ADDING VALUE THROUGH BEST PRACTICES€¦ · Tameer Microﬁnance Bank Limited The Bank of Punjab United Bank Limited ... in 2006 and the main objective is to provide maximum beneﬁts

ADDING VALUE THROUGH BEST PRACTICES

Our comprehension of the maturity of Insurance Industry leads us to be the provider of services that adds value through best practices. At Adamjee Insurance, we believe in continuous evaluation, so as to evolve through amalgamation of various practices into the best set of practices in the industry. This unique blend, which is our statement of best practices comprises solid foundations, matrix and commercial values, creative philanthropy, measuring processes, benchmarking and consistently raising the bar.

CONTENTS

0102030507091213

3642434647

109

Financial Highlights

Statement of Value Addition

Vision / Our Core Values

Company Information

Management Team

CEO Message

Company Profile

Quality Policy

Notice of AnnualGeneral Meeting

Directors’ report onunconsolidated

financial statements

1719 Corporate Social

Responsibility Review

21 Events

24 Ten Years at a Glance

Proxy Form

Review Report to themembers on statement of

compliance

Statement of the Compliancewith the Code of Corporate

Governance

110111185

Auditors’s Report to the members on Unconsolidated

Financial Statements

Auditors’s Report to the members on Consolidated


Pattern of the share holding

ConsolidatedFinancial Statements

Director Report on Consolidated


UnconsolidatedFinancial Statements

CATEGORIES OF SHAREHOLDERSAND FINANCIAL HIGHLIGHTS

Directors Chief Executive Officer Executives/ executives' spouses Associated companies, undertakings & related parties Banks, DFIs and NBFls Public sector companies and corporations Insurance companies Modaraba and mutual funds General publicOthers

CATEGORIES OF SHAREHOLDERS

Change

(%)

FINANCIAL ASSETSTotal assetsTotal equityGross premium underwrittenUnderwriting resultInvestment incomeProfit after tax

OPERATING PERFORMANCEUnderwriting results to net premiumProfit after tax/ net premiumInvestment income to net premiumTotal expenses/ net premiumCombined ratio

Directors

Chief Executive Officer

Executives/ executives’ spouses

Associated companies, undertakings &related parties

Banks, DFIs and NBFIs

Public sector companies and corporations

Insurance companies

Modaraba and mutual funds

General public

Others

27,88711,00011,564

246779484

4%8%

11%28%96%

24,08210,90111,064

529852132

8%2%

12%40%92%

(13.64)(0.90)(4.32)

115.149.40

(72.70)

0.1930.0020.098

32.3165.0040.0835.2960.764

37.05519.189

100.000

Stake (%)

239,0532,500

121,78239,975,8206,190,047

102,4336,552,066

944,68245,838,40623,737,754

123,704,543

Number of Shares

2011 2010

(Rupees in Million)

01

STATEMENT OF VALUE ADDITION

WEALTH GENERATED

STATEMENT OF VALUE ADDITION AND ITS DISTRIBUTION

2011

(Rupees In ‘000’) %

(Rupees In ‘000’) %

2010

WEALTH GENERATED

Gross premium earnedInvestment and other income Management and other expenses

WEALTH DISTRIBUTED To employees To government

To shareholders Cash dividend Bonus shares

Retained in business Depreciation and amortization Retained profit / loss

2011 2010

To shareholders

Retained in business

11,753,4011,009,590

12,762,991(11,709,639)

1,053,352

895,298(174,145)

721,153

309,262-

309,262

200,022(177,085)

22,937

1,053,352

10,952,551951,376

11,903,927(10,182,949)

1,720,978

946,69157,682

1,004,373

292,393112,459404,852

197,689114,064311,753

1,720,978

100.00

85.00(16.53)

68.47

29.36-

29.36

18.99(16.81)

2.18

100.00

100.00

55.013.35

58.36

16.996.53

23.52

11.496.63

18.12

100.00

69%

29%

2%

58%

24%

18%

To employees and governmentTo shareholders

Retained in business

To employees and government

02

OUR VISION

VISION

CORE VALUES

Our will is to Explore, Innovate and Differentiate. Our passion is to provide leadership to the insurance industry.

04

COMPANY INFORMATION

BOARD OF DIRECTORSUmer Mansha ChairmanAhmed Ebrahim Hasham DirectorAli Munir DirectorFredrik De Beer DirectorKamran Rasool DirectorIbrahim Shamsi DirectorKhalid Qadeer Qureshi DirectorMuhammad Usman Ali Usmani DirectorMuhammad Umar Virk DirectorS. M. Jawed DirectorManzar Mushtaq Managing Director & CEO

ADVISORMian Mohammad Mansha

AUDIT COMMITTEEUmer Mansha ChairmanAhmed Ebrahim Hasham MemberAli Munir MemberIbrahim Shamsi MemberS. M. Jawed Member

HUMAN RESOURCE COMMITTEEUmer Mansha ChairmanIbrahim Shamsi MemberManzar Mushtaq Member

RISK MANAGEMENT COMMITTEES. M. Jawed ChairmanAli Munir MemberUmer Mansha Member

STRATEGIC COMMITTEEUmer Mansha ChairmanS. M. Jawed MemberManzar Mushtaq Member

05

SECRETARYTameez-ul-Haque,F.C.A.

CHIEF FINANCIAL OFFICERRehan Ahmad Khan,F.C.A., A.C.M.A.

Executive Management TeamManzar Mushtaq Managing Director & CEOJehangir Bashir Nawaz Executive DirectorRehan Ahmad Khan Chief Financial OfficerAsif Jabbar General Manager SalesAdnan Ahmed Chaudhry General Manager OperationsMuhammad Salim Iqbal General Manager TechnicalTameez-ul-Haque Company Secretary

AUDITORSM/s. Riaz Ahmad & Co.Chartered Accountants, Karachi

SHARES REGISTRARTechnology Trade (Pvt.) LimitedDagia House, 241-C, Block-2, P.E.C.H.S.,Off Shahrah-e-Quaideen, KarachiPhone: (92-21) 34391316-7, 34387960-1Fax: (92-21) 34391318

REGISTERED OFFICE1st Floor, ISE Towers,55-B, Jinnah Avenue,Blue Area, Islamabad.

BANKERSAskari Bank LimitedBank Alfalah LimitedBank Al-Habib LimitedBarclays Bank PLC, PakistanCitibank N.A.Habib Bank LimitedHSBC Middle East Bank LimitedKASHF Microfinance Bank LimitedMCB Bank LimitedNational Bank of PakistanNIB Bank LimitedOman International Bank S.A.O.G.Rozgar Microfinance Bank LimitedSoneri Bank LimitedStandard Chartered Bank (Pakistan) LimitedTameer Microfinance Bank LimitedThe Bank of PunjabUnited Bank LimitedZarai Taraqiati Bank Limited

06

NOTICE OF THE FIFTY FIRST ANNUAL GENERAL MEETING

NOTICE is hereby given that the Fifty first Annual General Meeting (AGM) of the Company will be held at the Islamabad Hotel, Islamabad on Friday, 27 April 2012 at 11.00 a.m to transact the following ordinary business:

1. To receive, consider and adopt the unconsolidated audited accounts of Adamjee Insurance Company Limited and consolidated audited accounts of Adamjee Insurance Company Limited and its subsidiary company for the year ended 31 December 2011 and the Directors’ and Auditor’s reports thereon.

2. To appoint auditors and fix their remuneration.

3. To transact any other business with the permission of the Chair.

Islamabad: 6 April 2012

By Order of the Board

Tameez ul HaqueSecretary

07

NOTES:

The share transfer books of the Company will remain closed from Saturday, 21 April 2012 to Friday, 27 April 2012 (both days inclusive).

A member entitled to attend and vote at the Annual General Meeting is entitled to appoint another member as a proxy to attend and vote instead of him/her. A corporation or a company being a member of the Company, may appoint any of its officers, though not a member of the Company.

The instrument appointing a proxy must be received at the Registered Office of the Company or Registrar Office not less than 48 hours before the time appointed for the Meeting. A member shall not be entitled to appoint more than one proxy . If a member appoints more than one proxy and more than one instruments of proxy are deposited by a member with Company, all such instruments of proxy shall be rendered invalid.

CDC shareholders are requested to bring with them their original National Identity Card or original passport alongwith the Participant’s ID number and their account number at the time of attending the Annual General Meeting in order to facilitate identification of the respective account holders.

Members are requested to promptly notify M/s Technology Trade (Pvt.) Limited of any change in their addresses to ensure delivery of mail.

a)

b)

c)

d)

e)

08

MANAGEMENT TEAM

MANAGEMENT TEAM

MANZAR MUSHTAQManaging Director & CEO

TAMEEZ-UL-HAQUECompany Secretary

MUHAMMAD SALIM IQBALGeneral Manager Technical

ASIF JABBARGeneral Manager Sales

ADNAN AHMAD CHAUDHRYGeneral Manager Operations

JEHANGIR BASHIR NAWAZExecutive Director

REHAN AHMADKHANChief Financial Officer

10

CEO MESSAGE

2011 has been a difficult year for the country and we have witnessed pervasive macro-economic instability, low productivity, high inflation, wide spread power shortages, devastating floods, rupee devaluation and incessant political violence. All these factors have adversely impacted general business conditions and strained financial strength of the industry. From AICL perspective, these seismic factors have fundamentally changed the competitive landscape and necessitated re-evaluation of our business strategy. Two key initiatives were undertaken during the year. One was a major cost saving program directed to reduce fixed costs on long term basis and second was balancing of our insurance portfolios and existing market segments with high disproportionate risk coupled with low pricing. Both of these initiatives were successfully concluded by the year end and are now a permanent feature of our business philosophy. Business adjustments almost always entail one time costs which have been accounted for in current years’ financial statements. These one time costs primarily consist of Voluntary Severance Scheme and provision for doubtful debts.

Benefits of these initiatives are visible in the current year underwriting results which are significantly higher than the previous year. We are confident that these measures will yield superior profitability in future as well. The UAE operations have performed well in spite of economic depression in GCC region.

I am eagerly looking at 2012 when hopefully Pakistan operations will be as profitable as our overseas operations. I believe AICL will be well positioned for the future. I would also like to take this opportunity to extend my sincere appreciation to all the employees and stakeholders both in Pakistan and Overseas, for their hard work, and dedication in achieving the goals of the Company. I am confident that we will emerge an even stronger Company in 2012 and beyond.

MANZAR MUSHTAQManaging Director & CEO

12

COMPANY PROFILE

The operation was re-established in 2006 and the main objective is to provide maximum benefits to our clients from all sections of the community. We foresee a significant potential in the UAE

market. Total gross premium generated in Dubai in 2011 amounts to AED 65.251 million. The Company has plans to expand its operations in the Middle East Region.

Adamjee Insurance Company Limited (AICL) was incorporated as a Public Limited Company on September 28, 1960 and is listed on all three stock exchanges of Pakistan. The Company is also registered with the Central Depository Company of Pakistan Limited (CDC) and is involved in the business of general insurance. The head office is located in Karachi and it operates a network of branches all across Pakistan and one in UAE (Dubai).

The Company commenced operations with a paid-up capital of Rupees 2.5 million, which has grown phenomenally in the past five decades to Rupees 1.24 billion, as on 31 December 2011.

The Directors present on the Board of Adamjee Insurance represent various sectors of the Industry and have immense market knowledge and financial strength that outlines the Company’s stability and growth towards the future. Our diversified portfolio of products guarantees customer satisfaction and our in-house technological solutions for underwriting and claims processing highlights the competencies of our dedicated employees. The Company’s core aim is to provide highly differentiated and innovative set of services to the customers, duly mounting up profits for its stakeholders.

Dubai Operations

COMPANY PROFILE

14

CORE BUSINESS

Adamjee Insurance offers general insurance, risk management and underwriting services to large, medium and small industries including commercial organizations, real estate, financial services, commercial cargo and individuals, helping identify control and transfer risk.

AICL is involved in underwriting the following classes of Business:

Fire and Property Marine, Aviation and Transport Motor Miscellaneous Business Retail Insurance (Auto, Travel, Crop and Livestock)

In 2009 Adamjee Insurance formed Adamjee Life Assurance Company, a subsidiary in collaboration with Hollard, South Africa. Adamjee Life has a very diverse portfolio of products that

include not only savings plans, health plans but also loan protection and group life plans that cater to all needs of the customer.

ADAMJEE LIFE ASSURANCE COMPANY LIMITED

15

ACHIEVEMENTS

IFS rating of AA (Double ‘A’) by PACRABest General Insurance Company for consecutive four years by Consumer Association of PakistanCertification of ISO 9001 by Lloyd’s Register Quality AssuranceBrand of the year Award 2010 in the category of “Fire and Property Insurance”

16

QUALITY POLICY

The management and employees of Adamjee Insurance demonstrate commitment in satisfying customer needs for managing the risk assessment in General Insurance.

In alignment with satisfaction of customer needs, processes are established to support the vision and values of the Company. We use QMS-9001 as a tool to continually review and improve the effectiveness of our implemented systems.

We regularly assess our processes and practices, to build on our relationship with all our stakeholders, including customers, shareholders, strategic partners and employees.

QUALITY POLICY

18

CORPORATE RESPONSIBILITY

CORPORATE RESPONSIBILITY

Compliance and EthicsIn order to uphold the highest standards of integrity and transparency, regulations are becoming increasingly complex the world over. Keeping in step with this international inclination, AICL has taken rigorous and extensive steps to develop its capabilities and structures to meet the set standards. Having efficiently achieved a more stringent level of compliance than others, AICL has a competitive edge in the local market. AICL has restated the Compliance Performance Standards which applies to all areas of business and processes. AICL has taken steps in furthering the knowledge and understanding of compliance and ethical obligations through all the levels of its management and personnel. These initiatives include internal awareness campaigns, specific trainings in detailed regulatory areas and focused efforts on areas such as conflict of interests.

Donations in the Year 2011

AICL focuses on compliance, ethics and corporate citizenship and maintaining overall sustainability as part of its corporate responsibility activities. AICL has worked to cultivate these aspects of its operations through enhancing communication, training and other initiatives.

Flood Rehabilitation Shelter Program in district Muzaffargarh; village Qureashi Wal with NGO Awaz CDSFlood 2011 Rehabilitation Program in Badin with NGO, HOPE Parkinson’s SocietyBhittai Rangers Sindh (upgrading of school)Polo Club Sponsorship

20

EVENTS

NATIONAL SALES CONFERENCE 2011

The National Sales Conference was held on 26 and 28 July 2011, in Lahore and Karachi respectively. The theme of the conference was “Believers are Achievers” and the purpose of the conference was to discover platforms for communication and planning skills, ideas for a better tomorrow, insights on the changing insurance sector and to interact with the product leaders. Opportunity was taken to appreciate and recognize the high achievers of 2010.

NATIONAL SALES CONFERENCE - LAHORE

NATIONAL SALES CONFERENCE - KARACHI

22

WOMEN’S’ DAY 2011

LEARNING FAIR 2011

AICL believes in the value of educating its employees extensively regarding developing trends in business It is an investment in employees for their personal and professional growth, enhancement of knowledge and affluent of business. Learning Fair 2011 was held for the South region at the Pakistan Society for Training and

Development from 24 to 27 October 2011 and North region from 28 to 30 December 2011. The team members from various divisions and departments participated enthusiastically and over 500 members got a refresher course in technical underwriting, management and soft skills.

The Company organized the first women’s day event in March 2011 where the platform was opened for female employees to discuss success stories, issues and future plans for their empowerment. Special guest appearance was

made by a female Corporate Head HR from a multinational company. The conference had a large attendance and the initiative was highly appreciated by the female staff of AICL.

23

46

AUDITORS’ REPORT TO THE MEMBERS

We have audited the annexed unconsolidated financial statements comprising of:

(i) unconsolidated balance sheet;(ii) unconsolidated profit and loss account;(iii) unconsolidated statement of comprehensive income;(iv) unconsolidated statement of changes in equity;(v) unconsolidated cash flow statement;(vi) unconsolidated statement of premiums;(vii) unconsolidated statement of claims;(viii) unconsolidated statement of expenses; and(ix) unconsolidated statement of investment income

of ADAMJEE INSURANCE COMPANY LIMITED (“the company”) as at 31 December 2011 together with the notes formingpart thereof, for the year then ended, in which are incorporated the results and balances of Dubai branch, audited by anotherfirm of auditors.

It is the responsibility of the Company’s management to establish and maintain a system of internal control, and prepareand present the financial statements in conformity with the approved accounting standards as applicable in Pakistan andthe requirements of the Insurance Ordinance, 2000 (XXXIX of 2000) and the Companies Ordinance, 1984 (XLVII of 1984).Our responsibility is to express an opinion on these statements based on our audit.

We conducted our audit in accordance with the International Standards on Auditing as applicable in Pakistan. Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are freeof material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosuresin the financial statements. An audit also includes assessing the accounting policies used and significant estimates madeby management, as well as, evaluating the overall financial statements presentation. We believe that our audit provides areasonable basis for our opinion.

In our opinion:

a) proper books of accounts have been kept by the Company as required by the Insurance Ordinance, 2000 and theCompanies Ordinance, 1984;

b) the unconsolidated financial statements together with the notes thereon have been drawn up in conformity with theInsurance Ordinance, 2000 and the Companies Ordinance, 1984, and accurately reflect the books and records ofthe Company and are further in accordance with accounting pol icies consistently applied;

c) the unconsolidated financial statements together with the notes thereon, present fairly, in all material respects, thestate of the Company’s affairs as at 31 December 2011 and of the profit, its comprehensive income, its cash flowsand changes in equity for the year then ended in accordance with approved accounting standards as applicable inPakistan, and give the information required to be disclosed by the Insurance Ordinance, 2000 and the CompaniesOrdinance, 1984; and

d) Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), was deducted by the Companyand deposited in the Central Zakat Fund establ ished under Section 7 of that Ordinance.

RIAZ AHMAD & COMPANYChartered Accountants

Name of engagement partner:Muhammad Kamran Nasir

Date: 22 March 2012Karachi

47

Share capital and reserves Authorised share capital 3.1 1,500,000 1,500,000

Paid-up share capital 3.2 1,237,045 1,237,045Retained earnings - restated 8,422,236 8,599,321Reserves 4 1,241,625 1,163,638

9,663,861 9,762,959TOTAL EQUITY 10,900,906 11,000,004

Underwriting provisionsProvision for outstanding claims (including IBNR) - restated 5 5,548,018 8,015,404Provision for unearned premium 4,328,346 5,017,435Commission income unearned 371,687 305,434

10,248,051 13,338,273

Deferred liabilitiesDeferred taxation - 68,353Staff retirement benefits 6 22,011 17,326

Creditors and accrualsPremiums received in advance 80,142 75,329Amounts due to other insurers / reinsurers 1,151,088 1,581,965Accrued expenses 158,185 147,995Other creditors and accruals 7 1,429,947 1,520,732

2,819,362 3,326,021

BorrowingsLiabilities against assets subject to finance lease 8 58,567 107,637

Other liabilitiesUnclaimed dividends 33,495 29,121

TOTAL LIABILITIES 13,181,486 16,886,731

CONTINGENCIES AND COMMITMENTS 9

TOTAL EQUITY AND LIABILITIES 24,082,392 27,886,735

The annexed notes 1 to 34 form an integral part of these unconsolidated financial statements.

Rupees in thousand

Note 31 December 2011 31 December 2010

UNCONSOLIDATED BALANCE SHEETAS AT 31 DECEMBER 2011

Cash and bank deposits 10Cash and other equivalents 21,566 59,393Current and other accounts 1,415,207 1,060,597Deposits maturing within 12 months 942,194 1,584,827

2,378,967 2,704,817Loans

To employees 11 17,175 22,086

Investments 12 9,451,731 9,406,998

Deferred taxation 195,068 -

Current assets - othersPremiums due but unpaid 13 3,568,167 4,546,222Amounts due from other insurers / reinsurers 14 679,631 993,584Salvage recoveries accrued 165,718 99,636Premium and claim reserves retained by cedants 23,252 23,252Accrued investment income 15 21,626 33,445Reinsurance recoveries against outstanding claims 16 3,799,366 6,253,202Taxation - payments less provision 7,501 43,697Deferred commission expense 472,399 512,222Prepayments 17 2,033,763 1,829,112Sundry receivables 18 205,158 317,071

10,976,581 14,651,443

Fixed assets - Tangible & Intangible 19

OwnedLand and buildings 271,731 281,472Furniture and fixtures 59,855 62,289Motor vehicles 211,173 197,252Machinery and equipment 211,450 316,190Computers and related accessories 50,475 52,270Intangible asset - computer software 37,068 48,475Capital work in progress - Tangible 133,378 -

975,130 957,948

LeasedMotor vehicles 19.1 87,740 143,443

TOTAL ASSETS 24,082,392 27,886,735

Rupees in thousand


Umer ManshaChairman

S. M. JawedDirector

Ahmed Ebrahim HashamDirector

Manzar MushtaqManaging Director & Chief Executive Officer

48

49

Revenue accountNet premium revenue 1,203,286 912,455 2,974,057 1,893,546 - 6,983,344 6,883,397Net claims-restated (655,775) (494,320) (2,000,623) (1,598,395) - (4,749,113) (4,868,301)Expenses 20 (217,992) (164,275) (503,698) (343,372) - (1,229,337) (1,254,811)Net commission (92,018) (149,164) (248,126) 13,046 - (476,262) (514,564)

Underwriting result 237,501 104,696 221,610 (35,175) - 528,632 245,721

Investment income 852,315 779,089Rental income 657 1,048Other income 21 156,618 171,239

1,538,222 1,197,097General and administration expenses 22 (1,565,401) (634,922)Exchange gain / (loss) 390 (1,396)Finance charges on lease liabilities (15,179) (18,966)

(Loss) / profit before tax (41,968) 541,813

Provision for taxation 23 174,145 (57,682)

Profit after tax 132,177 484,131

Balance at the commencement of the year 8,599,321 8,520,042Profit after tax for the year 132,177 484,131Final dividend for the year ended 31 December 2010 @ 15%(Rupees 1.5/- per share) [2009: Rupees 1.5/- per share] (185,557) (168,688)Issue of bonus shares for the year ended 31 December 2010Nil (2009:10%) - (112,459)Interim dividend @ 10% (Rupee 1/- per share)[2010: Rupee 1/- per share] (123,705) (123,705)

Balance unappropriated profit at the end of the year 8,422,236 8,599,321

Rupees RupeesRestated

Earnings per share - basic and diluted (Note 24) 1.07 3.91


Rupees in thousand

UNCONSOLIDATED PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED 31 DECEMBER 2011

Marine,Aviation and

TransportMotor Miscellaneous Treaty

31December

2011

31December

2010

Fire andPropertyDamage

Umer ManshaChairman

S. M. JawedDirector



Note

50

Revenue accountNet premium revenue 1,184,133 869,401 1,953,476 1,872,534 - 5,879,544 5,578,112Net claims (653,141) (488,982) (1,359,152) (1,596,167) - (4,097,442) (4,122,946)Expenses (215,202) (158,003) (355,021) (340,311) - (1,068,537) (1,106,146)Net commission (93,462) (143,661) (155,918) 13,939 - (379,102) (416,226)

Underwriting result 222,328 78,755 83,385 (50,005) - 334,463 (67,206)

Investment income 852,315 779,089Rental income 657 1,048Other income 120,809 139,239

1,308,244 852,170

General and administration expenses (1,457,125) (543,440)Exchange gain / (loss) 387 (804)Finance charges on lease liabilities (15,179) (18,966)

(Loss) / profit before tax (163,673) 288,960


Rupees in thousand


Marine,Aviation and


31December

2011

31December

2010


BUSINESS UNDERWRITTEN INSIDE PAKISTAN

Umer ManshaChairman

S. M. JawedDirector



51

Revenue accountNet premium revenue 19,153 43,054 1,020,581 21,012 - 1,103,800 1,305,285Net claims-restated (2,634) (5,338) (641,471) (2,228) - (651,671) (745,355)Expenses (2,790) (6,272) (148,677) (3,061) - (160,800) (148,665)Net commission 1,444 (5,503) (92,208) (893) - (97,160) (98,338)

Underwriting result 15,173 25,941 138,225 14,830 - 194,169 312,927

Other income 35,809 32,000

229,978 344,927

General and administration expenses (108,276) (91,482)Exchange gain / (loss) 3 (592)

Profit before tax 121,705 252,853


Rupees in thousand


Marine,Aviation and


31December

2011

31December

2010


BUSINESS UNDERWRITTEN OUTSIDE PAKISTAN

Umer ManshaChairman

S. M. JawedDirector



52

Profit after tax for the year 132,177 484,131

Other comprehensive income:

Effect of translation of net investment in foreign branches-restated 77,987 27,091

Total comprehensive income for the year 210,164 511,222


Rupees in thousand

31 December 2011 31 December 2010

UNCONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2011

Umer ManshaChairman

S. M. JawedDirector



53

UNCONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2011

Balance as at 31 December 2009

Total comprehensive income for the year ended 31

December 2010 - restated

Final dividend for the year ended 31 December 2009

@ 15 % (Rupees 1.5/- per share)

Transferred to reserve for issue of bonus shares

Issue of bonus shares for the year ended 31 December

2009 @ 10 %

Interim dividend @ 10% (Rupee 1/- per share)

Balance as at 31 December 2010 - restated

Total comprehensive income for the year ended

31 December 2011

Final dividend for the year ended 31 December 2010

@ 15 % (Rupees 1.5/- per share)

Interim dividend @ 10% (Rupee 1/- per share)

Balance as at 31 December 2011

Rupees in thousand

Total

Capital Reserves Revenue Reserves

Retainedearnings

Generalreserve

Exchangetranslation

reserve

Investmentfluctuation

reserve

Reserve forexceptional

losses

Reserve forissue of

bonus shares

ShareCapital

1,124,586 - 22,859 3,764 173,424 936,500 8,520,042 10,781,175

- - - - 27,091 - 484,131 511,222

- - - - - - (168,688) (168,688)

- 112,459 - - - - (112,459) -

112,459 (112,459) - - - - - -

- - - - - - (123,705) (123,705)

1,237,045 - 22,859 3,764 200,515 936,500 8,599,321 11,000,004

- - - - 77,987 - 132,177 210,164

- - - - - - (185,557) (185,557)

- - - - - - (123,705) (123,705)

1,237,045 - 22,859 3,764 278,502 936,500 8,422,236 10,900,906


Issued,subscribedand paid-up

Umer ManshaChairman

S. M. JawedDirector



54

Operating cash flowsa) Underwriting activities

Premiums received 11,537,144 10,905,763Reinsurance premiums paid (5,385,962) (3,806,233)Claims paid (9,533,707) (6,193,362)Surrenders paid (87,492) (85,589)Reinsurance and other recoveries received 5,018,915 1,174,620Commissions paid (1,286,828) (1,071,186)Commissions received 858,763 693,974Other underwriting payments (1,208,246) (1,069,698)

Net cash (used in) / flow from underwriting activities (87,413) 548,289

b) Other operating activitiesIncome tax paid (53,080) (119,376)General and other expenses paid (601,280) (502,148)Loans disbursed (26,652) (31,991)Loan repayments received 38,442 38,006Other receipts 11,603 18,944Net cash used in other operating activities (630,967) (596,565)

Total cash used in all operating activities (718,380) (48,276)

Investment activitiesProfit / return received 132,782 141,763Dividends received 814,369 517,788Payments for investments (4,745,209) (4,586,048)Proceeds from disposal of investments 4,707,437 5,068,448Fixed capital expenditure - Tangible assets (258,534) (292,062)Fixed capital expenditure - Intangible assets (5,673) (23,152)Proceeds from disposal of fixed assets 78,344 74,191Rentals received 657 3,335Income received on PIBs 9,136 15,264Income received on TFCs 24,106 25,565

Total cash flow from investing activities 757,415 945,092

Financing activitiesLease rentals paid (64,249) (60,239)Dividends paid (304,888) (289,237)

Total cash used in financing activities (369,137) (349,476)

Net cash (outflow) / inflow from all activities (330,102) 547,340Cash at the beginning of the year 2,699,993 2,152,653

Cash at the end of the year 2,369,891 2,699,993

Rupees in thousand


UNCONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2011

55

Rupees in thousand

Rupees in thousand

Reconciliation to Profit and Loss AccountOperating cash flows (718,380) (48,276)Depreciation expense (182,942) (184,743)Provision for gratuity (4,685) (3,745)Other income - bank deposits 121,534 143,156(Loss) / profit on disposal of fixed assets (23,871) 7,744Finance charges on lease obligations (15,179) (18,966)Rental income 657 1,048(Decrease) / increase in assets other than cash (3,694,148) 5,795,325Decrease / (increase) in liabilities other than running finance 2,909,432 (5,417,616)

(1,607,582) 273,927Others

Profit on sale of investments 367,235 96,319Amortization expense (17,080) (12,946)Decrease / (Increase) in unearned premium 689,089 (611,618)Amortization of income on Government Securities - net - 2,160Decrease in loans (11,790) (6,015)Income tax paid 53,080 119,376Profit on PIBs 7,846 15,634(Provision) / reversal of impairment in value of investments (361,960) 128,882Dividend, investment and other income 806,031 511,396Income on treasury bills 10,217 -Income on TFCs 22,946 24,698

1,565,614 267,886(Loss) / profit before taxation (41,968) 541,813

Definition of cash:

Cash comprises cash in hand, bank balances excluding Rupees 9.076 million (2010: Rupees 4.824 million) held under lienand other deposits which are readily convertible to cash and which are used in the cash management function on a day-to-day basis.



Cash for the purposes of the Statement of Cash Flows consists of:

Cash and other equivalents 21,566 59,393Current and other accounts 1,415,207 1,060,597Deposits maturing within 12 months 933,118 1,580,003

Total cash and cash equivalents 2,369,891 2,699,993



Umer ManshaChairman

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56

Rupees in thousand


Premiums received 10,124,160 9,219,937Reinsurance premiums paid (4,868,293) (3,367,207)Claims paid (8,367,130) (5,189,845)Surrenders paid (87,492) (83,569)Reinsurance and other recoveries received 4,521,213 890,176Commissions paid (1,146,416) (902,537)Commissions received 786,144 614,736Other underwriting payments (1,173,206) (944,007)

Net cash (used in) / flow from underwriting activities (211,020) 237,684



Investment activitiesProfit / return received 105,649 114,855Dividends received 814,369 517,788Payments for investments (4,745,209) (4,586,048)Proceeds from disposal of investments 4,707,437 5,068,448Fixed capital expenditure - Tangible assets (121,669) (288,166)Fixed capital expenditure - Intangible assets (5,673) (23,152)Proceeds from disposal of fixed assets 78,344 73,287Rentals received 657 3,335Income received on PIBs 9,136 15,264Income received on TFCs 24,106 25,565

Total cash flow from investing activities 867,147 921,176








57

Reconciliation to Profit and Loss Account

Operating cash flows (754,709) (275,834)Depreciation expense (179,855) (181,445)Other income - bank deposits 93,627 114,457(Loss) / profit on disposal of fixed assets (23,871) 7,871Finance charges on lease obligations (15,179) (18,966)Rental income 657 1,048(Decrease) / increase in assets other than cash (4,047,180) 5,418,022Decrease / (increase) in liabilities other than running finance 3,195,239 (4,994,723)

(1,731,271) 70,430Others

Profit on sale of investments 367,235 96,319Amortization expense (17,080) (12,946)Decrease / (increase) in unearned premium 689,222 (660,935)Amortization of income on Government Securities - net - 2,160Decrease in loans (9,939) (6,054)Income tax paid 53,080 119,376Profit on PIBs 7,846 15,634(Provision) / reversal of impairment in value of investments (361,960) 128,882Dividend, investment and other income 806,031 511,396Income on treasury bills 10,217 -Income on TFCs 22,946 24,698

1,567,598 218,530(Loss) / profit before taxation (163,673) 288,960

Definition of cash:

Cash comprises cash in hand, bank balances excluding Rupees 9.076 million (2010: Rupees 4.824 million) held under lienand other deposits which are readily convertible to cash and which are used in the cash management function on a day-to-day basis.




Cash and other equivalents 21,322 59,160Current and other accounts 1,254,451 972,792Deposits maturing within 12 months 3,999 504,519





Rupees in thousand

Rupees in thousand

Umer ManshaChairman

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58


Premiums received 1,412,984 1,685,826Reinsurance premiums paid (517,669) (439,026)Claims paid (1,166,577) (1,003,517)Surrenders paid - (2,020)Reinsurance and other recoveries received 497,702 284,444Commissions paid (140,412) (168,649)Commissions received 72,619 79,238Other underwriting payments (35,040) (125,691)

Net cash flow from underwriting activities 123,607 310,605

b) Other operating activitiesGeneral and other expenses paid (96,983) (85,844)Loans disbursed (1,902) (5,242)Loan repayments received 3,753 5,203Other receipts 7,854 2,836Net cash used in other operating activities (87,278) (83,047)

Total cash flow from all operating activities 36,329 227,558

Investment activitiesProfit / return received 27,133 26,908Dividends received - -Payments for investments - -Proceeds from disposal of investments - -Fixed capital expenditure - Tangible assets (136,865) (3,896)Fixed capital expenditure - Intangible assets - -Proceeds from disposal of fixed assets - 904Rentals received - -Income received on PIBs - -Income received on TFCs - -

Total cash (used in) / flow from investing activities (109,732) 23,916

Financing activitiesLease rentals paid - -Dividends paid - -

Total cash flow from financing activities - -

Net cash (outflow) / inflow from all activities (73,403) 251,474Cash at the beginning of the year 1,163,522 912,048





Rupees in thousand

59

Reconciliation to Profit and Loss AccountOperating cash flows 36,329 227,558Depreciation expense (3,087) (3,298)Provision for gratuity (4,685) (3,745)Other income - bank deposits 27,907 28,699Loss on disposal of fixed assets - (127)Finance charges on lease obligations - -Rental income - -Increase in assets other than cash 353,032 377,303Increase in liabilities other than running finance (285,807) (422,893)

123,689 203,497Others

Profit on sale of investments - -Amortization expense - -(Increase) / decrease in unearned premium (133) 49,317Amortization of income on Government Securities - net - -(Decrease) / increase in loans (1,851) 39Income tax paid - -Profit on PIBs - -Reversal for diminution in value of investments - -Dividend, investment and other income - -Income on TFCs - -

(1,984) 49,356

Profit before taxation 121,705 252,853

Definition of cash:

Cash comprises cash in hand, bank balances excluding Rupees Nil (2010: Rupees Nil) held under lien and other depositswhich are readily convertible to cash and which are used in the cash management function on a day-to-day basis.


