africa PlcZenith Bank Plc
Re-insurers Continental Reinsurance Plc8th Floor, St Nicholas House6 Catholic Mission Street
Lagos, Nigeria
Reporting actuary in Nigeria Ernst & Young Nigeria, 4th Floor, UBA House, 57 Marina Street, Lagos.
Asset management advisory services United Capital Plc
12th Floor UBA House57 Marina, Lagos
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METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
DIRECTORS' REPORT
Legal form and principal activity
The directors submit their report together with the audited financial statements for the year ended 31 December 2018,
which discloses the state of affairs of the Company.
Metropolitan Life Insurance Nigeria Limited provides life insurance services in the corporate and financial institutional
markets in Nigeria as well as the retail life insurance market. The Company is a specialised life underwriter and was
incorporated as a private limited liability company on 19 August 2004. The Company is ultimately controlled by MMI
Holdings Limited through its subsidiary Metropolitan International Holdings Pty Limited. The National Insurance
Commission licensed the Company on 14 February 2007 to carry on the business of life insurance in Nigeria.
To this end, the Company combines the presence and technical expertise of its parent company to deliver high quality
professional service to its chosen markets and customers through group and credit life value propositions.
Metropolitan Life Insurance Nigeria Limited is one of the top specialised life underwriter in the Nigerian market. The
penetration of the market by life insurance, especially in terms of retail value propositions, remains very low and
presents an enormous opportunity to the Company for which a mass market strategy has been developed and is being
implemented based on voluntary group products.
A significant portion of the profit generated over the years by the Company has been derived from the four funds
approach to investment management that ensures appropriate segregation of policyholder and shareholder funds and
aligns the asset allocations in the fund to the objectives of the fund. The Company managed to maintain superior
investment returns and was largely unaffected by the collapse of the Nigerian equity market, which followed the
deterioration in the macro-economic environment as a result of the significant drop in oil prices in the global market
that subsequently affected the value of the naira against major foreign currencies. Over 90% of the total asset base
comprised assets that generate quality yield.
During the past year and going forward, it is the view of management that the interventions of the regulator in the
structure of the insurance industry will only strengthen the underwriting and distribution of products into the market,
providing increasing comfort to the market as to the value proposition presented. In particular, the continued
enforcement of the "No Premium No Cover" ruling based on the Insurance Act, has resulted in a significant
improvement in premium collections in recent history and in the future it will ensure timely payment of premiums and
will improve overall industry and Company profitability.
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METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
DIRECTORS' REPORT
Business objectives and strategies
Resources, risks and relationship
31-Dec-18 31-Dec-17
N'000 N'000
Gross premium written 2,265,495 2,006,246
Profit before tax 231,084 156,264
Income tax (12,844) (14,432)
Profit for the year 218,240 141,832
Total comprehensive income for the year 218,240 141,832
Appropriation to contingency reserve 22,655 20,598
Earnings per share - basic/diluted (kobo) 21.82 14.18
It is the stated intent of the Company to remain one of the leading specialist life insurance underwriters in the market.
To this end we combine our technical expertise with high quality people to identify opportunities and market segments
in which we can offer life insurance value propositions profitably and sustainably while meeting the expectations of our
policyholders and shareholders.
The objectives of the business therefore focus on profitable revenue growth, certainty in delivery of benefits to our
policyholders, distribution reach and efficiency and ensuring optimal capital management and returns for shareholders.
The primary resources employed by the Company consist of the intellectual property and spread provided by the parent
company, combined with the professionalism and drive of the high quality people employed in the business which, in
combination, provide the Company with the opportunity to pursue the stated strategy. In addition, the Company's
operations remain self-funding with adequate capital to continue to do so in the foreseeable future while meeting the
capital adequacy requirements of both the regulator and that of the policyholder liabilities with no exposure to premium
debtors due to the ongoing accounting practice of "no premium, no cover ruling".
Risk in the business is managed in terms of the Enterprise Risk Management Guidelines of the regulator and reviewed
on a quarterly basis, while identified risks are actively managed with the objective of maintaining the risk profile of the
Company within the defined risk appetite parameters. The ERM review is endorsed and approved for relevance by the
Enterprise Risk Management, Remuneration and Governance Committee of the Board before submission of the same to
National Insurance Commission.
The ongoing sustainable growth and success of the business are largely dependent on the continued strong support of
our parent company which provides the access and technical know-how, in addition to the strategic direction for the
business. This is augmented by the strong moves of the Commission in sanitising the industry of inappropriate
competitive practices and ensuring deepening penetration and premium settlement, all of which are to the benefit of
both the insurance industry and its consumers in the long term.
Operating results:The following is a summary of the Company’s operating results:
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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
DIRECTORS' REPORT
2018 2018 2017 2017
31-Dec 31-Dec 31-Dec 31-Dec
No. of shares % Holding No. of shares % Holding
999,999,999 100 999,999,999 100
1 0 1 0
Acquisition of own shares
Composition of all employees (inclusive of top management) Number Percentage
Female 20 43%
Male 27 57%
Total 47 100%
Board composition by gender
Female 1 13%
Male 6 86%
Total 7 100%
Metropolitan International
Holdings (Pty) Ltd
Directors' interest in contractsNone of the directors has notified the Company for the purpose of section 277 of the Companies and Allied Matters Act
of their direct or indirect interest in contracts or proposed contracts with the Company during the year.
No director has direct or indirect interest in the share capital of the Company (December 2017 :Nil)
1. Report on diversity in employment
The Company operates a non-discriminatory policy in the consideration of applications for employment. The
Company's policy is that the most qualified and experienced persons are recruited for appropriate job levels,
irrespective of an applicant's state of origin, ethnicity, religion, gender or physical condition. We believe diversity and
inclusiveness are powerful drivers of competitive advantage in understanding the needs of our customers and creatively
developing solutions to address them.
Post balance sheet eventsThere are no post balance sheet events that require disclosure in this directors' report.
Donations and charitable gifts
Directors' and their interest
Human resources
The Company made no contributions to charitable and non-political organizations during the year (31 December 2017:
Nil).
ShareholdingAccording to the register of members, Metropolitan International Holdings (Pty) and MMI Strategic Investments were
the shareholders and its interest in the issued share capital of the Company as at 31 December 2018 was as follows:
The Company did not purchase any of its own shares during the year (31 December 2017: Nil).
MMI Strategic Investments
(Pty) Ltd
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METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
CORPORATE GOVERNANCE REPORT
S/N
1
2 Mr. Olufemi Olasupo Adeyemo
3
4
5
6
7
8
*Mr Henry Ationu resigned from the board with effect from 30 June, 2018
Ghanaian
South African
South African
Nigerian
ZimbabweanMr. Livingstone Magorimbo
Mr. Philip Du Preez
Mr. Dumo Mbethe
Mr. Henry Ationu *
Managing Director / Chief
Executive Officer
Non-Executive Director
Non-Executive Director
Executive Director
Mrs. Beatrice Ofei Non-Executive Director
Metropolitan Life Insurance Nigeria Limited (“the Company”) is committed to implementing the best practice
standards of corporate governance. The Company functions under a governance framework that enables the Board to
discharge its role of providing oversight and strategic direction in balance with its responsibility to ensure the
Company’s compliance with regulatory requirements and acceptable risk.
The Board of Directors is the Company’s highest decision making body responsible for governance. It operates based
on the understanding that sound governance practices are fundamental to earning the trust of stakeholders which is
critical to sustainable growth.
The Board composition, is driven by the need to manage costs and at the same time, ensure that the committees have
access to the required skills and competencies from directors. As at 31 December 2018, the Board comprised seven
(7) members made up of six (6) Non-Executive Directors and one (1) Executive Directors, in line with the provisions
of the NAICOM Code of Corporate Governance for Insurance Companies in Nigeria. The full details of the Board
composition is set out below:
Introduction:
The Board:
Composition and role:
Mr. Phillip Matlakala
Mr. Charles Egan
Name Designation Citizenship
South African
Nigerian
Ghanaian
Chairman
Non-Executive Director
/Independent Director
Non-Executive Director
In line with best practice and in accordance with the provisions of all the Codes of Corporate Governance by which
the Company is governed, the roles of the Chairman and Managing Director are assumed by different individuals and
there is a separation of powers and functions between the Chairman and the Managing Director. The Board is able to
reach impartial decisions as its Non-Executive Directors are a blend of Independent and Non-Independent directors
with no shadow or alternate Directors, which ensures that independent thought, is brought to bear on decisions of the
Board. The effectiveness of the Board derives from the diverse range of skills and competences of the Executive and
Non-Executive directors who have exceptional degrees of insurance, financial and broader entrepreneurial
experiences.
The Board carries out its oversight function through its standing committees. In line with best practice, the Chairman
of the Board does not sit on any of the committees. In line with the 2015 NAICOM Corporate Governance Guidelines,
the three Board committees are as follows;
• Finance, Investment and General Purpose Committee (FIGPC);
• Audit and Compliance Committee (ACC); and
• Enterprise Risk Management Remuneration and Governance Committee (ERMRGC)
Board Committees
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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
CORPORATE GOVERNANCE REPORT
S/N ACC ERMGC FIGPC
1 -
2 C M M
3 M C
4 M C -
5 - M M
6 - - -
7 - - -
Key
C Chairman of Committee
M Member
Mr. Phillip Matlakala
Mr. Charles Egan
Mrs. Beatrice Ofei
Mr. Livingstone Magorimbo
Mr. Olufemi Olasupo Adeyemo
Mr. Dumo Mbethe
Mr. Philip Du Preez
The composition and responsibilities of the Committees are set out below:
Board Audit and Compliance Committee
Audit & Compliance Committee functions:
The functions of the Audit & Compliance Committee are as follows:
• Ensure that an effective system of audit and internal controls are in place to safeguard the assets and income of the
Company and ensure the integrity of the Company’s financial statements.
• Monitor processes designed to ensure compliance in all respect with legal and regulatory requirements, including
disclosure controls and procedures and the impact (or potential impact) of the developments related thereto. Also
ensure compliance with Anti-Money laundering laws, policies and reporting requirements.
• Evaluate annually the independence and performance of the external and internal auditors.
• Review with management and external auditors the annual audited financial statements before its submission to
the Board.
• Select and review appointments of independent external auditors and recommend to the Board for approval prior
to the Board’s recommendation to shareholders for ratification.
• Review management’s internal audit and control reports and recommend controls that will address control lapses
to the Board.
• Review all whistleblowing reports.
• In collaboration with Enterprise Risk Management, Remuneration and Governance Committee, respond to
regulators on behalf of the Board in respect of their audit comments.
• Review and approve audit policies.
• Review and approve internal audit charter.
• Recommend, in line with best practice, the Head Internal Audit for appointment by the Board.
• The Head Internal Audit and the Chief Compliance Officer will report to the Chairman of the Committee and will
be assessed annually by him/her in consultation with the MD/CEO.
• Advise the Board of significant control failures and tracking.
• Act as the disciplinary committee of the Board for the MD/CEO, Executive Director(s) and the Executive
Management Team.
• Review regulators audit reports and ensure that systems are put in place to address any weaknesses.
• Review the activities of the internal audit function and ensure that no unjustified restrictions or limitations are
imposed
• Review the internal audit function’s compliance with its mandate as approved by the Committee
• Consider whether or not the objectives, staffing plans, financial budgets, audit plans and standing of the internal
audit function provides adequate support to enable the Committee to meet its objectives.
Director
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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
CORPORATE GOVERNANCE REPORT
• Ensure that the internal audit function is subject to an independent quality review, as and when the Committee
determines it appropriate, provided it takes place at intervals not exceeding 5 years at a time, including compliance
with the Institute of Internal Auditors' International Standards for the Professional Practice of Internal Auditing.
• On a regular basis meet separately with the head of internal audit to discuss any matters that the Committee or
internal audit believes should be discussed privately
• Ensure that a formal process to follow up significant internal and external audit recommendations is in place, and
that the Internal Auditor reports to the Audit & Compliance Committee on any slow progress or non-implementation
of these recommendations.
Internal control
The Committee will review the effectiveness of the design and operation of the Company’s system of internal control.
In discharging these responsibilities the Committee will:
• Evaluate whether management is setting the appropriate “control culture” by communicating the importance of
internal control and ensuring that all employees have an understanding of their roles and responsibilities;
• Gain an understanding of whether internal control recommendations made by internal and external auditors have
been implemented by management;
• Review the directors’ responsibility statement in the financial statements on internal controls prior to endorsement
by the Board and, in particular, to review:
i. the procedures for identifying business and financial risk and controlling their impact on the company;
ii. the Company’s procedures for preventing or detecting fraud;
iii. the Company’s procedures for ensuring that relevant regulatory and legal requirements are complied with;
iv. the operational effectiveness of policies and procedures.
• Review the controls over significant financial risks. Assess whether management has controls in place for unusual
types of transactions and/or any potential transactions that may involve an unacceptable degree of risk;
• Review the results of work performed by the internal audit function in relation to financial reporting, corporate
governance, internal control and any significant investigations and that findings and recommendations are received
and discussed on a timely basis;
• Review such significant transactions not directly related to the company’s normal business as the Committee might
deem appropriate;
• Review the report of internal audit to the Committee in providing comfort on internal controls and on any
unmanaged risks and controls;
• Compliance with laws and regulations;
• Review the effectiveness of the system for monitoring compliance with laws and regulations.
• Review the findings of any examinations by regulatory agencies, and any auditor observations.
• Review the process for communicating the code of conduct to Company personnel, and for monitoring compliance
therewith.
• Obtain regular updates from management and company Chief Legal Officer regarding compliance matters.
External audit
• Review the external auditors' proposed audit scope, approach, terms of engagement and audit fee, including
coordination of audit effort with internal audit, and ensure that no undue restrictions or limitations have been placed
on the scope of the audit.
• Review and discuss the external auditor’s proposed report, any matters arising from the audit that the auditors may
wish to raise, as well as the external auditor’s management letter and the management response thereto.
• Review the performance of the external auditors, and make recommendations to the Boards on the appointment or
discharge of the auditors.
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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
CORPORATE GOVERNANCE REPORT
Authority
Meeting procedures
Attendance
Quorum and voting
• Review and confirm the independence of the external auditors by obtaining statements from the auditors on
relationships between the auditors and the company, including non-audit services, and discussing the relationships
with the auditors.
• On a regular basis, meet separately with the external auditors to discuss any matters that the Committee or
auditors believe should be discussed privately.
In order to meet its responsibilities and fulfil its role, the Committee:
• Acts in terms of the delegated authority of the Board.
• Has the power to investigate any activity within the scope of its Terms of Reference.
• May call upon the Chairmen of the other Board Committees, any of the executive directors, officers or Company
Secretary to provide it with information, subject to following a Board approved process.
• Has reasonable access to the Companies’ records, facilities and any other resources necessary to discharge its
duties and responsibilities.
• May delegate authority to one or more designated members of the Committee.
• Has the right to obtain independent outside professional advice to assist with the execution of its duties, at
companies’ cost, subject to following a Board approved process.
• Makes recommendations to the Board that it deems appropriate on any area within the ambit of its Terms of
Reference where action or improvement is required.
• The Committee will meet on an ad hoc basis but will meet a minimum of four times per annum.
• The chairman of the Committee may meet with the CEO, the Head Internal Audit, and/or the Company Secretary
prior to a Committee meeting to discuss important issues and agree on the agenda.
• The Chairman may invite any member of staff from the Company, including external professional advisors, to
Committee meetings as and when required, provided that a Board approved process is followed. Invitees to meetings
attend by invitation only and they may not vote on matters at the meeting.
• The following persons shall attend Committee meetings as appropriate (but have no voting power):
• MD/CEO
• Chief Compliance Officer;
• Chief Financial Officer;
• Executive Director, Business Development; and
• Internal Auditor
• Committee members will attend all scheduled meetings of the Committee, including meetings called on an ad hoc
basis for special matters, unless prior apology, with reasons, have been submitted to the Chairperson or Committee
Secretary.
• If the nominated Chairperson of the Committee is absent from a meeting, the members present shall elect one of
the members present to act as Chairperson for that meeting.
• The Company Secretary or his/her delegate is the secretary to this Committee.
• A quorum for meetings shall be a simple majority of members.
• Individuals in attendance at Committee meetings by invitation may participate in discussions at meetings but do
not form part of the quorum for Committee meetings, and shall have no voting rights where decisions are to be voted
on;
• Wherever possible the Committee will take decisions on a consensus basis. Where consensus cannot be reached,
voting takes place by a show of hands.
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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
CORPORATE GOVERNANCE REPORT
Agenda and minutes
Evaluation
Remuneration
Review of terms of reference
Introduction
The purpose of Enterprise Risk Management Remuneration and Governance Committee is to:
Committee members not holding executive office shall be compensated for their services, with the Chairperson being
entitled to an additional fee for his/her service.
The Board will review the contents of this terms of reference each year to ensure that it remains consistent with the
Boards’ objectives and responsibilities.
The Board Enterprise Risk Management, Remuneration and Governance (ERMR&GC) Committee is a Committee of
the Board.
• Discharge the Board’s risk management responsibilities as defined in the Company’s Risk Policies and in
compliance with regulation, law and statute;
• Review and assess the integrity and adequacy of the overall risk management function of the Company;
• Review risk limits and periodic risk reports and make recommendations to the Board;
• Establish procedures for the nomination of directors.
• Advise and recommend to the Board the composition of the Board.
• Approve recruitments, promotions, redeployments, disengagements and succession planning for Executive
Management in line with the approved organization structure of the Company and manning levels and the approved
annual Manpower Plan.
• Approve recruitments, promotions, redeployments and disengagement for Executive Management of Subsidiaries,
where applicable. Recruitments shall be in line with the approved organisation structure of the subsidiary.
• Review and evaluate the skills of members of the Board using the skills matrix found in the Appendix.
• Recommend to the Board compensation for all staff of the Company.
• Advise the Board on corporate governance standards and policies.
• Review and approve all human resources and governance policies for the Company.
• Review and recommend to the Board and Shareholders any changes to the Memorandum and Articles of
Association.
Board Enterprise Risk Management, Remuneration and Governance Committee.
• The Committee shall establish an annual work plan for each year to ensure that all relevant matters are covered by
the agendas of the meetings planned for the year.
• The notice of each meeting of the Committee, confirming the venue, time and date and enclosing an agenda of
items to be discussed, together with the supporting documentation, shall be forwarded to each member of the
Committee not less than five (5) working days prior to the date of the meeting.
• Committee members must be fully prepared for Committee meetings, to provide appropriate and constructive input
on matters discussed.
• The minutes of meetings shall be completed as soon as possible after the meeting and circulated to the Chairperson
for review thereof. The minutes will be formally approved by the Committee at its next scheduled meeting.
The Board, and each member of the Committee, will perform an evaluation of the effectiveness of the Committee
annually.
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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
CORPORATE GOVERNANCE REPORT
Composition of the Committee
Remuneration and performance management
• The Committee will comprise at least three members of whom the majority will be non-executive, including the
Chairperson of the Audit and Compliance Committee.
• The Chairperson and members of this Committee shall be appointed by the Board, or its duly mandated Board
Committee. Any change to the composition of the Committee shall be considered and approved by the Board, or its
duly mandated Board Committee.
• The Committee’s composition shall be reviewed at least every three years and members may be eligible for re-
appointment.
• The members of the Committee must collectively have sufficient qualifications and experience to fulfil their duties,
be fit and proper, and keep up-to-date with developments affecting the required skills-set.
• The Company Secretary, or any other person so appointed by the Board, duly mandated by the Board Committee,
shall be the secretary to the Committee.
• Risk management
• Approve annual risk management plan and oversee its implementation and monitor performance. This annual
plan should also include a fraud risk plan to consider the Company’s fraud exposure and prevention.
• Ensure that risk assessments are performed on a continual basis and ensure that frameworks and methodologies
are in place to increase the probability of anticipating unpredictable risks.
• Monitor, review and assess the integrity and adequacy of the overall risk management framework of the Company.
• Recommend risk approval limits to the Board for approval.
• Review and on a continuous basis update the risk management policies, frameworks and procedures subject to the
approval of the Board.
• Advise the Board on any emerging risks that the Company’s or could be exposed to and recommend mitigation
actions.
• Recommend the organization structure of the Company to the Board for approval.
• Evaluate and appraise the performance of the Board and Board Committees and its members annually in
conjunction with consultants.
• Review management’s performance against pre-set objectives and compliance with human resources policies and
practices.
• Review and recommend for approval to the Board, Company Policies relating to Human Resources risk
management.
The responsibilities and scope of the Enterprise Risk Management Remuneration and Governance Committee are:
• Recommend the entitlements of Directors to the Board for approval.
• Recommend compensation package for the Managing Director/CEO, Executive Director(s) and Executive
Management Team for approval by the Board.
• Define the MD/CEO’s accountabilities and how performance will be appraised.
• Approve the accountabilities and how performance will be appraised for the Executive Management Team.
• Appraise the performance of the MD/CEO, and the Executive Management Team of the Company against Key
Performance Indicators, with a report of the appraisal submitted to the Board of Directors.
• Review and evaluate the MD/CEO’s annual evaluation of the Executive Management Team and decide on their
individual compensation packages in accordance with the remuneration policy for the Executive Management Team.
• Appraise Board performance and oversee the evaluation of the Board.
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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
CORPORATE GOVERNANCE REPORT
Governance
Authority
• The BERMRGC shall provide a central source of guidance and advice to the Board and Company on matters of
ethics, conflict of interest and good corporate governance.
• Responsible for evaluating the overall system of corporate governance for the Company and proposing any changes
to the Board for approval.
• Recommend to the Board for approval, the Board Governance and Board Committee and Executive Management
Governance frameworks/mechanisms, and conduct its periodic review as it deems appropriate.
• Recommend to the Board for approval, the Policy framework and procedures for the Company.
• Review and recommend to the Board and shareholders any changes to the Memorandum and Articles of
Association.
• Deliberate and respond on behalf of the Board to regulatory reports/comments.
• Organize all Board and Board Committees inductions and trainings. Conduct training for the Board on all aspects
of governance practices and compliance to ensure that it can carry out its decision making and oversight functions
effectively.
