THE MARITIME FINANCIAL GROUP CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31… · 2017. 7. 14. · Kenny Sohun General Manager-Retail Operations BANKERS Scotiabank Trinidad & Tobago

PKF

THE MARITIME FINANCIAL GROUPMaritime Life CaribbeanLimited andits subsidiaries

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER31, 2006

PKFTHE MARITIME FINANCIAL GROUP

Maritime Life Caribbean Limited and its subsidiaries

CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2006

INDEX Page

Directors’ Report 2

CorporateInformation 3

Notice of Meeting

ActuarialCertificate 5

IndependentAuditors’ Report 6

BalanceSheets

Statementsof Income 8

Statementsof Changesin Shareholders’Equity 9 - 10

Statementsof CashFlows II

Notesto the FinancialStatements 12 - 37

THE MARITIME FINANCIAL GROUPMaritime Life Caribbean Limited and its subsidiaries

DIRECTORS’ REPORT

MARITIME LIFE CARIBBEAN LIMITED

To be presentedat the Thirty-Fifth Annual GeneralMeeting of the shareholdersto be held at the CorporateOffices, Maritime Centre,29 TenthAvenue,Baratariaon July 03, 2007.

Your directorshavepleasurein submittingtheir report for theyearendedDecember31, 2006.

Company Group2006 2006

$,000 $,000

1. Income for the year

Surplusfor theyear 3,628 10,638Less: Taxation 1,329 3,275

Net incomefor the year 2,299 7,363Less: Minority interest - 623

Amount transferredto CatastropheReserve - 926Amount transferredto StatutoryReserves 1,773Dividendspaid- 2005 220 2,392 2,392

Leavinga balanceto be carriedforwardof 93 1,649

2. Capitalreserve 65,319 67,741

3. Insurancecontracts 841,275 997,685

4. The directorshaveproposeda dividendof 220 per share,amountingto $2,391,705payableon July 03,2007 to shareholdersof recordatJune01, 2007.

5. In accordancewith By Law 4.3 all thedirectorswith theexceptionof the ManagingDirector, retire fromoffice andbeing eligible offer themselvesfor re-election.

6. The auditors,Messrs.Pannell Kerr Forster,retire andbeing eligible offer themselvesfor re-appointmentas auditorsof theCompany.

BY ORDEROF THE BOARD

The Maritime Financial Group LimitedSecretary

2


CORPORATE INFORMATION


ADVISORY BOARD BruceA. Mc 1. Procope,Q.C. - ChairmanHugh P. EastmanBarbaraGomesJeanKhoury

BOARD OF DIRECTORS JohnH. Smith, F.C.C.A.,C.A.JacintaP. Sohun,F.C.C.A.LesleyJ. Alfonso, B.B.A.

EXECUTIVE MANAGEMENT JohnH. Smith, F.C.C.A.,C.A. Chairman/ManagingDirectorChiefExecutiveOfficer

Earl Wilson, F.C.C.A,C.A. ChiefOperatingOfficer

JacintaP. Sohun,F.C.C.A. ExecutiveDirector- Finance!ChiefFinancialOfficer

Oliver Camps Chairman- GeneralInsuranceServices

LesleyJ. Alfonso, B.B.A. Manager- CorporateRelations

SalahudeenAu, F.C.C.A.,C.A. GeneralManager- Finance

Andre Baptiste,F.L.M.I. GeneralManager- CareerAgency Development

RogerGomes,F.C.C.A, Acting GeneralManager-FinancialandTrust Services

RicardoBaynes,B.Sc Hons, Manager- TechnologyServicesF.L.M.I/M

Baliram Sawh, A.C.I.I. GeneralManager- GeneralInsuranceServices

Kenny Sohun GeneralManager-RetailOperations

BANKERS ScotiabankTrinidad& TobagoLimited, Port of Spain.RBTT Bank Limited, Port of Spain.Republic Bank Limited, Port of Spain.

ATTORNEYS Chersons,Port of Spain.Lex Caribbean,Portof Spain.Pollonais,Blanc, de la Bastide& Jacelon,Port of Spain.

CONSULTING ACTUARY Michelle P. ChongTai-Bell, F.S.A.

AUDITORS PannellKerr Forster,Port of Spain.

REGISTEREDOFFICE 29 TenthAvenue,Barataria

3


NOTICE OF MEETING


NOTICE is herebygiven that the Thirty-Fifth Annual GeneralMeetingof the above-namedCompanywill beheldat the CorporateOffices, Maritime Centre,29 TenthAvenue,Baratariaon TuesdayJuly 03, 2007 at2:30pm for the following purposes:

1. Waiver of Notice.

2. To receivethe Audited Financial Statementsfor the yearended December31, 2006, togetherwith theReportsof theDirectorsandAuditors thereon.

3. To declarea dividend.

4. To re-electretiring directors.

5. To electanew director.

6. To appointauditorsandauthorisetheDirectorsto determinethe remunerationof suchauditors.

7. To transactany otherordinarybusiness.

BY ORDEROF THE BOARD

The Maritime Financial Group LimitedSecretary

June 18,2007

RegisteredOffice:Maritime Centre29 TenthAvenue,Barataria,Trinidad,W.I.

NOTES:

A memberentitled to attendand vote is entitled to appoint a proxy to attendand vote on his behalfand suchproxy neednot alsobe a memberof the Company.

If the appointeris a corporation,the form of proxy must be under its commonseal or underthe hand of anofficer of thecorporationor attorney duly authorisedin that behalf.

To bevalid theinstrumentappointingaproxy duly completedandexecutedmust be depositedatthe registeredoffice of the Companynot lessthanforty-eight hoursbefore the timeappointedfor holding themeeting.

4


ACTUARIAL CERTIFICATE

Maritime Life Caribbean Limited

In accordancewith section56 2 of the InsuranceAct 1980, 1 havemadeavaluationof the actuarialliabilities

of Maritime Life CaribbeanLimited for its balancesheetas at December31, 2006. In my opinion, the

aggregateamount of the liabilities of the Companyin relation to its long term insurance businessas at

December31, 2006 did not exceedthe aggregateamountof those liabilities shown in the balancesheetof the

Company.

Michelle P. Chong Tai-Bell, F.S.A.Consulting Actuary

.June 01, 2007

5

PKr PANNELLKEmFORSTER245 Belmont Circular Road,P.O. Bag 250, BelmontPort of Spain, Trinidad, W.l.Tel: 868 624-4569Fax: 868 624-4388E-mail: [email protected]

INDEPENDENT AUDITORS’ REPORT

To the ShareholdersofMaritime Life Caribbean Limited

We haveauditedthe accompanyingconsolidatedfinancial statementsof MaritimeLife CaribbeanLimited anditssubsidiaries "the Group", which comprise the consolidatedbalance sheet as at December31, 2006, theconsolidatedstatementsof income, changesin shareholders’equity and cashflows for the year thenended,andasummaryof significantaccountingpolicies andotherexplanatorynotes.

Management’sResponsibilityfor theFinancial StatementsManagementis responsiblefor the preparationand fair presentationof theseconsolidatedfinancial statementsinaccordance with International Financial Reporting Standards. This responsibility includes: designing,implementing and maintaining internal control, relevant to the preparationand fair presentationof financialstatementsthat are free from material misstatement,whether due to fraud or error; selecting and applyingappropriateaccountingpolicies;andmaking accountingestimatesthat arereasonablein the circumstances.

