Sanad Cooperative Insurance Company: Interim Condensed Financial Statements - 31 December 2016

Transcription

1. SANAD COOPERATIVE INSURANCE COMPANY (A Saudi Joint Stock Company) UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS For the three and twelve month periods ended 31 December 2016 Together with the Independent auditors’ limited review report
10. SANAD COOPERATIVE INSURANCE COMPANY (A Saudi Joint Stock Company) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED) FOR THE THREE AND TWELVE MONTH PERIODS ENDED 31 DECEMBER 2016 1 ORGANIZATION AND PRINCIPAL ACTIVITIES Sanad Cooperative Insurance Company (“the Company”) is a Saudi Joint Stock Company incorporated under Ministerial Resolution dated 15 Jumada II, 1428 H, (corresponding to 30 June 2007). The Company is registered in the Kingdom of Saudi Arabia under commercial registration number 1010235409 dated 23 Jumada II, 1428 H (corresponding to 8 July 2007). The objective of the Company is to transact cooperative insurance operations and related activities in the Kingdom of Saudi Arabia. The Company was listed on the Saudi Stock Exchange on 21 July 2007. The Registered Office of the Company is located at Dareen Center, Al Ahsa Street, Riyadh 11417, Kingdom of Saudi Arabia. These interim condensed financial statements cover the period from 1 January 2016 to 31 December 2016 (the ''period''). 2 BASIS OF PREPARATION 2.1 Basis of measurement The interim condensed financial statements have been prepared under the historical cost convention, except for the measurement at fair value of available for sale investments. 2.2 Going concern As at 31 December 2016, the Company’s solvency margin is below the limit prescribed by Saudi Arabian Monetary Agency (SAMA). The Company accumulated losses amounted to SR 174.6 million that represents approximately 87% of the Share Capital. The Saudi Arabian Regulations for Companies Article 148 require that in situations where the losses exceed 75% of the share capital, the Company’s Board of Directors must call for an extraordinary general meeting to consider this situation. As of the date of the approval of these interim condensed financial statements, the extraordinary general meeting has not been called and the Board is in the process of calling the extraordinary general assembly. The Board of Directors has announced a restructuring plan to the shareholders which has been approved by the Board on 9 Dhul Qadah 1435 (corresponding to 4 September 2014). The restructuring plan includes the following: a) Increasing the capital b) Cancellation of the reinsurance license c) Administrative restructuring including the appointment of Chief Executive Officer and all the vacant leadership positions in the Company. d) Financial restructuring including the establishment of collection Department to collect the company’s debts and reduce the accumulated losses of the Company. Due to the restructuring plan, the Board is expecting that there will be improvements in the net results of the Company and it will be able to continue its operations for the foreseeable future. SAMA has restrained the Company from accepting new subscribers to any of its insurance activities, thus, banning it from issuing or renewing any insurance policy whatsoever as of 12 DhulQadah 1435 corresponding to (7 September 2014) until a decision is issued by SAMA that the Company has rectified its status. SAMA has also directed the Company to settle and pay out all due claims and compensations arising from insurance policies issued before 12 Dhul Qadah 1435 corresponding to (7 September 2014). 9
