ANNUAL REPORT 2017 · Next to Omantel new Branch, Al Hajer Street, Al Amerat, Sultanate of Oman...

ANNUAL REPORT 2017

Oman Qatar Insurance Company SAOG

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His Majesty Sultan Qaboos Bin Said

OQIC - Corporate OfficePostal Code 112, Ruwi, P.O. Box 3660, Sultanate of Oman

Tel: +968 24765333, Fax no: +968 24765399

Email: [email protected]

CBD BranchBank Street, Ruwi

Tel: +968 24765222, 24765202, Fax. No: +968 24765299

Al Khoudh BranchBuilding No. 312, Block no. 331, Street Name: Commercial Khoudh

Tel: +968 24765224, Fax. No: +968 24765234

Salalah BranchAlrazikh Building, Shop # 5 & 6, Salalah Central Market

Tel: +968 23298527, 90690855

Oman Avenues Mall BranchOman Avenues Mall, Shop No 12- A (Basement),

Al Sultan Qaboos street, Muscat, Sultanate of Oman

Tel: +968 24524544, +968 24765235, 24592211

Fax. No: +986 24765239

Al Amerat BranchBuilding Number: 904, Shop no: 1, Block no: 415, Way No: 1522,

Next to Omantel new Branch, Al Hajer Street,

Al Amerat, Sultanate of Oman

Tel: +968 24882713

Sohar Branch Al Wakeba, Sohar, Sultanate of Oman, Way No: 1522

Tel: +968 26844194, 92878097, Fax. No: +986 26845807

City Centre Qurum Branch2nd Floor, Opp. Carrefour, Qurum City Centre, Sultanate of Oman

Tel: +968 24470920, 9122 3838, 9722 8455

Website: www.oqic.com

Call Center: 8006 7421

3

Board of Directors ................................................................................................................4

Chairman’s Report ................................................................................................................6

Management Discussion and Analysis Report Year -2017 ..................................................8

Annual Corporate Governance Report 2017 ......................................................................13

Report of the Auditors on Financial Statements ...............................................................21

CONTENTS

BOARD OF DIRECTORS

5

H.E. Khalaf Ahmed Al MannaiChairman, Board of Director

Mr. Musallam Mahad Al Qatan Deputy Chairman, Board of Director

Member, Board Investment Committee

Member, Board Nomination

and Remuneration Committee

Mr. Tariq Marzooq S A Al-ShamlanChairman, Board Audit Committee

Mr. Ali Saleh Al FadalaChairman, Board Nomination

and Remuneration Committee

Mr. Salem Khalaf A Al-MannaiMember, Board Investment Committee

Member, Board Nomination and

Remuneration Committee

Mr. Omar Al MarwaniChairman, Board Investment Committee

Member, Board Audit Committee

Mr. Said Mobarak S Al-MohannadiMember, Board Audit Committee

Member, Board Nomination and

Remuneration Committee

CHAIRMAN’S REPORT

7

Dear Shareholders,I have pleasure in presenting, on behalf of the Board, the

audited Financial Statements of Oman Qatar Insurance

Company S.A.O.G. (“OQIC” the company) for the 12

months period ended 31st December, 2017.

Business EnvironmentThe company has delivered strong performance in the

year 2017 despite sluggish economic environment

continued during the current year. Company remains

focused in bottom line driven growth and providing

excellent customer services. Key highlights of the

company performance are as below:

Performance of the company in the year 2017 As company was focused on bottom line driven

growth, the Gross Written Premium grown in FY2017

by 9% compared to FY2016, GWP achieved RO

23.38 million as against RO 21.38 million in FY2016.

Net Underwriting Income has increased by 58%(FY2017: RO 2.65 MN; FY2016 RO 1.68MN).

Investmentincomeincreasedby68%anditstoodasincome of RO 1165K (net of impairment of RO 515K)

for the year 2017 as against investment income of

RO 695K for the year 2016.

Net Profit after tax increased by 161% for theyear 2017 and it registered as RO 1.87 Million in

comparison to RO 719K for the year 2016.

Shareholders Returns Basic Earnings per share (EPS) increased to 24

Baizas per equity share for the year 2017 from 12

Baizas for the year 2016 on weighted average shares

method.

NetAssetValue(NAV)persharestands150Baizasas on 31st December 2017 on 100 Million equity

shares.

Outlook Overall Omani economy will remain challenging

in the year 2018 and company will face very stiffcompetition from its peers, however, company will

remain focus on bottom line driven growth with

prudent risk management and overall improvement

in customer services.

Company’sonline retailbusiness isgrowing rapidlyand further focus will be there to enhance this channel.

We will open three new branches to enhance direct

business in retail segment.

In Life andMedical Businesswe see huge growthopportunities and we will continue to develop this

portfolio inasignificantwayandwillaspiretobealeading player in this segment in coming future.

ManaginglargeEnergyandEngineeringriskareourspecialty and we will continue to strengthen this

portfolio.

AppreciationThe singular wisdom and vision of His Majesty Sultan

Qaboos Bin Said has guided the Sultanate on its path of

progress. We remain pledged to supporting the economic

development of the Sultanate and to providing the

benefitsofinsurancetoallsectorsoftheeconomy.

We thank the Ministry of Commerce and Industry and

the Capital Market Authority for their continued guidance

and support. We also wish to record our gratitude to our

clients for their valuable support, to the Management and

tothestafffortheirdedicatedefforts.

May God Bless You All.

H.E. Khalaf Ahmed Al-Mannai Chairman

MANAGEMENT

DISCUSSIONANDANALYSISREPORT YEAR -2017

9

On behalf of the management of the OQIC’s, I am pleased

to present a report on the performance and future outlook

of the OQIC’s for the year ended 31st December, 2017.

OQIC’s Vision of the future is tomaintain our drive forgrowthandexcellencethroughinnovation,diversificationand responsible leadership. By means of existing and

new strategic alliance and partnerships we aim to

createtheoptimumframeworkforcontinuousprofitabledevelopment.

FINANCIAL PERFORMANCETheYear2017witnessedgoodfinancialresultsshowinggrowth in revenue and the net profit achieved by thecompany. The key financial results for year 2017 areillustrated in the following table:

Details2017 2016 Change

RO RO %

Gross written premium

23,379,184

21,381,481 9%Net insurance income

2,653,846

1,680,812 58%

Other Income

234,807

149,823 57%

Investment income

1,165,468

694,710 68%

Total Income

4,054,121

2,525,345 61%General and admin-

istrative expenses

(1,936,951)

(1,777,367) 9%

Net profit before tax

2,117,170

747,978 183%Income tax expense (244,825) (29,273) 736%

Net profit after tax

1,872,345

718,705 161%

GROSS WRITTEN PREMIUMOQIC’s Gross Written Premium grown in FY 2017 by 9%

compared to FY 2016, and GWP stands at RO 23.38

million as against RO 21.38 million in FY2 016.

25.00

20.00

15.00FY2014

19.49

FY2015

19.96

FY2016

21.38

FY2017

23.38

GWP (In million)

Line wise GWP for FY2017:Retail

31%

Marine &

Aviation

3%

Energy

13%

WCA

0%

Fire &

Engineering

14%

MISC

6%

Medical

& Life

33%

Line wise GWP for FY2016:

Retail

39%

Marine &

Aviation

3%

Energy

24%

WCA

1%

Fire &

Engineering

14%

MISC

13%

Medical & Life

6%

10

NET INSURANCE INCOMENet Insurance Income for the FY 2017 is RO. 2.65 million

which is up by 58% in comparison to the FY 2016 by

prudentunderwritingandrightriskselectiondespitestiffcompetition from our peers.

OPERATING INCOMEOperating Income for the FY2017 is RO. 746K which is up

by 938% in comparison to the FY2016 RO. 72K.

INVESTEMENT INCOMEWe made Investment income of RO. 1.17 million in the

FY2017 as against in FY2016 of OMR 695K which is

above by 68% over the previous year.

1,500

1,000

500

-

(500)FY2014

1,375

Th

ou

san

ds

FY2015

(157)

FY2016

695

FY2017

1,165

Investment Income

Bifurcation of Investment Income

Investment Income

YTD Dec-17

YTD Dec-16

%

Change

Interest on Bonds

209,951

228,837 (8)%

Interest on Cash

& Deposits

375,002

169,590 121%

Dividend income 345,080 388,352 (11)%

ProfitfromSale of Investments

750,004

112,759 565%

Impairment

(losses)/Gain

(514,569)

(204,829) 151%

Investment Income

1,165,468 694,709 68%

Return Assessment on Investment

DurationPortfolio

ReturnMSM30

IndexOut-

performance

1 month 2.49% (0.20)% 2.69%

3 Months 0.47% (0.74)% 1.21%

6 Months 2.57% (0.37)% 2.94%

9 Months (7.18)% (8.13)% 0.95%

12 Months (8.28)% (11.82)% 3.54%

From Inception 36.45% (10.70)% 47.15%

NET PROFIT WeachievedaNetprofitfortheFY2017ofRO1.87millionand increase of 161% over FY 2016. This is due to the

increaseinprofitabilityinRetail,Property&Commerciallines of business.

3,000

2,000

1,000

-

(1,000)

(2,000)FY2014

1,014

Th

ou

san

ds

FY2015

(972)

FY2016

719

FY2017

1,872

Net Profit

4,000

2,000

-FY2014

1,552

Th

ou

san

ds

FY2015

982

FY2016

1,681

FY2017

2,654

Income from underwriting

U/WIncome2654K

OtherIncome

(Policy Fee& Comm)

234K

G & A Exp2142K

OperatingIncome746K

11

COMBINED RATIOCombined ratio is a main tool for measurement of the

performance of insurance company. If combined ratio is

healthy (less than 100%) it means company generates

money from insurance activities. Below chart show

OQIC’s performance for last four years:

120

110

100

90

80

FY2014

104

FY2015

109

FY2016

105

FY2017

91

Combined Ratio

CASH FLOW & INVESTMENT Cash and cash equivalent as on 31st December,2017

is RO. 14.31 million compared to RO. 8.81 million in

December 2016 an increase of 62%. Total Investment

has declined by (8%) and stands at RO. 11.76 million in

comparison to the December 2016 at RO. 12.72 Million.

Wehavemaintainedadequatecashflow&liquidityduringthe FY2017 in order to meet payments to claimants,

settlements to the garages, payments to local & foreign

reinsurance companies and day to day expenses

includingstaffpayrolletc.

20,000

15,000

10,000

5,000

-

8,189

Th

ou

san

ds

Cash & Bank

8,254

Investment

8,807

14,309 13,03613,124

12,72511,050

FY2014 FY2015 FY2016 FY2017

HUMAN RESOURCESAs on 31st December, 2017, the OQIC’s had 64

employees and out of this we have 43 Omani national.

The Omanisation stands at 67.2%

OUTLOOK VISION AND FUTURE STRATEGYOverall Omani economy will remain challenging in the

year2018andcompanywill facevery stiffcompetitionfrom its peers, however, company will remain focus for

healthy top line and bottom line growth by adopting

following strategy in two broad areas:

Operation

Wewillbefocusondevelopmentofmoreprofitabledirect retail business through branches and online

platform.

Focus will be on development of life and medicalportfolio in the country to take advantage of

compulsory health insurance for all nationalities in

Oman.

We will be committed to all round developmentin customer services level, improvements in

corporate governance, bringing more transparency

& accountability and enhancing efficiency by usingtechnology.

Regular monitoring of business performance andtaking necessary corrective steps for improvement in

performance.

Overallfocuswillbeinoperationsidetohavebottomline driven growth.

Investment Goingforward,welooktoinvestincompanieswho

can withstand the lower growth environment with

good dividend yield. We favour businesses driven

by strong domestic demand and which are not

correlated to the oil price.

We will use any improvement in interest rate inmarket for placing additional fund in fixed depositand sovereign bonds.

The success of OQIC has resulted with continued

support and guidance from all our directors, placing faith

and providing opportunities by our valued customers and

service providers and continued hard work put throughout

theyearbyouralldedicatedstaff.Iplacedmygratitudeand thanks to all of them.

Best Regards,

Navin KumarChiefExecutiveOfficer

ANNUAL CORPORATEGOVERNANCE REPORT 2017

14

INTRODUCTIONOman Qatar Insurance Company SAOG (OQIC), a

subsidiary of Qatar Insurance Company S.A.Q, was

established in 2004 as a closely held joint stock company

registered and incorporated in the Sultanate of Oman.

The Company’s shares were listed on the Muscat

Securities Market (MSM) in October 2017 after a

successful IPO “Initial Public Offering”. As an OmaniPublic Joint Stock Company (SAOG), OQIC is subjected

to the 2015 Code of Corporate Governance for Publicly

Held Joint Stock Companies published by the Oman’s

Capital Markets Authority (CMA) (or the “New Code”).

Following its conversion to an SAOG, the Company’s

Directors have committed to review existing policies and

adopt any new manuals as may be required by the “New

Code” within a period of one year from the conversion.

The governance and internal control system, ranging

from its constitutional documents, policies, structure

and any subsequent amendments will ensure that the

company continuously complies with the requirements

and principles of governance best practice.

The position of the company regarding adherence to the

2015 Code of Governance is outlined in the following

paragraphs:

1. CORPORATE PHILOSOPHYThe Board of Directors of Oman Qatar Insurance Company

(“OQIC”) ensures that the governance structure actively

identifies,respondstoandcommunicatesthosematerialissues that have an impact on the Company’s ability to

create value. The Board acknowledges its responsibility

to ensure the integrity of the annual governance reporting

process and believes that this report addresses all

material issues appropriately and fairly.

The Board is committed to the highest standards of

business integrity, ethical values and governance. It

recognizes OQIC’s responsibility to conduct its affairswith prudence, transparency, accountability, fairness and

social responsibility, thereby ensuring its sustainability

while safeguarding the interests of all its stakeholders.

The Board also acknowledges the relationship between

good governance on the one hand and risk management

practices, the achievement of the Company’s strategic

objectives and performance on the other. OQIC

subscribes to a governance system where, in particular,

ethics and integrity set the standards for compliance.

It continuously reviews andmodifies its structures andprocessestofacilitateeffectiveleadership,sustainabilityand corporate citizenship in order to support the

Company’sstrategyandreflectnationalandinternationalcorporate governance standards, developments and

best practices in all the territories it operates.

The Board promotes and supports high standards of

corporate governance and endorses to the principles

of the “New Code” as prescribed by the regulator, the

CMAaswellastheOmanCommercialLaw.TheBoardis committed to the full compliance of the “New Code”

and believes its principles are embedded in the internal

controls, policies and procedures governing corporate

conduct within the Company. The OQIC Board’s

commitment will continue to strengthen the principles

and spirit envisioned in the “New Code” in its operations,

to the extent that is applicable and appropriate.

2. BOARD OF DIRECTORSOQIC has put in place an internal governance structure

withdefinedrolesandresponsibilitiesofeveryconstituentof the system. The Company’s shareholders appoint the

Board of Directors, which in turn governs the Company.

The Board has established several committees to

dischargeitsresponsibilitiesinaneffectivemanner.TheBoard is assisted by various Board Committees, namely

the Audit Risk & Compliance Committee; Investment

Committee; Nomination and Remuneration Committee.

The role and responsibilities of the Board, its committees

and the Executive Management are set out later in this

report.

2.1 Board CompositionAs per the Articles approved at the EGM held on 6th July,

2017 the Company is managed by a Board comprising

7 members, appointed from amongst the Shareholders

and non-Shareholders, provided that the Shareholder

candidate owns at least 10,000 Shares and has been,

elected at the EGM of the Company in accordance with

the provisions of theCommercial Company Law (CCL)and the Articles. The Company had its OGM within two

months from the date of listing of its shares on MSM for

reconstituting the Board to ensure that it complies with

the applicable Code, and the Articles.

It’s the Company’s intention to have a Board that

complieswithapplicableCMA,InsuranceLawandCCLrequirements from the date of re-election, including the

number of Independent Directors and Non-Executive

Directors that represents the interests of all Shareholders,

includingthosewhosubscribeforOfferShares.

Asatthe2017financialyear-end,thecompositionsof7members were as follows:

4nonindependentnon-executives; 3independentnon-executives.

Particulars of the Board members and their capacities,

categorized as executive, non-executive, independent

and non-independent, are set out below table 2.2.

