Al Wathba National Insurance Co: Interim Financial Information - 31 March 2020

Transcription

1. Al Wathba National Insurance Company P .J.S.C. Condensed interim financial information 31 March 2020 Principal business address: Al Wathba National Insurance Company P.J.S.C. P.O. Box: 45154 Abu Dhabi UAE
2. Al Wathba National Insurance Company P .J.S.C. Condensed interim financial information Contents Page Directors’ report 1 Independent auditors’ report on review of condensed interim financial information 3 Condensed interim statement of financial position 5 Condensed interim statement of profit or loss 6 Condensed interim statement of profit or loss and other comprehensive income 7 Condensed interim statement of changes in shareholders’ equity 8 Condensed interim statement of cash flows 9 Notes to the condensed interim financial information 10
5. KPMG Lower Gulf Limited Level 19 , Nation Tower 2 Abu Dhabi Corniche, UAE Tel. +971 (2) 401 4800, Fax +971 (2) 632 7612 Independent Auditors’ Report To the Shareholders of Al Wathba National Insurance Company P.J.S.C. Report on Review of Condensed Interim Financial Information Introduction We have reviewed the accompanying 31 March 2020 condensed interim financial information of Al Wathba National Insurance Company P.J.S.C. (the “Company”), which comprises: • the condensed interim statement of financial position as at 31 March 2020; • the condensed interim statement of profit or loss for the three-month period ended 31 March 2020; • the condensed interim statement of profit or loss and other comprehensive income for the three-month period ended 31 March 2020; • the condensed interim statement of changes in shareholders’ equity for the threemonth period ended 31 March 2020; • the condensed interim statement of cash flows for the three-month period ended 31 March 2020; and • notes to the condensed interim financial information. Management is responsible for the preparation and presentation of this condensed interim financial information in accordance with IAS 34, ‘Interim Financial Reporting’. Our responsibility is to express a conclusion on this condensed interim financial information based on our review. Scope of Review We conducted our review in accordance with the International Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”. A review of condensed interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. 3 KPMG Lower Gulf Limited is a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG Lower Gulf Limited is registered and licensed as a foreign branch under the laws of the United Arab Emirates.
6. Al Wathba National Insurance Company (PJSCJ Independent Auditors' Report on Review of Condensed Interim Financial Information 31 March 2020 Conclusion Based on our review, nothing has come to our attention that causes us to believe that the accompanying 31 March 2020 condensed interim financial information is not prepared, in all material respects, in accordance with IAS 34, 'Interim Financial Reporting'. KPMG Lower Gulf Limited aif Fayez Shawer Registration No: 1131 Abu Dhabi, United Arab Emirates Date: 30 June 2020 4 KPMG Lower Gulf Limited is a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG lnternatlonal"). a Swiss entity. All rights reserved. KPMG Lower Gulf Limited is registered and licensed as a foreign branch under the laws of the United Arab Emirates.
7. Al Wathba National Insurance Company P .J.S.C. Condensed interim statement of financial position as at Note Assets Property and equipment Investment in associates Financial assets at amortised cost Financial assets at fair value through other comprehensive income Financial assets at fair value through profit or loss Investment properties Insurance balance receivables Statutory deposits Reinsurers’ share of unearned premiums reserve Reinsurers’ share of outstanding claims reserve Reinsurers’ share of claims incurred but not reported reserve Other receivables and prepayments Term deposits Bank balances and cash 31 March 2020 (Unaudited) AED’000 31 December 2019 (Audited) AED’000 5,386 92,076 14,170 251,061 323,055 316,863 81,217 6,000 43,653 133,411 9,732 61,154 89,665 76,763 5,282 107,595 14,368 346,585 424,537 316,863 49,059 6,000 28,002 118,302 9,977 8,248 91,544 43,206 5 6 7 8 10 9 9 9 8 10 10 Total assets ---------------- ---------------- ======== ======== 207,000 103,500 51,750 88,753 9,959 (189,178) (5,023) 321,990 207,000 103,500 51,750 88,753 9,959 (95,122) 400,019 1,504,206 Equity and liabilities Equity Share capital Legal reserve Statutory reserve General reserve Capital reserve Fair value reserve Cash flow hedge reserve Retained earnings 11 Total equity --------------- --------------- --------------- --------------- 170,739 181,717 36,382 4,528 1,482 119,545 171,815 36,177 4,373 2,494 588,751 Technical reserves Unearned premiums reserve Claims outstanding reserve Claims incurred but not reported reserve Unallocated loss adjustment expenses reserve Unexpired risk reserve 9 9 9 9 9 Total technical reserves 12 13 10 --------------- 379,122 7,166 5,023 107,758 