Dawood Family Takaful: Annual Report 2020

Transcription

1. ANNUAL 20 20 REPORT DAWOOD FAMILY TAKAFUL LIMITED
2. DAWOOD FAMILY TAKAFUL ANNUAL REPORT 2020
3. BRAND OF THE YEAR AWARD 2020 DAWOOD FAMILY TAKAFUL Has Been Successfully Qualified For Fastest Growing Brand of the year Award 2020
4. CLEAN GREEN PAKISTAN Being Muslim it is our utmost duty to leave behind sadqa jaria for the benefit of humanity . One of best sadqa jaria is to plant a tree. Extract of Hadith ref. “To Plant a tree is Sadqa-e-Jaria” Muslims are not allowed to destroy or burn or cut the trees even in adverse situation Like war. Extract of related Part of Hadith Ref. (It is ordered even during war) Not to destroy, MR. RAFIQUE DAWOOD cut or burn Date tree gardens, neither to cut any fruitful tree. Besides Prime Minister Mr. Imran Khan launched a Campaign of Green Pakistan in the past. DFT initiated plant a tree campaign & DFT Management planted many trees in its warehouse site. DFT also took an active part in “LADIESFUND Women Plant a Tree” “Give Life Give hope” event. Being a Takaful company, we not only practice our religious obligations but also fulfill our patriotic responsibilities owed to our beloved PAKISTAN as well. Very well said “It is our collective and individual responsibility to preserve and tend to the environment in which we all live” said by Dalai Lama.
5. OUR PRODUCTS & ITS FEATURES SUKOON SALAMTI SAHULAT DEATH BENEFITS Sum Cover + Net Accumulated PIA Value + Surplus from Waqf Fund, if any DEATH BENEFITS DEATH BENEFITS MATURITY BENEFITS Sum Cover + Net Accumulated PIA Value + Surplus from Waqf Fund, if any Sum Cover + Net Accumulated PIA Value + Surplus from Waqf Fund, if any Sum Cover + Net Accumulated PIA Value + Surplus from Waqf Fund, if any MATURITY BENEFITS MATURITY BENEFITS Net Accumulated PIA Value + Surplus from Waqf Fund, if any Net Accumulated PIA Value + Surplus from Waqf Fund, if any SILAH SAMAR DEATH BENEFITS Higher of Sum Cover or PIA Value Surplus from Waqf Fund, if any DEATH BENEFITS Plan Continuation Benefit + Family income Benefit + Sum cover in case of accidental death MATURITY BENEFITS Net Accumulated PIA Value + Surplus from Waqf Fund, if any MATURITY BENEFITS Net Accumulated PIA Value + Surplus from Waqf Fund, if any ANNUAL REPORT 2020
6. OUR PRODUCTS & ITS FEATURES SALARY SAVINGS SEHAL DEATH BENEFITS DEATH BENEFITS Sum Cover + Net Accumulated PIA Value + Surplus from Waqf Fund, if any Higher of Sum Cover or PIA Value + Surplus from Waqf Fund, if any MATURITY BENEFITS MATURITY BENEFITS Net Accumulated PIA Value + Surplus from Waqf Fund, if any Net Accumulated PIA Value + Surplus from Waqf Fund, if any SAHARA SAADA DEATH BENEFITS DEATH BENEFITS Higher of Sum Cover or PIA Value + Surplus from Waqf Fund, if any Sum Cover + Surplus from Waqf Fund, if any MATURITY BENEFITS MATURITY BENEFITS Accumulated PIA Value + Surplus from Waqf Fund, if any Surplus from Waqf Fund, if any ANNUAL REPORT 2020
7. Term Takaful provides protection to the Participant ’s employees in the event of death due to any cause. They will be covered 24 hours a day Under Group Credit Takaful each borrower of the Participant is covered for outstanding balance of financing. The compensation due to the Participant anywhere in the world. In PROVIDENT FUND COVERAGE PLAN Group GROUP CREDIT TAKAFUL PLAN is the scheduled amount case of death (God Forbid) Group Provident Fund Takaful Scheme has been designed to provide a financial cushion to the family on the untimely death of the bread earner. Under this coverage the sum cover can be chosen in multiples of PF balance to the beneficiaries. death of the borrower. as mutually agreed. FEE CONTINUATION PLAN full sum cover will be paid outstanding on the date of Under this plan remaining fee and other educational expenses of a student could be covered in case of untimely demise of the parent/guardian of the student. Colleges and Schools, Universities could avail this coverage to ensure continuity of student’s studies by protect- PAY CONTINUATION PLAN GROUP TERM TAKAFUL PLAN CORPORATE TAKAFUL SOLUTIONS This product is designed to provide a monthly income if the covered employee dies or becomes totally permanent disable and to perform any work. The employer may choose to continue paying all or part of an employee's salary to the parents/guardians employee or beneficiary upto against remaining fee and certain years or age of 60 other educational expenses. years,whichever comes earlier. ing the BANCA TAKAFUL ANNUAL REPORT 2020 unable
8. Annual Sales Conference 2021 at Serena Hotel , Islamabad
9. VISION & MISSION The Company will strive to become the Takaful partner of choice in pakistan catering to the financial protection, long term savings, retirement and financial planning needs of individuals, business and the public sector, in full conformity with shariah principles. OUR VISION To be recognized as a reputable, profitable, Shariah driven Family OUR MISSION Takaful operator offering innovative financial solutions to its clients through best in class talent, technology and distribution power. ANNUAL REPORT 2020
10. CONTENTS Core Values 02 Corporate Information 05 Directors ’ Report to the Shareholders 14 Key Financial Data for Last Six Years 15 Shariah Review Report 16 Statement of Compliance with Code of Corporate Governance CONTENTS 01 20 Review Report to the Members on Statement of Compliance with Code of Corporate Governance 21 Auditors’ Report to the Members 24 Financial Statements 83 Statement of Directors 84 Certificate of Appointed Actuary 85 Pattern of Shareholding 87 Notice of 13th Annual General Meeting 104 Urdu Translation of Directors’ report to the shareholders Proxy Form ANNUAL REPORT 2020
11. CORE VALUES CORE VALUES Our values transcend throughout the entire organization . These principles will guide us to succeed in our business and will serve us well ahead into the future, from day-to-day business operation to product development and customer service. We are establishing a fully moral and ethical Company whose people are strong in religious values and live by the highest ethical standards. OUR COMPANY We strive to earn the confidence of our participants by building a reputation for fair and prompt claims services and ensuring the financial stability of the Company. We believe that these form the foundation of their security. CUSTOMER CENTRIC We believe in doing the right things right the first time and every time. Quality and continuous improvements shall be the key drivers in all our management processes. ANNUAL REPORT 2020 01 02 03 04 05 ISLAMIC VALUES We are building a Team that takes personal responsibility for the delivery of our services and promises to our participants and business partners. We shall consciously seek to develop our staff and consultants in their chosen careers and install in them a sense of pride and ownership in the Company. FINANCIAL STRENGTH We believe that by being pro-active and meeting the changing needs of our participants through value-added products and services, we will meet the aspirations of all stakeholders. QUALITY CULTURE
12. DAWOOD FAMILY TAKAFUL LIMITED CORPORATE INFORMATION BOARD OF DIRECTORS Mr . Ayaz Dawood Chairman - Nominee of B.R.R. Guardian Modaraba Mr. Ghazanfar-ul-Islam Chief Executive Officer Mr. Muhammad Rizwan-ul Haque Director Mr. Rizwan Ahmed Farid Director Mr. Moin Rana Director - Nominee of the Bank of Khyber Miss. Tara Uzra Dawood Director SHARIAH BOARD Professor Mufti Munib-ur-Rehman Chairman Mufti Syed Zahid Siraj Member Mufti Syed Sabir Hussain Member Mr. Mohammad Asif Haque Secretary AUDIT COMMITTEE Mr. Muhammad Rizwan-ul Haque Chairman Mr. Rizwan Ahmed Farid Member Mr. Moin Rana Member Mr. Naveed Ahmed Secretary INVESTMENT COMMITTEE Mr. Ayaz Dawood Chairman Mr. Muhammad Rizwan-ul Haque Member Mr. Ghazanfar-ul-Islam Member Mr. Shujat Siddiqui Member Mr. Muhammad Rizwan Saleem Member Mr. Tauqir Shamshad Member Mr. Ajaz Hussain Member Mr. Naveed Ahmed Secretary ETHICS, NOMINATION, HUMAN RESOURCE & REMUNERATION COMMITTEE Mr. Ayaz Dawood Chairman Mr. Muhammad Rizwan-ul Haque Member Mr. Ghazanfar-ul-Islam Member Mr. Jawwad-ul-Islam Secretary ANNUAL REPORT 2020 02
13. DAWOOD FAMILY TAKAFUL LIMITED UNDERWRITING COMMITTEE Mr . Ghazanfar-ul-Islam Chairman Mr. Mohammad Asif Haque Member Mr. Tanveer Kolachi Member & Secretary CLAIM SETTLEMENT COMMITTEE Mr. Ghazanfar-ul-Islam Chairman Mr. Muhammad Rizwan Saleem Member Mr. Kashif Khan Member Ms. Shahana Shaikh Member & Secretary RE-TAKAFUL COMMITTEE Mr. Ghazanfar-ul-Islam Chairman Mr. Mohammad Asif Haque Member Mr. Shujat Siddiqui Member Mr. Ajaz Hussain Secretary RISK MANAGEMENT & COMPLIANCE COMMITTEE Mr. Ghazanfar-ul-Islam Chairman Mr. Mohammad Asif Haque Member Mr. Muhammad Rizwan Saleem Member Mr. Ajaz Hussain Member Mr. Naveed Ahmed Member & Secretary IT COMMITTEE Mr. Ghazanfar-ul-Islam Chairman Syed Nasir Ali Rizvi Member Mr. Mohammad Asif Haque Member Mr. Muhammad Rizwan Saleem Member Mr. Ajaz Hussain Member Mr. Noman Ali Member Syed Muhammad Anwer Secretary 03 ANNUAL REPORT 2020
14. DAWOOD FAMILY TAKAFUL LIMITED CHIEF FINANCIAL OFFICER COMPANY SECRETARY & HEAD OF COMPLIANCE Mr. Muhammad Rizwan Saleem Mr. Naveed Ahmed STATUTORY AUDITORS Yousuf Adil, Chartered Accountants INTERNAL AUDITORS BDO Ebrahim & Co, Chartered Accountants SHARIAH AUDITORS Sajid & Co. Chartered Accountants SHARIAH COMPLIANCE OFFICER Allama Abdul Kalam APPOINTED ACTUARY Mr. Shujat Siddiqui, MA, FIA, FPSA Akhtar & Hassan (Pvt.) Limited LEGAL ADVISOR Nishtar & Zafar Advocates and Legal Consultants TAX ADVISOR Yousuf Adil, Chartered Accountants SHARE REGISTRAR FD Registrar Services (Pvt.) Limited 1705, 17th Floor, Saima Trade Towers – A I.I. Chundrigar Road BANKERS Karachi – 74000 Al Baraka Bank (Pakistan) Limited Bank Al-Falah Limited Bank Al-Habib Islamic Banking BankIslami Pakistan Ltd Dubai Islamic Bank Limited Faysal Bank Limited Barkat Islamic Banking Habib Bank Limited, Islamic Banking Habib Metropolitan Bank Limited, Sirat Islamic Banking Meezan Bank Limited Silk Bank Limited, Emaan Islamic Banking Soneri Bank Ltd, Mustaqeem Islamic Banking UBL Ameen Islamic Banking Telenor Microfinance Bank Limited REGISTERED AND HEAD OFFICE 17th Floor, Saima Trade Towers – A I.I. Chundrigar Road, Karachi – 74000 Website: www.dawoodtakaful.com Email: contactus@dawoodtakaful.com ANNUAL REPORT 2020 04
15. DAWOOD FAMILY TAKAFUL LIMITED DIRECTOR ’S REPORT TO THE SHAREHOLDERS Dear Shareholders, The Directors of your Company are pleased to present 13thAnnual Financial Report for year ended December 31, 2020. By the grace of Allah the performance for the year was marked with many improvements. Economy Overview Since COVID-19 has engulfed the entire world and disrupt the supply chains. The pandemic is not only inflicting unprecedented damage to human lives but it has also taken a heavy toll on global economic activity. Currently, Pakistan is faced with dual challenge, to contain the spread of this pandemic and to mitigate the socio-economic losses. The world is facing a rapid spread of fatal virus. As at December 31, 2020 there was no authentic prevention / treatment to overcome the pandemic. Presently, the vaccine(s) is thought to be the only sure way to move forward, but only the time will tell about its results. Pakistan formally launched the coronavirus vaccination drive from February 3, 2021 as the country faces the threat from the second and the third wave. The first batch of COVID19 vaccines arrived in Pakistan from China, Pakistan has begun vaccinating citizens over the age of 60 against the coronavirus. We hope & pray that by grace of Allah in the next year, the world will reopen with a relatively smoother operations. Your company gradually picked-up its business activities during the year. The businesses were primarily effected in the first half, but there was reasonable recovery seen in the last two quarters i.e. after the ease of lockdown and control on the virus. We are pleased to report that by grace of Allah, the company achieved its targets and has shown a 10.50% growth in new business and an overall increase of 12.10% in total revenue. However, second year persistency continues to remain a concern, which is now aggressively being addressed. Market Overview Pakistan Stock Exchange (PSX) 100 Index started the year with 40,735 points, however, due to breakout of Covid-19 the 100 index dropped to 27,229 points on March 25, 2020 generating the negative return of 33%. However, after dying effects of the first wave; the 100 Index showed a remarkable surge and closed the year at 45,345 points on the back of; lower interest rates, surplus liquidity, the U.S. elections viz-a-viz improvement in performance of global markets. Henceforth, PSX made a recovery of 66.53% from its lowest closing of the year with net return of 7.41%. Locally, the recovery was driven by market friendly monetary & fiscal policies and Sino-American trade war, which led to improvement in economic activity and better corporate earnings. 05 ANNUAL REPORT 2020
16. DAWOOD FAMILY TAKAFUL LIMITED The market capitalization was PKR 8 .035 trillion. The foreign investors offloaded portfolios worth PKR 92.62 billion during CY 2020, which was absorbed by domestic individual investors, companies and insurance companies. This strong buying by local investors has shown the confidence of Pakistani investors on equity market. The pandemic enabled Pakistan to instate pro-growth policies earlier and much faster than we had thought before the crisis, the SBP moved quickly by cutting policy rate by 625 bps to 7% and took several measures to support the economy, introducing a range of concessionary finance schemes like Temporary Economic Refinancing Facility (TERF) at a subsidies rate of 7% fixed for 10 years’ tenor for plant and machinery for new projects. Brand of the year Award Dawood Family Takaful Limited has been recognized as fastest growing family takaful brand of the year Award 2020 by Brands Accreditation Council. Business Performance and Operating Results Contribution Income Gross total contribution underwritten in year 2020 amounted to Rs.1,834 Million with overall growth of 12.1% percent as compared to year 2019, whereas our first year individual contribution is Rs.577.2 Million with overall growth of 10.5%. Our total individual contribution is Rs.1,713.2 Million showing growth of 8.5% while Group term Contribution is Rs.121 Million showing an impressive growth of 130.7%. Group Contribu�on First Year Contribu�on 577.2 121 Million 522.1 Million 2020 2019 2020 Total Contribution Composition for the year 2020 Others 52.4 Million 2019 Group First Year Renewals ANNUAL REPORT 2020 06
17. DAWOOD FAMILY TAKAFUL LIMITED Claim Settlements The company from its inception has believed in the philosophy of prompt claim settlement . During the year 2020 DFTL has successfully paid claims totaling Rs.184.26 Million. Profitability During year 2020, the Company earned Takaful operator fees amounting to Rs.761.90 Million as compared to Rs.648.5 Million last year, which is an increase of 17%. Whereas, the total income is Rs.820.51 Million as compared to Rs.719.82 Million, an increase of 14%. While the profit before tax has augmented to Rs.88.58 Million as compared to Rs.50.78 Million last year, showing increase of 37.8 Million in current year. The company has made a Profit after tax of Rs.75.5 Million as compared to Rs.30.1 Million last year, thus showing an increase of Rs.45.4 Million and a growth of 151% as compared to last year. Takaful Operator Fee Commission Expense Management Expenses 2020 761.90 (273.90) (458.00) Profit/ (loss) Before Tax Profit/ (loss) After Tax 88.50 75.50 Rs. in Millions 2019 % 648.50 17% (264.40) 4% (404.60) 13% 50.78 30.10 74% 151% Participant Investment and Takaful Fund Participant Investment and Participant Takaful Funds made surplus amounting to Rs.803.10 Million and Rs.286.9 Million respectively. Whereas, fund sizes as at December 31, 2020 are Rs.4.10 Billion and Rs.1.66 Billion as compared to Rs.3.28 Billion and Rs.1.41 Billion respectively, which shows significant improvement in performance. Operational Efficiencies during pandemic The Company has taken several initiatives to give better services to their certificate holders like; Allowed additional grace period with takaful protection to ensure social distancing and financial relief during the difficult times as many of the participants has lost / reduced their income due to lockdown and business interruptions. Optimum utilization of remote technological services to ensure connectivity between clients and representatives. All divisions of the business were fully functional through remote excess given to employees working from home and online contribution received facility was also activated for ease of our certificate holders. Complimentary free of cost additional takaful cover to all of existing active retail participants in case of death due to COVID-19. 07 ANNUAL REPORT 2020
18. DAWOOD FAMILY TAKAFUL LIMITED Code of Conduct and Business Ethics The highest standards of Corporate Governance , ethics and good business practices are an integral part of the Company’s Code of Conduct approved by the Board. The code of Conduct, Corporate strategy, Vision, Mission, and core values have been adopted by the Board. The Code defines the obligation and responsibilities of the Board of Directors, the Employees and the Company towards its various stakeholders, towards each other and towards the society as a whole. Necessary steps have been taken to disseminate the same throughout the Company. The code is also available on the Company’s website. Corporate Social Responsibility Charity We believe in serving the community in general, and specially the community of the area where our operations are located. Our priority for such payments are for activities like i) Workers and Social Welfare and ii) Shariah Compliant Charitable Institutions. In line with the approved donation, charities, contribution policy the company has donated amount of Rs.0.95 million during the year. Green Pakistan Being Muslim it is our utmost duty to leave behind ‘Sadqa-e-Jaria’ for the benefit of humanity. One of best ‘Sadqa-e-Jaria’ is to plant a tree. Extract of Hadith “To Plant a tree is Sadqa-e-Jaria” Muslims are not allowed to destroy or burn or cut the trees even in adverse situation like war. Extract of related Part of Hadith (It is ordered even during war) Not to destroy, cut or burn Date tree gardens, neither to cut any fruitful tree. Besides Prime Minister Mr. Imran Khan launched a Campaign of Green Pakistan in the past. DFT initiated plant a tree campaign & DFT Management planted many trees in its warehouse site. DFT also took an active part in “LADIESFUND Women Plant a Tree” “Give Life Give hope” event. Being a Takaful company, we not only practice our religious obligations but also fulfill our patriotic responsibilities owed to our beloved PAKISTAN as well. “It is our collective and individual responsibility to preserve and tend to the environment in which we all live” said by Dalai Lama. Staff Retirement Benefits The Company operates a provident fund scheme for all permanent employees. The value of investments of provident fund as at December 31, 2020 is Rs.45.9 Million (Un-Audited) (Rs.43.42 million as of June 30, 2020 Audited). Expansion of Geographical Reach As of December 31, 2020 we have network of 58 branches all over Pakistan. ANNUAL REPORT 2020 08
19. DAWOOD FAMILY TAKAFUL LIMITED Distribution of Surplus An amount of Rs .46.65 million has been distributed to the participant of Individual Family Takaful as surplus in 2020. Insurer Financial Strength Rating (IFS Rating) Pakistan Credit Rating Agency (PACRA) has maintain Financial Strength (IFS) rating “A” (Single A) with stable outlook to DFTL which denotes our strong capacity to meet takaful contracts obligation. New Product & Restructuring DFT have launched a Shari’ah compliant saving and protection plan named as “Sahara Takaful Plan” under which higher of the sum cover or PIA value will be payable in case of death to the participant during the certificate term or accumulated PIA value will be payable at maturity of the certificate where the participant survives till maturity. A Shari’ah compliant pure protection plan ntamed as “Saada Takaful Plan” was also launched as a small ticket product. Under this plan the participant is covered for full sum cover against death due to any cause. A supplementary rider named as “Hospitalization Cash Rider” was also launched during 2020 as a medical benefit. Under this rider the participant will be entitled to daily cash benefit allowance of defined amount in case of hospitalization due to medical reasons. Training (Learning & Development) Although the pandemic of COVID 19 has hampered training & development, particularly in the first half of the year, sufficient opportunities for learning were availed across Pakistan. The detail of conducted sessions are as follow: AML/CFT & Takaful Foundation Trainings: There were 48 sessions for head office employees as well as new and current sales force, conducted mostly in the second half of the year, across Pakistan. Management Development Program Multiple sessions focusing on Capacity Development and Productive Managerial Behavior trainings were also given in all major business centers. Online Agent Refresher/Low Producer Clinics Support Due to the restrictions, the online software like Zoom Meeting, Google Meet and Skype were employed to train the field force related with the new products launched in 2020, as well as refresher sessions, along with Low Producer Clinic sessions were conducted for reaffirmation and removing skills-gap deficiencies. 09 ANNUAL REPORT 2020
20. DAWOOD FAMILY TAKAFUL LIMITED Pre-Course Facility by Online Digital Learning Management System (LMS) Since 2019, the Individual Marketing & Sales force has been constantly encouraged and trained to use the LMS for providing online video content, with online evaluation and reporting system. This system has provided instant access to high-quality pre-foundation content (video & quiz) to learners across Pakistan, at their convenience. It has supported in better development of maximum learners, as well as support in orientation and onboarding functions. Information Technology DFTL IT Team performance was outstanding in FY 2020, especially with COVID-19 affecting every person and organization across the globe. The sudden shift to remote work and then a move to hybrid a blended model where some employees return to the workplace and others continued to work from home created a new challenge for IT but IT team faced all the challenges and delivered successfully. Alhamdulillah. During the year, the DFTL IT department launched the Auto Underwriting System that enabled paperless underwriting and expedited the certificate issuance process. Business intelligence software was also introduced to the higher management to aid in timely decision-making. DFTL IT Team also developed and launched new functionalities and applications like Petty Cash, Investment Application, Portal updates, SMS short code implementation, FM radio campaign, Call Center software, updated Group Life Software and updated new features in Illustration Software. Furthermore, it also updated IT Infrastructure and installed a new state of the art firewall to enhance the level of cyber security. Re-Takaful Arrangements To enhance the customers’ confidence and to secure the risk of Takaful arrangements DFTL has comprehensive Re-Takaful arrangements with best international Re-Takaful companies “Munich ReTakaful” and “Hannover Re-Takaful”. Related Party Transactions All related parties/associated companies transactions during the year have been executed on an arm’s length basis. All such transactions have been approved by the Board of Directors in their meeting. Internal Control and Audit Function The Board is responsible for the effective implementation of sound internal controls systems including compliance with the control procedures. The Audit Committee is assisted by the Internal Audit function which is outsourced to review both adequacy and operational effectiveness of the internal controls. ANNUAL REPORT 2020 10
