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
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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
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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
Theattachednotes1to29formpartofthesefinancialstatements.
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
Theattachednotes1to29formpartofthesefinancialstatements.
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
Theattachednotes1to29formpartofthesefinancialstatements.
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
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)
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
NotestothefinancialstatementsFortheyearended31December2017(continued)
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
NotestothefinancialstatementsFortheyearended31December2017(continued)
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
NotestothefinancialstatementsFortheyearended31December2017(continued)
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
NotestothefinancialstatementsFortheyearended31December2017(continued)
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
NotestothefinancialstatementsFortheyearended31December2017(continued)
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
NotestothefinancialstatementsFortheyearended31December2017(continued)
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
NotestothefinancialstatementsFortheyearended31December2017(continued)
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
NotestothefinancialstatementsFortheyearended31December2017(continued)
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
NotestothefinancialstatementsFortheyearended31December2017(continued)
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
NotestothefinancialstatementsFortheyearended31December2017(continued)
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
NotestothefinancialstatementsFortheyearended31December2017(continued)
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
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NotestothefinancialstatementsFortheyearended31December2017(continued)
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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NotestothefinancialstatementsFortheyearended31December2017(continued)
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
NotestothefinancialstatementsFortheyearended31December2017(continued)
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
NotestothefinancialstatementsFortheyearended31December2017(continued)
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
NotestothefinancialstatementsFortheyearended31December2017(continued)
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
NotestothefinancialstatementsFortheyearended31December2017(continued)
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
NotestothefinancialstatementsFortheyearended31December2017(continued)
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
NotestothefinancialstatementsFortheyearended31December2017(continued)
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
NotestothefinancialstatementsFortheyearended31December2017(continued)
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
NotestothefinancialstatementsFortheyearended31December2017(continued)
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
NotestothefinancialstatementsFortheyearended31December2017(continued)
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
NotestothefinancialstatementsFortheyearended31December2017(continued)
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
NotestothefinancialstatementsFortheyearended31December2017(continued)
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
NotestothefinancialstatementsFortheyearended31December2017(continued)
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
NotestothefinancialstatementsFortheyearended31December2017(continued)
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
NotestothefinancialstatementsFortheyearended31December2017(continued)
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
NotestothefinancialstatementsFortheyearended31December2017(continued)
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
NotestothefinancialstatementsFortheyearended31December2017(continued)
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
NotestothefinancialstatementsFortheyearended31December2017(continued)
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
NotestothefinancialstatementsFortheyearended31December2017(continued)
27. Risk management (continued)
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
NotestothefinancialstatementsFortheyearended31December2017(continued)
27. Risk management (continued)
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
NotestothefinancialstatementsFortheyearended31December2017(continued)
27. Risk management (continued)
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
NotestothefinancialstatementsFortheyearended31December2017(continued)
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.
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