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TAKAFUL PAKISTAN LIMITED
ANNUAL REPORT 2014
OUR VISION
To spread Takaful benefits beyond borders, beyond Time!
OUR MISSION
To deliver Takaful as a viable alternative to conventional insurance.
To become the ‘top-of-the-mind’ Takaful brand for our Participants in terms of competitiveness,
service standards and business ethics
To give value for money to our shareholders and make Takaful Pakistan their prized asset.
To become an ideal organization for our employees that encourages them to achieve self-actualization
and growth.
To contribute positively and proactively for the welfare of our society at large as well as for the
preservation of our environment.
OUR AMBITION
To be a role model for the contemporary insurance industry and eventually bring it in conformity with
the Shariah compliant Takaful mode of insurance.
CONTENTS
Corporate Information 03
Board Committees 04
Management Team 05
Branch Network 05
Director’s Report 06
Shariah Audit Report 13
Review Report to the Members on Compliance with Code of Corporate Governance 15
Statement of Compliance with the Code of Corporate Government 17
Auditor’s Report to the Members 20
Balance Sheet 22
Profit & Loss Account 24
Statement of Comprehensive Income 25
Statement of Changes in Equity 26
Statement of Cash Flows 27
Statement of Contributions 29
Statement of Claims 30
Statement of Expenses 31
Statement of Investment Income 33
Notes to the Financial Statements 34
CORPORATE INFORMATION
Chairman of Board of Directors Mr. Tahir Naz Siddique
Directors Syed Tariq Husain
Syed Abdul Razzaq
Mr. Ahmad Shuja Kidwai
Mr. Haseeb Ahmed
Dr. Mumtaz A. Hashmi
Mr. Nadeem Rafi
Chief Executive Officer Dr. Syed Arif Hussain
Chief Finance Officer and
Company Secretary
Jamil Ahmed
Shariah Advisor Mufti Imtaiz Alam
Auditor M.Yousuf Adil Saleem & Co.
Chartered Accountants
Legal Advisors Surridge & Beecheno
Advocates, Consultants, Attorneys
Mohsin Tayebaly & Co.
Corporate Legal Consultants, Barristers &
Advocates High Courts & Supreme Court
Head office 6th floor, Business Centre,
Plot No 19-1-A, Block -6, P.E.C.H.S.,
Shahrah-e-Faisal, Karachi-75400, Pakistan.
UAN : (021) 111-875-111
Tel : (+92-21) 34373171-80
(10 Lines)
Fax : (+92-21) 34373195-6
E-mail : [email protected]
Website : www.takaful.com.pk
Bankers Meezan Bank Limited
Bank Islami Pakistan Limited
Dubai Islamic Bank Limited
Burj Bank Limited
Al Baraka Bank (Pakistan) Limited
Habib Bank Limited (Islamic Banking Division)
Faysal Bank Limited (Islamic Banking Division)
Askari Bank Limited ( Islamic Banking Division)
Bank AlFalah Limited (Islamic Banking Division)
Habib Metropolitan Bank (Islamic Banking Division)
National Bank of Pakistan (Islamic Banking Division)
Bank of Khyber (Islamic Banking Division)
UBL (Islamic Banking Division)
BOARD COMMITTEES
Audit Committee
Syed Tariq Husain Dr. Mumtaz A. Hashmi Abdul Razzaq
Risk Management Committee Tahir Naz Siddique Syed Tariq Hussain Dr. Mumtaz A. Hashmi
Human Resource Committee Syed Tariq Hussain Ahmed Shuja Kidwai Nadeem Rafi
MANAGEMENT TEAM Dr. Syed Arif Hussain Chief Executive Officer
Jamil Ahmed General Manager, Chief Financial Officer and Company Secretary
Kashif Masood Assistant General Manager and Head of Operations
Muhammad Adnan Sharif Assistant General Manager (Marketing)
Moeen ud Din Assistant General Manager (Marketing)
Rizwan-ul-Haq Assistant General Manager (Marketing)
Akbar Ali Qureshi Senior Manager & Head of Fire, Property underwriting & Re-takaful
Jawwad Bin Yousuf Senior Manager & Head of Accident Underwriting
Dr. Aamir Siddiqui Senior Manager & Head of Group Health
Abdul Haseeb Fakih Senior Manager & Head of Risk Management
Muhammad Irfan Senior Manager & Head of Accounts
Muhammad Saeed Senior Manager & Head of Information Technology
Shaikh Azeemuddin Senior Manager & Head of Human Resources & Administration
BRANCH NETWORK
Branch Branch Head Branch Address
Karachi Muhammad Adnan Sharif 6th floor, Business Centre,
Plot No 19-1-A, Block -6, P.E.C.H.S.,
Shahrah-e-Faisal, Karachi.
UAN: (021) 111-875-111
Fax: (021) 34373195-6
Lahore Moeen ud din 130-E/1, Main Boulevard
Gulberg-III, Lahore.
UAN: (042) 111-875-111
Fax: (042) 35716790
Peshawar Raza Ali 6th Floor, State Life Building,
34-The Mall, Peshawar Cantt,
Peshawar.
UAN: (091) 111-875-111
Fax: (091) 5260107
Faisalabad Ghulam Mustafa Office # 3, 2nd floor, Wahab
Centre, Main Susan Road,
Faislabad.
UAN: (041) 111-875-111
Fax: (041) 8720063
TAKAFUL PAKISTAN LIMITED
BALANCE SHEET
AS AT DECEMBER 31, 2014
2013
Shareholders' Participants' Aggregate Aggregate
Fund Takaful Fund
Note
SHARE CAPITAL AND RESERVES
Authorised share capital
50,000,000 (2013: 30,000,000)
ordinary shares of Rs. 10 each 500,000,000 - 500,000,000 300,000,000
Issued, subscribed and paid-up
30,000,000 ordinary shares of Rs. 10 each
fully paid in cash 5 300,000,000 - 300,000,000 300,000,000
Accumulated loss (136,877,696) - (136,877,696) (142,970,825)
Qard-e-hasna to Waqf (11,211,134) - (11,211,134) -
151,911,170 - 151,911,170 157,029,175
PARTICIPANTS' TAKAFUL FUND (PTF)
WAQF / PARTICIPANTS' TAKAFUL FUND
Cede money - 500,000 500,000 500,000
Accumulated (deficit) / surplus - (11,711,134) (11,711,134) 4,514,815
Qard-e-hasna from Shareholders' Fund - 11,211,134 11,211,134 -
- - - 5,014,815
UNDERWRITING PROVISIONS
Provision for outstanding claims (including IBNR) - 99,377,655 99,377,655 92,387,445
Provision for unearned contribution - 137,318,047 137,318,047 96,791,106
Contribution deficiency reserve - 3,000,000 3,000,000 965,800
Unearned retakaful rebate 31 - 5,644,186 5,644,186 5,512,659
Total underwriting provisions - 245,339,888 245,339,888 195,657,010
CREDITORS AND ACCRUALS
Contribution received in advance - 2,203,314 2,203,314 1,310,854
Amounts due to takaful / re-takaful companies - 37,418,436 37,418,436 52,015,920
Unearned wakala fees 54,927,216 - 54,927,216 38,716,442
Wakala fees payable and other account balances - 54,310,030 54,310,030 46,128,623
Mudarib fees payable - 1,841,660 1,841,660 438,616
Accrued expenses 1,575,777 - 1,575,777 3,661,376
Other creditors and accruals 6 13,224,821 14,423,482 27,648,303 19,180,197
69,727,814 110,196,922 179,924,736 161,452,028
69,727,814 355,536,810 425,264,624 357,109,038
TOTAL EQUITY AND LIABILITIES 221,638,984 355,536,810 577,175,794 519,153,028
CONTINGENCIES AND COMMITMENTS 7
The annexed notes 1 to 33 form an integral part of these financial statements.
2014
-------------------------------------------------------------(Rupees)-------------------------------------------------------------
TAKAFUL PAKISTAN LIMITED
BALANCE SHEET
AS AT DECEMBER 31, 2014
2013
Shareholders' Participants' Aggregate Aggregate
Fund Takaful Fund
Note
CASH AND BANK DEPOSITS 8
Cash and other equivalents 49,010 355,900 404,910 488,656
Current and other accounts 619,119 34,756,230 35,375,349 23,530,749
Deposits maturing within 12 months 104,400,000 147,100,000 251,500,000 258,000,000
105,068,129 182,212,130 287,280,259 282,019,405
LONG TERM DEPOSITS 9 1,523,034 - 1,523,034 1,523,034
INVESTMENTS 10 25,517,243 10,007,878 35,525,121 38,986,982
CURRENT ASSETS - OTHERS
Contributions due but unpaid 11 - 37,698,199 37,698,199 25,399,919
Amounts due from other takaful / re-takaful companies 12 - 2,326,333 2,326,333 3,161,300
Salvage recoveries accrued - 500,000 500,000 825,000
Taxation - payment less provision 9,013,031 - 9,013,031 8,991,740
Accrued investment income 13 4,801,229 6,608,327 11,409,556 6,003,201
Re-takaful recoveries against outstanding claims - 27,002,169 27,002,169 21,558,596
Wakala fees receivable and other account balances 14 49,799,258 - 49,799,258 41,617,851
Mudarib fees receivable 1,841,660 - 1,841,660 438,616
Deferred Wakala fees - 54,927,216 54,927,216 38,716,442
Deferred commission expense 7,900,924 - 7,900,924 6,717,583
Prepayments 15 1,676,955 33,817,482 35,494,437 28,932,125
Sundry receivables 16 814,537 437,076 1,251,613 1,222,557
75,847,594 163,316,802 239,164,396 183,584,930
FIXED ASSETS
Tangibles and Intangibles 17
Leasehold improvements 1,979,708 - 1,979,708 2,394,186
Furniture and fixtures 4,291,043 - 4,291,043 5,430,941
Office equipment 2,930,139 - 2,930,139 3,063,065
Computers 1,941,770 - 1,941,770 824,033
Vehicles 2,540,324 - 2,540,324 1,287,458
13,682,984 - 13,682,984 12,999,683
Computer software - - - 38,994
TOTAL ASSETS 221,638,984 355,536,810 577,175,794 519,153,028
The annexed notes 1 to 33 form an integral part of these financial statements.
2014
----------------------------------------------(Rupees)-------------------------------------------------------------------
TAKAFUL PAKISTAN LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED DECEMBER 31, 2014
2013
Fire and Marine, Motor Health Miscellaneous Aggregate Aggregate
property aviation and (Restated)
damage transport
Note
PARTICIPANTS' TAKAFUL FUND (PTF)
- Net contribution revenue 10,422,632 5,081,133 109,134,722 44,568,945 200,700 169,408,132 160,723,233
Net claims (5,862,675) (209,243) (43,932,886) (43,988,061) 6,666 (93,986,199) (101,787,770)
Wakala fee (17,486,967) (7,863,401) (49,899,306) (17,827,578) (452,165) (93,529,417) (89,221,680)
Direct expenses 18 (176,026) (8,340) (21,415,213) - (1,158) (21,600,737) (23,867,671)
Retakaful rebate 9,300,920 4,464,960 25,182 - 182,160 13,973,222 14,552,283
Contribution deficiency reversal/(charge) - - - (2,034,200) - (2,034,200) 691,409
Net underwriting results before
participants' investment income (3,802,116) 1,465,109 (6,087,501) (19,280,894) (63,797) (27,769,199) (38,910,196)
Investment income 15,398,180 13,344,719
Modarib's share (3,849,545) (3,336,180)
Net investment income 11,548,635 10,008,539
Other income 19 42,832 188,825
Bank charges (48,217) (44,940)
Deficit before taxation (16,225,949) (28,757,772)
Provision for taxation - -
Total deficit transferred to balance of
Waqf / Participants' Takaful Fund (16,225,949) (28,757,772)
SHAREHOLDERS' FUND (SHF)
Wakala fee 93,529,417 89,221,680
Commission expense (17,310,291) (16,503,593)
Management expenses 20 (45,860,566) (42,073,631)
30,358,560 30,644,456
Modarib's share of PTF investment income 3,849,545 3,336,180
Investment income 4,765,515 9,946,933
Other income 21 708,221 787,286
(Loss)/gain on sale of fixed assets (2,892) 992,833
General and administration expenses 22 (28,708,697) (27,949,781)
Profit before taxation 10,970,252 17,757,907
Provision for taxation 23 (2,338,235) (2,230,542)
Net profit after tax 8,632,017 15,527,365
Earnings per share - Basic and diluted 24 0.29 0.52
The annexed notes 1 to 33 form an integral part of these financial statements.
2014
------------------------------------------------------------------- (Rupees) -------------------------------------------------------------------
TAKAFUL PAKISTAN LIMITED
STATEMENT OF CHANGES IN EQUITY / FUND
FOR THE YEAR ENDED DECEMBER 31, 2014
Issued,
subscribed and
paid-up
capital
Balance as at January 01, 2013 300,000,000 (158,798,560) - 141,201,440
Total comprehensive income for the year ended December 31, 2013
Profit for the year - 15,527,365 - 15,527,365
Other comprehensive income - recognition of actuarial gain for the year - 300,370 - 300,370
- 15,827,735 - 15,827,735
Balance as at December 31, 2013 300,000,000 (142,970,825) - 157,029,175
Total comprehensive income for the year ended December 31, 2014
Profit for the year - 8,632,017 - 8,632,017
Other comprehensive income - recognition of actuarial loss for the year - (2,538,888) - (2,538,888)
- 6,093,129 - 6,093,129
Transaction with owners
Qard-e-hasna contributed to Waqf * - - (11,211,134) (11,211,134)
Balance as at December 31, 2014 300,000,000 (136,877,696) (11,211,134) 151,911,170
--------------------------------------(Rupees)--------------------------------------
Balance as at January 01, 2013 500,000 33,272,587 - 33,772,587
Deficit for the year ended December 31, 2013 - (28,757,772) - (28,757,772)
Balance as at December 31, 2013 500,000 4,514,815 - 5,014,815
Deficit for the year ended December 31, 2014 - (16,225,949) - (16,225,949)
Qard-e-hasna contributed by Shareholders' fund * - - 11,211,134 11,211,134
Balance as at December 31, 2014 500,000 (11,711,134) 11,211,134 -
* In compliance of Rule 20 of Takaful Rules, 2012
The annexed notes 1 to 33 form an integral part of these financial statements.
SHAREHOLDERS' FUND
Accumulated
loss Total
--------------------------------------(Rupees)--------------------------------------
Cede
money Qard-e-hasna Total
Qard-e-hasna
WAQF / PARTICIPANTS' TAKAFUL FUND
Accumulated
(deficit) / surplus
TAKAFUL PAKISTAN LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2014
2014 2013
(Rupees) (Rupees)
SHAREHOLDERS' FUND (SHF)
Net profit after tax 8,632,017 15,527,365
Other comprehensive income
Items that will not be reclassified to profit or loss
Actuarial (loss)/gain on defined benefit plan for the year (2,538,888) 300,370
Total comprehensive income for the year 6,093,129 15,827,735
The annexed notes 1 to 33 form an integral part of these financial statements.
