Contents Page - NEM Insurance Plc · 2015-05-22 · REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2013 NEM Insurance 2013 Page 6 REPORT OF THE DIRECTORS

NEM INSURANCE PLC

REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2013

NEM Insurance 2013 Page 1

Contents Page Corporate Information 2

Results at a Glance 5

Report of the Directors 6

Statement of Directors’ Responsibilities 18

Certification Pursuant to Section 60 (2) of Investment and Securities Act No. 29 of 2007 19

Report of the Independent Auditors 20

Report of the Audit Committee 21

Statement of Significant Accounting Policies 22

Statement of Financial Position 50

Statement of Comprehensive Income 51

Statement of Change in Equity 52

Statement of Cash Flows 54

Segment Information 55

Segment Income Statement 56

Notes to the Financial Statements 57

Segments Report 81

Claim Development Table 82

Financial Risk Management Policy 88

Capital Management Policy 105

Value Added Statement 107

Group Financial Summary 109

Parent Financial Summary 110

NEM INSURANCE PLC



Corporate Information Directors Chief Adewale Teluwo Chairman

Mr. Tope Smart Group Managing Director/CEO

Mrs. Susan Abisola Giwa-Osagie Executive Director

Mrs. Yinka Aletor Director Mr. Olusesan Adekunle Director

Dr. Fidelis Ayebae Director

Company Secretary Mrs. Omolara Oyetunde NEM Insurance Plc

138/146, Broad Street

Lagos

Registered Office 138/146 Broad Street

Lagos

FRCN Number FRC/2012/0000000000249 Registration Number 6971 Corporate Head Office 138/146 Broad Street

Lagos

Registrars Africa Prudential Registrars Plc Registrars’ Department

220B, Ikorodu Road

Palmgrove

Lagos Tel: 01-841153, 7301004

E-mail: info@africaprudential registrars.com

Bankers Access Bank Plc Diamond Bank Plc

Ecobank Nigeria Limited

First Bank of Nigeria Limited

First City Monument Bank Plc GT Bank Plc

Keystone Bank Plc

Standard Chartered Bank Limited

Sterling Bank Plc United Bank for Africa Plc

Zenith Bank Plc

Auditors SIAO (Chartered Accountants) 18b, Olu Holloway Road

Off Alfred Rewane Road

Falomo- Ikoyi

P.O.Box 55461, Falomo Ikoyi, Lagos.

Tel: +234 01 463 0871-2

Website: www.siao-ng.com

E-mail: [email protected]

NEM INSURANCE PLC



Corporate Information (Cont’d) Solicitors Koya & Kuti Solicitors 5th Floor, 3, Ajele Street

Lagos.

Sola Abidakun & Co 9th Floor, UBA House

57, Marina Lagos.

Reinsurers African Reinsurers Corporation

Continental Reinsurance Corporation

WAICA Reinsurance Pool

Nigerian Reinsurance Corporation

Aveni Reinsurance

Branch Networks Subsidiary Warri C587/13, Olu Obasanjo Highway 57, Effurun Sapele Road

Accra Girls Area Effurun, Delta State

P.M.B AN, Accra Branch Manager: Kayode Arimoro Ghana Mobile Nos: 08034221374

Tel: 021-220797,021-220798 08023288188, 07029554541

Managing Dirctoe, Iyiola Saraki

Mobile No: 08033143823 Abuja Jos 3, Lokoja Street 10, Rwang Pam Street

Area 8, Garki P.O Box 1261 Abuja Jos, Plateau State

Branch Manager: Michael A. Giwa Tel: 073-454216

Tel:09-6714952, 5233083,7805440 Branch Manager: Thomas Nkom

Mobile Nos: 08033208141 Mobile Nos: 081917772374 070228243127, 07029909242 080983766292, 07095087999 Akure Kaduna

3rd Floor, BIO Building Alagabaka Ground Floor, Turaki Ali House Akure, Ondo State 3, Kanata Road

Tel: 034-215829 P.O Box 822, Kaduna

Branch Manager: Kehinde Agbelade Tel: 062-217683

Mobile No: 08033509419 Branch Manager: Eyitayo Ogboyomi Mobile No: 07028243118

NEM INSURANCE PLC



Corporate Information (Cont’d) Apapa Kano 3rd Floor, Commercial Road 3rd Floor, Union Bank Building

Apapa, Lagos 37, Niger Street Tel: 01-7375546, 07028442653 P.O Box 1185, Kano

Branch Manager: Uzor Enubuzor Tel: 064-649374

Mobile Nos: 08059301673, 08028968842 Branch Manager: Peter I. Agono

07029096131 Mobile No: 08035923740

Calabar Lagos Mainland 2nd Floor, 26, Etta-Agbor Road 284, Ikorodu Road Calabar Anthony Lagos

Cross River State Tel: 01-8171844, 01-4824737, 01-2710060

Tel No: 087-239571 Branch Manager: Andrew M. Ikekhua

Branch Manager: Nkume Omoghogie Mobile Nos: 08076175287, 08023123006 Moblie Nos: 08054642551 07028243123

08033542048

Ibadan Onitsha 3rd Floor, Broking House 2nd Floor, (AIB) Building

1, Alhaji Jimoh Odutola Street 107, Upper New Market Road, Onitsha

PMB 5328, Ibadan Tel: 046-410736

Oyo State Branch Manager: Cyracus Akinjobi Tel: 02-2411992 Mobile Nos: 08033457426, 07029219983

Branch Manager: Rufus Olumide Mobile Nos: 08033463697

08055899976, 07028243124 Osogbo Port Harcourt 1st Floor, Former Afribank Building House 2, Road 2

Opposite Fakunle Comprehensive High School Circular Road, Residential Estate Fakunle, Gbongan/Ibadan Road Port Harcourt, Rivers State

Osogbo, Osun Sate Tel: 084-233513

Tel: 035-214844 Branch Manager: Yemi Mayadenu

Branch Manager: Victor Eweme Mobile Nos: 08063670020, Mobile Nos: 08023276477, 08033698967 08052653797

Vision To be the preferred choice of the insuring public.

Mission To build a customer-satisfying Insurance Institution that is passionate about adding value to the interests of all stakeholders.

Core Values

• Discipline

• Integrity

• Humility

• Excellence

• Empathy

NEM INSURANCE PLC



Result at a Glance 31 Dec.

2013 31 Dec.

2012 Change

Financial Position N'000 N'000 N'000 %

Cash and cash equivalents 3,865,965 3,125,679 740,286 24

Trade receivable 496,007 981,032 (485,024) (49)

Financial assets 2,624,638 1,350,967 1,273,671 94

Reinsurance Asset 65,496 129,501 (64,004) (49)

Property and equipment 1,284,191 828,586 455,605 55

Other receivables and prepayments 278,712 237,634 41,077 17

Deferred acquisition cost 513,387 325,944 187,443 58

Investment properties 468,974 459,813 9,161 2

Statutory deposit 349,200 342,879 6,321 2

Intangible asset 18,851 27,085 (8,234) (30)

Current Income tax Asset 80,456 - 80,456 -

Total Assets 10,045,877 7,809,120 2,236,756 29

Insurance contract liabilities 4,787,052 3,027,556 1,759,496 58

Trade payables 48,510 23,367 25,143 108

Other payables 167,874 168,727 (853) (1)

Book overdraft 9,848 - 9,848

Retirement benefit obligations 170,838 160,205 10,633 7

Current Income Tax Liability - 21,949 (21,949) (100)

Deferred tax liability 166,062 106,671 59,391 56

Total Liabilities 5,350,184 3,508,475 1,841,709 52

Issued share capital 2,640,251 2,640,251 - -

Share premium 272,551 272,551 0 0

Contingency reserve 1,696,986 1,434,193 262,793 18

Retained earnings 30,366 (101,902) 132,268 (130)

Shareholders Fund 4,695,693 4,300,645 395,048 9

Comprehensive Income

Gross premiums 8,933,345 9,652,556 (719,210) (7)

Net premiums 7,424,740 9,117,035 (1,692,295) (19)

Other revenue 849,094 510,286 338,808 66

Total Revenue 8,273,835 9,627,321 (1,353,486) (14)

Claims paid (3,070,271) (2,934,435) (135,836) 5

Other expenses (4,659,154) (6,027,640) 1,368,486 (23)

Total Benefits, Claims and Other Expenses (7,729,425) (8,962,075) 1,232,650 (14)

Profit before tax 544,410 665,246 (120,836) (18)

Income tax expense (149,350) (209,934) 60,584 (29)

Profit For the Year 395,060 455,312 (60,252) (13)

Other Comprehensive Income for the year, net of tax (12) (38,951) (14,760) 38

Total comprehensive income for the year net of tax 395,048 416,361 (75,012) (18)

Basic Earnings Per Share (Kobo) 7 9

NEM INSURANCE PLC



REPORT OF THE DIRECTORS The Directors present their annual reports on the affairs of NEM Insurance Plc together with the

financial statements and auditor’s reports.

1. LEGAL FORM The Company was incorporated in 1970 as a Nigerian Company in accordance with the

Companies Act 1968. The Company became listed on the Nigerian Stock Exchange in 1989

following its privatization by the Federal Government of Nigeria.

2. PRINCIPAL ACTIVITIES

The Company is engaged in General Insurance business which includes marine, motor vehicle, fire etc.

2.1 SUMMARY OF THE RESULT

Comprehensive Income

Gross premiums 8,933,345 9,652,556 (719,210) (7)

Net premiums 7,424,740 9,117,035 (1,692,295) (19)

Other revenue 849,094 510,286 338,808 66

Total Revenue 8,273,835 9,627,321 (1,353,486) (14)

Claims paid (3,070,271) (2,934,435) (135,836) 5

Other expenses (4,659,154) (6,027,640) 1,368,486 (23)

Total Benefits, Claims and Other Expenses (7,729,425) (8,962,075) 1,232,650 (14)

Profit before tax 544,410 665,246 (120,836) (18)

Income tax expense (149,350) (209,934) 60,584 (29)

Profit For the Year 395,060 455,312 (60,252) (13)

Other Comprehensive Income for the year, net of tax (12) (38,951) (14,760) 38

Total comprehensive income for the year net of tax 395,048 416,361 (75,012) (18)

Basic Earnings Per Share (Kobo) 7 9

NEM INSURANCE PLC



Directors Report (Cont’d)

3. CORPORATE GOVERNANCE REPORT Introduction

The business of NEM Insurance Plc is conducted under a corporate governance structure that

incorporates the Board, the Committees, and a functional Management System with the

Board as the apex decision making body. This is in accordance with the “Code of Good

Corporate Governance for the Insurance Industry in Nigeria” and Best Practice. The Company adheres to a high standard of ethics, integrity and professionalism as a demonstration of its

avowed commitment to excellent corporate governance practices. At NEM Insurance Plc, are

committed to full disclosure and transparency in providing information to all stakeholders.

A summary of the key components of our Corporate Governance System is provided

hereunder.

The Board

The Board of Directors of the Company is responsible for establishing the policy framework

that would ensure that the Company fully discharges its legal, financial as well as regulatory

responsibilities. The Board is ultimately responsible to deliver sustainable value to the

shareholders. The Board monitors the performance of the Company, monitors the effectiveness of the governance structure under which it operates, and renders the accounts

of its stewardship of the organization’s resources to the shareholders. The Board of Directors

of the Company is composed of a mix of non-executives and executives whereby the number

of non-executives exceeds the executives while the position of the Chairman of the Board is clearly delineated from the Chief Executive Officer.

The Chairman

The Chairman of NEM Insurance Plc was duly appointed. The Chairman’s primary role is to

ensure that the Board carries out its governance role in the most effective manner. The Chairman manages the operations of the Board effectively in order to ensure that members

make concrete contributions towards the decisions of the Board and that the Board operates

in harmony.

The Chief Executive Officer (CEO)

The CEO has the overall responsibilities for developing, implementing and monitoring the

strategic and financial plans of the Company with the cooperation and support of the Board.

The CEO ensures the effective operation and management of the Company’s resources in

order to ensure profitability of its operations and that all significant matters affecting the Company are brought to the attention of the Board.

Independent Director

The Board appointed one independent director who has remained truly independent since his

appointment.

Annual Board Appraisal

In accordance with the requirement of the NAICOM Code, the Board commissioned New Version Consultants Limited, 5, Lanre Da-Silva Close, Dolphin Extension, Ikoyi, Lagos to

conduct the appraisal exercise of its performance. The report of the appraisal will be

presented at the Company’s Annual General Meeting as required by the NAICOM Code.

NEM INSURANCE PLC



Director Report (Cont’d)

Activities of the Board

The Board meets quarterly to discuss critical issues affecting the organisation and performs

other responsibilities that fall within its purview as provided in the Company’s Article of

Association and by other relevant regulatory authorities. Meetings were well attended with sufficient notice given well in advance of the meetings. The Board met four times during the

year i.e 18th April, 20th June, 8th October and 23rd December, 2013

The Board functions either as a full Board or through any of the underlisted five committees

which are constituted as follows:

Committee Membership Status

Finance and General Purpose Committee Mr. Olusesan Adekunle Chairman

Mr. Tope Smart Member

Mrs. Susan Giwa-Osagie Member

Investment Committee Mrs. Yinka Aletor Chairperson



Enterprise Risk Management Committee Dr. Fidelis Ayebae Chairman



Establishment And Corporate Governance

Committee Dr. Fidelis Ayebae Chairman



Audit Committee Mr. Peter Okoh Chairman

Mr. Taiwo Oderinde Member

Mr. Samuel Mpamaugo Member


Mrs. Yinka Aletor Member

Mr. Olusesan Adekunle Member

Also the Management Committee meets bi-weekly to address policy implementation and operational

issues

Finance and General Purposes Committee (F&GPC)

The key responsibilities of the Finance and General Purposes Committee are:

- Monitoring Budget;

- Monitoring Sources of Income Generation;

- Ensuring Integrity of Financial Reporting;

- Control of expenses.

NEM INSURANCE PLC



Director Report (Cont’d) The Committee met twice (12th June and 5th November, 2013) during the year to ensure the

implementation of efficient and effective financial procedures, guidelines and practices which have

been put in place by the board.

Investment Committee

The essential responsibilities of the Committee are:

• Setting Investment Policies of the Company;

• Approving Investment Plans;

• Evaluating Investment Performance; and

• Reviewing the adequacy of the Investment Charter of the Company.

The Committee held two meetings (11th June and 5th November, 2013) during the financial year to

review the Company’s annual and long-term financial and investment strategies and objectives.

Enterprise Risk Management Committee

The key responsibilities of the Committee are:

• Determine the policies in respect of Risk Profile and Risk Limits;

• Review Policies as required by the emerging dynamics of the operating environment;

• Ensure that all the departments of the Company are adequately;

• Sensitized to the level of risks inherent in their operations;

• Assess adequacy of risk mitigants for major risk indicators; and

• Set up the risk management structure of the Company.

The Committee held two meetings (31st July and 27th November, 2013) during the financial year to

determine the Company’s policies in respect of Risk profile and Risk limits.

Establishment and Corporate Governance Committee

The Terms of Reference of the Committee are to:

� Ensure that money and properties are used and managed to meet the aims and objectives of the Company;

� Ensure that the organisation adheres to regulations, its governing instrument/constitution

and agreed procedures;

� Recommend the number of directors who shall serve on the Board; � Identify individuals acknowledged to be qualified as Board members; and

� Agree on evaluation process to be employed in evaluating the performance of the Board, the

Board Committees and Management.

The Committee held two meetings (31st July and 27th November 2013) during the financial

year under review to review the composition of the Board and recommend skill mix and diversify

required for appointment of new Board members as well as make recommendations relating to

corporate governance and compensation.

NEM INSURANCE PLC




Audit Committee

The NAICOM Code makes the following provisions in respect of the responsibilities of the Audit and

Compliance Committee:

- The Committee shall have a written mandate and Terms of Reference;

- The Committee shall be responsible for the review of integrity of the data

and information provided in the Audit and/or Financial Report;

S.359 (6) of the Companies and Allied Matters Act Cap (20) Laws of the Federation of Nigeria 2004

provides for the functions of the committee.

The key responsibilities of the Committee are to:

� Provide oversight functions with regards to both the Company’s Financial Statement and

its Internal Control and Risk Management Functions;

� Review the terms of engagement and recommend the appointment or reappointment and compensation of External Auditors to the Board and the Shareholders;

� Review the procedure put in place to encourage honest whistle blowing;

� The Audit Committee shall meet at least three times in a year and at least once with the

External Auditors; and � Review the overall performance of the Company.

The Committee met thrice (1st February, 19th June and 21st August 2013) during the year and

covered the basic components of these responsibilities.

Directors Attendance At Meetings The Composition of the Committee and schedule of attendance are as follows:

Directors Board

Establishment

and Corporate

Governance

Finance and

General

Purpose Investment

Enterprise

Risk

Management

Number of Meetings 4 2 2 2 2

Chief (Dr.) Adewale Teluwo 4 N/A N/A N/A N/A

Mr. Tope Smart 4 2 2 2 2

Mr. Olusesan Adekunle 4 N/A 2 N/A N/A

Mrs. Susan Giwa-Osagie 4 2 2 2 2

Mrs. Yinka Aletor 4 N/A N/A 2 N/A

Dr. Fidelis Ayebae 4 2 N/A N/A 2

NEM INSURANCE PLC




The Composition of the Audit Committee and schedule of attendance are as follows:

Name Status Attendance

Mr. Peter Okoh Chairman- Shareholders' Rep 3

Mr.Taiwo Oderinde Shareholders' Rep 3

Mr. Samuel Mpamaugo Shareholders' Rep 3

Mr. Olusesan Adekunle Non Executive Director 3

Mrs. Suzan Giwa-Osagie Executive Director 3

Mrs. Yinka Aletor Non Executive Director 3

Retirement by Rotation and Re-election

In accordance with the Articles of Association of the Company, Dr. Fidelis Ayebae will retire

by rotation and being eligible offer himself for re-election.

Change in the Composition of the Board

Since the last Annual General Meeting of the Company, there has been no change in the composition of the Board.

4. DIVIDEND The Directors recommend a declaration of dividend of N316,830,174.78 which translates to

6 kobo per ordinary share of 50 kobo each subject to the approval of the shareholders at the

next Annual General Meeting.

5. DIRECTORS AND DIRECTORS’ INTERESTS

i. Directors No director has disclosed any declarable interest in any contract with the Company during

the year in pursuant to Section 277 of the Companies and Allied Matters Act CAP C20 LFN 2004.

ii. Directors’ interest The interests of the directors in the issued share capital of the Company as recorded in the register of shareholdings and/or as notified by them for the purposes of Sections 275 and

276 of the Companies and Allied Matters Act CAP C20 LFN 2004 are as follows:

NEM INSURANCE PLC




Indirect Direct

Total

2013 2012 2013 2012 2013 2012

Chief Adewale Teluwo 337,054,369 337,057,367 112,621,359 112,621,359

449,675,728

449,678,726

Tope Smart Esq - - 118,243,848 101,985,909 118,243,848 101,985,909

Suzan Giwa-Osagie (Mrs) - - 2,125,008

2,125,008 2,125,008

2,125,008

Olusesan Adekunle Esq - - 50,848,252 44,458,252 50,848,252 49,458,252

Yinka Aletor (Mrs) 387,378,703 382,457,035 - - 387,378,703 382,457,035

Dr. Fidelis Ayebae - - - -

6. DIRECTORS RESPONSIBILITIES

The directors are responsible for the preparation of the consolidated financial statements

which give a true and fair view of the state of affairs of the Company at the end of each

financial year and of the income statement for that year and comply with the Insurance Act, 2003, Financial Reporting Council of Nigeria Act, No 6 2011 CAP 117 LFN 2004 and the

Companies and Allied Matters Act CAP C20 LFN 2004

7. SHAREHOLDINGS

“The Registrars have advised that the called-up and fully paid up shares of the Company as

at 31 December, 2013 were beneficially held as follow:

Range No. of

Holders Holders

% Holders

Cum Units Units

% Units Cum.

N'000 N'000

1 - 1,000 4297 8.69 4297 2,756 0.05 2,746

1,001 - 5,000 11794 23.85 16091 38,847 0.72 40,612

5,001 - 10,000 9268 18.74 25359 78,153 1.48 118,765

10,001 - 50,000 16396 33.16 41755 420,487 7.96 539,252

50,001 - 100,000 4087 8.27 45842 325,895 6.17 865,147

100,001 - 500,000 2812 5.69 48654 610,932 11.57 1,476,080

500,001 - 1,000,000 407 0.82 49061 317,792 6.02 1,793,872

1,000,001 - 999,999,999,999 385 0.78 49446 3,486,631 66.03 5,280,503

49446 5,280,503

Shareholders with 5% and above of the company’s issued and fully paid shares.

Account

Number Name Address Holdings %

2979 JEIDOC LIMITED

CEDDI TOWERS, 16 WHARF ROAD APAPA

LAGOS 368445497 6.98

147140

BUKSON INVESTMENT

LIMITED

C/O NEM INSURANCE PLC, BROAD STREET,

LAGOS 337054367 6.38

NEM INSURANCE PLC




8. RECORD OF DIRECTORS ATTENDANCE

In accordance with section 258(2) of the Companies and Allied Matters Act CAP C20 LFN 2004, the records of the Directors attendance at Directors’ meeting in 2013 are available for

inspection at the Annual General Meeting.

9. PROPERTY AND EQUIPMENT

Movements in property & equipment are shown in note 11 on pages 61 and 62. In the

opinion of the directors, the market value of the Company’s properties is not less than the value shown in the consolidated financial statements.

10. DONATIONS Donations during the year ended December 31, 2013 amounted to N1,760,000

(2012: N4,057,861) as follows: N

Association of Registered Insurance Agents 10,000 Chartered Insurance Institute of Nigeria 300,000

Fountain of Hope 50,000

Pearl Award 200,000

Higher International Institute 400,000 Children Emergency Relief Foundation 300,000

Little Saints Orphanage Strong Tower House 300,000

Professional Insurance Ladies Association 200,000

1,760,000

11. AGENTS AND BROKERS

The Company maintains a network of licensed agents and renders services to its customers through Insurance Licensed Brokers and Registered Agents.

12. REINSURERS

During the financial year under review, the Company had business transactions with the following re-insurance companies in compliance with the relevant Insurance Act of 2003. The

re-insurance companies are:

• African Reinsurance Corporation

• Continental Reinsurance Plc.,

• WAICA Reinsurance Pool,

• Nigerian Reinsurance Corporation and

• Aveni Reinsurance.

13. EVENTS AFTER REPORTING DATE

There were no significant events after reporting date which could have had a material effect

on the consolidated financial statements for the year ended 31 December, 2013 which have

not been adequately provided for or disclosed in the financial statements except the

appointment of Mr. Alani Olojede as Executive Director with effect from 6 June, 2014.

NEM INSURANCE PLC




14. EMPLOYMENT AND EMPLOYEES

It is the policy of the Company not to adopt discriminatory criteria for considering applications for employment including those from disabled persons. All employees whether

or not disabled are given equal opportunities to develop their experience and knowledge and

to qualify for promotion.

When an employee becomes disabled during the course of his or her employment, the

Company endeavours to retain the individual for employment in spite of his disability, when

this is reasonably possible. As at 31st December, 2013 one disabled person was in the employment of the Company.

15. EMPLOYEES INVOLVEMENT, TRAINING AND DEVELOPMENT

i. Information dissemination

“The employees are regularly provided with information on matters that are of concern to them through established channels of communication.”

ii. Consultation with employees

There are regular consultations between the senior and junior staff unions and

Management, particularly on matters affecting staff welfare.

iii. Encouraging employees’ involvement and training

The employees are the Company’s most valuable and cherished resource. The

Company is therefore committed to their continuous training and development. In

line with this policy of continuous development of the human resources, members of staff are sent on training programmes. The courses are aimed at broadening their

technical/professional knowledge and managerial skills.

iv. Health, safety at work and welfare of employees

The Company places high premium on health and welfare of its employees. Medical

facilities are provided for staff and their families at private hospitals retained in their

respective localities. Transportation, housing and lunch subsidies are provided to all levels of employees. Fire fighting equipments are also installed in strategic positions

in the office building.

NEM INSURANCE PLC




16. AUDITORS

In compliance with Section 33(2) of the Securities and Exchange Commission’s Code of

Corporate Governance and Section 22(1) of National Insurance Commission 2010 guidelines

on the tenure of External Auditors, Messrs SIAO (Chartered Accountants) has been appointed

as the auditors in accordance with Section 357(2) of the Companies and Allied Matters Act 2004, as amended. A resolution will be proposed at the Annual General Meeting to authorize

the Directors to determine their remunerations.

BY ORDER OF THE BOARD OMOLARA OYETUNDE (MRS.) COMPANY SECRETARY

Lagos, Nigeria

FRC/2013/NBA/00000003153 Date:

NEM INSURANCE PLC



Directors Report (Cont’d) REPORT OF EXTERNAL CONSULTANTS ON BOARD APPRAISAL

NEM INSURANCE PLC In compliance with the requirement of the NAICOM “Code of Good Corporate Governance for the

Insurance Industry in Nigeria” “The Code” the Board of NEM Insurance Plc commissioned New Version Consultants Limited to conduct an appraisal of the performance of the Board of the Company. The exercise was guided by the provisions of The NAICOM Code and other recognised

Codes of Best Practices which promote enhanced governance values. Our findings are as follows:

i. The Board is composed of a mix of executives and non-executives which indicates that the

non-executives are in greater proportion than the executives. The proportion of executives to

non-executives is 1:2. Members are individuals of diverse professional backgrounds and

business experience. Among the non-executives are: A legal practitioner, foremost industrialist and investment expert as well as astute businessmen with interests in key

sectors of the economy including: Insurance, Pharmaceuticals, Real Estate and

Manufacturing who have established successful track records in their chosen fields of

endeavours and are well exposed to taking business and financial decisions in their day-to-day activities. The Executive Directors are qualified professionals with cognate experience in

their areas of specialization and a vast knowledge of Insurance business and its operating

terrain. Members have been bringing their experience to bear in directing the affairs of the

Company which has since stabilized its operations post-consolidation.