21. DAWOOD FAMILY TAKAFUL LIMITED Compliance with Code of Corporate Governance for Insurers , 2016 The financial statements, prepared by the management of the Takaful Operator, present fairly its state of affairs, the result of its operations, cash flows and changes in equity; Proper books of account of the Takaful Operator have been maintained; Appropriate accounting policies have been consistently applied in preparation of financial statements and accounting estimates are based on reasonable and prudent judgment; International Accounting Standards, International Financial Reporting Standards or any other regulation or law (including but not limited to the Shariah guidelines / principles) as applicable in Pakistan, have been followed in preparation of financial statements and any departure there from has been adequately disclosed; The system of internal control is sound in design and has been effectively implemented and monitored; There are no significant doubts about the Takaful Operator’s ability to continue as a going concern; There has been no material departure from the best practices of corporate governance; Election of Directors During the year Election of Directors was held in Annual General Meeting on March 31, 2020. Accordingly, as per the compliance under section 154(3) of Companies Act, 2017 a female director was elected. Following persons were elected / re-elected as directors (subject to approval from SECP under sound and prudent management Regulation) for the term of next three years. S. No 1 2 3 4 5 6 7 Name of Director Mr. Rafique Dawood – Nominee of First Dawood Investment Bank Ltd Mr. Ayaz Dawood - Nominee of BRR Guardian Modaraba Miss. Tara Uzra Dawood Mr. Muhammad Rizwan-ul Haque Mr. Ghazanfar-ul-Islam Mr. Rizwan Ahmed Farid Mr. Moin Rana - Nominee of The Bank of Khyber All above directors has been approved by the SECP Insurance division except one director Mr. Rafique Dawood whose appeal is subjudice with the SECP appellate Bench. Two directors Syed Ishtiaq Hussain and Syed Musharaf Ali served on the Board for eight and three years respectively. Both directors decided not to seek re-election. The Board thanks them for their valuable services. Mr. Ghazanfar-ul-Islam was reappointed as Chief Executive Officer of the Company. 11 ANNUAL REPORT 2020
22. DAWOOD FAMILY TAKAFUL LIMITED Meetings of the Board of Directors During the year four meetings of the Board of Directors were held and attended as follows : S. No. 1 2 3 4 5 6 7 8 Name of Directors Mr. Ayaz Dawood Mr. Ghazanfar-ul-Islam Mr. Muhammad Rizwan-ul Haque Mr. Rizwan Ahmed Farid Mr. Moin Rana Miss. Tara Uzra Dawood Syed Ishtiaq Hussain Syed Musharaf Ali Meetings Attended 4 out of 4 4 out of 4 4 out of 4 4 out of 4 2 out of 2 1 out of 1 0 out of 1 1 out of 1 Leave of absence was granted to the directors, who could not attend the Board Meetings. External Auditors Yousuf Adil, Chartered Accountants have retired and being eligible to offers themselves for reappointment for the financial year 2021. Audit Committee recommended to the Board and Board has recommended to the shareholders for their reappointment. Pattern of Shareholding A statement showing the pattern of shareholding is attached with annual report. Key Operating and Financial Data A summary of key operating and financial data for the last six years is attached with annual report. Events after Balance Sheet Date There have been no material changes since December 31, 2020 to date of this report and the Company has not entered into any material commitment during this period which would adversely affect the financial position of the Company. Earnings per Share The earnings per share of the Company for the year 2020 is Rs.1.01 [2019 Rs: 0.40] per share. Acknowledgements We would like to record our appreciation and gratitude to Munich Re and Hannover Re who are Retakaful partners of your company and who continue to provide full support to your Company. Our gratitude is also due to our sponsors for their continuous support and guidance, which has enabled the Company to establish its presence in the market. ANNUAL REPORT 2020 12
23. DAWOOD FAMILY TAKAFUL LIMITED The Directors wish to record their appreciation for the tremendous contribution made by the able and eminent officers , staff and field force of the Company towards its development and growth. Their continuous commitment to high ethical standards, client service and hard work. Finally, we would like to thank our valuable clients for the confidence expressed in us and also extend our thanks to the Insurance Division of the Securities and Exchange Commission of Pakistan for their guidance, co-operation and understanding extended to us throughout the year. On behalf of the Board of Directors Dawood Family Takaful Limited _______________________ Chief Executive Officer Karachi, March 29, 2021 13 ANNUAL REPORT 2020 ____________________ Chairman
24. DAWOOD FAMILY TAKAFUL LIMITED KEY FINANCIAL DATA FOR LAST SIX YEARS 2020 2019 2018 2017 2016 2015 --------------------- (Rupees in Thousand)-------------------Gross Contribution 1,834,213 1,636,063 1,471,410 1,313,292 1,178,417 1,039,847 Takaful Benefits -net 480,306 274,572 231,401 214,562 200,143 132,309 Net Investment Income in Statutory Funds 554,239 333,351 (23,149) (59,823) 231,996 107,034 Takaful Operator Fee 761,906 648,530 506,810 442,557 439,352 381,987 (731,975) 669,082 509,850 455,569 461,221 447,083 Investment Income and Others 58,654 71,336 24,383 27,889 24,826 27,252 Profit/ (loss) before tax 88,586 50,784 21,342 7,218 2,957 (37,844) Profit/ (loss) after tax 75,536 30,185 9,430 (4,820) (15,033) (51,085) 5,399,337 4,536,961 3,713,756 2,895,923 2,350,310 1,729,279 102,541 102,541 115,033 120,641 127,141 140,740 Other Assets 1,118,461 702,717 425,618 540,553 522,871 384,771 Fixed Assets 202,909 171,615 35,197 32,306 37,481 43,723 6,823,248 5,513,834 4,289,604 3,589,423 3,037,803 2,298,513 491,432 414,121 379,723 370,201 375,001 392,829 Participant takaful fund-PTF 1,656,006 1,413,114 1,142,943 917,120 730,439 536,408 Participant investment fund-PIF 4,090,248 3,281,078 2,586,147 2,132,873 1,753,198 1,212,865 585,563 405,521 180,791 169,229 179,165 156,411 6,823,248 5,513,834 4,289,604 3,589,423 3,037,803 2,298,513 Acquisition Cost and Other Expenses Statement of Financial Position: Investments and Bank Deposits Deferred Tax Asset Total Assets Net Shareholders Equity Other liabilities Total Equities & Liabilities ANNUAL REPORT 2020 14
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28. DAWOOD FAMILY TAKAFUL LIMITED ANNUAL REPORT 2020 18
29. DAWOOD FAMILY TAKAFUL LIMITED Name of the Person Designation Mr . Naveed Ahmed Compliance Officer Mr. Ajaz Hussain Head of Actuary Mr. Naveed Ahmed Company Secretary Mr. Mohammad Asif Haque Head of Underwriting Mr. Kashif Khan Head of Claims Mr. Syed Talha Bin Adil Head of Re-Takaful Mr. Ajaz Hussain Head of Risk Management Ms. Shahana Shaikh Head of Grievance Department 22. The Statutory auditors of the Takaful Operator have been appointed from the panel of auditors approved by the Commission in terms of section 48 of the Insurance Ordinance, 2000 (Ordinance No. XXXIX of 2000). The Statutory auditors have confirmed that they have been given a satisfactory rating under the Quality Control Review program of the Institute of Chartered Accountants of Pakistan, that they or any of the partners of the firm, their spouses and minor children do not hold shares of the Takaful Operator and that the firm and all its partners are in compliance with the International Federation of Accountants (IFAC) guidelines on code of ethics as adopted by the Institute of Chartered Accountants of Pakistan. 23. The Statutory auditors or the persons associated with them have not been appointed to provide other services and the auditors have confirmed that they have observed IFAC guidelines in this regard. 24. The Appointed Actuary of the insurer has confirmed that he or his spouse and minor children do not hold shares of the Takaful Operator. 25. The Board ensures that the Appointed Actuary complies with the requirements set out for him/her in the Code of Corporate Governance for Insurers, 2016. 26. The Investment policy has been drawn up, reviewed and approved by the Board of Directors with the requirements of the Code of Corporate Governance for Insurers, 2016. 27. The Board ensures that the risk management system of the Takaful Operator is in place as per the requirements of the Code of Corporate Governance for Insurers, 2016. 28. The Takaful Operator has set up a risk management function / department, which carries out its tasks as covered under the Code of Corporate Governance for Insurers, 2016. 29. The Board ensures that as part of the risk management system, the Takaful Operator gets itself rated from Pakistan Credit Rating Agency (PACRA) which is being used by its risk management function/department and the respective Committee as a risk monitoring tool. The rating assigned by the said rating agency is A, which is still maintain on December 31, 2020 with ”Stable” outlook. 30. The Board has set up a grievance department/function, which fully complies with the requirements of the Code of Corporate Governance for Insurers, 2016. 31. We confirm that all other material principles contained in the Code of Corporate Governance for Insurers, 2016 have been complied with. By Order of the Board ______________________ Chief Executive Officer 19 ANNUAL REPORT 2020 ___________________ Director
30. DAWOOD FAMILY TAKAFUL LIMITED Yousuf Adil Chartered Accountants Cavish Court , A-35, Block 7& 8 KCHSU, Shahrah-e-Faisal Karachi-75350 Pakistan Tel: +92 (0) 21 3454 6494-7 Fax: +92(0) 21-3454 1314 www.yousufadil.com INDEPENDENT AUDITOR’S REVIEW REPORT To the members Dawood Family Takaful Limited Review Report on the Statement of Compliance Contained in Code of Corporate Governance for insurer’s, 2016 We have reviewed the enclosed Statement of Compliance with the best practices contained in the Code of Corporate Governance for Insurers, 2016 (the Code) prepared by the Board of Directors of Dawood Family Takaful Limited (the Company) for the year ended December 31, 2020 to comply with the respective requirements of the Code. The responsibility for compliance with the Code is that of the Board of Directors of the Company. Our responsibility is to review, whether the Statement of Compliance reflects the status of the Company’s compliance with the provisions of the Code and report if it does not and to highlight any non-compliance with the requirements of the Code. A review is limited primarily to inquiries of the Company’s personnel and review of various documents prepared by the Company to comply with the Code. As part of our audit of the financial statements, we are required to obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. We are not required to consider whether the Board of Directors’ statement on internal control covers all risks and controls, or to form an opinion on the effectiveness of such internal controls, the Company’s corporate governance procedures and risks. The Regulations require the Company to place before the Audit Committee, and upon recommendation of the Audit Committee, place before the Board of Directors for their review and approval, its related party transactions and also ensure compliance with the requirements of section 208 of the Companies Act, 2017. We are only required and have ensured compliance of this requirement to the extent of the approval of the related party transactions by the Board of Directors upon recommendation of the Audit Committee. We have not carried out procedures to assess and determine the Company’s process for identification of related parties and that whether the related party transactions were undertaken at arm’s length price or not. Based on our review, nothing has come to our attention which causes us to believe that the Statement of Compliance does not appropriately reflect the Company's compliance, in all material respects, with the Regulations as applicable to the Company for the year ended December 31, 2020. Chartered Accountants Place: Karachi Date: March 31, 2021 Independent Correspondent Firm to Deloitte Touche Tohmatsu Limited ANNUAL REPORT 2020 20
31. DAWOOD FAMILY TAKAFUL LIMITED Yousuf Adil Chartered Accountants Cavish Court , A-35, Block 7 & 8 KCHSU, Shahrah-e-Faisal Karachi-75350 Pakistan Tel: +92 (0) 21 3454 6494-7 Fax: +92(0) 21-3454 1314 www.yousufadil.com INDEPENDENT AUDITOR’S REPORT To the members Dawood Family Takaful Limited Report on the Audit of the Financial Statements We have audited the annexed financial statements of Dawood Family Takaful Limited (the Company), which comprise the statement of financial position as at December 31, 2020, the statement of profit or loss and other comprehensive income - participants’ Fund, the statement of profit or loss and other comprehensive income - shareholders’ Fund, and the statement of changes in equity and the statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purpose of the audit. In our opinion and to the best of our information and according to the explanations given to us, the statement of financial position, the statement of profit or loss account and other comprehensive income – participants’ fund, the statement of profit or loss and other comprehensive income – shareholders’ fund, the statement of changes in equity and the statement of cash flows together with the notes forming part thereof conform with the accounting and reporting standards as applicable in Pakistan and give the information required by the Insurance Ordinance, 2000 and the Companies Act, 2017 (XIX of 2017), in the manner so required and respectively give a true and fair view of the state of Company’s affairs as at December 31, 2020 and of the profit, total comprehensive income, the changes in equity and its cash flows for the year then ended. We conducted our audit in accordance with the International Standards on Auditing (ISAs) as applicable in Pakistan. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants as adopted by the Institute of Chartered Accountants of Pakistan (the Code) and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of Matters We draw attention to: Note 12.1 of the financial statements where management has disclosed that the Company has recognised deferred tax asset which is considered realizable based on financial projections of taxable profits for five years which have been approved by the Board of Directors. Note 20 to the financial statements where it is disclosed that the Company has challenged the scope and applicability of Punjab Sales Tax (PST) and Sindh Sales Tax (SST) on services on the risk based premium from life insurance or takaful. Our opinion is not modified in respect of the above matters. Information Other than the Financial Statements and Auditor’s Report Thereon Management is responsible for the other information. The other information comprises the information included in the Annual Report but does not include the financial statements and our auditor’s report thereon. Independent Correspondent Firm to Deloitte Touche Tohmatsu Limited 21 ANNUAL REPORT 2020
32. DAWOOD FAMILY TAKAFUL LIMITED Yousuf Adil Chartered Accountants Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibility of Management and Board of Directors for the Financial Statement Management is responsible for the preparation and fair presentation of the financial statements in accordance with the accounting and reporting standards as applicable in Pakistan and the requirements of the Insurance Ordinance, 2000 and the Companies Act, 2017 (XIX of 2017) 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. In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Board of directors are responsible for overseeing the Company’s financial reporting process. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs as applicable in Pakistan will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs as applicable in Pakistan, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit e vidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit 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 Company’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. Independent Correspondent Firm to Deloitte Touche Tohmatsu Limited ANNUAL REPORT 2020 22
33. DAWOOD FAMILY TAKAFUL LIMITED Yousuf Adil Chartered Accountants Evaluate the overall presentation , structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with the board of directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Report on Other Legal and Regulatory Requirements Based on our audit, we further report that in our opinion: a) proper books of account have been kept by the Company as required by the Insurance Ordinance, 2000 and the Companies Act, 2017 (XIX of 2017); b) the statement of financial position, the statement of profit or loss and other comprehensive income – participants’ fund, the statement of profit or loss and other comprehensive income – shareholders’ fund, the statement of changes in equity and the statement of cash flows together with the notes thereon have been drawn up in conformity with the Insurance Ordinance, 2000, the Companies Act, 2017 (XIX of 2017) and are in agreement with the books of account; c) the apportionment of assets, liabilities, revenue and expenses between two or more funds has been performed in accordance with the advice of the appointed actuary; d) investments made, expenditure incurred and guarantees extended during the year were for the purpose of the company’s business; and e) zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), was deducted by the Company and deposited in the Central Zakat Fund established under section 7 of that Ordinance. The engagement partner on the audit resulting in this independent auditor’s report is Hena Sadiq. Chartered Accountants Place: Karachi Date: March 31, 2021 Independent Correspondent Firm to Deloitte Touche Tohmatsu Limited 23 ANNUAL REPORT 2020
34. DAWOOD FAMILY TAKAFUL LIMITED STATEMENT OF FINANCIAL POSITION AS AT DECEMBER 31 , 2020 Aggregate Note Assets Property and equipment Intangible assets Investment properties 6 7 8 Investments 9 Equity securities Government securities Debt securities Term deposits Mutual funds Takaful / retakaful receivables Receivables, Loans & Advances Taxation-payment less provision Deferred tax asset Prepayments Cash, stamps & bank 10 11 12 13 14 Total Assets Shareholders' Participants' December 31, December 31, Fund Fund 2020 2019 ------------------------------------ (Rupees) -----------------------------------200,345,330 2,563,200 - 70,950,000 200,345,330 2,563,200 70,950,000 168,959,812 2,655,387 70,950,000 11,923,000 170,000,000 59,533,696 241,456,696 1,759,973,367 1,360,401,048 1,271,018,272 660,000,000 35,538,106 5,086,930,793 1,771,896,367 1,530,401,048 1,330,551,968 660,000,000 35,538,106 5,328,387,489 1,319,807,163 522,124,288 1,410,778,041 1,179,816,323 33,485,220 4,466,011,035 19,127,185 45,840,560 130,455,683 102,540,929 3,949,011 38,657,300 73,908,458 254,663,089 20,685,220 534,750 530,639,918 93,035,643 300,503,649 151,140,903 102,540,929 4,483,761 569,297,218 75,592,916 105,103,947 110,012,804 102,540,929 2,380,641 409,626,254 784,935,894 6,038,312,228 6,823,248,122 5,513,833,725 Equity and Liabilities Shareholders' Equity Share Capital Surplus on revaluation of available for sale investments Contributed to takaful fund Unappropriated deficit-net Total Shareholders' Equity 15 750,000,000 348,278 (475,000) (258,441,571) 491,431,707 - 750,000,000 348,278 (475,000) (258,441,571) 491,431,707 750,000,000 323,327 (2,225,000) (333,977,756) 414,120,571 Waqf / Participant Takaful Fund (PTF) - 485,000 1,655,520,751 1,656,005,751 485,000 1,655,520,751 1,656,005,751 485,000 1,412,628,616 1,413,113,616 156,355,207 137,148,980 4,214,387,573 51,565,851 98,294,497 18,058,556 4,214,387,573 156,355,207 51,565,851 x 98,294,497 155,207,536 3,319,018,443 133,452,337 68,324,267 69,343,787 96,460,704 Total Liabilities 293,504,187 4,382,306,477 4,675,810,664 3,686,599,538 Total equity and liabilities 784,935,894 6,038,312,228 6,823,248,122 5,513,833,725 Cede money-Waqf Accumulated surplus Total Participant Takaful Fund (PTF) Liabilities Takaful liabilities Ijarah liabilites Contribution received in advance Takaful / retakaful payable Other creditors and accruals Contingencies and commitments 16 17 18 19 20 The annexed notes 1 to 40 form an integral part of these financial statements. _______________ Chairman ___________________ Chief Execu�ve Officer ________________ Director ________________ Director ANNUAL REPORT 2020 24
35. DAWOOD FAMILY TAKAFUL LIMITED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31 , 2020 Note Participants' Fund Contribution revenue Less: Wakala fees recognised 21 Contribution ceded to retakaful Net contribution revenue 21 Surplus income Surplus from retakaful operator Loyalty Reward Investment income Realised gain / (loss) on disposal of listed shares Unrealised gain on revaluation of listed shares Dividend income Rental income Net unrealised gain on investment property 22 8 Net income Takaful benefits Recoveries from retakaful Takaful operator fee Other expenses 23 23 24 Net Takaful benefits Excess of income over expenditure December 31, December 31, 2020 2019 ------------- (Rupees) ------------1,834,213,269 (599,405,517) 1,234,807,752 1,636,063,643 (535,184,462) 1,100,879,181 (94,661,089) 1,140,146,663 (62,836,485) 1,038,042,696 46,652,500 15,090,682 241,709 303,492,620 175,810,889 12,994,982 57,491,304 4,449,520 - 31,162,492 30,452,588 302,150,114 (78,342,462) 62,603,952 41,722,448 4,044,000 1,173,200 616,224,206 394,966,332 1,756,370,869 1,433,009,028 (539,072,661) 58,767,004 (156,627,748) (29,337,808) (291,382,744) 16,810,627 (113,268,596) (27,082,435) (666,271,213) (414,923,148) 1,090,099,656 1,018,085,880 1,090,099,656 1,018,085,880 Appropriation of excess of income over expenditure Excess of income over expenditure Net changes in takaful liabilities (other than outstanding claims) 33.1 Surplus reserve for the year - Participant Takaful Fund (PTF) (803,136,278) (699,819,631) 286,963,378 318,266,249 The annexed notes 1 to 40 form an integral part of these financial statements. _______________ Chairman 25 ANNUAL REPORT 2020 ___________________ Chief Execu�ve Officer ________________ Director ________________ Director
36. DAWOOD FAMILY TAKAFUL LIMITED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31 , 2020 Note Shareholders' Fund December 31, December 31, 2020 2019 ------------- (Rupees) ------------605,278,696 (273,934,393) 535,261,589 (264,445,660) 331,344,303 270,815,929 156,627,748 48,993,220 8,059,486 393,203 570,050 638,376 113,268,596 69,403,875 75,948 (175,766) 614,213 1,417,400 215,282,083 184,604,266 546,626,386 455,420,195 (273,533,894) (173,594,016) (10,912,370) (246,195,096) (150,373,693) (8,067,469) Total expenses (458,040,280) (404,636,258) Profit before tax 88,586,106 50,783,937 (13,049,921) - (8,106,627) (12,491,902) (13,049,921) (20,598,529) 75,536,185 30,185,408 Wakala fee less: Commission expenses 25 Takaful operator fee Investment income Realised gain on disposals of listed shares Unrealised gain / (loss) on revaluation of listed shares Dividend Income Other income 24 22 26 Net income Acquisition expenses Administration expenses Other expenses 25 27 28 Taxation Current tax Deferred tax 29 Profit after tax Other comprehensive income: Items that will be reclassified subsequently Unrealised gain on remeasurement of 'available-for-sale' financial assets - net Total comprehensive income for the year Earnings per share - basic and diluted 30 24,951 212,669 75,561,136 30,398,077 1.01 0.40 The annexed notes 1 to 40 form an integral part of these financial statements. _______________ Chairman ___________________ Chief Execu�ve Officer ________________ Director ________________ Director ANNUAL REPORT 2020 26
37. DAWOOD FAMILY TAKAFUL LIMITED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31 , 2020 Aggregate Shareholders' Fund Operating cash flows Participants' Fund December 31, 2020 December 31, 2019 ------------------------------------ (Rupees) ----------------------------------- Cash flow from takaful activities Contributions received Takaful benefits paid Retakaful paid Retakaful received Wakala fee Other takaful operator fee Commission paid Net cash flow from takaful activities 599,405,517 156,694,335 (262,381,619) 1,817,454,853 (452,873,183) (65,643,791) 56,348,358 (599,405,517) (156,694,335) - 1,817,454,853 (452,873,183) (65,643,791) 56,348,358 (262,381,619) 1,660,323,642 (281,446,877) (33,711,485) 32,902,244 (256,645,859) 493,718,233 599,186,385 1,092,904,618 1,121,421,665 Other operating cash flows Income tax paid Management and other expenses paid Other operating payments Other operating receipts Prepayments (54,178,020) (338,510,346) (20,792,145) 5,873,179 (1,568,370) Net cash used in other operating activities (409,175,704) Total cash flow from all operating activities 84,542,530 (42,161,018) (450,000) (54,178,020) (338,510,346) (62,953,163) 5,873,179 (2,018,370) (42,417,015) (337,116,322) (36,751,805) 2,404,247 (3,176,223) (42,611,018) (451,786,721) (417,057,118) 641,117,897 704,364,547 556,575,367 Investment activities 49,686,383 95,000,000 (101,512,617) 106,489,958 570,050 18,214,286 (170,000,000) 103,154 (29,245,369) 323,342,826 2,604,816,323 (2,180,000,000) (4,554,911,052) 4,134,735,621 50,557,103 329,591,230 (1,101,500,000) - 373,029,209 2,699,816,323 (2,180,000,000) (4,656,423,669) 4,241,225,579 51,127,153 347,805,516 (1,271,500,000) 103,154 (29,245,369) 340,767,149 2,750,000,000 (2,859,816,323) (2,092,026,505) 1,720,443,910 40,937,081 761,965,246 (1,130,631,476) 560,971 (18,723,778) (30,694,156) (393,367,948) (424,062,104) (486,523,725) Capital contribution redeemed to Shareholder Payments against Ijarah lease 1,750,000 (57,384,830) (1,750,000) - (57,384,830) (47,390,827) Net cash used in financing activities (55,634,830) Profit received on investment Receipts against term deposits Payments against term deposits Payments against listed shariah compliant shares Receipts against listed shariah compliant shares Dividend received from listed shariah compliant shares Receipts against sukuks Payments against sukuks Proceeds from disposal of operating fixed assets Payments against operating fixed capital expenditure Net cash used in investing activities Financing activities (57,384,830) (47,390,827) Net increase in cash and cash equivalents (1,786,457) 161,457,419 159,670,964 170,449,995 Cash and cash equivalents at the beginning 40,443,756 369,182,498 409,626,254 239,176,258 Cash and cash equivalents at the end 38,657,300 530,639,918 569,297,218 409,626,254 Cash and cash equivalents Cash and stamps Current and other accounts 27 ANNUAL REPORT 2020 (1,750,000) 3,574,339 35,082,961 530,639,918 3,574,339 565,722,879 1,636,084 407,990,170 38,657,300 530,639,918 569,297,218 409,626,254
