promise, innovation succession - reliance insurance

Promise, innovationsuccession...

Journey of

Highlights.....2013 has been a year of tremendous achievement.

1,638.89

Credit RatingRated by CRISL

Stable Outlook

AA+

9.93%

Gross Premium

BDT mn 704.23

9.84%

Net Premium

BDT mn

35.62%5.33

Earnings Per Share

BDT 406.1736.33%

Net Profit Before Tax

BDT mn

BDT mn

Underwriting Income

228.88

23.65%

BDT mn

Investment Income

230.26

40.44%

Annual Report 2013

2

Table of ContentsLetter of Transmittal 04Awards & Recognitions 06Shareholders' View 09Notice of the Twenty Sixth Annual General Meeting 10

Corporate Objectives, Values & Structure

Vision & Mission 12Core Values 13Overall Strategic Objective 14Profi le of the Company 15Products of Reliance 16Product Diversifi cation and Innovation 17Company Information 18Corporate Milestones 19

Our Management

From the Records Book 20Composition of Board and its Committees 21Organizational Chart 22Management & Core Executives 24Senior Executives 26Heads of Branches 27

Chairman’s & CEO's Review, Director's Report etc.

Chairman's Review 28Managing Director and CEO's Roundup 30Directors' Report to the Shareholders 34Summary of Accounts 40Key Operating and Financial Highlights 41Meeting attended by the Directors 42Pattern of Shareholding 43Brief Profi le of the Directors 44Status of Compliance of Corporate Governance Guidelines 50Certifi cate of Compliance with the Corporate Governance Guidelines 57

Sustainability Reporting

Attributes of Sustainability 58Sustainability Strategy 58Corporate Social Responsibility 59Environmental Policy 60Human Resources Policy 60Integrated Reporting 61Report on Going Concern 62Report on Information Technology 63Human Resource Accounting 65

Information about Corporate Governance

Report on Corporate Governance 66

12

20

28

58

66

3

RIL 2013 Annual Report

Corporate objectives, values &

structure

Our M

anagement

Chairman’s &

CEO’s

review, D

irector’s report etc.

Sustainability reporting

Information

about corporate governance

Summ

ary of our perform

anceRisk m

anagement &

control environm

entSpecifi c areas for insurance sector

Financial perform

anceStakeholders’ inform

ation

Performance Summary

Performance Indicators 70Value Added Statement 72Economic Value Added Statement 73Market Value Added Statement 73Contribution to the National Economy 74Bangladesh Non-life Insurance Market Composition & Reliance Share 75

Risk Management & Control Environment

Risk Management Framework 76Insurance Risk & its Mitigation 77Disclosure of Risk Reporting 79

Specifi c areas for Insurance Sector

Claims Management and details of Outstanding Claims (IBNR & IBNER) with ageing thereof

80

Solvency Margin 81Accounting Ratio pertaining to Insurance Sector 82Review of Asset Quality 83

Financial Performance

Report of the Audit Committee 85Responsibility Statement of CEO & CFO 86Auditors' Report to the Shareholders' 87Statement of Financial Position 88Statement of Comprehensive Income 90Fire Insurance Revenue Account 92Marine Insurance Revenue Account 94Miscellaneous Insurance Revenue Account 96Classifi ed Summary of Assets 98Statement of Cash Flows 100Statements of Changes in Shareholders Equity 101Notes to the Financial Statements 102

Stakeholders' Information

Dividend Policy and Capital Raising History 118Financial Calendar 118Quarterly Analysis 119Shareholding Composition 120Redressal of Investors Complaints 121Redressal of Clients Complaints 121Branch Connectivity 122Event Highlights 124Glossary 126Proxy Form 131

70

76

80

85

118

4

All Shareholders,Bangladesh Securities and Exchange Commission,Insurance Regulatory and Development Authority,Registrar of Join Stock Companies & Firms,Dhaka Stock Exchange Limited andChittagong Stock Exchange Limited

Dear Sir (s):

Annual report for the year ended December 31, 2013

Enclosed please fi nd a copy of the Annual Report together with the Audited Financial Statements including Statement of Financial Position as at December 31, 2013 and Statement of Comprehensive Income, Statements of Cash Flows for the year ended December 31, 2013 along with notes thereon of Reliance Insurance Limited for kind information and record.

Best regards,

Yours sincerely,

Md. Anisur Rahman

Company Secretary

Letter of Transmittal

6

Awards and Recognitions

Mr. Akhtar Ahmed, Managing Director & CEO, Reliance Insurance Limited is receiving the 13th ICAB National Award for Best Presented Annual Reports 2012 under Financial Sector - Insurance (First Position).

Mr. Akhtar Ahmed, Managing Director & CEO, Reliance Insurance Limited is receiving the ICMAB Best Corporate Awards 2012 (First Position).

Mr. Akhtar Ahmed, Managing Director & CEO,

Reliance Insurance Limited is receiving the 12th ICAB

National Award for Best Presented Annual Reports

2011 under Financial Sector - Insurance (First Position).

7


Mr. Mohammed Sabir Ahmed, CFO, Reliance Insurance Limited

is receiving Certifi cate of Merit from SAFA for Best Presented

Annual Report Awards and SAARC Anniversary Awards for Corporate

Governance Disclosures 2011.

Mr. Shamsur Rahman, Vice Chairman, Reliance Insurance

Limited is receiving the 11th ICAB National Award (First Position)

for Best Published Accounts and Reports 2010 under Financial

Sector - Insurance.

Mr. Akhtar Ahmed, Managing Director & CEO, Reliance Insurance Limited is receiving the ‘HR Award 2010’ given by Institute of Personnel Management (IPM), Bangladesh in the Corporate Category.

Mr. Akhtar Ahmed, Managing Director & CEO, Reliance Insurance Limited is receiving the ICMAB 2nd Best Corporate Award 2010.

8

Awards and Recognitions

Certifi cate of Merit for Best Presented Accounts and Corporate Governance Disclosure Awards 2010

Certifi cate of Merit for Best Presented Accounts and Corporate Governance Disclosure Awards 2011

1st position in 11th ICAB Awards for Best Published Accounts and

Reports 2010


Reports 2011


Reports 2012

2nd position in ICMAB Best Corporate Awards 2010

1st position in ICMAB Best Corporate Awards 2012

HR Award – 2010Presented by

Institute of Personnel Management

9


Shareholders’ View

10

Notice of the Twenty Sixth Annual

General Meeting

Notice is hereby given to all members of Reliance Insurance Limited that the twenty sixth Annual General Meeting of the Company will be held at La-Vita Hall, Lake Shore Hotel, House # 46, Road # 41, Gulshan-2, Dhaka-1212, on Sunday, March 30, 2014 at 11:00 am to transact the following business:

1. To receive, consider and adopt the Directors’ Report and Audited Financial Statements for the year ended December 31, 2013 together with the Auditors’ Reports thereon.

2. To declare dividend for the year ended December 31, 2013 as recommended by the Board of Directors.

3. To elect/re-elect Directors.

4. To confi rm the appointment of proposed Managing Director & CEO of the Company.

5. To appoint Auditors and fi x their remuneration.

6. To transact any other business with permission of the Chair.

By order of the Board of Directors

March 3, 2014 Md. Anisur Rahman Company Secretary

Notes:

(a) The “Record Date” shall be Wednesday, March 5, 2014. Shareholders whose names appear in the members’ register of the company on the record date will be eligible to attend the meeting and qualify for dividend.

(b) A member entitled to attend and vote at the Annual General Meeting may appoint a proxy to attend and vote in his/her stead. Duly stamped proxy must be submitted to the Share Department of the Company at least 72 hours before the start of the meeting at 11:00 am on March 30, 2014.

(c) Shareholders and Proxies are requested to record their entry in the Annual General Meeting well in time. No entry will be recorded after 12:00 noon.

(d) Members are advised to update change of address (if any) through their respective Depository Participant.

12

Vision and Mission

Our Vision

Is to:

become the premier insurance organization and the insurer of fi rst choice in Bangladesh with a sound reputation for dependability, professionalism and the highest standard of customer services.

Our Mission

Is to:

grow signifi cantly and achieve signifi cant non-life insurance market share.

continue delivering attractive returns to our shareholders.

become a caring organization and employer of choice.

invest in top quality human resources and develop full potentials of employees by providing continued training and insurance education.

bring innovation in insurance products and selling techniques.

112

13



structure

Our Core Values

Transparency: We encourage and inculcate total transparency and communicate openly & honestly with all our stakeholders and clients. We accept our individual and team responsibilities and we make and support business decisions through experience and good judgment.

Integrity: We are committed to employ the highest ethical standards, demonstrating honesty and fairness in all our actions.

Professionalism & Excellence: We believe in developing a highly motivated, valued and diverse workforce. We strive constantly to be the best in quality and in everything we do in order to meet and exceed the highest expectations of our customers.

Customer Focus: We are dedicated to satisfying customer needs and honoring commitments that we have made to them. Our customers are our partners and we remain committed to build strong relationship with them and value their loyalty as our best rewards.

Result Focus: We are result focused. We strive to timely, tenaciously and consistently execute well developed plans, goals and objectives and we accept responsibility for the results they deliver.

Teamwork: We are committed to a teamwork environment where every individual is a valued member, treated with respect, encouraged to contribute and recognized and rewarded for his/her eff orts.

14

Overall Strategic ObjectivesIt is important to recognize the elements that make our intangible resources, such as, our ability to relate to customers regarding their needs and wants, management style, corporate culture and commitment. These elements will diff erentiate us from our competitors and contribute towards the development of a sustainable competitive edge. Our corporate strategy and guiding principles rest fi rmly on this belief.

Process focus

To have all products meet standard of excellence guidelines

To continually improve internal process to realize effi ciencies

Improve system accuracy and responsiveness

Improve organizational structure

Improve performance measurement and reporting capability

Reduce administrative overhead

Improve fi nancial analysis, controls, and audit capability

Business focus

Increase quality

Reduce delivery time

Implement change faster

Increase customer retention

Increase customer loyalty

Introduce new products to new and existing markets

Improve overall productivity and maximize market share

Improve marketing, advertising and public relations

Achieve and maintain outstanding customer service

Continuously broaden customer database by obtaining new information on customer characteristics and needs

People/Learning focus

To hire, develop and maintain the right people in right place

Employ professionals who create success for customers

Develop broad set of skills useful for customer support

To continually learn and adopt current best practices

Transfer knowledge from leading-edge clients

To align incentives and staff rewards with performance

We, at Reliance realize that, for us to prosper, we need to be fl exible and responsive, to

satisfy our clients by providing them with what they want,

when they want it and most importantly before other competitors can offer it.

15



structureReliance transacts all classes of non-life insurance business in

Bangladesh and its turnover was in excess of BDT 1,638.89 million, being total gross premium underwritten in 2013. The Company carries its insurance activities through head offi ce along with 31 (thirty one) branches spread across the whole country. RIL received “AA+ (Double A Plus)” Surveillance Rating (Stable outlook) from CRISL based on its sound fi nancial performance and claim paying ability.

Reliance has an authorized capital of Tk. 2,000 million and paid up capital of Tk 519.50 million. Shares of the company are traded in both Dhaka Stock Exchange and Chittagong Stock Exchange and are listed in the “A” category. The company has a total market capitalization of approximately Tk 4,140.40 million as at December 31, 2013.

Reliance is focused on providing professional services of the highest quality to its clientele which include many reputed large national and multinational conglomerates. Over the years, Reliance has established its track record as a sound and dependable insurer, consistently able to meet its commitments and by providing insurance solution to the individual needs of its clients.

The Board of Directors of Reliance comprises a good number of eminent entrepreneurs and personalities of the country. The management team is headed by Mr. Akhtar Ahmed ACII, Ex-Managing Director of SBC, with over 43 years of experience in the insurance industry of which a greater part was spent in the Far East, holding important positions with reputed professional reinsurance companies. Other members of the team are highly qualifi ed professionals, who have been trained at home and abroad. Reliance emphasizes on imparting technical know how of highest standard to its employees and in ensuring that they keep abreast of latest developments in the world of insurance, through training and continued education.

Financial performance of the company has been consistently positive, delivering both underwriting and investment income and by giving attractive returns to its shareholders. The Company has over the years been maintaining strong corporate culture, corporate governance, ethical standards, corporate social responsibilities, superior underwriting skills and abilities and dynamic investment management.

The future plans of Reliance encompass not only development of new products and services, but also marketing activities aimed at tapping the hitherto untapped segments of the market. The Company is fully aware of its social responsibilities and would like to aim its future developments activities in the direction which bring insurance services and benefi ts to the reach of the common people of Bangladesh.

Profi le of the Company

A leading fi rst generation private sector Non-life Insurance Company in

Bangladesh, Reliance Insurance Limited (RIL) was incorporated

in 1988 as a public limited company under the Companies

Act, 1913 (Present 1994) and subsequently was listed with Dhaka and Chittagong Stock

Exchanges in 1995.

16

Property Insurances

Fire Insurance (including Allied Perils)Property Damage All RisksIndustrial All Risks (IAR) including Business InterruptionComprehensive Machinery Insurance

Marine Insurances

Marine CargoMarine HullBuilders Risks Insurances

Engineering Insurances

Machinery Breakdown Insurance (MBD)Deterioration of Stocks (DOS)Boiler and Pressure Vessel (BPV)Electronic Equipment Insurance (EEI)Erection All Risks (EAR)Contractors’ All Risks (CAR)Work Plant (WP)Oil & Gas Well Drilling Equipment Package (OGD)Contractors Plant & Machinery (CPM)

Motor InsurancesMotor Insurances for Commercial useMotor Insurances for Private useSpecialised Motor Vehicle

Miscellaneous Insurances

BurglaryCash in Safe, Cash in Transit, Cash on Counter, Cash in PremisesFidelity GuaranteeAll RisksProduct LiabilityPublic LiabilityDirectors’ & Offi cers’ Liability InsuranceWorkmen’s CompensationEmployer’s LiabilityMarine Terminal Operators Liability (MTOL)Comprehensive General LiabilityHole in One (Golf ) Insurance/Event CoverHotel Owner’s All Risks (HOAR)Personal Accident InsurancePeople Personal AccidentAviation Insurance-Aircraft Hull, Liability and Related Risks

Overseas Mediclaim

Business and Holiday (B&H) Corporate Frequent Travels (CFT) Employment and Study (E&S)

Health Insurance

Products of Reliance

17



structure

17

Diversifi cation is the key to maximizing profi tability in today’s insurance market. Most of the Insurance companies in Bangladesh focus largely on traditional insurance products like Fire, Marine and Motor Insurance.

