roYal eXChanGe PlC...roYal eXChanGe PlC ANNUAL REPORT & ACCOUNTS 2017 3 Contents 5 Corporate...

ANNUAL REPORT & ACCOUNTS 2017Royal ExchangE Plc 3

Contents

5 Corporate Information

6 Corporate Profile

7-8 Results at a Glance

9-10 The Notice of Annual General Meeting

11-12 Proxy/Authority to Admit Form

13-14 Important Notice

15-16 Mandate for E-Dividend Payment

18-20 Chairman’s Statement and Reports

21-23 Group Managing Director’s Statement and Reports

24-30 Report of Corporate Governance

31-35 Risk Management Statement

38-40 Board of Directors and their Profile

41 Executive Management Team

42-45 Executive Management Team’s Profile

46 Business Directors

47-52 Report of the Directors

53 Statement of Directors’ Responsibilities in relation to the Financial Statements

54 Report of Audit Committee

56-59 Independent Auditor’s Report

60 Consolidated and Separate Statement of Financial Position

61 Consolidated and Separate Statement of Profit or Loss and Other Comprehensive Income

62 Statement of Change in Equity - Group

63 Statement of Change in Equity - Company

64 Consolidated Statement of Cash Flows

66-170 Notes to the Consolidated Financial Statements

172 Statement of Value Added

173 Financial Summary - Group

174 Financial Summary - Company

176-181 Management (Group and Subsidiaries)

182 Branch/Office Network cum Directory

183 Friendship Centre Network

184-185 Corporate Events

186 Notes

ANNUAL REPORT & ACCOUNTS 2017 Royal ExchangE Plc4

Who We are

Vision statement

“to responsibly and efficiently mobilize and utilize human, financial and technological capital to exceed stakeholders expectations”.

mission statement

“to attain leadership in the financial sector and provide the highest quality services in accordance with ethical practices and norms to our clients, while ensuring adequate returns to our stakeholders”.

our Values

C - Customer orientationC - CreativityI - integrityL - learning organisationP - ProfessionalismT - teamwork


DirectorsChairman – mr. Kenny ezenwani odogwu

non-executive Directors – Chief anthony ikemefuna idigbe (san) mr. Daniel maegerle (swiss) Chief uwadi okpa-obaji alhaji ahmed rufa’i mohammed alhaji rabiu muhammad Gwarzo, oon mr. adeyinka ojora

Group managing Director – alhaji auwalu muktari

Group Company secretary – ms. sheila ezeuko

registereD office – 31, marina, lagos

AuDitors – KPmG Professional services

BAnkers – access Bank Plc Diamond Bank Plc ecobank Plc FCmB Plc First Bank of nigeria ltd Guaranty trust Bank Plc heritage Bank Plc stanbic iBtC Bank Plc Keystone Bank ltd mainstreet Bank ltd (now skye Bank Plc) sterling Bank Plc uBa Plc uBn Plc Wema Bank Plc Zenith Bank Plc

registrArs – Cardinalstone (registrars) limited, 358, herbert macauley street, Yaba, lagos.

rc nuMBer – 6752

CorPorate inFormation


in 1918, our company started operations in nigeria represented by Barclays Bank Dco and on february 28, 1921 converted to a full branch of its then parent company, royal exchange Assurance, London.royal exchange assurance, london was originally founded in 1720 and was one of the first two insurance companies in Britain to receive legal status via royal Charter. originally established for marine business, it expanded within a year to include fire and life insurance as well, thereby becoming Britain’s first composite insurer. the establishment of its branch in nigeria was the result of an overseas expansion drive in the early 20th century.

some notable figures in the local insurance industry have headed our company, which was, for over twenty years, the only insurance company operating in nigeria. thus, our company can be said to be the beginning of insurance in nigeria and today, has one of the largest branch networks in its sector, with fifteen branches, two friendship centers and thirteen sales outlets.

Pursuant to section 396(2) of then companies act of 1968, our company was on December 29, 1969, reconstituted and incorporated as a private limited liability company, royal exchange assurance (nigeria) limited. the company went public July 18, 1989 and was duly listed on the nigerian stock exchange on December 3, 1990. in June 2007, our company entered into a merger with african Prudential insurance Company and Phoenix of nigeria assurance Company Plc. the merger brought about a significantly stronger company, better positioned to serve the needs of its clientele in the financial services sector.

in June 2008, our company was re-organized into a Group structure, whereby it assumed the role of a group holding and asset management company to execute its strategic vision for financial services, namely insurance, funds management, finance and banking, through its five wholly owned subsidiaries namely:

• RoyalExchangeGeneralInsuranceCompanyLimitedestablishedinJanuary2008,tocarryonthenon-lifeinsurancebusinessofthegroup;

• RoyalExchangePrudentialLifePlc,establishedinFebruary2007tocarryonlifeassurancebusinessofthegroup;

• RoyalExchangeFinance&AssetManagementLimited(previouslycalledRoyalExchangeFinance&InvestmentLtd)wasincorporatedas a wholly-owned subsidiary of royal exchange Plc in october 2004 and licensed in april 2005 by Central Bank of nigeria, to carry on the finance and assets management functions of the group;

• RoyalExchangeHealthcareLimited,establishedinMay2006toprovidehealthmanagementservicesandhealthcareinsurance;

• RoyalExchangeMicrofinanceBankLimited,establishedinJuly2009andlicensedtocarryonthebusinessofassistingallenterprisesengaged in small scale industries, micro economic activities and co-operative related endeavors;

all subsidiaries are properly licensed by their respective regulators and are structured to fully exploit the significant opportunities available in the nigerian economy.

the royal exchange brand is a notable brand in nigeria especially in the field of insurance. the company will ensure its continued relevance in the environment in which it operates by continuously re-inventing its products and services.

CorPorate ProFile

our Directors:roYAL eXcHAnge PLc1. mr. Kenny ezenwani odogwu - Chairman2. Chief anthony ikemefuna idigbe (san) - Director3. mr. Daniel maegerle (swiss) - Director4. Chief uwadi okpa-obaji - Director5. alhaji ahmed rufa’i mohammed - Director6. alhaji rabi’u muhammad Gwarzo, oon - Director7. mr. adeyinka ojora - Director8. alhaji auwalu muktari - Group managing Director

roYAL eXcHAnge generAL insurAnce coMPAnY LiMiteD (regic)1. alhaji auwalu muktari - Chairman2. mr. Benjamin agili - managing Director3. mr. olawale Bamore - Director4. mr. Donald nosiri - Director5. mr. nelson akerele - Director6. mrs. Jane ekomwereren - Director7. mr. nnamdi oragwu - independent Director

roYAL eXcHAnge PruDentiAL Life PLc (rePru)1. alhaji auwalu muktari - Chairman2. mr. olawale Banmore - managing Director3. mr. Benjamin agili - Director4. mr. adekunle Kasim - Director5. mr. nelson akerele - Director6. mr. matthew adefila - Director7. mr. Ben azi - independent Director

roYAL eXcHAnge HeALtHcAre LiMiteD (reHL)1. alhaji m. s. hammid (fwc) - Chairman2. Dr. emenike onwutalu - managing Director3. alhaji auwalu muktari - Director4. mr. olawale Banmore - Director5. mrs. Jane ekomwereren - Director6. mr. Ben azi - independent Director

roYAL eXcHAnge finAnce AnD Asset MAnAgeMent LiMiteD (refAM)1. alhaji auwalu muktari - Chairman2. mrs. irene opara - managing Director3. mr. Benjamin agili - Director4. mr. olawale Banmore – Director5. alhaji ibrahim turaki - independent Director

roYAL eXcHAnge MicrofinAnce BAnk LiMiteD (reMfB)1. alhaji auwalu muktari - Chairman2. mr. hassan Yusuf - acting managing Director3. mr. nelson akerele - Director4. mrs. irene opara - Director5. mr. Ben azi - independent Director


results at a GlanCe

group Parent

2017=n=’000

2016=n=’000

%growth

2017=n=’000

2016=n=’000

%growth

MAJor stAteMent of coMPreHensiVe incoMe iteMs

Gross Premium Written 12,822,219 12,517,381 2.44 - - -

Gross Premium Income 13,396,839 12,435,442 7.73 - - -

Net Premium Income 7,078,057 8,172,005 (13.39) - - -

Investment and Other Income 1,360,549 800,126 70.04 57,237 81,289 (29.59)

Loss Before Tax (682,127) (743,838) 8.30 (351,118) (368,735) 4.78

Loss for the period (969,643) (980,252) 1.08 (399,669) (368,735) (8.39)

2017=n=’000

2016=n=’000

2017=n=’000

2016=n=’000

MAJor stAteMent of finAnciAL Position iteMs

Total Assets 33,272,846 31,676,729 5.04 11,454,447 9,810,075 16.76

Insurance Contract Liabilities 11,337,881 10,158,280 11.61 - - -

Investment Contract Liabilities 293,555 339,456 13.52 - - -

-2,000,000

-

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

Gross Premium Written

Gross Premium Income

Net Premium Income

Investment and Other Income

Loss Before Tax Loss for the period

Thou

sand

s of N

aira

Group- Major Statement of Comprehensive Income Items

2017 ₦'000

2016 ₦'000

-

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

Total Assets Insurance Contract Liabilities Investment Contract Liabilities

Tho

usan

ds o

f Nai

ra

Group- Major Statement of Financial Position Items

2017 ₦'000

2016 ₦'000


results at a GlanCe (continued)

8,500,000

9,000,000

9,500,000

10,000,000

10,500,000

11,000,000

11,500,000

12,000,000

Total Assets

TH

OU

SAN

DS

OF

NA

IRA

Parent- Major Statement of Financial Position Items

2017 ₦'000

2016 ₦'000

-500,000

-400,000

-300,000

-200,000

-100,000

-

100,000

200,000

Investment and Other Income Loss Before Tax Loss for the period

Tho

usan

ds o

f Nai

ra

Parent- Major Statement of Comprehensive Income Items

2017 ₦'000

2016 ₦'000


notiCe oF annual General meetinG

orDinArY Business:

1. to lay before the meeting, the Consolidated Financial statements of the Group for the year ended December 31, 2017 together with the reports of the Directors, the audit Committee and the auditors thereon.

2. to elect/re-elect directors.

3. to authorize the directors to appoint new auditors.

4. to authorize the directors to fix the remuneration of the auditors.

5. to elect shareholders as members of the statutory audit Committee.

sPeciAL Business:

1. to approve the remuneration of the directors.

BY ORDER OF THE BOARD

SHEILA EZEUKOComPanY seCretarY/Gm (leGal serViCes)FrC/2013/nBa/00000004059new africa house31, marina, lagos.

september 25, 2018

notice is hereby given that the forty-ninth Annual general Meeting of royal exchange Plc will be held at the Banquet Hall, civic centre, ozumba Mbadiwe road, Victoria island, Lagos, Lagos state on thursday, 18th october, 2018 at 10.00 o’clock in the forenoon to transact the following business:

sHeiLA eZeukoCOMPANY SECRETARY/GM (LEGAL SERVICES)


notes

• Proxy a member of the company entitled to attend and vote is allowed to appoint a proxy to attend and vote in his/her

stead. a proxy needs not be a member of the company. a proxy form is contained in the annual report and accounts. if it is to be valid for the purpose of the meeting, it must be completed, detached, duly stamped at the office of the Commissioner for stamp Duties and deposited at the office of the registrars, Cardinal stone (registrars) limited, 358, herbert macauley street, Yaba, lagos, not later than 48 hours before the time appointed for holding the meeting.

• DividendWarrants the company will not recommend any dividend for the year ended December 31, 2017.

• ClosureofRegisterofMembersandTransferBooks the register of members and the transfer Books will be closed from 4th october, 2018 to 11th october, 2018, both

dates inclusive.

• AppointmentofMembersoftheAuditCommittee any member may nominate a shareholder as a member of the audit Committee of the company, by giving notice

in writing of such nomination to the Company secretary, at least 21 (twenty-one) days before the annual General meeting.

• UnclaimedShareCertificatesandDividendWarrants the company notes that some share certificates have been returned, marked “unclaimed”. the company notes further

that some dividend warrants sent to shareholders are yet to be presented for payment. therefore, all shareholders with unclaimed share certificates should write to the registrars, Cardinalstone (registrars) limited, the Company secretary or call at the registered office of the company during normal working hours.

Furthermore, all shareholders with unclaimed dividend warrants nos. 1 – 12 should address their claims to the Company secretary or call at the registered office of the company during normal working hours for processing of their claims or assistance. shareholders, with unclaimed dividend warrants nos. 13 – 17 should address their claims to the registrars, Cardinalstone (registrars) limited. members are urged to advise the registrars or the Company secretary of any change of address or situation particularly as it relates to share certificates and dividend warrants.

• RightofSecurities’HolderstoaskQuestions securities’ holders have a right to ask questions not only at the meeting, but also in writing prior to the meeting, and

such questions must be submitted to the company on or before 12th day of october, 2018.

notiCe oF aGm (continued)


Tear off from here

the Annual general Meeting of royal exchange Plc to be held at the Banquet Hall, civic centre, ozumba Mbadiwe road, Victoria island, Lagos, Lagos state, on thursday, 18th october, 2018 at 10.00 am in the forenoon.

i/We………………………………. being a member/members of royal exchange Plc hereby appoint …….…….………...................……………………………………… or failing him, the Chairman of the meeting as my/our proxy to vote for me/us and on my/our behalf at the 49th annual General meeting of the Company to be held on thursday, 18th october, 2018 and at every adjournment thereof.

Dated this 31st day of august, 2018.

NOTES:

1. Please indicate with an ‘X’ in the appropriate squares how you wish your votes to be cast on the resolutions set out above.

2. a member (shareholder) who is unable to attend the annual General meeting is allowed to vote by proxy. the above proxy form has been prepared to enable you to exercise your right to vote in case you cannot personally attend the meeting. members wishing to vote by proxy should please ensure that the appropriate stamp duties due on the proxy form are paid. the proxy must produce the “authority to admit”, attached to this form to gain entrance to the meeting.

3. Provision has been made on this form for the Chairman of the meeting to act as your proxy. however, if you so wish, you may insert in the space provided on the form, the name of any person whether a member of the company or not who will attend the meeting and vote on your behalf.

4. Please sign the above proxy form and post it so as to reach the registrars, Cardinalstone (registrars) limited, 358, herbert macauley street, Yaba lagos, not later than 48 hours before the appointed time for holding the meeting. if executed by a corporation, the proxy form must bear the common seal of such corporation.

nos. resoLutions for AgAinst

1. to elect mr. hewett Benson.

2. to re-elect Chief u. okpa-obaji.

3. to re-elect alhaji r. mohammed.

4. to authorize the directors to appoint new auditors.

5. to authorize the directors to fix the remuneration of the auditors. 6. to fix the remuneration of directors. 7. to elect members of the audit Committee.

AUTHORITY TO ADMIT

Please admit ………………………………………………..........…………. at the 49th annual General meeting of royal exchange Plc to be held at the Banquet hall, Civic Centre, ozumba mbadiwe road, Victoria island, lagos, lagos state on thursday, 18th october, 2018, 10.00 am in the forenoon.

SHEILA EZEUKOComPanY seCretarY/Gm (leGal serViCes)FrC/2013/nBa/00000004059

NOTES:

1. this authority to admit must be produced by the shareholder or his/her proxy in order to gain entry to the venue of the annual General meeting

2. shareholders or their proxies must sign this authority for admission before attending the meeting.

………………………............................................………….............…signature of person attending

FOR REGISTRAR/COMPANY USE ONLY

name oF shareholDer:

numBer oF shares:

CAUTION: TO BE VALID THIS FORM MUSTBE STAMPED ACCORDINGLY

BeFore PostinG the aBoVe CarD Please tear oFF this Part anD retain it.

ProXY Form


Tear off from here

Please affixPostage stamp

here

the registrar,Cardinalstone (registrars) limited,358, herbert macauley street, Yaba, lagos.

ProXY/authoritY to aDmit


To:

The Registrar, CardinalStone (Registrars) Limited, 358, Herbert Macauley StreetYaba, Lagos.

ROYAL EXCHANGE PLCREQUEST FOR E-BONUS

i/We hereby request that henceforth, all bonuses due to me/us with respect to my/our shareholding in royal exchange Plc be paid directly to my CsCs/stock broker account stated below:

account Details:

shareholder account no: (Please look on the left hand corner of our certificate for your shareholder account number)

name of shareholder:

address of shareholder:

investor’s account no:

CsCs account no. (Chn):

Gsm no:

e-mail address:

Yours faithfully,

signature: ) Corporate shareholders ) should please affix sealname: ) here and state rC no. For Joint shareholders

signature: ) name: ) ) of shareholder



official stamp and authorized signatures of stockbroker

1. signatory: seal of stockbroker

2. signatory:

imPortant notiCe



here


imPortant notiCe


manDate For e-DiViDenD PaYment

NAME OF COMPANYACORN PET. PLCAFRIK PHARMACEUTICALS PLCAG HOMES SAVINGS & LOANSAG LEVENTISARBICO PLCASHAKACEM PLCBANKERS WAREHOUSEBETA GLASSCAPITAL HOTEL PLCELLAH LAKESEVANS MED PLCFCMB BONDFCMB GROUP PLCFIDSON BONDG. CAPPA PLCGUINEA PLCIMB ENERGY MASTER FUNDJOS INT. BREWERIES PLCKOGI SAVINGS & LOAN LTDLAFARGE AFRICA PLCLAFARGE BONDLAW UNION & ROCK PLCLEGACY FUNDLIVESTOCK FEEDS PLCMORISON PLCMRS OIL PLCNAHCO BONDNAHCO PLCNEWPAK PLCN.G.C PLCNGC STERILENPF MICROFINANCE BANKNULEC INDUSTRIES PLCOKOMU OIL PALM PLCPREMIER PAINT PLCREAN PLCSKYE BANK PLCTOTAL NIG. PLCTRANEX PLCWOMEN INVESTMENT FUND

TICK ACCOUNT NO.SHAREHOLDER’S

S L



here


manDate For e-DiViDenD PaYment

ROYAL ExCHAngE PLC 17ANNUAL REPORT & ACCOUNTS 2017

stAteMents & rePorts


Distinguished shareholders, Colleagues on the board of directors, ladies and gentlemen.

it is my pleasure to welcome you to the 49th annual General meeting of our company, taking place this 18th Day of october, 2018 where the audited annual Financial statement and annual reports of your Company will be presented for your consideration.

By virtue of my position as Chairman, i will now present an overview of the 2017 macroeconomic environment, a review of our operating results for the year and synopsis of our expectations for 2018, for your kind consideration.

2017MACROECONOMICREVIEW

globalit has been a tumultuous year marked by natural disasters, geopolitical tensions, and deep political divisions in many countries.

on the economic front, however, 2017 is ending on a high note, with GDP continuing to accelerate over much of the world in the broadest cyclical upswing since the start of the decade. the global economy recovered with strong standing in the year under review on the back of the 3.2% growth for 2016, while the global growth rate for 2017 is estimated at 3.7%.

Growth accelerated in about three quarters of countries—the highest share since 2010. even more important, some of the countries that had high unemployment for some time, for example, several in the euro area, are participating in the growth surge and experiencing strong employment growth.

summarily, the global growth seen was as a result of higher commodity prices, a weak dollar and anticipation of tax cuts in the united states of america. Common incidence worldwide is the stock markets rallied in 2017.

Localnigeria’s economic performance worsened in 2017, even though she officially exited recession in the third quarter of 2017. the economy was severely affected by the plunge

CHAIRMAn’sstAtEMEnt&REPORt

in crude oil prices, decline in oil production, and the reduction in non-oil exports, all of which contributed to the acute scarcity of foreign exchange. the economy was also adversely affected by the knock-on effects of foreign exchange controls introduced by the CBn in 2015, especially the foreign exchange restriction of 41 import items, some of which are direct inputs required by the manufacturing and agro-allied industries.

there was an annual growth of 0.83% in GDP in 2017 as against the 1.58% drop in 2016. inflation rate continued its decline during the year dropping to 15.37% from the height of 18.72% in January 2017. nigerian foreign exchange saw a great improvement in the management of our reserves as this grew from us$26.26bn to us$38.76bn giving a growth rate of 47.7% year-on-year. nigerian stock exchange did not disappoint as usual as the all share index closed the year at 38,243.19 points with a huge 42.30% growth over the figure of 2016 which stood at 26,874.62 points, making it the second best performing exchange in the world in 2017.

Government during the year successfully raised eurobonds and sukuk bonds to address the deficit in Government finances, as it intended to drastically increase the capital expenditure component of the budget. the mPr was left unchanged while yields on short-term Government securities rose to over 21% in some instances. this aided the flow of foreign capital into the economy and further reduced inflation level.

however, delay in signing the 2017 budget meant that overall expected positive effect on the macro-economic level could neither be achieved nor sustained.

regulatory bodies - national insurance Commission (naiCom), securities exchange Commission (seC) and nigeria stock exchange (nse) with related activities to insurance industry continued with their activities during the year. naiCom came up with new draft guidelines with aim to broaden and strengthen the way insurance is being done in nigeria. among these guidelines are micro insurance,

KENNYEzENWANIODOgWUChAIRMAN


CHAIRMAn’sstAtEMEnt&REPORt(continued)

Bancassurance and takaful insurance respectively.

2017 oPerAting resuLts for tHe coMPAnYDespite the daunting challenges posed by the hostile operating environment, royal exchange Group was able to deliver a mixed to good result in 2017 through cost optimization initiatives, innovation in key categories and extensive retail market expansion, all of which helped to offset further deterioration of margins during the year.

During the period under review, your company generated gross written premium of =n=12.822 billion, while that of the preceding year was =n=12.517 billion, an increase of 2.4%. Claims expense for the year amounted to =n=5.331 billion in comparison with =n=4.870 billion reported in 2016; signaling an increase of 9.47%. underwriting expenses grew by 5% from =n=2.469 billion in 2016 to =n=2.597 billion in 2017. Provisions of =n=524 million were made to cater mainly for our life insurance contract liabilities during the year against the sum of =n=670 million provided in the previous year of 2016. these translated into net income before overhead expenses of =n=2.413 billion, a decrease of 11% when compared with 2016 value of =n=2.724 billion.

management expenses were =n=3.096 billion in 2017 in comparison with =n=3.468 billion in 2016 showing a drop of 10.74%. the management has been mindful of its cost profile during the year.

the group experienced a loss before taxation of =n=832 million largely due to insurance contract liabilities’

provisions made in accordance with best reporting practices.

eXPectAtions for 2018the year under review, i.e. 2017, was mixed in economic terms from traumatic recession to recovery. it started with a negative growth rate of 0.8 percent, but the economy recovered and moved out of negative growth to a positive path of a long-term sustained growth.

For the year 2018, there is a blurred trajectory that would make any forecasts dependent on the school of thought one belongs to. this varies from the imF projection of 2.1 percent to that of the 2.6 percent of the rating agency, Fitch, and the revised World Bank’s raised growth rate of 2.5 percent.

all these projections will not make meaning until nigerians feel the impact on their living standard. it is achievable if only the economic policy makers handle the most crucial elements of the economy, about which there are absolutely no guarantees. this has to do with how the Government settles the poor implementation of the 2017 budget and how quick is the resolution of the remaining issues relating to budget 2018. also important is the propitious holding forth of global oil prices, which currently stand at us$70.00 per barrel. it is also important to continue with the dialogue with niger Delta militants to ensure that we maintain 2.1 mpd or even higher.

in order to have an enduring and a stable macro economy and a framework for longterm sustained growth, certain things are very critical. on the monetary side, there should

be a proactive initiative to make improvements as against last year. We hope also to get a fewer multiple exchange rates compared to the past, with the hope of getting a single exchange rate regime. although the monetary policy is weak due to heavy deficit on the CBn balance sheet as a result of housing the amCon liability from the banking industry, the result is interest rates would become too high, and the monetary Policy rate, mPr to sustainable levels.

as the economy recovers to full-level, it is expected that the mPr will be eased downwards. interest rates matter particularly for smes who need affordable credit to build their businesses and create jobs. one other way the interest rate can be brought down is by using the excess unused tsa funds which can be given to commercial banks to loan out to specified sectors on agreed rates lower than 10 percent, and the banks can then charge one to two percent service charges. in that manner, the interest rates of the commercial banks will crash and the banks will gain from the service charges. it will further reduce the various interventions of the CBn. also, the challenges faced by some of the banks relating to non-performing loans need to be frontally and squarely addressed to safeguard the stability and integrity of the financial system.

on the fiscal side, quick conclusion of this year’s budget process and its religious implementation is key to unleashing the kind of spending that will sustain the recovery and get the required job creation that would reduce unemployment level. there is the need for fiscal responsibility to drive the process of growth.

“there was an annual growth of 0.83% in gDP in 2017 as against the 1.58% drop in 2016. inflation rate continued its decline during the year dropping to 15.37% from the height of 18.72% in January 2017. nigerian foreign exchange saw a great improvement in the management of our reserves as this grew from us$26.26bn to us$38.76bn giving a growth rate of 47.7% year-on-year”.


CHAIRMAn’sstAtEMEnt&REPORt(continued)

the extractive sector needs to be rejuvenated to enhance the extractive capacity of the state.

on taxes, the nigerian workers need a relief to enhance income capacity to participate in the economy effectively. any kind of increase in taxes will retard growth. Finally, we need more coordination between the fiscal and monetary side. What we have seen in the preceding year was a poor coordination between the two. We need the entire team to do their part, together and in harmony, to ensure positive results. equally important is the need to keep inflation on check. although inflation has come down from 19 percent to its current 15.1 percent, we still have the challenge of food inflation hovering around 20 percent. another element is the petrol scarcity. this has a tendency to drive up prices, given that the cost of transportation has direct bearing on other prices. also, in a political-electoral cycle, politicians are to outspend each other to peddle influence and engage in political horse-trading. this also means that both fiscal and monetary authorities have to work together to stem the tide of these spending excesses so that prices remain stable.Focusing more specifically on your Company, royal exchange in 2018 we will be consolidating the initiatives that we started since 2016, support growth and working capital and restructuring across the group.

as always, royal exchange stays abreast with many of the initiatives mentioned above in our quest to grow market share and attain market leadership position. the group is presently streamlining major components of her businesses, service delivery, processes and operations to deliver superior returns in the medium term to our shareholders through a digital transformation process we embarked upon recently. this

we believe will reposition our great company as not only a major industry player but as a potential game changer.to sum it up, your board is confident about the future of our company irrespective of the current challenges besetting the company in the short term.

DiViDenDsthe Board of Directors do not recommend the payment of a dividend for the year ended December 31, 2017.

concLusion

future outlookthe management and staff of the Company are highly commended for their deep sense and display of loyalty, commitment, honesty and dedication to duty during the year under review. as we look forward to an improved performance in the years ahead, i encourage you all that there is light at the end of the tunnel as we pilot the ship of our dear company to the desired destination.

Finally, i must also appreciate our esteemed clients, agents and brokers for their patronage and also the shareholders for the trust bestowed upon the Board. We assure you of our commitment to you always and continue to solicit your support now and always.

the future of our company and our plans for 2018 are well on course notwithstanding the vulnerabilities imminent in our domestic economy.

thank You.

kenny ezeanwani odogwuChairman


GrouP manaGinG DireCtor’s statement

gROUPCEO’SBUSINESSREVIEWDistinguished shareholders, members of the Board of Directors and Colleagues, it is my pleasure to present to you the report of our stewardship for the financial year ended 31st December 2017.

nigeria’s economy came to be defined by recession that engulfed the nation and devaluation in 2016, thereby confirming the known fact that our economy had been built on the favorable global commodity known as oil. Weak commodity prices brought nigeria’s growth to a very abrupt end and inflicted heavy bouts of devaluation to the local currency: naira. major learning point for nigeria is that larger capital inflows would have made the oil price fall less hurtful.

group PerformanceFor the Group, the board and management of royal exchange remained resolute in accomplishing the task of restructuring the Group which commenced some years ago. the business terrain has been tough but we are more poised to face the challenge head long with our set objectives to be achieved. We shall continue to proactively take measures to mitigate the impact of the adverse business environment by continuing to drive change in our company’s processes and strategies.

across the Group, Premiums rose by 2.4% year-on-year from =n=12.517 billion in 2016 to =n=12.822 billion in 2017. results from core operating activities suffered a dip of 45% as we recorded underwriting profit =n=1.053 billion as at December 2017 from =n=1.924 billion in the corresponding year of 2016. it is of note that we increased our outward reinsurance by 48% year-on-year in line with appropriate risk management put in place by the management translating to =n=2.055 billion increase in 2017. however, management was able to keep a check on the management expenses during the period as it fell by 10.74% year-on-year to =n=3.096 billion in 2017 from

AlHAjIAUWAlUMUKTARIGROuP MANAGING DIRECTOR

=n=3.468 billion in the preceding year. this is despite an unexpected surge in the cost of doing business during the year.

a loss before tax of =n=832 million was reported in 2017. the occurrence of this loss is traceable to a =n=0.524 billion provisions made on insurance contract liabilities during the year as well as impairment charges recognized.

at the subsidiary level, our objectives remain the same; continue to expand the market share for our core insurance subsidiaries and ensure a sustained increase in the contributions of our non-core insurance businesses i.e. asset management and microfinance banking divisions, to the pool. oPerAting resuLts

grouPthe company’s wholly owned subsidiaries at the end of 2017 were:(a) royal exchange General insurance

Company ltd(b) royal exchange Prudential life

Plc(c) royal exchange healthcare ltd(d) Royal Exchange Finance & Asset

management ltd(e) royal exchange microfinance

Bank ltd

royal exchange general insurance company Limitedroyal exchange General insurance Company limited (reGiC) being the major income earner of the group contributed about 76% of the gross earnings of the group.

Gross Written Premium (GWP) at =n=9.69 billion rose 8% above 2016 results of =n=8.99 billion, whilst earned premium income of =n=10.20 billion increased by 16.45% when placed side by side with that of the corresponding year 2016 at =n=8.76billion. reinsurance cost year–on-year spiked by 49.83% impacting negatively on net premium earned, but that shows our dexterity in risk management. net premium income of =n=4.24 billion was recorded in the year; 11.36% drop against that of 2016.


net Claims incurred (excluding reinsurance recoverable) was =n=1.347 billion as against =n=1.724 billion recorded in 2016 displaying a positive drop of 21.83 %. the company’s claims ratio also dropped marginally from 36.07% in 2016 to 31.81% in 2017. underwriting expenses at =n=2.021 billion increased by 7.6% over 2016 levels. hence, we recorded an underwriting profit of =n=1.33billion in 2017, as against =n=1.605 billion in 2016.management expenses at =n=1.627 billion dropped sharply by 15.73% against 2016 levels.

Consequently, a profit before tax of =n=450 million is reported for the company in 2017.

royal exchange Prudential Life PlcDespite the challenges of 2017 especially for life underwriters, royal exchange Prudential life was able to record some growth too.

Gross Written Premium at =n=3.01 billion dropped marginally by 10.29% in comparison to 2016, and earned premium at =n=3.06 billion likewise saw a drop of 11.90% when compared with the 2016 levels. our life company experienced a tough year as underwriting activities resulted to negative of =n=91.7m against a profit of =n=489m recorded in the year 2016. huge claims experience was the main factor. similarly additional provision on our insurance contract liabilities of =n=524m further contributed to the loss recorded for the year.

management expenses at =n=902million was 1.84% higher than =n=886 million recorded in 2016. the increase in management expenses was attributed to increased cost of doing business during the year. Consequently, the company realized a loss before tax of =n=638 million in 2017.

royal exchange finance & Asset Management Ltdthe company achieved gross earnings of =n=401 million as against =n=404 million in 2016, a dip of 0.65%. net interest margin also suffered similar fate as it dropped by 20%, from =n=234 million in 2016 to =n=188 million in 2017.

a profit before tax of =n=9.8 million is reported for 2017 as against =n=50.5 million in 2016.

royal exchange Healthcare LtdGross written premium increased by 8.5% to =n=278 million in 2017 from =n=256 million in 2016. Gross underwriting expenses dropped slightly by 7% to =n=327 million in 2017 as against =n=351 million which shows some improvement in 2016 as a result of management’s determination to turn around the company. operating expenses however climbed up by 11% from =n=128 million in 2016 to =n=142 million in 2017 as the cost of business saw increases in general price levels.

a loss before tax of =n=132 million is reported for 2017 compared to =n=104 million loss recorded in 2016 same period.

Royal Exchange Microfinance BankLtdthe audited account shows a gross interest income of =n=84.297 million in 2017 and this increased by 8.6% when compared to 2016 figure of =n=77.597 million. net interest income also appreciated by 11.6% to =n=54.55 million in 2017 from 2016 results of=n=48.87 million.

operating expense dropped from =n=84.49 million in 2016 to =n=74.56 million in 2017. Profit before tax of =n=0.585million was reported for 2017 as against a loss position of =n=10.998 million in 2016.

corPorAte sociAL resPonsiBiLitYDuring the year, royal exchange kept to its promise of being a socially responsible corporate citizen by engaging in insurance education and advocacy through sponsorship and co-sponsorship of Chartered insurance instititute of nigeria (Ciin) and institute of Directors (ioD) programs during the year under review. Furthermore, royal exchange plc also donated Computer systems to some selected secondary schools thereby contributing her quota to the teaching of information science in nigeria. in future, we intend to be more active in promoting micro insurance to bridge insurance needs of the yearning public.

GrouP manaGinG DireCtor’s statement (continued)

“the focus would be on achieving long-term sustainable growth for our company through the deepening of our revenue base, improving service delivery support systems and at same time keeping a lid on our group-wide costs”.


GrouP manaGinG DireCtor’s statement (continued)

concLusionthe board and management has very high expectation for 2018. We remain resolute to bring in our best to the table even though various analysts’ expectations for economic growth remain modest. the focus would be on achieving long-term sustainable growth for our company through the deepening of our revenue base, improving service delivery support systems and at same time keeping a lid on our group-wide costs.

We sincerely appreciate the firm commitments of our executive and senior management team as well as staff who put in their best during the year. i am indeed grateful for the trust, contributions and sacrifices made by all during the course of the year 2017.

thank you

Alhaji Auwalu MuktariGroup managing Director


introDuctionour brand heritage dictates that we continually demonstrate our commitment as a responsible corporate entity by obeying rules and regulations, operating with the highest standards of corporate governance and living our core values with a view to delivering greater shareholder value,enhancingconfidenceofbusinesspartners,employeesandthefinancialmarkets.

We believe maintaining good corporate governance practices and keeping public trust and confidence is key to our continued long-term success and has become even more important, in view of the increased risks brought about by globalization and digitalization.

to this end, royal exchange maintains a robust Corporate Governance structure which provides a robust framework for the governance of the company. it ensures compliance with the Code of Corporate Governance for Public Companies issued by the securities and exchange Commission (“the seC Code”), and other codes issued by other regulators. the company’s Code of Corporate Governance is continuously reviewed to align with additional legal and regulatory requirements and global best practices. in addition to the Code, the company aggressively promotes its core values. Whereas we value our brand, we promote integrity over brand and this is a strong indication of our determination to entrench best global practice in the system.

goVernAnce structure

the Board/group Board of Directorsthe Board of Directors is the principal driver of strategic affairs and corporate governance of the company and has overall oversight responsibility for ensuring that the tenets of good corporate governance are adhered to by the management of the company and is accountable to shareholders for creating and delivering sustainable value through the management of the company’s business.

the Board’s size provides for sufficient diversity among its members to exercise their business judgment in the best interest of royal exchange’s shareholders while facilitating substantial discussions in which each director can participate meaningfully. the Board membership comprises eight (8) members, including the Chairman, seven (7) non-executive Directors, and one (1) executive Director. the company has appointed an independent Director who will be presented to the general meeting. the independent Director is not expected to have any significant shareholding interest or any special business relationship with the Company.

the Board is required to meet at least four times each year. the Board met five (5) times in 2017 and the average attendance was 92 percent.

all the current non-executive Directors served on the Board throughout 2017. members of the Board of Directors of the subsidiaries are appointed from the Group executive management. independent Directors are also appointed for each subsidiary. in addition to the Board’s direct oversight, the Board exercises its oversight responsibilities through six (6) Committees, namely, Board risk management, Board investment, Board strategy, establishment and Governance, Finance&GeneralPurpose,andtheBoardAudit.

rePort oF CorPorate GoVernanCe

“the company’s code of corporate governance is continuously reviewed to align with additional legal and regulatory requirements and global best practices. in addition to the code, the company aggressively promotes its core values.”


the Board has delegated the responsibility for day-to-day operations of the company to management and ensures that management delivers on both long-term growth and short-term objectives. in fulfilling its primary responsibility, the Board is aware of the importance of achieving a balance between conformance to governance principles and economic performance. notwithstanding the delegation of the operation to the management, the Board reserves certain powers which include; the approval of quarterly, half-yearly and full year financial statements (whether audited or unaudited) and any significant change in accounting policies and/or practices, approval of major changes to the corporate structure and changes relating to the company’s capital structure, approval of the company’s strategy, medium and short term plan, annual operating and capital expenditure budget, recommendation to shareholders of the appointment or removal of auditors and the remuneration of auditors.

Board code of ethicsto avoid unethical and unwholesome practices and conflicts of interest in any business relationship with the company, the Group Board has put in place a Code of Business ethics to provide guidance for the board and staff to maintain strong ethical standards.

Board Performance evaluation in compliance with provisions of the seC Code of Corporate Governance, the performance of the Board, its committees, the chairman and individual directors were appraised by an independent consultant. Furthermore, an annual board appraisal is also conducted by an independent Consultant appointed by the Company whose report is submitted tonigerianstockExchange(nsE)&securitiesandExchangeCommission(sEC)andpresentedtoshareholdersatthe annual General meeting of the Company in compliance with the recommendation of the seC Code of Corporate Governance and nse rules.

internal organizationthe Board is chaired by the Chairman. Board members are subject to standards of business conduct policies, rules and regulations to avoid conflict of interest and use of insider information. the Board appoints committees to help carry out its duties. Given the separation of roles of the chairman and the Ceo, the Board appoints non-executive Directors as chairmen of Board committees. Board committees work on key issues in greater details than would be possible at full Board meetings, which helps to ensure more effective full Board meetings. each Board committee reviews the results of its meeting with the full Board.

executive management, led by the Group managing Director (GmD), constitute the key management organ of the company and is primarily responsible for achieving performance expectations and increasing shareholder value.

Board Meetings Attendance

rePort oF CorPorate GoVernanCe (continued)

Directors status

expected Meetings 4

Actual Meetings 5 Designation Attendance % Attendancemr. K. e. odogwu non-executive Director Chairman 5 100%

Chief a. i. idigbe (san) non-executive Director member 5 100%

mr. Daniel maegerle non-executive Director member 5 100%

Chief u. okpa-obaji non-executive Director member 5 100%

alhaji a. r. mohammed non-executive Director member 5 100%

alhaji r. m. Gwarzo, oon non-executive Director member 5 100%

mr. a. a. ojora non-executive Director member 5 100%

alh. auwalu muktari executive Director member 5 100%

Average Attendance 100%


Board committeesin order to increase the efficiency of its work and enable a more detailed analysis of certain issues, the Board appointed committees for specific areas from among its members and established terms of reference and rules with respect to delegated authority and reporting to the Board. the primary objective of the Committees is to provide preparatory and administrative support to the Board. the issues considered at Committee meetings are recorded in minutes with extract of the major issues raised reported at the subsequent full Board meetings for final consideration and resolution of action points/directives.

the Board has the following committees:• Establishment&GovernanceCommittee• AuditCommittee• RiskManagementCommittee• FinanceandGeneralPurposesCommittee• InvestmentCommittee• strategyCommittee

to enable the Committees meet their oversight responsibilities, each Committee has a defined Charter which embodies its guiding principles and sets out its composition, functions, responsibilities and scope of authority.

establishment and governance committeethe committee which comprises four (4) members (three non-executive and one executive), oversees the Group’s governance and measures its governance program against best practice to ensure that the rights of the shareholders are fully protected. it is also responsible for determining the remuneration of the executive and non-executive members of the Board, nominations for approval of the Board candidates to fill Board vacancies, and for the continuous review of senior management succession plans. to assist in the review of the compensation structures and practices, the committee has retained its own independent advisor – leading edge Consultants.

the committee met four (4) times during the year with average attendance of 80%. the following served in the committee, mr. D. magerle, alhaji r. m. Gwarzo, oon, Chief u. i. okpa–obaji, alhaji auwalu muktari. each of these Directors is considered by the Board to be independent in judgment and character.

Audit committeethe committee serves as a focal point for communication and oversight regarding Financial accounting reporting. the audit committee, at least annually, reviews the standards of internal control, including the activities, plans, organization and quality of internal audits. it is also charged with the task of:• Ensuringtheintegrityofthefinancialreportingsystem.• Ensuringtheexistenceofindependentinternalandexternalauditfunctions.• Ensuringtheeffectivenessofinternalcontrolsystem,prudenceandaccountabilityinsignificantcontractsand

compliance with regulatory requirements. • Effectivenessofaccountingandoperatingprocedures.

the committee met five (5) times during the year with average attendance of 97.1%. the following served in the committee, alhaji r. m. Gwarzo, oon, Chief u. okpa-obaji, mr. a. a. ojora, alhaja a. s. Kudaisi, mr. t. olawuyi and mr. B. akinsolu. each of these Directors is considered by the Board to be independent in judgment and character.

risk Management committeethe committee is tasked with overseeing, setting and reviewing the risk governance framework, including risk management and control, risk policies and their implementation as well as the risk strategy and monitoring of operational risks. it oversees the Group risk appetite statements to ensure alignments with the group’s strategic objectives. the coverage of supervision includes the following: Credit risk, reputational risk, operations risk, technology risk, market risks, liquidity risk and other pervasive risks as may be posed by the events in the industry at any point in time.

the committee met four (4) times during the year with average attendance of 93.8%. the following served in the committee, mr. a. a. ojora, Chief u. okpa-obaji and Chief a. i. idigbe (san). each of these Directors is considered by the Board to be independent in judgment and character.



finance and general Purposes committeetheBoardFinance&GeneralPurposesCommitteehasoversightresponsibilityforissuesrelatingtothebudgetaryprocess, procurements and strategic planning. it assists the board in fulfilling its financial oversight responsibilities with specific reference to corporate finance, resources and assets utilization, capital structure, cash management, equity and debt financing, financial planning and reporting as well as the overall financial performance of the group.

the Committee’s terms of reference include: • ReviewmajorexpenselinesperiodicallyandapproveexpenditurewithintheapprovallimitoftheCommitteeas

documented in the financial manual of authorities.• Reviewannually,thecompany’sfinancialprojections,aswellascapitalandoperatingbudgetsandreviewona

quarterly basis with management, the progress of key initiatives, including actual financial results against targets and projections.

• ReviewandrecommendtotheBoardforapprovaltheprocurementstrategy• Ensurethatallmajorcontractsarecarriedoutaccordingtothetermsandconditionsofthecontractagreement.• Other financematters including recommending for Board approval, the company’s dividend policy, including

amount, nature and timing and other corporate activities. • Recommendacomprehensiveframeworkfordelegationofauthorityonfinancialmattersandensurecompliance

with same.

the committee met five (5) times during the year with average attendance of 100%. the following served in the committee, Chief u. i. okpa–obaji, mr. Daniel maegerle and alhaji a. r. mohammed. each of these Directors is considered by the Board to be independent in judgment and character.

investment committeethe committee assists the board in its oversight functions with respect to investment strategies, investment portfolio performance, investment mix and the overall investment performance of the group.

the committee met four (4) times during the year with average attendance of 93.8%. the following served in the committee, alhaji a. r. mohammed, Chief a. i. idigbe (san) and mr. Daniel maegerle. each of these Directors is considered by the Board to be independent in judgment and character.

strategy committeethe Committee’s responsibility includes but not limited to advising and assisting the board in carrying out:i) the development, articulation and execution of the Group’s long term strategic plan andii) it’s advisory oversight responsibilities relating to potential mergers, acquisitions and other key strategic

transactions outside the ordinary course of the Group’s business.

the committee met four (4) times during the year with average attendance of 87.5%. the following served in the committee, Chief a. i. idigbe (san) mr. a. a. ojora and alhaji r. m. Gwarzo (oon). each of these Directors is considered by the Board to be independent in judgment and character.


Board committee Meeting AttendanceDirectors status Bic e&gc f&gP rMs Ac Bscexpected Meetings 4 4 4 4 4 4Actual Meetings 4 4 5 4 5 4Chief a. i. idigbe (san) non-executive Director 4 4 4mr. Daniel maegerle non-executive Director 3 3 5Chief u. okpa-obaji non-executive Director 4 5 4 5alhaji a. r. mohammed non-executive Director 4 5alhaji r. m. Gwarzo, oon non-executive Director 4 5 4mr. a. a. ojora non-executive Director 1 3 4 2alh. auwalu muktari executive Director 4 4 5 4 5 4alhja a. s. Kudaisi non-executive Director 5mr. t. olawuyi non-executive Director 5mr. a. Bekunmi non-executive Director 5Average Attendance 93.8% 80.0% 100.0% 93.8% 97.1% 87.5%



scHeDuLe of Meetings HeLD

FIRSTQUARTER2017coMMittee Meetings DAte BoArD Meeting DAteaudit risk management strategy

april 18, 2017 emergency Board meeting February 9, 2017

Establishment&Governanceinvestment Committee F&GP

april 19, 2017 Group Board april 20, 2017

SECONDQUARTER2017audit risk management strategy

July 24, 2017 Group Board July 26, 2017

Establishment&Governanceinvestment Committee F&GP

July 25, 2017

THIRDQUARTER2017strategyF&GPEstablishment&Governance

october 16, 2017 Group Board october 18, 2017

auditinvestment Committeerisk management

october 17, 2017 aGm october 19, 2017

FOUTHQUATER2017F&GPrisk managementinvestment Committee

november 27, 2017 Group Board november 30, 2017

auditEstablishment&Governancestrategy

november 28, 2017

grouP structure AnD sHAreHoLDers

operational group structureto effectively manage the complexity associated with group structure both in operations and governance, royal exchange Plc manages its exposure to group governance on a matrix depicting lines of business and functionalities which reflect in the areas of responsibility.

the executive committee (eXco)the executive Committee (eXCo) is headed by the Group managing Director (GmD) and includes the Group executive DirectorandtheGroupHeadsofFinance&Accounts,HumanResources,EnterpriseRiskManagement,strategy&BusinessImprovement,Legal&CompanysecretarialservicesandtheManagingDirectorsofcompaniessubsidiary.

this management structure leads to the reporting of the Group based on the following primary business segments:• Generalinsuranceservesthepropertyandcasualtyinsurance(inclusiveoilandgasbusiness)needofawiderange

of customers, from individual to small and medium sized businesses, commercial enterprises and multinational corporations.