21,538 7,316 75,370 386,619 --------------- --------------- --------------- --------------- --------------- 915,455 Total equity and liabilities 334,404 --------------- 520,607 Total liabilities 765,859 --------------394,848 Liabilities Borrowings Employees' end of service benefits Derivative financial instruments Trade and other payables Bank overdrafts 1,569,568 469,305 803,709 1,504,206 1,569,568 ======== ======== To the best of our knowledge, nothing has come to our attention that causes us to believe that the condensed interim financial information is not prepared, in all material respects, in accordance with IAS 34. H.E. Shk. Saif Bin Mohammed Bin Butti Al Hamed Chairman Bassam Chilmeran Chief Executive Officer Murali Krishnan Chief Financial Officer The notes set out on pages 10 to 23 form an integral part of this condensed interim financial information. The independent auditors’ report on review of the condensed interim financial information is set out on pages 3 and 4. 5
8. Al Wathba National Insurance Company P .J.S.C. Condensed interim statement of profit or loss for the three-month period ended 31 March (Unaudited) Note Gross premiums written Reinsurance share of gross premiums written Net premiums Net transfer to unearned premiums reserve Net premiums earned Reinsurance commissions earned Acquisition costs of insurance contracts Gross underwriting income 2020 AED’000 115,591 (35,648) 91,381 (37,001) --------------- --------------- 79,943 (35,543) 54,380 (10,085) --------------- --------------- 44,400 10,229 (9,053) 44,295 14,069 (10,923) --------------- --------------- 45,576 Gross claims paid Reinsurance share of gross claims paid Net claims paid Change in gross outstanding claims reverse Change in reinsurers’ share of outstanding claims reserve Net change in incurred but not reported claims reserve Change in allocated and unallocated loss adjustment expenses reserve Change in unexpired risk reserve Net claims incurred Net underwriting income Investment (loss) / income, net Net income from investment properties - rental income Income from hedging Share of (loss) / profit from associates 14 Total (loss) / income --------------- (29,264) 5,647 (30,167) 6,012 --------------- --------------- (23,617) (9,902) 15,109 (450) (155) 1,012 (24,155) (5,158) 2,834 (126) (65) - --------------- --------------- (Loss) / profit for the period --------------- 27,573 (10,691) 20,771 (9,220) --------------- --------------- 16,882 (78,120) 1,439 97 (7,992) 11,551 4,605 1,793 1,126 --------------- ----------------------------- (1,080) (4,075) (1,099) (3,914) --------------- --------------- ======== 15 19,075 --------------- (72,849) Basic and diluted (loss) / earnings per share (26,670) --------------- (67,694) Other expenses Finance costs 47,441 --------------- (18,003) Underwriting income Expenses relating to underwriting 2019 AED’000 (0.35) ======== 14,062 ======== 0.07 ======== The notes set out on pages 10 to 23 form an integral part of this condensed interim financial information. The independent auditors’ report on review of the condensed interim financial information is set out on pages 3 and 4. 6
9. Al Wathba National Insurance Company P .J.S.C. Condensed interim statement of profit or loss and other comprehensive income for the three-month period ended 31 March (Unaudited) Note (Loss) / profit for the period 2020 AED’000 2019 AED’000 (72,849) 14,062 (7,543) 342 1,188 723 Items that will not be reclassified to statement of profit or loss in subsequent periods Share of other comprehensive (loss) / income of associates Gain on sale of equity investments carried at fair value through other comprehensive income Change in fair value of financial assets carried at fair value through other comprehensive income 6 (92,881) (7,835) (5,023) --------------(104,259) --------------(177,108) ======== --------------(6,770) --------------7,292 ======== Items that are or may be reclassified to statement of profit or loss in subsequent periods Cash flow hedges – effective portion of changes in fair value Other comprehensive loss for the period Total comprehensive (loss) / income for the period The notes set out on pages 10 to 23 form an integral part of this condensed interim financial information. The independent auditors’ report on review of the condensed interim financial information is set out on pages 3 and 4. 7
