Zenith Life Assurance Company Limited Financial StatementsZenith Life Assurance Company Limited...

Zenith Life Assurance Company LimitedFinancial Statements

31 December 2016

Contents

Corporate information…………………………………………………………………………………………………………………………………………………1

Directors' report…………………………………………………………………………………………………………………………………………………2-5

Management’s Discussion and Analysis………………………………………………………………………………………………………………6-15

Statement of directors' responsibilities…………………………………………………………………………………………………………………….16

Corporate governance report …………………………………………………………………………………………………………… 17-21

Independent auditor's report…………………………………………………………………………………………………………………….22-24

Reporting entity......................................................................................................................................................................................................................................................................................25

Statement of compliance with International Financial Reporting Standard.....................................................................................................................................................................................................................................................................................25

Basis of preparation....................................................................................................................................................................................................................................................................................25-28

Significant accounting policies.......................................................................................................................................................................................................................................................................................28-39

Required technical and other reserves by NAICOM.......................................................................................................................................................................................................................................................................................39-40

Statement of profit or loss and other comprehensive income....................................................................................................................................................................................... 341

Statement of financial position....................................................................................................................................................................................... 342

Statement of changes in equity....................................................................................................................................................................................... 443

Statement of cash flows……………………………………………………………………………………………………………………………………..44

Notes to the financial statement ................................................................................................................................................................................................................................ 545

1 Financial risk management.......................................................................................................................................................................................................................................................................................45-70

2 Operating segment ..........................................................................................................................................................................................................................................................71

3 Financial assets and liabilities..............................................................................................................................................................................................................................................................72-73

4 Gross premium....................................................................................................................................................................................................................... 1174

5 Reinsurance expenses..........................................................................................................................................................................................................................74

6 Commission income........................................................................................................................................................................................................................... 1174

7 Claims expenses.......................................................................................................................................................................................................................... 1175

8 Underwriting expenses........................................................................................................................................................................................................................... 1175

9 Investment income ........................................................................................................................................................................................................................... 1175

10 Management expenses ........................................................................................................................................................................................................................... 1376

11 Cash and cash equivalents..................................................................................................................................................................................................... 1377

12 Financial assets:

Investment securities - held to maturity.................................................................................................................................................................................. 1477

Investment securities - available for sale................................................................................................................................................................................... 1578

Loans and receivables.................................................................................................................................................................................................................. 1979

Trade receivables.......................................................................................................................................................................................................................................... 1979

13 Reinsurance assets.......................................................................................................................................................................................................................................... 2079

14 Deferred acquisition cost.......................................................................................................................................................................................................................................... 2080

15 Other receivables............................................................................................................................................................................................................................. 2081

16 Intangible assets................................................................................................................................................................................................................................. 2381

17 Property and equipment................................................................................................................................................................................................................................ 2282

18 Statutory deposit.................................................................................................................................................................................................................................. 2183

19 Insurance contract liabilities..................................................................................................................................................................................................................................... 2583-86

20 Investment contract liabilities..................................................................................................................................................................................................................................... 2587

21 Trade payables................................................................................................................................................................................................................................ 2487

22 Provisions and other payables................................................................................................................................................................................................................................ 2588

23 Current income tax liabilities................................................................................................................................................................................................................................. 2689

24 Deferred taxation..................................................................................................................................................................................................................................... 2890

25 Share capital....................................................................................................................................................................................................................................... 2991

26 Statutory contingency reserves................................................................................................................................................................................................................................. 3291

27 Retained earnings........................................................................................................................................................................................................................................ 3091

28 Fair value reserves...................................................................................................................................................................................................................................... 3192

29 Earnings per share...................................................................................................................................................................................................................................... 3392

30 Related party transactions....................................................................................................................................................................................................................................... 3492-93

31 Litigations....................................................................................................................................................................................................................................... 3494

32 Events after reporting date....................................................................................................................................................................................................................................... 3494

33 Directors and employees.....................................................................................................................................................................................................................94-95

34 Contravention of laws and regulations....................................................................................................................................................................................................................................... 3495

Other National Disclosures………………………………………………………………………………………………………………………..96

I Hypothecation...................................................................................................................................................................................................................................... 3697-98

II Age analysis of outstanding claims.......................................................................................................................................... 3699

III Value added statement...................................................................................................................................................................................................................................... 36100

IV Financial summary.................................................................................................................................................................................................................................... 37101

Zenith Life Assurance Company Limited

Annual Report

31 December 2016

Corporate Information

Name of Directors Jim Ovia Chairman

Chukwuemeke Igumbor Managing Director

Ebelechukwu Nwachukwu Non-Executive Director

Elaine Delaney Non-Executive Director

Joseph Onwubuya Non-Executive Director

Victor Abulele Non-Executive (Independent) Director

Professor Oyewusi Ibidapo-Obe Non-Executive (Independent) Director

Registered Office Civic Towers,

Ozumba Mbadiwe, Victoria Island

Lagos

RC Number 407202

Company Secretary Emeka Anyaeji

Plot 280 Ajose Adeogun Street

Victoria Island

Lagos

Auditors PricewaterhouseCoopers

Plot 5B Water Corporation Drive

Victoria Island

Lagos

Major Banker(s) Zenith Bank Plc

First Bank of Nigeria Plc

FCMB

Actuary HR Nigeria Limited

Reinsurers Africa Reinsurance Corporation

Continental Reinsurance Plc

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Annual Report

31 December 2016

Directors’ ReportFor the year ended 31 December 2016

Legal form and principal activity

The address of its registered office is: 13th/14th floor, Civic Towers, Ozumba Mbadiwe, Victoria Island, Lagos.

Operating results:

The following is a summary of the Company’s operating results:

31-Dec-2016 31-Dec-2015

N’000 N’000

Gross premium written 3,270,883 3,363,440

Profit before taxation 1,006,642 867,407

Taxation (251,887) 173,330

Profit after taxation 754,755 1,040,737

Transfer to contingency reserve (75,475) (104,074)

Retained earnings for the year 679,280 936,663

Retained earnings beginning of year 1,383,674 2,447,011

Interim dividend - (2,000,000)

Retained earnings, end of year 2,062,954 1,383,674

Earnings per share – basic 38k 52k

Dividend

Directors and their interests

The directors of the Company who held office during the year were as follows:

Jim Ovia Chairman

Chukwuemeke Igumbor Managing director

Ebelechukwu Nwachukwu Non-executive director

Joseph Onwubuya Non-executive director

Elaine Delaney Non-executive director

Professor Oyewusi Ibidapo-Obe Non-executive (Independent) Director

Victor Abulele Non-executive (Independent) Director

The Directors are pleased to present their annual report on the affairs of Zenith Life Assurance Company Limited ("The Company"),

together with the audited financial statements and the auditor's report for the year ended 31 December 2016.

The Company's principal activities are the provision of life assurance services, claims settlement and undertaking investment

activities.

No interim or final dividend was declared during the year (2015; interim dividend of N2bn)

Zenith Life Assurance Company Limited was incorporated in Nigeria on 30 March 2001 under the Companies and Allied Matters

Act as a private limited liability company, and is domiciled in Nigeria.

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Annual Report

31 December 2016

Directors shareholding

The following directors have direct shareholding in the Company:

2016 2015

No. of Shares No. of Shares

Jim Ovia - 1

2016 2016

No. of Shares % Holding

Veritas Registrars Limited 1,999,999,999 100%

Paradox Limited 1 0%

2,000,000,000 100%

2015 2015

No. of Shares % Holding

Zenith General Insurance Company Limited 1,999,999,999 100%

Jim Ovia 1 0%

2,000,000,000 100%

The analysis of the distribution of the shares of the Company at the end of the financial year is as follows:

31 December 2016

No. of

Shareholders% of Holdings No. of Holdings

1 0% 1

1 100% 1,999,999,9992 100% 2,000,000,000

31 December 2015

No. of

Shareholders% of Holdings No. of Holdings

1 0% 1

1 100% 1,999,999,999

2 100% 2,000,000,000

Directors' interest in contracts

Property and equipment

The Company made no contributions to charitable and non-political organisations during the year (2015:Nil)

Total

None of the directors has notified the Company, for the purpose of section 277 of the Companies and Allied Matters Act, of their

direct or indirect interest in contracts or proposed contracts with the Company during the year.

Information relating to changes in property and equipment during the year is given in Note 17 to the financial statements.

Donations and charitable gifts

Local Shareholders

1-1,000,000,000

1,000,000,000-2,000,000,000

The called-up and fully paid-up shares of the Company as at 31 December 2016 were beneficially held as follows:

Ownership structure

Total

Share range

1-1,000,000,000

1,000,000,000-2,000,000,000

Analysis of shareholding

Share range

Local Shareholders

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Annual Report

31 December 2016

Gender analysisThe number and percentage of male and female employed during the financial year vis-à-vis total workforce was as follows:

Male Female Male Female

Number Number Percentage PercentageEmployees 12 8 60% 40%

Gender analysis of the board and top management is as follows:Board 5 2 71% 29%

Top Management 4 2 67% 33%

Detailed analysis of the board and top management is as follows:Assistant Manager 1 0 0% 0%

Deputy Manager 0 0 0% 0%

Manager 0 2 0% 100%

Senior Manager 2 0 100% 0%

Principal Manager 0 0 0% 0%

Executive Director 1 0 100% 0%

Non-executive Director 5 2 71% 29%

Male Female Male Female

Number Number Percentage PercentageEmployees 16 10 62% 38%

Gender analysis of the board and top management is as follows:Board 5 2 71% 29%

Top Management 3 2 60% 40%

31 December 2016

31 December 2015

Employment of disabled persons

The Company operates a non-discriminatory policy on recruitment. Applications by disabled persons are always fully considered,

bearing in mind the respective aptitudes and abilities of the applicants concerned.

In the event of members of staff becoming disabled, every effort is made to ensure that their employment with the Company

continues and that appropriate training is arranged. It is the policy of the Company that the training, career development and

promotion of disabled persons should, as far as possible, be identical with those of other employees. During the year under review,

there was no disabled person in its employment.

Health, safety and welfare of employees

Employee training and involvement

The Company places considerable value on the involvement of its employees and has continued its practice of keeping them

informed on matters affecting them as employees and the various factors affecting the performance of the Company. This is

achieved through regular meetings between management and staff of the Company.

The Company's employees are adequately insured against occupational hazards. In addition, medical facilities at specified limits are

provided to employees and their immediate families at the Company's expense.

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Annual Report

31 December 2016

Management’s Discussion and Analysis

(a) Forward-Looking Statements

(i)

•

•

•

• failure of the Company to manage her relationship with Brokers and Insurance Agents;

failure to realize revenue growth, anticipated cost savings or operating efficiencies from the Company’s major initiatives,

including investments in the Company’s IT systems, including the Company’s IT systems implementation, or unanticipated

results from these initiatives; the inability of the Company’s IT infrastructure to support the requirements of the Company’s

business; heightened competition, whether from current competitors or new entrants to the marketplace; changes in economic

conditions including the rate of inflation or deflation, changes in interest and currency exchange rates and derivative and

commodity prices; public health events including those related to food safety;

the inability of the Company to manage receivables to minimize the impact of inability to collect the premiums due;

failure by the Company to maintain appropriate records to support its compliance with accounting, tax or legal rules,

regulations and policies;

This Management’s Discussion and Analysis (“MD&A”) is designed to provide the reader with a greater understanding of the

Company’s business, business strategy and performance, as well as how it manages risk and capital resources.

These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events

to differ materially from current expectations, including, but not limited to:

It is intended to enhance the understanding of the audited annual financial statements and accompanying notes, and should

therefore be read in conjunction with these documents.

Reference in this MD&A to the “Company” means "Zenith Life Assurance Company Limited"

The Company’s quarterly and annual financial statements, its Annual returns form and other financial documents are

available in our various offices nationwide and with the National Insurance Commission.

Unless otherwise indicated, all financial information presented in this MD&A, including tabular amounts, is in Nigeria Naira

and is prepared in accordance with International Financial Reporting Standards (“IFRS”).

This Annual Report – Financial Review for Zenith Life Assurance Company Limited contains forward-looking statements

about the Company’s objectives, plans, goals, aspirations, strategies, financial condition, results of operations, cash flows,

performance, prospects and opportunities. These forward-looking statements are typically identified by words such as

“anticipate”, “expect”, “believe”, “foresee”, “could”, “estimate”, “goal”,“intend”, “plan”, “seek”, “strive”, “will”, “may” and

“should” and similar expressions, as they relate to the Company and its management.

The forward-looking statements in this document reflects the Company’s expectations as at 6 February 2017 when the

Company’s Board of Directors approved this document, and are subject to change after this date. These forward-looking

statements are not historical facts but reflect the Company’s current expectations concerning future results and events. They

also reflect management’s current assumptions regarding the risks and uncertainties referred to below and their respective

impact on the Company. The Company does not undertake any obligation to update publicly or to revise any such forward-

looking statements, unless required by applicable legislation or regulation.

Its revenues in 2017 will be approximately N4.4billion; This income expectation is associated with improved patronage,

diversified marketing strategies especially in the first Quarter of the year when insurance covers will be required by many.

In addition, the Company’s expectation with regard to its net earnings in 2017 is based in part on the assumptions that tax

rates will be similar to those in 2016,

In this Annual Report – Financial Review, forward looking statements include the Company’s expectation that:

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Annual Report

31 December 2016

•

• supply and quality control issues with vendors;

• changes to or failure to comply with laws and regulations affecting the Company and its business,

•

•

•

(b) Overview of Our Business and Strategy

(c) Vision and Strategies

To be the best provider of insurance services to our valuable clients, both locally and globally.

We aim to be the preferred insurer by all our brokers and clients on the basis of

- Integrity

- Professionalism

- Satisfaction

- Sustainable stakeholder value creation

- Good corporate governance

Mission

Strategic Priorities Include

· Operational Excellence

· Improved Competitiveness

· Stronger relationships with Clients

· Geographical Diversification and growth of markets and Offerings

· Building Sustainable People and Organizational Capabilities

· Financial Strength and Flexibility

· Corporate Social Responsibility

To employ the use of a highly motivated workforce and state of the art technology in our risk management process thereby

generating good returns to our stakeholders.

reliance on the performance and retention of third-party service providers including those associated with the Company’s

supply chain and apparel business;

changes in the Company’s income, commodity, other tax and regulatory liabilities including changes in tax laws, regulations

or future assessments;

the risk that the Company would experience a financial loss if its counterparties fail to meet their obligations in accordance

with the terms and conditions of their contracts with the Company; and

This is not an exhaustive list of the factors that may affect the Company’s forward-looking statements. Other risks and

uncertainties not presently known to the Company or that the Company presently believes are not material could also cause

actual results or events to differ materially from those expressed in its forward-looking statements.

Additional risks and uncertainties are discussed in the Company’s Enterprise Risks and Risk Management section of this

MD&A.

Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect the Company’s

expectations only as of the date of this MD&A. The Company disclaims any intention or obligation to update or revise these

forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

The Company was incorporated in 30 March 2001 to carry out the business of Life Assurance The company is a subsidiary of

Veritas Registrars Limited and it is domiciled in Nigeria.

We operate from 12 locations, three within Lagos, Abuja, Kano, Ibadan, Enugu, Port harcourt, Warri, Asaba, Benin, Uyo &

Aba. Each Branch or Operational office situated strategically to serve a wider area.

the inability of the Company to collect on its brokers/insurance companies receivables.

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Annual Report

31 December 2016

Our Board

Our Business

· Life insurance services

· Investment linked services

Our Reinsurance

Our Clients

Our Branch Network

Our Core Values

· Customer satisfaction

· Sustainable stakeholder value creation

· Professionalism

· Good corporate governance

We have specialized strategically located underwriting offices in Apapa, Abuja, Asaba, Benin, Enugu, Port Harcourt, Kano,

Marina, Warri, Ikeja and Ibadan.

The Company has enjoyed a steady growth in its commitment to providing integrated financial services to its customers from

various sectors of the economy.

The Company offers unique, customer based products to clients in various sectors. The services we offer include;

The Company underwrites with the support of various reinsurance companies and brokers to ensure its risk management is

always optimal. We also consult with reinsurance companies and brokers on technical issues/alliance.

Our Reinsurers are Africa Reinsurance, Continental Reinsurance, as a localized reinsurer is required, however, we liaise with

Hannover Life Re of South Africa and are working towards an alliance for products and advisory support.

The Company is proud to be of service to companies in all sectors. Our clientele base spans across all major industries

including Oil & Gas, Transportation, Marine, Aviation, Power, Construction, Engineering, Ministries, Government, Missions,

Embassies and Individuals.

The company’s growth, since its incorporation, is premised upon sound business standards backed by being associated with

Zenith General Insurance Company Limited, one of the leading insurance companies in Nigeria and the uncompromising

integrity and dedication of its directors, led by Mr. Jim Ovia

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Annual Report

31 December 2016

The company is structured to ensure absolute professionalism at all levels.

Generally, People, Service, Technology, Skills, Talent, Our Brand, Integrity, Reinsurance and effective Relationship

Management and Alliances all fit together to increase our competitive advantage

Reinsurance & Lifeclaims

Zenith Life Assurance

Group Shared Services

Underwriting

Customer care, Products,Human Resources, InternalControl/ Compliance, CreditControl, Corporate Affairs.

FinancialControl

Group Shared Services

Underwriting

Customer care, Products,Human Resources, InternalControl/ Compliance, CreditControl, Corporate Affairs.

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Annual Report

31 December 2016

(d) Revenue and Underwriting Activities

Items Current period Prior period Change

2016 2015

N'000 N'000 %

Gross premium written 3,270,883 3,363,440 -3%

Gross premium earned 3,344,234 2,991,044 12%

Reinsurance expenses (634,679) (653,152) -3%

Net premium income 2,709,555 2,337,892 16%

Fees and commision income 167,939 161,292 4%

Net underwriting income 2,877,494 2,499,184 15%

Profit before taxation 1,006,642 867,407 16%

Taxation (251,887) 173,330 -245%

Profit after taxation 754,755 1,040,737 -27%

(e) Financial Condition

Financial Profile

2016 2015

N'000 N'000

Assets

Cash and cash equivalents 1,424,454 1,747,983

Financial assets

Investment securities held to maturity 4,897,009 5,544,704

Investment securities available for sale 65,173 106,009

Loans and receivables 27 89

Trade receivables 66,441 12,958

Reinsurance assets 1,631,377 496,708

Deferred acquisition cost 38,613 -

Other receivables and prepayments 199,576 3,225

Deferred tax asset 571,936 762,599

Intangible assets 19,797 18,640

Property and equipment 32,649 5,405

Statutory deposits 200,000 200,000

9,147,052 8,898,320

Liabilities

Insurance contract liabilities 3,590,685 1,854,293

Investment contract liabilities 752,652 634,392

Trade payables 60,151 23,779

Provisions and other payables 64,449 2,085,747

Current income tax liabilities 131,700 496,333

4,599,637 5,094,544

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Annual Report

31 December 2016

(f) Key Financial Performance Indicators

and long term objectives.

Financial trends and ratios 2016 2015

Business volumes and trends

Growth in gross premium written

(in thousands of naira) (92,557) 1,037,988

Premium growth rate -3% 45%

Renewal rate 83% 69%

Profitability

Underwrting profit ratio 32% 20%

Operating ratio -22% 8%

Average return on investment 14% 16%

Return on equity 16% 38%

Solvency and reserves

Net premium/shareholders' funds 60% 61%

Policyholders' funds/shareholders' funds 79% 49%

Solvency ratio

% growth, shareholders' funds 20% -13%

% growth, net premiums 16% 28%

Liquidity

Policyholders' funds/liquid assets 39% 21%

Trade debts/Assets 1% 0%

Cash claims cover 213% 1476%

Trade debts/shareholders' funds 1% 0%

Investments

Investment yield 14% 16%

% growth, Investment income -24% 25%

Underwriting performance

Underwriting performance ratio 32% 20%

Retention ratio 83% 69%

Claims (loss) ratio 46% 39%

Expense ratio 10% 15%

Combined ratio 56% 54%

Capital adequacy

Gross risk ratio 139% 113%

Net risk ratio 168% 163%

The Company has identified specific key financial performance indicators to measure the progress of short

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Annual Report

31 December 2016

(g) Insurance Industry Regulatory Framework

Impact of reforms on insurance industry

The Company being a major player in the Nigerian insurance industry has witnessed tremendous changes in recent times owing

to the new reforms embarked upon by NAICOM.

These reforms include the introduction of Risk Based Supervision, migration to International Financial Reporting Standard

(IFRS) from the Nigerian Generally Accepted Accounting Principles (NGAAP); Market Conduct Reforms, Claims Settlement

Reforms, Financial Inclusion, etc, all geared towards developing the industry and improving the general perception about

insurance.

Suffice it to say that these reforms are in line with the Federal Government’s vision 2020 of deepening insurance penetration to

become the insurance industry of choice among the emerging markets in terms of capacity, safety, transparency and efficiency.

In its fourth year of the commencement of the ‘No premium no cover’ (NPNC) policy, the Company is consolidating the gains

of the regulatory reform. Though not so much enthusiasm was expressed about the enforcement of the 'NPNC' policy at its

inception, now reviewing the performance in its fourth year the experience has been a positive one in improved cash flows and

liquidity.

Leveraging on the complementary strength of NPNC regulatory framework, Gross premiums were sustained despite economic

down turns and premium receivables were made up of only seven (7) policies for which premium has all been received in the

first month of 2017.

Management believes that this positive development which has enhanced the performance of the company in terms of Good

public Image and increased profitability which obviously has been achieved as a result of efficient and prompt claims

settlement and ability to generate more income on investment which will arise because of the increase in Investible

funds(Liquidity).

Our Vision

To be the best provider of insurance services to our valuable clients, both locally and globally.

We aim to be the preferred insurer by all our brokers and clients on the basis of

- Integrity

- Professionalism

- Satisfaction

- Sustainable stakeholder value creation

- Good corporate Governance

Our services remained uncompromised making our growth trajectory and maintaining a stronghold on our existing businesses

in 2016.

We operate from 12 locations, three within Lagos, Abuja, Kano, Ibadan, Enugu, Port harcourt, Warri, Asaba, Benin, Uyo &

Aba. Each Branch or Operational office situated strategically to serve a wider area.

With our proper understanding of Nigeria’s business environment we shall continuously activate tailored activities that would

enable us utilize the developmental opportunities of our “Market Space” through our strategic business plan.

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Annual Report

31 December 2016

(h) Financial Instruments

(i) Disclosure Controls and Procedures

(j) Internal Control over Financial Reporting

(k)

(l) Enterprise Risks and Risk Management

· Promote a culture of awareness of risk management and compliance within the Company;

· Assist in developing consistent risk management methodologies and tools across the organization;

· Ensure that resources are acquired economically, used efficiently and adequately protected; and

The Company discloses information on the classification and fair value of its financial instruments, as well as on the nature

and extent of risks arising from financial instruments, and related risk management in the 2016 audited annual financial

statements.