11. SANAD COOPERATIVE INSURANCE COMPANY (A Saudi Joint Stock Company) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED) FOR THE THREE AND TWELVE MONTH PERIODS ENDED 31 DECEMBER 2016 2 BASIS OF PREPARATION (Continued) 2.2 Going concern (continued) Furthermore, the Capital Market Authority’s (CMA) Board has issued its decision on 12 Dhul Qadah 1435 corresponding to (7 September 2014) to suspend trading the shares of the Company in the Saudi Stock Exchange (Tadawul) starting from 12 Dhul Qadah 1435 corresponding to (7 September 2014). Also the Company has to correct its position in regard to the decision received from SAMA as required by the related rules and regulations. Based on that the CMA will look into whether to continue or discontinue suspending the trading of the shares. During the third quarter of 2015, the Company obtained a conditional approval from SAMA for increasing the share capital whereby the Company’s’ management believes that it would be able to meet the requirements for the conditional approval within the stated deadlines i.e. 31 December 2015. The Company as per it’s point of view has fulfil all the requirements contained in the conditional approval within the prescribed time limit; and the same was announced on Saudi Arabian Stock Exchange’s website (‘Tadawul’) on January 3, 2016, and the Company has received the final approval from the Saudi Arabian Monetary Agency to increase the capital by 200 million at 18 Rabi’a Al Akhir 1437 (corresponding to 28 January 2015) and the same was announced on Saudi Arabian Stock Exchange’s website (‘Tadawul’) at the same date. The Company cancelled the contract with the Financial Advisor handling the capital increase file and requested a time extension from SAMA in order to appoint another financial advisor and handling the file to CMA and a letter was received from SAMA extending the deadline to handle the file to CMA on 15 June 2016. The company appointed Saudi Kuwaiti Finance House as the new Financial Advisor on 10 April 2016 .The company requested from SAMA to reduce its Capital by 10 million shares (i.e. SR 100 million) an received their approval on 2 June 2016, both files related to Capital increase and decrease were submitted to CMA on 15 June 2016. On 28 November 2016, the Saudi Kuwaiti Finance House withdrew themselves from underwriting the capital increase and as a result they withdrew the file from CMA till the company gets a quotation from another underwriter. On 6 December 2016 the Company withdrew the capital reduction file from CMA, in order to be submitted with the capital increase file after securing another underwriter. Based on Company’s restructuring plan, future business prospects and the various discussions and negotiations with SAMA, the management believes that the going concern assumption is valid and has therefore prepared the financial statements on a going concern basis. 2.3 Statement of compliance The interim condensed financial statements of the Company have been prepared in accordance with International Accounting Standard 34 - Interim Financial Reporting. As required by Saudi Arabian Insurance Regulations, the Company maintains separate books of accounts for Insurance Operations and Shareholders’ Operations. Assets, liabilities, revenues and expenses clearly attributable to either activity are recorded in the respective accounts. The basis of allocation of expenses from joint operations is determined and approved by the management and Board of Directors. The interim condensed financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Company’s financial statements for the year ended 31 December 2015. In management’s opinion, the interim condensed financial statements reflect all adjustments (which include normal recurring adjustments) necessary to present fairly the results of operations for the interim period presented. The Company’s interim results may not be indicative of its annual results. 10