15

Director Executive / Independent

Represented Institution/ Personal Capacity

Member/ Chairman in other Boards (not OQIC)

Changes

H.E. Khalaf Ahmed Al Mannai

( Chairman)

Non-Executive /

Non-Independent

Qatar Insurance

Company

4

Musallam Mahad Al Qatan

(ViceChairman)Non-Executive /

Independent

Personal Capacity 1

Ali Saleh Al Fadala

Non-Executive /

Non-Independent

Personal Capacity

11

Omar Al Marwani

Non-Executive /

Non-Independent

Al Hosn Investment

Company 5

Mr. Sunil K. Talwar

Non-Executive /

Non-Independent Personal Capacity 2

Retired December

2017

Mr. Tariq Marzooq S A

Al-Shamlan

Non-Executive /

Independent

Personal Capacity 0 Appointed December

2017

Mr. Abduallah Said

Mohammed Al Eida

Non-Executive /

Non-Independent

Personal Capacity

3

Retired December

2017

Mr. Salem Khalaf A Al-Mannai Non-Executive /

Non-Independent

Personal Capacity

1

Appointed December

2017

Mr. Said Mobarak S

Al-Mohannadi

Non-Executive /

Independent

Personal Capacity 2 Appointed December

2017

* Information as at 31/12/ 2017.

2.2 Board Nomination ProcessThetermofofficeofamemberoftheBoardisforaperiodof three years. The Directors shall be elected by direct

secret ballot by the Shareholders of the Company. A vote

is equal to the number of Shares held. A Shareholder

shall have the right to use the entirety of their votes in

support of one nominee or divide their Shares among

other nominees of his choice through the voting card. The

BoardwillobservetherestrictionsstipulatedbytheCCL,theCode,theInsuranceLawanditsrelatedregulationsupon the election of the Board.

OQIC Board of Directors*

16

Attendance of 2017 Board and Committee meetings

Board Director

Board Meeting

Audit Committee

Investment Committee

EGM OGM

Plan/held 6/6 * Plan/held 4/4 Plan/held 4/5 Plan/held 1/1 Plan/held

2/2

H.E. Khalaf Ahmed Al Mannai

(Chairman)6/6 - - 1/0 2/0

Musallam Mahad Al Qatan

(Deputy Chairman) 6/6 - 0/0 1/1 2/2

Mr. Abduallah Said Mohammed

Al Eida5/3 - - 0/0 0/0

Ali Saleh Al Fadala 6/6 3/3 - 1/1 2/2

Omar Al Marwani 6/4 4/3 4/4 1/0 2/0

Mr. Sunil K. Talwar 5/5 3/3 4/4 1/0 2/0

*Mr. Tariq Marzooq S A Al-Shamlan 1/0 1/1 - 0/0 1/0

*Mr. Salem Khalaf A Al-Mannai 1/0 - 1/1 0/0 1/0

*Mr. Said Mobarak S Al-Mohannadi 1/0 1/1 - 0/0 1/0

The 2017 board meetings were held on 9th February, 1st and 21st June, 3rd August, 6th November and 14th December.

The Nomination and Remuneration Committees did not meet in the year as they were formed on 13th December 2017.

* These Board Directors assumed their responsibilities in December 2017 and therefore were not eligible to attend earlier

meetings of the year.

2.3 Board MeetingsAs per the “New Code” the Board is expected to meet

at least 4 times in a year. During the year under review,

the Board held six (6) meetings attended by all members

of the Board personally or through their representatives.

According to governance best practices, if a Member of

the Board fails to attend three consecutive meetings or

four non- consecutive meetings without an acceptable

excuse, he is considered as having resigned.

Article 21 of the revised Articles of Association (AOA) of

the Company states that the Board of Directors will meet

at the invitation of its Chairman. In case the Chairman

is unable or unwilling to convene a meeting, then the

meeting shall be convened by any two Board members.

All meetings for the current year were at the invitation of

the Chairman of the Board. A letter of invitation, along

with the agenda of the meeting, were sent to all Board

members a week in advance. This allows any member of

the Board to add any other items on the agenda.

17

3. COMMITTEES OF THE BOARDThe Board has established a number of permanent

standing committees with specific responsibilities,whicharedefinedintheirrespectiveTermsofReference,to assist the Board in discharging its duties and

responsibilities. The ultimate responsibility resides at all

times with the Board and, as such, it does not abdicate

this responsibility to the committees.

There is full disclosure, transparency and reporting from

these committees to the Board. The chairpersons of the

committees attend the AGM and are available to respond

to any shareholder questions. The respective committee

members are all satisfied that they have fulfilled theirresponsibilities as set out in their respective Terms of

Reference as at 31 December 2017.

In addition to the standing Committees, the Board of

Directors may form any other Committees as and when

requiredtocarryoutspecifictasksorfunctions.

Presently, the Board has set up the following Committees:

InvestmentCommittee; Audit,RiskandComplianceCommitteeand NominationsandRemunerationCommittee.

A) Investment Committee: The Investment Committee comprises of following

members until12th December, 2017:

Mr.SunilK.Talwar,Chairman Mr.OmarAlMarwani,Member

The Investment Committee comprises of following

members from 13th December, 2017:

Mr.MusallamBinMahadBinAliQatan,Member Mr.OmarAlMarwani,Member Mr.SalemKhalafAAl-Mannai,Member

The Committee has decision-making and advisory

functions for all investment related matters. It guides the

management for its investment function and reviews the

investment transactions on regular basis.

The Investment Committee of the Board will perform the

following functions;

i) Frames the Investment Policy of the Company in

accordance with its mandate from the Board to

develop an investment strategy for its dealings in the

financialmarkets.ii) Sets limits to the powers of management in respect

of investment activities and takes the necessary

decisions if these limits are exceeded.

iii) Monitors the management of portfolio securities of

the Company in order to achieve the best possible

returns.

iv) Discusses potential investment initiatives in respect

of surplus funds and makes recommendations to the

Board on the potential opportunities for investment

partnerships.

v) Reports to the Board about the activities of the

Committee and makes recommendations on issues

that need approval of the Board.

B) Audit, Risk and Compliance Committee:The Company has established adequate internal control

systems and audit procedures. The Board oversees

the same through its Audit Committee comprising of

following members till 12th December, 2017:

Mr.OmarAbdulAzizAlMarwani,AuditCommitteeMember

Mr.AliSalehAlFadala,AuditCommitteeMember Mr.SunilK.Talwar,AuditCommitteeMember

New Audit Committee comprising of following members

from 13th December, 2017:

Mr.TariqMarzooqSAAl-Shamlan–Chairman Mr.SaidMobarakSAl-Mohannadi–Member Mr.OmerAbdulazizHAAl-Marwani–Member

The Audit, Risk and Compliance Committee is committed

to undertake the following tasks:

i) Make necessary recommendation to the Board

on appointment of external auditors; discuss their

reports & comments and take necessary action.

ii) Appointment of internal auditors, approve internal

audit plans and strategies, discuss periodic reports

and issue necessary guidance and directions.

iii) Adoption of internal control systems to ensure

compliance with laws and regulations governing the

activities of the Company including but not limited

to law related to anti-money laundering and counter

terroristfinancing.iv) Approve the risk management framework and

discuss periodic reports in accordance with the

established framework for the Company. To review

and approve overall risk retention policy for the

Company including maximum limits for insurance

risks accepted and the maximum retention limits.

v) Approve rules, regulations, systems and policies to

ensureimplementationofactionplansefficientlyandeffectivelyinlinewithlocalrequirementsandglobalstandards, as per the directives of the Board.

vi) Submit its report to the Board on internal audit,

corporate governance, compliance and risk

management reviewed during the year and submit its

opinion on the matters reviewed.

C) Nomination and Remuneration Committee:Subject to the provisions of the applicable rules of

remuneration and sitting fees for Directors of public joint

stock companies, the committee shall exert its effortsto assist the Company in formulating clear, credible

18

4. SENIOR MANAGEMENTDetails of the current senior management of the Company are set out in the table below:

Name Designation Nationality Academic qualificationYears of service in the Company

Total Experience (in years)

Navin Kumar Chief Executive

OfficerIndian B.Com, ACA 4 19

CVSatishKumar UnderwritingManager - P&C,

Marine & Energy

Indian Master of Financial

Management, Fellow of

the Insurance Institute of

India

7 23

Arun Kumar S Business

Development

Manager - P&C,

Marine & Energy

Indian M.Com, Fellow of the

Insurance Institute of India

5 22

EdwinViegas Business

Development

Manager-Life&Medical

Indian Fellow,LifeManagementInstitute-LOMA,USA

2 28

Mohammed Abdel Sabour Claims Manager -

Motor

Egyptian Bachelor of Automotive

Mechanical Engineering

2 11

Hamed Qasim Zayed Al

Musalmi

Retail Manager Omani Diploma in Insurance 2 14

Sushil Jain Finance Manager Indian B.Com, FCA 1 14

Omar Bakhit Ali Al Shanfari Relationship

Manager- Govt.

& HR

Omani Higher Diploma 6 18

and accessible policies to inform shareholders about

Directors’ and executives’ remuneration. However,

additional performance based criteria have to be used

to determine the bonus and remunerations of the chief

executiveofficerandseniorexecutivemanagement.Thecommittee shall submit to the Board an annual plan of

action.

The Nomination and Remuneration Committee has been

recently appointed and comprises of following members:

Mr.MusallamBinMahadBinAliQatan,Member Mr.AliSalehAlFadala,Member

Mr.SalemKhalafAAl-Mannai,Member Mr.SaidMobarakSAl-Mohannadi,Member

The Nomination and Remuneration Committee is

committed to undertake the following tasks:

Assist the Company in formulating clear, credible

and accessible policies to inform shareholders about

Directors’ and Executives’ remuneration.

Determination of bonus and remunerations of the Chief

ExecutiveOfficerandSeniorExecutivemanagement.Thecommittee shall submit to the Board an annual plan of

action.

19

5. REMUNERATIONThe remuneration approach of the Company is an integral

part of the governance and incentive structure overseen

by the Board. The aim is to enhance performance,

encourage acceptable risk-taking behaviour and reinforce

the proper risk culture.

The General Assembly determines the Directors’

remuneration based on the recommendations of the

Board.

Board Sitting Fees & RemunerationThe Company paid a total amount of RO 32,400 for the

year 2017 to its Board of Directors towards the sitting fees

for the meetings attended by them.

Other than above Board sitting fees, Board remuneration

of RO 17,600 provision has been made in books of

accounts pertaining to the Financial Year 2017 (Year 2016

RO 31,000) which is subject to approval of Annual General

Assembly to be held in March 21st 2018.

Executive Management RemunerationThe Company paid a total amount of RO 64,122 for the

year 2017 to its Executive management.

The performance based bonuses and incentives for

Executive Management are undertaken through the

Corporate Performance Management Program (PMP) tool

which definesmanagement objectives at the beginningof the financial year. Annual appraisals are, thereafterundertaken to conclude on the Management’s yearly

performance. Bonus or incentives are subsequently

awarded to Management and employees.

6. RISK MANAGEMENT The ERM framework has been developed and integrated

into the management of the OQIC. The framework is

designed to assess, control, and monitor risks from all

sources for the purpose of increasing short and long-term

value to OQIC stakeholders.

OQIC’s enterprise risk management cycle comprises:

Risk identification and assessment. Each riskidentifiedmusthaveanownerresponsibleforensuringthattheriskiseffectivelymonitoredandmanaged.Inaddition, the inter-relationship and correlation of risks

is also assessed at OQIC level through simulation and

stress testing;

Riskmeasurement; Risk management, including through appropriate

limits and contingency planning;

Risk monitoring, including through key controlsand risk indicators, to ensure that business issues

are identified and addressed as appropriate bymanagement; and

Risk reporting. Risk reports are presented to Risk

Committee, Audit Risk and Compliance Committees,

Risk Committee and entire Board on a quarterly basis.

These reports identify risk issues and responses, as

well as providing a full update on the status of the risk

management framework and key mitigation actions.

The key risk factors affecting OQIC’s businessobjectives are insurance risks, including underwriting

risk, claims management risk, pricing risks and

product risk.

7. INTERNAL AUDIT AND COMPLIANCE FUNCTIONS

7.1 Internal Audit The Internal Auditor carries an independent review of

the internal control and governance systems reporting

on the existence, effectiveness and/or weaknesses ofsuch systems covering risk management, system for

maintaining and safeguarding assets and financials ofOQIC.Healsoreviewstheeffectivenessofthecompliancemachinery and functions as an internal control tool of

Management by providing assurance to the Board of the

existence of sound internal control systems.

7.2 Compliance OQIC considers compliance with applicable laws,

industry regulations, codes and its own ethical

standards and internal policies to be an integral part

of doing business. The Compliance Officer facilitatesthe management of compliance through the analysis of

statutory and regulatory requirements, and monitoring the

implementation and execution thereof.

8. NON COMPLIANCESNo penalties have been levied on the company by MSM

or CMA or any other regulatory authority during the past

three years

9. COMMUNICATION WITH SHAREHOLDERS AND INVESTORSThe Board is committed to ensure that all material

information relating to the company’s operations is

regularly communicated to its stakeholders and investors.

All material information relating to the company, its

products,itsoperationsandannualandquarterlyfinancialstatements are posted on the company’s website. The

company’s web-site address is www.oqic.com

The quarterly, half-yearly, and annual results of operations

of the company are published in leading Arabic and English

newspapers in the Sultanate of Oman. After completion

of the statutory audit, the annual report and summary

financialstatementsaresentbyposttoallshareholdersalong with the notice of the forthcoming Annual General

Meeting of the company.

20

10. MARKET PRICE DATA

10.1 Company share price movement during 2017

Month

OQIC MSM 30 IndexHigh Price

Low Price High Low

October,

17.164 .149 5,010.860 4,978.780

November,

17.154 .145 5,112.340 5,101.770

December,

17.150 .147 5,099.430 5,051.290

10.2 Distribution of shareholding

Name of shareholders Number of shares

% of shares

Qatar Insurance

Company S.A.Q.

52,498,500 52.499%

Al Hosn Investment

Company SAOC

22,500,000 22.500%

Others less than 10% 25,001,500 25.001%

Total 100,000,000 100.000%

11. CORPORATE GOVERNANCE TRANSITIONAL ARRANGEMENTSFollowing OQICs conversion to an SAOG, the Company’s

board intends, within a period of one year from such

conversion, to review and update its existing policies and

manuals and adopt any new manuals as may be required

by the CMA. Furthermore, the Company is in the process

of ensuring its Governance policies, manuals and

procedures including its internal regulations are approved

by its Board of Directors and adopted.

12. PROFESSIONAL PROFILE OF THE STATUTORY AUDITORSThe shareholders of the Company appointed Ernst &

YoungLLCastheCompany’sauditorsfortheyear2017.EY is a global leader in assurance, tax, transaction and

advisory services. EY is committed to doing its part in

building a better working world. The insights and quality

serviceswhichEYdelivershelpbuildtrustandconfidencein the capital markets and in economies the world over.

The MENA practice of EY has been operating in the region

since 1923 and employs over 6,700 professionals. EY

has been operating in Oman since 1974 and is a leading

professionalservicesfirminthecountry.EYMENAformspart of EY’s EMEIA practice, with over 4,500 partners

and approximately 1,06,079 professionals. Globally,

EY operates in more than 150 countries and employs

256,500professionalsin728offices.Pleasevisitey.comfor more information about EY.

Ernst&YoungLLCinOmanisaccreditedbytheCapitalMarket Authority (CMA) to audit joint stock companies

(SAOGs). The details of the professional fees paid or

payable to auditors for audit services during the year

2017 are set out below:

AuditoffinancialstatementoftheCompanyfortheperiod ended 31 March 2017 - RO 6,500.

AuditoffinancialstatementoftheCompanyfortheperiod ended 31 July 2017 - RO 10,000 (Note: This

amount has been recovered by the Company from its

shareholder’s as IPO related cost).

AuditoffinancialstatementoftheCompanyfortheyear ended 31 December 2017 - RO 10,500.

13. Acknowledgement by the Management

The management of Oman Qatar Insurance Company

SAOG.herebyconfirmthat: Thefinancialstatementarepreparedandpresented

in accordance with the International Financial

Reporting Standards.

InternalControl systemof the company is efficientand adequate and complies with the internal rules

and regulation of the company.

There are no material items, which will affect thecompany’s ability to continue its operations in the

comingfinancialyears.

14. CONCLUSIONThe Company is fully committed to the adherence of the

requirements and principles of Corporate Governance as

laid down in the rules and regulations, the “New Code”.

Going forward, the Company will further strive to achieve

and implement the highest possible level of Corporate

Governance culture in line with global standards.