Management is responsible for establishing and maintaining a system of disclosure controls and procedures to provide

reasonable assurance that all material information relating to the Company is gathered and reported to senior management

on a timely basis so that appropriate decisions can be made regarding public disclosure.

Management is also responsible for establishing and maintaining adequate internal controls over financial reporting to

provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for

external purposes in accordance with International Financial Reporting Standard (IFRS).

It should be recognized that due to inherent limitations, any controls, no matter how well designed and operated, can

provide only reasonable assurance of achieving the desired control objectives and may not prevent or detect misstatements.

Projections of any evaluations of effectiveness to future periods are subject to the risk that controls may become inadequate

because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Additionally, management is required to use judgment in evaluating controls and procedures.

Changes in Internal Control over Financial Reporting

Management has also evaluated whether there were changes in the Company’s internal controls over financial reporting that

occurred during the period beginning on January 1, 2016 and ended on December 31, 2016 that materially affected, or are

reasonably likely to materially affect, the Company’s internal control over financial reporting. Management determined that

no material changes occurred during this period.

The Company is committed to establishing a framework that ensures risk management is an integral part of its activities. To

ensure the continued growth and success of the Company, risks are identified and managed through an Enterprise Risk

Management (“ERM”) program. The Board has approved an ERM policy and oversees the ERM program through approval

of the Company’s risks and risk prioritization. The ERM program assists all areas of the business in managing appropriate

levels of risk tolerance by bringing a systematic approach, methodology and tools for evaluating, measuring and monitoring

key risks. The results of the ERM program and other business planning processes are used to identify emerging risks to the

Company, prioritize risk management activities and develop a risk-based internal audit plan.

Risk is not eliminated through the ERM program. Risks are identified and managed within understood risk tolerances. The

ERM program is designed to:

· Facilitate corporate governance by providing a consolidated view of risks across the Company and insight into the

methodologies for identification, assessment, measurement and monitoring of the risks;

· Enable the Company to focus on its key risks in the business planning process and optimize financial performance

through responsible risk management.

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Annual Report

31 December 2016

The operating, financial and reputational risks and risk management strategies are discussed below.

• Operating Risks and Risk Management

· Operating Risks

· Information Technology and other Systems Implementations

· Change Management and Process Execution

· Contract Management and Records Retention

· Information Integrity and Reliability

· Competitive Environment

· Economic Environment

· Food Safety and Public Health

· Colleague Retention and Succession Planning

· Distribution and Supply Chain

· Labour Relations

· Merchandising

· Inventory Management

· Disaster Recovery & Business Continuity

· Strategy Development and Execution

· Privacy and Information Security

· Franchise Independence and Relationships

· Vendor Management and Third Party Service Providers

· Regulatory and Tax

· Workplace Health and Safety

· Environmental

· Trademark and Brand Protection

· Defined Benefit Plan Contributions

· Multi-Employer Pension Plans

· Real Estate and Store Renovations

· Utility and Fuel Prices

· Ethical Business Conduct

The Internal Audit and Risk Management group manages the ERM program through the development of the risk framework

and methodologies, completion of the annual ERM assessment, continuous monitoring of the key risks and semi-annual

reporting to the Audit Committee. The accountability for oversight of the management of each risk is allocated by the Audit

Committee to either the full Board or to a Committee of the Board.

Each of these risks has the potential to negatively affect the Company’s financial performance. The Company has risk

management strategies, including insurance programs, that are intended to mitigate the potential impact of these risks.

However, these strategies do not guarantee that the associated risks will be mitigated or not materialize or that events or

circumstances will not occur that could negatively affect the Company’s financial condition or performance.

The annual ERM assessment is carried out primarily through interviews and risk assessments with senior management.

Risks are assessed and evaluated based on the Company’s vulnerability to the risk and the potential impact that the

underlying risk would have on the Company’s ability to execute its strategies and achieve its objectives. Risk owners are

assigned relevant risks and metrics are developed for the top risks for monitoring. Management provides a semi-annual

update to the Audit Committee of the status of the top risks based on significant changes from the prior update, anticipated

impacts in future quarters and significant changes in key risk metrics. In addition, the long-term (1-3 year) risk level is

assessed in order to monitor potential long term impacts on the risk which may assist in risk mitigation planning activities.

Risk identification and assessments are important elements to the Company’s ERM framework. An annual ERM

assessment is completed to assist in the update and identification of financial, operational or reputational risks affecting the

Company and to effectively prioritize the risks.

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Annual Report

31 December 2016

• Financial Risks and Risk Management

· Financial Risks

· Liquidity and Capital Availability

· Commodity Prices

· Credit Common Share Price

· Interest Rates Derivative Instruments

· Foreign Currency Exchange Rate

(l) Accounting Policies and Changes

(m) How We Analyze and Report Our Results

Result by category of activity. These include;

· Life assurance revenues

· Investment income

(n) How We Budget and Forecast Our Results

· Insurance Lines of business level

· Divisional level

· Consolidated level

The divisional budgets are subsequently reviewed by the Company’s senior executives .

· Board of Directors

Final approval is provided by the Board of Directors in the first quarter of the current year.

The Annual Budget is a key tool used by management to monitor the Company’s performance and progress against key

financial objectives. Furthermore, the figures set in the Annual Budget have an impact on management’s compensation, as

these figures are used in determining part of their performance bonus. The Annual Budget is updated during the year to

reflect current information as the Company prepares forecasts of its annual expected results in the first, second and third

quarters (“Quarterly Forecasts”), which are presented to the Board of Directors. In addition, the performance of each

individual project (i.e., its estimated revenues and costs to complete) is continuously reviewed by its respective project

manager and, depending on the size and risk profile of the project, by key management personnel, including the divisional

manager, the business segment executive vice-president, the Chief Financial Officer and the Chief Executive Officer.

Budgeted and forecasted marketing, general and administrative expenses, net financial expenses, and income tax expense

are derived from detailed analysis and are influenced by the level of anticipated activities and profitability.

In regards to its OCI budget and forecast, expected results based on assumptions specific to each investment are used.

One of the key management tools for monitoring the Company’s performance is the monthly evaluation and analysis of

actual results compared to the Annual Budget or the Quarterly Forecasts, for revenues, gross margin and profitability. This

enables management to analyze its performance and, if necessary, take remedial actions.

The Company prepares a formal annual budget (“Annual Budget”) in the First quarter of each year, which is the basis of

the Company’s financial outlook.

The budget information is prepared for individual lines of business which will form the primary basis of the Company’s

Annual Budget.

The project information is then compiled by each marketing division/branch /zone and approved by the Company’s

divisional management .

The Company's accounting policies adopted are consistently applied in the current and preceeding periods, except as

disclosed in Note IV.

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Annual Report

31 December 2016

Corporate Governance Report

b. Shareholding

2016 2016

No of shares % Holding

Veritas Registrars Limited 1,999,999,999 100%

Paradox Limited 1 0%

2,000,000,000 100%

2015 201500%

No of shares % Holding

Zenith General Insurance Company Limited 1,999,999,999 100%

Jim Ovia 1 0%

2,000,000,000 100%

• Reviewing and providing guidance for the Company’s corporate and business strategy, major plans of action and risk policy;

Besides possessing the requisite academic qualifications and experience in Board affairs, Directors are well abreast of their

responsibilities and are conversant with the Company’s business.

• Providing oversight of senior management;

• Establishment of the various Committees of the Board including the terms of reference and review of reports of such

Committees to address key areas of the Company’s business.

The Board is responsible for:

• Review and approval of annual budgets and business plans; setting performance objectives, monitoring implementation and

corporate performance;

• Overseeing major capital expenditures, acquisitions and divestitures;

• Monitoring the effectiveness of the governance practices under which the Company operates and making appropriate changes

as necessary;

• Ensuring the integrity of the Company’s accounting and financial reporting systems, including the internal audit function and

that appropriate systems of control and risk monitoring are in place;

They are therefore able to exercise sound judgment on matters relating to its business.

d. Board Structure

The board is made up of seven( 7 ) directors comprising of Five( 5 ) non-executive directors & one (1 ) executive directors. Of

the 5 non-executive members, one (1) are independent members.

The Managing Director is responsible for the day to day running of the Company, assisted by the Management Committee.

e. Responsibilities of the Board

a. Introduction

Company's shareholding is as follows:

c. Board of Directors

The Board is responsible for driving the Corporate Governance mechanism of the Company.

The Company has in place an effective governance mechanism that not only ensures proper over-sight of its business by the

Directors and other principal organs of the Company, but also carries on its business in a manner that engenders public trust and

confidence while meeting the expectations of all stakeholders.

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Annual Report

31 December 2016

Board of Directors

NAME POSITION

Mr. Jim Ovia Chairman

Mr. Chukwuemeke Igumbor Managing Director

Mrs. Ebelechukwu Nwachukwu Non- Executive Director

Mrs. Elaine Delaney Non- Executive Director

Mr. Onwubuya Joseph Ndidi Non- Executive Director

Professor Oyewusi Ibidapo-Obe Non-Executive (Independent) Director

Mr. Abulele Victor Non-Executive (Independent) Director

Mrs. Elaine Delaney Chairman

Mr. Victor Abulele Member

Mrs. Ebelechukwu Nwachukwu Member

Mr. Chukwuemeke Igumbor Member

This Committee is made up of four (4) members. It is chaired by a Non-executive Director. The Committee considers large

scale procurement by the Company, as well as matters bordering on staff welfare, discipline, staff remuneration and promotion.

The membership of the Committee is as follows:

• Consideration and recommendation to the Board, of all financial and administrative matters whose aggregate monetary value is

beyond the limit of the Company's Management approving power;

• Review of all matters relating to staff welfare, discipline, remuneration and promotion.

• Any other matter that may be referred to the Committee by the Board from time to time.

• Approving commission payment in excess of Management approval limit, standardization of process and mode of payment of

commission in line with cashless policy and in compliance with Anti Money Laundering requirements;

Committee’s Terms of Reference

• Consideration and recommendation of staff compensation package;

• Consideration and Recommendation of promotion of senior management staff;

• Setting limit for approval of commission by Management;

i. Finance and General Purpose Committee

f. Board Committees

The Committees have well defined terms of reference and Charters defining their scope of responsibilities in such a way as to

avoid overlap of functions.

The following are the current standing Committees of the Board:

The Board meets at least every quarter but may hold extra-ordinary sessions to address urgent matters requiring the attention of

the Board.

The Board carries out its oversight functions using its various Board Committees. This makes for efficiency and allows for a

deeper attention to specific matters for the board. The Committees are set up in line with statutory and regulatory requirements

and consistent with global best practice.

Membership of the Committees of the Board is intended to make the best use of the skills and experience of non-executive

directors in particular.

The Committees of the Board meet quarterly but may hold extraordinary sessions as business of the Company demand.

The board members who served on the board during the financial year are as follows:

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Annual Report

31 December 2016

Mr Oyewusi Ibidapo-Obe Chairman

Mr. Onwubuya Joseph Ndidi Member

Mrs. Ebelechukwu Nwachukwu Member

Mr. Chukwuemeke Igumbor Member

Mrs Elaine Delaney Member

Mr. Abulele Victor Chairman

Mrs. Elaine Delaney Member

Prof. Oyewusi Ibidapo-Obe Member

Mr. Onwubuya Joseph Ndidi Member

• The effectiveness of the Company's system of internal controls, including computerized information systems and security; any

recommendations by the independent auditor and internal auditor regarding internal control issues and any actions taken in

response thereto and, the internal control certification and attestation required to be made in connection with the Company's

quarterly and annual financial reports;

• The primary responsibility of the Committee is to ensure that sound policies, procedures and practices are in place for the risk-

wide management of the Company’s material risks and to report the results of the Committee’s activities to the Board of

Directors;

• Design and implement risk management practices, specifically provide ongoing guidance and support for the refinement of the

overall risk management framework and ensuring that best practices are incorporated;


• To consider and approve major investment requests by the company & allocate resources as appropriate;

• Periodically review and monitor risk mitigation process and periodically review and report to the Board of Directors.

iii. Audit, Compliance & Investment Committee

The Committee’s membership consists of four (4) Non-executive Directors and chaired by Mr Abulele Victor (a Non-executive

Director). The Committee meets every quarter, but could also meet at any other time, should the need arise.

The membership of the Committee is as follows:

• Ensure and monitor risk management practices, specifically determine which enterprise risks are most significant and approve

resource allocation for risk monitoring and improvement activities, assign risk owners and approve action plans;

• To meet with the Managing Director, Internal Auditor and any other executive both individually and/or together, as the

Committee deems appropriate at such times as the Committee shall determine to discuss and review:

• The Company's quarterly and audited annual financial statements, including any related notes, the Company's specific

disclosures and discussion under "Managements Control Report and the independent auditors' report, in advance of publication;

• The performance and results of the external and internal audits, including the independent auditors' management letter, and

management's responses thereto;

(a) Management Committee

The Management Committee comprises the senior management of the Company and has been established to identify, analyse,

and make recommendations on risks arising from day-to-day activities. They also ensure that risk limits as contained in the

Board and Regulatory policies are complied with. Members of the management committee make contributions to the respective

Board Committees and also ensure that recommendations of the Board Committees are effectively and efficiently implemented.

They meet weekly and as frequently as the need arises.


ii. Enterprise Risk Management and Governance

The Committee has oversight responsibility for the overall risk assessment of various areas of the Company’s operations and

Compliance with the code of corporate governance as well as global best practice.

Chaired by Mr. Oyewusi Ibidapo-Obe (a Non-executive Director), the Committee’s membership comprises the following:

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Annual Report

31 December 2016

December 2016

Directors Board Finance & General

Purpose Committee

Risk Management

Committee

Number of Meetings 5 4 4

AttendanceMr. Jim Ovia 5 N/A N/A

Mrs. Elaine Delaney 4 4 4

Mrs. Ebelechukwu Nwachukwu 5 4 N/A

Mr. Chukwuemeke Igumbor 5 4 4

Mr. Onwubuya Joseph Ndidi 5 N/A 4

Mr. Abulele Victor 5 4 4

Professor Oyewusi Ibidapo-Obe 5 N/A 4

December 2015

Directors Board Finance & General

Purpose Committee

Risk Management

Committee

Number of Meetings 4 3 3

AttendanceMr. Jim Ovia 4 N/A

Mrs. Elaine Delaney 4 N/A

Mrs. Ebelechukwu Nwachukwu 4 3

Mr. Chukwuemeke Igumbor 4 3

Mr. Onwubuya Joseph Ndidi 4 3

Mr. Abulele Victor 4 N/A

Professor Oyewusi Ibidapo-Obe 4 N/A

Members

2016 2015

Number of Meetings 4 3

Attendance

Mr. Abulele Victor (Chairman) 4 3

Professor Oyewusi Ibidapo-Obe 4 3

Mrs. Elaine Delaney 4 3

Committee members attended all committee meetings as scheduled and held during the year. Meetings attended depended on

their eligibility as determined by the date of becoming a member of the board and a member of the committee.

3

N/A

The table below shows the frequency of meetings of the Audit Committee and members’ attendance at these meetings during the

BOARD AND BOARD COMMITTEES MEETINGS

The table below shows the frequency of meetings of the Audit Committee and members’ attendance at these meetings during the

year under review.

N/A

3

3

The table below shows the frequency of meetings of the Board of Directors, Board Committees and members’ attendance at

these meetings during the year under review.

Audit, Compliance & Investment committee

3

N/A

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Annual Report

31 December 2016

g. Whistle Blowing Procedure

h. Relationship with Shareholders

The Company has a whistle-blowing policy which provides the procedure for reporting suspected breaches of the Company’s

internal policies, laws and regulations. There is a special portal created on the Company's intranet dedicated for whistle blowing.

The Comapny maintains an effective communication with its shareholders and this has helped improve the understanding of our

business, financial condition, operating performance and trends.

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Annual Report

31 December 2016

I Reporting Entity

II

III Basis of Preparation

(a) Functional and presentation currency

(b) Basis of measurement

Going concern

(c) Use of estimates and judgment

• in the period in which the estimate is revised, if the revision affects only that period, or

• in the period of the revision and future periods, if the revision affects both current and future periods.

The impairment on trade receivables is provided in Notes 1.2.5

The fair value and fair value hierarchy is provided in Notes 1.3.4

The financial statements were authorized for issue by the Directors on 6 February 2017.

The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the

application of policies and reported amounts of assets and liabilities, income, and expenses. The estimates and associated

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

circumstances, the results of which form the basis of making judgments about carrying values of assets and liabilities that are

not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are

recognised thus:

Judgments made by management in the application of IFRSs that have significant effect on the financial statements and

estimates with a significant risk of material adjustment are disclosed in the notes to the accounts:

Statement of compliance with International Financial Reporting Standards

Zenith Life Assurance Company Limited ("The Company") is a private limited liability company incorporated on 30 March

2001 to carry out the business of life assurance. The Company is a wholly owned subsidiary of Veritas Registrars Limited

The registered office of the Company is: Civic Towers, Ozumba Mbadiwe Victoria Island Lagos.

The principal activities of the Company are the provision of life assurance services, claims settlement and undertaking

investment activities.

The financial statement have been prepared on the going concern basis. The Company has no intention or need to reduce

substantially its business operations. Management believes that the going concern assumption is appropriate for the Company

due to the sufficient capital adequacy ratio and projected liquidity, based on historical experience that short-term obligations

will be refinanced in the normal course of business. Liquidity ratio and continuous evaluation of current ratio of the Company

is carried out to ensure that there are no going concern threats to the operation of the Company.

The financial statements have been prepared in accordance with, and comply with, International Financial Reporting

Standards (IFRS), in the manner required by Companies and Allied Matters Act of Nigeria, the Insurance Act of Nigeria,

relevant National Insurance Commission (NAICOM) guidelines and circulars and the Financial Reporting Council of Nigeria

Act (FRCN Act), to the extent that these laws are not in conflict with the requirement of IFRS.

The financial statement is presented in Naira, which is the Company's functional currency; except where indicated, financial

information presented in Naira has been rounded to the nearest thousands.

The financial statements have been prepared in accordance with the going concern principle under the historical cost basis

except for the following:

• Held-to-maturity financial assets, loans & receivables and trade receivables are carried at amortised cost

• Financial instruments at fair value through profit or loss are measured at fair value

• Available-for-sale financial assets are measured at fair value.

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Annual Report

31 December 2016

Income tax exposure

Current Tax

• an insurance company, whether proprietary or mutual, other than a life insurance company; or

• a Nigerian company whose profit accrued in part outside Nigeria,

(b) for other reserves, claims and outgoings of the company an amount equal to 25 percent of the total premium.

The Directors have adopted current tax practices in computing the tax liabilities.

(d)(i) Standards and interpretations issued/amended but not yet effective

Effective Date

Amendments to IAS 12 1/1/2017

IFRS 15 1/1/2018

Amendments to IAS 7 1/1/2017

IFRS 9 1/1/2018

IFRS 16 1/1/2019

Commentaries on these new standards/amendments are provided below.

Amendments to IAS 12 – Income Taxes

Amends IFRS 12 to clarify accounting treatment for deferred tax assets for unrealised losses on debt instruments measured at

fair value. The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits

against which it may make deductions on the reversal of that deductible temporary difference. Furthermore, the amendments

provide guidance on how an entity should determine future taxable profits and explains in which circumstances taxable profit

may include the recovery of some assets for more than their carrying amount.

The current income tax charge is calculated on taxable income on the basis of the tax laws enacted or substantively enacted at

the reporting date. The Company applies Section 16 of the Company Income Tax Act. It states that an Insurance business shall

be taxed as;

the profit on which tax may be imposed, shall be ascertained by taking the gross premium interest and other income receivable

in Nigeria less reinsurance and deducting from the balance so arrived at, a reserve fund for unexpired risks at the percentage

consistently adopted by the company in relation to its operation as a whole for such risks at the end of the period for which the

profits are being ascertained, subject to the limitation below:

An insurance company, other than a life insurance company, shall be allowed as deductions from its premium the following

reserves for tax purposes‐

Financial instruments

Leases

The Company will assess the impact once the standard has been finalised and becomes effective.

Income Taxes

Revenue from Contracts with Customers

Statement of Cash Flows

(a) for unexpired risks, 45 percent of the total premium in case of general insurance business other than marine insurance

business and 25 percent of the total premium in the case of marine cargo insurance;

Actual results may differ from these estimates based on the interpretation by the tax authorities. The Directors acknowledge

that changes in the application of the current tax practices can have a significant impact on the tax expense and tax liabilities

recorded in the financial statements.

The following new or revised standards and amendments which have a potential impact on the company are not yet effective

for the year ended 31 December 2016 and have not been applied in preparing these financial statements. However, the

company's assessments of the new standards and amendments are not expected to have significant impact on the company's

operations and financial position.

The Company does not plan to adopt these standards early.

These other standards issued/amended by the IASB but yet to be effective are outlined below:

Content

26


Annual Report

31 December 2016

This is a new standard introduced by IASB to replace existing standard IAS 17 - Leases.

IFRS 16 requires lessees to account for all leases under a single on-balance sheet model in a similar way to finance leases

under IAS 17. The standard includes two recognition exemptions for lessees – leases of ’low-value’ assets (e.g., personal

computers) and short-term leases (i.e. leases with a lease term of 12 months or less). At the commencement date of a lease, a

lessee will recognise a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the

underlying asset during the lease term (i.e., the right-of-use asset).

Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the

right-of-use asset. Lessees will be required to remeasure the lease liability upon the occurrence of certain events (e.g., a

change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine

those payments). The lessee will generally recognise the amount of the remeasurement of the lease liability as an adjustment

to the right-of-use asset.

Lessor accounting 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.

Other standards and interpretations issued that are effective for annual periods beginning after January 1, 2016, have not been

applied in preparing these financial statements and the Company is yet to assess the full impact of the amendments arising

IFRS 15 - Revenue from Contracts with Customers

Amendments to IAS 7 - Statement of Cash Flows

IFRS 9 - Financial instruments

IFRS 16 – Leases

IFRS 15 provides a single, principles based five-step model to be applied to all contracts with customers.

The five steps in the model are Identification of the contract with the customer, Identification of the performance obligations

in the contract, Determination of the transaction price, Allocation of the transaction price to the performance obligations in

the contracts, and Recognition of revenue when (or as) the entity satisfies a performance obligation.

The Company is yet to consider the impact of the standard on its business.

Amends IAS 7 to include disclosures that enable users of financial statements to evaluate changes in liabilities arising from

financing activities. The amendment specifies that the following changes arising from financing activities are disclosed (to the

extent necessary): (i) changes from financing cash flows; (ii) changes arising from obtaining or losing control of subsidiaries

or other businesses; (iii) the effect of changes in foreign exchange rates; (iv) changes in fair values; and (v) other changes.

