Amana Takaful PLC: Annual Report 2018

Transcription

1. Mutuality Open to all Am ãna Takaful PLC Annual Report 2018
3.  The Amãna ethos is based upon inclusivity underpinned by pristine ethics. Our proposition is one for all people, irrespective of where diversity of thought and precept lies. The Company keeps customer convenience and satisfaction top of mind when designing and offering innovative products – a newly developed mobile app exemplifies the heightened levels of customer friendliness and interaction we seek. We also sought to widen outreach through conventional as well as an evolving disruptive digital media initiative.
4. Am ãna Takaful PLC Annual Report 2018  OUR VISION “Committed to providing peace of mind through World Class Takaful solutions” OUR MISSION “We will stand apart from the rest by engaging all stakeholders, crafting unique insurance solutions, in a spirit of mutuality and solidarity” OUR VALUES Customer Centered: Interaction with Customers. We LISTEN to our customers and go the EXTRA MILE to SERVE them Open Mindedness: Changing the status Quo, seeking new ideas. We FOSTER a culture where IDEAS and OPINIONS are shared freely Rise for Quality: A culture of continuous improvement. We are DRIVEN to give all stakeholders a QUALITY service Diversity: Our soul and spirit We are Open to all 2
5. Am ãna Takaful PLC Annual Report 2018  CONTENTS 4 – Financial Highlights Financial Reports 6 – Chairman’s Review 66 – Statement of Directors’ Responsibilities 8 – Chief Executive Officer’s Review 67 – Certificate of the Actuary – Family Takaful (Life) 10 – Board of Directors 14 – Leadership Team 68 – Certification of Incurred But Not Reported (IBNR) Claims and Liability Adequacy 69 – Independent Auditors’ Report 72 – Statement of Financial Position Management Discussion and Analysis 73 – Statement of Profit or Loss and Other Comprehensive Income 20 – Group Overview 74 – Statement of Changes in Equity 21 – Business Performance Review 76 – Statement of Cash Flows 24 – Product Portfolio 78 – Segmental Analysis – Statement of Financial Position – 2018 28 – Corporate Social Responsibility 29 – Human Resource Stewardship 38 – Corporate Governance 46 – Enterprise Risk Management 55 – Annual Report of the Board of Directors on the Affairs of the Company 79 – Segmental Analysis – Statement of Profit or Loss and Other Comprehensive Income – 2018 80 – Segmental Analysis – Statement of Financial Position – 2017 81 – Segmental Analysis – Statement of Profit or Loss and Other Comprehensive Income – 2017 82 – Statement of Financial Position of Family Takaful (Life Insurance) – Supplemental 83 – Notes to the Financial Statements 59 – Report of the Board Audit and Compliance Committee 61 – Report of the Board Remuneration Committee 62 – Report of the Related Party Transactions Review Committee 63 – Report of the Shari’ah Advisory Council Annexes 158 – Value Added Statement 159 – Share Information 161 – Ten Year Summary 164 – Geographic Locations 165 – Glossary 166 – Notice of Meeting Form of Proxy/Enclosed Corporate Information/Inner Back Cover 3
6. Am ãna Takaful PLC Annual Report 2018 FINANCIAL HIGHLIGHTS FINANCIAL HIGHLIGHTS 2018 Rs. Mn. 2017 Restated Rs. Mn. Growth 4,214 3,641 15.75 104 155 -32.78 (%) Group Total Gross Written Premium Profit/(Loss) After tax 0.33 0.70 -52.58 6,590 5,936 11.02 Net Assets Value per Share (Rs.) 9.02 8.26 9.13 Return on Equity 0.05 0.09 -39.81 Gross Written Premium 3,386 2,848 18.87 Net Earned Premium 2,419 1,898 27.46 828 792 4.52 Earnings/(Loss) per Share (Rs.) – (Note 35.4) Total Assets General Takaful Life (Family) Takaful Gross Written Premium 535 581 -7.88 Life Fund – Unit Link 1,660 1,525 8.85 Total Life (Family Takaful) Fund 2,195 2,106 4.24 Life Fund – FTF Company 23 63 -62.06 0.13 0.35 -62.06 10.22 10.09 1.25 Return on Equity 0.01 0.03 -61.14 Number of Employees 234 224 4.46 36 33 9.09 Gross Written Premium 2,002 1,792 11.74 Net Earned Premium 1,541 1,284 20.02 Profit/(Loss) After Tax Earnings/(Loss) per Share (Rs.) – (Note 35.4) Net Assets Value per Share (Rs.) Number of Branches/Distribution Centres General Takaful 4
7. Am ãna Takaful PLC Annual Report 2018 FINANCIAL HIGHLIGHTS Rs. Mn./Nos. 5,000 GENERAL TAKAFUL GWP – GROUP 18.9% 4,000 3,000 2,000 GROUP TOTAL ASSETS 9.8% 1,000 0 2014 2015 2016 2017 General Takaful Contributions (Rs. Mn.) General Takaful Net Claims Incurred (Rs. Mn.) Family Takaful Life Certificate – New Business (Nos.) Family Takaful (Life) Contribution (Rs. Mn.) 2018 2014 2015 2016 2017 2018 1,973 2,309 2,586 2,848 3,386 735 1,130 1,118 1,050 1,387 3,593 4,047 4,379 4,467 4,467 679 928 821 792 792 5
8. Am ãna Takaful PLC Annual Report 2018 CHAIRMAN’S REVIEW ”Group Gross Written Premium (GWP) of Rs. 4.2 Bn. is ahead by 16%, more than doubling the outturn in the previous year” The Board of Directors join me in extending a warm welcome to you on the occasion of the 20th Annual General Meeting of Amãna Takaful PLC. This publication comprises the Annual Report of Amãna Takaful PLC (ATPLC) and the Consolidated Financials of the Amãna Takaful Group. Amãna Takaful Life PLC (ATLL) and Amãna Takaful Maldives (ATM) will also publish their reports individually. Group Results Group performance in terms of growth and business fundamentals have been relatively well managed in the context of the overall industry performance, though dampened by an overrun in claims and a hiccup in investments in the Life entity. Group Gross Written Premium (GWP) of Rs. 4.2 Bn. is ahead by 16%, more than doubling the outturn in the previous year. However, profit before tax from Group operations is Rs. 104 Mn., adverse by Rs. 51 Mn. compared to the previous year. ATM reports a significant growth of 135% in profits, while ATPLC was restricted to 38% of its 2017 result. ATLL reports a loss of Rs. 63 Mn. 6 The Group’s investment assets yielded consolidated returns of Rs. 343 Mn., 10% below that of 2017. ATLL’s returns were negatively affected on account of its troubled assets, which is receiving heightened attention of the Board. Total claims accounted for Rs. 1.9 Bn. in 2018, up 30% on the previous year. Amãna Takaful PLC, sustained its GWP growth momentum at 12% in 2018, with satisfactory results in all classes of business, validating the strategic balance we envisage in portfolio performance in the current three year plan. Read in the context of industry performance which declined to 8%, the lowest in five years, that too with Motor class taking the entirety of the growth, we consider our construct exemplary and boding well for the future. The Company made good progress in new product performance, strategic tie-ups and an eye on cost. However, claims were 26% ahead of 2017, impacting significantly on profitability to Rs. 24 Mn. in 2018, in the same comparison. Share consolidation was successfully accomplished in July 2018. Amãna Takaful Life PLC, a largely owned subsidiary of ATPLC too consolidated its shares with shareholder approval, effective July 2018. Premium growth at 4%, was largely boosted by a 29% upside in new business derived from the protection portfolio. Platinum Plus - a much needed hospital benefit cover was launched in July, evoking ready acceptance from new and existing policyholders. Weighted average
9. Am ãna Takaful PLC Annual Report 2018 Chairman’s Review premiums at Rs. 5,000/- on individual policies are twice the industry average. Branch distribution and business expansion continue unabated. As reported in 2017 the troubled investment assets were completely secured by year end in respect of the Policyholders Fund with transparency to our policyholders. Business conditions have been affected for the most part by economic headwinds and the need for political stability and societal harmony. We remain optimistic of a much improved future. Amãna Takaful Maldives, now counting fifteen years in pioneering Islamic Finance in the archipelago posts excellent results in GWP growth and profits on a sustainable basis, since its listing as the only Insurance outfit in the Maldives Stock Exchange in 2011. GWP of Rs. 1.4 Bn. was 31%, way ahead of the previous year’s 9%, while profit before tax climbed 128% to Rs. 151 Mn. Despite irresponsible rate cutting practices by competitors, the Company steadfastly adhered to ethical practices, launching products and programmes to its discerning clientele. For the 6th consecutive year, the Company honoured its policyholders with surplus payments, while distributing dividends to shareholders. I reiterate my earlier call for regulatory support through a meaningful dialogue with industry players to build a secure environment for the insuring public. The Takaful system is unique in that it is an ethical platform for participatory risk management and a governance framework of sharing. Towards that realisation, engaging all stakeholders is paramount. The understanding and ready support of the IRCSL in our business endeavours is well appreciated. Insurance Landscape and Outlook Industry growth has been stifled to a single digit with a much greater dependency from the Motor class accounting for all of it in Sri Lanka. Motor rates are also subject to industry-wide price-cutting, further exacerbating the claims service costs where spike in prices of spare parts following the devaluation of the currency is of concern. It is a pity that traction in other classes of business is yet to come by, despite the construction projects and investment opportunities. As stated in my review of 2017, it is timely that all industry stakeholders resolve to work in unison and explore means to uplift the sector under the aegis of the Insurance Regulatory Commission of Sri Lanka (IRCSL). Insurance penetration continues to be abysmally low, with the informal and under penetrated sectors of the population devoid of a safety net. For our Company’s part, sustainable livelihoods in this sector is receiving disproportionate attention and spend through product design and benefits in our micro portfolio expansion. Enlisting critical mass and achieving economies of scale to enroll such participants into the financial ecosystem is being pursued in a measured way. Our middle-income status road map will be meaningful if employers and individuals alike are encouraged to seek protection and indemnity through incentives thereby reducing the overdependence on state handouts. Acknowledgements “The Takaful system is unique in that it is an ethical platform for participatory risk management and a governance framework of sharing” I wish to place on record my gratitude to colleagues on the Board of the respective companies for their time, advice’ and commitment in working to resolve issues speedily. Dr. Ifthikarudeen Ismail resigned from the Board in September 2018. Apart from his active participation at meetings of the Board, the Company greatly benefited from his wisdom and advice. I would like to thank him and wish him success. The office of the Insurance Ombudsman has been a beacon in dispute resolution, while that of an advisory on our business matters. We pay tribute to the Late Dr. Wickrema Weerasooriya for the dignity and honour he brought to bear on the industry in the discharge of his duties. Tyeab Akbarally Chairman 29 March 2019 7
10. Am ãna Takaful PLC Annual Report 2018 CHIEF EXECUTIVE OFFICER’S REVIEW ”On the innovations front, a digital app – yet another industry first was launched through a revamped product, All-in-1, targeted at SME trade channels giving a fillip to speed and flexibility, wholly through an electronic platform” Peace be Upon You All In this twentieth year of operation, Amãna Takaful PLC (ATL) reports a Gross Written Premium of Rs. 2 Bn., 12% growth for the second successive year, ahead of the industry performance of 8% in 2018. Profit before tax from operations was adversely affected by claims overrun to stand at Rs. 24 Mn. Being the first lap of the second three-year plan (2018-2020), ATL has vigorously pursued its Portfolio Rebalancing Programme, New Product introduction initiatives, Expansion in Distribution Reach, Digitisation and Productivity enhancements with a marginal growth in market share. All these activities contributed significantly to the business. Our motor share of 55% is on target for the second successive year with a balanced mix in its portfolio. Exercising prudence in under-writing and pricing, our strategy to spread the risk across the same portfolio, with accent on the revamped subclasses, continues to make the class profitable, again for the second successive year. Industry share of motor is at 66%, with almost all of its growth fuelled by motor. The non-motor segment’s modest growth of 4% was boosted largely by the medical class and the continued thrust on the micro products. In the case of the former, regrettably, recourse to rate-cutting to shore-up volume and gain market 8 share akin to the malaise on motor, has gained momentum. Moreover, as a result of growing needs and allocations for medical requirements, corporates both large and medium will do well to subscribe to the maxims of under-writing principles, rather than a carte-blanche approach in engaging a solutions provider. Equally, industry players, now plagued with high claims ratios will need to be introspective. On the micro segment, suffice to say, that our measured approach to marginalised communities, informal associations and self-employed persons through a myriad of products have won favour in their consideration set. Raising awareness, education programmes and establishing alliances with credible opinion leaders in the communities has been a rewarding precursor to help manage the segment’s uncertainty and risks, while enlisting them to the financial eco system. Our limiting factor is scale and reach, which are being addressed through a simple digitised interface. On the innovations front, a digital app – yet another industry first was launched through a revamped product “All-in-1”, targeted at SME trade channels giving a fillip to speed and flexibility, wholly through an electronic platform. Four new branches were added on to our network accounting for 20% of the net volume upside in 2018.
11. Am ãna Takaful PLC Annual Report 2018 Chief executive officer’s review Overall, our claims experience was contained at 57% for the second successive year, being among the industry’s lowest. However, claims in property damage following the communal riots in the Central Province earlier in the year and medical class too, resulted in an overrun in the claims budget, causing a heavy impact on profitability. Total net claims payout in the year was Rs. 876 Mn., an increase of 26% compared to 2017. ATL’s investment assets yielded Rs. 117 Mn., 5% upside over 2017. Limited opportunities in Shari’ah compliant instruments remains a challenge. The industry’s single digit growth in 2018, from a track record of double digits in the previous five years or more, is indicative of the overall depressed economic climate that persisted for the better part of the year and the uncertainty that prevailed at the tail end. This is borne out in industry class-wise performance too, where, save for the motor class, results have been dormant or negative in others. Low ebb trading activity, currency devaluation, and upswing in taxation, resulting in pressure on disposable income, have a concomitant effect on insurance related transactions, the first casualty in any cost cutting/containing decision. Credit outlay exacerbates. Notwithstanding, the Company has made good progress to build on its strategic intent to weather these headwinds, while honouring its commitments to clients, in its drive towards sustainability. True to the tenets of Takaful, I take pleasure to announce, in 2018, ATL shared SURPLUS to the value of Rs. 14 Mn. amongst 7,980 non-claimant recipients. Our operations are now fully compliant with the new version of ISO 9001:2015, following a thorough review by DNV-GL, the accredited representative body for such certification in Sri Lanka. The Islamic Financial Forum for South Asia bestowed the Gold Award for the Best Takaful Entity and an additional Gold accolade for the Product “KiriGovi Sathkara” that seeks to protect dairy farmers and their livelihood. As borne out through the strategic direction of a robust three-year plan notwithstanding the external climate, a high sense of urgency and optimism pervades the Organisation’s will to succeed. Evidenced through enlistments of high calibre individuals from competition and allied industries, the thirst for multi-skilling, aided by a digitisation agenda, augmented with a best-in-class product development and innovation process, we remain confident to deliver on expectations of policyholders, stakeholders and the regulatory authorities. The reinsurance community too has expressed satisfaction and confidence in our risk mitigatory actions and portfolio direction. In my last review, I spoke of advocacy. We’ve witnessed generous referrals through our loyal customer base, new enlistments, and stakeholders giving us the confidence to take the Takaful concept far and wide, living true to the adage – Open to all. I can vouch, that we remain, the only fully-fledged, ethical Takaful enterprise in the land. “Our operations are now fully compliant with the new version of ISO 9001:2015, following a thorough review by DNV-GL, the accredited representative body for such certification in Sri Lanka” In conclusion, I wish to pay tribute to the Chairman and the Board for their continued wisdom, advice, and uncompromising governance ethos. It is our belief, that our proactive level of interaction and openness vis à vis the Insurance Regulatory Commission of Sri Lanka has evoked a higher level of understanding and reciprocity that augurs well for the Takaful Brand of insurance, given the recent vicissitudes of business. I thank them. The continued confidence of our Retakaful partners is a sine quo non in furthering our risk appetite. We remain open to their advice at all times. The “watch” of the Shari’ah Advisory Council in our dealings is a guiding light in the way we work, walking the tightrope in the cluttered market, yet staying steadfast to our principles and ethics. Finally, I wish to say that an organisation can develop the best of products, with world class processes and systems, yet it is the people who make the difference. Trust me, amanites make the difference! They include colleagues from the subsidiaries Amãna Takaful Life PLC and Amãna Takaful Maldives, all of whom have teamed together to deliver Group Revenue of Rs. 4.2 Bn., 16% ahead of 2017. The synergy in all functions across the Group continue to be optimised for consistency in a spirit of mutuality and trust, true to our watchword – Amãna Takaful. M Fazal Ghaffoor Chief Executive Officer 29 March 2019 9
12. Am ãna Takaful PLC Annual Report 2018 BOARD OF DIRECTORS BOARD OF DIRECTORS Tyeab Akbarally Osman Kassim Mohamed Haniffa Mohamed Rafiq Chairman – Non-Executive (ATPLC) Non-Executive Director (ATPLC and AT – Life) Independent Non-Executive Director (ATPLC and AT – Life) Tyeab Akbarally is the Chairman of the Company. He has been on the Board since its inception. He is also a Director of Akbar Brothers (Pvt) Ltd., the largest tea exporter in the country. Tyeab’s business interests extend to many sectors of the economy, including Tea Trade, Pharmaceutical Trade, Hydropower and Commodity Trading. He is also on the Boards of Amãna Bank PLC and several companies in the Akbar Brothers Group. Osman Kassim, the visionary and one of the main promoters of Amãna Group of Companies, is the Chairman of Amãna Bank PLC, Sri Lanka’s first and only licensed commercial bank to conduct all its operations under the principles of Islamic banking. Mr Kassim, a well-versed personality in Islamic banking and finance, was instrumental in introducing Islamic finance to Sri Lanka with the setting up of Amãna Investments in 1997, whose assets and liabilities were later transferred to Amãna Bank PLC in 2011. He has expanded his directorships in Islamic finance companies overseas as well, where he is a Director at Amãna Takaful Maldives and the Maldives Islamic Bank. M H M Rafiq has been on the Board since its inception. He has been involved in the insurance industry for over four decades. His interests are extremely diverse and include Education, Healthcare and Real Estate. Rafiq, with his wealth of experience in the sphere of insurance, plays an active role in Amãna Takaful PLC. With over 40 years of Senior management experience, Mr Kassim was also the founder Chairman of the well-established Expolanka Group of Companies which is engaged in diverse business activities. He is the Chairman of Vidullanka PLC, a leading provider of renewable energy to the National Grid. He also sits on the Board of Aberdeen Holdings (Private) Limited and Crescentrating (Private) Limited – Singapore. He was conferred an Honorary Doctorate from the Staffordshire University in recognition of his achievements as both a global entrepreneur and visionary educationalist. 10
13. Am ãna Takaful PLC Annual Report 2018 BOARD OF DIRECTORS Dato’ Mohd Fadzli Yusof Independent Non-Executive Director (ATPLC and AT – Life) Dato’ Mohd Fadzli Yusof was appointed to the Board on 10 February 1999. He was the founder Chief Executive Officer of Syarikat Takaful Malaysia Berhad, the first Takaful Operator in Malaysia as well as in Asia, since its incorporation in 1984 until his retirement in 2005. He obtained the professional Diploma in Communication, Advertising and Marketing (CAM) from the CAM Foundation in the United Kingdom in 1976. He started his career in broadcasting, including six years with the BBC External Service in London. Currently he is an independent member of the Board of Hei Tech Padu Berhad, Malaysia. He is also a member of the Board of Motor Research Consortium Data Sdn. Bhd, a subsidiary of Hei Tech Padu Berhad. He has been appointed as a member of the Board of State Economic Development Corporation of Kelantan, Malaysia. He is also a member of the Council, Ismail Petra International Islamic College Kelantan, Malaysia, member of the Negeri Sembilan Baitulmal Corporation, Malaysia as well as member of the Board of Trustees Sultan Mizan Royal Foundation, an NGO institution. Dr. Aboobacker Admani Mohamed Haroon Aboo Sally Mohamed Muzzammil Independent Non-Executive Director (ATPLC) Non-Executive Director (ATPLC) Dr. A A M Haroon was appointed as a Director on 21 September 2000. He is a Medical Practitioner by profession. He also holds the chairmanship of several private companies, encompassing different industries including Garments, Healthcare and Clinical Diagnostics. A S M Muzzammil was appointed to the Board in April 2010. He is the Chairman/ Managing Director, Ceylon Foods (Pvt) Ltd. He has served for over 40 years in senior management positions in commerce and industry. He holds an MA in Business Analysis from Lancaster University, UK and the J Dip MA, UK. He is a Fellow of the CIMA (UK) and ACCA (UK). Muzzammil served as the President of CIMA Sri Lanka Division, Exporters Association of Sri Lanka and the Seafood Exporters Association of Sri Lanka. He has been a member, of the Councils of the Moratuwa University, SLIATE, SLSI and the ITI and was a member of the Joint Business Forum and various Chambers of Commerce and Industry. He has been a Vice-President and Treasurer of the OPA and also serves in several business, educational, social and religious organisations. 11
14. Am ãna Takaful PLC Annual Report 2018 BOARD OF DIRECTORS Radhakrishnan Gopinath Independent Non-Executive Director (ATPLC and AT-Life) Radhakrishnan Gopinath was appointed to the Board on 6 June 2012. He was formerly the Chief Executive Officer and the Managing Director of Life Insurance Corporation Lanka (LIC Lanka), having previously held several top positions at LIC India. Gopinath was also a Director at Al Nabooda Insurance Brokers LLC Dubai. He has also served as a Vice-President of the Insurance Association of Sri Lanka and was an Executive Committee member of the Ceylon Chamber of Commerce in the Insurance Subcommittee. Gopinath is a member of Chartered Insurance Institute (CII), UK and also a member of The Personal Finance Society and Society of Mortgage Professionals (PFS) London, UK. He is also a member of Indian Management Association and also is the Alumnus of Madras Christian College, India. He holds a Bachelor of Science (Mathematics) and a Postgraduate Diploma in Business Management. His passion in training, coaching and mentoring along with his extensive experience in insurance led him to establish GOPAST Centre for Learning (Pvt) Ltd., a company dedicated towards building human potential, where he holds the position of Chief Executive Officer/ Managing Director. 12 Mohamed Rizwan Mohamed Nayeem Independent Non-Executive Director (ATPLC and AT-Life) Rizwan Nayeem was appointed to the Board on 7 March 2016. He is currently an Executive Director at the Nortonbridge Capital (Pvt) Ltd. He has had an extensive career in investment research, corporate finance and management consultancy in Sri Lanka, Middle East and United Kingdom. Rizwan has had well-acclaimed research-based publications in the insurance sector and luxury goods in Sri Lanka and United Kingdom. He is also an accomplished entrepreneur having successfully launched vibrant enterprises including the Nortonbridge Capital and Orofini Jewellery. Rizwan has an MBA from the Cranfield School of Management, United Kingdom and he has successfully completed the programme on Advanced Corporate Financial Strategies at the Kellogg School of Management, Illinois, USA. Rizwan is also a member of the Association of Chartered Certified Accountants (ACCA – UK), Chartered Institute of Management Accountants (CIMA – UK) and Chartered Institute of Marketing (CIM – UK).
15. Am ãna Takaful PLC Annual Report 2018 BOARD OF DIRECTORS Mohamed Hassan Sattar Kassim Independent Non-Executive Director (ATPLC) Dr. Ifthikarudeen Ahamed Ismail (Resigned w.e.f. 30 September 2018) Independent Non-Executive Director (ATPLC and AT – Life) Hassan Kassim was appointed to the Board on 7 March 2016. He is the founder and CEO of Expolanka Commodities DMCC Dubai. He has also served as Head of International Trading at Expolanka Commodities (Pvt) Ltd. and Head of Corporate Communications and CSR at Expolanka Holdings PLC. He holds a BA (Hons.) Degree in Management Studies from the University of Nottingham, UK. Hassan Kassim serves as a member of the Board of Directors of EZ Warehousing (Pvt) Ltd., Lanka Commodity Holdings (Pvt) Ltd., Norfolks Foods (Pvt) Ltd., and Beta Ventures. Dr. Ifthikarudeen Ahamed Ismail was appointed to the Board of Amãna Takaful PLC in June 2012. He also serves as Chairman of ATL Investments Holdings Ltd. (Formerly known as Amãna Holdings Ltd.) and as a Director of Asia Siyaka Commodities PLC. He holds a BSc (Hons.) Degree from the University of Ceylon and a PhD from the University of St. Andrews, UK. He has attended the Advanced Management Programme at the Harvard Business Schoaol and has participated in a variety of senior functional and general management training courses, mainly in Europe. He is a Fellow of the Institute of Management of Sri Lanka. Whilst he was Vice-Chairman of Unilever, he served in various capacities in state institutions; among them as a Director of the National Apprentice Board, a member of the Advisory Committee of the Ministry of Foreign Affairs, the Research Planning Council of the CISIR, the Tertiary Vocational Education Commission and the Council of the Open University. He has served as Principal of Zahira College, Colombo, CEO and Director of APIIT Lanka and as Chairman of the Board of the Sri Lanka Business Development Centre, Council member of the Employers’ Federation, Chairman of the Board of Governors of the Symphony Orchestra, Chairman of the Colombo District Scouts Association and Patron of the Photographic Society of Sri Lanka. 13
16. Am ãna Takaful PLC Annual Report 2018 LEADERSHIP TEAM GENERAL MANAGEMENT COMMITTEE 3 5 4 6 1 2 1 – M Fazal Ghaffoor – Chief Executive Officer 2 – Zaid Ibnu Aboobucker – General Manager – Operations and Medical 3 – M S M Iqbal – Head of Information Technology 4 – M Farhan Jabir – Head of Human Resources 5 – A H M Dilshad – Head of Compliance and Corporate Risk 6 – M Rinaz Niyas – Head of Finance 14
17. Am ãna Takaful PLC Annual Report 2018 LEADERSHIP TEAM CORPORATE MANAGEMENT Rizvan Ahamed Nalin Sakalasooriya Shamail Annam Assistant General Manager – Retakaful Assistant General Manager – Motor Claims Assistant General Manager – Business Development (Corporate) Gayan De Silva Noushad Cassim Udaya Kumara Assistant General Manager – Sales Head of Sales – Metropolitan Assistant General Manager – Underwriting Madara Kumarasinghe Senior Manager – Marketing 15
18. Am ãna Takaful PLC Annual Report 2018 LEADERSHIP TEAM MANAGEMENT TEAM 16 Thilak Nishantha Rushdi Zarook Sumedha Mirihana Roshan Ranasinghe Manager – Human Resources and Administration Manager – Legal Manager – Marketing Activations Senior Manager – Medical Underwriting Ahmed Ajfar Jawfer-Us Sadik Faique Hassen Sanjeewa Kaluarachchi Manager – Information Technology Manager – Retakaful Manager – Underwriting Manager – General Takaful K Karunamoorthy Venura Perera Shaheer Rasooldeen Janaka Wijayakumara Manager – Learning and Development Manager – Motor Claims Manager – Relationship Management Unit Senior Regional Manager – Southern and Sabaragamuwa
19. Am ãna Takaful PLC Annual Report 2018 LEADERSHIP TEAM M F M Hismy Thasleen Ammon Zakir Kanaka Aruna Wickramage Regional Manager – East Channel Sales Manager (Corporate) Senior Sales Manager (Broker and Leasing) Area Business Development Manager Suluki Kuthdoos Luqmaan Nizamdeen Manjula Herath M Ramakrishnan Area Business Development Manager Area Business Development Manager Senior Sales Manager Manager – Micro Takaful Hashmath Huzair Arshad Azeez Muhammed Afzal Ali Shafeen Nayeem Assistant Manager – Internal Audit Assistant Manager – Finance Assistant Manager Finance Assistant Manager – Finance 17
20. Am ãna Takaful PLC Annual Report 2018 LEADERSHIP TEAM 24 Connectivity and Convenience Being connected with the customer and enhancing customer convenience are priorities for the Company. Initiatives such as our 24-hour call centre, ready access to prime Takaful solutions via digital channels, and an extensive network of agents island-wide complements our drive...to stay connected. 18
21. Am ãna Takaful PLC Annual Report 2018 LEADERSHIP TEAM Management Discussion and Analysis Group Overview 20 Business Performance Review 21 Product Portfolio 24 Corporate Social Responsibility 28 Human Resource 29 19
22. Am ãna Takaful PLC Annual Report 2018 GROUP OVERVIEW Amãna Takaful PLC (ATPLC) Amãna Takaful PLC was incorporated in 1998 as a Composite Insurer with a paid-up share capital of Rs. 30 Mn. At present the expanded group records an annual GWP of Rs. 4.2 Bn., stated capital of Rs. 1.8 Bn., 36 branches, 313 full time employees and retains its dominant position in the Takaful insurance space in Sri Lanka and Maldives. With a public listing in 2006 ATPLC has three subsidiaries, namely Amãna Takaful Maldives PLC (ATM), Amãna Takaful Life PLC ( AT-Life) and AGL. ATL/ATM were listed in 2011 and 2016 respectively and Amãna Global Limited is a BOI registered Technical Advisory. Amãna Takaful PLC 82% 55% Amãna Takaful Life PLC Amãna Takaful (Maldives) PLC 100% Amãna Global Limited Sri Lanka – Macroeconomic Position Given the low penetration levels in both life and general insurance segments, Sri Lanka’s Insurance industry is well positioned for growth. The segregation of life and non-life has led to the consolidation of smaller companies, resulting in the formation of stronger insurance companies. Sri Lanka’s low level of disposable income remains a challenge for the increase in insurance penetration in the Nation. Further, the depreciation of the Sri Lankan Rupee has further exacerbated the situation during 2018. The increase in interest rates and the rise in insurance claims on account of adverse weather conditions have compelled insurers to increase their rates, thus making the industry less attractive. The introduction of Sri Lanka Financial Reporting Standard SLFRS 17 replacing SLFRS 4 and the introduction of SLFRS 9 – “Financial Instruments” would improve the transparency in financial reporting and introduce a consistent accounting approach to insurance contracts. The new income tax regime that came into effect from 1 April 2018 through the Inland Revenue Act No. 24 of 2017 had a significant impact on the insurance industry. Whilst this had lowered the net profit of life insurers, the distributions to participating life policyholders which were not taxed previously, is now taxed at 14%, and will be increased to 28% from 2021. Therefore, the industry players are led to consider the increased use of technology to reduce costs, product innovation and optimise the use of underutilised channels to obtain a competitive edge. 20 Sri Lanka recorded a Gross Domestic Product (GDP) growth rate of 2.9% for the 3 quarters ended September 2018 compared to 3.3% recorded for the corresponding period in 2017. The trade deficit widened further in the first eleven months of 2018 with the expansion in import expenditure outpacing the growth of export earnings. However, there was a moderation in import expenditure in response to the measures adopted to curb imports of motor vehicles and non-essential goods as well as the impact of the depreciation of the rupee. Reflecting the impact of increase in taxes for vehicles since August, vehicle imports declined in November 2018. While earnings from tourism continued to grow, a slowdown was observed in workers’ remittances. In the financial account, both the Government Securities market and the Colombo Stock Exchange experienced net outflows of foreign investment, although marginal inflows were observed in December 2018. The widening trade deficit, tight conditions in the global markets and excessive speculation in the domestic market exerted pressure on the exchange rate, and the Sri Lankan Rupee depreciated by 15.9% against the US dollar up to 27 December 2018. However, the Rupee appreciated by 1.6% by 31 January 2019. Gross official reserves amounted to USD 7 Bn. at end November 2018, providing an import cover of 3.7 months. Reflecting the impacts of the tight monetary policy stance, money supply decelerated gradually along with the inflation. Due to continued slowdown in food inflation and lower growth in money supply in the market, the year-on-year headline inflation was 2.8% in December 2018. The World Bank's January 2019 Global Economic Prospects Report cites that Sri Lanka's economic growth is expected to speed up slightly to 4.0% in 2019. Inflation, on average, is expected to be below 5.0% in 2019 and stabilise in the range of 4 - 6% thereafter with appropriate policy adjustments. Industry Overview The Gross Written Premiums (GWP) of the General Insurance sector grew by 8% in 2018 to Rs. 96 Bn. The premium income from Motor Insurance of Rs. 62.9 Bn. accounts for nearly 66% of the market, with a growth rate of 12% YoY. The vehicle market is highly dependent on the vehicle Leasing and Hire Purchase industry. Given the prevailing tight monetary conditions, it is expected to result in a slow-down of the vehicle market, impacting the Motor Insurance sector. Non-Motor segment increased to Rs. 1.7 Bn, a 8% growth YoY. Medical Insurance recorded a decline of 13% YoY to Rs. 10.1 Bn., Insurance penetration in Sri Lanka stood at 1.24% significantly lower compared to the 2.71% avergae of peer nations. Technology has a high potential to become one of the key drivers of the insurance sector. Additionally, the adoption of new methods of marketing, distribution and payments will help to boost the industry sales and keep premiums in check.
23. Am ãna Takaful PLC Annual Report 2018 BUSINESS PERFORMANCE REVIEW Group Performance ATPLC The Group’s GWP of Rs. 4.2 Bn. is up 16% from Rs. 3.6 Bn. the previous year. Profits for the year was Rs. 104.2 Mn. (2017 – Rs 155. Mn.). The five-year growth is depicted in the chart below: ATPLC has grown its Gross Written Premium (GWP) by 12% to Rs. 2 Bn. over the previous year, maintaining its market share and position. Profit before tax of Rs. 24 Mn. was recorded for 2018, as compared to the profit of Rs. 63 Mn. the previous year. AT-Life GWP growth of 4% in 2018 to Rs. 828 Mn. an improvement compared to a decline in the previous year. However, the Company posted loss of Rs. 63 Mn., a decline over the previous period. This is due to provision being made for the “past due” investments. Rs. Mn. % 2,500 15 2,000 12 1,500 9 1,000 6 500 3 0 0 2014 ATPLC (Rs. Mn.) 2015 2016 2017 2018 Growth % ATM Posted a GWP of Rs. 1.38 Bn, a 31.4% growth. A profit before tax of Rs. 150 Mn. PBT is generated at Rs. 151 Mn. which is a 128% growth over 2017. MOTOR AND NON-MOTOR MIX ATPLC Group GWP segmental growth over the last five years is depicted in the chart below: 8% – Marine Fire – 10% GROUP GWP Rs. Mn. 4,500 2,500 3,600 2,000 2,700 1,500 1,800 1,000 900 500 0 Misc – 12% 55% – Motor Medical – 15% 0 2014 Group (LHS) 2015 2016 ATPLC (RHS) 2017 ATLL (RHS) 2018 ATM (RHS) 21
24. Am ãna Takaful PLC Annual Report 2018 Business Performance Review Amãna Takaful Life Risk Management and Risk-based Capital AT-Life has completed its 4th year of operation as a separate entity in 2018. The chart below depicts the growth in Gross Written Premium over the last five years: The Company has implemented a detailed Enterprise Risk Management Framework, which is reviewed periodically. A detailed Business Continuity Plan (BCP) supplemented by a Disaster Recovery Plan (DRP) is regularly updated and validated. All control procedures are monitored at the level of Department Heads. The meetings of the Risk Management Committee of the Board are held every quarter. FAMILY TAKAFUL GWP Rs. Mn. The Risk Based Capital Framework was fully-implemented from 1 January 2016. The Company has maintained TAC and CAR above the required levels at all times. 1,000 800 600 ISO Re-certification 400 200 0 2014 Family Takaful 2015 2016 Mortgage and Group 2017 2018 Unit Linked ATPLC successfully obtained ISO re-certification. ISO certification entails routine quality and management related auditing by an external ISO accreditation body. DNV the renowned German ISO certification agency being our ISO accreditor conducted such auditing process, the criteria of which we successfully surpassed. Presently we are the only insurance company to maintain the ISO accreditation. Investment Income The Group reports an investment income of Rs. 343 Mn. in 2018, which is a decline of 19%. Past due investments in AT-Life affected this performance. Microinsurance Profitability The 2018 forecast for the global extreme poverty rate is 8.6%. The main reasons for poverty are political instability, wars and climate change. ATPLC recorded a profit before tax of Rs. 24 Mn. in 2018 compares with that of Rs. 63 Mn. in 2017. Higher claims in 2018 impacted this result. AT-Life, in its fourth year of independent operations, recorded a loss before tax of Rs. 63 Mn. for 2018 for the first time on account of the past due investments. ATM recorded a profit before tax of Rs. 151 Mn. in 2018, a 128% growth over the previous year. At group level a profit of Rs. 104 Mn. is reported in 2018 compared to Rs. 155 Mn. in 2017. 22 In the last 25 years tremendous progress has been made towards the goal of ending extreme poverty. The World Bank also cites that half the world’s population i.e. 3.4 Bn. people still struggle to meet basic needs. This vast section of the population is generally underserved and has very limited access to basic necessities of life. Their livelihoods are dependant basically on informal sectors with no regular income flows and limited or negligible financial resources. They face numerous risks and generally do not have access to formal risk coping solutions. Microinsurance offers a viable alternative for low-income households to manage their risks. According to Swiss Re, the global microinsurance market has the potential of covering up to 4 billion people.
25. Am ãna Takaful PLC Annual Report 2018 Business Performance Review In Sri Lanka, market penetration in microinsurance stands at less than 1% and hence there is high potential. According to research, there is a lack of demand for insurance among low-income households in Sri Lanka which can be attributed partially to an inability to pay the costs involved, as well as a lack of trust in insurance providers. Also the high level of community-based networks at the grass roots level has mitigated the need for insurance as a risk management strategy. Additionally, Sri Lanka’s insurance regulation does not address or define either microinsurance or mutual microinsurance, although it does not prevent insurers from carrying out microinsurance. In order to popularise microinsurance, it is necessary to improve knowledge and awareness on insurance, whilst building trust between low-income communities and insurance providers. Also, innovative technology applications play an important role. As the pioneer in Takaful concept in Sri Lanka, ATPLC has introduced a range of micro Takaful products to suit the different needs of this market segment. According to the study conducted by International Cooperative Mutual Insurance Federation (ICMIF), Sri Lanka was named in its global 5-5-5 strategy which seeks to reach out to five million households in five continents in five years. Being closest to the mutual model, ATPLC was selected as a participating entity. This has provided an impetus to our operations in reaching the underserved and needy segments of the market to extend protection and comfort on a sustainable platform. 23
26. Am ãna Takaful PLC Annual Report 2018 Product portfolio PRODUCT PORTFOLIO GENERAL MOTOR A good insurance policy is an important aspect of business security, as it secures investments against specific forms of destruction or loss. The Business Cover enables an enterprise to operate smoothly despite unexpected calamities. We also offer tailor-made policies for different types of businesses including textile, restaurants, groceries, pharmacies, hardware stores, and supermarkets. The small and medium sized business owner plays a critical role in the Island’s economy. Amãna Takaful PLC (ATL) recognising this discerning segment and its requirements introduced an innovative insurance policy “All in 1”. This policy was designed fully understanding the toil and challenges a business owner undergoes in finding funds and investments to establish their trade. At times of duress this policy would be there to support you through these unforeseen misfortunes. The unique feature of this product is that it is totally digitalised and obtaining a quote as per your requirements could be done without any hassle instantly. 24 MEDICAL MICRO “Takaful Travel Pal” policy offers support to customers travelling overseas for leisure, business, or family engagements. The policy is a comprehensive and reliable travel companion. It covers the holder in the event of hospitalisation, personal accident and injuries, permanent or total disabilities, loss of luggage and valuables, reimbursement of repatriation cost and a comprehensive cover for flight delay/cancellation, missed departure etc. Travel Pal also provides absolute peace of mind to the policyholder and free access to airport lounge facilities at the Bandaranaike International Airport. The policy is available online, catering to the ever growing tech savvy customers. Quotations can be viewed and travel policies can be bought online through our website. The ATL Mobile App can be downloaded and used for any purpose including visa applications. Foreign travellers can obtain their Travel Pal Policy through ATL’s island-wide branch network as well as partnered travel agents. A home is a showpiece of a lifetime decorated with memories of love, care, and family. It is more than mere bricks and mortar. Therefore, “My Home” provides a comprehensive cover for a range of potential risks. In the event of a burglary it covers damaged property and stolen goods. It includes all belongings in the home – jewellery, valuables, interior and exterior decorations. The cover also provides protection against damages caused by fire, and natural disasters such as earthquakes, lightning and thunderstorms etc. Additionally, it offers a host of free benefits such as, a personal accident cover for the family, protection against loss of rent and cash, fire brigade charges, replacement of ATM/credit cards, alternative accommodation requirements, and much more. Maritime enterprise is fraught with many risks. With our Easy Marine cover, one can be at ease, whilst the goods are on the move. This is because we are committed to safeguarding your imports and exports from the point of origin to destination. The policyholder can also enjoy the broad coverage offered with a superior professional and friendly service with speed and efficiency, ensuring smooth sail at any stage.
