EQUITY ASSURANCE PLC AND ITS SUBSIDIARY COMPANIES ...€¦ · EQUITY ASSURANCE PLC AND ITS SUBSIDIARY COMPANIES Introduction Equity Assurance Plc's Financial statements comply with

EQUITY ASSURANCE PLC AND ITS SUBSIDIARY COMPANIES

FINANCIAL STATEMENTS31 DECEMBER, 2014

Results at a glance

Group Group Company Company2014 2013 Variance 2014 2013 VarianceN'000 N'000 % N'000 N'000 %

Gross written Premium 4,845,997 4,616,050 5 3,415,146 3,256,827 5Earned Premium 3,784,359 3,209,794 18 2,619,630 2,028,909 29Profit/(Loss) before taxation and Daewoo loan charges 379,224 302,087 26 229,517 -85,106 -370Daewoo loan charges -68,467 -667,027 -90 -68,467 -667,027 -90Profit/(Loss) before taxation 310,757 -364,940 -185 161,050 -752,133 -121Cash and cash equivalents 3,741,023 1,818,259 106 3,357,358 1,461,238 130Property, Plant & Equipment 939,954 2,362,843 -60 435,357 2,253,275 -81Financial Assets 618,406 560,430 10 200,848 224,047 -10Statutory deposit 322,671 323,203 (0.2) 300,000 300,000 - Borrowings 1,454,615 2,231,452 -35 1,452,233 2,241,255 -35Contigency reserves 715,820 623,027 15 657,444 554,990 18Shareholders funds 3,998,281 3,852,126 4 3,426,856 3,339,064 3

PER 50k SHARE DATA:

Earnings/(Loss) per share (Kobo) 1.8 (5.7) -132 1.0 (8.7) -111

Net assets per share (Kobo) 45 44 4 39 38 3

Stock Exchange Quotation as at31 December (Kobo) 50 50 -


Introduction

Equity Assurance Plc's Financial statements comply with the applicable legal requirements of theCompanies and Allied Matters Act CAP C20 LFN 2014 regarding financial statements and comprisesConsolidated and Separate Financial Statements for the year ended 31 December, 2014. The consolidatedfinancial statements have been prepared in compliance with IAS 1, 'Presentation of financial statements'issued by the International Accounting Standards Board.


CONTENTS PAGES

Corporate information 3Statement of Directors' Responsibilities 4Report of the Directors 5 - 8Certification Pursuant to Section 60 (2) Investment and Securities Act. 9Report of the Audit Committee 10Corporate Governance Report 11-16Management Discussion and Analysis 17-18Report of the Independent Auditors 19 - 20Summary of significant accounting policies 21 - 54Financial Statements:Statement of Financial Position 55Statement of Profit or Loss and Other Comprehensive Income 56Statement of Changes in Equity - Group 57 - 58Statement of Changes in Equity - Company 59Statement of Cash Flows 60Critical accounting estimates and judgements 61Management of insurance and financial risks 61 - 65Financial Risk Management 66 - 76Capital Management 77 - 78Segment information 79 - 81Financial assets and liabilities 82 - 83Fair value hierarchy 84Notes to the Statement of Profit or Loss and Other Comprehensive Income and the Statement of Financial Position 85 - 104

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CORPORATE INFORMATION

BOARD OF DIRECTORSMr Adetutu Buraimo - ChairmanMr. Ibidolapo Balogun - Vice-Chairman/GMDMr. Godwin AlegieunoMrs Olayiwola Adeola Died on December 13, 2014Mr. Ibikunle BalogunMrs. Markie IdowuMr. Olanrewaju OgunbanjoMr. Ekpe Ukpabio - MD /CEO

COMPANY SECRETARYJohn Nkemakonam AkujiezePlot 1196, Bishop Oluwole streetVictoria Island, Lagos

REGISTERED OFFICEEquity PlacePlot 1196, Bishop Oluwole StreetVictoria Island, Lagos

RC No: - 65443

FRC Registration no: - FRC/2012/0000000000408

REGISTRARS AND TRANSFER OFFICEApel Capital & Trust Limited18 Nnobi StreetSurulereLagos

BANKERSEcobank Nigeria LimitedFirst Bank of Nigeria LimitedGuaranty Trust Bank PlcSkye Bank PlcSterling Bank PlcUnited Bank for Africa PlcZenith Bank Plc

RE-INSURERSMunich Mauritius Reinsurance Co. LtdAfrican Reinsurance CorporationContinental Reinsurance PlcNigerian Reinsurance Corporation

ACTUARIESHR Nigeria Limited

EXTERNAL AUDITORSBDO PROFESSIONAL SERVICESADOL House15 CIPM AvenueCBD, Alausa, IkejaLagos, Nigeria.

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REPORT OF THE DIRECTORS FOR THE YEAR ENDED 31 DECEMBER, 2014(Cont'd)

RE-ELECTION OF DIRECTORS

CORPORATE GOVERNANCE

BOARD AUDIT COMMITTEE

BOARD FINANCE & INVESTMENT COMMITTEE

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BOARD TECHNICAL, RISK MANAGEMENT AND COMPLIANCE COMMITTEE

BOARD HUMAN RESOURCES AND REMUNERATION COMMITTEE

REINSURANCE ARRANGEMENTThe company had treaty arrangements with the following Companies during the year:

Munich Mauritius Reinsurance Co. LtdAfrican Reinsurance CorporationContinental Reinsurance PlcNigerian Reinsurance Corporation

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In accordance with article 93 of the Company's Article of Association, Mrs Markie Idowu and Mr.Ibikunle Balogunwill retire by rotation , and being eligible, will be offering themselves for re-election.

The Board is responsible for the corporate governance of the Holding Company. The Directors are responsible forkeeping proper accounting records which disclose with reasonable accuracy at any time, the financial status of thecompany and ensures that the financial statements comply with the provisions of the Companies and AlliedMatters Act CAP C20 LFN 2004.

They are also responsible for safeguarding the assets of the Company by taking reasonable steps for theprevention and detection of fraud and irregularities.

During the year under review, the Company was managed by a Board of 8 Directors consisting of 6 non-ExecutiveDirectors (which includes the Chairman) and 2 Executive Directors.

The Board of Directors ensured that the Company's objectives were implemented through the followingconstituted board committees:


The Committee is established in compliance with Section 359(6) of the Companies and Allied Matters Act CAP C20LFN 2004 and it has the oversight responsibility for the Company's accounts.

The Board Committee oversees the Company’s investment and corporate finance transactions, reviewsmanagement policies and guidelines, reviews the Company’s investment performance, and the Company’s capitalstructure. The Committee also makes recommendations to the Board concerning:

The Committee has oversight functions over the internal control, assessment of associated risk in the Company'sbusiness and compliance functions within the Company.

The Committee has oversight functions in determining the terms of reference for the Executive Management. Itrecommends the remuneration of the Executive Directors.

The Company's investment policies and guidelines, the Company's implementation of and compliance withthose policies and guidelines, and the performance of the Company's investment portfolios and investmentmanagers.

Corporate financial policies relating to capital structure, financial performance, in relation to both thecapital and revenue budgets, including debt limits, dividend policy, stock splits and repurchases of stocksor other securities.The Company's Capital needs and financing arrangements, the Company's ability to access the capitalmarket and management's financing plans.

The Company's policies and procedures for investment risk management.The Company's accounting and investment policies

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The ultimate responsibility for the governance of the Company resides with the Board of Directors which is accountable toshareholders for creating and delivering sustainable value through the management of the Company. The Board’s oversightfunction is exercised through its various Committees, namely, Board Technical, Risk Management and Compliance Committee;Board Establishment, Human Resources and Governance Committee, Board Finance and Investment Committee and the AuditCommittee. Through these Committees the Board sets broad policy guidelines, and ensures proper management of theCompany on a regular basis.

The Board is comprised of eight (8) members, five (5) of whom are Non-Executive Directors (including the Chairman of theBoard), two (2) are Executive Directors and one(1) is an Independent Non-Executive Director. The Board is made up ofseasoned professionals who have excelled in their various professions and possess the requisite integrity, skill and experienceto bring to bear independent judgement on the deliberations of the Board. The effectiveness of the Board is derived from theappropriate balance and mix of skills and experience of all the Directors. The Board meets once in every quarter and additionalmeetings are convened when required. The Board met five (5) times during the year ended December 31, 2014.

Good corporate governance is essential in earning and retaining the confidence and trust of stakeholders. It is designed toensure the accountability of the Board and Management of the company to stakeholders.

The Company has provided structures upon which the objectives of the group and the means of attaining these objectives areset. The Company has designed and put in place charters, policies and processes, which are reviewed periodically to ensureproper organization and conduct of the company’s business.

Equity Assurance Plc is committed to protect and increase shareholder's value through transCompany corporate governancepractices which imbibe local regulatory standards and international best practices. The Company ensures compliance with theCode of Corporate Governance for Public Companies issued by the Securities and Exchange Commission (the SEC Code), theCode of Corporate Governance for Insurance Industry in Nigeria (the NAICOM Code), the Companies and Allied Matters Act, aswell as disclosure requirements under the International Financial Reporting Standard (IFRS).

The principles of Corporate Governance and the standards therein have been incorporated into and reflected in a number ofdocuments such as the Board charter, the charter of the various Board Committees, company policies and staff handbook. Thecompany carries out a quarterly review of its compliance status, and a Board evaluation exercise was carried out for the yearunder review.

EQUITY ASSURANCE PLC AND ITS SUBSIDIARY COMPANIESCORPORATE GOVERNANCE REPORT

Equity Assurance Plc is a public quoted company, committed to improving shareholder value through best business practices.The Company has consistently adopted, implemented and applied best practices in corporate governance, service delivery andvalue creation for all its stakeholders.

GOVERNANCE STRUCTUREThe Board of Directors

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Corporate financial policies relating to capital structure, financial performance, in relation to both the capital andrevenue budgets, including debt limits, dividend policy, stock splits and repurchases of stocks or other securities.

The Company’s Capital needs and financing arrangements, the Company’s ability to access capital market andmanagement’s financing plans.

Mr. Olanrewaju OgunbanjoMr. Ekpe Ukpabio

Board Finance & Investment CommitteeThe Board Committee oversees the Company’s investment and corporate finance transactions, reviews management policiesand guidelines, reviews the Company’s investment performance, and the Company’s capital structure. The Committee alsomakes recommendations to the Board concerning:

The Company’s investment policies and guidelines, the Company’s implementation of and compliance with those policiesand guidelines, and the performance of the Company’s investment portfolios and investment managers.

NAMEMr. Adetutu BuraimoMr. Ibidolapo BalogunMrs. Olayiwola AdeolaMr. Godwin Alegieuno


Directors Training

Mr. Ibikunle BalogunMrs. Markie Idowu

CORPORATE GOVERNANCE REPORT (CONT'D)

Role of Chairman and Chief Executive OfficerThe roles of the Chairman and Chief Executive are separate, and no one individual combines the two positions. The Chairman’smain responsibility is to lead and manage the Board to ensure that it operates effectively and fully discharges its legal andregulatory responsibilities. The Chairman is responsible for ensuring that Directors receive accurate, timely and clearinformation to enable the Board take informed decisions, and effectively monitor and provide advice necessary for the growthand success of the Company.

The responsibility for the day to day management of the Company is vested in the Managing Director/Chief Executive Officer,who is supported by Executive Management. The Managing Director executes the powers vested in him in accordance withguidelines approved by the Board of Directors. The Executive Management is accountable to the Board for the developmentand implementation of strategies and policies.

Board meetings attendance for year 2014

The Vice Chairman/Group Managing Director reports to the Chairman (acting on behalf of the Board) and to the Board directly.The Vice Chairman/Group Managing Director is responsible for all executive management matters affecting the Group. Allmembers of executive management report, either directly or indirectly to the Group acting executive.

Role of Group Managing Director

Training and Education of Directors on issues pertaining to their oversight function is a continuous process, which is necessaryin order to update their knowledge and skills and keep them informed of new developments in the Company’s business andoperating environment. The training of its Directors is of great importance to the Company. The Directors received traininglocally during the financial period ended December 31, 2014.

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The Company’s accounting and investment policies

EQUITY ASSURANCE PLC AND ITS SUBSIDIARY COMPANIESCORPORATE GOVERNANCE REPORT (CONT'D)

The Company’s policies and procedures for investment risk management.

Finance & Investment Committee membership and attendance for year 2014

NAMEMrs. Markie IdowuMr. Ibidolapo BalogunMr. Ekpe Ukpabio Mr. Ibikunle Balogun

Mr. Olanrewaju Ogunbanjo

Board Establishment, Human Resources & Governance Committee

The Board Establishment, Human Resources and Governance Committee assists the Board of Directors in performing itsoversight functions of identifying, evaluating and making recommendations to the Board in respect of qualified individuals tobe appointed Board members. The Committee formulates policies that guarantee effective Human Resources operations andthe highest standard of Governance, consistent with the approved policy guidelines by the Board and the various Codes ofCorporate Governance. The Committee’s terms of reference include but is not limited to the following:

Making recommendations with respect to the composition of the Board and its committees.

Making recommendation to the Board for evaluating the effectiveness of the Board’s and Company’s governancestructure.

Evaluate and make recommendations to the Board regarding the adoption of best practices appropriate for thegovernance of the affairs of the Board, its committees and the Company.

Discharge the Board's responsibilities relating to compensation and benefits of the Company’s Chief Executive Officer,officers of the Company who are designated as principal officers, and other senior officers, as appropriate, includingresponsibility for evaluating and reporting to the Board on matters concerning management performance, compensationand benefits, appointments, promotion and separation.

Align human capital policies, programs, processes and systems to support accomplishment of the Company’s mission,vision, goals and priorities.

Set strategic direction for Human capital development throughout the Company.

Recommend and periodically review the Company’s compensation policy for Board approval.

Ensure that the Company’s Board is independent, effective, competent and committed to enhancing shareholder value.

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Mr. Godwin Alegieuno

Board Establishment, Human Resources & Governance Committee membership and attendance for year 2014


NAMEMrs. Olayiwola AdeolaMr. Ibidolapo Balogun

The Committee's terms of reference includes but is not limited to:ensuring that sound technical, risk management and compliance policies and framework are in place to identify, accessand manage risks within the Company’s risk appetite as determined by the Board.

ensuring that the Company is fully compliant with statutory and regulatory guidelines and directives.

reviewing the adequacy and effectiveness of the Company’s risk management and controls.

Mrs. Markie Idowu

Mr. Ekpe Ukpabio

Mr. Ekpe Ukpabio

NAME

Board Technical, Risk Management & Compliance Committee meeting and attendance for year 2014

Board Technical, Risk Management & Compliance CommitteeThe Committee has oversight function over the implementation of the Company’s Enterprise Risk Management Framework,assessment of the non financial risks inherent in the Company’s operations and ensuring compliance with both regulatoryprovisions and directives and internally laid down policies. The Committee also has oversight over the implementation of theCompany’s Anti Money Laundering and Compliance program.

Mr. Ibidolapo BalogunMrs. Olayiwola Adeola

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P – PresentA – AbsentN/A Dr Oniwinde died on 3rd March, 2014.

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The Board ensures the protection of the statutory and general rights of Shareholders at all times, particularly their right tovote at General Meetings. All Shareholders are treated equally regardless of volume of shareholding or social status.

Shareholders

Protection of Shareholders Rights and Communication to Shareholders

The General Meeting of the Company is conducted in a transCompany and fair manner. Shareholders have ample time andopportunity to express their opinions on the Company’s financial performance and other issues affecting the Group.Representatives of the Corporate Affairs Commission, National Insurance Commission, Nigerian Stock Exchange, Securities andExchange Commission, Shareholder Associations and members of the press are invited to observe the proceedings of themeeting. Attendance at the meetings is open to all Shareholders or their proxies.

Key

Dr. Taiwo A. Oniwinde

Mr. Samuel Adedoyin

Mr. Godwin Alegieuno


Prince Adebunmi Adebanjo

Audit CommitteePursuant to Section 359(3) of the Companies and Allied Matters Act CAP, C20 LFN 2004, the Company has an Audit Committeecomprising 3 Directors and 3 Shareholders. The functions of the Audit Committee are as laid down in Section 359(6) of theCompanies and Allied Matters Act, CAP C20 LFN 2004.

Audit Committee Meeting and attendance for the year 2014

NAME


Mr. Ibikunle Balogun

The Board and Management of the Company ensure that accurate communication and information regarding the operations ofthe Company is properly disseminated to Shareholders, stakeholders and the general public timely and continuously. Theseinformation which includes the Company’s Annual Reports are also made available on the Company’s web portal atwww.equityassuranceplc.com.

Independent AdviceIndependent professional advice is available on request to the Board at the expense of the Company where such advice isrequired to enable the Board members effectively perform their duties.

http://www.equityassuranceplc.com/



















































**

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* Design Group-wide policies * Provide support synergies and efficient sharing of resources across the Group*

* Ensure more strategic focus on growth and other emerging opportunities and;*

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*

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EA Capital Management Limited is into business of Leasing of assets. The company is engaged in equipment leasing to Corporate and Individual clients.

Coordinate the formulation and implementation of Group StrategyAnticipate and identify potentially profitable business opportunities and champion the expansion of the Group.

Monitor risk exposure of subsidiaries, investments and potential investments to align with the Group’s risk appetite.

Institutionalise appropriate structures for effective management reporting, monitoring and control of the Groupsbusiness.

Equity Assurance Ghana LimitedEquity Assurance Ghana Limited like the Parent company is also engaged in General Insurance business

EA Capital Management Limited

Equity Assurance Plc is the Parent company and is engaged in General Insurance business covering Motor, Marine,Fire & Special Peril, Special Risks (Oil & Gas, Aviation), Contractors all risk, amongst others.

Equity Assurance Plc has a concession from the Ogun State Government. Equity Resort Hotel provides hotel,catering and entertainment services in Ijebu-Ode and beyond.

This is a Health Maintenance Organization. It provides qualitative healthcare services to individuals andorganizations within Nigeria. The company provides easy access to healthcare delivery, and is accredited by theNational Health Insurance Scheme.


Equity Resort Hotel Limited

Establish a formal structure that reduces redundancies within the current system and effectively maximises thetalents of available staff within the business.

GROUP STRUCTURE

The Company established a Group office in 2012. The purpose of the Group Office is to:

Managed Healthcare Services Limited

The Vice Chairman/Group Managing Director oversees the affairs of the Group, which comprises of the following companies:

Equity Assurance Plc


MANAGEMENT DISCUSSION AND ANALYSISFOR THE YEAR ENDED 31 DECEMBER, 2014

Forward Looking Statements

Business Strategy of the Company and Overall Performance

Operating Result, Cashflow and Financial Condition(in thousands of Nigerian Naira)

Dec-14 Dec-13 %chg Dec-14 Dec-13 %chgGross premium written 4,845,997 4,616,050 5 3,415,146 3,256,827 5

3,784,359 3,209,794 18 2,619,630 2,028,909 29 Underwriting results 1,512,914 1,626,849 -7 927,727 935,145 (1) Investment income 285,339 417,867 -32 157,381 307,362 (49) Operating expenses -2,148,503 -2,463,392 -13 (1,431,035) (1,715,078) (17) Profit/(loss)before tax 310,757 -364,940 -185 161,050 -752,133 (121)

% change = Percentage change in years.

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The Group experienced a growth of 5% in gross written premium when compared to prior year result. Thegrowth was mainly attributed to increasing marketing network via the various agency outlet spreads across thecountry and Ghana with key emphasis on providing insurance services and products that meet the global needsof customers.

Net Insurance Premium

Company

The Group's strategy is to use technology and international best practices to provide its customers with tailormade solutions, superior services and specially designed programs to assist its patrons through a network ofregional and agency offices spread over Nigeria and Ghana.

Group

As at 31 December, 2014, Equity Group comprises of Equity Assurance Plc (Parent company) and 3 subsidiaries.The group's major business activities are insurance, health and asset management respectively.

This "Management Discussion and Analysis" (MD&A) has been prepared as at 31 December, 2014 and should beread in conjunction with the consolidated financial statements of EQUITY ASSURANCE PLC AND ITS SUBSIDIARYCOMPANIES.

The MD & A contains forward looking statements related to Equity Assurance Plc financial and otherprojections, expected future plans, event, financial and operating results, objectives and performance as wellas underlying assumptions all of which involve risk and uncertainties. When used in this MD&A the words"believe", "anticipation", "intended", "estimate" and similar expressions are used to identify forward lookingstatements, although not all forward looking statements contain such words. These statements reflectmanagement's current belief and are based on information available to Equity Assurance Plc and are subject tocertain risk, uncertainties and assumptions.

The Group is engaged in providing insurance, health management and investment management to thecorporate and retail sector of Nigeria and in Ghana. It also aims to establish itself as the apex insurancecompany in Nigeria and the West Africa region. Equity Assurance Plc began the implemention of the NAICOMdirective on "no premium no cover policy" from the 1 January, 2013. The policy aims to stimulate liquiditywithin the system by reducing the huge receivables being carried on the statement of financial position ofinsurance companies. This will positively impact the income statements of insurance companies by eliminatingthe large portion of provision for outstanding premium charged for the receivables and make more cashavailable which can be used to generate more investment income.

On the contrary, this would reduce the premium income recognised by companies initially (as premium wouldonly be recognised when cash is received ) but the situation would normalize as the insured public adjust theircash flow management to the new regulation.


MANAGEMENT'S DISCUSSION AND ANALYSISFOR THE YEAR ENDED 31 DECEMBER, 2014 (Cont'd)

Revenue and Underwriting Results

Investment Income

Operating Expenses

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The underwriting result at the end of the year amounted to N1.513 billion compared to N1.627 billion earnedduring the year ended December 2013.

Investment income for the year amounted to N285.3million, a decrease of 32% over December 2013 figure ofN417.87million.

Operating expenses for the year totalled N2.264 billion an increase of 8% when compared to prior year.

The increase in the Group's level of activity was also reflected in the earned premium of N3.784 billion, anincrease of 18% over December 2013 figure of N3.21billion.

EQUITY ASSURANCE PLC AND ITS SUBSIDIARY COMPANIESSUMMARY OF SIGNIFICANT ACCOUNTING POLICIESFOR THE YEAR ENDED 31 DECEMBER, 2014

1 REPORTING ENTITY

2 BASIS OF PREPARATION

(a) GOING CONCERN

(b) STATEMENT OF COMPLIANCE WITH IFRS

(c) BASIS OF MEASUREMENT

· Non-derivative financial instruments are measured at fair value through profit or loss.· Available-for-sale financial assets that are measured at fair value.· Investment property is measured at fair value.· Insurance liabilities measured at present value of future cashflows.

(d) USE OF SIGNIFICANT ESTIMATES, ASSUMPTIONS AND MANAGEMENT JUDGEMENT

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The financial statements have been prepared in accordance with, and comply with, InternationalFinancial Reporting Standards (IFRSs) and in the manner required by Companies and Allied Matters Act ofNigeria, the Insurance Act of Nigeria and the Financial Reporting Council of Nigeria.

The Group makes estimates and assumptions about the future that affect the reported amounts of assets,liabilities, income,expenses and equity. Estimates and judgments are continually re- evaluated and arebased on historical experience and other factors, including expectations of future events that arebelieved to be reasonable under the circumstances. Actual results may differ from these estimates.

The effect of a change in an accounting estimate is recognized prospectively by including it incomprehensive income in the period of the change, if the change affects that period only; or in the periodof the change and future periods, if the change affects both.

These financial statements are the consolidated financial statements of Equity Assurance Plc, a Companyincorporated in Nigeria and its subsidiaries (hereafter referred to as ' the Group').

The Company emerged as a result of the merger between Equity Indemnity Insurance Limited and FirstAssurance Plc. In the scheme of the merger arrangement, First Assurance Plc acquired the net assets ofEquity Indemnity Insurance Limited and subsequently changed its name to Equity Assurance Plc.

The Company was incorporated in Nigeria as a private limited liability company, on December 13, 1984 tocarry out non-life insurance business and was converted to a Public Liability Company in 1985.

The principal activities of the Group is mainly the provision of non-life insurance, health management,assets management and hospitality services.

The consolidated financial statements for the year ended December 31, 2014 were approved for issue bythe Board of Directors on 29 April 2015.

These financial statements have been prepared on the going concern basis. The group has no intention orneed to reduce substantially its business operations. The Management believes that the going concernassumption is appropriate for the group due to sufficient capital adequacy ratio and projected liquidity,based on historical experience that short-term obligations will be refinanced in the normal course ofbusiness. Liquidity ratio and continuous evaluation of current ratio of the group is carried out by the group to ensure that there are no going concerns threats to the operation of the group.

The presentation of the group's consolidated financial statements requires management to makeestimates and judgement that affect the reported amount of assets and liabilities at the reporting dateand the reported amount of income and expenses during the year ended.

These consolidated and separate financial statements have been prepared on the historical cost basisexcept for the following:


SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESFOR THE YEAR ENDED 31 DECEMBER, 2014

(e) FUNCTIONAL AND PRESENTATION CURRENCY

(f) REGULATORY AUTHORITY AND FINANCIAL REPORTING

(g) OFFSETTING

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(i) Section 20(1a) provides that provisions for unexpired risks shall be calculated on a time apportionmentbasis of the risks accepted in the year.

(ii) Section 20(1b) requires provision for outstanding claims to be credited with an amount equal to thetotal estimated amount of all outstanding claims with a further amount representing 10% of the estimatedfigure for outstanding claims in respect of claims incurred but not reported at the end of the year underreview.

(iii) Section 21(1a) requires maintenance of contingency reserves for general businesses at specified rateas set out under Note 3.17 to cover flunctuations in securities and variation in statistical estimates

(v) Section 10(3) requires insurance companies in Nigeria to deposit 10% of the minimum paid up sharecapital with the Central Bank of Nigeria

(vi) Section 25(1) requires an insurance company operating in Nigeria to invest and hold investment inNigeria assets equivalent to not less than the amount of policyholders' funds in such accounts of theinsurer. Note 52 sets out assets allocation that covers policyholders' funds.