IFRS 9 is part of the IASB’s project to replace IAS 39. It addresses classification, measurement and impairment of financial

assets as well as hedge accounting.

IFRS 9 replaces the multiple classification and measurement models in IAS 39 with a single model that has only three

classification categories: amortised cost, fair value through OCI and fair value through profit or loss. It includes the guidance

on accounting for and presentation of financial liabilities and derecognition of financial instruments which was previously in

IAS 39. Furthermore for non-derivative financial liabilities designated at fair value through profit or loss, it requires that the

credit risk component of fair value gains and losses be separated and included in OCI rather than in the income statement.

IFRS 9 also requires that credit losses expected at the balance sheet date (rather than only losses incurred in the year) on

loans, debt securities and loan commitments not held at fair value through profit or loss be reflected in impairment

allowances. The bank is yet to quantify the impact of this change although it is expected to lead to an increased impairment

charge than recognized under IAS 39.

Furthermore, the IASB has amended IFRS 9 to align hedge accounting more closely with an entity’s risk management. The

revised standard establishes a more principles-based approach to hedge accounting and addresses inconsistencies and

weaknesses in the current model in IAS 39. The company is yet to quantify the impact of these changes on its financial

statements.

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Annual Report

31 December 2016

IV Changes in accounting policies

V Significant accounting policies

(a) Foreign currency transactions

(b) Segment reporting

applied in preparing these financial statements and the Company is yet to assess the full impact of the amendments arising

from these standards.

Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional

currency at the exchange rate when the fair value was determined.

Except for the changes explained in Note IV above, the Company consistently applied the following accounting policies to the

periods presented in the financial statements.

Transactions denominated in foreign currencies are recorded in Naira at the rate of exchange ruling at the date of each

transaction. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included in

the statement of profit or loss and other comprehensive income.

Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional

currency at the spot exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between

the amortised cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during

the year, and the amortised cost in the foreign currency translated at the spot exchange rate at the end of the year.

Significant accounting policies are defined as those that reflect significant judgments and uncertainties, and potentially give

rise to different results under different assumptions and conditions.

The following new or amended standards are not expected to have a significant impact of the Company’s financial statements.

• IFRS 14 Regulatory Deferral Accounts.

• Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11).

• Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38).

• Equity Method in Separate Financial Statements (Amendments to IAS 27).

• Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28).

• Annual Improvements to IFRSs 2012–2014 Cycle.

• Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28).

• Disclosure Initiative (Amendments to IAS 1)

Except for the changes below, the Company has consistently applied the accounting policies as set out in notes V to all

periods presented in the financial statements.

Foreign currency differences arising on translation are generally recognised in profit or loss. However, foreign currency

differences arising from the translation of Available-for-sale equity instruments are recognised in OCI.

An operating segment is a distinguishable component of the Company that is engaged in providing products or services

(business segment), or in providing products or services within a particular economic environment (geographical segment),

which is subject to risks and rewards that are different from those of other segments. The Company’s primary format for

segment reporting is based on business segments.

Where applicable, segment results that are reported include items directly attributable to a segment as well as those that can

be allocated on a reasonable basis.

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Annual Report

31 December 2016

(c) Underwriting activities

(i) Gross premium written

Gross premium income

(ii) Unearned premiums

(iii) Reinsurance

Reinsurance assets

Prepaid reinsurance

Unearned reinsurance premiums

Outward reinsurance premium are accounted for in the same accounting period as the premium for the related direct insurance

or reinsurance business assumed.

Premium on investment products are unbundled and reported as gross premium during the period.

Gross premium income relates to premium earned net of unearned premium reserves and are stated gross of commission and

recognised when due. Premium earned relates to risks assumed during the period.

Reinsurance assets represent balances due from reinsurance contracts. Reinsurance assets consist of short-term balances due

from reinsurers, as well as longer term receivables that are dependent on the expected claims and benefits arising under the

related reinsured insurance contracts. Amounts recoverable from or due to reinsurers are measured consistently with the

amounts associated with the reinsured insurance contracts and in compliance with the terms of each reinsurance contracts.

Unearned reinsurance premiums are those proportions of premium written in a year that relate to periods of risk after the

statement of financial position date. Unearned reinsurance premiums are deferred over the term of the underlying direct

insurance policies for risks-attaching contracts and over the term of the reinsurance contract for losses-occurring contracts.

Gross premium comprise the premiums on insurance contracts entered into during the year, irrespective of whether they relate

in whole or in part to a later accounting period. It is recognised at the point of attachment of risk to a policy before deducting

cost of reinsurance cover and unearned portion of the premium.

Unearned premiums are those proportions of premium written in the year that relate to periods of risks after the reporting date.

It is computed separately for each insurance contract using a time proportionate basis, or another suitable basis for uneven risk

contracts.

The Company cedes reinsurance in the normal course of business for the purpose of limiting its net loss potential on policies

written. Premium ceded comprise written premiums ceded to reinsurers, adjusted for the reinsurers’ share of the movement in

the provision for the unearned premiums. Reinsurance arrangements do not relieve the Company from its direct obligations to

its policyholders.

Prepaid reinsurance cost is determined on a time apportionment basis and is reported under reinsurance assets in the statement

of financial position. Premiums include any adjustments arising in the accounting period in respect of reinsurance contracts

incepting in prior accounting periods.

Gross premium on life contract are recognised in the life fund account when payable by the policy holder. Gross life insurance

written premium comprise the total premium receivable for the whole period of cover provided by contracts entered into

during the accounting period and are recognised on the date of inception of the policy.

Premiums on reinsurance inward are included in gross written premiums and accounted for as if the reinsurance was

considered direct business, taking into account the product classification of the reinsured business.

Premium ceded, claims reimbursed and commission recovered are reported directly in the Life fund account.

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Annual Report

31 December 2016

Reinsurance claims recoveries

Reinsurance claims recoveries

(iv) Claims incurred

Life Business

(v) Underwriting expenses

(d) Commission earned

(e) Investment income

(f) Dividend income

(g) Employee benefits/personnel expenses

Short-term benefits

Interest income is recognised in the income statement as it accrues and is calculated using the effective interest rate method.

Fees and commissions that form part of an integral part of the effective yield of a financial instrument are recognised as an

adjustment to the effective interest rate of the instrument.

When a receivable is impaired, the Company reduces the carrying amount to its recoverable amount, being the estimated

future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as

interest income.

Short-term employee benefit obligations include wages, salaries and other benefits which the Company has a present

obligation to pay, as a result of employees’ services provided up to the reporting date. The accrual is calculated on an

undiscounted basis, using current salary rates.

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

Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee

and the obligation can be estimated reliably.

Reinsurance recoverable are estimated in manner consistent with the outstanding claims provision and claims incurred

associated with the reinsurer’s polices and are in accordance with the related insurance contract. They are measured at their

carrying amount less impairment charges. Amounts recoverable under reinsurance contracts are assessed for impairment at

each reporting date. If there is objective evidence of impairment, the Company reduces the carrying amount of its insurance

assets to its recoverable amount and recognizes the impairment loss in the income statement as a result of an event that

occurred after its initial recognition, that the Company may not recover all amounts due and that the event has a reliably

measurable impact on the amounts that the Company will receive from the reinsurer.

Claims incurred in respect of life business consist of claims arising during the year including provision for policyholders’

liabilities. Claims are charged against the Life fund account.

Underwriting expenses for insurance contracts are recognized as expense when incurred. Underwriting expenses relating to

investment contracts are also recognised as an expense when incurred and are reported in the investment contract revenue

account.

Commissions are recognized on ceding business to the reassurer and are credited to the profit and loss account over the period

the service is provided.

Investment income comprises interest income earned on short-term deposits and income earned on trading of securities

including all realised and unrealised fair value changes, interest, dividends and foreign exchange differences. Investment

income is accounted for on an accrual basis.

Reinsurance liabilities are primarily premiums payable for the reinsurance contracts entered into by the Company and are

recognised as a payable when incurred. The Company has the right to set-off re-insurance payables against the amount due

from re-insurance and brokers in line with the agreed arrangement beween both parties.

Dividend is recognised as earned in the period in which the right of receipt is established and is stated net of withholding tax.

Underwriting expenses are made up of acquisition and maintenance expenses comprising commission and policy expenses,

proportion of staff cost and insurance supervision levy.

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Annual Report

31 December 2016

Post Employment Benefits

(h) Management expenses

(i) Leases

Lease payments - Lessee

Lease assets – Lessee

Lease assets – Lessor

(j) Income tax

Current tax

Deferred tax

Income tax comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the extent that it

relates to items recognised directly in equity, in which case it is recognised in other comprehensive income .

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to

the tax payable or receivable in respect of previous years. It is measured using tax rates enacted or substantively enacted at the

reporting date. Current tax also includes any tax arising from dividends.

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

financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:

• temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and

that affects neither accounting nor taxable profit or loss;

• temporary differences related to investments in subsidiaries to the extent that it is probable that they will not reverse in the

foreseeable future; and

• taxable temporary differences arising on the initial recognition of goodwill.

Management expenses are expenses other than claims and underwriting expenses. They include depreciation expenses and

other expenses. They are accounted for on an accrual basis and recognised in the profit or loss.

Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease

when the lease adjustment is confirmed.

Assets held by the Company under leases that transfer to the Company 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.

If the Company 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

The Company operates a defined contributory retirement scheme as stipulated in the Pension Reform Act 2014. Under the

defined contribution scheme, the Company pays fixed contributions of 13% to a separate entity – Pension Fund

Administrators; employees also pay a fixed contribution of 5% to the same entity. Once the contributions have been paid, the

Company retains no legal or constructive obligation to pay further contributions if the Fund does not hold enough assets to

finance benefits accruing under the retirement benefit plan. The Company’s obligations are recognized in the statement of

profit or loss and other comprehensive income.

Payments made under operating leases are recognised in statement of profit or loss and other comprehensive income on a

straight line basis over the terms of the Lease. Lease incentives received are recognised as an integral part of the total lease

expense, over the term of the lease.

Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the

outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant

periodic rate of interest on the remaining balance of the liability.

31


Annual Report

31 December 2016

(k) Earnings per share

(l) Cash and cash equivalent

(m) Financial assets and liabilities

(i) Classification

• financial assets at fair value through profit or loss;

• held-to-maturity investments;

• loans and receivables, and

• available-for-sale financial assets

Deferred tax assets and liabilities are offset only if certain criteria are met.

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 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. 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.

All financial instruments are initially recognized at fair value, which includes directly attributable transaction costs for

financial instruments not classified at fair value through profit and loss. Financial instruments are derecognized when the

rights to receive cash flows from the financial instruments have expired or where the Company has transferred substantially

all risks and rewards of ownership.

The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Company expects,

at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

The Company presents basic and diluted earnings per share for its ordinary shares. Basic EPS is calculated by dividing the

profit or loss that is attributable to ordinary shareholders of the Company 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.

Adjusted EPS is determined by dividing the profit or loss attributable to ordinary shareholders by the weighted average

number of shares adjusted for bonus shares issued.

Cash and cash equivalent include notes and coins on hand, unrestricted balances held with banks and highly liquid financial

assets with original maturities of three months or less from the acquisition date that are subject to an insignificant risk of

changes in their fair value, and are used by the Company in the management of its short term commitment.

The classification of financial assets depends on the purpose for which the investments were acquired or originated. The

Company classifies its financial assets into the following categories:

The Company’s financial assets include cash and short term deposits, trade and other receivables, quoted and unquoted equity

instruments, bonds and treasury bills.

The Company’s financial liabilities are classified as other financial liabilities. They include: investment contract liabilities,

creditors and accruals.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax

rates enacted or substantively enacted at the reporting date.

32


Annual Report

31 December 2016

(ii) Subsequent measurement

(iii) Derecognition: Financial assets

(iv) Derecognition: Financial liabilities

(v) Financial assets held at fair value through profit or loss

(vi) Held-to-maturity

• those that the Company designates as available for sale.

• those that meet the definition of loans and receivables.

(vii) Available-for-sale

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

value cannot be reliably determined, which are carried at cost. Fair values are determined in the same manner as for

investments at fair value through profit or loss. Unrealised gains and losses arising from changes in the fair value of available-

for-sale financial assets are recognised in other comprehensive income while the investment is held, and are subsequently

transferred to the statement of profit or loss and other comprehensive income upon sale or de-recognition of the investment.

Subsequent measurement of financial instruments depends on their classification. Subsequent to initial measurement,

financial instruments are measured either at fair value or amortised cost, depending on their classification.

The Company derecognises a financial asset when the contractual rights to the cash flow from the financial asset expires; or

transfers its right to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of the

financial assets are transferred or in which the Company neither transfers nor retains substantially all risks and rewards of

ownership and it does not retain control of the asset;

Financial assets at fair value through profit or loss include financial assets held for trading. Financial assets classified as

trading are acquired principally for the purpose of selling in the short term.

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

gains and losses arising from changes in this value recognized in the statement of profit or loss and other comprehensive

income in the period in which they arise. The fair values of quoted investments in active markets are based on current bid

prices. The fair values of unquoted equities, and quoted equities for which there is no active market, are established using

valuation techniques corroborated by independent third parties. These may include reference to the current fair value of other

instruments that are substantially the same and discounted cash flow analysis.

Interest earned and dividends received while holding trading assets at fair value through profit or loss are included in

investment income. Interest income are recognised using effective interest rate.

• sales or reclassification that are so close to maturity that changes in the market rate interest would not have a significant

effect in the financial asset's fair value;

• sales or reclassification attributable to non-recurring isolated events beyond the Company's control that could not have been

reasonably anticipated.

Available for sale financial investments are non-derivative instruments which includes equity and debt securities. The

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

financial assets, and strategic capital investments held for an indefinite period of time, which may be sold in response to needs

for liquidity or changes in interest rates, exchange rates or equity prices.

• sales or reclassification after the Company has collected substantially all of the assets' original principals; and

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

management has both the positive intention and ability to hold to maturity other than:

Held-to-maturity investments are carried at amortised cost using effective interest method less any impairment losses. A sale

or reclassification of more than an insignificant amount of held-to-maturity investment would result in the reclassification of

all held-to-maturity investments to Available-for-sale, and would prevent the Company from classifying investment security

as held-to-maturity for the current and following two financial years. However, sales and reclassification in any of the

following circumstances would not trigger a reclassification;

The Company derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.

33


Annual Report

31 December 2016

(viii) Loans and receivables

(ix) Fair value measurement

(x) Amortised cost measurement

Portfolios of financial assets and financial liabilities that are exposed to market risk and credit risk that are managed by the

Company on the basis of the net exposure to either market or credit risk are measured on the basis of a price that would be

received to see a net long position (or paid to transfer a net short position) for a particular 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 Company recognises transfers between levels of fair value hierarchy as of the end of the reporting period during which

the change has occurred.

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

active market, other than those classified by the Company at fair value through profit or loss or available-for-sale.

Loans and receivables consist primarily of staff loans, premium debtors, due from reinsurers and other receivables. These are

managed in accordance with a documented policy.

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

granted at below market rates are fair valued by reference to expected future cash flows and current market interest rates for

instruments in a comparable or similar risk class and the difference between the historical cost and fair value is accounted for

as employee benefits under staff costs in the period over the period of the staff loan.

‘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

Company has access at that date. The fair value of a liability reflects its non-performance risk.

When available, the Company 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.

Dividends received on available-for-sale instruments are recognised in income statement when the Company’s right to receive

payment has been established.

Interest income on available for sale investments are recognised in the profit and loss account using effective interest rates

The amortised cost of a financial asset or liability is the amount at which the financial asset or liability is measured at initial

recognition, minus principal repayments, plus or minus the cumulative amortisation using the effective interest rate method of

any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment.

If there is no quoted price in an active market, then the Company 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 on initial recognition is the transaction price, i.e. the fair value of

the consideration paid or received. If the Company 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 recognized in the statement of 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.

If an asset or a liability measured at fair value has a bid price and an ask price, the Company measures the assets and long

positions at a bid price and liabilities and short positions at an ask price.

34


Annual Report

31 December 2016

(xi) Impairment of financial assets

(xii) Offsetting financial instruments

All impairment losses are recognized through profit or loss. If any loss on the financial asset was previously recognized

directly in equity as a reduction in fair value, the cumulative net loss that had been recognized in equity is transferred to the

income statement and is recognized as part of the impairment loss. The amount of the loss recognized in the income statement

is the difference between the acquisition cost and the current fair value, less any previously recognized impairment loss.

The carrying amounts of these assets are reviewed at each reporting date to determine whether there is any objective evidence

of impairment. A financial asset is considered to be impaired if objective evidence indicates that one or more events that have

occurred since the initial recognition of the asset have had a negative effect on the estimated future cash flows of that asset

and can be reliably estimated. For financial assets measured at amortised cost, the Company first assesses whether objective

evidence of impairment exists individually for financial assets that are individually significant and, on the other hand,

collectively for financial assets that are not individually significant. Individually significant financial assets are tested for

impairment on an individual basis. The remaining financial assets are assessed in groups that share similar credit risk

characteristics. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference

between its carrying value and the present value of the estimated future cash flows discounted at the original effective interest

rate.

Income and expenses are presented on a net basis only when permitted under IFRS, or from gains and losses arising from a

group of similar transactions such as in the Company's trading activities.

The Company assesses the premium debtors on both specific and collective impairment test bases. Specific impairment on

premium debtors are assessed on individually significant receivables based on impairment triggers identified by the Company.

The amount of loss recognised in the income statement is the difference between the carrying amount and discounted present

value of expected cash flows at the original effective interest rate.

Subsequent decreases in the amount relating to an impairment loss, that can be linked objectively to an event occurring after

the impairment loss was recognized in the statement of profit or loss, is reversed through the statement of profit or loss. An

impairment loss in respect of an equity instrument classified as available-for-sale is not reversed through the statement of

profit or loss but accounted for directly in equity.

Financial assets and liabilities are set off and the net amount presented in the statement of financial position when, and only

when, the Company has a legally enforceable right to set off the recognized amounts and intends either to settle on a net basis

or to realise the asset and settle the liability simultaneously.

Loans and receivables, including premium debtors not specifically impaired are then assessed for collective impairment.

Loans and receivables not individually significant are collectively assessed for impairment by grouping together the

receivables with similar risk characteristics.

In assessing collective impairment, the Company uses statistical modeling of historical trends of the probability of default, the

timing of recoveries and the amount of loss incurred, adjusted for management's judgment as to whether current economic and

credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends. Default

rates, loss rates and the expected timing of future recoveries are regularly benchmarked against actual outcomes to ensure that

they remain appropriate.

35


Annual Report

31 December 2016

(n) Insurance contract liabilitiesClassification of insurance contract liabilities

Recognition and measurement of insurance contract liabilities

(o) Deferred taxation

(p) Intangible assets

Software

Recognition of software acquired is only allowed if it is probable that future economic benefits to this intangible asset are

attributable and will flow to the Company.

Software acquired is initially measured at cost. The cost of acquired software comprises its purchase price, including any

import duties and non-refundable purchase taxes, and any directly attributable expenditure on preparing the asset for its

intended use. After initial recognition, software acquired is carried at its cost less any accumulated amortisation and any

accumulated impairment losses. Maintenance costs is not included but recognised and expensed immediately in the profit or

loss

Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the

related tax benefit will be realised.

Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the

related dividend is recognised.

• differences relating to investments in subsidiaries to the extent that they probably will not reverse in the foreseeable future

and differences arising from investment property measured at fair value whose carrying amount will be recovered through use.

Software acquired by the Company is measured at cost less accumulated amortisation and any accumulated impairment losses.

Deferred taxation, which arises from timing differences in the recognition of items for accounting and tax purposes, is

calculated using the liability method. Deferred taxation is provided fully on timing differences, which are expected to reverse

at the rate of tax likely to be in force at the time of reversal. A deferred tax asset is recognized to the extent that it is probable

that future taxable profits will be available against which the associated unused tax losses and deductible temporary

differences can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax

benefit will be realized.

Contracts under which the Company accepts significant insurance risk from another party( the policyholder) by agreeing to

compensate the policy holder or other beneficiary if a specified uncertain future event ( the insured event) adversely affects

the policy holder or other beneficiary are classified as insurance contracts. Insurance risk is risk other than financial risk,

transferred from the holder of the contract to the issuer.

Financial guarantees are contracts that requires the Company to make specific payments to reimburse the holder for a loss it

incurs because a specified debtors fails to make payments when due in accordance with the terms of a debt instrument.

Contracts that transfer financial risks but not significant insurance risk are classified as investment contracts. Financial risk is

the risk of a possible future change in one or more of a specified interest rate, security price, commodity price, foreign

exchange rate, index of prices 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. Insurance contracts may also transfer some financial risk.

Liabilities arising from financial guarantees, commitments and insurance contract are initially measured at fair value and the

initial fair value is amortised over the life of the guarantees, commitments or insurance contract. The liability is subsequently

carried at the higher of this amortised amount and the present value of any expected payment to settle the liability when a

payment under the contracts has become probable.

Deferred tax is not recognised for the following temporary differences:

• the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither

accounting nor taxable profit,

The Company issues contracts that transfer insurance risk or financial risk or both.

36


Annual Report

31 December 2016

(r) Property and equipment

(i) Recognition & Measurement

(ii) Subsequent Costs

(iii) Depreciation

Leasehold improvements 20% (or period of primary lease where shorter)

Office equipment 20%

Computer equipment 33.33%

Motor vehicles 25%

(iv) De-recognition

Depreciation is calculated on property and equipment on the straight line basis to write down the cost of each asset to its

residual value over its estimated useful life. Depreciation methods, useful lives and residual values are reassessed at each

reporting date. No depreciation is charged on item of property and equipment until they are brought into use.

Depreciation begins when an asset is available for use and ceases at the earlier of the date that the asset is derecognised or

classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.

Depreciation reduces an asset's carrying value to its residual value at the end of its useful life, and is allocated on a straight

line basis over the estimated useful lives, as follows:

Upon disposal of any item of property and equipment or when no future economic benefits are expected to flow from its use,

such items are derecognized from the books. Gains and losses on disposal of assets are determined by comparing proceeds

with their carrying amounts and are recognized in the statement of profit or loss and other comprehensive income in the year

of de-recognition.

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

development of the software and to use it in a manner that will generate future economic benefits, and can reliably measure

the costs to complete the development. The capitalised costs include all costs directly attributable to the development of the

software. Internally developed software is stated at capitalised cost less accumulated amortisation and impairment.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is

probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be

measured reliably. All other repairs and maintenance costs are charged to the statement of profit or loss and other

comprehensive income during the financial period in which they are incurred.

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

carrying amount of the replaced or renewed component is derecognized.