TAKAFUL PAKISTAN LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2014
2014 2013
Operating activities (Rupees) (Rupees)
(a) Takaful activities
Contributions received 263,929,287 222,312,418
Net re-takaful paid (12,285,089) (5,455,316)
Claims paid (158,041,782) (131,186,992)
Commissions paid (17,828,136) (15,703,503)
Other takaful payments (10,213,332) (8,649,101)
Net cash generated from underwriting activities 65,560,948 61,317,506
(b) Other operating activities
Income tax paid (2,359,526) (2,677,748)
Payment of retirement benefits (1,500,000) -
General administrative and management expenses paid (70,748,073) (65,456,296)
Other operating receipts 1,378,184 1,002,730
Advances to employees and agents - net (224,452) 269,160
Net cash used in other operating activities (73,453,867) (66,862,154)
Total cash used in all operating activities (7,892,919) (5,544,648)
Investment activities
Profit / return received 22,483,575 25,269,139
Investments made (6,000,000) -
Proceeds from disposal of investments 2,038,554 11,237,985
Maturity of term deposits 85,000,000 10,690,000
Fixed capital expenditure (4,203,285) (575,934)
Proceeds from disposal of fixed assets 90,189 1,707,398
Net cash generated from investing activities 99,409,033 48,328,588
Financing activities
Security deposits paid - (517,900)
Ijarah rentals paid (1,255,260) (208,680)
Total cash used in financing activities (1,255,260) (726,580)
Net cash generated from all activities 90,260,854 42,057,360
Cash and cash equivalents at beginning of the year 152,019,405 109,962,045
Cash and cash equivalents at end of the year 242,280,259 152,019,405
2014 2013
(Rupees) (Rupees)
Reconciliation to profit and loss account
Operating cash flows (7,892,919) (5,544,648)
Depreciation (3,426,903) (3,223,796)
Amortisation of intangibles (38,994) (79,978)
(Loss)/Gain on disposal of fixed assets (2,892) 992,833
Ijarah rentals (1,255,260) (208,680)
Provision for taxation (2,338,235) (2,230,542)
Provision for staff retirement benefits (1,027,945) (727,381)
Security deposits paid - (517,900)
Investment income 27,667,758 20,377,321
Decrease in assets other than cash (56,437,056) (21,547,804)
Increase in liabilities other than running finance (62,250,519) (48,848,421)
Cash generated from investing activities 99,409,033 48,328,589
Loss after taxation (7,593,932) (13,230,407)
Breakup of profit / (loss) after tax
Participant's Takaful Fund (16,225,949) (28,757,772)
Shareholders' Fund 8,632,017 15,527,365
(7,593,932) (13,230,407)
Definition of cash and cash equivalents
Cash and other equivalents 404,910 488,656
Current and other accounts 35,375,349 23,530,749
Deposits maturing within 3 months 206,500,000 128,000,000
242,280,259 152,019,405
The annexed notes 1 to 33 form an integral part of these financial statements.
Cash and cash equivalents for the purposes of Statement of Cash Flows consist of cash and stamps in hand, balances with
banks, short term deposits with maturities of three months or less from balance sheet date and highly liquid short-term
investments that are convertible to known amount of cash and are subject to insignificant risk of change in value.
TAKAFUL PAKISTAN LIMITED
STATEMENT OF CONTRIBUTIONS
FOR THE YEAR ENDED DECEMBER 31, 2014
Business underwritten inside Pakistan
2013
Gross Contribution Re-takaful Re-takaful Net Net
Class written Opening Closing earned ceded expense contribution contribution
contribution Opening Closing revenue revenue
A B C D=A+B-C E F G H=E+F-G I=D-H (Restated)
Direct and Facultative
Fire and property damage 44,315,432 21,174,428 21,772,442 43,717,418 34,320,792 14,971,219 15,997,225 33,294,786 10,422,632 12,935,813
Marine, aviation and transport 18,922,771 3,494,592 2,758,861 19,658,502 13,971,218 2,582,829 1,976,678 14,577,369 5,081,133 6,100,413
Motor 158,144,216 55,455,691 88,851,644 124,748,263 15,613,541 - - 15,613,541 109,134,722 101,824,046
Health 51,632,641 16,020,341 23,084,037 44,568,945 - - - - 44,568,945 39,446,212
Miscellaneous 1,335,421 646,054 851,063 1,130,412 1,066,238 309,559 446,085 929,712 200,700 416,749
Total 274,350,481 96,791,106 137,318,047 233,823,540 64,971,789 17,863,607 18,419,988 64,415,408 169,408,132 160,723,233
Treaty
Proportional / non proportional - - - - - - - - - -
Grand total 274,350,481 96,791,106 137,318,047 233,823,540 64,971,789 17,863,607 18,419,988 64,415,408 169,408,132 160,723,233
The annexed notes 1 to 33 form an integral part of these financial statements.
2014
Unearned contribution reserve Prepaid re-takaful
contribution ceded
----------------------------------------------------------------------------------------------------------------------- (Rupees) --------------------------------------------------------------------------------------------------------------
TAKAFUL PAKISTAN LIMITED
STATEMENT OF CLAIMS
FOR THE YEAR ENDED DECEMBER 31, 2014
Business underwritten inside Pakistan
2013
Class Claims Claims Re-takaful Re-takaful Net claims Net claims
paid Opening Closing expense and other and other expense expense
recoveries recoveries
received Opening Closing revenue
A B C D=A-B+C E F G H=E-F+G I=D-H
Direct and Facultative
Fire and property damage 33,580,853 6,460,793 20,273,170 47,393,230 30,956,951 5,345,022 15,918,626 41,530,555 5,862,675 2,768,558
Marine, aviation and transport 5,246,463 8,167,956 5,333,589 2,412,096 3,539,094 3,617,485 2,281,244 2,202,853 209,243 2,314,609
Motor 61,193,661 59,362,622 55,844,209 57,675,248 17,622,882 11,643,270 7,762,750 13,742,362 43,932,886 49,307,758
Health 44,020,908 15,115,438 15,082,591 43,988,061 - - - - 43,988,061 46,342,849
Miscellaneous 384,635 3,280,636 2,844,096 (51,905) 193,031 1,777,819 1,539,549 (45,239) (6,666) 1,053,996
Total 144,426,520 92,387,445 99,377,655 151,416,730 52,311,958 22,383,596 27,502,169 57,430,531 93,986,199 101,787,770
Treaty .
Proportional / non proportional - - - - - - - - - -
Grand total 144,426,520 92,387,445 99,377,655 151,416,730 52,311,958 22,383,596 27,502,169 57,430,531 93,986,199 101,787,770
The annexed notes 1 to 33 form an integral part of these financial statements.
------------------------------------------------------------------------------------------------------------(Rupees)-------------------------------------------------------------------------------------------------------
2014
Outstanding claims Re-takaful and other
recoveries in respect of
outstanding claims
TAKAFUL PAKISTAN LIMITED
STATEMENT OF EXPENSES - PARTICIPANTS' TAKAFUL FUND
FOR THE YEAR ENDED DECEMBER 31, 2014
Business underwritten inside Pakistan
2013
Rebate from Net Net
Class Gross Wakala fee Other direct retakaful operators underwriting underwriting
wakala fee Opening Closing expired expenses earned * expenses expenses
A B C D=A+B-C E F G=D+E-F
Direct and Facultative
Fire and property damage 17,726,173 8,469,771 8,708,977 17,486,967 176,026 9,300,920 8,362,073 11,743,553
Marine, aviation and transport 7,569,108 1,397,837 1,103,544 7,863,401 8,340 4,464,960 3,406,781 4,139,224
Motor 63,257,686 22,182,276 35,540,656 49,899,306 21,415,213 25,182 71,289,337 66,524,596
Health 20,653,056 6,408,136 9,233,614 17,827,578 - - 17,827,578 15,778,485
Miscellaneous 534,168 258,422 340,425 452,165 1,158 182,160 271,163 351,210
Total 109,740,191 38,716,442 54,927,216 93,529,417 21,600,737 13,973,222 101,156,932 98,537,068
Treaty
Proportional / non proportional - - - - - - - -
Grand total 109,740,191 38,716,442 54,927,216 93,529,417 21,600,737 13,973,222 101,156,932 98,537,068
* Rebate from retakaful operators is arrived at taking impact of opening and closing unearned rebate.
The annexed notes 1 to 33 form an integral part of these financial statements.
2014
Deferred wakala fee
--------------------------------------------------------------------------(Rupees)--------------------------------------------------------------------------
TAKAFUL PAKISTAN LIMITED
STATEMENT OF EXPENSES - SHAREHOLDERS' FUND
FOR THE YEAR ENDED DECEMBER 31, 2014
Business underwritten inside Pakistan
2013
Commission Net Other Net Net
Class paid or commission management SHF SHF
payable Opening Closing expense expenses expenses expenses
A B C D=A+B-C E F=D+E
Direct and Facultative
Fire and property damage 6,438,738 3,171,645 3,291,843 6,318,540 7,407,790 13,726,330 15,196,521
Marine, aviation and transport 2,836,184 500,878 380,254 2,956,808 3,163,140 6,119,948 7,174,010
Motor 6,518,565 2,254,733 3,183,008 5,590,290 26,435,468 32,025,758 25,890,260
Health 2,573,517 727,545 964,656 2,336,406 8,630,938 10,967,344 9,886,369
Miscellaneous 126,628 62,782 81,163 108,247 223,230 331,477 430,064
Total 18,493,632 6,717,583 7,900,924 17,310,291 45,860,566 63,170,857 58,577,224
Treaty
Proportional / non proportional - - - - - - -
Grand total 18,493,632 6,717,583 7,900,924 17,310,291 45,860,566 63,170,857 58,577,224
The annexed notes 1 to 33 form an integral part of these financial statements.
2014
Deferred commission
-------------------------------------------------------------------------------- (Rupees) --------------------------------------------------------------------------------
TAKAFUL PAKISTAN LIMITED
STATEMENT OF INVESTMENT INCOME
FOR THE YEAR ENDED DECEMBER 31, 2014
2014 2013
Income from non-trading investments
Participants' Takaful Fund (PTF)
Profit on bank deposits and placements 15,322,424 13,289,723
Available-for-sale
Gain on redemption of Islamic Fund units 75,756 54,996
15,398,180 13,344,719
Modarib's fee (3,849,545) (3,336,180)
Net investment income 11,548,635 10,008,539
Shareholders' Fund (SHF)
Profit on bank deposits and placements 9,429,182 7,070,118
Held to maturity
Return on government securities 1,002,288 903,758
Return on other securities 1,838,108 1,974,557
Provision on impairment of sukuks (7,499,063) -
(4,658,667) 2,878,315
Investment related expenses (5,000) (1,500)
Net investment income 4,765,515 9,946,933
The annexed notes 1 to 33 form an integral part of these financial statements.
(Rupees)
TAKAFUL PAKISTAN LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2014
1. STATUS AND NATURE OF BUSINESS
1.1
1.2
1.3
2. BASIS OF PREPARATION
2.1 Statement of compliance
The Company, based on its business plan/financial projections and sponsors’ support, is confident about continuity of its
operations and that the Company will be able to meet the solvency requirements and any adverse financial implications
arising from eventualities arising from pending litigations disclosed in note 7.1 to 7.3 to the financial statements.
Takaful Pakistan Limited ("the Company / Takaful operator") is an unlisted public limited company incorporated in Pakistan
on June 2, 2006 under the Companies Ordinance, 1984. The Company is established with the objective to carry out General
Takaful Business as specified under the Insurance Ordinance, 2000, Insurance Rules, 2002 and Takaful Rules, 2012.The
registered office of the Company is at 6th Floor, Business Centre, 19-1-A, Block-6, P.E.C.H.S., Shahrah-e-Faisal, Karachi, in
the province of Sindh. The Company operates with 2 (December 31, 2013: 2) branches in Pakistan.
For the purpose of carrying on the takaful business, the Company has formed a Waqf for Participants' equity. The Waqf,
namely Takaful Pakistan Waqf (hereinafter referred to as the Participants' Takaful Fund or PTF) was formed on January 22,
2007 under the Trust deed executed by the Company with a ceded money of Rs. 500,000. The cede money is required to be
invested in Shariah compliant investments and profit thereon is utilized to pay benefits to participants or defray PTF
expenses. The accounts of the Waqf are maintained by the Company in a manner that the assets and liabilities of the Waqf
remain separately identifiable. These financial statements have been prepared such that the financial position and results of
operations of the Waqf and the Company are shown separately. Waqf deed also governs the relationship of shareholders and
participants for management of takaful operations, investment of participants' funds and investment of shareholders' funds
approved by the Shariah Board established by the Company.
The Company has a solvency margin of Rs. 134,207,430 as against the requirement of minimum solvency margin of Rs.
150,000,000 as at December 31, 2014 prescribed by Securities and Exchange Commission of Pakistan (SECP) vide its SRO
16 (1) 2012 dated January 09, 2012 under section 167 of the Insurance Ordinance, 2000. The Company applied for an
extension of one year for meeting the required margin, against which SECP vide its letter dated April 02, 2015 advised the
Company to immediately ensure compliance with the provisions relating to minimum solvency requirements.
The Company has a business plan, approved by the Board of Directors, which includes injection of further capital through
right issue and the achievement of the planned business results. In its meeting held on April 02, 2015, the Board of directors
has passed a resolution for issue of further capital.
These financial statements have been prepared in line with the format of financial statements issued by Securities and
Exchange Commission of Pakistan (SECP) through Securities and Commission (Insurance) Rules, 2002 [SEC (Insurance)
Rules, 2002], vide S.R.O. 938 dated December 12, 2002, with appropriate modifications based on the advice of the Shariah
Board of the Company.
These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan.
Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by International
Accounting Standards Board (IASB) and Islamic Financial Accounting Standards (IFAS) issued by the Institute of Chartered
Accountants of Pakistan (ICAP), as are notified under the Companies Ordinance, 1984, the requirements of Companies
Ordinance, 1984, the Insurance Ordinance, 2000, the SEC (Insurance) Rules, 2002, Takaful Rules, 2012 and directives
issued by the SECP. Wherever the requirements of Companies Ordinance, 1984, the Insurance Ordinance, 2000, the SEC
(Insurance) Rules, 2002, Takaful Rules, 2012 and directives issued by the SECP differ with the requirement of IFRS/IFAS,
the requirements of Companies Ordinance, 1984, the Insurance Ordinance, 2000, the SEC (Insurance) Rules, 2002, Takaful
Rules, 2012 or said directives shall prevail.
2.2 Basis of measurement
These financial statements have been prepared under the historical cost convention.
2.3 Functional and presentation currency
2.4 Use of estimates and judgements
- Provision against doubtful receivables (note 4.2)
- Re-takaful recoveries against outstanding claims (note 4.3)
- Provision for outstanding claims including IBNR (note 4.4)
- Contribution deficiency reserve (note 4.6)
- Staff retirement benefits - defined benefit plan (note 4.10)
- Classification and valuation of investments (note 4.14)
- Taxation (note 4.15)
- Useful lives of assets and methods of depreciation and amortisation (note 4.16)
- Impairment of other assets (note 4.17)
3.
