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Pak-Qatar Family Takaful: Annual Report 2020

IM Insights
By IM Insights
3 years ago
Pak-Qatar Family Takaful: Annual Report 2020

Arif, Ijara, Islamic banking, Mudarib, Mufti, Shariah, Shariah advisor, Shariah compliant, Sukuk, Takaful, Waqf, Zakat, Credit Risk, General Takaful, Net Assets, Provision, Receivables, Reserves, Sales, Group family Takaful

Takaful

Sukuk

Waqf

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  1. 2020
  3. 04 05 06 07 08 10 13 17 18 39 40 41 47 48 50 51 54 128 130 130 15 131 Annual Report 2020 03
  4. 04 Annual Report 2020
  5. Pak-Qatar Family Takaful Limited (PQFTL) is the first and largest dedicated Family Takaful Company in Pakistan. PQFTL is a progressive and technology-driven Shari’ah Compliant company providing innovative Takaful solutions since 2007. PQFTL is the fastest growing Family Takaful operator in the country. Incorporated in 2006, and beginning operations in 2007, the Company is registered with and supervised by the Securities and Exchange Commission of Pakistan (SECP). An independent Shari’ah Advisory Board chaired by Mufti Muhammad Hassaan Kaleem certifies all products and operations for Shari’ah compliance. Mufti Muhammad Taqi Usmani was the founding Chairman of the group’s Shari’ah Advisory Board since inception and named Mufti Hassaan Kaleem as his successor in 2019. The Company is rated “A+” (having Stable Outlook) by JCR-VIS Credit Rating Co. Limited and Pakistan Credit Rating Agency (PACRA). The Company’s paid-up capital is in excess of PKR 1.3 billion. PQFTL has a vision of providing financial protection through Takaful to everyone. The company’s shareholders include some of the strongest financial institutions in the state of Qatar, such as Qatar Islamic Insurance Company (QIIC) and Qatar International Islamic Bank (QIIB). The company is further strengthened by its ReTakaful arrangements with Munich Re and Hannover Re and Hannover ReTakaful. Pak-Qatar Family Takaful Limited has a strategic BancaTakaful alliance with FWU AG, a leading group in life insurance, Technology and Investments, based in Munich (Germany), for distribution of Takaful policies through banking channels. Pak-Qatar Family Takaful Limited has one of the largest Takaful branch networks across Pakistan (over 160 branches in 100+ cities), in addition to about 2,675 bank branches in over 100 cities that provide BancaTakaful products. Pak-Qatar Family Takaful (PQFTL) is currently providing need-based financial protection to more than 1000 corporate clients and over 560,000 Individual Takaful members for Individual Family, Group Family and Group Health business segments. Pak-Qatar Family has around 250+ prominent hospitals on panel across Pakistan to provide the best healthcare to Takaful members. Pak-Qatar Family Takaful Limited is the recipient of several domestic and international awards and nominations including, ‘Best Takaful Company’ Award from FPCCI in 2020, ‘Brand of the Year’ at the FPPCI Awards in Karachi 2018, ‘Best Takaful Operator’ by IFN Awards in 2017, ‘Best Takaful Operator in Pakistan’ award at the 10th International Takaful Summit London 2016 and ‘Best Takaful Company in Pakistan’ for the year 2015 at ‘RTC Islamic Banking & Finance Awards’ ceremony in Islamabad. Annual Report 2020 05
  6. Pak-Qatar Family Takaful is sponsored by some of the most prominent and leading financial institutions from the State of Qatar ; Qatar International Islamic Bank (QIIB) is one of the most successful Islamic Bank in the State of Qatar Qatar Islamic Insurance Company (QIIC) is a pioneer Takaful company in the State of Qatar Pak-Qatar Limited Investment (Private) is a Group Company, expanding its wing in the capital market & real estate business FWU Group is one of the premier providers of Takaful products in the world 06 Annual Report 2020
  7. With our vision of providing financial protection through Takaful to everyone , Pak-Qatar Family Takaful takes pride in offering its members a suite of products and services which not only provide them with financial protection but investment opportunities as well. Thus, helping them fulfill their lifelong dreams. Whether you’re saving for your child’s bright future or building your dream home, we have a plan that is best suited for all. All of our products are Shari’ah compliant and have been certified by an independent Shari’ah Advisory Board chaired by Mufti Muhammad Hassaan Kaleem. The products are available at our ever-growing Takaful branch network across Pakistan, having over 160 branches, in more than 100 cities, in addition to about 2,675 bank branches, in over 100 cities that provide BancaTakaful products. Annual Report 2020 07
  8. What Is Takaful ? A Shari'ah compliant alternative to insurance. Definition Takaful is a community-pooling system based on the principle of brotherhood, and mutual help wherein participants contribute in a fund to help those who need it most in times of financial difficulties. The example of Takaful may be found in the early Islamic History when the Muslim merchants took Takaful protection for safeguarding caravans from travel risks like storms or pirates. Our Shari'ah Credibility An independent Shari'ah Advisory Board chaired by Mufti Muhammad Hassaan Kaleem certifies all products and operations for Shari'ah compliance. Mufti Muhammad Taqi Usmani was the founding Chairman of the group's Shari'ah Advisory Board since inception and named Mufti Hassaan Kaleem as his successor in 2019. Global Awards and Recognitions Pak-Qatar Family Takaful Limited is the recipient of several domestic and international awards and nominations including, ‘Best Takaful Company’ Award from FPCCI in 2020, ‘Brand of the Year’ at the FPPCI Awards in Karachi 2018, ‘Best Takaful Operator’ by IFN Awards in 2017, ‘Best Takaful Operator in Pakistan’ award at the 10th International Takaful Summit London 2016 and ‘Best Takaful Company in Pakistan’ for the year 2015 at ‘RTC Islamic Banking & Finance Awards’ ceremony in Islamabad. Branch Presence Nationwide The Pak-Qatar Takaful Group has one of the Largest Takaful Branch networks across Pakistan (over 160 branches in 100+ cities). These branches serve more than 560,000 individual members nationwide. In addition, the Takaful Group also serves more than 1,000 corporate covered members across Pakistan. BancaTakaful: Leveraging Branch Network of Pakistani Banks Pak-Qatar Family Takaful Limited has a strategic BancaTakaful alliance with FWU AG, for the distribution of Takaful policies, through banking channels. The company continues to leverage more than 2,675 Pakistan-based banking branches in 100+ cities across the country. The strategic initiative to use the wide distribution network of the bank branches is aligned with the Pak-Qatar Group endeavor of providing Takaful Protection to masses in every corner of Pakistan. 08 Annual Report 2020
  9. Technology & Innovation In line with strategic objectives, the company has one of the most technologically advanced capabilities for product delivery. The company has established an industry benchmark by providing integrated information at various marketing touchpoints that include 24/7 Telephone Helpline, smartphone-based apps and cyberspace connectivity through various digital media platforms. Family Takaful-Individual Saving & Protection Plan Pak-Qatar Family Takaful, in line with the company’s vision to provide protection to everyone, has offered a hallmark of the products that cater to a person. This includes various Shari'ah compliant and uniquely innovative product solutions for an individual member to have a Takaful Protection combined with long-term saving and investment plans. Family Takaful-Group: Family (Life) & Group Health Coverage Pak-Qatar Family Takaful provides various risk coverage plans to employees of various business and non-business entities. These unique plans include protection of death or disability in the case of Group Family Takaful. Whereas Group Health Takaful plan provides medical coverage due to any reason, major medical expenses and day-to-day medical needs across the Globe. (Terms & Conditions Apply) Annual Report 2020 09
  10. 10 Annual Report 2020
  11. This was a record-setting year for our Individual Life direct business with over PKR 1 billion achieved in 1st Year Gross Contributions despite the challenging situation faced by COVID-19 . Pak-Qatar Family Takaful reported a total Gross Contribution of over PKR 7.96 billion and the highest ever Profit Before Tax in its history of PKR 208 million. Annual Report 2020 11
  13. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Corporate Information Board of Directors H. E. Sheikh Ali Bin Abdullah Al-Thani Said Gul Abdul Basit Ahmed Al-Shaibei Ali Ibrahim Al Abdul Ghani Muhammad Owais Ansari Zahid Hussain Awan Farrukh Viqaruddin Junaidy Sameera Usman Chairman Director Director Director Director Director Director Director Executive Committee Said Gul Ali Ibrahim Al Abdul Ghani Muhammad Owais Ansari Zahid Hussain Awan Muhammad Kamran Saleem Chairman Member Member Member Secretary Audit Committee Farrukh Viqaruddin Junaidy Muhammad Owais Ansari Zahid Hussain Awan Muhammad Shoaib Akhter Chairman Member Member Secretary Investment Committee Zahid Hussain Awan Said Gul Azeem Iqbal Pirani Muhammad Kamran Saleem Muhammad Ahsan Qureshi Abdul Rahim Abdul Wahab Farhan Shaukat Chairman Member Member Member Member Member Secretary Ethics, Human Resources & Remuneration Committee Said Gul Zahid Hussain Awan Sameera Usman Muhammad Kamran Saleem Chairman Member Member Secretary Shariah Board Mufti Muhammad Hassaan Kaleem Mufti Ismatullah Chairman Member Chief Executive Officer Azeem Iqbal Pirani Annual Report 2020 13
  14. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Director Finance & Company Secretary Muhammad Kamran Saleem Chief Financial Officer Muhammad Ahsan Qureshi Chief Internal Auditor Muhammad Shoaib Akhter Statutory Auditors & External Shariah Compliance Auditors EY Ford Rhodes, Chartered Accountants Appointed Actuary Abdul Rahim Abdul Wahab Shariah Advisor Mufti Ismatullah Shariah Compliance Officer Mufti Muhammad Akhlaq Compliance Officer Jehanzaib Ahmed Legal advisors M/s AHM & Co Tax advisors EY Ford Rhodes, Chartered Accountants Rating Agency VIS Credit Rating Company Limited The Pakistan Credit Rating Agency Limited Bankers Al Baraka Bank (Pakistan) Limited Allied Bank Limited Askari Bank Limited Apna Micro Finance Bank Bank Al Habib Limited Bank Alfalah Limited Bank Islami Pakistan Limited Dubai Islamic Bank Pakistan Limited Faysal Bank Limited Habib Bank Limited JS Bank Limited 14 Annual Report 2020 Kushali Micro Finance Bank MCB Bank Limited Meezan Bank Limited Mobilink Microfinance Bank Limited MIB Bank Limited NRSP MicroFinance Bank Limited Silk Bank Limited Soneri Bank Limited Standard Chartered Bank (Pakistan) Limited Summit Bank Limited Telenor MicroFinance Bank
  15. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Re-takaful Operators Hannover Re Hannover Re-Takaful Munich Re (Munchener Ruckversicherungs - Gesellsschaft) Head Office Room No. 101-105, 1st Floor, Business Arcade, Block-6, P.E.C.H.S., Sharea Faisal, Karachi, Pakistan Phone: + 92 21 34311747-56 Fax: +92 21 34386451 Email: info@pakqatar.com.pk Web: www.pakqatar.com.pk Branch Offices in: Abbotabad AhmedPur East Astore Badin Bagh Bahawalnagar Bahawalpur Bannu Batkhela Battagram Bhakkar Bhalwal Bhimber Buner Burewala Charhoi Charsadda Chilas Chistian Chitral Dera Ghazi Khan Dera Ismail Khan Dadu Dadyal Danyor Daska Dera Allah Yar Dera Murad Jamali Dhamtal Digri Faisalabad Gahkuch Gambat Ghotki Gilgit Gojra Gujranwala Gujrat Hafizabad Hajra Haripur Hasil Pur Hassanabdal Hunza Hyderabad Islamabad Islamgrah Jacobabad Jaranwala Jehlum Jhang Kandhkot Karachi Kasur Khairpur Khanewal Khanpur Khuiratta Khwazakhela Kotli Lahore Lakki Marwat Lalamusa Larkana Layyah Lodhran Mandi Bahauddin Mansehra Mardan Mehar Mian Channu Mianwali Mingora, Swat Mirpur Mirpurkhas Moro Multan Muridwala Muzaffarabad Muzzafargarh Nankana Sahib Narowal Nawabshah Okara Peshawar Pir Mahal Quetta Rahim Yar Khan Rawalakot Rawalpindi Sadiqabad Sahiwal Samundari Sanghar Sargodha Sehnsa Shabqadar Shujabad Sialkot Skardu Swabi Thall Thatta Timergara Toba Tek Singh Uch Sharif Vehari Wari Annual Report 2020 15
  16. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Management Committee Azeem Iqbal Pirani Muhammad Kamran Saleem Muhammad Waqas Durrani Haq Nawaz Tariq Saeed Chaudhry Muhammad Ahsan Qureshi Farhan Shaukat Muhammad Shoaib Akhter Muhammad Shahzad Imran Irshad Saifuddin Shaikh Muhammad Umair Kamran Ali Khan Ahsan Yameen Jehanzaib Ahmed Nasir Ali Soomro Mufti Shakir Siddiqui Chief Executive Officer Director Finance & Company Secretary Head of Individual Life /Agency & Marketing Head of Country Sales - Individual Life Head of Corporate Distribution Chief Financial Officer Head of Investment & Deputy CFO Head of Internal Audit Head of Underwriting - Individual Life Head of Group Operations Head of Procurement & Administration Head of IT&S Head of Human Resource & Training Head of Actuarial /Re-Takaful& Risk Management Head of Legal & Grievance Head of Taxation & Chief Accountant Head of Shariah Underwriting Committee & Re-takaful Committee Zahid Hussain Awan Azeem Iqbal Pirani Muhammad Ahsan Qureshi Adnan Arif Sagheer Alam Siddiqui Ahsan Yameen Muhammad Shahzad Chairman Member Member Member Member Member Member & Secretary Claims Committee Said Gul Azeem Iqbal Pirani Tariq Saeed Chaudhry Farhan Shaukat Jehanzaib Ahmed Nasir Ali Soomro Muhammad Saleem Imran Irshad Chairman Member Member Member Member Member Member Member & Secretary Risk Management & Compliance Committee Zahid Hussain Awan Azeem Iqbal Pirani Muhammad Ahsan Qureshi Muhammad Shoaib Akhter Muhammad Waqas Durrani Muhammad Shahzad Adnan Arif Imran Irshad Ahsan Yameen Muhammad Umair Saifuddin Shaikh Mufti Shakir Siddiqui Jehanzaib Ahmed 16 Annual Report 2020 Chairman Member Member Member Member Member Member Member Member Member Member Member Member & Secretary
  17. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Chairman's Message The year of 2020 saw a continuation of economic struggles and strife around the globe. As the world slowly got back into a sense of financial and economic normalcy - Pak-Qatar Takaful Group was able to build upon the success of the previous year through creative adaptation, perseverance and efficient management. We continued to lead the way in financial security and protection for all through Takaful by investing in product innovation, and providing a better experience for our esteemed members. Our commitment to providing the best in Takaful has not wavered as we continued to digitize our marketing efforts through social media platforms as well as website integration - ushering in a new digital age for Pak-Qatar Takaful. This evolution has enabled an unprecedented level of interaction with our members allowing us to receive and analyze feedback and communication in real-time - thus allowing us to better ourselves and our products. It is because of these forward thinking initiatives as well as the continuation of our industry leading ethos that Pak-Qatar Takaful Group achieved an aggregate turnover of around PKR 8.56 Billion. The Group posted a net profit after tax of PKR 182.6 Million for the year 2020. Participant Takaful Fund generated the net consolidated surplus of PKR 113 Million. Profit before tax of Pak-Qatar Family Takaful Limited (PQFTL) increased to PKR 208.1 Million as compared to PKR 84.1 Million last year, a growth of 147% despite all challenges (economic and political) and the global pandemic caused by COVID-19. The company has increased its balance sheet footing through impressive growth in its investments and financing portfolio. Pak-Qatar General Takaful Limited (PQGTL) posted the profit after tax of Rs 19 million. Earnings per share (EPS) of Pak-Qatar Family Takaful Limited was recorded at PKR 1.25 while PKR 0.37 for Pak-Qatar General Takaful Limited. As we venture beyond into 2021 we foresee our illustrious companies having a very bright and prosperous future, enabled by our dedicated staff and best-in-industry products and services. As innovation in product development, customer service, as well as marketing and distribution has become our priority for 2021 - we must ready ourselves to tackle the many challenges the future may bring. We foresee the digital realm playing a pivotal role in taking Pak-Qatar Takaful to greater heights, ushering in a new age of growth, prosperity and expansion. Thus, we must adapt, learn and evolve - this means developing a broader vision for what is possible. We are confident that Pak-Qatar Takaful Group will continue to remain the top Takaful provider in the country. Sheikh Ali Bin Abdullah Al-Thani Chairman of the Board of Directors Pak-Qatar Family Takaful Limited Pak-Qatar General Takaful Limited Annual Report 2020 17
  18. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Directors’ Report Dear Shareholders, The situation above triggered off a proactive approach at PQFTL to combat the effect of COVID, leading to a development of response strategy at an early stage of the pandemic. The Company's investment over its state of the art IT infrastructure proved its worth in face of smooth business functioning in times of work from home protocol during period of lock down. The effects of pandemic on all areas of business operations were in continuous close monitoring of the Company's think tank, ensuring the entire human resource i.e. the front office as well as the back office staff are fully equipped to manage the affairs in uncertain times and achieve the targets determined. The Board of Directors of Pak-Qatar Family Takaful Limited (hereinafter referred to as "the Company" or "PQFTL") have the pleasure in submitting their Annual Report along with the audited financial statements of the Company for the year ended December 31, 2020. 1. Economic Overview Outbreak of COVID-19 made 2020 an unprecedented year for the entire world, having lasting impact on global economies and ways of doing business. On one hand, the pandemic has put the whole world in a Lockdown and changed the dynamics of ongoing and future economic activities, while on the other, the pandemic wiped out any mentionable economic performance of any economy. Similar to the entire world, Pakistan's economy has also been affected due to COVID-19, resulting in 0.4 percent contraction in GDP during the fiscal year 2020 on the basis of 2.67, -2.64 and -0.59 percent growth in agricultural, industrial and services sectors respectively. The above was effectively responded by the Government of Pakistan using both the fiscal and monetary measures ranging from pack ages for lower income groups, construction industry and export sector to create employment opportunities. On the monetary front, certain appreciable measures were adopted by the State Bank of Pakistan (SBP) including the option of deferral of principal payments as well low cost financing schemes, covering salary payments and funding for setting up new industrial units. These fiscal and monetary measures along with other strict precautionary measures including the concept of smart lockdown helped contain the spread of virus and at the same time allowed the economic engine to continue working, which in many strong global economies came to a complete halt for the reason of pandemic. 18 Annual Report 2020 Living by the “one team one goal approach”, despite all challenges, by the Grace of Allah, the year 2020 was a standout year in terms of performance in the history of the Company. Your Company's performance is discussed in detail as under; 2. Business Performance The gross contribution income during the year amounted to Rs. 7.96 billion (2019: 8.29 billion). A slight decline of 4.15 percent, where the numbers achieved could be termed as at sustainable levels from last year keeping in view the slowdown in economic activity due to prevailing circumstances. The short fall having some effects of the novel virus, mainly came in from the strategic offloading of some corporate customers leading to an overall dip in contribution income discussed above. Contribution underwritten under Individual Life Business segment showed a marginal increase of 2.1 percent with a notable increase of 39 percent in Year 1 business from Individual Life, Direct Business Model. The above performance under Individual Life is a direct reflection of strategic restructuring,
  19. Company Overview 3 . Message for Stakeholders Financial Highlights & Reports Other Information deliberated upon last year, which included enhancing the Company's market outreach, yet ensuring the overheads remain within acceptable levels and respective changes in sales force hierarchy. During COVID-19 lockdowns it was difficult to reach out retail clients both for new as well as renewal business and the existing policyholders were finding it difficult to continue their policies due to liquidity issues. In addition to the former, stringent know-your-customer, anti-money laundering and other requirements emanating from compliance with FATF requirements, also had an impact on customer confidence. During these testing times where writing new business as well as policy renewals was a challenge, the Company's new business as well as the renewal business was higher than last year. Rs. 27.6 million and the Individual Life Segment though in surplus, fall short by 26.2 percent from previous year. Both the segment's performance were directly affected by death claims due to COVID-19, leading to incremental claims, against which your Company has adequate re-takaful arrangements in place to mitigate the impact of these additional pandemic related claims. Participant Takaful Fund & Claims Performance The Participant Takaful Fund (PTF) posted an overall surplus before distribution of Rs. 86.6 million against a surplus of Rs. 31.5 million in 2019. Post distribution the surplus retained amounted to Rs. 26.8 million which was a deficit of Rs. 24 million the year before. The above performance is a result of complete turnaround under Group Health Business Segment which generated a surplus of Rs. 18.3 million against a deficit of Rs. 113.3 million in 2019. The results are the outcome of control over claim expense, keeping claim ratios in check, and the positive impact of compromised top line as discussed earlier. The Group Life Segment was in deficit by The gross contribution composition was as follows; The Company has a robust claim management system in place, critical to success of any Takaful/insurance provider. Our team consisting of doctors and other skilled professionals serve round the clock, ensuring peace of mind to our policyholders' of a helping hand with a wide range of hospitals at your Company's panel. The servicing of our policyholders has been our utmost priority, and it is their time of distress when they look towards the promises they've bought and those sold to them by us. We've been with them & their successor's at every step of their journey with us, reflected in benefits/claims paid worth Rs. 4.7 billion (2019: 4.6 billion) inclusive of the policyholder's request for withdrawals, surrender and maturities that were due during the year. Your Company has historically been distributing surplus generated under PTF on a consistent basis in addition to creating value for its policyholders by way of above benchmark investment returns. During the year, 28 percent surplus for the individual life Annual Report 2020 19
  20. Company Overview Message for Stakeholders Financial Highlights & Reports business segment policyholders was declared. The efficient management of the fund has ensured year on year declaration of surplus and the management is determined to continue with this stream in future as well. 4. Investment Performance PQFTL manages unit linked and non-unit linked Other Information funds in accordance to their investment policy and risk appetite. Aggressive and Balanced Funds managed exposure to market and outperformed their respective benchmarks. Conservative Funds also surpassed benchmark returns yielding healthy returns for policyholders. PQFTL continues to allocate exposure in equities and fixed income coinciding with risk strategies. Investment Performance of our key Unit Linked Funds "Direct Sales Channel" Funds under management Unit Price at the end of the year 2020 Aggressive Balanced Conservative Secure Wealth 1,435.13 1,426.35 1,536.22 1,109.78 Annualized gross return 2020 15.00 13.60 10.50 9.60 percent percent percent percent Investment performance of funds maintained on behalf of Banca-Takaful "Banca-Takaful Channel" Funds under management Unit Price at the end of the year 2020 PQFT Banca Growth PQFT Banca Conservative Ø Shareholders' Fund During the calendar year shareholders' fund produced an annualized yield of 13.90%. Investment in Shareholders fund was assessed with market conditions and exposure actively managed in accordance with regulatory limits to maximize return for investors, congruent with funds' risk profile. 5. Profitability Respected Shareholders, Your Company concluded the year 2020 with highest ever 20 Annual Report 2020 962.80 973.01 Annualized gross return 2020 16.03 percent 10.35 percent profit since the inception of business in 2008. Profit before tax mounted to Rs. 208 million against Rs. 84 million in 2019, settling at Rs. 163.6 million after tax effects (2019: Rs. 55 million), an increase of 197% over previous year. The Board of Directors would like to congratulate you all upon the above achievement and would like to place on record the unstinted faith that has been entrusted by the members in the leadership of the Company over the years, allowing the same to be transmitted at all levels of Company's hierarchy.