Leasehold properties are depreciated based on the lease period agreed and lower of the unexpired lease period or 99 years for

leasehold lands

Depreciation method, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

Subsequent expenditure on software assets is capitalised only when it increases the future economic benefits embodied in the

specific asset to which it relates. All other expenditures are expensed as incurred. Amortisation is recognised in profit or loss

on a straight-line basis over the estimated useful life of the software, from the date that it is available for use. The estimated

useful life of software is three years subject to annual reassessment.

Items of property and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses.

Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. If

significant parts of an item of property or equipment have different useful lives, then they are accounted for as separate items

(major components) of property and equipment. Any gain or loss on disposal of an item of property and equipment is

recognised within other income in profit or loss.

37


Annual Report

31 December 2016

(r) Statutory deposit

(s) Impairment of non-financial assets

(t) Group Life Business

(u) Individual Business

Insurance contract liabilities

(v) Life insurance contract liabilities

(w) Reinsurance liabilities

(x) Investment contract liabilities

Life Savings Plan / Deposit Administration

(y) Trade and other payables

An unexpired premium reserve is included for group life business, with an allowance for acquisition expenses as a percentage

of premium. An allowance is made for IBNR (Incurred But Not Reported) claims in Group Life to take care of the delay in

reporting claims.

Statutory deposit represents 10% of required minimum paid-up capital of the Company deposited with and held by the Central

Bank of Nigeria (CBN) in pursuant to Section 10 (3) of the Insurance Act 2003. Statutory deposit is measured at cost.

The carrying amounts of the Company’s non-financial assets, other than investment property and deferred tax assets, are

considered to be impaired when there exists any indication that the asset’s recoverable amount is less than the carrying

amount. Impairment losses are recognised in profit or loss.

The carrying amount of these non-financial assets are reviewed at each reporting date to determine whether there is any

indication of impairment.

Impairment losses of non-financial assets, related claims for or payments of compensation from third parties and any

subsequent purchase or construction of replacement assets are separate economic events and are accounted for separately.

Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective

interest method. The fair value of a non-interest bearing liability is its discounted repayment amount. If the due date of the

liability is less than one year, discounting is omitted.

The reserve for life savings plan and deposit administration fund are taken as the amount standing to the credit of the policy

holders as at valuation date. Where policies still have active term assurance life covers, these are valued alongside the regular

term assurance policies as described under the Individual Business policy above.

The life insurance contract liabilities represents the liability due to policy holders at the end of every reporting period. The

liability in the life fund account is determined by an actuarial valuation using a liability adequacy test model.

Individual risk business comprises term assurance and mortgage protection policies, for which a gross premium method of

valuation is adopted.

Reserves are calculated via a cash flow perfected approach taking into account future office premiums, expenses and benefit

payments ( death). Future cash flows are discounted back to the valuation date at the valuation interest rate.

Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has

decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the

recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the

carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been

recognised. Reversals of impairment losses are recognised in profit or loss.

Reinsurance liabilities are primarily premiums payable for the reinsurance contracts entered into by the Company and are

recognised as a payable when incurred. The Company has the right to set-off re-insurance payables against the amount due

from re-insurance and brokers in line with the agreed arrangement between both parties.

38


Annual Report

31 December 2016

(z) Provisions for other liabilities and charges

(aa) Share capital & reserves

Share Capital

(ab) Dividends

(ac) Fair value reserves

(ad) Contingent liabilities

(ae) Actuarial valuation

VI Required technical and other reserves by NAICOM

(a) Contingency reserve

Dividend distribution to the Company’s shareholders is recognized as a liability in the financial statements in the period in

which the dividends are approved by the Company’s shareholders. Dividends that are proposed but not yet declared are

disclosed in the notes to the financial statements.

Dividends on the Company’s ordinary shares are recognised in equity in the period in which they are paid or, if earlier, the

period approved by the Company’s shareholders.

Actuarial valuation of the life fund is conducted annually to determine the net liabilities on the existing policies and the

adequacy of the assets repesenting the insurance fund as at the date of valuation. All deficits arising therefrom are charged to

the statement of profit or loss and other comprehensive income while the surplus is appropriated to the shareholders and

credited to the statement of profit or loss and other comprehensive income.

Contingency reserve is credited with the greater of 1% of gross premiums, or 10% of the profits. This shall accumulate until it

reaches the amount of greater of minimum paid-up capital or 50% of net premium.

A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be

estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.

Provisions are determined by discounting the expected future cash flows at a rate that reflects current market assessments of

the time value of money and the risks specific to the obligation. The unwinding of the amount is recognised as a finance cost.

The Company has only one class of shares, ordinary shares. Ordinary shares are classified as equity. When new shares are

issued, they are recorded in share capital at their par value. The excess of the issue price over the par value is recorded in the

share premium reserve.

All ordinary shares rank equally with regard to the Company's residual assets. Holders of these shares are entitled to dividends

as declared from time to time and are entitled to one vote per share at general meetings of the Company.

Incremental costs directly attributable to issue of shares are recognized as deductions from equity net of any tax effects.

The fair value reserve comprises the cumulative net change in the fair value of available-for-sale financial assets until the

assets are derecognised or impaired.

A contingent liability is a possible obligation that arises from past events and whose existence will be confirmed only by the

occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or the

Company has a present obligation as a result of past events which is not recognised because it is not probable that an outflow

of resources will be required to settle the obligation; or the amount cannot be reliably estimated. Contingent liabilities

normally comprise of legal claims under arbitration or court process in respect of which a liability is not likely to crystallise.

39


Annual Report

31 December 2016

(b) Technical Reserve

These are computed in compliance with the provisions of the Insurance Act 2003 as follows:

i Reserve for unearned premiums

iii Reserve for outstanding claims

In accordance with Section 20 (1) (a) of Insurance Act 2003, the reserve for unexpired risks is calculated on a time

apportionment basis in respect of the risks accepted during the year. A provision for the additional unexpired risk reserve is

recognised for an underwriting year where it is envisaged that the estimated cost of claims and expenses would exceed the

unearned premium reserved.

The reserve for outstanding claims is maintained at the total amount of outstanding claims incurred and reported plus claims

incurred but not reported (IBNR) at the reporting date.

40

Zenith Life Assurance Company LimitedAnnual Report

31 December 2016Statement of profit or loss and other comprehensive incomefor the year ended 31 December 2016

2016 2015

Note N'000 N'000

Gross premium written 4 3,270,883 3,363,440

Unearned premium reserve 4 73,351 (372,396)

Gross premium income 4 3,344,234 2,991,044

Reinsurance expenses 5 (634,679) (653,152)

Net premium income 2,709,555 2,337,892

Commission income 6 167,939 161,292

Net underwriting income 2,877,494 2,499,184

Net claims expenses 7 (1,489,433) (1,316,676)

Underwriting expenses 8 (326,317) (514,455)

Increase in individual life fund 19 (3,501) (4,797)

Underwriting profit 1,058,243 663,256

Investment income 9(a) 674,163 890,407

Net income on investment contracts 9(b) 11,151 9,917

Impairment of investment securities available for sale 12(b) (6,572) (422,983)

Net income 1,736,985 1,140,597

Management expenses 10 (730,343) (273,190)

Profit before tax 1,006,642 867,407Taxation 23 (251,887) 173,330Profit for the year 754,755 1,040,737

Other comprehensive income:

Items that are or may be reclassified to profit or loss:

Fair value changes on available for sale financial assets

- Net reclassification adjustment on impairment - 422,983

- Unrealised net loss arising during the year 28 (11,116) (17,943)Other comprehensive (loss)/income, net of tax (11,116) 405,040

Total comprehensive income for the year 743,639 1,445,777

– Basic (in kobo) 29 38 52

The notes on pages 45 to 95 form an integral part of these financial statements.

41


31 December 2016

Statement of Changes in Equity

As at 31 December 2016

Share capital

Retained

earnings

Fair value

reserves

Statutory

contingency

reserve Total

N'000 N'000 N'000 N'000 N'000

As at 1 January 2016 2,000,000 1,383,674 3,066 417,036 3,803,776

Profit for the year - 754,755 - - 754,755

Transfer to contingency reserve - (75,475) - 75,475 -

Other comprehensive income

Fair value on AFS investment - - (11,116) - (11,116)

Total comprehensive income for the year - 679,280 (11,116) 75,475 743,639

As at 31 December 2016 2,000,000 2,062,954 (8,050) 492,511 4,547,415

Share capital

Retained

earnings

Fair value

reserves

Statutory

contingency

reserve Total

N'000 N'000 N'000 N'000 N'000

As at 1 January 2015 2,000,000 2,447,011 (401,974) 312,962 4,357,999

Profit for the year - 1,040,737 - - 1,040,737

Transfer to contingency reserve - (104,074) - 104,074 -

Other comprehensive income

Fair value on AFS investment - - (17,943) - (17,943)

Impairment on AFS securities 422,983 422,983

Total comprehensive income for the year - 936,663 405,040 104,074 1,445,777

Transactions with owners recorded directly in equity

Interim dividends to share holders - (2,000,000) - - (2,000,000)

As at 31 December 2015 2,000,000 1,383,674 3,066 417,036 3,803,776

43


Annual Report

31 December 2016

Statement of cash flowsfor the year ended 31 December 2016

2016 2015

Note N'000 N'000

Premium received from policyholders 3,217,400 3,365,067

Re-insurance premium paid (680,366) (643,146)

Commission received 188,552 161,292

Commission paid (357,818) (515,836)

Re-insurance receipt in respect of claims 1,288,686 666,653

Claims paid (2,052,212) (2,144,704)

Withdrawals from investment contracts (281,564) (200,753)

Additions to investment contracts 399,824 415,549

Income received from operations - 11,353

Cash payments for operating expenses (997,880) (305,409)

Cash paid to and on behalf of employees (130,768) (97,692)

Tax paid 23 (425,857) (281,946)

Net cash from operating activities 167,997 430,428

Cash flows from investing activities:

Purchase of treasury bills (4,462,678) (3,415,103)

Proceeds from liquidation of treasury bills 4,750,000 3,633,019

Purchase of bond investment (204,707) -

Proceed from liquidation of bonds 900,000 -

Interest received on investment 348,082 406,403

Changes in Loans and receivables 62 -

Dividend received 6,044 3,264

Proceeds on disposal of AFS investment 19,415 -

Acquisition of property and equipment 17 (34,345) (840)

Acquisition of intangible assets 16 (13,400) (13,400)

Net cash from investing activities 1,308,473 613,343

Cash flows from financing activities:

Dividend paid (1,800,000) (700,000)

Net cash used in financing activities (1,800,000) (700,000)

(Decrease)/Increase in cash equivalents (323,530) 343,771

Cash and cash equivalents at beginning of year 1,747,983 1,404,212

(Decrease)/Increase in cash and cash equivalents (323,529) 343,771Cash and cash equivalents at end of year 11 1,424,454 1,747,983

The notes on pages 45 to 95 form an integral part of these financial statements.

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Annual Report

31 December 2016

Notes to the financial statements

1 Financial risk management

1.1

1.1.1 Risk management philosophy/strategy

1.1.2 Risk appetite

The key features of the Company’s risk management policy are:

- The Board of Directors provides overall risk management direction and oversight.

- The Company’s risk appetite is approved by the Board of Directors.

- Risk management is embedded in the Company as an intrinsic process and is a core competency of all its employees.

- The Company manages its credit, market, operational and liquidity risks in a co-ordinated manner within The

organisation.

Enterprise risk review

Zenith Life Assurance’s business operation is largely diversified and spread across different geographical locations. This

necessitates the need for proper identification, measurement, aggregation and effective management of risks and efficient

utilisation of capital to derive an optimal risk and return ratio.

Risks associated with the business of the Company include underwriting insurance risks, operational risks, financial capital

risks, credit risks, liquidity risks, reinsurance risks, claims management risks, regulatory risks, market risks (which

includes currency risk, interest rate risk and other price risks) as well as other risks such as legal risks, reputation risks,

political risks, strategic risks, emerging market risks.

The Company's risk management philosophy is to proactively manage all risks by aligning our people, technology and

processes with the best risk management practices. The company considers sound risk management to be the foundation of

a long lasting financial institution therefore the company continues to adopt a holistic and integrated approach to risk

management and therefore, brings all risks together under one or a limited number of oversight functions.

Our aim is to ensure that our risk management framework is appropriate to the size of the organization, aligned with our

strategy, embedded in our decision making process and is responsive to our constantly changing environment. We view

risk management as a shared responsibility therefore the Group aims to build a shared perspective on risks, one that is

grounded in consensus.

Our primary objectives are to ensure that;

- Risk Management is governed by well defined policies which are clearly communicated across the Group.

- Risk related issues are taken into consideration in all business decisions.

- The Group continually strive to maintain a conservative balance between risk and revenue consideration.

- All risks are identified, effectively managed and that returns are commensurate with the risk taken.

- The Company only underwrites a high quality portfolio of risks and payouts for claims arising as a result of errors/lapses

are kept to the barest minimum.

- Procedures are in place that support proper assessment of risk factors presented by potential policy holders before the

inception of the risks.

The Company addresses the challenge of risks comprehensively through an enterprise-wide risk management framework

by applying leading practices that is supported by a robust governance structure consisting of board level and enterprise

Risk management committees. The Board drives the risk governance and compliance process through its committees. The

Board committee provides oversight on the systems of internal control, financial reporting and compliance. The Board Risk

Committee sets the risk philosophy, policies and strategies as well as provides guidance on the various risk elements and

their management.

The Board Risk Control Functions are supported by management committees that help it develop and implement various

risk strategies. The Enterprise Risk Management Committee drives the management of the financial risks (market, liquidity

and credit risk), operational risks as well as strategic and reputational risks.

In addition, Zenith Life Assurance manages its risks in a structured, systematic and transparent manner through a global

risk policy which embeds comprehensive risk management processes into the organizational structure and risk

measurement and monitoring activities. This structure ensures that the Company’s overall risk exposures are within the

parameters set by the Board.

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Annual Report

31 December 2016

1.1.3 Risk Management Structure

The Company continually modifies and enhances its risk management policies and systems to reflect changes in markets,

products and international best practices. Training, individual responsibility and accountability, together with a disciplined

and cautious culture of control, lie at the heart of the Company’s management of risk.

Our risk management governance structure is designed in line with the “three lines defence” model. In this model, risk

management responsibilities and accountabilities reside at all levels, from the Board downwards.

First Line of defence – Risk Ownership

Our first line of defense comprises business units and functions with direct responsibility for managing and controlling

risk. The process for evaluating and measuring risk is integrated into their day to day activities. The primary

responsibilities and objectives of this line of defence include:

• Identifying, reporting and priotising existing and emerging risks

• Implementing polices and managing risk exposures by using appropriate procedures and internal controls and;

• Identifying risk events and losses, reporting and escalating material risks and implementing remedial actions to address

these issues.

- The Company’s risk management function is independent of The business divisions.

- The Company’s internal audit function reports to The Board audit Committee and provides independent validation of

The business units’ compliance with risk policies and procedures and The adequacy and effectiveness of The risk

management framework on an enterprise-wide basis.

Shareholders

Board of Directors

Board Enterprise Risk Management Committee

MD/CEO Risk Management Committee

Statutory Audit Committee

Business and support units Risk Management Department

InternalAudit

ExternalAudit

1st Line of defense 2nd line of defense 3rd Line of defense

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Annual Report

31 December 2016

1.1.4 Methodology for risk rating

- Establish lines of authority and responsibility for managing individual risk elements in line with the Board’s overall

direction.

Second Line of Defence- Risk Oversight

Our second line of defence comprises functions with direct responsibility for providing independent risk oversight,

coordination, facilitation, monitoring and challenge of the effectiveness and integrity of our risk management processes.

They provide support, training and counsel to business units in relation to risk management and report on risk management

activities to the Board and executive management. Their responsibilities and objectives include:

• Establishing risk policy, standards and limits and monitoring adherence;

• Providing risk oversight and independent reporting to executive management and the board;

• Assisting the first line defence in implementing the Company’s risk management framework and policy;

• Establishing a measurable and systematic process for risk assessment and governance reporting;

• Ensuring the effectiveness of risk management activities and allocating resources to execute risk management initiatives;

• Providing analytics, guidance and coordination among the different business units;

• Providing independent review and reporting on the effectiveness of risk management policy as implemented by the first

line of defence.

Third line of defence- Assurance Functions

The third line of defence comprises functions with direct responsibility for assessing and providing independent assurance

on the adequacy, appropriateness, effectiveness and integrity of the Company’s overall risk management framework, policy

and actions.

The Board of Directors is committed to managing compliance with a robust compliance framework to enforce compliance

with applicable laws, rules and standards issued by the industry regulators and other law enforcement agencies, market

conventions, codes of practices promoted by industry associations and internal policies.

The compliance function, under the leadership of the Chief Compliance Officer of the Company has put in place a robust

compliance framework, which includes:

- Comprehensive compliance manual, the manual details the roles and responsibilities of all stakeholders in the

compliance process,

- Review and analysis of all relevant laws and regulations, which are adopted into policy statements to ensure business is

conducted professionally;

- Review of the Insurance's Anti Money Laundering Policy in accordance with changes in the Money Laundering

Prohibition Act 2011 and Anti Terrorism Act 2011;

- Incorporation of new guidelines in the Insurance's Know Your Customer policies in line with the increasing global trend

as outlined in the Central Bank of Nigeria's Anti Money Laundering/Combating Finance of Terrorism Compliance Manual.

The Company's culture emphasizes high standard of ethical behaviour at all levels of the Company, therefore the

Company's board of directors promotes a sound organisation with the highest ethical standards.

The risk management strategy is to develop an integrated approach to risk assessments, measurement, monitoring and

control that captures all risks in all aspects of the Company’s activities.

All activities in the Company have been profiled and the key risk drivers and threats in them identified. Mitigation and

control techniques are then determined in tackling each of these threats. These techniques are implemented as risk policies

and procedures that drive the strategic direction and risk appetite as specified by the board. Techniques employed in

meeting these objectives culminate in the following roles for the risk control functions of the Company:

- Develop and implement procedures and practices that translate the board's goals, objectives, and risk tolerances into

operating standards that are well understood by staff.

- Risk identification, measurement, monitoring and control procedures.

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Annual Report

31 December 2016

1.2 Credit Risk

1.2.1 Credit Metrics and Measurement Tools

1. Adherence to the strict credit selection criteria which includes defined target market, credit history, the capacity and

character of customers.

• The consequences for non-compliance with the credit policy and credit indiscipline are communicated to all staff and

implemented.

- Create adequate awareness to make risk management a part of the corporate culture of the Company.

The NAICOM Guidelines on Risk Management prescribes quantitative and qualitative criteria for the identification of

significant activities and sets a threshold of contributions for determining significant activities in Insurance and its

subsidiaries. This practice is essentially to drive the risk control focus of financial institutions.

- Establish effective internal controls that cover each risk management process.

- Ensure that the company’s risk management processes are properly documented.

- Ensure that risk remains within the boundaries established by the Board.

- The strategic importance of the activity and sector.

- The contribution of the activity/sector to the total assets of the Insurance.

- The net income of the sector.

- The risk inherent in the activity and sector.

Zenith Insurance applies a mix of qualitative and quantitative techniques in the determination of its significant activities

under the prescribed broad headings. The criteria used in estimating the materiality of each activity is essentially based on

the following:

Risk Management structures and processes are continually reviewed to ensure, their adequacy and appropriateness for the

company’s risk and opportunities profile as well as bringing them up to date with changes in strategy, business

environment, evolving thoughts and trends in risk management.

• Credit is not given to a customers (Brokers or Insurance Companies) where the ability of the customer to meet

obligations is based on the most optimistic forecast of events. Risk considerations will always have priority over business

and profit considerations.

Credit risk is defined as the likelihood that a customer or counterparty is unable to meet the contracted financial

obligations resulting in a default situation and/or financial loss. Credit exposures arise principally in credit-related risk that

is embedded in premium credits and investments.

The Company has dedicated credit standards, policies and procedures to control and monitor intrinsic and concentration

risks through all credit levels of selection, underwriting, administration and control. Some of the policies are:

• Credit is not extended to direct customers.

• Credit is only extended to suitable and well identified customers and never where there is any doubt as to the ethical

standards and record of the intending borrower.

4. Estimated Rate of Recovery which is a measure of the portion of the debt that can be regained through freezing of assets

and collateral should default occur.

- Ensure that business lines comply with risk parameters and prudent limits established by the Board.

Over the years, The Company and its subsidiaries have been able to devote resources and harness its credit data into

developing models to improve the determination of economic and financial threats due to credit risk. As a result some key

factors are considered in credit risk measurement.

• The primary source of repayment for all credits must be from an identifiable cash flow from the counterparty’s normal

premium collections from the insured.

• Exposures to any industry or customer will be determined by the regulatory guidelines, clearly defined internal policies,

debt service capability and balance sheet management guidelines.

2. The possibility of failure to pay over the period stipulated in the contract.

3. The size of the credit limit in case default occurs.

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Annual Report

31 December 2016

1.2.2

1.2.3

· Regulatory agencies reports

· External ratings of such instruments/institutions by rating agencies like Fitch; Standard & Poor’s; Agusto & Co. etc.

The Company's credit risk rating system is reviewed periodically to confirm that the rating criteria and procedures are

appropriate given the current portfolio and external conditions. As all models materially impacting the risk rating process

are reviewed in accordance with the Company's model risk policy.

Furthermore, the ratings accorded to customers are regularly reviewed, incorporating new financial information available

and the experience in the development of the Insurance relation. The regularity of the reviews increases in the case of

clients who reach certain levels in the automatic warning systems.

Control mechanisms for the credit risk rating system

This is the risk that the insurer may be unable to manage the settlement process by which insurers fulfils their contractual

obligation to policyholders. All insurers should have in place a claims management policy and procedure for ensuring that

claims are handled fairly and promptly. In establishing and maintaining effective claims handling systems and procedures,

The Company considers the following factors:

Categories Of Credit Risks

Zenith Life Assurance is exposed to the following categories of credit risk.

(a) Other debt instruments

Credit Risk Management

Appropriate systems and controls shall be maintained to ensure that all liabilities or potential liabilities notified to the

insurer are recorded promptly and accurately. Accordingly, the systems and controls in place should ensure that a proper

record is established for each notified claim;

Suitable controls shall be maintained to ensure that estimates for reported claims and additional estimates based on

guideline for developing a risk management framework for insurers and reinsurers In Nigeria statistical evidence are

appropriately made on a consistent basis and are properly categorized;

Regular reviews of the actual outcome of the estimates made shall be carried out to check for inconsistencies and to

ensure that procedures remain appropriate. The reviews should include the use of statistical techniques to compare the

estimates with the eventual cost of settling the claims, after deducting the amounts already paid at the time the estimates

were made;

A functional systems shall be in place to ensure that claim files without activity are reviewed on a regular basis;

Appropriate systems and procedures should be in place to assess the validity of notified claims by reference to the

underlying contracts of insurance and reinsurance treaties;

Suitable systems shall be adopted to accommodate the use of suitable experts such as loss adjusters, lawyers, actuaries,

accountants etc. as and when appropriate, and to monitor their use; and

Appropriate procedures shall be put in place to identify and handle large or unusual claims, including system to ensure

that senior management are involved from the outset in the processing of claims that are significant because of their size or

nature.