Cash and other equivalents 244 233Current and other accounts 160,756 87,805Deposits maturing within 12 months 929,119 1,075,484






Rupees in thousand


Rupees in thousand

Umer ManshaChairman

S. M. JawedDirector



60

UNCONSOLIDATED STATEMENT OF PREMIUMSFOR THE YEAR ENDED 31 DECEMBER 2011

Direct and facultative

Fire and property damage 4,702,415 1,977,580 2,163,408 4,516,587 3,553,956 1,371,210 1,611,865 3,313,301 1,203,286 1,103,966

Marine, aviation and transport 1,227,550 57,988 68,692 1,216,846 336,886 12,199 44,694 304,391 912,455 942,943

Motor 3,185,260 1,760,996 1,589,761 3,356,495 353,638 175,330 146,530 382,438 2,974,057 3,351,982

Miscellaneous 1,949,087 1,220,871 506,485 2,663,473 710,605 215,786 156,464 769,927 1,893,546 1,477,612

Total 11,064,312 5,017,435 4,328,346 11,753,401 4,955,085 1,774,525 1,959,553 4,770,057 6,983,344 6,876,503

Treaty

Proportional - - - - - - - - - 6,894

Total - - - - - - - - - 6,894

Grand Total 11,064,312 5,017,435 4,328,346 11,753,401 4,955,085 1,774,525 1,959,553 4,770,057 6,983,344 6,883,397


Rupees in thousand

Premiumswritten

Opening Closing

Premiumsearned

Reinsuranceceded

Opening Closing

Reinsuranceexpense 31

December2011

31December

2010

Class

Unearned premiumreserve

Prepaid reinsurancepremium ceded Net premium revenue

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Fire and property damage 4,624,978 1,928,688 2,123,552 4,430,114 3,495,425 1,330,808 1,580,252 3,245,981 1,184,133 1,080,887

Marine, aviation and transport 1,183,501 43,918 59,728 1,167,691 330,061 8,975 40,746 298,290 869,401 897,785

Motor 1,802,045 955,232 774,385 1,982,892 27,567 2,297 448 29,416 1,953,476 2,129,449

Miscellaneous 1,905,878 1,204,439 485,390 2,624,927 689,678 209,257 146,542 752,393 1,872,534 1,463,097

Total 9,516,402 4,132,277 3,443,055 10,205,624 4,542,731 1,551,337 1,767,988 4,326,080 5,879,544 5,571,218

Treaty

Proportional - - - - - - - - - 6,894

Total - - - - - - - - - 6,894

Grand Total 9,516,402 4,132,277 3,443,055 10,205,624 4,542,731 1,551,337 1,767,988 4,326,080 5,879,544 5,578,112


Rupees in thousand


Premiumswritten

Opening Closing

Premiumsearned

Reinsuranceceded

Opening Closing


December2011

31December

2010

Class




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62


Fire and property damage 77,437 48,892 39,856 86,473 58,531 40,402 31,613 67,320 19,153 23,079

Marine, aviation and transport 44,049 14,070 8,964 49,155 6,825 3,224 3,948 6,101 43,054 45,158

Motor 1,383,215 805,764 815,376 1,373,603 326,071 173,033 146,082 353,022 1,020,581 1,222,533

Miscellaneous 43,209 16,432 21,095 38,546 20,927 6,529 9,922 17,534 21,012 14,515

Total 1,547,910 885,158 885,291 1,547,777 412,354 223,188 191,565 443,977 1,103,800 1,305,285

Treaty

Proportional - - - - - - - - - -

Total - - - - - - - - - -

Grand Total 1,547,910 885,158 885,291 1,547,777 412,354 223,188 191,565 443,977 1,103,800 1,305,285


Rupees in thousand


Premiumswritten

Opening Closing

Premiumsearned

Reinsuranceceded

Opening Closing


December2011

31December

2010

Class




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63

Direct and facultative Restated

Fire and property damage 4,181,352 4,893,957 2,436,459 1,723,854 3,496,433 4,334,740 1,906,386 1,068,079 655,775 1,030,802


Motor 2,568,256 1,575,733 1,725,349 2,717,872 507,542 995,153 1,204,860 717,249 2,000,623 2,301,644

Miscellaneous 2,131,519 1,099,317 1,058,285 2,090,487 650,350 856,873 698,615 492,092 1,598,395 980,674

Total 9,533,707 7,995,072 5,527,686 7,066,321 4,704,962 6,352,838 3,965,084 2,317,208 4,749,113 4,859,084

Treaty

Proportional - 20,332 20,332 - - - - - - 9,217

Total - 20,332 20,332 - - - - - - 9,217

Grand Total 9,533,707 8,015,404 5,548,018 7,066,321 4,704,962 6,352,838 3,965,084 2,317,208 4,749,113 4,868,301


UNCONSOLIDATED STATEMENT OF CLAIMSFOR THE YEAR ENDED 31 DECEMBER 2011

Rupees in thousand

Total claimspaid

Opening Closing

Claimsexpenses

Reinsuranceand otherrecoveriesreceived Opening Closing

Reinsuranceand otherrecoveriesrevenue

31December

2011

31December

2010

Class

Outstanding claimsReinsurance and otherrecoveries in respect of

outstanding claimsNet claims expense

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64


Fire and property damage 4,172,288 4,888,290 2,388,840 1,672,838 3,489,154 4,329,886 1,860,429 1,019,697 653,141 1,028,408


Motor 1,426,197 468,010 392,635 1,350,822 30,441 81,471 42,700 (8,330) 1,359,152 1,565,308

Miscellaneous 2,121,051 1,098,068 1,056,985 2,079,968 642,072 856,497 698,226 483,801 1,596,167 980,201

Total 8,367,130 6,869,240 4,134,510 5,632,400 4,212,304 5,433,924 2,756,578 1,534,958 4,097,442 4,113,729

Treaty

Proportional - 20,332 20,332 - - - - - - 9,217

Total - 20,332 20,332 - - - - - - 9,217

Grand Total 8,367,130 6,889,572 4,154,842 5,632,400 4,212,304 5,433,924 2,756,578 1,534,958 4,097,442 4,122,946




Rupees in thousand

Total claimspaid

Opening Closing

Claimsexpenses



31December

2011

31December

2010

Class



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65

Direct and facultative Restated

Fire and property damage 9,064 5,667 47,619 51,016 7,279 4,854 45,957 48,382 2,634 2,394

Marine, aviation and transport 4,986 11,193 11,543 5,336 - 2 - (2) 5,338 6,152

Motor 1,142,059 1,107,723 1,332,714 1,367,050 477,101 913,682 1,162,160 725,579 641,471 736,336

Miscellaneous 10,468 1,249 1,300 10,519 8,278 376 389 8,291 2,228 473

Total 1,166,577 1,125,832 1,393,176 1,433,921 492,658 918,914 1,208,506 782,250 651,671 745,355

Treaty

Proportional - - - - - - - - - -

Total - - - - - - - - - -

Grand Total 1,166,577 1,125,832 1,393,176 1,433,921 492,658 918,914 1,208,506 782,250 651,671 745,355




Rupees in thousand

Total claimspaid

Opening Closing

Claimsexpenses



31December

2011

31December

2010

Class



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66


Fire and property damage 650,760 259,844 270,645 639,959 217,992 857,951 547,941 310,010 337,625

Marine, aviation and transport 166,185 11,662 14,189 163,658 164,275 327,933 14,494 313,439 364,055

Motor 280,780 162,226 134,109 308,897 503,698 812,595 60,771 751,824 804,615

Miscellaneous 131,214 78,490 53,456 156,248 343,372 499,620 169,294 330,326 258,470

Total 1,228,939 512,222 472,399 1,268,762 1,229,337 2,498,099 792,500 1,705,599 1,764,765

Treaty

Proportional - - - - - - - - 4,610

Total - - - - - - - - 4,610

Grand Total 1,228,939 512,222 472,399 1,268,762 1,229,337 2,498,099 792,500 1,705,599 1,769,375


UNCONSOLIDATED STATEMENT OF EXPENSESFOR THE YEAR ENDED 31 DECEMBER 2011

Commissionspaid orpayable

Opening Closing31

December2011

31December

2010

Class

Deferred commission Net underwritingexpenseNet

commissionexpense

Othermanagement

expenses

Underwritingexpense

Commissionfrom

reinsurers

Rupees in thousand

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67

Umer ManshaChairman

S. M. JawedDirector




Fire and property damage 639,275 250,919 265,139 625,055 215,202 840,257 531,593 308,664 339,709

Marine, aviation and transport 162,656 9,004 14,003 157,657 158,003 315,660 13,996 301,664 344,021

Motor 151,998 69,412 64,097 157,313 355,021 512,334 1,395 510,939 575,506

Miscellaneous 128,045 76,871 51,942 152,974 340,311 493,285 166,913 326,372 258,526

Total 1,081,974 406,206 395,181 1,092,999 1,068,537 2,161,536 713,897 1,447,639 1,517,762

Treaty

Proportional - - - - - - - - 4,610

Total - - - - - - - - 4,610

Grand Total 1,081,974 406,206 395,181 1,092,999 1,068,537 2,161,536 713,897 1,447,639 1,522,372




Opening Closing31

December2011

31December

2010

Class


commissionexpense

Othermanagement

expenses

Underwritingexpense

Commissionfrom

reinsurers


Rupees in thousand

68


Fire and property damage 11,485 8,925 5,506 14,904 2,790 17,694 16,348 1,346 (2,084)

Marine, aviation and transport 3,529 2,658 186 6,001 6,272 12,273 498 11,775 20,034

Motor 128,782 92,814 70,012 151,584 148,677 300,261 59,376 240,885 229,109

Miscellaneous 3,169 1,619 1,514 3,274 3,061 6,335 2,381 3,954 (56)

Total 146,965 106,016 77,218 175,763 160,800 336,563 78,603 257,960 247,003

Treaty

Proportional - - - - - - - - -

Total - - - - - - - - -

Grand Total 146,965 106,016 77,218 175,763 160,800 336,563 78,603 257,960 247,003




Opening Closing31

December2011

31December

2010

Class


commissionexpense

Othermanagement

expenses

Underwritingexpense

Commissionfrom

reinsurers


Rupees in thousand

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Income from non-trading investments

Available-for-sale

Return on fixed income securities - 2,160Return on Term Finance Certificates 22,946 24,698Return on Treasury Bills 10,217 -Return on Pakistan Investments Bonds 7,846 15,634Dividend income

- associated undertakings 577,720 318,526 - others 228,311 192,870

806,031 511,396 847,040 553,888

Gain on sale of ‘available-for-sale’ investments - associated undertakings 17,563 75,626 - others 349,672 20,693

367,235 96,319 1,214,275 650,207

(Provision) for / reversal of impairment in value of'available-for-sale' investment 12.2 (361,960) 128,882

Investment related expenses - -

Net investment income 852,315 779,089



UNCONSOLIDATED STATEMENT OF INVESTMENT INCOMEFOR THE YEAR ENDED 31 DECEMBER 2011

Rupees in thousand

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1. THE COMPANY AND ITS OPERATIONS

Adamjee Insurance Company Limited (the Company) is a public limited company incorporated in Pakistan on 28September 1960 under the Companies Act, 1913 (now Companies Ordinance, 1984). The Company is listed on allthe stock exchanges in Pakistan and is engaged in the non-life insurance business.

The registered office of the Company is situated at Islamabad Stock Exchange Building, Islamabad.

1.1 The Company also operates branches in the United Arab Emirates (UAE), the Kingdom of Saudi Arabia (KSA) andthe Export Processing Zone (EPZ). The branch in the KSA has closed down its operations and is in “run-off” statuswith effect from 01 October 2003. During the year, the Company has opened its new branch office in Abu-Dhabi toextend its operations.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies applied in the preparation of these unconsolidated financial statements are set out below:

2.1 BASIS OF PREPARATION

a) Statement of compliance

These unconsolidated financial statements are prepared in accordance with approved accounting standards asapplicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards(IFRS) issued by the International Accounting Standards Board as are notified under the Companies Ordinance,1984, provisions of and directives issued under the Companies Ordinance,1984, the Insurance Ordinance, 2000and SEC (Insurance) Rules, 2002. In case requirements differ, the provisions or directives of the CompaniesOrdinance, 1984, Insurance Ordinance, 2000 and SEC (Insurance) Rules, 2002 shall prevail.

The SECP has allowed insurance companies to defer the application of International Accounting Standard - 39(IAS 39) 'Financial Instruments: Recognition and Measurement' in respect of "available-for-sale investments" untilsuitable amendments have been made in the laws. Accordingly, the requirements of IAS-39, to the extent allowedby SECP, have not been considered in the preparation of these unconsolidated financial statements. The effectof such departure from the requirements of IAS - 39 is disclosed in Note 12.1.

b) Basis of presentation

These financial statements represent separate unconsolidated financial statements of Adamjee Insurance CompanyLimited, prepared in accordance with the format of financial statements prescribed under SEC (Insurance) Rules,2002. The consolidated financial statements of the group are issued separately.

c) Accounting convention

These unconsolidated financial statements have been prepared under the historical cost convention except thatcertain investments are stated at lower of cost and market value and the obligations under certain employeebenefits that are measured at present value. Accrual basis of accounting has been used except for cash flowinformation.

d) Critical accounting estimates and judgments

The preparation of these unconsolidated financial statements in conformity with the approved accounting standardsas applicable in Pakistan requires management to make judgments, estimates and assumptions that affect thereported amounts of assets and liabilities and income and expenses. It also requires management to exercisejudgment in application of its accounting policies. The estimates and associated assumptions are based on historicalexperience and various other factors that are believed to be reasonable under the circumstances. These estimatesand assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the periodin which the estimate is revised if the revision affects only that period, or in the period of revision and future periodsif the revision affects both current and future periods.

NOTES TO THE UNCONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2011

71

The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates aresignificant to these unconsolidated financial statements or judgment was exercised in application of accountingpolicies, are as follows:

i) Provision for outstanding claims including claims incurred but not reported (IBNR)

Provision for liability in respect of unpaid reported claims is made on the basis of individual case estimates. Provisionfor IBNR is based on the management's best estimate which takes into account the past trends, expected futurepatterns of reporting of claims and the claims actually reported subsequent to the balance sheet date.

ii) Provision for taxation including the amount relating to tax contingency

In making the estimates for income tax currently payable by the Company, the management takes into accountthe current income tax law and the decisions of appellate authorities on certain issues in the past.

iii) Provision for doubtful receivables

The receivable balances are reviewed against any provision required for any doubtful balances on an ongoingbasis. The provision is made while taking into consideration expected recoveries, if any.

iv) Useful lives, patterns of economic benefits and impairments - Fixed assets

Estimates with respect to residual values and useful lives and pattern of flow of economic benefits are based onthe analysis of the management of the Company. Further, the Company reviews the value of assets for possibleimpairment on an annual basis. Any change in the estimates in the future might affect the carrying amount ofrespective item of fixed assets with a corresponding effect on the depreciation charge and impairment.

v) Defined benefit plans

The actuarial calculations are involved in the working of provision for defined benefit plans that are based on certainactuarial assumptions.

vi) Classification of investments

The Company classifies its investments into "available-for-sale" category. The classification is determined bymanagement at initial recognition and depends on the purpose for which the investments are acquired.

e) Functional and presentation currency

Items included in these unconsolidated financial statements are measured using the currency of the primaryeconomic environment in which the Company operates. These unconsolidated financial statements are presentedin Pakistani Rupees, which is the Company's functional and presentation currency.

f) Standards, interpretations and amendments to published approved standards that are effective in currentyear and are relevant to the Company

Standards and amendments to published approved accounting standards that are effective in the current year andare relevant to the Company have no significant impact on these unconsolidated financial statements and aretherefore not detailed in these unconsolidated financial statements.

g) Standards, interpretations and amendments to published approved accounting standards that are effectivein current year but not relevant to the Company

There are other new standards, interpretations and amendments to the published approved accounting standardsthat are mandatory for accounting periods beginning on or after 01 January 2011 but are considered not to berelevant or do not have any significant impact on these unconsolidated financial statements and are therefore notdetailed in these unconsolidated financial statements.


72

h) Standards, interpretations and amendments to published approved accounting standards that are not yeteffective but relevant to the Company

Following standards and amendments to existing standards have been published and will be effective to theCompany's accounting periods beginning on or after 01 January 2012 or later periods:

IFRS 7 (Amendment), 'Financial Instruments: Disclosures' (effective for annual periods beginning on or after 01July 2011). The new disclosure requirements apply to transfer of financial assets. An entity transfers a financialasset when it transfers the contractual rights to receive cash flows of the asset to another party. These amendmentsare part of the IASBs comprehensive review of off balance sheet activities. The amendments will promotetransparency in the reporting of transfer transactions and improve users’ understanding of the risk exposuresrelating to transfers of financial assets and the effect of those risks on an entity’s financial position, particularlythose involving securitization of financial assets.

IFRS 9 'Financial Instruments' (effective for annual periods beginning on or after 01 January 2015). This standardis the first step in the process to replace IAS 39 ‘Financial Instruments: Recognition and Measurement’. IFRS 9introduces new requirements for classifying and measuring financial assets and is likely to affect the Company’saccounting for its financial assets.

IFRS 13 ‘Fair Value Measurement’ (effective for annual period beginning on or after 01 January 2013). IFRS 13establishes a single framework for measuring fair value where that is required by other standards. IFRS 13 appliesto both financial and non-financial items measured at fair value. Fair value is defined as the price that would bereceived to sell an asset or paid to transfer a liability in an orderly transaction between market participants at themeasurement date.

IAS 1 (Amendments), ‘Presentation of Financial Statements’ (effective for annual periods beginning on or after 01July 2012). It clarifies that an entity will present an analysis of other comprehensive income for each componentof equity, either in the statement of changes in equity or in the notes to the financial statements.

IAS 19 (Amendment), ‘Employee benefits’ (effective for annual periods 01 January 2013). This amendment eliminatesthe corridor approach and recognizes all actuarial gains and losses in other comprehensive income as they occur,to immediately recognize all past service costs, and to replace interest cost and expected return on plan assetswith a net interest amount that is calculated by applying the discount rate to the net defined benefit liability / (assets).

The management of the Company is in the process of evaluating the impact of the aforesaid standards on theCompany’s financial statements.

i) Standards, interpretations and amendments to published approved accounting standards that are noteffective in current year and not considered relevant to the Company

There are other accounting standards, amendments to published approved accounting standards and newinterpretations that are mandatory for accounting periods beginning on or after 01 January 2012 but are considerednot to be relevant or do not have any significant impact on these unconsolidated financial statements and aretherefore not detailed in these unconsolidated financial statements.

2.2 Insurance contracts

Insurance contracts are those contracts where the Company (the insurer) has accepted significant insurance risk fromanother party (the policyholders) by agreeing to compensate the policyholders if a specified uncertain future event (theinsured event) adversely affects the policyholders.

Once a contract has been classified as an insurance contract, it remains an insurance contract for the remainder ofits life time, even if the insurance risk reduces significantly during this period, unless all rights and liabilities areextinguished or expired.

The Company neither issues investment contracts nor does it issue insurance contracts with discretionary participationfeatures (DPF).


73

2.2.1 Premium

Premium received / receivable under a policy is recognized as written from the date of attachment of the policy to whichit relates. Premium income under a policy is recognized over the period of insurance from inception to expiry as follows:

(a) For direct business, evenly over the period of the policy;(b) For proportional reinsurance business, evenly over the period of underlying insurance policies; and(c) For non-proportional reinsurance business, in accordance with the pattern of the reinsurance service.

Where the pattern of incidence of risk varies over the period of the policy, premium is recognized as revenue inaccordance with the pattern of the incidence of risk.

Administrative surcharge is recognized as premium at the time the policies are written.

Provision for unearned premium represents the portion of premium written relating to the unexpired period of coverageand is recognized as a liability by the Company. This liability is calculated by applying 1/24 method as specified in theSEC (Insurance) Rules, 2002. This liability is calculated as follows:

- for marine cargo business and for motor business in the UAE branches, as a ratio of the unexpired period to the total period of the policy applied on the gross premium of the individual policies; and

- for other classes / lines of business, by applying the twenty-fourths method as specified in the SEC (Insurance)Rules, 2002, as majority of the remaining policies are issued for a period of one year.

Receivables under insurance contracts are recognized when due, at the fair value of the consideration receivable lessprovision for doubtful debts, if any. Provision for impairment on premium receivables is established when there isobjective evidence that the Company will not be able to collect all amounts due according to original terms of receivable.Receivables are also analyzed as per their ageing and accordingly provision is maintained on a systematic basis.

2.2.2 Reinsurance ceded

The Company enters into reinsurance contracts in the normal course of business in order to limit the potential for lossesarising from certain exposures. Outward reinsurance premiums are accounted for in the same period as the relatedpremiums for the direct or accepted reinsurance business being reinsured.

Reinsurance liabilities represent balances due to reinsurance companies. Amounts payable are estimated in a mannerconsistent with the related reinsurance contract. Reinsurance assets represent balances due from reinsurance companies.Amounts recoverable from reinsurers are estimated in a manner consistent with the provision for outstanding claimsor settled claims associated with the reinsurance policies and are in accordance with the related reinsurance contract.

Reinsurance assets are not offset against related insurance liabilities. Income or expenses from reinsurance contractare not offset against expenses or income from related insurance assets.

Reinsurance assets or liabilities are derecognized when the contractual rights or obligations are extinguished or expired.

The Company assesses its reinsurance assets for impairment on reporting date. If there is an objective evidence thatthe reinsurance asset is impaired, the Company reduces the carrying amount of the reinsurance asset to its recoverableamount and recognizes the impairment loss in the profit and loss account.

The portion of reinsurance premium not recognized as an expense is shown as a prepayment.

Commission income from reinsurers is recognized at the time of issuance of the underlying insurance policy by theCompany. This income is deferred and brought to account as revenue in accordance with the pattern of recognitionof the reinsurance premium to which it relates. Profit commission, if any, which the Company may be entitled to underthe terms of reinsurance, is recognized on accrual basis.

2.2.3 Claims expense

General insurance claims include all claims occurring during the year, whether reported or not, related internal andexternal claims handling costs that are directly related to the processing and settlement of claims, a reduction for the


74

value of salvage and other recoveries, and any adjustments to claims outstanding from previous years.

The Company recognizes liability in respect of all claims incurred upto the reporting date which is measured at theundiscounted value of the expected future payments. The claims are considered to be incurred at the time of the incidentgiving rise to the claim except as otherwise expressly indicated in the insurance contract. The liability for claims includeamounts relating to unpaid reported claims, claims incurred but not reported (IBNR) and expected claims settlementcosts.

2.2.4 Reinsurance recoveries against outstanding claims

Claims recoveries receivable from the reinsurer are recognized as an asset at the same time as the claims which giverise to the right of recovery are recognized as a liability and are measured at the amount expected to be received.

2.2.5 Commission expense and other acquisition costs

Commission expense and other acquisition costs are charged to profit and loss account at the time the policies areaccepted.

2.2.6 Premium deficiency reserve

The Company maintains a provision in respect of premium deficiency for the class of business where the unearnedpremium liability is not adequate to meet the expected future liability, after reinsurance, from claims and othersupplementary expenses expected to be incurred after the balance sheet date in respect of the unexpired policies inthat class of business at the reporting date.

The movement in the premium deficiency reserve is recorded as an expense / income in profit or loss account for theyear.

For this purpose, loss ratios for each class are estimated based on historical claims development. Judgment is usedin assessing the extent to which past trends may not apply in future or the effects of one-off claims. If these ratios areadverse, premium deficiency is determined. The loss ratios estimated on these basis for the unexpired portion are asfollows:


2011 2010

Fire and property damage 67.59% 70.38%Marine, aviation and transport 51.57% 50.74%Motor 68.71% 70.73%Miscellaneous 76.89% 74.55%

Based on an analysis of combined operating ratio for the expired period of each reportable segment, the managementconsiders that the unearned premium reserve for all classes of business as at the year end is adequate to meet theexpected future liability after reinsurance, from claims and other expenses expected to be incurred after the balancesheet date in respect of policies in those classes of business in force at the reporting date. Hence, no reserve for thesame has been created in these unconsolidated financial statements.

2.3 Staff retirement benefits

2.3.1 Defined contribution plan

The Company operates an approved contributory provident fund scheme for all its eligible employees. Equal monthlycontributions to the fund are made by the Company and the employees at the rate of 8.33% of basic salary.

2.3.2 Defined benefit plans

The Company operates the following defined benefit plans:

(a) an approved funded gratuity scheme for all its permanent employees in Pakistan. Annual contributions are madeto this scheme on the basis of actuarial recommendations. The actuarial valuation is carried out using the projectedunit credit method. Actuarial gains and losses are amortized over the expected future service of the current members.Gratuity is payable to staff on completion of the prescribed qualifying period of service under the scheme;

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(b) unfunded gratuity scheme covering the employees in the UAE branches as per the requirements of the applicableregulations. Provision is made in these unconsolidated financial statements based on management's best estimateof the liability in respect of such scheme.

2.4 Employees' compensated absences

The Company accounts for these benefits in the period in which the absences are earned. The provision has beenmade in accordance with the actuarial valuation. The valuation uses a discount rate of 13.00% and assumes a salaryincrease average of 10.75% in the long term.

2.5 Creditors, accruals and provisions

Liabilities for creditors and other amounts payable are carried at cost which is the fair value of the consideration to bepaid in future for the goods and / or services received, whether or not billed to the Company.

Provisions are recognized when the Company has a present, legal or constructive obligation as a result of past eventsand, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligationand a reliable estimate of the amount can be made. Provisions are reviewed at each reporting date and adjusted toreflect the current best estimate.

2.6 Cash and cash equivalents

Cash and cash equivalents are carried in the balance sheet at cost. For the purpose of cash flow statement, cash andcash equivalents comprise cash and bank deposits and excludes bank balances held under lien.

2.7 Investments

All investments are initially recognized at cost being the fair value of the consideration given and include any transactioncosts. All purchases and sales of investments that require delivery within the time frame established by regulations ormarket convention are accounted for at the trade date. Trade date is the date when the Company commits to purchaseor sell the investment.

The above investments are classified as 'available-for-sale'.

Available-for-sale

Investments which are intended to be held for an undefined period of time but may be sold in response to the needfor liquidity, changes in interest rates, equity prices or exchange rates are classified as available-for-sale.

Subsequent to initial recognition at cost, these are stated at the lower of cost or market value (market value being takenas lower if the reduction is other than temporary) in accordance with the requirements of the SEC (Insurance) Rules,2002. The Company uses stock exchange quotations at the reporting date to determine the market value of its quotedinvestments. The Company uses appropriate valuation techniques to estimate the fair value of unquoted investmentsin delisted / unlisted companies. Such valuation is obtained from independent valuers. If such estimated fair value islesser than the cost, the Company recognizes the impairment adjustments.

In case of fixed income securities redeemable at a given date where the cost is different from the redemption value,such difference is amortized uniformly over the period between the acquisition date and the date of maturity in determining'cost' at which these investments are stated as per the requirements of the SEC (Insurance) Rules, 2002.

2.8 Taxation

2.8.1 Current

Provision for current taxation is based on taxable income for the year determined in accordance with the prevailinglaw for taxation of income. The charge for current tax is calculated using prevailing tax rates or tax rates expected toapply to the profit for the year, if enacted. The charge for current tax also include adjustments, where considerednecessary, to provision for tax made in previous years arising from assessments finalised during the current year forsuch years.


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2.8.2 Deferred

Deferred tax is accounted for using the balance sheet liability method in respect of all temporary differences arisingfrom differences between the carrying amount of assets and liabilities in the unconsolidated financial statements andthe corresponding tax bases used in the computation of the taxable profit. Deferred tax liabilities are generally recognizedfor all taxable temporary differences and deferred tax assets to the extent that it is probable that taxable profits willbe available against which the deductible temporary differences, unused tax losses and tax credits can be utilized.

Deferred tax is calculated at the rates that are expected to apply to the period when the differences reverse based ontax rates that have been enacted or substantively enacted by the reporting date. Deferred tax is charged or creditedin the profit and loss account, except in the case of items credited or charged to statement of comprehensive incomein which case it is included in statement of comprehensive income.

2.9 Fixed assets

2.9.1 Tangible

Owned fixed assets, other than freehold land which is not depreciated and capital work-in-progress, are stated at cost,signifying historical cost, less accumulated depreciation and any provision for impairment. Freehold land and capitalwork-in-progress are carried at cost less impairment losses, if any. Depreciation is charged to income applying varyingmethods depending upon the nature of the asset, at the rates specified for calculation of depreciation after taking intoaccount residual value, if any. The useful lives, residual values and depreciation method are reviewed, and adjustedif appropriate, at each reporting date.

Assets subject to finance lease are accounted for by recording the assets at the lower of present value of minimumlease payments under lease agreements and the fair value of asset at the inception of the lease contract. The relatedobligation under the lease is accounted for as liability. Finance charges are allocated to accounting period in a mannerso as to provide a constant periodic rate of charge on the outstanding liability.

Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, onlywhen it is probable that future benefits associated with the item will flow to the Company and the cost of the item canbe measured reliably. All other repairs and maintenance costs are charged to profit and loss account as and whenincurred.

Depreciation on additions is charged from the month the assets are available for use while on disposals, depreciationis charged up to the month in which the assets are disposed off.

The carrying values of tangible fixed assets are reviewed for impairment when events or changes in circumstancesindicate that this carrying value may not be recoverable. If any such indications exist and where the carrying valuesexceed the estimated recoverable amounts, the assets are written down to their recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount of the assets disposedoff. These are taken to profit and loss account.

2.9.2 Intangible

These are stated at cost less accumulated amortization and any provision for impairment.

Amortization is calculated from the month the assets are available for use using the straight-line method, whereby thecost of the intangible asset is amortized over its estimated useful life over which economic benefits are expected toflow to the Company. The useful life and amortization methods are reviewed, and adjusted if appropriate, at eachreporting date.

Software development costs are only capitalized to the extent that future economic benefits are expected to be derivedby the Company.

The carrying values of intangible assets are reviewed for impairment when events or changes in circumstances indicatethat this carrying value may not be recoverable. If any such indications exist and where the carrying values exceedthe estimated recoverable amounts, the assets are written down to their recoverable amount.


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2.10 Expenses of management

Expenses of management allocated to the underwriting business represent directly attributable expenses and indirectexpenses allocated to the various classes of business on the basis of net premium revenue. Expenses not allocableto the underwriting business are charged as administrative expenses.

2.11 Investment income

From available-for-sale investments

- Return on fixed income securities

Return on fixed income securities classified as available-for-sale is recognized on a time proportion basis.

- Dividend

Dividend income is recognized when the Company's right to receive the dividend is established.

- Gain / loss on sale of available-for-sale investments

Gain / loss on sale of available-for-sale investments is recognized in profit and loss account in the year of sale.

- Return on Term Finance Certificates

The difference between the redemption value and the purchase price of the Term Finance Certificates is amortizedand taken to the profit and loss account over the term of the investment.

2.12 Foreign currencies

Transactions in foreign currencies (other than the result of foreign branches) are accounted for in Pak Rupees at therates prevailing on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies aretranslated into Pak Rupees at the rates of exchange prevailing at the reporting date. Exchange differences are takento the profit and loss account currently.

The assets and liabilities of foreign branches are translated to Pak Rupees at exchange rates prevailing at the reportingdate. The results of foreign branches are translated to Pak Rupees at the average rate of exchange for the year.Translation gains and losses are included in the profit and loss account, except those arising on the translation of theCompany's net investment in foreign branches, which are taken to the capital reserves (exchange translation reserve).

2.13 Financial instruments

Financial assets and liabilities are recognized at the time when the Company becomes a party to the contractualprovisions of the instrument and de-recognized when the Company loses control of contractual rights that comprisethe financial assets and in the case of financial liabilities when the obligation specified in the contract is discharged,cancelled or expired. Any gain or loss on the de-recognition of the financial assets and liabilities is included in the profitand loss account.

Financial instruments carried on the balance sheet include cash and bank, loans, investments, premiums due butunpaid, amounts due from other insurers / reinsurers, premium and claim reserves retained by cedants, accruedinvestment income, reinsurance recoveries against outstanding claims, sundry receivables, provision for outstandingclaims, amounts due to other insurers / reinsurers, accrued expenses, other creditors and accruals, liabilities againstassets subject to finance lease and unclaimed dividends. The particular recognition methods adopted are disclosedin the individual policy statements associated with each item.

2.14 Dividend and other appropriations

Dividend distribution to the Company's shareholders is recognized as a liability in the Company's financial statementsin the period in which the dividends are approved by the shareholders and other appropriations are recognized in theperiod in which these are approved by the Board of Directors.

2.15 Off setting of financial assets and financial liabilities

A financial asset and a financial liability is offset and the net amount is reported in the balance sheet when the Companyhas a legally enforceable right to set-off the recognized amounts and it intends either to settle on a net basis or torealize the asset and settle the liability simultaneously.


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2.16 Earnings per share

The Company presents basic and diluted earnings per share (EPS) for its shareholders. Basic EPS is calculated bydividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number ofordinary shares outstanding during the year. Diluted earnings per share is calculated if there is any potential dilutiveeffect on the Company's reported net profits.

2.17 Impairment

Financial assets

A financial asset is considered to be impaired if objective evidence indicate that one or more events had a negativeeffect on the estimated future cash flow of that asset.

An impairment loss in respect of a financial asset measured at amortized cost is calculated as a difference betweenits carrying amount and the present value of estimated future cash flows discounted at the original effective interestrate. An impairment loss in respect of available-for-sale financial asset is calculated with reference to its current fairvalue.

Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assetsare assessed collectively in groups that share similar credit risk characteristics.

Non financial assets

The carrying amounts of the Company's non-financial assets are reviewed at each balance sheet date to determinewhether there is any indication of impairment. If such indication exists, the recoverable amount of such asset is estimated.An impairment loss is recognized wherever the carrying amount of the asset exceeds its recoverable amount. Impairmentlosses are recognized in profit and loss account. A previously recognized impairment loss is reversed only if there hasbeen a change in the estimates used to determine the asset's recoverable amount since the last impairment loss wasrecognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increasedamount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairmentloss been recognized for the asset in prior years. Such reversal is recognized in profit and loss account.

2.18 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operatingdecision maker (the Board of Directors) who is responsible for allocating resources and assessing performance of theoperating segments.

The Company accounts for segment reporting using the classes of business as specified under the Insurance Ordinance,2000 and the SEC (Insurance) Rules, 2002 as the primary reporting format based on the Company's practice of reportingto the management on the same basis.

Assets, liabilities and capital expenditures that are directly attributable to segments have been assigned to them whilethe carrying amount of certain assets used jointly by two or more segments have been allocated to segments on areasonable basis. Those assets and liabilities which cannot be allocated to a particular segment on a reasonable basisare reported as unallocated corporate assets and liabilities.

2.19 Borrowing cost

Interest, mark-up and other charges on long-term finances are capitalized up to the date of commissioning of respectivequalifying assets acquired out of the proceeds of such long-term finances. All other interest, mark-up and other chargesare recognized in profit and loss account.

2.20 Share capital

Shares are classified as equity when there is no obligation to transfer cash or other assets. Incremental costs directlyattributable to the issue of equity instruments are shown in equity as a deduction from the proceeds.


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3.3 As at 31 December 2011, MCB Bank Limited, Nishat Mills Limited, Security General Insurance Company Limited, D.G.Khan Cement Company Limited and Pakistan Molasses Company (Pvt.) Limited, associated undertakings, held36,338,092 (2010: 36,338,092), 36,337 (2010: 36,337), NIL (2010: 4,138,572), 3,541,391 (2010: 3,541,391), and 60,000(2010: 55,000) ordinary shares of Rupees 10 each, respectively.

Note4. RESERVES

Capital reserves

Reserve for exceptional losses 4.1 22,859 22,859Investment fluctuation reserve 4.2 3,764 3,764Exchange translation reserve 4.3 278,502 200,515

305,125 227,138Revenue reserveGeneral reserve 936,500 936,500

1,241,625 1,163,638

4.1 The reserve for exceptional losses represents the amount set aside in prior years up to 31 December 1978, in orderto avail the deduction while computing the taxable income under the old Income Tax Act of 1922. Subsequent to theintroduction of repealed Income Tax Ordinance, 1979, which did not permit the said deduction, the Company discontinuedthe setting aside of amounts as reserve for exceptional losses.

4.2 This amount has been set aside in prior years for utilization against possible diminution in the value of investments.

4.3 The exchange translation reserve represents the gain resulted from the translation of foreign branches (having businessin foreign currencies) into Pak Rupees. For the purpose of exchange translation reserve, the UAE and Export ProcessingZone branches are treated as foreign branches since these carry on their business in AED and US Dollars, respectively.


Rupees in thousand


Number of shares


3. SHARE CAPITAL

3.1 Authorized share capital

3.2 Paid-up share capital

Issued, subscribed and fully paid:

Ordinary shares of Rupees10 each

Opening balance

Ordinary shares of Rupees 10each fully paid in cash

Ordinary shares of Rupees 10each issued as fully paid bonusshares

Issued during the year

Ordinary shares of Rupees 10each issued as fully paid bonusshares

Closing balance

250,000 250,000

123,454,544 112,208,676

- 11,245,868

123,704,544 123,704,544

150,000,000 150,000,000 1,500,000 1,500,000

2,500 2,500

1,234,545 1,122,086

- 112,459

1,237,045 1,237,045

Rupees in thousand


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Rupees in thousand

31 December 2011 31 December 20105. PROVISION FOR OUTSTANDING CLAIMS (including IBNR)

Related parties 187,035 1,697,849Others 5,360,983 6,317,555

5,548,018 8,015,404

5.1 In UAE branch, an additional provision for IBNR claims amounting to Rupees 34.785 million has been accounted forretrospectively in the year 2010. These IBNR claims were inadvertently not booked last year. Had this error not beencorrected retrospectively, the profit before tax for the year 2010 would have been higher by Rupees 34.785 million.

6. STAFF RETIREMENT BENEFITS - Unfunded staff gratuity

Opening balance 17,326 13,581 Charge for the year 4,688 3,382

22,014 16,963 Gratuity paid (930) - Exchange loss 927 363

22,011 17,326

6.1 The above provision relates to the Company's operations in UAE branches. Actuarial valuation has not been obtainedas the liability is not material.

7. OTHER CREDITORS AND ACCRUALS

Cash margin against performance bonds 612,067 556,683Sundry creditors 137,679 134,662 Commission payable 531,396 589,285 Workers' welfare fund 11,762 88,009 Federal insurance fee 35,471 18,889 Federal excise duty 101,572 133,204

1,429,947 1,520,732

7.1 During the year, an amount of Rupees 21.666 million (2010: Rupees 22.495 million) has been charged to the profitand loss account in respect of the Company's contributions to the Employees' Provident Fund.

8. LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE

Present value of minimum lease payments 58,567 107,637

8.1 Minimum lease payments

Not later than 1 year 27,809 39,313 Later than 1 year and not later than 5 years 42,056 98,296

69,865 137,609 Future finance charges on finance lease (11,298) (29,972)Present value of finance lease liability 58,567 107,637

8.2 Present value of finance lease liabilitiesNot later than 1 year 20,904 25,502 Later than 1 year and not later than 5 years 37,663 82,135

58,567 107,637

8.3 The above represents finance lease entered into with leasing companies for motor vehicles. The liability is payableby October 2014 in quarterly installments and is secured against respective vehicles and security deposits.

8.4 Lease payments bear variable mark-up rates including finance charges at 3 months KIBOR + 2% to 2.5% per annum.KIBOR is determined on a quarterly basis.

Restated

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9. CONTINGENCIES AND COMMITMENTS

9.1 Contingencies

The income tax assessments of the Company have been finalized up to and including the tax year 2011. However,the Company has filed appeals in respect of certain assessment years mainly on account of the following:

i) The Deputy Commissioner Inland Revenue (DCIR) has finalized assessments for the assessment year 1999-2000by taxing capital gains at the full rate of 33%. The aggregate tax liability assessed by the DCIR amounted to Rupees48.205 million against which the Company has made a total provision of Rupees 44.141 million resulting in ashortfall of Rupees 4.064 million. The Company filed appeals with the Commissioner Inland Revenue (Appeals)and Appellate Tribunal Inland Revenue (ATIR) which were decided against the Company. Consequently, theCompany has filed an appeal before the Honorable High Court of Sindh and the petition is fixed for regular hearing.

ii) The Additional Commissioner / Taxation Officer has reopened assessments for the assessment years 2000-2001and 2001-2002 by taxing bonus shares received by the Company during the above mentioned periods resultingin an additional tax liability of Rupees 14.907 million. An appeal was filed before the Commissioner Inland Revenue(Appeals) who cancelled the amended order passed by the Additional Commissioner and allowed relief to theCompany but the Tax Department had filed an appeal before the ATIR against the order of the Additional Commissioner,which has been decided in favour of the Company. However, the Company received another notice from AdditionalCommissioner for reassessment of the case in response to which the Company has filed a constitutional petitionin Sindh High Court against such notice.

iii) While finalizing the assessment for the assessment year 2002-2003, DCIR has reduced the business loss for theyear by Rupees 88.180 million by adjusting the dividend income against this loss. The Company maintains that itis entitled to carry the gross loss forward for adjustment against the future taxable income and dividend incomefor the year should be taxed separately at reduced rate. The appeals of the Company in this respect have beenrejected by the Commissioner Inland Revenue (Appeals), the ATIR and the Sindh High Court. The Company hasfiled a reference application with the Supreme Court of Pakistan. The management is confident that the matter willeventually be decided in favor of the Company and has consequently not made any provision against the additionaltax liability of Rupees 26.455 million which may arise in this respect.

iv) The Tax Authorities have also amended the assessments for tax years 2003 to 2007 on the ground that the Companyhas not apportioned management and general administration expenses against capital gain and dividend income.The Company has filed constitution petition in the High Court of Sindh against the amendment in the assessmentorder. The Company may be liable to pay Rupees 5.881 million in the event of decision against the Company, outof which Rupees 2.727 million have been provided resulting in a shortfall of Rupees 3.154 million.

v) The Taxation Officer has passed an order in the tax years 2005 and 2006 under section 221 of the Income TaxOrdinance, 2001 (the Ordinance) levying minimum tax liability aggregating to Rupees 38.358 million. An appealwas filed before the Commissioner Inland Revenue (Appeals) who upheld the order of the Taxation Officer. TheCompany has filed an appeal before the ATIR which is yet to be heard.

vi) The Company received a notice from Additional Commissioner Inland Revenue pertaining to the amendment oftax year 2008. Amongst others, the Additional Commissioner raised an issue with respect to the claim of exemptionclaimed on capital gains on listed securities by way of incorrect application of the provisions of law. The Companypreferred to contest this matter by way of filing a constitutional petition before Sindh High Court. The court hasordered for stay of proceedings.