  21. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Extract of the Profit and Loss Account & Other Comprehensive Income 2020 2019 ————(Rupees) ———— Total investment income of Shareholders' fund Other revenues Total investment income & other revenues 167,149,701 11,905,139 179,054,840 189,982,388 8,758,654 198,741,042 (8,249,062) 37,315,724 29,066,662 (8,769,928) (105,901,427) (114,671,355) 208,121,502 (44,558,409) 163,563,093 84,069,687 (28,828,481) 55,241,206 353,635 (563,012) Change in unrealised gains/(losses) on available for-sale-investments - net of tax (14,383,044) 50,097,787 Total comprehensive income for the year 149,533,684 104,775,981 Expenses not attributable to statutory funds Surplus/(Deficit) in shareholders' sub fund Profit before taxation Taxation for the year Profit for the year after tax Other comprehensive income/(loss) Actuarial gain/(loss) on defined benefit scheme - net of tax 6. from its core business as well as investment and other income. As part of liquidity management, Company also gets auditors certification annually on its solvency position prepared as per requirements of Insurance Ordinance, 2000. The Company has a paid up capital of Rs. 1.3 billion against minimum requirement of Rs. 700 million for life insurance companies / takaful operators. Earnings per Share & Break-up Value per Share The earnings per share for the year was Rs. 1.25 (2019: Rs. 0.42). Net Equity during the period increased by Rs. 149.5 to settle at Rs. 1.46 billion from 1.31 billion at the start of the year, resulting in a break-up value per share of Rs. 11.15 (2019: Rs. 10.01). 7. Dividend to Shareholders Total comprehensive income for the year amounted to Rs. 149.5 million, increasing the Company's net un-appropriated profit to Rs. 150.5 million (2019: Rs. 1.01 million). Your Directors have pleasure in recommending a Dividend of 7.5 percent to the shareholders. 8. Capital Management and Liquidity The Company maintains good financial base. Your Company carefully administers its liquidity to ensure its ability to meet its obligations efficiently. The company operates and honors its obligations through cash flow generated 9. Post Balance Sheet Event No material changes and commitments affecting the financial position of the Company have occurred between the end of the financial year to which this balance sheet relates and the date of the Directors' Report. 10. Market Share Based on the figures compiled by the Insurance Association of Pakistan as of 31 December 2019 the Company has a market share of 7.6% in the private life insurance sector companies based on the gross premium and contribution income. Annual Report 2020 21
  22. Company Overview 11 . Message for Stakeholders Financial Highlights & Reports With respect to organizational learning & development, employees were supported toward acquiring professional certifications and memberships in various business disciplines. During 2020, more than 700 training sessions were conducted nationwide and over 6,000 employees and Takaful agents were imparted training. Credit Rating A credit rating is a comprehensive tool for assessing an obligor's creditworthiness and reliability of its debt obligations. It allows the rating bearer to show potential investors and partners its creditworthiness, without divulging any confidential information, and to make relations between obligor and investors highly transparent and efficient. To better serve our employees and for process improvement, a significant focus was made for implementation of SAP Fiori (HR Portal) to promote HR Services automation, and an efficient talent portal integrated with the company's website. With a number of projects in the phase of completion, the year 2021 shall witness an enhanced digital transformation of HR services to both employees and career aspirants and will cater to requirements of future-of-work, and improve overall HR experience. Your Company stands with a strong credit rating of A+ (Single A+) from the countries' two most reputed credit rating agencies, the VIS Credit Rating Company Limited and The Pakistan Credit Rating Agency (PACRA). A strong rating reflects the Company's financial discipline and prudence and that the operations and the financial health of the Company are transparent. 12. Human Resource Management During the year 2020, the outbreak of Covid19 severely affected the global as well as Pakistan's economy. The way organizations operate changed overnight where a major shift was towards work-from-home and availability of necessary logistics in a very quick time. Throughout this testing period, HR tried to navigate the entire workforce by maintaining a balance between business objectives and ensuring their safety & well-being. HR ensured there was a clear communication between management and team-members, and the right environment was created to enable employees to contribute to their deliverables while maintaining required productivity levels. Continuing from the previous year, this year also saw a great deal of focus given to bringing structural and hierarchical reforms, improved procedures & awareness to the staff, compliance and effective monitoring for managing the company's takaful distribution as well as other staff related HR operations. A number of important HR policies were revised objectively to improve efficiency, employee satisfaction & security, and to gain competitive advantage. Several employee benefits were also included while up-gradation was made in some of existing benefits in the company's benefits program. 22 Annual Report 2020 Other Information 13. Related Party Transactions At board meeting, the Board of Directors approves Company's transactions with Associated Companies/Related parties. All transactions executed with related parties are on arm's length basis. Accordingly, transactions pertaining to sharing of administrative expense are carried at actual cost, sales/purchase of investments are carried out at fair value and transactions related to claims or contribution were carried out at commercial terms. In the case of related party transactions with Pak-Qatar General Takaful Limited, majority of the Directors are common due to common ownership structure, and accordingly may be perceived as interested. However, subject common directorship in both the companies is due to common ownership structure and no Director or Chief Executive has any personal interest in the transactions with associated company i.e. Pak-Qatar General Takaful Limited. 14. Relationship with other Stakeholders Your Company continues to maintain good relationship with: - Its employees by providing a positive work environment
  23. Company Overview - - 15 . Message for Stakeholders Its clients through building trust and providing quality service The business community through honest and fair dealing The Government & Regulators through promoting free enterprise along with competitive market system and complying with all applicable laws; and Society in general through providing safe and healthy workplace and provide employees the opportunity to improve their skills 17. Since inception, Pak-Qatar Takaful Group of companies have an independent Shariah Advisory Board (SAB), to oversee all products and operations for Shariah compliance. Justice (Retd.) Mufti Muhammad Taqi Usmani was the founding Chairman of the group's Shariah Board since inception and named Mufti Hassaan Kaleem as his successor in 2019. This privilege supervision has enabled us to have distinction in implementing Shariah governance practices exceeding statutory requirements. Pak-Qatar Takaful Group also has the distinction of being the 'first takaful group', licensed by the SECP to operate dedicated General Takaful and Family Takaful companies. Thus, a complete Shariah compliant suite with wide range of financial planning & Compliance with Code of Corporate Governance In November 2016, the Securities & Exchange Commission of Pakistan implemented 'the Code of Corporate Governance for Insurers, 2016', applicable to all insurance/takaful companies. The requirements of the Code of Corporate Governance set out by the regulatory authorities have been duly complied with. A Statement to this effect is annexed with the report. 18. Grievance Function The Company has setup complaints / grievances function for takaful policyholder. Grievance functions tries its best to resolve the complaints /grievances effectively and efficiently within shortest possible time. Relevant staff of grievance function resolves the complaints / grievances within the minimum possible time and act according to the requirements of the Code of Corporate Governance for insurer. Compliance with Shariah principles The requirements set out by the Takaful Rules, 2012, Shariah Governance Regulations, 2018 (SGR) read with letter ID/PRDD/MISC/2018/17474 dated 12 December 2018, and directives issued by our respected Sharia Advisor have been complied with. In this regard, Independent Shariah compliance review report & our Shariah Advisor's report are annexed with the annual report. Other Information protection products for all walk of life. Contribution to National Exchequer Your Company contributes to the national economy in terms of taxes and duties and the contribution is increasing as the Company is growing. The Company, in the capacity of a tax payer and withholding agent, has deposited Rs. 185.9 million into national exchequer. 16. Financial Highlights & Reports 19. Board of Directors During the year, there is no casual vacancy and significant change in the board of directors of Company. Directors' Orientation Course: Our respected Board of Directors are experienced and seasoned professionals with decades of experience. Many of our directors are holding director position in the Company for a decade or more than one tenure, and accordingly have gone through orientation courses several times. In line with CoCG requirement, orientation course to acquaint them with their responsibilities along with recent developments in relevant rules & regulations, was conducted in 2020. In furtherance, Company Secretary & Head of Internal Audit have already acquired certification under the Directors training program from Pakistan Institute of Corporate Governance during 2019. Annual Report 2020 23
  24. Company Overview Message for Stakeholders Board of Directors ' Meeting Financial Highlights & Reports 21. During the year 2020, six (6) meetings of the Board of Directors were held and attended as follows: # Director 1 2 3 4 5 6 7 8 Sheikh Ali Bin Abdullah Al-Thani Ali Ibrahim Al Abdul Ghani Abdul Basit Ahmad Al-Shaibei Said Gul Zahid Hussain Awan Muhammad Owais Ansari Farrukh Vaqaruddin Junaidy Sameera Usman Number of meetings attended 1 1 2 6 5 4 4 5 The management is committed to putting risk management at the center of the strategic decision-making process and to this end runs a robust risk management process that traverses through all functions of the Company. This puts the Company at such advantageous position that provides safeguarding its business & stakeholders. The business decision taken is based on weighing the associated risks against rewarding opportunities, as we strive to seize business opportunities that are compatible with our long-term vision. The Company has set up a risk management function/ department, which carries out its tasks as covered under the Code of Corporate Governance for Insurers, 2016. Board and Management Committees As part of Corporate Governance, Board maintains Board level committees and Management committees, whose latest composition is presented in annual report under heading Corporate Information. 20. Information Technology The Company has aligned itself for efficient use of the information technology resources in achieving its operational and strategic objectives. Strategic investments in prior years by the Company in the Technology enabled the Company to continue its operations efficiently & smoothly during lockdowns era. Staff were enabled to work from home through secure VPN connections. Customers were able to connect with the Company through various channels such as Call Center, Mobile App, and web portals for enquires and service requests. The Company maintains its "Disaster Recovery" site and performs "Disaster Recovery" drills. Further, the Company maintains good standards of Cyber Security and firewalls. The Company will continue to strive to create more opportunities for engaging its customers in the digital arena and provide services when and how customer desires. 24 Annual Report 2020 Risk and uncertainties The Company conducts business in a complex and challenging environment and is therefore exposed to number of external and internal risks that may present threats to its success and profitability. Some of the major risks facing the Company include regulatory risk, operational risks, underwriting risks, credit risks, reinsurance risks, liquidity risk & economic / political risks etc. Leave of absence was granted to directors, who could not attend the Board Meetings. Ø Other Information 22. Internal Audit function - Audit Committee It oversees the effective implementation of a sound internal control system including compliance with control procedures. The committee is chaired by an independent director, who is a Fellow Member of the Institute of Chartered Accountants of Pakistan (ICAP) with over thirty years of experience. He has served as the Vice President and Council Member of the ICAP, & has also has served on the board of directors of Pakistan Stock Exchange and National Clearing Company of Pakistan as a nominee of the Securities & Exchange Commission and Pakistan Stock Exchange. The Audit Committee is assisted by the Internal Auditor in reviewing the adequacy of operational controls and in monitoring and managing risks to provide reasonable assurance that such system continues to
  25. Company Overview Message for Stakeholders Financial Highlights & Reports Compliance framework is part and parcel of internal control framework of the Company, main purpose being, to ensure and remain compliant. operate satisfactorily and effectively in the Company and to add value and improve the Company's operations by providing independent and objective assurance. - Internal Audit For appraisal of internal controls and monitoring compliance, the Company has in place and appropriately staffed, Internal Audit department headed by suitably qualified and experienced Chartered Accountant. Internal auditor has full access to the Chairman of the Board Audit Committee. Further, the internal auditor meets senior management to discuss internal audit reports and is fully independent to access the management at any time to discuss audit issues in order to make the audit process transparent and effective. The scope and authority of Internal Audit Department is defined in the approved Internal Audit Charter. The Internal Audit Department has adopted a risk based approach to conduct internal audits, and monitors and evaluates the efficacy and adequacy of internal controls, consistency in application of policies and procedures and compliance with laws and regulations. Based on the report of the internal audit function, process owners undertake corrective action in their respective areas and thereby strengthen the controls. To maintain its objectivity and independence, the Internal Audit Department reports functionally to the Board Audit Committee and administratively to the CEO. 23. Compliance Framework A compliance framework outlines the regulatory compliance standards and regulations relevant to the organization. We comply with laws and regulations promulgated by Securities and Exchange Commission of Pakistan. The Company also adheres with the laws and regulations promulgated by Federal and provincial governments as are relevant to the Company. We consider compliances of the relevant laws and rules as the foremost priority. Compliance Officer is responsible for the compliance function. Policies and procedures are amended whenever required for effective, efficient and smooth operations. The Other Information 24. Corporate and Financial Reporting Frame Work a. The financial statements prepared by the management of the Company present fairly its state of affairs, the result of its operations, cash flow and changes in equity. b. Proper books of accounts have been maintained by the Company. c. Appropriate accounting policies have been consistently applied in preparation of financial statements, and accounting estimates are based on reasonable and prudent judgment. d. The International Accounting Standards, as applicable in Pakistan, have been followed in preparation of financial statements, and any departure there from h a s b e e n a d e q u a te l y d i s c l o s e d. e. The system of internal control is sound in design and has been effec tively implemented and monitored. f. There are no significant doubts upon the Company's ability to continue as a going concern. g. There has been no material departure from the best prac tices of Corporate Governance. h. The key operating and financial data for the last six years is attached. i. There is no significant change in objective & strategies from last year, and there is no plan to discontinue any operations. j. The number of board meeting & attendance by director(s) is given under heading 'Board of Directors'. k. The pattern of shareholding of the Annual Report 2020 25
  26. Company Overview Message for Stakeholders Financial Highlights & Reports plentiful of structural changes across all sectors and the insurance industry was no exception. The year witnessed many important planning go twisted with working from home and dealing with clients virtually becoming the new norm for an industry that traditionally relied on face-to-face communication. company is attached. l. The balance in the provident & gratuity fund accounts as at the year-end was Rs. 104,858,724 & Rs. 20,770,123 respectively. m. No trading in shares has been made by the Chief Executive, Directors, Chief Financial Officer, Company Secretary, their spouses and minor children. In view of the above, the insurance/takaful industry players will do well if they focus on meeting customer needs, learn from other industries and adopt digital technologies. Online products are now being viewed as a necessity rather than a luxury. Most of industry's trends for 2021 will therefore be driven by new technologies that can be used to streamline and improve insurance processes. n. The earnings per share & break-up value are Rs. 1.25 and Rs. 11.15 respectively 25. Statement of Ethics and Business Practices The Board has adopted the statement of Ethics and Business Practices. All employees are informed of this statement and are required to observe these rules of conduct in relation to business and regulations. 26. During the last 10 months, people have well realized the importance of insurance/takaful and the need to stay protected. Customers have started practicing a healthy lifestyle backed by efficient and effective wellness and preventive healthcare measures. The coming year will see industry come up with plans that focus on making customers fit and healthy. Product innovation to cater to evolving customer needs will therefore also be at the forefront of the industry's initiatives. Auditors The present auditors, M/s. EY Ford Rhodes, Chartered Accountants, retire and are eligible for re-appointment for the ensuing year. On recommendation of the Audit Committee, the Board of Directors of the Company has proposed their name for re-appointment as auditors of the Company for the year ending on the 31st December, 2021. 27. With people being vaccinated across the globe, we have not been able to completely bid farewell to the deadly virus, where in some countries it is re-emerging with its second or the third layer. Under the prevailing circumstances the Company expects that financial year 2021 will also be a challenging year from the overall business and economic perspective. However, with the continued support of all stakeholders, reflected in Company's notable financial performance during the era of unprecedented crisis, the management of the Company is determined to capitalize upon the outgoing year's performance and increase the company's footprint in the industry. Anti-Money Laundering (AML) & Counter Terrorism Financing (CFT) The Company is keen to implement & adhere the requirements of the SECP to cater the relevant risk and exposure. In this connection, the management has implemented the AML & CTF Policy through the utilization of relevant modern tools, techniques and by amending the procedures accordingly. The Company has also conducted / arranged trainings of its staff with regards to AML and CTF. 28. Outlook The Coronavirus outbreak is a human tragedy, affecting hundreds of thousands of people globally. It is also having a growing adverse impact on the global economy including Pakistan. The invisible deadly virus triggered a 26 Annual Report 2020 Other Information 29. Appreciation & Acknowledgement The Company's performance during the year would not have been possible without passion, commitment, hard work of both the employees & the management and above all, the
  27. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information persistent support of the shareholder of the Company. On behalf of the Board of Directors, we wish to place our thanks and sincere appreciation for the continued support from all the stakeholders. unstinted faith in the Company, and we are sure of continuing to share our success with all of them. We also acknowledge the support of the Securities and Exchange Commission of Pakistan as the apex regulator and appreciate various regulatory and ease of doing business measures initiated. On behalf of the Board of Directors, we thank our policyholders, intermediaries and reinsurers for reposing their In conclusion, we bow, beg and pray to Almighty Allah, Ar-Rahman-Ar-Rahim, for the continued showering of His blessings, guidance, strength, health, and prosperity upon us, our Company, Country and all other stakeholders. Ameen, Summa Ameen. Conclusion By Order of the Board Chief Executive Officer Director Annual Report 2020 27
  28. Company Overview 28 Annual Report 2020 Message for Stakeholders Financial Highlights & Reports Other Information
  29. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Annual Report 2020 29
  30. Company Overview 30 Annual Report 2020 Message for Stakeholders Financial Highlights & Reports Other Information
  31. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Annual Report 2020 31
  32. Company Overview 32 Annual Report 2020 Message for Stakeholders Financial Highlights & Reports Other Information
  33. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Annual Report 2020 33
  34. Company Overview 34 Annual Report 2020 Message for Stakeholders Financial Highlights & Reports Other Information
  35. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Ø Annual Report 2020 35
  36. Company Overview 36 Annual Report 2020 Message for Stakeholders Financial Highlights & Reports Other Information
  37. Company Overview Message for Stakeholders 20 .33% 4.26% Financial Highlights & Reports Other Information 20.87% 54.54% Annual Report 2020 37
  38. Company Overview 38 Annual Report 2020 Message for Stakeholders Financial Highlights & Reports Other Information
  39. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Key Operating & Financial Data (Rupees in thousand) 2020 2019 2018 2017 2016 2015 7,961,475 8,287,057 7,816,618 8,263,052 7,493,980 6,721,214 7,554,834 3,246,602 1,329,329 2,992,255 45,178 167,150 994,446 26,886 1,186,179 26,819 208,122 163,563 7,861,433 2,812,533 1,645,503 2,350,400 51,633 189,982 999,168 25,208 1,192,269 (23,963) 84,070 55,241 7,443,140 7,907,340 7,102,032 6,355,184 2,443,021 2,369,312 1,461,966 1,119,076 1,192,466 1,056,754 896,060 580,444 367,498 (291,910) 1,265,415 646,305 28,023 16,464 22,981 23,806 112,353 22,496 45,493 36,261 810,046 846,176 1,132,533 1,373,026 20,155 21,190 27,683 25,850 1,028,996 875,050 719,231 600,080 130,778 66,433 94,013 160,118 154,762 173,375 165,816 133,853 107,458 126,060 122,607 84,044 SIX YEARS SUMMARY Gross contribution Revenue & P&L account Contribution - net of retakaful Surrenders & Maturities Net Claims under PTF Net investment income (PIF) Net investment income (PTF) Net investment income (SHF) Commission expense Policy stamps Total administrative expenses Surplus / (Deficit) in PTF Profit before tax Profit after tax Balance sheet Investments including bank deposits Deferred tax asset Other assets Fixed assets Total assets Issued, subscribed & paid up capital Share Premium\ Advance against Share Capital Accumulated Surplus/(deficit) & Qard-e-Hasna Balance of statutory funds Other liabilities Total equity & liabilities 27,220,588 22,980,553 19,810,943 17,492,172 14,676,502 11,171,319 3,353 38,009 48,703 63,069 82,917 2,339,370 2,241,763 1,716,430 1,245,213 1,463,097 721,154 569,830 615,037 330,514 261,708 204,193 123,531 30,129,788 25,840,706 21,895,896 19,047,796 16,406,861 12,098,921 1,307,124 - 1,307,124 - 1,307,124 - 994,880 24,872 710,629 710,629 - - 150,541 1,007 160,924 116,852 74,523 (113,733) 27,136,292 23,367,668 19,547,685 17,217,103 14,881,441 10,896,831 1,535,831 1,164,907 880,163 694,089 740,268 605,195 30,129,788 25,840,706 21,895,896 19,047,796 16,406,861 12,098,921 Annual Report 2020 39
  40. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Key Operating & Financial Ratios 2020 2019 2018 2017 2016 2015 Financial ratios Profitability Profit / (loss) before tax / Gross contribution Profit / (loss) before tax / Net contribution 2.61% 2.75% 1.01% 1.07% 1.98% 2.08% 2.10% 2.19% 2.21% 2.33% 1.99% 2.11% Profit / (loss) after tax / Gross contribution Profit / (loss) after tax / Net contribution 2.05% 2.17% 0.67% 0.70% 1.37% 1.44% 1.53% 1.59% 1.64% 1.73% 1.25% 1.32% Net claims & surrenders / Net contribution 60.57% 56.71% 48.84% 43.33% 33.20% 26.74% Commission / Gross contribution Administrative expenses / Gross contribution 12.49% 12.06% 10.36% 10.24% 15.11% 20.43% 14.90% 14.39% 13.16% 10.59% 9.60% 8.93% Net investment income / Net contribution 42.42% 32.97% 6.82% -3.20% 18.78% 11.11% 11.22% 1.59 1.25 11.15 8.58% 4.22% 0.64 0.42 10.01 3.13% 7.32% 1.22 0.85 11.23 6.62% 11.34% 1.85 1.35 11.17 10.08% 15.62% 2.12 1.73 11.05 12.57% 14.08% 1.88 1.18 8.40 11.42% 1.03 0.31 19.67 4.34% 4.84% 1.03 0.35 18.75 5.06% 5.06% 1.05 0.11 13.91 5.97% 6.70% 1.05 0.12 16.11 5.22% 5.84% 1.03 0.24 19.90 4.33% 4.79% 1.03 0.23 19.27 5.87% 4.93% Return to shareholders Return on equity Earning per share (pre-tax) Earning per share (after-tax) Net assets per share (SHF) Return on assets (SHF) Performance liquidity Current ratio (Times) Total liabilities / Equities (Times) - SHF Total liabilities / Equities (Times) - Total Paid up capital / Total assets Equity / Total assets (Rupees in thousand) Cash flows Net cash flow from operating activities Net cash flow from investing activities Net cash flow from financing activities Net change in cash & cash equivalent 40 Annual Report 2020 869,827 674,550 1,873,844 2,485,094 2,276,857 2,631,792 (2,717,176) 724,815 (3,495,725) (2,981,453) (3,978,495) 2,262,289 (58,566) 274,518 274,074 (1,847,349) 1,340,799 (1,347,363) (222,285) (1,701,638) 4,894,081
  41. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Statement Of Compliance With The Code of Corporate Governance For Insurers, 2016 For The Year Ended 31 December 2020 This statement is being presented in compliance with the Code of Corporate Governance for Insurers, 2016 for the purpose of establishing a framework of good governance, whereby an insurer is managed in compliance with the best practices of corporate governance. Pak-Qatar Family Takaful Limited (PQFTL or the Company), being an insurer, has applied the principles contained in the Code in the following manner: 1. PQFTL encourages representation of independent non-executive directors and directors representing minority interests on its Board of directors. At present, the Board includes: Category Names Independent Director Mr. Farrukh Viqaruddin Junaidy Non-Executive Directors H.E. Sheikh Ali Bin Abdullah Al Thani Mr. Said Gul Mr. Abdul Basit Ahmad Al-Shaibei Mr. Ali Ibrahim Al Abdul Ghani Mr. Zahid Hussain Awan Mr. Muhammad Owais Ansari Ms. Sameera Usman Executive Director (Chief Executive Officer)* Mr. Azeem Iqbal Pirani *The chief executive is a 'deemed director' under section 188(3) of the Companies Act, 2017 whereas the number of elected/nominated directors on the Board are eight (8). The independent director meets the criteria of independence as laid down under the Code of Corporate Governance for Insurers, 2016. 2. The directors have confirmed that none of them is serving as a director on more than seven listed companies, including PQFTL. 3. All the resident directors of PQFTL are registered as taxpayers and none of them has defaulted in payment of any loan to a banking company, a DFI or a NBFI or, being a member of a stock exchange, has been declared as a defaulter by that stock exchange. 4. No casual vacancy arose on the Board of Directors during the year. 5. PQFTL has prepared a Code of Conduct, which has been disseminated among all the directors and employees of the Company. 6. The Board has developed a vision/mission statement, overall corporate strategy and significant policies of the Company. A complete record of particulars of significant policies along with the dates on which they were approved or amended has been maintained. Annual Report 2020 41
  42. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information 7. All the powers of the Board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration and terms and conditions of employment of the Chief Executive Officer, other executive directors and key officers, have been taken by the Board. 8. The meetings of the Board were presided over by the Chairman and, in his absence, by a director elected by the Board for this purpose and the Board met at least once in every quarter. Written notices of the Board meeting, along with agenda and working papers, were circulated at least seven (7) days before the meeting. The minutes of the meeting were appropriately recorded and circulated. 9. The Board has established system of sound internal control, which is effectively implemented at all levels within the Company. PQFTL has adopted and complied with all the necessary aspects of internal controls given in the code. 10. The orientation course was arranged for the directors in the form of booklet to apprise them of their duties and responsibilities and also about changes in Laws and Regulations. 11. There was no change of Chief Financial Officer, Company Secretary and Head of Internal Audit during the year 2020. The Board has approved the remuneration and terms and conditions of employment of CFO, Company Secretary and Head of Internal Audit. 12. The directors' report for this year has been prepared in compliance with the requirements of the Code of Corporate Governance for Insurers, 2016 and fully describes the salient matters required to be disclosed. 13. The financial statements of PQFTL were duly endorsed by Chief Executive Officer and Chief Financial Officer before approval of the Board. 14. The directors, Chief Executive Officer and other executives do not hold any interest in the shares of PQFTL other than disclosed in the pattern of shareholding. 15. PQFTL has complied with all the corporate and financial reporting requirements of the Code of Corporate Governance for Insurers, 2016. 16. The Board has formed the following Management Committees: Underwriting & Re-Takaful Committee: 42 Name of the Member Category Mr. Zahid Hussain Awan Mr. Azeem Iqbal Pirani Mr. Muhammad Ahsan Qureshi Mr. Muhammad Shahzad Mr. Adnan Arif Mr. Sagheer Alam Siddiqui Mr. Ahsan Yameen Chairman Member Member Member & Secretary Member Member Member Annual Report 2020
  43. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Claims Settlement Committee: Name of the Member Category Mr. Said Gul Mr. Azeem Iqbal Pirani Mr. Tariq Saeed Chaudhry Mr. Farhan Shaukat Mr. Jehanzaib Ahmed Mr. Nasir Ali Soomro Mr. Muhammad Saleem Mr. Imran Irshad Chairman Member Member Member Member Member Member Member & Secretary Risk Management & Compliance Committee 17. Name of the Member Category Mr. Zahid Hussain Awan Mr. Azeem Iqbal Pirani Mr. Muhammad Ahsan Qureshi Mr. Muhammad Shoaib Akhter Mr. Saifuddin Shaikh Mr. Muhammad Umair Mr. Muhammad Shahzad Mr. Adnan Arif Mufti Shakir Siddiqui Mr. Imran Irshad Mr. Ahsan Yameen Mr. Danish Wasim Mr. Jehanzaib Ahmed Chairman Member Member Member Member Member Member Member Member Member Member Member Member & Secretary The Board has formed the following Board Committee Ethics, Human Resource & Remuneration Committee: Name of the Member Category Mr. Said Gul Mr. Zahid Hussain Awan Mr. Ali Ibrahim Al Abdul Ghani Mr. Muhammad Kamran Saleem Chairman Member Member Secretary Annual Report 2020 43