Direct Default Risk: This is the risk that the Company will not receive the cash flows or assets to which it is entitled

because brokers, clients and other receivables which the Company has a bilateral contract defaults on their obligations.

Concentration Risk: This is the exposure to losses due to excessive concentration of business activities to individual

counterparties, groups of individual counterparties or related entities, counterparties in specific geographical locations,

industry sectors, specific products etc.

Counterparty Risk: This is the risk that a counterparty is not able or willing to meet its financial obligations to the

Company’s as they fall due.

The Company has established principles, policies and processes and structure for the management of credit risk.

In addition to the above, we have put in place a conservative limit structure which is monitored from time to time in order

to limit our risk exposures on these securities.

With respect to other debt instruments, the Company takes the following into consideration in the management of the

associated credit risk:

· Internal and external research and market intelligence reports

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Annual Report

31 December 2016

1.2.4 Credit processes

1.2.5

1.2.5 .1

The Company's dynamic and proactive approach in managing credit risk is a key element in achieving its strategic

objective of maintaining and further enhancing its asset quality and credit portfolio risk profile. The conservative, prudent

and well-established credit standards, policies and procedures, risk methodologies and framework, solid structure and

infrastructure, risk monitoring and control enable the Company to deal with the emerging risks and challenges with a high

level of confidence and determination.

The Company operates a well defined credit evaluation, credit analysis and approval process system. Credits are originated

from the branches/business units and subjected to reviews at various levels.

As part of credit appraisal process, the Company will have to satisfy itself in the following areas:

a) Ensure that only credit requests that meet the approved risk acceptance criteria shall be processed;

b) Take a formal written request for all credit applications.

c) The track record of the premium debtor.

d) Assess/evaluate the repayment capacity of the premium debtor.

e) The proposed terms and conditions and covenants.

f) Comply with the guidelines for the building credit relationships and creating quality assets in accordance with the

Company’s risk management policies.

g) Approval from appropriate authority.

In compliance with this policy, all insurance policies written during the year were provided on a strict "no premium no

cover basis".

As a result of the growing challenges arising from huge levels of outstanding premium reported in the financial statements

of insurance companies, a revised guideline dated 1 January 2013 was issued by NAICOM on Insurance premium

collection and remittance in which it was specified that there shall be no outstanding premium in the books of any insurer

as covers granted on credit are not recognized by the law.

"No premium no cover policy"

Additionally, the Company continues to upgrade and fine-tune the above in line with the developments in the financial

services industry environment and technology.

These are intended to identify any inherent risks in the portfolios resulting from changes in market conditions and are

supplemented by independent reviews from our Company's Internal Audit.

Our rigorous credit processes are supplemented by sectorial portfolio reviews focused on countries, regions or specific

industries as well as multiple stress testing scenarios.

The framework for credit risk at Zenith Life Assurance is well defined and institutionally predicated on:

• Clear tolerance limits and risk appetite set at the Board level, well communicated to the business units and periodically

reviewed and monitored to adjust as appropriate.

• Well-defined target market and risk asset acceptance criteria.

• Rigorous financial, credit and overall risk analysis for each customer/transaction.

• Portfolio quality examined on regular basis according to key performance indicators mechanism and periodic stress

testing.

• Concentrations together with mitigation strategies are continuously assessed.

• Early warning system is continually validated and modified to ensure proper functioning for risk identification.

• Systematic and objective credit risk rating methodologies that are based on quantitative, qualitative and expert judgment.

• Systematic credit limits management enabling the Insurance to monitor its credit exposure on daily basis at country,

borrower, industry, credit risk rating and credit facility type levels.

• Solid documentation and collateral management process with proper coverage and top-up triggers and follow-ups.

• Annual and interim individual credit reviews to ensure detection of weakness signs or warning signals and considering

proper remedies.

Credit Risk Management

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Annual Report

31 December 2016

At 31 December 2016 Notes 2016 2015

N'000 N'000

Cash and cash equivalents 11 1,424,454 1,747,983

Investment securities - held to maturity 12(a) 4,897,009 5,544,704

Investment securities - available for sale 12(b) 65,173 106,009

Loans and receivables 12(c) 27 89

Trade receivables 12(d) 66,441 12,958

Other receivables 15 199,576 3,225

Reinsurance assets 13 1,229,912 222,774

Statutory deposits 18 200,000 200,000

8,082,592 7,837,742

2016 2015

Neither past due nor impaired 266,017 16,183

Past due 1-30 days - -



266,017 16,183

Credit quality

At 31 December 2016 Notes

N'000 N'000

Individually impaired - -

Collectively impaired - -

Gross 27 27

Impairment allowance

Specific impairment - -

Collective impairment - -

- -

Impairment

Specific Impairment

Movement in specific impairment on staff loans

2016 2015

Balance as at 1 January 1,393 -

Impairment loss recognised (1,393) 1,393

Balance as at 31 December - 1,393

Financial assets

The following table breaks down the Company’s main credit exposure at their gross amounts, as at 31 December 2016 and

2015 respectively. For this table, the Company has allocated exposures to each classification based on the nature of the

outstanding trade and other receivables.

The specific component of the total allowance for impairment applies to staff loans evaluated individually for impairment

and is based upon management's best estimates of the present value of the cash flows that are expected to be received. In

estimating these cash flows, management makes judgments about a debtor's financial situation and the net realizable value

of expected cash flow and underlying collateral (if possible). Each impaired asset is assessed on its merits, and the workout

strategy and estimate of cash flows considered recoverable are independently approved by the credit review team.

At 31 December 2016, the ageing of trade and other receivables that were not impaired was as follows:

Staff Loans Total

In thousands on Naira

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Annual Report

31 December 2016

Collective impairment

Cash and cash equivalents

Debt securities

2016 2015

In thousands of naira

North East - -

North Central - -

North West - -

South East - -

South South - -

South West 4,897,009 5,544,704

4,897,009 5,544,704

1.2.6

1.2.7

In managing credit risk, the Company applies credit risk limits, among other techniques. This is the practice of stipulating

a maximum amount that the individual or counterparty can obtain as credit. Internal and regulatory limits are strictly

adhered to.

Credit risk is monitored on an ongoing basis with formal weekly, monthly and quarterly reporting to ensure senior

management awareness of shifts in credit quality and portfolio performance along with changing external factors such as

economic and business cycles.

Collective impairment are for premium debts for which no objective evidence of impairment exists.

The Company continues to focus on its concentration and intrinsic risks and further manage them to a more comfortable

level. This is very important due to the serious risk implications that intrinsic and concentration risk pose to the Company.

A thorough analysis of economic factors, market forecasting and prediction based on historical evidence is used to mitigate

the crystallization of these risks.

The Company’s exposures are continuously monitored through a system of triggers and early-warning signals aimed at

detecting symptoms which could result in deterioration of credit risk quality. The triggers and early-warning systems are

supplemented by a review of upcoming credit facility expiration and market intelligence to enable timely corrective action

by management. The results of the monitoring process are reflected in the internal rating process in a quarterly review

activity.

These limits shall be reviewed on a periodic basis to take into account changes in the client’s credit strength and economic

conditions demands.

The size of the limits will be based on the type of clients, industry segments of the clients, their ratings, outcome of the

credit analysis and evaluation and the financial and operational viability of the clients.

The Company held cash and cash equivalents of N1.4billion at 31 December 2016 (2015: N1.7billion). The cash and cash

equivalent are held with reputable banks and financial institutions.

The Company limits its exposure to credit risk by investing only in liquid debt securities and only with counterparties that

have a very high credit rating. The maximum exposure to credit risk for debt securities calssified as held-to-maturity at the

reporting date per geo-political region was as follows:

The Company did not have any debt securities that were past due but not impaired as at 31 December 2016 or 2015

Company Credit Risk Limits

Company Credit Risk Monitoring

The Company has in place various portfolio concentration limits (which is subject to periodic review) .These limits are

closely monitored and reported on from time to time.

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Annual Report

31 December 2016

1.3

1.3.1

The Company proactively manages its Market risk exposures within the acceptable levels.

1.3.2

The Company undertakes activities which give rise to a considerable level of market risks exposures (i.e. the risk that the

fair value of future cash flows of our trading and investment positions or other financial instrument will fluctuate because

of changes in market prices). Market risks can arise from adverse changes in interest rates, foreign exchange rates, equity

prices, commodity prices and other relevant factors such as Market volatilities. The objective of market risk management

activities is to continually manage and control market risk exposure within acceptable parameters, while optimizing the

return on risks taken.

A specialized and focused loan recovery and workout team handles the management and collection of problem credit

facilities.

The capabilities of the credit review team has been strengthened in order to improve the facility monitoring activity and

assure good quality Risk Assets Portfolio across the Company.

The Company is exposed to a considerable level of interest rate risk i.e. the risk that the future cash flows of a financial

instrument will fluctuate because of changes in market interest rates. Similar to the last financial year, interest rate was

fairly volatile. These changes could have a negative impact on the Net Interest Income, if not properly managed. The

Company however, has a significant portion of its liabilities in non-rate sensitive liabilities. This greatly assists it in

managing its exposure to interest rate risks.

Sensitivities analysis are carried out from time to time to evaluate the impact of rate changes on the net interest income

(ranging from 100 basis point to 500 basis points). The assessed impact has not been significant on capital or earnings of

the Company.

The Company currently does not offer very complex derivative products. However, we are already building capacity ( both

systems and training/knowledge base) to enable us handle these products as at when they are introduced. Financial

assets/liabilities exposed to market risks are disclosed in Note 3.

2. The Company's risk exposure is within established limits.

3. Risk taking decisions are in line with business strategy and objectives set by the Board of Directors.

4. The expected payoffs compensate for the risks taken.

5. Sufficient capital, as a buffer, is available to take risk.

The Company's market risk objectives, policies and processes are aimed at instituting a model that objectively identifies,

measures and manages market risks in the Company and ensure that:

The Company has an independent Market Risk Management unit which assesses, monitors , manages and reports on

market risk taking activities across the Company. We have continued to enhance our Market Risk Management

Framework. The operations of the unit is guided by the mission of "inculcating enduring market risk management values

and culture, with a view to reducing the risk of losses associated with market risk-taking activities, and optimizing risk-

reward trade-off.”

Interest Rate Risk

1. The individuals who take or manage risk clearly understand it.

Market risk

Management of market risk

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Annual Report

31 December 2016

Exposure to interest rate risk

Note 2016 2015

N’000 N’000

Fixed rate instruments

Placements with financial institutions 11 1,285,854 1,651,929

Investment security - HTM 12(a) 4,897,009 5,544,704

Loans and receivables - Staff loans 12(c) 27 89

Investment contract liabilities 20 (752,652) (634,392)

5,430,238 6,562,330

Effect in thousands on naira 100bp increase

100bp

decrease

100 bp

increase

100bp

decrease

31 December 2016

Financial instruments 54,302 (54,302) 54,256 (54,256)

54,302 (54,302) 54,256 54,256-

31 December 2015

Financial instruments 65,623 (65,623) 65,623 (65,623)

65,623 (65,623) 65,623 65,623-

Foreign Currency Risk

Exposure to foreign currency risk

TOTAL NGN USD GBP Others

Asset N'000 N'000 $'000 £'000

Cash and cash equivalent 1,424,454 1,399,806 78 2 -

Other receivables 199,576 193,481 20 - -

Investment securities 4,962,182 4,962,182 - - -

Trade receivables 66,441 66,441 - - -

Reinsurance asset 1,533,087 1,533,087 - - -

Statutory deposit 200,000 200,000 - - -

Total financial asset 8,385,740 8,354,997 98 2 -

31 December 2016

A reasonably possible change of 100 basis points in interest rates at the reporting date would be increased (decreased)

equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign

currency exchange rates, remain constant.

The Company does not account for any fixed rate financial assets or financial liabilities at fair value through profit or loss.

Therefore a change in interest rates at the reporting date would not affect profit or loss.

The Company is exposed to currency risk to the extent that there is a mismatch between the currencies in which premium,

claims are denominated. The functional currency of the Company is the Nigerian naira. The currencies in which these

transactions are primarily denominated are the Nigerian naira. However, the Company receives some premium in foreign

currencies and also pays some claims in foreign currencies. The foreign currencies the Company transacts in include british

pound and united states dollars.

The summary quantitative data about the Company's exposure to currency risks as reported to the management of the

Company is as follows.

Cash flow sensitivity for fixed-rate instruments

Profit or loss Equity, net of tax

Fair value sensitivity for fixed-rate instruments

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Annual Report

31 December 2016


Liabilities N'000 N'000 $'000 £'000

752,672 752,672 - - -

Trade payables 60,151 60,151 - - -

64,449 64,451 - - -

877,272 877,274 - - -

7,508,468 7,477,723 98 2 -


Asset N'000 N'000 $'000 £'000

Cash and cash equivalent 1,747,983 1,539,252 1,056 2 -

Other receivables 3,225 20 - -

Investment securities 5,650,713 5,650,713 - - -

Trade receivables 12,958 12,958 - - -

Reinsurance asset 452,752 452,752 - - -

Statutory deposit 200,000 200,000 - - -

Total Financial Asset 8,067,631 7,855,675 1,076 2 -

Liabilities

634,392 634,392 - - -

Trade payables 23,779 23,779 - - -

2,085,747 2,085,747 - - -

2,743,918 2,743,918 - - -

5,323,713 5,111,757 1,076 2 -

The following exchange rates have been applied.

Naira 2016 2015

USD 1 304.25 196.5

GBP 1 394.13 291.19

Sensitivity Analysis

Effect in thousands on naira +10% -10%

31 December 2016

USD (10% movement) 2,975 (2975) 2975 (2975)

GBP (10% movement) 98.02 (98) 98.02 (98)

31 December 2015

USD (10% movement) 1371 (1371) 1371 (1371)

GBP (10% movement) 72 (72) 72 (72)

31 December 2015

Year-end spot rate

Profit or loss Equity, net of tax

A reasonably possible strengthning (weakening) of the euro, US dollar or sterling against all other currencies as at 31

December 2016 would have affected the measurement of financial instruments denominated in a foreign currency and

affected equity and profit or loss by the amounts shown below. This amount assumes that all other variables, in particular

interest rates, remain constant and ignores any impact of forecast sales and purchases.

Other payables (excluding non-

financial liabilities)

Total financial liabilities

Net financial assets/liabilities

Investment contract liabilities


Other payables (excluding non-

Total financial liabilities

Net financial assets/liabilities

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Annual Report

31 December 2016

1.3.3

1.3.4

(i) Cash balance with central Bank

(ii) Trade receivables

(iii) Treasury bills and investment securities

(iv) Other assets

Fair value and fair value hierarchy

Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.

Treasury bills represent short term instruments issued by the Central Bank of Nigeria. The fair value of treasury bills and

bonds at fair value through profit or loss are determined with reference to quoted prices (unadjusted) in active markets for

identical assets. The estimated fair value of treasury bills and bonds at amortized cost represents the discounted amount of

estimated future cash flows expected to be received. Expected cash flows are discounted at current market rates to

determine fair value.

The fair values of quoted equity securities are determined by reference to quoted prices (unadjusted) in active markets for

identical instruments.

The determination of fair value for financial assets and financial liabilities for which there is no observable market price

requires the use of certain valuation techniques.

For financial instruments that trades infrequently and have little price transparency, fair value is less objective, and

requires varying degrees of judgment depending on liquidity, concentration, uncertainty of market factors, pricing

assumptions and other risks affecting the specific instrument.

The Company measures fair value using the following fair value hierarchy that reflects the significance of the inputs used

in making the measurement.

Level 2: Valuation techniques based on observable inputs, either directly -i.e. as prices - or indirectly - i.e. derived from

prices in active markets for similar instruments; quoted prices for identical or 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.

Other assets represent monetary assets which usually has a short recycle period and as such the fair values of these

balances approximate their carrying amount.

Equity price risk

Fair valuation methods and assumptions

Trade receivables represents balances with contract holders, reinsurers and co-insurers. The fair value of this balance is the

carrying amount.

Cash amount with Central Bank of Nigeria represent cash held (mandatory central bank statutory deposit requirements of

2016: N200 million, 2015: N200 million) . The fair value of this balance is the carrying amount.

The Company is exposed to equity price risk by holding investments quoted on the Nigerian Stock Exchange (NSE) and

other non-quoted investments. Equity securities quoted on the NSE is exposed to movement based on the general

movement of the all share index and movement in prices of specific securities held by the Company. For such investments

classified as available for sale, a 2% increase in the share price of equities at the reporting date would have increased

equity by N1.5million after tax. An equal change in the opposite direction would have reduced equity by N1.5million after

tax.

The company has investments in equities. Provide sensitivity analysis of investment in equity (quoted and unquoted)

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Annual Report

31 December 2016

In thousands of naira: Note2016

Level 1 Level 2 level 3 Total

Available for sale 12(b) 44,173 3,066 - 47,239

In thousands of naira: Note2015

Level 1 Level 2 level 3 Total

Available for sale 12(b) 85,740 20,269 - 106,009

Financial instruments not measured at fair value

In thousands of naira:

2016

Carrying amount Level 1 Level 2 Level 3 Fair value

Assets

1,424,454 - 1,424,454 - 1,424,454

4,897,009 4,824,705 - - 4,824,705

27 - 27 - 27

Trade receivables 66,441 - 66,441 - 66,441

Reinsurance Asset 1,533,087 1,533,087 - 1,533,087

Statutory Deposit 200,000 - 200,000 - 200,000

Other receivables 199,576 - 199,576 - 199,576

8,320,594 4,824,705 3,423,585 - 8,248,290

Liabilities

752,652 - 752,652 - 752,652Trade payables 60,151 - 60,151 - 60,151

812,803 - 812,803 - 812,803

Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the

valuation techniques includes inputs not based on observable data and unobservable inputs have a significant effect on the

instrument's valuation. This category includes instruments that are valued based on quoted prices for similar instruments

where significant unobservable adjustments or assumptions are required to reflect differences between the instruments.


The following table sets out the fair values of financial instruments not measured at fair value and analyse them by the

level in the fair value hierarchy into which each fair value measurement is categorised. It does not include fair value

information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable

approximation of fair value.

The table below analyses financial instruments measured at fair value at the end of the reporting period, by the level of the

fair value hierarchy into which the fair value measurement is categorized.

In some cases, if the inputs used to measure the fair value of an asset or a liability is categorised in different levels of the

fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value

hierarchy as the lowest level of input that is significant to the entire measurement.

Loans and receivables

Cash and cash equivalents

Investment securities HTM

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Annual Report

31 December 2016

In thousands of naira:

2015

Carrying amount Level 1 Level 2 Level 3 Fair value

Assets

Cash and cash equivalents 1,747,983 - 1,747,983 - 1,747,983.00

Investment securities HTM 5,544,704 5,548,034 - - 5,548,034.00

Loans and receivables 89 - 89 - 89.00

Trade receivables 12,958 - 12,958 - 12,958.00

Reinsurance Asset 452,752 - 452,752 - 452,752.00

Statutory Deposit 200,000 - 200,000 - 200,000.00

Other receivables 3,225 - 3,225.00 - -

7,961,711 5,548,034 2,417,007 - 7,961,816

Liabilities

634,392 - 634,392 - 634,392Trade payables 23,779 - 23,779 - 23,779

658,171 - 658,171 - 658,171

1.4 Liquidity risk

1.4.1 Liquidity risk management process

The Company maintains adequate liquid assets and marketable securities sufficient to manage any liquidity stress situation.

The liquidity ratio is far above the regulatory limits.

The Maximum Cumulative Outflow has remained positive all through the short tenor maturity buckets. Assessments are

carried out on Contractual and Behavioural bases. These reveal very sound and robust liquidity position of the Company.

f. Maintaining liquidity and funding contingency plans. These plans identify early indicators of stress conditions and

describe actions to be taken in the event of difficulties arising from systemic or other crises while minimizing any adverse

long-term implications for the business.

e. Monitoring depositor concentration in order to avoid undue reliance on large individual depositors and ensure a

satisfactory overall funding mix;

The Company’s liquidity risk exposure is monitored and managed by the financial control unit on a regular basis. This

process includes:

d. Managing the concentration and profile of debt maturities;

a. Projecting cash flows and considering the level of liquid assets necessary in relation thereto;

c. Maintaining a diverse range of funding sources with adequate back-up facilities;

b. Monitoring statement of financial position liquidity ratios against internal and regulatory requirements;

g. Regular conduct of stress testing, coupled with testing of contingency funding plans from time to time.

The Company has a sound and robust liquidity risk management framework that ensures that sufficient liquidity, including

a cushion of unencumbered and high quality liquid assets are maintained at all times, to enable the Company withstand a

range of stress events, including those that might involve significant claim loss or impairment of funding sources.

Liquidity risk is the potential loss arising from the Company’s inability to meet its obligations as they fall due or to fund

increases in assets without incurring unacceptable cost or losses. Liquidity risk is not viewed in isolation, because financial

risks are not mutually exclusive and liquidity risk is often triggered by consequences of other risks such as insurance

claims risk, credit, market and operational risks.


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Annual Report

31 December 2016

31 December 2016 Carrying 1-3 4-6 7-12 1-5 Above 5

Note amount months months months Years Years Total

N'000 N'000 N'000 N'000 N'000 N'000

Cash and cash equivalents 11 1,424,454 1,424,454 - - - - 1,424,454

Debt securities 12(a) 4,897,009 3,206,839 1,169,141 305,201 215,829 - 4,897,009

Equity securities 12(b) 65,173 44,172 - - 20,999 - 65,172

Loans and receivables 12(c) 27 27 - - - - 27

Trade receivables 12(d) 66,441 66,441 - - - - 66,441

Reinsurance assets (excluding prepaid reinsurance) 13 1,533,087 1,533,087 - - - - 1,533,087

Statutory deposit 17 200,000 - - - - 200,000 200,000

Other receivables 14 199,576 193,470 - - 6,106 - 199,576

6,468,490 1,169,141 305,201 242,934 200,000 8,385,766

Investment contract liabilities 19 752,652 752,652 - - - - 752,652

Trade payables 20 60,151 39,538 - - - - 39,538

Accruals and other payables 21 64,449 64,449 - - - - 64,449

856,639 - - - - 856,639

31 December 2015 Carrying 1-3 4-6 7-12 1-5 Above 5

Note amount months months months Years Years Total

N'000 N'000 N'000 N'000 N'000 N'000

Cash and cash equivalents 11 1,747,983 1,747,983 - - - - 1,747,983

Debt securities 12(a) 5,544,704 1,980,445 723,741 1,901,528 938,990 - 5,544,704

Equity securities 12(b) 106,009 - - - - 106,009 106,009

Loans and receivables 12(c) 89 - - 89 - - 89

Trade receivables 12(d) 12,958 12,958 - - - - 12,958

Reinsurance assets (excluding prepaid reinsurance) 13 452,752 61,294 111,049 30,699 249,710 - 452,752

Statutory deposit 17 200,000 - - - - 200,000 200,000

Other receivables 14 3,225 3,225 - - - - 3,225

3,805,905 834,790 1,932,316 1,188,700 306,009 8,067,720

Investment contract liabilities 19 634,392 129,035 165,021 133,080 207,256 - 634,392

Trade payables 20 23,779 23,779 - - - - 23,779

Accruals and other payables 21 2,085,747 2,085,747 - - - - 2,085,747

2,238,561 165,021 133,080 207,256 - 2,743,918

The table below sets out the Company’s classification of each class of financial assets and liabilities, and their maturity profiles:

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Annual Report

31 December 2016

1.5 Underwriting risk

1.5.1

1.5.2

Underwriting is the process by which an insurer appraises a risk being presented by the proposer and decides whether or

not to accept the risk and the consideration (premium) to receive. Weaknesses in the systems and controls surrounding

the underwriting process can expose an insurer to the risk of unexpected losses which may threaten the capital adequacy

of the insurer. The Company's underwriting process is subjected to internal audit and peer review process to ensure

effectiveness.