Section 59 of the Financial Reporting Council Act , 2011 (FRC Act) provides that in matters of financialreporting, if there is any inconsistency between the FRC Act and other Acts which are listed in section59(1) of the FRC Act, the FRC Act shall prevail. The Financial Reporting Council of Nigeria acting underthe provision of the FRC Act has promulgated IFRS as the National financial reporting framework ofNigeria. Consequently, the provision of Section 20(1b) of the Insurance Act 2003 which conflicts with theprovisions of IFRS have not been adopted. Section 20(1b) of the Insurance Act requires provision of 10% foroutstanding claims in respect of claims incurred but not reported at the end of the year under reviewwhereas Claims incurred but not reported liabilities have been estimated in line with accounting policy.

Financial assets and liabilities are set off and the net amount presented in the statement of financialposition when, and only when,the Group has a legal right to set off the amounts and intends either tosettle on a net basis or to realise the asset and settle the liability simultaneously. Income and expensesare presented on a net basis only when permitted under IFRS, or for gains and losses arising from a groupof similar transactions such as in the Group's trading activity.

(iv) Section 24 requires the maintenance of a margin of solvency to be calculated in accordance with theAct.

Information about significant areas of estimation, uncertainty and critical judgements in applyingaccounting policies that have the most significant effect on the amounts recognized in the consolidatedfinancial statements is included in Note 4 of the financial statements.

Items included in the consolidated financial statement of each entity of the group are measured using thecurrency that best reflects the economic substance of the underlying events and circumstances relevantto that entity(" the functional currency"). These consolidated financial statements are presented inNigerian Naira(N), which is the Company's functional currency. The financial information has beenrounded to the nearest thousands , except as otherwise indicated.

The Company is regulated by the National Insurance Commission of Nigeria (NAICOM) under the NigeriaInsurance Act. The Act specifies certain provisions which have impact on financial reporting as follows:



2.1 Basis of presentation and compliance with IFRS

2.2

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New standards, interpretations and amendments effective from 1 January 2014

The following new/amended accounting standards and interpretations have been issued, but are notmandatory for the financial year ended 31 December 2014. They have not been adopted in preparing thefinancial statements for the year ended 31 December 2014 and are expected to affect the entity in theperiod of initial application. In all cases the entity intends to apply these standards from application dateas indicated in the table below.

The principal accounting policies applied in the preparation of these financial statements are set outbelow. These policies have been consistently applied to all the periods presented, unless otherwisestated.

The consolidated financial statements comprise the consolidated statement of financial position, thestatements of changes in equity, the consolidated statement of cash flows and the notes.

These financial statements have been prepared in accordance with International Financial ReportingStandards (IFRS) and International Financial Reporting Interpretations Committee (IFRIC) applicable tocompanies reporting under IFRS. Additional information required by National regulations is includedwhere appropriate.

EQUITY ASSURANCE PLC AND ITS SUBSIDIARY COMPANIESFINANCIAL STATEMENTS, 31 DECEMBER 2014

IFRS Reference Nature of change Application date Impact on initial Application

1Annual Improvements (2011–2013 Cycle) Issued December 2013

The amendment to the Basis for Conclusions clarifies that an entity has an option to use either: - The IFRSs that are mandatory at the reporting date, or- One or more IFRSs that are not yet mandatory, if those IFRSs permit early application.

Mandatory adoption for periods beginning on or after 1 July 2014. Early adoption permitted.

No impact, as the Company has already adopted IFRS

2 IFRS 2 Share-based PaymentAnnual Improvements (2010-2012 Cycle) Issued December 2013

The amendment clarifies vesting conditions by separately defining a performance condition and a service condition, both of which were previously incorporated within the definition of a vesting condition.


No impact as the Company has no share based payment

3 IFRS 3 Business CombinationsAnnual Improvements (2010-2012 Cycle) Issued December 2013

The amendment clarifies that contingent consideration is assessed as either being a liability or an equity instrument on the basis of IAS 32 Financial Instruments: Presentation, and also requires contingent consideration that is not classified as equity to be remeasured to fair value at each reporting date, with changes in fair value being reported in profit or loss.


No impact, as Company is not involved in any business combination.

Annual Improvements (2011-2013 Cycle) Issued December 2013

The amendments to IFRS 3 clarify that:- The formation of all types of joint arrangements as defined in IFRS 11 (ie joint ventures and joint operations) are excluded from the scope of IFRS 3- The scope exception only applies to the accounting by the joint arrangement in its own financial statements and not to the accounting by the parties to the joint arrangement for their interests in the joint arrangement.


No impact

4 IFRS 5 Non-current Assets Held for Sale and Discontinued OperationsAnnual Improvements (2012-2014 Cycle) Issued December 2013

The amendment clarifies that the reclassification of an asset or disposal group from being held for sale to being held for distribution to owners, or vice versa is considered to be a continuation of the original plan of disposal.Upon reclassification, the classification, presentation and measurement requirements of IFRS 5 are applied.If an asset ceases to be classified as held for distribution to owners, the requirements of IFRS 5 for assets that cease to be classified as held for sale apply.

Mandatory adoption for periods beginning on or after 1 January 2016. Early adoption permitted.

The Company will assess the impact on adoption of the Standard and when it holds assets as 'distribution to owner'

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

IFRS 1 First-time Adoption of International Financial Reporting Standards



5 IFRS 7 Financial Instruments: Disclosures

Annual Improvements (2012-2014 Cycle)

The IASB clarified the circumstances in which an entity has continuing involvement from the servicing of a transferred asset.Continuing involvement exists if the servicer has a future interest in the performance of the transferred financial asset. Examples of situations where continuing involvement exists are where a transferor’s servicing fee is:- A variable fee which is dependent on the amount of the transferred asset that is ultimately recovered; or- A fixed fee that may not be paid in full because of non-performance of the transferred financial asset.The amendment is required to be applied retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. However, the amendment needs not to be applied for any period beginning before the annual period in which the entity first applies the amendments.


The Company is yet to assess the impact of the adoption of this standard.

A consequential amendment has been made to IFRS 1 First-time Adoption of International Financial Reporting Standards, in order that the same transitional provision applies to first time adopters. Applicability of the offsetting amendments in condensed interim financial statements.A further amendment to IFRS 7 has clarified that the application of the amendment Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7) issued in December 2011 is not explicitly required for all interim periods. However, it is noted that in some cases these disclosures may need to be included in condensed interim financial statements in order to comply with IAS 34.

6 IFRS 8 Operating SegmentsAnnual Improvements (2010-2012 Cycle) Issued: December 2013

The amendments require additional disclosures regarding management’s judgements when operating segments have been aggregated in determining reportable segments, including:- A description of the operating segments that have been aggregated- The economic indicators considered in determining that the aggregated operating segments share similar economic characteristics.Reconciliation of the total of a reportable segment’s assets to the entity’s assets:The amendment clarifies that a reconciliation of the total of reportable segments assets to the entity’s assets is only required if a measure of segment assets is regularly provided to the chief operating decision maker.


The Company would implement the standard on adoption.

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7 IFRS 9 Financial InstrumentsIFRS 9 (2009) Issued: November 2009

IFRS 9 (2009) applies to all assets within the scope of IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 requires that on initial recognition, all financial assets are measured at fair value (plus an adjustment for certain transaction costs if they are not measured as at fair value through profit or loss) and are classified into one of two subsequent measurement categories:- Amortised cost- Fair value.IFRS 9 (2009) eliminates the Held to Maturity (HTM), Available for Sale (AFS) and Loans and Receivables categories. In addition, the exception under which equity instruments and related derivatives are measured at cost

Can only be applied if an entity’s date of initial application is before February 2015.

To be implemented on adoption of the standard.

rather than fair value, where the fair value cannot be reliably determined, has been eliminated with fair value measurement being required for all of these instruments. A financial asset is measured after initial recognition at amortised cost only if it meets the following two conditions:1. The objective of an entity’s business model is to hold the financial asset in order to collect contractual cash flows2. The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

All other instruments are required to be measured after initial recognition at fair value. IFRS 9 (2009) retains the current requirement for financial instruments that are held for trading to be recognised and measured at fair value through profit or loss, including all derivatives that are not designated in a hedging relationship.Hybrid contracts with a host that are within the scope of IFRS 9 (2009) (ie a financial host) must be classified in their entirety in accordance with the classification approach summarised above. This eliminates the existing IAS 39 requirement to account separately for a host contract and certain embedded derivatives. The embedded derivative requirements under IAS 39 continue to apply where the host contract is a non-financial asset and for financial liabilities.

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IFRS 9 (2009) includes an option which permits investments in equity instruments to be measured at fair value through other comprehensive income. This is an irrevocable election to be made, on an instrument by instrument basis, at the date of initial recognition. Where the election is made, no amounts are subsequently recycled from other comprehensive income to profit or loss. Where this option is not taken, equity instruments with the scope of IFRS 9 (2009) are classified as at fair value through profit or loss. Irrespective of the approach adopted for the equity instrument itself, dividends received on an equity instrument are always recognised in profit or loss (unless they represent a return of the cost of investment).

Subsequent reclassification of financial assets between the amortised cost and fair value categories is prohibited, unless an entity changes its business model for managing its financial assets in which case reclassification is required. However, the guidance is restrictive and such changes are expected to be very infrequent. IFRS 9 (2009) states explicitly that the following are not changes in business model:1. A change in intention relating to particular financial assets (even in circumstances of significant changes in market conditions)2. A temporary disappearance of a particular market for financial assets3. A transfer of financial assets between parts of the entity with different business models.

8 IFRS 9 (2010) Issued: October 2011

As noted above, IFRS 9 (2009) was published in November 2009 and contained requirements for the classification and measurement of financial assets. Equivalent requirements for financial liabilities were added in October 2010, with most of them being carried forward unchanged from IAS 39.


To be implemented on adoption of the standard.

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In consequence: '- A financial liability is measured as at fair value through profit or loss (FVTPL) if it is held for trading, or is designated as at FVTPL using the fair value option- Other liabilities are measured at amortised cost.

In contrast to the requirements for financial assets, the bifurcation requirements for embedded derivatives have been retained; similarly, equity conversion features will continue to be accounted for separately by the issuer.However, some changes have been made, in particular to address the issue of where changes in the fair value of an entity’s financial liabilities designated as at FVTPL using the fair value option, which arise from changes in the entity’s own credit risk, should be recorded. This amendment is a result of consistent feedback received by the IASB from its constituents that changes in an entity’s own credit risk should not affect profit or loss unless the financial liability is held for trading.

IFRS 9 (2010) requires that changes in the fair value of financial liabilities designated as at FVTPL which relate to changes in an entity’s own credit risk should be recognised directly in other comprehensive income (OCI). However, as an exception, where this would create an accounting mismatch (which would be where there is a matching asset position that is also measured as at FVTPL), an irrevocable decision can be taken to recognise the entire change in fair value of the financial liability in profit or loss.

9 IFRS 9 (2013) Issued: November 2013

Three significant changes/additions were made compared to the previous version of IFRS 9:- Add new hedge accounting requirements- Withdraw the previous effective date of 1 January 2015 and leave it open pending the completion of outstanding phases of IFRS 9- Make the presentation of changes in ‘own credit’ in other comprehensive income (OCI) for financial liabilities under the fair value option available for early adoption without early application of the other requirements of IFRS 9.The new hedge accounting requirements are more principles-based, less complex, and provide a better link to risk management and treasury operations than the requirements in IAS 39 Financial Instruments: Recognition and Measurement.


The new model allows entities to apply hedge accounting more broadly to manage profit or loss mismatches, and as a result reduce ‘artificial’ hedge ineffectiveness that can arise under IAS 39.

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Key changes introduced by the new model include:- Simplified effectiveness testing, including removal of the 80-125% highly effective threshold- More items will now qualify for hedge accounting, eg pricing components within a non-financial item, and net foreign exchange cash positions- Entities can hedge account more effectively the exposures that give rise to two risk positions (eg interest rate risk and foreign exchange risk, or commodity risk and foreign exchange risk) that are managed by separate derivatives over different periods- Less profit or loss volatility when using options, forwards, and foreign currency swaps- New alternatives available for economic hedges of credit risk and ‘own use’ contracts which will reduce profit or loss volatility.

10 IFRS 9 (2014) Issued: July 2014

IFRS 9 Financial Instruments (2014) incorporates the final requirements on all three phases of the financial instruments projects – classification and measurement, impairment, and hedge accounting. IFRS 9 (2014) adds to the existing IFRS 9:- New impairment requirements for all financial assets that are not measured at fair value through profit or loss . -Amendments to the previously finalised classification and measurement requirements for financial assets.In a major change, which will affect all entities, a new ‘expected loss’ impairment model in IFRS 9 (2014) replaces the ‘incurred loss’ model in IAS 39 Financial Instruments: Recognition and Measurement. Under IFRS 9 (2014), the


The Company is still assessing the impact of adoption.

impairment model is a more ‘forward looking’ model in that a credit event (or impairment ‘trigger’) no longer has to occur before credit losses are recognised. For financial assets measured at amortised cost or fair value through other comprehensive income (FVTOCI), an entity will now always recognise (at a minimum) 12 months of expected losses in profit or loss. Lifetime expected losses will be recognised on these assets when there is a significant increase in credit risk after initial recognition.

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For trade receivables there is a practical expedient to calculate expected credit losses using a provision matrix based on historical loss patterns or customer bases. However, those historical provision rates would require adjustments to take into account current and forward looking information. The new impairment requirements are likely to bring significant changes. Although provisions for trade receivables may be relatively straightforward to calculate, new systems and approaches may be needed. However, for financial institutions the changes are likely to be very significant and require significant changes to internal systems and processes in order to capture the required information.

In other changes, IFRS 9 (2014) also introduces additional application guidance to clarify the requirements for contractual cash flows of a financial asset to be regarded as giving rise to payments that are Solely Payments of Principal and Interest (SPPI), one of the two criteria that need to be met for an asset to be measured at amortised cost. Previously, the SPPI test was restrictive, and the changes in the application of the SPPI test will result in additional financial assets being measured at amortised cost. For example, certain instruments with regulated interest rates may now qualify for amortised cost measurement, as might some instruments which only marginally fail the strict SPPI test.

A third measurement category has also been added for debt instruments - FVTOCI. This new measurement category applies to debt instruments that meet the SPPI contractual cash flow characteristics test and where the entity is holding the debt instrument to both collect the contractual cash flows and to sell the financial assets.In comparison with previous versions of IFRS 9, the introduction of the FVTOCI category may result in less profit or loss volatility, in particular for entities such as insurance companies which hold large portfolios with periodic buying and selling activities. The amendments could lead to significant reclassifications of debt instruments across the different measurement categories: amortised cost, FVTOCI, and FVTPL. This may lead to less volatility in profit or loss for debt investment portfolios, but greater equity volatility if assets are reclassified from amortised cost to FVTOCI (which could affect regulatory capital).

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11 IFRS 9 (own credit risk requirements)

IFRS 9 (2014) provides an option to early adopt the ‘own credit’ provisions for financial liabilities measured at fair value through profit or loss (FVTPL) under the fair value option without any of the other requirements of IFRS 9. This option will remain available until 1 January 2018.Entities that use the fair value option and designate financial liabilities at fair value through profit or loss (FVTPL) present the fair value changes in ‘own credit’ in OCI instead of profit or loss.Therefore, for financial liabilities designated at FVTPL, entities can continue to apply IAS 39 Financial Instruments: Recognition and Measurement but follow the presentation requirement in IFRS 9 and present the changes in ‘own credit’ in OCI.This amendment is expected to mainly affect financial institutions and insurers.

Can be applied until the effective date of IFRS 9 (2014) which is 1 January 2018.

12 IFRS 10 Consolidated financial statementsAmendments to IFRS 10 Issued: September 2014

Amendments to IFRS 10 and IAS 28 - Sale or Contribution of Assets between an Investor and its Associate or Joint VentureThe amendments clarify the accounting for transactions where a parent loses control of a subsidiary, that does not constitute a business as defined in IFRS 3 Business Combinations, by selling all or part of its interest in that subsidiary to an associate or a joint venture that is accounted for using the equity method.In the case of any retained interest in the former subsidiary, gains and losses from the remeasurement are treated as follows:


No impact.

- The retained interest is accounted for as an associate or joint venture using the equity method:The parent recognises the gain or loss in profit or loss only to the extent of the unrelated investors’ interests in the new associate or joint venture. The remainder is eliminated against the carrying amount of the investment in the associate or joint venture.- The retained interest is accounted for at fair value in accordance with IFRS 9 Financial Instruments:The parent recognises the gain or loss in full in profit or loss.

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13 IFRS 11 Joint ArrangementsAmendments to IFRS 11 Issued: May 2014

Amendments to IFRS 11 – Accounting for Acquisitions of Interests in Joint OperationsThe amendments require an entity to apply all of the principles of IFRS Business Combinations when it acquires an interest in a joint operation that constitutes a business as defined by IFRS 3. The amendment also includes two new Illustrative Examples:- Accounting for acquisitions of interests in joint operations in which the activity constitutes a business- Contributing the right to use know-how to a joint operation in which the activity constitutes a business.


No impact.

A consequential amendment to IFRS 1 First-time Adoption of International Financial Reporting Standards has also been made, to clarify that the exemption from applying IFRS 3 to past business combinations upon adoption of IFRS also applies to past acquisitions of interests in joint operations in which the activity of the joint operation constitutes a business, as defined in IFRS 3.

14 IFRS 13 Fair Value MeasurementAnnual Improvements (2010-2012 Cycle) Issued: December 2013

The amendment clarifies that short-term receivables and payables with no stated interest rate can still be measured at the invoice amount without discounting, if the effect of discounting is immaterial.


No impact.

15 Scope of IFRS 13.52 (portfolio exemption)Improvements (2011-2013 Cycle) Issued: December 2013

IFRS 13.52 defines the scope of the exception that permits an entity to measure the fair value of a group of financial assets and financial liabilities on a net basis. This is often referred to as the portfolio exception.The amendment clarifies that the portfolio exception applies to all contracts within the scope of IAS 39 Financial Instruments: Recognition and Measurement (or IFRS 9 Financial Instruments if this has been adopted early), regardless of whether they meet the definition of financial assets or financial liabilities in IAS 32 Financial Instruments: Presentation.


No impact.

16 IFRS 14 Regulatory Deferral AccountsIFRS 14 Issued: January 2014

In many countries, industry sectors (including utilities such as gas, electricity and water) are subject to rate regulation where governments regulate the supply and pricing. This can have a significant effect on the amount and timing of an entity’s revenue. Some national GAAPs require entities that operate in industry sectors subject to rate regulation, to recognise associated assets and liabilities. The scope of IFRS 14 is narrow, with this extending to cover only those entities that:


No impact.

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- Are first-time adopters of IFRS- Conduct rate regulated activities- Recognise associated assets and/or liabilities in accordance with their current national GAAP.Entities within the scope of IFRS 14 would be afforded an option to apply their previous local GAAP accounting policies for the recognition, measurement and impairment of assets and liabilities arising from rate regulation, which would be termed regulatory deferral account balances.Any regulatory deferral account balances, and their associated effect on profit or loss, would be recognised and presented separately from other items in the primary financial statements. As a result, for those entities that elect to adopt IFRS 14, all other line items and subtotals would exclude the effects of regulatory deferral accounts, meaning that they would be comparable with other entities that report in accordance with IFRS but do not apply IFRS 14.

Application guidance is included in IFRS 14 in respect of other IFRSs that would need to be considered alongside the previous national GAAP accounting requirements in order for these regulatory deferral accounts to be accounted for appropriately in an entity’s IFRS financial statements, including:- IAS 10 Events after the Reporting Period- IAS 12 Income Taxes- IAS 28 Investments in Associates and Joint Ventures- IAS 33 Earnings per Share- IAS 36 Impairment of Assets- IFRS 3 Business Combinations- IFRS 5 Non-current Assets Held for Sale and Discontinued Operations- IFRS 10 Consolidated Financial Statements- IFRS 12 Disclosure of Interests in Other Entities.

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17 IFRS 15 Revenue from Contracts with CustomersIFRS 15 Issued: May 2014

IFRS 15 Revenue from Contracts with Customers supersedes IAS 18 Revenue, IAS 11 Construction Contracts and related Interpretations (IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfers of Assets from Customers and SIC 31 Revenue – Barter Transactions Involving Advertising Services).The objective of IFRS 15 is to clarify the principles of revenue recognition. This includes removing inconsistencies and perceived weaknesses and improving the comparability of revenue recognition practices across companies, industries and capital markets. In doing so IFRS 15 establishes a single revenue recognition framework. The core principle of the framework is, that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.


The Company is currently assessing the impact on adoption.

Furthermore the guidance significantly enhances the required qualitative and quantitative disclosures related to revenue. The main objective of the requirements is the disclosure of sufficient information in terms of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. In order to meet this objective, IFRS 15 requires specific disclosures for contracts with customers and significant judgements.

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To accomplish this, IFRS 15 requires the application of the following five steps:1. Identify the contract2. Identify the performance obligation(s)3. Determine the transaction price4. Allocate the transaction price to each performance obligation5. Recognise revenue when each performance obligation is satisfied.IFRS 15 also includes specific guidance related to several additional topics, some of the key areas are:- Contract costs- Sale with a right of return- Warranties- Principal vs agent considerations- Customer options for additional goods and services- Customers unexercised rights- Non-refundable upfront fees (and some related costs)- Licensing Repurchase agreements- Consignment arrangements- Bill-and-hold arrangements- Customer acceptance.



18 IAS 16 Property, Plant and EquipmentAnnual Improvements (2010-2012 Cycle) Issued: December 2013

Revaluation method – proportionate restatement of accumulated depreciationThe amendment clarifies the computation of accumulated depreciation when items of property, plant and equipment are subsequently measured using the revaluation model. The net carrying amount of the asset is adjusted to the revalued amount, and either:i. The gross carrying amount is adjusted in a manner consistent with the net carrying amount (eg proportionately to the change in the [net] carrying value, or with reference to observable market data). Accumulated depreciation is then adjusted to equal the difference between the gross and net carrying amountsii. Accumulated depreciation is eliminated against the gross carrying amount.


The standard is not expected to have a material impact on the future financial statements.

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Amendments to IAS 16 Issued: May 2014

Paragraph 62A of IAS 16 has been added to prohibit the use of revenue-based methods of depreciation for items of property, plant and equipment.Paragraph 62A clarifies that this is because the revenue generated by an activity that includes the use of an item of property, plant and equipment generally reflects factors other than the consumption of the economic benefits of the item, such as:- Other inputs and processes- Selling activities and changes in sales- Volumes and prices, and- Inflation.


The Company is currently assessing the impact on adoption.

Paragraph 56 of IAS 16, which includes guidance for the depreciation amount and depreciation period, has been expanded to state that expected future reductions in the selling price of items produced by an item of property, plant and equipment could indicate technical or commercial obsolescence (and therefore a reduction in the economic benefits embodied in the item), rather than a change in the depreciable amount or period of the item.

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Amendments to IAS 16 and IAS 38 – Clarification of Acceptable Methods of Depreciation and Amortisation



20 IAS 19 Employee Benefits

21 IAS 19 Employee BenefitsAnnual Improvements (2012-2014 Cycle) Issued: September 2014

The guidance in IAS 19 has been clarified and requires that high quality corporate bonds used to determine the discount rate for the accounting of employee benefits need to be denominated in the same currency as the related benefits that will be paid to the employee.Entities are required to apply the amendment from the earliest comparative period presented in the financial statements, with initial adjustments being recognised in retained earnings at the beginning of that period.



22 IAS 24 Related Party DisclosuresAnnual Improvements (2010-2012 Cycle) December 2013

The amendment clarifies that an entity that provides key management personnel services (management entity) to a reporting entity (or to the parent of the reporting entity), is a related party of the reporting entity, and:- Would require separate disclosure of amounts recognised as an expense for key management personnel services provided by a separate management entity- Would not require disaggregated disclosures by the categories set out in IAS 24.17.



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Amendments to IAS 19 Issued: November 2013

Amendments to IAS 19 - Defined Benefit Plans: Employee ContributionsThe amendment introduces a narrow scope amendments that: - Provides a practical expedient for certain contributions from employees or third parties to a defined benefit plan, but only those contributions that are independent of the number of years of service- Clarifies the treatment of contributions from employees or third parties to a defined benefit plan that are not subject to the practical expedient. These are accounted for in the same way that the gross benefit is attributed in accordance with IAS 19.70.Contributions that are independent of the number of years of service include:- Contributions that are based on a fixed percentage of salary- Contributions of a fixed amount throughout the service period- Contributions that are dependent on the employee’s age.






23 IAS 27 Separate Financial StatementsAmendments to IAS 27 Issued: August 2014

The amendments include the introduction of an option for an entity to account for its investments in subsidiaries, joint ventures, and associates using the equity method in its separate financial statements. The accounting approach that is selected is required to be applied for each category of investment.Before the amendments, entities either accounted for its investments in subsidiaries, joint ventures or associates at cost or in accordance with IFRS 9 Financial Instruments (or IAS 39 Financial Instruments: Recognition and Measurement for those entities that have yet to adopted IFRS 9). The option to present its investments using the equity method result in the presentation of a share of profit or loss, and other comprehensive income, of subsidiaries, joint ventures and associates with a corresponding adjustment to the carrying amount of the equity accounted investment in the statement of financial position.



Any dividends received are deducted from the carrying amount of the equity accounted investment, and are not recorded as income in profit or loss.A consequential amendment was also made to IAS 28 Investments in Associates and Joint Ventures, to avoid a potential conflict with IFRS 10 Consolidated Financial Statements for partial sell downs.