  44. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Nominations Committee: Name of the Member Category Mr. Abdul Basit Ahmad Al-Shaibei Mr. Said Gul Mr. Ali Ibrahim Al Abdul Ghani Mr. Muhammad Kamran Saleem Chairman Member Member Secretary Investment Committee: 18. Name of the Member Category Mr. Zahid Hussain Awan Mr. Said Gul Mr. Azeem Iqbal Pirani Mr. Muhammad Kamran Saleem Mr. Muhammad Ahsan Qureshi Mr. Abdul Rahim Abdul Wahab Mr. Farhan Shaukat Chairman Member Member Member Member Member Secretary The Board has formed an audit committee. It comprises of three members, whom are non-executive directors including the chairman who is also the independent director of the Company. Audit Committee: Name of the Member Category Mr. Farrukh Viqaruddin Junaidy Mr. Muhammad Owais Ansari Mr. Zahid Hussain Awan Mr. Muhammad Shoaib Akhter Chairman Member Member Secretary 19. The meeting of the committees, except Ethics, Human Resource & Remuneration Committee & Nominations Committee, were held at least once every quarter prior to approval of interim and final results of PQFTL and as required by the Code of Corporate Governance for Insurers, 2016. The term of reference of the committees have been formed and advised to the committees for compliance. 20. The Board has set up an effective internal audit function. 21. The Chief Executive Officer, Chief Financial Officer, Compliance Officer and the Head of Internal Audit possess such qualification and experience as required under the Code of Corporate Governance for Insurers, 2016. The Appointed Actuary of the Company also meets the conditions as laid down in the said Code. Moreover, the persons heading the underwriting, claim, re-takaful, risk management and grievance functions/ departments possess qualification and experience of direct relevance to their respective functions, as required under section 12 of the Insurance Ordinance, 2000 (Ordinance No. XXXIX of 2000); 44 Annual Report 2020
  45. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Name of the Person Designation Mr. Azeem Iqbal Pirani* Mr. Muhammad Kamran Saleem Mr. Muhammad Ahsan Qureshi Mr. Danish Wasim** Mr. Jehanzaib Ahmed** Chief Executive Officer Company Secretary Chief Financial Officer Head of Risk Management Compliance Officer & Head of Grievance Department Actuary Head of Internal Audit Head of Re-Takaful Head of Underwriting Head of Claims Mr. Abdul Rahim Abdul Wahab Mr. Muhammad Shoaib Akhter Mr. Ahsan Yameen Mr. Muhammad Shahzad Mr. Imran Irshad *The Board of Directors upon resignation of Mr. Nasir Ali Syed, approved the appointment of Mr. Azeem Iqbal Pirani as the new CEO of the Company. **Mr. Danish Wasim during the year was elevated to the position of Head of Risk Management Department and Mr. Jehanzaib Ahmed allotted additional responsibilities of Grievance Department, following Mr. Kamran Saleem's elevation to the position of Director Finance in 2019. 22. The statutory auditors of the Company have been appointed from the panel of auditors approved by the Commission in terms of section 48 of the Insurance Ordinance, 2000 (Ordinance No. XXXIX of 2000). The statutory auditors have confirmed that they have been given a satisfactory rating under the Quality Control Review program of the Institute of Chartered Accountants of Pakistan (ICAP), that they or any of the partners of the firm, their spouses and minor children do not hold shares of the Company and that the firm and all its partners are in compliance with the International Federation of Accountants (IFAC) guidelines on code of ethics as adopted by the ICAP. 23. The statutory auditors or the persons associated with them have not been appointed to provide other services and the auditors have confirmed that they have observed IFAC guidelines in this regard. 24. The actuary appointed by the company has confirmed that he or his spouse and minor children do not hold shares of the Company. 25. The Board ensures that the appointed actuary complies with the requirements set out for him in the Code of Corporate Governance for Insurers, 2016. 26. The Board ensures that the investment policy of the Company has been drawn up in accordance with the provisions of the Code of Corporate Governance for Insurers, 2016. 27. The Board ensures that the risk management system of the Company is in place as per the requirements of the Code of Corporate Governance for Insurers, 2016. Annual Report 2020 45
  46. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information 28. The company has set up a risk management function/department, which carries out its tasks as covered under the Code of Corporate Governance for Insurers, 2016. 29. The Board ensures that as part of the risk management system, the PQFTL gets itself rated from The Pakistan Credit Rating Agency Limited (PACRA) and VIS Credit Rating Company Limited which are being used by its risk management function/ department and the respective Committee as a risk monitoring tool. The rating assigned by the said rating agencies on 30th June 2020 and 15th October 2019 respectively are A+ with 'Stable' outlooks. 30. The Board has set up a grievance department, which fully complies with the requirements of the Code of Corporate Governance for Insurers, 2016. 31. We confirm that all other material principles contained in the Code of Corporate Governance for Insurers, 2016 have been complied with. The Company has not obtained exemption from the Securities & Exchange Commission of Pakistan in respect of the requirements of Code of Corporate Governance for Insurers, 2016. By Order of the Board ______________________ Chief Executive Officer Date: 08 April, 2021 46 Annual Report 2020 ______________________ Director
  47. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Shariah Review Report to the Board of Directors for the year ended 31 December 2020 We have reviewed the accompanying financial statements of Pak-Qatar Family Takaful Limited (hereafter referred to as "the Company") for the year ended 31 December 2020. During this year Shariah Advisory Board held meetings on various matters which was referred to them by the management. Also, we have reviewed all types of products, documents, MOUs and the business concerns of the Company with the assistance of qualified Muftis of Shariah Compliance Department in accordance with the principles of Shariah. In our opinion, and to the best of our understanding based on the provided information and explanations, below are our findings: (i) Financial transactions and relevant documentations & procedures, undertaken by the Company for the year ended 31 December 2020 were in accordance with guidelines issued by Shariah Advisory Board as well as the requirements of Takaful Rules 2012. (ii) The given Shariah Screening Criteria has been fulfilled properly in all kind of investment & financial transactions. (iii) We have realized the amount 6,012,236 as non Shariah Compliant income which has been credited to the relevant charity account. (iv) The company performed its duties to its level best by following Shariah guidelines. Few cases which were required to be consulted in accordance with the Shariah rules and market practice have been discussed and duly resolved. (v) Consequently, we have found that the Company is in accordance with the Shariah principles in all transactional aspects. Moreover, we also agree with the Accounting principles adopted for incorporation of Participants' Takaful Fund (Waqf Fund) into the accompanying financial statements. (vi) The year 2020 was very challenging year due to spread of COVID-19, this not only affected the business of the companies but also affected the training and awareness sessions due to lockdown nationwide. However, we managed to conduct nearly 70 sessions across Pakistan on awareness of Takaful. "And Allah Knows Best" Mufti Muhammad Hassan Kaleem Chairman Shariah Advisory Board Dr. Mufti Ismatullah Shariah Advisor & Shariah Advisory Board Member Annual Report 2020 47
  48. Company Overview Building a better working world Message for Stakeholders EY Ford Rhodes Chartered Accountants Progressive Plaza , Beaumont Road P.O. Box 15541, Karachi 75530 Pakistan Financial Highlights & Reports Other Information UAN: +9221 111 11 39 37 (EYFR) Tel: +9221 3565 0007-11 Fax: +9221 3568 1965 ey.khi@pk.ey.com ey.com/pk Independent Reasonable Assurance Report to the Board of Directors on the Statement of Management's Assessment of Compliance with the Takaful Rules, 2012 1. Introduction We were engaged by the Board of Directors of Pak Qatar Family Takaful Limited (the Company) to report on the management's assessment of compliance of Takaful Operations (Takaful Operations), as set out in the annexed Statement of Compliance (the Statement) prepared by the management for the year ended 31 December 2020, with the Takaful Rules, 2012, in the form of an independent reasonable assurance conclusion about whether the annexed statement presents fairly the status of compliance of the Takaful Operations with the Takaful Rules, 2012, in all material respects. 2. Applicable Criteria The criteria against which the subject matter information (the Statement) is assessed is the Takaful Rules, 2012. 3. Responsibilities of Management The management of the Company is responsible for preparation of the annexed Statement that is free from material misstatement. This responsibility includes designing, implementing and maintaining internal controls relevant to the preparation of the annexed Statement that is free from material misstatement, whether due to fraud or error. It also includes ensuring the overall compliance of the Takaful Operations with the Takaful Rules, 2012. 4. Our Independence and Quality Control We have complied with the independence and other ethical requirements of the Code of Ethics for Chartered Accountants issued by the Institute of Chartered Accountants of Pakistan, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior. The firm applies International Standard on Quality Control 1 "Quality Control for firms that perform Audits and Reviews of Historical Financial information, and Other Assurance and Related Services Engagements" and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. 48 Annual Report 2020
  49. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information This engagement was conducted by a multidisciplinary team including assurance practitioners and Shari'ah expert. 5. Our Responsibility and Summary of Work Performed Our responsibility is to carry out an independent reasonable assurance engagement to express a conclusion as to whether the Statement is prepared in accordance with the applicable criteria, based on our work performed and the evidences obtained. We conducted our engagement in accordance with International Standard on Assurance Engagements 3000 (Revised), 'Assurance Engagements other than audits or reviews of historical financial statements' (ISAE 3000) (Revised) issued by the International Auditing and Assurance Standards Board. ISAE 3000 (Revised) requires that we plan and perform this engagement to obtain reasonable level of assurance about whether the Statement presents fairly the status of compliance of the Takaful Operations with the Takaful Rules 2012, in all material respects. The procedures selected by us for the engagement depended on our judgment, including the assessment of the, risks of the Company's material non-compliance with the Takaful Rules 2012, whether due to fraud or error. In making those risk assessments, we considered internal control relevant to the Company's compliance with the Takaful Rules, 2012, in order to design assurance procedures that are appropriate in the circumstances but not for the purpose of expressing a conclusion as to the effectiveness of the Company's internal control over the Takaful Operations' compliance with the Takaful Rules, 2012. A system of internal control, because of its nature, may not prevent or detect all instances of non-compliance with the Takaful Rules, 2012, and consequently cannot provide absolute assurance that the objective of compliance with the Takaful Rules, 2012 will be met. Further, projection of any evaluation of effectiveness to future periods is subject to the risk that the controls may become inadequate or fail. We have designed and performed necessary verification procedures on various financial arrangements, contracts, classes of transactions and related policies and procedures based on judgmental and systematic samples with regard to the compliance with Takaful Rules, 2012. In performing our audit procedures necessary guidance on Shari'ah matters was provided by the Shari'ah expert referred above. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 6. Conclusion In our opinion, the Statement for the year ended 31 December 2020 present fairly the status of compliance of the Takaful Operations of the Company with the Takaful Rules, 2012, in all material respects. Date: 27 April 2021 Karachi Chartered Accountants _______________________ Shaikh Ahmed Salman Assurance Engagement Partner Annual Report 2020 49
  50. Company Overview Building a better working world Message for Stakeholders Financial Highlights & Reports EY Ford Rhodes Chartered Accountants Progressive Plaza, Beaumont Road P.O. Box 15541, Karachi 75530 Pakistan Other Information UAN: +9221 111 11 39 37 (EYFR) Tel: +9221 3565 0007-11 Fax: +9221 3568 1965 ey.khi@pk.ey.com ey.com/pk Independent Auditor's Review Report To the members of Pak-Qatar Family Takaful Limited (the Company) Review Report on the Statement of Compliance with Code of Corporate Governance We have reviewed the enclosed Statement of Compliance with the Code of Corporate Governance prepared by the Board of Directors of Pak-Qatar Family Takaful Limited for the year ended 31 December 2020 in accordance with the requirements of the Code of Corporate Governance for Insurers, 2016 (the Code). The responsibility for compliance with the Code is that of the Board of Directors of the Company. Our responsibility is to review whether the Statement of Compliance reflects the status of the Company's compliance with the provisions of the Code and report if it does not and to highlight any non-compliance with the requirements of the Code. A review is limited primarily to inquiries of the Company's personnel and review of various documents prepared by the Company to comply with the Code. As a part of our audit of the financial statements we are required to obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. We are not required to consider whether the Board of Directors' statement on internal control covers all risks and controls or to form an opinion on the effectiveness of such internal controls, the Company's corporate governance procedures and risks. Based on our review, nothing has come to our attention which causes us to believe that the Statement of Compliance does not appropriately reflect the Company's compliance, in all material respects, with the requirements contained in the Code as applicable to the Company for the year ended 31 December 2020. Chartered Accountants Place: Karachi Date: 28 April 2021 50 Annual Report 2020
  51. Company Overview Building a better working world Message for Stakeholders Financial Highlights & Reports EY Ford Rhodes Chartered Accountants Progressive Plaza, Beaumont Road P.O. Box 15541, Karachi 75530 Pakistan Other Information UAN: +9221 111 11 39 37 (EYFR) Tel: +9221 3565 0007-11 Fax: +9221 3568 1965 ey.khi@pk.ey.com ey.com/pk Independent Auditor's Report To the members of Pak-Qatar Family Takaful Limited Report on the Audit of the Financial Statements Opinion We have audited the annexed financial statements of Pak-Qatar Family Takaful Limited (the Company), which comprise the statement of financial position as at 31 December 2020, and the statement of comprehensive income, the statement of changes in equity, the statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit. In our opinion and to the best of our information and according to the explanations given to us, the statement of financial position, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows together with the notes forming part thereof, conform with the accounting and reporting standards as applicable in Pakistan and give the information required by the Insurance Ordinance, 2000 and the Companies Act, 2017 (XIX of 2017), in the manner so required and respectively give a true and fair view of the state of Company's affairs as at 31 December 2020 and of the profit, total comprehensive income, the changes in equity and its cash flows for the year then ended. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) as applicable in Pakistan. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants as adopted by the Institute of Chartered Accountants of Pakistan (the Code) and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Information Other than the Financial Statements and Auditor's Report Thereon Management is responsible for the other information. The other information comprises the information included in the Directors' Report but does not include the financial statements and our auditor's report thereon. Annual Report 2020 51
  52. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of Management and Board of Directors for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with the accounting and reporting standards as applicable in Pakistan and the requirements of Insurance Ordinance, 2000 and Companies Act, 2017 (XIX of 2017) and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Board of directors are responsible for overseeing the Company's financial reporting process. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs as applicable in Pakistan will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs as applicable in Pakistan, we exercise professional judgement and maintain professional skepticism throughout the audit. We also: l l l 52 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. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Annual Report 2020
  53. Company Overview l l Message for Stakeholders Financial Highlights & Reports Other Information Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with the board of directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Report on Other Legal and Regulatory Requirements Based on our audit, we further report that in our opinion: a) proper books of account have been kept by the Company as required by the Insurance Ordinance, 2000 and the Companies Act, 2017 (XIX of 2017) b) the statement of financial position, the statement of comprehensive income, the statement of changes in equity and statement of cash flows together with the notes thereon have been drawn up in conformity with the Insurance Ordinance, 2000, the Companies Act, 2017 (XIX of 2017), and are in agreement with the books of account; c) the apportionment of assets, liabilities, revenue and expenses between two or more funds has been performed in accordance with the advice of the appointed actuary; d) investments made, expenditure incurred and guarantees extended during the year were for the purpose of the company's business; and e) zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), was deducted by the Company and deposited in the Central Zakat Fund established under section 7 of that Ordinance. The engagement partner on the audit resulting in this independent auditor's report is Omer Chughtai. Chartered Accountants Karachi Date: 28 April 2021 Annual Report 2020 53
  54. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Statement of Financial Position As at December 31, 2020 Notes Shareholders' Fund Policyholders' Fund Aggregate 2020 2019 --------------------------------------- (Rupees) --------------------------------------ASSETS Property & equipment 8 433,636,350 - 433,636,350 446,222,171 Intangible assets 9 102,275,193 - 102,275,193 102,502,655 Capital work in progress 10 33,918,724 - 33,918,724 66,311,828 569,830,267 - 569,830,267 615,036,654 Investments Equity securities 11 74,467,421 9,213,908,255 9,288,375,676 7,237,352,217 Government securities - Sukuk Certificates 12 725,000,000 454,062,509 1,179,062,509 1,400,799,753 Debt securities - Sukuk Certificates 13 - 139,555,030 139,555,030 6,055,209,288 Term deposits 14 - 300,000,000 300,000,000 3,640,000,000 Mutual funds 15 - 13,379,889,659 13,379,889,659 561,584,092 799,467,421 23,487,415,453 24,286,882,874 18,894,945,350 3,775,000 361,259,800 365,034,800 365,034,800 1,038,829,073 1,038,829,073 878,667,238 60,867,255 189,309,518 405,984,747 Advance against investment property Takaful / Retakaful receivables 16 Other loans and receivables 17 Deferred tax asset 18 Taxation - payments less provision 128,442,263 19,838,051 695,508,295 3,352,746 715,346,346 561,156,155 28,099,926 30,920,762 Prepayments 19 28,099,926 Cash and bank 20 357,485,143 2,578,970,054 2,936,455,197 4,085,607,244 1,906,938,071 28,222,849,930 30,129,788,001 25,840,705,696 Total Assets The annexed notes 1 to 51 form an integral part of these financial statements. 54 Annual Report 2020 - -
  55. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Statement of Financial Position As at December 31, 2020 Notes Shareholders' Fund Policyholders' Fund Aggregate 2020 2019 --------------------------------------- (Rupees) --------------------------------------EQUITY & LIABILITIES Shareholders' Equity Share capital 21 Unappropriated profit - net Total Equity 1,307,124,400 - 1,307,124,400 1,307,124,400 150,540,614 - 150,540,614 1,006,930 1,457,665,014 - 1,457,665,014 1,308,131,330 Waqf / Participant Takaful Fund (PTF) Cede money - 500,000 500,000 500,000 Accumulated surplus - 650,304,912 650,304,912 623,486,021 Total PTFs Equity - 650,804,912 650,804,912 623,986,021 Qard -e -Hasna - 135,000,000 135,000,000 135,000,000 Total Policyholders' Equity - 785,804,912 785,804,912 758,986,021 Deferred tax liability 18 1,802,947 - 1,802,947 - Liabilities Takaful liabilities 22 Retirement benefits obligations 24 Contributions received in advance 47,615,996 - 37,803,040 142,023,329 - 27,368,442 27,368,442 68,729,939 72,634,284 222,150,426 110,374,103 250,337,972 323,009,041 26 149,516,142 Lease Liabilities 27 250,337,972 - - Contingencies and commitments 47,615,996 299,301,666 Other creditors and accruals Total Equity and Liabilities 23,090,396,559 299,301,666 25 Total Liabilities 27,037,740,626 - Takaful / Retakaful payable Taxation -provision less payments 27,037,740,626 - - 1,252,334 447,470,110 27,437,045,018 27,884,515,128 23,773,588,345 449,273,057 27,437,045,018 27,886,318,075 23,773,588,345 1,906,938,071 28,222,849,930 30,129,788,001 25,840,705,696 28 The annexed notes 1 to 51 form an integral part of these financial statements. Chief Executive Officer Director Director Chairman Annual Report 2020 55
  56. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Profit and Loss Account For the year ended December 31, 2020 Policyholders' Fund Notes Contributions revenue less: Wakala fee recognised 29 30 Contribution ceded to retakaful Net contribution revenue 29 Investment income Net realised fair value gains/(losses) on investments Net fair value gains/(losses) on investments Surplus income Net change in takaful liabilities (Other than outstanding claims) Surplus/(Deficit) reserve for the year [ Participant Takaful Fund (PTF) ] The annexed notes 1 to 51 form an integral part of these financial statements. 56 Annual Report 2020 2019 7,961,474,662 (1,798,674,513) 6,162,800,149 (403,640,591) 5,759,159,558 8,287,057,397 (1,721,719,153) 6,565,338,244 (425,624,545) 6,139,713,699 31 32 33 1,123,128,867 1,198,120,535 767,112,361 79,340,986 3,167,702,749 8,926,862,307 1,776,486,829 342,819,752 336,553,529 81,005,468 2,536,865,578 8,676,579,277 35 35 36 (4,860,220,533) 284,289,603 (446,152,051) (59,742,286) (76,412,959) (5,158,238,226) (4,704,790,074) 246,754,548 (380,253,912) (55,497,188) (72,809,510) (4,966,596,136) (3,741,805,190) (3,733,945,867) 26,818,891 (23,962,726) Net income Takaful benefits Recoveries from retakaful Benefit related expenses Surplus distribution Other expenses Net takaful benefits 2020 --------------------- Rupees ---------------------
  57. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Profit and Loss Account For the year ended December 31, 2020 Shareholders' Fund Notes 2020 2019 --------------------- Rupees --------------------- Wakala fee Commission expense 30 37 1,798,674,513 (994,445,666) 804,228,847 1,721,719,153 (999,167,653) 722,551,500 Takaful operator fee income Investment income Net realised fair value gains/(losses) on investments Other income 36 31 32 34 446,152,051 124,604,352 42,545,349 11,905,139 625,206,891 380,253,912 132,152,647 57,829,741 8,758,654 578,994,954 1,429,435,738 1,301,546,454 (704,369,624) (508,695,550) (8,249,062) (1,221,314,236) (654,147,517) (553,673,533) (9,655,717) (1,217,476,767) 208,121,502 (44,558,409) 84,069,687 (28,828,481) 163,563,093 55,241,206 1.25 0.42 Net income Acquisition expenses Marketing & administration expenses Other expenses Total expenses 37 38 39 Profit for the year before tax Income tax expense 40 Profit for the year after tax Profit (after tax) per share - Rupees The annexed notes 1 to 51 form an integral part of these financial statements. Chief Executive Officer Director Director Chairman Annual Report 2020 57
  58. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Statement of Comprehensive Income For the year ended December 31, 2020 Notes 2020 2019 --------------------- Rupees --------------------- Profit after tax for the year - as per Profit and Loss Account 163,563,093 55,241,206 498,082 (144,447) 353,635 (792,974) 229,962 (563,012) Tax effect Change in unrealised gains/(losses) on available for-sale-investments - net of tax 37,676,657 (57,934,465) (20,257,808) 5,874,764 (14,383,044) 93,868,645 (23,308,381) 70,560,264 (20,462,477) 50,097,787 Total comprehensive income for the year 149,533,684 104,775,981 Other comprehensive income/(loss) Items not to be recognised to profit and loss account in subsequest year Actuarial gain/(loss) on defined benefit scheme Tax effect 24.6.2 Items that may be recognised to profit and loss account in subsequent years Change in unrealised gains on available for sale investments Loss/(Gain) on disposal reclassified to profit or loss account The annexed notes 1 to 51 form an integral part of these financial statements. Chief Executive Officer 58 Annual Report 2020 Director Director Chairman
  59. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Statement of Changes in Equity For the year ended December 31, 2020 Attributable to Policyholders' of the Company Cede Money Accumulated surplus / (deficit) Qard-eHasna Total ------------------------------------- (Rupees) ------------------------------------Balance at January 01, 2019 (Deficit) for the year ended December 31, 2019 - net of distribution Contribution by Shareholder's Fund Balance as at December 31, 2019 Surplus for the year ended December 31, 2020 - net of distribution Balance as at December 31, 2020 500,000 500,000 500,000 647,448,747 25,000,000 672,948,747 (23,962,726) - 110,000,000 (23,962,726) 110,000,000 623,486,021 135,000,000 758,986,021 26,818,891 650,304,912 135,000,000 26,818,891 785,804,912 Annual Report 2020 59
  60. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Statement of Changes in Equity For the year ended December 31, 2020 Attributable to Shareholders' of the Company Net Unappropriated profit / (Accumulated loss) Net Capital Surplus/ Unappropriated (Deficit) on contribution Unappropriated profit / profit / (Accumulated revaluation of to statutory (Accumulated funds availableloss) loss) for-sale investments Share Capital Total ----------------------------------------------(Rupees)---------------------------------------------Balance at January 01, 2019 1,307,124,400 167,165,769 (70,578,598) (25,000,000) 71,587,171 1,378,711,571 - 55,241,206 55,241,206 - 49,534,775 104,775,981 49,534,775 104,775,981 - (65,356,222) (65,356,222) (110,000,000) (110,000,000) (110,000,000) (175,356,222) (110,000,000) (175,356,222) (135,000,000) 1,006,930 1,308,131,330 - 163,563,093 163,563,093 - (14,029,409) 149,533,684 (14,029,409) 149,533,684 Total comprehensive income for the year ended December 31, 2019 Profit for the year Other comprehensive income for the year - net of tax Total comprehensive income for the year Transaction with the owners Issue of Share Capital Dividend for the year ended December 31, 2018 Qard-e-Hasna contributed to shareholders' sub fund Balance at December 31, 2019 - 55,241,206 - (563,012) 54,678,194 - (65,356,222) - - (65,356,222) - 1,307,124,400 156,487,741 50,097,787 50,097,787 (20,480,811) Total comprehensive income for the year ended December 31, 2020 Profit for the year Other comprehensive income for the year - net of tax Total comprehensive income for the year Transaction with the owners Issue of Share Capital Qard-e-Hasna contributed to shareholders' sub fund Balance as at December 31, 2020 - 163,563,093 - 353,635 163,916,728 (14,383,044) (14,383,044) - - - - - - - - - - - - 1,307,124,400 320,404,469 (34,863,855) (135,000,000) 150,540,614 1,457,665,014 The annexed notes 1 to 51 form an integral part of these financial statements. Chief Executive Officer 60 Annual Report 2020 Director Director Chairman
  61. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Cash Flow Statement For the year ended December 31, 2020 Aggregate Shareholders' Fund Policyholders' Fund 2020 2019 ------------------------------------- (Rupees) ------------------------------------Operating Cash flows (a) (b) (c) (d) Takaful activities Contributions received Retakaful payment - net Claims / benefits paid Commission paid Wakala fees/Modarib received Wakala fees/Modarib paid Net cash flow from takaful activities (963,417,895) 2,244,826,564 1,281,408,669 8,034,114,706 (156,895,041) (4,654,681,656) (2,244,826,564) 977,711,445 8,034,114,706 (156,895,041) (4,654,681,656) (963,417,895) 2,244,826,564 (2,244,826,564) 2,259,120,114 8,077,403,260 (141,483,754) (4,626,971,798) (1,019,137,195) 2,101,973,065 (2,101,973,065) 2,289,810,513 Other operating activities Income tax paid General and other expenses paid Other operating payments Advances and deposits Surplus distributed Net cash flow from other operating activities Total cash flow from all operating activities (54,762,783) (1,208,853,783) 100,502,582 (216,484) (1,163,330,468) 118,078,201 (134,352,140) (33,170,820) (500,000) (59,742,286) (227,765,246) 749,946,199 (189,114,923) (1,208,853,783) 67,331,762 (716,484) (59,742,286) (1,391,095,714) 868,024,400 (244,097,827) (1,181,389,727) (43,559,007) (7,814,020) (55,497,188) (1,532,357,769) 757,452,744 Investment activities Profit / return received Payment for investments Proceeds from disposal of investments Dividend received Fixed capital expenditure Advance for investment property Proceeds from disposal of property and equipment Total cash flow from investing activities 99,793,609 (2,374,527,735) 2,473,795,957 11,343,975 (65,068,075) 1,447,813 146,785,544 1,075,131,764 (23,438,880,541) 19,235,195,231 264,591,555 (2,863,961,991) 1,174,925,373 (25,813,408,276) 21,708,991,188 275,935,530 (65,068,075) 1,447,813 (2,717,176,447) 1,444,046,512 (13,918,272,595) 12,897,225,670 354,167,850 (89,842,536) (46,383,730) 971,285 641,912,456 264,863,745 92,621,398 (2,114,015,792) 4,792,985,846 (1,849,152,047) 4,885,607,244 (58,565,944) (58,565,944) 1,340,799,256 3,544,807,988 357,485,143 2,678,970,054 3,036,455,197 4,885,607,244 Financing activities Dividend paid Total cash flow from financing activities Net cash flow from all activities Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Annual Report 2020 61