• Review the leadership development and training initiatives of executive management and ensure that any
development needs are addressed. Due consideration must be given to the MMI group aspirations to grow talent in
country that could be developed to take on greater responsibility in other parts of the MMI International and MMI
group companies.
• Review and on a continuous basis update the policies, frameworks and procedures of the Company subject to the
approval of the Board;
• Approve the promotion of Head Internal Audit and senior management of the Audit Department, upon
recommendation from the Audit and Compliance Committee. These promotions must be based on approved
promotion eligibility criteria and the approved annual Manpower plan by the Board.
• Approve IT governance framework and delegate to Management the responsibility for the implementation of the IT
governance framework.
In order to meet its responsibilities and fulfil its role, the Committee:
• Acts in terms of the delegated authority of the boards.
• Has the power to investigate any activity within the scope of its Terms of Reference.
• May call upon the Chairmen of the other Board Committees, any of the executive directors, officers or company
secretary to provide it with information, subject to following a Board approved process.
• Has reasonable access to the companies’ records, facilities and any other resources necessary to discharge its duties
and responsibilities.
• May delegate authority to one or more designated members of the Committee.
• Has the right to obtain independent outside professional advice to assist with the execution of its duties, at
company’s cost, subject to following a Board approved process.
• Makes recommendations to the board that it deems appropriate on any area within the ambit of its Terms of
Reference where action or improvement is required.
• Propose candidates to the Board for all Board positions.
• Propose to the Board, candidates for the position of Managing Director Chief Executive Director(s) and members
of the Executive Management Team for the Company.
• Recommend to the Board, directors for election and re-election.
• Regularly update the Board about the Committee’s activities and make appropriate recommendations in
accordance with Companies’ vision statement and business concept.
• Appointments will be approved as follows:
> Appointments of up to Senior Manager should be approved by the CEO;
> Appointments of Assistant General Manager and above should be approved by ERMRGC;
> Appointments of Company Secretary, Head Internal Audit, and Executive Directors/Non-Executive Directors
should be approved by the Board. Approve the redeployments of the Executive Management.
• Review the Executive Management succession plans and make recommendations to the Board.
• Approve the disengagement (resignation, retirement, termination, dismissal, redundancy and invalidation on
medical grounds) of Executive Management.
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FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
CORPORATE GOVERNANCE REPORT
Meeting procedures
Attendance
Quorum and voting
Agenda and minutes
• The Committee will meet on an ad hoc basis but will meet a minimum of four times per annum.
• The Chairman of the Committee may meet with the CEO, the Risk Officer, Internal Auditor, Head HCM and/or the
Company Secretary prior to a Committee meeting to discuss important issues and agree on the agenda.
• The Chairman may invite any member of staff from the Company, including external professional advisors, to
Committee meetings as and when required, provided that a Board approved process is followed. Invitees to meetings
attend by invitation only and they may not vote on matters at the meeting.
• The following persons shall attend Committee meetings as appropriate (but have no voting power):
• The Risk Officer;
• The Head of Internal Audit;
• Head of HCM;
• Chief Financial Officer; and
• Chief Compliance Officer.
The Head HR MMI International may attend the meetings of the Committee but only by invitation.
• Committee members must attend all scheduled meetings of the Committee, including meetings called on an ad hoc
basis for special matters, unless prior apology, with reasons, have been submitted to the Chairperson or Committee
secretary.
• If the nominated Chairperson of the Committee is absent from a meeting, the members present shall elect one of
the members present to act as Chairperson for that meeting.
• The Company Secretary or his/her delegate is the secretary to this Committee.
• A quorum for meetings shall be a simple majority of Members.
• Individuals in attendance at Committee meetings by invitation may participate in discussions at meetings but do
not form part of the quorum for Committee meetings, and shall have no voting rights where decisions are to be voted
on;
• Wherever possible the Committee will take decisions on a consensus basis. Where consensus cannot be reached,
voting shall take place by a show of hands.
• The Committee shall establish an annual work plan for each year to ensure that all relevant matters are covered by
the agendas of the meetings planned for the year.
• The notice of each meeting of the Committee, confirming the venue, time and date and enclosing an agenda of
items to be discussed, together with the supporting documentation, shall be forwarded to each member of the
Committee not less than five (5) working days prior to the date of the meeting.
• Committee members must be fully prepared for Committee meetings, to provide appropriate and constructive
input on matters discussed.
• The minutes of meetings shall be completed as soon as possible after the meeting and circulated to the Chairperson
for review thereof. The minutes will be formally approved by the Committee at its next scheduled meeting.
Evaluation
The Board, and each member of the Committee, will perform an evaluation of the effectiveness of the Committee
annually.
Remuneration
Committee members not holding executive office shall be compensated for their services, with the Chairperson being
entitled to an additional fee for his/her service.
Review of terms of reference
The Board will review the contents of this terms of reference each year to ensure that it remains consistent with the
Boards’ objectives and responsibilities.
13
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
CORPORATE GOVERNANCE REPORT
Board Finance, Investment and General Purpose Committee (FIGPC)
The purpose of The Finance, Investment and General Purpose Committee is to:
Composition of the Committee
• Formulate and shape the strategy of the Company and make recommendations to the Board accordingly;
• In carrying out its functions, the FIGPC may engage an adviser on behalf of the Board to facilitate an annual review
of the Company’s long term plans and the principal issues that the Company may face in the future.
• Conduct one Board/Management Strategy Retreat a year to formulate the strategy.
• Review and approve the budget of the Company within its limit and make recommendations to the Board for
approvals above its limit.
• Review and approve within its approved limits, the annual manpower plan for the Company as part of the budget
approval process. The manpower plan shall at a minimum include the vacancies, maximum levels, cost implication,
etc.
• Approve within its approved limits the annual estimated number of staff to be promoted based on agreed
promotion eligibility criteria as part of the annual budget exercise.
• Monitor performance of the Company against budget.
• Conduct Quarterly business reviews with Management/Board.
• Concur on compensation for executives.
• Consider and approve expenses (including donations, sponsorships and overseas training) above the limits of the
Executive Management and its organs as specified in the expense empowerment policy.
• Consider and approve significant IT investments and expenditure for the Company.
• Consider and approve extra budgetary expenditure (including donations, sponsorships and overseas training)
above the limits of Executive Management and its organs as specified in the approved expense empowerment policy.
The responsibilities and scope of the Finance, Investment and General Purpose Committee are:
• The Committee comprises at least three members of whom the majority will be non-executive, including the
Chairperson of the Finance, Investment and General Purpose committee.
• The Chairperson and members of this Committee shall be appointed by the Board, or its duly mandated Board
Committee. Any change to the composition of the Committee shall be considered and approved by the Board, or its
duly mandated Board Committee.
• The Committee’s composition shall be reviewed at least every three years and members may be eligible for re-
appointment.
• The members of the Committee must collectively have sufficient qualifications and experience to fulfil their duties,
be fit and proper, and keep up-to-date with developments affecting the required skills-set.
• The Company Secretary, or any other person so appointed by the Board, duly mandated by the Board Committee,
shall be the secretary to the Committee.
• Discharge the Board’s responsibilities with regard to strategic direction and budgeting;
• Provide oversight on financial matters and the performance of the company;
• Review and approve the Company’s policies of a financial and general nature;
• Make financial and investment decisions within its approved limits on behalf of the Board;
• Discharge other related responsibilities of a finance, investment and/or general nature as the name implies.
14
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
CORPORATE GOVERNANCE REPORT
Financial reporting (financial statements)
• Consider and approve income reversals, refunds of fraud losses on customer accounts.
• Review the assets and liability committee reports.
• Develop and review a Board information system needed for the Board to carry out its oversight role.
• Approve financial policies for the Company regarding financial reporting and controls and audits.
• Approve the following other policies of the company:
a. Accounting and Finance Policies;
b. Operations Policies;
c. Expense Policies;
d. Accrual, Depreciation and Amortization Policies;
e. Asset Management/Disposal Policies;
f. Income Generation Policies;
g. Investment Policies;
h. Recommend Dividend Policies to the Board for approval;
i. Insurance Policies;
j. Treasury Policies & Frameworks; and
k. Any Other Policies/Matters relating to the title of the Committee;
• Monitor and evaluate significant IT investments and expenditure.
• Financial Reporting (General)
• Review any legal matters which could significantly impact the financial statements.
• Gain an understanding of the current areas of greatest financial and nonfinancial (operational, strategic and
regulatory) risk that may impact on the reporting, and how management is managing these effectively.
Monitor and evaluate significant IT investments and expenditure.
• Financial Reporting (General)
• Review any legal matters which could significantly impact the financial statements.
• Gain an understanding of the current areas of greatest financial and nonfinancial (operational, strategic and
regulatory) risk that may impact on the reporting, and how management is managing these effectively.
• Communicate with management and the internal and external auditors on the significant risks and exposures and
the plans to minimize such risks.
• Review significant accounting and reporting issues, including recent professional and regulatory pronouncements,
and understand their impact on the financial statements.
• Consider, with the internal and external auditors, any fraud, illegal acts and deficiencies in internal control or other
similar issues.
• Review and approve non-credit products above the level of Executive Management.
• Review the Company’s investment portfolio annually.
• Approve investment/divestment proposals on behalf of the Company within its limit and recommend to the Board
decisions above its limits for approval.
• Review the Company’s investment proposals irrespective of the amount, before presenting to the Board.
• Approve any new business activity irrespective of the amount of capital commitment.
• Review from time to time the capital (debt/equity) requirements of the Company.
• Recommend to the Board for approval the authority limits for all Executives (including all Executive Directors and
Managing Director).
• Review significant accounting and reporting issues, including the definition of materiality, any complex or unusual
transactions and highly judgmental areas.
• Review with management and the external auditors the results of the audit, including any difficulties encountered.
• Review the annual financial statements, and before recommending them to the Board for approval, consider
whether they are complete, consistent with information known to Committee members, follow appropriate
accounting principles, fairly reflect the state of affairs of the companies and that all material legal and regulatory
compliance matters have been considered.
• Review with management and the external auditors all matters required to be communicated to the FIGP under
generally accepted international standards on auditing.
15
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
CORPORATE GOVERNANCE REPORT
Actuarial & financial report
Reporting responsibilities
Other responsibilities
Meeting procedures
• Understand how management develops interim financial information, and the nature and extent of internal and
external auditor involvement.
• Review financial reports with management and the external auditors before filing with regulators, and consider
whether they are complete and consistent with the information known to Committee members. In reviewing financial
reports, consider whether management representations are fair and reasonable.
• Consider whether or not the objectives, staffing plans, financial budgets, audit plans and standing of the internal
audit function provides adequate support to enable the Committee to meet its objectives.
• Receive reports and review such reports and minutes of meetings submitted that relate to finance and actuarial
mandates. Ensure that material risks and concerns are addressed by management.
• Regularly report to the Board about the Committee’s activities and make appropriate recommendations.
• Ensure that the Board is aware of matters which may significantly impact the financial condition or affairs of the
business.
• Perform any other functions as may be requested by the Board; provided that those functions are not management
functions.
• Institute and oversee special investigations as needed.
• Review and assess the adequacy of the Committee terms of reference annually, requesting Board approval for
proposed changes, and ensure appropriate disclosure.
• Confirm annually that all responsibilities outlined in this terms of reference have been carried out.
• Evaluate the Committee's and individual members' performance on a regular basis.
In order to meet its responsibilities and fulfil its role, the Committee:
• Acts in terms of the delegated authority of the Board.
• Has the power to investigate any activity within the scope of its terms of reference.
• May call upon the Chairmen of the other Board Committees, any of the executive directors, officers or company
secretary to provide it with information, subject to following a board approved process.
• Has reasonable access to the Company’s records, facilities and any other resources necessary to discharge its duties
and responsibilities.
• May delegate authority to one or more designated members of the Committee.
• Has the right to obtain independent outside professional advice to assist with the execution of its duties, at
companies’ cost, subject to following a Board approved process.
• Makes recommendations to the Board that it deems appropriate on any area within the ambit of its terms of
reference where action or improvement is required.
• The Committee will meet on an ad hoc basis but will meet a minimum of four times per annum.
• The Chairman of the Committee may meet with the CEO, the CFO, Chief Technical Officer, Head of Business
Development and/ or the Company Secretary prior to a Committee meeting to discuss important issues and agree on
the agenda.
• The Chairperson may invite any member of staff from the Company, including external professional advisors, to
Committee meetings as and when required, provided that a Board approved process is followed. Invitees to meetings
attend by invitation only and they may not vote on matters at the meeting.
• The following persons shall attend Committee meetings as appropriate (but have no voting power):
• Chief Financial Officer;
• Executive Director, Business Development;
• Chief Technical Officer; and
• Internal Auditor
16
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
CORPORATE GOVERNANCE REPORT
Quorum and voting
Agenda and minutes
S/N Director BoD ACC ERMGC FIGPC
4 4 4 4
1 Mr. Phillip Matlakala 4 - - -
2 Mr. Olufemi Olasupo Adeyemo 4 4 4 4
3 Mr. Charles Egan 4 4 - 4
4 Mrs. Beatrice Ofei 4 4 4 -
5 Mr. Philip Du Preez 4 - - -
6 Mr. Livingstone Magorimbo 4 - 4 4
7 Mr. Dumo Mbethe 3 - - -
8 Mr. Henry Ationu* 2 - - -
*Mr. Henry Ationu resigned from the board with effect from 30 June, 2018
Number of Meetings Held
Attendance:
NAME OF DIRECTORS
• A quorum for meetings shall be a simple majority of members.
• Individuals in attendance at Committee meetings by invitation may participate in discussions at meetings but do
not form part of the quorum for Committee meetings, and shall have no voting rights where decisions are to be voted
on.
• Wherever possible the Committee will take decisions on a consensus basis. Where consensus cannot be reached,
voting shall take place by a show of hands.
• The Committee shall establish an annual work plan for each year to ensure that all relevant matters are covered by
the agendas of the meetings planned for the year.
• The notice of each meeting of the Committee, confirming the venue, time and date and enclosing an agenda of
items to be discussed, together with the supporting documentation, shall be forwarded to each member of the
Committee not less than five (5) working days prior to the date of the meeting.
• Committee members must be fully prepared for Committee meetings, to provide appropriate and constructive input
on matters discussed.
• The minutes of meetings shall be completed as soon as possible after the meeting and circulated to the Chairperson
for review thereof. The minutes will be formally approved by the Committee at its next scheduled meeting.
• Committee members will attend all scheduled meetings of the Committee, including meetings called on an ad hoc
basis for special matters, unless prior apology, with reasons, have been submitted to the Chairperson or Committee
secretary.
• If the nominated Chairperson of the Committee is absent from a meeting, the members present shall elect one of
the members present to act as Chairperson for that meeting.
• The Company Secretary or his/her delegate is the secretary to this Committee.
MEETING
Evaluation
The Board, and each member of the Committee, will perform an evaluation of the effectiveness of the Committee
annually.
Remuneration
Committee members not holding executive office shall be compensated for their services, with the Chairperson being
entitled to an additional fee for his/her service.
Review of terms of reference
The Board will review the contents of this terms of reference each year to ensure that it remains consistent with the
Board’s objectives and responsibilities.
Attendance at Board and Board Committee meetings
Directors' attendance at meetings during the 2018 financial year was as shown below:
17
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
CORPORATE GOVERNANCE REPORT
Statement of compliance
234-12772526
Whistle blowing procedure
Dial- in number:
The Company is a private limited liability company and is subject to the relevant provisions of the NAICOM Code of
Corporate Governance.
The Company's Head of Internal Audit is responsible for monitoring and reporting on whistleblowing. Quarterly
reports are rendered to the Board Audit and Compliance Committee.
The Company expects all its employees and Directors to observe the highest level of probity in their dealings with the
Company and its stakeholders. The Company's Whistle-Blowing Policy covers internal and external whistle-blowers.
Customer, employees and other stakeholders may raise concern about actual or potential infraction of company's
corporate business principles, other ethic related policies or violation of the Company's processes and procedures
such as internal dealing and illegal information brokerage, conflict of interest and abuse of office, improper payment,
compromise of company's health and safety policy, standards, commission of a crime, failure to comply with any legal
obligations, a miscarriage of justice, damage to the environment, fraud and financial irregularities, the deliberate
concealment of information tending to show one of the above mention is occurring or likely to occur.
18
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
MANAGEMENT'S COMMENTARY AND ANALYSIS OF THE CURRENT YEAR PERFORMANCE
31-Dec-18 31-Dec-17 ChangeN'000 N'000 %
2,265,495 2,006,246 13 Reinsurance expenses (414,671) (345,265) 20
1,840,507 1,637,982 12 (405,106) (359,095) 13 698,679 1,007,238 (31)
(908,197) (1,137,024) (20) 231,084 156,264 48 218,240 141,832 54 Earnings per share -
basic/diluted (kobo) 21.82 14.18 54
Profit before taxProfit for the year
Performance indicators
Net claims ratio. 2018: 5% (2017:23%)
The net claims experience has been managed, inter alia, by increased facultative reinsurance. The
reinsurance claims recoveries were N629.04 million in 2018 compared to N376.14 million in 2017.
Unprofitable schemes are monitored in respect of loss ratios and pricing adjustments implemented
where feasible. Other policy conditions are also reviewed in instances where the claims experience
warrants such interventions.
Operating results and financial position
Dividend declaration
The Directors do not recommend the payment of a dividend for the year ended 31 December 2018.
Performance measures and indicators
The performance measures applied in the Company focus on the factors that ensure the sustainable
growth of the business in the long term while meeting the requirements and obligations towards both
providers of capital and policyholders. These measures are applied consistently across financial
reporting periods and reviewed by the Board on a quarterly basis with corrective action following any
deviation. The specific performance indicators are as follows:
Growth in gross premium income measured as a percentage of prior year: 2018: 13%
(2017:1%)
After a growth of 1% in the prior year, the economic headwinds currently ravaging Nigeria impacted
the company's business model in 2018. The company sought to achieve renewal ratios of at about 53%
in 2018 (2017: 80%). However, despite achieving the performance in terms of number of schemes, the
renewal levels of premium were diminished because of company downsizing and retrenchments so the
related sums assured commensurately reduced. Premium inflows from Public Sector also diminished
greatly as a consequence of fiscal challenges. The credit life line of business struggles to gain decent
traction in an environment where most financial institutions are curtailing personal lending lines as
the incidence of non-performing loans continually increases.
Reinsurance ratio. 2018:-20% (2017:-6%)
The company still maintain the usage of facultative reinsurance arrangements as part of the policy in
managing the net claims ratio. Facultative reinsurance is utilized as a mitigation strategy in respect of
schemes which exhibit a gross loss ratio which is deemed to be chronic and competitive market forces
militate against repricing of such schemes.
Gross premium written
Net premium incomeUnderwriting expensesInvestment and other incomeManagement expenses
19
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
MANAGEMENT'S COMMENTARY AND ANALYSIS OF THE CURRENT YEAR PERFORMANCE
The business model employed in 2018 by Metropolitan is optimised for what, in the view of
management, represents the viable life insurance market segments. This includes product
development, distribution, service delivery and administration. However, as the market evolves and
new opportunities present themselves, the company has the capability and capacity to pursue such
opportunities as are viable and attractive. Specific emphasis is being placed on evaluating the mass
retail market and the application of mobile technology for value proposition delivery. Obviously the
fortunes of Metropolitan are inextricably linked to the wellbeing or otherwise of the Nigerian
economy. If recessionary conditions start to ease and sustained progress is maintained in respect of
initiatives to diversify the Nigerian economy, the company's current principal lines of business, being
employee benefits and credit life underwriting, will be well placed to capitalize on any such green
shoots of recovery.
Growth in underwriting expenses 2018:13% (2017:-3%)
The increase in Underwriting Expenses between 2017 and 2018 was as a result increase in premium
written but frequent prudent processes were put around the underwriting processes. As a result of
this, underwriting expenses incurred in previous years have been cut down to the barest minimum
without necessarily compromising the underwriting processes which resulted in increase of 185% in
underwriting profit between 2017 and 2018.
Growth in management expenses 2018:19% (2017:2%)
The relative stability of the naira to dollar exchange rate at N360 to a Dollar assisted a lot in
controlling foreign exchange denominated expenses. More so, Management has been able to put in
place a lot of cost control initiatives to stem the tide in increased cost as it was obtainable in the past
years. Additionally, staff rationalisation exercise was carried out in August 2017 to checkmate
unnecessary overheads hence the company's ability to reduce the management expenses by about 19%
despite inflation and the increasing cost of doing business in Nigeria.
Financial assets reduced by N515 million in 2018 as against an increase of N423 million in 2017 while
insurance contract liabilities increased by N0.53 million primarily as a result of changes in insurance
Contract Liabilities in the year end actuarial valuation. The yield generated by the investment portfolio
reduced by 31% over the previous period as about 57% of the company's investment assets are in
Treasury Bills which realized enhanced returns 2018. The investment portfolio is completely derisked
with the disposal of the equity portfolio in 2017. The rising yield curve did result in an unrealized
revaluation loss of N96 million in respect of the bond and Treasury Bills portfolio.
Investment performance
Forward looking statements
20
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
SIGNIFICANT ACCOUNTING POLICIES
1 General information
2 Summary of significant accounting policies
2.1 Basis of preparation
2.2 New standards and amendments applicable during the year
IFRS 9- Financial Instruments effective 1 January, 2018.
The Company has its registered office at 205B Ikorodu Road, Obanikoro, Lagos, Nigeria.
Metropolitan Life Insurance Nigeria Limited was incorporated as a private limited liability Company on 19 August 2004.
The National Insurance Commission licensed the Company on 14 February 2007 to carry on the business of life
insurance in Nigeria. The Company is ultimately controlled by MMI Holdings Limited through its subsidiary
Metropolitan International Holdings Pty Limited.
The financial statements of the Company have been prepared and approved by the directors in accordance with
International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB),
the International Financial Reporting Interpretations Committee (IFRIC), Companies and Allied Matters Act, the
Insurance Act of Nigeria and the relevant national regulations. These financial statements comprise the statement of
financial position, the statement of comprehensive income, the statement of changes in equity, the cash flow statement
and the accompanying notes. The accounting policies set out have been consistently applied in preparing the financial
statements for the year ended 31 December 2018.
The financial statements were authorised for issue by the directors on 2 May, 2019.
