Financial Statements
31 December 2014
Page
Actuary’s Report
01
Independent Auditors’ Report to the Members
02
Financial Statements
EXPRESSION OF OPINION
Statement of comprehensive income
02
Statement of financial position
03
Statement of changes in equity
03
The liabilities described in this report by the term “policy and claims liabilities” refer
to the liabilities described in the regulations to The Insurance Act, 2001 by the term
“actuarial liabilities”. The author’s opinion relates to the values of the policy and claims
liabilities as summarized in Sections 3.2 and 3.3 of this report. The financial condition
of the Company referenced in Section 3.1 below refers to the financial state reflected by
the amount, nature and composition of its assets, liabilities and equity, all at a particular
point in time.
Statement of cash flows
03
Report of the Appointed Actuary
Notes to the financial statements
04-19
I have examined the financial condition and valued the policy and claims liabilities
of Advantage General Insurance Company Limited for its balance sheet as at 31
December 2014 and the corresponding change in the policy and claims liabilities in the
statement of operations for the year then ended. I meet the appropriate qualification
standards and am familiar with the valuation and solvency requirements applicable to
general insurance companies in Jamaica. I have relied upon PwC for the substantial
accuracy of the records and information concerning other liabilities, as certified in the
attached statement.
In my opinion:
i.
the methods and procedures used in the verification of the data are sufficient and
reliable and fulfil acceptable standards of care;
ii.
the valuation of policy and claims liabilities has been made in accordance with
generally accepted actuarial practice with such changes as determined and
directions made by the Financial Services Commission;
iii.
the methods and assumptions used to calculate the policy and claims liabilities
are appropriate to the circumstances of the Company and of the said policies
and claims;
iv.
the amount of the policy and claims liabilities represented in the balance sheet of
Advantage General Insurance Company Limited makes proper provision for the
future payments under the Company’s policies and meets the requirements of
The Insurance Act, 2001 and other appropriate regulations of Jamaica;
v.
a proper charge on account of these liabilities has been made in the statement
of operations;
vi.
there is sufficient capital available to meet the solvency standards as established
by the Financial Services Commission;
Xavier Bénarosch
Fellow, Canadian Institute of Actuaries
Kingston, Jamaica
19 March 2015
AGIC Financial Statements • 31 December 2014
1
Financial Statements • 31 December 2014
Statement of Comprehensive Income
Year ended 31 December 2014
(expressed in Jamaican dollars unless otherwise indicated)
Note
2014
$’000
2013
$’000
5,203,202
Gross Premiums Written
5,392,961
Independent Auditor’s Report
Change in gross provision for unearned premiums
(160,057)
(176,772)
Gross insurance premium revenue
5,232,904
5,026,430
To the Members of
Advantage General Insurance Company Limited
Written premiums ceded to reinsurers
(386,931)
(361,003)
12,484
8,971
Reinsurers’ share of change in provision for unearned premiums
Net insurance premium revenue
Report on the Financial Statements
We have audited the accompanying financial statements of Advantage General Insurance
Company Limited, set out on pages 2 to 19, which comprise the statement of financial
position as at 31 December 2014, and the statements of comprehensive income, changes
in equity and cash flows for the year then ended, and notes, comprising a summary of
significant accounting policies and other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation of financial statements that give a true
and fair view in accordance with International Financial Reporting Standards and with
the requirements of the Jamaican Companies Act, and for such internal control as
management determines is necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our
audit. We conducted our audit in accordance with International Standards on Auditing.
Those standards require that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free
from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation of financial statements that
give a true and fair view in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the entity’s internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the financial statements.
Claims expense
Reinsurer’s share of claims and benefits incurred
Commission expense
Commission income
Other underwriting income
Operating expenses
Underwriting Profit
Investment income, net
4,674,398
(2,919,580)
25,578
28,075
(253,934)
(297,798)
89,950
51,803
111,131
101,601
(1,397,142)
(1,194,278)
590,422
444,221
751,977
577,237
Change in fair value of investment properties
(6,000)
22,000
Foreign exchange gains, net
32,595
34,110
(74,651)
(45,646)
1,294,343
1,031,922
(454,113)
(311,331)
840,230
720,591
8,402
(211,026)
33,236
43,284
Investment properties expense, net
7
4,858,457
(2,843,618)
15
Profit before Taxation
Taxation
10
Net profit for the year
Other Comprehensive Income
Items that may be reclassified subsequently to profit or loss
Unrealised gains/(losses) on available-for-sale investments, net of tax
Items that will not be reclassified to profit or loss
Increase in valuation of property, plant and equipment, net of tax
Re-measurement (losses)/gains on employee benefit obligation, net of tax
TOTAL COMPREHENSIVE INCOME
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements give a true and fair view of the financial position
of Advantage General Insurance Company Limited as at 31 December 2014, and of its
financial performance and its cash flows for the year then ended in accordance with
International Financial Reporting Standards and the requirements of the Jamaican
Companies Act.
Report on Other Legal and Regulatory Requirements
As required by the Jamaican Companies Act, we have obtained all the information and
explanations which, to the best of our knowledge and belief, were necessary for the
purposes of our audit.
In our opinion, proper accounting records have been kept, so far as appears from
our examination of those records, and the accompanying financial statements are in
agreement therewith and give the information required by the Jamaican Companies Act,
in the manner so required.
Chartered Accountants
31 March 2015
Kingston, Jamaica
AGIC Financial Statements • 31 December 2014
2
(44,861)
14,465
(3,223)
(153,277)
837,007
567,314
Financial Statements • 31 December 2014
Statement of Financial Position
Statement of Cash Flows
(expressed in Jamaican dollars unless otherwise indicated)
(expressed in Jamaican dollars unless otherwise indicated)
31 December 2014
Year ended 31 December 2014
Note
2014
$’000
2013
$’000
22,935
187,840
ASSETS
2014
$’000
2013
$’000
840,230
720,591
60,328
41,167
5,252
4,725
Cash Flows from Operating Activities
Cash resources
Net profit
Reverse repurchase agreements
11
373,445
-
Investment securities classified as available-for-sale
and loans and receivables
12
9,577,470
8,786,401
Insurance receivables and deferred expenses
13
614,300
388,615
Loss on disposal of property, plant and equipment
Reinsurance asset
14
202,667
235,177
Premiums earned (net of re-insurance)
Other accounts receivable
Withholding tax recoverable
Adjustments for items not affecting cash:
Depreciation
Amortisation of intangible assets
83,055
70,776
219, 857
445,389
Claims expense (net of reinsurance)
Taxation
Investment properties
15
466,000
472,000
Intangible assets
16
32,151
3,672
Property, plant and equipment
17
964,670
934,585
12,556,550
11,524,455
LIABILITIES
Change in fair value of investment properties
311,331
8,426
Bad debt provision
11,749
4,452
Gains on foreign exchange
18
334,938
256,103
14
7,795,079
7,282,263
Insurance payables and deferred income
19
24,187
52,266
88,645
546,620
Other accounts receivable
Accounts payable and accrued charges
142,919
150,981
Employee benefit obligation
21
176,820
79,267
8,562,588
8,367,500
Insurance receivables & deferred expenses
Insurance payables and deferred income
Claims paid
Share capital
22
2,009,907
2,009,907
Capital reserves
23
196,050
162,814
Fair value reserves
(6,207)
(14,609)
1,794,212
998,843
3,993,962
3,156,955
12,556,550
11,524,455
Accumulated surplus
Approved for issue by the Board of Directors on 24 March 2015 and signed on its behalf by:
(32,595)
(34,110)
(742,119)
(529,149)
(1,407,198)
(1,275,252)
(237,434)
(15,841)
(12,279)
(11,183)
78,835
14,901
Changes in operating assets and liabilities:
Premiums written
SHAREHOLDER’S EQUITY
(22,000)
2,891,505
30,261
Insurance contract provisions
20
6,000
2,818,040
454,113
Accounts payable and accrued charges
Deferred tax liability
2,208
(4,674,398)
Employee benefit obligation
Interest income
Income tax payable
(4,858,457)
Taxes paid
(28,079)
24,591
(1,606,155)
(1,262,784)
5,006,030
4,842,199
(2,420,287)
(2,186,725)
(682,656)
(124,009)
296,932
1,268,681
Interest received
667,228
499,293
Additions to property, plant and equipment and intangible assets
Net cash provided by/(used in) operating activities
Cash Flows from Investing Activities
(84,640)
(98,953)
Investment securities classified as available-for-sale
and loans and receivables, net
(1,709,769)
(5,536,107)
Net cash used in investing activities
(1,127,181)
(5,135,767)
Cash Flows from Financing Activities
Proceeds from issue of shares
-
59,905
Dividends paid
-
(247,600)
Net cash used in financing activities
Karlene Bailey
Director
Mark Thompson
Director
-
(187,695)
Decrease in cash and cash equivalents
(830,249)
(4,054,781)
Cash and cash equivalents at beginning of year
1,286,366
5,341,147
456,117
1,286,366
22,935
187,840
CASH AND CASH EQUIVALENTS AT END OF THE YEAR
Statement of Changes in Equity
Comprising:
Year ended 31 December 2014
Cash resources
(expressed in Jamaican dollars unless otherwise indicated)
Reverse repurchase agreements
Investment securities
Note
Balance at 31 December 2012
Share
Capital
$’000
Capital
Reserves
$’000
Fair Value
Reserves
$’000
Accumulated
Surplus
$’000
Share
Capital
$’000
2,777,337
1,950,002
119,530
196,417
511,388
Net profit for the year
-
-
-
720,591
720,591
Other comprehensive income
-
43,284
(211,026)
14,465
(153,277)
567,314
Total comprehensive income
-
43,284
(211,026)
735,056
Issue of shares
22
59,905
-
-
-
59,905
Dividends
25
-
-
-
(247,600)
(247,600)
2,009,907
162,814
(14,609)
998,843
3,156,955
840,230
Balance at 31 December 2013
Net profit for the year
-
-
-
840,230
Other comprehensive income
-
33,236
8,402
(44,861)
(3,223)
Total comprehensive income
-
33,236
8,402
795,369
837,007
2,009,907
196,050
6,207
1,794,212
3,993,962
Balance at 31 December 2014
AGIC Financial Statements • 31 December 2014
3
373,445
-
59,737
1,098,526
456,117
1,286,366
Financial Statements • 31 December 2014
arise at a point in time or progressively over time. The interpretation
also requires that an obligation to pay a levy triggered by a minimum
threshold is recognised when the threshold is reached. The adoption
of this interpretation has not had a material impact on the financial
statements.
Notes to the Financial Statements
1.
Identification and Activities
Advantage General Insurance Company Limited (the company) is incorporated
under the laws of Jamaica, and is a wholly owned subsidiary of NCB Capital
Markets Limited. The company is incorporated in Jamaica and its ultimate parent
company is National Commercial Bank Jamaica Limited, which is controlled by the
Honourable Michael A. Lee-Chin, OJ. Until February 2013, the company was an
80% subsidiary of AIC (Barbados) Limited, which is incorporated in Barbados. The
ultimate parent company was then Portland Holdings Inc., incorporated in Canada
and also controlled by the Honourable Michael A. Lee-Chin, OJ.
The principal activity of the company is the underwriting of general insurance
business. The company’s registered office is located at 4-6 Trafalgar Road, Kingston
5.
2.
Accounting pronouncements that are not yet effective, and have not been
early adopted
At the date of authorisation of these financial statements, certain new
standards, interpretations and amendments to existing standards have been
issued which are mandatory for the company’s accounting periods beginning
on or after 1 January 2015 or later periods, but were not effective at the date
of the statement of financial position, and which the company has not early
adopted. The company has assessed the relevance of all such new standards,
interpretations and amendments, has determined that the following may be
relevant to its operations, and has concluded as follows:
•
Amendment to IAS 1, ‘Disclosure initiative’, (effective for accounting
periods beginning on or after 1 January 2016). These amendments
clarify the existing requirements of IAS 1 and provide additional assistance
to apply judgement when meeting the presentation and disclosure
requirements in IFRS. The amendment does not affect recognition and
measurement. It is not expected to have a significant impact on the
financial statements.
•
IFRS 15, ‘Revenue from Contracts with Customers’, (effective for
accounting periods beginning on or after 1 January 2017). The IASB has
published its new revenue standard, IFRS 15 ‘Revenue from Contracts
with Customers’. The U.S. Financial Accounting Standards Board (FASB)
has concurrently published its equivalent revenue standard which is
the result of a convergence project between the two Boards. IFRS 15
applies to nearly all contracts with customers: the main exceptions are
leases, financial instruments and insurance contracts. It specifies how
and when an entity will recognise revenue. It also requires entities to
provide more informative, relevant disclosures. The standard supersedes
IAS 18, ‘Revenue’, IAS 11, ‘Construction Contracts’ and a number of
revenue-related interpretations. The impact of future adoption of the
standard is not expected to be significant for the company as the affected
revenue streams are not material.