Auditors’ ResponsibilityOur responsibility is to expressan opinion on theseconsolidatedfinancial statementsbasedon our audit. Weconductedour audit in accordancewith International Standardson Auditing. Those standardsrequire that wecomply with ethical requirementsand plan and perform the audit to obtain reasonableassurancewhether theconsolidatedfinancialstatementsarefree from materialmisstatement.

An audit involves performing proceduresto obtain audit evidence about the amounts and disclosuresin thefinancial statements.The proceduresselecteddependon the auditors’ judgment,including the assessmentof therisks of material misstatementof the financial statements,whether due to fraud or error. In making those riskassessments,the auditorsconsiderinternal control relevantto the entity’s preparationandfair presentationof thefinancial statementsin order to designaudit proceduresthat areappropriatein the circumstances,but not for thepurposeof expressingan opinion on the effectivenessof the entity’s internal control. An audit also includesevaluatingthe appropriatenessof accountingpolicies usedandthereasonablenessof accountingestimatesmadebymanagement,as well as evaluatingthe overall presentationof the financial statements.

We believe that the audit evidencewe haveobtainedis sufficient and appropriateto provide abasis for our auditopinion.

OpinionIn our opinion, the consolidatedfinancial statementspresentfairly, in all materialrespects,the financial position oftheGroup as of December31, 2006 andof its financial performanceand its cashflows for the yearthen endedinaccordancewith InternationalFinancialReportingStandards.

Without qualifying our opinion we drawattentionto Note 29 to the consolidatedfinancial statements.The Statelaid several chargeson the Companyand two of its subsidiariestogetherwith othercompaniesand individuals.The ultimate outcomeof thesematterscannotpresentlybe determined,andno provisionfor any liability that mayresulthasbeenmadein the consolidatedfinancial statements.

Port-of-SpainTRINIDADJune 01, 2007 CHARTERED ACCOUNTANTS

* Partners: A.A. Mark, M.G. Toney, R.L. Philip


BALANCE SHEETSAT DECEMBER 31, 2006

Company Group

CurrentassetsDeferredtax assetsInvestmentsin subsidiariesFinancialassetsInvestmentpropertiesProperty,plant andequipment

Total Assets

Financed By:

CurrentliabilitiesInsurancecontractsMinority interestDeferredtax liabilities

Notes

Total Liabilities

StatedcapitalCapital reserveCatastrophereserveGeneralreserveInvestmentrevaluationreserveStatutoryreservesRetainedearnings

Total Shareholders’Equity

Total Liabilities andShareholders’Equity

Thesefinancial statementswere approvedby the Boardof Directorsandauthorisedare signedon their behalfby:

2006$,000

3 323,2724 8395 -6 700,5147 84,2008 184.234

1,293,059

9 106,68810 997,685

6,780ii 1,279

1.112,432

2005$,000

391,6451,554

575,81767,203

143,904

1,180,123

87,555942,469

6,4181,493

1,037,935

12 10,871 10,87113 67,741 31,34114 4,782 3,85615 19,415 19,41516 7,344 5,03517 18,500

66,66216,72765,013

180,627 142,188

1,293,059 1,180,123

for issueon June01, 2007 and

,lacinta P’Sohun

J Director

The noteson pages12 to 37 form part of thesefinancial statements.

2005$,000

2006$,000

311,173

55,585386,83555,203

119.285

273,616

55,585444,83672,200

153,357

928,081

39,234810,887

816

850.937

10,87128,919

15,5005,035

26.889

77,144

928,081

999,594

46,454841,275

723

888,452

10,87165,319

15,5007,344

26,796

111.142

999,594

Director

7


STATEMENTS OF INCOMEFOR THE YEAR ENDED DECEMBER 31, 2006

Company Group2005 2006 2006 2005

$‘OOO $‘OOO Notes $‘OOO $‘OOO

Revenue

74,516 84,816 Premiumincome 236,941 211,9641,555 990 Recoveriesfrom reinsurers 13,041 12,408

69,879 67,231 Investmentincome 18 76,881 86,5754,066 10,804 Otherincome 68,721 55,716

150,016 163,841 395,584 366,663

Expenses

78,432 85,052 Policyholders’benefits 150,363 134,9562,725 3,921 Reinsurancepremiums 81,592 85,776

- - Intereston deposits 615 88513,579 16,497 Otherdirectcosts 73,592 60,54351,394 54,743 Expensesof management 78,784 71,072

146,130 160,213 384,946 353,232

3,886 3,628 Surplusbeforetaxation 19 10,638 13,4312,003 1,329 Taxation 20 3,275 3,415

1,883 2,299 Surplusaftertaxation 7,363 10,016- - Minority interest 623 570

1,883 2,299 Surplus attributable to shareholders 6,740 9,446

The noteson pages 12 to 37 form part of these financial statements.

8


STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITYFOR THE YEAR ENDED DECEMBER 31, 2006

Stated Capital Catastrophe General Investment Statutory Retained Totalcapital reserve reserve reserve revaluation reserves earnings equity

reserve$,000 $‘OOO $‘OOO $‘OOO $‘OOO $‘OOO $‘OOO $‘OOO

Group

BalanceatDecember31, 2004 10,871 28,625 3,856 19,415 - 14,994 59,692 137,453

Surplusattributabletoshareholders - - - - - - 9,446 9,446

Revaluationsurplus - 1,614 - - - . - 1,614

Changein compositionofGroup - 1,102 - - - - - 1,102

Fair value adjustment-available for salefinancialassets - - - - 5,035 - - 5,035

Dividends paid2004 22 0 - - - - - - 2,392 2,392

Transfersfromretainedearnings - 1,733 1,733

BalanceatDecember31, 2005 10,871 31,341 3,856 19,415 5,035 16,727 65,013 142,188


Revaluationsurplus - 36,400 - - - - - 36,400

Fair valueadjustment-available for sale financialassets - - - - 2,309 - - 2,309

Dividends paid2005 220 - - - - - - 2,392 2,392

Transfersfromretainedearnings - - 926 - - 1,773 2,699

BalanceatDecember31, 2006 10,871 67,741 4,782 19,415 7,344 18,500 66,662 180,627

The noteson pages12 to 37 form part of thesefinancialstatements.

9


STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITYFOR THE YEAR ENDED DECEMBER 31, 2006

CONTINUED

Stated Capital CatastropheGeneral Investment Statutory Retained Totalcapital reserve reserve reserve revaluation reserves earnings equity

reserve$,000 $‘OOO $‘OOO $‘OOO $‘OOO $‘OOO $‘OOO $‘OOO

Company

BalanceatDecember31, 2004 10,871 27,305 - 15,500 - - 27,398 81,074



Fairvalue adjustment-available for sale financialassets - - - - 5,035 - - 5,035

Dividendspaid200422 0 - - 2,392 2,392

BalanceatDecember31, 2005 10,871 28,919 - 15,500 5,035 - 26,889 77,144



Fair value adjustment-available for sale financialassets - - - - 2,309 - - 2,309

Dividends paid2005 220 2,392 2.392

BalanceatDecember31, 2006 10,871 65,319 - 15,500 7,344 26,796 111,142

The noteson pages12 to 37 form part of thesefinancial statements.