For Oman Qatar Insurance Company SAOG

ChiefExecutiveOfficer

For and Behalf of Board of Directors

Board Member

FINANCIALSTATEMENTS31 DECEMBER 2017

22

Contents Pages

Independent auditor’s report ...................................................................................... 23 - 27

Statementoffinancialposition ...........................................................................................28

Statementofprofitorlossandothercomprehensiveincome ...........................................29

Statement of changes in equity ..........................................................................................30

Statementofcashflows .....................................................................................................31

Notestothefinancialstatements ............................................................................... 32 - 69

28

StatementoffinancialpositionAs at 31 December 2017

Notes 2017 2016

RO RO

ASSETSCash and cash equivalents 5 4,709,402 2,385,008

Bank deposits 6 9,599,543 6,422,319

Premiums and reinsurance balances receivable 7 11,049,919 7,907,039

Reinsurers’ share of insurance contract liabilities 8 29,380,380 18,358,536

Other receivables and prepayments 9 656,423 573,646

Available-for-sale investments 10 11,764,808 12,724,958

Property and equipment 12 62,653 76,939

Total assets 67,223,128 48,448,445

EQUITY AND LIABILITIESEquityShare capital 15 10,000,000 5,000,000

Legalreserve 16 751,275 561,491

Contingency reserve 17 3,529,810 3,003,643

Fair value reserve (283,763) 831,300

Retained earnings 1,015,704 859,310

Total equity 15,013,026 10,255,744

LiabilitiesLiabilitiesarisingfrominsurancecontract 8 38,838,652 29,692,791

Due to reinsurers 13 1,523,783 4,363,231

Other liabilities and accruals 14 11,847,667 4,136,679

Total liabilities 52,210,102 38,192,701

Total equity and liabilities 67,223,128 48,448,445

Net assets per share (Rial Omani) 24(b) 0.150 0.205

Thefinancialstatementswereauthorisedforissueon12February2018inaccordancewitharesolutionoftheBoardofDirectors.

____________________________ ____________________________

H.E. Khalaf Ahmed Al Mannai Navin KumarChairman ChiefExecutiveOfficer

Theattachednotes1to29formpartofthesefinancialstatements.

29

Statement of comprehensive incomeFor the year ended 31 December 2017

Notes 2017 2016

RO RO

Insurance premium revenue 18 23,379,184 21,381,481

Insurance premium ceded to reinsurers 18 (14,970,069) (11,859,926)

Net insurance premium revenue 8,409,115 9,521,555

Movement in unexpired premium 8.1 (49,027) 768,081

Net premium earned 8,360,088 10,289,636

Claims paid 18 (10,834,582) (11,240,859)

Reinsurers’ share of claims 18 5,287,818 3,766,872

Net movement in outstanding claims 8.1 725,700 (479,559)

Net commission 18 (885,178) (655,279)

Net underwriting results 2,653,846 1,680,811

Investment income (net) 20 1,680,037 899,540

Impairment loss on available-for-sale investment 10 (514,569) (204,829)

Other income 21 234,807 149,823

4,054,121 2,525,345

General and administrative expenses 22 (1,899,189) (1,745,635)

Depreciation 12 (37,762) (31,732)

Profit before taxation 2,117,170 747,978

Income tax expense 23 (244,825) (29,273)

Profit for the year 1,872,345 718,705

Other comprehensive (expense) incomeItems that may be reclassified subsequently to profit or lossNet change in fair value of available for sale investments (879,627) 234,253

Impairment of available-for-sale investments 514,569 204,829

Net realised gain on sale of available-for-sale investments

recycledtoprofitandloss 27 (750,005) (112,760)

Other comprehensive (expense) income for the year (1,115,063) 326,322

Total comprehensive income for the year 757,282 1,045,027

Earnings per share - basic and diluted 24(a) 0.024 0.012


30

Statement of changes in equityFor the year end 31 December 2017

Share Legal Contingency Fair value Retainedcapital reserve reserve reserve earnings Total

RO RO RO RO RO ROAt 1 January 2017 5,000,000 561,491 3,003,643 831,300 859,310 10,255,744Profit for the year - - - - 1,872,345 1,872,345Other comprehensive expense for the year - - - (1,115,063) - (1,115,063)Total comprehensive income for the year - - - (1,115,063) 1,872,345 757,282Issue of bonus shares

(note 15) 1,000,000 - - - (1,000,000) -

Rights issue (note 15) 4,000,000 - - - - 4,000,000Transfer to contingency reserve (note 17) - - 526,167 - (526,167) -

Transfer to legal reserve (note 16) - 189,784 - - (189,784) -

Balance at 31 December 2017 10,000,000 751,275 3,529,810 (283,763) 1,015,704 15,013,026

At 1 January 2016 5,000,000 489,620 2,396,426 504,978 819,693 9,210,717

Profitfortheyear - - - - 718,705 718,705

Other comprehensive income

for the year - - - 326,322 - 326,322

Totalcomprehensiveprofitforthe year - - - 326,322 718,705 1,045,027

Transfer to contingency reserve

(note 17) - - 607,217 - (607,217) -

Transfer to legal reserve (note

16) - 71,871 - - (71,871) -

Balance at 31 December 2016 5,000,000 561,491 3,003,643 831,300 859,310 10,255,744


31

StatementofcashflowsFor the year ended 31 December 2017

2017 2016

Notes RO RO

OPERATING ACTIVITIES Profitbeforetaxfortheyear 2,117,170 747,978

Adjustments for :

Unexpiredpremium(release)/charge–net 8.2 49,027 (768,081)

Depreciation of property and equipment 12 37,762 31,732

Provision for withholding tax liabilities 36,223 23,030

Gain on sale on available-for-sale investments (750,005) (112,760)

Dividend income 20 (345,079) (388,352)

Interest income 20 (584,953) (398,428)

Impairment loss on available-for-sale investments 514,569 204,829

Accrualforemployees’endofservicebenefits 14 20,260 22,773

Allowance for doubtful premiums and reinsurance balance receivables 7 20,000 122,673

Gain on disposal of property and equipment (52) (220)

Operating cash flows before changes in operating assets and liabilities 1,114,922 (514,826)

Premiums and reinsurance balances receivable (3,162,880) (3,478,943)

Reinsurers’ share of insurance contract liabilities (11,021,844) 3,264,442

Other receivables and prepayments 3,507 (23,181)

Liabilitiesarisingfrominsurancecontract 9,096,834 (2,784,883)

Due to reinsurers (2,839,448) 1,754,135

Decrease in provisions, due to reinsurers and other payables 7,460,207 1,149,463

Cash from / (used in) operations 651,298 (633,793)

Employees’endofservicebenefitspaid 14 (13,594) (41,063)

Income taxes paid (36,933) (37,060)

Net cash from / (used in) operating activities 600,771 (711,916)

INVESTING ACTIVITIESPurchase of available-for-sale investments (4,107,207) (1,190,381)

Proceeds from disposal of available-for-sale investments 4,187,730 1,823,719

Net movement in bank deposits (3,177,224) (815,634)

Purchase of property and equipment (23,476) (74,652)

Interest income received 498,669 309,469

Dividend income received 345,079 388,352

Proceeds from disposal of property and equipment 52 8,338

Net cash (used in) / from investing activities (2,276,377) 449,211

FINANCING ACTIVITIESProceeds from right issue 4,000,000 -

Net cash generated from financing activities 4,000,000 -

Net increase / (decrease) in cash and cash equivalents 2,324,394 (262,705)

Cash and cash equivalents at the beginning of the year 2,385,008 2,647,713

Cash and cash equivalents at the end of the year 5 4,709,402 2,385,008


32

NotestothefinancialstatementsFor the year ended 31 December 2017

1. GeneralOman Qatar Insurance Company SAOG (formerly Oman Qatar Insurance Company SAOC) (the “Company") is

registered as a closely held joint stock company registered and incorporated in the Sultanate of Oman. The Company

is engaged in the business of life and general insurance within the Sultanate of Oman. The registered address of

the Company is P O Box 3660, Postal Code 112, Sultanate of Oman. The Company started its operations from 21

July 2004.

The Company was granted general insurance license by the Capital Market Authority (Oman) on 25 August 2004

valid up to 25 August 2014 and life insurance license by the Capital Market Authority (Oman) on 4 January 2011

valid up to 25 August 2014. The license was renewed by Capital Market Authority (Oman) for general and life

insurance on 26 August 2014 valid up to 20 June 2019.

The Company is a substantially owned subsidiary of Qatar Insurance Company S.A.Q., a public joint stock company

incorporated in the State of Qatar, whose registered address is at P O Box 666, Doha, State of Qatar.

In accordance with the Royal Decree 39/2014 dated 17 August 2014 (the “RD”), all insurance companies registered

underCommercialCompaniesLawshouldbeaPublicJointStockCompanywithaminimumpaidupcapitalofRO10 million within 3 years from the date of the RD. In order to comply with the RD, on 5 June 2017 the shareholders of

the Company approved the transformation of the Company from a closed joint stock company (SAOC) to a General

Omani Joint Stock Company (SAOG). It was further resolved that the transformation would be part of the process

ofsellingaportionofthesharesheldbytheexistingshareholderstothepublicthroughanInitialPublicOffering“IPO” in the Muscat Securities Market (the “MSM”). Accordingly, the Company’s completed the IPO process and

the Company’s shares were listed for trading on the MSM from 19 October 2017 onwards. The conversion from

aclosedjointstockcompany(SAOC)toaGeneralOmaniJointStockCompany(SAOG)wasconfirmedbytheAdministrative Order No. 124/2017 dated 19 October 2017.

2 New standards, interpretations and amendments adopted by the CompanyTheaccountingpoliciesadoptedinthepreparationofthefinancialstatementsareconsistentwiththosefollowedinthepreparationoftheCompany'sannualfinancialstatementsfortheyearended31December2016.

2.1 The following amendments to IFRS apply for the first time in 2017 and have been adopted by the Company For the year ended 31 December 2017, the Company has adopted all of the following new and revised standards

and interpretations issued by the International Accounting Standards Board (IASB) and the International Financial

ReportingInterpretationsCommittee(IFRIC)oftheIASBthatarerelevanttoitsoperationsandeffectiveforperiodsbeginning on 1 January 2017.

AmendmentstoIAS7StatementofCashFlows:DisclosureInitiative

AmendmentstoIAS12IncomeTaxes:RecognitionofDeferredTaxAssetsforUnrealisedLosses

AnnualImprovementsCycle-2014-2016

– AmendmentstoIFRS12Disclosureof Interests inOtherEntities:Clarificationofthescopeofdisclosurerequirements in IFRS 12

The adoption of these standards and interpretations has not resulted in any major changes to the Company’s

accountingpoliciesandhasnotaffectedtheamountsreportedforthecurrentandpriorperiods.

33

NotestothefinancialstatementsFor the year ended 31 December 2017 (continued)

2 New standards, interpretations and amendments adopted by the Company (continued)2.2 Standards issued but not yet effective

The Company has not yet applied the following new and revised IFRSs that have been issued but are not yet

effective:

2.2.1 Amendments to IFRS 4 Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts IFRS 4 Insurance Contract’s amendments to the standard to introduce two alternative options for entities issuing

contracts within the scope of IFRS 4, notably a temporary exemption and an overlay approach. The temporary

exemption enables eligible entities to defer the implementation date of IFRS 9 for annual periods beginning 1

January 2021 at the latest.

An entity may apply the temporary exemption from IFRS 9 if:

i) it has not previously applied any version of IFRS 9 before and

ii) its activities are predominantly connected with insurance on its annual reporting date that immediately precedes

1 April 2016.

TheoverlayapproachallowsanentityapplyingIFRS9toreclassifybetweenprofitorlossandothercomprehensiveincomeanamountthatresultsintheprofitorlossattheendofthereportingperiodforthedesignatedfinancialassetsbeing thesameas if anentityhadapplied IAS39 to thesedesignatedfinancial assets.The temporaryexemption from IFRS 9 is available from 1 January 2018 while the overlay approach applies when IFRS 9 is applied

forthefirsttime.TheCompanyhasassessedtheaboveoptionsavailableandcriterionthereofandconcludedtoadopt IFRS 9 from 1 January 2018.

2.2.2 IFRS 9 Financial InstrumentsThe Company will adopt IFRS 9 on 1 January 2018 and will not restate the comparative information in accordance

with the IFRS guidelines. IFRS 9 Financial Instruments Standard issued July 2014, replaces the existing IAS 39

FinancialInstruments:RecognitionandMeasurement.IFRS9includesrevisedguidanceontheclassificationandmeasurementoffinancialinstruments,includinganewexpectedcreditlossmodelforcalculatingimpairmentonfinancial assets, and thenewgeneral hedgeaccounting requirements. It also carries forward theguidanceonrecognitionandde-recognitionoffinancialinstrumentsfromIAS39.

Key requirements of IFRS 9: allrecognisedfinancialassetsthatarewithinthescopeofIFRS9arerequiredtobesubsequentlymeasured

atamortisedcostor fair value.Specifically,debt investments thatareheldwithinabusinessmodelwhoseobjectiveistocollectthecontractualcashflows,andthathavecontractualcashflowsthataresolelypaymentsof principal and interest on the principal outstanding are generally measured at amortised cost at the end of

subsequent accounting periods. Debt instruments that are held within a business model whose objective is

achievedbothbycollectingcontractualcashflowsandsellingfinancialassets,andthathavecontractualtermsthatgiveriseonspecifieddatestocashflowsthataresolelypaymentsofprincipalandinterestontheprincipalamountoutstanding,aregenerallymeasuredatfairvaluethroughothercomprehensiveincome(FVOCI).Allotherdebt investments and equity investments are measured at their fair value at the end of subsequent accounting

periods. In addition, under IFRS 9, entities may make an irrevocable election to present subsequent changes

in the fair value of an equity investment (that is not held for trading nor contingent consideration recognised by

an acquirer in a business combination) in other comprehensive income, with only dividend income generally

recognisedinprofitorloss.

34

NotestothefinancialstatementsFortheyearended31December2017(continued)

2 New standards, interpretations and amendments adopted by the Company (continued)2.2 Standards issued but not yet effective (continued)2.2.2 IFRS 9 Financial Instruments (continued)

withregardtothemeasurementoffinancialliabilitiesdesignatedasatfairvaluethroughprofitorloss,IFRS9requiresthattheamountofchangeinthefairvalueofafinancialliabilitythatisattributabletochangesinthecredit risk of that liability is presented in other comprehensive income, unless the recognition of such changes

inothercomprehensiveincomewouldcreateorenlargeanaccountingmismatchinprofitorloss.Changesinfairvalueattributabletoafinancialliability’screditriskarenotsubsequentlyreclassifiedtoprofitorloss.UnderIAS39,theentireamountofthechangeinthefairvalueofthefinancialliabilitydesignatedasfairvaluethroughprofitorlossispresentedinprofitorloss.

inrelationtotheimpairmentoffinancialassets,IFRS9requiresanexpectedcreditlossmodel,asopposedtoan incurred credit loss model under IAS 39. The expected credit loss model requires an entity to account for

expectedcreditlossesandchangesinthoseexpectedcreditlossesateachreportingdatetoreflectchangesincredit risk since initial recognition. In other words, it is no longer necessary for a credit event to have occurred

before credit losses are recognised.

thenewgeneralhedgeaccountingrequirementsretainthethreetypesofhedgeaccountingmechanismscurrentlyavailableinIAS39.UnderIFRS9,greaterflexibilityhasbeenintroducedtothetypesoftransactionseligibleforhedgeaccounting,specificallybroadening the typesof instruments thatqualify forhedging instrumentsand the typesof riskcomponentsofnon-financial items thatareeligible forhedgeaccounting. Inaddition,the effectiveness test has been overhauled and replaced with the principle of an ‘economic relationship’.Retrospectiveassessmentofhedgeeffectivenessisalsonolongerrequired.Enhanceddisclosurerequirementsabout an entity’s risk management activities have also been introduced.

Classification and measurement

Financial Assets Note Classification DescriptionIAS 39 IFRS 9

Debt instruments 9 AFS FVOCI The instruments that were classified as available-for-sale investments and carried at fair value. These

instruments are held within a business model whose

objective is achieved both by collecting contractual

cashflowsandselling in theopenmarket, and theinstruments contractual terms give rise to cash

flowsonspecifieddatesthataresolelypaymentsofprincipal and interest on the principal outstanding.