3.1
The SECP has allowed the insurance / takaful companies to defer the application of International Accounting Standard (IAS-
39) "Financial Instruments: Recognition and Measurement" in respect of valuation of investments classified as available for
sale. Accordingly, the requirements of IAS-39 to the extent allowed by the SECP as aforesaid have not been considered in the
preparation of these financial statements.
These financial statements are presented in Pak Rupees which is the Company's functional and presentation currency.
The preparation of financial statements in conformity with approved accounting standards as applicable in Pakistan requires
management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of
assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under the circumstances, the result of which form the basis of making
the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates. The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to
accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or
in the period of the revision and future periods if the revision affects both current and future periods.
The estimates and judgments that have a significant effect on the financial statements are in respect of the following:
ADOPTION OF NEW AND AMENDED INTERNATIONAL FINANCIAL REPORTING STANDARDS AND IFRS
INTERPRETATIONS
The following standards, amendments and interpretations are effective for the year ended December 31, 2014. These
standards, interpretations and the amendments are either not relevant to the Company's operations or are not expected to have
significant impact on the Company's financial statements other than certain additional disclosures.
IAS 36 Impairment of Assets - Recoverable amount disclosures for non-
financial assets
Effective from accounting
period beginning on or after
January 1, 2014
January 1, 2014Amendments to IAS 32 Financial Instruments: Presentation - Offsetting
financial assets and financial liabilities
3.2 Standards, amendments and interpretations to the published standards that are not yet effective
- IFRS 1 – First Time Adoption of International Financial Reporting Standards
- IFRS 9 – Financial Instruments
- IFRS 14 – Regulatory Deferral Accounts
- IFRS 15 – Revenue from Contracts with Customers
Amendments to IAS 16 and IAS 41 Agriculture: Bearer plants
IAS 39 Financial Instruments: Recognition and measurement - Novation
of derivatives and continuation of hedge accounting
IFRIC 21 - Levies
Amendments to IAS 19 Employee Benefits: Employee contributions
The following standards, amendments and interpretations are only effective for accounting periods, beginning on or after the
date mentioned against each of them. These standards, interpretations and the amendments are either not relevant to the
Company's operations or are not expected to have significant impact on the Company's financial statements other than certain
additional disclosures.
Amendments to IAS 16 and IAS 38 Clarification of acceptable methods
of depreciation and amortization
IAS 27 (Revised 2011) – Separate Financial Statements
IFRS 10 – Consolidated Financial Statements
IFRS 11 – Joint Arrangements
IFRS 12 – Disclosure of Interests in Other Entities
Certain annual improvements have also been made to a number of IFRSs.
Other than the aforesaid standards, interpretations and amendments, the International Accounting Standards Board (IASB)
has also issued the following standards which have not been adopted locally by the Securities and Exchange Commission of
Pakistan:
IFRS 13 – Fair Value Measurement
IAS 28 (Revised 2011) – Investments in Associates and Joint Ventures
January 1, 2014
January 1, 2014
Effective from accounting
period beginning on or after
January 01, 2015
January 01, 2015
January 01, 2015
January 01, 2015
January 01, 2015
January 01, 2015
July 01, 2014
January 01, 2016
January 01, 2016
Effective from accounting
period beginning on or after
The above amendments and interpretations do not have any impact on the Company's financial statements and therefore have
not been discussed in detail.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
4.1 Takaful contracts
4.2 Contribution
i) For direct business, evenly over the period of the policy.
ii) For proportional re-takaful business, evenly over the period of the underlying takaful policies.
Contributions including administrative surcharge received / receivable (if any) under a takaful policy are recognised as
written at the time of issuance of policy. Contributions are stated gross of commission payable to intermediaries and exclusive
of taxes and duties levied on contributions.
Marine, aviation and transport takaful provides coverage against cargo risk, terminals, damages occurred in between the
points of origin and final destination and other related perils.
Miscellaneous takaful provides cover against burglary, loss of cash in safe and cash in transit, money, engineering losses,
travel and other coverage.
Contribution income under a policy is recognised over the period of takaful from the date of inception of the policy to which
it relates to its expiry as follows:
The takaful contracts are based on the principles of Wakala. The takaful contracts so agreed usually inspire concept of
tabarru (to donate for benefit of others) and mutual sharing of losses with the overall objective of eliminating the element of
uncertainty.
Contracts under which the Participant Takaful Fund (PTF) accepts significant takaful risk from another party (the policy
holder) by agreeing to compensate the policyholder if a specified uncertain future event (the takaful event) adversely affects
the policy holder, are classified as takaful contracts. Takaful risk is significant if a takaful event could cause the PTF to pay
significant benefits due to the happening of the takaful event compared to its non-happening. Once a contract has been
classified as a takaful contract, it remains a takaful contract for the remainder of its lifetime even if the takaful risk reduces
significantly during this period, unless all rights and obligations are extinguished or expire.
The PTF underwrites non-life takaful contracts that can be categorised into Fire, Property and Damage, Marine, Aviation and
Transport, Motor, Health and Miscellaneous contracts. Contracts may be concluded for a fixed term of one year, less than
one year and in some cases for more than one year. However, most of the contracts are for twelve months duration. Takaful
contracts entered into by the PTF under which the contract holder is another takaful operator / insurer (inward retakaful /
reinsurance) of a facultative nature are included within the individual category of takaful contracts, other than those which
fall under the Treaty.
The terms of the takaful contracts are in accordance with the generally accepted principles and norms of insurance business
suitably modified with guidance by the Shariah Board of the Takaful operator.
The principal accounting policies applied in the preparation of these financial statements are stated below. These are
consistent with those of the previous financial year.
Health takaful provides basic hospital care and major medical care including maternity care and outpatient care.
Fire takaful provides coverage against damages caused by fire, riot and strike, explosion, earthquake, atmospheric damage,
flood, electric fluctuation and other related perils.
Motor takaful provides comprehensive car coverage, indemnity against third party loss and other related covers.
4.3 Re-takaful
4.4 Claims
Administrative surcharge recovered from insurer is recognised as part of contribution in the case of co-takaful policies
(Leader Follower case) on proportionate basis.
Amount due to takaful / re-takaful companies represent the balance due to re-takaful companies. Amounts due to / from
retakaful operators are carried at cost less provision for impairment, if any. Cost represents the fair value of the consideration
to be received / paid in the future for services rendered.
Contribution due but unpaid represents the amount due from participants on account of takaful contracts. These are
recognised at cost, which is the fair value of the consideration to be received less provision for impairment, if any.
If there is an objective evidence that any contribution due but unpaid is impaired, the Company reduces the carrying amount
of that contribution receivable and recognizes the loss in profit and loss account.
Amount due from other takaful / re-takaful companies are carried at cost less provision for impairment, if any. Cost
represents the fair value of consideration to be received in the future.
Claim recoveries receivable from the re-takaful are recognised as an asset at the same time as the claims which give rise to
the right of recoveries are recognised as a liability and are measured at the amount expected to be received, after considering
impairment relating thereto.
The unearned portion of contribution written net of wakala is set aside as a reserve and is recognized as a liability. Such
reserve is calculated according to the ratio of the unexpired period of the policy and the total period, both measured to the
nearest day. The Unearned portion of Health Takaful is calculated in accordance with the advice of Actuary.
The Company cedes retakaful in the normal course of business for the purpose of limiting its net loss potential through the
diversification of its risks. Assets, liabilities, income and expense arising from ceded retakaful contracts are presented
separately from the assets, liabilities, income and expense from the related takaful contracts because the retakaful
arrangements do not relieve the PTF from its direct obligations to its policyholders. These retakaful contracts include both
facultative and treaty arrangements contracts and are classified in same categories of takaful contracts for the purpose of
these financial statements.
Re-takaful contribution is recognised evenly as expense after taking into account the proportion of deferred contribution
expense which is calculated using 1/365 method other than marine business in which it is calculated using 1/120 method. The
deferred portion of contribution expense is recognised as a prepayment.
Provision for impairment in contribution receivables is estimated on a systematic basis after analyzing the receivables as per
their ageing.
Re-takaful assets or liabilities are derecognised when the contractual rights are extinguished or expired.
Claims expense include all claims occurring during the year, whether reported or not, related internal and external claim
handling costs that are directly related to the processing and settlement of claims, a reduction for the value of salvage and
other recoveries, and any adjustments to claims outstanding from previous years.
Outstanding claims comprise the estimated cost of claims incurred but not settled at the reporting date, whether reported or
not. Provisions for reported claims not paid as at the balance sheet date are made on the basis of individual case estimates. In
addition, a provision based on management’s judgment and the Company’s prior experience is maintained for the cost of
settling claims incurred but not reported (IBNR) at the reporting date, by taking into account the claims intimated in the
month following the reporting date.
Rebate income from retakaful is spread and recognised as revenue in accordance with the pattern of recognition of retakaful
contribution to which it relates.
Revenue from contribution is recognised after taking into account the unearned portion of contribution which is calculated
using the 1/365 method for all classes except for marine class where marine class earned contribution is calculated using
1/120 method. The unearned portion of contribution income is recognised as a liability.
4.5 Commission
4.6 Contribution deficiency reserve
4.7 Takaful surplus
4.8 Wakala and Mudarib fees
4.9 Qard-e-Hasna
4.10 Staff retirement benefits
4.10.1 Defined contribution plan
4.10.2 Defined benefit plan
Any difference between the provisions at the reporting date and settlements in the following year is included in the financial
statement of that year.
Commission incurred in obtaining and recording policies is deferred and recognised as an asset. These costs are charged to
profit and loss account based on the pattern of recognition of contribution revenue.
The Company is required as per Takaful Rules, 2012 to maintain a provision in respect of contribution deficiency for the
class of business where the unearned contribution reserve is not adequate to meet the expected future liability, after re-takaful
from claims, and other supplementary expenses expected to be incurred after the reporting date in respect of the unexpired
policies in that class of business at the reporting date. The movement in the contribution deficiency reserve is recorded as an
expense in the profit and loss account.
The Company determines adequacy of liability of contribution deficiency by carrying out analysis of its loss ratio of expired
periods. For this purpose average loss ratio of last few years inclusive of claim settlement cost but excluding major
exceptional claims are taken into consideration to determine ultimate loss ratio to be applied on unearned contribution. The
liability of contribution deficiency in relation to Health takaful is calculated in accordance with the advice of the actuary.
Takaful surplus attributable to the participants is calculated after charging all direct costs and setting aside various reserves
and charity. Allocation to participants, if applicable, is made after deducting the claims paid to them during the year.
The Takaful Operator manages the general takaful operations for the participant and charges 40% of gross contribution as
wakala fee to meet the general and administrative expenses of the Company.
The Takaful Operator also manages the participants' investment as Mudarib and charges 25% of the general takaful
investment income as Modarib's share earned by the Participants' Takaful Fund.
Wakala fee and Mudarib fee is recognised on the same basis on which related revenue is recognised. Unexpired portion of
wakala fee is disclosed as a liability of Shareholders' Fund (SHF) and an asset of Participants' Takaful Fund (PTF).
When the PTF including reserves are insufficient to meet their current payments less receipts, the deficit is funded by way of
interest free loan (Qard-e-Hasna) from the Shareholders' fund.
The Company maintains an approved contributory provident fund scheme for all its permanent employees. Contributions are
made by both the Company and the employees to the fund at the rate of 10 percent per annum of basic salary. Contributions
made by the Company are recognised as an expense.
The Company operates an approved defined gratuity scheme for all its permanent employees who attain the minimum
qualification period for entitlement to gratuity. Contributions to the scheme are made in accordance with actuarial valuation
using Projected Unit Credit Actuarial Cost Method.
4.10.3 Employees' compensated absences
4.11 Provisions
4.12 Appropriations
Appropriations of profit, if any, are recognised in the period in which these are approved.
4.13 Cash and cash equivalents
4.14 Investments
Investments are recognised and classified as follows:
4.14.1 Held to maturity (HTM)
Profit on held to maturity investment is recognized on a time proportion basis.
4.14.2 Available-for-sale (AFS)
For the purpose of statement of cash flows, cash and cash equivalents consist of cash and stamps in hand, balances with
banks, short term deposits with maturities of three months or less from balance sheet date and highly liquid short-term
investments that are convertible to known amount of cash and are subject to insignificant risk of change in value.
All investments are initially recognised at cost being the fair value of the consideration given and include transaction costs,
except for held for trading investments in which case transaction costs are charged to profit and loss account.
All purchase and sale of investments that require delivery within the required time frame established by regulations or market
convention are accounted for at the trade date. Trade date is the date when the Company commits to purchase or sell the
investment.
All investments are de-recognised when the rights to receive cash flows from the investments have expired or have been
transferred and the Company has transferred substantially all risks and rewards of ownership.
Investments with fixed maturity, where management has both the intent and the ability to hold to maturity, are classified as
held to maturity.
Investments classified as held to maturity are recognized initially at fair value being the cost, plus attributable transaction
costs.
Provisions are recognised when the Company has a legal or constructive obligation as a result of past events, it is probable
that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made.
Provisions are reviewed at each reporting date and are adjusted to reflect the current best estimate.
The Company accounts for the liability in respect of employees' compensated absences in the period in which these are
earned.
Subsequently, these are measured at amortized cost less impairment loss, if any. Any premium paid or discount availed on
acquisition of held to maturity investment is deferred and amortized over the term of investment using the effective yield.
These are reviewed for impairment and any losses arising from impairment in values are charged to the profit and loss
account.
Investments which are intended to be held for an undefined period of time but may be sold in response to the need for
liquidity, changes in interest rates, equity prices or exchange rates are classified as available-for-sale. Any permanent decline
recognized in profit and loss account is not reversed through profit and loss account.
Quoted
Unquoted
4.14.3 Fair values
4.15 Taxation
4.15.1 Current
4.15.2 Deferred
4.16 Fixed assets
Tangibles
Annual rates
of depreciation
(%)
Leasehold improvements 10
Furniture and fixtures 10
Office equipments 10
Computers 33.33
Vehicles 20
The fair value of financial assets at fair value through profit or loss, held to maturity investments and available-for-sale
financial assets is determined by reference to their quoted closing bid price at the reporting date.
Income tax expense comprises current and deferred tax. Income tax expense is recognised in the profit and loss account,
except to the extent that it relates to items recognised directly in other comprehensive income or below equity, in which case
it is recognised in other comprehensive income or below equity respectively.
Provision for current taxation is based on the taxable income for the year determined in accordance with the prevailing law
for taxation on income using prevailing tax rates after taking into account available tax credits and rebates, if any. The charge
for current tax includes adjustments to charge for prior years, if any.
Deferred tax is recognised using the balance sheet method, providing for all temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of
deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and
liabilities, using the rate enacted or substantively enacted at the reporting date.
The Company recognises a deferred tax asset to the extent that it is probable that taxable profits in the foreseeable future will
be available against which the related tax losses and deductible temporary differences can be utilised. Deferred tax assets are
reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Subsequent to initial recognition at cost, quoted investments are stated at the lower of cost or market value (market value on
an individual investment basis being taken as lower if the fall is other than temporary) in accordance with the requirements of
the SEC (Insurance) Rules, 2002. The Company uses Mutual Funds Association of Pakistan (MUFAP) quotations at the
reporting date to determine the market value.