10. Al Wathba National Insurance Company P .J.S.C. Condensed interim statement of changes in shareholder’s equity for the three-month period ended 31 March (Unaudited) Share capital AED’000 Legal reserve AED’000 Statutory reserve AED’000 General reserve AED’000 Capital reserve AED’000 207,000 103,500 51,750 44,476 9,959 (31,227) - 428,979 851,146 _______ Total comprehensive (loss) / income Net changes in non-controlling interest _______ Balance at 31 March 2019 (Unaudited) 207,000 _______ _______ 103,500 _______ _______ 51,750 _______ _______ 44,476 _______ _______ 9,959 (7,493) _______ (7,493) _______ (38,720) _______ _______ - 14,062 723 _______ 14,785 _______ 443,764 14,062 (6,770) _______ 7,292 _______ 858,438 Balance at 1 January 2020 (Audited) 207,000 103,500 51,750 88,753 9,959 (95,122) - 400,019 Loss for the period - - - - - - Other comprehensive (loss) / income Transfer to retained earnings on disposal of financial assets at FVOCI Cash flow hedge reserve - - - - - - _______ _______ _______ _______ _______ 6,368 _______ (5,023) _______ _______ _______ _______ _______ _______ (94,056) _______ (5,023) _______ 9,959 (189,178) Balance at 1 January 2019 (Audited) Profit for the period Other comprehensive (loss) / income ====== Total comprehensive loss Balance at 31 March 2020 (Unaudited) 207,000 ====== ====== 103,500 ====== ====== 51,750 ====== ====== 88,753 ====== ====== ====== Fair value Cash flow reserve hedge reserve AED’000 AED’000 Equity attributable to equity Retained holders of earnings the Company AED’000 AED’000 ====== (100,424) ====== The notes set out on pages 10 to 23 form an integral part of this condensed interim financial information. 8 ====== (5,023) ====== Noncontrolling interests AED’000 77 Total equity AED’000 851,223 _______ (77) _______ - 14,062 (6,770) _______ 7,292 (77) _______ 858,438 765,859 - 765,859 (72,849) (72,849) - (72,849) 1,188 (99,236) - (99,236) (6,368) _______ (5,023) _______ _______ (5,023) _______ (78,029) _______ (177,108) _______ _______ (177,108) _______ ====== 321,990 ====== ====== 588,751 ====== ====== - ====== ====== 588,751 ======
11. Al Wathba National Insurance Company P .J.S.C. Condensed interim statement of cash flows for the three-month period ended 31 March Note Cash flows from operating activities (Loss) / profit for the period Adjustments for: Unearned premiums reserve - net Outstanding claims reserve and claims incurred but not reported reserve including allocated and unallocated loss adjustment expense reserve Reinsurance share of outstanding claims reserve and IBNR Charge for allowance for impairment of insurance balances receivable Change in fair value of investments carried at FVTPL Gain on disposal of investments carried at FVTPL Gain on disposal of property and equipment Provision for employees end of service benefits Depreciation of property and equipment Share of profit of associates Finance costs Dividend income Interest income Interest income on hedge instruments 7 /14 14 14 14 Working capital changes: Insurance receivables and prepayments Trade and other payables Cash generated from operations Employees' end of service benefits paid 31 March 2020 (Unaudited) AED’000 (72,849) 14,062 35,543 10,085 9,250 (14,864) 5,591 (3,076) 1,155 97,433 (2,046) 37 355 7,992 4,075 (23,472) (92) (97) 718 36,576 (9,669) (19) 169 277 (1,126) 3,914 (31,615) (94) - --------------- --------------- 42,420 25,793 (68,852) 32,388 (34,999) 10,906 --------------- --------------- 5,956 (187) 1,700 (41) --------------- Net cash generated from operating activities 5,769 Investing activities Purchase of property and equipment Additions to investment properties Purchase of investments carried at FVTPL Purchase of investments carried at OCI Purchase of investment in associates Proceeds from sale of property and equipment Proceeds from disposal of investments carried at FVOCI Proceeds from disposal of investments carried at FVTPL Term deposits Interest received Dividends received 7 (459) (9,098) (16) 3,831 15,193 1,879 290 6,202 (454) (293) (45,602) (23,629) 20 8,181 84,120 9,090 94 4,395 Cash and cash equivalents at the beginning of the period (4,075) 379,122 (3,914) (3,914) --------------- 398,638 33,667 (343,413) 10 --------------- --------------- --------------- Cash and cash equivalents at the end of the period 35,922 --------------- 375,047 Net increase in cash and cash equivalents --------------- --------------- --------------- Net cash generated from / (used in) financing activities 1,659 --------------- 17,822 Financing activities Finance cost paid Term loan received --------------- --------------- --------------- Net cash generated from investing activities 31 March 2019 (Unaudited) AED’000 55,225 ======== (287,090) --------------- The notes set out on pages 10 to 23 form an integral part of this condensed interim financial information. The independent auditors’ report on review of the condensed interim financial information is set out on pages 3 and 4. 9 (253,423) ========