• PrudentialLifepursuesastrategywithmarket–leadingpropositionininvestmentlinkedandprotectionproductsthrough global distribution and proposition pillars to develop leadership position in its chosen segment.

• Healthcareprovidesqualitativehealthcareservicestoindividualsandorganizations.theirmajorstrategyistopursue blue chip companies that have large number of staff. the main benefits of the service is that apart from the easy access to healthcare delivery system, the enormous cash outlay needed by the organizations to settle medical bills of staff is significantly reduced.

• FinanceandAssetManagementprovidesfinancialservicestotheGroupandthepublic.Itpursuesastrategyofgenerating income in the course of garnering borrowings from the public, disbursing credits to individuals and corporate entities as well as asset management for individuals and corporate entities.



• MicrofinanceBankprovidesservicestothelessprivilegedpublichavingatotalproductionassetofnotexceeding=n=500,000.00 and monthly income not exceeding twice the monthly per capita income in nigeria or minimum wage.

the group Management executive committee (gMec)the GmeC is headed by the Group managing Director and includes managing Directors of the subsidiaries and Group head of Departments.

the GmeC is responsible for:• theday-to-dayrunningoftheGrouponbehalfoftheBoard• thedevelopmentandimplementationofallBoard-approvedinitiatives• theachievementofallbusinessandoperationalplans,targets,strategiesandobjectiveswithinthecompany’srisk

management framework; and • thedevelopmentofadvancedreportingprocedurestoensuretheBoardisfullyinformedatalltimes.

the GmeC also ensures that the processes, policies, procedures and controls within the Group are effective and regularly reviewed to deliver financial and operational accountability and success.

suBsiDiArY goVernAnce subsidiary governance is a vital ingredient of royal exchange risk management framework. royal exchange’s governance strategy is implemented through the establishment of systems and processes which assures the Board that the subsidiaries reflect the same values, ethics, control and processes as that of the parent while remaining independent in the conduct of their business. it provides the structure through which performance objectives of the subsidiaries are set, the means through which the set objectives are achieved and how performance monitoring is conducted.

monthly, subsidiaries strategic business activities and operating environment are discussed at the executive Committee (eXCo) level where strategic directions are set. the reports cover the subsidiaries’ financial performance, risk assessment, regulatory activities among others. to ensure an effective and consistent compliance culture across all entities, the Group Compliance function oversee compliance risk and promote training and best practice implementation across the subsidiaries, therefore affirming the group’s commitment to a zero tolerance for regulatory breaches.

inforMAtion to sHAreHoLDers shareholders have the opportunity to express their opinions on the company’s financial results and other issues affecting the company. royal exchange Plc is thus committed to continually disclose all material information in a timely and transparent manner to its shareholders. to ensure the shareholders are adequately informed and their interests protected, the company has an investors relations unit domiciled in the company secretariat to deal directly with enquiries from shareholders and ensures that shareholders’ views are escalated to management and the Board. information relating to the company’s going concern are periodically released to the investing public on quarterly, half-yearly and annual basis in widely read national newspapers.

AnnuAL generAL Meetingin compliance with statutory and regulatory requirements, the General meeting of the company is held annually and provides shareholders of the company or their proxies with opportunity and direct access to senior and executive management to deliberate and take decisions on issues affecting the company. the annual General meetings are attended by representatives of regulators such as the securities and exchange Commission (seC), the nigerian stock exchange (nse), Corporate affairs Commission (CaC) as well as representatives of shareholders’ association.

cross sHAreHoLDing the Company has no interest in any other company exceeding 5% of the voting rights of other company, neither does any other company have an interest in royal exchange Plc exceeding 5% of their voting rights.

coMMunicAtion PoLicYthe company ensures that communication and information dissemination regarding the company’s operations to stakeholders and the general public is timely, accurate and continuous. such information is available on the company’s website, http://www.royalexchangeplc.com.



WHISTlEBlOWINgPROCEDURESroyal exchange is committed to the highest standards of ethical, moral and legal business conduct. in line with this commitment and royal exchange’s philosophy of open dialogue and communications, the company has established a whistle blowing procedure that ensures and provides an avenue for employees to raise concerns and be assured that they will be protected from reprisals or victimization for whistle blowing. this whistleblower policy is intended to provide protection for any whistleblower that raises concerns in good faith regarding royal exchange Plc, relating to:• Incorrectorinappropriatefinancialreporting;• Aviolationofalaworregulation;• Possiblefraudandcorruption;• Activitieswhichotherwiseamounttoseriousimproperconduct;and• Health&safetyrisksincludingriskstothepublicaswellasotherstaff.

tHe coMPAnY secretArYthe Company secretariat provides reference and support for all Directors. it also consults regularly with Directors to ensure that they receive required information promptly. the Company secretary is also responsible for assisting the Board and management in the implementation of the Code of Corporate Governance, coordinating the orientation and training of new Directors and the continuous education of non-executive Directors.

coMPLAints MAnAgeMentroyal exchange views complaints as a feedback mechanism for business improvement and customer retention strategy, this may be in form of any expression of dissatisfaction, resentment or grievances whether justified or not made by a person or corporate body about any aspect of royal exchange’s operation, services, personnel, policies, shares or dividends. the group is committed to resolving customer’s complaints whenever they arise. our complaints and feedback structure ensures prompt resolution of customers’ complaints. there is a dedicated Complaints unit apart from our 24/7 Contact Center responsible for receiving, escalating, ensuring prompt investigation and resolution of customers’ complaints within the specified service level agreement (sla).

ANTI-MONEYlAUNDERINgANDCOMBATINgTHEFINANCINgOFTERRORISM(AMl/CFT)FRAMEWORKroyal exchange is committed to ensuring that its products and services are not used for money laundering and Financing of terrorism and Proliferation of Weapons of mass Destruction; and that its processes and procedures are in compliance with all applicable laws and regulations on money laundering. to this end, there is an annual awareness and sensitization training on aml/CFt for royal exchange Board members, management and staff across the nation on money laundering techniques and how to combat it. there is also in place continuous compliance risk assessments and profiling of all our products and customers for effective combating of aml/CFt violations with an enshrined due diligence in place for all our business activities.

notes1. it is the policy of the Group that any Director who will be absent from any meeting shall send his alternate to

attend the meeting. in compliance with the above, every director ab-nitio has named and presented his permanent alternates details with the board. the directors with asterisks were represented by their alternates on the day they were absent.

2. During the year, the Group contravened the provision of appendix iii Clause 14(c) of the nigeria stock exchange Commission (nse) Post-listing requirements and consequently, a penalty of =n=9,700,000:00 (nine million seven hundred thousand naira only) was paid.

3. the Company has an approved share dealing policy and the Directors adhere to the policy in their dealings with the Company’s shares.

4. the Company has an approved Complaints management Policy Framework in compliance with the rules and regulations of securities and exchange Commission (seC).

SHEIlAIFEYINWAEzEUKOComPanY seCretarY/Gm (leGal serViCes)FrC/2013/nBa/00000004059laGos, niGeria16 July 2018


risk is the effect of uncertainty on objectives. the greater the complexity of a transaction, the greater the inherent uncertainty hence, royal exchange Plc is risk averse and will not go into business to which it has limited knowledge or expertise. this is the bedrock of our risk management principle that shapes the setting of our risk appetite.

the risk management infrastructure encompasses a comprehensive and integrated approach to identifying, managing, monitoring and reporting risks with focus on the following inherent risk groups – insurance, liquidity, Credit, market, operational, and technology to promote and embedded risk management culture. Whilst the internal control is a process effected by our Board of Directors, management and other personnel to provide reasonable assurance regarding the achievement of objectives (in line with Coso framework) in three categories-effectiveness and efficiency of operations; reliability of financial reporting; and compliance with applicable laws and regulations to ensure that material errors or inconsistencies are identified and corrected.

risk management and internal control system in royal exchange thus comprises risk assessment, Control environment, Control activities, information and Communication and monitoring. the scope of internal control therefore extends to policies, plans, procedures, processes, systems, activities, functions, projects, initiatives, and endeavors of all types at all levels.

to support the governance process, the Group relies on documented policies and guidelines, regular reporting of the Group risk profile and current risk issues. these are generated by the various business units such as audit, Control, risk and Compliance for management’s decision making. these reports include:• WeeklyControlExceptionLogs• MonthlyKeyRiskIndicator(KRI)Report• MonthlyInternalControlReport• QuarterlyActuarialValuationReport(AVR)• QuarterlyRiskAssessmentReport• QuarterlyComplianceReport• QuarterlyInternalAuditReport

our key enterprise risk management framework:• theBoardofDirectorshasoverallresponsibilityfortheestablishmentoftheGroup’sRiskManagementframework

and exercises its oversight function over all the Group’s prevalent risks through its various committees; Board risk management Committee (BrmC), Board investment Committee (BiC), Board strategy Committee (BsC), Board Finance&GeneralPurposeCommittee(BF&GPC),BoardEstablishment&GovernanceCommittee(BE&GC)andBoard audit Committee (BaC). these committees are responsible for developing and monitoring risk policies in their specific areas and report regularly to the Board of Directors.

• theBoardriskmanagementcommitteecharter,BoardAuditcommitteecharter,theenterpriseriskmanagementpolicy, internal control policy and charter and internal audit charter are the Group’s main risk governance documents. they specify authorities, reporting requirements, procedure to approve any exceptions and methods of referring any risk issues to senior management and the Board of Directors.

risk Assessment the Board and senior management regularly assess the risks the group is exposed to, and the effectiveness of the internal control on an ongoing basis and specifically on quarterly basis. senior management also regularly considers whether the existing internal controls are effective in relation to the risks identified in the process mapping and risk and control self-assessments. the Board also assesses the management letter issued by the external auditors which contains the auditors’ observations on the control environment in the company at the audit Committee meetings.

control environment thecompanyhastwoBoardCommittees(BoardRiskManagementCommittee&BoardAuditCommittee)maintainingoversight function on the company’s risk management Processes. the BrmC is responsible for setting risk management policies that ensure material risks inherent in the company’s business are identified and mitigated or controlled. the audit Committee which is made up of three shareholders’ representatives and three non-executive Directors is independent and maintains oversight functions among others, ensuring that quality accounting policies, and independent and objective statutory auditors are in place to prevent and detect fraud and material errors in financial reporting. the management committees are responsible for implementing risk management policies set out

risK manaGement statement


by the Board. they are also responsible for setting internal control policies and monitoring the effectiveness of the internal control systems. they ensure proper books of accounts are kept and accounting policies are in conformity with: international Financial reporting standards and Prudential Guidelines issued by all regulators governing royal exchange business activities.

control Activities royal exchange understands that control activities are an integral part of its day-to-day operations and has embedded control functions within each business area for self-checking of activities within the business areas e.g. transactions call over for timely detection of errors. Physical controls such as policies, processes and procedures are also in place guiding access to the company’s physical and financial assets.

the group also sets internal limits guiding its investments activities, liquidity and credit concentration limits. additionally, limits are set for approval and authorization of any credit facilities and expenses. also in place is segregation of duties with maker-checker in all processes; no officer can start and conclude transactions. limits for transactions are approved at appropriate levels.

For adequacy of effective control, the company adopted the three lines of defense in its operations. First level defense (operational management) is carried out by the business owners and customer facing units who set the strategic directions of the company and are first contacts with the clients respectively, whilst the risk management, internal Control and Compliance units carry out second level defense (checking). Verifications, Validations and reconciliations of all internal ledgers are regularly proofed and reconciled; exception reports are generated. the internal and external auditors carry out the third level defense by giving independent assurance that control is effective and efficient.

additionally, the company has instituted a whistle blowing culture among staff and is continually creating awareness among its stakeholders. the whistle blowing platform is accessible to all and the aim is primarily to ensure that all cases of irregularities are made known and addressed by the company.

royal exchange understands the need for a timely, reliable and accurate information flow, for effective decision making, enhanced financial reporting and governance process every information regarding the activity of the company is carried out within the company’s risk management and communication policy which outlines the process flow and specifies the duties and responsibilities of every officer in relation to the activity.

risk culturethe board of directors and management ensured that the long term survival and reputation of the company are not at risk by sustaining the promotion of risk awareness across the Group to manage products, market, portfolio, liquidity, credit and interest rate risks where the associated risks are deemed unacceptable and may affect the strategic vision of the company. in addition, the company continually exposes the staff to training on principles and practice of enterprise risk management (erm) which has enhanced the skill level of staff.

risk Appetitethe board of directors established the Group risk appetite statements to guide the Group to effectively discharge its functions. the management is thus guided to take decisions on managing different categories of risk within the purview of the risk appetite statements. also, the risk appetite levels such as prudential limits were set by the board of directors to guide the management’s decision on the amount of risk they are prepared to accept. in line with the Group appetite statements, the subsidiaries’ risk appetites were scaled down from that of the Group to reflect the respective subsidiary’s need.

risk governance the primary objective of the company’s risk and financial management framework is to protect the company’s stakeholders from events that hinder the sustainable achievement of financial performance objectives, including failing to exploit opportunities.

the company’s strategy for managing risk exposures is to establish and maintain a robust enterprise risk management (erm) programme that is embedded in all processes and driven by technology with emphasis on protection from unwanted risk while maintaining stakeholders’ value.

risK manaGement statement (continued)


to this end, the board established the Group’s corporate risk management framework. the erm programme will help structure and coordinate all direct and indirect risk management activities within the company, while eliminating redundancies and ensuring consistency in the risk management process.

the risk management committee of the board serves as the focal point for oversight regarding risk management. it reviews the risk management methodologies, policies, models, and reporting and risk strategies.

regulatory frameworkregulators are primarily interested in protecting the rights of policyholders and depositors’ funds and monitoring them closely to ensure that the company is satisfactorily managing affairs for their benefit. at the same time, regulators are also interested in ensuring that the company maintains an appropriate solvency position to meet unforeseen liabilities arising from economic shocks or natural disasters.

the operations of the company are thus subject to regulatory requirements. such regulations not only prescribe approval and monitoring of activities, but also impose certain restrictive reserves (e.g., contingency reserve, limits on recognition of revaluation reserves for solvency purposes, limit of investment in fixed assets, permissible level of portfolio at risk and distribution to shareholders of actuarial surpluses) to minimize the risk of default and insolvency on the part of the companies to meet unforeseen liabilities as these arise.

Asset and Liability Management frameworkthe assets and liability management framework is integrated in the overall risk management policy of the company. this is directly and indirectly applied to the insurance business assessment criteria and investment liabilities options. our insurance risk management policy is to ensure in each period, sufficient cash flow is available to meet liabilities arising from insurance and investment contracts.

capital Management Approachthe group’s operations are subject to regulatory requirements of the national insurance Commission (naiCom), Central Bank of nigeria (CBn), the nigerian stock exchange (nse) and the securities and exchange Commission (seC). such regulations not only prescribe approval and monitoring of activities, but also impose certain restrictive provisions (e.g., capital adequacy) to minimize the risk of default and insolvency on the part of the financial service companies and to meet unforeseen liabilities as these arise.

the company’s capital management policy is therefore to hold sufficient capital to cover the statutory requirements based on regulators’ directives, including any additional amounts required by the regulators.

the company has established the following capital management objectives, policies and approach to managing the risks that affect its capital position:

• Maintaintherequiredlevelofstabilityofthecompanytherebyprovidingadegreeofsecuritytopolicyholders;

• allocatecapitalefficientlyandsupportthedevelopmentofbusinessbyensuringthatreturnsoncapitalemployedmeet the requirements of its capital providers and of its shareholders;

• Retainfinancialflexibilitybymaintainingstrongliquidityandaccesstoarangeofcapitalmarkets;

• Aligntheprofileofassetsandliabilities,takingaccountofrisksinherentinthebusiness;

• Maintainfinancialstrengthtosupportnewbusinessgrowthandsatisfytherequirementsofthepolicyholders,regulators and other stakeholders;

in reporting financial strength, capital and solvency are measured using the rules prescribed by naiCom. these regulatory tests are based upon required levels of solvency, capital and a series of prudent assumptions in respect of the type of assets held.



the capital management process is governed by the board of directors who has the ultimate responsibility for the capital management process. the board of directors is supported by the Board risk management Committee, Board Credit Committee all of whom have various inputs into the capital management process.

risk Management the Group operations cut across the financial sector thus, the Group operations is exposed to varied forms of risk, such as, operational risk, insurance risk, Credit risk, liquidity risk, and market risk. to mitigate all these risks, the company has put in place approved policies, procedures and guidelines for identifying, measuring and control of these risks.

operational riskthe Company recognizing it cannot completely eliminate the operational risk, such as human error, system failure, fraud and external events has put in place adequate controls to ensure that the impact does not lead to damage to the reputation of the company, financial loss or legal and regulatory implication.

Controls such as segregation of duties, access control, authorization and reconciliation procedures, staff education and assessment processes including the use of internal audit have been put in place. Business risks such as changes in environment, technology and industry are monitored through the company’s strategic planning and budgeting process.

insurance risk insurance business being the central part of the Group’s business, exposes the company to the risk of timing and expectations of claims and benefit payments. this is influenced by the frequency of claims, severity of claims, actual benefits paid and subsequent development of long-term claims.

underwriting risk appetite is defined based on underwriting objectives, business acceptance guidelines, retention guidelines, net retention capacity, annual treaty capacity, regulatory guidelines, other operational considerations and the judgment of the Board and senior management.

the risk exposure is mitigated by diversification across a large portfolio of insurance contracts and ensuring that sufficient reserves are available to cover these liabilities.

theCompanyhasalsoinstitutedanAsset&LiabilityCommittee(ALCO)toprovideguidanceandoversightfunctiononpotential insurance risk exposure. the variability of risks is also improved by careful selection and implementation of underwriting strategy guidelines, as well as the use of reinsurance arrangements.

credit risk the Company’s credit risk appetite is set based on the Company’s strategic objectives, available resources and the provisions of the regulators’ Prudential guidelines. the Group’s credit risk policy is to ensure that an appropriate, adequate and effective system of risk management and internal control which addresses credit control is established and maintained.

the Company thus ensures the establishment of principles, policies, processes and structure for the management of risk exposure arising from direct default, counter party and concentration risks to ensure that these risks are properly managed within the Group’s risk appetite.

in setting this appetite limits, the corporate solvency level, risk capital and liquidity level, level of investments, reinsurance and co-insurance arrangements, nature and categories of its clients, are taken into consideration.

the following risk mitigation and control activities are in place to effectively manage exposures to default risk: client evaluation, credit analysis, credit limit setting, credit approval, security management, and provision for impairments.

similarly, the quality and performance of credit portfolios is monitored to identify early signs of decline in credit quality. such activities include the review of ageing report, credit portfolio quality and delinquency management.



reinsurance is placed with counterparties that have a good credit rating and concentration of risk is avoided by following policy guidelines in respect of counterparties’ limits that are set each year by the board of directors and are subject to regular reviews.

Liquidity risk the Group continues to be proactive in implementing adequate risk management measures to mitigate against all liquidity risks. the liquidity risk management governance structure comprises the Board, management and internal audit department.

our strategy is to continually maintain a good optimum balance between having stock of liquid assets, profitability and investment needs. additionally, credit control and approval limits, effective management of receivables and contingency account to meet all claims payment are put in place.

Market riskan unfavorable change in the market conditions exposes the Group to the possibility of loss of income or investment hence the Group has adopted a cautious and prudent approach to investment and trading activities.

the Group investment policy is that, except waived by the Board investment Committee (BiC), investment/trading transactions that do not fall within the Group risk appetite, are not undertaken, no matter how profitable the transaction may seem.

additionally, the company does not enter into any transaction that is illegal, unethical or contravenes any applicable law, regulations, and professional code of conduct or is capable of damaging the company’s corporate image or key officer. the company does not enter into any transaction with any organization with perceived likelihood of failure or showing signs of going concern challenges.

regulatory/compliance riskCompliance risk is exposure to legal penalties, financial forfeiture and material loss an organization faces when it fails to act in accordance with industry laws and regulations, internal policies or prescribed best practices. this threat can lead to diminished reputation and limited business opportunities as the company finds it’s franchises reduced in value and its potential for expansion curtailed.

Whilst governance refers to the responsibility of the company’s executives for maintaining organizational transparency and taking steps to reduce compliance risk by ensuring that established policies and procedures are followed, risk management is the process by which a company sets its risk tolerance. Compliance is the process that actually records and monitors the daily business activities to make sure that the company is complying with the law, industry mandates, and internal policies.

thus, the company takes an integrated approach to compliance risk management with an effective and holistic Governance, risk and Compliance (GrC) approach to business activities.


“the company’s strategy for managing risk exposures is to establish and maintain a robust enterprise risk Management (erM) programme that is embedded in all processes and driven by technology with emphasis on protection from unwanted risk while maintaining stakeholders’ value”.

37ANNUAL REPORT & ACCOUNTS 2017ROYAL ExCHAngE PLC

BoArD of Directors


Mr. kenny ezenwani odogwu (Chairman)

chief Anthony ikemefuna idigbe (sAn)Director

he is a legal practitioner. he was called to the nigerian Bar in 1990 and was engaged as acounselinthefirmofsofunde,Osakwe,Ogundipe&Belgore.HeworkedastheHead(legal Department) of Perfecta investments limited, a capital market operator and as Chief executive officer of siotel, an it company. he is currently on the board of several publicly quoted and private companies and was the last Chairman of international merchant Bank (imB), before it merged into First inland Bank (now FCmB). he is also the Chief executive of odogwu Group of Companies. he was appointed to the Board of the company on september 1, 1997 and became Chairman on July 26, 2007.

BoarD oF DireCtors

Mr. Daniel MaegerleDirector

a seasoned legal practitioner with over 30 years experience, Chief anthony idigbe is the senior Partner in Punuka attorneys. he was elevated to the rank of senior advocate of nigeria (san) in 2000 and was recently admitted to practice law in ontario, Canada. he has advised clients on several complex transactions and has represented major companies and institutions in the highest courts of nigeria.

he is a well-known capital markets legal adviser and has advised and acted as counsel to the securities and exchange Commission. he has also been involved as lead counsel in many ‘big ticket’ litigation briefs such as the Kano trovan Clinical trial Cases. he also possesses wealth of knowledge and experience in telecommunications law particularly the workings of the nigerian telecommunications industry, having represented numerous clients in various telecommunications disputes.

Chief anthony idigbe, san, graduated from the university of ife, (now obafemi awolowo university), ile- ife in 1982 with a 2nd Class upper Degree (hons). he also received the hon. Justice orojo Prize for the Best student in Company law. he finished from the nigerian law school, lagos in 1983, also with a second Class (upper Division). he has an llm from the university of toronto, Canada (2015), the robert Gordon university (rGu), scotland, uK (2012) and the university of lagos, akoka (1988) respectively as well as mBa from the enugu state university of science and technology (esut) enugu (1997). he also has a Diploma in advertising from advertising Practitioners Council of nigeria (aPCon), (1999) and was a lecturer at esut Business school, enugu between 1999 and 2009 and aPCon from 2000 – 2002.

Chief idigbe is a Fellow of the Chartered institute of arbitrators, uK, insolvency international and the international Bar association. he is also a member of the institute of Directors and the international insolvency institute. he was the immediate past President of the Business recovery and insolvency Practitioners association of nigeria (BriPan). he was the Founder and first Chairman, Capital markets solicitors association (Cmsa), and now functions as a trustee of the association. he has also served on various arbitration panels and is presently a member of the international Criminal Court (iCC) arbitral Panel. he is the author of many published books and articles. he is currently the Chairman of the strategy Committee.

he is a swiss national and holds a degree in law from the university of Zurich, switzerland. he was called to the Zurich Bar in 2002 and qualified as a Certified specialist of the swiss Bar association (sBa) in employment law in 2009. he was a Partner in the firm streiff Von Kaenel, a firm established in 1962 and engaged in a broad range of legal services both nationally and internationally, until 2015. Currently, he is the Founding and managing Partner of his own law chambers, maegerle attorneys at law, founded in 2016. he was appointed to the Board of the company on november 24, 2004. he is currently the Chairman of the establishment and Corporate Governance Committee.


BoarD oF DireCtors

chief uwadi okpa-obajiDirector

Alhaji Ahmed rufa’i MohammedDirector

Alhaji rabiu Muhammad gwarzo, oonDirector

Mr. Adeyinka ojoraDirector

he holds a B.sc (1980), an m.sc (1982) both in economics from the university of lagos, lagos state; an ll.B (2007) from the university of abuja and was called to the nigerian Bar in 2008. he also has a certificate in macro-economic Policy and management from harvard university institute for international Development. he participated and completed the Chief executive Programme 14 (CeP 14) of the Pan atlantic university, lagos. he also attended harvard Business school for a programme on Compensation Committee titled “new Challenges, new solutions”. he is a Fellow of the Chartered institute of management accountants, uK, the institute of Chartered secretaries and administrators uK and the institute of Chartered accountants of nigeria. he is also an associate of the association of national accountants of nigeria and the Chartered institute of taxation of nigeria. he is a member of the Chartered institute of stockbrokers of nigeria and an authorized Dealing Clerk of the nigerian stock exchange. Chief okpa-obaji was a founding staff and former Director of the national Council on Privatisation/Bureau of Public enterprises and is currently an executive Director of the odogwu Group of Companies. he was appointed to the Board of the Company on march 15, 2007. he is currently the Chairman of the Board Finance and General Purposes Committee of the Company.

he is a graduate of the ahmadu Bello university, Zaria, Kaduna state. he also holds a certificate in Banking and Development Finance from the manchester Business school and is a Fellow of the institute of Public administration. he has undertaken several national assignments and is currently on the Board of several publicly quoted and private companies. he is currently the Chairman of the institute of Directors (ioD). he is also the Chairman of the ioD Governing Board, and the ioD Centre for Corporate Governance. he is a recipient of various national and international awards and honours. he was appointed to the Board of the Company on may 16, 2007. he is currently the Chairman of the Board investment Committee of the Company.

he is an associate of the British society of Commerce. he holds a certificate in accounting and Finance for Developing countries from the university of strathclyde, Glasgow, scotland Business school and certificate in Wheat marketing and Processing from Kansas state university, usa. he is also an associate of the institute of industrialists and Corporate administrators (aiiCa) and a Fellow of the institute of industrialists and Corporate administrators (FiiC). he has undertaken several national assignments and is currently on the Board of several publicly quoted and private companies. he holds the national honour of the officer of the order of the niger (oon) and was appointed to the Board of the Company on november 21, 2008.

Mr.Ojorastartedhisbusinesspursuits in 1992whenhe joinednigerlink fromAt&tGlobal information services where he was a marketing support specialist for the miCr implementation for the Central Bank of nigeria. he worked with eco securities limited as an assistant registrar and broker from 1996-1998 and was later appointed managing Director with specific responsibility for power generation. he also heads the defence procurement division of nigerlink industries limited. he serves as a director on the boards of different companies, as well as advisor to numerous companies seeking entry into the nigerian market place. as a philanthropist, he is a trustee of the Well Being Foundation, whose goal is the reduction of maternal and infant mortality in nigeria. he is a director, ojora group and was appointed to the Board of royal exchange on June 6, 2011. he is currently the Chairman of the Board risk Committee.


Alhaji Auwalu MuktariGroup Managing Director

Ms. sheila i. ezeukoGroup General Manager(Legal Secretariat & Compliance Services)

he completed his first degree in Business administration and later his masters Degree in Banking and Finance at Bayero university, Kano in 1993 and 1995 respectively. he also attended ahmadu Bello university, Zaria where he obtained a Diploma in insurance at Credit level in 1983.

he started his working career with the Kano based insurance company, Kapital insurance limited and rose to become head of re-insurance Department.

alhaji muktari joined royal exchange assurance nigeria (as it was then known) in 1995 as Branch manager in Kano, with direct oversight and responsibility over the activities of Bauchi, maiduguri and Yola offices of the company. in 2003, he became the regional Director, abuja.

he left royal exchange Plc to become the managing Director/Chief executive officer of Yankari insurance Co. ltd. in 2008, (later called Fin insurance Co. ltd) and returned to royal exchange as the Group executive Director, marketing and sales in 2010.

alhaji muktari was elected in 2010 as a member of the institute of Directors, nigeria: and is also a professional member of the following bodies: associates member, institute of management specialist, uK; member, Chartered insurance institute of nigeria; associate member, institute of management and is currently the President of the institute of sales and marketing management of nigeria. he is also a Fellow of the institute of islamic Finance Professionals, nigeria.

he has attended various executive management and Development programmes around the world and is an alumnus of harvard Business school, usa.

he was appointed the Group managing Director, royal exchange Plc with effect from June 14, 2016.

BoarD oF DireCtors

she is a graduate of the university of nigeria, nsukka, enugu state where she obtained a Bachelor of arts in history and a Bachelor of law degrees. she also has post graduate certificates in Commercial and Corporate law as well as insurance law from the university of london, and was called to the nigerian Bar in 1999. she worked in the Chambers of G. e. ezeuko (san) before going into corporate practice. she served as Company secretary to General Cotton mill limited and also sosoliso airlines limited. she has undergone various management and professional courses. she was appointed Company secretary of royal exchange Plc in 2007 and is currently the Group General manager (Company secretariat, legal services and Compliance) with responsibility for the management and execution of legal services and Company secretariat across the Group. she is also an alumna of the lagos Business school having undergone the advanced management Programme (amP 24). she is an associate member of the institute of Chartered arbitrators, nigeria and member of other professional bodies notably, the international Bar association and the nigerian Bar association. in addition to her existing roles, she was also appointed the Group Chief Compliance officer on november 1, 2013.


eXeCutiVe manaGement team

Alhaji Auwalu MuktariGroup Managing Director

Dr. emenike onwutaluManaging Director (Royal Exchange healthcare)

Mr. olawale BanmoreManaging Director (Royal Exchange Prudential Life)

Mr. kunle HassanAg. Managing Director (Royal Exchange Microfinance Bank)

Mrs. irene oparaManaging Director (Royal Exchange Finance & Asset Management)

Ms. sheila ezeukoGroup General Manager (Legal, Secretariat & ComplianceServices)

Mr. Ben AgiliManaging Director (Royal Exchange General Insurance)

Mr. nelson AkereleGroup head (Retail)

Mr. Donald nosiriGroup head (human Resources)

Mr. kunle kasimManaging Director Designate(Royal Exchange Takaful Company Limited)

Mr. okoli francisGroup Chief Financial Officer

Mr. simon ejimaGroup head (Enterprise Risk Management)

Mallam Bashir BabajoGroup head (Facilities Management)

Mr.WilsonOkoh-EseneGroup head(Corporate Communications)

Mr. Josiah unuaneGroup head (Audit and Investigation)


AlHAjIAUWAlUMUKTARIhe completed his first degree in Business administration and later his masters Degree in Banking and Finance at Bayero university, Kano in 1993 and 1995 respectively. he also attended ahmadu Bello university, Zaria where he obtained a Diploma in insurance at Credit level in 1983.

he started his working career with the Kano based insurance company, Kapital insurance limited and rose to become head of re-insurance Department.

alhaji muktari joined royal exchange assurance nigeria (as it was then known) in 1995 as Branch manager in Kano, with direct oversight and responsibility over the activities of Bauchi, maiduguri and Yola offices of the company. in 2003, he became the regional Director, abuja.

he left royal exchange Plc to become the managing Director/Chief executive officer of Yankari insurance Co. ltd. in 2008, (later called Fin insurance Co. ltd) and returned to royal exchange as the Group executive Director, marketing and sales in 2010.

alhaji muktari was elected in 2010 as a member of the institute of Directors, nigeria: and is also a professional member of the following bodies: associates member, institute of management specialist, uK; member, Chartered insurance institute of nigeria; associate member, institute of management and is currently the President of the institute of sales and marketing management of nigeria. he is also a Fellow of the institute of islamic Finance Professionals, nigeria.

he has attended various executive management and Development programmes around the world and is an alumnus of harvard Business school, usa.

he was appointed the Group managing Director, royal exchange Plc with effect from June 14, 2016.

Ms. sHeiLA eZeukoshe is a graduate of the university of nigeria, nsukka, enugu state where she obtained a Bachelor of arts in history and a Bachelor of law degrees. she also has post graduate certificates in Commercial and Corporate law as well as insurance law from the university of london, and was called to the nigerian Bar in 1999. she worked in the Chambers of G. e. ezeuko (san) before going into corporate practice. she served as Company secretary to General Cotton mill limited and also sosoliso airlines limited. she has undergone various management and professional courses. she was appointed Company secretary of royal exchange Plc in 2007 and is currently the Group General manager (Company secretariat, legal services and Compliance) with responsibility for the management and execution of legal services and Company secretariat across the Group. she is also an alumna of the lagos Business school having undergone the advanced management Programme (amP 24). she is an associate member of the institute of Chartered arbitrators, nigeria and member of other professional bodies notably, the international Bar association and the nigerian Bar association. in addition to her existing roles, she was also appointed the Group Chief Compliance officer on november 1, 2013.

MR.OlAWAlEBANMOREmr. Banmore is a graduate of the university of ibadan, oyo state. he holds a Bachelor of science degree in sociology and a masters degree in managerial Pschology from the same institution.

he is an associate member of the Chartered insurance institute of nigeria (aCiin), a member of the africa insurance organization; a member of the nigeria and south africa Chamber of Commerce and an alumnus of the lagos Business school.

he joined the insurance industry in 1992 as a management trainee at uniC insurance Plc and rose to become the Group head (operations). he was also the former regional head (West) of First Chartered insurance Company limited.

he joined royal exchange in 2003 and was subsequently promoted to assistant General manager and appointed the head (technical services) in 2007. in 2011, he was appointed managing Director of royal exchange Prudential life Plc; a subsidiary of royal exchange Plc.

eXeCutiVe manaGement team’s ProFile


Mr. Ben AgiLimr. agili is a graduate of Building technology of the institute of management and technology, enugu and holds an mBa in Financial management from lagos state university, ojo, lagos state.

he is a Fellow of the Chartered insurance institute of london (FCii) and the insurance institute of nigeria (Fiin).

he started his insurance career with uniC insurance Plc. he joined royal exchange Plc in 2003 as an assistant General manager (eastern operations) and was later elevated to a regional Director in 2007. in 2015, he was appointed managing Director of royal exchange General insurance Company limited; a subsidiary of royal exchange Plc.

DR.EMENIKEONWUTAlUDr.OnwutaluholdsMBBs(BachelorsofMedicine&surgery)andMBA(HealthcareManagement)degreesfromuniversity of ilorin and lagos state university respectively, as well as a Post Graduate Diploma in health, safety and environmental management from College of medicine, university of lagos.

he has over 25 years’ cognate working experience in Clinical Practice and health insurance industry. he has attended several professional and management courses, training, conferences and workshops within and outside the country.

he joined royal exchange healthcare limited in november, 2008 as its pioneer regional manager, north and was appointed the managing Director of the Company in november 2018.

Mrs. irene oPArAMrs.OparaisagraduateofBusinessAdministrationoftheInstituteofManagement&technology(IMt).sheholds a post degree diploma in Banking and Finance and an mBa (Finance) respectively from the anambra state university of technology (now esut).

she is a member of the nigerian institute of management (nim), an associate member, Certified Pension institute of nigeria (CPin) and a senior member of the Chartered institute of loan and risk management of nigeria.

she has over 12 years of successful history of achievements in senior management roles in the banking and manufacturing sectors.

shejoinedRoyalExchangeinnovember2015astheChiefOperatingOfficer,RoyalExchangeFinance&Assetmanagement limited and was appointed the managing Director of the Company in January 2018.

Mr. kunLe HAssAnmr. hassan holds a Bachelor of science and a master degree in agricultural sciences respectively from the university of ibadan as well as an mBa in management from imo state university. he is a Certified microfinance Banker (mCiB).

he is a seasoned Banker with over 20 years experience in the Finance and Banking industry and has served for nine years in top management level.

he joined royal exchange in June 2009 as the head of operations, royal exchange microfinance Bank limited and was appointed the acting managing Director of the Company in may, 2017.

Mr. DonALD nosirimr. nosiri is a graduate of the university of nigeria, nsukka, enugu state. he holds a Bachelor of arts and masters degree in mass Communication from unn and the university of lagos respectively. he holds a Certificate in Personnel Practice from the Chartered institute of Personnel and Development in london. he is an alumnus of the lagos Business school (lBs).

eXeCutiVe manaGement team’s ProFile (continued)


he is a member of the Chartered institute of Personnel management of nigerian (CiPm), associate member of the Chartered institute of Personnel and Development (CiPD) london and honorary senior member (hCiB) of the Chartered institute of Bankers of nigeria. he is also a 2013 Certified Balance scorecard Professional.

he joined royal exchange as Group head (human resources) in 2012.

Mr. neLson AkereLemr. akerele is an insurance graduate of the Kano state Polytechnic, Kano. he is an associate of the Chartered insurance institute of london (aCii), Fellow, institute of Direct marketing nigeria (FDmn) and an alumnus of iBm marketing College, Warbrook, london.

he is an astute insurance professional with in-depth knowledge of general insurance practice, life underwriting/marketing, engineering, special risk management and bonds.

he joined royal exchange Plc on october 9, 2006. he is currently the Group head, retail Business.

Mr. frAncis okoLimr. okoli is a graduate of accounting of the university of Port harcourt and holds a masters Degree in Finance from the university of lagos. he is a fellow of the institute of Chartered accountants of nigeria (FCa), Chartered institute of taxation of nigeria (FCti) and the Chartered institute of Bankers of nigerian (FCiB) respectively. he is also a Certified information systems auditor (Cisa), usa; a Certified information security manager (Cism), usa; a Certified information systems security Professional (CissP) and a Certified internal auditor (Cia) as well as member, nigerian institute of management (nim).

he has over 26 years experience in financial control and strategic financial management having worked various financial services sectors.

he joined royal exchange Plc on December 2, 2010 and was appointed the Group Chief Financial officer on november 9, 2015.

Mr. kunLe kAsiMmr. adekunle Kasim is a graduate of economics from the university of ibadan and also holds an mBa from the abubakar tafawa Balew university, Bauchi.

he started his insurance career with the nigerian-French insurance Company upon graduation in 1992 and rose to the position of senior manager before leaving to Great nigeria insurance Company as a regional Director/Controller in the company.

mr. Kasim later moved to Fin insurance Company, a subsidiary of FCmB, as assistant General manager, marketing.

he joined royal exchange Prudential life assurance (a subsidiary of royal exchange Plc) as assistant General manager/head of marketing in the company.

mr. Kasim is an associate of the Chartered insurance institute of nigeria (aCiin), as well as an associate of the Certified economists of nigeria, and the Certified institute of Pensions of nigeria. he is also a Fellow of the institute of islamic Finance Professionals, nigeria.



Mr. siMon eJiMA mr. ejima is a graduate of the university of uyo, uyo with a Bachelor of science in economics/statistics. he holds a masters Degree in economics from the lagos state university, lagos.

he is an associate member of the nigerian institute of management (Chartered); Fellow, enterprise risk management Professionals (FerP); associate member of the risk management association of nigeria (riman) as well as an associate member of the institute of Certified economist (aCe).

he has over 15 years experience in Banking operations and Process re-engineering, audit and Compliance management, operational risk management, enterprise risk management and internal Controls.

he joined royal exchange as the Group head, enterprise risk management in october 2017.

Mr. JosiAH unuAnemr. unuane holds a higher national Degree Certificate in accounting from Yaba College of technology, lagos as well as a Bachelor Degree in economics from Caleb university, lagos. he also holds an mBa degree in management from the obafemi awolowo university, ile-ife.

he is a Fellow of the institute of Chartered accountants of nigeria (iCan) and an associate member of Chartered institute of taxation of nigeria (Citn).

he has over 25 years cognate audit experience spanning the financial and manufacturing sectors.

He joined Royal Exchange as an Audit Manager in 2010 and rose to become the Group Head (Audit &investigation) in april 2018.

MALLAM BAsHir BABAJohe is a graduate of the ahmadu Bello university, Zaria. he holds a Bachelor of science degree in Business administration and an mBa from the same institution. he started his career in 1988 in the Public sector and has over the years served in various capacities before joining royal exchange in may 2008. he is currently the Group head, Facilities management. he is also an alumnus of the lagos Business school.

MR.WIlSONOKOH-ESENEhe is a graduate of the university of nigeria, nsukka. he holds a Bachelor of arts in mass Communication and is an associate of the nigerian institute of management (Chartered) and a member of the Chartered institute of Public relations, mCiPr, uK.

Wilson started his professional career in 1998 after his youth service with united Bank for africa Plc (uBa) as trainee officer, Corporate affairs unit and later moved to Fidelity Bank Plc in 2001. he then joined hallmark Bank Plc and moved to oando Plc in 2006 as Coordinator, Corporate Communications. he joined royal exchange Plc in 2010 and is currently the Group head, Corporate Communications.



Mrs. Vivian eluemeBusiness Director (South-South)

Mrs. Jane ekomwererenBusiness Director (Lagos-Central)

Mr. Patrick ojiBusiness Director (Lagos-West)

Mr. nicholas chukwumaBusiness Director (South-East)

Business DireCtors


the Directors are pleased to submit to the members of the company, their forty-ninth annualreport,togetherwiththeauditedfinancialstatementsfortheyearendedDecember31, 2017.

1. Legal form and Principal Activities the Company was incorporated as a private limited liability company on December 29, 1969, converted

to a public limited liability company on July 15, 1989 and was listed on the nigerian stock exchange on December 3, 1990. the principal activities of the company include life, healthcare and general insurance, financing, asset management, trusteeship and micro–finance banking services.

2. results for the Year the highlights of the company’s trading results for the year ended December 31, 2017.

group group company company

In thousands of Naira 31 Dec 2017 31 Dec 2016 31 Dec 2017 31 Dec 2016

(loss)/profit before taxation (682,127) (743,838) (351,118) (368,735)

minimum tax (149,633) (63,391) (48,551) -

income taxes (137,883) (173,023) - -

(loss)/profit after taxation (969,643) (980,252) (399,669) (368,735)

other comprehensive (loss)/income, net of tax 167,907 (65,848) 62 1,401

total comprehensive (loss)/income for the year (801,736) (1,046,100) (399,607) (367,334)

total assets 33,272,846 31,676,729 11,454,447 9,810,075

shareholders fund/total equity 5,578,400 6,380,136 5,751,949 6,151,556

3. Dividend3.1 the Company will not recommend any dividend on ordinary shares to its members for the year ended

December 31, 2017.

4. Directors’ interest and shareholding a board of 8 (eight) directors determined the general strategy and policy of the Group in the year under

review.

4.1 the names of directors who served during the year were: mr. K. e. odogwu - Chairman Chief a. i. idigbe (san) - non-executive Director mr. D. maegerle - non-executive Director Chief u. okpa-obaji - non-executive Director mr. a. a. ojora - non-executive Director alhaji a. r. mohammed - non-executive Director alhaji r. m. Gwarzo, oon - non-executive Director alhaji a. muktari - Group managing Director

For the Year Ended 31 December 2017

DireCtors’ rePort


4.2 the Directors’ interests in the issued share capital of the Company as recorded in the register of members and in the register of Directors’ holdings and Contracts, as notified by them for the purposes of section 276 and 277 of the listing requirements of the nigerian stock exchange, are as follows:

Holdings as atDecember 31, 2017

numberDirect

number of 50kordinary shares

Held as atDecember 31, 2017

numberindirect

Holdings as atDecember 31, 2016

numberDirect

number of 50kordinary shares

Held as atDecember 31, 2016

numberindirect

mr. K. e. odogwu nil 2,013,119,834 nil 2,013,119,834Chief a. i. idigbe (san) nil 1,350,276 nil 1,350,276mr. D. maegerle nil nil nil nilChief u. okpa-obaji 645,468 nil 645,468 nilalhaji a. r. mohammed nil nil nil nilalhaji r. m. Gwarzo, oon 3,782,319 nil 3,782,319 nilmr. a. a. ojora 100,000 183,529,858 100,000 183,529,858alhaji a. muktari 546,410 nil 546,410 nilgrand total 5,074,197 2,197,999,968 5,074,194 2,197,999,968

4.3 Board changes

4.3.1 Appointment since the last annual General meeting, mr. hewett Benson was appointed an independent Director of the

Company with effect from 18 april 2018.

in accordance with s249(2) of the Companies and allied matters act Cap C20 laws of the Federation of nigeria 2004, mr. hewett Benson offers himself for election.

the Board of Directors further recommends to the members of the Company that the appointment of mr. hewett Benson as an independent Director be approved.

4.3.2 re-appointments and rotation in accordance with the articles of association, Chief uwadi okpa-obaji and alhaji rufa’i mohammed are

the directors retiring by rotation. Chief uwadi okpa-obaji and alhaji rufa’i mohammed being eligible, offer themselves for re-election.