Accordingly, such instrument will continue to be

subsequently measured at fair value through other

comprehensiveincome(FVOCI)upontheapplicationof IFRS 9, and the fair value gains or losses

accumulated in the investment revaluation reserve

willcontinuetobesubsequentlyreclassifiedtoprofitor loss when the instrument are de-recognised or

reclassified.

35


2 New standards, interpretations and amendments adopted by the Company (continued)2.2 Standards issued but not yet effective (continued)2.2.2 IFRS 9 Financial Instruments (continued)

Financial Assets Note Classification DescriptionIAS 39 IFRS 9

Equity instruments

(Omani and

international)

Private equity

investments

9 AFS FVTPL Equity instruments (quoted and unquoted) were

classifiedasavailable-for-saleinvestmentscarriedatfairvalue.TheinstrumentwillbemeasuredatFVTPLunder IFRS 9 and the fair value gains or losses will be

recognisedintheprofitorloss.

Allotherfinancialassetsandfinancialliabilitieswillcontinuetobemeasuredonthesamebasesasiscurrentlyadopted under IAS 39.

a) Impairment

Financialassetsmeasuredatamortisedcost,bondportfoliocarriedatFVTOCIunderIFRS9(seeclassificationand measurement section above), due from customers will be subject to the impairment provisions of IFRS 9.

TheCompanyexpects toapply thesimplifiedapproach to recognise lifetimeexpectedcredit losses for itsreceivables as permitted by IFRS 9. As regards the quoted debt instrument as disclosed in note 10, the Company

consider that they have low credit risk given their strong external credit rating and hence expect to recognise

12-month expected credit losses for these items.

In general, the Company anticipate that the application of the expected credit loss model of IFRS 9 will result

in earlier recognition of credit losses for the respective items and will increase the amount of loss allowance

recognised for these items.

b) Hedge accounting IFRS 9’s hedge accounting requirements are designed to align the accounting more closely to the risk

management framework; permit a greater variety of hedging instruments; and remove or simplify some of the

rule-basedrequirementsinIAS39.Theelementsofhedgeaccounting:fairvalue,cashflowandnetinvestmenthedges are retained.

The new hedge accounting requirements will align more closely with the Company’s risk management policies.

When initially applying IFRS 9, the Company has the option to continue to apply the hedge accounting

requirements of IAS 39 instead of the requirements in IFRS 9. However, the Company determined that all

existinghedgerelationshipsthatarecurrentlydesignatedineffectivehedgingrelationshipswouldcontinuetoqualify for hedge accounting under IFRS 9. The Company do not anticipate that the application of the IFRS 9

hedgeaccountingrequirementswillhaveamaterialimpactontheCompany’sfinancialstatements.

c) Disclosure IFRS 9 also introduces expanded disclosure requirements and changes in presentation. These are expected to

changethenatureandextentoftheCompany’sdisclosuresaboutitsfinancialinstrumentsparticularlyintheyear of the adoption of IFRS 9.

TheCompanyhasundertakenparallelrunsofthesystemsandassociatedcontrols,andiscurrentlyrefiningandfinalisingitsmodels.Theactualimpactoftheadoptionmaychangeoncethesystemsandassociatedcontrolshave been operational for a more extended period. Furthermore, the new accounting policies, assumptions,

judgements and estimation techniques employed are subject to re-assessment and changes upon instructions

of the regulatory authority, if any.

36


2 New standards, interpretations and amendments adopted by the Company (continued)2.2 Standards issued but not yet effective (continued)2.2.3 IFRS 17 Insurance Contracts

In May 2017, the IASB issued IFRS 17 Insurance Contracts, a comprehensive new accounting standard for insurance

contracts covering recognition and measurement, presentation and disclosure, which replaces IFRS 4 Insurance

Contracts. IFRS 17 Insurance Contracts establishes principles for the recognition, measurement, presentation and

disclosure of insurance contracts issued. It also requires similar principles to be applied to reinsurance contracts

heldandinvestmentcontractswithdiscretionaryparticipationfeaturesissued.Thestandardiseffectiveforannualperiods beginning on or after 1 January 2021 with an earlier application is permitted.

IFRS 17 provides comprehensive guidance on accounting for insurance contracts and investment contracts with

discretionary participation features. For general insurance contracts, IFRS 17 requires discounting of loss reserves

expected to be paid inmore than one year aswell as risk adjustment, for which confidence level equivalentdisclosurewillberequired.InordertofurtherevaluatetheeffectsofadoptingIFRS17inthefinancialstatements,anIFRS17GroupImplementationTeamhasbeensetupsponsoredbytheGroupChiefFinancialOfficer,comprisingsenior management from Finance, Risk, Operations and Investment Operations.

2.2.4 IFRS 15 Revenue from Contracts with Customers IFRS15wasissuedinMay2014andestablishesafive-stepmodeltoaccountforrevenuearisingfromcontractswithcustomers.UnderIFRS15,revenueisrecognisedatanamountthatreflectstheconsiderationtowhichanentity expects to be entitled in exchange for transferring goods or services to a customer.

The new revenue standard will supersede all current revenue recognition requirements under IFRS. Either a full

retrospectiveapplicationoramodified retrospectiveapplication is required forannualperiodsbeginningonorafter1January2018.Earlyadoption ispermitted.TheCompanyexpects toapply IFRS15using themodifiedretrospective application. Given insurance contracts are scoped out of IFRS 15, the Company does not expect the

impacttobesignificant.

2.2.5 IFRS 16 – LeasesThe IASB issued IFRS16Leases (IFRS16),which requires lessees to recogniseassetsand liabilities formostleases.Thestandardincludestworecognitionexemptionsforlessees–leasesof’low-value’assets(e.g.,personalcomputers) and short-term leases (i.e., leases with a lease term of 12 months or less). For lessors, there is little

changetotheexistingaccountinginIAS17Leases.TheCompanywillperformadetailedassessmentinthefuturetodeterminetheextent.Thenewstandardwillbeeffectiveforannualperiodsbeginningonorafter1January2019.IFRS 16 also requires lessees and lessors to make more extensive disclosures than under IAS 17. In 2018, the

CompanywillcontinuetoassessthepotentialeffectofIFRS16onitsfinancialstatements.

3. Summary of significant accounting policies

a) Statement of compliance The financial statements of the Company have been prepared in accordance with International Financial

Reporting Standards, applicable requirements of the Commercial Companies Law of 1974, as amended,InsuranceCompaniesLaw1979,asamendedandtheprovisionsfordisclosurerelatedtoinsurancecompaniesissued by Capital Market Authority, of the Sultanate of Oman.

b) Basis of preparation Thefinancialstatementshavebeenpreparedonthehistoricalcostbasisexceptforthefollowing:

Unexpired premium and outstanding claims provisions for life business determined based on actuarialtechniques;

Available-for-salefinancialassetsaremeasuredatfairvalue.

37


3. Summary of significant accounting policies (continued)

b) Basis of preparation (continued) Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly

transaction between market participants at the measurement date, regardless of whether that price is directly

observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability,

the Company takes into account the characteristics of the asset or liability if market participants would take

those characteristics into account when pricing the asset or liability at the measurement date. Fair value for

measurementand/ordisclosurepurposesinthesefinancialstatementsisdeterminedonsuchabasis.

ThefinancialstatementsarepresentedinRialsOmani(“RO”),whichistheCompany’sfunctionalandpresentationcurrency.

TheCompanypresentsitsstatementoffinancialpositionbroadlyinorderofliquidity.

The principal accounting policies are set out as below are consistently applied during the year and are consistent

with previous year.

3.1 Insurance premium revenueGeneral businessPremiums are taken into income over the terms of the policies.Unexpired premiums represent the portion ofpremiums written relating to the unexpired period of coverage. The change in the provision for unexpired premiums

istakentotheprofitorlossinorderthatrevenueisrecognisedovertheperiodofrisk.

AsrequiredbytheInsuranceCompaniesLawofOman,provisionsforunexpiredclaimsatnotlessthan45%ofthetotalnetpremiumsismaintainedforeachclassofinsuredoperations.Unexpiredpremiumiscalculatedbasedonhigher of 1/365 method or at 45% of the net premiums for each class of insured operations. Acquisition costs are

recognised as expenses when incurred considering the short term nature of the insurance contracts.

Life businessPremiums, after deducting policy acquisition costs, are taken into income over the terms of the policies to which

they relate on a pro-rata basis. Unexpired premiums represent the proportion of premiumswritten relating toperiods of insurance subsequent to the reporting date. Premiums are pro-rated by reference to the unexpired term

of cover. An appropriate actuarial reserve that is determined annually by an independent actuary is maintained.

3.2 Unexpired premiumThe provision for unexpired premium represents that portion of premiums received or receivable, after deduction

of the reinsurance share, which relates to risks that have not yet expired at the reporting date. The provision is

recognised (see note 3.1) when contracts are entered into and premiums are charged, and is brought to account as

premium income over the term of the contract in accordance with the pattern of insurance service provided under

the contract.

Insurance contract liabilities are derecognised when the contract expires, discharged or cancelled by any party to

the insurance contract.

At each reporting date, the Company reviews its unexpired risk and a liability adequacy test is performed in

accordance with IFRS 4 to determine whether there is any overall excess of expected claims over unexpired

premiums.This calculationusescurrent estimatesof futurecontractual cashflowsafter takingaccountof theinvestment return expected to arise on assets relating to the relevant non-life insurance technical provisions. If these

estimatesshowthatthecarryingamountoftheunexpiredpremiumsisinadequate,thedeficiencyisrecognisedintheprofitorlossbysettingupaprovisionforpremiumdeficiency.

38


3. Summary of significant accounting policies (continued)3.3 Reinsurance

InordertominimisefinancialexposurefromlargeclaimstheCompanyentersintoagreementswithotherpartiesforreinsurance purposes. Premiums ceded and claims reimbursed are presented on a gross basis.

Premiums on reinsurance assumed are recognised as revenue in the same manner as they would be if the

reinsurance were considered direct business.

Amounts due to reinsurers are estimated in a manner consistent with the associated reinsured policies and in

accordance with the reinsurance contract.

Claims receivable from reinsurers are estimated in a manner consistent with the claim liability and in accordance with

the reinsurance contract. These are shown as “Reinsurers’ share of insurance contract liabilities” in the statement

ofthefinancialpositionuntiltheclaimispaidbytheCompany.Oncetheclaimispaidtheamountduefromthereinsurer in connection with the paid claim is transferred to “Premiums and insurance balances receivable”. Ceded

reinsurance arrangements do not relieve the Company from its obligations to policyholders.

3.4 Premiums and insurance balances receivablePremiums and insurance balances receivable are recognised when due and measured on initial recognition at

the fair value of the consideration received or receivable. The carrying value of the receivables is reviewed for

impairment whenever events or circumstances indicate that the carrying amount may not be recoverable, with

theimpairmentlossrecordedinthestatementofprofitorloss.Afterinitialmeasurement,premiumsandinsurancebalances receivable are measured at amortized cost as deemed appropriate.

Premiumsandinsurancebalancesreceivablearederecognisedwhenthede-recognitioncriteriaforfinancialassets,asdescribedbelowinaccountingpoliciesforfinancialinstruments.

3.5 Reinsurers’ share of insurance contract liabilitiesThe Company cedes insurance risk in the normal course of business as part of its businesses model. Reinsurers’

share of insurance contract liabilities represent balances recoverable from reinsurance companies. Amounts

recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision or settled

claims associated with the reinsurers' policies and are in accordance with the related reinsurance contract.

Reinsurers’ share of insurance contract liabilities are reviewed for impairment at each reporting date, or more

frequently, when an indication of impairment arises during the reporting year. Impairment occurs when there is

objective evidence as a result of an event that occurred after initial recognition of the reinsurance asset that the

Company may not receive all outstanding amounts due under the terms of the contract and the event has a

reliably measurable impact on the amounts that the Company will receive from the reinsurer. The impairment loss

isrecordedintheprofitorloss.

3.6 Reinsurance and other payablesReinsurance and other payables are recognised when due and measured on initial recognition at the fair value

of the consideration received less directly attributable transaction costs. Subsequently, reinsurance and other

payables are measured at amortised cost, as deemed appropriate.

3.7 ClaimsGeneral insurance businessClaims consist of amounts payable to contract holders and third parties and related loss adjustment expenses, net

ofsalvageandotherrecoveries,arechargedtoprofitorlossasincurred.

39


3. Summary of significant accounting policies (continued)3.7 Claims (continued)

General insurance business (continued)Gross outstanding claims comprise the gross estimated cost of claims incurred but not settled at the reporting

date, whether reported or not. Provision for reported claims not paid as at the reporting date is made on the basis

of individual case estimates. In addition, a provision based on the Company’s prior experience is maintained for the

cost of settling claims incurred but not reported at the reporting date.

Anydifferencebetweentheprovisionsatthereportingdateandsettlementsandprovisionsinthefollowingyearisincluded in the underwriting account for that year.

Life insurance businessGross outstanding claims comprise the gross estimated cost of claims incurred but not settled at the reporting

date, whether reported or not.

Differencesbetweentheestimatedcostandsubsequentsettlementsaredealtwithintheunderwritingaccountinthe year in which the claim is settled or re estimated using the best information available regarding claim settlement

patternsandanticipatedfutureinflationtrends.

Deathclaimsandallotherclaimsareaccountedforwhennotified.

Provision for outstanding claimsProvision for outstanding claims is recognised at the date the claims are known and covers the liability for losses

and loss adjustment expenses based on loss reports from independent loss adjusters and management's best

estimate.

Claims provision also includes liability for claims incurred but not reported as at the reporting date. The liability

is calculated at the reporting date using a range of historic trends, empirical data and standard actuarial claim

projection techniques. The current assumptions may include a margin for adverse deviations. The liability is not

discounted for the time value of money.

3.8 Claims paidGross claims paid include all claims paid during the year and the related external claims handling costs that are

directly related to the processing and settlement of claims.

3.9 Liabilities arising from insurance contractsInsurance contract liabilities include the outstanding claims provision and the provision for unexpired premium.

Insurance contract liabilities are recognised when contracts are entered into and premiums are charged.

3.10 Commission earned and paidCommissions earned / paid are recognised as expenses / income when incurred considering the short term nature

of the insurance contracts.

3.11 Income taxTaxationontheresultsfortheyearcomprisesofcurrenttaxcalculatedasperthefiscalregulationsoftheSultanateof Oman and deferred tax.

Currenttaxisrecognisedintheprofitorlossasthetaxpayableonthetaxableincomefortheyear,usingtaxratesenacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous

years.

40


3. Summary of significant accounting policies (continued)3.11 Income tax (continued)

Deferredincometaxisprovided,usingtheliabilitymethod,foralltemporarydifferencesarisingbetweenthetaxbasesof assets and liabilities and their carrying values for financial reportingpurposes.Currently enacted taxratesareusedtodeterminedeferredtax.DeferredincometaxassetsandliabilitiesareoffsetasthereisalegallyenforceablerighttooffsettheseinOman.Thetaxeffectsonthetemporarydifferencesaredisclosedundernon-current liabilities as deferred tax.

Adeferredtaxassetisrecognisedonlytotheextentthatitisprobablethatfuturetaxableprofitswillbeavailableagainst which the unused tax losses and credits can be utilised. Deferred tax assets are reduced to the extent that

itisnolongerprobablethattherelatedtaxbenefitwillberealised.

Incometaxontheprofitorlossfortheyearcomprisescurrentanddeferredtax.Incometaxisrecognisedintheprofitorlossfortheyearexcepttotheextentthatitrelatestoitemsrecogniseddirectlytoothercomprehensiveincome, in which case it is recognised in equity.

3.12 Cash and cash equivalentsCash and cash equivalents consist of cash and bank balances and time deposits that are readily convertible to

knownamountsofcashandwhicharesubjecttoaninsignificantriskofchangesinvalue.Timedepositsthathavea maturity of more than three months from the date of acquisition are excluded from cash and cash equivalents.

3.13 Financial instruments Financial assets and financial liabilities are recognisedwhen a Company becomes a party to the contractualprovisions of the instruments.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directlyattributabletotheacquisitionor issueoffinancialassetsandfinancial liabilities(otherthanfinancialassetsandfinancialliabilitiesatfairvaluethroughprofitorloss)areaddedtoordeductedfromthefairvalueofthefinancialassetsor financial liabilities, asappropriate, on initial recognition. Transactioncostsdirectly attributable to theacquisitionoffinancialassetsorfinancialliabilitiesatfairvaluethroughprofitorlossarerecognisedimmediatelyinprofitorloss

Financial assets Financial assets are classified into the following specified categories: ‘available-for-sale' (AFS) financial assetsand‘loansandreceivables'.Theclassificationdependsonthenatureandpurposeofthefinancialassetsandisdetermined at the time of initial recognition.