A fall in market value of a security is treated as “other than temporary (i.e. impaired)”, if there is a significant or prolonged
decline in fair value of security below its cost. Reversals due to subsequent increase in the market value of these securities
upto its original cost is recognised as income in the profit and loss account.
Unquoted investments are stated at cost less accumulated impairment (if any), in the value of such investments.
Tangible fixed assets are stated at cost less accumulated depreciation and impairment in value, if any. Depreciation is
calculated on a straight line basis, whereby the depreciable amount of an operating asset is written off over its estimated
useful life, using the following rates:
Intangibles
Capital work-in-progress
4.17 Impairment
4.18 Ijarah
Ijarah rentals are recognised as an expense on accrual basis as and when the rentals become due.
4.19 Financial instruments
Financial assets and financial liabilities other than those arising out of takaful contracts are recognized at the time when the
Company becomes a party to the contractual provisions of the instrument. At the time of initial recognition, financial assets
and liabilities are measured at fair values which is the cost of consideration given or received for it. Financial assets are
derecognized when the contractual right to receive future cash flows from the asset expires or is transferred along with the
risk and reward of the asset. Financial liabilities are derecognized when obligation specified in the contract is discharged,
cancelled or expired. Any gains or losses on derecognition of the financial assets and liabilities are recognized in the profit
and loss account of the current period.
Gain or loss on disposal of the assets is recognised in the profit and loss account in the period of disposal.
The assets residual values and useful lives are reviewed, at each financial year end.
An item of fixed assets is derecognised upon disposal or when no future economic benefits are expected from its use or
disposal.
Subsequent costs, are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that the future economic benefits associated with the items will flow to the Company and the cost of the item can be
measured reliably.
Depreciation on acquisitions during the year is charged from the date on which the assets is available for use whereas on
disposals, depreciation is charged upto the date of disposal.
Normal repairs and maintenance are charged to income as and when incurred. Subsequent costs are included in the asset's
carrying amount or recognised as a separate asset, as appropriate, only when it is possible that the future economic benefits
associated with the item will flow to the Company and the cost of the item can be measured reliably.
The assets residual values and useful lives are reviewed, at each financial year end.
Intangible assets comprise software licenses, and are stated at cost less accumulated amortisation and impairment in value, if
any. Amortisation is charged over the useful life of the asset on a systematic basis to profit and loss account by applying the
straight line method at the rates specified in note 17.2 to the financial statements.
Capital work-in-progress is stated at cost less any impairment in value. It includes advances made to suppliers in respect of
tangible and intangible assets.
The assets residual values and useful lives are to be reviewed, at each financial year end.
The carrying amount of assets (other than deferred tax asset) are reviewed at each reporting date to determine whether there
is any indication of impairment in carrying amount of any asset or group of assets. If such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent of impairment loss, if any. An impairment loss is recognised
whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in profit and loss
account. An impairment loss is reversed if the reversal can be objectively related to an event occurring after the impairment
loss was recognised.
4.20 Creditors, accruals and provisions
4.21 Off setting the financial assets and liabilities
4.22 Earnings / (loss) per share
4.23 Business segment
Motor takaful provides comprehensive vehicle coverage and indemnity against third party loss and other related covers.
The fire and engineering takaful segment provides takaful covers against damages caused by fire, riot and strike, explosion,
earthquake, atmospheric damage, flood, engineering losses, electric fluctuation and impact.
Health takaful provides basic hospital care and major medical care including maternity care and outpatient care.
Assets and liabilities are allocated to particular segments on the basis of contribution earned. Those assets and liabilities
which cannot be allocated to a particular segment on a reasonable basis are reported as unallocated corporate assets and
liabilities.
Miscellaneous takaful provides cover against burglary, loss of cash in safe and cash in transit, personal accident, money,
travel and other coverages.
Marine takaful segment provides coverage against cargo risk, war risk and damages occurring in inland transit and other
related perils.
The health and miscellaneous segment includes "Amaan Travel Takaful Package" which comes under the definition of an
operating segment.
Liabilities for creditors and other amounts payable are carried at cost which is fair value of the consideration to be paid in
future for goods and / or services received, whether or not billed to the Company.
Financial assets and liabilities other than those relating to takaful contracts are only off-set and the net amount is reported in
the balance sheet when the Company has a legally enforceable right to set-off the recognized amounts and it intends either to
settle on net basis, or to realise the asset and settle the liability simultaneously.
Earnings/ (loss) per share is calculated by dividing the profit / (loss) after tax attributable to ordinary shareholders for the year
by the weighted average number of shares outstanding during the year.
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and
returns that are different from those of other business segments. The Company accounts for segment reporting using the
classes or sub classes of business (Takaful Business Statutory Funds) as specified under the Insurance Ordinance, 2000 and
SEC (Insurance) Rules, 2002 as the primary reporting format.
The Company has five primary business segments for reporting purposes namely fire, marine, motor, health and
miscellaneous and one discontinued segment namely "Amaan Travel Takaful Package".
In 2010, Amaan Travel Takaful Package was classified as a 'discontinued operations' in accordance with the requirements of
IFRS 5 'Non-current assets held for sale and discontinued operations'. Since then the results of operations have been disclosed
in a separate column in profit and loss account in the ensuing years. There was no contribution/expenses against its
operations and the management has only been accruing return against the related assets. In the current year , the management
has decided to reclassify the income within the continuing operation as it is representative of the flow of economic benefits to
the company and the comparatives have been restated accordingly.
4.24 Revenue recognition
PTF
i)
SHF
i)
ii)
PTF / SHF
i) Profit on Islamic investment products is recognised on accrual basis.
ii) Dividend income is recognised when the right to receive dividend is established.
iii) Gain or loss on sale of investments is included in the profit and loss account in the period of disposal.
iv) Income on held to maturity investments is recognised on time proportionate basis using effective interest method.
4.25 Expenses
4.26 Foreign currency translations
Contribution income under a policy is recognised over the period of takaful. Administrative surcharge recovered
from insurer is recognised as part of contribution in the case of co-takaful policies (Leader Follower case) on
proportionate basis.
The Takaful Operator manages the general takaful operations for the participants and charges 40% of the gross
contribution written net of administrative surcharge on co-takaful inward as wakala fee against the services. It is
recognized upfront on the issue of takaful policy.
The Takaful Operator also manages the participants' investment as Modarib and charges 25% of the investment
income earned by the participants' fund as Modarib's fee. It is recognized on the same basis on which related
revenue is recognised.
Expenses allocated to the takaful business represent only directly attributable expenses. Expenses not directly allocable
to takaful business are charged to Shareholders' Fund. All indirect and common expenses are allocated between
management expense and general and administrative expenses in the ratio of 70% and 30% respectively.
Foreign currency transactions are translated into Pak Rupees (functional currency) using the exchange rates prevailing
at the date of transaction. Monetary assets and liabilities in foreign currencies are translated into Pak Rupees using the
exchange rate at the reporting date. Foreign exchange gains and losses resulting from the settlement of such
transactions and from translation at the year end exchange rates of monetary assets and liabilities denominated in
foreign currencies are recognized in the profit and loss account.
5. ISSUED, SUBSCRIBED AND PAID UP CAPITAL
2014 2013 2014 2013
30,000,000 30,000,000 300,000,000 300,000,000
5.1 Shareholders of the Company are:
Holding Holding
% %
House Building Finance Company Limited 8,700,500 29 8,700,500 29
Al-Bhuaira National Insurance Company 5,100,000 17 5,100,000 17
Al Baraka Bank (Pakistan) Limited 5,100,000 17 5,100,000 17
Sitara Chemical Industries Limited 3,000,000 10 3,000,000 10
Arif Habib Corporation Limited 3,000,000 10 3,000,000 10
Mal Al Khaleej Investment LLC 2,550,000 8.5 2,550,000 8.5
Emirates Investment Group LLC 2,045,000 6.8 2,045,000 6.8
Trust Securities and Brokerage Limited 504,500 1.7 504,500 1.7
30,000,000 30,000,000
6. OTHER CREDITORS AND ACCRUALS
2013
Note Shareholders' Participants' Aggregate Aggregate
Fund Takaful Fund
Commission payable to agents 8,165,726 - 8,165,726 7,500,230
Federal excise duty - 3,377,497 3,377,497 2,377,038
Federal insurance fee - 267,177 267,177 203,499
Withholding tax 84,451 211,174 295,625 29,267
Contribution due to other co-takaful /
insurance companies - 2,335,331 2,335,331 1,318,195
Payable to staff gratuity fund 6.1 2,390,718 - 2,390,718 323,885
Provision for compensated absences 256,054 - 256,054 256,054
Security deposit 1,352,039 - 1,352,039 897,677
Tracker installation fee payable - 6,348,015 6,348,015 3,649,024
Other payables 975,833 1,884,288 2,860,121 2,625,328
13,224,821 14,423,482 27,648,303 19,180,197
6.1 Staff gratuity fund
The following significant assumptions were used for valuation of this scheme:
2014 2013
Discount rate 11.75% 13.24%
Expected rate of increase in salary of employees 10% 10%
Expected rate of return on plan assets 11.75% 13.24%
Normal retirement age 60 years 60 years
Ordinary shares of Rs. 10 each fully paid in cash
(Number of shares) Issued subscribed and paid up (Rupees)
2014 2013
Number of shares Number of
shares
2014
--------------------------------------------(Rupees)-----------------------------------------
Rate per annum
The Company operates an approved funded gratuity scheme for all permanent employees. Latest actuarial valuation was carried out as at
December 31, 2014.
6.2
Salary increase risk
Discount rate risk
Mortality / withdrawal risk
This is the risk that the actual mortality/withdrawal experience is different than that assumed by the Company.
Investment risk
This is the risk that the assets are underperforming and are not sufficient to meet the liabilities.
6.3 Number of employees under the scheme
The number of employees covered under the scheme is 62 (2013: 57).
6.4
2014 2013
Liability recognised in the balance sheet
Present value of defined benefit obligation 5,376,516 3,696,348
Fair value of plan assets (2,985,798) (3,372,463)
Liability recognised in the balance sheet 2,390,718 323,885
6.5 Movement in liability during the year
Opening balance 323,885 (103,126)
Charge for the year 2,066,833 427,011
Closing balance 2,390,718 323,885
6.6 Reconciliation of present value of defined benefit obligation
Opening balance of defined benefit obligation 3,696,348 4,418,516
Current service cost 916,866 803,780
Interest cost 584,868 538,097
Actuarial loss/(gain) on defined benefit obligation 2,121,945 (536,449)
Benefits paid during the year (1,943,511) (1,527,596)
Closing balance of defined benefit obligation 5,376,516 3,696,348
6.7 Reconciliation of fair value of plan assets
Opening balance of fair value of plan assets 3,372,463 4,521,642
Expected return on plan assets 473,789 614,496
Contribution paid 1,500,000 -
Benefits paid by the fund (1,943,511) (1,527,596)
Actuarial loss on plan assets (416,943) (236,079)
Closing balance of fair value of plan assets 2,985,798 3,372,463
The fund typically exposes the Company to actuarial risks such as: salary increase risk, discount rate risk, mortality/withdrawal risk and
investment risk defined as follow:
This is the risk that the salary at the time of cessation of service is higher than that assumed. This is a risk to the Company because the
benefits are based on the final salary; if the final salary is higher than what we have assumed, the benefits will also be higher.
The discount rate is based on the yield on government bonds. If the market yield of bonds varies, the discount rate would vary in the
same manner and would affect the present value of obligation and fair value of assets.
The fair value of the scheme's assets and liabilities for past services of the employees at the latest valuation date are as follows:
(Rupees)
2014 2013
Note
6.8 Charge for the year
Recognised through profit and loss account
Current service cost 916,866 803,780
Interest on obligation 584,868 538,097
Expected return on plan assets (473,789) (614,496)
1,027,945 727,381
Recognised through other comprehensive income
Actuarial loss/(gain) for the year 2,538,888 (300,370)
Total gratuity expense for the year for funded obligation 3,566,833 427,011
6.8.1 Gratuity cost allocation
Management expenses 20.1 719,562 509,167
General and administrative expenses 22.1 308,383 218,214
1,027,945 727,381
6.9 Composition of fair value of plan assets
Fair Value Percentage Fair Value Percentage
(Rupees) (%) (Rupees) (%)
Term Deposit Certificates 2,812,967 94.2 2,844,152 84.33
Cash 172,831 5.8 528,311 15.67
2,985,798 3,372,463
6.10 Sensitivity analysis
(Rupees)
Base 5,376,516
Discount rate Increase by 0.5% 4,986,217 -7.26%
Decrease by 0.5% 5,806,734 8.00%
Salary growth rate Increase by 0.5% 5,809,387 8.05%
Decrease by 0.5% 4,980,859 -7.36%
Mortality rate 50% of base assumption 5,358,474 -0.34%
150% of base assumption 5,394,270 0.33%
Withdrawal rate 50% of base assumption 5,326,066 -0.94%
150% of base assumption 5,423,364 0.87%
6.11
% change from
base
Present value of
obligation
Significant actuarial assumptions for the determination of the defined obligation are discount rate, and expected rate of salary increase.
The sensitivity analysis below have been determined based on reasonably possible changes of the respective assumptions occurring at the
end of the reporting period, while holding all other assumptions constant:
The estimated gratuity cost for the year ending December 31, 2015 before allowing for the impact of net actuarial loss or gain is Rs.
1,877,893.
2014 2013
(Rupees)
7. CONTINGENCIES AND COMMITMENTS
CONTINGENCIES
7.1
7.2
7.3
COMMITMENTS
7.4 Commitments under Ijarah arrangements and the period in which these payments will become due are:
2014 2013
Not later than one year 1,255,260 1,255,260
Later than one year but not later than five years 3,557,100 4,812,360
4,812,360 6,067,620
8. CASH AND BANK DEPOSITS
2013
Shareholders' Participants' Aggregate Aggregate
Fund Takaful Fund
Note
Cash and other equivalents
Cash 49,010 - 49,010 138,091
Policy stamps and bond papers in hand - 355,900 355,900 350,565
49,010 355,900 404,910 488,656
Current and other accounts
Current accounts 3,106 1,625,461 1,628,567 683,427
PLS savings accounts 8.1 616,013 33,130,769 33,746,782 22,847,322
619,119 34,756,230 35,375,349 23,530,749
Deposits maturing within 12 months
Term deposits 8.2 104,400,000 147,100,000 251,500,000 258,000,000
105,068,129 182,212,130 287,280,259 282,019,405
------------Rupees------------
Securities and Exchange Commission of Pakistan (SECP) imposed a fine of Rs. 10,000,000 in May 2010 on the Company on account
of non-compliance of certain provisions of Insurance Ordinance, 2000 in respect of Amaan Travel Takaful Scheme. The Company has
already discontinued the travel business and has filed a petition before the Honorable High Court of Sindh against the impugned
orders of SECP. The Company approached the Court to dispose off the petition with a direction to Commissioner Insurance, Securities
and Exchange Commission of Pakistan to review and recalculate the penalty/fine imposed on the Company, which was allowed by the
Court. The matter is now pending review by the Commissioner, Insurance. The management, based on the opinion of its legal
advisors, is confident that the ultimate outcome of the matter will not result in any material adverse financial impact on the Company.