The principal accounting policies applied in the preparation of these financial statements are set out below. These
policies have been consistently applied to all the years presented, unless otherwise stated.
The financial statements have been prepared in accordance with the going concern principle under the historical cost
convention as modified by the revaluation of financial assets designated as fair value through profit and loss. The
financial statements are presented in Nigerian currency (Naira-which is the Company's functional currency) and all
values are rounded to the nearest thousand except when otherwise indicated.
Metropolitan Life Insurance Nigeria Limited has adopted IFRS 9 as issued by the International Accounting Standard
Board with a date of transition of 1 January 2018. The adoption resulted in changes in accounting policies and
adjustments to the amounts previously recognised in the financial statements.
Adjustments to the carrying amounts of financial assets at the date of transition were applied restrospectively from 1
January 2018, without restating comparative figures, Opening retained earning as at 1 January 2018 was adjusted for
any differences in the carrying amounts of financial instruments. The adoption of IFRS 9 has resulted in changes in the
accounting policies for recognition, classification and measurement of financial assets and financial liabilities and
impairment of financial assets. IFRS 9 also significantly amends other standards dealing with financial instruments such
as IFRS 7 'Financial Instruments: Disclosures'.
Disclosures relating to the impact of the adoption of IFRS 9 on our financial assets are shown below. Further details of
the specific IFRS 9 accounting policies applied in the current period are described in the accounting policies section (see
note 2.6).
29
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
N'000 N'000 N'000 N'000 N'000 N'000
a 779,518 - - - (4,404) 775,114
b - 58,343 - - (103) 58,240
c 5,315,962 (58,343) -
- -
5,257,619
70,120 - - - - 70,120
331,166 - - - - 331,166
135,664 - - - - 135,664
478 - - - - 478
200,000 - - - - 200,000
6,832,908 - - - (4,507) 6,828,401
-
2,293,372 - - - - 2,293,372
53,440 - - - - 53,440
- - - - - -
383,198 - - - - 383,198
d 18,015 - - (45) - 17,970
2,748,025 - - (45) - 2,747,980
1,000,000 - - - - 1,000,000
2,494,862 - - - - 2,494,862
272,243 - - - - 272,243
e 317,778 - - 45 (4,507) 313,316
4,084,883 - - 45 (4,507) 4,080,421
-
6,832,908 - - - (4,507) 6,828,401
Summary of reconciliation of transition from IAS 39 to IFRS 9 and significant accounting policies for
the balances in the statement of financial position
Reconciliation of statement of financial position balances from from IAS 39 to IFRS 9 at 1 January 2018
Summary
Note
Ref.
IAS 39
Closing
balance 31
December,
2017
Impact of
classifica-
tion
Impact
of
measur-
ement
Tax impact
of IFRS 9
adoption
Impact of
impair-
ment (ECL)
IFRS 9
Opening
balance as at
1 January,
2018
Financial assets at
amortised cost
Cash and cash
equivalents
Financial assets at fair
value through profit or
loss
Other receivables
Reinsurance assets
Property and equipment
Intangible assets
Statutory deposit
Other payables and
accruals
Total Assets
Liability and equity
Insurance contract
liabilitiesInvestment contract
liabilities
Trade payables
Current income tax
Total Liabilities
Equity
Share capital
Share premium
Contingency reserves
Retained earnings
Total equity
Total equities and
30
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
Transition reconciliation
Note
Ref Line items
IAS 39
Closing
Balance As
at 31
December,
2017
IFRS 9
Opening
balance as at
1 January,
2018
A Cash and cash equivalent N'000 N'000
Balance as at 31 Dec 2017 (IAS 39) 779,518 779,518
Reclassifications:
Day 1 IFRS 9 adjustment (ECL impairment) (see note 6a) - (4,404)
Balance as at 1 Jan 2018 (IFRS 9) 779,518 775,114
b Financial assets at amortised cost
Balance as at 31 Dec 2017 (IAS 39) - -
Reclassification:
See (c) - from FVTPL - (treasury bill of less than 90 days) - 58,343
Day 1 IFRS 9 adjustment (ECL impairment) (see note 7a) - (103)
Balance as at 1 Jan 2018 (IFRS 9) - 58,240
c Financial assets at fair value through profit or loss
Balance as at 31 Dec 2017 (IAS 39) 5,315,962 5,315,962
Reclassification:
See (b) - (58,343)
Balance as at 1 Jan 2018 (IFRS 9) 5,315,962 5,257,619
d Current income tax liabilities
Balance as at 31 Dec 2017 (IAS 39) 18,015 18,015
See (e) Remeasurement on transition to IFRS 9 - (45)
Balance as at 1 Jan 2018 (IFRS 9) 18,015 17,970
e Retained earnings
Balance as at 31 Dec 2017 (IAS 39) 317,778 317,778
See (d) Tax impact on transition to IFRS 9 - 45
See (f) Impairment (ECL Model) - (4,507)
Balance as at 1 Jan 2018 (IFRS 9) 317,778 313,316
f Reconciliation of impairement loss allowance
IAS as at 31 Dec 2017 (IAS 39) IAS 39
Impairme
nt
allowances
as at 31
December
2017
Change due to
reclassifica -
tion
Change due to
introduction of
IFRS 9 ECL
Model
IFRS
Impairment
allowance as at 1
Jan 2018
Cash and cash equivalents - - (4,404) (4,404)
Financial assets at amortised cost (103) (103)
(4,507) (4,507)
If the company had adopted IFRS 9 in the prior year, the the technology levy which is based on profit before tax would have reduced
by N45 thousand. However, the transition does not affect the corporate tax as the company is subjected to minimum tax in line with
the Company Income Tax Act
Impact of tax on transition from IAS 39 to IFRS 9
- to financial assets at amortised costs - (placement with financial institution
less than 90 days)
31
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
SIGNIFICANT ACCOUNTING POLICIES
2.3 Standards and interpretations issued/amended but not yet effective
Title
The company has assessed the classification of its financial instruments carried at fair value through profit or loss (
treasury bills and bonds) and concluded that the business model has not changed significantly compared with the
classification under IAS 39. A significant portion of the companies financial assets are carried at fair value through profit
or loss.
The company's cash and cash equivalents includes short term deposits (i.e call and term deposits with financial
institutions), bank balances with banks and treasury bills with less than 90days maturity. The balances were assessed by
the company in line with IFRS 9 Solely Payments of Principal and Interest (SPPI) test and the placements met the
conditions required for financial assets classified or carried at amortised cost. Hence, the assets have been assessed for
Expected Credit Loss impairment.
IFRS 15 provides a single, principles based five-step model to be applied to all contracts with customers.
The five steps in the model are Identification of the contract with the customer, Identification of the
performance obligations in the contract, Determination of the transaction price, Allocation of the transaction
price to the performance obligations in the contracts, and Recognition of revenue when (or as) the entity
satisfies a performance obligation. The standard permits a modified retrospective approach for the adoption.
Under this approach, entities will recognise transitional adjustments in retained earnings on the date of initial
application without restating comparative period. They will only need to apply the new rules to contracts that
are not completed as of the date of initial application.
Management has assessed the impact of the new rules and identified that the standard does not have significant impact
on the Company's financial statements.
IFRS 15- Revenue from contracts with customers effective 1 January 2018
Key requirements
The IASB issued the new standard for accounting for leases - IFRS 16 Leases in January 2016.
The new standard does not significantly change the accounting for leases for lessors. However it
requires lessees to recognise most leases on their statements of financial position as lease
liabilities, with the corresponding right-of-use assets. Lessees must apply a single model for all
recognised leases, but will have the option not to recognise ‘short-term’ leases and leases of ‘low-
value’ assets. Generally, the profit or loss recognition pattern for recognised leases will be similar
to today’s finance lease accounting, with interest and depreciation expense recognised separately
in the income statement.
Early application is permitted provided the new revenue standard. Lessees must adopt IFRS 16
using either a full retrospective or a modified retrospective approach.
At this stage, the company is not able to estimate the effect of the new rules on the company's
financial statements. The company will make more detailed assessments of he effect over the
next twelve months.
IFRS 16 Leases
(effective 1 January
2019)
As at 31 December 2018, a number of standards and interpretations, and amendments thereto, had been issued by the
IASB which are not yet effective for these financial statements. The following are the standards that may have material
impact on the Company's financial statements. The Company has not early adopted any of these standards.
32
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
SIGNIFICANT ACCOUNTING POLICIES
2.4 Foreign currency translation
(a) Functional and presentation currency
(b) Transactions and balances
2.5 Cash and cash equivalents
2.6 Financial instruments
Items included in the financial statements are measured using the currency of the primary economic environment in
which the entity operates (‘the functional currency’). The financial statements are presented in thousands of naira,
which is the Company’s presentation and functional currency.
Foreign currency transactions are transactions denominated, or that require settlement in a foreign currency and are
translated into the functional currency using the exchange rates prevailing at the dates of the transactions.
Monetary items denominated in foreign currency are translated with the closing rate as at the reporting date. If several
exchange rates are available, the forward rate is used at which the future cash flows represented by the transaction or
balance could have been settled if those cash flows had occurred. Non-monetary items measured at historical cost
denominated in a foreign currency are translated with the exchange rate as at the date of initial recognition; non-
monetary items in a foreign currency that are measured at fair value are translated using the exchange rates at the date
when the fair value was determined.
Foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the
translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognised in the income statement.
Financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity
instrument of another entity.
Metropolitan Life Insurance classifies financial instruments on initial recognition as a financial asset, financial liability
or an equity instrument in accordance with the substance of the contractual arrangement.
IFRS 17 was issued in May 2017 as replacement for IFRS 4 Insurance Contracts. It requires a
current measurement model where estimates are re-measured each reporting period. Contracts
are measured using the building blocks of:
- discounted probability-weighted cash flows;
- an explicit risk adjustment, and
- a contractual service margin (“CSM”) representing the unearned profit of the contract which is
recognised as revenue over the coverage period.
The standard allows a choice between recognising changes in discount rates either in the income
statement or directly in other comprehensive income. The choice is likely to reflect how insurers
account for their financial assets under IFRS 9.
An optional, simplified premium allocation approach is permitted for the liability for the
remaining coverage for short duration contracts, which are often written by non-life insurers.
There is a modification of the general measurement model called the ‘variable fee approach’ for
certain contracts written by life insurers where policyholders share in the returns from
underlying items. When applying the variable fee approach the entity’s share of the fair value
changes of the underlying items is included in the contractual service margin. The results of
insurers using this model are therefore likely to be less volatile than under the general model.
The new rules will affect the financial statements and key performance indicators of all entities
that issue insurance contracts or investment contracts with discretionary participation features.
IFRS 17 Insurance
Contracts (effective
January 1, 2021)
Cash and cash equivalents include cash at bank, call deposits and short term highly liquid financial assets with original
maturities of three months or less from the acquisition date, which are subject to insignificant risk of changes in their
fair value, and are used by the Company in the management of its short-term commitments.
33
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
SIGNIFICANT ACCOUNTING POLICIES
2.6.1
Amortised cost and effective interest rate
2.6.2 Off-setting
2.6.3 (a) Financial assets
2.6.3.1 Classification and subsequent measurement
Initial recognition and measurement
Financial assets are classified and measured at initial recognition at fair value, including directly attributable transaction
cost. Subsequent measurement is based on the Company's business model objective of managing the assets as well as the
contractual cash flow characteristics of financial assets.
The Company classifies its financial assets into the following categories: fair value through profit or loss and amortized
cost. The classification is determined by management at initial recognition and depends on the objective of the business
model.
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions
of the instrument. Regular way purchases and sales of financial assets are recognised on the trade date, the date on
which the Company commits to purchase or sell the asset.
At initial recognition, the Company measures a financial asset or financial liability at its fair value plus or minus, in the
case of a financial asset or financial liability not at fair value through profit or loss (FVTPL), transaction costs that are
incremental and directly attributable to the acquisition or issue of the financial asset or financial liability, such as fees
and commissions. Transaction costs of financial assets and financial liabilities carried at FVTPL are expensed in profit or
loss. Immediately after initial recognition, an expected credit loss (ECL) allowance is recognised for financial assets
measured at amortised cost (AC) and investments in debt instruments measured at fair value through other
comprehensive income (FVOCI).
When the fair value of financial assets and liabilities differs from the transaction price on initial recognition, the entity
recognises the difference as follows:
a. When the fair value is evidenced by a quoted price in an active market for an identical asset or liability (i.e. a Level 1
input) or based on a valuation technique that uses only data from observable markets, the difference is recognised as a
gain or loss.
b. In all other cases, the difference is deferred and the timing of recognition of deferred day one profit or loss is
determined individually. It is either amortised over the life of the instrument, deferred until the instrument’s fair value
can be determined using market observable inputs or realised through settlement.
Financial assets or liabilities are set off and the net amount presented in the statement of financial position only when
the Company has a legal right to set off the amounts and intends either to settle on a net basis or to realise the asset and
settle the liability simultaneously.
AC is the amount at which the financial asset or financial liability is measured at initial recognition minus the principal
repayments, plus or minus the cumulative amortisation using the effective interest method for any difference between
the initial amount and the maturity amount and, for financial assets, adjusted for any loss allowance.
The effective interest rate (EIR) is the rate that exactly discounts estimated future cash payments or receipts through the
expected life of the financial asset or financial liability to the gross carrying amount of a financial asset (i.e. its AC before
any impairment allowance) or to the AC of a financial liability. The calculation does not consider the ECL and includes
transaction costs, premiums or discounts and fees and points paid or received that are integral to the EIR.
When the Company revises the estimates of future cash flows, the carrying amount of the respective financial asset or
financial liability is adjusted to reflect the new estimate discounted using the original EIR. Any changes are recognised in
profit or loss.
34
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
SIGNIFICANT ACCOUNTING POLICIES
Business Model Assessment
Solely payments of principal and interest
Where the business model is to hold assets to collect contractual cash flows or to collect contractual cash flows and sell,
the Company assesses whether the financial instruments’ cash flows represent Soley Payment of Principal and Interest
(the SPPI test). In making this assessment, the Company considers whether the contractual cash flows are consistent
with a basic lending arrangement (i.e. interest includes only consideration for the time value of money, credit risk, other
basic lending risks and a profit margin that is consistent with a basic lending arrangement). Where the contractual terms
introduce exposure to risk or volatility that are inconsistent with a basic lending arrangement, the related financial asset
is classified and measured at FVTPL.
The Company reclassifies debt investments when and only when its business model for managing those assets changes.
The reclassification takes place from the start of the first reporting period following the change. Such changes are
expected to be very infrequent, and none occurred during the period. The Company may also irrevocably designate
financial assets at FVTPL if doing so significantly reduces or eliminates a mismatch created by assets and liabilities being
measured on different bases. The Company has determined that an accounting mismatch is reduced if financial assets
backing non-participating life insurance contracts are measured at FVTPL. For these instruments, the Company has
applied the option to designate these financial assets at FVTPL.
Metropolitan Life Insurance classifies its financial assets into the following categories;
a) Fair value through profit or loss
b) Amortised cost
The business model reflects how the Company manages assets in order to generate cash flows. That is, it reflects whether
the Company’s objective is solely to collect the contractual cash flows from assets or to collect both the contractual cash
flows and cash flows arising from the sale of assets. If neither of these is applicable (e.g. financial assets are held for
trading purposes), then the financial assets are classified as part of the other business model and measured at FVTPL.
Factors considered by the Company in determining the business model for a Company of assets include past experience
on how the cash flows for these assets were collected, how the asset’s performance is evaluated and reported to key
management personnel, how risks are assessed and managed and how managers are compensated. The proceeds from
the contractual cash flows of the financial assets are used to settle insurance contract liabilities as they become due. To
ensure that the contractual cash flows from the financial assets are sufficient to settle those liabilities, the Company
undertakes significant buying and selling activity on a regular basis to rebalance its portfolio of assets and to meet cash
flow needs as they arise. Securities held for trading are held principally for the purpose of selling in the near term or are
part of a portfolio of financial instruments that are managed together and for which there is evidence of a recent actual
pattern of short-term profit-taking. These securities are classified in the other business model and measured at FVTPL.
All equity investments in scope of IFRS 9 are measured at fair value in the statement of financial position, with value
changes recognised in profit or loss, except for those equity investments for which the entity has elected to present value
changes in other comprehensive income.
35
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
SIGNIFICANT ACCOUNTING POLICIES
Financial assets at fair value through profit or loss
Financial assets at amortised cost
2.6.3.2
Financial assets will be measured at fair value through the income statement if they do not meet the business model
criteria of either “Hold to collect” or “Hold to collect and sell”. All equity instruments and similar securities (unless
designated at inception to fair value through other comprehensive income); and all derivatives are measured at fair value
through profit or loss. An entity have the option to designate a financial asset as measured at fair value through profit or
loss if doing so eliminates or significantly reduces an accounting mismatch.
The company currently designate its financial assets at inception at fair value through profit and loss because they are
held in internal funds to match insurance and investment contracts liabilities that are linked to the changes in fair value
of these assets. The designation of these assets to be at fair value through profit and loss eliminates or significantly
reduces a measurement or recognition inconsistency (sometimes referred to as ‘an accounting mismatch’) that would
otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases; and
whose performance is evaluated and managed on a fair value basis. Fair value gains or losses arising from the financial
assets designated as fair value through profit or loss are recognised in income statement "Fair value gains/(losses)". The
Company's financial assets designated as fair value through profit or loss (comprising treasury bills and bonds).
The Company has undertaken an assessment to determine the potential impact of changes in classification and
measurement of financial assets based on the composition of the company’s statement of financial position as at 31
December 2017. The assessment indicated that the adoption of IFRS 9 will not result in significant changes to existing
asset measurement bases.
Financial assets are measured at amortized cost if they are held within a business model whose objective is to hold for
collection of contractual cash flows where those cash flows represent solely payments of principal and interest. After
initial measurement, debt instruments in this category are carried at amortized cost using the effective interest rate
method. Amortized cost is calculated taking into account any discount or premium on acquisition, transaction costs and
fees that are an integral part of the effective interest rate. Interest income on financial assets at amortised cost is
included in investment income in the statement of comprehensive income.
The company's placement with other financial institutions with original maturities of three months or less from the
acquisition date are measured at amortised cost.
Impairment on financial assets measured at amortized cost is calculated using the expected credit loss approach.
Reclassification of financial assets occurs when the Company changes its business model for managing financial assets
(i.e. previous business model assessment would no longer apply). However, IFRS 9 does not allow reclassification:
• when the fair value option has been elected in any circumstance for a financial asset;
• or equity investments (measured at FVTPL or FVTOCI); or
• for financial liabilities.
If an company reclassifies a financial asset, it is required to apply the reclassification prospectively from the
reclassification date, defined as the first day of the first reporting period following the change in business model that
results in the entity reclassifying financial assets. Previously recognised gains, losses (including impairment gains or
losses) or interest are not restated.
All impairment losses are recognized through profit or loss. If any loss on the financial asset was previously recognized
directly in equity as a reduction in fair value, the cumulative net loss that had been recognized in equity is transferred to
the statement of comprehensive income and is recognized as part of the impairment loss. The amount of the loss
recognized in thestatement of comprehensive income is the difference between the acquisition cost and the current fair
value, less any previously recognized impairment loss.
Reclassification of financial assets
36
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
SIGNIFICANT ACCOUNTING POLICIES
2.7 (b) Financial liabilities
Derecognition
2.7.1
2.8
2.9 Reinsurance assets
Contracts entered into by the Company with reinsurers under which the Company is compensated for losses on one or
more contracts issued by the Company and that meet the classification requirements for insurance contracts are
classified as reinsurance contracts held. The benefits to which the Company is entitled under its reinsurance contracts
held are recognised as reinsurance assets. These assets consist of short-term balances due from reinsurers (classified as
receivables), as well as longer term receivables (classified as reinsurance assets) that are dependent on the expected
claims and benefits arising under the related reinsured insurance contract. 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. The aggregate value of reinsurance contracts is determined
actuarially.
If there is objective evidence that the reinsurance asset is impaired, the Company reduces the carrying amount of the
reinsurance asset to its recoverable amount and recognises that impairment loss in the income statement.
Classification and subsequent measurement
In both the current and prior period, financial liabilities are classified and subsequently measured at AC, except for
insurance contract liabilities which is measured at FVTPL.
The Company’s main valuation techniques incorporate all factors that market participants would consider and make
maximum use of observable market data. The fair value of financial liabilities for investment contracts without fixed
terms is determined using the current unit values in which the contractual benefits are denominated. These unit values
reflect the fair values of the financial assets contained within the Company’s unitised investment funds linked to the
financial liability. The fair value of the financial liabilities is obtained by multiplying the number of units attributed to
each contract holder at the end of the reporting period by the unit value for the same date.
When the investment contract has an embedded put or surrender option, the fair value of the financial liability is never
less than the amount payable on surrender, discounted for the required notice period where applicable.
Changes in the fair value of financial liabilities measured at FVTPL related to own credit risk are presented in OCI, while
all other fair value changes are presented in the consolidated statement of profit or loss.
Other payables are initially recognised at fair value and subsequently measured at amortised cost.
Other payables and accurals
Other receivables
Other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest rate method less any allowance for impairment.
Financial liabilities are derecognised when they are extinguished (i.e. when the obligation specified in the contract is
discharged, cancelled or expires).
The exchange between the Company and its original lenders of debt instruments with substantially different terms, as
well as substantial modifications of the terms of existing financial liabilities, are accounted for as an extinguishment of
the original financial liability and a recognition of a new financial liability. The terms are substantially different if the
discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and
discounted using the original EIR, is at least 10% different than the discounted present value of the remaining cash flows
of the original financial liability. In addition, other qualitative factors, such as the currency that the instrument is
denominated in, changes in the type of interest rate, new conversion features attached to the instrument and changes in
covenants, are also taken into consideration. If an exchange of debt instruments or a modification of terms is accounted
for as an extinguishment, any costs or fees incurred are recognised as part of the gain or loss on the extinguishment. If
the exchange or modification is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying
amount of the liability and are amortised over the remaining term of the modified liability.