All regularwaypurchasesorsalesoffinancialassetsare recognisedandderecognisedona tradedatebasis.Regularwaypurchasesorsalesarepurchasesorsalesoffinancialassetsthatrequiredeliveryofassetswithinthetime frame established by regulation or convention in the marketplace.

Effective interest methodTheeffectiveinterestmethodisamethodofcalculatingtheamortisedcostofadebtinstrument/financialliabilityandof allocating interest income /expenseover the relevant period. The effective interest rate is the rate thatexactly discounts estimated future cash receipts / payments (including all fees and points paid or received that

formanintegralpartoftheeffectiveinterestrate,transactioncostsandotherpremiumsordiscounts)throughtheexpectedlifeofthedebtinstrument/financialliability,or,whereappropriate,ashorterperiod,tothenetcarryingamount on initial recognition.

41


3. Summary of significant accounting policies (continued)3.13 Financial instruments (continued)

Loans and receivablesLoansandreceivablesarefinancialassetswithfixedordeterminablepaymentsthatarenotquotedinanactivemarket. Loans and receivables (including cash and cash equivalents, bank deposits, premium and insurancereceivable,andotherreceivables)aremeasuredatamortisedcostusingtheeffective interestmethod, lessanyimpairment.

Interestincomeisrecognisedbyapplyingtheeffectiveinterestrate,exceptforshort-termreceivableswhentheeffectofdiscountingisimmaterial.

Available-for-sale financial (AFS) assets / investmentsAFSfinancialassetsareeitherdesignatedasAFSorarenotclassifiedas(a)loansandreceivables,(b)held-to-maturityinvestmentsor(c)financialassetsatfairvaluethroughprofitorloss.

Available-for-sale - quotedQuotessharesheldbytheCompanythataretradedinanactivemarketareclassifiedasAFSandarestatedatfairvalue at the end of each reporting period.

Fair value is determined in the manner described in note 28. Changes in the carrying amount of AFS monetary

financialassetsrelatingtochangesinforeigncurrencyrates,interestincomecalculatedusingtheeffectiveinterestmethodanddividendsonAFSequityinvestmentsarerecognisedinthestatementofprofitorloss.Otherchangesinthecarryingamountofavailable-for-salefinancialassetsarerecognisedinthestatementofothercomprehensiveincomeandaccumulatedunderthe‘Fairvaluereserve’.Whentheinvestmentisdisposedoforisdeterminedtobeimpaired,thecumulativegainorlosspreviouslyaccumulatedintheinvestmentsrevaluationreserveisreclassifiedtothestatementofprofitorloss.

ThefairvalueofAFSmonetaryfinancialassetsdenominatedinaforeigncurrencyisdeterminedinthatforeigncurrency and translated at the spot rate prevailing at the end of the reporting period. The foreign exchange gains

andlossesthatarerecognisedinthestatementofprofitorlossaredeterminedbasedontheamortisedcostofthemonetary asset. Other foreign exchange gains and losses are recognised in the statement of other comprehensive

income.

Available-for-sale – unquoted sharesAFS equity investments that do not have a quoted market price in an active market and whose fair value cannot be

reliablymeasuredaremeasuredatcostlessanyidentifiedimpairmentlossesattheendofeachreportingperiod.

Impairment of financial assetsFinancial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are

considered to be impaired when there is objective evidence that, as a result of one or more events that occurred

aftertheinitialrecognitionofthefinancialasset,theestimatedfuturecashflowsofthefinancialassethavebeenaffected.

ForAFSequity investments,asignificantorprolongeddecline inthefairvalueof thesecuritybelowitscost isconsidered to be objective evidence of impairment.

Forallotherfinancialassets,objectiveevidenceofimpairmentcouldinclude:

significantfinancialdifficultyoftheissuerorcounterparty; breachofcontract,suchasadefaultordelinquencyininterestorprincipalpayments; itbecomingprobablethattheborrowerwillenterbankruptcyorfinancialre-organization;or thedisappearanceofanactivemarketforthatfinancialassetbecauseoffinancialdifficulties.

42


3. Summary of significant accounting policies (continued)3.13 Financial instruments (continued)

Impairment of financial assets (continued)For certain categories of financial assets, such as premiums and insurance balances receivable, assets areassessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective

evidence of impairment for a portfolio of receivables could include the Company’s past experience of collecting

payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as

observable changes in national or local economic conditions that correlate with default on receivables. Bad debts

arewrittenoffduringtheyearinwhichtheyareidentified.

For financial assets carriedat amortisedcost, the amountof the impairment loss recognised is thedifferencebetween the asset's carryingamount and thepresent valueof estimated future cashflows,discountedat thefinancialasset'soriginaleffectiveinterestrate.

For financial assets that are carriedat cost, the amountof the impairment loss ismeasuredas thedifferencebetweentheasset'scarryingamountandthepresentvalueoftheestimatedfuturecashflowsdiscountedatthecurrentmarketrateofreturnforasimilarfinancialasset.Suchimpairmentlosswillnotbereversedinsubsequentperiods.

Thecarryingamountofthefinancialassetisreducedbytheimpairmentlossdirectlyforallfinancialassetswiththeexception of trade receivables, where the carrying amount is reduced through the use of an allowance account.

Whenatradereceivableisconsidereduncollectible,itiswrittenoffagainsttheallowanceaccount.Subsequentrecoveriesofamountspreviouslywrittenoffarecreditedagainsttheallowanceaccount.Changesinthecarryingamountoftheallowanceaccountarerecognizedinstatementofprofitorloss.

Forfinancialassetsmeasuredatamortisedcost, if, inasubsequentperiod,theamountofthe impairment lossdecreases and the decrease can be related objectively to an event occurring after the impairment was recognised,

thepreviouslyrecognisedimpairmentlossisreversedthroughprofitorlosstotheextentthatthecarryingamountof the investment at the date the impairment is reversed does not exceed what the amortised cost would have been

had the impairment not been recognised.

WhenanAFSfinancialasset isconsideredtobe impaired,cumulativegainsor lossespreviouslyrecognised inothercomprehensiveincomearereclassifiedtoprofitorlossintheperiod.

InrespectofAFSequitysecurities,impairmentlossespreviouslyrecognisedinprofitorlossarenotreversedthroughprofitorloss.Anyincreaseinfairvaluesubsequenttoanimpairmentlossisrecognisedinothercomprehensiveincome and accumulated under the heading of fair value reserve. In respect of AFS debt securities, impairment

lossesaresubsequentlyreversedthroughprofitor lossifanincreaseinthefairvalueoftheinvestmentcanbeobjectively related to an event occurring after the recognition of the impairment loss.

Financial liabilities and equity instrumentsDebt andequity instruments issuedby theCompanyare classifiedas either financial liabilities or as equity inaccordancewiththesubstanceofthecontractualarrangementsandthedefinitionsofafinancialliabilityandanequity instrument.

Equity instrumentsAn equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all

of its liabilities. Equity instruments issued by a group entity are recognised at the proceeds received, net of direct

issue costs.

Financial liabilities Financial liabilities (including due to reinsurers and other liabilities and accruals) are subsequently measured at

amortisedcostusingtheeffectiveinterestmethod.

43


3. Summary of significant accounting policies (continued)3.14 Derecognition of financial instruments

Financial assetsTheCompanyderecognisesafinancialassetwhenthecontractualrightstothecashflowsfromtheassetexpire,orwhenittransfersthefinancialassetandsubstantiallyalltherisksandrewardsofownershipoftheassettoanotherparty.

Onderecognitionofafinancialassetinitsentirety,thedifferencebetweentheasset'scarryingamountandthesum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other

comprehensiveincomeandaccumulatedinequityisrecognizedinprofitorloss.

Financial liabilitiesTheCompanyderecognisesfinancialliabilitieswhen,andonlywhen,theCompany'sobligationsaredischarged,cancelledorhaveexpired.Thedifferencebetweenthecarryingamountofthefinancialliabilityderecognisedandtheconsiderationpaidandpayableisrecognisedinprofitorloss.

OffsettingFinancialassetsandfinancialliabilitiesareoffsetandthenetamountreportedinthestatementoffinancialpositiononlywhenthereislegallyenforceablerighttooffsettherecognizedamountsandthereisanintentiontosettleonanetbasis,ortorealisetheassetsandsettletheliabilitysimultaneously.Incomeandexpensewillnotbeoffsetinthefinancialstatementsunlessrequiredorpermittedbyanyaccountingstandardorinterpretation,asspecificallydisclosed in the accounting policies.

3.15 Interest income Interest incomefromafinancialasset is recognisedwhen it isprobable that theeconomicbenefitswillflowtothe Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by

referencetotheprincipaloutstandingandattheeffectiveinterestrateapplicable.

3.16 Dividend income Dividend income is recognised when the right to receive the dividends is established (provided that it is probable

thattheeconomicbenefitswillflowtotheCompanyandtheamountofincomecanbemeasuredreliably).

3.17 Profit or loss on sale of investmentGainsand losseson thesaleof investmentsarecalculatedas thedifferencebetweennetsalesproceedsandsimple average cost of investment and are recorded on occurrence of the sale transaction.

3.18 Property and equipment Property and equipment is stated at cost less accumulated depreciation and any impairment in value.

Depreciation is calculated on a straight line basis over the estimated useful lives of other assets as follows:

YearsFurnitureandfixtures ......................................................................3 to 5

Motor vehicles ............................................................................................3

The carrying values of property and equipment is reviewed for impairment when events or changes in circumstances

indicate the carrying value may not be recoverable. If any such indication exists and where the carrying values

exceed the estimated recoverable amount, the assets are written down to their recoverable amount, being the

higher of their fair value less costs to sell and their value in use.

44


3. Summary of significant accounting policies (continued)3.18 Property and equipment (continued)

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate,

onlywhenitisprobablethatfutureeconomicbenefitsassociatedwiththeitemwillflowtotheCompanyandthecostoftheitemcanbemeasuredreliably.Allotherrepairsandmaintenancearechargedtotheprofitorlossduringthefinancialperiodinwhichtheyareincurred.

The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting

period,withtheeffectofanychangesinestimateaccountedforonaprospectivebasis.

An item of property and equipment is derecognised upon disposal or when no future economic benefits areexpected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of

anitemofpropertyandequipmentisdeterminedasthedifferencebetweenthesalesproceedsandthecarryingamountoftheassetandisrecognisedinprofitorloss.

3.19 Foreign currency transactionsTransactions in currencies other than the Company's functional currency (foreign currencies) are recognised at the

rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items

denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried

at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the

fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency

are not retranslated.

Exchangedifferencesonmonetaryitemsarerecognisedinprofitorlossintheperiodinwhichtheyarise.

3.20 Provisions ProvisionsarerecognisedinthestatementoffinancialpositionwhentheCompanyhasapresentobligation(legalorconstructive)asaresultofapastevent,itisprobablethatanoutflowofeconomicbenefitswillberequiredtosettle the obligation, and a reliable estimate can be made of the amount of the obligation.

3.21 Employees’ end of service benefitsTheCompanyprovidesendofservicebenefitstoitsexpatriateemployees.Theentitlementtothesebenefitsisbased upon the employees' salary and length of service, subject to the completion of a minimum service period.

EndofservicebenefitsareaccruedinaccordancewiththetermsofemploymentoftheCompany'semployeesat the reportingdate, having regard to the requirements of theOmanLabour Law2003 and its amendments.Employee entitlements to annual leave and leave passage are recognized when they accrue to employees and an

accrual is made for the estimated liability arising as a result of services rendered by employees up to the reporting

date.Theseaccrualsareincludedinotherliabilitiesandaccruals,whilethatrelatingtoendofservicebenefitsisdisclosed in other liabilities and accruals.

With respect to its national employees, the Company makes contributions to the Omani Public Authority for Social

Insurance under Royal Decree No. 72/91 for Omani employees calculated as a percentage of the employees'

salaries. The Company's obligations are limited to these contributions, which are expensed when due.

3.22 Fair valuesThe fair value forfinancial instruments traded inactivemarketsat the reportingdate isbasedon theirquotedmarket price or dealer price quotations, without any deduction for transaction costs.

45


3. Summary of significant accounting policies (continued)3.22 Fair values (continued)

Forallotherfinancialinstrumentsnottradedinanactivemarket,thefairvalueisdeterminedbyusingappropriatevaluation techniques. Valuation techniques include the discounted cash flow method, comparison to similarinstruments for which market observable prices exist, and other relevant valuation models.

Thefairvalueofinterest-bearingitemsisestimatedbasedondiscountedcashflowsusinginterestratesforitemswith similar terms and risk characteristics.

3.23 Operating segmentAn operating segment is a component of the Company that engages in business activities from which it may

earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the

Company’s other components. All operating segments’ operating results are reviewed regularly by the CEO to

make decisions about resources to be allocated to the segment and assess its performance.

3.24 Earnings per shareThe Company presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is

calculatedbydividing theprofitor lossattributable toordinary shareholdersof theCompanyby theweightedaveragenumberofordinarysharesoutstandingduringtheperiod.DilutedEPSisdeterminedbyadjustingtheprofitor loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for

theeffectsofalldilutivepotentialordinaryshares.

3.25 LeasesLeasesareclassifiedasfinance leaseswhenever the termsof the lease transfer substantiallyall the risksandrewardsofownershiptothelessee.Allotherleasesareclassifiedasoperatingleases.

Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where

anothersystematicbasisismorerepresentativeofthetimepatterninwhicheconomicbenefitsfromtheleasedasset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period

in which they are incurred.

3.26 Dividend on ordinary sharesDividends on ordinary shares are recognized as a liability and deducted from equity when they are approved by the

Company’s shareholders. Interim dividends are deducted from equity when they are approved.

Dividends for the year that are approved after the reporting date are dealt with as an event after the reporting date.

3.27 Directors’ remunerationTheboardofdirectors’remunerationisaccruedwithinthelimitsspecifiedbytheCapitalMarketAuthorityandtherequirementsoftheCommercialCompaniesLawoftheSultanateofOman.

4. Critical accounting judgments and key sources of estimates uncertainty In the process of applying the Company’s accounting policies, which are described in Note 3, management has

madejudgementsthathavethemostsignificanteffectontheamountsrecognisedinthefinancialstatementsandapplied certain assumptions, and other key sources of estimation uncertainty at the reporting date as discussed

below:

a) Classification of investments QuotedSecurities couldbe classifiedeither as held for trading, carried at fair value throughprofit or loss,

or available-for-sale or held-to-maturity investments. The Company invests substantially on quoted securities

46


4. Critical accounting judgments and key sources of estimates uncertainty (continued)

a) Classification of investments (continued) either locally or overseas and management has primarily decided to account for them on their potential for

longtermgrowthratherthantheshorttermprofitbasis.Consequently,suchinvestmentsarerecognisedasavailable-for-saleratherthanatfairvaluethroughprofitorloss.

Financialassetsareclassifiedasfairvaluethroughprofitorlosswheretheassetsareeitherheldfortradingordesignatedasatfairvaluethroughprofitorloss.

The Company invests in managed and mutual funds for trading purpose.

b) Impairment of available-for-sale investments The Company determines whether available-for-sale financial assets are impaired when there has been

a significant or prolonged decline in their fair value below cost. This determination of what is significantor prolonged requires judgment. In making this judgment and to record whether impairment occurred, the

Companyevaluatesamongotherfactors,thenormalvolatilityinshareprice,thefinancialhealthoftheinvestee,industryandsectorperformance,changesintechnologyandoperationalandfinancialcashflows.