10


STATEMENTS OF CASH FLOWSFOR THE YEAR ENDED DECEMBER 31, 2006

Company Group2005 2006 2006 2005

$,000 $‘OOO $,000 $‘OOO

Cash Flows from Operating Activities

3,886 3,628 Surplusbefore taxation 10,638 13,431Adjustmentsfor:

5,186 6,086 Depreciationnet 13,178 9,72932,103 19,338 Gain on sale/revaluationof financialassets 19,659 35,79027,765 30,994 Increasein insurancecontracts 55,822 50,325

4,734 21,370 Operatingsurplusbeforeworking capital changes 59,979 37,69510,005 754 Changein receivables 18,308 16,030

- - Changein customers’deposits 2,378 1,01 1- - Changein otherfunding instruments 58 42

4,833 2,291 Changein otherpayables 10,081 19,972

19,572 24,415 Cashgeneratedfrom operations 54,188 40,584734 606 Dividendspaidto policyholders 606 734

-- Dividendspaid to minority interest 261 -

1,929 1.310 Corporationtaxespaid net 2,636 3,530

16,909 22,499 Net cashgeneratedfrom operatingactivities 50,685 36,320

Cash Flows from Investing Activities

103,250 21,324 Sale/redemptionof financial assets 29,402 88,847332 106 Saleof property,plant and equipment 739 674

6,918 22,297 Changein mortgageand otherloans 90,450 73,874118,316 55,575 Purchaseof other financialassets 61,875 119,371

7,892 3,864 Purchaseof property,plant and equipment 17,847 24,738393 - Acquisition of sharesin subsidiaries - 39353 1,421 Additions to investmentproperties 1,421 53

29,990 61,727 Net cashusedin investingactivities 141,452 128,908

Cash Flows from FinancingActivities

2,392 2,392 Dividendspaid to shareholders 2.392 2,392

2,392 2,392 Net cashusedin financingactivities 2,392 2,392

15,473 41,620 Net decreasein cashand cashequivalents 93,159 94,980

Cash andcashequivalents252,608 237.135 - at beginning of year 255.781 350,761

237,135 195,515 - at endof yearNote 21 162,622 255,781

The notes on pages12 to 37 form part of thesefinancial statements.

11


NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2006

Incorporation and PrincipalActivity

Maritime Life CaribbeanLimited is incorporatedin the Republic of Trinidad and Tobago and wascontinuedunder the provisionsof the CompaniesAct, 1995 on 23rd March, 1999. Its principal activity isthe carryingon of all classesof long term insurancebusinessin the Republicof Trinidad andTobago.TheCompany’sregisteredoffice andprincipal placeof businessarelocatedat 29 TenthAvenue,Barataria.

A listing of the subsidiaries,their principal activitiesandplaceof incorporationis given in Note 31.

2. Statementof Accounting Policies

a Basis of preparation

These financial statementsare preparedin accordancewith International Financial ReportingStandardsIFRS and arestatedin TrinidadandTobagodollars. They havebeenpreparedon thehistorical cost basis except for the measurementat fair value, of financial assetsat fair valuethroughprofit or loss,availablefor sale financialassetsandproperties.

The accountingpolicies usedareconsistentwith thoseof thepreviousyears.

The Group has not applied the following IFRS and IFRIC Interpretationsthat have becomeeffectiveon or after 1 January2006, as theydo not apply to the activitiesof the Group.

Standards:

IFRS 6 Explorationfor andEvaluationof Mineral Resources

Interpretations:

IFRIC 5 Rightsto Interestsarisingfrom Decommissioning,RestorationandEnvironmentalRehabilitationFunds

IFRIC 6 Liabilities arisingfrom Participatingin a Specific Market-WasteElectricalandElectronicEquipment

IFRIC 7 Applying theRestatementApproachunder lAS 29:FinancialReportingin HyperinflationaryEconomies

IFRIC 8 Scopeof IFRS 2

The Group has not appliedIFRS 7 - Financial Instruments:Disclosures,and the amendmenttolAS I - Presentationof Financial Statements:Capital Disclosures,as they are applicable forannual periods beginning on or after 1 January,2007. These standardswill not have anyquantifiableimpacton thefinancial statementsbut will require additionaldisclosures.

12



Continued

2. Statement of Accountin2 Policiescontinued

b Use of estimates

The preparationof financial statementsin accordancewith International Financial ReportingStandardsrequires managementto make estimatesand assumptionsthat affect the reportedamountof assetsand liabilities anddisclosureof contingentassetsand liabilities atthe dateof thefinancial statementsand the reportedamountsof revenuesand expensesduring the reportingperiod. Actual resultscould differ from thoseestimates.

The significant accountingjudgementsand estimatesmade by managementin applying theGroup’s accountingpoliciesareasfollows:

i Fairvalues

The fair values of financial assetsare based on quotedmarket prices for specific orsimilar instruments.

The fair values of properties are based on independentprofessionalopen marketvaluations.

ii Impairmentof assets

Managementassessesat eachbalancesheetdatewhetherassetsare impaired.An assetisimpaired when the carrying value is greater than its recoverableamount and there isobjectiveevidenceof impairment.Recoverableamount is the presentvalueof the futurecash flows. Provisionsaremadefor the excessof the carryingvalue over its recoverableamount.

iii Deferredtax assets

Managementusesjudgementin determiningwhether it is probablethat future taxableprofits will be availableagainstwhich unusedtax lossescan be utilised before deferredtax assetsarisingtherefromare recognised.

iv Property,plant andequipment

Managementexercisesjudgementin determiningwhether future economicbenefitscanbe derivedfrom expendituresto be capitalised,andthe useful lives andresidualvaluesoftheseassets.

v Long-term insurancecontract liabilities

Managementdetermines, at the inception of the contract, assumptionsregardingmortality, morbidity, lapses,surrenders,return on investments,and the level of expensesthat havea material effect on the valuationof insuranceliabilities. Theseassumptionsarebasedon pastexperienceas well as prevailingandexpectedfuture conditions. Theyare reviewed annually and are changedas current and future expectedcircumstanceschange.

13



Continued


b Useof estimatescontinued

vi Short-terminsurancecontractliabilities

Managementestimatesthe costof claims incurred but not settledat the balancesheetdate and claims incurred but not reporteduntil after the balancesheetdate, based oninput from adjustorsandpast claimsdevelopmentexperience. Estimatesarealso madefor unexpiredrisks, calculatedas a percentageof unearnedpremiums.The estimatesarereviewedfor adequacyon an ongoingbasisandtheprovisionsareadjustedaccordingly.

c Comparatives figures

Certaincomparativefigureswere restatedto facilitate changesin presentation.Thesechangeshadno effect on the previouslyreportedsurplus.

d Basisof consolidation

Group

The consolidatedfinancial statementsincludethe accountsof Maritime Life CaribbeanLimitedand its subsidiaries. All significant inter-company balances and transactions have beeneliminatedon consolidation.

The financial statementsof the subsidiariesarepreparedfor the samereportingyearas the parentcompany,usingconsistentaccountpolicies.