5. share capital and shareholding the Company did not purchase its own shares during the year.

5.1 Authorized share capital the authorized share capital of the company is =n=5billion made up of 10,000,000,000 ordinary shares of

50k each.

5.2 called up, issued and fully Paid share capital

5.2.1 the issued and paid-up share capital of the Company is currently =n=2,572,685,037 made up of 5,145,370,074 ordinary shares of 50k each.

no. of ordinaryshares Held

as at December 31 2017% Holdings

as at December 31 2017

no of ordinaryshares held

as at December 31 2016% Holdings

as at December 31 2016spennymoor limited, Jersey C.i: 2,013,119,834 39.12 2,013,119,834 39.12royal exchange assurance (u.K): 3,776 0.00 3,776 0.00nigerian Government: 20,654,487 0.40 20,654,487 0.40DantataInvestments&securitiesCompany limited: 690,244,885 13.41 690,244,885 13.41Chief (Dr.) s. i. odogwu, oFr 266,870,509 5.19 266,870,509 5.19helen and troy holdings limited 261,058,784 5.07 261,058,784 5.07Phoenix holdings limited 183,529,858 3.57 183,529,858 3.57De-Canon investment limited*(under litigation - suit noFhC/l/Cs/5479/08) 159,388,632 3.10 159,388,632 3.10OthernigerianCitizens&associations: 1,550,499,309 30.14 1,550,499,309 30.14grand total 5,145,370,074 100 5,145,370,074 100


DireCtors’ rePort (ContinueD)


the Company hereby declares that aside from the listed person(s) in the above schedule, no other person(s) has 3% or more of the issued and fully paid share capital of the company.

* this represents ordinary shares held in trust by De-canon investment limited with respect to a law suit number FhC/l/Cs/5479/08.

5.3 share range Analysis as at December 31, 2017

share range Analysis as at December 31, 2017 no. of Holders % of units Held units Held % of units Held

1 - 500 1,044 6.77 242,916 0.00

501 - 1,000 771 5.00 588,065 0.01

1,001 - 5,000 5,152 33.41 14,367,433 0.28

5,001 - 10,000 2,827 18.33 19,716,702 0.38

10,001 - 50,000 3,712 24.07 82,049,498 1.59

50,001 - 100,000 791 5.13 57,717,467 1.13

100,001 - 500,000 812 5.27 171,306,589 3.36

500,001 - 1,000,000 131 0.85 90,802,056 1.71

1,000,001 - 5,000,000 133 0.86 285,772,854 5.48

5,000,001 - 10,000,000 26 0.17 176,467,034 3.53

10,000,001 - 5,145,370,074 22 0.14 4,246,332,460 82.53

grand total 15,421 100 5,145,370,074 100

5.4 share range Analysis as at December 31, 2016

share range Analysis as at December 31, 2016 no. of Holders % of units Held units Held % of units Held

1 - 500 1,012 6.60 242,668 0.00

501 - 1,000 753 4.91 573,002 0.01

1,001 - 5,000 5,123 33.40 14,304,603 0.28

5,001 - 10,000 2,818 18.38 19,657,677 0.38

10,001 - 50,000 3,711 24.19 82,046,452 1.59

50,001 - 100,000 795 5.18 58,057,813 1.13

100,001 - 500,000 818 5.33 172,764,389 3.36

500,001 - 1,000,000 127 0.83 88,164,976 1.71

1,000,001 - 5,000,000 132 0.86 281,739,000 5.48

5,000,001 - 10,000,000 27 0.18 181,487,034 3.53

10,000,001 - 5,145,370,074 22 0.14 4,246,332,460 82.53

grand total 15,338 100 5,145,370,074 100

6. records of Directors Attendance Further to the provisions of section 258 (2) of the Companies and allied matters acts, Cap C20 laws of

the Federation of nigeria 2004, the record of Directors’ attendance at the Board meetings held in 2017 is available at the venue of annual general meeting and is contained in the report on Corporate Governance.

7. Property and equipment information relating to property and equipment during the year is shown in note 17.




8. Donations the Group made several donations in the sum of =n=1,414,000 during the year ended December 31, 2017 as

follows:

=n=Donations of Computers to Government Girls school, Kano 289Donations to abu alumni association to celebrate abu Zaria at 55 100royal exchange award for academic excellence - sponsorship of awards for aun Graduting Class of 2017 1,000Donation to lagos state agric Devlopment seminar 2017 25total 1,414

9. events After reporting Date there were no events subsequent to the financial position date which require adjustment to, or disclosure

in these financial statements.

10. Agents, Brokers and intermediaries the group maintains a network of licensed agents, brokers, as well as other intermediaries throughout the

country.

11. trusteeship services royal exchange Plc (the Company) acts as a custodian, trustee or in other fiduciary capacity for its clients.

the Company acts as a custodian of unclaimed debentures issued by various third party entities which have matured but have not been claimed by beneficiaries. these assets are held and managed by the Group in order to preserve their value. (see note 61 for more details).

the Company also acts as a trustee for arm ethical Fund and Paramount equity Fund. these funds are managed by independent Fund managers and the assets are held by appointed custodians. the Company has oversight responsibilities which include, monitoring the activities of the fund manager and fund custodian, ensuring that the funds are administered in line with the applicable trust Deed of the fund and all relevant regulatory guidelines governing the fund, ensuring that relevant regulations are adhered to and ensuring that the interests of the unit holders in the funds are protected at all times.

12. employees’ Development

12.1 employment of physically challenged persons it is the policy of the Group that there be no discrimination in the consideration of all applications for

employment, including physically challenged persons.

all employees whether physically challenged or not, are given equal opportunities to develop their expertise and knowledge and qualify for promotion in furtherance of their careers. in the event of members of staff becoming physically challenged, every effort is made to ensure that their employment with the Group continues and that appropriate training is arranged. it is the policy of the Group that training, career development and promotion of physically challenged persons should, as far as possible, be identical with that of other employees.

12.2 Health and safety at work and welfare of employees the Group is concerned about the health, safety and welfare of its employees. therefore the Group,

through its subsidiary, royal exchange healthcare limited, provides health insurance for all group staff.

12.3 employees’ involvement and consultation the Group’s consultation machinery was fully utilized in the year to disseminate management policies and

encourage employee involvement in its affairs.




employee representatives are consulted regularly on a wide range of matters affecting their current and future interests.

Circulars and newsletters on significant corporate issues are published. in order to facilitate the exchange of information, a house journal titled “royal news” is published featuring contributions from and about employees of the Group.

12.4 training the Group recognizes that the acquisition of knowledge is ongoing. the Group also recognizes that to foster

commitment, its employees need to hone their awareness of factors economic, financial or otherwise, that affect the Group. to this end, the Group, in the execution of its training programs, encourages and provides the opportunity for its staff to develop and enhance their skills awareness and horizons.

13. Audit committee the members of the statutory audit Committee appointed at the annual general meeting held on 19

october, 2017, in accordance with section 359 (3) of the Companies and allied matters Decree Cap C20, laws of the Federation of nigeria 2004, were:

Chief u. okpa-obaji - (Chairman) mr. t. olawuyi - (shareholders’ representative) mr. B. akinsolu - (shareholders’ representative) alhaja a. s. Kudaisi - (shareholders’ representative) alhaji r. m. Gwarzo, oon - (member) mr. a. a. ojora - (member)

the committee met in accordance with the provisions of section 359 of the Companies and allied matters act, Cap C20, laws of Federation of nigeria 2004 and will present their report.

14. shareholders information Build up of share capital history

1. share capital History:

Year share capital Mode of Acquisition1990 21,600,000 initial share CaPital

1991 27,000,000 Bonus 1991 5,400,000 shares

1992 33,750,000 Bonus 1992 6,750,000 shares

1995 50,625,000 Bonus 1995 16,875,000 shares

1996 75,937,500 Bonus 1996 25,312,500 shares

1997 227,812,500 riGht oFFer 151,875,000 shares

2000 341,718,750 Bonus 2000 113,906,250 shares

2001 512,578,125 Bonus 2001 170,859,375 shares

2003 683,437,500 riGhts oFFer 170,859,375 shares

2003 854,296,875 Bonus 2003 170,859,375 shares

2004 1,067,871,094 Bonus 2004 213,574,218 shares

2005 1,601,806,641 Bonus 2005 533,935,547 shares

2006 2,818,608,785 riGhts oFFer 1,216,802,144 shares

2007 3,359,898,835 sCheme shares 541,290,050 shares

2008 3,695,888,719 Bonus 2008 335,989,884 shares

2009 4,065,477,591 Bonus 2009 369,588,872 shares

2010 4,573,662,289 Bonus 2010 508,184,698 shares

2011 5,145,370,074 Bonus 2011 571,707,786 shares






2. Bonus HistoryYear Bonus issues1991 5,400,0001992 6,750,0001995 16,875,0001996 25,312,5002000 113,906,2502001 170,859,3752003 170,859,3752004 213,574,2182005 533,935,5472008 335,989,8842009 369,588,8722010 508,184,6982011 571,707,786

total Bonus 3,042,943,505

3. summaryinitial share CaPital 21,600,000Bonus issues 3,042,943,505riGhts issues 1,539,536,519sCheme shares 541,290,050PaiD uP CaPital 5,145,370,074

4. rights issuesYear rights issue1997 151,875,0002003 170,859,3752006 1,216,802,144

total rights 1,539,536,519

15. Auditors messrs, KPmG Professional services, having completed the prescibed duration for the rotation of the

insurance companies of 5 years, shall no longer continue in office as auditors of the Company. in accordance with section 357(1) of the Companies and allied matters act, Cap C.20, laws of the Federation of nigeria 2004, a resolution will be proposed authorizing the Directors to appoint new auditors and to determine their remuneration at the annual general meeting.

16. compliance with the code of Best Practices on corporate governance the Directors confirm that they have reviewed the structure and activities of the Group in view of the Code

of Best Practices on Corporate Governance in nigeria published in February, 2009. the Directors confirm that the Group has substantially complied with the provisions of the Code of Best Practices on Corporate Governance with regards to matters stated therein concerning the Board of Directors, the shareholders and the audit Committee.

BY ORDER OF THE BOARD

SHEIlAIFEYINWAEzEUKOComPanY seCretarY/Gm (leGal serViCes)FrC/2013/nBa/00000004059laGos, niGeria16 JulY, 2018


TheDirectorsacceptresponsibilityforthepreparationoftheannualfinancialstatementsthat give a true and fair view in accordance with international financial reporting standards (ifrs) and in the manner required by the companies and Allied Matters Act, cap c.20, Laws of the federation of nigeria and the financial reporting council of nigeria Act, 2011.

the Directors further accept responsibility for maintaining adequate accounting records as required by the Companies and allied matters act, Cap C.20, laws of the Federation of nigeria, 2004 and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement whether due to fraud or error.

the Directors have made an assessment of the Company’s ability to continue as a going concern and have no reason to believe the Company will not remain a going concern in the year ahead.

SIGNED ON BEHALF OF THE BOARD OF DIRECTORS:

KENNY ODOGWU AUWALU MUKTARI(Chairman) (Group managing Director)(FrC/2013/nBa/00000004195) (FrC/2013/ioDn/00000004058)16 July, 2018 16 July, 2018


statement oF DireCtors’ resPonsiBilities

in relation to the FinanCial statements


in compliance with section 359 (6) of the companies and Allied Matters Act c20 Laws of the Federation of Nigeria 2004, (“The Act”) We, the Members of the Audit CommitteehavereviewedandconsideredthefinancialstatementsoftheCompanyfortheyearendedDecember31,2017andthereportsthereonandconfirmasfollows:

a) the accounting and reporting policies of the Company and Group are in accordance with legal requirements and agreed ethical practices.

b) the scope and planning of both the external and internal audits for the year ended 31 December, 2017 were satisfactory and reinforce the Group’s internal control systems.

c) We have reviewed the findings on management matters, in conjunction with the external auditors and are satisfied with the response of management thereon.

d) the company’s systems of accounting and internal controls were adequate.

e) after due consideration, the committee accepted the report of the auditors that the financial statements were in accordance with ethical practice and international Financial reporting standards (iFrs). the Committee therefore recommends that the audited financial statements for the period ended 31 December 2017 and the auditors’ report thereon be presented for adoption by the Company at the annual General meeting.

DATED THIS 16 JULY, 2018

CHIEF U. OKPA-OBAJIFrC/2014/multi/00000010359Chairman of the audit Committee

otHer MeMBersChief u. okpa-obaji - Chairmanalhaja a. Kudaisi – member (sharholders’ representative)mr. t. olawuyi - member (shareholders’ representative)mr. B. akinsolu - member (shareholders’ representative)ahaji r. m. Gwarzo, oon - membermr. a. a. ojora – member


rePort oF the auDit Committee

ROYAL ExCHAngE PLC ANNUAL REPORT & ACCOUNTS 2017 55

finAnciAL stAteMent


KPMG Professional Services telephone 234 (1) 271 8955 KPmG tower 234 (1) 271 8599Bishop aboyade Cole street internet www.kpmg.com/ngVictoria islandPmB 40014, Falomolagos

report on the Audit of the financial statements

opinionWe have audited the consolidated and separate financial statements of royal exchange Plc (“the Company”) and its subsidiaries (together, “the Group”), which comprise the consolidated and separate statement of financial position as at 31 December 2017, and the consolidated and separate statement of profit or loss and other comprehensive income, consolidated and separate statement of changes in equity and consolidated and separate statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 60 to 170.

in our opinion, the accompanying consolidated and separate financial statements give a true and fair view of the consolidated and separate financial position of the Company and its subsidiaries as at 31 December, 2017, its consolidated and separate financial performance and its consolidated and separate cash flows for the year then ended in accordance with international Financial reporting standards (iFrss) and in the manner required by the Companies and allied matters act, Cap C.20, laws of the Federation of nigeria, 2004, the Financial reporting Council of nigeria act, 2011.

Basis for opinionWe conducted our audit in accordance with international standards on auditing (isas). our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the Consolidated and separate Financial statements section of our report. We are independent of the Group and Company in accordance with the international ethics standards Board for accountants’ Code of ethics for Professional accountants (iesBa Code) together with the ethical requirements that are relevant to our audit of the consolidated and separate financial statements in nigeria and we have fulfilled our other ethical responsibilities in accordance with these requirements and the iesBa Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

key Audit MattersKey audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. these matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

the key audit matters relate to the consolidated financial statements of the Group.

Valuation of insurance contract liabilitiesthe Group has significant insurance contract liabilities held in two subsidiary entities, which have arisen from life and non-life insurance activities.

the valuation of the Group’s insurance contract liabilities involves high estimation uncertainties and significant judgments and assumptions made by the Directors over uncertain future outcomes which can be broken down in the following components:

KPmG Professional services, a Partnership established under abayomi D. sanni adebisi o. lamikanra adekunle a. elebute adetola P. adeyeminigeria law, is a member of KPmG international Cooperative adewale K. ajayi ajibola o. olomola ayodele a. soyinka ayodele h. othihiwa(“KPmG international”), a swiss entity. all rights reserved. ayo i. salami Chibuzor n. anyanechi Goodluck C. obi ibitomi m. adepoju Joseph o. tegbe Kabir o. okunola mohammed m. adama oladapo r. okubadejoregistered in nigeria no Bn 986925 oladimeji i. salaudeen olanike i. James olumide o. olayinka olusegun a. sowande oluseyi t. Bickersteth olufemi o. awotoye oluwatoyin a. Gbagi tayo i. ogungbenro Victor u. onyenkpa

to the shareholders of Royal Exchange Plc

inDePenDent auDitor’s rePort


inDePenDent auDitor’s rePort (continued)

• theestimationof theultimatetotalsettlementvalueof liabilitieson longterm insurancecontracts isbasedonassumptions regarding economic and demographic factors such as investment returns, applicable discount rates and mortality rates.

• Provision in relation to reported claims for life and non-life insurance contracts are determined using data onhistorical experience. as the historical data is only an indicator for the determination of the provision, the eventual paid amounts to settle the claims may differ from the recorded provisions.

• theestimationliabilityforincurredbutnotyetreportedclaimsinrelationtolifeandnon-lifeinsurancecontractsinvolve assumptions on economic factors including inflation and discount rates.

the estimation of these amounts, the assumptions applied and the related judgement and level of complexity made the valuation of insurance contract liabilities an area of focus for our audit.

How the matter was addressed in our audit

our audit procedures included the following:

• We evaluated the design and operating effectiveness of key controls instituted by the Group which includemanagement review of data used for the valuation of insurance contract liabilities

• Wetestedtheaccuracyandcompletenessoftheunderlyingdatausedintheactuarialvaluationsincludingtheclaimspaid, outstanding claims and underwriting data on a sample basis by comparing the data to insurance contact files.

• WeengagedourActuarialspecialisttoassesstheappropriatenessoftheactuarialmethodsappliedbymanagement’sexternal actuary, taking into account specific product features of the Group.

• WealsoengagedourActuarialspecialisttochallengethereasonablenessoftheactuarialassumptionsusedbymanagement’s external actuary. these assumptions included amongst others projected cash flows, basic chain ladder run off period, expected loss ratio, projected investment returns and applicable inflation, discount and mortality rates. We also compared the actuarial assumptions to the Group’s specific data, market trends and volatility.

• Weassessed the adequacyof theGroup’s disclosures in relation to the assumptionsused in the calculationofinsurance contract liabilities for compliance with the relevant accounting requirements.

refer to pages 40 - 41 (Group accounting policies), page 47 (critical accounting estimates and judgments), page 80 - 84 (note 26: insurance contract liabilities) and page 113 -116 (insurance risk).

Information Other than the Financial Statements and Audit Report thereonthe Directors are responsible for the other information. the other information comprises the Directors’ report, statement of Directors’ responsibilities, Corporate governance report, report of the audit Committee, Group managing Director’s statement and reports, Chairman’s statement and reports, consolidated results at a glance and other national disclosures, but does not include the consolidated and separate financial statements and our audit report thereon, which we obtained prior to the date of this auditors’ report and the Corporate profile, Board of Directors pictures, executive management team profile, notice of annual General meeting, risk management report, which is expected to be made available to us after that date (“outstanding reports”).


our opinion on the consolidated and separate financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

in connection with our audit of the consolidated and separate financial statements, our responsibility is to read the other information and in doing so, consider whether the other information is materially inconsistent with the consolidated and separate financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

When we read the outstanding reports, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the audit Committee. We have nothing to report in this regard.

Responsibilities of the Directors for the Consolidated and separate Financial Statementsthe Directors are responsible for the preparation of consolidated and separate financial statements that give a true and fair view in accordance with iFrss and in the manner required by the Companies and allied matters act, Cap C.20, laws of the Federation of nigeria, 2004 nigeria, the Financial reporting Council of nigeria act, 2011 the insurance act 2003 and relevant national insurance Commission of nigeria (“naiCom”) Circulars, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

in preparing the consolidated and separate financial statements, the directors are responsible for assessing the Group (and Company)’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group (and Company) or to cease operations, or has no realistic alternative but to do so.

Auditor’s Responsibility for the Audit of the consolidated and separate financial statementsour objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with isas will always detect a material misstatement when it exists. misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

as part of an audit in accordance with isas, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identifyandassesstherisksofmaterialmisstatementoftheconsolidatedandseparatefinancialstatements,whetherdue to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. the risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group and Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates andrelated disclosures made by the Directors.



• ConcludeontheappropriatenessofDirectors’useofthegoingconcernbasisofaccountingand,basedontheauditevidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group and Company’s ability to continue as a going concern. if we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated and separate financial statements or, if such disclosures are inadequate, to modify our opinion. our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. however, future events or conditions may cause the Group and Company to cease to continue as a going concern.

• Evaluate theoverall presentation, structureand contentof the consolidatedand separatefinancial statements,including the disclosures, and whether the consolidated and separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtainsufficientappropriateauditevidenceregardingthefinancialinformationoftheentitiesorbusinessactivitieswithin the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the audit Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the audit Committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated and separate financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

report on other Legal and regulatory requirements

Compliance with the requirements of Schedule 6 of the Companies and Allied Matters Act, Cap C.20, Laws of the Federation of Nigeria, 2004

in our opinion, proper books of account have been kept by the Company, so far as appears from our examination of those books and the Company’s statement of financial position and statement of profit or loss and other comprehensive income are in agreement with the books of account.

signed:

kabir o. okunlola, fcAFrC/2012/iCan/00000000428 For: KPmG Professional services Chartered accountants18 July 2018lagos, nigeria




ConsoliDateD anD seParate statements oF FinanCial Position

In thousands of Naira notegroup

31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16AssetsCash and cash equivalents 5 12,505,923 11,105,440 112,363 127,279 Loans and advances to customers 6 1,173,612 992,011 - - Advances under finance lease 7 203,410 206,890 - - Investments securities 8 5,561,773 5,632,949 44,747 82,644 Investment in subsidiaries 9 - - 10,989,990 8,689,990 Trade receivables 10 92,424 247,851 - - Reinsurance assets 11 2,794,485 2,660,526 - - Deferred acquisition cost 12 295,829 351,076 - - Other receivables and prepayments 13 800,429 436,881 210,098 319,967 Investment in associates 14(a) 193,617 179,146 - - Investment properties 15 5,431,182 5,419,858 - - Property and equipment 17 2,136,567 2,283,270 91,736 90,195 Intangible assets 18 29,435 33,116 5,513 - Employees retirement benefit asset (net) 19(a) 258,135 234,011 - - Statutory deposits 20 555,000 555,000 - - Deferred tax assets 22 267,386 365,065 - - Assets classified as held for sale 16 973,639 973,639 - - Deposit for shares 21 - - - 500,000 total assets 33,272,846 31,676,729 11,454,447 9,810,075

LiABiLitiesBorrowings 30 1,743,156 2,585,324 1,613,723 2,482,327 Deferred income 23 143,798 162,942 - - Trade payables 24 10,159,430 8,355,104 - - Other liabilities 25 1,608,666 1,616,032 3,784,039 920,200 Depositors' funds 26 1,446,763 1,203,456 - - Insurance contract liabilities 27 11,337,881 10,158,280 - - Investment contract liabilities 28 293,555 339,456 - - Current income tax liabilities 29 608,472 537,200 303,660 255,109 Employees retirement benefit liability 19 38,458 39,269 1,076 883 Deferred tax liabilities 22 314,267 299,530 - - total liabilities 27,694,446 25,296,593 5,702,498 3,658,519

EQUITYShare capital 31 2,572,685 2,572,685 2,572,685 2,572,685 Share premium 32 2,690,936 2,690,936 2,690,936 2,690,936 Contingency reserve 33 2,046,612 1,728,852 - - Treasury shares 34 (500,000) (500,000) - - Retained earnings 35 (1,967,362) (647,828) 486,445 886,114 Other components of equity 36 735,529 535,491 1,883 1,821 total equity 5,578,400 6,380,136 5,751,949 6,151,556 total equity & liabilities 33,272,846 31,676,729 11,454,447 9,810,075

The financial statements was approved by the board of directors on 16 July 2018 and signed on its behalf by:

kenneth odogwu Auwalu Muktari francis okoliChairman Group Managing Director Chief Financial Officer(FRC/2013/NBA/00000004195) (FRC/2013/IODN/00000004058) (FRC/2013/ICAN/00000002399)

The statement of significant accounting policies and the accompanying notes form an integral part of these financial statements.



ConsoliDateD anD seParate statement oF ProFit or loss anD other ComPrehensiVe inCome


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16Gross premium written: 12,822,219 12,517,381 - - unearned premium 574,620 (81,939) - - Gross premium income 13,396,839 12,435,442 - - Reinsurance expenses 37 (6,318,782) (4,263,437) - - Net premium income 7,078,057 8,172,005 - - Fees and commission income 38 523,177 477,328 - - Net underwriting income 7,601,234 8,649,333 - - Gross Insurance claims and benefits incurred 39 (5,330,864) (4,869,893) - - Insurance claims and benefits incurred - recoverable from reinsurers 40 1,903,060 1,284,485 - - Net claims expenses (3,427,804) (3,585,408) - - Changes in insurance contract liabilities (523,792) (670,393) - - underwriting expenses 41 (2,596,788) (2,469,497) - - total underwriting expenses (6,548,384) (6,725,298) - - Underwritingprofit 1,052,850 1,924,035 - - Net interest income/(expense) 42 1,017,451 283,788 (282,841) (166,549)Investment and other income 43 56,147 (27,172) 532 446 Share of profit on investment in associate 14(a) 14,471 (88,954) - - Net fair value gain 44 322,782 359,955 15,963 (5,973)Charge of impairment allowance 45 (377,119) (274,487) - - Other operating income 46 323,988 562,120 323,583 253,365 Foreign exchange gains 47 2,829 (15,124) - - net income 2,413,399 2,724,161 57,237 81,289 Management expenses 48 (3,095,526) (3,467,999) (408,355) (450,024)total expenses (3,095,526) (3,467,999) (408,355) (450,024)Loss before minimum taxation (682,127) (743,838) (351,118) (368,735)Minimum tax 29(a) (149,633) (63,391) (48,551) - Loss before taxation (831,760) (807,229) (399,669) (368,735)Income tax charge 29(a) (137,883) (173,023) - - lossprofitaftertaxation (969,643) (980,252) (399,669) (368,735)

other comprehensive loss, net of taxItems that will never be reclassified subsequently to profit or loss:Revaluation surplus on PPE - - - - Net actuarial (loss)/gain of defined benefit obligations 19.1(c)ii (12,598) 81,321 62 1,401 Tax effects on other comprehensive income/(loss) 22 1,803 (4,890) - - Share of returns in associates 14(a) - (5,988) - - Adjustments to gratuity reserves - 832 - - Items that are or may be reclassified subsequently to profit or loss:Changes in fair value of AFS investments 178,702 (121,899) - - Net amount reclassified to profit or loss - (15,224)total other comprehensive income/(loss), net of tax 167,907 (65,848) 62 1,401 total comprehensive loss for the period (801,736) (1,046,100) (399,607) (367,334)total comprehensive income attributable to shareholdersLoss share - Basic and diluted (kobo) 49 (19) (19) - -

The statement of significant accounting policies and the accompanying notes form an integral part of these financial statements.


For

the

Year

End

ed 3

1 Dec

embe

r 20

17

stA

tEM

En

tO

FC

HA

nG

EsI

nE

Qu

Ity

-G

RO

uP

othe

r com

pone

nt o

f equ

ity

In th

ousa

nds o

f Nai

rash

are

capi

tal

shar

e Pr

emiu

mco

ntin

genc

y re

serv

ere

tain

ed

earn

ings

trea

sury

sh

ares

regu

lato

ry

risk

rese

rve

Actu

aria

l gai

n/Lo

ss r

eser

vefa

ir v

alue

re

serv

e

othe

r co

mpo

nent

of

equ

ity

(tot

al)

tota

l eq

uity

As a

t 1 J

anua

ry 2

017

2,57

2,68

5 2

,690

,936

1,

728,

852

(647

,828

) (5

00,0

00)

494

,246

11

9,01

6 (7

7,771

) 5

35,4

91

6,3

80,13

6 Lo

ss fo

r the

yea

r -

- -

(969

,643

) -

- -

- -

(969

,643

)Tr

ansf

er to

cont

inge

ncy

rese

rve

- -

317

,760

(3

17,7

60)

- -

- -

- -

Tran

sfer

to re

gula

tory

rese

rve

- -

- (3

2,13

1) -

32,

131

- -

32,

131

- Ot

her c

ompr

ehen

sive

inco

me/

(loss

): -

Chan

ges i

n fa

ir va

lue

of A

FS in

vest

men

ts -

- -

- -

- -

178,

702

178,

702

178,

702

Shar

e of

retu

rns i

n as

soci

ates

- -

- Ne

t act

uaria

l gai

ns -

- -

- -

- (1

2,59

8) -

(12,

598)

(12,

598)

Net a

mou

nt re

clas

sified

to p

rofit

or l

oss

- -

- Ta

x ef

fect

s on

othe

r com

preh

ensiv

e in

com

e/(lo

ss)

- -

- -

- -

1,80

3 -

1,80

3 1,

803

Tota

l com

preh

ensiv

e in

com

e/(lo

ss)

- -

317

,760

(1

,319

,534

) -

32,

131

(10,

795)

178,

702

200

,038

(8

01,7

36)

Tran

sact

ions

with

in e

quity

:Di

vide

nd p

aid

- -

- -

- -

- -

- -

As a

t 31 D

ecem

ber 2

017

2,57

2,68

5 2

,690

,936

2

,046

,612

(1

,967

,362

) (5

00,0

00)

526

,377

10

8,22

1 10

0,93

1 7

35,5

29

5,5

78,4

00

othe

r com

pone

nt o

f equ

ity

In th

ousa

nds o

f Nai

rash

are

capi

tal

shar

e Pr

emiu

mco

ntin

genc

y re

serv

ere

tain

ed

earn

ings

trea

sury

sh

ares

regu

lato

ry

risk

rese

rve

Actu

aria

l gai

n/Lo

ss r

eser

vefa

ir v

alue

re

serv

e

othe

r co

mpo

nent

of

equ

ity

(tot

al)

tota

l eq

uity

As a

t 1 J

anua

ry 2

016

2,5

72,6

85

2,6

90,93

6 1,

422,9

19

834

,374

(500

,000

) 2

98,22

9 4

1,753

6

5,34

0 4

05,32

2 7,

426,

236

Loss

for t

he y

ear

- -

- (9

80,25

2) -

- -

- -

(980

,252)

Tran

sfer

to co

ntin

genc

y re

serv

e -

- 3

05,93

3 (3

05,93

3) -

- -

- -

- Tr

ansf

er to

regu

lato

ry re

serv

e -

- -

(196

,017

) -

196,

017

- -

196,

017

- Ot

her c

ompr

ehen

sive

inco

me/

(loss

): -

Chan

ges i

n fa

ir va

lue

of A

FS in

vest

men

ts -

- -

- -

- -

(121

,899

) (1

21,8

99)

(121

,899

)Sh

are

of re

turn

s in

asso

ciat

es (5

,988)

(5,98

8) (5

,988)

Net a

ctua

rial g

ains

- -

- -

- -

81,3

21

- 8

1,321

8

1,321

Ad

just

men

ts to

gra

tuity

rese

rves

832

8

32

832

Ne

t am

ount

recl

assifi

ed to

pro

fit o

r los

s (1

5,22

4) (1

5,22

4) (1

5,22

4)Ta

x ef

fect

s on

othe

r com

preh

ensiv

e in

com

e/(lo

ss)

- -

- -

- -

(4,8

90)

- (4

,890

) (4

,890

)To

tal c

ompr

ehen

sive

inco

me/

(loss

) -

- 3

05,93

3 (1

,482

,202)

- 19

6,01

7 7

7,263

(1

43,11

1) 13

0,16

9 (1

,046

,100)

Tran

sact

ions

with

in e

quity

:Di

vide

nd p

aid

- -

- -

- -

- -

- -

As a

t 31 D

ecem

ber 2

016

2,5

72,6

85

2,6

90,93

6 1,

728,

852

(647

,828

) (5

00,0

00)

494

,246

119,0

16

(77,7

71)

535

,491

6

,380

,136


For

the

Year

End

ed 3

1 Dec

embe

r 20

17

stA

tEM

En

tO

FC

HA

nG

EsI

nE

Qu

Ity

-C

OM

PA

ny

othe

r com

pone

nt o

f equ

ity

In th

ousa

nds o

f Nai

rash

are

capi

tal

shar

e Pr

emiu

mre

tain

ed

earn

ings

Actu

aria

l ga

in/L

oss

rese

rve

othe

r co

mpo

nent

of

equ

ity

(tot

al)

equi

ty

attr

ibut

able

to

Par

ent's

sh

areh

olde

rs

non-

cont

rolli

ng

inte

rest

sto

tal

equi

tyAs

at 1

Jan

uary

201

7 2

,572

,685

2

,690

,936

8

86,11

4 1,

821

1,82

1 6

,151,5

56

- 6

,151,5

56Lo

ss fo

r the

yea

r -

- (3

99,6

69)

- -

(399

,669

)-

(399

,669

)Ot

her c

ompr

ehen

sive

loss

:-

Net a

ctua

rial g

ains

- -

- 6

2 6

2 6

2 -

62

Tota

l com

preh

ensiv

e lo

ss -

- (3

99,6

69)

62

62

(399

,607

)-

(399

,607

)Tr

ansa

ctio

ns w

ithin

equ

ity:

-Di

vide

nd p

aid

- -

- -

- -

- -

As a

t 31 D

ecem

ber 2

017

2,5

72,6

85

2,6

90,9

36

486

,445

1,

883

1,88

3 5

,751

,949

-

5,7

51,9

49

othe

r com

pone

nt o

f equ

ity

In th

ousa

nds o

f Nai

rash

are

capi

tal

shar

e Pr

emiu

mre

tain

ed

earn

ings

Actu

aria

l ga

in/L

oss

rese

rve

othe

r co

mpo

nent

of

equ

ity

(tot

al)

equi

ty

attr

ibut

able

to

Par

ent's

sh

areh

olde

rs

non-

cont

rolli

ng

inte

rest

sto

tal

equi

tyAs

at 1

Jan

uary

201

6 2

,572

,685

2

,690

,936

1,25

4,84

9 4

20

420

6

,518

,890

-

6,5

18,8

90

Loss

for t

he y

ear

- -

(368

,735)

- -

(368

,735)

- (3

68,73

5)Ot

her c

ompr

ehen

sive

loss

:Ne

t act

uaria

l gai

ns -

- -

1,40

1 1,

401

1,40

1 -

1,40

1 To

tal c

ompr

ehen

sive

loss

- -

(368

,735)

1,40

1 1,

401

(367

,334

)-

(367

,334

)Tr

ansa

ctio

ns w

ithin

equ

ity:

Divi

dend

pai

d -

- -

- -

- -

- As

at 3

1 Dec

embe

r 201

6 2

,572

,685

2

,690

,936

886

,114

1,82

1 1,

821

6,15

1,556

-

6,15

1,556



ConsoliDateD statements oF CashFloWs


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

Loss for the year (969,643) (980,252) (399,669) (368,735)

Add: Minimum tax 29(a) 149,633 63,391 48,551 -

Add: Income taxes 29(a) 137,883 173,023 - -

Loss before taxes (682,127) (743,838) (351,118) (368,735)

Adjustments for:

Depreciation on property and equipment 17 218,774 261,948 30,021 16,508

Amortization of intangible assets 18 12,310 14,104 - -

Interest income 42 (1,485,704) (576,324) (13,606) (5,460)

Interest expense 42 468,253 292,536 296,447 172,009

Loss on disposal of Investment property 43 75,000 187,206 - -

Dividend income on equity investments (AFS & FVTPL) 43 (119,194) (81,970) (532) -

Fair value gain/(loss) on investment securities 44 (380,222) 251,467 (15,963) 5,973

Fair value gain on investment properties 44 57,440 (611,422) - -

Charge/(write-back) of impairment allowance 45 377,119 274,487 - -

Loss/(Profit) on disposal of property and equipment 46 (8,669) 7,060 - -

Rental income 46 (99,373) (147,765) - -

Foreign exchange (gains)/losses 47 (2,829) 15,124 - -

(1,569,222) (857,387) (54,751) (179,705)

Changes in working capital:

Loans and advances to customers 51(viii) (315,472) 248,467 - -

Advance under finance lease 51(ix) 38,224 (61,053) - -

Trade receivables 51(iii) 363,435 89,218 - -

Re-insurance asset 51(iv) (133,959) (770,776) - -

Deferred acquisition cost 55,247 31,414 - -

Other receivables and prepayment 51(ii) (410,973) (57,290) 109,869 (240,848)

Deferred income (19,144) 40,773 - -

Trade payables 1,650,524 2,967,475 - -

Other liabilities 132,746 156,770 2,905,827 (290,260)

Depositors' funds 51(x) 241,362 (384,210) - -

Investment contract liabilities (72,271) 3,185 - -

Changes in unearned premium 51(vii) (574,620) 81,939 - -

Changes in provision for outstanding claims 51(vi) 1,754,221 1,813,138 - -

Changes in employee retirement benefits 51(i) 30,022 25,093 255 422

1,170,120 3,326,756 2,961,200 (710,391)

Income tax paid 28(b) (94,050) (77,863) - -

Employee benefits paid 51(i) (7,511) (554,506) - (41,467)

Interest expense paid (324,915) (220,556) (326,395) (170,992)

net cash provided by operating activities 743,644 2,473,831 2,634,805 (922,850)



ConsoliDateD statements oF CashFloWs


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

Purchases of property and equipment 17 (93,801) (352,942) (31,564) (85,421)

Purchases of intangible assets 18 (8,620) (8,132) (5,513) -

Proceeds from disposal of investment properties 143,763 1,812,100 - -

Proceeds from disposal of property and equipment 28,253 17,662 - 5,318

Proceeds from redemption/disposal of investment securities 51(v) 4,060,175 519,018 48,931 -

Additional investment in subsidiary - - (2,300,000) (29,526)

Deposit for shares 21 - - 500,000 (500,000)

Purchase of investment securities 51(v) (3,478,352) (3,248,955) (46,268) (64,256)

Dividend received 124,813 62,980 - -

Rent received 116,258 150,083 - -

Interest received 910,684 666,536 2,616 -

Net cash provided by investing activities 1,803,173 (381,650) (1,831,798) (673,885)

Cash flows from financing activities:

Repayment of borrowings (5,623,276) (798,339) (5,380,068) (752,968)

Proceeds from new borrowings 4,492,125 2,751,266 4,549,115 2,361,055

unclaimed dividend received 13,030 10,475 13,030 10,475

Net cash (used)/provided in financing activities (1,118,121) 1,963,402 (817,923) 1,618,562

Cash and cash equivalent at beginning of year 11,091,425 7,035,842 127,279 105,452

Effect of exchange rate flunctuations on cash and cash equivalents (14,198) - - -

Net increase in cash and cash equivalent 1,428,696 4,055,583 (14,916) 21,827

Cash and cash equivalent at end of year 50 12,505,923 11,091,425 112,363 127,279


1 reporting entity the Company was incorporated as royal exchange assurance (nigeria) Plc, a private limited liability Company on

29 December 1969. it was converted to a public limited Company on 15 July 1989 and then listed on the nigerian stock exchange on 3 December 1990. on 28 July 2008, the Company changed its name to royal exchange Plc and transferred its general and life insurance businesses to newly incorporated subsidiaries, royal exchange General insurance Company limited and royal exchange Prudential life Plc respectively.

the Group currently comprises royal exchange Plc (Parent entity), royal exchange General insurance Company limited, royal exchange Prudential life Plc, royal exchange Finance and asset management ltd, royal exchange micro-Finance Bank limited and royal exchange healthcare limited. in november 2016, the royal exchange takaful insurance Company limited was incorporated with an authorized share capital of =n=200 million. the Company is yet to begin operations as it is yet to obtain the necessary approval from naiCom.

the principal activities of the Group are general and health insurance, life assurance, asset management, credit financing and microfinance banking.

the financial statements of the Group are as at and for the year ended 31 December 2017.

the registered office address of the Group is new africa house, 31, marina, lagos, nigeria.

2 Basis of preparation

(a) statement of compliance with international financial reporting standards these financial statements are the separate and consolidated financial statements of the Company, and its

subsidiaries (together, “the Group”). the Group’s consolidated financial statements and the Company’s separate financial statements for the year ended 31 December 2017 have been prepared in accordance with, and comply with the, international Financial reporting standards (iFrs) issued by the international accounting standards Board (iasB) and in the manner required by the Companies and allied matters act of nigeria, the Financial reporting Council of nigeria act, 2011, the insurance act of nigeria 2003 and relevant national insurance Commission of nigeria (”naiCom”) circulars.

the consolidated and separate financial statements include the statement of financial position, statement of profit or loss and other comprehensive income, the statement of cash flows, the statement of changes in equity and the notes to the account.

(b) functional and presentation currency the consolidated and separate financial statements are presented in naira, which is the group’s functional currency.

Financial information presented in naira has been rounded to the nearest thousands except where otherwise indicated.

(c) Basis of measurement these consolidated and separate financial statements have been prepared on a historical cost basis except for the

following items:

(i) Carried at fair value: • financialinstrumentsatfairvaluethroughprofitorloss;

• available-for-saleinvestmentsecurities;

• investmentproperties;

• planassetsfordefinedbenefitsobligations

(ii) Carried at a different measurement basis • Retirementbenefitobligationsaremeasuredintermsoftheprojectedunitcreditmethod;

• Insurance contract liabilities aremeasuredusingagrosspremiumvaluationapproach for individual andgroup life risk business while discounted cash flows approach are used for measuring annuity and the risk reserve for individual deposit based businesses.


notes to the FinanCial statements



notes to the FinanCial statements (continued)

(d) reporting period these consolidated and separate financial statements have been prepared for a 12 month period.

(e) use of estimates and judgment in preparing these financial statements in conformity with the international Financial reporting standards (iFrs)

which requires the use of certain critical accounting estimates, management has made judgements, estimates and assumptions that affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and expenses. actual results may differ from these estimates.

estimates and underlying assumptions are reviewed on an ongoing basis. revisions to estimates are recognised prospectively.

information about significant areas of estimation uncertainties and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements are disclosed in note 4.

(f) changes in accounting policies the accounting policies adopted in the preparation of the Group’s financial statements are consistent with those

followed in the preparation of the financial statements for the year ended 31 December 2017, except for changes/amendments highlighted below:

standards, amendments and interpretations effective during the reporting period a number of new standards and amendments to standards are effective for annual periods beginning after 1 January

2017, and have been applied in preparing these financial statements.

(i) Disclosure initiative (Amendments to iAs 7) the amendments provide for disclosures that enable users of financial statements to evaluate changes in liabilities

arising from financing activities, including both changes arising from cash flow and non-cash changes. this includes providing a reconciliation between the opening and closing balances arising from financing activities.

(ii) recognition of Deferred tax Assets for unrealised Losses (Amendments to iAs 12) the amendments provide additional guidance on the existence of deductible temporary differences, which depend

solely on a comparison of the carrying amount of an asset and its tax base at the end of the reporting period, and is not affected by possible future changes in the carrying amount or expected manner of recovery of the asset.

the amendments also provide additional guidance on the methods used to calculate future taxable profit to establish whether a deferred tax asset can be recognised.

Guidance is provided where an entity may assume that it will recover an asset for more than its carrying amount, provided that there is sufficient evidence that it is probable that the entity will achieve this.

Guidance is provided for deductible temporary differences related to unrealised losses are not assessed separately for recognition. these are assessed on a combined basis, unless a tax law restricts the use of losses to deductions against income of a specific type.

(g) standards, amendments and interpretations issued but not yet effective a number of new standards and amendments to standards are effective for annual periods beginning after 1 January

2017, and have not been applied in preparing these financial statements. the Group does not plan to adopt these standards early.

(i) ifrs 9 financial instruments on 24 July 2014, the iasB issued the final iFrs 9 Financial instruments standard, which replaces earlier versions of

iFrs 9 and completes the iasB’s project to replace ias 39 Financial instruments: recognition and measurement.

iFrs 9 includes revised guidance on the classification and measurement of financial instruments, a new expected credit loss model for calculating impairment on financial assets, and new general hedge accounting requirements. it also carries forward the guidance on recognition and derecognition of financial instruments from ias 39. this standard will have a significant impact on the measurement bases of the Group’s financial assets to amortised cost,


fair value through other comprehensive income or fair value through profit or loss. even though these measurement categories are similar to ias 39, the criteria for classification into these categories are significantly different. in addition, the iFrs 9 impairment model has been changed from an “incurred loss” model from ias 39 to an “expected credit loss” model.

the standard is effective for annual periods beginning on or after 1 January 2018 with retrospective application, early adoption is permitted. the Group has opted to defer the adoption of iFrs 9 till 2021 when iFrs 17, insurance Contracts will be effective as permitted. this is because a significant portion of the Group’s liability are insurance-related.

(ii) ifrs 15 revenue from contracts with customers this standard replaces ias 11 Construction Contracts, ias 18 revenue, iFriC 13 Customer loyalty Programmes, iFriC

15 agreements for the Construction of real estate, iFriC 18 transfer of assets from Customers and siC-31 revenue-Barter of transactions involving advertising services.

the standard contains a single model that applies to contracts with customers and two approaches to recognising revenue: at a point in time or over time. the model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognised.

this new standard will most likely have no significant impact on the Group, since the significant portion of the Group’s revenue is recorded using iFrs 4, insurance contracts. Furthermore, investment income is recognised under the scope of ias 39, Financial instruments, recognition and measurement.

the standard is effective for annual periods beginning on or after 1 January 2018, with early adoption permitted. the Group will adopt the amendments for the year ending 31 December 2018.

(iii) foreign currency transactions and advance consideration (ifric 22) the amendments provide guidance on the transaction date to be used in determining the exchange rate for translation

of foreign currency transactions involving an advance payment or receipt.

the amendments clarifies that the transaction date is the date on which the entity initially recognises the prepayment or deferred income arising from the advance consideration. For transactions involving multiple payments or receipts, each payment or receipt gives rise to a separate transaction date.

the interpretation applies when an entity: • paysorreceivesconsiderationinaforeigncurrency;and

• recognisesanon-monetaryassetorliability–e.g.non-refundableadvanceconsideration–beforerecognisingtherelated item.

the Group will adopt the amendments for the year ending 31 December 2018.

Based on preliminary assessment of the Group, the new accounting policies are not expected to have significant impact on the financial statements, except for possibly the above.