In accordance with The NAICOM Code, the Board Chairman is a Non-Executive Director; there

is a clear delineation of responsibilities between the position of the GMD and the Chairman

while no one individual occupies the two positions at the same time thereby avoiding the issue of executive duality. The two individuals are not members of the same family.

ii. The Operations/Processes of the Board were managed within the context of regulatory

requirements and in accordance with Best Practices. Accordingly, the Board held four meetings during the year under review and attendance was outstanding whereby each

member met the 75% minimum requirement prescribed in The Code in respect of

attendance. A Committee structure comprising of the minimum requirement of the NAICOM

Code was institutionalized and the Committees were provided with the required Terms of Reference. The agenda contained issues meant for the attention of the Board and the

preparation of the agenda was flexible in allowing all members to introduce relevant subject

matters to the Board.

Adequate notice was given for meetings and Board materials were circulated promptly to

members which allowed them adequate time to prepare for the meetings. Members were

given equal opportunity and they made cogent contributions to deliberations and most

decisions were arrived at by consensus. The Board enjoys a cordial working relationship and meetings were conducted in an atmosphere devoid of rancour. The above review suggests

that the Composition and Processes/Operations of the Board meet most of the parameters of

The NAICOM Code.

iii. Members performed their oversight responsibilities with respect to the activities of

management in particular as regards the Company’s growth strategy, its Financial

Performance, Business Prospects as well as status of Regulatory Compliance.


NEM INSURANCE PLC



Following the recommendation made to the Board, particularly the regularization of its size,

we observed that the Board has instituted the required mechanism to address the issue in

order to enhance its governance practices.

BY ORDER OF THE BOARD MOSUNMOLA OYERINDE (MRS.) MANAGING CONSULTANT

Lagos, Nigeria

Date:

NEM INSURANCE PLC



Statement of Directors’ Responsibilities

In accordance with the provisions of Section 334 and 335 of the Companies and Allied Matters Act

2004 and Sections 24 and 28 of the Banks and Other Financial Institutions Act 1991, the Directors

are responsible for the preparation of annual financial statements which give a true and fair view of the financial position at the end of the financial year of the Company and of the operating result for

the year then ended.

The responsibilities include ensuring that:

• Appropriate and adequate internal controls are established to safeguard the assets of the

Company and to prevent and detect fraud and other irregularities;

• The Company keeps proper accounting records which disclose with reasonable accuracy

the financial position of the Company and which ensure that the financial statements

comply with the requirements of the Companies and Allied Matters Act, 2004, Banks and

Other Financial Institutions Act, 1991, Insurance Act 2003, Financial Reporting Council

and the yearly Operational Guidelines issued by NAICOM.

• The Company has used appropriate accounting policies, consistently applied and

supported by reasonable and prudent judgments and estimates, and that all applicable

accounting standards have been followed; and

• The financial statements are prepared on a going concern basis unless it is presumed that

the Company will not continue in business.

The Directors accept responsibility for the year’s financial statements, which have been prepared

using appropriate accounting policies supported by reasonable and prudent judgments and

estimates in conformity with;

• Insurance Act 2003

• International Financial Reporting Standards;

• Companies and Allied Matters Act 2004;

• Banks and Other Financial Institutions Act, 1991;

• NAICOM Operational Guidelines; and

• Financial Reporting Council Act, 2011.

The Directors are of the opinion that the financial statements give a true and fair view of the state of

the financial affairs of the Company and of its operating result for the year ended.

The Directors further accept responsibility for the maintenance of accounting records that may be

relied upon in the preparation of the financial statements, as well as adequate systems of financial

control. Nothing has come to the attention of the Directors to indicate that the Company will not remain a going concern for at least twelve months from the date of this statement.

Signed on behalf of the Directors on ……………………. by: …………………………. …………………………………. Mr. Tope Smart Chief Adewale Teluwo GMD Chairman, Board of Directors

NEM INSURANCE PLC



Certification Pursuant to Section 60 (2) of Investment and Securities Act No. 29 of 2007

We the undersigned hereby certify the following with regards to our Audited Financial Statements for

the year ended December 31, 2013 that:

� We have reviewed the report;

• To the best of our knowledge, the report does not contain: - Any untrue statement of a material fact, or

- Omit to state a material fact, which would make the statements, misleading in the light of

circumstances under which such statements were made;

� To the best of our knowledge, the financial statement and other financial information included in

this report fairly present in all material respects the financial condition and results of operation

of the company as of, and for the periods presented in this report.

� We:

- are responsible for establishing and maintaining internal controls.

- have designed such internal controls to ensure that material information relating to the

Company and its consolidated subsidiary is made known to such officers by others within those entries particularly during the period in which the periodic reports are being prepared;

- have evaluated the effectiveness of the Company’s internal controls as of date within 90 days

prior to the report;

- have presented in the report our conclusions about the effectiveness of our internal controls based on our evaluation as of that date;

� We have disclosed to the auditors of the Company and Audit Committee:

- all significant deficiencies in the design or operation of internal controls which would

adversely affect the company’s ability to record, process, summarize and report financial

data and have identified for the company’s auditors any material weakness in internal

controls, and - any fraud, whether or not material, that involves management or other employees who have

significant role in the company’s internal controls;

We have identified in the report whether or not there were significant changes in internal controls or other factors that could significantly affect internal controls subsequent to the date of our evaluation,

including any corrective actions with regard to significant deficiencies and material weaknesses.

_____________________ ______________________ Mr. Tope Smart (GMD) Miss Stella Omoraro CFO FRC/2013/CIIN/00000001331 FRC/2013/ICAN/00000001238

Independent Auditor’s Report To the members of NEM Insurance Plc

NEM INSURANCE PLC



We have audited the accompanying financial statements of NEM Insurance Plc (“the Company), and its subsidiary (“together referred

to as the Group”), which comprise the Consolidated Statement of Financial Position as at

December 31, 2013, and the Consolidated

Statement of Comprehensive Income and Other Comprehensive Income, Consolidated Cash Flows

Statements and the statement of significant

accounting policies on pages 22 to 49 and explanatory notes to the financial statements, as

set out on pages 57 to 110.

Directors’ Responsibility for the Financial Statements The directors are responsible for the preparation and fair presentation of these financial statements

in accordance with International Financial

Reporting Standard (IFRSs) and in the manner required by the Companies and Allied Matters Act,

CAP C20, LFN 2004, Financial Reporting Council

Act 2011, the Insurance Act 2003 of Nigeria, the Investments and Securities Act 2007 and National

Insurance Commission (NAICOM) circulars. This

responsibility includes: designing, implementing

and maintaining internal controls relevant to the preparation and fair presentation of financial

statements that are free from material

misstatement, whether due to fraud or error; selecting and applying appropriate accounting

policies; and making accounting estimates that

are reasonable in the circumstances.

Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We

conducted our audit in accordance with Nigerian

Standard on Auditing (NSA) and International Standard on Auditing (ISA). Those standards

require that we comply with ethical requirements

and plan and perform the audit to obtain reasonable assurance on whether the financial

statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures

in the financial statements. The procedures

selected depend on the auditor’s judgment, including the assessment of the risks of material

misstatement of the financial statements whether

due to fraud or error. In making those risk assessments; the auditor considers internal

controls relevant to the entity’s preparation and

fair presentation of the financial statements in order to design audit procedures that are

appropriate in the circumstances, but not for the

purpose of expressing an opinion on the effectiveness of the entity’s internal controls. An

audit also includes evaluating the appropriateness

of accounting policies used and the reasonableness of accounting estimates made by

the directors, as well as evaluating the overall

presentation of the financial statements.

We believe that the audit evidence we have

obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the consolidated financial

statements give a true and fair view of the

financial position of NEM Insurance Plc and its subsidiary as at December 31, 2013 and of its

financial performance and cash flows for the year

then ended in accordance with International Financial Reporting Standards (IFRSs) applicable

and in the manner required by the Financial

Reporting Council Act 2011, Companies and Allied Matters Act, CAP C20 LFN 2004, the

Insurance Act 2003 of Nigeria, the Investments

and Securities Act 2007 and the relevant NAICOM circulars.

Report on Other Legal Regulatory Requirements The Company contravened the following guidelines in

the year

- Default in filing the 2012 Audited Account - Use of unregistered Brokers

- Unremitted Premium Report for 2nd Qtr 2013

Appropriate penalties have been paid by the company

Compliance with the requirements of the Companies

and Allied Matters Act, 2004.

In our opinion, proper books of account have been

kept by the Company, so far as appears from our examination of those books and Company’s

financial position and comprehensive income are

in agreement with the books of accounts. Joshua Ansa, FCA FRC/2013/ICAN/00000001728 For: SIAO (Chartered Accountants) Lagos, Nigeria Date……………

NEM INSURANCE PLC



Report of the Audit Committee

To the members of NEM Insurance Plc

In accordance with the provisions of Section 359(6) of the Companies and Allied Matters Act, Cap

59 of the Laws of the Federation of Nigeria 2004, we the Members of the Audit Committee of NEM

Insurance Plc, having carried out our statutory functions under the Act, hereby report as follows:

• We have reviewed the scope and planning of the audit for the year ended December 31,

2013 and we confirm that they were adequate.

• The Company’s reporting and accounting policies as well as internal control systems

conform to legal requirements and agreed ethical practices.

• We are satisfied with the departmental responses to the External Auditors’ findings on

management matters for the year ended December 31, 2013

Finally, we acknowledge and appreciate the co-operation of Management and Staff in the conduct of

these duties.

----------------------------

Mr. Peter Okoh

Chairman of the Audit Committee

FRC/2013/NIM/00000002860

Date.........................

Members of the Audit Committee Mr. Peter Okoh - (Shareholders’ Representative)- Chairman

Mr. Taiwo Oderinde - ,, ,, Member

Mr. Samuel Mpamaugo - ,, ,, Member

Mr. Olusesan Adekunle - (Non Exec Director) Member Mrs. Yinka Aletor - ,, ,, Member

Mrs. Suzan Giwa Osagie - (Exc. Director) Member

The Company Secretary/Legal Adviser acted as the Secretary to the Committee.

NEM INSURANCE PLC



Statement of Significant Accounting Policies The following are the significant accounting policies adopted by the Group in the preparation of

these financial statements. These accounting policies have been consistently applied for all years

presented.

1.0 General Information

NEM Insurance Plc (“NEM” or ‘‘the Company”) is a public limited liability company domiciled in

Nigeria. The Company’s registered and corporate office is 138/146 Broad Street, Lagos Island,

Lagos. The Company is principally engaged in the business of general Insurance activities. Such services include provision of non-life insurance services for both corporate and individual

customers. In 2009 the Company opened a subsidiary in Ghana (NEM Insurance Ghana Limited) to

transact the same line of business.

The financial statement was authorised by Board on 18th June, 2013.

2.0 Summary of Significant Accounting Policies

The principal accounting policies applied in the preparation of these Financial Statements are set

out below. These policies have been consistently applied to all the years presented, unless

otherwise stated.

2.1 Going Concern Assessment

These financial statements have been prepared on the going concern basis. The Group has no

intention or need to reduce substantially its business operations, the management believes that the

going concern assumption is appropriate for the Group due to sufficient capital adequacy ratio and

projected liquidity, based on historical experience that short-term obligations will be refinanced in the normal course of the business. Liquidity ratio and continuous evaluation of current ratio of the

group is carried out by the group to ensure that there are no going concerns threats to the

operation of the group.

2.2 Basis of Preparation and Compliance with IFRS The Group’s financial statements for the year 2013 have been prepared in accordance with the

International Financial Reporting Standards (IFRS) as issued by the International Accounting

Standards Board (IASB), Company and Allied Matters Act, CAP C20 LFN 2004, Insurance Act 2003 of Nigeria and Investment and Securities Act 2007 to the extent that they do not conflict with the

requirements of International Financial Reporting Standard (IFRS).

NEM INSURANCE PLC



Statement of Significant Accounting Policies (Cont’d) Functional and Presentation of Currency The financial statements are presented in Nigerian currency (Naira) which is the Company’s

functional currency. Except otherwise indicated, financial information presented in Naira have been

rounded to the nearest thousand (₦ 000)

Basis of Measurement The financial statements have been prepared under the historical cost basis except for the

following:

• Financial instruments at fair value through profit or loss.

• Financial assets classified as available for sale which are measured at fair value through other

comprehensive income.

• Loans and receivables and held to maturity financial assets and financial liabilities which are

measured at amortized cost

• Investment properties which are measured at fair value 2.3 Critical Accounting Estimates, Judgments and Assumptions The preparation of financial statements in conformity with IFRS requires the use of certain critical

accounting estimates. It also requires management to exercise its judgment in the process of applying the company’s accounting policies. The estimates and associated assumptions are based

on historical experience and various other factors that are believed to be reasonable under the

circumstances, the results of which form the basis of making judgments about carrying values of

assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions. Changes in assumptions may

have a significant impact on the financial statements in the period the assumptions changed.

Management believes that the underlying assumptions are appropriate and that the company’s

financial statements therefore present the financial positions and results fairly. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are

significant to the financial statements are disclosed in Note 2.4.

2.4 Judgment, Estimates and Assumption The estimates and underlying assumptions are reviewed on an on-going basis. Revision to

accounting estimates are recognized in the period in which the estimate is revised, if the revision

affects only that period or if the revision affects both current and future periods.

Information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial

statements are described below:

2.4.1 Income Taxes Significant estimates are required in determining the provision for income taxes. There are many

transactions and calculations for which the ultimate tax determination is uncertain. The company

recognizes liabilities for anticipated tax issues based on estimates of whether additional taxes will

be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions.

2.4.2 Retirement Benefits

NEM INSURANCE PLC



The present value of the retirement benefit obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. Any changes in these

assumptions will impact the carrying amount of gratuity obligations. The assumptions used in

Statement of Significant Accounting Policies (Cont’d)

determining the net cost (income) for gratuity include the discount rate, rate of return on assets,

future salary increments and mortality rates.

The Group determines the appropriate discount rate at the end of the year. This is the interest rate

that should be used to determine the present value of estimated future cash outflows expected to

be required to settle the gratuity obligations. In determining the appropriate discount rate, the Company considers the interest rates of high-quality government bonds that are denominated in the

currency in which the benefits will be paid and that have terms to maturity approximating the terms

of the related gratuity liability. Other key assumptions for gratuity obligations are based in part on

current market conditions. In most cases, no explicit assumptions are made regarding the future rates of claims inflation or

loss ratios. Instead, the assumptions used are those implicit in the historical claims development

data on which the projections are based. Additional qualitative judgment is used to assess the

extent to which past trends may not apply in future, (e.g. to reflect one-off occurrences, changes in external or market factors such as public attitudes to claiming, economic conditions, level s of

claims inflation, judicial decisions and legislation, as well as internal factors such as portfolio mix,

policy features and claims handling procedures) in order to arrive at the estimated ultimate cost of

claims that present the likely outcome from the range of possible outcomes, taking account of all the uncertainties involved.

Similar judgments, estimates and assumptions are employed in the assessment of adequacy of

provisions for unearned premium. Judgment is also required in determining whether the pattern of insurance service provided by a contract requires amortization of unearned premium on a basis

other than time apportionment.

2.4.3 Fair Valuation of Investment Properties

The fair value of investment properties is based on the nature of investment properties is based on the nature, location and condition of the specific asset. The fair value is determined by reference to

observable market prices. The fair value of investment property does not reflect the related future

benefits from this future expenditure. These valuations are performed annually by external

appraisers. Assumptions are made about expected future cash flows and the discounting rates

2.5 Improvements to IFRSs

Below are the IFRSs and International Financial Reporting Interpretations Committee (IFRIC)

interpretations that are effective for the first time for the financial period beginning on or after 1

January 2013 that would be expected to have an impact on the company.

IFRS Updates (Effective in 2013 and beyond) and IFRS Updates in 2013

List of amendments

Amendments Issued 2013

• Recoverable Amount Disclosures for Non Financial Assets- IAS 36 (Issued May 2013)

• IFRIC 21: New Interpretation (Issued May 2013)

• Novation of Derivatives and Continuation of Hedge Accounting for novations (Issued June 2013)

NEM INSURANCE PLC




Amendments Effective 1st January, 2013

1. IFRS 1 (First time Adoption): IFRS 1 amendment includes an exception to the retrospective

application of IFRS 9(Financial Instruments) and IAS 20 (Accounting for government grants).

2. IAS 19 (Employee benefit): This includes certain amendments such as eliminating the corridor

approach to recognizing actuarial gains and losses.

3. IFRS 7 (Financial Instruments- Disclosures): The amendments require an entity to disclose

information about rights of set-off (financial assets and liabilities) and related arrangements.

4. IFRS 10 (Consolidated Financial Statement), IAS 27(Separate Financial Statements): This

amendment addresses IFRS 10 for consolidated financial statements and IAS 27 for separate

financial statements. It also revises the definition of control.

5. IFRS 12 (Disclosures): IFRS 12 requires certain disclosures to facilitate understanding of

financial statements by users of financial statements.

6. IFRS 13 (Fair value measurement): IFRS 13 gives a definition for fair value wherever fair value

is used under IFRS with the exclusion of fair value under IFRS 2 (Share based payment) and IAS

17(Leases).

7. IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine:

Effective 1st January, 2014

8. IAS 32(Off-setting financial Assets and Financial Liabilities -Amendments to IAS 32) : IAS 32

clarifies the meaning of “ legally enforceable rights to set off”

9. Investment Entities- Amendments to IFRS 10, IFRS 12, and IAS 27: This amendment requires

Investment entities to account for investment in subsidiaries at Fair value through profit or loss

in accordance with IAS 39. In addition, a criterion for qualifying as an Investment entity is that

Investments in associates and Joint ventures are accounted for at Fair value through profit or

loss in accordance with IAS 39.

10. Novation of Derivatives and Continuation of Hedge Accounting- IAS 39 Amendments:

Amendments to IAS 39 provides relief from discontinuing hedge accounting for novations of

hedging instruments that meet certain criteria.

11. Recoverable Amount Disclosures for Non financial Assets- Amendments to IAS 36: This

amendment removes the requirements for an entity to disclose the recoverable amount of every

CGU to which significant goodwill or indefinite – lived intangible assets have been allocated.

Instead, such disclosure is required only when an impairment loss has been recognized or

reversed.

12. IFRIC 21: IFRIC 21 provides guidance on determining the obligating event that give rise to a

liability in connection with a levy imposed by a government. IFRIC 21 clarifies that the obligating

event is the activity that triggers the payment of the levy as identified by the legislation. Income

taxes in the scope of IAS 12, fines and penalties are not in the scope of IFRIC 21.

NEM INSURANCE PLC




Effective January 1st, 2015

13. IFRS 9 (Financial Instruments): These amendments apply to the classification and

measurement of financial assets and liabilities.

14. IFRS 1: Government Loans — Amendments to IFRS 1

Effective for annual periods beginning on or after 1 January 2013

Key requirements

The IASB has added an exception to the retrospective application of IFRS 9 Financial Instruments

(or IAS 39 Financial Instruments: Recognition and Measurement, as applicable) and IAS 20 Accounting for Government Grants and Disclosure of Government Assistance. These amendments

require first-time adopters to apply the requirements of IAS 20 prospectively to government loans

existing at the date of transition to IFRS.

However, entities may choose to apply the requirements of IFRS 9 (or IAS 39, as applicable) and

IAS 20 to government loans retrospectively if the information needed to do so had been obtained at

the time of initially accounting for that loan.

The exception would give first-time adopters relief from retrospective measurement of government loans with a below market rate of interest. As a result of not applying IFRS 9 (or IAS 39, as

applicable) and IAS 20 retrospectively, first-time adopters would not have to recognise the

corresponding benefit of a below-market rate government loan as a government grant.

Transition

The amendments may be applied earlier than the effective date, in which case, this must be

disclosed.

Impact

These amendments give first-time adopters the same relief as existing preparers of IFRS financial

statements and therefore will reduce the cost of transition to IFRS

� IAS 19 Employee Benefits (Revised)

Effective for annual periods beginning on or after 1 January 2013.

Key requirements

The revised standard includes a number of amendments that range from fundamental changes to

simple clarifications and re-wording. The more significant changes include the following:

• For defined benefit plans, the ability to defer recognition of actuarial gains and losses (i.e., the corridor approach) has been removed. As revised, actuarial gains and losses are recognised in

OCI as they occur. Amounts recorded in profit or loss are limited to current

and past service costs, gains or losses on settlements, and net interest income (expense). All other changes in the net defined benefit asset (liability) are recognised in OCI with no

subsequent recycling to profit or loss.

• Objectives for disclosures of defined benefit plans are explicitly stated in the revised standard,

along with new or revised disclosure requirements. These new disclosures include quantitative

information about the sensitivity of the defined benefit obligation to a reasonably possible change in each significant actuarial assumption.

NEM INSURANCE PLC




• Termination benefits will be recognised at the earlier of when the offer of termination cannot

be withdrawn, or when the related restructuring costs are recognised under IAS 37 Provisions, Contingent Liabilities and Contingent Assets.

• The distinction between short-term and other long-term employee benefits will be based on

the expected timing of settlement rather than the employee’s entitlement to the benefits.

Transition

The revised standard is applied retrospectively in accordance with the requirements of IAS 8 for

changes in accounting policy. There are limited exceptions for restating assets outside the scope of IAS 19 and presenting sensitivity disclosures for comparative periods in the period the amendments

are first effective. Early application is permitted and must be disclosed.

Impact

These changes represent a significant further step in reporting gains and losses outside of profit

and loss, with no subsequent recycling. Actuarial gains and losses will be excluded permanently

from earnings.

� IFRS 7: Disclosures — Offsetting Financial Assets and Financial Liabilities — Amendments

to IFRS 7


Requirements

These amendments require an entity to disclose information about rights of set-off and related

arrangements (e.g., collateral agreements). The disclosures would provide users with information

that is useful in evaluating the effect of netting arrangements on an entity’s financial position. The

new disclosures are required for all recognised financial instruments that are set off in accordance with IAS 32 Financial Instruments.

Presentation

The disclosures also apply to recognised financial instruments that are subject to an enforceable

master netting arrangement or ‘similar agreement’, irrespective of whether they are set off in accordance with IAS 32.

Transition

These amendments are applied retrospectively in accordance with IAS 8. They do not refer to the

ability to adopt early. However, if an entity chooses to early adopt IAS 32 “Offsetting Financial

Assets and Financial Liabilities — Amendments to IAS 32, it also must make the disclosure required by IFRS 7 Disclosures — Offsetting Financial Assets and Financial liabilities — Amendments to IFRS

7.

� IFRS 10 Consolidated Financial Statements, IAS 27 Separate Financial Statements


Key requirements

IFRS 10 replaces the portion of IAS 27 that addresses the accounting for consolidated financial

statements. It also addresses the issues raised in SIC-12 Consolidation — Special Purpose Entities

which resulted in SIC-12 being withdrawn. IAS 27, as revised, is limited to the accounting for investments in subsidiaries, joint ventures, and associates in separate financial statements.

NEM INSURANCE PLC




IFRS 10 does not change consolidation procedures (i.e., how to consolidate an entity). Rather, IFRS

10 changes whether an entity is consolidated by revising the definition of control.

Control exists when an investor has:

• Power over the investee (defined in IFRS 10 as when the investor has existing rights that give

it the current ability to direct the relevant activities)

• Exposure, or rights, to variable returns from its involvement with the investee and

• The ability to use its power over the investee to affect the amount of the investor’s returns.

IFRS 10 also provides a number of clarifications on applying this new definition of control, including

the following key points:

• An investor is any party that potentially controls an investee; such party need not hold an

equity investment to be considered an investor.

• An investor may have control over an investee even when it has less than a majority of the voting rights of that investee (sometimes referred to as de facto control).

• Exposure to risks and rewards is an indicator of control, but does not in itself constitute control.

• When decision-making rights have been delegated or are being held for the benefit of others, it is necessary to assess whether a decision-maker is a principal or an agent to determine

whether it has control.

• Consolidation is required until such time as control ceases, even if control is temporary.

Transition

The new standard is applied retrospectively in accordance with the requirements of IAS 8 for

changes in accounting policy, with some relief being provided.

Earlier application is permitted if the entity also applies the requirements of IFRS 11 Joint Arrangements, IFRS 12 Disclosure of Interests in Other Entities, IAS 27 (as revised in 2011) and IAS

28 Investments in Associates (as revised in 2011) at the same time.

Impact

IFRS 10 creates a new, and broader, definition of control than under current IAS 27. This may result

in changes to a consolidated group (more or fewer entities being consolidated than under current

IFRS).

Assessing control will require a comprehensive understanding of an investee’s purpose and design,

and the investor’s rights and exposures to variable returns, as well as rights and returns held by other investors. This may require input from sources outside of the accounting function, such as

operational personnel and legal counsel, and information external to the entity. It will also require

significant judgment of the facts and circumstances.

NEM INSURANCE PLC




� IFRS 12 Disclosure of Interests in Other Entities


Key requirements

IFRS 12 applies to an entity that has an interest in subsidiaries, joint arrangements, associates and/or structured entities. Many of the disclosure requirements of IFRS 12 were previously included

in IAS 27, IAS 31, and IAS 28, while others are new.