Pending resolution of the above-mentioned appeals filed by the Company, no provision has been made in theseunconsolidated financial statements for the aggregate amount of Rupees 86.938 million (2010: 88.201 million) as themanagement is confident that the eventual outcome of the above matters will be in favor of the Company.

9.2 Commitments

There were no capital or other commitments as at 31 December 2011 (2010: Nil).

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Rupees in thousand

31 December 2011 31 December 201010. CASH AND BANK DEPOSITS Note

Cash and other equivalents

Cash in hand 1,817 3,002Cheques in transit 19,749 56,391

21,566 59,393Current and other accounts

Current accounts 239,015 170,703Savings accounts 1,176,192 889,894

1,415,207 1,060,597Deposits maturing within 12 months

Fixed and term deposits 10.1 942,194 1,584,8272,378,967 2,704,817

10.1 These include fixed deposits amounting to Rupees 166.947 million (AED 6.844 million) [2010: 158.536 million (AED6.795 million)] kept in accordance with the requirements of Insurance Regulations applicable to the UAE branches forthe purpose of carrying on business in United Arab Emirates. These also include liens against cash deposits of Rupees9.076 million (2010: Rupees 4.824 million) with banks in Pakistan essentially in respect of guarantees issued by thebanks on behalf of the Company for claims under litigation filed against the Company.

10.2 Cash and bank deposits include an amount of Rupees 745.929 million (2010: Rupees 803.040 million) held with relatedparties.

11. LOANS - considered good

Secured

Executives 11.2 3,273 4,108Employees 11.2 24,691 35,646

27,964 39,754Less: Recoverable within one year shown under sundry receivables

Executives 18 1,311 3,684Employees 18 9,478 13,984

10,789 17,66817,175 22,086

11.1 Loans to employees are granted in accordance with the terms of their employment for the purchase of vehicles,purchase / construction of houses and for other purposes as specified in the SEC (Insurance) Rules, 2002. Theseloans are recoverable in monthly installments over various periods and are secured by registration of vehicles, depositof title documents of property with the Company and against provident fund balances of the employees. The loans areinterest free except for those granted for the purchase / construction of houses which carry interest at the rate of 5%(2010: 5%) per annum.

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11.2 Reconciliation of carrying amount of loans

Opening balance 4,108 35,646 39,754 1,990 43,779 45,769 Disbursements 4,270 22,382 26,652 7,552 24,439 31,991Repayments (5,105) (33,337) (38,442) (5,434) (32,572) (38,006)Closing balance 3,273 24,691 27,964 4,108 35,646 39,754

Rupees in thousand

31 December 2011 31 December 201012. INVESTMENTS Note

In related partiesAvailable-for-sale

Marketable securities 12.3 6,119,613 5,724,324 Less: Provision for impairment in value of investments (12,085) -

6,107,528 5,724,324

Investment in Subsidiary - Adamjee LifeAssurance Company Limited 294,065 294,065 Less: Provision for impairment in value of investment (91,850) -

202,215 294,065 Investment in Associates- Lalpir Power Limited 412,796 412,796 - Pakgen Power Limited - Listed 355,448 412,796 Less: Provision for impairment in value of investments (66,841) -

701,403 825,592 7,011,146 6,843,981

OthersAvailable-for-sale

Marketable securities 12.3 3,041,835 2,973,083 Less: Provision for impairment in value of investments (601,250) (410,066)

2,440,585 2,563,017 9,451,731 9,406,998

12.1 On 31 December 2011, the fair value of available-for-sale securities was Rupees 9,556.734 million (2010: Rupees10,003.082 million). As per the Company's accounting policy, available-for-sale investments are stated at lower of costor market value (market value being taken as lower if the reduction is other than temporary). However, InternationalAccounting Standard (IAS) 39, "Financial Instruments: Recognition and Measurements" dealing with the recognitionand measurement of financial instruments requires that these instruments should be measured at fair value. Accordingly,had these investments been measured at fair value, their carrying value as at 31 December 2011 would have beenhigher by Rupees 105.003 million (2010: higher by Rupees 596.084 million).

2011

Executives Others Total

2010


Rupees in thousand

84


12.2 Reconciliation of provision for impairment in value of investments

Opening provision 410,066 541,300Charge / (Reversal) for the year 361,960 (128,882)Written off - (2,352)Closing provision 772,026 410,066

Rupees in thousand


12.3 Available-for-sale

In related parties:- Listed shares 4,767,708 (12,085) 4,755,623 4,690,300- Mutual Fund Certificates 1,351,905 - 1,351,905 1,034,024- Investment in Subsidiary - Adamjee Life

Assurance Company Limited 294,065 (91,850) 202,215 294,065- Investment in Associates

Lalpir Power Limited 412,796 - 412,796 412,796Pakgen Power Limited 355,448 (66,841) 288,607 412,796

12.3.1 7,181,922 (170,776) 7,011,146 6,843,981Others:- Listed shares 12.3.2 2,749,968 (600,952) 2,149,016 2,223,347- Term Finance Certificates 12.3.3 130,445 (298) 130,147 160,947- Mutual Fund Certificates 12.3.4 36,041 - 36,041 56,101- NIT Units 161 - 161 161- Government treasury bills 105,456 - 105,456 - - Pakistan Investment Bonds 19,764 - 19,764 122,461

3,041,835 (601,250) 2,440,585 2,563,017 10,223,757 (772,026) 9,451,731 9,406,998

Rupees in thousand

31 December 2011 31 December2010

CarryingValue

CarryingValue

Provisionthere againstCost

Note

12.3.1 Related parties Cost Cost

Rupees in thousand

31 December 2011 31 December 2010No. of Shares / CertificatesFacevalue Company's name

31 December2011

31 December2010

Rupees

1,258,650 1,258,650 10 Nishat Mills Limited 34,211 34,211[Equity held 0.36% (2010: 0.36%)]

115,500 115,500 10 Hub Power Company Limited 3,224 3,224[Equity held 0.01% (2010: 0.01%)]

1,407,944 1,407,944 10 D.G. Khan Cement Company Limited 38,878 38,878[Equity held 0.39% (2010:0.39% )]

26,037,715 23,263,378 10 MCB Bank Limited 4,691,395 4,613,987[Equity held 3.42% (2010: 3.06%)]

4,767,708 4,690,300

25,631,181 29,766,527 10 Pakgen Power Limited[Equity held 6.89% (2010: 8%)] 355,448 412,796

5,123,156 5,103,096Investment in subsidiary-unlisted29,406,493 29,406,493 10 Adamjee Life Assurance Company

Limited [Equity held 55% (2010: 55%)] 294,065 294,065

27,624,635 27,624,635 10 Lalpir Power Limited [Equity held 8.00% (2010: 8.00% )] 412,796 412,796

706,861 706,861

Listed Shares:

Investment in an Associate-listed

Investment in an Associate-unlisted

85


Mutual Fund Certificates Cost Cost

Rupees in thousand


8,323,906 6,393,810 100 MCB Dynamic Cash Fund 809,040 618,402[Units held 15.69% (2010: 13%)]

5,478,668 3,931,583 100 MCB Cash Management Optimizer Fund 542,865 400,622[Units held 7.27% (2010: 5.22%)]

- 152,790 100 MCB Sarmaya Mehfooz Fund 1 - 15,000[Units held Nil (2010: 2.43%)]

1,351,905 1,034,024

12.3.2 Other - listed sharesInvestment Bank/ Investment Companies /Security Companies

2,310,840 - 10 Arif Habib Investments Limited 47,086 - Commercial Banks

1,573,951 1,309,570 10 Allied Bank Limited 75,492 67,2181,684,247 1,531,134 10 Askari Bank Limited 71,871 71,8716,202,355 6,582,322 10 Bank Al-Habib Limited 130,982 166,807

- 837,178 10 Bank Alfalah Limited - 25,346 293,299 266,636 10 Habib Bank Limited 38,447 38,4473,901,899 3,724,444 10 Habib Metropolitan Bank Limited 87,327 100,0265,509,052 1,427,242 10 National Bank of Pakistan 319,034 164,683

- 284,644 10 Soneri Bank Limited - 8,1023,830,544 3,830,544 10 United Bank Limited 296,886 296,886

Insurance15,375 15,375 10 EFU General Insurance Company Limited 1,081 1,081

305,188 196,579 10 International General Insurance Company of Pakistan 22,888 22,888286,843 286,843 10 Pakistan Reinsurance Company Limited 6,326 6,326

Textile Spinning400,000 400,000 10 Hira Textile Mills Limited 5,000 5,000

Power Generation & Distribution85,000 85,000 10 Kot Addu Power Company Limited 3,913 3,913

Oil and Gas Marketing Companies110,000 110,000 10 Pakistan State Oil Company Limited 48,178 48,178

- 157,100 10 Shell Gas LPG Pakistan Limited - 1,749- 174,916 10 Shell Pakistan Limited - 36,607

2,011,905 1,916,100 10 Sui Northern Gas Pipelines Limited 127,666 127,666Oil and Gas Exploration Companies

100,000 790,687 10 Oil and Gas Development Company Limited 10,671 84,376483,585 427,171 10 Pakistan Oilfields Limited 140,624 101,084

1,208,766 1,483,355 10 Pakistan Petroleum Limited 178,308 229,779Engineering

1,398,823 1,398,823 10 International Industries Limited 77,490 77,490Automobile Assembler

301,378 301,378 5 Al-Ghazi Tractors Limited 43,030 43,030394,544 394,544 10 Millat Tractors Limited 35,335 35,335

Cables and Electrical Goods326,128 326,128 10 Pakistan Cables Limited 27,717 27,717171,930 171,930 10 Siemens (Pakistan) Engineering Company Limited 135,531 135,531

Fertilizer- 135,868 10 Engro Corporation - 24,223

1,936,906 704,078 10 Fauji Fertilizer Bin Qasim 85,611 23,7602,763,199 2,083,516 10 Fauji Fertilizer Company Limited 243,440 151,388

- 168,494 10 Fatima Fertilizer Company Limited - 1,312Pharmaceutical

1,242,596 1,242,596 10 Abbot Laboratories Pakistan Limited 151,883 151,883814,172 707,976 10 GlaxoSmithKline Pakistan Limited 84,811 84,811

No. of Shares / CertificatesFacevalue Company's name

31 December2011

31 December2010

Rupees

86

No. of Shares / CertificatesFacevalue Company's name

31 December2011

31 December2010

Rupees


Chemical

Rupees in thousand


110,401 88,321 10 Clariant Pakistan Limited 11,762 11,76241,400 41,400 10 ICI Pakistan Limited 8,561 8,561

880,000 800,000 10 Arif Habib Corporation Limited 98,981 98,981

Food and Personal Care Products

706,850 642,592 10 Murree Brewery Company Limited 34,565 34,56532,783 32,783 10 Nestle Pakistan Limited 18,980 18,98054,870 54,870 10 Rafhan Maize Products Limited 44,644 44,64426,336 26,336 50 Unilever Pakistan Limited 35,847 35,847

2,749,968 2,617,853

12.3.3 Others-Term Finance Certificates

3,992 3,993 5,000 Allied Bank Limited (05/11/2006) 19,960 19,968 9,977 9,981 5,000 Bank Alfalah Limited (25/11/ 2005) 49,885 49,904

2,998 2,999 5,000 Bank Alfalah Limited (02/12/ 2009) 14,988 14,994 - 750 5,000 IGI Investment Bank Limited (10/07/2006) - 3,749 998 1,997 5,000 Jahangir Siddiqui and Company Limited (21/11/ 2006) 4,991 9,984 167 500 5,000 Orix Leasing Pakistan Limited (25/05/ 2007) 833 2,498 2,995 4,992 5,000 Pakistan Mobile Communication Limited (31/05/ 2006) 14,976 24,960 1,970 2,955 5,000 Royal Bank of Scotland Limited (10/02/ 2005) 9,848 14,774 - 375 5,000 Searle Pakistan Limited (9/03/2006) - 1,874 2,993 3,991 5,000 Soneri Bank Limited (5/05/2005) 14,964 19,956

130,445 162,661

12.3.4 Others-Mutual Fund Certificates

Open End - Mutual Funds

1,403,277 1,246,785 100 ABL Income Fund 10,000 10,000 6,835 6,341 500 Atlas Income Fund 2,725 2,725

- 65,561 100 AMZ Plus Income Fund - 4,843 244,386 227,020 100 Meezan Islamic Income Fund 10,000 10,000 1,172,613 1,065,013 100 NIT Government Bond Fund 10,000 10,000 31,737 50,708 100 Crosby Phoenix Fund 3,316 5,157

Close End - Mutual Funds

- 2,677,937 10 JS Growth Fund - 22,605- 400,000 10 Pakistan Strategic Allocation Fund - 4,000

36,041 69,330

Cost Cost

87


Rupees in thousand


13. PREMIUMS DUE BUT UNPAID - Unsecured

Considered good 3,568,167 4,546,222Considered doubtful 309,821 199,015

3,877,988 4,745,237Less: Provision for doubtful balances 13.1 (309,821) (199,015)

3,568,167 4,546,22213.1 Reconciliation of provision for doubtful balances

Opening provision 199,015 119,530Exchange loss 3,735 274Charge for the year 661,627 86,867Written off during the year (554,556) (7,656)Closing provision 309,821 199,015

13.2 Premiums due but unpaid include an amount of Rupees 534.000 million (2010: Rupees 412.000 million) held with related parties.

14. AMOUNTS DUE FROM OTHER INSURERS / REINSURERS - Unsecured

Considered good 679,631 993,584Considered doubtful 276,327 30,000

955,958 1,023,584Less: Provision for doubtful balances 14.1 (276,327) (30,000)

679,631 993,584

14.1 Reconciliation of provision for doubtful balances

Opening provision 30,000 30,000Charge for the year 270,000 -Written off during the year (23,673) -Closing provision 276,327 30,000

15. ACCRUED INVESTMENT INCOME

Return accrued on Term Finance Certificates 2,242 3,402Return accrued on Treasury Bills 10,217 -Return accrued on Pakistan Investment Bonds 757 2,047Dividend income- associated undertakings - -- others 3,164 11,502

3,164 11,502Return on deposit accounts- associated undertakings - 11,847 - others 5,246 4,647

5,246 16,494 21,626 33,445

16. REINSURANCE RECOVERIES AGAINST OUTSTANDING CLAIMS

These are unsecured and considered to be good.

17. PREPAYMENTS

Prepaid reinsurance premium ceded 1,959,553 1,774,525Others 74,210 54,587

2,033,763 1,829,112

Note

88


Rupees in thousand


18. SUNDRY RECEIVABLES

Considered goodCurrent portion of long-term loans

Executives 11 1,311 3,684 Employees 11 9,478 13,984Other advances 120,992 104,848Staff Gratuity Fund 18.1.1 14,730 53,818Security deposits 17,749 17,729Stationery in hand 4,716 4,716Receivable from Employees' Provident Fund 1,720 1,737Sundry debtors 6,140 92,568

176,836 293,084Miscellaneous 28,322 23,987

205,158 317,071

18.1 Staff Gratuity Fund

The Company operates an approved funded gratuity scheme for all employees. Actuarial valuation is carried out every year and thelatest valuation was carried out as at 31 December 2011.

The following significant assumptions have been used for valuation of this scheme:

- Valuation discount rate - Expected rate of increase in salary level- Rate of return on plan 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:

Present value of defined benefit obligation at the end of the year (196,137) (215,970)Fair value of plan assets at the end of the year 145,205 186,219

(50,932) (29,751)Net unrecognized actuarial losses 65,662 83,569Net assets 14,730 53,818

18.1.1 Amounts recognized in the balance sheet

Liabilities - -Assets 14,730 53,818Net assets 14,730 53,818

18.1.2 The amounts charged in profit and loss are as follows:

Current service cost 16,291 16,301Interest on obligation 26,386 21,783Expected return on plan assets (20,300) (29,432)Curtailment cost 4,039 -Actuarial losses recognized during the year 12,672 2,812Total gratuity expense for the year for funded obligation 39,088 11,464

Rupees in thousand


Note

Rate per annum

2011 2010

13.00% 14.25%10.75% 12.00%13.00% 14.25%

89


Rupees in thousand


18.1.3 Actual return on plan assets 22,723 25,687

18.1.4 Changes in present value of the defined benefit obligation

Present value of defined benefit obligation at the beginning of the year 215,970 201,262Current service cost 16,291 16,301Interest cost 26,386 21,783Curtailment cost 4,039 -Actuarial (gain) / losses (2,812) 39,329Benefits paid (63,737) (62,705)Present value of defined benefit obligation at the end of the year 196,137 215,970

18.1.5 Changes in the fair value of plan assets

Fair value of plan assets at the beginning of the year 186,219 223,237Expected return 20,300 29,432Actuarial gain / (loss) 2,423 (3,745)Benefits paid (63,737) (62,705)Fair value of plan assets at the end of the year 145,205 186,219

The Company is not expected to contribute to the gratuity fund in 2012 due to unrecognized actuarial losses.

18.1.6 Fund Investment

Government Bonds 9,872 6.80 - -Shares and deposits 92,172 63.48 93,350 50.13Unit Trusts 52,555 36.19 94,692 50.85Creditors (9,394) (6.47) (1,823) (0.98)

145,205 100 186,219 100

18.1.7 Amounts / percentages for the current and previous four periods

The Company amortizes gains and losses over the expected remaining service of current plan members. The following table showsobligation at the end of each year and the proportion thereof resulting from experience loss during the year. Similarly, it shows planassets at the end of the year and proportion resulting from experience gain during the year.

2011 2010 2009 2008 2007

Defined benefit obligation 196,137 (215,970) (201,262) (161,130) (173,663)Plan assets (145,205) 186,219 223,237 250,143 282,517Surplus / (Deficit) 50,932 (29,751) 21,975 89,013 108,854

Experience adjustments on plan liabilities -1% 18% 25% -10% -2%Experience adjustments on plan assets 2% -2% -8% -15% 10%

19. FIXED ASSETS

Owned assets - tangible 19.1 804,684 909,473 - intangible 19.1 37,068 48,475

841,752 957,948Leased assets 19.1 87,740 143,443Capital work in progress 19.2 133,378 -

1,062,870 1,101,391

Rupees in thousand



(Rupees in thousand) % (Rupees in thousand) %

Rupees in thousand

Note

90


At 01 January 2011Cost 318,742 105,752 341,634 633,492 198,418 1,598,038 85,893 1,683,931 177,115 177,115 1,861,046Accumulated depreciation /amortisation 37,270 43,463 144,382 317,302 146,148 688,565 37,418 725,983 33,672 33,672 759,655Net book value 281,472 62,289 197,252 316,190 52,270 909,473 48,475 957,948 143,443 143,443 1,101,391

Year ended 31 December 2011Opening net book value 281,472 62,289 197,252 316,190 52,270 909,473 48,475 957,948 143,443 143,443 1,101,391Additions 7,752 16,281 59,012 20,536 21,575 125,156 5,673 130,829 - - 130,829

Disposals / Write offCost 6,568 18,750 22,798 129,420 57,907 235,443 - 235,443 50,009 50,009 285,452Depreciation / amortisation 3,935 10,660 10,680 92,459 52,701 170,435 - 170,435 12,311 12,311 182,746

2,633 8,090 12,118 36,961 5,206 65,008 - 65,008 37,698 37,698 102,706

Depreciation / amortisation chargefor the year 14,860 10,625 32,973 88,315 18,164 164,937 17,080 182,017 18,005 18,005 200,022Closing net book value 271,731 59,855 211,173 211,450 50,475 804,684 37,068 841,752 87,740 87,740 929,492

At 31 December 2011Cost 319,926 103,283 377,848 524,608 162,086 1,487,751 91,566 1,579,317 127,106 127,106 1,706,423Accumulated depreciation /amortisation 48,195 43,428 166,675 313,158 111,611 683,067 54,498 737,565 39,366 39,366 776,931Net book value 271,731 59,855 211,173 211,450 50,475 804,684 37,068 841,752 87,740 87,740 929,492

Depreciation rate per annum 10% 15% 15% 15% &16.67% 30% 20% 15%

Rupees in thousand

Owned assets Leased assets

Tangible Intangible Tangible

Computersand relatedaccessories

Totalfixed

assetsTotalleased

Motorvehicles

TotalownedComputer

software

Totaltangibleassets

Machineryand

equipment

Motorvehicles

Furnitureand

fixtures

Land &Buildings

2011



DisposalsCost 1,477 1,709 57,629 3,062 301 64,178 - 64,178 27,166 27,166 91,344Depreciation / amortisation 859 1,093 17,093 1,507 178 20,730 - 20,730 4,167 4,167 24,897

618 616 40,536 1,555 123 43,448 - 43,448 22,999 22,999 66,447

Depreciation / amortisation chargefor the year 8,609 6,589 32,897 90,228 18,286 156,609 12,946 169,555 28,134 28,134 197,689Closing net book value 281,472 62,289 197,252 316,190 52,270 909,473 48,475 957,948 143,443 143,443 1,101,391

At 31 December 2010Cost 318,742 105,752 341,634 633,492 198,418 1,598,038 85,893 1,683,931 177,115 177,115 1,861,046Accumulated depreciation /amortisation 37,270 43,463 144,382 317,302 146,148 688,565 37,418 725,983 33,672 33,672 759,655Net book value 281,472 62,289 197,252 316,190 52,270 909,473 48,475 957,948 143,443 143,443 1,101,391

Depreciation rate per annum 10% 15% 15% 15% &16.67% 30% 20% 15%

19.1 The following is a statement of operating fixed assets:

2011

Rupees in thousand




Totalfixed

assetsTotalleased

Motorvehicles

TotalownedComputer

software

Totaltangibleassets

Machineryand

equipment

Motorvehicles

Furnitureand

fixtures

Land &Buildings

20112010

91


19.1.1 Detail of tangible assets disposed / written off during the year are as follows:

Land & BuildingsHafeez Centre Premises Lahore 1,283 768 515 7,500 Auction Sheikh Sajid - LahoreGlamour Centre Premises Lahore 1,065 638 427 2,200 Auction Humera Muneer - LahoreLatif Centre Premises Lahore 1,100 660 440 2,950 Auction Syed Aadil Gillani - LahoreEden Garden Premises No. 302 and 326 Lahore 3,120 1,869 1,251 6,500 Auction Hashim Aslam Butt - Lahore

6,568 3,935 2,633 19,150

Furniture & FixturesItems having book valuebelow Rupees 50,000 2,569 2,165 404 335 Items written off 16,181 8,495 7,686 -

18,750 10,660 8,090 335 Motor VehiclesOwnedToyota Corolla AJJ-271 1,309 732 577 700 Negotiation Mazhar Saleem - Company employeeSuzuki Cultus AMU-987 600 320 280 490 Negotiation Jameel Khan - Company employeeSuzuki Cultus 2007 ARM-589 780 275 505 550 Negotiation Edris Goawala - Company employeeToyota Saloon SE AFT-571 1,169 816 353 353 Negotiation Muhammad Ali Zeb - Karachi-Ex-employeeToyota Corolla XLI 2003 AFK-543 675 383 292 333 Negotiation Gul Munawar Khan - Company employeeHonda Civic VTI 2005 AHE-033 1,000 541 459 530 Negotiation Nadeem Rehman - Company employeeSuzuki Cultus 2008 ARH-625 754 308 446 300 Negotiation Asif Jabbar - Company employeeHonda Civic Prosmatic Oriel AST-327 1,920 566 1,354 1,238 Negotiation Mudassar Zubair Mirza - Karachi Ex-employeeSuzuki Mehran 2010 ASX-506 525 96 429 480 Claim Settled M. Farooq Shakoor - KarachiSuzuki Mehran 2010 ASX-508 525 112 413 415 Negotiation Syed Adnan Iqbal - KarachiSuzuki Mehran 2010 ASZ-214 509 136 373 341 Negotiation Syed Mobin Ahmed - Company employeeSuzuki Cultus AQA- 294 632 262 370 370 Negotiation Satwat Butt - Company employeeHonda City LZX-9997 1,288 759 529 1,076 Auction Adnan Wahed - LahoreToyota Corolla XLI LWA-5225 1,354 376 978 1,075 Auction Adnan Wahed - LahoreHonda City MNA-3088 975 271 704 871 Auction Muhammad Ashraf - LahoreSuzuki Cultus LZN-9871 350 97 253 606 Auction Nadeem Aziz Naz - LahoreHonda City 1197 841 464 377 869 Auction Muhammad Ashraf - LahoreHonda City 2005 LEB-5358 831 514 317 810 Auction Nadeem Aziz Naz - LahoreSuzuki Cultus LED-7721 610 268 342 668 Auction Malik Muhammad Ashraf - LahoreHonda City LZV-8185 885 522 363 718 Auction Miqdad Azam - LahoreHonda City LZV-8229 885 522 363 758 Auction Shakeel - LahoreSuzuki Cultus LEC-4613 600 264 336 662 Auction Muhammad Irfan - LahoreHonda City LEC-2885 863 380 483 972 Auction Asim Hanif - LahoreToyota Corolla LZW-5225 885 540 345 686 Auction Fawad Malik - LahoreHonda City LWA-9307 1,038 577 461 1,056 Auction Dilawar Hussain - LahoreSuzuki Cultus JH-967 492 318 174 522 Auction Haji Meraj Din - Islamabad

Items having book value below Rupees 50,000 503 261 242 297 Auction22,798 10,680 12,118 17,746

LeasedSuzuki Cultus LEC-09-1962 851 172 679 710 Negotiation Hakim Akbar - Company employeeSuzuki Mehran LEC-09-7712 543 110 433 421 Negotiation Ahmar Butt - Company employeeSuzuki Mehran ASA-387 534 120 414 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASA-169 534 103 431 430 Auction Yasin Anwar - Karachi Suzuki Mehran ARX-619 534 120 414 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASC-479 534 103 431 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASD-609 534 103 431 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASA-391 534 120 414 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASD-602 535 102 433 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASA-638 535 120 415 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASC-974 535 103 432 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASA-748 535 120 415 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASC-539 534 103 431 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASA-536 534 120 414 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASA-513 534 120 414 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASA-591 534 120 414 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASA-504 534 120 414 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASD-435 534 103 431 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASD-463 534 103 431 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASE-314 534 103 431 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASD-438 534 103 431 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASA-506 534 125 409 451 Negotiation Owais bin Alam - Karachi Ex-employeeToyota Corolla GLI ASM-647 1,389 267 1,122 1,163 Negotiation Salman Hassan Ali - Karachi Ex-employeeSuzuki Mehran ASC-485 534 114 420 438 Negotiation Mansoor Ahmed - Company employee

Rupees in thousand

Description Cost Accumulateddepreciation

Bookvalue

Saleproceeds

Mode ofdisposal Particulars of purchaser

92


Suzuki Cultus ASC-839 844 180 664 695 Negotiation Mazahir Akbar - Company employeeSuzuki Mehran ASA-379 534 135 399 425 Negotiation Shahzad Kasumbi - Karachi Ex-employeeSuzuki Mehran ASA-168 534 119 415 436 Claim Settled Mohammad Yousuf Jamal - KarachiSuzuki Mehran ASB-491 529 118 411 446 Claim Settled Abdul Rahim Khan - KarachiSuzuki Cultus ASE-509 805 181 624 693 Claim Settled Syed Jafar Ali - KarachiSuzuki Cultus LEC-09-3749 813 174 639 645 Negotiation Jasim Ahmed Waheed-Karachi Ex-employeeSuzuki Mehran ASA-578 534 135 399 525 Claim Settled Muhammad Saleem Haroon - KarachiSuzuki Mehran ASC-493 534 124 410 441 Negotiation Manzoor Hussain - KarachiSuzuki Mehran LEB-09-8973 540 142 398 435 Negotiation Abdur Rehman - Company employeeSuzuki Mehran ASD-603 529 123 406 431 Negotiation Anwar Ismail (late) - Ex-employeeSuzuki Mehran ASA-519 534 146 388 412 Negotiation Ali Ghufran Siddiqui - Company employeeSuzuki Mehran LEB-09-8968 541 148 393 419 Negotiation Maqsood ur Rehman - Company employeeSuzuki Cultus ASA-148 839 203 636 657 Negotiation Jahanzeb Khan - Company employeeSuzuki Cultus ASD-598 805 197 608 657 Negotiation Salman Qaiser - Karachi Ex-employeeSuzuki Cultus ASE-510 805 197 608 657 Negotiation Owais - KarachiSuzuki Mehran ASA-165 534 135 399 414 Negotiation Mudassar Raza Lakhani - Company employeeSuzuki Mehran ASA-382 534 151 383 412 Negotiation Muhammad Ashraf Khan - Ex-employeeToyota Corolla ALTIS ASL-201 1,791 418 1,373 1,446 Negotiation Syed Murtaza Shah - Ex-employeeSuzuki Mehran ASE-316 534 141 393 408 Negotiation Shahab Hussain - Karachi Ex-employeeSuzuki Mehran LEC-09-1965 535 141 394 423 Negotiation Asher Mazhar - KarachiToyota Corolla GLI ASM-649 1,389 324 1,065 1,111 Negotiation Ghulam Qadir - Karachi Ex-employeeSuzuki Mehran ASC-537 534 141 393 414 Negotiation Rehan Khan - KarachiSuzuki Mehran ASA-534 534 156 378 400 Negotiation Behrooz M. KhodadadI - Ex-employeeHonda Civic VTI PTSR JK-099 1,878 458 1,420 1,478 Negotiation Irfan ul Haq - Company employeeSuzuki Cultus ASC-749 844 231 613 629 Negotiation Haroon - Karachi Ex-employeeSuzuki Mehran ASA-619 534 146 388 402 Negotiation Jabbar Kadir - Karachi Ex-employeeHonda Civic VTI PT SR ASP-285 1,882 478 1,404 1,435 Negotiation Nadeem Ahmad - Company employeeSuzuki Mehran ASC-481 534 146 388 402 Negotiation Danish Hussain - Karachi Ex-employeeSuzuki Mehran ASB-018 534 146 388 402 Negotiation Nilofer A. Malik - KarachiSuzuki Cultus LEC-09-3752 813 232 581 641 Negotiation Pervez Rasool Malik - Company employeeHonda Civic VTI PT SR LED-09-8101 1,868 475 1,393 1,427 Negotiation Adnan Chaudhary - KarachiSuzuki Mehran ASA-359 534 120 414 414 Negotiation Shams-ur-Rehman - KarachiSuzuki Mehran ASA-184 534 166 368 389 Negotiation Shahla Yasmeen - Company employeeSuzuki Mehran ASL-307 520 138 382 391 Negotiation Sarwat Jahan - Company employeeSuzuki Mehran LEB-09-8945 541 168 373 395 Negotiation Syed Walayat Ali - Company employeeSuzuki Mehran ASD-610 534 151 383 431 Negotiation Ahsan Ali - Company employeeToyota Corolla GLI ASP-790 1,389 382 1,007 1,025 Negotiation Yawer Abbas - Karachi Ex-employee Suzuki Mehran ASA-376 534 172 362 378 Negotiation Syed Haider Hussain - Company employeeSuzuki Cultus ASD-471 805 245 560 587 Negotiation Faisal Mustafa Siddiqui - Company employeeSuzuki Mehran ASD-459 534 162 372 392 Negotiation Masood Akhtar Khan - Company employeeSuzuki Cultus ASA-703 804 229 575 608 Negotiation Zahiya Taufiq - Company employeeSuzuki Mehran ASC-561 529 150 379 385 Negotiation Mohammad Yousuf - Company employeeHonda Civic VTI PT SR ASQ-228 1,882 556 1,326 1,576 Negotiation Mansoor Ali Khan - Karachi Ex-employeeHonda Civic VTI PT SR LED-09-4345 1,876 534 1,342 1,370 Negotiation Mudassar Zubair Mirza - Karachi Ex-employee

50,009 12,311 37,698 39,512

Machinery & Equipment

3 AC, 1 Fridge and 1 Television 161 95 66 66 Negotiation Syed Murtaza Shah - KarachiDiesel Generator 275 103 172 92 Auction Rana Mukhtar Ahmed - LahoreGenerator 345 246 99 155 Negotiation Rana Mukhtar Ahmed - LahoreItems having book valuebelow Rupees 50,000 2,918 2,094 824 917 Items written off 125,721 89,921 35,800 -

129,420 92,459 36,961 1,230

Computer

Items having book valuebelow Rupees 50,000 22,249 21,790 459 371 Items written off 35,658 30,911 4,747 -

57,907 52,701 5,206 371

Grand Total 285,452 182,746 102,706 78,344

19.2 Capital work in progress represents capital expenditure in respect of Dubai Branch office premises.

Rupees in thousand


Bookvalue

Saleproceeds


93


Rupees in thousand


20. EXPENSES

Salaries and wages 785,321 803,256Rent, rates and taxes 58,126 65,252Utilities 31,632 40,909Communication 30,474 32,479Printing and stationery 32,402 29,127Traveling and entertainment 52,561 51,049Repairs and maintenance 142,698 167,308Advertisement and sales promotion 52,328 48,285Depreciation 19.1 23,535 -Amortization of intangible asset 19.1 17,080 12,946Others 3,180 4,200

1,229,337 1,254,811

21. OTHER INCOME

Income from financial assetsReturn on bank deposits 121,534 143,156Interest on loans to employees 463 852

Income from non financial assetsGain on sale of fixed assets 23,871 7,744Miscellaneous 10,750 19,487

156,618 171,239

22. GENERAL AND ADMINISTRATION EXPENSES

Salaries and wages 22.1 109,977 143,435Depreciation 19.1 159,407 184,743Repairs and maintenance 43,926 -Directors' fee 420 320Legal and professional expenses 80,075 60,659Auditors' remuneration 22.2 5,094 4,539Donations 22.3 3,510 2,163Provision for doubtful balances 951,627 86,866Sundry receivables written off 8,101 -Fixed assets written off 48,233 -Workers' welfare fund - 11,762Others 155,031 140,435

1,565,401 634,922

22.1 These include Rupees 65.443 million (2010: Rupees 38.122 million) in respect of staff retirement benefits.

22.2 Auditors' remuneration

Inside Pakistan:

Audit fee 1,997 1,815Half yearly review 385 350Other certifications 300 273Out of pocket expenses 396 360

3,078 2,798Outside Pakistan:

Audit fee 1,434 1,159Out of pocket expenses 582 582

2,016 1,7415,094 4,539

22.3 None of the directors or their spouses had any interest in the donee.

Note

94


Rupees in thousand


23. PROVISION FOR TAXATION

Current 23.1 89,276 77,163Deferred 23.2 (263,421) (19,481)

(174,145) 57,682

23.1 Relationship between tax expense and accounting profit

The relationship between tax expense and accounting profit cannot be given because the provision represents the final tax on dividendincome and capital gain.

23.2 Deferred tax effect due to temporary differences of:

Tax depreciation allowance 66,814 86,833Provision for gratuity (7,704) (6,064)Assets subject to finance lease 10,211 12,532Effect of minimum tax - (24,948)Carried forward tax losses (264,389) -

(195,068) 68,353Less: Opening balance 68,353 87,834

(263,421) (19,481)

24. EARNINGS PER SHARE - BASIC AND DILUTED

There is no dilutive effect on basic earnings per share which is based on: RestatedNet profit after tax for the year 132,177 484,131

(Number of shares)

Weighted average number of shares 123,704,544 123,704,544

Rupees

Basic earnings per share 1.07 3.91

25. REMUNERATION OF CHIEF EXECUTIVE OFFICER, DIRECTORS AND EXECUTIVES

Fee - 420 - 420 - 320 - 320Managerial remuneration 7,720 - 151,629 159,349 7,720 - 152,307 160,027Allowances and perquisites 3,885 - 112,800 116,685 3,885 - 113,998 117,883

11,605 420 264,429 276,454 11,605 320 266,305 278,230Number 2 10 130 142 1 10 112 123

25.1 In addition, the Chief Executive Officer and executives are also provided with free use of the Company's cars, certain householditems, furniture and fixtures and equipment in accordance with the policy of the Company.

Rupees in thousand

TotalExecutivesDirectorsChief

ExecutiveOfficer


ExecutiveOfficer

2011 2010

Note

95


Rupees in thousand


26. TRANSACTIONS WITH RELATED PARTIES

The Company has related party relationships with its associated companies, subsidiary company, employee benefit plans,keymanagement personnel and other parties. Transactions entered into with such related parties include the issuance of policiesto and disbursements of claims incurred by them and payments of rentals for the use of premises rented from them, etc.

There are no transactions with key management personnel other than as per their terms of employment. These transactionsare disclosed in notes 11, 18 and 25 to these unconsolidated financial statements. Particulars of transactions with the Company'sstaff retirement benefit schemes are disclosed in note 7.1 and 18. Investments in and balances outstanding with related partieshave been disclosed in the relevant notes to the unconsolidated balance sheet. Other transactions with related parties aresummarized as follows:

Premium underwritten 1,428,639 1,057,855Premium received 1,295,077 1,118,833Premium ceded 3,403 1,555Claims paid 3,134,676 547,722Rent paid 6,042 13,876Dividends received 577,720 318,526Dividends paid 110,271 104,227Income on deposit accounts 43,103 82,880

Bonus shares received 2,326,337 2,114,852Bonus shares issued - 4,008,442

Number of shares


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ADAMJEE INSURANCE COMPANY LIMITED97 ANNUAL REPORT 2011


Rupees in thousand


28. FINANCIAL AND INSURANCE RISK MANAGEMENT OBJECTIVES AND POLICIES

The Company's activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (including interest /mark-up rate risk, price risk and currency risk). The Company's overall risk management program focuses on the unpredictabilityof financial markets and seeks to minimize potential adverse effects on the financial performance. Overall risks arising fromthe Company's financial assets and liabilities are limited. The Company consistently manages its exposure to financial riskwithout any material change from previous period in the manner described in notes below. The Board of Directors has overallresponsibility for the establishment and oversight of Company's risk management framework. The Board is also responsiblefor developing the Company's risk management policies.

The individual risk wise analysis is given below:

28.1 Credit risk and concentration of credit risk

Credit risk is the risk that arises with the possibility that one party to a financial instrument will fail to discharge its obligationand cause the other party to incur a financial loss. The Company attempts to control credit risk by monitoring credit exposuresby undertaking transactions with a large number of counterparties in various sectors and by continually assessing the creditworthiness of counterparties.