27. Am ãna Takaful PLC Annual Report 2018 Product portfolio GENERAL MOTOR This motor policy cares not only for your car, but also for your loved ones and includes various covers to suit your risk appetite. It includes an exceptional claim settlement with the choice of three payment options. Our online portal www.takaful.lk and the ATL Mobile App offers customers a wide range of functions that include; renewal of motor policies, obtaining quotations, notifying an accident and tracking a motor claim. MEDICAL MICRO “Smart Rider Cover” – a compelling insurance scheme for motor bikes that covers riders across a spectrum of worst-case scenarios to ensure that they do not have to suffer monetary loss due to any reason. The customised process flow ensures “Smart Rider Cover” customers can ride off after a swift transaction, secure in the knowledge that their motor bikes, their families, and they are covered against any eventualities. This value proposition for three-wheel owners and its driver is the most attractive in the market and takes into account all the challenges faced by the drivers on a daily basis, to ensure that their livelihoods are sustained. The policy includes a host of eventualities, to ensure that at any point in time, the policyholder is shielded from loss. “Tuk Tuk Full” covers natural perils, riot and strike, third party property damage and hiring cover. In addition to this, “Tuk Tuk Full” extends a comprehensive insurance cover against personal emergencies such as death and disability or hospitalisation and unavailability of vehicle due to an accident to secure their daily income. 25
28. Am ãna Takaful PLC Annual Report 2018 Product portfolio GENERAL MOTOR For the 1st time in Sri Lanka ATL has introduced an unique health insurance policy with an extremely affordable fee of just Rs. 2,222/- for an annual medical insurance coverage of Rs. 100,000/-. This has made the Suwasiri Health Insurance policy the most affordable policy available to Sri Lankans. Suwasiri is the perfect solution to the challenges faced by Sri Lankans due to the increasing costs of hospitalisation and medical treatment expenses. Whilst good health is a blessing, an illness can occur when we least expect it. ATL Suwasiri Health Insurance policy is the solution that will help ease one’s financial burden during a time of health crisis. “Kruthaguna”, an insurance cover designed to take care of your elderly loved ones hospitalisation. It gives you the peace of mind to spend time with them, to love them and care for them. ATL’s Kruthaguna provides you with financial security and much needed support in times of need. It is the only policy that provides health insurance benefits for elders above 55 years, and is a lifetime policy. One could enroll with this policy up to the age of 73. 26 MEDICAL MICRO An extended hospital stay is not only distressing but it can also be surprisingly expensive with costs escalating beyond one’s limit. Not just the disease but the cost of treatment too takes its toll. Hale & Hearty insurance plan covers individuals and their families within the age group of 18 to 55. It can be tailored to meet the needs of entrepreneurs, executives, managers, and others like young adults and housewives. The policy also features an array of benefits that provide policyholders with added value and convenience. ATL’s Hale & Hearty gives policyholders the convenient option of cashless transactions in 22 leading hospitals. As a result, ATL settles hospitalisation bills directly to the hospital ensuring the policyholder has minimal need for cash and feels no hassle or stress. Women are the primary caregivers in todays society. However, a number of health issues pose specific risks to them. ATL’s Crystalline policy is especially tailored for ladies, providing coverage for the treatment of ailments common to ladies. From critical illnesses to the complications of aging, the policy insures against the most pressing threats to women’s health, providing peace of mind to them.
29. Am ãna Takaful PLC Annual Report 2018 Product portfolio GENERAL MOTOR “Kiri Govi Sathkara”, yet another revolutionary insurance scheme offered by Amãna Takaful PLC (ATL), aims to up lift the livelihood of the local dairy farmer and is the latest addition to Amãna Takaful’s innovative line-up of covers. ATL’s Kiri Govi Sathkara insurance scheme is designed with a list of benefits that seeks to provide relief to critical issues faced by our dairy farmers. The cover seeks to do so through a life insurance for the farmer while providing the necessary payments in the case of accidental or natural death of their prized cattle. MEDICAL MICRO Insurance is believed to be a requirement which can only be afforded by the affluent in our society. Therefore, “Navodhaya” the Micro Takaful (Insurance) product was launched to spread inclusiveness and mutual assistance. It is an annually renewable Death and Living benefit cover for groups of individuals. 27
30. Am ãna Takaful PLC Annual Report 2018 CORPORATE SOCIAL RESPONSIBILITY ATPLC Continuing with our community engagement initiatives, ATL conducted a blood donation campaign in Akkaraipattu during the year under review as one more valuable CSR initiative by the company. Initiated by ATL’s Banca Takaful team, the campaign was supported by the Company’s sales force together with the banking institutions in the region. The blood donation drive attracted many generous donors, comprising the staff and customers of the respective institutions that took part enthusiastically in this endeavour. Medical Student Sponsorship Amãna Takaful financially supported five university students who gained admission to various universities. The monthly stipend will help meet educational and living expenses and will be supported during the entire period of study. The students were selected from different districts in the country. Regular follow-up is done and students are required to inform the Company of their progress. Senior Management met with the students and parents over lunch to review the progress. 28
31. Am ãna Takaful PLC Annual Report 2018 HUMAN RESOURCES Right People. Right Tools – for the Future! 2018 witnessed the formulation and implementation of ATL’s new Business Plan (2018-2020). Our people have been at the very heart of the Company’s planning process, taking ownership, driving business and delivering results. We are conscious that the commitment and competence of our talent is paramount in addressing business opportunities and challenges. Investments in developing the competencies of our people continue to ensure they are equipped with the essential tools and skills. In line with our credo – Open to all, ATL’s openness to gender, ethnic diversity and fostering a work place in which employees strive to delight all stakeholders, has resulted in ATL being a sought-after employer. The work environment at Head Office and the branch network is reflective of an open, inclusive and stimulating ambience for our employees and customers alike. It’s an environment that advocates and embraces diversity, fresh thinking and shared values building a mutually inclusive culture and one of tolerance. Employee Analysis 2018 Staff Distribution by Province No. % No. % Central 37 11.8 36 12.2 Eastern 24 7.6 26 8.9 2 0.7 2 0.7 27 8.6 28 9.3 Northern 5 1.6 4 1.3 Southern 11 3.7 16 5.4 North Central North Western 4 1.2 2 0.7 Western 203 64.8 182 61.5 Total 313 100 296 100 Sabaragamuwa STAFF AGE ANALYSIS – 2018 Above 50 years – 6.64% Today the Group has 313 full-time employees based at the Head Office and island-wide branch network. 2017 41-50 – 22.59% years 5.65% – 18-25 years 14.62% – 26-30 years Towards our goal in developing and fortifying a sustainable business model, we have aligned the Human Resources Strategy to the Organisation’s corporate goals. Hence, it becomes critically important to ensure we have the right people, with the right skills, at the right place at the right time, in catering to the requirements of all our stakeholders. 50.50% – 31-40 years 29
32. Am ãna Takaful PLC Annual Report 2018 Human Resources Benefits Philosophy SERVICE ANALYSIS OF STAFF – 2018 Above 10 – 22% years 7-10 years – 28% Category It is ATL’s philosophy to provide competitive benefits to its employees. Regular surveys of industry standards are deployed to ensure that the benefits meet the needs of the employees. 37% – 2 years and below yy Personal Accident, Surgical and Hospitalisation/Insurance Designed for employees to manage medical expenses due to unexpected accidents or hospitalisations, ATL provides coverage for employees through the Group Life, Surgical/ Hospitalisation, OPD, Child Birth Insurance Cover, and Critical Illness. 13% – 3-6 years 2018 2017 Staff Strength Senior Management 16 14 Middle Management 141 124 Executives 145 147 11 11 313 296 56 61 314 296 17.83 20.61 Non-Executives Grand Total Labour Turnover Number of Staff Resigned/Terminated Average Number of Staff During the Period Labour Turnover (%) 30 yy Employees Provident Fund and Employees Trust Fund Scheme As per the Employees’ Provident Fund and Employees’ Trust Fund Act, ATL contributes 12% of basic salary towards the Employees’ Provident Fund and 3% towards Employees’ Trust Fund scheme. yy Employees Gratuity Scheme Full-time employees who have completed a minimum of five years continuous service or more are eligible for gratuity as per the Payment of Gratuity Act No. 12 of 1983. yy Annual Awards Day In rewarding and recognising the performance and achievements of staff, ATL held its gala Annual Awards Night at the Golden Rose. More than 550 participants witnessed the glitzy event unfold with many top performers walking away with accolades and prizes that included foreign tours, cash prizes, medals, and trophies.
33. Am ãna Takaful PLC Annual Report 2018 Human Resources Being a much-anticipated event in the Company’s annual calendar, ATL’s “Annual Awards Night” also proves to be a vital motivational and engagement tool in recognising employees in the presence of Board members, Senior Management and staff of ATL. Key Awards: CEO’s Award – Essentially recognises the contribution of operations staff who go beyond the call of duty. Ten Years’ Service Award – Staff completing 10-years of service in the Company are recognised for their dedicated service to ATL. Champion of Champions – Prestigious award for Outstanding Sales Person of the year for overall best performance. yy Amãna Takaful Welfare Association – ATWA Individuals joining ATL are automatically enrolled as members of ATWA. ATWA was founded in 2002 and is run by a committee of staff members, supported by ATL Management. ATWA forms an integral part of our Company and ensures that staff are engaged in different activities and events organised throughout the year, in a spirit of bonhomie. ATWA’s mandate covers staff welfare, sports, and social events. 31
34. Am ãna Takaful PLC Annual Report 2018 Human Resources yy Open Door Policy We foster an Open-door Policy in promoting transparent and open communication. Staff are encouraged to engage their line managers/superiors, HR Department or any member of the Senior Management or executive staff regarding any work-related concern. It is our goal to resolve such issues in an amicable method through such open discussions. We invite and encourage a free and continuous exchange of information and welcome employees’ suggestions and ideas. These meetings are typically informal and an open dialogue is encouraged. The Internal Communications Unit too serves as a robust interface in communicating relevant information to staff on important events, monthly Team Briefs – sharing the performance of the Company and staff achievements in a timely manner. Sri Lanka’s Best Employer Brand Award ATL was a recipient of “Sri Lanka’s Best Employer Brand Award – 2018” – at the World HRD Congress held at the Hotel Taj Samudra in Colombo. The Award was conferred on ATL for the 3rd consecutive year in recognition of the effective HR initiatives taken towards attracting, retaining and developing talent. This has positioned the Organisation as an employer of choice in Sri Lanka. 32 Women’s Day ATL once again touched the lives of the inmates at “Mallika Home for Elderly Women”, by celebrating International Women’s Day with them. It is home to around 100 elderly folk who are looked after and sheltered in a serene and caring setting.
35. Am ãna Takaful PLC Annual Report 2018 Human Resources Learning and Development We propagate a culture of learning within the Organisation, whereby staff are exposed to a structured learning and development plan. There has been no compromise in allocating resources for the growth and development of our talent. The identification of employees’ skills gaps through the year-end Performance Appraisal Review and the role-out of identified and effective programmes has undoubtably played an essential role in talent development and retention thereby creating sustainable, competitive advantage. Training programmes are crafted both internally and also sourced through reputed external facilitation based on the annual Training Needs Analysis, in consultation with Heads of Functions. It is designed to enhance the capability and capacity of employees, in all categories. Professional trainers within and outside the industry form part of our able faculty and panel of trainers to coach our operations and sales force on best practices. A nalysis of needs, requirements, tasks, and participants’ current capabilities D esign learning objectives, delivery format, activities and exercises D evelop course materials, review and conduct, training sessions I mplementation of training with proper tools in place, and observation E valuate awareness, knowledge, behaviour, and results 33
36. Am ãna Takaful PLC Annual Report 2018 Human Resources SKILLS TRAINING TRAINING SUMMARY FOR THE FINANCIAL YEAR – 2018 Nos. 500 Soft – 35% Skills 400 300 200 65% – Technical Skills 100 0 A B A – Overseas Training Exposure B – Soft Skills Development C – Outbound Training C D E D – Executive Development E – Management Development PER CAPITA LEARNING HOURS Management Development Programme (MDP) General – 33% An MDP was crafted in consultation with the Postgraduate Institute of Management (PIM) in 2018. A select group of eight managers attended the said programme covering key subjects/topics over a period of four months. A graduation ceremony is to follow in 2019. 67% – Life Executive Development Programme (EDP) An EDP was devised and facilitated by Mc Quires & Jones for selected Senior Executives of the Company over a six months period, covering key soft skills. The programme was designed to provide executives with the knowledge and tools to enhance their supervisory skills whilst preparing them to face the corporate challenges. 34
37. Am ãna Takaful PLC Annual Report 2018 Human Resources Outbound Training Technical and Sales Training Outbound training was rolled out during the year to enhance organisational performance through experiential learning and team building exercises. In addition to soft skills training, ATL conducted multiple initiatives to enhance the technical and sales skills of staff. During the year all the branch and regional managers were provided a comprehensive training on various subjects to familiarise them in the technical aspects of the business. For new sales advisors joining the Company - “Knowledge Management Track” was introduced in order for them to familiarise themselves to the training initiatives offered by the Company. Manuals were introduced to support the sales team on planning and implementation, skills on professional selling, time management, negotiation and recruitment/selection to name a few. Overseas Training ATL continued to provide overseas training to staff members as an essential element of the L & D Process. In 2018, 21 employees attended overseas training programmes that were directly job related. 35
38. Am ãna Takaful PLC Annual Report 2018 Human Resources Products that Matter We take great care in developing a raft of solutions in packaged products to meet the expectations of our discerning customers. Our “Smart Rider Cover” goes beyond the “norm” to address personal emergency situations. The “All-in-one” Trade cover embraces multiple retail channels through an electronic interface – a game changer. 36
39. Am ãna Takaful PLC Annual Report 2018 Human Resources Stewardship Corporate Governance 38 Enterprise Risk Management 46 Annual Report of the Board of Directors on the Affairs of the Company 55 Report of the Board Audit and Compliance Committee 59 Report of the Board Remuneration Committee 61 Report of the Related Party Transactions Review Committee 62 Report of the Shari’ah Advisory Council 63 37
40. Am ãna Takaful PLC Annual Report 2018 CORPORATE GOVERNANCE Corporate governance that nurtures a culture of transparency, accountability and integrity plays an integral part in ensuring growth and stability. It is through the adoption of the highest of such standards that we continue to enjoy the trust and confidence of all our stakeholders. The present business environment has become more challenging. Therefore, Amãna Takaful PLC and the Group strongly believe that it is vital for the Company and the Group to adopt the highest standards of corporate governance. This would nurture a culture of transparency, accountability, and integrity which are essential prerequisites in ensuring the Company’s survival and growth in a competitive market. Corporate governance is described as a management process in which a corporate, business entity or company is directed, managed, and controlled. It is a concept which is now entrenched in the business world. In any company, where the shareholders have placed the reigns of power in the hands of the Directors, it naturally follows that the Directors are accountable to the shareholders. To ensure that the trust placed in the Directors is secure, a company must adhere to the best corporate governance practices which embody integrity, accountability, and transparency. Nevertheless, the success of any good governance practice initiative depends on how the people are led and the policies as well as how the processes are implemented. In order to create shareholders’ wealth and gain market confidence, Amãna Takaful PLC is committed to adopting best practices. It is also committed to maintain, the smooth functioning of the Company’s operations. 38 Capital Structure and Shareholding Amãna Takaful PLC has at its foundation a capital structure consisting of an issued share capital of Rs. 1,860,001,339/-. The Company has 5,884 shareholders, while the majority shares are held by institutions. Details of the main shareholders are given on page 159. In terms of Article 6 of the Articles of the Association of the Company, the shareholders having approved a consolidation of shares, every 10 existing issued ordinary share to 1 share without any change to the share capital of the Company on 30 July 2018, the issued number of shares have reduced from 1,800,001,296 fully paid shares to 180,000,130 fully paid shares. Board of Directors and Board Committees There are nine Directors on the Board of Amãna Takaful PLC, who hold office in non-executive capacity. The Board of Directors has been drawn from a cross-section of industries/ disciplines. Their expertise and experience in various fields as well as insights, have contributed immensely to making effective and informed Board decisions. The selection of the appropriate and suitable candidates with the right skills and attributes is crucial in order to ensure its efficiency and effectiveness. For it is believed that a healthy Board culture will help to encourage and safeguard good governance practices, which in turn will ensure shareholders’ interests are always protected. The names of the Board of Directors are given on pages 57.
41. Am ãna Takaful PLC Annual Report 2018 Corporate Governance Corporate Governance Framework Amãna Takaful PLC and the Group operate within a clear governance framework, which is outlined in the diagram below and set out in this Report: Amãna Takaful PLC Board of Amãna Takaful PLC Chairman: Tyeab Akbarally Principal objective: Leading the Board to ensure effectiveness in all aspects of its role. Nine Directors: A Non-Executive Chairman and eight Non-Executive Directors. Principal objective: Collectively to ensure the long-term success of the Company. BOARD AUDIT AND COMPLIANCE COMMITTEE BOARD ENTERPRISE RISK MANAGEMENT COMMITTEE BOARD INVESTMENT COMMITTEE Four Independent Non-Executive Directors Three Independent Non-Executive Directors and one Non-Executive Director Two Non-Executive Directors and three Independent Non-Executive Directors Principal objective: Principal objective: Principal objective: To ensure that the interests of shareholders are properly protected in relation to financial reporting and internal controls. The Board Audit and Compliance Committee and . Report on pages 59 60 Review and realign the risk appetite of the Company at strategic and various functional levels. The Board Enterprise Risk Management to . Committee Report on pages 46 54 BOARD REMUNERATION COMMITTEE EXECUTIVE COMMITTEE OF THE BOARD Three Independent Non-Executive Directors and one Non-Executive Director Five Directors, the CEO and Senior Managers on invitation. The Chairman presides at these monthly meetings Principal objective: To develop policy on executive remuneration. It also recommends packages for the Executive Director and senior managers immediately below Board level. The Board Remuneration Committee Report on page 61 . To ensure that a healthy investment portfolio is maintained within the investment guidelines of the IRCSL and Shari’ah. Principal objective: To monitor the implementation of the business strategies of the Company and the Group. RELATED PARTY TRANSACTIONS REVIEW COMMITTEE Three Independent Non-Executive Directors Principal objective: To ensure that the interests of the shareholders are taken into consideration when entering into related party transactions and to ensure that these transactions are not more favourable to related parties than those generally available to the general public. The Board-related Party Transactions Review Committee Report on page 62 . 39
42. Am ãna Takaful PLC Annual Report 2018 Corporate Governance Board Composition The Board currently comprises nine Directors. The composition of the Board and its committees are regularly reviewed by the Board and in particular, by the Nominations Committee to ensure that there is an appropriate balance and diverse mix of skills, experience, independence, and knowledge of the Group. More details of our Board members can be found on pages 10 to 13. The Board is collectively responsible for the long-term success of the Group. The Executive Committee is responsible for running the business operations and ensuring that the necessary financial and human resources are in place in order to achieve the Company’s strategic aims. The Non-Executive Directors are responsible for constructively challenging and helping develop proposals on strategy; scrutinising the performance of Management; satisfying themselves that financial controls and systems of risk management are robust; determining levels of remuneration; satisfying themselves on the integrity of financial information and succession planning. The Board reviews strategic issues on a regular basis and exercises control over the performance of the Company by agreeing budgetary targets and monitoring performance against those targets. Certain matters are reserved for approval by the Board and the Board has overall responsibility for the Group’s system of internal controls and risk management, as described on pages 46 to 54 Following presentation by the Executive Management and a disciplined process of review and challenge by the Board, clear decisions on policy and strategy are adopted and the Executive Management is empowered to implement those decisions. A formal schedule of matters reserved for Board approval is maintained, which covers items that are significant to the Group as a whole, due to their strategic, financial, or reputational implications. A summary of these matters includes: Board Decisions STRATEGIC Approval and monitoring strategic and annual business plans Review of business performance Approving significant acquisitions, mergers or disposals SUCCESSION PLANNING AND REWARDS Ensuring adequate succession plans are in place Board and Board Committee appointments and removals Appointment or removal of the Company Secretary Appointment or removal of the Auditors and determination of the audit fee Major changes in the employee share or pension schemes 40 REPORTING Approval of the Annual Reports and Accounts to be placed before the Company Approval of Financial Statements Matters for business reviews FINANCE, GOVERNANCE AND CONTROLS Internal controls and risk management systems Approval of policies, major projects and contracts Oversight of Directors’ conflicts of interest Rules and procedures for dealing in the Company’s shares Corporate governance and compliance with the SEC’s Code of Conduct REGULATORY Approval of the Group’s interim dividend and recommendation of final dividend Compliance with the SEC Listing Rules, Disclosure and Transparency Rules and the Company’s Law on Takeovers and Mergers, Insurance Regulations
43. Am ãna Takaful PLC Annual Report 2018 Corporate Governance The main functions of the Board of Directors are as follows: yy Formulate, review and monitor implementation of competitive business strategies, including long-term business plans. yy Ensure the appointment of a competent Chief Executive Officer, and an effective management team, including an evaluation of their performance, as well as review the Company’s and the Group’s succession plans. yy Secure a sound and an adequate risk management system. yy Review the integrity and effective information, control, and audit systems. yy Provide the appropriate environment to recruit, engage, retain and develop the personnel needed to deliver the strategy. Board Secretary Under the direction of the Chairman, the role of the Board Secretary and his team is to: yy Ensure good information flows within the Board and its Committees and between Senior Management and Non-Executive Directors; yy Facilitate Director inductions and professional development; yy Adopt business practices that conform to “Shari’ah” principles. yy As requested, arrange independent professional advice for Directors at the Company’s expense; and yy Approve policies of corporate conduct that continue to promote, maintain and sustain the integrity of the Company and the group. yy Advise the Board through the Chairman on governance matters. yy Ensure compliance with legal/ethical standards. The responsibilities of the Chief Executive Officer and the Chairman have been clearly established, adhering to best corporate governance practices. The responsibility and task of the Chairman and the Chief Executive Officer are separated in order to facilitate better workings of the Company and the Group. Board Roles and Responsibilities Chairman The role of the Chairman (or Chair) is to: yy Lead the Board to ensure effectiveness in all aspects of its role; yy Plan agenda items and timings for Board meetings; yy Ensure the membership of the Board is appropriate to meet the needs of the business; yy Oversee that the Board Committees carry out their duties including reporting to the Board; yy Establish appropriate personal objectives for the Chief Executive; yy Ensure Directors are up to date with training and development; yy Provide the information necessary for Directors to take a full and constructive part in Board discussions; yy Promote an open culture of debate; and develop and maintain effective communications with shareholders. New Directors are nominated to bridge identified knowledge gaps. Such Directors are elected to the Board by shareholders at the Annual General Meeting. In accordance with the Articles of Association, three Directors retire annually and being eligible, offer themselves for re-election. The Board meets quarterly and the agenda is circulated to the Board members well ahead of the scheduled date. The Chairman of the Board as well as members chairing various committees of the Board will outline the agendas for the Board and committee meetings respectively. Each Director or member is free to suggest items for the agenda or raise issues and concerns at these meetings. Amãna Takaful PLC has outsourced its secretarial functions to a qualified company of secretaries. The following committees of the Board have been formed with the objective of improving governance; viz- Chief Executive i. Audit and Compliance Committee The role of the Chief Executive Officer (or Chief Executive or CEO) is to: ii. Risk Management Committee yy Run the day-to-day business and operations of the Company; lead the development and delivery of strategy to enable the Group to meet the requirements of its shareholders; iv. Remuneration Committee iii. Investment Committee v. Related Party Transactions Review Committee vi. Executive Committee yy Lead and oversee the Executive Management of the Company; meet the Group’s budget and strategic plans; and 41
44. Am ãna Takaful PLC Annual Report 2018 Corporate Governance Each committee has a defined Terms of Reference approved by the Board, outlining the respective committees’ authorities and responsibilities. The Board may, from time to time, establish and maintain additional committees. All members of these committees are expected to attend all meetings. The Report of the Remuneration Committee is provided on page 61. i. The Board Audit and Compliance Committee The Related Party Transactions Review Committee of the Board comprises three Independent Non-Executive Directors. This Committee is chaired by A S M Muzzammil. The Audit and Compliance Committee comprises three Independent Non-Executive Directors and four Non-Executive Director of the Board. This Committee is chaired by Dato’ Mohd Fadzli Yusof who is an Independent Non-Executive Director of the Company. The Chief Executive Officer, General Managers, relevant Senior Managers and Internal Auditors are invited to be present at the meetings. Exit meetings are held after each internal audit assignment with all concerned, where rectification actions are taken for any weaknesses described in the audit findings. The details of the Audit and Compliance Committee are provided in the Report of the Board Audit and Compliance Committee on pages 59 and 60. ii.The Board Risk Management Committee The Risk Management Committee of the Board comprises four Non-Executive Directors, of which, three are Independent Directors. This Committee is chaired by Dato’ Mohd Fadzli Yusof, who is an Independent Non-Executive Director of the Company. The main function of this Committee is to review and realign the risk appetite of the Company at strategic and various functional levels. Further, the Committee also reviews the different risks that the Company is exposed to and recommends mitigation strategies for such risks. A detail report on the Risk Management Committee functions and its activities during the year 2018 are provided on pages 46 to 54. iii. The Board Investment Committee The Investment Committee comprises Osman Kassim, M R M Nayeem, M H S Kassim and D A Wijesundera. The Committee ensures that a healthy investment portfolio is maintained within the Investment Guidelines of the Insurance Regulatory Commission of Sri Lanka and Shari’ah Advisory Council, whilst optimising yield to meet investment income targets of the Company. The Committee convenes its meetings on a monthly basis. iv. The Board Remuneration Committee The Remuneration Committee comprise four Non-Executive Directors of the Board, of which, three are Independent Directors. Details of remuneration paid to Directors are set out in Note 32 to the Financial Statements on page 128. 42 v.The Board-related Party Transactions Review Committee The Chief Executive Officer and relevant Senior Managers are invited to be present at the meetings. The details of the Related Party Transactions Review Committee are provided in the Report of the Related Party Transactions Review Committee on page 62. vi. The Executive Committee of the Board The Executive Committee or EXCOM is composed of five members of the Board and is chaired by the Chairman of the Company. Meetings are held once a month and the Committee is entrusted with the responsibility of monitoring the implementation of the business strategies of the Company and the Group. The members of the Committee are as follows: i. Tyeab Akbarally – Chairman ii. Osman Kassim iii. M H M Rafiq iv. Dr. Ifthikarudeen Ahamed Ismail (Resigned w.e.f. 30 September 2018) v. M R M Nayeem vi. M H S Kassim Ethical Standards Amãna Takaful PLC aspires to adopt the highest ethical standards and adheres to the Code of Ethics for insurance companies in Sri Lanka, which contain the following elements: yy Honesty and fairness; yy Compliance with regulatory requirements; yy Accountability – provision of accuracy, timely and essential information to stakeholders; yy Avoiding conflict of interest; yy Professional judgement; yy Maintaining privacy and confidentiality of customer-related information; yy Corporate and Social Responsibility; and maintaining best practices in marketing and advertising. The Management encourages employees to adopt ethical practices during the weekly mission meetings.
45. Am ãna Takaful PLC Annual Report 2018 Corporate Governance Executive Management The Chief Executive Officer deliberates strategic issues with the General Management Committee (GMC), which includes the CEO of the Family Takaful business, General Manager – Operations, Head of Finance, Head of Human Resource and the Head of Information Technology and the Head of Compliance and Corporate Risk. Each of them, who head Strategic Business Units, drive their business functions aligned to the strategic plan, building capacity and capability. Corporate governance and compliance is a key function of the GMC. The Company’s performance dashboard is a key evaluation and measurement tool in this process. The Business Operations Management (BOM) takes responsibility for operationalising the plan on a day-to-day basis and implementing the decisions of the GMC. These include a track on competitor activity, steering projects and building cross-functional bonds across different departments and taking ownership for the technical aspects. It is also a forum to build leadership and talent in support of the succession plan. Compliance with “Shari’ah” Requirements Amãna Takaful PLC takes the utmost care in adhering to “Shari’ah” principles. A unit has been set-up internally to carry out quarterly reviews on the policies and operations of the Company. The Unit also conducts regular training programmes to members of staff in order to disseminate the knowledge of Takaful and Islamic finance in general. The Statement of Compliance is a part of the Annual Report and is provided on page 63. Regulatory Compliance The Audit and Compliance Committee is responsible for regulatory compliance. In addition, a Compliance Unit has been set-up to monitor and investigate into all compliance-related matters across the Organisation. It keeps a close track of all new legislations, regulations etc., beside notifying and guiding the respective departments accordingly. Relationship with Stakeholders Internal Controls The Board of Directors acknowledges the imperative of a sound and strong internal control environment for the purpose of attaining good governance. The internal control system, among others, covers risk management and organisational, operational, financial, compliance and business development controls. Towards this end, the Board has entrusted the responsibility of establishing an effective internal control system to the Audit and Compliance Committee, which is also responsible for the regular monitoring of such controls. In addition, an in-house audit team conducts internal audit on the systems and various aspects of the operations, in accordance with the risk-based principle. The findings are conveyed to the Audit and Compliance Committee, which, in turn, briefs the Board on areas of concern. The Board of Directors, discloses policy decisions and operations affecting shareholders through its Quarterly Financial Reports and Annual Reports. The Board entertains questions from shareholders at the Annual General Meetings, ensuring shareholder participation and interaction. The Management holds monthly Team Brief, at which, employees are briefed on company performance, policies, goals and values of Amãna Takaful PLC and their views and suggestions are sought and evaluated. Amãna Takaful PLC believes in serving its customers beyond their expectations. An interactive website provides access to the general public on the Company’s activities. Solvency Requirements The Solvency Margin (Risk-Based Capital) pertaining to long-term insurance (Family Takaful) Business of Amãna Takaful Life PLC and General Insurance Business of Amãna Takaful PLC, has been maintained as per the Solvency Margin (Risk-Based Capital) Rules 2015.   43
46. Am ãna Takaful PLC Annual Report 2018 Corporate Governance Corporate Governance Disclosures Under Colombo Stock Exchange (CSE) Rules in Relation to Directors of the Company Areas of Compliance Current Status Remarks Board of Directors Non-Executive Directors All members of the Board serve in the capacity of Non-Executive Directors. The Company has complied with the CSE Listing Rule 7.10.1. Tyeab Akbarally – Chairman Osman Kassim M H M Rafiq Dato’ Mohd Fadzli Yusof Dr. A A M Haroon A S M Muzzammil All Non-Executive Directors have submitted the annual declaration of their independence or non-independence to the Board of Directors. The Board reviewed the declarations and determined the Independent Directors as given below. Dr. Ifthikarudeen Ahamed Ismail (Resigned w.e.f. 30 September 2018) R Gopinath M R M Nayeem M H Sattar Kassim Independent Directors M H M Rafiq Dato’ Mohd Fadzli Yusof A S M Muzzammil R Gopinath M R M Nayeem M H Sattar Kassim The Board comprises six Independent Directors out of nine Non-Executive Directors, by the end of 2018. Dato’ Mohd Fadzli Yusof and M H M Rafiq do not technically qualify as independent by not meeting Rule 7.10.4 (e) of the CSE Listing Rules. However, the Board, after much discussions, were of the view that they are nevertheless independent. Set out below are the criteria to consider them as Independent Directors: a. They do not provide any services to the Company in a capacity other than Director. b. They have not received financial assistance from the Company. c. They do not have any apparent conflict of interest in the Company, which would impair their independent judgement as Directors. The Board was also of the view that, taking into account the contribution made by these Directors to the affairs of the Company, their integrity and stature were not in question. The Company has complied with the CSE Listing Rule 7.10.2 Remuneration Committee Dato’ Mohd Fadzli Yusof – Chairman This Committee comprises four Independent Non-Executive Directors. M H M Rafiq The Company has complied with the CSE Listing Rule 7.10.5 Dr. A A M Haroon A S M Muzzammil Audit and Compliance Committee Dato’ Mohd Fadzli Yusof – Chairman This Committee comprises four Independent Non-Executive Directors. M H M Rafiq The Company has complied with the CSE Listing Rule 7.10.6 A S M Muzzammil M H S Kassim Related Party Transactions Review Committee 44 A S M Muzzammil – Chairman M H M Rafiq This Committee comprises three Independent Non-Executive Directors. M R M Nayeem The Company has complied with the CSE Listing Rule 9.2.2
47. Am ãna Takaful PLC Annual Report 2018 Corporate Governance Directors’ Attendance at the Meetings Name of the Director Board Meetings Audit Committee Meetings Held/ Applicable Attended Tyeab Akbarally – Chairman 4 3 Osman Kassim 4 3 M H M Rafiq 4 Dato’ Mohd Fadzli Yusof Remuneration Committee Meetings Related Party Transactions Review Committee Meetings Held/ Applicable Attended Held/ Applicable Attended Held/ Applicable Attended 4 4 4 2 2 4 3 4 4 4 4 2 2 Dr. Aboobacker Admani Mohamed Haroon 4 2 2 1 Aboo Sally Mohamed Muzzammil 4 4 2 2 4 3 (Resigned w.e.f. 30 September 2018) 3 3 Radhakrishnan Gopinath 4 4 M R M Nayeem 4 4 4 3 M H Sattar Kassim 4 4 4 4 Dr. Ifthikarudeen Ahamed Ismail 4 4 45
48. Am ãna Takaful PLC Annual Report 2018 Compliance Reporting Operations As the pioneer Takaful Company, risk management is at the heart of what we do and is the source of value creation as well as a vital form of control. It is an integral part of maintaining financial stability for our customers, shareholders and other stakeholders. Our sustainability and financial strength are underpinned by effective risk management, which allows us to prepare for future challenges, move speedily and facilitate better decisions for our customers, giving them peace of mind. Strategic ENTERPRISE RISK MANAGEMENT Internal Environment Objective Setting Though the risk elements are managed on a daily basis at operational levels, the Risk Management Committee (RISCO) formally monitors the Key Risk Indicators through Enterprise Risk Registers for both the Life and the General segments separately since 2014. This section elaborates the Company’s Enterprise Risk Management Framework and the Key Risk Management activities carried out during 2017. What is Enterprise Risk Management? ERM is yet an emerging topic in this part of the world thus needs repeated explanations and elaborations for our society both internally and externally. ERM has formally been defined as “the identification and assessment of the collective risks that affect firm value, and the implementation of a firm-wide strategy to manage those risks” (Meulbroek 2002). Collective risks refer to risk categories such as the one profiled in Committee of Sponsoring Organisations of the Treadway Commission (COSO) ERM cube, as well as the interaction of risks over time. COSO and framework which was published in 2004 in the US defines ERM: “…a process, effected by an entity's Board of Directors, Management and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risks to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives.” 46 Event Identification Risk Assessment Risk Response Control Activities Information and Communication Monitoring Entity-level Division Business unit Subsidiary The Company’s Risk Management Strategy is to operate within the risk appetite guidelines set by the Board Risk Committee and approved by the Board of Directors, which are then reviewed on a quarterly basis, with an eye on the changing corporate risk environment. Given the increased level of assertiveness required in the Risk-Based Capital regime and the connected risk involvements, the Company revisited the current Risk Management Model and widened its scope to an Enterprise Risk Management (ERM) Framework. The Risk Management Unit carries out the risk management process with involvement of departments, managers and executives on the ERM Framework. The underlying premise of enterprise risk management is that every entity exists to provide value for its stakeholders. All entities face uncertainty and the challenge for Management is to determine how much uncertainty to accept as it strives to grow stakeholder value. Uncertainty presents both the risk and the opportunity, with the potential to erode or enhance value. Enterprise risk management enables Management to effectively deal with uncertainty and associated risk and opportunity, enhancing the capacity to build value. Value is maximised when Management sets strategy and objectives to strike an optimal balance between growth return goals and related risks, and efficiently and effectively deploys resources in pursuit of the entity’s objectives. Enterprise risk management encompasses – yy Aligning risk appetite and strategy – Management considers the entity’s risk appetite in evaluating strategic alternatives, setting related objectives, and developing mechanisms to manage related risks. yy Enhancing risk response decisions – Enterprise risk management provides the rigour to identify and select among alternative risk responses – risk avoidance, reduction, sharing, and acceptance. yy Reducing operational surprises and losses – Entities gain enhanced capability to identify potential events and establish responses. yy Reducing surprises and associated costs or losses.
49. Am ãna Takaful PLC Annual Report 2018 Enterprise Risk Management yy Identifying and managing multiple and cross-enterprise risks – Every enterprise faces a myriad of risks affecting different parts of the Organisation, and enterprise risk management facilitates effective response to the interrelated impacts, and integrated responses to multiple risks. yy Seizing opportunities – By considering a full range of potential events, Management is positioned to identify and proactively realise opportunities. IN G Enterprise risk management is as much about understanding the implications from the strategy and the possibility of strategy not aligning as it is about managing risks to set objectives. The figure below illustrates these considerations in the context of mission, vision, core values, and as a driver of the Company’s overall direction and performance. I MPLI CAT IO N LITY OF ST SSIBI RAT TRAT Strategy and Business Objectives RI Risk Governance and Culture Risk, Strategy and Objective Setting Enhanced Performance N PO EGY CHOSE Form the Initial Expression of Risk Available in Strategy ES Mission, Vision, and Core Values FR TH EG Y OT A N L IG Enterprise risk management helps ensure effective reporting and compliance with laws and regulations, and helps avoid damage to the entity’s reputation and associated consequences. In summary, enterprise risk management helps an entity get to where it wants to go and avoid pitfalls and surprises along the way. OM N yy Improving deployment of capital – Obtaining robust risk information allows Management to effectively assess overall capital needs and enhance capital allocation. These capabilities inherent in enterprise risk management help Management achieve the entity’s performance and profitability targets and prevent loss of resources. SK TO E X EC U T I N G T HE Risk in Execution E AT ST R GY Risk Information, Communication and Reporting Monitoring Enterprise Risk Management Performance 47
50. Am ãna Takaful PLC Annual Report 2018 Enterprise Risk Management Definitions of Risk and Risk Management Risk in general could be defined as “The combination of the probability of an event and its negative consequences”, in other words, the barriers in meeting the corporate objectives. Risk management can be defined as “An efficient and effective process of minimising risks in meeting stakeholder requirements”. However, enterprise risk management is not strictly a serial process, where one component affects only the next. It is a multi directional, iterative process in which almost any component can and does influence another. Risks Faced by Insurance Companies It appears that many organisations are experiencing pressure and recognising that change in the organisation’s overall approach to risk oversight is warranted, with the status quo no longer acceptable. Insurance companies whose business model is based on risk management require special attention with regard to its Management. As an insurance company, we identified the following risk categories as illustrated in the diagram below: The risk management professionals refer to this as the “Risk Wheel”. The different colours and shapes illustrate the magnitude and angles of risks that each of the risk types carries with it. Insurance Risk Being an insurance company, risks related to the insurance business i.e., insurance risk, becomes primary in the list. Insurance is all about managing risks on behalf of the customers. In that context, we have identified the following three major risk areas under this category: Risk Control Underwriting Risk – At the time of underwriting of a risk (business/ asset) it is our duty towards the customer to analyse and evaluate the risk that we are willing to undertake. Therefore the Company is bound to charge the right premium as all such premiums are pooled up with other participants. At the time of claims, it is shared by all the participants in the pool. A robust underwriting regime is in place with well-experienced and qualified professionals in the team. Product design – Designing the product offers and benefits with the right pricing is very critical to the insurance business. The Company has appointed a Product Development Team with a set of hand-picked members from sales, Underwriting, Operation, Marketing, Strategy and Finance. They meet periodically and review existing product features while researching for new product requirements. Actuarial calculations and provisions carry Mortality and Claims risks for Life and Non-Life businesses. A qualified and well-experienced professional firm has been contracted to carry out the actuarial functions for both the life and the general segments. A well-scrutinised set of SOPs are formulated and implemented. Claims Risk Risk Control Potential loss of values is the primary risk that the insurance businesses undertake to manage in the business model. At the time of planning for the years ahead, the Management along with the underwriting and sales teams, decide the product mix targets taking the claims experiences pertaining to the specific classes. It also assesses the future potential on agreed assumption. The risk of overpayment or underpayment of claims arises from the claims assessment process and the level of decision-making competency of the staff involved. A segregated process with checks and balances is implemented. Continuous training and development programmes are in place with supervision of well-experienced senior staff to mitigate such risks. 48
51. Am ãna Takaful PLC Annual Report 2018 Enterprise Risk Management Retakaful Risk Risk Control Credit risk can also be a factor with respect to Retakaful. Should a reinsurance company be either slow to pay its claims/contributions or unable to make such payments, the effects on insurance company performance (and hence value) could be significant. Retakaful placements are done with reinsurers having credit ratings as required by Insurance Regulatory Commission of Sri Lanka (IRCSL). Accepting risks beyond the Company’s retention limits. System controls are in place to avoid such instances. However, to further enhance the control measure, certain critical processes are being automated. Additionally, all cases are handled through an evaluation process. Market Risks Strategic and Reputational Risk Market risks are wider risks that any company is exposed to in terms of demand and supply for any types of goods and services, and cost. The increased competition from the industry players in terms of rates, products, marketing etc., are continuous risks while the entry of new players to the industry is a further risk. Achievement of overall business goals is the top most priority for any company and justifies the purpose and existence of organisations in the long run. However, companies need to achieve their corporate goals consistently in the short run in order to achieve long-term success. Thus, achieving annual targets in terms of revenue and profitability along with other operational targets become critical to the Organisation. Furthermore, for insurance companies which are heavily dependent on investment income, healthy market conditions underpinned by solid economic conditions are vital. Therefore, in addition to the overall economic growth conditions, key economic variables such as interest rates, inflation, stock market performance, exchange rates and commodity market conditions especially Gold etc., expose enormous speculative risks to the Company. The Company experienced enormous threat from the market during the year mainly through intense price cutting by almost all the players, especially the Takaful window operators to tap the Takaful client segment. However, we have been able to secure the base being the only fully-fledged Takaful Company. Our clientele do understand that the Takaful is a complete system and not simply a product range in a conventional system. The services of professional Retakaful brokers are also obtained in reinsurance placements. Even though the overall Enterprise Risk Management Framework embraces this objective, specific strategies and action plans to support and ensure achievements of annual targets are vital. Due to internal and external reasons the Company could be exposed to serious risks to the reputation of the Company and its Brand Image, which could in turn affect the performance and achievement of corporate goals. The Company has appointed a Corporate Spokesperson, who maintains a watching brief and monitors all news items related to the Company in the public domain. A collation of these are escalated to Management with the assistance of Media-Watch partners through the marketing unit. 49
52. Am ãna Takaful PLC Annual Report 2018 Enterprise Risk Management Operational Risks Operational risks result from inadequate or failed internal processes, people and systems which cover a wider area of operational aspects: Risk Control Sudden disasters/calamities A detail DRP is in force to recover within 12 hours. BCP/DRP failures Tested every six months. Not having the right people at the right place A Semi-Annual Performance Appraisal system is in place to scrutinise the performance of key staff members including the Top Management Personnel. Process failures – Standard Operating Procedures (SOPs) do not capture important controls The Risk Committee reviews the SOPs periodically along with internal audit and makes modifications when required. Potential fraud and errors Strict implementation of the SOPs will minimise the risks involved in this area in addition to the supervisory controls. Liquidity crunch The Treasury team prepares a cash forecast on a weekly basis prior to making investment decisions. Technology failure The Disaster Recovery Plan covers such risks. Non-implementation of key projects The Business Operations Management (BOM) and the General Management Committee (GMC) meet monthly and review projects under implementation. Utilities Electricity – A back-up Generator is fully active. Compliance Risk The key compliance risks and the control measures are listed below: Risk Control Unable to comply with the applicable regulatory requirements The first item of the Agenda for the regular Executive Committee is set on compliance matters to prioritise the discussion on the subject. Any significant issue is escalated to the Audit/Risk Committees and the Board. A Dedicated Compliance Department is functional headed by a Senior Manager who is a member of the General Management Committee. All Heads of Departments are made aware of the applicable laws and regulations. Further, the regulatory requirements are cascaded down to relevant staff members. A monthly sign-off is obtained on a compliance check list covering applicable laws and regulations. This checklist is tabled at the Executive Committee meetings. A periodic internal audit exercise is carried out on the compliance function and a report is tabled at the Audit Committee meetings. 50
53. Am ãna Takaful PLC Annual Report 2018 Enterprise Risk Management Credit Risk With the deteriorating market practices on credit due to competitive pressures, the Company heightened its credit arrangement process through strict control measures and improved the Credit Policy on the recommendation of the Audit Committee. Risk Control Unable to comply with the applicable regulatory requirements SOP on credit approval which covers authorisation and approvals of Credit Policy is linked to the Sales Commission and Incentive Scheme. Weekly credit review. Risk in recovering Retakaful Rated Retakaful companies. Unable to recover capital value of investments Guided by the IRCSL Investment Guidelines. Close monitoring by the Board Investment Committee. ATPLC Risk Management Grid Impact/Consequences and Likelihood of the risks are the two parameters to gauge the criticalness of the risks that are encountered by the Company. The parameter of Likelihood ranges from almost certain to rare on a scale of A to E while the consequence parameter ranges from negligible to severe on I to V scale. Likelihood Rare Unlikely Possible Likely Almost Certain E D C B A Consequence Severe V H H H VH VH Major IV M M H H VH Moderate III M M H H H Minor II L L M M H Negligible I L L L M M L – Low M – Medium H – High VH – Very High Amãna Takaful maintains a Risk Register which analyses all the potential risks under each of the above categories and these items have been graded based on the above parameters of likelihood and consequence. 51
54. Am ãna Takaful PLC Annual Report 2018 Enterprise Risk Management The Company adopts the following strategies in managing the risks as per the likelihood and impact grading. Please refer the impact and likelihood along with the Risk Management Grid. Impact/Likelihood Risk Option Strategy (I,E), (I,D), (I,C), (II,E), (II,D) Low Accept Keep monitoring of the likelihood. (I,B), (I,A), (II,C), (II,B), (III,E), (III,D), (IV,E), (IV,D) Medium Reduce likelihood and/or impact Have measures to manage likelihood and/or impact. (II,A), (III,C), (III,B), (III,A), (IV,C), (IV,B), (V,E), (V,D), (V,C) High Spread and/or transfer Spread the risk to a third party or involve risk owner sharing the risk. Have contingency arrangements. Have plans for recovery. (IV,A), (V,B), (V,A) Very High Avoid ATPLC Enterprise Risk Management Framework In the ERM Framework of ATPLC, the entire Company (Enterprise) has been structured into a 4-stage cascade viz; Practices, Personnel, Procedures and Publicise from a risk management perspective, as illustrated below: Practices – Governance BOARD RISCO BAC BIC EXCOM Personnel – Key Position Segment Heads CEO CRO HODs Do not participate in the activity. Board – The Board of Directors RISCO – Board Risk Committee BAC – Board Audit Committee BIC – Board Investment Committee EXCOM – Executive Committee CEO – Chief Executive Officer CRO – Chief Risk Officer HODs – Heads of Departments SOPs – Standard Operating Procedures GMC – General Management Committee BOM – Business Operations Management TC – Technical Committee PDT – Product Development Team The ERM framework operates on a bottom-up approach in terms of its Lines of Defence. Policies and Procedures Policies Manual SOPs GMC and BOM First Line of Defence TC PDT Publicise – Company-wide Risk Awareness 52 Publicise – Educating the staff at shop floor level with the appropriate level of authority will help them take the right decision at the right time. We recognise that staff in the front line are exposed to the market and most often encounter various challenges. Cognisant of the challenge in communicating the entire ERM Framework and strategies to manage risks, the Risk Management Unit has adopted a simplified cascade process to the wider audience to mobilise support and upscale knowledge at all levels in the Company.