24 IAS 34 Interim Financial ReportingAnnual Improvements (2012-2014 Cycle) Issued: September 2014

The requirements of paragraph 16A of IAS 34 require additional disclosures to be presented either in the:- Notes to the interim financial statements or- Elsewhere in the interim financial report.The amendment clarifies, that a cross-reference is required, if the disclosures are presented ‘elsewhere’ in the interim financial report, such as in the management commentary or the risk report of an entity. However, to comply with paragraph 16A of IAS 34, if the disclosures are contained in a separate document from the interim report, that document needs to be available to users of the financial statements on the same terms and at the same time as the interim report itself.



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25 IAS 38 Intangible AssetsAnnual Improvements (2010-2012 Cycle) Issued: December 2013

The amendment clarifies the computation of accumulated amortisation when intangible assets are subsequently measured using the revaluation model. The net carrying amount of the asset is adjusted to the revalued amount, and either:i. The gross carrying amount is adjusted in a manner consistent with the net carrying amount (eg proportionately to the change in the [net] carrying value, or with reference to observable market data). Accumulated amortisation is then adjusted to equal the difference between the gross and net carrying amountsii. Accumulated amortisation is eliminated against the gross carrying amount.



26 Amendments to IAS 38 Issued: May 2014

The amendments clarify that for intangible assets there is a rebuttable presumption that amortisation based on revenue is not appropriate.Paragraphs 98A - 98C of IAS 38 have been added to clarify that there is a presumption that revenue-based amortisation is not appropriate, and that this can only be rebutted in limited circumstances where either:- The intangible asset is expressed as a measure of revenue, or- Revenue and the consumption of the economic benefits of the intangible asset are highly correlated.Paragraph 98B clarifies that as a starting point to determining an appropriate amortisation method, an entity could determine the ‘predominant limiting factor’ inherent in the intangible asset, for example:- A contractual term which specifies the period of time that an entity has the right to use an asset



- Number of units allowed to be produced- Fixed total amount of revenue allowed to be received.Paragraph 98C then clarifies that where an entity has identified that the achievement of a revenue threshold is the predominant limiting factor of an intangible asset, it may be possible to rebut the presumption that revenue-based amortisation is not appropriate.

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27 IAS 40 Investment PropertyAnnual Improvements (2011-2013 Cycle) Issued: December 2013

The amendment notes that determining whether the acquisition of an investment property is a business combination requires consideration of the specific requirements of IFRS 3, independently from the requirements of IAS 40, in relation to:- Whether the acquisition of investment property is the acquisition of an asset, a group of assets, or a business combination (by applying the requirements of IFRS 3 only)- Distinguishing between investment property and owner-occupied property (by applying the requirements of IAS 40 only).



28 IAS 41 AgricultureAmendments to IAS 41 Issued: June 2014

The amendments extend the scope of IAS 16 Property, Plant and Equipment to include bearer plants and define a bearer plant as a living plant that:- Is used in the production process of agricultural produce,- Is expected to bear produce for more than one period; and- Has a remote likelihood of being sold (except incidental scrap sales).The changes made result in bearer plants being accounted for in accordance with IAS 16 using either:- The cost model, or- The revaluation model.The agricultural produce of bearer plants remains within the scope of IAS 41 Agriculture.The amendments include the following transitional reliefs for the purposes of their first time application:



- Deemed cost exemption – Entities are allowed to use the fair value of the bearer plants at the beginning of the earliest period presented as the deemed cost.- Disclosures – Quantitative information describing the effect of the first time application as required by IAS 8.28(f) is not required for the current reporting period, but is required for each prior period presented.

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3 SIGNIFICANT ACCOUNTING POLICIES

3.1 CONSOLIDATION(i) Subsidiaries

Acquistion - related costs are expensed as incurred.

(ii) Disposal of subsidiaries

(iii) Special purpose entities

3.2 CASH AND CASH EQUIVALENTS

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Significant accounting policies are defined as those that are reflective of significant judgements anduncertainties and potentially give rise to different results under different assumptions and conditions.

Special purpose entities that are created to accomplish a narrow and well- defined objective such as thesecuritisation of particular assets, or the execution of specific borrowings or lending transactions or theprovision of certain benefits to employee.

The financial statements of special purpose entities are included in the Group's consolidated financialstatements, where the substance of the relationship is that the Group controls the special purpose entity.

Cash and cash equivalents include notes and coins on hand and highly liquid financial assets with originalmaturities of less than three months, which are subject to insignificant risk of changes in their fair value,and are used by the Group in the management of its short-term commitments. Cash and cash equivalentsare carried at amortized cost in the statement of financial position.

The accounting policies set out below have been consistently applied to all periods presented in thesefinancial statements.

The financial statements of subsidiaries are consolidated from the date the Group acquires control, up tothe date that such effective control ceases. For the purpose of these financial statements, subsidiariesare entities over which the Group, directly or indirectly, has power to govern the financial and operatingpolicies so as to obtain benefits from their activities.

Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for asequity transactions (transactions with owners). Any difference between the amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or received is recogniseddirectly in equity and attributed to the Group.

Inter- company transactions, balances and unrealised gains on transactions between companies within theGroup are eliminated on consolidation. Unrealised losses are also eliminated in the same manner asunrealised gains, but only to the extent that there is no evidence of impairment. Accounting policies ofsubsidiaries have been changed where necessary to ensure consistency with the policies adopted by theGroup. Investment in subsidiaries in the separate financial statements of the Company entity is measuredat cost.

If the business combination is achieved in stages, fair value of the acquirer's previously held equityinterest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.

On loss of control, the Group derecognises the assets and liabilities of the subsidiary, any controllinginterests and the other components of equity related to the subsidiary. Any surplus or deficit arising onthe loss of control is recognised in profit or loss. If the Group retains any interest in the previoussubsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, thatretained interest is accounted for as an equity, accounted investment or as an available - for - salefinancial asset depending on the level of influence retained.



3.3 FINANCIAL ASSETS 3.3.1 Classification of financial assets

The Group classifies its financial assets into the following categories:, (a) Financial assets at fair fair value through profit or loss(b) Available-for-sale financial assets(c) Held-to-maturity (d) Loans and receivables

(a) Fair value through profit or lossFair value through profit or loss financial assets can be classified into two sub-categories, namely:i) those which are held for trading, and ii) those designated at fair value through profit or loss at inception.

(i) Held-for-trading

i. is acquired principally for the purpose of selling in the short-term, or

(ii) Other financial assets designated at fair value through profit or loss

·

·

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A financial asset must be classified as fair value through profit or loss when the instrument is deemed tobe held-for-trading.

Management designates a financial instrument which is held-for-trading to any other category of financialinstruments (e.g. as available-for-sale or held-to-maturity) if it

ii. forms part of a portfolio of financial assets in which there is evidence of short-term profi-taking

Management may elect to designate any financial asset at fair value through profit or loss. Such adesignation by management may only be made at initial recognition and is an irrevocable decision. Twopossible situations where management may want to designate financial instruments which are not held-for-trading are as follows:

Instruments held in internal funds to match insurance and investment contracts liabilities that are linkedto the changes in fair value of these assets. The designation of these assets to be at fair value throughprofit or loss eliminates or significantly reduces a measurement or recognition inconsistency (sometimesreferred to as an accounting mismatch’) that would otherwise arise from measuring assets or liabilities orrecognizing the gains and losses on them on different bases; and

Instruments managed and whose performance is evaluated on a fair value basis. Information about thesefinancial assets is provided internally on a fair value basis to the company’s key management personnel.The company’s investment strategy is to invest in equity and debt securities and to evaluate them withreference to their fair values. Assets that are part of these portfolios are designated upon initialrecognition at fair value through profit or loss.

The classification depends on the purpose for which the investments were acquired. Managementdetermines the classification of investments at initial recognition and re-evaluates this at each reportingdate.

A financial asset is classified into the ‘financial assets at fair value through income category at inceptionif acquired principally for the purpose of selling in the short-term, if it forms part of a portfolio offinancial assets in which there is evidence of short-term profit-taking, or if so designated bymanagement.



( b ) Available-for-sale financial assets

(c) Held-to-maturity financial assets

( d ) Loans and receivables

(d)(i) Trade receivables

3.3.2 Measurement

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A provision for impairment of loans and receivables is established when there is objective evidence thatthe company will not be able to collect all amounts due according to their original terms. Receivablesarising from insurance contracts are also classified in this category and are reviewed for impairment aspart of the impairment review of loans and receivables.

Trade receivables arising from insurance contracts are stated after deducting allowance made for specificdebts considered doubtful of recovery. Trade receivables are reviewed at every reporting period forimpairment.

Regular-way purchases and sales of financial assets are recognized on trade-date which is the date onwhich the Group commits to purchase or sell the asset.

Financial assets are initially recognized at fair value, in the case of all financial instruments not carriedat fair value through profit or loss, transaction costs that are directly attributable to their acquisition.Financial assets carried at fair value through profit or loss are initially recognized at fair value, andtransaction costs are expensed in the income statement.

Financial assets are derecognized when the rights to cash flows from them have expired or where theyhave been transferred and the company has also transferred substantially all risks and rewards ofownership.

Available-for-sale financial assets are non-derivatives financial assets that are either designated as suchby management in this category or not classified in any of the other categories. Unquoted equitysecurities whose fair values cannot be reliably measured are carried at cost less impairment allowance ifany. All other available -for- sale investments are carried at fair value. Dividends received on Available-for-sale financial assets are recognized in the statement of profit or loss and other comprehensive incomein the period in which the dividends are approved by the investee Companys' shareholders in the annualgeneral meeting and the Group's right to receive payment has been established. Foreign exchange gainsor losses on availabe-for- sale debt security investments are recognized in profit or loss.A non- derivative financial asset may be reclassified from the available-for-sale category to the loans andreceivable category if it otherwise would have met the definition of loans and receivables and if theGroup has the intention and ability to hold that financial asset for the foreseeable future or untilmaturity.

Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable paymentsand fixed maturities that the company’s management has the positive intention and ability to hold tomaturity. These assets are recognized initially at fair value and subsequently measured at amortized costusing the effective interest method, less provision for impairment.

A provision for impairment of debt securities held to maturity is established when there is objectiveevidence that the company will not be able to collect all amounts due according to their original terms.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that arenot quoted in an active market other than those that the Group intends to sell in the short term or that ithas designated as at fair value through income or available for sale. Loans and receivables are recognizedinitially at fair value and subsequently measured at amortized cost using the effective interest method,less provision for impairment.



3.3.3 De-recognition

3.3.4 Amortized cost measurement

3.3.5 Fair value measurement

3.3.6 IMPAIRMENT OF FINANCIAL ASSETS

43

For all other financial instruments , fair value is determined using valuation techniques. These includethe use of recent arm's length transactions, reference to other instruments that are substantially thesame, discounted cash flow analysis and option pricing model making maximum use of market inputs andrelying as little as possible on entity-specific inputs.

In cases where the fair value of unlisted equity instruments cannot be determined reliably, theinstruments are carried at cost less impairment.

The Group assesses at each reporting date whether there is objective evidence that a financial asset orgroup of financials is impaired. A financial asset or a group of financial assets is impaired and impairmentlosses are incurred only if there is objective evidence of impairment as a result of one or more eventsthat occurred after the initial recognition of the asset(a loss event) and that loss event (or events) has animpact on the estimated future cashflows of the financial asset or group of financial assets that can bereliably estimated. The criteria that the Group uses to determine that there is objective evidence of animpairment loss include:

Interest on available-for-sale securities calculated using the effective interest method is recognized inthe income statement. Dividends on available-for-sale equity instruments are recognized in the incomestatement when the company’s right to receive payments is established. Both are included in theinvestment income line.

The Group derecognizes a financial asset when the contractual rights to the cashflows from the financialasset expire, or when it transfers the rights to receive contractual cashflows on the financial asset in atransaction in which substantially all of the risks and rewards of ownership of the financial asset aretransferred. Any interest in transferred financial assets that is created or retained by the Group isrecognized as a separate asset or liability.

The Group derecognizes a financial liability when its contractual obligations are discharged, cancelled orexpired.

The amortized cost of a financial asset or liability is the amount at which the financial asset or liability ismeasured at initial recognition, minus principal repayments, plus or minus the cumulative amortizationusing the effective interest method of any difference between the initial amount recognized and thematurity amount, minus any reduction for impairment.

Fair value is the amount for which an asset could be exchanged, or a liability settled, betweenknowledgeable, willing parties in an arm's length transaction on the measurement date.

For financial instruments traded in active markets, the determination of fair values of financial assetsand liabilities is based on quoted market prices readily available in major exchanges ( for example, NSE,LSE).

Available-for-sale financial assets and financial assets at fair value through profit or loss aresubsequently carried at fair value.Loans and receivables and held-to-maturity financial assets are carriedat amortized cost using the effective interest method. Realized and unrealized gains and losses arisingfrom changes in the fair value of the ‘financial assets at fair value through profit or loss’ category areincluded in the income statement in the period in which they arise. Unrealized gains and losses arisingfrom changes in the fair value of available-for-sale financial assets are recognized in equity. Whensecurities classified as available for sale are sold or impaired, the accumulated fair value adjustments areincluded in the income statement as net realized gains/losses on financial assets.



(i) significant financial difficulty of the issuer or debtor

(iii) a breach of contract, such as a default or delinquency in interest or principal payments(iv) deterioration of the borrower's competitive position(v) deterioration in the value of collaterals

(a)

(b)

44

For assets carried at amortized cost, the Group first assesses whether objective evidence of impairmentexists individually for financial assets that are individually significant and individually or collectively forfinancial assets that are not individually significant. If the Group determines that no objective evidenceof impairment exists for an individually assessed financial asset, whether significant or not, it includesthe asset in a group of financial assets with similar credit risk characteristics and collectively assessesthem for impairment. Asset that are individually assessed for impairment and for which an impairmentloss is or continues to be recognized are not included in a collective assessment of impairment.

The amount of the loss is measured as the difference between the asset's carrying amount and thepresent value of estimated future cash flows ( excluding future credit losses that have not been incurred)discounted at the financial asset's original effective interest rate. The carrying amount of the asset isreduced through the use of an allowance account and the amount of the loss is recognized in theconsolidated income statement.

For assets classified as available for sale, the Group assesses at each reporting date whether there isobjective evidence that a financial asset or a group of financial assets is impaired. In the case of equityinvestments classified as available for sale, a significant or prolonged decline in the fair value of thesecurity below its cost is an objective evidence of impairment resulting into the recognition of animpairment loss. In this respect, a decline of 20% or more is regarded as significant, and a period of12months or longer is considered to be prolonged. If any such quantitative evidence exists, the asset isconsidered for impairment, taking qualitative evidence into account. The cumulative loss measured asthe difference between the acquisition cost and the current fair value, less any impairment loss on thatfinancial asset previously recognised in profit or loss is removed from equity and recognized in theconsolidated income statement. Impairment losses recognized in the consolidated income statement onequity instruments are not reversed through the consolidated income statement. If in a subsequent period the fair value of a debt instrument classified as available for sale increases and the increase can beobjectively related to an event occurring after the impairment loss was recognized in profit or loss, theimpairment loss is reversed through the consolidated income statement.

(ii) it becomes probable that the premium debtors will enter bankruptcy or other financial re-organization

(vi) observable data indicating that there is a measurable decrease in the estimated future cash flowfrom a group of financial assets since the initial recognition of those assets, although the decrease cannotyet be identified with the individual financial assets in the Group

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fairvalue less costs to sell. In assessing value in use, the estimated future cash flows are discounted to theirpresent value using a pre-tax discount rate that reflects current market assessments of the time value ofmoney and the risks specific to the asset.



( c)

3.4 REINSURANCE RECEIVABLES

(a) Receivables and payables related to insurance contracts

3.5 DEFERRED ACQUISITION COSTS

45

Receivables and payables are recognised when due. These include amounts due to and from agents,brokers and insurance contract holders. If there is objective evidence that the insurance receivable isimpaired, the Group reduces the carrying amount of the insurance receivable accordingly and recognisesthat impairment loss in the income statement. The Group gathers the objective evidence that aninsurance receivable is impaired using the same methodology adopted for financial assets held at used forthese financial assets. These processes are described in accounting policy.

Acquisition costs comprise all direct and indirect costs arising from the writing of non-life insurancecontracts. Deferred acquisition costs represent a proportion of commission which are incurred during afinancial year and are deferred to the extent that they are recoverable out of future revenue margins. Itis calculated by applying to the acquisition expenses the ratio of unearned premium to written premium.

Trade receivables - They are initially recognized at fair value and subsequently measured at amortizedcost less provision for impairment. A provision for impairment is made when there is an objectiveevidence (such as the probability of solvency or significant financial difficulties of the debtors) that theGroup will not be able to collect all the amount due based on the original terms of the invoice.Allowances are made based on an impairment model which consider the loss given default for eachcustomer, probability of default for the sectors in which the customer belongs and emergence periodwhich serves as an impairment trigger based on the age of the debt. Impaired debts are derecognizedwhen they are assessed as uncollectible. If in a subsequent period, the amount of the impairment lossdecreases and the decrease can be related objectively to an event occurring after the impairment wasrecognized, the previous recognized impairment loss is reversed to the extent that the carrying value ofthe asset does not exceed its amortized cost at the reversed date. Any subsequent reversal of animpairment loss is recognized in the profit and loss.

Contracts entered into by the Group with reinsurers under which the Group is compensated for losses onone or more contracts issued by the Group and that meet the classification requirements for theinsurance contracts in accounting policy 4 are classified as reinsurance contracts held. Contract that donot meet these classification requirements are classified as financial assets. Insurance contracts enteredin to by the Group under which the contract holder is another insurer (inwards reinsurance) are includedwith insurance contracts. Reinsurance assets consist of short-term balances due from reinsurers, as wellas long term receivables that are dependent on the expected claims and benefits arising under therelated reinsured insurance contracts. Amounts recoverable from or due to reinsurers are measuredconsistently with the amounts associated with the reinsured insurance contracts and in compliance withthe terms of each reinsurance contract. Reinsurance liabilities are primarily premiums payable forreinsurance contracts and are recognised as an expense when due. The Group has the right to set-off re-insurance payables against amount due from re-insurance and brokers in line with the agreedarrangement between both parties.

The Group assesses its reinsurance assets for impairment on a yearly basis. If there is objective evidencethat the reinsurance asset is impaired, the Group reduces the carrying amount of the reinsurance asset toits recoverable amount and recognises that impairment loss in the income statement. The Group gathersthe objective evidence that a reinsurance asset is impaired using the same process adopted for financialassets held at amortised cost. The impairment loss is calculated using the incurred loss model for thesefinancial assets.



3.6

3.7 INVESTMENT IN SUBSIDIARIES

3.8 INVESTMENT PROPERTIES

46

Recognition of investment properties takes place only when it is probable that the future economicbenefits that are associated with the investment property will flow to the entity and the cost can bemeasured reliably.

Investment properties are measured initially at cost, including transaction costs. The carrying amountincludes the cost of replacing parts of an existing investment property at the time the cost was incurredif the recognition criteria are met and excludes the costs of day-to-day servicing of an investmentproperty. Subsequent to initial recognition, investment properties are stated at fair value, which reflectsmarket condition at the date of the consolidated statement of financial position.

Gains or losses arising from the changes in the fair value of investment properties are included in theconsolidated income statement in the year in which they arise. Subsequent expenditure is included in theassets carrying amount only when it is probable that future economic benefits associated with the itemwill flow to the Group and the cost of the item can be measured reliably. All other repairs andmaintenance costs are charged to the consolidated income statement during the financial period in whichthey are incurred. The fair value of investment property is based on the nature, location and condition ofthe specific asset.

Rent receivable is recognized in profit or loss and is spread on a straight-line basis over the period of thelease. Where lease incentive, such as a rent free period are given to a Lessee, the carrying value of therelated investment property excludes any amount reported as a separate asset as a result of recognizingrental income on this basis.

PREPAYMENTS AND OTHER RECEIVABLESOther receivables are made up of prepayments and other amounts due from parties which are not directly linked to insurance or investment contracts, prepayments are carried at amortised cost.Other receivablesare stated after deductions of amount considered bad or doubtful of recovery.When a debt is deemed notcollectible,it is written-off against the related provision or directly to the profit and loss account to theextent not previously provided for.Any subsequent recovery of written-off debts is credited to the profitand loss account. Prepayments are carried at cost less amortisation and accumulated impairment losses

In the separate financial statements of Equity Assurance Plc, investments in subsidiaries is accounted forat cost.

Properties that are held for long-term rental yields or for capital appreciation or both and that areinsignificantly occupied by the entities in the consolidated group are classified as investment properties.These properties consist of office and residential buildings. The Group considers the owner-occupiedportion as insignificant when it occupies less than 20 percent.In order to determine the percentage of theportions, the Group uses the size of the property measured in square metre.



3.9 INTANGIBLE ASSETS(i) Software

(ii) Goodwill

(iii) Amortization of investment in Equity Resort Hotel Limited

3.10 PROPERTY, PLANT AND EQUIPMENT(i) Recognition and measurement

(ii) Subsequent costs

47

The Company's investment in Equity Resort Hotel Limited will be written off over the concession period of25 years and is tested annually for possible impairment. Profit/(loss) accruing to the Company from theoperations of the Hotel will be taken into statement of profit or loss and other comprehensive income.

Property, plant and equipment are initially recorded at cost. Land and building are subsequently carriedat revalued amount being the fair value at the date of revaluation less any subsequent accumulateddepreciation and subsequent accumulated impairment losses. Revaluations are made with sufficientregularity such that the carrying amount does not differ materially from that which would be determinedusing fair value at the end of the reporting period.

All other property, plant and equipment are stated at historical cost less depreciation. Historical costincludes expenditure that is directly attributable to the acquisition of the items. Any increase in assetscarrying amount, as a result of revaluation is credited to other comprehensive income and accumulatedin Revaluation Surplus within Revaluation reserves in equity. The increase is recognized in profit or loss tothe extent that it reverses reduction decrease of the same asset previously recognised in profit or loss.

The cost of replacing part of an item of property or equipment is recognized in the carrying amount ofthe item if it is probable that the future economic benefits embodied within the part will flow to theGroup and its cost can be measured reliably. The carrying amount of the replaced part is derecognized.The costs of the day-to-day servicing of property and equipment are recognized in profit or loss asincurred.

Software acquired by the Group is stated at cost less accumulated amortization and accumulatedimpairment losses. Expenditure on internally developed software is recognized as an asset when theGroup is able to demonstrate its intention and ability to complete the development and use the softwarein a manner that will generate future economic benefits and can reliably measure the costs to completethe development. Development costs previously expensed cannot be capitalized. The capitalized costs ofinternally developed software include all costs attributable to developing the software and capitalizedborrowing costs and are amortized over its useful life. Subsequent expenditure on software assets iscapitalized only when it increases the future economic benefits embodied in the specific asset to which itrelates. All other expenditure is expensed as incurred. Amortization is recognized in profit or loss on astraight-line basis over the estimated useful life of the software, from the date that it is available for usesince this most closely reflects the expected pattern of consumption of the future economic benefitsembodied in the asset. The maximum useful life of software is five years.Amortization methods, usefullives and residual values are reviewed at each financial year end and adjusted if appropriate.

Goodwill represents the excess of the cost of an acquisition over the fair value of the net identifiableassets of the company acquired at the date of acquisition. Goodwill is tested annually for impairment andcarried as cost less accumulated impairment losses. Impairment losses in goodwill are not reversed.



(iii) Depreciation

Assets class Average useful lifeBuildings 50 years Office equipment 5 years Furniture and fittings 5 years Motor Vehicles 5 years

(iv) De-recognition

3.10.1 LEASES

(a) When the Group is the Lessee(i) Operating lease

(ii) Finance lease

(b) When the Group is the Lessor

3.10.2 IMPAIRMENT OF NON- FINANCIAL ASSETS

48

When assets are held subject to a finance lease, the present value of the lease payments is recognized asa receivable. The difference between the gross receivable and the present value of the receivable isrecognized as unearned finance income. Lease income is recognized over the term of the lease using thenet investment method which reflects a constant periodic rate of return.

Non-financial assets are subject to impairment tests whenever events or changes in circumstancesindicate that their carrying amount may not be fully recoverable. Where the carrying value of an assetexceeds its recoverable amount, which is the higher of value- in- use and fair value less costs to sell, theasset is written down accordingly.

For the purpose of assessing value in use, the estimated future cash flows are discounted to their presentvalue using a pre-tax discount rate that reflects current market assessment of the time value of moneyand the risks specific to the asset.

Leases are accounted for in accordance with IAS 17 AND IFRIC 4. They are divided into finance andoperating leases respectively.

Leases in which a significant portion of the risks and rewards of ownership are retained by another party,the lessor, are classified as operating leases. Payments, including prepayments, made under operatingleases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease. When an operating lease is terminated before the lease periodhas expired, any payment required to be made to the lessor by way of penalty is recognized as anexpense in the period in which termination takes place.

Leases, where the Group has substantially all the risks and rewards of ownership, are classified as financeleases. Finance leases are capitalized at the lower of the fair value of the leased property and thepresent value of the minimum lease payments. Each lease payment is allocated between the liability andfinance charges so as to achieve a constant rate on the finance balance outstanding. The correspondingrental obligations, net of finance charges, are included in other liabilities. The interest element of thefinance cost is charged to the income statement over the lease period so as to produce a constantperiodic rate of interest on the remaining balance of the liability for each period.

Depreciation is recognized in Profit or Loss and is provided on a straight-line basis over the estimateduseful life of the assets.Depreciation methods, estimated useful lives and residual values are reviewedannually and adjusted when necessary. The average useful lives per class of asset are as follows:

An item of property and equipment is derecognized on disposal or when no future economic benefits areexpected from its use or disposal. Any gain or loss arising on de-recognition of the asset which iscalculated as the difference between the net disposal proceeds and the carrying amount of the asset isincluded in profit or loss in the year the asset is derecognized.



3.11 STATUTORY DEPOSIT

3.12 INSURANCE CONTRACT LIABILITIES

Technical Reserves

a) Insurance Funds

i) Reserves for unearned premium

ii) Reserves for additional unexpired risk

iii) Reserves for outstanding claims

b) Liability adequacy test

49

Reserves for outstanding claims is maintained as the total amount of oustanding claims incurred andreported plus claims incurred but not reported ("IBNR") as at the balance sheet date. The IBNR is based onthe liability adequacy test.