In addition, there is a process for assessing brokers’ procedures and systems to ensure that the quality of information

provided to the company is of a suitable standard and in the case of reinsurers, audits of ceding companies to ensure that

reinsurance assumed is in accordance with treaties.

The government through the Nigerian Oil and Gas Industry development Act has empowered life insurers to underwrite

100 per cent of risks in the country, which has also paved way for insurers to improve their operations. The factors that

the Company uses to classify risks is considered highly objective and clearly related to the likely cost of providing

coverage, practical to administer, consistent with applicable law, and designed to protect the long-term viability of the

insurance program.

Underwriting Process Risk – This is risk from exposure to financial losses related to the selection and acceptance of

risks to be insured.

Mispricing Risk – Risk that insurance premium will be too low to cover the Company’s expenses related to

underwriting, claim handling and administration.

Brokers’ Underwriting Risk – This is the risk that brokers may:

(I) Be inadequately trained to assess the risk and offer professional advise to the client.

(II) Fail to remit premium collected to the Insurer

Underwriting Risk Appetite

The following factors constitute the basis for the Company's underwriting risk appetite:

Risk not understood shall not be underwritten;

We will not underwrite unquantifiable risks;

Extreme caution shall be taken underwriting risk with low safety standards or businesses with excessively high risk

profile;

Businesses and Opportunities that can create systemic risk exposure will be adequately evaluated;

We shall exercise caution when underwriting discrete (one-off) risks, particularly where there is no requisite

experience or know-how;

We shall ensure compliance with NAICOM’s guideline on KYC.

The Company develops own products through its research and development unit. We always ensure that our marketers

interact with our customers in order to get a feedback. These feedbacks guide us in developing product that meets their

individual / corporate needs. The limits, standard and exposure are guided by prudent underwriting procedure and

Reinsurance treaties.

Underwriting Responsibilities:

The Underwriting unit has the following responsibilities:

Ensure adherence to reinsurance strategy and delegated limits;

Manage risk appetite by adhering to delegated authority standards;

Ensure compliance with the underwriting plan, policies and manuals and implement correct sign-off process for

variations;

Manage underwriting risk exposure and ensure a high quality policy standards;

To put in place, records of all exposures in the different lines of insurance business;

Demonstrate skills and capability in executing underwriting activities;

Review the suitability of cover and contact terms, and ensure that all words used are correct, appropriate and

authorized.

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Annual Report

31 December 2016

1.5.3

1.5.4

1.5.5 Insurance risk

1.5.6 Insurance premium rating

(a) Individual life products – Term-assurance, Mortgage protection and Savings Plan

· Age;

· Gender;

· Smoker status;

· Medical conditions;

· Financial condition; and

· Hazardous pursuits.

Underwriting Risk Management and Control:Risk management and Control department of Zenith Life Assurance is responsible for the following:

• Ensure compliance with the regulatory requirements at it relates to underwriting;

• Coordinate issues tracking activities and ensure action plans are developed for all identified gaps;

• Collaborate with the underwriting risk committee to develop appetite and tolerance limits;

• Identify and manage the company’s underwriting risk;

• Review and approve reinsurance and retrocession arrangements as mandated by NAICOM.

Risk Pricing Processes

Good and prudent pricing is a key element of an insurance underwriting process. Stakeholders and decision takers in

underwriting are made to know the profit implications of underwriting pricing decisions. It is important to know that

appropriate pricing is necessary to maintain the quality of insurance portfolio in terms of risk underwritten. Although all

risks can be priced, but not all risks should be underwritten.

Risk Reporting And Monitoring

There is regular reporting and monitoring process for each class of insurance business. This is to evaluate the level of

performance of each of the insurance portfolio. The level of information reported ranges from a Profit/Loss account to

reporting on risk segments. Some of the elements that reported are listed below:

• Gross Premium written;

• Types of risks written;

• Lines of Business written

• Policy volume

Also monitoring activities include:

• Peer review processes established within the underwriting department;

• Risk management and control review

• Monthly underwriting Risk Committee meetings where results and performances are discussed

Insurance risk is the risk that future risk claims and expenses will exceed the value placed on insurance liabilities. It

occurs due to the uncertainty of the timing and amount of future cash flows arising under insurance contracts. The timing

is specifically influenced by future mortality, longevity, morbidity, persistency and expenses about which assumptions

are made in order to place a value on the liabilities. Deviations from assumptions will result in actual cash flows

differing from those projected in the policyholder liability calculations. As such, each assumption represents a source of

uncertainty.

The price for an individual life product is adjusted for the following risk factors:

The overall strategy motive that form the basis for the Company underwriting policies is to achieve growth in gross

written premium/market share and also to price (underwrite) risks to ensure that the Company makes a targeted return on

equity

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Annual Report

31 December 2016

(b) Deposit administration

(c) Company life products

· Region;

· Salary structure;

· Gender structure; and

· Industry.

(d) Short-term insurance products

use for vehicle cover;

1.6 Mortality and morbidity risks

Underwriting on Company business is much less stringent than for individual business, as there is typically less scope for

anti-selection. The main reason for this is that participation in the Company's schemes is normally compulsory, and

members have limited choice in the level of the benefits.

Company policies are priced using standard mortality tables. The price for an individual scheme is adjusted for the

following risk factors:

For large schemes, a scheme’s past experience is a crucial input in setting rates for the scheme. The larger the scheme

the more weight is given to the scheme’s past experience. Rates are guaranteed for one year and reviewable at the

renewal of the policy.

Underwriting on short-term insurance products takes the form of the insurance applicant completing a proposal form.

The following risk factors are used in the risk classification:

· Age and gender of the insured driver or operator;

· Value of the item(s) to be covered;

The Company employs the following additional controls and measures to ensure that only acceptable risks are accepted

and risks are appropriately priced:

· Underwriting controls, with risk classification based on the above risk factors;

· Regular review of premium rates; and

· Appropriate policy conditions, including any exclusion on the cover on the individual's life.

Premium rating on deposit administration policies distinguishes between the ages and genders of prospective

policyholders. Annual premiums, payable up-front, are repriced at renewal of the deposit administration policies.

Premium rates are guaranteed for the period up to the renewal of a policy, typically, after (1) one year.

The risk that actual experience in respect of the rates of mortality and morbidity may vary from what is assumed in

pricing and valuation, depending on the terms of different products. The material classes of business most affected by

these risks are discussed below.

· Use of the item(s) to be insured, for example, premium rates distinguish business and personal

· Physical condition of the item(s) to be insured;

· Safety and security features installed; and

· Past claims experience, for example, the premium rate payable on vehicle cover reflects the past claims

experience on the vehicle and driver to be insured.

Where the value of the item(s) to be insured exceeds a pre-specified limit, the underwriting becomes more stringent.

This is particularly the case for marine and aviation cover. In this case the Company makes use of specialist underwriting

agents to assess the risks and set an appropriate premium for cover.

Premium rates are guaranteed for the period up to the renewal of a policy, typically, after (1) one year.

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Annual Report

31 December 2016

(a) Individual life products – Term assurance, Mortgage protection, Savings Plan

.

.

.

(b) Company life products

(c) Annuity

Products are sold directly to individuals providing a benefit on death. The main insurance risk relates to the possibility

that rates of death may be higher than expected. This may be due to:

· Normal statistical variation due to the random nature of the insured events;

· Natural catastrophes such as floods, and unnatural catastrophes such as acts of terrorism;

· The impact of HIV/AIDS or other health epidemics;

An aggregate stop-loss reinsurance agreement is in place to ensure that the Company's exposure to the aggregate

mortality risk in its Company life business is managed and limited to a specified limit.

In addition, there is a catastrophe reinsurance treaty in place for both Company business and individual business. Such a

treaty is particularly important for the Company life business as there are considerably more concentrations of risks

compared to individual business.

This contract provides a guaranteed life annuity conversion at the maturity of the contract. The mortality risk in this case

is that the policyholders may live longer than assumed in the pricing of the contract. This is known as the risk of

longevity.

The Company manages this risk by allowing for improvements in mortality when pricing and valuing the contracts. The

Company also performs more detailed actuarial experience investigations and adjusts assumptions in pricing for new

contracts and valuation of existing contracts when necessary.

· The effect of selective withdrawal; and

For contracts with fixed and guaranteed benefits (such as the minimum death benefits available on savings plan policies)

and fixed future premiums, there are no mitigating terms that reduce the risk accepted by Company. The Company

therefore employs some underwriting controls to ensure that only acceptable risks are accepted.

The following additional controls and measures are in place in order to ensure that the Company manages its exposure to

mortality risk:

Claims assessment processes to ensure only valid claims are paid;

Reinsurance to limit liability on particularly large claims or substandard risks; and

· Concentration risk, which is the risk of a large number of claims from a single event or in a particular

geographical area.

· Anti-selection such as where a policyholder with a pre-existing condition or disease purchases

a product where a benefit will be paid on death;

Concentration risk is reduced by diversification of business over a large number of independent lives, as well as by

taking out catastrophe reinsurance.

Employee benefit products provide life cover to members of a Company, such as employees of companies or members of

trade unions.

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Annual Report

31 December 2016

1.7

1.8 Claims experience risk

1.9 Reinsurance risk

Under the short-term insurance products, the Company also holds a concentration risk, which is the risk of a large

number of claims from a single event or in a particular geographical area. This risk is reduced by diversifying over a

large number of uncorrelated risks, as well as taking out catastrophe reinsurance.

This is the risk of inadequate reinsurance cover which may be triggered by a situation such as the insolvency of a

reinsurer, omission to cede risk to the treaty, wrong cession to the treaty, assumption of risks without reinsurance cover ,

acceptance of risks above automatic capacity and there is already market saturation and non-payment of reinsurance

premium as at when due. The Company ensures that it maintains adequate reinsurance arrangements and treaties in

respect of the classes or category of insurance business authorized to transact. The Company has put in place a

documented policy stating:

Systems for the selection of reinsurance brokers and other reinsurance advisers;

Systems for selecting and monitoring reinsurance programmes;

Clearly defined managerial responsibilities and controls;

Presence of a well resourced reinsurance department that prepares clear methodologies for determining all aspects of

a reinsurance programme;

Senior management that should review an insurer’s reinsurance management systems on a regular basis.

Claims management risk

This is the risk that the insurer may be unable to manage the settlement process by which insurers fulfils their contractual

obligation to policyholders. All insurers are required to have in place a claims management policy and procedure for

ensuring that claims are handled fairly and promptly. In establishing and maintaining effective claims handling systems

and procedures, the Company considers the following factors:

· Appropriate systems and controls shall be maintained to ensure that all liabilities or potential liabilities notified to

the insurer are recorded promptly and accurately. Accordingly, the systems and controls in place should ensure that a

proper record is established for each notified claim;

· Suitable controls shall be maintained to ensure that estimates for reported claims and additional estimates based

on Guideline For Developing a Risk Management Framework For Insurers and Reinsurers in Nigeria statistical evidence

are appropriately made on a consistent basis and are properly categorized;

· Regular reviews of the actual outcome of the estimates made shall be carried out to check for inconsistencies and

to ensure that procedures remain appropriate. The reviews should include the use of statistical techniques to compare the

estimates with the eventual cost of settling the claims, after deducting the amounts already paid at the time the estimates

were made;

· A functional system is in place to ensure that claim files without activity are reviewed on

· Appropriate systems and procedures are in place to assess the validity of notified claims by

· Suitable systems are adopted to accommodate the use of suitable experts such as loss adjusters, lawyers,

· Appropriate procedures are put in place to identify and handle large or unusual claims,

In terms of the short-term insurance contracts held by the Company, the claims experience risk for these policies is that

the number of claims and/or the monetary claim amounts are worse than that assumed in the pricing basis.

processing of claims that are significant because of their size or nature.

including system to ensure that senior management are involved from the outset in the

accountants etc. as and when appropriate, and to monitor their use; and

The Company manages this risk by charging premiums which are appropriate to the risks under the insurance contracts.

a regular basis;

reference to the underlying contracts of insurance and reinsurance treaties;

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Annual Report

31 December 2016

1.10 Capital management

Regulatory capital requirement

2016 2015 2014 2013

N’000 N’000 N’000 N’000

Gross life insurance contract liabilities:

Unearned premium reserve (see note 19(a)) 629,381 699,231 322,037 389,744

Incurred but not reported (see note 19(b)) 1,130,028 653,958 651,252 424,894

1,759,409 1,353,189 973,289 814,638

Reinsurance recoverables:

Travel reinsurance 30,621 31,344 - -

Unearned premium reserve (see note 13) 98,290 43,956 62,866 51,408

Incurred but not reported (see note 13) 272,554 198,634 152,208 46,372

401,465 273,934 215,074 97,780

The strategy for assessing and managing the impact of our business plans on present and future regulatory capital forms

an integral part of the Company’s strategic plan. Specifically, the Company considers how the present and future capital

requirements will be managed and met against projected capital requirements. This is based on the Company's

assessment and against the supervisory/regulatory capital requirements taking account of the Company business strategy

and value creation to all its stakeholders.

The Company prides itself in maintaining very healthy solvency and capital adequacy ratio in all its areas of operations.

Capital levels are determined either based on internal assessments or regulatory requirements.

The solvency and Capital Adequacy of the Company is reviewed regularly to meet regulatory requirements and standard

of international best practices in order to adopt and implement the decisions necessary to maintain the capital at a level

that ensures the realisation of the business plan with a certain safety margin.

The Company engaged an external actuary in determining the valuation of gross life insurance contract liabilities and the

estimated reinsurance recoverables. The results of the valuation done as at year end are presented below:

The Company undertakes a regular monitoring of its solvency and capital adequacy and the application of regulatory

capital by deploying internal systems based on the guidelines provided by the National Insurance Commission

(NAICOM) for supervisory purposes.

The Company has consistently met and surpassed the minimum capital adequacy requirements applicable in all areas of

operations during the period.

Most of the Company's capital is Tier 1 (Core Capital) which consists of essentially share capital, and reserves are

created by appropriations of retained earnings.

The Company’s capital plan is linked to its business expansion strategy which anticipates the need for growth and

expansion in its branch network and IT infrastructure. The capital plan sufficiently meets regulatory requirements as well

as provides adequate cover for the Company’s risk profile. The Company's capital adequacy remains strong and the

capacity to generate and retain reserves continues to grow.

The sources of fund available to the Company to meet its capital growth requirements are mainly:

1. Profit from Underwriting Operations: The Company has consistently reported good underwriting profit which can

easily be retained to support the capital base.

2. Profit from Investments: The Company has consistently reported good investment income which can easily be retained

to support the capital base.

NAICOM requires that the Company maintains a minimum capital base of N2 billion. The Company's Capital base was

N4.547 billion as at reporting period (2015: N3.804 billion).

In accordance to prvisions of the Insurance Act 2003, the company had a solvency margin of N3,816,933,000 which is

N1,816,933,000 in surplus of the regulatory requirement of N2,000,000,000 (minimum capital) for the year ended 31

December 2016.

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Annual Report

31 December 2016

Net liability (see note 19(b)) 1,357,944 1,079,255 758,215 716,858


Life Savings Plan (see note 19) 391,438 305,365 199,444 100,981

Deposit Administration (see note 19) 361,214 329,027 220,152 112,227

752,652 634,392 419,596 213,208

1.11 Operational risk

.

.

.

.

.

.

There was no significant operational risk incidence during the financial year.

1.12 Strategic risk

Adequate provisions have been made in the statement of financial position for these obligations/recoverables.

Operational Risk is the risk of loss resulting from inadequate and /or failed internal processes, people and systems or

from external events, including legal risk and any other risks that is deemed fit on an ongoing basis but excludes

reputation and strategic risk. Operational risk exists in all products and business activities. Operational Risk is

considered as a critical risk faced by the Company.

The Company proactively identifies, assesses and manages all operational risks by aligning the people, technology and

processes with best risk management practices towards enhancing stake holders' value and sustaining industry

leadership.

Operational risk objectives includes the following:

Risk mitigation, including insurance, is considered where this is cost-effective.

The Operational Risk Unit constantly identifies and assesses the operational risk inherent in all material products,

activities, processes and systems. It also ensures that before new products, activities, processes and systems are

introduced or undertaken, the operational risk inherent in them is identified clearly and subjected to adequate assessment

procedures.

The techniques employed by the Company in its measurements include the following: Key Control Self Assessment

(KCSA), Key Risk Indicators (KRIs) and the Risk Register. These tools have been quite useful in the identification,

measurement and analyses of operational risk in the Company. These are subject to review from time to time.

Strategic risk examines the impact of design and implementation of business models and decisions, on earnings and

capital as well as the responsiveness to industry changes. This responsibility is taken quite seriously by the Board and

Executive management of the Company and deliberate steps are taken to ensure that the right models are employed and

appropriately communicated to all decision makers in the Company. The execution, processes and constant reviews

ensures that strategic objectives are achieved. This has essentially driven the Company’s sound insurance culture and

performance record to date.

To provide clear and consistent direction in all operations of the Company

The basic principles that guide the operational risk activities include:

Operational risks are identified by the assessments covering risks facing each business unit and risks inherent in

processes, activities and products.

Risk assessment incorporates a regular review of risks identified to monitor significant changes.

To provide a standardised framework and appropriate guidelines for creating and managing all operational risk exposures

To enable the Company identify and analyse events (both internal and external) that impact on its business.

Training and sensitisation on operational risk is carried out on an ongoing basis across the Company.

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Annual Report

31 December 2016

1.13 Legal risk

1.14 Reputational risk

1.15 Taxation risk

1.16 Regulatory risk

1.16.1 Persistency risk

Legal risk is defined as the risk of loss due to defective contractual arrangements, legal liability (both criminal and civil)

incurred during operations by the inability of the organisation to enforce its rights, or by failure to address identified

concerns to the appropriate authorities where changes in the law are proposed.

The Company manages the regulatory risk which it is potentially exposed to by monitoring new regulatory rules and

applicable laws, and the identification of significant regulatory risks. The Company strives to maintain appropriate

procedures, processes and policies that enable it to comply with applicable regulation.

The Company has continued to maintain zero tolerance posture for any regulatory breaches in all its area of operations.

The strengthening of compliance by the Company during the financial year has further enhanced the process of

management of regulatory risk across the Company.

Persistency risk relates to the risk that policyholders may withdraw their benefits and terminate their contracts prior to

the contractual maturity date of the contract. Expenses such as commission and acquisition expenses are largely incurred

at the outset of the contract. These upfront costs are expected to be recouped over the term of a contract from fees and

charges from the contract. Therefore, if the contract is terminated before the contractual date, expenses might not have

been fully recovered, resulting in losses being incurred.

The Company manages this risk by monitoring new legislation, creating awareness of legislation amongst employees,

identifying significant legal risks as well as assessing the potential impact of these.

Legal risks management in the Company is also being enhanced by appropriate product risk review and management of

contractual obligations via well documented Service Level Agreements and other contractual documents.

It is recognised that the Company’s reputation may suffer adversely due to bad publicity, non-compliance with regulatory

rules and legislation, which may lead to a significant drop in new business and/or a significant increase in the number of

lapses and/or withdrawals.

The Company promotes sound business ethics among its employees.

The Company did not record any issue with major reputational effect in the financial year.

The Company also has a team of well experienced professionals who handle legal issues across the Company.

The Company also strives to maintain quality customer services and procedures, and business operations that enable

compliance with regulatory rules and legislation in order to minimise the risk of a drop in the reputation of the Company.

Where a surrender benefit is payable, the benefit amount on withdrawal normally makes provision for recouping any

outstanding expenses. However, losses may still occur if the expenses incurred in respect of the policy exceed the value

of the policy, or where the withdrawal benefit does not fully allow for the recovery of all unrecouped expenses. This may

either be due to a regulatory minimum surrender benefit applying, or because of product design.

Taxation risk refers to the risk that new taxation laws will adversely affect the Company and/or the loss may arise due to

non-compliance with tax laws.

The taxation risk is managed by monitoring applicable tax laws, maintaining operational policies that enable the

Company to comply with taxation laws and, where required, seeking the advice of tax specialists.

This risk is well managed across the Company.

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Annual Report

31 December 2016

1.16.2 Expense risk

1.16.3 Business volume risk

1.16.4 Capital adequacy risk

1.16.5 Asset liability matching risk

1.16.6 Assumption risk

.

.

.

1.16.7 Data risk

Data risk is the risk that data used in the policyholders' liabilities valuation calculations are inaccurate or incomplete and,

therefore, are not a true and accurate view of the insurance contracts held by the Company. The data could be inaccurate

or incomplete due to incorrect data or valuation extracts between the policy administration system and the actuarial

valuation model and/or incorrect capturing of data on the policy administration system.

This risk is managed by the Company through regular data integrity testing in order to assess the appropriateness,

accuracy and credibility of the various data sets as well as investigations into data exceptions reported.

Where insufficient internal data is available, the Company makes use of external sources to derive its pricing and

valuation assumptions. Frequent monitoring of these external sources is performed, including actual versus expected

investigations.

This risk is monitored and assessed by performing annual valuations on the life insurance liabilities by an independent

valuation actuary, calculating the outstanding claims reported (OCR) and Incurred But Not Reported (IBNR)

contingency reserves, monitoring any regulatory rules applying to the assets and the adequacy of the assets to back the

liabilities and adopting an investment strategy which is aimed at investing in admissible assets and maintaining adequate

capital.