55. Am ãna Takaful PLC Annual Report 2018 Enterprise Risk Management Second Line of Defence Final Line of Defence Policies and procedures – Policies and procedures play a vital role through proper internal control mechanisms in mitigating several risk factors. Further, the Company also has restructured the Management Review Process through the General Management Committee (GMC) and a Business Operations Management Team (BOM), widening the participation of Key Management Personnel with specific roles in each of the groups. Governance Practices are activities that take place at Board level in order to ensure delivery of promises made to the stakeholders. In addition to the scheduled Board meetings and deliberations, there are Subcommittees at Board level such as the Investment, Board Audit, Risk Management and Executive Committees. These committees independently meet with the Key Management Personnel and review performance, challenges and opportunities under the respective areas and report to the Board periodically. While the Executive and the Investment Committees meet on a monthly basis, the other committees meet on a quarterly basis. Third Line of Defence Key personnel being appointed at key positions in any organisation will mitigate a major part of the risk. We believe in our people, especially people who are occupying key positions, that they will take prudent business decisions in pursuit of corporate objectives. Risk Management Process In the process of managing the risks of the Organisation the Company has identified the following Key Risk Indicators. These indices are monitored through a dashboard which is reviewed at BOM, GMC, RISCO and Board levels. Corrective actions will be taken as and when significant deviations are observed in the relevant areas. Risk Area Key Risk Indicator Insurance risk yy Average rates by subclasses yy Claims ratios by sales teams and subclasses yy Product profitability yy RI Covers Vs risk accumulation Strategic and reputational risk yy Overall target achievements at firm level and departmental level yy Variance analysis yy Market positioning yy Client satisfaction index Market risk yy Interest rate movement yy Bullion market movement yy Equity market movement yy Economic indicators yy Changes in tax regulations yy Changes in Government policies Operational risk yy Staff turnover ratio yy Staff satisfaction index yy Internal/External audit findings yy Deviations from ISO Standards on safety measures yy Current and liquidity ratios yy Implementation of industry best practises 53
56. Am ãna Takaful PLC Annual Report 2018 Enterprise Risk Management Risk Area Key Risk Indicator Credit risk Debtors turnover ratio (Days) Compliance risk yy Queries raised by regulator/Ombudsman yy Pending legal matters yy Unresolved audit queries yy Items in the Management letter yy Investment portfolio mix Key areas reviewed by the Board Risk Committee during 2018: yy Review of the Risk Registers on a quarterly basis and monitored the Key Risk Indicators covering all aspects of the business. yy Review of the status pertaining to Capital Adequacy Ratio (CAR) and Total Available Capital (TAC) under Solvency Margin (Risk-Based Capital) Rules 2015. yy Review of the Takaful Funds and available surplus yy Review of key risks pertaining to the business yy Review of investments The composition of the Committee and details of attendance of each member at meetings of the Committee during the period under review are as follows: Member Number of Meetings Attended Dato’ Mohd Fadzli Yusof Chairman/Independent Non-Executive Director 4 out of 4 M H M Rafiq Independent Non-Executive Director 3 out of 4 Dr. A A M Haroon Non-Executive Director 1 out of 4 A S M Muzzammil Independent Non-Executive Director 4 out of 4 The Chief Executive Officer of Amãna Takaful PLC, Chief Executive Officer of Amãna Takaful Life PLC, General Manager Operations and Medical Takaful, Head of Finance were invited to be present at all meetings of the Committee during the period under review. The Head of Compliance and Corporate Risk also attended all meetings in the capacity of Secretary to the Board Risk Committee. Other members of the Management were also invited to attend the meetings when required. 54
57. Am ãna Takaful PLC Annual Report 2018 ANNUAL REPORT OF THE BOARD OF DIRECTORS ON THE AFFAIRS OF THE COMPANY The Directors are pleased to submit their report together with the audited accounts of the Company and the Group, for the year ended 31 December 2018, to be presented at the 20th Annual General Meeting of the Company. Property, Plant and Equipment Review of the Year Information relating to movement in property, plant and equipment during the year is disclosed under Note 6 to the Financial Statements. The Chairman’s Review on pages 6 to 7 describes the Company’s affairs and mentions important events that occurred during the year and up to the date of this Report. The Management Discussion and Analysis on pages 20 to 23 elaborates the financial results of the Company. These reports together with the Audited Financial Statements reflect the state of affairs of the Company. Principal Activities The principal activity of the Company is General Takaful Business. The Family Takaful (Long-Term Insurance) business is carried out through Amãna Takaful Life PLC, a subsidiary of Amãna Takaful PLC. Financial Statements The Financial Statements are prepared in conformity with the Sri Lanka Accounting Standards and comply with the requirements of Section 151 of the Companies Act No. 07 of 2007 and the Rules and Regulations of Insurance Regulatory Commission of Sri Lanka are given on pages 72 to 156 of this Annual Report. Independent Auditors’ Report The Auditors’ Report on the Financial Statements is given on page 69 to 71 of this Annual Report. Accounting Policies The accounting policies adopted in preparation of the Financial Statements are given on pages 83 to 98. Financial Results and Appropriations The profit after taxation of the Company for the year was Rs. 23.8 Mn. (2017 – Profit of Rs. 62.5 Mn.) and the profit after taxation of the Group for the year was Rs. 104.2 Mn. (2017 – Profit Rs. 155 Mn.). The Family Takaful (Life) Fund balance including Unit Linked Fund stood at Rs. 2.2 Bn. in 2018 (2017 – Rs. 2.1 Bn.) During the year under review, the capital expenditure on property, plant and equipment for the Group amounted to Rs. 36.4 Mn. (2017 – Rs. 20 Mn.). Financial Assets Details of financial assets held by the Company are given in Note 9 to the Financial Statements. Reserves Accumulated Loss as at 31 December 2018 for the Company and Group amounted to Rs. 52.5 Mn. (2017 – Loss Rs. 74.2 Mn.) and loss of Rs. 377.9 Mn. (2017 – Loss Rs. 455.6 Mn.), respectively. The break-up and the movement are shown in the Statement of Changes in Equity in the Financial Statements. Stated Capital The stated capital of the Company as at 31 December 2018 was Rs. 1,860,001,339/- represented by 180,000,130/ordinary shares. The details of the stated capital are given in Note 14 to the Financial Statements on page 115. Contingent Liabilities There were no material contingent liabilities outstanding as at 31 December 2018 other than those reported in Note 38 to the Financial Statements. Material Issues Pertaining to Employees and Industrial Relations of the Company The Company did not come across any material issues pertaining to employees and industrial relations during the year. Post-Balance Sheet Events There were no material events occurring after the reporting date that require adjustments or disclosure in the Financial Statements. 55
58. Am ãna Takaful PLC Annual Report 2018 Annual Report of the Board of Directors on the Affairs of the Company Directors’ Responsibilities Remuneration Committee The Statement of the Directors’ Responsibilities is given on page 66 of this Annual Report. Following are the names of the Directors comprising the Remuneration Committee of the Board: Dato’ Mohd Fadzli Yusof – Chairman Corporate Governance The Company has complied with the Corporate Governance Rules laid down under the Listing Rules of the Colombo Stock Exchange. The Report on the Corporate Governance is given on pages 38 to 45 of this Annual Report. Statutory Payments The Directors, to the best of their knowledge and belief, are satisfied that all statutory payments in relation to all relevant regulatory and statutory authorities have been paid within the stipulated period. Interests Register The Company has maintained an Interest Register as contemplated by the Companies Act No. 07 of 2007. a.Directors’ interest in contracts of the Company, both direct and indirect during the year under review, are included in Note 36 in the related party disclosures to the Financial Statements. b.Details of shareholding of Directors are given under particulars of Directors’ Shareholding below: Board Committees Audit and Compliance Committee Following are the names of the Directors comprising the Audit and Compliance Committee of the Board: Dato’ Mohd Fadzli Yusof – Chairman M H M Rafiq A S M Muzzammil M H S Kassim The Report of the Audit Compliance Committee on pages 59 and 60 set out the manner of compliance by the Company in accordance with the requirements of the Rule 7.10.6 of the Listing Rules of the Colombo Stock Exchange on Corporate Governance. 56 M H M Rafiq Dr. A A M Haroon A S M Muzzammil The particulars of the Remuneration Committee are mentioned in the Report of the Remuneration Committee on page 61. The details of the aggregate remuneration paid to the Executive and Non-Executive Directors during the financial year are given in Note 32 to the Financial Statements. Related Party Transaction Review Committee Following are the names of the Directors comprising Related Party Transaction Review Committee of the Board: A S M Muzzammil – Chairman M H M Rafiq M R M Nayeem The particulars of the Related Party Transaction Review Committee are mentioned in the Report of the Related Party Transaction Committee on page 62. Share information and substantial shareholdings The distribution of shareholding, market value of shares and twenty largest shareholders are given on pages 159 and 160. The earnings per share, dividends per share, net assets per share are given on page 160.
59. Am ãna Takaful PLC Annual Report 2018 Annual Report of the Board of Directors on the Affairs of the Company Directors Re-election of Dato’ Mohd Fadzli Yusof The Directors of the Company during the year are as follows: Date of Appointment Date of Resignation Tyeab Akbarally 7 December 1998 – Osman Kassim 7 December 1998 – M H M Rafiq 7 December 1998 – Dato’ Mohd Fadzli Yusof 10 February 1999 – Dr. A A M Haroon 21 September 2000 – A S M Muzzammil 29 April 2010 – Dr. I A Ismail 6 June 2012 R Gopinath 6 June 2012 – M R M Nayeem 7 March 2016 – M H Sattar Kassim 7 March 2016 – IT IS HEREBY RESOLVED: To re-elect Dato’ Mohd Fadzli Yusof who is 74 years of age as a Director in terms of Section 211 of the Companies Act No. 07 of 2007 and it is specifically declared that the age limit of 70 years referred to, in Section 210 of the Companies Act No. 07 of 2007 shall not apply to the said Dato’ Mohd Fadzli Yusof. Directors’ Shareholdings The interest of the Directors in the shares of the Company as at 31 December 2018 were as follows: 30 September 2018 A brief profile of the Directors are given on pages 10 to 13 of this Annual Report. During the year under review the Board met on four occasions. The attendance at these meetings is mentioned on page 45. In terms of Section 83 of the Articles of Association of the Company – Dr. A A M Haroon retires by rotation and being eligible has offered himself for re-election. As at 31 December 2018 Number of Ordinary Shares 2017 Number of Ordinary Shares Tyeab Akbarally 14 144 33,300,024 127,174,307 Osman Kassim Dato’ Mohd Fadzli Yusof – Dr. A A M Haroon M H M Rafiq – 4 40 2 20 A S M Muzzammil – – Dr. I A Ismail – – R Gopinath – – M R M Nayeem – – M H Sattar Kassim – – R Gopinath retires by rotation and being eligible has offered himself for re-election. In terms of Section 211 of the Companies Act No. 07 of 2007, the following Directors who are above 70 years of age retire by rotation and being eligible have offered themselves for re-election and the following resolutions to be passed accordingly, if thought fit. Re-election of M H M Rafiq IT IS HEREBY RESOLVED: To re-elect M H M Rafiq who is 74 years of age as a Director in terms of Section 211 of the Companies Act No. 07 of 2007 and it is specifically declared that the age limit of 70 years referred to, in Section 210 of the Companies Act No. 07 of 2007 shall not apply to the said M H M Rafiq. Independence of Directors Particulars of Independent Directors are mentioned under Corporate Governance Report on page 44. Related Party Transactions The details pertaining to related party transactions which exceeds the lower of 10% of equity or 5% of the total assets of the Company have been disclosed in the respective Notes to the Financial Statements. Directors have disclosed the transactions with related parties in terms of Sri Lanka Accounting Standard LKAS 24 – “Related Party Disclosures”, in Note 36 to the Financial Statements. In terms of Section 9.3.2 (d) of the listing rules the Board confirms that the Company has complied with all requirements pertaining to Related Party Transaction. 57
60. Am ãna Takaful PLC Annual Report 2018 Annual Report of the Board of Directors on the Affairs of the Company Going Concern Notice of Annual General Meeting The Directors, after making necessary inquiries and review of the financial position and future prospects of the Company, have a reasonable expectation that the Company has adequate resources to continue to be in operational existence for the foreseeable future. Therefore, the going concern basis is adopted in the preparation of the Financial Statements. The Annual General Meeting will be held on 30 April 2019 at 9.30am. at the Committee Room A, Bandaranaike Memorial International Conference Hall (BMICH), Bauddhaloka Mawatha, Colombo 07. The Notice of the Annual General Meeting appears on page 166 of this Annual Report. For and on behalf of the Board, Auditors The resolutions to appoint the present Auditors, Messrs Ernst & Young, Chartered Accountants, who have expressed their willingness to continue in office, will be proposed at the Annual General Meeting. The audit and non-audit fees paid to the Auditors is disclosed in Note 32 on page 128 of this Annual Report. As far as the Directors are aware, the Auditors do not have any relationship on interest in the Company. The Audit Committee reviews the appointment of the Auditors, its effectiveness and its relationship with the Company including the level of audit and non-audit fees paid to the Auditors. Details on the work of the Audit Committee are set out in the Audit Committee Report. 58 Tyeab Akbarally Chairman Managers & Secretaries (Pvt) Ltd. Secretaries Amãna Takaful PLC 29 March 2019 Colombo
61. Am ãna Takaful PLC Annual Report 2018 REPORT OF THE BOARD AUDIT AND COMPLIANCE COMMITTEE Composition The Audit Committee of the Board, appointed by and answerable to the Board of Directors, comprises (as at the date of this Annual Report) four independent Non-Executive Directors. The Committee is made up of members who bring their varied expertise, experience, and knowledge to carry out and discharge their duties and responsibilities professionally and effectively. The Committee meets at least four (4) times a year, usually at quarterly intervals, to review and approve both the annual external and internal audit plans; review and deliberate the internal audit reports on significant issues and audit findings, audit recommendations and Management responses as well as its action plans; discuss on action taken to improve the effectiveness of the internal control system in the audit areas; ensure the independence and objectivity of the External Auditors; review the internal audit process, adequacy of internal controls, and assessment on various transactions of the related party. In addition, the Committee also plays the role of a platform for the Management to raise concerns on possible irregularities for investigation. Agendas and reports to be tabled, presented and deliberated at the meetings were prepared and distributed sufficiently in advance to all members, along with the appropriate and relevant briefing materials. Objectives, Duties and Responsibilities The key objectives of the Audit Committee are: yy To satisfy themselves that a good financial reporting system is in place in order to ensure accurate and timely financial information to the Board of Directors, regulators and shareholders, and to make sure that these are prepared in accordance with Sri Lanka Accounting Standard and other relevant laws and regulations. yy To satisfy themselves of the effectiveness of the Company’s risk management process in order to identify and mitigate risks. yy To review the design and implementation of the internal control system and take steps to strengthen them as necessary. The membership composition of the Committee and details of attendance of each member at meetings of the Committee during the period under review are as follows: yy To ensure that the contract of the business is in compliance with the applicable laws and regulations of the country and the policies and procedures of the Company. Member yy To assess the independence of the External Auditors, and monitor the performance of Internal and External Auditors. Number of Meetings Attended Dato’ Mohd Fadzli Yusof Chairman/ Independent Non-Executive Director 4 out of 4 M H M Rafiq Independent Non-Executive Director 4 out of 4 Aboo Sally Mohamed Muzzammil Independent Non-Executive Director 4 out of 4 M H Sattar Kassim Independent Non-Executive Director 4 out of 4 The Chief Executive Officer, General Manager Operations and Medical Takaful as well as Head of Sales and Marketing were invited to be present at all meetings of the Committee during the period under review. The Head of Internal Audit also attended all meetings in the capacity of Secretary to the Audit Committee, so were the respective Heads of Departments Compliance and Corporate Risk, Finance, Underwriting, Claims and Reinsurance/Retakaful. Other members of the Management were also invited to attend the meetings when required. yy To assess the Company’s ability to continue as a going concern in the foreseeable future. The primary duties and the responsibilities of the Committee are as follows: 1.Review the adequacy of the internal audit programme and plan, internal audit findings and recommend actions to be taken by the Management of deficiencies in controls, processes and procedures. 2.Assessment of the independence and performance of the Company’s External Auditors. 3.Review the Management Letter of the External Auditors and follow-up on its recommendations. 4.Ensure the preparation and presentation of financial reports in line with the accounting standards and ensuring the adequacy of disclosure in such report. 5.Review the effectiveness of internal controls and risk management processes. 6.Ensure compliance with Regulatory Affairs and Corporate Governance. 59
62. Am ãna Takaful PLC Annual Report 2018 Report of the Board Audit and Compliance Committee Internal Audit Conclusion The internal audit functions of the Company are undertaken by the Internal Audit Department. The Department presented to the Committee the Comprehensive Audit Plan for the financial year under review, and instructed the Internal Auditors on the approach to be adopted in their auditing processes. Apart from the Audit Plan, the Committee also instructed the Auditors to carry out investigation, inspection and auditing on certain issues deemed necessary to maintain and ensure the adequacy and effectiveness of internal controls, appropriate governance and principles of best practice. The Committee is satisfied that effective measures, in respect of internal controls of the Company, are in place. The accounting standards are duly followed. Similarly, all the activities and functions of the Company are in compliance with regulatory and statutory provisions. The Committee is also comfortable that the assets of the Company have been adequately safeguarded, and the requirements of independence of both the Internal and the External Auditors are met. With the transparent and appropriate relationship established with the External Auditors, the latter have an obligation to raise and highlight any significant defects or weaknesses in the Company’s system of internal control and compliance to the attention of the Management, the Committee and the Board. On the whole, the Committee firmly believes that the Company is in the right direction in terms of corporate governance and best practices. The Committee deliberated and reviewed a number of internal audit reports on a multitude of operational areas such as Reinsurance (Retakaful), various types of reserve including technical/mortality reserve, claims and underwriting as well as treasury matters. To ensure key decisions and recommendations of the Committee were efficiently implemented a process of follow-up programmes had been put in place. Where necessary, Auditors were directed to conduct follow-up audits and inspections. Dato’ Mohd Fadzli Yusof External Audit Chairman – Board Audit and Compliance Committee The Committee reviewed the Management Letter and other recommendations submitted by the External Auditors, Messrs Ernst & Young and followed-up the issues raised, during the financial year under review. From time to time during the period under review External Auditors made presentations and briefings to the Committee on matters related to new accounting standards and regulatory requirements. 29 March 2019 Colombo The Committee further made recommendations in relation to the remuneration, functions, and terms of engagement of the External Auditors, particularly in relation to their audit work. Provision of Non-Audit Service The Committee is also responsible for reviewing the nature of non-audit services that the External Auditors may undertake in order to ensure that the Auditors’ independence is not impaired in such circumstances. 60
63. Am ãna Takaful PLC Annual Report 2018 REPORT OF THE BOARD REMUNERATION COMMITTEE The Remuneration Committee is entrusted by the Board of Directors with the responsibility of overseeing a reasonable, attractive and competitive remuneration package policy be adopted for all level of employees of the Amãna Takaful Group of Companies. The policy ought to be aligned with the Group’s performance and interests of all stakeholders. The Committee has to ensure that the remuneration structure is commensurate with each employee’s performance, competency, commitment, dedication, responsibility and skill. In implementing the policy, the Committee reviewed and compared the overall executive compensation package, benchmarking against the industry, for the consideration and adoption of the Board. It also recommended the packages for the Chief Executive Officer and other senior members of the Management, taking into cognisance the practice of the industry as well as the overall financial strength of the Group. In relation to this, the Committee took into consideration key result areas and performances linked to the achievement, contribution and performance of each individual officer, relative to respective targets set. Independent Directors had not received, directly or indirectly, any consulting, advisory or other compensatory fees from the Group. Papers to be deliberated at meetings of the Committee were distributed in advance to all the members. Member Number of Meetings Attended Dato’ Mohd Fadzli Yusof Chairman/ Independent Non-Executive Director 2 out of 2 M H M Rafiq Independent Non-Executive Director 2 out of 2 Dr. A A M Haroon Non-Executive Director 1 out of 2 A S M Muzzammil Independent Non-Executive Director 2 out of 2 Farhan Jabir Secretary 2 out of 2 Dato’ Mohd Fadzli Yusof Chairman – Remuneration Committee 29 March 2019 Colombo Other key responsibilities under the mandate of the Remuneration Committee covered the following scopes: yy Reviewing and ensuring that the Group implemented a sound Performance Appraisal Review System for employees at all levels. yy Making recommendation to the Board on annual increments, key promotions and scale-ups. yy Making recommendation to the Board on bonus and related payment, if any, to employees of all levels. yy Considering and recommending to the Board the remuneration scheme for the Directors. yy The Committee comprised four (4) Non-Executive Directors, of whom three (3) are independent. The Committee met twice during the year under review. 61
64. Am ãna Takaful PLC Annual Report 2018 REPORT OF THE RELATED PARTY TRANSACTIONS REVIEW COMMITTEE Objective of the Committee The Committee reviews all related party transactions of Amãna Takaful PLC to ensure that the Company complies with the Rules set out under Section 09 of the Listing Rules. The primary objective of the Committee is to ensure that the interests of the shareholders are taken into consideration when entering into related party transactions and to ensure that these transactions are not more favourable to related parties than those generally available to the general public. Composition of Committee The Related Party Transaction Review Committee (the Committee) comprises three Independent Non-Executive Directors. Four (4) meetings of the Committee were held during the period under review and the attendance of the Committee is as follows: Number of Meetings Attended A S M Muzzammil Chairman/Independent Non-Executive Director 3 out of 4 M H M Rafiq Independent Non-Executive Director 3 out of 4 M R M Nayeem Independent Non-Executive Director 3 out of 4 In addition, the Chief Executive of the Company, Chief Executive Officer of Amãna Takaful Life PLC, Head of Compliance and Head of Finance attended these meetings by invitation. The Head of Compliance, A H M Dilshad served as the Secretary to the Committee. Review of Related Party Transactions The Committee reviewed all related party transactions of the Company for the year 2018 and concluded that all related party transactions entered into during the year were of a recurrent and trading nature, and were within the normal scope of day-to-day operations of the Company. Details of such related party transactions entered into during the year are given in Note 36 to the Financial Statements on pages 133 to 135 of this Annual Report. 62 Policies and Procedures The Head of Compliance is responsible for reporting related party transactions proposed to be entered into by the Company which are within the purview of the Committee in terms of the Listing Rules for the Committee to review and to grant approval. Moreover, on a quarterly basis, the Head of Compliance is required to report the related party transactions entered into by the Company during the period under review for Committee’s consideration. Conclusion Meetings of the Committee Member The Chairman of the Committee has on a regular basis, appraised the Board on the matters deliberated at the Related Party Transactions Review Committee meetings. The Committee is satisfied that the interests of the shareholders as a whole are taken into consideration when entering into related party transactions and that the transactions were not more favourable to related parties than those generally available to the general public. A S M Muzzammil Chairman – Related Party Transactions Review Committee 29 March 2019 Colombo
65. Am ãna Takaful PLC Annual Report 2018 REPORT OF THE SHARI’AH ADVISORY COUNCIL We have examined the operations of Amãna Takaful (PLC) (the “Company”) for the year ending 31 December 2018. We have also conducted our review to form an opinion as to whether the Company has complied with the Shari’ah Rules and Principles and also with the specific fatwas, regulations and guidelines issued by the Shari’ah Advisory Council. We seek Allah the Almighty to grant us all success and straightforwardness. Responsibilities It is our responsibility, as Shari’ah Advisory Council, to ensure that the Takaful operations, financial arrangements, contracts and transactions entered in to by the Company with its participants, clients and stakeholders are in compliance with Shari’ah Rules and Principles. It is the responsibility of the Company’s Management to ensure that all rules, principles and guidelines set by the Shari’ah Advisory Council are complied with, and that all policies and services being offered are duly approved by the Shari’ah Advisory Council. Mufti M I M Rizwe Chairman – Shari’ah Advisory Council Mufti Shafique A Jakhura Scope of Audit and Basis of Opinion Member – Shari’ah Advisory Council The scope of our audit primarily involves the review of Company’s compliance with the Shari’ah Regulations and Guidelines. Our review also includes examining, on a test basis of each type of product in relation to issuance and claims. Ash-Sheikh Murshid Mulaffar Opinion Secretary – Shari’ah Advisory Council In our opinion and to the best of our information and belief and according to the explanations given to us – a.The Takaful operations and financial transactions undertaken by the Company, during the year 2018, were generally in accordance with the guidelines prescribed by the Shari’ah Advisory Council. b.All non-permissible income received are applied in accordance with the guidelines issued by the Shari’ah Advisory Council. 63
66. Am ãna Takaful PLC Annual Report 2018 Report of the Shari’ah Advisory Council Our Guiding Values The Amãna ethos of inclusivity rests on a rock solid base of ethics and values that are in conformity with Shari’ah precepts. It is this foundation that enables the Company to serve all without bias. 64
67. Am ãna Takaful PLC Annual Report 2018  Financial Reports Statement of Directors’ Responsibilities 66 Certificate of the Actuary – Family Takaful (Life) 67 Certification of Incurred But Not Reported (IBNR) Claims and Liability Adequacy 68 Independent Auditors’ Report 69 Statement of Financial Position 72 Statement of Profit or Loss and Other Comprehensive Income 73 Statement of Changes in Equity 74 Statement of Cash Flows 76 Segmental Analysis – Statement of Financial Position – 2018 78 Segmental Analysis – Statement of Profit or Loss and Other Comprehensive Income – 2018 79 Segmental Analysis – Statement of Financial Position – 2017 80 Segmental Analysis – Statement of Profit or Loss and Other Comprehensive Income – 2017 81 Statement of Financial Position of Family Takaful (Life Insurance) – Supplemental 82 Notes to the Financial Statements 83 65
68. Am ãna Takaful PLC Annual Report 2018 STATEMENT OF DIRECTORS’ RESPONSIBILITIES This statement sets out the responsibilities of the Directors in relation to Financial Statements of the Group and the Company. The Directors confirm that the Financial Statements for the year 2018 prepared and presented in this Annual Report are consistent with the requirements of the Companies Act No. 07 of 2007 and the Regulation of Insurance Industry Act No. 43 of 2000. In preparing the financial statements, the Directors have adopted appropriate accounting principles and policies and where relevant, disclosed and explained material departures, if any. The Directors ensure that applicable Accounting Standards (SLFRS/LKAS) have been followed and that the judgements and estimates provided are reasonable and prudent and provide a true and fair view of the state of affairs as well as the profitability of the Company. The Directors also state that the financial statements are prepared on a going concern basis and a review of the Company’s performance indicates that the Company has adequate resources to continue in operation. The Directors have taken proper and sufficient care to ensure the maintenance of adequate accounting records in conformity with the applicable provisions of the Regulation of Insurance Act No. 43 of 2000 and any other legislations including the Companies Act No. 07 of 2007 to safeguard the assets of the Company and to prevent and detect fraud and other irregularities. The Company possesses an effective internal audit system commensurate with the size and nature of its business. Steps have also been taken to ensure that proper records are maintained and the information generated is reliable. It is the responsibility of the Directors to provide the Auditors every opportunity to carry out necessary audit work to enable them to present their audit report. The Directors, are satisfied that all statutory payments, in relation to all relevant regulatory and statutory authorities, which were due and payable by the Company as at the reporting date have been paid or where relevant provided for. 66 The Directors are of the view that they have to the best of their knowledge, discharged their responsibilities as set out in this Statement. For and on behalf of the Board. Tyeab Akbarally Chairman 29 March 2019 Colombo, Sri Lanka
69. Am ãna Takaful PLC Annual Report 2018 CERTIFICATE OF THE ACTUARY – FAMILY TAKAFUL (LIFE) To the Shareholders of Amãna Takaful Life PLC. Actuarial valuation of the Long-Term Insurance Business as at 31 December 2018 We have carried out an actuarial valuation of the Long-Term Insurance Business as at 31 December 2018. We here by certify that, in our opinion – 1.Proper records have been kept by the Company, which are appropriate for the purpose of the actuarial valuation of the liabilities of the Long-Term Insurance Fund; 2.Adequate and proper reserves have been provided as at 31 December 2018, for insurance-related risk liabilities in respect of the Long-Term Insurance Fund, taking into account all current and contingent liabilities as at that date. Zainal Abidin Mohd. Kassim Fellow of the Institute of Actuaries Actuarial Partners Consulting Sdn. Bhd. Suite 17.02, Kenanga International Jalan Sultan Ismail 50250 Kuala Lumpur Malaysia Tel.: 603 2161 0433 Fax: 603 2161 3595 29 March 2019 67
70. Am ãna Takaful PLC Annual Report 2018 CERTIFICATION OF INCURRED BUT NOT REPORTED (IBNR) CLAIMS AND LIABILITY ADEQUACY Amãna Takaful PLC 31 December 2018 Net IBNR and LAT Certification I hereby certify that the undiscounted Central Estimate of IBNR provision of LKR 48,437,789/- inclusive of claim handling expenses is adequate in relation to the Claim Liability of Amãna Takaful PLC as at 31 December 2018, net of Retakaful. This IBNR provision, together with the Case Reserves held by the Operator, is expected to be adequate at a 50th percentile to meet the future liabilities in respect of the Operator’s reported claims obligations as at 31 December 2018, in many, but not all, scenarios of future experience. At the end of each reporting period, companies are required to carry out a Liability Adequacy Test (LAT) as laid out in SLFRS 4. The LAT is performed to assess the adequacy of the carrying amount of the Unearned Contribution Reserve (UCR). I hereby certify that the UCR provision of LKR 628,533,451/set by the Operator, net of Retakaful is adequate at a 50th percentile in relation to the unexpired risks of Amãna Takaful PLC as at 31 December 2018, in many, but not all, scenarios of future experience. The results have been determined in accordance with internationally accepted actuarial principles. I have relied upon information and data provided by the Management of the above operator and I have not independently verified the data supplied, beyond applying checks to satisfy myself as to the reasonableness of the data. Sivaraman Kumar Fellow of the Institute and Faculty of Actuaries For and on behalf of NMG Consulting 19 March 2019 T: +65 6325 9855 F: +65 6325 4700 E: contact@NMG-Group.com www.NMG-Group.com 30 Hill Street, #03-02A, Singapore 179360 68
71. Am ãna Takaful PLC Annual Report 2018 INDEPENDENT AUDITORS’ REPORT Ernst & Young Chartered Accountants 201 De Saram Place P.O. Box 101 Colombo 10 Sri Lanka Tel : +94 11 2463500 Fax Gen : +94 11 2697369 Tax : +94 11 5578180 eysl@lk.ey.com ey.com APAG/HLKC/MHM Basis for opinion Independent Auditors’ Report to the Shareholders of Amãna Takaful PLC We conducted our audit in accordance with Sri Lanka Auditing Standards (SLAuSs). 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 Group in accordance with the Code of Ethics issued by CA Sri Lanka (Code of Ethics) and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Report on the audit of the Financial Statements Opinion We have audited the financial statements of Amãna Takaful PLC (“the Company”), and the consolidated financial statements of the company and its subsidiary (“Group”), which comprise the statement of financial position as at 31 December 2018, and the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including summary of significant accounting policies. In our opinion, the accompanying financial statements of the Company and the Group give a true and fair view of the financial position of the Company and the Group as at 31 December 2018, and of their financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements of the current period. These matters were addressed in the context of the audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial statements. Partners: W R H Fernando FCA FCMA M P D Cooray FCA FCMA R N de Saram ACA FCMA Ms. N A De Silva FCA Ms. Y A De Silva FCA W K B S P Fernando FCA FCMA Ms. K R M Fernando FCA ACMA Ms. L K H L Fonseka FCA A P A Gunasekera FCA FCMA A Herath FCA D K Hulangamuwa FCA FCMA LLB (Lond) H M A Jayesinghe FCA FCMA Ms. A A Ludowyke FCA FCMA Ms. G G S Manatunga FCA Ms. P V K N Sajeewani FCA N M Sulaiman ACA ACMA B E Wijesuriya FCA FCMA Principal T P M Ruberu FCMA FCCA A member firm of Ernst & Young Global Limited 69
72. Am ãna Takaful PLC Annual Report 2018 Independent Auditors’ Report Key audit matter Insurance Liability The Group has significant Non-Life Insurance contract liabilities of Rs. 1,394,786,725, Family Takaful Fund Insurance contract Liabilities of Rs. 534,967,470 and Unit Linked Insurance contract liabilities of Rs. 1,660,124,030 which represents 78% of Group’s total liabilities. General and Life insurance contract liabilities are accounted for in the financial statement using significant estimates and judgments which are sensitive to various factors and uncertainties as disclosed in note 43. Significant management judgement was applied in setting these assumptions. Changes in such significant estimates and judgments used in the valuation of the insurance contract liabilities directly impact the statement of profit and loss. How our audit addressed the key audit matter Our audit procedures were focused on the valuations performed by the firm of external Professional Actuaries engaged by the Company which included the following procedures: yy Testing the key controls on a sample basis over the process of recognition, measurement and submission of data for estimating the insurance contract liabilities. yy We engaged our internal specialized resources to assess the reasonableness of the assumptions used in the valuations of the insurance contract liabilities yy We also assessed the adequacy of the related disclosures in notes 17, 18 and 43 to the financial statements. Accordingly, we considered the valuation of insurance contact liability as a key audit matter. Valuation of Investment Properties Our audit procedures focused on the valuation performed by the The Group carried Investment properties amounting to Rs. 220,429,000 which are stated at fair value as at the reporting date. external valuers, which included the following amongst others. Fair value was determined by an external valuers engaged by the Company. The valuation is subjective to the significant judgement and estimates used by the valuers, which are disclosed in note 7 to the Financial Statements. Due to the significance of estimates and judgements associated with the valuation, this was considered a key audit matter. yy We evaluated the competence, capabilities and objectivity of the external valuers appointed by the management. Other information included in the 2018 Annual Report Responsibilities of management and those charged with governance for the financial statements Other information consists of the information included in the Group’s 2018 Annual Report, other than the financial statements and our Auditors’ Report thereon. Management is responsible for the other information. The Group’s 2018 annual report is expected to be made available to us after the date of this Auditors’ Report. Our opinion on the financial statements does not cover the other information and we will 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 identified above when it becomes available 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. 70 yy We engaged internal specialized resources to assist us in evaluating the appropriateness of the valuation method and range of prices used for the valuation of Land and Buildings. yy We also assessed the adequacy of the related disclosures in note 7 to the financial statements. Management is responsible for the preparation of financial statements that give a true and fair view in accordance with Sri Lanka Accounting Standards, 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 Group’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 Group or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company’s and the Group’s financial reporting process.