•
IFRS 9, ‘Financial instruments part 1: Classification and
measurement’, (effective for annual periods beginning on or after 1
January 2018) was issued in November 2009 and replaces those parts
of IAS 39 relating to the classification and measurement of financial
instruments. Key features are as follows:
Summary of Significant Accounting Policies
The principal financial accounting policies adopted in the preparation of these
financial statements are set out below. These policies have been consistently applied
to all the years presented, unless otherwise stated.
(a) Basis of preparation
These financial statements have been prepared in conformity with International
Financial Reporting Standards (IFRS) and have been prepared under the
historical cost convention as modified by the revaluation of certain financial
instruments, property plant and equipment and investment properties which
are carried at fair value.
The preparation of financial statements in conformity with IFRS requires the
use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the company’s accounting
policies. Although these estimates are based on managements’ best knowledge
of current events and action, actual results could differ from those estimates.
The areas involving a higher degree of judgement or complexity, or areas
where assumptions and estimates are significant to the financial statements
are disclosed in Note 6.
Accounting pronouncements effective in 2014 which are relevant to the
company’s operations
Certain new standards, amendments and interpretations to existing standards
have been published that became effective during the current financial year
and are relevant to the company’s operations. The adoption of these new
pronouncements has impacted the company as discussed below.
•
•
•
Financial assets are required to be classified into two measurement
categories: those to be measured subsequently at fair value, and those to
be measured subsequently at amortised cost. The decision is to be made
at initial recognition. The classification depends on the entity’s business
model for managing its financial instruments and the contractual cash
flow characteristics of the instrument.
IAS 32, (Amendment) ‘Financial instruments: Presentation’
(effective for annual periods beginning on or after 1 January 2014).
This amendment updates the application guidance in IAS 32, ‘Financial
instruments: Presentation’, to clarify some of the requirements for
offsetting financial assets and financial liabilities on the statement of
financial position. The company has applied the amendment in the
statement of financial position.
An instrument is subsequently measured at amortised cost only if it is
a debt instrument and both the objective of the entity’s business model
is to hold the asset to collect the contractual cash flows, and the asset’s
contractual cash flows represent only payments of principal and interest
(that is, it has only ‘basic loan features’). All other debt instruments are to
be measured at fair value through profit or loss.
Recoverable amount disclosures for non-financial assets
(Amendments to IAS 36), (effective for annual periods beginning on or
after 1 January 2014). The amendments to IAS 36 require disclosure
of the recoverable amount of an individual asset (including goodwill) or
a cash-generating unit and additional information about the fair value
less costs of disposal for which an impairment loss has been recognised
or reversed during the reporting period. The requirement to disclose the
recoverable amount of each cash generating unit for which the carrying
amount of goodwill or intangible assets with indefinite life intangible
assets allocated to that unit is significant when compared to the total
carrying amount of goodwill or indefinite life intangible assets has been
removed. These amendments may result in additional disclosure relating
to impairments or reversals of impairments in the future.
IFRIC 21, ‘Levies’, (effective for annual periods beginning on or after 1
January 2014). IFRIC 21 addresses the accounting for a liability to pay a
levy recognised in accordance with IAS 37, ‘Provisions’, and the liability
to pay a levy whose timing and amount is certain. It excludes income
taxes within the scope of IAS 12, ‘Income taxes’. IFRIC 21 indicates that
the obligating event that gives rise to a liability to pay a levy is the event
identified by the legislation that triggers the obligation to pay the levy.
It concludes that the fact that an entity is economically compelled to
continue operating in a future period, or prepares its financial statements
under the going concern principle, does not create an obligation to pay
a levy that will arise from operating in the future. Accordingly, a liability
to pay a levy is recognised when the obligating event occurs. This might
All equity instruments are to be measured subsequently at fair value.
Equity instruments that are held for trading will be measured at fair value
through profit or loss. For all other equity investments, an irrevocable
election can be made at initial recognition, to recognise unrealised and
realised fair value gains and losses through OCI rather than profit or
loss. There is to be no recycling of fair value gains and losses to profit or
loss. This election may be made on an instrument-by-instrument basis.
Dividends are to be presented in profit or loss, as long as they represent
a return on investment.
While adoption of IFRS 9 is mandatory from 1 January 2018, earlier
adoption is permitted. The company is considering the implications of
the standard, the impact on the company and the timing of its adoption.
IASB Annual Improvements The IASB annual improvements project for the 2010 - 2012 cycle resulted
in amendments to the following standards which may be relevant to the
company’s operations. These amendments are effective for the accounting
periods beginning on or after 1 July 2014 and 1 January 2016. The company
is assessing the impact of future adoption of the amendments.
AGIC Financial Statements • 31 December 2014
4
Financial Statements • 31 December 2014
2.
Summary of Significant Accounting Policies (Continued)
(a)
Basis of preparation (continued)
Standards, interpretations and amendments to published standards
that are not yet effective (continued)
Rental income
Rental income is recognised on an accrual basis.
IASB Annual Improvements •
•
•
•
Dividend
Dividend income for equities is recognised when the right to receive payment
is established.
IFRS 13, ‘Fair value measurements’. When IFRS 13 was published, certain
paragraphs of IAS 39 were deleted as consequential amendments. This
led to a concern that entities no longer had the ability to measure shortterm receivables and payables at invoice amounts where the impact
of not discounting is immaterial. The IASB has amended the basis for
conclusions of IFRS 13 to clarify that it did not intend to remove the ability
to measure short-term receivables and payables at invoice amounts in
such cases. This amendment is effective for periods beginning on or after
1 July 2014.
IAS 16, ‘Property, plant and equipment’ and IAS 38, ‘Intangible assets.
Both standards are amended to clarify how the gross carrying amount
and the accumulated depreciation are treated where an entity uses the
revaluation model. The carrying amount of the asset is to be restated
to the revalued amount. The split between gross carrying amount
and accumulated depreciation is treated in one of two ways. The
gross carrying amount may restated in a manner consistent with the
revaluation of the carrying amount, and the accumulated depreciation is
adjusted to equal the difference between the gross carrying amount and
the carrying amount after taking into account accumulated impairment
losses. Alternatively, the accumulated depreciation may be eliminated
against the gross carrying amount of the asset. This amendment is
effective for periods beginning on or after 1 July 2014.
IFRS 7, ‘Financial instruments: Disclosures’. The amendment clarifies,
among other things, that the additional disclosure required by the
amendments to IFRS 7, ‘Disclosure – Offsetting financial assets and
financial liabilities’ is not specifically required for all interim periods, unless
required by IAS 34. This amendment is effective for periods beginning on
or after 1 January 2016.
IAS 19 (Revised), ‘Employee benefits’. The amendment clarifies that,
when determining the discount rate for post-employment benefit
obligations, it is the currency that the liabilities are denominated in that
is important, and not the country where they arise. The assessment
of whether there is a deep market in high-quality corporate bonds or
not is based on corporate bonds in that currency, and not corporate
bonds in a particular country. Similarly, where there is no deep market
in high-quality corporate bonds in that currency, government bonds in
the relevant currency should be used. This amendment is effective for
periods beginning on or after 1 January 2016.
The company has concluded that all other standards, interpretations and
amendments to existing standards, which are published but not yet effective
are either relevant to its operations but will have no material impact on
adoption; or are not relevant to its operations and will therefore have no impact
on adoption; or contain inconsequential clarifications that will have no material
impact when they come into effect. This includes amendments resulting from
the IASB’s ongoing ‘Improvements to IFRS’ project.
(b) Revenue and income recognition
Revenue comprises the fair value of the consideration received or receivable
for the provision of services in the ordinary course of the company’s activities.
Revenue is shown net of General Consumption Tax and is recognised as
follows:
Insurance services
Gross premiums written relate to business incepted and or renewed during the
year, less the value of policies cancelled.
Premium income is recognised over the life of the policies written. Only the
earned portion of premium income, which is recognized from the effective
date of the policy, is reflected as revenue. The portion of premium income
that is written in the current year relating to coverage in the subsequent year
is deferred as unearned income. Unearned premiums are calculated on the
“twenty-fourths” basis
(Note 2(q)(i)).
Other underwriting income
This represents transaction processiong fees recognised as earned.
(c) Foreign currency translation
(i)
Functional and presentation currency
Items included in the financial statements of the company are measured
using the currency of the primary economic environment in which
it operates (the functional currency). The financial statements are
presented in Jamaican dollars which is also the company’s functional
currency.
(ii)
Transactions and balances
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of
such transactions and from the translation at year-end exchange rates
of monetary assets and liabilities denominated in foreign currencies are
recognised in profit or loss.
Translation differences resulting from changes in the amortised cost of foreign
currency monetary assets classified as available-for-sale are recognised in
profit or loss. Other changes in the fair value of these assets are recognised
in other comprehensive income. Translation differences on non-monetary
financial assets classified as available-for-sale are reported as a component of
the fair value gain or loss in other comprehensive income.
(d) Reinsurance ceded
Contracts entered into by the company with reinsurers under which the
company is compensated for losses on one or more insurance contracts issued
by the company are classified as reinsurance contracts.
The benefits to which the company is entitled under its reinsurance contracts
held are recognised as reinsurance assets. These assets consist of short–
term balances due from reinsurers as well as longer term receivables that
are dependent on the expected claims and benefits arising under the related
reinsurance contracts. Amounts recoverable from or due to reinsurers are
measured consistently with amounts associated with the reinsured insurance
contracts and in accordance with the terms of each reinsurance contract.
Reinsurance liabilities are primarily premiums payable for reinsurance
contracts and are recognised as an expense when due.
Estimated amounts of reinsurance recoverable, which represent the portion
of unearned premiums ceded to the reinsurers, are included in reinsurance
assets on the statement of financial position.
The company relies upon reinsurance agreements to limit the potential
for losses and to increase its capacity to write insurance. Reinsurance
arrangements are effected under reinsurance treaties and by negotiation on
individual risks. Reinsurance does not relieve the company from liability to its
policyholders. To the extent that a reinsurer may be unable to pay losses for
which it is liable under the terms of the reinsurance agreement, the company
is exposed to the risk of continued liability for such losses.
The company assesses its reinsurance assets for impairment. If there is
objective evidence that the reinsurance asset is impaired, the company reduces
the carrying amount of the reinsurance asset to its recoverable amount and
recognises that impairment loss in profit or loss.
(e) Taxation
Taxation on the profit or loss for the year comprises current and deferred tax.
Current and deferred taxes are recognised as income tax expense or benefit
in net profit or loss in the statement of comprehensive income except where
they relate to items recorded in other comprehensive income or equity, in
which case they are also charged or credited to other comprehensive income
or equity.
(i)
Commissions payable on premium income and commissions receivable on
reinsurance of risks are charged and credited to profit or loss, respectively,
over the life of the policies.
Current taxation
Current tax is the expected taxation payable on the taxable income for
the year, using tax rates enacted at date of the statement of financial
position, and any adjustment to tax payable and tax losses in respect of
the previous years.
Interest income
Interest income is recognised on a time-proportion basis using the effective
interest method. When a receivable is impaired, the company reduces the
carrying amount to its recoverable amount, being the estimated future cash
flow discounted at the original effective interest rate of the instrument, and
continues unwinding the discount as interest income.
AGIC Financial Statements • 31 December 2014
5
Financial Statements • 31 December 2014
2.
Summary of Significant Accounting Policies (Continued)
(e)
comprise balances with maturity dates of less than 90 days from the dates of
acquisition including cash and bank balances, deposits held on call with banks
net of bank overdrafts and investment securities.
Taxation (continued)
(ii)
Deferred income taxes
Deferred tax liabilities are recognised for temporary differences between
the carrying amounts of assets and liabilities and their amounts as
measured for tax purposes, which will result in taxable amounts in future
periods. Deferred tax assets are recognised for temporary differences
which will result in deductible amounts in future periods, but only to the
extent it is probable that sufficient taxable profits will be available against
which these differences can be utilised.
(i)
Available for sale financial assets
Available-for-sale financial assets are non-derivatives that are either
designated in this category or not classified in any of the other categories.