Concentration of credit risk occurs when a number of counterparties have a similar type of business activities. As a result anychange in economic, political or other conditions would affect their ability to meet contractual obligations in similar manner.The Company's credit risk exposure is not significantly different from that reflected in these unconsolidated financial statements.The management monitors and limits the Company's exposure and makes conservative estimates of provisions for doubtfulassets, if any. The management is of the view that it is not exposed to significant concentration of credit risk as its financialassets are adequately diversified in entities of sound financial standing, covering various industrial sectors.

The carrying amount of financial assets represents the maximum credit exposure, as specified below:

Bank deposits 2,357,401 2,645,424Investments 9,451,731 9,406,998Premiums due but unpaid 3,568,167 4,546,222Amounts due from other insurers / reinsurers 679,631 993,584Salvage recoveries accrued 165,718 99,636Loans 27,964 39,754Accrued investment income 21,626 33,445Reinsurance recoveries against outstanding claims 3,799,366 6,253,202Sundry receivables 173,203 239,132

20,244,807 24,257,397

Provision for impairment is made for doubtful receivables according to the Company's policy. The impairment provision iswritten off when the Company expects that it cannot recover the balance due. During the year, receivables of Rupees 931.627million (2010: Rupees 86.867 million) were further impaired and provided for. The movement in the provision for doubtful debtaccount is shown in note 13.1 and 14.1.

The age analysis of receivables is as follows:Upto 1 year 3,158,516 4,011,3481-2 year & prior years 719,472 733,889

3,877,988 4,745,237

Rupees in thousand

2011 2010


Askari Bank Limited A-1+ AA PACRA 45 45

Bank Alfalah Limited A-1+ AA PACRA 315,456 42,917

Bank Al Habib Limited A-1+ AA+ PACRA - 7,572

Barclays Bank PLC, Pakistan P-1 Aa3 Moody's 100 100

Citibank N.A. P-1 A1 Moody's - 90,284

Habib Bank Limited A-1+ AA+ JCR-VIS 109,992 92,803

HSBC Bank Middle East Limited P-1 A1 Moody's 11,937 22,480

Industrial Development Bank of Pakistan - - - 646 776

KASHF Micro Finance Bank Limited A-3 BBB JCR-VIS 858 809

MCB Bank Limited A-1+ AA+ PACRA 745,929 825,796

National Bank of Pakistan A-1+ AAA JCR-VIS 296 7,732

Oman International Bank S.A.O.G. A-3 BBB JCR-VIS 2,256 2,130

Rozgar Micro Finance Bank Limited A-3 BB+ JCR-VIS 1,000 1,000

The Bank of Punjab A-1+ AA PACRA 3,779 -

Soneri Bank Limited A-1+ AA- PACRA 227 334

Standard Chartered Bank (Pakistan) Limited A-1+ AAA PACRA 8,909 6,982

Tameer Micro Finance Bank Limited A-1 A JCR-VIS 1,000 1,000

United Bank Limited A-1+ AA+ JCR-VIS 932,364 1,024,881

Zarai Taraqiati Bank Limited A-1+ AAA JCR-VIS 222,607 517,783

2,357,401 2,645,424

Rating Rating 2011 2010

Short term Long term Agency Rupees in thousand

The credit quality of amount due from other insurers (gross of provisions) can be assessed with reference to external credit ratingas follows:

A or above (including PRCL) 922,949 3,828,170 4,751,119 5,874,984

BBB 24,215 100,438 124,653 1,333,053

Others 8,794 36,476 45,270 68,749

Total 955,958 3,965,084 4,921,042 7,276,786

Amount due fromother insurers /

reinsurers

Reinsurance andother recoveries

againstoutstanding claims

2011 2010

Rupees in thousand

28.2 Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. Prudent liquidity risk

management implies maintaining sufficient cash and marketable securities and the availability of adequate funds through committed

credit facilities. The Company finances its operations through equity, borrowings and working capital with a view to maintaining an

appropriate mix between various sources of finance to minimize risk. The management follows an effective cash management

program to mitigate the liquidity risk.

The following are the contractual maturities of financial liabilities, including estimated interest payments on an undiscounted cash

flow basis:

The credit quality of Company’s bank balances can be assessed with reference to external credit rating as follows:



Financial liabilities

Provision for outstanding claims (including IBNR) 5,548,018 5,548,018 5,548,018 -

Amounts due to other insurers / reinsurers 1,151,088 1,151,088 1,151,088 -

Accrued expenses 158,185 158,185 158,185 -

Unclaimed dividend 33,495 33,495 33,495 -

Other creditors and accruals 1,281,142 1,281,142 1,281,142 -

Liabilities against assets subject to finance lease 58,567 69,865 27,809 42,056

8,230,495 8,241,793 8,199,737 42,056


Provision for outstanding claims (including IBNR) -restated 8,015,404 8,015,404 8,015,404 -

Amounts due to other insurers / reinsurers 1,581,965 1,581,965 1,581,965 -

Accrued expenses 147,995 147,995 147,995 -

Unclaimed dividend 29,121 29,121 29,121 -

Other creditors and accruals 1,280,630 1,280,630 1,280,630 -

Liabilities against assets subject to finance lease 107,637 137,609 39,312 98,297

11,162,752 11,192,724 11,094,427 98,297

Carryingamount

Contractualcash flow

Upto one yearMore thanone year

Rupees in thousand

2010

28.3 Market risk

Market risk means that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market

prices. The objective is to manage and control market risk exposures within acceptable parameters, while optimizing the

return. The market risks associated with the Company's business activities are interest / mark-up rate risk, price risk and

currency risk.

a) Interest / mark-up rate risk

Interest / mark-up rate risk is the risk that value of a financial instrument or future cash flows of a financial instrument will

fluctuate due to changes in the market interest / mark-up rates. Sensitivity to interest / mark-up rate risk arises from mismatching

of financial assets and liabilities that mature or repaid in a given period. The Company manages this mismatchment through

risk management strategies where significant changes in gap position can be adjusted. At the reporting date the interest /

mark-up rate profile of the Company's significant interest / mark-up bearing financial instruments was as follows:

Carryingamount

Contractualcash flow


Rupees in thousand

2011


Fixed rate financial instruments

Financial assets

Investments-PIBs and Treasury Bills 12% to 14% 14% to 16% 125,220 123,078

Loans 5% 5% 27,964 39,754

Floating rate financial instruments

Financial assets

Bank deposits 5% - 12.75% 2.5% - 15% 2,118,386 2,474,721

Investments -TFCs 13.5% - 16.5% 9.3% - 15.5% 130,147 162,661


Liabilities against assets subject to finance lease 3 month KIBOR plus 2% to 2.5 % 58,567 107,637

Rupees in thousand

2011 2010 2011 2010

Carrying amountsEffective interest rate (%)

Sensitivity analysis

The Company does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore, a change in

interest rate will not affect fair value of any financial instrument. For cash flow sensitivity analysis of variable rate instruments a hypothetical

change of 100 basis points in interest rates at the reporting date would have decreased / (increased) profit for the year by the amounts

shown below. It is assumed that the changes occur immediately and uniformly to each category of instrument containing interest rate risk.

Variations in market interest rates could produce significant changes at the time of early repayments. For these reasons, actual results might

differ from those reflected in the details specified below. The analysis assumes that all other variables remain constant.

As at 31 December 2011 - Fluctuation of 100 bps

Cash flow sensitivity-variable rate financial liabilities (586) 586

Cash flow sensitivity-variable rate financial assets 22,485 (22,485)

As at 31 December 2010 - Fluctuation of 100 bps

Cash flow sensitivity-variable rate financial liabilities (1,076) 1,076

Cash flow sensitivity-variable rate financial assets 26,374 (26,374)

Rupees in thousand

Increase Decrease

Profit and loss



b) Price risk

Price risk represents the risk that the fair value of a financial instrument will fluctuate because of changes in the market prices

(other than those arising from interest / mark-up rate risk or currency risk), whether those changes are caused by factor specific

to the individual financial instrument or its issuer, or factors affecting all or similar financial instrument traded in the market.

The Company is exposed to equity price risk that arises as a result of changes in the levels of KSE-Index and the value of

individual shares. The equity price risk exposure arises from the Company's investments in equity securities for which prices

in the future are uncertain. The Company policy is to manage price risk through selection of blue chip securities.

The Company's strategy is to hold its strategic equity investments on long term basis. Thus, Company is not affected

significantly by short term fluctuation in its strategic investments provided that the underlying business, economic and

management characteristics of the investees remain favorable. The Company strives to maintain above average levels of

shareholders' capital to provide a margin of safety against short term equity price volatility. The Company manages price risk

by monitoring exposure in quoted equity securities and implementing the strict discipline in internal risk management and

investment policies.

The Company has investments in quoted equity securities amounting to Rupees 7,873.124 million (2010: Rupees 7,308.153

million) at the reporting date. The carrying value of investments subject to equity price risk are, in almost all instances, based

on quoted market prices as of the reporting date. Market prices are subject to fluctuation which may result from perceived

changes in the underlying economic characteristics of the investee, the relative price of alternative investments and general

market conditions.


As the entire investment portfolio has been classified in the available-for-sale category, a 10% increase / decrease in redemption

value and share prices at year end would have increased / decreased impairment loss of investment recognized in profit and

loss account as follows:

Rupees in thousand

Impact on profit before tax Impact on equity

2011

Effect of increase in share price 124,256 111,830

Effect of decrease in share price (767,152) (690,437)

2010

Effect of increase in share price 79,988 79,988

Effect of decrease in share price (90,729) (90,729)


c) Currency risk

Currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in

foreign exchange rates. The Company’s principal transactions are carried out in Pak Rupees and its exposure to foreign

exchange risk arises primarily with respect to AED and US Dollar. Financial assets and liabilities exposed to foreign exchange

risk amounted to Rupees 3,344.063 million (2010: Rupees 3,929.319 million) and Rupees 1,751.054 million (2010: Rupees

3,046.514 million), respectively, at the end of the year.

The following significant exchange rates were applied during the year:

Rupees per US Dollar

Average rate 86.39 85.16

Reporting date rate 89.60 85.70

Rupees per AED

Average rate 23.52 23.19

Reporting date rate 24.39 23.33

28.4 Insurance risk

The principal risk the Company faces under insurance contracts is that the actual claims and benefit payments or the timing

thereof, differ from expectations. This is influenced by the frequency of claims, severity of claims, actual benefits paid and

subsequent development of long-term claims. Therefore, the objective of the Company is to ensure that sufficient reserves

are available to cover these liabilities. The above risk exposure is mitigated by diversification across a large portfolio of

insurance contracts and geographical areas. The variability of risks is also improved by careful selection and implementation

of underwriting strategy guidelines, as well as the use of reinsurance arrangements. Further, strict claim review policies to

assess all new and ongoing claims, regular detailed review of claims handling procedures and frequent investigation of possible

fraudulent claims and similar procedures are put in place to reduce the risk exposure of the Company. The Company further

enforces a policy of actively managing and prompt pursuing of claims, in order to reduce its exposure to unpredictable future

developments that can negatively impact the Company.

Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision and are in

accordance with the reinsurance contracts.

Although the Company has reinsurance arrangements, it is not relieved of its direct obligations to its policyholders and thus

a credit exposure exists with respect to ceded insurance, to the extent that any reinsurer is unable to meet its obligations

assumed under such reinsurance agreements. The Company’s placement of reinsurance is diversified such that it is neither

dependent on a single reinsurer nor are the operations of the Company substantially dependent upon any single reinsurance

contract. Reinsurance policies are written with approved reinsurers on either a proportionate basis or non-proportionate basis.

The reinsurers are carefully selected and approved and are dispersed over several geographical regions.

Experience shows that larger the portfolio is in similar insurance contracts, smaller will be the relative variability about the

expected outcome. In addition, a more diversified portfolio is less likely to be affected across the board by a change in any

subset of the portfolio. The Company has developed its insurance underwriting strategy to diversify the type of insurance risks

accepted and within each of these categories to achieve a sufficiently large population of risks to reduce the variability of the

expected outcome.

The Company principally issues the general insurance contracts e.g. marine and aviation, property, motor and general

accidents. Risks under non-life insurance policies usually cover twelve month or lesser duration. For general insurance

contracts the most significant risks arise from accidental fire, atmospheric disaster and terrorist activities. Insurance contracts

2011 2010

at times also cover risk for single incidents that expose the Company to multiple insurance risks.



a) Geographical concentration of insurance risk

To optimize benefits from the principle of average and law of large numbers, geographical spread of risk is of extreme

importance. There are a number of parameters which are significant in assessing the accumulation of risks with reference to

the geographical location, the most important of which is risk survey.

Risk surveys are carried out on a regular basis for the evaluation of physical hazards associated primarily with the commercial

/ industrial occupation of the insured. Details regarding the fire separation / segregation with respect to the manufacturing

processes, storage, utilities, etc. are extracted from the layout plan of the insured facility. Such details are formed part of the

reports which are made available to the underwriters / reinsurers for their evaluation. Reference is made to the standard

construction specifications laid down by Insurance Association of Pakistan (IAP). For fire and property risk a particular building

and neighboring buildings, which could be affected by a single claim incident, are considered as a single location. For earthquake

risk, a complete city is classified as a single location. Similarly, for marine risk, multiple risks covered in a single vessel voyage

are considered as a single risk while assessing concentration of risk. The Company evaluates the concentration of exposures

to individual and cumulative insurance risks and establishes its reinsurance policy to reduce such exposures to levels acceptable

to the Company.

A risk management solution is implemented to help assess and plan for risk in catastrophic scenarios. It provides a way to

better visualize the risk exposure of the Company and to determine the appropriate amount of reinsurance coverage to protect

the business portfolio.

b) Reinsurance arrangements

Keeping in view the maximum exposure in respect of key zone aggregates, a number of proportional and non-proportional

reinsurance arrangements are in place to protect the net account in case of a major catastrophe. Apart from the adequate

event limit which is a multiple of the treaty capacity or the primary recovery from the proportional treaty, any loss over and

above the said limit would be recovered from the non-proportional treaty which is very much in line with the risk management

philosophy of the Company.

In compliance with regulatory requirements, the reinsurance agreements are duly submitted to the Securities and Exchange

Commission of Pakistan on an annual basis.

The concentration of risk by type of contracts is summarized below by reference to liabilities:

Fire 3,006,526,257 2,420,943,660 2,358,653,326 1,692,898,065 647,872,931 728,045,595

Marine 1,393,259,912 1,342,046,500 377,285,090 176,107,263 1,015,974,822 1,165,939,237

Motor 70,019,175 70,302,006 1,071,111 1,074,007 68,948,064 69,227,999

Miscellaneous 183,462,584 334,429,165 103,780,593 123,545,771 79,681,991 210,883,394

4,653,267,928 4,167,721,331 2,840,790,120 1,993,625,106 1,812,477,808 2,174,096,225

Gross sum insured

Rupees in thousand

Reinsurance Net

2011 2010 2011 2010 2011 2010


c) Neutral assumptions for claim estimation

The process used to determine the assumptions for calculating the outstanding claim reserve is intended to result in neutral

estimates of the most likely or expected outcome. The nature of the business makes it very difficult to predict with certainty

the likely outcome of any particular claim and the ultimate cost of notified claims. Each notified claim is assessed on separate,

case by case basis with due regard to claim circumstances, information available from surveyors and historical evidence of

the size of similar claims. Case estimates are reviewed regularly and are updated as and when new information is available.

The estimation of IBNR is generally subject to a greater degree of uncertainty than the estimation of the cost of setting claims

already notified to the Company, in which case information about the claim event is available. IBNR provisions are initially

estimated at a gross level and a separate calculation is carried out to estimate the size of the reinsurance recoveries.

The estimation process takes into account the past claims reporting pattern and details of reinsurance programs. The premium

liabilities have been determined such that the total premium liability provisions (unearned premium reserve and premium

deficiency reserve) would be sufficient to service the future expected claims and expenses likely to occur on the unexpired

policies as of reporting date. The expected future liability is determined using estimates and assumptions based on the

experience during the expired period of the contracts and expectations of future events that are believed to be reasonable.

d) Sensitivity analysis

The risks associated with the insurance 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 insurance claims recognized in the balance sheet is adequate. However, actual

experience may differ from the expected outcome.

As the Company enters into short term insurance contracts, it does not assume any significant impact of changes in market

conditions on unexpired risks. However, some results of sensitivity testing are set out below, showing the impact on loss before

tax net of reinsurance.

10% increase in loss

Net:

Fire (65,578) (103,080) (42,626) (67,002)

Marine (49,432) (54,596) (32,131) (35,487)

Motor (200,062) (230,164) (130,040) (149,607)

Miscellaneous (159,840) (98,067) (103,896) (63,744)

(474,912) (485,907) (308,693) (315,840)

10% decrease in loss

Net:

Fire 65,578 103,080 42,626 67,002

Marine 49,432 54,596 32,131 35,487

Motor 200,062 230,164 130,040 149,607

Miscellaneous 159,840 98,067 103,896 63,744

474,912 485,907 308,693 315,840

2011 2010 2011 2010

Rupees in thousand

Pre tax profit / (loss) Shareholders' equity



e) Claims development table

The following table shows the development of claims over a period of time. 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.

Estimate of ultimate claims cost:

At end of accident year 6,327,871 10,683,087 6,593,318 23,604,276

One year later 6,194,680 6,964,385 - 13,159,065

Two years later 879,951 - - 879,951

Estimate of cumulative claims 879,951 6,964,385 6,593,318 14,437,654

Less: Cumulative payments to date 280,862 5,251,179 3,732,953 9,264,994

Liability recognized 599,089 1,713,206 2,860,365 5,172,660

2009 2010 2011 Total

Rupees in thousand

Accident year

29. FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES

The carrying values of all financial assets and liabilities reflected in these unconsolidated financial statements approximate

to their fair values except for available-for-sale investments which are stated at lower of cost and market value in accordance

with the requirements of the SEC (Insurance) Rules, 2002. The carrying and fair value of these investments have been

disclosed in note 12 to the financial statements. Since the financial assets are not stated at exact fair values, therefore, analysis

under following groups from level 1 to level 3 based on the degree to which fair value is observable is not produced:

Level 1: Quoted Market prices

Level 2: Valuation techniques (market observable)

Level 3: Valuation techniques (non market observable)

30. FINANCIAL INSTRUMENT BY CATEGORIES As at 31 December 2011

Financial assets

Cash and other equivalents 21,566 - 21,566

Current and other accounts 1,415,207 - 1,415,207

Deposits maturing within 12 months 942,194 - 942,194

Loans to employees 27,964 - 27,964

Investments - 9,451,731 9,451,731

Premiums due but unpaid 3,568,167 - 3,568,167

Amounts due from other insurers / reinsurers 679,631 - 679,631

Salvage recoveries accrued 165,718 - 165,718

Accrued investment income 21,626 - 21,626

Reinsurance recoveries against outstanding claims 3,799,366 - 3,799,366

Sundry receivables 173,203 - 173,203

10,814,642 9,451,731 20,266,373

Loans andreceivables Available-for-sale Total

Rupees in thousand


As at 31 December 2011

Financial liabilitiesProvision for outstanding claims (including IBNR) 5,548,018Amounts due to other insurers / reinsures 1,151,088Accrued expenses 158,185Other creditors and accruals 1,281,142Unclaimed dividends 33,495Liabilities against assets subject to finance lease 58,567

8,230,495

Rupees in thousand

Financial liabilitiesat amortized cost


Financial assets

Cash and other equivalents 59,393 - 59,393

Current and other accounts 1,060,597 - 1,060,597

Deposits maturing within 12 months 1,584,827 - 1,584,827

Loans to employees 39,754 - 39,754

Investments - 9,406,998 9,406,998

Premiums due but unpaid 4,546,222 - 4,546,222

Amounts due from other insurers / reinsurers 993,584 - 993,584

Salvage recoveries accrued 99,636 - 99,636

Accrued investment income 33,445 - 33,445

Reinsurance recoveries against outstanding claims 6,253,202 - 6,253,202

Sundry receivables 239,132 - 239,132

14,909,792 9,406,998 24,316,790

Loans andreceivables Available-for-sale Total

Rupees in thousand



Provision for outstanding claims (including IBNR)-restated 8,015,404

Amount due to other insurers / reinsurers 1,581,965

Accrued expenses 147,995

Other creditors and accruals 1,280,630

Unclaimed dividends 29,121

Liabilities against assets subject to finance lease 107,637

11,162,752

Rupees in thousand

Financial liabilitiesat amortized cost

Umer ManshaChairman

S. M. JawedDirector



2011 2010



31. CAPITAL RISK MANAGEMENT

The Company's goals and objectives when managing capital are:

- to be an appropriately capitalised institution in compliance with the paid-up capital requirement set by the SECP. Minimum

paid-up capital requirement for non-life insurers is Rupees 300 million. The Company's current paid-up capital is well

in excess of the limit prescribed by the SECP;

- 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 the other stakeholders;

- to provide an adequate return to shareholders by pricing insurance contracts commensurately with the level of risk;

- maintain strong ratings and to protect the Company against unexpected events / losses; and

- to ensure a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development

of the business.

32. NUMBER OF EMPLOYEES AT 31 DECEMBER 828 978

33. DATE OF AUTHORIZATION FOR ISSUE

These unconsolidated financial statements have been approved and authorized for issue by the Board of Directors of the

Company in their meeting dated 22 March 2012.

34. GENERAL

No significant reclassification or rearrangement of corresponding figures has been made during the year.

Figures in these unconsolidated financial statements have been rounded off to the nearest thousand of rupees unless otherwise

stated.

Number

Rupees in thousand



On behalf of the Board, I am pleased to present the third report on consolidated financial statements of Adamjee InsuranceCompany Limited for the year ended 31 December 2011.

The following appropriation of profit has been recommended by Board of Directors:


Taxation 170,838 (62,993)


Profit attributable to non-controlling interest (8,312) (5,679)

Profit attributable to ordinary shareholders 240,138 584,220

Unappropriated profit brought forward 8,701,466 8,522,098

Profit available for appropriation 8,941,604 9,106,318

Appropriation

Final dividend for the year ended 31 December 2010 @15% (Rs 1.5/share)[2009 @15% (Rs. 1.5/- per share)] (185,557) (168,688)

Issue of bonus shares for the year ended 31 December 2010Nil (2009: @ 10%) - (112,459)

Interim dividend @ 10% (Rupee 1/- per share)(2010 : Rupee 1/- per share) (123,705) (123,705)

Total appropriation (309,262) (404,852)

Profit after appropriation 8,632,342 8,701,466

Rupees Rupees

Restated

Earnings per share 1.94 4.72

On Behalf of Board of Directors

Manzar Mushtaq Managing Director and Chief ExecutiveDate: 22, March 2012Lahore

Directors' Report to the Members On Consolidated Financial Statements For the year ended 31 December 2011

Rupees in thousand

AUDITORS’ REPORT TO THE MEMBERS


We have audited the annexed consolidated financial statements comprising consolidated Balance Sheet of ADAMJEEINSURANCE COMPANY LIMITED (“the Holding Company”) and its subsidiary company (together referred to as “Group”)as at 31 December 2011 and the related consolidated Profit and Loss Account, consolidated Statement of ComprehensiveIncome, consolidated Statement of Changes in Equity, consolidated Cash Flow Statement, consolidated Statement ofPremiums, consolidated Statement of Claims, consolidated Statement of Expenses and consolidated Statement of InvestmentIncome together with the notes forming part thereof, for the year then ended. We have also expressed separate opinion onthe financial statements of Adamjee Insurance Company Limited. The financial statements of subsidiary company AdamjeeLife Assurance Company Limited were audited by another firm of auditors whose report has been furnished to us and ouropinion, in so far as it relates to the amounts included for such company, is based solely on the report of such other auditors.These consolidated financial statements are the responsibility of the Holding Company’s management. Our responsibilityis to express an opinion on these financial statements based on our audit.

Our audit was conducted in accordance with the International Standards on Auditing and accordingly included such tests ofaccounting records and such other auditing procedures as we considered necessary in the circumstances.

In our opinion, the consolidated financial statements present fairly the financial position of ADAMJEE INSURANCE COMPANYLIMITED and its subsidiary company as at 31 December 2011 and the results of their operations for the year then ended.

RIAZ AHMAD & COMPANYChartered Accountants

Name of engagement partner:Muhammad Kamran Nasir

Date: 22 March 2012Karachi

Rupees in thousand



Share capital and reserves Authorised share capital 3.1 1,500,000 1,500,000

Paid-up share capital 3.2 1,237,045 1,237,045

Retained earnings-restated 8,632,342 8,701,466 Reserves 4 1,023,432 1,046,896

9,655,774 9,748,362Equity attributable to equity holders of the parent 10,892,819 10,985,407Non-controlling interest 5 77,748 152,444

TOTAL EQUITY 10,970,567 11,137,851Balance of statutory funds 6 509,586 99,479

Underwriting provisionsProvision for outstanding claims (including IBNR) - restated 7 5,576,211 8,024,818Provision for unearned premium 4,328,346 5,017,435Commission income unearned 371,687 305,434

10,276,244 13,347,687

Deferred liabilitiesDeferred taxation - 58,375 Staff retirement benefits 8 26,458 19,585

Creditors and accrualsPremiums received in advance 88,159 77,174 Amounts due to other insurers / reinsurers 1,203,579 1,599,650 Accrued expenses 161,009 151,051 Other creditors and accruals 9 1,516,432 1,564,460

2,969,179 3,392,335

BorrowingsLiabilities against assets subject to finance lease 10 58,567 107,637

Other liabilitiesUnclaimed dividends 33,495 29,121

TOTAL LIABILITIES 13,363,943 16,954,740

CONTINGENCIES AND COMMITMENTS 11

TOTAL EQUITY AND LIABILITIES 24,844,096 28,192,070

The annexed notes 1 to 36 form an integral part of these consolidated financial statements.

CONSOLIDATED BALANCE SHEETAS AT 31 DECEMBER 2011

Rupees in thousand

Umer ManshaChairman

S. M. JawedDirector




Cash and bank deposits 12Cash and other equivalents 21,597 59,453 Current and other accounts 1,527,090 1,098,285 Deposits maturing within 12 months 957,694 1,584,827

2,506,381 2,742,565 Loans

To employees 13 17,175 22,086

Investments 14 9,958,281 9,607,857

Deferred taxation 201,604 -

Current assets - othersPremiums due but unpaid 15 3,598,905 4,554,824 Amounts due from other insurers / reinsurers 16 679,631 993,584 Salvage recoveries accrued 165,718 99,636 Premium and claim reserves retained by cedants 23,252 23,252 Accrued investment income 17 40,533 41,389 Reinsurance recoveries against outstanding claims 18 3,799,366 6,253,202 Taxation - payments less provision 13,024 45,873 Deferred commission expense 472,399 512,222 Prepayments 19 2,042,849 1,835,054 Sundry receivables 20 207,396 316,635

11,043,073 14,675,671

Fixed assets - Tangible & Intangible 21

OwnedLand and buildings 271,731 281,472 Furniture and fixtures 76,664 70,212 Motor vehicles 217,901 203,650 Machinery and equipment 213,916 318,224 Computers and related accessories 57,351 60,455 Intangible asset - computer software 58,901 66,435 Capital work-in-progress-tangible 133,378 -

1,029,842 1,000,448

LeasedMotor vehicles 87,740 143,443

TOTAL ASSETS 24,844,096 28,192,070


Rupees in thousand


Rupees in thousand

CONSOLIDATED PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED 31 DECEMBER 2011

31December

2011

Revenue accountNet premium revenue 1,203,286 912,455 2,974,057 1,893,546 - 75,444 26 355,992 360,488 7,775,294 7,098,887Net claims - restated (655,775) (494,320) (2,000,623) (1,598,395) - (28,415) - (942) (363) (4,778,833) (4,884,479)Expenses 22 (217,992) (164,275) (503,698) (343,372) - (37,171) (300) (69,603) (64,306) (1,400,717) (1,400,355)Net commission (92,018) (149,164) (248,126) 13,046 - (24,487) (7) (175,708) (187,804) (864,268) (640,881)Net Investment income- statutory funds - - - - - 7,862 8 14,019 913 22,802 6,162Add: Policyholders' liabilities atbeginning of the year - - - - - 20,034 59 79,386 - 99,479 11,499Less: Policyholders' liabilities atend of the year - - - - - (54,320) (8) (247,183) (178,051) (479,562) (99,479)Capital contribution fromshareholders' fund - - - - - 51,737 302 63,297 69,123 184,459 154,367Surplus of Policyholders' funds - - - - - (10,684) (80) (19,258) - (30,022) -Underwriting result 237,501 104,696 221,610 (35,175) - - - - - 528,632 245,721

Investment income - other 763,569 765,396Rental income 657 1,048Other income 23 158,608 171,239

1,451,466 1,183,404General and administration expenses 24 (1,577,675) (646,338)Exchange gain / (loss) 390 (1,396)Finance charge on lease liabilities (15,179) (18,966)Share of profit from associatedcompanies 218,610 136,188


Provision for taxation 25 170,838 (62,993)


Profit attributable to:

Equity holders of the parent 240,138 584,220Non-controlling interest 8,312 5,679

248,450 589,899

Profit and loss appropriation account - Parent Company

Balance at the commencement of the year 8,701,466 8,522,098Profit after tax for the year attributable to equity holders of the parent 240,138 584,220Final dividend for the year ended 31 December 2010 @ 15%(Rupees 1.5/- per share) [2009: Rupees 1.5/- per share] (185,557) (168,688)Issue of bonus shares for the year ended 31 December 2010Nil (2009:10%) - (112,459)Interim dividend @ 10% (Rupee 1/- per share)[2010: Rupee 1/- per share] (123,705) (123,705)Balance unappropriated profit at the end of the year 8,632,342 8,701,466

Rupees Rupees

Restated

Earnings per share - basic and diluted (Note 26) 1.94 4.72


General Insurance Total

31December

2010


Marine,Aviation and

Transport

Motor Miscellaneous Treaty ConventionalBusiness

Accident andHealth

Business

Non-UnitizedInvestment Link

Business

Unit LinkBusiness

Umer ManshaChairman

S. M. JawedDirector



Note

Life Insurance


Profit after tax for the year 248,450 589,899

Other comprehensive income:

Effect of translation of net investment in foreign branches - restated 77,987 27,091

Capital contribution to statutory funds (184,459) (154,367)Total comprehensive income for the year 141,978 462,623

Total comprehensive income attributable to:

Equity holders of the parent 216,674 526,409Non-controlling interest (74,696) (63,786)

141,978 462,623


Rupees in thousand


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 31 DECEMBER 2011

Umer ManshaChairman

S. M. JawedDirector




Rupees in thousand

CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 DECEMBER 2011

Balance as at 31 December 2009 1,124,586 - 22,859 3,764 (31,840) 173,424 936,500 8,522,098 10,751,391 216,230 10,967,621

Total comprehensive income for theyear ended 31 December 2010 - restated - - - - (84,902) 27,091 - 584,220 526,409 (63,786) 462,623

Final dividend for the year ended31 December 2009 @ 15 %(Rupees 1.5 /- per share) - - - - - - - (168,688) (168,688) - (168,688)

Transferred to reserve for issue ofbonus shares - 112,459 - - - - - (112,459) - - -

Issue of bonus shares for the yearended 31 December 2009 @ 10 % 112,459 (112,459) - - - - - - - - -

Interim dividend @ 10%(Rupee 1/- per share) - - - - - - - (123,705) (123,705) - (123,705)

Balance as at31 December 2010 - restated 1,237,045 - 22,859 3,764 (116,742) 200,515 936,500 8,701,466 10,985,407 152,444 11,137,851

Total comprehensive income forthe year ended 31 December 2011 - - - - (101,451) 77,987 - 240,138 216,674 (74,696) 141,978

Final dividend for the year ended31 December 2010 @ 15%(Rupees 1.5/- per share) - - - - - - - (185,557) (185,557) - (185,557)

Interim dividend @ 10%(Rupee 1/- per share) - - - - - - - (123,705) (123,705) - (123,705)

Balance as at 31 December 2011 1,237,045 - 22,859 3,764 (218,193) 278,502 936,500 8,632,342 10,892,819 77,748 10,970,567


Issued,subscribedand paid-up

Share capital Capital reserves Revenue reserves Equityattributable

to equityholders ofthe parent

Non-controlling

interest

TotalEquityReserve for

issue ofbonusshares

Reserve forexceptional

losses

Investmentfluctuation

reserve

Capitalcontributionto statutory

funds

Exchangetranslation

reserve

Generalreserve

Retainedearnings

Umer ManshaChairman

S. M. JawedDirector




Operating cash flows

a) Underwriting activitiesPremiums received 12,429,414 11,189,830Reinsurance premiums paid (5,390,966) (3,812,319)Claims paid (9,620,262) (6,248,557)Surrenders paid (87,492) (85,589)Reinsurance and other recoveries received 5,018,915 1,174,620Commissions paid (1,643,185) (1,182,671)Commissions received 858,763 693,974Other underwriting payments (1,208,307) (1,069,698)Net cash flow from underwriting activities 356,880 659,590



Investment activitiesProfit / return received 153,949 161,049Dividends received 815,584 518,567Payments for investments (6,236,991) (5,253,522)Proceeds from disposal of investments 6,012,347 5,799,124Fixed capital expenditure - Tangible assets (288,774) (299,828)Fixed capital expenditure - Intangible assets (5,673) (23,152)Proceeds from disposal of fixed assets 83,975 75,476Rental received 657 3,335Profit received on PIBs 9,136 15,264Income received on TFCs 24,106 25,565

Total cash flow from investing activities 568,316 1,021,878





Rupees in thousand


CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2011

Umer ManshaChairman

S. M. JawedDirector




Reconciliation to Profit and Loss AccountOperating cash flows (439,615) (103,368)Depreciation expense (192,349) (192,980)Provision for gratuity (6,873) (3,745)Other income - bank deposits 121,534 143,156(Loss)/ Profit on disposal of fixed assets (23,001) 7,314Finance charges on lease obligations (15,179) (18,966)Rental income 657 1,048Share of profit from associated companies 218,610 136,188(Decrease) / increase in assets other than cash (3,707,936) 5,823,722Decrease / (increase) in liabilities other than running finance 2,183,655 (5,560,550)

(1,860,497) 231,819Others

Gain on sale of investments 369,406 104,414Amortization expense (21,435) (17,436)Capital contribution from shareholders’ fund 184,459 154,367Decrease / (increase) in unearned premium 689,089 (611,618)Amortization of income on Government Securities - net - 2,160Decrease in loans (11,790) (6,015)Income tax paid 53,080 130,217Profit on PIBs 7,846 15,634(Provision) / reversal for diminution in value of investments (200,930) 127,643Dividend, investment and other income 835,221 497,009Return on Treasury Bills 10,217 -Income on TFCs 22,946 24,698

1,938,109 421,073Profit before taxation 77,612 652,892

Definition of cash:

Cash comprises cash in hand, bank balances excluding Rupees. 9.076 million (2010: Rupees. 4.824 million) held underlien and other deposits which are readily convertible to cash and which are used in the cash management function on a dayto-day basis.