In today’s competitive market we need to be innovative and diversify our product line. The potential untapped insurance market in Bangladesh is the personal lines business. The personal lines business remains weak due to the people’s negative perception on insurance industry.

The personal lines business may include products such as:

1. Householders Comprehensive Insurance2. Motor Insurance3. Personal Accident Insurance

4. People’s Personal Accident Insurance5. Overseas Mediclaim Insurance6. Health Insurance

Health Insurance was not very common in Bangladesh few years back, but now it is becoming very popular, especially in the corporate culture. Still, large number of population is not under the coverage of Health Insurance.

We need to provide easy access to the public to be able to buy the above products with ease. Providing one stop service and facility to get insurance coverage via the Internet shall be a positive move on part of the Insurance companies to generate sizable premium income from the untapped market.

Product Diversifi cation and Innovation

18

The Company is listed with Dhaka Stock Exchange and Chittagong Stock Exchange as a Publicly Traded Company. The Company carries its insurance activities through thirty one branches spread across the country.

Registered Name of the CompanyReliance Insurance Limited

NatureNon-life insurance business

Company Registration No.C-17379(179)/88

Tax Identifi cation Number (TIN)647975407445/LTU, Dhaka

VAT Registration Number9011003407

Registered Offi ceShanta Western TowerLevel-5, 186 Tejgaon I/ADhaka 1208

ContactsTelephone : +88 02 8878836-45Mobile : +88 01714 014 895Fax : +88 02 8878831-34E-mail : [email protected]

Web Presencewww.reliance.com.bd

Company SecretaryMd. Anisur Rahman

AuditorsMalek Siddiqui WaliChartered Accountants9-G, Motijheel C/A, Dhaka-1000

Legal AdviserMr. Rokanuddin MahmudBarrister-at-Law

Principal BankersBank Asia LimitedPrime Bank LimitedIFIC Bank LimitedHSBC BangladeshCiti Bank N.A.Standard Chartered Bank

Company InformationThe Company was incorporated as a

public limited company in Bangladesh in the year 1988 under the Companies

Act 1913 (at present 1994). The Company within the stipulations laid

down by Insurance Act 2010 and directives as received from time to

time from Insurance Development & Regulatory Authority provides Non-life

Insurance services.

19



structure

Reliance Insurance Offi ce Tower foundation laid on 12.03.2014

Received Certificate of Merit for Best Presented Annual Reports 2012 from SAFA 11.03.2014

Received 13th ICAB National Award (First Position) for Best Published Accounts and Reports 2012 21.12.2103

Received Certificate of Merit for Best Presented Accounts and Corporate Governance Disclosure 2011 from SAFA

22.02.2013

Received ICMAB First Best Corporate Awards 2012 12.01.2013


Received ICMAB Second Best Corporate Awards 2011 12.12.2011

Received Certificate of Merit for Best Presented Accounts and Corporate Governance Disclosure Awards 2010 from SAFA

29.11.2011

Received HR Award 2010 Presented by Institute of Personnel Management 15.10.2011


Shifting Registered Office 06.03.2011

Received of 10th ICAB National Award (Second Position) for Best Published Accounts and Reports 2009 19.12.2010

Purchase of Office Premises for the Company 18.05.2010

Completion of 20 Years of Service 20.03.2008

Agreement sign with CDBL 31.08.2004

Issuance of first Bonus Share (For the year 2003) 50% Stock & 10% Cash 28.05.2004

Purchase of Land for the Company 27.03.2002

First Dividend Declared in the AGM 30% Cash 18.06.1996

First Trading of Shares on Chittagong Stock Exchange Limited 04.11.1995

Listed with Chittagong Stock Exchange Limited 10.10.1995

First Trading of Shares on Dhaka Stock Exchange Limited 17.07.1995

Subscription Closed 25.05.1995

Subscription Opened 16.05.1995

Listed with Dhaka Stock Exchange Limited 08.05.1995

Publication of prospectus 01.05.1995

Received consent from SEC for issuance of public share of BDT 30 million 12.04.1995

Signing of First Insurance business 21.04.1988

License issued for operating the first Branch 21.04.1988

Certificate of Commencement of Business 22.03.1988

Incorporation of the Company 20.03.1988

Corporate Milestones

20

From the Records BookRespectable Chairmen, Deputy Chairmen and MD & CEOs

Chairmen

Mr. Latifur Rahman

1988, 1989, 1997, 2005

From Left to Right

Mr. Asadul Huq

1992, 1999, 2007

Late Azimur Rahman

1990, 1998Mr. Abdur Rouf Chowdhury

1991, 2002, 2010

The Company recalls with gratitude their contribution

Deputy Chairmen

Managing Director & CEOs

Mr. M. Shamsul Alam

March 1988 to March 2005

Mr. M. Shamsul Alam


Mr. Akhtar Ahmed

March 2005 to Date

Mr. Anwarul Huq


Late A. S. Mahmud

1995

Mr. Habibullah Khan

1993, 2008

Mr. Shamsur Rahman

1996, 2004, 2012

Ms. Joya Pati

1994

Ms. Shahnaz Rahman

2001, 2009, 2013Mr. Rajiv Prasad Shaha

2003, 2011

Ms. Yasmeen Khan

2000

Ms. Rokia Afzal Rahman

2006

21


Our M

anagement

Board of Directors

Chairman

1. Ms. Shahnaz Rahman Nominated by Trinco Limited

Vice Chairman

2. Mr. Habibullah Khan Nominated by Meenhar Fisheries Limited

Directors

3. Ms. Zakia Rouf Chowdhury Nominated by Rangs Limited

4. Mr. Md. Khalilur Rahman Choudhury Nominated by General Produce International Limited

5. Ms. Farah Huq Nominated by FinAccord Trading Limited

6. Mr. Arshad Waliur Rahman Nominated by Transfi n Trading Limited

7. Mr. Imran Faiz Rahman Nominated by Arlinks Limited

8. Mr. Shamsur Rahman Representing Self Shareholding

9. Mr. Rajiv Prasad Shaha Nominated by Kumudini Welfare Trust of Bengal (BD)

Limited

10. Mr. Amanullah Chowdhury Nominated by Rangs Workshop Limited

11. Ms. Romana Rouf Chowdhury Nominated by Deep Sea Fishers Limited

12. Iftikhar Arshad Husain Nominated by Kumudini Handicraft13. Ms. Yasmeen Khan Nominated by Meenhar Sea Foods Limited

14. Mr. Atiqur Rahman Nominated by Transcom Limited

Independent Directors

15. Mr. Anis-uz-Zaman Khan

16. Dr. Toufi q Ali

Managing Director & CEO

17. Mr. Akhtar Ahmed

Audit Committee

Chairman

1. Mr. Anis-uz-Zaman Khan

Member

2. Mr. Habibullah Khan 3. Mr. Md. Khalilur Rahman Choudhury4. Mr. Amanullah Chowdhury5. Mr. Atiqur Rahman

Finance & Asset Management Committee

Chairman

1. Mr. Shamsur Rahman

Member

2. Mr. Habibullah Khan3. Mr. Atiqur Rahman4. Ms. Farah Huq5. Mr. Akhtar Ahmed

Human Resource Committee

Chairman

1. Ms. Shahnaz Rahman

Member

2. Mr. Habibullah Khan3. Mr. Atiqur Rahman4. Mr. Amanullah Chowdhury5. Mr. Arshad Waliur Rahman6. Mr. Akhtar Ahmed

Composition of Board & its Committees

22

Organizational Chart of Reliance Insurance Limited

23


Our M

anagement

24

Management and Core ExecutivesAnd their Profi les

Akhtar AhmedM.A. ACII (UK), Chartered Insurer


After completing B.A. (Honours) and M.A. from Dhaka University in 1970, Mr. Ahmed joined Eastern Federal Union Insurance Company, the largest insurance company in the then Pakistan, as an Executive Offi cer. Following the nationalization of insurance industry in Bangladesh in 1972, his services were absorbed in Sadharan Bima Corporation.

In 1981 he joined Asian Reinsurance Corporation, Bangkok, an inter-governmental organization set up by the United Nations and served in various Managerial position till 1989. In 1989 he joined Arab Insurance Group, the largest insurance organization of the Middle East and served for 14 years in various positions as Chief Manager, Regional General Manager and Chief Executive of its Far East operations, based in Hong Kong and Kuala Lumpur.

Mr. Ahmed returned back home in 2003 and served as Managing Director of Sadharan Bima Corporation till February 2004. In early 2005 he completed an assignment as Consultant to KPMG, Abu Dhabi, on a project for setting up of a large Reinsurance company in the Middle East.

He joined Reliance Insurance Limited as its Managing Director & CEO in March 2005.

Mohammed Sabir Ahmed

Akhtar Ahmed Enamul Haque Khandker

Md. Anisur Rahman

Mohammad Khaled Mamun

25


Our M

anagement

Mohammad Khaled MamunM.Sc, M. Demo, DDP, ABIA, ACII (UK)

Deputy Managing Director

Mr. Mamun joined Reliance Insurance in June, 2005 after 11 years of service in Reinsurance Department of the State Owned Sadharan Bima Corporation. Apart from his Masters degree from Dhaka University, he also obtained Diploma in Development Planning from Academy for Planning and Development, Dhaka. He is an Associate Member of Bangladesh Insurance Academy, Dhaka and also the Associate Member of the Chartered Insurance Institute, United Kingdom. He received Advanced Non-Life Insurance & Reinsurance Training from Swiss Insurance Training Centre (SITC) of Swiss Re, Zurich, Switzerland and Reinsurance Management Training from Asian Re, Bangkok, Thailand.

Mr. Khaled has also attended a number of seminars on Insurance and Reinsurance at home and abroad.

Enamul Haque KhandkerExecutive Director (HR & Admin)

Mr. Khandker has obtained his Masters with Honours in Public Administration from University of Dhaka. In a career spanning over nearly thirty years, Mr. Khandker worked mostly for International and Joint Venture Companies both in the country and abroad in the fi eld of Human Resources & Administration. Prior to joining Reliance Insurance Limited in 2005, he served in CARE-International, Bangladesh, Karnaphuli Fertilizer Company Limited (KAFCO), & Saudi-Bangladesh Industrial & Agricultural Investment Company Limited (SABINCO) as General Manager & Head of Human Resources & Administration Division. Mr. Khandker was entrusted with special assignments in CARE Sri Lanka. He is a fellow of Institute of Personnel Management (IPM) and Bangladesh Society for Human Resources Management (BSHRM).

Md. Anisur RahmanM.Com (Marketing), MBA (Finance) DU ABIA, DAIBB

Company Secretary,

Deputy Executive Director & Head of Operations

Mr. Rahman joined Reliance Insurance Limited in October 2005. He had earlier served Pragati Insurance Limited and United Insurance Company Limited in senior positions. He also worked as an Instructor of Bangladesh Insurance Academy. Starting his career as a banker with Standard Chartered Bank in March 1982, he moved to Investment Corporation of Bangladesh and thereafter Bangladesh Krishi Bank. He received intensive training programme at the University of Philippines, Quezon City, Manila, Reinsurance Management in Bangkok organized by the Asian Re and Annual Seminar of Arab Insurance Group (ARIG) in Bahrain.

Mr. Rahman has also attended a number of seminars on Insurance and claims at home and abroad.

Mohammed Sabir Ahmed M.Com, FCA, FCS

Deputy Executive Director & CFO

Mr. Ahmed joined in Reliance Insurance Limited on July 8, 2007. Before joining Reliance Insurance Limited he worked with Bashundhara Group and TeleBarta Limited in Senior Management Positions. Mr. Ahmed is a Chartered Accountant and Chartered Secretary in profession and has been working in fi nancial management and internal audit & control functions for more than fi fteen years. He has also been serving as a member of diff erent committees of “The Instutitute of Chartered Accountants of Bangladesh (ICAB)” including TRC, BCPAR and Audit Committee. He is part time faculty member of ICAB. Mr. Ahmed has attended a number of seminars at home and abroad.