The objective of the new disclosure requirements is to help the users of financial statements

understand the following:

• The effects of an entity’s interests in other entities on its financial position, financial

performance and cash flows

• The nature of, and the risks associated with, the entity’s interest in other entities

Some of the more extensive qualitative and quantitative disclosures of IFRS 12 include:

• Summarised financial information for each of its subsidiaries that have non-controlling

interests that are material to the reporting entity.

• Significant judgments used by management in determining control, joint control and significant influence, and the type of joint arrangement (i.e., joint operation or joint venture),

if applicable.

• Summarised financial information for each individually material joint venture and associate.

• Nature of the risks associated with an entity’s interests in unconsolidated structured entities, and changes to those risks.

Transition

IFRS 12 must be applied retrospectively in accordance with the requirements of IAS 8 for changes

in accounting policy, with comparative disclosures required.

An entity may early adopt IFRS 12 before adopting IFRS 10, IFRS 11, IAS 27 and IAS 28. Entities are also encouraged to provide some of the information voluntarily without necessarily adopting all

of IFRS 12 before its effective date.

Impact

The new disclosures will assist users to make their own assessment of the financial impact were

management to reach a different conclusion regarding consolidation. Additional procedures and

changes to systems may be required to gather information for the preparation of the additional disclosures.

� IFRS 13 Fair Value Measurement


Key requirements

IFRS 13 does not affect when fair value is used, but rather describes how to measure fair value where fair value is required or permitted by IFRS. Fair value under IFRS 13 is defined as “the price

that would be received to sell an asset or paid to transfer a liability in an orderly transaction

NEM INSURANCE PLC



Statement of Significant Accounting Policies (Cont’d) between market participants at the measurement date” (i.e., an “exit price”). “Fair value” as used in

IFRS 2 Share-based Payments and IAS 17 Leases is excluded from the scope of IFRS 13.

The standard provides clarification on a number of areas, including the following:

• Concepts of “highest and best use” and “valuation premise” are relevant only for non-financial assets and liabilities

• Market participants are assumed to transact in a way that maximizes value in situations

where the unit of account for the item being measured is not clear from other IFRS

• The impact of blockage discounts is prohibited in all fair value measurements

• A description of how to measure fair value when a market becomes less active.

New disclosures related to fair value measurements are also required to help users understand the valuation techniques and inputs used to develop fair value measurements and the effect of fair value

measurements on profit or loss.

Transition

IFRS 13 is applied prospectively. Early application is permitted and must be disclosed.

Impact

Specific requirements relating to the highest and best use and the principal market may require

entities to re-evaluate their processes and procedures for determining fair value, and assess whether they have the appropriate expertise.

� IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine


Key requirements

This Interpretation applies to waste removal (stripping) costs incurred in surface mining activity, during the production phase of the mine.

If the benefit from the stripping activity will be realised in the current period, an entity is required to account for the stripping activity costs as part of the cost of inventory. When the benefit

is the improved access to ore, the entity should recognise these costs as a non-current asset, only if

certain criteria are met.

This is referred to as the “stripping activity asset”. The stripping activity asset is accounted for as

an addition to, or as an enhancement of, an existing asset.

If the costs of the stripping activity asset and the inventory produced are not separately identifiable,

the entity allocates the cost between the two assets using an allocation method based on a relevant production measure.

After initial recognition, the stripping activity asset is carried at its cost or revalued amount less depreciation or amortisation and less impairment losses, in the same way as the existing asset of

which it is a part.

Transition

This Interpretation is applied to production stripping costs incurred on or after the beginning of the

earliest period presented. The Interpretation does not require full retrospective application. Instead

it provides a practical expedient for any stripping costs incurred and capitalised prior to that date.

Earlier application is permitted and must be disclosed.

NEM INSURANCE PLC



Statement of Significant Accounting Policies (Cont’d) Impact

IFRIC 20 represents a change from the current life of mine average strip ratio approach used by

many mining and metals entities reporting under IFRS. Depending on the specific facts and

circumstances of an entity’s mines, these changes may impact both financial position and profit or loss. In addition, changes may also be required to processes, procedures and systems of the

reporting entity.

Effective Jan 1st, 2014

� IAS 32 (Offsetting Financial Assets and Financial Liabilities) — Amendments to IAS 32

Effective for annual periods beginning on or after 1 January 2014. Key requirements

These amendments clarify the meaning of “currently has a legally enforceable right to set-off”. The

amendments also clarify the application of the IAS 32 offsetting criteria to settlement systems (such

as central clearing house systems) which apply gross settlement mechanisms that are not

simultaneous. IAS 32 paragraph 42(a) requires that “a financial asset and a financial liability shall be offset ... when, and only when, an entity currently has a legally enforceable right to set off the

recognised amounts …” The amendments clarify that rights of set-off must not only be legally enforceable in the normal course of business, but must also be enforceable in the event of default and the event of bankruptcy or insolvency of all of the counterparties to the contract, including the reporting entity itself. The amendments also clarify that rights of set-off must not be contingent

on a future event. The IAS 32 offsetting criteria require the reporting entity to intend either to settle

on a net basis, or to realise the asset and settle the liability simultaneously. The amendments clarify

that only gross settlement mechanisms with features that eliminate or result in insignificant credit and liquidity risk and that process receivables and payables in a single settlement process or cycle

would be, in effect, equivalent to net settlement and, therefore, meet the net settlement criterion.

Transition

These amendments are applied retrospectively, in accordance with IAS 8. Early application is permitted. However, if an entity chooses to early adopt, it must disclose that fact and also make the

disclosure required by IFRS 7 Disclosures — Offsetting Financial Assets and Financial liabilities —

Amendments to IFRS 7.

Impact

Entities will need to review legal documentation and settlement procedures, including those applied

by the central clearing houses they deal with to ensure that offsetting of financial instruments is still

possible under the new criteria. Changes in offsetting may have a significant impact on financial presentation. The effect on leverage ratios, regulatory capital requirements, etc., will need to be

considered by management.

� Investment Entities- IFRS 10, IFRS 12 and IAS 27 (Amendments)


Key requirements

The investment entities amendments apply to investments in subsidiaries, joint ventures and

associates held by a reporting entity that meets the definition of an investment entity.

NEM INSURANCE PLC




The key amendments include:

• Investment entity’ is defined in IFRS 10

• An investment entity must meet three elements of the definition and consider four typical

characteristics, in order to qualify as an investment entity

• An entity must consider all facts and circumstances, including its purpose and design, in making its assessment

• An investment entity accounts for its investments in subsidiaries, associates and joint

ventures at fair value through profit or loss in accordance with IFRS 9 (or IAS 39, as

applicable), except for investments in subsidiaries, associates and joint ventures that provide services that relate only to the investment entity, which must be consolidated

(investments in subsidiaries) or accounted for using the equity method (investments in

associates or joint ventures)

• An investment entity must measure its investment in another controlled investment entity at

fair value

• A non-investment entity parent of an investment entity is not permitted to retain the fair value accounting that the investment entity subsidiary applies to its controlled investees

• For venture capital organizations, mutual funds, unit trusts and others that do not qualify as investment entities, the existing option in IAS 28, to measure investments in associates and

joint ventures at fair value through profit or loss, is retained.

Transition

The amendments must be applied retrospectively, subject to certain transition reliefs. Early

application is permitted and must be disclosed.

Impact

The concept of an investment entity is new to IFRS. The amendments represent a significant change

for investment entities, which are currently required to consolidate investees that they control.

Significant judgment of facts and circumstances may be required to assess whether an entity meets

the definition of investment entity.

Effective Jan 1st, 2015

� IFRS 9 Financial Instruments — Classification and Measurement

IFRS 9 for financial assets was first published in November 2009 and was later updated in October

2010 to include financial liabilities. These pronouncements initially required the adoption of the

standard for annual periods on or after 1 January 2013. Amendments to IFRS 9 Mandatory Effective Date of IFRS 9 and Transition Disclosures, issued in December 2011, moved the mandatory

effective date of both the 2009 and 2010 versions of IFRS 9 from 1 January 2013 to 1 January

2015.

Key requirements

The first phase of IFRS 9 addresses the classification and measurement of financial instruments

(Phase 1). The Board’s work on the other phases is ongoing and includes impairment of financial

instruments and hedge accounting, with a view to replacing IAS 39 in its entirety. Phase 1 of IFRS 9 applies to all financial instruments within the scope of IAS 39.

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Financial assets All financial assets are measured at fair value at initial recognition.

Debt instruments may, if the Fair Value Option (FVO) is not invoked, be subsequently measured at

amortised cost if:

• The asset is held within a business model that has the objective to hold the assets to collect

the contractual cash flows and

• The contractual terms of the financial asset give rise, on specified dates, to cash flows that

are solely payments of principal and interest on the principal outstanding.

• All other debt instruments are subsequently measured at fair value.

• All equity investment financial assets are measured at fair value either through other

comprehensive income (OCI) or profit or loss.

Equity instruments held for trading must be measured at fair value through profit or loss. However,

entities have an irrevocable choice by instrument for all other equity financial assets.

Financial liabilities

For FVO liabilities, the amount of change in the fair value of a liability that is attributable to changes in credit risk must be presented in OCI. The remainder of the change in fair value is presented in

profit or loss, unless presentation of the fair value change in respect of the liability’s credit risk in

OCI would create or enlarge an accounting mismatch in profit or loss.

All other IAS 39 classification and measurement requirements for financial liabilities have been carried forward into IFRS 9, including the embedded derivative separation rules and the criteria for

using the FVO.

Transition

The entity may choose to apply the classification and the measurement requirements of IFRS 9 retrospectively, in accordance with the requirements of IAS 8. However, the restatement of

comparative period financial statements is not required.

IFRS 7 has been amended to require additional disclosures on transition from IAS 39 to IFRS 9. The

new disclosures are either required or permitted on the basis of the entity’s date of transition and whether the entity chooses to restate prior periods.

Early application of the financial asset requirements is permitted.

Early application of the financial liabilities requirements is permitted if the entity also applies the requirements for financial assets. Early application must be disclosed.

Impact

Phase 1 of IFRS 9 will have a significant impact on:

• The classification and measurement of financial assets

• Reporting for entities that have designated liabilities using the FVO

For entities considering early adoption, there are a number of benefits and challenges that should

be considered. Careful planning for this transition will be necessary

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2.6 Foreign Currency Transactions

2.6.1 Functional and Presentation Currency Items included in the financial statements are measured using the currency of the primary

economic environment in which the entity operates (‘the functional currency). The financial statements are presented in thousands. Naira is the Company’s functional and presentation

currency.

2.6.2 Transactions and Balances Transactions denominated in foreign currencies are recorded in Naira at the rate of exchange ruling

at the date of each transaction. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included in the profit and loss account. Monetary assets

and liabilities denominated in foreign currencies at the balance sheet date are translated at that


date. Exchange gains arising from the revaluation of monetary assets and liabilities are recognized

in the income statement while those on non-monetary items are recognized in other comprehensive

income. For non-monetary financial investments available-for-sale, unrealized exchange differences are recorded directly in equity until the asset is disposed or impaired.

2.7 Consolidation

2.7.1 Subsidiaries The financial statements of subsidiaries are consolidated from the date the Group acquires control,

up to the date that such effective control ceases. For the purpose of these financial statements,

subsidiaries are entities over which the Group, directly or indirectly, has the power to govern the

financial and operating policies so as to obtain benefits from their activities. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity

transactions (transactions with owners). Any difference between the amount by which the non-

controlling interest is adjusted and the fair value of the consideration paid or received is recognised

directly in equity and attributed to the Group.

Inter-company transactions, balances and unrealised gains on transactions between companies

within the Group are eliminated on consolidation. Unrealised losses are also eliminated in the same

manner as unrealised gains, but only to the extent that there is no evidence of impairment.

Accounting policies of subsidiaries have been changed where necessary to ensure consistency with

the policies adopted by the Group. Investment in subsidiaries in the separate financial statement of

the parent entity is measured at cost.

Acquisition-related Costs are expensed as Incurred

If the business combination is achieved in stages, fair value of the acquirer’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date through profit or loss.

2.7.2 Disposal of Subsidiaries On loss of control, the Group derecognises the assets and liabilities of the subsidiary, any

controlling interests and the other components of equity related to the subsidiary. Any surplus or

deficit arising from the loss of control is recognised in income statement.

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Statement of Significant Accounting Policies (Cont’d) If the Group retains any interest in the previous subsidiary, then such interest is measured at fair

value at the date that control is lost. Subsequently, that retained interest is accounted for as an

equity-accounted investee or as an available-for-sale financial asset depending on the level of influence retained.

3.0 Detailed Accounting Policies

3.1 Cash and Cash Equivalents

Cash and cash equivalents include cash in hand and at bank, call deposits and short term highly

liquid financial assets with original maturities of three months or less from the acquisition date,

which are subject to insignificant risk of changes in their fair value, and are used by the Company in

the management of its short-term commitments. Cash and cash equivalents are carried at

amortised cost in the statement of financial position.

3.2 Financial assets

3.2.1 Classification

The classification of financial assets depends on the purpose for which the investments were

acquired or originated. The Company classifies its financial assets into the following categories:

• financial assets at fair value through profit or loss;

• held-to-maturity investments;

• loans and receivables, and

• available-for-sale financial assets

3.2.2 Financial assets held at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading. Financial assets classified as trading are acquired principally for the purpose of selling in the short

term.

These investments are initially recorded at fair value. Subsequent to initial recognition, they are

remeasured at fair value, with gains and losses arising from changes in this value recognized in the income statement in the period in which they arise. The fair values of quoted investments in

active markets are based on current bid prices. The fair values of unquoted equities, and quoted

equities for which there is no active market, are established using valuation techniques

corroborated by independent third parties. These may include reference to the current fair value of other instruments that are substantially the same and discounted cash flow analysis.

Interest earned and dividends received while holding trading assets at fair value through profit or

loss are included in investment income.

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3.2.3 Held-to-maturity

Held-to-maturity investments are non-derivative financial assets with fixed determinable payments

and fixed maturities that management has both the positive intention and ability to hold to maturity

other than:

• Those that the Company designates as available for sale.

• Those that meet the definition of loans and receivables.

Such instruments include corporate bonds, government bonds, convertible debt notes and are

carried at amortised cost, using the effective interest method, less any provisions for impairment.

3.2.4 Available-for-sale

Available for sale financial investments include equity and debt securities. The Company classifies

as available-for-sale those financial assets that are generally not designated as another category of

financial assets, and strategic capital investments held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity

prices.

Available-for-sale financial assets are carried at fair value, with the exception of investments in

equity instruments where fair value cannot be reliably determined, which are carried at cost. Fair values are determined in the same manner as for investments at fair value through profit or loss.

Unrealised gains and losses arising from changes in the fair value of available-for-sale financial

assets are recognised in other comprehensive income while the investment is held, and are

subsequently transferred to the income statement upon sale or de-recognition of the investment.

Dividends received on available-for-sale instruments are recognised in income statement when the

Company’s right to receive payment has been established.

3.2.5 Loans and receivables

Loans and receivables include non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than those classified by the Company as at fair value

through profit or loss or available-for-sale.

Loans and advances consist primarily of commercial loans, staff loans, premium debtors, due from

reinsurers, other debtors. These are managed in accordance with a documented policy.

Loans and receivables are measured at amortised cost using the effective interest method, less any

impairment losses. Loans granted at below market rates are fair valued by reference to expected

future cash flows and current market interest rates for instruments in a comparable or similar risk

class and the difference between the historical cost and fair value is accounted for as employee benefits under staff costs.

3.2.6 Fair Value Measurement

The best evidence of the fair value of a financial instrument on initial recognition is the transaction

price, i.e. the fair value of the consideration paid or received, unless the fair value is evidenced by

comparison with other observable current market transactions in the same instrument, without

modification or repackaging, or based on discounted cash flow models and option pricing valuation

techniques whose variables include only data from observable markets.

Subsequent to initial recognition, the fair values of financial instruments are based on quoted

market prices or dealer price quotations for financial instruments traded in active markets. If the

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market for a financial asset is not active or the instrument is an unlisted instrument, the fair value is

determined by using applicable valuation techniques. These include the use of recent arm’s length

transactions, discounted cash flow analyses, pricing models and valuation techniques commonly

used by market participants.

Where discounted cash flow analyses are used, estimated cash flows are based on management’s

best estimates and the discount rate is a market-related rate at the balance sheet date from a

financial asset with similar terms and conditions.

Where pricing models are used, inputs are based on observable market indicators at the balance

sheet date and profits or losses are only recognised to the extent that they relate to changes in

factors that market participants will consider in a setting price.

3.3 Trade Receivables

Trade receivables arising from insurance contracts are stated after deducting allowance made for

specific debts considered doubtful of recovery. Trade receivables are reviewed at every reporting

period for impairment. They are initially recognised at fair value and subsequently measured at amortised cost less provision for impairment. A provision for impairment is made when there is

objective evidence (such as the probability of solvency or significant financial difficulties of the

debtors) that the Group will not be able to collect the entire amount due under the original terms of

the invoice.

Allowances are made based on an impairment model which considers the loss given default for each

customer, probability of default for the sectors in which the customer belongs and emergence

period which serves as an impairment trigger based on the age of the debt. Impaired debts are derecognized when they are assessed as uncollectible. If in a subsequent period the amount of the

impairment loss decreases and the decrease can be related objectively to an event occurring after

the impairment was recognised, the previous recognised impairment loss is reversed to the extent

that the carrying value of the asset does not exceed its amortised cost at the reversed date. Any subsequent reversal of an impairment loss is recognized in the Income Statement.

3.3.1 Derecognition The Company derecognizes a financial asset only when the contractual rights to cash flows from

the asset expire or it transfers the financial asset expire or it transfers the financial asset and

substantially all the risks and rewards of ownership of the asset to another entity. If the Company

neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognizes its retained interest in the asset and an

associated liability for amounts it may have to pay. If the Company retains substantially all the risks

and rewards of ownership of a transferred financial asset, the Company continues to recognize the

financial asset and also recognizes a collateralized borrowing for the proceeds received. 3.4 Reinsurance Assets The Company cedes business to reinsurers in the normal course of business for the purpose of

limiting its net loss potential through the transfer of risks. Premium ceded comprise gross written premiums. Reinsurance arrangements do not relieve the Company from its direct obligations to its

policy holders.

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Reinsurance assets are recognized when the related gross insurance claim is recognized according

to the terms of the relevant contract. The Company has the right to set off reinsurance payables

against amounts due from reinsurers and brokers in line with the agreed arrangements between both parties.

3.5 Deferred Acquisition Costs (DAC)

Acquisition costs comprise insurance commissions, brokerage and other related expenses arising

from the generation and conclusion of insurance contracts. The proportion of acquisition costs that

correspond to the unearned premiums are deferred as an asset and recognized in the subsequent

period. They are recognised on a basis consistent with the related provisions for unearned

premiums.

3.6 Other Receivables and Prepayments Other receivables and prepayments are carried at cost less accumulated impairment losses.

3.7 Investment in Subsidiary 3.7.1 Subsidiaries

The financial statements of subsidiaries are consolidated from the date the Company acquires control, up to the date that such effective control ceases. For the purpose of these financial

statements, subsidiaries are entities over which the Group, directly or indirectly, has the power to

govern the financial and operating policies so as to obtain benefits from their activities. Changes in

the Company’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions (transactions with owners). Any difference between the amount by which the

non-controlling interest is adjusted and the fair value of the consideration paid or received is

recognised directly in equity and attributed to the Group.

Inter-company transactions, balances and unrealised gains on transactions between companies

within the Group are eliminated on consolidation. Unrealised losses are also eliminated in the same

manner as unrealised gains, but only to the extent that there is no evidence of impairment. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with

the policies adopted by the Group. Investment in subsidiaries in the separate financial statement of

the parent entity is measured at cost.

Acquisition-related Costs are expensed as Incurred

If the business combination is achieved in stages, fair value of the acquirer’s previously held equity

interest in the acquiree is re-measured to fair value at the acquisition date through profit or loss.

3.7.2 Disposal of Subsidiaries On loss of control, the Group derecognises the assets and liabilities of the subsidiary, any

controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising from the loss of control is recognised in income statement. If the Group retains any

interest in the previous subsidiary, then such interest is measured at fair value at the date that

control is lost. Subsequently, that retained interest is accounted for as an equity-accounted investee

or as an available-for-sale financial asset depending on the level of influence retained.

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3.8 Investment Property

Investment property comprises investment in land or buildings held primarily to earn rentals or

capital appreciation or both. Investment property is initially recognized at cost including transaction

costs. The carrying amount includes the cost of replacing part of an existing investment property at

the time that cost is incurred if the recognition criteria are met; and

excludes cost of day to day servicing of an investment property. An investment property is

subsequently measured at fair value with any change therein recognised in profit or loss. Fair values

are determined individually, on a basis appropriate to the purpose for which the property is

intended and with regard to recent market transactions for similar properties in the same location.

3.8.1 Recognition and Measurement

Fair values are reviewed annually by independent valuer, holding a recognized and relevant

professional qualification and with relevant experience in the location and category of investment

property being valued. Any gain and loss arising from a change in the fair value is recognized in the

income statement.

Subsequent expenditure on investment property is capitalized only if future economic benefit will

flow to the Company; otherwise they are expensed as incurred.

Investment properties are disclosed separate from the property and equipment used for the

purposes of the business. The Company separately accounts for a dual purpose property as

investment property if it occupies only an insignificant portion. Otherwise, the portion occupied by

the Company is treated as property plant and equipment. However, the Company considers an

occupation of 30% as significant.

3.8.2 Transfer If an item of property and equipment becomes an investment property its use has changed, any

difference arising between the carrying amount and the fair value of this item at the date of transfer

is recognized in other comprehensive income as a revaluation of property, plant and equipment. However, if a fair value gain reverses a previous impairment loss, the gain is recognized in the

Statement of Comprehensive Income. Upon the disposal of such investment property, any surplus

previously recorded in equity is transferred to retained earnings; the transfer is not made through

the statement of comprehensive income.

3.8.3 De-recognition Investment properties are derecognized either when they have been disposed of, or when the investment property is permanently withdrawn from use and no future economic benefit is expected

from its disposal. Any gains or losses on the retirement or disposal of an investment property is

recognized in the statement of comprehensive income in the year of retirement or disposal.

3.9 Statutory Deposits Statutory deposits are cash balances held with the Central Bank of Nigeria and are only available to

the Company upon liquidation of the Company. They have been separately disclosed due to their

nature and liquidity. They represent 10% of the paid up capital of Company as stipulated by Section 10 (3) of the Insurance Act of 2003. Statutory deposits are measured at cost.

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3.10 Intangible assets (Software)

3.10.1Recognition and Measurement

Recognition of software acquired is only allowed if it is probable that future economic benefits to

this intangible asset are attributable and will flow to the Company. Software acquired is initially

measured at cost. The cost of acquired software comprises its purchase price, including any import

duties and non-refundable purchase taxes, and any directly attributable expenditure on

preparing the asset for its intended use. After initial recognition, software acquired is carried at its

cost less any accumulated amortisation and any accumulated impairment losses. Maintenance

costs should not be included.

Internally developed software is capitalized when the Company has the intention and demonstrates

the ability to complete the development and use of the software in a manner that will generate

future economic benefits, and can reliably measure the costs to complete the development. The

capitalised costs include all costs directly attributable to the development of the software. Internally

developed software is stated at capitalised cost less accumulated amortisation and impairment. Subsequent expenditure on software assets is capitalised only when it increases the future

economic benefits embodied in the specific asset to which it relates. All other expenditure is

expensed as incurred. Amortisation is recognised in profit or loss on a straight-line basis over the

estimated useful life of the software, from the date that it is available for use. The estimated useful

life of software is four years subject to annual reassessment.

3.11 Property and Equipment

3.11.1 Recognition & Measurement

Property and Equipment comprise land and buildings and other properties owned by the Company.

Items of property and equipment are carried at cost less accumulated depreciation and impairment

losses. Cost includes expenditure that is directly attributable to the acquisition of the assets.

3.11.2 Subsequent Costs

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as

appropriate, only when it is probable that future economic benefits associated with the item will

flow to the Company and the cost of the item can be measured reliably. All other repairs and

maintenance costs are charged to the profit or loss account during the financial period in which

they are incurred.

Subsequent costs on replacement parts on an item of property are recognized in the carrying

amount of the asset and the carrying amount of the replaced or renewed component is

derecognized.

3.11.3 Depreciation

Depreciation is calculated on property, plant and equipment on the straight line basis to write down

the cost of each asset to its residual value over its estimated useful life. Depreciation methods,

useful lives and residual values are reassessed at each reporting date. No depreciation is charged

on fixed assets until they are brought into use.

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Depreciation reduces an asset's carrying value to its residual value at the end of its useful life, and

is allocated on a straight line basis over the estimated useful lives, as follows:

Land - over the lease period

Buildings - 2%

Office equipment - 20%

Computer hardware - 20%

Furniture and fittings - 20%

Motor vehicles - 20%

3.12 Insurance Contracts

NEM Insurance issues contracts that transfer insurance risk. Insurance contracts are those contracts that transfer significant insurance risk. NEM Insurance

defines significant insurance risk as the possibility of having to pay benefits, on the occurrence of

an insured event, that are significantly more than the benefits payable if the insured event did not

occur. These contracts are accident and casualty and property insurance contracts.

Accident and casualty insurance contracts protect the Company’s customer against the risk of

causing harm to third parties as a result of their legitimate activities. Damages covered include both contractual and non contractual events. The typical protection offered is designed for

employers who become legally liable to pay compensation to injured employee (employers’

liability) and for individual and business customers who become liable to pay compensation to a

third party for bodily harm or property damage (public holiday).