Cash and other equivalent 21,597 59,453Current and other accounts 1,527,090 1,098,285Deposits maturing within 12 months 948,618 1,580,003Total cash and cash equivalents 2,497,305 2,737,741


Rupees in thousand


CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2011

Umer ManshaChairman

S. M. JawedDirector




General insurance:


Fire and Property Damage 4,702,415 1,977,580 2,163,408 4,516,587 3,553,956 1,371,210 1,611,865 3,313,301 1,203,286 1,103,966

Marine, Aviation and Transport 1,227,550 57,988 68,692 1,216,846 336,886 12,199 44,694 304,391 912,455 942,943

Motor 3,185,260 1,760,996 1,589,761 3,356,495 353,638 175,330 146,530 382,438 2,974,057 3,351,982

Miscellaneous 1,949,087 1,220,871 506,485 2,663,473 710,605 215,786 156,464 769,927 1,893,546 1,477,612

11,064,312 5,017,435 4,328,346 11,753,401 4,955,085 1,774,525 1,959,553 4,770,057 6,983,344 6,876,503

Treaty

Proportional - - - - - - - - - 6,894

Total - - - - - - - - - 6,894

11,064,312 5,017,435 4,328,346 11,753,401 4,955,085 1,774,525 1,959,553 4,770,057 6,983,344 6,883,397

Life insurance:

Conventional Business 180,829 - - 180,829 105,385 - - 105,385 75,444 41,661

Accident and Health Business 28 - - 28 2 - - 2 26 160

Non-unitised InvestmentLink Business 362,034 - - 362,034 6,042 - - 6,042 355,992 173,669

Unit Link Business 369,777 - - 369,777 9,289 - - 9,289 360,488 -

Total 912,668 - - 912,668 120,718 - - 120,718 791,950 215,490

Grand Total 11,976,980 5,017,435 4,328,346 12,666,069 5,075,803 1,774,525 1,959,553 4,890,775 7,775,294 7,098,887


Rupees in thousand

CONSOLIDATED STATEMENT OF PREMIUMSFOR THE YEAR ENDED 31 DECEMBER 2011

Premiumswritten

Opening Closing31

December2011

31December

2010

Class

Unearned premium reserve Net premium revenueReinsurance

ceded

Prepaid reinsurancepremium ceded

Reinsuranceexpense

Premiumsearned

Opening Closing

Umer ManshaChairman

S. M. JawedDirector




General insurance: Restated


Fire and Property Damage 4,181,352 4,893,957 2,436,459 1,723,854 3,496,433 4,334,740 1,906,386 1,068,079 655,775 1,030,802

Marine, Aviation and Transport 652,580 426,065 307,593 534,108 50,637 166,072 155,223 39,788 494,320 545,964

Motor 2,568,256 1,575,733 1,725,349 2,717,872 507,542 995,153 1,204,860 717,249 2,000,623 2,301,644

Miscellaneous 2,131,519 1,099,317 1,058,285 2,090,487 650,350 856,873 698,615 492,092 1,598,395 980,674

9,533,707 7,995,072 5,527,686 7,066,321 4,704,962 6,352,838 3,965,084 2,317,208 4,749,113 4,859,084

Treaty

Proportional - 20,332 20,332 - - - - - - 9,217

- 20,332 20,332 - - - - - - 9,217

Total 9,533,707 8,015,404 5,548,018 7,066,321 4,704,962 6,352,838 3,965,084 2,317,208 4,749,113 4,868,301

Life insurance:

Conventional Business 86,144 9,395 25,084 101,833 73,418 - - 73,418 28,415 16,173

Accident and Health Business - - - - - - - - - -

Non-unitised InvestmentLink Business 48 19 3,109 3,138 2,196 - - 2,196 942 5

Unit Link Business 363 - - 363 - - - - 363 -

Total 86,555 9,414 28,193 105,334 75,614 - - 75,614 29,720 16,178

Grand Total 9,620,262 8,024,818 5,576,211 7,171,655 4,780,576 6,352,838 3,965,084 2,392,822 4,778,833 4,884,479


Rupees in thousand

CONSOLIDATED STATEMENT OF CLAIMSFOR THE YEAR ENDED 31 DECEMBER 2011

Total claimspaid

Opening Closing31

December2011

31December

2010

Class

Outstanding claims Net claims expenseReinsuranceand otherrecoveriesreceived

Reinsurance and otherrecoveries in respect of

outstanding claims Reinsuranceand otherrecoveriesrevenue

Claimsexpenses

Opening Closing

Umer ManshaChairman

S. M. JawedDirector




General insurance:


Fire and Property Damage 650,760 259,844 270,645 639,959 217,992 857,951 547,941 310,010 337,625

Marine, Aviation and Transport 166,185 11,662 14,189 163,658 164,275 327,933 14,494 313,439 364,055

Motor 280,780 162,226 134,109 308,897 503,698 812,595 60,771 751,824 804,615

Miscellaneous 131,214 78,490 53,456 156,248 343,372 499,620 169,294 330,326 258,470

1,228,939 512,222 472,399 1,268,762 1,229,337 2,498,099 792,500 1,705,599 1,764,765

Treaty

Proportional - - - - - - - - 4,610

- - - - - - - - 4,610

Total 1,228,939 512,222 472,399 1,268,762 1,229,337 2,498,099 792,500 1,705,599 1,769,375

Life insurance:

Conventional Business 24,471 - - 24,471 37,171 61,642 (16) 61,658 64,229

Accident and Health Business 7 - - 7 300 307 - 307 410

Non-unitised InvestmentLink Business 177,110 - - 177,110 69,603 246,713 1,402 245,311 207,222

Unit Link Business 191,710 191,710 64,306 256,016 3,906 252,110 -

Total 393,298 - - 393,298 171,380 564,678 5,292 559,386 271,861

Grand Total 1,622,237 512,222 472,399 1,662,060 1,400,717 3,062,777 797,792 2,264,985 2,041,236


Rupees in thousand

CONSOLIDATED STATEMENT OF EXPENSESFOR THE YEAR ENDED 31 DECEMBER 2011


Opening Closing31

December2011

31December

2010

Class

Deferred commission Net UnderwritingexpenseNet

Commissionexpense

Othermanagement

expenses

Underwritingexpense

Commissionfrom

reinsurers

Umer ManshaChairman

S. M. JawedDirector




General Insurance:

Income from non-trading investments

Available-for-saleReturn on fixed income securities - 2,160Return on Term Finance Certificates 22,946 24,698Return on Treasury Bills 10,217 -Return on Pakistan Investment Bonds 7,846 15,634Dividend income - associated undertakings 311,441 275,483 - others 228,311 192,870

539,752 468,353580,761 510,845

Gain on sale of ‘available-for-sale’ investments - associated undertakings 4,344 75,626 - others 349,672 20,693

354,016 96,319934,777 607,164

(Provision) / reversal for impairment in value of 'available-for-sale' investment 14.3 (203,271) 128,882

731,506 736,046Life Insurance:Shareholders' fund

Appreciation / (diminution) in value of quoted securities 68 (762)Return on Government Securities 15,157 23,839Return on bank deposits 617 717Dividend income 1,136 719Gain on sale of non trading investments 13,218 7,170Reversal / (provision) for impairment in value of available-for-saleinvestments 1,867 (2,333)

32,063 29,350Statutory fundsConventional business

Return on Government Securities 4,682 2,361Investment income on bank deposits 1,492 515Gain on sale of disposal of open-end non trading investments 1,214 948Reversal / (provision) for impairment in value of available-for-saleinvestments 474 (532)

7,862 3,292Accident and health business

Investment income on bank deposits 8 5Gain on sale of units of open-end mutual funds - -

8 5Non-unitised investment link business

Diminution in value of quoted securities (10,162) (70)Return on Government Securities 21,525 2,092Investment income on bank deposits 1,769 866Gain / (loss) on sale of Government securities 888 (23)

14,020 2,865

Rupees in thousand


CONSOLIDATED STATEMENT OF INVESTMENT INCOMEFOR THE YEAR ENDED 31 DECEMBER 2011


Unit Link BusinessDiminution in value of quoted securities (4,767) -Return on Government Securities 3,958 -Dividend income 79 -Investment income on bank deposits 1,572 -Gain on sale of Government securities 70 -

912 -Net investment income 786,371 771,558

Net investment income - statutory funds 22,802 6,162Net investment income - other 763,569 765,396

786,371 771,558


Rupees in thousand


CONSOLIDATED STATEMENT OF INVESTMENT INCOMEFOR THE YEAR ENDED 31 DECEMBER 2011

Umer ManshaChairman

S. M. JawedDirector




1. THE GROUP AND ITS OPERATIONS

The group consists of:

Holding CompanyAdamjee Insurance Company Limited

Subsidiary Company Percentage held by Adamjee Insurance Company Limited

Adamjee Life Assurance Company Limited 55%

Adamjee Insurance Company Limited (Holding Company)

Adamjee Insurance Company Limited is a public limited company incorporated in Pakistan on 28 September 1960under the Companies Act, 1913 (now Companies Ordinance, 1984). The Company is listed on all the stock exchangesin Pakistan and is engaged in the non-life insurance business.The registered office of the Company is situated atIslamabad Stock Exchange Building, Islamabad. The Company also operates branches in the United ArabEmirates (UAE), the Kingdom of Saudi Arabia (KSA) and the Export Processing Zone (EPZ). The branch in the KSAhas closed down its operations and is in “run-off” status with effect from 01 October 2003. During the year, the Companyhas opened its new branch in Abu Dhabi to extend its operations.

Adamjee Life Assurance Company Limited (Subsidiary Company)

Adamjee Life Assurance Company Limited was incorporated in Pakistan on 4 August 2008 as a public unlisted companyunder the Companies Ordinance, 1984 and started its operations from 24 April 2009. The registered office of theCompany is located at MCB Building, Jinnah Avenue, Blue Area, Islamabad while its principal place of business islocated at Third Floor, The Forum, Khayaban-e-Jami, Clifton, Karachi. The Company is a subsidiary of AdamjeeInsurance Company Limited and an associate of IVM Intersurer B.V. who have a holding of 55% and 45%, respectivelyin the share capital of the Company. IVM Intersurer B.V. has nominated Hollard Life Assurance Company Limited (HLA),a subsidiary of IVM Intersurer B.V., to act on its behalf. HLA is South Africa's largest private sector insurance company.

The Company is engaged in life assurance business carrying on non-participating business only. In accordance withthe requirements of the Insurance Ordinance, 2000, the Company has established a shareholders' fund and the followingstatutory funds in respect of its each class of life assurance business:

- Conventional Business - Accident and Health Business- Non-Unitized Investment Link Business- Unit Link Fund (Introduced this year in June 2011)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies applied in the preparation of these consolidated financial statements are set out below.These policies have been consistently applied to all the periods presented, unless otherwise specified.

2.1 Basis of preparation

a) Statement of compliance

These consolidated financial statements are prepared in accordance with approved accounting standards as applicablein Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS)issued by the International Accounting Standards Board as are notified under the Companies Ordinance, 1984, provisionsof and directives issued under the Companies Ordinance,1984, the Insurance Ordinance, 2000 and SEC (Insurance)Rules, 2002. In case requirements differ, the provisions or directives of the Companies Ordinance, 1984, InsuranceOrdinance, 2000 and SEC (Insurance) Rules, 2002 shall prevail.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2011


The SECP has allowed insurance companies to defer the application of International Accounting Standard - 39(IAS 39) 'Financial Instruments: Recognition and Measurement' in respect of "investments available-for-sale" untilsuitable amendments have been made in the laws. Accordingly, the requirements of IAS-39, to the extent allowedby SECP, have not been considered in the preparation of these consolidated financial statements.

b) Consolidation

i) Subsidiary Company

Subsidiary Company is the entity in which Holding Company directly or indirectly controls beneficially owns or holdsmore than 50% of the voting securities or otherwise has power to elect and appoint more than 50% of its directors.The financial statements of the Subsidiary Company are included in the consolidated financial statements fromthe date the control commences until the date that control ceases.

The assets and liabilities of Subsidiary Company have been consolidated on a line by line basis and carrying valueof investments held by the Holding Company is eliminated against Holding Company's share in paid up capital ofthe Subsidiary Company.

Intergroup balances and transactions have been eliminated.

Non-controlling interests are that part of net results of the operations and of net assets of Subsidiary Companyattributable to interest which are not owned by the Holding Company. Non-controlling interests are presented asseparate item in the consolidated financial statements.

ii) Associates

Associates are the entities over which the Group has significant influence but not control. Significant influence isgenerally considered where shareholding percentage is between 20% to 50% of the voting shares. However, suchsignificant influence can also arise where shareholding is lesser than 20% but due to other factors e.g. Group’srepresentation on the Board of Directors of investee Company, the Group can exercise significant influence.

Group’s investment in “Lalpir Power Limited” and “Pakgen Power Limited” have been considered as investmentin associates as the Holding Company has two directors each, in common, at the Board of Directors of each ofsuch associated companies besides holding 8% and 6.89% shareholding each, respectively, in the voting shares.

Investments in these associates are accounted for using the equity method of accounting and are initially recognizedat cost. The Group’s investment in associates includes goodwill identified on acquisition, net of accumulatedimpairment loss, if any.

The Group’s share of its associate’s post-acquisition profits or losses, movement in other comprehensive income,and its share of post-acquisition movements in reserves is recognized in the profit and loss account, statementof comprehensive income and reserves, respectively. The cumulative post-acquisition movements are adjustedagainst the carrying amount of the investment. Distributions received from an associate reduce the carrying amountof the investment.

c) Accounting convention

These consolidated financial statements have been prepared under the historical cost convention except thatcertain investments which are stated at lower of cost and market value and valuation of policyholders’ liability andemployees' retirement benefits which are carried on the basis of actuarial valuation. Accrual basis of accountinghas been used except for cash flow information.

d) Critical accounting estimates and judgments

The preparation of consolidated financial statements in conformity with approved accounting standards as applicablein Pakistan requires management to make judgments, estimates and assumptions that affect the reported amountsof assets and liabilities and income and expenses. It also requires management to exercise judgment in applicationof its accounting policies. The estimates and associated assumptions are based on historical experience andvarious other factors that are believed to be reasonable under the circumstances. These estimates and assumptionsare reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which theestimate is revised if the revision affects only that period, or in the period of revision and future periods if the revisionaffects both current and future periods.




The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates aresignificant to the consolidated financial statements or judgment was exercised in application of accounting policiesare as follows:

i) Provision for outstanding claims including incurred but not reported (IBNR)

Provision for liability in respect of unpaid reported claims is made on the basis of individual case estimates. Provisionfor IBNR is based on the management's best estimate which takes into account the past trends, expected futurepatterns of reporting of claims and the claims actually reported subsequent to the reporting date.

ii) Provision for taxation including the amount relating to tax contingency

In making the estimates for income tax currently payable by the Group, the management takes into account thecurrent income tax law and the decisions of appellate authorities on certain issues in the past.

iii) Provision for doubtful receivables

The receivable balances are reviewed against any provision required for any doubtful balances on an ongoingbasis. The provision is made while taking into consideration expected recoveries, if any.

iv) Useful lives, patterns of economic benefits and impairments - Fixed assets

Estimates with respect to residual values and useful lives and patterns of flow of economic benefits are based onthe analysis of the management of the Group. Further, the Group reviews the value of assets for possible impairmenton an annual basis. Any change in the estimates in the future might affect the carrying amount of respective itemof property, plant and equipment, with a corresponding effect on the depreciation charge and impairment.

v) Valuation discount rate

The valuation of policyholders' liabilities has been based on a discount rate of 3.75%, which is in line with therequirements under the repealed Insurance Act, 1938 and is considerably lower than the actual investment returnthe Company is managing on its conventional portfolio. The difference each year between the above and the actualinvestment return is intended to be available to the Company for meeting administrative expenses and to providemargins for adverse deviation.

vi) Mortality assumption

For the purpose of valuing the insurance contracts, the mortality assumption used is based on EFU (61-66) tablewhich is adjusted to reflect the mortality expectation in Pakistan. In the opinion of the appointed actuary the adjustedtable gives the closest match to the underlying mortality of the covered population.

vii) Claims provision

For the purpose of valuation of conventional business, no provision has been made for lapses and surrenders.This gives prudence to the value placed on the liability by not taking any credits for the profits made on surrenders.

viii)Actuarial valuation of liabilities

The actuarial calculations are involved in determination of policyholders' liability arising from life insurance businessand the working of provision for defined benefit plans that are based on certain actuarial assumptions.

ix) Classification of investments

The Group classifies its investments into "available-for-sale", "held to maturity" and "at fair value through profit orloss". The classification is determined by management at initial recognition and depends on the purpose for whichthe investments are acquired.



e) Functional and presentation currency

Items included in these consolidated financial statements are measured using the currency of the primary economicenvironment in which the Group operates. These consolidated financial statements are presented in Pak Rupees,which is the Group's functional and presentation currency.

f) Standards, interpretations and amendments to published approved standards that are effective in currentyear and are relevant to the Group

Standards and amendments to published approved accounting standards that are effective in the current year andare relevant to the Group have no significant impact on these consolidated financial statements and are thereforenot detailed in these consolidated financial statements.

g) Standards, interpretations and amendments to published approved accounting standards that are effectivein current year but not relevant to the Group

There are other new standards, interpretations and amendments to the published approved accounting standardsthat are mandatory for accounting periods beginning on or after 01 January 2011 but are considered not to berelevant or do not have any significant impact on these consolidated financial statements and are therefore not detailed in these consolidated financial statements.

h) Standards, interpretations and amendments to published approved accounting standards that are not yeteffective but relevant to the Group

Following standards and amendments to existing standards have been published and are mandatory for the Group'saccounting periods beginning on or after 01 January 2012 or later periods:

IFRS 7 (Amendment), 'Financial Instruments: Disclosures' (effective for annual periods beginning on or after01 July 2011). The new disclosure requirements apply to transfer of financial assets. An entity transfers a financialasset when it transfers the contractual rights to receive cash flows of the asset to another party. These amendmentsare part of the IASBs comprehensive review of off balance sheet activities. The amendments will promotetransparency in the reporting of transfer transactions and improve users’ understanding of the risk exposuresrelating to transfers of financial assets and the effect of those risks on an entity’s financial position, particularlythose involving securitization of financial asset. The management of the Group is in the process of evaluating theimpacts of the aforesaid amendment on the Group's consolidated financial statements.

IFRS 9 'Financial Instruments' (effective for annual periods beginning on or after 01 January 2015). This standardis the first step in the process to replace IAS 39 ‘Financial Instruments: Recognition and Measurement’. IFRS 9introduces new requirements for classifying and measuring financial assets and is likely to affect the Group’saccounting for its financial assets.

IFRS 13 ‘Fair Value Measurement’ (effective for annual periods beginning on or after 01 January 2013). IFRS 13establishes a single framework for measuring fair value where that is required by other standards. IFRS 13 appliesto both financial and non-financial items measured at fair value. Fair value is defined as the price that would bereceived to sell an asset or paid to transfer a liability in an orderly transaction between market participants at themeasurement date. The management of the Group is in the process of evaluating the impacts of the aforesaidstandard on the Group’s consolidated financial statements.

IAS 1 (Amendments), ‘Presentation of Financial Statements’ (effective for annual periods beginning on or after 01July 2012). It clarifies that an entity will present an analysis of other comprehensive income for each componentof equity, either in the statement of changes in equity or in the notes to the financial statements.

IAS 19 (Amendment), ‘Employee benefits’ (effective for annual periods begining on or after 01 January 2013).This amendment eliminates the corridor approach and recognizes all actuarial gains and losses in othercomprehensive income as they occur, to immediately recognize all past service costs, and to replace interest costand expectedreturn on plan assets with a net interest amount that is calculated by applying the discount rate tothe net defined benefit liability (assets).



The management of the Group is in process of evaluating the impact of the aforesaid amendment on the Group’sconsolidated financial statements.

IFRS 10 ‘Consolidated Financial Statements’ (effective for annual periods beginning on or after 01 January 2013).Concurrent with the issuance of IFRS 10, the IASB has also issued IFRS 11 ‘Joint Arrangements’, IFRS 12‘Disclosure of Interests in Other Entities’, IAS 27 (revised 2011) ‘Consolidated and Separate Financial Statements’and IAS 28 (revised 2011) ‘Investments in Associates'. The objective of IFRS 10 is to have a single basis forconsolidation for all entities, regardless of the nature of the investee, and that basis is control. The definition ofcontrol includes three elements: power over an investee, exposure or rights to variable returns of the investee andthe ability to use power over the investee to affect the investor’s returns. IFRS 10 replaces those parts of IAS 27 ‘Consolidated and Separate Financial Statements’ that address when and how an investor should prepareconsolidated financial statements and replaces Standing Interpretations Committee (SIC) 12 ‘Consolidation –Special Purpose Entities’ in its entirety. The management of the Company is in the process of evaluating the impactsof the aforesaid standard on the Group’s consolidated financial statements.

IFRS 12 ‘Disclosure of Interests in Other Entities’ (effective for annual periods beginning on or after 01 January2013). IFRS 12 applies to entities that have an interest in subsidiaries, joint arrangements, associates orunconsolidated structured entities. IFRS 12 establishes disclosure objectives and specifies minimum disclosuresthat an entity must provide to meet those objectives. IFRS 12 requires an entity to disclose information that helpsusers of its financial statements evaluate the nature of and risks associated with its interests in other entities andthe effects of those interests on its financial statements. The management of the Group is in the process of evaluatingthe impacts of the aforesaid standard on the Group’s consolidated financial statements.

i) Standards, interpretations and amendments to published approved accounting standards that are noteffective in current year and not considered relevant to the Group

There are other accounting standards, amendments to published approved accounting standards and newinterpretations that are mandatory for accounting periods beginning on or after 01 January 2012 but are considerednot to be relevant or do not have any significant impact on these consolidated financial statements and are thereforenot detailed in these consolidated financial statements.

2.2 Insurance contracts

Insurance contracts are those contracts where the Group (the insurer) has accepted significant insurance risk fromanother party (the policyholders) by agreeing to compensate the policyholders if a specified uncertain future event(the insured event) adversely affects the policyholders.

Once a contract has been classified as an insurance contract, it remains an insurance contract for the remainderof its life time, even if the insurance risk reduces significantly during this period, unless all rights and liabilities areextinguished or expired.

Since the nature of insurance contracts entered in to by the Holding Company and its Subsidiary are different, therespected accounting policy have separately been provided here under:

2.2.1 Holding Company - Non-life business

a) Premium

Premium received / receivable under a policy is recognized as written from the date of attachment of the policyto which it relates. Premium income under a policy is recognized over the period of insurance from inception toexpiry as follows:

(a) For direct business, evenly over the period of the policy;(b) For proportional reinsurance business, evenly over the period of underlying insurance policies; and(c) For non-proportional reinsurance business, in accordance with the pattern of the reinsurance service.

Where the pattern of incidence of risk varies over the period of the policy, premium is recognized as revenue inaccordance with the pattern of the incidence of risk.



Administrative surcharge is recognized as premium at the time the policies are written.

Provision for unearned premium represents the portion of premium written relating to the unexpired period of coverageand is recognized as a liability by the Holding Company. This liability is calculated as follows:

- for marine cargo business and for motor business in Dubai, as a ratio of the unexpired period to the total periodof the policy applied on the gross premium of the individual policies; and

- for other classes / lines of business, by applying the twenty-fourths method as specified in the SEC (Insurance)Rules, 2002, as majority of the remaining policies are issued for a period of one year.

Receivables under insurance contracts are recognized when due, at the fair value of the consideration receivable lessprovision for doubtful debts, if any. Provision for impairment on premium receivables is established when there isobjective evidence that the Holding Company will not be able to collect all amounts due according to original terms ofreceivable. Receivables are also analyzed as per their ageing and accordingly provision is maintained on a systematicbasis.

b) Reinsurance ceded

The reinsurance contracts are entered into the normal course of business in order to limit the potential for losses arisingfrom certain exposures. Outward reinsurance premiums are accounted for in the same period as the related premiumsfor the direct or accepted reinsurance business being reinsured.

Reinsurance liabilities represent balances due to reinsurance companies. Amounts payable are estimated in a mannerconsistent with the related reinsurance contract. Reinsurance assets represent balances due from reinsurance companies.Amounts recoverable from reinsurers are estimated in a manner consistent with the provision for outstanding claimsor settled claims associated with the reinsurance policies and are in accordance with the related reinsurance contract.

Reinsurance assets are not offset against related insurance liabilities. Income or expenses from reinsurance contractare not offset against expenses or income from related insurance assets.

Reinsurance assets or liabilities are derecognized when the contractual rights are extinguished or expired.

Reinsurance assets are assessed for impairment on each reporting date. If there is an objective evidence that thereinsurance asset is impaired, the carrying amount of the reinsurance asset is reduced to its recoverable amount andimpairment loss is recognized in the profit and loss account.

The portion of reinsurance premium not recognized as an expense is shown as a prepayment.

Commission income from reinsurers is recognized at the time of issuance of the underlying insurance policy by theGroup. This income is deferred and brought to account as revenue in accordance with the pattern of recognition ofthe reinsurance premium to which it relates. Profit commission, if any, which may be entitled to under the terms ofreinsurance, is recognized on accrual basis.

c) Claims expenses

General insurance claims include all claims occurring during the year, whether reported or not, related internal andexternal claims handling costs that are directly related to the processing and settlement of claims, a reduction for thevalue of salvage and other recoveries, (if any) and any adjustments to claims outstanding from previous years.

The liability in respect of all claims is recognized upto the reporting date which is measured at the undiscounted valueof the expected future payments. The claims are considered to be incurred at the time of the incident giving rise tothe claim except as otherwise expressly indicated in the insurance contract. The liability for claims include amountsrelating to unpaid reported claims, claims incurred but not reported (IBNR) and expected claims settlement costs.



d) Reinsurance recoveries against outstanding claims

Claims recoveries receivable from the reinsurer are recognized as an asset at the same time as the claims whichgive rise to the right of recovery are recognized as a liability and are measured at the amount expected to bereceived.

e) Commission expense and other acquisition costs

Commission expense and other acquisition costs are charged to profit and loss account at the time the policiesare accepted.

f) Premium deficiency reserve

A provision is maintained in respect of premium deficiency for the class of business where the unearned premiumliability is not adequate to meet the expected future liability after reinsurance, from claims and other supplementaryexpenses expected to be incurred after the reporting date in respect of the unexpired policies in that class ofbusiness at the reporting date.

The movement in the premium deficiency reserve is recorded as an expense / income in profit and loss accountfor the year.

For this purpose, loss ratios for each class of non life insurance business are estimated on the basis of historicalclaims development. Judgment is used in assessing the extent to which past trends may not apply in future or theeffects of one-off claims. If these ratios are adverse, premium deficiency is determined. The loss ratios estimatedby Holding Company on this basis for the unexpired portion are as follows:

2011 2010

Fire and property damage 67.59% 70.38%Marine, aviation and transport 51.57% 50.74%Motor 68.71% 70.73%Miscellaneous 76.89% 74.55%

Based on an analysis of combined operating ratio for the expired period of each reportable segment, the managementconsiders that the unearned premium reserve for all classes of business as at the year end is adequate to meetthe expected future liability after reinsurance, from claims and other expenses expected to be incurred after thebalance sheet date in respect of policies in those classes of business in force at the reporting date. Hence, noreserve for the same has been made in these consolidated financial statements.

2.2.2 Subsidiary Company - Life business

a) Conventional Business

The Conventional Business includes individual life, group life and group credit life assurance. The individual lifebusiness segment provides life assurance coverage to individuals under conventional policies issued. The riskunderwritten is mainly death and sometimes disability with some additional rider as per the discretion of thepolicyholder. The business is written through direct sales as well as through bancassurance and telesales. Thegroup life business and group credit life segment provides life assurance coverage to members of businessenterprises and corporate entities under group life assurance schemes issued and assurance coverage to a groupof members or subscribers registered under a common platform. The risk underwritten is mainly death and sometimesdisability. This business is written through direct sales, through the agents and bancassurance (credit life).

i) Individual life

Revenue recognition

Premiums are recognised once the related policies have been issued and the premiums have been received.



Recognition of policyholders' liabilities

Policyholders’ liabilities included in the statutory fund are determined based on the appointed actuary’s valuationconducted as at the reporting date, in accordance with section 50 of the Insurance Ordinance, 2000.

Claims expenses

Claims expenses are recognised on the earlier of the policy expiry or the date when the intimation of the event giving rise to the claim is received.

Liability for outstanding claims includes amounts in relation to unpaid reported claims and is stated at estimated claims settlement cost. Full provision is made for the estimated cost of claims incurred and reported to the date of the balance sheet.

Liability for claims "Incurred But Not Reported" (IBNR) is included in the policyholders' liabilities in accordance with the advise of the appointed actuary.

ii) Group life and group credit life

Revenue recognition

Premiums are recognised when due. In respect of certain group policies, insurance cover is provided even if the premium is received after the grace period. Provision for unearned premiums is included in the policyholders’ liabilities.


Policyholders’ liabilities included in the statutory fund are determined based on the appointed actuary’s valuation conducted as at the reporting date, in accordance with section 50 of the Insurance Ordinance, 2000.

Claims expenses

Claims expenses are recognised on the date the insured event is intimated.

Liability for outstanding claims includes amounts in relation to unpaid reported claims and is stated at estimated claimssettlement cost. Full provision is made for the estimated cost of claims incurred and reported to the date of the balancesheet.

Liability for claims "Incurred But Not Reported" (IBNR) is included in the policyholders' liabilities in accordance withthe advise of the appointed actuary.

Experience refund of premium

Experience refund of premium payable to policyholders is included in policyholders' liability in accordance with theadvice of the appointed actuary.

b) Accident and Health Business

Accident and Health business provides fixed pecuniary benefits or benefits in the nature of indemnity or a combinationof both in case of accident or sickness to individuals. The risk underwritten is medical expenses related tohospitalisation. This business is written through direct sales as well as through telesales.

Revenue recognition






Claims expenses

Claims expenses are recognised as soon as a reliable estimate of the claim amount can be made.


Liability for claims "Incurred But Not Reported" (IBNR) is included in the policy-holders' liabilities in accordance withthe advice of the appointed actuary.

c) Non-unitised Investment Link Business

Non-unitised Investment Link Business provides life assurance coverage to individuals under universal life policiesissued. Benefits are expressed in terms of account value of the policyholders’ account which is related to the marketvalue of the underlying assets of the investment fund. The risk underwritten is mainly death and sometimes disability.This business is written through bancassurance channel and brokers.

Revenue recognition




Claims expenses

Claim expenses are recognised on the earlier of the policy expiry or the date when the intimation of the event givingrise to the claim is received.


Liability for claims "Incurred But Not Reported" (IBNR) is included in the policyholders' liabilities in accordance withthe advice of the appointed actuary.

d) Unit Link Business

Unit Link Business provides life assurance coverage to individuals under unit linked investment policies issued.Benefits are expressed in terms of account value of the policyholders’ account which is related to the market valueof the underlying assets of the investment fund. The risk underwritten is mainly death and sometimes disability.This business is only written through bancassurance channel.

Revenue recognition

Premiums are recognised once the related policies have been issued and the premiums have been received. Singlepremiums are recognised once the related policies are issued against the receipt of premium.





Claims expenses

Claim expenses are recognised on the earlier of the policy expiry or the date when the intimation of the event givingrise to the claim is received.


Liability for claims "Incurred But Not Reported" (IBNR) is included in the policy holders' liabilities in accordance withthe advice of the appointed actuary.

e) Reinsurance contracts held

Individual life unit link business, non-unitised investment link business, conventional business and accident andhealth business are reinsured under an individual life reinsurance agreements whereas group life and group creditlife policies are reinsured under group life and group credit life reinsurance agreements respectively.

Reinsurance premium

Reinsurance premium expense is recognised at the same time when the related premium income is recognised. It ismeasured in line with the terms and conditions of the reinsurance treaties.

Claim recoveries from reinsurers are recognised at the same time when the claim giving rise to the right of recoveryis recognised.

Amount due from / to reinsurer

All receivables (reinsurer's share in claims, commission from reinsurer and experience refund) and payables (reinsurancepremium) under reinsurance agreements are recognised on net basis, only under the circumstances that there is aclear legal right of off-set of the amounts .

Amounts due from / to reinsurers are carried at cost which is the fair value of the consideration to be received / paidin the future for services rendered / received, less provision for impairment, if any.

f) Receivables and payables related to insurance contracts

These include amounts due to and from agents and policyholders which are recognised when due except unpaidpremiums. Unpaid premiums are recognised as revenue only:

- during days of grace as specified in the policy; or

- where actuarial valuation assumes that all the premium due have been received.

g) Acquisition costs

There are costs incurred in acquiring insurance policies, maintaining such policies, and include without limitationall forms of remuneration paid to insurance agents.

Commission and other expenses are recognised as expense in the earlier of the financial year in which they arepaid and the financial year in which they become due and payable, except that commission and other expenseswhich are directly referable to the acquisition or renewal of specific contracts are recognised not later than theperiod in which the premium to which they refer is recognised as revenue.



2.3 Statutory funds

Subsidiary Company - Life business

The Subsidiary Company maintains statutory funds in respect of each class of life assurance business in which itoperates. Assets, liabilities, revenues and expenses of the Subsidiary Company are referable to the respective statutoryfunds. However, where these are not referable to statutory funds, these are allocated to shareholders' fund of theSubsidiary Company on the basis of actuarial advice. Apportionment of assets, liabilities, revenues and expenses,whenever required between funds are made on the basis certified by the appointed actuary of the Company. Policyholders’liabilities have been included in statutory funds on the basis of the actuarial valuation carried out by the appointedactuary of the Subsidiary Company on the reporting date as required by section 50 of the Insurance Ordinance, 2000.

2.4 Policyholders' liabilities

Subsidiary Company - Life business

a) Conventional Business

i) Individual Life

Policyholders' liabilities constitute the reserves for basic plans and riders attached to the basic plans.

Policy reserves pertaining to the primary plans are based on Full Preliminary Term - Net Premium method using EFU(61-66) mortality table and a discounting factor interest rate of 3.75%. This table reflects the mortality expectations inPakistan. In the opinion of the appointed actuary, the table gives the closest match to the underlying mortality of theconcerned population. This is in line with the requirements under the repealed Insurance Act, 1938 and is considerablylower than the actual investment return managed on conventional portfolio. The difference between the above andactual investment return is intended to be available to the Subsidiary Company for meeting administrative expensesand for providing margins against adverse deviations. Policy reserves for both waiver of premium and accidental deathriders have been based on net unearned premiums.

ii) Group life and group credit

Policy reserves for these plans are based on the unearned premium method net of allowances made for acquisitionexpenses, unexpired reinsurance premium reserve and profit commission. The reserve also comprises allowance for"Incurred But Not Reported" (IBNR) claims. The provision for 'Incurred But Not Reported' (IBNR) claims as includedin policyholders' liability is determined by reference to actual claims reported after the valuation date for events takingplace before the valuation date. This approach is being used as the Subsidiary Company has recently started business.Once sufficient experience of claim reporting patterns have built up, the appointed actuary will determine IBNR inaccordance with these claim log patterns for each line of business separately. Appropriate margins will be added toensure that the reserve set aside are resilient to changes in the experience.

b) Accident and Health Business

Policy reserves for this plan have been based on net unearned premiums with allowance for mortality pertainingto accident only.

c) Non-unitised Investment Link Business

Policyholders' liabilities constitute the account value of investment link contracts as well as non-investment reserves of these contracts. Non-investment reserves constitute liability kept to account for risks such as death and non-investment riders (accidental death and disability, monthly income benefit, waiver of premium, etc.). Reserves for

death are based on risk charges deducted for, while reserves for the attached riders are based on net unearnedpremiums.

d) Unit Link Business

Policyholders' liabilities constitute the account value of investment link contracts as well as non-investment reservesof these contracts. Non-investment reserves constitute liability kept to account for risks such as death and non-



investment riders (accidental death and disability, monthly income benefit, waiver of premium, etc.). Reserves fordeath are based on risk charges deducted for, while reserves for the attached riders are based on net unearnedpremiums.

For the purpose of valuation of unit link business, no provision has been made for lapses and surrenders. Thisgives prudence to the value placed on the liability by not taking any credits for the profits made on surrenders.

2.5 Staff retirement benefits

2.5.1 Holding Company

a) Defined contribution plan

The Holding Company operates an approved contributory provident fund scheme for all its eligible employees. Equalmonthly contributions to the fund are made by the Holding Company and the employees at the rate of 8.33% ofbasic salary.

b) Defined benefit plans

The Holding Company has the following defined benefit plans:

i) an approved funded gratuity scheme for all its permanent employees in Pakistan. Annual contributions aremade to the schemes on the basis of actuarial recommendations. The actuarial valuation is carried out usingthe projected unit credit method. Actuarial gains and losses are amortized over the expected future service ofthe current members. Gratuity is payable to staff on completion of the prescribed qualifying period of serviceunder the scheme;

ii) unfunded gratuity schemes covering the employees in the UAE branch of the Holding Company as per therequirements of the applicable regulations. Provision is made in the consolidated financial statements basedon the management's best estimate of the liability in respect of these schemes.

2.5.2 Subsidiary Company

a) Defined benefit scheme

The Subsidiary Company operates an unfunded gratuity scheme covering eligible employees whose period ofemployment with the Subsidiary Company is six months or more. The liability recognized in respect of the definedbenefit scheme is the present value of the defined benefit obligation at the reporting date together with adjustmentsfor unrecognized actuarial gains or losses. The defined benefit obligation is determined annually by the appointedactuary using projected unit credit method.

Actuarial gains / losses in excess of ten percent of the higher of actuarial liabilities at the end of last reporting yearare recognized over the average lives of employees.

2.6 Employees' compensated absences

The Group accounts for these benefits in the period in which the absences are earned.

2.7 Creditors, accruals and provisions

Liabilities for creditors and other amounts payable are carried at cost which is the fair value of the consideration to bepaid in the future for the goods and / or services received, whether or not billed to the Group.

Provisions are recognized when there is a present, legal or constructive obligation as a result of past events and it isprobable that an outflow of resources embodying economic benefits will be required to settle the obligation and areliable estimate of the amount can be made. Provisions are reviewed at each balance sheet date and adjusted toreflect the current best estimate.



2.8 Cash and cash equivalents

Cash and cash equivalents are carried in the balance sheet at cost. For the purpose of cash flow statement, cash andcash equivalents comprise of cash and bank deposits and short-term bank borrowings and excludes bank balancesheld under lien.

2.9 Investments

All investments are initially recognized at cost being the fair value of the consideration given and include transactioncosts except in case of investments at fair value through profit or loss. All purchases and sales of investments thatrequire delivery within the time frame established by regulations or market convention are accounted for at the tradedate. Trade date is the date when the Group commits to purchase or sell the investment.

The above investments are classified into the following categories:

Held-to-maturity

Investments with fixed or determinable payments and fixed maturity, where the management has both the intent andthe ability to hold the investments to maturity, are classified as held-to-maturity.

Subsequent to initial recognition at cost, these investments are measured at amortized cost less any accumulatedimpairment losses. Amortized cost is calculated taking into account any discount or premium on acquisition by usingthe effective interest rate method.

Available-for-sale

Investments which are intended to be held for an undefined period of time but may be sold in response to the needfor liquidity, changes in interest rates, equity prices or exchange rates are classified as available-for-sale.

Subsequent to initial recognition at cost, these are stated at the lower of cost or market value (market value being takenas lower if the reduction is other than temporary) in accordance with the requirements of the SEC (Insurance) Rules,2002. The stock exchange quotations at the reporting date are used to determine the market value of its quotedinvestments. Appropriate valuation techniques are used to estimate the fair value of unquoted investments in delisted/ unlisted companies. Such valuation is obtained from independent valuers.

In case of Government securities, the market value is determined using rates announced by the Financial MarketAssociation.

In case of other fixed income securities redeemable at a given date where the cost is different from the redemptionvalue, such difference is amortized uniformly over the period between the acquisition date and the date of maturity indetermining 'cost' at which these investments are stated as per the requirements of the SEC (Insurance) Rules, 2002.

At fair value through profit or loss

A financial asset is classified into the 'financial assets at fair value through profit or loss' category at inception if acquiredprincipally for the purpose of selling in the short term, if it forms part of a portfolio of financial assets in which there isevidence of short term profit taking, or if so designated by the management. Subsequently, these are measured at fairvalue and gains and losses arising from change in fair value are included in the profit and loss account / revenueaccount.

2.10 Taxation

Current

Provision for current taxation is based on taxable income at the current rates of taxation after taking into account taxcredits and rebates available, if any. The charge for the current taxation also includes adjustments where considerednecessary, relating to prior years which arise from assessments framed / finalized during the year or required by anyother reason.



Deferred

Deferred tax is accounted for using the balance sheet liability method in respect of all temporary differences arisingfrom differences between the carrying amount of assets and liabilities in the financial statements and the correspondingtax bases used in the computation of the taxable profit. Deferred tax liabilities are generally recognized for all taxabletemporary differences and deferred tax assets to the extent that it is probable that taxable profits will be availableagainst which the deductible temporary differences, unused tax losses and tax credits can be utilized.

Deferred tax is calculated at the rates that are expected to apply to the period when the differences reverse based ontax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged orcredited in the profit and loss account, except in the case of items credited or charged to statement of comprehensiveincome in which case it is included in statement of comprehensive income.

2.11 Fixed assets

Tangible

Owned fixed assets, other than freehold land which is not depreciated and capital work-in-progress, are stated at cost,signifying historical cost, less accumulated depreciation and any provision for impairment. Freehold land and capitalwork-in-progress are carried at cost less impairment losses, if any. Depreciation is charged to income applying varyingmethods depending upon the nature of the asset, at the rates specified for calculation of depreciation after taking intoaccount residual value, if any. The useful lives, residual values and depreciation method are reviewed, and adjustedif appropriate, at each reporting date.