12. Al Wathba National Insurance Company P .J.S.C. Notes to the condensed interim financial information 1 Legal status and principal activities Al Wathba National Insurance Company PJSC (the “Company”), incorporated in Abu Dhabi is registered as a public shareholding Company in accordance with UAE Federal Law No. (6) of 2007 concerning Insurance Companies and Agents, and is registered in the Insurance Companies Register under registration No. (2). The Company’s principal activity is the writing of general insurance and reinsurance business of all classes, the Company’s principal activity is the transaction of general insurance and reinsurance business of all classes. The Company operates through its head office in Abu Dhabi and branch offices in Dubai, Al Ain, and Sharjah. The Company is domiciled in the United Arab Emirates and its registered head office is P.O. Box 45154, Abu Dhabi, United Arab Emirates. 2 Basis of preparation (a) Statement of compliance The condensed interim financial information has been prepared in accordance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting. Accordingly, the condensed interim financial information do not include all of the information required for a complete set of financial statements and should be read in conjunction with the financial statements of the Company as at and for the year ended 31 December 2019, which have been prepared in accordance with International Financial Reporting Standards (IFRS). The results for the threemonth period ended 31 March 2020 are not necessarily indicative of the results for the year ending 31 December 2020. (b) Basis of measurement The condensed interim financial information has been prepared under the historical cost convention except for the financial assets at fair value through profit or loss and financial assets at fair value through other comprehensive income, derivative financial instruments and investment properties which are carried at fair value. (c) Functional and reporting currency This condensed interim financial information is presented in United Arab Emirates Dirhams (“AED”), which is the Company’s functional currency. Except as indicated, financial information presented in AED has been rounded to the nearest thousand. (d) Use of judgments and estimates In preparing this condensed interim financial information, management has made judgments and estimates that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. The significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those described in the last annual financial statements for the year ended 31 December 2019. 10
13. Al Wathba National Insurance Company P .J.S.C. Notes to the condensed interim financial information 2 Basis of preparation (continued) (e) Impact of CoVid-19 The economic repercussions from the global outbreak of CoVid-19 have significantly and adversely affected businesses worldwide. As at 31 March 2020, the Company has primarily been impacted in its investments segment where the net unrealised losses on financial assets measured at fair value through other comprehensive income and fair value through profit and loss amounted to AED 92.9 million and AED 97.4 million respectively. The losses in investments are consistent with the worldwide trend. There is insufficient information available to assess the direction of this trend for the future. (f) Insurance risk In its underwriting segment, the Company is primarily exposed to business interruption policies. With regards to Business Interruption (BI) policies, the Company has in place pandemic and infectious disease policy exclusions in place as well. The Company has evaluated all business interruption policies in force for which the Company may have to incur claim payouts. As a result of initial examination of the policies, the Company determined that these will not have a material impact in relation to the net claims paid due to lower retention levels of the Company. Furthermore, the Company has been able to retain major customers during the three-month period ended 31 March 2020 and has generally witnessed renewals and new business across some major lines of businesses. (g) Credit risk On 27 March 2020, the IASB issued a guidance note, advising that both assessment of Significant Increase in Credit Risk (“SICR”) and the measurement of expected credit losses are required to be based on reasonable and supportable information that is readily available to the entity without incurring additional costs. As at 31 March 2020, there is insufficient information available in the market to assess the monetary impact of credit losses on financial assets and reduction in future premiums. Accordingly, the Company will assess the impact as soon as sufficient and reliable information is available. The Company’s reinsurance is placed with approved reinsurers which are generally international reputable companies with high credit ratings. As at 31 March 2020, no reinsurer has expressly disassociated with the Company nor has any reinsurer communicated its non-willingness to accept CoVid-19 related claims. (h) Business continuity plan The Company has remained fully operational throughout the period and has put in place effective business continuity and remote working plans enabled by the right technologies and systems to ensure uninterrupted services to customers and the operations. The outbreak has not caused any significant delays in policies issuance and claims settlements. The Company will continue to monitor the reverberations of CoVid-19, if any, on its customers and operations and will take further action as needed. The steps taken by the Company to estimate the impact of CoVid-19 and the judgments applied by management in assessing the values of assets and liabilities as at 31 March 2020 includes both quantitative and qualitative criteria such as risk profiling and actuarial analysis. Such analysis has enabled the Company to timely and accurately identify its exposure although these are subject to significant judgment due to the rapidly changing dynamics of CoVid-19. 11
