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Financial Reports

Understanding Our Financials

The Statement of Income of a life insurance company contains income and expense items that do not appear in a Statement of Income of a manufacturing and trading business. Similarly, the Statement of Financial Position of a life insurer also contains some industry-specific assets and liabilities. This brief note is aimed at helping the reader to understand our financials and is to be read along with the Audited Financial Statements, Notes and the Glossary.

Statement of Comprehensive Income

Rs.’000 Rs.’000 Comment
Gross written premiums 8,291,277

The main source of income of a life insurer is the premium paid by customers for the risks transferred to the life insurer through the insurance contract. GWP is comparable to the ‘turnover’ of a manufacturing and trading company.

Premiums ceded to reinsurers (183,463)

Reinsurance is the process by which part of the risks undertaken by the life insurer is transferred to a reinsurer, for which reinsurance premium paid by the insurer to the reinsurer.

Net written premiums 8,107,814

Net earned premium is the premium earned by the insurer for the financial year.

Fees and commission income 50,662

Fees and commission income includes the charges and policy fees paid by customers.

Investment income 3,896,071

Investment income contains the interest income, dividend income and rental income on investments made out of the Life Fund, after deducting the related investment expenses.

Realised gains 4,369

Realised gains and losses include gains and losses arising on sale of financial assets.

Fair value gains and losses 65,389

Fair value gains and losses are gains and losses that arise from changes in fair values of assets.

Other operating revenue 4,758

Other income comprises fees charged for policy administration services, disposal gains on property, plant and equipment, gains on foreign currency translations and miscellaneous income.

Other revenue 4,021,249
Net income 12,129,063
Gross benefits and claims paid (3,805,625)

Gross benefits and claims paid refer to the total amount of claims and claim-related expenses incurred during the year.

Claims ceded to reinsurers 115,745

Claims ceded to reinsurers contain the proportion of claims paid, which was recovered from reinsurers.

Gross change in contract liabilities (3,675,856)

Gross change in contract liabilities is the net transfer to the Life Fund during the period.

Net benefits and claims (7,365,736)
Acquisition cost (977,782)

Acquisition cost refers to the commission expenses incurred for the financial year. Life insurance business is predominantly transacted through independent contractual agents who are paid commission based on premium they collected.

Other operating and administrative expenses (1,761,496)

Other operating and administrative expenses include administration, staff, sales and marketing expenses related to the Company.

Finance cost (6,001)

Finance cost includes charges on the financial services provided by financial institutions, particularly bank charges.

Total other expenses (2,745,279)
Profit before tax 2,018,048
Income tax expense (116,762)

Income tax expense comprises the current and deferred tax. Current tax is the expected tax payable on the taxable income for the year and any adjustment to tax payable in respect of previous year.

Profit for the year 1,901,286

Group Consolidated Statement of Financial Position

As at 31 December 2015 Rs.'000 Comment

Assets

Intangible assets 645
Property, plant and equipment 5,343,752
Investment properties 1,399,171
Investment in subsidiaries 521,000
Investment in associates 365,553
Financial instruments 64,853,851 Financial instruments represent the financial investments made out of the Life Fund by a life insurer, with the aim of earning investment income to increase profitability of the Company. Such investment income is accumulated to the Life Fund.
Employee gratuity benefit asset 725,726
Employee pension benefit asset 873,081
Reinsurance receivables 46,007

Loans to life policyholders include the loans granted by the life insurer to policyholders. Eligible policyholders can obtain loans up to a pre-determined percentage of the surrender value of their policy.

Income tax receivables 1,183,836
Loans to life policyholders 1,335,634

Reinsurance receivables represent the amounts receivable by the life insurer for the claims made the policyholders.

Premium receivables 192,401

Premium receivables represent the gross written premium accrued up to the Reporting date.

Accrued income 2,485,422
Other assets 310,435
Cash and cash equivalents 598,651
Total assets 80,235,165
Equity and liabilities
Equity attributable to equity holders of parent
Stated capital 500,001
Retained earnings 1,733,281
AFS reserve (98,563)
Special reserve 7,311,651
Total ordinary shareholders’ equity 9,446,370
Non-controlling interests
Total equity 9,446,370
Liabilities
Insurance contract liabilities – life 68,011,535

Due to the long term nature of life insurance business, life insurers are required to maintain a separate fund to meet future policyholder obligations. This fund is known as ‘Insurance Contract Liabilities – Life’, or more commonly as ‘Life Fund’. An actuarial valuation is performed at each year-end to determine the size of the fund necessary in comparison to the assets maintained out of the fund. Any excess of assets over the policy liabilities of the fund, known as the ‘Life Surplus’, is transferred to the shareholders’ funds of the Company.

Insurance contract liabilities – unit linked 240,654

These items represent the balances of the other separately identifiable funds, in addition to the Life Fund, maintained by a life insurer.

Insurance contract liabilities – family Takaful 4,708

These items represent the balances of the other separately identifiable funds, in addition to the Life Fund, maintained by a life insurer.

Individual investment fund ISF 22,700

These items represent the balances of the other separately identifiable funds, in addition to the Life Fund, maintained by a life insurer.

Other financial liabilities 299,811
Deferred tax liabilities 71,840
Reinsurance payables 58,153

Reinsurance payables contain amounts outstanding to be paid to reinsurers by a life insurer as at the Reporting date.

Trade and other payables 1,635,439
Bank overdraft 443,955
Total liabilities 70,788,795
Total equity and liabilities 80,235,165