Kuwait Insurance Company S.A.K.P
Kuwait
Annual Financial Statements and
Independent Auditors' Report
31 December 2014
Kuwait Insurance Company S.A.K.P
Kuwait
Annual Financial Statements and
Independent Auditors' Report
31 December 2014
C o n t e n t s
Page
Independent Auditors' Report 1 - 2
Statement of Financial Position 3
Statement of Income 4
Statement of Comprehensive Income 5
Statement of Changes in Equity 6
Statement of Cash Flows 7
Notes to the Financial Statements 8 – 25
Deloitte & Touche
Al-Wazzan & Co.
Ahmed Al-Jaber Street, Sharq
Dar Al-Awadi Complex, Floors 7 & 9
P.O. Box 20174 Safat 13062 or
P.O. Box 23049 Safat 13091
Kuwait
Tel : + 965 22408844, 22438060
Fax: + 965 22408855, 22452080
www.deloitte.com
Kuwait Insurance Company S.A.K.P
Kuwait
Independent Auditors’ Report to the Shareholders
Report on the financial statements
We have audited the accompanying financial statements of Kuwait Insurance Company S.A.K.P (“the Company”),
which comprise the statement of financial position as at 31 December 2014, and the statements of income,
comprehensive income, changes in equity and cash flows for the year then ended, and a summary of significant
accounting policies and other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance
with International Financial Reporting Standards, and for such internal control as management determines is
necessary to enable the preparation of the financial statements that are free from material misstatements, whether
due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our
audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance 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 auditors’ 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 auditors consider internal control 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 control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made
by management, 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 financial statements present fairly, in all material respects, the financial position of the Company
as at 31 December 2014, and of its financial performance and cash flows for the year then ended in accordance
with International Financial Reporting Standards.
2
Kuwait Insurance Company S.A.K.P
Kuwait
Independent Auditors’ Report to the Shareholders (Continued)
Report on other Legal and Regulatory Requirements
Furthermore, in our opinion, proper books of account have been kept by the Company and the financial statements,
together with the contents of the report of the Board of Directors relating to these financial statements, are in
accordance therewith. We further report that we obtained all the information and explanations that we required for
the purpose of our audit and that the financial statements incorporate all information that is required by the
Companies Law No 25 of 2012; as amended, and its executive regulations and of Law No. 24 of 1961, as amended,
concerning insurance companies and insurance agents and its related regulations; and by the Company's
Memorandum of Incorporation and Articles of Association; as amended, that an inventory was duly carried out and
that, to the best of our knowledge and belief, no material violation of Companies Law No 25 of 2012, as amended,
and its executive regulations or of Law No. 24 of 1961, as amended or of the Memorandum of Incorporation and
Articles of Association, as amended, have occurred during the financial year ended 31 December 2014 that might
have had a material effect on the business of the Company or on its financial position.
Bader A. Al-Wazzan
Licence No. 62A
Deloitte & Touche
Al-Wazzan & Co.
Rabea Saad Al-Muhanna
Licence No. 152A
Horwath Al-Muhanna & Co.
Kuwait, 10 February 2015
Kuwait Insurance Company S.A.K.P
Kuwait
Statement of Financial Position as of 31 December 2014
(All amounts are in Kuwaiti Dinars)
3
Note 2014 2013
ASSETS
Property and equipment 3 1,655,162 1,801,206
Investment properties 135,187 135,187
Loans secured by life insurance policies 230,020 123,803
Investments available for sale 4 60,710,962 60,062,013
Due from insurance and reinsurance companies 5,189,389 5,800,943
Reinsurance companies’ share of reserve for outstanding claims 40,763,134 23,562,629
Trade and other receivables 5 8,872,182 10,788,896
Fixed deposits with banks 6 34,947,934 29,169,686
Cash and cash equivalents 7 9,584,795 3,390,569
Total assets 162,088,765 134,834,932
EQUITY AND LIABILITIES
Equity
Share capital 8 19,404,000 19,404,000
Statutory reserve 8 9,702,000 9,702,000
Voluntary reserve 8 17,500,000 17,500,000
Treasury shares 9 (2,676,969) (2,575,354)
Investment fair valuation reserve 9,792,970 4,857,620
Retained earnings 6,696,966 5,273,625
Total equity 60,418,967 54,161,891
Liabilities
Technical reserves 10 84,429,150 63,520,330
Due to insurance and reinsurance companies 7,016,984 7,900,632
Insurance and other payables 11 10,223,664 9,252,079
Total liabilities 101,669,798 80,673,041
Total equity and liabilities 162,088,765 134,834,932
The accompanying notes form an integral part of these financial statements
Mohammed Saleh Behbehani Sulaiman Khaled Al Ghunaim Dr. Ali Hamad Al Bahar
Chairman Vice-Chairman Chief Executive Officer
Kuwait Insurance Company S.A.K.P
Kuwait
Statement of Income for the year ended 31 December 2014
(All amounts are in Kuwaiti Dinars)
4
Note 2014 2013
Revenue
Gross premium revenue 35,615,709 33,975,646
Premium ceded to reinsurers (15,481,120) (13,956,160)
Net premium revenue 20,134,589 20,019,486
Change in reserve for unexpired risks 408,955 (1,540,830)
Premiums earned 20,543,544 18,478,656
Commission earned 2,735,391 2,434,194
Investment income 12 4,664,604 3,759,300
Other income 916,792 1,449,294
28,860,331 26,121,444
Expenses
Net incurred claims losses (11,156,129) (11,687,841)
Change in additional reserve (1,000,000) -
Change in reserve for life insurance fund (1,738,215) 742,773
Life insurance - expiry settlement (985,555) (1,141,287)
Life insurance - policies liquidated (115,308) (226,592)
Commissions paid (3,709,242) (3,879,680)
General and administrative expenses (4,245,848) (4,026,904)
Participants rights 31,411 (14,406)
(22,918,886) (20,233,937)
Profit before provisions, contribution to taxes and remuneration 5,941,445 5,887,507
Impairment loss on investment securities (507,233) (1,379,433)
Profit before taxes and remuneration 5,434,212 4,508,074
Board of Directors remuneration (56,000) (56,000)
Kuwait Foundation for Advancement of Science (KFAS) (54,342) (45,081)
National Labour Support Tax (125,521) (121,700)
Zakat tax (50,208) (48,680)
Total contribution to taxes and remuneration (286,071) (271,461)
Net profit for the year 5,148,141 4,236,613
Earnings per share (fils) 13 27.64 22.75
The accompanying notes form an integral part of these financial statements
Kuwait Insurance Company S.A.K.P
Kuwait
Statement of Comprehensive Income for the year ended 31 December 2014
(All amounts are in Kuwaiti Dinars)
5
2014 2013
Net profit for the year 5,148,141 4,236,613
Other comprehensive income items:
Items that may be reclassified subsequently to statement of income
Changes in fair value of investments available for Sale 5,956,142 7,055,581
Transferred to statement of income on sale of investments available for sale (1,528,025) (747,815)