Subsidiariesare all entities over which the Group has the power to govern the financial andoperatingpolicies generallyaccompanyinga shareholdingof morethan 50% of the voting rights.Subsidiariesare fully consolidatedfrom the date on which control is transferredto the Group.They aredeconsolidatedfrom the datecontrol ceases.

The Group usesthe purchasemethodof accountingfor theacquisitionof subsidiaries.Thecostofthe acquisitionis measuredas the fair valueof the assets,equity instrumentsand intangibleassetsgiven andliabilities incurredor assumedat thedate of exchangeplus costsdirectly attributabletothe acquisition.The excessof the costof the acquisitionover the fair valueof the Group’s shareof the identifiablenet assetsacquiredis recordedas goodwill.

Therewere no acquisitionsor disposalsof subsidiariesduringtheyear.

Company

Investmentsin subsidiariesare accountedfor atcost.

14



Continued


e Cash and cash equivalents

For the purposeof the statementsof cash flows, cashand cashequivalentscomprisecash andbank balances,bank overdraftsandshort term interestbearinginstruments.

1 Inventories

Inventoriescomprisegoods held for resaleand arestatedat the lower of cost and net realisablevalue. Cost is determinedon the weightedaveragecostbasis.

g Financial assets

i Financialassetsat fair valuethroughprofit or loss

Quoted securitiesare statedat fair values basedon quotedmarket prices. Gains andlossesarisingfrom changesin fair valuesare includedin investmentincome.

ii Available for sale financial assets

Quotedsecurities are statedat fair values basedon quotedmarket prices. Gains andlossesarisingfrom changesin fair valuesare includedin investmentrevaluationreservein shareholders’equity.

Unquoted securitiesare statedat cost less provision for any permanentdiminution invaluethereof.

iii Held to maturity investments

Governmentand otherbonds with fixed or determinablepaymentsand fixed maturity,purchasedwith theintention of beingheld to maturity arestatedat amortisedcost.

iv Loansandreceivables

Mortgagesandother loans are statedat amortisedprincipal lessprovisionfor loan losses.Specific provisionsare madefor potentiallosseson non-performingloanson the basisofnet realisablevalue. Periodic portfolio reviews areconductedduring the courseof eachyearto determinethe adequacyof provisions.

Policy loansare statedatoutstandingprincipal plus accruedinterest.

h Investmentproperties

Investmentpropertiesare statedprimarily at fair values basedon independentprofessionalopenmarket valuationsin 2006 andadditionsthereafterat cost. It is the Group’s policy to revalue itsinvestmentpropertiesevery three years. Gains and lossesarisingfrom changesin fair values areincludedin investmentincome.

15



Continued

2. Statementof Accounting Policiescontinued

I Property, plant and equipment

i Propertiesare stated primarily at fair values based on independentprofessionalopenmarket valuationsin 2004 and 2006 and additionsthereafterat cost, less accumulateddepreciation. It is the Group’s policy to revalueits propertiesevery threeyears. Gainsand lossesarising from changesin the fair valuesare includedas revaluationsurplusincapital reserve.

ii Other property, plant and equipment are stated at historical cost less accumulateddepreciation.

iii Property,plant andequipmentaredepreciatedover their estimateduseful lives usingthestraight line methodat thefollowing rates:

Buildings 2% perannumFurniture/equipment 8.33-25%perannumMotor vehicles 25% per annumEquipmenton lease 10-50%per annum

j Provisions

Provisions are recordedwhen there is a presentor constructiveobligation as a result of pastevents,it is probablethat an outflow of resourceswill be requiredto settle the obligation, andareliableestimateof the amountcan bemade.

k Insurance contracts

Insurancecontractsare those contractsunder which the Group acceptssignificant insuranceriskfrom the policyholderby agreeingto compensatethe policyholderif an insuredeventadverselyaffectsthe policyholder. Insurancerisk is significant if, andonly if, an insuredeventcould causethe paymentof significant additional benefits in any scenario,excluding scenariosthat lackcommercialsubstance.Oncea contracthasbeenclassifiedas an insurancecontract it remainsaninsurancecontractuntil the liability is extinguishedor expired.

1 Long term insurancecontracts

Long term insurancecontractsareclassifiedas thosewith discretionaryparticipationfeaturesandthose without discretionary participation features. For insurancecontracts with discretionaryparticipation features, the guaranteedelement has not been recognisedseparately. Thesecontractsare valued using a modified net premiummethod for traditional insurancesand fundvalue for insurancecontractswith fund accumulations.

The valuationby the Group’s consultingactuaryat December31, 2006 revealeda surplusbeforetax amountingto $2,570,0002005 : $2,826,000,of which $1,788,0002005 : $2,036,000isallocatedto shareholders’equity and $782,0002005 : $790,000is allocatedto "participating"policyholders.

16



Continued


m Short term insurancecontracts

Shortterm insurancecontractsgenerallyrun for a period of twelve months and are subject toreview and renewalat the end of the period. Thesecontractsincludeproperty, motor, liability,marine, pecuniary loss and personalaccident insurancecontracts. The liabilities arising fromshort term insurancecontractsinclude provisionsfor unearnedpremiums,unexpiredrisks andoutstandingclaims.

n Provisions for unearned premiums

Provisionsfor unearnedpremiumsrepresentthe proportionsof the premiumswritten in the yearwhich relateto periodsof insurancesubsequentto the balancesheetdateandarecomputedon thedaily pro-ratafractional basis - the "365ths" method,exceptfor mortgageindemnity, contractorsall risk, erection all risk andperformancebond businesssomeof which carry a policy period inexcessof twelve months. The unearnedpremiums on these policies are pro-rated over theperiodsof theguarantees/policies.

o Provisionsfor unexpired risks

Provisionsfor unexpiredrisks representamountsset asideat the year-end,in additionto unearnedpremiums, in respectof subsequentrisks to be borne by the Group underinsurancecontractsinforce at theyear-endandarecomputedas apercentageof unearnedpremiums.

p Provisionsfor outstanding claims

Provisionsfor outstandingclaims comprisethe estimatedcost of all claimsand claims expensesincurredbut not settledatthe balancesheetdate, Provisionsarealsomadefor claimsandclaimsexpensesincurredin 2006 but not reporteduntil afterthe balancesheetdate. Differencesbetweenthe provisions for outstanding claims and claims expensesand subsequentsettlementsandrevisionsare includedin the statementsof incomein lateryears.

q Liability adequacytest

The Group assessesat each balancesheetdate whether its recognisedinsuranceliabilities areadequate,using current estimatesof future cash flows under its insurance contracts. If thatassessmentshowsthat the carryingamountof its insuranceliabilities is inadequatein light of theestimatedfuture cash flows, the entiredeficiencyis recognisedin the statementof incomeandtheamount of the relevant insurancecontract liabilities is increased. The minimum reservescalculatedbasedon the liability adequacytest at December31, 2006 were lower thanthe actualreservesheld in thebalancesheet.