Key sources of estimation uncertaintyThe key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting date,

thathaveasignificantriskofcausingamaterialadjustmenttothecarryingamountsofassetsandliabilitieswithinthenextfinancialyear,arediscussedbelow:

TheCompanymakesestimatesandassumptionsthataffectthereportedamountsofassetsandliabilitieswithinthenextfinancialyear.Estimatesandjudgmentsarecontinuallyevaluatedandbasedonhistoricalexperienceandother factors, including expectations of future events that are believed to be reasonable under the circumstances.

a) Claims made under insurance contracts Claimsand lossadjustmentexpensesarecharged to theprofitor lossas incurredbasedon theestimated

liabilityforcompensationowedtocontractholdersorthirdpartiesdamagedbythecontractholders.Liabilitiesfor unpaid claims are estimated using the input of assessments for individual cases reported to the Company

and management estimations for the claims incurred but not reported. The method for making such estimates

andforestablishingtheresultingliabilityiscontinuallyreviewed.Anydifferencebetweentheactualclaimsandtheprovisionsmadeareincludedinthestatementofprofitorlossandothercomprehensiveincomeintheyearof settlement.

b) Impairment of premium and insurance balance receivable An estimate of the collectible amount of premium and insurance balance receivable is made when collection

of the full amount is no longer probable. This determination of whether these premium and insurance balance

receivable are impaired, entails the Company evaluating, the credit and liquidity position of the policy holders

and the insurance companies, historical recovery rates including detailed investigations carried out in the

reportingperiodand feedback received from their legaldepartment. Thedifferencebetween theestimatedcollectibleamountandthebookamountisrecognisedasanexpenseinthestatementofprofitorlossandothercomprehensiveincome.Anydifferencebetweentheamountsactuallycollectedinthefutureperiodsandtheamountsexpectedwillberecognisedinthestatementofprofitorlossandothercomprehensiveincomeatthetime of collection.

c) Liability adequacy test At each reporting date, liability adequacy tests are performed to ensure the adequacy of insurance contract

liabilities.TheCompanymakesuseofthebestestimatesoffuturecontractualcashflowsandclaimshandlingand administration expenses, as well as investment income from the assets backing such liabilities in evaluating

theadequacyoftheliability.Anydeficiencyisimmediatelychargedtothestatementofprofitorlossandother

47


comprehensive income.

5. Cash and cash equivalents 2017 2016

RO RO

Call deposits 4,707,613 2,383,720

Cash in hand 1,789 1,288

4,709,402 2,385,008

Call deposits carry an interest ranging from 0% to 1.75% (2016: 0% to 1.75%) per annum.

6. Bank deposits

2017 2016

RO RO

Bank deposits with a maturity of greater than three months

but less than and equal to one year from the date of acquisition 9,599,543 6,422,319

The deposits are held with commercial banks in Oman and carry annual interest rates ranging from 1.75% to 4.15%

(2016: 1.75% to 3.75%). At the reporting date, the Company does not hold any bank deposits denominated in

foreign currency (2016: Nil).

7. Premiums and reinsurance balances receivable

2017 2016

RO RO

Due from policy holders, agents and brokers 8,719,012 6,680,791

Reinsurance balance receivable 2,890,907 1,766,248

11,609,919 8,447,039

Allowance for doubtful receivable (560,000) (540,000)

11,049,919 7,907,039

Movements in the allowance for doubtful receivable:

2017 2016

RO RO

At January 1 540,000 417,327

Charge during the year 20,000 122,673

At December 31 560,000 540,000

Premiums and reinsurance receivable includes related party transactions of RO 2,187,170 (2016: RO 1,150,068)

(note 26).

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8. Reinsurers’ share of insurance contract liabilities and liabilities arising from Insurance contracts

2017 2016

RO RO

Gross liabilities arising from insurance contractsClaims reported but unsettled 14,125,684 9,912,566

Claims incurred but not reported 4,262,775 2,125,881

Unexpiredpremium 20,450,193 17,654,344

Total 38,838,652 29,692,791

Reinsurers’ share of insurance contract liabilities Claims reported but unsettled (9,890,718) (4,767,324)

Claims incurred but not reported (3,344,441) (1,064,955)

Unexpiredpremium (16,145,221) (12,526,257)

Total (29,380,380) (18,358,536)

Net liabilities arising from insurance contracts

Claims reported but unsettled 4,234,966 5,145,242

Claims incurred but not reported 918,334 1,060,926

Unexpiredpremiums 4,304,972 5,128,087

Total 9,458,272 11,334,255

8.1 Movements in claims during the year

2017 2016

Liabilities arising from

Insurance contracts

Reinsurers’ share Net

Liabilitiesarising from

Insurance

contracts

Reinsurers’

share Net

RO RO RO RO RO RO

At 1 January

Claims reported but

unsettled 9,912,566 (4,767,324) 5,145,242 8,998,802 (4,337,068) 4,661,734

Claims incurred but

not reported 2,125,881 (1,064,955) 1,060,926 1,064,875 - 1,064,875

12,038,447 (5,832,279) 6,206,168 10,063,677 (4,337,068) 5,726,609

Add: claims incurred 17,511,762 (12,690,698) 4,821,064 13,215,629 (5,262,083) 7,953,546

Less:claimspaidduring the year (10,834,582) 5,287,818 (5,546,764) (11,240,859) 3,766,872 (7,473,987)

Movement in

outstanding claims 6,677,180 (7,402,880) (725,700) 1,974,770 (1,495,211) 479,559

Transfer of

outstanding claims

(note 26) (327,168) - (327,168) - - -

At 31 December 18,388,459 (13,235,159) 5,153,300 12,038,447 (5,832,279) 6,206,168

49


8.2 Movements in unexpired premiums during the year

2017 2016

Gross written

premiumsReinsurers’

share Net

Gross

written

premiums

Reinsurers’

share Net

RO RO RO RO RO RO

At January 1 17,654,344 (12,526,257) 5,128,087 15,299,717 (9,403,549) 5,896,168

Add: premiums written 23,379,184 (14,970,069) 8,409,115 21,381,481 (11,859,926) 9,521,555

Less:premiumsearned (19,711,193) 11,351,105 (8,360,088) (19,026,854) 8,737,218 (10,289,636)

Movement in

unexpired premium 3,667,991 (3,618,964) 49,027 2,354,627 (3,122,708) (768,081)

Transfer of unexpired

premium (note 26) (872,142) - (872,142) - - -

At December 31 20,450,193 (16,145,221) 4,304,972 17,654,344 (12,526,257) 5,128,087

9. Other receivables and prepayments

2017 2016

RO RO

Prepaid expenses 366,585 370,092

Accrued interest 289,838 203,554

656,423 573,646

10. Available for sale investmentsa. Available-for-sale investments can be analysed as follows:

Carrying value Cost2017 2016 2017 2016

RO RO RO RO

Quoted local – equity securities Banking 1,510,187 1,814,510 1,543,871 1,606,591

Services 1,622,691 2,290,628 1,791,873 1,827,927

Investment 148,798 318,303 144,521 329,576

Industrial 1,213,758 1,251,750 1,256,918 1,100,957

4,495,434 5,675,191 4,737,183 4,865,051

Quoted foreign – equity securities Banking 527,567 881,192 525,195 851,733

Services 656,214 1,008,193 761,428 931,531

Investment 273,247 347,915 278,703 387,811

Industrial 623,514 805,047 645,475 882,956

2,080,542 3,042,347 2,210,801 3,054,031

50


10. Available for sale investments (continued)

Carrying value Cost2017 2016 2017 2016

RO RO RO RO

Unquoted shares 71,428 71,428 71,428 71,428

Quoted bondsLocalbonds 3,497,998 2,371,987 3,497,998 2,371,987

Foreign bonds 1,619,406 1,564,005 1,531,161 1,531,161

5,117,404 3,935,992 5,029,159 3,903,148

Total available-for-sale investments 11,764,808 12,724,958 12,048,571 11,893,658

Asatreportingdate,theCompany’sinvestmentinunquotedsharedofRO71,428inOmaniUnifiedBureaufortheOrange Card SAOC was 14.28% of the paid up share capital of the investee company.

In the current year, the Company recognised impairment loss on available-for-sale investment in the amount of RO

514,569 (2016: RO 204,829).

b. The movement in the available-for-sale investments is analysed as below:

2017 2016

RO RO

At 1 January 12,724,958 13,124,043

Additions 4,107,207 1,190,381

Disposals (4,187,730) (1,823,719)

Realised gain on sale 750,005 112,760

Impairment on investments (514,569) (204,829)

Fair value changes (1,115,063) 326,322

11,764,808 12,724,958

11 Restrictions on transfer of assets

i) In accordance with the law governing the operation of insurance companies within the Sultanate of Oman, the

CompanyhasidentifiedtotheCapitalMarketAuthoritycertainspecificbankdepositsandinvestmentsincludedinthestatementoffinancialpositionatatotalvalueofRO14,201,932(2016-RO13,399,717).Underthetermsof the legislation, the Company can transfer these assets only with the prior approval of the Capital Market

Authority.

ii) TheCompanyhasprovidedabankdeposit to theOmaniUnitedBureau for theOrangeCardSAOCofRO58,180 (2016 - RO 58,180).

iii) The Company has provided a bank guarantee deposit to the Capital Market Authority of RO 150,000 (2016 -

RO150,000)tocomplywiththerequirementsofArticle51oftheInsuranceCompaniesLawoftheSultanateofOman.

iv) The Company has provided bank guarantee deposit of RO 163,602 (2016 - RO 223,380) in the normal course

of business from which it is anticipated that no material liabilities will arise.

51


12. Property and equipment

Furniture and fixtures

Motor vehicle Total

RO RO ROCost

At 1 January 2017 304,859 16,175 321,034Additions 23,476 - 23,476Disposals (499) - (499)At 31 December 2017 327,836 16,175 344,011Depreciation:

At 1 January 2017 228,011 16,084 244,095Charge for the year 37,671 91 37,762Disposals (499) - (499)At 31 December 2017 265,183 16,175 281,358Carrying values

At 31 December 2017 62,653 - 62,653

Furniture

andfixturesMotor

vehicle Total

RO RO RO

Cost:

At 1 January 2016 232,207 33,960 266,167

Additions 74,652 - 74,652

Disposals (2,000) (17,785) (19,785)

At 31 December 2016 304,859 16,175 321,034

Depreciation:

At 1 January 2016 203,482 20,548 224,030

Charge for the year 25,796 5,936 31,732

Disposals (1,267) (10,400) (11,667)

At 31 December 2016 228,011 16,084 244,095

Carrying values

At 31 December 2016 76,848 91 76,939

52


13. Due to reinsurers

2017 2016

RO RO

Reinsurance balances payable 1,523,783 4,363,231

Reinsurance balances payable include related party balances of RO 24,916 (2016: RO 1,122,106) (note 26).

14. Other liabilities and accruals

2017 2016

RO RO

Accounts payable 1,211,925 1,114,886

Due to related parties (note 26) 9,577,997 2,332,764

Other payables 379,751 353,609

Accrued expenses 288,409 196,616

Income tax and withholding tax liabilities 313,253 69,138

Accrualforendofservicebenefits 76,332 69,666

11,847,667 4,136,679

Movementintherelatedliabilityforendofservicebenefitsrecognisedinthestatementoffinancialpositionisasfollows:

2017 2016

RO RO

At 1 January 69,666 87,956

Charge for the year 20,260 22,807

Transfer during the year - (34)

Paid during the year (13,594) (41,063)

At 31 December 76,332 69,666

15. Share capital

2017 2016

RO RO

Authorised–200,000,000sharesof100Baizaeach 20,000,000 5,000,000

Issued and fully paid - 100,000,000 shares of 100 Baiza each 10,000,000 5,000,000

Shareholders of the Company who own 10% or more of the Company’s shares and the number of shares they hold

as of 31 December 2017 and 2016 are as follows:

2017 2016

Number of % of Number of % of

shares Shares shares Shares

Qatar Insurance Company S.A.Q. 52,498,500 52.499 3,499,900 69.998

Al Hosn Investment Company SAOC 22,500,000 22.500 1,500,000 30.000

74,998,500 74.999 4,999,900 99.998

53


15. Share capital (continued)On 6 July 2017, the shareholders of the Company in the extraordinary general meeting approved the increase of

authorised share capital from RO 5,000,000 to RO 20,000,000 and changed the nominal value of the shares from

RO 1 per share to 100 Baiza per share.

Further, on 6 July 2017, the shareholders of the Company in the ordinary general meeting approved:

- issuance of RO 1,000,000 bonus shares comprising of 10,000,000 shares of par value of 100 baiza each as

interim dividend.

- increase in the issued share capital of the Company on a rights issue basis from RO 6,000,000 to RO 10,000,000

by issuing 40,000,000 new shares at a nominal value of 100 Baiza per share.

Proposed dividendThe Board of Directors have proposed a cash dividend of 8 Baiza per share totalling to RO 800,000 for the year

ended 31 December 2017, which is subject to the approval of the shareholders at the Annual General Meeting to

be held in March 2018.

16. Legal reserve AsrequiredbytheCommercialCompaniesLawofOman,10%oftheprofitfortheyearisrequiredtobetransferredto legal reserve until such time as the reserve equals one third of the Company’s paid up capital. The reserve is not

available for distribution.

17. Contingency reserve In accordance with Article 10(bis) (2)(c) and 10(bis) (3)(b) of Regulations for Implementing Insurance Companies

Law (MinisterialOrder5/80),asamended,10%of thenetoutstandingclaims incaseof thegeneral insurancebusiness and 1% of the life assurance premiums for the year in case of life insurance business at the reporting

date is transferred from retained earnings to a contingency reserve. The Company may discontinue this transfer

whenthereserveequalstotheissuedsharecapital.Nodividendshallbedeclaredinanyyearuntilthedeficitinthereserveiscoveredfromtheretainedprofits.ThereservesshallnotbeusedexceptbypriorapprovaloftheCapitalMarket Authority.

As at the reporting date contingency reserve for general business amounts to RO 3,420,246 (2016: RO 2,904,915)

and for life business amounts to RO 109,564 (2016: RO 98,728).

18. Segmental informationOperating SegmentsTheCompany has three reportable segments, as describedbelow. The strategic business units offer differentproductsandservices,andaremanagedseparatelybecausetheyrequiredifferentmarketingstrategies.Foreachof the strategic business units, the CEO reviews internal management reports on at least a monthly basis. The

following summary describes the operations in each of the Company’s reportable segments:

Marineandaviationinsuranceincludesmarinecargo,marinehullandmachineryandaviation.

Fireandgeneralinsuranceincludesfire,engineering,energy,motor,generalaccident,medicalinsuranceandthird party liability.

Lifeincludesgrouplifeandcreditlifeinsurance.

Information regarding the results of each reportable segment is included below. Performance is measured based

on segment net insurance income, as included in the internal management reports that are reviewed by the CEO.

Inter-segment pricing is determined on an arm’s length basis.

54


18.

Segm

enta

l info

rmat

ion

(con

tinue

d)

Oper

atin

g Se

gmen

ts (c

ontin

ued)

Segm

entstatemento

fprofitorlossa

ndothercom

prehensiv

einc

ome

Mar

ine

and

avia

tion

Fire

and

gen

eral

Grou

p an

d cr

edit

life

Tota

l

2017

2016

2017

2016

2017

20

16

2017

20

16

ROR

ORO

RO

ROR

ORO

RO

Insura

nce p

rem

ium

revenue

654,

555

561,1

38

21,6

41,0

6520,0

08,5

73

1,08

3,56

48

11

,77

023

,379

,184

21

,38

1,4

81

Insura

nce p

rem

ium

ced

ed

to

rein

sure

rs(5

84,2

80)

(445,9

20)

(13,

395,

338)

(10,8

29,6

15)

(990

,451

)(5

84

,39

1)

(14,

970,

069)

(11

,85

9,9

26

)

Net

pre

miu

m70

,275

115,2

18

8,24

5,72

79,1

78,9

58

93,1

132

27

,37

98,

409,

115

9,5

21

,55

5

Mo

vem

ent

in u

nexp

ired

pre

miu

m18

,000

(24,0

00)

(67,

027)

770,5

34

-2

1,5

47

(49,

027)

76

8,0

81

Net

pre

miu

m e

arn

ed

88,2

7591,2

18

8,17

8,70

09,9

49,4

92

93,1

132

48

,92

68,

360,

088

10

,28

9,6

36

Cla

ims p

aid

(18,

486)

(276,9

25)

(9,7

40,5

02)

(9,0

90,3

42)

(1,0

75,5

94)

(1,8

73

,59

2)

(10,

834,

582)

(11

,24

0,8

59

)

Rein

sure

rs’ share

of

cla

ims

12,0

23256,8

23

4,20

0,20

1 1,9

72,4

28

1,07

5,59

41

,53

7,6

21

5,28

7,81

83

,76

6,8

72

Mo

vem

ent

in

outs

tan

din

g c

laim

s(4

6,00

0)2,0

00

771,

700

(475,7

00)

-(5

,85

9)

725,

700

(47

9,5

59

)

Net

co

mm

issio

n37

,490

(2,3

02)

(831

,916

)(5

56,3

63)

(90,

752)

(96

,61

4)

(885

,178

)(6

55

,27

9)

Unde

rwriting

results

73,3

0270,8

14

2,57

8,18

31,7

99,5

15

2,36

1(1

89

,51

8)

2,65

3,84

61

,68

0,8

11

Investm

ent

inco

me

1,68

0,03

78

99

,54

0

Im

pairm

ent

loss o

n a

vaila

ble

-fo

r-sale

investm

ent

(514

,569

)(2

04

,82

9)

Oth

er

inco

me

234,

807

14

9,8

23

4,05

4,12

12

,52

5,3

45

Genera

l and

ad

min

istr

ative e

xp

enses

(1,8

99,1

89)

(1,7

45

,63

5)

Dep

recia

tio

n

(37,

762)

(31

,73

2)

Profitb

eforetaxation

2,11

7,17

07

47

,97

8

Inco

me t

ax e

xp

ense

(244

,825

)(2

9,2

73

)

Profitforth

eyear

1,87

2,34

57

18

,70

5

Assets

and

lia

bili

ties o

f th

e C

om

pany a

re c

om

mo

nly

used

acro

ss t

he p

rim

ary

seg

ments

.