Impairment of available for sale investments 507,233 1,379,433
Other comprehensive income for the year 4,935,350 7,687,199
Total comprehensive income for the year 10,083,491 11,923,812
The accompanying notes are an integral part of these financial statements
Kuwait Insurance Company S.A.K.P
Kuwait
Statement of Changes in Shareholders’ Equity for the year ended 31 December 2014
(All amounts are in Kuwaiti Dinars)
6
Share
Capital
Statutory
reserve
Voluntary
Reserve
Treasury
Shares
Change in
fair value
reserve
Retained
Earnings s
Total
Balance as at 1 January 2014 19,404,000 9,702,000 17,500,000 (2,575,354) 4,857,620 5,273,625 54,161,891
Total comprehensive income for the year - - - - 4,935,350 5,148,141 10,083,491
Treasury shares purchased - - - (101,615) - - (101,615)
Dividend paid for 2013 - - - - - (3,724,800) (3,724,800)
Balance as at 31 December 2014 19,404,000 9,702,000 17,500,000 (2,676,969) 9,792,970 6,696,966 60,418,967
Balance as at 1 January 2013 19,404,000 9,702,000 17,500,000 (2,345,235) (2,829,579) 4,761,812 46,192,998
Total comprehensive income for the year - - - - 7,687,199 4,236,613 11,923,812
Treasury shares purchased - - - (230,119) - - (230,119)
Dividend paid for 2012 - - - - - (3,724,800) (3,724,800)
Balance as at 31 December 2013 19,404,000 9,702,000 17,500,000 (2,575,354) 4,857,620 5,273,625 54,161,891
The accompanying notes form an integral part of these financial statements
Kuwait Insurance Company S.A.K.P
Kuwait
Statement of Cash Flows for the year ended 31 December 2014
(All amounts are in Kuwaiti Dinars)
7
Note 2014 2013
Cash flows from operating activities
Net profit for the year 5,148,141 4,236,613
Adjustments for:
Investment income 12 (4,664,604) (3,759,300)
Depreciation 182,579 159,206
Impairment loss on investment securities 507,233 1,379,433
Staff terminal benefits 245,485 155,791
Finance expenses 69 25,020
Operating profit before working capital changes 1,418,903 2,196,763
Decrease in due from insurance and reinsurance companies 611,554 1,116,918
Decrease in trade and other receivables 1,916,714 3,357,209
Increase in technical reserves 3,708,316 2,929,493
Decrease in due to insurance and reinsurance companies (883,648) (4,864,637)
Increase in Insurance and other payables 987,577 1,503,402
Cash from operating activities 7,759,416 6,239,148
Payment of staff terminal benefits (20,857) (56,791)
Payment of KFAS (45,081) (41,469)
Payment of National Labour Support Tax (121,700) (98,846)
Payment of Zakat tax (48,680) (39,538)
Payment of Board of Directors remuneration (56,000) (56,000)
Net cash from operating activities 7,467,098 5,946,504
Cash flows from investing activities
Purchase of property and equipment (36,535) (13,162)
Net movement of loans secured by life insurance policies (106,217) 12,346
Purchase of investments available for sale (1,468,872) (256,416)
Proceeds from sale of investments available for sale 6,787,023 2,313,479
Net movement in fixed deposits with banks (5,778,248) (6,047,491)
Dividend received 2,523,505 2,167,972
Interest received 602,116 453,428
Net cash generated from/(used in) investing activities 2,522,772 (1,369,844)
Cash flows from financing activities
Purchase of treasury shares (101,615) (230,119)
Payment of finance expenses (69) (25,021)
Dividends paid to shareholders (3,693,960) (3,729,449)
Net cash used in financing activities (3,795,644) (3,984,589)
Net increase in cash and cash equivalents 6,194,226 592,071
Cash and cash equivalents at beginning of the year 3,390,569 2,798,498
Cash and cash equivalents at end of the year 7 9,584,795 3,390,569
The accompanying notes form an integral part of these financial statements
Kuwait Insurance Company S.A.K.P
Kuwait
Notes to the Financial Statements for the year ended 31 December 2014 (All amounts are in Kuwaiti Dinars unless otherwise stated)
8
1. Incorporation and objectives
Kuwait Insurance Company S.A.K.P, (the Company) is a Kuwaiti Public Shareholding Company established in
Kuwait in 1960 by Amiri Decree No. 7 of 1960, and registered with the Ministry of Commerce in accordance
with the Insurance Companies and Agent Law No. 24 of 1961 under Insurance license No. 1.
The objects of the Company are to underwrite life and non-life insurance risks such as fire, general accidents,
marine and aviation, lend funds against life insurance policies; and to invest in permitted securities and real
estate properties. The Company also engages in underwriting all types of risks under the Takaful insurance law.
The registered office of the Company is located at Kuwait Insurance Building, Abdullah Al-Salem Street, Kuwait.
P.O. Box 769 Safat 13008, Kuwait. The Company has 13 branches in the State of Kuwait.
These financial statements have been approved for issue by the Board of Directors on 10 February 2015, and
are subject to shareholders’ approval at the annual general meeting.
The extra-ordinary general assembly meeting was held on 7 April 2014 to approve the amendments to the
company’s Memorandum of Incorporation and Articles of Association to be in compliance with companies
law, as amended, and CMA’s related resolutions.
These amendments have been authenticated in the commercial register on 23 June 2014.
2. Basis of preparation and significant accounting policies
2.1 Basis of preparation
These financial statements have been prepared in accordance with the International Financial Reporting
Standards (IFRS) issued by International Accounting Standards Board (IASB). These financial statements are
prepared under the historical cost basis of measurement as modified by the revaluation of financial instruments
classified as “available for sale”. The financial statements have been presented in Kuwaiti Dinar.
The preparation of financial statements in conformity with International Financial Reporting Standards requires
management to make estimates and assumptions that may affect amounts reported in these financial statements,
as actual results could differ from those estimates. It also requires management to exercise its judgment in the
process of applying the Company’s accounting policies. The areas where estimates and assumptions are
significant to the financial statements, or areas involving a higher degree of judgment, are disclosed in Note 20.
New and revised standards
New and revised IFRSs issued and effective
In the current year, the Company has applied a number of new and revised IFRSs that are issued and effective
for accounting periods that begin on or after 1 January 2014.
Amendments to IFRS 10, IFRS 12 and IAS 27 Investment Entities
The Company has applied the amendments to IFRS 10, IFRS 12 and IAS 27 Investment Entities for the first time
in the current year. The amendments to IFRS 10 define an investment entity and require a reporting entity that
meets the definition of an investment entity not to consolidate its subsidiaries but instead to measure its
subsidiaries at fair value through profit or loss in its consolidated and separate financial statements.
Consequential amendments have been made to IFRS 12 and IAS 27 to introduce new disclosure requirements
for investment entities. The application of the amendments has had no impact on the disclosures or the
amounts recognized in the Company’s financial statements.
Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities
The Company has applied the amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities for
the first time in the current year. The amendments to IAS 32 clarify the requirements relating to the offset of
financial assets and financial liabilities.
The amendments have been applied retrospectively. The Company has assessed whether certain of its financial
assets and financial liabilities qualify for offset based on the criteria set out in the amendments and concluded
that the application of the amendments has had no impact on the amounts recognised in the Company’s
financial statements.
Kuwait Insurance Company S.A.K.P
Kuwait
Notes to the Financial Statements for the year ended 31 December 2014 (All amounts are in Kuwaiti Dinars unless otherwise stated)
9
Amendments to IAS 36 Recoverable Amount Disclosures for Non-Financial Assets
The Company has applied the amendments to IAS 36 Recoverable Amount Disclosures for Non-Financial
Assets for the first time in the current year. The amendments to IAS 36 remove the requirement to disclose the
recoverable amount of a cash-generating unit (CGU) to which goodwill or other intangible assets with
indefinite useful lives had been allocated when there has been no impairment or reversal of impairment of the
related CGU.
Furthermore, the amendments introduce additional disclosure requirements applicable to when the
recoverable amount of an asset or a CGU is measured at fair value less costs of disposal.
The application of these amendments has had no material impact on the disclosures in the Company’s financial
statements.
New and revised IFRSs in issue but not yet effective
The Company has not applied the followings new and revised IFRS that have been issued and not yet effective
For annual periods beginning on or after 1 July 2014
Amendments to IAS 19 Defined Benefit Plans: Employee Contributions
The Annual Improvements to IFRSs 2010-2012 Cycle:
• IFRS 2 Share-based Payment
• IFRS 3 Business Combinations
• IFRS 8 Operating Segments
• IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets
• IAS 24 Related Party Disclosures
The Annual Improvements to IFRSs 2011-2013 Cycle:.
• IFRS 3 Business Combinations
• IFRS 13 Fair Value Measurement
• IAS 40 Investment Property
The directors of the Company do not anticipate that the application of these amendments will have
a material impact on the Company’s financial statements.
For annual periods beginning on or after 1 January 2016
Amendments to IFRS 11 Accounting for Acquisitions of Interests in Joint Operations
Amendments to IAS 16 & IAS 38 Clarification of Acceptable Methods of Depreciation & Amortisation
Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants
The directors of the Company do not anticipate that the application of these amendments will have
a material impact on the Company’s financial statements.
Effective for annual periods beginning on or after 1 January 2017
IFRS 15 Revenue from Contracts with Customers
The directors of the Company anticipate that the application of these IFRS 15 in the future may have a material
impact on amounts reported in respect of the Company’s financial assets and financial liabilities. However, it
is not practicable to provide a reasonable estimate of the effect until the Company undertakes a detailed review.
Effective for annual periods beginning on or after 1 January 2018
IFRS 9 Financial Instruments
The directors of the Company anticipate that the application of IFRS 9 in the future may have a material impact
on amounts reported in respect of the Company’s financial assets and financial liabilities. However, it is not
practicable to provide a reasonable estimate of the effect until the Company undertakes a detailed review.
2.2 Significant Accounting Policies
2.2.1 Financial Instruments
Classification and measurement
The Company classifies financial assets as ‘loans and receivables’ and ‘available for sale’. Financial liabilities
are classified as ‘other than at fair value through profit or loss’.
Kuwait Insurance Company S.A.K.P
Kuwait
Notes to the Financial Statements for the year ended 31 December 2014 (All amounts are in Kuwaiti Dinars unless otherwise stated)
10
All financial instruments are initially recognized at fair value. Transaction costs are included only for those
financial instruments not classified as ‘at fair value through profit or loss’.
Loans and receivables
These are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. These are subsequently measured and carried at amortized cost using the effective interest rate, less
any provision for impairment. Loans and receivables include loans secured by life insurance policies, due from
insurance and reinsurance companies, trade and other receivables, fixed deposits, cash and cash equivalents.
Available for sale
These are non-derivative financial assets not included in any of the above classifications and are principally
those intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity,
changes in interest rates or prices. These are subsequently measured and carried at fair value. Any resultant
unrealized gains and losses arising from changes in fair value are recognized in other comprehensive income
and accumulated in change in fair value reserve in equity. When an available for sale asset is disposed off or
is impaired, the related cumulative fair valuation changes earlier reported in other comprehensive income and
accumulated in equity are transferred to the statement of income.
Financial liabilities
Financial liabilities are subsequently measured at amortized cost using the effective interest rate.
Recognition and de-recognition
A financial asset or a financial liability is recognized when the Company becomes a party to the contractual
provisions of the instrument. A financial asset is derecognized when the contractual rights to the cash flows
from the financial asset expire or when the Company has transferred substantially all the risks and rewards of
ownership or when it has neither transferred nor retained substantially all risks and rewards of ownership and
it no longer has control over the asset or portion of the asset. If the Company has retained control, it shall
continue to recognize the financial asset to the extent of its continuing involvement in the financial asset. A
financial liability is derecognized when the obligation specified in the contract is discharged/ cancelled or
expired.
All 'regular way' purchase and sale of financial assets are recognized using trade date accounting. Regular way
purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame
generally established by regulations or conventions in the market place.
Fair values
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.
Impairment
A financial asset is impaired if its carrying amount is greater than its estimated recoverable amount. An
assessment is made at each date of financial position to determine whether there is objective evidence that a
specified financial asset, or a group of similar financial assets, may be impaired.
In the case of financial assets classified as ‘available for sale’, a significant or prolonged decline in the fair value
of assets below its cost is considered in determining whether the assets are impaired. If any such evidence exists
for available for sale financial assets, the cumulative loss measured as the difference between the acquisition
cost and the current fair value, less any impairment loss on that financial asset previously recognized in the
statement of income, is removed from shareholder’s equity and recognized in the statement of income.
Impairment loss recognized in the statement of income on available for sale financial assets that are equity
instruments are not subsequently reversed through the statement of income.
Kuwait Insurance Company S.A.K.P
Kuwait
Notes to the Financial Statements for the year ended 31 December 2014 (All amounts are in Kuwaiti Dinars unless otherwise stated)
11
A credit risk provision for impairment of loans and receivables is established if there is objective evidence that
the Company will not be able to collect all amounts due. The amount of the provision is the difference between
the carrying amount and the recoverable amount, being the present value of expected future cash flows,
discounted at the original effective rate of interest and the current contractual interest rate, for fixed and floating
rate loans respectively.
2.2.2 Offsetting financial instruments
Financial assets and liabilities are setoff and the net amount reported in the statement of financial position when
there is a legally enforceable right to set off the recognized amounts and there is an intention to settle on a net
basis, or realize the asset or settle the liability simultaneously.
2.2.3 Property and equipment
Property and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.