17



Continued

2. Statement of Accounting Policiescontinued

r Impairment of reinsuranceassets

A reinsuranceassetis impaired if, and only if, thereis objectiveevidence,as aresultof an eventthat occurredafter initial recognition of the reinsuranceasset,that the Group may not receiveallamountsdueto it under the terms of the contractandthat eventhas a reliably measurableimpacton the amount that the Group will receivefrom the reinsurer. Impaired lossesare recognisedinthestatementof income.

s Revenuerecognition

i Premiumsfor insurancecontractsareshownon a receivablebasis.

ii Investment income derived from long term insurance business is allocated topolicyholders, whilst that derived from short term insurance and other operationsisallocatedto shareholders.Interestincome is accountedfor on the accrualsbasis whilstdividendsareaccountedfor whenreceived.

iii Financechargesearnedon instalmentcredit loansare takeninto incomeunder the "sumof the digits" method. Thismethodis basedon the assumptionthat for eachpayment,theinterestearnedis greater in the early periodsof the debt as the outstandingprincipal islarger thanin latermonthswhenmost of the advanceshavebeenrecovered.The balanceof interestchargedon the principal outstandingis carried forwardasunearned.

iv Financechargesearnedon mortgages,amortisedloans and financeleasesare taken intoincome under the "annuity" method. Under this method, interest is calculatedso as toproducea constantperiodic rate of return on the outstandingprincipal balance.

v Accrual of financechargesceaseswhen a paymenton a loan is contractually90 days inarrearsand will only be recognisedon a cashbasiswhenthe loan statusis determinedtobecurrent.

vi Revenuefrom the saleof goods is recognisedupon delivery and stated net of discountsandvalue addedtax.

vii Rentals under operating leasesare recognisedon a straight line basis over the leaseterm.

t Underwriting results

Underwriting resultsarestatedafter allowing for reinsurancepremiumsandclaimsrecoveriesandafter making adequateprovisionsfor unearnedpremiums,unexpiredrisks andoutstandingclaims.

18



Continued

2. Statementof Accounting Policiescontinued

u Foreign currencies

Foreign currencytransactionsduring the yearare translatedinto Trinidad and Tobagodollars attheexchangeratesruling atthe date of the transactions.Monetaryassetsand liabilities in foreigncurrenciesatthe balancesheetdate areexpressedin Trinidad andTobagodollarsat the exchangeratesruling at that date. Profits andlossesthus arisingare dealtwith in the statementsof income.

v Taxation

Deferredtaxationis provided usingthe liability methodfor all temporarydifferencesbetweenthecarrying amountsand tax basesof assetsand liabilities using currentcorporationtax rates.Theprincipal temporary differences arise from depreciation of property, plant and equipment,unrealisedgain/lossesand tax lossescarried forward. Deferred tax assetsrelating to the carryforward of unusedtax losses are recognisedto the extentthat it is probable that future taxableprofit will beavailableagainstwhich the unusedtax lossescanbe utilised.

Corporationtax is chargedannuallyat 15% of investmentincomerelatingto long term insurancefunds otherthanapprovedpensionplans lessinvestmentexpensesallowablein relationthereto.A further10% 2005: 15% corporationtax is chargeableon net surplusesarisingfrom the annualactuarialvaluations,whenthesearetransferredto shareholders’equity.

Corporationtax is chargedannuallyat 25% 2005: 30% in respectof surplusesfrom short terminsuranceandotheroperations.

w Staffpensions

All full time employeesof theGroup participatein a DefinedContributionPensionPlanoperatedby the parentcompany. The Group’s contribution to this plan is chargedto the statementsofincomeas incurred.

x Administered funds

The assetsand liabilities under administrationby the Group havenot been included in thesefinancial statements, Grossassetsunder administrationamountedto $21,842,000at December31, 2006 2005:$21,256,000.

19



Continued

Company Group2005 2006 2006 2005

$,000 $‘OOO $,000 $‘OOO

3. CurrentAssets

783 233 Cashandbankbalances 6,122 8,312237,272 201,019 Shortterm interestbearinginstruments 165,500 249,965

-- CentralBank reserveaccount 13,858 2,733

33,469 36,344 Accountsreceivable 42,054 40,62011,082 12,362 Reinsuranceassets 85,653 78,62827,146 23,658 Amountsduefrom subsidiaries - -

- - Inventories 3,283 3,1381,421 - Land development 5,762 7,183

- Taxation recoverable 1,040 1,066

311,173 273,616 323,272 391,645

a Reinsuranceassets

5,449 5,449 Amountsduefrom reinsurers 7,608 11,481

4,334 5,662 Reserveson long term insurancecontracts 5,662 4,334Reinsurersshareof:

1,299 1,251 Outstandingclaims 37,415 34,322- - Claimsincurredbut not reported 7,233 6,605- - Unearnedpremiums 25,800 20,359

Unexpiredrisks 1,935 1.527

-5,633 6,913 78,045 67,147

11,082 12,362 85,653 .78,62a

b Fair value of current assetsdepositedwithandlor pledgedto the order of the Inspectorof Financial Institutions under the

201,961 provisionsof the InsuranceAct, 1980. 274,80a

c The FinancialInstitutionsAct 1 993, requiresthat the subsidiary, Fidelity Finance andLeasing Company Limited, hold andmaintain an accountwith the Central Bankof Trinidad and Tobago to be called areserveaccountwhich, at present, is to beequivalentto 9% of the total liabilities todepositors. This account is non-interestbearing.

20



Continued

Company Group2005 2006 2006 2005

$,000 $‘OoO $,000 $‘OOO

4. Deferred Tax Assets

Deferredtax assetsarisingfrom:

- - Tax lossescarriedforward 705 1,024Depreciationof property,plant andequipment 134 530

839 1,554

a Movementfor the year:

- - Balancebrought forward 1,554 2,621Effectof reductionin tax rate from 30%

-- to 25% 437

Provision for the year 715 630

Balancecarriedforward 839 1,554

5. Investments in Subsidiaries

55,585 55,585 Sharesatcost

a Investmentsin subsidiariespledged to theorder of the Inspector of FinancialInstitution under the provisions of the

24.292 34,437 InsuranceAct, 1980.

21



Continued

Company Group2005 2006 2006 2005

$,000 $‘oOO $,000 $‘OOO

6. Financial Assets

Financial assetsat fair value throughprofit or loss

180,897 176,982 Quotedsecurities 182.201 186,545

Available for sale financial assets

30,147 27,838 Quotedsecurities 27,838 30,147529 529 Unquotedsecurities 13,118 13,126

30,676 28,367 40,956 43,273

Held to maturity investments

54,648 66,133 Quotedsecurities 91,245 80,02244,840 74,868 Unquotedsecurities 112,537 83,955

99,488 141.001 203,782 163.977

Loans and receivables

42,028 46,682 Policy loans 46,682 42,02833,746 51,804 Mortgageandother loans 226,893 139,924

75,774 98,486 273,575 182,022

386,835 444,836 Total 700,514 575,817

a Financialassetsat fair valuethroughprofitor loss

l43,LJ. Quotedsecuritiesatcost Ui2

b Available for sale financial assetsQuotedsecuritiesat cost

c Held to maturity investnientsQuotedsecuritiesat marketvalue

22



Continued

Company Group2005 2006 2006 2005

$,000 $‘OOO $,000 $‘OOO

6. Financial Assetscontinued

d Mortgageand otherloans

34,296 51,939 i Loansoutstanding 228,930 143,134550 135 Less: provision for loan losses 2,037 3,140