Travel Agents Association of Pakistan (TAAP) raised a demand for distribution of surplus in Amaan Travel Participation Takaful
Fund (PTF) and the profit thereon aggregating to Rs. 120,000,000. TAAP filed a case on October 10, 2012 in the Insurance Tribunal
of Sindh for recovery of Rs. 546,534,125 inclusive of compensation/ damages for premature termination of the agreement of Rs.
386,534,125 in respect of Amaan Travel and Health Takaful Package. The Company filed an application for suspending the
proceedings in the suit till disposal of appeal filed by the Company in the High Court of Sindh details of which are stated in note 7.1
above. The management, based on the advice of its legal advisor, is confident that the Company has good defence in the case and as
such no loss is likely to arise from this litigation and accordingly, no provision has been made in these financial statements in this
regard.
There are few cases filed by policy holders against the Company before High Court of Sindh, Insurance Tribunals at Lahore and
Khyber Phaktun Khawa for the recovery of claims, contribution amounts and liquidated damages which amounted to Rs. 101,039,546
(2013: Rs 101,039,546) including claim for damages of Rs. 50,000,000. These claims are not acknowledged by the Company as in
management's view these are frivolous cases and based on the advice of its legal advisors, the management is confident that the
Company has good defence in these cases and as such no loss is likely to arise from these litigations and accordingly, no provision has
been made in these financial statements in this regard.
2014
--------------------------------------- (Rupees) ---------------------------------------
8.1
8.2
2014 2013
Note
9. LONG TERM DEPOSITS
Deposits against
Ijarah 517,900 517,900
Rent 73,590 73,590
Others 9.1 931,544 931,544
1,523,034 1,523,034
9.1
10. INVESTMENTS
2013
Shareholders' Participants' Aggregate Aggregate
Fund Takaful Fund
Note
Held to maturity
GoP Ijarah sukuk 10.1 10,000,000 - 10,000,000 10,000,000
Other sukuk 10.2 30,515,368 - 30,515,368 32,170,540
40,515,368 - 40,515,368 42,170,540
Less: Provision for impairment (14,998,125) - (14,998,125) (7,499,062)
25,517,243 - 25,517,243 34,671,478
Available-for-sale
Quoted - units of Islamic Fund 10.3 - 10,007,878 10,007,878 4,315,504
25,517,243 10,007,878 35,525,121 38,986,982
10.1 GoP Ijarah sukuks 12th Issue
Credit Effective yield Face value Market Maturity
Rating % (Rupees) Value date
6 months T Bills 10,000,000 10,024,000
These represent balances maintained with Islamic commercial banks under profit and loss sharing basis carrying expected profit rates
ranging from 3.51% to 6.92% (2013: 4.26% to 7.67%) per annum.
These represent term deposits maintained with Islamic commercial banks under profit and loss sharing basis having maturity upto 1
year and carry expected profit at rates ranging from 8% to 9.97% (2013: 8.05% to 9%) per annum. These include term deposits
amounting to Rs. 20,000,000 maintained with Dubai Islamic Bank (Pakistan) Limited on which lien is marked in favour of State Bank
of Pakistan in compliance of section 29 of Insurance Ordinance, 2000 and Takaful Rules, 2012.
(Rupees)
GoP Ijarah sukuk certificates 100
certificates (2013: 100
certificates) of Rs. 100,000 each
This include deposits amounting to Rs. 875,000 (2013: Rs. 875,000) in respect of enlistment of hospitals and other medical institutes
on panel.
These represent GoP Ijarah sukuk certificates amounting to Rs. 10,000,000 (2013: Rs. 10,000,000) having maturity upto 3.4 years.
These carry profit at the rates ranging from 9.47 % to 9.98% (2013: 8.92 % to 9.33%) per annum. These certificates are pledged with
State Bank of Pakistan as statutory deposit kept under section 29 of the Insurance Ordinance, 2000.
Not
Applicable
2014
------------------------------------------ (Rupees) ----------------------------------------------
Profit
payment
Semi-annuallyNovember 21,
2015
10.2 Other Sukuk Certificates
Number of Credit Effective yield Profit Face value Carrying Market Maturity
Certificates Rating % payment (Rupees) Value Value date
Engro Fertilizers Limited - Sukuk Certificates 2,000 A 6 months Semi-annually 10,000,000 10,000,000 10,039,000 September 06,
KIBOR + 1.5% 2015
Agritech Limited - Sukuk Certificate (note 10.2.1) 3,000 NPA* 6 months Semi-annually 15,000,000 - NPA* August 06,
KIBOR + 2% 2019
Quetta Textile Mills Limited - Sukuk Certificates (note 10.2.2) 2,000 NPA* 6 months Quarterly 10,000,000 5,517,243 NPA* March 26,
KIBOR + 1.75% 2020
10.2.1
10.2.2
* Non performing assets
10.3 Units of Islamic Fund - Available for sale
Note
Sector / name of investee scheme As at Purchased Bonus Disposed off As at Cost Market Cost Market
January 1, during the during the December 31, value value
2014 year year 2014
------------------------------------(Rupees)-------------------------------------
Participants' Takaful Fund
United Composite Islamic Fund - - - - - - Alfalah GHP Islamic Fund - - - - - - Nafa Islamic Multi Assets Fund - - - - - -
ABL Islamic Principal Preservation Fund II - 593,404 7,987 - 601,391 6,000,000 6,496,111 - -
Meezan Sovereign Fund 103,614 - 3,910 (7,538) 99,986 4,007,878 5,178,287 4,315,504 5,222,159
10,007,878 11,674,398 4,315,504 5,222,159
2014
An agreement for restructuring of these sukuks was executed between the Investment Agent of these sukuks and Quetta Textile Mills Limited on June 24, 2013. According to the restructuring terms, repayment of principal
of Rs. 8,000,000 will be made to the Company over a period of 7 years till March 26, 2020 in twenty-nine quarterly instalments whereas the profit shall be received by the Company at the rate of 6-monthly KIBOR and a
spread of 1.75% with effect from March 26, 2013. During the year, four instalments became due out of which three were received.
Number of units 2013
This represents investment aggregating to Rs. 15,000,000 (2013: 15,000,000) in sukuks issued by Agritech Limited (the investee company) against which the investee company had not made payments at the contractual
dates i.e. August 06, 2010 and February 06, 2011. In 2011, a restructuring agreement was signed between the investee company and the Investment Agent of the sukuk certificates, whereby, certain terms included in the
original trust deed dated July 22, 2008 were amended, including the repayment period which was extended from August 06, 2015 to August 06, 2019. Further, in lieu of accrued overdue profit, zero coupon Term Finance
Certificates (TFCs) were issued by Agritech Limited on October 17, 2011 which were to be repaid by the investee company within three and a half years from the date of issuance of such TFCs. However, the investee
company defaulted on the instalment due based on the restructuring agreement as well as in making payments in respect of zero coupon term finance certificates. Therefore, the management has neither recorded TFCs in the
books of accounts nor accrued any profit on outstanding principal amount and is fully provided, on prudence basis.
2014 2013
Note
11. CONTRIBUTION DUE BUT UNPAID
Unsecured
Considered good 37,698,199 25,399,919
Considered doubtful 8,431,428 8,431,428
46,129,627 33,831,347
Provision against contribution due but unpaid 11.1 (8,431,428) (8,431,428)
37,698,199 25,399,919
11.1 Movement of provision against contribution due but unpaid
Opening balance 8,431,428 7,719,779
Charge for the year - 808,346
Reversal during the year - (96,697)
Closing balance 8,431,428 8,431,428
12.
Unsecured
Considered good 2,326,333 3,161,300
Considered doubtful 4,667,878 4,667,878
6,994,211 7,829,178
Provision against amount due from other takaful companies 12.1 (4,667,878) (4,667,878)
2,326,333 3,161,300
12.1 Movement of provision against amounts due from other takaful companies
Opening balance 4,667,878 2,164,172
Charge for the year - 2,503,706
Reversal during the year - -
Closing balance 4,667,878 4,667,878
13. ACCRUED INVESTMENT INCOME
2014 2013
Shareholders' Participants' Aggregate Aggregate
Fund Takaful Fund
Return on term deposits 3,741,899 6,608,327 10,350,226 4,985,404
Return on Sukuk certificates 1,059,330 - 1,059,330 1,017,797
4,801,229 6,608,327 11,409,556 6,003,201
(Rupees)
------------------------------------- (Rupees) -------------------------------------
AMOUNTS DUE FROM OTHER TAKAFUL COMPANIES / RETAKAFUL COMPANIES
2014 2013
Note
14. WAKALA FEE RECEIVABLE AND OTHER ACCOUNT BALANCES
Considered good 49,799,258 41,617,851
Considered doubtful 4,510,772 4,510,772
54,310,030 46,128,623
Provision for doubtful balances 14.1 (4,510,772) (4,510,772)
49,799,258 41,617,851
14.1 Movement of provision for doubtful balances
Opening balance 4,510,772 3,169,182
Charge for the year - 1,341,590
Closing balance 4,510,772 4,510,772
15. PREPAYMENTS
2014 2013
Shareholders' Participants' Aggregate Aggregate
Fund Takaful Fund
Prepaid re-takaful ceded (note 31) - 18,419,988 18,419,988 17,863,607
Prepaid expenses 1,676,955 15,397,494 17,074,449 11,068,518
1,676,955 33,817,482 35,494,437 28,932,125
16. SUNDRY RECEIVABLES
2014 2013
Shareholders' Participants' Aggregate Aggregate
Fund Takaful Fund
Return on bank balances and deposits 8,736 131,793 140,529 443,457
Advances to employees and agents 420,292 - 420,292 195,840
Others 385,509 305,283 690,792 583,260
814,537 437,076 1,251,613 1,222,557
----------------------------------(Rupees)--------------------------------------
(Rupees)
----------------------------------(Rupees)--------------------------------------
17. FIXED ASSETS
17.1 Tangibles Assets
Written Depreciation
At the Additions/ At the end At the For the At the end down value rate
beginning (disposals) of the year beginning year / of the year December 31
of the year of the year (disposals) (%)
Leasehold improvements 4,156,141 - 4,156,141 1,761,955 414,478 2,176,433 1,979,708 10
Furniture and fixtures 12,364,595 100,900 12,465,495 6,933,654 1,240,798 8,174,452 4,291,043 10
Office equipment 5,578,869 485,900 5,952,119 2,515,804 576,136 3,021,980 2,930,139 10
(112,650) (69,960)
Computers 15,828,279 1,802,485 17,527,982 15,004,246 634,357 15,586,212 1,941,770 33.33
(102,782) (52,391)
Vehicles 2,320,278 1,814,000 4,134,278 1,032,820 561,134 1,593,954 2,540,324 20
40,248,162 4,203,285 44,236,015 27,248,479 3,426,903 30,553,031 13,682,984
(215,432) (122,351)
17.1.1 It includes fully depreciated assets having cost of Rs 14,932,670 (2013: 14,856,852).
17.1.2 Tangibles Assets (for comparative period)
Written Depreciation
At the Additions/ At the end At the For the At the end down value at rate
beginning (disposals) of the year beginning year / of the year December 31
of the year of the year (disposals) (%)
Leasehold improvements 4,156,141 - 4,156,141 1,347,477 414,478 1,761,955 2,394,186 10
Furniture and fixtures 12,344,595 20,000 12,364,595 5,700,573 1,233,081 6,933,654 5,430,941 10
Office equipments 5,612,036 32,000 5,578,869 1,994,486 556,613 2,515,804 3,063,065 10
(65,167) (35,295)
Computers 16,232,605 372,901 15,828,279 15,225,716 454,116 15,004,246 824,033 33.33
(777,227) (675,586)
Vehicles 4,473,880 68,500 2,320,278 2,106,362 565,508 1,032,820 1,287,458 20
(2,222,102) (1,639,050)
42,819,257 493,401 40,248,162 26,374,614 3,223,796 27,248,479 12,999,683
(3,064,496) (2,349,931)
17.2 Intangibles
Carrying
At the Additions At the end At the For the At the end value at
beginning of the year beginning year of the year December 31
of the year of the year
(%)
Computer software (note 17.2.1) 13,841,108 - 13,841,108 13,802,114 38,994 13,841,108 - 33.33%
17.2.1 It include fully amortised asset having cost of Rs. 13,841,108 (2013: Rs. 13,758,575).
17.2.2 Intangibles (for comparative period)
Carrying
At the Additions At the end At the For the At the end value at
beginning of the year beginning year / of the year December 31
of the year of the year
(%)
Computer software 13,758,575 82,533 13,841,108 13,722,136 79,978 13,802,114 38,994 33.33
Cost Accumulated depreciation
2014
Cost Accumulated depreciation
-------------------------------------------------------------- (Rupees) --------------------------------------------------------------
2013
Cost Accumulated amortization
------------------------------------------------------------------------ (Rupees) ------------------------------------------------------------------------
-------------------------------------------------------------- (Rupees) --------------------------------------------------------------
2014
Cost Accumulated amortization
-------------------------------------------------------------- (Rupees) --------------------------------------------------------------
2013
Annual
rate of
amortization
Annual
rate of
amortization
2014 2013
Note
18. DIRECT EXPENSES - PTF
Tracker fees 21,179,028 20,421,404
Inspection fees 109,900 23,250
Doubtful debts - 3,215,355
Others 311,809 207,662
21,600,737 23,867,671
19. OTHER INCOME - PTF
Income from non - financial assets
Exchange gain on Retakaful foreign transaction - 158,890
Others 42,832 29,935
42,832 188,825
20. MANAGEMENT EXPENSES - SHF
Salaries, wages and benefits 20.1 32,748,676 31,581,515
Rent, rates and taxes 3,859,481 3,631,298
Utilities 1,181,042 1,012,183
Communications 885,762 862,847
Printing and stationery 1,190,097 887,529
Travelling and entertainment 828,901 813,962
Repairs and maintenance 879,032 884,612
Vehicles running and maintenance 1,023,039 766,368
Advertisement and promotions 647,925 238,231
Ijarah rentals 878,682 146,076
Fees and subscription 1,233,401 604,310
Other expenses 504,528 644,700
45,860,566 42,073,631
20.1
2014 2013
Note
21. OTHER INCOME - SHF
Income from non - financial assets
Others 708,221 787,286
22. GENERAL AND ADMINISTRATION EXPENSES - SHF
Salaries, wages and benefits 22.1 14,035,147 13,534,935
Depreciation 17.1 3,426,903 3,223,796
Amortization of intangibles 17.2 38,994 79,978
Shariah board honorarium 2,115,768 2,028,000
Legal and professional 2,371,802 2,334,650
Rent, rates and taxes 1,654,063 1,556,270
Utilities 506,161 433,793
Communications 379,612 369,791
Printing and stationery 510,041 380,370
Travelling and entertainment 355,243 348,841
Repairs and maintenance 376,728 379,120
Vehicles running and maintenance 438,446 328,444
Advertisement and promotions 277,682 102,099
Ijarah rentals 376,578 62,604
Fees and subscription 528,601 258,990
Takaful expense 437,718 319,321
Auditors' remuneration 22.2 655,192 578,955
Bank charges 7,792 11,934
Doubtful debts - Wakala fee - 1,341,590
Other expenses 216,226 276,300
28,708,697 27,949,781
These include Rs. 1,395,316 (2013: Rs.1,126,514) in respect of employees provident fund and Rs. 719,562 (2013: Rs. 509,167) for retirement gratuity.