Available-for-sale investments are initially recognised at fair value, which
includes transaction costs, and subsequently carried at fair value based on
quoted bid prices or amounts derived from cash flow models. Unrealised
gains and losses arising from changes in fair value of available-for-sale
securities are recognised in other comprehensive income.
Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply in the period in which the asset will be realised or the liability
will be settled based on enacted rates.
(f)
Employee benefits
Employee benefits comprise all forms of consideration given by an enterprise
in exchange for service rendered by employees.
Equity securities for which fair values cannot be measured reliably are
recognised at cost less impairment. When securities classified as availablefor-sale are sold or impaired, the accumulated fair value adjustments in equity
at the date of disposal or impairment are reclassified to profit or loss.
These include current or short-term benefits such as salaries, NIS contributions
paid, annual vacation and sick leave, and post-employments benefits, such as
pensions and other long-term employee benefits, such as long service benefits.
(i)
Impairment of financial assets
A financial asset is considered impaired if its carrying amount exceeds
its estimated recoverable amount. The company assesses at each date of
statement of financial position whether there is objective evidence that a
financial asset or group of financial assets is impaired. The amount of the
impairment loss for assets carried at amortised cost is calculated as the
difference between the asset’s carrying amount and the present value of
expected future cash flows discounted at the original effective interest rate.
The recoverable amount of a financial asset carried at fair value is the present
value of expected future cash flows discounted at the current market interest
rate for a similar financial asset. In the case of equity securities classified as
available-for- sale, a significant or prolonged decline in the fair value of the
security below its cost is considered as an indicator that the securities are
impaired. If any such evidence exists for available-for-sale financial assets,
the cumulative loss - measured as the difference between the acquisition cost
and the current fair value, less any impairment loss on that financial asset
previously recognised in other comprehensive income – is recycled through
other comprehensive income and recognised in profit or loss for the current
year. Impairment losses recognised in profit or loss on equity instruments are
not reversed through profit or loss.
General benefits:
Short-term employee benefits are recognised as a liability, net of
payments made, and charged as expense.
The expected cost of vacation leave that accumulates is recognised when
the employee becomes entitled to the leave. Post-employment benefits
are accounted for as described below.
(ii)
Defined benefit pension plan:
The company operates a defined benefit pension plan, the assets of which
are generally held in a separate trustee-administered fund. The pension
plan is funded by payments from employees and by the company, taking
into account the recommendations of independent qualified actuaries. A
defined benefit plan is a pension plan that is not a defined contribution
plan. Typically, defined benefit plans define an amount of pension benefit
that an employee will receive on retirement, usually dependent on one or
more factors such as age, years of service and compensation.
The amount recognised in the statement of financial position in respect
of defined benefit pension plan is the present value of the defined benefit
obligation at the statement of financial position date less the fair value
of plan assets. The defined benefit obligation is calculated annually
by independent actuaries using the projected unit credit method.
The present value of the defined benefit obligation is determined by
discounting the estimated future cash outflows using interest rates of
high-quality Government of Jamaica bonds that are denominated in
the currency in which the benefits will be paid and that have terms to
maturity approximating to the terms of the related pension liability.
(j)
Past-service costs are recognised immediately in expenses.
Other post-employment obligations
The company provides post-employment health care benefits to its
retirees. The entitlement to these benefits is usually conditional on the
employee remaining in service up to retirement age and the completion
of a minimum service period. The expected costs of these benefits are
accrued over the period of employment using an accounting methodology
similar to that for defined benefit pension plans. Actuarial gains and
losses arising from experience adjustments, and changes in actuarial
assumptions are charged or credited to equity in other comprehensive
income in the period in which they arise. These obligations are valued
annually by independent qualified actuaries.
(g) Financial instruments
Financial instruments carried on the statement of financial position include
investment securities, reinsurance assets, insurance receivable, other
receivables, cash and cash equivalent, accounts payable , insurance payables
and insurance contract provisions. The particular recognition methods adopted
are disclosed in the individual policy statements associated with each item.
The fair values of the company’s financial instruments are discussed in Note 5.
(h) Cash and cash equivalents
For the purpose of the statement of cash flows, cash and cash equivalents
Loans and receivables
The company classifies some of its financial assets in the loans and receivables
category. The classification depends on the purpose for which the financial
assets were acquired. Management determines the classification at initial
recognition and re-evaluates this designation at every reporting date.
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. These
balances are carried at amortised cost using the effective yield method, less
provision made for impairment. A provision for impairment is established
when there is objective evidence that the company will not be able to collect
all amounts due according to the original terms. The amount of the provision
is the difference between the carrying amount and the recoverable amount,
being the present value of expected cash flows, discounted at the market rate
of interest on Treasury Bills. Debts that are known to be uncollectible are
written off during the year in which they are identified.
Actuarial gains and losses arising from experience adjustments and
changes in actuarial assumptions are charged or credited to equity in
other comprehensive income in the period in which they arise.
(iii)
Investments
Investments are classified as available-for-sale and loans and receivables.
Management determines the appropriate classification of investments at the
time of purchase. Purchases and sales of investments are recognised on the
trade date, which is the date that the company commits to purchase or sell
the asset.
Financial assets classified as loans and receivables either meet the definition of
loans and receivables at the date of acquisition, or at the date of reclassification
from another category (fair value through profit or loss or available-forsale). Insurance receivables, some investment securities and other accounts
receivable have been classified as loans and receivables.
(k)
Property, plant and equipment
Land is stated at historical cost. All other property, plant and equipment
are stated at historical cost less accumulated depreciation and impairment.
Depreciation is computed on the straight line method at rates estimated to
write off the assets over their expected useful lives as follows:
Freehold buildings
Motor vehicles
Furniture, fixtures and equipment
Leasehold improvement
2.5% or useful lives
20%
10%,25%
10% or lease period
Property, plant and equipment are reviewed periodically for impairment. Where
the carrying amount of an asset is greater than its estimated recoverable
amount, it is written down immediately to its recoverable amount. Gains
and losses on disposals are determined by comparing proceeds with carrying
amount and are included in underwriting profit.
AGIC Financial Statements • 31 December 2014
6
Financial Statements • 31 December 2014
2.
Summary of Significant Accounting Policies (Continued)
(iii)
Claims outstanding
A provision is made to cover the estimated cost of settling claims
arising out of events which occurred by the year end, including claims
incurred but not reported (IBNR), less amounts already paid in respect
of those claims. This provision is estimated by management (insurance
case reserves) and the appointed actuary (IBNR) on the basis of claims
admitted and intimated.
(iv)
Claims incurred but not reported
The reserve for IBNR claims has been calculated by an independent
actuary using the Paid Loss Development method, the Incurred Loss
Development method, the Bornhuetter-Ferguson Paid Loss method, the
Bornhuetter-Ferguson Incurred Loss method, the Expected Loss Ratio
method and the Frequency-Severity method (Note 11). This calculation
is done in accordance with the Insurance Act 2001.
(v)
Provision for adverse deviations
This provision reflects considerations relating to the company’s claims
practices, the underlying data, and the nature of the lines of business
and seeks to provide for any unforeseen adverse development in claims
liabilities.
(k) Property, plant and equipment (continued)
Repairs and maintenance expenses are charged to profit or loss during the
financial period in which they are incurred. The cost of major renovations is
included in the carrying amount of the asset when it is probable that future
economic benefits in excess of the originally assessed standard of performance
of the existing asset will flow to the company. Major renovations are depreciated
over the remaining useful life of the related asset.
(l)
Investment property
Investment property is held for long-term rental yields and is not occupied by
the company. Investment property is carried at fair value using an income
approach, which is determined by an external valuator. Changes in fair value
are recognised in profit or loss in the statement of comprehensive income.
(m) Intangible assets
Computer software
Acquired software licences are capitalised on the basis of the costs incurred to
acquire and bring to use the specific software. These costs are amortised on
the basis of the expected useful life, which is five years.
Impairment of long-lived assets
Long-lived assets are reviewed for impairment losses whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the
carrying amount of the asset exceeds its recoverable amount, which is the
higher of an asset’s net selling price and value in use. For the purpose of
assessing impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash flows.
(r)
Accounts payable
Payables are recognised at fair value and subsequently measured at amortised
cost.
(s)
Dividend distribution
Dividend distribution to the company’s shareholders is recognised as a liability
in the company’s financial statements in the period in which the dividends are
approved by the company’s shareholders.
(o)
Deferred policy acquisition costs
The cost of acquiring and renewing insurance contracts, including
commissions, underwriting and policy issue expenses, which vary with and are
directly related to the contracts, are deferred over the unexpired period of risk
carried. Deferred policy acquisition costs are subject to recoverability testing
at the time of policy issue and at the end of each accounting period.
(t)
Related party transactions and balances
Parties are considered to be related if one party has the ability to control the
other party or exercise significant influence over the other party in making
financial or operational decisions. Related party transactions and balances are
recognised and disclosed for the following:
(p)
Insurance contracts
Insurance contracts are those contracts that transfer significant insurance risk.
The company’s insurance contracts are classified as short-term insurance
contracts which include casualty and property insurance contracts.
(n)
The portion of premium received on in-force contracts that relates to
unexpired risk at the date of the statement of financial position is reported
as unearned premium in Insurance Reserves. Premiums are shown before
deductible commission.
3.
Claims and loss adjustments expenses are charged to profit or loss as incurred
based on estimated liability for compensation owed to contract holders or
third parties damaged by the contract holders. They include direct and indirect
claims settlement costs and arise from events that have occurred up to the
date of the statement of financial position even if they have not yet been
reported to the company. The company does not discount its liabilities for
unpaid claims. Liabilities for unpaid claims are estimated using the input of
assessments for individual cases reported to the company. Statistical analysis
is used to estimate claims incurred but not reported, as well as the expected
ultimate cost of more complex claims that may be affected by external factors.
(q)
Provision for unearned premium
The provision for unearned premium represents that proportion of
premiums written in respect of risks to be borne subsequent to the year
end, under contracts entered into on or before the date of the statement
of financial position and is computed by applying the “24th” basis to gross
written premiums for the period.
(ii)
Unearned commission
The unearned commission represents the actual commission income
on premium ceded on proportional reinsurance contracts relating to the
unexpired period of risk carried. The income is deferred as unearned
commission reserves, and amortised over the period in which the
commissions are expected to be earned. These reserves are calculated
on the 24th basis.
Enterprises and individuals owning directly or indirectly an interest in
the voting power of the company that gives them significant influence
over the company’s affairs and close members of the families of these
individuals.
(ii)
Key management personnel, which are persons having authority and
responsibility for planning, directing and controlling the activities of the
company, including directors and officers and close members of the
families of these individuals.
Responsibilities of the Appointed Actuary and External Auditors
The actuary has been appointed by the Board of Directors pursuant to the Act.
With respect to the preparation of the financial statements, the actuary is required
to carry out an actuarial valuation of management’s estimate of the company’s
policy liabilities and report thereon to the shareholders. Actuarially determined
policy liabilities consist of the provisions for, and reinsurance recovery of, unpaid
claims and adjustment expenses on insurance policies in force, including provisions
for salvage and subrogation, and future obligations on the unearned portion of
insurance policies including deferred policy acquisition costs. The valuation is made
in accordance with accepted actuarial practice, as well as any other matter specified
in any directive that may be made by regulatory authorities. The actuary, in his
verification of the management information provided by the company, and which
is used in the valuation, also makes use of the work of the external auditors. The
actuary’s report outlines the scope of his work and opinion.
Insurance reserves
Under the Insurance Regulations, 2001, the company is required to
actuarially value its insurance reserves annually. Consequently, provision for
claims incurred but not reported (IBNR) as well as the provision for adverse
deviations have been independently actuarially determined. The remaining
components of the reserves, as below, are determined by management, but
are also reviewed by the actuary in determining the overall adequacy of the
provision for the company’s insurance liabilities.
(i)
(i)
The external auditors have been appointed by the shareholders pursuant to the
Jamaican Companies Act to conduct an independent and objective audit of the
financial statements of the company in accordance with International Standards
on Auditing and report thereon to the shareholders. In carrying out their audit, the
auditors also make use of the work of the actuary and his report on the company’s
actuarially determined policy liabilities. The auditors’ report outlines the scope of
their audit and their opinion.
4.
Insurance and Financial Risk Management
The company’s activities expose it to a variety of insurance and financial risks and
those activities necessitate the analysis, evaluation, control and/or acceptance of
some degree of risk or combination of risks. Taking various types of risk is core to
the financial services business and operational risks are an inevitable consequence of
being in business. The company’s aim is therefore to achieve an appropriate balance
between risk and return and minimise potential adverse effects on the company’s
financial performance.