55


18. Segmental information (continued)

Geographical segment The information with respect to operating segment is stated below:

a) All of the Company’s policies were issued within Oman.

b) As at year, all assets of the Company are located within Oman except RO 6,527,892 (2016 : RO 6,282,516).

19. Underwriting results The underwriting results are analysed as follows:

Net premiumUnderwriting results after

Reinsurers’ share2017 2016 2017 2016

RO RO RO RO

Marine and aviation 70,275 115,218 73,302 70,814

Fire and general 8,245,727 9,178,958 2,578,183 1,799,515

Group and credit life business 93,113 227,379 2,361 (189,518)

8,409,115 9,521,555 2,653,846 1,680,811

The net claims ratios are as follows:

2017 2016

% %

Marine and aviation 9 17

Fire and general 67 78

Group and credit life business - 148

The net claims ratio is calculated by dividing the net claims (Claims paid less reinsurers’ share of claims) by the net

premiums (Insurance premiums revenue less insurance premiums ceded to reinsurers).

20. Investment income (net)

2017 2016

RO RO

Interest income 584,953 398,428

Dividends 345,079 388,352

Gain on sale of investments (net) 750,005 112,760

1,680,037 899,540

21. Other income

2017 2016

RO RO

Other miscellaneous income 234,807 149,823

56


22. General and administrative expenses

2017 2016

RO RO

Employee related costs 829,792 847,627

Rent 153,815 142,194

Communication expenses 92,086 85,170

Other operating expenses 823,496 670,644

1,899,189 1,745,635

Otheroperatingexpenses includesboardofdirector’s remuneration, headofficecharges,baddebtsexpense,withholding tax expense and other miscellaneous expenses. During the year the Company has expense of RO

362,232 on which withholding tax liability has been created @ 10 % amounting to RO 36,223.

23. Income taxRecognised in the statement of profit or loss and other comprehensive income

2017 2016

RO RO

Current year income tax expense 244,825 29,273

ThetaxrateapplicabletotheCompanyis15%(2016–12%).Forthepurposeofdeterminingthetaxableexpensefortheyear,theaccountingprofithasbeenadjustedfortaxpurposes.Adjustmentsfortaxpurposesincludeitemsrelating toboth incomeandexpense.Aftergivingeffect to theseadjustments, theaverageeffective tax rate isestimated to be 13.08% (2016: 4.08%)

Setoutbelowisreconciliationofincometaxcalculatedonaccountingprofitswithincometaxexpensefortheyear:

Profitbeforeincometax 2,117,170 747,978

Tax calculated at the statutory income tax rate of 15% (2016- 12%) 317,576 86,157

Taxeffectof:Income / gains not taxable (75,228) (78,068)

Non-deductible expenses 5,433 126

Deferred tax not recognised (2,956) 21,058

Income tax expense 244,825 29,273

57


23. Income tax (continued)Unrecognised deferred tax asset / (liability)Deferredtaxarisesonaccountoftemporarydifferencesbetweenthetaxbaseofassetsandliabilitiesandtheircarryingvaluesinthestatementoffinancialposition.

Unrecogniseddeferredtaxassetareattributabletothefollowingitems:

2017 2016

RO RO

Property and equipment 2,276 787

Provision for doubtful accounts 84,000 64,800

Unrealisedgainoninvestments 212,963 194,467

299,239 260,054

Status of tax returnsThe tax assessment has been completed up to year 2011. The Management of the Company believes that additional

taxes, ifany,relatedtotheopentaxyearwouldnotbesignificanttotheCompany'sfinancialpositionasat31December 2017.

24. (a) Earnings per shareBasicearningspershareiscalculatedbydividingtheprofitfortheyearbytheweightedaveragenumberofsharesoutstanding during the year as follows:

2017 2016

RO RO

Profitfortheyear 1,872,345 718,705

Weighted average number of shares 79,560,440 60,000,000

Earnings per share 0.024 0.012

For the purpose of earnings per share, the Company has restated the previous year weighted average number of

sharestoincludetheeffectofsharesplitandbonussharesissuedin2017.

NofigurefordilutedearningspersharehasbeenpresentedastheCompanyhasnotissuedanyinstrumentswhichwould have an impact on earnings per share when exercised.

(b) Net assets per share

2017 2016

RO RO

Net assets (RO) 15,013,026 10,255,744

Number of shares at the reporting date 100,000,000 50,000,000

Net assets per share (RO) 0.150 0.205

Net assets per share are calculated by dividing the shareholders’ equity at the reporting date by the number of

shares outstanding.

For the purpose of net assets per share, the Company has restated the previous year number of shares at the

reportingdatetoincludetheeffectofsharesplit.

58


25. Contingent liabilities and commitment

Legal claimsTheCompany,incommonwiththesignificantmajorityofinsurers,issubjecttolitigationinthenormalcourseofits business. The Company, based on independent legal advice, does not believe that the outcome of these court

caseswillhaveamaterialimpactontheCompany’sincomeorfinancialposition.

2017 2016

RO RO

Bank guarantees 163,602 223,380

Operating lease rental commitmentThe Company has entered into rental agreement for the period of 5 years that expires between years 2017 to 2020.

At 31 December 2017, undiscounted future commitments under operating lease rent were as follows:

2018 2019 2020RO RO RO

Leaserent 20,093 21,100 16,410

26. Related party transactions

Transactions with related partiesThese represent transactions with related parties, i.e. parties are considered to be related if one party has the ability

tocontroltheotherpartyorexercisesignificantinfluenceovertheotherpartyinmakingfinancialandoperatingdecisions and directors of the Company and companies of which they are key management personnel. Related

parties comprise the shareholders, directors, key management personnel and business entities in which they have

theabilitytocontrolorexercisesignificantinfluenceinfinancialandoperatingdecisions.PricingpoliciesandtermsofthesetransactionsareapprovedbytheCompany’smanagementandareonmutuallyagreedterms.Significanttransactions were:

Shareholders Other related parties2017 2016 2017 2016

RO RO RO RO

Insurance premium 26,054 19,620 13,853 53,628

Claims paid 523 12 2,304 1,785

Commission paid - - - 146

Reinsurance premium 2,232,049 2,417,140 7,178,650 651,919

Commission received 368,226 452,888 164,184 -

Claims recovered 1,731,206 788,830 3,329,714 1,873,135

Management expenses 366,827 25,000 - -

Board of director’s sitting fees 32,400 19,000 - -

Board of director’s remuneration* 17,600 31,000 - -

Other expenses 57,595 296,680 (7,292) 42,300

*Board of director’s remuneration is subject to approval at annual general meeting to be held on 21 March 2018.

59


26. Related party transactions (continued)

Transactions with related parties (continued)Balances due from and due to related parties or holders of 10% or more of the Company’s shares, or their family

members are analysed as follows:

Shareholders Other related parties2017 2016 2017 2016

RO RO RO RO

Premiums and reinsurance balance

receivable 373,622 3,653 1,813,548 1,146,415

Due to reinsurers - (1,113,571) (24,916) (8,535)

Other liabilities (3,806,356) (1,972,513) (5,771,641) (360,251)

Compensation of key management personnelThe remuneration of key management during the year was as follows:

2017 2016

RO RO

Salariesandothershorttermbenefits 64,067 132,807

Endofservicebenefits 55 6,301

64,122 139,108

Outstanding balances at the year-end arise in the normal course of business. For the year ended 31 December

2017, the Company has not recorded any impairment of amounts owed by related parties (2016: nil).

From the beginning of the current year the Company has transferred its complete life and medical portfolio to a

groupcompanynamelyQLife&MedialinsuranceCompanyLLCthroughanagreementdated26December2016.FollowingamountsweretransferredfromthebooksoftheCompanytoQLifeandMedicalInsuranceCompanyLLC:

a) Net outstanding claim amounting to RO 327,168 and

b) UnexpiredpremiumreserveamountingtoRO872,142

27. Risk managementGovernance frameworkTheprimaryobjectiveoftheCompany’sriskandfinancialmanagementframeworkistoprotecttheCompany’sshareholders fromevents that hinder the sustainable achievement of the set financial performanceobjectives,includingfailingtoexploitopportunities.Keymanagementrecognisesthecriticalimportanceofhavingefficientandeffectiveriskmanagementsystemsinplace.

The Company has established a risk management function with clear terms of reference from the Board of

Directors, its committees and the associated executive management committees. This is supplemented with a clear

organisational structure with documented delegated authorities and responsibilities from the board of directors to

executive management committees and senior managers. A group risk management policy framework which sets

outtheriskprofilesfortheCompany,riskmanagement,controlandbusinessconductstandardsfortheCompany’soperations has been put in place.

60


27. Risk management (continued)Capital management frameworkThe Company has an internal risk management framework for identifying risks to which each of its business units

and the Company as a whole are exposed, quantifying their impact on economic capital. The internal framework

estimates indicate how much capital is needed to mitigate the risk of insolvency to a selected remote level of risk

appliedtoanumberoftests(bothfinancialandnon-financial)onthecapitalpositionofthebusiness.

The capital structure of the Company comprises of share capital, legal reserve, contingency reserve, fair value

reserve and retained earnings. The Company manages its capital requirements by assessing shortfalls between

reported and required capital levels on a regular basis

TheCompanyfullycompliedwiththeexternallyimposedcapitalrequirementsduringthereportedfinancialperiodsand no changes were made to its capital base, objectives, policies and processes from the previous year.

Regulatory frameworkRegulators are primarily interested in protecting the rights of the policyholders and monitor them closely to ensure

that theCompany is satisfactorilymanaging affairs for their benefit. At the same time, the regulators are alsointerested in ensuring that the Company maintains an appropriate solvency position to meet unforeseen liabilities

arising from economic shocks or natural disasters.

The operations of the Company are also subject to regulatory requirements within the jurisdictions where it operates.

Such regulations not only prescribe approval and monitoring of activities, but also impose certain restrictive

provisions (such as solvency margin) to minimise the risk of default and insolvency on the part of the insurance

companies to meet unforeseen liabilities as these arise.

Asset liability management (ALM) frameworkFinancial risks arise from open positions in interest rate, currency and equity products, all of which are exposed to

generalandspecificmarketmovements.ThemainriskthattheCompanyfacesduetothenatureofitsinvestmentsandliabilitiesisinterestraterisk.TheCompanymanagesthesepositionswithinanALMframeworkthathasbeendeveloped to achieve long-term investment returns in excess of its obligations under insurance and investment

contracts.

TheCompany’sALMisalsointegratedwiththemanagementofthefinancialrisksassociatedwiththeCompany’sotherfinancialassetsandliabilitiesnotdirectlyassociatedwithinsuranceandinvestmentliabilities.

TheCompany’sALMalsoformsanintegralpartoftheinsuranceriskmanagementpolicy,toensureineachperiodsufficientcashflowisavailabletomeetliabilitiesarisingfrominsuranceandinvestmentcontracts.

Insurance riskTheprincipalrisktheCompanyfacesunderinsurancecontractsisthattheactualclaimsandbenefitpaymentsorthetimingthereof,differfromexpectations.Thisisinfluencedbythefrequencyofclaims,severityofclaims,actualbenefitspaidandsubsequentdevelopmentof long-termclaims.Therefore theobjectiveof theCompany is toensurethatsufficientreservesareavailabletocovertheseliabilities.

The Company manages the insurance risk through the careful selection and implementation of its underwriting

strategy guidelines together with the adequate reinsurance arrangements and proactive claims handling.

The concentration of insurance risk exposure is mitigated by the implementation of the underwriting strategy of the

Company,whichattemptstoensurethattherisksunderwrittenarewelldiversifiedacrossalargeportfoliointermsoftype,levelofinsuredbenefits,andamountofrisk,industryandgeography.Underwritinglimitsareinplacetoenforce risk selection criteria.

TheCompanyprincipallyissuesgeneralinsurancecontractswhichconstitutesmainlymarine&aviationandfire&general risks. During the year, the Company expanded its life insurance activities.

61


27. Risk management (continued)

Insurance risk (continued)TheCompany,inthenormalcourseofbusiness,inordertominimisefinancialexposurearisingfromlargeclaims,enters into contracts with other parties for reinsurance purposes. Such reinsurance arrangements provide for

greaterdiversificationofbusiness,allowmanagementtocontrolexposuretopotential lossesarisingfromlargerisks,andprovideadditionalcapacityforgrowth.Asignificantportionofthereinsuranceiseffectedundertreaty,facultative and excess-of-loss reinsurance contracts.

Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision

and are in accordance with the reinsurance contracts.

Tominimise itsexposure tosignificant losses fromreinsurer insolvencies, theCompanyevaluates thefinancialcondition of its reinsurers and monitors concentrations of credit risk arising from similar geographic regions,

activities or economic characteristics of the reinsures.

The Company only deals with reinsurers approved by the parent company’s management, which are generally

international companies that are rated by international rating agencies or other GCC securities.

Although the Company has reinsurance arrangements, it is not relieved of its direct obligations to its policyholders

and thus a credit exposure exists with respect to ceded insurance, to the extent that any reinsurer is unable to

meet its obligations assumed under such reinsurance agreements. The Company’s placement of reinsurance is

diversifiedsuchthatitisneitherdependentonasinglereinsurernoraretheoperationsoftheCompanysubstantiallydependent upon any single reinsurance contract.

The Company has in place strict claim review policies to assess all new and ongoing claims, regular detailed review

of claims handling procedures and frequent investigation of possible fraudulent claims to reduce the risk exposure

of the Company. The Company further enforces a policy of actively managing and prompt pursuing of claims in

order to reduce its exposure to unpredictable future development that can negatively impact the Company.

Key assumptionsThe principal assumption underlying the estimates is the Company’s past claims development experience. This

includesassumptions in respectofaverageclaimcosts,claimhandlingcosts,claim inflation factorsandclaimnumbers for each accident year. Additional qualitative judgments are used to assess the extent to which past

trendsmaynotapply in the future, forexampleone-offoccurrence,changes inmarket factorssuchaspublicattitude to claiming, economic conditions, as well as internal factors such as portfolio mix, policy conditions and

claims handling procedures. Judgment is further used to assess the extent to which external factors such as

judicialdecisionsandgovernmentlegislationaffecttheestimates.

Other key assumptions include variation in interest rates, delays in settlement and changes in foreign currency rates.

SensitivitiesThe general insurance claims provision is sensitive to the above key assumptions. The analysis below is performed

for reasonably possible movements in key assumptions with all other assumptions held constant showing the

impactonliabilitiesandnetprofit.

31 December 2017Change in

assumptionsImpact on

liabilitiesImpact onnet profit

Incurred claims +10% 482,106 482,10631 December 2016

Incurred claims +10% 795,355 795,355

62


27.

Risk

man

agem

ent (

cont

inue

d)Cl

aim

s de

velo

pmen

tT

he C

om

pany m

ain

tain

s s

tro

ng

reserv

es i

n r

esp

ect

of

its i

nsura

nce b

usin

ess i

n o

rder

to p

rote

ct

ag

ain

st

ad

vers

e f

utu

re c

laim

s e

xp

erien

ce a

nd

develo

pm

ents

. T

he u

ncert

ain

ties a

bo

ut

the a

mo

unt

and

tim

ing

of

cla

im p

aym

ents

are

no

rmally

reso

lved

with

in o

ne y

ear.