12. SANAD COOPERATIVE INSURANCE COMPANY (A Saudi Joint Stock Company) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED) FOR THE THREE AND TWELVE MONTH PERIODS ENDED 31 DECEMBER 2016 2 BASIS OF PREPARATION (Continued) 2.4 Functional and presentation currency The interim condensed financial statements have been presented in Saudi Riyals, being the functional currency of the Company. Amounts are rounded to nearest Riyal unless otherwise indicated. 2.5 Use of accounting judgements, estimates and assumptions in the preparation of interim condensed financial statements The preparation of interim condensed financial statements in conformity with International Financial Reporting Standards (IFRS) requires the use of judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim condensed financial statements and the reported amounts of revenue and expenses during the reporting period. Although these judgments, estimates and assumptions are based on management’s best knowledge of current events and actions, actual results ultimately may differ from those estimates. Estimates and judgments are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to accounting estimates are recognized in the period in which the estimate is revised. In particular, the matters involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are: - Unearned premium reserve - Outstanding claims and other technical reserve - Impairment of receivables and salvage recoveries - Impairment in value of investment – available for sale 3 SIGNIFICANT ACCOUNTING POLICIES AND RISK MANAGEMENT POLICIES The accounting policies used in the preparation of these interim condensed financial statements are consistent with those used in the preparation of the annual financial statements as of and for the year ended 31 December 2015, except for a) The adoption of new standards, amendments and revisions to existing standards, as mentioned below, which had no significant financial impact on the interim condensed financial statements of the Company:  Annual Improvements 2010-2012 and 2011-2013 Cycles - Annual improvements to IFRS 2010-2012 and 2011-2013 cycle applicable for annual periods beginning on or after 1 July 2014. The IASB made amendments to a total of nine standards, which included an amendment to IFRS 13 Fair Value Measurement. It clarifies in the Basis for Conclusions that short-term receivables and payables with no stated interest rates can be measured at invoice amounts when the effect of discounting is immaterial. This amendment to IFRS 13 has no impact on the Company. b) New and amended standards issued and adopted Annual improvements to IFRSs 2012 – 2014 Annual improvements to IFRSs 2012 – 2014 cycle applicable to annual period beginning on or after 1 January 2016. 11
13. SANAD COOPERATIVE INSURANCE COMPANY (A Saudi Joint Stock Company) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED) FOR THE THREE AND TWELVE MONTH PERIODS ENDED 31 DECEMBER 2016 3. SIGNIFICANT ACCOUNTING POLICIES AND RISK MANAGEMENT POLICIES (Continued) Disclosure initiative (Amendments to IAS 1) Amends IAS 1 Presentation of Financial Statements to address perceived impediments to preparers exercising their judgments in presenting the financial reports. It is effective for annual periods beginning on or after 1 January 2016. c) Standard issued not yet effective In addition to the above mentioned standards, the following standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Company’s interim condensed financial statements are disclosed below. The Company intends to adopt these standards, if applicable, when they become effective. Further, the Company has chosen not to early adopt the amendments and revisions to the International Financial Reporting Standards which have been published and are mandatory for compliance for the Company with effect from future dates. IFRS 9 Financial Instruments IFRS 9, as issued, reflects the first phase of the IASB’s work though the adoption date is subject to the recently issued Exposure Draft on the replacement of IAS 39 and applies to classification and measurement of financial assets and liabilities as defined in IAS 39. The standard was initially effective for annual periods beginning on or after 1 January 2013, but Amendments to IFRS 9 Mandatory Effective Date of IFRS 9 and Transition Disclosures, issued in December 2011, moved the mandatory effective date to 1 January 2015. However, on 19 November 2013, the IASB issued IFRS 9 Financial Instruments (Hedge Accounting and amendments to IFRS 9) amending IFRS 9 to include the new general hedge accounting model. In its February 2014 meeting, the IASB decided that IFRS 9 would be mandatorily effective for years ending on or after 31 December 2018. Disclosure initiative (Amendments to IAS 7) IAS 7 Statement of Cash flows has been amended as part of the IASB’s broader disclosure initiative to improve presentation and disclosure in financial statements. It is effective for annual periods beginning on or after 1 January 2017. 