These are depreciated on a straight line basis over their useful lives as follows:
Buildings 20 years
Equipment, Furniture and fixtures up to 3 years
Land is not depreciated. The carrying amount of property and equipment is reviewed periodically to determine
whether there is any indication of impairment in its carrying value. If any such indication exists, an impairment
loss, is recognised in the statement of income, being the difference between carrying value and the asset’s
recoverable amount. For the purposes of assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash flows.
2.2.4 Investment properties
Investment properties held by the Company are the properties held for capital appreciation or to earn rental
income. Investment properties are measured initially at cost, including transaction costs. Subsequent to initial
recognition, investments properties are carried out at historical cost less accumulated impairment losses.
Freehold land is not depreciated.
Investment properties are derecognized when either 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. The
difference between the net disposal proceeds and the carrying amount of the asset is recognised in the statement
of income in the year of derecognition.
2.2.5 Cash and cash equivalents
Cash and cash equivalents comprise of cash in hand, current account with banks and fixed deposits with banks
with maturities not exceeding three months from acquisition date.
2.2.6 Provisions for liabilities
Provisions are recognized when the Company has a present legal or constructive obligation as a result of past
events; and it is probable that an outflow of resources embodying economic benefits will be required to settle
the obligation, and a reliable estimate of the amount of the obligation can be made.
2.2.7 Employees terminal benefits
Provision is made for amounts payable under Kuwaiti labour law. This liability, which is unfunded, represents
the amount payable to each employee as a result of involuntary termination on the date of statement of financial
position, and approximates the present value of this obligation.
Kuwait Insurance Company S.A.K.P
Kuwait
Notes to the Financial Statements for the year ended 31 December 2014 (All amounts are in Kuwaiti Dinars unless otherwise stated)
12
2.2.8 Insurance payables
Reserve for outstanding claims
Provisions are recognized for reported claims, which are not settled on the date of statement of financial
position based on internal and independent loss assessments, after deduction of expected salvage values and
other recoveries.
Reserve for unexpired risks
General Insurance
This is computed at the rate of 40% of the net retained premiums for the Fire and General Accidents
departments and 25% of the net retained premiums for the Marine and Aviation departments.
Life Insurance
Provisions for life insurance liabilities are recognised based on independent actuarial valuation.
Additional reserves
The Company estimates additional provisions for claims incurred but not reported at the date of statement of
financial position based on historical loss ratios.
2.2.9 Treasury shares
The Company’s holding in its own shares is stated at the acquisition cost. These shares are not entitled to any
cash dividend that the Board of Directors may propose.
2.2.10 Revenue recognition
Premiums are recognized as revenue annually and over the period of the cover. The portion of premiums that
relates to unexpired risks at the date of statement of financial position is reported as reserve for unexpired risks
or as unearned premium.
Dividend income is recognized when the right to receive payment is established and interest on fixed deposits
are recognized on time proportion basis using effective interest rate.
Commission earned is recognized at the time insurance policies are ceded to other insurers.
2.2.11 Contribution to taxes
Contribution to Kuwait Foundation for the Advancement of Sciences (KFAS)
The Company calculates KFAS at 1% of taxable profit for the year, in accordance with the calculation based on
the Foundation’s Board of Directors resolution.
National Labour Support Tax (NLST)
The Company calculates NLST in accordance with Law No 19 of 2000 and the Ministry of Finance Resolution
No. 24 of 2006 at 2.5% of taxable profit for the year.
Zakat
The Company calculates Zakat in accordance with Law No. 46 of 2006 and the Ministry of Finance resolution
No 58 of 2007 at 1% of the taxable profit of the Company.
2.2.12 Foreign currency translation
The Company's functional currency is the Kuwaiti Dinar. Transactions in foreign currencies are converted into
Kuwaiti Dinars at the rates prevailing at the date of the transaction. Monetary assets and liabilities denominated
in foreign currencies outstanding at the date of statement of financial position are converted into Kuwaiti Dinar
at the rates prevailing at the date of statement of financial position. Resulting gains or losses are taken to the
statement of income.
Kuwait Insurance Company S.A.K.P
Kuwait
Notes to the Financial Statements for the year ended 31 December 2014 (All amounts are in Kuwaiti Dinars unless otherwise stated)
13
Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates
prevailing on the date when the fair value was determined. Translation difference on non-monetary items
classified as at fair value through statement of income are reported as part of the fair value gain or loss in the
statement of income whereas the translation difference on non-monetary items classified as available for sale
financial assets are included in change in fair value reserve in the statement of comprehensive income.
2.2.13 Segment reporting
A segment is a distinguishable component of the Company that engages in business activities from which it
earns revenues and incurs costs. The operating segments are used by the management of the Company to
allocate resources and assess performance. Operating segments exhibiting similar economic characteristics,
product and services, class of customers where appropriate are aggregated and reported as reportable segments.
3. Property and equipment
Land &
buildings
Furniture &
office
equipment
Total
Cost
As at 1 January 2013 4,319,335 1,693,464 6,012,799
Additions for the year 2013 - 13,162 13,162
Disposals for the year 2013 - (1,670) (1,670)
As at 31 December 2013 4,319,335 1,704,956 6,024,291
Additions for the year 2014 - 36,535 36,535
Disposals for the year 2014 - (1,329) (1,329)
As at 31 December 2014 4,319,335 1,740,162 6,059,497
Accumulated depreciation
As at 1 January 2013 2,372,086 1,693,463 4,065,549
Charge for the year 2013 146,044 11,492 157,536
As at 31 December 2013 2,518,130 1,704,955 4,223,085
Charge for the year 2014 146,044 36,535 182,579
Disposals for the year 2014 - (1,329) (1,329)
As at 31 December 2014 2,664,174 1,740,161 4,404,335
Net book value
As at 31 December 2014 1,655,161 1 1,655,162
As at 31 December 2013 1,801,205 1 1,801,206
Depreciation is included in general and administrative expenses in the statement of income.
4. Investments available for sale
2014 2013
Quoted shares 56,091,486 50,264,900
Unquoted shares 2,955,880 3,658,292
Investment funds 1,663,596 6,138,821
60,710,962 60,062,013
Movements in investments available for sale:-
2014 2013
Opening balance 60,062,013 54,673,409
Additions 1,468,872 256,416
Disposals (6,776,065) (1,923,393)
Changes in fair value 5,956,142 7,055,581
Closing balance 60,710,962 60,062,013
Investments in quoted shares include shares with fair value of KD 5,148,000 as of 31 December 2014
(31 December 2013: KD 9,606,000) are under lien to Ministry of Commerce and Industry, Kuwait to comply
with local insurance regulations.
Kuwait Insurance Company S.A.K.P
Kuwait
Notes to the Financial Statements for the year ended 31 December 2014 (All amounts are in Kuwaiti Dinars unless otherwise stated)
14
5. Trade and other receivables
2014 2013
Trade receivables 10,020,562 11,869,115
Provision for doubtful debts (2,375,000) (2,283,829)
7,645,562 9,585,286
Participation in Arab Syndicate Fund for War Risk Insurance 929,882 880,426
Other receivable 296,738 323,184
8,872,182 10,788,896
6. Fixed deposits with banks
Fixed deposits amounting to KD 18,925,000 are under lien to the Ministry of Commerce and Industry, to
comply with local insurance regulations (31 December 2013: KD 20,425,000).