14. Al Wathba National Insurance Company P .J.S.C. Notes to the condensed interim financial information 3 Significant accounting policies The accounting policies applied in the condensed interim financial information are the same as those applied in the Company’s annual financial statements as at and for the year ended 31 December 2019. 3.1 Standards issued but not yet effective A number of new standards and amendments to standards are effective for annual periods beginning on or after 1 January 2020 however these do not have a material impact on the condensed interim financial information of the Company. The following amended standards and interpretations are not expected to have a significant impact on the Company’s financial information: - 4 Amendments to References to Conceptual Framework in IFRS Standards Definition of a business (Amendments to IFRS 3) Definition of material ( Amendments to IAS 1 and IAS 8) Commitments and contingencies Contingent liabilities The Company’s bankers have issued in the normal course of business letters of guarantee in favour of third parties amounting to AED 6.6 million (31 December 2019: AED 6.6 million). Legal claims The Company, in common with the significant majority of insurers, is subject to litigation in the normal course of business. Management, based on advice from independent loss adjusters and internal legal counsel, has made a provision of AED 14.0 million (2019: AED 14.0 million) representing amounts expected to result in a probable outflow of economic resources. 5 Financial assets at amortised cost Included in financial assets at amortised cost are two listed five-year sukuks with a total amount of AED 9 million which carry profit of 6 month EBOR + 300 bps or 7.5%, whichever is higher and one perpetual bond amounting to AED 5 million which carries profit of 8.25% (2019: Two listed five year sukuks amounting to AED 9 million and one perpetual bond amounting to AED 5 million) having an accrued profit of AED 0.17 million (2019: AED 0.368 million). 6 Financial assets at fair value through other comprehensive income Quoted securities Unquoted securities 31 March 2020 (Unaudited) AED’000 31 December 2019 (Audited) AED’000 230,894 20,167 --------------251,061 ======== 323,547 23,038 --------------346,585 ======== Certain securities are registered in the name of a director for the beneficial interest of the Company. The fair value of these securities as at 31 March 2020 was AED 12.5 million (2019: AED 12.8 million). 12
15. Al Wathba National Insurance Company P .J.S.C. Notes to the condensed interim financial information 6 Financial assets at fair value through other comprehensive income (continued) The movement in the investments at fair value through other comprehensive income (FVOCI) is as follows: 31 March 2020 (Unaudited) AED’000 At beginning of the period / year Additions Disposals Change in fair value 346,585 (2,643) (92,881) --------------251,061 ======== Balance at end of the period / year 31 December 2019 (Audited) AED’000 267,865 163,605 (42,945) (41,940) --------------346,585 ======== The geographical distribution of investments at FVOCI is as follows: Within UAE Outside UAE 247,055 4,006 --------------251,061 ======== 342,604 3,981 --------------346,585 ======== Certain investments with a total fair value of AED 127.9 million (2019: AED Nil) are pledged against bank borrowings (note 12). 7 Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss consist of quoted investments in local securities. The movement in investments at fair value through profit or loss is as follows: 31 March 2020 (Unaudited) AED’000 At beginning of the period / year Additions Disposals Change in fair value (note 14) 424,537 9,098 (13,147) (97,433) --------------323,055 ======== Balance at end of the period / year 31 December 2019 (Audited) AED’000 466,488 322,734 (338,166) (26,519) --------------424,537 ======== Certain investments with a total fair value of AED 146.7 million (2019: AED Nil) are pledged against bank borrowings (noted 12). 13