Due to the short-term nature of the Company’s insurance business, most of the liability cash flows will be of short-term

nature. The asset liability matching risk lies in the risk that the cash inflows from the assets held will not match liability

cash outflows in terms of timing and/or amounts. Therefore, the risk arises that the Company will be unable to meet

policyholder obligations. In this case, the asset liability mismatch risk is similar to liquidity risk described under liquidity

risk (section 1.4).

In determining the value of insurance liabilities, assumptions need to be made regarding future rates of mortality,

morbidity, termination rates, expenses and investment performance. The uncertainty of these rates may result in actual

experience being different from that assumed and hence actual cash flows being different from those projected and, in

the extreme, that the actual claims and benefits exceed the liabilities. The risk is mitigated to an extent through:

The use of appropriate sources of data; and

Regular actual versus expected investigations.

There is a risk that the Company may experience a loss due to actual expenses being higher than those assumed when

pricing and valuing policies. This may be due to inefficiencies, higher than expected inflation, lower than expected

volumes of new business or higher than expected terminations resulting in smaller in-force policies.

To manage this risk, the Company performs expense investigations annually and sets pricing and valuation assumptions

to be in-line with the actual expenses experience, with allowance for inflation.

The Company’s exposure to unexpected increases in the inflation rate is expected to be minimal due to the short-term

nature of their business and their ability to review premium rates at renewals (typically on an annual basis).

There is a risk the Company may not sell sufficient volumes of new business to meet the expenses associated with

distribution and administration. A significant portion of the new business acquisition costs are variable and relate

directly to sales volumes.

There is a risk that the capital held by the Company to back to its insurance liabilities may prove to be inadequate on a

regulatory solvency basis. This may then lead to intervention by the Regulator and may further lead to a fall in the

reputation of the Company (see Reputational risk above for further details). At an extreme, the Regulator may require the

Company to close new business. This will have a further negative impact on the Company.

The addition of margins, specifically where there is evidence of moderate or extreme variation in experience;

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Annual Report

31 December 2016

1.16.8 Model risk

.

.

1.17 Sustainability report

1.17.1

1.17.2

(a) Waste Reduction & Recycling

The Insurance company continually promotes reduced paperless culture where employees are encouraged to use

electronic communications, online approvals and other web- based applications, and to print documents only when

required. Document workflows are automated, which minimizes paper usage.

(b) Employee Relations

Zenith Life Assurance believes that its people are the driving force behind its success and the main competitive

advantage that positions it ahead of competition. The Company is of the view that its future lies in a committed team of

individuals who are convinced of their future at the organisation.

(c) Diversity

To this end, the Company remains committed to creating a healthy, safe and fulfilling work environment that supports

personal growth, encourages individuality and instigates team spirit. The Company organizes numerous training

programs covering soft skills, negotiation skills to personality development and encourages all staff to participate

actively.

(a) Sustainable Practices

Sustainability of the environment is central to the Zenith Life Assurance, and its wider social and environmental impact

is of concern. The Company goes beyond concerted efforts to minimise energy usage internally and dispose of waste

responsibly, to also having in place lending policies that promote sustainable lending and ensure high environmental

standards.

Internal Principles

There is a risk that the Company may suffer a loss if the model used to calculate the insurance liabilities does not project

expected cash flows under the insurance contracts accurately. The expected cash flow projections may be inaccurate

either due to the model itself being incorrect, inappropriate to the policies being valued or inaccurate and/or the

underlying assumptions used in the model being inappropriate.

The Company makes use of an independent valuation actuary to value its liabilities. The models being used to value the

liabilities are, therefore, not internal to but belong to an external third party. The model risk underlying the use of third

party models are addressed by:

Regular actual versus expected cash flow investigations to assess the appropriateness of the external models; and

Detailed investigations are performed annually to ensure the integrity of the data used in the valuation process.

Zenith Life Assurance recognizes the need to promote a diverse workforce as a means to attracting top-flight talent and

enhancing its competitive advantage. It further recognizes that each employee brings to the workplace experiences and

capabilities that are as unique as the individual.

The Company treats all employees fairly and the Company does not discriminate on the basis of gender, race, colour,

nationality, religious belief or any other distinctive attribute. Furthermore, we take steps to assure that employees

continue to have access to available opportunities within the organisation and that they are upwardly mobile within the

system at all managerial levels within the Company.

Zenith Life Assurance is committed to sustainable development and the responsible stewardship of resources. This

implies developing solutions that link economic success with social responsibility, which requires balancing short and

long term goals and interests and integrating economic, environmental and social considerations into business decisions

across the board.

External Principles

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Annual Report

31 December 2016

The health and safety of employees, customers and other stakeholders is of paramount importance to the Company. The

Company constantly seeks to identify and reduce the potential for accidents or injuries in all its operations. There is

ongoing training of health and safety officers in line with the Company’s health and safety policy. There is also adequate

communication of the health and safety policies across the Company to ensure staff are conversant with its content.

(e) Supply Chain Management

The Company will continue to work in active partnership with its suppliers to help them manage their own social and

environmental risks, particularly those firms which have more significant impacts than it does and those in countries,

where the regulatory framework is sometimes not as stringent as our standards. The Company is also committed to

treating its suppliers with respect, especially in areas such as contract terms and conditions and payment terms.

(d) Occupational Health & Safety

70


31 December 2016

2 Operating segments

Information about reportable segments

Life Business Life Business

Investment

management

Investment

management Total Total

In thousands of Naira 2016 2015 2016 2015 2016 2015

External revenues

Gross premium earned 3,344,234 2,991,044 - - 3,344,234 2,991,044

Reinsurance expenses (634,679) (653,152) - - (634,679) (653,152)

Other revenue - - 167,939 161,292 167,939 161,292

Total revenue 2,709,555 2,337,892 167,939 161,292 2,877,494 2,499,184

Interest and commission revenue - - 678,742 916,488 678,742 916,488

-

Expenses

Personnel expenses (130,671) (97,603) - - (130,671) (97,603)

Other expenses (2,415,422) (2,006,718) - - (2,415,422) (2,006,718)

Operating Profit before tax 163,462 233,571 846,680 1,077,780 1,010,143 1,311,351

Income tax expense (251,887) 173,330 - - (251,887) 173,330

Operating Profit after tax (88,425) 406,901 846,680 1,077,780 758,256 1,484,681

Assets & Liabilities

Reportable segment assets 7,084,099 7,514,646 4,962,182 5,650,713 12,046,281 13,165,359

Reportable segment liabilities 4,607,687 5,091,478 64,449 2,085,747 4,672,136 7,177,225

Geographical segment

The Company has two reportable segments, as described below, which are the Company’s strategic business units. The strategic business units offer different products and

services, and are managed separately. The following summary describes the operations in each of the Company’s reportable segments:

Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before income tax, as included in the

internal management reports that are reviewed by the Company’s Management Committee. Segment profit is used to measure performance as management believes that

such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. Inter-segment pricing is

determined on an arm’s length basis.

Nigeria is the Company's primary geographical segment as all the Company’s income is derived in Nigeria. Accordingly, no further geographical segments information is

reported.

71


31 December 2016

3 Financial assets and liabilities

Accounting classification measurement basis and fair values

31 December 2016 Loans and Available- Held to Other financial Total carrying Fair

Note receivables for-sale maturity liabilities amount value

N'000 N'000 N'000 N'000 N'000 N'000

Cash and cash equivalents 11 138,600 - 1,285,854 - 1,424,454 1,424,454

Debt securities 12(a) - - 4,897,009 - 4,897,009 5,548,034

Equity securities 12(b) - 65,173 - - 65,173 65,173

Loans and receivables 12( c) 27 - - - 27 27

Trade receivables 12(d) 66,441 - - - 66,441 66,441

Reinsurance assets 13 1,533,087 - - - 1,533,087 1,533,087

Other receivables 15 199,576 - - - 199,576 199,576

Statutory deposit 18 200,000 - - - 200,000 200,000

2,137,731 65,173 6,182,863 - 8,385,767 9,036,792

Investment contract liabilities 20 - - - 752,652 752,652 752,652

Trade payables 21 - - - 60,151 60,151 60,151

Provisions and other payables 22 - - - 64,449 64,449 64,449

- - - 877,252 877,252 877,252

The table below sets out the Company’s classification of each class of financial assets and financial liabilities, and their fair values.

72


31 December 2016

31 December 2015 Loans and Available- Held to Other financial Total carrying Fair

Note receivables for-sale maturity liabilities amount value

N'000 N'000 N'000 N'000 N'000 N'000

Cash and cash equivalents 11 96,054 - 1,651,929 - 1,747,983 1,747,983

Debt securities 12(a) - - 5,544,704 - 5,544,704 5,548,034

Equity securities 12(b) - 106,009 - - 106,009 106,009

Loans and receivables 12( c) 89 - - - 89 89

Trade receivables 12(d) 12,958 - - - 12,958 12,958

Reinsurance assets 13 452,752 - - - 452,752 452,752

Other receivables 15 3,225 - - - 3,225 3,225

Statutory deposit 18 200,000 - - - 200,000 200,000

765,078 106,009 7,196,633 - 8,067,720 8,071,050

Investment contract liabilities 20 - - - 634,392 634,392 634,392

Trade payables 21 - - - 23,779 23,779 23,779

Provisions and other payables 22 - - - 2,085,747 2,085,747 2,085,747

- - - 2,743,918 2,743,918 2,743,918

73


Annual Report

31 December 2016

4 Gross premium income

2016 2015

N’000 N’000

Group life premium 3,238,725 3,329,739

Single life premium 344 566

Savings plan premium (See note(a)) 1,193 1,791

Travel insurance (See note(b)) 30,621 31,344

Gross premium written 3,270,883 3,363,440

Unearned premium reserve 73,351 (372,396)

Gross premium income 3,344,234 2,991,044

(a)

(b)

5 Reinsurance expenses

2016 2015

N’000 N’000

Re-insurance premium ceded 688,290 634,242

Changes in unexpired reinsurance premium (53,611) 18,910

634,679 653,152

6 Commission income

2016 2015

N’000 N’000

Commission received 167,939 161,292

167,939 161,292

Savings plan premium is the premium charged for the life component of the Zenith Life Savings Plan, an Investment

linked product. The life investment product/contract has been unbundled into the life and investment component and the

related income reported as part of gross premium.

Travel insurance is the premium charged for the life component/death benefit on the travel insurance product. The

premium received on the travel insurance product is reported as part of gross premium.

Commission received comprises commission earned from reinsurance ceeded by the Company during the financial

year.

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Annual Report

31 December 2016

7 Net claims expenses

2016 2015

N’000 N’000

Claims paid 2,052,212 2,144,704

Changes in outstanding claims 1,330,172 45,340

Changes in provision for claims incurred but not reported (IBNR) 476,070 2,706

3,858,454 2,192,750

Recoveries from paid claims (1,287,963) (649,244)

Changes in recoverable on outstanding claims (1,007,138) (180,404)

Changes in recoverable on provision for claims incurred but not

reported (IBNR) (73,920) (46,426)

(2,369,021) (876,074)

Net claims expenses 1,489,433 1,316,676

8 Underwriting expenses

2016 2015

N’000 N’000

Commission expense 326,317 514,455

326,317 514,455

9(a) Investment income

2016 2015

N’000 N’000

Interest income on held to maturity financial assets 539,395 698,929

Loss on disposal on equity investment (3,733)

Dividend income on available for sale equity investments 6,044 3,264

Interest income on cash and cash equivalents 102,600 153,742

Interest income on statutory deposits 20,423 23,119

Other income (see note (i)) 9,434 11,353

674,163 890,407

2016 2015

Other Income N’000 N’000

Net foreign exchange translation gain/(loan) 8,820 10,919

Income on contract cancellation 612 426

Personal loan 2 8

9,434 11,353

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Annual Report

31 December 2016

9(b) Net income on investment contracts:

2016 2015

N’000 N’000

Interest income 49,064 56,544

Interest on investment contract liability (32,650) (30,462)

Expenses related to deposit administration (5,263) (16,165)

11,151 9,917

10 Management expenses

10(a) Depreciation and ammortisation 2016 2015

N’000 N’000

7,101 2,274

Amortisation (see note 16) 12,242 3,309

19,343 5,583

10(b) Management expenses 2016 2015

N’000 N’000

Personnel expenses (see 10(c) below) 130,671 97,603

Auditor's remuneration 17,500 14,000

Directors allowance 33,250 37,100

Professional expenses 133,779 42,089

Subscription and filing fees 3,797 2,485

Naicom levy 26,487 27,579

Corporate branding 38,239 27,909

Rental expense 49,221 -

Travelling /Hotel & Accomodation 9,910 -

Advertisement and publicity 12,893 3,320

Tax/Vat Expenses 52,679 -

Administrative expenses 52,574 15,522

Fines 150,000 -

711,000 267,607

Total 730,343 273,190

10(c) Personnel expenses

2016 2015

N’000 N’000Wages and salaries 119,463 89,831

NSITF & ITF 1,315 1,419

Pension costs 9,893 6,353

130,671 97,603

Depreciation (see note 17)

76


Annual Report

31 December 2016

11 Cash and cash equivalents

2016 2015

N’000 N’000

Balances held with banks in Nigeria 138,600 96,054

Placements with financial institutions (see (a) below) 1,285,854 1,651,929

1,424,454 1,747,983

(a)

12 Financial assets - Investment securities

2016 2015

N’000 N’000

Investment securities- held to maturity (see 12(a) below) 4,897,009 5,544,704

Investment securities- available for sale (see 12(b) below) 65,173 106,009

4,962,182 5,650,713

Maturity profile of financial assets

2016 2015

N’000 N’000

Within 12 months 4,681,181 5,544,704

After 12 months 281,001 106,009

4,962,182 5,650,713

12(a) Investment securities- held to maturity

2016 2015

N’000 N’000Debt securities – fixed interest:

Quoted debt securities - Bonds (see (i) below) 1,148,593 1,897,901

Quoted debt securities - Treasury bills (Federal Government of Nigeria) 3,748,416 3,646,803

4,897,009 5,544,704

(i) Quoted debt securities - Bonds.

The bonds comprise: 2016 2015

N’000 N’000

15.54% Federal Government of Nigeria FGN FEB 2020 215,829 -

13.05% Federal Government of Nigeria 16 AUG 2016 - 938,990

15.10% Federal Government of Nigeria 27 APR 2017 932,764 958,911

1,148,593 1,897,901

Placement with financial institutions comprises term deposits with maturity of less than 90 days from the value date of

the instruments.

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Annual Report

31 December 2016

(ii) Movement to held-to-maturity investment securities

2016 2015

N’000 N’000Balance, beginning of the year 5,544,704 5,267,151

Additions 4,667,386 5,700,000

Accrued interest receivables 588,749 730,903

Interest received during the year (253,830) (253,350)

Redemption during the year (5,650,000) (5,900,000)

Balance, end of the year 4,897,009 5,544,704

12(b) Investment securities- available for sale

2016 2015

N’000 N’000(i) Equities listed on the Nigeria Stock Exchange (see note ii below) 44,174 85,741

Unquoted equity securities - mutual funds (see note iii below) 20,999 20,268

65,173 106,009

Movement in available for sale

Balance at the beginning of year 525,926 525,926

(ii) Disposals (251,480) -

Impairment losses - accumulated (422,983) -

Impairment on disposal 228,333 -

Impairment loss charge for the year (6,572) (422,983)

mark to market gains/losses c/f 3,066 -

fair value changes during the year (11,117) 3,066

65,173 106,009

(iii) Equities listed on the Nigeria Stock Exchange


Disposals (251,480) -


Impairment on disposal 228,333 -

Impairment loss charge for the year (6,572) (410,521)

mark to market gains/losses c/f 3,066 -

fair value changes during the year (11,847) 3,066

44,174 85,741

Unquoted equity securities - mutual funds


Disposals - -


Impairment on disposal - -

Impairment loss charge for the year - (12,462)

mark to market gains/losses c/f - -

fair value changes during the year 730 -

20,999 20,269

78


Annual Report

31 December 2016

12(c) Loans and receivables

2016 2015

Movement in loans and receivables N’000 N’000Balance at the beginning of year 1,482 1,482

Additions during the year - -

Repayment during the year (62) -

Specific impairment (1,393) (1,393)

Accrued interest - -

27 89

Maturity profile of loans and receivables

2015 2015

N’000 N’000

Within 12 months 27 89

27 89

12(d) Trade receivables

2016 2015

N’000 N’000

Due from brokers 66,441 12,958

66,441 12,958

(v)

13 Reinsurance assets

2016 2015

N’000 N’000

Reinsurance prepaid - UPR (see note (a)) 98,290 43,956

Reinsurance recoverable - IBNR (see note(b)) 272,554 198,634

Travel insurance - UPR 30,621 31,344

Reinsurance recoverables due on claims 1,229,912 222,774

1,631,377 496,708

(a)

(b)

The Company's loans and receivables has no collateral as security. The Company has no loans or receivables that is past

due but not impaired. Insurance receivables are to be settled on demand and the carrying amount is not significantly

different from the fair value. As at 31 December 2016, the Company had no insurance receivables that were past due or

impaired whose terms were renegotiated.

Prepaid reinsurance are deferred cost on reinsurance contracts, the balance on the account is amortized into the income

statement over the life of the reinsurance contract.

Reinsurance recoverables are estimated recoveries from reinsurance companies based on the actuarially determined

liabilities under the Life fund account.

Trade receivables represent premium receivable due from brokers within 30 days in line with the NAICOM guideline

on premium. Hence no impairment.

79


Annual Report

31 December 2016

(i) Movement in reinsurance prepaid - Group Life

Balance, beginning of the year 43,956 62,866

Increase/(decrease) during the year 54,334 (18,910)

Balance, end of year 98,290 43,956

(ii) Movement in reinsurance prepaid - Travel insurance


Decrease during the year (723) -


(iii) Movement in recoverable - IBNR


Increase during the year 73,920 46,426


(iv) Movement in recoverables due on claims


Recoveries durng the year (1,287,963) (697,996)

Increase during the year 2,295,101 829,648

Balance, end of year 1,229,912 222,774

Maturity profile of reinsurance assets

2016 2015

N’000 N’000

Within 12 months 1,461,722 254,118

After 12 months 169,655 242,590

1,631,377 496,708

14 Deferred acquisition cost

2016 2015

N’000 N’000

Deferred acquisition cost - Group Life 38,613 -

38,613 -

Balance, beginning of year -

Cost incurred during the year 364,930 514,455

Amortised during the year (326,317) (514,455)

Balance, end of year 38,613 -

80


Annual Report

31 December 2016

15 Other receivables

2016 2015

N’000 N’000

Receivable from IHI Bupa (see note (a) below) 6,095 3,214

Receivable from Zenith General Insurance Company Limited 192,869 -

Receivables from Zenith Securities Limited 12 11

Other receivables 600 -

199,576 3,225

a

Maturity profile of other receivables

2016 2015

N’000 N’000

Within 12 months 193,472 -

After 12 months 6,104 3,225

199,576 3,225

16 Intangible assets

2016 2015

N' 000 N' 000

Computer software:

Cost

Balance, beginning of year 38,978 25,578

Additions during the year 13,399 13,400

Balance at year end 52,377 38,978

Accumulated amortisation:


Charge for the year 12,242 3,309


Net book value:

Balance end of year 19,797 18,640


The intangible assets held by the Company are computer softwares.

Receivable from IHI Bupa represents a refundable deposit made by Zenith Life Assurance to IHI Bupa in relation to an

alliance agreement both parties have on Zenith travel insurance business. IHI Bupa is a branch of an established

international insurance company with experience in the design, marketing, selling and underwriting of international

health care and travel insurance.

81


31 December 2016

17 Property and equipment

As at 31 December 2016

LeaseholdImprovement Motor Vehicle

ComputerEquipment

OfficeEquipment TOTAL

Cost N' 000 N' 000 N' 000 N' 000 N' 000

Balance as at 1 January 2016 - 1,820 4,997 3,988 10,805

Additions 8,264 18,675 - 7,406 34,345

Balance, end of year 8,264 20,495 4,997 11,394 45,150

Accumulated depreciation

Balance as at 1 January 2016 - 1,820 2,498 1,082 5,400

Charge for the year 1,377 2,334 1,667 1,723 7,101

Balance, end of year 1,377 4,154 4,165 2,805 12,501

Net book value

Balance as at 31 December 2016 6,887 16,341 832 8,589 32,649

As at 31 December 2015 Motor VehicleComputer

EquipmentOffice

Equipment TOTAL

Cost N' 000 N' 000 N' 000 N' 000

Balance as at 1 January 2015 1,820 4,997 3,147 9,964

Additions - - 840 840

Balance, end of year 1,820 4,997 3,987 10,804

Accumulated depreciation

Balance as at 1 January 2015 1,820 833.00 472 3,125

Charge for the year - 1,666 608 2,274

Balance, end of year 1,820 2,499 1,080 5,399

Net book value

Balance as at 31 December 2015 - 2,498 2,907 5,405

i. No leased assets are included in the above property and equipment account (2015:Nil)

ii. The Company had no capital commitments as at the reporting date (2015: Nil)

82


Annual Report

31 December 2016

18 Statutory deposit

2016 2015

N’000 N’000

Life business statutory deposit 200,000 200,000

Maturity profile of statutory deposit

2016 2015

N’000 N’000

After 12 months 200,000 200,000

200,000 200,000

19 Insurance contract liabilities

Insurance contract liabilities comprise:

2016 2015

N' 000 N' 000

Outstanding claims (see (i) below) 2,961,304 1,155,062

Gross ordinary life business unearned premium (see (ii) below) 585,868 658,496

Individual life fund (see (iii) below) 12,892 9,391

Travel insurance (see (iv) below) 30,621 31,344

3,590,685 1,854,293

(i) Outstanding claims

The movement in outstanding claims during the year was as follows:

2016 2015

N' 000 N' 000

Outstanding claims

Outstanding claims as at start of year 501,104 455,764

Changes in outstanding claims 1,330,172 45,340


Provision for incurred but not reported (IBNR) claims


Movement during the year 476,070 2,706


Total 2,961,304 1,155,062

This represents amounts deposited with the Central Bank of Nigeria (CBN) pursuant to Section 10(3) of the Insurance

Act, 2003.

The Statutory deposit balance represents restricted cash balance held with the Central Bank of Nigeria and is not

available for use in the day to day activities of the Company.

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Annual Report

31 December 2016

(ii) Movement in group life business unearned premium

2016 2015

N' 000 N' 000Balance, beginning of year 658,496 286,100

(Decrease)/increase during the year (72,628) 372,396


(iii) Movement in individual life fund

2016 2015

N' 000 N' 000


Increase from actuarial valuation 3,501 4,797


(iv) Movement in travel Insurance

2016 2015

N' 000 N' 000Balance, beginning of year 31,344 -

(Decrease)/increase during the year (723) 31,344


19(a)

The aging analysis for claims reported and loss adjusted for life insurance contracts

2016 2015

Days N' 000 N' 000

0- 90 513,776 117,587

91- 180 596,087 81,227

181-270 354,699 97,304

271-360 177,841 24,493

Above 360 188,873 180,493

1,831,276 501,104

Outstanding claims: represents the estimated ultimate cost of settling all claims arising from incidents occurring as at

the reporting date.