  62. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Cash Flow Statement For the year ended December 31, 2020 Aggregate Shareholders' Fund Policyholders' Fund 2020 2019 ------------------------------------- (Rupees) ------------------------------------Reconciliation to profit and loss account Cash flow from operating activities Exchange gain Depreciation expense Amortisation expense Actuarial (gain)/loss - gratuity Tax paid Gain on disposal of property and equipment Return on investments Long term deposits Increase/(decrease) in receivables & other assets (Increase)/decrease in liabilities Fair value gain / (loss) on investments Net realised fair value gain/(loss) on investments Profit/Surplus before for the year (Before Tax/Reserves) 118,078,201 32,053 (44,973,825) (9,464,907) (498,082) 54,762,783 191,522 124,604,352 216,484 (84,214,680) 6,842,252 42,545,349 208,121,502 749,946,199 134,352,140 1,117,377,953 500,000 178,431,073 (377,216,180) 767,112,361 1,198,120,535 3,768,624,081 868,024,400 32,053 (44,973,825) (9,464,907) (498,082) 189,114,923 191,522 1,241,982,305 716,484 94,216,393 (370,373,928) 767,112,361 1,240,665,884 3,976,745,583 757,452,744 90,245 (33,573,955) (7,877,193) 792,974 244,097,827 350,452 1,903,563,851 7,814,020 141,366,230 42,772,611 336,553,529 400,649,493 3,794,052,828 Definition of cash Cash comprises of cash in hand, policy stamps, cheques in hand, bank balances and other deposits which are readily convertible to cash in hand and which are used in the cash management function on a day-to-day basis. Cash for the purposes of the statement of cash flows consists of: 2020 2019 --------------------- Rupees --------------------Cash and other equivalents Cash in hand Stamps in hand Current and other accounts Current accounts Saving accounts Deposits maturing within 3 months (encashable on demand) 345,414 2,404,535 2,749,949 313,529 1,206,246 1,519,775 83,068,453 2,850,636,795 2,933,705,248 100,000,000 3,036,455,197 30,636,442 4,053,451,027 4,084,087,469 800,000,000 4,885,607,244 The annexed notes 1 to 51 form an integral part of these financial statements. Chief Executive Officer 62 Annual Report 2020 Director Director Chairman
  63. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Notes to the Financial Statements For the year ended December 31, 2020 1 CORPORATE INFORMATION Pak Qatar Family Takaful Limited (the Company) was incorporated in Pakistan as an unquoted public company limited by shares on March 15, 2006 under the Companies Ordinance, 1984 (now the Companies Act, 2017). The Company received certificate of registration on August 16, 2007 under Section 6 of the Insurance Ordinance, 2000. The registered office of the Company is situated at Suite # 101-105, Business Arcade, Block 6, P.E.C.H.S, Karachi. The main activity of the Company is to undertake family takaful business. For the purpose of carrying on takaful business, the Company has formed a Waqf for Participants' Equity. The Waqf namely Pak-Qatar Family Takaful Limited Waqf [hereafter referred to as the Participant Takaful Fund (PTF)] was formed on August 17, 2007 under a trust deed executed by the Company with a cede amount of Rs. 500,000. Waqf deed also governs the relationship of shareholders and policyholders for the management of the takaful operations, investment of policyholders' funds and investment of shareholders' funds approved by the Shariah Board established by the Company. In accordance with the requirements of Insurance Ordinance, 2000, the following funds have been established in respect of each class of Family Takaful business; - 2 Individual Family; Group Family; and Group Health BASIS OF PREPARATION These financial statements have been prepared in line with the format issued by the Securities and Exchange Commission of Pakistan (SECP) through Insurance Rules, 2017 (the Rules) vide SRO 89(I)/2017 and Insurance Accounting Regulations, 2017 (the Regulations) vide SRO 88(I)/2017 dated 09 February 2017, with appropriate modifications based on the advice of Shariah Adviser of the Company. In this regard, the Company has sought approval from the SECP vide email dated 29 April, 2019. The Company maintains statutory/policyholders' funds in respect of each class of family takaful business. Assets, liabilities, revenues and expenses referable to respective funds have been recorded accordingly. Apportionment of assets, liabilities, revenues and expenses, where required, between funds are made on a fair and equitable basis in accordance with the written advice of the appointed actuary. These financial statements reflect the financial position and results of operations of both shareholders' Fund and policyholders' funds in a manner that the assets, liabilities, income and expenses remain separately identifiable. 3 STATEMENT OF COMPLIANCE These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by International Accounting Standards Board (IASB), as are notified under the Companies Act, 2017, and Islamic Financial Accounting Standards (IFAS) issued by the Institute of Chartered Accountants of Pakistan (ICAP), the requirements of Companies Act, 2017, the Insurance Ordinance, 2000, the Insurance Rules, 2017, Insurance Accounting Regulations, 2017, Takaful Rules, 2012 and directives issued by the SECP. Wherever the requirements of Companies Act, 2017, the Insurance Ordinance, 2000, the Insurance Rules, 2017, Insurance Accounting Regulations, 2017, Takaful Rules, 2012 and directives issued by the SECP differ with the requirement of IFRS/IFAS, the requirements of Companies Act, 2017, the Insurance Ordinance 2000, the Insurance Rules, 2017, Insurance Accounting Regulations, 2017, Takaful Rules, 2012 or said directives shall prevail. Annual Report 2020 63
  64. Company Overview 4 Message for Stakeholders Financial Highlights & Reports Other Information BASIS OF MEASUREMENT These financial statements have been prepared under the historical cost convention, except for investments which are carried at fair value. These financial statements have been presented in Pakistani rupees, which is the functional currency of the Company. 5. ACCOUNTING STANDARDS, IFRIC INTERPRETATIONS AND AMENDMENTS 5.1 Standards, interpretations of and amendments to published approved accounting standards that are effective in the current year There are certain new and amended standards, issued by International Accounting Standards Board (IASB), interpretations and amendments that are mandatory for the Company's accounting periods beginning on or after January 1, 2020 but are considered not to be relevant or do not have any significant effect on the Company's operations and therefore not detailed in these financial statements. 5.2 Standards, interpretations of and amendments to published approved accounting standards that are not yet effective The following standards, amendments and interpretations as notified under the Companies Act, 2017 will be effective for accounting periods beginning on or after January 01, 2021: Standard or Interpretation Effective date (annual periods beginning) IFRS 9 'Financial Instruments Note 5.3 Amendment to IFRS 16 - Covid 19 Related Rent Concessions 64 June 01, 2020 Amendment to IAS 39 / IFRS 9 'Financial Instruments: Recognition and Meansurement' - Profit Rate Benchmark Reform - Phase 2 January 01, 2021 Amendments to IAS 1 'Presentation of Financial Statements' – Classification of Liabilities as Current or Non-current January 01, 2023 Amendments to IAS 16 'Property Plant and Equipment' – Proceeds before Intended Use January 01, 2022 Annual improvement process IFRS 9 Financial Instruments – Fees in the ’10 percent’ test for derecognition of financial liabilities January 01, 2022 Amendments to IAS 37 - Onerous Contracts - Costs of fulfilling a contract January 01, 2022 Annual improvement process First time adoption of IFRS 1 - Subsidiary as a first time adopter January 01, 2022 Annual improvement process IAS 41 Agriculture – Taxation in fair value measurements January 01, 2022 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture -Amendments to IFRS 10 and IAS 28 Not yet finalized Annual Report 2020
  65. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information The above standards and amendments are not expected to have any material impact on the Company's financial statements in the period of initial application. Further, following new standards have been issued by IASB which are yet to be notified by the SECP for the purpose of applicability in Pakistan. Standard 5.3 IASB Effective date (annual periods beginning) IFRS 1 – First time adoption of IFRSs January 01, 2009 IFRS 17 – Insurance Contracts January 01, 2023 Temporary exemption from application of IFRS 9: In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments that replaces IAS 39 Financial Instruments: Recognition and Measurement. As notified by the SECP, IFRS 9 is applicable for annual periods beginning on or after 01 July 2018. In September 2016, the IASB issued amendments to IFRS 4 ‘Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts’ to address issues arising from the different effective dates of IFRS 9 and the new insurance contracts standard (IFRS 17). The amendments introduce two alternative options of applying IFRS 9 for entities issuing contracts within the scope of IFRS 4: a temporary exemption; and an overlay approach. The temporary exemption enables eligible entities to defer the implementation date of IFRS 9 until the application of IFRS 17 and continue to apply IAS 39 to financial assets and liabilities. The overlay approach allows an entity applying IFRS 9 from the effective date to remove from the profit and loss account the affects of some of the accounting mismatches that may occur from applying IFRS 9 before IFRS 17 is applied. The Company has applied the temporary exemption which allows the Company to defer the application of IFRS 9. 6. SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies adopted in the preparation of these financial statements are the same as those applied in the preparation of the financial statements of the Company for the year ended 31 December 2019. 6.1 Leases 6.1.1 The Company assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Company as a lessee The Company applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Company recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets. Annual Report 2020 65
  66. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Right-of-use assets At the commencement date of the lease, the right-of-use asset is initially measured at the present value of lease liability. Subsequently, RoU assets are measured at cost, less accumulated depreciation and any impairment losses, and adjusted for any remeasurement of lease liabilities. RoU assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Lease liabilities At the commencement date of the lease, the Company recognises lease liability measured at the present value of the consideration (lease payments) to be made over the lease term and is adjusted for lease prepayments. The lease payments are discounted using the interest rate implicit in the lease, unless it is not readily determinable, in which case the lessee may use the incremental rate of borrowing. After the commencement date, the carrying amount of lease liability is increased to reflect the accretion of interest and reduced for the lease payments made. 6.1.2 Determination of the lease term for lease contracts with renewal and termination options (Company as a lessee) The Company determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The Company has several lease contracts that include extension and termination options. The Company applies judgement in evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. After the commencement date, the Company reassesses the lease term if there is a significant event or change in circumstances that is within its control that affects its ability to exercise or not to exercise the option to renew or to terminate (e.g., construction of significant leasehold improvements or significant customization of the leased asset). 6.1.3 Estimating the incremental borrowing rate The Company cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (‘IBR’) to measure lease liabilities. The IBR is the rate of interest that the Company would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The Company estimates the IBR using observable inputs (such as market interest rates) when available and is required to make certain entityspecific adjustments (such as stand-alone credit rating, or to reflect the terms and conditions of the lease). 6.2 Property and equipment These are stated at cost less accumulated depreciation and impairment, if any. Depreciation is charged using reducing balance method at the rates specified in note 8 to the financial statements. Depreciation on additions is charged from the month in which asset is available for use while no depreciation is charged in the month of disposal. Gains and losses on disposals are taken to profit and loss account. Residual values, useful lives and depreciation methods are reviewed and adjusted, if appropriate, at each balance sheet date. 66 Annual Report 2020
  67. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Subsequent cost are included in the assets' carrying amount or recognized as a separate asset, as appropriate, only when it is probable that the future economic benefits associated with the items will flow to the Company and the cost of the item can be measured reliably. Maintenance and normal repairs are charged to profit and loss account. Asset is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the profit and loss in the year the asset is derecognized. 6.3 Intangible assets These are stated at cost less accumulated amortisation and any provision for impairment loss. Amortisation on intangible fixed assets is charged to income applying the straight line method at the rates specified in note 9 to the financial statements after taking into account residual value, if any. Full month’s amortisation is calculated from the month the assets are available for use, whereby the cost of the intangible asset is amortised over its estimated useful life over which economic benefits are expected to flow to the Company. The useful life and amortisation method is reviewed, and adjusted if appropriate, at each balance sheet date. 6.4 Capital work-in-progress All expenditure connected with specific assets incurred during installation and construction period are carried under capital work in progress. It also includes advances to suppliers in respect of tangible and intangible assets. These are transferred to specific assets as and when assets are available for use. Capital work-in-progress is stated at cost less impairment in value, if any. 6.5 Investments 6.5.1 Classification Investments with fixed or determinable payments and fixed maturity, where the Company has positive intent and ability to hold to maturity, are classified as held-to-maturity. Investments acquired principally for the purpose of selling or repurchasing in the near future are classified as held for trading. All investments that have not been classified as either Held to Maturity, held for trading or as fair value through profit or loss have been classified as available-for-sale. The company does not hold any portfolio which is held-for-trading. 6.5.2 Initial recognition and measurement All financial instruments are recognised in the financial statements when, and only when, the company becomes a party to the contractual provisions of the instruments. All investments are initially recognised at cost, being the fair value of the consideration given, including transaction costs associated with the investments, except for held for trading investments and at Fair Value through Profit or Loss categories, wherein the transaction costs are charged to the profit and loss account. 6.5.3 Investment categories and subsequent measurement The company classifies its investment into he following categories; Annual Report 2020 67
  68. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Fair Value through profit or loss Investments at FVTPL comprise held-for-trading investments and investments other than held-for-trading that are designated at fair value through profit or loss. a) Held-for-trading investments are investments that are acquired and held principally for the purpose of selling in the short term or it is part of a portfolio of identified securities that are managed together and for which there is evidence of a recent actual pattern of short term profit taking. b) Investments other than held-for-trading that are designated at fair value are classified as such if it eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different basis. All investments under policyholders' funds except investment in short term deposits have been designated as carried at fair value through profit or loss. Investments classified as FVTPL are subsequently measured at their fair values with fair value adjustments and realised gains and losses recognised in their respective funds. Equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are carried at cost. Available-for-sale All investments under shareholders' Fund except investment in short term deposits have been classified as available-for-sale investments. AFS investments are investments that are not classified in any of the other categories and are measured at fair value. AFS investments are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition and are subsequently carried at fair value. Fair value gains or losses of those investments are recognised directly in other comprehensive income, except for impairment losses. Significant or prolonged decline in the fair value of the investments below its cost is considered in determining whether the assets are impaired. If any such evidence exist for AFS investments, the cumulative losses, measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in equity is removed from equity and recognised in profit or loss. If in a subsequent period, the fair value of debt instrument classified as AFS increase and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through profit or loss, Impairment losses previously recognised in profit or loss for equity instruments are not reversed through profit or loss. On de-recognition, the cumulative gains or losses previously reported in revaluation reserves are reclassified to profit and loss account for the period. Held-to-maturity This represents term deposits of fixed maturity maintained with Islamic commercial banks under profit and loss sharing basis. Fair / market value measurement For investment in Government & Other fixed income securities, fair / market value is determined by reference to quotations obtained from brokers. The fair / market value of mutual fund units is determined as per the rates announced by the Mutual Funds Association of Pakistan (MUFAP). The fair / market value of shares is determined on the basis of closing quoted market prices available at the Pakistani Stock Exchange. 68 Annual Report 2020
  69. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Date of recognition Regular way purchases and sales of investments that require delivery within the time frame established by regulations or market convention are recognized at the trade date. Trade date is the date on which the Company commits to purchase or sell the investment. 6.6 Impairment of non-financial assets The carrying amounts of the Company’s assets are reviewed at each balance sheet date to determine whether there is any indication of impairment loss. If any such indication exists, the asset’s recoverable amount is estimated in order to determine the extent of the impairment loss, if any. An impairment loss is recognised for the amount by which the assets carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less cost to sell and value in use. Impairment losses are charged to profit and loss account. 6.7 Ijarah arrangements Ijarah rentals are recognised as an expense on accrual basis as and when the rentals become due. 6.8 Creditors, accruals and provisions Liabilities for creditors and other amounts payable are carried at cost which is fair value of the consideration to be paid in future for goods and / or services received, whether or not billed to the Company. Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events, it is probable that an out flow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. 6.9 Takaful liabilities These includes outstanding claims and the technical reserves comprising reserve for claims – incurred but not reported (IBNR), contribution deficiency reserve (CDR) & reserve for unearned contribution. 6.10 Financial instruments Financial assets and financial liabilities other than those arising out of takaful contracts are recognized at the time when the Company becomes a party to the contractual provisions of the instrument. At the time of initial recognition, financial assets and liabilities are measured at fair values which is the cost of consideration given or received for it. Financial assets are de-recognized when the contractual right to future cash flows from the asset expire or is transferred along with the risk and reward of the asset. Financial liabilities are derecognized when obligation specified in the contract is discharged, cancelled or expired. Any gain or loss on de-recognition of the financial asset and liabilities are recognized in the profit and loss account or revenue account, as appropriate. 6.11 Off–setting A financial asset and financial liability is offset and the net amount is reported in the balance sheet when the Company has a legally enforceable right to set-off the recognized amounts and it intends either to settle on the net basis or to realize the asset and settle the liability simultaneously. Annual Report 2020 69
  70. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information 6.12 Takaful contracts The takaful contracts are based on the principles of Waqf Wakala Model. Takaful is a programme based on shariah compliant, approved concept founded on the principles of mutual cooperation, solidarity and brotherhood. The obligation of Waqf for Waqf participants' liabilities is limited to the amount available in the Waqf Fund. In the event where there is insufficient funds in waqf to meet their current payments less receipts, the deficit is funded by way of an interest free loan (Qard-e-Hasna) from the Shareholders fund to the policyholders' funds (Takaful Business Statutory Funds). The amount of Qard-e-Hasna is refundable to the shareholders' fund. Technical reserves are stated at a value determined by the appointed actuary through an actuarial valuation carried out as at each balance sheet date, in accordance with section 50 of the Insurance Ordinance, 2000. Principal actuarial assumptions used by the actuary in computing technical reserves are: a) the liability in respect of Family Takaful Business and riders of all types is set using the unearned contribution method. Due provision is made for claims incurred but not reported (IBNR) and contingencies over the term of coverage. b) the liability is calculated by summing up individual mathematical reserves for the policies. The mathematical reserves as at the valuation date are calculated individually. Group takaful The group family takaful contracts are issued typically on yearly renewable term basis. The Company offers group term life and group credit plans to its participants. Individual takaful contracts Unit-linked The Company offers Unit Linked Takaful Plans which provide Shariah compliant financial protection and investment vehicle to individual participants. These plans carry cash value. The death benefit design is based on Constant Sum at Risk approach i.e. the sum cover is paid up to the cash value. The plans offer investment choices to the customer to direct their investment related contributions based on their risk / return objectives. No investment guarantees are offered. The investment risk is borne by the participants. Term life The Company offers term life contracts which provides financial protection to individual participants. The death benefit design is based on decreasing term value i.e. the face value is reduced with term. The plan offers financial protection choices by selecting the factors for decreasing the face value. 6.13 Provision for outstanding claims A liability for outstanding claims is recognized in respect of all claims incurred up to the balance sheet date and includes expected settlement cost, except for accident and health claims / surrenders / partial withdrawals which are recognized as soon as reliable estimates of the claims amount can be made. 70 Annual Report 2020
  71. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Claims where intimation of the event giving rise to the claim is received or in respect of investment linked business when the policy ceases to participate in the earnings of the policyholders' funds are reported as claims in the revenue account. Claim recoveries receivable from the retakaful operator are recognised at the same time as the claim which gave rise to the right of recovery and are measured at the amount expected to be recovered. 6.14 Reserve for claims – Incurred but not reported (IBNR) The liability for claims - IBNR is determined by the Appointed Actuary and included in the technical reserves. The IBNR is expressed on the basis of past claims reporting pattern as percentage of earned contribution. 6.15 Contribution deficiency reserve The Company maintains a provision in respect of contribution deficiency for the class of business where the unearned contribution reserve is not adequate to meet the expected future liability, after retakaful claims and other supplementary expenses expected to be incurred after the balance sheet date in respect of the unexpired policies in that class of business at the balance sheet date. Provision for contribution deficiency reserve is made as per the advice of appointed actuary. The movement in the contribution deficiency reserve is recorded as an expense / income in the revenue account. 6.16 Commission Commission expense incurred in obtaining and recording policies is recognized as an expense in accordance with the pattern of recognition/receipt of contribution revenue. 6.17 Retakaful Contracts entered into by the Company with retakaful operator under which the Waqf cedes takaful risks assumed during normal course of its business and according to which the Waqf is compensated for losses on contracts issued by it are classified as retakaful contracts held. Retakaful contribution Retakaful contribution is recorded at the time the retakaful is ceded. Surplus from retakaful operator is recognised in the revenue account. Retakaful expense Retakaful expense is recognized as a liability in accordance with the pattern of recognition of related contribution. Retakaful assets and liabilities Retakaful assets represent balances due from retakaful operator. Recoverable amounts are estimated in a manner consistent with the associated retakaful treaties. Retakaful liabilities represent balances due to retakaful companies. Amounts payable are calculated in a manner consistent with the associated retakaful treaties. Annual Report 2020 71
  72. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Retakaful assets are not offset against related takaful liabilities. Income or expenses from retakaful contract are not offset against expenses or income from related takaful contracts as required by the Insurance Ordinance, 2000. Retakaful assets and liabilities are derecognized when the contractual rights are extinguished or expired. Impairment of retakaful assets An impairment review of retakaful assets is performed at each balance sheet date. If there is an objective evidence that the asset is impaired, the Company reduces the carrying amount of the retakaful asset to its recoverable amount and recognises that impairment loss in the revenue account. 6.18 Operating segment An operating segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other operating segments. The Company accounts for segment reporting using the classes or sub classes of business (Takaful Business Statutory Funds) as specified under the Insurance Ordinance, 2000. The Company has three primary business segments for reporting purposes; Individual Family Takaful, Group Family Takaful and Group Health Takaful: a) The Individual Family Takaful segment provides family takaful coverage to individuals. b) The Group Family Takaful business segment provides family takaful coverage to member of business enterprises, corporate entities and common interest groups under group family takaful schemes. c) The Group Health Takaful segment provides accident coverage and inpatient / outpatient health coverage to members of business enterprises and corporate entities under group health schemes. 6.19 Revenue recognition Contributions i) Individual Family - First year contributions and single contributions are recognised once the related policies are issued against receipt of contribution. - Renewal contributions are recognised on receipt basis. - Top up contributions are recognised against receipt of contribution. ii) Group Family - 72 Group Family contributions are recognised as and when due. In respect of certain group policies the Company continues to provide cover even if the contribution is received after the grace period. Annual Report 2020
  73. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information iii) Group Health - Group Health contributions are recognised as and when due. In respect of certain group policies the Company continues to provide cover even if the contribution is received after the grace period. Income from investments - Return on bank deposits and income on Islamic investment products is recognised on an accrual basis. - Gain / loss on sale of available-for-sale investments and investments held at fair value through profit or loss are included in profit and loss account or revenue account, as appropriate, in the period of sale. - Dividend income is recognized when the right to receive the dividend is established. 6.20 Reserve for unearned contribution The unearned portion of gross contribution net off wakala is set aside as a reserve and included in the technical reserves. Such reserve is calculated as a portion of the gross contribution of each policy, determined according to the ratio of the unexpired period of the policy and the total period, both measured to the nearest day. 6.21 Acquisition cost These are costs incurred in acquiring and maintaining takaful policies and include without limitation all forms of remuneration paid to takaful agents. Commissions and other expenses are recognised as an expense in the earlier of the financial year in which they are paid and financial year in which they become due and payable, except that commission and other expenses which are directly referable to the acquisition or the renewal of specific contract are recognised not later than the period in which the contribution to which they relate is recognised as revenue. 6.22 Takaful operator’s fee / Wakala fee The shareholders of the Company manage the family takaful operations for the participants and as such the Company is entitled for the takaful operator’s fee for the management of takaful operation under Waqf Fund to meet its general and administrative expenses. The takaful operator’s fee is recognised upfront. 6.23 Modarib fee The shareholders of the Company manage the PTF’s investments as a Modarib and charge Modarib’s share of takaful investment income and profit on bank balances earned by PTF. 6.24 Contribution due but unpaid These are initially recognised at fair value. Provision for impairment on contribution receivable is established when there is objective evidence that the Company will not be able to collect all amount due according to original term of receivables. Receivables are analysed as per their aging and accordingly provision is maintained on a systematic basis. Annual Report 2020 73