(iv) transfer of investment property (Amendments to iAs 40) the iasB has amended the requirements of ias 40 investment Property on when a Company should transfer a

property to, or from, investment property.

the amendments state that a transfer is made when and only when there is a change in use: – i.e. an asset ceases to meet the definition of investment property and there is evidence of a change in use. a change

in management intention alone does not support a transfer.

a company has a choice on transition to apply: • theprospectiveapproach–i.e.applytheamendmentstotransfersthatoccurafterthedateofinitialapplication

– and also reassess the classification of property assets held at that date; or

• theretrospectiveapproach–i.e.applytheamendmentsretrospectively,butonlyifitdoesnotinvolvetheuseofhindsight. the Group will adopt the amendments for the year ending 31 December 2018.




(v) ifric 23 uncertainty over income tax treatments iFriC 23 clarifies the accounting for income tax treatments that have yet to be accepted by tax authorities. specifically,

iFriC 23 provides clarity on how to incorporate this uncertainty into the measurement of tax as reported in the financial statements.

iFriC 23 does not introduce any new disclosures but reinforces the need to comply with existing disclosure requirements about:

a) judgments made;

b) assumptions and other estimates used;

c) the potential impact of uncertainties that are not reflected.

Based on preliminary assessment of the Group, the amendments are not expected to have significant impact on the financial statements.

iFriC 23 applies for annual periods beginning on or after 1 January 2019. early adoption is permitted.

(vi) ifrs 16 Leases iFrs 16 replaces ias 17 leases, iFriC 4 Determining whether an arrangement contains a lease, siC-15 operating

leases – incentives and siC-27 evaluating the substance of transactions involving the legal Form of a lease.

the standard sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, i.e. the customer(‘lessee’) and the supplier (‘lessor’). iFrs 16 eliminates the classification of leases as operating leases or finance leases as required by ias 17 and introduces a single lessee accounting model. applying that model, a lessee is required to recognise:

a. assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value; and

b. depreciation of lease assets separately from interest on lease liabilities in the profit or loss.

For the lessor, iFrs 16 substantially carries forward the lessor accounting requirements in ias 17. accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently.

the Group is yet to carry out an assessment to determine the impact that the initial application of iFrs 16 could have on its business; however, the Group will adopt the standard for the year ending 31 December 2019.

(vii) Long-term interests in associates and joint ventures (Amendments to iAs 28) the amendments clarify that an entity applies iFrs 9 to long-term interests in an associate and joint venture that

form part of the net investment in the associate or joint venture but to which the equity method is not applied.

the Group has opted to defer the adoption of iFrs 9 till 2021 when iFrs 17, insurance Contracts will be effective as permitted. in addition, the Group’s investment in associates is accounted for using the equity method, consequently, the amendments are not expected to have significant impact on the financial statements.

(viii) ifrs 17 insurance contracts iFrs 17 supersedes iFrs 4 insurance Contracts and aims to increase comparability and transparency about profitability.

the new standard introduces a new comprehensive model (“general model”) for the recognition and measurement of liabilities arising from insurance contracts. in addition, it includes a simplified approach and modifications to the general measurement model that can be applied in certain circumstances and to specific contracts, such as:

- reinsurance contracts held;

- Direct participating contracts; and

- investment contracts with discretionary participation features.




under the new standard, investment components are excluded from insurance revenue and service expenses. entities can also choose to present the effect of changes in discount rates and other financial risks in profit or loss or oCi. the new standard includes various new disclosures and requires additional granularity in disclosures to assist users to assess the effects of insurance contracts on the entity’s financial statements.

the Group is in the process of determining the impact of iFrs 17 and will provide more detailed disclosure on the impact in future financial statements. the standard is effective for annual periods beginning on or after 1 January 2021. early adoption is permitted.

3 Summaryofsignificantaccountingpolicies except for the changes explained in note 2(f) above, the Group consistently applied the following accounting policies

to the periods presented in the financial statements.

(a) Basis of consolidation

(i) Business combination the Group applies iFrs 3 Business Combinations in accounting for business combinations. Business combinations

are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. the consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. any goodwill that arises is tested annually for impairment. any gain on bargain purchase is recognised in profit or loss immediately.

the Group measures goodwill at the acquisition date as the total of: - the fair value of the consideration transferred, which is generally measured at fair value; plus

- the recognized amount of any non-controlling interests in the acquire; plus if the business combination is achieved in stages, the fair value of the existing equity interest in the acquire; less

- the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

subsequent to initial recognition, goodwill is measured at cost less accumulated impairment losses. the consideration transferred does not include amounts related to the settlement of pre-existing relationships. such amounts are generally recognised in profit or loss.

transactions costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

any contingent consideration payable is measured at fair value at the acquisition date. if the contingent consideration is classified as equity, then it is not re-measured and settlement is accounted for within equity. otherwise, subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.

When share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree’s employees (acquiree’s awards) and relate to past services , then all or a portion of the amount of the acquirer’s replacement awards is included in measuring the consideration transferred in the business combination. this determination is based on the market-based value of the replacement awards compared with the market-based value of the acquiree’s awards and the extent to which the replacement awards relate to pre-combination service.

in the separate financial statements of the Company, investments in subsidiaries are accounted for at cost.

(ii) non-controlling interest non controlling interest are measured at their proportionate share of the acquiree’s identifiable net assets at the

acquisition date. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

(iii) subsidiaries subsidiaries are investees controlled by the Group. the Group ‘controls’ an investee if it is exposed to, or has rights

to, variable returns from its involvement with investee and has the ability to affect those returns through its power over the investee. the Group financial statements incorporates the assets, liabilities and results of; royal exchange




General insurance Company limited, royal exchange Prudential life Plc, royal exchange microfinance Bank, royal exchange healthcare limited and royal exchange Finance and asset management limited. the financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

(iv) Associates associates are those entities in which the Group has significant influence, but not control or joint control, over the

financial and operating policies.

investments in associates are accounted for using the equity method of accounting. they are initially recognised at cost, which includes transaction costs.

subsequent to initial recognition, the Group’s share of its associates’ post-acquisition profits or losses is recognised in the consolidated profit or loss; its share of post-acquisition movements is recognised in other comprehensive income. the cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

intra-group gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. intra-group losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. For preparation of consolidated financial statements, equal accounting policies for similar transactions and other events in similar circumstances are used. Dilution gains and losses in associates are recognised in the consolidated profit or loss.

(v) Loss of control When the Group loses control over a subsidiary, the Group derecognizes the assets and liabilities of the subsidiary,

any non-controlling interests and the other components of equity related to the subsidiary. any resulting gain or loss is recognised in profit or loss and any interest retained in the former subsidiary is measured at fair value when control is lost.

(vi) transaction eliminated on consolidation intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions,

are eliminated in preparing the consolidated financial statements. unrealized gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

(b) foreign currency transactions Foreign currency transactions are translated into the respective group entities’ functional currencies at exchange

rates prevailing at the date of the transactions.

the group’s consolidated and separate financial statements are presented in nigerian naira which is the functional and presentation currency of royal exchange Plc.

Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year-end exchange rates, are recognised in profit or loss. non-monetary assets and liabilities denominated in foreign currencies that are measured at historical cost are translated using the exchange rate at the transaction date and those measured at fair value are translated at the exchange rate at the date that the fair value was measured.

exchange rate differences on non-monetary items such as property and equipment, prepayment, intangible assets are accounted for based on the classification of the underlying items.

however, foreign currency differences arising from the translation of the following item is recognised in oCi: • available-for-saleequityinvestments(exceptonimpairment,inwhichcaseforeigncurrencydifferencesthathave

been recognised in oCi are reclassified to profit or loss).




• available-for-sale debt securities investments, in which case foreign currency differences on the fair valuedifference are recognised in oCi.

(c) cash and cash equivalents Cash comprises cash in hand and demand deposits. Cash equivalents are short-term highly liquid investments that

are readily convertible to known amounts of cash and that are subject to insignificant risk of changes in their fair value. Cash equivalents comprise investments with original maturities of three months or less and used by the Group to manage its short - term commitments.

subsequent to initial recognition, cash and cash equivalents are carried at amortised cost in the statement of financial position. For the purpose of the statement of cash flows, cash and cash equivalents are net of outstanding overdrafts.

interest income on cash and cash equivalents is recorded in net interest income in profit or loss.

(d) financial instruments the classification of the Group’s financial instruments depends on the nature and purpose of the instruments and are

determined at the time of initial recognition.

(i) Classificationoffinancialassets the financial assets have been recognised in the statement of financial position and measured in accordance with

their assigned classifications.

the Group classifies its financial assets into the following categories: • financialassetsatfairvaluethroughprofitorloss(FVtPL);

• Available-for-sale(AFs)financialassets;and

• Loansandreceivables

Financialassetsatfairvaluethroughprofitorloss(FVTPl) Financial instruments are classified at FVtPl when the financial instrument is either held-for-trading or it is designated

as at FVtPl. Financial instruments at FVtPl are stated at fair value.

Available-for-salefinancialassets(AFS) available-for-sale financial instruments are non-derivatives that are either designated as aFs or are not classified as: (a) loans and receivables;

(b) held-to-maturity investments; or

(c) financial assets at fair value through profit or loss.

listed redeemable notes held by the Group that are traded in an active market are classified as aFs and are stated at fair value at the end of each reporting period. the Group also has investments in unlisted shares that are not traded in an active market but that are also classified as aFs financial assets.

Loans and receivables loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in

an active market. loans and receivables are measured at amortised cost using the effective interest method, less any impairment.

(ii) Classificationoffinancialliabilities a financial liability is classified as at fair value through profit or loss if it is classified as held-for-trading or is designated

as such on initial recognition. Directly attributable transaction costs are recognised in profit or loss as incurred.

Financial liabilities at fair value through profit or loss are measured at fair value and changes therein, including any interest expense, are recognised in profit or loss.




other financial liabilities are initially measured at fair value less any directly attributable transaction costs. subsequent to initial recognition, these liabilities are measured at amortised cost using the effective interest method.

Financial liabilities have been recognised in the statement of financial position and measured in accordance with their assigned classifications.

the Group’s financial liabilities are classified as other financial liabilities. they include borrowings, trade and other payables.

(iii) initial recognition and measurement all financial instruments are initially recognised at fair value, which includes directly attributable transaction costs for

financial instruments not classified as at fair value through profit and loss. For financial instruments held at fair value through profit and loss (FVtPl), the transaction costs are immediately expensed in the profit and loss.

(iv) subsequent measurement subsequent to initial recognition, financial assets are measured either at fair value or amortised cost, depending on

their categorisation:

FinancialAssetsatfairvaluethroughprofitorloss(FVTPl) Financial assets at FVtPl are stated at fair value. any gains or losses arising on re-measurement are recognised in

the statement of profit or loss in the period in which they arise. the net gain or loss recognized in the statement of profit or loss incorporates any dividend or interest earned on the financial asset and is included in the ‘investment income’ line item in the Group’s profit or loss statement.

Available-for-salefinancialassets(AFS) available-for-sale financial assets are carried at fair value, with the exception of investments in equity instruments

where fair value cannot be reliably determined, which are carried at cost. the fair values for quoted instruments are determined by reference to regulated exchange quoted ruling prices. if quoted market prices are not available, reference is also made to readily and regularly available broker or dealer price quotations.

the fair values of unquoted equities and other instruments for which there is no active market, are established using valuation techniques. these include the use of recent arm’s length transactions, reference to the current market value of other instruments that are substantially the same and discounted cash flow analysis. Where the fair value of financial assets is determined using discounted cash flow techniques, estimated future cash flows are based on management’s best estimates and the discount rate used is a market related rate for a similar instrument.

available-for-sale equity instruments for which fair value cannot be reliably determined are carried at cost less impairment allowance, if any. impairment losses are recognised in profit or loss and reflected in an allowance account in the statement of financial position.

Changes in the fair value of available-for-sale financial assets are recognised in the statement of other comprehensive income as a separate component of equity under the heading of Fair value reserves.

When an available-for-sale instrument carried at fair value is disposed of, the cumulative gain or loss previously accumulated in the Fair value reserve is reclassified to investment and other income in profit or loss.

Dividends on available-for-sale equity instruments are recognised in profit or loss as investment and other income when the Group’s right to receive the dividends is established.

interest income recognized on available-for-sale instruments are recognised in profit or loss as net interest income as it accrues and is calculated by using the effective interest method.

Loans and receivables loans and receivables on the statement of financial position comprise cash and cash equivalent, loans and advances

to customers, advances under finance lease, trade receivables, other receivables and statutory deposits.




loans and receivables, after initial measurement, are measured at amortised cost, using the effective interest rate method less any impairment (if any). amortised cost is calculated by taking into account any discount or premium on acquisition and fee or costs that are an integral part of the effective interest rate.

loans granted at below market rates are fair valued by reference to expected future cash flows and current market interest rates for instruments in a comparable or similar risk class and the difference between the historical cost and fair value is accounted for as employee benefits under staff costs.

interest on loans and receivables are included in net interest income in profit or loss.

When the asset is impaired, impairment losses are recognised in profit or loss and reflected in an allowance account against loans and receivables. interest on the impaired assets continues to be recognised through the unwinding of the discount. if an event occurring after the impairment was recognised causes the amount of impairment loss to decrease, then the decrease in impairment loss is reversed through profit or loss.

trade receivables trade receivables arising under insurance contracts are recognized when due. these include premium due from

agents, brokers, co-insurers and insurance contract holders for which credit notes issued are within 30 days, in conformity with the “no Premium no CoVer” policy. trade receivables are stated at cost less impairment.

financial liabilities subsequent to initial recognition, other financial liabilities are measured at amortised cost.

trade payables are recognized when due. these include amounts due to agents, reinsurers, co-assurers and insurance contract holders. trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. other liabilities include accruals, staff payables, other payables, unclaimed dividend and dividend withheld.

(v) fair value measurement 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 in the principal or, in its absence, the most advantageous market to which the Group has access at that date. the fair value of an asset or liability reflects its non-performance risk.

When available, the Group measures the fair value of an instrument using the quoted price in an active market for that instrument. a market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

if there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. the chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

the best evidence of the fair value of a financial instrument at initial recognition is normally the transaction price - i.e. the fair value of the consideration given or received. if the Group determines that the fair value at initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique that uses only data from observable markets, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value at initial recognition and the transaction price.

subsequently, that difference is recognised in profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable market data or the transaction is closed out.

the fair value of a non-interest bearing liability is its discounted repayment amount. if the due date is less than one year, discounting is omitted.




Portfolios of financial assets and financial liabilities that are exposed to market risk and credit risk that are managed by the Group on the basis of a price that would be received to sell a net long position (or paid to transfer a net short position) for a particular risk exposure. those portfolio-level adjustments are allocated to the individual assets and liabilities on the basis of the relative risk adjustment of each of the individual instruments in the portfolio.

the Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which the change has occurred.

(vi) Impairmentoffinancialassets the Group assesses its financial assets, other than those at fair value through profit or loss, for indicators of impairment

at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

objective evidence that a financial asset or group of financial assets is impaired could include: •significantfinancialdifficultyoftheissuerorcounterparty;

•Breachofcontract,suchasadefaultordelinquencyininterestorprincipalpayments;

•Itbecomingprobablethattheborrowerwillenterbankruptcyorotherfinancialre-organization;

•thedisappearanceofanactivemarketforthatfinancialassetbecauseoffinancialdifficulties.

For available-for-sale (aFs) equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

Loans and receivables For loans and receivables, the amount of the impairment loss recognized is the difference between the asset’s carrying

amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate. if in a subsequent period the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

When the asset is impaired, impairment losses are recognised in profit or loss and reflected in an allowance account against loans and receivables and held-to-maturity instruments. interest on the impaired assets continues to be recognised through the unwinding of the discount. if the amount of impairment loss subsequently decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, then the previously recognised impairment loss is reversed through profit or loss.

Available-for-salefinancialassets(AFS) impairment losses on available-for-sale financial assets are recognised by reclassifying the losses accumulated in the

fair value reserve to profit or loss. the amount reclassified is the difference between the acquisition cost (net of any principal repayment and amortisation) and the current fair value, less any impairment loss previously recognised in profit or loss.

if the fair value of an impaired available-for-sale debt security subsequently increases and the increase can be related objectively to an event occurring after the impairment loss was recognised, then the impairment loss is reversed through profit or loss.

impairment losses recognised in profit or loss for an investment in an equity instrument classified as available-for-sale are not reversed through profit or loss.

trade receivables an impairment is established when there is objective evidence that, as a result of one or more events that occurred

after the initial recognition, the estimated future cash flows have been impaired. the carrying amount of the financial asset is reduced by the impairment loss through the use of an allowance account and recognised as impairment loss in income statement.




the Group’s allowance for impairment is based on incurred loss model for each customer. the probability of default and the age of the debts are also taken into account in arriving at the impairment amount.

When a trade receivable is considered uncollectible, it is written off against the impairment allowance account.

(vii) De-recognitionoffinancialassets the Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expires, or

when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. if the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. if the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and financial liability separately.

on de-recognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognized in profit or loss.

on de-recognition of a financial asset other than in its entirety (e.g. when the Group retains an option to repurchase part of a transferred asset), the Group allocates the previous carrying amount of the financial asset between the part it continues to recognize under continuing involvement, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. the difference between the carrying amount allocated to the part that is no longer recognized and the sum of the consideration received for the part no longer recognized and any cumulative gain or loss allocated to it that had been recognized in other comprehensive income is recognized in profit or loss. a cumulative gain or loss that had been recognized in other comprehensive income is allocated between the part that continues to be recognized and the part that is no longer recognized on the basis of the relative fair values of those parts.

the Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire.

Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group currently has a legally enforceable right to offset the amounts and intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.

(e) Impairmentofothernon-financialassets at the end of each reporting period, the Group reviews the carrying amounts of its non-financial assets (other than

deferred tax assets and investment property) to determine whether there is any indication of impairment. if any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest Group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

recoverable amount is the higher of fair value less costs to sell and value in use. in assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

if the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. an impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at a revalued amount in which case the impairment loss is treated as a revaluation decrease.




When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. a reversal of an impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

(f) reinsurance assets the Group cedes reinsurance in the normal course of business in order to limit its net loss potential for losses arising

from certain exposures. the cost of reinsurance related to long-term contracts is accounted for over the life of the underlying reinsured policies, using assumptions consistent with those used to account for these policies. however, reinsurance arrangements do not relieve the Group from its direct obligations to its policyholders.

reinsurance assets include balances due from various reinsurance companies for ceded insurance contracts. amounts recoverable from reinsurers are estimated in a manner consistent with the underlying reinsurance contract.

reinsurance assets are assessed for impairment at each reporting date. if there is reliable objective evidence that a reinsurance asset is impaired as a result of an event that occurred after initial recognition of the reinsurance asset, that the Group may not receive all amounts due to it under the terms of the contract and the event has a reliably measurable impact on the amounts that the Group will receive from the reinsurer.

the Group gathers the objective evidence that a reinsurance asset is impaired using the same process adopted for financial assets held at amortised cost. the impairment loss is calculated following the same method used for financial assets.

the Group has the right to set off reinsurance payables against amounts due from reinsurers and co-assurers in line with the agreed arrangement between both parties.

(g) Deferred acquisition costs the incremental costs directly attributable to the acquisition of new business which had not expired at the reporting

date, are deferred by recognizing an asset. For non-life insurance contracts, acquisition costs include both incremental acquisition costs and other indirect costs of acquiring and processing new businesses.

Deferred acquisition costs are amortised in the income statement systematically over the life of the contracts at each reporting date.

(h) other receivables and prepayments other receivables balances include dividend receivable, inter-group balances for Company accounts, accrued rental

income and security holding trust account

Prepayment are essentially prepaid rents and staff upfront payments. other receivables and prepayments are carried at amortised cost less accumulated impairment losses.

(i) investment properties investment properties are properties held for long-term rental yields or for capital appreciation (including property

under construction for such purposes) or for both purposes, but not for sale in the ordinary course of business.

recognition and measurement recognition of investment properties takes place only when it is probable that the future economic benefits that are

associated with the investment property will flow to the entity and the cost can be measured reliably.

investment properties are measured initially at cost, including all transaction costs.

subsequent to initial recognition, investment properties are measured at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair value of investment properties are included in the statement of profit or loss in the period in which they arise. Fair values are evaluated and assessed annually by a Financial reporting Council’s accredited external valuer.




De-recognition an investment property is derecognised upon disposal or when the investment property is permanently withdrawn

from use and no future economic benefits are expected from the disposal. any gain or loss arising on de-recognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is recognised in the income statement in the period of de-recognition.

transfers transfers are made to or from investment property only when there is a change in use. For a transfer from investment

property to owner occupied property, the deemed cost for subsequent accounting is the fair value at the date of change. if owner-occupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under property and equipment up to the date of change. subsequently, the property is re-measured to fair value and reclassified as investment property.

(j) Property and equipment

recognition and measurement all property and equipment used by the Group is stated at historical cost less accumulated depreciation and any

accumulated impairment losses. historical cost includes expenditure that is directly attributable to the acquisition of the items. if significant parts of a property and equipment have different useful lives, then they are accounted for as separate items (major components) of property and equipment.

subsequent costs subsequent expenditures are recognized in the carrying amount of the asset or as a separate asset as appropriate

if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be reliably measured. the costs of the day-to-day servicing of property and equipment are recognized in the statement of profit or loss as incurred.

Depreciation Depreciation is recognized so as to allocate the cost of assets (other than freehold land) less their residual values

over their useful lives, using the straight-line method. the estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. however, when there is no reasonable certainty that ownership will be obtained by the end of the lease term, assets are depreciated over the shorter of the lease term and their useful lives.

the estimated useful lives of property and equipment are as follows:

Buildings 50 years Furniture and office equipment 5 years motor vehicles - new 4 years - salvage 3 years Computer hardware 4 years Plant and equipment 5 years

De-recognition an item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are

expected to arise from the continued use of the asset. any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the statement of profit or loss of the year that the asset is de-recognised.

(k) intangible assets

software expenditure an internally-generated intangible asset arising from the Group’s software development is recognised if and only if all

of the following conditions are met: • thetechnicalfeasibilityofcompletingtheintangibleassetsothatitwillbeavailableforuseorsale;




• theintentiontocompletetheintangibleassetanduseorsellit;

• theabilitytouseorselltheintangibleasset;

• Howtheintangibleassetwillgenerateprobablefutureeconomicbenefits;

• theavailabilityofadequatetechnical,financialandotherresourcestocompletethedevelopmentandtouseorsell the intangible asset; and

• theabilitytomeasurereliablytheexpenditureattributabletotheintangibleassetduringitsdevelopment.

the amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognized, development expenditure is recognised in profit or loss in the period in which it is incurred.

subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.

Acquired computer software acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use

the specific software. Computer software is stated at cost less amortisation and impairment losses. subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. Costs associated with maintaining computer software programmes are recognised as an expense as incurred.

Amortisation Computer software costs, whether developed or acquired, are amortized for a period of five years using the straight

line method.

intangible assets which are not available for use are tested for impairment annually. amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

an intangible asset shall be derecognised by the Group on disposal; or when no future economic benefit are expected from its use or disposal. any gain or loss arising on de-recognition of the assets (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the period the asset is recognised.

(l) taxation income tax expense comprises current and deferred tax. income tax expense is recognized in the statement of profit

or loss except to the extent that it relates to items recognized in other comprehensive income or directly in equity. in this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

current income taxes the Group is subject to the Companies income tax act (Cita). total amount of tax payable under Cita is determined

based on the higher of two components namely income tax (based on taxable income (or loss) for the year; and minimum tax (determined based on the sum of the highest of 0.25% of revenue of n500,000, 0.5% of gross profit, 0.25% of paid up share capital and 0.5% of net assets and 0.125% of revenue in excess of n500,000). taxes based on taxable profit for the period are treated as current income tax in line with ias 12; whereas taxes which is based on gross amounts is outside the scope of ias 12 and therefore are not treated as current income tax.

Where the minimum tax is higher than the Company income tax (Cit), a hybrid tax situation exits. in this situation, the Cit is recognised in the income tax expense line in the profit or loss and the excess amount is presented above income tax line as minimum tax.

the Group income tax expense and payable is the sum of the individual tax expense and payable under the various tax laws governing each of the subsidiaries of the Group and the Company.




the tax currently payable is based on taxable profit for the year. taxable profit differs from profit as reported in the Group’s statement of profit or loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. the Group’s liability for current tax is calculated using tax rates that have been enacted by the end of the reporting period.

the current taxes include: Company income tax at 30% of taxable profit; education tax at 2% of assessable profit; Capital Gain tax at 10% of chargeable gains; and information technology development levy at 1% of accounting profit.

Deferred tax Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the

Group’s financial statements and the corresponding tax bases used in the computation of taxable profit.

Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill (arising in a business combination) or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit or related to investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future.

the carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be used. Future taxable profits are determined based on the reversal of relevant taxable temporary differences. if the amount of taxable differences is insufficient to recognise the deferred tax asset in full, then future taxable profits adjusted for reversals of existing temporary differences, are considered, based on the business plans of the Company. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised; these reductions are reversed when the probability of future taxable profits improves.

unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. the measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

For the purposes of measuring deferred tax liabilities and deferred tax assets for properties held for sale that are measured using the fair value model, the carrying amount of such properties are presumed to be recovered entirely through the sale unless the presumption is rebutted. the presumption is rebutted when the investment property is depreciable and is held within a business model whose objective is to consume substantially all the economic benefits embodied in the investment property over time rather than through sale.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.




(m) statutory deposits statutory deposits are cash balances held with the Central Bank of nigeria (CBn) in compliance with the insurance

act, CaP 117, lnF 2004 for the general and life insurance companies.

the deposits are only available as a last resort to the Group if it goes into liquidation. statutory deposits are measured at cost.

(n) Borrowings Borrowings by way of bank overdrafts that are repayable on demand and form an integral part of the Group’s

cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. Borrowings have been measured in line with the Group’s accounting policy for financial instruments (see note 3(d))

Borrowing costs comprise interest payable on loans and bank overdrafts. they are charged to profit or loss as incurred, except those that relate to qualifying assets. arrangement fees in respect of financing arrangements are charged to borrowing costs over the life of the related facility.

(o) Deferred income Deferred income comprises deferred rental income and deferred commission.

Deferred rental income relates to rents received in advance. these are amortized and transferred to the statement of profit or loss over the periods that they relate.

Deferred commission income relates to commissions received on ceded reinsurance businesses but not yet earned as at reporting date. Deferred commission incomes are amortized systematically over the life of the contracts at each reporting date.

(p) Provisions and other liabilities

Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it

is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

the amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).

other liabilities other liabilities are recognised initially at fair value and subsequently measured at amortized cost using the effective

interest rate method. the fair value of a non-interest bearing liability is its discounted repayment amount. if the due date is less than one year, discounting is omitted.

(q) finance and operating lease obligations these are the corresponding liabilities on assets acquired under finance lease. lease payments are apportioned

between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognized immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Group’s general policy on borrowing costs.

Lease assets - lessee assets held by the Group under leases that transfer to the Group substantially all of the risks and rewards of ownership

are classified as finance leases. the leased asset is initially measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.




assets held under other leases are classified as operating leases.

Lease payments Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the

lease. lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.

Lease assets - lessor if the Group is the lessor in a lease agreement that transfers substantially all of the risks and rewards incidental to

ownership of the asset to the lessee, then the arrangement is classified as a finance lease and a receivable equal to the net investment in the lease is recognised and presented within loans and advances.

(r) insurance contract liabilities

(i) Classification iFrs 4 requires contracts written by insurers to be classified as either ‘insurance contracts’ or ‘investment

contracts’ depending on the level of insurance risk transferred.

insurance contracts are those contracts when the insurer has accepted significant insurance risk from another party (the policyholders) by agreeing to compensate the policyholders if a specified uncertain future event (the insured event) adversely affects the policyholders.

insurance contract liabilities represent the Group’s liability to the policy holders. they comprise the unearned premium, unexpired risk, outstanding claims and the incurred but not reported claims. at the end of each accounting period, this liability is reflected as determined by the actuarial valuation report.

unearned premium provision the provision for unearned premiums represents the proportion of premiums written in the periods up to the

accounting date that relate to the unexpired terms of policies in force at the end of the reporting date. this is estimated to be earned in subsequent financial periods, computed separately for each insurance contract using a time apportionment basis.

reserve for unexpired risk a provision for additional unexpired risk reserve is recognised for an underwriting year where it is envisaged that the

estimated cost of claims and expenses exceed the unearned premium provision.

reserve for outstanding claims outstanding claims represent the estimated ultimate cost of settling all claims arising from incidents occurring prior

to the end of reporting date, but not settled at that date.

reserve for incurred but not reported claims (iBnr) a provision is made for claims incurred but not yet reported as at the end of the financial year. this provision is based

on the liability adequacy test report.

Liability Adequacy test at the end of each reporting period, liability adequacy tests are performed to ensure that material and reasonably

foreseeable losses arising from existing contractual obligations are recognised. in performing these tests, current best estimates of future contractual cash flows, claims handling and administration expenses, investment income backing such liabilities are considered. long-term insurance contracts are measured based on assumptions set out at the inception of the contract. any deficiency is charged to the statement of profit or loss by increasing the carrying amount of the related insurance liabilities.

the liability adequacy test (lat) was carried out by eY nigeria (Consultant actuaries).

insurance contract with discretionary participating features (DPf) some insurance contracts and investment contracts contain a discretionary participating feature (DPF), which is a

contractual right to receive as, a supplement to guaranteed benefits, additional benefits that are:




• Likelytobeasignificantportionofthetotalcontractualbenefits;

• theamountortimingiscontractuallyatthediscretionoftheinsurer;and

• thatarecontractuallybasedon: i. the performance of a specified pool of contracts or a specified type of contract;

ii. realized and or unrealized investment returns on a specified pool of assets held by the issuer; or

iii. the profit or loss of the Company.

recognition and measurement insurance contracts with DPF are classified into two main categories, depending on the duration of risk and whether

or not the terms and conditions are fixed.

(i) Short-term insurance contracts short-duration life insurance contracts (Group life) protect the Group’s clients from the consequences of events (such

as death or disability) that would affect the ability of the client or his/her dependants to maintain their current level of income. these contracts have no maturity or surrender value and the premiums are recognized as earned premiums proportionally over the period of coverage.

the proportion of premium received on in-force contracts that relates to unexpired risks at the reporting date is reported as unearned premium liability. Premiums are shown before deductions of commissions and are gross of any taxes or duties levied on premiums.

Claims expenses are recognized in the statement of profit or loss as incurred based on the estimated liability for compensation owed to contract holders. they include direct and indirect claims settlement costs that arise from events that have occurred up to the end of the reporting period even if they have not been reported to the Group. the Group does not discount it liabilities for unpaid claims. liabilities for unpaid/outstanding claims are estimated using the input of assessments for individual cases reported to the Group and statistical analyses for the claims incurred but not reported.

(ii) Long-term insurance contracts with fixed and guaranteed terms these contracts insure events associated with human life (for example, death or survival) over a long duration.

Premiums are recognized as revenue when they become payable by the contract holder. Premiums are shown before deduction of commission. Benefits are recognized as an expense when they are incurred. a liability for contractual benefits that are expected to be incurred in the future is recorded when the premiums are recognized. the liability is actuarially determined based on assumptions such as mortality, persistency, maintenance expenses and investment income that are established at the time the contract is issued.

(iii) Annuity annuity premium are recognised as income when received from policy holders, and payments to policy holders are

recognised as an expense when due. annuities are valued by using a discounted cash flow approach. the reserves are set equal to the present value of future annuity payments plus expenses, with allowance being made for any guaranteed periods as required by the terms of the contract. annuities collected in a year are credited to the Gross Premium written and the portion that extends beyond one year is taken out via the unearned premium. the assets representing the annuities are invested in near-cash money market financial instruments with a tenor of 30 days on rolling basis.

the annuity is valued at year end by a professional consultant actuary registered with the Financial reporting Council (”FrC”). also a liability adequacy test is required by law to be performed on annuity fund to determine its sufficiency in meeting the contractual liabilities. some of the assumptions being considered in valuing the annuity fund at the year end are:

(a) a 10 year guaranteed minimum annuity payment

(b) a valuation interest determined by a long term FGn bond yield

(c) a maintenance expenses and the mortality rates.




(s) recognition and measurement of insurance contract

Premium Gross written premiums for general insurance contracts comprise premiums received in cash as well as premiums

that have been received and confirmed as being held on behalf of the Group by insurance brokers and duly certified thereto. Gross premiums are stated gross of commissions and taxes payable and stamp duties that are payable to intermediaries and relevant regulatory bodies respectively.

unearned premiums represent the proportions of premiums written in the year that relate to the unexpired risk of policies in force at the reporting date.

reinsurance Premiums, losses and other amounts relating to reinsurance treaties are measured over the period from inception

of a treaty to expiration of the related business. the actual profit or loss on reinsurance business is therefore not recognized at the inception but as such profit or loss emerges. in particular, any initial reinsurance commissions are recognized on the same basis as the acquisition costs incurred.

Premiums ceded, claims recovered and commission received are presented in the statement of profit or loss and statement of financial position separately from the gross amounts.

amounts recoverable under reinsurance contracts are assessed for impairment at each reporting date. such assets are deemed impaired if there is objective evidence, as a result of an event that occurred after its initial recognition, that the Group may not recover all amounts due under the contract terms and that the event has a reliably measurable impact on the amounts the Group will receive from the reinsurer.

Claimsandpolicyholdersbenefitpayable Claims incurred comprise claims and claims handling expenses paid during the financial year and changes in the

provision for outstanding claims. Claims and claims handling expenses are charged to profit or loss as incurred.

For long term insurance business, benefits are recorded as an expense when they are incurred. Claims arising on maturing policies are recognized when the claims become due for payment. Death claims are accounted for on notification. surrenders are accounted for on payment.

(t) investment contract liabilities investment contracts are those contracts that transfer significant financial risk. Financial risk is the risk of a possible

future change in one or more of a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of price or rates, credit rating or credit index or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract. the investment contract comprises of the royal Policy Product, (rPP), the royal insurance savings account (isa) and the Deposit administration (Da).

amounts collected from investment linked contracts with no discretionary participating features are reported as deposits (i.e. as investment contract liabilities) in the statement of financial position. interest, usually agreed with clients, is credited per annum to each account holder and the amount expensed to statement of profit or loss. Payment of benefits are treated as withdrawal (reduction) from the balance standing in the credit account of the client.

(u) Employeebenefitsliabilities

(i) Short-termbenefits staff benefits such as wages, salaries, paid annual leave allowance, and non-monetary benefits are recognized as

employee benefit expenses. the expenses are accrued when the associated services are rendered by the employees of the Group.

short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.




(ii) Definedcontributionplans the Group operates a defined contribution plan in accordance with the provisions of the Pension reform act 2014.

the Group contributes 10% and employees contribute 8% each of the qualifying monthly emoluments in line with the Pension reform act.

the Group’s monthly contribution to the plan is recognised as an expense in profit or loss.

the Group pays contributions to privately administered pension fund administration on a monthly basis. the Group has no further payment obligation once the contributions have been paid. Prepaid contributions are recognised as an asset to the extent that a cash refund or reduction in the future payments is available. Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions.

(iii) Terminationbenefits termination benefits are payable when employment is terminated before the normal retirement date, or whenever an

employee accepts voluntary redundancy in exchange for these benefits. the Group recognizes termination benefits when it is demonstrably committed to either: terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy.

(iv) Pension the Group operated a funded pension scheme for its employees prior to the Pension reform act 2004. it therefore

has continuing pension obligation to its staff who retired prior to the commencement of the contributory pension scheme.

Pensioners are entitled to 3% annual increment. over 90% of the pension assets are being managed by a pension fund administrator while the balance is invested in marketable securities and bank placement.

the calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Group, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. to calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in oCi. the Group determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. net interest expense and other expenses related to defined benefit plans are recognised in profit or loss.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in profit or loss. the Group recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.

(v) Otherlongtermbenefits the Group operates a long service award plan for eligible staff who have rendered continued service to the organization.

Benefits accrue after a minimum of 10 years and a maximum of 35 years. the main benefits payable on the scheme are both cash and gift items which vary according to the number of years of service.

the liability is valued annually by a qualified actuary using the projected unit credit method.

remeasurements of the obligation, which comprise actuarial gains and losses, are recognised immediately in oCi. the Group determines the net interest expense (income) on the obligation for the period by applying the discount rate used to measure the obligation at the beginning of the annual period to the liability, taking into account any changes




in the liability during the period as a result of benefit payments. net interest expense and other expenses related to obligation are recognised in profit or loss.

the Group meets benefits on a pay-as-you-qualify basis as the plan is an unfunded scheme.

(v) capital and reserves

(i) share capital the equity instruments issued by the Group are classified as equity in accordance with the substance of the contractual

arrangements and the definitions of an equity instrument.

equity instruments issued by the Group are recognized as the proceeds are received, net of direct issue costs. repurchase of the Group’s own equity instruments is recognized and deducted directly in equity. no gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments.

(ii) share premium this represents the excess amount paid by shareholders on the nominal value of the shares. this amount can be

utilized as provided in section 120(3) of Companies and allied matters act. the share premium is classified as an equity instrument in the statement of financial position.

(iii) contingency reserve the Group maintains Contingency reserves for the general and life businesses in accordance with the provisions of

s.21 of the insurance act 2003.

in compliance with the regulatory requirements in respect of Contingency reserve for the general business, which includes the health insurance business, the Group maintains contingency reserve at the rate equal to the higher of 3% of gross premium or 20% of the total profit after taxation until the reserve reaches the greater of minimum paid up capital or 50% of net premium.

in compliance with the regulatory requirements in respect of Contingency reserve for life business, the Group maintains contingency reserve at the rate equal to the higher of 1% of gross premium or 10% of the net profit accumulated until it reaches the amount of the minimum paid up capital.

(iv) retained earnings the reserve comprises undistributed profit/(loss) from previous years and the current year. retained earnings is

classified as part of equity in the statement of financial position.

(v) fair value reserves Fair value reserves represent the cumulative net change in the fair value of available-for-sale financial assets at the

reporting date.

(vi) regulatory risk reserve the regulatory risk reserves warehouses the difference between the impairment of loans and advances under the

nigeria GaaP and Central Bank of nigeria prudential guidelines and the loss incurred model used in calculating the impairment balance under iFrs.

(vii) Otherreserves-employeebenefitactuarialsurplus actuarial (surplus)/deficit on employee benefits represent changes in benefit obligation due to changes in actuarial

valuation assumptions or actual experience differing from expectation. the gains/losses for the year, net of applicable deferred tax asset/liability on employee benefit obligation, are recognized in other comprehensive income.

(viii) treasury shares Where the Company or any member of the Group purchases the Company’s share capital, the consideration paid

is deducted from the shareholders’ equity as treasury shares until they are cancelled. Where such shares are subsequently sold or reissued, any consideration received is included in shareholders’ equity.




(ix) Dividends on ordinary shares Dividends on ordinary shares are recognised in equity in the period in which they are approved by the Group’s

shareholders. Dividends for the year that are declared after the end of the reporting period are dealt with in the subsequent period.

Dividends proposed by the Directors but not yet approved by shareholders are disclosed in the financial statements in accordance with the requirements of the Company and allied matters act of nigeria.

(w) revenue recognition

(i) grossWrittenPremium Gross written premiums for non-life (general), life, health insurance and investment contracts with discretionary

participating features comprise premiums received in cash as well as premiums that have been received and confirmed as being held on behalf of the Group by insurance brokers and duly certified thereto. Gross written premiums are stated gross of commissions, net of taxes and stamp duties that are payable to intermediaries and relevant regulatory bodies respectively.

unearned premiums represent the proportions of premiums written in the year that relate to the unexpired risk of policies in force at the reporting date.

Deposits collected from investment-linked contracts with non-discretionary participating features are reported as investment contract liabilities in the statement of financial position.

outward facultative premiums and reinsurance premiums ceded are accounted for in the same accounting period as the premiums for the related direct insurance or facultative business assumed.

the earned portion of premiums received is recognized as revenue. Premiums are earned from the date of attachment of risk, over the indemnity period, based on the pattern of risks underwritten. outward reinsurance premiums are recognized as an expense in accordance with the pattern of indemnity received.

(ii) reinsurance expenses reinsurance cost represents outward premium paid/payable to reinsurance companies less the unexpired portion as

at the end of the financial year.

(iii) fees and commission income Fees and commission income consists primarily of insurance agency and brokerage commission, reinsurance

and profit commissions, policyholder administration fees and other contract fees. reinsurance commissions receivable are deferred in the same way as acquisition costs. all other fee and commission income is recognised as the services are provided.

(iv) interest income interest income is recognised in the income statement as it accrues and is calculated by using the effective interest

rate method. Fees and commissions that are an integral part of the effective yield of the financial asset or liability are recognised as an adjustment to the effective interest rate of the instrument.

the effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expense over the relevant period. the effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Group estimates cash flows considering all contractual terms of the financial instrument (for example, prepayment options) but does not consider future credit losses. the calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. Where the estimated cash flows on financial assets are subsequently revised, other than impairment losses, the carrying amount of the financial assets is adjusted to reflect actual and revised estimated cash flows.




once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

(v) investment income investment income consists of dividends, realised gains and losses as well as unrealized gains and losses on financial

instruments.

(vi) Dividend income Dividend income from investments is recognised when the shareholders’ rights to receive payment have been

established.

(vii) realised gains and losses and unrealised gains and losses realised gains and losses on investments include gains and losses on financial assets and investment properties.

Gains and losses on the sale of investments are calculated as the difference between net sales proceeds and the original or amortised cost and are recorded on occurrence of the sale transaction.

unrealised gains or losses represent the difference between the carrying value at the year end and the carrying value at the previous year end or purchase value during the year, less the reversal of previously recognised unrealised gains and losses in respect of disposals during the year.

(viii) other operating income other operating income represents income generated from sources other than premium revenue and investment

income. it includes rental income, profit on disposal of fixed assets, insurance brokerage commission, and fund management fee. rental income is recognized on an accrual basis.

(x) expense recognition

(i) Insuranceclaimsandbenefitsincurred Gross benefits and claims consist of benefits and claims paid / payable to policyholders, which include changes in the

gross valuation of insurance contract liabilities, except for gross change in the unearned premium provision which are recorded in premium income. it further includes internal and external claims handling costs that are directly related to the processing and settlement of claims. amounts receivable in respect of salvage and subrogation are also considered.

salvage some non-life insurance contracts permit the Group to sell (usually damaged) property acquired in the process of

settling a claim.

subrogation subrogation is the right of an insurer to pursue a third party that caused an insurance loss to the insured. this is done

as a means of receiving the amount of the claim paid to the insured for the loss.

(ii) underwriting expenses underwriting expense include acquisition costs and maintenance expense. acquisition costs comprise direct and

indirect costs associated with the writing of insurance contracts. these include commission expenses and other technical expenses. maintenance expenses are expenses incurred in servicing existing policies and clients. all underwriting expenses are charged to income statement as they accrue or become payable.

(iii) Management expenses management expenses are charged to profit or loss when goods are received or services rendered. they are expenses

other than claims, maintenance and underwriting expenses and include employee benefits, depreciation charges and other operating expenses.




(y) segment reporting operating segments are identified and reported in consonance with the internal reporting policy of the Group that

are regularly reviewed by the Chief executive (being the chief operating decision maker) who allocates resources to the segment and assesses their performance thereof.

the Group’s reportable segments, for management purpose, are organized into business units based on the products and services offered as follows:

• nonlifeinsurance-(RoyalExchangeGeneralInsuranceCompanyLimited);

• Lifeinsurance-(RoyalExchangePrudentialLifePlc);

• Financialservices-(RoyalExchangeMicro-FinanceBankLimited);

• Healthcare-(RoyalExchangeHealthcareLimited);and

• AssetManagement(RoyalExchangeFinanceandAssetManagementLtd).

the other segments include corporate shared services and other activities not related to the core business segment and which are not reportable segments due to their immateriality. Certain expenses such as finance costs and taxes are also not allocated to particular segments.

the segment reporting is the measure used by the Group’s Chief executive for the purposes of resource allocation and assessment of segment performance.

(z) earnings per share the Group presents basic and diluted ePs data for its ordinary shares. Basic ePs is calculated by dividing the profit

or loss that is attributable to ordinary shareholders of the Group by the weighted average number of ordinary shares outstanding during the period.

Diluted ePs is determined by adjusting the profit or loss that is attributable to ordinary shareholders and the weighted-average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.

(aa) fiduciary activities the Group acts as trustees and in other fiduciary capacities that results in the holding and placing of assets on behalf

of clients and oversight functions over certain funds. the value of the assets held on behalf of clients as at reporting date are excluded from the statement of financial position of the Group as they are not assets of the Group, but are disclosed in the financial statements (see note 61). the carrying value of the assets under custody were determined as follows:

- Cash and cash equivalents are carried at amortised cost.

- loans and receivables and held-to maturity investments are carried at amortised cost.

- other liabilities are measured at amortised cost using the effective interest rate method.

Fees and commissions earned from providing such services are generally recognised on an accrual basis in the statement of profit and loss in line with the agreement between the Group and the party for which the Group holds its assets.




4 critical accounting estimates and judgments in preparing these consolidated financial statements, management has made judgements, estimates and assumptions

that affect the reported amounts of assets and liabilities within the financial year.

estimates and underlying assumptions are reviewed on an ongoing basis and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. revisions to estimates are recognised prospectively.

A Judgements management applies its judgement to determine whether the indicators set out in note 3(a)(iv) indicate that the Group

has significant influence over it’s investment in associates.

according to ias 28, a 20% or more interest in an investee leads to a rebuttable presumption that the investor has significant influence over the investee.

the Group holds a direct interest of 26.10% in CBC emea. management has considered the fact and circumstances, including the representation of the Company on the board of CBC emea and has concluded that the Group has significant influence over CBC emea and the entity is an associate of the Group.