37
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
SIGNIFICANT ACCOUNTING POLICIES
2.10 Statutory deposit
2.11 Intangible assets (computer software)
2.12 Property and equipment
2.13
Share capital
Share premium
Retained earnings
2.14 Contingency reserve
The statutory deposit represents 10% of the paid up capital of the Company deposited with the Central Bank of Nigeria
(CBN) as mandated by the Insurance Act 2003. The deposit is measured at cost and interest is paid twice annually at
rates determined by the CBN.
The retained earnings represent the amount available for dividend distribution to the equity shareholders of the
Company. Refer to the statement of changes in equity for the movements in retained earnings.
Computer software is reviewed for impairment losses whenever events or changes in circumstances indicate that the
carrying amounts may not be recoverable. An impairment loss is recognised for the amount by which the carrying
amount of the asset exceeds its recoverable amount, the latter being the higher of the fair value less cost to sell, and the
value in use.
Property and equipment is stated at historical cost less accumulated depreciation. 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 Company and the cost of the item
can be measured reliably. All other repairs and maintenance costs are charged to the income statement during the
financial period in which they are incurred.
All assets are depreciated using the straight-line method to allocate their cost less their residual values over their
estimated useful lives, as follows:
Leasehold Improvements - 5 years
Motor vehicles - 4 years
Computer equipment - 5 years
Furniture and fittings - 5 years
Gains and losses on disposal of property and equipment are determined by comparing proceeds with carrying amounts
and are included in other operating income in the income statement in the year of disposal.
Equipment is reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying
amounts may not be recoverable. An impairment loss is recognised immediately for the amount by which the carrying
amount of the asset exceeds its recoverable amount, the latter being the higher of the fair value less cost to sell of the
asset and its value in use.
Share capital, share premium and retained earnings
The residual values and useful lives of the assets are reviewed at each reporting date and adjusted if appropriate.
Any amounts received over and above the par value of shares issued are classified as 'share premium' in equity.
The Company maintains a contingency reserve in accordance with the provisions of the Insurance Act to cover
fluctuations in statistical estimates as prescribed by the Act in respect of life insurance business. The contingency reserve
is credited with an amount equal to 1% of gross premium or 10% of the profits after tax (whichever is greater) and
accumulated until it reaches the amount of the minimum paid-up 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, net of tax.
Acquired computer software licenses are capitalised on the basis of the cost incurred to acquire and bring to use the
specific software. These costs are amortised on the basis of an expected useful life of five years, which is assessed
annually, using the straight-line method. Included in acquired computer software is the Exergy system license which is
amortised over an expected useful life of 5 years.
38
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
SIGNIFICANT ACCOUNTING POLICIES
2.15 Insurance and investment contracts
2.15.1
Investment contracts
2.16
2.17
2.18.1 Gross premium income
Classification of contracts
The Company issues contracts that transfer insurance risk or financial risk or both. For the purposes of valuations and
profit recognition, contracts are divided into investment and insurance contracts. Insurance contracts are those
contracts that transfer significant insurance risk to the Company, whereas investment contracts transfer financial risk.
Investment contracts are comprised of the liabilities on policies in force as actuarially computed on the reporting date.
Current income tax is assessed at 30% and is tax payable on the taxable profit for the period determined in accordance
with the Company Income Tax Act (CITA). Education tax is assessed at 2% of the chargeable profit. Income tax is
recognised as an expense/(income) for the period except to the extent of current tax related to items that are charged or
credited in other comprehensive income or directly to equity. In these circumstances, current tax is charged or credited
to other comprehensive income or to equity (for example, current tax on available-for-sale asset).
Unearned premiums
Revenue recognition
Only insurance premiums and annuity considerations received from insurance contracts are recognised as revenue in
the income statement, gross of commission and reinsurance premiums and excluding taxes and levies. Premiums are
earned from the date of attachment of risk, over the policy cover period, based on the pattern of risk underwritten.
Receivables are only recognised in respect of individual life contracts while the 30 days NAICOM grace period is
operative.
Metropolitan Life Insurance revenue streams comprise gross premium income, claims recoveries from reinsurance
companies, investment income and other operating income. Revenue are recognised as follows:
Investment contracts with guaranteed returns (interest linked) and other business of a savings nature are recognized as
liabilities. Interest accruing to the life assured from investment of the savings is recognized in the income statement
account in the year it is earned while interest paid and due to depositors is recognized as an expense. The net result of
the deposit administration revenue account is transferred to the income statement of the Company.
Company income tax
Current income tax liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or
prior reporting periods, that are unpaid at the reporting date. Current tax is payable on taxable profit, which differs from
profit or loss in the financial statements. Calculation of current tax is based on tax rates and tax laws that have been
enacted or substantively enacted by the end of the reporting period.
Unearned premiums are those proportions of premiums written in the year that relate to periods of risk after the
reporting date. They are computed separately for each insurance contract using a time proportionate basis, or another
suitable basis for uneven risk contracts.
A contract is classified as an insurance contract where the Company accepts significant insurance risk by agreeing with
the policyholder to pay benefits if a specified uncertain future event (the insured event) adversely affects the
policyholder or other beneficiaries. Significant insurance risk exists where it is expected that for the duration of the
policy or part thereof, policy benefits payable on the occurrence of the insured event will exceed the amount payable on
early termination, before allowance for expense deductions at early termination. Once a contract has been classified as
an insurance contract, the classification remains unchanged for the remainder of its lifetime, even if the insurance risk
reduces significantly during this period.
Insurance contract liabilities
Life insurance policy claims received up to the last day of each financial period and claims incurred but not reported
(IBNR) are provided for and included in the policy liabilities. Past claims experience is used as the basis for determining
the extent of the IBNR claims.
Income from reinsurance policies is recognised concurrently with the recognition of the related policy benefit. Insurance
liabilities are presented without offsetting them against related reinsurance assets.
Insurance liabilities are retained in the statement of financial position until they are discharged or cancelled and/or
expire. The Company performs a liability adequacy test to determine the recognised insurance liabilities and an
impairment test for reinsurance assets held at each reporting date.
Investment contracts are those contracts that transfer financial risk with no significant insurance risk. Investment
contracts comprise interest linked funds. Interest linked investment contracts are measured at amortised cost.
39
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
SIGNIFICANT ACCOUNTING POLICIES
2.18.2 Claims recoveries from reinsurance companies
2.18.3 Investment income
(a) Interest income
(b) Dividend income
2.18.4 Other operating income
2.19
2.20
2.21
2.22
2.22.1
2.22.2
Dividends received are recognised in income statement when the right to receive payment is established.
Short term benefits
Claims and loss adjustment expenses are charged to income as incurred based on the estimated liability for
compensation owed to policyholders and/or beneficiaries. They include direct and indirect claims settlement costs and
arise from events that have occurred up to the end of the reporting period even if they have not yet been reported to the
Company.
The Company does not discount its liabilities for unpaid claims. Liabilities for unpaid claims are estimated using the
input of assessments for individual cases reported to the Company and statistical analyses for the claims incurred but
not reported, and to estimate the expected ultimate cost of more complex claims that may be affected by external factors.
No provisions are made for possible claims under contracts that are not in existence at the end of the reporting period.
Underwriting expenses comprise acquisition expenses and maintenance expenses. Acquisition expenses comprise all
direct and indirect costs arising from the writing of insurance contracts. Examples of these costs include, but are not
limited to, commission expense, and other technical expenses. Maintenance expenses are those incurred in servicing
existing policies/contract. These expenses are charged in the income statement.
Insurance premium ceded to reinsurers
Insurance premium ceded to reinsurers also described as reinsurance expenses represents outward premium paid to
reinsurance companies less the unexpired portion as at the end of the accounting year.
Claims
Wages, salaries, paid annual leave and, bonuses are recognised as employee benefit expenses and accrued when the
associated services are rendered by the employees of the Company.
The Company operates a defined contributory pension scheme for eligible employees. Employees and the Company
contribute 8% and 10% respectively for each of the qualifying staff's salary in line with the provisions of the Pension
Reform Act. The Company pays contributions to the employee - nominated Pension Fund Administrator (PFA) on a
mandatory basis. The Company has no further payment obligations once the contributions have been paid. The
contributions are recognised as employee benefits expense when they are due.
Defined contribution plan
Reinsurance recoveries are accounted for in the same period as the related claim.
Investment income comprise dividend income and interest income.
Interest income is recognised in the income statement, using the effective interest rate method, and taking into account
the expected timing and amount of cash flows. Interest income includes the amortisation of any discounts or premiums
or other difference between the initial carrying amount of an interest-bearing instrument and its amount at maturity,
calculated on an effective interest rate method.
Other operating income comprises profit from disposal of property and equipment and recoveries from assets previously
written off. The income is recognised when it is earned by the Company.
Underwriting expenses
Employee benefit expenses
40
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
SIGNIFICANT ACCOUNTING POLICIES
2.22.3
2.19
Management expenses are expenses other than claims, employee benefit, expenses for marketing and administration
and supervisory levies. They include professional fee, depreciation expenses and other non- technical expenses.
Management expenses are accounted for on accrual basis and recognized in the income statement upon utilization of the
service or at the date of their origin.
Management expenses
Share based payment
The Company operates a cash-settled share based compensation plan. The share-based payment transactions are settled
in cash based on the equity of the parent, the Company measures the goods or services received as cash-settled share-
based payment transactions by assessing the nature of the awards and its own rights and obligations.
The Company recognises the value of the services received (expense), and the liability to pay for those services, as the
employees render service. The liability is measured, initially and at each reporting date until settled, at the fair value
appropriate to the scheme, taking into account the terms and conditions on which the rights were granted, and the
extent to which the employees have rendered service to date, excluding the impact of any non market-related vesting
conditions. Non market-related vesting conditions are included in the assumptions regarding the number of units
expected to vest. These assumptions are revised at every reporting date. The impact of the revision of original estimates,
if any, is recognised in the income statement, and a corresponding adjustment is made to the liability.
41
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
STATEMENT OF COMPREHENSIVE INCOME
Restated *
31-Dec-18 31-Dec-17
Notes N'000 N'000
Gross premium written 2,265,495 2,006,246
Gross premium income 22 2,255,178 1,983,247
Reinsurance expenses 23 (414,671) (345,265)
Net premium income 1,840,507 1,637,982
Changes in insurance contract liabilities 14 (8,335) 5,024
Claims expenses 24 (1,616,035) (1,373,975)
Claims recoveries from reinsurance companies 25 629,037 376,114
Underwriting expenses 26 (405,106) (359,095)
Net underwriting income 440,068 286,050
Investment income 27b 750,012 842,439
Profit on investment contracts 28 48,794 19,375
Fair value (losses)/gains 29 (95,548) 136,173
Other operating (loss)/income 30 (4,580) 9,251
Net expected credit loss 31 535 -
Management expenses 32 (908,197) (1,137,024)
Profit before tax 231,084 156,264
Income tax 18 (12,844) (14,432)
Profit for the year 218,240 141,832
Total comprehensive income for the year 218,240 141,832
Total comprehensive income attributable to:
Owners of the Company 218,240 141,832
Earnings per share - basic/diluted (kobo) 33 21.82 14.18
* See note 40 for details regarding the restatement
43
METROPOLITAN LIFE INSURANCE NIGERIA LIMITEDFINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
STATEMENT OF CHANGES IN EQUITY
Share capital Share
Premium
Contingency
Reserve
Retained
earnings
Total equity
N'000 N'000 N'000 N'000 N'000
Balance at 1 January 2018 1,000,000 2,494,862 272,243 317,778 4,084,883
Day 1 IFRS 9 adjustment (ECL impairment)(see note 6a) - - - (4,507) (4,507)
Day 1 tax impact of IFRS adoption (see note 18a) - - - 45 45
Adjusted 1 January 2018 1,000,000 2,494,862 272,243 313,316 4,080,421
Profit for the year - - - 218,240 218,240
Total comprehensive income for the year - - - 218,240 218,240
Transfer to contingency reserves - - 22,655 (22,655) -
Balance at 31 December 2018 1,000,000 2,494,862 294,898 508,901 4,298,661
Balance at 1 January 2017 1,000,000 2,494,862 251,645 196,544 3,943,051
Correction of errors (net of tax) - - - - -
Restated total equity at the beginning of the financial year 1,000,000 2,494,862 251,645 196,544 3,943,051
Profit for the year - - - 141,832 141,832
Total comprehensive income for the year - - - 141,832 141,832
Transfer to contingency reserves - - 20,598 (20,598) -
Balance at 31 December 2017 1,000,000 2,494,862 272,243 317,778 4,084,883
44
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
STATEMENT OF CASH FLOWS
Note 31-Dec-18 31-Dec-17
Cash flows from operating activities: N'000 N'000
Premium received from policyholders 2,265,495 2,006,246
Deposit for premium in advance 16 210,229 -
Cash received from in investment contracts liabilities 15a 49,324 53,555
Cash withdrawals from in investment contracts liabilities 15a (234,712) (161,337)
Reinsurance premium paid (459,996) (364,285)
Underwriting expenses 26 (405,106) (359,095)
Claims recovered from reinsurance 577,391 284,042
Claims paid 24 (1,581,367) (1,325,696)
Payment to and on behalf of employees (295,814) (318,372)
Other operating cash payments (649,809) (538,714)
Other operating cash receipts - 2,003
Income tax paid 18 (13,602) (12,198)
Net cash outflow used in operating activities (537,967) (733,851)
Cash flows from investing activities:
Proceeds from disposal of equity investment - 178,758
Purchase of treasury bills (4,845,660) (8,418,042)
Proceeds from maturities of treasury bills 6,141,128 7,636,821
Purchase of bonds - (313,688)
Proceeds from bonds redemption - 250,000
Net money market placements with banks (590) (55,377)
Purchase of property and equipment 11 (12,609) (21,162)
Purchase of intangible assets 12 (361) -
Proceeds from disposal of property and equipment 9,316 2,880
Interest received from investments 777,005 1,063,330
Dividend received 27 347 6,347
Net cash from/(used in) investing activities 2,068,576 329,867
Net decrease in cash and cash equivalents 1,530,609 (403,984)
Cash and cash equivalents at beginning of year 779,518 1,183,502
Cash and cash equivalents at end of year 6 2,310,127 779,518
45
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
3
3.1
(i)
(ii)
(iii)
(v)
(vi)
3.2
Insurance risk
Underwriting risk
Severity of claims
The risk under any 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 Company 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 by a change in any subset of the
portfolio. The Company 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. This
section summarises the nature and management of these risks.
Underwriting risk relates mainly to the uncertainty that the insured event will occur. The nature of an insurance contract is
that the timing and size of claims are uncertain and therefore unpredictable. The principal underwriting risk is the risk that
the actual outcome of mortality, morbidity and medical claims will result in volatile profits from one year to the next. Such
volatility may result from large concentrations of risk or from charging inadequate premiums relative to the severity or
incidence of the risk accepted. Inadequate policy wording may fail to protect the insurer from claims that were not envisaged
when the product was priced. Insurance events are random and the actual number and amount of underwriting benefits will
vary from the best estimates established from statistical techniques and taking cognisance of past experience. The Company
manages these risks through its underwriting strategy, reinsurance arrangements and claims handling processes.
All long-term insurance product additions and alterations are required to pass through the approvals framework that
forms part of the governance process. The statutory actuary approves the financial soundness of new and revised
products.
The following policies and practices are used by the Company as part of its underwriting strategy to mitigate underwriting risk:
The Company's underwriting strategy aims to ensure that the underwriting risks are well diversified in terms of type
(medical, occupational, financial) and amount of risk covered. Whilst this is difficult to measure at underwriting stage,
the success or failure of the strategy may be measured by the historical stability of profits emerging from the book of
business.
Premium rates are required to be certified by the statutory actuary as being financially sound, prior to issuance.
The right to re-rate premiums is retained as far as possible, although this is limited by competitive pressure.
Investigations into mortality and morbidity experience are conducted at least half yearly to ensure that corrective action is
taken where necessary.
The company reduces the severity of claims it may suffer by setting underwriting limits to enforce appropriate risk selection
criteria through reinsurance arrangements. The effect of such reinsurance arrangements is that the Company should not suffer
net insurance losses of more than N5 million per group life business and N3 million per individual life businesses on any
policy. The Company has specialised claims units dealing with the mitigation of risks surrounding claims. This unit
investigates and adjusts all claims. The claims are reviewed individually on a quarterly basis and adjusted to reflect the latest
information on the underlying facts, contractual terms and conditions, and other factors. The Company actively manages and
pursues early settlements of claims to reduce its exposure to unpredictable developments.
46
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
3.3 Concentration risks
Gross
liability
Re-
Insurance
Net liability
N000 N000 N000
13,388 - 13,388
52,458 (9,539) 42,919
476,104 (144,365) 331,739
8,785 (4,442) 4,343
610,802 (171,592) 439,210
Claims reported and loss adjustment expenses 150,410 - 150,410
1,311,947 (329,938) 982,009
Gross
liability
Re-
Insurance
Net liability
N000 N000 N000
5,052 - 5,052
176,806 (28,751) 148,055
329,987 (62,950) 267,037
20,238 (3,304) 16,934
593,619 (149,584) 444,035
Claims reported and loss adjustment expenses 132,923 - 132,923
1,258,625 (244,589) 1,014,036
Gross
liability
Re-
Insurance
Net liability
N000 N000 N000
10,078 - 10,078
965,805 - 965,805
191,413 (56,113) 135,300
285,767 (19,872) 265,895
26,851 - 26,851
618,936 (125,137) 493,799
Claims reported and loss adjustment expenses 59,327 - 59,327
2,158,177 (201,122) 1,957,055
3.4
3.5 Valuation methods
01-Jan-17
Class of business
Individual traditional
Individual savings
Group credit life
Group life – UPR
Group life – AURR
Group life – IBNR
The insurance liabilities was based on the following valuation methodologies:
Sources of uncertainty in the estimation of future claim payments
Class of business
Individual traditional
Group credit life
Group life – UPR
Group life – AURR
Group life – IBNR
Group credit life
Group life – UPR
Group life – AURR
Group life – IBNR
Uncertainty in the estimation of future benefits payments and premium receipts for life insurance contracts arises from the
unpredictability of long-term changes in overall levels of mortality and the variability in policyholders' behaviour.
Valuation Method
Gross premiumDeposit reserve: Account balance at valuation dateRisk reserve: Discounted cashflowUPR + IBNR UPR
Individual risk businessIndividual deposit based (savings) business
Group life Group credit life
Type of Business
The Company uses appropriate and acceptable base tables of standard mortality according to the type of contract being
written.
Individual traditional
The concentration of insurance risk before and after reinsurance by class of business in relation to the type of insurance risk
accepted is summarised below, with reference to the carrying amount of the estimated insurance liabilities (gross and net of
reinsurance) arising from insurance contracts:
31-Dec-18
31-Dec-17
Class of business
47
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
3.5.1 Individual risk business
3.5.2 Individual savings business
3.5.3 Group business
The group business portfolio includes group life and group credit life.
3.6
The assumptions used for the insurance contracts disclosed in this note are as follows:
3.6.1
Process used to decide on assumptions
Valuation interest rate
For all whole of life and term assurance policies the gross premium method of valuation was used. This includes the life cover
provider, family funeral provider and keyman cover provider.
Reserves were calculated using the cashflow projection approach, taking into account future office premiums, expenses and
benefit payments (death and disability). Future cashflows were discounted back to the valuation date at the valuation rate of
interest. Reserves were calculated for each life covered under the multiple life products (i.e. family funeral provider).
The individual risk business contains some legacy mortgage protection business for which premiums are no longer received.
These contracts have been valued as term assurances, with no credit taken for future premiums.
For all Savings business, unit and non-unit reserves have been held. Unit reserves have been taken as the face value of the
policyholder unit funds at the valuation date. Where this fund is negative it has been set to zero, taking into account the
minimum surrender value terms.
Non-unit reserves have been calculated via a cashflow projection of charges (determined from a projection of unit funds),
expenses and benefit payments in excess of the fund balances (on death and disability). Future cashflows were discounted
back to the valuation date at the valuation rate of interest. Negative non-unit reserves have been permitted. However these
have been limited such that the total unit plus non-unit reserve for each policy is at least as high as its surrender value.
An unexpired risk premium reserve was included for group life business, after deducting the loadings for initial expenses and
profit. A test was performed to assess the need for an additional unexpired risk reserve (AURR) in the event of any
inadequacies in the UPR for meeting claims in respect of the unexpired period. The claim rates underlying the AURR were
based on pooled historical scheme claims experience.
No assets have been established in respect of deferred acquisition costs (DAC) as these are typically insignificant in size. Any
costs incurred are absorbed as part of the underwriting expenses.
An allowance was made for incurred but not reported claims (IBNR) in group life to take care of the delay in reporting claims.
This was based on a loss ratio approach, where the underlying rates are based on an analysis of historical claims experience.
An unexpired premium reserve was held for credit life business, after deducting the initial expense and profit loadings. As a
result of the high premium rates underlying the business, the UPR is expected to be sufficient to meet all future claim and
expenses, including those relating to IBNR claims. Therefore no separate reserve for IBNR was calculated.
The valuation interest rate (VIR) is based on current market risk-free yields with adjustments. The use of a risk-free rate also
implies that future investment margins (in excess of the risk-free return) will not be capitalised upon. Further the result is a
"fair value" liability calculation which aids the comparability of accounts between insurers.
A net valuation interest rate of 14.21% pa was adopted for all businesses, applied as a single long term rate of return. The VIR
is calculated based on the weighted average of gross redemption yield (GRY) on long term FGN Bond as at 29 December 2018.
For the purpose of determining the valuation interest rate on non-annuity business, we have considered a 0.25% deduction
from the long term yield to arrive at a gross valuation interest rate of 15.12%. This makes some allowance for the volatility of
the "risk free" yields.
48
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
These are summarised in the table below:
Current
valuation
Previous
valuation
15.37% 14.00%
-0.25% -0.25%
15.12% 13.75%
-0.91% -0.83%
14.21% 12.93%
The valuation interest rates for the individual risk products are as follows:
Current
valuation
Previous
valuation
14.21% 13.00%
14.21% 13.00%
3.6.2
Investment
return
Managed
fund asset
mix
Classic fund
asset mix
18.87% 40% 10%
15.37% 50% 30%
12.87% 10% 60%
- 16.52% 14.22%
3.6.3
(a)
(b)
The equity and cash returns are based on assumed long-term yield gaps around the FGN bond yield. The assumed gaps were
+3.5% and -2.5% respectively.