AGIC Financial Statements • 31 December 2014
7
Financial Statements • 31 December 2014
4.
Insurance and Financial Risk Management (Continued)
(a)
Insurance risk
The primary insurance activity carried out by the company is the transfer of
risk from persons or entities that are directly subject to the risk, by means of
the sale of insurance policies. As such the company is exposed to uncertainty
surrounding the timing, frequency and severity of claims under these policies.
Types of
Contract
Liability
The principal types of policy written by the company are:
•
Motor insurance
•
Property insurance
•
Liability insurance
The company manages its insurance risk through its underwriting policy
that includes inter alia, authority limits, approval procedures for transactions
that exceed set limits, pricing guidelines and the centralised management of
reinsurance. The company actively monitors insurance risk exposures both
for individual and portfolio types of risks. These methods include internal risk
measurement, portfolio modeling and scenario analyses.
Underwriting strategy
Insurance companies assume risk through the insurance contracts they
underwrite and the exposures are associated with both the perils covered by
the specific line of insurance and the specific processes associated with the
conduct of the insurance business. The company manages the individual risk
through its Underwriting Risk Management Policy to determine the insurability
of risks and exposure to large claims. The company follows detailed, uniform
underwriting practices and procedures designed to properly assess and
quantify risks before issuing coverage. The company’s underwriting guidelines
also outline acceptance limits and the appropriate levels of authority for
acceptance of risks.
Reinsurance strategy
A comprehensive reinsurance programme is critical to the financial stability
of the organisation and a detailed analysis of the company’s exposures,
reinsurance needs and quality of reinsurance securities is conducted by the
Board and Senior Management.
The company’s exposures are continually evaluated by Management to
ensure that its reinsurances remain adequate and mechanisms are in
place to continually monitor the reinsurance counterparties to ensure that
they maintain “A” rating, in keeping with the company’s Board approved
Reinsurance Risk Management Policy. Credit risk on reinsurance is discussed
in more detail later in Note 4 (b).
Terms and conditions of general insurance contracts and factors affecting cash
flows:
Key factors affecting
future cash flows
Terms and conditions
Under these contracts,
compensation is paid for
injury suffered by individuals,
including employees or
members of the public. The
main liability exposure is in
relation to bodily injury.
The timing of claim reporting and
settlement is a function of factors
such as the nature of the coverage
and the policy provisions.
Although bodily injury claims have
a relatively long tail, the majority of
bodily injury claims are settled in full
within three to four years. In general,
these contracts involve higher
estimation uncertainty.
Management of risks relating to insurance contracts
Motor contracts:
The risks relating to motor contracts are managed primarily through the pricing and
selection process. The company monitors and reacts to changes in trends of injury
awards, litigation and the frequency of claims appeals.
Property contracts:
The risks relating to property contracts are managed primarily through the pricing and
selection process. The company uses strict underwriting criteria to ensure that the risk of
losses is acceptable. Furthermore, the company accepts property insurance risks for one
year so that each contract can be re-priced on renewal to reflect the continually evolving
risk profile.
Liability contracts:
Risks arising from liability insurance are managed primarily through pricing, product
design, risk selection, adopting an appropriate investment strategy, rating and reinsurance.
The company monitors and reacts to changes in the general economic and commercial
environment in which it operates to ensure that only liability risks which meet its criteria
for profitability are underwritten. In pricing contracts, the company makes assumptions
that costs will increase in line with the latest available research.
Risk exposure and concentrations of risk:
The following table shows the company’s exposure to general insurance risk (based on
the carrying value of insurance provisions at the reporting date) per major category of
business.The company has its largest risk concentration in the motor line.
The table below provides an overview of the terms and conditions of general insurance
contracts written by the company and the key factors upon which the timing and
uncertainty of future cash flows of these contacts depend:
Types of
Contract
Motor
Property
Terms and conditions
Key factors affecting
future cash flows
Motor insurance contracts
provide cover in respect
of policyholders’ motor
vehicles and their liability
to third parties in respect
of damage to property and
injury. The exposure on
motor insurance contracts
is normally limited to the
replacement value of the
vehicle,
bodily
injuries
sustained and a policy limit
in respect of third party
damage.
In general, claims reporting lags
are minor and claims complexity is
relatively low except with respect
to bodily injury claims. Bodily injury
claims tend to be more difficult to
estimate due to uncertainties with
respect to the value at which they
will be ultimately settled, and the
timeframe within which they will be
settled.
Property
insurance
indemnifies, subject to
any limits or excesses, the
policyholder against the
loss or damage to their
own material property and
business interruption arising
from this damage.
The risk on any policy varies according
to many factors such as location,
safety measures in place and the age
of the property.
2014
Liability
$’000
Property
$’000
Motor
$’000
Other
$’000
Total
$’000
Gross
118,584
39,098
5,001,890
1,703
5,161,275
Net of proportional reinsurance
116,758
38,496
4,924,864
1,677
5,081,795
2013
Gross
Net of proportional reinsurance
The event giving rise to a claim for
damage to buildings or contents
usually occurs suddenly (as for fire
and burglary) and the cause is easily
determinable. Therefore, claims are
generally notified promptly and can
be settled without delay. Property
business is therefore classified
as “short-tailed” and expense
deterioration and investment return
is of less importance in estimating
provisions.
Liability
$’000
Property
$’000
Motor
$’000
Other
$’000
Total
$’000
102,495
37,060
4,662,280
6,681
4,808,516
99,842
36,101
4,541,591
6,508
4,684,042
Development Claim Liabilities
In addition to sensitivity analysis, the development of insurance liabilities provides a
measure of the company’s ability to estimate the ultimate value of claims. The table below
illustrates how the company’s estimate of the ultimate claims liability for accident years
2009 - 2014 has changed at successive year-ends, up to 2014. Updated unpaid claims
and adjustment expenses (UCAE) and IBNR estimates in each successive year, as well
as amounts paid to date are used to derive the revised amounts for the ultimate claims
liability for each accident year, used in the development calculations.
AGIC Financial Statements • 31 December 2014
8
Financial Statements • 31 December 2014
4.
Insurance and Financial Risk Management (Continued)
2009
and prior
years
$’000
2009
UCAE, end of year
IBNR, end of year
2010
2013
2014
2011
$’000
$’000
$’000
$’000
$’000
$’000
2013
2013
and
pior
2014
2014
and
pior
$’000
$’000
$’000
$’000
63,956
721,216
2,035,704
UCAE, end of year
1,637,082
1,161,255
2,798,337
IBNR, end of year
(313,471)
539,207
225,736
-2.48%
Paid during year
710,991
864,640
1,575,631
754,132
2,329,763
UCAE, end of year
913,024
752,371
1,665,295
1,032,405
2,697,800
IBNR, end of year
(114,500)
(12,377)
(126,877)
576,421
449,544
-9.70%
-2.98%
Paid during year
382,092
210,470
652,562
680,806
1,333,368
604,150
1,937,518
UCAE, end of year
870,230
517,719
1,387,949
677,258
2,065,205
1,039,979
3,105,184
IBNR, end of year
173,471
63,340
236,811
85,807
322,618
551,460
874,078
Ratio: excess (deficiency)
-34.07%
-27.41%
-18.23%
Paid during year
295,114
241,255
536,369
393,481
929,850
597,480
1,527,330
659,395
2,186,725
UCAE, end of year
634,999
401,781
1,036,780
613,622
1,650,402
835,374
2,485,775
1,176,771
3,662,546
IBNR, end of year
142,838
80,483
223,321
104,371
327,692
125,191
452,883
568,613
1,021,496
Ratio: excess (deficiency)
-35.21%
-33.09%
-34.76%
-12.23%
Paid during year
238,412
157,588
396,000
315,442
711,442
417,636
1,129,078
660,306
1,789,385
630,902
2,420,287
UCAE, end of year
468,991
306,246
775,237
487,747
1,262,984
668,866
1,931,850
856,191
2,788,041
1,002,747
3,790,788
IBNR, end of year
138,194
52,390
190,584
17,367
207,951
29,342
237,292
256,320
493,612
797,395
1,291,007
37.84%
7.77%
36.45%
17.78%
41.25%
7.66%
21.27%
1.57%
8.26%
Ratio: excess (deficiency)
Sensitivity Analysis of Actuarial Liabilities
The determination of actuarial liabilities is sensitive to a number of
assumptions, and changes in those assumptions could have a significant effect
on the valuation results.
In applying the noted methodologies, the following assumptions were made:
(i)
Claims inflation has remained relatively constant and there have been
no material legislative changes in the Jamaican civil justice system that
would cause claim inflation to increase dramatically.
(ii)
There is no latent environmental or asbestos exposure embedded in the
company’s loss history.
(iii)
The company’s case reserving and claim payments rates have remained,
and will remain, relatively constant.
(iv)
The overall development of claims costs gross of reinsurance is not
materially different from the development of claims costs net of
reinsurance. This assumption is supported by the fact that the majority of
the company’s reinsurance program consists of proportional reinsurance
agreements.
(v)
2012
2012
and
pior
2,510,255
1,314,488
Ratio: excess (deficiency)
2012
2010
Paid during year
Ratio: excess (deficiency)
2011
2010
2011
and
pior
Claims are expressed at their estimated ultimate undiscounted value, in
accordance with the requirement of the Insurance Act, 2001.
Provision for adverse deviation assumptions
The basic assumptions made in establishing insurance reserves are best
estimates for a range of possible outcomes. To recognise the uncertainty
in establishing these best estimates, to allow for possible deterioration in
experience and to provide greater comfort that the reserves are adequate to
pay future benefits, the appointed actuary is required to include a margin for
adverse deviation in each assumption.
(b) Financial risk management
The company has exposure to credit risk, liquidity risk and market risks from
its use of financial instruments and its insurance contracts:
The Board of Directors has overall responsibility for the establishment and
oversight of the company’s financial risk management framework. The Board
has established the Audit and Compliance, Conduct Review, and Investment
committees, which are responsible for developing and monitoring the
company’s financial risk management policies. These committees have both
executive and non-executive members and report regularly to the Board of
Directors on their activities. The company’s risk management policies are
established to identify and analyse the risks faced by the company, to set
appropriate risk limits and controls, and to monitor risks and adherence to
limits. The focus of financial risk management for the company is ensuring
that the proceeds from its financial assets are sufficient to fund the obligations
arising from its insurance contracts. The goal of the investment management
process is to optimise the risk-adjusted investment income net of taxes and
risk-adjusted total return by investing in a diversified portfolio of securities,
whilst ensuring that the assets and liabilities are managed on a cash flow and
duration basis.
The Management team is responsible for the execution of the financial risk
management policies. These policies detail the framework for matching
liabilities with appropriate assets, the approaches to be taken when liabilities
cannot be matched and the required monitoring processes. The matching of
assets and liabilities is also governed by the existing regulatory framework.
The asset/liability matching process is largely influenced by estimates of the
timing of payments required in terms of insurance. These estimates are reevaluated on a regular basis. There are also criteria for ensuring the matching
of assets and liabilities as investment markets change.
Credit risk
Credit risk is the risk of financial loss to the company if acounterparty fails to
meet its contractual obligations.
The company’s key areas of exposure to credit risk include:
•
Debt securities, and cash and cash equivalents;
•
Amounts due from policyholders;
•
Amounts due from intermediaries;
•
Reinsurers’ share of insurance liabilities; and
•
Amounts due from reinsurers in respect of payments already made to
policy holders.
The nature of the company’s exposures to credit risk and its objectives, policies
and processes for managing credit risk have not changed significantly from
the prior period.
AGIC Financial Statements • 31 December 2014
9
Financial Statements • 31 December 2014
4.
Insurance and Financial Risk Management (Continued)
(ii) Concentrations of credit risk
Credit risk (Continued)
The specific concentration of risk from counterparties where premium receivables
for any one counterparty or group of connected counterparties is 10% or more of
premium receivables at the year end is as reflected in table below.
Management of credit risk
The company manages its credit risk in respect of debt securities by placing limits on its
exposure to a single counterparty, by reference to the credit rating of the counterparty.
The company has a policy of investing only in high quality corporate bonds and government
issued debts instruments.
The company’s exposure to individual policyholders and groups of policyholders is
monitored as part of its credit control process. Financial analyses are conducted for
significant exposures to individual policyholders or homogenous groups of policyholders.