38. DAWOOD FAMILY TAKAFUL LIMITED Aggregate Shareholders ' Fund Participants' Fund December 31, 2020 December 31, 2019 ------------------------------------ (Rupees) ----------------------------------Reconciliation to profit and los s account Profit before taxation / Surplus in funds Depreciation expense Amotization expense Gain on disposal of fixed assets Unrealised loss on investments Dividend income Surplus income Ijara rentals -ROU assets Rental expense-ROU assets Investment income Inrecrease in receivables & other assets Inrecrease in labilities 88,586,106 57,043,703 616,516 (56,068) (8,452,689) (570,050) 6,311,635 11,763,589 (48,993,220) (59,762,964) 38,055,971 1,090,099,656 (188,805,871) (57,491,304) (64,743,182) (303,492,620) (35,533,250) 116,541,938 1,178,685,762 57,043,703 616,516 (56,068) (197,258,560) (58,061,354) (64,743,182) 6,311,635 11,763,589 (352,485,840) (95,296,214) 154,597,910 1,037,707,324 45,259,988 168,113 (490,706) 15,838,328 (40,937,081) (61,615,080) 5,228,906 12,970,676 (371,553,989) (90,523,272) 152,311,340 Total cash flow from all operating activities 84,542,530 556,575,367 641,117,897 704,364,547 The annexed notes 1 to 40 form an integral part of these financial statements. _______________ Chairman ___________________ Chief Execu�ve Officer ________________ Director ________________ Director ANNUAL REPORT 2020 28
39. DAWOOD FAMILY TAKAFUL LIMITED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31 , 2020 Attributable to Shareholder's of the Company Unrealized Issued, gain/(loss) on Capital subscribed available for contributions Net and paid-up sale Accumulated to Takaful reserves Total share capital investments deficit Business -------------------------------------------------------------- (Rupees) -------------------------------------------------------------Balance as at January 01, 2019 750,000,000 110,658 (364,163,164) (6,225,000) (370,388,164) 379,722,494 - 212,669 - 30,185,408 - 4,000,000 30,185,408 4,000,000 30,185,408 212,669 4,000,000 - 212,669 30,185,408 4,000,000 34,185,408 34,398,077 Total comprehensive income for the year ended December 31, 2019 Profit for the year Other comprehensive income Qard-e-Hasna refunded from statutory fund Balance as at December 31, 2019 750,000,000 323,327 (333,977,756) (2,225,000) (336,202,756) 414,120,571 Balance as at January 01, 2020 750,000,000 323,327 (333,977,756) (2,225,000) (336,202,756) 414,120,571 - 24,951 - 75,536,185 - 1,750,000 75,536,185 24,951 1,750,000 75,536,185 24,951 1,750,000 - 24,951 75,536,185 1,750,000 77,311,136 77,311,136 Total comprehensive income for the year ended December 31, 2020 Profit for the year Other comprehensive income Qard-e-Hasna refunded from statutory fund Balance as at December 31, 2020 750,000,000 348,278 (258,441,571) (475,000) (258,891,620) 491,431,707 Attributable to Participant Takaful Fund of the Company Ceded money - waqf Unrealized gain/(loss) on AFS Accumulated surplus Qard -eHasna Net Reserves Total -------------------------------------------------------------- (Rupees) -------------------------------------------------------------Balance as at January 01, 2019 Surplus for the year net of distribution Unrealised gain on available for sale sukuks - PTF Qard e hasna refunded to operator Surplus distribution 485,000 - (12,066,976) (12,932,920) - 1,124,640,804 318,266,249 (31,162,493) 5,750,000 (4,000,000) - 1,142,457,780 1,142,942,780 318,266,249 (12,932,920) (4,000,000) (31,162,493) 318,266,249 (12,932,920) (4,000,000) (31,162,493) Balance as at December 31, 2019 485,000 (865,944) 1,411,744,560 1,750,000 1,412,628,616 1,413,113,616 Balance as at January 01, 2020 485,000 (865,944) 1,411,744,560 1,750,000 1,412,628,616 1,413,113,616 Surplus for the year Unrealised gain on available for sale sukuks Qard e hasna refunded to operator Surplus distribution Balance as at December 31, 2020 485,000 4,331,257 3,465,313 286,963,378 (46,652,500) (1,750,000) - 1,652,055,438 - 286,963,378 4,331,257 (1,750,000) (46,652,500) 1,655,520,751 286,963,378 4,331,257 (1,750,000) (46,652,500) 1,656,005,751 The annexed notes 1 to 40 form an integral part of these financial statements. _______________ Chairman 29 ANNUAL REPORT 2020 ___________________ Chief Execu�ve Officer ________________ Director ________________ Director
40. DAWOOD FAMILY TAKAFUL LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31 , 2020 1. STATUS AND NATURE OF BUSINESS Dawood Family Takaful Limited (the Company or DFTL) was incorporated in Pakistan as an unquoted public limited company on May 04, 2007 under the Repealed Companies Ordinance, 1984 (now Companies Act, 2017). The Company received the certificate of registration on May 16, 2008 under Section 6 of the Insurance Ordinance, 2000. The principal business activity of the Company is to undertake family takaful business in accordance with the Insurance Ordinance 2000, Securities and Exchange Commission (Insurance) Rules, 2002 (repealed) now (Insurance Rules, 2017) and Takaful Rules, 2012. To carry out the family takaful business, the Company has established the Takaful Business Statutory Fund with effect from December 01, 2008 as per Rule 8 of the Repealed Takaful Rules, 2005 (now Takaful Rules, 2012) and Section 15 of the Insurance Ordinance, 2000. The Takaful Business Statutory Fund has the following components in accordance with the Waqf-Wakala Model adopted by the Company. i) Participant Takaful Fund (PTF i.e. DFTL Waqf): The Company formed a Waqf on May 30, 2008 to manage the risk related contributions and payment of Takaful benefits. The Waqf supports the following: a) Group Family Takaful Business (both term and credit takaful). b) Risk related contributions of Individual Takaful supplementary rider contributions. ii) Products (mortality and morbidity charges) including Participant Investment Fund (PIF): Investment component of the participants contributions are managed in PIF which represents the aggregate of the individual Participant’s Investment Accounts (PIA).The Company has established three sub-investment funds under PIF, with cede money, having different investment objectives. Name of sub-funds Effective dates a) Islamic Income Fund b) Islamic Balanced Fund c) Islamic Aggressive Fund December 01, 2008 December 01, 2008 April 29, 2011 As per Section 21 of the Insurance Ordinance, 2000 capital contribution to a statutory fund is distributable back to the shareholders’ fund subject to the written advice of the appointed actuary. Following are the geographical location and address of all the business units of the Company: Head office - Registered Office 1701-A, Saima Trade Towers, I. I. Chundrigar Road, Karachi, Province of Sindh, Pakistan. Branches i) Province of Punjab, Pakistan: Lahore: Sargodha: Faisalabad: Sahiwal: Multan: Haroonabad: Bahawalpur: Rahim Yar Khan: Uch Sharif: Liaquatpur: 1st Floor, Dawood Islamic Bank Building, 57-B, Hussain Chowk, Gulberg-III 3rd Floor, E-26, Paradise Centre, Walten Road. 1st Floor, Nizami Centre, Club Road, Shama Chowk. 1st Floor, Raya Plaza, Near Darban Hotel, Anjala Road, Bhalwal, Distt. Hassan Arcade, 871-B, Peoples Colony No.1. 3rd Floor, Saeed Centre, Fareed Town Road. 1st Floor, Khawar Centre, 92-Nusrat Road, SP Chowk, Multan Cantt. Ground Floor 140/A Timber Market. Bahawal Pace Center, 2nd Floor, Kathoni # 2087, Block ll, Modal Town. 1st Floor, Khata No.23/23, Khatooni No. 45, Abu Dhabi Road. Khatoni # 383 Khata # 181, Channi Goth Road. Ground Floor, Plot No. 37/A3 Commercial Site, 087 Bank Road. ANNUAL REPORT 2020 30
41. DAWOOD FAMILY TAKAFUL LIMITED Kasur : 1st Floor above on Doce Bakery, Emerald Square, Khan Mahal Chowk Road. Muzaffargarh: 1st Floor, Awan Plaza, Opposite Allied Bank, Jhung Road. Jhang: 1st Floor, Sunny Heights, Church Road, Jhang Saddar. Farooqabad: Ground Floor, Guru Nanak Pura Stop, Lahore Sargodha Road. Sheikhupura: 1st Floor, Shop No. 1,2,3,4 & 5, City plaza, Sargodha Road. Okara: 1st Floor, Zarwa Plaza, Jinnah Link Road. DG Khan: 1st Floor Azmeer Plaza, No. 705, Block 36, Kutchery Road. Rawalpindi: 2nd Floor, B-414, Satellite Town. Dera Ismail Khan: 1st Floor, at Jans Plaza Centre, Circular Road. Chakwal: 2nd Floor, Office # 10, Nawab Khan Plaza, Tehsil Chowk. Gujrat: 1st Floor above on Faisal Bank, G.T. Road. Kotla Arab Ali Khan: 2nd Floor, Taj Nasir Plaza, Bhimber Road. Mandi Bahauddin: 2nd Floor, Qasim Plaza, Phalia Road. 1st Floor, Kechehry Road, Mohallh Kanyan Wala, Tehsil Malakwal Distt. Phalia: 1st Floor, Usman Plaza, Mohallah No. 306, & Khatoni No. 771-775. Sialkot: 1st Floor, Jamal Towers, Shhb Pura Goki Road. Gujranwala: 1st Floor, Faisal Plaza, Khatoni No. 1908 & 1916 Commercial, Mumtaz Market, GT Road. ii) Province of Sindh, Pakistan: Karachi: Hyderabad: Mirpurkhas: Tando Adam: Nawab Shah: Larkana: Sukkur: Khairpur: Shahdadpur: iii) Swabi: Timergara: Chitral: Mardan: Sawat: Khawaza Khela: Haripur: Abbotabad: Floor, JB Tower, Town Area, University Road. Floor, TRT Plaza, Nishataabad Road. Floor, Sher Zaman Plaza, Swabi Ground Jahangira Road. Floor, Shaheed Plaza, Shaheed Chowk, Blaambut Road. Floor, Main Road, Opposite Polo Ground, Distt. Floor, PRC, HQ Golf Course Road, Guide Chowk. Floor, Shahzad Plaza Makan Bagh Saidu Sharif Road Mingora. Floor, Zahir Shah Plaza, Matta Chowk, Tetabat. Floor, Shop No. 3, Malik Muzaffar Arcade, Main GT Road. Floor Zaman Plaza, Phase II, Khata/Khatoni # 118/127. 1st Floor, Deen Arcade, Shaheed Chowk. 1st Floor Abdullah Plaza Besides girl, College Madina Market. Gilgit-Baltistan Gilgit: Skardu: Chilas: vi) 5th 1st 3rd 3rd 1st 1st 1st 1st 1st 1st Azad Kashmir Kotli: Muzafarabad: v) 1st Floor, C/s No. 324/2/A/2, New Town. 1st Floor, above Al-Baraka Bank, Hyderabad Road. 2nd Floor, plot B-599, above Askari Bank, Katchery Road. 2nd Floor, opposite City Medical Hospital, Sachal Colony, 2nd Floor, F-33/4/7, beside MCB Bank, Workshop Road. 2nd Floor, above Faysal Bank, Katchery Road. 1st Floor, Opposite The City Grammer School, Hospital Road, Province of Khyber Pakhtunkhwa, Pakistan: Peshawar: iv) Room No 302 & 303, 3rd Floor, Meriums Complex, Bahadurabad. Room 301 at 3rd Floor, Meriums Complex, Bahadurabad. 2nd Floor, Office No. 202, Ambar Estate, Main Shahrah-e-Faisal. 2nd Floor, SB-10 KDA, Scheme 1, Near Times Medico, Karachi. 2nd Floor, bearing No. 13/FL-4, Block No.5 Gulshan-e-Iqbal. Mezzanine Floor, Plot # 205, Block-D, Unit # 7, Latifabad. Main Office Room # 203, 2ndFloor Zs Plaza Jutial Gilgit. Qauid abad alamdar road Khshmarah. Main Bazar Murgi Guli near,Al-habib Bank Hokum Khan Market. Islamabad Capital Territory 2nd Floor, Plot # 96-E, Civic and Business Centre United Plaza, Fazal-ul-Haq Road,Sector F-7,Blue Area. 31 ANNUAL REPORT 2020
42. DAWOOD FAMILY TAKAFUL LIMITED 2 . STATEMENT OF COMPLIANCE These financial statements have been prepared in accordance with the approved accounting standards as applicable in Pakistan. The accounting and reporting standards comprise of: - International Financial Reporting Standards (IFRS) issued by the International Accounting Standard Board (IASB) as are notified under the Companies Act, 2017, Insurance Accounting Regulations, 2017 and Takaful Rules, 2012. - Provision of and directives issued under the Companies Act, 2017 and Insurance Ordinance, 2000, Insurance Rules, 2017, Takaful Rules, 2012 and Insurance Accounting Regulations, 2017. In case requirements differ, the provision or directives of the Companies Act, 2017, the Insurance Ordinance, 2000, Insurance Rules, 2017, the Insurance Accounting Regulations, 2017 and Takaful Rules, 2012 shall prevail. To clarify the applicability of Insurance Accounting Regulations, 2017 on Takaful business, Company has applied through letter number SEC/19-08/20 dated August 09, 2019 which was responded by Securities and Exchange Commission of Pakistan (SECP) vide letter ID/OSM/DFTL/2019/1507 dated August 20, 2019 which direct the company to apply Insurance Accounting Regulation 2017 format to maximum extent possible. 3. BASIS OF PREPARATION The financial statements is prepared on new format as prescribed by Insurance Accounting Regulations 2017 except for the necessary modifications in the light of Takaful Rules 2012 and based on the advice of Sharia Advisor of the Company. 3.1 Basis of measurement These financial statements have been prepared on the basis of historical cost convention, except for certain investments which are carried at fair value. 3.2 Functional and presentation currency These financial statements are presented in Pak Rupees which is also the Company's functional currency. 3.3 Use of est i m a te s a nd j udgm e nts The preparation of financial statements in conformity with approved accounting and reporting standards requires management to make judgments, estimates and assumptions that affect the application of policies and reported amount of assets and liabilities, income and expenses. These estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the result of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised, if the revision affects only the period of the revi sion and future period if the revision affects both current and future periods. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements or judgments were exercised in application of accounting policies, are as follows: Note Technical reserves Provision for claims Waqf participants’ liabilities Leave encashment Investment property Operating fixed assets - useful lives and salvage value Deferred taxation Impairment Provisions 5.2 5.6 5.11 5.14 5.15 5.16 5.18 5.24 5.26 ANNUAL REPORT 2020 32
43. DAWOOD FAMILY TAKAFUL LIMITED 3 .4 Novel coronavirus (Covid-19) The World Health Organization classified the COVID-19 as a pandemic on March 11, 2020, impacting countries around the globe. Measures taken to contain the spread of the virus, including lock-downs, travel bans, quarantines, social distancing, and closures of non-essential services and factories triggered significant disruptions to businesses globally and in our country, resulting in an economic slowdown. During the lockdown that lasted from March to May 2020, the Company continued their activities, although on a slower level and recovered during last two quarters when the lockdown was eased. Since the mortality shock due to COVID-19 to date has been very low in Pakistan there is no material impact on takaful / insurance companies. In response to the COVID-19 pandemic the Company took several initiatives regard and few of them are as follow; 4. - Allowed additional grace period with takaful protection to ensure social distancing and financial relief during the difficult times as many of the participants had lost / reduced their income due to lockdown and business interruptions. - Optimum utilization of remote technological services to ensure connectivity between clients and representatives. All divisions of the business were fully functional through remote excess given to employees working from home. The Company further allowed submission of some documents in scanned form (where originals to be submitted after lockdown) and online payment facility was activated in its capacity. - Complimentary free of cost additional takaful cover to all of existing active retail participants in case of death due to COVID -19. ACCOUNTING STANDARDS / AMENDMENTS AND IFRS INTERPRETATIONS a) New accounting standards / amendments and IFRS interpretations that are effective for the year ended December 31, 2020 The following standards, amendments and interpretations are effective for the year ended December 31, 2020. These standards, amendments and interpretations are either not relevant to the Company's operations or are not expected to have significant impact on the Company's financial statements other than certain additional disclosures. Effective from accounting period beginning on or after IFRS 14 – Regulatory Deferral Accounts Amendments to the conceptual framework for financial reporting, including amendments to references to the conceptual frame work in IFRS Amendments to IFRS 3 'Business Combinations' - Definition of a business Amendments to IAS 1 'Presentation of Financial Statements' and IAS 8 ‘ Accounting Policies, Changes in Accounting Estimates and Errors' - Definition of material Amendments to IFRS 9 'Financial Instruments', IAS 39 'Financial Instruments Recognition and Measurement' and IFRS 7 'Financial Instruments Disclosures' - Interest rate benchmark reform Certain annual improvements have also been made to a number of IFRSs. 33 ANNUAL REPORT 2020 July 01, 2019 January 01, 2020 January 01, 2020 January 01, 2020 January 01, 2020
44. DAWOOD FAMILY TAKAFUL LIMITED b ) New accounting standards, amendments and IFRS interpretations that are not yet effective Effective from accounting period beginning on or after Amendment to IFRS 16 'Leases' - Covid-19 related rent concessions June 01, 2020 Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) January 01, 2021 Amendments to IFRS 3 'Business Combinations' - Reference to the conceptual framework January 01, 2022 Amendments to IAS 16 'Property, Plant and Equipment' - Proceeds before intended use January 01, 2022 Amendments to IAS 37 'Provisions, Contingent Liabilities and Contingent Assets' - Onerous Contracts — cost of fulfilling a contract January 01, 2022 Amendments to IAS 1 'Presentation of Financial Statements' Classification of liabilities as current or non-current January 01, 2023 Certain annual improvements have also been made to a number of IFRSs. Other than the aforesaid standards, interpretations and amendments, the International Accounting Standards Board (IASB) has also issued the following standards which have not been adopted locally by the Securities and Exchange Commission of Pakistan: 4.1 - IFRS 1 – First Time Adoption of International Financial Reporting Standards - IFRS 17 – Insurance Contracts IFRS 9 ‘Financial Instruments: IFRS 9 ‘Financial Instruments’ is effective from reporting year ended December 31, 2019. It replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 includes revised guidance on the classification and measurement of financial instruments, a new expected credit loss model for calculating impairment on financial assets, and new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39. Amendment to IFRS 4 ‘Insurance Contracts’ - Applying IFRS 9 ‘Financial Instruments with IFRS 4 addresses issue arising from the different effective dates of IFRS 9 and the forthcoming new standard IFRS 17 ‘Insurance Contracts’. The amendments introduces two alternative options for entities issuing contracts within the scope of IFRS 4, notably a temporary exemption and an overlay approach. The temporary exemption enables eligible entities to defer the implementation date of IFRS 9. The overlay approach allows an entity applying IFRS 9 from July 01, 2018 onwards to remove from the statement of profit or loss the effects of some of the accounting mismatches that may occur from applying IFRS 9 before IFRS 17 is applied. The Company has determined that it is eligible for the temporary exemption option since the Company has not previously applied any version of IFRS 9, its activities are predominantly connected with insurance as the percentage of the total carrying amount of its liabilities connected with insurance relative to the total carrying amount of all its liabilities is greater than 95 percent and the company does not engage in significant activities unconnected with insurance based on historical available information. Under the temporary exemption option, the Company can defers the application of IFRS 9 until the application of IFRS of 17. ANNUAL REPORT 2020 34
45. DAWOOD FAMILY TAKAFUL LIMITED 35 ANNUAL REPORT 2020
46. DAWOOD FAMILY TAKAFUL LIMITED 5 . SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies adopted in the preparation of these financial statements are consistent with those of the previous financial year. 5.1 Takaful contracts The takaful contracts are based on the principles of Wakala Waqf Model. Takaful is a programme based on shariah compliant, approved concept founded on the principles of mutual cooperation, solidarity and brotherhood. The Company maintains Takaful Business Statutory Funds for all classes of family takaful business. Assets, liabilities, revenues and expenses are recorded in respective funds, if referable or, on the basis of actuarial advice if not referable. The obligation of Waqf for Waqf participants' liabilities is limited to the amount available in the waqf fund. In the event where there is insufficient funds in waqf to meet their current payments less receipts, the deficit is funded by way of an interest free loan (Qard-e-Hasna) from the Shareholders' fund to the statutory fund (Takaful Business Statutory Funds). The amount of Qard-e-Hasna is refundable to the shareholders' fund in event of the surplus balance in the statutory funds. Technical reserves included in the Takaful business statutory funds are determined based on appointed actuary’s valuation conducted at the reporting date, in accordance with Section 50 of the Insurance Ordinance, 2000. Principal actuarial assumptions used in computing technical reserves are as follows: a) the liability in respect of Group Family Takaful Business and riders of all types was set using the unearned contribution method. Due provision is made for claims incurred but not reported (IBNR) and contingencies over the term of coverage. b) the liability was calculated by summing up individual mathematical reserves for the policies. The mathematical reserves as at the valuation date were calculated individually. Group Takaful The group family takaful contracts are issued typically on yearly renewable term basis (YRT). The Company offers group term life and group credit plans to its clients. For one or more of the takaful contracts following risks may be covered: - Death due to any cause Accidental Death benefit Accidental Permanent Total Disability (PTD-A) Accidental Permanent Partial Disability (PPD-A) Accidental Temporary Disability (TTD-A) Natural Disability Accidental Hospitalisation (AH) - Reimbursement of hospital expense due to accident with limits Individual Takaful Contracts Unit Linked The Company offers Unit Linked Takaful Plans which provide Shariah compliant financial protection and investment vehicle to individual participants. These plans carry cash value. The death benefit design is based on Constant Sum at Risk approach i.e. the sum cover is paid in addition to the cash value. The plans offer investment choices to the customer to direct their investment related contributions based on their risk / return objectives. No investment guarantees are offered. The investment risk is borne by the participants. Term Takaful The Company offers Term Takaful contracts which provide Shari’ah complaint financial protection to individual participants. A fixed Sum Cover opted by the participant is paid on death of the participant during the coverage term. ANNUAL REPORT 2020 36