16. Al Wathba National Insurance Company P .J.S.C. Notes to the condensed interim financial information 8 Premiums and insurance receivables 31 March 2020 (Unaudited) AED’000 Due from policy holders and brokers Due from policy holders - related parties (note 16) Due from insurance and reinsurance companies Less: allowance for impairment of insurance balance receivables Insurance balance receivables Prepayments Accrued income Other receivables Deferred acquisition cost Other receivables and prepayments 9 57,147 31,500 13,732 --------------102,379 (21,162) --------------81,217 --------------9,429 19,393 12,375 19,957 --------------61,154 --------------142,371 ======== 31 December 2019 (Audited) AED’000 37,863 16,002 15,201 --------------69,066 (20,007) --------------49,059 --------------2,773 1,365 4,110 --------------8,248 --------------57,307 ======== Insurance contract liabilities and reinsurance contract assets Liabilities arising from insurance contracts Gross unearned premiums reserves (“UPR”) Claims incurred but not reported reserve (“IBNR”) Gross outstanding claims reserve (“OCLR”) (i) Unexpired risk reserve Reinsurance contract assets Reinsurers' share of unearned premiums reserve Reinsurers' share of outstanding claims reserve Reinsurers' share of IBNR reserve 14 31 March 2020 (Unaudited) AED’000 31 December 2019 (Audited) AED’000 170,739 36,382 186,245 1,482 --------------394,848 ======== 119,545 36,177 176,188 2,494 --------------334,404 ======== 31 March 2020 (Unaudited) AED’000 31 December 2019 (Audited) AED’000 (43,653) (133,411) (9,732) --------------(186,796) ======== (28,002) (118,302) (9,977) --------------(156,281) ========
17. Al Wathba National Insurance Company P .J.S.C. Notes to the condensed interim financial information 9 Insurance contract liabilities and reinsurance contract assets (continued) Net Unearned premiums reserve Claims incurred but not reported reserve Outstanding claims reserve Unexpired risk reserve 127,086 26,650 52,834 1,482 --------------208,052 ======== 91,543 26,200 57,886 2,494 --------------178,123 ======== (i) Outstanding claims reserve includes allocated and unallocated loss adjustment expense reserve of AED 6.1 million and AED 4.5 million (31 December 2019: AED 4.1 million and AED 4.4 million). 10 Cash and cash equivalents 31 March 2020 (Unaudited) AED’000 Bank balances and cash Statutory deposit Term deposits Bank and cash balances Less: bank overdrafts Less: term deposits with original maturity over 3 months Less: statutory deposits Cash and cash equivalents 76,763 6,000 89,665 --------------172,428 (21,538) (89,665) (6,000) --------------55,225 ======== 31 December 2019 (Audited) AED’000 43,206 6,000 91,544 --------------140,750 (386,619) (91,544) (6,000) --------------(343,413) ======== Geographical concentration of cash and bank balances including bank overdrafts is as follows: 31 March 2020 (Unaudited) AED’000 Within UAE 150,890 ======== 31 December 2019 (Audited) AED’000 (245,869) ======== Term deposits are held with financial institutions in UAE. The original maturity ranges from three to twelve months. Interest is receivable at annual rates ranging from 0.85% to 6.00% per annum (31 December 2019: 0.85% to 6.00% per annum). In accordance with the requirements of Federal Law No. (6) of 2007, concerning Establishment of Insurance Authority and Organisation of its Operations, the Company maintains a bank deposit of AED 6 million (31 December 2019: AED 6 million) which cannot be utilised without the consent of the UAE Insurance Authority. 15
18. Al Wathba National Insurance Company P .J.S.C. Notes to the condensed interim financial information 11 Share capital Authorised, issued and fully paid 207,000,000 (31 December 2019: 207,000,000) ordinary shares of AED 1 each 12 31 March 2020 (Unaudited) AED’000 31 December 2019 (Audited) AED’000 207,000 ======== 207,000 ======== 244,337 134,785 -------------379,122 ======= --------------======== Borrowings Term loan 1 Term loan 2 The movement in the borrowing facilities of the Company is as follows: Term loan facilities Proceeds from borrowing (net) during the period / year Finance cost Balance as at 31 March 2020 (Unaudited) AED’000 31 December 2019 (Audited) AED’000 376,847 2,275 - -------------------- ------------------ 379,122 - ======= ====== Term loan 1 During 2020, the Company obtained a bank facility amounting to AED 237.9 million (31 December 2019: AED nil) from an international commercial bank to finance its operations and short-term liabilities. The loan carries variable interest rate of 3-month EIBOR plus 1.75% per annum and charged quarterly. The amount of the loan is repayable in one bullet payment at the end of the loan term of three years. The loan is secured against investments in equity securities and investment in associates. As at reporting date, the outstanding loan balance was AED 244.3 million (31 December 2019: AED nil). Term loan 2 During 2020, the Company obtained a bank facility amounting to AED 133.5 million (31 December 2019: AED nil) from a local commercial bank. The loan carries variable interest rate of 3-month EIBOR plus 2.30% per annum and charged quarterly. The amount of the loan is repayable in twenty irregular principal instalments commencing from 12 April 2020 till 12 January 2025. The loan is secured against investment properties comprising head office building and a plot of land. As at reporting date the outstanding loan amount was AED 134.8 million (31 December 2019: AED nil). 16