27,708
-
26,699
2014
A- to AA*
B/B-
Not rated
Total
$’000
$’000
$’000
$’000
-
9,062,981
-
9,062,981
-
-
460,392
460,392
-
373,445
-
373,445
NCB Capital Markets Limited
79,480
-
-
79,480
Reinsurance asset (excluding UPR)
52,634
-
442,312
494,946
-
-
59,607
59,607
Cash resources -
Other institutions
Insurance receivables
22,672
-
-
-
26
26
132,114
9,459,098
962,337
10,553,549
A- to AA*
B/B-
Not rated
Total
$’000
$’000
$’000
$’000
Reinsurance asset (excluding UPR)
Insurance receivables
Other receivables
8,785,984
-
Other institutions
60-90
Day
More than
90 Days
Total
$’000
$’000
$’000
111,299
32,630
143,929
60-90
Day
More than
90 Days
Total
$’000
$’000
$’000
75,638
62,153
137,791
The analysis of overall credit risk exposure indicates that the company has insurance
receivables that are impaired at the reporting date. These receivables are aged over
90 days. The assets that are individually impaired are analysed below:
2014
8,785,984
124,474
-
-
124,474
-
-
257,821
257,821
-
-
45,167
45,167
-
187,564
-
187,564
Insurance receivables
-
-
26
26
124,474
8,973,548
303,014
9,401,036
* The split between A- to A+ and AA is not available.
The company has no financial assets or reinsurance assets that would be past due or
impaired and for which the terms have been renegotiated.
The company has collateral as security for its repurchase agreements as disclosed in
Note 11.
In February 2013, the company participated in the National Debt Exchange (NDX)
transaction under which the Company exchanged its holdings of domestic debt instruments
issued by the Government of Jamaica for new, longer-dated debt instruments available to
the company under the election options contained in the agreement. The NDX transaction
resulted in a reduction in yields and an increase in the tenor of locally issued Government
of Jamaica securities. The company recognised a loss consequent on the exchange in the
prior year.
2013
Gross
Net
Gross
Net
$’000
$’000
$’000
$’000
19,729
-
10,233
-
The movement on the provision for impairment of insurance receivables was as
follows:
Cash resources National Commercial Bank Jamaica Limited
78,612
(iv) Assets that are individually impaired:
Debt Securities -
47,008
22,672
2013
Government of Jamaica
-
2013
Other receivables
-
24,205
2014
Insurance receivables
Corporate
National Commercial Bank Jamaica Limited
47,008
(iii) Assets that are past due but not impaired:
The company has insurance and other receivables that are past due but not impaired
at the reporting date (as indicated by the overall credit risk exposure analysis).
Management believes that an impairment allowance for these receivables is not
appropriate on the basis of stage of collection of amounts owed to the company. An
aged analysis of the carrying amounts of these insurance and other receivables is
presented below.
The following table analyses the credit rating by investment grade of financial assets
bearing credit risk:
Insurance receivables
-
Jamaica Citadel Insurance Brokers
The balances in the current year for Covenant Insurance Brokers, Jamaica Citadel
Insurance Brokers and Mutual Security Insurance Brokers fell below the 10% threshold.
(i) Overall exposure to credit risk:
Reverse repurchase agreements -
Covenant Insurance Brokers
Riveria Insurance Agency
The company also operates a policy to manage its reinsurance counterparty exposures.
The company assesses the credit worthiness of all reinsurers by reviewing public rating
information and from internal investigations. The impact of reinsurer default is measured
regularly and managed accordingly.
Government of Jamaica
2013
$’000
Mutual Security Insurance Brokers
All intermediaries must meet minimum requirements that are established and enforced by
the company’s management. The credit ratings and payment histories of intermediaries
are monitored on a regular basis.
Debt Securities -
2014
$’000
2014
2013
$’000
$’000
At 1 January
10,233
10,590
Provision for doubtful debts
13,238
9,295
Bad debts written off
(3,742)
(9,652)
At 31 December
19,729
10,233
The company has other receivables that are impaired at the reporting date amounting
to $37,348,000 (2013 - $37,348,000). These balances are aged over 90 days and
a provision of $37,348,000 (2013 - $37,348,000) has been made in respect of
these amounts.
The creation and release of provision for impaired receivables have been included
in expenses in the statement of comprehensive income. Amounts charged to the
allowance account are generally written off when there is no expectation of recovering
additional cash.
AGIC Financial Statements • 31 December 2014
10
Financial Statements • 31 December 2014
4.
Insurance and Financial Risk Management (Continued)
(b)
(i) Interest rate risk
Financial risk (continued)
Liquidity risk
Liquidity risk is the risk that the company is unable to meet its payment obligations
associated with its financial liabilities when they fall due and to replace funds when they
are withdrawn. The consequence may be the failure to meet obligations to fulfil claims
and other liabilities incurred.
Management of liquidity risk
The company’s approach to managing liquidity is to ensure, as far as possible, that it
has sufficient liquidity to meet its liabilities when due, under both normal and stressed
conditions, without incurring unacceptable losses or risking damage to its reputation.
Consequently, the company invests in marketable securities that can be readily realised
as its obligations under insurance contracts fall due, and in the event of reasonably
foreseeable abnormal circumstances.
The maturity profile of the company’s financial assets and financial liabilities (excluding
equities which have no set maturity)are summarised in the following table. Maturity profile
amounts are stated at the expected undiscounted cash flows (principal and interest) and
are analysed by their expected payment dates.
Within 1
Month
$’000
2-3
Months
$’000
4-12
Months
$’000
1 to 5
Years
$’000
Over
5 Years
$’000
22,935
-
-
-
-
22,935
1,106,849
2,454,108
3,891,690
2,310,187
716,194
10,479,028
Reinsurance asset (excluding UPR)
Insurance receivables
Other receivables
Total financial assets
374,713
-
-
-
-
374,713
79,480
-
-
-
-
79,480
-
442,312
52,634
-
-
494,946
59,607
-
-
-
-
59,607
1,643,584
2,896,420
3,944,324
2,310,187
716,194
11,510,709
Financial Liabilities
Claims outstanding
163,095
326,191
1,467,860
2,567,002
637,127
5,161,275
Other payables
138,159
-
-
-
-
138,159
Total financial liabilities
The following tables summarise the company’s exposure to interest rate risk at
year end date. It includes financial instruments at carrying amounts, categorised by
the earlier of contractual repricing or maturity dates. Equity instruments which are
non-interest bearing have been excluded from investment securities classified as
available-for-sale and loans and receivables.
Within 1
Month
$’000
2-3
Months
$’000
4-12
Months
$’000
1 to 5
Years
$’000
Over
5 Years
$’000
NonInterest
Bearing
$’000
Total
$’000
2014
Cash resources
Investment securities classified as
Reverse repurchase agreements
The nature of the company’s exposures to interest rate risk and its objectives, policies
and processes for managing interest rate risk have not changed significantly from
the prior period.
Financial Assets
Financial Assets
available-for-sale and loans and
receivables
The company manages its interest rate risk by maintaining an appropriate mix of
fixed and variable rate instruments. The company has no exposure with respect to its
liabilities as they are not interest bearing.
Total
$’000
2014
Cash resources
Interest rate risk arises primarily from the company’s investments. However,
changes in investment values attributable to interest rate changes are mitigated by
corresponding and partially offsetting changes in the economic value of insurance
provisions.
301,254
326,191
1,467,860
2,567,002
637,127
5,299,434
Net liquidity gap
1,342,330
2,570,229
2,476,464
(256,815)
79,067
6,211,275
Cumulative liquidity gap
1,342,330
3,912,559
6,389,023
6,132,208
6,211,275
Within 1
Month
$’000
2-3
Months
$’000
4-12
Months
$’000
1 to 5
Years
$’000
Over
5 Years
$’000
Investment securities classified as
available-for-sale and loans and
receivables
Reverse repurchase agreements
-
-
-
-
-
22,698
22,698
2,311,542
4,731,942
1,199,126
901,481
199,729
179,553
9,523,373
373,445
372,671
-
-
-
-
774
Reinsurance asset (excluding UPR)
-
-
-
-
-
79,480
79,480
Insurance receivables
-
-
-
-
-
494,946
494,946
Other receivables
Total financial assets
-
-
-
-
-
59,607
59,607
2,684,213
4,731,942
1,199,126
901,481
199,729
837,058
10,553,549
5,161,275
Financial Liabilities
Claims outstanding
-
-
-
-
-
5,161,275
Other payables
-
-
-
-
-
138,159
138,159
Total financial liabilities
-
-
-
-
-
5,299,434
5,299,434
5,254,115
Total interest repricing gap
2,684,213
4,731,942
1,199,126
901,481
199,729
(4,462,376)
Cumulative interest sensitivity
2,684,213
7,416,155
8,615,281
9,516,762
9,716,491
5,254,115
Within 1
Month
$’000
2-3
Months
$’000
4-12
Months
$’000
1 to 5
Years
$’000
Over
5 Years
$’000
NonInterest
Bearing
$’000
Total
$’000
2013
Total
$’000
Financial Assets
Cash and cash equivalent
Reinsurance asset (excluding UPR)
Insurance receivables
Other receivables
Total financial assets
187,840
1,652,601
-
1,425,816
-
4,084,384
-
1,883,660
-
647,458
187,840
9,693,919
Claims outstanding
Total financial liabilities
Net liquidity gap
-
-
-
-
-
187,590
187,590
3,537,410
3,050,177
953,688
919,209
220,833
104,667
8,785,984
Reinsurance asset (excluding UPR)
-
-
-
-
-
124,474
124,474
Insurance receivables
-
-
-
-
-
257,821
257,821
Other receivables
-
-
-
-
-
45,167
45,167
3,537,410
3,050,177
953,688
919,209
220,833
719,719
9,401,036
4,808,516
Total financial assets
124,474
-
-
-
-
124,474
-
257,821
-
-
-
257,821
45,167
-
-
-
-
45,167
2,010,082
1,683,637
4,084,384
1,883,660
647,458
10,309,221
Financial Liabilities
Other payables
Cash resources
Investment securities classified as
available-for-sale and loans and
receivables
2013
Investment securities classified as
available-for-sale and loans and
receivables
Financial Assets
153,659
307,318
1,382,930
2,418,860
545,749
94,458
-
-
-
-
94,458
248,117
307,318
1,382,930
2,418,860
545,749
4,902,974
1,761,965
1,376,319
2,701,454
(535,200)
101,709
5,406,247
Cumulative liquidity gap
1,761,965
3,138,284
5,839,738
5,304,538
5,406,247
Cumulative liquidity gap
1,342,330
3,912,559
6,389,023
6,132,208
6,211,275
Financial Liabilities
Claims outstanding
-
-
-
-
-
4,808,516
Other payables
-
-
-
-
-
94,458
94,458
Total financial liabilities
-
-
-
-
-
4,902,974
4,902,974
4,498,062
Total interest repricing gap
3,537,410
3,050,177
953,688
919,209
220,833
(4,183,255)
Cumulative interest sensitivity
3,537,410
6,587,587
7,541,275
8,460,484
8,681,317
4,498,062
4,808,516
Weighted average interest rates
The table below summarises the effective interest rates at 31 December by major
currencies for financial instruments of the company.
Market risk
Market risk is the risk that changes in market prices, such as interest rate, foreign
exchange rates and equity prices will affect the value of the company’s assets, the amount
of its liabilities and/or the company’s income.
The objective of market risk management is to manage and control market risk exposures
within acceptable parameters, while optimising the return on risk. The nature of the
company’s exposures to market risks and its objectives, policies and processes for
managing credit risk have not changed significantly from the prior period.
2014
Investment securities classified as available-for-sale
and loans and receivables
Reverse repurchase agreements
2013
J$
US$
J$
US$
%
%
%
%
8.0
4.5
8.6
-
6.4
-
-
-
Management of market risks
Fair value sensitivity analysis for fixed rate instruments
The Investment Committee manages market risks in accordance with its asset/liability
management framework. The committee reports regularly to the Board of Directors on
its activities. For each of the major components of market risk, the company has policies
and procedures in place which detail how each risk should be managed and monitored.
The management of each of these major components of major risk and the exposure of
the company at the reporting date to each major risk are addressed below.
The following table indicates the sensitivity to a reasonable possible change in interest
rates, with all other variables held constant, on the net profit and other components
of equity.
AGIC Financial Statements • 31 December 2014
11
Financial Statements • 31 December 2014
4.