47. DAWOOD FAMILY TAKAFUL LIMITED The following riders are offered by the Company which can be added to the basic Unit Linked Takaful Plans . Type of contract 5.2 Accidental Death Benefit (ADB) Accidental Death and Disability Benefit (ADDB) Family Income Benefit (FIB) Additional Takaful Benefit (ATB) Funeral Expense Benefit (FEB) Total & Permanent Disability (TPD) Waiver of Contribution (WOC) Family Protection Benefit (FPB) Critical Illness (CI) Shareek e Zindagi (SZR) Benefit type Lump Sum Lump Sum Annuity Lump Sum Lump Sum Lump Sum Annuity Lump Sum Lump Sum Lump Sum Technical reserve Liability adequacy test An assessment has been made to ensure that the business provisions are adequate. Using current estimates of future cash flows, appointed actuary has carried out expense projections of the Company to maintains reserves in the light of estimated future cash flows. The current estimates are adequate and no separate reserve needs to be set aside other than those mentioned below: a) Net technical reserves The company maintains provision in respect of net technical reserves to pay the expected future Takaful liabilities for Individual Family Takaful. Whereas for Group Family Takaful, it includes unearned net contribution for in-force policies. Due provisions have been made as per advice of appointed actuary. b) Reserves for claims incurred but not reported (IBNR) Provision for IBNR is made for the cost of settling claims incurred but not reported at the reporting date at a value determined by the appointed actuary which takes into account the expected future patterns of claims and the claims of current period reported subsequent to the reporting date in Group Family Takaful. For Individual Family Takaful, a provision is made in respect of IBNR as a percentage of annual mortality costs. c) Surplus equalisation reserves The Company maintains provision for surplus equalisation reserves in order to stabilise the distribution of surplus in future. Provision for surplus equalisation reserves is made as per the advice of appointed actuary. d) Provision for outstanding claims exceeding 12 months The Company maintains due provisions for outstanding claims having maturity period of more than 12 months. e) Contribution deficiency reserve The Company maintains a provision in respect of contribution deficiency for the class of business where the unearned contribution reserve is not adequate to meet the expected future liability, after retakaful claims and other supplementary expenses expected to be incurred after the reporting date in respect of the unexpired policies in that class of business at the reporting date. The movement in the contribution deficiency reserve is recorded as an expense / income in the statement of profit or loss. Provision for contribution deficiency reserve is made as the advise of appointed actuary. f) Contingency reserves The Company maintains reserves to meet any contingent event occuring in the future. contingency reserves is made as per the advice of appointed actuary. 37 ANNUAL REPORT 2020 Provision for
48. DAWOOD FAMILY TAKAFUL LIMITED 5 .3 Surrender Charges As per the mechanism introduced by Shariah Board, the Takaful Operator will remain Rab-ul-Mal of allocated PIF for the period of applicability of Surrender Charge. In case of a policy lapse, the PIF units which had been earmarked to the policyholder, for which the Company is Rab-al-Mal, will be returned to the Company as surrender charge. 5.4 Unclaimed Maturity Benefits The Company recognises the provision for policies which have been matured but have not been claimed by the policyholders or their beneficiaries at the amount which is accumulated in their maintained account. 5.5 Commission Commission expense incurred in obtaining and recording policies is recognised as an expense in accordance with the pattern of recognition of revenue. 5.6 Provision for claims A liability for outstanding claims is recognised in respect of all claims incurred up to the reporting date and includes expected settlement cost, except for accident and health claims which are recognised as soon as reliable estimates of the claims amount can be made. Claims where intimation of the event giving rise to the claim is received or in respect of investment linked business when the policy ceases to participate in the earnings of the statutory funds are reported as claims in the statement of profit or loss - Participants' Fund. Claims recoveries receivable from the retakaful operator are recognised at the same time as the claim which gave rise to the right of recovery and are measured at the amount expected to be recovered. 5.7 Retakaful These contracts entered into by the Company with retakaful operator under which the Waqf cedes takaful risks assumed during normal course of its business and according to which the Waqf is compensated for losses on contracts issued by it are classified as retakaful contracts held. a) Retakaful contribution Retakaful contributions is recorded at the time the retakaful is ceded. Surplus from retakaful operator is recognised in the statement of profit or loss - Participants' Fund. b) Retakaful assets and liabilities Retakaful assets represent balances due from retakaful operator. Recoverable amounts are estimated in a manner consistent with the outstanding claims provision and are in accordance with the retakaful treaties. Retakaful liabilities represent balances due to retakaful companies. Amounts payable are calculated in a manner consistent with the associated retakaful treaties. Retakaful assets are not offset against related takaful liabilities. Income or expenses from retakaful contract are not offset against expenses or income from related takaful contracts as required by the Insurance Ordinance, 2000. Retakaful assets or liabilities are derecognised when the contractual rights / liabilities are extinguished or expired. c) Impairment of retakaful assets An impairment review of retakaful assets is performed at each reporting date. If there is an objective evidence exists that the asset is impaired, the Company reduces the carrying amount of the retakaful asset to its recoverable amount and recognises that impairment loss in the statement of profit or loss - Participants' Fund. Retakaful expense is recognised in accordance with the pattern of recognition of related contribution. ANNUAL REPORT 2020 38
49. DAWOOD FAMILY TAKAFUL LIMITED 5 .8 Operating segment A operating segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. The Company accounts for segment reporting using the classes or sub classes of business (Takaful Business Statutory Funds) as specified under the Insurance Ordinance, 2000 and Securities and Exchange Commission (Insurance) Rules, 2002 (repealed) as the primary reporting format. The Company has two primary operating segments for reporting purposes; Individual Family Takaful (Unit linked) and Group Family Takaful: 5.9 a) The Individual Family Takaful (unit linked) segment provides family takaful coverage to individuals under unit based policies issued by the Company. b) The Group Family Takaful business segment provides family takaful coverage to member of business enterprises, corporate entities and common interest groups under group family takaful schemes issued by the Company. Investments 5.9.1 Classification Investments with fixed or determinable payments and fixed maturity, where the Company has positive intent and ability to hold to maturity, are classified as Held-to-Maturity. Investments which are intended to be held for an indefinite period but may be sold in response to the need for liquidity or change in mark-up / interest rates are classified as available for sale. Investments which are acquired principally for the purpose of generating profit from short-term price fluctuation or are part of the portfolio in which there is recent actual pattern of short-term profit taking are classified at held for trading at fair value through profit or loss. 5.9.2 Initial recognition All investments are initially recognised at cost, being the fair value of the consideration given and includes transaction costs. However in case of held for trading investments, transaction cost is recognised as an expense in statement of profit or loss. 5.9.3 Subsequent measurement Available-for-sale Quoted Investments classified as available-for-sale are valued at market value in accordance with the requirements of the Securities and Exchange Commission (Insurance) Rules, 2017. On de-recognition or impairment of available-for-sale investments, the cumulative gains or losses previously reported in revaluation reserves are reclassified to statement of profit or loss and other comprehensive income for the year. Unquoted Unquoted investments are recorded at cost less impairment, if any. Financial Instrument at fair value through profit or loss Financial instruments classified at fair value through profit or loss are subsequently measured at fair value, and changes therein are recognised in statement of profit or loss. Held to maturity Investment classified as 'Held to maturity' consists of sukuks of fixed maturity under profit-loss sharing basis. 39 ANNUAL REPORT 2020
50. DAWOOD FAMILY TAKAFUL LIMITED 5 .9.4 Date of recognition All purchases and sales of investments that require delivery within the time frame established by regulations or market convention are recognised at the trade date. Trade date is the date on which the Company commits to purchase or sell the investments. 5.9.5 Derecognition All investments are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. 5.10 Revenue recognition Contributions i) Individual Family - First year and single contributions related to Individuals Family Takaful are recognised once the related policies have been issued against receipt of contributions. - Renewal contributions are recognised on receipt provided the policy is still in force. - Top up contributions are recognised against receipt of contribution on previously issued policies. ii) Group Family Group Family Takaful contributions are recognised when due and spread over the term of contract, therefore a provision for unearned contribution is included in the technical reserves. Income from investments - Return on bank deposits and income on Islamic investment products is recorded on a time proportion basis taking into account the effective yield on such investments. - Gain / loss on sale of available-for-sale investment are included in statement of profit or loss in the period of sale. - Dividend income is recognised when right to receive such dividend is established. Income from Takaful Business i) Takaful operator’s fee The shareholders of the Company manage the family takaful operations for the participants and as such the Company is entitled for the takaful operator’s fee for the management of takaful operation under Participant Takaful Fund to meet its general and administrative expenses. The takaful operator’s fee is recognised upfront. ii) Modarib fee The shareholders of the Company manage the PTF’s investments as a Modarib and charge Modarib’s share of takaful investment income earned by PTF. iii) Tharawat fee Tharawat fee is recognised on time proportion (daily) basis on the net asset value of the participant investment fund. iv) Bid offer fee Bid offer fee is recognised on allocation of units to participant, it is calculated as the difference between bid and offer price of units prevailing as at that date. ANNUAL REPORT 2020 40
51. DAWOOD FAMILY TAKAFUL LIMITED 5 .11 Waqf participants' liabilities Waqf Participants' liabilities are stated at a value determined by the appointed actuary through an actuarial valuation carried out as at each reporting date. No valuation basis has been prescribed by the Commission under Sub-Section (5) of Section 50 of the Insurance Ordinance, 2000. Hence, in pursuance of Sub-Rule (2) of Rule 23 of the Insurance Rules, 2017, the valuation was carried out on the minimum valuation basis prescribed under Annexure V of Insurance Rules, 2017. 5.12 Qard-e-Hasna When the PTF including reserves are insufficient to meet the current payments less receipt, the deficit is funded by way of interest free loan (qard-e-hasna) from the shareholder's fund. 5.13 Staff retirement benefits - Defined Contribution Plan The Company operates a defined contribution plan for all of its permanent employees. Monthly contributions to the fund are made in accordance with the employment rules by the employee and the Company. Contributions made to this fund are recognised as an expense. 5.14 Leave encashment Provision in respect of liability for leave encashment is accounted for in the year in which these are earned on the basis of actuarial valuation carried out using the Projected Unit Credit Method. Actuarial gain or losses if any, are recognised immediately. 5.15 Investment property Investment properties are properties held to earn rentals. The investment properties of the Company consists of free hold land and building. The investment properties are initially recognised at cost and subsequently at fair value model as per IAS 40 "Investment Property", with any changes therein to be recognised in statement of profit or loss - Participants' Fund. 5.16 Property and equipment Operating fixed assets These are stated at cost less accumulated depreciation and impairment loss, if any. Depreciation is charged over the estimated useful life of the asset on a systematic basis using straight line method, at the rates specified in the note 6.1 to these financial statements. Depreciation on additions is charged from the month in which the asset is available for use where as no depreciation is charged from the month the asset is disposed off. Subsequent cost are included in the assets' carrying amount or recognised as a separate asset, as appropriate, only when it is possible that the future economic benefits associated with the items will flow to the Company and the cost of the item can be measured reliably. Maintenance and normal repairs are charged to statement of profit or loss currently. An item of operating fixed asset is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit or loss in the year the asset is derecognised. Ijarah (Lease) liability and Right-of-use assets At inception of a contract, the Company assesses whether a contract is, or contains, a lease based on whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Leases are recognised as a right-of-use asset and a corresponding liability at the date on which the leased asset is available for use by the Company. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease, or if that rate cannot be readily determined, the Company's incremental borrowing rate. 41 ANNUAL REPORT 2020
52. DAWOOD FAMILY TAKAFUL LIMITED Lease payments include fixed payments , variable lease payments that are based on an index or a rate, amounts expected to be payable by the lessee under residual value guarantees, the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option, less any lease incentives receivable. The extension and termination options are incorporated in determination of lease term only when the Company is reasonably certain to exercise these options. The right-of-use asset is initially measured based on the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentive received. The right-of-use asset is depreciated on a straight line method over the lease term as this method most closely reflects the expected pattern of consumption of future economic benefits. The right of use asset is reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. The Company reassess the lease liability subsequently to reflect changes in: 1) 2) 3) 4) The lease term (using a revised discount rate); The assessment of purchase option (using revised discount rate); The amounts expected to be payable under residual value guarantees (using an unchanged discount rate); or Future lease payments resulting from a change in an index or a rate used to determine those payments (using an unchanged discount rate) The impact of such remeasurement is treated as adjustment to the right-of-use of asset. Lease modification may also prompt remeasurement of the lease liability unless they are treated as separate lease. 5.17 Intangible These are stated at cost less accumulated amortisation and impairment loss, if any. Amortisation is charged over the estimated useful life of the asset on a systematic basis to income applying the straight line method at the rates specified in note 7 to these financial statements. Amortisation on additions is charged from the month in which the asset is acquired or capitalised whereas no amortisation is charged from the month the asset is disposed off. Capital work-in-progress Capital work-in-progress is stated at cost less any impairment in value. It consists of advances made to suppliers in respect of operating fixed assets and intangible assets. These are transferred to specific assets as and when assets are available for use. 5.18 Taxation Current Provision for current taxation is recorded as higher of, taxable income of shareholder`s fund at the rates enacted or substantively enacted at the reporting date after taking into account available tax credits and rebates, if any, and turnover and ACT. Deferred Deferred tax is accounted for using the liability method in respect of all temporary differences at the reporting date between the tax bases and carrying amounts of assets and liabilities for financial reporting purposes. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which the deductible temporary differences, unused tax losses and tax credits can be utilised. The carrying amount of deferred tax asset is reviewed at each reporting date and is adjusted to the extent probable that future taxable profits will allow deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on the tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax is charged or credited in the statement of profit or loss, except in the case of items credited or charged to equity in which case it is included in equity. ANNUAL REPORT 2020 42
53. DAWOOD FAMILY TAKAFUL LIMITED 5 .19 Financial instruments Financial assets and financial liabilities other than those arising out of takaful contracts are recognised at the time when the Company becomes a party to the contractual provisions of the instrument. At the time of initial recognition, financial assets and liabilities are measured at fair values which is the cost of consideration given or received for it. Financial assets are derecognised when the contractual right to future cash flows from the asset expire or is transferred along with the risk and reward of the asset. Financial liabilities are derecognised when obligation specified in the contract is discharged, cancelled or expired. Any gain or loss on derecognition of the financial asset and liabilities are recognised in the statement of profit or loss and other comprehensive income for the current period. 5.20 Off setting the financial assets and liabilities Financial assets and liabilities are only offset and the net amount is reported in the financial statements when the Company has a legally enforceable right to set off the recognised amounts and it intends either to settle on the net basis or to realise the asset and settle the liability simultaneously. 5.21 Foreign currency translations Foreign currency transactions are translated into Pak Rupees (functional currency) using the exchange rates prevailing at the date of the transactions. Monetary assets and liabilities in foreign currencies are translated into Pak Rupees using the rate of exchange ruling at the reporting date. Exchange differences, if any, are recognised to statement of profit or loss and other comprehensive income. 5.22 Cash and cash equivalents For the purpose of statement of cashflows, cash and cash equivalents consist of cash and stamps in hand, balances with banks, short-term deposits and highly liquid short-term investments that are convertible to known amount of cash with original maturity of with in three months and are subject to insignificant risk of change in value. 5.23 Dividend and appropriation of reserves Dividend and appropriation to reserves except appropriations required by the law or determined by actuary or allowed by Insurance Ordinance, 2000 are recognised in the year in which these are approved. 5.24 Impairment of non-financial assets The carrying amount of assets (other than deferred tax asset) are reviewed at each reporting date to determine whether there is any indication of impairment of any asset or group of assets. If such indication exists, the recoverable amount of the asset is estimated. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in statement of profit or loss and other comprehensive income. 5.25 Creditors and accruals Liabilities for creditors and other amounts payable are carried at cost which is fair value of the consideration to be paid in future for goods and / or services received, whether or not billed to the Company. 5.26 Provisions Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an out flow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount can be made. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. 5.27 Contribution due but unpaid These are initially recognised at fair value. Provision for impairment on contribution receivable is established when there is objective evidence that the Company will not be able to collect all amount due according to original term of receivables. Receivables are analysed as per their aging and accordingly provision is maintained on a systematic basis (if required). 43 ANNUAL REPORT 2020
54. 6 . Operating fixed assets Additions / (disposals) - 200,345,330 Closing balance - 144,263,144 6.3 704,500 856,200 147,932,931 28,721,040 119,398,891 4,197,189 15,983,968 25,383,240 28,966,511 103,694,729 Furniture and fixtures Office equipment (279,806) 4,645,054 (79,252) 1,532,704 (200,554) 52,000 5,557,021 19,342,395 1,004,754 28,997,829 Computer equipment Vehicles Lease hold improvements Opening balance For the year / (on disposals) Closing balance 82,820,156 23,866,143 19,151,758 19,028,229 648,474 20,125,552 (135,468) 9,357,557 2,707,209 2,226,127 (43,468) 1,258,884 (92,000) 168,279 2,997,058 92,042,245 26,573,352 21,377,885 20,243,645 724,753 23,122,610 55,890,686 13,472,049 15,734,295 3,554,311 743,947 22,386,084 119,398,891 33,163,700 30,028,294 20,795,847 856,200 34,554,850 72,424,778 19,713,084 16,749,488 18,159,138 667,753 17,135,315 (209,209) 10,604,588 4,153,059 2,402,270 (53,509) 922,601 (155,700) 136,421 2,990,237 82,820,157 23,866,143 19,151,758 19,028,230 648,474 20,125,552 10-20 9,297,557 36,578,734 10 33.33 20 10 % Rate 10-20 10 33.33 20 10 % Rate 10,876,536 1,767,617 207,726 14,429,298 COST ACCUMULATED DEPRECIATION Net book Additions / For the year / (on value Closing balance Opening balance Closing balance Opening balance (disposals) disposals) ----------------------------------------------------------------------------------- (Rupees) -------------------------------------------------------------------------------------- (187,000) 37,112,180 40,045,401 7,083,886 6,881,701 30,028,294 33,163,700 Office equipment 23,797,956 1,468,700 45,508,694 Furniture and fixtures (95,000) 3,097,109 (92,000) 10,953,844 34,554,850 20,795,847 December 31, 2019 168,959,812 200,345,330 Net book value 129,719,502 36,578,734 2,661,576 144,263,144 55,890,686 191,500 ACCUMULATED DEPRECIATION - 55,890,686 191,500 ----------------------------------------------------------------------------------- (Rupees) -------------------------------------------------------------------------------------- Opening balance COST Aggregate December 31, December 31, Shareholders Participants' 2020 2019 Fund Fund -------------------------------- (Rupees) -------------------------------- 6.1 6.2 Note Computer equipment Vehicles Lease hold improvements December 31, 2020 6.1 Right to use asset Capital work in progress Operating fixed assets PROPERTY AND EQUIPMENT DAWOOD FAMILY TAKAFUL LIMITED ANNUAL REPORT 2020 44
55. 45 ANNUAL REPORT 2020 7 . 50,000 Cost 20,831 Accumulated depreciation 29,169 Written down value 50,000 Sale proceed 6.2.1 Note 20,831 Gain / (loss) 3,843,496 8,421,130 (9,603,050) 2,661,576 2,661,576 12,552,674 (15,022,750) 191,500 December 31, 2020 Computer software December 31, 2019 Computer software ACCUMULATED AMORTISATION Opening balance 31,716,436 34,456,246 2,739,810 524,329 34,456,246 34,980,575 31,632,746 31,800,859 168,113 616,516 31,800,859 32,417,375 2,655,387 2,563,200 Net book Closing Closing For the year balance balance value ----------------------------------------------------------------------------------- (Rupees) -------------------------------------------------------------------------------------Additions COST 129,719,502 144,263,144 Closing balance Opening balance 153,699,718 (873,440) 12,609,837 (1,061,217) (34,655,396) 129,719,501 9,004,727 53,652,990 (427,926) (47,686,148) Opening balance Reassessment of lease liability Additions Leases terminated Depreciation expense 20 20 % Rate Mr. Shahid Hameed - Employee Particulars of buyers & Relationship Aggregate December 31, December 31, 2020 2019 ---------- (Rupees) ---------- As per Company policy Mode of disposal The transfers were made to furnitures amounting to Rs. 3,761,218 to office equipment amounting to Rs. 3,881,590 and to lease hold improvements amounting to Rs. 7,055,466. Aggregate December 31, December 31, 2020 2019 ---------- (Rupees) ---------Right to use asset Closing balance Opening balance Additions Transfer to assets Capital work in progress INTANGIBLE ASSETS 6.3 6.2.1 6.2 Vehicle Particulars Details of operating fixed asset disposed off during the year is as follows: 6.1.1 Disposal of operating fixed asset DAWOOD FAMILY TAKAFUL LIMITED