  74. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information 6.25 Liability adequacy test An assessment has been made to ensure that the business provisions are adequate. Using current estimates of future cash flows, appointed actuary has carried out expense projections of the Company to keep a reserve in the light of estimated future cash flows. The current estimates are adequate and no separate reserve needs to be set aside. 6.26 Claims expense Provision is maintained in respect of all reported claims against losses incurred up to the balance sheet date which is measured at the undiscounted value of expected future payments. Claims are recognised if the takaful event occurs before the policy ceases to participate in the earnings of the funds. 6.27 Dividend and appropriation to reserves Dividend and appropriation to reserves except appropriations required by the law or determined by actuary or allowed by Insurance Ordinance, 2000, are recognised in the year in which these are approved. 6.28 Qard-e-Hasna When the PTF including reserves are insufficient to meet the current payments less receipts, the deficit is funded by way of contributions (qard-e-hasna) from the shareholder's fund. 6.29 Taxation Current Provision for current taxation is based on taxable income of shareholders’ fund at the current rate of taxation after taking into account tax credits and rebates available, if any, or 1.50 percent of turnover, which ever is higher and tax paid on final tax regime basis. Deferred Deferred tax is recognized using the liability method, on all temporary differences arising at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable that the future taxable profits will be available against which the assets may be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized. The carrying amount of deferred tax asset is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to be recognized. Unrecognized deferred tax assets are reassessed at each balance sheet date and are recognized to the extent that it has become probable that future taxable profit will allow deferred tax asset to be recovered. 74 Annual Report 2020
  75. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the periods when the asset is utilized or the liability is settled, based on the tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. 6.30 Foreign currency transactions and translations Foreign currency transactions are translated into Pak Rupees (functional currency) using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities in foreign currencies are translated into Pak Rupees using the exchange rate at the balance sheet date. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translations at the year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit and loss account. 6.31 Staff retirement benefits - defined benefit plan The Company operates funded gratuity scheme for all its permanent employees who have completed minimum qualifying period of service. The expense is recognised on the basis of actuarial valuation carried out at each year end using the "Projected unit credit method". Actuarial gains and losses are recognized in other comprehensive income (OCI) in the periods in which they occur. Amounts recorded in the profit and loss account are limited to current and past service costs, gains or losses on settlements, and net interest income/(expense). All other changes in the net defined benefit obligation are recognized directly in other comprehensive income with no subsequent recycling through the profit and loss account. 6.32 Staff retirement benefits - defined contribution plan The Company operates an approved contributory provident fund for all its permanent employees. Contributions are made by both the Company and the employees to the fund at the rate of 10% of basic salary. Contribution made by the Company is recognized as an expense in profit and loss account. 6.33 Provisions Provisions are recognised when the company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. 6.34 Cash and cash equivalents For the purpose of cash flow statement, cash and cash equivalents include the following: - Cash at bank in current and saving accounts - Cash and stamps in hand - Term deposits with original maturity within three months - Highly liquid short-term investments that are convertible to known amount of cash and are subject to insignificant risk of change in value. Annual Report 2020 75
  76. Company Overview 7 Message for Stakeholders Financial Highlights & Reports Other Information ACCOUNTING JUDGEMENTS AND ESTIMATES The preparation of financial statements in conformity with approved accounting standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting polices. The estimates / judgments and associated assumptions used in the preparation of the financial statements are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates / judgments and associated assumptions are reviewed on an ongoing basis. Revision to the accounting estimates are recognized in the period in which the estimate is revised, if the revision affects only that period, or in the period of revision and future periods if the revision affects both current and future periods. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements, or judgments was exercised in application of accounting policies, are as follows: Note Estimation of technical reserves and underlying actuarial assumption Classification and valuation of investments Useful lives of assets and method of depreciation 6.12, 6.13, 6.14, 6.20, 6.25 and 22 6.5,11,12,13 and 15 6.1, 6.2, 6.3, 6.4, 8 and 9 Taxation Impairment of assets 6.29, 18 and 40 6.2, 6.3, 6.4, 6.5, 6.6 and 6.24 Determination of the lease term for lease contracts with renewal and termination options 6.1.2 Estimating the incremental borrowing rate 6.1.3 2020 2019 ----------------- Rupees ----------------8 Property & Equipment 433,636,350 433,636,350 76 Annual Report 2020 446,222,171 446,222,171
  77. Company Overview Message for Stakeholders Financial Highlights & Reports Cost Particulars As at January 01, 2020 Other Information Accumulated depreciation Additions / (disposals) As at December 31, 2020 As at For the year / As at January 01, (disposals) December 31, 2020 2020 Carrying Value Rate % - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (Rupees) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Building improvements 194,918,456 74,646,357 268,339,692 94,878,072 17,742,930 111,689,879 156,649,813 15 34,043,338 20,817,672 15 32,441,163 22,908,732 15 5,168,398 3,452,293 20 75,086,196 47,635,268 30 74,844,101 138,730,087 182,172,572 281,581,009 119,817,926 397,159,061 433,636,350 (1,225,121) Furniture and fixtures 54,481,223 Office equipment 53,538,057 1,789,647 (931,123) 54,861,010 31,571,100 55,349,895 30,076,567 3,522,317 (1,409,860) 3,638,525 (1,050,079) 3,794,462 (1,826,687) Motor vehicles 9,212,991 170,400 115,014,457 7,978,807 (1,429,866) 8,620,691 5,024,364 846,605 122,721,464 56,144,920 19,067,511 (762,700) Computer equipment (702,571) (271,800) Right of Use Assets 2020 (126,235) 300,637,996 20,264,663 320,902,659 727,803,180 108,488,399 830,795,411 63,885,986 (5,496,168) (4,239,874) Cost Particulars Accumulated depreciation As at As at As at For the year / As at Impact of Additions / January 01, adoption (disposals) December 31, January 01, (disposals) December 31, 2019 2019 2019 2019 of IFRS 16 Carrying Rate Value % - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (Rupees) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Building improvements 164,505,535 - 30,412,921 194,918,456 79,323,256 15,554,816 Furniture and fixtures 49,064,474 - 5,979,214 54,481,223 28,278,965 3,502,653 Office equipment 50,398,528 - 3,295,579 53,538,057 26,449,526 3,844,444 (562,465) 7,012,075 - 3,133,796 70,139,000 - 45,230,201 9,212,991 4,892,341 997,925 115,014,457 46,562,287 9,674,117 2019 - 258,011,292 15 30,076,567 23,461,490 15 5,024,364 4,188,627 20 56,144,920 58,869,537 30 (91,484) 42,626,704 300,637,996 341,119,612 258,011,292 130,678,415 727,803,180 (2,006,139) 22,910,123 (865,902) (354,744) Right-of-use Assets 31,571,100 (217,403) (932,880) Computer equipment 15 (210,518) (156,050) Motor vehicles 94,878,072 100,040,384 - 185,506,375 63,885,986 63,885,986 236,752,010 97,459,941 281,581,009 446,222,171 (1,385,307) Annual Report 2020 77
  78. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information 2020 2019 ----------------- Rupees ----------------9 Intangible Assets 102,275,193 102,275,193 Cost As at January 01, 2020 Particulars Additions 102,502,655 102,502,655 Accumulated Amortization As at December 31, 2020 As at January 01, 2020 For the year As at December 31, 2020 Carrying Value Rate % - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (Rupees) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Computer software and ERP 2020 168,773,896 9,237,445 178,011,341 66,271,241 9,464,907 75,736,148 102,275,193 05-20 2019 150,130,662 18,643,234 168,773,896 58,394,048 7,877,193 66,271,241 102,502,655 05-20 2020 2019 ----------------- Rupees ----------------10 Capital work in progress Building improvements Balance at beginning of year Additions during the year Transfers during the year Balance at end of the year 11 66,311,828 28,646,282 (61,039,386) 33,918,724 83,164,238 46,741,377 (63,593,787) 66,311,828 INVESTMENTS IN EQUITY SECURITIES December 31, 2020 Note Cost Impairment / Provision December 31, 2019 Carrying Value ---------------------------Rupees--------------------------- Cost Impairment / Provision Carrying Value ---------------------------Rupees--------------------------- Available-for-sale Listed shares 11.1 98,431,308 - 74,467,421 168,234,678 - 189,778,326 11.2 9,024,437,011 - 9,213,908,255 6,763,469,784 - 7,047,573,891 9,288,375,676 6,931,704,462 - 7,237,352,217 Fair value through profit or loss Listed shares 9,122,868,319 78 Annual Report 2020 -
  79. Company Overview Message for Stakeholders Financial Highlights & Reports 2020 2019 Number of units / shares Sector Wise Names of the Investee companies / organizations 2020 Face value Rupees 11.1 Listed Shares - Available-for-sale Cement DG Khan Cement Limited Fauji Cement Company Limited Textile composite Nishat Mills Ltd. Oil and Gas exploration Oil & Gas Development Company Limited Pakistan Petroleum Ltd Cables and electrical goods Pak Elektron Limited Other Information 2019 Carrying amount Rupees - 1,175,000 200,000 10 10 - 87,267,250 3,112,000 - 85,000 10 - 9,021,900 330,700 - 10 10 51,885,000 22,582,421 47,065,176 - 1,600,000 10 74,467,421 43,312,000 189,778,326 10,000,000 2,556,500 7,050,000 10 10 5 10 315,280,000 651,642,225 361,200,000 147,995,700 390,711,000 500,000 250,000 - 11.2 Listed Shares - Fair value through profit or loss Sector wise Names of the investee companies / organizations Engineering Amreli Steels Limited Agha Steel Industries Limited International Steel Ltd Crescent Steel and Allied Products Limited Food & personal care products Al Shaheer Corporation Ltd Al Shaheer Corporation Ltd (Provisional Right Shares) Refinery Attock Refinery Ltd. Cement DG Khan Cement Company Limited Fauji Cement Company Limited Kohat Cement Company Limited Lucky Cement Limited Maple Leaf Cement Factory Limited Pioneer Cement Ltd Real estate investment trust Dolmen City REIT Fertilizer Engro Fertilizers Limited Chemicals Engro Polymer Sitara Peroxide Power generation and distribution Lalpir Power Limited Textile composite Nishat Mills Ltd Oil and Gas exploration Oil & Gas Development Company Limited Pakistan Petroleum Ltd Cables and electrical goods Pak Elektron Limited Oil and Gas marketing companies Pakistan State Oil Co. Ltd Sui Northern Gas Pipelines Limited Automobile assemblers Ghandara Nissan Limited 8,000,000 7,747,500 12,211,000 - 10 189,758,940 - 6,105,500 - 10 15,691,135 - 1,363,500 - 10 248,225,175 - 10,355,000 12,023,500 858,500 - 8,403,500 11,780,000 873,600 21,123,074 3,820,500 10 10 10 10 10 10 1,186,475,900 260,549,245 597,593,265 - 624,127,945 183,296,800 67,616,640 488,787,932 116,487,045 2,537,500 7,419,000 10 26,897,500 92,663,310 13,127,983 5,828,000 10 830,082,365 427,950,040 6,506,000 2,858,500 10 10 4,200,500 4,200,500 10 53,850,410 60,949,255 5,811,500 4,415,300 10 591,436,355 468,639,942 9,505,000 11,398,813 5,000,000 5,000,000 10 10 986,333,850 1,029,654,778 711,600,000 685,700,000 28,286,500 25,756,000 10 1,135,137,245 697,214,920 2,852,192 10,833,470 2,330,200 6,565,500 10 10 614,076,938 481,222,929 446,559,528 500,099,444 3,931,000 10 9,213,908,255 299,424,270 7,047,573,891 - - - 216,064,260 60,485,860 Annual Report 2020 79
  80. Company Overview 12 Message for Stakeholders Financial Highlights & Reports Other Information INVESTMENTS IN GOVERNMENT SECURITIES 2020 Note Cost 2019 Impairment / Provision Carrying Value Cost Impairment / Provision Carrying Value ------------------------------------------------------------Rupees-----------------------------------------------------------Available-for-sale Sukuk certificates 12.1 724,436,000 - 725,000,000 648,084,478 - 660,917,691 12.2 458,500,663 - 454,062,509 728,536,195 - 739,882,062 1,182,936,663 - 1,179,062,509 1,376,620,673 - 1,400,799,753 Fair value through profit or loss Sukuk certificates 12.1 Government Securities - Available-for-sale 2020 Maturity Year Rate of Return % Cost Impairment / Provision 2019 Carrying Value Cost Impairment / Provision Carrying Value ------------------------------------------------------------Rupees------------------------------------------------------------ Government of Pakistan Ijara - sukuk XIX - Neelum Jehlum Sukuk - Government of Pakistan Ijara - sukuk XX - Government of Pakistan Ijara - sukuk XXIII - Pakistan Energy - sukuk II 2020 2026 2025 2025 2030 5.24% 6 months Kibor plus 1.13% 5.95% 8.37% 6 months Kibor plus 1% - - - 490,000,000 158,084,478 - 498,750,000 162,167,691 150,000,000 - 150,000,000 - - - 549,436,000 - 550,000,000 - - - 25,000,000 724,436,000 - 25,000,000 725,000,000 648,084,478 - 660,917,691 12.1.1 GOP Ijara – XX Sukuk certificates amounting to Rs. 137,000,000 (2019: GoP XIX 137,000,000) are held under lien with the State Bank of Pakistan in compliance with the requirements of Section 29 of the Insurance Ordinance, 2000. 12.2 Government Securities - Fair Value Through Profit or Loss 2020 Maturity Year Rate of Return % Cost 2019 Impairment / Provision Carrying Value Cost Impairment / Provision Carrying Value ------------------------------------------------------------Rupees------------------------------------------------------------ Government of Pakistan Ijara - sukuk XIX 2020 5.24% - - - 218,999,500 - 219,549,750 - Government of Pakistan Ijara - sukuk XXIII - Neelum Jehlum Sukuk 2025 8.37% 2026 6 months Kibor plus 1.13% 12.3 80 99,200,000 - 100,000,000 - - - 359,300,663 - 354,062,509 509,536,695 - 520,332,312 458,500,663 - 454,062,509 728,536,195 - 739,882,062 Government securities comprise of GOP Ijara Sukuk certificates, issued by the Government of Pakistan, Neelum Jehlum Sukuk certificates, issued by the Neelum Jhelum Hydropower Company (Private) Limited, guaranteed by Government of Pakistan and Pakistan Energy Sukuk certificates, issued by the Power Holding Limited (PHL), entity owned by Ministry of Energy and Government of Pakistan. Annual Report 2020
  81. Company Overview 13 Message for Stakeholders Financial Highlights & Reports Other Information INVESTMENTS IN DEBT SECURITIES 2020 Note Cost 2019 Impairment / Provision Carrying Value Cost Impairment / Provision Carrying Value ------------------------------------------------------------Rupees-----------------------------------------------------------Fair value through profit or loss Sukuk certificates 13.1 139,889,425 - 139,889,425 - 139,555,030 6,032,481,365 - 6,055,209,288 139,555,030 6,032,481,365 - 6,055,209,288 13.1 Sukuk Certificates - Fair Value Through Profit or Loss 2020 Maturity Year Rate of Return % Cost 2019 Impairment / Provision Carrying Value Cost Impairment / Provision Carrying Value ------------------------------------------------------------Rupees------------------------------------------------------------ AGP Sukuk 2022 3 month Kibor plus 1.30% - Al-Baraka Bank Tier II Sukuk 2021 6 month Kibor plus 0.75% - Aspin Pharma Sukuk 2023 3 month Kibor plus 1.50% - BYCO Sukuk 2022 3 month Kibor plus 1.05% - Dubai Islamic Bank Sukuk Tier I Sukuk Perpetual 6 month Kibor plus 1.75% - Dubai Islamic Bank Sukuk Tier II Sukuk 2027 6 month Kibor plus 0.5% - Fatima Fertilizer Sukuk 2021 6 month Kibor plus 1.10% - Hascol sukuk 2022 3 months Kibor plus 1.50% - K-Electric Limited - AZM Sukuk VII 2022 3 month Kibor plus 1% - Meezan Bank Limited - tier - I sukuk Perpetual 3 month Kibor plus 1.75% - Meezan Bank Limited - tier - II sukuk 2026 6 months Kibor plus 0.50% - PAEL Sukuk 2020 3 month Kibor plus 1.05% - PSL Sukuk 2024 6 month Kibor plus 1% - SHAKARGANJ Sukuk 2024 3 month Kibor plus 1.75% - TPL Sukuk 2021 1 year Kibor plus 3% - K-Electric Limited - AZM Sukuk XIX 2020 3 month Kibor plus 1.70% - ENGRO POLYMER & CHEMICALS LTD 2026 3 month Kibor plus 0.90% - INTERNATIONAL BRANDS LIMITED SUKUK 2021 12 month Kibor plus 0.50% - HUBC 2023 3 month Kibor plus 1.90% - BIPL TIER I Perpetual 3 month Kibor plus 2.75% 2,151,300 6,060,000 30,000,000 - 2,151,300 6,060,000 30,000,000 180,797,750 - 181,042,500 426,887,500 - 427,125,000 211,446,000 - 212,706,000 434,016,236 - 437,557,709 329,700,000 - 330,000,000 - - - 656,592,500 - 659,940,000 - - - 408,035,598 - 406,528,265 122,383,125 - 122,180,625 281,987,358 - 282,162,388 607,435,000 - 605,000,000 67,878,125 31,000,000 - 67,543,730 31,000,000 - - - 491,239,677 - 493,680,000 - - - 100,000,000 - 100,000,000 - - - 200,000,000 - 200,000,000 - - - 47,500,000 - 47,500,000 - - - 72,675,000 - 72,675,000 - - - 700,000,000 - 710,500,000 - - - 225,000,000 - 225,000,000 - - - 311,785,621 - 316,611,801 - - - 75,000,000 - 75,000,000 150,000,000 6,032,481,365 - 150,000,000 6,055,209,288 2,800,000 139,889,425 - 2,800,000 139,555,030 Annual Report 2020 81
  82. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Aggregate 2020 2019 ----------------- Rupees ----------------14 INVESTMENTS IN TERM DEPOSITS Deposits maturing within 12 months Deposits maturing after 12 months 14.1 15 300,000,000 300,000,000 3,490,000,000 150,000,000 3,640,000,000 This represents term deposits of fixed maturity maintained with Islamic commercial banks under profit and loss sharing basis. The estimated profit rate on such deposits ranges from 5.80 percent to 13.62 percent (2019: 10.86 percent to 14.0 percent) per annum with maturity up to October 01, 2021. INVESTMENTS IN MUTUAL FUNDS 2019 2020 Note Cost Impairment / Provision Carrying Value Cost Impairment / Provision Carrying Value ------------------------------------------------------------Rupees-----------------------------------------------------------Available-for-sale Mutual funds 15.1 - - - 25,641,551 - 25,752,086 Fair value through profit or loss Mutual funds 15.1 15.2 12,797,472,852 - 13,379,889,659 517,988,373 - 535,832,006 12,797,472,852 - 13,379,889,659 543,629,925 - 561,584,092 Mutual Funds - Available-for-sale 2020 2019 Number of units / shares Atlas Islamic Income Fund 82 Annual Report 2020 - 2020 Face value Rupees 48,058 50 2019 Carrying Amount Rupees - 25,752,086 25,752,086
  83. Company Overview 15 .2 Message for Stakeholders Financial Highlights & Reports Other Information Mutual Funds - Fair Value Through Profit or Loss 2020 2019 Number of units / shares ABL Islamic Asset Allocation Fund 214,386,277 ABL Islamic Stock Fund 33,058,767 2020 Face value Rupees - Carrying Amount Rupees 10 2,202,304,470 - 100 516,797,781 1,928,132 - 100 100,032,270 - Al Ameen Islamic Aggressive Income Plan I 19,654,846 - 100 2,046,944,110 - Alfalah GHP Islamic Value Fund 22,445,635 - 100 2,063,427,200 - Faysal Islamic Asset Allocation Fund 32,601,148 - 100 2,218,340,878 - AKD Islamic Income Fund HBL IFPF Strategic Allocation Plan - HBL Islamic Asset Allocation Fund Plan I 19,927,542 Meezan Strategic Allocation Plan IV - 33,016,252 2019 200,839 821,693 100 100 477,903,198 - 23,982,711 2,055,304,753 50 - - 33,946,097 JS Islamic Income Fund 13,683,854 - 100 1,447,341,218 - Pak Oman Advantage Islamic Income Fund 13,441,934 - 100 729,396,979 - 13,379,889,659 16 TAKAFUL & RETAKAFUL RECEIVABLES - Unsecured, considered good 535,832,006 Aggregate 2020 2019 Shareholders' Policyholders' Fund Fund -------------------------------------------Rupees------------------------------------------- Due from takaful contract holders Related party Others Due from retakaful operators 17 - 883,698,540 883,698,540 799,060,247 - 155,130,533 1,038,829,073 155,130,533 1,038,829,073 79,606,991 878,667,238 OTHER LOANS & RECEIVABLES Aggregate 2020 2019 Shareholders' Policyholders' Fund Fund -------------------------------------------Rupees------------------------------------------- Accrued investment income Security deposit Advance to supplier Advance to employees Receivable against Banca takaful Car Ijarah receivable Surety against legal expense Other receivables 25,194,414 35,016,430 6,463,646 9,266,287 34,102,287 5,147,870 8,522,000 4,729,329 128,442,263 56,041,520 4,000,000 156 825,579 60,867,255 81,235,934 39,016,430 6,463,646 9,266,287 34,102,443 5,147,870 8,522,000 5,554,908 189,309,518 270,395,939 38,299,946 5,667,268 13,312,749 57,539,853 7,064,457 8,522,000 5,182,535 405,984,747 Annual Report 2020 83
  84. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information 2020 2019 ----------------- Rupees ----------------18 DEFERRED TAX ASSET / (LIABILITY) Deductible temporary difference arising in respect of Surplus/(Deficit) on revaluation of available-for-sale-investments Minimum tax on turnover Remeasurement of post retirement benefits obligation Taxable temporary difference arising in respect of Accelerated depreciation 18.1 6,486,160 12,693,226 3,222,191 22,401,577 611,396 22,401,052 3,366,635 26,379,083 (24,204,524) (23,026,337) (1,802,947) 3,352,746 Reconciliation of deferred tax Balance at January 01, 2019 Recognized Recognized in Balance at Recognized Recognized Balance at statement of December 31, in profit in statement of December 31, in profit comprehensive and loss 2019 and loss comprehensive 2020 income income ——————————————— (Rupees) ——————————————— Deductible temporary difference arising in respect of Minimum tax on turnover Remeasurement of post retirement benefits obligation Impairment of investments Surplus/(Deficit) on revaluation of available for sale investments 28,446,081 (6,045,029) 3,136,673 - - 299,783 229,962 (299,783) 21,073,873 - 22,401,052 3,366,635 (20,462,477) 611,396 (9,707,826) - - 12,693,226 (144,444) - - - 3,222,191 - 5,874,764 6,486,160 Taxable temporary difference arising in respect of Accelerated depreciation (14,947,633) (8,078,704) - 38,008,777 (14,423,516) (20,232,515) 19 (23,026,337) (1,178,187) - (24,204,524) 3,352,746 (10,886,013) 5,730,320 (1,802,947) PREPAYMENTS Aggregate Shareholders' 2020 2019 Policyholders' Fund Fund -------------------------------------------Rupees------------------------------------------- Prepaid rent Prepaid software/hardware maintenance fee Prepaid marketing Others 84 Annual Report 2020 2,635,062 - 2,635,062 5,110,541 9,016,927 10,666,837 5,781,100 28,099,926 - 9,016,927 10,666,837 5,781,100 28,099,926 9,284,519 11,183,404 5,342,298 30,920,762
  85. Company Overview 20 Message for Stakeholders Financial Highlights & Reports Other Information CASH AND BANK Aggregate Note Shareholders' Policyholders' 2020 2019 Fund Fund -------------------------------------------Rupees------------------------------------------- Cash and cash equivalent Cash in hand Stamps in hand 345,414 2,404,535 - 345,414 2,404,535 313,529 1,206,246 83,068,453 2,850,636,795 2,936,455,197 30,636,442 4,053,451,027 4,085,607,244 Cash at bank Current accounts Saving accounts 3,957,193 350,778,001 357,485,143 20.1 79,111,260 2,499,858,794 2,578,970,054 20.1 Saving accounts carry profit rates of 3.50 percent to 12.95 percent (2019: 5.01 percent to 13.75 percent) per annum. 2020 2019 ----------------- Rupees ----------------Cash for the purposes of the statement of cash flows consists of: Cash and other equivalents Cash in hand Stamps in hand Current and other accounts Current accounts Saving accounts Deposits maturing within 3 months (encashable on demand) 21 345,414 2,404,535 2,749,949 313,529 1,206,246 1,519,775 83,068,453 2,850,636,795 2,933,705,248 100,000,000 3,036,455,197 30,636,442 4,053,451,027 4,084,087,469 800,000,000 4,885,607,244 SHARE CAPITAL 21.1 AUTHORISED SHARE CAPITAL 2020 2019 2020 ......... Number of shares ......... 140,000,000 140,000,000 2019 ——- (Rupees) ——Ordinary shares of Rs. 10 each 1,400,000,000 1,400,000,000 Annual Report 2020 85
  86. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information 21.2 ISSUED, SUBSCRIBED AND PAID-UP SHARE CAPITAL 2020 2019 2020 ......... Number of shares ......... 130,712,440 130,712,440 2019 ——- (Rupees) ——Ordinary shares of Rs. 10 each, fully paid in cash Note 1,307,124,400 2020 1,307,124,400 2019 ----------------- Rupees ----------------22 TAKAFUL LIABILITIES Reported outstanding claims (including claims in payment) Incurred but not reported claims Liabilities under individual takaful contracts Liabilities under group takaful contracts Investment component of unit-linked and account value policies 22.1 22.2 22.3 22.4 687,253,164 120,823,047 38,468,065 541,892,468 481,714,287 116,526,227 31,344,346 575,511,402 22.5 25,649,303,882 21,885,300,297 27,037,740,626 23,090,396,559 534,532,667 152,720,497 687,253,164 427,967,051 53,747,236 481,714,287 170,569,679 (49,746,632) 120,823,047 150,087,893 (33,561,666) 116,526,227 84,399,252 (45,931,187) 38,468,065 69,855,364 (38,511,018) 31,344,346 541,892,468 575,511,402 25,649,303,882 21,885,300,297 22.1 Reported outstanding claims Gross of re-takaful Payable within one year Payable over a period of time exceeding one year 22.2 Incurred but not reported claims Gross of re-takaful Re-takaful recoveries Net of re-takaful 22.3 Liabilities under individual takaful contracts Gross of re-Takaful Re-takaful recoveries Net of re-takaful 22.4 Liabilities under Group Takaful Contracts 22.5 Investment Component of Unit Linked and Account Value Policies Investment component of unit-Linked policies 86 Annual Report 2020
  87. Company Overview 23 Message for Stakeholders Financial Highlights & Reports Other Information UNCLAIMED TAKAFUL BENEFIT Circular 11 of 2014 dated May 19, 2014 issued by the Securities and Exchange Commission of Pakistan (SECP) has established requirement for all insurers to disclose age wise break up of unclaimed insurance benefits in accordance with format prescribed in the annexure to the said circular. The unclaimed benefits are described in the circular as the amounts which have become payable in accordance with the terms and conditions of an insurance policy but have not been claimed by the policyholders or their beneficiaries. Such unclaimed amounts may fall into the following categories: Age-wise break up - 2020 Total Amount 1-6 Months 7 - 12 Months 13 - 24 Months 25 - 36 Months Beyond 36 Months -------------------------------------------------------- (Rupees)--------------------------------------------------------Unclaimed maturity benefits 113,192,121 45,956,000 31,294,627 28,396,551 4,104,599 3,440,344 Claims not encashed 104,849,245 82,095,717 14,668,232 1,316,338 404,411 6,364,547 218,041,366 128,051,717 45,962,859 29,712,889 4,509,010 9,804,891 Total Amount 1-6 Months Age-wise break up - 2019 7 - 12 Months 13 - 24 Months 25 - 36 Months Beyond 36 Months -------------------------------------------------------- (Rupees)--------------------------------------------------------- 24 Unclaimed maturity benefits 72,447,965 56,648,362 9,404,554 3,693,698 1,330,755 Claims not encashed 63,208,967 57,737,761 2,607,563 2,311,976 551,667 135,656,932 114,386,123 12,012,117 6,005,674 1,882,422 1,370,596 1,370,596 STAFF RETIREMENT BENEFITS Defined benefit plan - gratuity scheme The Company has approved funded gratuity scheme applicable to permanent employees with effect from January 01, 2012. The actuarial valuation is carried out periodically. The latest actuarial valuation was carried out as at December 31, 2020. Following were the significant assumptions used for the actuarial valuation: -Discount rate per annum -Expected rate of increase in the salaries of employees per annum 24.1 2020 % 2019 % 9.75 8.75 11.75 10.75 The scheme typically exposes the Company to actuarial risks such as: salary risk, discount rate risk, mortality risk and investment risk defined as follow: - Salary increase risk This is the risk that the salary at the time of cessation of service is higher than that assumed by the Company. This is a risk because the benefits payable are based on the final salary; if the final salary is higher than what was estimated, the benefits will also be higher. Annual Report 2020 87
  88. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information - Discount rate risk The discount rate is based on the yield on government bonds. If the market yield of bonds varies, the discount rate would vary in the same manner and would affect the present value of obligation and fair value of assets. - Mortality / withdrawal risk This is the risk that the actual mortality/withdrawal experience is different than that assumed by the Company. - Investment risk This is the risk that the assets are underperforming and are not sufficient to meet the liabilities. 2020 2019 ----------- Rupees ----------24.2 Balance sheet reconciliation Present value of defined benefit obligations Fair value of plan assets Net liability 24.3 37,649,082 17,160,984 792,974 (17,800,000) 37,803,040 57,864,566 11,374,681 6,445,808 (6,013,246) (2,154,315) 67,517,494 56,191,475 13,854,840 5,467,675 (17,292,943) (356,481) 57,864,566 20,061,526 2,309,451 5,200,000 (6,013,246) (1,656,233) 19,901,498 18,542,393 2,161,531 17,800,000 (17,292,943) (1,149,455) 20,061,526 Movement in fair value of plan assets Fair value of plan assets at January 1 Interest income on plan assets Contribution to the fund during the year Benefits paid during the year Actuarial Gain/(Loss) Fair value of plan assets at December 31 88 37,803,040 15,511,038 (498,082) (5,200,000) 47,615,996 Movement in present value of obligations Present value of obligations at January 1 Current service cost Interest cost Benefits paid during the year Actuarial (Gain)/Loss Present value of obligations at December 31 24.5 57,864,566 (20,061,526) 37,803,040 Movement in liability during the year Opening balance Charge for the year Other comprehensive income Contribution Closing balance 24.4 67,517,494 (19,901,498) 47,615,996 Annual Report 2020
  89. Company Overview 24 .6 Message for Stakeholders Financial Highlights & Reports Other Information 2020 2019 ----------- Rupees ----------- Charge for the year 24.6.1 Charged to profit and loss account Current service cost Interest cost 11,374,681 4,136,357 15,511,038 13,854,840 3,306,144 17,160,984 15,511,038 15,511,038 17,160,984 17,160,984 (2,154,315) 1,656,233 (498,082) (356,481) 1,149,455 792,974 Allocated to: Shareholder's sub fund 24.6.2 Charged to statement of comprehensive income Actuarial loss/(gain) on obligations Actuarial loss/(gain) on plan assets 24.6.3 Composition of fair value of plan assets Fair value (Rupees) Bank balance Mutual Funds Accrued Profit 2020 177,007 19,724,206 285 19,901,498 Percentage % Fair value (Rupees) 1 99 0 100 825,463 19,224,572 11,491 20,061,526 2019 Percentage % 4 96 0 100 24.6.4 Sensitivity analysis Significant actuarial assumptions for the determination of the defined obligation are discount rate, expected rate of salary increase, mortality rates and withdrawal rates. Sensitivity analyses were carried out on each of these assumptions while keeping the other assumptions constant. The results are given below. Present Value of Obligation (Rupees) Base % Change from base 67,517,494 Discount rate Increase by 1% Decrease by 1% 61,713,144 74,199,042 (8.60) 9.90 Salary growth rate Increase by 1% Decrease by 1% 74,134,320 61,663,397 9.80 (8.67) Annual Report 2020 89
  90. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information 24.6.5 The estimated contribution to the fund for the year ending December 31, 2021 is Rs. 16.460 million. Comparison for five years: 2020 2019 2018 2017 2016 As at December 31 Fair value of plan assets Present value of defined benefit obligation (Deficit)/Surplus 19,901,498 (67,517,494) (47,615,996) 20,061,526 (57,864,566) (37,803,040) 18,542,393 (56,191,475) (37,649,082) 18,573,454 (43,298,717) (24,725,263) 14,151,109 (33,131,253) (18,980,144) (1,656,233) 2,154,315 (1,149,455) 356,481 13,484 461,076 (1,784,860) 271,433 (628,091) (419,022) -8.32% -5.73% 0.07% -9.61% -4.44% 3.19% 0.62% 0.82% 0.63% -1.26% Experience adjustments Gain/(loss) on plan assets Gain/(loss) on obligations Gain/ (loss) on plan assets ( as a percentage of plan asset) Gain/ (loss) on obligations ( as a percentage of plan obligations) 2020 2019 ----------------- Rupees ----------------25 TAKAFUL / RETAKAFUL PAYABLES Due to retakaful operators 26 27,368,442 27,368,442 68,729,939 68,729,939 OTHER CREDITORS & ACCRUALS Aggregate Shareholders' Policyholders' 2020 2019 Fund Fund -------------------------------------------Rupees------------------------------------------Agent commission Payable for banca-takaful Accrued expenses Withholding tax Stamp duty Advance against claim - administrative services only Computer and Software Maintenance Dividend payable Stale cheques Charity Payble Provision for surplus distribution Others 90 Annual Report 2020 80,881,749 961,911 16,129,899 696,305 421,862 17,387,099 7,538 776,556 - 80,881,749 18,349,010 16,137,437 1,472,861 421,862 49,853,978 4,698,964 4,520,608 13,919,033 348,691 8,320,059 22,929,218 6,790,278 414,920 8,367,067 3,602,874 149,516,142 12,728,019 361,371 40,150,330 1,223,371 72,634,284 8,320,059 22,929,218 6,790,278 13,142,939 8,728,438 40,150,330 4,826,245 222,150,426 3,713,721 1,550 6,790,278 8,644,983 11,143,621 6,738,676 110,374,103