B Assumptions and estimation uncertainties information about assumptions and estimation uncertainties that have a significant risk of resulting in a material

adjustment in the year ending 31 December 2017 is set out below in relation to the impairment of financial instruments and in the following notes in relation to other areas:

(i) Deferred tax assets recognised deferred tax assets (see note 22) are measured at the tax rates enacted or substantively enacted at

the end of the reporting period and represents those amounts that are probable of realisation taking into account management’s estimates of future taxable profits. in determining estimates of future taxable profit against which deductible amount can be utilised, management has considered the existence of taxable temporary differences that will reverse in the same year that deductible amounts will reverse. management’s estimate of future taxable profits has been determined on the basis of a five year profit forecast and their assessment of applicable tax regulations. management affirms that assumptions underlying the five year forecast is reasonable given the Group’s restructured operations and there are no objective indicators to suggest that the projected earnings level will not be achieved.

(ii) Liabilities arising from insurance contracts

claims arising from non-life insurance contracts liabilities for unpaid claims are estimated on case by case basis. the liabilities recognised for claims fluctuate based

on the nature and severity of the claim reported. Claims incurred but not reported are determined using statistical analyses and the Company deems liabilities reported as adequate. assumptions used in determining the liabilities are disclosed in note 55.

(iii) impairment of available-for-sale equity investment securities investment in equity securities are evaluated for impairment on the basis described in accounting policies note 3(d)

(vi). the Group determines that available-for-sale equity investments are impaired when there has been a significant or prolonged decline in the fair value below its cost. this determination of what is significant or prolonged requires judgment relating to the period over which the losses occur. in making this judgment, the Group evaluates among other factors, the volatility in share price. in addition, objective evidence of impairment may be deterioration in the financial health of the investee, decline in quoted market price that has lasted for 9 months, industry and sector performance, changes in technology, and operational and financing cash flows etc.

(iv) Impairmentofotherfinancialassetsmeasuredatamortisedcost the directors use their judgment in selecting an appropriate valuation technique for some financial assets. impairment

for financial assets carried at amortised cost as well as the amount of impairment for trade receivables.the impairment for financial assets carried at amortised cost and trade receivables are evaluated on the basis described in accounting policies note 3(d)(vi).




the Group reviews its loans and other receivables portfolios to assess impairment at least on a quarterly basis. in determining whether a specific impairment loss should be recorded in profit or loss, the Group makes judgements as to whether there is any observable data indicating an impairment trigger. the trigger may include observable data indicating that the borrower is unable to fulfil the repayment obligations as per contractual terms e.g significant financial difficulty being experienced by the borrower, occurrence of default/delays in interest or principal repayments, restructuring of the credit facilities by giving extraordinary concessions to borrower or national or local economic conditions that correlate with defaults on assets in the Group. the Group uses estimates based on historical loss experience for assets with similar credit risk characteristics and objective evidence of impairment similar to those in the portfolio when scheduling future cash flows. in estimating these future cash flows, management makes judgements about a debtor’s financial situation and the net realisable value of any underlying collateral. the methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience. each impaired asset is assessed on its merits, and the workout strategy and estimate of cash flows considered recoverable are independently approved by the management.

(v) Fairvalueoffinancialinstruments the directors use their judgment in selecting an appropriate valuation technique for some financial assets. impairment

for financial assets carried at amortised costs as well as the amount of impairment for trade receivables. the significant estimates and judgments applied in determination of fair value of financial assets are as shown in the statement of accounting policies note 3 (d)(v).

(vi) Determination of fair value of investment property management employed the services of estate surveyors and valuers to value its investment properties. the estimated

open market value is deemed to be the fair value based on the assumptions that there will be willing buyers and sellers. recent market prices of neighborhood properties were also considered in deriving the open market values. other key assumptions are as disclosed in note 15 to the financial statements.

(vii) Definedbenefitplan the present value of the employee benefit obligations depends on a number of factors that are determined in an

actuarial basis using a number of assumptions. any changes in these assumptions will impact the carrying amount of obligations. the assumptions used in determining the net cost (income) for pensions include the discount rate.

the Group determines the appropriate discount rate at the end of the reporting period. in determining the appropriate discount rate, reference is made to the yield on nigerian Government Bonds that have maturity dates approximating the terms of the related pension liability. other key assumptions for pension obligations are based in part on current market conditions as disclosed in note 19.

(viii) current income tax significant estimates are required in determining the provision for income taxes. there are many transactions and

calculations for which the ultimate tax determination is uncertain during the ordinary course of business. the Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due and based on its assessment of the applicable tax regulations. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

(ix) Determination of impairment of property and equipment, and intangible assets excluding goodwill management is required to make judgements concerning the cause, timing and amount of impairment. in the

identification of impairment indicators, management considers the impact of changes in current competitive conditions, cost of capital, availability of funding, technological obsolescence, discontinuance of services and other circumstances that could indicate that impairment exists. the Group applies the impairment assessment to its separate cash generating units. this requires management to make significant judgements and estimates concerning the existence of impairment indicators, separate cash generating units, remaining useful lives of assets, projected cash flows and net realisable values. management’s judgement is also required when assessing whether a previously recognised impairment loss should be reversed.

(x) Depreciation, amortisation and the carrying value of property and equipment and intangible assets the estimation of the useful lives of assets is based on management’s judgement. any material adjustment to the

estimated useful lives of items of property and equipment will have an impact on the carrying value of these items. Depreciation and amortisation is recognised on the basis described in accounting policies note 3(j) and 3(k).






5 cash and cash equivalents

In thousands of Nairagroup

31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

Cash 4,697 8,079 72 75

Bank balances 480,373 554,963 28,624 77,402

Short-term deposits (including demand and time deposits) (i) 12,020,853 10,542,398 83,667 49,802

Cash and cash equivalents (as per statement of financial position) 12,505,923 11,105,440 112,363 127,279

(i) Short–term deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the Group.

The carrying amounts disclosed above reasonably approximate fair value at the reporting date.

6 Loans and advances to customers


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

Term loan 1,356,118 1,143,522 - -

Specific impairment (182,506) (150,929) - -

Collective impairment - (582) - -

Total impairment (see note 6(a) below) (182,506) (151,511) - -

Carrying amount 1,173,612 992,011 - -

(a) the movements in impairment allowance on loans and advances to customers is analysed below:


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

Balance, beginning of year 151,511 108,479 - -

Write-off during the year (2,435)

Impairment allowance recognised during the year (see note 45) 33,430 43,032 - -

Balance, end of year 182,506 151,511 - -

Within one year

986,084 202,186 - -

More than one year 187,528 789,825 - -

1,173,612 992,011 - -

7 Advancesunderfinancelease


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

Gross investment in finance lease 226,410 229,890 - -

Impairment allowance (see note 7(b) below) (23,000) (23,000) - -

203,410 206,890 - -


(a) Analysisofadvancesunderfinanceleasebymaturity


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

1-30 days 129,679 - - -

31-90 days 2,092 - - -

91-180 days 22,012 - - -

181-360 days 10,769 - - -

Later than 1 year but less than 5 years 61,858 229,890 - -

Later than 5 years - - - -

226,410 229,890 - -

(b) The movements in impairment allowance on advance under finance lease is analysed below;


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16


Write back of impairment allowance - - - -

Impairment allowance recognised during the year (see note 45) - 10,000 - -


Within one year 164,552 - - -


203,410 206,890 - -

8 investments securities


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

Available-for-sale investment securities (see note 8(a) below) 1,651,103 1,504,826 - -

Fair value through profit or loss (FVTPL) (see note 8(b) below) 3,760,129 3,138,789 44,747 82,644

Loans and receivables at amortised cost (see note 8(c) below) 150,541 989,334 - -

Totalfinancialassets 5,561,773 5,632,949 44,747 82,644

Within one year 1,735,491 2,212,619 - -

More than one year 3,826,282 3,420,330 44,747 82,644

5,561,773 5,632,949 44,747 82,644

(a) Available-for-sale investment securities:


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

Listed equities 93,962 495,419 - -

unlisted equities at cost 594,243 154,334 - -

Bonds: Annuity fund 1,141,839 1,026,458 - -

Specific impairment allowance (see note 8(a)(iii) below) (178,941) (171,385) - -

1,651,103 1,504,826 - -






(i) An analysis of equities in available-for-sale financial assets as at 31 December 2017 is as shown below:

31-Dec-17 31-Dec-16

name of entity

carrying value

=n=’000

Percentage holding

%

carrying value

=n=’000

Percentage holding

%

Sterling Assurance 232,094 41% 232,095 44%

Capital Bancorp 3,432 1% 3,432 1%

R.E.A Real property investment 1,449 0% 1,449 0%

DPMS 1,261 0% 1,261 0%

African Reinsurance Corporation 151,632 34% 128,255 31%

Nigeria Liability Pool 21,160 5% 21,160 5%

Nigeria Energy Liability Pool 67,000 4 Lines 67,000 4 Lines

Others 1,173,075 1,050,174

1,651,103 1,504,826

(ii) The Group’s available-for-sale financial assets includes investment in listed and unlisted equities. unlisted equities are carried at cost less impairment allowance as the fair value could not be determined reliably. Listed available-for-sale equities are measured at fair value using the quoted prices in active markets and fair value changes recognised in other comprehensive income. The investments were assessed for impairment as at year end.

(iii) The movements in specific impairment allowance on listed and unlisted equities classified as available-for-sale is analyzed below:


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16


Impairment allowance recognised during the year 7,556 - - -


(b) Fairvaluethroughprofitorloss(FVTPl)


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

Federal government bonds 356,966 351,506 - -

Treasury bills 2,186,699 1,477,020 16,949 15,853

Listed equities 1,216,464 1,310,263 27,798 66,791

3,760,129 3,138,789 44,747 82,644

(c) Loans and receivables at amortised cost


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16unlisted debenture - - - - Individual loans 2,781 - - -

Staff personal loans 2,882 4,409 - - Staff mortgage loans 104,266 127,835 - - Policy holders loan 39,699 20,373 - - Placement with financial institutions 6,152 836,717 - - Specific impairment allowance (see note 8(c)(i) below) (5,239) - - -

150,541 989,334 - -




8(c)(i) The movements in specific impairment allowance on loans and receivables is analyzed below;


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

Balance, beginning of year - - - -

Impairment allowance recognised during the year 5,239 - - -

Write-off during the year - - - -

Balance, end of year 5,239 - - -

9 investment in subisidiaries


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

Royal Exchange General Insurance Company Limited - - 6,169,404 5,169,404

Royal Exchange Prudential Life Plc. - - 3,865,833 2,565,833

Royal Exchange Finance and Asset Management Limited - - 777,802 777,802

Royal Exchange healthcare Company Limited - - 151,669 151,669

Royal Exchange Microfinance Bank Limited - - 106,205 106,205

- - 11,070,913 8,770,913

Allowance for impairment - - (80,923) (80,923)

- - 10,989,990 8,689,990

(a) Movement in gross investment in subsidiaries


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16Balance as at the beginning of the year - - 8,770,913 8,770,913 Disposals - - - -

Additions (see note 9(a)(i) below) - - 2,300,000 - Balance, end of year - - 11,070,913 8,770,913

(i) During the year, the Company acquired 1billion ordinary shares and 1.3billion ordinary shares of Royal Exchange General Insurance Company Limited and Royal Exchange Prudential Life Plc respectively at =N=1 per share.

(b) The subsidiary companies comprise of the following:

ownership interest (%)

name of entity nature of Business Year end 31-Dec-17 31-Dec-16Royal Exchange General Insurance Company Limited (see note (i) below) Non-Life Insurance 31 Dec 99.90 99.90Royal Exchange Prudential Life Plc. (see note (ii) below) Life Insurance 31 Dec 99.90 99.90

Royal Exchange Finance And Asset Management Limited (see note (iii) below)

Credit Financing and Asset Management

31 Dec 99.90 99.90

Royal Exchange healthcare Company Limited (see note (iv) below) health insurance 31 Dec 29.84 29.84Royal Exchange Microfinance Bank Limited (see note (v) below) Microfinance Bank 31 Dec 53.00 53.00

All subsidiaries are incorporated in Nigeria.




indirect holdings The Company indirectly owns shares in Royal Exchange healthcare Company Limited and Royal Exchange Microfinance Bank through some

of its wholly owned subsidiaries as listed below:

Holdingsroyal exchange Healthcare

company Limited royal exchange

MicrofinanceBank

Indirect holdings

Royal Exchange General Insurance Company Limited 33.00 14.60

Royal Exchange Prudential Life Plc. 37.16 21.60

Royal Exchange Finance And Asset Management Limited - 10.80

70.16 47.00

Direct holdings by the Company 29.84 53.00

100.00 100.00

There are no non-controlling interests in any of the subsidiaries.

(i) This represents the Company’s 99.9% (2016: 99.9%) shareholdings in Royal Exchange General Company Limited, a Nigerian registered company involved in general insurance business.

(ii) This represents the Company’s 99.9% (2016: 99.9%) shareholdings in Royal Exchange Prudential Life Plc., a Nigerian registered company involved in life insurance business.

(iii) This represents the Company’s 99.9% (2016: 99.9%) shareholdings in Royal Exchange Finance and Asset Management Limited, a Nigerian registered company involved in the business of finance, financial advisory, fund management, leasing and investment management. The investment which has been carried at cost was impaired, based on management judgement, by the sum of =N=80.9million in 2011.

(iv) This represents the Company’s 29.84% (2016: 29.84%) shareholdings in Royal Exchange healthcare Limited, a Nigerian registered company involved in the business of healthcare insurance service. The balance of 70% is owned by Royal Exchange General Insurance Company Limited and Royal Exchange Prudential Life Assurance Plc., two fully owned subsidiaries of the Company.

(v) This represents the Company’s 53% (2016: 53%) shareholdings in Royal Exchange Microfinance Bank Limited, a Nigerian registered company involved in the business of microfinance banking.




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348,

163

- -

422

,300

Pr

oper

ty a

nd e

quip

men

t 2

,136,

567

(1)

2,13

6,56

8 9

1,736

1,

814,

563

197,6

33

9,4

13

16,6

90

6,5

33

Inta

ngib

le a

sset

s 2

9,435

3

2

9,432

5

,513

1,

389

757

18,67

9 6

35

2,4

59

Empl

oyee

s ret

irem

ent b

enefi

ts 2

58,13

5 -

258

,135

- 2

58,13

5 -

- -

- St

atut

ory

depo

sits

555

,000

-

555

,000

-

340

,000

2

15,0

00

- -

- De

ferr

ed ta

x as

sets

267

,386

-

267

,386

-

235

,968

- -

- 3

1,418

As

sets

cla

ssifi

ed a

s hel

d fo

r sal

e 9

73,6

39

- 9

73,6

39

- -

973

,639

-

- -

tota

l ass

ets

33,2

72,8

46

(16,

504,

496)

49,7

77,3

42

11,4

54,4

47

25,

685,7

34

9,27

5,45

1 2

,211,8

79

299

,248

850

,583

LiAB

iLit

ies

Borr

owin

gs 1,

743,1

56

(603

,807

) 2

,346

,963

1,61

3,723

6

62,6

82

44,

512

- 2

6,04

6 -

Defe

rred

inco

me

143,7

98

- 14

3,798

-

143,7

98

- -

- -

Trad

e pa

yabl

es

10,15

9,430

-

10,15

9,430

-

9,9

10,95

7 24

8,47

3 -

- -

Othe

r lia

bilit

ies

1,60

8,66

6 (3

,808

,852

) 5

,417,

518

3,78

4,03

9 6

86,8

40

644

,984

85,

210

24,3

64

192,0

81

Depo

sitor

s' fu

nds

1,44

6,763

(2

4,66

7) 1,

471,4

30

- -

- 1,

341,3

92

130,

038

- In

sura

nce

cont

ract

liab

ilitie

s 11

,337

,881

-

11,3

37,8

81

- 5

,446

,009

5

,709,2

61

- -

182,6

11 In

vest

men

t con

tract

liab

ilitie

s 2

93,5

55

- 2

93,5

55

- -

293

,555

-

- -

Curr

ent i

ncom

e ta

x lia

bilit

ies

608

,472

-

608

,472

3

03,6

60

266

,976

22,2

80

10,8

68

1,06

3 3

,625

Em

ploy

ees b

enefi

t lia

bilit

y 3

8,45

8 -

38,

458

1,07

6 2

8,35

8 5

,044

1,

722

702

1,55

6 De

ferr

ed ta

x lia

bilit

ies

314

,267

- 3

14,26

7 -

248,

565

35,9

56

- -

29,7

46

tota

l lia

bilit

ies

27,6

94,4

46

(4,4

37,32

6) 3

2,131

,772

5,70

2,498

17

,394,1

85

7,00

4,06

5 1,

439,1

92

182,2

13

409

,619

EQUI

TYSh

are

capi

tal

2,5

72,6

85

(9,5

16,6

87)

12,0

89,37

2 2

,572

,685

5

,366

,667

3

,461

,339

2

17,88

8 70

,793

400

,000

Sh

are

prem

ium

2,6

90,93

6 (2

,096

,630

) 4

,787,5

66

2,6

90,93

6 8

02,73

7 4

04,4

94

559

,914

10

1,817

2

27,6

68

Cont

inge

ncy

rese

rve

2,0

46,6

12

- 2

,046

,612

-

1,84

9,430

18

0,09

2 -

- 17

,090

Tr

easu

ry sh

ares

(500

,000

) (5

00,0

00)

- -

- -

- -

- Re

tain

ed e

arni

ngs

(1,96

7,362

) 8

0,95

9 (2

,048

,321)

486

,445

4

4,85

2 (1

,754,

450)

(544

,380

) (5

9,722

) (2

21,0

66)

Othe

r com

pone

nt o

f equ

ity 7

35,5

29

(7,22

4) 74

2,753

1,

883

200

,273

(20,

089)

539

,265

4,14

7 17

,274

tota

l equ

ity 5

,578

,400

(1

2,039

,582

) 17

,617,

982

5,75

1,949

8

,263,9

59

2,27

1,386

7

72,6

87

117,0

35

440

,966

tota

l equ

ity &

liab

iliti

es 3

3,272

,846

(1

6,47

6,908

) 4

9,749

,754

11,4

54,4

47

25,

658,

144

9,27

5,45

1 2

,211,8

79

299

,248

850

,585




(b)

The

cond

ense

dfin

anci

ald

ata

ofth

eco

nsol

idat

ede

ntitie

sas

at3

1Dec

embe

r201

6,a

rea

sfo

llows

:

(ii)

Cond

ense

dst

atem

ento

fpro

fito

rlos

sfo

rthe

yea

rend

ed3

1Dec

embe

r201

6

In th

ousa

nds o

f Nai

ragr

oup

bala

nces

elim

inat

ion

entr

ies

gros

s am

ount

roya

l ex

chan

ge

Plc

roya

l ex

chan

ge

gene

ral

insu

ranc

e

roya

l ex

chan

ge

Prud

enti

al

Life

Plc

roya

l ex

chan

ge

fina

nce

and

Asse

t M

anag

emen

t

roya

l ex

chan

ge

Mic

rofin

ance

Ba

nk

roya

l ex

chan

ge

Heal

thca

re

Gros

s pre

miu

m in

com

e 12

,435

,442

(8

4,83

9) 12

,520

,281

- 8

,759,6

55

3,4

72,4

75

- -

288

,151

Rein

sura

nce

expe

nses

(4,26

3,437

) -

(4,26

3,437

) -

(3,98

0,99

3) (2

82,4

44)

- -

-

Net p

rem

ium

inco

me

8,17

2,005

(8

4,83

9) 8

,256,

844

- 4

,778,

662

3,19

0,03

1 -

- 2

88,15

1

Fee

and

com

miss

ion

inco

me

477

,328

- 4

77,32

8 -

428

,420

4

8,90

8 -

- -

Net u

nder

writi

ng In

com

e 8

,649

,333

(8

4,83

9) 8

,734,1

72

- 5

,207,0

82

3,23

8,93

9 -

- 2

88,15

1

Tota

l und

erwr

iting

exp

ense

s (6

,725,

298)

- (6

,725,

298)

- (3

,602

,030

) (2

,775,

416)

- -

(347

,852

)

unde

rwrit

ing

profi

t 1,

924,

035

(84,

839)

2,0

08,8

74

- 1,

605,0

52

463

,523

-

- (5

9,701

)

Shar

e of

(los

s) o

n in

vest

men

t in

asso

ciat

e (8

8,95

4) (9

,701)

(79,2

53)

- (7

9,253

) -

- -

-

Write

-bac

k/(c

harg

e) o

f im

pairm

ent a

llowa

nce

(274

,487

) 1,

611

(276

,098

) -

(171

,363

) 2

,309

(5

1,794

) (1

,238)

(54,

012)

Inve

stm

ent a

nd o

ther

inco

me

1,16

3,567

(2

65,0

90)

1,42

8,65

7 8

1,289

8

24,97

4 2

7,047

2

80,37

2 74

,735

140,

240

Net i

ncom

e 2

,724,1

61

(358

,019

) 3

,082

,180

81,2

89

2,17

9,410

4

92,8

79

228

,578

73

,497

2

6,52

7

Tota

l exp

ense

s (3

,467

,999)

377

,973

(3,8

45,97

2) (4

50,0

24)

(1,8

93,99

7) (1

,109,0

99)

(178

,045

) (8

4,49

5) (1

30,3

12)

(Los

s)/P

rofit

bef

ore

tax

(743

,838

) 19

,954

(763

,792)

(368

,735)

285

,413

(6

16,22

0) 5

0,53

3 (1

0,99

8) (1

03,78

5)

Mini

mum

tax

(63,3

91)

- (6

3,391

) -

(46,

424)

(11,9

67)

- -

(5,0

00)

Inco

me

tax

expe

nse

(173

,023

) -

(173

,023

) -

(154

,926)

(2,18

2) (1

2,147

) (7

78)

(2,99

0)

(Los

s)/P

rofit

afte

r tax

atio

n (9

80,25

2) 19

,954

(1,0

00,20

6) (3

68,73

5) 8

4,06

3 (6

30,3

69)

38,

386

(11,7

76)

(111,

775)




Cond

ense

d St

atem

ent o

f fina

ncia

l pos

ition

as a

t 31 D

ecem

ber 2

016

In th

ousa

nds o

f Nai

ragr

oup

bala

nces

cons

olid

atio

n en

trie

sgr

oss

amou

nt

roya

l ex

chan

ge P

lc

roya

l ex

chan

ge

gene

ral

insu

ranc

e

roya

l ex

chan

ge

Prud

enti

al

Life

Plc

roya

l exc

hang

e fi

nanc

e an

d As

set

Man

agem

ent

roya

l exc

hang

e Mic

rofin

ance

Ba

nk

roya

l exc

hang

e He

alth

care

Asse

tsCa

sh a

nd c

ash

equi

vale

nts

11,10

5,44

0 (6

4,65

4) 11

,170,

094

127,2

79

9,6

15,16

0 9

65,5

46

363

,251

62,

323

36,

535

Loan

s and

adv

ance

s to

cust

omer

s 9

92,0

11 (8

6,89

6) 1,

078,

907

- -

- 9

99,27

8 7

9,629

-

Adva

nces

und

er fi

nanc

e le

ase

206

,890

(2

10,74

5) 4

17,63

5 -

- -

417,

635

- -

Fina

ncia

l ass

ets

5,6

32,94

9 (2

8,22

2) 5

,661

,171

82,6

44

2,4

28,71

3 2

,819

,362

4

5,729

10

,000

2

74,72

3 In

vest

men

t in

subs

idia

ries

- (8

,689

,990)

8,6

89,99

0 8

,689

,990

- -

- -

- Tr

ade

rece

ivab

les

247,8

51

- 24

7,851

-

47,5

87

38,

869

- -

161,3

95

Rein

sura

nce

asse

ts 2

,660

,526

-

2,6

60,5

26

- 2

,189,9

35

470

,591

-

- -

Defe

rred

acq

uisit

ion

cost

351

,076

-

351

,076

-

283

,338

4

8,64

0 -

- 19

,098

Ot

her r

ecei

vabl

es a

nd p

repa

ymen

ts 4

36,8

81

(1,6

15,8

70)

2,0

52,75

1 3

19,96

7 1,

082,0

08

502

,854

8

0,35

2 5

4,35

7 13

,213

Inve

stm

ent i

n as

soci

ates

179,1

46

(534

,773)

713

,919

-

415

,429

2

83,21

7 15

,273

- -

Inve

stm

ent p

rope

rtie

s 5

,419

,858

(1

) 5

,419

,859

-

3,74

1,609

1,

259,7

50

- -

418

,500

Pr

oper

ty a

nd e

quip

men

t 2

,283,2

70

(4)

2,28

3,274

9

0,19

5 1,

887,3

86

230

,689

2

3,003

3

5,155

16

,846

In

tang

ible

ass

ets

33,1

16

2

33,1

14

- 5

,907

1,57

9 24

,905

723

- Em

ploy

ees r

etire

men

t ben

efits

234

,011

- 2

34,0

11 -

234

,011

- -

- -

Stat

utor

y de

posit

s 5

55,0

00

- 5

55,0

00

- 3

40,0

00

215

,000

-

- -

Defe

rred

tax

asse

ts 3

65,0

65

(5,71

2) 3

70,77

7 -

339

,359

- -

- 3

1,418

As

sets

cla

ssifi

ed a

s hel

d fo

r sal

e 9

73,6

39

- 9

73,6

39

- -

973

,639

-

- -

Depo

sit fo

r sha

res

- (5

00,0

00)

500

,000

5

00,0

00

- -

- -

- to

tal a

sset

s 3

1,676

,729

(11,7

36,8

65)

43,4

13,5

94

9,8

10,0

75

22,6

10,4

42

7,80

9,736

1,

969,4

26

242,1

87

971

,728

LiAB

iLit

ies

Borr

owin

gs 2

,585

,324

(60,

616)

2,6

45,94

0 2

,482

,327

103,9

25

24,13

4 -

35,

554

- De

ferr

ed in

com

e 16

2,942

-

162,9

42

- 16

2,942

-

- -

- Tr

ade

paya

bles

8

,355,1

04

- 8

,355,1

04

- 8

,313

,225

41,8

79

- -

- Ot

her l

iabi

litie

s 1,

616,

032

(1,4

38,35

3) 3

,054

,385

9

20,20

0 1,

116,5

84

748,

212

37,8

85

13,72

9 2

17,77

5 De

posit

ors'

fund

s 1,

203,4

56

(15,

815)

1,21

9,271

-

- -

1,14

4,32

3 74

,948

- In

sura

nce

cont

ract

liab

ilitie

s 10

,158,

280

- 10

,158,

280

- 5

,398,

979

4,6

15,35

2 -

- 14

3,949

In

vest

men

t con

tract

liab

ilitie

s 3

39,4

56

- 3

39,4

56

- -

339

,456

-

- -

Divi

dend

pay

able

- -

- -

- -

- -

- Cu

rren

t inc

ome

tax

liabi

litie

s 5

37,20

0 -

537

,200

255

,109

262

,574

-

13,6

04

931

4

,982

Empl

oyee

s ben

efit l

iabi

lity

39,2

69

- 3

9,269

8

83

29,9

95

4,20

5 1,

816

814

1,

556

Defe

rred

tax

liabi

litie

s 2

99,5

30

- 2

99,5

30

- 2

39,39

6 3

3,991

-

- 2

6,143

to

tal l

iabi

litie

s 2

5,29

6,59

3 (1

,514

,784)

26,

811,3

77

3,6

58,5

19

15,6

27,6

20

5,8

07,22

9 1,

197,6

28

125,9

76

394

,405

EQUI

TYSh

are

capi

tal

2,5

72,6

85

(7,21

6,68

7) 9

,789,

372

2,5

72,6

85

4,3

66,6

67

2,16

1,339

2

17,88

8 70

,793

400

,000

Sh

are

prem

ium

2,6

90,93

6 (2

,096

,630

) 4

,787,5

66

2,6

90,93

6 8

02,73

7 4

04,4

94

559

,914

10

1,817

2

27,6

68

Cont

inge

ncy

rese

rve

1,72

8,85

2 -

1,72

8,85

2 -

1,55

8,47

7 15

6,06

3 -

- 14

,312

Tr

easu

ry sh

ares

(500

,000

) (5

00,0

00)

- -

- -

- -

- Re

tain

ed e

arni

ngs

(647

,828

) 9

6,193

(7

44,0

21)

886

,114

70,0

86

(1,0

45,74

6) (5

07,5

53)

(63,0

80)

(83,8

42)

Othe

r com

pone

nt o

f equ

ity 5

35,4

91

(4,95

6) 5

40,4

47

1,82

1 18

4,85

4 (1

73,6

43)

501

,549

6

,681

19

,185

tota

l equ

ity 6

,380

,136

(9,72

2,080

) 16

,102,2

16

6,15

1,556

6

,982,8

21

1,50

2,507

7

71,79

8 11

6,21

1 5

77,32

3 to

tal e

quity

& li

abili

ties

31,6

76,72

9 (1

1,236

,864

) 4

2,913

,593

9

,810

,075

2

2,610

,441

7,

309,7

36

1,96

9,426

24

2,187

9

71,72

8




10 trade receivables


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

Due from agents (see note 10(a) below) 75,016 221,943 - -

Due from co-insurers (see note 10(b) below) 17,408 25,908 - -

92,424 247,851 - -

Within one year 92,424 247,851 - -

More than one year - - - -

92,424 247,851 - -

The carrying amount is a reasonable approximation of fair value.

(a) The analysis of due from agents is as follows:


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

Gross receivable from agents 621,009 637,150 - -

Less: Impairment allowance (see note 10a(i) below) (545,993) (415,207) - -

75,016 221,943 - -

(i) The movements in impairment allowance on amount due from agents is analysed below:


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16Balance, beginning of year 415,207 427,729 - - Allowance made during the year (see note 45) 138,066 75,605 - -

Write off (7,280) - - - Write back (see note 45) - (88,127) - - Balance, end of the year 545,993 415,207 - -

(b) The analysis of due from co-insurers is as follows:


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16Reinsurance receivables 451,263 382,542 - - Less: Impairment allowance (see note 10(b)(i) below) (433,855) (356,634) - -

17,408 25,908 - -

(i) The movements in impairment allowance on reinsurance receivables is analysed below:


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16Balance, beginning of year 356,634 152,782 - - Allowance made during the year (see note 45) 77,221 203,852 - -

Balance, end of the year 433,855 356,634 - -




11 reinsurance assets


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16Non-life business reinsurance share of insurance liabilities (see 11(a) below) 2,212,548 2,189,935 - - Life business reinsurance share of insurance liabilities (see 11(b) below) 581,937 470,591 - -

2,794,485 2,660,526 - -

Within one year

2,782,217

2,660,526 - - More than one year 12,268 - - -

2,794,485 2,660,526

(a) non-life business reinsurance share of insurance liabilities


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16Prepaid reinsurance premium (see note (a)(i)) 642,587 1,217,601 - -

Reinsurer's share of claims expenses outstanding (see note (a)(ii)) 1,204,292 643,402 - -Reinsurer's share of incurred but not reported claims (see note (a)(iii)) 365,669 328,932 - -

2,212,548 2,189,935 - -

(i) The movement in prepaid reinsurance premium is shown below:


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16Balance, beginning of year 1,217,601 858,696 - - Movement during the year (see note 37) (575,013) 358,905 - -

Balance, end of year 642,588 1,217,601 - -

(ii) The movement in reinsurer’s share of claims expenses outstanding is shown below:


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16Balance, beginning of year 643,402 437,798 - - Movement during the year 560,890 205,604 - -

Balance, end of year 1,204,292 643,402 - -

(iii) The movement in reinsurer’s share of incurred but not reported claim is shown below:


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16Balance, beginning of year 328,932 285,634 - - Movement during the year 36,737 43,298 - -


(iv) Analysis of non-life business reinsurance share of insurance liabilities by business classes are as follows:


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16Fire 1,345,788 799,554 - - General accident 72,815 95,384 - -

Motor 101,085 142,485 - - Marine 126,007 126,358 - - Oil & gas 479,595 946,892 - - Engineering 82,000 72,110 - - Bonds 5,258 7,152 - -

2,212,548 2,189,935 - -




(b) Life business reinsurance share of insurance liabilities


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

Reinsurance asset (actuarial valuation) (see note 11(b)(i)) 240,140 180,338 - -

Reinsurer and facultative asset 341,797 290,253 - -

581,937 470,591 - -

(i) Reinsurance assets (actuarial valuation)


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

Short-term insurance contract 227,872 16,059 - -

Long-term insurance contract 12,268 164,279 - -

240,140 180,338 - -

(ii) The movement in life business reinsurance assets is as shown below:


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

At 1 January 470,591 307,622 - -

Additions in the year 453,800 290,980 -

Receipts during the year (237,844) (128,011) - -

Impairment of reinsurance assets (104,610) - -

Balance as at year end 581,937 470,591 - -

Reinsurance assets are valued after an allowance for their recoverability and the carrying amount is a reasonable approximation of fair value.

12 Deferred acquisition costs This represents the unexpired portion of the commission paid to brokers and agents as at reporting date.


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

Balance at start of the year 351,076 382,490 - -

Additions in the year 1,006,468 937,254 - -

Amortization in the year (1,061,715) (968,668) - -

Balance as at year end 295,829 351,076 - -

Within one year

295,829 351,076 - -


295,829 351,076 - -




13 other receivables and prepayments


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

Intercompany receivables (see note 13(a) below) - - 55,214 252,944

Accrued investment income (see note 13(b) below) 168,449 191,810 - -

Other receivables (see note 13(c) below) 1,292,164 893,336 100,516 29,104

Prepayments 267,594 254,592 56,657 40,208

1,728,207 1,339,738 212,387 322,256

Impairment allowance on other receivables (see note 13(d) below) (927,778) (902,857) (2,289) (2,289)

800,429 436,881 210,098 319,967

Within one year 800,429 436,881 210,098 319,967


800,429 436,881 210,098 319,967

(a) Due from related parties


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

Royal Exchange Microfinance Bank Limited - - - 3,738

Royal Exchange Finance and Asset Management Limited - - - -

Royal Exchange healthcare Limited - - 55,214 49,493

Royal Exchange General Insurance Company Limited - - - 199,713

Royal Exchange Prudential Life Plc - - - -

- - 55,214 252,944

(b) Accrued investment income


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

Dividend receivables 168,449 191,810 - -

168,449 191,810 - -

(c) other receivables


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16Inventory 3,647 - - - Accrued rental income 12,477 29,362 - - Staff advance and other debtors 76,801 88,665 - - Management fees receivable 21,379 - 21,379 19,048 Witholding tax receivables 52,147 5,481 Income tax receivables - 2,262 35,700 Trustee fees receivable 2,267 1,873 2,267 1,873 Sundry debtors 806,052 624,483 - - Deposit for investment 215,200 - - - Annuity Transfer to REFAM 23,758 11,039 - - Receivable from Funds under management 2,167 2,167 - - Sundry receivables 76,269 128,004 41,170 8,183

1,292,164 893,336 100,516 29,104




(d) impairment allowance on other receivables The movements in impairment allowance on other receivables is analysed below:


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16Balance, beginning of year 902,857 878,379 2,289 2,289

Allowance made during the year (see note 45) 48,021 42,811 - - Write-off - - - -

Reclassifications - - - -

Write back (see note 45) (23,100) (18,333) - -

Balance, end of year 927,778 902,857 2,289 2,289

Included in other receivables are financial assets as follows:


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

Financial assets 532,835 182,289 153,441 279,759

14 investment in associates(a) The movement in balances of investment in associates are as shown below:


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16Balance, beginning of the year 179,146 274,088 - - Additional investment during the year - - - - Dividend income - - - - Share of current year result recognised in OCI - (5,988) - -

179,146 268,100 - - Share of current year result recognised in profit or loss 14,471 (1,406) - - Share of cumulative unrecognised results - (87,548) - - Recognised in profit or loss 14,471 (88,954) - - Balance, end of the year (see note 14(b) below) 193,617 179,146 - -

(b) This represents the Group’s investment in the ordinary shares of City Business Computers EMEA Limited (CBC EMEA) incorporated in Nigeria, representing 26.10% (December 2016: 26.10%) equity interest in the company. The investee company has 31 December as its year end.

The summarised financial information of CBCEMEA Limited are as set out below:

In thousands of Naira 31-Dec-17 31-Dec-16Percentage ownership interest 26.10% 26.10%Non-Current Assets 1,422,311 1,788,506 Current Assets 2,063,771 3,730,915 Total Assets 3,486,082 5,519,421 Non-Current Liabilities (415,740) (895,587)Current Liabilities (1,568,832) (3,937,447)Total Liabilities (1,984,572) (4,833,034)Net assets 1,501,510 686,387 Company's share of net assets 391,894 179,146 Carrying amount of associate 193,617 179,146

Revenue

140,615 2,734,506 (Loss)/profit after tax from continuing operations 55,445 (5,387)Other comprehensive income - (22,942)Total comprehensive income 55,445 (28,329)Company's share of total comprehensive income 14,471 (7,394)Company's share of other comprehensive income - (5,988)Company's share of loss 14,471 (1,406)




15 investment properties


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

At 1 January 5,419,859 6,807,743 - -

Additions during the year 143,763 - - -

Disposals during the year - (1,999,306) - -

Fair value gains (see note 44) (57,440) 611,422 - -

Derecognised investment properties (75,000)

Transfer to property and equipment (see note 17) - - - -

Transfer to non current assets held for sale (see note 16) - - - -

At 31 December 5,431,182 5,419,859 - -

(a) The items of investment properties are valued as shown below:

investment properties Location

name of valuer Address of Valuer frc nos. niesVA reg. no

31-Dec-17 31-Dec-16

In thousands of Naira

No.2, Bank road, off Ibrahim Taiwo way, Kano

Yayok Associates Estate Surveyor & Valuer

Suite B7, halima Plaza, behind Sahad Stores, Balanga, Abuja

FRC/2013/NIESV/00000000834

A-1277 410,800 405,600

No.5, NBC road, off Ahmadu Bello way, Kaduna



FRC/2013/NIESV/00000000834

A-1277 280,200 275,400

No. 7,usuma Cresent Maitama Abuja

Emeka Orji Partnership

Suite 9G, 9th floor, Ahmed Talib house (NNDC) 18/19 Ahmadu Bello Way, Kaduna

FRC/2013/NIESV/00000000976

A-1672 562,870 559,999

No 1, Eleko close, Ikoyi, Lagos

Saibu Makinde & Associates

NIPOST Building, 5th floor (right wing), Lafiaji, Lagos

FRC/2013/NIESV/00000000730

A-1878 771,942 799,422

No. 2,Eleko close Ikoyi Lagos



FRC/2013/NIESV/00000000730

A-1878 950,640 981,073

No. 26, Abduraman Okene cresent,Victoria Island, Lagos



FRC/2013/NIESV/00000000730

A-1878 684,267 720,114

29,Oroago crescent Garki 11,Abuja

Emeka Orji Partnership

Suite 9G, 9th Floor, Ahmed Talib house. (NNDC), 18/19 Ahmodu Bello Way, Kaduna

FRC/2013/NIESV/00000000976

A-1672 403,650 390,000

15a Asa road, Aba uma uma & Company

46 St. Michael's Road, Aba, Abia State

FRC/2013/NIESV/00000004050

- 69,000

36/38, Apapa Oshodi expressway, Oshodi, Lagos



FRC/2013/NIESV/00000000730

A-1878 944,513 800,750

12, Post Office road, Kano



FRC/2013/NIESV/00000000834

A-1277 422,300 418,500

5,431,182 5,419,858




(a) Movement in investment properties are as shown below: For the year ended 31 December 2017

Property DetailsBalance as at 1

January 2017 Additionstransfer/disposal

fair value gain/(Loss)

Balance as at 31 December

2017


No.2, bank road, off Ibrahim Taiwo way, Kano 405,600 - - 5,200 410,800

No.5, NBC road, off Ahmadu Bello way, Kaduna 275,400

- - 4,800 280,200

No. 7,usuma Cresent Maitama Abuja 559,999 - - 2,871 562,870

No 1, Eleko close, Ikoyi, Lagos 799,422 - - (27,480) 771,942

No. 2,Eleko close Ikoyi Lagos 981,073 - - (30,433) 950,640

No. 26, Abduraman Okene Cresent,Victoria Island, Lagos 720,114 - - (35,847) 684,267

29,Oroago Crescent Garki 11,Abuja 390,000 - - 13,650 403,650

15a Asa road, Aba 69,000 - (75,000) 6,000 -

36/38, Apapa Oshodi Expressway Oshodi, Lagos 800,750 143,763 - - 944,513

12, Post office road, Kano 418,501 - - 3,799 422,300

5,419,859 143,763 (75,000) (57,440) 5,431,182

For the year ended 31 December 2016

Property DetailsBalance as at 1 January 2016 Additions

transfer/disposals

fair value gain/(Loss)

Balance as at 31 December

2016


No.2, bank road, off Ibrahim Taiwo way, Kano 320,700 - - 84,900 405,600

No.5, NBC road, off Ahmadu Bello way, Kaduna 220,800 - - 54,600 275,400

No. 7,usuma Cresent Maitama Abuja 545,824 - - 14,175 559,999

No 1, Eleko close, Ikoyi, Lagos 700,000 - - 99,422 799,422

No. 2,Eleko close Ikoyi Lagos 850,000 - - 131,073 981,073

No. 26, Abduraman Okene Cresent,Victoria Island, Lagos 628,391 - - 91,723 720,114

29,Oroago Crescent Garki 11,Abuja 356,196 - - 33,804 390,000

15a Asa road, Aba 69,000 - - - 69,000

36/38, Apapa Oshodi Expressway Oshodi, Lagos 755,026 - - 45,724 800,750

10, Bayo Kuku Street, Ikoyi, Lagos 1,857,706 - (1,857,706) - -

12, Post office road, Kano 362,500 - - 56,001 418,501

8, Bank Street, Jos. 141,600 - (141,600) - -

6,807,743 - (1,999,306) 611,422 5,419,859




(b) Valuation techniques used for fair valuation of investment properties Investment properties are stated at fair value, which has been determined based on valuations performed by Messrs Yayok Associates,

Emeka Orji, uma uma & Company & Saibu Makinde Associates as at 31 December 2017. They are industry specialists in valuing these types of investment properties. The fair value is supported by market evidence and represents the amount at which the assets could be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing seller in an arm’s length transaction at the date of valuation, in accordance with standards issued by the International Valuation Standards Committee. Valuations are performed on an annual basis and the fair value gains and losses are reported in profit or loss. The profits or losses on disposal are also reported in profit or loss as they occurred.

The fair value measurement for the investment properties has been categorised as a Level 3 fair value based on the use of significant unobservable inputs in the valuation technique used.

The details of valuation techniques and significant observable inputs used in determining the fair value of investment properties are presented below:

Property descriptionValuation (=n='000)

Location of investment properties Valuation technique

Significantunobservable inputs

inter-relationship between key unobservable inputs and fair value measurement

The property is a fully completed building with 3 floors located in the central business district of Kano which is a commercial neighbourhood.

Site: The site, which is slightly irregular in shape, appears level and well drained and is relatively flat. It has a total area of approximately 1,685 square metres.

Situation: Primary access to the property is vide the Ibrahim Taiwo road Kano State.

410,800 No.2, Bank road, off Ibrahim Taiwo way, Kano

Discounted cashflows:The valuation method considers the present value of net cashflows to be generated from the property, taking into account the expected rental growth rate, vacancy rates, maintenance costs and capitalisation rates.The expected cashflows are discounted using risk adjusted discount rates.

Expected market rental growth rate (2017:15% 2016: 15%);Estimated vacancy rates (2017:0% ; 2016:0%)Maintenance costs (2017:=N=370,000 - =N=500,000; 2016: ) Capitalisation rate(2017: 4.5%; 2016:4.5%)Discount rate (2017: 10%; 2016: 10%)

The estimated fair value would increase (decrease) if:- future rental cashflows were higher (lower)- Estimated vacancy rates were lower (higer)- Maintenance costs were lower (higher)- Capitalisation rate were lower (higher) - Discount rates were lower (higher)

The property is a 2 storey office block and a commercial bungalow located in the central business district of Kaduna State.

Site: The site, which is rectangular in shape, appears level and relatively flat. It covers a total land area of approximately 5,184 square metres.

Situation: Primary access to the property is vide the Ahmadu Bello way while a secondary access is the Broadcasting road Kaduna State.

280,200 No.5, NBC road, off Ahmadu Bello way, Kaduna


Expected market rental growth rate (2017:15% 2016: 15%);Estimated vacancy rates (2017:0% ; 2016:25%)Maintenance costs (2017:=N=5million - =N=6mllion; 2016: ) Capitalisation rate(2017: 5%; 2016:5%)Discount rate (2017: 15%; 2016: 15%)









The property is a 5 bedroom detached duplex located in a high brow low density residential neighbourhood in Abuja.

Site: The site is rectangular in shape, appears firm and is sloped gently towards the back. It has a total land area of approximately 2,133.60 square metres.

Situation: Primary access to the property is vide the usman Crescent which takes its root from Gana street which itself takes root from the popular Shehu Shagari way in Maitama Abuja.

562,870 No. 7,usuma Cresent Maitama Abuja


Expected market rental growth rate (2017:15% -20%; 2016: 15%-20%);Estimated vacancy rates (2017:5%; 2016:10%)Maintenance costs (2017:10% of annual income; 2016: 10% of annual income) Capitalisation rate(2017: 3.5%; 2016:3.5%)Discount rate (2017: 10%; 2016: 15%)


The property is a 4 bedroom detached house. It is located in the Old Ikoyi fully developed neighbourhood of Lagos.

Site: The site, which is rectangular in shape, and covers a total land area of approximately 1,041.76 square metres.

Situation: Primary access to the property is vide the Macpherson Street which carries traffic to Bourdillon road Ikoyi.