4 RELATED PARTY TRANSACTIONS AND BALANCES Related parties represent major shareholders, directors and key management personnel of the Company, and companies of which they are principal owners and any other entities controlled, jointly controlled or significantly influenced by them. Pricing policies and terms of these transactions are mutually agreed and are approved by the Company’s management. The related parties of the Company are as follows: 12
14. SANAD COOPERATIVE INSURANCE COMPANY (A Saudi Joint Stock Company) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE THREE AND TWELVE MONTH PERIODS ENDED 31 DECEMBER 2016 (Amount in Saudi Riyals) 4. RELATED PARTY TRANSACTIONS AND BALANCES (Continued) Nature of relationship 10% founding directorship shareholder Name of related party and common - Saudi Continental Insurance Company 90% shareholder in Saudi Continental Insurance Company and have a common directorship Common directorship and control - Aggad Investment Company - Arabian Tiles Company - Medical Supplies and Services Company Limited (MEDISERV) - National Advanced Systems Company Limited (NASCO) - United Motors Company a) Transactions with related parties: Details of significant transactions carried out during the period with related parties are as follows: Twelve months ended December 2015 (Audited) Twelve months ended December 2016 (Unaudited) Gross written premium Gross claims paid Gross written premium Gross claims paid Aggad Investment Company Arabian Tiles Company Medical Supplies and Services Company Limited (MEDISERV) National Advanced Systems Company Limited (NASCO) - 61,466 - - 89,974 402,862 - - - 165,884 - - 235,701 3,391,805 United Motors Company - 1,200 - 1,753,110 b) Balances with related parties: Details of significant receivables from and payables to the related parties are as follows: 31 December 2016 (Unaudited) Aggad Investment Company Arabian Tiles Company Medical Supplies and Services Company Limited (MEDISERV) National Advanced Systems Company Limited (NASCO) United Motors Company 31 December 2015 (Audited) Premiums Outstanding receivable claims Premiums receivable Outstanding claims - 28,560 - 375,951 30,915 23,455 269,021 330,232 269,021 330,232 - 3,087,838 - - 4,088,140 325,226 13
15. SANAD COOPERATIVE INSURANCE COMPANY (A Saudi Joint Stock Company) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE THREE AND TWELVE MONTH PERIODS ENDED 31 DECEMBER 2016 (Amount in Saudi Riyals) 4 RELATED PARTY TRANSACTIONS AND BALANCES (Continued) c) Compensation of key management personnel: Key management personnel of the Company include all directors, executive and non-executive, and senior management. The summary of compensation of key management personnel for the period is as follows: Twelve months ended December 2016 (Unaudited) 5,579,157 285,698 5,864,855 Twelve months ended December 2015 (Audited) 3,853,842 116,890 1,174,175 5,144,907 31 December 2016 (Unaudited) 31 December 2015 (Audited) 35,392,356 (26,178,686) 9,213,670 38,564,972 (28,036,594) 10,528,378 Salaries and other short term benefits End of service benefit Board Of Directors & Executive Committee 5 PREMIUMS RECEIVABLE, NET Premiums receivable Less : Impairment against doubtful receivables Total 31 December 2016 (unaudited) 31 December 2015 (Audited) Neither past due Past due but not nor impaired impaired - 35,392,356 38,564,972 9,213,670 10,528,378 Past due and impaired 26,178,686 28,036,594 The Company classifies receivable balances as ‘past due and impaired’ on a case to case basis, impairment against which is recorded in the statement of insurance operations. The Company does not obtain collateral against premium receivables. Amount which are neither past due nor considered impaired by management, in respect of premium receivables, are from individuals and unrated corporate policy holders. 