The average effective interest rate on fixed deposits was 1.97% as at 31 December 2014 (31 December 2013:
1.47%).
7. Cash and cash equivalents
2014 2013
Cash on hand 5,524 9,838
Cash at banks 9,079,271 3,005,731
Fixed deposits with less than three months maturity 500,000 375,000
Cash and cash equivalents 9,584,795 3,390,569
Effective interest rate on time deposits (%) 1.97 1.47
8. Share capital
The authorized, issued and fully paid-up capital is KD 19,404,000 divided into 194,040,000 shares with a
nominal value of Kuwaiti fils 100 each and all shares are in cash.
Statutory reserve
The statutory reserve has reached 50% of the share capital and as permitted by the Articles of Association, the
Company has discontinued appropriations to statutory reserve. This reserve is not available for distribution
except for distribution of a maximum dividend up to 5% of share capital in years when the retained earnings
are inadequate for this purpose.
Voluntary reserve
In accordance with the Company’s Articles of Association, 10% of net profit is to be transferred annually to the
voluntary reserve. This reserve has been discontinued since 1998 based on a recommendation of the Board of
Directors and approval of the shareholders.
Proposed dividend
On 10 February 2015, The Board of Directors has proposed a cash dividend of 20 fils per share for the income
of the year ended 31 December 2014 (31 December 2013: 20 fils per share). This is subject to the approval of
the shareholders at the next annual general meeting.
9. Treasury shares
2014 2013
Number of treasury shares (Share) 8,150,000 7,800,000
% of treasury shares to issued shares 4.20 4.02
Cost of treasury shares 2,676,969 2,575,354
Fair value of treasury shares 2,200,500 2,262,000
The Company is committed to retain reserves and retained earnings equivalent to the treasury shares throughout
the period, in which they are held by the Company, pursuant to the relevant instructions of the regulatory
authorities.
Kuwait Insurance Company S.A.K.P
Kuwait
Notes to the Financial Statements for the year ended 31 December 2014 (All amounts are in Kuwaiti Dinars unless otherwise stated)
15
10. Technical reserves
Technical reserves movements by segment are as follows:
Year ended 31 December 2014
Marine and
aviation
Fire General
accident
Takaful Life Total
Gross balance at beginning of the year 4,177,757 5,672,739 31,299,030 1,339,711 21,031,093 63,520,330
Less: Reinsurance recoverable (3,461,188) (4,648,421) (14,516,686) (61,645) (874,688) (23,562,628)
Net balance at beginning of the year 716,569 1,024,318 16,782,344 1,278,066 20,156,405 39,957,702
Net charge for the year 96,597 99,960 9,810,776 299,855 3,178,201 13,485,389
Paid during the year (52,543) (56,241) (7,127,045) (966,753) (1,574,493) (9,777,075)
Net balance at end of the year 760,623 1,068,037 19,466,075 611,168 21,760,113 43,666,016
Add: Reinsurance recoverable 3,399,720 24,162,975 12,168,952 45,512 985,975 40,763,134
Gross balance at end of the year 4,160,343 25,231,012 31,635,027 656,680 22,746,088 84,429,150
Year ended 31 December 2013
Marine and
aviation
Fire General
accident
Takaful Life Total
Gross balance at beginning of the year 7,165,542 13,960,980 26,306,718 514,906 21,284,017 69,232,163
Less: Reinsurance recoverable (6,353,350) (12,986,544) (12,103,798) (79,942) (680,321) (32,203,955)
Net balance at beginning of the year 812,192 974,436 14,202,920 434,964 20,603,696 37,028,208
Net charge for the year (7,691) 125,597 9,134,428 1,443,005 1,790,559 12,485,898
Paid during the year (87,932) (75,715) (6,555,004) (599,903) (2,237,850) (9,556,404)
Net balance at end of the year 716,569 1,024,318 16,782,344 1,278,066 20,156,405 39,957,702
Add: Reinsurance recoverable 3,461,188 4,648,421 14,516,686 61,645 874,688 23,562,628
Gross balance at end of the year 4,177,757 5,672,739 31,299,030 1,339,711 21,031,093 63,520,330
During the year ended 31 December 2014, the Company has recorded a reported claim amounted to USD 100 Million based on the loss valuator estimation. This claim
is fully reinsured and partial amount of USD 30 Million has been collected from reinsurer and paid to the insured party.
Kuwait Insurance Company S.A.K.P
Kuwait
Notes to the Financial Statements for the year ended 31 December 2014 (All amounts are in Kuwaiti Dinars unless otherwise stated)
16
11. Insurance and other payables
2014 2013
Insurance payables 2,467,767 2,739,047
Unearned premiums 1,450,346 527,134
Reserve for reinsurance premium ceded 618,916 574,595
Dividends payable 117,201 86,360
Staff payables and others 2,036,188 2,048,980
Staff terminal benefits 2,165,262 1,940,634
Reserve for Arab Syndicate Fund for War Risk Insurance 929,882 880,426
Board of directors remuneration 56,000 56,000
Kuwait Foundation for Advancement of Sciences (KFAS) 54,342 45,081
National Labour Support tax 125,521 121,700
Zakat tax 50,208 48,680
Due to policy holders 152,031 183,442
10,223,664 9,252,079
Due to policy holders represents 50% (2013: 50%) of the net surplus from Takaful insurance business
appropriated to the policy holders and is subject to the approval from Sharia Board.
12. Investment income
2014 2013
Realized gain from sale of investments 1,538,983 1,137,900
Cash dividends 2,523,505 2,167,972
Interest income 602,116 453,428
4,664,604 3,759,300
13. Earning per share
Earning per share is calculated by dividing net profit for the year and by the weighted average number of
ordinary shares after deduction of treasury shares, as follows:
2014 2013
Net profit for the year 5,148,141 4,236,613
Weighted average number of issued shares (share) 186,239,041 186,240,000
Earning per share (fils) 27.64 22.75
14. Staff Costs
General and administrative expenses include staff costs of KD 2,717,340 (31 December 2013 - KD 2,630,451).
As of 31 December 2014, the Company had 223 (31 December 2013: 225) employees.
15. Segmental analysis
The Company has five principal reportable segments as follows:
� Marine and aviation
Insurance against risks related to goods transportation and different types of marine and aviation vessels.
� Fire
Insurance against fire for different types of buildings, stores, industrial risks and gas and oil industry.
Kuwait Insurance Company S.A.K.P
Kuwait
Notes to the Financial Statements for the year ended 31 December 2014 (All amounts are in Kuwaiti Dinars unless otherwise stated)
17
� General accident
Insurance against risks of contractors, machinery and computer damages and cessation of work; insurance
cover for cash, bonds, fidelity, professional risks, work accidents, civil responsibility and motor vehicles.
� Life insurance
Life insurance cover for individuals and groups and medical insurance cover.