Future maintenance expenses
The Company has maintained expense assumptions based on a functional cost analysis performed by the Company based on
experience, expense budgets and expected business volumes. The expense assumptions for the current valuation are those
adopted in the previous valuation, uplifted by inflation as follows:
Risk business including annuity
Savings Business
Supplementary benefits
Expenses
The Company makes provisions for expenses in its mathematical reserves of an amount which is not less than the amount
expected to be incurred in fulfilling its long-term insurance contracts. Claims handling expenses need to be considered as
incidental to fulfilling the insurance contracts.
The regulatory maintenance expenses are derived from the best estimate maintenance expenses plus a prudence margin for
adverse deviations. The best estimate maintenance expenses are calculated as the sum of the following:
Returns on unit funds
The policyholder unit funds for the individual savings policies will be projected in order to determine the expected future
income from the fund charges that are applied. The assumed long term return on unit funds are:
Previous valuation
N5,381 per policy per p.a.
N272 p.a.
N5,381 per policy per p.a.
Risk products (excluding annuity)
Risk reserves for deposit-based policies
Class of investments
Equity
Bonds
Cash
Assumed fund returns
N4,760 per policy per p.a.
N241 p.a.
Per policy maintenance charges
Details
Assumed average yield based on long-term FGN bond
Less prudent margin
Gross valuation interest rate
Less tax (6%)
Net valuation interest rate
Details
Type of Business
Company income tax in Nigeria is 30% of income minus expenses on non-annuity business, with some specific investment
income being exempt from tax. However this calculation is subjected to a minimum tax, which is payable on 20% of gross
incomes, with no exemptions or deductions. This is equivalent to tax payable of 6% of gross investment income. The minimum
tax test implies that tax will always be payable, and as such the payment of future tax needs to be allowed for. Therefore, the
company deducted 6% of the gross valuation interest rate, to arrive at net rates to adopt for valuation purposes.
Current Valuation
Allocated operating expenses
N4,760 per policy per p.a.
49
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
3.6.4
3.6.5
3.6.6
3.6.7
Commission Overriding
commission
Expenses Profit Total
9.00% 1.38% 10.00% 2.50% 22.88%
10.00% 0.00% 3.00% 15.00% 28.00%
10.00% 0.00% 1.50% 0.00% 11.50%
3.6.8 Reinsurance agreements
3.6.9 Insurance risks sensitivities
The sensitivity analysis of insurance and market risk is used as it provides a detailed understanding of the risks inherent in the
business and to help develop a risk monitoring and management framework to ensure the risks remain within limits, taking
into account the risk tolerance levels of the Company.
The table below shows the impacts of changes in key variables of the insurance liability valuation on the insurance liabilities.
The sensitivity analysis was performed using the under-listed variables:
Previous valuation
45% of premium
2.8 per mille
2.0 per mille
Current valuation
45% of premium
2.5 per mille
1.65 per mille
45% of premium
45% of premium
Expense inflation
Schemes with missing sum at risk data
Credit life-Renewal premium
Mortality
Employee benefit
Credit life-Single premium
Group life
Federal Head of Service schemes
Reinsurance is allowed for in the valuation by having gross and reinsurance ceded records in the policy files. All reserves has
been reported gross of reinsurance, with the value of the reinsurance asset reported separately.
The above expenses are subject to inflation at 12.9% per annum and is consistent with the assumption used for the internal
Metropolitan Life valuation. Consumer price inflation at December 2018 was 11.44%. The company anticipates an upward
trend and consider the high levels witnessed over the last few months to be as a result of the harsh economy at the time and
hence, not the true reflection of long-term future experience. Both the expense inflation and expense assumption will be
actively reviewed in subsequent valuations once more experience data and an expense analyses are available.
There has been no change to the mortality assumptions since the previous valuation. The mortality table for the current
valuation remains at the UK's Mortality of Assured Lives 1967-70 (A6770) without adjustment for individual risk business. The
industry analysis shows that the A6770 table appears prudent based on recent experience. Furthermore, the reserves are less
sensitive to the mortality basis - with discount rate and expense being more dominant assumptions.
Unexpired premium reserves (UPR) are reduced by a margin representing acquisition expenses, as these have been loaded
into rates yet they have already been incurred. The Company has used acquisition expense ratio of 20% of gross premium.
Group life commission is commonly paid at 9% of premium. Other acquisition costs include a NAICOM (regulatory) fee of 1%
of premium, payment of stamp duty and other administrative costs. The additional margin in the 20% assumption is an
allowance for these other costs.
Unexpired premium reserves (UPR) are based on the risk premium only, after the removal of margins in respect of the initial
expense and profit loadings. The following table summarises the margins removed in order to arrive at the risk premiums:
The following average loss ratios were adopted for AURR estimation and IBNR reserving purposes, based on the group life
coverage for 2018. The rates below are reflective of recent mortality investigation conducted on the group life business using
the industry data.
The lapse rates have been maintained at the levels adopted at the previous valuation. The lapse assumptions were determined
from an adjusted pricing basis.
Group life
Average schemes
Large private oil schemes
Group life businesses
Withdrawals
50
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
0.93 1.15 1.48 0.27 2.86 0.67 1.24 1.00 1.02 0.97
13,389 13,106 13,752 16,823 10,014 14,162 12,733 13,308 13,508 13,419 13,296
977,911 977,911 977,911 977,911 977,911 977,911 977,911 977,911 977,911 977,911 977,911
53,440 53,440 53,440 53,440 53,440 53,440 53,440 53,440 53,440 53,440 53,440
150,410 150,410 150,410 150,410 150,410 150,410 150,410 150,410 150,410 150,410 150,410
52,458 52,458 52,458 52,458 52,458 52,458 52,458 52,458 52,458 52,458 52,458
476,104 476,104 476,104 476,104 476,104 476,104 476,104 476,104 476,104 476,104 476,104
8,785 8,785 8,785 8,785 8,785 8,785 8,785 8,785 8,785 8,785 8,785
610,802 610,802 610,802 610,802 610,802 610,802 610,802 610,802 610,802 610,802 610,802
2,343,299 2,343,016 2,343,662 2,346,733 2,339,924 2,344,072 2,342,643 2,343,218 2,343,418 2,343,329 2,343,206
(329,938) (329,938) (329,938) (329,938) (329,938) (329,938) (329,938) (329,938) (329,938) (329,938) (329,938)
2,013,361 2,013,078 2,013,724 2,016,795 2,009,986 2,014,134 2,012,705 2,013,280 2,013,480 2,013,391 2,013,268
-0.01% 0.03% 0.15% -0.34% 0.21% -0.07% 0.03% 0.01% 0.00% -0.01%
1,044,740 1,044,457 1,045,103 1,048,175 1,041,365 1,045,514 1,044,085 1,044,659 1,044,859 1,044,770 1,044,647
968,620 968,620 968,620 968,620 968,620 968,620 968,620 968,620 968,620 968,620 968,620
2,013,360 2,013,077 2,013,723 2,016,795 2,009,985 2,014,134 2,012,705 2,013,279 2,013,479 2,013,390 2,013,267
-0.01% 0.03% 0.15% -0.34% 0.21% -0.07% 0.03% 0.01% 0.00% -0.01%
Mortality
-5%
Mortality
+5%
% change in liability
Lapses +10%
Lapses -
10%
Net liability
Group life
Expense
Inflation -
2%
Summary Base
Interest rate
+1%
Interest rate -
1%
Expenses
+10%
Expenses
-10%
Expense
Inflation +2%
Variable Rate for sensitivity
Valuation interest rates +/- 1%
Expense +/- 10%
Expense inflation +/- 2%
Mortality +/- 5%
Summary of sensitivity analysis - 31 December 2018
Lapses +/- 10%
HEIRS
Sensitivity of liabilities to changes in valuation assumptions - 31 December 2018
Mortality
-5%
Individual traditional
Individual savings
Mortality
+5%
Reinsurance
Credit life
Group life-UPR
Individual business
Lapses -
10%
Base Interest rate
+1%
Interest rate -
1%
Expenses
+10%
Expenses
-10%
Summary
Group life-AURR
Insurance &
investment contracts
liabilities
Group life-IBNR
Net liability
% change in liability
Claims provision
Expense
Inflation +2%
Expense
Inflation - Lapses +10%
51
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
5,052 4,716 5,411 7,988 2,134 6,101 4,067 5,045 5,059 5,140 4,963
1,034,748 1,034,748 1,034,748 1,034,748 1,034,748 1,034,748 1,034,748 1,034,748 1,034,748 1,034,748 1,034,748
53,440 53,440 53,440 53,440 53,440 53,440 53,440 53,440 53,440 53,440 53,440
132,923 132,923 132,923 132,923 132,923 132,923 132,923 132,923 132,923 132,923 132,923
176,806 176,806 176,806 176,806 176,806 176,806 176,806 176,806 176,806 176,806 176,806
329,986 329,986 329,986 329,986 329,986 329,986 329,986 329,986 329,986 329,986 329,986
20,238 20,238 20,238 20,238 20,238 20,238 20,238 20,238 20,238 20,238 20,238
593,619 593,619 593,619 593,619 593,619 593,619 593,619 593,619 593,619 593,619 593,619
2,346,812 2,346,476 2,347,171 2,349,748 2,343,894 2,347,861 2,345,827 2,346,805 2,346,819 2,346,900 2,346,723
(244,589) (244,589) (244,589) (244,589) (244,589) (244,589) (244,589) (244,589) (244,589) (244,589) (244,589)
2,102,223 2,101,887 2,102,582 2,105,159 2,099,305 2,103,272 2,101,238 2,102,216 2,102,230 2,102,311 2,102,134
-0.02% 0.03% 0.12% -0.28% 0.19% -0.10% 0.05% 0.00% 0.00% -0.01%
1,226,163 1,225,827 1,226,521 1,229,099 1,223,244 1,227,211 1,225,177 1,226,156 1,226,170 1,226,251 1,226,074
876,060 876,060 876,061 876,060 876,061 876,061 876,061 876,060 876,060 876,060 876,060
2,102,223 2,101,887 2,102,582 2,105,159 2,099,305 2,103,272 2,101,238 2,102,216 2,102,230 2,102,311 2,102,134
-0.02% 0.03% 0.12% -0.28% 0.19% -0.10% 0.05% 0.00% 0.00% -0.01%
Individual savings
Claims provision
Credit life
Group life-UPR
Group life-AURR
Group life-IBNR
HEIRS
% change in liability
Lapses +10%
Lapses -
10%
Mortality
+5%
Mortality
-5%
Sensitivity of liabilities to changes in valuation assumptions - 31 December 2017
Summary Base Interest rate
+1%
Interest rate -
1%
Expenses
+10%
Expenses
-10%
Expense
Inflation +2%
Expense
Inflation - Lapses +10%
Lapses -
10%
Mortality
+5%
Mortality
-5%
Individual traditional
Summary
Net liability
Summary of sensitivity analysis - 31 December 2017
Base
Expense
Inflation +2%
Expense
Inflation -
2%
Interest rate
+1%
Interest rate -
1%
Expenses
+10%
Expenses
-10%
Reinsurance
Insurance &
investment contracts
liabilities
Net liability
% change in liability
Individual business
Group life
52
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
4
4.1
(i)
4.2 Credit risk
31-Dec-18 31-Dec-17
N'000 N'000
Cash and cash equivalents 2,310,127 779,518
Financial assets at amortised cost 65,091 58,343
Financial assets at fair value through profit or loss 4,010,451 5,257,619
Other receivables - 742
Reinsurance assets 116,215 86,577
Statutory deposit 200,000 200,000
6,701,884 6,382,799
The Company's maximum credit risk exposure is as follows:
Within Nigeria’s jurisdictions, there is little rated paper, apart from government bonds. Local investments made within
Nigeria's jurisdictions must be executed with counterparties that are accorded the high credit grades. No exposure is
permitted to leveraged credit instruments, e.g. instruments where exposure to an entity or small group of entities can cause
greater losses across the portfolio than the proportionate share of the defaulting entity or entities.
The Company's exposures to credit risk arise from: cash at banks, placements with financial institutions, treasury bills, FGN
bonds, other receivables and reinsurance assets (i.e. reinsurers' share of insurance liabilities, amounts due from reinsurers for
claims already paid).
Financial risk management
Responsibility for risk management
The board is ultimately responsible for risk management. The board has delegated the assessment of the quality, integrity and
reliability of the Company’s risk management processes to the board enterprise risk management, remuneration and
governance committee (ERMRGC).
The Company’s activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (including foreign
exchange risks, interest risk and equity price risks). The Company’s overall risk management programme seeks to minimise
potential adverse effects on the Company’s financial performance.
The ERMRGC provides executive oversight and review of the information presented by the risk officer (RO).
The Chief Executive Officer is accountable to the board for the management of risks facing the Company and is
supported in the management of these risks by business unit executives and line management.
The Risk Officer acts on behalf of the board and the board ERMRGC to provide guidance and oversight over the
implementation of risk management processes in specialized risk disciplines as well as to coordinate risk reporting at
corporate level.
The asset managers provide specialized guidance to the board ERMRGC in respect of all investment strategies and the
optimization of investment returns and the management of related risks.
The asset managers execute all investment related decisions in accordance with fund mandates and oversight from the
board ERMRGC and the custodianship of all investments vests in nominee accounts managed by assets custodian.
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to
discharge an obligation.
The Company takes on exposure to credit risk, which is the risk that one party will cause a financial loss for the other party by
failing to discharge an obligation. The Company has no significant concentration of credit risk. All debt investments
represent public debt investments executed in accordance with the objective of the Company.
(iv)
(v)
(ii)
(iii)
53
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
4.2.1Concentration of risks of financial assets with credit risk exposure
(a) Geographical sectors
(b) Industry sectors
The Company is exposed to various industries as shown below:
Financial
institution
Public
Sector and
othersTotal
N'000 N'000 N'000
Cash and cash equivalents 2,310,127 - 2,310,127
Financial assets at amortised cost 65,091 - 65,091
Financial assets at fair value through profit or loss - 4,010,451 4,010,451
Reinsurance assets 116,215 - 116,215
Statutory deposit 200,000 - 200,000
Total 2,691,433 4,010,451 6,701,884
Financial
institution
Public
Sector and
othersTotal
N'000 N'000 N'000
Cash and cash equivalents 779,518 - 779,518
Financial assets at amortised cost 58,343 - 58,343
Financial assets at fair value through profit or loss - 5,257,619 5,257,619
Other receivables 742 - 742
Reinsurance assets 86,577 - 86,577
Statutory deposit 200,000 - 200,000
Total 1,125,180 5,257,619 6,382,799
4.2.2Credit quality of financial assets
All credit risk exposures (without taking into account any collateral held or other credit support) are maintained within
Nigeria.
All of the Company's financial assets are neither past due nor impaired. The credit quality of the Company's financial assets
that are neither past due nor impaired can be assessed by reference to external credit rating (Fitch Ratings Inc.). The risk of
default is considered low.
31-Dec-17
31-Dec-18
54
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
B - to BBB+ Unrated Total
N'000 N'000 N'000
Cash and cash equivalents 2,186,159 123,968 2,310,127
Financial assets at amortised cost - 64,909 64,909
Financial assets at fair value through profit or loss 4,010,451 - 4,010,451
Reinsurance assets - 116,215 116,215
Statutory deposit - 200,000 200,000
Total 6,196,610 505,092 6,701,702
B - to BBB+ Unrated Total
N'000 N'000 N'000
Cash and cash equivalents 626,154 153,364 779,518
Financial assets at amortised cost - 58,343 58,343
Financial assets at fair value through profit or loss 5,257,619 - 5,257,619
Other receivables - 742 742
Reinsurance assets - 86,577 86,577
Statutory deposit - 200,000 200,000
Total 5,883,773 499,026 6,382,799
No financial asset of the Company is either past due or impaired.
4.3 Liquidity risk
Liquidity risk is the risk that the Company does not have sufficient financial resources to meet its obligation as they fall due or
will have to meet the obligations at excessive costs. This risk could arise from mismatches in the timing of cash flows. In
extreme circumstances, lack of liquidity could result in reductions in the statement of financial position and sales of assets, or
potentially an inability to fulfil policyholder commitments. The risk that the Company will be unable to do so is inherent in all
insurance operations and can be affected by a range of institution-specific and market-wide events including, but not limited
to, credit events, merger and acquisition activity, systemic shocks and natural disasters.
31-Dec-18
31-Dec-17
All policyholder funds are invested in appropriate assets to meet the reasonable benefit expectations of policyholders, which
include the expectation that funds will be available to pay out benefits as required by the policy contract. The Company
employs the service of an asset manager who helps to implement the Company's investment strategies. The value for
policyholders' liabilities and the assets backing them are as per the carrying amount in the statement of the financial position.
The Company's liquidity risk arises from investment contract liabilities, trade payables and other payables and accruals. The
table below analyses the Company’s non-derivative financial liabilities into relevant maturity groupings based on the
remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the
contractual undiscounted cash flows.
55
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
4.3.1
Carrying
amount
Gross
nominal
0 - 3 months 3- 6 months 3- 9 months 9 months -
1 year
>1 year
N'000 N'000 N'000 N'000 N'000 N'000 N'000
Investment contract liabilities 1,031,352 1,031,352 53,440 977,912 - - -
Trade payables 241,400 241,400 241,400 - - - -
Other payables and accruals 264,360 264,360 264,360 - - - -
Total financial liabilities 1,537,112 1,537,112 559,200 977,912 - - -
Cash and cash equivalents 2,310,127 2,319,573 2,319,573 - - -
Financial assets at amortised cost 65,091 65,233 65,233
Financial assets at fair value through profit or loss 4,010,451 4,178,722 23,310 28,000 2,976,102 828,000 323,310
Reinsurance assets 116,215 116,215 116,215 - - - -
Statutory deposit 200,000 200,000 - - - - 200,000
Total financial assets 6,701,884 6,879,743 2,524,331 28,000 2,976,102 828,000 523,310
Net financial assets 5,164,772 5,342,631 1,965,131 (949,912) 2,976,102 828,000 523,310
Insurance contract liabilities 1,311,947 1,311,947 777,372 125,774 216,176 138,722 53,903
Net policyholders' assets/(liabilities) 3,852,825 4,030,684 1,187,759 (1,075,686) 2,759,926 689,278 469,407
Carrying
amount
Gross
nominal
0 - 3 months 3- 6 months 3- 9 months 9 months -
1 year
>1 year
N'000 N'000 N'000 N'000 N'000 N'000 N'000
Investment contract liabilities 1,088,187 1,088,187 53,440 1,034,746 - - -
Trade payables 7,774 7,774 7,774
Other payables and accruals 362,736 362,736 362,736 - - - -
Total financial liabilities 1,458,697 1,458,697 423,950 1,034,746 - - -
Cash and cash equivalents 779,518 799,091 799,091 - - - -
Financial assets at amortised cost 58,343 58,376 58,376
Financial assets at fair value through profit or loss 5,257,619 5,774,689 364,930 4,132,519 23,310 28,000 1,225,930
Other receivables 742 742 742 - - - -
Reinsurance assets 86,577 86,577 86,577 - - - -
Statutory deposit 200,000 200,000 - - - - 200,000
Total financial assets 6,382,798 6,919,475 1,309,716 4,132,519 23,310 28,000 1,425,930
Net financial assets/(liabilities) 4,924,102 5,460,778 885,766 3,097,773 23,310 28,000 1,425,930
Insurance contract liabilities 1,258,625 1,258,625 777,953 43,830 124,007 180,674 132,162
Net policyholders' assets/(liabilities) 3,665,477 4,202,153 107,813 3,053,943 (100,697) (152,674) 1,293,768
Maturity analysis (contractual undiscounted cashflow basis)
Undiscounted contractual cash flows-31 Dec-2017
The liquidity gap analysis tables above show that with the exception of liabilities falling due with 3 - 6 months in 2018, the Company contractually has surplus assets to
meet its contractual obligations as they fall due.
The table below analyses the Company’s non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to
the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
Undiscounted contractual cash flows- 31-Dec-2018
56
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
4.4 Market risks
4.4.1Foreign exchange risks
4.4.2Equity price risks
4.4.3Price sensitivity analysis on bonds and treasury bills
Fair value through profit or loss: T-bills 2,930,616 (1,294) 942
Fair value through profit or loss: Bonds 1,079,835 16,208 (72,911)
4.5 Capital management
The table below shows the impact of likely movement in yields on the value of bonds and treasury bills.
This relates to the financila instruments at FVTPL and FVTOCI. Since an increase in yields would lead
to decline in market values of bonds and treasury bills, the analysis was carried out to show the likely
impact of 5% increase or decrease in market yields.
Impact of
increasing
yield by 5%
Impact of
reducing
yield by 5%
Carrying
value
The Company however, monitors the contribution of individual stock to the total stocks holding in a portfolio. The company
has no exposure to equity price risks arising from investments in equity securities as at 31 December 2018. Hence there was
there was no impact on profit before tax and equity with respect to changes in equity prices.
The Company's monthly management accounts are subjected to models which simulate the actuarial process so that the board
is continually aware of the actuarial consequences of the Company's financial results. This process, inter alia, ensures that the
maintenance of regulatory minimum capital is constantly monitored.
The Company is exposed to market risk through the use of financial instruments and specifically to foreign exchange risks and
equity price risks.
The Company holds very minimal assets denominated in currencies other than the functional currency. The exchange rate
ruling at the date of preparation of the financial statement is used to ascertain the net position of the foreign currency. The
financial unit monitors the Company's foreign currency position on a monthly basis.
The Company’s exposure to foreign exchange risk is limited, to the US dollar domiciliary account balance of N79.3 million (31-
Dec-17: N87.66 million) and N92.82 million technical and support fees payable to MMI Holdings Limited (31-Dec-17:
N191.88 million). Changes in exchange rates relative to these foreign currency balances will not have material impact in the
financial statements.
The Company is required to maintain a minimum regulatory capital base of N2 billion by NAICOM. The Company has
complied with this requirement as the total capital contribution was N4.3 billion as at December 2018 (2017: N4.08 billion).