Insurance and Financial Risk Management (Continued)
2013
(i) Interest rate risk (Continued)
Jamaican$
Fair value sensitivity analysis for fixed rate instruments (Continued)
US$
Total
J$’000
J$’000
J$’000
124,753
62,837
187,590
8,785,984
-
8,785,984
Financial Assets
The sensitivity of the net profit is the effect of the assumed changes in interest
rates on net income based on the floating rate of non-trading financial assets
and financial liabilities. The sensitivity of other components of equity is calculated
by revaluing fixed rate available-for-sale financial assets for the effects of the
assumed changes in interest rates. The correlation of variables will have a
significant effect in determining the ultimate impact on market risk, but to
demonstrate the impact due to changes in variable, variables had to be assessed
on an individual basis. It should be noted that movements in these variables
are non-linear.
Cash resources
Investment securities classified as
available-for-sale and loans and receivables
Reinsurance asset (excluding UPR)
124,474
-
124,474
Reinsurance receivables
257,821
-
257,821
Other receivables
Total financial assets
45,167
-
45,167
9,338,199
62,837
9,401,036
4,808,516
-
4,808,516
94,458
-
94,458
Financial Liabilities
Change in
basis points
2014
JMD / USD
$’000
Change in
basis points
2014
JMD / USD
$’000
Effect on Other
Components of
Equity 2014
$’000
Change in
basis points
2013
JMD / USD
Effect on
Net Profit
2013
$’000
Effect on
Other
Components of
Equity 2013
-100/-50
(48,874)
24,199
-100/-50
(33,903)
1,003
+250/+200
122,184
(52,300)
+400/+250
84,757
(10,286)
$’000
$’000
Claims outstanding
Other payables
Total financial liabilities
4,902,974
-
4,902,974
Net financial position
4,435,225
62,837
4,498,062
Sensitivity analysis
(ii) Equity price risk
At December 31, the company held $53,680,000 (2013: nil) of its investments
in quoted equities.
Sensitivity analysis
All the company’s quoted investments are listed on the Jamaica Stock Exchange.
A 10% (2013: 10%) increase in the unit prices of the company’s equity holding
would have increased equity (before considering the effect of taxation) by
$5,368,000 (2013: $nil). A 10% decline would have had an equal but opposite
effect on equity.
The impact on the company’s profit before taxation, arising from a weakening or
strengthening of the Jamaican dollar in relation to the US dollar is as follows:
Increase/(decrease)
in profit before taxation
2014
$’000
2013
$’000
10% (2013:10%) weakening
74,372
6,284
1% (2013: 1%) strengthening
(7,437)
(628)
(iii) Foreign currency risk
Foreign currency risk is the risk that the value of a financial instrument will
fluctuate due to changes in foreign exchange rates.
The company is exposed to foreign currency risk primarily on insurance and
reinsurance contracts and investments that are denominated in a currency
other than the Jamaica dollar.
The table below summarises the exposure to foreign currency exchange rate
risk at 31 December.
2014
Jamaican$
US$
Total
Investment securities classified as
available-for-sale and loans and receivables
Reverse repurchase agreements
Reinsurance asset (excluding UPR)
Reinsurance receivables
Other receivables
Total financial assets
The primary responsibility for the development and implementation of controls to address
operational risk is assigned to senior management within the company.
J$’000
Capital Management
22,698
-
22,698
The company’s objectives when managing capital, which is a broader concept than the
‘equity’ on the face of statement of financial position, are:
8,779,657
743,716
9,523,373
373,445
-
373,445
79,480
79,480
494,946
(a)
To comply with the capital requirements set by the regulators of the insurance
markets where the company operates;
(b)
To safeguard the company’s ability to continue as a going concern so that
it can continue to provide returns for stockholders and benefits for other
stakeholders; and
(c)
To maintain a strong capital base to support the development of its business.
494,946
59,607
-
59,607
9,809,833
743,716
10,553,549
5,161,275
-
5,161,275
138,159
-
138,159
Total financial liabilities
5,299,434
-
5,299,434
Net financial position
4,510,399
743,716
5,254,115
Other payables
The company’s objective is to manage operational risk so as to balance the avoidance of
financial losses and damage to its reputation with overall cost effectiveness and to avoid
control procedures that restrict initiative and creativity.
J$’000
Financial Liabilities
Claims outstanding
Operational risk is the risk of direct or indirect loss arising from a wide variety of causes
associated with the company’s processes, personnel, technology and infrastructure, and
from external factors other than financial risks such as those arising from legal and
regulatory requirements and generally accepted standards of corporate behaviour.
J$’000
Financial Assets
Cash resources
Operational risks
The Minimum Capital Test (MCT) is used as a measure of capital, as required by the
FSC. The required MCT ratio is 250%. The MCT for the company for the year ended 31
December 2014 is as follows:
MCT
AGIC Financial Statements • 31 December 2014
12
Actual
Required
Actual
Required
2014
2014
2013
2013
328%
250%
275%
250%
Financial Statements • 31 December 2014
5.
Fair Value of Financial Instruments
input into this valuation is the price per square foot. The higher the price per square
foot the higher the fair value.
Fair 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. Market
price is used to determine fair value where an active market exists as it is the best
evidence of the fair value of a financial instrument. A market is regarded as active if
quoted prices are readily and regularly available from an exchange, dealer, broker,
industry group, pricing service, or regulatory agency, and those prices represent
actual and regularly occurring market transactions on an arm’s length basis. Where
no market price is available, the fair values presented have been estimated using
present values or other estimation and valuation techniques based on market
conditions existing at the statement of financial position dates.
The values derived from applying these techniques are significantly affected by the
underlying assumptions used concerning both the amounts and timing of future
cash flows and the discount rates. The following methods and assumptions have
been used:
(i)
Investment securities classified as available-for-sale are measured at fair
value by reference to quoted market prices when available. If quoted market
prices are not available, then fair values are estimated on the basis of pricing
models or other recognised valuation techniques;
Investment Approach
The projected net income of the subject properties are discounted using an
appropriate capitalisation rate. The most significant inputs to this valuation are the
rental rate per square foot and the capitalisation rate. Rental rates of the subject
properties are adjusted to reflect the market rent for properties of similar size,
location and condition. The higher the rental rate per square foot the higher the fair
value. The higher the capitalisation rate the lower the fair value.
A reconciliation of the opening and closing balances for the company’s investment
properties and property, plant and equipment are disclosed in Notes 15 and 17
respectively.
6.
Accounting Estimates and Judgements
Judgements made by management in the application of IFRS that may have a
material impact on the financial statements and estimates with a risk of material
adjustment in the next financial year are discussed below:
(i)
(ii)
The fair value of liquid assets and other assets maturing within a year (e.g.
cash resources, reverse repurchase agreements) is assumed to approximate
their carrying amount. This assumption is applied to liquid assets and the
short-term elements of all other financial assets and financial liabilities.
Allowance for impairment losses on receivables:
In determining amounts recorded for impairment losses in the financial
statements, management makes judgements regarding indicators of
impairment, that is, whether there are indicators that suggest there may be a
measurable decrease in the estimated future cash flows from receivables, for
example, based on default and adverse economic conditions.
(iii)
The fair value of variable rate financial instruments is assumed to approximate
their carrying amounts.
Management makes estimates of the likely estimated future cash flows from
impaired receivables as well as the timing of such cash flows.
(iv)
Equity securities for which fair values cannot be measured reliably are
recognised at cost less impairment.
(ii)
Insurance liabilities, reinsurance recoverable and financial instruments
Notes 2b and 14 contain information about the assumptions and uncertainties
relating to insurance liabilities and amounts recoverable in respect of claims
from reinsurers and disclose the risk factors in these contracts. Note 4(a)
contains information about the risks and uncertainties associated with financial
instruments.
(iii)
Taxation
The company accounts for taxation in accordance with IAS 12. Accordingly,
the company recognises deferred tax assets and liabilities based on the
estimated future tax effects of differences between the financial and tax
base of assets and liabilities based on currently enacted tax laws. The tax
balances and tax expense/credit recognized by the company are based on
management’s interpretation of the tax laws and IAS 12. Taxation expense/
credit also reflects the company’s best estimates and assumptions regarding,
among other things, the level of future taxable income the presumption that
carrying amount of investment property will be recovered entirely through
sale. Future changes in tax laws, changes in projected levels of taxable income
and tax planning could affect the effective tax rate and tax balances recorded
by the company.
(iv)
Retirement benefit plans
The present value of retirement benefit obligations depends on a number
of factors that are determined on an actuarial basis using a number of
assumptions. The assumptions used in determining the net periodic cost/
income for retirement benefits include the discount rate and, in the case of
the retirement medical benefits, the expected rate of increase in medical costs.
Any changes in these assumptions will impact the carrying amount of pension
obligations.
Financial instruments are grouped into levels 1 to 3 based on the degree to which
the fair value is observable, as follows:
•
Level 1 includes those instruments which are measured based on quoted
priced in active markets for identical assets and liabilities. These mainly
comprise of equity shares traded on the Jamaica Stock Exchange and are
classified as available-for-sale and financial assets at fair value through profit
or loss.
•
Level 2 includes those instruments which are measured using inputs other than
quoted prices that are observable for the instrument, directly or indirectly. The
fair value for these instruments is determined by using valuation techniques
and maximise the use of observable market data where it is available and rely
as little as possible on entity specific estimates. If all significant inputs required
to fair value an instrument are observable, the instrument is included in level
•
If one or more of the significant inputs is not based on observable market data,
the instrument is included in level 3.
The following table presents the company’s financial instruments that are measured
at fair value at 31 December grouped into Levels 1 to 3 dependent on the degree to
which fair values are observable.
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
53,680
2,047,679
417
2,101,776
-
2,256,370
417
2,256,787
As at 31 December 2014
Available-for-sale investments
As at 31 December 2013
Available-for-sale investments
There were no transfers between the levels during the year.
Non-financial assets carried at fair value include land and buildings classified as
property, plant and equipment and investment properties, which fall within level 3
of the fair value hierarchy. The company uses external, independent and qualified
valuers to determine the fair value of the land and buildings on an annual basis.
The valuations have been performed using the investment and sales comparison
approach.
The company determines the appropriate discount rate at the end of each
year. This is the interest rate that should be used to determine the present
value of estimated future cash outflows expected to be required to settle the
pension obligations. In determining the appropriate discount rate, the company
considers the interest rates of Government of Jamaica debt securities that are
denominated in the currency in which the benefits will be paid and that have
terms to maturity approximating the terms of the related pension obligation.
The expected rate of increase of medical costs has been determined by
comparing the historical relationship of the actual medical cost increases with
the rate of inflation. Past experience has shown that actual medical costs have
increased on average by one time the rate of inflation.
Other key assumptions for pension obligations are based in part on current
market conditions. See Note 21 for key assumptions.
Sales Comparison Approach
The company’s land and buildings are for the most part commercial in nature. There
have been a limited number of similar sales in the local market, and consequently
the sales comparison approach incorporates unobservable inputs which in the
valuator’s judgement reflects suitable adjustments regarding size, age, condition,
time of sale, quality of land and buildings and improvements. The most significant
AGIC Financial Statements • 31 December 2014
13
Financial Statements • 31 December 2014
7.
Investment Income, net
11. Reverse Repurchase Agreements
2014
$’000
2013
$’000
Interest income
742,119
529,149
Dividend income
10,774
6,322
Gains on disposal of investments
8.
54,575
590,046
(916)
(12,809)
751,977
577,237
Less: investment expenses
Net investment income
752,893
The company entered into reverse repurchase agreements collateralised mainly
by Government of Jamaica securities. These agreements may result in credit
exposure in the event that the counterparties to these transactions are unable to
fulfill their contractual obligations. Included in this balance is interest receivable of
$774,000 (2013 – Nil).
At 31 December 2014, the company held securities with accumulated face values
and accrued interest of $390,677,000 (2013 - Nil), mainly Government of Jamaica
debt securities, as collateral for reverse repurchase agreements.
All reverse repurchase agreements have original maturities of less than twelve
months.
Profit before Taxation
In arriving at the profit before taxation, the following have been charged:
2014
$’000
2013
$’000
Auditors’ remuneration
12,307
12,750
Depreciation (Note 17)
60,328
41,167
5,252
4,725
Amortisation of intangible assets (Note 16)
Included in reverse repurchase agreements are the following amounts which are
regarded as cash and cash equivalents for the purposes of the statement of cash
flows:
Reverse repurchase agreements with an original maturity
of less than 90 days
2014
$’000
2013
$’000
373,445
-
Directors emoluments 3,633
37,542
2014
$’000
2013
$’000
579,398
595,867
2,613
14,605
Statutory contributions
67,735
57,551
Treasury Bills
Pension benefits (Note 21)
36,289
37,951
Bank of Jamaica Certificates of Deposit
Management remuneration
9.