56. DAWOOD FAMILY TAKAFUL LIMITED Aggregate Note 8 . December 31, December 31, Shareholders' Participants' 2020 2019 Fund Fund ------------------------------------ (Rupees) ------------------------------------ INVESTMENT PROPERTIES Opening balance Unrealized fair value gain 8.1 9. - - Closing balance 8.1 70,950,000 - 70,950,000 70,950,000 69,776,800.00 - 1,173,200 70,950,000 70,950,000 The cost of the investment property amounts to 66.78 million (2019: 66.78 million) as on December 31, 2020. The fair value of the investment properties was determined by external, independent property valuer having appropriate recognised professional qualifications and recent experience in the location and category of the property being valued. The independent valuer provides the fair value of the Company's investment properties every year. INVESTMENTS 9.1 INVESTMENT IN EQUITY SECURITIES Aggregate Note December 31, December 31, Shareholders' Participants' 2020 2019 Fund Fund -------------------------------- (Rupees) -------------------------------- Held-for-trading investments Listed shariah compliant shares 9.1.1 9.1.1 11,923,000 1,759,973,367 1,771,896,367 1,319,807,163 Listed shariah compliant shares December December 31, 2020 31, 2019 ---(Number of shares)--- Face value per share Name of the investee entity December 31, December 31, 2020 2019 ---------- (Rupees) ---------- (Rupees) - Related party 8,710,069 - Modaraba 5,344,499 10 Other parties 750,000 734,500 B.R.R. Guardian Modaraba 105,653,137 44,199,007 76,327,500 49,997,415 35,609,970 2,947,578 - 30,699,900 81,179,701 35,441,285 78,113,828 11,792,620 1,019,250 10,779,707 60,054,722 16,516,940 87,563,782 1,041,300 - Textile composite 335,500 19,805 - 10 10 10 Nishat Mills Limited Suraj Cotton Mills Limited Interloop Limited Cement 210,000 708,498 1,635,500 112,218 262,000 135,000 - 203,199 808,600 1,061,500 204,400 45,000 - 10 10 10 10 10 10 Cherat Cement Company Limited D.G. Khan Cement Company Limited Fauji Cement Company Limited Lucky Cement Limited Maple Leaf Cement Factory Limited Safe Mix Concrete Limited 262,000 89,439 10 10 Pioneer Cement Limited Power Cement Limited - 7,988,380 550,050 ANNUAL REPORT 2020 46
57. DAWOOD FAMILY TAKAFUL LIMITED December December 31 , 2020 31, 2019 ---(Number of shares)--- Face value per share Name of the investee entity December 31, December 31, 2020 2019 ---------- (Rupees) ---------- (Rupees) Refinery 52,100 - 42,000 43,250 10 10 Attock Refinery Limited National Refinery Limited 4,690,980 9,484,805 - 6,101,710 56,764,423 29,139,275 44,310,258 27,852,195 2,543,188 3,579,777 52,322,585 16,023,272 10,835,140 12,109,923 2,428,920 45,717,234 13,476,125 17,717,136 51,802,800 83,504,665 69,181,384 28,451,597 66,663,128 76,954,740 52,331,064 25,920,690 14,795,712 7,243,980 1,780,288 15,177,750 - 3,511,375 3,614,553 2,418,000 4,554,550 3,612,960 122,853,021 70,975,675 41,430,000 62,085,065 16,768,830 35,343,527 3,303,388 14,924,018 Power generation and distribution 715,548 7,452,500 474,668 6,373,500 10 3.5 The Hub Power Company Limited K-Electric Limited Oil and gas marketing companies 7,600 243,688 1,177,906 74,423 29,300 450,183 78,000 600,200 70,320 10 10 10 10 10 10 Attock Petroleum Limited Hascol Petroleum Limited Sui Northern Gas Pipelines Limited Hitech Lubricants Limited Sui Southern Gas Company Limited Pakistan State Oil Company Limited Oil and gas exploration companies 44,807 38,664 924,440 666,680 63,690 50,884 561,140 367,700 10 10 10 10 Pakistan Oilfields Limited Mari Petroleum Company Limited Pakistan Petroleum Limited Oil & Gas Development Company Limited Automobile assembler 79,000 81,600 31,400 3,650 41,300 - 10 10 10 5 10 Pak Suzuki Motor Company Limited Honda Atlas Cars (Pakistan) Limited Hino Pak Motors Limited Al-Ghazi Tractors Limited Sazgar Engineering Works Limited Cable and electrical goods 87,500 26,900 18,600 10 10 Pak Elektron Limited Pakistan Cables Limited Technology and communication 500,500 386,000 10 Pakistan Telecommunication Company Limited Fertilizer 399,704 1,122,500 120,000 845,500 10 10 Engro Corporation Limited Engro Fertilizers Limited Pharmaceuticals 147,250 184,244 33,250 92,944 47 ANNUAL REPORT 2020 10 10 AGP Limited GlaxoSmithKline (Pakistan) Limited
58. DAWOOD FAMILY TAKAFUL LIMITED December December 31 , 2020 31, 2019 ---(Number of shares)--- Face value per share Name of the investee entity December 31, December 31, 2020 2019 ---------- (Rupees) ---------- (Rupees) 134,163 188,800 6,400 28,663 137,910 38,700 10 10 10 GlaxoSmithKline (Pakistan) Consumer Healthcare Limited The Searle Company Limited Abbott Laboratories (Pakistan) Limited 35,570,636 47,054,624 4,834,368 7,349,766 26,029,133 17,290,386 31,121,438 8,266,740 33,268,470 12,529,342 19,855,125 28,925,910 - 20,294,403 54,038,092 16,347,922 16,541,305 1,927,680 2,154,500 6,228,090 23,046,128 7,028,733 17,491,485 7,056,860 8,348,910 3,036,000 6,006,600 2,860,704 45,146,673 3,884,920 9,274,020 3,360,000 6,726,903 1,800,000 25,583,880 966,600 2,029,615 79,860,818 - 13,642,524 3,344,760 23,509,129 1,784,580 Chemical 340,125 174,000 2,722,421 46,600 245,125 871,000 - 10 10 10 10 26,700 352,430 1,002,940 719,500 128,000 6,950 27,000 34,150 23,550 106,009 333,500 595,500 132,000 28,200 10 10 10 10 10 10 10 10 10 Akzo Nobel Pakistan Limited Berger Paints Pakistan Limited Engro Polymer & Chemcials Limited Engro Polymer & Chemcials Limited Preference Share I.C.I. Pakistan Limited Sitara Chemical Industries Limited Pakistan Oxygen Limited Ghani Global Holdings Ltd Sitara Peroxide Limited Lotte Chemical Pakistan Limited Sitara Chemical Industries Limited Ittehad Chemicals Limited WAH Noble Chemical Limited Food and personal care products 141,900 206,725 124,000 311,000 240 30,300 240 10 5 10 10 10 At Tahur Limited National Foods Limited Treet Corporation Limited Al-Shaheer Corporation Limited Unilever Pakistan Foods Limited Vanaspati & Allied Industries 798,000 60,000 10 Unity Foods Limited Engineering 51,500 856,600 - 377,700 68,400 406,100 10,500 322,500 10 10 10 10 10 10 349,580 10 Amreli Steels Limited Bolan Castings Limited Agha Steel Industries Limited International Steels Limited K.S.B. Pumps Company Limited Mughal Iron and Steel Industries Limited International Industries Limited - 13,212,825 38,747,447 - 5,240,000 7,646,737 - 14,766,460 - 10,578,253 9,290,642 Automobile parts and acessories - 26,200 470,279 5 10 Agriauto Industries Limited Loads Limited Transport - 1,366,000 10 Pakistan International Bulk Terminal Limited Paper and board - 87,114 23,300 10 10 Cherat Packaging Limited Packages Limited ANNUAL REPORT 2020 48
59. DAWOOD FAMILY TAKAFUL LIMITED December December 31 , 2020 31, 2019 ---(Number of shares)--- Face value per share Name of the investee entity December 31, December 31, 2020 2019 ---------- (Rupees) ---------- (Rupees) Leather and tanneries 6,900 1,380 10 Bata Pakistan Limited 10,569,696 2,750,423 76,314,700 68,064,255 54,522,902 4,071,390 43,712,235 34,966,770 Real Estate Investment Trust 7,199,500 5,449,500 10 Dolmen City REIT Commercial Banks 522,050 339,000 459,500 3,153,000 10 10 Meezan Bank Limited BankIslami Palkistan Limited Glass & Ceramics 25,000 - - 10 133,000 10 Ghani Global Glass Holdings Limited Tariq Glass Limited - 456,000 - 14,231,000 3,194,100 - 3,050,320 80,625 12,492,805 6,550,400 1,771,896,367 1,319,807,163 Modaraba 182,000 - 182,000 64,500 10 10 Orix Modaraba First Prudential Modaraba Synthetic & Rayon 1,353,500 9.2 736,000 10 Tri-star Polyester Limited INVESTMENT IN GOVERNMENT SECURITIES Aggregate Note Shareholders' Fund Participants' Fund December 31, December 31, 2020 2019 -------------------------------- (Rupees) -------------------------------- Available-for-sale investments Government securities Sukuks 9.2.1 & 9.2.2 170,000,000 1,195,398,946 1,365,398,946 355,554,902 Held to Maturity (amortised cost) Government securities - Sukuks 170,000,000 9.2.1 165,002,102 165,002,102 166,569,386 1,360,401,048 1,530,401,048 522,124,288 These represent Government Securities Sukuks having maturity period upto 10 years and carrying profit rates of 6MK-1.25% to 6MK+1.13% (2019: 5.24% to 3MK+1.13% ) per annum. (Out of these, Sukuk receipts of Rs.75 Million have been marked as lien in favor of State Bank of Pakistan in compliance with Section 29 of Insurance Ordinance, 2000 and Rule 21 of Takaful Rules, 2012). 49 ANNUAL REPORT 2020
60. 9 .2.2 5 years 5 years 5 years June 24, 2020 July 29, 2020 December 29, 2020 July 29, 2016 GOP - Sukuk GOP - Sukuk GOP - Sukuk Neelum Jhelum Sukuks Issue date June 29, 2016 Neelum Jhelum Sukuks May 26, 2016 10 years Tenure 10 years October 14, 8 years 2013 Held to Maturity Pakistan Energy Sukuk II Wapda Sukuks 5 years April 30, 2020 GOP - Sukuk 10 years Tenure Issue date Available-for-sale investments Particulars of Government Securities - Sukuks Semi annually Principal payment Maturity Semi annually Semi annually Maturity Maturity Maturity Maturity Principal payment 6 month Kibor +1.00% 6 month Kibor +1.13% T-bill - 0.1% T-bill - 0.2% T-bill - 0.1% T-bill - 1.25% Coupon rate (per annum) Semi annually Semi annually Semi annually Semi annually Semi annually Semi annually Coupon payment December 29, 2019 Principal redemption starts on 6 month Kibor +1.13% Coupon rate (per annum) Semi annually Coupon payment May 22, 2026 6 month Kibor - Semi annually 0.1% April 14, 2015 December 29, 2019 December 8, 2025 June 28, 2025 June 23, 2025 April 29, 2025 Principal redemption starts on 166,569,386 522,124,288 1,530,401,048 355,554,902 - 165,002,102 1,365,398,946 600,000,000 22,829,776 8,765,818 - 87,500,000 190,674,783 - 162,000,000 136,582,785 - 142,050,343 185,000,000 185,550,343 2020 2019 ---------- (Rupees) ---------- December 31, Aggregate December 31, DAWOOD FAMILY TAKAFUL LIMITED ANNUAL REPORT 2020 50
61. 51 9 .3.1 9.3 ANNUAL REPORT 2020 Maturity September 10 years 22, 2016 August 01, 2018 January 07, 2016 Meezan Bank Tier II Sukuks Meezan Bank Tier I Sukuks Hascol Petroleum Limited Sukuks 6 years 5 years Semi annually 7 years Quarterly Maturity Quarterly Semi annually Quarterly September 26, 2014 9.3.5 New Allied Electronics Industries (Private) Limited II 6 years Quarterly AL Baraka Bank (Pakistan) Limited - Tier II - Sukuk 9.3.5 New Allied Electronics March 31, 2008 8 years Quarterly 5 years 9.3.3 Eden Housing Limited II December 31, 2007 5 years Principal payment July 27, 2007 9.3.3 Eden Housing Limited I October 12, 2007 Tenure 5 years 9.3.2 Amtex Limited Issue date December 03, 2007 Note Held to Maturity Particulars of other securities - Sukuks Other sukuks/bonds Held to Maturity Provision for impairment Other sukuks/bonds Available-for-sale investments INVESTMENT IN DEBT SECURITIES 3 month Kibor +2% Coupon rate (per annum) 59,533,696 - 59,533,696 (32,081,281) 91,614,977 April 07, 2017 August 01, 2023 September 22, 2026 March 26, 2015 3 month Kibor +1.50% 3 month Kibor +1.00% 6 month Kibor +0.50% 6 month Kibor +1.25% 3 month Kibor +2.25% to 2.6% 3 month Kibor +2.2% December 02, 2010 October 30, 2008 3 month Kibor +3% September 30, 2009 December 31, 2019 1,410,778,041 338,419,200 1,072,358,841 (32,081,281) 1,104,440,122 7,872,000 2,953,125 20,000,000 9,375,000 6,690,049 64,652,315 12,000,000 22,668,750 7,872,000 2,953,125 20,000,000 9,375,000 3,213,142 66,425,320 12,000,000 12,746,498 Semi annually Monthly Quarterly Semi annually Quarterly Semi annually Quarterly Quarterly Quarterly 37,500,000 ---------- (Rupees) ---------- December 31 2020 1,330,551,968 327,587,718 1,002,964,250 (32,081,281) 1,035,045,531 37,500,000 Coupon payment 1,271,018,272 327,587,718 943,430,554 - 943,430,554 December 31, Shareholders' Participants' 2020 2019 Fund Fund -------------------------------------- (Rupees) -------------------------------------- June 30, 2009 3 month Kibor +3% January 10, 2010 Principal redemption starts on 9.3.1 Note Aggregate December 31, DAWOOD FAMILY TAKAFUL LIMITED
62. November 16 , 2017 March 01, 2018 January 18, 2017 Dawood Hercules Corporation Limited Sukuks I Dawood Hercules Corporation Limited Sukuks II Byco Petroleum Pakistan Limited Sukuks 9.3.4 Less: Provision for Impairment Engro Polymer & Chemical Sukuks Pakistan Services Limited Sukuks Agha Steel Industries Limited Sukuks 9.3.4 9.3.4 Shakarganj Food Products Limited Sukuks9.3.4 Dubai Bank Tier I Sukuks Dubai Islamic Bank Tier II Sukuks June 09, 2017 AGP Limited Sukuks 6 years 6 years January 11, 7.5 years 2019 March 14, 2018 October 09, 2018 5 years 5 years December 21, 2018 July 10, 2018 10 years July 14, 2017 5 years 5 years 5 years 5 years 5 years November 28, 2016 Fatima Fertilizer Company Limited Sukuks Tenure 5 years 9.3.4 TPL Trakker Limited Sukuks Issue date April 13, 2016 Note Held to Maturity Semi annually Semi annually Quarterly Quarterly Maturity Maturity Quarterly Quarterly annually Semi Quarterly Semi annually Quarterly Principal payment July 11 ,2024 March 14, 2020 October 09, 2020 October 10, 2019 3 month Kibor +0.65% 6 month Kibor +1.00% 3 month Kibor +0.80% Quarterly Semi annually Quarterly Quarterly Monthly Semi annually 6 month Kibor +0.50% Quarterly ANNUAL REPORT 2020 (32,081,281) 1,072,358,841 (32,081,281) 1,104,440,122 1,035,047,531 1,002,966,250 203,763,387 205,020,524 150,000,000 150,000,000 99,999,968 67,409,340 64,171,427 99,999,968 30,000,000 88,088,000 90,333,814 30,000,000 85,199,792 59,733,085 47,342,507 Quarterly 67,114,513 3,969,905 2,296,867 Quarterly 103,230,673 9,871,164 6,439,286 Semi annually 81,491,540 19,463,569 Quarterly Quarterly 3 month Kibor +1.75% December 31, 2019 ---------- (Rupees) ---------- December 31 2020 18,750,000 Coupon payment 3 month Kibor +1.05% 3 month Kibor +1.00% +1.00% 3 month Kibor 3 month Kibor +1.30% 6 month Kibor +1.10% 1 Year Kibor +3.00% Coupon rate (per annum) December 21, 3 month Kibor 2022 +1.75% July 14, 2027 April 18, 2019 September 01, 2019 May 16, 2019 September 09, 2017 May 28, 2017 January 13, 2020 Principal redemption starts on DAWOOD FAMILY TAKAFUL LIMITED 52
63. 53 ANNUAL REPORT 2020 9 .3.5 9.3.4 9.3.3 9.3.2 5 years 6 years 7 years March 01, 2018 October 09 2018 December 27, 2019 November 21, 2019 Dawood Hercules Corporation Limited Sukuks II Agha Steel Industries Limited Sukuks K-Electric Sukuk Hub Power Company Limited Sukuks Quarterly 6 month Kibor +1.5% 3 month Kibor +1.70% 3 month Kibor +0.80% Maturity Quarterly Quarterly Quarterly Quarterly Coupon rate (per annum) 999,900 250,000,000 999,900 300,000,000 338,419,200 1,410,778,041 327,587,718 1,330,553,968 50,000,000 13,447,350 10,447,350 - 23,971,950 16,140,468 2020 2019 ---------- (Rupees) ---------- Limited. These include provision for impairment of Rs 29.38 million (2019: Rs. 29.38 million) against first and second issue of sukuks of New Allied Electronics Industries (Private) have requested for an extension in the payment of the principal amount installments and the rental payments. As per BPRD Circular Letter No. 13 of 2020 dated March 26,2020. and BPRD circular Letter No. 25 dated June 16,2020 issued by State Bank of Pakistan. The Company’s the mortgaged property. The Company has recorded provision amounting to Rs. 2.7 million against these sukuks. in its repayments of both the sukuks, consequently, mark-up accrual thereon has been suspended by the Company. The said sukuks are fully secured against charge over These represent Eden Housing Limited sukuks I and II issued on December 31, 2007 and March 31, 2008 respectively. During the year 2014, Eden Housing Limited defaulted there is no likelihood of any unfavorable outcome and management of the Company is vigorously following and contesting the case. 07, 2016. During 2016, BoP sought and was granted stay order against the distribution of the deposited amount to the interested parties. Based on the opinion of legal advisor Court ordered Bank of Punjab (BoP) to deposit the entire outstanding amount of bank guarantee within 10 days from the date of order which was deposited by BoP on March sukuk. The guarantee has been called by the investors through their trustee Bank Islami Pakistan Limited which expired during 2012. On February 24, 2015, the Lahore High secured against bank guarantee of Bank of Punjab. During 2011, Amtex defaulted in its repayment and consequently, the Company suspended further accrual of profit on this The Company had invested Rs. 37.5 million in sukuks of Amtex Limited and the profit accrued thereon as at February 11, 2011 is Rs. 1.78 million. These certificates are fully May 21, 2020 Mar 27, 2022 October 09, 2020 Quarterly 3 month Kibor +1.00% 3 month Kibor +1.00% May 16, 2019 September 01, 2019 Coupon rate (per annum) Principal redemption Quarterly Semi annually Principal payment 6 months Maturity 5 years Tenure November 16, 2017 Issue date Dawood Hercules Corporation Limited Sukuks I Held to Maturity DAWOOD FAMILY TAKAFUL LIMITED
64. DAWOOD FAMILY TAKAFUL LIMITED 9 .4 INVESTMENT IN TERM DEPOSITS Aggregate December 31, December 31, Participants' Shareholders' 2020 2019 Fund Fund ------------------------------------- (Rupees) ------------------------------------- Note Deposits maturing within twelve months Term deposits with Islamic Banks Islamic Commercial Papers 9.4.1 - 660,000,000 - 660,000,000 - 855,000,000 324,816,323 - 660,000,000 660,000,000 1,179,816,323 9.4.1 These represent term deposits maintained with Islamic financial institutions under profit and loss sharing basis having maturity upto 1 year and carrying profit rates ranging from 6.7% to 1MK+1% per annum. (2019 : 12.60% to 6MK+1.3%). As at 2020, Rs Nil (2019: Rs. 75 Million) have been marked as lien in favor of State Bank of Pakistan in compliance with Section 29 of Insurance Ordinance, 2000 and Rule 21 of Takaful Rules, 2012. However, there were zero as at December 2020. 9.5 INVESTMENT IN MUTUAL FUNDS Aggregate December 31, December 31, Participants' Shareholders' 2020 2019 Fund Fund -------------------------------------- (Rupees) -------------------------------------- Note Available-for-sale investments Dawood Islamic Mutual Fund - 9.5.1 35,538,106 35,538,106 9.5.1 This represents 428,963 units (2019: 389,417 units) of 786 Smart Fund which is a related party of the company. 9.6 MOVEMENT IN INVESTMENTS Held to Maturity Available for sale Fair value through P&L Term deposits 33,485,220 Total -------------------------------------------------- (Rupees) -------------------------------------------------Balance as at December 31, 2018 Additions 504,988,586 1,480,967,776 997,022,967 1,165,988,572 3,643,979,315 625,642,890 2,092,026,505 2,763,827,751 5,986,485,732 (2,750,000,000) Disposals (sales and redemption) - (665,976,674) (1,720,443,910) Fair value net gains/ (losses) - Unrealised - (12,720,249) (15,313,179) Balance as at December 31, 2019 Additions Disposals (sales and redemption) Fair value net gains/ (losses) Unrealised Balance as at December 31, 2020 - (5,136,420,584) (28,033,428) 504,988,586 1,427,913,743 1,353,292,383 1,179,816,323 4,466,011,035 50,000,000 1,221,500,000 4,656,423,669 2,180,000,000 8,107,923,669 (4,399,540,139) (2,699,816,323) (7,447,161,983) (62,398,766) 492,589,820 (285,406,755) 4,356,208 197,258,560 2,368,363,196 1,807,434,473 660,000,000 201,614,768 5,328,387,489 ANNUAL REPORT 2020 54
65. DAWOOD FAMILY TAKAFUL LIMITED 10 . TAKAFUL / RETAKAFUL RECEIVABLES Aggregate Shareholders' 'Participants' December 31, December 31, Fund Fund 2020 2019 ------------------------------------------ (Rupees) ----------------------------------------- Takaful operator fee receivable Contributions due but unpaid Amount due from retakaful companies 11. RECEIVABLES, LOANS & ADVANCES Note Accrued investment income Security deposits Advances Loans to agents Loans to employees Inter fund balances Receivable against sale of equity securities Dividend receivable Other receivables 11.1 19,127,185 - 511,657 73,396,801 19,127,185 511,657 73,396,801 19,193,786 1,467,057 54,932,073 19,127,185 73,908,458 93,035,643 75,592,916 Aggregate Shareholders' Participants' December 31, December 31, Fund Fund 2020 2019 -------------------------------- (Rupees) -------------------------------3,811,912 22,146,762 1,778,676 2,825,486 605,894 14,671,830 43,060,572 6,988,595 33,718,403 158,314,560 9,206,956 3,374,003 46,872,484 29,135,357 1,778,676 2,825,486 605,894 33,718,403 158,314,560 9,206,956 18,045,833 62,966,331 14,915,389 1,053,010 2,247,814 1,018,495 11,789,419 2,072,755 9,040,734 45,840,560 254,663,089 300,503,649 105,103,947 982,352 2,103,988 38,888 686,684 6,167,558 32,746,398 4,146,616 7,149,910 34,850,386 38,888 4,833,300 1,033,917 48,535,075 10,595,950 2,801,389 3,811,912 43,060,572 46,872,484 62,966,331 11.1 Accrued investment income: Government securities Accrued profit on sukuks Accrued profit on term deposits Accrued profit on savings accounts 12. DEFERRED TAX ASSET Deferred taxation - net Note 12.1 December 31, December 31, 2020 2019 ---------- (Rupees) ---------102,540,929 102,540,929 This comprises of the following: Deductible / (taxable) temporary difference arising in respect of: Accelerated depreciation/ amortisation - net Unrealised Loss on revaluation of investment in equity shares Provision for impairment on sukuks Provisions (leave encashment and doubtful debts) Unused tax losses and turnover tax (963,484) (114,029) 9,303,571 3,441,221 90,873,650 102,540,929 10,677 50,972 9,303,571 3,704,423 89,471,286 102,540,929 12.1 The deferred tax asset includes asset recognised against unused carry forward tax losses as the management estimates that sufficient taxable profits will be available in future years against which such losses can be utilised.The estimates of future taxable profits are based on financial projections of the Company for the next five years approved by the Board. The projections involve certain key assumptions underlying the estimation of future estimated taxable profits including income tax rates, cost curtailment, growth of first year contribution, investment returns. Any significant change in the key assumptions may have an effect on the realisability of the deferred tax asset. As of December 31, 2020, the Company has accumulated tax losses of Rs. 158.5 million (2019: Rs. 188.23 million). The deferred tax on such losses works out to Rs. 44.9 million (2019: Rs. 54.58 million). 55 ANNUAL REPORT 2020
66. DAWOOD FAMILY TAKAFUL LIMITED 13 . PREPAYMENTS Note Prepayments: 3,949,011 - Prepaid expenses 14. Aggregate Shareholders' Participants' December 31, December 31, Fund Fund 2020 2019 -------------------------------- (Rupees) -------------------------------534,750 4,483,761 2,380,641 CASH, STAMPS & BANK Cash and cash equivalents - Cash in hand - Stamps in hand 1,827,521 1,746,818 - 1,827,521 1,746,818 941,099 694,985 3,574,339 - 3,574,339 1,636,084 Cash at bank - Current accounts - Saving accounts - Saving accounts-Waqf 14.1 14.1 4,796 35,078,165 - 462,982 424,163,088 106,013,848 467,778 459,241,253 106,013,848 2,627,028 370,079,744 35,283,398 35,082,961 530,639,918 565,722,879 407,990,170 38,657,300 530,639,918 569,297,218 409,626,254 14.1 These represent cash at bank maintained with Islamic commercial banks under profit and loss sharing basis carrying profit rates ranging from 4% to 6.25% (2019: 7.50% to 12.50% ) per annum. 15. SHARE CAPITAL Authorized capital December 31, December 31, 2020 2019 ----- (Number of shares) ----80,000,000 December 31, December 31, 2020 2019 -------------- (Rupees) -------------- 80,000,000 800,000,000 800,000,000 750,000,000 750,000,000 Issued, subscribed and paid-up capital December 31, December 31, 2020 2019 ----- (Number of shares) ----75,000,000 75,000,000 15.1 The company has only one class of shares, each share carries equal voting rights. 15.2 Following are the categories shareholders: December 31, December 31, December 31 December 31 2020 2019 2020 2019 Note---------------- (Number of shares) ---------------- ------------ (Rupees) ------------Directors, chief executive officer their spouse(s) & minor child Associated companies, undertakings & related parties Others 15.2.1 7,855,500 7,482,000 78,555,000 74,820,000 12,415,500 22,826,010 124,155,000 228,260,100 54,729,000 44,691,990 547,290,000 446,919,900 75,000,000 75,000,000 750,000,000 750,000,000 ANNUAL REPORT 2020 56