6 REINSURERS’ BALANCE RECEIVABLE, NET 31 December 2016 (Unaudited) - Reinsurers’ balance receivable Less: Impairment against doubtful receivables Total 31 December 2016 (Unaudited) 31 December 2015 (Audited) 3,646,210 14 Past due but not impaired 3,555,647 31 December 2015 (Audited) 3,646,210 (90,563) 3,555,647 Past due and impaired 90,563
16. SANAD COOPERATIVE INSURANCE COMPANY (A Saudi Joint Stock Company) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE THREE AND TWELVE MONTH PERIODS ENDED 31 DECEMBER 2016 (Amount in Saudi Riyals) 7 OUTSTANDING CLAIMS AND OTHER TECHNICAL RESERVES 31 December 2016 (Unaudited) Reinsurers’ Share Gross Net Outstanding claim reserves Incurred but not reported reserve (“IBNR”) 11,881,299 2,949,562 (3,639,800) (862,387) 8,241,499 2,087,175 Outstanding claims and other technical reserves 14,830,861 (4,502,187) 10,328,674 31 December 2015 (Audited) Reinsurers’ Share Gross Outstanding claim reserves Incurred but not reported reserve (“IBNR”) Outstanding claims and other technical reserves 8 13,704,221 10,437,257 24,141,478 (2,378,042) (2,455,759) (4,833,801) Net 11,326,179 7,981,498 19,307,677 INVESTMENTS Investments - available for sale Investment in available for sale securities comprise of the following: 31 December 2015 (Audited) 31 December 2016 (Unaudited) Cost Quoted/Published prices Mutual Funds Global Sukuk Fund deposits Equities Unquoted Equities Total investments in available for sale Unrealized (loss) / gain Market value Market Value 6,625,998 602,253 9,450,000 2,452,006 16,316,608 (4,733,264) 32,392,606 (1,679,005) 7,228,251 11,902,006 11,583,344 30,713,601 7,085,475 11,647,502 11,916,218 30,649,195 1,923,078 34,315,684 1,923,078 32,636,679 1,923,078 32,572,273 15 (1,679,005)
17. SANAD COOPERATIVE INSURANCE COMPANY (A Saudi Joint Stock Company) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE THREE AND TWELVE MONTH PERIODS ENDED 31 DECEMBER 2016 (Amount in Saudi Riyals) 8 INVESTMENTS (continued) Movements in available for sale investments are as follows: 31 December 2016 (Unaudited) 32,572,273 64,423 32,636,679 At beginning of the period Change in fair value At end of the period 9 31 December 2015 (Audited) 38,165,215 (5,592,942) 32,572,273 SEGMENTAL INFORMATION Consistent with the Company’s internal reporting process, business segments have been approved by management in respect of the Company’s activities, assets and liabilities as stated below. Segment results do not include general and administration expenses and other income. Segment assets do not include property and equipment, prepayments and other assets, premiums receivable, reinsurances’ balance receivables, cash and cash equivalents, and due from shareholders’ operations. Accordingly they are included in unallocated assets. Segment liabilities do not include, end-of-service indemnities, reinsurers’ balances payable, accrued expenses and other liabilities. All unallocated assets and liabilities are reported to chief operating decision maker as unallocated assets and liabilities and are monitored on a centralized basis. All of the Company’s operating assets and principal activities are located in the Kingdom of Saudi Arabia. 16