Property insurance contract mainly compensate the Company’s customer for damage suffered to

their properties or for the value of properties lost. Customers who undertake commercial activities

on their premises could also receive compensation for the loss of earnings caused by the inability to use the insured properties in their business activities (business interruption cover).

In accordance to IFRS 4, the Company has continued to apply the accounting policies it applied in

accordance with the prechange over from Nigerian GAAP.

3.12.1 Salvages

Some non-life insurance contracts permits the company to sell (usually damaged) property acquired

in the process of settling a claim. The Company may also have the right to pursue third parties for payment of some or all costs of damages to its client’s property (subrogation right).

Salvage recoveries are used to reduce the claim expenses when the claim is settled. 3.12.2 Subrogation

Subrogation is the right of an insurer to pursue a third party that caused an insurance loss to the

insured. This is done as a means of recovering the amount of the claim paid to the insured for the

loss.

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A receivable for subrogation is recognized in other assets when the liability is settled and the

Company has the right to receive future cash flow from the third party.

3.12.3 Insurance Contract Liabilities These are computed in compliance with the provision of section 20, 21, and 22of the Insurance Act

2003 as follows:

3.12.3.1 Reserves for Outstanding Claims The reserve for outstanding claims is maintained at the total amount of outstanding claims incurred

and reported plus claims incurred but not reported (“IBNR”) as at the balance sheet date. The IBNR is based on the liability adequacy test (See 20 b (vii)

3.12.3.2 Reserves for Unexpired Risk

A provision for additional unexpired risk reserve (AURR) is recognized for an underwriting year

where it is envisaged that the estimated cost of claims and expenses would exceed the unearned

premium reserve (UPR)”

3.12.4 Liability Adequacy Test

At each end of the reporting period, liability adequacy test are performed by an Actuary to ensure

the adequacy of the contract liability net of related DAC assets. In performing these tests, current

best estimates of future contractual cash flows and claims handling and administration expenses, as well as invest income from the assets backing such liabilities, are used. Any deficiency is

immediately charged to profit or loss initially by writing off DAC and by subsequently establishing

a provision for losses arising from Liability Adequacy test ''the unexpired risk provision.''

The provision of the Insurance Act 2003 requires an actuarial valuation of life reserves only.

However, However, IFRS 4 requires a liability adequacy test for insurance reserves.

The provision of Section 59 of the Financial Reporting Council Act 2011 gives superiority to the

provision of IFRS and since it results in a more conservative reserving than the provision of the Insurance Act 2003, it serves the Company's prudential concern well.

3.13 Trade Payables Trade payables are recognised when due and measured on initial recognition at the fair value of the consideration received less directly attributable transaction costs. Subsequent to initial recognition,

they are measured at amortized cost using the effective interest rate method.

3.13.1 Derecognition of Trade Payables Trade payables are derecognized when the obligation under the liability is settled, cancelled or

expired.

3.13.2 Other Payables and Accruals A financial liability is derecognized when the obligation under the liability is discharged or cancelled

or expires. When an existing financial liability is replaced by another from the same lender on

substantially different terms, or the terms of an existing liability are substantially modified, such an

exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the income

statement. Gains and losses are recognised in the income statement when the liabilities are

derecognized.

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3.14 Employee Benefits

3.14.1 Short-term benefits

Short-term employee benefit obligations include wages, salaries and other benefits which the

Company has a present obligation to pay, as a result of employees’ services provided up to the

balance sheet date. The accrual is calculated on an undiscounted basis, using current salary rates.

A provision is recognised for the amount expected to be paid under short-term cash bonus or profit-

sharing plans if the Company has a present legal or constructive obligation to pay this amount as a

result of past service provided by the employee and the obligation can be estimated reliably.

3.14.2 Post-Employment Benefits

The Company operates a defined contributory retirement scheme as stipulated in the Pension

Reform Act 2004. Under the defined contribution scheme, the Company pays fixed contributions of

7.5% to a separate entity – Pension Fund Administrators; employees also pay the same fixed

percentage to the same entity. Once the contributions have been paid, the Company retains no legal

or constructive obligation to pay further contributions if the Fund does not hold enough assets to

finance benefits accruing under the retirement benefit plan. The Company’s obligations are

recognized in the profit and loss account.

3.14.3 Gratuity Benefits

Prior to 31 December, 2004, the Company operated a gratuity scheme under which employees were

entitled to one month basic salary, transport and housing allowance for each completed year of

service effective 31 December, 2004 the gratuity scheme was terminated. Under the terms of the

termination, amounts payable to employees who were in the employment of the Company as at the

termination date will be paid when such employees leave the service of the Company based on

benefits determined as at 31 December 2004. The gratuity assets are managed in-house.

3.14.4 Other Long-Term Employee Benefits

The company recognizes obligation for defined benefit plans in respect of its long term service

award as determined by actuarial valuation. The liability recognized is the net total of the present

value of the defined benefit obligations plus any unrecognized actuarial gains (less actuarial losses)

minus any unrecognized past service costs minus fair value of plan assets at the end of the

reporting period.

3.14.5 Termination Benefits

Termination benefits are payable whenever an employee’s employment is terminated before the

normal retirement date or whenever an employee accepts voluntary redundancy in exchange for

these benefits. The Company recognizes termination benefits when it is demonstrably committed

either to terminate the employment of current employees according to a detailed formal plan

without possibility of withdrawal, or to provide termination benefits as a result of an offer made to

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encourage voluntarily redundancy if it is probable that the offer will be accepted and the number of

acceptances can be estimated. Benefits falling due more than 12 months after balance sheet date

are discounted to present value.

3.15 Taxation

Income tax comprises current income and deferred tax. Income tax expense is recognised in the

income statement except to the extent that it relates to items recognised directly in equity, in which

case it is recognised in equity.

3.15.1 Current Income Tax

Current income Tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to

compute the amount are those that are enacted or substantively enacted by the reporting date.

Current income Tax asset and liabilities also include adjustments for tax expected to be payable or recoverable in respect of previous periods.

Current income tax relating to items recognised directly in equity is recognised in other

comprehensive income and not in income statement. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to

interpretation and establishes provisions, where appropriate.

3.15.2 Deferred tax

Deferred taxation, which arises from timing differences in the recognition of items for accounting

and tax purposes, is calculated using the liability method.

Deferred taxation is provided fully on timing differences, which are expected to reverse at the rate of

tax likely to be in force at the time of reversal. A deferred tax asset is recognized to the extent that

it is probable that future taxable profits will be available against which the associated unused tax

losses and deductible temporary differences can be utilized. Deferred tax assets are reduced to the

extent that it is no longer probable that the related tax benefit will be realized.

Deferred tax is not recognised for the following temporary differences: the initial recognition of

assets or liabilities in a transaction that is not a business combination and that affects neither

accounting nor taxable profit, differences relating to investments in subsidiaries to the extent that

they probably will not reverse in the foreseeable future and differences arising from investment

property measured at fair value whose carrying amount will be recovered through use. Deferred

tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer

probable that the related tax benefit will be realised. Additional income taxes that arise from the

distribution of dividends are recognised at the same time as the liability to pay the related dividend

is recognised.

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Statement of Significant Accounting Policies (Cont’d) 3.16 Issued Share Capital The issued ordinary shares of the Company are classified as equity instruments. Incremental costs

directly attributable to the issue of an equity instrument are deducted from the initial measurement of the equity instruments.

3.16.1 Dividends on ordinary share capital Dividends on the Company’s ordinary shares are recognised in equity in the period in which they are

paid or, if earlier, approved by the Company’s shareholders. 3.17 Share Premium

This represents the excess amount paid by the shareholder on the nominal value of its shares. This

amount is distributable to the shareholders at the discretion. The share premium is classified as an equity instrument in the statement financial position.

3.18 Contingency Reserves

The Company maintains contingency reserves in accordance with the provisions of the Insurance

Act 2003 to cover fluctuations in securities and variations in statistical estimates at the rate equal

to the higher of 3% of total premium or 20% of the total profit after taxation until the reserve

reaches the greater of minimum paid up capital or 50% of net premium for general business.

3.19 Retained earnings The reserve comprises of undistributed profit/loss from previous years and the current year.

Retained earnings are classified as part of equity in the statement of financial position. 3.20 Available-for-sale Reserve The available-for-sale reserve comprises the cumulative net change in the fair value of the

Company’s available-for-sale investments. Net fair value movements are recycled to income statement if an underline available-for-sale investment is either derecognized or impaired.

3.21 Other Reserves- Employee Benefit Actuarial Surplus Actuarial surplus/ deficit on employee benefit represent changes in benefit obligation due to

changes in actuarial valuation assumptions or actual experience differing from experience. The

gains/ losses for the year, net of applicable deffered tax assets /liability on employee benefit

obligation, are recognized in other comprehensive income.

3.22 Gross Premiums Written

Gross written premiums comprise the premiums on insurance contracts entered into during the

year, irrespective of whether they relate in whole or in part to a later accounting period. These are

shown gross of any taxes or duties levied on premiums.

3.22.1 Gross premium earned

Gross premium earned includes estimates of premium due but not yet received, less unearned

premium.

NEM INSURANCE PLC




3.22.2 Unearned premiums

Unearned premiums are those proportions of premiums written in the year that relate to periods of

risks after the reporting date. It is computed by a recognised professional actuary separately for

each insurance contract or another suitable basis for uneven risk contracts. Provision for unexpired

risk is made for unexpired risks arising where the expected value of claims and expenses

attributable to the unexpired period of policies in force at the reporting date exceeds the unearned

premium in relation to such policies after deduction of any deferred acquisition costs. Specifically,

provision for unexpired risk is based on time apportionment.

3.22.3 Reinsurance Premium

Reinsurance premiums are recognized as outflows in accordance with the tenor of the reinsurance

contract.

3.23 Reinsurance Cost

Reinsurance cost represents outward premium paid to reinsurance companies less the unexpired

portion as at the end of the accounting year.

3.24 Fees and Commission Income

Insurance contract policyholders are charged for policy administration services and other contract

fees. These fees are recognised as revenue over the period in which the related services are

performed.

3.25 Claims Expenses

Claims expenses consist of claims and claims handling expenses paid during the financial year

together with the movement in the provision for outstanding claims. The provision for outstanding

claims represent the amount computed Company’s estimate of the ultimate cost of settling all

claims incurred but unpaid at the balance sheet date whether reported or not. The provision

includes an allowance for claims management and handling expenses.

The provision for outstanding claims for reported claims is estimated based on current information

and the ultimate liability may vary as a result of subsequent information and events and may result

in significant adjustments to the amounts provided. Adjustments to the amounts of claims provision

for prior years are reflected in the income statement in the financial period in which adjustments

are made, and disclosed separately if material.

Reinsurance recoverable is recognized when the Company records the liability for the claims and is

not netted off. Claim expenses are presented separately in the income statement.

3.26 Underwriting expenses

Underwriting expenses are made up of acquisition and maintenance expenses comprising

commission and policy expenses, proportion of staff cost and insurance supervision levy.

Underwriting expenses for insurance contracts are recognized as expense when incurred, with the

exception of acquisition costs which are recognized on a time apportionment basis in respect of risk.

NEM INSURANCE PLC




3.27 Investment Income Investment income comprises interest income earned on short-term deposits, rental income and

income earned on trading of securities including all realised and unrealised fair value changes,

interest, dividends and foreign exchange differences. Investment income is accounted for on an

accrual basis.

Interest income is recognised in the income statement as it accrues and is calculated using the

effective interest rate method. Fees and commissions that form part of an integral part of the

effective yield of a financial instrument are recognised as an adjustment to the effective interest rate

of the instrument.

When a receivable is impaired, the Company reduces the carrying amount to its recoverable

amount, being the estimated future cash flow discounted at the original effective interest rate of the

instrument, and continues unwinding the discount as interest income.

3.28.1 Dividend income

Dividend is recognized as earned when the quoted price of the related security is adjusted to reflect

the value of the dividend and is stated net of withholding tax. Scrip dividend is recognized on the

basis of the market value of the shares on the date they are quoted.

3.29 Impairment of Financial Assets The carrying amounts of these assets are reviewed at each reporting date to determine whether

there is any objective evidence of impairment. A financial asset is considered to be impaired if

objective evidence indicates that one or more events that have occurred since the initial recognition

of the asset have had a negative effect on the estimated future cash flows of that asset and can be reliably estimated. For financial assets measured at amortised cost, the Company first assesses

whether objective evidence of impairment exists individually for financial assets that are individually

significant and individually or collectively for financial assets that are not individually significant.

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

characteristics. An impairment loss in respect of a financial asset measured at amortised cost is

calculated as the difference between its carrying value and the present value of the estimated future

cash flows discounted at the original effective interest rate. Available-for-sale financial assets are impaired if there is objective evidence of impairment, resulting

from one or more loss events that occurred after initial recognition but before the balance sheet

date, that have an impact on the future cash flows of the asset.

All impairment losses are recognized through profit or loss. If any loss on the financial asset was previously recognized directly in equity as a reduction in fair value, the cumulative net loss that had

been recognized in equity is transferred to the income statement and is recognized as part of the

impairment loss. The amount of the loss recognized in the income statement is the difference

between the acquisition cost and the current fair value, less any previously recognized impairment loss.

Subsequent decreases in the amount relating to an impairment loss, that can be linked objectively

to an event occurring after the impairment loss was recognized in the income statement, is reversed

through the income statement. An impairment loss in respect of an equity instrument classified as available-for-sale is not reversed through the income statement but accounted for directly in equity.

NEM INSURANCE PLC




Impairment of non-financial assets

The carrying amounts of the Group’s non-financial assets are considered to be impaired when

existence of an indication that the asset’s recoverable amount is less than the carrying amount.

Impairment losses are recognised in profit or loss. Impairments or losses of non-financial assets, related claims for or payments of compensation from third parties and any subsequent purchase or construction of replacement assets are separate

economic events and are accounted for separately.

Impairment losses recognised in prior periods are assessed at each reporting date for any

indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss

is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount

that would have been determined, net of depreciation or amortisation, if no impairment loss had

been recognised. Reversals of impairment losses are recognised in profit or loss.

3.30 Administrative expenses

Management expenses are expenses other than claims and underwriting expenses. They include

depreciation expenses and other expenses. They are accounted for on an accrual basis.

3.31 Earnings per share

The Group presents basic earnings per share for its ordinary shares. Basic earnings per share are

calculated by dividing the profit attributable to ordinary shareholders of the Group by the number of

shares outstanding during the year. Adjusted earnings per share is determined by dividing the profit

or loss attributable to ordinary shareholders by the weighted average number of ordinary shares

adjusted for the bonus shares issued.

3.32 Provisions, contingent liabilities and assets Provisions are liabilities that are uncertain in amount and timing. Provisions are recognized when

the Group has a present legal or constructive obligation as a result of past events and it is more

likely than not that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated.

Where there are a number of similar obligations, the likelihood that an outflow will be required in

settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one item included in the same

class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects the current market assessments of the time value of

money and the risks specific to the obligation.

A contingent liability is a possible obligation that arises from past event and whose existence will be

confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the company. Contingent assets are not recognized but are disclosed in

the financial statement as they arise.

NEM INSURANCE PLC



Statement of Significant Accounting Policies (Cont’d) 3.33 Comparatives

Except when a standard or an interpretation permits or requires otherwise, all amounts are reported

or disclosed with comparative information. Where IAS 8 applies, comparative figures have been

adjusted to conform to changes in presentation in the current year.

3.34 Segment reporting A segment is a distinguishable component of the Group that is engaged in providing products or

services (business segment), or in providing products or services within a particular economic

environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. The Group’s primary format for segment reporting is based on business

segments. Significant geographical regions have been identified as the secondary basis of reporting.

NEM INSURANCE PLC



Consolidated Statement of Financial Position

Group Parent

Dec. 2013 Dec. 2012 Dec. 2013 Dec. 2012

Notes N'000 N'000 N'000 N'000

Assets

Cash and cash equivalents 1 3,865,965 3,125,679 3,836,821 2,947,856

Financial assets 2 2,624,638 1,350,967 2,373,132 1,350,967

Trade receivables 3 496,007 981,032 347,494 887,009

Reinsurance assets 4 65,496 129,501 65,496 92,512

Deferred acquisition cost 5 513,387 325,944 472,346 298,151

Other receivables and prepayments 6 278,712 237,634 219,552 224,150

Investment in a subsidiary 7 - - 175,396 175,396

Investment properties 8 468,974 459,813 468,974 459,813

Statutory deposit 9 349,200 342,879 320,000 320,000

Intangible asset 10 18,851 27,085 15,772 27,085

Property and equipment 11 1,284,191 828,586 1,245,149 797,208

Income Tax Credit 16.1 80,456 - 87,745 -

Total assets 10,045,877 7,809,120 9,627,877 7,580,147

Liabilities

Insurance contract liabilities 12 4,787,052 3,027,556 4,419,597 2,819,395

Trade payables 13 48,510 23,367 48,510 1,532

Other payables 14 167,874 168,727 127,699 161,751

Book overdraft 1.2 9,848 - 9,848 -

Retirement benefit obligations 15 170,838 160,205 170,838 160,205

Current Income Tax Liability 16.1 - 21,949 - 14,164

Deferred tax liability 16.3 166,062 106,671 166,062 106,671

5,350,184 3,508,475 4,942,554 3,263,718

Equity

Issued share capital 17 2,640,251 2,640,251 2,640,251 2,640,251

Share premium 18 272,551 272,551 272,551 272,551

Contingency reserve 19 1,696,986 1,434,193 1,664,960 1,417,120

Retained earnings 20 30,366 (101,902) 52,022 (69,047)

Available for sale reserve 21 9,978 53,411 9,978 53,411

Other Reserves-employee benefit actuarial surplus 22 45,562 2,141 45,562 2,141

Total Equity 4,695,693 4,300,645 4,685,323 4,316,427

Total equity and liabilities 10,045,877 7,809,120 9,627,877 7,580,147

These accounts were approved by Board on………………………….. and signed on its behalf by:

________________________ _________________________ _______________________

Chief Adewale Teluwo (Chairman) Mr. Tope Smart (GMD/CEO) Miss. Stella Omoraro (CFO)

FRC/2013/IODN/00000003151 FRC/2013/CIIN/00000001331 FRC/2013/ICAN/00000001238

The accounting policies on pages 22 to 49 and the accompanying notes on pages 57 to 110 form an integral part of these financial statements.

NEM INSURANCE PLC



Consolidated Statement of Comprehensive Income

Group Parent

2013 2012 2013 2012

Notes N'000 N'000 N'000 N'000

Gross premiums written 23 8,933,345 9,652,556 8,261,325 9,246,217

(Increase) in unearned income (1,142,383) (317,374) (1,010,503) (202,335)

Gross premium income 23 7,790,962 9,335,182 7,250,821 9,043,882

Reinsurance expenses 24 (366,222) (218,147) (324,527) (180,163)

Net premium income 23 7,424,740 9,117,035 6,926,294 8,863,719

Fee and commission income 25 14,873 13,737 1,035 1,951

Net underwriting income 7,439,613 9,130,771 6,927,329 8,865,670

Claims expenses 26 (3,070,271) (2,934,435) (2,965,052) (2,879,691)

Underwriting expenses 27 (2,538,188) (2,567,359) (2,488,051) (2,533,363)

Underwriting profit 1,831,155 3,628,978 1,474,226 3,452,616

Investment Income 28 444,972 274,717 396,959 258,062

Fair value (loss)/gain 29 370,276 215,582 370,276 215,582

Other income 30 18,973 6,250 18,889 5,011

Revaluation gain on investment

properties 8 9,161 (23,307) 9,161 (23,307)

Impairments 31 (366,940) (1,960,905) (236,615) (1,960,905)

Other operating and admin. expenses 32 (1,763,187) (1,476,068) (1,526,006) (1,309,657)

Profit before tax 544,410 665,246 506,889 637,401

Income taxes 16.2 (149,350) (209,934) (137,981) (203,326)

Profit after tax 395,060 455,312 368,908 434,075

Other Comprehensive Income

Fair value loss on available for sale 21 (43,433) (41,092) (43,433) (41,092)

Actuarial profit on defined benefit plan 22 43,421 2,141 43,421 2,141

395,048 416,361 368,896 395,124

Basic earnings per share (kobo) 33 7 9 7 8

The accounting policies on pages 22 to 49 and the accompanying notes on pages 57 to 110 form an integral part of

these financial statements.

NEM INSURANCE PLC



Consolidated Statement of Change in Equity - Group

GROUP

Issued Share Capital

Share Premium

Retained Earnings

AFS Reserve

Other Reserves

Contingency Reserves Total

N'000 N'000 N'000 N'000 N'000 N'000 N'000

At January 1, 2013 2,640,251 272,551 (101,902) 53,411 2,141 1,434,193 4,300,645

Profit for the year - - 395,059 395,059

Transfer to capital reserves Transfer to contingency

reserves - - (262,793) 262,793 -

Actuarial gain on defined benefit plan - - - Other comprehensive

income (43,433) 43,421 (12)

Distribution to Owners - Dividend paid during the

year - -

As at December 31, 2013 2,640,251 272,551 30,366 9,978 45,562 1,696,986 4,695,693

NEM INSURANCE PLC



Statement of Change in Equity - Parent

Parent

Issued Share Capital

Share Premium

Retained Earnings

AFS Reserve

Other Reserves

Contingency Reserves Total

N'000 N'000 N'000 N'000 N'000 N'000 N'000

At January 1, 2013 2,640,251 272,551 (69,047) 53,411 2,141 1,417,120 4,316,427

Profit for the year - - 368,908 368,908

Transfer to contingency reserves - - (247,840) 247,840 -

Other Comprehensive Income (43,433) 43,421 (12) Actuarial gain on defined

benefit plan - - -

Distribution to Owners -

Dividend paid during the year - - -

As at December 31, 2013 2,640,251 272,551 52,022 9,978 45,562 1,664,960 4,685,323

NEM INSURANCE PLC



Consolidated Statement of Cash Flows

Group Parent

Dec. 2013 Dec. 2012 Dec. 2013 Dec.

2012

Note N'000 N'000 N'000 N'000

Operating profit before taxation 544,410 680,594 506,889 652,749

Adjustment for items not involving the movement of cash: Depreciation & Amortisation 135,888 120,146 119,949 109,118

Increase in insurance payables 1,759,496 1,122,196 1,600,202 988,088

(Increase) in deferred insurance asset (123,439) (113,539) (147,181) (69,393)

Profit on disposal of assets (2,384) 3,440 (2,384) 3,440

Fair value loss/(gain) on quoted investment (370,276) (256,674) (370,276) (256,674)

Cash flow changes before changes in working capital 1,943,695 1,556,162 1,707,199 1,427,327

CHANGES IN WORKING CAPITAL Decrease in insurance receivables 485,024 (405,266) 539,514 (317,529)

(Increase) in loans and receivables (1,267,778) (284,468) (1,022,164) (284,468)

(Increase) in other Trade Recievables & prepayment (46,969) (30,192) 4,599 (31,296)

Increase in other payables 34,923 154,126 23,559 138,739

Tax paid (192,364) (129,090) (180,499) (123,344)

Net cash inflows from operating activities 956,532 861,273 1,072,209 809,430

CASH FLOWS FROM INVESTING ACTIVITIES Intangible assets 11,313 (13,210) 11,313 (13,210)

Proceed of disposal 2,384 1,071 2,384 1,071

Unrealised gain/(Loss) on equity 370,276 215,582 370,276 215,582

Statutory deposit (6,321) 71,960

Disposal/(purchase of investments) (9,175) 78,021 (9,175) 72,195

Purchase of intangible asset (4,106) - -

Purchase of plant and equipment (590,467) (252,721) (567,890) (244,562)

Net cash outflows investment activities (226,095) 100,702 (193,091) 31,076

CASH FLOWS FROM FINANCIAL ACTIVITIES

Dividends paid to equity holders of the

parent - (264,025) - (264,025)

Net cash outflows from financial activities - (264,025) - (264,025)

Total cash flow 730,437 697,951 879,117 576,481

Cash and cash equivalent at January 1, 3,125,679 2,427,729 2,947,856 2,371,375

Cash and cash equivalent at December 31, 3,856,117 3,125,679 3,826,973 2,947,856

Represented by:

Cash and cash equivalent at December 31 1.3 3,856,117 3,125,679 3,826,973 2,947,856

The accounting policies on pages 22 to 49 and the accompanying notes on pages 57 to 110 form an integral part of these financial statements.

NEM INSURANCE PLC



Segment Information

For Management purposes, the Group is organized into business units based on location and has

two reportable operating segments as follows:

• NEM Insurance Plc in Nigeria comprises general insurance to corporate entities and individuals. Non-life insurance products offered include motor, household, commercial

and business interruption insurance. These products offer protection of policyholder’s

assets and indemnification of other parties that have suffered damage as a result of policyholder’s accident.

• NEM Insurance Ltd in Ghana is a Subsidiary wholly owned (100%) by NEM Insurance Plc Nigeria and its business comprises only general insurance to corporate entities

and individuals. Non-life insurance products offered include motor, household,

commercial and business interruption insurance. These products offer protection of

policyholder’s assets and indemnification of other parties that have suffered damage as a result of policyholder’s accident.

Segment Performance is evaluated based on profit or loss which, in certain respects, is measured

differently from profit or loss in the financial statements. The Company’s financing and income

taxes are managed on a group basis and are not allocated to individual operation segments.

No inter-segment transaction occurred in 2013 and 2012. If any transaction were to occur,

transfer prices between operating segment are set on an arm’s length basis in a manner similar

to transaction with third parties. Segment income, expenses and result will include those transfers between business segment.