This is an assessment of whether the carrying amount of an insurance liablity needs to be increased ( orthe carrying amount of related deferred acquisition costs or related intangible assets decreased), basedon a review of future cashflows. At each reporting date the Company performs a liability adequacy teston its insurance liabilities less deferred policy acquisition expenses to ensure that the carrying amount isadequate. If the assessment shows that the carrying amount is inadequate, the deficiency is recognized inthe income statement by setting up an additional provision in the statement of financial position atamortised cost. The impairment loss is calculated under the same method.

Statutory deposit represents 10% of the paid up capital of the Company deposited with the Central Bankof Nigeria (CBN) in pursuant to Section 10(3) of the Insurance Act of Nigeria CAP I17, 2004. Statutorydeposit is measured at cost.

The Group underwrites risks that individuals, corporate and other entities wish to transfer to an insurer.These risks relate to property, personal accident, motor, liability, marine and other perils which mayarise from an insured event. The company is therefore exposed to uncertainty surrounding the timing,frequency and severity of claims under insurance contracts. The major risk is that the frequency andseverity of claims may be greater than estimated or expected. The Group is engaged in the general andhealth insurance businesses and most of the risks it underwrites are insurance which claims are settledwithin one year of the occurrence of the events giving rise to the claims.

In accordance with IFRS 4 on insurance contracts, the Company has continued to apply certain accountingpolicies which are applied in accordance with pre-changeover Nigeria GAAP.

Technical Reserves are statutory amounts which are computed in accordance with the provisions ofSections 20(1) (a) of the Insurance Act of Nigeria CAP I17 LFN 2004 as follows:

Reserves for unearned premium is made on the basis of percentage of net premiums written on timeapportionment in accordance with section 20(1) (a) of the Insurance Act of Nigeria CAP I17 LFN 2004.

A provision for additional unexpired risk reserves (AURR) is recognized for an underwriting year where itis envisaged that the estimated cost of claims and expenses would exceed the unearned premium reserve("UPR")

Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test iscarried out on the asset's cash-generating unit, which is the lowest group of assets in which the assetbelongs for which there are separately identifiable cash flows. The Company has two cash-generatingunits for which impairment testing is performed. Impairment charges are included in profit or loss exceptto the extent they reverse gains previously recognized in other comprehensive income.

Goodwill and intangible assets with indefinite useful lives will be tested for impairment annually,regardless of any indicators an impairment of goodwill will not be reversed.



3.13 TRADE AND OTHER PAYABLES

3.14 BORROWINGS

3.15 INCOME TAXIncome tax expense comprises current and deferred tax

(i) Current income tax

(ii) Deferred income tax

However, deferred income tax is not recognized for:

(a) Temporary differences arising on the initial recognition of goodwill

50

Deferred income tax is provided using liability method, on temporary differences arising between the taxbases of assets and liabilities and their carrying amounts in the financial statements. Deferred income taxis determined using tax rates that have been enacted or substantially enacted by the date of theconsolidated statement of financial position and are expected to apply when the related deferred incometax asset is realised or the deferred income tax liability is settled.

The principal temporary differences arise from depreciation of property, plant and equipment,revaluation of certain financial assets and liabilities and in relation to acquisitions on the differencebetween the fair values of the net assets acquired and their tax base.

(b) Temporary differences on the intial recognition of assets or liabilities in a transaction that is not abusiness combination and that affects neither accounting nor taxable profit or loss.

(c) Temporary differences related to investments in subsidiaries to the extent that it is probable thatthey will not reverse in the foreseeable future.

Deferred tax assets are recognized when it is probable that future taxable profit will be available againstwhich these temporary differences can be utilized.

The provisions of the Insurance Act CAP I17, 2004 requires an actuarial valuation for life reserves only.However, IFRS 4 requires a liability adequacy test for both life and non-life insurance reserves. Theprovision of section 59 of the Financial Reporting Council Act of Nigeria, CAP I17 LFN,2004 givessuperiority to the provision of IFRS and since it results in a more conservative reserving than the provisionof the Insurance Act of Nigeria,CAP I 17 2004, it well serves the Company's prudential concerns.

Trade and other payables are recognised initially at fair value and subsequently measured at amortisedcost using the effective interest method. The fair value of a non-interest bearing liability is its discountedrepayment amount. If the due date of the liability is less than one year discounting is omitted.

Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings aresubsequently stated at amortized cost; any difference between the proceeds(net of transaction costs)and the redemption value is recognized in the income statement over the period of the borrowings usingthe effective interest method. Fees paid on the establishment of loan facilities are recognized astransaction costs of the loan to the extent that it is probable that some or all of the facility will be drawndown. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidencethat it is probable that some or all of the facility will be drawn down, the fee is capitalized as aprepayment for liquidity services and amortized over the period of the facility to which it relates.Borrowings are classified as current liabilities unless the group has an unconditional right to defersettlement of the liabilities for at least 12 months after the date of the statement of financial position.

Income tax payable is calculated on the basis of the applicable tax law in the respective jurisdiction andis recognized as an expense for the period except to the extent that current tax related to items that arecharged or credited in other comprehensive income or directly to equity. In these circumstances, currenttax is charged or credited to other comprehensive income or to equity for example, current tax onavailable-for-sale investment.



3.16 SHARE CAPITAL AND PREMIUM

3.16.1 TREASURY SHARES

3.16.2 DIVIDENDS

3.17 CONTINGENCY RESERVE

3.18 RETAINED EARNINGS

3.19 FOREIGN CURRENCY TRANSLATION(a) Functional and presentation currency

(b) Transactions and balances

51

Items included in the financial statements of each of the Group's entities are measured using the currencyof the primary economic environment in which the entity operates (the ‘functional currency’). Theconsolidated financial statements are presented in Nigerian Naira (N), which is the Group's presentationcurrency.

Foreign currency transactions are translated into the functional currency using the exchange ratesprevailing at the dates of the transactions. Foreign exchange gains and losses resulting from thesettlement of such transactions and from the translation at year-end exchange rates of monetary assetsand liabilities denominated in foreign currencies are recognised in the profit or loss.

Foreign exchange gains and losses relating to borrowings and cash and cash equivalents are presented inthe income statement within ‘finance income or finance cost’. All other foreign exchange gains and lossesare presented in the income statement within ‘Other operating income’ or ‘ Other operating expenses’.

Ordinary shares are classified as equity when there is no obligation to transfer cash or other assets.Incremental costs directly attributable to the issue of equity instruments are shown in equity as adeduction from the proceeds, net of tax. Share premium accounts for the amount the Company raises inexcess of par value.

Where any member of the Group purchases the Company's equity share capital(treasury shares), theconsideration paid, including any directly attributable costs (net of income taxes), is deducted fromequity attributable to the Company's equity holders. Where such shares are subsequently sold, reissued orotherwise disposed off, any consideration received is included in equity attributable to the Company'sequity holders, net of any directly attributable incremental transaction costs and the related income taxeffects.

Dividends on the company's ordinary share are recognized in equity in the period in which they areapproved by the company's shareholders. Dividend distribution to the company's shareholders isrecognised as a liability in the financial statements in the year which the dividend is approved by thecompany's shareholders.

Contingency reserve is credited at the higher of 3% of total premiums during the year and 20% of netprofit per year, until it reaches the higher of the minimum paid up capital or 50% of net premium inaccordance with Section 21 (2) of the Insurance Act CAP I17, LFN 2004.

When the group's land and building are revalued by independent professional valuer, surpluses arising onthe revaluation of these assets are credited to the asset revaluation reserve account. When assetspreviously revalued are disposed off, any revaluation surplus relating to the disposed assets is transferredto retained earnings.

This represents the amount available for dividend distribution to the equity shareholders of the Company.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current taxliabilities against current tax assets, and they relate to taxes levied by the same tax authority on thesame taxable entity or on different tax entities, but they intend to settle current tax liabilities and assetson a net basis or their tax assets and liabilities will be realised simultaneously.



(c) Foreign Operations

All resulting exchange differences are recognised in other comprehensive income.

3.20 NON-CONTROLLING INTEREST

3.21 REVENUE RECOGNITION

Recognition and Measurement of Insurance Contracts

i Gross written premium

ii Gross premium earned

iii Net premium earned

iv Reinsurance premium

3.22 REINSURANCE EXPENSES

52

Net premium represents total amount invoiced to policy holders less reinsurance and is recognized as anincome from the date of attachment of risk.

The Group cedes reinsurance in the normal course of business with retention limits varying by line ofbusiness for the purpose of limiting its net loss potential. Reinsurance arrangements however do notrelieve the Company from its direct obligation to its policy holders. This is recognized as an expense ordeduction from the gross premium and it relates to premium on business ceded on treaty and facultativeand is recognized on part apportionment basis.

Reinsurance cost represents outward premium paid to reinsurance companies less the unexpired portionas at the end of the accounting year.

The group applies IAS 27- Consolidated and Separate Financial Statements in accounting for acquisitionsof non-controlling interests. Under this accounting policy, acquisitions of non-controlling interests areaccounted for as transactions with equity holders in their capacity as owners and therefore, no goodwillis recognized as a result of such transactions. The adjustments to non-controlling interests are based onthe proportionate amount of the net assets of the subsidiary.

Revenue comprises the fair value for services, net of value-added tax, after eliminating revenue withinthe Group. Revenue is recognized as follows:

(a) Rendering services: Revenue arising from asset management and other related services offered by theGroup are recognised in the accounting period in which the services are rendered.

(b) Dividend income: Dividend income for available-for sale equities is recognised when the right toreceive payment is established, this is the ex- dividend date for equity securities.

Gross premium is recognized at the point of attachment of risk to a policy before deducting cost ofreinsurance cover. All written premium relating to risk for period not falling due within the accountingperiod is carried forward as an unearned premium.

Gross premium earned is stated at premium written on direct and indirect business after deductingpremium relating to unexpired risks which is determined on time apportionment basis.

The results and financial position of all the subsdiaries (none of which has the currency of ahyperinflationary economy) that have a functional currency different from the presentation currency aretranslated into the presentation currency as follows:

i. Assets and liabilities for each statement of financial position presented are translated at the closingrate at the date of that consolidated statement of financial position.

ii. Income and expenses for each income statement are translated at average exchange rates (unless thisaverage is not a reasonable approximation of the cumulative effect of the rates prevailing on thetransaction dates, in which case income and expenses are translated at the dates of the transactions.



3.23 COMMISSION INCOME

3.24 CLAIMS AND LOSS ADJUSTMENT EXPENSES

(a) Salvages

3.25 UNDERWRITING EXPENSES

(a) Commission expenses

Class of business %Motor 12.5General Accident 20Marine 20Fire 20

(b) Maintenance expenses

3.26 EMPLOYEE BENEFIT EXPENSES(a) Defined contribution plans

53

The Group operates a defined contributory pension scheme for eligible employees. Employees and theGroup contribute 7.5% each of the qualifying staff's salary in line with the provisions of the PensionReform Act 2004. The Group pays contributions to pension fund administrator on a mandatory basis. TheGroup has no further payment obligations once the contributions have been paid. The contributions arerecognised as employee benefits expense when they are due. Prepaid contributions are recognised as anasset to the extent that a cash refund or a reduction in the future payments is available.

Some non-life insurance contracts permit the Group to sell (usually damaged) property acquired in theprocess of settling a claim.

The Group may also have the right to pursue third parties for payment of some or all costs of damages toits clients property (i.e. subrogation right).

Salvage recoveries are used to reduce the claim expenses when the claim is settled.

Underwriting expenses comprise acquistion costs and other underwriting expenses. Acquisition costscomprise all direct and indirect costs arising from the writing of insurance contracts. Examples of thesecosts include, but are not limited to, commission expense, supervisory levy, superintending fees andother technical expenses. Other underwriting expenses are those incurred in servicing exisitngpolicies/contract.

Commission expenses are brokerage fees paid to brokers and agents which are certain percentages basedon the class of business underwritten as below:

Maintenance expenses are expenses incurred in servicing existing policies/contract. These expenses arecharged to the revenue account in the accounting period in which they are incurred.

Commissions earned are recognized on ceding businesses to the reinsurers and other insurance companiesand are credited to the income statement.

Claims and loss adjustment expenses are charged to income as incurred based on the estimated liabilityfor compensation owed to contract holders or third parties damaged by the contract holders. Theyinclude direct and indirect claim settlement costs and arise from events that have occurred up to the endof the reporting period even if they have not yet been reported to the Group. The Group does notdiscount its liabilities for unpaid claims. Liabilities for unpaid claim are estimated using the input of assessments for individual cases reported tothe Group and statistical analyses for the claims incurred but not reported, and to estimate the expectedultimate cost of more complex claims that may be affected by external factors (such as court decisions).



(b) Short-term benefits

3.27 OTHER OPERATING EXPENSES

3.28 INTEREST INCOME AND EXPENSES

3.29 EARNINGS PER SHARE

3.30 SEGMENT REPORTING

3.31 CONTINGENT LIABILITIES

54

Contingent liability is a possible obligation that arises from past events and whose existence will beconfirmed only by the ocurrence or non-ocurrence of one or more uncertain future events not whollywithin the control of the Group or the Group has a present obligation as a result of past events which isnot recognised because it is not probable that an outflow of resources will be required to settle theobligation; or the amount cannot be reliably estimated. Contingent liabilities normally comprise of illegalclaims under arbitration or court process in respect of which a liability is not likely to crystallise.

Wages, salaries, paid annual leave and sick leave, bonuses and non-monetary benefits are recognised asemployee benefit expense and accrued when the associated services are rendered by the employees ofthe Group.

Other expenses are expenses other than claims, investment expenses, employee benefit, expenses formarketing and administration and underwriting expenses. They include rents, professional fee,depreciation expenses and other non-operating expenses. Other operating expenses are accounted for onaccrual basis and recognised in the income statement upon utilization of the service or at the date oftheir origin.

Interest income and expenses for all interest bearing financial instruments including financial instrumentsmeasured at fair value through profit or loss, are recognised within investment income and finance costin the income statement using the effective interest rate method. When a receivable is impaired, theGroup reduces the carrying amount to its recoverable amount, being the estimated future cash flowdiscounted at the original effective interest rate of the instrument, and continues unwinding thediscount as interest income.

The group presents basic earnings per share ( EPS ) data for its ordinary shares. Basic EPS is calculated bydividing the profit or loss attributable to ordinary shareholders of the company by the weighted averagenumber of ordinary shares oustanding during the period excluding treasury shares held by the Group.Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and theweighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinaryshares.

An operating segment is a component of the Group that engages in business activities from which it canearn and incur expenses, including revenues and expenses that relate to transaction with any of theGroup's other components, whose revenues and operating results are reviewed regularly by ExecutiveManagement to make decisions about the resources allocated to each segment and assess itsperformance, and for which discrete financial information is available.All costs that are directlytraceable to the operating segments are allocated to the segment concerned while indirect costs areallocated based on the benefits derived from such costs.

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER, 2014(IN THOUSAND OF NIGERIAN NAIRA UNLESS OTHERWISE STATED)

NOTES Group Group Company Company2014 2013 2014 2013

Gross premium written 32 4,845,997 4,616,050 3,415,146 3,256,827

Gross premium income 32 4,927,941 4,082,147 3,557,882 2,762,470 Re-insurance expenses (1,143,582) (872,353) (938,252) (733,561) Net premium income 32 3,784,359 3,209,794 2,619,630 2,028,909 Commission income 33 149,637 169,114 94,195 109,400 Net underwriting income 3,933,996 3,378,908 2,713,825 2,138,309

Claims:Claims expenses (Gross) 34 2,075,612 1,418,052 1,473,423 842,435 Claims expenses recovered from reinsurers 34 (557,906) (463,481) (373,402) (295,132) Claims expenses (Net) 34 1,517,706 954,571 1,100,021 547,303 Underwriting expenses 35 903,376 797,488 686,077 655,861 Total underwriting expenses 2,421,082 1,752,059 1,786,098 1,203,164 Underwriting results 1,512,914 1,626,849 927,727 935,145

Net income from non-insurance subsidiaries 36 143,297 144,458 - - Investment income 37 285,339 367,316 157,381 256,811 (Loss)/profit from concessionary arrangement 11.2 (113,155) 50,551 (113,155) 50,551 Net realised gains on assets 38 2,508 9,539 2,508 9,539 Net fair value gain on investment property - 184,100 - -

Net fair value (loss)/gain on financial assets 39 (42,432) 21,481 (40,666) 19,821 Other operating income 40 748,694 42,793 730,743 34,259 Employee benefit expenses (655,804) (568,443) (398,866) (343,722) Impairment loss 41 (276,434) (453,023) (233,074) (311,894) Other operating expenses 42 (1,216,265) (1,441,926) (799,095) (1,059,462) Results of operating activities 388,662 (16,305) 233,503 (408,952)

Finance costs 43 (77,905) (348,635) (72,453) (343,181) Profit/(Loss) before tax 310,757 (364,940) 161,050 (752,133) Income tax expense 22.1 (127,423) (72,892) (73,393) (21,527)

Profit/(Loss) for the year 183,334 (437,833) 87,657 (773,660)

Profit attributable to:Owners of the parent 163,365 (507,483) 87,657 (773,660) Non-controlling interests 30 19,969 69,650 - -

183,334 (437,833) 87,657 (773,660)

Other comprehensive income:Items within OCI that may be reclassified to profit or lossGains on available for sale financial assets 134 6,587 134 6,587 Exchange difference on translation of foreign operations (73,802) 6,663 - - Items within OCI that may not be reclassified to profit or lossGain on revaluation of Property, plant & equipment 27 - 162,075 - 162,075 Other comprehensive income for the year (73,668) 175,325 134 168,662

Total comprehensive income for the year 109,666 (262,508) 87,791 (604,998)

Attributable to:Owners of the parent 99,737 (332,158) 87,791 (604,998) Non-controlling interests 9,929 69,650 - - Total comprehensive income for the year 109,666 (262,508) 87,791 (604,998)

Earnings/(Loss) per share:Basic earnings/(loss) per share 44 1.8 (5.7) 1.0 (8.7)

56


STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER, 2014IN THOUSANDS OF NIGERIAN NAIRA

GroupShare

capitalShare

premiumRevaluation

reserves

Foreign currency reserves

Available for sale reserve

Contingency reserves

Retained Earnings Total

Non-Controlling

interest Total Equity

4,423,649 1,105,193 1,560,478 19,531 6,587 623,027 -4,087,900 3,650,565 201,561 3,852,126

- - - - - - 163,365 163,365 19,969 183,334- - - - - 125,247 -125,247 - - -

- - - - 134 - - 134 - 134

- - -1,391,588 - - - 1,391,588 - - - - - - - ( 25,189 ) - 25,189 - - -

- - - -35,963 - -13,751 (14,048) -63,762 (10,040) -73,802- - -1,391,588 -35,963 -25,055 111,496 1,440,847 99,737 9,929 109,666

- - - - - - (4,831) -4,831 - -4,831(5,209) -5,209 5,209 -

(18,702) -18,702 18,702 - Dividend paid - - - - - - (11,188) -11,188 (5,372) -16,560

- - - - - - - - 6,055 6,055- - - - - - - - 51,826 51,826- - - - - ( 18,702 ) -21,228 -39,930 76,420 36,490

4,423,649 1,105,193 168,890 -16,432 18,468- 715,821 -2,668,281 3,710,372 287,910 3,998,282

57

Total Comprehensive income for the year

Gain on available for sale financial assetsRealisation of Revaluation surplus on Property, Plant & Equipment disposed off

Exchange difference on translation of foreign operationsTotal comprehensive income for the year

Profit for the yearTransfer to contingency reservesOther comprehensive income:

Capitalisation of reserves -Bonus shares

Transfer from Retained Earnings

Transfer from share capital of Equity Assurance Limited, GhanaDeposit for shares utilisedTotal transactions with owners

Balance at 31 December 2014

Transfer from contingency reserves


Balance at 1 January, 2014

Transactions with owners, recorded directly in equitycontributions by and distributions to owners

Transfer to Available for Sale Investment



GroupShare

capitalShare

premiumRevaluation

reserves

Foreign currency reserves

Available for sale reserve

Contingency reserves

Retained Earnings Total

Non-Controlling

interest Total Equity

4,423,649 1,105,193 1,398,403 - - 508,687 -3,379,779 4,056,153 200,185 4,256,338

- - - - - - -507,483 -507,483 69,650 -437,833- - - - - 119,891 -119,891 - - -

- - - - 6,587 - - 6,587 6,587

- - 162,075 - - - - 162,075 - 162,075

- - - 19,531 - -5,551 (7,318) 6,662 - 6,662- - 162,075 19,531 6,587 114,340 -634,692 -332,159 69,650 -262,509

- - - - - - (42,422) -42,422 - -42,422Rights issue - - - - - - - - 2,419 2,419

- - - - - - - - 2,122 2,122Dividend paid - - - - - - (36,484) -36,484 (17,516) -54,000

- - - - - - 5,476 5,476 (52,409) -46,933- - - - - - - - (2,890) -2,890- - - - - - -73,430 -73,430 -68,274 -141,704

4,423,649 1,105,193 1,560,478 19,531 6,587 623,027 -4,087,900 3,650,565 201,561 3,852,126

58

Balance at 1 January, 2013Total Comprehensive income for the year(Loss)/profit for the year

Balance at 31 December 2013

Total comprehensive income for the year

Transfer to contingency reservesOther comprehensive income:Gain on available for sale financial assets

Transfer from deposit for shares

Disposal of MHS shares by non-controlling

Total transactions with owners

Revaluation surplus on Property, Plant & EquipmentExchange difference on translation of foreign operations

Transactions with owners, recorded directly in equitycontributions by and distributions to ownersCapitalisation of reserves -Bonus shares

Deposit for shares utilised


CompanyShare Share Available for Revaluation Contingency Retained Total

capital premium sale reserves reserves reserves EarningsBalance at 1 January, 2014 4,423,649 1,105,193 6,587 1,560,478 554,990 -4,311,832 3,339,065Total Comprehensive income for the yearProfit for the year - - - - - 87,657 87,657Transfer to contingency reserves - - - - 102,454 -102,454 - Other comprehensive income: - - - Realization of Revaluation surplus on Property, Plant & Equipment disposed off - - - -1,391,588 - 1,391,588 - Gain on available for sale financial assets - - 134 134Transfer to Available for Sale Reserve -25,189 25,189 - Total comprehensive income for the year - - -25,055 -1,391,588 102,454 1,401,980 87,791

Transactions with owners, recorded directly in equitycontributions by and distributions to ownersBonus shares - - - - - - - Dividend paid - - - - - - - Total transactions with owners - - - - - -

Balance at 31 December, 2014 4,423,649 1,105,193 -18,468 168,890 657,444 -2,909,852 3,426,856

Share Share Available for Revaluation Contingency Retained Totalcapital premium sale reserves reserves reserves Earnings

Balance at 1 January, 2013 4,423,649 1,105,193 1,398,403 457,285 -3,440,467 3,944,063Total Comprehensive income for the yearLoss for the year - - - - - -773,660 -773,660Transfer to contingency reserves - - - - 97,705 -97,705 - Other comprehensive income: - - -

- - - 162,075 - - 162,075 Gain on available for sale financial assets - - 6,587 6,587 Total comprehensive income for the year - - 6,587 162,075 97,705 (871,365) -604,998

Transactions with owners, recorded directly in equitycontributions by and distributions to ownersBonus shares - - - - - - - Dividend paid - - - - - - - Total transactions with owners - - - - - -

Balance at 31 December, 2013 4,423,649 1,105,193 6,587 1,560,478 554,990 -4,311,832 3,339,065

59


Revaluation surplus on Property, Plant & Equipment


STATEMENT OF CASHFLOWSFOR THE YEAR ENDED 31 DECEMBER, 2014(IN THOUSANDS OF NIGERIAN NAIRA)

NOTES Group Group Company Company2014 2013 2014 2013

Cash collection 5,310,148 4,812,097 3,761,149 3,336,231 Cash paid to Suppliers and employees (4,636,067) -4,351,678 (3,375,458) -2,887,744Tax paid (99,842) (44,483) (71,257) (28,069)

45 574,238 415,936 314,434 420,418

Cash flows from investing activities

Additions to investment in subsidiaries - - - (275,351) Additions to Investment properties 13 (470) (244,078) - - Additions to Intangible assets 14 (6,415) (5,605) -5,001 (1,200) Available-for-sale financial assets 6,600 6,600

2,501,748 6,238 2,501,748 601 Additions to property, plant and equipment 15 (142,864) -123,645 -87,797 -46,190Held to maturity investment 7.3 (82,940) -29,641 - 250

2,269,059 -390,131 2,408,950 -315,290

Cash flows from financing activities

Deposit for shares 20 -82,082 82,582 - - Repayment of borrowings 21.2 -827,264 -160,000 -827,264 -160,000Dividend Paid ( 11,188 ) (36,484) - -

Net cash outflow from financing activities (920,534) (113,902) -827,264 -160,000

1,922,763 (88,097) 1,896,120 (54,872) 1,818,259 1,906,356 1,461,238 1,516,110

6 3,741,022 1,818,259 3,357,358 1,461,238

60

Proceeds from disposal of Property Plant & Equipment

Cash and cash equivalents brought forward

Cash and cash equivalents carried forward

Net cash inflow from operating activities

Net cash inflow/(outflow) from investing activities

Net increase/(decrease) in cash and cash equivalents

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER, 2014

4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Provision for unpaid claims

Impairment of available-for-sale investments

Income taxes

Fair value of investments not quoted in an active market

5.0 MANAGEMENT OF INSURANCE AND FINANCIAL RISKS

5.1 Insurance Risk

61


The Group makes estimates and assumptions that affect the reported amounts of assets and liabilitieswithin the next financial year. Estimates and Judgements are continually evaluated and based onhistorical experience and other factors, including expectations of future events that are believed to bereasonable under the circumstances.