771,942 No 1, Eleko close, Ikoyi, Lagos


Expected market rental growth rate (2017:5%; 2016: 5%);Estimated vacancy rates (2017:0% ; 2016:0%)Capitalisation rate(2017: 94.05; 2016: 94.05)Discount rate (2017: 17.2%; 2016: 17.2%)

The estimated fair value would increase (decrease) if:- future rental cashflows were higher (lower)- Estimated vacancy rates were lower (higer)- Capitalisation rates were lower (higher) - Discount rates were lower (higher)

The property is a 4 bedroom detached house. It is located in the Old Ikoyi fully developed neighbourhoud of Lagos.

Site: The site, which is rectangular in shape, and covers a total land area of approximately 1,837.85 square metres.

Situation: Primary access to the property is vide the Macpherson Street which carries traffic to Bourdillon road Ikoyi.

950,640 No. 2,Eleko close Ikoyi Lagos


Expected market rental growth rate (2017:5%; 2016: 5%);Estimated vacancy rates (2017:0% ; 2016:0%)Capitalisation rate(2017: 92.67; 2016:103.27)Discount rate (2017: 17.2%; 2016: 17.2%)

The estimated fair value would increase (decrease) if:- future rental cashflows were higher (lower)- Estimated vacancy rates were lower (higer)- Capitalisation rates were lower (higher) - Discount rates were lower (higher)








The property is a block of open plain office space on two floors. It is located in the commercial area of Lagos State.


Situation: Primary access to the property is vide the Ligali Ayorinde Street.

684,267 No. 26, Abduraman Okene cresent,Victoria Island, Lagos


Expected market rental growth rate (2017:5%; 2016: 5%);Estimated vacancy rates (2017:0%; 2016:0%)Capitalisation rate(2017: 16.37%; 2016: 19.18%)Discount rate (2017: 17.2%; 2016: 17.2%)

The estimated fair value would increase (decrease) if:- future rental cashflows were higher (lower)- Estimated vacancy rates were lower (higer)- Capitalisation rate were lower (higher) - Discount rates were lower (higher)

The property is a fully completed building with 3 floors located in the central business district of Garki II, Abuja which is a commercial neighbourhood.

Site: The site, which is slightly irregular in shape, appears level and well drained and is relatively flat. It has a total area of approximately 2,017 square metres.

Situation: Primary access to the property is vide the Muhammud Buhari Way, Abuja.

403,650 29,Oroago crescent Garki 11,Abuja

The fair value of theproperty is determined by applying the investment method and also depreciated replacement cost (DRC) to derive the open market value.These techniques reflect the cost of putting up same or similar structure based on today’s bill of quantities with percentage allowance(s) to reflect depreciation and obsolescence as may be applicable.

Price of other similar properties in the area.

The estimated fair values would increase (decrease) if:- the rate of development in the area increases (decreases), - quality of the building increases (decreases), - influx of people and/or business to the area increases (decreases).

The property is a fully completed building with 3 floors located in Oshodi, Lagos which is a commercial neighbourhood.


Situation: Primary access to the property is vide the Oshodi Apapa Express way and Akin Lawanson street, Lagos State.

944,513 36/38, Apapa Oshodi express-way, Oshodi, Lagos

The fair value of the property is determined by applying the Investment Basis to derive the Open Market Capital value upon which prospective investor would likely make a bid. The technique reflects the discounted information of the benefits derivable from the property over its useful economic life or the cost of erecting a similar property.

Price of other similar properties in the area.

The estimated fair values would increase (decrease) if:- the rate of development in the area increases (decreases), - quality of the building increases (decreases), - influx of people and/or business to the area increases (decreases).








The property is a fully completed building with 2 floors located in the Central Business District Kano Municipality, which is a commercial neighbourhood.

Site: The site, which is triangular in shape, appears level and relatively flat. It covers a total land area of approximately 2,618 square metres.

Situation: Primary access to the property is vide Post Office Road and Bank Road, Kano.

422,300 12, Post Office road, Kano

Sales Comparison Price per square meter

The estimated fair values would increase (decrease) if:- the price per square meter increases (decreases)

16 Assetsclassifiedasheld-for-sale


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16


Transfer from investment properties - - - -


In December 2015, management committed to a plan to sell one of its investment property located at 776 Cadastral Zone A00, Central business area, Abuja. Accordingly, this property is presented as a non current assets held-for-sale.

At 31 December 2017, the non current assets held for sale was stated at its carrying amount; as investment properties are measured at the lower of its carrying amount and fair value less cost to sell.

The company conducted an impairment test on the non current asset held for sale in the period under review and there was no indication of impairment on the assets. The fair value of the non current asset held-for-sale as at 31 December 2017 stood at =N=995 million, higher than the carrying amount of =N=974 million, hence there were no changes to its carrying amount. There are no gains or losses recognised in relation to its classification as a non-current asset held for sale.

The determination of the fair value was conducted by a professional Estate Surveyor and Valuer; Emeka Orji Partnership, with FRC number FRC/2013/NIESV/00000000976 and NIESV number A-1672.




17 Property and equipment

(a) group

In thousands of NairaLand Plant and

machineryfreeholdbuildings

computer equipment

furnitureand fittings

MotorVehicles total

cost

Balance at 1 January 2017 194,239 2,672 1,780,232 315,951 589,433 998,896 3,881,423

Reclassification - - (45) - - (45)

Additions - - - 4,328 7,112 82,361 93,801

Disposals - (2,672) - - (7,201) (69,654) (79,527)

Balance at 31 December 2017 194,239 - 1,780,232 320,234 589,344 1,011,603 3,895,652

Balance at 1 January 2016 197,525 - 1,780,044 300,055 575,618 826,053 3,679,295

Reversal (see note iv below)

Reclassification (3,286) - - - (2,586) - (5,872)

Additions - 2,672 188 15,896 25,204 308,982 352,942

Disposals - - - - (8,803) (136,139) (144,942)

Balance at 31 December 2016 194,239 2,672 1,780,232 315,951 589,433 998,896 3,881,423

Accumulated Depreciation

Balance at 1 January 2017 - 311 195,311 278,388 511,196 612,947 1,598,153

Charge for the year - 223 6,292 17,706 38,105 156,448 218,774

Reclassification - - - (37) - - (37)

Disposals - (534) - - (6,778) (50,493) (57,805)

Balance at 31 December 2017 - - 201,603 296,057 542,523 718,902 1,759,085

Balance at 1 January 2016 2,456 - 161,244 257,760 472,755 565,496 1,459,711

Charge for the year (2,456) 311 34,067 20,628 42,095 164,017 258,662

Reclassification - - - - - - -

Disposals - - - - (3,654) (116,566) (120,220)

Balance at 31 December 2016 - 311 195,311 278,388 511,196 612,947 1,598,153

Carrying amounts:

Balance at 31 December 2017 194,239 - 1,578,629 24,177 46,821 292,701 2,136,567

Balance at 31 December 2016 194,239 2,361 1,584,921 37,563 78,237 385,949 2,283,270

(i) There were no capitalised borrowing costs related to the acquisition of property and equipment during the year (2016: nil).

(ii) The Group had no capital commitments as at the balance sheet date (2016: nil) see note 59(a).

(iii) There was no item of plant and equipment that has been pledged as security for borrowings as at year end (2016 : nil).




(b) company

In thousands of Nairafreeholdbuildings

computerequipment

furnitureand fittings

MotorVehicles total

cost

Balance at 1 January 2017 18,516 25,650 121,097 165,263

Additions - - 103 31,461 31,564

Reclassifications - - - - -

Disposals - - - - -

Balance at 31 December 2017 - 18,516 25,753 152,558 196,827

Balance at 1 January 2016 - 16,371 25,732 49,150 91,253

Additions - 2,145 3,178 80,097 85,421

Reclassifications - - - - -

Disposals - - (3,260) (8,150) (11,410)


Accumulated Depreciation


Charge - 1,045 1,049 27,927 30,021

Transfer - - - - -

Disposals - - - - -



Charge - 1,185 1,628 13,696 16,508

Transfer - - - - -

Disposals - - (1,847) (4,245) (6,092)


Carrying amounts:



(i) There were no capitalised borrowing costs related to the acquisition of property and equipment during the year (2016: nil).

(ii) The Company had no capital commitments as at the balance sheet date (2016: nil) see note 59(a).

(iii) There was no property and equipment that has been pledged as security for borrowing as at year end. (2016: Nil).




18 intangible assets


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

cost:

At 1 January 239,587 231,455 9,375 9,375

Additions 8,620 8,132 5,513 -

Reclassification 45 - - -

At 31 December 248,252 239,587 14,888 9,375

Accumulated amortisation:

At 1 January 206,471 192,367 9,375 9,375

Charge for the year 12,310 14,104 - -

Reclassification 37 - - -

At 31 December 218,818 206,471 9,375 9,375

Carrying Amount as at 31 December 29,435 33,116 5,513 -

The Intangible assets of the Group comprised computer software. The computer software is accounted for using the historical cost model (Cost less accumulated amortization and accumulated impairment). The amortization is charged to the income statements in accordance with the Group’s accounting policy. As at 31 December 2017, these assets were tested for impairment, and Management has determined that no impairment is required of these assets.

19 Employeebenefitobligations The Group operates defined contribution pension plan based on the New Pension Act 2014, and a defined benefit gratuity plan based on

employee’s pensionable and other post-employment remuneration and length of service.

The details of the Group’s assets from Employee benefits are as below:

group31-Dec-17

group31-Dec-16

company31-Dec-17

company31-Dec-16

Defined benefit obligations (see Note 19.1 below) 258,135 234,011 - -

Employee benefit asset in statement of financial position 258,135 234,011 - -

The details of the Group's liabilities from Employee benefit obligations are as below:

group31-Dec-17

group31-Dec-16

company31-Dec-17

company31-Dec-16

Defined contribution obligations - - - -

Defined benefit obligations (see Note 19.1 below) 38,458 39,269 1,076 883

Employee benefit liability in statement of financial position 38,458 39,269 1,076 883




19.1Definedbenefitplan: The Group offers its employees defined benefit plans in the form of gratuity scheme and long service awards. The Gratuity Scheme covers all

employees and it is payable to an employee on resignation only if the employee has served the entity for more than five years. The gratuity benefit is based on a percentage of an employee’s annual emolument.

The Group operates a Long Service Award scheme for its employees. Qualification for long service awards are 10 years, 15 years, 20 years, 25 years, 30 years and 35 years.

(a) The details of the defined benefit plans are as below:

group31-Dec-17

group31-Dec-16

company31-Dec-17

company31-Dec-16

Pension (net asset) (see note 19.1 (d) below) 258,135 234,011 - -

Defined benefit asset in statement of financial position 258,135 234,011 - -

Gratuity (outstanding liability) (see note 19.1(e) below) - - - -

Long service award (outstanding liability) (see note 19.1(f) ) (38,458) (39,269) (1,076) (883)

Defined benefit liability in statement of financial position (38,458) (39,269) (1,076) (883)

(b) Company’s obligations for:


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

– Pension benefits (see note 19.1(d) below) (197,415) (181,830) - -

– Gratuity (see note 19.1(e) below) - - - -

– Long service award (see note 19.1(f) below) (38,458) (39,269) (1,076) (883)

Total Company's obligation (235,873) (221,099) (1,076) (883)

(c) Fair value of Company’s plan assets


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

– Pension (see note 19.1(d) below) 455,550 415,841 - -

– Gratuity (see note 19.1(e) below) - - - -

455,550 415,841 - -

i Income statement charge for:

– Pension benefits (see note 19.1(d)(iii) below) (39,274) (21,904) - -

– Gratuity (see note 19.1(e)(iii) below) - - - -

– Long service award (see note 19.1(f)(ii) below) 9,252 13,724 255 422

Total (See note 48) (30,022) (8,180) 255 422

ii Gain/ (loss) on other comprehensive income

- Adjustments for net pension assets (see note 19.1(d)(iv)) (15,150) 58,091 - -

- Adjustments for long-service awards obligations (see note 19.1(f)(iii)) 2,552 23,230 (62) (1,401)

Total (12,598) 81,321 (62) (1,401)

Tax effect of remeasurement 1,803 (4,890) - -

Total in other comprehensive income (10,795) 76,431 (62) (1,401)




(d) Pension benefits The amounts recognised in the statement of financial position are determined as follows:


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

Present value of funded obligations (see note 19.1(d)(i) below) (197,415) (181,830) - -

Fair value of plan assets (see note 19.1(d)(ii) below) 455,550 415,841 - -

Net asset in the statement of financial position 258,135 234,011 - -

Current - - - -

Non-current 258,135 234,011 - -

258,135 234,011 - -

i The movement in the present value of the funded pension benefits obligation over the year is as follows:


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

At 1 January 181,830 242,792 - -

Interest cost 26,429 25,713 - -

Actuarial (gains)/ losses-assumption 16,940 (41,413) - -

Actuarial (gains)/losses-experience (12,754) (19,659) - -

Benefits paid by employer - - - -

Benefits paid by the fund (15,030) (25,603) - -

At 31 December 197,415 181,830 - -

ii The movement in the fair value of plan assets of the year is as follows:

At 1 January 415,841 396,808 - -

Expected return on plan assets 65,703 47,617 - -

Benefits paid (15,030) (25,603) - -

Actuarial (loss)/gains (10,964) (2,981) - -

At 31 December 455,550 415,841 - -

iii The amounts recognised in the profit or loss are as follows:

Current service costs - - - -

Net interest costs/income:

- Interest costs (see note 19.1(d)(i)) 26,429 25,713 - -

- Expected return on plan asset (see note 19.1(d)(ii)) (65,703) (47,617) - -

At 31 December (39,274) (21,904) - -

iv The amounts recognised in other comprehensive income are as follows:

Actuarial (gains)/ losses-assumption for obligation (see note 19.1(d)(i)) (16,940) 41,413 - -

Actuarial (losses)-experience for obligation (see note 19.1(d)(i)) 12,754 19,659 - -

Actuarial (losses) on plan asset (see note 19.1(d)(ii)) (10,964) (2,981) - -

At 31 December (15,150) 58,091 - -




The periodic pension costs are included in the staff costs for the reporting period and treated as a single line item.

The principal actuarial assumptions used were as follows:


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

Discount rate 14% 16% n/A N/A

Rate of pension increase 3% 3% n/A N/A

Inflation rate 12% 12% n/A N/A

The mortality rates assumed for the employees are the rates published in the A67/70 ultimate Tables published jointly by the Institute and Faculty of Actuaries in the united Kingdom.

The average life expectancy in years of a pensioner retiring at age 65, at the end of the reporting period is as follows:

In yearsgroup

31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

Male 79 79 n/A N/A

Female 83 83 n/A N/A

The sensitivity of overall pension liability to changes in the weighted principal assumptions is:

31-Dec-17

change in assumptionimpact on liability

including change (=n='000)

Discount rate -0.50% 0.50% 202,692 192,401

31-Dec-16

change in assumptionimpact on liability

including change (=n='000)

Discount rate -0.50% 0.50% 186,392 177,486

(e) Gratuity benefits The amounts recognised in the statement of financial position are determined as follows:


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

Present value of obligations (see note 19.1(e)(i) below) - - - -

Fair value of plan assets (see note 19.1(e)(ii) below) - - - -

Net obligation in the statement of financial position - - - -

Current - - - -

Non-current - - - -

- - - -




(i) The movement in the present value of the gratuity obligation over the year is as follows:


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

At 1 January - 551,896 - 41,467

Current service cost - - - -

Interest cost - - - -

Past service cost (including curtailments) - - - -

Benefits paid - (551,064) - (41,467)

Adjustments to gratuity reserves - (832) - -

Actuarial (gains)/losses - - - -

At 31 December - - - -

The gratuity plan has been terminated effective 31 December 2015. The Group’s liability was not actuarially determined in the year ended 31 December 2016 as the liability determined as at 31 December 2015 was adopted as the Group’s liability to its employees.

The Group settled its employees in January 2016.

(ii) The movement in fair value of plan assets over the year is as follows:


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

At 1 January - 37,892 - -

Employer contributions - - - -

Expected returns on plan assets - - - -

Benefits paid - - - -

Actuarial (gains)/losses - - - -

Extinguished plan assets - (37,892)


(iii) The amounts recognised in the profit or loss are as follows:


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

Current service costs - - - -


- Interest costs (see note 19.1(e)(i)) - - - -

Past service costs (including curtailment) (see note 19.1(e)(i)) - - - -





(f) Long Service Awards


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

Present value of unfunded obligations (see note 19.1(f)(i) below) 38,458 39,269 1,076 883

38,458 39,269 1,076 883

Current - - - -

Non-current 38,458 39,269 1,076 883

38,458 39,269 1,076 883

(i) The movement in the defined benefit obligation over the year is as follows:


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

At 1 January 39,269 52,217 883 1,862

Current service cost 4,284 7,836 125 259

Interest cost 4,968 5,888 130 163

Benefits paid (7,511) (3,442) - -

Actuarial (gains)/losses (2,552) (23,230) (62) (1,401)

At 31 December 38,458 39,269 1,076 883

(ii) The amounts recognised in the profit or loss are as follows:


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

Current service costs (see note 19.1(f)(i)) 4,284 7,836 125 259


- Interest costs (see note 19.1(f)(i)) 4,968 5,888 130 163

At 31 December 9,252 13,724 255 422

(iii) The amounts recognised in other comprehensive income are as follows:


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

Actuarial losses/(gains) on obligations (see note 19.1(f)(i)) (2,552) (23,230) (62) (1,401)

The principal actuarial assumptions used were as follows:

group31-Dec-17

group31-Dec-16

company31-Dec-17

company31-Dec-16

Discount rate 14% 16% 16% 16%

Future salary increases 3% 13% 13% 13%

Inflation rate 12% 12% 12% 12%




The mortality rates assumed for the employees are the rates published in the A67/70 ultimate Tables published jointly by the Institute and Faculty of Actuaries in the united Kingdom.

The sensitivity of overall long service award liability to changes in the weighted principal assumptions is:

31-Dec-17

change in assumption impact on liability including change (=n='000)

Discount rate -0.50% 0.50% 39,551 37,451

Future salary increases -0.50% 0.50% 37,660 39,322

Inflation rate -0.50% 0.50% 38,310 38,644

31-Dec-16

change in assumption impact on liability including change (=n='000)

Discount rate -0.50% 0.50% 36,832 35,008

Future salary increases -0.50% 0.50% 35,163 36,611

Inflation rate -0.50% 0.50% 35,736 36,017

20 statutory deposits In line with Section 10 (3) of the Insurance Act of Nigeria, a deposit of 10% of the regulatory share capital is kept with the Central Bank of

Nigeria (CBN). The cash amount held is considered to be a restricted cash balance.


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

Deposits with CBN 555,000 555,000 - -

The analysis of the statutory deposit is as follows:

Deposit with CBN for non-life business 340,000 340,000 - -

Deposit with CBN for life business 215,000 215,000 - -

555,000 555,000 - -

21 Deposit for shares Deposit for shares represents cash deposit for additional shares in Royal Exchange Prudential Life Plc, during the year ended 31 December

2016. The Group, through a Board resolution dated 30 December 2016 agreed that the sum of =N=500,000,000 (Five hundred million naira) be deposited for the creation of additional 500,000,000 ordinary shares in Royal Exchange Prudential Life Plc at the price of =N=1 per share. The Company had in the current year obtained regulatory approval and have alloted the shares to the parent company.


31-Dec-17 group

31-Dec-16company

31-Dec-17company

31-Dec-16

Deposit for shares in Royal Exchange Prudential Life Plc - - - 500,000




22 Deferred taxation

group The movement in the net deferred tax assets/(liabilities) during the year are shown below: For the year ended 31 December 2017


net balance as at 1

January

recognised inprofitor

lossrecognised

in oci

net balance as at 31

December 2017

Deferred tax assets

Property and equipment, and software 142,409 (23,189) - 119,220

unrelieved losses 215,560 (79,111) - 136,449

Employee benefits 2,206 7,708 1,803 11,717

Deferred tax assets 360,175 (94,592) 1,803 267,386

Deferred tax liabilities

Investment properties (294,640) (19,611) - (314,251)

Foreign exchange - (16) - (16)

Deferred tax liabilities (294,640) (19,627) - (314,267)

net deferred tax assets/(liabilities) 65,535 (114,219) 1,803 (46,881)

For the year ended 31 December 2016


net balance as at 1

January

recognised inprofitor

lossrecognised

in oci

net balance as at 31

December 2016

Deferred tax assets

Property and equipment, and software 39,401 103,008 - 142,409

unrelieved loss 242,663 (27,103) - 215,560

Employee benefits 145,557 (138,461) (4,890) 2,206

Foreign exchange - - - -

Deferred tax assets 427,621 (62,556) (4,890) 360,175

Deferred tax liabilities

Investment properties (244,868) (49,772) - (294,640)

Deferred tax liabilities (244,868) (49,772) (4,890) (299,530)

net deferred tax assets/(liabilities) 182,753 (112,328) (4,890) 65,535

Deferred tax assets have been recognised because it is considered probable that future taxable profit will be available against which the Group can utilise the benefits therefrom.

Deferred tax assets have not been recognised in the Company because it is not probable that future taxable profit will be available against which the Company can utilise the benefits therefrom as detailed in Note 22(a) below.




(a) unrecognised deferred tax assets Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely

timing and the level of future taxable profits together with future tax planning strategies.

The deferred tax assets of Royal Exchange Prudential Life Plc, and Royal Exchange Plc, components of the Group, which relates primarily to timing difference in the recognition of depreciation and capital allowances on property and equipment, employee benefit liabilities and unrelieved tax losses were not recognised in these financial statements.

This is due to the uncertainty about the availability of future taxable profits for these entities against which deferred tax assets can be utilised.

The unrecognised deferred tax asset during the year is attributable to the following:


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Property and equipment 393,176 120,439 46,043 37,037

Employee benefit liabilities (1,184) 1,629 323 283

unrelieved tax losses 195,915 868,260 341,878 247,604

587,907 990,328 388,244 284,924

The movement in the unrecognised deferred tax asset during the year was as follows:


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Balance, beginning of year 990,328 792,014 284,924 172,542

Increase/(decrease) during the year (402,421) 198,314 103,320 112,382

587,907 990,328 388,244 284,924

23 Deferred income


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Deferred rental income (see 23(a) below) 40,593 29,648 - -

Deferred commission income (see 23(b) below) 103,205 133,294 - -

At 31 December 143,798 162,942 - -

Within one year 120,331 154,332 - -


143,798 162,942 - -

(a) Deferred rental income


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

At 1 January 29,648 23,392 - -

Additions during the year 86,805 67,949 - -

Amortised during the year (75,860) (61,693) - -

At 31 December 40,593 29,648 - -




(b) Deferred commission income This represents the unexpired portion of commission received from businesses ceded to reinsurers as at the reporting date.


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Balance at start of the year 133,294 98,777 - -

Additions in the year 467,565 462,937 - -

Amortization during the year (497,654) (428,420) - -

At 31 December 103,205 133,294 - -

Analysis of deferred acquisition income by class of insurance are as follow:

Fire 27,619 75,348 - -

Accident 10,347 (3,495) - -

Motor 8,332 11,832 - -

Marine and aviation 13,084 6,531 - -

Oil & gas 20,864 22,762 - -

Engineering 22,826 20,169 - -

Bond 133 147 - -

103,205 133,294 - -

24 trade payables


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Reinsurance payables 655,980 343,410 - -

Deposit for premium (see note (a) below) 9,446,598 8,005,683 - -

Premium payables to co-insurers 56,852 6,011 - -

10,159,430 8,355,104 - -

Within one year 10,159,430 8,355,104 - -


10,159,430 8,355,104 - -

The carrying amount disclosed above approximate fair value at the reporting date. All amounts are payable within one year.

(a) Deposit for premium represents premium collected in advance at the reporting date that are yet to be recognised as at year end.




25 other liabilities


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Due to related parties (see 25(a) below) - - 3,270,016 415,240

Other liabilities (see 25(b) below) 1,608,666 1,616,032 514,023 504,960

1,608,666 1,616,032 3,784,039 920,200

Within one year 1,382,788 1,382,788 171,996 171,996

More than one year 225,878 233,244 3,612,043 748,204

1,608,666 1,616,032 3,784,039 920,200

(a) Due to related parties


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Royal Exchange General Insurance Company - - 2,173,342 -

Royal Exchange Prudential Life Plc - - 1,088,397 412,182

Royal Exchange Finance and Asset Management - - 8,115 3,058

Royal Exchange Microfinance Bank - - 162 -

- - 3,270,016 415,240

(b) Analysis of other liabilities is as follows:


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Deferred income 28,931 12,069 - -

Accruals 235,737 142,583 17,995 15,404

WhT and PAYE payables 46,932 106,506 44,845 45,336

VAT payable 78,443 101,458 78,443 85,703

NAICOM levy 32,827 50,065 - -

Other statutory payables 4,473 6,381 - -

Staff payables 15,107 24,181 - -

Bank overdrafts - 14,015 - -

Dividend payable held as collateral (see note (i) below) - 237,193 - 237,193

Other pension obligation 7,361 - -

unclaimed dividends (see note (ii) below) 75,948 66,902 75,948 62,919

Other payables (see note (iii) below) 1,082,907 854,679 296,792 58,405

1,608,666 1,616,032 514,023 504,960

(i) Dividend payable held as collateral represents dividend belonging to Spennymoor Limited, Dantata Investments & Securities Company Limited and Phoenix holdings Limited which was withheld by the Group in respect to 250 million units of the Group’s shares held by Decanon Investment Limited in relation to an ongoing litigation case involving the Group and the aforementioned counterparties.

(ii) unclaimed dividend represents all dividends belonging to shareholders of the Group outstanding for more than 15 months, which have been returned to the Group by the Registrar in compliance with the Securities Exchange Commission (SEC)’s directive.




(iii) The analysis of other payables is as follows:


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Sundry creditors 533,694 290,135 246,903 6,963

Provision for litigations and claims 78,954 78,954 - -

VAT payable 17,300 15,801 - -

Sales deposit and other creditors 87,863 271,270 - -

Accrued commissions payable 140,074 84,838 - -

Withholding tax 59,152 61,806 - -

Co-operative/thrift savings 1,094 - - -

Pay As You Earn (PAYE) tax 7,001 428 - -

Solicitors fee 49,739 51,294 49,739 51,294

Judgement sum 150 150 150 150

Oshodi plaza redevelopment 43,927 - - -

Employee benefit payable 53,835 - - -

Pension payable 10,049 - - -

union dues 75 3 - -

1,082,907 854,679 296,792 58,407

26 Depositors’ funds


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Royal Exchange investment notes (see note (a) below) 220,885 97,353 - -

high yield investment papers (see note (b) below) 1,064,309 990,039 - -

Savings (281) 14,191 - -

Demand deposit 82,159 39,584 - -

Term deposit and call deposits 79,691 62,289 - -

1,446,763 1,203,456 - -

(a) Royal Exchange Investment Notes represents customers’ deposits into the Group’s term deposit options. It is a flexible money market investment option that has an upfront interest payment and accepts a minimum of =N=2million as deposit payable over 90 days. It is carried at amortised cost.

(b) high Yield Investment Papers represent customers’ deposits into the Group’s term deposit options. It is a product that offers a certain interest, promising to be higher than the average money market rate. Interests are paid back end and minimum deposits of =N=1million are accepted, payable over 90 days. It is carried at amortised cost.




(c) Analysis of depositor’s funds by maturity


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

up to 1 month 264,832 62,809 - -

3 - 6 months 596,889 486,884 - -

6 - 12 months 76,702 131,617 - -

Above 12 months 508,340 522,146 - -

1,446,763 1,203,456 - -

27 insurance contract liabilities


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Non-life insurance (see note 27(a) below) 5,446,009 5,398,979 - -

healthcare insurance (see note 27(b) below) 182,611 143,949 - -

Life insurance (see note 27(c) below) 5,709,261 4,615,352 - -

11,337,881 10,158,280 - -

(a) non-life general insurance


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Claims outstanding (see note v below) 2,584,041 1,971,277 - -

Incurred but not reported 904,986 968,543 - -

Outstanding claims (See note 27(a)(iv) below): 3,489,027 2,939,820 - -

unexpired risk (See note 27(a)(ii) below) 1,956,982 2,459,159 - -

5,446,009 5,398,979 - -

(i) The concentration of non-life insurance by type of contract is summarised below by reference to liabilities.


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Fire 2,089,367 1,507,883 - -

Accident 412,026 741,719 - -

Motor 962,162 1,165,026 - -

Marine 449,537 327,365 - -

Oil and gas 1,396,351 1,521,538 - -

Engineering 126,916 121,133 - -

Bond 9,650 14,315 - -

5,446,009 5,398,979 - -




(ii) unexpired risk is summarised by type below


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Fire 410,125 573,221 - -

Accident 156,595 261,980 - -

Motor 534,098 584,333 - -

Marine 232,199 145,424 - -

Oil and gas 594,568 849,355 - -

Engineering 28,501 44,829 - -

Bond 896 17 - -

1,956,982 2,459,159 - -

(iii) The movement in unexpired risk reserve is shown below:


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Balance, beginning of the year 2,459,159 2,223,284 - -

Movement during the year (502,177) 235,875 - -

Balance, end of the year 1,956,982 2,459,159 - -

(iv) Outstanding claims represent the estimated ultimate cost of settling all claims arising from incidents occurring prior to the end of reporting date, but not settled at that date and provision made for claims incurred but not yet reported as at the end of the financial year. This provision is based on the liability adequacy test report.

Analysis of outstanding claims per class of non-life insurance business is shown below:


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Fire 1,679,242 934,662 - - Accident 255,431 479,739 - - Motor 428,064 580,693 - - Marine 217,338 181,941 - - Oil and gas 801,783 672,183 - - Engineering 98,415 76,304 - - Bond 8,754 14,298 - -

3,489,027 2,939,820 - -

(v) An ageing analysis of the time between when the outstanding claims were reported and the date of the financial statements is presented below:


31-Dec-17group

31-Dec-16

0 - 90 days 243,634 259,590

91 - 180 days 124,091 226,092

181 - 270 days 155,484 177,239

271 - 360 days 789,068 205,290

Above 360 days 1,271,764 1,103,066

2,584,041 1,971,277




(vi) The movement in outstanding claims is shown below:


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Balance, beginning of the year 2,939,820 2,211,000 - -

Movement during the year 549,207 728,820 - -

Balance, end of the year 3,489,027 2,939,820 - -

(b) Healthcare insurance


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Claims and loss adjustment expenses (see note 27(b)(i)) 127,048 69,480 - -

Provisions for unearned premiums and unexpired short term insurance risks (see note 27(b)(ii))

55,562 74,469 - -

182,611 143,949 - -

(i) Analysis of claims and loss adjustment expenses are as follows:


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Claims outstanding as at 1 January 69,480 65,980 - -

Cash paid for claims settled in the year 266,401 500,525 - -

– Arising from current-year claims (128,634) (431,046) - -

– Arising from prior year claims (80,198) (65,979) - -

Balance, as at 31 December 127,048 69,480 - -

(ii) Provisions for unearned premiums and unexpired short term insurance risks The movements for the year are summarised below:


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Balance at 1 January 74,469 106,518 - -

Increase in period 179,032 95,075 - -

Release in the period (197,939) (127,124) - -

Balance, as at 31 December 55,562 74,469 - -

These provisions represent the liability for short-term insurance contracts for which the Group’s obligations are not expired at the end of the reporting period. The unexpired risk provision relates to the casualty insurance contracts for which the Group expects to pay claims in excess of the related unearned premium provision. This assessment is performed using geographical aggregation of portfolios of liability insurance contracts within the casualty segment.




(c) Life insurance


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Outstanding claims - Group life (see note 27(c)(i) below) 1,538,816 1,029,893 - -

Outstanding claims - Individual life (see note 27(c)(ii) below) 71,762 16,835 - -

1,610,578 1,046,728 - -

Life insurance contract liabilities (see note 27(c)(iii) below) 4,098,683 3,568,624 - -

5,709,261 4,615,352 - -

(i) Outstanding claims - group life The movement in the provision for outstanding claims during the year was as follows:


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Beginning of the year 1,029,893 618,617 - -

Increase during the year (see note 39(ii)) 508,923 411,276 - -

As at year end 1,538,816 1,029,893 - -

(ii) Outstanding claims - individual life The movement in the provision for outstanding claims during the year was as follows:


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Beginning of the year 16,835 17,686 - -

Decrease/(increase) during the year (see note 39(ii)) 54,927 (851) - -

As at year end 71,762 16,835 - -

Outstanding claims represent the estimated ultimate cost of settling all claims arising from incidents occurring as at the reporting date. The ageing analysis for claims reported and loss adjusted for life insurance contracts is as stated below:


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Days

0- 90 250,709 317,928 - -

91- 180 385,767 123,297 - -

181-270 210,565 192,070 - -

271-360 220,401 172,891 - -

Above 360 543,253 240,542 - -

1,610,695 1,046,728 - -




(iii) Life insurance contract liability The movement on the Life funds account during the year was as follows:


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Beginning of the year 3,568,624 3,020,118 - -

Increase/(decrease) during the year 583,595 670,393 - -

Difference in unearned premium (see note 27(c)(v) below) (53,536) (121,887) - -

As at year end 4,098,683 3,568,624 - -

The life insurance contract liability is analysed as follows:


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Risk-based deposit policies 12,667 21,667 - -

Individual life policies 1,775,743 1,341,657 - -

Group life policies 985,123 1,007,181 - -

Additional reserve by Actuary 183,000 112,253 - -

Annuity valuation by Actuary (see 27(c)(iv) below) 1,142,150 1,085,866 - -

As at year end 4,098,683 3,568,624 - -

(iv) Annuity The annuities were reserved for by using a discounted cash flow approach by the Actuary. here, reserves are set equal to the present value

of future annuity payments plus expenses, with allowance being made for any guaranteed periods as required by the terms of the contract. The assets representing the annuities are invested in near-cash money market financial instruments and long term secured instruments such as Federal government bond and treasury bills with a varying tenor.

The annuities fund has supporting assets and liabilities as follows:


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Assets 1,144,537 1,085,866 - -

Liabilites 1,142,150 1,085,866 - -

(v) The movement in the unearned premium during the year was as follows:


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Beginning of the year 466,116 588,003 - -

Decrease/(increase) during the year (53,536) (121,887) - -

As at year end 412,580 466,116 - -




28 investment contract liabilities


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Deposit administered funds (see note 28(a)) 129,755 126,808 - -

Investment managed funds (see note 28(b)) 163,800 212,648 - -

293,555 339,456 - -

(a) Deposit administered funds


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

At 1 January 126,808 113,911 - -

Deposits received in the year 2,372 20,410 - -

Interest paid 3,941 3,092 - -

Withdrawals (3,366) (10,605) - -

Balance at 31 December 129,755 126,808 - -

Current 35,782 33,496 - -

Non Current 93,973 93,312 - -

129,755 126,808 - -

The Company has a total sum of =N=129.8million (2016: =N=126.8 million) in deposit administered funds with guaranteed interest which has been in existence since 2010. The outstanding balance in the account is attributable to clients who are yet to terminate their investment.

(b) investment managed funds


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

At 1 January 212,648 222,360 - -

Deposits 150,807 238,658 - -

Interest accrued thereon 22,429 22,431 - -

Withdrawals (222,084) (270,801) - -

Balance at 31 December 163,800 212,648 - -

Current 165,985 165,985 - -

Non Current (2,185) 46,663 - -

163,800 212,648 - -




29 taxation

(a) income tax expense

Recognised in profit or lossIn thousands of Naira

notesgroup

31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16Current Income tax 5,076 11,938 - - under/(over) provision in prior years - 44,945 - - Capital gains tax 1,058 - - - Tertiary Education Tax 462 839 - - NITDA Levy 4,601 2,974 - -

11,197 60,696 - - Withholding tax on dividends 6,754 - - -

17,951 60,696 - - Deferred tax charge 22 119,932 112,327 - -

137,883 173,023 - - Minimum tax 149,633 63,391 48,551 -

Recognised in other comprehensive incomeDeferred tax on remeasurement of defined benefit scheme - - - -

Companies with 25% and above imported equity capital are exempted from the computation of minimum tax. The Company has in the past been exempted from the computation of minimum tax based on the capital structure of the Company. A back duty assessment for the last six years was carried out and the amount recognised in the current year based as minimum tax based.

group company31-Dec-17

tax rate%

Amount=n=’000

31-Dec-16tax rate

%Amount=n=’000

31-Dec-17tax rate

%Amount=n=’000

31-Dec-16tax rate

%Amount=n=’000

Profit/(loss) before tax (682,127) (743,838) (351,118) (368,735)Income tax using the domestic corporation tax rate 30% (204,638) 30% (223,151) 30% (105,335) 30% (110,621)Non-deductible expenses -101% 690,160 -31% 230,726 -2% 8,110 -3% 10,813 Tax exempt income 110% (750,115) 29% (217,003) 2% (6,095) 3% (12,574)Derecognition of unutilized tax losses -59% 402,421 -43% 322,855 -29% 103,320 -30% 112,382 under/(over) provision in prior years 2% (15,503) -6% 44,945 0% - 0% - Change in recognised deductible temporary differences 0% - -1% 8,656 0% - 0% - Minimum tax -22% 151,409 -9% 63,391 -14% 48,551 0% - Capital gains tax 0% 1,965 0% 2,182 0% 0%NITDA Levy 0% 212 0% - 0% - 0% - Tertiary Education Tax -1% 4,851 0% 3,665 0% - 0% - Withholding tax on dividends -1% 6,754 0% 148 0% - 0% -

-42% 287,516 -32% 236,414 -14% 48,551 0% -

(b) current income tax liabilities


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

At 1 January 537,200 488,714 255,109 255,109

Charge for the year 167,584 124,087 48,551 -

Payment during the year (94,050) (77,863) - -

Reclassification of tax assets (2,262) 2,262 - -

At 31 December 608,472 537,200 303,660 255,109




30 Borrowings


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Wema Bank - 862,254 - 862,254

Central Bank of Nigeria (see note 30(i)) 26,046 25,543 - -

Borrowings from Funds under management (see note 30(ii)) 222,125 196,610 28,071 24,911

Royal Exchange Finance and Asset Management Limited (see note 30(iii)) - - 90,667 94,245

FSDh (see note 30(v)) 1,494,985 1,500,917 1,494,985 1,500,917

1,743,156 2,585,324 1,613,723 2,482,327

Current - 862,254 - 862,254

Non Current 1,743,156 1,723,070 1,613,723 1,620,073

1,743,156 2,585,324 1,613,723 2,482,327

(i) The amount of =N=26,046,000 (2016: =N=25,543,000) represents the carrying amount of a =N=50,300,000 term loan obtained from the Central Bank of Nigeria as at 31 December 2017 under the Micro, Small & Enterprises Development Fund. The facility’s effective date is 9 April 2015.

(ii) The amount represent the carrying amount of term loans obtained by the Group from the unclaimed debentures under the management of Royal Exchange Plc as at the 31 December 2017.

(iii) Borrowings from Royal Exchange Finance and Asset Management Limited


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Term Loan - - 7,367 21,228

Finance Lease Obligations - - 83,300 73,017

- - 90,667 94,245

(v) The amount of =N=1,494,985,000 represents the carrying amount of a =N=1,500,000,000 term loan obtained from FSDh as at 31 December 2017 to finance the Company’s investment in Royal Exchange General Insurance Company Limited and Royal Exchange Prudential Life Plc. The facility’s effective date is 28 December 2017 with a tenor of one year (365 days) at twenty-two (22) percent interest rate to the Company.

31 share capital


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Share capital comprises:

Authorized share capital

10,000,000,000 ordinary share of 50k each 5,000,000 5,000,000 5,000,000 5,000,000

Issued share capital

5,145,370,074 ordinary share of 50k each 2,572,685 2,572,685 2,572,685 2,572,685

The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at meetings of the Company.

Dividends on ordinary shares Dividends on ordinary shares are recognised in equity in the period in which they are approved by the Company’s shareholders. Dividends

for the year that are declared after the end of the reporting period are dealt with in the subsequent period.

Dividends proposed by the Directors but not yet approved by members are disclosed in the financial statements in accordance with the requirements of the Company and Allied Matters Act of Nigeria.




32 share premium


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

As at year end 2,690,936 2,690,936 2,690,936 2,690,936

33 contingency reserve In compliance with Section 21(1) of Insurance Act 2003, the contingency reserve for general business is credited with the greater of 3% of

gross premium or 20% of net profit and accumulated until it reaches the amount of greater of minimum paid up capital or 50 percent of net premium, where as, the contingency reserve for life business is credited with the greater of 1% of gross premium or 10% of net profit and accumulated until it reaches the amount of greater of minimum paid up capital or 50 percent of net premium.

34 treasury shares Treasury shares represent the cost of the 250,000,000 ordinary shares of the Group which is held in respect to Security holding Trust

Limited in respect to a proposed share ownership scheme for staff of a subsidiary which is subject to a litigation in suit FhC/L/CS/5479/09. The ordinary shares are being held as guarantee that value will not be lost as well as =N=228.1million cash dividend. The ordinary shares have a market value of =N=452 million as at 31 December 2017.

35 retained earnings The amount represents the retained earnings available for dividend distribution to the equity shareholders of the company (if approved at

the Annual General Meeting). For the analysis of movement in Retained Earnings, see the ‘Statement of Changes in Equity’.

36 other components of equity Other component of equity comprises of actuarial gains or losses on employee benefit obligation, cumulative net change in the fair value of

available-for-sale financial assets until assets are derecognized and transfers to regulatory risk reserve.

(a) Actuarialgains/lossesonemployeebenefitobligation Actuarial gains/losses on employee benefits represent changes in benefit obligation due to changes in actuarial valuation assumptions or

actual experience differing from expectation. The gains/losses for the year, net of applicable deferred tax asset/liability on employee benefit obligation, are recognized in other comprehensive income.

(b) fair value reserves Fair value reserves represent the cummulative net change in the fair value of available-for-sale financial assets at the reporting date.

(c) regulatory risk reserve Regulatory risk reserves represents the difference between the allowance for impairment losses on loans and advances to customers based

on Central Bank of Nigeria (CBN) prudential guidelines, compared with the loss incurred model used in calculating the impairment under IFRSs. This reserve is maintained by Royal Exchange Microfinance Bank in compliance with the CBN prudential guidelines.

37 reinsurance expenses


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Non-life reinsurance premiums:

Gross written reinsurance premiums 5,389,823 4,339,898 - -

Change in reinsurance unearned premiums (see note 11(a)(i)) 575,013 (358,905) - -

5,964,836 3,980,993 - -

Life reinsurance premiums:

Insurance premium ceded to reinsurers 353,946 282,444 - -

6,318,782 4,263,437 - -




38 fee and commission income


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Reinsurance commissions on non-life business 467,565 428,420 - -

Reinsurance commissions on life business 55,612 48,908 - -

523,177 477,328 - -

39 Insuranceclaimsandbenefitsincurred


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Insurance claims and benefits incurred on non-life busines(see note 39(i) below) 2,796,750 2,717,310 - -

Insurance claims and benefits incurred on life busines(see note 39(ii) below) 2,322,441 1,940,748 - -

Insurance claims and benefits incurred on healthcare business (see note 39(iii) below) 211,673 211,835 - -

5,330,864 4,869,893 - -

(i) Analysis of insurance claims and benefits incurred on Non-life business:


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Motor and accident 533,081 953,756 - -

Fire and IAR 1,683,835 1,045,221 - -

Marine 121,911 415,869 - -

Engineering 83,985 20,084 - -

Bond (3,525) 5,267 - -

Special risk 377,463 277,113 - -

2,796,750 2,717,310 - -

(ii) Analysis of insurance claims and benefits incurred on life business:


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Short term insurance contract 1,122,223 1,101,758 - -

Long term insurance contract 636,368 428,565 - -

Increase in outstanding claims short term insurance contract (see note 27(c)(i)) 508,923

411,276 - -

Increase/(decrease) in outstanding claims long term insurance contract (see note 27(c)(ii)) 54,927 (851) - -

2,322,441 1,940,748 - -

(iii) Analysis of insurance claims and benefits incurred on healthcare business:


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Short term insurance contract 211,673 206,126 - -

Increase in outstanding claims short term insurance contract - 5,709 - -

211,673 211,835 - -




40 Insuranceclaimsandbenefitsincurred-recoverablefromreinsurers


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Insurance claims and benefits incurred- recoverable on non-life busines(see note 40(i) below) 1,449,260 993,505 - -

Insurance claims and benefits incurred-recoverable on life business(see note 40(ii) below)

453,800

290,980

- -

1,903,060 1,284,485 - -

(i) Insurance claims and benefits incurred- recoverable on non-life busines:


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Motor and accident 68,079 179,416 - -

Fire and IAR 1,045,696 490,371 - -

Marine 53,335 119,045 - -

Engineering 73,760 110,947 - -

Bond (1,362) (1,500) - -

Special risk 209,752 95,226 - -

1,449,260 993,505 - -

(ii) Insurance claims and benefits incurred- recoverable on life busines:


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Short term insurance contract 453,800 290,980 - -

453,800 290,980 - -

41 underwriting expenses


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Acquisition costs: Non-life business 776,152 676,327 - -

Acquisition costs: Life 304,573 273,714 - -

Acquisition costs: healthcare 114,974 28,876 - -

Salaries & Allowances - underwriting employees 841,177 929,619 - -

Guaranteed interest on life products - 25,524 - -

Other commissions 559,912 535,437 - -

2,596,788 2,469,497 - -




42 net interest income/(expense) on investments and borrowings


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Gross Interest Income:

Interest income on placement with local banks 783,734 251,479 9,785 5,460

Interest income on treasury bills 392,581 29,072 3,821 -

Interest income on loans and receivables 272,806 260,624 - -

Interest income on advances under finance lease 34,744 32,568 - -

Interest on staff loan & advances 1,839 2,581 - -

1,485,704 576,324 13,606 5,460

Interest expense:

Interest expense on depositors funds (1,945) (125,406) - -

Interest expense on borrowings (466,308) (167,130) (296,447) (172,009)

Net interest income 1,017,451 283,788 (282,841) (166,549)

43 investment and other income

Included in investment and other income are results from sale and disposals of financial and other investments and dividend income. Analysis of the balance as at year end is as follows:


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Debt securities:

*Available-for-sale - - - -

*At fair value through profit/loss - 29,952 - -

*Loans & receivables (amortised cost) - 28,419 - -

Equity securties:

Dividend from investment in subsidiaries - - - -

Dividend Income:

*Available-for-sale 30,997 27,108 - -

*At fair value through profit/loss 88,197 54,862 532 446

Income on disposal of equities - -

*Available-for-sale - - - -

*At fair value through profit/loss 11,953 19,693 - -

Derivative financial instruments - - - -

Loss on disposal of investment properties (75,000) (187,206) - -

56,147 (27,172) 532 446




44 net fair value gain or (loss) on assets

Included in net fair value gain or (loss) on assets is fair value gains and losses on assets held at fair value through profit or loss.