Net i

ncur

red

clai

ms

31 D

ecem

ber 2

017

Accid

ent

ye

ar

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Tota

lRO

RORO

RORO

RORO

RORO

RORO

At

the e

nd

of

each

rep

ort

ing

year

4,383

,224

3,596

,438

833,7

393,9

50,31

22,9

83,88

24,7

38,31

2 6,0

68,50

0 7,8

27,11

2 8,5

11,09

6 5,5

56,89

1O

ne y

ear

late

r3,6

49,36

25,1

54,73

92,1

75,35

57,0

47,39

54,4

43,10

85,6

48,98

6 6,3

50,76

7 7,8

72,19

3 8,3

29,17

3 -

Two

years

late

r4,3

99,70

85,6

04,12

82,7

33,94

96,4

28,30

04,6

80,17

35,6

59,73

2 5,8

31,15

9 7,1

44,12

6 -

-

Thre

e y

ears

late

r4,4

28,28

35,6

94,28

62,5

82,39

96,4

08,12

54,6

62,13

45,7

42,41

7 6,0

52,28

9 -

--

Fo

ur

years

late

r4,4

44,96

35,6

37,50

62,5

50,37

56,4

19,05

04,4

98,15

05,5

09,19

8 -

--

-

Fiv

e y

ears

late

r4,4

24,72

75,6

37,45

62,5

34,71

96,4

24,20

54,1

51,12

3-

--

--

Six

years

late

r4,3

86,11

95,6

18,99

32,5

27,32

86,4

78,27

5-

--

--

-

Seve

n y

ears

late

r4,3

46,33

35,6

14,72

02,6

30,61

8-

--

--

--

Eig

ht

year

late

r4,3

51,11

75,6

24,62

8-

--

--

--

-

Nin

e y

ears

late

r4,3

94,46

4-

--

--

--

--

-

Est

imate

of

cum

ula

tive

cla

ims

4,394

,464

5,624

,628

2,630

,618

6,478

,275

4,151

,123

5,509

,198

6,052

,289

7,144

,126

8,329

,173

5,556

,891

55,87

0,785

Cum

ula

tive

paym

ents

to

date

4,394

,464

5,614

,216

2,544

,703

6,315

,278

4,400

,864

5,574

,097

5,827

,542

6,962

,787

6,444

,754

2,638

,780

50,71

7,485

Liabilityre

cogn

isedinthes

tatem

ento

ffinancialpositio

n(neto

utsta

nding

claim

sand

IBNR

)5,1

53,30

0

63


27.

Risk

man

agem

ent (

cont

inue

d)Cl

aim

s de

velo

pmen

t (co

ntin

ued)

Net

incurr

ed

cla

ims (31 D

ecem

ber

2016)

Accid

ent

year

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Tota

l

RO

RO

RO

RO

RO

RO

RO

RO

RO

RO

RO

At

the e

nd

of

each

rep

ort

ing

year

1,8

84,8

57

4,3

83,2

24

3,5

96,4

38

833,7

39

3,9

50,3

12

2,9

83,3

12

4,7

38,3

12

6,0

68,5

01

7,8

27,1

12

8,5

11,0

96

One y

ear

late

r1,2

62,5

41

3,6

49,3

62

5,1

54,7

39

2,1

75,3

55

7,0

47,3

95

4,4

43,1

08

5,6

48,9

86

6,3

50,7

67

7,8

72,1

93

-

Two

years

late

r1,2

73,5

56

4,3

99,7

08

5,6

04,1

28

2,7

33,9

49

6,4

28,3

00

4,6

80,1

73

5,6

59,7

32

5,8

31,1

59

--

Thre

e y

ears

late

r1,5

63,1

67

4,4

28,2

83

5,6

94,2

86

2,5

82,3

99

6,4

08,1

25

4,6

62,1

34

5,7

42,4

17

--

-

Fo

ur

years

late

r1,5

78,4

88

4,4

44,9

63

5,6

37,5

06

2,5

50,3

75

6,4

19,0

50

4,4

98,1

50

--

--

Fiv

e y

ears

late

r1,6

00,1

46

4,4

24,7

27

5,6

37,4

56

2,5

34,7

19

6,4

24,2

05

--

--

-

Six

years

late

r1,6

15,7

85

4,3

86,1

19

5,6

18,9

93

2,5

27,3

28

--

--

--

Seve

n y

ears

late

r1,6

16,3

65

4,3

46,3

33

5,6

14,7

20

--

--

--

-

Eig

ht

year

late

r1,6

16,3

65

4,3

51,1

17

--

--

--

--

Nin

e y

ears

late

r1,6

16,3

65

--

--

--

--

--

Est

imate

of

cum

ula

tive

cla

ims

1,6

16,3

65

4,3

51,1

17

5,6

14,7

20

2,5

27,3

28

6,4

24,2

05

4,4

98,1

50

5,7

42,4

17

5,8

31,1

59

7,8

72,1

93

8,5

11,0

96

52,9

88,7

50

Cum

ula

tive

paym

ents

to d

ate

1,6

16,3

65

4,4

06,7

81

5,6

14,7

08

2,5

43,5

68

6,4

15,9

89

4,3

84,9

24

5,4

63,2

09

5,6

89,5

73

6,5

28,9

20

4,1

18,5

45

46,7

82,5

82

Liabilityre

cogn

izedinthes

tatem

ento

ffinancialpositio

n(neto

utsta

nding

claim

sand

IBNR

)6,2

06,1

68

64


27. Risk management (continued)Credit riskCreditriskistheriskthatonepartytoafinancialinstrumentwillcauseafinanciallosstotheotherpartybyfailingto discharge an obligation.

A credit risk policy setting out the assessment and determination of what constitutes credit risk for the Company

has been established and policies and procedures are in place to mitigate the Company’s exposure to credit risk.

Compliance with the policy is monitored and exposures and breaches are regularly reviewed for pertinence and for

changes in the risk environment.

ForallclassesoffinancialassetsheldbytheCompany,other thanthoserelatingtoreinsurancecontracts, themaximumcreditriskexposuretotheCompanyisthecarryingvalueasdisclosedinthefinancialstatementsatthereporting date.

Reinsurance is placed with reinsures approved by the management, which are generally international companies

that are rated by international rating agencies or other GCC agencies.

The Company’s bank balances, bank deposits and investment in bonds are maintained with a range of international

andlocalbanksinaccordancewithlimitssetbytheboardofdirectors.Forbanksandfinancialinstitutions,bankswith better ratings are accepted.

Tominimise itsexposure tosignificant losses fromreinsurer insolvencies, theCompanyevaluates thefinancialcondition of its reinsurers and monitors concentration of credit risk arising from similar geographic regions, activities

or economic characteristics of the reinsurers. At each reporting date, management performs an assessment of

creditworthiness of reinsurers and updates the reinsurance purchase strategy, ascertaining suitable allowance for

impairment.

The following table explains the credit position of the Company.

31 December 2017

Not past due and considered good

Not dueLess than

30 days31 to 60

days61 to 90

days91 to 120

days

Past due but not

impaired More than

121 days

Impaired more than

121days TotalRO RO RO RO RO RO RO

Cash and cash

equivalents 4,709,402 - - - - - - 4,709,402Bank deposits 9,599,543 - - - - - - 9,599,543Available-

for-sale

investments

–localandforeign bonds 5,117,404 - - - - - - 5,117,404Premiums and

reinsurance

balance

receivables 3,925,025 1,718,957 1,296,730 899,728 496,121 2,713,358 560,000 11,609,919Accrued interest - 289,838 - - - - - 289,838

23,351,374 2,008,795 1,296,730 899,728 496,121 2,713,358 560,000 31,326,106

65


27. Risk management (continued)Credit risk (continued)31 December 2016

Not past due and considered good

Not due

Lessthan30 days

31 to 60

days

61 to 90

days

91 to 120

days

Past due

but not

impaired

More than

121days

Impaired

more than

121days

Total

RO RO RO RO RO RO RO

Cash

and cash

equivalents

2,385,008 - - - - - - 2,385,008

Bank deposits 6,422,319 - - - - - - 6,422,319

Available-

for-sale

investments

–localandforeign bonds 3,935,992 - - - - - - 3,935,992

Premiums and

reinsurance

balance

receivables 2,118,558 707,281 930,608 538,734 459,959 3,151,899 540,000 8,447,039

Accrued

interest - 203,554 - - - - - 203,554

14,861,877 910,385 930,608 538,734 459,959 3,151,899 540,000 21,393,912

Included in the Company’s premiums and insurance balance receivables are debtors with a carrying amount of RO

2,713,358 (2016: RO 3,151,899) which are past due at the reporting date for which the Company has not provided

astherehasnotbeenasignificantchangeincreditqualityandtheamountsarestillconsideredrecoverable.

Liquidity riskLiquidityriskistheriskthatanenterprisewillencounterdifficultyinraisingfundstomeetcommitmentsassociatedwithfinancialliabilities

Liquidityrequirementsaremonitoredonaweeklybasisandmanagementensuresthatsufficientfundsareavailableto meet any commitments as they arise.

Maturity profilesThe tablebelowsummarises thematurityprofileof thefinancial liabilitiesof theCompanybasedon remainingundiscounted contractual obligations. Repayments which are subject to notice are treated as if notice were to be

given immediately.

66



Maturity profiles (continued)31 December 2017

Up to one year 1-5 years Over 5 years TotalRO RO RO RO

Due to reinsurers 1,261,472 96,016 166,295 1,523,783Other liabilities and accruals 11,187,590 123,505 146,987 11,458,082Net principal liabilities 12,449,062 219,521 313,282 12,981,865

31 December 2016

Uptooneyear 1-5 years Total

RO RO RO

Due to reinsurers 4,120,950 242,281 4,363,231

Other liabilities and accruals 3,969,178 28,697 3,997,875

Net principal liabilities 8,090,128 270,978 8,361,106

Market riskMarketriskistheriskthatthevalueofafinancialinstrumentwillfluctuateasaresultofchangesinmarketprices,whetherthosechangesarecausedbyfactorsspecifictotheindividualsecurity,oritsissuer,orfactorsaffectingall securities traded in themarket. The Company limitsmarket risk bymaintaining a diversified portfolio andby continuous monitoring of developments in international and local equity and bond markets. In addition, the

Companyactivelymonitorsthekeyfactorsthataffectstockandbondmarketmovements,includinganalysisoftheoperationalandfinancialperformanceofinvestees.

Currency riskCurrencyriskistheriskthatthefairvalueoffuturecashflowsofafinancialinstrumentwillfluctuatebecauseofchanges in foreign exchange rates.

ConsideringthefactthattheOmaniRialiseffectivelypeggedtoUSDollar,theCompanyisnotexposedtoanymaterial currency risk.

The table below summarises the Company’s exposure to foreign currency exchange rate risk at reporting date by

categorizing assets and liabilities by major currencies:

31 December 2017

USD EURO TotalCash and cash equivalents 700,722 42,713 743,435Premiums and reinsurance balances receivables 1,353,823 12,744 1,366,567Investments 1,531,161 - 1,531,161Total assets 3,585,706 55,457 3,641,163Due to reinsurers 1,336,907 29,223 1,366,130Total liabilities 1,336,907 29,223 1,366,130

67



Currency risk (continued)

USD EURO Total

Cash and cash equivalents 799,525 155,072 954,597

Premiums and insurance balances receivables 2,565,027 9,968 2,574,995

Other receivables 5,842 - 5,842

Investments 1,564,005 - 1,564,005

Total assets 4,934,399 165,040 5,099,439

Due to reinsurers 2,991,509 604 2,992,113

Other liabilities and accruals 7,325 - 7,325

Total liabilities 2,998,834 604 2,999,438

Interest rate riskInterestrateriskistheriskthatthevalueorfuturecashflowsofafinancialinstrumentwillfluctuatebecauseofchanges in market interest rates.

The Company invests in securities and has deposits that are subject to interest rate risk. Interest rate risk to the

Company is the risk of changes in market interest rates reducing the overall return on its interest bearing securities.

TheCompany’sinterestriskpolicyrequirestomanageinterestriskbymaintaininganappropriatemixoffixedandvariablerateinstruments.Thepolicyalsorequiresittomanagethematuritiesofinterestbearingfinancialassetsand interestbearingfinancial liabilities.TheCompany limits interest rate riskbymonitoringchanges in interestratesinthecurrenciesinwhichitscashandinvestmentsaredenominatedandhasnosignificantconcentrationofinterest rate risk.

Equity price riskEquitypriceriskistheriskthatthefairvalueoffuturecashflowsofafinancialinstrumentwillfluctuatebecauseofchanges in market prices (other than those arising from interest rate risk or currency risk), whether those changes

arecausedby factors specific to the individual financial instrumentor its issuer,or factorsaffectingall similarfinancialinstrumentstradedinthemarket.

TheCompany’s equity price risk exposure relates to financial assets and financial liabilitieswhose valueswillfluctuateasaresultofchangesinmarketprices,principallyinvestmentsecuritiesnotheldfortheaccountofunit-linked business.

The Company’s price risk policy requires it to manage such risks by setting and monitoring objectives and

constraintson investments,diversificationplans, limitson investments ineachcountry,sectorandmarketandcarefulandplanneduseofderivativefinancialinstruments.

TheCompanyhasnosignificantconcentrationofpricerisk.

68



Equity price risk (continued)The analysis below is performed for reasonably possible movements in key variables with all other variables held

constant,showingtheimpactonnetprofitandequity.

31 December 2017

Change in variable

Impact on net profit

Impact on equity

Available-for-sale investments +2% - 233,868Available-for-sale investments -2% - (233,868)

31 December 2016

Available-for-sale investments +2% - 253,071

Available-for-sale investments -2% - (253,071)

Operational risksOperational risk is the risk of loss arising from system failure, human error, fraud or external events. When controls

fail to perform, operational risks can cause damage to reputation, have legal or regulatory implications or can lead

tofinancialloss.

The Company cannot expect to eliminate all operational risks, but by initiating a rigorous control framework and by

monitoring and responding to potential risks, the Company is able to manage the risks.

TheCompanyhasdetailedsystemsandproceduresmanualswitheffectivesegregationofduties,accesscontrols,authorisation and reconciliation procedures, staff training and assessment processes etc. with a complianceand internal audit framework. Business risks such as changes in environment, technology and the industry are

monitored through the Company’s strategic planning and budgeting process.

28. Fair values of financial instrumentsFair value is the amount for which an asset could be exchanged or a liability settled between knowledgeable, willing

parties in an arm’s length transaction.

Managementbelievesthatthecarryingamountsoffinancialassetsandfinancialliabilitiesrecognisedatamortisedcostinthefinancialstatementsapproximatetheirfairvalues.

Fair value measurements recognized in the statement of financial positionThefollowingtableprovidesananalysisoffinancialinstrumentsthataremeasuredsubsequenttoinitialrecognitionatfairvalue,groupedintoLevels1to3basedonthedegreetowhichthefairvalueisobservable.

Level1-fairvaluemeasurementsarethosederivedfromquotedprices(unadjusted)inactivemarketsforidenticalassets or liabilities.

Level2-fairvaluemeasurementsarethosederivedfrominputsotherthanquotedpricesincludedwithinLevel1that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level3-fairvaluemeasurementsarethosederivedfromvaluationtechniquesthatincludeinputsfortheassetorliability that are not based on observable market data (unobservable inputs).

69


28. Fair values of financial instruments (continued)

31 December 2017Level 1 Total

RO ROAvailable-for-sale financial assets Quoted local investments 4,495,434 4,495,434 Quoted foreign investments 2,080,542 2,080,542 Foreign bonds 1,619,406 1,619,406Total 8,195,382 8,195,382

31 December 2016

Level1 Total

RO RO

Available-for-salefinancialassets Quoted local investments 5,675,191 5,675,191

Quoted foreign investments 3,042,347 3,042,347

Foreign bonds 1,564,005 1,564,005

Total 10,281,543 10,281,543

LocalbondsandunquotedequitiesamountingtoRO3,569,426(2016:RO2,443,415)arecarriedatcostduetonon-availability of fair values. Management is of the opinion that there has been no impairment in value of these

investments.

29. ComparativesDuring the year, the Company has grossed up certain insurance assets and liabilities that has resulted in the

followingamendmentstopreviousyearfigures.

31 December

as previously

reported Adjustments 31 December

2016 2016

RO RO RO

Reinsurers’ share of insurance contract liabilities 17,293,581 1,064,955 18,358,536

Liabilities arising from insurance contract 28,627,836 1,064,955 29,692,791

Suchreclassificationdonotaffectthepreviouslyreportedfinancialperformance,netassetsorequity.

ANNUAL REPORT 2017 · Next to Omantel new Branch, Al Hajer Street, Al Amerat, Sultanate of Oman...

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