26

Mr. Shahadat Hossain

Executive Vice PresidentRe-insurance

Mr. Md. Israfi l

Executive Vice PresidentBranch Control & Co-ordination

Mr. Md. Golam Sarower

Executive Vice PresidentInternal Audit and Control

Mr. Md. Jashim Uddin

Deputy Executive Vice PresidentAccounts

Mr. Nirmal Chandra Roy

Deputy Executive Vice PresidentNew Product & Services

Mr. Md. Nazrul Islam

Senior Vice PresidentHuman Resources & Admin

Mr. Md. Masud Rana

Deputy Senior Vice PresidentFinance

Mr. Md. Rakib Uddin Chowdhury

Deputy Senior Vice PresidentRe-insurance

Mr. Md. Mahbubur Rahman

Deputy Senior Vice PresidentInformation Technology

Mr. Syed Qayem Hussain

Deputy Senior Vice PresidentMarketing Services & Health Plan

Mr. Md. Abdul Matin

Deputy Senior Vice PresidentPolicy Issuing Section

Mr. Sanjay Kumar Basak

Deputy Senior Vice PresidentFinance & Accounts

Mr. Abu Saleh Md. Musha Khan

Deputy Senior Vice PresidentMarketing Services & Health Plan

Mr. Ashiqur Rahman

Vice PresidentClaims

Mr. Kazi Altaf Hussain

Vice PresidentSpecialised Underwriting

Mr. Quazi Mozaff ar Asif Rana

Vice PresidentMarketing Services & Health Plan

Mr. Md. Zahurul Haque

Vice PresidentShare Department

Mr. Md. Abul Kalam Azad

Vice PresidentInternal Control & Audit

Mr. Md. Badaruddoza

Vice PresidentFinance & Accounts

Senior Executives

27


Our M

anagement

Mr. Syed Mohammad Akram

SEVP & Branch ManagerKawran Bazar, Dhaka

Mr. Hara Krishna Roy

SEVP & Branch ManagerMotijheel, Dhaka

Mr. Swapan Kumar Saha

SEVP & Branch ManagerNarayangonj

Mr. Rezwan Karim

EVP & Branch ManagerLocal Offi ce, Dhaka

Mr. Md. Nurul Amin

SVP & Branch ManagerNew Market, Dhaka

Mr. S.M. Omar

SVP & Branch ManagerKhatungonj, Chittagong

Mr. Md. Harun Al Rashid

DSVP & Branch ManagerJessore

Mr. Musleh Uddin Chowdhury

VP & Branch ManagerUttara, Dhaka

Mr. Tayyeb Mohsin

VP & Branch ManagerBijoynagar, Dhaka

Ms. Meharoon Hyder

DVP & Branch ManagerAgrabad, Chittagong

Mr. Md. Bashirullah Sheikh

DVP & Branch ManagerBangshal, Dhaka

Mr. Kazi Abdul Bari

DVP & Branch ManagerRajshahi

Mr. Md. Shah Jahan

DVP & Branch ManagerMoulvi Bazar, Dhaka

Mr. Kamal Das

DVP & Branch ManagerFaridpur

Mr. Khan Md. Tofail

DVP & Branch ManagerMohakhali, Dhaka

Mr. Md. Soyef Ali

AVP & Branch ManagerThakurgaon

Mr. Swapan Kumar Nag Chowdhury

AVP & Branch ManagerKushtia

Mr. Tota Miah Sikder

AVP & Branch ManagerMadaripur

Mr. Reaz Ahmed Siddiqui

DGM (Mkt) & Branch ManagerJubilee Road, Chittagong

Mr. Md. Alamgir Hossain

Khandaker

DGM (Mkt) & Branch ManagerKhulna

Mr. Shafi qul Islam

AGM (Mkt) & Branch ManagerMogh Bazar, Dhaka

Mr. Md. Nurul Anwar

Branch ManagerCox’s Bazar

Mr. Md. Ashraful Alam Mamun

Branch ManagerPabna

Mr. Md. Shahidul Islam

Branch ManagerRangpur

Mr. Md. Nurul Haque

Branch ManagerComilla

Mr. Md. Shariful Islam

Branch ManagerSirajgonj

Mr. Md. Ibrahim

Branch ManagerNarshingdi

Mr. S.M. Mahfuzur Rahman

Branch ManagerSylhet

Mr. Md. Abdul Hai Shaikh

Branch ManagerBogra

Mr. Md. Halimuzzaman

Branch ManagerMymensingh

Mr. Md. Hafi zur Rahman

Branch ManagerDinajpur

Heads of Branches

28

Chairman’s Review

Under diffi cult circumstances

which prevailed in the country

last year, particularly during

the last 4 months when

economic activities almost

came to a standstill, the

Company was able to maintain

its momentum and achieve a

near 10% growth in business.

During the year 2013, Gross

Premium income attained was

Taka 1,638.9 million as against

Taka 1,490.8 million in 2012.

We record with gratitude the

contribution to this growth

made by all of our clients:

local corporate, in-house,

multinational and sundry

clients.

29


Chairman’s &

CEO’s

review, D


Dear Shareholders

I have great pleasure to welcome you all to the 26th Annual General Meeting (AGM) of Reliance Insurance Limited. The Company last year completed its 25 years of operation and today we are presenting the Accounts for the year 2013, of the 25th completed year with achievements befi tting the occasion. The Company’s bottom line results for 2013 are the best so far. We all rejoice on this occasion and thank all shareholders and clients for their continuous support to the Company.

Under diffi cult circumstances which prevailed in the country last year, particularly during the last 4 months when economic activities almost came to a standstill, the Company was able to maintain its momentum and achieve a near 10% growth in business. During the year 2013, Gross Premium income attained was Taka 1,638.9 million as against Taka 1,490.8 million in 2012. We record with gratitude the contribution to this growth made by all of our clients: local corporate, in-house, multinational and sundry clients.

You will be pleased to know that underwriting profi t achieved by the Company was Taka 228.9 million as against Taka 185.1 million in 2012, an increase of 23.66%. Investment income increased to Taka 230.3 million from Taka 163.96 million in 2012, achieving a most notable and praise-worthy increase of 40.4%

The net pre and after tax operating profi t rose to of Taka 406.1 million and Taka 297.9 million respectively, showing increases of 36.3% and 35.9% over the preceding year and are the highest so far.

The Company continues with its eff orts towards diversifying its business portfolios by increasing segments of medium and smaller clients and thus achieving a desirable spread of business which is fundamental to the business of Insurance. Notwithstanding set backs suff ered in 2012, the Branches as a whole have staged come back and registered a healthy growth of 15% in 2013. Likewise, business from local corporate clients increased by 21%.

This Company continues to strive to develop a well balanced business portfolio which is not overly dependent on any particular type of business or client. The Company is working

to introduce new products and services. Its newly introduced of Health insurance portfolio is expanding satisfactorily.

We have always emphasized on professionalism and the Company is in the hands of highly qualifi ed personnel, who have rendered dedicated services over the years and moved the Company forward to where it is now. Development of proper human resources is one of the priorities of the Company to maintain its ability to provide services of the highest quality to its clients and thus have edge over its competitors. In these days of information technology, the Company is equally attentive to this area and has introduced new IT facilities and expanded its network services to the fullest extent

Dear Shareholders, with its impressive track record, we are very much confi dent that the Company is poised to accept challenges of the future, capitalize on opportunities arising and maintain its momentum in growth in business and profi tability in the years to come. We are most obliged and appreciative of the continued support and patronage received from our clients and shareholders and would look forward to continuation of the same.

Based on the operating profi ts for 2013, we have proposed a dividend of 30%: in the form of 15% Bonus shares and 15% cash dividend. With the addition of proposed Bonus share, the Paid up capital of the company will be almost Taka 60 crore.

I would like to convey my sincere thanks to my fellow directors for their support and co-operation. The management team and the staff worked very hard to take the Company forward and in delivering excellent results, particularly on the 25th year of operation of the Company; I would like to record our deepest appreciation of their dedicated and unfl inching services and convey our thanks to all of them.

Shahnaz Rahman

Chairman

30

Managing Director and CEO’s Round Up

Reliance completed yet

another successful year of

operation. The year 2013

marked 25th year of the

Company’s operation and

we closed the year with

impressive fi nancial results –

contributed by underwriting

and investment incomes, a

befi tting tribute to our 25th

Anniversary.

31


Chairman’s &

CEO’s

review, D


According to Swiss Re, global non-life premium moderately grew by 2.6% in 2012, the main thrust came from emerging markets which grew by an average of 8.6% whereas developed markets grew by an average of 1.5%.

Underwriting results for non-life insurance world wide improved in 2012. Natural catastrophic losses accounted for US$186 billion in 2012, almost half of the level of 2011. Overall profi tability improved in 2012, with average after

World Non-life Insurance 2012: US$1,991,649 mn

World Insurance Premium grew to US$4,612.5 billion in 2012: Life US$2,620.8 billion and Non-life US$1,991.6 billion, registering growths of 0.4% and 1.9% respectively. The growth has been lower than of previous year mainly because of slower expansion in developed countries. The geographical split of World Non-life Premium Insurance penetration rates are as follows:

World Insurance Premium 2012

ContinentUS$ Million Insurance

Penetration rate %Life Non-life Total

North America

619,538 773,878 1,393,416 8.03

Latin America

71,834 96,903 168,737 3.0

Europe 876,444 658,732 1,535,176 6.7Asia 957,712 388,511 1,346,223 5.7Africa 49,888 22,002 71,890 3.65Oceania 45,448 51,623 97,071 5.6Total 2,620,864 1,991,649 4,612,513 6.5World Growth

0.40% 1.90% 1.00%

tax return increasing to 6% from 4% in the previous year. Underwriting results improved but were still negative with combined ratio at 102% compared to 105% in the previous year. 2012. However global reinsurers maintained their strong capitalization. Insurance outlook for emerging markets in 2013 remains challenging in view of uncertain global economic landscape.

Following large catastrophic losses suff ered in 2011 Reinsurers introduced higher rates and terms in general. In particular, event limit under all property proportional treaties have been introduced, thereby limiting the reinsurers liability any one catastrophic event. However keeping in view of cyclical nature of reinsurance business and increasing supply of capital has led to capacity increases and signs of softening of reinsurance markets are already there.

The non-life insurance market of Bangladesh with a gross premium income of only Taka 21,475 million in 2012 registered a growth of 11.6%, the penetration rate (Insurance premium as % of GDP) has been stagnating at around 0.20% for many years 2002 to 2012, whereas during the same period the life sector has improved from 0.37% to 0.71%. Low

penetration rate in non-life insurance sector points to serious shortcomings in the Industry and its inability to achieve horizontal growth.

Although the non-life insurance industry achieved a growth of 11.6% in 2012, due to political crisis and disturbances in 2013 which brought the economy almost to a standstill, the insurance industry will register a slow growth.

32

The hitherto untapped segments of population and insurable interests need to be brought under insurance coverage, which can only lead to expansion of the Insurance industry in real terms and bring the benefi ts of Insurance to those who need it most. For that, the fi rst and foremost is to remove the negative perception of the public at large of the insurance industry as a whole. This is not an individual issue and the industry must tackle this collectively. Conducting business in the most professional way, improving services, introducing new products, using modern marketing tools and eff ective use of IT are some of the key requirements. From the clients’ perspective, pricing is one of the most important consideration in deciding purchase of Insurance.

According to an international survey, Pricing/Premium rates constitute a factor of 58% among all aspects considered by a client while purchasing insurance. Bangladesh still follows a system whereby premium rates by and large are prescribed by mandatory tariff s. However, the system of tariff does not mean that Premium rates should be pegged at levels not commensurate with the loss experience. Therefore the tariff rates require to be periodically reviewed and scientifi cally adjusted to give a fair deal to the clients.

Reliance completed yet another successful year of operation. The year 2013 marked 25th year of the Company’s operation and we closed the year with impressive fi nancial results – contributed by underwriting and investment incomes, a befi tting tribute to our 25th Anniversary. Looking forward, Reliance will continue to conduct its aff airs in a true spirit of professionalism with utmost importance to clients’ services. We are committed to take the Company to a glorious future and accomplish its avowed objective of being the Insurer of fi rst choice in Bangladesh.

Akhtar Ahmed


34

Dear Shareholders, Ladies and Gentlemen,We have great pleasure to welcome you all to the Twenty Sixth Annual General Meeting of the Company and also to place before you the Directors’ Report along with the Audited Accounts and fi nancial statements and the Auditors’ Report for the year ended December 31, 2013 for your review and approval. In the year 2013 Reliance completed 25 years of its operation and I am proud to report that this was yet another successful year of operation – as a matter of fact the best year so far in terms of profi tability of the Company.

The Global Economy and Business EnvironmentAccording to IMF, Global economic activity strengthened during the second half of 2013 and is expected to improve further in 2014–15, largely on account of recovery in the advanced economies. Global growth is now projected to be slightly higher in 2014, at around 3.7 percent, rising to 3.9 percent in 2015. But downward revisions to growth forecasts in some economies highlight continued fragilities, and downside risks remain. In many emerging market and developing economies, stronger external demand from advanced economies will lift growth, although domestic weaknesses remain a concern.

Growth in the United States is expected to be 2.8 percent in 2014, up from 1.9 percent in 2013. The euro area is fast recovering from recession; growth is projected to strengthen to 1 percent in 2014 and 1.4 percent in 2015. In Japan, annual growth is expected to remain broadly unchanged at 1.7 percent in 2014, before moderating to 1 percent in 2015.

Overall, growth in emerging market and developing economies is expected to increase to 5.1 percent in 2014 and to 5.4 percent in 2015. Growth in China rebounded strongly in the second half of 2013, due largely to acceleration in investment. Many other emerging market and developing economies

have started to benefi t from stronger external demand in advanced economies and China.

Meanwhile, the World Bank has raised its global growth forecasts as the easing of austerity policies in advanced economies supports their recovery, boosting prospects for developing markets’ exports. It sees the world economy expanding 3.2 per cent this year. The forecast for the richest nations was raised to 2.2 per cent from 2 per cent. Part of the increase refl ects improvement in the 18-country euro area, while the US is forecast to perform better than its developed peers, growing twice as fast as Japan. The bank lowered its forecast for China this year to 7.7 per cent from 8 per cent. The 2014 forecast for developing markets was cut to 5.3 percent from 5.6 percent.

State of The Bangladesh EconomyAccording to Bangladesh Bank, Bangladesh economy achieved GDP growth of 6.0 percent in Financial Year 2013, Substantial remittance infl ows and export activities helped to achieve this solid economic growth rate. Infl ation decreased to 6.8 percent. Other than European Union and US, export diversifi cation to the newly discovered markets improved earnings from exports to record a satisfactory growth of 10.7 percent in Financial Year 2013 as against 6.2 percent in 2012. The growth of imports decreased from 2.4 percent in 2012 to 0.8 percent in 2013 due mainly to major reduction in imports of food grain, some consumer goods and capital machinery. A lower trade defi cit and higher growth of workers’ remittances led the current account balance to a signifi cant surplus of USD 2,525 million in fi nancial year 2013. The overall balance also showed a huge surplus of USD 5,128 million in 2013 with substantial contributions from current account balance, capital account and fi nancial account.

Growth in agriculture sector declined from 3.1 percent in Financial Year 2012 to 2.2 percent in 2013. Industry sector grew slightly more at 9.0 percent in 2013 compared to 8.9 percent in 2012. Services sector growth decreased to

Directors’ Report to the Shareholders

for the Year Ended December 31, 2013

35


Chairman’s &

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5.7 percent in 2013 from 6.0 percent in 2012 aff ected mainly by lower growth of wholesale and retail trade sub-sector. Gross fi xed investment increased slightly to 26.8 percent of GDP in 2013 from 26.5 percent in 2012 due to increasing growth of public investment.