Liabilities for unpaid claims are estimated on case by case basis. The reserves made for claimsflunctuate based on the nature and severity on the claim reported. Claims incurred but not reported aredetermined using statistical analysis.

The Group determines that available-for-sale investments are impaired when there has been asignificant or prolonged decline in fair value below its cost. The determination of what is significant orprolonged requires judgment. In making this judgment the Group considers among other factors, thenormal volatility in market price, the financial health of the investee, industry and sector performance,changes in technology and operational and financing cashflow. In this respect, a decline of 20% or moreis regarded as significant and a period of twelve months or longer is considered to be prolonged. If anysuch quantitative evidence exists for available-for-sale financial assets, the asset is considered forimpairment, taking qualitative evidence into account.

The Company periodically assesses its liability and contingencies related taxes for all years open toaudit based on the latest information available. where it is probable that an adjustment will be made,the Company records its best estimate of the tax liability including the related interest and penalties inthe current tax provision. Management believes that they have adequately provided for the probableoutcome of these matters; however, the final outcome may result in materially different outcome thanthe amount included in the tax liabilities.

The fair value of securities that are not quoted in an active market is determined by using valuationtechniques, primarily earning multiples, discounted cash flows and recent comparable transactions.

The Group issues contracts that transfer insurance risk or financial risk or both. This section summarizesthese risks and the way the Group manages them.

The risk in any Insurance contract is the possibility that the insured event occurs which could result in aclaim. This risk is very random and unpredictable.

The principal risk that the Group faces under its insurance contracts is that the actual claims andbenefits payments exceed the carrying amount of the insurance liabilities. This could occur because thefrequency or severity of claims and benefits are greater than estimated. Insurance events are random,and the actual number and amounts of claims and benefits will vary from year to year from the levelestablished using statistical techniques.

The Group has developed its insurance underwriting strategy to diversify the type of Insurance risksaccepted and within each of these categories to achieve a sufficiently large population of risks toreduce the variability of the expected outcome.

a) Frequency and severity of claims

(b)

c) Process used to decide on assumptions

62

Underwriting limits are in place to enforce appropriate risk selection criteria. For example, the Grouphas the right to renew individual policies, it can impose excess or deductibles and it has the right toreject the payment of fraudulent claim. Insurance contracts also entitle the Group to pursue thirdparties for payment of some or all costs. The reinsurance arrangements include excess and proportionalcoverage. The effect of such reinsurance arrangements is that the Group should not suffer total loss.

The Group has a specialized claims unit that ensures mitigation of the risks surrounding all knownclaims. This unit investigates and adjusts all claims in conjunction with appointed loss adjusters. TheGroup actively manages and pursues early settlements of claims to reduce its exposure to unpredictabledevelopments.

Management assesses risk concentration per class of business. The concentration of insurance riskbefore and after reinsurance by class in relation to the type of insurance risk accepted is summarizedbelow, with reference to the carrying amount of the insurance liabilities( gross and net reinsurance)arising from non-life insurance.

Claims on non-life insurance contracts are payable on a claims-occurence basis. The Group is liable forall insured claims that occur during the term of the contract. There are several variables that affect theamount and timing of cash flows from these contracts. These mainly relate to the inherent risks of thebusiness activities carried out by individual contract holders and risk management procedures adopted.

The estimated cost of claims includes direct expenses to be incurred in settling claims, net of theexpected subrogation value and other recoveries. The Group takes all reasonable steps to ensure that ithas appropriate information regarding its claims exposures. However, given the uncertainty inestablishing claims provisions it is likely that the final outcome will prove to be different from theoriginal liability established.

The reserves held for these contracts comprises provision for IBNR, a provision for reported claims notyet paid and a provision for unearned premiums at the end of the reporting period.

For non-life insurance risks, the Group uses different methods to incorporate the various assumptionsmade in order to estimate the ultimate cost of claims. The two methods used are Basic Chain Ladderand the Inflation Adjusted Chain Ladder methods.

Claims data was grouped into triangles by accident year or quarter and payment year or quarter. Thechoice between quarters or years was based on the volume of data in each segment. The claims paiddata was sub-divided into large and attritional claims. Large claims were projected separately as theycan significantly distort patterns. Where there was insuficcient claim data, large and attritional claimswere projected together as removing large claims would reduce the volume of data in the triangles andcompromise the credibility.

Sources of uncertainty in the estimation of future claims payments

The frequency and severity of claims can be affected by several factors. The most significant are theincreasing level of awards for the damages suffered as a result of road accidents. The Group managesthese risks through its underwriting strategy, adequate reinsurance arrangements and proactive claimshandling.

Insurance risk is increased by the lack of risk diversification in terms of type and amount of risk,geographical location and type of industry covered.

Basic Chain Ladder method (BCL)

Assumptions underlying the BCL

Inflation Adjusted Chain Ladder method (IACL)

Assumptions underlying the IACL

(d) Change in assumptions and sensitivity analysis

(e) Sensitivity analysis and claims development tables

63

The Basic Chain Ladder Method assumes that the past experience is indicative of future experience i.ethat claims recorded to date will continue to develop in a similar manner in the future.

Sensitivity analysis are performed to test the variability around the reserves that are calculated at abest estimate level. The estimated claim amounts can never be an exact forecast of the future claimamounts and therefore looking at how these claim amount can vary could provide valuable informationfor business planning and risk appetite considerations.

An implicit assumption is that, for an immature accident year, the claims observed thus far tell yousomething about the claims yet to be observed.

A further assumption is that it assumes consistent claim processing, a stable mix of types of claims,stable inflation and stable policy limits.

If any of these assumptions are invalidated, the results of the reserving may prove to be inaccurate.

Under this method, the historical paid losses are inflated using the corresponding inflation index in eachof the accident years to the year of valuation and accumulated to their ultimate values for eachaccident year to obtain the projected outstanding claims. These projected outstanding by the futureclaims are further multiplied by inflation index from the year of valuation to the future year of paymentof the outstanding claims. Past official inflation index and 12% p.a for the future are adopted

The IACL anticipates that total claims may be exposed to inflationary increase and it further recognisesthat present value needs to be reserved for total payments. Unearned premium provision was calculatedusing a timeapportionment basis, in particular, the 365ths method. The same approach was taken fordeferred acquisition costs as for the calculation of the UPR balance.

There was no change in the assumptions used to estimate the ultimate cost of claims paid during theyear.

i.e IBNR= Ultimate claim amount (excl. extreme large losses) Minus paid claims to date Minus claimsoutstanding(excl. extreme large losses)

Development factors were calculated using the last 5 years of data by accident year or quarter.Ultimate development factors are calculated for each of the permutations and the most prudent resultis selected.

Ultimate development factors are applied to the paid per accident year or quarter and an ultimateclaim amount is calculated. The future claims (the ultimate amount less paid claims to date) areallocated to future payment periods in line with the development patterns calculated above. Theoutstanding claims reported to date are then subtracted from the total future claims to give theresulting IBNR figure per accident year or quarter.

For cases where there were large losses that had been reported but not paid, and therefore would nothave influenced the development patterns, the total cash reserve were excluded from the calculationof the IBNR.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER, 2014 (CONT'D)Claims Paid Triangulations as at December 2014

Accident

A/Y year/ Dev Year 1 2 3 4 5 6 72007 25,910,059 65,221,996 32,575,655 3,654,241 4,620,407 9,975 25,726 2008 28,738,750 79,737,865 17,843,883 9,630,383 3,484,409 2,075,547 861,000 2009 45,677,887 97,468,624 51,459,512 7,066,948 8,288,802 580,000 2010 47,411,497 111,177,791 80,143,613 18,314,972 15,895 2011 37,472,011 104,323,207 29,241,619 6,801,000 2012 42,441,754 76,656,065 34,616,000 2013 34,357,036 49,031,000 2014 30,145,000

Fire

A/Y year/ Dev Year 1 2 3 4 5 6 72007 15,858,187 53,230,242 26,615,121 2,779,557 1,109,141 427,941 2008 34,927,719 77,423,907 38,711,954 19,838,399 728,123 37,911 2009 43,171,975 88,133,092 44,066,546 15,851,369 14,050,703 5,402,000 2010 51,416,232 79,920,378 65,894,781 1,192,014 357,000 2011 67,704,397 51,869,184 11,228,053 5,028,000 2012 59,560,315 157,543,049 18,927,000 2013 72,987,531 35,454,000 2014 87,389,000

Motor

A/Y year/ Dev Year 1 2 3 4 5 6 72007 75,468,267 93,856,309 7,780,552 1,933,921 1,692,478 - - 2008 123,216,844 165,972,191 6,112,136 756,197 164,804 28,125 - 2009 120,790,315 143,671,548 22,327,467 3,024,757 285,718 - - 2010 90,318,138 109,667,403 3,883,525 3,609,272 206,000 - 2011 78,170,489 70,926,862 13,634,746 2,267,000 - 2012 125,251,401 118,065,329 4,218,000 - 2013 130,574,877 96,102,000 - 2014 247,827,000

Marine

A/Y year/ Dev Year 1 2 3 4 5 6 72007 402,722 7,028,853 7,209,943 3,013,845 19,584 17,303 2008 2,708,956 3,005,101 1,602,080 1,210,382 511,585 1,542,500 2009 5,593,234 12,478,428 4,895,346 2,823,554 - - 2010 8,477,513 22,388,590 10,915,996 1,629,137 - 2011 4,709,809 27,274,021 13,273,068 7,317,000 2012 4,971,064 31,070,241 1,161,000 2013 8,739,738 10,445,000 2014 42,690,000

64


Incremental Development Pattern - Annual Projections




NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER, 2014 (CONT'D)Claims Paid Triangulations as at December 2013

Accident

A/Y yea 1 2 3 4 5 6 72007 25,910,059 65,221,996 32,575,655 3,654,241 4,620,407 9,975 25,726 2008 28,738,750 79,737,865 17,843,883 9,630,383 3,484,409 2,075,547 2009 45,677,887 97,468,624 51,459,512 7,066,948 8,288,802 2010 47,411,497 111,177,791 80,143,613 18,314,972 2011 37,472,011 104,323,207 29,241,619 2012 42,441,754 76,656,065 2013 34,357,036

Fire

A/Y yea 1 2 3 4 5 6 72007 15,858,187 53,230,242 26,615,121 2,779,557 1,109,141 427,941 2008 34,927,719 77,423,907 38,711,954 19,838,399 728,123 37,911 2009 43,171,975 88,133,092 44,066,546 15,851,369 14,050,703 2010 51,416,232 79,920,378 65,894,781 1,192,014 2011 67,704,397 51,869,184 11,228,053 2012 59,560,315 157,543,049 2013 72,987,531

Motor

A/Y yea 1 2 3 4 5 6 72007 75,468,267 93,856,309 7,780,552 1,933,921 1,692,478 - - 2008 123,216,844 165,972,191 6,112,136 756,197 164,804 28,125 - 2009 120,790,315 143,671,548 22,327,467 3,024,757 285,718 - - 2010 90,318,138 109,667,403 3,883,525 3,609,272 - - - 2011 78,170,489 70,926,862 13,634,746 - - - - 2012 125,251,401 118,065,329 - - - - - 2013 130,574,877 - - - - - -

Marine

A/Y yea 1 2 3 4 5 6 72007 402,722 7,028,853 7,209,943 3,013,845 19,584 17,303 2008 2,708,956 3,005,101 1,602,080 1,210,382 511,585 1,542,500 2009 5,593,234 12,478,428 4,895,346 2,823,554 2010 8,477,513 22,388,590 10,915,996 1,629,137 2011 4,709,809 27,274,021 13,273,068 2012 4,971,064 31,070,241 2013 8,739,738

65






NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER, 2014

5.2 FINANCIAL RISK MANAGEMENT

Introduction and overview

Credit risk Liquidity riskMarket risk

Internal Control and Risk Management Systems

Enterprise-wide Risk Management Principles

66

The Company seeks to be the reference point for risk management in the industry while maximizing our valueto stakeholders through an approach that balances the risk and reward in our business. In order to ensureeffective integration over time into the Group's processes so that risk management not only protects valuebut creates value, Equity Assurance Plc is being guided by the following principles:

The risk structure includes our approach to management of risks inherent in the business and our appetite forthese risk exposures. Under this approach, we continuously assess the Company’s top risks and monitor ourrisk profile against approved limits. Our main strategies for managing and mitigating risk include policies andtools that target specific broad risk categories.

Equity Assurance plc has a robust and functional Enterprise-wide Risk Management (ERM) Framework that isresponsible for identifying and managing the inherent and residual risks facing the Group. The Group hasexposure to the following risks from its use of financial instruments:

Other key risks faced by the Group as a result of its existence and operations include operational risks,property risks, reputational and strategy risks.

This note presents information about the Group’s exposure to each of the risks stated above, the Group’spolicies and processes for measuring and managing risks, and the Group’s management of capital.

Being an insurance company, the management of risk is at the core of the operating structure of EquityAssurance Plc. As a result, the Company employs the best risk management practices to identify, measure,monitor, control and report every material risk prevalent in our business operation.

The Company’s ERM framework is in line with Committee of Sponsoring Organizations of the TreadwayCommission (COSO) as approved by the insurance industry regulator, National Insurance Commission(NAICOM), to identify, assess, manage and monitor the risks inherent in our operations.

a) The Company will not take any action that will compromise its integrity. It shall identify, measure,manage, control and report as practical as possible all risks.

b) The Company will at all times comply with all government regulations and uphold international bestpractice.

c) The Company will build and entrench an enduring risk culture, which shall pervade the entireorganization.

d)The Company will only accept risks that fall within its risk acceptance criteria and have commensuratereturns and continually review its activities to determine inherent risks level and adopt appropriate riskresponse at all times.

e) The Company will make decisions based on careful analysis of the implications of such risk to its strategicgoals and operating environment.



Enterprise-wide Risk Management Framework

1st line – Management

2nd line – Risk oversight

3rd line – Independent assurance

ERM Governance Structure

67

This framework is developed to promote a strong risk management culture and integrate risk considerationsinto management and decision-making processes through a robust risk governance structure. It ensures thattop risks are properly identified, analyzed and assessed, in a consistent manner across the organization. Weoperate the ‘three lines of defence model’ for the oversight and management of risk to create and promote aculture that emphasizes effective management and adherence to operating controls as illustrated below:

It involves broad setting of strategy, risk appetite, performance measurement, establishment andmaintenance of internal control and risk management in the business. In addition, business units have theprimary responsibility for managing risks and required to take responsibility for the identification,assessment, management, monitoring and reporting of risks arising within their respective businesses,thereby ensuring an informed risk and reward balance.

The Company’s risk management function provides oversight and independent reporting to executivemanagement, implements the group’s risks management policy in the business units, approve risk withinspecific mandates and provides an independent overview of the effectiveness of risk management by the firstline of defence.

The last line of defence comprises the internal audit function that provides independent and objectiveassurance of the effectiveness of the Company’s systems of internal control established by the first andsecond lines of defence in management of enterprise risks across the organization.


Board

Board & Compliance Committee

System and Control

Board Investment & Finance Committee

Board Risk Management & Technical Committee

Enterprise Risk Management Function

MANAGEMENT COMMITTEES

Management underwriting committee Investment committee

Other business functions


This function is carried out via its Board Committees as follows:

BOARD COMMITTEES FUNCTIONSBoard Audit & Compliance a) Oversight of financial reporting and accounting

b) Oversight of the external auditorc) Oversight of regulatory complianced) Monitoring the internal control process

Board Risk Management & Technical Committee

f) Oversight of enterprise risk management

Board Finance and a) Reviews and approves the company’s investment policy Investment Committee b) Approves investments over and above managements’ approval

limitc) Ensures that optimum asset allocation is achieved

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a) Assist in the oversight of the review and approval of the companiesrisk management policy including risk appetite and risk strategy;

The Board sets the organization’s risk appetite, approves the strategy for managing risk and is ultimatelyresponsible for the organization’s system of internal control.

b)Review the adequacy and effectiveness of risk management andcontrols;

c) Oversee management’s process for the identification of significantrisks across the company and the adequacy of prevention, detectionand reporting mechanisms;

d) Review of the company’s compliance level with applicable laws andregulatory requirements that may impact the company’s risk profile;

e) Review changes in the economic and business environment,including emerging trends and other factors relevant to the company’srisk profile; and

d) Review large underwritten risks for adequacy of reinsurance andother risk management techniques including environmental & socialmanagement system

e) Review and recommend for approval of the Board risk managementprocedures and controls for new products and services

The Company's ERM Management committee in line with Management Investment Committee recommends tothe Board Risk Management and Technical Committee an amount at risk that it is prudent for the riskcommittee to approve in line with the Company's business strategies. The Board Risk Management andTechnical Committee approve the Company's risk appetite each year, based on a well-defined and broad setof risk measures.



Risk Appetite

Risk Management Policies and Procedures

a) Risk management policies, framework and processes are complied with.

69

The Company's risk appetite is defined by a clear risk strategy and limit structure. Close risk monitoring andreporting allows us to detect potential deviations from our risk tolerance at an early stage at both the Groupand operating entity levels.

The Company's ERM Management committee is also responsible for establishing, documenting and enforcingall policies that involve risk. Specifically, the Chief Risk Officer( a member of the Management Committee) isresponsible for the risk policies, risk methodologies and risk infrastructure.

The Chief Risk Officer (CRO) plays a pivotal role in informing the Board, as well as ERM ManagementCommittee about the risk profile of the Company and also communicates the views of the Board and SeniorManagement down the Company. The CRO is also responsible for independently monitoring the broad risk setby the board throughout the year, and delegating some responsibilities to the heads of the various StrategicBusiness Units within the Company.

The internal audit functions evaluate the design and conceptual soundness of risk measures, accuracy of riskmodels, soundness of elements of the risk management information systems, adequacy and effectiveness ofthe procedures for monitoring risk, the progress of plans to upgrade risk management systems, the adequacyand effectiveness of application of the vetting processes.

The Company recognizes that its long-term sustainability is dependent upon the protection of our brand,preservation of the value and relationship with customers. To this end, we will not accept risks thatmaterially impair reputation and value and requires that our customers are always treated with integrity.

We have developed policies and procedures for each broad risk category inherent in our business. Thepolicies set out and ensure alignment and consistency in the way in which we deal with major risk typesacross the group, from identification to reporting. Procedures targeted at managing each broad risk categoryare embedded in our Enterprise-wide Risk Management framework approved by the Board.

Risk Management is an ongoing activity and is to be carried out as part of day-to-day business. The risks areidentified by different portfolio and strategic business units and re-assesses regularly to determine whetherthere are new or emerging risks in light of any current or anticipated changes. Treatment plans for identifiedrisks are monitored to ensure that risks are being mitigated as planned.

The company -wide risk assessments is refreshed and reported twice per year. Management is responsibleand accountable for ensuring that:

b) The risk profiled for areas under their control are refreshed and updated on a timely basis to enable thecollation, analysis and reporting of risks to the Board Committees.

c) Explanations are provided to the Board Committees for any major gaps in the risk profiled and anysignificant delays in planned treatments for high risk and high priority matters

Our internal audit function, the Systems &Control (SYSCON) group, conducts a risk-based audit on all businessunits using outputs of the annual company-wide risk assessment to guide its annual audit planning.



Risk Categorization

a) Market riskb) Underwriting riskc) Credit riskd) Operational riske) Liquidity riskg ) Business riskh) Reputational risk

c ) Interest rate risk: the risk that the value of a fixed income security will fall as a result of movement in market interest rates.d) Property price risk: The Company’s portfolio is subject to property price risk arising from changes in the market value of properties.

b) risks are not adequately ceded to reinsurers exposing the company to potential high claims payout;c) many more claims occur than expected or that some claims that occur are much larger than expected claims resulting in unexpected losses and;d) The company’s policyholder will act in ways that are unanticipated and have an adverse effect on the company

a) Direct Default Risk: risk that the company will not receive the cash flows or assets to which it is

70

a) The prices charged by the company for insurance contracts will be ultimately inadequate to support thefuture obligations arising from those contracts, risk exposure under its insurance contracts that wereunanticipated in the design and pricing of the insurance contract;

Equity Assurance Plc is exposed to an array of risks through its operations. The Company has identified andcategorized its exposure to these broad risks as listed below:

Market risk: This reflects the possibility that the value of investment’s funds will fall as a result of changesin market conditions, whether those changes are caused by factors specific to the individual investment orfactors affecting all investments traded in the market. The Company is exposed to this risk through itsfinancial assets and comprises

a) Equity price risk: the risk associated with volatility in the stocks in our investment portfolio.

b) Foreign exchange risk: may arise from movement of currency prices on assets held in foreign currency

Underwriting risk: Our activities are primarily concerned with the pricing, acceptance and management ofrisk arising from our contracts with customers. It entails the risk that:

Credit risk: This is the risk arising from the uncertainty of an obligor’s ability to perform its contractualobligations. Risks that brokers and large corporate who are allowed extended payment period may defaultand this is closely allied to cash flow risks. The three sources of credit risk identified are :

entitled because a party with which the firm has a bilateral contract defaults on one or more obligations.

b) Downgrade Risk: risk that changes in the possibility of a future default by an obligor will adversely affectthe present value of the contract with the obligor today. c) Settlement Risk: risk arising from the lag between the value and settlement dates of securitiestransactions



a) Funding liquidity risk: Arising from our investment-linked products where there is a financial obligation to customers.

Market Risk Management

1.Equity price risk2. Foreign exchange risk3. Interest-rate risk4. Property price risk

1. Equity price risk

Investment quality and limit analysis

a) sets a personal discretionary limit for Chief Executive Officer;

to assign limits to subordinates.71

Operational risk: This is the risk of loss resulting from inadequate or failed internal processes, people andsystems or from external events. This includes legal risk, strategic risk and reputational risk. Legal riskincludes, but is not limited to, exposure to fines, penalties, or punitive damages resulting from supervisoryactions, as well as private settlements.

Liquidity risk: The Company recognizes the risk of loss due to insufficient liquid assets to meet cash flowrequirements or to fulfill its financial obligation once claims crystallize. The Company's exposure to liquidityrisk comprises:

b) Asset liquidity risk: arising from our financial assets where we might not be able to execute transactionsat prevailing market price because there is temporarily, no appetite for the deal at the other side of themarket

Business risk: Business risk relates to the potential erosion of our market position or revenue shortfallcompared to the cost base due to strategic and/or reputational reasons.

Reputational risk: The Company is exposed to this risk through events that damage its image amongststakeholders and the public which may impair the ability to retain, generate and drive sustainablebusiness.We understand that reputational risk is the biggest risk to our business as it poses a special threat tothe confidence of our customers, regulators and industry.

The identification, management, control, measurement and reporting of market risk are aligned towards thesub-risk categories namely :

The Group’s management of equity price risk is guided by the investment quality and limit analysis.

Management Investment Committee establishes and approves a list of eligible listed and unlisted stocksaligned with investment approval/dealer limits as approved by the Board through its Board Finance &Investment Committee. These approval limits are illustrated using an approval hierarchy that establishesdifferent levels of authority necessary to approve investment decisions of different naira amounts. Theapproval limit system:


by the Group Managing Director(GMD);b) requires that investment decisions above this personal discretionary limit requires approval

c) requires that investment decisions above the GMD's limit requires approval by the Board of

d) sets out lower limits for Chief Investment Officer (CIO) and, or provides the CIO with the authority Directors and;


2. Foreign Exchange risk

Cash & Cash Equivalents2014 2013

N'000 N'000Dollars 175,457 302,556 Euros 8,241 8,676 Pounds 453 1,275 Cedis 196,848 198,072

380,999 510,579

3. Interest-rate Risk

4. Property Price Risk

Underwriting Risk Management

72

Equity Assurance Group is exposed to foreign exchange currency risk primarily through certain transactionsdenominated in foreign currency. The Group is exposed to foreign currency risk through its investment inEquity Assurance Limited, Ghana and bank balances in other foreign currencies.

The carrying amounts of the Group’s foreign currency-denominated assets as at end of the year are asfollows:

The Group limits its exposure to foreign exchange to 12% of total investment portfolio.Foreign currencychanges are monitored by the investment committee and holdings are adjusted when offside of theinvestment policy. The Group further manages its exposure to foreign exchange risk using sensitivity analysisto assess potential changes in the value of foreign exchange positions and impact of such changes on theGroup’s investment income. At the year end, the foreign currency investments held in the portfolio were onunquoted equity and cash and cash equivalents. There have been no major changes from the previous year inthe exposure to risk or policies, procedures and methods used to measure the risk.

The Group is moderately exposed to interest-rate risk through its conservative investment approach with highinvestment in Fixed Income and Money Market instruments. Interest rate risk is managed principally throughmonitoring interest rate gaps and sensitivity analysis across all investment portfolios.

The Group is exposed to property price risk through its investment in property. Exposure to property pricerisk accounts for 10% of the total investment portfolio. The Group manages the risk by constantly monitoringthe contribution of property to its portfolio and converting some of this class to earning properties.

The Group faces underwriting risk through its core business when actual claims and benefits payments or thetiming thereof, differ from expectations. This is influenced by the frequency of claims, severity of claims,actual benefits paid and subsequent development of long-term claims.

EQUITY Assurance plc manages its underwriting risk by diversification across large portfolio of insurance. Thevariability of risks is also improved by careful selection and implementation of underwriting strategyguidelines, as well as the use of reinsurance arrangements. The Group purchases reinsurance as part of itsrisk mitigation program and establishes retention limits for reinsurance across product lines.



Business Risk Management

Reputational Risk Management

Credit Risk Management - Outstanding premiums

73

The Group also recognizes that a concentration of risk may arise from insurance contracts issued in a specificgeographical location since most of the insurance contracts are written in Nigeria and Ghana and constantlyconducts concentration risk analysis to evaluate and manage its exposure to the risk.