The Company's capital adequacy ratio (CAR) is also appraised twice annually by its actuaries, on the basis of the Professional
Guidance Note 104 of the Actuarial Society of South Africa. It is a risk-based capital measure that is intended to provide a
reasonable confidence level that insurers will be able to meet their existing liabilities. This report indicate that the Company
holds sufficient assets over liabilities to absorb any unforeseen circumstances and hence protect its solvency and the interests
of the policyholders.
57
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
The key objectives of the Company's capital management programme are as follows:
(i)
(ii)
(iii) That the level of capital reflects the Company's risk appetite;
(iv)
(iv) To ensure that there is sufficient capital available for profitable business growth.
4.5.1Solvency margin
To maintain an optimal level of capital in the most cost efficient way. This is achieved through balancing the needs of the
regulators and the policyholders;
To manage the levels of capital across the Company to keep them in line with the long term capital requirements of the
Company;
To optimise the level of capital, the investment of capital and the future use of the capital for the benefits of all
stakeholders; and
Insurance industry regulator measures the financial strength of insurers using a solvency margin model. This test compares
insurers' capital against the risk profile. The solvency margin shall not be less than 15 percent of the gross premium income
less reinsurance premiums expenses and the minimum paid-up capital, whichever is higher. The Company has complied with
this capital requirement. Refer to the computation in the subsequent page
58
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
Admissible Inadmissible Total Admissible Inadmissible Total
Admissible assets N'000 N'000 N'000 N'000 N'000 N'000
Cash and cash equivalents 1,831,996 474,274 2,306,270 779,518 - 779,518
Financial assets at amortised cost 64,976 - 64,976 58,343 - 58,343
Financial assets at fair value through profit or loss 4,010,451 - 4,010,451 5,257,619 - 5,257,619
Other receivables - 59,511 59,511 742 69,378 70,120
Reinsurance assets 446,154 - 446,154 331,166 - 331,166
Property and equipment 95,580 - 95,580 135,664 - 135,664
Intangible assets - 289 289 - 478 478
Statutory deposit 200,000 - 200,000 200,000 - 200,000
Total admissible assets (a) 6,649,157 534,074 7,183,231 6,763,052 69,856 6,832,908
Insurance contract liabilities 1,311,947 - 1,311,947 1,258,625 - 1,258,625
Investment contract liabilities 1,031,352 - 1,031,352 1,088,187 - 1,088,187
Trade payables 241,400 - 241,400 7,774 - 7,774
Other payables and accruals 282,659 - 282,659 375,424 - 375,424
Current income tax liabilities 17,212 - 17,212 18,015 - 18,015
Total admissible liabilities (b) 2,884,570 - 2,884,570 2,748,025 - 2,748,025
Solvency margin (a-b) 3,764,587 534,074 4,298,661 4,015,027 69,856 4,084,883
Gross premium income 2,255,178 1,983,247
Less: Reinsurance expenses (414,671) (345,265)
Net premium income 1,840,507 1,637,982
Subject to higher of:
15% of net premium income or 276,076 245,697
Minimum capital requirement 2,000,000 2,000,000Gross solvency ratio 188% 201%
4.5.2Policyholders' Assets and Liabilities Management (PALM)
Excluded from admissible assets (cash and cash equivalents) are Metropolitan Life's investment of more than 20% of the total current accounts balances
and bank placements placed in one bank in accordance with Section 24 of the Insurance Act. The amount excluded was N474.27 million.
The Company is regulated in Nigeria by the National Insurance Commission (NAICOM) under the National Insurance Act of Nigeria. Section 25 (1) of the Act
requires an insurance Company operating in Nigeria to invest and hold investments in Nigeria assets equivalent to not less than the amount of policy holders'
funds in such accounts of the insurer.
As at 31 December 2018, the company has N2.413 billion (2017: N2.648 billion) admissible assets representing the policyholders fund and the total
policyholders' fund was N2.343 billion (2017: N2.346 billion), made up of insurance contract liabilities of N2.29 billion (2017: N2.293 billion) and
investment contract liabilitiesof N53.44 million (2017: N53.44 million) thereby having surplus asset of N70.56 million for the year (2017: N301.96 million).
See note 4.5.2(i)
31-Dec-18 31-Dec-17
59
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
4.5.2 (i) Hypothecation
Assets N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000
398,651 - 1,433,345 1,831,996 377,427 - 402,091 779,518
Financial assets at amortised
cost 64,976 - - 64,976 58,343 - - 58,343
914,268 1,035,959 2,060,225 4,010,451 1,124,816 1,088,187 3,044,616 5,257,619
- - 59,511 59,511 - - 70,122 70,122
- - 446,154 446,154 - - 331,166 331,166
Property and equipment - - 95,580 95,580 - - 135,665 135,665
- - 289 289 - - 478 478
- - 200,000 200,000 - - 200,000 200,000
1,377,895 1,035,959 4,295,104 6,708,957 1,560,586 1,088,187 4,184,138 6,832,911
1,311,947 - - 1,311,947 1,258,625 - - 1,258,625
- 1,031,352 - 1,031,352 - 1,088,187 - 1,088,187
- - 241,400 241,400 - - - -
- - 282,659 282,659 - - 383,198 383,198
- - 17,212 17,212 - - 18,017 18,017
1,311,947 1,031,352 541,271 2,884,570 1,258,625 1,088,187 401,215 2,748,026
Surplus 65,948 4,607 3,753,833 3,824,387 301,961 0 3,782,923 4,084,884
Total liabilities
Statutory deposit
Other receivables
Total assets
Liabilities
Insurance contract liabilities
Investment contract liabilities
Reinsurance assets
Trade payable
Other payables and accruals
Tax payable
Intangible assets
Total
31-Dec-18 31-Dec-17
Total
Policy
holders fund
-Insurance
Contract
Policy holders
fund -
Investment
Contract
Shareholders
fund
Policy
holders fund -
Insurance
Contract
Policy holders
fund -
Investment
Contract
Cash and cash equivalents
Financial assets at fair value
through profit or loss
Shareholders
fund
60
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
4.6
IAS 39 IFRS 9
AC AC
FVTPL AC
FVTPL FVTPL
FVTPL FVTPL
AC AC
FVTPL FVTPL
AC AC
Designated, accounting mismatch
4. The Company also assessed its trade and other receivables balances and concluded that the payments meet the SPPI criterion and
based on the Company’s business model for holding the balances, concluded that they remain valued at amortised cost as was the
case under IAS 39.
Impact of IFRS 9 on the Company's solvency positionThe impact of IFRS 9 on the company's solvency position is two-fold. As the standard covers classification and measurement of both
financial assets and liabilities:
Changes in the measurement of financial assets in scope for IFRS 9 and defined as admissible under the risk based capital as
detailed in the prudential guidelines set by the NAICOM may result in a decline in the asset value through ECL.
Changes in the impairment of financial instruments in scope for IFRS 9 and defined as admissible liabilities under the NAICOM
prudential guidelines have resulted in an increase in allowance provisions and consequently admissible liabilities/ decrease in
admissible assets.
The changes in measurement of financial instruments may also affect the amount of capital available to meet the regulator's
minimum capital requirement. This will probably have an adverse effect on the insurers' solvency position, though not material.
Investment contract
liabilitiesOther payables
Designated, accounting mismatch
SPPI, hold to collect business model
Reason
Summary of classification and measurement categories
SPPI, hold to collect business model
SPPI, hold to collect business model
1. The Company has assessed the classification of its financial instruments and conclude that the business model has not changed
significantly compared with the classification under IAS 39. The Company is not likely to be exposed to any significant volatility in
assets and capital following the full adoption of IFRS 9 earlier than 2022 when IFRS 17 will be adopted. In line with the Company’s
business model, all financial assets and financial liabilities are matched through profit or loss.
2. As of 1 January 2018, the Company’s analysis highlighted the components of its cash and cash equivalents as including short term
deposit (i.e. placements), bank accounts balances held with banks and cash in hand. The balances meet the SPPI criterion and these
were classified as financial assets carried at amortised cost.
3. The Company assessed its investment securities (treasury bills and federal government bonds) measured at fair value through
profit or loss under IAS 39 and retained its classification, as the financial liabilities were also measured through profit or loss.
Expected credit lossess
Treasury Bills
Other receivables
Cash and cash
Financial assets at
fair value through
profit or loss:
Placement with
financial institutions
(above 90day maturity)FGN Bonds
The transition from IAS 39 to IFRS 9 resulted into accumulated expected credit impairment loss on the company's
placements to the tune of N3.97 million in the year (2017: N4.51 million), (see note 6).
Designated, accounting mismatch
SPPI, hold to collect business model
The company classifies its financial instruments into the following categories:
Type of financial
instrument
61
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
Impairment
Model for expected credit loss
Staging of financial assets
Stage 2: This stage comprise of assets that have significant increases in credit risk. In instances where credit risk has
increased significantly since initial recognition, the company measures a loss allowance at an amount equal to full
lifetime expected credit losses. That is, the expected credit losses that result from all possible default events over the life
of the financial instrument. For these debt instruments, interest income recognition will be based on the effective
interest rate multiplied by the gross carrying amount.
Stage 3: This stage comprise of assets that are credit impaired. For debt instruments that have both a significant
increase in credit risk plus observable evidence of impairment.
The company assess changes in credit risk by comparison of probability of default at the reporting date and probability
of default at initial recognition. The company also consider other qualitative elements and backstop indicators.
No impairment reserve is set on financial assets measured at fair value through profit and loss.
The impairment model under IFRS 9 reflects expected credit losses, as opposed to incurred credit losses under IAS 39.
Consequently, the company recognize credit losses before actual credit event occurs. The amount of expected credit
losses are updated at each reporting date to reflect changes in credit risk since initial recognition.
The Company recognizes loss allowances for Expected Credit Losses (ECL) on financial assets measured at amortised
cost (i.e. placements) and recognizes interest income on risk assets based on the following stages:
Stage 1: This stage comprise of assets that are performing. If credit risk is low as of the reporting date or the credit risk
has not increased significantly since initial recognition, the comany recognize a loss allowance at an amount equal to 12-
month expected credit losses. This amount of credit losses is intended to represent lifetime expected credit losses that
will result if a default occurs in the 12 months after the reporting date, weighted by the probability of that default
occurring.
IFRS 9 outlines a three-stage model for impairment based on changes in credit quality since initial recognition as summarised
below:
• A financial instrument that is not credit-impaired on initial recognition is classified in Stage 1 and has its credit risk continuously
monitored by the Company.
• If a SICR since initial recognition is identified, the financial instrument is moved to Stage 2 but is not yet deemed to be credit-
impaired.
• If the financial instrument is credit-impaired, the financial instrument is then moved to Stage 3.
• Financial instruments in Stage 1 have their ECL measured at an amount equal to the portion of the lifetime ECL that results from
default events possible within the next 12 months. Instruments in Stages 2 or 3 have their ECL measured based on the ECL on a
lifetime basis.
• A pervasive concept in measuring the ECL in accordance with IFRS 9 is that it should consider forward-looking information.
• Purchased or originated credit-impaired financial assets are those financial assets that are credit-impaired on initial recognition.
Their ECL is always measured on a lifetime basis (Stage 3).
The following diagram summarises the impairment requirements under IFRS 9 (other than purchased or originated credit-impaired
financial assets):
The Company assesses on a forward-looking basis the ECL associated with its debt instrument assets carried at AC and FVOCI. The
Company recognises a loss allowance for such losses at each reporting date. The measurement of the ECL reflects:
a. an unbiased and probability weighted amount that is determined by evaluating a range of possible outcomes;
b. the time value of money; and
c. reasonable and supportable information that is available without undue cost or effort at the reporting date about past events,
current conditions and forecasts of future economic conditions.
62
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
Financial assets and liabilitiesThe carrying amounts of the financial assets and liabilities held by the Company are:
AC FVTPL TotalN'000 N'000 N'000
2,310,127 - 2,310,127 Financial assets at amortised cost 65,091 - 65,091
- 1,079,835 1,079,835 - 2,930,616 2,930,616
2,375,218 4,010,451 6,385,669
AC FVTPL TotalN'000 N'000 N'000
779,518 - 779,518 Financial assets at amortised cost 58,343 - 58,343
- 1,041,290 1,041,290 - 4,216,329 4,216,329
837,861 5,257,619 6,095,480
Definition of default and credit-impaired assets
(Initial recogniton)
(Significant increase in
credit risk since initial
recognition)
(Credit-impaired assets)
12-month expected credit losses Lifetime expected credit losses Lifetime expected credit losses
The Company defines a financial instrument as in default, which is fully aligned with the definition of credit-impaired, when it
meets one or more of the following criteria:
Quantitative criteria
The borrower is more than 90 days past due on its contractual payments
Qualitative criteria
The borrower meets the unlikeliness to pay criteria, which indicates the borrower is in significant financial difficulty.
These are instances where:
• the borrower is in long-term forbearance;
• the borrower is insolvent;
• the borrower is in breach of (a) financial covenant(s);
• an active market for that financial asset has disappeared because of financial difficulties;
• concessions have been made by the lender relating to the borrower’s financial difficulties;
• it is becoming probable that the borrower will enter bankruptcy; or
• financial assets are purchased or originated at a deep discount that reflects the incurred credit losses.
The criteria above have been applied to all financial instruments held by the Company and are consistent with the definition of
default used for internal credit risk management purposes. The default definition has been applied consistently to model the
probability of default (PD), exposure at default (EAD) and loss given default (LGD) throughout the Company’s expected loss
calculations.
An instrument is considered to no longer be in default (i.e. to have cured) when it no longer meets any of the default criteria for a
consecutive period of six months. This period of six months has been determined based on an analysis that considers the likelihood
of a financial instrument returning to default status after cure using different possible cure definitions.
FGN bondsTreasury bills investmentTotal investment assets and Cash and cash
equivalents
Total investment assets and Cash and cash
equivalents
31-Dec-17
Financial assets at fair value:
Cash and cash equivalents
Financial assets at fair value:
31-Dec-18
FGN bondsTreasury bills investment
Cash and and bank balances
Stage 1 Stage 2 Stage 3
63
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
Measuring ECL - Explanation of inputs, assumptions and estimation techniques
Significant increase in credit risk
Backstop criteria
Low credit risk debt instruments
A backstop is applied and the debt financial instrument considered to have experienced a SICR if the borrower is more than 30 days
past due on its contractual payments.
The Company has used the low credit risk exemption for financial instruments when they meet the following conditions:
• the financial instrument has a low risk of default;
• the borrower is considered to have a strong capacity to meet its obligations in the near term; and
• the Company expects, in the longer term, that adverse changes in economic and business conditions might, but will not
necessarily, reduce the ability of the borrower to fulfil its obligations.
The Company defines low credit risk financial assets as financial assets that are “investment grade” at the reporting date, based on
the Company’s credit grading policies. For such instruments, the SICR is not assessed, and the impairment allowance is calculated
and the financial asset is measured using the 12M ECL, as long as the financial asset meets the criteria above.
The ECL is measured on either a 12-month (12M) or lifetime basis depending on whether a SICR has occurred since initial
recognition or whether an asset is considered to be credit-impaired. The ECL is the discounted product of the PD, EAD and LGD,
defined as follows:
• The PD represents the likelihood of a borrower defaulting on its financial obligation (as per definition of default and credit-
impaired assets above), either over the next 12 months (12M PD) or over the remaining lifetime (Lifetime PD) of the obligation.
• The EAD is based on the amounts the Company expects to be owed at the time of default, over the next 12 months or over the
remaining lifetime.
• The LGD represents the Company’s expectation of the extent of loss on a defaulted exposure. The LGD varies by type of borrower,
type and seniority of claim and availability of collateral or other credit support. The LGD is expressed as a percentage loss per unit
of exposure at the time of default (EAD). The LGD is calculated on a 12M or lifetime basis, where the 12M LGD is the percentage of
loss expected to be made if the default occurs in the next 12 months and the lifetime LGD is the percentage of loss expected to be
made if the default occurs over the remaining expected lifetime of the loan.
The ECL is determined by projecting the PD, LGD and EAD for each future month and for each individual exposure or collective
segment. These three components are multiplied together and adjusted for the likelihood of survival (i.e. the exposure has not
prepaid or defaulted in an earlier month). This effectively calculates an ECL for each future month, which is then discounted back to
the reporting date and summed. The discount rate used in the ECL calculation is the original EIR or an approximation thereof.
The Lifetime PD is developed by applying a maturity profile to the current 12M PD. The maturity profile looks at how defaults
develop on a financial instrument portfolio from the point of initial recognition throughout the lifetime of the financial instrument.
The maturity profile is based on historical observed data and is assumed to be the same across all assets within a portfolio and credit
grade band. This is supported by historical analysis.
The assumptions underlying the ECL calculation are monitored and reviewed on a quarterly basis.There have been no significant
changes in estimation techniques or significant assumptions made during the reporting period.
The Company considers a financial instrument to have experienced a SICR when one or more of the following quantitative,
qualitative or backstop criteria have been met:
Quantitative criteria
Thresholds have been established to determine whether the remaining Lifetime PD at the reporting date has increased significantly
compared to the residual Lifetime PD expected at the reporting date when the exposure was first recognised.
Qualitative criteria
For debt instruments securities, if the instrument meets one or more of the following criteria:
• significant increase in credit spread;
• significant adverse changes in business, financial and/or economic conditions in which the borrower operates;
• actual or expected forbearance or restructuring;
• actual or expected significant adverse change in operating results of the borrower; and
• significant change in collateral value (secured facilities only) that is expected to increase risk of default.
The assessment of a SICR incorporates forward-looking information and is performed at the borrower level and on a
periodic basis. The criteria used to identify a SICR are monitored and reviewed periodically for appropriateness by the independent
risk management officer in the company.
64
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
Forward-looking information incorporated in the ECL models
Sensitivity of estimates used in IFRS 9 ECL
Probability of default (PD)
Sensitivity of the ECL estimates to changes in PDs
31-Dec-18 31-Dec-17Increase/(decrease) on probability of default N'000 N'000+ 10% 4,377 4,967 No change 3,972 4,506
- 10% 3,567 4,048
Loss given default (LGD)
Sensitivity of the ECL estimates to changes LGDs
31-Dec-18 31-Dec-17Increase/(decrease) on probability of default N'000 N'000+ 10% 4,357 4,944 No change 3,972 4,506
- 10% 3,586 4,069
Forward looking macroeconomic indicators
- 10% Change + 10%
N'000 N'000 N'000
2018 3,628 3,972 4,315
2017 4,178 4,506 4,894
Inflation
The Company has used the low credit risk exemption for financial instruments when they meet the following conditions:
• the financial instrument has a low risk of default;
• the borrower is considered to have a strong capacity to meet its obligations in the near term; and
• the Company expects, in the longer term, that adverse changes in economic and business conditions might, but will not
necessarily, reduce the ability of the borrower to fulfil its obligations.
The Company defines low credit risk financial assets as financial assets that are “investment grade” at the reporting date, based on
the Company’s credit grading policies. For such instruments, the SICR is not assessed, and the impairment allowance is calculated
and the financial asset is measured using the 12M ECL, as long as the financial asset meets the criteria above.
The calculation of the ECL both incorporate forward-looking information. The Company has performed historical analysis and
identified the key economic variables impacting credit risk and the ECL for each portfolio.
These economic variables and their associated impact on the PD, EAD and LGD vary by financial instrument. Expert judgement has
also been applied in this process. Forecasts of these economic variables (the base economic scenario) are provided by the Company’s
risk management officer on a quarterly basis and provide the best estimate view of the economy over the next five years. After five
years, to project the economic variables out for the full remaining lifetime of each instrument, a mean reversion approach has been
used, which means that economic variables tend to have either a long run average rate or a long run average growth rate. The
impact of these economic variables on the PD, EAD and LGD has been determined by performing statistical regression analysis to
understand the impact changes in these variables have had historically on default rates and on the components of the LGD and
EAD.
In addition to the base economic scenario, the Company’s risk management officer also provides other possible scenarios along with
scenario weightings. The number of other scenarios used is set based on the analysis of each major product type to ensure non-
linearities are captured. The number of scenarios and their attributes are reassessed at each reporting date. The assessment of a
SICR is performed using the Lifetime PD under each of the bases and the other scenarios, along with qualitative and backstop
indicators. This determines whether the whole financial instrument is in Stage 1, Stage 2 or Stage 3 and hence whether the 12M or
lifetime ECL should be recorded. Following this assessment, the Company measures the ECL as either a probability weighted 12M
ECL (Stage 1) or a probability weighted lifetime ECL (Stages 2 and 3). These probability weighted ECLs are determined by running
each scenario through the relevant ECL model and multiplying it by the appropriate scenario weighting (as opposed to weighting
the inputs).
As with any economic forecasts, the projections and likelihoods of occurrence are subject to a high degree of inherent uncertainty
and therefore the actual outcomes may be significantly different to those projected. The Company considers these forecasts to
represent its best estimate of the possible outcomes and has analysed the non-linearities and asymmetries within the Company’s
different portfolios to establish that the chosen scenarios are appropriately representative of the range of possible scenarios.
In establishing sensitivity of the ECL estimates to macroeconomic factors for placements, Inflation was considered.
The table below outlines the total ECL for Placements as at 31 December 2018, if the assumptions used to measure ECL remain as
expected (amount as presented in the statement of financial position), as well as if each of the key assumptions used change by plus
or minus 10%. The responsiveness of the ECL estimates to variation in macroeconomic variables have been presented below.
Estimation uncertainty in measuring impairment loss
The tables below shows information on the sensitivity of the carrying amounts of the Company’s financial assets to the methods,
assumptions and estimates used in calculating impairment losses on those financial assets at the end of the reporting period.
Changes to these methods, assumptions and estimates may result in material adjustments to the carrying amounts of the Company’s
financial assets.
Year
65
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
4.7 Fair value of financial assets and liabilities
Level 3: Inputs, for the asset or liability, that are not based on observable market data.
4.7.1Financial instruments measured at fair value
Level 1 Level 2 Total
balance
N'000 N'000 N'000
Financial assets at fair value through profit or loss 4,010,451 - 4,010,451
4,010,451 - 4,010,451
Level 1 Level 2 Total
balance
N'000 N'000 N'000
Financial assets at fair value through profit or loss 5,257,619 - 5,257,619
5,257,619 - 5,257,619
4.7.2Financial instruments not measured at fair value
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e
as prices) or indirectly (i.e. derived from prices). This hierarchy requires the use of observable market data when available.