The exports earnings increased to USD 26,566 million from USD 23,989 million and import payments increased marginally to USD 33,576 million from USD 33,309 million in 2013 over 2012. Trade defi cit declined to USD 7,010 million in 2013 from USD 9,320 million in 2012. Remittance infl ows increased to USD 14,338 million in 2013 from USD 12,734 million in 2012. As a result, current account balance moved to a surplus of USD 2,525 million as compared to a defi cit of USD 447 million in 2012. The overall balance of payments registered a huge surplus of USD 5,128 million in 2013 compared to a surplus of USD 494 million in 2012.

Bangladesh Bank’s projections suggest that the GDP growth outlook for Financial Year 2014 is unlikely to deviate signifi cantly from the last 10 years’ average of 6.2 percent.

However, according to Asian Development Bank (ADB) in Bangladesh, the gross domestic product (GDP) in Fiscal Year 2013 grew by 6.0%, Export growth accelerated briskly, but imports were fl at, such that net exports markedly contributed to growth. Agriculture growth slowed to 2.2% because weather was unfavorable and rice prices fell. Industry grew by 9.0%, with strong expansion in construction and small-scale manufacturing. Services growth slowed slightly to 5.7%, refl ecting stagnant imports and politically inspired strikes that disrupted trade. ADB forecasts GDP growth in FY2014 at 5.8%.

Insurance Industry Outlook and Possible Future Developments Global Perspective

World insurance premium stood at US$ 4,613 billion in 2012, out of which US$2,621 billion is attributable to life insurance and US$1,992 billion to non-life Insurance. Global insurance

industry returned to positive overall growth of 2.4% in 2012: 2.3% for life and 2.6% for non-life. In 2012 total premiums of advanced countries increased by 1.7% and their global share decreased to 84%. Total insurance premiums in emerging markets grew by 6.8%. According to Swiss Re, over the last fi fty years, the share of world premiums has vigorously increased in Asia. The share of Europe and the Anglo-Saxon countries fell from 93% in 1962 of total global premium volume to 56% in 2012. Over the next ten years, this shift will continue and by 2023, China is expected to become the second largest insurance market after the US.

Bangladesh Perspective

The growth of Non-life insurance companies’ premium income in 2012 was 11.6 percent. The 43 private insurers and one Government Corporation in the general insurance sector earned TK 21,475 million in 2012.

Insurance market in Bangladesh remains extremely competitive due to existence and operation of a large number of companies, un-commensurate with the size of the market. In addition to the existing 43 non-life insurance companies, the Government in 2013 issued 2 new non-life insurance licenses. With 45 non-life Insurance companies operating in a market of the size of US$275 million in Premium income makes us a very crowded market when compared with our neighboring countries: India with a non-life Premium of US15,000 million has 25 non-life companies, Sri Lanka with a market Premium US$385 million has 17 companies and Pakistan with a market Premium of US$615 million has 29 non-life companies. Consequently, the situation in Bangladesh non-life market has worsened due to intense and cut throat competition among the existing players, leading to many unhealthy practices.

The Regulatory reforms which started with the introduction of the Insurance Act 2010 is yet to be completed as the important Regulations under the Act have not yet

36

been put in place. The absence of important Regulations has created a vacuum and we seem to be still governed by the old Insurance Act 1938 to a large extent. Bangladesh is still one of the very few remaining Tariff market, it is being obligatory for insurance companies to charge premium rates as determined by the Regulatory Authority. However, the tariff rates have not been reviewed for a long time in the light of updated loss experience obtaining over the years and as such many clients do feel that they are being overcharged. This has further negatively impacted on the public perception of the insurance industry at large thereby hindering its growth. Bangladesh non life insurance industry is already one of the smallest in the world and insurance penetration (total insurance premium as a percentage of GDP) for non-life insurance sector has remained stagnant at 0.20%.

The future progress of Bangladesh Insurance industry predominantly depends on how the consumers’ perception of insurance as an useful and effi cient vehicle of risk transfer can be bolstered. This can be achieved through sustained eff orts of the industry as well as Regulators towards restoring public confi dence by providing effi cient services, honoring insurance policy obligations, introducing new products and by rationalizing the pricing mechanism.

Product Wise Performance of The CompanyPictorial presentation on product-wise performance of the Company along with comparable information for earlier years are presented graphically.

Profi tability of The Company Reliance has performed with consistent profi table results over the years, as may be observed from the statistical fi gures. It’s underwriting and investment incomes have always complemented each other and produced one of the most attractive returns in the non-life insurance industry. Considering that the business of insurance is essentially a risk taking business and hence vulnerable to fl uctuations, Reliance follows a conservative policy – both in matter of insurance

underwriting and investments to safeguard the interests of the Company in the long run.

Risks and Concerns As an entity engaged exclusively in the business of Insurance, Reliance obviously has to face Risks of diverse nature, a good number of which are peculiar to the Insurance industry. It also has to counter concerns arising out of adverse developments in the industry and economic arena. These factors can be summarized as follows: strategic risk, underwriting risks, reinsurance risks, reserving risks, investment risks, liquidity risks and socio-politico-economic risks. The Company monitors such risks from time to time, keeping abreast of relevant developments and takes corrective and/or preventive measures as necessary to protect its interests to the fullest extent.

Related Party TransactionsReliance insurance, in normal course of business, carried out a number of transactions with other entities that fall within the defi nition of related party contained in Bangladesh Accounting Standard 24: Related Party Disclosures. All transactions involving related parties arising in normal course of business are conducted on an arm’s length basis at commercial rates on the same terms and conditions as applicable to the third parties. Details of transactions with related parties and balances with them as at December 31, 2013 are shown in notes to the fi nancial statements.

Remuneration Paid to Directors Including Independent DirectorsDuring the year under review company paid total Tk. 0.505 million to the directors including independent directors as remuneration. Details of the directors’ attendance record are shown in Annexure-III.

Information TechnologyReliance has been able to successfully build up its own IT Division, manned by highly experienced and trained professionals, working on maintaining and developing the company’s IT infrastructure. The IT professionals are constantly innovating and

37


Chairman’s &

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producing in-house programs to meet the needs of the company’s ever increasing and diversifi ed products and services industry. IT division has successfully implemented a Wide Area Network (WAN) to connect the entire branch offi ces situated all over the country on real time basis, thereby providing seamless connectivity and prompt customer services. We have also acquired a new high confi gured server for running our oracle 10g application server to build-up three tier applications and hardware architecture.

We have upgraded our oracle Front End Application from 6i to 10g web version, together with migration into three tier systems (like client >> application server >> database server). As a result our CIIS software can be accessed from any where through any web browser as well, resulting in reduction of connectivity cost signifi cantly.

The Company aims at selling its products, particularly of personal lines business, through internet in the near future when the regulatory restrains are done away with.

Human Capital ManagementReliance has always emphasized on professionalism and development of appropriate human resource management policies and practices to enhance the quality of its employees, and to ensure their optimum contribution towards the achievement of corporate goals. At Reliance, we believe that our Human Resources (HR) give the organization a signifi cant competitive edge in terms of knowledge and experience. The Company has continued its policy of recruiting the best people and implementing programs to develop and retain high quality human resources. .In line with this Policy, need based internal and external training at both home and abroad is regularly and systematically arranged. The Company also ensures competitive compensation and rewards and employee’s health and safety to ensure their retention and provide job satisfaction.

Corporate GovernanceAwareness of Corporate Governance has grown rapidly worldwide in recent years due to increased legislative and regulatory

activities as well as evolving best practice recommendations.

As a leading insurance company in Bangladesh led by professional people Reliance Insurance Limited is committed in adopting the highest governance standard and adjusting them as required in protecting the interest of shareholders and policyholders.

Good corporate governance system is vital for effi cient and eff ective business operation to achieve the set goal. In line with the best practice, the corporate governance systems and practices in RIL are designed to ensure adequate internal control in operational process, transparency and accountability. The Board of Directors always put emphasis on and agreed to the point that the company conducts itself as a good corporate entity and comply with corporate behavior and guidelines as well as adherence to rules and regulations etc. It is also ensured that duties and responsibilities are appropriately segregated between the Board and management to provide suffi cient check and balance and fl exibility for smooth business operations. The Board provides leadership and direction to the management, approves strategic and major policy decisions and oversees management to attain predetermined goals and objectives of the company.

Corporate Social ResponsibilityThe Company has continued its endeavours to deliver economic and social benefi ts to the community in discharge of its CSR and has extended fi nancial assistance to Management and Resources Development Initiative (MRDI), Bangladesh Thalassemia Hospital (BTH), Disabled Child Foundation (DCF), TMSS Nursing College (TNC), Society for Education and Inclusion of the Disabled (SEID) Trust: and Anarpur Akramun Nessa Private primary school.

Credit RatingCredit Rating Information and Services Limited (CRISL) has reaffi rmed the Claim Paying Ability (CPA) Rating of the Company “AA+” (Pronounced as Double A Plus) based on the fi nancials up to December

38

31, 2012 and other relevant qualitative and quantitative information up to the date of reporting on August 1, 2013. The Reaffi rmation refl ects RIL’s good underwriting and fi nancial performance, good market share and franchise value, good solvency, good IT infrastructure, good reinsurance arrangement with SBC and foreign reinsurers, good business exposure from multinational clients. Details of the rating as follows:

Claim Paying AbilityCPA Rating AA+Outlook StableDate of Reporting August 1, 2013

Operating Result of The Company During the year 2013 Reliance

attained a Gross Premium income of Taka 1,638.9 million as against Taka 1,490.8 million in 2012 – an increase of 9.93%, Net Premium income achieved was Taka 704.2 million as against Taka 641.1 million in 2012 – an increase of 9.98%. The prevailing political situation and slowing down of economic activities in the country in the end half of 2013 hindered business development.

Underwriting profi t achieved was Taka 228.88 million as against Taka 185.09 million in 2012, an increase of 23.66%

Investment income grew impressively to Taka 230.26 million as against Taka 163.96 million in 2011, an increase of 40.45%

Net pre tax profi t attained is Taka 406.1 million as against Taka 297.92 million in 2012, an increase of 36.3%

After tax Profi t is Taka 277.1 million in 2013 as against Taka 203.9 million in 2012, an increase of 35.9%

Some important statistics relating to the performance of the company in the year 2013 are shown at Annexure-I.

Financial Results & AppropriationWe are pleased to report that due to eff ective underwriting, marketing, appropriate

portfolio issue, technically sound reinsurance arrangements and eff ective monitoring, the company has been able to achieve favourable fi nancial results in 2013. Taking into consideration of the company’s fi nancial needs and the shareholders’ short as well as long term interests the Board of Directors recommend the appropriation of after-tax profi t of Tk. 27,70,60,100.00 as follows:

TakaReserve for Exceptional Losses

70,422,824

Dividend @ 15% Stock and 15% cash

155,849,265

Retained Earnings 50,788,011

Corporate and Financial Reporting Framework The directors, in accordance with BSEC Notifi cation No. SEC/ CMMRCD/ 2006 – 158 /134/Admin/ 44 dated August 7, 2012 confi rm compliance with the fi nancial reporting frame work for the following

We report that:

i) The fi nancial statements prepared by the management of the company present fairly its state of aff airs, the result of its operations, cash fl ows and changes in equity.

ii) Proper books of account of the company have been maintained.

iii) Appropriate accounting policies have been consistently applied in preparation of the fi nancial statements and that the accounting estimates are based on reasonable and prudent judgment.

iv) International Accounting Standards (IAS)/ Bangladesh Accounting Standards (BAS), International Financial Reporting Standards (IFRS)/ Bangladesh Financial Reporting Standards (BFRS), as applicable in Bangladesh, have been followed in preparation of the fi nancial statements and any departure there-from has been adequately disclosed.

v) The system of internal control is sound in design and has been eff ectively implemented and monitored.

39


Chairman’s &

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vi) There are no signifi cant doubts upon the company’s ability to continue as a going concern.

vii) There are no signifi cant deviations from last year in operating result of the company.

viii) The key operating and fi nancial data of preceding fi ve years have been provided in annexure –II.

ix) The number of Board meetings held during the year 2013 and attendance by each director are shown in annexure-III.

x) As on December 31, 2013, shareholdings pattern of the Company are shown in annexure-IV.

xi) A brief resume of the Directors along with other necessary particulars are show in annexure –V.

Status of Compliance with the conditions imposed by Bangladesh Securities and Exchange omission is enclosed in annexure –VI.

Directors

In terms of the Article 114 of the Articles of Association, the under-noted Directors from Group A shareholders retire from offi ce, but being eligible they off er themselves for re-election.

1. Mrs. Zakia Rouf Chowdhury

2. Mr. Arshad Waliur Rahman

3. Mrs. Farah Huq

In accordance with the same provisions, two directors from Group B shareholders retire from offi ce and as required by Insurance Rules, 1958 election of Directors from public shareholders will be held in the said Annual General Meeting. The necessary notice dated January 29, 2014 for election of Directors from public shareholders was published in two national dailies, namely the Daily Star and the Daily Sokaler Khobor on 29th January 2014.

Auditors

The auditors of the Company, Malek Siddiqui Wali, Chartered Accountants, have consented to continue in offi ce and being eligible,

automatically qualify for re-appointment under section 210(3) of the Companies Act, 1994. A resolution will be placed at the AGM for their re-appointment.

Acknowledgement

On behalf of the Board of Directors, I would like to express my heartfelt gratitude to all of our valued clients, shareholders and well wishers at home and abroad for their wholehearted co-operation and active support in discharging the responsibilities reposed on me and the Board during the year under review.

I also thank Insurance Development & Regulatory Authority (IDRA), Registrar of Joint Stock Companies and fi rms, Bangladesh Securities and Exchange Commission, Government and Non-Government Organizations, Sadharan Bima Corporation, Dhaka and Chittagong Stock Exchange, Bangladesh Insurance Association and all the scheduled Banks and Leasing Companies for their sincere support and whole hearted co-operation.

The Board also acknowledges with thanks, the contribution made by the honorable Directors by guiding and giving proper directions from time to time which has made RIL a hallmark in general insurance industry of Bangladesh.

The Directors also take the opportunity to express their sincere appreciation for the contributions made by the executives and members of the staff for their praiseworthy eff orts in increasing growth and continued progress of the company as well as their eff orts towards putting Reliance among the top insurance companies in Bangladesh. Without their dedicated and loyal services the company could not have achieved this result.