The Group’s internal processes and policies also ensure that amounts recoverable from reinsurers areestimated in a manner consistent with the outstanding claims provision and are in accordance with thereinsurance contracts. In addition, the Group recognizes that its reinsurance program with respect to cededreinsurance is exposed to credit risk, to the extent that any reinsurer who is unable to meet its obligationsassumed under such reinsurance agreements, thus it is not relieved of its direct obligations to itspolicyholders.


The Group holistically manages this risk via its underwriting and reinsurance strategy within an overall riskmanagement framework. Exposures are limited by having documented underwriting limits and criteria.Pricing of policies are based on trends and past experience amongst others in an attempt to correctly matchpolicy revenue with exposed risk.

Business risk is managed by Management Underwriting & Investment Committee through consistentmonitoring of product lines’ profitability, stakeholder engagement to ensure positive outcomes from externalfactors beyond the Group’s control and prompt response to changes in the external environment.

EQUITY Assurance Plc’s norms and values set a tone for acceptable behaviours required for all staffmembers, and provide structure and guidance for non-quantifiable decision making, thereby assisting in themanagement of the group’s reputation.

The Group identifies, assesses and manages reputational risks predominately within its business processes.Management of reputational risks is based on the Group’s risk governance framework. In addition, company-wide risks are identified and assessed qualitatively as part of the annual risk & control self-assessment. TheGroup’s risk functions analyses the overall risk profile and regularly informs management about the currentprofile and potential exposures to the risk. Risk functions’ presentation of potential reputational risk guidesmanagement decisions in executing business operations and strategies.

The Group has laid great emphasis on effective management of its exposure to credit risk especially premiumrelated debts. The Group defines credit risk as the risk of counterparty’s failure to meet its contractualobligations. Credit risk arises from insurance cover granted to parties with payment instruments or paymentsplan issued by stating or implying the terms of contractual agreement. Credit risk exposure to direct businessis low as the Company requires debtors to provide payment plans before inception of insurance policies. TheCompany’s exposure to credit risk arising from brokerage business is relatively moderate and the risk ismanaged by the Group’s internal rating model for brokers. Our credit risk internal rating model is guided byseveral weighted parameters which determine the categorization of brokers the Group transacts businesseswith.

The Group credit risk originates from reinsurance recoverable transactions, retail clients, corporate clients,brokers and agents.


Management of credit risk due to outstanding premiumCredit Rating

a) Previous year contribution (4 years)b) Payment modec) Outstanding as at December of the previous yeard) Future prospecte) Recommendation

In measuring credit risk, the Group considers three models:

Impairment Model

74

e) Continuous reviewing of compliance and processes in order to maintain credit risk exposure withinacceptable parameters.

c) Developing and monitoring credit limits. The Group is responsible for setting credit limits through gradingin order to categorize risk exposures according to the degree of financial loss and the level of priorityexpected from management.

We constantly review brokers’ contribution to ensure that adequate attention is paid to high premiumcontributing brokers while others are explored for possible potentials.

The Group credit risk is constantly reviewed and approved during the weekly Management Operationsmeeting. The monthly Group management meeting is responsible for the assessment and continual review ofthe Company premium debt and direct appropriate actions in respect of delinquent ones. It also ensured thatadequate provisions are taken in line with the regulatory guidelines. Other credit risk management includes:

a) Formulating credit policies with strategic business units, underwriters, brokers covering brokers grading,reporting, assessment, legal procedures and compliance with regulatory and statutory bodies.

b) Identification of credit risk drivers within the Group in order to coordinate and monitor the probability ofdefault that could have an unfortunate impact.

Receivables are reviewed and categorized into grade A, B, C and D on the basis of:


d) Assessment of credit risk. All firsthand assessment and review of credit exposures in excess of creditlimits, prior to granting insurance cover are subject to review process and approval given during managementmeeting.

a) The Probability of Default(PD), the likelihood that the insured will fail to make full and timely payment offinancial obligationsb)The Exposure at Default (EAD) is derived from the Group’s expected value of debt at the time of default

c)The Loss Given Default (LGD) which state the amount of the loss if there is a default, expressed as apercentage of the (EAD).

Premium debtors, which technically falls under receivables is recognized at a fair value and subsequentlymeasured at amortized cost, less provision for impaired receivables. Under IFRS, an asset is impaired if thecarrying amount is greater than the recoverable amount. The standard favours the use of the incurred lossmodel in estimating the impairment of its receivables


The model used is defined as thus:

Impairment loss = EP * LGD * EAD * PD

Where EP is Emergency Period;

LGD is Loss Given Default;

EAD is Exposure At Default; and

PD is 1-year Probability of Default.

Credit quality

Operational Risk Management

Issue tracking report/action plan report:

75

Risk control and self-assessment (RCSA): The business areas perform self-assessments semi- annually andresults are aggregated to provide a qualitative and quantitative profile of risk across the organization andrelated action items. Severity of the risks identified is compared with previous RCSA risk severity and a trendis ascertained. The register summarizes findings into list of risks facing the institution. These summaryresults are accompanied by descriptions of the significant gaps and trends, suggested mitigants, and processowners and timeline for each risk.


Risk Maps: Risk maps typically are graphs on which impact of each risk is plotted against probability ofoccurrence. Risk maps are designed either to show inherent or residual risk categories by line of business.Risks in the upper right are very severe and need to be monitored closely to reduce the Group’s exposure.High-frequency/low-severity risks create the basis for expected losses and are often subject to detailedanalysis focused on reducing the level of losses.

The profile of risks across the organization is an integral input for the Group’s internal audit whilst preparingaudit plans. Areas with high-risk exposures are thoroughly audited and performance of recommendedcontrols tested by the Group’s internal control function to ascertain that risks are properly managed.

Following the provisions of IAS 36, the impairment of the premium debtors will be assessed at two differentlevels, individually or collectively. The premium debt of the Group will be assessed for impairment using theincurred loss model adapted for insurance business.

The Group loan and receivables has no collateral as security and other credit enhancements, thus the grouphas no loan or receivables that are past due but not impaired. Insurance receivables are to be settled ondemand and the carrying amount is not significantly different from the fair value.

The Group further manages its exposure to credit risk through deduction of transactions at source andinvestment in blue-chip companies quoted on Nigerian Stock Exchange. The exposure to credit risk associatedwith other receivables is low.

A summary of the analytical tools that the Group employed in operational risk management are discussedbelow:

Issues can surface from the internal self-assessment process, an audit, or regulators requirements. A keyresult of the self-assessment process is an action plan with assigned responsibilities. This report contains areap of major issues, the status of the action plan, and an aging of overdue tasks.


Liquidity Risk Management

76

The limits are monitored and reported on a weekly and monthly basis to ensure that exposure of the Group’sinvestment portfolio to this risk is properly managed.

Key risk indicators dashboard: These are numerous measures of actual risks in the business and supportfunctions, such as error rates and control breaks. Summary indicators, related escalation criteria,explanations of any excesses, and identified trends are all important aspects that are tracked. Manyindicators are specific to each business unit or process, but some may be common and reported in aconsolidated fashion. Threshold is set by management for each key risk indicators and escalation ofindicators above such levels triggers a mitigation response.

Loss events report: The ERM team developed a database for loss event collation named Loss Event Register.This register allows staff to report actual and near-miss (an unplanned event that did not result in injury,illness, or damage – but had the potential to do so) loss events. Summary statistics from the loss eventdatabase are used to show trends of total losses and mean average loss, with analysis by type of loss andbusiness line.

Business continuity plan: A critical tool in managing our operational risk is the Business Continuity Plan(BCP) that documents the procedures to be executed by relevant teams in the event of a disaster.

Liquidity risk is the risk that cash may not be available to pay obligations when due at a reasonable cost. TheGroup mitigates this risk by monitoring cash activities and expected outflows. The Group’s current liabilitiesarise as claims are made and clients request for termination of their investment-linked products. The Grouphas no material commitments for capital expenditures and there is no need for such expenditures in thenormal course of business. Claims payments are funded by current operating cash flow including investmentincome. The Group has no tolerance for liquidity risk and is committed to meeting all liabilities as they falldue.

The Group’s investment policy requires that 35% of the Group’s portfolio to be held in cash and short-terminvestments. This highlights liquid marketable securities sufficient to meet its liabilities as at when due.Short term investments include treasury bills and term deposits with an original maturity of less than oneyear.


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER, 2014 (Cont'd)IN THOUSANDS OF NIGERIAN NAIRA

5.3 CAPITAL MANAGEMENT

The Group's objectives when managing capital are as follows:1. To ensure that capital is, and will continue to be, adequate for the safety, soundness andstability of the Group.2. To generate sufficient capital to support the Group's overall business strategy.3. To ensure that the Group meets all regulatory capital ratios 4. To maintain a strong risk rating.5. To ensure that capital allocation decisions are optimal, considering the return on economic and regulatory capital.6. To determine the capital required to support each business activity based on returns generatedon capital to facilitate growth/expansion of existing businesses.7. To establish the efficiency of capital utilisation;

In reporting financial strength, capital and solvency are measured using the rules prescribed bythe National Insurance Commission. These regulatory capital tests are based upon required levelsof solvency, capital and a series of prudent assumptions in respect of the type of business written.

Minimum Capital Requirement

77


The Group's objectives with respect to capital management are to maintain a capital base that is designedto satisfy regulatory requirement and optimize capital allocations.

Insurance industry regulator measures the financial strength of non-life insurers using a solvency marginmodel, which NAICOM generally expects non-life insurers to comply with this capital adequacyrequirements.

Section 24 of the Insurance Act CAP I17, 2004 defines Solvency margin of a non-life insurer as the differencebetween the admissible assets and liabilities and this shall not be less than 15% of Net premium income orthe minimum capital base (N3billion) whichever is higher.

This test compares insurers' capital against the risk profile. The regulator indicated that insurers shouldproduce a minimum solvency margin of 100%. The company experienced a shortfall of N154.5 million in itssolvency margin for the year ended 31st December, 2014. The regulator has the authority to request moreextensive reporting and can place restriction on the Company's operations if the company falls below thisrequirement.

Solvency Margin

Equity Assurance Plc has over the years been deploying capital from earnings and equity funds to supportgrowth in business volumes while striving to meet dividend commitments to shareholders. To be able tocontinue to generate and deploy capital both to grow core businessess and reward shareholders, there isneed for the Company to execute the right strategy, the right growth dynamics, the right cost structure andrisk discipline as well as the right capital management.

The Group's capital management strategy focus on the creation of shareholders' value whilst meeting thecrucial and equally important objective of providing an appropriate level of capital to protectstakeholders'interests and satisfies regulators.

Equity Assurance Plc complied with the minimum capital requirement of N3 billion for non-life operations.This is shown under Shareholders' fund in the statement of financial Position.


December 2014N'000

Cash and Cash equivalents 3,352,208 Quoted stocks at market value 162,091 Trade receivables 57,406 Statutory deposits 300,000 Unquoted stocks at cost 962,751 Land and building 267,053 Furniture & fittings 12,721 Office equipment 51,862 Motor vehicles 103,721 Reinsurance receivables 1,133,154 Deferred acquisition costs 183,371 Intangible assets other than computer software 942,383

Admissible assets 7,528,722

Insurance contract liabilities 2,945,797 Trade payable 27,668 Obligation under finance lease 6,866 Convertible redeemable loan 1,445,367 Other credit balances 186,199 Taxation 71,331

Admissible liabilities 4,683,228

Solvency margin 2,845,493

The higher of 15% of net premium income and shareholdersfunds 3,000,000

Solvency ratio 94.85

78

In order to continually meet the company's obligation to policy holders, the company has taken concretesteps towards attracting potential investors as shareholders to boost her capital base. It is expected that thecapital injection initiatives will crystalise on or before December 31, 2015.


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER, 2014 (Cont'd)

5.4 SEGMENT INFORMATION

Non-Life

Asset Management

Health Management

- System and controls - Financial controls - Human resources - Information technology -Strategy and Perfomance Management

79

EA Capital Management Limited rendered asset management services for other business segmentsof the Group. All fee income earned on group asset management services is eliminated onconsolidation.


The Group is organized into three operating segments. These segments distribute their productsthrough various forms of Brokers, Agencies and direct marketing programs. These segments andtheir respective operations are as follows:

This segment covers the protection of customers' assets (particularly their properties, both forpersonal and commerical business) and indemnification of other parties that have suffered damageas a result of Customers' accidents. All contracts in this segment are short term in nature. Revenuein this segment is derived primarily from insurance premium, investment income, net realizedgains on financial assets and net fair value gains on financial assets at fair value through profit orloss.

This segment offers finance leases to both individual and corporate clients. Revenue from thissegment is derived primarily from lease income, investment income, net realized gains on financialassets and net fair value gains on financial assets at fair value through profit or loss.

This segment offers health management to both individual and corporate clients. It derives itsrevenue primarily from premium on plan scheme, income from consultancy, income from thirdparty administration, fee for service, investment income, net realized gains on financial assets andnet fair value gains on financial assets at fair value through profit or loss.

Expenses for the Group office that renders services for all the business segments are initially paidby the general business segment and transferred to other business units at cost price. Theexpenses are allocated based on service man hours rendered by the group office to the variousbusiness segments.

The corporate expenses for the following centrally shared services are being apportioned to allbusiness segments in the;

NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER, 2014IN THOUSANDS OF NIGERIAN NAIRA

5.4 SEGMENT REPORTING -2013GROUP NON-LIFE HEALTHCARE ASSET TOTAL

MGT

Revenue:Derived from external customersGross Premium 4,217,462 398,588 - 4,616,050

Gross Premium income 3,685,571 396,576 - 4,082,147Reinsurance expenses (872,353) - - -872,353Net Premium income 2,813,218 396,576 - 3,209,794 Commission income 169,114 - - 169,114 Income from non-insurance subsidiaries - 115,377 29,081 144,458Investment income 379,860 31,616 6,391 417,867Net realised gains on financial assets 9,539 - - 9,539Net fair value loss on financial assets at fair value through profit or loss 19,821 1,660 - 21,481Other operating income 38,760 1,393 2,641 42,793Fair value gains on investment property - 184,100 - 184,100

Net income 3,430,312 730,722 38,112 4,199,146

Insurance claims 1,191,360 226,692 - 1,418,052Insurance claims recovered from reinsurer (463,481) - - -463,481Net insurance claims 727,878 226,692 - 954,571Acquisition costs 663,138 9,734 - 672,872Other underwriting expenses 124,616 - - 124,616Employee benefit expense 443,319 115,336 9,787 568,443Impairment loss-Others 141,846 - - 141,846Impairment loss 311,177 - - 311,177Other expenses 1,274,755 156,290 10,882 1,441,927

Net expenses 3,686,729 508,053 20,670 4,215,452

Reportable segment profit -256,417 222,669 17,443 -16,305Finance cost (345,369) (3,206) (60) -348,635Profit before income tax from reportable segments -601,786 219,463 17,382 -364,940Income tax (63,276) (4,737) (4,878) -72,892

(Loss)/Profit after income tax -665,062 214,726 12,504 -437,832

80




SEGMENT REPORTING -2014

GROUP NON-LIFE HEALTHCARE ASSET TOTALMGT

Revenue:Derived from external customersGross Premium 4,428,817 367,190 - 4,796,007

Gross Premium income 4,509,186 368,765 - 4,877,951Reinsurance expenses -1,093,592 - - -1,093,592Net Premium income 3,415,594 368,765 - 3,784,359 Commission income 149,637 - - 149,637 Income from non-insurance subsidiaries - 107,528 35,769 143,297Investment income 241,719 34,001 9,619 285,339Net realised gains on financial assets 2,508 - - 2,508Net fair value (loss)/gain on financial assets at fair value through profit or loss -37,943 -1,766 - -39,709Other operating income 742,163 2,591 3,940 748,694

Net income 4,513,678 511,119 49,328 5,074,125

Insurance claims 1,847,335 228,278 - 2,075,613Insurance claims recovered from reinsurer -557,905 - - -557,905Net insurance claims 1,289,430 228,278 - 1,517,708Acquisition costs 840,189 10,491 - 850,680Other underwriting expenses 52,696 - - 52,696Employee benefit expense 537,517 112,723 5,564 655,804Depreciation and amortization 164,176 23,961 1,017 189,154Impairment loss 276,434 - - 276,434Other expenses 1,000,163 121,291 21,533 1,142,987

Net expenses 4,160,605 496,744 28,114 4,685,463

Reportable segment profit 353,073 14,375 21,214 388,662Finance cost -76,188 -1,717 - -77,905Profit before income tax from reportable segments 276,885 12,658 21,214 310,757Income tax -107,652 -13,406 -6,364 -127,422

Profit after income tax 169,233 -748 14,850 183,335

81

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER, 2014 (CONT'D)IN THOUSANDS OF NIGERIAN NAIRA

5.5 FINANCIAL ASSETS AND LIABILITIESAccounting classfication measurement basis and fair values.

(a) GroupHeld for trading

Held -to-maturity

Loans & receivables

Available-for- sale

Other financial liabilities at

amortized cost

Total Carrying amount Fair Value

December 31, 2014Cash and cash equivalents - - 3,741,023 - - 3,741,023 3,741,023Financial assets 166,660 412,989 - 38,757 - 618,406 618,406Trade receivables - - 350,826 - - 350,826 350,826Other receivables excluding prepayments - - 379,323 - - 379,323 379,323

166,660 412,989 4,471,172 38,757 - 5,089,579 5,089,579

Insurance contract liabilities - - - - 3,302,335 3,302,335 3,302,335Trade and other payables - - - - 521,252 521,252 521,252Borrowings - - - - 1,454,615 1,454,615 1,454,615

- - - - 5,278,202 5,278,202 5,278,202

GroupHeld for trading

Held -to-maturity

Loans & receivables

Available-for- sale

Other financial liabilities at

amortized cost

Total Carrying amount Fair Value

December 31, 2013Cash and cash equivalents - - 1,818,259 - - 1,818,259 1,818,259 Financial assets 191,759 330,049 - 38,622 - 560,430 560,430 Trade receivables - - 864,968 - - 864,968 864,968 Other receivables excluding Prepayments - - 521,778 - - 521,778 521,778

191,759 330,049 3,205,006 38,622 - 3,765,436 3,765,436

Insurance contract liabilities - - - - 2,754,236 2,754,236 2,754,236 Trade and other payables - - - - 551,486 551,486 551,486 Borrowings - - - - 2,231,452 2,231,452 2,231,452

- - - - 5,537,174 5,537,174 5,537,174

82


The table below sets out the Group's classification of each class of financial assets and liabilities, and their fair values


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER, 2014(CONT'D)IN THOUSANDS OF NIGERIAN NAIRA

(b) FINANCIAL ASSETS AND LIABILITIESAccounting classfication measurement basis and fair values.The table below sets out the Company's classification of each class of financial assets and liabilities, and their fair values

Other financial TotalHeld for Held -to- Loans & Available- liabilities at carrying Fair

Company trading maturity receivables for- sale amortized cost amount valueDecember 31, 2014Cash and cash equivalents - - 3,357,358 - - 3,357,358 3,357,358Financial assets 162,091 - - 38,757 - 200,848 200,848Trade receivables - - 57,406 - - 57,406 57,406Other receivables excluding prepayments - - 339,815 - - 339,815 339,815

162,091 - 3,754,579 38,757 - 3,955,428 3,955,428

Insurance contract liabilities - - - - 2,945,797 2,945,797 2,945,797Trade and other payables - - - - 213,867 213,867 213,867Borrowings - - - - 1,452,233 1,452,233 1,452,233

- - - - 4,611,897 4,611,897 4,611,897

Other financial TotalHeld for Held -to- Loans & Available- liabilities at carrying Fair

Company trading maturity receivables for- sale amortized cost amount valueDecember 31, 2013Cash and cash equivalents - - 1,461,238 - - 1,461,238 1,461,238 Financial assets 185,425 - - 38,622 - 224,047 224,047 Trade receivables - - 403,409 - - 403,409 403,409 Other receivables excludingPrepayments - - 459,615 - - 459,615 459,615

185,425 - 2,324,262 38,622 - 2,548,309 2,548,309

Insurance contract liabilities - - - - 2,332,272 2,332,272 2,332,272 Trade and other payables - - - - 231,603 231,603 231,603 Borrowings - - - - 2,241,255 2,241,255 2,241,255

- - - - 4,805,130 4,805,130 4,805,130

83


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER, 2014 (CONT'D)IN THOUSANDS OF NIGERIAN NAIRA

6 FAIR VALUE HIERARCHYThe Group's accounting policy and basis of fair value measurements are disclosed under notes 3.3.1

Level 1: Quoted market price in an active market for an identical instrument

TotalGroup- December 31, 2014 Level 1 Level 2 Level 3 balanceAssetsEquity securities - Held for trading 166,660 - - 166,660Financial assets measured at fair value 166,660 - - 166,660

TotalGroup- December 31, 2013 Level 1 Level 2 Level 3 balanceAssetsEquity securities - Held for trading 191,759 - - 191,759Financial assets measured at fair value 191,759 - - 191,759

TotalCompany- December 31, 2014 Level 1 Level 2 Level 3 balanceAssetsEquity securities - Held for trading 162,091 - - 162,091Financial assets measured at fair value 162,091 - - 162,091

TotalCompany- December 31, 2013 Level 1 Level 2 Level 3 balanceAssetsEquity securities - Held for trading 185,425 - - 185,425Financial assets measured at fair value 185,425 - - 185,425

84

Level 2: Valuation techniques based on observable inputs. This category includes instruments valued usingquoted market prices in active markets for similar instruments; quoted prices for similar instruments inmarket that are considered less than active; or other valuation techniques where all significant inputs aredirectly or indirectly observable from market data.

Level 3: This includes financial instruments, the valuation of which incorporate significant inputs for the assetor liability that is not based on observable market data(unobservable inputs). Unobservable inputs are thosenot readily available in an active market due to market illiquidity or complexity of the product. These inputsare generally determined based on inputs of a similar nature, historic observations on the level of the input oranalytical techniques.

The table below analyses financial instruments measured at fair value at the end of the year, by the level inthe fair value hierarchy into which the fair value measurement is categorised:


6.1 CASH AND CASH EQUIVALENTS

Group Group Company CompanyDec-14 Dec-13 Dec-14 Dec-13

Cash at bank and in hand 342,600 573,402 251,424 494,346Short term deposits 3,398,423 1,244,857 3,105,934 966,892

___________ ___________ ___________ ___________3,741,023 1,818,259 3,357,358 1,461,238

=========== =========== =========== ===========Deposits with banks earned interest at floating rates based on the daily rates. Cash and depositsare available for use in the company's day-to-day operations.Cash and bank overdrafts include the following for the purposes of the cash flow statement:

Cash at bank and in hand 3,741,023 1,818,259 3,357,358 1,461,238 Bank overdraft - -

___________ ___________ ___________ ___________3,741,023 1,818,259 3,357,358 1,461,238

=========== =========== =========== ===========

7.0 FINANCIAL ASSETSThe Group's financial assets are summarized below by measurement category in the table below:


Fair value through profit or loss (see note 7.1 below) 166,660 191,759 162,091 185,425 Available- for-sale (see note 7.2 below) 38,757 38,622 38,757 38,622 Held-to-maturity (see note 7.3 below) 412,989 330,049 - -

Total financial assets 618,406 560,430 200,848 224,047

Current 579,649 521,808 162,091 185,425 Non-current 38,757 38,622 38,757 38,622

85


For the purpose of the cash flow statement, cash and cash equivalents comprise the following balances withoriginal maturity of less than 90 days.

EQUITY ASSURANCE PLC AND ITS SUBSIDIARY COMPANIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER, 2014 (Cont'd)In thousands of Nigerian Naira

7.1 Financial assets at fair value through profit or lossThese are equity securities as analysed below:


Access Bank 1,044 1,521 824 1,198 Africa Prudential Registrar Plc 28 35 2 2 Ashaka 320 326 320 326 C & I Leasing 449 449 449 449 Consolidated Hallmark 1,000 1,000 1,000 1,000 Dangote Cement 6,930 7,807 6,930 7,807 Dangote Sugar 2,862 476 2,862 476 Deap Capital 941 941 941 941 Diamond Bank 30,690 36,750 30,690 36,750 Dunlop 69 69 69 69 ETI 1,815 1,583 1,792 1,562 FCMB 2,358 2,881 2,358 2,881 FBN Holdings 15,641 22,452 15,641 22,452 Flour Mills 2,579 855 2,579 855 GTB 57,765 61,986 57,765 61,986 Guinea Ins 250 250 250 250 Guiness 1,407 1,975 1,407 1,975 International Breweries 186 229 186 229 John Holt - 5 - 5 Julius Berger 2,574 103 2,574 103 Linkage - 1,201 - 1,201 NAHCO - 1 - 1 National Salt Company Plc 752 336 603 Nestle 3,601 4,271 3,601 4,271 Nigeria Breweries 3,912 3,974 3,912 3,974 Oando 129 334 129 334 PZ 647 1,006 647 1,006 Regency 5,070 5,071 3,342 3,342 Royal Exchange - 17 - 17 Skye Bank 1,906 513 1,906 513 Skye Shelter 2,186 10,000 2,186 10,000 STACO 275 275 275 275 Sterling Bank 2,786 607 2,159 - Thomas Wyatt 20 20 20 20 Total 34 40 34 40 UAC 230 359 230 359 UBA 3,388 3,602 2,154 902 UBA Capital Plc 61 81 4 5 Union Bank 681 773 681 773 Union Homes 313 313 313 313 Unity Bank 33 33 33 33 Universal Insurance Company Plc 500 500 - - WAPCO 1,193 1,704 1,193 1,704 Wapic 15 37 10 28 Wema 355 451 355 451 Zenith Bank 9,664 14,547 9,664 14,547

166,660 191,759 162,091 185,425 86

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER, 2014 (Cont'd)

7.2 Available - for- sale financial assetsThese represent interest in unquoted companies as analyzed below


Intercontinental Homes 3,125 3,125 3,125 3,125 FBN Heritage 25,000 25,000 25,000 25,000 FCSL Asset Management Company Ltd 22,500 22,500 22,500 22,500 Energy and Special Risk Insurance 6,600 6,600 6,600 6,600

57,225 57,225 57,225 57,225 Fair value gain 3,998 6,587 3,998 6,587 Less: provision for impairment -22,466 -25,190 -22,466 -25,190

Total available-for-sale financial assets 38,757 38,622 38,757 38,622

Non-current 38,757 38,622 38,757 38,622

7.2.1

7.2.2

Trust bond Mortgage

Bank

FCSL Asset Management Limited

FBN Heritage Fund

Total

Dec - 13 Dec - 13 Dec-14 Dec - 14Net asset value of other corporate entities 5,111,132 833,051 - Unit of shares held by Equity Assurance Plc - 250

Percentage holding/unit price 0.05% 0.88% 115.99 2,432 7,327 28,998 38,756

(2,432) -7,327 (25,000) -34,759- - 3,998 3,998

7.3 Held - to- maturity financial assets at amortized costs


Short term deposits with financial institutions 361,868 317,595 - - Treasury bills with Ghana government 51,121 12,454 - -

412,989 330,049 - -

Current 412,989 330,049 - - Non-current - - - -

87

Available-for-sale financial assets represent the Group’s investments in unlisted securities in other corporateentities. The investment is carried at fair value based on the net assets value of the group's investments in theother corporate entities and where determinable the market price of the Investment.