33,746 5l,804 226,893 139.994

ii Movementsin the provision forloan losses:

550 550 Balancebrought forward 3,140 3,320- 415 Provisionfor the year 14 124

- Write offs and adjustments 1,117 304

550 135 2,037 3,140

iii Sectoralanalysis

30,334 46,133 Consumer 159,083 95,9933,412 5,671 Commercialandindustrial 67,810 44,001

33,746 5L804 226,893 139,994

iv Loanson which interestis not704 1,047 beingaccrued 5,707 5,057

e Fair valueof financial assetsdepositedwithand/orpledgedto the orderof the InspectorFinancialInstitutionsunderthe provisionsof

346,170 399,195 the InsuranceAct, 1980. 429 _375,670

23



Continued

Company Group2006 2006

6. Financial Assetscontinued

Information regardingbondsanddebenturesheldat December31, 2006:

Rangeof RangeofInterest Interest

rates Amount Amount rates% per annum $‘OOO $‘OOO % per annum

Contracted maturity

10.75- 10.75 8,448 Within one year 8,722 10.75- 10.886.00 - 10.75 64,958 Betweentwo andfive years 89,585 6.00 - 10.886.00 - 10.75 202,760 Over five years 242,301 5.46 - 10.88

276.166 340,608

Company Group2005 2006 2006 2005

$,000 $‘OOO $,000 $,000

7. Investment Properties

55,150 55,203 At beginningof year 67,203 67,15053 1,421 Additions 1,421 53

- 15,576 Gainsfrom fair valueadjustments 15,576 -

55,203 72,200 84,200 67,203

2.253 2,279 a Rental income 2.279 2,253

713 711 b Directoperatingexpenses 711 713

c Investment properties pledged to theorder of the Inspector of FinancialInstitutions under the provisions of the

_5545 InsuranceAct, 1980

24



Continued

Furnituref Motor Equipment8. Property, Plant andEquipment Properties equipment vehicles on lease Total

$‘OOO $‘OOO $‘OOO $‘OOO $‘OOOGroup

Cost/ValuationAt beginningof year 114,171 65,826 4,919 22,861 207,777Additions 2,214 4,069 571 11,067 17,921Revaluation 31,432 - - - 31,432Disposals 10 1,068 841 1,919

147,817 69,885 4,422 33,087 255,211

Accumulated depreciationAt beginningof year 4,027 49,223 2,794 7,829 63,873Chargefor the year 1,898 5,108 872 5,641 13,519Revaluation 4,968 - - - 4,968Disposals 937 510 1,447

957 54,331 2,729 12,960 70,977

Net book valueAt December31,2006 146,860 15,554 1,693 20,127 184,234

At December31,2005 110,144 16,603 2,125 15,032 143,904

Company

Cost/ValuationAt beginningof year 110,068 47,840 3,182 - 161,090Additions 393 3,098 448 - 3,939Revaluation 31,432 - - - 31,432Disposals 343 343

141,893 50,938 3,287 - 196,118

Accumulated depreciationAt beginningof year 3,427 36,934 1,444 - 41,805Chargefor the year 1,805 3,658 697 - 6,160Revaluation 4,968 - - - 4,968Disposals - - 236 - 236

264 40,592 1,905 - 42,761

Net book valueAt December31, 2006 141,629 10,346 1,382 - 153,357

At December31,2005 106,641 10,906 1,738 - 119,285

25



Continued

Company Group2005 2006 2006 2005

$,000 $‘OOO $,000 $,000

8. Property, Plant and Equipment continued

a Freeholdpropertiespledgedto the order ofthe Inspectorof FinancialInstitutionsunder

130,500 theprovisionsof the InsuranceAct 1980. 130,500 97,700

b Written down valueof the propertieshad91,049 89,703 revaluationsnotbeendone. 90,529 91,968

2 1,593 23,207 c Revaluationsurplusbrought forward 23,207 21,5931,614 36,400 Revaluationsurplusfor the year 36,400 1,614

23,207 59,607 Revaluationsurpluscarriedforward 59,607 23.207

9. Current Liabilities

920 5,737 Bankoverdraft 9,000 2,496- - Customers’deposits 8,750 6,372- - Other funding instruments 1,508 1,450

36,544 39,076 Accountspayableand accruals 71,699 64,6461,665 1,424 Reinsuranceliabilities 15,514 12,486

105 217 Taxationpayable 217 105

39,234 46,454 106,688 87,555

a Sectoralanalysisof customers’depositsandotherfunding instruments:

- - Corporateand commercialsector 2,471 1,680- - Otherfinancial institutions 1,530 2,355

Personal 6,257 3.787

- 10,258

b Other funding instruments are secured byspecific assets including Trinidad andTobagoGovernmentsecurities.

26



Continued

Company Group2005 2006 2006 2005

$,000 $‘OOo $,000 $‘OOO

10. Insurance Contracts

368,763 397,906 With discretionaryparticipation features 397,906 368,763433,429 433,624 Without discretionaryparticipationfeatures 433,624 433,429

8,695 9,745 Provisionsfor outstandingclaims 88,515 80,426Provisionsfor claims incurredbut not

-- reported 15,754 14,347

-- Provisionsfor unearnedpremiums 57,522 42,267

Provisionsfor unexpiredrisks 4,364 3,237

810,887 841,275 997,685 942,469

a Movementsfor the year

783,856 810,887 Balancebroughtforward 942,469 892,87824,572 28,010 Increasein reserves 38,543 25,587

430 1,098 Increasein claims 5,775 8,4692,889 1,280 Increasein reinsuranceassets 10,898 15,535

810,887 841.275 Balancecarriedforward 997,685 942A2

8 10,887 841,275 b Insurancecontracts 997,685 942,4695,633 6,913 Less: reinsuranceassets 78,045 67,147

805,254 834,362 919,640 8752

Represents

368,763 397,906 With discretionaryparticipationfeatures 397,906 368,763429,095 427,962 Withoutdiscretionaryparticipationfeatures 427,962 429,095

7,396 8,494 Provisionsfor outstandingclaims 51,100 46,104Provisionsfor claims incurredbut not

-- reported 8,521 7,742

-- Provisionsfor unearnedpremiums 31,722 21,908

Provisionsfor unexpiredrisks 2,429 1.710

JTh32

27



Continued

Company Group2005 2006 2006 2005

$,000 $‘OOo $,000 $‘OOO

11. Deferred Tax Liabilities

Deferredtax liabilities arising from:

Depreciationof property,plant144 86 and equipment 642 821672 637 Other 637 672

816 723 1,279 1,493

a Movementsfor the year

834 816 Balancebrought forward 1,493 1,903Effect ofreductionin tax ratefrom 30% to

139 - 25% - 317121 93 Provisionfor theyear 214 93

816 723 Balancecarriedforward 1,279 1,493

12. StatedCapital

AuthorisedAn unlimited numberof ordinary sharesof no parvalue.

Issuedandfully paid10,871,387ordinarysharesof no parvalue,

13. CapitalReserve

Capitalreservecomprisessharepremiumand revaluationsurpluses.

14. Catastrophe Reserve

The CorporationTaxes Act was amendedin 1994 by Section lOD such that contributionsto the catastrophereservefund up to a maximum of 20% of net premiumincomeon propertybusinessare allowedas a deductionin computingchargeableincome.