Thank you all.

For and on behalf of the

Board of Directors

Shahnaz RahmanChairman

40

Annexure - i

(BDT mn)

Particulars FireMarine

Cargo

Marine

HullMotor Misc. 2013 2012

Gross Direct Premium 842.47 395.08 36.73 167.09 192.17 1,633.54 1,486.26

Gross R/I Premium 1.23 - 4.12 - - 5.35 4.56

Total Gross Premium 843.70 395.08 40.85 167.09 192.17 1,638.89 1,490.82

Reinsurance Premium ceded 648.78 112.43 41.39 2.88 129.18 934.66 849.68

Net Premium 194.92 282.65 (0.54) 164.21 62.99 704.23 641.13

Net Premium Reserve retained 0.50 (11.29) 5.13 (7.86) (9.07) (22.59) 36.13

Net Earned Premium 195.42 271.36 4.60 156.35 53.92 681.64 677.26

Commission Paid 121.93 57.03 4.12 21.53 25.11 229.72 285.76

Net R/I Commission Earned 112.43 36.92 12.19 0.30 17.16 178.99 158.45

Management Expenses (Revenue A/C) 119.70 55.93 5.20 24.36 27.63 232.83 221.89

Management Expenses (P & L A/C) - - - - - 52.98 51.13

Gross Incurred Claims 457.01 46.73 4.85 50.46 51.04 610.09 353.02

Net Incurred Claims 32.77 40.05 0.37 50.46 45.55 169.20 142.96

U/W Result 33.44 155.27 7.09 60.30 (27.22) 228.88 185.10

Investment Income (Before Tax) 230.26 163.96

Net Profit before tax 406.17 297.92

Return on Equity 18.71 16.03

Shareholder's fund 3,371.00 3,195.76

Summary of Accounts 2013

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Annexure -ii

Particulars Terms 2013 2012 2011 2010 2009

Financial Position

Total assets BDT mn 4,796.38 4,410.74 4,530.84 4,605.93 1,880.29

Investments BDT mn 1,301.27 1,254.70 1,539.70 2,673.34 190.52

Current assets BDT mn 2,110.21 1,763.60 1,587.70 1,392.81 1,337.62

Net current assets BDT mn 739.44 597.79 529.11 335.52 438.60

Cash & cash equivalents BDT mn 1,559.30 1,228.74 864.80 791.88 759.87

Investment & other income BDT mn 230.26 163.95 159.91 153.68 114.94

Current liabilities BDT mn 1,370.77 1,165.81 1,058.59 1,057.29 899.02

Total reserve BDT mn 3,133.94 2,983.35 3,312.83 3,457.53 891.84

Operational Result

Gross premium BDT mn 1,638.89 1,490.82 1,422.06 1,241.00 1,041.13

Net premium BDT mn 704.23 641.13 731.40 618.07 430.25

Net claims BDT mn 169.20 142.96 152.04 137.68 105.09

Underwriting profi t BDT mn 228.88 185.10 194.25 161.00 56.78

Net profi t before tax BDT mn 406.17 297.92 304.97 287.23 146.30

Net profi t after tax BDT mn 277.06 203.93 220.34 217.64 119.75

Cash fl ow from operating activities BDT mn 261.72 401.53 67.57 109.28 226.82

Net operating cash fl ow per share BDT 5.04 8.50 1.65 3.59 9.69

Financial Ratio

Dividend in stock % - 10 15 35 30

Dividend in cash % - 15 15 0 0

Earnings per share BDT 5.33 4.32 5.37 7.15 5.12

Return on shareholders' fund % 18.71 16.03 19.50 23.93 17.31

Return on capital employed % 23.04 19.45 21.39 24.80 16.91

Return on assets % 5.78 4.62 4.86 4.73 6.37

Price earnings ratio Ratio 14.95 21.95 19.03 24.29 26.17

Current ratio Ratio 1.54:1 1.51 : 1 1.5 : 1 1.32 : 1 1.49 : 1

Debt equity ratio Ratio - - - 1:.03 -

Gross profi t ratio Ratio 57.68 46.47 41.70 46.47 34.00

Dividend payout ratio Ratio - 57.90 55.91 48.92 58.62

Dividend yield Ratio - 2.64 2.94 2.01 2.24

Equity Statistics

Paid-up capital BDT mn 519.50 472.27 410.67 304.20 234.00

Shareholders' equity BDT mn 3,371.00 3,195.76 3,427.52 3,513.07 952.44

Market value per share BDT 79.70 94.80 102.10 173.80 133.93

Net assets value per share BDT 64.89 67.66 83.46 115.49 40.70

Key Operating and Financial Highlights

42

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43


Chairman’s &

CEO’s

review, D


Shareholding by Companies, Directors and their Spouse & Children

Name of Shareholders Represented by No. of Shares Held Percentage

Rangs Limited Ms. Zakia Rouf Chowdhury 31,87,142 6.13

General Produce International Ltd. Mr. Md. Khalilur Rahman Choudhury 16,13,216 3.10

FinAccord Trading Ltd. Ms. Farah Huq 16,13,216 3.10

Meenhar Fisheries Ltd. Mr. Habibullah Khan 31,87,395 6.14

Transfin Trading Ltd. Mr. Arshad Waliur Rahman 31,87,078 6.13

Arlinks Limited Mr. Imran Faiz Rahman 31,87,355 6.14

Trinco Limited Ms. Shahnaz Rahman 31,87,169 6.14

Mr. Shamsur Rahman Self 20,31,175 3.91

Kumudini Welfare Trust of Bengal (BD) Ltd. Mr. Rajiv Prasad Shaha 27,93,665 5.38

Prantik Engineering Co. Ltd. Sponsor Shareholder 8,48,169 1.64

Rangs Workshop Ltd. Mr. Amanullah Chowdhury 18,41,497 3.54

Deep Sea Fishers Ltd. Ms. Romana Rouf Chowdhury 32,93,338 6.33

Transcom Limited Mr. Atiqur Rahman 12,32,476 2.37

Kumudini Handicraft Mr. Iftikhar Arshad Husain 9,02,601 1.73

Meenhar Sea Foods Ltd. Ms. Yasmeen Khan 4,50,225 0.87

Mr. Atiqur Rahman Self 36,710 0.07

Ms. Nafisa Rahman SiddiquiDaughter of Mr. Shamsur Rahman Self 5,69,603 1.09

Ms. Fahreen RahmanDaughter of Mr. Shamsur Rahman

Self 5,69,603 1.09

Independent Director Nil

Managing Director & CEO Nil

B) Shareholders by others

Company Secretary Nil

CFO Nil

Head of Internal Audit Nil

Parent/Subsidiary/Associate and other related parties Nil

Shareholding of top fi ve executives Nil

Shareholders holding ten percent or more Nil

Pattern of Shareholding AS ON DECEMBER 31, 2013 Annexure iv

44

Brief Profi le of the Directors

Ms. Shahnaz Rahman

Ms. Shahnaz Rahman is a Director of Transcom Limited, Transcom Beverages Limited (sole franchisee of PEPSI), Bangladesh Lamps Limited (licensed manufacturers of PHILIPS lighting products) Transcom Foods Limited (sole franchisee of Pizza Hut & KFC), Transcom Electronics Limited, Transcom Cables Limited (manufacturers of domestic and industrial cables), Transcom Mobile Limited, Eskayef Bangladesh Limited, Transcom Distribution Co. Limited, Bangaldesh electrical Industries Limited, Transcom Consumer Products Limited, Trinco Limited, Transfi n Trading Limited, Mediastar Limited (publishers of Prothom Alo), Tea Holdings Limited, Mediaworld Limited (publishers of The Daily Star).

Ms. Rahman is a Director and current Chairman of Reliance Insurance Limited.

Mr. Habibullah Khan

Mr. Habibullah Khan is the Managing Director of Meenhar Group of Companies. Mr. Khan has been recognized as CIP by the Government of Bangladesh for many years for his outstanding contribution towards industrialization of the country .Under his dynamic leadership, Meenhar Sea Foods Limited and Meenhar Fisheries Limited was awarded National Export Trophy Gold by the Government of Bangladesh for its contribution in export sector of the country for several times. He was the founder Vice President and Former President, Chittagong Stock Exchange Ltd., former President of Bangladesh Frozen Food Exporters Association. He is also a Member of the Governing Council of Independent University, Bangladesh, Vice President, Bhatiary Golf and Country Club, Chittagong and the founder of Habibullah Khan High School, Feni. Mr. Khan is a Sponsor Director and Vice Chairman of Reliance Insurance Limited.

Mr. Shamsur Rahman

Mr. Shamsur Rahman is the Director of Bangladesh Lamps Limited (licensed manufacturers of PHILIPS lighting products), Transcom Electronics Limited, Mediastar Limited (publishers of Prothom Alo), Mediaworld Limited (publishers of The Daily Star), ABC Radio (FM Radio Station), Marina Tea Co. Limited, Monipur Tea Co. Limited and M. Rahman Tea Co. Limited.

Mr. Rahman is a Sponsor Director and immediate past Chairman of Reliance Insurance Limited.

Annexure v

45


Chairman’s &

CEO’s

review, D


Ms. Zakia Rouf Chowdhury

Ms. Zakia Rouf Chowdhury obtained her Bachelor of Arts degree from University of Dhaka. She is the Director of Rangs Limited, Rangs Motors Limited, Rangs Properties Limited, Rangs Industries Limited, Rangs Pharmaceuticals Limited, Rangs Workshop Limited, Rancon Motors Limited, Ranks ITT Limited, Ranks Telecom Limited, Ranks Interior Limited, Ranks Real Estate Limited, Shield Security Services Limited, Ranks Steels Limited, Ranks Agro Biotech Limited, Sash Limited, Zest Polymer Limited, Metro Foils Limited, Sea Resources Group. Ms. Chowdhury is also a member of Board of Director of Reliance Insurance Limited.

Mr. Md. Khalilur Rahman

Choudhury

Mr. Md. Khalilur Rahman Choudhury obtained B.Com (Hons.) and M.Com. degree from Dhaka University in 1958 and 1959 respectively. He received training in USA and UK in the fi eld of “Securities Regulations and Stock Exchanges” under UNDP fellowship. He is a retired Joint Secretary of the Government of the Peoples’ Republic of Bangladesh. He served as Joint Secretary in the Ministry of Finance and Ministry of Commerce. While in government service, he was a member of the Board of Directors of several State owned organizations including Rupali Bank and Jibon Bima Corporation. He was also a Director of the Board of Karmasangsthan Bank. Mr. Khalilur Rahman has wide experiences in the fi eld of export and import as he was posted to Trading Corporation of Bangladesh and Bangladesh Jute Mills Corporation on deputation. He is associated with various social activities of his locality.

Ms. Farah Huq

Ms. Farah Huq is a member of the Board of Directors of Reliance Insurance Limited.

She is a Research Associate at Dr. Kamal Hossain & Associates, and a Consultant (Communications and Advocacy) at Bangladesh Legal Aid and Services Trust (BLAST).

She obtained her B.A. (Hons) in English Literature from Queen Mary, University of London (2009). In 2011, she completed her LL.B (Hons) and the Bar Professional Training Course from the University of Law (formerly known as The College of Law), London. She was Called to the Bar at the Honourable Society of Lincolns Inn in October 2011.

46

Mr. Arshad Waliur Rahman

Mr. Arshad Waliur Rahman is a Director of Transcom Limited, Transcom Beverages Limited (sole franchisee of PEPSI), Transcom Foods Limited (sole franchisee of Pizza Hut & KFC), Transcom Electronics Limited, Bangladesh Lamps Limited (licensed manufacturers of PHILIPS lighting products) Transcom Cables Limited (manufacturers of domestic and industrial cables), Transcom Mobile Limited (distributor for SAMSUNG mobile handsets), Eskayef Bangladesh Limited (leading pharmaceutical Manufacturers – formerly SmithKline & French), Transcom Distribution Co. Limited ( distributor of pharmaceutical – SK & F, NOVO NORDISK, SERVIER, ALLERGAN and consumer brands – Frito Lay, Heinz, Wrigley, Mars, Energizer, Schick, L’Oreál, Garnier, Ferrero, ConAgra Foods, Hemas), Transcom Consumer Products Limited, Trinco Limited, Transfi n Trading Limited, Mediastar Limited (publishers of PROTHOMALO),

Mr. Imran Faiz Rahman

Mr. Imran Faiz Rahman is a member of the Board of Directors of Reliance Insurance Limited. He has completed Bachelor of Business Administration (BBA) from a reputed University of USA. He is the Chairman of Imaan Cold Storage Limited and Managing Director of Arlinks Limited and Imaan Cold Storage Limited. He is also the Director of R. R. Cold Storage Limited, Aris Holdings Limited, R R Estates Limited.

Mr. Rajiv Prasad Shaha

Mr. Rajiv Prasad Shaha obtained his Graduation from the University of Dhaka. He has been the Managing Director of Kumudini Welfare Trust of Bengal (BD) Limited and Kumudini Pharma Limited since January 2000. He is a Sponsor Director of Reliance Insurance Limited and also a member of Micro Industries Development Assistance and Service (MIDAS). He was the Director of Kumudini Welfare Trust of Bengal (BD) Limited and Kumudini Pharma Limited since 1987 till December 1999. He is a widely travelled person.

Mr. Shaha is the grandson of the great philanthropist Rai Bahadur Ranada Prashad Shaha (R. P. Shaha), the founder of Kumudini welfare Trust of Bengal (BD) Limited.

47


Chairman’s &

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review, D


Mr. Amanullah Chowdhury

Mr. Amanullah Chowdhury is the Vice Chairman of Rangs Limited. He is also the Director of Rangs Pharmaceuticals Limited and the Managing Director of Sea Resources Limited. He was the President of Superpharmacal Laboratories & Vice President of Superpharm Corporation (a pharmaceutical manufacturer in New York from 1979 to 1981). Mr. Chowdhury was District Sales Manager, Calibiochem Behring Corporation, USA from 1977 to 1979. He was a Senior Technical Representative of Behring Corporation-a subsidiary of American Hoechst Corporation from 1974 to 1977. Mr. Amanullah Chowdhury was Marketing Manager of Hoechst (Bangladesh) Limited, Chittagong. He obtained his Bachelor of Pharmacy (Hons.) degree.