(Rupees)
(Rupees)
22.1
2014 2013
Note
22.2 Auditors' remuneration
Audit fee 280,000 250,000
Half yearly review fee 120,000 100,000
Other certification 100,000 100,000
Out of pocket expenses 155,192 128,955
655,192 578,955
23. TAXATION
Current - for the year 23.1 2,338,235 2,230,542
23.1
23.2
The break-up of
unused business tax
Tax Year
Normal
business loss
Year of expiry of
normal business
loss
(Rupees)
2014 28,374,160 2020
2012 4,746,398 2018
33,120,558
24. EARNINGS PER SHARE - Basic and diluted
2014 2013
--------------(Rupees)-------------
Profit for the year
after taxation 8,632,017 15,527,365
(Number of shares)
Weighted average number of shares outstanding during the year 30,000,000 30,000,000
Earnings per share 0.29 0.52
25. REMUNERATION OF CHIEF EXECUTIVE OFFICER AND OTHER EXECUTIVES
2014 2013 2014 2013 2014 2013
Note
Managerial remuneration 2,322,577 4,780,644 10,137,627 7,267,455 12,460,204 12,048,099
Retirement benefits 425,808 - 1,922,632 1,173,814 2,348,440 1,173,814
House rent 1,045,164 261,291 4,561,921 3,110,524 5,607,085 3,371,815
Utilities 232,260 58,065 1,013,764 691,245 1,246,024 749,310
Medical expenses 102,000 - 421,217 228,000 523,217 228,000
Others 252,000 48,000 4,348,814 2,053,267 4,600,814 2,101,267
4,379,809 5,148,000 22,405,975 14,524,305 26,785,784 19,672,305
Number of persons 25.1 1 2 14 8 15 10
25.1
As a matter of prudence the Company has not recognised deferred tax asset amounting to Rs. 40,157,895 as at December 31, 2014 on net deductible
temporary differences aggregating to Rs. 114,736,844 as at December 31, 2014 . The net deductible temporary difference includes unused tax losses and
tax depreciation/amortization amounting to Rs. 33,120,558 and Rs. 47,307,267 respectively.
Executives Total
Earning per share is calculated by dividing the Earning / loss for the year by the weighted average number of shares outstanding during the year:
--------------------------------------------------------------------(Rupees)--------------------------------------------------------------------
The Chief Executive Officer and some other executives are provided with free use of Company maintained cars in accordance with their entitlements.
These include Rs. 597,993 (2013: Rs. 482,792) in respect of employee provident fund and Rs. 308,383 (2013: Rs. 218,214) retirement gratuity.
The relationship between tax expense and accounting profit has not been presented in these financial statements as the income of the Company is subject to
tax under section 113 and section 149 of Income Tax Ordinance, 2001.
Chief Executive Officer
(Rupees)
26. SEGMENT REPORTING
2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013
SEGMENT ASSETS
Segment assets 57,426,107 47,837,480 13,315,025 17,793,473 103,595,149 63,059,052 31,934,008 17,991,532 2,871,594 3,129,461 209,141,883 149,810,998
Unallocated corporate assets 368,033,911 369,342,030
Consolidated total assets 577,175,794 519,153,028
SEGMENT LIABILITIES
Segment liabilities 86,271,094 81,232,467 34,009,348 34,963,435 214,563,860 159,350,006 65,645,361 47,451,382 5,353,412 8,853,256 405,843,075 331,850,546
Unallocated corporate liabilities 19,421,549 25,258,492
Consolidated total liabilities 425,264,624 357,109,038
-------------------------------------------------------------------------------------------------------------------------------------------(Rupees)-------------------------------------------------------------------------------------------------------------------------------------------
Class of business wise revenue and results have been disclosed in the profit and loss account prepared in accordance with the requirement of Insurance Ordinance, 2000, SEC (Insurance) Rules, 2002 and Takaful Rules 2012. The
following table presents information regarding segment assets and liabilities as at December 31, 2014 and December 31, 2013:
Fire and property damage Marine, aviation and transport Motor Health Miscellaneous Total
27. RELATED PARTY TRANSACTIONS AND BALANCES
Transactions with related parties during the year and comparatives are as follows:
2014 2013
Status
Contribution written
House Building Finance Company Limited Associate 9,395,977 9,762,593
Al Baraka Bank (Pakistan) Limited Associate 4,702,006 5,447,018
Sitara Chemical Industries Limited Associate 666,617 841,002
Contribution received
House Building Finance Company Limited Associate 10,195,667 8,962,903
Al Baraka Bank (Pakistan) Limited Associate 4,295,853 4,812,563
Sitara Chemical Industries Limited Associate 666,617 2,369,612
Contribution receivable
House Building Finance Company Limited Associate - 799,690
Al Baraka Bank (Pakistan) Limited Associate 1,547,471 1,141,318
Sitara Chemical Industries Limited Associate 202,045 202,045
Claims incurred / (Reversed)
House Building Finance Company Limited Associate 89,816 211,379
Al Baraka Bank (Pakistan) Limited Associate 2,573,549 865,305
Sitara Chemical Industries Limited Associate (23,413) (4,394,804)
Sitara Peroxide Limited Associate 35,523 -
Claims paid
House Building Finance Company Limited Associate 21,195 40,000
Al Baraka Bank (Pakistan) Limited Associate 839,240 3,041,795
Sitara Chemical Industries Limited Associate 8,703 2,592,060
Claims outstanding
House Building Finance Company Limited Associate 240,000 171,379
Al Baraka Bank (Pakistan) Limited Associate 4,936,819 3,202,510
Sitara Chemical Industries Limited Associate 558,199 590,315
Sitara Peroxide Limited Associate 35,523 -
Gratuity asset / (liability)
Balance at beginning of the year (323,885) 103,126
Charge for the year (3,566,833) (427,011)
Paid during the year 1,500,000 -
Balance at end of the year (2,390,718) (323,885)
Provident fund asset / (liability)
Balance at beginning of the year - -
Charge for the year (1,993,309) (1,609,306)
Payments / contribution made during the year 1,993,309 1,609,306
Balance at end of the year - -
Other transactions / balances
Deposit maturing within 12 months placed with
Al Baraka Bank (Pakistan) Limited Associate
Balance at beginning of the year 75,000,000 50,000,000
Placed during the year 60,000,000 150,000,000
Encashed during the year (135,000,000) (125,000,000)
Balance at end of the year - 75,000,000
PLS savings account with Al Baraka Bank (Pakistan) Limited Associate 984,056 227,978
Related parties comprise related group companies, directors of the Company and group, major share holders, key management personnel and
employees' retirement benefit funds. Transactions with related parties are entered into at rates negotiated with them. Transactions with key
management personnel are entered as per their terms of appointment and disclosed in note 25. The transactions and balances with related parties,
other than those disclosed elsewhere are summarized as follows:
----------(Rupees)----------
28. MANAGEMENT OF TAKAFUL AND FINANCIAL RISK
28.1 Takaful risk management
Takaful risk
(a) Frequency and severity of claims
-
-
The risk under any one takaful contract is the possibility that the covered event occurs and the uncertainty of the amount of
the resulting claim. By the very nature of a takaful contract, this risk is random and therefore unpredictable. The principal risk
that the Company faces under its takaful contracts is that the actual claims exceed the carrying amount of the takaful
liabilities. This could occur because the frequency or severity of claims is greater than estimated takaful events are random,
and the actual number and amount of claims will vary from year to year from the level established.
Experience shows that the larger the portfolio of similar takaful contracts, the smaller the relative variability about the
expected outcome will be. In addition, a more diversified portfolio is less likely to be affected by a change in any subset of the
portfolio. The Company has developed its takaful underwriting strategy to diversify the type of takaful risks accepted and
within each of these categories to achieve a sufficiently large population of risks to reduce the variability of the expected
outcome.
Factors that aggravate takaful risk include lack of risk diversification in terms of type and amount of risk, geographical
location and type of industry covered.
Political, environmental, economical and climatic changes give rise to more frequent and severe extreme events (for
example, fire, theft, steal, riot and strike, explosion, earthquake, atmospheric damage, hurricanes, typhoons, river
flooding, electric fluctuation, terrorism, war risk, damages occurring in inland transit, burglary, loss of cash in safe and
cash in transit, travel and personal accident, money losses, engineering losses and other events) and their consequences
(for example, subsidence claims). For certain contracts, the Company has also limited the number of claims that can be
paid in any policy year or introduced a maximum amount payable for claims in any policy year.
Takaful contracts which is divided into direct and facultative arrangements are further subdivided into five segments: fire,
marine, motor, health and miscellaneous. The takaful risk arising from these contracts is concentrated in the territories in
which the Company operates, and there is a balance between commercial and personal properties / assets in the overall
portfolio of covered properties / assets. The Company underwrites takaful contracts in Pakistan.
The Company manages these risks through its underwriting strategy, adequate re-takaful arrangements and proactive
claims handling.
The underwriting strategy attempts to ensure that the underwritten risks are well diversified in terms of type and
amount of risk, industry and geography. The Company has the right to re-price the risk on renewal. It also has the
ability to impose deductibles and reject fraudulent claims. Takaful contracts also entitle the Company to pursue third
parties for payment of some or all costs (for example, subrogation). The claims payments are limited to the extent of
sum covered on occurrence of the covered event.
The company has entered into re-takaful cover / arrangements, with local and foreign re-takaful operators having
good credit rating by reputable rating agencies, to reduce its exposure to risks and resulting claims. Keeping in view
the maximum exposure in respect of key zone aggregates, a number of proportional and non-proportional facultative
re-takaful arrangements are in place to protect the net account in case of a major catastrophe. The effect of such re-
takaful arrangements is that the Company recovers the share of claims from re-takaful companies thereby reducing its
exposure to risk. Apart from the adequate event limit which is a multiple of the treaty capacity or the primary
recovery from the proportional re-takaful arrangements, any loss over and above the said limit would be recovered
under non-proportional treaty which is very much in line with the risk management philosophy of the Company.
In compliance of the regulatory requirement, the re-takaful agreements are duly submitted with Securities and
Exchange Commission of Pakistan (SECP) on an annual basis.
-
(b) Sources of uncertainty in the estimation of future claim payments
Assumed net
loss ratio
Assumed net
loss ratio
Class 2014 2013
% %
Fire and property damage 56.25 21.40
Marine, aviation and transport 4.12 37.94
Motor 40.26 48.42
Health 98.70 117.48
Miscellaneous (3.32) 252.91
(c) Process used to decide on assumptions
The estimated cost of claims includes direct expenses to be incurred in settling claims, net of the expected subrogation
value, re-takaful and other recoveries. The Company takes all reasonable steps to ensure that it has appropriate
information regarding its claims exposures. However, given the uncertainty in establishing claims provisions, it is likely
that the final outcome may be different from the original liability established. The liability comprises amount in relations
to unpaid reported claims, claims incurred but not reported (IBNR), expected claims settlement costs and a provision for
unexpired risks at the end of the reporting period.
The Company has claim department dealing with the mitigation of risks surrounding claims incurred whether
reported or not. This department investigates and settles all claims based on surveyor's report / assessment. The
unsettled claims are reviewed individually at least semi-annually and adjusted to reflect the latest information on the
underlying facts, contractual terms and conditions, and other factors. The Company actively manages and pursues
early settlements of claims to reduce its exposure to unpredictable developments.
Claims reported and otherwise are analysed separately. The development of large losses / catastrophes is analysed
separately. The shorter settlement period for claims allows the Company to achieve a higher degree of certainty about the
estimated cost of claims including IBNR. However, the longer time needed to assess the emergence of a subsidence claim
makes the estimation process more uncertain for these claims.
Liability in respect of outstanding claims is based on the best estimate of the claims intimated or assessed. In calculating
the estimated cost of unpaid claims (both reported and not), the Company estimation techniques are a combination of loss-
ratio-based estimates (where the loss ratio is defined as the ratio between the ultimate cost of takaful claims and takaful
contribution earned in prior financial years in relation to such claims) and an estimate based upon actual claims
experience using predetermined basis where greater weight is given to actual claims experience as time passes.
In estimating the liability for the cost of reported claims not yet paid, the Company considers any information available
from surveyor's assessment and information on the cost of settling claims with similar characteristics in previous periods.
Claims are assessed on a case-by-case basis separately.
The principal assumption underlying the liability estimation of IBNR and Contribution Deficiency Reserves is that the
company's future claim development will follow similar historical pattern for occurrence and reporting. The management
uses qualitative judgement to assess the extent to which past occurrence and reporting pattern will not apply in future.
The judgement includes external factors e.g. treatment of one-off occurrence claims, changes in market factors, economic
conditions etc. The internal factors such as portfolio mix, policy conditions, and claims handling procedures are further
used in this regard.
The assumed net of retakaful loss ratios for each class of business is as follows:
The risks associated with takaful contracts are complex and subject to a number of variables that complicate quantitative
sensitivity analysis. This exposure is geographically concentrated in Pakistan only.
(d) Changes in assumptions
(e) Sensitivity analysis
2014 2013 2014 2013
10% increase in deficit
Fire and property damage (586,268) (276,856) (586,268) (276,856)
Marine, aviation and transport (20,924) (231,461) (20,924) (231,461)
Motor (4,393,289) (4,930,776) (4,393,289) (4,930,776)
Health (4,398,806) (4,634,285) (4,398,806) (4,634,285)
Miscellaneous 667 (105,400) 667 (105,400)
(9,398,619) (10,178,778) (9,398,619) (10,178,778)
10% decrease in deficit
Fire and property damage 586,268 276,856 586,268 276,856
Marine, aviation and transport 20,924 231,461 20,924 231,461
Motor 4,393,289 4,930,776 4,393,289 4,930,776
Health 4,398,806 4,634,285 4,398,806 4,634,285
Miscellaneous (667) 105,400 (667) 105,400
9,398,619 10,178,778 9,398,619 10,178,778
Concentration of takaful risk
As the Company enters into short term takaful contracts, it does not assume any significant impact of changes in market conditions on unexpired risks.
However, results of sensitivity testing assuming 10% change in the claim incidence net of recoveries showing effect on underwriting results and balance of waqf
fund is set out below:
The Company uses assumptions based on a mixture of internal and market data to measure its related claims liabilities. Internal data is derived mostly
from the Company’s monthly claims reports, surveyor's report for particular claim and screening of the actual takaful contracts carried out to derive data
for the contracts held. The Company has reviewed the individual contracts and in particular the industries in which the participant companies operate and
the actual exposure years of claims. This information is used to develop related provision for outstanding claims (both reported and non-reported).
The choice of selected results for each accident year of each class of business depends on an assessment of the technique that has been most appropriate to
observe historical developments. Through this analysis, the Company determines the need for an IBNR or an unexpired risk liability to be held at each
reporting date.