� Takaful
Insurance against all type of risk under Takaful insurance law.
Investment activities are not considered as a segment by itself. Assets and liabilities are not allocated to
the Company’s segments except for those related to the life insurance and Takaful insurance segment.
Kuwait Insurance Company S.A.K.P
Kuwait
Notes to the Financial Statements for the year ended 31 December 2014 (All amounts are in Kuwaiti Dinars unless otherwise stated)
18
Information on the Company’s principal reportable segments are as follows:
Income statement
Year ended 31 December 2014
Marine &
aviation
Fire
General
accident
Life Takaful
Unallocated
items
Total
Revenue
Gross premium revenue 2,873,971 6,005,479 19,496,809 6,863,480 375,970 - 35,615,709
Premium ceded to reinsurers (2,392,026) (5,460,182) (5,713,244) (1,842,476) (73,192) - (15,481,120)
Net premiums revenue 481,945 545,297 13,783,565 5,021,004 302,778 - 20,134,589
Changes in reserve for unexpired risks 2,502 (38,544) (51,242) - 496,239 - 408,955
Premiums earned 484,447 506,753 13,732,323 5,021,004 799,017 - 20,543,544
Commissions earned 789,416 570,823 1,278,514 85,975 10,663 - 2,735,391
Investment income - - - 420,506 14,640 4,229,458 4,664,604
Other income 5,653 757 879,206 (33,230) 5,922 58,484 916,792
1,279,516 1,078,333 15,890,043 5,494,255 830,242 4,287,942 28,860,331
Expenses
Net incurred claims 99,099 11,416 8,809,534 1,439,986 796,094 - 11,156,129
Change in additional reserve - 50,000 950,000 - - - 1,000,000
Changes in reserve for life insurance fund - - - 1,738,215 - - 1,738,215
Life insurance – Expiry settlement - - - 985,555 - - 985,555
Life insurance – Policies liquidated - - - 115,308 - - 115,308
Commissions paid 134,271 240,599 3,068,769 241,946 23,657 - 3,709,242
General and administrative expenses 472,774 417,154 1,334,892 673,245 73,313 1,274,470 4,245,848
Participants rights - - - - (31,411) - (31,411)
Impairment loss on investment securities - - - - - 507,233 507,233
BOD remuneration - - - - - 56,000 56,000
Contribution to Kuwait foundation for advancement of Science share (KFAS) - - - - - 54,342 54,342
National Labour Support tax - - - - - 125,521 125,521
Zakat tax - - - - - 50,208 50,208
706,144 719,169 14,163,195 5,194,255 861,653 2,067,774 23,712,190
Net profit for the year 573,372 359,164 1,726,848 300,000 (31,411) 2,220,168 5,148,141
Kuwait Insurance Company S.A.K.P
Kuwait
Notes to the Financial Statements for the year ended 31 December 2014 (All amounts are in Kuwaiti Dinars unless otherwise stated)
19
Year ended 31 December 2013
Marine &
aviation
Fire
General
accident
Life Takaful
Unallocated
items
Total
Revenue
Gross premium revenue 2,897,431 5,660,774 18,459,204 5,278,378 1,679,859 - 33,975,646
Premium ceded to reinsurers (2,405,479) (5,211,836) (4,803,745) (1,398,588) (136,512) - (13,956,160)
Net premiums revenue 491,952 448,938 13,655,459 3,879,790 1,543,347 - 20,019,486
Changes in reserve for unexpired risks (10,605) (1,646) (1,056,284) - (472,295) - (1,540,830)
Premiums earned 481,347 447,292 12,599,175 3,879,790 1,071,052 - 18,478,656
Commissions earned 660,154 539,068 1,181,887 36,717 16,368 - 2,434,194
Investment income - - - 309,738 2,568 3,446,994 3,759,300
Other income 6,935 787 1,356,035 (6,417) 14,163 77,791 1,449,294
1,148,436 987,147 15,137,097 4,219,828 1,104,151 3,524,785 26,121,444
Expenses
Net incurred claims 18,296 (123,951) (8,078,144) (2,533,332) (970,710) - (11,687,841)
Changes in reserve for life insurance fund - - - 742,773 - - 742,773
Life insurance – Expiry settlement - - - (1,141,287) - - (1,141,287)
Life insurance – Policies liquidated - - - (226,592) - - (226,592)
Commissions paid (140,276) (268,008) (3,256,364) (182,517) (32,515) - (3,879,680)
General and administrative expenses (476,976) (420,861) (1,346,755) (578,873) (72,113) (1,131,326) (4,026,904)
Participants rights - - - - (14,406) - (14,406)
Impairment loss on investment securities - - - - - (1,379,433) (1,379,433)
BOD remuneration - - - - - (56,000) (56,000)
Contribution to Kuwait foundation for advancement of Science share (KFAS) - - - - - (45,081) (45,081)
National Labour Support tax - - - - - (121,700) (121,700)
Zakat tax - - - - - (48,680) (48,680)
(598,956) (812,820) (12,681,263) (3,919,828) (1,089,744) (2,782,220) (21,884,831)
Net profit for the year 549,480 174,327 2,455,834 300,000 14,407 742,565 4,236,613
Kuwait Insurance Company S.A.K.P
Kuwait
Notes to the Financial Statements for the year ended 31 December 2014 (All amounts are in Kuwaiti Dinars unless otherwise stated)
20
Segment assets and liabilities
Statement of financial position as of
31 December 2014 Life Takaful
General
Insurance Total
Assets
Property and equipment - - 1,655,162 1,655,162
Investment properties - - 135,187 135,187
Loans secured by life insurance policies 230,020 - - 230,020
Investments available for sale 3,300,000 - 57,410,962 60,710,962
Due from insurance and reinsurance companies - 31,641 5,157,748 5,189,389
Reinsurance companies’ share of
Reserve for outstanding claims 985,975
45,512
39,731,647
40,763,134
Trade and other receivables 562,377 23,775 8,286,030 8,872,182
Fixed deposits with banks 12,700,000 1,009,493 21,238,441 34,947,934
Cash and cash equivalents 652,378 401,917 8,530,500 9,584,795
Total assets 18,430,750 1,512,338 142,145,677 162,088,765
Equity and Liabilities
Technical reserve 22,746,088 656,680 61,026,382 84,429,150
Due to Insurance and reinsurance companies 31,977 142,538 6,842,469 7,016,984
Insurance and other payables 804,929 554,234 8,864,501 10,223,664
Share holders‘ equity - - 60,418,967 60,418,967
Total equity and liabilities 23,582,994 1,353,452 137,152,319 162,088,765
Statement of financial position as of
31 December 2013
Life Takaful General
Insurance Total
Assets
Property and equipment - - 1,801,206 1,801,206
Investment properties - - 135,187 135,187
Loans secured by life insurance policies 123,803 - - 123,803
Investments available for sale 3,300,000 - 56,762,013 60,062,013
Due from insurance and reinsurance companies 151,501 29,159 5,620,283 5,800,943
Reinsurance companies’ share of
reserve for outstanding claims
874,692
61,645
22,626,292
23,562,629
Trade and other receivables 569,551 247,323 9,972,022 10,788,896
Fixed deposits with banks 12,700,000 1,000,462 15,469,224 29,169,686
Cash and cash equivalents 418,347 481,766 2,490,456 3,390,569
Total assets 18,137,894 1,820,355 114,876,683 134,834,932
Equity and Liabilities
Technical reserve 21,031,096 1,339,711 41,149,523 63,520,330
Due to Insurance and reinsurance companies 449 149,921 7,750,262 7,900,632
Insurance and other payables 792,522 121,969 8,337,588 9,252,079
Share holders‘ equity - 183,442 53,978,449 54,161,891
Total equity and liabilities 21,824,067 1,795,043 111,215,822 134,834,932
16. Insurance Risk Management
The Company issues contracts that assumes insurance risk. This section summarizes these risks and the way the
Company manages them.