  91. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information 2020 2019 ----------------- Rupees ----------------27 LEASE LIABILITIES UNDER IFRS 16 Current Portion Non Current Portion Opening Balance Addition Finance Cost Payments 82,362,775 167,975,197 250,337,972 70,286,160 252,722,881 323,009,041 323,009,041 18,528,905 19,292,589 (110,492,563) 250,337,972 337,770,160 42,626,704 43,147,888 (100,535,711) 323,009,041 27.1 Finance cost on lease liabilities for the year ended December 31, 2020 was Rs. 19.29 million (2019: Rs. 43.15 million). 28 CONTINGENCIES AND COMMITMENTS 28.1 Contingencies The company, together with other Life/Health insurance companies, through writ petitions in the Hon’ble Lahore High Court (LHC) and the Hon’ble Sindh High Court (SHC) challenged in 2019 the levy of Punjab Sales Tax and Sindh Sales Tax on Life and Health Insurance. The Hon’ble LHC in its hearing had directed that no final order shall be passed in pursuance to impugned show cause notices (which were issued by PRA to some of the Life and Health insurance companies) until the next date of hearing. The Hon’ble SHC, in their interim order dated December 02, 2019, directed that the request of the petitioners seeking exemption in terms of section 10 of the Sindh Sales Tax Act, 2011, shall be considered by the Sindh Revenue Board (SRB) in accordance with the law. Further, the Hon’ble SHC, in their interim order dated December 08, 2020, impleaded that the Federal Government be also added as one of the Respondents. The SRB through Notification No. SRB-3-4/13/2020 dated June 22, 2020, made taxable the life insurance w.e.f. July 01, 2020 at the full rate of 13%.A conditional exemption for the financial year 2019-20 was granted from the levy of SST, subject to the person providing Life Insurance services commences edepositing with the SRB, the amount of SST due on such services for the tax periods from July 01, 2020 onwards. The health insurance services, however, have been exempted from the levy of SST till June 30, 2021 by the SRB through Notification No. SRB-3-4/14/2020 dated June 22, 2020. Further, the SRB through Notification No. SRB-3-4/18/2020 dated June 29, 2020 also withdrew the exemption on withholding of SSTon payment for services of Life and Health Insurance made by a withholding agent. The Punjab Revenue Authority (PRA), in order to provide relief to the industries effected from COVID-19 impact, w.e.f. April 02, 2020 to June 30, 2020 reduced the PST rate from 16% to zero % without input tax adjustment. From July 01, 2020, such relief of zero % has been continued for Individual Health Insurance only without input tax adjustment. Whereas, the Life insurance and corporate health insurance shall continue to be taxed at the standard rate of 16%. Annual Report 2020 91
  92. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Further, the management of the Company after due consultation of legal advisor is of the view that since under the Unit Linked Family Takaful Policy, contribution is received for two separate purposes, i.e “Risk coverage” and “Investment” and contributions thus received are segregated into separate funds, therefore, only the risk based portion of contribution may potentially be subject to sales tax. This contention is further strengthened by the underlying provisions of Punjab Sales Tax on Services (Specific Provisions) Rules, 2012 and Sindh Sales Tax on Services Rules, 2011. These rules clearly state that sales tax shall be calculated on the gross amount of premium charged on risk covered in the insurance policy. In view of the opinion of the legal advisors, and pending the adjudication of the petitions filed, the company has neither billed its customers, nor recognized the contingent liability for sales tax on services on the policies issued which amounts to around Rs. 108.122 million computed on the basis of risk based premium. 28.2 Commitments Commitments under ijarah arrangements amounting to Rs. 157,831,310/- (2019: Rs. 158,366,524/-) and the period in which these payments will become due are: 2020 2019 ----------------- Rupees ----------------Not later than one year Later than one year and not later than five years 29 Single & top-up contributions Group policies without cash values Total Gross Contributions Less: retakaful contributions ceded On individual life first year business On individual life second year business On individual life subsequent renewal business On single contributions individual policies On group policies Net Contributions 1,661,315,977 887,237,340 3,455,058,016 1,466,650,568 757,737,119 3,591,011,134 339,219,654 398,237,371 1,618,643,675 7,961,474,662 2,073,421,205 8,287,057,397 (39,190,549) (36,107,771) (174,567,419) (367,193) (153,407,659) (403,640,591) 7,557,834,071 (43,043,694) (27,947,742) (183,684,344) (838,192) (170,110,573) (425,624,545) 7,861,432,852 1,377,530,757 421,143,756 1,798,674,513 1,295,722,403 425,996,750 1,721,719,153 WAKALA FEE Contribution allocated to Shareholders' Sub-Fund Other Wakala fee 92 49,003,006 109,363,518 158,366,524 NET TAKAFUL CONTRIBUTION REVENUE Gross Contributions Regular contribution individual policies First year Second year renewal Subsequent year renewal 30 52,805,835 105,025,475 157,831,310 Annual Report 2020
  93. Company Overview 31 Message for Stakeholders Financial Highlights & Reports Other Information INVESTMENT INCOME Aggregate Shareholders' Policyholders' 2020 2019 Fund Fund -------------------------------------------Rupees-------------------------------------------Dividend income Listed shares - Available-for-sale - Fair value through profit or loss 11,343,975 - 264,591,555 11,343,975 264,591,555 11,696,625 342,471,225 -Return on debt securities Debt securities - Available-for-sale - Fair value through profit or loss 45,484,416 - 447,291,023 45,484,416 447,291,023 51,252,496 800,659,427 Income from deposits 67,775,961 411,246,289 479,022,250 702,559,703 124,604,352 1,123,128,867 1,247,733,219 1,908,639,476 Total investment income 32 NET REALISED FAIR VALUE GAINS / (LOSSES) ON INVESTMENTS Aggregate Shareholders' Policyholders' 2020 2019 Fund Fund -------------------------------------------Rupees------------------------------------------Available-for-sale: -Listed shares -Mutual Funds -Debt securities Fair value through profit or loss: -Listed shares -Mutual Funds -Debt securities Net gain/(loss) 27,825,121 2,431,470 12,288,758 42,545,349 - 27,825,121 2,431,470 12,288,758 5,997,330 (8,649,197) 60,481,608 1,217,877,008 (26,042,185) 6,285,712 1,217,877,008 (26,042,185) 6,285,712 281,331,157 76,740,775 (15,252,180) 1,198,120,535 1,240,665,884 400,649,493 2020 2019 ----------------- Rupees ----------------33 NET FAIR VALUE GAINS / (LOSSES) ON INVESTMENTS Fair value through profit or loss Net unrealized gain/(loss) -Equity securities -Mutual Funds -Debt securities 189,471,052 582,413,845 (4,772,536) 767,112,361 284,098,884 17,840,846 34,613,799 336,553,529 Annual Report 2020 93
  94. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information 2020 2019 ----------------- Rupees ----------------34 OTHER INCOME Gain on sale of fixed assets Exchange gain Administrative services income Miscellaneous 35 191,522 32,053 8,792,113 2,889,451 11,905,139 350,452 90,245 6,748,619 1,569,338 8,758,654 Gross Claims Claims under individual policies by death by surrenders/withdrawals by maturities Total gross individual policy claims 184,698,736 2,780,571,040 466,031,130 3,431,300,906 163,617,703 2,452,134,220 360,398,541 2,976,150,464 Claims under group policies by death by insured event other than death Total gross group claims 409,521,877 1,019,397,750 1,428,919,627 341,755,428 1,386,884,182 1,728,639,610 Total Gross Claims 4,860,220,533 4,704,790,074 (93,272,493) (191,017,110) (284,289,603) (106,891,802) (139,862,746) (246,754,548) 4,575,930,930 4,458,035,526 45,177,951 400,974,100 446,152,051 48,750,957 331,502,955 380,253,912 NET TAKAFUL BENEFITS Less: retakaful On individual life On group claims Total retakaful Net claims 36 TAKAFUL OPERATOR FEE INCOME Modarib fee income Other wakala income 94 Annual Report 2020
  95. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information 2020 2019 ----------------- Rupees ----------------37 ACQUISITION EXPENSES / COMMISSION EXPENSE Remuneration to takaful intermediaries on individual policies: -Commission to agent on first year contributions -Commission to agent on second year contributions -Commission to agent on subsequent renewal contributions -Commission to agent on top-up contribution and single contribution 684,369,566 163,326,324 84,465,652 4,330,998 698,487,843 137,169,320 93,734,935 5,273,594 Other benefits to takaful intermediaries: -Salaries, allowances and other benefits 325,254,284 257,429,385 57,953,126 62,170,439 64,501,961 62,986,403 1,410,647 3,637,508 13,846,439 5,538,480 14,411,671 6,848,154 21,086,716 15,341,630 5,636,247 13,739,687 8,060,112 8,010,050 16,759,874 46,305,171 20,441,069 357,111 6,943,509 60,079,850 13,967,826 7,636,966 26,886,184 1,698,815,290 2,099,659 6,419,165 11,074,172 6,994,148 12,147,496 8,044,925 20,134,792 13,564,231 11,754,390 12,304,673 7,936,871 13,209,405 12,388,120 59,681,432 17,467,906 37,750 6,318,746 47,654,767 32,185,501 7,105,613 25,207,967 1,653,315,170 Remuneration to takaful intermediaries on group policies: -Commission -Other benefits to takaful intermediaries Other acquisition expenses: -Entertainment -Training / Conference -Office supplies & Amenities -Vehicle running -Car ijarah -Traveling -Utilities -Rental -Postages -Telephone -Repairs & maintenance -Printing & stationary -Computer -Sales Promotion -Depreciation -Miscellaneous other expenses -Group Takaful -Depreciation (Right-of-use-Asset) -Finance Cost (Lease Liabilities) -Medical -Policy stamps Annual Report 2020 95
  96. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information 2020 2019 ----------------- Rupees ----------------38 MARKETING & ADMINISTRATION EXPENSES -Salaries, allowances and other benefits 237,402,368 278,735,161 -Charge for defined benefit plan 15,511,038 17,160,984 -Contribution to defined contribution plan 13,516,916 14,342,074 -Vehicle running 18,155,278 20,420,256 -Car Ijarah rentals 6,274,456 8,922,819 -Medical 9,015,641 7,506,377 -Traveling 5,826,985 7,695,341 -Utilities 15,001,606 14,330,849 -Rental 2,283,812 4,619,979 10,273,511 12,288,525 -Repairs and maintenance 3,514,226 3,595,406 -Printing and stationary 7,506,808 5,860,280 -Software maintenance 46,092,084 27,324,556 8,064,832 17,336,320 -Depreciation 24,532,756 16,106,050 -Amortization 9,464,907 7,877,193 -Shariah advisors` fees 3,342,000 3,099,500 -Actuary's fees 1,540,208 1,546,380 -Legal and professional 2,827,787 6,635,507 -Consultancy 7,098,656 6,318,181 -Supervision fees 15,633,240 16,526,136 -Subscription fees 7,686,418 7,927,424 -Bank and brokerage 2,113,323 1,668,584 -Entertainment 1,011,316 1,885,581 -Training 1,699,425 2,409,288 -Staff welfare 4,729,797 4,651,705 -Group Takaful 5,679,815 6,786,843 14,764,251 16,231,220 -Finance Cost (Lease Liabilities) 5,324,763 10,962,386 -General takaful 2,619,991 2,405,357 187,336 497,271 508,695,550 553,673,533 -Communication -Advertisement -Depreciation (Right-of-use-Asset) -Miscellaneous 96 Annual Report 2020
  97. Company Overview Message for Stakeholders Financial Highlights & Reports Note 39 39.1 4,315,899 204,644 128,913 25,366 28,245 3,284,673 261,322 8,249,062 5,575,088 172,512 246,360 64,454 26,396 3,377,770 193,137 9,655,717 750,000 1,245,000 442,060 2,437,060 847,613 3,284,673 550,000 1,025,000 916,981 2,491,981 885,789 3,377,770 33,672,396 33,672,396 31,529,596 (17,124,631) 14,404,965 10,886,013 44,558,409 14,423,516 28,828,481 Auditors’ remuneration Audit and related services Audit fee Fee for review, other certifications & Advisory Services Out of pocket Tax services 40 2020 2019 ----------------- Rupees ----------------- OTHER EXEPNSES (EXPENSES NOT ATTRIBUTABLE TO POLICYHOLDERS' FUNDS) Salaries, allowances and other benefits Employer’s contribution to provident fund Vehicles running Traveling Communication Auditors’ remuneration Miscellaneous expenses 39.1 Other Information TAXATION Current For the year Prior years Deferred For the year 40.1 The Company has filed returns upto and including tax year 2020 which are deemed to have been assessed under Section 120 of the Income Tax Ordinance, 2001. 40.2 The relationship between tax expense and accounting profit for the year 2020 is given below. Comparative reconciliation for the year 2019 is not provided as during 2019 the Company's income was subject to tax under Section 113 of the Income Tax Ordinance, 2001. Annual Report 2020 97
  98. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information 2020 --- Rupees --Profit before taxation 208,121,502 Tax at the applicable rate of 29% (2019: 29%) 60,355,236 Tax effect of: - expenses not deductible for tax purposes - income not subject to tax - others 41 (1,190,665) (9,061,830) (5,544,331) 44,558,409 2020 2019 ----------------- Rupees ----------------- EARNINGS PER SHARE Profit (after tax) for the year 163,563,093 55,241,206 (Number of shares) Weighted average number of ordinary shares as at year end 130,712,440 130,712,440 -----------Rupees ---------1.25 42 0.42 REMUNERATION OF CHIEF EXECUTIVE OFFICER (CEO), DIRECTORS AND EXECUTIVES Aggregate amounts charged in the financial statements for remuneration, including all benefits to Chief Executive Officer, Directors, and Executives of the Company are as follows: 2020 CEO Executives ————— Rupees ————— Managerial remuneration House rent Utilities Medical expenses Others Number of persons 98 Annual Report 2020 2019 CEO Executives ————— Rupees ————— 4,671,290 2,102,081 413,228 374,225 941,843 8,502,667 87,578,963 39,410,532 7,747,233 2,498,137 14,644,862 151,879,727 3,360,240 1,512,108 297,247 18,520 868,659 6,056,774 90,239,686 40,607,861 7,982,605 1,801,481 16,248,978 156,880,611 1 44 1 39
  99. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information In addition to the above, fee paid to independent director during the year amounted to Rs. 1,187,500/-. The Company also provides Company maintained cars to certain executives. Certain directors have been reimbursed with the boarding and lodging costs in relation to attending Board meetings of the Company as per the Company’s policy which amounted to Rs. 463,537/- (2019: Rs. 866,026). Executive mean employees other than Chief Executive and Directors, whose basic salary exceeds Rs. 1.2 million in a financial year. 43 PROVIDENT FUND The Company operates approved contributory provident fund (the Fund) for its permanent employees. The following information is based on unaudited financial statements of the fund as at December 31, 2020. 2020 2019 (Un-audited) (Audited) ————(Rupees) ———— Size of the fund - net assets Cost of the investments made Percentage of the investments made Fair value of the investments made 43.1 118,266,723 104,858,724 89% 104,858,724 105,548,294 97,563,865 92% 97,150,000 The break up of fair value of the investments in provident fund is as follows: 2020 Rupees Bank balances Government securities Non government securities Mutual funds % 104,610,879 99.76% 0.00% 247,845 0.24% 0.00% 104,858,724 2019 Rupees 4,872,703 73,386,190 18,891,107 97,150,000 % 5.02% 0.00% 75.54% 19.45% The investments have been made in accordance with the provisions of Section 218 of the Companies Act, 2017 and the rules formulated for this purpose. Annual Report 2020 99
  100. Company Overview 44 Message for Stakeholders Financial Highlights & Reports Other Information RELATED PARTY TRANSACTIONS DISCLOSURES Related parties comprise of related group companies, associates, directors, staff retirement funds and key management personnel. The Company in the normal course of business carries out transactions with various related parties. Details of transactions and balances with related parties, except as disclosed elsewhere in the financial statements, are as follows: Relationship Nature of transactions Entities with common directorship Net shared expenses received Claims received against general takaful Associated company Employees provident fund 2020 2019 ———— (Rupees) ———— 27,718,837 244,397 36,086,730 - Claims paid against group takaful 2,377,199 2,158,525 Contribution paid against general takaful 3,104,894 2,583,099 Contribution received against group takaful 3,834,999 3,062,694 191,659,237 196,556,612 21,571,882 21,881,629 2,993 76,500 961,911 1,475,732 Banca takaful acquisition, entrance and administration fee Contribution paid Balances with related parties are as follows: Entities with common directorship Claims outstanding against group takaful Associated company Administrative charges payable Investment management charges payable Receivable against common expenses 100 Annual Report 2020 16,932,191 - 26,963,994
  101. Company Overview 45 Message for Stakeholders Financial Highlights & Reports Other Information SEGMENTAL INFORMATION 45.1 REVENUE ACCOUNT Policyholders' Funds Individual Family Group Family Aggregate Group Health 2020 -------------------------------------------Rupees------------------------------------------Participant Investment Fund (PIF) Income Allocated contribution Net investment income Total net income 4,477,562,236 2,992,254,950 7,469,817,186 - - 4,477,562,236 2,992,254,950 7,469,817,186 3,246,602,170 400,974,100 58,237,331 3,705,813,601 - - 3,246,602,170 400,974,100 58,237,331 3,705,813,601 Excess of income over claim and expenditure 3,764,003,585 - - 3,764,003,585 Add: Technical reserves at beginning of the year 21,885,300,297 Less: Technical reserves at end of the year 25,649,303,882 Movement in technical reserves (3,764,003,585) Surplus / (deficit) - - - 21,885,300,297 25,649,303,882 (3,764,003,585) - Movement in technical reserves 3,764,003,585 - - 3,764,003,585 21,885,300,297 - - 21,885,300,297 25,649,303,882 - - 25,649,303,882 Less: Claims and expenses Surrender / partial withdrawal Takaful operators' fee Other charges / (income) Total claims and expenditure Balance of PIF at beginning of the year Balance of PIF at end of the year (a) Participants' Takaful Fund (PTF) Income Contribution net of retakaful Net investment income Other income Total net income 237,505,062 33,953,756 79,340,986 350,799,804 310,249,513 10,330,041 320,579,554 1,154,986,503 894,151 1,155,880,654 1,702,741,078 45,177,948 79,340,986 1,827,260,012 Less: Claims and expenditures Claim net of retakaful recoveries Takaful operators' fee Other charges Total claims and expenditure 91,426,243 135,182,478 10,452,122 237,060,843 218,504,767 88,665,133 791,959 307,961,859 1,019,397,750 197,296,145 1,180,633 1,217,874,528 1,329,328,760 421,143,756 12,424,714 1,762,897,230 Excess / (deficit) of income over claims and expenditures 113,738,961 12,617,695 (61,993,874) 64,362,782 Add: Technical reserves at beginning of the year Less: Technical reserves at end of the year Movement in technical reserves Surplus / (deficit) before distribution 34,675,555 52,534,566 (17,859,011) 95,879,950 141,721,123 181,969,554 (40,248,431) (27,630,736) 546,985,297 466,679,460 80,305,837 18,311,963 723,381,975 701,183,580 22,198,395 86,561,177 Annual Report 2020 101
  102. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Policyholders' Funds Individual Family Group Family Aggregate Group Health 2020 -------------------------------------------Rupees------------------------------------------Distribution of surplus (59,742,286) Surplus / (deficit) after distribution 36,137,664 (27,630,736) 18,311,963 26,818,891 17,859,011 40,248,431 (80,305,837) (22,198,395) Movement in technical reserves Transfers from/(to) Qard-e-Hasna (returned to)/ contributed from shareholders' sub fund Net transfer from shareholders' sub fund - Balance of PTF at beginning of the year Balance of PTF at end of the year (b) Subtotal (a+b) - - - (59,742,286) - - 670,821,446 229,090,350 581,956,200 1,481,867,996 724,818,121 241,708,045 519,962,326 1,486,488,492 26,374,122,003 241,708,045 519,962,326 27,135,792,374 Aggregate Individual Family Shareholders' Sub Fund Group Family Group Health 2020 Income -------------------------------------------Rupees------------------------------------------- Takaful operator's fee Mudarib fee from PTF Total income 1,913,687,335 33,953,758 1,947,641,093 88,665,133 10,330,042 98,995,175 197,296,145 894,151 198,190,296 2,199,648,613 45,177,951 2,244,826,564 936,492,540 607,204,294 385,279,678 1,928,976,512 28,715,374 38,546,706 37,499,713 104,761,793 29,237,752 58,618,624 85,916,159 173,772,535 994,445,666 704,369,624 508,695,550 2,207,510,840 18,664,581 18,664,581 (5,766,618) (5,766,618) 24,417,761 24,417,761 37,315,724 37,315,724 (18,664,581) 5,766,618 (24,417,761) (37,315,724) Less: Expenditures Net commission expenses Other acquisition expenses Management expenses Total expenditure Excess / (deficit) of income over expenditure Add: Technical reserves at beginning of the year Less: Technical reserves at end of the year Surplus / (deficit) for the year (Surplus) / deficit transferred to shareholders' fund Transfer from / (to) shareholders' fund Contribution received from shareholders' fund Qard-e-Hasna contributed to PTF Net transfer from / (to) shareholders' fund - - - - Balance of shareholders' sub fund at beginning of the year - - - - Balance of fund at end of the year - - - - (c) Balance of policyholders' funds at end of the year (a+b+c) 102 Annual Report 2020 26,374,122,003 241,708,045 519,962,326 27,135,792,374
  103. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Aggregate Individual Family Group Family Group Health 2020 -------------------------------------------Rupees------------------------------------------Represented by: Participants' Investment Fund Technical reserves for PIF 25,649,303,882 Participants' Takaful Fund Technical reserves for PTF Qard-e-Hasna contributions Accumulated surplus / (deficit) - PTF Shareholders' sub fund Technical reserves for shareholders' sub fund Accumulated surplus - shareholders' sub fund Balance of Funds at the end of the year 52,534,566 672,283,555 724,818,121 181,969,554 59,738,491 241,708,045 26,374,122,003 466,679,460 135,000,000 (81,717,134) 519,962,326 241,708,045 25,649,303,882 701,183,580 135,000,000 650,304,912 1,486,488,492 519,962,326 27,135,792,374 FOR THE YEAR ENDED DECEMBER 31, 2019 Policyholders' Funds Individual Family Group Family Aggregate Group Health 2019 -------------------------------------------Rupees------------------------------------------- Participant Investment Fund (PIF) Income Allocated contribution Net investment income Total net income 4,452,586,842 2,350,400,323 6,802,987,165 - - 4,452,586,842 2,350,400,323 6,802,987,165 2,812,532,761 331,502,955 52,247,255 3,196,282,971 - - 2,812,532,761 331,502,955 52,247,255 3,196,282,971 Excess of income over claim and expenditure 3,606,704,194 - - 3,606,704,194 Add: Technical reserves at beginning of the year 18,278,596,103 Less: Technical reserves at end of the year 21,885,300,297 Movement in technical reserves (3,606,704,194) Surplus / (deficit) - - - 18,278,596,103 21,885,300,297 (3,606,704,194) - Movement in technical reserves 3,606,704,194 - - 3,606,704,194 18,278,596,103 - - 18,278,596,103 21,885,300,297 - - 21,885,300,297 Less: Claims and expenses Surrender / partial withdrawal Takaful operators' fee Other charges / (income) Total claims and expenditure Balance of PIF at beginning of the year Balance of PIF at end of the year (a) Annual Report 2020 103
  104. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Policyholders' Funds Individual Family Group Family Aggregate Group Health 2019 -------------------------------------------Rupees------------------------------------------Participants' Takaful Fund (PTF) Income Contribution net of retakaful Net investment income Other income Total net income 209,812,975 32,863,001 81,005,468 323,681,444 335,258,640 17,984,272 353,242,912 1,568,051,992 785,932 1,568,837,924 2,113,123,607 51,633,205 81,005,468 2,245,762,280 Less: Claims and expenditures Claim net of retakaful recoveries Takaful operators' fee Other charges Total claims and expenditure 56,725,901 117,431,331 10,792,743 184,949,975 201,892,682 111,379,895 3,280,319 316,552,896 1,386,884,182 197,185,524 1,413,568 1,585,483,274 1,645,502,765 425,996,750 15,486,630 2,086,986,145 Excess / (deficit) of income over claims and expenditures 138,731,469 36,690,016 (16,645,350) 158,776,135 Add: Technical reserves at beginning of the year Less: Technical reserves at end of the year Movement in technical reserves Surplus / (deficit) before distribution 25,903,327 34,675,555 (8,772,228) 129,959,241 119,914,240 141,721,123 (21,806,883) 14,883,133 450,322,735 546,985,297 (96,662,562) (113,307,912) 596,140,302 723,381,975 (127,241,673) 31,534,462 Distribution of surplus (55,497,188) Surplus / (deficit) after distribution 74,462,053 14,883,133 (113,307,912) (23,962,726) 8,772,228 21,806,883 96,662,562 127,241,673 110,000,000 110,000,000 110,000,000 110,000,000 Movement in technical reserves Transfers from/(to) Qard-e-Hasna (returned to)/ contributed from shareholders' sub fund Net transfer from shareholders' sub fund Balance of PTF at beginning of the year Balance of PTF at end of the year Subtotal 104 Annual Report 2020 (b) (a+b) - - - - (55,497,188) 587,587,165 192,400,334 488,601,550 1,268,589,049 670,821,446 229,090,350 581,956,200 1,481,867,996 22,556,121,743 229,090,350 581,956,200 23,367,168,293
  105. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Aggregate Individual Family Group Family Group Health 2019 -------------------------------------------Rupees------------------------------------------Shareholders' Sub Fund Income Takaful operator's fee Mudarib fee from PTF Total income 1,744,656,689 36,237,488 1,780,894,177 111,379,895 11,989,515 123,369,410 197,185,524 523,954 197,709,478 2,053,222,108 48,750,957 2,101,973,065 934,665,692 559,694,708 422,053,384 1,916,413,784 26,493,490 37,218,502 39,964,150 103,676,142 38,008,471 57,234,307 91,655,999 186,898,777 999,167,653 654,147,517 553,673,533 2,206,988,703 (135,519,607) (135,519,607) 19,693,268 19,693,268 10,810,701 10,810,701 (105,015,638) (105,015,638) 135,519,607 (19,693,268) (10,810,701) 105,015,638 110,000,000 (110,000,000) - 110,000,000 (110,000,000) - Less: Expenditures Net commission expenses Other acquisition expenses Management expenses Total expenditure Excess / (deficit) of income over expenditure Add: Technical reserves at beginning of the year Less: Technical reserves at end of the year Surplus / (deficit) for the year (Surplus) / deficit transferred to shareholders' fund Transfer from / (to) shareholders' fund Contribution received from shareholders' fund Qard-e-Hasna contributed to PTF Net transfer from / (to) shareholders' fund - - Balance of shareholders' sub fund at beginning of the year - - - - - - - - Balance of fund at end of the year Balance of policyholders' funds at end of the year Represented by: Participants' Investment Fund Technical reserves for PIF Participants' Takaful Fund Technical reserves for PTF Qard-e-Hasna contributions Accumulated surplus / (deficit) - PTF Shareholders' sub fund Technical reserves for shareholders' sub fund Accumulated surplus - shareholders' sub fund Balance of Funds at the end of the year (c) (a+b+c) 22,556,121,743 21,885,300,297 34,675,555 636,145,891 670,821,446 22,556,121,743 229,090,350 141,721,123 87,369,227 229,090,350 229,090,350 581,956,200 546,985,297 135,000,000 (100,029,097) 581,956,200 23,367,168,293 21,885,300,297 723,381,975 135,000,000 623,486,021 1,481,867,996 581,956,200 23,367,168,293 Annual Report 2020 105
  106. Company Overview 45 .2 Message for Stakeholders Financial Highlights & Reports Other Information SEGMENTAL RESULTS BY LINE OF BUSINESS FOR THE YEAR ENDED DECEMBER 31, 2020 Policyholders' Funds Individual Family Income Gross Contributions - First year individual regular contributions - Individual renewal contributions - Individual single & top-up contributions - Group contributions Total gross contributions Retakaful contributions - Individual policies - Group policies Total retakaful contributions Net contribution revenues Surplus from retakaful operators Net investment income Group Family Aggregate Group Health 2020 -------------------------------------------Rupees------------------------------------------- 1,661,315,977 4,342,295,356 339,219,654 6,342,830,987 463,657,172 463,657,172 1,154,986,503 1,154,986,503 1,661,315,977 4,342,295,356 339,219,654 1,618,643,675 7,961,474,662 (250,232,932) (250,232,932) 6,092,598,055 79,340,986 3,026,208,706 (153,407,659) (153,407,659) 310,249,513 10,330,041 1,154,986,503 894,151 (250,232,932) (153,407,659) (403,640,591) 7,557,834,071 79,340,986 3,037,432,898 9,198,147,747 320,579,554 1,155,880,654 10,674,607,955 3,397,770,699 1,982,376,788 218,504,767 89,457,092 1,019,397,750 198,476,778 4,635,673,216 2,270,310,658 Total takaful benefits and expenditures 5,380,147,487 307,961,859 1,217,874,528 6,905,983,874 Excess of income over takaful benefits and expenditures 3,818,000,260 12,617,695 (61,993,874) 3,768,624,081 Add: Policyholders liabilities at beginning of year Less: Policyholders liabilities at end of year 21,919,975,852 25,701,838,448 141,721,123 181,969,554 546,985,297 466,679,460 22,608,682,272 26,350,487,462 36,137,664 (27,630,736) 18,311,963 26,818,891 Total net income Takaful benefits and expenditures Takaful benefits, including bonuses, net of retakaful Management expenses less recoveries Surplus reserve for the year [ Participant Takaful Fund (PTF) ] 106 Annual Report 2020
  107. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information FOR THE YEAR ENDED DECEMBER 31, 2019 Policyholders' Funds Individual Family Income Gross Contributions - First year individual regular contributions - Individual renewal contributions - Individual single & top-up contributions - Group contributions Total gross contributions Retakaful contributions - Individual policies - Group policies Total retakaful contributions Net contribution revenues Surplus from retakaful operators Net investment income Group Family Aggregate Group Health 2019 -------------------------------------------Rupees------------------------------------------- 1,466,650,568 4,348,748,253 398,237,371 6,213,636,192 505,369,213 505,369,213 1,568,051,992 1,568,051,992 1,466,650,568 4,348,748,253 398,237,371 2,073,421,205 8,287,057,397 (255,513,972) (255,513,972) 5,958,122,220 81,005,468 2,383,263,324 (170,110,573) (170,110,573) 335,258,640 17,984,272 1,568,051,992 785,932 (255,513,972) (170,110,573) (425,624,545) 7,861,432,852 81,005,468 2,402,033,528 8,422,391,012 353,242,912 1,568,837,924 10,344,471,848 2,924,755,850 1,807,696,687 201,892,682 114,660,214 1,386,884,182 198,599,092 4,513,532,714 2,120,955,993 Total takaful benefits and expenditures 4,732,452,537 316,552,896 1,585,483,274 6,634,488,707 Excess of income over takaful benefits and expenditures 3,689,938,475 36,690,016 (16,645,350) 3,709,983,141 Add: Policyholders liabilities at beginning of year Less: Policyholders liabilities at end of year 18,304,499,430 21,919,975,852 119,914,240 141,721,123 450,322,735 546,985,297 18,874,736,405 22,608,682,272 74,462,053 14,883,133 (113,307,912) (23,962,726) Total net income Takaful benefits and expenditures Takaful benefits, including bonuses, net of retakaful Management expenses less recoveries Deficit for the year [ Participant Takaful Fund (PTF) ] Annual Report 2020 107