The Company has not changed its assumptions for the takaful contracts as disclosed in above (b) and (c).
The analysis of exposure described in paragraph (c) above is also used to test the sensitivity of the selected assumptions to changes in the key underlying
factors. Assumptions of different levels have been used to assess the relative severity of subsidence claims given past experience. The key material factor
in the Company’s exposure to subsidence claims is the risk of more permanent changes in geographical location in which Company is exposed.
The risks associated with the takaful contracts are complex and subject to a number of variables which complicate quantitative sensitivity analysis. The
Company makes various assumptions and techniques based on past claims development experience. This includes indications such as average claims cost,
ultimate claims numbers and expected loss ratios. The Company considers that the liability for takaful claims recognised in the balance sheet is adequate.
However, actual experience may differ from the expected outcome.
Underwriting results Balance of Waqf
--------------------------------------- (Rupees) ---------------------------------------
A concentration of risk may also arise from a single takaful contract issued to a particular type of participant, within a geographical location or to a particular
types of commercial business. In order to minimise the financial exposure arising from large claims, the Company, in the normal course of business, enters into
agreement with other re-takaful operators, who are dispersed over several geographical regions.
The maximum class wise risk exposure (in a single policy) is as follows:
2014 2013 2014 2013 2014 2013
Fire and property and damage 700,000,000 650,000,000 698,000,000 648,000,000 2,000,000 2,000,000
Marine, aviation and transport 73,645,000 185,631,000 71,645,000 183,631,000 2,000,000 2,000,000
Motor 7,040,000 5,748,500 6,540,000 5,248,500 500,000 500,000
Health 700,000 700,000 - - 700,000 700,000
Miscellaneous 1,920,000 1,440,000 1,470,000 990,000 450,000 450,000
783,305,000 843,519,500 777,655,000 837,869,500 5,650,000 5,650,000
Claims development table
Analysis on gross basis
Accident year 2010 2011 2012 2013 2014 Total
and before
Estimate of ultimate claims cost:
At the end of accident year 215,199,827 46,790,720 50,824,208 57,227,095 59,518,960 429,560,810
One year later 41,887,118 9,427,975 7,362,069 19,559,603 - 78,236,765
Two years later 17,855,646 8,446,606 5,704,009 - - 32,006,261
Three years later 13,449,335 5,058,470 - - - 18,507,805
Four years later 17,322,001 - - - - 17,322,001
Estimate of cumulative claims 414,862,871 99,530,878 107,566,184 141,294,778 174,060,558 937,315,269
Cumulative payments to date (404,726,174) (94,472,408) (101,862,175) (121,735,175) (115,141,682) (837,937,614)
Liability recognised in the balance sheet 10,136,697 5,058,470 5,704,009 19,559,603 58,918,876 99,377,655
The following table shows the development of claims over a period of time on gross basis. The disclosure goes back to the period when the earliest material
claim arose for which there is still uncertainty about the amount and timing of the claims payments. For each class of business, the uncertainty about the amount
and timings of claims payment is usually resolved within a year. Further, claims with significant uncertainties are not outstanding as at December 31, 2014.
-------------------------------------------------- (Rupees) -----------------------------------------------------
Gross sum insured Re-takaful Net
------------------------------------------------------(Rupees )--------------------------------------------------------
28.2 FINANCIAL RISK MANAGEMENT
28.3 Risk management framework
28.4 Credit risk
Exposure to credit risk
The Company structures the levels of credit risk it accepts by placing limits on its exposure to a single counter party, or
groups of counterparties, and to geographical and industry segments. Such risks are subject to an annual or more frequent
review. Limits on the level of credit risk by category and territory are approved regularly by the Board of Directors.
Re-takaful is used to manage takaful risk. This does not, however, discharge the Company’s liability as primary takaful
operator. If a Re-takaful operator fails to pay a claim for any reason, the Company remains liable for the payment to the
participant. The creditworthiness of Re-takaful operators is considered on an annual basis by reviewing their financial
strength prior to finalisation of any contract.
Exposures to individual participants and groups of participants are collected within the ongoing monitoring of the controls
associated with regulatory solvency. Where there exists significant exposure to individual participants, or homogenous
groups of participants, a financial analysis equivalent to that conducted for Re-takaful operators is carried out by the
Company's risk department.
The Company's activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (including
currency risk, interest rate risk and price risk). The Company's overall risk management policy focuses on the
unpredictability of financial markets and seeks to minimize potential adverse effects on the Company's financial
performance. In particular, the key financial risk is that in the long-term its investment proceeds are not sufficient to fund the
obligations arising from its takaful and investment contracts.
The Board of Directors has overall responsibility for establishment and oversight of the Company's risk management
framework. The Board is responsible for developing and monitoring the Company’s risk management policies.
The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set
appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are
reviewed regularly to reflect changes in market conditions and the Company’s activities. The Company, through its training
and management standards and procedures, aims to develop a disciplined and constructive control environment in which all
employees understand their roles and obligations.
The audit committee oversees compliance by management with the Company’s risk management policies and procedures,
and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Audit
Committee is assisted in its oversight role by an outsourced Internal Audit function. Internal Audit undertakes both regular
and adhoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.
Credit risk is the risk, which arises with the possibility that one party to a financial instrument will fail to discharge its
obligation and cause the other party to incur a financial loss. The Company attempts to control credit risk by monitoring
credit exposures by undertaking transactions with a large number of counterparties in various industries and by continually
assessing the creditworthiness of counterparties.
The carrying amount of financial assets represents the maximum credit exposure, as specified below:
2014 2013
Note
Financial assets
Held to maturity
GoP Ijarah Sukuks 10,000,000 10,000,000
Other sukuks 15,517,243 24,671,478
25,517,243 34,671,478
Available-for-sale
Quoted - units of Islamic Fund 10,007,878 4,315,504
Other financial assets at amortised cost
Bank deposits 286,875,349 281,530,749
Long term deposits 1,523,034 1,523,034
Contributions due but unpaid 37,698,199 25,399,919
Amounts due from other takaful / re-takaful companies 2,326,333 3,161,300
Accrued investment income 11,409,556 6,003,201
Re-takaful recoveries against outstanding claims 27,002,169 21,558,596
Wakala fee receivable and other account balances 49,799,258 41,617,851
Mudarib fee receivable 1,841,660 438,616
Sundry receivables 1,251,613 1,222,557
419,727,171 382,455,823
455,252,292 421,442,805
Financial assets
Secured 28.4.1 37,002,169 31,558,596
Unsecured 418,250,123 389,884,209
455,252,292 421,442,805
Not past due 388,225,591 362,229,084
Past due 28.4.1 67,026,701 59,213,721
455,252,292 421,442,805
The age analysis of financial assets is as follows:
Gross value Impairment Carrying value Gross value Carrying value
Not past due 388,225,591 - 388,225,591 369,728,146 (7,499,062) 362,229,084
Past due
Upto 1 year 49,260,993 - 49,260,993 37,359,713 - 37,359,713
1-2 years 20,072,949 (7,726,127) 12,346,822 5,796,473 (4,556,945) 1,239,528
Over 2 years 30,300,962 (24,882,076) 5,418,886 33,667,613 (13,053,133) 20,614,480
Total 487,860,495 (32,608,203) 455,252,292 446,551,945 (25,109,140) 421,442,805
28.4.1
(Rupees)
2014 2013
It includes Government of Pakistan Ijarah sukuks amounting to Rs. 10,000,000 and retakaful recoveries against outstanding
claims amounting to Rs. 27,002,169 which are past due but not impaired and are secured against amount due to re-takaful
companies.
Impairment
-----------------------------------------------------------(Rupees)------------------------------------------------------------------
Rating 2014 2013
Short term Long term Agency
Al Baraka Bank (Pakistan) Limited A-1 A JCR-VIS 984,056 75,227,978
Askari Bank Limited ( Islamic Banking) A1+ AA PACRA 9,184 9,184
Bank AlFalah Limited (Islamic Banking) A1+ AA PACRA 1,427,811 4,117,402
Bank Islami Pakistan Limited A1 A PACRA 25,010,416 24,967,571
Burj Bank Pakistan Limited A-1 A JCR-VIS 69,882 5,040,326
Dubai Islamic Bank Limited A-1 A+ JCR-VIS 106,628,932 34,552
Faysal Bank Limited (Islamic Banking) A1+ AA PACRA 35,079,841 25,035,275
Habib Bank Limited (Islamic Banking) A-1+ AAA JCR-VIS 55,005,965 48,006,166
Habib Metropolitan Bank (Islamic Banking) A1+ AA+ PACRA 1,326,180 711,716
Meezan Bank Limited A-1+ AA JCR-VIS 60,316,388 27,919,709
National Bank of Pakistan (Islamic Banking) A-1+ AAA JCR-VIS 11,188 10,218
The Bank of Khyber (Islamic Banking) A-1 A JCR-VIS 924,733 10,395,707
UBL Ameen A-1+ AA+ JCR-VIS 80,773 60,054,945
286,875,349 281,530,749
28.5 Concentration of credit risk
Industry
(Rupees) % (Rupees) %
Textiles 19,974,326 37.6% 12,346,737 29.7%
Banks 17,329,370 32.6% 17,958,744 43.2%
Automobiles 261,136 0.5% 99,539 0.2%
Cement 243,493 0.4% 62,077 0.1%
Chemical and fertilizer 1,817,111 3.4% 2,169,434 5.2%
Distribution 688,190 1.3% 91,277 0.2%
Education 1,261,441 2.4% (1,092,136) -2.6%
NGOs 2,008,307 3.8% 1,053,648 2.5%
Petroleum 250,128 0.5% 346,829 0.8%
Food and allied 469,814 0.9% 768,932 1.8%
Leather 746,349 1.4% 590,629 1.4%
Engineering 2,160,063 4.1% 299,194 0.7%
Housing 251,178 0.5% 927,150 2.2%
Pharmaceuticals 880,491 1.6% 192,819 0.5%
Takaful 68,980 0.1% 988,735 2.4%
NBFIs 140,888 0.3% 1,519,989 3.7%
Individual 1,019,357 1.9% 1,106,725 2.7%
Paper 387,602 0.7% 261,998 0.6%
IT Industry 300,420 0.6% 15,739 0.0%
Oil mills 1,198,077 2.3% 238,012 0.6%
Others 1,667,117 3.1% 1,714,454 4.1%
53,123,838 100% 41,660,525 100%
Concentration of credit risk occurs when a number of counterparties have a similar type of business activities. As a result, any change in economic,
political or other conditions would effect their ability to meet contractual obligations in similar manner. Sector-wise analysis of gross "contribution due
but unpaid" and "amount due from other takaful companies" at the reporting date is as follows:
2014
The credit quality of the Company's bank balances and deposits can be assessed with reference to external credit ratings as follows:
Rating
(Rupees)
The Company has made investment in GoP Ijarah Sukuk certificates, other sukuk certificates and units of Islamic fund. GoP Ijarah Sukuk certificates
are government guaranteed, for credit rating of other Sukuk Certificates, refer note 10 to the financial statements.
2013
The management monitors exposure to credit risk through regular review of credit exposure, assessing creditworthiness of counterparties and prudent
estimates of provision for doubtful debts.
28.5.1 The age analysis of "contributions due but unpaid" at the reporting date is as follows:
Note Gross Impairment Gross Impairment
Upto 1 year 28.5.2 37,698,199 - 25,399,919 -
1-2 years 711,649 711,649 711,649 711,649
Over 2 years 7,719,779 7,719,779 7,719,779 7,719,779
Total 46,129,627 8,431,428 33,831,347 8,431,428
2014 2013
28.5.2 This includes following amounts due from related patries which are past due but not impaired:
Name Status
House Building Finance Company Limited Associate - 799,690
Al Baraka Bank (Pakistan) Limited Associate 1,547,471 1,141,318
Sitara Chemical Industries Limited Associate 202,045 202,045
1,749,516 2,143,053
28.5.3
Gross Impairment Gross Impairment
Upto 1 year 2,326,333 - 3,161,300 -
1-2 years 2,503,706 2,503,706 2,503,706 2,503,706
Over 2 years 2,164,172 2,164,172 2,164,172 2,164,172
Total 6,994,211 4,667,878 7,829,178 4,667,878
Amount due from other takaful companies, re-takaful recoveries against outstanding claims
Amount due from
re-takaful
companies
Re-takaful
recoveries
against
outstanding
claims
Prepaid re-takaful
contribution ceded
Total
A or above - 22,207,784 14,735,990 36,943,775
BBB or above - 4,794,385 3,683,998 8,478,382
- 27,002,169 18,419,988 45,422,157
2014 2013
In common with other takaful companies, in order to minimise the financial exposure arising from large claims, the Company, in the normal course of
business, enters into agreement with re-takaful companies.
The Company enters into re-takaful / co-takaful arrangements with re-takaful and takaful companies having sound credit ratings accorded by reputed
credit rating agencies. The Company is required to comply with the requirements of circular No. 24 / 2010 dated October 27,2010 issued by SECP
which requires a takaful operator to place at least 80% of their outward treaty cessions with re-takaful companies rated 'A' or above by Standard &
Poors or equivalent rating by any other reputed international rating agency, with the balance (20%) being placed with entities rated at least 'BBB' by
Standard & Poors or equivalent rating by any other reputed international rating agency. An analysis of all re-takaful assets relating to outward treaty
cessions recognised by the rating of the entity from which it is due is as follows:
(Rupees)
2014
------------------------------------------------(Rupees )------------------------------------------------
-----------------------------------------(Rupees)-----------------------------------------
The age analysis of "amount due from other takaful companies" at the reporting date is as follows:
2014 2013
---------------------------------------(Rupees)---------------------------------------
Re-takaful agreement does not relieve the Company from its obligation to participants and as a result the Company remains liable for the portion of
outstanding claims covered by re-takaful to the extent that re-takaful fails to meet the obligation under the re-takaful agreements.
Amount due
from re-
takaful
companies
Re-takaful
recoveries
against
outstanding
claims
Prepaid re-
takaful
contribution
ceded
Total
A or above - 4,461,537 4,465,901 8,927,438
BBB or above - 17,097,059 13,397,706 30,494,765
- 21,558,596 17,863,607 39,422,203
Gross Impairment Gross Impairment
Upto 1 year 9,236,461 - 11,959,794 -
1-2 years 12,346,822 - 1,239,528 -
Over 2 years 5,418,886 - 8,359,274 -
Total 27,002,169 - 21,558,596 -
28.6 Liquidity risk
--------------------------------------------(Rupees)--------------------------------------------
In respect of the aforementioned takaful and re-takaful assets, the Company takes into account its track record of recoveries
and financial position of the counterparties while creating provision for impairment. Further, re-takaful recoveries are made
when corresponding liabilities are settled.
Liquidity risk is the risk that the Company will encounter difficulty in meeting its financial obligations as they fall due.
Liquidity risk arises because of the possibility that the Company could be required to pay its liabilities earlier than expected
or difficulty in raising funds to meet commitments associated with financial liabilities as they fall due. The Company’s
approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to
the Company's reputation. The diversified funding sources and assets of the Company are managed with liquidity in mind,
maintaining a healthy balance of cash and cash equivalents and readily marketable securities.