Assets subject to finance lease are accounted for by recording the assets at the lower of present value of minimumlease payments under lease agreements and the fair value of asset at the inception of the lease contract. The relatedobligation under the lease is accounted for as liability. Financial charges are allocated to accounting period in a mannerso as to provide a constant periodic rate of charge on the outstanding liability.

Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, onlywhen it is probable that future benefits associated with the item will flow to the Group and the cost of the item can bemeasured reliably. All other repairs and maintenance costs are charged to profit and loss account as and when incurred.

Depreciation on additions is charged from the month the assets are available for use while on disposals, depreciationis charged up to the month in which the assets are disposed off.

The carrying values of tangible fixed assets are reviewed for impairment when events or changes in circumstancesindicate that this carrying value may not be recoverable. If any such indications exist and where the carrying valuesexceed the estimated recoverable amounts, the assets are written down to their recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount of the assets disposedoff. These are included in the profit and loss account currently.

Intangible

The intangible assets having finite useful lives are stated at cost less accumulated amortization and any provision forimpairment. Intangible assets having an indefinite useful lives are stated at acquisition cost less impairment, if any.

Amortization is calculated from the month the assets are available for use using the straight-line method, whereby thecost of the intangible asset is amortized over its estimated useful life over which economic benefits are expected toflow to the Company. The useful life and amortization methods are reviewed, and adjusted if appropriate, at eachbalance sheet date.

Software development costs are only capitalized to the extent that future economic benefits are expected to be derivedby the Group.

The carrying values of intangible assets are reviewed for impairment when events or changes in circumstances indicatethat this carrying value may not be recoverable. If any such indications exist and where the carrying values exceedthe estimated recoverable amounts, the assets are written down to their recoverable amount.



2.12 Expenses of management


Expenses of management allocated to the underwriting business represent directly attributable expenses and indirectexpenses allocated to the various classes of business on the basis of net premium revenue. Expenses not allocableto the underwriting business are charged as administrative expenses.


Expenses of management have been allocated to various classes of business as deemed equitable by the management.Allocation to each segment is based on the nature of the expense and its correlation to each segment.

2.13 Investment income

a) From available-for-sale investments

- Return on fixed income investments

Return on fixed income securities classified as available-for-sale is recognized on a time proportion basis.

- Dividend

Dividend income is recognized when the right to receive the dividend is established.

- Gain / loss on sale of available-for-sale investments

Gain / loss on sale of available-for-sale investments is recognized in profit and loss account currently.

- Return on Term Finance Certificates

The difference between the redemption value and the purchase price of the Term Finance Certificates is amortizedand taken to the profit and loss account over the term of the investment.

b) From held-to-maturity investments

Income from held-to-maturity investments is recognized on a time proportion basis taking into account the effectiveyield on the investments.

c) From investments at fair value through profit or loss

Gain or loss on sale of investment is included in profit and loss account or respective revenue account of the fundin the period in which disposal has been made.

d) Share of profit from associated companies

This is recognized as per policy stated in note 2.1 b (ii).

2.14 Foreign currencies

Transactions in foreign currencies (other than the result of foreign branches) are accounted for in Pak Rupees at therates prevailing on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies aretranslated into Pak Rupees at the rates of exchange prevailing at the reporting date. Exchange differences are takento the profit and loss account currently.

The assets and liabilities of foreign branches are translated to Pak Rupees at exchange rates prevailing at the balancesheet date. The results of foreign branches of the Holding Company are translated to Pak Rupees at the averagerate of exchange for the year.



Translation gains and losses are included in the profit and loss account, except those arising on the translation ofthe net investment in foreign branches, which are taken to the capital reserves (exchange translation reserve).

2.15 Financial instruments

Financial assets and liabilities are recognized at the time when the Group becomes a party to the contractual provisionsof the instrument and de-recognized when the Group loses control of contractual rights that comprise the financialassets and in the case of financial liabilities when the obligation specified in the contract is discharged, cancelled orexpired. Any gain or loss on the de-recognition of the financial assets and liabilities is included in the profit and lossaccount currently.

Financial instruments carried on the balance sheet include cash and bank, loans, investments, premiums due butunpaid, amounts due from other insurers / reinsurers, premium and claim reserves retained by cedants, accruedinvestment income, reinsurance recoveries against outstanding claims, sundry receivables, provision for outstandingclaims, amounts due to other insurers / reinsurers, accrued expenses, other creditors and accruals, liabilities againstassets subject to finance lease and unclaimed dividends. The particular recognition methods adopted are disclosedin the individual policy statements associated with each item.

2.16 Dividend and appropriation to reserves

Dividend distribution to the Group's shareholders is recognized as a liability in the Group's consolidated financialstatements in the period in which the dividends are approved by the shareholders and other appropriations arerecognized in the period in which these are approved by the Board of Directors.

2.17 Off setting of fund liabilities and fund assets

A financial asset and a financial liability is offset and the net amount is reported in the balance sheet when there isa legally enforceable right to set-off the recognized amounts and it is intended either to settle on a net basis or torealize the asset and settle the liability simultaneously.

2.18 Earnings per share

The Group presents basic and diluted earnings per share (EPS) for its shareholders. Basic EPS is calculated bydividing the profit or loss attributable to ordinary shareholders of the Holding Company by the weighted averagenumber of ordinary shares outstanding during the period / year. Diluted earnings per share is calculated if there isany potential dilutive effect on the reported net profits.

2.19 Share Capital

Shares are classified as equity when there is no obligation to transfer cash or other assets. Incremental costs directlyattributable to the issue of equity instruments are shown in equity as a deduction from the proceeds.

2.20 Impairment

Financial assets

A financial asset is considered to be impaired if objective evidence indicate that one or more events had a negativeeffect on the estimated future cash flow of that asset.

An impairment loss in respect of a financial asset measured at amortized cost is calculated as a difference betweenits carrying amount and the present value of estimated future cash flows discounted at the original effective interestrate. An impairment loss in respect of available-for-sale financial asset is calculated with reference to its current fairvalue.

Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assetsare assessed collectively in groups that share similar credit risk characteristics.



Non financial assets

The carrying amounts of the non-financial assets are reviewed at each reporting date to determine whether there isany indication of impairment. If such indication exists, the recoverable amount of such asset is estimated. An impairmentloss is recognized wherever the carrying amount of the asset exceeds its recoverable amount. Impairment lossesare recognized in profit and loss account. A previously recognized impairment loss is reversed only if there has beena change in the estimates used to determine the asset's recoverable amount since the last impairment loss wasrecognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increasedamount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairmentloss been recognized for the asset in prior years. Such reversal is recognized in profit and loss account.

2.21 Segment reporting


Operating segments are reported in a manner consistent with the internal reporting provided to the chief operatingdecision makers (the Board of Directors) who is responsible for allocating resources and assessing performance ofthe operating segments.

The segment reporting is accounted for using the classes of business as specified under the Insurance Ordinance,2000 and the SEC (Insurance) Rules, 2002 as the primary reporting format based on the practice of reporting to themanagement on the same basis.

Assets, liabilities and capital expenditures that are directly attributable to segments have been assigned to them whilethe carrying amount of certain assets used jointly by two or more segments have been allocated to segments on areasonable basis. Those assets and liabilities which cannot be allocated to a particular segment on a reasonablebasis are reported as unallocated corporate assets and liabilities.


Operating segments are reported in a manner consistent with that provided to the chief operating decision maker.The chief operating decision-maker, who is responsible for allocating resources and assessing performance of theoperating segments, has been identified as the Chief Executive Officer of the Company.

The Company operates in Pakistan only. The Company has four primary business segments for reporting purposesnamely; Conventional Business and Accident and Health Business and Non-Unitised Investment Link Business andUnit Link Business. The Company accounts for segment reporting using the classes or sub-classes of business(Statutory Funds) as specified under the Insurance Ordinance, 2000 and SEC (Insurance) Rules, 2002 as the primaryreporting format.

2.22 Borrowing cost

Interest, mark-up and other charges on long-term finances are capitalized up to the date of commissioning of respectivequalifying assets acquired out of the proceeds of such long-term finances. All other interest, mark-up and othercharges are recognized in profit and loss account.



3.3 As at 31 December 2011, MCB Bank Limited, Nishat Mills Limited, Security General Insurance Company Limited, D.G.Khan Cement Company Limited and Pakistan Molasses Company (Pvt.) Limited, associated undertakings, held36,338,092 (2010: 36,338,092), 36,337 (2010: 36,337), NIL (2010: 4,138,572), 3,541,391 (2010: 3,541,391) and 60,000(2010: 55,000) ordinary shares of Rupees 10 each, respectively.

Note

Reserve for exceptional losses 4.1 22,859 22,859Investment fluctuation reserve 4.2 3,764 3,764Exchange translation reserve 4.3 278,502 200,515Capital contribution to statutory funds 4.4 (218,193) (116,742)

86,932 110,396Revenue reserveGeneral reserve 936,500 936,500

1,023,432 1,046,896

Rupees in thousand


Number of shares


3. SHARE CAPITAL

3.1 Authorized share capital

3.2 Paid-up share capital

Issued, subscribed and fully paid:

Ordinary shares ofRupees 10 each

Opening balance

Ordinary shares of Rupees10 each fully paid in cash

Ordinary shares of Rupees10 each issued as fully paidbonus shares

Issued during the year

Ordinary shares of Rupees10 each issued as fully paidbonus shares

Closing balance

250,000 250,000

123,454,544 112,208,676

- 11,245,868

123,704,544 123,704,544

150,000,000 150,000,000 1,500,000 1,500,000

2,500 2,500

1,234,545 1,122,086

- 112,459

1,237,045 1,237,045

4.1 The reserve for exceptional losses represents the amount set aside by the Holding Company in prior years up to 31December 1978, in order to avail the deduction while computing the taxable income under the old Income Tax Act of1922. Subsequent to the introduction of repealed Income Tax Ordinance, 1979, which did not permit the said deduction,the Holding Company discontinued the setting aside of amounts as reserve for exceptional losses.

4.2 This amount has been set aside by the Holding Company in prior years for utilization against possible diminution inthe value of investments.

Rupees in thousand


4. RESERVES

Capital reserves Restated



4.3 The exchange translation reserve represents the gain resulted from the translation of foreign branches (having businessin foreign currencies) of Holding Company into Pak Rupees. For the purpose of exchange translation reserve, the UAEand Export Processing Zone branches are treated as foreign branches since these carry on their business in AED andUS Dollars, respectively.

4.4 This represents the share of equity holders of the Parent in the capital contribution made by shareholders’ fund ofSubsidiary to its statutory funds.

5. NON-CONTROLLING INTEREST

Share capital 240,599 240,599Profit for the year 8,312 5,679Capital contribution to statutory funds (178,524) (95,516)Opening retained earnings 7,361 1,682

77,748 152,444

6. POLICYHOLDERS' LIABILITIES

Life insurance:

6.1 Gross of reinsurance

Actuarial liability relating to future events 90,231 8 255,210 182,405 527,854 122,405

Provision for incurred but not reported claims 16,182 - - - 16,182 9,793

106,413 8 255,210 182,405 544,036 132,198

6.2 Net of reinsurance

Actuarial liability relating to future events 48,835 8 247,183 178,051 474,077 92,725

Provision for incurred but not reported claims 5,487 - - - 5,487 6,754

Retained earnings 10,684 80 19,258 - 30,022 -

65,006 88 266,441 178,051 509,586 99,479

ConventionalBusiness

Accident andHealth

Business

31December

2010

Rupees in thousand

Statutory Funds31

December2011

Non-unitisedInvestment

Link Business

Unit linkBusiness

6.3 The appointed actuary of the Subsidiary Company has carried out a valuation of the policyholders' liabilities with respectto the Conventional Business, Accident and Health Business, Non-unitised Investment Linked Business and Unit LinkBusiness (Statutory Funds) as per section 50 of the Insurance Ordinance, 2000. The significant assumptions used inthe valuations are disclosed in note 30.4.2 to these consolidated financial statements.

The details of the significant assumptions used by the appointed actuary in computation of policyholders' liability willbe specified in the Financial Condition Report for the year ended 31 December 2011 to be issued by the appointedactuary of the Subsidiary Company in accordance with the requirements set out in section 50 of the Insurance Ordinance,2000.

Rupees in thousand


Restated

7. PROVISION FOR OUTSTANDING CLAIMS (including IBNR)

General insurance:Related parties 187,035 1,697,849Others 5,360,983 6,317,555

5,548,018 8,015,404Life insurance 28,193 9,414

5,576,211 8,024,818

Rupees in thousand


Percent per annum

2011 2010



7.1 In UAE branch of the Holding Company, provision for IBNR claims of Rupees 34.785 million have been accountedfor retrospectively in the year 2010. These IBNR claims could not be booked last year due to error. Had this error notbeen corrected retrospectively, the profit before tax would have been higher by Rupees 34.785 million.

8. STAFF RETIREMENT BENEFITS - Unfunded staff gratuity

Opening balance 19,585 14,298Charge for the year - Holding Company 8.1 4,688 3,382Charge for the year - Subsidiary Company 8.2.3 2,574 1,880Benefits paid - Holding Company (930) -Benefits paid - Subsidiary Company (386) (338)

25,531 19,222Exchange loss - Holding Company 927 363

26,458 19,585

Rupees in thousand

31 December 2011 31 December 2010Note

8.1 The above provision relates to the Holding Company's operations in UAE. Actuarial valuation has not been obtainedas the liability is not material.

8.2 The Subsidiary Company operates an unfunded gratuity scheme for all permanent employees. An actuarial valuationis carried out at 31 December 2011 to determine the liability of the Subsidiary Company in respect of the scheme. Theinformation provided in notes 8.2.1 to 8.2.5 is based upon the actuarial valuation carried out as at 31 December 2011.The following significant assumptions have been used for valuation of this scheme:

Discount rate 13.00 14.25Expected rate of increase in salaries 11.00 11.00

8.2.1 Amounts recognised in the balance sheetPresent value of the obligation 7,087 3,071Unrecognised actuarial loss (2,640) (812)Gratuity liability as at 31 December 2011 4,447 2,259

8.2.2 Movement in the present value of the defined benefit obligationObligation at the beginning of the year 3,071 1,465Current service cost 1,920 1,528Interest cost 629 322Actuarial loss 1,853 94Benefits paid (386) (338)Obligation at the end of the year 7,087 3,071

8.2.3 Amounts recognised in the profit and loss accountCurrent service cost 1,920 1,528Interest cost 629 322Recognised actuarial loss 25 30

2,574 1,8808.2.4 Reconciliation of liability

Opening net liability 2,259 717Charge for the year 2,574 1,880Benefits paid (386) (338)Closing net liability 4,447 2,259

Rupees in thousand




8.2.5 Actual return on plan assets

The Subsidiary Company does not have any plan assets as at 31 December 2011 in respect of its unfunded gratuityscheme.

9. OTHER CREDITORS AND ACCRUALS

Cash margin against performance bonds 612,067 556,683Sundry creditors 193,059 168,237Commission payable 531,396 589,285Workers' welfare fund 11,762 88,375Federal insurance fee 35,471 18,889Federal excise duty 101,572 133,204Others 31,105 9,787

1,516,432 1,564,460

Rupees in thousand


9.1 During the year, an amount of Rupees 22.666 million (2010: Rupees 22.495 million) has been charged to the profitand loss account in respect of the Holding Company's contributions to the Employees' Provident Fund.

10. LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE

Present value of minimum lease payments 58,567 107,637

10.1 Minimum lease paymentsNot later than 1 year 27,809 39,313Later than 1 year and not later than 5 years 42,056 98,296

69,865 137,609

Future finance charges on finance lease (11,298) (29,972)Present value of finance lease liability 58,567 107,637

10.2 Present value of finance lease liabilities

Not later than 1 year 20,904 25,502Later than 1 year and not later than 5 years 37,663 82,135

58,567 107,637

10.3 The above represents finance lease entered into with leasing companies for motor vehicles. The liability is payable byOctober 2014 in quarterly installments and is secured against respective vehicles and security deposits.

10.4 Lease payments bear variable mark-up rates and include finance charges at KIBOR + 2% to 2.5% per annum. KIBORis determined on quarterly basis.



11. CONTINGENCIES AND COMMITMENTS

11.1 Contingencies

Holding Company

The income tax assessments of the Holding Company have been finalized up to tax year 2011. However, the HoldingCompany has filed appeals in respect of certain assessment years mainly on account of following:

i) The Deputy Commissioner Inland Revenue (DCIR) has finalized assessments for the assessment year 1999-2000 bytaxing capital gains at the full rate of 33%. The aggregate tax liability assessed by the DCIR amounted to Rupees48.205 million against which the Holding Company has made a total provision of Rupees 44.141 million resulting in ashortfall of Rupees 4.064 million. The Holding Company filed appeals with the Commissioner Inland Revenue (Appeals)and Appellate Tribunal Inland Revenue (ATIR) which were decided against the Holding Company. Consequently, theHolding Company has filed an appeal before the Honorable High Court of Sindh and the petition is fixed for regularhearing.

ii) The Additional Commissioner / Taxation Officer has reopened assessments for the assessment years 2000-2001 and2001-2002 by taxing bonus shares received by the Holding Company during the above mentioned periods resultingin an additional tax liability of Rupees 14.907 million. An appeal was filed before the Commissioner Inland Revenue(Appeals) who cancelled the amended order passed by the Additional Commissioner and allowed relief to the HoldingCompany but the Tax Department had filed an appeal before the ATIR against the order of the Additional Commissioner,which has been decided in favour of the Holding Company. However, the Holding Company received another noticefrom Additional Commissioner for reassessment of the case in response to which the Holding Company has filed aconstitutional petition in Sindh High Court against such notice.

iii) While finalizing the assessment for the assessment year 2002-2003, DCIR has reduced the business loss for the yearby Rupees 88.180 million by adjusting the dividend income against this loss. The Holding Company maintains that itis entitled to carry the gross loss forward for adjustment against the future taxable income and dividend income forthe year should be taxed separately at reduced rate. The appeals of the Holding Company in this respect have beenrejected by the Commissioner Inland Revenue (Appeals), the ATIR and the Sindh High Court. The Holding Companyhas filed a reference application with the Supreme Court of Pakistan. The management is confident that the matterwill eventually be decided in favor of the Holding Company and has consequently not made any provision against theadditional tax liability of Rupees 26.455 million which may arise in this respect.

iv) The Tax Authorities have also amended the assessments for tax years 2003 to 2007 on the ground that the HoldingCompany has not apportioned management and general administration expenses against capital gain and dividendincome. The Holding Company has filed constitution petition in the High Court of Sindh against the amendment in theassessment order. The Holding Company may be liable to pay Rupees 5.881 million in the event of decision againstit, out of which Rupees 2.727 million have been provided resulting in a shortfall of Rupees 3.154 million.

v) The Taxation Officer has passed an order in the tax years 2005 and 2006 under section 221 of the Income Tax Ordinance,2001 (the Ordinance) levying minimum tax liability aggregating to Rupees 38.358 million. An appeal had been filedbefore the Commissioner Inland Revenue (Appeals) who upheld the order of the Taxation Officer. The Holding Companyhas filed an appeal before the ATIR which is pending to be heard.

vi) The Holding Company received a notice from Additional Commissioner Inland Revenue pertaining to the amendmentof tax year 2008. Among others, the Additional Commissioner raised an issue with respect to the claim of exemptionon capital gains on listed securities by way of incorrect application of the provisions of law. The Holding Companypreferred to contest this matter by way of filing a constitutional petition before Sindh High Court. The court has orderedfor stay of proceedings.

Pending resolution of the above-mentioned appeals filed by the Holding Company, no provision has been made inthese consolidated financial statements for the aggregate amount of Rupees 86.938 million (31 December 2010:88.201 million) as the management is confident that the eventual outcome of the above matters will be in favor of theHolding Company.

Subsidiary Company

Bank guarantee 500 -

11.2 Commitments:

Holding Company There were no capital or other commitments as at 31 December 2011 (2010: Nil).

Subsidiary CompanyCommitments in respect of leased assets - not later than one year is Nil (2010: 2.996 million) and intangible assetsnot later than one year is Nil (2010: 2.555 million).

12. CASH AND BANK DEPOSITS

Cash and other equivalentsCash in hand 1,848 3,062Cheques in transit 19,749 56,391

21,597 59,453Current and other accountsCurrent accounts 239,015 170,902Savings accounts 1,288,075 927,383

1,527,090 1,098,285Deposits maturing within 12 monthsFixed and term deposits 12.1 957,694 1,584,827

2,506,381 2,742,565

12.1 These include fixed deposits amounting to Rupees 166.947 million (AED 6.844 million) [2010: 158.536 million (AED6.795 million)] kept in accordance with the requirements of Insurance Regulations applicable to the UAE branchesfor the purpose of carrying on business in United Arab Emirates. These also include liens against cash deposits ofRupees 9.076 million (2010: Rupees 4.824 million) with banks in Pakistan essentially in respect of guarantees issuedby the banks on behalf of the Holding Company for claims under litigation filed against the Holding Company.

12.2 Cash and bank deposits include an amount of Rupees 745.929 million (2010: Rupees 803.040 million) held withrelated parties.

13. LOANS - considered goodSecuredExecutives 13.2 3,273 4,108Employees 13.2 24,691 35,646

27,964 39,754Less: Recoverable within one year shown under sundry receivables


10,789 17,66817,175 22,086

Rupees in thousand




Note

13.1 Loans to employees are granted in accordance with the terms of their employment for the purchase of vehicles,purchase / construction of houses and for other purposes as specified in the SEC (Insurance) Rules, 2002. Theseloans are recoverable in monthly installments over various periods and are secured by registration of vehicles, depositof title documents of property with the Holding Company and against provident fund balances of the employees. Theloans are interest free except for those granted for the purchase / construction of houses which carry interest at therate of 5% (2010: 5%) per annum.



Rupees in thousand


13.2 Reconciliation of carrying amount of loans

Opening balance 4,108 35,646 39,754 1,990 43,779 45,769

Disbursements 4,270 22,382 26,652 7,552 24,439 31,991

Repayments (5,105) (33,337) (38,442) (5,434) (32,572) (38,006)

Closing balance 3,273 24,691 27,964 4,108 35,646 39,754

14. INVESTMENTS

Available-for-sale In related parties

Marketable securities 14.3 6,932,043 6,699,828

Less: Provision for impairment in value of investments (12,085) -

6,919,958 6,699,828

Others

Marketable securities 14.3 3,258,267 3,264,744

Less: Provision for impairment in value of investments (601,776) (412,931)

2,656,491 2,851,813

At fair value through profit or loss 14.4

In related parties

Marketable securities 14.4.1 791 -

Others

Marketable securities 14.4.2 1,986 853

Government securities 14.4.3 373,877 55,363

Mutual Funds 14.4.4 5,178 -

381,041 56,216

9,958,281 9,607,857

2011


2010


Rupees in thousand

Note

14.1 At 31 December 2011, the fair value of available-for-sale securities was Rupees 9,973.924 million (2010: Rupees10,099.074 million). As per the Group's accounting policy, available-for-sale investments are stated at lower of costor market value (market value being taken as lower if the reduction is other than temporary). However, InternationalAccounting Standard (IAS) 39, "Financial Instruments: Recognition and Measurements" dealing with the recognitionand measurement of financial instruments requires that these instruments should be measured at fair value. Accordingly,had these investments been measured at fair value, their carrying value as at 31 December 2011 would have beenhigher by Rupees 2.424 million (2010: higher by Rupees 491.217 million).



Rupees in thousand

31 December 2011 31 December 201014.2 Reconciliation of provision for impairment in value of investments

Opening provision 412,931 541,300

Charge / (reversal) for the year 200,930 (126,017)

Written off - (2,352)

Closing provision 613,861 412,931

Note

14.3 Marketable securities - Available-for-saleIn related parties:

- Listed shares 4,767,707 (12,085) 4,755,622 4,690,300

- Mutual Fund Certificates 1,363,835 - 1,363,835 1,090,791

- Investment in Associate

Lalpir Power Limited 439,752 - 439,752 459,523

Pakgen Power Limited 360,749 - 360,749 459,214

14.3.1 6,932,043 (12,085) 6,919,958 6,699,828

Others:- Listed shares 14.3.2 2,758,171 (601,376) 2,156,795 2,231,550

- Term Finance Certificates 14.3.3 130,445 (298) 130,147 160,947

- Mutual Fund Certificates 14.3.4 81,135 - 81,135 136,101

- NIT Units 161 - 161 161

- Government Treasury Bills 136,104 - 136,104 -

- Pakistan Investment Bonds 19,764 - 19,764 122,461

- Pakistan Investment Bonds (5 Years) 132,487 (102) 132,385 200,593

3,258,267 (601,776) 2,656,491 2,851,813

10,190,310 (613,861) 9,576,449 9,551,641

31 December 2011 31 December2010

CarryingValue

CarryingValue

Provision thereagainstCost

Rupees in thousand



Listed shares:

1,258,650 1,258,650 10 Nishat Mills Limited

[Equity held 0.36% (2010: 0.36%)] 34,211 34,211

115,500 115,500 10 Hub Power Company Limited

[Equity held 0.01% (2010: 0.01%)] 3,224 3,224

1,407,944 1,407,944 10 D.G. Khan Cement Company Limited

[Equity held 0.39% (2010: 0.39% )] 38,878 38,878

26,037,715 23,263,378 10 MCB Bank Limited

[Equity held 3.42% (2010: 3.06%)] 4,691,394 4,613,987

4,767,707 4,690,300

Listed shares in Associate:

25,631,181 29,766,527 10 Pakgen Power Limited

[Equity held 6.89% (2010: 8%)]

Opening balance 459,214 412,796

Shares disposed (70,567) -

Share in profit after tax 100,258 68,743

Dividend income (128,156) (22,325)

360,749 459,214

5,128,456 5,149,514

Unlisted shares in Associate:

27,624,635 27,624,635 10 Lalpir Power Limited

[Equity held 8.00% (2010: 8.00% )]

Opening balance 459,523 412,796

Share in after tax profit 118,352 67,445

Dividend income (138,123) (20,718)

439,752 459,523

Rupees in thousand


31 December2011

31 December2010

Rupees

14.3.1 Related partiesCost Cost



Rupees in thousand


14.3.1.1 Pakgen Power Limited(a) The movement is as follows:

Opening cost of investment 412,796 412,796Shares sold during the year (57,348) -

355,448 412,796Post acquistion reserveOpening balance of post acquisition reserve 46,418 -Share of profit from associate for the year 100,258 68,743Dividend income (128,156) (22,325)Earnings reversed on sale of shares (13,219) -

5,301 46,418Closing balance 360,749 459,214

(b) Summarized financial position of Pakgen Power Limited

Total assets 21,901,014 19,320,771Total liabilities 8,653,541 5,568,680Net assets 13,247,473 13,752,091Profit after tax 1,355,790 1,537,444Cost of investment 355,448 412,796Ownership interest 6.89% 8%

Number of ordinary shares held 25,631,181(2010: 29,766,527) of Rupees 10 each. These shares were acquired on 11 June2010. Moreover, 4,135,346 shares were sold on 14 June 2011.

14.3.1.2 Lalpir Power Limited

(a) The movement is as follows:

Cost of investment 412,796 412,796

Post acquisition reserveOpening balance of post acquisition reserve 46,727 -Share of profit from associate for the year 118,352 67,445Dividend income (138,123) (20,718)

26,956 46,727Closing balance 439,752 459,523

(b) Summarized financial position of Lalpir Power Limited

Total assets 19,247,554 17,491,582Total liabilities 7,232,834 5,229,722Net assets 12,014,720 12,261,860Profit after tax 1,479,399 1,508,420Cost of investment 412,796 412,796Ownership interest 8% 8%

Number of ordinary shares held 27,624,635 (2010: 27,624,635) of Rupees 10 each. These shares were acquired on 11 June2010.

Rupees in thousand


31 December2011

31 December2010

Rupees

Mutual Fund Certificates Cost Cost



8,444,180 6,813,142 100 MCB Dynamic Cash Fund 820,970 658,403[Units held 15.69% (2010: 12.05%)]

5,478,668 4,098,524 100 MCB Cash Management Optimizer Fund 542,865 417,388[Units held 7.27% (2010: 5.22%)]

- 152,790 100 MCB Sarmaya Mehfooz Fund 1 - 15,000[Units held Nil (2010: 2.43%)]

1,363,835 1,090,79114.3.2 Other - listed shares

Investment Bank/ Investment Companies / Security Companies

2,310,840 - 10 Arif Habib Investments Limited 47,086 -Commercial Banks

1,573,951 1,309,570 10 Allied Bank Limited 75,492 67,2181,684,247 1,531,134 10 Askari Bank Limited 71,871 71,8716,202,355 6,582,322 10 Bank Al-Habib Limited 130,982 166,807

- 837,178 10 Bank Alfalah Limited - 25,346293,299 266,636 10 Habib Bank Limited 38,447 38,4473,901,899 3,724,444 10 Habib Metropolitan Bank Limited 87,327 100,0265,571,552 1,477,242 10 National Bank of Pakistan 322,024 167,673

- 284,644 10 Soneri Bank Limited - 8,1023,830,544 3,830,544 10 United Bank Limited 296,886 296,886

Insurance15,375 15,375 10 EFU General Insurance Company Limited 1,081 1,081

305,188 196,579 10 International General Insurance Company of Pakistan 22,888 22,888286,843 286,843 10 Pakistan Reinsurance Company Limited 6,326 6,326

Textile Spinning400,000 400,000 10 Hira Textile Mills Limited 5,000 5,000

Power Generation & Distribution85,000 85,000 10 Kot Addu Power Company Limited 3,913 3,913

Oil and Gas Marketing Companies110,000 110,000 10 Pakistan State Oil Company Limited 48,178 48,178 - 157,100 10 Shell Gas LPG Pakistan Limited - 1,749 - 174,916 10 Shell Pakistan Limited - 36,6072,011,905 1,916,100 10 Sui Northern Gas Pipelines Limited 127,666 127,666

Oil and Gas Exploration Companies100,000 790,687 10 Oil and Gas Development Company Limited 10,671 84,376483,585 427,171 10 Pakistan Oilfields Limited 140,624 101,0841,232,790 1,505,195 10 Pakistan Petroleum Limited 181,472 232,943

Engineering1,398,823 1,398,823 10 International Industries Limited 77,490 77,490

Automobile Assembler301,378 301,378 5 Al-Ghazi Tractors Limited 43,030 43,030394,544 394,544 10 Millat Tractors Limited 35,335 35,335

Cables and Electrical Goods326,128 326,128 10 Pakistan Cables Limited 27,717 27,717171,930 171,930 10 Siemens (Pakistan) Engineering Company Limited 135,531 135,531

Fertilizer - 135,868 10 Engro Corporation Limited - 24,223

1,936,906 704,078 10 Fauji Fertilizer Bin Qasim Limited 85,611 23,7602,788,199 2,103,516 10 Fauji Fertilizer Company Limited 245,489 153,437

- 177,494 10 Fatima Fertilizer Company Limited - 1,312Pharmaceutical

1,242,596 1,242,596 10 Abbot Laboratories Pakistan Limited 151,883 151,883814,172 707,976 10 GlaxoSmithKline Pakistan Limited 84,811 84,811



Chemical880,000 800,000 10 Arif Habib Corporation Limited 98,981 98,981 110,401 88,321 10 Clariant Pakistan Limited 11,762 11,76241,400 41,400 10 ICI Pakistan Limited 8,561 8,561

Food and Personal Care Products706,850 642,592 10 Murree Brewery Company Limited 34,565 34,565

32,783 32,783 10 Nestle Pakistan Limited 18,980 18,98054,870 54,870 10 Rafhan Maize Products Limited 44,644 44,64426,336 26,336 50 Unilever Pakistan Limited 35,847 35,847

2,758,171 2,626,056

14.3.3 Others-Term Finance Certificates

3,992 3,993 5,000 Allied Bank Limited (05/11/2006) 19,960 19,968 9,977 9,981 5,000 Bank Alfalah Limited (25/11/ 2005) 49,885 49,904

2,998 2,999 5,000 Bank Alfalah Limited (02/12/ 2009) 14,988 14,994 - 750 5,000 IGI Investment Bank Limited (10/07/2006) - 3,749

998 1,997 5,000 Jahangir Siddiqui and Company Limited (21/11/ 2006) 4,991 9,984 167 500 5,000 Orix Leasing Pakistan Limited (25/05/ 2007) 833 2,498

2,995 4,992 5,000 Pakistan Mobile Communication Limited (31/05/ 2006) 14,976 24,960 1,970 2,955 5,000 Royal Bank of Scotland Limited (10/02/ 2005) 9,848 14,774

- 375 5,000 Searle Pakistan Limited (9/03/2006) - 1,874 2,993 3,991 5,000 Soneri Bank Limited (5/05/2005) 14,964 19,956

130,445 162,661

14.3.4 Others-Mutual Fund Certificates

(Open-Ended) Mutual Funds

1,403,277 1,246,785 100 ABL Income Fund 10,000 10,0006,835 6,341 500 Atlas Income Fund 2,725 2,725

- 65,561 100 AMZ Plus Income Fund - 4,843 244,386 227,020 100 Meezan Islamic Income Fund 10,000 10,000

98,267 271,305 100 IGI Income Fund 9,163 25,000 782,021 1,165,653 100 Arif Habib Pakistan Income Enhancement Fund 35,931 55,000

1,172,613 1,065,013 100 NIT Government Bond Fund 10,000 10,000 31,737 50,708 100 Crosby Phoenix Fund 3,316 5,157

(Close-Ended) Mutual Funds

- 2,677,937 10 JS Growth Fund - 22,605 - 400,000 10 Pakistan Strategic Allocation Fund - 4,000

81,135 149,330

14.4 Investment at fair value through profit or loss

14.4.1Listed shares - Related parties

5,653 - 10 Nishat Power Limited 73 - 10,224 - 10 Nishat Chunian Power Company Limited 130 - 15,000 - 10 The Hub Power Company Limited 513 -

1,848 - 10 Nishat Mills Limited 75 - 791 -

Rupees in thousand


31 December2011

31 December2010

Rupees

Rupees in thousand




Cost Cost

14.4.2 Listed shares - Others

Commercial Banks 6,600 6,000 10 Askari Bank Limited 66 106

32,434 - 10 Soneri Bank Limited 126 - 8,285 - 10 Meezan Bank Limited 144 -

Fertilizer 6,007 - 10 Fauji Fertilizer Company Limited 138 - 3,200 - 10 Fatima Fertilizer Company Limited 479 -

601 - 10 Engro Corporation Limited 56 -

Oil and Gas Marketing Companies 538 - 10 Pakistan State Oil Company Limited 122 -

Chemical 33,000 30,000 10 Arif Habib Corporation Limited 855 747

1,986 853

14.4.3 Government securities

10 Year Pakistan Investment Bonds 275,331 17,73412 Months Treasury Bills 10,318 -6 Months Treasury Bills 63,228 -3 Months Treasury Bills - 37,629Ijarah Sukuks 25,000 -

373,877 55,363

14.4.4 Mutual Fund Certificates - Related parties

21,555 - 100 MCB Cash Management Optimizer Fund 2,218 - 37,855 - 100 MCB Dynamic Stock Fund 2,960 -

5,178 -

15. PREMIUMS DUE BUT UNPAID - Unsecured

Considered good 3,598,905 4,554,824Considered doubtful 309,821 199,015

3,908,726 4,753,839Less: Provision for doubtful balances 15.1 (309,821) (199,015)

3,598,905 4,554,824

Note

Rupees in thousand


31 December2011

31 December2010

Rupees



15.1 Reconciliation of provision for doubtful balances

Opening provision 199,015 119,530Exchange loss 3,735 274Charge for the year 661,627 86,867Written off during the year (554,556) (7,656)Closing provision 309,821 199,015

15.2 Premiums due but unpaid include an amount of Rupees 534.000 million (2010: Rupees 412.000 million) held with relatedparties.

16. AMOUNTS DUE FROM OTHER INSURERS / REINSURERS - Unsecured

Considered good 679,631 993,584Considered doubtful 276,327 30,000

955,958 1,023,584Less: Provision for doubtful balances 16.1 (276,327) (30,000)

679,631 993,58416.1 Reconciliation of provision for doubtful balances

Opening provision 30,000 30,000Charge for the year 270,000 -Written off during the year (23,673) -Closing provision 276,327 30,000

17. ACCRUED INVESTMENT INCOME

Return accrued on Term Finance Certificates 2,242 3,402Return accrued on Treasury Bills 10,217 -Return accrued on Pakistan Investment Bonds 19,664 9,973Dividend income - associated undertakings - - - others 3,164 11,502

3,164 11,502Return on bank deposit accounts - associated undertakings - 11,847 - others 5,246 4,665

5,246 16,51240,533 41,389

18. REINSURANCE RECOVERIES AGAINST OUTSTANDING CLAIMS

These are unsecured and considered to be good.

19. PREPAYMENTS

Prepaid reinsurance premium ceded 1,959,553 1,774,525Others 83,296 60,529

2,042,849 1,835,054

Rupees in thousand


154

Percent per annum

2011 2010

Rupees in thousand



20. SUNDRY RECEIVABLES

Considered goodCurrent portion of long-term loans


Other advances 123,230 108,583Staff Gratuity Fund - Holding Company 20.1.1 14,730 53,818Security deposits 17,749 17,729Receivable from Employees' Provident Fund 1,720 1,737Stationery in hand 4,716 4,716Sundry debtors 6,140 88,397

179,074 292,648Miscellaneous 28,322 23,987

207,396 316,635

20.1 Staff Gratuity Fund

The Holding Company operates an approved funded gratuity scheme for all employees. Actuarial valuation is carried outevery year and the latest valuation was carried out as at 31 December 2011.