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16Debt securities:*At fair value through profit/loss 14,057 2,153 (62) - Equity securties:*At fair value through profit/loss 366,165 (253,620) 16,025 (5,973)Investment properties (57,440) 611,422 - -

322,782 359,955 15,963 (5,973)

45 charge/(write-back) of impairment allowance


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16Impairment allowance on premium receivables(see note 10(a)(i)) 138,067 75,605 - - Write back of impairment on premium receivables(see note 10(a)(i) (7,280) (88,127) - - Impairment allowance on reinsurance receivables (see note 10(b)(i)) 77,221 203,852 - - Impairment allowance on reinsurance assets (see note 11(b)(ii)) 104,610 - - - Impairment allowance on financial assets (see note 8(a)(ii)) 8,585 - - - Impairment allowance on loans and advances (see note 6(a)) 33,430 43,032 - - Write back of impairment on loans and advances (see note 6(a)) (2,435) - - - Impairment allowance on advance under lease (see note 7(b)) - 10,000 - - Impairment allowance on other receivables (see note 13(d)) 48,021 42,977 - - Write back of impairment on other receivables (see note 13(d)) (23,100) (18,333) - - Impairment allowance on WhT credit notes receivables on rental income - 5,481 - -

377,119 274,487 - -

46 other operating income


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16Rental income 99,373 147,765 - - (Loss)/profit on disposal of property & equipment 8,669 (7,060) - - Management fee income from subsidiaries 429 100,944 272,040 221,028 Trustee Fee income 1,585 410 1,585 410 Other income* 84,485 89,608 49,958 31,927 Insurance brokerage commission 6,144 4,251 - - Income from lead-underwriting business 16,149 153,927 - - Third party administration and other related income 62,171 36,138 - - Fees and commission on loans and advances 44,983 36,137 - -

323,988 562,120 323,583 253,365

* Other income concerns, amongst others, bad debt recoveries, statutory deposit interest, funds management fee, insurance brokerage commission.

47 foreign exchange gains


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

(Loss)/gains on translation of foreign currency transactions 2,829 (15,124) - -




48 Management expenses


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Salaries and allowances of other employees 930,785 875,582 83,584 84,010

Post employment defined benefit expenses (see note 19.1(c)(i)) (30,292) (8,180) 255 422

Termination benefits - 136,331 - 136,331

Audit fees 46,689 38,068 11,330 8,715

Amortization and impairment charges (see note 18) 12,310 14,104 - -

Depreciation on property and equipment (see note 17) 218,774 261,948 30,021 16,508

Promotional and advert expenes 10,162 6,431 968 -

Rent and rates 5,888 7,051 - -

Directors' fees 40,717 8,848 1,420 1,420

Directors' sitting allowances 20,228 31,454 20,228 16,709

Directors' other allowances 97,232 68,017 97,232 68,017

Donations 1,414 225 100 -

Bank charges 15,313 29,023 918 3,134

Legal fee 48,344 63,086 6,029 34,964

Insurance premium (121,340) 52,845 7,486 4,970

Accounting consultancy fee 96,226 69,214 13,069 14,899

Investment expenses 52,714 33,263 - -

Finance cost (6,829) - - -

Power charges 5,674 - 1,598 -

Government charges 61,426 29,094 - -

Stationeries 4,611 4,783 - -

Printing external 25,118 34,383 2,132 -

Repairs and maintenance 115,330 143,752 2,212 -

Transport expenses 117,179 106,715 30,775 -

Software expenses 4,169 19,872 - -

Subscription and journals 10,887 2,564 1,333 -

E-business - - - -

Asset written off - 13,363 - -

Marketing expenses 872,165 858,951 - -

Advertisement 68,094 130,964 - -

Fine paid (contravention) 26,992 8,152 15,925 7,633

Electricity and diesel expenses 1,615 50,207 - -

VAT paid 4,838 16,879 - -

Telephone expenses 17,914 18,536 - -

Judgement sum expense 50 8,279 50 8,279

Loss on investment contract 49,361 - - -

Other administrative expenses* 271,768 334,195 81,690 44,013

3,095,526 3,467,999 408,355 450,024

Other expenses concerns entertainment and representation, board meeting expenses and expenses incurred for the day to day running of the Group during the year.




49 earnings per share

group31-Dec-17

group31-Dec-16

Basic and diluted earnings per share(kobo) (19) (19)

The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:


31-Dec-17group

31-Dec-16Loss/(profit) for the year attributable to owners of the company (969,643) (980,252)

Units in thousandsgroup

31-Dec-17group

31-Dec-16Number of ordinary shares for the purpose of basic and diluted earnings per share 5,145,370 5,145,370

50 cash and cash equivalents for cash flow Purposes

For the purposes of the statement of cash flow, cash and cash equivalents include cash, bank balances, investment in short term deposits (demand and time deposits) with a maturity date of 3 months or less upon acquisition and bank overdrafts.


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16Cash (see note 5) 4,697 8,079 72 75 Bank balances (see note 5) 480,373 554,963 28,624 77,402 Short-term deposits (see note 5) 12,020,853 10,542,398 83,667 49,802 Bank overdrafts (see note 25(b)) - (14,015) - - 12,505,923 11,091,425 112,363 127,279

51 reconciliation notes to consolidated and separate statement of cashflows

(i) Net Increase/(decrease) in employee retirement benefit:


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16Changes in employee retirement benefit asset (24,124) (79,995) - - Changes in employee retirement benefit liability (811) (530,739) 193 (42,446)Net changes (24,935) (610,734) 193 (42,446)Contibutions to plan asset - - - - Cash payment to employees 7,511 554,506 - 41,467 Net actuarial gains recognised in OCI (12,598) 81,321 62 1,401 Total changes recognised in statement of cashflows (30,022) 25,093 255 422

(ii) Net Increase/(decrease) in other receivable and prepayments:


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16Net changes in other receivable and prepayments (363,548) (49,485) (109,869) 240,848 Dividend received (124,813) (62,979) - - Dividend income 119,194 81,970 - - Rent received (116,258) (150,083) - - Rental income 99,373 147,765 - - Writebacks recognised in profit or loss 23,100 18,333 - - Impairments recognised in profit or loss (48,021) (42,811) - - Reclassifications from prepayments to PPE - - - -

Total changes recognised in statement of cashflows (410,973) (57,290) (109,869) 240,848




(iii) Net Increase/(decrease) in trade receivable:


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Net changes in trade receivable (155,427) (280,548) - -

Impairment allowance on reinsurance receivables (see note 10(b)(i)) 77,221 203,852 - -

Write back of impairment on premium receivables(see note 10(a)(i) (7,280) (88,127) - -

Impairment allowance on premium receivables(see note 10(a)(i)) 138,067 75,605 - -

Total changes recognised in statement of cashflows 52,581 (89,218) - -

(iv) Net Increase/(decrease) in reinsurance asset:


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Net changes in reinsurance asset (133,959) (770,776) - -

Writebacks recognised in profit or loss - - - -

Total changes recognised in statement of cashflows (133,959) (770,776) - -

(v) Changes in financial assets


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Balance as at 31 December 2016 71,176 (2,184,066) 37,897 (64,709)

Impairment recognised in profit or loss (5,239) - - -

Foreign exchange gain recognised in OCI 25,782 -

Foreign exchange gain recognised in profit or loss 11,981 - - -

Fair value changes recognised in OCI 152,920 (121,899) - -

Fair value changes on recognised in profit or loss 380,221 251,467 (15,963) 5,973

Redemptions/disposals (4,060,175) 519,018 48,931 -

Purchases by related companies - - - -

Interest received - 416,303 (3,821)

Transfers (55,018) - 55,018 (55,019)

Purchases 3,478,352 (3,248,955) (46,268) (15,663)

Balance as at 31 December 2017 (71,176) (2,184,066) 37,897 (64,709)

(vi) Changes in provision for outstanding claims


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16Changes in outstanding claims on group-life insurance 508,923 411,276 - - Changes in outstanding claims on individual-life insurance 54,927 (851) - - Changes in outstanding claims on non-life general insurance (including IBNR)

549,207 728,820 - -

Changes in claims and unadjusted expense on health insurance - - Cash paid for claims settled in the year 266,401 500,525 - - – Arising from current-year claims (128,634) (431,046) - - – Arising from prior year claims (80,198) (65,979) - - Increase/(decrease) in insurance contract liabilities on life insurance 583,595 670,393 - - Total changes statement of cashflows 1,754,221 1,813,138 - -




(vii) Changes in unearned premium


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Changes in unexpired risk on non-life general insurance (502,177) 235,875 - -

Changes in provisions for unearned premiums and unexpired short term insurance risks

– Increase in period 179,032 95,075 -

– Release in the period (197,939) (127,124) -

Changes in unearned premium on life insurance contract liability (53,536) (121,887) - -

Total changes in statement of cashflows (574,620) 81,939 - -

(viii) Changes in loans and advances to customers


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Net changes in loans and advances to customers (181,601) 286,423 - -

Interest income 272,806 260,624 -

Interest income received (375,682) (255,548) -

Impairment allowance recognised in profit or loss (30,995) (43,032) - -

Total changes in statement of cashflows (315,472) 248,467 - -

(ix) Changes in advances under finance lease


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Net changes in advances under finance lease 3,480 (83,621) - -

Interest income 34,744 32,568 - -

Write back of impairment allowance - - - -

Impairment allowance recognised in profit or loss - (10,000) - -

Total changes in statement of cashflows 38,224 (61,053) - -

(x) Changes in depositors fund


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Net changes in depositors fund (243,307) (7,132) - -

Foreign exchange difference - 15,124 - -

Interest expense 1,945 125,406 - -

Other changes recognised in cashflows - 250,812 - -

Total changes recognised in statement of cashflows (241,362) 384,210 - -




52 capital management The group manages its capital to ensure that it will be able to continue as a going concern and comply with the regulators’ capital and

solvency requirements for every of its subsidiaries whose capital is regulated, while maximizing return to stakeholders through the optimisation of the equity balance.

The capital structure of the group consist of only equity attributable to equity holders of the company, comprising issued capital, reserves and retained earnings.

The regulatory capitals of the subsidiaries in insurance and banking and asset management have been maintained and preserved over the reporting periods. The regulatory capital within the insurance industry in Nigeria, in which the entity has its major operations, is =N=3billion and =N=2billion for Non-life and Life businesses respectively. Also, the regulatory capital for unit microfinance bank is =N=20million, same as for the group’s finance house business.

The insurance industry regulator, NAICOM, measures the financial strength of Non-life underwriters through a solvency margin model. The Insurance Act, under section 24, defines solvency margin of a Non-life underwriter as the difference between the admissible assets and liabilities which shall not be less than 15% of Net premium income or the minimum capital base of N3billion, whichever is higher. The regulation requires non-life underwriters to maintain a minimum of 100% solvency margin. The Group’s Solvency requirement was revalidated by EY Nigeria, the Company’s Consultant Actuaries

The table below sets out the capital that is managed by the Company on an IFRS and regulatory basis:

The solvency position of the Non-life insurance business “The Insurance Act 2003 (Section 24) prescribed that an insurer shall in respect of its business other than life insurance business, maintain

a margin of solvency being the excess of the value of its admissible assets in Nigeria over its liabilities in Nigeria. The solvency margin, which is determined as the excess of admissible assets over total liabilities shall not be less than 15% of the gross

premium income less reinsurance premiums paid out during the year under review or the minimum paid up capital, whichever is greater.”


31-Dec-17group

31-Dec-16Admissible AssetsCash and cash equivalents 10,547,832 8,967,451 Financial assets:- Available-for-sale 440,212 409,316 - At fair value through profit or loss 1,311,082 1,075,988 - Loans and receivables 91,671 542,204 Investment in associates 418,421 415,429 Trade receivables 35,646 47,587 Other receivables and prepayment 535,870 500,000 Deferred acquisition cost 248,260 283,338 Reinsurance assets 2,212,548 2,189,935 Investment properties 2,969,719 3,060,609 Statutory deposit 340,000 340,000 Property and equipment 842,154 797,879 Intangible assets 1,389 5,907 Employees benefits assets 258,135 234,011 A 20,252,939 18,869,654 Less: Admissible liabilitiesBank overdrafts 49,068 63,718 Trade and other payables 9,910,957 8,313,225 Provision and other payables 880,894 1,052,868 Deferred income 143,798 162,942 Insurance liabilities 5,446,009 5,398,979 Finance lease obligations 89,061 103,925 Borrowings 330,499 - Employees benefits obligations 28,358 29,995 Current income tax liabilities 266,976 262,572 B 17,145,620 15,388,224 solvency margin (A-B) 3,107,319 3,481,430 Minimum paid up capital 3,000,000 3,000,000 net premium from non-Life insurance Business 4,235,774 4,778,662 15% of net premium 635,366 716,799




The Group’s non-life solvency margin =N=3,107,319,000 (2016: =N=3,481,430,000) is more than the minimum paid up capital of =N=3,000,000,000 (2016: =N=3,000,000,000). Therefore, the Group’s non-life business subsidiary is solvent since the solvency margin is higher than the minimum paid up capital & 15% of net premium.

the solvency position of the Life insurance business The solvency margin of the life business of =N=776 million (2016: 741 million) is below the minimum capital of =N=2 billion prescribed by the

Insurance Act of Nigeria. In order to overcome the deficit, the Directors of the Company are planning to inject more capital and funds into the business via both capital raising and sale of some of the Company’s investment properties.

The asset cover of the Company on the valuation date of 31 December, 2017 was 101%. That is, the admissible assets representing the Life Fund (including outstanding claims) and deposit administration funds, amounting to =N=6,063,357,000 were 101% of the actuarially determined gross liabilities of =N=6,022,816,000.

The table below sets out the capital that is managed by the Company on an IFRS and regulatory basis:


31-Dec-17group

31-Dec-16

Shareholders’ fund as per financial position 2,271,387 1,502,506

Less: Intangible assets (757) (1,579)

Capital resources on a regulatory basis exclusive of deposit for shares 2,270,630 1,500,927

Deposit for shares - 500,000

regulatory capital upon approval for deposit for shares 2,270,630 2,000,927

The details of the Company’s capital structure are shown in the statement of financial position section of the financial statements.

Including the deposit for shares amounting to N0.5 billion, the capital level of Royal Exchange Prudential Life Plc is in compliance with the requirements for life insurance companies as stipulated in the Insurance Act 2003. The deposit on shares was contribute by way of a cash payment before year-end to make good on the deficit in shareholders’ funds of Royal Exchange Prudential Life Plc. The Company, Royal Exchange PLC, had committed to the additional capital, currently recorded as deposit for shares, by a written board resolution prior to year-end. Since the capital contribution the Company and the subsidiary are in process of obtaining all regulatory approvals.

53 financial risk management

Factors relating to general economic conditions, such as consumer spending, business investment, government spending, the volatility and strength of both debt and equity markets and inflation, all affect the profitability of businesses in Nigeria.

In a sustained economic phase of low growth, characterised by higher unemployment, lower household income, lower corporate earnings, lower business investment and lower consumer spending, the demand for financial and insurance products could be adversely affected.

The Group’s risk management process includes the identification and measurement of various forms of risk, the establishment of risk thresholds and the creation of processes intended to maintain risks within these thresholds while optimising returns on the underlying assets and minimizing costs associated with liabilities. Risk range limits are established for each type of risk, and are approved by the Board’s Investment Committee and subject to ongoing review.

The Group’s risk management strategy is an integral part of managing the Group’s core businesses, and utilises a variety of risk management tools and techniques such as:

- Measures of price sensitivity to market changes (e.g., interest rate and foreign exchange rate); - Asset/Liability management; - Periodic Internal Audit and Control, and; - Risk management governance, including risk oversight committee, policies and guidelines, and approval limits.

In addition, the Group monitors and manages the financial risks relating to the operations of the organization through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (currency risk, interest rate risk and price risk), credit risk and liquidity risk.




54 Fairvalueoffinancialinstruments

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 in the principal or, in its absence, the most advantageous market to which the Group has access at that date. Fair values are determined at prices quoted in active markets. In our environment, such price information is typically not available for all instruments and the Group applies valuation techniques to measure such instruments. These valuation techniques make maximum use of market observable data but in some cases management estimate other than observable market inputs within the valuation model. There is no standard model and different assumptions could generate different results.

Fair values are subject to a control framework designed to ensure that input variables and output are assessed independent of the risk taker. The Group has minimal exposure to financial assets which are valued at other than quoted prices in an active market.

a fair value hierarchy IFRS 13 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or

unobservable. Observable input reflect market data obtained from independent sources; unobservable inputs reflect the Group’s market assumptions. These two types of inputs have created the following fair value hierarchy:

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities. This level includes listed equity securities and debt instruments on exchanges.

Level 2 - Valuation techniques based on observable inputs. This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data.

Level 3 - This includes financial instruments, the valuation of which incorporate significant inputs for the asset or liability that is not based on observable market data (unobservable inputs). unobservable inputs are those not readily available in an active market due to market illiquidity or complexity of the product. These inputs are generally determined based on inputs of a similar nature, historic observations on the level of the input or analytical techniques.

This hierarchy requires the use of observable market data when available. The Group considers relevant and observable market prices in its valuations where possible.

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, analyzed into Levels 1 to 3 based on the degree to which the fair value is observable.

group31 December 2017In thousands of Naira Level 1 Level 2 Level 3 total

financial Assets:

Fair value through profit or loss:

Quoted equity shares 8(b) 1,216,464 - - 1,216,464

Treasury bills 8(b) 2,186,699 - - 2,186,699

Federal government bonds 8(b) 356,966 - - 356,966

3,760,129 - - 3,760,129

Available-for-salefinancialassets:

Quoted equity shares 8(a) 93,962 - - 93,962

Bonds: Annuity fund 8(a) 1,141,839 - 1,141,839

1,235,801 - - 1,235,801

Total financial assets measured at fair value 4,995,930 - - 4,995,930




group31 December 2016In thousands of Naira Level 1 Level 2 Level 3 total

financial Assets:


Quoted equity shares 8(b) 1,310,263 - - 1,310,263

Treasury bills 8(b) 1,477,020 - - 1,477,020

Federal government bonds 8(b) 351,506 - - 351,506

3,138,789 - - 3,138,789

Available-for-salefinancialassets:

Quoted equity shares 8(a) 495,419 - - 495,419

Bonds: Annuity fund 9(a) 1,026,458 - 1,026,458

1,521,877 - - 1,521,877

Total financial assets measured at fair value 4,660,666 - - 4,660,666

company31 December 2017In thousands of Naira Level 1 Level 2 Level 3 total

financial Assets:


Quoted equity shares 8(b) 44,747 - - 44,747

Federal government bonds 8(b) - - - -

44,747 - - 44,747

Totalfinancialassetsmeasuredatfairvalue 44,747 - - 44,747

31 December 2016In thousands of Naira

Financial Assets:

Fair value through profit or loss:-

Quoted equity shares 8(b) 82,644 - - 82,644

Federal government bonds 8(b) - - - -

82,644 - - 82,644

Totalfinancialassetsmeasuredatfairvalue 82,644 - - 82,644

b financial instruments not measured at fair value The fair value information for financial assets and financial liabilities not measured at fair value has not been disclosed because the carrying

amount is a reasonable approximation of its fair value. These financial instruments include:

Cash and cash equivalents Cash and cash equivalents consists of cash on hand and current balances with banks.

The carrying amounts of current balances with banks is a reasonable approximation of fair value which is the amount receivable on demand.

Loans and receivables Loans and receivables consists of placements with financial institutions and staff mortgage loans.

The estimated fair value of fixed interest earning placements is based on discounted cash flows using prevailing money-market interest rates for the debts. The carrying amount represents the fair value which is receivable on maturity. The estimated fair value of staff mortgage loans represents the market values of the loans, arrived at by recalculating the carrying amount of the loans using the estimated market rate.




Financial assets held-to-maturity held-to-maturity consists of state government and corporate bonds.

The carrying amount of financial assets held-to-maturity are a reasonable approximation of their fair values which are receivable on demand.

Trade receivables and other receivables The carrying amounts of trade receivables and other receivables are reasonable approximation of their fair values which are receivable on

demand. Bank overdrafts, trade payables, provision and other payables and finance lease obligations The carrying amounts of bank borrowings, trade payables, provision and other payables and finance lease obligations are reasonable

approximation of their fair values which are repayable on demand.

(c) financial risks The Group is exposed to the following categories of risk as a consequence of offering different financial products and services :

(i) Market risk This reflects the possibility that the value of the Group’s investments will fall as a result of changes in market conditions, whether those

changes are caused by factors specific to the individual investment or factors affecting all investments traded in the market. The Group is exposed to this risk through its financial assets and comprises of currency risk, interest rate risk and price risk.

Currency risk This is the risk of the fair value of financial instruments being affected by changes in foreign exchange rates.

The Group seeks to manage its exposures to risk through control techniques which ensure that the residual risk exposures are within acceptable tolerances agreed by the Board. A description of the risks associated with the Group’s principal products and the associated control techniques is detailed below.

Foreign Currency risk The Group accepts receipt of premiums in foreign currency, in addition to Naira, from its clients; hence, exposures to exchange rate

fluctuations arise. The Group is exposed to foreign currency denominated in dollars through a domiciliary bank balance.

The Group has minimal exposure to currency risk as the Group’s financial assets are primarily matched to the same currencies as its insurance and investment contract liabilities. As a result, foreign exchange risk arises from other recognized assets and liabilities denominated in other currencies.

The carrying amounts of the Group’s foreign currency denominated assets and liabilities are as follows:

group31 December 2017In thousands of Naira

Pounds sterling euro us Dollars total

Assets (cash & cash equivalent) 628 38,058 8,327,441 8,366,128

Quoted equities - - 244,949 244,949

Loans and receivables - - - -

Liabilities - - (9,292,796) (9,292,796)

628 38,058 (720,405) (681,719)



Assets (cash & cash equivalent) 650 25,792 8,327,441 8,353,883

Quoted equities - - 40,245 40,245

Loans and receivables - - - -

Liabilities - - (8,005,683) (8,005,683)

650 25,792 362,003 388,445




foreign currency sensitivity analysis The following table details the Group’s sensitivity to a 10% increase and decrease in foreign currency rates against the Naira. A 10% sensitivity

rate is used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. For each sensitivity scenario, the impact of change in a single factor is shown, with other assumptions or variables held constant.



10% increase 63 3,806 (72,041) (68,172)10% decrease (63) (3,806) 72,041 68,172

impact of increase on:Pre-tax profit - - - (899,932)Shareholders’ equity - - - 5,510,228

impact of decrease on:Pre-tax profit - - - (763,588)Shareholders’ equity - - - 5,646,572

The tax impact of foreign exchange results is generally 30% of the result. This is not included in the impact on shareholders equity as the final impact will depend on the tax status of the Company when it realises the impact of the foreign exchange results for tax.



10% increase 65 2,579 36,200 38,845 10% decrease (65) (2,579) (36,200) (38,845)

impact of increase on:Pre-tax profit - - - (704,993)Shareholders’ equity - - - 6,418,981

impact of decrease on:Pre-tax profit - - - (782,683)Shareholders’ equity - - - 6,341,291

Interest rates risk The Group’s exposure to interest rate risk relates primarily to the market price and cash flow variability of assets and liabilities associated

with changes in interest rates.

Insurance liabilities and employee benefits do not form part of this profile. Although they are significant liabilities subject to interest rate risk, they are not financial instruments within the scope of IFRS 7.

Changes in interest rates result to reduction in income ‘spread’ or the difference between the amounts that the Group is required to pay under the contracts and the rate of return the Group is able to earn on investments intended to support obligations under the contracts. Investment spread is, arguably, one of the key components of the net income of insurers.

The Group’s mitigation efforts with respect to interest rate risk are primarily focused on maintaining an investment portfolio with diversified maturities that has a weighted average duration or tenor approximately equal to the duration of its liability cash flow profile.

Also, the Group manages this risk by adopting close asset/liability matching criteria, to minimise the impact of mismatches between asset and liability values arising from interest rate movements.

Furthermore, the Group uses sensitivity analytics to measure the impact of interest rate changes and movements on the value of our financial assets scenarios.

The Group is very moderately exposed to interest rate risk as it invests in fixed income and money market instruments.




Interestrateprofile At the end of the reporting period the interest rate profile of the Group’s interest bearing financial instruments as reported to the Management

of the Group are as stated below:

groupfinancial instrumentsIn thousands of Naira notes 31-Dec-17 31-Dec-16Fixed Interest rate instructionsCash and cash equivalents 5 12,020,853 10,542,398 Bonds: Annuity fund 8(a) 1,141,839 1,026,458 Federal government bonds 8(b) 356,966 351,506 Treasury bills 8(b) 2,186,699 1,477,020 Staff personal loans 8(c) 2,882 4,409 Staff mortgage loans 8(c) 104,266 127,835 Policy holders Loan 8(c) 39,699 20,373 Other loans and advances 8(c) 6,152 836,717 Loans and advances 6 1,173,612 992,011 Advances under finance lease 7 203,410 206,890 Statutory deposits 20 555,000 555,000

17,791,378 16,140,617 Bank overdrafts 25 - 14,015

17,791,378 16,154,632

In addition to the financial instruments listed above, the Group has borrowings amounting to =N=1.74 billion (2016: =N=2.59 billion) and depositors funds amounting to =N=1.46 billion (2016: =N=1.20 billion). The impact on interest sensitivity information below for borrowings is 0.5% of =N=1.74 billion, which is =N=8.72 million (2016: =N=12.91 million) while the impact on depositors funds is 0.5% of =N=1.46 billion, which is =N=7.28 million (2016: =N=6.02 million).

companyfinancial instrumentsIn thousands of Naira notes 31-Dec-17 31-Dec-16

Fixed Interest rate instructions

Cash and cash equivalents 5 83,667 49,802

83,667 49,802

In addition to the financial instruments listed above, the Company has borrowings amounting to =N=1.61billion (2016: =N=2.48 billion). The impact on interest sensitivity information below is 0.5% of =N=1.61 billion, which is =N=8.07 million (2016: =N=12.54 million).

interest rate sensitivity analysis The sensitivity analyses below have been determined based on the exposure to interest rates for both derivative and non-derivative

instruments at the balance sheet date. A 0.5% increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16Increase in interest rate by 50 basis points (+0.5%) 88,957 80,773 418 249 Decrease in interest rate by 50 basis point (-0.5%) (88,957) (80,773) (418) (249)

EquityandprofitafteradjustmentsPre-tax profit (742,803) (663,065) (399,251) (368,486)Shareholders’ equity 5,667,357 6,460,909 5,752,367 6,151,805

EquityandprofitafteradjustmentsPre-tax profit (920,717) (824,611) (400,087) (368,984)Shareholders’ equity 5,489,443 6,299,363 5,751,531 6,151,307




The tax impact of interest rate movement is generally 30% of the result. This is not included in the impact on shareholders equity as the final impact will depend on the tax status of the Company when it realises the impact of the interest rate results for tax purposes.

equity price risk management The Group is exposed to equity price risks arising from equity investments primarily from investments not held for unit-linked business. The

shares included in financial assets represent investments in listed securities that present the Group with opportunity for return through dividend income and capital appreciation.

Equity investments designated as available-for-sale are held for strategic rather than trading purposes. The Group has no significant concentration of price risk.

The carrying amounts of the Group’s equity investments are as follows:

group31-Dec-17

=n=‘000

group31-Dec-16

=n=‘000

company31-Dec-17

=n=‘000

company31-Dec-16

=n=‘000

Equity Securities; - quoted (available-for-sale) 8(a) 93,962 495,419 (401,457) -

Equity Securities; - quoted (fair value through profit or loss) 8(b) 1,216,464 1,310,263 27,798 66,791

Equity Securities; - unquoted (available-for-sale) 8(a) 594,243 154,334 - -

1,904,669 1,960,016 (373,659) 66,791

equity price sensitivity analysis The sensitivity analyses set out below show the impact of a 10% increase and decrease in the value of equities on profit before tax and

shareholders’ equity based on the exposure to equity price risk at the reporting date.

group31-Dec-17

=n=‘000

group31-Dec-16

=n=‘000

company31-Dec-17

=n=‘000

company31-Dec-16

=n=‘000

10% increase 190,467 196,002 (37,366) 6,679

10% decrease (190,467) (196,002) 37,366 (6,679)

Equityandprofitafteradjustments

Pre-tax profit (641,293) (547,836) (437,035) (362,056)

Shareholders’ equity 5,768,867 6,576,138 5,714,583 6,158,235

Equityandprofitafteradjustments

Pre-tax profit (1,022,227) (939,840) 37,366 50,919

Shareholders’ equity 5,387,933 6,184,134 5,789,315 6,144,877

(ii) credit risk Credit risk refers to the risk that counterparties will default on their contractual obligations resulting in financial loss to the Group. The

key areas of exposure to credit risk for the Group are in relation to its investment portfolio, reinsurance program and receivables from reinsurers and other intermediaries.

The Group has adopted a policy of dealing with only creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group transacts with only entities that have an investment grade rating and above.

This information is supplied by independent rating agencies, where available, and if not available, the Group uses other publicly available financial information and its own trading records to rate its major policyholders and reinsurers.

The Group’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties. Credit exposure is controlled by counterparty limits that are reviewed and approved by the risk management committee periodically.




The Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties. Concentration of credit, otherwise known as single obligor credit, did not exceed 5% of gross monetary assets at any time during the year. The credit risk on liquid funds and other near cash financial instruments is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.

The Group is exposed to credit risk via •Debtsecurities •Reinsuranceassets •Loansandreceivablestopolicyholders,agentsandintermediaries •Cashandcashequivalents •Trade/insurancereceivables The Group’s maximum exposure to credit risk at 31 December 2017 and 31 December 2016 respectively, is represented by the net carrying

amounts of the financial assets set out below:

group 2017

statutory deposits

2017

other receivables

2017

Loans and advances to

customers2017

Debt securities

2017

cash and cash

equivalent2017

Advances under

financelease2017

trade/insurance

receivables2017

Neither past due nor impaired (see note (a) below) 555,000 800,429 1,356,118 150,541 12,505,923 203,410 92,424

Past due but not impaired - - - - - - -

Individually impaired (see note (b) below) - 927,778 - - - 23,000 979,848

gross 555,000 1,728,207 1,356,118 150,541 12,505,923 226,410 1,072,272

Allowance for specific impairment - (927,778) (182,506) - - (23,000) (979,848)

Allowance for collective impairment - - - - - - -

net 555,000 800,429 1,173,612 150,541 12,505,923 203,410 92,424

group 2016

statutory deposits

2016

other receivables

2016


customers2016

Debt securities

2016

cash and cash

equivalent2016

Advances under

financelease2016

trade/insurance

receivables2016

Neither past due nor impaired (see note (a) below) 555,000 436,881 1,143,522 989,334 11,105,440 206,890 247,851

Past due but not impaired - -

Individually impaired (see note (b) below) 902,857 - 23,000 771,841

gross 555,000 1,339,738 1,143,522 989,334 11,105,440 229,890 1,019,692

Allowance for specific impairment - (902,857) (150,929) - - (23,000) (771,841)

Allowance for collective impairment - - (582) - - - -

net 555,000 436,881 992,011 989,334 11,105,440 206,890 247,851




(a) risk assets: neither past due nor impaired The credit quality of the Group’s portfolio to customers that were neither past due nor impaired can be assessed by reference to the internal

rating system adopted by the Group.

Gross amount of financial instruments are as disclosed below:

group 2017In thousands of Naira

neither past due nor impaired

statutory deposits

2017

other receivables

2017


customers2017

Debt securities

2017

cash and cash

equivalent2017

Advances under

financelease2017

trade/insurance

receivables2017

Neither past due nor impaired 555,000 800,429 1,356,118 150,541 12,505,923 203,410 92,424

total 555,000 800,429 1,356,118 150,541 12,505,923 203,410 92,424

group 2016

Neither past due nor impaired 555,000 436,881 1,143,522 989,334 11,105,440 229,890 247,851

total 555,000 436,881 1,143,522 989,334 11,105,440 229,890 247,851

(b) risk assets: individually impaired The Group’s financial instruments are considered individually impaired based on the Group’s accounting policy as documented in Note 2.10.

Gross amount of financial instruments are as disclosed below:

group 2017In thousands of Naira

indvidually impaired

statutory deposits

2017

other receivables

2017


customers2017

Debt securities

2017

cash and cash

equivalent2017

Advances under

financelease2017

trade/insurance

receivables2017

Individually impaired - 927,778 - - - 23,000 979,848

total - 927,778 - - - 23,000 979,848

group 2016

Individually impaired - 902,857 - - - 23,000 771,841

total - 902,857 - - - 23,000 771,841




Analysisoffinancialassetsbasedoncreditriskgrades The majority of debt securities are investment grade and the Group has very limited exposure to sub-standard credits.

Reinsurance assets are reinsurers’ share of outstanding claims and reinsurance receivables. They are allocated below on the basis of ratings for claims paying ability.

Loans and receivables from policyholders, agents and intermediaries generally do not have a credit rating.

The following table shows aggregated credit risk exposure for assets with external credit ratings:

group

31 December 2017In thousands of Naira notes AAA AA A+ A BBB B

not rated

carrying Amount

Fair value through profit or loss carried at fair value (FVTPL)

- FGN bonds 8(b) - - - - - 356,966 - 356,966

- Treasury bills (> 90 days) 8(b) - - - - - 2,186,699 - 2,186,699

2,543,665

Loans and receivables:

- Staff personal loans 8(c) - - - - - - 2,882 2,882

- Staff mortgage loans 8(c) - - - - - - 104,266 104,266

- Policy holders loan 8(c) - - - - - - 39,699 39,699

- Placement 8(c) - - - - - - 6,152 6,152

- Loans and advances to customers 6 - - - - - - 1,173,612 1,173,612

- Advances under finance lease 7 - - - - - - 203,410 203,410

1,530,021

Cash and cash equivalents:

Bank balances 5 - - - 163,848 25,216 233,498 50,877 473,439

Short term deposit 5 - - - 3,405,547 430,709 6,544,489 1,650,721 12,031,466

12,504,905

Non-life reinsurance claims recoverable

11(a) 1,569,961 1,569,961

Life reinsurance claims recoverable:

Short-term insurance contract 11(b) - - - - - - 240,140 240,140

Long-term insurance contract 11(b) - - - - - - 341,797 341,797

2,151,898

Trade/insurance receivables 10 - - - - - - 92,424 92,424

18,822,913




group31 December 2016In thousands of Naira notes AAA AA A+ A BBB B not rated

carrying Amount

Fair value through profit or loss carried at fair value (FVTPL)- FGN bonds 8(b) - - - - 351,506 - 351,506 - Treasury bills (> 90 days) 8(b) - - - - - 1,477,020 - 1,477,020

1,828,526 Loans and receivables:- Lagos state government bond 8(c) - - - - - - - - - Kaduna state government bond 8(c) - - - - - - - - - Corporate bonds 8(c) - - - - - - - - unlisted debentures 8(c) - - - - - - - - - Staff personal loans 8(c) - - - - - - 4,409 4,409 - Staff mortgage loans 8(c) - - - - - - 127,835 127,835 - Policy holders loan 8(c) - - - - - - 20,373 20,373 - Placement 8(c) - - - - - - 836,717 836,717 - Loans and advances to customers 6 - - - - - - 992,011 992,011 - Advances under finance lease - - - - - - 206,890 206,890

2,188,235 Cash and cash equivalents:Bank balances 5(b) - - - - - 554,963 - 554,963 Short term deposit 5(b) - - - - - 10,542,398 - 10,542,398

11,097,361 Non-life reinsurance claims recoverable - - - - - - 972,334 972,334 Life reinsurance claims recoverable:Short-term insurance contract 11(a) - - - - - - 180,338 180,338 Long-term insurance contract 11(b) - - - - - - 290,253 290,253

11(b) 1,442,925 Trade/insurance receivables 10 - - - - - - 247,851 247,851

16,804,898

Analysisoffinancialassetsbasedonpastduestatusgroup31 December 2017Past due statusIn thousands of Naira

fair value through profitorloss

Available-for-sale financialassets

Loans and receivables

recoverable from reinsurers

insurance/trade receivables

Past due and impaired - 178,941 182,506 - 979,848 Past due more than 90 days - - - - - Past due 31 to 90 days - - - - - Past due less than 30 days - - - - - Neither past due nor impaired 3,760,129 1,830,044 1,173,612 2,794,485 92,424 Total carrying amount 3,760,129 2,008,985 1,356,118 2,794,485 1,072,272

31 December 2016Past due statusPast due and impaired - 171,385 151,511 - 771,841 Past due more than 90 days - - - - - Past due 31 to 90 days - - - - 161,395 Past due less than 30 days - - - - 38,869 Neither past due nor impaired 3,138,789 1,676,211 992,011 2,660,526 47,587 Total carrying amount 3,138,789 1,847,596 1,143,522 2,660,526 1,019,692




credit concentrations

geographical Location

group

In thousands of nairacash and cash

equivalents


customers

Advances under

financelease

financial assets

trade/insurance

receivables reinsurance

assets

other loans and

receivables total

31 December 2017

In Nigeria:

North East - - - - - - - -

North Central 13,772 167,233 - - 5,497 - 252 186,754

North West - - - - 2 - - 2

South East 121 - - - 52 - - 174

South South 5,334 4,128 - - 18,898 - 90 28,450

South West 12,486,695 1,002,251 203,410 5,561,773 67,975 2,794,485 800,087 22,916,677

total 12,505,923 1,173,612 203,410 5,561,773 92,424 2,794,485 800,429 23,132,057

31 December 2016

In Nigeria:

North Central - 66,416 - - - - - 66,416

South East - - - - - - - -

South South - - - - - - - -

South West 11,105,440 925,595 206,890 5,632,949 247,851 2,660,526 - 20,779,251

total 11,105,440 992,011 206,890 5,632,949 247,851 2,660,526 - 20,845,667

sectorial analysis

group

In thousands of nairacash and cash

equivalents

Loans and

advances to customers

Advances under

financelease

financial assets

trade/insurance

receivables reinsurance

assets

other loans

and receivables total

31 December 2017

Agriculture - 12,681 2,198 - - - - 14,878

Manufacturing - 12,404 2,150 - - - - 14,554

Trade and commerce - - - - - - - -

Finance and insurance 12,505,923 454,979 78,857 5,561,773 92,424 2,794,485 800,429 22,288,870

Real estate and construction - 110,574 19,165 - - - - 129,739

Education - 177,715 30,802 - - - - 208,517

Others - 405,259 70,239 - - - - 475,499

total 12,505,923 1,173,612 203,410 5,561,773 92,424 2,794,485 800,429 23,132,057

31 December 2016

Agriculture - 33,828 - - - - - 33,828

Manufacturing - 160,502 24,311 - - - - 184,813

Trade and commerce - 86,115 123,182 - - - - 209,297

Finance and insurance 11,105,440 - - 5,632,949 247,851 2,660,526 - 19,646,766

Real estate and construction - 194,551 4,853 - - - - 199,404

Education - 507,379 54,544 - - - - 561,924

Others - 9,635 - - - - 9,635

total 11,105,440 992,011 206,890 5,632,949 247,851 2,660,526 - 20,845,667




(iii) Liquidity risk The Group’s principal objective in managing its liquidity and capital resources is to maximize the returns on capital to shareholders, while

enabling it to pay claims, pay dividends, pay staff and fulfill statutory obligations to regulators and the different tiers of government in the environment in which it operates. Effective and prudent liquidity is a priority across the Group.

Management monitors the liquidity of the Group on a daily basis and projects her financial needs over a multi-year time horizon through its quarterly budget and review process. Management believes that the cash flows from the sources of fund available to the Group are sufficient to satisfy the current liquidity requirements of the Group, including under reasonably foreseeable stress scenarios.

In managing liquidity (and of course, capital), the Group seeks to:

- Match the profile of assets and liabilities, taking into account the risks inherent in each line of product; - Maintain financial strength to support new business growth whilst still satisfying the requirements of policyholders and regulators; - Retain financial flexibility by maintaining strong liquidity, and; - Allocate liquid resources efficiently to support growth while paying claims and other commitments promptly.

Sources of Liquidity In managing cash flow position, the Group has a number of sources of liquidity, including the following principal sources:

- Premium Income; - Investment income - Investment maturities

Application of funds The principal uses of our liquidity include: - Payment of Claims - Staff benefits; - Purchase of investments’ and; - Payment in connection with financing activities.

In practice, most of the Group’s assets are marketable securities which could be converted into cash when required.

Maturity Profile The following table shows the Group’s expected maturity for its non-derivative assets. The table has been drawn up based on the undiscounted

contractual maturities of the assets including interest that will be earned on those assets except where the Group anticipates that the cash flow will occur in a different period.Reinsurers’ share of unearned premiums are excluded from this analysis.

It also shows details of the expected maturity profile of the Group’s undiscounted obligations with respect to its financial liabilities and estimated cash flows of recognized insurance contract liabilities. It includes both interest and principal cash flows.