2013
------------------------------------------------(Rupees )------------------------------------------------
The age analysis of "re-takaful recoveries against outstanding claims" at the reporting date is as follows:
2014 2013
Carrying
amount
Contractual
cash flows
Less than one
year
1-2 years 2-3 years 3-5 years
Financial liabilities at amortised cost
Provision for outstanding claims 91,931,551 91,931,551 91,931,551 - - -
Amount due to re-takaful companies 37,418,436 37,418,436 37,418,436 - - -
Accrued expenses 1,575,777 1,575,777 1,575,777 - - -
Wakala fee payable and other account balances 54,310,030 54,310,030 54,310,030 - - -
Mudarib fee payable 1,841,660 1,841,660 1,841,660 - - -
Other creditors and accruals 21,061,232 21,061,232 21,061,232 - - -
208,138,686 208,138,686 208,138,686 - - -
Carrying
amount
Contractual
cash flows
Less than one
year
1-2 years 2-3 years 3-5 years
Financial liabilities at amortised cost
Provision for outstanding claims 83,998,771 83,998,771 83,998,771 - - -
Amount due to Re-takaful companies 52,015,920 52,015,920 52,015,920 - - -
Accrued expenses 3,661,376 3,661,376 3,661,376 - - -
Wakala fee payable and other account balances 46,128,623 46,128,623 46,128,623 - - -
Mudarib fee payable 438,616 438,616 438,616 - - -
Other creditors and accruals 16,570,393 16,570,393 16,570,393 - - -
202,813,699 202,813,699 202,813,699 - - -
28.7 Market risk
28.8 Currency risk
28.9 Profit rate risk
At the balance sheet date, the profit rate profile of the Company’s significant halal profit-bearing financial instruments is:
Note
2014 2013 2014 2013
(Rupees)
Financial assets
Variable rate instruments
- Term deposits 8.2 251,500,000 258,000,000 8.0 - 9.97 8.05 - 9
- PLS savings accounts 8.1 33,746,782 22,847,322 3.51 - 6.92 4.26 - 7.67
- GoP Ijarah sukuk certificates 10.1 10,000,000 10,000,000 9.47 - 9.98 8.92 - 9.33
- Other sukuk certificates 10.2 30,515,368 32,170,540
Cash flow sensitivity analysis for variable rate instruments
Shareholders' Fund
The Company is exposed to cash flow profit rate risk in respect of its deposits with banks and investment in sukuk certificates. In case of 100 basis points (bp)
increase / decrease in profit rates at year end, assuming that all other variables remain constant, the net income and equity would have been higher / lower by Rs.
1,328,338 (2013: Rs. 1,090,085).
6 months KIBOR+1.5% - 2%
The table below analyses the Company's financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the maturity
date.
2014
-------------------------------------------------------------------- (Rupees) --------------------------------------------------------------------
2013
-------------------------------------------------------------------- (Rupees) --------------------------------------------------------------------
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company's income or value of
its financial instruments. The objective of market risk management is to manage and control market risk exposures with acceptable parameters, while optimising
the return. The Company is exposed to currency risk, interest rate risk and other price risk.
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Currency
risk arises mainly where receivables and payables exist due to transactions based on currencies other than Pak Rupees. The Company is not exposed to currency
risk as there are no assets or liabilities recoverable/repayable in foreign currencies.
Profit rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market halal profit rates. Majority of
the profit rate exposure arises from balances held in profit and loss sharing accounts and term deposits with reputable banks.
Gross Carrying amount Effective halal profit rate
(in Percent)
Participant's Takaful Fund
Cash flow sensitivity analysis for fixed rate instruments
28.10 Other price risk
2014 2013
Effect on 5 percent increase / decrease
in market value of mutual fund units
Investment in Islamic Funds 583,720 261,108
Investment in Islamic Funds 10,007,878 4,315,504
The Company is exposed to cash flow profit rate risk in respect of its deposits with banks. In case 100 basis points (bp)
increase / decrease in profit rates at year end, assuming that all other variables remain constant, the net income and balance
of Waqf would have been higher / lower by Rs. 1,821,427 (2013: Rs. 1,547,879).
The Company does not have any fixed rate financial assets and liabilities at fair value through profit or loss, therefore a
change in interest rates at the reporting date would not affect profit or loss.
The sensitivity analysis prepared is not necessarily indicative of the effects on loss for the year and assets / liabilities of the
Company.
Other price risk is the risk of changes in the fair value of securities as the result of changes in the levels of net asset value of
units listed on Islamabad Stock Exchange held by the Company. The equity price risk exposure arises from the investment in
equity securities. This arises from investments held by the Company for which prices in the future are uncertain.
The Company manages equity price risk by limiting exposure to equity securities to 50% of the equity. The limit set for
exposure to any single investee company is 10% of the equity with overall limit to 25% to a single industrial sector. The
Company also manages price risk by continuously reviewing portfolio allocation and monitoring developments in market. A
summary analysis of investments is disclosed in note 10.3 to these financial statements.
The table below summarises the sensitivity of listed mutual fund units held by the Company as at year end. The analysis is
based on the assumption that market price increase / decrease by 5% (2013: 5%) with all other variables held constant. This
represents management's best estimate of a reasonable possible shift in the market value of listed equity securities held by the
Company.
(Rupees)
The sensitivity analysis presented is based upon the portfolio position as at year end. Accordingly, the sensitivity analysis is
not necessarily indicative of the effect on the Company's assets of future movements in the market value of mutual fund units
held by the Company. The carrying values of units that are subject to other price risk are as follows:
The sensitivity change will not have an effect on the Company's reported results and financial position as these investments
are classified as available for sale and carried at lower of cost or market value. Currently, the cost of these investments is
lower by Rs. 1,666,520 to its market value of Rs. 11,674,398 as at December 31, 2014.
28.11 Mismatch of interest rate sensitive assets and liabilities / yield / interest rate risk
Effective rate %
per annum
Upto one
month
Over one
month to three
months
Over three
months to six
months
Over six months
to one year
Over one year to
five years
Over five years Sub Total Non profit
bearing
Total
Financial assets
Cash and bank deposits 3.51% - 6.92% 145,246,782 95,000,000 5,000,000 40,000,000 - - 285,246,782 2,033,477 287,280,259
Investments 9.47 % - 11.92% - 275,862 10,275,862 10,551,724 - 4,413,795 25,517,243 10,007,878 35,525,121
Contribution due but unpaid - - - - - - - 37,698,199 37,698,199
Amounts due from other
takaful companies - - - - - - - 2,326,333 2,326,333
Accrued investment income - - - - - - - 11,409,556 11,409,556
Re-takaful recoveries against
outstanding claims - - - - - - - 27,002,169 27,002,169
Wakala fee receivable - - - - - - - 49,799,258 49,799,258
Security deposit - - - - - - - 1,523,034 1,523,034
Mudarib fee receivable - - - - - - - 1,841,660 1,841,660
Sundry receivables - - - - - - - 1,251,613 1,251,613
145,246,782 95,275,862 15,275,862 50,551,724 - 4,413,795 310,764,025 144,893,177 455,657,202
Financial liabilities
Outstanding claims - - - - - - - 91,931,551 91,931,551
Amounts due to takaful /
re-takaful companies - - - - - - - 37,418,436 37,418,436
Accrued expenses - - - - - - - 1,575,777 1,575,777
Wakala fee payable - - - - - - - 54,310,030 54,310,030
Mudarib fee payable - - - - - - - 1,841,660 1,841,660
Other creditors and accruals - - - - - - - 21,061,232 21,061,232
- - - - - - - (208,138,686) (208,138,686)
Inter risk sensitivity gap 145,246,782 95,275,862 15,275,862 50,551,724 - 4,413,795 310,764,025 (63,245,509) 247,518,516
Cumulative halal profit rate
risk sensitivity gap-2014 145,246,782 240,522,644 255,798,506 306,350,230 306,350,230 310,764,025
Effective rate %
per annum
Upto one
month
Over one
month to three
months
Over three
months to six
months
Over six months
to one year
Over one year to
five years
Over five years Sub Total Non profit
bearing
Total
Financial assets
Cash and bank deposits 4.26% - 7.67% 22,847,322 128,000,000 110,000,000 20,000,000 - - 280,847,322 1,172,083 282,019,405
Investments 8.92% - 11.92% - 275,862 275,862 551,724 33,568,030 - 34,671,478 4,315,504 38,986,982
Contribution due but unpaid - - - - - - - 25,399,919 25,399,919
Amounts due from other
takaful companies - - - - - - - 3,161,300 3,161,300
Accrued investment income - - - - - - - 6,003,201 6,003,201
Re-takaful recoveries against
outstanding claims - - - - - - - 21,558,596 21,558,596
Wakala fee receivable - - - - - - - 41,617,851 41,617,851
Security deposit - - - - - - - 1,523,034 1,523,034
Mudarib fee receivable - - - - - - - 438,616 438,616
Sundry receivables - - - - - - - 1,222,557 1,222,557
22,847,322 128,275,862 110,275,862 20,551,724 33,568,030 - 315,518,800 106,412,661 421,931,461
Financial liabilities
Outstanding claims - - - - - - - 83,998,771 83,998,771
Amounts due to takaful /
re-takaful companies - - - - - - - 52,015,920 52,015,920
Accrued expenses - - - - - - - 3,661,376 3,661,376
Wakala fee payable - - - - - - - 46,128,623 46,128,623
Mudarib fee payable - - - - - - - 438,616 438,616
Other creditors and accruals - - - - - - - 15,990,454 15,990,454
- - - - - - - (202,233,760) (202,233,760)
Inter risk sensitivity gap 22,847,322 128,275,862 110,275,862 20,551,724 33,568,030 - 315,518,800 (95,821,099) 219,697,701
Cumulative halal profit rate
risk sensitivity gap-2013 22,847,322 151,123,184 261,399,046 281,950,770 315,518,800 315,518,800
----------------------------------------------------------------------------------------------------------(Rupees)----------------------------------------------------------------------------------------------------------
2014
Profit bearing
----------------------------------------------------------------------------------------------------------(Rupees)----------------------------------------------------------------------------------------------------------
2013
Profit bearing
28.12 Fair value of financial instruments
Level 1: Fair value measurements using quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2:
Level 3:
Financial assets Level 1 Level 2 Level 3 Total
Units of Islamic Funds 11,674,398 - - 11,674,398
Sukuk certificates 20,063,000 - 5,517,243 25,580,243
28.13 Operational risk
-
- requirements for the reconciliation and monitoring of transactions;
- compliance with regulatory and other legal requirements;
The table below analyses financial instruments measured at the end of the reporting period by the level in the fair value
hierarchy into which the fair value measurement is categorised:
Fair value is an amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties
in an arm’s length transaction. Consequently, differences may arise between the carrying values and the fair value estimates.
The fair values of all the financial instruments are estimated to be not significantly different from their carrying values except
for sukuk certificates and units of Islamic Funds, fair value of which have been stated in notes 10.1, 10.2 and 10.3
respectively.
The Company’s accounting policy on fair value measurements of its investments is discussed in note 4.14.3 to these financial
statements.
The Company measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in
making the measurements:
Fair value measurements using inputs other than quoted prices included within Level 1 that are observable for the
asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Fair value measurements using inputs for the asset or liability that are not based on observable market data (i.e.
unobservable inputs).
----------------------------------------- (Rupees) -----------------------------------------
Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the processes,
technology and infrastructure supporting the Company’s operations, either internally within the Company or externally at the
Company’s service providers, and from external factors other than credit, market and liquidity risks such as those arising
from legal and regulatory requirements and generally accepted standards of investment management behaviour. Operational
risks arise from all of the Company’s activities.
The Company’s objective is to manage operational risk so as to balance limiting of financial losses and damage to its
reputation with achieving its objective of generating returns for stakeholders.
The primary responsibility for the development and implementation of controls over operational risk rests with the board of
directors. This responsibility encompasses the controls in the following areas:
requirements for appropriate segregation of duties between various functions, roles and responsibilities;
- documentation of controls and procedures;
-
- ethical and business standards; and
- risk mitigation, including insurance, where this is effective.
28.14 Capital risk management
29. PROVIDENT FUND
2014 2013
Rupees Rupees
Size of the fund- net assets 9,898,205 8,724,258
Cost of investments made 10,292,613 8,673,458
Percentage of investments made 103.98% 99.42%
Fair value of investments made 10,292,613 8,673,458
Fair Value Percentage Fair Value Percentage
(Rupees) (%) (Rupees) (%)
Bank balances 1,592,613 15% 1,673,458 19%
Term deposit certificates 8,700,000 85% 7,000,000 81%
requirements for the periodic assessment of operational risks faced, and the adequacy of controls and procedures
to address the risks identified;
Senior management ensures that the Company's staff have adequate training and experience and fosters effective
communication related to operational risk management.
The Company's objective when managing capital is to safeguard the Company's ability to continue as a going
concern so that it can continue to provide returns for shareholders and benefits for other stakeholders; and to
maintain a strong capital base to support the sustained development of its businesses.
The Company manages its capital structure by monitoring return on net assets and makes adjustments to it in the
light of changes in economic conditions. In order to maintain or adjust the capital structure, the Company may
adjust the amount of dividend paid to shareholders or issue new shares. Currently, the Company has paid up capital
of Rs. 300 million which is in compliance with the minimum paid up capital requirement set by SECP for insurance
companies/ takaful operators for the year ended December 31, 2014.
The breakup of fair value of investments, based on audited financial statements of the Fund, is as
The management is of the view that the investments out of provident funds have been made in accordance with the
provision of section 227 of the Companies Ordinance, 1984 and the rules formulated for the purpose.
The Company operates approved funded contributory provident fund (the Fund) for its employees. Detail of net
assets and investments of the fund, based on their audited financial statements as at December 31, 2014, are as
follows:
2014 2013
30. NUMBER OF EMPLOYEES
31. CORRESPONDING FIGURES
Description 2013
From To Rupees
Rebate from retakaful operators Net contribution revenue 14,552,283
Unearned retakaful rebate Prepaid re-takaful
ceded (note 15) 5,512,659
32. DATE OF AUTHORISATION
33. GENERAL
Figures have been rounded off to nearest Rupee unless otherwise mentioned.
These financial statements have been authorised for issue in accordance with a resolution of the Board of Directors
on
The average number of employees for the year ended December 31, 2014 were 65 (2013: 61) and number of
employees as at December 31, 2014 were 68 (2013: 66).
Reclassified
Corresponding figures have been rearranged and reclassified, wherever necessary, for the purposes of comparison
and to reflect the substance of the transactions. No significant rearrangements or reclassifications were made in
these financial statements except the following:
Unearned retakaful rebate
(Underwriting provisions)
The above reclassifications have been made to show separately retakaful rebate which is earned from retakaful
operators. Previously, retakaful expense (being deduction from contribution income) and prepaid retakaful ceded
were recorded net of related retakaful rebate income and unearned retakaful rebate, which now have been shown
separately in the profit and loss account and balance sheet respectively.
Rebate from retakaful operators
earned
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