18. SANAD COOPERATIVE INSURANCE COMPANY (A Saudi Joint Stock Company) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE THREE AND TWELVE MONTH PERIODS ENDED 31 DECEMBER 2016 (Amount in Saudi Riyals) 9 SEGMENTAL INFORMATION (CONTINUED) a) Statement of results for insurance operations For the three months ended 31 December 2016 (Unaudited) Medical - Motor - Marine - Engineering 32,171 Others - Total 32,171 Reinsurance premiums ceded - - - (29,919) - (29,919) Net written premiums - - - 2,252 - 2,252 Net changes in unearned premiums - - - 3,406 23,096 26,502 Net earned premiums - - - 5,658 23,096 28,754 Reinsurance commission earned - - - 29,874 3,962 33,836 Other underwriting income 3,933 11,960 - 50 - 15,943 Underwriting revenue 3,933 11,960 - 35,582 27,058 78,533 - (43,447) - - (9,080) 8,826 - (52,527) 8,826 - (43,447) - (254) - (43,701) 41,703 41,703 212,299 168,852 42,527 42,527 (119,339) (119,593) (7,451) (7,451) 169,739 126,038 Policy acquisition costs - - - (16,092) (5,145) (21,237) Other underwriting expenses, net Impairment allowance against doubtful receivables - - - (311) - (311) 15,198 369,674 - - - 384,872 Underwriting expenses 56,901 538,526 42,527 (135,996) (12,596) 489,362 Underwriting surplus / (deficit) before administration expenses and other income 60,834 550,486 42,527 (100,414) 14,462 567,895 Gross written premiums EXPENSES Gross claims paid Reinsurance share of claims paid Net claims paid Net changes in outstanding claims and other technical reserves Net claims incurred Unallocated income (3,987,851) Unallocated expenses Net deficit from insurance operations (3,419,956) 17
19. SANAD COOPERATIVE INSURANCE COMPANY (A Saudi Joint Stock Company) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE THREE AND TWELVE MONTH PERIODS ENDED 31 DECEMBER 2016 (Amount in Saudi Riyals) 9 SEGMENTAL INFORMATION (CONTINUED) b) Statement of results for insurance operations For the Twelve months ended 31 December 2016 (Unaudited) Gross written premiums Reinsurance premiums ceded Net written premiums Net changes in unearned premiums Net earned premiums Medical (36,986) Motor - Marine - Engineering 84,944 Others - Total 47,958 - (392,913) (284,874) (122,669) (96,000) (896,456) (36,986) (392,913) (284,874) (37,725) (96,000) (848,498) - - - 32,050 111,974 144,024 (36,986) (392,913) (284,874) (5,675) 15,974 (704,474) Reinsurance commission earned (484,917) - - 187,527 20,826 (276,564) Other underwriting income 1,319,237 2,455,511 178,465 75,256 58,117 4,086,586 797,334 2,062,598 (106,409) 257,108 94,917 3,105,548 (8,320) - (2,953,397) - (1,550) 1,008 (394,948) 375,003 (153,321) 104,930 (3,511,536) 480,941 (8,320) (2,953,397) (542) (19,945) (48,391) (3,030,595) 407,797 399,477 8,721,369 5,767,972 47,657 47,115 87,673 67,728 (175,351) (223,742) 9,089,145 6,058,550 Underwriting revenue EXPENSES Gross claims paid Reinsurance share of claims paid Net claims paid Net changes in outstanding claims and other technical reserves Net claims incurred Policy acquisition costs Other underwriting expenses, net Impairment allowance against doubtful receivables Underwriting expenses Underwriting surplus / (deficit) before administration expenses and other income 3,089 - - (104,077) (25,733) (126,721) (125,400) (134,356) - (1,149) - (260,905) 408,246 2,108,013 - - - 2,516,259 685,412 7,741,629 47,115 (37,498) (249,475) 8,187,183 1,482,746 9,804,227 (59,294) 219,610 (154,558) 11,292,731 Unallocated income 250 (18,851,217) Unallocated expenses Net deficit from insurance operations (7,558,236) 18
20. SANAD COOPERATIVE INSURANCE COMPANY (A Saudi Joint Stock Company) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE THREE AND TWELVE MONTH PERIODS ENDED 31 DECEMBER 2016 (Amount in Saudi Riyals) 9 SEGMENTAL INFORMATION (CONTINUED) a) Statement of results for insurance operations (continued) For the three months ended 31 December 2015 (Unaudited) Medical Gross written premiums Reinsurance premiums ceded Motor Marine Engineering Others Total (434,872) (385) - 45,000 - (390,257) 139,002 (354,298) (141,569) (64,575) (118,132) (539,572) Net written premiums (295,870) (354,683) (141,569) (19,575) (118,132) (929,829) Net changes in unearned premiums Net earned premiums (295,870) (354,683) (141,569) 17,851 (1,724) 51,530 (66,602) 69,381 (860,448) Reinsurance commission earned (886,434) - - 94,433 9,262 (782,739) Other underwriting income Underwriting revenue 417,887 62,829 2,269,026 73,552 (796,000) 