  108. Company Overview 45 .3 Message for Stakeholders Financial Highlights & Reports Other Information SEGMENTAL STATEMENT OF FINANCIAL POSITION AS AT DECEMBER 31, 2020 Shareholders' Fund Policyholders' Funds Individual Family Group Family Aggregate Group Health 2020 -------------------------------------------Rupees------------------------------------------ASSETS Property & equipment Intangible assets Capital work in progress Investments Advance against investment property Takaful / retakaful receivables Other loans and receivables Taxation - payments less provision Prepayments Cash and bank Total Assets 433,636,350 102,275,193 33,918,724 799,467,421 3,775,000 128,442,263 19,838,051 28,099,926 357,485,143 23,264,629,888 361,259,800 98,112,716 57,777,511 680,564,123 2,567,608,204 222,785,565 296,398,358 442,756 12,030,881 8,604,975 644,317,999 2,646,988 2,913,291 2,756,875 433,636,350 102,275,193 33,918,724 24,286,882,874 365,034,800 1,038,829,073 189,309,518 715,346,346 28,099,926 2,936,455,197 1,906,938,071 27,029,952,242 540,262,535 652,635,153 30,129,788,001 EQUITY & LIABILITIES Shareholders' Equity Share capital Unappropriated profit - net Total Equity Deferred tax liability Waqf / Participant Takaful Fund (PTF) Cede money Accumulated surplus/(Deficit) Total PTFs Equity Qard-e-Hasna Total Policyholders' Equity Liabilities Takaful liabilities Retirement benefits obligations Contributions received in advance Takaful / retakaful payable Other creditors and accruals Lease Liabilities Total Liabilities Total Equity and Liabilities 108 Annual Report 2020 1,307,124,400 150,540,614 1,457,665,014 - - - 1,307,124,400 150,540,614 1,457,665,014 1,802,947 - - - 1,802,947 - 47,615,996 149,516,142 250,337,972 447,470,110 449,273,057 1,906,938,071 672,283,555 672,283,555 672,283,555 500,000 59,738,491 60,238,491 60,238,491 (81,717,134) (81,717,134) 135,000,000 53,282,866 500,000 650,304,912 650,804,912 135,000,000 785,804,912 26,140,927,358 116,979,410 27,368,442 72,393,477 26,357,668,687 26,357,668,687 27,029,952,242 378,369,507 101,422,684 231,853 480,024,044 480,024,044 540,262,535 518,443,761 80,899,572 8,954 599,352,287 599,352,287 652,635,153 27,037,740,626 47,615,996 299,301,666 27,368,442 222,150,426 250,337,972 27,884,515,128 27,886,318,075 30,129,788,001
  109. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information AS AT DECEMBER 31, 2019 Shareholders' Fund Policyholders' Funds Individual Family Group Family Aggregate Group Health 2019 -------------------------------------------Rupees------------------------------------------ASSETS Property & equipment Intangible assets Capital work in progress Investments Advance against investment property Takaful / retakaful receivables Other loans and receivables Deferred tax asset Taxation - payments less provision Prepayments Cash and bank Total Assets 446,222,171 102,502,655 66,311,828 876,448,103 3,775,000 141,541,364 3,352,746 30,920,762 92,621,398 17,830,513,497 361,259,800 60,198,625 260,505,020 551,515,418 3,944,782,846 187,983,750 215,286,640 1,578,049 6,893,937 10,168,841 603,181,973 2,360,314 2,746,800 38,034,159 446,222,171 102,502,655 66,311,828 18,894,945,350 365,034,800 878,667,238 405,984,747 3,352,746 561,156,155 30,920,762 4,085,607,244 1,763,696,027 23,008,775,206 421,911,217 646,323,246 25,840,705,696 EQUITY & LIABILITIES Shareholders' Equity Share capital Unappropriated profit - net Total Equity Waqf / Participant Takaful Fund (PTF) Cede money Accumulated surplus Total PTFs Equity Qard-e-Hasna Total Policyholders' Equity Liabilities Takaful liabilities Retirement benefits obligations Contributions received in advance Takaful / retakaful payable Other creditors and accruals Lease Liabilities Taxation -provision less payments Total Liabilities Total Equity and Liabilities 1,307,124,400 1,006,930 1,308,131,330 - 37,803,040 93,500,282 323,009,041 1,252,334 455,564,697 455,564,697 1,763,696,027 - 636,145,891 636,145,891 636,145,891 22,218,643,147 69,289,690 68,729,939 15,966,539 22,372,629,315 22,372,629,315 23,008,775,206 - - 500,000 87,369,227 (100,029,097) 87,869,227 (100,029,097) 135,000,000 87,869,227 34,970,903 263,685,615 69,456,809 899,566 334,041,990 334,041,990 421,911,217 608,067,797 3,276,830 7,716 611,352,343 611,352,343 646,323,246 1,307,124,400 1,006,930 1,308,131,330 500,000 623,486,021 623,986,021 135,000,000 758,986,021 23,090,396,559 37,803,040 142,023,329 68,729,939 110,374,103 323,009,041 1,252,334 23,773,588,345 23,773,588,345 25,840,705,696 Annual Report 2020 109
  110. Company Overview Message for Stakeholders MOVEMENT IN INVESTMENTS Availablefor-sale Other Information Fair value through profit or loss Term deposits Total At beginning of previous year 683 ,788,987 12,482,346,152 3,850,000,000 17,016,135,139 Additions Disposal (sale and redemption) Fair value net gains/(losses) 2,315,996,304 (2,193,897,452) 70,560,264 8,762,276,291 (7,202,678,725) 336,553,529 (210,000,000) - 11,078,272,595 (9,606,576,177) 407,113,793 At beginning of current year 876,448,103 14,378,497,247 3,640,000,000 18,894,945,350 Additions Disposal (sale and redemption) Fair value net gains/(losses) 2,374,527,734 23,238,880,541 (2,431,250,608) (15,197,074,696) (3,340,000,000) (20,257,808) 767,112,361 - 25,613,408,275 (20,968,325,304) 746,854,553 At end of current year 46 Financial Highlights & Reports 799,467,421 23,187,415,453 300,000,000 24,286,882,874 TAKAFUL AND FINANCIAL RISK MANAGEMENT The Company issues contracts that transfer takaful risk or financial risk or both to the Company. This section summarises these risks and the way the Company manages them. 46.1 Takaful risk The PTF issues takaful contracts which are classified in the following segments: l l l 110 Individual Family (unit linked) Group Family Group Health - The Individual Family including (unit linked) segment provides family takaful coverage to individuals under unit based policies issued by the PTF. The takaful contracts under individual family are distributed through Direct Sales Force and Bancatakaful. - The Group Family segment provides Family takaful coverage to members of business enterprises and corporate entities under group family takaful schemes issued by the PTF. The takaful contracts under group family are distributed through Direct Sales Force and sales staff employed by the Company. - The Group Health segment provides accident coverage and inpatient / outpatient health coverage to members of business enterprises and corporate entities under group health schemes issued by the PTF. The takaful contracts under group health are distributed through Direct Sales Force and sales staff employed by the Company. Annual Report 2020
  111. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information The Company assesses the takaful risk on the basis of the different factors such as non-medical factors, medical factors, financial assessment, occupation assessment, group size, industry class, average age of the group and free cover limit etc. The basic risk the Company faces under takaful contracts is that the actual claims and benefit payments or timing thereof, differ from expectations. This is influenced by frequency of claims, severity of claims, actual claim paid and subsequent development of claims. The most significant risks arise from catastrophic events and epidemic. Underwriting & Re-takaful and claim committees are in place to monitor the core business activities of the Company. This is further supplemented with a clear organisational structure with documented delegated authorities and responsibilities. Management of the Company recognises the critical importance of having efficient and effective risk management systems. The focus is on issuing contract to people having moderate risk of mortality and morbidity and having appropriate economic worth and source of income. The PTF’s risk exposure is mitigated by employing a comprehensive framework to identify, assess, manage and monitoring of risk. This framework includes implementation of underwriting strategies which aim to ensure the careful selection of takaful contracts and the diversification in terms of portfolio, type and amount of the risk. Adequate retakaful is arranged to mitigate the effect of the losses and retakaful arrangement for catastrophic events. PTF exposure has also been limited by imposing limits to the maximum sum covered in a single takaful contract in each class of business. Further, in order to reduce the risk exposure of the PTF, the Company adopts proactive claim handling procedures and strict claim review policies including active management and prompt pursuing of the claims, regular detailed review of claim handling procedures and frequent investigation of possible false claims. The PTF's class wise risk exposure (for a single life policy) is as follows: ———————————— 2020 ————————————— Class Maximum Gross Risk Maximum Exposure Retakaful Cover Highest Net Risk Retention ———————————— Rupees ——————————— Individual Family 275,000,000 272,000,000 3,000,000 Group Family 224,399,988 222,399,988 2,000,000 Group Health 3,557,400 502,957,388 494,399,988 3,557,400 8,557,400 ———————————— 2019 ————————————— Class Maximum Gross Risk Maximum Exposure Retakaful Cover Highest Net Risk Retention ———————————— Rupees ——————————— Individual Family 105,889,403 102,889,403 3,000,000 Group Family 204,000,012 202,000,012 2,000,000 Group Health 3,557,400 313,446,815 304,889,415 3,557,400 8,557,400 Annual Report 2020 111
  112. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Categories of takaful contracts (i) Long term takaful contracts (ii) Short term takaful contracts (i) Long term takaful contracts (a) Sources of uncertainty in the estimation of future benefit payments and contribution receipts. Uncertainty in the estimation of future benefit payments and contribution receipts for long-term contracts arises from the unpredictability of long-term changes in overall levels of mortality and the variability in contract holder behaviour. The Company uses appropriate base tables of standard mortality according to the type of contract being written and the territory in which the insured person resides. An investigation into the actual experience of the Company over the few years is carried out and statistical methods are used to adjust the crude mortality rates to produce a best estimate of expected mortality for the future. Where data is sufficient to be statistically credible, the statistics generated by the data are used without reference to an industry table. Where this is not based on standard industry tables adjusted for the Company's overall experience, contracts that insure survival, an adjustment is made for future mortality improvements based on trends identified in the data and in the continuous mortality reflected in this experience. The Company maintains voluntary termination statistics to investigate the deviation of actual termination experience against assumptions. Statistical methods are used to determine appropriate termination rates. An allowance is then made for any trends in the data to arrive at a best estimate of future termination rates. (b) Process used to decide an assumptions Mortality and morbidity experience: Mortality / Morbidity tables are based on the risk rates being charged by the Retakaful Operators supporting individual and group lines of business. These rates vary due to the age, sex, occupation and the nature of industry. Persistency rates for long term individual policies: An investigation into the Company’s experience from time to time determines an appropriate persistency rate. Persistency rates vary by product type and policy duration. An allowance is then made for any trends in the data to arrive at a best estimate of future persistency rates that takes into account the Participants’ behaviour. Expense levels and inflation All administrative and management expenses are charged to SHF, therefore, the inflationary risk is borne by the SHF. Investment returns The participant account values of these plans depend upon actual investment returns earned on these policies. 112 Annual Report 2020
  113. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information No investment guarantees are offered by the Company. Investment risk is borne by the participants. Tax There is no major impact of taxes on valuation of liabilities, future benefit payments and contribution. Change in assumptions There has been no change in assumptions for the takaful contracts during the year. (ii) Short term takaful contracts (a) Frequency and severity of claims These contracts mostly pay a pre-determined amount on death and disability without any maturity or surrender values. These contracts are issued to individuals and also to employers to ensure their commitments to their employees in terms of other employees' benefit plans. The risk is affected by several factors e.g. age, occupation, benefit structure and life style. The Company attempts to manage this risk through its underwriting, claims handling and retakaful policy. (b) Sources of uncertainty in the estimation of future claim payments Other than for the testing of the adequacy of the liability representing the unexpired risk at the end of the reporting period, there is no need to estimate mortality rates for future year because these contracts have short duration. However, for incurred disability income claims, it is necessary to estimate the rates of recovery from disability for future years. Standard recovery tables produced by reinsurers are used as well as the actual experience of the Company. The influence of economic circumstances on the actual recovery rate for individual contracts is the key source of uncertainty for these estimates. (c) Process used to decide an assumptions The assumptions used for these contracts are the same as for long term contracts. Mortality An appropriate base table of standard mortality is chosen depending on the type of contract. An investigation into Company's experience is conducted from time to time. Where data is sufficient to be statistically credible, the statistics generated by the data are used without reference to an industry table. Morbidity The rate of recovery from disability is derived from industry experience studies, adjusted where appropriate for the Company’s own experience. (d) Change in assumptions The Company did not change its assumptions during the year. Annual Report 2020 113
  114. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Sensitivities The claims are sensitive to changes in the key assumptions. Results of sensitivity testing due to the variation in assumptions of mortality and morbidity as determined by appointed actuary on PTF will be as follows: Class of business Change in assumption Individual family 20 % increase in mortality level 20 % decrease in mortality level (16,727,115) 16,727,115 Group Health 20 % increase in morbidity level 20 % decrease in morbidity level (200,943,218) 200,943,218 20 % increase in mortality level (33,653,970) 20 % decrease in mortality level 33,653,970 Group Family Impact on PTF balance Rupees Aging and movement of outstanding claims The claims development table for each class of business and an overall aging and movement of outstanding claims is presented below: Individual Family Accident Year 2016 2017 2018 2019 2020 Estimate of ultimate claims costs: At end of accident year 92,657,523 107,557,298 109,347,307 140,712,016 One year later 92,644,700 134,636,942 138,958,795 139,703,167 Two years later 93,177,422 136,757,032 147,335,731 Three years later 88,734,337 143,732,062 Four years later 94,206,499 Current Estimate of cumulative claims 94,206,499 143,732,062 147,335,731 139,703,167 220,866,673 less: cumulative payments to date 89,456,405 134,215,672 131,326,218 82,197,010 93,320,951 4,750,094 9,516,390 16,009,513 57,506,157 127,545,722 Liability recognised in the statement of financial position 114 Annual Report 2020 - 220,866,673 - - - - - - - - - 136,112,668
  115. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Group Family Accident Year 2016 2017 2018 2019 2020 Estimate of ultimate claims costs: At end of accident year 201,954,640 242,361,526 272,794,069 365,374,418 One year later 226,886,885 249,345,094 272,380,278 353,623,542 Two years later 224,169,882 248,418,117 275,524,137 Three years later 224,001,882 248,770,117 Four years later 222,497,882 Current Estimate of cumulative claims 222,497,882 248,770,117 275,524,137 353,623,542 414,032,372 less: cumulative payments to date 221,934,794 244,543,117 261,694,583 302,003,030 238,027,198 563,088 4,227,000 13,829,554 51,620,512 176,005,174 - 414,032,372 - - - - - - - - - Liability recognised in the statement of financial position 196,399,953 Group Health Accident Year 2016 2017 2018 2019 2020 Estimate of ultimate claims costs: At end of accident year 825,923,452 876,281,834 1,002,730,013 1,391,664,168 One year later 830,162,007 882,424,441 1,023,670,902 1,486,546,883 Two years later 830,340,945 882,628,537 1,024,969,017 Three years later 830,340,945 882,628,537 Four years later 830,340,945 Current Estimate of cumulative claims 830,340,945 882,628,537 1,024,969,017 1,486,546,883 918,758,329 less: cumulative payments to date 830,340,945 882,628,537 1,024,532,777 1,478,227,066 794,606,679 436,240 8,319,817 124,151,650 Liability recognised in the statement of financial position - - 918,758,329 - - - - - - - - - 51,764,301 Annual Report 2020 115
  116. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information 2020 2019 ————(Rupees) ———— Aging of outstanding claims Upto one year Over one year 534,532,667 152,720,497 687,253,164 427,967,051 53,747,236 481,714,287 481,714,287 4,860,220,533 (4,654,681,656) 687,253,164 403,896,011 4,704,790,074 (4,626,971,798) 481,714,287 Movement of outstanding claim Opening balance Total gross claims Claims paid Closing balance 46.2 Retakaful risk In order to minimise the financial exposure arising from claims, the Company, in the normal course of business, enters into agreement with other parties for retakaful purposes. Retakaful ceded does not relieve the PTF from its obligation to takaful contract holders and as a result the PTF remains liable for the portion of outstanding claims covered under retakaful to the extent that retakaful company fails to meet the obligation under the retakaful agreements. To minimise its exposure to significant losses from retakaful insolvencies, the Company evaluates the financial condition of its retakaful companies. The Company has obtained Retakaful arrangements with prominent international Retakaful operator having high credit rating. 46.3 Financial risk management The Board of Directors of the Company has overall responsibility for the establishment and oversight of the Company's risk management framework. The Company has exposure to the following risks from its use of financial instruments: - Liquidity risk - Credit risk - Market risk Risk management framework The Board meets frequently throughout the year for developing and monitoring the Company’s risk management policies. The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Company, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. The Audit Committee monitors management's compliance with the Company’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Company Audit Committee is assisted in its oversight role by Internal Audit function. Internal Audit undertakes both regular and adhoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee. 116 Annual Report 2020
  117. Company Overview 46 .4 Message for Stakeholders Financial Highlights & Reports Other Information Liquidity risk Liquidity risk is the risk that the Company will encounter difficulty in meeting its financial obligations as they fall due. Liquidity risk arises because of the possibility that the Company could be required to pay its liabilities earlier than expected or difficulty in raising funds to meet commitments associated with financial liabilities as they fall due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation. The Company ensures that it has sufficient cash on demand to meet expected operational requirements. To guard against the risk, the Company maintains balance of cash and cash equivalent and readily marketable securities. The maturity profile of assets and liabilities is also monitored to ensure that adequate liquidity is maintained. The following are contractual maturities of financial liabilities: 2020 2019 Carrying Contractual Carrying Contractual Amount cash flows Amount cash flows upto upto one year one year -------------------------------------- (Rupees)--------------------------------------------- Non-derivative financial liabilities Outstanding claims Takaful / retakaful payables Agent commission Creditors, accruals and other liabilities 46.5 687,253,164 27,368,442 80,881,749 687,253,164 27,368,442 80,881,749 481,714,287 68,729,939 49,853,978 481,714,287 68,729,939 49,853,978 39,312,692 39,312,692 42,538,680 42,538,680 834,816,047 834,816,047 642,836,884 642,836,884 Maturity profile of financial assets and liabilities: 2020 Profit Bearing Maturity up to one year Maturity after one year Non-profit bearing Sub total Maturity up to one year Maturity after one year Sub total Total ———————————————————— Rupees ———————————————————— FINANCIAL ASSETS Cash and bank deposits Investments Takaful / retakaful receivables Advance against investment property Other loans and receivables December 31, 2020 2,850,636,795 300,000,000 - 1,318,617,539 - 3,150,636,795 1,318,617,539 2,850,636,795 1,618,617,539 - 83,068,453 22,668,265,335 1,038,829,073 150,293,088 365,034,800 39,016,430 83,068,453 2,933,705,248 22,668,265,335 24,286,882,874 1,038,829,073 1,038,829,073 365,034,800 189,309,518 365,034,800 189,309,518 4,469,254,334 23,940,455,949 404,051,230 24,344,507,179 28,813,761,513 FINANCIAL LIABILTIES Outstanding claims Takaful / retakaful payable Agents commission Creditors, accruals and other liabilities - - - 687,253,164 27,368,442 80,881,749 - 687,253,164 27,368,442 80,881,749 687,253,164 27,368,442 80,881,749 - - - 39,312,692 - 39,312,692 39,312,692 December 31, 2020 - - - 834,816,047 - 834,816,047 834,816,047 Annual Report 2020 117
  118. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Maturity profile of financial assets and liabilities: 2019 Profit Bearing Maturity up to one year Maturity after one year Non-profit bearing Sub total Maturity up to one year Maturity after one year Sub total Total ———————————————————— Rupees ———————————————————— FINANCIAL ASSETS Cash and bank deposits Investments Takaful / retakaful receivables Advance against investment Other loans and receivables December 31, 2019 4,053,451,027 5,018,799,750 - 6,077,209,291 - 9,072,250,777 6,077,209,291 4,053,451,027 11,096,009,041 - 30,636,442 7,798,936,309 878,667,238 367,684,801 365,034,800 38,299,946 15,149,460,068 9,075,924,790 403,334,746 30,636,442 4,084,087,469 7,798,936,309 18,894,945,350 878,667,238 878,667,238 365,034,800 365,034,800 405,984,747 405,984,747 9,479,259,536 24,628,719,604 FINANCIAL LIABILTIES Outstanding claims Takaful / retakaful payable Agents commission Creditors, accruals and other liabilities - - - 481,714,287 68,729,939 49,853,978 42,538,680 - 481,714,287 68,729,939 49,853,978 42,538,680 481,714,287 68,729,939 49,853,978 42,538,680 December 31, 2019 - - - 642,836,884 - 642,836,884 642,836,884 46.6 Profit / yield rate risk Profit / yield rate risk is the risk of changes in profit / yield rates reducing the overall return on profit bearing assets. The Company is exposed to profit / yield rate risk in respect of bank balances and deposits and available for sale debt instruments. Effective profit / yield rates on such accounts are disclosed in note 20 to these financial statements. At the reporting date, the rate of profit profile of the Company's profit-bearing financial instruments was: Variable rate instruments Financial assets Term deposits Savings accounts Sukuk bonds 118 Annual Report 2020 Carrying amount 2020 2019 Effective rate of profit in % 2020 2019 ——————— Rupees ——————— 300,000,000 2,850,636,795 1,318,617,539 3,640,000,000 4,053,451,027 7,456,009,041 4,469,254,334 15,149,460,068 5.8 to 13.62 3.5 to 12.95 5.24 to 16.46 10.86 to 14.0 5.01 to 13.75 5.24 to 16.39
  119. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Cash flow sensitivity analysis for variable rate instruments The following table demonstrates the sensitivity to a reasonable change in rates of profit, with all other variables held constant, of the Company's profit before tax and equity based upon average balances and rates: Increase / decrease in basis points Effect on profit before tax Effect on equity - - - - - - - - - - - - - - - - - (Rupees) - - - - - - - - - - - - - - - - December 31, 2020 100 (100) 9,119,132 (9,119,132) 6,474,584 (6,474,584) December 31, 2019 100 (100) 5,707,851 (5,707,851) 4,052,574 (4,052,574) Mismatch of rate of profit sensitivity assets and liabilities / yield / rate of profit risk 2020 Effective rate % per annum Profit bearing Upto one month Over one Over three Over six Over one month to months to six months to year to five three months months one year year Over five year Sub Total Non profit bearing Total ———————————————————— Rupees ———————————————————— FINANCIAL ASSETS Cash and bank deposits 3.50 to 12.95 Investments 5.24 to 16.46 Takaful / retakaful receivables 2,850,636,795 - 100,000,000 150,000,000 50,000,000 875,755,030 - 2,850,636,795 83,068,453 2,933,705,248 442,862,509 1,618,617,539 22,668,265,335 24,286,882,874 - - - - - - - 1,038,829,073 1,038,829,073 - - - - - - - 365,034,800 365,034,800 - - - - - - - 189,309,518 189,309,518 Advance against investment property Other loans and receivables Total 2,850,636,795 100,000,000 150,000,000 50,000,000 875,755,030 442,862,509 4,469,254,334 24,344,507,179 28,813,761,513 FINANCIAL LIABILTIES Outstanding claims - - - - - - - 687,253,164 Takaful / retakaful payable - - - - - - - 27,368,442 687,253,164 27,368,442 Agents commission - - - - - - - 80,881,749 80,881,749 - - - - - - - 39,312,692 39,312,692 - - - 834,816,047 834,816,047 Creditors, accruals and other liabilities Total Profit sensitivity gap 2,850,636,795 100,000,000 150,000,000 50,000,000 875,755,030 442,862,509 4,469,254,334 23,509,691,132 27,978,945,466 Annual Report 2020 119
  120. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information 2019 Profit bearing Effective rate % per annum Upto one month Over one Over three Over six Over one month to months to six months to year to five three months months one year year Over five year Sub Total Non profit bearing Total ———————————————————— Rupees ———————————————————— FINANCIAL ASSETS Cash and bank deposits 5.01 to 13.75 4,053,451,027 Investments 5.24 to 16.39 700,000,000 Takaful / retakaful receivables - - - 100,000,000 2,490,000,000 1,728,799,750 - - 4,053,451,027 30,636,442 4,084,087,469 2,931,089,288 3,146,120,003 11,096,009,041 7,798,936,309 18,894,945,350 - - - - - - - 878,667,238 878,667,238 - - - - - - - - - - - - 365,034,800 365,034,800 - - 405,984,747 405,984,747 Advance against investment property Other loans and receivables Total 4,753,451,027 100,000,000 2,490,000,000 1,728,799,750 2,931,089,288 3,146,120,003 15,149,460,068 9,479,259,536 24,628,719,604 FINANCIAL LIABILTIES Outstanding claims - - - - - - - 481,714,287 481,714,287 Takaful / retakaful payable - - - - - - - 68,729,939 68,729,939 Agents commission - - - - - - - 49,853,978 49,853,978 Creditors, accruals and other liabilities - - - - - - - 42,538,680 42,538,680 - - - - - - 642,836,884 642,836,884 Total - Profit sensitivity gap 46.7 4,753,451,027 100,000,000 2,490,000,000 1,728,799,750 2,931,089,288 3,146,120,003 15,149,460,068 8,836,422,652 23,985,882,720 Credit risk Credit risk is the risk, which arises with the possibility that one party to a financial instrument will fail to discharge its obligation and cause the other party to incur a financial loss. The Company attempts to control credit risk by monitoring credit exposures with counterparties and by continually assessing the credit worthiness of counterparties and measuring exposure with counterparties to remain at a reasonable level. 46.7.1 Exposure to credit risk The Company structures the levels of credit risk it accepts by placing limits on its exposure to a single counterparty, or groups of counterparties, and to geographical and industry segments. Such risks are subject to an annual or more frequent review. Retakaful is used to manage takaful risk. This does not, however, discharge the Company's liability as primary takaful operator. If a retakaful operator fails to pay a claim for any reason, the Company remains liable for the payment to the participant. The creditworthiness of retakaful operators is considered on an annual basis by reviewing their financial strength prior to finalisation of any contract. Exposures to individual participants and groups of participants are collected within the ongoing monitoring of the controls associated with regulatory solvency. Where there exists significant exposure to individual participants, or homogenous groups of participants, a financial analysis equivalent to that conducted for retakaful operators is carried out by the Company risk department. 120 Annual Report 2020
  121. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information The credit quality of the Company's bank balances and term deposits can be assessed with reference to external credit ratings as follows: 2020 2019 ————(Rupees) ———— Rating AAA AA+ AA AAA+ A A- 119,077,794 436,478,365 279,217,012 1,790,502,403 488,467,340 112,347,607 7,614,727 3,233,705,248 450,642,180 946,944,941 1,077,501,092 1,989,488,845 2,040,949,039 154,559,856 1,064,001,516 7,724,087,469 *Rating of Banks performed by PACRA and JCR-VIS. 46.7.2 The carrying amount of financial assets represent the maximum credit exposure, as specified below: Note 2020 2019 ————(Rupees) ———— Cash & Bank deposits 2,936,455,197 4,085,607,244 300,000,000 3,640,000,000 1,038,829,073 878,667,238 Advance against investment Property 365,034,800 365,034,800 Other loans and receivables 189,309,518 405,984,747 4,829,628,588 9,375,294,029 3,885,628,777 8,440,644,974 Deposits with fixed maturity Takaful / Retakaful receivables Financial assets Secured Unsecured Not past due Past due but not impaired 46.7.2.1 943,999,811 934,649,055 4,829,628,588 9,375,294,029 3,945,930,048 8,576,233,782 883,698,540 799,060,247 4,829,628,588 9,375,294,029 The age analysis of financial asset are as follows: Carrying value Not past due Past due but not impaired Upto 1 year Over 1 year Total 2020 Impairment 2019 Carrying value Impairment 3,945,930,048 - 8,576,233,782 - 882,966,385 732,155 4,829,628,588 - 797,288,870 1,771,377 9,375,294,029 - Annual Report 2020 121
  122. Company Overview 46 .7.2.1 Message for Stakeholders Financial Highlights & Reports Other Information These amounts are receivable from corporate customers having good credit standing in the market and are doing regular business with the Company, therefore the management believes that these amounts will be fully recoverable. 46.7.3 The table below analyses the concentration of credit risk by industrial distribution in respect of: Banks Manufacturing Other Financial Institutions Pharmaceuticals Services Textile Trading Foreign Embassy 2020 % 2019 % 6 13 2 2 54 1 4 18 100 7 9 1 8 59 3 0 13 100 46.7.4 Amount due from retakaful operator in respect of retakaful recoveries against outstanding claims The Company enters into a retakaful arrangements with retakaful operator having sound credit ratings accorded by reputed credit rating agencies. The Company is required to comply with the requirement of circular 32/2009 dated October 27, 2009 issued by SECP which requires a takaful company to place atleast 80% of their outward treaty session with retakaful rated 'A' or above by Standard and Poor's with the balance being placed with entities rated atleast 'BBB' by reputed credit agency. During the year, the Company placed 100% of their outward treaty cession with retakaful operator having rating of 'A' or above. An analysis of all retakaful cession by the rating of the re-takaful entity is as follow: Credit rating agency 2020 2019 ——— Rupees ——— Rating A or above 46.8 Standard and Poor 403,640,591 425,624,545 403,640,591 425,624,545 Market risk Market risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices, whether those changes are caused by factors specific to the individual security, or its issuer, or factors affecting all securities traded in the market. The Company manages its exposure to such risks by maintaining a diversified portfolio comprising of sukuks, Islamic mutual funds and listed securities. 122 Annual Report 2020