15. GeneralReserve

The general reserverepresentsappropriationsof retained earningsfor any possibleunforeseenlossesoiifinancialassetsfor which alternativespecificprovision is notmade.

16. Investment Revaluation Reserve

The investmentrevaluationreserverepresentsgains and lossesarising from changesin fair valueof availablefor salefinancial assets.

28



Continued

17. StatutoryReserves

a Section 171 of the InsuranceAct, 1980 requiresthat at least 25% of the profit of the subsidiary,Maritime General InsuranceCompanyLimited, for the current year shall be appropriatedtowardssurplus until such surplus equals or exceedsthe reservesin respectof its outstandingunexpiredpolicies.

b The Financial InstitutionsAct, 1993 providesthat no lessthan 10% of the netprofit afterdeductionoftaxes of the subsidiary,Fidelity Finance and Leasing CompanyLimited, shall be transferredto areservefund until the amountstandingto the credit of the reservefund is equalat leastto its paid upcapital.

Company Group2005 2006 2006 2005

$,000 $‘OOO $,000 $,000

18. Investment Income

35,118 39,362 Interestincome 54,804 47,9752,172 8,383 Dividends 2,728 2,272

12,501 - Realisedgains - 15,98620,088 19,486 Unrealisedgains 19,349 20,342

69,879 67,231 76,881 86,575

19. Surplus before Taxation

Surplusbefore taxationis arrived atafteraccountingfor the following items:

5,186 6,086 Depreciationnet 13,178 9,729-

- Cost of sales 3 1 ,924 28,45918,629 19,386 Staff costs 28,889 27,184

445 570 Pensioncosts 823 729

20. Taxation

a Tax chargefor theyear

Currentyear1,850 1 ,840 Insurancerevenuestatement 1 ,840 1,850

404 239 Shareholders 2,000 1,141

2,254 2,079 3,840 2,991233 657 Prioryear 1,066 23318 93 Deferredtaxation 501 657

2,003 1,329 3,275 3,415

29



Continued

Company Group2005 2006 2006 2005

$‘OOO $‘OOO $‘OOO $‘OOO

20. Taxationcontinued

b Reconciliation

Income taxes in the statementsof incomevary from amountsthat would be computedby applying the statutory tax rates for thefollowing reasons:

3,886 3,628 Surplusbeforetaxation 10,638 13,431

1,166 907 Tax at applicablestatutoryrates 2,660 4,030Effectof different tax ratesof life

277 184 insurancecompanies 184 2771,001 819 Itemsnot subjectto tax 277 643245 302 Temporarydifferences 396 12

-- Tax losses 480 242

132 515 Other 606 51

2,003 1,329 3,275 3,415c Tax losses

At December 31, 2006 there wereunrelieved tax losses in subsidiarycompanies amounting to approximately$22,759,0002005: $24,778,000availablefor set off against future chargeableprofitsof thosecompanies.

21. Cash and CashEquivalents

783 233 Cashandbankbalances 6,122 8,3 12920 5,737 Bank overdraft 9,000 2,496

237,272 201,019 Shortterm interestbearinginstruments 165,500 249,965

237,135 195,515 162,622 255,78122. Capital Commitments

Mortgageloans conditionallyapprovedby3,366 5,314 the directorsbutnotyet takenup 5,314 3,366

23. Future Income from Operating Leases

- - Within one year 7,675 4,673Betweentwo and five years 11,330 10,649

19,005 15,322

30



Continued

24. Related Party Transactions

Partiesareconsideredto be relatedif onehas the ability to control or exercisesignificant influence,overthe other in making financialandoperationaldecisions.

Key managementpersonnelare those personshaving the authority and responsibility for planning,directingandcontrollingthe activities of the Group.

A numberof transactionsare enteredinto with relatedparties in the normal courseof business.Thesetransactionswerecarriedout on commercialtermsandconditionsat marketrates.

Balancesand transactionswith relatedpartiesduring the yearwere as follows:

Company Group2005 2006 2006 2005

$,000 $,000 $,000 $‘OOO

Assets

77,996 112,586 Balancedue from subsidiaries - -2,976 2,986 Loansto keymanagementpersonnel 6,128 3,5697,276 7,276 Provisionsfor doubtful debts - -

Liabilities

- - Key managementpersonnel 236 -

Income

3,975 14,509 Subsidiaries - -186 172 Keymanagementpersonnel 341 213

Expenses

964 1,154 Subsidiaries - --

- Provisionsfor doubtful debts - -

Key managementcompensation

4,372 7,359 Short termbenefits 8,612 5,482124 215 Postemploymentbenefits 267 162

31



Continued

25. Insurance Contracts - assumptions, chan2es in assumptions andsensitivity

a Long term insurancecontracts

The Actuarial liabilities for long term insurancecontractsaredeterminedin accordancewith theprovisionsof the InsuranceAct, 1980 and following generallyacceptedactuarialpracticein theRepublic of Trinidad andTobago. The InsuranceAct requiresthat the actuaryplacea "proper"value on the liabilities. Adjustmentsare madeif projectedfuture cashflows using bestestimateassumptionsindicate that net premiumreservesare inadequate.During the currentyearno suchadjustmentswere requiredandno changeswere madeto netpremiumassumptions.

Sensitivity

Typically, net premiumassumptionsmay not be changedfor the life of a policy. Current bestestimateassumptionswere used for the liability adequacytests. The sensitivity of the liabilityadequacytestcarriedout was as follows:

Scenario

ChangeIn

Variable

% Change in MinimumReservebasedon Liability

AdequacyTest

Increasein interestandexpenseinflation +1% -7.1%Decreasein interestandexpenseinflation -1% +8.6%Increasein mortality life insuranceDecreasein mortality annuities

+10% +1.1%

Decreasein mortality life insuranceIncreasein mortalityannuities

-10% - 1.1%

Increasein lapses +10% -1.2%Decreasein lapses -10% +1.2%Increasein expenses +20% +4.9%Decreasein expenses -20% -4.8%Increasein critical illness incidence +10% +0.4%Decreasein critical illness incidence -10% -0.4%

b Short term insurancecontracts

The most significant liability arising from short term insurancecontractsis the provisions foroutstandingclaims. Theseprovisionsare determinedusing input from loss adjustorsand pastexperience.To this is addedprovisionsmade for claims and claims expensesincurred but notreporteduntil after the balancesheetdate. Theseprovisionscannotbe determinedwith certaintybecauseof the substantialdelay betweenthe occurrence,reporting and final settlementof theclaims. Theyare reviewedandamendedon an ongoingbasisas claimsaresettledand new claimsreported.

Experienceand industry information are used to assessthe impact of external factors such aslegislative changes,judicial decisions and technologicalchanges. The claims reserves aresensitiveto theseassumptions.

32



Continued

26. InsuranceRisk

a Long term insurancecontracts

Policy benefitsunderlong term insurancecontractsbecomepayablewhenan insurableeventsuchas deathor critical illness occurs,at a specifiedtimesuch as atthe retirementdatespecifiedby anannuity contractand on the exerciseof policy options such as surrenderor requestfor a policyloan by a policyowner.