Insurance risk
The risk under any one 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.
Kuwait Insurance Company S.A.K.P
Kuwait
Notes to the Financial Statements for the year ended 31 December 2014 (All amounts are in Kuwaiti Dinars unless otherwise stated)
21
The principal risk that the Company faces under its insurance contracts is that the actual claims and benefit
payments exceed the carrying amount of the insurance liabilities. This could occur because the frequency or
severity of claims and benefits are greater than estimated. Insurance events are random and the actual number
and amount of claims and benefits will vary from year to year.
The Company manages these risks through its underwriting strategy, adequate reinsurance arrangements and
proactive claims handling.
Sources of uncertainty in the estimation of future claim payments
Non life
Claims are payable on a claims-occurrence basis. The Company is liable for all insured events that occurred
during the term of the contract, even if the loss is discovered after the end of the contract term. As a result,
liability claims are settled over a long period of time and an element of the claims provision relates to incurred
but not reported claims (IBNR). There are several variables that affect the amount and timing of cash flows from
these contracts. These mainly relate to the inherent risks of the business activities carried out by individual
contract holders and the risk management procedures they adopted.
The estimated cost of claims includes direct expenses to be incurred in settling claims, net of the expected
subrogation value and other recoveries. The Company takes all reasonable steps to ensure that it has appropriate
information regarding its claims exposures. However, given the uncertainty in establishing claims provisions, it
is likely that the final outcome will prove to be different from the original liability established. The liability for
these contracts comprise a provision for IBNR, a provision for reported claims not yet paid and a provision for
unexpired risks at the statement of financial position date.
In estimating the liability for the cost of reported claims not yet paid the Company considers any information
available from loss adjusters and information on the cost of settling claims with similar characteristics in
previous periods. Large claims are assessed on a case-by-case basis or projected separately.
Life
Uncertainty in the estimation of future benefit payments and premium receipts for life insurance contracts arises
from the unpredictability of overall levels of mortality, health and the variability in contract holder behaviour.
The Company uses an actuarial valuation to determine reserve estimate for life insurance contracts. For health
and disability insurance covers there is no need to estimate mortality rates or morbidity rates for future years
because these contracts have short duration and the claims are payable on a claims-occurrence basis. These
insurance contracts are exposed to similar risks of uncertainty in the estimation of future claim payments as non
life insurance contracts and are managed in a similar manner.
17. Fair value estimation
The fair value for the financial assets and financial liabilities are determined as follows:
• Level one: Quoted prices in active markets for identical financial instruments.
• Level two: Quoted prices in an active market for similar instruments. Quoted prices for identical assets
or liabilities in the market that is not active. Inputs other than quoted prices that is observable for assets
or liabilities.
• Level three: Inputs for the assets or liabilities that are not based on observable market data.
Kuwait Insurance Company S.A.K.P
Kuwait
Notes to the Financial Statements for the year ended 31 December 2014 (All amounts are in Kuwaiti Dinars unless otherwise stated)
22
The table below gives information about how the fair values of the financial assets are determined:
Fair value of the Company’s financial assets that are measured at fair value on a recurring basis.
Fair value as at Fair value hierarchy
Valuation technique(s)
and Key input(s)
Significant unobservabl
e input(s)
Relationship of unobservable inputs to fair
value Financial assets 31/12/14 31/12/13 Investments available for sale
- Quoted Shares 56,091,486 50,264,900 1 Last bid price
N/A N/A
- Unquoted Shares
2,955,880 - 3 Technical valuation methods
Adjusted book value of market
risk
The higher the market
risk, the lower the fair value
- Investment Funds
1,663,596 6,138,821 2 Net assets value
N/A N/A
The fair value of financial assets and financial liabilities that are not measured at fair value on a recurring basis
approximately equals their carrying values.
During the year, there were no transfers between the levels.
18. Financial Risk Management
The Company is exposed to a variety of financial risks, through its financial assets, financial liabilities,
reinsurance assets and insurance liabilities. The most important components of this financial risk are credit risk,
market risk and liquidity risk. In particular, the key financial risk is that the Company’s investment proceeds
may not be sufficient to fund the obligation arising from its underwritings. The Company’s risk management is
conducted by its senior management in accordance with policies approved by the Board of Directors. The
various risks that the Company is exposed to and the processes in place to manage those risks are described
below.
Credit Risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the
other party to incur a financial loss. The financial assets, other than investments in equities are exposed to credit
risk. The assets value presented in the statement of financial position represent the maximum level exposed to
those risks. The Company seeks to mitigate this risk by dealing with credit worthy parties including banks,
financial institutions, insurance and reinsurance companies and non-concentration of its assets with one counter
party.
The maximum exposure to credit risk as of the date of statement of financial position is given below.
Asset Description 2014 2013
Loans secured by life insurance policies 230,020 123,803
Due from insurance and reinsurance companies 5,189,389 5,800,943
Trade and other receivables 7,942,300 9,858,460
Fixed deposits with banks 34,947,934 29,169,686
Cash and cash equivalents 9,579,271 3,380,731
57,888,914 48,333,623
Due from insurance and reinsurance companies represent amounts receivable from reinsurance claims net of
premium on policies ceded. These are due from local and international companies of repute which have a track
record of settling debts.
Trade and other receivables primarily represent amounts due against premiums for policies underwritten by the
Company. These are generally due for payment within a period of one month from the date of issue of the
policy. The Company is selective in extending credit facilities to its customers and has a good track record of
collecting its debts. Furthermore, credit risk with respect to receivables is limited due to dispersion across large
number of customers.
Kuwait Insurance Company S.A.K.P
Kuwait
Notes to the Financial Statements for the year ended 31 December 2014 (All amounts are in Kuwaiti Dinars unless otherwise stated)
23
At 31 December 2014, trade receivables of KD 1,848,191(31 December 2013 – KD 2,207,702) are neither
past due nor impaired and KD 5,797,371 (31 December 2013 – KD 7,377,584) are past due. Out of the past
due Receivables, KD 2,841,697is due for a period of one month to six months (31 December 2013 – KD
2,906,188) and KD 2,955,674 is due for a period of 6 months to one year (31 December 2013 – KD 2,527,283)
and KD 2,375,000 is due for more than one year (31 December 2013 – KD 1,944,113).