The following significant assumptions have been used for valuation of this scheme:

- Discount rate 13.00 14.25- Expected rate of increase in salary level 10.75 12.00- Rate of return on plan assets 13.00 14.25

The fair value of the scheme’s assets and liabilities for past services of the employees at the latest valuation date are asfollows:

Present value of defined benefit obligation at the end of the year (196,137) (215,970)Fair value of plan assets at the end of the year 145,205 186,219

(50,932) (29,751)Net unrecognized actuarial losses 65,662 83,569 Net assets 14,730 53,818

20.1.1 Amounts recognized in the balance sheet

Liabilities - -Assets 14,730 53,818 Net assets 14,730 53,818

Rupees in thousand


Rupees in thousand

31 December 2011



20.1.2 The amounts charged in profit and loss are as follows:

Current service cost 16,291 16,301 Interest cost 26,386 21,783 Expected return on plan assets (20,300) (29,432)Curtailment cost 4,039 - Actuarial losses recognized during the year 12,672 2,812 Total gratuity expense for the year for funded obligation 39,088 11,464

20.1.3 Actual return on plan assets 22,723 25,687

20.1.4 Changes in present value of the defined benefit obligation

Present value of defined benefit obligation at the beginning of the year 215,970 201,262Current service cost 16,291 16,301Interest cost 26,386 21,783Curtailment cost 4,039 -Actuarial (gain) / loss (2,812) 39,329Benefits paid (63,737) (62,705)Present value of defined benefit obligation at the end of the year 196,137 215,970

20.1.5 Changes in the fair value of plan assets

Fair value of plan assets at the beginning of the year 186,219 223,237Expected return 20,300 29,432Actuarial gain / (loss) 2,423 (3,745)Benefits paid (63,737) (62,705)Fair value of plan assets at the end of the year 145,205 186,219

The Holding Company is not expected to contribute to the gratuity fund in 2012 due to unrecognized actuarial losses.

20.1.6 Fund investment

Government Bonds 9,872 6.80 - -Shares and deposits 92,172 63.48 93,350 50.13Unit Trusts 52,555 36.19 94,692 50.85Creditors (9,394) (6.47) (1,823) (0.98)

145,205 100.00 186,219 100.00

Rupees in thousand


31 December 2010

% Rupees in thousand %

156

20.1.7 Amounts / percentages for the current and previous four periods

The Company amortizes gains and losses over the expected remaining service of current plan members. The following tableshows obligation at the end of each year and the proportion thereof resulting from experience loss during the year. Similarly,it shows plan assets at the end of the year and proportion thereof resulting from experience gain during the year.


Defined benefit obligation 196,137 (215,970) (201,262) (161,130) (173,663)

Plan assets (145,205) 186,219 223,237 250,143 282,517

Surplus / (Deficit) 50,932 (29,751) 21,975 89,013 108,854

Experience adjustments on plan liabilities -1% 18% 25% -10% -2%

Experience adjustments on plan assets 2% -2% -8% -15% 10%

21. FIXED ASSETS

Owned assets - tangible 21.1 837,563 934,013

- intangible 21.1 58,901 66,435

896,464 1,000,448

Leased assets 21.1 87,740 143,443

Capital work-in-progress - tangible 21.2 133,378 -

1,117,582 1,143,891

Rupees in thousand


Rupees in thousand

2011 2010 2009 2008 2007

157


21.1 The following is a statement of operating fixed assets :

At 01 January 2011Cost 318,742 115,830 352,143 636,791 211,022 1,634,528 108,343 1,742,871 177,115 177,115 1,919,986Accumulated depreciation /amortisation 37,270 45,618 148,493 318,567 150,567 700,515 41,908 742,423 33,672 33,672 776,095Net book value 281,472 70,212 203,650 318,224 60,455 934,013 66,435 1,000,448 143,443 143,443 1,143,891

Year ended 31 December 2011Opening net book value 281,472 70,212 203,650 318,224 60,455 934,013 66,435 1,000,448 143,443 143,443 1,143,891Additions 7,752 26,989 62,343 22,040 24,885 144,009 17,061 161,070 - - 161,070

DisposalsCost 6,568 18,750 24,122 130,119 57,907 237,466 3,950 241,416 50,009 50,009 291,425Depreciation / amortisation 3,935 10,660 11,276 92,779 52,701 171,351 790 172,141 12,311 12,311 184,452

2,633 8,090 12,846 37,340 5,206 66,115 3,160 69,275 37,698 37,698 106,973

Depreciation / amortisationcharge for the year 14,860 12,447 35,246 89,008 22,783 174,344 21,435 195,779 18,005 18,005 213,784Closing net book value 271,731 76,664 217,901 213,916 57,351 837,563 58,901 896,464 87,740 87,740 984,204

At 31 December 2011Cost 319,926 124,069 390,364 528,712 178,000 1,541,071 121,454 1,662,525 127,106 127,106 1,789,631Accumulated depreciation /amortisation 48,195 47,405 172,463 314,796 120,649 703,508 62,553 766,061 39,366 39,366 805,427Net book value 271,731 76,664 217,901 213,916 57,351 837,563 58,901 896,464 87,740 87,740 984,204

Depreciation rate per annum 10% 15% 15% 15%&16.67% 30% 20% 15%



DisposalsCost 1,477 1,709 58,985 3,062 1,237 66,470 - 66,470 27,166 27,166 93,636Depreciation / amortisation 859 1,093 17,432 1,507 542 21,433 - 21,433 4,167 4,167 25,600

618 616 41,553 1,555 695 45,037 - 45,037 22,999 22,999 68,036

Depreciation / amortisationcharge for the year 8,609 8,029 35,135 90,869 22,206 164,848 17,436 182,284 28,134 28,134 210,418Closing net book value 281,472 70,212 203,650 318,224 60,455 934,013 66,435 1,000,448 143,443 143,443 1,143,891

At 31 December 2010Cost 318,742 115,830 352,143 636,791 211,022 1,634,528 108,343 1,742,871 177,115 177,115 1,919,986Accumulated depreciation /amortisation 37,270 45,618 148,493 318,567 150,567 700,515 41,908 742,423 33,672 33,672 776,095Net book value 281,472 70,212 203,650 318,224 60,455 934,013 66,435 1,000,448 143,443 143,443 1,143,891

Depreciation rate per annum 10% 15% 15% 15%&16.67% 30% 20% 15%

Rupees in thousand




Totalfixed

assetsTotalleased

Motorvehicles

TotalownedComputer

software

Totaltangibleassets

Machineryand

equipment

Motorvehicles

Furnitureand

fixtures

Land &Buildings

20112011

Rupees in thousand




Totalfixed

assetsTotalleased

Motorvehicles

TotalownedComputer

software

Totaltangibleassets

Machineryand

equipment

Motorvehicles

Furnitureand

fixtures

Land &Buildings

20112010

158


21.1.1 Detail of tangible assets disposed / written off during the year are as follows:

TangibleLand & BuildingsHafeez Centre Premises Lahore 1,283 768 515 7,500 Auction Sheikh Sajid - LahoreGlamour Centre Premises Lahore 1,065 638 427 2,200 Auction Humera Muneer - LahoreLatif Centre Premises Lahore 1,100 660 440 2,950 Auction Syed Aadil Gillani - LahoreEden Garden Premises No. 302 and 326 Lahore 3,120 1,869 1,251 6,500 Auction Hashim Aslam Butt - Lahore

6,568 3,935 2,633 19,150Furniture & FixturesItems having book valuebelow Rupees 50,000 2,569 2,165 404 335 Items written off 16,181 8,495 7,686 -

18,750 10,660 8,090 335 Motor VehiclesOwnedToyota Corolla AJJ-271 1,309 732 577 700 Negotiation Mazhar Saleem - Company's employeeSuzuki Cultus AMU-987 600 320 280 490 Negotiation Jameel Khan - Company's employeeSuzuki Cultus 2007 ARM-589 780 275 505 550 Negotiation Edris Goawala - Company's employeeToyota Saloon SE AFT-571 1,169 816 353 353 Negotiation Muhammad Ali Zeb - Ex-employee KarachiToyota Corolla XLI 2003 AFK-543 675 383 292 333 Negotiation Gul Munawar Khan - Company's employeeHonda Civic VTI 2005 AHE-033 1,000 541 459 530 Negotiation Nadeem Rehman - Company's employeeSuzuki Cultus 2008 ARH-625 754 308 446 300 Negotiation Asif Jabbar - Company's employeeHonda Civic Prosmatic Oriel AST-327 1,920 566 1,354 1,238 Negotiation Mudassar Zubair Mirza - Ex-employee KarachiSuzuki Mehran 2010 ASX-506 525 96 429 480 Claim Settled M. Farooq Shakoor - KarachiSuzuki Mehran 2010 ASX-508 525 112 413 415 Negotiation Syed Adnan Iqbal - KarachiSuzuki Mehran 2010 ASZ-214 509 136 373 341 Negotiation Syed Mobin Ahmed - Company's employeeSuzuki Cultus AQA- 294 632 262 370 370 Negotiation Satwat Butt - Company's employeeHonda City LZX-9997 1,288 759 529 1,076 Auction Adnan Wahed - LahoreToyota Corolla XLI LWA-5225 1,354 376 978 1,075 Auction Adnan Wahed - LahoreHonda City MNA-3088 975 271 704 871 Auction Muhammad Ashraf - LahoreSuzuki Cultus LZN-9871 350 97 253 606 Auction Nadeem Aziz Naz - LahoreHonda City 1197 841 464 377 869 Auction Muhammad Ashraf - LahoreHonda City 2005 LEB-5358 831 514 317 810 Auction Nadeem Aziz Naz - LahoreSuzuki Cultus LED-7721 610 268 342 668 Auction Malik Muhammad Ashraf - LahoreHonda City LZV-8185 885 522 363 718 Auction Miqdad Azam - LahoreHonda City LZV-8229 885 522 363 758 Auction Shakeel - LahoreSuzuki Cultus LEC-4613 600 264 336 662 Auction Muhammad Irfan - LahoreHonda City LEC-2885 863 380 483 972 Auction Asim Hanif - LahoreToyota Corolla LZW-5225 885 540 345 686 Auction Fawad Malik - LahoreHonda City LWA-9307 1,038 577 461 1,056 Auction Dilawar Hussain - LahoreSuzuki Cultus JH-967 492 318 174 522 Auction Haji Meraj Din - IslamabadToyota Corolla 1,324 596 728 1,361 Company PolicyMr. Noman Noor - Company's employeeItems having book value below Rupees 50,000 503 261 242 297 Auction

24,122 11,276 12,846 19,107 LeasedSuzuki Cultus LEC-09-1962 851 172 679 710 Negotiation Hakim Akbar - Company's employeeSuzuki Mehran LEC-09-7712 543 110 433 421 Negotiation Ahmar Butt - Company's employeeSuzuki Mehran ASA-387 534 120 414 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASA-169 534 103 431 430 Auction Yasin Anwar - Karachi Suzuki Mehran ARX-619 534 120 414 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASC-479 534 103 431 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASD-609 534 103 431 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASA-391 534 120 414 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASD-602 535 102 433 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASA-638 535 120 415 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASC-974 535 103 432 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASA-748 535 120 415 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASC-539 534 103 431 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASA-536 534 120 414 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASA-513 534 120 414 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASA-591 534 120 414 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASA-504 534 120 414 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASD-435 534 103 431 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASD-463 534 103 431 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASE-314 534 103 431 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASD-438 534 103 431 430 Auction Yasin Anwar - KarachiSuzuki Mehran ASA-506 534 125 409 451 Negotiation Owais Bin Alam - Karachi Ex-employeeToyota Corolla GLI ASM-647 1,389 267 1,122 1,163 Negotiation Salman Hassan Ali - KarachiSuzuki Mehran ASC-485 534 114 420 438 Negotiation Mansoor Ahmed - Company's employee

Rupees in thousand


Bookvalue

Saleproceeds


159


Suzuki Cultus ASC-839 844 180 664 695 Negotiation Mazahir Akbar - Company's employeeSuzuki Mehran ASA-379 534 135 399 425 Negotiation Shahzad Kasumbi - Company's employeeSuzuki Mehran ASA-168 534 119 415 436 Claim Settled Mohammad Yousuf Jamal - Ex - employeeSuzuki Mehran ASB-491 529 118 411 446 Claim Settled Abdul Rahim Khan - KarachiSuzuki Cultus ASE-509 805 181 624 693 Claim Settled Syed Jafar Ali - KarachiSuzuki Cultus LEC-09-3749 813 174 639 645 Negotiation Jasim Ahmed Waheed - Ex - employeeSuzuki Mehran ASA-578 534 135 399 525 Claim Settled Muhammad Saleem Haroon - KarachiSuzuki Mehran ASC-493 534 124 410 441 Negotiation Manzoor Hussain - KarachiSuzuki Mehran LEB-09-8973 540 142 398 435 Negotiation Abdur Rehman - Company's employeeSuzuki Mehran ASD-603 529 123 406 431 Negotiation Anwar Ismail (late) - Ex - employee Suzuki Mehran ASA-519 534 146 388 412 Negotiation Ali Ghufran Siddiqui - Company's employeeSuzuki Mehran LEB-09-8968 541 148 393 419 Negotiation Maqsood ur Rehman - Company's employeeSuzuki Cultus ASA-148 839 203 636 657 Negotiation Jahanzeb Khan - Company's employeeSuzuki Cultus ASD-598 805 197 608 657 Negotiation Salman Qaiser - Ex - employee Suzuki Cultus ASE-510 805 197 608 657 Negotiation Owais - KarachiSuzuki Mehran ASA-165 534 135 399 414 Negotiation Mudassar Raza Lakhani - Company's employeeSuzuki Mehran ASA-382 534 151 383 412 Negotiation Muhammad Ashraf Khan - Ex - employeeToyota Corolla ALTIS ASL-201 1,791 418 1,373 1,446 Negotiation Syed Murtaza Shah - Ex - employeeSuzuki Mehran ASE-316 534 141 393 408 Negotiation Shahab Hussain - Ex - employeeSuzuki Mehran LEC-09-1965 535 141 394 423 Negotiation Asher Mazhar - KarachiToyota Corolla GLI ASM-649 1,389 324 1,065 1,111 Negotiation Ghulam Qadir - Ex - employeeSuzuki Mehran ASC-537 534 141 393 414 Negotiation Rehan Khan - KarachiSuzuki Mehran ASA-534 534 156 378 400 Negotiation Behrooz M. Khodadad - Ex - employeeHonda Civic VTI PTSR JK-099 1,878 458 1,420 1,478 Negotiation Irfan ul Haq - Company's employeeSuzuki Cultus ASC-749 844 231 613 629 Negotiation Haroon - Ex - employeeSuzuki Mehran ASA-619 534 146 388 402 Negotiation Jabbar Kadir - Ex - employeeHonda Civic VTI PT SR ASP-285 1,882 478 1,404 1,435 Negotiation Nadeem Ahmad - Company's employeeSuzuki Mehran ASC-481 534 146 388 402 Negotiation Danish Hussain - Ex - employeeSuzuki Mehran ASB-018 534 146 388 402 Negotiation Nilofer A. Malik - KarachiSuzuki Cultus LEC-09-3752 813 232 581 641 Negotiation Pervez Rasool Malik - Company's employeeHonda Civic VTI PT SR LED-09-8101 1,868 475 1,393 1,427 Negotiation Adnan Chaudhari - KarachiSuzuki Mehran ASA-359 534 120 414 414 Negotiation Shams-ur-Rehman - KarachiSuzuki Mehran ASA-184 534 166 368 389 Negotiation Shahla Yasmeen - Company's employeeSuzuki Mehran ASL-307 520 138 382 391 Negotiation Sarwat Jahan - Company's employeeSuzuki Mehran LEB-09-8945 541 168 373 395 Negotiation Syed Walayat Ali - Company's employeeSuzuki Mehran ASD-610 534 151 383 431 Negotiation Ahsan Ali - Company's employeeToyota Corolla GLI ASP-790 1,389 382 1,007 1,025 Negotiation Yawer Abbas - Ex - employeeSuzuki Mehran ASA-376 534 172 362 378 Negotiation Syed Haider Hussain - Company's employeeSuzuki Cultus ASD-471 805 245 560 587 Negotiation Faisal Mustafa Siddiqui - Company's employeeSuzuki Mehran ASD-459 534 162 372 392 Negotiation Masood Akhtar Khan - Company's employeeSuzuki Cultus ASA-703 804 229 575 608 Negotiation Zahiya Taufiq - Company's employeeSuzuki Mehran ASC-561 529 150 379 385 Negotiation Mohammad Yousuf - Company's employeeHonda Civic VTI PT SR ASQ-228 1,882 556 1,326 1,576 Negotiation Mansoor Ali Khan - KarachiHonda Civic VTI PT SR LED-09-4345 1,876 534 1,342 1,370 Negotiation Mudassar Zubair Mirza - Ex-employee

50,009 12,311 37,698 39,512

Machinery & Equipment3 AC, 1 Fridge and 1 Television 161 95 66 66 Negotiation Syed Murtaza Shah - KarachiDiesel Generator 275 103 172 92 Auction Rana Mukhtar Ahmed - LahoreGenerator 345 246 99 155 Negotiation Rana Mukhtar Ahmed - LahoreItems having book valuebelow Rupees 50,000 3,617 2,414 1,203 1,237 Items written off 125,721 89,921 35,800 -

130,119 92,779 37,340 1,550

Computers and related accessories Items having book valuebelow Rupees 50,000 22,249 21,790 459 371 Items written off 35,658 30,911 4,747 -

57,907 52,701 5,206 371

IntangibleComputer SoftwareERP 3,950 790 3,160 3,950 Company Policy Sidat Hyder Morshed Associates (Pvt.) Ltd. Grand Total 291,425 184,452 106,973 83,975

21.2 Capital work-in-progress represents capital expenditure in respect of Dubai Branch office premises.

Rupees in thousand


Bookvalue

Saleproceeds


160


22. EXPENSESSalaries and wages 862,640 866,052Rent, rates and taxes 68,763 74,255Utilities 35,481 43,349Communication 42,553 45,695Printing and stationery 39,425 30,119Traveling and entertainment 56,380 53,510Repairs and maintenance 151,575 172,302Advertisement and sales promotion 59,629 57,790Depreciation 21.1 32,439 -Amortisation of intangible asset 21.1 21,435 17,436Others 30,397 39,847

1,400,717 1,400,35523. OTHER INCOME

Income from financial assetsReturn on bank deposits 121,534 143,156Interest on loans to employees 463 852Income from non financial assetsGain on sale of fixed assets 25,286 7,744Miscellaneous 11,325 19,487

158,608 171,23924. GENERAL AND ADMINISTRATION EXPENSES

Salaries and wages 24.1 116,877 149,284Depreciation 21.1 159,910 192,982Repairs and maintenance 43,926 -Directors' fee 420 320Legal and professional expenses 80,314 61,100Auditors' remuneration 24.2 5,175 4,614Donations 24.4 3,510 2,163Provision for doubtful receivables 951,627 86,866Sundry receivables written off 8,101 -Fixed assets written off 48,233 -Workers' welfare fund - 11,890Others 159,582 137,119

1,577,675 646,338

24.1 These include Rupees 65.443 million (2010: Rupees 38.122 million) in respect of staff retirement benefits.

24.2 Auditors' remunerationHolding CompanyAudit fee 3,431 2,974Half yearly review 385 350Other certifications and tax advisory services 300 273Out of pocket expenses 978 942

5,094 4,539Subsidiary Company 24.3Audit fee 81 75Out of pocket expenses - -

5,175 4,614

24.3 In addition, Subsidiary Company charged audit fee amounting to Rupees 0.725 million (2010: Rupees 0.675 million) to itsstatutory funds.

24.4 None of the directors or their spouses had any interest in the donee.

Rupees in thousand



25 PROVISION FOR TAXATIONCurrent- current year 89,446 78,888- prior years (305) -

89,141 78,888Deferred 25.2 (259,979) (15,895)

(170,838) 62,993

25.1 Relationship between tax expense and accounting profit

The relationship between tax expense and accounting profit cannot be given because the provision represents the final taxon dividend income and capital gain.

25.2 Deferred tax effect due to temporary differences of:Tax depreciation allowance 66,716 86,966Provision for gratuity (7,648) (6,145)Pre commencement expenses of Subsidiary Company (6,367) (10,030)Assets subject to finance lease 10,211 12,532Effect of minimum tax - Holding Company - (24,948)Carried forward tax losses (264,516) -

(201,604) 58,375Less: opening balance (58,375) (74,270)

(259,979) (15,895)26 EARNINGS PER SHARE - BASIC AND DILUTED

There is no dilutive effect on basic earnings per share which is based on: RestatedNet profit after tax for the year attributable to owners of the Parent 240,138 584,220

(Number of shares)

Weighted average number of shares 123,704,544 123,704,544

(Rupees)

Basic earnings per share 1.94 4.72

27 REMUNERATION OF CHIEF EXECUTIVE OFFICER, DIRECTORS AND EXECUTIVES

The aggregate amount charged for the year for remuneration including all benefits to Chief Executive Officer, directors andexecutives of the Holding Company is as follows:

Fee - 420 - 420 - 320 - 320Managerial remuneration 7,720 - 151,629 159,349 7,720 - 152,307 160,027Allowances and perquisites 3,885 - 112,800 116,685 3,885 - 113,998 117,883

11,605 420 264,429 276,454 11,605 320 266,305 278,230Number 2 10 130 142 1 10 112 123

In addition, the Chief Executive Officer and executives of Holding Company are also provided with free use of the Company's cars,certain household items, furniture and fixtures and equipment in accordance with the policy of the Holding Company.

Rupees in thousand


Rupees in thousand


ExecutiveOfficer


ExecutiveOfficer

2011 2010

161

162

28 TRANSACTIONS WITH RELATED PARTIES

The Group has related party relationships with associates, employee benefit plans, key management personnel and otherparties. Transactions are entered into with such related parties for the issuance of policies to and disbursements of claimsincurred by them and payments of rentals for the use of premises rented from them.

There are no transactions with key management personnel other than their terms of employment. These transactions aredisclosed in notes 8 and 27 to the consolidated financial statements. Particulars of transactions with the Holding Company'sstaff retirement benefit schemes are disclosed in note 8 and 20. Investments in and balances outstanding with related parties(associated undertakings) have been disclosed in the relevant consolidated balance sheet notes. Other transactions withrelated parties (associated undertakings) are summarized as follows:

Holding CompanyPremium underwritten 1,428,639 1,057,855Premium received 1,295,077 1,118,833Premium ceded 3,403 1,555Claims paid 3,134,676 547,722Rent paid 6,042 13,876Dividend received 577,720 318,526Dividend paid 110,271 104,227Profit on bank deposits 43,103 82,880

Bonus shares received 2,326,337 2,114,852Bonus shares issued - 4,008,442

Subsidiary CompanyPremium underwritten 83,089 39,171Profit on bank deposits 3,926 918Claims expense 47,034 28,695Commission expense in respect of Bancassurance 380,995 123,692Technical support fee 14,136 13,348Travelling expenses of directors 1,623 1,010Investment purchased 27,722 260,910Investment sold 96,700 406,112


(Number of shares)

Rupees in thousand


Rupees in thousand


163


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165


30. FINANCIAL AND INSURANCE RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group's activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (including interest /mark-up rate risk, price risk and currency risk). The Group's overall risk management programme focuses on the unpredictabilityof financial markets and seeks to minimize potentially adverse effects on the financial performance. Overall risks arisingfrom the Group's financial assets and liabilities are limited. The Group consistently manages its exposure to financial riskwithout any material change from previous period in the manner described in notes below. The Board of Directors of theHolding Company has overall responsibility for the establishment and oversight of Group's risk management framework.The Board is also responsible for developing the Group's risk management policies.

The individual risk wise analysis is given below:

30.1 Credit risk and concentration of credit risk

Credit risk is the risk that arises with the possibility that one party to a financial instrument will fail to discharge its obligationand cause the other party to incur a financial loss. The Group attempts to control credit risk by monitoring credit exposuresby undertaking transactions with a large number of counterparties in various industries and by continually assessing thecredit worthiness of counterparties.

Concentration of credit risk occurs when a number of counterparties have a similar type of business activities. As a resultany change in economic, political or other conditions would affect their ability to meet contractual obligations in similarmanner. The Group's credit risk exposure is not significantly different from that reflected in the consolidated financialstatements. The management monitors and limits the Group's exposure and conservative estimates of provisions for doubtfulassets, if any. The management is of the view that it is not exposed to significant concentration of credit risk as its financialassets are adequately diversified in entities of sound financial standing, covering various industrial sectors.

The carrying amount of financial assets represents the maximum credit exposure, as specified below:

Bank deposits 2,484,784 2,683,112Investments 9,157,780 8,689,120Premiums due but unpaid 3,598,905 4,554,824Amounts due from other insurers / reinsurers 679,631 993,584Salvage recoveries accrued 165,718 99,636Loans 27,964 39,754Accrued investment income 40,533 41,389Reinsurance recoveries against outstanding claims 3,799,366 6,253,202Sundry receivables 175,441 238,696

20,130,122 23,593,317

Provision for impairment is made for doubtful receivables according to the Group's policy. The impairment provision is writtenoff when the Group expects that it cannot recover the balance due. During the year receivables of Rupees 931.627 million(2010: Rupees 86.867) million were further impaired and provided for. The movement in the provision for doubtful debtsaccount is shown in note 15.1 and 16.1.

The age analysis of gross receivables is as follows:

Upto 1 year 3,189,255 4,019,9501-2 year 719,471 733,889

3,908,726 4,753,839

Rupees in thousand


Rupees in thousand


166


Askari Bank Limited A-1+ AA PACRA 45 45Bank Alfalah Limited A-1+ AA PACRA 316,818 43,808 Bank Al Habib Limited A-1+ AA+ PACRA - 7,572Barclays Bank PLC, Pakistan P-1 Aa3 Moody's 100 100Citibank N.A. P-1 A1 Moody's - 90,343Habib Bank Limited A-1+ AA+ JCR-VIS 109,992 92,803HSBC Bank Middle East Limited P-1 A1 Moody's 11,937 22,480Industrial Development Bank of Pakistan - - - 646 776KASHF Micro Finance Bank Limited A-3 BBB JCR-VIS 858 -KASB Bank Limited A-2 A- PACRA 974 1,164 MCB Bank Limited A-1+ AA+ PACRA 837,987 851,104National Bank of Pakistan A-1+ AAA JCR-VIS 296 7,732Oman International Bank S.A.O.G. A-3 BBB JCR-VIS 2,256 2,130Rozgar Micro Finance Bank Limited A-3 BB+ JCR-VIS 1,000 1,000Soneri Bank Limited A-1+ AA- PACRA 227 334Standard Chartered Bank (Pakistan) Limited A-1+ AAA PACRA 24,721 18,057Tameer Micro Finance Bank Limited A-1 A JCR-VIS 1,000 1,000The Bank of Punjab A-1+ AA PACRA 3,779 -United Bank Limited A-1+ AA+ JCR-VIS 932,430 1,024,881Zarai Taraqiati Bank Limited A-1+ AAA JCR-VIS 222,607 517,783Faysal Bank Limited A-1+ AA JCR-VIS 17,111 -

2,484,784 2,683,112

The credit quality of amount due from other insurers (gross of provision) can be assessed with reference to external credit ratingas follows:

The credit quality of Group's bank balances can be assessed with reference to external credit ratings as follows:

Rupees in thousand

20102011Rating

Short term Long term

RatingAgency

Amounts due fromother insurers /

reinsurers

Reinsurance andother recoveries

against outstandingclaims

31 December2011

31 December2010

Rupees in thousand

A or above (including PRCL) 922,949 3,828,170 4,751,119 5,874,984BBB 24,215 100,438 124,653 1,333,053Others 8,794 36,476 45,270 68,749Total 955,958 3,965,084 4,921,042 7,276,786

Subsidiary Company's receivable from reinsurers was Nil as at 31 December 2011. Therefore, the above stated amounts are ofthe Holding Company.

167

30.2 Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. Prudent liquidity riskmanagement implies maintaining sufficient cash and marketable securities and the availability of adequate funds throughcommitted credit facilities. The Group finances its operations through equity, borrowings and working capital with a view tomaintaining an appropriate mix between various sources of finance to minimize risk. The management follows an effectivecash management program to mitigate the liquidity risk.

The following are the contractual maturities of financial liabilities, including estimated interest payments on an undiscountedcash flow basis:


Provision for outstanding claims(including IBNR) 5,576,211 5,576,211 5,576,211 -Amounts due to other insurers / reinsurers 1,203,579 1,203,579 1,203,579 -Accrued expenses 161,009 161,009 161,009 -Unclaimed dividends 33,495 33,495 33,495 -Other creditors and accruals 1,367,627 1,367,627 1,367,627 -Liabilities against assetssubject to finance lease 58,567 69,865 27,809 42,056

8,400,488 8,411,786 8,369,730 42,056


Provision for outstanding claims(including IBNR) - Restated 8,024,818 8,024,818 8,024,818 -Amounts due to other insurers / reinsurers 1,599,650 1,599,650 1,599,650 -Accrued expenses 151,051 151,051 151,051 -Unclaimed dividends 29,121 29,121 29,121 -Other creditors and accruals 1,323,992 1,323,992 1,323,992 -Liabilities against assetssubject to finance lease 107,637 137,609 39,312 98,297

11,236,269 11,266,241 11,167,944 98,297

30.3 Market risk

Market risk means that the fair value or future cash flows of a financial instrument will fluctuate because of changes in marketprices. The objective is to manage and control market risk exposures within acceptable parameters, while optimizing thereturn. The market risks associated with the Group's business activities are interest / mark-up rate risk, price risk and currencyrisk.

a) Interest / mark-up rate risk

Interest / mark-up rate risk is the risk that value of a financial instrument or future cash flows of a financial instrument willfluctuate due to changes in the market interest / mark-up rates. Sensitivity to interest / mark-up rate risk arises frommismatching of financial assets and liabilities that mature or repaid in a given period. The Group manages this mismatchmentthrough risk management strategies where significant changes in gap position can be adjusted. At the reporting date theinterest / mark-up rate profile of the Group's significant interest / mark-up bearing financial instruments was as follows:


Carrying amountContractualcash flow


Rupees in thousand

2011

Carrying amountContractualcash flow


Rupees in thousand

2010

168

As at 31 December 2011 - Fluctuation of 100 bpsCash flow sensitivity-variable rate financial liabilities (586) 586Cash flow sensitivity-variable rate financial assets 23,759 (23,759)

As at 31 December 2010 - Fluctuation of 100 bpsCash flow sensitivity-variable rate financial liabilities (1,076) 1,076Cash flow sensitivity-variable rate financial assets 26,749 (26,749)

b) Price risk

Price risk represents the risk that the fair value of a financial instrument will fluctuate because of changes in the marketprices (other than those arising from interest / mark-up rate risk or currency risk), whether those changes are caused byfactor specific to the individual financial instrument or its issuer, or factors affecting all or similar financial instrument tradedin the market. The Group is exposed to equity price risk that arises as a result of changes in the levels of KSE-Index andthe value of individual shares. The equity price risk exposure arises from the Group's investments in equity securities forwhich prices in the future are uncertain. The Group policy is to manage price risk through selection of blue chip securities.

The Group's strategy is to hold its strategic equity investments on long term basis. Thus, Group's management is notconcerned with short term price fluctuations with respect to its strategic investments provided that the underlying business,economic and management characteristics of the investee remain favorable. The Group strives to maintain above averagelevels of shareholders' capital to provide a margin of safety against short term equity price volatility. The Group managesprice risk by monitoring exposure in quoted equity securities and implementing the strict discipline in internal risk managementand investment policies.

Fixed rate financial instruments

Financial assetsInvestments-PIBs and DSCs 12% to 14% 14% to 16% 427,480 378,417Loans

5% 5% 27,964 39,754Floating rate financial instruments

Financial assetsBank deposits 5% - 12.75% 2.5% - 15% 2,245,769 2,512,210Investments -TFCs 13.5% - 16.5% 9.3% - 15.5% 130,147 162,661

Financial liabilitiesLiabilities against assets subject to finance lease 3 month KIBOR plus 2 % to 2.5 % 58,567 107,637


The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Thereforea change in interest rate will not effect fair value of any financial instrument. For cash flow sensitivity analysis of variablerate instruments a hypothetical change of 100 basis points in interest rates at the reporting date would have decreased /(increased) profit for the year by the amounts shown below. It is assumed that the changes occur immediately and uniformlyto each category of instrument containing interest rate risk. Variations in market interest rates could produce significantchanges at the time of early repayments. For these reasons, actual results might differ from those reflected in the detailsspecified below. The analysis assumes that all other variables remain constant.


Rupees in thousand

2010201120102011

Carrying amountsEffective interest rate (in%)

Decrease

Profit and loss

Rupees in thousand

Increase

169

The carrying value of investments subject to equity price risk are, in almost all instances, based on quoted market pricesas of the reporting date. Market prices are subject to fluctuation which may result from perceived changes in the underlyingeconomic characteristics of the investee, the relative price of alternative investments and general market conditions.


Group's investment portfolio has been classified in the available-for-sale and fair value through profit or loss categories, a10% increase / decrease in redemption value and share prices at year end would have increased / decreased impairmentloss of investment recognized in profit and loss account or in revenue account of both statutory funds of life insurancebusiness as follows:

Rupees in thousand

Impact on profit before tax Impact on equity

2011Effect of increase in share priceAvailable-for-sale 147,039 147,039Through profit or loss 38 38

Effect of decrease in share priceAvailable-for-sale (789,935) (789,935)Through profit or loss (38) (38)

2010Effect of increase in share priceAvailable-for-sale 79,988 79,988Through profit or loss 78 78

Effect of decrease in share priceAvailable-for-sale (104,981) (104,981)Through profit or loss (78) (78)

c) Currency riskCurrency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changesin foreign exchange rates. The Group’s principal transactions are carried out in Pak Rupees and its exposure to foreignexchange risk arises primarily with respect to AED and US Dollars. Financial assets and liabilities exposed to foreignexchange risk amounted to Rupees 3,760.532 million (2010: Rupees 3,929.319 million) and Rupees 2,696.931 million(2010: Rupees 3,046.516 million), respectively, at the end of the year.

The following significant exchange rates were applied during the year: 2011 2010

Rupees per US DollarAverage rate 86.39 85.16Reporting date rate 89.60 85.70

Rupees per AEDAverage rate 23.52 23.19Reporting date rate 24.39 23.33

30.4 Insurance risk


The principal risk the Holding Company faces under insurance contracts is that the actual claims and benefit payments orthe timing thereof, differ from expectations. This is influenced by the frequency of claims, severity of claims, actual benefitspaid and subsequent development of long-term claims. Therefore the objective of the Holding Company is to ensure thatsufficient reserves are available to cover these liabilities. The above risk exposure is mitigated by diversification across alarge portfolio of insurance contracts and geographical areas. The variability of risks is also improved by careful selectionand implementation of underwriting strategy guidelines, as well as the use of reinsurance arrangements. Further, strict claimreview policies to assess all new and ongoing claims, regular detailed review of claims handling procedures and frequent


170

investigation of possible fraudulent claims and similar procedures are put in place to reduce the risk exposure of the HoldingCompany. The Holding Company further enforces a policy of actively managing and prompt pursuing of claims, in order toreduce its exposure to unpredictable future developments that can negatively impact the Holding Company.

Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision and arein accordance with the reinsurance contracts.

Although the Group has reinsurance arrangements, it is not relieved of its direct obligations to its policyholders and thus acredit exposure exists with respect to ceded insurance, to the extent that any reinsurer is unable to meet its obligationsassumed under such reinsurance agreements. The Group’s placement of reinsurance is diversified such that it is neitherdependent on a single reinsurer nor are the operations of the Group substantially dependent upon any single reinsurancecontract. Reinsurance policies are written with approved reinsurers on either a proportionate basis or non-proportionatebasis. The reinsurers, carefully selected and approved, are dispersed over several geographical regions.

Experience shows that larger the portfolio is of similar insurance contracts, smaller the relative variability will be about theexpected outcome. In addition, a more diversified portfolio is less likely to be affected across the board by a change in anysubset of the portfolio. The Group has developed its insurance underwriting strategy to diversify the type of insurance risksaccepted and within each of these categories to achieve a sufficiently large population of risks to reduce the variability ofthe expected outcome.

The Group principally issues the general insurance contracts e.g. marine and aviation, property, motor and general accidentsand life insurance policies (by Subsidiary Company) with respect to statutory funds established in accordance with therequirements of the law i.e. for conventional business, accident and health business and non-unitised investment linkbusiness. Risks under non-life insurance policies usually cover twelve month duration which in life insurance policies coverslonger terms. For general insurance contracts the most significant risks arise from accidental fire, atmospheric disaster andterrorist activities. Insurance contracts at times also cover risk for single incidents that expose the Company to multipleinsurance risks.

a) Geographical concentration of insurance risk

To optimize benefits from the principle of average and law of large numbers, geographical spread of risk is of extremeimportance. There are a number of parameters which are significant in assessing the accumulation of risks with referenceto the geographical location, the most important of which is risk survey.

Risk surveys are carried out on a regular basis for the evaluation of physical hazards associated primarily with the commercial/ industrial occupation of the insured. Details regarding the fire separation / segregation with respect to the manufacturingprocesses, storage, utilities, etc. are extracted from the layout plan of the insured facility. Such details are formed part ofthe reports which are made available to the underwriters / reinsurers for their evaluation. Reference is made to the standardconstruction specifications laid down by IAP (Insurance Association of Pakistan). For fire and property risk a particularbuilding and neighboring buildings, which could be affected by a single claim incident, are considered as a single location.For earthquake risk, a complete city is classified as a single location. Similarly, for marine risk, multiple risks covered in asingle vessel voyage are considered as a single risk while assessing concentration of risk. The Group evaluates theconcentration of exposures to individual and cumulative insurance risks and establishes its reinsurance policy to reducesuch exposures to levels acceptable to the Group.

A risk management solution is implemented to help assess and plan for risk in catastrophic scenarios. It provides a way tobetter visualize the risk exposure to the Group determines the appropriate amount of reinsurance coverage to protect thebusiness portfolio.

b) Reinsurance arrangements

Keeping in view the maximum exposure in respect of key zone aggregates, a number of proportional and non-proportionalreinsurance arrangements are in place to protect the net account in case of a major catastrophe. Apart from the adequateevent limit which is a multiple of the treaty capacity or the primary recovery from the proportional treaty, any loss over andabove the said limit would be recovered from the non-proportional treaty which is very much in line with the risk managementphilosophy of the Group.


171

In compliance of the regulatory requirement, the reinsurance agreements are duly submitted with the Securities and ExchangeCommission of Pakistan on an annual basis.