12. Investment Securities Classified as Available-for-sale and Loans and
Receivables
5,795
37,914
Fees
Staff Cost
Wages and salaries
Termination costs
20,810
-
100,480
84,902
807,325
790,876
Other post-employment benefits (Note 21)
Other
Debt instruments Within 1 year -
Bank of Jamaica Certificates of Deposit
Pronotes and Corporate Bonds
1,035,366
300,000
460,392
-
840,369
647,922
877,492
1,257,558
329,818
350,890
Within 1 year Government of Jamaica Investment Notes
Within 1 and 5 years -
2013
$’000
Government of Jamaica Investment Notes
Over 5 years -
426,864
316,097
23,349
-
450,213
316,097
3,900
(4,766)
454,113
311,331
Government of Jamaica Investment Notes
Equity instruments Quoted equities
Unquoted investments
Add: Interest receivable
The tax on the company’s profit before tax differs from the theoretical amount that
would arise as follows:
2014
$’000
2013
$’000
1,294,343
1,031,922
431,448
343,974
Income not subject to tax
(1,016)
(28,377)
Effect of income taxed at different rate
(1,416)
(1,500)
Prior year under provision for income tax
23,349
-
Deferred taxes not recognised in the prior year
13,667
(6,879)
Expenses disallowed
21,308
4,113
Other
(5,893)
-
Tax charge
454,113
311,331
Tax at 331/3% of profit before tax
-
Debt instruments -
Current tax expense -
Profit before tax
6,124,947
Available for sale -
2014
$’000
Deferred taxation (Note 20)
13,150
5,787,228
Within 1 and 5 years -
Taxation for the year is based on results for the year as adjusted for tax purposes
and comprises the following:
Prior year under provision for income tax
2013
$’000
Loans and receivables -
10. Taxation
Income tax at 331/3%
2014
$’000
Adjusted for the effect of:
53,680
-
417
417
9,397,912
8,681,734
179,558
104,667
9,577,470
8,786,401
Investments in loans and receivables securities include foreign currency indexed
investments aggregating $743,716,000 (2013 - Nil). At 31 December 2014,
the fair value of loans and receivables aggregated $7,296,136,000 (2013 $6,424,947,000).
Government of Jamaica securities include amounts totalling $45,000,000 (2013:
$45,000,000), which are deposited with the Financial Services Commission in
accordance with the Insurance Regulations 2001.
Included in investments are the following amounts which are regarded as cash and
cash equivalents for the purposes of the statement of cash flows:
2014
$’000
2013
$’000
Debt securities with an original maturity of less than 90 days
Bank of Jamaica Certificates of Deposit
Treasury bills
AGIC Financial Statements • 31 December 2014
14
59,737
-
-
1,098,526
59,737
1,098,526
Financial Statements • 31 December 2014
13.
Insurance Receivables and Deferred Expenses
Analysis of gross unearned premiums:
Premiums receivable
2014
$’000
2013
$’000
442,312
257,821
52,634
-
119,354
130,794
Reinsurance receivable
Deferred commission expense
614,300
Liability
Motor
Property
The premiums receivable balance is shown after an allowance for impairment of
$19,729,000 (2013 - $10,233,000), which includes allowances of Nil (2013 $1,320,000) on balances due from related parties. The balances for premium and
reinsurance receivables are all due within one year.
The analysis of the deferred commission expense is as follows:
2013
$’000
Balance at January
130,794
122,609
Commissions paid during year
242,494
305,983
(253,934)
(297,798)
119,354
130,794
Recognised in income during the year
Balance at December 31
Claims outstanding
Unearned premiums
2013
Net
Gross
Reinsurance
Net
$’000
$’000
$’000
$’000
$’000
$’000
5,161,275
(79,480)
5,081,795
4,808,516
(124,474)
4,684,042
2,633,804
(123,187)
2,510,617
2,473,747
(110,703)
2,363,044
7,795,079
(202,667)
7,592,412
7,282,263
(235,177)
7,047,086
Movement in claims outstanding:
2014
2013
Net
Gross
2,485,056
2,341,390
-
9,553
138,583
117,547
2,633,804
2,473,747
Process used to determine the assumptions for measuring insurance contracts:
The company adopts a consistent process in the calculation of an adequate provision for insurance contracts. The overriding aim is to establish reserves which are
expected to be at least adequate and that there is consistency from year to year.
However, there is a risk that, due to unforeseen circumstances, the reserves may
be insufficient to meet insurance claim liabilities reported in future years on policy
periods which have expired.
The outstanding claims provisions are estimated based on facts known at the date
of estimation. Case estimates are generally set by skilled claims technicians, applying their experience and knowledge to the circumstances of individual claims. The
ultimate cost of outstanding claims is estimated using a range of standard actuarial
claims projection techniques.
Reinsurance
Reinsurance
5,257
The estimation of claims incurred but not reported is generally subject to a greater
degree of uncertainty than the estimates of claims already notified, where more
information is available.
Gross
Gross
10,165
The insurance claims provision at the reporting date comprises the expected ultimate cost of settlement of all claims incurred in respect of events up to that date,
whether reported or not, together with related claims handling expenses, less
amounts already paid. This provision is not discounted for the time value of money.
14. Reinsurance Asset and Insurance Contract Provisions
2014
2013
$’000
Pecuniary loss
388,615
2014
$’000
2014
$’000
Reinsurance
The main assumption underlying these techniques is that a company’s past claims
development experience can be used to project future claims development and
hence ultimate claims costs. As such, these methods extrapolate the development
of paid and incurred losses, average costs per claim and claim numbers based on the
observed development of earlier years and expected loss ratios. There are reasons
why this may not be the case, which, insofar as they can be identified, have been
allowed for by modifying the methods. Such reasons include:
•
Economic, legal, political and social trends (resulting in, for example,
a difference in expected levels of inflation);
Net
$’000
$’000
$’000
$’000
$’000
$’000
•
Changes in the mix of insurance contracts written; and
Claims notified
3,774,749
(112,203)
3,662,546
3,233,673
(128,489)
3,105,184
•
Impact of large losses.
Claims incurred but
not reported and other
claim estimates
1,033,767
(12,271)
1,021,496
901,980
(27,902)
874,078
Balance at January 1
4,808,516
(124,474)
4,684,042
4,135,653
(156,391)
3,979,262
Claims incurred
Claims paid
31 December
2,843,618
(25,578)
2,818,040
2,919,580
(28,075)
2,891,505
(2,490,859)
70,572
(2,420,287)
(2,246,717)
59,992
(2,186,725)
5,161,275
(79,480)
5,161,275
4,808,516
(124,474)
4,684,042
Analysis of claims outstanding:
15. Investment Properties
2014
Claims notified
Claims incurred but not
reported
Provision for adverse
deviation
Unallocated claim
adjustment expense
31 December
2013
Gross
Reinsurance
Net
Gross
Reinsurance
Net
$’000
$’000
$’000
$’000
$’000
$’000
3,857,015
(66,227)
3,790,788
3,774,749
(112,203)
3,662,546
896,130
(11,315)
884,815
566,892
(9,235)
557,657
Changes in fair value
237,658
(1,938)
235,720
325,623
(3,036)
322,587
Balance at end of year
170,472
-
170,472
141,252
-
141,252
5,161,275
(79,480)
5,081,795
4,808,516
(124,474)
4,684,042
Outstanding claims include claims payable of $11,631,000 (2013: $24,251,000) under policies issued
to related parties. The balances for claim payable are all due within one year.
Movement in unearned premiums:
2014
Balance at 1 January
Premiums written
during the year
Premiums earned
during the year
Balance at 31 December
Provisions for claims incurred but not reported and provisions for outstanding claims
are initially estimated at a gross level and a separate calculation is carried out to
estimate the size of reinsurance recoveries. The company purchases a range of excess of loss and other reinsurance contracts. The method uses historical data, gross
incurred but not reported estimates and the terms and conditions of the reinsurance
contracts to estimate the carrying value of the reinsurance asset. Impairment of
reinsurance assets is considered separately.
2013
Gross
Reinsurance
Net
Gross
Reinsurance
Net
$’000
$’000
$’000
$’000
$’000
$’000
2,473,747
(110,703)
2,363,044
2,296,975
(101,732)
2,195,243
5,392,961
(386,931)
5,006,030
5,203,202
(361,003)
4,842,199
(5,232,904)
374,447
(4,858,457)
(5,026,430)
352,032
(4,674,398)
160,057
(12,484)
147,573
176,772
(8,971)
167,801
2,633,804
(123,187)
2,510,617
2,473,747
(110,703)
2,363,044
Balance at beginning of year
Income earned from the properties
Expenses incurred by properties
2014
$’000
2013
$’000
472,000
450,000
(6,000)
22,000
466,000
472,000
31,377
30,590
(106,028)
(76,236)
(74,651)
(45,646)
Investment properties at 31 December 2014 are stated at fair value derived from
valuations done by independent valuators, Allison Pitter and Company during
October 2014. The change in fair value was (charged)/credited to profit or loss.
Investment properties include land at valuation aggregating $249,000,000 (2013
- $243,800,000).
AGIC Financial Statements • 31 December 2014
15
Financial Statements • 31 December 2014
16. Intangible Assets
19. Insurance Payables and Deferred Income
Movement in unearned premiums:
2014
$’000
2013
$’000
80,290
154,311
445
383
Payables arising from insurance and reinsurance contracts
Deferred commission income
Cost At beginning of year
Additions
Transfer from property, plant and equipment
Disposals
At end of year
33,286
-
-
(74,404)
114,021
80,290
Balance at beginning of year
Commission received during the year
76,618
146,169
Charge for the year
5,252
4,725
Eliminated on disposals
At end of year
Net book value
-
(74,276)
81,870
76,618
32,151
3,672
Amounts recognised in income during the year
Disposal
Revaluation adjustments
31 December 2013
Land and
buildings
$’000
Motor
Vehicle
$’000
Furniture,
Fixtures &
Equipment
$’000
Leasehold
Improvements
$’000
Total
$’000
713,900
5,335
377,295
16,837
1,113,367
3,869
176
79,247
15,278
98,570
-
-
(152,851)
-
(152,851)
38,331
-
-
-
38,331
5,511
303,691
32,115
1,097,417
2,756
-
79,154
2,285
84,195
Reclassification
1,358
-
-
(1,358)
-
-
-
(33,286)
-
(33,286)
26,644
-
-
-
26,644
786,858
5,511
349,559
33,042
1,174,970
31 December 2014
Depreciation 31 December 2012
-
4,696
Charge for the year
274,509
9,281
16,050
-
546
23,333
1,238
41,167
-
(150,771)
-
(150,771)
(16,050)
-
-
-
(16,050)
31 December 2013
-
5,242
147,071
10,519
162,832
Charge for the year
17,317
69
40,155
2,787
60,328
Disposal
Revaluation adjustment
Revaluation adjustment
288,486
(12,860)
-
-
-
(12,860)
4,457
5,311
187,226
13,306
210,300
31 December 2014
782,401
200
162,333
19,736
964,670
31 December 2013
756,100
269
156,620
21,596
934,585
31 December 2014
Freehold land and buildings are stated at fair value, as appraised by an independent
valuator, Allison Pitter and Company in October 2014. The revaluation gain of
$33,236,000 (2013 - $43,284,000), net of applicable deferred income taxes, was
credited to other comprehensive income. All other property, plant and equipment
are stated at cost.
2014
$’000
2013
$’000
18,163
10,604
95,974
59,362
(51,803)
24,187
18,163
Balance at
31 December
$’000
$’000
$’000
$’000
Property, plant and equipment
and intangible assets
(149,818)
11,235
(6,268)
(144,851)
(34,889)
(25,222)
-
(60,111)
26,422
10,087
22,431
58,940
7,304
-
(4,201)
3,103
(150,981)
(3,900)
11,962
(142,919)
Balance at
1 January
Recognised
in Profit or
Loss
Recognised
in other
Comprehensive
income
Balance at
31 December
$’000
$’000
$’000
$’000
(150,630)
11,909
(11,097)
(149,818)
(24,937)
(9,952)
-
(34,889)
30,846
2,809
(7,233)
26,422
-
-
7,304
7,304
(144,721)
4,766
(11,026)
(150,981)
Employee benefit obligation
Investment securities classified
as available-for-sale
2013
Property, plant and equipment
and intangible assets
Interest receivable
Employee benefit obligation
Investment securities classified
as available-for-sale
The following table reflects the deferred tax effect on items (charged)/credited to
other comprehensive income:
Before Tax
$’000
2014
$’000
2013
$’000
169,084
128,047
27,695
33,598
138,159
94,458
334,938
256,103
Tax
$’000
After Tax
$’000
2014
Unrealised gains on available-for-sale
investments
12,603
(4,201)
8,402
Increase in valuation of property, plant and
equipment (Note 17)
39,504
(6,268)
33,236
(67,292)
22,431
(44,861)
(15,185)
11,962
(3,223)
Re-measurement of employee benefit
obligation (Note 21)
2013
Unrealised gains on available-for-sale
investments
18. Accounts Payable and Accrued Charges
Other payables
52,266
Recognised
in other
Comprehensive
income
Freehold land and buildings include land at valuation aggregating $246,200,000
(2013: $225,500,000). The carrying value of land and building excluding
revaluation is $534,486,000 (2013 - $549,939,000).