Ms. Romana Rouf

Chowdhury

Ms. Romana Rouf Chowdhury is a Director of Sea Resources Group of Companies consisting of three export oriented Deep sea Fishing Companies and four other Companies. She is fi nal year student of English Literature (Hons.) of BRAC University.

Ms. Yasmeen Khan

Ms. Yasmeen Khan obtained her Master of Arts degree from University of Dhaka. She is the Chairperson of Meenhar Group of Companies. She has been recognized as CIP by the Government of Bangladesh for many years for her outstanding contribution towards economic development of the country. Ms. Khan is a former Area Director & President of Zonta Club of Chittagong; and also a former Director of Chittagong Women Chamber of Commerce & Industry. She is involved with many social organizations and activities. Ms. Khan is a Director and former Chairman of Reliance Insurance Limited.

48

Mr. Atiqur Rahman

Mr. Atiqur Rahman is a member of the Board of Directors of Reliance Insurance Limited. He is the Group Finance Director of Transcom Group of Companies and also a Director of Transcom Electronics Limited, Bangladesh Lamps Limited (licensed manufacturers of PHILIPS, Transcraft Limited (modern printing Press), Transfin Trading Limited, Trinco Limited, Transcom Cables Limited, Transcom Mobile Limited, Eskayef Bangladesh Limited (leading pharmaceutical manufacturers), Transcom Beverages Limited (PEPSI), Transcom Foods Limited (Pizza Hut & KFC),Trascom Limited, Transcom Distribution Co. Ltd., Transcom Consumers Products Limited, Mediastar Limited (publishers of Prothom Alo), ABC Radio (FM Radio Station), M. Rahman Tea Co. Limited, Monipur Tea Co. Limited, Marina Tea Co. Limited (Tea Plantations). He is the Chairman of Heritage Agro Firms Limited.

Mr. Anis-uz-Zaman Khan

Mr. Anis-uz-Zaman Khan was appointed to the Board of Directors of Reliance Insurance Limited on 9th September 2012 as independent Director of the Company. He is also Chairman of the Audit Committee of Reliance Insurance Limited. Before taking voluntary retirement from the Government of the Peoples’ Republic of Bangladesh, he served as Secretary in the Ministry of Information and Rural Development & Co-operative. He was also a Director of GEC (BD) Ltd. and Managing Director of Social Marketing Company Ltd. He has visited many countries including USA in 1977 on invitation from the US Government under the Leader Exchange Program. Mr. Khan completed his Master of Arts degree from University of Dhaka and obtained his Post Graduate Diploma in Development Administration from University of Leeds, United Kingdom.

Mr. Iftikhar Arshad Husain

Mr. Iftikhar Arshad Husain is a Director of Kumudini Welfare Trust of Bengal (BD) Limited. Mr. Husain obtained Bachelor of Science degree in Electrical Engineering from The Polytechnic, Regent St. London University in 1962. He also obtained a Diploma in Pharmaceutical from Brunswic, New Jersy, USA. He is an Associate Member of the Institute of Electrical Engineers (AIMEE), and a Member of the Institute of Electrical & Radio Engineers (MIERE). He is also a Chartered Engineer (C. Eng).

49


Chairman’s &

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review, D


Dr. Toufi q Ali

Dr. Toufi q Ali was appointed to the Board of Directors of Reliance Insurance Limited on 20th March 2013 as independent Director of the Company and has been the Chief Executive of the Bangladesh International Arbitration Centre (BIAC) since October 2010, and helped establish it.

Mr. Ali has vast experience with the Government, having joined the erstwhile Civil Service (CSP) in 1968 and later moving to the Foreign Service. His later appointments included Deputy Chief of Mission in our Embassy in Washington, Ambassador in the Netherlands, Secretary in the Ministry of Foreign Aff airs, and Ambassador in Geneva, Ambassador to the Holy See and to the UN offi ces in Vienna.

After leaving the Government in 2007, he joined the United Nations Industrial Development Organization in Vienna as a Senior Adviser (Trade & LDCs) and returned to Bangladesh in 2009. In additional to being the chief Executive of BIAC, Dr. Ali is also a Member of the Board of Directors of KAFCO.

Dr. Ali obtained B.A. (Hons) and an LL.B. from Dhaka University and then completed MAPE and Ph. D. from Boston University, USA.

Mr. Akhtar Ahmed


After completing B.A. (Honours) and M.A. from Dhaka University in 1970, he joined Eastern Federal Union Insurance Company, the largest insurance company in the then Pakistan, as an Executive Offi cer. Following the nationalization of insurance industry in Bangladesh in 1972, his services were absorbed in Sadharan Bima Corporation. In 1981 he joined Asian Reinsurance Corporation, Bangkok, an inter- governmental organization set up by the United Nations and served in various Managerial position till 1989. In 1989 he joined Arab Insurance Group, the largest insurance organization of the Middle East and served for 14 years in various positions as Chief Manager, Regional General Manager and Chief Executive of its Far East operations, based in Hong Kong and Kuala Lumpur. Mr. Akhtar Ahmed returned back home in 2003 and served as Managing Director of Sadharan Bima Corporation till February 2004. In early 2005 he completed an assignment as Consultant to KPMG, Abu Dhabi, on a project for setting up of a large Reinsurance company in the Middle East. He joined Reliance Insurance Limited as its Managing Director & CEO in March 2005.

50

Status of compliance with the conditions imposed by the Notifi cation No.SEC/CMRRCD/2006-158/134/Admin/44 dated August 7, 2012 of Bangladesh Securities and Exchange Commission (BSEC) issued under section 2CC of the Securities and Exchange Ordinance 1969:

(Report under Condition No.7.00)

Condition

No.Title

Compliance Status as on

December 31, 2013 Remarks

Complied Not Complied

1.1 Board’s Size:

The number of the Board members of the Company shall not be less than 5 (fi ve) and more than 20 (twenty)

√

1.2 Independent Directors:

1.2(i) At least one fi fth (1/5) of the total number of directors in the Company’s Board shall be Independent Directors

√

1.2(ii)(a) Who either does not hold share in the company or holds less than one (1%) shares of the total paid up shares of the company

√

1.2(ii)(b) Who is not sponsor of the Company and is not connected with any sponsor or director or shareholder who holds one percent or more shares of the Company

√

1.2(ii)(c) Who does not have any other relationship, whether pecuniary or otherwise, with the company or its subsidiary/ associated companies

√

1.2(ii)(d) Who is not a member, director or offi cer of any stock exchange;

√

1.2(ii)(e) Who is not a shareholder, director or offi cer of any member of stock exchange or an intermediary of the capital market;

√

1.2(ii)(f ) Who is not a partner or an executive or was not a partner or an executive during the preceding 3 (three) years of the concerned company’s statutory audit fi rm;

√

1.2(ii)(g) Who shall not be an independent director in more than 3 (three) listed companies;

√

1.2(ii)(h) Who has not been convicted by a court of competent jurisdiction as a defaulter in payment of any loan to a bank or a Non-Bank Financial Institution (NBFI);

√

1.2(ii)(i) Who has not been convicted for a criminal off ence involving moral turpitude.

√

1.2(iii) Independent Director(s) shall be appointed by the Board of Directors and approved by the Shareholders in the Annual General Meeting (AGM);

√

1.2(iv) The post of independent director(s) cannot remain vacant for more than 90 (ninety) days.

√

Status of Compliance with the Corporate Governance Guidelines (CGG)

Annexure vi

51


Chairman’s &

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review, D


Condition

No.Title




1.2(v) The Board shall lay down a code of conduct of all Board members and annual compliance of the code to be recorded.

1.2(vi) The tenure of offi ce of an independent director shall be for a period of 3 (three) years, which may be extended for 1 (one) term only.

√

1.3 Qualifi cationof IndependentDirector(ID):

1.3(i) Independent Director shall be a knowledgeable individual with integrity who is able to ensure compliance with fi nancial, regulatory and corporate laws and can make meaningful contribution to business

√

1.3(ii) The person should be a Business Leader/Corporate Leader/Bureaucrat/University Teacher with Economics or Business Studies or Law background/Professionals like Chartered Accountants, Cost & Management Accountants, Chartered Secretaries. The independent director must have at least 12 (twelve) years of corporate management/professional experiences.

√

1.3(iii) In special cases the above qualifi cations may be relaxed subject to prior approval of the Commission.

1.4

Chairman of the Board and Chief Executive Offi cer: The positions of the Chairman of the Board and the Chief Executive Offi cer of the companies shall be fi lled by diff erent individuals. The Chairman of the company shall be elected from among the directors of the company. The Board of Directors shall clearly defi ne respective roles and responsibilities of the Chairman and the Chief Executive Offi cer.

√

1.5 Directors Report to Shareholders shall include following additional statements on:

1.5(i) Industry outlook and possible future developments in the industry

√

1.5(ii) Segment-wise or product-wise performance √

1.5(iii) Risks and concerns √

1.5(iv) Discussion on Cost of Goods sold, Gross Profi t Margin and Net Profi t Margin

√

1.5(v) Discussion on continuity of any Extra-Ordinary gain or loss

No such item exists

1.5(vi) Statement of all related party transactions √

1.5(vii) Utilization of proceeds from public issues, rights issues and/or through any others instruments

No such item exists

1.5(viii) An explanation if the fi nancial results deteriorate after the Company goes for Initial Public Off ering (IPO), Repeat Public Off ering (RPO), Rights Off er, Direct Listing, etc.

No such event occurred

1.5(ix) If signifi cant variance occurs between Quarterly Financial performance and Annual Financial Statements the management shall explain about the variance on their Annual Report.

√

52

Condition

No.Title




1.5(x) Remuneration to directors including independent directors.

√

1.5(xi) The fi nancial statements prepared by the management of the issuer company present fairly its state of aff airs, the result of its operations, cash fl ows and changes in equity.

√

1.5(xii) Proper books of account of the issuer company have been maintained.

√

1.5(xiii) Appropriate accounting policies have been consistently applied in preparation of the fi nancial statements and that the accounting estimates are based on reasonable and prudent judgment.

√

1.5(xiv) International Accounting Standards (IAS)/ Bangladesh Accounting Standards (BAS)/ International Financial Reporting Standards (IFRS)/ Bangladesh Financial Reporting Standards (BFRS), as applicable in Bangladesh, have been followed in preparation of the fi nancial statements and any departure there- from has been adequately disclosed.

√

1.5(xv) The system of internal control is sound in design and has been eff ectively implemented and monitored.

√

1.5(xvi) There are no signifi cant doubts upon the issuer company’s ability to continue as a going concern. If the issuer company is not considered to be a going concern, the fact along with reasons thereof should be disclosed.

√

1.5(xvii) Signifi cant deviations from the last year’s operating results of the issuer company shall be highlighted and the reasons thereof should be explained.

√

1.5(xviii) Key operating and fi nancial data of at least preceding 5 (fi ve) years shall be summarized.

√

1.5(xix) If the issuer company has not declared dividend (cash or stock) for the year, the reasons thereof shall be given.

N/A

1.5(xx) The number of Board meetings held during the year and attendance by each director shall be disclosed.

√

1.5(xxi) The pattern of shareholding shall be reported to disclose the aggregate number of shares (along with name wise details where stated below) held by:-

1.5(xxi)(a) Parent/Subsidiary/Associated Companies and other related parties (name wise details);

√

1.5(xxi)(b) Directors, Chief Executive Offi cer, Company Secretary, Chief Financial Offi cer, Head of Internal Audit and their spouses and minor children (name wise details);

√

1.5(xxi)(c) Executives ; √

1.5(xxi)(d) Shareholders holding ten percent (10%) or more voting interest in the company (name wise details).

√

53


Chairman’s &

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review, D


Condition

No.Title




1.5(xxii) In case of the appointment/re-appointment of a director the company shall disclose the following information to the shareholders:-

1.5(xxii)(a) A brief resume of the director; √ 1.5(xxii)(b) Nature of his/her expertise in specifi c functional areas; √ 1.5(xxii)(c) Names of companies in which the person also holds the

directorship and the membership of committees of the board.

√

2.0 Chief Financial Offi cer (CFO), Head of Internal Audit and Company Secretary (CS):

2.1 The company shall appoint a Chief Financial Offi cer (CFO), a Head of Internal Audit (Internal Control and Compliance) and a Company Secretary (CS). The Board of Directors should clearly defi ne respective roles, responsibilities and duties of the CFO, the Head of Internal Audit and the CS.

√

2.2 Requirement to attend the Board Meetings: The CFO and the Company Secretary of the companies shall attend the meetings of the Board of Directors, provided that the CFO and/or the Company Secretary shall not attend such part of a meeting of the Board of Directors which involves consideration of an agenda item relating to their personal matters.

√

3.0 Audit Committee:

3.0(i) The company shall have an Audit Committee as a sub-committee of the Board of Directors.

√

3.0(ii) The Audit Committee shall assist the Board of Directors in ensuring that the fi nancial statements refl ect true and fair view of the state of aff airs of the company and in ensuring a good monitoring system within the business.

√

3.0(iii) The Audit Committee shall be responsible to the Board of Directors. The duties of the Audit Committee shall be clearly set forth in writing.

√

3.1 Constitution of the Audit Committee:

3.1(i) The Audit Committee shall be composed of at least 3 (three) members.

√

3.1(ii) The Board of Directors shall appoint members of the Audit Committee who shall be directors of the company and shall include at least 1 (one) Independent Director.

√

3.1(iii) All members of the audit committee should be “fi nancially literate” and at least 1 (one) member shall have accounting or related fi nancial management experience.

√

3.1(iv) Filling of casual vacancy in the Audit Committee √

54

Condition

No.Title




3.1(v) The company secretary shall act as the secretary of the Committee

√

3.1(vi) The quorum of the Audit Committee meeting shall not constitute without Independent Director

√

3.2 Chairman of the Audit Committee:

3.2(i) The Board of Directors shall select 1 (one) member of the Audit Committee to be Chairman of the Audit Committee, who shall be an independent director.