84


Annual Report

31 December 2016

19(b)

Life insurance contract liabilities comprises:

2016 2015

N' 000 N' 000

Group life IBNR claims 1,130,028 653,958

Travel Insurance 30,621 31,344

Unearned premium reserves including AURR 585,868 658,496

Individual traditional 12,892 9,391

Gross liability 1,759,409 1,353,189

Reinsurance recoverables (see Note 13) (401,465) (273,934)

Net liability 1,357,944 1,079,255

19(c) Maturity profile of insurance contract liabilities

2016 2015

N' 000

Within 12 months 3,525,131 1,275,070

After 12 months 65,554 579,223

3,590,685 1,854,293

Actuarial valuation

2016 2015

N' 000 N' 000

Gross liability

- Individual 12,892 9,391

- Group life 1,705,295 1,301,954

- Travel insurance 30,622 31,344

Additional reserves 10,600 10,500

1,759,409 1,353,189

Deposit administration (see Note 20)

- Individual 391,438 305,365

- Group 361,214 329,027

Gross liability 2,512,061 1,987,581

Reinsurance recoverable (401,465) (273,934)

Net liability 2,110,596 1,713,647

The latest available actuarial valuation of the life business funds was as at 31 December 2016. The actuarial value of the

net liability of the fund was N2,121,743 (31 December 2015: N1,713,646,277).

The analysis of the gross liability due to the fund holders and amount recoverable from reinsurance is stated below:

Life insurance contract liabilities: Life insurance contract liabilities is assessed every year by qualified consulting

actuaries in accordance with the Company's accounting policy.

85


Annual Report

31 December 2016

(i)

(ii)

(iii)

(iv)

(v)

(vi)

(vii)

(viii)

(ix)

(x)

(xi)

(xii)

(xiii)

(xiv)

(xv)

(xvi)

O.O Okpaise

Associate, Society Of Actuaries , USA

Fellow, Institute of Actuaries England,

The FRC no is FRC/NAS/00000000738

The valuation of the liabilities was made on the assumption that premiums have been credited to the accounts as they

fall due, according to the frequency of the particular payment.

For individual business, reserves were calculated via a cashflow projection approach, taking into account future office

premiums, expenses and benefit payments (death). Future cashlfows were discounted back to the valuation date at the

valuation rate of interest.

The valuation age has been taken as age at last birthday at the valuation date. The period to maturity has been taken as

the full term of the policy less the expired term. Full credit has been taken for premiums due between the valuation date

and end of the premium paying term.

An unexpired premium reserve was included for Group life business after allowing for acquisition expenses at a ratio of

20% of premium. An Additional Unexpired Risk Reserve (AURR). was also held to allow for any inadequacies in the

UPR for meeting claims in respect of the unexpired period. The claims rates underlying the AURR were based on

pooled historical scheme experience.

The valuation of the Company's life business fund as at 31 December 2016 was carried out by HR Nigeria Limited

consultant and actuaries. The valuation was done based on the following principles:

The solvency level at the valuation date was 103.20 (31 December 2015: 98.15%). That is, assets representing the Life

and Deposit Administration funds on the Company's balance sheet were 103.20% of the value of the acturially

calculated liabilities.

The company does not write with profits business, therefore discussion of basis to be adopted for the distribution of

profits among policyholders is not applicable.

The company does not write with profits business, so the general principles upon which the distribution of profits to

policyholders is determined is not applicable.

An expense overrun of N10,600,000 is provided as an additional reserve.

No specific adjustment has been made for immediate payment of claims.

No specific adjustment has been made for expenses after premiums have been ceased in the case of limited payments

policies i.e. they have been allocated the same level of expenses as premium paying policies.

Expenses for individual life business were reserved explicitly at N6,020 (31 December 2015: N5,420) per annum

increasing with inflation at 11% per annum. (31 December 2015: 9.5%)

There are no policies on the books that are entitled to surrender. No allowance has been made in the valuation for the

reinstatement of policies that lapsed before the valuation date.

Where negative reserves were calculated, these were set to zero to prevent policies being treated as assets.

The mortality table used in the valuation is the UK's mortality of assured lives 1967-70 (A6670) without adjustment.

The rate of interest used in the valuation is 14.65% per annum. (31 December 2015: 10.25%)

Any policies issued according to substandard terms were valued using the same method and basis as standard policies.

86


Annual Report

31 December 2016

20 Investment contract liabilities

2016 2015

N' 000 N' 000

Life savings plan (see (a) below) 391,438 305,365

Deposit Administration (see (b) below) 361,214 329,027

752,652 634,392

a Life savings plan 2016 2015

N' 000 N' 000


Additions 367,174 243,098

Withdrawals (243,564) (157,612)

Guranteed investment income on savings plan 32,650 20,435

Actuarial valuation surplus reversal adjustment (70,187) -

Balance, end of the year 391,438 305,365

2016 2015

N' 000 N' 000

b Deposit administration


Addition - 141,989

Withdrawals (38,000) (43,141)

Guranteed investment income on deposit administration - 10,027

Actuarial valuation adjustment 70,187 -

Balance, end of the year 361,214 329,027

Maturity profile of investment contract liabilities

2016 2015

N' 000 N’000

Within 12 months 225,796 232,340

After 12 months 526,856 402,052

752,652 634,392

21 Trade payables

2016 2015

N' 000 N' 000

Commission payable 9,380 2,268

Reinsurance payable 30,158 21,511

Deferred commission income 20,613 -

60,151 23,779

Life savings plan : These are receipts from individuals and employers (on behalf of their employees), respectively, of a

savings nature. They are treated as liabilities in the Company's statement of financial position.

87


Annual Report

31 December 2016

Maturity profile of Trade payables

2016 2015

N' 000 N' 000

Within 12 months 60,151 23,779

After 12 months - -

60,151 23,779

22 Accruals and other payables

2016 2015

N' 000 N' 000

Accruals and other payables comprise:

Auditors fees accruals 17,500 14,500

Other tax payable 1,858 201,643

Intercompany payable (see (a) below) 8,387 24,302

Premium payable to IHI Bupa Travel & ZGIC - 5,336

NAICOM Levy 26,485 27,479

Dividend payable - 1,800,000

ITF payable 1,315 1,343

NSITF payable - 75

National Housing Fund payable 10 4

Sundry payables (see note (b)) 3,132 11,065

Other payable (see note (c)) 5,762 -

64,449 2,085,747

(a)

(b)

(c) Other payable represents payment made for annuity software.

Maturity profile of accruals and other payables

2016 2015

N' 000 N' 000

Within 12 months 64,449 2,085,747

64,449 2,085,747

Amount in sundry payables represents unreconciled credit deposits into the Company's accounts.

Intercompany payable represents amounts owed to parent Company; Zenith General Insurance Company Limited with

respect to cash disbursements made by the parent on behalf of the Company. All outstanding balances with these related

parties are to be settled in cash within twelve months of the reporting date. None of the balances are secured nor bear

interest.

88


Annual Report

31 December 2016

23 Current income tax liabilities

The movement in this account during the year was as follows:

2016 2015

N' 000 N' 000

Balance beginning of year 496,333 188,038

Minimum tax 51,195 425,857

NITDA levy (see note (a) below) 10,029 164,384

557,557 778,279

Payments during the year (425,857) (281,946)


a Minimum and Income tax expense recognised in income statement

2016 2015

N' 000 N' 000

i Minimum tax 51,195 425,857

ii Corporate income tax charge - -

Company income tax - -

Tertiary education tax - -

NITDA levy 10,029 8,588

Prior year under provision - 155,796

10,029 164,384

Deferred tax expense/(credit) for the year 190,663 (763,571)

Income tax 200,692 (599,187)

Total income tax 251,887 (173,330)

b The effective tax reconciliation is as follows:

Rate 2016 Rate 2015

% N' 000 % N' 000

Profit before tax 1,006,642 867,407

Tax using the statutory corporation tax rate 30% 301,993 30% 260,222

Non-deductible expenses 0% 2,129 123% 1,067,294

Exempt income -16% (163,632) -153% (1,327,516)

Change in recognised deductible temporary

difference5% 50,136 -88% (763,571)

Tertiary education Tax 0% - 0% -

NITDA 1% 10,066 1% 8,588

Prior year under provision 0% - 18% 155,796

Minimum tax 5% 51,195 49% 425,857

25% 251,887 -20% (173,330)

The Company's tax expense in the year has been assessed based on the minimum tax requirements as there was no

taxable profit in the year. Tertiary education tax has not been charged because the Company had no assessible profit for

the year.

89


Annual Report

31 December 2016

24 Deferred taxation

(a) Deferred tax liablity account 2016 2015

N' 000 N' 000

Balance, beginning of year - 972

Credit for the year -

Reclassification to deferred tax asset - (972)

Deferred tax charge for the year - -

Balance, end of year - -

(b) Deferred tax asset account 2016 2015

N' 000 N' 000

Balance, beginning of year 762,599 -

Reclassification from deferred tax liablity account - (972)

(190,663) 763,571


No deferred tax was recognised in OCI during the year

(c) Analysis of deferred tax asset as at year end is as follows

2016 2015

N' 000 N' 000

Unrelieved losses 560,189 762,097

Unutilized capital allowance 11,747 502

571,936 762,599

Maturity profile of deferred tax asset

2016 2015

N’000 N’000

Within 12 months

After 12 months 571,936 762,599

571,936 762,599

Deferred tax credit/(charge) for the year recognised in profit or

90


Annual Report

31 December 2016

25 Share capital

Share capital comprises:

2016 2015

N' 000 N' 000

Authorized:2,000,000,000 Ordinary shares of N1 each 2,000,000 2,000,000

Issued and fully paid: 2,000,000,000 Ordinary shares of N1 each

In issue at 1 January 2,000,000 2,000,000

In issue at 31 December 2,000,000 2,000,000

26 Statutory contingency reserves

The movement in this account during the year is as follows:

2016 2015

N' 000 N' 000


Transfer from retained earnings 75,475 104,074


27 Retained earnings

(a) The movement in this account during the year is as follows:

2016 2015

N' 000 N' 000

Balance, beginning of year 1,383,674 2,447,011

Interim dividend declared - (2,000,000)

Profit for the year 754,755 1,040,737

2,138,429 1,487,748

Transfer to contingency reserves (75,475) (104,074)

Balance, end of year 2,062,954 1,383,674

The statutory contingency reserve is prescribed under Section 21 (1&2) of the Insurance Act. The Company is mandated to

maintain a statutory contingency reserve to cover for the fluctuations in securities and variations in statistical estimates.

The statutory contingency reserve is credited with an amount of not less than 1% of the gross premium or 10% of the net

profits (whichever is greater) and the amount shall accumulate until it reaches the amount of the minimum paid-up capital. An

amount of 10% of net profit being higher was credited to statutory contigency reserves during the year (2015: 10%)

No interim dividend was declared during the year (2015:₦1per share on the issued and paid up capital of 2,000,000,000

ordinary shares of N1.00 each, amounting ₦2billion).

91


Annual Report

31 December 2016

28 Fair value reserves

The movement in this account during the year is as follows:

2016 2015

N' 000 N' 000

Balance, beginning of year 3,066 (401,974)

Fair value loss on available for sale shares (11,116) 405,040

Balance, end of year (8,050) 3,066

Fair value loss on available for sale shares (see note 12b) (10,880) (17,943)

Transfer to Income Statement - Impairment on AFS securities (see note 12b) (236) 422,983

(11,116) 405,040

29 Earnings per share

2016 2015

N' 000 N' 000

Profit attributable to shareholders 754,755 1,040,737

Number of shares in issue 2,000,000 2,000,000

Basic earnings per share (in kobo) 38 52

30 Related party transactions:

I Transactions with key management personnel

2016 2015

N' 000 N' 000

(a) Interest income comprises:

Interest earned on term deposits with Zenith Bank Plc 14,486 5,659

The fair value reserve comprises the cumulative net change in the fair value of available-for-sale financial assets until assets

are derecognised or impaired.

Basic earnings per share is calculated by dividing the profit attributable to shareholders by the number of the shares.

The Company has no diluted earnings per share since there are no potentially dilutive instruments.

The Company’s key management personnel, and persons connected with them, are also considered to be related parties for

disclosure purposes. The definition of key management includes close members of family of key management personnel and

any entity over which key management personnel exercise control. The key management personnel have been identified as the

executive and non-executive directors of the Company, parent company. 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 Company. The amounts

outstanding in respect of related party transaction as at reporting date to companies in which the directors have interest are set

out below:

92


Annual Report

31 December 2016

2016 2015

N' 000 N' 000

(b) Premium written from related parties comprises:

Cyberspace Networks Limited 6,243 4,018

Zenith Bank Plc 840,716 341,962

Zenith Medicare Limited 4,086 2,917

Zenith Trustees Limited - 10

Zenith Capital Limited 2,266 492

Zenith Securities Limited 1,506 309

Zenith Pensions Custodian Limited 1,264 992

Veritas Registrars Limited 1,674 1,167

People Plus Management Services Limited 139,280 61,693

Visafone Communications Limited - 7,213

Oviation Limited - 14,416

Zenith Asset Management Limited 816 20

Quantum Markets Limited 122 116

Quantum Petrochemical Processing Plant Limited - 86

997,973 435,411

II ACCOUNT BALANCES

(c) Claims paid :


People Plus Management Services Limited - 13,387

Visafone Communications Limited - 14,345

96,524 100,992

(d) Bank Accounts :


(e) Term Deposits :

Zenith Bank Plc - 197,009

(f) Investment in managed fund :

Zenith Securities 44,174 85,741

Zenith Capital Limited 8,538 12,070

52,712 97,811

(g) Related party receivable :

Zenith General Insurance Company Limited 192,872 -

Zenith Securities Limited 12 12

192,884 12

(h) Related party payable

Zenith General Insurance Company Limited - 24,302

Veristas Registrars Limited 8,387

8,387 24,302

(h) Federal Government Treasury Bills and Bonds

Investment in treasury bills 3,748,416 3,642,717

Investment in bonds 1,148,593 1,897,901

4,897,009 5,540,618

93


Annual Report

31 December 2016

31 Litigations

32 Events after reporting date

33 Directors and employees

(a) Directors

The remuneration paid to the directors of the Company were:

2016 2015

N'000 N'000

Fees and allowances

disclosed above include amounts paid to :

The Chairman 4,750 4,563

The highest paid director 24,989 24,801

2016 2015

Number Number

1,000,000 - 3,000,000 - -

3,000,001 - 5,000,000 6 6

Above 5,000,000 1 1

7 7

(b) Employees 2016 2015

Number Number

Management staff 6 5

Non-management staff 14 21

20 26

The staff costs for the above persons was:

2016 2015

N'000 N'000

Salaries and wages 127,464 96,627

Pension costs 1,892 976

129,356 97,603

(c)

Fees and other emoluments (excluding pension contributions)

The average number of persons employed (excluding Directors) in the Company

during the year was

There were no pending litigation against the Company as at 31 December 2016 (31 December, 2015: Nil)

The Company purchased Federal Government Treasury bills and Bonds through Zenith Bank Plc during the year.

There were no events after reporting date that requires disclosure or adjustment in the financial statement that has not been

disclosed or adjusted.

The number of employees of the Company, other than Directors, who received emoluments in excess of N100,000 are shown

in the following ranges:

The number of directors who received fees and other emoluments in Naira in the following ranges were :

94


Annual Report

31 December 2016

2016 2015

N

Number Number

600,001 - 900,000 8 10

900,001 - 2,000,000 1 1

2,000,001 - 3,000,000 2 3

3,000,001 - 4,000,000 0 0

4,000,001 - 5,000,000 2 3

Above 5,000,000 7 9

20 26

(d) Key management personnel compensation for the year comprises:

2016 2015

N'000 N'000

Salaries, short term benefit and pension 17,627 17,627

Allowances and benefits 2,312 2,312

Fees as directors 2,250 2,250

22,189 22,189

34 Contravention of laws and regulations

Details Contravention

(a) The Company was fined for the transfer of its Transfer of shares

shares during the period. A payment of N150million

was paid by the company to NAICOM

During the year under review, the Company contravened some regulations during the year and appropriate penalties were

paid. Details are:

95


Annual Report

31 December 2016

Other National Disclosures

96


Annual Report

31 December 2016


Hypothecation

for the year ended 31 December 2016

Company Company

2016 2015

Note N'000 N'000

(a) Investment in placements - Allocation

Shareholders funds 601,101 1,232,075

Insurance funds 684,753 419,854

1,285,854 1,651,929

Assets

Cash and cash equivalents 11 1,285,854 1,651,929

Investment securities- held to maturity 12(a) - -

1,285,854 1,651,929

2016 2016

Note N'000 N'000

(b) Investment in treasury bills - Allocation


Insurance funds 3,443,215 1,934,936

3,748,416 3,646,803

Assets

Quoted debt securities - Treasury bills 12(a) 3,748,416 3,646,803

3,748,416 3,646,803

2016 2016

Note N'000 N'000

(c) Investment in bonds - Allocation


Insurance funds 700,000 -

1,148,593 1,897,901

Assets

Quoted debt securities - Bonds 12(a) 1,148,593 1,897,901

1,148,593 1,897,901

2016 2016

Note N'000 N'000

(d) Total assets allocated to the insurance fund:

Placements 684,753 419,854

Treasury bills 2,958,584 1,934,936

Bonds 700,000 -

4,343,337 2,354,790

Assets allocation was done in accordance with NAICOM guidelines in force to meet the minimum requirement of Section

26(1)(c)of the Insurance Act 2003 for hypothecation of investments representing the insurance funds.

97


Annual Report

31 December 2016

2016 2016

Note N'000 N'000

(e) Insurance contracts liability & Investment contract liability accounts

Life insurance contract liabilities 19 3,590,685 1,854,293

Investment contract liabilities 20 752,652 634,392

4,343,337 2,488,685

Reinsurance Recoverables 19(c) (401,465) (273,934)3,941,872 2,214,751

The total asset of N4.343 billion are allocated to insurance liability of N3.942 billion for the current year (2015: total asset of

N2.355billion allocated to N2.215billion)

Asset allocation was done in accordance with NAICOM guidelines in force to meet the minimum requirements of the Section

26(1)(c) of the Insurance Act 2003 for hypothecation of investment representing the insurance funds.

98


Annual Report

31 December 2016

AGE ANALYSIS OF OUTSTANDING CLAIMS

The Age Analysis of the outstanding claims reserves liability as at 31 December, 2016

Outstanding Days 0-90 91-180 181-270 271-360 361 TOTAL

Claims per Claimant DAYS DAYS DAYS DAYS DAYS

1 - 250,000 969 754 2,376 95 2,345 6,539

250,001 - 500,000 2,585 1,695 309 867 13,161 18,617

500,001 - 1,500,000 9,655 10,371 12,137 10,853 32,545 75,561

1,500,001 - 2,500,000 21,579 10,393 1,869 2,104 11,706 47,651

2,500,001 - 5,000,000 23,280 13,226 16,092 5,917 23,524 82,039

5,000,000 - ABOVE 455,708 559,648 321,916 158,007 105,592 1,600,871

513,776 596,087 354,699 177,843 188,873 1,831,278

99


Annual Report

31 December 2016


Value added statement


2016 2015N'000 N'000

Net premium income 2,709,555 2,333,095

Investment income & Commision received 842,102 1,061,615

Claimsincurred, commission paid and operating expense (2,899,497) (2,424,117)

Value added 652,160 100% 970,593 100%

Distribution :

Applied to pay :

Employee (Staff cost) 130,671 20% 97,603 10%

Government (Taxes) (251,887) -39% (173,330) -18%

Retained in business:

Depreciation and amortisation 19,343 3% 5,583 1%

To augment reserves 754,755 116% 1,040,737 107%

Value added 652,882 100% 970,593 100%

100


Annual Report

31 December 2016


Financial Summary


2016 2015 2014 2013 2012

N'000 N'000 N'000 N'000 N'000

Cash and cash equivalents 1,424,454 1,747,983 1,404,212 1,342,453 1,284,479

Financial assets:

Investment securities held to maturity 4,897,009 5,544,704 5,267,151 3,644,767 2,740,461

Investment securities available for sale 65,173 106,009 123,953 191,579 140,179

Loans and receivables 27 89 - 1,393 1,568

Trade receivables 66,441 12,958 33,774 - 198,756

Reinsurance assets 1,631,377 496,708 306,196 152,468 107,628

Deferred acquisition cost 38,613

Other receivables and prepayments 199,576 3,225 3,225 73,042 5,344

Deferred tax asset 571,936 762,599 - 275 1,391

Statutory deposits 200,000 200,000 200,000 200,000 200,000

Property and equipment 32,649 5,405 6,839 1 1

Intangible asset 19,797 18,640 8,549 751 3881

Total assets 9,147,052 8,898,320 7,353,899 5,606,729 4,683,688

Liabilities

Trade payables 60,151 23,779 34,064 124,959 198,863

Other payables and liabilities 64,449 2,085,747 924,177 36,923 32,274

Insurance contract liabilities 3,590,685 1,854,293 1,429,053 1,070,235 1,243,907

Investment contract liabilities 752,652 634,392 419,596 213,208 60,256

Current income tax liabilities 131,700 496,333 188,038 175,470 48,472

Deferred tax liability - - 972 - -

Total liabilities 4,599,637 5,094,544 2,995,900 1,620,795 1,583,772

Net assets 4,547,415 3,803,776 4,357,999 3,985,934 3,099,916

Equity

Share capital 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000

Retained earnings 2,062,954 1,383,675 2,447,011 2,128,277 1,371,530

AFS valuation reserves (8,050) 3,066 (401,974) (342,112) (387,300)

Statutory contingency reserve 492,511 417,035 312,962 199,769 115,686

Total equity 4,547,415 3,803,776 4,357,999 3,985,934 3,099,916

Profit and loss account

2016 2015 2014 2013 2012

N'002 N'000 N'000 N'000 N'000

Gross premium earned 3,344,234 2,991,044 2,393,159 1,356,346 1,877,004

Net premium earned 2,709,555 2,337,892 1,942,778 1,142,318 1,567,555

Profit before taxation 1,006,642 867,407 1,373,090 981,553 381057

Taxation (251,887) 173,330 (241,163) (140,723) (10,483)

Profit after taxation 754,755 1,040,737 1,131,927 840,830 370,574

Transfer to contingency reserve (75,475) (104,073) (113,193) (84,083) (37,057)

Transfer to retained earnings 679,280 936,664 1,018,734 756,747 333,517

Earnings per share (basic &diluted) 38k 52k 57k 42k 19k

101

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