General Consumption Tax
24,187
Recognised
in Profit or
Loss
Net Book Value -
Accruals
18,163
Balance at
1 January
Interest receivable
756,100
Revaluation adjustments
24,187
2014
Additions
Transfer to intangible assets
34,103
20. Deferred Tax Liability
At Cost -
Additions
-
(89,950)
Balance at end of year
17. Property, Plant and Equipment
1 January 2013
2013
$’000
The analysis of the movement in deferred commission income is as follows:
Amortisation At beginning of year
2014
$’000
(218,330)
7,304
(211,026)
Increase in valuation of property, plant and
equipment (Note 17)
54,381
(11,097)
43,284
Re-measurement of employee benefit
obligation (Note 21)
21,698
(7,233)
14,465
(142,251)
(11,026)
(153,277)
2014
$’000
2013
$’000
58,940
26,422
(144,851)
(149,818)
Deferred tax assets to be recovered after
more than one year
Deferred tax liabilities to be settled after
more than one year
AGIC Financial Statements • 31 December 2014
16
Financial Statements • 31 December 2014
21. Employee Benefit Obligation
The movement in the fair value of plan assets for the year is as follows:
The company sponsors a defined benefit pension scheme, which is open to all
employees who have satisfied certain minimum service requirements, and is
managed by a related company. The scheme is funded by employee contributions
at rates of either 5% or 10% of salary and employer contributions at the rate of
6.3%, (2013 – 6.3%). Retirement and other benefits are based on average salary
for the last three years of pensionable service.
The company provides other post-employment benefits in the form of health care
to its retirees who have satisfied certain minimum service requirements. Funds are
not built up to cover the obligations under this scheme. The method of accounting
and the frequency of valuations are similar to those used for the defined benefit
pension scheme.
The amounts recognised in the financial statements in respect of post-employment
benefits are as follows:
2014
$’000
2013
$’000
(55,868)
(79,267)
(120,952)
-
(176,820)
(79,267)
Liabilities recognised in the statement of financial position -
Pension
2014
$’000
2013
$’000
545,298
474,021
Contributions
54,190
61,339
Interest on plan assets
52,115
53,155
(36,087)
(27,335)
(5,189)
-
Fair value of plan assets at 1 January
Benefits paid
Administrative fees
Remeasurements on plan assets
Fair value of plan assets at 31 December
7,847
(15,882)
618,174
545,298
The plan assets in the pension fund are comprised as follows:
Pension
Other post-employment benefits
Pension
Government of Jamaica securities
Amounts recognised in profit or loss Pension
36,289
37,951
Other post-employment benefits
20,810
-
57,099
37,951
Amounts recognised in other comprehensive income (32,850)
Pension
Other post-employment benefits
21,698
100,142
-
(67,292)
21,698
The amounts recognised in the statement of financial position are as follows:
2014
$’000
2013
$’000
310,341
294,766
Quoted equities
89,774
79,758
Repurchase agreements
75,817
60,234
Promissory notes
64,112
57,298
Real estate
30,000
15,000
Other
48,130
38,242
618,174
545,298
Fair value of plan assets at 31 December
The amounts recognised in profit or loss in the statement of comprehensive income
were as follows:
Other post-employment benefits
Other post-employment benefits
Present value of funded
obligations
Pension
2014
$’000
2013
$’000
2014
$’000
2013
$’000
(120,952)
-
(674,042)
(624,565)
Employee benefit obligation
-
-
618,174
545,298
(120,952)
-
(55,868)
(79,267)
Current service cost
Net interest cost
Net obligation at 1 January
Expenses recognised in profit
or loss
Contributions paid
Remeasurement (losses)/
gains recognised in other
comprehensive income
Net liability at 31 December
2014
$’000
2013
$’000
2014
$’000
2013
$’000
-
-
(79,267)
(92,539)
(7,350)
-
(24,584)
(26,305)
-
-
26,838
29,525
(100,142)
-
32,850
21,698
(120,952)
-
(55,868)
(79,267)
The movement in the present value of the defined benefit obligation during the prior
year was as follows:
Present value of obligation at
1 January
Current service cost
Pension
2014
$’000
2013
$’000
2014
$’000
2013
$’000
-
-
(624,565)
(566,560)
(7,350)
-
(24,584)
(26,305)
Benefits paid
-
-
36,087
27,335
Interest cost
(13,460)
-
(58,631)
(64,801)
-
-
(27,352)
(31,814)
Remeasurement (losses)/gains
(100,142)
-
25,003
37,580
Present value of obligation at
31 December
(120,952)
-
(674,042)
(624,565)
Contributions paid
2014
$’000
2013
$’000
7,350
-
24,584
26,305
13,460
-
11,705
11,646
20,810
-
36,289
37,951
Other post-employment benefits
Pension
Other post-employment benefits
2013
$’000
The amounts recognised in other comprehensive income were as follows:
The movement in the net obligation during the year was as follows:
Other post-employment benefits
Pension
2014
$’000
Re-measurement of the
obligations
Re-measurement of the plan
assets
Pension
2014
$’000
2013
$’000
2014
$’000
2013
$’000
100,142
-
25,003
37,580
-
-
7,847
(15,882)
100,142
-
32,850
21,698
Principal actuarial assumptions used in valuing retirement benefits
The principal actuarial assumptions used were as follows:
2014
%
2013
%
Discount rate
9.5
9.5
Rate of salary increases
7.0
7.0
Rate of increase in pension benefits
2.5
2.5
Price inflation (CPI)
5.5
5.5
Health cost inflation above CPI
1.5
1.5
Assumptions regarding future mortality are set based on actuarial advice in
accordance with published statistics and experience in each territory. These
assumptions translate into an average life expectancy in years for a pensioner
retiring at age 60 for females and 65 for males.
The average liability duration at 31 December 2014 is 19.2 years (2013 – 18.8
years) for the pension benefit obligation and 19.1 years (2013 – 19.1 years) for
other post-employment obligations.
The company expects to pay $27.5 million in contributions to the defined benefit
pension plan in 2015.
The sensitivity of the defined benefit obligation in respect of the pension plan to
changes in the weighted principal assumptions is:
AGIC Financial Statements • 31 December 2014
17
Financial Statements • 31 December 2014
Inflation risk
21. Employee Benefit Obligation (Continued)
Principal actuarial assumptions used in valuing retirement benefits (Continued)
Change in
Assumption
Increase in
Assumption
Decrease in
Assumption
$’000
$’000
Discount rate
1%
(107,778)
142,161
Rate of salary increases
1%
70,477
(59,302)
Rate of increase in pension benefits
1%
57,829
(50,142)
Increase
Assumption
by One Year
Decrease
Assumption
by One Year
$’000
$’000
11,400
11,400
Life expectancy
Higher inflation will lead to higher liabilities. The majority of the plan’s assets are
unaffected by fixed interest bonds, meaning that an increase in inflation will either
reduce the surplus or create a deficit.
Life expectancy
The majority of the plan’s obligations are to provide benefits for the life of the
member, so increases in life expectancy will result in an increase in the plan’s
liabilities. This is particularly significant, where inflationary increases result in higher
sensitivity to changes in life expectancy.
22. Share Capital
2014
$’000
2013
$’000
2,009,907
2,009,907
Authorised:
The sensitivity of the defined benefit obligation in respect of the pension plan to
changes in the weighted principal assumptions is:
Change in
Assumption
Increase in
Assumption
Decrease in
Assumption
1,045,001,667 ordinary shares
Issued and fully paid:
1,020,588,667 (2013 – 1,020,588,667) ordinary shares
$’000
$’000
On 28 June 2013, the company issued 20,586,000 ordinary shares to NCB Capital
Discount rate
1%
(19,313)
25,006
Markets Limited fully paid for in cash at $2.91 per share.
Health inflation
1%
24,763
(19,443)
Increase
Assumption
by One Year
Decrease
Assumption
by One Year
$’000
$’000
2,900
2,900
Life expectancy
The above sensitivity analyses are based on a change in an assumption while
holding all other assumptions constant. In practice, this is unlikely to occur, and
changes in some of the assumptions may be correlated. When calculating the
sensitivity of the defined benefit obligation to significant actuarial assumptions the
same method (present value of the defined benefit obligation calculated with the
projected unit credit method at the end of the reporting period) has been applied as
when calculating the retirement benefit obligation recognised within the statement
of financial position.
23. Capital Reserve
2014
$’000
2013
$’000
Surplus on revaluation of land and buildings
247,915
206,161
Deferred tax arising from surplus revaluation of buildings
(51,865)
(45,597)
-
2,250
196,050
162,814
Capital reserve is comprised as follows:
Realised gain on disposal of investment properties
Realised capital reserves are available for distribution to shareholders, subject to
transfer tax at 4% (2013: 4%).
Risks associated with pension plans and post-employment plans
Through its defined benefit pension plan, the company is exposed to a number of
risks, the most significant of which are detailed below:
Asset volatility
The plan liabilities are calculated using a discount rate set with reference to
Government of Jamaica bond yields; if plan assets underperform this yield, this will
create a deficit.
As the plan matures, the company intends to reduce the level of investment risk by
investing more in assets that better match the liabilities. The Government bonds
represent investments in Government of Jamaica securities.
The company believes that due to the long-term nature of the plan liabilities, a level
of continuing equity investment is an appropriate element of the company’s long
term strategy to manage the plans efficiently. See below for more details on the
company’s asset-liability matching strategy.
Changes in bond yields
A decrease in Government of Jamaica bond yields will increase plan liabilities,
although this will be partially offset by an increase in the value of the plans’ bond
holdings.
AGIC Financial Statements • 31 December 2014
18
Financial Statements • 31 December 2014
24. Related Parties
(a)
25. Dividends Paid
The statement of financial position includes balances arising in the ordinary
course of business with related parties as follows:
Insurance receivables and deferred expenses
Cash and cash equivalents
2014
$’000
2013
$’000
431
(1,639)
22,672
187,577
Reverse repurchase agreements
373,445
-
Unearned premium
(63,301)
(38,275)
Other payables
(54,387)
(21,094)
(b)
Profit for the year includes the following income earned from, and expenses
incurred in, transactions with related parties. The transactions were in the
ordinary course of business.
2014
$’000
2013
$’000
190,866
170,826
27,704
3,286
-
54,575
Income:
Gross premiums written
Interest income
Gain on disposal of investment securities
Dividend
3,673
76,548
Operating expenses – internet & cable
-
4,370
management fees
-
1,902
security costs
-
28,833
group life premium
bank charges
(c)
2,529
2,653
20,639
18,486
2014
$’000
2013
$’000
91,027
117,552
3,391
3,781
94,418
121,333
247,600
In February 2008, the company received an assessment from the Commissioner,
Taxpayer Audit and Assessment Department (“CTAAD”) for 2003 year of
assessment totaling $26,562,252. This assessment is based on the company
offsetting tax losses brought forward from 2000 amounting to $692,182,606
against its taxable income. The loss of $692,182,606 arose from the change
in accounting policy in respect of the method of calculating the claims reserves
(liabilities) adopted by the company, as required. The company settled the amount
of $26,562,252 in 2013. The Tax Administration of Jamaica also completed their
assessment of Income Tax Returns for the period 2004 – 2011 and raised an
additional assessment of $223,120,000 in respect of the disallowed tax losses, of
which the company had previously provided $203,961,000. The company settled
the amount of $223,120,000 in December 2014, however an appeal has been
filed with the Privy Council to challenge the assessment and a hearing date is to
be determined.
Short term employment benefits:
Unearned premium
-
26. Tax Assessment
Transactions with key management personnel:
Salaries (inclusive of profit share)
2013
$’000
This represents dividend paid of $0.25 per share in the prior year.
Expenses:
Claims
2014
$’000
AGIC Financial Statements • 31 December 2014
19