67. DAWOOD FAMILY TAKAFUL LIMITED December 31 , 2020 December 31, 2019 December 31 2020 December 31 2019 ---------------- (Number of shares) ---------------- ------------ (Rupees) ------------- 15.2.1Associated companies, undertakings & related parties B.R.R. Investment (Private) Limited BRR Guardian Modaraba 786 Investments Limited First Dawood Investment Bank Limited 16. 7,400,000 15,426,010 26,430,000 74,000,000 23,725,000 - 74,000,000 154,260,100 12,415,500 22,826,010 124,155,000 228,260,100 Shareholders' Fund Participants' Fund TAKAFUL LIABILITIES Note Investment component of unit-linked and account value policies Surrender/ withdrawals payable Unclaimed maturity benefit payable Liabilities under individual takaful contracts Liabilities under group takaful contracts 17. 2,643,000 7,400,000 2,372,500 - IJARAH LIABILITES Ijarah Rental - Vehicles Ijarah Rental - Buildings 17.1 Opening balance Increase/decrease in lease liability Acceleration of interest Payments 33.1 Aggregate December 31 December 31, 2019 2020 ------------------------------------------ (Rupees) ------------------------------------------ - 4,090,247,656 3,076,831 32,237,835 40,806,977 48,018,274 4,090,247,656 3,076,831 32,237,835 40,806,977 48,018,274 3,281,078,004 3,147,847 8,761,507 16,797,503 9,233,582 - 4,214,387,573 4,214,387,573 3,319,018,443 Aggregate Shareholders' 'Participants' December 31 December 31, Fund Fund 2020 2019 ------------------------------------------ (Rupees) -----------------------------------------78,476,628 77,878,579 - 78,476,628 77,878,579 38,660,313 94,792,024 156,355,207 - 156,355,207 133,452,337 133,452,337 62,212,475 18,075,225 (57,384,830) - 133,452,337 62,212,475 18,075,225 (57,384,830) 150,814,625 11,766,534 18,262,005 (47,390,827) 156,355,207 - 156,355,207 133,452,337 48,879,321 107,475,886 - 48,879,321 107,475,886 37,108,974 96,343,363 156,355,207 - 156,355,207 133,452,337 17.2 Tenure analysis Current Non-current 57 ANNUAL REPORT 2020
68. DAWOOD FAMILY TAKAFUL LIMITED 17 .3 The future minimum lease payments to which the Company is committed under the lease agreements and the periods in which they will become due are as follows: December 31, 2019 December 31, 2020 Present value Present value Minimum lease of minimum of minimum payments lease payments lease payments ------------------------------------------ (Rupees) ------------------------------------------ Minimum lease payments Not later than one year Later than one year but not more than 5 years Financial charges allocable to future periods 18. 56,463,702 129,697,976 48,879,321 107,475,886 24,267,600 19,977,525 37,108,974 96,343,363 186,161,678 156,355,207 44,245,125 133,452,337 (29,806,471) - - 89,207,212 156,355,207 156,355,207 133,452,337 133,452,337 Current (48,879,320) (48,879,321) (37,108,974) (37,108,974) Non-current 107,475,887 107,475,886 96,343,363 96,343,363 TAKAFUL / RETAKAFUL PAYABLE Aggregate Shareholders' 'Participants' December 31 December 31, Fund Fund 2020 2019 ------------------------------------------ (Rupees) -----------------------------------------Takaful operator fee payable Amount due to retakaful companies 19. - 19,127,199 79,167,298 19,127,199 79,167,298 19,193,787 50,150,000 - 98,294,497 98,294,497 69,343,787 OTHER CREDITORS AND ACCRUALS Aggregate Shareholders' 'Participants' December 31 December 31, Fund Fund 2020 2019 ------------------------------------------ (Rupees) -----------------------------------------Agent Commission 54,517,836 Interfund payable 30,544,432 Unearned wakala fee Payable to suppliers Salary payable Provident fund payable EOBI payable - 3,173,968 - 54,517,836 42,965,062 33,718,400 11,789,419 - 5,873,182 1,361,933 - 1,361,933 1,610,334 17,406,044 - 17,406,044 8,963,118 1,902,434 - 1,902,434 2,621 522,480 - 522,480 420,120 Provision for leave encashment 4,866,278 - 4,866,278 6,773,871 Provision for bonus 7,000,000 - 7,000,000 6,000,000 Accrued expenses 1,018,816 - 1,018,816 915,169 747,150 - 747,150 803,950 Audit fee payable 1,621,874 - 1,621,874 1,577,461 Withholding tax payable 2,474,755 - 2,474,755 968,054 Consultancy fee payable Surplus distribution payable Stale cheques payable Policy certificate fee payable Other payables 2,164,014 - 80,347 80,347 80,347 1,391,789 3,555,803 1,480,179 4,392,276 6,391,046 6,391,046 11,000,934 7,021,406 18,022,340 1,845,541 137,148,980 18,058,556 155,207,536 96,460,704 ANNUAL REPORT 2020 58
69. DAWOOD FAMILY TAKAFUL LIMITED 20 . CONTINGENCIES AND COMMITMENTS 20.1 Contingency 20.1.1Provincial Sales Tax Punjab Sales Tax (PST): With effect from November 01, 2018, Punjab Revenue Authority (PRA) withdrew exemption on both life insurance / takaful. However during the current year, the Government of Punjab through notification no: SO(TAX)1-110/220 (COVID-19) dated April 02, 2020, has levied temporarily "zero percent" tax without input tax adjustment for health and life insurance, in order to provide relief to the industry for the damage caused during the pandemic outbreak, the notification was made effective from April 02, 2020 till June 30, 2020 only. Sindh Sales Tax (SST): Similiar to PRA, Sindh Revenue Board, also lifted the exemption that was initially provided vide notification no. SRB-3-4/18/2014 dated October 29, 2014 and was extended through different notifications. However in 2019, SRB vide notification no. SRB-3-4/5/2019 dated May 08, 2019 restored the exemption on both life insurance and takaful business for period starting July 01, 2018 to June, 2019. This exemption was further extended till June 30, 2020 through notification no. SRB-3-4/13/2020 dated June 22, 2020. The said exemption was made subject to following conditions: a) SST due on services for tax period July 2020 onward, must be e-deposited in the Sindh Government head of account; and b) Any amount of SST charged or collected on life insurance and health insurance, during the period starting from July 01, 2019 to June 30, 2020, shall be e-deposited in Sindh Government head of account. The management of the Company sought a legal opinion from the legal advisors, who are of the view that life insurance / takaful is not a service, but infact is an underwriting agreement to pay to the participants in the furture, a specified sum of money, either on occurence of an identified event or upon maturity of the policy, as is also clearly identified in definition of the term "insurance or takaful" under Insurance Ordinance, 2000. In the view of above and being an issue of insurance / takaful industry, the Company collectively through the forum of Insurance Association of Pakistan (IAP) had filed a constitutive petition in the Lahore High Court and in the High Court of Sindh at Karachi on September 28, 2019 and November 28, 2019 against PRA and SRB respectively. The IAP has also sought the support of Securities Exchange Commission of Pakistan (SECP), which has also endorsed the insurance / takaful industry's request to restore the exemptions. Subsequently to this stay order against any coercive actions by SRB and PRA, was received from the High Court of Sindh at Karachi and Lahore High Court on September 22, 2020 and October 03, 2019. The legal advisors of the Company have expressed the opinion that there are sufficient grounds available to challenge the levy of provincial sales tax on life insurance / takaful and in their opinion, it is likely that the Courts may favourably and positively consider the same and the recommendations of SECP. In view of the above, Company and participants of the industry are not billing their customers for the provincial sales tax for the period when exemption was not applicable nor have they made any provision for the same in books of account for the year ended December 31, 2020. Furthermore subsequent to the exemption period (ending on June 30, 2020 in both cases), no provincial sales tax has been charged on the customers of the industry. The amount of provincial sales tax involved in this matter, as on December 31, 2020, computed on risk based contribution amounts to Rs. 109.795 million. 20.2 Commitments There are no commitments except for the ijarah liabilities disclosed in Note 17.2. 59 ANNUAL REPORT 2020
70. DAWOOD FAMILY TAKAFUL LIMITED December 31 , December 31, 2020 2019 ------------ (Rupees) ------------21. CONTRIBUTION REVENUE Regular contributions on individual policies - First year - Second year renewal - Subsequent years renewal Top up contributions Single contribution on individual policies Group policies without cash values Total gross contributions Less: Wakala fee recognised 577,193,000 266,148,895 824,227,554 38,827,062 6,845,000 120,971,758 522,110,989 248,830,157 767,917,423 39,644,736 5,120,000 52,440,338 1,834,213,269 1,636,063,643 (599,405,517) (535,184,462) (38,903,599) (55,757,490) (39,285,101) (23,551,384) (94,661,089) (62,836,485) Less: Retakaful contribution ceded Regular contributions on individual policies Group policies without cash values Retakaful contribution ceded Total net contributions 22. INVESTMENT INCOME Income from debt securities Income from term deposits Income from savings accounts 23. TAKAFUL BENEFITS 1,140,146,663 1,038,042,696 Shareholders Participants December 31, December 31, Fund Fund 2020 2019 ---------------------------------------------- (Rupees) ------------------------------------------------34,447,702 7,322,451 7,223,067 219,919,393 48,390,576 35,182,651 254,367,095 55,713,027 42,405,718 244,808,996 97,842,157 28,902,836 48,993,220 303,492,620 352,485,840 371,553,989 December 31, December 31, 2020 2019 ------------ (Rupees) ------------- Claims under individual policies by by by by death covered events other than death maturity surrender Claims under group policies by death by event other than death NET TAKAFUL BENEFITS 60,317,968 50,622,064 63,637,553 291,173,632 28,306,113 32,686,548 13,601,293 197,694,799 71,851,430 1,470,014 17,589,204 1,504,787 539,072,661 291,382,744 12,877,476 45,889,528 4,955,811 11,854,816 58,767,004 16,810,627 480,305,657 274,572,117 Re-Takaful recoveries under PTF On individual policies On group policies Recoveries from retakaful NET TAKAFUL BENEFITS 23.1 Claims development For each class of business, the uncertainty about the amount and timings of claims payment is usually resolved within a year. Further, claims with significant uncertainties are not outstanding as at December 31, 2020, therefore claim development table is not required to be presented. However, aging of outstanding claims and movement of outstanding claims are presented below: ANNUAL REPORT 2020 60
71. DAWOOD FAMILY TAKAFUL LIMITED December 31 , December 31, 2020 2019 -------------------------------------- (Rupees) --------------------------------------- Upto one year Over one year 42,899,416 5,118,858 48,018,274 9,233,582 2,089,734 27,009,907 34,601,180 63,700,821 987,097 5,227,928 6,205,797 12,420,822 3,076,831 32,237,835 40,806,977 76,121,643 3,147,847 8,761,507 16,797,503 28,706,857 106,600,237 17,539,680 124,139,917 37,940,439 Claims outstanding under group business Claims outstanding under individual business Surrender and withdrawals Unclaimed maturity benefits Other outstanding claims Total claims outstanding under individual business 24. TAKAFUL OPERATOR FEE Note Mudarib Share Bid offer charge Tharawat fee 25. 48,642,483 54,874,112 53,111,153 23,883,290 47,968,679 41,416,627 156,627,748 113,268,596 226,538,765 20,164,723 17,153,667 160,858 734,826 264,752,839 223,560,638 19,072,867 16,791,409 120,321 667,968 260,213,203 9,181,554 4,232,457 273,934,393 264,445,660 140,137,562 5,242,421 2,432,010 34,226,222 17,934,792 11,710,242 8,822,692 10,259,041 7,518,407 872,053 1,119,973 4,733,726 615,661 2,243,623 2,105,967 369,910 2,415,218 1,165,357 5,835,109 4,974,171 411,920 4,939,650 3,448,167 273,533,894 547,468,287 121,558,422 4,580,333 2,235,399 501,683 27,155,993 22,480,461 10,043,137 9,728,007 8,908,263 7,374,258 659,379 766,160 3,921,680 684,064 2,432,033 2,176,800 100,868 1,897,433 1,041,962 5,075,134 4,501,907 594,108 3,940,700 3,836,913 246,195,096 510,640,756 COMMISSION & ACQUISITION EXPENSES Commission Commission Commission Commission Commission on on on on on first year contribution second year contribution subsequent years contribution single contribution topup contribution Remuneration to takaful intermediaries on group policies: Total commission expense Other benefits to takaful intermediaries: Salaries and other benefits Provident fund contributions Employee old age contribution Leave encashment Depreciation Sales promotion expenses Repair and maintenance Rent Vehicle running Utilities Medical Advertisement and publicity Ijarah rentals Accommodation charges Printing and stationery Training and development Amortisation Travelling Computer expenses Communication Entertainment Rates and taxes Takaful coverage Revenue stamps Total acquisition expenses Totall commission & acquisition expense 61 December 31, December 31, 2020 2019 ------------ (Rupees) ------------- ANNUAL REPORT 2020 25.1
72. DAWOOD FAMILY TAKAFUL LIMITED 25 .1 Disclosures relating to Provident Fund The Company operates the approved contributory provident fund (the fund) for its permanent employees. Details of net assets and investments as per unaudited financial statements of the fund are as follows: Note Size of the fund (Rupees) Cost of investments made (Rupees) Investment - (%) Fair value of investments (Rupees) Break-up of investments Sukuk-others Shariah compliant mutual funds Investment in term deposit Investment in listed shares Special account with an Islamic bank 25.1.1 Un-audited December 31, 2020 57,718,353 10,327,847 80% 45,915,078 Un-audited December 31, 2019 53,631,436 16,285,292 82% 43,805,382 December 31, December 31, 2020 2019 ------------ (Rupees) ------------- 768,000 4,828,112 2,928,053 37,390,913 5,344,000 4,549,217 5,000,000 1,770,306 27,141,859 45,915,078 43,805,382 December 31, December 31, 2020 2019 -------(Percentage)------25.1.1 Break-up of investments as percentage of size of the fund Sukuk-others Shariah compliant mutual funds Investment in term deposit Investment in listed shares Special account with an Islamic banks 26. OTHER INCOME Gain on sale of operating fixed assets Other incomes 26.1 1% 9% 0% 5% 65% 10% 8% 9% 3% 51% 80% 82% December 31, December 31, 2020 2019 ------------ (Rupees) ------------56,068 582,308 490,706 926,694 638,376 1,417,400 This includes partial withdrawal and endorsement fees. ANNUAL REPORT 2020 62
73. DAWOOD FAMILY TAKAFUL LIMITED 27 . ADMINISTRATION EXPENSES Salaries and other benefits Bonus Provident fund contributions Employee old age contribution Depreciation Vehicle running Fees and subscriptions Repair and maintenance Rent Actuarial services charges Utilities Communication Entertainment Takaful coverage Medical Ijarah rentals Leave encashment Advertisement and publicity Accommodation charges Printing and stationery Amortisation Travelling Computer expenses Rates and taxes Note 25.1 Total administration expenses 28. 97,383,730 7,000,000 3,643,038 1,690,041 22,817,482 7,129,164 4,570,451 5,018,675 2,940,897 3,729,000 3,222,174 2,500,761 2,131,788 2,116,993 2,034,790 1,577,909 479,988 410,441 961,553 246,606 1,035,094 776,904 176,537 84,472,801 6,000,000 3,182,944 1,553,413 18,103,995 6,190,488 4,004,176 4,304,202 3,242,669 3,514,500 3,160,396 2,175,058 1,929,389 1,688,872 1,538,552 1,307,227 348,628 328,354 456,043 1,042,300 67,245 813,185 694,641 254,615 173,594,016 150,373,693 690,000 631,708 1,920,000 1,903,887 3,763,000 2,086 797,963 1,203,726 590,000 842,757 1,920,000 1,962,285 1,397,531 301,587 249,981 803,328 10,912,370 8,067,469 1,384,995 376,007 142,885 1,463,392 376,008 122,885 1,903,887 1,962,285 OTHER EXPENSES Director meeting fee Legal and professional Shariah advisor fee Auditors' remuneration Consultancy fees Charity and donation Investment related expenses Others 28.1 28.1 Auditors' remuneration Audit fee Other certifications Out of pocket expenses 29. December 31, December 31, 2020 2019 ------------ (Rupees) ------------- TAXATION Current tax Current year Prior year Deferred tax (11,428,596) (1,621,325) (8,106,627) - (13,049,921) (8,106,627) (13,049,921) 29.1 (12,491,902) (20,598,529) The relationship between tax expense and accounting profit has not been presented in these financial statements as the income of the Company is subject to tax under section 113 of the Income Tax Ordinance, 2001. 63 ANNUAL REPORT 2020
74. DAWOOD FAMILY TAKAFUL LIMITED Income tax assessments of the Company have been finalised upto and including tax year 2021 (income year ended December 31, 2020). The returns for the tax years 2012-2020 are being finalised under Universal Self Assessment Scheme which provides that the returns filed are deemed as assessed unless opened for reassessment under section 120 of the Income Tax Ordinance, 2001. 30. December 31, 2020 2019 EARNINGS PER SHARE - BASIC AND DILUTED Profit after taxation - (Rupees) 75,536,185 30,185,408 Weighted average number of ordinary shares - (Number) 75,000,000 75,000,000 1.01 0.40 Earnings per share - basic and diluted - (Rupees) 31. December 31, REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES Chief Executive December 31, 2020 Directors December 31, 2019 December 31, 2020 Executives December 31, 2019 December 31, 2020 Aggregate December 31, 2019 December 31, 2020 December 31, 2019 -------------------------------------------------------------------- (Rupees) -------------------------------------------------------------------Remuneration 7,891,848 7,366,564 - - 55,453,552 40,215,829 63,345,400 47,582,393 398,644 423,636 - - 5,016,319 4,061,163 5,414,963 4,484,799 690,000 590,000 Vehicle maintenance and medical expenses - Meeting fee 690,000 - - 590,000 - Provident fund contribution 518,124 467,436 8,808,616 8,257,636 - 3,440,061 2,425,104 3,958,185 2,892,540 63,909,932 46,702,096 73,408,548 55,549,732 - 690,000 590,000 -------------------------------------------------------------------- (Number) -------------------------------------------------------------------Number of persons 31.1 32. 1 1 5 7 16 22 12 20 Directors are provided a fee of Rs. 30,000 and Rs. 15,000 (2019: Rs. 20,000 and Rs. 10,000) for attending the Board meetings and its committee meetings respectively. TRANSACTIONS AND BALANCES WITH RELATED PARTIES The related parties comprise of group companies, entities under common management, directors, major shareholders and key management personnel and employee retirement benefit funds. Transactions with related parties are entered into at rates negotiated with them. Details of the balances and transactions with related parties, other than those which have been specifically disclosed elsewhere in these financial statements, are as follows: Relationship with the Company Nature of transactions December 31, December 31, 2020 2019 ------------- (Rupees) ------------Associated companies - Common Directorship B.R.R. Guardian Modaraba Contribution received B.R.R. Guardian Modaraba Investment income B.R.R. Guardian Modaraba Principal redemptions B.R.R. Guardian Modaraba Rent of premises B.R.R. Guardian Modaraba Locker rent B.R.R. Guardian Modaraba Short Term Placement-Purchase 320,415 319,111 2,089,804 3,553,880 5,474,928 5,337,936 5,474,928 35,400 - 105,000,000 50,000,000 80,000,000 50,000,000 B.R.R. Guardian Modaraba Short Term Placement-Redemption First Dawood Investment Bank Limited Contribution received 55,776 53,460 Systems Limited Contribution received 5,234,302 4,112,166 Systems Limited Death claim paid 3,161,000 786-Smart Fund (Formerly Dawood Income Fund) Contribution received 51,702 3,510,000 73,243 ANNUAL REPORT 2020 64
75. DAWOOD FAMILY TAKAFUL LIMITED 33 . SEGMENTAL INFORMATION Statutory Funds Aggregate December 31, December 31, Group Family Individual 2020 2019 Family Takaful Takaful -------------------------------------------------------- (Rupees) -------------------------------------------------------------33.1 Revenue account -Participant Investment Fund (PIF) Incomes Allocated contribution Allocated surplus Loyalty Reward Net investment income 1,050,588,065 46,652,500 241,709 398,547,244 - 1,050,588,065 46,652,500 241,709 398,547,244 928,212,846 31,162,492 220,909,675 Total income 1,496,029,518 - 1,496,029,518 1,180,285,013 Less: Expenditures Surrenders / partial withdrawals Net risk contribution / ANF contribution Bid offer share Tharawat fee (on net assets values) Policy certificate fee Maturity Benefits Charity and donation Brokerage fee and other charges - (321,460,051) (135,263,978) (218,231,233) (106,143,770) (54,874,112) (53,111,153) (43,352,945) (63,637,553) (876,549) (20,316,899) - (54,874,112) (53,111,153) (43,352,945) (63,637,553) (876,549) (20,316,899) (47,968,679) (41,416,627) (39,246,518) (13,601,293) (442,846) (13,414,416) Total expenditures (692,893,240) - (692,893,240) (480,465,382) Surplus for the year 803,136,278 - 803,136,278 699,819,631 Unrealised gain / (loss) on revaluation of sukuks Balance of PIF at the beginning of the year Balance of PIF at the end of the year 33.2 (321,460,051) (135,263,978) A 6,033,374 - 6,033,374 3,281,078,004 - 3,281,078,004 2,586,143,220 4,090,247,656 - 4,090,247,656 3,281,078,004 (4,884,847) Revenue account -Participant Takaful Fund (PTF) Income 623,749,847 135,263,978 15,090,682 150,854,917 924,959,424 65,214,268 4,837,154 70,051,422 688,964,115 135,263,978 15,090,682 155,692,071 995,010,846 645,014,312 106,143,770 30,452,588 112,441,577 894,052,247 Less: Claims and expenditures Claims net of retakaful recoveries Wakala fee Mudarib share Charity and donation Waqf direct expenses (98,062,556) (495,766,165) (45,256,475) (73,548) (15,149,403) (27,431,916) (22,787,968) (3,386,008) (133,430) (125,494,472) (518,554,133) (48,642,483) (73,548) (15,282,833) (63,276,025) (475,401,510) (23,883,290) (42,448) (13,182,725) Total claims and expenditures (654,308,147) (53,739,322) (708,047,469) (575,785,998) 270,651,277 16,312,100 286,963,377 318,266,249 1,017,901,306 1,122,227,097 6,460,272 24,943,265 1,024,361,578 1,147,170,362 899,781,236 1,024,361,578 164,154,593 193,685,906 Contribution net of retakaful Net risk contribution / ANF contribution Surplus from retakaful operator Investment income Total net income Excess of income over expenditure Add: Technical reserve at the beginning of the year Less: Technical reserve at end of the year Surplus before distribution 166,325,486 (2,170,893) 4,269,001 62,256 4,331,257 Net movement in technical reserves 104,325,791 18,482,993 122,808,784 124,580,342 Surplus distribution (46,652,500) (46,652,500) (31,162,492) (1,750,000) (4,000,000) Unrealised gain/(loss) on revaluation of AFS -sukuks Transfer To Qard e hasna refunded to operator - Balance of Participants' Takaful Fund at the beginning of the year Balance of Participant Takaful Fund at the end of the year 65 ANNUAL REPORT 2020 (1,750,000) (12,932,920) 1,395,008,243 17,620,374 1,412,628,617 1,142,457,780 B 1,623,276,021 32,244,730 1,655,520,751 1,412,628,617 (A+B) 5,713,523,677 32,244,730 5,745,768,407 4,693,706,621
76. DAWOOD FAMILY TAKAFUL LIMITED Statutory Funds Aggregate December 31 , December 31, Group Family Individual 2020 2019 Family Takaful Takaful ------------------------------------------------------- (Rupees) -----------------------------------------------------33.3 Revenue account-Shareholders' sub fund Income Takaful operator fee Wakala fee Mudarib share Tharawat fee Bid offer share 576,617,546 45,256,475 53,111,136 54,874,112 28,661,150 3,386,008 - 605,278,696 48,642,483 53,111,136 54,874,112 535,261,589 23,883,290 41,416,627 47,968,679 Total takaful operator fee 729,859,269 32,047,158 761,906,427 648,530,185 Less: Expenditures Commission & acquisition expenses Management expenses Other expenses (519,968,437) (158,793,933) (3,041,901) (25,719,788) (12,154,439) (337,989) (545,688,225) (170,948,372) (3,379,890) (506,895,733) (146,580,724) (3,209,476) Total expenditures (681,804,272) (38,212,216) (720,016,488) (656,685,933) Transferred to shareholders' fund Contribution refunded to shareholders' fund - (1,750,000) (1,750,000) (4,000,000) Qard e hasna refunded from PTF - Group - 1,750,000 1,750,000 4,000,000 Deficit transferred to shareholders' fund 48,054,997 (6,165,058) 41,889,939 (8,155,748) 33.4 Statement of contribution income Gross contributions Regular contributions on individual policies - First year - Second year - Subsequent years Top up contributions Single contribution on individual policies Group policies without cash values Total gross contributions 577,193,000 266,148,895 824,227,554 38,827,062 6,845,000 - 120,971,758 577,193,000 266,148,895 824,227,554 38,827,062 6,845,000 120,971,758 522,110,989 248,830,157 767,917,423 39,644,736 5,120,000 52,440,338 1,713,241,511 120,971,758 1,834,213,269 1,636,063,643 Gross contributions allocated as follows: Participants' Investment Fund (PIF) Regular contributions on individual policies Single contribution on individual policies Top up contributions on individual policies 1,004,916,003 6,845,000 38,827,062 - 1,004,916,003 6,845,000 38,827,062 883,448,110 5,120,000 39,644,736 Total contributions allocated to PIF 1,050,588,065 - 1,050,588,065 928,212,846 Participants' Takaful Fund (PTF) Regular contributions on individual policies Group policies without cash values 662,653,446 - 120,971,758 662,653,446 120,971,758 655,410,459 52,440,338 Total gross contributions allocated to PTF 662,653,446 120,971,758 783,625,204 707,850,797 Regular individual policies Group policies without cash values (38,903,599) - (55,757,490) (38,903,599) (55,757,490) (39,285,101) (23,551,384) Total retakaful ceded (38,903,599) (55,757,490) (94,661,089) (62,836,485) Contribution net of retakaful 623,749,847 65,214,268 688,964,115 645,014,312 (495,766,165) - (22,787,968) (495,766,165) (22,787,968) (463,533,593) (11,867,917) (495,766,165) (22,787,968) (518,554,133) (475,401,510) 127,983,682 42,426,300 170,409,982 169,612,802 Less: Retakaful contributions ceded Contributions allocated to shareholders' sub fund Regular individual policies Group policies without cash values Total contributions allocated to shareholders' sub fund Net risk contributed to PTF ANNUAL REPORT 2020 66