73. Am ãna Takaful PLC Annual Report 2018 Independent Auditors’ Report 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 Auditors’ 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 SLAuSs 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 SLAuSs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also: yy 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 evidence 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. yy 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 and the Group. yy Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. yy 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 Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our Auditors’ 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 Auditors’ Report. However, future events or conditions may cause the Group to cease to continue as a going concern. yy 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 those charged with governance 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. We also provide those charged with governance with a statement that we have complied with ethical requirements in accordance with the Code of Ethics regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our Auditors’ Report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on Other Legal and Regulatory Requirements As required by Section 163 (2) of the Companies Act No. 07 of 2007, we have obtained all the information and explanations that were required for the audit and, as far as appears from our examination, proper accounting records have been kept by the Company. As required by Section 47(2) of the Regulation of Insurance Industry Act, No.43 of 2000, as far as appears from our examination, the accounting records of the Company have been maintained in the manner required by the rules issued by the Insurance Regulatory Commission of Sri Lanka, so as to clearly indicate the true and fair view of the financial position of the Company. CA Sri Lanka membership number of the engagement partner responsible for signing this independent Auditors’ Report is 1697. 29 March 2019 Colombo yy Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. 71
74. Am ãna Takaful PLC Annual Report 2018 STATEMENT OF FINANCIAL POSITION Group Company Notes 2018 Rs. 2017 Rs. 2018 Rs. Intangible Assets 5 86,942,914 31,812,197 31,025,948 6,665,391 Property, Plant and Equipment 6 96,024,241 76,724,518 63,757,277 53,168,306 97,451,909 As at 31 December 2017 Rs. Assets 34.2 103,483,264 105,048,241 96,792,137 Investment Property 7 220,429,000 79,925,000 75,500,000 79,925,000 Investments in Subsidiaries 8 1,052,867,811 1,074,322,352 Financial Assets 9 Deferred Tax Assets Retakaful (Reinsurance) Receivables – – 2,835,180,727 2,727,922,574 837,492,607 872,276,119 437,579,148 357,532,747 410,365,133 254,123,425 Contribution (Premium) Receivables 10 711,244,729 567,358,602 529,532,922 489,748,895 Other Assets 11 252,737,848 186,501,020 135,396,673 162,684,646 Financial Assets – Unit Linked 12 1,621,208,465 1,526,678,553 Cash and Bank Balances 13 217,105,631 269,133,976 Cash and Bank Balances – Unit Linked 13 Total Assets – 94,692,309 – – 110,981,837 8,155,160 7,370,003 6,590,091,127 5,936,007,430 3,327,422,816 3,201,347,880 972,644,129 700,319,999 – Liabilities 17 1,394,786,725 1,015,130,229 Insurance Contract Liabilities – Family Takaful Fund 18.1 534,967,470 580,710,123 – Insurance Contract Liabilities – Unit Linked 18.2 1,660,124,030 1,525,135,501 – Employee Benefits 19 66,878,749 50,016,182 Other Liabilities – Unit Linked 20 51,285,609 51,844,853 Other Liabilities 21 653,704,232 548,767,363 183,116,946 266,963,102 Subordinated Debt 22 46,599,805 200,000,000 97,024,473 200,000,000 Finance Lease Liability 23 3,849,823 6,379,446 Short-Term Borrowings 24 200,777,276 187,698,284 Bank Overdrafts 13 Insurance Contract Liabilities – Non-Life Total Liabilities – 37,426 35,028,091 – – 200,777,276 – – – 28,996,165 – 1,244,605 187,698,284 37,426 4,612,973,719 4,165,719,406 1,488,590,915 1,385,259,581 1,860,001,339 Shareholders’ Equity Equity Attributable to Equity Holders of the Parent Stated Capital 14 1,860,001,339 1,860,001,339 1,860,001,339 Other Reserves 15 140,955,732 83,090,398 31,400,577 30,331,677 Revenue Reserves 16 (377,685,807) (52,570,013) (74,244,716) (455,558,904) 1,623,271,187 1,487,532,833 353,846,144 282,755,191 Total Equity 1,977,117,331 1,770,288,024 1,838,831,904 1,816,088,300 Total Equity and Liabilities 6,590,091,127 5,936,007,430 3,327,422,816 3,201,347,880 Non-Controlling Interest These Financial Statements are in compliance with the requirements of the Companies Act No. 07 of 2007. M Rinaz Niyas M Fazal Ghaffoor Head of Finance Chief Executive Officer The Board of Directors is responsible for these Financial Statements. Signed for and on behalf of the Board by: Tyeab Akbarally M H M Rafiq ChairmanDirector The Notes on pages 83 to 156 are an integral part of these Consolidated Financial Statements. 29 March 2019 Colombo 72 1,838,831,904 – 1,816,088,300 –
75. Am ãna Takaful PLC Annual Report 2018 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Group Gross Written Contribution (Premium) Company Notes 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. 25 4,213,899,613 3,640,635,096 2,002,389,304 1,792,031,034 Year Ended 31 December Less: Contribution (Premium) Ceded to Retakaful Companies (Reinsurers) (832,979,375) 3,380,920,237 Net Written Contribution (Premium) (792,904,261) 2,847,730,835 (388,004,377) 1,614,384,927 (378,254,928) 1,413,776,106 Net Change in Reserve for: (156,111,084) Unearned Contribution (Premium) Net Earned Contribution (Premium) (185,078,348) (73,200,586) (129,645,176) 3,224,809,153 2,662,652,487 1,541,184,341 1,284,130,930 303,649,871 381,997,687 112,132,924 111,637,172 Other Revenue Income from Investments 26 – Fair Value Gain from Investment Transferred – 39,439,117 Gain/(Loss) on Available-for-Sale Financial Instruments – – Fair Value Gains and Losses 338,249 54,545,459 – – – – – Other Income 27 143,803,791 70,494,630 30,974,247 14,103,727 Total Revenue 28 3,711,701,932 3,115,483,053 1,738,836,970 1,409,871,829 29 (1,930,905,608) (1,479,674,077) (875,877,178) (694,025,443) (260,412,793) (202,355,823) (108,321,161) (69,514,133) Benefits, Losses and Expenses Takaful (Insurance) Claims and Benefits (Net) Acquisition Cost (Net of Reinsurance Commission) 36,961,441 Change in Family Takaful Contract Liability Other Operating and Administration Expenses 30 Amortisation 31 Total Claims, Benefits and Expenses (1,382,498,205) (5,369,888) (1,967,678) (1,550,306) (1,680,480,301) (1,316,439,672) 168,321,919 33 (35,118,177) 133,203,743 Profit for the Year – (551,349,790) (2,913,705,913) 32 34 (694,314,285) (6,524,847) Profit from Operations Profit/(Loss) Before Taxation (1,185,770,573) – (3,543,380,012) Finance Cost Income Tax (40,535,552) (29,011,797) 201,777,140 58,356,669 93,432,157 (31,872,998) (34,371,140) (30,710,869) 169,904,142 23,985,529 62,721,287 (14,899,924) (244,089) (142,500) 104,191,945 155,004,218 23,741,440 62,578,787 Equity Holders of the Parent 59,986,522 126,501,146 23,741,440 62,578,787 Non-Controlling Interest 44,205,423 28,503,068 104,191,945 155,004,218 23,741,440 62,578,787 0.33 0.07 0.13 0.03 Profit Attributable to: – – Earnings Per Share Basic, Diluted Earnings Per Share 35.2 Other Comprehensive Income Items that will Never be Reclassified to Profit or Loss Defined Benefit Plan Actuarial Losses 19.1 (2,127,800) (5,467,989) (2,066,736) (4,782,978) (2,127,800) (5,467,989) (2,066,736) (4,782,978) Items that are or may be Reclassified to Profit or Loss Net Change in Fair Value of Available-for-sale Financial Assets 2,111,188 Net Change from Revaluation of Property, plant and Equipment 3,494,085 – – – 1,068,900 Net Change in Fair Value of Available-for-sale Financial Assets – Transfer (to)/from Policyholders Reserve 2,550,539 1,124,161 – – Foreign Currency Translation Differences for Foreign Operations 98,856,817 2,220,094 – – – – Related Tax Effect – – 107,012,628 3,344,255 1,068,900 Other Comprehensive Income, Net of Tax 104,884,828 (2,123,734) Total Comprehensive Income for the Year 209,076,774 152,880,484 22,743,604 57,795,809 Equity Holders of the Parent 118,984,303 123,265,853 22,743,604 57,795,809 Non-Controlling Interest 90,092,471 209,076,774 29,614,526 152,880,484 – 22,743,604 – 57,795,809 (997,836) – (4,782,978) Total Comprehensive Income Attributable to: The Notes on pages 83 to 156 are an integral part of these Consolidated Financial Statements. 73
76. Am ãna Takaful PLC Annual Report 2018 STATEMENT OF CHANGES IN EQUITY Other Reserves Year Ended 31 December Revenue Reserves Stated Capital Revaluation Reserve Translation Reserve Rs. Rs. Rs. 1,860,001,339 34,234,871 51,634,475 Policyholders’ Reserve Accumulated Loss Rs. Availablefor-Sale Reserve Rs. Total Rs. NonControlling Interest Rs. (3,172,800) 98,276 (564,355,039) 261,912,591 1,640,353,713 126,501,150 28,503,068 155,004,218 Rs. Group Balance as at 1 January 2017 Net Profit for the Year – – – Foreign Currency Translation Differences for Foreign Operations – – Net Change in Fair Value of Available-for-Sale Financial Assets – Transfer (to)/from Policyholders Reserve – – – Defined Benefit Plan Actuarial Losses, Net of Deferred Tax – – – Total Comprehensive Income – – Transfer of Revaluation Surplus to Retained Earnings, at the Disposal – Dividend Paid – Changes in Ownership Interests – – – – – – 999,042 2,220,094 – – 112,416 1,124,161 Other Comprehensive Income Balance as at 31 December 2017 1,860,001,339 Net Profit for the Period – (4,000,000) – (4,000,000) 30,234,871 – 1,221,052 1,221,052 1,011,745 – 1,011,745 – (5,467,989) – 121,033,161 – 29,614,526 152,880,484 – – – 4,000,000 – – – (14,174,248) (8,771,926) (22,946,174) – – – (10,174,248) (8,771,926) (22,946,174) (453,496,126) 282,755,191 1,770,288,024 59,986,522 44,205,423 104,191,945 52,855,527 (2,161,054) 98,276 – (5,467,989) – – – – – – – – – – – 44,485,567 98,856,817 – – 451,445 2,550,539 – 950,035 2,111,188 Other Comprehensive Income Net Change in Fair Value of Property, plant and Equipment – Foreign Currency Translation Differences for Foreign Operations – – Net Change in Fair Value of Available-for-Sale Financial Assets – Transfer (to)/from Policyholders Reserve – – – Net Change in Fair Value of Available-for-Sale Financial Assets – – – – Defined Benefit Plan Actuarial Losses, Net of Deferred Tax – – – – Total Comprehensive Income – 57,858,722 90,092,471 209,076,774 Dividend Paid – – – – – (22,684,989) (19,001,519) (41,686,508) Effect of Acquisitions, Disposals and Change in Percentage Holdings in Subsidiaries – – – – – 39,439,117 – Total Changes in Ownership Interests – – 39,439,117 – 3,494,085 3,494,085 54,371,249 54,371,249 2,099,094 2,099,094 1,161,154 – 1,161,154 (2,127,800) – – 3,494,085 (2,127,800) Changes in Ownership Interests Balance as at 31 December 2018 1,860,001,339 33,728,956 74 – 107,226,776 – (61,960) – 1,259,430 (378,883,276) 353,846,144 39,439,117 39,439,117 1,977,117,331
77. Am ãna Takaful PLC Annual Report 2018 Statement of Changes in Equity Other Reserves Year Ended 31 December Stated Capital Rs. Revaluation Reserve Rs. 1,860,001,339 34,331,677 Revenue Reserves Availablefor-Sale Reserve Rs. Accumulated Profit/(Loss) Rs. Total – (136,040,525) 1,758,292,491 62,578,787 62,578,787 Rs. Company Balance as at 1 January 2017 Total Comprehensive Income Net Loss for the Year – – – Defined Benefit Plan Actuarial Losses, Net of Deferred Tax – – – (4,282,978) (4,282,978) Total Comprehensive Income – – – 57,795,809 57,795,809 Other comprehensive income Transfer from the Revaluation Reserve Balance as at 31 December 2017 – 1,860,001,339 (4,000,000) – 4,000,000 30,331,677 – (74,244,716) 1,816,088,300 – – 23,741,440 23,741,440 Total Comprehensive Income Net Profit for the Period – Transfer from the Revaluation Reserve – Defined Benefit Plan Actuarial losses, Net of Deferred Tax – Total Comprehensive Income – Balance as at 31 December 2018 1,860,001,339 – 1,068,900 – – – 1,068,900 – (2,066,736) (2,066,736) 1,068,900 – 21,674,704 22,743,604 31,400,577 – (52,570,013) 1,838,831,904 75
78. Am ãna Takaful PLC Annual Report 2018 STATEMENT OF CASH FLOWS Group Year Ended 31 December Notes Company 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. 4,070,013,736 3,496,870,810 1,962,605,277 1,630,517,354 Operating Activities Contribution (Premium) Received from Participants Retakaful (Reinsurance) Premium Paid Claims, Benefits and Expenses Paid Retakaful (Reinsurance) Receipts in Respect of Claims (524,806,482) (691,152,263) (231,762,669) (254,793,855) (2,060,438,062) (1,843,108,519) (1,275,531,234) (955,417,123) 291,481,088 386,167,793 215,291,799 225,327,012 (635,263,575) (421,522,439) (342,305,789) (235,882,228) 214,031,897 232,744,414 64,785,258 35,194,824 24,751,220 22,684,989 16,734,002 (35,118,177) (31,872,998) (34,371,140) (30,710,869) (1,212,529,170) (758,335,005) (387,243,047) (383,666,958) 142,566,081 394,543,013 (5,846,557) 69,278,473 (3,805,874) (7,554,728) (2,995,994) (6,024,204) Income Tax Paid (27,811,385) (10,715,077) Net Cash Flow from/(used in) Operating Activities 110,948,822 376,273,208 (398,553,365) (93,258,634) Purchase of Intangible Assets (32,265,738) (7,209,338) Purchase of Property, Plant and Equipment (39,063,531) (8,922,976) Cash Paid to and on Behalf of Employees Profits Received from Investments and Other Income Dividends Received Finance Cost Paid Other Operating Cash Payments Cash Flow from/(used in) Operating Activities (Note A) Gratuity Paid 33 – 8,842,551 57,171,138 – 63,254,269 Investing Activities Net Disposal/(Purchase) of Investment Securities Proceeds from Disposal of Property, Plant and Equipment Net Cash Flows used in Investing Activities – (430,443,516) 5,763,411 (103,627,537) (56,238,054) – (20,056,653) – (76,294,706) 84,074,809 (6,790,500) (1,146,670) 10,450,000 86,587,639 Financing Activities Repayment of Lease Facility (2,529,623) Short-Term Loans Obtained 550,000,000 Subordinated Debt 107,666,195 Repayment of Short-Term Borrowings (6,902,568) 325,000,000 – (1,393,149) 550,000,000 75,614,945 – (606,699,963) (206,398,390) Dividend Paid (41,686,508) (19,463,127) Net Cash Flows from Financing Activities (64,786,305) 92,235,915 (54,761,919) 217,641,941 (384,281,000) 364,881,587 (139,899,176) 367,483,848 Increase/(Decrease) in Cash and Cash Equivalents (Note B) 76 (678,983,715) (5,836,492) 325,000,000 – (101,521,567) –
79. Am ãna Takaful PLC Annual Report 2018 Statement of Cash Flows Group Year Ended 31 December Notes Company 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. 168,321,919 28,382,621 201,777,140 58,356,669 93,432,157 30,809,410 19,363,761 24,332,695 Note A Reconciliation of Operating Profit/(Loss) with Cash Flows from Operations Profit/(Loss) from Operations Depreciation 32 Amortisation Provision for Gratuity (Gain)/Losses from FVTPL Investments 6,524,847 5,369,888 1,967,678 1,550,306 14,897,485 13,046,710 6,961,184 6,240,148 483,803 (456,386) – – Fair Value of Instrument transferred – – 54,545,459 – Provision for Impairment of Investment in Subsidiary – – (49,500,000) – (Increase)/Decrease in Debtors and Other Assets (65,133,773) (57,078,089) Increase tn Family Takaful (Long-Term Insurance) Fund (35,823,821) 64,202,606 Increase/(Decrease) in Net Unearned Contribution (Premium) 156,111,084 Increase/(Decrease) in IBNR and General Reserve Provision 42,315,777 185,078,347 (168,737,762) – 73,200,586 (169,597,135) – 129,645,176 9,513,079 40,552,135 6,640,580 Increase/(Decrease) in Claims Provision (141,161,360) (97,331,572) 114,903,719 (86,641,238) Increase/(Decrease) in Other Creditors 104,936,870 76,321,296 127,513,846 99,227,070 Profit on Sale of Property, Plant and Equipment Finance Cost – 33 (Gain)/Loss on Fair Value of Investment Property (35,118,177) (3,415,418) (31,872,998) – (34,371,140) (3,415,418) (30,710,869) 5,495,000 (1,425,000) 142,566,081 394,539,013 Cash at Bank and in Hand and Cash Equivalents 682,894,486 1,067,175,486 379,659,911 519,559,087 Cash and Cash Equivalents at the End of the Period 682,894,486 1,067,175,486 379,659,911 519,559,087 1,067,175,486 702,293,899 519,559,087 152,075,239 364,881,587 (139,899,176) 367,483,848 Cash Flows from/(used in) Operating Activities 4,425,000 (1,425,000) (5,846,557) 69,278,472 Note B Increase/(Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents at the Beginning of the Year Increase/(Decrease) in Cash and Cash Equivalents 13 (384,281,000) The Notes on pages 83 to 156 are an integral part of these Consolidated Financial Statements. 77
80. Am ãna Takaful PLC Annual Report 2018 SEGMENTAL ANALYSIS – STATEMENT OF FINANCIAL POSITION – 2018 Amãna Takaful PLC Rs. Amãna Takaful Life PLC Rs. Amãna Takaful (Maldives) PLC Rs. Intangible Assets 31,025,948 20,954,644 39,477,845 Property, Plant and Equipment 63,757,277 28,703,776 3,541,555 Year Ended 31 December Amãna Global Limited Rs. Adjustments Group Rs. Rs. Assets Improvements to Leasehold Buildings Deferred Tax Asset Investment Property Investment in Subsidiaries – 96,792,137 75,500,000 1,052,867,810 – 144,929,000 – – – (4,515,524) – – (2,641,350) – 86,942,914 96,024,240 – 103,483,262 – – – – (1,052,867,810) 220,429,000 1,204,999,333 – (82,475,918) 27,214,096 – – 437,579,148 711,244,729 – Financial Assets 837,492,607 Retakaful (Reinsurance) Receivables 410,365,133 Contribution (Premium) Receivables 529,532,922 39,676,266 142,035,541 – – Other Assets 127,916,276 51,885,520 72,936,050 – – 252,737,848 – – 1,621,208,465 Financial Assets – Unit Linked Related Party Receivable Cash and Bank Balances Cash and Bank Balances – Unit Linked Total Assets – 875,164,705 – 9,332,475 – 21,630 – 1,621,208,465 7,480,397 1,832,199 94,692,309 85,064,941 – 3,327,422,816 8,155,160 2,877,574,677 – – 35,397,494 – 1,534,934,390 – 1,950,886 – 1,972,516 (9,312,596) – – (1,151,813,198) 2,835,180,727 – 217,105,631 8,155,160 6,590,091,127 Liabilities Insurance Contract Liabilities – Non-Life 972,644,129 – Insurance Contract Liabilities – Family Takaful Fund – 534,967,470 Insurance Contract Liabilities – Family Takaful Unit Linked – 1,660,124,030 Retakaful (Reinsurance) Payables Employee Benefits Other Liabilities – Unit Linked Other Liabilities Related Party Payable Subordinated Debt Finance Lease Liability Short-Term Borrowings Total Liabilities 120,192,628 35,028,091 – 61,092,118 – 7,078,883 51,285,609 65,011,168 422,142,596 – – 1,394,786,725 – – – 534,967,470 – – – 1,660,124,030 127,963,743 – – 248,156,371 24,771,775 – – 66,878,749 – – 51,285,609 – 405,547,861 – 266,496,212 12,948,440 1,832,199 7,480,397 – – (9,312,596) 97,024,473 32,051,250 – – (82,475,918) 3,849,823 – – – 3,849,823 – – – 200,777,276 – 200,777,276 – – 46,599,805 1,488,590,915 2,361,848,629 841,374,325 12,948,440 (91,788,514) 4,612,973,719 1,860,001,339 500,000,000 202,370,719 37,125,000 (739,495,719) 1,860,001,339 31,400,577 3,430,948 194,828,432 12,295,100 296,360,913 (48,100,924) (585,670,852) 515,726,048 693,560,064 (10,975,924) (1,413,870,829) Shareholders’ Equity Equity Attributable to Equity Holders of the Parent Stated Capital Other Reserves Revenue Reserves (52,570,013) 1,838,831,904 Non-Controlling Interest – – – Total Equity 1,838,831,904 515,726,048 693,560,064 Total Equity and Liabilities 3,327,422,816 2,877,574,677 1,534,934,390 – – (10,975,924) 1,972,516 The Notes on pages 83 to 156 are an integral part of these Consolidated Financial Statements. 78 (88,704,257) 353,846,144 140,955,732 (377,685,807) 1,623,271,264 353,846,144 (1,060,024,685) 1,977,117,408 (1,151,813,198) 6,590,091,127
81. Am ãna Takaful PLC Annual Report 2018 SEGMENTAL ANALYSIS – STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME – 2018 Year Ended 31 December Gross Written Contribution (Premium) Less: Contribution (Premium) Ceded to Retakaful Companies (Reinsurers) Net Written Contribution (Premium) Amãna Takaful PLC Rs. Amãna Takaful Life PLC Rs. Amãna Takaful (Maldives) PLC Rs. 2,002,389,304 827,947,507 1,383,562,803 – – (21,194,646) (423,780,353) – – (388,004,377) Amãna Global Limited. Rs. Adjustments Group Rs. Rs. 4,213,899,613 (832,979,375) 1,614,384,927 806,752,861 959,782,450 – – 3,380,920,237 Add: Unearned Takaful Contribution (Premium) at the Beginning of the Year 555,332,865 5,126,039 165,802,624 – – 726,261,528 Less: Unearned Takaful Contribution (Premium) at the End of the Year (628,533,451) (5,816,636) (248,022,525) – – (882,372,612) – Net Earned Contribution (Premium) 1,541,184,341 806,062,264 877,562,549 – 112,132,924 180,151,438 45,039,934 – (33,674,429) – 54,545,459 3,224,809,153 Other income Income from Investments Fair Value Gains from Investment Transfers Gain/(loss) on Available-forSale Financial Instruments Fair Value Gains and Losses Other Operating Income Total Revenue 54,545,459 – – – – – – 39,439,117 – (42,545,459) – 30,974,247 30,003,052 67,826,166 8,400,326 1,738,836,970 1,016,216,754 990,428,649 5,293,984 – 42,545,459 6,600,000 (39,074,429) 303,649,871 – 39,439,117 – 143,803,791 3,711,701,932 Benefits, Losses and Expenses Takaful (Insurance) Claims and Benefits-Net (875,877,178) (543,446,265) (511,582,166) – – (1,930,905,608) Acquisition Cost (Net of Reinsurance Commission) (108,321,161) (105,824,511) (46,267,121) – – (260,412,793) – – Increase in Family Takaful (Long-Term Insurance) Fund – 36,961,441 – 36,961,441 Less: Indirect Expenses Other Operating and Administration Expenses (675,063,626) (457,558,206) (275,426,062) Amortisation (1,967,678) (1,295,725) (4,823,944) Depreciation (19,250,659) (7,282,950) (1,512,942) Profit/(Loss) from Operations Finance Cost Profit/(Loss) Before Taxation Income Tax Profit/(Loss) for the Period 58,356,669 (34,371,140) 23,985,529 (244,089) 23,741,440 (62,229,463) (747,036) (62,976,499) – (62,976,499) 150,816,415 – 150,816,415 (27,811,385) 123,005,030 (5,954,839) – (47,959) (708,815) – (708,815) – (708,815) 59,599,037 (1,354,403,695) 1,562,500 (6,524,847) – 6,616,078 – 6,616,078 (956,323) 5,659,755 (28,094,510) 168,321,919 (35,118,177) 133,203,743 (29,011,797) 104,191,945 The Notes on pages 83 to 156 are an integral part of these Consolidated Financial Statements. 79
82. Am ãna Takaful PLC Annual Report 2018 SEGMENTAL ANALYSIS – STATEMENT OF FINANCIAL POSITION – 2017 Year Ended 31 December Amãna Takaful PLC Rs. Amãna Takaful Amãna Takaful Amãna Life PLC (Maldives) PLC Global Limited Rs. Rs. Rs. Adjustments Group Rs. Rs. (4,515,524) 31,812,197 Assets Intangible Assets Property, Plant and Equipment 6,665,391 22,250,369 7,411,960 53,168,306 21,164,995 2,321,626 Improvements to Leasehold Buildings Deferred Tax Asset Investment Property Investment in Subsidiaries Financial Assets Investment in Gold – – – – 105,048,241 – 79,925,000 79,925,000 – – – 1,074,322,352 – – – – (15,106,341) – 2,727,922,574 – – 254,123,425 250,000 103,159,402 – – 357,532,747 Contribution (Premium) Receivables 489,748,895 33,059,196 44,550,511 – – 567,358,602 Other Assets 146,113,354 28,816,883 53,954,722 – – Financial Assets – Unit Linked – Inter-Fund Receivable – Management Fee Receivable – Related Party Receivable Call Deposit Cash and Bank Balances Cash and Bank Balances – Unit Linked Total Assets 16,571,292 – 110,981,837 – 3,201,347,880 – – 15,106,341 (1,074,322,352) – Retakaful (Reinsurance) Receivables Other Assets – Unit Linked – 815,070,447 76,724,516 – – 1,040,576,008 – – 97,451,909 872,276,119 7,596,332 – 69,589 (42,383,938) – 186,501,020 – – – – – – – – – – – – – – – – – – – – 1,526,678,553 129,461,474 7,370,003 2,809,627,482 28,229,176 – 1,062,294,178 3,639,639 – 461,489 – 19,277,057 (20,210,931) – – – (1,156,539,086) – 1,526,678,553 – – 269,133,976 7,370,003 5,936,007,430 Liabilities Insurance Contract Liabilities – Non-Life Insurance Contract Liabilities – Family Takaful Fund Insurance Contract Liabilities – Family Takaful Unit Linked Retakaful (Reinsurance) Payables Employee Benefits 700,319,999 580,710,123 – 1,525,135,501 – – 1,015,130,229 – – – 580,710,123 – – – 1,525,135,501 11,714,253 67,813,027 – – 276,018,732 28,996,166 6,013,000 15,007,016 – – 50,016,182 – – – – – – 51,844,853 – 272,748,631 – Other Liabilities – Unit Linked – 70,471,650 Murabaha Facility – Related Party Payable – Subordinated Debt 314,810,230 196,491,452 Deferred Tax Liability Other Liabilities – – 200,000,000 – 51,844,853 38,851,889 – 16,435,130 – 151,099,089 – 9,210,131 12,326,003 – 17,218,164 – (42,863,425) – – – – – – 200,000,000 Finance Lease Liability 1,244,604 – – – 6,379,445 Short-Term Borrowings 187,698,284 – – – – 187,698,284 37,426 37,426 Bank Overdrafts 5,134,842 – – – – Inter-Fund Payable – – – – – Management Fee Payable – – – – – Total Liabilities – – 1,385,259,581 2,235,839,592 557,939,492 29,544,167 (42,863,425) 4,165,719,406 1,860,001,339 500,000,000 202,370,719 37,125,000 (739,495,719) 1,860,001,339 30,331,677 (1,544,774) 96,055,050 (74,244,716) 75,332,665 205,928,924 1,816,088,300 573,787,890 504,354,699 Shareholders’ Equity Equity Attributable to Equity Holders of the Parent Stated Capital Other Reserves Revenue Reserves Non-Controlling Interest – – – – (41,751,554) 83,090,398 (47,392,109) (615,183,669) (455,558,906) (10,267,109) (1,396,430,942) 1,487,532,832 – 282,755,192 282,755,192 Total Equity 1,816,088,300 573,787,890 504,354,699 (10,267,109) (1,113,675,750) 1,770,288,024 Total Equity and Liabilities 3,201,347,880 2,809,627,482 1,062,294,178 19,277,058 (1,156,539,086) 5,936,007,430 The Notes on pages 83 to 156 are an integral part of these Consolidated Financial Statements. 80
83. Am ãna Takaful PLC Annual Report 2018 SEGMENTAL ANALYSIS – STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME – 2017 Year Ended 31 December Gross Written Contribution (Premium) Less: Contribution (Premium) Ceded to Retakaful Companies (Reinsurers) Net written Contribution (Premium) Amãna Takaful PLC Rs. Amãna Takaful Life PLC Rs. Amãna Takaful (Maldives) PLC Rs. Amãna Global Limited Rs. Adjustments Group Rs. Rs. 1,792,031,034 792,173,604 1,056,430,458 – – 3,640,635,096 (378,254,928) (26,823,377) (387,825,957) – – (792,904,261) 1,413,776,106 765,350,227 668,604,501 – – 2,847,730,835 110,683,783 – – 536,371,472 Add: Unearned Takaful contribution (Premium) at the Beginning of the Year 425,687,689 Less: Unearned Takaful Contribution (Premium) at the End of the Year (555,332,865) (314,564) (165,802,624) – – (721,450,053) 1,284,130,930 765,035,663 613,485,660 – – 2,662,652,487 111,637,172 253,100,870 27,024,548 Net Earned Contribution (Premium) – Other Income Income from Investments Fair Value Gains and Losses Other Operating Income – – 734,166 338,249 – (10,500,000) – 381,996,755 338,249 14,103,727 15,966,881 40,424,021 5,400,000 (5,400,000) 70,494,630 1,409,871,829 1,034,103,415 681,272,479 6,134,166 (15,900,000) 3,115,482,120 Takaful (Insurance) Claims and Benefits-Net (694,025,443) (423,475,426) (362,173,207) – – (1,479,674,077) Acquisition Cost (Net of Reinsurance Commission) (69,514,133) (97,197,627) (35,644,063) – – (202,355,823) – – (40,535,552) Total Revenue Benefits, Losses and Expenses Increase in Family Takaful (Long-Term Insurance) Fund – (40,535,552) – Less: Indirect Expenses Other Operating, Investment Related and Administration Expenses (527,017,095) (414,868,918) (211,835,327) Amortisation (1,550,306) (1,298,185) (4,083,897) – Depreciation – (24,332,695) (4,974,036) (1,445,895) Profit/(Loss) from Operations 93,432,157 51,753,671 66,090,089 Finance Cost (30,710,869) (1,162,129) Share of Profit/(Loss) from Associate Profit/(Loss) Before Taxation Income Tax Profit/(Loss) for the Period – 62,721,288 – (6,696,608) (562,442) 5,400,000 (1,155,017,948) 1,562,500 (5,369,888) – (8,937,500) – – – – – – 50,591,542 66,090,089 (562,442) (142,500) (759,963) (13,823,623) (173,838) 62,578,787 49,831,579 52,266,467 (736,281) (8,937,500) – (8,937,500) (30,751,693) 201,777,140 (31,872,998) – 169,904,142 (14,899,924) 155,004,218 The Notes on pages 83 to 156 are an integral part of these Consolidated Financial Statements. 81
84. Am ãna Takaful PLC Annual Report 2018 STATEMENT OF FINANCIAL POSITION OF FAMILY TAKAFUL (LIFE INSURANCE) – SUPPLEMENTAL 2018 Rs. 2017 Rs. Intangible Assets 20,954,644 22,250,369 Property, Plant and Equipment 28,703,776 21,164,995 Assets Investment Property 144,929,000 Financial Assets 875,164,705 Retakaful (Reinsurance) Receivables – – 1,040,576,008 250,000 Contribution (Premium) Receivables 39,676,266 33,059,196 Other Assets 53,717,719 28,816,882 1,621,208,465 1,526,678,553 85,064,941 129,461,474 8,155,160 7,370,003 2,877,574,677 2,809,627,480 Financial Assets – Unit Linked Cash and Bank Balances Cash and Bank Balances – Unit Linked Total Assets Liabilities Insurance Contract Liability – Family Takaful Fund Insurance Contract Liability – Family Takaful – Unit Linked Employee Benefits 534,967,470 580,710,123 1,660,124,030 1,525,135,501 7,078,883 6,013,000 Other Liabilities – Unit Linked 51,285,609 51,844,853 Subordinated Debt 32,051,250 Other Liabilities 72,491,565 67,001,273 3,849,823 5,134,842 2,361,848,629 2,235,839,592 500,000,000 500,000,000 Finance Lease Liability Total Liabilities – Shareholders’ Equity Stated Capital Other Reserves Accumulated Profit Total Equity Total Equity and Liabilities 82 3,430,948 (1,544,774) 12,295,100 75,332,664 515,726,048 573,787,890 2,877,574,677 2,809,627,480
85. Am ãna Takaful PLC Annual Report 2018 NOTES TO THE FINANCIAL STATEMENTS 1. Corporate Information 1.4 Responsibility for Financial Statements 1.1 General The Board of Directors is responsible for preparation and presentation of these Financial Statements. Amãna Takaful PLC (“Company”) is a public limited liability company incorporated and domiciled in Sri Lanka. The registered office of the Company is located at 660 – 1/1, Galle Road, Colombo 03. The shares of the Company are listed on the Secondary Board of the Colombo Stock Exchange. These Consolidated Financial Statements comprise the Company and its subsidiaries (collectively the “Group” and individually “Group companies”). 1.2 Principal Activities and Nature of Operations Company During the year, the principal activity of the Company was General Takaful Insurance Business. Subsidiary The principal activity of Amãna Global Limited (100% stake) is providing services such as technical support, research and development, under Section 17 of the Board of Investment of Sri Lanka Law No. 4 of 1978. Amãna Takaful (Maldives) PLC, which is a subsidiary (55%) of Amãna Takaful PLC was incorporated to carryout Insurance Business in the Republic of Maldives and has obtained license from Maldivian Monetary Authority on 4 March 2010 to carry out General Takaful Business. Amãna Takaful Life PLC (82.3% stake) was incorporated on 10 July 2014 in which principal activity of the Company is Life Takaful insurance. 1.3 Date of Authorisation for Issue The Consolidated and Separate Financial Statements of Amãna Takaful PLC for the year ended 31 December 2018 was authorised for issue by the Board of Directors on 29 March 2019. 2. Basis of Preparation The Group’s Statement of Financial Position represents the assets, liabilities and equity of General Takaful (Non-Life Insurance), Family Takaful (Life Insurance) and Shareholders’ Fund. The Statement of Financial position of the Family Takaful (Life Insurance) Fund represents assets and liabilities of the Family Takaful (Life Insurance) Fund. The Group’s Statement of Financial Position includes the assets and liabilities of Amãna Global Limited, Amãna Takaful (Maldives) PLC and Amãna Takaful Life PLC. The Group’s Statement of Profit or loss and Other Comprehensive Income reflects the underwriting results of General Takaful business, surplus from Family Takaful business and investment and other income of General Takaful, Family Takaful and Shareholders’ Funds and related expenses. The results of Amãna Global Limited, Amãna Takaful (Maldives) PLC and Amãna Takaful Life PLC, are also included in the Group Statement of Profit or Loss and Other Comprehensive Income. Financial assets and financial liabilities are offset and the net amount reported in the Consolidated Statement of Financial Position only when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liability simultaneously. 2.1 Statement of Compliance The Consolidated Statement of Financial Position, the Consolidated Statement of Profit or Loss and Other Comprehensive Income, Changes in Equity and Cash Flows, together with accounting policies and notes, (“Financial Statements”) as at and for the year then ended, have been prepared in accordance with Sri Lanka Accounting Standards (hereinafter referred to as SLFRS/LKAS) as issued by The Institute of Chartered Accountants of Sri Lanka (CA), and comply with the requirements of the Companies Act No. 7 of 2007, the Regulation of Insurance Industry Act No. 43 of 2000 and amendments thereto. 83
86. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 2.2 Basis of Measurement The key items as such are discussed below: The Consolidated and Separate Financial Statements have been prepared on the historical cost basis except for the following material items in the Statement of Financial Position: 2.4.1 Assumption and Estimation Uncertainties yy Motor vehicles included in property, plant and equipment measured at fair value yy Financial instruments at fair value through profit or loss are measured at fair value Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ending 31 December 2018 is included in the following notes: yy Available-for-sale financial assets are measured at fair value 2.4.1.1 Note 7 – Investment Property yy Investment properties, which are measured at fair value The Group has determined the fair value of its investment properties based on the valuation reports submitted by Mr P P T Mohideen (FIV, MRICS). The fair value is determined, taking into consideration the situation, location infrastructure facilities, amenities available, present market value of close properties etc. yy Policyholders’ liabilities have been measured at actuarial determined values yy The liability for defined benefit obligations are actuarially valued and recognised at the present value yy Incurred by not reported/Incurred but not enough reported liability – actuarially determined values based on internationally accepted actuarial policies and methodologies The Group presents its Statement of Financial Position broadly in the order of liquidity. 2.3 Functional and Presentation Currency These Consolidated and Separate Financial Statements are presented in Sri Lankan Rupees (Rs.), which is the Company’s functional and presentation currency. 2.4 Use of Estimates and Judgements In the process of applying the Group accounting policies, Management is required to make judgements, apart from those involving estimations, which has the most significant effect on the amounts recognised in the Consolidated Financial Statements. Further, the Management is required to consider key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. The respective carrying amounts of assets and liabilities are given in related Notes to the Consolidated and Separate Financial Statements. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively. 84 2.4.1.2 Actuarial Valuations of the Insurance Provisions The valuation of Long-term Insurance Provision and General Insurance Provisions were carried out by Actuarial Partners Consulting Sdn. Bhd. (formerly known as Mercer Zainal Consulting Sdn. Bhd), Malaysia and NMG Consulting respectively. (i) Note 17 – General Insurance Provision Non-life insurance contract liabilities are recognised when contracts are entered into and premiums are charged. These liabilities are known as the outstanding claims provision, which are based on the estimated ultimate cost of all claims incurred but not settled at the reporting date, whether reported or not, together with related claims handling costs and reduction for the expected value of salvage and other recoveries. Delays can be experienced in the notification and settlement of certain types of claims, therefore the ultimate cost of these cannot be known with certainty at the reporting date. This calculation uses current estimates of future contractual cash flows, after taking account of the investment return expected to arise on assets relating to the relevant non-life insurance technical provisions. If these estimates show that the carrying amount of the unearned premiums is inadequate, the deficiency is recognised in the Statement of Profit or Loss and Other Comprehensive Income by setting up a provision for liability adequacy. The liability is not discounted for the time value of money. No provision for equalisation or catastrophe reserves is recognised. The liabilities are derecognised when the contract expires, is discharged or is cancelled.
87. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements The provision for unearned premiums represents premiums received for risks that have not yet expired. Generally, the reserve is released over the term of the contract and is recognised as premium income. At each reporting date, the Group reviews its unexpired risk and a liability adequacy test is performed to determine whether there is any overall excess of expected claims and over unearned premiums. This calculation uses current estimates of future contractual cash flows after taking account of the investment return expected to arise on assets relating to the relevant non-life insurance technical provisions. If these estimates show that the carrying amount of the unearned premiums is inadequate, the deficiency is recognised in the Statement of Profit or Loss and Other Comprehensive Income by setting up a provision for liability adequacy. (ii) Note 18 – Long-Term Insurance Provision – (Family Takaful Fund) Life insurance liabilities are recognised when contracts are entered into and premiums are receivable. At each reporting date, an assessment is made of whether the recognised life insurance liabilities are adequate by using a liability adequacy test. Significant estimates and assumptions made in respect of Actuarial Valuations have been disclosed in the Note 19.3 to the Financial Statements. 2.4.1.3 Note 19 – Employee Benefits The defined benefit obligation and the related charge for the year are determined using assumptions required under actuarial valuation techniques. The valuation involves making assumptions about discount rates, future salary increases, staff turnover rates etc. Due to the long-term nature of such obligations these estimates are subject to significant uncertainty. 2.4.1.4 Note 34.2 – Deferred Tax Asset Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the best estimate of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies. 2.4.1.5 Note 8 – Investments in Subsidiaries Fair Value of Investment Transferred The determination of fair value of investment transferred recorded on the Statement of Profit or Loss and Other Comprehensive Income and the corresponding entry being recorded in investment in subsidiary on the Statement of Financial Position is determined using a variety of valuation techniques that include the use of mathematical techniques. The inputs to these models are derived from observable market data where possible, but if this is not available, judgement is required to establish their fair values. The Board of Directors decided the fair value of share based on different valuation techniques. 2.5 Measurement of Fair Values A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. When measuring the fair value of an asset or a liability, the Group 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: yy Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. yy 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). yy 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 Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred. Further information about the assumptions made in measuring fair values is included in the following notes: yy Note 6 – Property, plant and equipment yy Note 7 – Investment property yy Notes 9 and 12 – Financial assets and financial assets unit linked 85
88. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 2.6 Segment Reporting A segment is a distinguishable component of the Group engaged in providing services, subject to risks and rewards that are different to those of other segments. Segmental information is based on industry segments reflecting the Group’s management structure. Segmentation has been determined, based on the activities of the companies or sectors into which the product or services are sold. The primary format is based on the core business, General, Family and Fund management services of Shareholders’ Fund and Technical services. Inter-segment transactions are based on fair market prices. Expenses directly identified to a particular segment, are charged accordingly. Expenses that cannot be directly identified to a particular segment, are allocated on basis decided by the Management and applied consistently throughout the period. The Group’s activities are located mainly in Sri Lanka and Maldives. Consequently, assets and liabilities by geographic region are considered not material to be disclosed. 2.7 Going Concern The Directors, after making necessary inquiries and reviews of the Group’s financial performance, position, future cash flows and potential borrowing facilities, have a reasonable expectation that the Group has adequate resources to continue as “a going concern” in the foreseeable future. Furthermore, Directors are not aware of any material uncertainties that may cast significant doubt upon the Group’s ability to continue as a going concern. Therefore, the Financial Statements continue to be prepared on the going concern basis. There are no going concern issues identified during the current financial year 2018. 3. Summary of Significant Accounting Policies The Group has consistently applied the following accounting policies to all periods presented in these Consolidated and Separate Financial Statements. The comparative information has been reclassified wherever necessary to conform with the current year’s presentation in order to provide a better presentation. 86 3.1 Basis of Consolidation 3.1.1 Business Combinations The Group accounts for business combinations using the acquisition method when control is transferred to the Group. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss. Any contingent consideration payable is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, other contingent consideration is remeasured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recognised in profit or loss. 3.1.2 Non-Controlling Interests (NCI) NCI are measured at their proportionate share of the acquiree’s identifiable net assets at the acquisition date. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. 3.1.3 Subsidiaries Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The Financial Statements of subsidiaries are included in the Consolidated Financial Statements from the date on which control commences until the date on which control ceases. 3.1.4 Loss of Control When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related NCI and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.
89. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 3.1.5 Transactions Eliminated on Consolidation Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated. 3.1.6 Common Control Transactions A business combination involving entities or businesses under common control is a business combination in which all of the combining entities or businesses ultimately are controlled by the same party or parties both before and after the combination, and that control is not transitory. The acquirer of the common control transaction applies book value accounting for all common control transactions. In applying book value accounting, no entries are recognised in profit or loss; instead, the result of the transaction is recognised in equity as arising from a transaction with shareholders. 3.1.7 Common Control Transactions in Separate Financial Statements When an investment in a subsidiary, associate or joint venture is acquired in a common control transaction, the investment shall be measured at the fair value of the consideration given (be it cash, other assets or additional shares) plus, where applicable any costs directly attributable to the acquisition. When the purchase consideration does not correspond to the fair value of the investment acquired, the transaction shall be recorded at fair value, irrespective of the actual consideration; any difference between fair value and agreed consideration will be a contribution to or a distribution of equity for a subsidiary, or an increase in the investment held or a distribution received by the parent. 3.2 Foreign Currency 3.2.1 Foreign Currency Transactions Transactions in foreign currencies are translated to the respective functional currencies of Group companies at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency, are translated to the functional currency at the exchange rate when the fair value was determined. Non-monetary items that are measured, based on historical cost in a foreign currency, are translated using the exchange rates as at the dates of the initial transactions. Foreign currency differences are generally recognised in profit or loss. However, foreign currency differences arising from the translation of available-for-sale equity investments (except on impairment, in which case foreign currency differences that have been recognised in OCI, are reclassified to profit or loss); are recognised in OCI. 3.2.2 Foreign Operations The assets and liabilities of overseas subsidiaries deemed as foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into Sri Lankan Rupees at the exchange rates at the reporting date. The income and expenses of foreign operations are translated into Sri Lankan Rupees at the exchange rates at the dates of the transactions. Foreign currency differences are recognised in OCI and accumulated in the translation reserve, except to the extent that the translation difference is allocated to NCI. When a foreign operation is disposed of in its entirety or partially, such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. If the Group disposes of part of its interest in a subsidiary but retains control, then the relevant proportion of the cumulative amount is reattributed to NCI. If the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely to occur in the foreseeable future, then foreign currency differences arising from such item form, part of the net investment in the foreign operation. Accordingly, such differences are recognised in OCI and accumulated in the translation reserve. 87
90. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 3.3 Income Tax Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in OCI. 3.3.1 Current Taxes Current income tax assets and liabilities for the current and prior periods, are measured at the amount expected to be recovered from or paid to the Commissioner General of Inland Revenue. The tax rates and tax laws used to compute the amount, are those that are enacted or substantively enacted by the reporting date. The provision for income tax is based on the elements of income and expenditure, as reported in the Consolidated and Separate Financial Statements and computed in accordance with the provisions of the Inland Revenue Act No. 10 of 2006 and the amendments thereto. 3.3.2 Deferred Taxation Deferred income tax is provided, using the liability method, on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry forward of unused tax assets and unused tax losses can be utilised. The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. 88 3.4 Intangible Assets 3.4.1 Goodwill Goodwill arising on the acquisition of subsidiaries is measured at the acquisition date as – yy the fair value of the consideration transferred; plus yy the recognised amount of any non-controlling interests in the acquiree; plus yy if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree; less yy the net recognised amount (fair value) of the identifiable assets acquired and liabilities assumed. Subsequently, goodwill is measured at cost less accumulated impairment losses. Goodwill is reviewed for impairment, annually or more frequently if event or changes in circumstances indicate that the carrying value may be impaired. 3.4.2 Research and Development Expenditure on development activities is capitalised only if the expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the Group intends to and has sufficient resources to complete development and to use or sell the asset. Subsequent to initial recognition, development expenditure is measured at cost less accumulated amortisation and any accumulated impairment losses. Amortisation is recognised in the Statement of Profit or Loss and Other Comprehensive Income on a systematic basis over 20 years to reflect the pattern in which the related economic benefits are recognised. Research and other development expenditure is recognised in the Statement of Profit or Loss and Other Comprehensive Income in the year it is incurred. 3.4.3 Other Intangible Assets Intangible assets acquired separately are measured on initial recognition at cost. Following the initial recognition of the intangible assets, the cost model is applied, requiring the assets to be carried at cost less any accumulated amortisation and accumulated impairment losses.
91. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate and treated as changes in accounting estimates. Reinsurance assets are reviewed for impairment at each Reporting date or more frequently when an indication of impairment arises during the reporting year. Impairment occurs when there is objective evidence as a result of an event that occurred after initial recognition of the reinsurance asset that the Group may not receive all outstanding amounts due under the terms of the contract and the event has a reliably measurable impact on the amounts that the Group will receive from the reinsurer. The impairment loss is recorded in the Statement of Profit or Loss and Other Comprehensive Income. The amortisation expense on intangible assets with finite lives is recognised in the Statement of Profit or Loss and Other Comprehensive Income in the expense category consistent with the nature of the intangible asset. Amortisation commences when the assets were available for use. The Group also assumes reinsurance risk in the normal course of business for life insurance and non-life insurance contracts where applicable. Premiums and claims on assumed reinsurance are recognised as revenue or expenses in the same manner as they would be, if the reinsurance were considered direct business, taking into account the product classification of the reinsured business. The useful lives and the amortisation methods of intangible assets with finite lives are as follows: Class Useful Life Amortisation Method Computer Software 8-20 years Straight-line method Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Statement of Profit or Loss and Other Comprehensive Income when the asset is derecognised. 3.5 Prepaid Expenditure Expenditure which is deemed to have a benefit or relationship to more than one financial year is classified as prepaid expenditure. Such expenditure is written off over the period to which it relates, on a straight-line basis. 3.6 Salvage Stock Salvage stocks are valued at since realised/realisable value. 3.7 Retakaful (Reinsurance) and Contribution (Premium) Receivable Reinsurance liabilities represent balances due to reinsurance companies. Amounts payable are estimated in a manner consistent with the related reinsurance contract. Premiums and claims are presented on a gross basis for both ceded and assumed reinsurance. Reinsurance assets or liabilities are derecognised when the contractual rights are extinguished or expired or when the contract is transferred to another party. Insurance receivables are recognised when due and measured on initial recognition at the fair value of the consideration received or receivable. The carrying value of insurance receivables is reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable, with the impairment loss recorded in the Statement of Profit or Loss and Other Comprehensive Income. 3.8 Other Assets and Receivables Other assets and receivables are stated at their estimated realisable value. The Group cedes insurance risk, in the normal course of business for all of its businesses. Reinsurance assets represent balances due from reinsurance companies. Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision or settled claims associated with the reinsurer’s policies and are in accordance with the related reinsurance contract. 89
92. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 3.9 Property, Plant and Equipment 3.9.1 Cost The estimated useful lives of property, plant and equipment are as follows: The property, plant and equipment are stated at cost (except for motor vehicles) less accumulated depreciation and any accumulated impairment losses. Class Useful Life Motor Vehicles 4-5 Years Computer Equipment 3-5 Years Other Equipment 4-5 Years Furniture and Fittings 5-10 Years Leasehold Vehicle 4-5 Years The cost of property, plant and equipment is the cost of acquisition or construction, together with any expenses incurred in bringing the asset to its working condition for its intended use. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. The Group provides depreciation from the date the assets are available for use, up to the date of disposal. Expenditure incurred for the purpose of acquiring, extending or improving assets of a permanent nature by means of which to carry on the business or to increase the earning capacity of the business has been treated as capital expenditure. 3.10 Leases 3.10.1 Finance Leases – Where the Group is the Lessee The Group has revalued its entire class of motor vehicles as at 31 December 2018 and has carried it at the revalued amount in the Consolidated and Separate Statement of Financial Position. The motor vehicles are revalued every three years on a rollover basis to ensure that the carrying amounts do not differ materially from the fair value at the reporting date. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use. Any gain or losses arising on derecognition of the asset is included in the Statement of Profit or Loss and Other Comprehensive Income in the year the asset is derecognised. 3.9.2 Restoration Cost Expenditure incurred on repairs or maintenance of property, plant and equipment in order to restore or maintain the future economic benefits expected from originally assessed standard of performance, is recognised in the Statement of Profit or Loss and Other Comprehensive Income as an expense when incurred. 3.9.3 Depreciation The provision for depreciation is calculated by using a straight-line method on the cost or revalued amount of all property, plant and equipment, in order to write-off such amounts less their estimated residual values over the estimated useful economic lives. Leased assets are depreciated over the shorter of the lease term and their useful lives, unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. 90 Property, plant and equipment on finance leases, which effectively transfer to the Group substantially all risks and benefits incidental to ownership of the leased item are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Capitalised leased assets are disclosed as property, plant and equipment and depreciated consistently with that of owned assets, as described under property, plant and equipment. The corresponding principal amount payable to the lessor, together with the finance cost payable over the period of the lease is shown as a liability. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant periodic rate of finance cost on the remaining balance of the liability. The cost of improvements to or on leasehold property is capitalised, disclosed as leasehold improvements and depreciated over the unexpired period of the lease or the estimated useful lives of the improvements, whichever is shorter. 3.10.2 Operating Leases Leases where the lessor effectively retains substantially all risks and benefits of ownership over the leased term, are classified as operating leases. Lease payments (excluding costs for services such as insurance and maintenance) paid under operating leases are recognised as an expense in the Statement of Profit or Loss and Other Comprehensive Income on a straight-line basis over the lease term.
93. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 3.11 Financial Assets The Group classifies non-derivative financial assets into the following categories: financial assets at Fair Value through Profit or Loss, Loans and Receivables and Available-For-Sale financial assets. The Group classifies non-derivative financial liabilities into the Other Financial Liabilities category. The classification depends on the purpose for which the investments were acquired or originated. Financial assets are classified as at fair value through profit or loss where the Group’s documented investment strategy is to manage financial investments on a fair value basis, because the related liabilities are also managed on this basis. The available for sale and held to maturity categories are used when the relevant liability (including shareholders’ funds) is passively managed and/or carried at amortised cost. The Group’s financial assets include cash and short-term deposits, trade and other receivables, loan and other receivables, quoted and unquoted financial instruments, and derivative financial instruments. The Group’s existing types of financial instruments and their classifications are shown in the table below: Financial Asset Category Treasury Bonds Available-For-Sale Treasury Bills Loans and Receivables Equity Shares Fair Value Through Profit or Loss and Available-For-Sale Unit Trust Available-For-Sale Term deposits/ Mudharabah Deposits Loans and Receivables Loans and Receivable Loans and Receivables Financial liability Category Murabaha Facility Other Financial Liabilities 3.11.1 Recognition of Financial Assets The Group initially recognises loans and receivables on the date that they are originated. All other financial assets (including assets designated as at fair value through profit or loss) are recognised initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are offset and the net amount presented in the Consolidated and Separate Statement of Financial Position when, and only when, the Group has a legal right to offset the amounts and intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously. 3.11.2 Measurement (a) Financial Assets at Fair Value Through Profit or Loss Financial assets at fair value through profit or loss include financial assets held for trading and those designated at fair value through profit or loss at inception. Investments typically bought with the intention to sell in the near future are classified as held for trading. For investments designated as at fair value through profit or loss, the following criteria must be met. The designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the assets or liabilities or recognising gains or losses on a different basis; or The assets and liabilities are part of a group of financial assets, financial liabilities or both which are managed and their performance evaluated on a fair value basis, in accordance with a documented risk management or investment strategy. These investments are initially recorded at fair value. Directly attributable transaction costs are recognised in the Statement of Profit or Loss and Other Comprehensive Income as incurred. Subsequent to initial recognition, these investments are remeasured at fair value. Fair value adjustments and realised gain and loss are recognised in the Statement of Profit or Loss and Other Comprehensive Income. (b) Loans and Receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. These investments are initially recognised at cost, being the fair value of the consideration paid for the acquisition of the investment. All transaction costs directly attributable to the acquisition are also included in the cost of the investment. After initial measurement, loans and receivables are measured at amortised cost, using the effective interest rate method. Gains and losses are recognised in the Statement of Profit or Loss and Other Comprehensive Income when the investments are derecognised or impaired, as well as through the amortisation process. 91
94. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements (c) Cash and Cash Equivalents Cash and cash equivalents are defined as cash in hand, demand deposits and short-term highly liquid investments, readily convertible to known amounts of cash and subject to insignificant risk of changes in value. For the purpose of Cash Flow Statement, cash and cash equivalents consist of cash in hand and deposits in banks net of outstanding bank overdrafts. Investments with short maturities i.e., three months or less from the date of acquisition are also treated as cash equivalents. Interest and dividend received are classified as operating cash flows. (d) Available-for-Sale Financial Assets Available-for-Sale financial assets are non-derivative financial assets that are designated as available for sale or are not classified in any of the three preceding categories. These investments are initially recorded at fair value plus any directly attributable transaction costs. After initial measurement, available-for-sale financial assets are measured at fair value. Fair value gains and losses are reported as a separate component in other comprehensive income and accumulated in the available-for-sale reserve until the investment is derecognised or the investment is determined to be impaired. On derecognition or impairment, the cumulative fair value gains and losses, previously reported in equity, are transferred to the Statement of Profit or Loss and Other Comprehensive Income. (e) Other Financial Liabilities Other financial liabilities are non-derivative financial liabilities, which are initially recognised at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortised cost using the effective interest method. 3.12 Impairment of Financial Assets Financial assets, not classified as at fair value through profit or loss, are assessed at each reporting date to determine whether there is objective evidence of impairment. Objective evidence that financial assets are impaired includes – yy default or delinquency by a debtor; yy restructuring of an amount due to the Group on terms that the Group would not consider otherwise; yy indications that a debtor or issuer will enter bankruptcy; 92 yy adverse changes in the payment status of borrowers or issuers; yy the disappearance of an active market for a security; or yy observable data indicating that there is measurable decrease in expected cash flows from a group of financial assets. (a) Assets Carried at Amortised Cost If there is objective evidence that an impairment loss on assets carried at amortised cost has been incurred, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the loss is recorded in the Statement of Profit or Loss and Other Comprehensive Income. The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant and individually or collectively for financial assets that are not individually significant. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and that group of financial assets is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment. The impairment assessment is performed at each reporting date. If, in a subsequent period, the amount of the impairment loss decreases and that decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the Statement of Profit or Loss and Other Comprehensive Income, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. (b) Available-for-Sale Financial Investments If an available-for-sale financial asset is impaired, an amount comprising the difference between its costs (net of any principal repayment and amortisation) and its current fair value, less any impairment loss previously recognised in other comprehensive income, is transferred from equity to the Statement of Profit or Loss and Other Comprehensive Income. Reversals in respect of equity instruments classified as available-for-sale are not recognised in the Statement of Profit or Loss and Other Comprehensive Income.
95. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements Reversals of impairment losses on debt instruments classified at available-for-sale are reversed through the Statement of Profit or Loss and Other Comprehensive Income if the increase in the fair value of the instruments can be objectively related to an event occurring after the impairment losses were recognised in the Statement of Profit or Loss and Other Comprehensive Income. (c) Financial Assets Carried at Cost If there is objective evidence that an impairment loss has been incurred on an unquoted equity instrument, that is not carried at fair value because its fair value cannot be reliably measured, or on a derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument, the amount of the impairment loss is measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses shall not be reversed. 3.13 Derecognition of Financial Assets A financial asset (or, when applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when – yy The rights to receive cash flows from the asset have expired; yy The Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a “pass-through” arrangement; yy The Group has transferred its rights to receive cash flows from the asset; and either: yy Has transferred substantially all the risks and rewards of the asset or yy Has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. When the Group has transferred its right to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay. When continuing involvement takes the form of a written and/ or purchased option (including cash settled option or similar provision) on the transferred asset, the extent of the Group’s continuing involvement is the amount of the transferred asset that the Group may repurchase, except that, in the case of a written put option (including a cash settled option or similar provision) on an asset measured at fair value, the extent of the Group’s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price. The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire. 3.14 Investment Properties Investment properties are measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met; and excludes the costs of day-to-day servicing of an investment property. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair value of investment properties are included in the Statement of Profit or Loss and Other Comprehensive Income in the year in which they arise. Valuation of investment property by a professional valuer is carried out every year. Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in the Statement of Profit or Loss and Other Comprehensive Income in the year of retirement or disposal. Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, the deemed cost for subsequent accounting is the fair value at the date of change. If owner-occupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under property, plant and equipment up to the date of change. 93
96. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 3.15 Liabilities and Provisions (Excluding Insurance Contracts) 3.15.1 Liabilities All known liabilities have been accounted for in preparing the Consolidated and Separate Financial Statements. 3.15.2 Provisions (Excluding Insurance Contracts) Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. The unwinding of the discount is recognised as finance cost. 3.16 Employee Benefits 3.16.1 Defined Benefit Plan – Gratuity A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The liability recognised in the Consolidated and Separate Financial Statements in respect of defined benefit plans is the present value of the defined benefit obligation as at the reporting date. The defined benefit obligation is calculated by a qualified Actuary as at the reporting date using the Projected Unit Credit (PUC) method as recommended by LKAS 19 – “Employee Benefits”. However, under the payment of Gratuity Act No. 12 of 1983, the liability to an employee arises only on completion of five years of continued service. The Group is liable to pay gratuity in terms of relevant statute. In order to meet this liability, a provision is carried forward in the Consolidated and Separate Statement of Financial Position. The item is stated under defined benefit liability in the Consolidated and Separate Statement of Financial Position. Recognition of Actuarial Gains and Losses Actuarial gains or losses are recognised in the Statement of Profit or Loss and Other Comprehensive Income in the period in which they arise. 94 Recognition of Past Service Cost Past Service Costs are recognised as an expense on a straightline basis over the average period until the benefits become vested. If the benefits have already been vested, immediately following the introduction of, or changes to the plan, past service costs are recognised immediately. Funding Arrangements The Gratuity liability is not externally funded. 3.16.2 Defined Contribution Plans – Employees’ Provident Fund and Employees’ Trust Fund Employees are eligible for Employees’ Provident Fund contributions and Employees’ Trust Fund contributions inline with the respective statutes and regulations. The Group contributes 12% and 3% of gross emoluments of employees to Employees’ Provident Fund and Employees’ Trust Fund respectively. 3.16.3 Short-Term Employee Benefits Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid, if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. 3.17 Impairment of Non-Financial Assets The Group assesses at each reporting date, whether there is an indication that an asset may be impaired. If any such indication exists or when annual impairment testing for an asset is required, the Group makes an estimate of the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation multiples or other available fair value indicators.
97. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements Impairment losses of continuing operations are recognised in the Statement of Profit or Loss and Other Comprehensive Income in those expense categories consistent with the function of the impaired asset, except for property previously revalued where the revaluation was taken to equity. In this case, the impairment is also recognised in equity up to the amount of any previous revaluation. 3.18.3 Unexpired Risk For assets, an assessment is made at each reporting date, as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group makes an estimate of recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount, since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the Statement of Profit or Loss and Other Comprehensive Income, unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. Contribution (Premium) ceded to Retakaful companies (Reinsurers), is recognised as an expense in accordance with the pattern of Retakaful (Reinsurance) service received. 3.18 General Takaful Business (Non-Life Insurance Business) 3.18.1 Gross Written Contribution (Gross Written Premium) Contributions (premiums) are recognised earlier of the entity being on risk to provide coverage to the policyholders for insured event and the signing of the insurance contract. Upon inception of the contract, contributions (premiums) are recorded as written and are earned primarily on a pro rata basis over the term of the related policy coverage. However, for those contracts for which the period of risk differs significantly from the contract period, contributions (premiums) are earned over the period of risk in proportion to the amount of insurance protection provided. 3.18.2 Unearned Contribution (Premium) The Unearned Contribution (Premium) Reserve represents the portion of the contributions (premiums) written in a year but relating to the unexpired terms of coverage. Provision is made where appropriate for the estimated amount required over and above unearned contribution (premium) to meet future claims and related expenses on the business in force as at 31 December. 3.18.4 Outward Retakaful (Reinsurance) 3.18.5 Claims General insurance, include all claims occurring during the year, whether reported or not, related internal and external claims handling costs that are directly related to the processing and settlement of claims, a reduction for the value of salvage and other recoveries and any adjustments to claims outstanding from previous years. Claims expense and liability for outstanding claims are recognised in respect of direct and inward Retakaful (reinsurance) business. The liability covers claims reported but not yet paid, Incurred But Not Reported claims (“IBNR”) and the anticipated direct and indirect costs of settling those claims. Claims outstanding are assessed by review of individual claim files and estimating changes in the ultimate cost of settling claims. The provision in respect of IBNR is actuarially valued to ensure a more realistic estimation of the future liability, based on past experience and trends. Whilst the Directors consider that the provision for claims are fairly stated on the basis of information currently available, the ultimate liability will vary as a result of subsequent information and events. This may result in adjustments to the amount provided. Such amount is reflected in the Consolidated and Separate Financial Statements for that period. The methods used and estimates made are reviewed regularly. 3.18.6 Deferred Acquisition Cost and Deferred Income Acquisition cost/Income is directly attributable to the profit or loss when policy is underwritten. The Unearned Premium is calculated applying 1/365 method on the net premium (gross written premium minus reinsurance and management fee). 95
98. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 3.19 Family Takaful Business (Long-Term Insurance Business) 3.19.1 Takaful Contribution (Premium) Contributions (premiums) from Family Takaful (traditional life insurance) contracts, including participating contracts and annuity policies with life contingencies, are recognised as revenue when payable by the policyholder. Benefits and expenses are provided against such revenue to recognise profits over the estimated life of the policies. Moreover, for single contribution (premium) contracts, contributions (premiums) are recorded as income when received with any excess profit deferred and recognised in income in a constant relationship to the insurance in force or, for annuities, the amount of expected benefit payments. 3.19.2 Retakaful Contracts (Reinsurance Contracts) Outward Retakaful contributions (reinsurance premiums) are recognised when payable. Retakaful (Reinsurance) recoveries are credited to match the relevant gross claims. 3.19.3 Claims Death claims are recorded on the basis of notifications received. Maturities are recorded when due. Claims on participating business include profit. Claims payable include direct costs of settlement. The interim payments (part withdrawals) and surrenders are accounted only at the time of settlement. 3.19.4 Technical Provisions – Family Takaful Business Provision and Provision for Linked Liabilities The Directors agree to the Family Takaful (long-term insurance) business provisions for the Group on the recommendation of reporting Actuary, following his annual investigation of the Family Takaful (life insurance) business. The Actuary’s valuation takes into account of all liabilities including contingent liabilities and is based on the assumptions recommended by the Consultant Actuary. 3.20 Revenue Recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue and associated costs incurred or to be incurred, can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable net of trade discounts and sales taxes. The following specific criteria are used for the purpose of recognition of revenue. 3.20.1 Wakala Fee (Agency/Management Fee) 3.20.1.1Wakala Fee (Agency/Management Fee) on Takaful Contribution (Insurance Premium) The Shareholders’ Fund is entitled for management fee on every Takaful Contribution (insurance premium) received in respect of the business received during the year on following basis: General Takaful (Insurance) Business The Shareholders’ Fund is entitled for a Management fee on contribution (premium) of General Takaful (Insurance) Certificates. However, the Shareholders’ Fund has charged a reduced management fee at the rates given below in order strengthen the General Takaful (Insurance) Fund. Medical Takaful (Insurance) Policies All other General Takaful (Insurance) Policies 37.5% 20%-50% Family Takaful (Life Insurance) Business The management fee is charged on contribution of Family Takaful Certificates, at the following rates: Family Takaful Products – First year 80% – Second year 45% – Third year and after 2% Mortgage Family Takaful (Insurance) Policies 20% Group Family Takaful (Insurance) Policies 30% 3.20.1.2Wakala Fee (Agency/Management Fee) on Investment Income The Shareholders’ fund is entitled for agency fee of 50% on net investment income. 96
99. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 3.20.2 Investment Income 3.23 Events after the Reporting Date 3.20.2.1 Interest Income Events after the reporting period are those events, favourable and unfavorable, that occur between the reporting date and the date when the Financial Statements are authorised for issue. All material events after the reporting date have been considered and where appropriate, adjustments or disclosures have been made in the respective Notes to the Financial Statements. Interest income is recognised in the Statement of Profit or Loss and Other Comprehensive Income, as it accrues and is calculated by using the effective interest rate method. Fees and commissions that are an integral part of the effective yield of the financial asset or liability are recognised as an adjustment to the effective interest rate of the instrument. 3.24 Capital Commitments and Contingencies 3.20.2.2 Dividend Income Investment income also includes dividends, when the right to receive payment is established. For listed securities, this is the date the security is listed as ex-dividend. 3.20.2.3Realised/Unrealised Gains and (Losses) Realised gains and losses, recorded in the Statement of Profit or Loss and Other Comprehensive Income on investments, include gains and losses on financial assets and investment properties. Gains and losses on the sale of investments are calculated as the difference between net sales proceeds and the original or amortised cost and are recorded on occurrence of the sale transaction. 3.21 Others Other income is recognised on an accrual basis. 3.22 Expenditure Recognition Expenses are recognised in the Statement of Profit or Loss and Other Comprehensive Income on the basis of a direct association between the cost incurred and the earning of specific items of income. All expenditure incurred in the running of the business and in maintaining the property, plant and equipment in a state of efficiency, has been charged to the Statement of Profit or Loss and Other Comprehensive Income. Surplus refund is made only when the Fund is in a surplus and to those participants who have not made any claims during the policy period. Contingent liabilities are possible obligations whose existence will be confirmed only by occurrence or nonoccurrence of uncertain future events not wholly within the control of the Group or present obligations where the transfer of economic benefits is not probable or cannot be reliably measured. Capital commitments and contingent liabilities of the Group are disclosed in the respective Notes to the Financial Statements. 3.25 Stated Capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects. 3.26 Earnings Per Share (EPS) The Group presents basic earnings per share data for its ordinary shareholders. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Group by the weighted average number of ordinary shares determined in accordance with LKAS 33. 3.27 Statement of Cash Flows The Cash Flow Statement has been prepared using the direct method of preparing Cash Flows in accordance with the Sri Lanka Accounting Standard (LKAS) 7 – “Statement of Cash flows”. For cash flow purposes, cash and cash equivalents are presented net of bank overdrafts. For the purpose of presentation of Statement of Profit or Loss and Other Comprehensive Income, the Directors are of the opinion that nature of expenses method, presents fairly, the elements of the Group’s performance, and hence such presentation method is adopted. 97
100. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 4. Standards Issued But not yet Effective as at Reporting Date Impending accountings standards/standards issued not yet effective. Certain new accounting standards and amendments/ improvements to existing standards have been published, that are not mandatory for 31 December 2018 reporting periods. None of those have been early adopted by the Company. Sri Lanka Accounting Standard (SLFRS) 9 – “Financial Instruments”: In December 2014, the CA Sri Lanka issued the final version of IFRS 9 “Financial Instruments” classification and measurement which reflects all phases of the financial instruments project and replaces LKAS 39 – “Financial Instruments: Recognition and Measurement”. SLFRS 9 is effective for annual periods beginning on or after 1 January 2018, with an early application permitted. Retrospective application is require, but comparative information is not compulsory. Temporary Exemption from SLFRS 9 An insurer that meets the criteria in paragraph 20B of SLFRS 4 (amended) provides a temporary exemption that permits, but does not require the insurer to apply LKAS 39 – “Financial Instruments: Recognition and Measurement” rather than SLFRS 9 for annual periods beginning before 1 January 2022. An insurer may apply the temporary exemption from SLFRS 9 if, and only if – a.It has not previously applied any version of SLFRS 9, other than only the requirements of the presentation of gains and losses on financial liabilities designated as at Fair Value Through Profit or Loss; and b.Its activities are predominantly connected with insurance, at its annual reporting date that immediately precedes 1 April 2016, or at a subsequent annual reporting date. 98 Having considered the above criteria, since Amãna Takaful PLC and Amãna Takaful Life PLC are connected with insurance activities, both the companies may continue to apply LKAS 39 – “Financial Instruments: Recognition and Measurement” rather than SLFRS 9 for annual periods beginning before 1 January 2022. SLFRS 16 “Leases” SLFRS 16 replaces existing leases guidance, including LKAS 17 – “Leases, International Financial Value” even though lessor accounting remains similar to current practice. This supersedes: LKAS 17 – “Leases”, IFRIC 4 determining whether an arrangement contains a lease, SIC 15 “Operating Leases – Incentives”; and SIC 27 evaluating the substance of Transactions Involving the Legal form of a Lease. Earlier application is permitted for entities that apply SLFRS 15 – “Revenue from Contracts with Customers”. SLFRS 16 is effective for annual reporting periods beginning on or after 1 January 2019.
101. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 5. Intangible Assets 5.1 Group Year Ended 31 December 2018 Rs. 2017 Rs. 101,438,350 100,914,372 Cost Balance at the Beginning of the Year Additions During the Year Exchange Gain/(Loss) Balance at the End of the Year 46,757,126 – 5,877,451 523,978 154,072,927 101,438,350 54,056,796 48,686,908 8,087,347 6,593,513 Amortisation Balance at the Beginning of the Year Charges for the Year Exchange Gain/(Loss) 6,548,369 338,875 Elimination (1,562,500) (1,562,500) Balance at the End of the Year 67,130,013 54,056,796 Carrying Amount 86,942,914 31,812,197 2018 Rs. 2017 Rs. Balance at the Beginning of the Year 44,482,847 44,482,848 Additions During the Year 10,758,879 – Balance at the End of the Year 55,241,726 44,482,848 22,248,100 20,697,794 1,967,678 1,550,306 Balance at the End of the Year 24,215,778 22,248,100 Carrying Value 31,025,948 6,665,391 5.2 Company Year Ended 31 December Cost Amortisation Balance at the Beginning of the Year Amortisation Charge for the Year 99
102. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 5.3 Acquisition of Intangible Assets During the Year During the financial year, the Group has acquired/capitalised intangible assets (computer software) to the aggregate value of Rs. 46,757,126/- (2017 – NIL). 5.4 Fully-Amortised Intangible Assets in Use Intangible assets includes fully-amortised computer software which are in the use of normal business activities having an initial cost of Rs. 10,862,742/- (2017 – Rs. 10,862,742/-). 5.5 Title Restriction on Intangible Assets There were no restrictions that existed on the title of the intangible assets of the Group as at 31 December 2018. 5.6 Assessment of Impairment of Intangible Assets The Board of Directors has assessed the potential impairment indicators of intangible assets as at 31 December 2018. Based on the assessment, no impairment indicators were identified. 6. Property, Plant and Equipment 6.1 Group Cost/Valuation Notes Balance as at 1 January 2018 Rs. Additions/ Transfers Rs. Freehold 6.1.1 295,809,365 36,391,604 Leasehold 6.1.2 14,120,725 309,930,090 Disposals/ Transfers Rs. – 36,391,604 Increase/Decrease in Revaluation Rs. Exchange Movement Rs. Total as at 31 December 2018 Rs. (5,051,006) 262,899 3,084,771 330,067,720 (4,313,000) 2,162,285 (5,070,010) 6,900,000 (9,364,006) 2,425,184 3,084,771 342,037,730 Exchange Movement Rs. Total as at 31 December 2018 Rs. 256,950 13,938,731 927,604 82,739,355 6.1.1 Freehold Property, Plant and Equipment Cost/valuation Balance as at 1 January 2018 Rs. Additions/ Transfers Rs. Disposals/ Transfers Rs. Motor Vehicles 13,625,796 5,274,005 Computer Equipment 75,134,195 6,677,556 – – – (5,051,006) Increase/Decrease in Revaluation Rs. 262,899 Elimination Rs. (429,914) 94,505,634 13,161,147 – – – 596,983 108,263,764 Furniture and Fittings 112,543,740 11,278,896 – – – 1,303,234 125,125,870 Total Value of Depreciable Assets 295,809,365 36,391,604 3,084,771 330,067,720 Other Equipment 100 (5,051,006) 262,899 (429,914)
103. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements Depreciation Balance as at 1 January 2018 Rs. Charge for the Year Rs. Disposals/ Transfers Rs. Increase/Decrease in Revaluation Rs. Elimination Rs. Exchange Movement Rs. Total as at 31 December 2018 Rs. 3,891,391 2,903,325 256,950 1,570,746 Computer Equipment 67,269,124 3,974,066 – – – 2,497,617 73,740,807 Other Equipment 78,579,289 9,742,679 – – – (1,123,920) 87,198,048 Furniture and Fittings 67,631,733 9,802,081 – – – 1,000,065 78,433,879 226,993,068 26,422,151 2,630,712 240,943,480 Motor Vehicles Total Depreciation Carrying Amount 68,816,297 (5,051,006) (5,051,006) – – – – – (429,914) (429,914) – – 89,124,240 6.1.2 Leasehold Property, Plant and Equipment Cost/Valuation Balance as at 1 January 2018 Rs. Additions/ Transfers Rs. Disposals/ Transfers Rs. Motor Vehicles 9,807,725 – Other Equipment 4,313,000 – (4,313,000) 14,120,725 – (4,313,000) Total Value of Depreciable Assets Depreciation Balance as at 1 January 2018 Rs. Charge for the Year Rs. Motor Vehicles 3,109,540 1,960,471 Other Equipment 3,102,964 Total Depreciation 6,212,504 Carrying Amount 7,908,221 – 1,960,471 – Disposals/ Transfers Rs. – Increase/Decrease in Revaluation Rs. – Increase/Decrease in Revaluation Rs. – – – – Exchange Movement Rs. – – 2,162,285 (5,070,010) (3,102,964) – Rs. 2,162,285 (5,070,010) (3,102,964) – Elimination Elimination Rs. (5,070,010) – (5,070,010) – – Exchange Movement Rs. Total as at 31 December 2018 Rs. 6,900,000 – 6,900,000 Total as at 31 December 2018 Rs. – – – – – – – 6,900,000 6.1.3 Net Book Values Year Ended 31 December Freehold Leasehold Total Carrying Amount of Property, Plant and Equipment 2018 Rs. 2017 Rs. 89,124,240 68,816,297 6,900,000 7,908,221 96,024,241 76,724,518 101
104. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 6.1.4 Acquisition of Property, Plant and Equipment During the Year – Group During the year, the Group acquired property, plant and equipment to the aggregate value of Rs. 36,391,604/(2017 – Rs. 32,378,604/-) for cash considerations. 6.1.5 Fully Depreciated Property, Plant and Equipment in Use – Group Group property, plant and equipment includes fully depreciated assets having a gross carrying amount of Rs. 115,486,210/(2017 – Rs. 115,486,210/-). 6.2 Title Restriction on Property, Plant and Equipment There are no restriction that existed on the title of the property, plant and equipment of the Group as at the reporting date. 6.3 Assessment of Impairment The Board of Directors has assessed the potential impairment indicators of property, plant and equipment as at 31 December 2018. Based on the assessment, no impairment indicators were identified. 6.4 Capitalisation of Borrowing Costs There were no capitalised borrowing costs relating to the acquisition of property, plant and equipment during the year. 6.5 Temporarily Idle Property, Plant and Equipment There were no temporarily idle property, plant and equipment as at the year ended 31 December 2018. 6.6 Company Cost/Valuation Notes Balance as at 1 January 2018 Rs. Additions/ Transfers Rs. 20,056,653 Freehold 6.6.1 258,363,470 Leasehold 6.6.2 4,313,000 262,676,470 Disposals/ Transfers Rs. Increase/Decrease in Revaluation Rs. – – 20,056,653 Eliminations Rs. 1,484,583 (4,313,000) – (4,313,000) 1,484,583 (5,051,006) – (5,051,006) Total as at 31 December 2018 Rs. 274,853,700 – 274,853,700 6.6.1 Freehold Property, Plant and Equipment Cost/valuation Balance as at 1 January 2018 Rs. Additions/ Transfers Rs. Disposals/ Transfers Rs. Motor Vehicles 11,807,000 3,789,422 – – Computer Equipment 64,262,295 3,253,895 Other Equipment 85,848,520 6,378,532 Furniture and Fittings 96,445,655 6,634,804 – 258,363,470 20,056,653 – Total Value of Depreciable Assets 102 Increase/Decrease in Revaluation Rs. 1,484,583 Elimination Rs. (5,051,006) Total as at 31 December 2018 Rs. 12,030,000 67,516,190 – – – – 92,227,052 – – 103,080,459 1,484,583 (5,051,006) 274,853,700
105. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements Depreciation Motor Vehicles Balance as at 1 January 2018 Rs. Charge for the Year Rs. Disposals/ Transfers Rs. Increase/Decrease in Revaluation Rs. Total as at 31 December 2018 Rs. Elimination Rs. 2,762,502 – – 59,973,326 2,080,297 – – – 62,053,623 Other Equipment 74,701,361 7,678,583 – – – 82,379,944 Furniture and Fittings 59,820,477 6,842,379 – – – 206,405,200 19,363,761 – – – – Total Depreciation Carrying Amount 51,958,270 – (5,051,006) – 2,288,504 Computer Equipment 66,662,856 (5,051,006) 211,096,423 63,757,277 – 6.6.2 Leasehold Property, Plant and Equipment Cost/Valuation Other Equipment Depreciation Balance as at 1 January 2018 Rs. Additions/ Transfers Rs. Disposals/ Transfers Rs. Increase/Decrease in Revaluation Rs. Total as at 31 December 2018 Rs. Elimination Rs. 4,313,000 – (4,313,000) – – – 4,313,000 – (4,313,000) – – – Balance as at 1 January 2018 Rs. Charge for the Year Rs. Generator 3,102,964 – Carrying Amount 1,210,036 – Disposals/ Transfers Rs. (3,102,964) – Increase/Decrease in Revaluation Rs. Total as at 31 December 2018 Rs. Elimination Rs. – – – – – – 6.6.3 Net Book Values Year Ended 31 December Freehold Leasehold Total Carrying Amount of Property, Plant and Equipment 2018 Rs. 2017 Rs. 63,757,277 51,958,270 – 63,757,277 1,210,036 53,168,306 103
106. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 6.6.4 Acquisition of Property, Plant and Equipment During the Year – Company During the year, the Company acquired property, plant and equipment to the aggregate value of Rs. 15,743,653/(2017 – Rs. 9,911,359/-) for cash considerations. 6.6.5 Fully-Depreciated Property, Plant and Equipment in Use – Company Company property, plant and equipment includes fully depreciated assets having a gross carrying amount of Rs. 101,072,300/(2017 – Rs. 101,072,300/-). 6.6.6 Revaluation Company Company’s entire class of motor vehicles were revalued by De Silva Motor Engineers (Pvt) Ltd., which is a professional valuation organisation. Valuation was made on the basis of open market value which is the Level 2 in the fair value hierarchy. The revaluation surplus was transferred to the Revaluation reserve. The carrying amount of revalued motor vehicles that would have been included in the Financial Statements had the assets been carried at cost would have been as follows: 2018 Rs. 2017 Rs. Cost 15,596,422 12,817,000 Accumulated Depreciation (5,051,006) (2,891,400) Carrying Value 10,545,416 9,925,600 Year Ended 31 December Other Group Companies Amãna Takaful Life PLC Amãna Takaful Life PLC’s entire class of motor vehicles were revalued by De Silva Motor Engineers (Pvt) Ltd., which is a professional valuation organisation. Valuation was made on the basis of open market value which is the Level 2 in the fair value hierarchy. The revaluation surplus was transferred to the revaluation reserve. The carrying amount of revalued motor vehicles that would have been included in the Financial Statements had the assets been carried at cost would have been as follows: Year Ended 31 December 2018 Rs. 2017 Rs. Cost 10,312,726 537,011 Accumulated Depreciation (5,499,524) (366,958) 4,813,202 170,053 Carrying Value 6.7 Title Restriction on Property, Plant and Equipment There are no restriction that existed on the title of the property, plant and equipment of the Company as at the reporting date. 6.8 Assessment of Impairment The Board of Directors has assessed the potential impairment indicators of property, plant and equipment as at 31 December 2018. Based on the assessment, no impairment indicators were identified. 104
107. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 6.9 Capitalisation of Borrowing Costs There were no capitalised borrowing costs relating to the acquisition of property, plant and equipment during the year. 6.10 Temporarily Idle Property, Plant and Equipment There were no temporarily idle property, plant and equipment as at the year ended 31 December 2018. 7. Investment Property Group Year Ended 31 December Balance as at 1 January Addition During the Year Net Gain/Loss from Fair Value Adjustment Balance as at 31 December Company 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. 79,925,000 78,500,000 79,925,000 78,500,000 145,999,000 (5,495,000) 220,429,000 – 1,425,000 79,925,000 – (4,425,000) 75,500,000 – 1,425,000 79,925,000 7.1 During the financial year, the Company has incurred direct operating expenses on the investment property to the aggregate value of Rs. 330,700/- (2017 – Rs. 240,000/-). 7.2 Fair Value Hierarchy The fair value of investment property was determined by external, independent property valuers, Mr P P T Mohideen (FIV, FRICS) 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 Group’s investment property portfolio annually. The Group’s entire class of investment properties were revalued on 31 December 2018. The fair value measurement for investment property of Rs. 220,429,000/- (2017 – Rs. 79,925,000/-) has been categorised as a Level 3 fair value based on the inputs to the valuation technique used. 105
108. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 7.3 Valuation Technique In determining the fair value, the current condition of the properties, further usability and associated redevelopment requirements have been considered. The Valuer has also made reference to market evidence of transaction prices for similar properties, with appropriate adjustments for size and location. The appraised fair values are approximated within appropriate range of values which are as follows: Address Extent Fair Value 2018 Rs. Per Perch/Sq. ft. Value Rs. Fair Value 2017 Rs. Per Perch/Sq. ft. Value Rs. – Land 50 Perches 10,000,000 200,000 per Perch 10,500,000 210,000 per Perch – Building 1,485 Sq.ft. 2,000,000 1,350 per sq.ft. General Takaful Fund a. Yalegoda Estate, Piligalla, Kandy – – b. 58/19, Ramyaweera Mawatha, Orugodawattha – Land 39 Perches 19,500,000 500,000 per Perch 22,425,000 575,000 per Perch 1,700 Sq.ft. 46,000,000 27,059 per sq. ft. 45,000,000 26,471 per sq. ft. – Land 5.5 Perches 134,750,000 24,500,000 per Perch – – – Building 2,610 Sq. ft 10,179,000 3,900 per sq. ft – – Shareholder Fund c. 107/15, Buthgamuwa Road, Rajagiriya – Building Amãna Takaful Life PLC 451, Old Moor Street, Colombo 12 8. Investments in Subsidiaries Holding Number of Shares 2018 % 2017 % Amãna Global Limited 100 100 33,333 33,333 37,125,000 37,125,000 Amãna Takaful Life PLC 82.7 90 411,500,000 450,000,000 411,500,000 450,000,000 Amãna Takaful (Maldives) PLC 55 51.39 11,133,308 10,402,558 641,367,811 587,197,352 Provision for Amãna Global Limited – Company 106 – 2018 Cost 2017 2018 Rs. – – (37,125,000) – – 1,052,867,811 2017 Rs. – 1,074,322,352
109. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 9. Financial Assets Group 2018 Rs. Company Year Ended 31 December Notes 2017 Rs. Financial Assets at Fair Value Through Profit and Loss 9.2.1 88,086,419 58,506,357 Available-for-Sale Financial Assets 9.2.2 318,521,556 299,558,531 Loans and Receivable 9.2.3 2,428,572,752 2,835,180,727 2018 Rs. 2017 Rs. – – 525,000 525,000 2,369,857,686 836,967,607 871,751,119 2,727,922,574 837,492,607 872,276,119 9.1 Fair value through profit or loss investments and available-for-sale investments have been valued at fair value. Loans and receivable are valued at amortised cost. 9.2 Classification of Financial Assets 9.2.1 Financial Assets at Fair Value Through Profit and Loss Group Notes 2018 Rs. 2017 Rs. 9.3.1 88,086,419 88,086,419 As at 31 December Investments in Equity Securities Company 2018 Rs. 2017 Rs. 58,506,357 – – 58,506,357 – – 9.2.2 Available-For-Sale Financial Assets Group Notes 2018 Rs. 2017 Rs. 9.3.2 28,956,551 12,423,578 As at 31 December Investments in Equity Securities – Quoted Company 2018 Rs. 2017 Rs. 34,561,038 – – 12,684,213 – – Unit Trust: – Candor Balance Fund – Candor Income Fund Investments in Equity Securities – Unquoted* 9.3.3 14,137,927 32,247,203 263,003,500 220,066,078 525,000 – 525,000 318,521,556 299,558,531 525,000 525,000 – * The Company carries the unquoted financial assets at cost, since such financial assets do not have a market price in an active market and in the absence of any similar securities with observable market data, fair value of the same cannot be measured reliably. 107
110. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 9.2.3 Loans and Receivable Group Year Ended 31 December Notes 2018 Rs. Company 2017 Rs. 2018 Rs. 2017 Rs. Repurchase Agreements 664,719,396 714,764,891 284,967,602 275,624,660 Fixed Term Investments 1,750,329,688 1,398,600,243 538,898,555 482,534,863 Commercial Papers Advances to Company Officers – 9.2.4 241,580,148 – 101,000,000 13,523,668 14,912,404 13,101,450 12,591,596 2,428,572,752 2,369,857,686 836,967,607 871,751,119 Investments in Government Securities are made for the purpose of meeting the requirements of the Regulation of Insurance Industry Act No. 43 of 2000. Loans and Receivables includes a provision of Rs. 75,658,959/- (2017 – Nil). The said provision will be revised upon recovery. 9.2.4 Advances to Company Officers Group Year Ended 31 December Balance at the Beginning of the Year Loans Granted During the Year Less: Repayments During the Year Balance at the end of the Year 108 Company 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. 14,912,404 12,130,593 12,591,596 11,154,456 16,305,496 15,623,775 15,883,277 14,279,105 (17,694,231) (12,841,964) (15,373,423) (12,841,965) 13,523,669 14,912,404 13,101,450 12,591,596 13,523,668 14,912,404 13,101,450 12,591,596
111. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 9.3 Investments in Equity Securities 9.3.1 Quoted Group Company 2018 Year Ended 31 December Number of Shares Number of Shares Market Value Rs. 140,000 3,290,000 70,000 987,000 10,937,500 33,906,250 47,500 641,250 47,500 301,209 1,084,352 Chevron Lubricants Lanka PLC 40,100 Colombo Dockyard PLC Access Engineering PLC Amãna Bank PLC Alumex PLC Ceylon Glass PLC Dhivehi Raajjeyege Gulhun PLC Dialog Axiata PLC 2018 2017 Market Value Rs. Number of Shares 2017 Market Value Rs. Number of Shares Market Value Rs. – – – – – – – – 878,750 – – – – 301,209 1,747,012 – – – – 2,919,280 40,100 4,771,900 – – – – 22,341 1,242,160 22,341 1,977,179 – – – – 2,270 2,146,657 2,000 1,581,936 – – – – 225,000 2,925,000 – – – – – – – – Haycarb 10,000 1,300,000 10,000 1,475,000 – – – – Kelani Valley Plantations PLC 11,100 1,106,670 11,100 1,003,440 – – – – 50,000 1,700,000 – – – – Textered Jersy Lanka PLC Tokyo Cement Company (Lanka) PLC – Non-Voting Ooreedoo At Fair Value Through Profit or Loss – – 60,000 1,380,000 60,000 3,540,000 – – – – 100,000 41,372,800 100,000 33,616,140 – – – – 58,506,357 – – – – – 88,086,419 – 9.3.2 Quoted Group Company 2018 Year Ended 31 December Amãna Bank PLC Available-for-Sale Investments at Fair Value 2018 2017 Market Value Rs. Number of Shares Market Value Rs. 9,340,821 28,956,551 9,398,344 34,561,038 – – – – 34,561,038 – – – – – 28,956,551 _ Number of Shares 2017 Number of Shares Market Value Rs. Number of Shares Market Value Rs. 9.3.3 Unquoted Group Company 2018 Year Ended 31 December Number of Shares 2018 2017 Market Value Rs. Number of Shares 525,000 35,000 2017 Market Value Rs. Number of Shares Market Value Rs. Number of Shares Market Value Rs. 525,000 35,000 525,000 35,000 525,000 Available-for-Sale Financials Assets Reclassified to Profit or Loss Cleanco (Pvt) Ltd. Maldives Islamic Bank Available-for-Sale Investments at Fair Value 35,000 9,000 262,478,500 9,000 219,541,078 – _ 263,003,500 _ 220,066,078 – – 525,000 – – – 525,000 109
112. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 9.4 Financial Instruments – Fair Value and Risk Management Fair value hierarchy for assets carried at fair value The different levels have been defined as follows: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: 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: Inputs for the asset or liability that are not based on observable market data (unobservable inputs). The following table shows the fair value hierarchy of the financial assets carried at fair value: 9.4.1 Accounting Classifications and Fair Values The following table shows the carrying amounts and fair values of financial assets and financial liabilities: The financial assets not measured at fair value are financial instruments for which their carrying amounts are a reasonable approximation of fair values, because for example they are short term in nature or re-prices to current market rates frequently. Carrying Amount 31 December 2018 Loans And Receivables Available for Sale Rs. Fair Value Total Level 1 Level 2 Level 3 Total Rs. Fair Value Through Profit or Loss Rs. Rs. Rs. Rs. Rs. Rs. 28,956,551 88,086,419 117,042,970 117,042,970 – – 117,042,970 61,432,832 61,432,832 61,432,832 – – 61,432,832 Group Financial Assets Measured at Fair Value Equity Securities – Quoted – Equity Securities – Unit Linked – Unit Trust Unit Linked – 27,007,989 – 55,964,540 – – 149,519,252 27,007,989 205,483,791 – 178,475,802 27,007,989 – 27,007,989 27,007,989 – 205,483,791 Financial Assets not Measured at Fair Value Repurchase Agreements 664,719,396 Equity Securities – Unquoted – Commercial Paper – – 263,003,500 – 664,719,396 – – – – – 263,003,500 – – – – – – – – – – 1,750,329,688 – – 1,750,329,688 – – – – Advances to Company Officers 13,523,668 – – 13,523,668 – – – – Repurchase Agreements – Unit Linked 20,056,658 – – 20,056,658 – – – – Mudharaba Investments – Unit Linked 1,512,710,987 – – 1,512,710,987 – – – – – 4,224,343,897 – – – Fixed Term Investments 110 3,961,340,397 263,003,500 3,961,340,397 318,968,040 149,519,252 – 4,429,827,688 178,475,802 27,007,989 – – 205,483,791
113. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 9.4.2 Company Carrying Amount 31 December 2018 Loans and Receivables Available for Sale Rs. Rs. Fair Value Fair Value Through Profit or Loss Rs. Total Level 1 Level 2 Level 3 Total Rs. Rs. Rs. Rs. Rs. Financial Assets not Measured at Fair Value Repurchase Agreements 284,967,602 – – 284,967,602 – – – – Fixed Term Investments 538,898,555 – – 538,898,555 – – – – – – – – – – 525,000 – – – – – 13,101,450 – – – – – 837,492,607 – – – – Commercial Paper – Equity Securities – Unquoted – Advances to Company Officers 525,000 13,101,450 836,967,607 – 525,000 – – 9.4.3 Group Carrying Amount 31 December 2017 Loans and Receivables Available for Sale Rs. Fair Value Total Level 1 Level 2 Level 3 Total Rs. Fair Value Through Profit or Loss Rs. Rs. Rs. Rs. Rs. Rs. 34,561,038 58,506,357 93,067,394 93,067,394 – – 93,067,394 109,653,738 109,653,738 109,653,738 – – 109,653,738 – – Financial Assets Measured at Fair Value Equity Securities – Quoted – Equity Securities – Unit Linked – – Unit Trust – – Unit Trust – Unit Linked – 25,158,906 – 59,719,944 – – 168,160,095 – 25,158,906 227,880,039 – – 202,721,133 – 25,158,906 – 25,158,906 25,158,906 – 227,880,039 Financial Assets not Measured at Fair Value Repurchase Agreements Equity Securities – Unquoted 714,764,891 220,066,078 – 714,764,891 – – – – – 220,066,078 – – – – Commercial Papers 241,580,148 – – 241,580,148 – – – – Murabaha Investments 250,930,016 – – 250,930,016 – – – – 1,147,670,227 – – 1,147,670,227 – – – – Advances to Company Officers 14,912,404 – – 14,912,404 – – – – Repurchase Agreements – Unit Linked 40,965,518 – – 40,965,518 – – – – Mudharaba Investments – Unit Linked 1,350,900,391 – – 1,350,900,391 – – – – – 3,981,789,673 – – – Mudharaba Investments – – 3,761,723,595 220,066,078 3,761,723,595 279,786,022 168,160,095 4,209,669,712 202,721,133 25,158,906 – – 227,880,039 111
114. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 9.4.4 Company Carrying Amount 31 December 2017 Loans and Receivables Available for Sale Rs. Rs. Fair Value Fair Value Through Profit or Loss Rs. Total Level 1 Level 2 Level 3 Total Rs. Rs. Rs. Rs. Rs. Financial Assets Not Measured at Fair Value Repurchase Agreements 275,624,660 – – 275,624,660 – – – – Mudharaba Investments 482,534,863 – – 482,534,863 – – – – Commercial Paper 101,000,000 – – 101,000,000 – – – – Equity Securities – Unquoted 525,000 – – 525,000 – – – – Advances to Company Officers 12,591,596 – – 12,591,596 – – – – 872,276,119 – – 872,276,119 – – – – 872,276,119 - 872,276,119 10. Contribution (Premium) Receivables Group Company 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. Contribution (Premiums) Receivable from Participants 563,324,251 403,306,248 381,612,444 325,696,541 Contribution (Premium) Receivable from Agents, Brokers and Intermediaries 147,920,478 164,052,354 147,920,478 164,052,354 Contribution (Premium) Receivable – Net 711,244,729 567,358,602 529,532,922 489,748,895 Year ended 31 December The Board of Directors has assessed potential impairment loss of premium receivable as at 31 December 2018. Based on the assessment, no impairment provision has been made in the Consolidated and Separate Financial Statements as at the reporting date in respect of premium receivable. 112
115. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 11. Other Assets Group Company Note 2018 Rs. Financial Assets 11.1 135,773,809 45,133,114 93,488,062 76,149,851 Non-Financial Assets 11.2 116,964,038 141,367,906 41,908,611 86,534,795 252,737,848 186,501,020 135,396,673 162,684,646 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. 135,773,809 45,133,114 86,007,665 59,578,559 Year Ended 31 December 2017 Rs. 2018 Rs. 2017 Rs. 11.1 Financial Assets Group Year Ended 31 December Other Receivables Amount Due from Related Party – Amãna Takaful Life PLC – Company 7,480,397 16,571,292 45,133,114 93,488,062 76,149,851 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. 116,964,038 141,367,906 41,908,611 86,534,795 116,964,038 141,367,906 41,908,611 86,534,795 Notes 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. Financial Assets at Fair Value Through Profit and Loss 12.1 61,432,832 109,653,738 – – Available for Sale 12.2 27,007,989 25,158,906 – – Loans and Receivable 12.3 1,532,767,645 1,391,865,910 – – 1,621,208,465 1,526,678,553 – – – 135,773,809 11.2 Non-Financial Assets Group Year Ended 31 December Deposits, Advances and Prepayments Company 12. Financial Assets – Unit Linked Group Year Ended 31 December Company 113
116. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 12.1 Financial Assets at Fair Value through Profit and Loss Group Notes 2018 Rs. 2017 Rs. 12.4 61,432,832 61,432,832 Year Ended 31 December Investment in Equity Securities Company 2018 Rs. 2017 Rs. 109,653,738 – – 109,653,738 – – 12.2 Available for Sale Group 2018 Rs. 2017 Rs. 27,007,989 27,007,989 Year Ended 31 December Unit Trust – Candor Income Fund Company 2018 Rs. 2017 Rs. 25,158,906 – – 25,158,906 – – 12.3 Loans and Receivable Group Repurchase Agreements Mudharaba Investments Company 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. 20,056,658 40,965,518 – – 1,512,710,987 1,350,900,391 – – 1,532,767,645 1,391,865,910 – – Year Ended 31 December 12.4 Investments in Equity Securities – Unit Linked Group 2018 Year Ended 31 December Access Engineering PLC ACL Cables PLC Alumex PLC 2017 Number of Shares Market Value Rs. Number of Shares Market Value Rs. 797,148 11,239,787 797,148 18,732,978 78,142 2,891,254 78,142 3,313,221 184,653 2,492,816 184,653 3,416,081 Dipped Products PLC 28,137 2,391,645 28,137 2,391,645 Colombo Dockyard PLC 22,948 1,275,909 22,948 2,030,898 Piramal Glass Ceylon PLC 522,240 1,984,512 522,240 3,028,992 Chevron Lubricants Lanka PLC 287,439 20,925,559 287,439 34,205,241 Hayleys MGT Knitting Mills PLC 430,000 3,913,000 430,000 5,805,000 Tokyo Cement Company (Lanka) PLC – Non-voting 622,537 14,318,351 622,537 36,729,683 – 114 61,432,832 – 109,653,738
117. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 13. Cash and Cash Equivalents in Cash Flow Statement 13.1 Components of Cash and Cash Equivalents Group Year Ended 31 December Cash and Bank Balances Cash and Bank Balances – Unit Linked Bank Overdrafts 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. 217,105,631 269,133,976 94,692,309 110,981,837 8,155,160 7,370,003 – Investments in Government Securities Company – – – (37,426) (37,426) 457,633,696 790,708,932 284,967,602 408,614,676 682,894,486 1,067,175,486 379,659,911 519,559,087 14. Stated Capital Company 2018 Year Ended 31 December Fully-Paid Ordinary Shares – Voting Notes Number of Shares 14.1 180,000,130 2017 Rs. 1,860,001,339 Number of Shares Rs. 1,800,001,296 1,860,001,339 All issued shares carry equal voting rights. The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at meetings of the Company. 14.1 Share Consolidation According to Article 6 of the Articles of Association of the Company the shareholders have approved a consolidation of every 10 existing issued ordinary shares into 1 Share on 30 July 2018. Subsequently the issued number of shares has reduced from One Billion Eight Hundred Million One thousand Two Hundred and Ninety-six (1,800,001,296) fully-paid shares to One Hundred and Eighty Million One Hundred and Thirty (180,000,130) fully paid shares. 15. Other Reserves Group Year Ended 31 December Notes Company 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. 31,400,577 30,331,677 Reserves Consists of the Following: Revaluation Reserve 15.1 33,728,956 30,234,871 Translation Reserve 15.2 107,226,776 52,855,527 140,955,732 83,090,398 – 31,400,577 – 30,331,677 115
118. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 15.1 Revaluation Reserve The revaluation reserve relates to the revaluation of Property, Plant and Equipment. Group Year ended 31 December Balance as at 1 January Transfer of Revaluation on Disposal of Investment in Subsidiary Change in Fair Value of Property, Plant and Equipment Transfer of Revaluation Surplus to Retained Earnings, at the Disposal Balance as at 31 December Company 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. 30,234,871 34,234,871 30,331,677 34,331,677 – – 3,494,085 – – (4,000,000) 33,728,956 30,234,871 – – 1,068,900 – – (4,000,000) 31,400,577 30,331,677 15.2 Translation Reserve The translation reserve comprises all foreign currency differences arising from the translation of the Financial Statements of foreign operations. Group Year Ended 31 December Company 2018 Rs. 2017 Rs. Balance as at 1 January 52,855,527 Foreign Currency Translation Differences for Foreign Operations Balance as at 31 December 2018 Rs. 2017 Rs. 51,634,475 – – 54,371,249 1,221,052 – – 107,226,776 52,855,527 – – 16. Revenue Reserve Group As at 31 December 2018 Rs. Company 2017 Rs. 2018 Rs. 2017 Rs. Accumulated Profit/(Losses) Balance as at 1 January (567,429,563) (74,244,716) 59,986,522 126,501,180 23,741,440 3,260,247 1,011,745 Defined Benefit Plan Actuarial Losses, Net of Deferred Tax (2,127,800) (5,467,989) Fair Value Gain on AFS Valuation 39,439,117 Net Profit for the Year Fair Value Changes Taken to OCI Dividend Paid Transfer of Revaluation Reserve on Disposal Balance as at 31 December 116 (455,558,904) (22,684,989) – (377,685,807) – (14,174,248) 4,000,000 (455,558,904) – (2,066,736) (136,040,525) 62,578,787 – (4,782,978) – – – – – (52,570,013) 4,000,000 (74,244,716)
119. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 16.1 Life Policyholders’ Reserve Fund The Life Policyholder Reserve Fund includes the fair value changes recorded under Other Comprehensive Income in respect of available-for-sale financial assets related to Family Takaful Fund. 16.2 Available-for-Sale Reserve The available for sale reserve comprises the cumulative net change in the fair value of available-for-sale financial assets until the assets are derecognised or impaired. 17. Insurance Contract Liabilities – Non-Life 17.1 Unearned Contribution (Premium) Group Year Ended 31 December Gross 2018 Rs. Company 2017 Rs. 2018 Rs. 2017 Rs. 1,059,322,948 855,865,377 768,853,293 689,637,394 (140,319,841) (134,304,550) (140,319,841) (134,304,550) 919,003,106 721,560,827 628,533,452 555,332,844 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. Claims Outstanding 375,662,673 235,764,234 254,425,542 95,854,155 Claims Incurred But Not Reported (IBNR) 100,120,946 57,805,168 89,685,135 49,133,000 475,783,618 293,569,402 344,110,677 144,987,155 1,394,786,725 1,015,130,229 972,644,129 700,319,999 Retakaful (Reinsurance) Net 17.2 Gross Claims Reserve Group Year Ended 31 December Company 17.3 General Takaful (Insurance) Technical Reserves Group Year Ended 31 December 2018 Rs. Company 2017 Rs. 2018 Rs. 2017 Rs. General Insurance (Non-Life) Provision 1,394,786,725 1,015,130,229 972,644,129 700,319,999 Retakaful (Reinsurance) Receivable on Outstanding Claims (212,620,230) (93,740,837) (212,620,230) (93,740,837) 1,182,166,495 921,389,392 760,023,899 606,579,162 The Incurred But Not Reported (IBNR) claim reserve has been actuarially computed by NMG Consulting as per SLFRS 4. The valuation is based on internationally accepted valuation methods, which analyses the past experience and pattern of the claims. Based on the actuaries recommendations, the Group and the Company have provided Rs. 100,120,946/(2017 – Rs. 57,805,168/-) and Rs. 89,685,135/- (2017 – Rs. 49,133,000/-) for IBNR claims reserve respectively, and there was no requirement for unexpired risk reserve for the year ended 31 December 2018 (2017 – Nil). 117
120. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 18. Insurance Contract Liabilities – Family Takaful Fund The Family Takaful Fund (Life Insurance Reserve) as shown in the Statement of Financial Position represents the following: 18.1 Insurance Contract Liabilities – Family Takaful Fund Group 2018 Rs. 2017 Rs. Participant Investment Fund (PIF) 426,958,498 475,221,961 Participant Tabarru Fund (PTF) and Group Fund (GF) 102,192,336 100,362,123 As at 31 December Unearned premium – Group Family Takaful 5,816,637 5,126,039 534,967,470 580,710,123 18.2 Insurance Contract Liabilities – Family Takaful Unit Linked Group As at 31 December Unit Fund – Unit Linked Participant Tabarru Fund and Group Fund – Unit Linked 2018 Rs. 2017 Rs. 1,641,098,275 1,497,531,383 19,025,755 27,604,118 1,660,124,030 1,525,135,501 Group As at 31 December Notes 18.3 Insurance Contract Liability Surplus of the Fund Total Insurance Contract Liability – Family Takaful Fund 18.1, 18.2 2018 Rs. 2017 Rs. 2,174,312,931 2,070,428,258 20,778,570 35,417,365 2,195,091,501 2,105,845,623 18.4 The Movement in Family Takaful Fund is as Follows: Group As at 31 December Balance as at 1 January Net Change in Contract Liabilities Balance as at 31 December 118 2018 Rs. 2017 Rs. 2,099,704,147 2,059,168,595 (35,823,821) 40,535,552 2,063,880,326 2,099,704,147
121. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 18.5 The Insurance Provision (Family Takaful Fund) has been Based upon the Following Assumptions and Other Information: 18.5.1 Acturial Assumptions Valuation Interest Rate For Participant Tabarru Fund (PTF) of Family Takaful and Unit-linked business, the Company has chosen Valuation Interest Rates of 2.5% p.a. and 2.0% p.a. respectively, which is net of Mudharaba sharing of investment returns with the Takaful Operator. For Mortgage Fund, Valuation Interest Rate of 7.5% p.a. is used which is based on the average of the last four years yield of the Fund whereas for the Takaful Operator’s Fund, Valuation Interest Rate equivalent to the risk-free yield is assumed. Mortality and Morbidity Assumption The Company has used the standard table SLA07/09 based on the Sri Lanka Assured Lives Mortality Study Report 2013 from Munich Re to calculate the best estimate assumptions for mortality due to insufficient in-house mortality and morbidity experience. The Total Permanent Disability (TPD) rates are assumed to be 10% of mortality rates and other morbidity rates are assumed as Retakaful rates. The risk margin loading factors assumed for mortality and morbidity are +/- 10% and +/- 20% respectively. Lapse Assumption Lapse rate assumptions are based on a combination of the Company’s experience for early durations as well as industry experience in Sri Lanka. The Company has used different lapse assumptions for each product to suit the specific nature of the product and business. A different lapse rate assumption has been used for single contribution as they are likely to exhibit different lapse experiences. The risk margin loading factor assumed for lapses is +/- 20% for both regular and single contribution plans. Expense Assumption The Company performed the expense study internally where the expenses are allocated to acquisition and maintenance expenses as well as variable and fixed expenses based on the best representation of actual cost. The variable expenses are linked to contribution amount whereas the fixed expenses are expressed as a per policy expense. Further, the maintenance expenses assumptions were derived assuming that 28.1% of the variable expenses and 19.2% of the fixed expenses will be charged to the PTF for Family Takaful and Unit-linked business. Expense inflation is assumed to be 5.0% p.a. for per policy maintenance expense. The risk margin loading factor assumed for expenses is +10%. Bonus Assumption No guarantees apply to any of the Takaful funds, and all funds except the unit fund and the mortgage fund are subject to sharing of investment income between the certificate holders and the Takaful Operator. 18.5.2 Other Information The valuation of the Insurance Provisions (Family Takaful Fund), as at 31 December 2018 was made by Actuarial Partners Consulting Sdn. Bhd. (formerly known as Mercer Zainal Consulting Sdn. Bhd.), Malaysia. In the opinion of the consultant actuary, the provision is adequate to cover the liabilities pertaining to Long-term Insurance (Family Takaful) Fund. It is not required to perform a valuation on Participating Investment Fund since it represents an accumulation of investments made by the policyholders. 119
122. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 18.6 Liability Adequacy Testing (LAT) A Liability Adequacy Test (“LAT”) for Life Insurance Contract Liability was carried out by Actuarial Partners Consulting Sdn. Bhd. (formerly known as Mercer Zainal Consulting Sdn. Bhd.), Malaysia as at December 2018 as required by SLFRS 4 – “Insurance Contracts”. When performing the LAT, all contractual cash flows were discounted and this amount was compared with the carrying value of the liability. According to the Consultant Actuary’s report, assets are sufficiently adequate as compared to the discounted cash flow reserves and in contrast to the reserves as at 31 December 2018. 19. Employee Benefits Group Notes Company 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. 50,016,182 38,871,095 28,996,165 23,997,243 17,025,285 18,511,699 9,027,920 11,023,126 67,041,467 57,385,794 38,024,085 35,020,369 Employee Benefits – Gratuity Balance at 1 January Net Benefit Expense Foreign Currency Translation Movement 19.1 3,643,156 185,115 – – Payments During the Year (3,805,874) (7,554,728) (2,995,994) (6,024,204) Balance at 31 December 66,878,749 50,016,182 35,028,091 28,996,165 19.1 Net Benefit Expense Group Company 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. 9,657,527 8,782,167 2,928,612 2,807,677 Included in Profit or Loss Interest Cost Current Service Cost 5,239,958 4,264,543 4,032,572 3,432,471 14,897,485 13,046,710 6,961,184 6,240,148 Actuarial Losses/(Gains) on Obligations 2,127,800 5,467,989 2,066,736 4,782,978 Actuarial Losses/(Gains) on Obligations 2,127,800 5,467,989 2,066,736 4,782,978 17,025,285 18,514,699 9,027,920 11,023,126 Included in Other Comprehensive Income Net Benefit Expense The gratuity liability was actuarially valued under the Projected Unit Credit Cost method by Mr Piyal S Goonetilleke (Fellow of the Society of Actuaries – USA) in 2018 as requires by LKAS 19 – “Employee Benefits”. 120
123. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements Principal actuarial assumptions used for the Group and the Company are as follows: % Per Annum (a) Discount Rate (b) Salary Increase 2018 2017 11.78 10.1 9 9 21 23 (d) Retirement Age 55 Years 55 Years (e) Expected Average Future Working Life of the Active Participants 4.5 Years 4.5 Years (c) Incidence of Withdrawals The Liability is not externally funded. 19.2 Sensitivity of Assumptions Employed in Actuarial Valuations Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation as shown below: 31 December 2018 Increase Discount Rate (1% Movement) Future Salary Growth (1% Movement) 31 December 2017 Decrease Increase Decrease 33,453,858 (36,770,380) 30,628,931 (27,531,167) (36,768,262) 33,428,670 (30,601,838) 27,528,328 Although the analysis does not take account of the full distribution of cash flows expected under the plan, it does provide an approximation of the sensitivity of the assumptions shown. 20. Other Liabilities – Unit Linked Group Company Notes 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. Financial Liabilities 20.1 13,134,356 21,503,728 – – Non-Financial Liabilities 20.2 38,151,252 30,341,124 – – 51,285,609 51,844,853 – – 20.1 Financial Liabilities Group Retakaful Payable Company 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. 13,134,356 21,503,728 – – 13,134,356 21,503,728 – – 121
124. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 20.2 Non-Financial Liabilities Group Company 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. Advances Received 20,939,015 Other Creditors 17,212,238 14,711,321 – – 15,629,804 – – 38,151,252 30,341,124 – – 21. Other Liabilities Group Company Notes 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. Financial Liabilities 21.1 249,920,508 276,018,730 122,024,828 196,491,452 Non-Financial Liabilities 21.2 403,783,724 272,748,632 61,092,118 70,471,650 653,704,232 548,767,362 183,116,946 266,963,102 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. 249,920,508 276,018,730 120,192,628 196,491,452 Year Ended 31 December 21.1 Financial Liabilities Group Year Ended 31 December Retakaful Payable Amount Due to Related Party – Company – 249,920,508 1,832,200 – 276,018,730 122,024,828 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. Accrued Liabilities 269,284,395 167,241,782 30,740,874 42,544,556 Other Creditors 109,733,225 96,042,946 30,351,244 27,927,094 196,491,452 21.2 Non-Financial Liabilities Group Year Ended 31 December Income Tax Payable 122 Company 24,766,103 9,463,905 403,783,724 272,748,632 – 61,092,118 – 70,471,650
125. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 22. Subordinated Debt Group As at 31 December Unsecured Subordinated Debt Company 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. 46,599,805 200,000,000 97,024,473 200,000,000 46,599,805 200,000,000 97,024,473 200,000,000 The details of the above instrument are as follows: Issue Date Purpose/Rationale Invested Party Relationship 28 September 2018 To Meet the Risk-Based Capital Requirements Amãna Takaful (Maldives) PLC Related Company 31 December 2015 To Meet the Risk-Based Capital Requirements Amãna Investor Candor Sharia’h Balance Fund 872,276,119 - Face Value Rs. Profit Rate Profit Payable Repayment Maturity Frequency Terms Date 75,614,945 6% on USD Quarterly 5 Years 28 September 2023 15,000,000 11% on LKR Annually 5 Years 31 December 2020 872,276,119 23. Finance Lease Liability Group Year Ended 31 December Opening Balance Lease Obtained Repayments 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. 8,527,568 15,571,180 2,145,968 7,275,100 – (4,060,448) 4,467,120 Unamortised Profit Net Liability Company (617,297) 3,849,823 – (7,043,612) – (2,145,968) – (5,129,132) 8,527,568 – 2,145,968 (2,148,121) – (901,363) 6,379,446 – 1,244,605 23.1 Maturity Analysis Year Ended 31 December Gross Liability Unamortised Profits Net Liability 1 Year or Less Rs. 2-5 Years Rs. Total Rs. 1,914,480 2,552,640 4,467,120 (410,518) (206,779) (617,297) 1,503,962 2,345,861 3,849,823 123
126. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 24. Short-Term Borrowings – Wakala Facility Group 2018 Rs. Year Ended 31 December Company 2017 Rs. 2018 Rs. 2017 Rs. Opening Balance 187,698,284 87,657,018 187,698,284 87,657,018 Obtained During the Year 587,247,498 260,000,000 587,247,498 260,000,000 (574,168,506) (159,958,734) (574,168,506) (159,958,734) 200,777,276 187,698,284 200,777,276 187,698,284 Repayments At the End of the Year 24.1 Short-term Wakala Facility represents the short-term loan facility obtained from The Bank of Ceylon (“BOC”) to finance large claims. The total loan facility is obtained on an instalment basis when claims are settled. Proceeds from reinsurance will be used to pay the BOC facility. 24.2 The Company's shares in Amãna Takaful Life PLC (Subsidiary), valued at Rs. 411,500,000/- have been pledged as security for this facility. 25. Gross Written Contribution Group Year Ended 31 December Company 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. 1,151,749,973 974,887,675 1,100,224,880 930,150,452 General Takaful (Insurance) Motor Fire 509,372,045 468,184,901 203,715,986 170,321,257 Marine 275,647,717 174,258,235 151,199,448 134,033,797 Medical 477,660,719 255,280,089 303,896,054 255,280,089 Miscellaneous 971,521,651 975,850,592 243,352,937 302,245,439 3,385,952,105 2,848,461,492 2,002,389,304 1,792,031,034 712,282,522 651,384,097 – – Family Takaful 79,332,430 101,059,718 – – Mortgage and Group Family Takaful 36,332,555 39,729,789 – – 827,947,507 792,173,604 – – 4,213,899,613 3,640,635,096 Long-Term Policies Unit Linked 124 2,002,389,304 1,792,031,034
127. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 26. Income from investments Group Investment Income Company Notes 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. 26.1 364,622,848 374,383,257 116,557,924 110,212,172 Year Ended 31 December Fair Value Gain/(Loss) on Investment Properties (5,495,000) Net Realised Capital Gain or (Losses) 214,247 Unrealised Capital Gain or (Losses) (55,692,225) 303,649,871 1,425,000 (4,425,000) 1,425,000 1,124,161 – – 5,065,269 – – 381,997,687 112,132,924 111,637,172 26.1 Investment Income Group Year Ended 31 December Notes Dividend Income Income from Fixed Term Deposits Interest Income from Investment in Government Securities 26.2 Income from Unit Trust 2018 Rs. Company 2017 Rs. 2018 Rs. 2017 Rs. 16,419,715 11,235,600 22,684,989 10,610,250 287,946,329 306,316,648 68,913,647 78,207,786 60,173,019 56,831,009 24,959,287 21,394,136 83,781 – 364,622,848 374,383,257 – – 116,557,924 110,212,172 26.2 Interest income from Government Securities has been recognised based on a special approval given by the Council of Islamic Scholars of the Company in 2009. 27. Other Income Group Year Ended 31 December Profit on Disposal of Property, Plant and Equipment 2018 Rs. – Company 2017 Rs. 3,415,418 Sundry Income 44,945,215 17,942,509 Fund Management Fee Income 80,674,649 45,654,940 Rental Income 3,200,000 Salvage Income 4,887,416 Exchange Gain/(Loss) – 1,106,800 2018 Rs. – 15,018,183 – 1,200,000 4,887,416 2017 Rs. 3,415,418 7,206,546 – – 1,106,800 10,096,511 2,374,963 9,868,648 2,374,963 143,803,791 70,494,630 30,974,247 14,103,727 125
128. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 28. Total Revenue Group Year Ended 31 December Gross Written Contribution (Premium) Less: Contribution (Premium) Ceded to Retakaful Companies (Reinsurers) Net Written Contribution (Premium) Net Change in Reserve for Unearned Contribution (Premium) Net Earned Contribution (Premium) Income from Investments Fair Value Gain from Investment Transferred Fair Value Gains and Losses Other Income Total Revenue Company 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. 4,213,899,613 3,640,635,095 2,002,389,304 1,792,031,033 (832,979,375) 3,380,920,237 (792,904,261) 2,847,730,835 (156,111,084) (185,078,348) (388,004,377) 1,614,384,927 (378,254,928) 1,413,776,105 (73,200,586) (129,645,176) 3,224,809,153 2,662,652,487 1,541,184,341 1,284,130,929 303,649,871 381,997,687 112,132,924 111,637,172 – – 54,545,459 – 39,439,117 338,249 – 143,803,791 70,494,630 30,974,247 14,103,727 3,711,701,392 3,115,483,053 1,738,836,970 1,409,871,829 – 29. Takaful (Insurance) Claims and Benefits (Net) Group Company 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. Motor 573,138,759 553,198,012 570,402,406 550,701,515 Fire 187,136,181 176,604,298 177,111,901 138,269,661 70,762,379 48,480,643 63,551,378 38,049,819 Medical 395,726,708 169,525,111 201,679,705 169,525,111 Miscellaneous 456,940,609 392,648,012 83,187,789 29,583,739 1,683,704,636 1,340,456,076 1,095,933,179 Year Ended 31 December General Takaful (Insurance) Marine Retakaful (Reinsurance) Recoveries General Insurance Claims and Benefits (Net) (296,245,292) (284,257,426) 926,129,844 (220,056,002) (232,104,401) 875,877,178 694,025,443 1,387,459,344 1,056,198,650 71,896,890 80,009,096 – – 399,762,430 295,192,689 – – 51,364,521 16,487,198 – – – Family Takaful (Long-Term Insurance) Claims Incurred Surrenders Policy Maturities Interim Payments/Part Withdrawals Long-Term Insurance Claims and Benefits 126 20,422,425 31,786,443 – 543,446,265 423,475,426 – 1,930,905,608 1,479,674,077 875,877,178 – 694,025,443
129. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 30. Other Operating and Administration Expenses Group Company Year Ended 31 December Notes 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. Staff Expenses 30.1 647,254,105 489,248,429 274,767,144 251,929,168 634,286,575 609,312,566 293,714,062 232,589,896 Administration and Establishment Expenses Provision for Impairment for Investment in Subsidiary – – 49,500,000 – Selling Expenses 72,936,706 56,456,952 57,082,420 42,498,031 Depreciation 28,094,510 30,752,626 19,250,659 24,332,695 1,382,498,205 1,185,770,573 694,314,285 551,349,790 644,633,342 30.1. Staff Expenses Group Year Ended 31 December Wages, Salaries and Bonuses Company 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. 457,288,816 334,219,907 193,649,796 172,925,821 Contribution to Defined Contribution Plans – EPF and ETF 84,715,377 53,229,075 50,108,977 41,307,385 Staff Welfare 63,663,603 67,706,808 15,264,078 18,744,933 Staff Training 16,984,566 11,404,443 8,783,109 4,929,881 9,704,258 10,731,667 14,897,484 11,956,530 6,961,184 6,240,148 647,254,105 489,248,429 274,767,144 251,929,168 Medical Claims Gratuity – 7,781,000 644,633,342 31. Amortisation Group Year Ended 31 December Intangible Asset Company 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. 6,524,847 5,369,888 1,967,678 1,550,306 6,524,847 5,369,888 1,967,678 1,550,306 6,524,847 644,633,342 127
130. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 32. The Profit from Operations for the Year is Stated after Charging/(Crediting) the Following: Group Year Ended 31 December Directors’ Emoluments – Executive – Non-Executive Company 2018 Rs. 2017 Rs. 2018 Rs. 20,981,674 16,591,232 9,665,343 4,949,117 3,729,878 3,717,933 1,000,500 2017 Rs. – 9,634,578 Auditors’ Remuneration (Fees) – Audit 3,781,656 3,084,842 1,510,620 – Audit-Related Other 1,048,864 975,205 328,654 – Non-Audit – 583,964 1,673,814 133,470 767,419 Depreciation 28,094,510 30,752,626 19,250,659 24,332,695 Advertisement Costs 36,599,440 85,896,999 20,745,154 59,585,434 Amortisation of Intangibles Staff Cost Profit on Disposal of Property, Plant and Equipment 8,087,347 5,369,888 1,967,678 1,550,306 647,254,105 489,248,429 274,767,144 251,929,168 398,305 3,415,418 – 3,415,418 Profit on Disposal of Property, Plant & Equipment 33. Finance Cost Group Year Ended 31 December Profit Mark up on Lease (Ijara) Facility Finance Cost on Subordinated Debt Profit Mark up on Wakala Facility 2018 Rs. Company 2017 Rs. 2018 Rs. 780,942 2,676,761 33,906 1,514,632 7,570,117 22,000,000 7,570,117 22,000,000 26,767,117 7,196,237 26,767,117 7,196,237 35,118,177 31,872,998 34,371,140 30,710,869 644,633,342 128 2017 Rs.
131. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 34. Income Tax Expense Group Year Ended 31 December Current Income Tax Fair Value Gain/(loss) of Investment Property 2018 Rs. (39,478,791) 1,239,000 WHT Adjustment – Over/(Under) Provision from Previous Years – Recognised in Profit or Loss Recognised in Other Comprehensive Income (14,757,425) (142,500) (1,002,363) – (38,239,791) Deferred Tax Company 2017 Rs. 2018 Rs. – 2017 Rs. (13,214,894) 1,239,000 (142,500) – – – – 1,239,000 (13,357,394) 9,227,994 717,366 (1,483,089) 13,214,894 9,227,994 717,366 (1,483,089) 13,214,894 (29,011,797) (14,899,924) (244,089) (142,500) (29,011,797) (14,899,924) (244,089) (142,500) – (15,902,288) – (29,011,797) (14,899,924) – – (244,089) (142,500) Profit on Disposal of Property, Plant & Equipment 34.1 Tax Reconciliation Statement Group Company 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. Accounting Profit Before Tax 133,203,743 169,904,142 23,985,529 62,769,725 Aggregate Disallowed Items 192,061,903 108,921,682 27,923,384 47,228,016 Aggregate Allowable Expenses (47,762,403) (153,832,341) (37,597,612) (36,191,033) Total Statutory Income/(Losses) 277,503,243 124,993,483 14,311,301 73,806,708 Year Ended 31 December Losses Incurred During the Year – – Utilisation of Tax Losses (14,311,301) (26,610,660) Taxable Income – (14,311,301) – (26,610,660) 263,191,942 98,382,823 – 47,196,048 Tax @ 15%/28% 39,478,791 14,757,425 – 13,214,894 Income Tax Expense for the Year 39,478,791 14,757,425 – 13,214,894 129
132. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 34.1.1 Amãna Takaful (Maldives) PLC is liable for income tax at 15% (2017 – 15%) on the taxable income for the Year of Assessment 2018, and the income tax expense recognised during the year is from Amãna Takaful (Maldives) PLC. 34.1.2 Amãna Takaful PLC is liable for income tax at 28% (2017 – 28%) on the taxable income for the Year of Assessment 2018. 34.1.3 Amãna Global Limited is liable for income tax at 15% (2017 – 15%) on the taxable income for the Year of Assessment 2018. 34.1.4 Amãna Takaful Life PLC is liable for income tax at 28% (2017 – 28%) on the taxable income for the Year of Assessment 2018. 34.1.5 Income Tax Assessment Relating to Years of Assessment 2010/11, 2011/12, 2012/13, 2013/14, 2014/15 and 2015/16 The Department of Inland Revenue has raised an assessment for the following years of assessment: – Year of Assessment 2010/11: assessing the General Insurance business to pay an income tax liability of Rs. 578,898/- inclusive of penalty and a assessment on the Life Insurance business, which however has nil balance to pay. The Company has lodged a valid appeal against the said assessment. – Year of Assessment 2011/12: an intimation on the Life Insurance business, which however has nil balance to pay. The Company has lodged a valid appeal against the said intimation. – Year of Assessment 2012/13: assessing the Life Insurance business to pay an income tax liability of Rs. 188,249/- and the Company has lodged a valid appeal against the said assessment. – Year of Assessment 2013/14: assessing the Life Insurance business to pay an income tax liability of Rs. 11,070,604/- and the Company has lodged a valid appeal against the said assessment. – Year of Assessment 2014/15: assessing the Life Insurance business to pay an income tax liability of Rs. 18,544,683/- and the Company has lodged a valid appeal against the said assessment – Year of Assessment 2015/16: assessing the Life Insurance business to pay an income tax liability of Rs. 39,828,769/- and the Company has lodged a valid appeal against the said assessment. Inland Revenue Department has assessed the General Insurance business to pay an income tax liability of Rs. 142,784,785/- inclusive of penalty. The Company has lodged a valid appeal against the said assessment. Directors are of the view that it has followed due process and acted in accordance with the prevailing laws in its tax submissions for years of assessment 2010/11, 2011/12, 2012/13, 2013/14, 2014/15 and 2015/16. Therefore, the above assessments have no rationale or basis in law. 130
133. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 34.2 Deferred Tax Asset Group Year Ended 31 December Tax Losses Brought Forward Tax Losses of Which Deferred Tax Asset was not Recognised Available-for-Sale Financial Assets Defined Benefit Obligation Company 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. 1,746,214,571 1,764,928,432 1,096,288,898 1,123,813,741 (1,153,671,257) (1,111,131,757) 2,703,514 43,782,586 (752,153,195) – (819,091,947) – 59,799,869 38,215,718 35,028,091 28,996,165 655,046,697 735,794,979 379,163,794 333,717,959 Deferred Tax Assets @ 15% and 28% 98,257,005 110,369,247 106,165,862 93,441,029 Recognised Deferred Tax Asset 98,257,005 110,369,247 106,165,862 93,441,029 (43,689,824) (31,792,913) (33,021,528) (31,446,478) Deferred Tax Liability Property, Plant and Equipment Available-for-Sale Financial Assets Revaluation Gain Fair Value Gain/(Loss) of Investment Property – (2,255,462) 37,009,989 – 4,425,000 (1,425,000) – – 415,683 4,425,000 – (1,425,000) Total Taxable Temporary Differences (2,254,835) (35,473,375) (28,180,845) Deferred Tax Liability @ 15% and 28% (4,001,735) (5,321,006) (7,890,636) (9,204,014) Deferred Income Tax Charge/(Reversal) 9,227,994 (1,483,089) 13,214,894 96,792,137 97,451,909 Net Deferred Tax Asset – 103,483,264 105,048,241 (32,871,478) Profit on Disposal of Property, Plant & Equipment 34.3 Movement in Temporary Differences During the Year Group Company Year Ended 31 December 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. Balance at 1 January 105,048,241 104,330,875 97,451,909 97,594,408 Recognised in Total Comprehensive Income Tax Losses Brought Forward (5,187,496) 4,017,905 3,623,486 1,335,397 Defined Benefit Obligation 17,935,845 1,413,695 9,807,865 1,399,698 Fair Value Gain/(Loss) of Investment Property Property, Plant and Equipment Available-for-Sale Financial Assets 1,239,000 (18,113,973) 2,561,646 (1,564,978) Balance as at 31 December 103,483,264 (142,500) (1,006,439) (3,565,295) 717,366 105,048,241 1,239,000 (15,330,124) – (659,772) 96,792,137 (142,500) (2,735,095) – (142,500) 97,451,909 103,483,264 131
134. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements Deferred tax assets are recognised for unused tax losses to the extent that it is probable that future taxable profit will be available against which the losses can be utilised. Significant Management judgement is required to determine the amount of deferred tax assets that can be recognised, based on the likely timing and the level of future taxable profits together with future tax planning strategies. However, Amãna Takaful PLC has recorded a deferred tax asset of Rs. 96,792,137/- (2017 – Rs. 97,451,909/-) as recognised up to the extent that it will be recognised within foreseeable future. Amãna Takaful Life PLC has not recognised a deferred tax asset on tax losses amounting to Rs. 311,490,776/(2017 – Rs. 252,665,084/-), since it is not probable that future taxable profits will be available within a foreseeable future. 35. Earnings Per Share 35.1 Basic earnings per share is calculated by dividing the net profit/(loss) for the year attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year. 35.2 The following reflect the income and share data used in the basic earnings per share computations: Amount used as the Numerator: Group For the Year Ended 31 December Net Profit Attributable to Ordinary Shareholders Company 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. 59,986,522 126,501,146 23,741,440 62,578,787 Number Number Number Number 180,000,130 1,800,001,296 180,000,130 1,800,001,296 0.33 0.07 0.13 0.03 Number of Ordinary Shares used as Denominator: Weighted Average Number of Ordinary Shares in Issue Earnings Per Share (Rs.) 35.3 There were no potential dilutive ordinary shares outstanding at any time during the year. Therefore, diluted earning per share is same as basic earnings per share shown above. 35.4 Share consolidation impact if reflected in 2017, earnings per share for 2017 would be Rs. 0.70 for the Group and for the Company Rs. 0.33. 132
135. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 36. Related Party Disclosures The Group carries out transactions in the ordinary course of its business with parties who are defined as related parties in Sri Lanka Accounting Standard (LKAS) 24 – “Related Party Disclosures”. Transactions with related parties were made on the basis of the price lists in force with non-related parties, but subject to approved discounts. Outstanding balances with related parties other than balances relating to investment-related transactions as at the reporting date are unsecured and interest free. Settlement will take place in cash. Such outstanding balances have been included under respective assets and liabilities. Details of related party transactions are reported below: (A) Transactions with the Parent, Subsidiaries and Fellow Subsidiaries Group Relationship Nature of Transaction 2018 Rs. Ultimate Parent Takaful Premium – Takaful Premium Receivable – – Claims Paid – – Investment in Equity – – Takaful Premium Receivable – Reimbursement Cost – – Current Account Settlements – – Investment Placed – – Investment Income Earned – – Takaful Premium – 43,620,173 Claim Paid – 10,850,356 Takaful Premium Receivable – 10,047,957 Fund Management Fees – 3,156,988 Investment Guarantee – 45,678,958 Parent Other Related Companies 2017 Rs. 743,007 12,437 133
136. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements Company Relationship Nature of Transaction 2018 Rs. Ultimate Parent Takaful Premium – Takaful Premium Receivable – – Claims Paid – – Investment in Equity – – Claims Paid – Takaful Premium – Reimbursement Cost – – Current Account Settlements – – Takaful Premium – 43,620,173 Claim Paid – 10,850,356 Takaful Premium Receivable – 10,047,957 Fund Management Fees – 2,056,988 Parent Other Related Companies Subsidiaries Takaful Premium Claims Paid Takaful Premium Receivable Shared Cost Support Service Fee Shared Cost Settlement Current Account Balance 2017 Rs. 743,007 – 201,600 14,197,616 1,868,728 2,702,471 229,434 – 162,866,734 64,101 122,199,444 8,400,000 8,400,000 168,389,501 87,085,004 5,648,197 16,497,664 Dividend 22,684,989 10,500,000 Subordinated Debt 82,475,918 – Share Transfer 54,545,459 – The Parent Company has diluted the controlling ownership of the Company in 2017. Accordingly from 2017, there is no parent or ultimate parent for the Company. 134
137. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements (B) Compensation of Key Management Personnel The total compensation to those individuals classified as Key Management Personnel, being those having authority and responsibility for planning, directing and controlling the activities of the Company. According to Sri Lanka Accounting Standard (LKAS) 24 – “Related Party Disclosure”, Key Management Personnel (KMP) are those having authority and responsibility for planning, directing and controlling the activities of the entity. Accordingly, the Directors (including Executive and Non-Executive Directors) of the Company and its parent have been classified as Key Management Personnel of the Group. The Group carries out transactions with KMPs and their close family members in the ordinary course of business on an arm’s length basis at commercial rates: Group 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. 55,686,716 46,247,443 20,185,228 15,054,983 2,827,251 2,563,950 1,858,403 1,677,713 Year Ended 31 December Salary and Other Short-Term Benefits Contributions Made by the Company to Provident Fund and Trust Fund Termination Benefits – Non-Cash Benefits Company 3,120,000 – 3,120,000 2,160,000 3,960,000 1,020,000 2,820,000 60,673,967 55,891,393 23,063,631 19,552,696 644,633,342 37. Principal Subsidiaries The following disclosure highlights the Group composition and the proportion of ownership interests held by NCI: Company and Country of Incorporation/Operation Principal Activities Class of Shares Held Proportion of Class Held by the Company (%) Group Interest (%) Non-Controlling Interest (%) 82.3 82.3 17.7 100 100 – 55 55 Sri Lanka Amãna Takaful Life PLC Life Insurance Ordinary Amãna Global Limited Asset/Investment Management Ordinary General Takaful Insurance Ordinary Maldives Amãna Takaful (Maldives) PLC 45 135
138. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 37.1 Summary Financial Information for Subsidiaries that have Non-Controlling Interests that are Material to the Group The following table summarises the information relating to the Group’s subsidiary that has material NCI, before any intra-group eliminations: 31 December 2018 NCI Percentage Total Assets Total Liabilities Net Assets – Attributable to Non-Controlling Interest – Attributable to Parent Amãna Takaful Life PLC Amãna Takaful (Maldives) PLC 17.7% 45% 2,877,574,677 1,534,934,390 (2,361,848,629) (841,374,325) 515,726,048 693,560,065 91,283,511 312,102,029 424,442,537 381,458,036 Net Earned Contribution (Premium) 806,062,264 877,562,549 Profit for the Period (62,976,499) 123,005,030 – Profit Attributable to Non-Controlling Interest (11,146,840) 55,352,264 – Profit Attributable to Parent (51,829,659) Other Comprehensive Income, Net of Tax Total Comprehensive Income for the Year Cash Flows from/(used) in Operating Activities Cash Flows from/(used) in Investment Activities Cash Flows used in Financing Activities (Dividends Paid to NCI: Rs. 19,001,519/-) Net Increase/(Decrease) in Cash and Cash Equivalents 136 2,489,475 67,652,767 100,968,005 (60,487,024) 223,973,035 (27,584) 264,984,443 (279,322,404) (216,678,219) (747,036) (46,658,914) (280,097,024) 1,647,311
139. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 31 December 2017 Amãna Takaful Life PLC Amãna Takaful (Maldives) PLC NCI Percentage 10% 45% Total Assets 2,809,627,481 1,062,294,178 Total Liabilities (2,235,839,592) (557,939,492) 573,787,889 504,354,686 57,978,789 225,390,457 516,409,700 278,964,229 765,035,663 613,485,660 49,831,579 52,266,467 4,983,158 23,519,910 44,848,421 28,746,557 Net Assets – Attributable to Non-Controlling Interest – Attributable to Parent Net Earned Contribution (Premium) Profit for the Period – Profit Attributable to Non-Controlling Interest – Profit Attributable to Parent Other Comprehensive Income, Net of Tax Total Comprehensive Income for The Year Cash Flows from Operating Activities Cash Flows used in Investment Activities Cash Flows used in Financing Activities Net Increase in Cash and Cash Equivalents 439,150 2,220,094 50,270,729 54,486,561 125,815,466 160,926,653 97,174,633 (373,198,126) (1,162,129) (19,513,138) 221,827,970 (231,784,611) 38. Commitments and Contingencies 38.1 Commitments The Group does not have significant capital commitments as at the reporting date. 38.2 Contingencies A contingent liability at a fair value of Rs. 273.5 Mn. has been determined from four claims where, Amãna Takaful PLC’s liability on the retention after receovery of reinsurance is assessed at Rs. 25 Mn., if any. The said claims are subject to legal proceeding. At the reporting date, the lawyers are of the view that these four cases will be favourable to the Company. The Group operates in the insurance industry and is subject to legal proceedings in the normal course of business. While it is not practicable to forecast or determine the final results of all pending or threatened legal proceedings, Management does not believe that such proceedings (including litigation) will have a material effect on its results and financial position. The Group is also subject to insurance solvency regulations in all the territories where it operates and has complied with all these solvency regulations. There are no contingencies associated with the Group's compliance or lack of compliance with such regulations. 137
140. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 39. Transfer Pricing Provision on transfer pricing under Sections 104 and 104 (A) of the Inland Revenue Act No. 10 of 2006 covers the transactions with associated undertakings. Since compliance reporting will be enforced from the year of assessment 2015/16. During the financial year, certain transactions including provision of insurance solutions and placement of deposits have been taken place with parent entity (associated undertaking). The Group is of the view that the transactions with its’ related entities have taken place on arm’s length price. As the aggregate value of transactions of each company with associated undertaking is more than Rs. 50 Mn., the Group is required to maintain separate documentation as prescribed by Transfer Pricing Regulations. All companies are in the process of seeking professional advice from tax consultants to prepare required documentations to comply with Transfer Pricing Regulation. 40. Events Occurring after the Reporting Date There have been no event occurring after the reporting date that require adjustments to or disclosures in these Financial Statements. 41. Assets Pledged The following assets have been pledged as security for liabilities. Nature of Assets Nature of Liability Carrying Amount Pledged 2018 Rs. Repurchase Agreements Repurchase Agreements Investment in Subsidiary Included Under 2017 Rs. Bank Guarantee For a Performance Bond 5,000,000 Bank Guarantee For a Performance Bond 1,000,000 1,000,000 411,500,000 450,000,000 Short-Term Wakala Facility – Financial Assets – Shareholders’ Funds Financial Assets – Shareholders’ Funds Investment in Subsidiary 42. Comparative Information Comparative information has been reclassified where necessary to conform with the current year presentation. 138
141. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 43. Risk Management 43.1 Overview All entities face uncertainty and the challenge for the Group is to determine how much uncertainty to accept as it strives to grow stakeholder value. Uncertainty presents both risk and opportunity, with the potential to erode or enhance value. Primarily, risk management framework enables Management to effectively deal with uncertainty and associated risk and opportunity, enhancing the capacity to build value. 43.2 Risk Management Framework The Group's risk management framework forms an integral part of the Management and Board processes and decision-making framework across the Group. The Group has a robust Enterprise Risk Management Framework to mitigate the identified risks exposed at multiple levels of the operation. We believe, while having the governance practices and the Standard Operating Procedures (SOP’s), having the right people at the right place will mitigate more than half the risks. However, the Board of Directors have the overall responsibility for the establishment and oversight of the Group’s risk management framework and thus, their approval is necessary for the risk management strategies. The Group’s risk management framework categorised into four lines of defence are as follows: 1. Front Line People – Risk awareness of the people in the front line is the First Line of Defence. 2. Policies and Procedures – The Standard Operating Procedures will mitigate the risks at operational level. 3. Key Personnel – Appointing key personnel at the key positions will assist mitigating through right decision-making and approval controls at Senior Management level. 4. Governance – The governance practices to mitigate the risks at Board level. The Board has appointed a subcommittee (Board Risk Committee) to monitor closely the affairs of risk management of the Group. This section discusses the salient features of the risks exposed by the Group in terms of financial instruments and other areas as an insurance sector. The financial instruments of the Group are exposed to the following risks. 1. Financial Risk 2. Market Risk 3. Insurance Risk 4. Liquidity Risk 139
142. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 43.3 Financial Risk 43.3.1 Capital Management a. Objectives and Policies The Group has established the following capital management objectives, policies and approaches to manage the risks that affect its capital position: – Optimise capital utilisation within the regulatory and Shari’ah guidelines. – To maintain the required level of solvency of the Group, thereby providing a degree of security to policyholders. – To allocate capital efficiently and support the development of business by ensuring that returns on capital employed meets the requirements of its shareholders, policyholders, and other stakeholders. – To retain financial flexibility by maintaining strong liquidity – To align the profile of assets and liabilities, taking account of risks inherent in the Group's line of business. The Group currently has, stated capital worth Rs. 1.86 Bn. which is well above the minimum regulatory requirement of the Insurance Regulatory Commission of Sri Lanka (IRCSL). Operations of the Group are also subject to statutory requirements of the IRCSL (Capital, investments, solvency etc.,) of which, adaptations are made to internal processes from time to time as and when regulations are amended. Such regulations not only prescribe approval and monitoring of activities, but also impose certain restrictive provisions on events such as capital adequacy and solvency to minimise the risk of default and insolvency on the part of the insurance companies to meet unforeseen liabilities. Furthermore, the Group firmly adheres to Islamic finance principles i.e. the strict adherence of Shari’ah guidelines in terms of investments, marketing activities and so on, and restrictions in borrowing capital etc., give more stability to the financial strength of the Group. b. Approach to Capital Management Capitals of all investments are maintained strictly within the investment guidelines of the Insurance Regulatory Commission of Sri Lanka. This primarily helps the Group to maintain the required levels of solvency at all times at different funds. In meeting the objectives mentioned above, the capital management and asset allocation decisions are reviewed and approved by the Executive Committee and the Board Investment Committee which meet regularly on a monthly basis. The Board Investment Committee operates under clear terms of reference to thoroughly analyse the new investment proposals, review the past performance, and provide guidance in terms of future investments and movements of assets. 43.3.2 Credit Risk Credit risk is the risk that one party to a financial instrument will cause a financial loss to the other party by failing to discharge an obligation. How credit risk could arise – 1.Premium Receivable 2.Reinsurance Receivable 3.Investments in Debt Securities 140
143. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements The following policies and procedures are in place to mitigate the Group’s exposure to credit risk: – The Group has a stringent credit policy and a detailed SOP outlining the authority and approval limits to manage credit granted to customers. – All reinsurers are selected based on the ratings as required by IRCSL. – The Investment Committee evaluates the exposure and the new investments in instruments in order to reduce the risks. – The Executive Committee regularly reviews the credit position of the Group i.e. outstandings and overdues. In addition the Group also ensures that there are sufficient provisions created in the case of doubtful debts. Industry Analysis – 2018 Financial Services Asset Management Government Food and Beverages Telecommunication Construction, Manufacturing, Power, and Chemicals Others Total 8,311,882 2,348,830 88,086,419 60,156,924 1,275,909 61,432,832 Assets Financial Assets at Fair Value Through Profit or Loss Investments in Equity Securities Investments in Equity Securities – Unit Linked 33,906,250 – – – – 43,519,457 – – – – – Available-for-Sale Financial Assets Investment in Equity Securities – – – – – 28,956,551 Unit Trust – 26,561,505 – – – – – 26,561,505 Unit Trust – Unit Linked – 27,007,989 – – – – – 27,007,989 – – – – 263,003,500 664,719,396 Unquoted 28,956,551 262,478,500 – 525,000 Loans and Receivables Repurchase Agreements Repurchase Agreements – Unit Linked – – 664,719,396 – – – – – – 20,056,658 – – – – 20,056,658 Fixed Term Investments 1,750,329,688 – – – – – – 1,750,329,688 Mudharaba Investments – Unit Linked 1,512,710,987 – – – – – – 1,512,710,987 – – – – – – – – Commercial Paper Advances to Company Officers Total Credit Exposure – – 3,588,381,976 – 53,569,494 684,776,054 – – 43,519,457 – 68,993,806 – 13,523,668 13,523,668 17,148,407 4,456,389,193 141
144. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements Industry Analysis – 2017 Financial Services Asset Management Government Food and Beverages Telecommunication Construction, Manufacturing, Power, and Chemicals Others Total 38,123,076 17,402,662 2,980,619 58,506,357 107,622,840 2,030,898 109,653,738 Assets Financial Assets at Fair Value through Profit or Loss Investments in Equity Securities – – – – Investments in Equity Securities – Unit Linked – – – – – – Available-for-Sale Financial Assets Investment in Equity Securities – – – – – 34,561,038 Unit Trust – 44,931,416 – – – – – 44,931,416 Unit Trust – Unit Linked – 25,158,906 – – – – – 25,158,906 – – – – 220,066,078 714,764,891 Unquoted 34,561,038 219,541,078 – 525,000 Loans and Receivables Repurchase Agreements Repurchase Agreements – Unit Linked – – 714,764,891 – – – – – – 40,965,518 – – – – 40,965,518 250,930,016 – – – – – – 250,930,016 Mudharaba Investments 1,147,670,227 – – – – – – 1,147,670,227 Mudharaba Investments – Unit Linked 1,350,900,391 – – – – – 1,350,900,391 – – – – – – Murabaha Investments Commercial Paper Advances to Company Officers Total Credit Exposure 142 – – 3,003,602,750 – 70,090,322 755,730,410 – – 38,123,076 – 101,000,000 – 226,550,503 140,580,148 241,580,148 14,912,404 14,912,404 160,504,068 4,254,601,128
145. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 43.3.2.1 Credit Exposure The Group’s maximum exposure to credit risk for the components of the Statement of Financial Position at 31 December 2018 and 2017, is the carrying amounts of respective financial instruments. Credit Exposure – 31 December 2018 Neither Past Due Nor Impaired Past Due But Not Impaired Individually Impaired Rs. Rs. Rs. As at 31 December 2018 Rs. Financial Assets Financial Assets at Fair Value Through Profit or Loss Investment in Equity Securities 88,086,419 – – 88,086,419 Investment in Equity Securities – Unit Linked 61,432,832 – – 61,432,832 28,956,551 – – 28,956,551 – – Available-for-Sale Financial Assets Investment in Equity Securities – Quoted Unit Trust Unit Trust – Unit Linked – – 27,007,989 – – 27,007,989 263,003,500 – – 263,003,500 664,719,396 – – 664,719,396 20,056,658 – – – – – – 1,512,710,987 – – 1,512,710,987 13,523,668 – – 13,523,668 Retakaful (Reinsurance) Receivables 437,579,148 – – 437,579,148 Contribution (Premium) Receivables 711,244,729 – – 711,244,729 Cash and Cash Equivalents 225,260,790 – – 225,260,790 5,803,912,355 – – 5,803,912,355 Investment In Equity Securities – Unquoted Loans and Receivables Repurchase Agreements Repurchase Agreements – Unit Linked Fixed Term Investments Commercial Paper Mudharaba Investments – Unit Linked Advance to Company Officers 1,750,329,688 – 20,056,658 1,750,329,688 – Other Assets Related to Financial Risk Total Credit Exposure 143
146. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements Credit Exposure – 31 December 2017 Neither Past Due Nor Impaired Past Due But Not Impaired Individually Impaired Rs. Rs. Rs. As at 31 December 2018 Rs. Financial Assets Financial Assets at Fair Value Through Profit or Loss Investment in Equity Securities Investment in Equity Securities – Unit Linked 58,506,357 – – 58,506,357 109,653,738 – – 109,653,738 34,561,038 – – 34,561,038 – – Available-for-Sale Financial Assets Investment In Equity Securities – Quoted Unit Trust Unit Trust – Unit Linked Investment In Equity Securities – Unquoted – – 25,158,906 – – 25,158,906 220,066,078 – – 220,066,078 714,764,891 – – 714,764,891 Loans and Receivables Repurchase Agreements Repurchase Agreements – Unit Linked Murabaha Investments Mudharaba Investments Commercial Paper 40,965,518 – – 40,965,518 250,930,016 – – 250,930,016 1,147,670,227 – – 1,147,670,227 – 241,580,148 1,350,900,391 – – 1,350,900,391 14,912,404 – – 14,912,404 Retakaful (Reinsurance) Receivables 360,020,248 – – 360,020,248 Contribution (Premium) Receivables 567,358,602 – – 567,358,602 Cash and Cash Equivalents 276,503,979 – – 276,503,979 – 5,413,552,541 Mudharaba Investments – Unit Linked Advance to Company Officers 185,080,148 56,500,000 Other Assets Related to Financial Risk Total Credit Exposure 5,357,052,541 56,500,000 The following table provided information regarding the credit risk exposure on investments of the Group as at 31 December 2018 as a percentage of respective credit ratings of the investee. AAA is considered the highest possible rating, while assets that fall outside the range of AAA to BBB- are classified as speculative grade. No credit exposure limits were exceeded by the Group during the year. Investment in Repurchase Agreements are Government Securities and can be categorised as risk free investment. Further, investments in shares and units are not considered, since credit rating is not applicable. Credit Rating Exposure A+ 43 A 21 AA- 18 AA 11 BB 7 144
147. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 43.4 Market Risk Market risk involves all the fluctuations in the demand and supply forces in the capital and insurance markets for the Group. The capital market forces determine interest rates, equity prices, yield on other investment assets, while the market forces in the insurance market determines the net premiums and gross premium values. Further, prices of goods and services in general i.e., inflation, determines the cost of administration. 43.4.1 Interest Rate Risk Interest rate risk is the risk that the value or future cash flows of a financial instrument will fluctuate because of changes in the market interest rates. Floating rate instruments expose the Group to cash flow interest risk, whereas fixed interest rate instruments expose the Group to fair value interest risk. The Group invests in to Treasury Bills primarily to meet the mandatory requirement of the investment Insurance Regulatory Commission of Sri Lanka and to park the cash inflow within the admissible assets category until a suitable option is identified within the available time space. 43.4.2 Equity Risk Listed equity investments are prone to market risk arising from uncertainties faced in the future values of the securities. In order to diversify its risk the Group and the Company have a diversified investment policy based on fundamental analysis which has helped balance the uncertainty faced. It is also notable that the Group and the Company invests only in sound fundamental value giving investments to the Group and the Company; providing greater security in its invested equity securities. Amãna Takaful Equity Exposure (Group) – Quoted 2018 Sector Equity Exposure Exposure Rs. Construction 2017 Equity Exposure Sector Weight % Exposure Rs. Sector Weight % 987,000 1 3,290,000 4 62,862,801 54 34,561,038 37 Manufacturing 7,324,882 6 14,112,662 15 Plantation 1,106,670 1 1,003,440 1 43,519,457 37 38,123,076 41 1,242,160 1 1,977,179 2 117,042,970 100 93,067,394 100 Financial Services Telecommunication Trading 2018 Sector 2017 Equity Exposure – Unit Linked Equity Exposure – Unit Linked Exposure Rs. Sector Weight % Exposure Rs. Sector Weight % Construction 15,406,950 25 24,077,097 22 Manufacturing 46,025,883 75 85,576,642 78 61,432,832 100 109,653,738 100 145
148. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 43.4.3 Foreign Currency Risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group has exposure to foreign currency risk where it has cash flows in overseas operations and foreign currency transactions which are affected by foreign exchange movements. 43.5 Insurance Risk Being in the insurance industry, risks related to the insurance business i.e. insurance risk, becomes primary in the list. Insurance is all about managing risks on behalf of the customers. In that context, we have identified the following three major risk areas under this category: – Underwriting Risks – Claims Risks – Reinsurance Risk In addition to the above Life insurance is specifically subject to the following risks 1. Mortality Risk – risk of loss arising due to policyholder death experience being different than expected. 2. Morbidity Risk – risk of loss arising due to policyholder health experience being different than expected 3. Investment Return Risk – risk of loss arising from actual returns being different than expected 4. Expense Risk – risk of loss arising from expense experience being different than expected 5. Policyholder Decision Risk – risk of loss arising due to policyholder experiences (lapses and surrenders) being different than expected. In order to mitigate such risk the Group has adopted the following strategy. The Group’s strategy is driven by the comprehensive screening of policyholders in order to ascertain current medical status, family medical history, the key been the comprehensive screening of participants. Further, the Group ensures that the overall risk is reduced by diversifying the product portfolio across widespread geographical and industry wide segments. The Group also rejects the payment of fraudulent claims once fully exhausting its investigative capacity. The insurance risk described above is also affected by the contract holder’s right to pay reduced premiums or no future premiums, to terminate the contract completely. As a result, the amount of insurance risk is also subject to contract holder behaviour. 43.5.1 Underwriting Risks In insurance, underwriting risk may either arise from an inaccurate assessment of the risks entailed in writing an insurance policy, or from factors wholly out of the underwriter's control. As a result, the policy may cost the insurer much more than it has earned in premiums. Management Strategy i. Price – The Group has strict pricing mechanisms which need to be adhered in respect of various classes of products. Whilst pricing is periodically reviewed in respect of market activity it is notable that discounting is strictly monitored with authority levels only at the highest level whilst also been on a multi-level basis. ii. Exposure – The Group fully ensures that the Group does not underwrite risk which does not suit its risk profile and further ensures all high volume non-motor risks are reinsured. iii. Personnel – The Group ensures that all underwriting personnel in both General and Life are adequately trained. Further, all staff inclusive of underwriting staff have been given specific Key Performance Indicators (KPI’s) with regard to revenue and profitability of product segments. The Life segment has its own in-house actuary, who reviews the Life business closely and guides the Management when taking crucial product-based decisions. Further, it should be noted that the Group monitors product profitability of all main classes of insurance on a month by month basis. 146
149. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 43.5.2 Claims Risk The key risk facing insurance companies is the claims risk where an extremely high amount of risks i.e. a significantly high claims ratio in comparison to the earned premium could drastically affect Group performance. Management Strategy Countenance of adverse risk of the same is in effect with strict claims management with proper policy documentation at underwriting level and thorough inspection at claims level been fully emphasised in Key Performance Indicators of all staff levels. Claim Development Table The following tables show the estimate of cumulative incurred claims for each year. Gross Non-Life Insurance Outstanding Claims Provision for 2018 (All figures are in Rupees thousands unless otherwise stated) Accident Year Current Estimate of Cumulative Claims Incurred 1 2 3 4 5 6 7 8 2006 40,128 1,279 2007 33,798 635 2008 67,667 2009 2010 2011 9 10 11 12 13 1,685 990 1,075 920 2,000 1,950 1,075 875 1,850 2,850 3,425 230 400 260 40 40 1,858 1,120 – 130 40 676 1,335 1,160 1,010 910 1,010 1,120 1,750 135 125 88,220 30,634 2,652 74,251 1,692 3,875 3,052 2,057 3,675 3,085 1,715 1,160 950 205 272 1,280 1,715 460 460 75,499 1,205 2,250 2,207 1,620 828 305 305 2012 93,994 1,453 2013 143,757 2,867 836 727 457 680 360 320 1,124 679 535 2014 69,559 2015 90,061 4,918 1,698 405 (67) 4,796 3,494 171 2016 2017 165,411 11,146 1,510 123,612 17,739 2018 319,189 147
150. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements Net Non-Life Insurance Outstanding Claims Provision for 2018 (All figures are in Rupees thousands unless otherwise stated) Accident Year Current Estimate of Cumulative Claims Incurred 1 2 3 4 5 6 7 8 9 10 11 12 13 2006 37,308 888 1,435 990 1,075 1,075 875 3,175 230 400 260 40 40 2007 25,281 635 920 2,000 1,950 1,850 2,850 1,858 1,750 – 130 40 2008 42,264 676 1,335 1,160 1,010 910 1,170 1,120 1,750 135 125 2009 37,615 907 2,652 3,052 2,057 1,715 1,160 950 205 164 2010 71,809 1,692 3,875 3,675 3,085 1,280 1,715 460 460 2011 73,280 1,205 2,250 2,207 1,620 828 305 305 2012 92,052 4,037 1,309 547 704 384 320 2013 82,908 2,679 725 1,124 633 535 2014 46,756 3,378 1,583 387 (67) 2015 70,892 2,018 2,014 171 2016 109,037 7,701 1,524 2017 66,599 7,326 2018 75,829 Sensitivity analysis on claim handling expenses, loss development factors and provision for adverse deviation. Table 1: Impact on Claim Liability to Changes in Key Variables Variable Change in Variable % Central Estimate of Claim Liability (Incl CHE) 75% Claim Liability Change in Ce Claim Liability (Incl CHE) Change in 75% Claim Liability Original – 90,243 98,688 – – Claim Handling Expenses (CHE) 10 90,590 99,067 (347) (380) Claim Handling Expenses (CHE) –10 89,896 98,308 347 380 Loss Development Factors (LDF) 10 94,855 102,443 (4,612) (3,756) Loss Development Factors (LDF) –10 85,578 92,425 4,665 6,263 Change in Variable % URR at 75% Confidence Level Premium Liability (PL) Change in Premium Liability Table 2: Impact on Premium Liability to Changes in Key Variables Variable Original – 632,843 632,843 Claim Handling Expenses (CHE) +10 635,277 635,277 (2,434) Claim Handling Expenses (CHE) –10 630,409 630,409 2,434 148 –
151. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 43.5.2.1 Claims Risk Amãna Takaful Life PLC (Group) The key risk facing insurance companies is the claims risk, where an extremely high amount of withdrawals i.e., a significantly high surrender ratio in comparison to the premium, could drastically affect Company performance. Sensitivities The sensitivity analysis below has been performed for reasonably possible movements in key assumptions with all other assumptions held constant, showing the impact on gross and net liabilities. The correlation of assumptions will have a significant effect in determining the ultimate claims liabilities, but to demonstrate the impact due to changes in assumptions, assumptions had to be changed on an individual basis. It should be noted that movements in these assumptions are non-linear. Sensitivity information will also vary according to the current economic assumptions. Impact on Takaful Contract Liabilities 31 December 2018 Change in Assumptions % Mortality/Morbidity +10 Mortality/Morbidity -10 Lapse and Surrender Rates -10 -1 +10 Discount Rate Expenses Unit Fund Investment Return -1 Gross Rs. 9,626.02 Net % Rs. % 0.44 2,789 0.13 -0.48 -3,902 -0.18 1,967.64 0.09 1,674 0.08 3,636.92 0.16 2,626 0.12 2,815.68 0.13 2,751 0.13 -0.03 -725 -0.03 (10,516.19) (730.75) Movement in Takaful Contract Liabilities The movement of Takaful Contract Liabilities are summarised in the table below by measurement category: Takaful Contract Liabilities Gross Rs. Net Rs. 31 December 2017 2,102,859 2,070,397 Reserve Unwinding (23,484) (16,410) Experience Variance (10,337) (9,406) Change in Valuation Basis (Methodology) Change in Valuation Basis (Assumptions) – – 6,756 6,749 New Business 34,215 27,680 Others 95,303 95,303 2,205,311 2,174,313 As at 31 December 2018 Management Strategy Countenance of adverse risk of the same is in effect with strict claims management with proper policy documentation at underwriting level and thorough inspection at claims level been fully-emphasised in Key Performance Indicators of all staff levels. 149
152. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 43.5.3 Management Strategy The Board Risk Committee annually reviews the list of reinsurers to ensure that the Group’s exposure is hedged to maximum effect, whilst periodically monitoring the financial status and condition of the same. The Group employs pre-agreed treaty insurance agreements to hedge against day-to-day insurance exposure, whilst engages in facilitative insurance to hedge against extraordinary insurance risks in the line of day-to-day business. Statement of Reinsurance Arrangements (General Insurance) Outward Treaty Reinsurance Class of Business Name of the Reinsurer Marine Fire Motor Liability Reinsurers Country of Origin Rating Financial Strength Credit Rating Agency Date of Rating Swiss Retakaful Switzerland AA- AA- S&P 24 October 2018 Labuan Reinsurance (L) Ltd. Malaysia A- (Excellent) A- (Excellent) A M Best 29 November 2018 Trust International Insurance and Reinsurance B.S.C.(c) Trust Re Cayman Island A- A- A M Best 4 May 2018 Asian Re Thailand BBB- B+ A M Best 30 April 2018 Swiss Retakaful Switzerland AA- AA- S&P 24 October 2018 Labuan Reinsurance (L) Ltd. Malaysia A- (Excellent) A- (Excellent) A M Best 29 November 2018 Trust International Insurance and Reinsurance B.S.C.(c) Trust Re Cayman Island A- A- A M Best 4 May 2018 Asian Re Thailand BBB- B+ A M Best 30 April 2018 Swiss Retakaful Switzerland AA- AA- S&P 24 October 2018 Labuan Reinsurance (L) Ltd. Malaysia A- (Excellent) A- (Excellent) A M Best 29 November 2018 General Insurance Corporation of India India A- (Excellent) A- A M Best 27 April 2018 Trust International Insurance and Reinsurance B.S.C.(c) Trust Re Cayman Island A- A- A M Best 04 May 2018 Asian Re Thailand BBB- B+ A M Best 30 April 2018 Swiss Retakaful Switzerland AA- AA- S&P 24 October 2018 Labuan Reinsurance (L) Ltd. Malaysia A- (Excellent) A- (Excellent) A M Best 29 November 2018 General Insurance Corporation of India India A- (Excellent) A- A M Best 27 April 2018 Trust International Insurance and Reinsurance B.S.C.(c) Trust Re Cayman Island A- A- A M Best 4 May 2018 Asian Re Thailand BBB- B+ A M Best 30 April 2018 Miscellaneous Swiss Retakaful Switzerland AA- AA- S&P 24 October 2018 Labuan Reinsurance (L) Ltd. Malaysia A- (Excellent) A- (Excellent) A M Best 29 November 2018 Trust International Insurance and Reinsurance B.S.C.(c) Trust Re Cayman Island A- A- A M Best 4 May 2018 Asian Re Thailand BBB- B+ A M Best 30 April 2018 Travel PA Labuan Reinsurance (L) Ltd. Malaysia A- (Excellent) A- (Excellent) A M Best 29 November 2018 Engineering Swiss Retakaful Switzerland AA- AA- S&P 24 October 2018 Labuan Reinsurance (L) Ltd. Malaysia A- (Excellent) A- (Excellent) A M Best 29 November 2018 Trust International Insurance and Reinsurance B.S.C.(c) Trust Re Cayman Island A- A- A M Best 4 May 2018 Asian Re Thailand BBB- B+ A M Best 30 April 2018 150
153. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements Amãna Takaful Life PLC Class of Business Name of the Reinsurer Reinsurers Country of Origin Name of The Regulatory Authority which Approval Obtained to Transact Reinsurance Business License Validity Period of the Reinsurer Rating Financial Strength Rating Agency Date of Rating Credit Life Long-term Takaful Plans (Endowments) Munich Re Malaysia Negara Malaysia (BNM) Yearly renewal unlimited AA- (Stable) AA- (Stable) S & P 23 May 2018 Hanover Re Bahrain Central Bank of Bahrain Yearly renewal unlimited A+ (Stable) A+ (Stable) S&P 10 December 2018 All Family Takaful Policies (CAT Cover) Hanover Re Bahrain Central Bank of Bahrain Yearly renewal unlimited A+ (Stable) A+ (Stable) S&P 10 December 2018 Unit-link Takaful Hanover Re Bahrain Negara Malaysia (BNM Yearly renewal unlimited A+ (Stable) A+ (Stable) S&P 10 December 2018 Group family Munich Re Malaysia Negara Malaysia (BNM) Yearly renewal unlimited AA- (Stable) AA- (Stable) S & P 23 May 2018 Munich Re Malaysia Negara Malaysia (BNM) Yearly renewal unlimited AA- (Stable) AA- (Stable) S & P 10 December 2018 2. Score Re Malaysia Labuan FSA Yearly renewal unlimited AA- (Stable) AA- (Stable) S & P 10 December 2018 Credit and Mortgage Takaful Amãna Takaful (Maldives) PLC Class of Business Marine Fire Name of the Reinsurer Reinsurers Country of Origin Rating Financial Strength Credit Rating Agency Date of Rating S&P 24 October 2018 Swiss Retakaful Switzerland AA- AA- Labuan Reinsurance (L) Ltd. Malaysia A- (Excellent) A- (Excellent) A M Best 29 November 2018 General Insurance Corporation of India India A- (Excellent) A- A M Best 28 February 2017 Trust International Insurance and Reinsurance B.S.C.(c) Trust Re Cayman Island A- A- A M Best 4 May 2018 Asian Re Thailand BBB- B+ A M Best 30 April 2018 Swiss Retakaful Switzerland AA- AA- S&P 24 October 2018 Labuan Reinsurance (L) Ltd. Malaysia A- (Excellent) A- (Excellent) A M Best 29 November 2018 General Insurance Corporation of India India A- (Excellent) A- A M Best 28 February 2017 Trust International Insurance and Reinsurance B.S.C.(c) Trust Re Cayman Island A- A- A M Best 4 May 2018 151
154. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements Class of Business Motor Liability Name of the Reinsurer Reinsurers Country of Origin Rating Financial Strength Credit Rating Agency Date of Rating S&P 24 October 2018 Swiss Retakaful Switzerland AA- AA- Labuan Reinsurance (L) Ltd. Malaysia A- (Excellent) A- (Excellent) A M Best 29 November 2018 General Insurance Corporation of India India A- (Excellent) A- A M Best 27 April 2018 Trust International Insurance and Reinsurance B.S.C.(c) Trust Re Cayman Island A- A- A M Best 4 May 2018 Swiss Retakaful Switzerland AA- AA- S&P 24 October 2018 Labuan Reinsurance (L) Ltd. Malaysia A- (Excellent) A- (Excellent) A M Best 29 November 18 General Insurance Corporation of India India A- (Excellent) A- A M Best 27 April 2018 Trust International Insurance and Reinsurance B.S.C.(c) Trust Re Cayman Island A- A- A M Best 4 May 2018 S&P 24 October 2018 Miscellaneous Swiss Retakaful Switzerland AA- AA- Labuan Reinsurance (L) Ltd. Malaysia A- (Excellent) A- (Excellent) A M Best 29 November 2018 General Insurance Corporation of India India A- (Excellent) A- A M Best 28 February 2017 Trust International Insurance and Reinsurance B.S.C.(c) Trust Re Cayman Island A- A- A M Best 4 May 2018 Travel PA Labuan Reinsurance (L) Ltd. Malaysia A- (Excellent) A- (Excellent) A M Best 29 November 2018 Engineering Swiss Retakaful Switzerland AA- AA- 24 October 2018 Labuan Reinsurance (L) Ltd. Malaysia A- (Excellent) A- (Excellent) A M Best 29 November 2018 Trust International Insurance and Reinsurance B.S.C.(c) Trust Re Cayman Island A- A- A M Best 4 May 2018 Asian Re Thailand BBB- B+ A M Best 30 April 2018 S&P 43.6 Liquidity Risk Liquidity risk is when a possibility arises that an entity will encounter difficulty in meeting obligations associated with financial instruments. The Group has a standard set of guidelines set up by an investment policy under the purview of the Investment Committee which is followed in accordance with the IRCSL guidelines. The following policies and procedures are in place to mitigate the Group’s exposure to liquidity risk: – The Group maintains a diverse maturity profile in its assets, in order to ensure sufficient funding available to meet insurance and investment contracts obligations. – The Investment Committee regularly reviews the liquidity levels and takes appropriate action to improve the liquidity whilst ensuring maximum possible yield and efficiency in investments. – Efficient forecasting of future commitments and making investments to meet the payouts to mitigate any possible liquidity concerns. 152
155. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements Maturity profile of Group investments based on remaining maturity is given below: 2018 – Maturity Analysis Within One Year 1-3 Years 3-5 Years More than 5 Years Rs. Rs. Rs. Rs. No Stated Maturity Rs. Total 44,736,958 117,042,970 Rs. Assets Investments in Quoted Equity Securities 72,306,012 – – – Unit Trust 26,561,505 – – – – – – Unquoted Investments – – 263,003,500 26,561,505 263,003,500 Repurchase Agreements 664,719,396 – – – – 664,719,396 Fixed Term Investments 1,750,329,688 – – – – 1,750,329,688 135,773,809 – – – – 135,773,809 – – – – 13,523,668 – – – – 13,523,668 711,244,729 – – – – 711,244,729 Other Assets – Other Receivables Other Assets – Unit Linked Advances to Company Officers Contribution (Premium) Receivables Total – 3,256,178,907 73,013,699 20,979,452 – 307,740,458 – 3,682,199,266 Liabilities Other Liabilities – Unit Linked 51,285,609 – – – – 51,285,609 Other Liabilities 653,704,232 – – – – 653,704,232 Short-Term Borrowings 200,777,276 – – – – 200,777,276 – – 46,599,805 – – 3,849,823 – – 956,216,744 Subordinated Debt Finance Lease Liability Total – – 1,503,962 2,345,861 907,271,079 2,345,861 46,599,805 – 46,599,805 153
156. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 2017 – Maturity Analysis Within One Year 1-3 Years 3-5 Years Rs. Rs. Rs. More Than 5 Years Rs. No Stated Maturity Rs. Total 44,736,958 93,067,394 Rs. Assets Investments in Quoted Equity Securities 48,330,436 – – – Unit Trust 44,931,416 – – – – 44,931,416 – – 220,066,078 – 220,066,078 Unquoted Investments – Repurchase Agreements 714,764,891 – – – – 714,764,891 Murabaha Investments 132,650,115 – – 24,286,750 – 250,930,016 Mudharaba Investments – – 1,147,670,227 Commercial Paper 241,580,148 – – – – 241,580,148 Other Assets – Other Receivables 45,133,114 – – – – 45,133,114 – – – – 14,912,404 – – – – 14,912,404 567,358,602 – – – – 567,358,602 Other Assets – Unit Linked Advances to Company Officers Contribution (Premium) Receivables Total 1,147,670,227 73,013,699 – 2,957,331,354 73,013,699 20,979,452 20,979,452 244,352,828 – 44,736,958 3,340,414,290 Liabilities Other Liabilities – Unit Linked 51,844,853 – – – – 51,844,853 Other Liabilities 548,767,363 – – – – 548,767,363 Short-Term Borrowings 187,698,284 – – – – 187,698,284 – – 200,000,000 – 200,000,000 – 6,379,446 Subordinated Debt Finance Lease Liability Total 154 – 2,529,624 3,849,823 – – 790,840,123 3,849,823 – 200,000,000 – 994,689,945
157. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements 44. Maturity Profile of Assets and Liabilities Group 2018 Year Ended 31 December Within 12 Months Rs. 2017 After 12 Months Rs. Total Rs. Within 12 Months Rs. After 12 Months Rs. Total Rs. Assets Cash and Bank Balances Cash and Bank Balances – Unit Linked 217,105,631 – 217,105,631 269,133,976 – 269,133,976 8,155,160 – 8,155,160 7,370,003 – 7,370,003 2,835,180,727 2,344,839,638 Financial Assets 2,672,163,869 Financial Assets – Unit Linked 163,016,859 383,082,937 2,727,922,575 1,621,208,465 – 1,621,208,465 1,526,678,553 – 1,526,678,553 Retakaful (Reinsurance) Receivables 437,579,148 – 437,579,148 360,020,248 – 360,020,248 Contribution (Premium) Receivables 711,244,729 – 711,244,729 567,358,602 – 567,358,602 Investment Property – 220,429,000 220,429,000 – 79,925,000 79,925,000 Property, Plant and Equipment – 96,024,241 96,024,241 – 76,724,518 76,724,518 Intangible Assets – 86,942,914 86,942,914 – 31,812,197 31,812,197 Deferred Tax Assets – 103,483,264 103,483,264 – 105,048,241 105,048,241 Other Assets Other Assets – Unit Linked Total Assets 252,737,848 – – – 5,920,194,849 669,896,277 252,737,848 – 186,501,020 – 6,590,091,127 5,261,902,041 – – 676,592,893 186,501,020 – 5,938,494,934 Liabilities Bank Overdrafts Short-Term Borrowings Insurance Contract Liabilities – Non-Life – – – 37,426 – 37,426 200,777,276 – 200,777,276 187,698,284 – 187,698,284 1,394,786,725 – 1,394,786,725 1,015,130,229 – 1,015,130,229 Insurance Contract Liabilities – Family Takaful Fund – 534,967,670 534,967,470 – 580,710,123 580,710,123 Insurance Contract Liabilities – Family Takaful Unit Linked – 1,660,124,030 1,660,124,030 – 1,525,135,501 1,525,135,501 Employee Benefits – 66,878,749 66,878,749 – 50,016,182 50,016,182 Subordinated Debt – 46,599,805 46,599,805 – 200,000,000 200,000,000 2,345,861 3,849,823 3,849,823 6,379,447 Finance Lease Liability Other Liabilities – Unit Linked 1,503,962 2,529,624 51,285,609 – 51,285,609 51,844,853 – 51,844,853 Other Liabilities 653,704,232 – 653,704,232 548,767,363 – 548,767,363 Total Liabilities 2,302,057,804 2,310,915,914 4,612,973,718 1,806,007,777 2,359,711,629 4,165,719,406 Net Balance 3,618,137,046 (1,641,019,637) 1,977,117,408 3,455,894,264 (1,683,118,736) 1,772,775,528 155
158. Am ãna Takaful PLC Annual Report 2018 Notes to the Financial Statements Company 2018 Year Ended 31 December Within 12 Months Rs. 2017 After 12 Months Rs. Total Rs. Within 12 Months Rs. 94,692,309 110,981,837 After 12 Months Rs. Total Rs. Assets Cash and Bank Balances Cash and Bank Balances – Unit Linked 94,692,309 – Financial Assets 836,967,607 Retakaful (Reinsurance) Receivables 410,365,133 Contribution (Premium) Receivables 529,532,922 – – 525,000 – – – – 837,492,607 871,751,119 410,365,133 256,610,926 529,532,922 489,748,895 – – 525,000 – – 110,981,837 – 872,276,119 256,610,926 489,748,895 Investments in Subsidiaries – 1,052,867,811 1,052,867,811 – 1,074,322,352 1,074,322,352 Investment Property – 75,500,000 75,500,000 – 79,925,000 79,925,000 Property, Plant and Equipment – 63,757,277 63,757,277 – 53,168,306 53,168,306 Intangible Assets – 31,025,948 31,025,948 – 6,665,391 6,665,391 Deferred Tax Assets – 96,792,137 96,792,137 – 97,451,909 97,451,909 Other Assets 135,396,673 Total Assets 2,006,954,645 – 1,320,468,173 135,396,673 162,684,646 3,327,422,817 1,891,777,423 – 1,312,057,958 162,684,646 3,203,835,381 Liabilities Bank Overdrafts – Short-Term Borrowings 200,777,276 Insurance Contract Liabilities – Non-Life 972,644,129 – – 37,426 – 37,426 – 187,698,284 – 700,319,999 – 200,777,276 187,698,284 – 972,644,129 700,319,999 Employee Benefits – 35,028,091 35,028,091 – 28,996,165 28,996,165 Subordinated Debt – 97,024,473 97,024,473 – 200,000,000 200,000,000 Finance Lease Liability – Other Liabilities 183,116,946 Total Liabilities 1,356,538,351 650,416,293 Net Balance 156 – – – 871,223 373,381 1,244,605 183,116,946 266,963,102 132,052,564 1,488,590,915 1,155,890,034 229,369,546 1,385,259,581 1,188,415,609 1,838,831,902 735,887,389 1,082,688,411 1,818,575,800 – 266,963,102
159. Am ãna Takaful PLC Annual Report 2018  Annexes Group Value Added Statement 158 Share Information 159 Ten Year Summary 161 Geographic Locations 164 Glossary 165 Notice of Meeting 166 Form of Proxy – Enclosed 157
160. Am ãna Takaful PLC Annual Report 2018 GROUP VALUE ADDED STATEMENT Net Earned Contribution (Premium) Investment and Other Income Net Claims and Benefits 2018 Rs. Mn. 2017 Rs. Mn. 3,225 2,663 492 453 (1,931) (1,480) (940) (905) Total Value Added 846 731 To employees as Salaries and Other Benefits Cost of External Services 647 489 To the Government as Taxes 29 15 Increase in Family Takaful (Long-Term Insurance) Fund 37 41 Retained with the Business – – 28 31 – in reserves 104 155 Total Value Added 846 731 – depreciation 158
161. Am ãna Takaful PLC Annual Report 2018 SHARE INFORMATION 1. Analysis of the Distribution of Shareholders as at 31 December 2018 Resident Shareholding Number of Shareholders Non-Resident Number of Percentage Shares Number of Shareholders Total Number of Percentage Shares Number of Shareholders Number of Shares 1,000 4,434 1,098,067 0.61 13 4,425 0.00 4,447 1,102,492 1,001 – 10,000 1,112 3,693,596 2.05 6 38,889 0.02 1,118 3,732,485 10,001 – 100,000 285 8,383,212 4.66 3 56,500 0.03 288 8,439,712 100,001 – 1,000,000 33 7,447,404 4.14 1 190,184 0.11 34 7,637,588 10 159,087,853 88.38 0 0 5,874 179,710,132 99.84 23 289,998 1 – Over 1,000,000 – 0.16 10 159,087,853 5,897 180,000,130 2. Public Holding The percentage of shares held by the public as at 31 December 2018 was 81.45% (31 December 2017 – 23.01%), where the number of shareholders was 5,891 (31 December 2017 – 6,434) 3. Top 20 Shareholders as at 31 December 2018 2018 2017 Number of Shares Percentage Number of Shares Percentage Sattar Kassim 30,855,752 17.14 102,731,591 5.71 Shafik Kassim 30,468,567 16.93 123,859,739 6.88 Amãna Bank PLC 27,159,633 15.09 274,614,686 15.26 Osman Kassim and K Kassim 21,399,097 11.89 127,174,307 7.07 ATL Investment Holdings Limited 13,889,678 7.72 756,374,596 42.02 Osman Kassim 11,900,927 6.61 Expolanka Holdings PLC 7,909,623 4.39 79,096,234 4.39 Seylan Bank PLC/Dr. Thirugnanasambandar Senthilverl 7,778,961 4.32 36,349,546 2.02 Sampath Bank PLC/Dr. T Senthilverl 4,864,313 2.70 48,643,135 2.70 Falcon Trading (Pvt) Ltd. 2,861,302 1.59 23,686,801 1.32 Mohamed Haji Omar 551,513 0.31 5,515,137 0.31 Pattini Deva Asoka Swarnakanthi Beruwalage 422,684 0.23 4,226,846 0.23 Seylan Bank PLC/Jayantha Dewage 414,308 0.23 4,143,082 0.23 Joseph Rohan Victoria 335,209 0.19 3,352,094 0.19 Mohamed Kalif Rahim 333,148 0.19 35,001 0.00 Mujahira Mohamed Fazeel and M F Mohamed Fazeel 326,700 0.18 3,267,000 0.18 Farook Kassim 325,000 0.18 Sithambaram Pillai Jayakumar and P Meena 300,000 0.17 3,000,000 0.17 Ravindra Earl Rambukwella 290,953 0.16 12,000 0.00 Nabeela Haroon Others Total – – 0.00 0.00 270,000 0.15 2,700,000 0.15 162,657,368 90.37 1,598,781,795 88.82 17,342,762 9.63 201,219,501 11.18 180,000,130 100.00 1,800,001,296 100.00 159
162. Am ãna Takaful PLC Annual Report 2018 Share Information 4. Investor Ratios Group Earnings/(Loss) per Share – (Note 35.4) Dividend per Share Net Assets per Share Company 2018 Rs. 2017 Rs. 2018 Rs. 2017 Rs. 0.33 0.70 0.13 0.35 – – – – 9.02 8.26 10.22 10.09 5. Market Value of Shares Group 2018 Rs. 2017 Rs. Highest Value 9.40 1.30 Lowest Value 0.60 0.60 Year End Value 6.80 0.80 160
163. Am ãna Takaful PLC Annual Report 2018 TEN YEAR SUMMARY Group 2018 Rs. ’000 2017 Rs. ’000 2016 Rs. ’000 2015 Rs. ’000 2014 Rs. ’000 2013 Rs. ’000 2012 Rs. ’000 2011 Rs. ’000 2010 Rs. ’000 2009 Rs. ’000 Gross Written Contribution (Premium) 4,213,900 3,640,635 3,406,904 3,237,609 2,652,008 2,373,301 2,153,770 1,613,979 1,173,348 1,160,895 Net Earned Contribution (Premium) 3,224,809 2,662,652 2,548,797 2,511,374 2,081,401 1,964,884 1,618,797 1,253,696 945,650 817,128 452,831 373,319 240,612 302,752 184,024 204,744 80,866 69,896 47,732 (1,479,674) (1,438,346) (1,337,090) (895,861) (929,340) (778,767) (652,614) (517,552) (476,266) Statement of Income for the Year Ended 31 December Income from Investments and Other Income Net Claims Incurred Net Commission Incurred Expenses Increase in Family Takaful (Long-Term Insurance) Fund Profit/(Loss) Before Taxation Income Tax Expenses Net Profit/(Loss) for the year Basic Earnings/(Loss) per Share (Rs.) 486,893 (1,930,906) (260,413) 1,424,141 (238,515) (226,904) (187,263) (130,096) (84,304) (65,589) (20,691) (34,036) (1,223,014) (1,084,447) (202,356) (976,552) (867,768) (757,034) (686,400) (555,622) (437,392) (345,744) 36,961 (40,536) (301,048) (482,827) (346,831) (221,141) (167,048) (131,213) (75,283) (60,820) 133,204 169,904 (140,239) (271,387) 86,429 111,298 107,022 (70,476) (35,372) (52,005) 29,012 (14,900) (5,919) (9,113) 16,582 46,560 (16,689) (918) 104,192 155,004 (146,158) (280,500) 103,011 157,857 90,333 (71,394) (35,372) (52,005) 0.33 0.08 (0.09) (0.18) 0.07 0.13 0.06 (0.09) (0.05) (0.10) – – General Insurance Business 2018 Rs. ’000 2017 Rs. ’000 2016 Rs. ’000 2015 Rs. ’000 2014 Rs. ’000 2013 Rs. ’000 2012 Rs. ’000 2011 Rs. ’000 2010 Rs. ’000 2009 Rs. ’000 Gross Written Contribution (Premium) 3,385,952 2,848,461 2,586,178 2,309,315 1,972,979 1,830,315 1,789,011 1,296,082 933,192 953,798 Net Earned Contribution (Premium) 2,418,747 1,897,617 1,742,740 1,603,309 1,416,151 1,426,921 1,261,846 942,842 713,535 614,051 183,763 150,530 110,409 165,763 118,458 170,769 71,615 46,610 31,683 (1,056,199) (1,118,164) (1,129,518) (734,623) (749,794) (698,422) (569,253) (446,969) (406,636) Statement of Income for the Year Ended 31 December Income from Investments and Other Income Net Claims Incurred 275,668 (1,387,459) Net Commission Incurred (154,588) (105,158) (130,278) (129,582) (113,552) (82,355) (67,852) (45,946) (637) (15,962) Expenses (956,187) (800,711) (820,759) (744,069) (647,310) (594,987) (559,319) (469,734) (347,911) (275,141) 196,181 119,312 (175,931) (289,451) 86,429 118,243 107,022 (70,476) (35,372) (52,005) Profit/(Loss) Before Taxation Amãna Takaful Life PLC/Long-Term (Family Takaful) Insurance Business 31.12.2018 Rs. ’000 31.12.2017 Rs. ’000 31.12.2016 Rs. ’000 31.12.2015 Rs. ’000 31.12.2014 Rs. ’000 31.12.2013 Rs. ’000 31.12.2012 Rs. ’000 31.12.2011 Rs. ’000 31.12.2010 Rs. ’000 31.12.2009 Rs. ’000 Gross Written Contribution (Premium) 827,948 792,174 820,726 928,294 679,029 542,986 364,759 317,897 240,156 207,097 Net Earned Contribution (Premium) 806,465 765,036 806,057 908,064 665,250 537,963 356,951 310,854 232,115 203,077 Statement of Income for the Year Ended Income from Investments and Other Income 211,224 269,068 222,789 130,203 136,988 65,566 33,975 9,251 23,286 16,049 Net Claims Incurred (543,446) (423,475) (320,181) (207,572) (161,238) (179,545) (80,345) (83,361) (70,583) (69,630) Net Commission Incurred (105,825) (97,198) (108,237) (97,322) (73,711) (47,741) (16,452) (19,643) (20,054) (18,074) Expenses (467,954) (422,303) (263,688) (232,484) (220,458) (162,046) (127,081) (85,888) (89,481) (70,603) 36,961 (40,536) (301,048) (482,827) (346,831) (221,141) (167,048) (131,213) (75,283) (60,820) (62,976) 50,592 35,691 18,064 Increase in Family Takaful (Long-Term Insurance) Fund Profit/(Loss) Before Taxation – (6,945) – – – – 161
164. Am ãna Takaful PLC Annual Report 2018 Ten year summary Group Statement of Financial Position as at 31 December 2018 Rs. ’000 2017 Rs. ’000 2016 Rs. ’000 2015 Rs. ’000 2014 Rs. ’000 2013 Rs. ’000 2012 Rs. ’000 2011 Rs. ’000 2010 Rs. ’000 2,835,181 2,727,923 2,305,095 2,448,385 1,754,470 1,655,539 1,877,583 993,838 809,489 220,429 79,925 78,500 73,500 101,800 173,531 184,105 750,946 88,853 1,621,208 1,526,679 1,473,332 1,092,154 637,572 353,566 127,335 91,882 86,943 31,812 36,658 24,703 24,159 29,002 29,199 40,365 2009 Rs. ’000 Assets Financial Assets Investments Financial Assets – Unit Linked Intangible Assets Property, Plant and Equipment Other Assets Other Assets – Unit Linked Total Assets – 25,681 – 573,210 – 28,692 96,024 76,726 101,870 123,231 127,570 96,720 83,385 39,654 49,610 56,534 1,722,150 1,485,573 1,450,105 937,383 1,000,999 916,957 532,335 578,647 525,610 568,858 8,155 7,370 72,193 46,639 95,837 36,434 14,512 6,187 6,590,091 5,936,007 5,517,752 4,745,995 3,742,407 3,261,750 2,848,454 2,501,519 1,499,243 1,227,294 – – Liabilities Insurance Provision – Non-life (General Takaful Fund) 1,394,787 1,015,130 917,870 742,618 625,154 698,682 597,736 454,936 374,619 346,430 Insurance Provision – Long-Term (Family Takaful Fund) 534,967 580,710 559,914 574,711 551,211 550,220 577,899 494,321 413,141 335,186 Insurance Provision – Long-Term (Family Takaful Fund) – Unit Linked 1,660,124 1,525,136 1,504,145 1,191,795 730,799 380,958 138,447 50,364 Subordinated Debt Other Liabilities Other Liabilities – Unit Linked 46,600 925,210 – – 992,898 845,154 – 687,939 – 443,988 – 329,820 – 433,522 – 550,861 – – 543,217 – – 357,060 51,286 51,845 50,316 39,437 20,116 9,042 2,985 2,176 4,612,974 4,165,719 3,877,398 3,236,500 2,371,268 1,968,722 1,750,589 1,552,658 1,330,977 1,038,676 1,860,001 1,860,001 1,860,001 1,650,001 1,250,001 1,250,001 1,250,001 1,250,001 500,000 500,000 140,956 83,090 85,869 80,105 65,949 30,128 30,140 14,711 17,505 20,648 (455,559) (567,430) (426,506) (121,500) (142,051) (324,619) (417,740) (367,112) (334,280) 1,623,271 – 1,378,441 1,303,601 1,194,450 1,138,078 955,522 846,971 150,393 186,368 353,846 282,755 261,913 205,894 176,689 154,951 142,343 101,889 17,873 2,250 Total Equity 1,977,117 1,770,288 1,640,354 1,509,494 1,371,139 1,293,028 1,097,865 948,861 168,266 188,618 Total Equity and Liabilities 6,590,091 5,936,007 5,517,752 4,745,995 3,742,407 3,261,750 2,848,454 2,501,519 1,499,243 1,227,294 Total Liabilities – – Shareholders’ Equity Equity Attributable to Equity Holders of the Parent Stated Capital Other Reserves Revenue Reserves Minority Interest 162 (377,686)
165. Am ãna Takaful PLC Annual Report 2018 Ten year summary Amãna Takaful Life PLC/Long-Term (Family Takaful) Insurance Business 2018 Rs. ’000 2017 Rs. ’000 2016 Rs. ’000 2015 Rs. ’000 2014 Rs. ’000 2013 Rs. ’000 2012 Rs. ’000 2011 Rs. ’000 2010 Rs. ’000 Financial Assets 875,165 1,040,576 1,018,398 1,089,313 590,099 506,956 539,756 328,486 424,414 Investments 144,929 43,683 71,908 73,463 161,666 50,750 637,572 353,566 127,335 91,882 Statement of Financial Position as at 31 December 2009 Rs. ’000 Assets Financial Assets – Unit Linked Intangible Assets Property, Plant and Equipment Other Assets Other Assets – Unit Linked Total Assets – – – 1,621,208 1,526,679 1,473,332 1,092,154 20,955 22,250 23,549 18,408 28,704 21,165 17,467 14,932 178,459 191,588 102,661 142,505 – – 64,612 – – 37,992 – – 43,936 – – 27,420 – – – 10,913 – 327,066 – 21,977 1,744 18,400 8,155 7,370 72,193 46,639 95,837 36,434 14,512 6,187 2,877,575 2,809,627 2,707,599 2,403,951 1,431,804 1,006,855 799,002 615,641 486,077 369,187 534,967 580,710 559,914 574,711 551,211 550,220 577,899 494,321 413,141 335,186 1,660,124 1,525,136 1,504,145 1,191,795 730,799 380,958 138,447 50,364 – – Liabilities Family Takaful Fund Balance (Insurance Provision – Long-Term) Family Takaful Fund (Insurance Provision – Long-Term) – Unit Linked Subordinated Debt 32,051 Other Liabilities 83,420 Other Liabilities – Unit Linked Total Liabilities – 78,149 – 69,708 – 82,414 – 129,678 – 66,636 – 79,171 – 23,251 – – 72,936 – – 34,001 51,286 51,845 50,316 39,437 20,116 9,042 3,485 47,705 2,361,849 2,235,840 2,184,082 1,888,357 1,431,804 1,006,855 799,002 615,641 500,000 500,000 500,000 500,000 – – – – – – 3,431 (1,545) (2,669) 2,169 – – – – – – 12,295 75,333 26,186 13,424 – – – – – – 515,726 573,788 523,517 515,594 – – – – – 2,877,575 2,809,627 2,707,599 2,403,951 – 486,077 – 369,187 Shareholders’ Equity Equity Attributable to Equity Holders of the Parent Stated Capital Other Reserves Revenue Reserves Total Equity Total Equity and Liabilities 1,431,804 1,006,855 799,002 615,641 486,077 – 369,187 163
166. Am ãna Takaful PLC Annual Report 2018 GEOGRAPHIC LOCATIONS Head Office No. 660-1/1, Galle Road, Colombo – 03 +94 11 750 1000 Kaduruwela No. 379 A, Main Street, Kaduruwela +94 27 750 1120 Mutur No. 253/A, Main Street, Mutur +94 26 750 1150 Akkaraipattu Main Street, Akkaraipattu – 02 +94 67 750 1100 Kalmunai No. 32, Mallika Building, Main Street, Kalmunai +94 67 750 1116 Negombo No. 121/1/1, 1st Floor, St. Joseph Street, Negombo +94 31 750 1121 Kalutara No. 161, Main Street, Kalutara +94 34 750 1132 Nugegoda Branch No. 331/1/A, High Level Road, Nugegoda +94 11 750 1290 Kandy No. 111-1/1, 2nd Floor Kotugodella Veediya, Kandy +94 81 750 1130 Pettah Nos. 51 and 53, Bankshall Street, Colombo – 11 +94 11 750 1212 Akurana No. 207/B, Matale Road, Akurana +94 81 750 1150 Anuradhapura No. 521/22, Maithripala Senanayaka Mawatha, Anuradhapura +94 25 750 1103 Batticaloa No. 32, Bar Road, Batticaloa +94 65 750 1100 Beruwala No. 201 B-2/1, 1st Floor, Galle Road, Beruwala +94 34 750 1138 Katugastota No. 161/1, Madawala Road, Katugastota +94 81 750 1166 Kattankudy No. 287/C, Main Street, Kattankudy – 01 +94 65 750 1118 Dehiwala No. 142, Galle Road, Dehiwala +94 11 750 1275 Kinniya No. 124, Main Street, Kinniya +94 26 750 1115 Digana No. 5, New Town, Rajawella, Digana +94 81 750 1225 Kurunegala No. 7, South Circular Road, Kurunegala +94 37 750 1111 Galle No. 41, Sri Devamiththa Mawatha, China Garden, Galle +94 91 750 1127 Mannar Pallimunai, Mannar +94 23 750 1200 Gampaha No. 118/B1/01, Colombo Road, Gampaha +94 33 750 1125 Gampola No. 134 A, 1st Floor, Kandy Road, Gampola +94 81 750 1104 Hambantota No. 103, Thissa Road, Hambantota +94 47 750 1100 Jaffna No. 249/1, 1st Floor, Power House Road, Jaffna +94 21 750 1100 Mawanella No. 207, New Kandy Road, Mawanella +94 35 750 1107 Trincomalee No. 71, Thirugnanasampanthar Street, Trincomalee +94 26 750 1100 Vavuniya – General No. 9/60, 1st Cross Street, Vavuniya +94 24 750 1100 Vavuniya – Life No. 37, 2nd Cross Street, Vavuniya South Vavuniya +94 24 750 1104 Jaffna Welimada No. 17, Haputale Road, Welimada +94 57 726 7300 Mannar Vavuniya Kinniya Trincomalee Muttur Anuradhapura Puttalam Kaduruwela Batticaloa Kurunegala Kattankudi Matale Akurana Negombo Gampaha Kandy Mawanella Thihariya Pettah Head Office Nugegoda Dehiwala Kalmunai Digana Katugastota Akkaraipattu Gampola Welimada Ratnapura Kalutara Beruwala Hambantota Galle Matara 164 Thihariya No. 122/1, Parakumbamahal, Kandy Road, Thihariya, Kalagedihena +94 33 750 1100 Puttalam No. 128, Mannar Road, Puttalam +94 32 750 1124 Matale No. 510, Main Street, Matale +94 66 750 1101 Matara No. 36/1, 1st floor, St. Thomas Mawatha, Matara +94 41 750 1132 Ratnapura No. 310-1/1, 1st Floor, Main Road, Kudukalwatta, Ratnapura +94 45 750 1100
167. Am ãna Takaful PLC Annual Report 2018 GLOSSARY Acquisition Expenses – General Takaful (Insurance) All expenses which vary with and are primarily related to the acquisition of the new insurance contracts and the renewal of existing insurance contracts. General Insurance Business (General Takaful) Insurance business falling within the classes of insurance specified as General Insurance Business, under the Regulation of Insurance Industry Act No. 43 of 2000. Acquisition Expenses – Family Takaful (Life) All expenses which vary with and are primarily related to the acquisition of new insurance contracts. Insurance Provision – Family Takaful (Long Term) The fund or funds to be maintained by an insurer in respect of its Long-term Insurance business in accordance with the Regulation of Insurance Industry Act No. 43 of 2000. Actuary An expert concerned with the application of probability and statistical theory to problems of insurance, investment, financial management and demography. Claims The amount payable under a contract of insurance arising from the occurrence of an insured event, such as, the destruction or damage of property and related death or injuries, the incurring of hospital or medical bills, death or disability of the insured, the maturity of an endowment policy and the amount payable on the surrender of a policy. Claims Incurred The aggregate of all claims paid during the accounting period together with attributable claims handling expenses, where appropriate, adjusted by the claims outstanding provisions at the beginning and the end of the accounting period. Claims Incurred But Not Reported (IBNR) A reserve to cover the expected cost of losses that have occurred by the balance sheet date but have not yet been reported to the insurer. Insurance Provision – General Takaful (Insurance) This includes net unearned premium, provisions for unexpired risks, outstanding claims reserve and IBNR reserve. Life Insurance Business (Family Takaful) Insurance business falling within the classes of insurance specified as Long-term Insurance, under the Regulation of Insurance Act No. 43, 2000. Mudharaba This is an agreement made between two parties. The Investor, who provides 100% of the capital for the project and the Mudharib manages the entire project using his entrepreneurial skills. The Investor has no control over the management of the project. Profits arising from the project are distributed according to a predetermined ratio. Losses are borne by the provider of the capital. Net Earned Premium Gross written premium adjusted for the reinsurance incurred and for the increase or decrease in unearned premium. Shari’ah Is the code of law for the Islamic way of life which has been derived from the Quran and the Sunnah (The Practice of the Holy Prophet Muhammad – Peace be upon him). Shari’ah Advisory Council (SAC) This comprises Shari’ah Scholars or/ and well-versed personnel in Shari’ah, which ensures Shari’ah compliance in the operations of the Company. The SAC advises the Company on all Shari’ah matters in its business activities and involves in endorsing and validating relevant documentation, such as products manuals, policy terms and conditions, marketing materials, sales illustrations, etc. Solvency Margin – Family Takaful (Life) The difference between the value of assets and the value of liabilities, required to be maintained by the insurer who carries on Long-Term Insurance business, determined as per Solvency Margin (Long-Term Insurance) Rules, 2002. Solvency Margin – General Takaful (Insurance) The difference between the value of the assets and the value of the liabilities required to be maintained by the insurer who carries on general insurance business as per Solvency Margin (General insurance) Rules, 2004. Surrender The act of cancelling of an insurance contract before it reaches its date of maturity. Claim Outstanding – General Takaful (Insurance) Business The amount provided to cover the estimated ultimate cost of settling claims arising out of events which have occurred by the balance sheet date including claims handling expenses, less amounts already paid in respect of those claims. Premium (Contribution) The consideration payable by the insured for an insurance contract. Takaful Is an Arabic word, which means “guaranteeing each other”. It is a system of risk management based on the principle of mutual assistance (TA-AWUN) and contributions (Tabarru) where the risk is shared collectively by the Group voluntarily. Retakaful (Reinsurance) Transfer of all or part of the risk assumed by an insurer under one or more insurance to another insurer, called the re-insurer. Underwriting The process of selecting which risks an insurance company can cover, and deciding the premium and terms of acceptance. Commissions A payment made to intermediaries in return for selling and servicing an insurer’s products. Risk-Based Capital A “Risk Based” approach to assess the Capital Adequacy, determined as per Solvency Margin (Risk-Based Capital) Rules 2015. Unearned Premium/ Unearned Premium Reserve It represents the portion of premium already entered in the accounts as due but which relates to a period of risk subsequent to the balance sheet date. Earned Premium Written premium adjusted by the unearned premium provisions at the beginning and the end of the accounting period. Written Premium Total premium received or due from all insurance contracts during a period. 165
168. Am ãna Takaful PLC Annual Report 2018 NOTICE OF MEETING NOTICE IS HEREBY GIVEN that the 20th Annual General Meeting of Amãna Takaful PLC will be held on 30 April 2019 at 9.30am at the Committee Room A, Bandaranaike Memorial International Conference Hall (BMICH), Bauddhaloka Mawatha, Colombo 07, for the following purposes: 1. To receive and consider the Annual Report of the Board of Directors on the affairs of the Company for the year ended 31 December 2018 and the Report of the Auditors thereon. 2. Re-election of Directors by rotation in terms of Article 83 of the Articles of Association of the Company – a. To re-elect Dr. A A M Haroon as a Director of the Company, who retires as per Article 83 of the Articles of Association of the Company, and being eligible, offers himself for re-election as a Director. b. To re-elect Mr R Gopinath as a Director of the Company, who retires as per Article 83 of the Articles of Association of the Company, and being eligible, offers himself for re-election as a Director. 3. Re-election of Directors in terms of Section 211 of the Companies Act No. 07 of 2007 – a. Re-elect Mr M H M Rafiq and the following resolution to be passed for this purpose, if thought fit: IT IS HEREBY RESOLVED: To re-elect Mr M H M Rafiq who is 74 years of age as a Director in terms of Section 211 of the Companies Act No. 07 of 2007 and it is specifically declared that the age limit of 70 years referred to, in Section 210 of the Companies Act No. 07 of 2007 shall not apply to the said Mr M H M Rafiq. b. Re-elect Dato’ Mohd Fadzli Yusof and the following resolution to be passed for this purpose, if thought fit: 166 IT IS HEREBY RESOLVED: To re-elect Dato’ Mohd. Fadzli Yusof who is 74 years of age as a Director in terms of Section 211 of the Companies Act No. 07 of 2007 and it is specifically declared that the age limit of 70 years referred to, in Section 210 of the Companies Act No. 07 of 2007 shall not apply to the said Dato’ Mohd Fadzli Yusof. 4. To reappoint the retiring Auditors, M/s Ernst & Young, Chartered Accountants for the ensuing year and to authorise the Directors to determine their remuneration. By Order of the Board, Amãna Takaful PLC Managers and Secretaries (Private) Ltd. Secretaries 29 March 2019 Notes: 1. A member entitled to attend and vote at the above meeting is entitled to appoint a proxy to attend and vote in his/her behalf. A proxy need not be a member of the Company. 2. A Form of Proxy is enclosed for this purpose. 3. The instrument appointing a proxy must be completed and deposited at the Registered Office of the Company, No. 660, 1/1, Galle Road, Colombo 3, not less than forty-eight hours prior to the time appointed for holding the meeting.
169. Am ãna Takaful PLC Annual Report 2018 FORM OF PROXY I/We the undersigned ...................................................................................................................................................................................................................................... bearing NIC No. ............................................................................., of ............................................................................................................................................................... ……………………………………………………………………………………………………………………………………........................................................................................................................ being a member/members of Amãna Takaful PLC, hereby appoint ...........……………………………………................................................................................... ....................................................................................................................... of …………………………...................................................................................……………………………… .………………………………..................................……………being NIC No. ………………………….………....…........................................………….....………......…… or failing him Mr Tyeab Akbarally of Colombo or failing him Mr Osman Kassim of Colombo or failing him Dato’ Mohd Fadzli Yusof of Malaysia or failing him Dr. A A M Haroon of Colombo or failing him Mr M H M Rafiq of Colombo or failing him Mr A S M Muzzamil of Colombo or failing him Mr R Gopinath of India or failing him Mr M R M Nayeem of Colombo or failing him Mr M H S Kassim of Colombo as my/our proxy to represent me/us and to vote for me/us on my/our behalf at the Annual General Meeting to be held on 30 April 2019 at 9.30am and at any adjournment thereof and at every poll which may be taken in consequence thereof. As witness my/our hands this …………………...............................................................…. day of …………..............................................……….………….. 2019. …………………………………… Signature INSTRUCTIONS AS TO COMPLETION 1. In order to appoint a proxy, this form shall in the case of an individual be signed by the shareholder or by his/her Attorney and in the case of a company/corporation, the Form of Proxy must be under its Common Seal, which should be affixed and attested in the manner prescribed by its Articles of Association. 2. The full name, NIC number and address of the proxy holder and of the shareholder appointing the proxy holder should be entered legibly in the Form of Proxy. 3. The duly completed Form of Proxy must be deposited at the Registered Office of the Company at No. 660, 1/1, Galle Road, Colombo 3, not later than 48 hours prior to the time appointed for the holding of the meeting. 4. In the case of a proxy signed by an Attorney, the relevant Power-of-Attorney or a certified copy thereof should also accompany the completed Form of Proxy and must be deposited at the Registered Office of the Company.
171. CORPORATE INFORMATION Name of the Company Am ãna Takaful (Maldives) PLC Amãna Takaful PLC 3rd Floor, H Mialani, SosunMagu, Malé, Republic of Maldives Legal Status Auditors Public Quoted Company with Limited Liability incorporated in Sri Lanka on 7 December 1998. Registered under the Companies Act No. 07 of 2007 on 27 June 2007. Company Registration Number Messrs Ernst & Young Chartered Accountants Consultant Actuaries – General Insurance PQ 23 NMG Financial Services Consulting Pte Ltd. 30 Hill Street, #03-02A, Singapore 179360 Tax-Payer Identification Number (TIN) Consultant Actuaries – Long-Term Insurance 134007958 Stock Exchange Listing The shares of the Company are listed in the Second Board of the Colombo Stock Exchange, Sri Lanka on 27 November 2006. Stock Exchange Code for Amãna Takaful PLC shares is “ATL”. Directors Tyeab Akbarally – Chairman Osman Kassim Dato’ Mohd Fadzli Yusof Dr. A A M Haroon M H M Rafiq A S M Muzzammil Dr. I A Ismail (Resigned w.e.f. 30 September 2018) R Gopinath M R M Nayeem M H Sattar Kassim Shari’ah Advisory Council Mufti M I M Rizwe – Chairman Mufti Shafique Ahamed Jakhura – Member Ash-Sheikh M Murshid – Secretary Chief Executive Officer – Amãna Takaful PLC M Fazal Ghaffoor Chief Executive Officer – Amãna Takaful Life PLC Gehan Shivantha Rajapakse Registered Office No. 660 – 1/1, Galle Road, Colombo 3, Sri Lanka Subsidiaries Amãna Takaful Life PLC No. 660 – 1/1, Galle Road, Colombo 3, Sri Lanka Amãna Global Ltd. No. 660 – 1/1, Galle Road, Colombo 3, Sri Lanka Actuarial Partners Consulting Sdn Bhd Suite 17.02, Kenanga International Jalan Sultan Ismail 50250 Kuala Lumpur, Malaysia Reinsurance Panel Swiss Re GIC Retakaful Labuan Reinsurance (L) Ltd. Trust Insurance Management Asian Re Scor Re Munich Re Hannover Re Secretaries Managers & Secretaries (Pvt) Ltd. Principal Bankers Amãna Bank PLC/Pan Asia Bank/NDB/Bank of Ceylon/ Commercial Bank/Hatton National Bank/Deutsche Bank
172. Am ãna Takaful PLC 660-1/1, Galle Road, Colombo 03, Sri Lanka www.takaful.lk