NEM INSURANCE PLC



Segment Statement of Comprehensive Income at 31st December, 2013

NEM Insurance

(Nigeria) Plc

NEM Insurance

(Ghana) Ltd

Group

31 Dec. 2013

N'000 N'000 N'000

Gross premiums written 8,261,325 672,020 8,933,345

Decrease(/Increase) in unearned income (1,010,503) (131,880) (1,142,383)

Gross premium income 7,250,821 540,141 7,790,962

Reinsurance expenses (324,527) (41,695) (366,222)

Net premiums income 6,926,294 498,446 7,424,740

Fee and commission income 1,035 13,838 14,873

Net underwriting income 6,927,329 512,284 7,439,613

Claims expenses (2,965,052) (105,219) (3,070,271)

Underwriting expenses (2,488,051) (50,137) (2,538,188)

Underwriting profit 1,474,226 356,928 1,831,154

Investment Income 396,959 48,013 444,972

Fair value (loss)/gain 370,276 - 370,276

Other income 18,889 84 18,973

Revaluation loss on investment properties 9,161 - 9,161

Impairments (236,615) (130,325) (366,940)

Other operating and admin. Expenses (1,526,006) (237,180) (1,763,187)

Profit before tax 506,889 37,520 544,410

Income taxes (137,981) (11,369) (149,350)

Profit after tax 368,908 26,151 395,060

Other Comprehensive Income -

Fair value loss on Available for sale (43,433) - (43,433)

Actuarial profit on defined benefit plan 43,421

43,421

Total Comprehensive income for the year, net of tax 368,896 26,151 395,048

NEM INSURANCE PLC



Notes to the Financial Statements

1 Cash and Cash Equivalent Group Parent

2013 2012 2013 2012

N'000 N'000 N'000 N'000

Cash and bank balances 920,514 577,229 891,370 547,907

Short - term deposits (Note 1.1) 2,945,451 2,548,450 2,945,451 2,399,949

Total cash and cash equivalents 3,865,965 3,125,679 3,836,821 2,947,856

Cash and Cash Equivalent

For Shareholders 200,000 670,962 443,672 720,000

For Policy Holders 3,495,127 2,249,512 3,222,311 2,067,651

Staff Benefit( Gratuity) 170,838 205,205 170,838 160,205

Total cash and cash equivalents 3,865,965 3,125,679 3,836,821 2,947,856

Short-term deposits are made for varying periods averaging between 1 - 90 days depending on the

immediate cash requirements of the Group. All deposits are subject to an average interest rate of 9%.

The carrying amounts disclosed above reasonably approximate fair value at the reporting date.

1.1 Short term deposit Group Parent

2013 2012 2013 2012

N'000 N'000 N'000 N'000

Placements with Local Bank 2,945,451 2,548,450 2,945,451 2,399,949

1.2 Book Overdraft Group Parent

2013 2012 2013 2012

N'000 N'000 N'000 N'000

Book Overdraft 9,848 - 9,848 -

This is not the same as Bank Overdraft as the Company has not borrowed any fund from any lending institution. The sum represents debit balance as at 31st December 2013. The reason being that most of

the cheques raised in those Cashbook have not been presented to the banks.

NEM INSURANCE PLC



Notes to the Financial Statements (Cont’d)

1.3 Cash & Cash Equivalent for Cash flow Group Parent

2013 2012 2013 2012

N'000 N'000 N'000 N'000

Cash & Cash Equivalent 3,865,965 3,125,679 3,836,821 2,947,856

Book Overdraft (9,848) - (9,848) -

Cash & Cash Equivalent for Cash flow 3,856,117 3,125,679 3,826,973 2,947,856

2 Financial Assets

The financial assets are as summarized below:

2013 2012 2013 2012

N'000 N'000 N'000 N'000

Financial assets at fair value through profit or loss (Note 2.2) 1,055,737 685,461 1,055,737 685,461

Available for sale (Note 2.3) 1,507,072 618,677 1,255,566 618,677

Held to maturity financial assets(Note 2.4) 61,829 46,829 61,829 46,829

Total financial assets 2,624,638 1,350,967 2,373,132 1,350,967

Current 1,507,073 618,677 1,255,566 618,677

Non- current 1,117,566 732,289 1,117,566 732,289

2,624,638 1,350,967 2,373,132 1,350,967

2.1 The following table compares the fair values of the financial assets to their carrying values:

2013 2012 2013 2012

Fair Value Fair Value Fair Value Fair Value

N'000 N'000 N'000 N'000

Financial asset at FVTPL 1,055,737 685,461 1,055,737 685,461

Available for sale 1,507,072 618,677 1,255,566 618,677

Held to maturity financial assets 61,829 46,829 61,829 46,829

2,624,638 1,350,967 2,373,132 1,350,967

NEM INSURANCE PLC




2.2 FINANCIAL ASSETS AT FVPTL Analysis

QUOTED EQUITIES AT MARKET VALUES

UNITS MKT.VALUE(N) MKT.VALUE(N) UNITS MKT.VALUE(N) MKT.VALUE(N)

2013 2012 2013 2012

ARM DISCOVERY

FUND 5,000 1,620,308 965,000 5,000 1,620,308 965,000

FBN HOLDINGS 768,361 12,524,284 75,356,634 768,361 12,524,284 75,356,634

UBA PLC 56,610,472 503,833,201 146,591,875 56,610,472 503,833,201 146,591,875

FLOURMILL 21,955 1,910,085 777,075 21,955 1,910,085 777,075

UBN PLC 4,562 43,932 24,064,135 4,562 43,932 24,064,135

OANDO - - 67,517 - - 67,517

Dangsugar Plc 3,390,563 39,669,587 23,879,478 3,390,563 39,669,587 23,879,478

Ecobank –

Transnational 136,000 2,203,200 2,388,456 136,000 2,203,200 2,388,456

Skye Bank Plc 3,729,058 16,407,855 9,223,036 3,729,058 16,407,855 9,223,036

Fidelity Bank Plc 13,201,250 35,511,363 16,490,863 13,201,250 35,511,363 16,490,863

Unilever Plc 400,000 21,520,000 18,600,000 400,000 21,520,000 18,600,000

Zenith Bank Plc 13,024,375 356,867,875 255,063,194 13,024,375 356,867,875 255,063,194

FIRST CITY

MONUMENT 1,444,550 5,330,390 5,625,000 1,444,550 5,330,390 5,625,000

GTBANK PLC 244,777 6,613,875 5,629,871 244,777 6,613,875 5,629,871

Access Bank Plc 2,885,702 27,702,739 34,504,953 2,885,702 27,702,739 34,504,953

DIAMOND BANK - - 12,840,591 - - 12,840,591

CORNERSTONE PLC - - 576,000 - - 576,000

Sterling Bank Plc 1,535,942 3,839,855 8,193,180 1,535,942 3,839,855 8,193,180

Nascon 250,000 3,747,500 12,821,920 250,000 3,747,500 12,821,920

CCNN 52,000 611,000 10,875,600 52,000 611,000 10,875,600

Mobil 3,384 401,342 308,085 3,384 401,342 308,085

NAHCO 1,196,602 7,418,932 743,820 1,196,602 7,418,932 743,820

JULIUS BERGER 3,465,000 3,465,000

RT BRISCOE 563,040 827,669 855,821 563,040 827,669 855,821

OKOMUOIL 37,112 1,632,928 12,750,000 37,112 1,632,928 12,750,000

AFRIPRUDENTIAL 644,928 2,141,161 644,928 2,141,161

Ashaka Cement 58,050 1,218,470 1,041,998 58,050 1,218,470 1,041,998

Costain 131,000 162,440 348,460 131,000 162,440 348,460

Custodian Insurance 270,000 561,600 351,000 270,000 561,600 351,000

Dangote Flour 42,254 433,104 346,483 42,254 433,104 346,483

Fidson 70,000 195,300 74,200 70,000 195,300 74,200

FTN Cocoa 543,000 271,500 271,500 543,000 271,500 271,500

MANSARD 200,000 490,000 370,000 200,000 490,000 370,000

UBCAPITal 12,363 25,591 - 12,363 25,591 -

TOTAL 1,055,737,086 685,460,745

1,055,737,086 685,460,745

NEM INSURANCE PLC




2.3 Available for Sale 2013

2012 2013 2012

N'000

N'000 N'000 N'000

Short term Investment over 90 days 553,544 55,137 302,038 55,137

Unquoted investments 953,528 563,540 953,528 563,540

1,507,072 618,677 1,255,566 618,677

2.4 Held to maturity financial assets

Lagos State Bond 9,000 9,000 9,000 9,000

Ondo State Bond 10,000 10,000 10,000 10,000

Osun State Bond 15,000 15,000

GT Bank Euro Bond 27,829 27,829 27,829 27,829

61,3SW829 46,829 61,829 46,829

Fair value through profit or loss

Management valued the Company's quoted investment at market value which is a reasonable measurement of fair value since the prices of the shares are quoted in an active market. This prompted

the classification of quoted investment as Financial assets at FVTPL (Fair Value Through Profit or Loss).

Available for sale

The fair value of unquoted equities was determined on market price as at year end. The over the counter

price (OTC) that was used in the last transaction before the reporting date was used as a reflection of fair value.

Fixed deposit with tenor of more than 90 days is classified as available for sale. This could easily be

turned to liquidity if there is urgent need for cash usage. It is valued at cost because there is no active market or other similar market that could be used for its valuation.

2.4.1 The details of Held to maturity investment are as follow:

2013 2012 2013 2012

N'000 N'000 N'000 N'000

As at January 1 46,829 31,508 46,829 31,508

Purchased during the year 15,000 15,321 15,000 15,321

As at December 31 61,829 46,829 61,829 46,829

The held to maturity investment relates to the fixed rate bond of the Lagos State Government. The

first one has a tenure spanning 2008 to 2011, it was purchased in 2009. The second one has a

tenure spanning 2010 to 2017. It was purchased in 2010 whose coupon rates are 13% and 10%

respectively payable half yearly.

Other investment relates to the fixed rate bond of the Ondo State Government and Osun State

Government with coupon rate of 15.5% and 14.75% with tenure period of 2012 to 2017 and 2013

to 2020 respectively.

The bonds were issued at par with no discount and they are redeemable at par on their respective

due dates. Based on all these facts, management is of the opinion that the fair values of these

bonds are equal to their face values.

NEM INSURANCE PLC




Group Parent

3 Trade Receivables 2013 2012 2013 2012

N'000 N'000 N'000 N'000

Opening Balance 5,025,075 3,736,007 5,835,813 3,671,444

Prior year collection - - - -

Addition (412,978) 1,289,068 (1,502,553) 2,164,369

4,612,097 5,025,075 4,333,260 5,835,813

Impairment for trade receivables (4,116,091) (5,007,080) (3,985,766) (4,948,804)

496,007 981,032 347,494 887,009

3.1 Movement in Impairment

Opening Balance 5,007,080 3,160,240 4,948,804 3,101,964

Addition (890,989) 1,846,840 (963,038) 1,846,840

4,116,091 5,007,080 3,985,766 4,948,804

3.2 Analysis of Trade Receivables

Insurance Companies - 436,094 - 317,027

Insurance Agents - 776,966 - 617,142

Direct Business - 5,361 - 3,478

Insurance Brokers 496,007 3,806,654 347,494 4,898,166

496,007 5,025,075 347,494 5,835,813

3.3 The age analysis of trade receivable

Under 90 days 496,007 442,290 347,494 395,279

91-180 days 884,580 790,557

Above 180 days 3,698,205 4,649,978

496,007 5,025,075 347,494 5,835,813

During the year 2013 and in line with the provision of “No Premium, No Cover”, the group policy on impairment on trade receivables was amended to recognize trade receivables from

Brokers only. Such receivables should not exceed a period of 30 days.

NEM INSURANCE PLC




Group Parent

2013 2012 2013 2012

4 Reinsurance Assets N'000 N'000 N'000 N'000

Opening Balance 129,501 93,983 92,512 83,937

For the year reinsurance assets 161,297 36,989 198,286 8,576

Transfer to Impairment (225,302) - (225,302) -

65,496 129,501 65,496 92,512

4.1 Analysis of Reinsurance Assets

Prepayments - 40,287 - -

Recoverables 65,496 89,214 65,496 92,512

65,496 129,501 65,496 92,512

5 Deferred acquisition cost

At January 1 325,944 247,923 298,151 228,758

Acquisition cost during the year 1,627,933 1,777,658 1,564,549 1,735,034

Apportionment during the year (1,440,492) (1,699,637) (1,390,354) (1,665,641)

513,386 325,944 472,346 298,151

Deferred acquisition cost represents commissions paid on unearned premium relating to the unexpired risk.

2013 2012 2013 2012

N'000 N'000 N'000 N'000

6 Other Receivables and Prepayments

Prepayments 31,844 35,041 17,150 21,814

Accrued Income 34,776 25,032 34,776 25,032

Other receivables 212,092 177,562 167,626 177,305

278,712 237,634 219,552 224,150

6.1 Other Receivables

Mortgage Loan 158,934 166,745 158,934 166,745

Staff Loan Parent Company 8,691 10,560 8,692 10,560

Staff Loan Subsidiary 44,467 257 - -

212,092 177,562 167,626 177,305

NEM INSURANCE PLC




Group Parent

2013 2012 2013 2012

7 INVESTMENT IN SUBSIDIARY N'000 N'000 N'000 N'000

2013 2012 2013 2012

N'000 N'000 N'000 N'000

Investment in a subsidiary - - 175,396 175,396

The Company's investment in a subsidiary established in Ghana was treated as unquoted

investment from which we are reclassifying it. Subsidiary is wholly owned (100%) by NEM Insurance Plc Nigeria. Since this investment was initially recorded as such, it must be reclassified

from unquoted investment to stand alone. The investment was fully funded by the Company.

Therefore no goodwill could arise from this transaction since it is not an IFRS 3 transaction i.e. not a business combination.

8 INVESTMENT PROPERTIES

2013 2012 2013 2012

N'000 N'000 N'000 N'000

Opening Balance 459,813 483,120 459,813 483,120

Revaluation surplus/deficit 9,161 (23,307) 9,161 (23,307)

As at December 31. 468,974 459,813 468,974 459,813

Investment properties are held at fair value, which has been determined based on valuations

performed by independent valuations performed by independent valuation experts, Kennedy

Egbukichi & Co 1st Floor (Suite 4 Right Wing),NUJ Lighthouse, 3/5 Adeyemo Alakija Street, Victoria Island, Lagos and Laide Oshikoya and Associates,13, Bode Thomas Road, Palmgroove,

Lagos.

The valuers are the industry specialists in valuing these types of investment properties. The fair

value is supported by market evidence and represent the amount at which the assets could be

exchanged between knowledgeable, willing buyers and knowledgeable, willing seller in an arm's length transaction at the date of valuation, in accordance with standards issued by International

Valuation Standards Committee. Valuations are performed on an annual basis and the fair value

gains and losses are recorded within the statement of comprehensive income.

This is an investment in land and building held primarily for generating income or capital appreciation and occupied substantially for use in the operations of the Company. This is carried

in the statement of financial position at their market value.

However in conformity with some provisions of IAS 40 some leasehold land and building were

reclassified from Property, Plant and Equipment because they were not occupied by the Company

as at December 31, 2010. Some of them were rented out and were generating income.

9 Statutory deposit

This represents the amount deposited with the Central Bank of Nigeria as at 31 December, 2013:

N320,000,000 (2012; N 320m) which was in accordance with section 9(1) and section 10 (3) of

Insurance Act 2003 Statutory deposits are measured at cost.

Group Parent

2013 2012 2013 2012

N'000 N'000 N'000 N'000

Statutory deposit 349,200 342,879 320,000 320,000

NEM INSURANCE PLC




10 Intangible Asset Group Parent

2013 2012 2013 2012

Cost N'000 N'000 N'000 N'000

At January 1, 45,253 32,000 45,253 32,000

Addition 4,106 - -

Written off (13,500) (13,500)

Reclassification from non-current asset 26,753 26,753

At December 31 49,359 45,253 45,253 45,253

Amortization

At January 1, 18,168 18,125 18,168 18,125

Written off (13,500) (13,500)

Impairment during the year 12,340 13,543 11,313 13,543

At December 31 30,508 18,168 29,481 18,168

Net Book Value 18,851 27,085 15,772 27,085

The only intangible asset of the Company was a software named "perfect policy' used in posting the business

transactions of the Company and this was acquired. It was formerly treated as Office Computer Equipment. In accordance with IAS 38, it is now being recognized under intangible asset.

NEM INSURANCE PLC




11.1 PROPERTY AND EQUIPMENTS- GROUP

Cost/Valuation

Building under

Construction

Office

Partitioning

Machinery & equipt

Motor Vehicles

Furniture &

fittings Computer

Equipt Total

N'000 N'000 N'000 N'000 N'000 N'000 N'000 As at Jan. 1 2013 603,523

37,107

19,085

258,118

38,465

154,022

1,110,320

Addition 424,923 9,021 140,747 7,267 8,509 590,467

Disposal -

- (64,088) (123) (15,570) (79,781)

At Dec. 31, 2013 1,028,446

37,107

28,106

334,777

45,609

146,961

1,621,006

Depreciation As at Jan. 1

2013 -

29,982

6,843

126,342

15,590

102,977

281,734

Charged for

the year - 1,180 6,011 79,773 7,897 40,001 134,862

Disposal - - (64,088) (123) (15,570) (79,781)

At Dec. 31, 2013 -

31,162

12,854

142,027

23,364

127,408

336,815

NET BOOK VALUE

At December 31, 2013 1,028,446

5,945

15,252

192,750

22,244

19,553

1,284,191

At December

31, 2012 603,523 7,125 12,242 131,776 22,875 51,045 828,586

NEM INSURANCE PLC




11.2 PROPERTY AND EQUIPMENTS – PARENT

Building

under Office Machinery Motor Furniture Computer

Cost/Valuation Construction Partitioning & equip. Vehicles & fittings Equip. Total

N'000 N'000 N'000 N'000 N'000 N'000 N'000

As at Jan. 1 2013 603,523 25,310 15,184

229,360

28,239

146,096

1,047,712

Addition 424,923 - 8,169

124,302

4,999

5,497 567,890

Disposal

(64,088)

(123)

(15,570)

(79,781)

At Dec. 31, 2013 1,028,446 25,310 23,353

289,574

33,115

136,023

1,535,821

Depreciation

As at Jan. 1 2013 - 25,310 5,116

109,257

12,196

98,625

250,504

Charge for the year 4,670

70,732

6,648

37,898 119,949

Disposal

(64,088)

(123)

(15,570)

(79,781)

At Dec. 31, 2013 - 25,310 9,786

115,901

18,721

120,953

290,672

NET BOOK VALUE At December 31,

2013 1,028,446 - 13,567

173,673

14,394

15,070

1,245,149

At December 31, 2012 603,523 - 10,068

120,103

16,043

47,471 797,208

NEM INSURANCE PLC




12 Insurance Contract Liabilities Group Parent

2013 2012 2013 2012

N'000 N'000 N'000 N'000

As at January 1

Reserve for unexpired Premium 1,917,853 1,600,478 1,730,246 1,527,911

Reserve for outstanding claims 1,109,703 304,883 1,089,148 303,396

Additions during the year

Reserve for unexpired Premium 1,142,383 317,375 1,010,503 202,335

Reserve for outstanding claims 617,113 804,821 589,700 785,752

As at December 31. 4,787,052 3,027,556 4,419,597 2,819,395

Reserve for unexpired Premium 3,060,236 1,917,853 2,740,749 1,730,246

Reserve for outstanding claims 1,726,816 1,109,703 1,678,848 1,089,148

4,787,052 3,027,556 4,419,597 2,819,395

12.1 Outstanding Claims Provision for reported claims by policyholders 1,569,833 1,008,821 1,526,226 990,135

Provision for claims incurred but not

reported (IBNR) 156,983 100,882 152,622 99,013

1,726,816 1,109,703 1,678,848 1,089,148

12.2 Unearned Premium

Opening Balance 1,917,853 1,600,480 1,730,246 1,527,911

Gross premium written 8,933,345 9,652,555 8,261,325 9,246,217

Gross premium earned (7,790,962) (9,335,181) (7,250,822) (9,043,881)

3,060,236 1,917,853 2,740,749 1,730,246

The above balances represent the amounts payable on direct insurance business and assumed reinsurance business. The carrying amounts disclosed above approximate fair value at the reporting date. All amounts

are payable within one year.

NEM INSURANCE PLC




12.3 Allocation of Assets to Policy Holders Fund Group Parent

2013 2012 2013 2012

N'000 N'000 N'000 N'000

Cash and cash equivalents 3,495,127 2,294,512 3,222,311 2,067,651

Financial assets 1,291,925 733,044 1,197,286 751,744

Fixed Assets and others - - -

4,787,052 3,027,556 4,419,597 2,819,395

12.4 Cash and Cash equivalents

Policy holders Fund 3,495,127 2,249,512 3,222,311 2,067,651

Shareholders Fund 200,000 670,962 443,672 720,000

3,695,127 2,920,474 3,665,983 2,787,651

12.5 Financial Assets

Policy holders Fund 1,291,925 733,044 1,197,286 751,744

Shareholders Fund 1,332,713 617,923 1,175,846 599,223

2,624,638 1,350,967 2,373,132 1,350,967

12.6 Investment Property

Policy holders Fund - - - -

Shareholders Fund 468,974 459,813 468,974 459,813

459,813 459,813 468,974 459,813

12.7 Plant, Equipment and Others



1,284,191 828,586 1,245,149 797,208

12.8 Work in Progress



1,028,446 603,523 1,028,446 603,523

NEM INSURANCE PLC




13 Trade Payables Group Parent

2013 2012 2013 2012

N'000 N'000 N'000 N'000

Trade Creditor 48,510 23,367 48,510 1,532

The carrying amount disclosed above reasonably approximates fair value at the reporting date. All amounts

are payable within one year.

14 Other Payables Group Parent

2013 2012 2013 2012

N'000 N'000 N'000 N'000

Accruals 107,671 167,109 67,496 161,751

Withholding tax - 1,233 - -

Rent - 140 - -

Other creditors 60,203 245 60,203 -

167,874 168,727 127,699 161,751

The carrying amount disclosed above reasonably approximates fair value at the reporting date. All amounts are payable within one year.

15 Retirement Benefit Obligations

The Company has a defined benefit gratuity scheme covering their entire employees who have

spent an average minimum number of five years. The scheme is not funded; therefore, no contribution is made to any fund.

The amounts recognized in the income statement (other operating and administrative expenses)

are as follows:

Group Parent

2013 2012 2013 2012

N'000 N'000 N'000 N'000

Current service cost 39,070 33,754 39,070 33,754

Interest cost on benefit obligation 20,563 15,559 20,563 15,559

59,633 49,313 59,633 49,313

The amounts recognized in the statement of financial position at the reporting date are as follows:

Group Parent

2013 2012 2013 2012

N'000 N'000 N'000 N'000

Present value of the defined benefit obligation 170,838 160,205 170,838 160,205

Total defined benefit obligation 170,838 160,205 170,838 160,205

NEM INSURANCE PLC




The movement in the defined benefit obligation is, as follows:

Group Parent

2013 2012 2013 2012

N'000 N'000 N'000 N'000

At 1 January 160,205 113,033 160,205 113,033

Current service cost 39,070 33,754 39,070 33,754

Interest cost 20,563 15,559 20,563 15,559

Benefits paid (5,579)

(5,579)

Actuarial gains - Due to change in assumption 8,510 (878) 8,510 (878)

Actuarial losses - Due to experience adjustment (51,931) (1,263) (51,931) (1,263)

At 31 December 2013 170,838 160,205 170,838 160,205

Actuarial Assumptions

The principal actuarial assumptions used in determining the pension benefit obligation for the

Company's plan are as follows:

Financial Assumptions (expressed as weighted

averages)

Group Parent

Long Term Average 2013 2012 2013 2012

Average Pay Increase (p.a) 13% 12% 13% 12%

Average Rate Inflation (p.a) 9% 10% 9% 10%

Discount Rate (p.a) 14% 13% 14% 13%

Mortality rate

Less than or equal to 30 3 3 3 3

31-39 2 2 2 2

40-44 2 2 2 2

45-50 0 0 0 0

The discount rate is the assumption that has the largest impact on the value of the obligation. A 1% increase in this rate would reduce the present value of the defined benefit obligation.

The mortality base table used for the schemes is A49/52 Ultimate Tables, published jointly by the Institute and Faculty Actuaries in the United Kingdom.

Amounts for the current and previous period are as follows:

Group Parent

2013 2012 2013 2012

N'000 N'000 N'000 N'000

Defined benefit obligation 170,838 160,205 170,838 160,205

Experience adjustments on plan liabilities (51,931) (1,263) (51,931) (1,263)

118,907 158,942 118,907 158,942

NEM INSURANCE PLC




16 Taxation Group Parent

2013 2012 2013 2012

16.1 Per Financial Position N'000 N'000 N'000 N'000

At January 1, 21,949 (74,243) 14,164 (81,166)

Income tax for the year 89,959 225,282 78,590 218,674

Paid during the year (192,364) (129,090) (180,499) (123,344)

At December 31, (80,456) 21,949 (87,745) 14,164

The Income tax resulted to Asset due to additional liability imposed by Federal inland Revenue Service during tax inspection for 2009-2012 Year of Assessment which resulted to tax provision for the year

less than payment during the year.

16.2 Per Income Statement N'000 N'000 N'000 N'000

Income tax 80,263 194,690 68,894 188,082

Education tax 9,696 15,244 9,696 15,244

89,959 209,934 78,590 203,326

Deferred tax 59,391 - 59,391

149,350 209,934 137,981 203,326

Technology tax/IT levy for 2012 has being reinstated as an expense in Other Management Expenses.