77. DAWOOD FAMILY TAKAFUL LIMITED 33 .5 Statement of financial position Assets Property and equipment Intangible assets Investment properties Aggregate Participants' December 31, December 31, Shareholders' individual Participants' 2020 2019 Fund Fund Group Fund ------------------------------------------ (Rupees) -----------------------------------------200,345,330 2,563,200 - 70,950,000 - 200,345,330 2,563,200 168,959,812 2,655,387 - 70,950,000 70,950,000 Investments 11,923,000 170,000,000 59,533,696 - 1,755,085,367 1,300,486,656 1,269,018,272 660,000,000 35,538,106 4,888,000 59,914,392 2,000,000 - 1,771,896,367 1,530,401,048 1,330,551,968 660,000,000 35,538,106 1,319,807,163 522,124,288 1,410,778,041 1,179,816,323 33,485,220 241,456,696 5,020,128,401 66,802,392 5,328,387,489 4,466,011,035 Takaful / retakaful receivables Receivables & Advances Taxation-payment less provision Deferred tax asset Prepayments Cash, stamps & bank 19,127,185 45,840,560 130,455,683 102,540,929 3,949,011 38,657,300 21,605,745 247,395,091 20,685,220 534,750 512,700,262 52,302,714 7,267,998 17,939,656 93,035,643 300,503,649 151,140,903 102,540,929 4,483,761 569,297,218 75,592,916 105,103,947 110,012,804 102,540,929 2,380,641 409,626,254 Total Assets 784,935,894 5,893,999,469 144,312,760 6,823,248,122 5,513,833,725 750,000,000 750,000,000 750,000,000 348,278 (475,000) (258,441,571) 348,278 (475,000) (258,441,571) 323,327 (2,225,000) (333,977,756) 491,431,707 491,431,707 414,120,571 Equity securities Government securities Debt securities Term deposits Mutual funds Equity and Liabilities Shareholders' Equity Issued, subscribed and paid-up share capital Deficit on revaluation of available for sale investments Contributed to takaful fund Unappropriated deficit-net Total Shareholders' Equity Waqf / Participant Takaful Fund (PTF) Cede money-Waqf Accumulated surplus - Total Participant Takaful Fund (PTF) 385,000 1,623,276,021 100,000 32,244,730 485,000 1,655,520,751 485,000 1,412,628,616 1,623,661,021 32,344,730 1,656,005,751 1,413,113,616 Liabilities Takaful liabilities Ijarah liabilites Contribution received in advance Takaful / retakaful payable Other creditors and accruals 156,355,207 137,148,980 4,166,369,298 50,868,718 38,296,190 14,804,241 48,018,274 697,133 59,998,307 3,254,315 4,214,387,573 156,355,207 51,565,851 98,294,497 155,207,536 3,319,018,443 133,452,337 68,324,267 69,343,787 96,460,704 Total Liabilities 293,504,187 4,270,338,448 111,968,029 4,675,810,664 3,686,599,538 Total equity and liabilities 784,935,894 5,893,999,469 144,312,760 6,823,248,122 5,513,833,725 67 ANNUAL REPORT 2020
78. DAWOOD FAMILY TAKAFUL LIMITED 34 . TAKAFUL RISK MANAGEMENT Takaful is based on the principle of cooperation and separation of participant and shareholders, thus passing the ownership of the Takaful funds to participants. Takaful risk is the risk that inadequate underwriting, claims management, product design and pricing will expose the fund to financial loss and consequent inability to meet its libailities. 34.1 Takaful risk The Company assesses the takaful risk on the basis of the different factors such as non-medical factors, medical factors, financial assessment, occupation assessment, group size, industry class, average age of the group and free cover limit etc. The basic risk the Company faces under takaful contracts is that the actual claims and benefit payments or timing thereof, differ from expectations. This is influenced by frequency of claims, severity of claims, actual claim paid and subsequent development of claims. The most significant risks arise from catastrophic events and epidemic outbreaks. Underwriting, claim and retakaful committees are in place to monitor the core business activities of the Company. This is further supplemented with a clear organisational structure with documented delegated authorities and responsibilities. Management of the Company recognises the critical importance of having efficient and effective risk management systems. They focus on issuing contract to people having moderate risk of mortality and morbidity and having appropriate economic worth and source of income. The PTF’s risk exposure is mitigated by employing a comprehensive framework to identify, assess, manage and monitoring of risk. This framework includes implementation of underwriting strategies which aim to ensure careful selection of takaful contracts and diversification in terms of portfolio, type and amount of the risk. PTF exposure has also been limited by imposing limits to the maximum sum covered in a single takaful contract in each class of business. Further, in order to reduce the risk exposure of the PTF, the Company adopts proactive claim handling procedures and strict claim review policies including active management and prompt pursuing of the claims, regular detailed review of claim handling procedures and frequent investigation of possible false claims. The PTF's class wise risk exposure (for a single life policy) is as follows: December 31, 2020 Class Individual Family Group Family Class Individual Family Group Family Maximum Highest Net Maximum Gross Risk Risk Retakaful Exposure Cover Retention ---------------------------------------- (Rupees) ---------------------------------------40,000,000 54,000,000 39,500,000 53,500,000 500,000 500,000 94,000,000 93,000,000 1,000,000 December 31, 2019 Maximum Maximum Highest Net Gross Risk Retakaful Risk Exposure Cover Retention ---------------------------------------- (Rupees) ---------------------------------------- 40,000,000 54,000,000 39,500,000 53,500,000 500,000 500,000 94,000,000 93,000,000 1,000,000 ANNUAL REPORT 2020 68
79. DAWOOD FAMILY TAKAFUL LIMITED 34 .1.1 Categories of takaful contracts (i) Long term takaful contracts (ii) Short term takaful contracts (i) Long term takaful contracts (a) Sources of uncertainty in the estimation of future benefit payments and contribution receipts. Uncertainty in the estimation of future benefit payments and contribution receipts for long-term contracts arises from the unpredictability of long-term changes in overall levels of mortality and the variability in contract holder behavior. The Company uses appropriate base tables of standard mortality according to the type of contract being written and the territory in which the insured person resides. An investigation into the actual experience of the Company over the few years is carried out and statistical methods are used to adjust the crude mortality rates to produce a best estimate of expected mortality for the future. Where data is sufficient to be statistically credible, the statistics generated by the data are used without reference to an industry table. Where this is not based on standard industry tables adjusted for the Company's overall experience. For contracts that insure survival, an adjustment is made for future mortality improvements based on trends identified in the data and in the continuous mortality reflected in this experience. The Company maintains voluntary termination statistics to investigate the deviation of actual termination experience against assumptions. Statistical methods are used to determine appropriate termination rates. An allowance is then made for any trends in the data to arrive at a best estimate of future termination rates. The table below presents the concentration of risk across five bands of insured benefits per individual life assured. The benefit figures are shown gross and net of the retakaful contracts described below. Individual Family Takaful Amount of Sum Covered December 31, 2020 Policies Number Before After retakaful retakaful Rupees Percentage Rupees Percentage 0 - 200,000 200,000 - 400,000 400,000 - 800,000 800,000 - 1,000,000 More than 1,000,000 9,063 11,450 10,268 3,569 5,279 1,286,985,095 3,450,795,837 5,650,744,278 3,421,768,700 11,107,097,394 5% 14% 23% 14% 45% 1,125,162,972 2,981,102,157 4,990,683,063 2,498,413,669 3,697,250,000 7% 20% 33% 17% 24% Total 39,629 24,917,391,304 100% 15,292,611,861 100% Individual Family Takaful Amount of Sum Covered December 31, 2019 Policies Number Before After retakaful retakaful Rupees Percentage Rupees Percentage 0 - 200,000 200,000 - 400,000 400,000 - 800,000 800,000 - 1,000,000 More than 1,000,000 7,625 4,796 10,454 9,395 3,235 1,106,840,386 3,149,810,227 5,170,244,411 3,088,971,230 10,192,729,429 5% 14% 23% 14% 45% 926,758,167 2,623,820,078 4,422,661,278 2,224,523,216 3,290,000,000 7% 20% 33% 17% 24% Total 35,505 22,708,595,683 100% 13,487,762,739 100% (b) Basis of assumptions used Mortality and morbidity experience: Mortality / Morbidity tables are based on the risk rates being charged by the Retakaful Operators supporting individual lines of business. These rates vary due to the age, sex, occupation and the nature of industry. Persistency rates for long term individual policies: The valuation method does not take into account persistency of individual policies because of the prescribed basis. 69 ANNUAL REPORT 2020
80. DAWOOD FAMILY TAKAFUL LIMITED Expense levels and inflation The administrative charges (Wakala Fee, Tharawat Fee and Mudarib Fee) are fixed for each contract. All expenses are charged to Share Holders’ Fund. Hence, the inflationary risk is borne by the Share Holders’ Fund. Investment returns The participant account values of these plans depend upon actual investment returns earned on these policies. No investment guarantees are offered by the Company. Investment risk is borne by the participants. Tax There is no major impact of taxes on valuation of liabilities, future benefit payments and contribution. Change in assumptions There has been no change in assumptions for the takaful contracts during the year. c) Sensitivity analysis The Company believes that the liabilities under the contracts provided for at the year end are adequate. The sensitivity to changes in claim liabilities is determined separately for each class of business while keeping all assumptions constant. The claims are sensitive to changes in the key assumptions. Results of sensitivity tetsing due to the variance of mortality and morbidity as determined by appointed actuary on PTF will be as follows: Long-Term Individual Unit Linked Takaful Plans (Participants’ Liability in the Individual Family Takaful PTF) Change in Change in variable liability liability December 31, December 31, 2020 2019 --(Percentage)-Variables Change in ---------------- (Rupees) ----------------- + 5% 5,577,163 4,797,672 + 10% 11,135,886 9,578,880 Worsening of mortality and / or morbidity rates for risk policies N/A Improvement of mortality rates for annuities Worsening of persistency rates for long-term individual policies Increase in expense levels and inflation N/A N/A No assumption of persistency in estimating Policy holder's liability No assumption of future expenses in estimating Policy holder's liability --(Percentage)-Decrease in investment returns Change in Change in liability liability December 31, December 31, 2020 2019 ---------------- (Rupees) ----------------- - 1% 124,277,022 116,057,750 - 2% 271,084,606 253,429,685 The process for estimation of IBNR and its provisioning mechanism: Due provision was made for claims Incurred But Not Reported (IBNR) by analysing claims incurred after the valuation date till the reporting date. The claims actually intimated in January and February 2021 which pertains to calendar year 2020 were taken as IBNR reserve after adjusting the amount for unreported claims pertaining to 2020. Provision for claims not reported upto the reporting date was based on standard actuarial methods. ANNUAL REPORT 2020 70
81. DAWOOD FAMILY TAKAFUL LIMITED The assumptions are used only to value risk related components of the Unit Linked Individual Family Takaful Plans . These assumptions are fixed according to the valuation regulations. Mortality assumption: SLIC (2001-2005) Table Discount rate: 3.75% per annum Expenses and Persistency: No explicit assumptions ii) Short term takaful contracts a) Frequency and severity of claims These contracts mostly pay a pre-determined amount on death and disability without any maturity or surrender values. These contracts are primarily issued under group takaful scheme. The risk is affected by several factors e.g. age, occupation, benefit structure and life style. The Company attempts to manage this risk through its underwriting, claims handling and retakaful policy. The number of groups and number of lives covered under group takaful scheme are enough to treat the risk as diversified, yet it is considered as an other measure to manage risk. The following tables disclose the concentration of risks of the short-term contracts by the industry sector in which the group participant operates and by the maximum covered loss limit included in the terms of the contract. Schedule of concentration of risk - short-term contracts Industry Chemical & Petroleum Construction Financial And Professional Manufacturing Pharmaceutical & Food Security Guards Textile Trade & Services Miscellaneous Industries Rupees 169,425,000 5,800,000 4,565,865,945 678,100,000 594,000,000 40,800,000 1,003,200,000 21,218,713,049 86,000,000 0.60% 0.02% 16.10% 2.39% 2.09% 0.14% 3.54% 74.81% 0.30% 84,712,500 2,900,000 1,533,152,835 335,650,000 297,000,000 20,400,000 501,600,000 8,448,197,604 43,000,000 0.75% 0.03% 13.61% 2.98% 2.64% 0.18% 4.45% 74.98% 0.38% 28,361,903,994 100% 11,266,612,939 100% Industry Rupees Chemical & Petroleum Construction Financial and Professional Manufacturing Pharmaceutical & Food Printing Security Guards Textile Trade & Services 71 ANNUAL REPORT 2020 December 31, 2020 Before After retakaful retakaful Percentage Rupees Percentage December 31, 2019 Before retakaful Percentage Rupees After retakaful Percentage 4,200,000 5,800,000 7,406,696,562 1,054,800,000 1,443,500,000 62,500,000 2,999,698,000 5,676,869,853 0.02% 0.03% 39.71% 5.65% 7.74% 0.34% 16.08% 30.43% 2,100,000 2,900,000 1,788,033,910 524,000,000 721,750,000 31,250,000 1,499,849,000 1,823,365,535 0.03% 0.05% 27.97% 8.20% 11.29% 0.49% 23.46% 28.52% 18,654,064,415 100.00% 6,393,248,445 100.00%
82. DAWOOD FAMILY TAKAFUL LIMITED b ) Sources of uncertainty in the estimation of future claim payments Other than for the testing of the adequacy of the liability representing the unexpired risk at the end of the reporting period, there is no need to estimate mortality rates for future years because these contracts have short duration. However, for incurred disability income claims, it is necessary to estimate the rates of recovery from disability for future years. Standard recovery tables produced by reinsurers are used as well as the actual experience of the Company. The influence of economic circumstances on the actual recovery rate for individual contracts is the key source of uncertainty for these estimates. c) Basis of assumptions used The assumptions used for these contracts are the same as for long-term contracts. Mortality An appropriate base table of standard mortality is chosen depending on the type of contract. An investigation into Company's experience is conducted from time to time. Where data is sufficient to be statistically credible, the statistics generated by the data are used without reference to an industry table. Morbidity The rate of recovery from disability is derived from industry experience studies, adjusted where appropriate for the Company’s own experience. d) Change in assumptions The Company did not change its assumptions during the year. Sensitivities The claims are sensitive to changes in the key assumptions. Since term period of policies is usually less than a year, therefore, the impact of variation in assumptions of mortality and morbidity would not be material. Therefore, no sensitivity analysis for group policies has been presented. 34.1.2 Break-up of total sum covered and risk ceded Gross sum covered Retakaful Net Decem ber 31, December 31, Decem ber 31, December 31, Decem ber 31, December 31, 2020 2019 2020 2019 2020 2019 ----------------------------------------------------------- (Rupees) ---------------------------------------------------------Group Family Takaful 28,361,903,994 18,654,064,415 17,095,291,055 12,260,815,971 11,266,612,939 6,393,248,445 Individual Family Takaful 24,917,391,304 22,708,595,683 9,624,779,442 9,220,832,943 15,292,611,861 13,487,762,740 53,279,295,298 41,362,660,098 26,720,070,497 21,481,648,914 26,559,224,800 19,881,011,185 ANNUAL REPORT 2020 72
83. DAWOOD FAMILY TAKAFUL LIMITED 35 . ASSETS LIABILITIES MATCHING December 31, 2020 Unit linked contracts Group contracts Share Holders Other financial Takaful Investment Takaful Investment assets/ Other assets/ liabilities Total contracts contracts contracts contracts liabilities ------------------------------------------------------------------------ (Rupees) ------------------------------------------------------------------------Assets Investments Equity securities 1,771,896,367 239,805,479 1,515,279,888 4,888,000 Debt securities 1,330,551,968 446,622,515 822,395,757 2,000,000 Government securities 1,530,401,048 715,845,106 584,641,550 59,914,392 660,000,000 35,538,106 35,000,000 8,884,550 625,000,000 26,653,556 93,035,643 21,605,744 Cash, stamps & bank 569,297,218 246,892,827 265,807,436 17,939,656 Receivables & Advances 300,503,649 26,550,973 220,844,118 7,267,998 Taxation-payment less provision 151,140,903 5,646,877 15,038,343 Deferred tax 102,540,929 Term deposits Mutual Funds Takaful/ retakaful receivables Prepayments Property and equipment Intangible assets 4,483,761 200,345,330 2,563,200 - - 52,302,714 - - - - - - - - - 70,950,000 70,950,000 6,823,248,122 1,818,338,820 4,075,660,648 144,312,760 Takaful liabilities 124,139,917 40,806,977 35,314,666 48,018,274 Ijarah liabilities 156,355,207 Investment property - 11,923,000 - - 59,533,696 - - 170,000,000 - - - - - 534,750 - - - 19,127,185 - - 38,657,300 - - 45,840,560 - - 130,455,683 - 102,540,929 - 200,345,330 - 2,563,200 3,949,011 - 345,081,741 439,854,153 Less: Creditors and accruals - Contribution received in advance 51,565,851 50,868,718 Takaful/ retakaful payable 98,294,497 33,367,300 155,207,536 Other creditors and accruals Net - - - - - - 156,355,207 - 697,133 - - 4,928,890 59,998,307 - - - 4,251,710 10,552,531 3,254,315 - 132,282,702 4,866,278 585,563,008 129,294,705 50,796,087 111,968,029 - 288,637,909 4,866,278 6,237,685,114 1,689,044,115 4,024,864,561 32,344,731 - 56,443,831 434,987,875 - December 31, 2019 Unit linked contracts Group contracts Share Holders Takaful Investment Takaful Investment Other financial Total assets Other assets contracts contracts contracts contracts ------------------------------------------------------------------------ (Rupees) ------------------------------------------------------------------------Assets Investments Equity securities 1,319,807,163 114,699,993 1,196,659,518 - 8,447,652 - Debt securities 1,410,778,041 218,454,526 1,112,600,483 2,000,000 - 77,723,032 - 522,124,288 361,893,889 135,369,439 24,860,960 - 1,179,816,323 280,229,037 804,587,286 - - Mutual funds 33,485,220 8,371,305 25,113,915 - - Takaful / retakaful receivables 75,592,916 37,673,459 Cash, stamps & bank 409,626,254 261,779,378 100,053,035 7,350,085 Receivables & Advances 105,103,947 30,047,089 44,565,941 1,698,703 Taxation-payment less provision 110,012,804 5,646,876 15,038,339 Deferred tax assets 102,540,929 Government securities Term deposits Prepayments Property and equipment Intangible assets Investment property 2,380,641 168,959,812 2,655,387 - - 18,725,671 95,000,000 - - - 19,193,786 - - 40,443,756 - - 28,792,214 - - - - 89,327,589 - - - - 102,540,929 - - - - - 168,959,812 - - - - - 2,655,387 - - - - 84,750 70,950,000 70,950,000 5,513,833,725 1,389,830,303 37,940,439 26,031,085 3,433,987,956 54,635,419 - 269,600,440 2,295,891 365,779,608 Less: Creditors and accruals Takaful liabilities Ijarah liabilites 133,452,337 - - 11,909,354 - - - - - - - Contribution received in advance 68,324,267 68,324,267 Takaful / retakaful payable 69,343,787 33,521,246 5,500,851 30,321,690 - Other creditors and accruals 96,460,704 389,243 5,272,274 2,992,047 - 405,521,534 128,265,841 10,773,125 45,223,091 5,108,312,191 1,261,564,462 3,423,214,831 9,412,328 Net 73 ANNUAL REPORT 2020 133,452,337 - - 81,033,269 6,773,871 - 214,485,606 6,773,871 - 55,114,834 359,005,737
84. DAWOOD FAMILY TAKAFUL LIMITED 36 . FINANCIAL RISK MANAGEMENT The Company's activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (including currency risk, profit rate risk and price risk). The Company's overall risk management policy focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company's financial performance. In particular, the key financial risk is that in the long-term its investment proceeds are not sufficient to fund the obligations arising from its takaful and investment contracts. 36.1 Risk management framework The Board of Directors has overall responsibility for establishment and oversight of the Company's risk management framework. The Board is responsible for monitoring the Company’s risk management committee and developing risk management policies. The Company’s risk management committee has been 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. Risk management policies and systems are also reviewed regularly to reflect and anayse the changes in market conditions and Company’s activities. The Company also through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. The Audit Committee oversees compliance by risk management committee with the Company’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Audit Committee is assisted in its oversight role by an outsourced Internal Audit function. Internal Audit undertakes both regular and adhoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee. 36.2 Credit risk Credit risk is the risk, which arises with the possibility that one party to a financial instrument will fail to discharge its obligation and cause the other party to incur a financial loss. The Company attempts to control credit risk by monitoring credit exposures by undertaking transactions with a large number of counterparties in various industries and by continually assessing the credit worthiness of counterparties. Exposure to credit risk The Company structures the levels of credit risk it accepts by placing limits on its exposure to a single counterparty, or groups of counterparties, and to geographical and industry segments. Such risks are subject to an annual or more frequent review. Retakaful is used to manage takaful risk. This does not, however, discharge the Company’s liability as primary takaful operator. If a retakaful operator fails to pay a claim for any reason, the Company remains liable for the payment to the participant. The creditworthiness of retakaful operators is considered on an annual basis by reviewing their financial strength prior to finalization of any contract. Exposures to individual participants and groups of participants are collected within the ongoing monitoring of the controls associated with regulatory solvency. Where there exists significant exposure to individual participants, or homogenous groups of participants, a financial analysis equivalent to that conducted for retakaful operators is carried out by the Company's risk department. The carrying amount of financial assets representing the maximum credit exposure are specified below: Financial assets Cash, stamps & bank Investments Takaful / retakaful receivables Receivables, loans and deposits December 31, December 31, 2020 2019 ---------- (Rupees) ---------569,297,218 5,328,387,489 93,035,643 50,612,570 409,626,254 4,466,011,035 75,592,916 27,222,432 6,041,332,920 4,978,452,637 ANNUAL REPORT 2020 74