The Company considers relevant and observable market prices in its valuations where possible.
The table below analyses financial instruments and other assets and liabilities measured at fair value at the end of the year, by
the level in the fair value hierarchy into which the fair value measurement is categorised:
The following table sets out the fair value of financial instruments not measured at fair value and analyses them by the level in
the fair value hierarchy into which each fair value measurement is categorised:
The Company measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used
in making the measurements:
31-Dec-17
31-Dec-18
66
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
Level 2 Level 3 Total
balance
N'000 N'000 N'000
Cash and cash equivalents 2,310,127 - 2,310,127
Financial assets at amortised cost 65,091 - 65,091
Reinsurance assets 116,215 - 116,215
Statutory deposit 200,000 - 200,000
2,691,433 - 2,691,433
Investment contract liabilities 1,031,352 - 1,031,352
Trade payable 241,400 - 241,400
Other payables and accruals 264,360 - 264,360
1,537,112 - 1,537,112
Level 2 Level 3 Total
balance
Cash and cash equivalents 779,518 - 779,518
Financial assets at amortised cost 58,343 - 58,343
Reinsurance assets 86,577 86,577
Statutory deposits 200,000 - 200,000
Other receivables 742 - 742
1,125,180 - 1,125,180
Investment contract liabilities 1,088,187 - 1,088,187
Trade payable 7,774 - 7,774
Other payables and accruals 362,736 - 362,736
1,458,697 - 1,458,697
4.7.3Fair value methods and assumptions
(i) Cash and cash equivalents:
(ii) Reinsurance assets and statutory deposit
(iii) Trade payables and other payables
(iv) Investment contract liabilities
Investment contracts are those that do not transfer significant insurance risk from the contract holder to the issuer. The
Company's balance of investment contract liabilities are payable on demand. Hence, the carrying amount of investment
contract liability is a reasonable approximation of fair values.
The carrying amount of trade payables and other payables are reasonable approximation of their fair value as they are
all short term in nature.
31-Dec-18
The estimated fair value of receivables with no stated maturity which includes no interest receivable is the amount is
received on demand. The carrying amounts are a reasonable approximation of fair value.
The fair value for financial assets and liabilities that are not carried at fair value were determined respectively as follows:
31-Dec-17
Included in the balances of cash and cash equivalents are cash and balances with banks and short-term placement. The
carrying amount of cash and cash equivalent is reasonable approximation of fair value.
There was no transfer between levels during the year under review.The carrying amounts of cash and cash equivalents, and
other financial assets and other financial liabilities approximate their fair value.
67
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
5 Critical accounting estimates and judgements
(i) Actuarial valuation of insurance contracts liabilities
(ii) Share based payment
(iii) Classification and measurement of financial instruments under IFRS 9.
Judgement Description
The liabilities for life insurance contracts are estimated using appropriate and acceptable base tables of standard
mortality according to the type and nature of the insurance contracts. Assumptions such as expenses inflation, valuation
interest rate, mortality and claims experience are considered in estimating the required reserves for individual life
contracts fund and the incurred but not reported claims under the group life contracts.
The Company operates a cash-settled share based compensation plan for its management personnel. The share-based
payment transactions are settled in cash based on the equity of the parent. The Company measures the goods or services
received as cash-settled share-based payment transactions by assessing the nature of the awards and its own rights and
obligations.
The liability is re-measured at each reporting date and at settlement date at fair value. Any changes in the fair value of
the liability are recognized as personnel expense in profit or loss. The factors considered in the valuation include the
forfeiture rate (i.e. estimated percentage of options granted that are expected to be forfeited or cancelled before
becoming fully vested based on historical experience) and share price of the parent Company (MMI Holdings Limited).
The amount of the share based as at 31 December, 2018 was N18.3 million (2017: N12.69 million).
Critical accounting judgements made in applying the Company’s accounting policies include:
This note provides an overview of the areas that involve a higher degree of judgement or complexity. More detailed
information about these judgements is included in the notes.
The Company has made judgements in applying the business model criteria to its
portfolio of debt instruments.
The Company has also applied judgement as to whether designating debt instruments at
FVTPL significantly reduces an accounting mismatch.
Classification of financial
instruments
Expected credit loss A number of significant judgements are required in applying the accounting
requirements for measuring
the ECL, such as:
a. determining criteria for a significant increase in credit risk (SICR);
b. adopting a lifetime PD term structure from the Standard & Poor Global Default Rate
Study for Corporate entities;
c. adopting Moody's average observed recoveries of global corporate bonds and loans
from 2003 to 2017. Statistical estimates were used to determine upturn and downturn
scenarios.
d. establishing the number and relative weightings of forward-looking scenarios for each
type of product/market and the associated the ECL; and
e. establishing Companys of similar financial assets for the purposes of measuring the
ECL.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It
also requires management to exercise its judgement in the process of applying the Company’s accounting policies. Changes in
assumptions may have a significant impact on the financial statements in the period the assumptions change. The
Management believe that the underlying assumptions are appropriate and that the Company’s financial statements therefore
present the financial position and results fairly.
Management makes estimates and assumptions that affect the reported amounts of assets and liabilities. The underlying
judgments of the selection and disclosure of the Company’s critical accounting policies and estimates, and the application of
these policies and estimates are continually evaluated based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances.
68
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
Estimates
Fair value of financial instruments
Expected credit loss
The preparation of financial statements requires the use of accounting estimates, which, by definition, will seldom equal the
actual results. This note provides an overview of items which are more likely to be materially adjusted due to changes in
estimates and assumptions in subsequent periods. Detailed information about each of these estimates is included in the below
notes together with information about the basis of calculation for each affected line item in the consolidated financial
statements. In applying IFRS 9 measurement requirements, the following inputs and methods were used that include
significant estimates.
The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The
Company uses its judgement to select a variety of methods and make assumptions that are mainly based on market conditions
existing at the end of each reporting period.
The measurement of the ECL allowance for financial assets measured at AC and FVOCI is an area that requires the use of
complex models and significant assumptions about future economic conditions and credit behaviour (e.g. the likelihood of
customers defaulting and the resulting losses).
69
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
6 Cash and cash equivalents 31-Dec-18 31-Dec-17
N'000 N'000
Cash at bank 894,641 89,562
Placements with financial institutions (less than 90day
maturity) 1,224,409 688,321
Treasury bills of less than 90 days maturity 191,077 1,635
2,310,127 779,518
Impairment (ECL) (See note 6a) (3,857) -
2,306,270 779,518
6a Movement in expected credit loss on cash and cash equivalents
Day 1 IFRS 9 adjustment (ECL impairment) (4,404) -
Impairment (ECL) write back during the year (see note 31) 547 -
Closing balance (3,857) -
7 Financial assets at amortised cost 31-Dec-18 31-Dec-17
N'000 N'000
Placements with financial institutions (above 90day
maturity) 65,091 58,343
Impairment (ECL) (See note 7a) (115) -
64,976 58,343
7a Movement in expected credit loss on placements with financial institution
Day 1 IFRS 9 adjustment (ECL impairment) (103) -
Impairment charge during the year (see note 31) (12) -
Closing balance (115) -
8
Financial assets at fair value through profit or
loss 31-Dec-18 31-Dec-17
N'000 N'000
Equity securities - -
FGN bonds (see note 8a) 1,079,835 1,041,290
Treasury bills investments (see note 8b) 2,930,616 4,216,329
4,010,451 5,257,619
31-Dec-18 31-Dec-17
8a Bonds movement: N'000 N'000
Bonds as at 1 January 1,041,290 901,518
Purchase of bonds investments - 313,688
Matured bonds investment - (250,000)
Interest received on matured bond investment (89,193) (88,471)
Interest income on bonds 161,510 136,897
Fair value (loss)/gain (33,772) 27,658
Treasury bills as at 31 December 1,079,835 1,041,290
31-Dec-18 31-Dec-17
8b
N'000 N'000
Treasury bills as at 1 January 4,216,329 3,475,118
Purchase of treasury bills 4,845,660 8,418,042
Matured treasury bills (6,141,128) (7,636,821)
Interest received on matured treasury bill (525,650) (858,505)
Interest income on treasury bills 597,181 775,972
Fair value (loss)/gain (61,776) 42,523
Treasury bills as at 31 December 2,930,616 4,216,329
The balance above relates to placement with financial institution above 90 days tenor.
Treasury bills investments of more than 90 days
maturity movement:
70
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
9 Other receivables 31-Dec-18 31-Dec-17
N'000 N'000
Prepayment 59,511 69,378
Other receivables - 742
59,511 70,120
Current 59,511 70,120
10 Reinsurance assets 31-Dec-18 31-Dec-17
N'000 N'000
Prepaid reinsurance (see note 10(i)) 158,347 95,005
Reinsurance share of IBNR (see note 10(ii)) 171,592 149,584
Balance per Actuarial Estimate 329,939 244,589
Reinsurance share of claims paid (see note 10(iii)) 116,215 86,577
446,154 331,166
Current 446,154 331,166
(i) Movement in prepaid reinsurance cost 31-Dec-18 31-Dec-17
N'000 N'000
Balance, beginning of year 95,005 75,985
Changes during the year (see note 23) 63,342 19,020
Balance, end of year 158,347 95,005
(ii) Movement in reinsurance share of IBNR 31-Dec-18 31-Dec-17
N'000 N'000
Balance, beginning of year 149,584 125,137
Changes during the year as actuarially determined (see
note 25) 22,008 24,447
Balance, end of year (see note 14f) 171,592 149,584
(iii) Movement in reinsurance share of claim paid 31-Dec-18 31-Dec-17
N'000 N'000
Balance, beginning of year 86,577 18,952
Changes during the year 29,638 67,625
Balance, end of year 116,215 86,577
The prepayment consists of prepaid rent of N49.34 million (2017: N60.91 million), prepaid asset insurance
costs of N5.34 million (2017: N5.45 million) and prepaid Medical/HMO of N4.83 million (2017: N3.02
million).
71
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
11 Property and equipment
Leasehold Motor Computer Furniture Total
improvement vehicle equipment and fittings
Cost N'000 N'000 N'000 N'000 N'000
At 1 January 2018 69,398 164,827 103,289 82,252 419,766
Additions - - 10,942 1,667 12,609
Disposals - (11,200) - - (11,200)
At 31 December 2018 69,398 153,627 114,231 83,919 421,175
Accumulated depreciation
At 1 January 2018 42,567 105,344 88,417 47,774 284,102
Charge for the year 7,222 25,273 9,008 9,103 50,606
Disposals - (9,113) - - (9,113)
At 31 December 2018 49,789 121,504 97,425 56,877 325,595
Carrying amount
At 31 December 2018 19,609 32,123 16,806 27,042 95,580
Leasehold Motor Computer Furniture Total
improvement vehicle equipment and fittings
Cost N'000 N'000 N'000 N'000 N'000
At 1 January 2017 69,398 166,815 102,261 80,830 419,304
Additions - 18,712 1,028 1,422 21,162
Disposals - (20,700) - (20,700)
At 31 December 2017 69,398 164,827 103,289 82,252 419,766
Accumulated depreciation
At 1 January 2017 35,345 103,076 78,412 39,769 256,602
Charge for the year 7,222 22,968 10,005 8,005 48,200
Disposals - (20,700) - - (20,700)
At 31 December 2017 42,567 105,344 88,417 47,774 284,102
Carrying amount
At 31 December 2017 26,831 59,483 14,872 34,478 135,664
31-Dec-2018
31-Dec-2017
72
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
12 Intangible assets 31-Dec-18 31-Dec-17
N'000 N'000
Cost:
Balance, beginning of year 56,256 56,256
Additions 361 -
Balance, end of year 56,617 56,256
Accumulated amortisation:
Balance, beginning of year 55,778 54,927
Amortisation charge 550 851
Balance, end of year 56,328 55,778
Net book value:
Balance 289 478
13 Statutory deposit
31-Dec-18 31-Dec-17
N'000 N'000
Statutory deposit 200,000 200,000
Non-current 200,000 200,000
Restated Restated
14 Insurance contract liabilities 31-Dec-18 31-Dec-17 1-Jan-17
N'000 N'000 N'000
Individual life fund 13,388 5,053 10,077
Group life fund 1,298,559 1,253,572 1,182,294
1,311,947 1,258,625 1,192,371
Restated
The insurance contract liabilities are made up of:
31-Dec-18 31-Dec-17
Change
during the
year
N'000 N'000 N'000
Unearned Premium Reserve (UPR) (see note 14(a)) 537,347 527,030 10,317
Outstanding claims (see note 14(b)) 150,410 132,923 17,487
IBNR reserves (see note 14( c) 610,802 593,619 17,183
Individual life fund (see note 14(d)) 13,388 5,053 8,335
1,311,947 1,258,625 53,322
Restated Restated
Change
during the
year31-Dec-17 1-Jan-17
N'000 N'000 N'000Unearned Premium Reserve (UPR) (see note 14(a)) 527,030 504,031 22,999 Outstanding claims (see note 14(b)) 132,923 59,327 73,596 IBNR reserves (see note 14( c) 593,619 618,936 (25,317) Individual life fund (see note 14(d)) 5,053 10,077 (5,024)
1,258,624 1,192,371 66,254
14a Movement in Unearned Premium Reserve (UPR) 31-Dec-18 31-Dec-17N'000 N'000
At the beginning 527,030 504,031 Change during the year (see note 14a(i)) 10,317 22,999 At the end 537,347 527,030
The Company's intangible assets relates to its computer software.
This represents amounts deposited with the Central Bank of Nigeria (CBN) pursuant to the Insurance Act. The deposits
are not available for use by the Company in the normal course of day to day business. The amount is 10% of minimum
regulatory capital of N2 billion for life insurance business.
* Individual life savings have been appropriately reclassified from insurance contract liabilities to investment contract liabilities .
73
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
14b Movement in outstanding claims 31-Dec-18 31-Dec-17N'000 N'000
At the beginning 132,923 59,327 Change during the year 17,487 73,596 At the end 150,410 132,923
14c Movement in IBNR reserves 31-Dec-18 31-Dec-17N'000 N'000
At the beginning 593,619 618,936 Change during the year 17,183 (25,317)At the end 610,802 593,619
14d The movement in individual life fund at amortised cost during the year was as follows:
31-Dec-18 31-Dec-17
N'000 N'000
At the beginning 5,053 10,077
Change during the year 8,335 (5,024)
At the end 13,388 5,053
14e
31-Dec-18 31-Dec-17
N'000 N'000
Balance at beginning of year 1,253,572 1,182,294
Increase/(decrease) in UPR reserves (see note 22) 10,316 22,999
Decrease in IBNR reserves (see note 24) 17,183 (25,317)
17,487 73,596
Balance, end of year 1,298,558 1,253,572
14f Reinsurer's share of insurance contract liabilities 31-Dec-18 31-Dec-17 1-Jan-17
N'000 N'000 N'000
Additional unexpired risk reserve 4,441 3,304 -
UPR Reserves 153,905 91,701 75,985
IBNR Reserves 171,592 149,584 125,137
329,938 244,589 201,122
Restated Restated
14g Net insurance contract liabilities 31-Dec-18 31-Dec-17 1-Jan-17
N'000 N'000 N'000
Individual risk business 13,388 5,053 10,077
Additional unexpired risk reserve 4,343 16,934 26,851
UPR Reserves 374,657 415,091 401,195
IBNR Reserves 439,210 444,036 493,799
Claims reported and loss adjustment expenses 150,410 132,923 59,327
982,008 1,014,036 991,249
Increase/(decrease) in claims reported and loss adjustment
expenses (see note 24)
The movement in group life fund at amortised cost during the year was as follows:
All outstanding claims reported are payable within 30 days from reporting date.
74
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
14h The ageing analysis of claims reported and loss adjustment expenses is as follows: Restated Restated
31-Dec-18 31-Dec-17 1-Jan-17
N'000 N'000 N'000
0-90 days 96,507 79,020 5,424
365 days and above 53,903 53,903 53,903
150,410 132,923 59,327
Restated Restated
15 Investment contract liabilities 31-Dec-18 31-Dec-17 1-Jan-17
N'000 N'000 N'000
Individual savings contract (see note 15(a)) 977,912 1,034,747 965,806
HEIRS 53,440 53,440 53,440
1,031,352 1,088,187 1,019,246
Non-current 1,031,352 1,088,187 1,019,246
15a Movement in investment contract liabilities
As at 1 January 1,088,187 1,019,246
Additions during the year 49,324 53,555
Withdrawals during the year (234,712) (161,337)
Interest charge 128,553 176,723
As at 31 December 1,031,352 1,088,187
Restated Restated
16 Trade payables 31-Dec-18 31-Dec-17 1-Jan-17
N'000 N'000 N'000
Reinsurance payable (see note 16(a)) 18,017 - -
Deposit for premium received in advance (see note 16(b)) 210,229 - -
Commission due to sales agents - - 3,103
Other sundry items (see note 16(c) below) 13,154 7,774 -
241,400 7,774 3,103
16a
16b
16c
17 Other payables and accruals Restated Restated
31-Dec-18 31-Dec-17 1-Jan-17
Financial liabilities N'000 N'000 N'000
92,824 191,887 69,917
Accrued expenditure (see note (b, d & e) below) 171,536 170,849 132,568
Total financial liabilities 264,360 362,736 202,485
Share based payment liabilities (see note (c) below) 18,299 12,688 -
282,659 375,424 202,485
Current 282,659 375,424 202,485
The deposit for premium received in advance relates to premium received from clients prior to commencement of cover
in 2019.
The reinsurance payable relates amount of premium ceded payable to reinsurance as at the end of the year.
The claims of 365 days and above relates to provision for claims notification from the erstwhile company (Heirs Life
Assurance Limited) which are yet to be settled due to non-availability of full documentation by claimants since 2007.
Other sundry items comprise of inflows from clients into the company's bank account that the details of the depositors
are yet to be determined as at 31 December, 2018.
Intercompany account with MMI Holdings (Pty) Limited (see note
(17a) below)
* Individual life savings have been appropriately reclassified to investment contract liabilities from insurance contract liabilities .
* Funds received into the Company's bank accounts with incomplete details from clients have been appropriately reclassified from other payables
(operational costs accruals) to trade payables.
* Funds received into the Company's bank accounts with incomplete details from clients have been appropriately reclassified to trade payables from
other payables (operational costs accruals).
75
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
17a
17b Breakdown of accrued expenditure is analysed below: 31-Dec-18 31-Dec-17 1-Jan-17
Levies and stamp duties 21,225 19,877 21,930
Audit, actuarial asset management and tax 50,635 31,930 27,220
Accrued WHT and VAT - 7,624 11,672
Operational cost accruals (see note 17(f)) 22,696 36,630 19,706
Liability for stale cheques (see note 17(d) below) 76,980 74,789 52,040
171,536 170,850 132,568
17c
17d
17e
17f This relates accrual on staff leave allowance and other management expenses accrual.
18 Current income tax liabilities
18a The movement in this account during the year was as follows: 31-Dec-18 31-Dec-17
N'000 N'000
Balance, beginning of year 18,015 15,781
Day 1 tax impact of IFRS 9 adoption (see note 21) (45) -
Charge for the year (see note (b) below) 12,844 14,432
Payments during the year (13,602) (12,198)
Balance, end of year 17,212 18,015
18b The tax charge for the year comprises: 31-Dec-18 31-Dec-17
N'000 N'000
Corporate income tax charge 10,533 12,876
Technology levy 2,311 1,556
12,844 14,432
18c Reconciliation of effective tax rate
Effective tax
rate N'000
Effective tax
rate N'000
Profit before tax 231,084 156,264
Tax at 30% 69,325 46,879
Tax effect of amount not deductible (or taxable):
Income not subject to tax (1,049,697) (1,065,808)
Deductible expenses 990,906 1,031,805
IT tax 2,311 1,556
6% 12,844 9% 14,432
Liability for stale cheques comprise of cheques issued to policy holders as claims which are yet to be presented for
payment for a period of more than six months.
In the 2018 financial year, the company introduced a cash-settled share based compensation plan for its management
staff. The share-based payment transactions are settled in cash, based on the equity of the parent. The number of shares
allocated to each participant is split into performance units and retention units. This split varies by individual grant. In
order for the performance units to become payable, the staff has to meet certain performance criteria. Vesting conditions
are determined for each participant specifically. The plans vest 3 years after the offer dates. The details of the cash settled
share based scheme are shown in note 38(b)
The intercompany balance relates to actuarial, technical fees and insurance system license fees payable to MMI Holdings
Limited. This has been further shown in the related party disclosure in note 36 (d).
The intercompany balance relates to actuarial, technical fees and insurance system license fees payable to MMI Holdings
Limited. This has been further shown in the related party disclosure in note 38(d).
31-Dec-18
The company had an assessable loss in 2018 and 2017 year of assessment. Hence the education tax of 2% of the
assessable profit for each year of assessment is not applicable.
31-Dec-17
76
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
`
18d Unrecognised deferred tax assets
19 Share capital
Share capital comprises: 31-Dec-18 31-Dec-17
N'000 N'000
19a Authorized capital
1,000,000,000 units of ordinary shares of N1 each 1,000,000 1,000,000
19b Issued and fully paid shares
Nominal value of shares in issue, ordinary shares of N1 each 1,000,000 1,000,000
Share premium 2,494,862 2,494,862
17c The movement in this account during the year was as follows:
Balance, beginning of year 1,000,000 1,000,000
Balance, end of year 1,000,000 1,000,000
20 Contingency reserves
The movement in this account during the year was as follows: 31-Dec-18 31-Dec-17
N'000 N'000
Balance, beginning of year 272,243 251,645
Transfer from income statement 22,655 20,598
Balance, end of year 294,898 272,243
21
The movement in this account during the year was as follows: 31-Dec-18 31-Dec-17
N'000 N'000
Balance, beginning of year 317,778 196,544
(4,404) -
(103) -
Day 1 tax impact of IFRS adoption 45 -
Transfer from profit and loss account 218,240 141,832
Transfer to contingency reserve (see note 20) (22,655) (20,598)
Balance, end of year 508,901 317,778
22 Gross premium income Restated
31-Dec-18 31-Dec-17
Gross premium revenue arising from insurance contracts issued: N'000 N'000
Group life 2,140,694 1,787,422
Credit life 124,801 218,824
Gross premium written 2,265,495 2,006,246
Increase/(decrease) in UPR reserves (see note 14a) (10,317) (22,999)
Gross premium income 2,255,178 1,983,247
Deferred tax asset of N1.055 billion (2017: N1.59 billion) is not recognized because there is little probability of any future
tax benefit emanating from this deferred tax assets.