16.3 Deferred tax

At January 1, 106,671 106,671 106,671 106,671

Release/ charge for the year 59,391 - 59,391

At December 31, 166,062 106,671 166,062 106,671

17 Issued Share Capital 2012 2012 2013 2012

N'000 N'000 N'000 N'000

Authorised share:

8,400,000,000 ordinary shares of 50k each 4,200,000 4,200,000 4,200,000 4,200,000

17.1 Ordinary shares At January 1 issued and fully paid:

5,280,502,913 ordinary shares of 50k each 2,640,251 2,640,251 2,640,251 2,640,251

At December 31, 2,640,251 2,640,251 2,640,251 2,640,251

NEM INSURANCE PLC




Group Parent

2013 2012 2013 2012

N'000 N'000 N'000 N'000

18 Share Premium 272,551 272,551 272,551 272,551

Premium from the issue of shares are reported in share premium

19 Contingency Reserve

As at 1 January 1,434,193 1,147,115 1,417,120 1,137,642

Transfer from retained earnings 262,793 287,078 247,840 279,478

1,696,986 1,434,193 1,664,960 1,417,120

Contingency reserve is calculated in accordance with the provisions of Section 21(2) of the Insurance Act, 2003 at the higher of 3% of the total premium or 20% of total profit after tax. This shall

accumulate until it reaches the amount of greater of minimum paid-up capital or 50% of net premium.

During the current year, this is calculated based on 3% of the total Premium.

20 Retained earnings

As at 1 January (101,902) (6,111) (69,047) 40,381

Transfer from comprehensive income 132,269 (95,791) 121,069 (109,428)

30,366 (101,902) 52,022 (69,047)

Retained earnings consist of undistributed profits/loss from previous years.

21 Available for sale reserve

Opening Balance 53,411 94,503 53,411 94,503

Movement (43,433) (41,092) (43,433) (41,092)

9,978 53,411 9,978 53,411

The fair value reserve shows the effect from the fair value measurement of financial instruments of the category available for sale. Any gains or losses are not recognised in the comprehensive income

statement until the asset has been sold or impaired. The negative movement was due to change in the

long term Unquoted Investment.

2013 2012 2013 2012

22 Other Reserve- N'000 N'000 N'000 N'000

Actuarial gains on retirement benefit

Opening Balance 2,141

2,141 -

Gain during the year 43,421 2,141 43,421 2,141

45,562 2,141 45,562 2,141

This represents actuarial gains on employee retirement

benefit

NEM INSURANCE PLC




23 Gross Premium written 2013 2012 2013 2012

N'000 N'000 N'000 N'000

The analysis of gross premium by business class is as follows:

Fire 1,437,937 1,260,554 1,340,434 1,191,892

Oil and Gas 1,524,120 972,023 1,524,120 972,023

General accident 1,599,171 2,484,527 1,444,199 2,389,105

Marine 1,192,152 1,469,500 1,185,049 1,465,478

Motor 3,073,238 3,381,606 2,660,795 3,143,373

Inward reinsurance 106,727 84,346 106,727 84,346

Gross premium written 8,933,345 9,652,556 8,261,325 9,246,217

Increase in unearned premium (1,142,383) (317,374) (1,010,503) (202,335)

Gross premium income 7,790,962 9,335,182 7,250,821 9,043,882

Re-insurance cost (366,222) (218,147) (324,527) (180,163)

Net premium income 7,424,740 9,117,035 6,926,294 8,863,719

2013 2012 2013 2012

24 Reinsurance expense N'000 N'000 N'000 N'000

Motor 25,590 92,054 - 69,785

Marine 441 22,670 - 22,294

Fire 8,413 33,324 2,364 26,905

General Accident 9,615 70,099 - 61,179

Oil & Gas 322,163 - 322,163

366,222 218,147 324,527 180,163

25 Fee and commission income

Fee income represents commission received on direct business and transactions ceded to re-

insurance during the year under review.

Group Parent

2013 2012 2013 2012

N'000 N'000 N'000 N'000

Motor 947 794 - 189

Marine 73 23 - 1

Fire 8,954 6,134 1,035 -

General Accident 4,899 6,786 - 1,761

Oil & Gas - - - -

14,873 13,737 1,035 1,951

NEM INSURANCE PLC




26 Claims Expenses 2013 2012 2013 2012

N'000 N'000 N'000 N'000

The analysis of claim expenses by business class is as follows:

Motor 989,146 854,562 892,322 837,934

Marine 327,664 406,393 327,664 398,843

Fire 414,883 644,737 413,552 632,438

General Accident 1,084,483 995,870 1,077,419 977,579

Oil & Gas 254,095 32,872 254,095 32,896

3,070,271 2,934,435 2,965,052 2,879,691

Claim expenses consist of claims paid during the financial year together with the movement in the provision

for outstanding claims.

27 Underwriting Expenses 2013 2012 2013 2012

N'000 N'000 N'000 N'000

Commission expense (26.1) 1,440,492 1,699,637 1,390,354 1,665,641

Maintenance expense (26.2) 1,097,697 867,722 1,097,697 867,722

2,538,188 2,567,359 2,488,051 2,533,363

27.1 Commission expense 2013 2012 2013 2012

The analysis of commission expenses by business class is as follows: N'000 N'000 N'000 N'000

Motor 353,987 425,780 320,810 417,264

Marine 227,629 304,418 227,616 298,330

Fire 281,028 276,639 275,021 271,106

General Accident 313,078 487,116 302,137 477,373

Oil & Gas 264,770 205,683 264,769 201,569

1,440,492 1,699,637 1,390,354 1,665,641

2013 2012 2013 2012

27.2 Maintenance expense N'000 N'000 N'000 N'000

Motor 481,454 446,165 481,454 446,165

Marine 129,893 104,824 129,893 104,824

Fire 129,628 57,008 129,628 57,008

General Accident 162,476 194,363 162,476 194,363

Oil & Gas 194,248 65,362 194,248 65,362

1,097,697 867,722 1,097,697 867,722

Underwriting expenses consist of acquisition and maintenance expenses which include commission and

policy expenses, proportion of staff cost and insurance supervision levy. Underwriting expenses for insurance

contracts are recognised as expense when incurred.

NEM INSURANCE PLC




Group Parent

2013 2012 2013 2012

28 Investment Income N'000 N'000 N'000 N'000

Dividend income 139,830 72,071 139,830 72,071

Interest from fixed deposit 263,686 164,732 215,673 148,077

Interest from statutory deposit 41,456 37,914 41,456 37,914

444,972 274,717 396,959 258,062

28.1 Investment Income

Investment Income attributable to Policy holders 335,864 130,166 289,435 118,055

Investment Income attributable to Share holders 109,108 144,551 107,524 140,007

444,972 274,717 396,959 258,062

2013 2012 2013 2,012

29 Fair Value Gain through profit or loss N'000 N'000 N'000 N'000

Financial Assets at Fair Value Through Profit or Loss

at beginning of the year (685,463) (469,881) (685,463) (469,881) Financial Assets at Fair Value Through Profit or Loss

at end of the year 1,055,739 685,463 1,055,739 685,463

Gain on Financial Assets at Fair Value Through Profit

or Loss at end of the year 370,276 215,582 370,276 215,582

2013 2012 2013 2012

30 Other Income N'000 N'000 N'000 N'000

Sundry Income 86 1,250 2 11

Rental Income 5,000 5,000 5,000 5,000

Exchange Gain 11,503 - 11,503 -

Profit on disposal of Property, Plant and Equipment 2,384 - 2,384 -

18,973 6,250 18,889 5,011

NEM INSURANCE PLC




Group Parent 2013 2012 2013 2012

31 Impairments N'000 N'000 N'000 N'000 Unquoted investment - 100,523 - 100,523

Trade receivable 130,325 1,846,840 - 1,846,840

Reinsurance assets 225,302 - 225,302 -

Intangible assets 11,313 13,543 11,313 13,543

366,940 1,960,905 236,615 1,960,905

2013 2012 2013 2012

N'000 N'000 N'000 N'000

32 Other Operating & Administrative Expenses

Auditors Remuneration 9,957 7,442 8,000 6,000

Employee Benefits (32.1) 794,802 855,108 698,303 791,088

Other Management Expenses (32.2) 822,540 489,187 699,754 399,266

Depreciation & Amortisation 135,888 124,331 119,949 113,303

1,763,187 1,476,068 1,526,006 1,309,657

2013 2012 2013 2012 32.1 Employee benefit expenses N'000 N'000 N'000 N'000

Salaries and Wages 569,238 492,383 496,956 436,456

Medical Expenses 38,278 111,836 29,564 108,804

Staff Training 26,035 25,756 24,719 24,976 Staff Uniform/Welfare 69,294 152,094 61,741 147,813

Gratuity 59,633 51,570 59,633 51,570

Employers' Contribution Fund 32,324 21,468 25,690 21,468

794,802 855,108 698,303 791,088

2013 2012 2013 2012 32.2 Other Management Expenses N'000 N'000 N'000 N'000

Advertising 17,245 44,053 16,592 27,559

Occupancy Expenses 114,348 30,757 89,544 23,786

Communication and Postages 10,258 9,149 8,343 7,950 Office Supply and Stationery 31,998 30,917 25,912 24,822

Fees and Assessments 238,700 161,382 185,124 135,884

Furnitures, Equipments and Miscellaneous

Expenses 409,990 212,930 374,241 179,265

822,540 489,187 699,754 399,266

33 Earnings Per Share 2013 2012 2013 2012

N'000 N'000 N'000 N'000 Net profit attributable to ordinary shareholders

for basic and diluted 395,060 455,312 368,908 434,075

Weighted average number of ordinary shares for basic EPS 5,280,503 5,280,503 5,280,503 5,280,503

Basic Earnings Per Share (kobo) 7 9 7 8

There have been no other transaction involving ordinary shares or potential ordinary shares between the reporting date and date of completion of these financial statements.

NEM INSURANCE PLC




2013 2012 2013 2012

34 Chairman's and Directors' Emoluments N'000 N'000 N'000 N'000

Fees

Chairman 3,750 3,230 2,250 2,300

Other Directors 12,171 5,275 3,750 4,500

15,921 8,505 6,000 6,800

Emoluments as Executives 69,640 52,400 48,300 38,000

85,561 60,905 54,300 44,800

The number of Directors excluding the Chairman whose emoluments were

within the following ranges were:

N N

5,000,001 - 6,000,000 - - - -

8,000,001 - 9,000,000 2 2 2 2

9,000,001 - 10,000,000 1 2 1 2

10,000,001 - Above 2 1 2 1

5 5 5 5

The Highest paid Director earned N 27,500,000 in 2013 (2012 N22,100,000)

Group

Parent

35 Staff Costs

2013 2012 2013 2012

The average number of persons employed

(excluding Directors ) in the financial year and staff

costs were as follows:

Managerial 18 18 14 14

Senior 121 130 114 123

Junior 96 78 74 63

235 226 202 200

The related staff costs were N 596,348,174 (2012 N523,746,994)

NEM INSURANCE PLC




36 Related party transactions

Transaction with Key Personnel The key Management personnel of the Company comprises of both the Board of Directors and the

Management Team of the company.

Short term Benefits (Board of Directors) 2013 2012 2013 2012

Fees: N'000 N'000 N'000 N'000

Chairman 3,750 3,230 2,250 2,300

Other Directors 12,171 5,275 3,750 4,500

15,921 8,505 6,000 6,800

Other Emoluments:

Other Directors 69,640 52,400 48,300 38,000

85,561 60,905 54,300 44,800

Short term Benefits (Management Team)

Salaries and Allowances: 251,030 178,877 192,318 178,877

Total Short term benefits 336,591 248,287 246,618 230,477

Other Long Term Benefits (Management Team)

Loan 188,934 166,745 188,934 166,745

Total Long Term benefits 188,934 166,745 188,934 166,745

Post Employment Benefits (Management Team)

Pension 15,720 10,037 11,408 10,037

Total Post Employment benefits 15,720 10,037 11,408 10,037

Total Benefits to Key Personnel 541,245 425,069 446,960 407,259

NEM INSURANCE PLC




37 Employees Remunerated at Higher Rates

The number of employees in receipt of emoluments excluding allowance and pension

within the following ranges were:

N N Group Parent

60,001 - 80,000 - - - -

80,001 - 100,000 21 15

15

100,001 - 120,000 - 13 - -

120,001 - 140,000 - - - -

140,001 - 160,000 7 17 7 10

160,001 - 180,000 8 24 8 18

180,001 and Above 214 157 187 157

38 Financial Commitments

The Directors are of the opinion that all known liabilities and commitments relevant in assessing the Company's state of affairs have been taken into account in the preparation

of these financial statement.

39 Comparative Figures

Certain prior year figures have been reclassified to conform with the current year's

presentation and meet accounting standards disclosure requirements.

40 Contingencies and Commitments

(a) Capital Commitments

There company has spent N1.028 billion on ongoing building project has been included in

the consolidated financial statements as at 31 December 2013.

(b) Legal Proceedings and Regulations

At the balance sheet date, there were several law suits in various court against the Company. The directors are of the opinion that the Company will not incur any significant

loss with respect to these claims and accordingly, no provision has been made in the

accompanying financial Statements.

41 Fines and Penalties

The company paid fines and penalties during the year as follows:

PAYEE DETAILS Amount

N

NAICOM For Unremitted Premium for 2nd Qtr 2013

120,000

NAICOM For use of unregistered Brokers

750,000

NSE For Default in filing the 2012 Audited Account 3,500,000

4,370,000

NEM INSURANCE PLC



Underwriting Result Per Class of Business.

Group MOTOR MARINE FIRE GENERAL ACCIDENT

OIL & GASS TOTAL 2012

INCOME N'000 N'000 N'000 N'000 N'000 N'000 N'000

Direct Business Premium 3,073,238 1,192,152 1,437,937 1,599,171 1,524,120 8,826,618 9,568,209

Reinsurance Inward 3,041 2,023 3,160 98,503 - 106,727 84,346

Gross Premium 3,076,279 1,194,175 1,441,097 1,697,673 1,524,120 8,933,345 9,652,555

(Increase)/Decrease in Unexpired Risk (376,159) (160,597) (119,084) (30,340) (456,202) (1,142,383) (317,374)

Gross Premium Earned 2,700,120 1,033,578 1,322,013 1,667,333 1,067,918 7,790,962 9,335,181

Reinsurance Cost (25,590) (441) (8,413) (9,615) (322,163) (366,222) (218,147)

Net Premium Earned 2,674,530 1,033,137 1,313,600 1,657,718 745,755 7,424,740 9,117,034

Commission Received 947 73 8,954 4,898 - 14,873 13,737

2,675,478 1,033,210 1,322,554 1,662,616 745,755 7,439,613 9,130,771

Gross Claim Paid (1,046,544) (376,815) (425,430) (1,124,054) (318,528) (3,291,371) (3,056,308)

Reinsurance Claim Recovery 57,398 49,151 10,547 39,571 64,433 221,100 121,874

(989,146) (327,664) (414,883) (1,084,483) (254,095) (3,070,271) (2,934,434)

Gross Claim Incurred (989,146) (327,664) (414,883) (1,084,483) (254,095) (3,070,271) (2,934,434)

Underwriting Expenses (835,441) (357,521) (410,655) (475,554) (459,017) (2,538,188) (2,567,359)

Total Deduction (1,824,587) (685,185) (825,538) (1,560,037) (713,112) (5,608,458) (5,501,793)

Underwriting Profit 850,891 348,025 497,016 102,579 32,642 1,831,154 3,628,978

NEM INSURANCE PLC



Underwriting Result Per Class of Business.

Parent MOTOR MARINE FIRE GENERAL ACCIDENT

OIL & GAS TOTAL 2012

N'000 N'000 N'000 N'000 N'000 N'000 N'000 Direct Business Premium 2,660,795 1,185,049 1,340,434 1,444,199 1,524,120 8,154,597 9,161,871

Reinsurance Inward 3,041 2,023 3,160 98,503 - 106,727 84,346

Gross Premium 2,663,837 1,187,072 1,343,594 1,542,702 1,524,120 8,261,325 9,246,217 (Increase)/Decrease in

Unexpired Risk (291,492) (160,340) (98,842) (3,627) (456,202) (1,010,503) (202,335)

Gross Premium Earned 2,372,344 1,026,732 1,244,752 1,539,075 1,067,918 7,250,821 9,043,881

Reinsurance Cost (2,364) (322,163) (324,527) (180,163)

Net Premium Earned 2,372,344 1,026,732 1,242,388 1,539,075 745,755 6,926,294 8,863,719

Commission Received 1,035 1,035 1,951

2,372,344 1,026,732 1,243,423 1,539,075 745,755 6,927,329 8,865,669

Gross Claim Paid (931,313) (376,815) (424,099) (1,114,180) (318,528) (3,164,935) (3,001,564)

Reinsurance Claim Recovery 38,992 49,151 10,547 36,761 64,433 199,883 121,874

(892,321) (327,664) (413,552) (1,077,419) (254,095) (2,965,052) (2,879,691)

Gross Claim Incurred (892,321) (327,664) (413,552) (1,077,419) (254,095) (2,965,052) (2,879,691)

Underwriting Expenses (802,264) (357,509) (404,648) (464,613) (459,017) (2,488,051) (2,533,363)

Total Deduction (1,694,585) (685,173) (818,201) (1,542,032) (713,112) (5,453,103) (5,413,054)

Underwriting Profit 677,759 341,559 425,223 (2,957) 32,642 1,474,226 3,452,616

NEM INSURANCE PLC



Claim Development Table

Claims Data The claims data has five risk groups - Marine, Motor, Fire, Personal Accident and Oil and Gas. The combined claims data for all lines of business between 2008 and 2013 are summarized in the table

below;

Incremental Development Pattern - Annual Projections

A/Y Year/Dev Years 1 2 3 4 5 6

Claims Paid to Date

2008 505,581,765 170,573,526 48,919,447 12,861,934 8,401,764 1,053,337 747,391,773

2009 491,747,453 167,581,324 43,179,164 25,012,022 5,952,519 733,472,482

2010 489,651,047 122,769,628 95,853,052 66,234,195 774,507,922

2011 507,855,867 357,672,596 263,382,712 1,128,911,175

2012 1,111,149,768 700,187,408 1,811,337,176

2013 1,461,811,394 1,461,811,394

Premium Data The premium data received have been compared with the revenue account as at 31st December, 2013.This certifies the

accuracy of the data used in computing unearned risk premium. The table below presents the distribution of premiums by class of business.

Class of Business

Gross Premium

Written Data

Gross Premium Written Account

General Accident 1,542,701,852 1,542,702,000

Fire 1,343,594,056 1,343,594,000

Marine 1,187,072,225 1,187,072,000

Motor 2,663,836,572 2,663,837,000

Oil and Gas 1,524,119,972 1,524,120,000

Total 8,261,324,676 8,261,325,000

Valuation Results

We present the results below for each of the valuation methods (The Chain Ladder and Inflation Adjusted Chain Ladder Methods) and the estimated outstanding (including IBNR) claim reserves as at December 31, 2013.

We estimates our reserves as the sum of the Unearned Premium Reserve (UPR), Outstanding Claims including the Incurred But Not Reported (IBNR) and the Additional Unexpired Risk Reserve (AURR) for each line of business as at 31st December,

2013.

Incremental Chain Ladder

Incremental Development Pattern - Annual Projections in Naira

A/Y year/Dev Years 1 2 3 4 5 6

2008 280,295,299 60,420,475 18,610,865 5,133,831 3,923,881

2009 294,075,678 52,369,618 13,978,330 9,965,423 547,735

2010 291,789,092 39,416,040 28,685,918 11,229,317

2011 258,498,136 149,644,453 13,327,859

2012 472,735,387 197,280,010

2013 578,127,882

This table illustrates that N280.3 million of the claims arising were paid in the first year and N60.4 million during the

second year for accidents that occurred in 2008, etc.

NEM INSURANCE PLC



Claim Development Table Cont’d

Cummulative Data

Cummulative Development Pattern - Annual Projections in Naira

A/Y year/Dev

Years 1 2 3 4 5 6

2008 280,295,299 340,715,774 359,326,639 364,460,470 368,384,352 368,384,352

2009 294,075,678 346,445,296 360,423,626 370,389,049 370,936,783

2010 291,789,092 331,205,132 359,891,049 371,120,367

2011 258,498,136 408,142,589 421,470,448

2012 472,735,387 670,015,397

2013 578,127,882

Loss dev factor 1.312 1.052 1.024 1.006 1.000

We the cumulate the data summing up the claims arising from each accident year until all claims are exhausted.

Unwinding the cumulative projections from table above, we expect claims projections to be made till 2015 as

follows;

Year of

Payment Amount N

2014 228,221,729

2015 59,502,993

2016 23,866,390

2017 4,977,145

2018 -

Total 316,568,257

We summarise Unearned Premium Reserve (UPR) estimation by class of business below. This was calculated

assuming risk will occur evenly over the period of insurance.

Unearned Premium Reserve

Class of Business Gross UPR Reinsurance

UPR Gross UPR

Motor 436,635,056 436,635,056

Accident 409,534,969 409,534,969

Marine 423,004,326 423,004,326

Fire 849,702,780 849,702,780

Oil and Gas 621,872,407 621,872,407

Total 2,740,749,537 - 2,740,749,537

NEM INSURANCE PLC




Technical Reserves We present Gross Claims Technical Reserves under Basic Chain Ladder and Inflation Adjusted Chain Ladder.

Technical Reserve Using Basic Chain Ladder Method

Class of Business Gross Claim

Reserve

Estimated Reinsurance Recoveries

Net Outstanding

Claims

General Accident 601,803,537 601,803,537

Fire 278,532,942 (1,063,800) 277,469,142

Marine 146,830,393 146,830,393

Motor 316,568,257 316,568,257

Oil and Gas* 384,107,493 (64,432,600) 319,674,893

Total 1,727,842,622 (65,496,400) 1,662,346,222

Accounts (Outstanding Claims) 1,317,032,000 - 1,317,032,000

Difference 410,810,622 (65,496,400) 345,314,222

* Reserve for Oil & Gas was based on Expected Loss Ration Approach

Technical Reserve - Using Discounted Basic Chain Ladder Method


Reserve


Net Outstanding

Claims


Fire 243,159,259 (1,063,800) 242,095,459

Marine 128,890,845 128,890,845

Motor 277,980,955 277,980,955

Oil and Gas* 384,107,493 (64,432,600) 319,674,893

Total 1,549,006,278 (65,496,400) 1,483,509,878

Accounts (Outstanding Claims) 1,317,032,000 1,317,032,000

Difference 231,974,278 (65,496,400) 166,477,878


Should we allow for discounting, our gross claims reserve will reduce from N1.728 billion above to N1.549 billion leading to a net position of N1.483 billion as detailed below;

We illustrate our estimates of reserve adjusting for inflation.

Technical Reserve - Using Inflation Adjusted Basic Chain Ladder Method


Reserve


Net Outstanding

Claims


Fire 307,511,200 (1,063,800) 306,447,400

Marine 157,143,664 157,143,664

Motor 344,740,990 344,740,990

Oil and Gas* 384,107,493 (64,432,600) 319,674,893

Total 1,886,042,367 (65,496,400) 1,820,545,967


Difference 569,010,367 (65,496,400) 503,513,967


NEM INSURANCE PLC




Technical Reserve - Using Discounted inflation Adjusted Basic Chain Ladder Method – Discounted


Reserve


Net Outstanding

Claims


Fire 267,390,385 (1,063,800) 266,326,585

Marine 137,266,181 137,266,181

Motor 301,415,179 301,415,179

Oil and Gas* 384,107,493 (64,432,600) 319,674,893

Total 1,678,847,991 (65,496,400) 1,613,351,591


Difference 361,815,991 (65,496,400) 296,319,591


Should we allow for discounting, our gross claims reserve will reduce from N 1.886 billon to N 1.679 billion leading

to a net position of N 1.613 billion

The Actuary adopted the Inflation Adjusted Basic Chain Ladder (Discounted) Method which presents a gross claims

reserve of N1.679billion and reinsurance recoveries estimate of N65.496million (a net position of N1.613billion) as being representative of the liability

This Figure:

- Anticipates that total claims may be exposed to inflationary increase

- Recognizes that present value needs to be reserved for anticipated future payments.