The Company made provision of KD 2,375,000 (31 December 2013 - KD 2,283,829) against past due
receivable. The Company believes that the balance amount of trade receivables can be recovered. The other
classes of financials assets are not impaired.
Deposits are placed with banks which have been given high rating by reputed international rating agencies
category (a). These deposits mature within a maximum period of 6 months from the date of this financial
statements.
Market Risk
Market risk is the risk that an enterprise may incur financial losses due to adverse movements in market price of investments or interest rates and foreign currency rates.
(a) Foreign Currency Risk
Foreign currency risk is represented in the exposure to changing currency exchange rates that may adversely
affect the Company’s cash flows or the value of assets and liabilities in foreign currencies. The Company is
exposed to foreign currency risk primarily from its foreign currency denominated investments and its dues
from/to re-insurance counterparties. The Company seeks to mitigate this risk by dealing in stable currencies
such as US Dollars, Euro and Sterling Pounds and monitoring its currency position on a regular basis.
The following are the Company's significant net exposures denominated in foreign currency represented in
equivalent Kuwaiti Dinar.
Surplus/ (deficit)
2014 2013
US Dollar 5,324,909 5,459,173
Sterling Pound (382,555) (333,918)
Euro 147,958 70,938
Saudi Riyal 335,801 328,207
UAE Dirham 135,555 130,536
Australian Dollar 14,930 15,106
Bahrain Dinar 356,087 443,320 Other Currencies 839,008 904,920
6,771,693 7,018,282
The net impact on profit and equity if, as of 31 December 2014, Kuwait Dinars had strengthened against the
US Dollar by 5%, is shown below:
Impact on profit Impact on equity
As at 31 December 2014 232,739 (105,846)
As at 31 December 2013 116,067 (389,026)
(b) Interest rate risk
Interest rate risk is the risk that the fair value or cash flows of an interest bearing financial instrument will
fluctuate because of changes in market interest rates. The Company does not have significant exposures to
interest rate risks as its interest earning assets are on short term fixed rates of interest and its exposure to interest
bearing liabilities are not significant.
Kuwait Insurance Company S.A.K.P
Kuwait
Notes to the Financial Statements for the year ended 31 December 2014 (All amounts are in Kuwaiti Dinars unless otherwise stated)
24
(c) Equity Price risk
This is the risk that the value of financial instruments will fluctuate as a result of changes in market prices,
caused by factors specific to the instrument or its issuer or factors affecting all instruments traded in the market.
The Company is exposed to equity price risk from investments held by the Company and classified as “available
for sale”. The Company’s investments are primarily exposed to the Kuwait Stock Exchange index.
To manage its price risk arising from investments in equity securities, the Company invests in a diversified
portfolio of securities. Diversification of the portfolio is done in accordance with the limits set by the Company.
The Board of directors constantly monitors the exposures and provides directions to manage risks and maximize
profits.
At 31 December 2014, if the Kuwait Stock Exchange index had changed by 5%, the equity of the Company
would have changed by KD 2,387,450 (31 December 2013 - KD 2,513,245).
Liquidity Risk
It is the risk that the Company may not be able to meet its financial obligations as they fall due. The policy of
the Company is to ensure that sufficient liquidity is available at all times to meet contractual obligations,
including loss claims. To manage liquidity risk the Company maintains sufficient cash and marketable securities,
having adequate amount of credit facilities and investing in securities which can be easily closed out. The
Company also has the option to raise additional capital to meet funding requirements.
The Company’s contractual liabilities as of 31 December 2014 mature over a period of one year.
19. Capital Risk Management
The Company’s objectives when managing capital are
• To ensure adequate funds are available to underwrite risks and maintain investor, creditor and market
conditions;
• To make available funds for future development of the business;
• To safeguard the Company’s ability to continue as a going concern so that it can continue to operate;
• To provide adequate return to shareholders and benefits to its other shareholders
The Board of Directors constantly monitors the capital structure of the Company with a view to ensuring that a
balance is maintained between returns and risk. The management ensures that the Company is not geared
beyond acceptable limits. For this purpose, the Company may adjust the amount of dividend payable to its
shareholders, issue new shares or sell assets to reduce debt.
Furthermore in order to protect against the impact of large claims and catastrophes, the Company is required
under law to maintain technical reserves depending on the exposure to various types of underwriting exposures.
The details of this reserve are given in Note No. 10.
Under local regulations, the Company places some of its investments securities and bank deposits under lien
to the regulator. The amount of securities and deposits to be placed under lien is determined as a percentage
of direct premium, received during the year for all the segments other than life insurance segment. Regarding
life insurance segment, the amount to be placed under lien is determined at 100% of the liability, as ascertained
by an actuarial valuation at the end of the year. The extent of lien on deposits is given in Note No. 4 and 6.
20. Critical accounting estimates and judgments
The Company makes estimates and assumptions that may affect amounts reported in these financial statements.
Estimates are revised if changes occur in the circumstances on which the estimate was based. The areas where
estimates and assumptions are significant to the financial statements, or areas involving a higher degree of
judgment, are:
Impairment of financial assets
The Company reviews financial assets at each statement of financial position date to assess whether a provision
for impairment loss should be recognized in the Statement of Income. The process for estimating the amount
of an impairment loss involves considerable judgment by the management with respect to the estimation of
Kuwait Insurance Company S.A.K.P
Kuwait
Notes to the Financial Statements for the year ended 31 December 2014 (All amounts are in Kuwaiti Dinars unless otherwise stated)
25
future cash flows. Such estimates and assumptions are also based on several other factors involving varying
degrees of judgment and uncertainty.
Classification of financial instruments
On acquisition of a financial instrument, the Company’s management decides its classification. In making that
judgment the Company considers the primary purpose for which it is acquired and how it intends to manage
and report its performance. Such judgment determines whether it is subsequently measured at fair value or at
amortized cost.
Financial instruments carried at amortized cost
The effective yield method of calculating the amortized cost of a financial instrument involves the estimation
of future cash flows through the expected life of the instrument.
Provision for outstanding claims
Considerable judgment by management is required in the estimation of amounts due to contract holders arising
from claims made under insurance contracts. Further information on the basis of estimation and significant
assumptions, made by the Company are given in Note No. 16 of these financial statements.
21. Related party transactions
In the ordinary course of business, the company has carried some transactions with related parties. The
Company carried out transaction with related parties on term approved by management. Transactions with
related parties are included in trade and other receivables note (5) and are subject to approval of Annual
General Meeting for shareholders. The balances and transactions with related parties are as follows:
Kuwaiti Dinars
2014 2013
Transactions:
Gross premiums written 3,330,071 3,169,446
Claims paid 1,794,003 3,116,858
Balances :
Due from related parties 539,234 629,305
Key Management Remuneration 300,000 300,000