Underwritingrisk inherent in long term insurancecontractsis the risk that the Group’s rateswillprove inadequatebecauseexperiencemortality, morbidity, lapse, expense,averagesize casesetc. worsensvis a vis pricing parameters.

Longevity Risk on annuity business

The Group is exposedto a risk exposureto improvementin mortality on its annuity business.This risk is managedby usinga conservativemortality assumptionin pricing including mortalityimprovementprojections.

Mortality and Morbidity Risk

Mortality andmorbidity risks includingcritical illness incidenceare managedthroughpricing andunderwriting strategiesand reinsurancearrangements. Mortality improvementcontinues to beexperienced,howeverthe Group is exposedto the risk of a suddenand severespike in mortalityrates due to either a global or region specific pandemic. These risks are mitigated throughcatastrophereinsurancearrangements.

Lapse Risk

Lapserisk is managedthroughproductdesignandconservationstrategies.

ExperienceStudies

Experiencestudiesare carried out on a regular basis to monitor experiencevis a vis pricingassumptionsandto determineexperienceassumptionsfor cashflow andprofitability projections.

33



Continued

26. Insurance Riskcontinued

b Short term insurance contracts

Insurancerisks are acceptedfrom insuredsin considerationfor premiumscalculatedon the basisof the client, company and the industry experiencewith particular types of risks. The Groupcarriessignificant exposureon the various lines of businesswritten, with the most significantbeing themotorandpropertylines. Material lossesarisefrom low frequency,high severityeventssuchas catastrophies,majorfires andmotor liability claims. The losspotential for theseevents islimited by cedingcertainportionsof theserisks to reinsurers.

Reinsurersare selectedbased on their track record and capability to meet their contractualobligations. In addition, the ratings assignedto reinsurersby the international rating agenciessuchas A.M. BestandStandardandPoors areusedin determiningwhetheror not reinsurersareacceptable.Theseratingsaremonitoredon anongoingbasis.

27. Financial Risk

a Interest rate risk

The Group is exposedto interest rate risk through the effect of fluctuations in the prevailinglevelsof interestrateson interestbearingassetsand liabilities. Exposureis managedlargely bythe use of naturalhedgesthat arise by matching interest sensitive assetswith liabilities of asimilar nature.

b Credit risk

The Group has set an upper limit of total assetsthat can de investedwith any one companyorgroup of related companiesso as to avoid any significant concentrationof credit risk. TheGroup’s loan portfolio is adequatelysecuredand where necessary,provisions are made forestimatedlosseswhen, in the opinionof the directors,the relatedloansare impaired.

c Liquidity risk

The Group hasset a minimum percentageof its assetsandhas un-drawncredit lines availabletomeetits short termobligationsas theyfall due.

d Currency risk

Most of the Group’s liabilities are denominatedin local currencyand are matchedwith localassets.The strategyfor dealingwith foreign exchangerisk is to as far as possibleoffset foreigncurrencyliabilities with assetsdenominatedin the samecurrency.

34



Continued

28. Fair valueof Financial Assets andLiabilities

Financialassetsand liabilities are carriedat amountsthatapproximatetheir fair valuesat thebalancesheetdate. The following methodshavebeenusedto estimatetheir fair value:

a Current assets

Since theseassetsareshort termin nature, thevaluesare takenas indicativeof realisablevalue.

b Financial assetsat fair value through profit or loss

Quotedsecuritiesarestatedat quotedmarketprices. Marketvalueswere determinedon the basisof informationavailableatDecember31, 2006.

c Available for salefinancial assets

Quotedsecuritiesare statedat quotedmarketprices. Marketvaluesweredeterminedon the basisof information available at December 31, 2006. Unquoted securities are statedat cost lessprovisionfor any permanentdiminution in valuethereof.

d Held to maturity investments

Governmentandotherbondsarecarriedat amortisedcostandareconsideredto reflect fair valuesasthey arebeingheld to maturity.

e Loans and receivables

Loans and receivablesare statednet of specific provisions for losses.These assetsresult fromtransactionsunder typical market conditions and their values are not adversely affected byunusualterms. The inherent ratesof interestin the portfolio approximatemarketconditionsandyield discountedcashflow valueswhich are substantiallyin accordancewith financial statementamounts.

f Current liabilities

The carrying amountsare a reasonableestimateof the fair values becauseof their short-termnature.

35



Continued

29. Contingent Liabilities

During the period from March to June 2002, the State laid several charges indictably on severalindividualsandcompaniesincluding two of the Company’ssubsidiaries.The chargescover offencesthatareallegedto haveoccurredbetweenthe period from July 1, 1996 to December21, 2000,and constitutefor thegreaterpart the following:

a corruptlyreceivingsignificant funds on accountof andpayingsuchfunds to andon behalfof anindividual who wasat the time performingduties in which the public hadan interest;

b aiding andabettingthesaid individual to misbehavein public office; and

c conspiringto convertfunds that the Stateallegesthesubsidiarieshadreasonablegroundstosuspectwere part of proceedsof aspecifiedoffence.

Additionally, on May 20, 2004, the Companyand two of its subsidiaries,togetherwith othercompanies,were charged with the offence of conspiringwith other persons to obtain contractsand paymentsorsettlementsthereafter,of a total face value of up to $1,600,000,000contrary to Section 341 of theLarcenyAct Chapter11:12.

All of thesematters are currently before the Courts. No provision has beenmade in these financialstatementsin respectto any of the allegedcharges. Legal fees in connectionwith thesemattersareexpensedas incurred.

30. Dividends

The Boardof Directorshas proposeda dividend of 220 persharefor the year ended December31, 2006.This dividend, amountingto $2,391,705is not recordedas a liability in the BalanceSheetin accordancewith InternationalAccountingStandard10.

36



Continued

2006 2005Placeof % %

31. Subsidiaries incorporation shareholding shareholding

Fidelity FinanceandLeasingCompanyLimitedAcceptanceof depositsandcarryingon the Republicofbusinessof afinancehouseor financecompany, Trinidadtrustcompanyandleasingcorporation andTobago 100 100

RepublicofInter-IslandMortgageFinanceLimited Trinidad

Grantingof mortgageloans andTobago 100 100

RepublicofKeystonePropertyDevelopersLimited Trinidad

Building contractorsandreal estatedevelopers andTobago 100 100

RepublicofLas CuevasSouthWestLimited Trinidad

Land development andTobago 100 100

Maritime GeneralInsuranceCompanyLimited RepublicofUnderwritingall classesof generalinsurance Trinidadbusinessin TrinidadandTobago andTobago 92 92

RepublicofMaritime LeasingCompanyLimited Trinidad

Leasingof equipmentandcommercialproperties andTobago 100 100

Maritime ResidencesLimited Republic ofDevelopment,tradeandrental of newly Trinidadconstructeddwelling houses andTobago 100 100

RepublicofNettletonsLimited Trinidad

Retail operations andTobago 100 100

RepublicofComteqTechnologicalServicesCompanyLimited Trinidad

On-line sales andTobago 100 100

RepublicofMamett SecurityCompanyLimited Trinidad

Provisionof security services andTobago 100 100

37

Documents

THE MARITIME FINANCIAL GROUP CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31… · 2017. 7. 14. · Kenny Sohun General Manager-Retail Operations BANKERS Scotiabank Trinidad & Tobago