NEM INSURANCE PLC



Claim Development Table Cont’d Appendix

Cumulative Claims Development Pattern

General Accident


A/Y years/Dev Years 1 2 3 4 5 6

2008 99,111,612 44,057,892 10,399,669 1,441,813 993,857 702,599

2009 108,728,528 44,503,316 10,009,322 7,614,519 4,529,641

2010 104,093,265 35,743,594 28,823,492 46,162,309 -

2011 120,533,106 98,789,871 50,182,498 - -

2012 391,308,493 221,809,074

2013 353,511,165 - - - -

Cumulative Development Pattern - Annual Projections


2008 99,111,612 143,169,504 153,569,172 155,010,985 156,004,843 156,707,442

2009 108,728,528 153,231,844 163,241,166 170,855,686 175,385,326 176,175,210

2010 104,093,265 139,836,859 168,660,351 214,822,660 218,463,942 219,447,839

2011 120,533,106 219,322,977 269,505,474 300,159,696 305,247,456 306,622,200

2012 391,308,493 613,117,567 706,096,030 786,409,144 799,738,919 803,340,706

2013 353,511,165 551,464,764 635,093,661 707,330,789 719,320,172 722,559,776

Summary of Results

Years Latest Paid Dev to Date Ultimate

Gross Outstanding

Claims

2008 156,707,442 100% 156,707,442 -

2009 175,385,326 100% 176,175,210 789,884 2010 214,822,660 98% 219,447,839 4,625,179

2011 269,505,474 88% 306,622,200 37,116,725

2012 613,117,567 76% 803,340,706 190,223,139 2013 353,511,165 49% 722,559,776 369,048,611

Total 1,783,049,634 75% 2,384,853,173 601,803,539

Motor



2008 280,295,299 60,420,475 18,610,865 5,133,831 3,923,881

2009 294,075,678 52,369,618 13,978,330 9,565,423 547,735

2010 291,789,092 39,416,040 28,685,918 11,229,317 - - 2011 258,498,136 149,644,453 13,327,859 - - -

2012 472,735,387 197,280,010

2013 578,127,882 - - - -



2008 280,295,299 340,715,775 359,326,639 364,460,470 368,384,352 368,384,352

2009 294,075,678 346,445,296 360,423,626 370,389,049 370,936,783 370,936,783

2010 291,789,092 331,205,132 359,891,049 371,120,367 373,378,663 373,378,663

2011 258,498,136 408,142,589 421,470,448 431,748,597 434,375,821 434,375,821

2012 472,735,387 670,015,397 705,055,587 722,249,359 726,644,302 726,644,302

2013 578,127,882 758,772,975 789,454,973 817,926,419 822,903,565 822,903,565

Summary of Results

Years Latest Paid Dev to Date Ultimate IBNR 2008 368,384,351 100% 368,384,351 - 2009 370,936,784 100% 3s70,936,784 -

2010 371,120,367 99% 373,378,663 2,258,296

2011 421,470,448 97% 434,375,821 12,905,373 2012 670,015,397 92% 726,644,302 56,628,905

2013 578,127,882 70% 822,903,565 244,775,683

Total 2,780,055,229 90% 3,096,623,486 316,568,257

NEM INSURANCE PLC




Fire



2008 70,236,292 31,105,070 13,692,982 2,986,397 1,534,797 2009 59,884,725 35,925,554 7,099,683 4,615,552 875,144

2010 70,926,923 30,311,291 26,736,797 6,068,470 - -

2011 77,013,604 59,343,443 40,018,433 - - 2012 163,490,462 116,685,290

2013 186,567,922 - - -



2008 70,236,292 101,341,362 115,034,343 118,020,741 119,555,538 119,555,538

2009 59,884,725 95,810,279 102,909,962 107,525,513 108,400,657 108,400,657

2010 70,926,923 101,238,214 127,975,012 134,043,482 135,475,724 135,475,724 2011 77,013,604 136,357,047 176,375,479 183,345,679 185,304,711 185,304,711

2012 163,490,462 280,175,752 336,596,620 349,898,614 353,637,248 353,637,248

2013 186,567,922 302,074,573 362,905,353 377,247,045 381,277,894 381,277,894

Summary of Results

Years Latest Paid Dev to Date Ultimate IBNR

2008 119,555,538 100% 119,555,538 -

2009 108,400,657 100% 108,400,657 -

2010 134,043,481 99% 135,475,724 1,432,243 2011 176,375,480 95% 185,304,711 8,929,231

2012 280,175,752 79% 353,637,248 73,461,496

2013 186,567,922 49% 381,277,894 194,709,972

Total 1,005,118,830 78% 1,283,651,772 278,532,942

Marine



2008 55,938,562 34,990,089 6,215,931 3,299,892 1,949,228

2009 29,058,522 34,782,836 12,091,829 2,816,528

2010 22,841,767 17,298,703 11,606,846 2,774,099 - - 2011 51,811,021 49,894,829 22,783,265 - -

2012 83,615,426 102,158,753

2013 141,966,943 - - -



2008 55,938,562 90,928,652 97,144,583 100,444,475 102,393,703 102,393,703

2009 29,058,522 63,841,358 75,933,187 78,749,715 78,749,715 78,749,715

2010 22,841,767 40,140,470 51,747,315 54,521,414 55,114,484 55,114,484 2011 51,811,021 101,705,851 124,489,116 129,411,934 130,819,643 130,819,643

2012 83,615,426 185,774,179 198,473,801 206,322,281 208,566,601 208,566,601

2013 141,966,943 230,768,583 246,544,046 256,293,424 259,081,317 259,081,317

Summary of Results

Years Latest Paid Dev to Date Ultimate IBNR

2008 102,393,703 100% 102,393,703 -

2009 78,749,715 100% 78,749,715 - 2010 54,521,415 99% 55,114,484 593,069

2011 124,489,115 95% 130,819,643 6,330,528

2012 185,774,179 89% 208,566,601 22,792,422 2013 141,966,943 55% 259,081,317 117,114,374

Total 687,895,070 82% 834,725,463 146,830,393

NEM INSURANCE PLC



Financial Risk Management Policy Management of financial and insurance risk NEM Insurance Plc issues contracts that transfer insurance risk or financial risk or both. This

section summarizes these risks and the way the company manages them.

Insurance risk

The risk, under any insurance contract, is the possibility that the insured event occurs and the

uncertainty of the amount of the resulting claim. By the very nature of an insurance contract, this

risk is random and therefore unpredictable. The Company manages its insurance risk by means of established internal procedures that include underwriting authority levels, pricing policy, approved

reinsurers list and monitoring.

NEM is exposed to underwriting risk through the insurance contracts that are underwritten. The

risks within the underwriting risk category are associated with both the perils covered by the specific lines of insurance including General Accident, Motor, Fire, Marine and Aviation, Oil and

Gas and Miscellaneous insurance, as well as the specific processes associated with the conduct of

the insurance business. The various subsets of underwriting risks are listed below;

Underwriting Process Risk: risk from exposure to financial losses related to the selection and

acceptance of risks to be insured.

Mispricing Risk: risk that insurance premiums will be too low to cover the Company’s expenses

related to underwriting, claims, claims handling and administration.

Individual risk: This include the identification of which is the risk inherent in an insured property (movable or unmovable), we shall ensure surveys are performed and reviewed as at when due and

that risks are adequately priced.

Claims Risk (for each peril): Risk that many more claims occur than expected or that some claims that occur are much larger than expected claims resulting in unexpected losses to the

Company. The underwriting risk assessment shall also determine the likelihood of a claim arising

from an insured risk by considering various factors and probabilities, determined by information

obtained from the insured party, historical information on similar risks and available external data.

Concentration risk (including geographical risk): This includes identification of the concentration

of risks insured by NEM. NEM utilizes data analysis, software and market knowledge to determine the concentration of its risks by insurance class, geographic location, exposure to a client or

business. The assessment of the concentration risk are consistent with the overall risk appetite as

established by the Company.

Underwriting Risk Appetite

The following statements amongst others shall underpin NEM’s underwriting risk appetite:

- We do not underwrite risks we do not understand;

- We are cautious in underwriting unquantifiable risks; - We are extremely cautious in underwriting risk observed to poorly managed at proposal state

e.g. those with low safety standards, shoddy construction or businesses with excessively high risk profile;

- We carefully evaluate businesses or opportunities that could create systemic risk exposures ( i.e.

incidents of multiple claims occurring from one event e.g. natural catastrophe risks, and risks dependent on the macroeconomic environment);

- We consider all applicable regulatory guidelines while carrying out our underwriting activities;

- We established and adhere to internal standards for co-insurance, reinsurance transactions;

- We exercise extreme caution when underwriting discrete (one-off) risks, particularly where we do

NEM INSURANCE PLC



Financial Risk Management Policy (Cont’d)

not have the requisite experience or know-how;

- Where the broker has inadequate knowledge of the trade of the client or the class of business, we exercise caution in taking on such risks into our books;

- We exercise extreme prudence and caution when dealing with clients with financial difficulties or

poor payment records; and with transient clients who change insurers regularly; and

- We ensure compliance with NAICOM’s guideline on KYC for consistency. Underwriting Strategy 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. Any risks exceeding the underwriting limits require

head office approval. Factors that aggravate insurance risk include lack of risk diversification in terms of type and amount of risk, geographical location and type of industry covered. The Company manages

these risks through its underwriting strategy, adequate reinsurance arrangements and proactive

claims handling. Underwriting limits are in place to enforce appropriate risk selection criteria. For

example, the Company has the right not to renew individual policies, it can impose deductibles and it has the right to reject the payment of a fraudulent claim. Insurance contracts also entitle the Company

to pursue third parties for payment of some or all costs (for example, subrogation).

Products and Services

NEM Insurance Plc is presently operating as a non-life insurance company and we have a wide range

of insurance products and services that are tailored to meet the specific needs of the company’s

clients. Insurance contracts are issued on an annual contract either directly to the customer or through accredited insurance brokers and agents. Premiums from brokers and agents are payable

within six months, whereas from direct customers upfront. The following is a broad spectrum of the

products and services the company is offering:

Fire/Extraneous Perils Policy This type of policy will provide indemnity to the insured in the event of loss or damage to property

covered under it as a direct result of fire outbreak, lightning or explosion. Other extraneous perils such

as social disturbances like strike and riot, and natural disasters like storm damage, flood and

earthquake can also be covered by an extension of the standard scope of the cover. The items to be insured are usually made up of the following:

a) Buildings

b) Office Furniture, Electrical & Electronic Equipment c) Plant and Machinery

d) Stock of Raw Materials and finished goods

e) Loss of Annual Rent for alternative accommodation.

The policy also contains various other extensions that are granted at no extra cost to the policyholder.

The replacement cost of the items to be insured will have to be supplied to us for assessment to

facilitate quotation of the premium payable.

NEM INSURANCE PLC



Financial Risk Management Policy (Cont’d) Consequential Loss Policy This type of policy, often referred to as "business interruption insurance" is designed to indemnify the

insured against loss of productive capacity or future earning power which may occur as a result of loss or damage to the premises and property insured under the Fire/Extraneous Perils in 1 above. This

policy is normally taken out in conjunction with the Fire Policy so that when the latter pays for the

material damage to property insured under it, this will pick up the intangible loss that will flow from

the primary loss of the Fire perils. The items usually covered under this policy are as follows: a)Gross Profit

b)Salary and Wages

c)Auditor's fees The sum insured to be indicated against the items of Gross Profit should represent the difference in

turnover and the total of standing and variable charges. The sum insured on Salary and Wages will be

that which is required to maintain some key staff pending resumption of business while the sum

insured on Auditor's Fees will represent charges that any firm of accountants will make in preparing papers for insurance claim.

Burglary/Housebreaking Policy

This type of policy is designed to indemnify the insured against loss or damage resulting from theft

or attempted theft which is accompanied by actual forcible or violent entry into or out of the

premises or any attempt thereat. The items usually covered under this policy are similar to those under the Fire/Extraneous Perils policy above with the exception of Buildings and Loss of Rent.

The replacement cost of the relative items would have to be supplied to enable us submit our

quotation.

Fidelity Guarantee Policy

This is a form of policy that protects an organization against loss of money or valuable stock as a

result of dishonesty or fraudulent activity of employees. It is possible to grant cover on named basis, positions basis or on a blanket basis. In any of these cases, the number of persons and the

limit of guarantee any one loss would be advised as well as aggregate amount of guarantee in a

given year. Once we have this information, we would be in a position to quote for premium

payable. Public Liability Policy

This policy also covers the insured against legal liability to third party for cost and expenses incurred in respect of accidental death, bodily injury and accidental damage to property occurring

within the insured's premises or at work-away premises. The vicarious liability of the insured's

employee can also be covered provided it arose in the course of carrying out his official duties.

Please indicate the limit of cover required to enable us advise the premium payable.

Money Policy

This is another type of All Risks policy which is designed to cover any fortuitous event that could

result in the loss of cash while in the course of transit either to or from the bank. The cover will also operate while the money is on the premises of the insured and while in a securely locked safe.

The policy can also be extended to cover cash in the personal custody of selected management

staff.

NEM INSURANCE PLC



Financial Risk Management Policy Goods in Transit Policy This is also an "All Risks" policy covering goods being carried from one location to another. Any

loss not specifically excluded under the policy is covered and the insurance is suitable for any

organization that is engaged in movement of goods either by road or rail and the cover will operate

when the goods are being conveyed by the insured’s owned or hired vehicles. Losses arising from Fire and Theft are covered under this policy.

Group Personal Accident Policy

This type of policy is designed to foster the welfare of employees as well as reduce the financial

constrain that an organization could undergo in the event of death or bodily injury to a member of

staff arising as a result of any injury sustained through accidental, violent, external and visible means. The policy provides a world-wide cover on 24 hours basis and benefits payable in respect

of Death and Permanent Disability are usually expressed as multiple of salaries. Cover also

extends to pay weekly benefit in the event of temporary total disability resulting from bodily injury

to the insured person as well as certain allowance for expenses incurred on medical treatment as a result of accidental injury. Death or injuries from natural causes are however not covered.

Motor Insurance Policy

This class of insurance is made compulsory by Government through the legislation known as the Motor Vehicle (Third Party) Insurance Act of 1945. Third Party Only cover which is the minimum

type of insurance legislated upon provides indemnity to policyholder against legal liability to Third

Parties for death, bodily injury and property damage.

The most popular type of cover under this policy is comprehensive insurance which, in addition to

the cover provided under the Third Party Only, will also indemnify the policyholder for loss or

damage to the vehicle resulting from road accident, fire and theft. The premium payable for the

various forms of cover under this policy is regulated by a statistical table of rate known as "tariff" which is approved by Government.

Marine Policies

CARGO: The policy issued here is to provide indemnity for loss or damage to imported goods being conveyed by sea or air. The All Risks type of cover known as Clauses "A" provides indemnity to the

insured in the event of total or partial loss of the goods while the restricted cover known as Clauses "C"

would provide indemnity in the event of total loss only. To enable us determine the premium payable

in this regard, we would require information on the nature and value of goods being imported as well as the type of cover required.

HULL: This type of policy is issued on vessels and yachts to provide indemnity for any loss, damage or

liability that may arise from their use. The scope of cover provided is either an "all risks" or "total loss only" while the policy usually carries a deductible of about 10% of the value of the vessel or yacht.

Aviation Policy This policy provides comprehensive cover against loss or damage to insured aircraft while operating anywhere in the world. Cover also extends to include the operator's legal liability to Third Parties for

death, bodily injury and property damage. Liability to passengers is also covered up to a certain limit

NEM INSURANCE PLC



Financial Risk Management Policy

selected. In order to ensure full protection for our clients, we reinsure as much as 90% of this type of

risk in the London Aviation Market through one of our overseas associates. The essence of this arrangement is to obviate the problem of absorption in the Nigerian Market which has limited capacity

for Aviation Insurance and also to afford our clients the opportunity of having a dollar/sterling based

insurance policy.

Machinery Breakdown Policy

This policy is designed to cover any damage to a plant or equipment while working or at rest, or being

dismantled for the purpose of cleaning, repairing or overhauling. In the same vein, boiler and pressure vessels can be covered under a separate but similar policy.

Electronic Equipment Policy

This policy is designed to cover any loss or damage that could result while any computer and or equipment insured is working or at rest. The cover under this policy also extends to include loss or

damage to external data media such as diskettes and tapes containing processed information while

such are kept within the premises. The increase in cost of working, as a result of damage to the main

computer equipment, is also covered and indemnity is provided for alternative means of carrying on operation. With payment of an additional premium, this policy can be extended to cover the risk of

theft.

Energy Risks

The policies on offer in this area have been specifically developed to take advantage of the insurance

opportunities created by the Nigerian Content Policy. The Nigerian content policy is aimed at utilizing

Nigerian human and material resources in creating values in the country through all contracts awarded in the Oil and Gas industry and the Power sector of the economy. NEM Insurance Plc has carved a

niche as the Leader in provision of Oil & Gas and Energy Insurance in Nigeria.

Our focus is on the following areas:

• Upstream Risks which includes Construction/Erection All Risks, Operators Extra Expense Insurance, Property Insurance and General Third Party Liability Insurance.

• Downstream Risks which includes the downstream properties (Refineries and Petrochemical plants,

Onshore pipelines, Oil tank farm, Gas processing plants, Pumping and Metering stations, Gas turbines

and Boilers, Damage to Asset and other related downstream sector risks. • Power, Solid Mineral and Other special products.

The above products have been packaged for marketing to the public sector as well as various manufacturing, industrial and commercial concerns. Financial institutions such as banks, mortgage

and stock broking firms are also being offered these products. Our company is innovative in

approach and we specialize in packaging policies in line with the needs of the various segments of

the economy. NEM Insurance Plc also provides comprehensive risk management services. The company carries out various risk surveys and make appropriate recommendations towards risk

improvement and minimization of loss impacts.

NEM INSURANCE PLC



Financial Risk Management Policy Approach to Management of Underwriting Risks The Company’s underwriting risk shall be managed by adhering to policies, principles and guidelines spelt out in the Annual Underwriting Plan.

Where the broker has inadequate knowledge of the trade of the client or the class of business and the client not willing to disclose such information, the Company shall exercise caution in taking on

such risks.

The Company shall exercise extreme prudence and caution when dealing with clients with financial difficulties or poor payment records; and with transient clients who change insurers regularly; and

The Company shall ensure compliance with the National Insurance Commission’s guidelines on

“Know Your Customer” (KYC) requirement to get enough information about the transaction.

The company carries out timely pre-loss inspection/survey exercise of risks, preferably before commencement of cover but not later than 48 hours after commencement of risks.

We limit acceptance of risks to a more convenient value/share while spreading excess through co-

insurance or facultative basis.

We ensure application/introduction/review of policy terms and conditions including

clauses/warranties that will deal with areas of concern which will at the end of the day make the risk worthy of being in the company’s portfolio.

Risk Acceptance Rules

The company shall follow the provisions (terms and conditions) of the reinsurance treaties that were

arranged for the classes of insurance that any risk offered for insurance falls under in deciding whether to accept the risk or not. This shall be the case on all cases where the sum insured of the

risk is more than the company’s retention as contained and evidenced by the treaty cover notes.

For any risk that Reinsurance Treaty could not be arranged for, acceptance of such risks shall be

limited to any limit set by the company for such risks at the beginning of each year and shown in the underwriting plan.

Energy Insurance Risks

No risks relating to the special covers in (as different from the standard covers) Energy, Oil and Gas shall be accepted without clarification from the Head of Energy Department or Head of Branch

Operations Department (for risks coming from the Branch/Area/Agency offices).

Marine Insurance Risks

No Marine insurance risk (Hull or Cargo), Marine Cargo or any other special risks of different nature but relating to Marine Insurance E.G. Marine Cargo Insurance export, shall be accepted without

clarification from the Heads of Technical, Energy and Branch Operations Departments. The

company shall not accept Marine Cargo business in respect of fish head risks whether as import or

export. Where it must be covered for any reason, cover shall be limited to ICC “C” and on rate of premium of a minimum of 0.20%.

NEM INSURANCE PLC



Financial Risk Management Policy Aviation Risks

No Aviation risk, Marine Hull risk, Marine Cargo export and any other special risks of different nature shall be accepted without clarification from the Heads of Technical, Energy and Branch Operations

Departments.

Approaches to Risk Mitigation

Generally, we shall apply any of the following four (4) approaches to risk mitigations:

a) Risk Termination (Avoidance) Under the risk termination approach, we will take measures to avoid risks that are outside our risk

appetite, not aligned to our strategy or offer rewards that are unattractive when compared to the

risk undertaken. Specifically, we will discontinue activities that generate these risks, such as

divesting from certain geographical markets, product lines or businesses. Generally, we will utilise these approach for high-risk events that remain unacceptably high even after we have applied

controls.

b) Risk Treatment (Reduction) Under the risk treatment approach, we would accept the risks inherent in our transactions, but shall take measures, through our system of internal controls, to reduce the likelihood and/or

impact of these risks. Generally, we would utilise this approach for risks that occur frequently and

have low impact. Some of the measures we shall take under this approach may include formulating

or enhancing policies, defining boundaries and authority limits, assigning accountabilities and measuring performance, improving processes, strengthening existing controls or implementing

new controls and continuing education and training.

c) Risk Transfer (Sharing) Under the risk transfer approach, we would accept the risks inherent in our transactions, but shall take measures to transfer whole or portions of the risk to an independent counterparty.

Specifically, we shall transfer our risks to an independent counterparty such as co-insurance and

reinsurance companies by utilising contracts and arrangements. We will retain accountability for

the outsourced risk and that outsourcing does not eliminate risk but only changes our risk profile. The relevant business units shall be responsible for identifying and incorporating the risks arising

from such risk transfer arrangements in their risk registers. The business units shall also be

responsible for managing the resultant risks and reviewing the risk transfer arrangement to ensure

that it is still capable of mitigating the initial risk. d) Risk Tolerance (Acceptance) Under the risk tolerance approach, we would accept the risks inherent in our transactions and

would not take any action to change the likelihood and/or impact of the risks. We shall adopt this approach where the risk is low and the cost of further managing the risk exceeds the potential

benefit should the risk crystallize.

d) Reinsurance Treaty Cover We have arranged very adequate reinsurance treaties to enable us accommodate risks with high

necessary support in the event of large claims. Our treaties are arranged by UAIB RE and placed

with a consortium of reputable reinsurance companies.

The types of re-insurance on NEM Treaty are: 1) Quota share

2) Surplus

3) Excess of loss

NEM INSURANCE PLC



Financial Risk Management Policy 1) Quota share

This is the simplest type of Re-insurance whereby a Reinsurer agrees to reinsure a fixed proportion of

every risk accepted by the ceding company, sharing proportionately in all losses and receiving in the

same proportion of all direct net premium, less the agreed reinsurance commission.

2) Surplus

Under this arrangement the ceding company can retain a risk up to the level of its agreed Retention amount. The proportion of the risk which is beyond the Retention amount is then ceded into the

Surplus treaty and reinsurer receives a proportionate share of the premium, less reinsurance

commission.

3) Excess of Loss

This arrangement protects the ceding company against a loss where the ceding company's claims liability exceeds its retention.

Concentration of insurance risk

The Company monitors concentrations of insurance risk by product and sector. An analysis of

concentrations of insurance risk at 31 December 2012 and 2011 for Gross Premiums written is set

out below:

(a) By product 31-Dec 31-Dec

2013 2012

N'000 N'000

Motor business 2,663,837 3,143,373

Fire & Property 1,343,594 1,191,892

Marine & Aviation 1,187,072 1,465,478


C.A.R & Engineering 406,199 84,346

Energy business 1,524,120 972,023

8,261,325 9,246,217

(b) By sector 31-Dec 31-Dec

2013 2012

N'000 N'000

Energy 836,046 935,717

Financial Services 2,654,364 2,970,810

IT/Telecoms & Other Corp. 2,147,945 2,404,017

Manufacturing 1,931,497 2,161,765

Retail 660,906 739,697

8,261,325 9,246,217

NEM INSURANCE PLC




Financial risk management

NEM Insurance Plc operates in a highly complex and competitive environment driven by the need to

meet all claim obligations, maximize returns to shareholders and comply with all statutory and

regulatory requirements. The Company is in the business of managing risks for public and private entities as well as individuals. In the ordinary course of its business activities, the Company is exposed

to a variety of financial risks, including currency risk, liquidity risk, credit risk, country risk and market

risk as well as operational and compliance risks.

Risk is the level of exposure to opportunity, threat and uncertainty – that should be identified, understood, measured and effectively managed, in the course of executing the Company’s business

strategies. In terms of opportunity, we see risk in relation to returns in that the greater the risk, the

greater the potential return. We therefore manage risk by using several methods to maximize the

positive aspects within the constraints of our risk appetite and business environment.

In terms of threat, we see risk as the potential for the occurrence of negative events such as financial

loss, fraud, damage to reputation or public image and loss of competitive advantage. We therefore

manage risk in this context by introducing risk management techniques to reduce the probability of

these negative events occurring without incurring excessive costs or stifling the initiative, innovation, and entrepreneurial flair of our staff.

In terms of uncertainty, we see risk as the distribution of all possible outcomes both positive and

negative. In this context, we manage uncertainty by seeking to reduce the variance between anticipated

outcomes and actual results.

RISK MANAGEMENT PHILOSOPHY AND CULTURE

Our risk management philosophy and culture consist of our shared beliefs, values, attitudes and practices with respect to how we consider risk in everything we do, from strategy development and

implementation to every aspect of our day-to-day activities.

“We shall underwrite all profitable transactions that we consider prudent and meets our risk appetite and profile. We shall take calculated and informed risk while seeking to maximize returns and

shareholders’ value. We shall continuously evaluate the risk and rewards inherent in our business

transactions, from strategy development and implementation to our day-today activities. We believe that

to achieve this objective would require a good understanding of the risks we are taking and the effective management of these risks both at the individual and enterprise levels”.

We therefore manage and control risk by introducing new risk management techniques, enhancing

existing risk management practices and placing a greater emphasis on cooperation among departments

to comprehensively manage the Company’s full range of risks as a whole. The Company proactively

formulates strategies and plans that enable the identification and management of events/factors/occurrences that impact our ability to attain our business and strategic objectives.

NEM INSURANCE PLC



Financial Risk Management Policy (Cont’d) Risk Management Strategy The Company adopts the following strategy for managing risks: i. Establish a clearly defined risk management process for identifying, measuring, controlling, monitoring and

reporting risks.

ii. Entrench and incorporate risk management principles in all functions across the Company iii. Comprehensive implementation and maintenance of our risk management framework

iv. Ensure good corporate governance practices

v. Board and senior management support to promote sound risk management vi. Zero tolerance for non-compliance with risk and control procedures

vii. Avoid concentration of risk to any industry, market, sector or individual entity.

viii. Deployed a risk management systems to facilitate the effective management of risks Short-term insurance contracts

For short-term insurance contracts, the Company funds the insurance liabilities with a portfolio of equity and debt

securities exposed to market risk. The following tables indicate the contractual timing of cash flows arising from assets and liabilities included in the Company's ALM framework for management of short-term insurance

contracts.