It should be noted that unit-linked assets and liabilities and reinsurers’ share of unearned premiums are excluded from this analysis.

group31 December 2017

In thousands of Naira notescarrying amount

contractual cashflow < 1 month 1 - 3 months 3 - 12 months 1 - 5 years > 5 years

Non-derivative financial assets/insurance assetsCash and cash equivalents 5 12,505,923 12,505,923 485,070 12,020,853 - - - Fair value through profit or loss carried at fair value (FVTPL) 8(b)

2,543,665 2,599,619 13,105 2,240,079 205,727 140,708 -

Loans and receivables 8(c) 150,541 189,727 30,982 7,546 28,535 101,415 21,249 Loans and advances to customers 6 1,173,612 1,356,118 715,912 96,383 356,295 187,528 - Advances under finance lease 7 203,410 226,410 129,679 2,092 32,781 61,858 - Statutory deposits 20 555,000 1,057,308 - - - 418,590 638,718

17,132,151 17,935,105 1,374,748 14,366,953 623,338 910,099 659,967

Non-derivative financial liabilities/insurance liabilityBorrowings 30 1,743,156 1,643,931 29,086 1,582,721 6,079 26,046 - Trade payables 24 10,159,430 10,159,430 9,503,450 655,980 - - - Other liabilities 25 1,343,998 1,343,998 1,343,998 - - - - Depositors' funds 26 1,446,763 1,446,763 264,832 121,776 551,815 508,340 - Investment contract liabilities 28 293,555 290,610 - - - 126,808 163,802

14,986,902 14,884,732 11,141,366 2,360,477 557,894 661,194 163,802

Gap (asset - liabilities) 2,145,249 3,050,373 (9,766,618) 12,006,476 65,444 248,905 496,165 Cumulative liquidity gap 12,006,476 12,071,921 12,320,826 12,816,991




31 December 2016



Non-derivative financial assets/insurance assetsCash and cash equivalents 5 11,105,440 11,191,153 9,836,474 397,375 957,304 - - Fair value through profit or loss carried at fair value (FVTPL)

8(b) 1,828,526 1,867,304 8,227 150,592 1,309,697 355,483 43,305

Loans and receivables 8(c) 989,334 997,925 7,746 819,697 32,213 111,571 26,698 Loans and advances to customers 6 992,011 1,230,418 39,806 22,478 93,688 1,074,446 - Advances under finance lease 7 206,890 439,293 810 1,835 8,021 428,627 - Statutory deposits 20 555,000 982,848 283,360 699,488

15,677,201 16,708,941 9,893,063 1,391,977 2,400,923 2,253,487 769,491

Non-derivativefinancialliabilities/insurance liabilityBorrowings 30 2,585,324 2,795,845 1,944 911,008 1,882,893 - - Trade payables 24 8,355,104 8,355,104 8,355,104 - - - - Other liabilities 25 1,461,380 1,461,380 1,461,380 - - - - Depositors' funds 26 1,203,456 1,203,456 76,615 2,269 616,232 508,340 - Investment contract liabilities 28 339,456 336,271 - - 17,811 132,201 186,259

13,944,720 14,152,056 9,895,043 913,277 2,516,936 640,541 186,259 Gap (asset - liabilities) 1,732,481 2,556,885 (1,980) 478,700 (116,013) 1,612,946 583,232 Cumulative liquidity gap 478,700 362,687 1,975,633 2,558,865

company31 December 2017



Non-derivativefinancialassets/insurance assetsCash and cash equivalents 5 112,363 112,363 28,083 84,280 - - - Fair value through profit or loss carried at fair value (FVTPL) 8(b)

16,949 17,680 - 490 17,190 - -

129,312 130,043 28,083 84,770 17,190 - -

Non-derivativefinancialliabilities/insurance liabilityBorrowings 30 1,613,723 1,617,885 29,086 1,582,721 6,079 - - Other liabilities 25 3,270,016 3,270,016 3,270,016 - - - -

4,883,739 4,887,901 3,299,102 1,582,721 6,079 - -

Gap (asset - liabilities) (4,754,427) (4,757,858) (3,271,019) (1,497,951) 11,111 - - Cumulative liquidity gap (1,497,951) (1,486,839) (1,486,839) (1,486,839)

31 December 2016In thousands of Naira notes

carrying amount


Non-derivativefinancialassets/insurance assetsCash and cash equivalents 5 127,279 127,701 77,477 50,224 - - - Fair value through profit or loss carried at fair value (FVTPL) 8(b) 82,644 83,191 66,791 16,400 - - -

209,923 210,892 144,268 66,624 - - -

Non-derivativefinancialliabilities/insuranceliabilityBorrowings 30 2,482,327 2,867,239 - 31,108 925,023 1,911,108 - Other liabilities 25 841,576 841,576 841,576 - - - -

3,323,903 3,708,815 841,576 31,108 925,023 1,911,108 - Gap (asset - liabilities) (3,113,980) (3,497,923) (697,308) 35,516 (925,023) (1,911,108) - Cumulative liquidity gap 35,516 (889,507) (2,800,615) (2,800,615)




(b) financial assets and liabilities

Accountingclassification,measurementbasisandfairvalues The table below sets out the Group’s classification of each class of financial assets and liabilities, and their fair values.

group 31 December 2017

In thousands of NairaLoans and

receivables

Designated at fair value

Available- for-sale

other financial

liabilities

total carrying amount fair value

Cash and cash equivalents 12,505,923 - - - 12,505,923 12,505,923

Financial assets 150,541 3,760,129 1,651,103 - 5,561,773 5,577,643

Loans and advances to customers 1,173,612 - - - 1,173,612 1,420,071

Advances under finance lease 203,410 - - - 203,410 203,410

Trade receivables 92,424 - - - 92,424 92,424

Other receivables less prepayments 532,835 - - - 532,835 532,835

Statutory deposits 555,000 - - - 555,000 555,000

15,213,745 3,760,129 1,651,103 - 20,624,977 20,887,305

Borrowings - - - 1,743,156 1,743,156 1,743,156

Trade payables - - - 10,159,430 10,159,430 10,159,430

Depositors' fund - - - 1,446,763 1,446,763 1,446,763

Other liabilities - - - 1,343,998 1,343,998 1,343,998

- - - 14,693,347 14,693,347 14,693,347

31 December 2016

Cash and cash equivalents 11,105,440 - - - 11,105,440 11,105,440

Financial assets 989,334 3,138,789 1,504,826 - 5,632,949 5,632,949

Loans and advances to customers 992,011 - - - 992,011 1,200,333

Advances under finance lease 206,890 - - - 206,890 250,337

Trade receivables 247,851 - - - 247,851 247,851


Statutory deposits 555,000 - - - 555,000 555,000

14,278,815 3,138,789 1,504,826 - 18,922,430 19,174,199

Borrowings - - - 2,585,324 2,585,324 2,585,324

Trade payables - - - 8,355,104 8,355,104 8,355,104

Depositors' fund - - - 1,203,456 1,203,456 1,203,456


- - - 13,605,264 13,605,264 13,605,264




company

31 December 2017

In thousands of NairaLoans and

receivables

Designated at fair value

Available- for-sale

other financial

liabilities

total carrying amount

fair value

Cash and cash equivalents 112,363 - - - 112,363 112,363

Financial assets - 44,747 - - 44,747 44,747


265,804 44,747 - - 310,551 310,551

Borrowings - - - 1,613,723 1,613,723 2,145,995


- - - 4,883,739 4,883,739 5,416,011

31 December 2016

Cash and cash equivalents 127,279 - - - 127,279 127,279

Financial assets - 82,644 - - 82,644 82,644


407,038 82,644 - - 489,682 489,682

Borrowings - - - 2,482,327 2,482,327 2,482,327

Other liabilities - - - 841,576 841,576 841,576

- - - 3,323,903 3,323,903 3,323,903

Management has assessed that the fair value of financial assets, loans and advances and borrowings approximates the carrying value of these instruments following the relatively short tenor of the instruments and that interest approximates market interest rate as at year end.

For other receivables and payables, management has assessed that given the nature of the instruments, carrying value approximates fair value.




55 insurance risk management The Group accepts insurance risk through its insurance contracts and certain investment contracts where it assumes the risk of loss from

persons or organisations that are directly subject to the underlying loss. The Group is exposed to the uncertainty surrounding the timing, frequency and severity of claims under these contracts.

The Group manages its risk via its underwriting and reinsurance strategy within an overall risk management framework. Pricing is based on assumptions which have regard to trends and past experience. Exposures are managed by having documented underwriting limits and criteria. Reinsurance is purchased to mitigate the effect of potential loss to the Group from individual large or catastrophic events and also to provide access to specialist risks and to assist in managing capital. Reinsurance policies are written with approved reinsurers on either a proportional or excess of loss treaty basis.

Regulatory capital is also managed (though not exclusively) by reference to the insurance risk to which the Group is exposed.

(a) non-life insurance The Group writes fire, general accident, oil & gas, engineering, bond, marine and motor risks primarily over a twelve month duration (usually

longer for engineering policies). The most significant risks arise from natural disasters, climate change and other catastrophes (i.e. high severity, low frequency events). A concentration of risk may also arise from a single insurance contract issued to a particular demographic type of policyholder, within a geographical location or to types of commercial business. The relative variability of the outcome is mitigated if there is a large portfolio of similar risks.

The concentration of non-life insurance by the location of the underlying risk is summarised below by reference to liabilities.

gross reinsurance netIn thousands of Naira 31-Dec-17 31-Dec-16 31-Dec-17 31-Dec-16 31-Dec-17 31-Dec-16- Within Nigeria 5,446,009 5,398,979 2,212,548 2,189,935 3,233,461 3,209,044 - Outside Nigeria - - - - - -

5,446,009 5,398,979 2,212,548 2,189,935 3,233,461 3,209,044

The concentration of non-life insurance by type of contract is summarised below by reference to liabilities.

gross reinsurance netIn thousands of Naira 31-Dec-17 31-Dec-16 31-Dec-17 31-Dec-16 31-Dec-17 31-Dec-16Fire 2,089,367 1,507,883 1,345,788 799,554 743,579 708,329 Accident 412,026 741,719 72,815 95,384 339,211 646,335 Motor 962,162 1,165,026 101,085 142,485 861,077 1,022,541 Marine 449,537 327,365 126,007 126,358 323,530 201,007 Oil and gas 1,396,351 1,521,538 479,595 946,892 916,756 574,646 Engineering 126,916 121,133 82,000 72,110 44,916 49,023 Bond 9,650 14,315 5,258 7,152 4,392 7,163

5,446,009 5,398,979 2,212,548 2,189,935 3,233,461 3,209,044

outstanding claims:Fire 1,679,242 934,662 1,173,325 555,691 505,917 378,971 Accident 255,431 479,739 41,502 65,926 213,929 413,813 Motor 428,064 580,693 73,563 100,022 354,501 480,671 Marine 217,338 181,941 50,286 50,286 167,052 131,655 Oil and Gas 801,783 672,183 121,596 149,070 680,187 523,113 Engineering 98,415 76,304 69,493 44,194 28,922 32,110 Bond 8,754 14,298 4,813 7,144 3,941 7,154 Total 3,489,027 2,939,820 1,534,578 972,334 1,954,449 1,967,486

unexpired risk:Fire 410,125 573,221 172,463 243,863 237,662 329,358 Accident 156,595 261,980 31,313 29,457 125,282 232,523 Motor 534,098 584,333 27,522 42,464 506,576 541,869 Marine 232,199 145,424 40,338 76,073 191,861 69,351 Oil and gas 594,568 849,355 357,999 797,821 236,569 51,534 Engineering 28,501 44,829 12,507 27,915 15,994 16,914 Bond 896 17 428 8 468 9 Total 1,956,982 2,459,159 642,570 1,217,601 1,314,412 1,241,558




reserving Methods and Assumptions To ensure the estimates calculated are not biased by the underlying assumptions of the model chosen, four different deterministic methods

were considered: a chain ladder Method

i The Basic Chain Ladder Method (BCL): The Basic Chain Ladder method forms the basis to the deterministic reserving methods explained below. For each class of business, historical

paid claims were grouped into accident year cohorts–representing when they were paid after their accident year. These cohorts form the development triangles. Each accident years, paid claims were accumulated to the valuation date and projected into the future to attain the expected ultimate claim arising in the year.This assumes the trends observed in the historical data will continue. The gross claim reserve is calculated as the difference between the cumulated paid claims and the estimated ultimate claims.

ii The Inflation Adjusted Chain Ladder Method (IACL): under this method, the historical paid losses were adjusted to allow for inflation to the valuation date using the corresponding inflation

index in each of the accident years. The inflation adjusted claims were then treated similarly to the Basic Chain Ladder described above. The projected incremental paid claims are then inflated based on our future inflation assumption to the expected future payment date.

iii Discounted Basic Chain Ladder (BCL) and Inflation Adjusted Basic Chain Ladder (IABCL) historical claims paid were goruped into 10 years cohorts- representing when they were paid after the underwriting year. This is the

discounted form of the BCL and IABCL. In determining the value, the future expected cash flow for claim payments is discounted to present day terms using our assumed discount rate.

b Loss ratio Method under this method the ultimate claims is obtained by studying the historical loss ratios, investigating any differences and using judgments

to derive a loss ratio. Paid claims already emerged were deducted from the estimated ultimate claims to obtain the reserves.

c Bornhuetter-ferguson Method This method combines the estimates attained from the Chain Ladder and Loss Ratio methods. The BF method takes a weighted average of

the two estimates, where the weights are related to the number of claims already reported. Therefore, the more past information there is available, the higher the weighting given to the chain ladder estimate.

d frequency and severity Method This method investigates the trend of the claim frequency and average cost per claim for each accident year. An average of the fully run

off accident years was used as a guide on the ultimate claim frequency and ultimate average cost which was then adopted for the accident years that are not fully run off.

Method selected- Discounted iABcL The IBNR reserves are determined using deterministic calculations which provide a “best estimate” of the reserve. The “best-estimate” is

determined by applying a combination of the Chain Ladder (“CL”) and the Bornhuetter-Ferguson (“BF”) methods to attritional paid claims triangles. The combination between a CL and BF methods aims to reflect the reliability of information when estimating the IBNR.

For earlier accident years, where the development is reasonably mature, a CL approach was used which relied more heavily on the data to set the ultimate level of claims. For later accident periods where there still exists a large degree of uncertainty about the ultimate level of claims and the reported to date is a less reliable estimate of the ultimate loss, a BF method is used which makes use of an estimate of the ultimate loss ratio.

Assumptions underlying the Valuation Methods

i Policies are written uniformly throughout the year for each class of business.ii Claims occur uniformly throughout the year for each class of business. This implies that claims occur on average halfway through year.iii Future claims follow a regression pattern from the historical data. hence payment patterns will be broadly similar in each accident year.

The proportionate increase in the known cumulative payments from one development year to the next is used to calculate the expected cumulative payments for the future development periods.

iv An implicit assumption of the chain ladder is that weighted past average inflation will remain unchanged into the future.v We assume gross claim amount includes all related claim expenses. If this is not the case, the Company will hold a separate reserve to cover

claim expenses.vi The uPR is calculated on the assumption that risk will occur evenly during the duration of the policy.vii under the Average Cost per claim method used in estimating large losses, the Company assumed the early years (e.g. accident years 2007,

2008) are fully developed.viii The run off period is ten (10) years and hence the method assumes no more claims will be paid subsequently.

(b) Life insurance and investment contracts with discretionary participating features (DPf) The Group writes life, annuities, and investment-linked contracts with or without discretionary participating features (DPF). The most

significant risks arise from mortality, persistency, longevity, morbidity, expense variations and investment returns.




concentration of insurance riskConcentration of risk may arise from geographic regions, epidemics, accumulation of risks and market risk. The concentration of life insurance and investment contracts with DPF by location of the underlying risk is summarized below by reference to liabilities.

gross reinsurance net

In thousands of Naira 31-Dec-17 31-Dec-16 31-Dec-17 31-Dec-16 31-Dec-17 31-Dec-16

Life insurance:

- Within Nigeria 5,746,583 4,615,352 598,553 470,591 5,148,030 4,144,761

- Outside Nigeria - - - - - -

5,746,583 4,615,352 598,553 470,591 5,148,030 4,144,761

Investment contracts with DPF:

- Within Nigeria 293,555 339,456 - - 293,555 339,456

- Outside Nigeria - - - - - -

293,555 339,456 - - 293,555 339,456

The concentration of life insurance and investment contracts with DPF by type of contract is summarized below by reference to liabilities.

gross reinsurance netIn thousands of Naira 31-Dec-17 31-Dec-16 31-Dec-17 31-Dec-16 31-Dec-17 31-Dec-16Protection 3,084,622 3,529,487 240,140 185,262 2,844,482 3,344,225 Pensions - - - - - - Annuities 1,142,150 1,085,865 - - 1,142,150 1,085,865 Others - - - - - -

4,226,772 4,615,352 240,140 185,262 3,986,632 4,430,090 Investment contracts with DPF 293,555 339,456 - - 293,555 339,456

Assumptions and sensitivitiesThe risks associated with the life insurance and investment contracts with DPF are complex and subject to a number of variables which complicate quantitative sensitivity analysis. The key assumptions in quantifying these liabilities include mortality, persistency, longevity, morbidity, expense variations, investment return and discount rates.

Some results of sensitivity testing are set out below showing the impact on profit before tax and shareholders’ equity before and after reinsurance. For each sensitivity scenario, the impact of a change in a single factor is shown, with other assumptions or variables unchanged.

Pre-taxprofit shareholders’ equityIn thousands of Naira 31-Dec-17 31-Dec-16 31-Dec-17 31-Dec-16Life insurance:5% increase in mortality/morbidity Gross (2017: Nil; 2016: Nil) - - - - Net (2017: =N=4,132; 2016: =N=3,737) (641,797) (619,958) 2,267,255 1,485,171 5% increase in longevity- Gross - - - - Net - - - 10% increase in expenses Gross (2017: Nil; 2016: Nil) - - Net (2017: =N=4,163; 2015: =N=3,762) (641,828) (619,983) 2,267,224 1,485,146 1% increase in interest rates Gross (2017: Nil; 2016: Nil) - Net (2017: =N=4,008; 2016: =N=3,631) (641,673) (619,852) 2,267,379 1,448,277




claims development table for group life schemeClaims on life insurance contracts are payable on a claims-occurrence basis and the Group is liable for all insured events that occurred during the term of the contract. There is however, uncertainty in the estimation of future benefits payments arising from the unpredictability of long term changes in overall levels of mortality and the variability in policy holder behavior.

Changes may occur in the amount of the Group’s obligations at the end of a contract period. In setting claims provisions, the Group gives consideration to the probability and magnitude of future claims experience being more adverse than assumed and exercises a degree of caution in setting reserves where there is considerable uncertainty.

The Group has taken advantage of the transitional rules of IFRS 4 that permit only five years of information to be disclosed upon adoption of IFRS.

The following table shows the estimates of cumulative incurred claims, including both claims notified and IBNR for each successive year at each reporting date, together with cumulative payments to date with respect to short-term insurance contract.

claims development pattern: group life

incremental chain ladder-Yearly Projections (=n=)

Development year

Accident year 0 1 2 3 4

2007 122,700 34,905 577 3,634 1,262

2008 45,486 45,342 29,838 1,256 2,379

2009 25,378 54,498 31,968 18,099 2,697

2010 51,891 93,022 27,854 11,738 15,333

2011 76,113 70,612 52,699 43,993 10,754

2012 84,733 171,188 47,664 46,107 47,213

2013 228,475 243,203 52,792 26,114 26,714

2014 313,679 431,806 176,710 119,421

2015 625,063 334,756 246,959

2016 481,742 318,491

2017 388,002

The company is not exposed to any insurance risk.




56 segment reporting IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly

reviewed by the Chief Executive to allocate resources to the segments and to assess their performance. In contrast, the predecessor standard (IAS 14 Segment Reporting) required the Group to identify two sets of segments (business and geographical), using a risks and rewards approach. The Group has adopted IFRS 8 Operating Segments reporting.

Following adoption of IFRS 8, the Group’s reportable segments have not changed as the business segments reported to the monthly executive committee follow clear business lines with distinct risk and rewards which formed the basis under IAS 14.

The Group’s reportable segments under IFRS 8 are therefore identified as follows:

- Non-life insurance; - Life insurance; - Financial services; - healthcare; and - Asset management.

The accounting policies of the reportable segments are the same as the Group’s accounting policies. Segment profit represents the profit earned by each segment without allocation of central corporate expenses, certain finance costs and tax expense. This is the measure reported to the Group’s Chief Executive for the purposes of resource allocation and assessment of segment performance.

(a) operating segment The group has the following five operating segments; all corresponding with the activities of one or two subsidiaries:

i Non-life insurance - consists of Royal Exchange General Insurance Company Limited

ii Life insurance - consists of Royal Exchange Prudential Life Plc

iii Financial services - consists of Royal Exchange Plc and Royal Exchange Microfinance Bank Limited

iv health insurance - consists of Royal Exchange healthcare Limited

v Asset management- consists Royal Exchange Finance and Asset Management is the only subsidiary in the asset management segment

Reference is made to note 9 for the required quantitative disclosures under IFRS 8

(b) geographical information The Group’s revenue and information about its segment net assets by geographical location are as follows:

revenue net assets

In thousands of Naira 31-Dec-17 31-Dec-16 31-Dec-17 31-Dec-16

Within Nigeria 2,413,399 2,724,161 5,578,400 6,380,136

Outside Nigeria - - - -

2,413,399 2,724,161 5,578,400 6,380,136




57 related Parties The Group’s related parties have been considered to be entities that the Group has control or influence over, key management personnel

and persons connected with them. The key management personnel have been identified as the executive and non-executive directors of the Group. Close members of family are those family members who may be expected to influence or be influenced by that individual in their dealings with the Group. Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below:

(a) transactions with related parties The Group enters into transactions with its subsidiaries, associates, joint ventures and its key management personnel in the normal course

of business. The transactions and balances below concern mainly banking, insurance and administrative transactions. The banking and insurance transactions are done in the ordinary course of business against a pricing that considers related party relationship. For the related party transactions with key management personnel, see note 62.

In thousands of Naira relationship 2017 2016

royal exchange PLc

Bank balances

Royal Exchange Microfinance Bank Ltd Subsidiary 12,790 2,378

Payables

Royal Exchange General Insurance Company Limited Subsidiary 2,173,342 -

Royal Exchange Prudential Life Plc Subsidiary 1,088,397 412,182

Royal Exchange Finance and Asset Management Subsidiary 8,115 3,058

Deposit for shares

Royal Exchange Prudential Life Plc Subsidiary - 500,000

receivables

Royal Exchange General Insurance Company Limited Subsidiary - 199,713

Royal Exchange Prudential Life Plc Subsidiary - -

Royal Exchange healthcare Ltd Subsidiary 55,214 49,493

Royal Exchange Microfinance Bank Ltd Subsidiary - 3,738

Premium paid

Royal Exchange healthcare Ltd Subsidiary 1,786 1,969

Royal Exchange General Insurance Company Limited Subsidiary - 2,761

Royal Exchange Prudential Life Plc Subsidiary 115 240

Loans


finance Lease


Management fees received

Royal Exchange General Insurance Company Limited Subsidiary 153,820 135,243

Royal Exchange Prudential Life Plc Subsidiary 118,221 85,591




In thousands of Naira relationship 2017 2016

solicitor's fee paid

Punuka Attorneys and solicitors Director 1,405 5,000

royal exchange general insurance company Limited

Bank/(Bank Overdraft) Balance with Royal Exchange Microfinance Bank (9,477) 2,382

Deposit fund with Royal Exchange Prudential Life Plc 269,335 294,146

Deposit fund with Royal Exchange Finance and Asset Management Ltd 61,164 10,136

Deposit fund with Royal Exchange Microfinance Bank Ltd - 2,479

Finance lease obligation to Royal Exchange Finance and Asset Management Ltd 89,061 103,925

Overdraft facility with Royal Exchange Microfinance Bank Ltd (49,068) (49,666)

royal exchange Prudential Life Plc

Bank/(Bank Overdraft) Balance with Royal Exchange Microfinance Bank 1,773 (1,669)

Deposit fund with Royal Exchange Finance and Asset Management Ltd - 2,537

Finance lease obligation to Royal Exchange Finance and Asset Management Ltd 44,512 24,134

royal exchange finance and Asset Management

Bank Balance with Royal Exchange Microfinance Bank 10,000 1,245

royal exchange Healthcare Limited

Bank overdraft balance with Royal Exchange Microfinance Bank 6,321 9,925

The Group considered the outstanding balances at the reporting date are unsecured and non-interest bearing. The settlements will involve physical delivery of cash.

58 statement of Prudential Adjustments In accordance with the Regulatory guidelines released by both CBN/NDIC, provisions for loan losses recognised in the income statement

shall be determined based on the requirements of IFRS. The IFRS impairment should be compared with provisions determined under the CBN Prudential guidelines and the expected impact/changes in general reserves should be treated as follows:

(a) If prudential provision is higher than IFRS impairment; Transfer the difference from general reserve to a non-distributable regulatory reserve.

(b) If prudential provision is less than IFRS impairment; Transfer the excess from the non-distributable regulatory reserve to the general reserve to the extent of the non-distributable reserve previously recognised.


31-Dec-17group

31-Dec-16

Loans and advances to customers

Specific impairment (see note 6) 182,506 150,929

Collective impairment (see note 6) - 582

Advancesunderfinancelease

Impairment allowance (see note 7) 23,000 23,000

Total impairment allowance (a) 205,506 174,511

Total impairment based on prudential guidelines (b) 731,883 668,757

Regulatory risk reserve (c = b - a) 526,377 494,246




59 contingencies and commitments (a) commitments for expenditure The Group and company have no commitment for capital expenditure at the reporting date.

however, the Group entered into a contract for the management and maintenance of some of its investment properties on annual basis, which will give rise to an annual expense of =N=1.275 million.

(b) contingencies and commitments Contingent liabilities

In thousands of Naira31-Dec-17

=n=‘00031-Dec-16

=n=‘000

Legal proceedings and litigations 2,307,052 6,083,184

Tax PAYE for 2014 tax audit 25,200 25,200

2,332,252 6,108,384

There are certain pending litigations in some courts of law in Nigeria involving the Group and the Company either as plaintiff or defendant. however, nine cases have been decided against the Group and necessary accruals have been made in the financial statements. The actions are being vigorously contested and the Directors are of the opinion that no significant liability will arise therefrom in excess of the provision made in the financial statements.

Contingent assets

In thousands of Naira31-Dec-17

=n=‘00031-Dec-16

=n=‘000

Legal proceedings 25,181 -

25,181 -

60 events after the reporting period There were no events subsequent to the financial position date which require adjustment to, or disclosure in, these financial statements.

61 fiduciary Activities The Company acts as a custodian, trustee or in other fiduciary capacity, that results in its holding, placing or performing oversight functions

over assets on behalf of its clients.

The Company performs oversight and monitoring functions over two mutual funds. Its responsibilities have been defined in Item 11 of the Directors’ report.

Other assets held on behalf of clients represents unclaimed debentures which have matured and are yet to be claimed by the debenture holders as at reporting date. These assets are excluded from these financial statements, as they are not assets of the Company. The analysis of these assets are as shown below:

In thousands of Nairacompany

31-Dec-17company

31-Dec-16Funds under Management

Clients' Federal Government Bonds 33,103 33,103 Clients' Commercial Papers 222,125 196,599 Clients' Treasury Bills 56,305 42,925 Clients' Bank balances 50 111

311,582 272,738 Clients' Payables - - Management Fees Payable - -

311,582 272,738




62 compensation of key management personnel Key management personnel of the Company includes all directors, executive and non-executive, and senior management. The summary of

compensation of key manangement personnel for the year is as follows:

(a) chairman and directors’ emoluments:

(i) Emoluments


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Non-executive directors

Directors' fees 1,420 1,420 1,420 1,420

Sitting allowance 21,853 24,064 20,228 16,709

Other allowances 86,349 46,237 86,349 46,237

109,622 71,721 107,997 64,366

Executive Directors

Executive Compensation 40,153 32,782 40,153 32,782

Post employment benefits 2,371 1,470 2,371 1,470

42,524 34,252 42,524 34,252

Chairman 15,702 3,424 15,235 3,424

Other directors 136,444 102,550 102,540 89,395

152,146 105,973 117,775 92,818

The highest paid director 53,407 44,178 53,407 44,178

(ii) Number of directors (excluding the chairman) within the following emolument range

=n=group

31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

400,000 - 500,000 - - - -

500,001 - 600,000 - 6 - -

2,000,001 - 5,000,000 1 3 - -

Above 5,000,000 7 7 7 7




(b) staff Average number of persons employed in the financial year and the related staff cost were as follows:


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Managerial 24 25 1 1

Senior staff 296 322 7 7

Junior staff 73 88 1 1

393 435 9 9

(i) Staff costs


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

Salaries, wages and allowances 1,680,169 1,637,890 83,584 85,100

Pension cost 86,351 88,544 - -

1,766,519 1,726,434 83,584 85,100

(ii) Pension scheme


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16

At January 1 - - - -

Provision in the year 86,351 88,544 - -

Remittance to pension fund administrators (81,808) (88,544) - -

At December 31 4,543 - - -

(iii) Employees remunerated at higher rates


31-Dec-17group

31-Dec-16company

31-Dec-17company

31-Dec-16 Below 400,000 1 16 - - 400,001 - 500,000 18 6 - - 500,001 - 600,000 - 6 - - 600,001 - 700,000 5 4 - - 700,001 - 800,000 3 1 1 1 800,001 - 900,000 - 13 - - 900,001 - 1,000,000 2 1 - - 1,000,001 - 2,000,000 80 98 1 1 2,000,001 - 3,000,000 146 162 2 2 3,000,001 - 4,000,000 27 21 2 2 4,000,001 - 5,000,000 42 49 1 1 5,000,001 - 6,000,000 27 20 - - 6,000,001 - 7,000,000 20 10 - - 7,000,001 - 8,000,000 4 7 1 1 8,000,001 - 9,000,000 8 7 - - 9,000,001 - 10,000,000 1 4 - - 10,000,001 - 12,000,000 5 5 - - 12,000,001 - 20,000,000 3 4 - - 20,000,001 - 30,000,000 1 1 1 1

393 435 9 9




63 contraventions During the year, the Group contravened certain sections of the Securities and Exchange Commission rules and regulations.


company regulatory Authority Description Penalty paid

31-Dec-17 31-Dec-16

Royal Exchange Plc NSE Penalty for late filing of 2016 audited accounts 7,300 -

SEC Penalty For Late Submission of Corporate Governance Scorecard for the Year Ended 31 December 2016

3,750 -

SEC Penalty For Non-Remittance of Dividends By Royal Exchange Plc

4,650 -

SEC Penalty for late filing of 1st quarter returns as at 30th April, 2016 - 7,505

SEC Penalty for Late Submission of 1st Quarter 2017 Trustee Returns 225 -

SEC Penalty for Late Submission of 1st Quarter 2016 Trustee Returns - 128

other components of group

Royal Exchange Finance and Asset Management Limited

SEC Penalty for Late Filing of Fidelity Bond Insurance Policy

11,067 519

26,992 8,152


otHer nAtionAL DiscLosures


Value aDDeD statementFor the Year Ended 31 December 2017


2017 =n=’000

%group 2016

=n=’000 %

company2017

=n=’000 %

company2016

=n=’000%

Net premium income 7,078,057 8,172,005 - -

Investment and other income 56,147 (27,172) 532 446

Interest income 1,017,451 283,788 (282,841) (166,549)

Net fair value gain or loss on financial assets 322,782 359,955 15,963 (5,973)

Other operating income 323,988 562,120 323,583 253,365

Bought in goods and services (8,031,215) (8,645,147) (294,495) (349,084)

Value added 767,210 100 705,549 100 (237,258) 100 (267,795) 100

Applied as follows:

In payment of employees:

- Salaries, wages and other benefits 900,493 164 867,402 164 83,839 719 84,432 719

In payment to government:

- Taxation 287,516 67 236,414 67 48,551 76 - 76

- Depreciation 231,084 44 276,052 44 30,021 57 16,508 57

- Contingency reserve 317,760 41 305,933 41 - - - -

- General reserve (969,643) (216) (980,252) (216) (399,669) (752) (368,735) (752)

767,210 100 705,549 100 (237,258) 100 (267,795) 100


FiVe Year FinanCial summarYFor the Year Ended 31 December 2017

grouP

In thousands of Naira 31-Dec-17 31-Dec-16 31-Dec-15restated

31-Dec-14 31-Dec-13AssetsCash and cash equivalents 12,505,923 11,105,440 7,035,842 6,635,540 1,810,882 Loans and advances to customers 1,173,612 992,011 1,278,434 1,083,876 812,571 Advances under finance lease 203,410 206,890 123,269 102,980 218,585 Financial assets 5,561,773 5,632,949 3,448,883 4,024,087 3,558,965 Trade receivables 92,424 247,851 528,399 319,428 421,637 Reinsurance assets 2,794,485 2,660,526 1,889,750 1,916,261 2,044,041 Deferred acquisition cost 295,829 351,076 382,490 366,892 469,160 Other receivables and prepayments 800,429 436,881 387,396 476,235 483,625 Investment in associates 193,617 179,146 274,088 295,250 213,694 Investment properties 5,431,182 5,419,858 6,807,743 7,722,739 7,092,569 Property and equipment 2,136,567 2,283,270 2,219,584 1,673,178 1,690,707 Intangible assets 29,435 33,116 39,088 46,863 37,418 Employees retirement benefit asset (Net) 258,135 234,011 154,016 170,199 166,963 Statutory deposits 555,000 555,000 555,000 555,000 555,000 Deferred tax assets 267,386 365,065 427,621 640,445 699,334 Assets classified as held for sale 973,639 973,639 973,639 - - Deposit for shares - - - - - Total assets 33,272,846 31,676,729 26,525,242 26,028,973 20,275,151

LiabilitiesBank borrowing 1,743,156 2,585,324 1,020,083 1,051,959 52,554 Deferred income 143,798 162,942 122,169 102,234 84,797 Trade payables 10,159,430 8,355,104 5,387,629 5,151,843 528,509 Other liabilities 1,608,666 1,616,032 1,469,737 1,233,863 1,170,182 Depositors' funds 1,446,763 1,203,456 1,196,324 1,032,616 595,449 Insurance contract liabilities 11,337,881 10,158,280 8,263,204 7,094,226 6,973,096 Investment contract liabilities 293,555 339,456 336,271 257,963 599,106 Dividend payable - - - - 80,525 Current income tax liabilities 608,472 537,200 488,713 502,951 494,388 Employees retirement benefit liability 38,458 39,269 570,008 545,206 550,660 Deferred tax liabilities 314,267 299,530 244,868 172,495 167,931 Total liabilities 27,694,446 25,296,593 19,099,006 17,145,356 11,297,197

equityShare capital 2,572,685 2,572,685 2,572,685 2,572,685 2,572,685 Share premium 2,690,936 2,690,936 2,690,936 2,690,936 2,690,936 Contingency reserve 2,046,612 1,728,852 1,422,919 1,176,375 947,734 Treasury shares (500,000) (500,000) (500,000) (500,000) (500,000)Retained earnings (1,967,362) (647,828) 834,374 2,657,434 3,045,281 Other component of equity 735,529 535,491 405,322 286,187 221,318 Total equity 5,578,400 6,380,136 7,426,236 8,883,617 8,977,954 Total equity and liabilities 33,272,846 31,676,729 26,525,242 26,028,973 20,275,151


31-Dec-14 31-Dec-13StatementofProfitorlossandOtherComprehensiveIncomeGross premium 12,822,219 12,517,381 10,790,628 9,425,451 9,083,092 Net income 2,413,399 2,724,161 2,377,409 3,391,805 3,403,995 Profit/ (loss) before taxation (831,760) (743,838) (896,961) 304,730 828,213 Income tax expense (287,516) (236,414) (401,999) (13,100) (21,929)Profit/(loss) after taxation (1,119,276) (980,252) (1,298,960) 291,630 806,284 Earnings per share (kobo) (19) (19) (25) 3 31


FiVe Year FinanCial summarYFor the Year Ended 31 December 2017

coMPAnY


31-Dec-14 31-Dec-13AssetsCash and cash equivalent 112,363 127,279 105,452 49,606 35,595 Financial assets 44,747 82,644 17,935 - - Investment in subsidiaries 10,989,990 8,689,990 8,660,464 8,660,464 7,620,464 Other Receivables and prepayments 210,098 319,967 79,119 81,920 76,384 Property and Equipment 91,736 90,195 26,600 17,488 16,852 Intangible Assets 5,513 - - - - Deposit for shares - 500,000 - - - Total assets 11,454,447 9,810,075 8,889,570 8,809,478 7,749,295

LiabilitiesBank borrowing 1,613,723 2,482,327 872,257 1,106,011 - Other liabilities 3,784,039 920,200 1,199,985 672,377 452,819 Dividend payable - - - - 80,525 Current income tax liabilities 303,660 255,109 255,109 255,109 254,373 Employees retirement benefit liability 1,076 883 43,329 24,374 20,139 Total Liabilities 5,702,498 3,658,519 2,370,680 2,057,871 807,856

equityShare capital 2,572,685 2,572,685 2,572,685 2,572,685 2,572,685 Share premium account 2,690,936 2,690,936 2,690,936 2,690,936 2,690,936 Retained earnings 486,445 886,114 1,254,849 1,487,563 1,677,257 Other component of equity 1,883 1,821 420 423 561 Shareholders' funds 5,751,949 6,151,556 6,518,890 6,751,607 6,941,439 Total Equities and Liabilities 11,454,447 9,810,075 8,889,570 8,809,478 7,749,295


31-Dec-14 31-Dec-13StatementofProfitorlossandOtherComprehensiveIncomeNet income 57,237 81,289 223,669 549,855 559,721 Profit/ (loss) before taxation (399,669) (368,735) (116,707) 150,093 311,803 Income tax expense - - (13,100) (31,606) (30,526)Profit/(loss) after taxation (399,669) (368,735) (129,807) 118,487 281,277


MAnAgeMent grouPAnD suBsiDiAries


EXECUTIVE GROUP

ROYAL EXCHANGE PLC

Group Managing Directoralhaji a. muktariBsc., msc., aioD, amin

Group General Managerms. s. i. ezeukoB.ed., llB, Bl, aCiarB, PGD insuranCe LAW,PGCLCORPORAtE&COMMERCIALlaW

Chief Operations Officermr. J. iwuajokuB.sc, mBa, Fiim, FCie, mCiBn, mnim

Deputy General Managers

Human Resourcesmr. D. nosiriBa, msc, CiPD

Retail Divisionmr. nelson akerelehnD, aCii

Finance and Accountsmr. F. C. okoliBsc., m.sc, FCa, FCti, FCiB, Cisa, CissP,

Cia, Cism, mnim

Assistant General Managers

Enterprise Risk Managementmr. s. ejimaBsc, msC, aCe, FerP

Facilities Managementmr. B. t. BabajoBsc., mBa

Audit and Investigationmr. J. unuanehnD, Bsc, FCa, mBa, aCti

Senior Manager

Legal and CompanySecretariat Servicesmrs. n. s. onyemell.m, ll.B, Bl, aCiarB

manaGement GrouP

anD suBsiDiaries

EXECUTIVE (SUBSIDIARIES)

Royal Exchange GeneralInsurance Company Limited

Managing Directormr. B. C. agilihnD, mBa, FCii, Fiim

Business Directors Lagos Centralmrs. Jane ekonwererenB.a., PGD, aCii

Lagos-Westmr. Patrick ojiBsc, Cii

South-Southmrs. V. o. eluemehnD, mBa

South-Eastmr. G. n. ChukwumahnD, Bsc., mBa

Senior Managersmr. ayo KamoruBsc, llB, Bl, mBa, aCiin, llm

mrs. D. a. l. akintayohnD, aCiin, mBa

Royal Exchange Prudential Life Plc

Managing Directormr. B. o. BanmoreBsc, mmP, aCii

Royal Exchange Finance & Asset Management Limited

Managing Directormrs. irene oparamBa, hnD, CPin

Senior Managermrs. Funke oluyemiBsc, mBa

Royal Exchange Healthcare Limited

Managing DirectorDr. e. onwutalumBBs, mBa, PGD (hse)

Royal Exchange Microfinance Bank Limited

Acting Managing Directormr. K. hassanBsc, mBa, msC


royal exchange general insurance company Limited is a wholly owned subsidiary of royal exchange Plc, licensed by the national insurance commission to offer the full range of general and special risks insuranceproducts.Withover90yearsintheNigerianmarket,RoyalExchangegeneralInsurancehasanenviablereputationforreliability,integrity,professionalism,technicalcompetenceandfinancialstrength.

the company operates from fifteen (15) branches country wide to ensure maximum outreach and complete accessibility to its customer base. the recent implementation of a web-enabled backbone it system will further enhance its ability to provide incomparable service. the company’s capacity to underwrite oil and gas risks is widely acknowledged throughout the industry and its oil and gas treaty is widely recognized to be one of the best in the market.

With its unwavering dedication to its core values, the company continues to maintain its lead on many of the major corporate risks in nigeria.

royal exchange genera l

Mr. Ben AgiliManaging Director (Royal Exchange General Insurance)


royal exchange Prudential Life Plc is a wholly owned subsidiary of royal exchange Plc and is licensed to underwrite life insurance and related risks. following the re-organization of the erstwhile royal exchange Assurance (nigeria) Plc into a group holding company in June 2008, royal exchange Prudential Life Plc emerged as the subsidiary providing a variety of life and investment linked savings products to cater for individual and corporate needs.

royal exchange Prudential life has pioneered the use of a Gsm based electronic platform which enables some of our products to be purchased and activated via scratch cards. this platform, which is user friendly, has also aided the accessibility of our products to all branches, friendship centers and other outlets nationwide.

at the corporate level, we are also at the forefront of providing cover under Compulsory Group life schemes for employees of both private and public sectors of the economy as required by the Pension reform act, 2004. We presently enjoy the partnership and collaboration of brokers and related organizations in providing quality services to the insuring public, in line with professional best practices.

royal exchange Prudent ia l L i fe

Mr. olawale BanmoreManaging Director (Royal Exchange Prudential Life)


royal exchange Healthcare Limited is a nationwide accredited nHis health maintenance organization, providingfinancialintermediationwithinthehealthindustry.Wethereforeactasafulcrumbetweentheenrollees and the healthcare providers selected purely on the quality of their services.

royal exchange healthcare limited’s primary function is the design of medical health plans that are both flexible and accommodating. our provider network is spread across the country and through rigorous continuous quality auditing, we strive to ensure the highest possible standards in medical services to our clients.

We utilize the principle of risk pooling and managed care in controlling and hedging risks associated with our business.

in performing these functions, the risk bearing responsibility and its innovative management have been the distinguishing factor of the royal exchange healthcare brand in the health insurance industry.

royal exchange healthcare limited will, in the long term, create a one-stop health solution for its customers.

royal exchange Healthcare

Dr. emenike onwutaluManaging Director(Designate Royal Exchange healthcare Company Limited)


royal exchange finance & Asset Management Ltd (previously called royal exchange finance & investment Ltd) was incorporated as a wholly-owned subsidiary of royal exchange Plc in october 2004 and licensed in April 2005 by central Bank of nigeria to provide a wide range of professional services in the areas ofcredit-finance,fundsmobilizationandfinancialadvisoryservices.Thecompanyisalsolicensedbysecurities and exchange commission to provide portfolio and fund management services.

We adopt a customer-centric approach to fill the service delivery gaps evident in nigeria financial sector in the area of financing businesses, especially small and medium scale enterprises. We are also excellent team players.

RoyalExchangeFinance&AssetManagementLtdrecognizestheindispensabilityoftechnologytostraight-through processing and rapid turnaround times. We are at the verge of upgrading our system to a more advanced multi-functional financial software package to execute large-scale business transactions without hitches.

the technical expertise of Royal Exchange Finance & Asset Management Ltd is reflected in our creativeapproach to financing engagements. our in-depth transaction knowledge and customer-centric approach allow us develop mutually beneficial long-term relationship with our clients. our variety of personalized products meets specific needs. these products include:

• HighyieldInvestmentPaper(HyIP)• RoyalInvestmentnote(RIn)• InvestmentPlan(I-Plan)• Leasing• Loans• MortgageFinancing• ProjectandL.P.OFinancing• FinancialAdvisoryservices

royal exchange f inance and Asset Management

Mrs. irene oparaManaging Director (Royal Exchange Finance & Asset Management)


RoyalExchangeMicrofinanceBanklimitedisawhollyownedsubsidiaryofRoyalExchangePlc,licensedbytheCentralBankofNigeriaonOctober15,2009toprovidecomprehensivemicrofinancialservicestotheunbankedandunderbankedinurban,semi-urbanandruralareasofNigeria.Wecommencedbusinessonoctober 19, 2009.

in line with the vision of royal exchange Plc to be a one-stop financial service shop and with its passion to alleviate poverty, royal exchange microfinance Bank was set up to provide micro finance services to improve the lives of the common people, alleviating poverty and building a better society. our focus is on micro, small, medium and retail markets, leveraging on state of the art technology to deliver superior and quality services.

the bank is in the process of converting to a state microfinance Bank. royal exchange microfinance Bank offers a broad range of products and services, most of which are unique and tailored to meet the needs of our diverse clientele.

the bank offers the following products:

savings Products:• RoyaltargetMicrosavings(ROtMIs)Account• RoyalOrdinaryMicrosavings(ROMIs)Account• RoyalMandatorysavings(REMAs)Account• CurrentAccount(ROCA)• FixedDeposit(ROFID)Account

loan Products:• tradeGroupLoan(RoyalOrdinaryMicrocredit-ROMIC)• WorkingCapitalLoan(RoyalFlexibleCredit-ReFlex)• Personalloanforsalaryearners(RoyalBailMeMicrocredit)• Assetacquisitionfinance• LPOfinancing(RoyalRealMicrocredit-REMIC)

the corporate head office of royal exchange microfinance Bank is located at 34/36 apapa-oshodi expressway, oshodi.

royal exchange Microf inance Bank

Mr. kunle HassanAg. Managing Director (Royal Exchange Microfinance Bank)


HeadOfficenew africa house, 31, marina, P.o. Box 112, lagos, nigeria.email: [email protected]: www.royalexchangeplc.comtel: 01-460-6690 to 01-460-6699

ControlOfficePlot 34/36, apapa/oshodi expressway, Charity Bus-stop, oshodi, P.m.B. 1804, ikeja, lagos.tel: 01-4606690 to 01-4606699 and 0708-060-6100

groupRetailOfficemosesola house, 3rd Floor,103/7, allen avenue,opposite alade market, ikeja,tel: 01-212-1826, 0708-621-0141, 01-295-5662

Abano. 83, azikwe road, aba (second Floor)abia statetel: 0803-776-3428, 0803-390-5798 Abuja26, mahatman Ghandi Crescent, area 11, Garki, abuja.tel: 0803-590-0354, 0803-661-3580 Asaba14, Dennis osadebey Way,asaba, Delta state. tel: 0803-673-2911

Beninunity Bank Building no. 98 new lagos road 113, new lagos road, Benin Cityedo statetel: 0806-081-4253

enuguCanute house, 19/25 ogui road, enugu state.tel: 04-229-108, 0802-313-3497

ibadanold sketch Building, First Floor,Cocoa house Complex,Dugbe, ibadan,tel: 0809-468-6750, 0814-999-3555

ikejamosesola house, 3rd Floor,103/7 allen avenue,opposite alade market, ikeja,P.o.Box 1803, ikeja.tel: 01-897-3858, 0803-320-8701

kaduna2, muritala mohammed square/independence Way, P.o. Box 261, Kaduna.tel: 0803-506-3925, 0811-306-5136

kano2B, Post office road, Kano.P.o.Box 301, Kanotel: 0803-629-9576, 0802-354-3139

Lagos Main Branch (Marina)new african house,31, marina, lagos. P.o.Box 112, lagostel:01-4181750, 0805-526-6886, 0810-536-6664

Port Harcourt42, evo road, Gra Phase ii, Port harcourt tel: 0803-310-5143

Warriogun house, 107, effurun/sapele road,opp. stanbic iBtC Bank,effurun, Delta state.tel: 0806-715-865

BranCh/oFFiCe netWorK

Cum DireCtorY


Royal Exchange Group Retail Friendship Centres

Royal Exchange Prudential Retail sales outlets

FrienshiP Centre netWorK

s/n name of Mega Agents Location telephone no.1 alaba int’l market 123 olojo Drive,

ojo alaba,lagos.

08029314777

2 ibadan old sketch Building, First Floor,Cocoa house Complex,Dugbe, ibadan.

08155538272

s/n name of unit Manager Location telephone no.1 micah ikegbu aba 08097902604

2 umeadi Gloria awka 08032910128

3 Victor omoniyi ibadan 08066617706

4 omolade agbelusi akure 08064945360

5 ogbuchukwu Genevieve asaba 08065368210

6 Vincent ojeagbase Port harcourt 08036642606

7 nwobodo obinna abuja 08037836308

8 akachukwu okey enugu 08063497754

9 David solomon Jos 08069694488

10 Jonathan inyang Calabar 08060792116

11 Gabriel Kolawole adedeji uyo 08053942500

12 okhihie Bosede Warri 08036268899

13 sesan adesida abeokuta 08026128239


corPorAte eVents


corPorAte eVents


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