2,027,294 (764,417) (291,854) 2,127,457 166,261 (853,340) 384,107 (25,222) (4,879,036) (27,708) (69) (89,728) (5,021,763) 4,579 29,850 50,983 24,367 86,588 196,367 (20,643) (4,849,186) 23,275 24,298 (3,140) (4,825,396) 2,551,331 2,530,688 7,390,764 2,541,578 (29,539) (6,264) 46,147 70,445 350,665 347,525 10,309,368 5,483,972 24,268 (2,082) - (54,833) (11,915) (44,562) (4) (2,656) (719,565) (875,146) (915,466) (2,512,837) 809,010 3,363,962 3,426,585 5,963,425 -(725,829) -(859,534) -(579,856) 4,235,595 7,162,168 2,599,545 5,671,571 1,401,628 (693,273) (1,433,196) 7,546,275 EXPENSES Gross claims paid Reinsurance share of claims paid Net claims paid Net changes in outstanding claims and other technical reserves Net claims incurred Policy acquisition costs Other underwriting expenses Impairment allowance against doubtful and salvage receivables Underwriting expenses Underwriting surplus / (deficit) before administration expenses and other income Unallocated income 5,700 Unallocated expenses (4,302,374) Net surplus from insurance operations 3,249,601 19
21. SANAD COOPERATIVE INSURANCE COMPANY (A Saudi Joint Stock Company) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE THREE AND TWELVE MONTH PERIODS ENDED 31 DECEMBER 2016 (Amount in Saudi Riyals) 9 SEGMENTAL INFORMATION (CONTINUED) a) Statement of results for insurance operations (continued) For the year ended 31 December 2015(Audited) Medical Gross written premiums Motor Marine Engineering Others Total Reinsurance premiums ceded (592,877) 249,605 220,467 (1,373,821) 40,837 (674,167) 500,611 (588,673) (36,155) (298,051) 132,883 (2,685,107) Net written premiums (343,272) (1,153,354) (633,330) (88,062) (334,206) (2,552,224) 1,011,222 13,954,198 69,303 137,679 805,555 15,977,957 667,950 12,800,844 (564,027) 49,617 471,349 13,425,733 (288,193) -- 941,508 671,771 439,087 1,764,173 Net changes in unearned premiums Net earned premiums Reinsurance commission earned Other underwriting income 417,887 1,550,310 2,269,051 73,552 (796,000) 3,514,800 Total underwriting revenue 797,644 14,351,154 2,646,532 794,940 114,436 18,704,706 (11,972,231) (28,436,813) (1,524,065) (3,424,144) (4,327,965) (49,685,218) EXPENSES Gross claims paid Reinsurance share of claims paid 6,922,099 660,225 1,256,589 3,335,602 270,596 12,445,111 Net claims paid (5,050,132) (27,776,588) (267,476) (88,542) (4,057,369) (37,240,107) Net changes in outstanding claims and other technical reserves Net claims incurred 15,401,236 10,351,104 30,653,839 2,877,251 1,213,480 946,004 693,588 605,046 6,180,409 2,123,040 54,142,552 16,902,445 Policy acquisition costs (222,524) (2,502,643) (529,646) (501,089) (408,665) (4,164,567) Other underwriting expenses, net Impairment allowance against doubtful and salvage receivables Underwriting expenses (487,691) (483,360) (2,602,290) (3,233,209) (3,768,058) (10,574,608) 2,058,443 11,699,332 3,396,970 3,288,218 -(2,185,932) -(3,129,252) -(2,053,683) 5,455,413 7,618,683 12,496,976 17,639,372 460,600 (2,334,312) (1,939,247) 26,323,389 Underwriting surplus / (deficit) before administration expenses and other income Unallocated income 73,975 Unallocated expenses (19,557,593) Net surplus from insurance operations 6,839,771 20
22. SANAD COOPERATIVE INSURANCE COMPANY (A Saudi Joint Stock Company) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE THREE AND TWELVE MONTH PERIODS ENDED 31 DECEMBER 2016 (Amount in Saudi Riyals) 9 SEGMENTAL INFORMATION (CONTINUED) a) Insurance operations’ assets and liabilities At 31 December 2016 (Unaudited) Medical Motor Marine Engineering Others Total Insurance operations assets Reinsurers' share of unearned premiums Reinsurers' share of outstanding claims and other technical reserves - - - 153,368 21,953 175,321 3,068 28,580 225,066 3,368,638 876,835 4,502,187 - - - 22,954 10,024 32,978 3,068 28,580 225,066 3,544,960 908,812 4,710,486 Deferred policy acquisition cost Allocated assets Unallocated assets Total insurance operations assets 44,657,883 49,368,369 Insurance operations