√

3.2(ii) Chairman of the audit committee shall remain present in the Annual General Meeting (AGM)

Will be ensured

3.3 Role of Audit Committee:

3.3(i) Oversee the fi nancial reporting process √

3.3(ii) Monitor choice of accounting policies and principles √

3.3(iii) Monitor Internal Control Risk management process √

3.3(iv) Oversee hiring and performance of external auditors √

3.3(v) Review along with the management, the annual fi nancial statements before submission to the board for approval

√

3.3(vi) Review along with the management, the quarterly and half yearly fi nancial statements before submission to the board for approval

√

3.3(vii) Review the adequacy of internal audit function √

3.3(viii) Review statement of signifi cant related party transactions submitted by the management

√

3.3(ix) Review Management Letters/ Letter of Internal Control weakness issued by statutory auditors

√

3.3(x) Declaration to Audit Committee by the Company regarding utilization of IPO/RPO, Right issue money.

N/A

3.4 Reporting of the Audit Committee:

3.4.1(i) The Audit Committee shall report on its activities to the Board of Directors.

√

3.4.1 (ii) The Audit Committee shall immediately report to the Board of Directors on the following fi ndings, if any:-

3.4.1(ii)(a) Report on confl icts of interests;

No such event found

3.4.1(ii)(b) Suspected or presumed fraud or irregularity or material defect in the internal control system;

No such event

found

3.4.1(ii)(c) Suspected infringement of laws, including securities related laws, rules and regulations;

No such event

found

3.4.1(ii)(d) Any other matter which shall be disclosed to the Board of Directors immediately.

No such event

found

55


Chairman’s &

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review, D


Condition

No.Title




3.4.2 Reporting to the Authorities:

Reported to the Board of Directors about anything which has material impact on the fi nancial condition and results of operation

No such event found

3.5 Reporting to the Shareholders and General Investors:

Report on the activities carried out by the Audit Committee, including any report made to the Board of Directors under condition 3.4.1 (ii)

No such event found

4.0 External/Statutory Auditors:

The issuer company should not engage its external/statutory auditors to perform the following services of the company; namely:-

4.0(i) Appraisal or valuation services or fairness opinions. √

4.0(ii) Financial information systems design and implementation.

√

4.0(iii) Book-keeping or other services related to the accounting records or fi nancial statements.

√

4.0(iv) Broker-dealer services. √

4.0(v) Actuarial services. √

4.0(vi) Internal Audit service. √ 4.0(vii) Any other services that the Audit Committee determines. √

4.0(viii) No partner or employees of the external audit fi rms shall possess any share of the company they audit at least during the tenure of their audit assignment of that company.

√

5.0 Subsidiary Company: 5.0(i) Provisions relating to the composition of the Board

of Directors of the holding company shall be made applicable to the composition of the Board of Directors of the subsidiary company.

N/A

5.0(ii) At least 1 (one) independent director on the Board of Directors of the holding company shall be a director on the Board of Directors of the subsidiary company.

N/A

5.0(iii) The minutes of the Board meeting of the subsidiary company shall be placed for review at the following Board meeting of the holding company.

N/A

5.0(iv) The minutes of the respective Board meeting of the holding company shall state that they have reviewed the aff airs of the subsidiary company also.

N/A

5.0(v) The Audit Committee of the holding company shall also review the fi nancial statements, in particular the investments made by the subsidiary company.

N/A

6.0 Duties of Chief Executive Offi cer (CEO) and Chief Financial Offi cer (CFO):

The CEO and CFO shall certify to the Board that -

56

Condition

No.Title




6.0(i) They have reviewed fi nancial statements for the year and that to the best of their knowledge and belief:

√

6.0(i)(a) These statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading;

√

6.0(i)(b) These statements together present a true and fair view of the company’s aff airs and are in compliance with existing accounting standards and applicable laws.

√

6.0(ii) There are, to the best of knowledge and belief, no transactions entered into by the company during the year which are fraudulent, illegal or violation of the company’s code of conduct.

√

7.0 Reporting and Compliance of Corporate Governance:

7.0(i) The company shall obtain a certifi cate from a practicing Professional Accountant/Secretary (Chartered Accountant/Cost and Management Accountant/Chartered Secretary) regarding compliance of conditions of Corporate Governance Guidelines of the Commission and shall send the same to the shareholders along with the Annual Report on a yearly basis.

√

7.0(ii) The directors of the company shall state, in accordance with the Annexure attached, in the directors’ report whether the company has complied with these conditions.

√

57


Chairman’s &

CEO’s

review, D


Certificate on compliance of conditions of corporate governance guidelines to the shareholders of

Reliance Insurance Limited

We have examined the compliance status of Reliance Insurance Limited for the year ended 31 December 2013 regarding conditions of corporate governance guidelines issued by the Bangladesh Securities and Exchange Commission as stipulated in Condition No. 7(i) of the BSEC notification No. SEC/CMRRCD/2006-158/134/Admin/44 dated 7 August 2012.

The compliance of conditions of corporate governance guidelines as stated in the aforesaid notification and reporting of the status of compliance is the responsibility of the Company’s management. Our examination for the purpose of issuing this certification was limited to the checking of procedures and implementations thereof, adopted by the Company for ensuring the compliance of conditions of corporate governance and correct reporting of compliance status on the attached statement on the basis of evidence gathered and representation received.

To the best of our information and according to the explanations given to us, we certify that the Company has complied with the conditions of corporate governance stipulated in the above mentioned BSEC notification dated 7 August 2012.

Md. Fazlul Haque FCAPartnerICAB Enrolment Number 933For, Alam Chowdhury Mostafa & Co.Chartered Accountants

Dhaka, Feb 16, 2014

ALAM CHOWDHURY MOSTAFA & CO. Chartered Accountants

73/3 Green Road (1st Floor), Dhaka - 1205Phone: 8118839Fax: 880 - 2 - 8118839Email: [email protected]

58

Introduction

In the corporate world, the term sustainability has come into use in a broad spectrum mainly as a result of increased environmental awareness. However, sustainability is wider than just environmental issue. Sustainability is a business strategy that drives long-term corporate growth and profi tability by obligating the inclusion of environmental and social issues in the business model. The very purpose of sustainability is to generate a maximum increase in company, consumer, and employee value by embracing opportunities and managing risks derived from environmental and social developments.

Corporate sustainability achieve long-term shareholder value by gearing their strategies and management to harness the market’s potential for sustainable products and services while at the same time successfully reducing and avoiding sustainability costs and risks. The quality of a company’s strategy and management and its performance in dealing with opportunities and risks deriving from economic, environmental and social developments can be quantifi ed and used to identify and select leading companies for investment purposes.

Attributes of SustainabilitySustainable development: This concept balances the corporate need for economic growth with environmental activism/protection and societal progress. With regards to sustainability, Sustainable development sets the boundaries of the societal and environmental issues and defi nes the company’s goal(s).

Corporate social responsibility: Corporate Social Responsibility is concerned with treating the stakeholders of a company or institution ethically or in a responsible manner. ‘Ethically or responsible’ means treating key stakeholders in a manner deemed acceptable according to international norms. Corporations use CSR as tool to address societal and environmental issues. Sustainability incorporates societal and environmental issues as building blocks within a business model. Therefore, a sustainable business will use some CSR practices. CSR policy functions as a built-in, self-regulating mechanism whereby a business monitors and ensures its active compliance with the spirit of the law, ethical standards, national and international norms. In some models, a fi rm’s implementation of CSR goes beyond compliance and engages in actions that appear to further some social good, beyond the interests of the fi rm and that which is required by law.

Stakeholders: Stakeholders exist both within a fi rm and outside. Sustainability focuses on stakeholders rather than shareholders.

Corporate Accountability: This contributes to a sustainable business practice in that corporate accountability provides a legal and ethical basis for a company to report on its impact on society and the environment, in addition to their fi nancial performance.

Sustainability StrategyOperational Risk Management: Operational risk management lowers the cost and risk of compliance. Additionally, it enables greater access to markets by enabling an enterprise to comply with customer requirements.

Resource Productivity: Resource productivity reduces costs through process effi ciency, including supply chain optimization. It is critical in a world with increasingly volatile commodity pricing.

Maintain Sustainable workforce: Sustainable workforce both ensures access to the right talent in the right market in the face of demographic shifts and provides foresight to meet the changing requirements of a new generation of workers.

Sustainable consumption: Sustainable consumption enables us to generate brand value and customer loyalty through more sustainable operations and to grow revenues by entering new markets.

Financial: Meeting shareholders’ demands for sound fi nancial returns, long-term economic growth, open communication and transparent fi nancial accounting.

Customer & Product: Fostering loyalty by investing in customer relationship management and product and service innovation that focuses on technologies and systems, which use fi nancial, natural and social resources in an effi cient, eff ective and economic manner over the long-term.

Governance and Stakeholder: Setting the highest standards of corporate governance and stakeholder engagement, including corporate codes of conduct and public reporting.

SustainabilityReporting

59



Corporate Social Responsibility

Corporate Social Responsibility (CSR) is a process with the aim to embrace responsibility for the company’s actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere who may also be considered as stakeholders

As part of the CSR initiatives, Reliance Insurance Limited focuses primarily on underprivileged children and physically challenges peoples of the society for their physical, mental and educational improvement. To achieve the said purpose, RIL worked with the following social development organizations for the last few years:

Society for Education and Inclusion of the Disabled (SEID) Trust: SEID trust is one of the pioneer social organizations in Bangladesh specially for promoting rights of children with intellectual and multiple disabilities as well as autism. SEID Trust is providing services to more than 450 underprivileged children with disabilities including pre-primary and special education, education materials, medical services, physiotherapy, speech therapy, vocational training, lunch and transport facilities through its four Centre’s situated at Shyamoli, Hazaribag, Kamrangir Char and Rayer Bazar. Reliance Insurance Limited donated total Tk. 853,880 in the year 2011 and 2012 for providing physiotherapy service to such children with disabilities more comprehensively.

Management and Resources Development Initiative (MRDI): MRDI is a multi-disciplinary, not-for-profi t, non-government organization engaged in a wide spectrum of social development activities. Its objectives are developing the standard and quality of the media, enhancing physical and mental well-being of the people and empowerment of women, adolescents, children, minority and other marginalised sections of the population. Partners of the MRDI include well reputed think tank, research organisations and development agencies. Besides, it gets support from international and local donors, embassies and UN agencies. Reliance Insurance donated a total of Tk. 966,000 in the year 2011, 2012 and 2013 for infrastructure development of primary schools in off shore areas of Char Fashion & Bhola.

Bangladesh Thalassaemia Hospital: Bangladesh Thalassaemia Hospital is a project of Bangladesh Thalassaemia Samity. It is an unique institution treating Thalassaemia patients. Thalassaemia is a deadly disease which is considered to be a blood related genetic disorder inherited by children from parents having Thalassaemia trait. Red blood cell of a Thalassaemia patient dies very fast resulting in multiple complications. Bangladesh Thalassaemia Hospital located at Green Road having requisite facilities to provide transfusion service to the Thalassaemia patients. Reliance Insurance Limited donated total of Tk. 600,000 in the year 2008 and 2010.

TMSS Nursing College (TNC): TMSS Nursing College (TNC) has been established at the Foundation Offi ce of TMSS near Rafatullah Community Hospital (RCH) in 2009 through the approval of Ministry of Health and Family Welfare (Nursing wing) and Bangladesh Nursing Council. It is also affi liated by Rajshahi University. It is located in Thengamara village under Bogra District. There is a fi ve stored separate building for this institution with modern facilities. In every session 80 students get the opportunity for admission according to the approval by the authority for both in the Diploma-in Nursing and Midwifery Course and BSc.-in Nursing Course. The purpose of the college is:

1. To provide knowledge and skill with new discoveries and innovation, balance and relevant education for lifelong learning of the global Bangladeshi.

2. To able to bridge cultural gaps in caring, work, with cultural diff erences and enable clients and families to achieve meaningful and supportive caring.

3. To prove knowledge, skilled and competent nurses.

4. To provide culturally responsible/accountable nurses for their activity to their clients and peers and reasonably independent and self-governing in decision making and nursing practice.

Reliance Insurance Limited donated Tk.5 lac in the year 2009 for purchasing essential equipments for the laboratory.

Disabled Child Foundation: Disabled Child Foundation is a non-Government, non-profi table and non-political voluntary organization was established in June 2005 by the initiatives of a group of committed visually challenged, physical challenged and sighted person which is duly registered by the Government of Peoples’ Republic of Bangladesh. Disabled Child Foundation has been working for the children with disabilities (CWDs) in the country with the faith in the morals of working for the poorest rural people irrespective of discrimination and the ideal service for them is to convert the CWDs into working and towards self-reliance to lead a decent life with dignity and courage so that their rights and privileges are recognized and the opportunity to be ensured to participate into the mainstream of national development activities. Reliance Insurance Limited donated Tk.2 lacs in the year 2012.

In addition to the above in the year 2013 Reliance Insurance Limited donated considerable amount of money to Prime Minister Relief Fund as donation for the victims of garments workers of Rana Plaza tragedy and Bangladesh Insurance Association for supporting to hold 8th Bangladesh Games 2013.

60

Human activity can have harmful eff ects on ecological systems, climate and public health. Recognizing this, Reliance Insurance Limited fully supports the principles of its commitment to promoting good environmental practice and sustainability of its activities. RIL committed to providing quality service in a manner that ensures a safe & healthy workplace for our employees protecting the environment, conserving energy and natural resources. With these policies in place, we believe that we can achieve a healthy and safe environment. We are committed to do and will:

1. Integrate the consideration of environmental concerns and impacts into our decision making and activities.

2. Develop and improve operations and technologies to minimize waste and other pollution, minimize health and safety risks, and dispose of waste safely and responsibly.

3. Minimize energy and water use within our premises and processes in order to conserve supplies and minimize the consumption of natural resources.

4. As far as possible, we will try to identify and purchase preferable products, supplies and services for all our

daily operational needs that do the least damage to the environment.

5. Conserve natural resources by adopting pollution prevention practices. Extending the life of equipments through preventive maintenance scheduling, purchasing and reworking used equipments etc.