19. Al Wathba National Insurance Company P .J.S.C. Notes to the condensed interim financial information 13 Derivative financial instruments Cash flow hedges – Interest rate swap The Company is exposed to variability in future interest cash flows on interest bearing loans and borrowings which bear interest at a variable rate. In order to reduce its exposure to interest rates fluctuations on these loans, the Company has entered into an interest rate swap arrangement, from floating interest rate to fixed interest rate with a counter-party bank for a notional amount that mirrors the draw down and repayment schedule of the loans, covering 100% of the outstanding interest-bearing loans and borrowings. The fixed interest rate for the Company is 1.67%. The floating interest rate is based on EIBOR. The notional amount outstanding at 31 March 2020 was AED 245 million (31 December 2019: nil). The derivative instrument which is entered into for the purpose of cash flow hedge had a negative fair value of AED 4.9 million at 31 March 2020 (31 December 2019: nil). 14 Investment (loss) / income, net Gain on disposal of investments carried at fair value through profit or loss Changes in fair value of investments carried at fair value through profit or loss (note 7) Interest income Dividend income Other expenses related to investments 15 31 March 2020 (Unaudited) AED’000 31 March 2019 (Unaudited) AED’000 2,046 9,669 (97,433) 92 23,472 (6,297) --------------(78,120) ======== (36,576) 94 31,615 (197) --------------4,605 ======== Basic and diluted earnings per share Basic (loss) / earnings per share is computed by dividing the (loss) / profit for the period by the weighted average number of shares outstanding during the period. Diluted (loss) / earnings per share are calculated by dividing the (loss) / profit for the period by the weighted average number of ordinary shares outstanding during the period, adjusted for the effects of dilutive instruments. Three-month period ended 31 March 2020 2019 (Unaudited) (Unaudited) (Loss) / profit for the period (AED’000) Weighted average number of ordinary shares outstanding during the period (shares in ‘000) Basic and diluted (loss) / earnings per share (AED) 17 (72,849) =========== 14,062 =========== 207,000 =========== (0.35) =========== 207,000 =========== 0.07 ===========
20. Al Wathba National Insurance Company P .J.S.C. Notes to the condensed interim financial information 16 Related parties Identity of related parties Related parties comprise the Directors of the Company and those entities in which they have the ability to control or exercise significant influence in financial and operation of decisions. The Company maintains significant balances with these related parties which arise from commercial transactions in the ordinary course of business at commercial rates as follows: Balances with related parties included in the condensed interim statement of financial position are as follows: Included in insurance receivables (note 8) Due from policy holders Included in other payables Due to policy holders Key management personnel Long term benefits Remuneration of key management personnel (i) (i) 31 March 2020 (Unaudited) AED’000 31 December 2019 (Audited) AED’000 31,500 =========== 16,002 =========== (12,612) =========== (9,176) =========== 2,705 =========== 2,662 =========== 993 =========== 895 =========== The remuneration of key management personnel is based on the remuneration agreed in their employment contract as approved by the Board of Directors. Transactions with related parties during the period are as follows: Gross premiums written Net claims paid 17 31 March 2020 (Unaudited) AED’000 31 March 2019 (Unaudited) AED’000 26,604 =========== 3,638 =========== 29,547 =========== 4,612 =========== Fair value of financial instruments A number of the Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. Management regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then management assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of IFRS, including the level in the fair value hierarchy in which such valuations should be classified. 18
21. Al Wathba National Insurance Company P .J.S.C. Notes to the condensed interim financial information 17 Fair value of financial instruments (continued) When measuring the fair value of an asset or a liability, the Company uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows: • • • Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: inputs other than quoted prices included in 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: inputs for the asset or liability that are not based on observable market data (unobservable inputs). If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred. At 31 March 2020 (Unaudited) Financial assets at fair value throughprofit or loss Financial assets at fair value throughother comprehensive income Interest rate swap used for hedging At 31 December 2019 (Audited) Financial assets at fair value throughprofit or loss Financial assets at fair value throughother comprehensive income Level 1 AED’000 Level 2 AED’000 Level 3 AED’000 Total AED’000 323,055 - - 323,055 230,894 (5,023) - 20,167 - 251,061 (5,023) 548,926 - 20,167 569,093 Level 1 AED’000 Level 2 AED’000 Level 3 AED’000 Total AED’000 424,537 - - 424,537 323,547 - 23,038 346,585 748,084 - 23,038 771,122 There were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into or out of Level 3 fair value measurements during the period. For Level 3 investments, the fair values are based on internal valuation techniques such as discounted cash flows and comparable companies’ multiples. 19