The concentration of risk by type of contracts is summarized below by reference to liabilities:


General Insurance:Fire 3,006,526,257 2,420,943,660 2,358,653,326 1,692,898,065 647,872,931 728,045,595Marine 1,393,259,912 1,342,046,500 377,285,090 176,107,263 1,015,974,822 1,165,939,237Motor 70,019,175 70,302,006 1,071,111 1,074,007 68,948,064 69,227,999Miscellaneous 183,462,584 334,429,165 103,780,593 123,545,771 79,681,991 210,883,394 4,653,267,928 4,167,721,331 2,840,790,120 1,993,625,106 1,812,477,808 2,174,096,225

2011 2010 2011 2010 2011 2010

Gross sum insured

Rupees in thousand

Reinsurance Net

c) Neutral assumptions for claims estimation

The process used to determine the assumptions for calculating the outstanding claim reserve is intended to result in neutralestimates of the most likely or expected outcome. The nature of the business makes it very difficult to predict with certaintythe likely outcome of any particular claim and the ultimate cost of notified claims. Each notified claim is assessed on aseparate, case by case basis with due regard to claim circumstances, information available from surveyors and historicalevidence of the size of similar claims. Case estimates are reviewed regularly and are updated as and when new informationis available.

The estimation of IBNR is generally subject to a greater degree of uncertainty than the estimation of the cost of settlingclaims already notified in which case information about the claim event is available. IBNR provisions are initially estimatedat a gross level and a separate calculation is carried out to estimate the size of the reinsurance recoveries.

The estimation process takes into account the past claims reporting pattern and details of reinsurance programs. Thepremium liabilities have been determined such that the total premium liability provisions (unearned premium reserve andpremium deficiency reserve) would be sufficient to service the future expected claims and expenses likely to occur on theunexpired policies as of reporting date. The expected future liability is determined using estimates and assumptions basedon the experience during the expired period of the contracts and expectations of future events that are believed to bereasonable.

d) Sensitivity analysis

The risks associated with the insurance contracts are complex and subject to a number of variables which complicatequantitative sensitivity analysis. The Group considers that the liability for insurance claims recognized in the balance sheetis adequate. However, actual experience may differ from the expected outcome.

As the Group enters into short term insurance contracts, it does not assume any significant impact of changes in marketconditions on unexpired risks. However, some results of sensitivity testing are set out below, showing the impact on profitbefore tax net of reinsurance.

General Insurance

10% increase in lossNet:Fire (65,578) (103,080) (42,626) (67,002)Marine (49,432) (54,596) (32,131) (35,487)Motor (200,062) (230,164) (130,040) (149,607)Miscellaneous (159,840) (98,067) (103,896) (63,744)

(474,912) (485,907) (308,693) (315,840)

Rupees in thousand

2010201120102011

Shareholders' equityPre tax profit

172


General Insurance

10% decrease in lossNet:Fire 65,578 103,080 42,626 67,002Marine 49,432 54,596 32,131 35,487Motor 200,062 230,164 130,040 147,346Miscellaneous 159,840 98,067 103,896 63,744

474,912 485,907 308,693 313,579

e) Claims development table

The following table shows the development of claims over a period of time. The disclosure goes back to the period whenthe earliest material claim arose for which there is still uncertainty about the amount and timing of the claims payments.

Accident year 2009 2010 2011 Total

Estimate of ultimate claims cost:At the end of accident year 6,327,871 10,683,087 6,593,318 23,604,276One year later 6,194,680 6,964,385 - 13,159,065Two years later 879,951 - - 879,951Estimate of cumulative claims 879,951 6,964,385 6,593,318 14,437,654Less: Cumulative payments to date 280,862 5,251,179 3,732,953 9,264,994Liability recognized in the balances 599,089 1,713,206 2,860,365 5,172,660

Since these are initial years of operations by Subsidiary Company, the analysis in (e) above, is given only in respect of theHolding Company.


30.4.2.1Conventional business

a) Individual LifeThe risk underwritten is mainly death and sometimes disability. The risk of death and disability will vary in degree by age,gender, occupation, income group and geographical location of the assured person. The Subsidiary Company's exposureto poor risks may lead to unexpectedly high severity and frequency in claims experience. This can be a result of anti-selection,fraudulent claims, a catastrophe or poor persistency. The Subsidiary Company may also face the risk of poor investmentreturn, inflation of business expenses and liquidity issues on amount invested in the fund. The Subsidiary Company facesthe risk of under-pricing particularly due to the fact that majority of these contracts are long term. Additionally, the risk ofpoor persistency may result in the Company being unable to recover expenses incurred at policy acquisition.

The Subsidiary Company manages these risks through its underwriting, reinsurance, claims handling policy and other relatedcontrols. The Subsidiary Company has a well defined medical underwriting policy and avoids selling policies to high riskindividuals which puts a check on anti-selection. Profit testing is conducted on an annual basis to ensure reasonablenessof premiums charged. Reinsurance contracts have been purchased by the Company to limit the maximum exposure on anyone insured person. The Subsidiary Company is developing and intends to eventually have a good spread of businessthroughout the country thereby ensuring diversification of geographical risks. To avoid poor persistency the Company appliesquality controls on the standard of service provided to policyholders and has placed checks to control mis-selling and totrack improvements in the standard of service provided to policyholders. For this, a regular monitoring of lapsation rates isconducted. On the claims handling side, the Subsidiary Company has procedures in place to ensure that payment of anyfraudulent claims is avoided. For this, the Manager Claims and Head of Operations reviews all claims (within variablemateriality limits) for verification, and a specific and detailed investigation of all apparently doubtful claims (particularly ofhigh amounts) is conducted. Further, all payments on account of claims are made after necessary approval of the ChiefExecutive Officer of the Subsidiary Company. The Subsidiary Company maintains adequate liquidity in its fund to cater fora potentially sudden and high cash requirement.

Rupees in thousand

Rupees in thousand

2010201120102011

Shareholders' equityPre tax profit

173


i) Frequency and severity of claims

The Subsidiary Company measures concentration of risk in terms of exposure by geographical area. Concentration of riskis not currently a factor of concern as the business is developing and aims to achieve a spread of risks across various partsof the country.

There is some concentration by sum assured amounts which may have an impact on the severity of benefit payments ona portfolio basis.

The table below presents the concentration of assured benefits across five bands of assured benefits per individual lifeassured. The benefit assured figures are shown gross and net of the reinsurance contracts described above.

The amounts presented are showing total exposure of the Subsidiary Company including exposure in respect of ridersattached to the main policies.

Benefits assured per lifeRupees0 - 200,000 7,867 2.40 2,360 3.00200,001 - 400,000 33,471 10.20 10,040 12.60400,001 - 800,000 82,257 25.00 24,677 31.00800,001 - 1,000,000 7,671 2.30 2,016 2.50More than 1,000,000 197,465 60.10 40,449 50.90Total 328,731 79,542

b) Sources of uncertainty in the estimation of future benefit payments and premium receipts

Uncertainty in the estimation of future benefit payments and premium receipts for long-term conventional assurance contractsarises from the unpredictability of long-term changes in overall levels of mortality and morbidity incidence rates.

The Subsidiary Company assumes the expected mortality to vary between 60% and 100% of EFU (61-66) since the currentexperience for this line of business is not credible. Morbidity incidence rates are taken as a percentage of reinsurer's riskpremium rate.

Before reinsurance After reinsurance

(Rupees in thousand) (Rupees in thousand)% %

Total benefits assured

Sum assured at the end of 2011

Benefits assured per lifeRupees0 - 200,000 3,093 1.20 900 1.50200,001 - 400,000 5,632 2.30 1,690 2.90400,001 - 800,000 26,345 10.60 7,902 13.40800,001 - 1,000,000 4,525 1.80 1,358 2.30More than 1,000,000 209,272 84.10 47,018 79.90Total 248,867 58,868





174


c) Process used to decide on assumptions

For long-term conventional assurance contracts, long-term assumptions are made at the inception of the contract. Keepingthe statutory minimum reserving basis in view, the Company determines assumptions on future mortality, morbidity, persistency,administrative expenses and investment returns. At regular intervals, profit testing is conducted on main policies. Assumptionsused for profit testing of the main policies are as follows:

The expected mortality is assumed to vary between 60% and 100% of EFU (61-66) since the current experience for thisline of business is not credible.

Morbidity incidence rates for morbidity are taken as a percentage of reinsurer's risk premium rate.

Persistency: Since the Subsidiary Company has recently started business, it has no own experience to refer. Industry standards for anticipated persistency rates have been used initially. Eventually, a periodic analysis of the Company’s recent

and historic experience will be performed and persistency will be calculated by applying statistical methods. Persistencyratesvary by products and more importantly the sales distribution channel. An allowance will then be made for any trend in thedata to arrive at the best estimate of future persistency rates for each sales distribution channel.

Expense levels and inflation: As the business is new, estimates from business projections have been used. Once established,a periodic study will be conducted on the Subsidiary Company’s current business expenses and future projections to calculateper policy expenses. Expense inflation is assumed in line with assumed investment return.

Investment returns: The investment returns are based on the historic performance of the assets and asset types underlyingthe fund.

d) Changes in assumptions

There has been no change in assumptions.

e) Sensitivity analysis

After reinsurance, the overall liability for individual life conventional business stands at less than 4% of the total policyholders’liability held in respect of individual life business. Due to its immateriality, sensitivity analysis has not been conducted.

30.4.2.2 Group Life

The main risk written by the Subsidiary Company is mortality. The Subsidiary Company may be exposed to the risk ofunexpected claim severity or frequency. This can be a result of writing business with higher than expected mortality (suchas mining or other hazardous industries), writing high cover amounts without adequate underwriting, difficulty of verificationof claims, fraudulent claims or a catastrophe. The Subsidiary Company also faces risk such as that of under-pricing to acquirebusiness in a competitive environment and of non-receipt of premium in due time. There also exists a potential risk of assetliability term mismatch due to liabilities being very short term in nature.

The Subsidiary Company manages these risks through underwriting, reinsurance, effective claims handling and other relatedcontrols. The Subsidiary Company has a well defined medical under-writing policy and avoids writing business for groupswith overly hazardous exposure. Pricing is done in line with the actual experience of the Subsidiary Company. The premiumcharged takes into account the actual experience of the client and the nature of mortality exposure the Group faces. Therates are certified by the appointed actuary for large groups having a group assurance policy with annual premium ofRs. 1 million or above in accordance with the requirements of Circular 9 of 2005 dated 1 August 2005. The SubsidiaryCompany also maintains a Management Information System (MIS) to track the adequacy of the premium charged. Reinsurancecontracts have been purchased by the Company to limit the maximum exposure to any one life. At the same time, duecaution is applied in writing business in areas of high probability of terrorism. The Subsidiary Company ensures writingbusiness with good geographical spread and tries to maintain a controlled exposure to large groups which generally havepoor experience. Writing business of known hazardous groups is also avoided. On the claims handling side, the Companyensures that payment of any fraudulent claims is avoided. For this, Manager Claims and Head of Operations reviews alllarge claims for verification. Strict monitoring is in place at the Board of Directors level in order to keep the outstandingbalances of premium at a minimum, especially the ones that are due for more than 90 days. The bulk of the assets heldagainst liabilities of this line of business are cash to money market with short durations and high liquidity, thus mitigatingthe risk of asset value deterioration and liability mismatch.

175


a) Frequency and severity of claims

The Subsidiary Company measures concentration of risk in terms of exposure by geographical area. Concentration of riskarising from geographical area is not a factor of concern as the Company aims to achieve a spread of risks across variousparts of the country.

The following table presents the concentration of assured benefits across five bands of assured benefits per individual lifeassured. The benefit assured figures are shown gross and net of the reinsurance contracts described above.


Benefits assured per lifeRupees0 - 200,000 1,061 0.00 743 0.00200,001 - 400,000 25,500 0.00 17,850 0.00400,001 - 800,000 119,500 0.10 59,750 0.10800,001 - 1,000,000 - 0.00 - 0.00More than 1,000,000 165,065,810 99.90 81,031,018 99.90Total 165,211,871 81,109,361

Benefits assured per lifeRupees0 - 200,000 - 0.00 - 0.00200,001 - 400,000 37,500 0.00 26,250 0.10400,001 - 800,000 103,500 0.10 51,750 0.20800,001 -1,000,000 - 0.00 - 0.00More than 1,000,000 123,088,742 99.90 33,417,042 99.70Total 123,229,742 33,495,042


Other than conducting a liability adequacy for Unexpired Risk Reserves (URR), there is no need to estimate mortality forfuture years because of the short duration of the contracts.


The business is too new for any meaningful investigation into Group’s past experience. However, industry experience, theinsured group's own past experience and reinsurer risk rates are used to determine the expected level of risk in relation tothe EFU (61-66) table.




After reinsurance, the net unearned premium reserve for this business stands at less than 10% of the total policyholders’liability. This liability will be in the Subsidiary Company's books for under a year. Due to its immateriality, a sensitivity analysishas not been conducted.









176


30.4.2.3 Accident & Health

The main risk written by the Subsidiary Company is hospitalisation and death by accidental means. The Subsidiary Companymay be exposed to the risk of unexpected claim frequency. This can be a result of high exposure in a particular geographicalarea, fraudulent claims and catastrophic event.

The Subsidiary Company manages these risks through its underwriting, reinsurance and claims handling policy. On theclaims handling side, the Subsidiary Company ensures that payment of any fraudulent claims is avoided.


Currently, only one product is being sold in this segment effectively which offers a fixed sum assured on hospitalisation ordeath due to accident. The Subsidiary Company therefore has a limited exposure to claim severity. Since this product ismarketed on an individual basis, the risk of unexpected high frequency in claims due to accumulation is also expected tobe low.

The table below presents the concentration of assured benefits across five bands of insured benefits per individual lifeassured.


Benefits assured per lifeRupees0 - 200,000 1,854 78.30 556 28.90200,001 - 400,000 515 21.70 155 8.10400,001 - 800,000 - 0.00 909 47.20800,001 - 1,000,000 - 0.00 - 0.00More than 1,000,000 - 0.00 303 15.80Total 2,369 1,923

Benefits assured per lifeRupees0 - 200,000 - 0.00 - 0.00200,001 - 400,000 14,746 78.50 4,424 78.50400,001 - 800,000 3,030 16.10 909 16.10800,001 - 1,000,000 - 0.00 - 0.00More than 1,000,000 1,010 5.40 303 5.40Total 18,786 5,636


Other than the hazard of fraudulent claims, there is no need to estimate accident rates for future years because of the shortduration of the product offered under this business.


Experience data is not sufficient to be statistically credible, so industry and reinsurer data has been used to fix assumptions.









177

178





The net unearned premium reserve for this business stands at less than 0.1% of the total (net of reinsurance) policyholders’liability. This liability will be in the Subsidiary Company's books for under a year. Due to its immateriality, a sensitivity analysishas not been conducted.

30.4.2.4 Non-unitised Investment Linked Business

The risk underwritten is mainly death and sometimes disability. The risk of death and disability will vary in degree by age,gender, occupation, income group and geographical location of the assured person. The Subsidiary Company's exposureto poor risks may lead to unexpectedly high severity and frequency in claims' experience. This can be a result of anti-selection, fraudulent claims, a catastrophe or poor persistency. The Subsidiary Company may also face the risk of inflationof business expenses and liquidity issues on amount invested in the fund. The Subsidiary Company faces the risk of under-pricing particularly due to the fact that these contracts are long term. Additionally, the risk of poor persistency may result inthe Subsidiary Company being unable to recover expenses incurred at policy acquisition.

The Subsidiary Company manages these risks through its underwriting, reinsurance, claims handling policy and other relatedcontrols. The Subsidiary Company has a well defined medical underwriting policy and avoids selling policies to high riskindividuals which puts a check on anti-selection. Profit testing is conducted on an annual basis to ensure reasonablenessof premiums charged. Reinsurance contracts have been purchased by the Subsidiary Company to limit the maximumexposure on any one insured person. The Subsidiary Company is developing and intends to eventually have a good spreadof business throughout the country thereby ensuring diversification of geographical risks. To avoid poor persistency theCompany applies quality controls on the standard of service provided to policyholders and has placed checks to control mis-selling and to track improvements in the standard of service provided to policyholders. For this, a regular monitoring oflapsation rates is conducted. On the claims handling side, the Subsidiary Company has procedures in place to ensure thatpayment of any fraudulent claims is avoided. For this, the Manager Claims and Head of Operations reviews all claims (withinvariable materiality limits) for verification, and a specific and detailed investigation of all apparently doubtful claims (particularlyof high amounts) is conducted. The Subsidiary Company maintains adequate liquidity in its fund to cater for a potentiallysudden and high cash requirement. Further all payments on account of claims are made after necessary approval of ChiefExecutive Officer of the Subsidiary Company. The Subsidiary Company reserves the right to review the charges deductibleunder the contracts, thus limiting the risk of under pricing.


The Subsidiary Company measures concentration of risk by geographical area. Concentration of risk is not currently a factorof concern as the business is developing and aims to achieve a spread of risks across various parts of the country.

There is some concentration by sum assured amounts which may have an impact on the severity of benefit payments ona portfolio basis.

The Subsidiary Company charges for mortality risk on a monthly basis for all insurance contracts. It has the right to alterthese charges based on its mortality experience and hence minimises its exposure to mortality risk. Delays in implementingincreases in charges and market or regulatory restraints over the extent of the increases may reduce its mitigating effect.The Subsidiary Company manages these risks through its underwriting strategy and reinsurance arrangements.

The table below presents the concentration of assured benefits across five bands of assured benefits per individual lifeassured. The benefit assured figures are shown gross and net of the reinsurance contracts described above. The amountspresented are showing total exposure of the Subsidiary Company including exposure in respect of riders attached to themain policies.



Uncertainty in the estimation of future benefit payments and premium receipts for long-term Non-unitised Investment Linkassurance contracts arises from the unpredictability of long-term changes in overall levels of mortality and morbidity of theinsured population and variability in policyholders' behaviour.

Factors impacting future benefit payments and premium receipts are as follows:

Mortality: The Subsidiary Company assumes the expected mortality to vary between 60% and 100% of EFU (61-66) sincethe current experience for this line of business is not credible.

Morbidity: Incidence rates for morbidity are taken as a proportion of reinsurer's risk rates.

Persistency: The business is developing and actual first year persistency rates will only be measurable next year. Eventuallythe Subsidiary Company intends to conduct periodic analyses on its historic book of business, using statistical methods todetermine its persistency experience. Persistency rates are expected to vary by product and more importantly the salesdistribution channel. Allowance will then be made for any trend in the data to arrive at best estimates of future persistencyrates for each sales distribution channel.

Benefits assured per lifeRupees0 - 200,000 43,637 0.90 12,888 1.10200,001 - 400,000 116,217 2.40 34,233 3.00400,001 - 800,000 540,072 11.40 157,433 14.00800,001 - 1,000,000 138,955 2.90 41,296 3.70More than 1,000,000 3,926,948 82.40 883,873 78.20Total 4,765,829 1,129,723





Benefits assured per lifeRupees0 - 200,000 132,070 6.20 38,269 7.80200,001 - 400,000 147,791 6.90 41,842 8.50400,001 - 800,000 413,647 19.40 118,409 24.10800,001 - 1,000,000 637,992 29.90 186,448 38.00More than 1,000,000 803,152 37.60 106,200 21.60Total 2,134,652 491,168





179



For long-term Non-unitised Investment Link assurance contracts, assumptions are made in two stages. At inception of thecontract, the Subsidiary Company determines assumptions on future mortality, morbidity, persistency, administrative expensesand investment returns. At regular intervals, profit testing is conducted on main policies. Assumptions used for profit testingof the main policies are as follows:

Mortality: The expected mortality is assumed to vary between 60% and 100% of EFU (61-66) since the current experiencefor this line of business is not credible.

Morbidity: Incidence rates for morbidity are taken as a proportion of reinsurer's risk rates.

Persistency: Since the Subsidiary Company has recently started business, it has no own experience to which it refer.Industry standards for anticipated persistency rates have been used initially. Eventually, a periodic analysis of the SubsidiaryCompany’s recent and historic experience will be performed and persistency will be calculated by applying statistical methods.Persistency rates vary by products and more importantly the sales distribution channel. An allowance will then made forany trend in the data to arrive at best estimate of future persistency rates for each sales distribution channel.






The Subsidiary Company has recently commenced operations and sensitivity tests were carried out at the time of pricingproducts to try and ensure robust pricing. Periodic sensitivity analyses of the Subsidiary Company's in-force businessdetermine whether any reserve needs to be created or product prices for new business need to be revised in light of changingor anticipated changes in experience from that expected when pricing the existing book of business. The current nature,volume and age of in-force business does not require a detailed sensitivity analysis at this stage.

30.4.2.5 Unit Link Business

The risk underwritten is mainly death and sometimes disability and/or critical illness. The risk of death and disability will varyfrom region to region. The Company may get exposed to poor risks due to unexpected experience in terms of claim severityor frequency. This can be a result of anti-selection, fraudulent claims, a catastrophe or poor persistency. The SubsidiaryCompany may also face the risk of poor investment return, inflation of business expenses and liquidity issues on moniesinvested in the fund. The Subsidiary Company faces the risk of under-pricing particularly due to the fact that these contractsare long term. Additionally, the risk of poor persistency may result in the Company being unable to recover expenses incurredat policy acquisition.

The Subsidiary Company manages these risks through its underwriting, reinsurance, claims handling policy and other relatedcontrols. The Company has a well defined medical under-writing policy and avoids selling policies to high risk individualswhich puts a check on anti-selection. Profit testing is conducted on an annual basis to ensure reasonableness of premiumscharged. Reinsurance contracts have been purchased by the Company to limit the maximum exposure on any one policyholder.The Company has a good spread of business throughout the country thereby ensuring diversification of geographical risks.To avoid poor persistency the Company applies quality controls on the standard of service provided to policyholders andhas placed checks to curb mis-selling and improvement in standard of service provided to the policyholders. For this, aregular branch wise monitoring of lapsation rates is conducted. On the claims handling side, the Company has proceduresin place to ensure that payment of any fraudulent claims is avoided. For this, Claims Committees (with variable materialitylimits) review all claims for verification and specific and detailed investigation of all apparently doubtful claims (particularlyof high amounts) is conducted. The Subsidiary Company maintains adequate liquidity in each unit fund to cater for potentiallysudden and high cash requirement. The Subsidiary Company reserves the right to review the charges deductible under thecontracts, thus limiting the risk of under-pricing.

180



Uncertainty in the estimation of future benefit payments and premium receipts for long term unit linked insurance contractsarises from the unpredictability of long term changes in overall levels of mortality and variability in policyholder’s behaviour.

Factors impacting future benefit payments and premium receipts are as follows:


Persistency: The business is developing and actual first year persistency rates will only be measurable next year. Eventuallythe Subsidiary Company intends to conduct periodic analyses on its historic book of business, using statistical methods todetermine its persistency experience. Persistency rates are expected to vary by product and more importantly the salesdistribution channel. Allowance will then be made for any trend in the data to arrive at best estimates of future persistencyrates for each sales distribution channel.


For long-term unit linked insurance contracts, assumptions are made in two stages. At inception of the contract, the SubsidiaryCompany determines assumptions on future mortality, persistency, administrative expenses and investment returns. Atregular intervals, profit testing is conducted on main policies. Assumptions used for profit testing of the main policies areas follows:



The Subsidiary Company measures concentration of risk by geographical area. Concentration of risk is not a factor ofconcern due to spread of risks across various parts of the country.

However, undue concentration by amounts could have an impact on the severity of benefit payments on a portfolio basis.

The Subsidiary Company charges for mortality risk on a monthly basis for all insurance contracts without a fixed term. Ithas the right to alter these charges based on its mortality experience and hence minimises its exposure to mortality risk.Delays in implementing increases in charges and market or regulatory restraints over the extent of the increases may reduceits mitigating effect. The Subsidiary Company manages these risks through its underwriting strategy and reinsurancearrangements.

The table below presents the concentration of insured benefits across five bands of insured benefits per individual lifeassured. The benefit insured figures are shown gross and net of the reinsurance contracts described above. At year-end,none of these insurance contracts had triggered a recovery under the reinsurance held by the Subsidiary Company.


Benefits assured per lifeRupees0 - 200,000 27,279 0.60 8,184 0.80200,001 - 400,000 74,705 1.60 22,178 2.10400,001 - 800,000 450,049 9.50 133,611 12.50800,001 - 1,000,000 461,547 9.80 134,420 12.60More than 1,000,000 3,696,169 78.50 768,937 72.00Total 4,709,749 1,067,330





181


Persistency: Since the Company has recently started business, it has no own experience to which it can refer. Industrystandards for anticipated persistency rates have been used initially. Eventually, a periodic analysis of the Subsidiary Company’srecent and historic experience will be performed and persistency will be calculated by applying statistical methods. Persistencyrates vary by products and more importantly the sales distribution channel. An allowance will then be made for any trendin the data to arrive at best estimate of future persistency rates for each sales distribution channel.




The Company has launched Unit Link Business during the current year, as a result changes in assumptions does not apply.


The Subsidiary Company has recently commenced operations and sensitivity tests were carried out at the time of pricingproducts to try and ensure robust pricing. Periodic sensitivity analyses of the Subsidiary Company's in-force businessdetermine whether any reserve needs to be created or product prices for new business need to be revised in light of changingor anticipated changes in experience from that expected when pricing the existing book of business. The current nature,volume and age of in-force business does not require a detailed sensitivity analysis at this stage.

31. FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES

The carrying values of all financial assets and liabilities reflected in these consolidated financial statements approximateto their fair values except for available-for-sale investments which are stated at lower of cost and market value in accordancewith the requirements of the SEC (Insurance) Rules, 2002. The carrying and fair value of these investments have beendisclosed in note 14 to the financial statements.

As at 31 December 2011 the fair values of all major financial assets are estimated to be not significantly different from theircarrying values except for the following:

Fair ValueCarrying ValueFair ValueCarrying Value

2011

Government securities 163,032 163,881 46,216 46,719Listed equities and mutual funds 64,802 73,691 144,968 159,962

32. FINANCIAL INSTRUMENTS BY CATEGORIESAs at 31 December 2011

Financial assetsCash and other equivalents 21,597 - - 21,597Current and other accounts 1,527,090 - - 1,527,090Deposits maturing within 12 months 957,694 - - 957,694Loan to employees 27,964 - - 27,964Investments - 381,832 8,775,948 9,157,780Premiums due but unpaid 3,598,905 - - 3,598,905Amounts due from other insurers / reinsurers 679,631 - - 679,631Salvage recoveries accrued 165,718 - - 165,718Accrued investment income 40,533 - - 40,533Reinsurance recoveries against outstanding claims 3,799,366 - - 3,799,366Sundry receivables 175,441 - - 175,441

10,993,939 381,832 8,775,948 20,151,719

TotalAvailable-for

-sale

At fair value

through profit or

loss

Loans and

receivables

Rupees in thousand

2010

Rupees in thousand

182



Financial liabilitiesProvision for outstanding claims (including IBNR) 5,576,211Amounts due to other insurers / reinsurers 1,203,579Accrued expenses 161,009Other creditors and accruals 1,367,627Unclaimed dividends 33,495Liabilities against assets subject to finance lease 58,567

8,400,488

Financial liabilities atamortised cost

Rupees in thousand

FINANCIAL INSTRUMENTS BY CATEGORIESAs at 31 December 2010

Financial assetsCash and other equivalents 59,453 - - 59,453Current and other accounts 1,098,285 - - 1,098,285Deposits maturing within 12 months 1,584,827 - - 1,584,827Loan to employees 39,754 - - 39,754Investments - 56,216 8,632,904 8,689,120Premiums due but unpaid 4,554,824 - - 4,554,824Amounts due from other insurers/ reinsurers 993,584 - - 993,584Salvage recoveries accrued 99,636 - - 99,636Accrued investment income 41,389 - - 41,389Reinsurance recoveries against outstanding claims 6,253,202 - - 6,253,202Sundry receivables 238,696 - - 238,696

14,963,650 56,216 8,632,904 23,652,770

TotalAvailable-for

-sale

At fair value

through profit or

loss

Loans and

receivables

Rupees in thousand


Financial liabilitiesProvision for outstanding claims (including IBNR) - restated 8,024,818Amounts due to other insurers / reinsurers 1,599,650Accrued expenses 151,051Other creditors and accruals 1,323,992Unclaimed dividends 29,121Liabilities against assets subject to finance lease 107,637

11,236,269

Financial liabilities atamortised cost

Rupees in thousand

33. CAPITAL RISK MANAGEMENT

The Group's goals and objectives when managing capital are:

- to be an appropriately capitalized institution in compliance with the paid-up capital requirement set by the SECP. Minimumpaid-up capital requirement for non-life insurers is Rupees 300 million while for life insurance it is Rupees 500 million. TheGroup is well in excess of the limits prescribed by the SECP and is also complying with other solvency requirementsprescribed by the SECP;

183

2010

Number

2011

- to safeguard the Group's ability to continue as a going concern so that it can continue to provide returns for shareholdersand benefits for the other stakeholders;

- to provide an adequate return to shareholders by pricing insurance contracts and policies commensurately with the levelof risk;

- maintain strong ratings and to protect the Group against unexpected events / losses; and

- to ensure a strong capital base so as to maintain investor, creditor and market confidence and to sustain future developmentof the business.

34. NUMBER OF EMPLOYEES AT 31 DECEMBER

Holding Company 828 978Subsidiary Company 63 55

891 1,033

35. DATE OF AUTHORIZATION FOR ISSUE

These consolidated financial statements have been approved and authorized for issue by the Board of Directors of theHolding Company in their meeting dated 22 March 2012.

36. GENERAL

Figures in these consolidated financial statements have been rounded off to the nearest thousand of rupees, unless otherwisestated.

No significant reclassification or rearrangement of corresponding figures has been made during the year.


Umer ManshaChairman

S. M. JawedDirector



184

PATTERN OF HOLDING OF THE SHARESHELD BY THE SHAREHOLDERSAS AT 31 DECEMBER 2011

No. of Shareholders Shareholdings Total Shares Held

1752 Holding from 1 to 100 54,4061405 " 101 " 500 374,823709 " 501 " 1000 544,818

1048 " 1001 " 5000 2,411,715230 " 5001 " 10000 1,617,817120 " 10001 " 15000 1,497,54053 " 15001 " 20000 945,08349 " 20001 " 25000 1,118,20433 " 25001 " 30000 921,82721 " 30001 " 35000 668,72615 " 35001 " 40000 558,0337 " 40001 " 45000 295,2629 " 45001 " 50000 432,6688 " 50001 " 55000 424,7705 " 55001 " 60000 287,0365 " 60001 " 65000 314,0563 " 65001 " 70000 199,2566 " 70001 " 75000 440,8104 " 75001 " 80000 309,8613 " 80001 " 85000 250,6952 " 85001 " 90000 175,5622 " 90001 " 95000 188,6739 " 95001 " 100000 874,7271 " 100001 " 105000 100,6574 " 105001 " 110000 437,1591 " 110001 " 125000 121,0001 " 125001 " 130000 125,9101 " 130001 " 145000 142,0053 " 145001 " 150000 448,0482 " 150001 " 165000 322,8262 " 165001 " 170000 336,5601 " 170001 " 190000 187,8521 " 190001 " 195000 192,0253 " 195001 " 200000 588,6782 " 200001 " 205000 404,2031 " 205001 " 210000 208,9921 " 210001 " 220000 220,0002 " 220001 " 225000 441,7051 " 225001 " 240000 235,6201 " 240001 " 245000 243,8002 " 245001 " 250000 496,8271 " 250001 " 295000 294,8051 " 295001 " 305000 302,5001 " 305001 " 350000 345,1551 " 350001 " 360000 357,1722 " 360001 " 375000 745,7591 " 375001 " 400000 397,0751 " 400001 " 405000 401,0121 " 405001 " 410000 408,3201 " 410001 " 420000 418,041

185


No. of Shareholders Shareholdings Total Shares Held

1 " 420001 " 440000 439,5001 " 440001 " 495000 494,3011 " 495001 " 545000 542,2231 " 545001 " 565000 560,1021 " 565001 " 570000 565,6001 " 570001 " 600000 597,9491 " 600001 " 615000 614,0811 " 615001 " 685000 684,2331 " 685001 " 790000 787,6801 " 790001 " 840000 837,6001 " 840001 " 925000 923,7121 " 925001 " 955000 953,5921 " 955001 " 1000000 1,000,0001 " 1000001 " 1320000 1,316,4461 " 1320001 " 1325000 1,321,9801 " 1325001 " 1530000 1,526,0521 " 1530001 " 1535000 1,533,3301 " 1535001 " 1565000 1,564,0931 " 1565001 " 1690000 1,689,0002 " 1690001 " 3545000 7,082,3591 " 3545001 " 4140000 4,138,5721 " 4145001 " 5730000 5,729,7811 " 5730001 " 5745000 5,742,1151 " 5745001 " 5780000 5,777,6631 " 5780001 " 7325000 7,324,5031 " 7325001 " 9790000 9,789,9101 " 9790001 " 36340000 36,338,092

5566 123,704,543

186

187

Categories of Shareholders Shares held Percentage

DirectorsUmer Mansha 21,325 0.017Ahmed Ebrahim Hasham 192,025 0.155Ali Munir 5,691 0.005Fredrik Coenrard De Beer 2,500 0.002Ibrahim Shamsi 5,937 0.005Mr. Khalid Qadeer Qureshi 3,025 0.002Muhammad Umer Virk 2,500 0.002S.M.Jawed 6,050 0.005

Chief Executive OfficerManzar Mushtaq 2,500 0.002

Directors / CEO's spouse - -

Executives / Executives' spouse 121,782 0.098

Associated Companies, undertakings & related partiesMCB Bank Ltd., 36,338,092 * 29.375Nishat Mills Ltd. 36,337 0.029D.G. Khan Cement Co., Ltd. 3,541,391 2.863Pakistan Molasses Company (Pvt.) Limited 60,000 0.048

NIT and ICP -Banks, DFls and NBFls 6,190,047 5.004

Public sector companies and corporations 102,433 0.083

Insurance Companies 6,552,066 5.297

Modaraba and Mutual Funds 944,682 0.764

General Publica) Local ( Individuals ) 35,862,979 28.991b) Foreign Companies/ organizations/ Individuals 9,975,427 8.064

( on repatriable basis )

Others - See below 23,737,754 ** 19.189123,704,543 100.000

Shareholders holding 10% or more voting interest 36,338,092 *


188

Others:1 Trustee Adamjee Foundation 9,789,9102 The Administrator Abandoned Properties Organisation 1213 Mobarak Begum Charitable Trust 11,7434 Trustee-Kasb Funds Limited Employees Provident Fund 4,0005 Trustee-Karachi Sheraton Hotel Employees Provident Fund 116 Trustee-Mcb Employees Pension Fund 5,777,6637 Trustee - Mcb Provident Fund Pak Staff 5,729,7818 Pakistan Memon Educational & Welfare Soc 54,8629 Trustee Cherat Cement Co.Ltd. Employees Provident Fund 8,900

10 Trustees Saeeda Amin Wakf 24,20011 Trustees Mohamad Amin Wakf Estate 30,25012 Ismailia Youth Services 3,95813 Trustees Nishat Mills Ltd. Employees Provident Fund 202,52314 Trustees D.G.Khan Cement Co.Ltd. Employees Provident Fund 19,67915 Trustees Nestle Pakistan Ltd Managerial Staff Pension Fund 65,00016 Trustees Nestle Pakistan Ltd Employees Provident Fund 98,71317 Trustees Nestle Pakistan Ltd Employees Gratuity Fund 40,00018 Trustee-Ebrahim Bawany Foundation 3819 Trustee- Khyber Pakhtunkhwa -Pension Fund 95,59020 Trustee-Kohinoor Mills Ltd. Staff Provident Fund 12,10021 Trustee, Nishat (Chunian) Limited Employees Provident Fund 6,05022 Cdc - Trustee Mcb Dynamic Allocation Fund 50023 Joint Stock Companies 1,762,162

23,737,754 **

Karachi: March 7, 2012MANZAR MUSHTAQ

Managing Director & Chief Executive

Categories of Shareholders Shares held


PROXY FORM

I/We of . being a member of

Adamjee Insurance Company Limited hereby appoint Mr.

of or failing him Mr.

of as my/our Proxy to vote for me/us and on my/our behalf

at the fifty one Annual General Meeting of the Company to be held on Friday, April 27, 2012 at 11.00 a.m.

at Islamabad Hotel, Islamabad and at any adjournment thereof.

Signed this . day of . 2012

WITNESSES:

1- Signature .

Name

Address

NIC No.

2- Signature

Name

Address

NIC No.

Signature

Holder of . Ord inary Shares

Share Register Folio No .

“CDC” Participant’s ID No A/c. No.

(Please See Notes on reverse)

Rupees FiveRevenue

Stamp

ADAMJEE INSURANCE COMPANY LIMITED ANNUAL REPORT 2011

ADAMJEE INSURANCE COMPANY LIMITEDRegistered Office: 1st Floor, ISE Towers, 55-B, Jinnah Avenue, Blue Area, Islamabad

NOTES

1. A member entitled to attend and vote at the Annual General Meeting is entitled to appoint another

member as a proxy to attend and vote instead of him/her. A corporation or a company being a

member of the Company may appoint any of its officers, though not a member of the Company.

2. Proxies must be received at the Office of our Registrar M/s Technology Trade (Pvt) Ltd., Dagia

House, 241-C, Block 2, P.E.C.H.S., Off: Shahrah-e-Quaideen, Karachi not less than 48 hours before

the time appointed for the Meeting.

3. The signature on the instrument of proxy must conform to the specimen signature recorded with

the Company.

4. CDC Account Holders will further have to follow the under-mentioned guidelines as laid down in

Circular 1 dated January 26, 2000 issued by the Securities and Exchange Commission of Pakistan.

A. For attending the Meeting

i) In case of individuals, the account holder or sub-account holder shall authenticate his/her identity

by showing his/her original National Identity Card or original Passport at the time of attending the

Meeting.

ii) In case of corporate entity, the Board of Directorsí resolution / power of attorney with specimen

signature of the nominee shall be produced (unless it has been provided earlier) at the time of the

Meeting.

B. For appointing Proxies

i) In case of individuals, the account holder or sub-account holder shall submit the proxy form as per

the above requirement.

ii) The proxy form shall be witnessed by two persons whose names, addresses and NIC numbers

shall be mentioned on the form.

iii) Attested copies of NIC or the passport of the beneficial owners and of the proxy shall be furnished

with the proxy form.

iv) The proxy shall produce his/her original NIC or original passport at the time of the Meeting.

v) In case of corporate entity, the Board of Directorsí resolution / power of attorney with specimen

signatures shall be submitted (unless it has been provided earlier) along with proxy form to the

Company.

ADAMJEE INSURANCE COMPANY LIMITED ANNUAL REPORT 2011

Documents

ADDING VALUE THROUGH BEST PRACTICES€¦ · Tameer Microﬁnance Bank Limited The Bank of Punjab United Bank Limited ... in 2006 and the main objective is to provide maximum beneﬁts