  123. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information A decline in markets or an increase in market volatility may also adversely affect sales of our unit linked products. Company recognises that market risk is part of the businesses and certain level of market risk is acceptable in order to deliver benefits to both participants’ and shareholders. 46.9 Foreign exchange risk Currency risk is the risk that the value of a financial asset or liability will fluctuate due to changes in foreign currency rates. Foreign exchange risk arises mainly where receivables and payables exist due to transactions in foreign currencies. As the Company had no material assets or liabilities in foreign currencies at the year end, the Company is not materially exposed to foreign exchange risk. 46.10 Capital management Capital requirements applicable to the Company are set and regulated by the SECP. These requirements have been put in place to ensure sufficient solvency margins. The Company manages its capital requirement by assessing its capital structure against the required capital level on a regular basis. Currently the Company has a paid up capital of Rs. 1,307,124,400/- against the minimum required paid-up capital of Rs. 700,000,000/set by the SECP for insurance companies / Takaful operators for the year ended December 31, 2020. 46.11 Fair value of financial instruments Fair value is defined as the price that would be received upon selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair values of all the financial instruments are estimated to be not significantly different from their carrying values. Fair Value Hierarchy The Company measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements: Level 1: Fair value measurements using quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Fair value measurements using inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3: Fair value measurements using input for the asset or liability that are not based on observable market data (i.e. unobservable inputs). Annual Report 2020 123
  124. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Transfer between levels of the fair value hierarchy are recognised at the end of the reporting period during which the changes have occurred. There are no such transfers during the year. Carrying amount Fair value Cash and Other Loans, Available Fair value Total Level 1 Level 2 Level 3 Total cash financial advances for Sale through equivalents liabilities and profit receivables or loss ———————————————————— Rupees ———————————————————— December 31, 2020 Financial assets - measured at fair value Investments Equity securities 74,467,421 9,213,908,255 - - - 9,288,375,676 9,288,375,676 - - 9,288,375,676 1,179,062,509 Government securities 725,000,000 454,062,509 - - - 1,179,062,509 - 1,179,062,509 - Debt securities - Sukuk Certificates Sukuk Certificates - 139,555,030 - - - - 139,555,030 - 139,555,030 Mutual funds - 13,379,889,659 - - - 13,379,889,659 13,379,889,659 - - 13,379,889,659 799,467,421 23,187,415,453 - - - 23,986,882,874 22,668,265,335 1,318,617,539 - 23,986,882,874 - 139,555,030 Financial assets - not measured at fair value Cash and others* - - - 2,749,949 Current and other accounts* - - - 2,933,705,248 Deposits maturing within 12 months* - - - 300,000,000 Takaful / retakaful receivables* - - 1,038,829,073 - Advance against investment property - - 365,034,800 - - Other loans and receivables* - - 189,309,518 - - - - 1,593,173,391 - - - - 47,615,996 Outstanding claims* - - - - Contributions received in advance* - - - - Takaful / retakaful payable* - - - - 3,236,455,197 2,749,949 - - - - - 2,933,705,248 - - - - - 300,000,000 - - - - - 1,038,829,073 - - - - 365,034,800 - - - - 189,309,518 - - - - - 4,829,628,588 - - - - 47,615,996 - 47,615,996 - 47,615,996 687,253,164 687,253,164 - - - - 299,301,666 299,301,666 - - - - 27,368,442 27,368,442 - - - - Financial liabilities - measured at fair value Staff retirement benefits Financial liabilities - not measured at fair value Agents commission* - - - - 80,881,749 80,881,749 - - - - Creditors, accruals and other liabilities* - - - - 39,312,692 39,312,692 - - - - - - - - 1,134,117,713 1,134,117,713 - - - - 124 Annual Report 2020
  125. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Carrying amount Fair value Cash and Other Loans, Available Fair value Total Level 1 Level 2 Level 3 Total cash financial advances for Sale through equivalents liabilities and profit receivables or loss ———————————————————— Rupees ———————————————————— December 31, 2019 Financial assets - measured at fair value Investments Equity securities 189,778,326 7,047,573,891 - - - 7,237,352,217 7,237,352,217 - - 7,237,352,217 Government securities Sukuk Certificates 660,917,691 739,882,062 - - - 1,400,799,753 - 1,400,799,753 - 1,400,799,753 - 6,055,209,288 - - - 6,055,209,288 - 6,055,209,288 - 6,055,209,288 25,752,086 535,832,006 - - - 561,584,092 - - 561,584,092 - - 15,254,945,350 7,798,936,309 7,456,009,041 - 15,254,945,350 Debt securities - Sukuk Certificates Mutual funds 876,448,103 14,378,497,247 561,584,092 Financial assets - not measured at fair value Cash and others* - - - 1,519,775 Current and other accounts* - - - 4,084,087,469 - 1,519,775 - - - - - 4,084,087,469 - - - - Deposits with fixed maturity* - - - 3,640,000,000 - 3,640,000,000 - - - - Takaful / retakaful receivables* - - 878,667,238 - - 878,667,238 - - - - Advance against investment property - - 365,034,800 - - 365,034,800 Other loans and receivables* - - 405,984,747 - - 405,984,747 - - - - - - 1,649,686,785 - 9,375,294,029 - - - - - - - - 37,803,040 37,803,040 - 37,803,040 - 37,803,040 Outstanding claims* - - - - 481,714,287 481,714,287 - - - - Contributions received in advance* - - - - 142,023,329 142,023,329 - - - - Takaful / retakaful payable* - - - - 68,729,939 68,729,939 - - - - 7,725,607,244 Financial liabilities - measured at fair value Staff retirement benefits Financial liabilities - not measured at fair value Agents commission* - - - - 49,853,978 49,853,978 - - - - Creditors, accruals and other liabilities* - - - - 42,538,680 42,538,680 - - - - - - - - 784,860,213 784,860,213 - - - - *The Company has not disclosed the fair value of these items because their carrying amounts are a reasonable approximation of fair value. Annual Report 2020 125
  126. Company Overview (a) Message for Stakeholders Financial Highlights & Reports Other Information Financial instruments in level 1 Financial instruments included in level 1 comprise of investments in listed ordinary shares and units of mutual funds. (b) Financial instruments in level 2 Financial instruments included in level 2 comprise of government sukuks and other sukuks. (c) Financial instruments in level 3 Currently, no financial instruments are classified in level 3. Valuation techniques and inputs used in determination of fair values 46.12 Item Valuation techniques and input used Ordinary shares of listed companies Fair values of investments in listed equity securities are valued on the basis of closing quoted market prices available at the Pakistan Stock Exchange Limited. Units of mutual funds Fair values of investments in units of mutual funds are determined based on the redemption prices (NAV) as at the close of the business day. Government sukuks and other sukuks Fair values of sukuks are derived by reference to quotations obtained from brokers. Operational risk Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the process, technology and infrastructure supporting the Company's operations either internally with in the Company or externally at the Company's service providers, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of investment management behaviour. Operational risks arise from all of the Company's activities. The Company's objective is to manage operational risk so as to balance limiting of financial losses and damage to its reputation with achieving its objective of generating returns for stakeholders. The primary responsibility for the development and implementation of controls over operational risk rests with the board of directors. Management ensures that the Company's staff have adequate training and experience and fosters effective communication related to operational risk management. 47 NUMBER OF EMPLOYEES The average number of employees during the year ended December 31, 2020 were 759 (2019: 682) and number of employees as at December 31, 2020 were 761 (2019: 692). 126 Annual Report 2020
  127. Company Overview 48 Message for Stakeholders Financial Highlights & Reports Other Information CORRESPONDING FIGURES Corresponding figures have been re-arranged or reclassified whereever necessary for better presentation and disclosure. There is no material reclassification to report. 49 GENERAL Figurers in these financial statements have been rounded off to the nearest Rupee, unless otherwise stated. 50 IMPACT OF COVID-19 The management continues to closely monitor the impact of COVID-19 on its key business indicators. Business planning processes have taken into account various scenarios such as the possibility of COVID-19 subsiding, as well as the probability of a next wave of the pandemic. The management team is fully equipped to manage their functions effectively in these uncertain times. The management based on its current assessment considered that there would be no significant impact that will adversely affect its business, result of operations, or adverse material implication on assets & liabilities of the Company. 51 DATE OF AUTHORIZATION FOR ISSUE These financial statements were authorized for issue on 08 April, 2021 by the Board of Directors of the Company. Chief Executive Officer Director Director Chairman Annual Report 2020 127
  128. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Pattern of Shareholding As at December 31, 2020 1. 2. Number of shareholders Shareholdings Total shares held 3 shareholding from 1 to 100 shares 14 shareholding from 1001 to 10000 shares 80,531 18 shareholding from 10001 to 200000 shares 840,692 12 shareholding from 200001 to 3000000 shares 6,332,676 4 shareholding from 3000001 to 10000000 shares 17,736,142 4 shareholding from 10000001 to 20000000 shares 60,524,038 1 shareholding from 20000001 to 50000000 shares 45,198,358 56 Total Categories of shareholders Shares held 3 130,712,440 Percentage 2.1 Directors, Chief Executive Officer, and their spouse and minor children. 2.1.1. Sheikh Ali Bin Abdullah 2.1.2. Said Gul 2.1.3. Sameera Usman 2.1.4. Abdul Basit Ahmed Al-Shaibei 2.1.5. Zahid Hussain Awan 2.1.6. Ali Ibrahim Al Abdul Ghani 2.1.7. Mohammad Owais Ansari 2.1.8. Farrukh Viqaruddin Junaidy 13,300,734 5,512,502 4,094,921 1,563,484 1,203,551 1 1 1 10.18% 4.22% 3.13% 1.20% 0.92% 0.00% 0.00% 0.00% 2.2 Associated Companies, undertakings and related parties. 2.2.1. Pak-Qatar Investment (Private) Ltd 2.2.2. FWU AG 2.2.3. Qatar Islamic Insurance Company 2.2.4. Qatar International Islamic Bank 128 Annual Report 2020 45,198,358 19,873,062 14,341,019 13,009,223 34.58% 15.20% 10.97% 9.95%
  129. Company Overview Message for Stakeholders Categories of shareholders 2 .3 NIT and ICP Financial Highlights & Reports Other Information Shares held Percentage - 0.00% 2.4 Banks, Development Financial Institutions, Non-Banking Financial Institutions. 2.4.1. FWU AG 2.4.2. Qatar Islamic Insurance Company 2.4.3. Qatar International Islamic Bank 19,873,062 14,341,019 13,009,223 15.20% 10.97% 9.95% 14,341,019 10.97% - 0.00% 45,198,358 19,873,062 14,341,019 13,300,734 34.58% 15.20% 10.97% 10.18% 12,615,583 9.65% 2.5 Insurance Companies 2.5.1. Qatar Islamic Insurance Company 2.6 Modarabas and Mutual Funds 2.7 Share holders holding 10% 2.7.1. Pak-Qatar Investment (Pvt.) Limited 2.7.2. FWU AG 2.7.3. Qatar Islamic Insurance Company 2.7.4. Sheikh Ali Bin Abdullah 2.8 General Public Annual Report 2020 129
  130. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Statement Under Section 52 (2) of Insurance Ordinance 2000 Statement by Appointed Actuary I have reviewed the Balance Sheet and Revenue Account and related notes prepared by the Company for the year ended 31 December 2020, in my opinion. a) the policyholder liability included in the balance sheet has been determined in accordance with the provisions of the Insurance Ordinance, 2000 ("the Ordinance") and b) the combined statutory funds and shareholders fund set up by the Company, after accounting for the capital contribution, complies with the solvency requirements of the Ordinance. Abdul Rahim Abdul Wahab, FSA Appointed Actuary Statement of Directors (As per the requirement of section 46(6) and section 52(2)(c) of the Insurance Ordinance, 2000) Section 46(6) (a) In our opinion the annual statutory accounts of the Pak-Qatar Family Takaful Limited set out in the forms attached to the statement have been drawn up in accordance with the Insurance Ordinance, 2000 and any rules made there under; (b) Pak-Qatar Family Takaful Limited has at all times in the year complied with the provisions of the Insurance Ordinance, 2000 and the rules made there under relating to paid-up capital, solvency and re-takaful arrangement; and (c) As at December 31, 2020 Pak-Qatar Family Takaful Limited continues to be in compliance with the provisions of the Insurance Ordinance, 2000 and the rules made there under relating to paid-up capital, solvency and re-takaful arrangements. Section 52(2)(c) (d) In our opinion each statutory fund of Pak-Qatar Family Takaful Limited complies with the solvency requirements of the Insurance Ordinance, 2000 and any rules made there under. Chief Executive Officer 130 Annual Report 2020 Director Director Chairman
  131. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Notice of the 15 t h Annual General Meeting Notice is hereby given that the 15th Annual General Meeting of the shareholders of Pak-Qatar Family Takaful Limited (the Company) will be held on Friday, 30th April 2021 at 1500 hours at the Head Office of Pak Qatar Family Takaful Limited, Business Arcade, Block 6 P.E.C.H.S, Shahra Faisal, Karachi and through video-link to transact the following business: ORDINARY BUSINESS: 1. To confirm the minutes of 14th Annual General Meeting (AGM) of the Company held on 29th April 2020. 2. To receive, consider and approve the Audited Financial Statements for the year ended December 31, 2020 together with the Chairman's review, Directors' and Auditors' reports thereon. 3. To consider and approve the Dividend of 7.5% for the year ended December 31, 2020 as recommended by the Board of Directors to shareholders for the year ended December 31, 2020. 4. To appoint External Auditors for the year ending 31 December 2021 and fix their remuneration. The Audit Committee and the Board of Directors have recommended the name of M/s. EY Ford Rhodes (Chartered Accountants) for re-appointment as Statutory Auditors and Shariah Compliance Auditors. Special Business: 5. To consider and, if thought fit, pass with or without modification, the following special resolution under section 199 of the Companies Act, 2017 and the Companies (Investment in Associated Companies or Associated Undertakings) Regulations, 2017 for the purpose of approving equity investment in the ordinary shares of the proposed associated company "Pak-Qatar Asset Management Company Limited (PQAMCL)." RESOLVED THAT pursuant to the requirements of section 199 of the Companies Act, 2017, the approval of the shareholders be and is hereby accorded in terms of Section 199 of the Companies Act, 2017 for investment not exceeding Rs.21 million in the purchase of ordinary shares of PQAMCL, a proposed associated company, at par value, in one or more transactions within the period of one (1) year. FURTHER RESOLVED THAT "the Chief Executive Officer" and/or "the Company Secretary" jointly or singly be authorized to take any or all actions which may be required for the investment of the abovementioned amount in the purchase of the ordinary shares of PQAMCL. "Statement under Section 134(3) of the Companies Act, 2017, concerning the Special Resolution, is attached along with the Notice circulated to the members of the Company, and is deemed an integral part thereof." 6. To transact any other business as may be placed before the Meeting with the permission of the Chair. 10 April 2021 Karachi Muhammad Kamran Saleem Company Secretary Annual Report 2020 131
  132. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Notes: 1. In the wake of the current situation related to Coronavirus and in the light of the guidelines issued by Securities & Exchange Commission of Pakistan (SECP) vide Circular No. 4 of 2021 dated February 15, 2021; whereby, Companies are allowed to hold Annual General Meeting virtually through video-link, webinar, zooming, or other electronic means etc., in addition to requirement of holding physical meeting. Accordingly, Shareholders can consolidate their attendance, participating in, and voting at Annual General Meeting into as few people as possible through proxies. For this, the Shareholders are requested to email their particulars like, Name, Folio Number, Cell Number, CNIC number and Number of Shares held in their name along with valid copy of both sides of Computerized National Identity Card (CNIC) at company.secretary@pakqatar.com.pk. The video-link and login credentials will be shared with only those Shareholders/designated proxies whose e-mails, containing all the above required particulars, are received at least 48 hours before the time of meeting. The shareholders can also provide their comments/suggestions for the proposed agenda items of the AGM through email at company.secretary@pakqatar.com.pk. Shareholders comments/suggestions for the proposed agenda of the AGM will be discussed in the meeting and will be made part of the minutes of the meeting. Due to prevailing COVID-19 pandemic, Shareholders are requested to consolidate their attendance at AGM into few peoples as possible through proxies. 2. The Share transfer books of the Company shall remain closed from 24-04-2021 to 30-04-2021 (both days inclusive). Transfers received in order at Company's registered office at the close of business on 23-042021 will be treated in time for the purpose of attending the meeting. 3. For attending the meeting: In case of individuals, the shareholder shall authenticate his/her original valid Computerized National Identity Card (CNIC) or the original Passport at the time of attending the meeting. In case of corporate entity, the Board of Directors' resolution / Power of Attorney with specimen signature of the nominee shall be produced (unless it has been provided earlier) at the time of meeting. 4. A Member of the Company entitled to attend and vote at this Meeting shall be entitled to appoint another member, as his/her proxy to attend, speak and vote instead of him/her, and a proxy so appointed shall have such rights, as respects attending, speaking and voting at the Meeting as are available to a member. A Member shall not be entitled to appoint more than one proxy to attend any one meeting. If any Member appoints more than one proxy for any one meeting and more than one instruments of proxy are deposited with the Company, all such instruments of proxy shall be rendered invalid. A proxy must be a member of the Company. 5. For appointment of proxies: Proxies, in order to be effective, must be received by / lodged with the Company at its Registered Office, Business Arcade, Block 6, P.E.C.H.S, Shahra-e-Faisal, Karachi not less than 48 hours before the Meeting. In case of corporate entity, the Board of Directors' resolution/ power of attorney with the specimen signature of the nominee shall be produced (unless it has been provided earlier) at the time of meeting. The proxy shall produce his/her original CNIC or original passport at the time of the Meeting. (Proxy form is annexed herewith). 6. The rates for deduction of withholding tax on the amount of dividend paid by the companies are @ 15% for filers of income tax returns and @ 30% for non-filers of income tax returns. All members are advised to ensure their names are on Active Tax-payers list (ATL) provided on the website of Federal Board of Revenue (FBR) otherwise tax on dividend will be deducted @30% instead of 15%. 132 Annual Report 2020
  133. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information In the case of shares registered in the name of two or more shareholders, each joint-holder is to be treated individually as either a filer or non-filer and tax be deducted by the Company on the basis of shareholding of each joint-holder as may be notified to the Company in writing. In this regard, all shareholders who hold shares with joint shareholders, are requested to provide shareholding proportions of Principal shareholder and Joint Holder(s) in respect of shares held by them to the Company at registered office, in writing as follow, before date of closing of share transfer book positively; otherwise it will be assumed that the shares are equally held by principal shareholder and joint holder(s). Principle Shareholder Name 7. Folio No. Total Shares Name & CNIC No. Shareholding Proportion (No. of shares) Joint Shareholder Name & CNIC No. Shareholding Proportion (No. of shares) As per directives, the dividend warrants of the shareholders whose valid CNICs, are not available with the Share Registrar could be withheld. Members are requested to immediately notify/submit the following at registered office, if not earlier provided; a) Change in their Addresses, if any. b) Valid & legible photocopy of Computerized Nation Identity Cards (CNIC)/Passport for individuals and National Tax Number (NTN) for both Individuals & Corporate entities. 8. SECP through its Notification SRO 787 (I)/2014 dated September 8, 2014 has allowed the circulation of Audited Financial Statements along with Notice to members of the Company through e-mail. The Company is pleased to offer this facility to our valued members who desire to receive annual financial statements and notices through email in future. In this regard, all members of the Company who wish to opt this facility are requested to send their consent via email on a standard request form which is available at the company's website. The Company shall, however, provide hard copy of the Audited Financial Statements to its shareholders, on request, free of cost, within seven days of receipt of such request. 9. Pursuant to Section 223(7) of the Companies Act, 2017, the Company has placed the Annual Financial Statements of the Company for the year ended December 31, 2020 along with the reports thereon on its website. 10. Pursuant to Section 132(2) of the Companies Act, 2017, the members can also avail video conference facility, in this regard, please fill the following and submit to registered address of the Company 07 days before holding of the Annual General Meeting. If the Company receives consent from members holding in aggregate 10% or more shareholding residing at a geographical location, to participate in the meeting through video conference at least 07 days prior to date of the meeting, the Company will arrange video conference facility in the city subject to availability of such facility in that city. The Company will intimate members regarding venue of video conference facility before the date of the Annual General Meeting along with complete information necessary to enable them to access the facility. Annual Report 2020 133
  134. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information I/We, __________________of _________________, being a member of Pak-Qatar Family Takaful Limited, holder of _____________________ ordinary share(s) as per Registered Folio/CDC Account No. _________________ hereby opt for video link facilit y at __________________. 11. As per the provision of Section 244 of the Companies Act 2017, any shares issued or dividend declared by the Company which have remained unclaimed/unpaid for a period of three years from the date on which it was due and payable are required to be deposited with the Commission for the credit of Federal Government after issuance of notice to the shareholders to file their claim. Shareholders are requested to ensure that their claims for unclaimed dividend and shares are lodged timely. In case, no claim is lodged with the Company in the given time, the Company shall after publication a notice in newspaper proceed to deposit the unclaimed/ unpaid amount and shares with the Federal Government pursuant to the provision of Section 244(2) of the Companies Act 2017. 12. Demand a poll: Members can exercise their right to demand a poll subject to meeting requirements of Sections 143 and 144 of the Companies Act, 2017 and applicable clauses of the Companies (Postal Ballot) Regulations, 2018. Statement under Section 134(3) of the Companies Act, 2017 This statement set out the material facts concerning the special business to be transacted at the annual general meeting of the Company to be held on April 30, 2021. Agenda item No. 05 Nature of information required to be disclosed pursuant to the Companies (Investment in Associated Companies and Undertakings) Regulations, 2017, for investment in proposed associated company M/s Pak-Qatar Asset Management Company Limited is as follows: Reg No. 3(a) A 134 Requirement Relevant Information Disclosures for all types on investments:Regarding associated company or associated undertaking:- (i) name of associated company Pak-Qatar Asset Management Company Limited (PQAMCL) (ii) Basis of relationship The associated relationship is established based upon common directorship between the Company & PQAMCL (iii) earnings per share for the last three years PQAMCL is in phase of incorporation (iv) break-up value per share, based on latest audited financial statements PQAMCL is in phase of incorporation Annual Report 2020
  135. Company Overview Reg No . Message for Stakeholders Financial Highlights & Reports Requirement Other Information Relevant Information (v) financial position, including main items of statement of financial position and profit and loss account on the basis of its latest financial statements; and PQAMCL is in phase of incorporation (vi) in case of investment in relation to a project of associated company or associated undertaking that has not commenced operations, following further information, namely:(I) description of the project and its history since conceptualization; (II) starting date and expected date of completion of work; (III) time by which such project shall become commercially operational; (IV) expected time by which the project shall start paying return on investment; and (V) funds invested or to be invested by the promoters, sponsors, associated company or associated undertaking distinguishing between cash and non-cash amounts. N/A 3(a) B General Disclosures:- (i) maximum amount of investment to be made; Rs. 21 Million (ii) purpose, benefits likely to accrue to the investing company and its members from such investment and period of investment; - To earn dividend income - To benefit from the expected future growth of Asset Management Industry - Over a period of one (1) year (iii) sources of funds to be utilized for investment and where the investment is intended to be made using borrowed funds:(I) justification for investment through borrowings; (II) detail of collateral, guarantees provided and assets pledged for obtaining such funds; and (III) cost benefit analysis; N/A Annual Report 2020 135
  136. Company Overview Reg No . Message for Stakeholders Financial Highlights & Reports Requirement Other Information Relevant Information (iv) salient features of the agreement(s), if any, with associated company or associated undertaking with regards to the proposed investment; Mr. Said Gul, the Director of the Company will be Pak-Qatar Family's nominee Director at the Board of Director of PQAMCL (v) direct or indirect interest of directors, sponsors, majority shareholders and their relatives, if any, in the associated company or associated under tak ing or the transaction under consideration; Interest of directors, sponsors, majority shareholders and their relatives in the associated company is limited to the extent of their investment in Pak-Qatar Family Takaful Limited. (vi) in case any investment in associated company or associated undertaking has already been made, the performance review of such investment including complete information/justification for any impairment or write offs; and N/A (vii) any other important details necessary for the members to understand the transaction; The above proposed/recommended investment is an investment in a Non-Banking Finance Company (NBFC) which has not yet commenced its operations and is in the phase of incorporation. 3(b) In case of equity investment, following disclosures in addition to those provided under clause (a) of sub-regulation (1) of regulation 3 shall be made:- FWU AG & Pak-Qatar Investment (Private) Limited, the majority shareholders of Pak-Qatar Family have direct interest in PQAMCL by way of their proposed subscription in PQAMCL. (i) maximum price at which securities will be acquired; Par value of share @ 10 per share (ii) in case the purchase price is higher than market value in case of listed securities and fair value in case of unlisted securities, justification thereof; N/A (iii) maximum number of securities to be acquired; 2,100,000 ordinary shares (iv) number of securities and percentage thereof held before and after the proposed investment; Before: Number of securities: Nil Shareholding: 0.00% After: Number of securities: 2,100,000 Shareholding: 7.00% 136 Annual Report 2020
  137. Company Overview Reg No . Message for Stakeholders Financial Highlights & Reports Requirement Other Information Relevant Information (v) current and preceding twelve weeks' weighted average market price where investment is proposed to be made in listed securities; and N/A (vi) fair value determined in terms of sub-regulation (1) of regulation 5 for investments in unlisted securities. N/A Regulation No. 3(3) The directors of the investing company while presenting the special resolution for making investment in an associated company or associated undertaking shall certify to the members of the investing company that they have carried out necessary due diligence for the proposed investment before recommending it for members' approval. The Directors of the company undertake that they have carried out necessary due diligence for the proposed equity investment in Pak-Qatar Asset Management Company Limited. Regulation No. 4(1) If the associated company or associated undertaking or any of its sponsors or directors is also a member of the investing company, the information about interest of the associated company or associated undertaking and its sponsors and directors in the investing company shall be disclosed in the notice of general meeting called for seeking members' approval pursuant to section 199 of the Act. No director or chief Executive has any interest in the investing Company except in their individual capacities as Directors/Chief Executive and/or as shareholders of the investing Company. Annual Report 2020 137
  139. Company Overview Message for Stakeholders Financial Highlights & Reports Other Information Proxy Form The Company Secretary Pak-Qatar Family Takaful Limited Business Arcade, Block 6, P.E.C.H.S., Main Shahra-e-Faisal, Karachi. I/we _____________________________________ of ________________________, (full address) being the member(s) of Pak-Qatar Family Takaful Limited and holder of _______________________________ ordinary shares as per share register Folio No. _______ hereby appoint ______________________________ of ____________________ (full address) or failing him/her ________________________________ of __________________________ as my/our proxy to vote for me or us and on my/our behalf at the Annual General Meeting of the Company to be held on 30th April 2021 and at any adjournment thereof. Signed this _____________ day of April 2021 (Witnesses 1:) 1. ________________________________(Signature) ________________________________(Name) ________________________________(Address) ________________________________(CNIC / Passport No.) (Witnesses 2:) 2. ________________________________ (Signature) Please affix Rupees five revenue stamp Signature of member(s) ________________________________(Name) ________________________________(Address) ________________________________(CNIC / Passport No.) Note: A member entitled to attend and vote at the Annual General Meeting is entitled to appoint another member as proxy to attend, speak and vote instead of him/her. The instrument appointing a proxy shall be in writing under the hand of the appointer or of his attorney duly authorized in writing, if the appointer is a corporation, under its common seal or the hand of an officer or attorney duly authorized. A proxy must be a member of the Company. Proxies in order to be effective must be received by the Company at its registered office not less than 48 hours before the meeting. Annual Report 2020
  140. Company Overview Annual Report 2020 Message for Stakeholders Financial Highlights & Reports Other Information