85. DAWOOD FAMILY TAKAFUL LIMITED The credit quality of Company 's bank balances and term deposits can be assessed with reference to external credit ratings as follows: December 31, December 31, December 31, December 31, 2020 2019 2020 2019 Rating Rating Un-Rated A1+ A1 A2 A1+ A1 A2 ---------- (Rupees) ---------25,000,000 590,861,909 607,871,993 1,988,978 850,269,840 737,462,129 74,526 1,225,722,880 1,587,806,495 * Rating of banks performed by VIS Credit Rating Co. Ltd. and PACRA. Concentration of credit risk Concentration of credit risk occurs when a number of counterparties have a similar type of business activities. As a result, any change in economic, political or other conditions would affect their ability to meet contractual obligations in similar manner. Sector-wise analysis of contributions due but unpaid at the reporting date is as follows: December 31, 2020 Rupees Percentage Financial and professional Textile Trade and services Chemical & Petroleum Pharmaceutical Security Guards December 31, 2019 Rupees Percentage 129,223 35,331 241,355 105,748 - 25% 7% 47% 21% 0% 0% 179,539 1,034,905 86,081 145,621 20,911 12.24% 70.54% 5.87% 9.93% 1.43% 511,657 100% 1,467,057 100% The management monitors exposure to credit risk through regular review of credit exposure, assessing credit worthiness of counter parties and prudent estimates of provision for doubtful debts. Amount due from retakaful operators in respect of retakaful recoveries against outstanding claims The Company enters into retakaful arrangements with retakaful operators having sound credit ratings accorded by reputed credit rating agencies. The Company is required to comply with the requirements of Circular no. 32/2009 dated October 27, 2009 issued by SECP which requires a takaful company to place at least 80% of their outward treaty cessions with retakaful companies rated 'A' or above by Standard & Poors with the balance being placed with entities rated at least 'BBB' by reputable rating agency. An analysis of all retakaful assets relating to outward treaty cessions recognised by the rating of the entity from which it is due is as under: The credit quality of amount due from retakaful operators can be assessed with reference to external credit ratings as follows: December 31, 2020 Retakaful recoveries Amounts due against Prepaid from retakaful outstanding retakaful operators claims contribution -------------------- (Rupees) ---------------------Rating A or above 73,396,801 58,767,004 - December 31, 2019 Retakaful Amounts due from recoveries against Prepaid retakaful outstanding claim contribution retakaful operators -------------------- (Rupees) ---------------------Rating A or above 75 ANNUAL REPORT 2020 85,384,661 16,810,627 -
86. DAWOOD FAMILY TAKAFUL LIMITED 36 .3 Liquidity risk Liquidity risk is the risk that the Company is unable to meet its obligations when they fall due as a result of participants benefit payments, cash requirements from contractual commitments, or other cash outflows. Such outflows would deplete available cash resources for operational, trading and investments activities. In extreme circumstances, lack of liquidity could result in an inability to fulfil participant commitments. The risk that the Company will be unable to do so is inherent in all takaful operations and can be affected by a range of institution-specific and market-wide events including, but not limited to, credit events, systemic shocks and natural disasters. The Company's liquidity management process includes day-to-day funding, managed by monitoring future cash flows to ensure that requirements can be met, maintaining a portfolio of highly marketable assets that can easily be liquidated as protection against any unforeseen interruption to cash flow and monitoring the liquidity ratios against internal and regulatory requirements. Monitoring and reporting take the form of cash flow measurement and projections for the next day, week and month respectively, as these are key periods for liquidity management. The starting point for those projections is an analysis of the contractual maturity of the financial liabilities and the expected collection date of the financial assets. The table below analyses the Company's financial assets liabilities into relevant maturity groupings based on the remaining period at the reporting date to the maturity date. December 31, 2020 Carrying Contractual Less than one One year to Two years to Three years amount cash flows year two years three years and above ----------------------------------------------------------- (Rupees) --------------------------------------------------------------Financial assets Cash and bank deposits Investments Takaful / retakaful receivables Receivable & Advances 569,297,218 5,328,387,489 93,035,643 50,612,570 6,041,332,920 569,297,218 5,328,387,489 93,035,643 50,612,570 6,041,332,920 569,297,218 2,689,412,815 93,035,643 50,612,570 3,402,358,246 295,302,397 295,302,397 156,355,207 124,139,917 51,565,851 98,294,497 155,207,536 156,355,207 124,139,917 51,565,851 98,294,497 155,207,536 48,879,320 23,183,601 51,565,851 98,294,497 155,207,537 107,475,887 14,756,838 - 190,461,034 190,461,034 2,153,211,243 2,153,211,243 Financial liabilities Ijarah liabilities Takaful liabilities Contribution received in advance Takaful / retakaful payable Other creditors and accruals 585,563,008 585,563,008 377,130,806 122,232,725 5,455,769,911 5,455,769,912 3,025,227,440 173,069,672 - - 190,461,034 2,153,211,243 December 31, 2019 Contractual cash Less than one One year to two Two years to Three years and Carrying amount year years three years above flows ----------------------------------------------------------- (Rupees) --------------------------------------------------------------Financial assets Cash, stamps & bank Investments 409,626,254 4,466,011,035 409,626,254 4,466,011,035 409,626,254 2,965,355,798 251,791,449 319,934,015 928,929,774 Takaful / retakaful receivables Receivable & Advances 75,592,916 27,222,432 4,978,452,637 75,592,916 27,222,432 4,978,452,637 75,592,916 27,222,432 3,477,797,400 251,791,449 319,934,015 928,929,774 133,452,337 37,940,439 68,324,267 69,343,787 96,460,704 133,452,337 37,940,439 68,324,267 69,343,787 96,460,704 37,108,974 23,183,601 68,324,267 69,343,787 96,460,704 96,343,363 14,756,838 - - - - - 405,521,534 405,521,534 294,421,333 111,100,201 - 4,572,931,103 4,572,931,103 3,183,376,067 140,691,248 Financial liabilities Ijarah liabilties Takaful liabilities Contribution received in advance Takaful / retakaful payable Other creditors and accruals 319,934,015 928,929,774 It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts. ANNUAL REPORT 2020 76
87. DAWOOD FAMILY TAKAFUL LIMITED 36 .4 Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, profit rates and equity prices will affect the Company's income or value of its financial instruments. The objective of market risk management is to manage and control market risk exposures with acceptable parameters, while optimising the return. The Company is exposed to currency risk, profit rate risk and other price risk. Currency risk Currency risk is the risk that the value of a financial asset or liability will fluctuate due to the changes in foreign currency rates. Foreign exchange risk arises mainly where receivables and payables exist due to transactions in foreign currencies. As the Company has no material assets or liabilities in foreign currencies at the year end, the Company is not materially exposed to foreign exchange risk. Profit rate risk Profit rate risk represents the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market profit rates. At the reporting date the profit rate profile of the Company's profit-bearing financial instruments was: Carrying amount Effective profit rate in % December 31, December 31, December 31, December 31, 2020 2019 2020 2019 6.7 - 8.42 6.60 - 10.50 4 - 6.25 7.08 to 1 year Kibor + 3 3 - 10.25 5.24 to 1 year Kibor + 3 ---------- (Rupees) ---------Variable rate instruments Financial assets Term deposits PLS savings accounts Sukuks 660,000,000 855,000,000 565,255,101 2,860,953,016 405,363,142 1,932,902,329 4,086,208,117 3,193,265,471 Cash flow sensitivity analysis for variable rate instruments Shareholders' fund The Company is exposed to cash flow profit rate risk in respect of its deposits with banks and investment in sukuks. In case of 100 basis points (bp) increase / decrease in profit rates at year end, assuming that all other variables remain constant, the net income and equity would have been higher / lower by Rs 2.3 million (2019: Rs 2.11 million). Participant takaful fund The Company is exposed to cash flow profit rate risk in respect of its deposits with banks. In case 100 basis points (bp) increase / decrease in profit rates at year end, assuming that all other variables remain constant, the net income and balance of Waqf would have been higher / lower by Rs.15.05 million (2019: Rs. 11.54 million). Fair value sensitivity analysis for fixed rate instruments The Company does not have any fixed rate financial assets and liabilities at fair value through profit or loss, therefore a change in profit rates at the reporting date would not affect profit or loss. The sensitivity analysis prepared is not necessarily indicative of the effects on loss for the year and assets / liabilities of the Company. 77 ANNUAL REPORT 2020
88. ANNUAL REPORT 2020 418 ,658,857 - Total Profit risk sensitivity gap - Other creditors and accruals 418,658,857 405,363,142 13,295,715 - 3 to 10.50 5.24 to 1 year Kibor + 3% 25,506,572 49,365,968 - - 49,365,968 49,365,968 1,538,489,244 - - 1,538,489,244 1,538,489,244 December 31, 2019 Profit bearing 144,556,502 - - 144,556,502 144,556,502 1,100,485,430 - - 1,100,485,430 1,100,485,430 4,086,208,117 - - 4,086,208,117 565,255,101 3,520,953,016 1,369,561,794 585,563,009 1,216,742,201 - - - 1,216,742,201 1,216,742,201 107,849,012 274,176,486 - - - 274,176,486 274,176,486 - - 107,849,012 107,849,012 982,834,457 - - - 982,834,457 982,834,457 517,820,784 - - - 517,820,784 517,820,784 3,518,081,797 - - - 3,518,081,797 405,363,142 3,112,718,655 1,107,547,676 405,521,534 96,460,704 133,452,337 37,940,439 68,324,267 69,343,787 75,592,916 79,920,799 1,513,069,210 4,263,112 1,353,292,383 4,625,629,473 405,521,534 96,460,704 133,452,337 37,940,439 68,324,267 69,343,787 75,592,916 79,920,799 5,031,151,007 409,626,254 4,466,011,038 Total 5,455,769,912 585,563,009 156,355,207 124,139,917 51,565,851 98,294,497 155,207,537 93,035,643 50,612,570 6,041,332,920 93,035,643 50,612,570 1,955,124,803 156,355,207 124,139,917 51,565,851 98,294,497 155,207,537 569,297,218 5,328,387,489 Total 4,042,117 1,807,434,473 Over three Over six Over one month months to six months to one Over one year Upto one month to three months months year to five years Over five years Sub total Non profit bearing ---------------------------------------------------------------------------------- (Rupees) ---------------------------------------------------------------------------------- 1,227,804,401 Ijarah liabilities Takaful liabilities Contribution received in advance Takaful / retakaful payable Financial liabilities Takaful / retakaful receivables Receivables & Advances Total Cash and bank deposits Investments Financial assets Profit risk sensitivity gap - - Total 25,506,572 25,506,572 - 1,227,804,401 565,255,101 662,549,300 December 31, 2020 Profit bearing Over one Over three Over six month to three months to six months to one Over one year Over five Non profit months months year to five years years Sub total bearing ---------------------------------------------------------------------------------- (Rupees) ---------------------------------------------------------------------------------- - Effective rate % per annum 4 to 6.25 7.08 to 1 year Kibor + 3% Upto one month Ijarah liabilities Takaful liabilities Contribution received in advance Takaful / retakaful payable Other creditors and accruals Financial liabilities Takaful / retakaful receivables Receivables & Advances Total Cash and bank deposits Investments Financial assets Effective rate % per annum Mismatch of profit rate sensitive assets and liabilities / yield / profit rate risk DAWOOD FAMILY TAKAFUL LIMITED 78
89. DAWOOD FAMILY TAKAFUL LIMITED Other price risk Other price risk is the risk of changes in the fair value of securities as the result of changes in the levels of net asset value of units and market value of shares and mutual fund units listed on Pakistan Stock Exchange (PSX) and MUFAP, held by the Company. The equity price risk exposure arises from the investment in equity securities. This arises from investments held by the Company for which prices in the future are uncertain. The table below summarizes the sensitivity of the market value of listed securities held by the Company as at December 31, 2020. The analysis is based on the assumption that market value of securities held by the Company increases / decreases by 5% (2019: 5%) with all other variables held constant. This represents management's best estimate of a reasonable possible shift in the net asset value of units and market prices of mutual funds, shares and sukuks held by the Company. The impact below arises from the reasonable possible change in the fair value of securities. December 31, December 31, 2020 2019 ---------- (Rupees) ---------Effect on income statement, assets of the Company of an increase / decrease Investments 233,419,374 164,309,736 The sensitivity analysis presented is based upon the portfolio position as at December 31, 2020. Accordingly, the sensitivity analysis prepared as at December 31 is not necessarily indicative of the effect on the Company's assets of future movements in the net asset value of units held by the Company. December 31, December 31, 2020 2019 ---------- (Rupees) ---------Investments 36.5 4,668,387,489 3,286,194,712 Fair value of financial instruments IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements and disclosures about fair value measurement where such measurements are required as permitted by other IFRSs. It defines fair value as 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 (i.e. an exit price). The fair values of all the financial instruments are estimated to be not significantly different from their carrying values except for quoted investments, fair value of which have been stated in note 9.1.1. The Company’s accounting policy on fair value measurements of its investments is discussed in note 5.9 to these financial statements. The Company measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements: Level 1: Fair value measurements using quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Fair value measurements using inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3: Fair value measurements using inputs for the asset or liability that are not based on observable market data (i.e. unobservable inputs). 79 ANNUAL REPORT 2020
90. DAWOOD FAMILY TAKAFUL LIMITED The table below analysis 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 categorised : December 31, 2020 Financial instruments Level 1 Level 2 Level 3 Total ------------------------------- (Rupees) ---------------------------------1,771,896,367 Listed shariah compliant shares - Government securities 1,530,401,048 1,330,551,968 Debt securities - 35,538,106 Sharia Compliant Mutual Fund 3,137,986,441 1,530,401,048 - 1,771,896,367 - 1,330,551,968 - 4,668,387,489 1,530,401,048 35,538,106 December 31, 2019 Level 1 Level 2 Level 3 Total ------------------------------- (Rupees) ---------------------------------Listed sharia compliant shares 1,319,807,163 Government securities - Debt securities Sharia Compliant Mutual Fund 1,410,778,041 - 33,485,220 - 2,764,070,424 36.6 522,124,288 522,124,288 - 1,319,807,163 - 1,410,778,041 - 3,286,194,712 522,124,288 33,485,220 Financial instruments by category December 31, 2020 Cash and cash equivalents Loans and receivables Assets at fair value through profit or loss Available for sale investments Total Held to maturity ----------------------------------------------------- (Rupees) --------------------------------------------------------Financial Assets 569,297,218 660,000,000 1,229,297,218 Cash and bank deposits Investments Takaful / retakaful receivables Receivables and advances - 2,403,901,302 - 492,589,820 - 569,297,218 5,328,387,489 73,908,458 297,072,268 1,771,896,367 - 370,980,726 1,771,896,367 2,403,901,302 492,589,820 6,268,665,433 73,908,458 297,072,268 Rupees Financial Liabilities Ijarah liabilities Outstanding claims 156,355,207 88,825,251 Amount due to retakaful companies 79,167,298 Contributions received in advance 51,565,851 Other creditors and accruals 152,732,782 528,646,389 ANNUAL REPORT 2020 80
91. DAWOOD FAMILY TAKAFUL LIMITED December 31 , 2019 Assets at fair Available for Loans and Cash and cash Held to maturity value through profit sale receivables equivalents or loss investments --------------------------------------------------- (Rupees) ------------------------------------------------------ Total Financial Assets Cash and bank deposits Investments Takaful / retakaful receivables Receivables and advances 409,626,254 1,179,816,323 1,589,442,577 56,399,130 1,319,807,163 101,672,567 - 158,071,697 1,319,807,163 1,427,913,743 1,427,913,743 504,988,586 504,988,586 409,626,254 4,432,525,815 56,399,130 101,672,567 3,410,781,189 Financial Liabilities Rupees Ijarah liabilities 133,452,337 Outstanding claims Amount due to retakaful 26,031,085 Contributions received in advance 68,324,267 Other creditors and accruals 50,150,000 96,460,704 374,418,393 36.7 Operational risk Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the processes, technology and infrastructure supporting the Company’s operations either internally within the Company or externally at the Company’s service providers, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of investment management behavior. Operational risks arise from all of the Company’s activities. The Company’s objective is to manage operational risk so as to balance limiting of financial losses and damage to its reputation with achieving its objective of generating returns for stakeholders. The primary responsibility for the development and implementation of controls over operational risk rests with the board of directors. This responsibility encompasses the controls in the following areas: - requirements for appropriate segregation of duties between various functions, roles and responsibilities; - requirements for the reconciliation and monitoring of transactions; - compliance with regulatory and other legal requirements; - documentation of controls and procedures; - requirements for the periodic assessment of operational risks faced, and the adequacy of controls and procedures to address the risks identified; - ethical and business standards; and - risk mitigation, including insurance where this is effective. Senior management ensures that the Company's staff have adequate training and experience and fosters effective communication related to operational risk management. Capital risk management The Company's objective when managing capital is to safeguard the Company's ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders; and to maintain a strong capital base to support the sustained development of its businesses. The Company manages its capital structure by monitoring return on net assets and makes adjustments to it in the light of changes in economic conditions. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividend paid to shareholders or issue new shares. 81 ANNUAL REPORT 2020
92. DAWOOD FAMILY TAKAFUL LIMITED In accordance with Insurance Rules , 2017 Rules 11, minimum paid-up capital requirement to be complied with by Insurance Companies / Takaful operators at the end of each year are as follows: December 31, December 31, December 31, December 31, December 31, 2020 2019 2018 2017 2016 --------------------------------------------- (Rupees) ----------------------------------------------Minimum paid-up capital 700,000,000 700,000,000 700,000,000 700,000,000 600,000,000 The Company currently meets the externally imposed capital limit. 37. NUMBER OF EMPLOYEES December 31, December 31, 2020 2019 Branches Headoffice Branches Head office Total Total --------------------------------------------------- (Number) ------------------------------------------------------- 38. Total 84 Average 85 637 541 721 626 85 445 530 82 398 480 GENERAL Figures have been rounded off to the nearest rupee. 39. CORRESPONDING FIGURES Corresponding figures have been re-arranged and re-classified for the purpose of better presentation, the effect of which is not material. 40. DATE OF AUTHORISATION FOR ISSUE March 29, 2021 by the Board of Directors of the Company. These financial statements were authorized for issue on ______________________ _______________ Chairman ___________________ Chief Execu�ve Officer ________________ Director ________________ Director ANNUAL REPORT 2020 82
93. DAWOOD FAMILY TAKAFUL LIMITED Statement of Directors As per the requirement of Section 46 (6) and Section 52(2) of the Insurance Ordinance, 2000 Section 46 (6) a) In our opinion the annual statutory accounts of Dawood Family Takaful Limited, set out in the forms attached to the statement have been drawn up in accordance with the ordinance and any rules made there under; b) Dawood Family Takaful Limited has at all times in the year complied with the provisions of the ordinance and the rules made there under relating to paid-up capital, solvency and reinsurance arrangements; and c) As at December 31, 2020 Dawood Family Takaful Limited continues to be in compliance with provisions of the ordinance and the rules made there under relating to paid-up capital, solvency and reinsurance arrangements. Section 52 (2) (c) d) In our opinion, each statutory fund of Dawood Family Takaful Limited complies with the Solvency requirements of the Insurance Ordinance, 2000 and the Insurance Rules, 2017. _______________ Chairman 83 ANNUAL REPORT 2020 ___________________ Chief Execu�ve Officer ________________ Director ________________ Director
94. DAWOOD FAMILY TAKAFUL LIMITED ANNUAL REPORT 2020 84
95. DAWOOD FAMILY TAKAFUL LIMITED 85 ANNUAL REPORT 2020
96. DAWOOD FAMILY TAKAFUL LIMITED ANNUAL REPORT 2020 86
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116. DAWOOD FAMILY TAKAFUL LIMITED PROXY FORM Folio /CDC Account No. I/We _______________________________________________________________________ of ___________________________________________________________ being member(s) of Dawood Family Takaful Limited (“the Company”) holding ______________________ ordinary shares, hereby appoint __________________________________________________________ of ___________________________________________________________________ or failing him/her _______________________________________________________________________ of ___________________________________________________________________________ member of the Company, as my/our proxy to vote for me/us, and on my/our behalf at the 13th Annual General Meeting of the Company to be held on Friday, April 30, 2021 at 09:00 a.m. at 17th Floor, Saima Trade Towers - A, I.I. Chundrigar Road, Karachi or at any adjournment thereof. Witnesses: 1) Signature: ___________________________ Name: ________________________________ CNIC No: _____________________________ Address: ______________________________ (Member’s signature on Rs.5/- Revenue Stamp) ______________________________________ 2) Signature: ___________________________ Name: ________________________________ CNIC No: _____________________________ Address: ______________________________ ______________________________________ ANNUAL REPORT 2020
117. DAWOOD FAMILY TAKAFUL LIMITED ANNUAL REPORT 2020
118. DAWOOD FAMILY TAKAFUL Branch Network Across Pakistan (Over 58 Branches in 50 Cities) SOUTH REGION KPK REGION Gulberg Branch-Lahore Islamabad Branch Bahadurabad Branch-Khi Peshawar Branch DHA Branch-Lahore Rawalpindi Branch Falcon Branch-Khi Peshawar City Branch Faisalabad Branch Kotli Branch Gulshan Branch-Kgi Swabi Branch Sahiwal Branch D.I. Khan Branch Shahrah-e-Faisal Branch-Khi Timergara Branch Multan Branch Chakwal Branch Stadium Road Branch Chitral Branch Haroonabad Branch Haripur Branch Hyderabad Banch Mardan Branch Bahawalpur Branch Muzaffarabad AJK Branch Nawab Shah Branch Swat Branch Rahim yar Khan Branch Abbotabad Branch MirpurKhas Branch Khawaza Khela Branch Liaquatpur Branch Gujrat Branch Tando Adam Branch Gilgit Branch Kasur Branch Kotla Arab Ali Khan Branch Shahdadpur Branch Skardu Branch Muzaffargarh Branch Mandibahauddin Branch Sukkur Branch Chilas Branch Jhang Branch Phalia Branch Khairpur Branch Farooqabad Branch Sargodha Branch Larkana Branch Sheikhupura Branch Sialkot Branch Okara Branch Bhalwal Branch Uch Sharif Branch Malakwal Branch DG Khan Branch Gujranwala Branch 17 CENTRAL REGION 17 NORTH REGION 13 SOUTH REGION 11 KPK REGION Printed by Creative Media 03482224373 CENTRAL REGION NORTH REGION