The analysis of the fair value gain of N3,998,000 on available for sale investment as at 31 December 2014 is asfollows:


Financial assets held-to-maturity are presented at amortized cost less impairment on the Group's consolidatedfinancial statement.

Fair value of available for sale financial assetsCarrying value of available for sale financial assetsFair value gain


8.0 TRADE RECEIVABLES Group Group Company CompanyDec-14 Dec-13 Dec-14 Dec-13

Insurance receivables 2,076,208 2,714,051 2,038,319 2,384,322 Other trade receivables 293,420 264,903 - -

2,369,628 2,978,954 2,038,319 2,384,322 Less: Provision for impairment -2,018,802 (2,113,986) (1,980,913) (1,980,913)

TRADE RECEIVABLES 350,826 864,968 57,406 403,409

The make up of the insurance receivables are as follows:Group Group Company CompanyDec-14 Dec-13 Dec-14 Dec-13

Brokers 1,512,686 1,928,847 1,508,397 1,843,119 Agents 505,561 573,168 502,609 513,396 Direct clients 57,960 212,036 27,313 27,807

Total 2,076,208 2,714,051 2,038,319 2,384,322

Less: impairment from brokers (1,455,280) (1,470,669) (1,450,991) (1,439,710) Less: impairment from agents (505,561) (534,502) (502,609) (513,396) Less: impairment from direct clients (57,960) (108,815) (27,313) (27,807)

(2,018,802) ( 2,113,986 ) ( 1,980,913 ) ( 1,980,913 )

The age analysis of gross insurance receivables as at the end of the year is as follows:Group Group Company CompanyDec-14 Dec-13 Dec-14 Dec-13

0- 90 days 57,406 245,535 57,406 403,409 91- 180 days 11,726 100,388 11,726 17,956 Above 180 days 2,007,076 2,368,128 1,969,187 1,962,957

Total 2,076,208 2,714,051 2,038,319 2,384,322

9.0 REINSURANCE RECEIVABLES Group Group Company CompanyDec-14 Dec-13 Dec-14 Dec-13

Total reinsurers' share of insurance liabilities 881,907 611,725 760,404 477,009 Prepaid re-insurance 478,841 396,371 372,750 296,187

1,360,748 1,008,096 1,133,154 773,196

The movement in prepaid reinsurance is as follows:Balance at January 1 396,371 276,252 296,187 188,474Additions during the year 1,176,062 992,472 1,014,815 841,274Released in the year -1,093,592 -872,353 -938,252 -733,561Balance at December 31 478,841 396,371 372,750 296,187

fair value(ii) Reinsurance assets are not impaired as balances are set-off against payables from retrocession.

88


(i) Reinsurance receivables are to be settled on demand and the carrying amount is not significantly different from


10.0 DEFERRED ACQUISITION COSTS


At 1 January 311,608 192,044 221,311 160,727Exchange difference -18,250 -3,382 - - Additions in the year 816,904 795,818 595,441 591,829Expensed during the year -850,680 -672,872 -633,381 -531,245At 31 December 259,582 311,608 183,371 221,311

11.0 PREPAYMENTS AND OTHER RECEIVABLES Group Group Company CompanyDec-14 Dec-13 Dec-14 Dec-13

Other receivables 123,081 145,157 63,279 64,592 Due from related companies (11.1) 12,904 13,773 143,732 152,279 Due from Equity Resort hotel (11.2) 132,804 242,744 132,804 242,744 Prepayments 154,686 82,488 62,812 22,111 Deposit for shares-Equity Assurance Liberia 110,534 120,104 - -

534,009 604,266 402,627 481,726

Current 277,767 227,645 269,823 238,982 Non-current 256,242 376,621 132,804 242,744

11.1 DUE FROM RELATED PARTIESEA Capital Management Limited - 4,194 6,860 Managed Health Care Services Limited - - 11,783 26,054 Equity Assurance Limited, Ghana - - 127,755 119,365 Equity Assurance Limited, Liberia 12,904 13,773 - -

12,904 13,773 143,732 152,279

11.2 DUE FROM EQUITY RESORT HOTEL LIMITEDAt 1 January 242,744 175,685 242,744 175,685

Reimbursable expenses incurred 3,215 16,508 3,215 16,508

(Loss)/profit from concessionary arrangement -113,155 50,551 -113,155 50,551 At 31 December 132,804 242,744 132,804 242,744

89

This represents commission on unearned premium relating to the unexpired tenure of risk and the movement indeferred acquisition costs is as follows:

Deferred policies acquisition expenses will be recognized as an expense within 12 months after the reporting date.


EQUITY ASSURANCE PLC AND ITS SUBSIDIARY COMPANIESNOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER, 2014IN THOUSANDS OF NIGERIAN NAIRA

12 INVESTMENT IN SUBSIDIARIES Group Group Company CompanyDec-14 Dec-13 Dec-14 Dec-13

EA Capital Management Limited - - 579,694 579,694 Managed HealthCare Services Limited(MHS) - - 344,300 344,300 Equity Assurance Limited, Ghana - - 196,848 198,072

- - 1,120,842 1,122,066

Principal subsidiary undertakings:

Company name Nature of business Country % of equityof origin capital controlled

EA Capital Management Limited Asset management Nigeria 100Managed HealthCare Services Limited Health management Nigeria 67.56Equity Assurance Limited, Ghana Non-life Insurance Ghana 75.22

90

The Group is controlled by Equity Assurance Plc "the company" (incorporated in Nigeria). Thecontrolling interest of Equity Assurance Plc in the Group entities is disclosed in the table below:

Equity Assurance Plc has direct and indirect shareholding in Managed Healthcare Services totaling67.56%. It has a direct shareholding of 55.83% with an indirect shareholding of 11.73% arising fromthe investment of its fully owned subsidiary named EA Capital Management Limited in ManagedHealthCare Services Limited.

1. EA Capital Management Limited was incorporated on October 29, 2008 as a private limitedliability company primarily to carry on the business of finance leases to both individual andcorporate clients. Its registered office is at Plot 1196 Bishop Oluwole Street, Victoria Island,Lagos, Nigeria.

2. Managed HealthCare Services Limited was incorporated on December 11, 1997 to carry on thebusiness of health management. It is a nationally licensed Health ManagementOrganization(HMO), accredited by the National Health Insurance Scheme (NHIS). It has its headoffice at 16 Obokun street, off Coker road, Ilupeju, Lagos, Nigeria and twelve branches acrossmajor cities in Nigeria.

3. Equity Assurance Limited, Ghana was registered and is domiciled in Ghana to undertake thebusiness of general insurance and other businesses and agencies incidental thereto. Its registeredoffice is 49, Senchi Street, Airport Residential Area, Accra, Ghana and it has fourteen branchesacross Ghana.



13 INVESTMENT PROPERTIES Group Group Company CompanyDec-14 Dec-13 Dec-14 Dec-13

Balance at 1 January 803,678 375,500 - - Exchange difference -11,671 - Reclassified to Property, Plant & Equipment -395,000 - Additions 470 244,078 - - Fair value gain on investment property - 184,100 - -

Balance at 31 December 397,477 803,678 - -

The investment properties are being held as follows:

Investment properties held by the Company:Investment properties held by MHS - 395,000 - - Investment properties held by Equity Assurance Limited 46,077 57,748 Investment properties held by EA Capital 351,400 350,930 - -

397,477 803,678 - -

1

2 The investment property belonging to EA Capital is situated at the following:Amount

S/N Location N'0001 Plot 21, Oniru Estate, Eti-Osa, Seagle tower, Oniru, Victoria Island 165,000 2 The LOFTS Diamond Estate, Sangotedo, Lekki, Lagos 156,400 3 Katampe District, Katampe Abuja, Federal Capital Territory 30,000

351,400

14 INTANGIBLE ASSETS Group Group Company CompanyDec-14 Dec-13 Dec-14 Dec-13

COSTBalance at 1 January 1,246,040 1,202,027 1,230,559 1,190,951 Additions 8,041 6,551 5,001 1,200 Adjustment (Note 15.1) - 38,408 38,408 Exchange difference (1,626) (946) - - Balance on 31 December 1,252,455 1,246,040 1,235,560 1,230,559 ACCUMMULATED AMORTISATION

Balance at 1 January 213,494 147,452 208,442 143,890 Amortisation charge for the year 61,199 52,685 59,002 50,859 Adjustment (Note 15.1) - 13,693 - 13,693 Exchange difference (882) (336) - - Balance on 31 December 273,811 213,494 267,444 208,442

Carrying value 978,644 1,032,546 968,116 1,022,117

The closing net book of the intangible assets comprises the following:

Computer Software 36,261 43,044 25,733 32,615 Leasehold improvements on Equity Resort hotels 942,383 989,502 942,383 989,502

91

The Parent company was granted a concession right in 2010 by the Ogun state Government to manage theaffair of Equity resort hotel, Ijebu-ode for the period of 25 years. The sum of N1.152 billion was spent torefurbish the hotel to enable it meet international standard. This sum above represents the carrying amountat cost of the improvements carried out on the hotel.

Investment property held by Managed Healthcare Services Limited was reclassified to Property, Plant andEquipment due to conversion of the property for administrative use by Managed HealthCare Services limitedduring 2014 financial year.


15.1 PROPERTY, PLANT AND EQUIPMENT (GROUP)Leasehold Buildings Office Motor Furniture Bill

Land Equipment Vehicles & Fittings Board TotalCOSTAt 1 January, 2014 949,025 1,184,139 157,911 259,137 58,332 5,730 2,614,274Additions - 368 31,155 106,802 4,539 - 142,864

- 395,000 - - - - 395,000Disposals (710,000) (1,135,000) (1,597) (13,960) - - -1,860,557Exchange difference - (2,019) -4,116 -12,807 -3,485 - -22,427At 31 December, 2014 239,025 442,488 183,353 339,172 59,386 5,730 1,269,154

At 1 January, 2013 832,184 1,152,148 174,113 209,529 54,472 5,730 2,428,176Additions 1,539 10,550 24,093 81,995 5,468 - 123,645Adjustment (Note 15.3) - - -38,408 - - - -38,408Disposals - - - (25,299) - -25,299Transfer to revaluation reserve ( 833,723 ) ( 1,140,950 ) - - - - -1,974,673Revaluation 949,025 1,163,600 - - - - 2,112,625 Exchange difference - (1,209) -1,887 -7,088 -1,608 - -11,792At 31 December, 2013 949,025 1,184,139 157,911 259,137 58,332 5,730 2,614,274

ACCUMULATED DEPRECIATIONAt 1 January, 2014 - 18,253 75,382 122,328 32,030 3,438 251,431 Charge for the year - 24,866 35,109 55,774 11,059 1,146 127,954 Disposals - (22,700) (1,579) (13,627) - (37,906) Exchange difference - -1,557 -2,426 -6,408 -1,888 - (12,279) At 31 December, 2014 - 18,862 106,486 158,067 41,201 4,584 329,200

At 1 January, 2013 - 27,991 56,145 96,258 21,766 2,292 204,452 Charge for the year - 33,084 33,936 49,099 11,033 1,146 128,298 Adjustment (Note 15.3) - - -13,693 - - - (13,693)

- ( 42,131 ) - - - - (42,131)

Disposals - - - (19,652) - (19,652) Exchange difference - -691 -1,006 -3,377 -769 - (5,843) At 31 December, 2013 - 18,253 75,382 122,328 32,030 3,438 251,431

CARRYING VALUE

At 31 December, 2014 239,025 423,626 76,867 181,105 18,185 1,146 939,954

At 31 December, 2013 949,025 1,165,886 82,529 136,809 26,302 2,292 2,362,843

92


Land and building held by Equity Assurance Plc was independently valued by Omotayo Adesina Associates, estate surveyors andvaluers at November 2013 to ascertain the open market value of the land and building.

The fair value of land and buildings is determined by discounting the expected cash flows of the properties based upon internalplans and assumptions and comparable market transactions.

Rclassification from investment property

Transfer to Revaluation reserve

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER, 2014(Cont'd)IN THOUSANDS OF NIGERIAN NAIRA

15.2 PROPERTY, PLANT AND EQUIPMENT (COMPANY)

Leasehold Buildings Office Motor Furniture BillLand Equipment Vehicles & Fittings Board Total

COSTAt 1 January, 2014 949,025 1,163,600 93,589 134,786 35,097 5,730 2,381,827Additions - - 21,958 63,851 1,988 - 87,797Disposals (710,000) (1,135,000) (1,597) (13,960) - - (1,860,557)

At 31 December, 2014 239,025 28,600 113,950 184,677 37,085 5,730 609,067

At 1 January, 2013 832,184 1,140,950 126,796 99,811 34,122 5,730 2,239,593Additions 1,539 - 5,201 38,475 975 - 46,190Adjustment (Note 15.3) - - -38,408 - - - -38,408Disposals - - - (3,500) - - (3,500) Transfer to Revaluation reserve ( 833,723 ) ( 1,140,950 ) - - - - (1,974,673) Revaluation 949,025 1,163,600 - - - - 2,112,625

At 31 December, 2013 949,025 1,163,600 93,589 134,786 35,097 5,730 2,381,826

ACCUMULATED DEPRECIATIONAt 1 January, 2014 - - 42,319 64,317 18,477 3,438 128,551 Charge for the year - 23,272 21,348 30,266 7,033 1,146 83,065 Disposals - (22,700) (1,579) (13,627) - - (37,906)

At 31 December, 2014 - 572 62,088 80,956 25,510 4,584 173,710

At 1 January, 2013 - 21,594 32,359 40,275 11,534 2,292 108,054 Charge for the year - 20,537 23,654 27,532 6,943 1,146 79,812 Adjustment (Note 15.3) - - -13,693 - - - (13,693) Disposals - - - (3,490) - - (3,490) Transfer to Revaluation reserve - ( 42,131 ) - - - - (42,131)

At 31 December, 2013 - - 42,319 64,317 18,477 3,438 128,551

CARRYING VALUE

At 31 December, 2014 239,025 28,028 51,862 103,721 11,575 1,146 435,357

At 31 December, 2013 949,025 1,163,600 51,270 70,469 16,620 2,292 2,253,275

15.3 Adjustment

This relates to intangible assets wrongly included in office equipment now amended.

93



16 STATUTORY DEPOSIT Group Group Company CompanyDec-14 Dec-13 Dec-14 Dec-13

Statutory deposit 322,671 323,203 300,000 300,000

17 INSURANCE CONTRACT LIABILITIESGroup Group Company Company

Dec-14 Dec-13 Dec-14 Dec-13

Claims reported and loss adjustment expenses 1,657,191 1,072,330 1,628,643 998,757 Claims incurred but not reported 258,903 140,671 253,193 126,818 Unearned premiums 1,386,241 1,541,235 1,063,961 1,206,697 Total Insurance contract iabilities, gross 3,302,335 2,754,236 2,945,797 2,332,272

Reinsurance receivables 881,907 611,725 760,404 477,009

Net insurance contract liabilities 2,420,428 2,142,511 2,185,393 1,855,263

18 TRADE PAYABLESTrade payables represent liabilities to Agents, Brokers and Re-insurer as at year end.


Reinsurance payable 116,416 232,904 23,488 101,384 Coinsurance payable - 8,604 - 8,604 Commission payable 9,703 14,153 4,180 2,091 Other trade payables 921 1,077 - -

127,040 256,738 27,668 112,079

19 OTHER PAYABLES Dec-14 Dec-13 Dec-14 Dec-13Deferred income (See note 19.1 below) 93,469 94,759 - - Dividend payable 45,585 43,643 38,798 38,798 Withholding tax payable 56,275 16,118 28,657 16,118 Staff pension 14,265 8,838 7,415 8,838Other creditors 68,808 78,592 32,894 6,204 Accrued expenses 115,810 52,798 78,435 49,566

394,212 294,748 186,199 119,524

Current 300,743 191,200 186,199 113,320Non-current 93,469 103,548 - 6,204

19.1

20 DEPOSIT FOR SHARES Group Group Company CompanyDec-14 Dec-13 Dec-14 Dec-13

At December 31 500 82,582 - -

21 BORROWINGS Group Group Company Company

Bank overdraft - - - - Obligations under finance lease 21.1 9,248 3,903 6,866 13,706 Convertible redeemable loan 21.2 1,445,367 2,227,549 1,445,367 2,227,549 Total 1,454,615 2,231,452 1,452,233 2,241,255

Maturity analysisCurrent portion 9,248 3,903 6,866 13,706 Non-current portion 1,445,367 2,227,549 1,445,367 2,227,549

1,454,615 2,231,452 1,452,233 2,241,255 94


This represents unearned income from the businesses of EA Capital Management Limited- N24,510,402(2013-N29,906,674) and Managed Healthcare Services Limited- N68,958,989 (2013-N64,852,538).

The sum of N500,000 represents deposit made by a prospective investor in Managed HealthCare Services Limited asat the end of 2014.

These represent deposits with the Central Bank of Nigeria in accordance with Section 10(3) of the Insurance ActCAP I17 LFN 2004 and Investment in Government of Ghana Treasury Bills as required by National InsuranceCommission (NIC), Ghana

21.1 Obligation under finance lease

21.2 Convertible redeemable loan

The movement in the convertible loan during the year is as follows: Group Group Company Company Dec-14 Dec-13 Dec-14 Dec-13

Balance at January 1 2,227,549 1,720,522 2,227,549 1,720,522 Interest charges 68,467 331,611 68,467 331,611 Payments during the year -827,264 -160,000 -827,264 -160,000Exchange difference -23,385 335,416 -23,385 335,416 Balance as at December 31 1,445,367 2,227,549 1,445,367 2,227,549

The impact of the convertible redeemable loan on the solvency margin is disclosed under Capital Management Note.

22 CURRENT INCOME TAX LIABILITIESThe movement in this account during the year was as follows:

Balance as at January 1 173,358 146,983 69,195 75,737 Exchange difference (21,972) (7,783) - - Charge for the year (see note 22.1 below) 123,915 78,641 73,393 21,527 Payment during the year (99,842) (44,483) (71,257) (28,069) Balance as at December 31 175,459 173,358 71,331 69,195

22.1 The tax charge for the year comprises:Company income tax -Equity Assurance Plc - - - - -Managed Healthcare Services 4,031 5,276 - - -EA Capital Management Limited 6,364 4,878 - - -Equity Assurance Limited- Ghana 34,335 42,240 - -

Education Tax -Equity Assurance Plc 1,361 - 1,361 - -Managed Healthcare Services - 962 - - Minimum tax -Equity Assurance Plc 22,035 21,527 22,035 21,527

National fiscal stabilisation levy -Equity Assurance Plc 1,611 - 1,611 - -Equity Assurance Limited- Ghana 5,792 3,759 - -

Under provision in previous year -Equity Assurance Plc 48,386 - 48,386 -

123,915 78,641 73,393 21,527

Deferred tax -Equity Assurance Plc - - - -Managed Healthcare Services 9,375 (1,500) - - -EA Capital Management Limited - - - - -Equity Assurance Limited- Ghana (5,867) (4,249) - -

3,508 (5,749) - -

Total tax charge for the year 127,423 72,892 73,393 21,527

95

The charge for Income and Education taxes in these financial statements has been based on the provisions of theCompanies Income Tax Act CAP C21 LFN 2004 as amended to date and Education Tax Act CAP E4 LFN 2004respectively.

The finance leases are secured by the related non current assets that were procured using the leased funds.

The Option commonly referred to as "Call Option" is the option side of the instrument and gives the Option holder(Daewoo Securities Europe Limited, the right but not obligation to subscribe to the equity of the issuer at anagreed price (Strike Price)and predetermined time period(Expiration). When exercised, a fresh injection of thecapital is required to take up the new issues created.

This represents zero coupon JPY1,350,000,000 direct, unconditional, unsubordinated and unsecured European Bondwith options issued to Daewoo Securities Europe Limited in 2008. The underlying Bond has a put period of48months with a yield to put of 4.25% per annum while the tenor of the convertible option is valid up to year 2026.The purpose for which the Bond was issued relates to upgrade of Information and Communication Technology,Expansion of Branch network and Working Capital.

The Company's obligations under Daewoo Bond is currently being restructured over a 5 year repayment plan terminating in December 2018.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER, 2014(Cont'd)IN THOUSANDS OF NIGERIAN NAIRA

22.2 Actual tax charge on the company's profit differ from the standard rate of corporate tax in Nigeria applied to profits for the year as analysed below:

Company CompanyCurrent tax on results for the year: 2014 2013

N '000 N '000Income Tax - - NITDA 1,611 - Education tax 1,360 - Under provision in previous year 48,386 - Minimum tax 22,035 21,527

73,392 21,527

Total current tax 73,392 21,527

Deferred tax liabilityOrigination and reversal of temporary differences - -

Total tax expense 73,392 21,527

Tax Expense recognised in Other Comprehensive Income

Capital Gains Tax on Revaluation Surplus - 18,008

The reasons for the difference between the actual tax charge for theyear and the standard rate of corporate tax in Nigeria applied to profits for the year are as follows:

Profit/(loss) before tax 161,050 (752,133)

Expected tax charge based on the standard rate on Nigeriacorporate tax at the domestic rate of 30% (2012: 30%) 48,315 (225,640)

Income tax as per computations - -

Difference ( see below) 48,315 -225,640

Adjustment for tax deductible and non-deductible items

Effect of income that is exempt from taxation -2,581,045 -1,080,766Effect of expenses that are not deductible in determining taxable profit 3,765,507 168,339 Balancing charge - - Loss relieved ( 533,083 ) - Adjusted loss - 160,294 Investment allowance ( 2,196 ) - Capital allowance restriction ( 488,133 ) - Minimum tax - - Education tax - - Deferred tax provision - -

Income tax @ 30% - Difference (as above) 161,050 (752,133)

Income tax at 30%- Diference (as above) 48,315 (225,640)

Effective tax rate 0.46 (0.03)

96

EQUITY ASSURANCE PLC AND ITS SUBSIDIARY COMPAN


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER, 2014(Cont'd)IN THOUSANDS OF NIGERIAN NAIRA

Group Group Company Company31 December 31 December 31 December 31 December

23 DEFERRED TAX 2014 2013 2014 2013 N'000 N'000 N'000 N'000

Balance at the beginning of the year 44,657 32,298 48,994 30,986Exchange difference -573 100Write back for the year -2,561 (5,749) - - Charge for the year:- Income statement 9,375 - - - - Other comprehensive income - 18,008 - 18,008 Balance at the end of the year 50,898 44,657 48,994 48,994

Current - - - - Non current 50,898 44,657 48,994 48,994

23.1 Deferred income tax are attributable to the following:

Company

Opening balance as at 1 January 2014

Recognized in net income

Recognized in OCI

Closing Balance at 31 December

2014 N'000 N'000 N'000 N'000

Deferred tax liabilitiesExcess of NBV over TWDV 30,986 - 30,986 Unrealised Exchange gainRevaluation Surplus 18,008 - - 18,008

48,994 - - 48,994

Deferred tax assets

Other timing difference items - - - -

Net deferred tax liability/ (asset) 48,994 - - 48,994

24 SHARE CAPITAL Group Group Company CompanyAuthorised Dec-14 Dec-13 Dec-14 Dec-1314,000,000,000 ordinary shares of 50k each 7,000,000 7,000,000 7,000,000 7,000,000

Issued and fully paid4,423,649 4,423,649 4,423,649 4,423,649

25 SHARE PREMIUM Group Group Company CompanyDec-14 Dec-13 Dec-14 Dec-13

At 31 December 1,105,193 1,105,193 1,105,193 1,105,193

97

8,847,298,420 ordinary shares of 50k each

Share premium comprises additional paid up capital in excess of the par value. The reserve is not ordinarilyavailable for distribution

EQUITY ASSURANCE PLC AND ITS SUBSIDIARY COMPANIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER, 2014(Cont'd)IN THOUSANDS OF NIGERIAN NAIRA

26 CONTINGENCY RESERVES

The movement in this account during the year is as follows:Group Group Company Company

Dec-14 Dec-13 Dec-14 Dec-13

At 1 January 623,027 508,687 554,990 457,285Exchange difference -13,751 -5,551 - - Transfer from retained earnings 125,246 119,891 102,454 97,705Due to Minority interest -18,702At 31 December 715,820 623,027 657,444 554,990

27 ASSETS REVALUATION RESERVES Dec-14 Dec-13 Dec-14 Dec-13

As at 1 January 1,560,478 1,398,403 1,560,478 1,398,403Transfer from property, plant and equipment (Note 15) - -1,974,673 - -1,974,673- accumulated depreciation (Note 15) - 42,131 - 42,131 Revaluation amount (Note 15) - 2,112,625 - 2,112,625

- 180,083 - 180,083Capital gain tax (see note 23) - -18,008 - -18,008Additional revaluation surplus during the year - 162,075 - 162,075Transfer to retained earnings -1,391,588 - -1,391,588 -

At 31 December 168,890 1,560,478 168,890 1,560,478

28 AVAILABLE FOR SALE RESERVE Dec-14 Dec-13 Dec-14 Dec-13

At December 31 (18,468) 6,587 ( 18,468 ) 6,587

This represents gain on available for sale financial assets

29 RETAINED EARNINGS

30 NON-CONTROLLING INTERESTS IN EQUITY Group GroupDec-14 Dec-13

Managed Healthcare Services Limited (MHS) 195,967 201,561 Equity Assurance Limited, Ghana 91,943 -

287,910 201,561 The movement in non-controlling interest is as follows: Group Group

Dec-14 Dec-13Balance as at I January 201,561 200,185 Deposit for shares now utilised 51,826 -2,890Dividend received from MHS - (17,516) Right issue - 2,419 Share in contingency reserves 18,702 - Transfer from deposit for shares of Equity Assurance Ltd, Ghana 6,055 2,122 Exchange difference on translation on foreign operations -10,040 - Transfer from retained earnings 5,209 - Dividend paid -5,372 - Disposal of MHS shares by non-controlling interest - (52,409) Transfer from the profit and loss account 19,969 69,650

287,910 201,561

98

In compliance with section 21(1) of Insurance Act CAP I17 LFN 2004, the contingency reserve for generalinsurance business is credited with the higher of 3% of total premiums during the year or 20% of the profits untilit reaches the higher of the minimum paid up share capital or 50% of net premium.