At 31 December 2013

Carrying amount N'000

No stated maturity

0 - 90 days

91 - 180 days

180 - 365 days

1 - 2 years

> 2 years

Financial assets

Cash &bank balances 891,370 891,370 Short Term Deposits 2,945,451 2,945,451

- Trade receivables 347,494 347,494

- Other Receivables 219,552 34,776 25,842 158,934 Debt securities 61,829 61,829

Equity securities

- quoted 1,055,737 1,055,737 - unquoted 953,528 953,528

6,474,961 2,009,265 4,219,091 - 25,842 - 220,763

Insurance liabilities

Outstanding Claims

Reserve

1,678,848 - 1,678,848 - - - -

Less assets arising from

reinsurance

(65,496)

-

(65,496)

-

-

-

-

1,613,352 - 1,613,352 - - - -

At 31 December 2012

Carrying amount N'000

No stated maturity

0 - 90 days

91 - 180 days

180 - 365 days

1 - 2 years

> 2 years

Financial assets

Cash &bank balances 547, 907 - 547, 907 - - - - Short Term Deposits 2,399, 949 2,399,949 - - -

- Trade receivables 887,008 674,108 212,900 - - -

- Other Receivables 224,150 12,785 6,784 2,245 - 202,336 Debt securities 46,829 - 46,829

Equity securities

- quoted 685,463 685,463 - - - - - - unquoted 510,129 510,129 - - - - -

5,301,435 1,195,592 3,634,749 219,684 2,245 - 249,165


Outstanding Claims

Reserve

2,819,395

-

2,819,395

- - - -

Less assets arising from

reinsurance

(92,512)

-

(92,512)

- - - -

2,726,883 - 2,726,883 - - - -

NEM INSURANCE PLC




At 31 December 2011

Carrying amount

No stated maturity

0 - 90 days

91 - 180 days

180 - 365 days

1 - 2 years

> 2 years

Financial assets

Cash & bank balances 298,352 - 298,352 - - - - - Trade receivables 569,480 - 484,058 85,422 - - -

- Other Receivables 274,021 4,567 4,322 3,876 1,376 259,880

Debt securities 31,508 - - 31,508

Equity securities

- quoted 469,881 469,881 - - - - -

- unquoted 315, 220 315,220 - - - - -

1,958,462 785,101 786,977 89,744 3,876 1,376 291,388


Outstanding Claims

Reserve

1,831,307

-

1,831,307

- -

Less assets arising from reinsurance

(83,937)

- (83,937)

- - - -

1,747,370 - 1,747,370 - - - -

At 31 December 2010

Carrying amount

No stated maturity

0 - 90 days

91 - 180 days

180 - 365 days

1 - 2 years

> 2 years

Financial assets

Cash & cash equivalents

251,186 - 251,186 - - - -

- Trade receivables 509,524 382,143 127,381 - - -

- Other Receivables 58, 565 - 21,083 13,470 24,012 -

Debt securities 23,500 - - - - - 23,500

Equity securities

- quoted 773,802 773,802 - - - - -

- unquoted 237,002 237,002 - - - - -

1,853,579 1,010,804 654,412 140,851 24,012 - 23,500

Insurance liabilities Outstanding Claims

Reserve

1,179,225 - 1,179,225 - -

Less assets arising

from reinsurance

(131,497) - (131,497) - - - -

1,047,728 - 1,047,728 - - - -

NEM INSURANCE PLC



Financial Risk Management Policy (Cont’d) The sensitivity analysis below is based on a change in one assumption while holding all other

assumptions constant. In practice this is unlikely to occur, and changes in some of the assumptions may be correlated - for example, change in interest rate and change in market values.

(a) Sensitivity analysis - interest-rate risk

31 December 2013 (N'000)

Assets Carrying

amount Fixed rate Floating

rate Non-interest

bearing Cash and cash equivalent 3,836,821 - - -

Trade receivables 347,494 - - 347,494

Reinsurance Assets 65,496 - - 65,496

Debt securities 61,829 61,829 - -

4,311,640 61,829 - 412,991

Liabilities

Non-life insurance liability 4,419,597 - - 4,419,597

Other liabilities 178,006 - - 178,006

Bank Overdraft 9,848 9,848

Debt security in issue - - - -

4,607,451 9,848 4,597,603

31 December 2012 (N'000)

Assets Carrying


rate Non-interest

bearing Cash and cash equivalent 2,947,856 - - -

Trade receivables 887,008 834,408 - 52,600

Reinsurance Assets 92,512 - 92,512


3,974,205 881,237 - 145,112

Liabilities


Other liabilities 163,283 - - 163,283

Debt security in issue - - - -

2,982,678 - - 2,982,678

31 December 2011 (N'000)

Assets Carrying


rate Non-interest

bearing Cash and Cash equivalent 2,371,375 -

Trade receivables 569,480 - - 569,480

Reinsurance assets 83,937 - - 83,937


3,056,300 31,508 - 653,417

Liabilities


Other liabilities 21,797 - 21,797

Bank overdraft - - -

Debt security in issue - - -

1,853,104 - - 1,853,104

NEM INSURANCE PLC



Financial Risk Management Policy (Cont’d) 31 December 2010 (N'000)

Assets Carrying


rate Non-interest

bearing Cash and cash equivalent 1,733,239

Trade receivables 509,524 -

- 509,524


2,266,263 23,500 - 509, 524

Liabilities

Non-life insurance liability 1,179,225

-

- 1,179,225

Other liabilities 12,744 - - S12,744

Bank overdraft - - -

Debt security in issue -

- -

1,191,969 - - 1,191,969

The impact on the Company's profit before tax if interest rates on financial instruments held at

amortised cost or at fair value had increased or decreased by 100 basis points, with all other variables held constant are considered insignificant. This is due to the short term nature of the

majority of the financial assets measured at amortised cost.

(b) Sensitivity analysis - equity risk The sensitivity analysis for equity price risk illustrates how changes in the fair value of equity

securities will fluctuate because of changes in market prices, whether those changes are

caused by factors specific to the individual equity issuer, or factors affecting all similar equity

securities traded in the market.

Management monitors movements of financial assets and equity price risk movements by

assessing the expected changes in the different portfolios due to parallel movements of a 10%

increase or decrease in the Nigeria All share index with all other variables held constant and all the Company’s equity instruments in that particular index moving proportionally.

As at 31 December 2013, the market value of quoted securities held by the Company is N 1.05

billion (2012: N 691 million). If the all share index of the NSE moves by 100 basis points at 31 December 2013, the effect on profit or loss would have been N 10.5 million (2012: N 6.9

million).

The Company holds a number of investments in unquoted securities with a market value of N 909 million as at 31 December 2013 (2012: N 516 million) of which investment in MTN

Nigeria Ltd is the significant holding. This investment was valued at N 741 million (cost N 741

million) (2012: N 382 million, cost N 382 million) as at 31 December 2013. MTN Nigeria is a

private limited liability company whose principal activity is the provision of mobile telecommunications service using the Global System for Mobile Communications (GSM)

platform.

NEM INSURANCE PLC



Financial Risk Management Policy (Cont’d) Credit Risk The Company’s assets are exposed to credit risk, which is the risk that a counterparty will be

unable to pay amounts in full when due. The Company’s maximum exposure to credit risk is reflected in the carrying amounts of financial assets on the balance sheet. The main sources of the

Company’s incoming cash flow are the amounts of receivables from insured and reinsurers. The

Company manages the credit risk arising from such sources by aging and monitoring the

receivables. The Company conducts the review of current and non-current receivables on a monthly basis and monitors the progress in the process of collection of the premiums in accordance with

the procedure stated in the Company’s internal control policy. The non-current receivables are

checked and assessed for impairment.

The overdue premiums are considered by the Company on case by case basis. If an overdue

premium is recognized by the Company as uncollectible, a notification is sent to the policyholder and the insurance agreement is cancelled from the date of notification. The premium related to the

period from the beginning of insurance cover until the date of cancellation of the insurance

agreement is considered a bad debt, and further steps right up to legal actions are planned with

regard to that bad debt.

Other areas where the Company is exposed to credit risk are: • amounts due from reinsurers for the insurance risks ceded;

• amounts due from insurance intermediaries.

• amounts due from insured

• amounts of deposits held in banks and correspondent accounts

NEM is exposed to the following categories of credit risk.

Direct Default Risk - risk that NEM will not receive the cash flows or assets to which it is entitled because brokers, clients and other debtors which NEM has a bilateral contract defaults on their

obligations.

Concentration Risk – is the exposure to losses due to excessive concentration of business activities

to individual counterparties, groups of individual counterparties or related entities, counterparties in specific geographical locations, industry sectors, specific products, etc

Counterparty Risk - the risk that a counterparty is not able or willing to meet its financial obligations

to the Company as they fall due.

Credit Risk Principles The following principles underpin the Company’s credit risk management policies:

• Individuals who create the credit risk and those who manage the risk clearly understand the

nature of the risk;

• The Company’s credit risk exposure is within the limits as approved by the Board;

• Credit decisions are clear and explicit and in line with the business strategy and objectives

as approved by the Board;

• Credit risk exposures shall be within the defined limits to ensure there is no excessive concentration and that credit control procedures for managing large exposures and related

counterparties are adhered to;

• Appropriate classification of credit risk through periodic evaluation of the collectability of risk assets; and

• Adequate loan loss provisioning to ensure that provisions or allowances are made to absorb

anticipated losses.

• The expected payoffs more than compensate for the credit risks taken by the Company;

• Credit risk taking decisions are explicit and clear;

• There shall be clear delegated authorization limits for transactions;

• Sufficient capital as a buffer is available to take credit risk;

NEM INSURANCE PLC



Financial Risk Management Policy (Cont’d) The Company’s credit risk appetite shall be in line with its strategic objectives, available resources and

the provisions of NAICOM Operational Guidelines. In setting this appetite/tolerance limits, NEM takes

into consideration its corporate solvency level, risk capital and liquidity level , credit ratings, level of

investments, reinsurance and coinsurance arrangements, and nature and categories of its clients. In setting the credit limit, a few conditions were put into consideration and these actually assisted in the

selection of the brokers that made this list. From the records available for this purpose, the conditions

used as yardstick are as follows:

1. Speed of payment; 2. Relationship management;

3. Volume of business and

4. Size of the accounts From the above conditions, the few Insurance Brokers identified have been categorized into three (3)

groups namely A, B and C. Maximum exposure to credit risk before collateral held or other credit

enhancements:

Maximum exposure

31 December 2013

31 December 2012

31 December 2011

N'000 N'000 N'000 Cash and bank balances 891,370 547,907 298,352 Loans and receivables

- Trade receivables 347,494 887,009 569,480

- Other Receivables and

Prepayments 220,684 224,150 274,021 Reinsurance assets 65,496 92,512 83,937

Debt securities 61,829 46,829 31,508

Total assets bearing credit risk

1,586,873 1,798,407 1,257,298

Liquidity Risk Liquidity risk is the inability of a company to meet obligations on a timely basis. It is also the inability of a company

to take advantage of business opportunities and sustain the growth target in its business strategy due to liquidity

constraints or difficulty in obtaining funding at a reasonable cost. Our liquidity risk exposure is strongly related to our credit and investment risk profile. The Company is exposed to daily calls on its available cash resources from claims

to be paid.

At 31 December 2011, management does not believe the current maturity profile of the Company lends itself to any

material liquidity risk, taking into account the level of cash and deposits and the nature of its securities portfolio at year end, as well as the reinsurance structure of the Company’s insurance portfolio. The Company’s bank deposits

and trading securities are able to be released at short notice when and if required. The possible payments of

significant insurance claims are secured by the reinsurance contracts’ clause that allows a cash call from the

reinsurers for the losses exceeding a certain amount based on line of business.

Sources of Liquidity Risk Our liquidity risk exposure depends on the occurrence of other risks. Some of the factors that could lead

to liquidity risks are:

• Reputational loss or rating downgrade, leading to inability to generate funds;

• Failure of insurance brokers and clients to meet their premium payment obligation as and when

due;

• Lack of timely communication between Finance &Investment Division and Claims Department resulting in mismatch of funds;

• Investment in volatile securities; and

• Frequency and severity of major and catastrophic claims.

NEM INSURANCE PLC



Financial Risk Management Policy (Cont’d) Liquidity Risk Management Strategy The Company’s strategy for managing liquidity risks are as follows:

• Maintain a good and optimum balance between having sufficient stock of liquid assets,

profitability and investment needs;

• Ensure strict credit control and an effective management of account receivables;

• Ensure unrestricted access to financial markets to raise funds;

• Develop and continuously update the contingency funding plan;

• Adhere to the liquidity risk control limits; and

• Communicate to all relevant staff on the liquidity risk management objectives and control

limits.

Liquidity Risk Appetite/Tolerance Our liquidity risk appetite is defined using the following parameters:

• Liquidity gap limits;

• Scenario and Sensitivity Analysis

• Liquidity Ratios such as:

• Claims ratio

• Cash ratio

• Quick ratio

• Receivable to capital ratio

• Technical provision to capital ratio

• Maximum exposure for single risk to capital ratio

• Maximum exposure for a single event to capital ratio

• Retention rate

• Re-insurance receipts to ceded premium ratio Solvency margin

(b) Financial instruments measured at fair value IFRS 7 specifies a hierarchy of valuation techniques based on whether the inputs to those

valuation techniques are observable or unobservable. Observable input reflect market data obtained from independent sources; unobservable inputs reflect the Group's market

assumptions. These two types of inputs have created the following fair value hierarchy:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset

or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)

Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs)

This hierarchy requires the use of observable market data when available. The Group considers

relevant and observable market prices in its valuations where possible.

NEM INSURANCE PLC



Financial Risk Management Policy (Cont’d) At 31 December 2013 (N'000) Level 1 Level 2 Level 3 Total

Financial assets

Quoted equity investments 1,055,737 - - 1,055,737

Unquoted equity investments - 953,528 - 953,528 Debt securities 61,829

61,829

1,117,566 953,528 - 2,071,094

At 31 December 2012 (N'000) Level 1 Level 2 Level 3 Total

Financial assets

Quoted equity investments 685,465 - - 685,465 Unquoted equity investments - 510, 129 - 510, 129

Debt securities 31,508

31,508

716,973 510,129 - 1,227,102

(c) Fair valuation methods and assumptions (i) Cash and bank balances

Cash and bank balances represent cash held with other banks. The fair value of these balances is their

carrying amounts.

(ii) Equity securities

The fair values of quoted equity securities are determined by reference to quoted prices (unadjusted) in active markets for identical assets. The fair value of the unquoted equity securities was determined on a net asset

value basis.

(iii) Debt securities

Treasury bills represent short term instruments issued by the Central banks of the jurisdiction where the

Company operates. The fair value of treasury bills and bonds at fair value are determined with reference to

quoted prices (unadjusted) in active markets for identical assets. The estimated fair value of bonds (asset or liability) at amortised cost represents the discounted amount of estimated future cash flows expected to be

received. Expected cash flows are discounted at current market rates to determine fair value.

(iv) Other assets

Other assets represent monetary assets which usually have a short recycle period and as such the fair values

of these balances approximate their carrying amount.

NEM INSURANCE PLC



Capital management Policy NEM has over the years been deploying capital from earnings and additional equity funds to

support growth in business volumes while striving to meet dividend commitments to shareholders.

To be able to continue to generate and deploy capital both to grow core businesses and reward shareholders, there is need for the Company to execute the right strategy, the right growth

dynamics, the right cost structure and risk discipline as well as the right capital management.

NEM’s capital management strategy focus on the creation of shareholders’ value whilst meeting the crucial and equally important objective of providing an appropriate level of capital to protect

stakeholders’ interests and satisfy regulators.

The Company’s objectives when managing capital are as follows:

• To ensure that capital is, and will continue to be, adequate for the safety, soundness and stability of the Company;

• To generate sufficient capital to support the Company’s overall business strategy;

• To ensure that the Company meets all regulatory capital ratios and the prudent buffer required by the Board;

• To ensure that the average return on capital over a 3 -5 years performance cycle is

sufficient to satisfy the expectations of investors;

• To maintain a strong risk rating;

• To ensure that capital allocation decisions are optimal, considering the return on economic

and regulatory capital;

• To determine the capital required to support each business activity based on returns

generated on capital to facilitate growth/expansion of existing businesses (i.e. capital

allocation);

• To establish the efficiency of capital utilization.

Minimum Capital Requirement The Company complied with the minimum capital requirement of N3billion for non-life operations. This is shown under Shareholders' Fund in the Statement of Financial Position.

Solvency Status

The Company met the criteria for solvency margin as stated in section 24(1) of the Insurance Act

2003, the solvency margin maintained is N 3,674,668,000

NEM INSURANCE PLC



Capital Management Policy (Cont’d)

Solvency Margin

2013

ADMISSIBLE ASSETS N'000 N'000

Cash and cash equivalents 3,432,859

Financial Assets 2,373,132

Trade Receivables 347,494

Reinsurance assets 65,496

Deferred Acquisition Cost 472,346

Other Receivables & Prepayments 8,692

Investment in Subsidiaries 175,396

Investment Property 468,974

Statutory Deposits 320,000

Property & Equipment 786,771

A 8,451,160

ADMISSIBLE LIABILITIES

Insurance Liabilities 4,419,597

Trade payables 48,510

Other payables 127,699

Book Overdraft 9,848

Retirement Benefit Obligations 170,838

B (4,776,492)

Actual Solvency (A - B) C 3,674,668

Net Premium 6,926,294

Solvency Margin

Limit of Net premium i.e 15% of Net Premium 1,038,944

Minimum of paid up Capital - D 3,000,000

Since C>D - Positive Solvency Margin - (C-D) 674,668

Percentage of insolvency 22 Statement of Value Added- Group

NEM INSURANCE PLC



2013 2012

N'000 % N'000 %

Gross Premium Written:

Local 8,933,345 9,652,556

Foreign -

Other Income:

Local 834,221 496,549

Foreign -

9,767,567 10,149,105

Bought in Material and Services:

Local (8,518,031) (9,131,171)

Foreign

Value Added 1,249,536 100 1,017,934 100

Applied as follows:

Employees Salaries and other employees

benefits 569,238 46 492,383 48.37

Provider of Capital

Minority Interest - - - -

Government

Taxation 149,350 12 209,934 20.62

Retention and Expansion

Depreciation 135,888 11 124,331 12.21

Contingency reserves 262,793 21 287,078 28.20

Retained profits for the year 132,268 11 (95,792) -

9.41

Value Added 1,249,536 100.00 1,017,934 100.00

Value added represents the additional wealth the company has been able to create by its own

and its employees' efforts. This statement shows the allocation of the wealth between employees, shareholders, government and that retained for the future creation of more wealth.

Statement of Value Added- Parent

NEM INSURANCE PLC



2013 2012

N'000 % N'000 %

Gross Premium Written:

Local 8,261,325 9,246,217

Foreign -

Other Income:

Local 786,124 478,655

Foreign -

9,047,449 9,724,872

Bought in Material and Services:

Local (7,923,655) (8,801,737)

Foreign

Value Added 1,123,794 100 923,135 100

Applied as follows:

Employees

Salaries and other employees benefits 496,956 44 436,456 47

Government

Taxation 137,981 12 203,326 22

Retention and Expansion

Depreciation 119,949 11 113,303 12

Contingency reserves 247,840 22 279,478 30

Retained profits for the year 121,069 11 (109,428) (12)

Value Added 1,123,794 100 923,135 100

Value added represents the additional wealth the company has been able to create by its own and

its employees' efforts. This statement shows the allocation of the wealth between employees,

shareholders, government and that retained for the future creation of more wealth.

Financial Summary - Group

NEM INSURANCE PLC



Dec. 2013 Dec. 2012 Dec. 2011 Dec. 2010 Assets N'000 N'000 N'000 N'000

Cash and Cash Equivalents 3,865,965 3,125,679 2,427,729 1,773,360

Trade Receivable 496,007 981,032 575,766 546,805

Reinsurance Assets 65,496 129,501 93,983 140,264

Deferred Acquisition Cost 513,387 325,944 247,923 184,468

Financial Assets 2,624,638 1,350,967 1,066,499 1,475,884

Investment Properties 468,974 459,813 483,120 483,120

Intangible Assets 18,851 27,085 13,875 13,500

Property and Equipment 1,284,191 828,586 705,922 598,215

Other Receivables and Prepayments 278,712 237,634 281,683 66,990

Statutory Deposit 349,200 342,879 414,839 399,759

Income Tax Credit 80,456 - - -

Total Assets 10,045,877 7,809,120 6,311,339 5,682,364

Liabilities Trade Payables 48,510 23,367 37,966 14,808

Other Payables 167,874 168,727 - -

Current Income Tax Liabilities - 21,949 - 129,122

Deferred Tax Liability 166,062 106,671 106,671 108,992

Retirement Benefit Obligations 170,838 160,205 113,033 -

Insurance Contract Liabilities 4,787,052 3,027,556 1,905,361 1,258,119

Bank Overdraft 9,848

Total liabilities 5,350,184 3,508,475 2,163,030 1,511,041

Net Assets 4,695,693 4,300,645 4,148,310 4,171,323

Equity Issued Share Capital 2,640,251 2,640,251 2,640,251 2,640,251

Share Premium 272,551 272,551 272,551 272,551

Other Reserves-employee benefit actuarial surplus 45,562 2,141 - -

Available-For-Sale Reserve 9,978 53,411 94,503 106,785

Contingency Reserve 1,696,986 1,434,193 1,147,115 850,415

Retained Earnings 30,366 (101,902) (6,110) 301,321

Shareholders' Fund 4,695,694 4,300,645 4,148,310 4,171,323

Gross Premium Written 8,933,345 9,652,556 8,381,196

Gross premiums income 7,790,962 9,335,182 7,817,268

Net underwriting income 7,439,613 9,130,771 7,166,438

Other Revenue 834,221 496,549 275,557 Total Revenue 8,273,835 9,627,321 7,441,995

Claims paid (3,070,271) (2,934,435) (1,810,688)

Impairment (366,940) (1,960,905) (1,676,541) Other Expenses (4,292,213) (4,066,735) (3,567,662)

Total Benefits, Claims and Other Expenses (7,729,425) (8,962,075) (7,054,891)

Profit Before Tax 544,410 665,246 387,104 Income tax expense (149,350) (209,934) (133,810)

Profit For the Year 395,060 455,312 253,294

Other Comprehensive Income for the year, net of tax (12) (38,951) (12,282)

Total Comprehensive Income for the year, net of tax 395,048 416,361 241,012

Basic Earnings Per Share 7 9 5

Financial Summary - Parent Dec. 2013 Dec. 2012 Dec. 2011 Dec. 2010

NEM INSURANCE PLC



Assets N'000 N'000 N'000 N'000

Cash and Cash Equivalents 3,836,821 2,947,856 2,371,375 1,733,238

Trade Receivable 347,494 887,009 569,480 509,524

Reinsurance Assets 65,496 92,512 83,937 131,497

Deferred Acquisition Cost 472,347 298,151 228,758 164,280

Financial Assets 2,373,132 1,350,967 1,066,499 1,475,884

Investment in Subsidiary 175,396 175,396 175,396 175,396

Investment Properties 468,974 459,813 483,120 483,120

Intangible Assets 15,772 27,085 13,875 13,500

Property and Equipment 1,245,149 797,208 671,675 566,865

Other Receivables and Prepayments 219,552 224,150 274,021 58,565

Statutory Deposit 320,000 320,000 320,000 320,000

Income Tax Credit 87,745 - - -

Total Assets 9,627,877 7,580,148 6,258,136 5,631,869

Liabilities Trade Payables 48,510 1,532 21,798 12,744

Other Payables 127,699 161,751 - -

Current Income Tax Liabilities - 14,164 - 129,226

Deferred Tax Liability 166,062 106,671 106,671 108,992

Retirement Benefit Obligations 170,838 160,205 113,033

Insurance Contract Liabilities 4,419,597 2,819,395 1,831,307 1,179,225

Bank Overdraft 9,848 - - -

Total liabilities 4,942,554 3,263,718 2,072,809 1,430,187

Net Assets 4,685,323 4,316,430 4,185,328 4,201,682

Equity Issued Share Capital 2,640,251 2,640,251 2,640,251 2,640,251

Share Premium 272,551 272,551 272,551 272,551

Other Reserves-employee benefit actuarial surplus 45,562 2,141 94,503 106,785

Available-For-Sale Reserve 9,978 53,411 - -

Contingency Reserve 1,664,960 1,417,120 1,137,642 852,496

Retained Earnings 52,022 (69,047) 40,381 329,599

Shareholders' Fund 4,685,323 4,316,430 4,185,328 4,201,682

Gross Premium Written 8,261,325 9,246,217 8,178,886

Gross premiums income 7,250,821 9,043,882 7,619,304

Net underwriting income 6,927,329 8,865,670 7,001,803

Other Revenue 795,286 478,655 249,864

Total Revenue 7,722,614 9,344,325 7,251,667

Claims paid (2,965,052) (2,879,691) (1,795,573)

Impairment (236,615) (1,960,905) (1,676,541)

Other Expenses (4,014,058) (3,866,327) (3,452,292)

Total Benefits, Claims and Other Expenses (7,215,725) (8,706,923) (6,924,406)

Profit Before Tax 506,889 637,401 327,261

Income tax expense (137,981) (203,326) (125,583)

Profit For the Year 368,908 434,075 201,678

Other Comprehensive Income for the year, net of tax (12) (38,951) (12,282)

Total Comprehensive Income for the year, net of tax 368,896 395,124 189,396

Basic Earnings Per Share 7 8 5

Documents

Contents Page - NEM Insurance Plc · 2015-05-22 · REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2013 NEM Insurance 2013 Page 6 REPORT OF THE DIRECTORS