liabilities Unearned premiums reserves Outstanding claims and other technical reserves - - - 160,527 72,077 232,604 5,388 9,565,566 369,519 3,683,891 1,206,497 14,830,861 - - - 43,291 6,037 49,328 5,388 9,565,566 369,519 3,887,709 1,284,611 15,112,793 Unearned commission income Allocated liabilities Unallocated liabilities Total insurance operations liabilities 34,255,576 49,368,369 At 31 December 2015 (Audited) Medical Motor Marine Engineering Others Total Insurance operations assets Reinsurers' share of unearned premiums - - - 742,127 97,682 839,809 Reinsurers' share of outstanding claims and other technical reserves Deferred policy acquisition cost 714,386 - 919,354 - 293,420 - 2,596,767 114,290 309,874 35,757 4,833,801 150,047 Allocated assets 714,386 919,354 293,420 3,453,184 443,313 5,823,657 Unallocated assets 66,181,387 Total insurance operations assets 72,005,044 Insurance operations liabilities Unearned premiums reserves Outstanding claims and other technical reserves Unearned commission income Allocated liabilities - - - 781,337 259,780 1,041,117 1,124,503 19,177,709 485,530 2,889,551 464,185 24,141,478 - - - 208,762 26,863 235,625 1,124,503 19,177,709 485,530 3,879,650 750,828 25,418,220 Unallocated liabilities 46,586,824 72,005,044 Total insurance operations liabilities 21
23. SANAD COOPERATIVE INSURANCE COMPANY (A Saudi Joint Stock Company) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (UNAUDITED) FOR THE THREE AND TWELVE MONTH PERIODS ENDED 31 DECEMBER 2016 (Amount in Saudi Riyals) 10 FAIR VALUES OF FINANCIAL INSTRUMENTS The Company measures financial instruments and non-financial assets at fair value at each balance sheet date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:   in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability The principal or the most advantageous market must be accessible to by the Company. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:    Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between Levels in the hierarchy by reassessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above. The Company’s management determines the policies and procedures for both recurring fair value measurement and for non-recurring measurement, such as assets held for distribution in any discontinued operation. External valuers are involved for valuation of significant assets, such as properties and AFS financial assets, and significant liabilities, such as contingent consideration. 22
24. SANAD COOPERATIVE INSURANCE COMPANY (A Saudi Joint Stock Company) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE THREE AND TWELVE MONTH PERIODS ENDED 31 DECEMBER 2016 (Amount in Saudi Riyals) 10 FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued) The table below analyses financial instruments measured at the end of the reporting period by the level in the fair value hierarchy into which the fair value measurement is categorized: 31 December 2016 (Unaudited) Level 2 Level 3 Level 1 Equities Other quoted investments Unquoted equities Equities Other quoted investments Unquoted equities 11,583,344 - 19,130,257 - 1,923,078 11,583,344 19,130,257 1,923,078 1,923,078 32,636,679 11,583,344 19,130,257 Level 1 31 December 2015 (Audited) Level 2 Level 3 11,916,218 11,916,218 18,732,977 18,732,977 Total Total 1,923,078 11,916,218 18,732,977 1,923,078 1,923,078 32,572,273 11 COMMITMENTS AND CONTINGENCIES Legal proceedings and regulations The Company operates in the insurance industry and is subject to legal proceedings in the normal course of business. While it is not practicable to forecast or determine the final results of all pending or threatened legal proceedings, management does not believe that such proceedings (including litigations) will have a material effect on its results and financial position. 12 APPROVAL OF THE INTERIM CONDENSED FINANCIAL STATEMENTS The interim condensed financial statements have been approved by the Board of Directors on 16th January 2017, corresponding to 18th Rabia II 1438. 23