Retained earnings
Day 1 IFRS 9 ECL impairment adjustment (Placements with
financial institutions)
Day 1 IFRS 9 ECL impairment adjustment (cash and cash
equivalent)
Contingency reserve for life assurance business is calculated in accordance with the Nigerian Insurance Act. The reserve
is calculated at the higher of 1% of gross premiums and 10% of net profits of the business for the year. An appropriation of
1% of gross premium was made during the year.
77
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
23 Reinsurance expenses 31-Dec-18 31-Dec-17
N'000 N'000
Reinsurance premium incurred 414,671 345,265
Movement in reinsurance expenses 31-Dec-18 31-Dec-17
N'000 N'000
Reinsurance cost during the year 478,013 364,285
Change in prepaid reinsurance (see note 10(i)) (63,342) (19,020)
Reinsurance expenses 414,671 345,265
Restated
24 Claims expenses 31-Dec-18 31-Dec-17
N'000 N'000
Death and disability claims paid 1,581,366 1,325,696
Surrenders/terminations paid - -
Withdrawal benefits paid - -
Gross claims paid during the year 1,581,366 1,325,696
Changes in outstanding claims 17,487 73,596
Change in IBNR reserves 17,182 (25,317)
Gross claims expense 1,616,035 1,373,975
25 Claims recoveries from reinsurance companies 31-Dec-18 31-Dec-17
N'000 N'000
Recoveries on claims paid 607,029 351,667
Increase in reinsurance share of IBNR (see note 10(ii)) 22,008 24,447
629,037 376,114
26 Underwriting expenses 31-Dec-18 31-Dec-17
N'000 N'000
Acquisition expenses 278,747 224,533
Maintenance expenses 126,359 134,562
405,106 359,095
Restated
27 Investment income 31-Dec-18 31-Dec-17
Dividend income on equities 347 6,347
Interest income on cash and cash equivalents 137,589 89,152
Interest income on treasury bills investment
597,181 775,972
Interest income on bonds 161,510 136,897
Interest income on statutory deposit 30,732 30,169
927,359 1,038,537
27a Investment income attributable to:
Policyholders 242,160 232,329
Shareholders 507,852 610,110
See note 27b 750,012 842,439
Investment contract liabilities (see note 29) 177,347 196,098
927,359 1,038,537
Underwriting expenses are subdivided into acquisition and maintenance expenses. Acquisition expenses relate to
commission expenses incurred in obtaining and renewing insurance contracts. Maintenance expenses are underwriting
expenses incurred during bidding and tendering and other incidental cost.
The investment income attributable to investment contracts have been transferred to profit/(loss) on investment
contract appropriately. (See note 28)
78
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
27b The investment income attributable to shareholders and policyholders are made up of:
Dividend income on equities 292 5,286
Interest income on cash and cash equivalents 115,677 74,244
Interest income on treasury bills investment 502,076 646,216
Interest income on bonds 135,789 25,124
Interest income on statutory deposit 25,837 114,006
779,671 864,876
Restated
28 Profit/(loss) on investment contracts 31-Dec-18 31-Dec-17
Investment income attributable to investment contract 177,347 196,098
Interest charge (128,553) (176,723)
48,794 19,375
29 Fair value gains/(losses) 31-Dec-18 31-Dec-17
N'000 N'000
-Equity investment - 65,992
-Bonds (33,772) 27,658
-Treasury bills (61,776) 42,523
(95,548) 136,173
Restated
30 Other operating (loss)/income 31-Dec-18 31-Dec-17
N'000 N'000
Net foreign exchange (losses)/gains (13,959) 1,264
Gain on disposal of property and equipment 7,228 2,880
Recoveries of staff advance previously written off. 2,151 5,107
(4,580) 9,251
31 Net expected credit loss 31-Dec-18 31-Dec-17
N'000 N'000
ECL Impairment on cash and cash equivalents 547 -
ECL Impairment on Placements with financial
institution
(12) -
535 -
* This relates to stage 1 expected credit loss on financial asset at amortised cost namely placement with other financial
institution. There has been no significant increase in credit risk from prior financial period. Hence all placements are still
held in stage 1.
79
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
Restated
32 Management expenses 31-Dec-18 31-Dec-17
N'000 N'000
Personnel costs - operations staff (see note 34(b)) 169,506 179,428
Asset management advisory fees (see note 32 (a) below ) 37,000 30,831
Auditors’ remuneration 17,000 16,000
Bank charges 907 913
Consulting fees 6,636 1,325
Information technology expenses 33,762 18,293
Business marketing costs 107,888 274,894
Directors emoluments (See note 35) 134,069 151,632
Legal services fee 11,197 18,309
Fines & Penalty (see note 32 (d) below) 5,500 600
Other office administrative expenses 37,589 37,749
Printing & stationaries 4,850 4,930
Professional fee to consultants 14,319 17,582
Redundancy cost - 9,443
Rent and rates 92,256 104,041
Repairs and maintenance expenses 51,684 50,633
Subscriptions 8,726 12,637
Support staff cost (see note 32 (b) below) 26,014 31,373
Technical Support Fees (see note 32 (c )) 78,730 98,376
Depreciation (see note 11) 50,606 48,200
Software amortization (see note 12) 550 851
Travel and entertainment expenses 19,408 28,984
908,197 1,137,024
32a
32b
32c
32d
33 Earnings per share - basic/diluted
31-Dec-18 31-Dec-17
N'000 N'000
Profit/(loss) for the year (N'000) 218,240 141,832
Weighted average number of ordinary shares in issue (N'000) 1,000,000 1,000,000
21.82 14.18 Basic/diluted earnings per share (in kobo per share)
The asset management advisory fee relates to the cost incurred in getting fund management advisory services while asset
custodian fees relates to cost incured on assets management advisory services. United Capital Plc acted as fund
management consultants and advisers while UBA Custodian acted as the asset custodian consultants.
This relates to fines from Financial Reporting Council of Nigeria (FRCN) forfailure to comply with filing and disclosure
requirements on the Financial Statements.
The Asset management advisory fees consist of Asset management advisory fee expenses of N22.3 million (2017: N17.852
million) and Asset custodian fee expenses of N14.7 million (2017: N12.979 million) incurred during the year.
The technical support fee relates to amount payable to MMI Holdings Limited (parent company) for advisory services
rendered to Metropolitan Life Insurance which include product research and competitor analysis, product design,
product specifications, product pricing, system testing and marketing support & actuarial services.
The support staff cost are expenses incurred by the company in respect of outsourced services. The outsourced services
include office drivers, cleaners and other office assistants.
Basic earnings per share is calculated by dividing the profit(loss) attributable to equity holders of the Company by the
weighted average number of ordinary shares in issue during the year, excluding own ordinary shares purchased by the
Company. Diluted earnings per share is computed by dividing the profit/(loss) attributable to equity holders of the
Company by the weighted average number of ordinary shares outstanding after adjusting the effects of all dilutive
ordinary shares.
80
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
34 Employees:
a)
31-Dec-18 31-Dec-17
N500,001-N1,000,000 - 1
N1,000,001-N1,500,000 2 1
N1,500,001-N2,000,000 7 7
N2,000,000-N2,500,000 6 8
N2,500,001-N3,000,000 5 5
N3,000,001-N3,500,000 4 1
N3,500,001-N4,000,000 1 4
N4,000,001-N5,000,000 6 3
N5,000,001-N6,000,000 1 2
N6,000,001-N7,000,000 3 4
N7,000,001-N8,000,000 3 -
N8,000,000 and above 9 10
47 46
b) Breakdown of employee benefit N'000 N'000 N'000 N'000
Operations Marketing Operations Marketing
Staff cost ` 161,279 77,590 171,387 76,633
Pension cost 8,227 4,331 8,041 4,456
169,506 81,921 179,428 81,089
35 Directors' remuneration:
31-Dec-18 31-Dec-17
N'000 N'000
Non-Executive directors' fees and sitting allowances 15,425 14,748
Executive directors salaries 111,883 123,199
Pension costs - defined contribution plan 1,149 998
Share based scheme 5,612 12,687
134,069 151,632
The emoluments of all other directors fell within the following range:
31-Dec-18 31-Dec-17
N'000 N'000
N200,001 - N500,000 - -
N500,001 - N5,000,000 2 2
N5,000,001 - N10,000,000 1 1
N10,000,001 - N20,000,000 - -
N20,000,000- Above 2 2
5 5
31-Dec-18
The number of employees of the Company, other than directors, who received emoluments in the following ranges was:
31-Dec-17
The Company does not make any form of payment to the chairman and as such no separate disclosure was made with
respect to the chairman's allowances.
Remuneration paid to the directors of the Company was as follows:
The staff salaries are split into that of operational and sales marketing staff. The sales marketing staff salaries have been
included as part of the underwriting cost in line with the Company's policy while that of the operations staff were
maintained as part of the Company's management expenses (personnel cost - operations staff).
The executive director's salaries and the managing directors salaries have been included in the directors fees as contained
in note 34 below.
81
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
36 Compliance with laws and regulations
37 Contingent liabilities and commitments
Contingent tax liabilities
38 Related parties
(a) Ultimate parent and parent companies
(b) Key management personnel compensation
31-Dec-18 31-Dec-17
N'000 N'000
Non- executive directors' fees and sitting allowance 15,425 14,748
Salaries and other benefits paid to executive directors 111,883 124,197
Post-employment benefits paid to executive directors 1,149 998
Share based scheme for executive director 5,612 12,687
Salaries of key management personnel other than executive directors 25,356 48,911
159,425 201,541
Staff share schemes
Vesting requirements
Key management personnel includes directors (executive and non executive) and other number of the executive
management of the Company (i.e. the chief financial officer and the chief technical officer). The compensation paid or
payable to key management personnel for employee services is shown below:
The Company operates a cash-settled share based compensation plan for its management staff. The share-based payment
transactions are settled in cash, based on the equity of the parent. The number of shares allocated to each participant is
split into performance units and retention units. This split varies by individual grant. In order for the performance units
to become payable, the MMI Group has to meet certain performance criteria. Vesting conditions are determined for each
participant specifically. The plans vest 3 years after the offer dates.
The Company is controlled by MMI Holdings Limited (incorporated in South Africa), through its subsidiary Metropolitan
International Holdings Pty Limited, which owns approximately 100% of the Company's shares. A number of transactions
were entered into with related parties in the normal cause of the business.
In 2015 FIRS conducted tax audit for the years 2009 to 2012. In the summary of the audit findings received on 14 May
2015, FIRS indicated additional tax liability for N23.935 million in respect of underpaid company income tax. The
Company's liability for income tax emanates from section 16.9.c of CITA and is a minimum tax levied on 20% on the
taxable income of the Company (effective tax charge equals 6%, being a 30% tax rate on 20% of taxable income).
However, a Government Gazette issued in 2012 granted exemption for 10 years from any taxation imposed by CITA on a
variety of FGN securities and bonds and consequently resulting in a dilutive impact on the provision of minimum tax. On
1 June 2015, the Company issued a letter of objection to FIRS based on the failure of FIRS to apply the above detailed
exemptions. FIRS are yet to respond to this letter of objection, and until such a response is received, the board cannot
make a determination on any future course of action. The tax computations for the years 2013 to 2017 have also been
based on the exemptions granted under the 2012 Gazette.
The three(3) South african directors don’t receive any emolument from the company and as such were not included in the
analysis above.
The Company paid a fine of N5.5 million to Financial Reporting Council of Nigeria during the year with respect to errors
noted in the 2016 audited financials statements (2017: N0.6 million to NAICOM on the same account with respect to
errors noted).
The only vesting requirement for retention units is that the employee remains in employment of MMI Group until the
vesting period expires whilst the Vesting of the performance units is dependent on the achievement of the group's
minimum Return on Embedded Value (ROEV) of Nominal GDP + 3% per annum over the vesting period, with 100%
vesting achieved if the ROEV meets or exceeds Nominal GDP + 6% per annum.
82
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
Settlement of the staff share schemes
31-Dec-18 31-Dec-17
N'000 N'000
Cash settled share based expense/liability 18,299 12,688
31-Dec-18 31-Dec-17
No of shares No of shares
Share based plan granted in the year 89,409 193,827
Share based balance at 31 December 89,409 193,827
The carrying amount of liabilities for cash-settled share based payments includes:
31-Dec-18 31-Dec-17
N'000 N'000
Balance, beginning of period 12,688 -
Effect of changes in fair value of share acqusition rights at period end 5,611 -
Share rights granted during the period - 12,688
Balance, end of period 18,299 12,688
(c) Transactions with other related parties
31-Dec-18 31-Dec-17
N'000 N'000
Parent 78,730 98,376
Parent 26,577 34,041
(d) Outstanding balances due to related parties:
31-Dec-18 31-Dec-17
N'000 N'000
Current payables to MMI Holdings 92,824 191,887
Actuarial and technical fees to MMI Holdings (Pty)
Insurance system license fees to MMI Holdings (Pty)
The following balances are outstanding at the end of the reporting period in relation to transactions with related parties.
Relationship
The following transactions occurred with related parties:
In the current financial year MMI group didn't meet its performance criteria. Hence a reduction in the units held in 2018
when compared to 2017 financial year.
Participants will receive in cash the full value of the shares (less PAYE on the full benefit) on the vesting date. The cash
amount to be paid out is computed by multiplying the number of participation units that have vested in a participant by
the fair market value of a share on the vesting date. The details of the cash settled share based scheme is as follows:
83
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
39 Reconciliation of operating profit to cash flow from operating activities Restated
31-Dec-18 31-Dec-17
Cash flows from operating activities: N'000 N'000
Profit / (Loss) before tax 231,084 156,264
Adjustments:
Depreciation charge 50,606 48,200
Software amortization charges 550 851
Impairment on financial assets (535) -
Profit on disposal of equipment (7,228) (2,880)
Unrealized portion net fair value (gains) / Loss
on financial assets
95,548 (136,173)
Interest income (927,012) (1,032,190)
Dividend income (347) (6,346)
Changes in operating assets and liabilities:
(Increase) in reinsurance assets (114,989) (111,092)
Increase / (decrease) in insurance contract
liabilities
53,322 66,251
Increase / (decrease) in investment contract
liabilities
(56,834) 68,942
Decrease in Other receivables 10,609 48,909
(Decrease) in trade payables 233,626 4,671
(Decrease) / Increase in other payables
accruals
(92,765) 172,939
(524,365) (721,653)
Tax paid (13,602) (12,198)
Net cash flow from operating activities (537,967) (733,851)
40 Restatement
(i) Insurance contract liabilities 31-Dec-17 1-Jan-17
N'000 N'000
Amount previously reported 2,293,372 2,158,177
Reclassification to investment contract liabilities (individual savings contracts) (1,034,747) (965,806)
Restated amount (see note 14) 1,258,625 1,192,371
(ii) Investment contract liabilities 31-Dec-17 1-Jan-17
N'000 N'000
Amount previously reported 53,440 53,440
Reclassification from insurance contract liabilities (individual savings contracts) 1,034,747 965,806
Restated amount (see note 15) 1,088,187 1,019,246
Reclassification of individual savings contracts:
The individual savings contracts balance were reclassified from insurance contract liability to investment contract
liability in 2018. Accordingly, the comparative numbers were also reclassified as shown below:
84
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
(iii) Trade payables 31-Dec-17 1-Jan-17
N'000 N'000
Amount previously reported - 3,103
Reclassification from other payables and accurals (other sundry trade payables) 7,774 -
Restated amount (see note 16) 7,774 3,103
(iv) Other payables and accruals 31-Dec-17 1-Jan-17
Financial liabilities N'000 N'000
Amount previously reported 383,198 202,485
Reclassification to trade payables (Operational cost accrual) (7,774) -
Restated amount (see note 17) 375,424 202,485
Reclassification of client deposit from other liabilities to trade payable
(v) Gross premium income 31-Dec-17 1-Jan-17
N'000 N'000
Amount previously reported 2,036,802
Reclassification to profit or loss on investment contracts (53,555)
Restated amount (see note 22) 1,983,247
Reclassification of client deposit from other liabilities to trade payable
(vi) Claims expenses 31-Dec-17
N'000
Amount previously reported 1,535,312
Reclassification to profit or loss on investment contracts (161,337)
Restated amount (see note 24) 1,373,975
Reclassification of client deposit from other liabilities to trade payable
(vii) Changes in insurance contract liabilities 31-Dec-17
N'000
Amount previously reported (63,917)
Reclassification to profit or loss on investment contracts 68,941
Restated amount (see note 14) 5,024
(viii) Investment income 31-Dec-17
N'000
Amount previously reported 1,038,537
Reclassification to profit or loss on investment contracts (196,098)
Restated amount (see note 27 (c) ) 842,439
Reclassification of investment income attributable to investment contract to profit on investment contract
The above relates to reclassification of client deposit from other liabilities to trade payable
Reclassification of client sundry deposit from other payables and accurals to trade payables:
Client sundry deposits were reclassified from other payables and accurals in 2018. Accordingly, the comparative numbers
were also reclassified as shown below:
Reclassification of transactions relating to investment contracts
The net impact of transaction relating to investment contract were reclassified to profit/loss on investment contracts in
2018. Accordingly, the comparative numbers were also reclassified as shown below:
85
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
NOTES TO THE FINANCIAL STATEMENTS
(ix) Profit/(loss) on investment contracts 31-Dec-17
N'000
Amount previously reported -
Reclassification from investment income 196,098
Reclassification from gross premium income 53,555
Reclassification from changes in insurance contract liabilities (68,941)
Reclassification from claims expenses (161,337)
Restated amount (see note 28) 19,375
(x) Other operating income 31-Dec-17
N'000
Amount previously reported 7,987
Reclassification from management expenses 1,264
Restated amount (see note 30) 9,251
31-Dec-17
(xi) Management expenses N'000
Amount previously reported 1,135,760
Reclassification to other operating income 1,264
Restated amount (see note 32) 1,137,024
Reclassification of net foreign exchange gain from management expenses to other operating income.
Reclassification of net foreign exchange gain from management expenses to other operating income.
Reclassification of investment income attributable to investment contract and interest charged on investment contract to
profit on investment contract
Reclassification of net foreign exchange gain from management expenses to other operating income.
There was a reclassification net foreign exchange gain from management expenses to other operating income in 2018.
Accordingly, the comparative numbers were also reclassified as shown below:
86
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
OTHER NATIONAL DISCLOSURES
STATEMENT OF VALUE ADDED
31-Dec-18 % 31-Dec-17 %
N'000 N'000
Net premium income 1,840,507 285 1,637,982 278
Investment income 750,012 116 842,439 144
Other income (100,127) (15) 145,424 25
Claims incurred, commissions paid and operating expenses (local) (1,738,386) (270) (1,933,605) (329)
Operating Expenses (foreign) (105,307) (16) (103,210) (18)
Value added 646,699 100 589,030 100
Applied to pay
Employee benefit expense 364,459 56 383,715 66
Government taxes 12,844 2 14,432 2
Retained in the business:
Depreciation of property and equipment 50,606 8 48,200 8
Amortisation of intangible assets 550 0 851 0
Profit/(loss) retained in the business 218,240 34 141,832 23
Value added 646,699 100 589,030 100
87
METROPOLITAN LIFE INSURANCE NIGERIA LIMITED
OTHER NATIONAL DISCLOSURES
FIVE YEAR FINANCIAL SUMMARY
STATEMENT OF FINANCIAL POSITION
31-Dec-18 31-Dec-17 31-Dec-16 31-Dec-15 31-Dec-14
N'000 N'000 N'000 N'000 N'000
Assets
Cash and cash equivalents 2,306,270 779,518 1,183,502 2,430,532 1,650,318
Financial assets at amortised cost 64,976 58,343 - - -
Financial assets at fair value through profit or
loss
4,010,451 5,257,619 4,489,401 3,751,089 3,811,274
Trade receivable - - - 737 9,417
Other receivables 59,511 70,120 119,029 35,163 39,666
Reinsurance assets 446,154 331,166 220,074 261,251 217,295
Property and equipment 95,580 135,664 162,702 69,759 57,698
Intangible assets 289 478 1,329 2,205 3,081
Statutory deposit 200,000 200,000 200,000 200,000 200,000
Total assets 7,183,231 6,832,908 6,376,037 6,750,736 5,988,749
LIABILITIES
Insurance contract liabilities 1,311,947 1,258,625 2,158,177 2,452,731 2,406,243
Investment contract liabilities 1,031,352 1,088,187 53,440 53,440 53,440
Trade payables 241,400 7,774 3,103 1,762 2,840
Other payables and accruals 282,659 375,424 202,485 194,243 157,717
Current income tax liabilities 17,212 18,015 15,781 24,542 19,380
Total liabilities 2,884,570 2,748,024 2,432,986 2,726,718 2,639,620
Net asset 4,298,661 4,084,884 3,943,051 4,024,018 3,349,129
EQUITY
Share capital 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000
Share Premium 2,494,862 2,494,862 2,494,862 2,494,862 2,494,862
Contingency reserves 294,898 272,243 251,645 231,280 163,791
Retained Earnings 508,901 317,778 196,544 297,876 (309,524)
Shareholder's fund 4,298,661 4,084,883 3,943,051 4,024,018 3,349,129
STATEMENT OF COMPREHENSIVE INCOME
31-Dec-18 31-Dec-17 31-Dec-16 31-Dec-15 31-Dec-14
N'000 N'000 N'000 N'000 N'000
Net premium income 1,840,507 1,637,982 1,712,068 1,844,658 1,618,408
Profit/(loss) before tax 231,084 156,264 (68,783) 695,901 255,008
Taxation (12,844) (14,432) (12,185) (21,012) (15,869)
Profit/(loss) after tax 218,240 141,833 (80,968) 674,889 239,139
88