The retained earnings represents the amount available for dividend distribution to the equity shareholders ofthe Company. The movement in the retained earnings is shown in the statement of changes in equity.

This represents the interest of shareholders holding 32.44% (2013: 32.44%) of the shareholding of ManagedHealthcare Services Limited and 24.78%(2013: 0%) of Equity Assurance Limited, Ghana respectively.

EQUITY ASSURANCE PLC AND ITS SUBSIDIARY COMPANIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER, 2014(Cont'd)IN THOUSANDS OF NIGERIAN NAIRA

31 RELATED PARTY TRANSACTIONS

Transactions with key management personnel

(a) Loans and advances to key management personnel2014 2013

Balance outstanding as at January 1 7,517 8,629Repayment during the year -7,517 -1,112Addition during the year 40,000 -

Balance outstanding as at 31 December 40,000 7,517

(b) Other receivables2014 2013

Balance outstanding as at January 1 - - Additions during the year - - Repayment during the year - -

Balance outstanding as at 31 December - - (c) Other Payables

2014 2013

Balance outstanding as at January 1 - - Additions during the year 6,826 - payment during the year - - Balance outstanding as at 31 December 6,826 -

(d) Key management compensationSee note 46 for key management compensation

Sale of insurance contracts and other services2014 2013

Premium received (see note (i) below) 116,375 86,406 Training and other expenses 2,460 2,520 Claims paid 11,305 341

Terms and conditions

(i) Premium received relates to sale of insurance contracts and are at arm's length

99

No provision has been recognized in respect of loans given to key management personnel ( 2013: Nil). The loangiven to key management personnel of N17M that was granted in July 2005 was paid off during the year and anew loan was granted over a period of 5years.

Transactions between Equity Assurance Plc and the subsidiaries meet the definition of related partytransactions. Where these are eliminated as a result of consolidation, they are not disclosed in the consolidatedfinancial statements.

The Group's key management personnel and persons connected with them, are also considered to be relatedparties for disclosure purposes. The definition of key management includes close members of family of keypersonnel and any entity over which key management exercise control. The key management personnel havebeen identified as the executive and non-executive directors of the Group. Close members of family are thosefamily members who may be expected to influence or be influenced by that individual in their dealings withEquity Assurance Plc.

The volume of related party transactions, outstanding balances at the year end and related expense and incomefor the year are as follows:


32 NET PREMIUM INCOME Group Group Company Company2014 2013 2014 2013

Gross direct premium written 4,772,494 4,554,698 3,341,643 3,195,475 Inward reinsurance premium 73,503 61,352 73,503 61,352

Gross premium written 4,845,997 4,616,050 3,415,146 3,256,827 Increase in unearned premiums 81,944 (533,903) 142,736 (494,357)

Gross Premium income 4,927,941 4,082,147 3,557,882 2,762,470 Less: Reinsurance costs -1,143,582 ( 872,353 ) (938,252) -733,561Net Premium income 3,784,359 3,209,794 2,619,630 2,028,909

33 COMMISSION INCOME

34 NET CLAIMS EXPENSESGroup Group Company Company2014 2013 2014 2013

Current year claims paid 1,414,294 1,279,760 853,724 817,701 Outstanding claims 661,318 138,292 619,699 24,734

Total claims and loss adjustment expenses 2,075,612 1,418,052 1,473,423 842,435

Recoverable from re-insurance ( 557,906 ) ( 463,481 ) ( 373,402 ) ( 295,132 )

1,517,706 954,571 1,100,021 547,303

35 UNDERWRITING EXPENSES

Group Group Company Company2014 2013 2014 2013

Acquisition costs 850,680 672,872 633,381 531,245 Other underwriting expenses 52,696 124,616 52,696 124,616 Total underwriting expenses 903,376 797,488 686,077 655,861

36 NET INCOME FROM NON-INSURANCE COMPANIESGroup Group Company Company2014 2013 2014 2013

EA Capital Management Limited 35,769 29,081 - - Managed Healthcare Services Limited 107,528 115,377 - -

143,297 144,458 - -

This is the gross profit from the group's subsidiaries that are not related to insurance businesses.100


Underwriting expenses can be sub-divided into acquisition and other underwriting expenses. Acquisitionexpenses are those incurred in obtaining and renewing insurance contracts. They include commissions orbrokerage paid to agents and brokers and indirect expenses. Other underwriting expenses are those incurredin servicing existing policies. These include processing costs, preparation of statistics and reports and otherincidental costs attributable to maintenance.

Commission income represents commission received on transactions ceded to reinsurance Companies during the year under review


37 INVESTMENT INCOME Group Group Company Company2014 2013 2014 2013

N'000 N'000 N'000 N'000

Cash and cash equivalents interest income 252,836 310,144 130,378 159,509 Dividend income 27,003 54,880 27,003 97,302 Rental income 5,500 2,292 - -

285,339 367,316 157,381 256,811

The investment income comprises the following:N'000 N'000 N'000 N'000

Investment income attributable to shareholders 135,055 178,459 7,097 92,325 Investment income attributable to policyholders 150,284 188,857 150,284 164,486

285,339 367,316 157,381 256,811

38 NET REALISED GAINS ON FINANCIAL ASSETSN'000 N'000 N'000 N'000

Realised gain on quoted equity securities 2,508 9,539 2,508 9,539 Impairment of placement - - - -

2,508 9,539 2,508 9,539

39 NET FAIR VALUE (LOSS)/GAIN ON FINANCIAL ASSETSN'000 N'000 N'000 N'000

-42,432 21,481 -40,666 19,821

40 OTHER OPERATING INCOMEN'000 N'000 N'000 N'000

Profit from sale of Property, Plant & Equipment 679,099 591 679,099 591 Rent income 1,266 2,247 1,266 2,247 Bank interest 966 17 914 Exchange gain 47,901 6,087 33,850 3,499 Gains on disposal - 1,894 - - Provision no longer required - 22,814 - 22,814 Other income 19,462 9,144 15,614 5,108

748,694 42,793 730,743 34,259

41 IMPAIRMENT LOSSN'000 N'000 N'000 N'000

Impairment on premium receivables 42,688 311,177 - 170,048 Impairment loss -others 233,746 141,846 233,074 141,846

276,434 453,023 233,074 311,894

101


Net fair value (loss)/gain on financial assets at fair value through profit or loss

EQUITY ASSURANCE PLC AND ITS SUBSIDIARY COMPANIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER, 2014 (Cont'd)IN THOUSANDS OF NIGERIAN NAIRA

42 OTHER OPERATING EXPENSES Group Group Company Company2014 2013 2014 2013

Depreciation and amortization charges 189,153 154,660 142,067 130,671 Auditors remuneration 12,906 9,315 7,000 7,000 Directors expenses 59,255 49,843 39,775 36,495 Professional fees 94,891 76,285 80,166 52,309 Bank charges 30,822 23,356 26,933 17,489 Training expenses 41,979 47,497 30,524 35,103 Communication expenses 55,536 36,967 40,288 26,486 Exchange loss 462 335,416 462 335,416 Marketing expenses 222,584 186,005 120,368 95,725 Statutory fees 42,686 58,704 33,627 54,972 Repairs& maintenance 68,269 72,673 51,188 54,215 Diesel & electricity 61,428 50,884 39,027 30,607 Rent & rates 32,792 24,843 14,487 11,413 Insurance expenses 23,604 16,235 13,880 9,685 Pension & gratuity 59,120 26,734 50,298 19,095 Printing & stationery 24,541 32,181 11,851 12,443 Travelling and accomodation 65,574 86,307 54,864 72,800 Other administrative expenses 130,663 154,021 42,290 57,538

1,216,265 1,441,926 799,095 1,059,462

43 FINANCE COSTS Group Group Company Company2014 2013 2014 2013

Loan interest 68,467 331,611 68,467 331,611 Lease interest 9,438 17,024 3,986 11,570

77,905 348,635 72,453 343,181

44 EARNINGS/(LOSS) PER SHARE

Profit/(Loss) attributable to the equity holders 163,365 (507,483) 87,657 (773,660) Weighted average number of ordinaryshares in issue (thousands) 8,847,298 8,847,298 8,847,298 8,847,298 Basic earnings per share (kobo per share) 1.8 (5.7) 1.0 (8.7)

102

Basic earnings/(Loss) per share is calculated by dividing the (loss)/profit attributable to equity holders of the Company bythe weighted average number of ordinary shares in issue during the year.

EQUITY ASSURANCE PLC AND ITS SUBSIDIARY COMPANIESNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER, 2014 (Cont'd)IN THOUSANDS OF NIGERIAN NAIRA

45 CASH GENERATED FROM OPERATIONSThis comprises: Group Group Company Company

2014 2013 2014 2013

Profit/(loss) for the year 163,365 (507,483) 87,657 (773,660)

Adjustment to reconcile profit before taxation to net cashflow from operations:Depreciation charges 127,954 128,298 83,065 79,812

(679,099) (591) (679,099) (591) 10,148 5,949 - - - (184,100) - -

Fair value loss/(gain) on investment at fair value through p 25,099 (54,881) 23,334 (53,222)Exchange difference on investment in subsidiary - - 1,224 - Exchange difference on investment property 11,671 - - - Capitalisation of reserve - bonus reserve (4,831) (42,422) - - Interest charges and exchange difference on borrowings 45,082 667,027 45,082 667,027 Contigency reserves (32,453) (5,551) - - Exchange difference on translation of foreign operations (14,048) (7,318) - - Amortization of intangible assets 60,317 52,349 59,002 50,859

- 5,476 - - Foreign currency translation reserve (35,964) 19,531 - - Non-controlling interest 81,140 1,376 - -

(241,620) 77,661 (379,735) (29,775)

Changes in working capital:Decrease in trade receivables 514,142 196,047 346,003 79,404 Increase in reinsurance receivables) (352,652) (105,305) (359,958) (69,455)Decrease/(increase) in other receivables 70,257 (156,386) 79,099 (39,961)Decrease/(increase) in deferred acquisition costs 52,026 (119,564) 37,940 (60,584)Decrease/(Increase) in statutory deposit 532 (3,898) - - Increase in insurance contract liabilities 548,099 548,881 613,525 519,090 (Decrease)/increase in trade payables (129,698) 54,796 (84,411) 84,253 Increase/(decrease) in other payables 99,464 (42,394) 66,675 13,953 Decrease in bank overdraft - (41,691) - (41,691)Increase/(decrease) in obligation under finance lease 5,345 (12,937) (6,840) (28,275)(Decrease)/increase in income tax liabilities 2,101 26,375 2,136 (6,542)Increase in deferred tax liabilities 6,241 (5,649) - -

Changes in working capital 815,858 338,275 694,169 450,193

Net cash from operating activities 574,238 415,936 314,434 420,418

46 SALARIES,BENEFITS AND DIRECTORS FEES AND REMUNERATIONGroup Group Company Company2014 2013 2014 2013

Chairman's and other directors' emoluments 46.1 Fees

Chairman 1,506 1,754 500 500 Other directors 4,793 4,765 1,500 1,500

2,000 Total fees 6,299 6,519 2,000 2,000

46.2 Other emolumentsChairman 3,257 2,389 2,050 1,300 Other directors 65,753 56,526 35,725 39,850

Total other emoluments 69,010 58,915 37,775 41,150

Highest paid director per annum 20,000 20,000 20,000 20,000

103

Profit on sale of property, plant and equipmentExchange difference on Property, plant and equipment

Operating profit before changes in working capital

Disposal of MHS shares by non-controlling interest

Fair value gain on investment property


46.3 The number of directors who had no emoluments is NIL NIL NIL NIL

EMPLOYEES REMUNERATED AT HIGHER RATESi)

Group Group Company Company 2014 2013 2014 2013

N N Number Number Number Number 300,001 - 500,000 30 23 12 15 500,001 - 750,000 42 55 29 30 750,001 - 1,000,000 39 63 12 33 1,000,001 - 2,000,000 103 79 52 34 2,000,001 - 3,000,000 40 29 17 16 3,000,001 - 4,000,000 19 11 11 9 4,000,001 - 5,000,000 10 12 9 10 5,000,001 and above 22 21 14 14

305 293 156 161

ii) Staff costs2014 2013 2014 2013

Number Number Number NumberManagerial 72 68 57 35 Senior 103 151 66 104 Junior 130 76 33 22

305 295 156 161

N'000 N'000 N'000 N'000Staff costs 655,804 568,443 398,866 343,722

47 EMPLOYEES' RETIREMENT BENEFITS

48 GUARANTEES AND OTHER FINANCIAL COMMITMENTS

.1 The company did not charge any of its assets to secure the liability of any third party.

.3 The company had no known contingent liabilities as at the year -end.

49 CONTRAVENTION OF LAWS AND REGULATIONS

50 EVENTS AFTER REPORTING PERIOD

51 APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS

104


The company and its subsidiaries operate a contributory retirement benefit scheme. For Companies resident inNigeria the Contributions to the scheme are funded through payroll deductions at the rate of 7.5% monthly foremployees and 7.5% employer's contribution in compliance with the provisions of the Pension Reform Act, 2004.

The consolidated financial statements were approved by the Board of Directors of the company on 29 April 2015.

In accordance with Ghana National Pensions Act, 2008 Act 766,Equity Assurance Limited, Ghana, contributes 13% ofregular employee's basic salary to the Social Security and National Insurance Trust (SSNIT) for employee pensions.

There were no events after the reporting period which could have a material effect on the financial position of theCompany as at 31 December 2014 and profit attributable to equity holders.

.2 There were no commitments to capital expenditure at the year-end both in respect of either contracted or authorized but not contracted.

The Company incurred the sum of N1million as penalty for violation of NAICOM guidelines for transacting businesseswith unregistered brokers and also for not fully complying with their request on Claims, management expenses andacquisition cost data.

The number of employees in receipt of emoluments within the following ranges and the related staff costs are:


52 HYPOTHECATION

Group - 31 December 2014 Insurance Shareholders' Totalfunds funds

AssetsCash and Cash equivalents 3,741,023 3,741,023 Financial assets 166,660 451,746 618,406 Trade receivables - 350,826 350,826 Re-insurance receivables 1,360,748 - 1,360,748 Deferred acquisition costs - 259,582 259,582 Other receivables and prepayments - 534,009 534,009 Investment property - 397,477 397,477 Intangible assets - 978,644 978,644 Property, plant and Equipment - 939,954 939,954 Statutory deposit - 322,671 322,671 Total Assets 5,268,431 4,234,909 9,503,341

LiabilitiesInsurance contract liabilities 3,302,335 - 3,302,335 Trade payables - 127,040 127,040 Provision and other payables - 394,212 394,212 Deposit for shares - 500 500 Borrowings - 1,454,615 1,454,615 Income tax liabilities - 175,459 175,459 Deferred tax liabilities - 50,898 50,898 Total Liabilities 3,302,335 2,202,725 5,505,060 GAP 1,966,096 2,032,185 3,998,281

Company - 31 December 2014 Insurance Shareholders' Totalfunds funds

AssetsCash and Cash equivalents 3,357,358 - 3,357,358 Financial assets 162,091 38,757 200,848 Trade receivables - 57,406 57,406 Reinsurance receivables 1,133,154 - 1,133,154 Deferred acquisition costs - 183,371 183,371 Other receivables and prepayments - 402,627 402,627 Investment in subsidiaries - 1,120,842 1,120,842 Intangible assets - 968,116 968,116 Property, plant and Equipment - 435,357 435,357 Statutory deposit - 300,000 300,000 Total Assets 4,652,603 3,506,476 8,159,079

LiabilitiesInsurance contract liabilities 2,945,797 - 2,945,797 Trade payables - 27,668 27,668 Provision and other payables - 186,199 186,199 Borrowings - 1,452,233 1,452,233 Income tax liabilities - 71,331 71,331 Deferred tax liabilities - 48,994 48,994 Total Liabilities 2,945,797 1,786,426 4,732,223 GAP 1,706,806 1,720,050 3,426,856

105

The Group is exposed to a range of financial risks through its financial assets, financial liabilities, reinsurance assetsand insurance liabilities. In particular, the key financial risk is that in the long term its investment proceeds will notbe sufficient to fund the obligations arising from its insurance contracts, In response to the risk, the Group's assetsand liabilities are allocated as follows:


Financial Summary - Companyfor the year ended December 31, 2014In thousands of Nigerian Naira

Statement of Financial Position

31-Dec 31-Dec 31-Dec 31-Dec 31-Dec2 0 1 4 2 0 1 3 2 0 1 2 2 0 1 1 2 0 1 0

AssetsCash and cash equivalents 3,357,358 1,461,238 1,516,110 1,094,712 1,203,972 Financial assets 200,848 224,046 171,088 679,770 883,609 Trade receivables 57,406 403,409 482,813 201,721 312,781 Reinsurance receivables 1,133,154 773,196 703,741 480,711 437,158 Deferred acquisition cost 183,371 221,311 160,727 130,152 140,642 Prepayments and other receivables 402,627 481,726 441,765 301,455 463,075 Investment in subsidiaries 1,120,842 1,122,066 846,715 846,715 440,325 Investment properties - - - - 44,762 Goodwill and intangible assets 968,116 1,022,117 1,047,061 1,097,661 1,373,943 Property, plant and equipment 435,357 2,253,275 2,131,539 1,796,092 1,053,833 Statutory deposit 300,000 300,000 300,000 300,000 300,000 Total assets 8,159,079 8,262,384 7,801,559 6,928,988 6,654,100

Liabilities Insurance Contract Liabilities 2,945,797 2,332,272 1,813,182 1,270,563 1,151,284 Trade payables 27,669 112,079 10,690 95,869 63,260 Other payables 186,199 119,525 100,310 76,828 113,335 Borrowings 1,452,233 2,241,255 1,804,194 1,790,799 1,683,350 Retirement Benefit Obligations - - 22,397 24,286 41,580 Income tax liabilities 71,331 69,195 75,737 82,493 27,020 Deferred tax 48,994 48,994 30,986 28,974 44,727 Total liabilities 4,732,223 4,923,320 3,857,496 3,369,812 3,124,556

Net Assets 3,426,856 3,339,064 3,944,063 3,559,176 3,529,544

EquityPaid up share capital 4,423,649 4,423,649 4,423,649 4,423,649 4,423,649 Share premium 1,105,193 1,105,193 1,105,193 1,105,193 1,105,193 Contingency reserves 657,444 554,990 457,285 378,899 311,936 Revaluation reserves 168,890 1,560,477 1,398,403 1,073,403 327,622 Available for sale reserve (18,468) 6,587 Retained earnings (2,909,852) (4,311,832) (3,440,467) (3,421,968) (2,638,856)

Shareholders funds 3,426,856 3,339,064 3,944,063 3,559,176 3,529,544

Financial Summary - Companyfor the year ended December 31, 2014In thousands of Nigerian Naira

Statement of Profit or Loss and Other Comprehensive Income31-Dec 31-Dec 31-Dec 31-Dec

2 0 1 4 2 0 1 3 2 0 1 2 2 0 1 1Gross premium written 3,415,146 3,256,827 2,612,848 2,232,105 Net underwriting income 2,713,825 2,138,309 2,173,531 1,769,892 Total underwriting expenses 1,786,098 1,203,164 1,211,936 1,006,962 Total underwriting profit 927,727 935,145 961,595 762,930 Total investment and other income 736,811 370,981 544,422 276,548 Total income 1,664,538 1,306,126 1,506,017 1,039,478 Expenses 1,503,488 2,058,259 1,408,462 1,693,738 Profit /(Loss) before tax 161,050 (752,133) 97,555 (654,260) Tax (73,393) (21,527) 37,668 61,889 Profit/(loss) after tax 87,657 (773,660) 59,887 (716,149) Gain on available for sale financial assets 134 6,587 Revaluation gain on property and equipment - 162,074 325,000 745,781 Total comprehensive income for the year 87,791 (604,999) 384,887 29,632 Earnings/(loss) per share (basic) 1.0 (8.7) 0.7k (8k)Earnings/(loss) per share (adjusted) 1.0 (8.7) 0.7k (8k)

Financial Summary - Groupfor the year ended December 31, 2014In thousands of Nigerian Naira

Statement of Financial Position

31-Dec 31-Dec 31-Dec 31-Dec 31-Dec2 0 1 4 2 0 1 3 2 0 1 2 2 0 1 1 2 0 1 0

AssetsCash and cash equivalents 3,741,023 1,818,259 1,906,356 1,336,293 1,423,537 Financial assets 618,406 560,430 475,921 910,914 1,050,017 Trade receivables 350,826 864,968 1,061,015 601,478 577,838 Reinsurance receivables 1,360,748 1,008,096 902,791 548,694 471,507 Deferred acquisition cost 259,582 311,608 192,044 164,302 173,061 Prepayments and other receivables 534,009 604,266 447,880 416,172 422,242 Inventory - - - 31 2,239 Investment properties 397,477 803,678 375,500 375,300 214,762 Goodwill and intangible assets 978,644 1,032,546 1,054,575 1,106,769 1,377,931 Property, plant and equipment 939,954 2,362,843 2,223,725 1,891,780 1,154,803 Statutory deposit 322,671 323,203 319,305 319,229 317,941 Total assets 9,503,340 9,689,897 8,959,111 7,670,962 7,185,879

Liabilities Insurance Contract Liabilities 3,302,335 2,754,236 2,205,355 1,545,408 1,335,895 Trade payables 127,040 256,738 184,806 196,618 195,534 Other payables 394,212 294,748 331,730 146,684 188,238 Deposit for shares 500 82,582 - - - Borrowings 1,454,615 2,231,452 1,779,053 1,799,787 1,683,350 Retirement Benefit Obligations - - 22,548 25,100 41,623 Income tax liabilities 175,459 173,358 146,983 112,294 49,132 Deferred tax 50,898 44,657 32,298 32,789 44,727 Total liabilities 5,505,059 5,837,771 4,702,773 3,858,680 3,538,500

Net Assets 3,998,281 3,852,126 4,256,338 3,812,282 3,647,379

EquityPaid up share capital 4,423,649 4,423,649 4,423,649 4,423,649 4,423,649 Share premium 1,105,193 1,105,193 1,105,193 1,105,193 1,105,193 Contingency reserves 715,820 623,028 508,687 411,476 329,762 Revaluation reserves 168,890 1,560,477 1,398,403 1,073,403 327,622 Available for sale reserve (18,468) 6,587 - - - Retained earnings (2,668,281) (4,087,900) (3,379,779) (3,357,866) (2,613,147) Foreign currency translation reserve (16,432) 19,531 - - -

3,710,371 3,650,565 4,056,153 3,655,855 3,573,079 Non controlling interest 287,910 201,561 200,185 156,427 74,300 Total equity 3,998,281 3,852,126 4,256,338 3,812,282 3,647,379

Financial Summary - Groupfor the year ended December 31, 2014In thousands of Nigerian NairaStatement of Profit or Loss and Other Comprehensive Income

31-Dec 31-Dec 31-Dec 31-Dec2 0 1 4 2 0 1 3 2 0 1 2 2 0 1 1

Gross premium written 4,845,997 4,616,050 3,923,738 3,072,995 Net underwriting income 3,933,996 3,378,908 3,282,086 2,556,598 Total underwriting expenses 2,421,082 1,752,059 1,675,870 1,390,833 Total underwriting profit 1,512,914 1,626,849 1,606,216 1,165,765 Total investment and other income 1,024,251 820,238 663,600 416,222 Total income 2,537,165 2,447,087 2,269,816 1,581,987 Expenses 2,226,408 2,812,027 2,023,961 2,131,539 Profit before tax 310,757 (364,940) 245,855 (549,552) Tax 127,423 72,892 96,225 81,355 Profit after tax 183,334 (437,832) 149,630 (630,907) Gain on available for sale financial assets 134 6,587 Exchange difference on translation of foreign operations (73,802) 6,663 (57,290) (6,083) Revaluation gain on property and equipment - 162,074 325,000 745,781 Total comprehensive income for the year 109,666 (262,508) 417,340 108,791 Attributable to:Parent 99,737 (332,159) 407,315 101,387 Non-controlling interests 9,929 69,650 10,025 7,404 Earnings/(loss) per share (basic) 2 (6) 1.7k (7k)Earnings/(loss) per share (adjusted) 2 (6) 1.7k (7k)

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EQUITY ASSURANCE PLC AND ITS SUBSIDIARY COMPANIES ...€¦ · EQUITY ASSURANCE PLC AND ITS SUBSIDIARY COMPANIES Introduction Equity Assurance Plc's Financial statements comply with