22. Al Wathba National Insurance Company P .J.S.C. Notes to the condensed interim financial information 17 Fair value of financial instruments (continued) Reconciliation of level 3 fair value measurement Movement in level 3 for financial assets at fair value through other comprehensive income is as follows: 31 March 2020 (Unaudited) AED’000 31 December 2019 (Audited) AED’000 Balance as at 1 January Disposal Change in fair value 23,038 (2,871) 27,611 (58) (4,515) Balance at 31 December 20,167 23,038 The fair value of the financial assets is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. 20
23. Al Wathba National Insurance Company P .J.S.C. Notes to the condensed interim financial information 18 Segment reporting For management purposes, the Company is organised into departments based on the classes of insured risks. The reportable operating segments of the Company are fire and general accident, medical, marine, aviation and investments. Management monitors the underwriting results of the operating segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on underwriting profit. The following table presents disclosure of segment revenues, measurement of segment profit for the period and their reconciliation to the Company’s income and profit for the period. 18.1 Segment revenue and results Three-month period ended 31 March (unaudited) 2020 Marine and Aviation AED’000 Fire and General Accident AED’000 Motor AED’000 Medical AED’000 Investments AED’000 Total AED’000 Gross premiums written Reinsurance share of ceded premiums Net change in unearned premium reserve Net claims incurred Net commission earned / (incurred) Rental income – net Loss from investments - net of finance costs Share of profit from associate 1,242 (964) (78) (92) (34) - 34,730 (27,631) (4,254) (1,246) (231) - 77,765 (5,755) (31,014) (16,423) 1,453 - 1,854 (1,298) (197) (242) (12) - 1,439 (82,098) (7,992) 115,591 (35,648) (35,543) (18,003) 1,176 1,439 (82,098) (7,992) Segment profit / (loss) before allocated expenses Allocated expenses, net 74 (288) 1,368 (2,521) 26,026 (7,647) 105 (235) (88,651) - (61,078) (10,691) Segment (loss) / profit (214) (1,153) 18,379 (130) (88,651) (71,769) Unallocated expenses (1,080) Loss for the period (72,849) 21
24. Al Wathba National Insurance Company P .J.S.C. Notes to the condensed interim financial information 18 Segment reporting (continued) 18.1 Segment revenue and results (continued) Three-month period ended 31 March (unaudited) 2019 Marine and Aviation AED’000 Fire and General Accident AED’000 Motor AED’000 Medical AED’000 Investments AED’000 Total AED’000 Gross premiums written Reinsurance share of ceded premiums Net change in unearned premium reserve Net claims incurred Net commission earned / (incurred) Rental income Share of profit of associates Income from investments - net of finance costs 1,143 (954) 22 (48) 1,110 - 32,907 (28,337) (3,547) (40,758) 4,924 - 55,547 (6,124) (6,277) 14,699 (3,020) - 1,784 (1,586) (283) (563) 132 - 1,793 1,126 690 91,381 (37,001) (10,085) (26,670) 3,146 1,793 1,126 690 Segment profit / (loss) before allocated expenses Allocated expenses, net 1,273 (283) (34,812) (2,523) 54,826 (6,126) (516) (287) 3,609 - 24,380 (9,219) 990 (37,335) 48,700 (803) 3,609 15,161 Segment profit / (loss) Unallocated expenses (1,099) Profit for the period 14,062 22
25. Al Wathba National Insurance Company P .J.S.C. Notes to the condensed interim financial information 18 Segment reporting (continued) 18.2 Segment assets and liabilities As at 31 March 2020 (Unaudited) Underwriting Investments AED’000 AED’000 Segment assets Unallocated assets 440,405 1,045,692 470,830 417,187 Total assets Segment liabilities Unallocated liabilities Total liabilities Capital expenditure 18.3 459 ======== ======== As at 31 December 2019 (Audited) Total Underwriting Investments Total AED’000 AED’000 AED’000 AED’000 1,486,097 18,109 --------------1,504,206 ======== 888,017 27,438 --------------915,455 ======== 459 ======== 358,483 1,201,973 373,733 399,285 2,105 ======== ======= 1,560,456 9,112 --------------1,569,568 ======== 773,018 30,691 --------------803,709 ======== 2,105 ======== Segment revenue from underwriting departments The following is an analysis of the Company's revenues (representing gross premiums, commission earned and other income relating to underwriting) classified by major underwriting departments. Motor Engineering Fire and general accidents Marine and aviation Life, medical and personal assurance 19 31 March 2020 (Unaudited) AED’000 31 March 2019 (Unaudited) AED’000 79,752 15,506 25,850 1,496 1,854 58,651 14,891 27,647 2,300 1,962 124,458 105,451 General The condensed interim financial information of the Company was approved for issuance by the Board of Directors on_30 June 2020_____. 23