6. Comply with all applicable environmental regulations.

7. Establish procedures to ensure that all employees are knowledgeable of, understand and comply with all applicable environmental laws and regulations. Train all our employees on our environmental program and empower them to contribute and participate.

8. Communicate our environmental commitment to our clients, contractors, suppliers and the community.

9. Strive to continually improve RIL’s environmental management system and performance & implement corrective actions.

RIL recognizes the interdependence between the employer and the employees and believes that each should give the other fair treatment. To this end, RIL specifi cally aims to do the following:

1. To establish and administer the policies that enable RIL to develop and implement opportunities related to recruitment, promotion, remuneration, benefi ts, transfer and training opportunities without any regard to age, sex, race, political belief and religion.

2. To create a climate of trust and support within the company which encourage the employees to work well together as a team and at the same time, to encourage them to be innovative and creative in order to achieve company goals.

3. To maintain work place and environmental conditions which permit employees to work to maximum eff ectiveness and to ensure that safety rules and hygiene are strictly observed.

4. To provide information to employees regularly about diff erent aspects of the operation and its progress which are relevant to them and involve them in matters which are of concern to their job and work situation.

5. To develop an eff ective internal communication and involvement mechanism which encourage employees to identify themselves with the company and its activities.

6. To adopt and institute a planned and systematic approach to anticipated changes and develop plans for preparing employees for technological and environmental changes.

7. To identify employees’ training and development needs and provide them with necessary development opportunities for them to advance in their career.

8. To ensure that employment opportunities conform to the established and acceptable practices of the country.

9. To ensure that there are proper manpower planning and forecasting system in place to ensure that there will be enough people with the right skills and talents to meet company’s current and future growths and needs.

10. To ensure that there are transparent processes in place for selection, promotion, appraisal and performance management, reward & recognition systems.

11. To put in place succession plans for all senior management positions in the company.

12. To ensure that people with high capabilities proven by track record reach key management position regardless of their sex, religion, caste, creed and more importantly age and seniority.

Environmental Policy

Human Resources Policy

61



Integrated Reporting

Integrated reporting is a process which results in effi cient communication and leads to value creation over a period of time. An integrated report is a concise communication about how an organization’s strategy, governance, performance and prospects lead to the creation of value over the short, medium and long term.

The process of integrated representation envisages evaluation of a company’s performance in terms of both fi nancial and other value relevant information. Integrated Reporting provides greater context for performance data, clarifi es how value relevant information fi ts into operations or a business, and may help embed long-term approach into a company’s decision making process. While the communications that result from Integrated Reporting will be of benefi t to a range of stakeholders, they are principally aimed at providers of fi nancial capital allocation decisions.

Value creation through proper strategy: History reveals that the most successful companies understand their corporate pasts, their corporate values. They also understand their stakeholders, know what the market wants, listen to customers and develop products that even the customer hasn’t yet imagined. So proper strategy play pivotal role in creation of value in the long run. Reliance Insurance Limited, being aware of this position. always focuses on its strategic objectives covering process, business, people and learning.

Value creation through good governance: The maintenance of eff ective corporate governance remains a key priority of the Board of Reliance Insurance Limited (RIL). To exercise clarity about Directors responsibilities towards the shareholders, corporate governance must be dynamic and remain focused on the business objectives of the Company

and create a culture of openness and accountability. RIL considers that its corporate governance practices are in full compliance with all the aspects of BSEC Notifi cation No. SEC/CMMRRCD/2006-158/134/Admin/44 dated 07 August 2012. In addition to establishing high standards of corporate governance, RIL also considers best governance practices in all of its activities. The independent role of Board of Directors, separate and independent role of Chairman and Chief Executive Offi cer, distinct role of Company Secretary and Chief Financial offi cer, diff erent Board Committees allows RIL to achieve excellence in best corporate governance practices.

Value creation through performance: Real Leaders, who are clear about their company’s reason for being good corporate citizens, are able to deliver and sustain both performance and employee satisfaction over time. The creation of a purposeful culture—one that recognizes employees for exceeding performance expectations while modeling the organization’s declared values—is critical for business leaders in today’s marketplace. Developing a high performance, values-aligned culture requires four integrated steps and they are:

1. Clarify performance expectations

2. Defi ne values in behavioral terms and establish motivation at every level

3. Hold leaders and staff accountable

4. Monitor regularly and adjust strategies as necessary

Some key features of the company for the last few years are mentioned below which clearly indicate how RIL is creating value through performance and advancing toward realization of its corporate objective, vision and mission:

Particulars 2009 2010 2011 2012 2013

Gross premium income 1,041.1 1,241.0 1,422.1 1,490.8 1,638.9

Net premium income 430.3 618.1 731.4 641.1 704.2

Underwriting profi t 56.8 161.0 194.3 185.1 228.9

Investment income 114.9 153.7 159.9 164.0 230.2

Profi t before tax 146.3 287.2 305.0 297.9 406.2

Profi t after tax 119.7 217.6 220.3 203.9 277.1

Fixed Deposit 612.9 658.7 718.1 1,107.5 1,483.9

Total assets 1,880.3 4,605.9 4,530.8 4,410.7 4,796.4

Total reserve 891.8 3,457.5 3,312.8 2,983.4 3,133.94

Paid up capital 234.0 304.2 410.7 472.3 519.5

Shareholders' fund 952.5 3,513.1 3,427.5 3,195.8 3,371.0

62

Financial Statements are normally prepared on the assumption that an enterprise is a going concern and will continue in operation for the foreseeable future. Hence, it is assumed that the enterprise has neither the intention nor the need to liquidate or curtail materially the scale of its operations; if such an intention or need exits, the fi nancial statement may have to be prepared on a diff erent basis and, if so, the basis used is disclosed. On the other hand Listed Companies are required by BSEC to report on its ability to continue as going concern.

The Board of Directors of Reliance Insurance Limited has made annual assessment about whether there exist material uncertainties which may cast signifi cant doubt upon the Company’s ability to continue as going concern. The director’s assessment of whether the company is a going concern involves making appropriate inquiries including review of budget, forecast, assumptions and future outcome of inherent uncertainties in existence. The Directors are convinced from the following indications, which give reasonable assurance as to company’s ability to continue as a going concern for the foreseeable future.

Financial Indications

Positive net current assets

Fixed term debt with realistic renewal or repayment

Less reliance on short term borrowing

Continuous fi nancial support by lenders

Positive operating cash fl ows

Positive key fi nancial ratios

Consistent payment of dividends

Credibility in payment of obligations

Performance growth

Positive underwriting results and trends

Operating Indications

No key management turnover

Good business expansion

Spread of business across diverse clientele

Good market reputation and clients satisfaction

Good Corporate environment and employee satisfaction

Other Indications

Maintenance of suffi cient capital base as required by law

Strong equity base

Strong claim Paying Ability (CPA)

Anticipates no signifi cant change in legislation or government policy

Report on Going Concern

63



Background: Since the very beginning of the Company till 2004, RIL had a computerized General Ledger for Central Accounts Department only. But like most other insurance companies, its’ operation was based on stand alone PC’s and manual system. There was no IT enabled MIS system in place to help RIL analyze the business fi gures and to track performance of products, customers, branches, department and people. As a result RIL was severely handicapped in the fi eld of IT, resulting in ineffi ciency and improper management negatively impacting its endeavor to maintain its’ position at the top of the Insurance fraternity.

Formation of IT Division: Against the backdrop of the above mentioned situation, RIL management decided in the year 2000 to introduce a modern computer system to cater to future prospects of the Company. As part of that vision, an Information Technology Division was established to make the dream come true.

The information technology’s role in the business sector certainly can hardly be over emphasized. It is of utmost importance, which enables businesses to eff ectively and successfully plan, manage, execute strategies which lead to profi t. Therefore the mission of this Division is to completely re-engineer and automate RIL’s business processes to achieve higher productivity, lower cost, improved quality, enhanced service and effi cient management.

IT mainly deals with computer applications which are now completely automated. The technology has not only made communication cheaper, but also much faster.

Information Technology Division has taken pragmatic approaches to bring the technological boon and advancement into RIL’s business process to make it more competitive and adaptive for the 21st century.

The software applications and the hardware devices are the main elements of use in information technology. So a modern and dynamic IT Division was created with two departments like Hardware and Software including a structured LAN for its smooth operation and getting the technical advantage. Operating the IT system at Reliance, there are six experienced and professional IT personnel.

Software development & implementation: Software is an important integral part of information technology which relates to computer applications that enable a company to generate, store, program, and retrieve data as and when needed. Like an ERP Software, a Computer Integrated Insurance System (CIIS) was jointly developed with the co-operation of IBCS PRIMAX (Bangladesh) Ltd. Under which all the business process and functionalities were included. After 14 months of development by IBCS and RIL’s 10

programmers, it was completed and on 1st of July 2004 it was implemented successfully at RIL. On the job training was also provided to all end users.

Key Benefi ts of RIL IT system: Huge saving in working time in preparing document, Money Receipt and some large informative monthly reports with excellent print quality

Getting 400 Plus system generated MIS report which helps management to take decisions properly and timely

Integrated Accounts where 80% Journal Voucher are passing through system as well as Final Accounts report like Balance Sheet, Profi t & Loss Account, Revenue Account, General Ledger and Trial Balance are generating automatically through system

Controlling business procurement trough Computer Integrated Insurance System (CIIS) software

Quick accessing the underwriting documents through CIIS for departmental integration with UW dept. like Co-Insurance, Claims, Commission, Re-Insurance and Accounts department

A Disaster Recovery Center has been established to secure the company’s valuable data in a professional manner.

On-line branches: Including Head Offi ce and Local Offi ce 24 (Twenty Four) branches are already connected to the IT Division through optical fi ber and data modem during the last eight years.

Future Plan: Making all the RIL branches as on-line to operate their daily business smoothly through the system and get all the IT benefi ts.

Preparing Data Center for providing Information to the management from data archive as and when required.

A network department to be established for providing services to all online branches.

Our management has decided to develop a new software module for Health Plan Department by our own resources.

Higher Training on latest information technology to be provided to the IT professionals for development of new software to meet the users demand by using present technology.

RIL has highly experienced and trained professionals working on maintaining and developing the company’s IT infrastructure. The IT professionals are constantly innovating and producing in-house programs to meet the needs of

Report on Information Technology

64

the company’s ever increasing and diversifi ed products and services industry. IT division has successfully implemented a Wide Area Network (WAN) to connect all of the branch offi ces in greater Dhaka, Chittagong, Khulna, Jessore, Dinajpur, Madaripur, Kustia, Rajshahi, Thakurgaon, Mymenshing and Comilla on real time basis, thereby providing seamless connectivity and prompt customer services. We have also purchased a new high confi gured server for running our oracle 10g application server to build-up three tier applications and hardware architecture.

We have upgraded our oracle Front End Application from 6i to 10g web version, together with migration into three tier systems (like client >> application server >> database server). As a result our CIIS software can be accessed from anywhere through any web browser as well as our connectivity cost has reduced signifi cantly.

Two new software modules named VAT management System and Commission Information System have been developed and added to our CIIS to manage our VAT & commission as required by the NBR and IDRA.

Conclusion: Information technology provides the ability to process a large amount of information and in a way which presents the information in a clear and concise manner to employees. Anticipated benefi ts of implementing an information technology system include improvements in profi t performance, and a higher degree of accuracy among information within the possible shortest time. Insurance business has made great strides in risk evaluation as well as their calculation and reporting abilities. Much of such analyses can be done by developing new software of risk infrastructure, data model governance and quality. In this perspective IT sector of Reliance have been playing an important role during the last 11 years and contributing to the economic stability of the company.

65



Human Resource AccountingThe Concept & Its Importance for Reliance Insurance Limited

Human Resource Accounting (HRA) is a new branch of accounting. It is based on traditional concept that all expenditure of human capital formation is treated as a charge against the revenue of the period as it does not create any physical asset. But now a day this concept has changed and the cost incurred on any asset (as human resource) should be capitalized as it yields benefi ts measurable in monetary terms. HRA means accounting for people as the organizational resources. It is the measurement of the cost and value of people to organizations. It is a process of accounting people as an organization resource and tries to place a value on the organizational human resources as assets and not as expense.

Management of any concern continuously strives hard for obtaining maximum effi ciency. In order to measure the eff ectiveness of any fi rm the normal method is to examine fi nancial statements. These statements include balance sheets in which physical assets such as cash accounts receivables, inventory and plant are recorded. However, these statements normally do not mention the productive capacity of the workers or goodwill of the company. It is needless to say that the following variables contribute heavily to make a fi rm superior to other fi rms:

1. Level of intelligence and aptitude of the personnel.

2. Level of training of employees.

3. Level of performance targets and motivation to achieve success for the organization.

4. Quality of leadership.

5. Capability to use diff erences for purpose of innovation & improvement.

6. Quality of sound communication, cooperative team work & eff ective coordination within the organization.

7. Eff ectiveness of decision making.

8. Quality of control process.

9. Ability to use experience and measurements to guide decisions, improve operations and innovations.

These factors are not accounted for in the balance sheet. HRA has developed in an attempt to overcome this defi ciency. HRA is the art of valuing, recording and presenting systematically the work of human resources in the books of account of an organization. Thus, it is primarily an information system, which informs the management about the changes that are taking place in the human resource of an organization.

In view of the importance of the emerging concept of HRA, Reliance Insurance places its utmost importance in obtaining benefi ts of HRA by way of making investments on its employees in the following key areas:

1. Competitive Compensation Package: Reliance is, perhaps, the market leader in the industry when it comes to the question of compensation packages off ered to its employees. The salary scale is very fl exible and off ers competitive salary and other benefi ts commensurate with the position to an employee taking into account his/her academic & professional qualifi cations & experiences etc. thereby off ering the much needed fi nancial relief to an employee from day one.

2. Staff Development & Training: The company has its own in-house training unit where training is off ered to employees, new & old, on diverse areas both core business & management areas on a regular basis. Besides, as part of continuous eff orts for staff development initiatives, employees receive training both from in-country & abroad to keep the employees updated on the modern approaches to enhance their skills & capacity building in their respective fi elds. A substantial sum of money is budgeted and used for this purpose.

3. Performance Appraisal: Reliance has a modern performance appraisal system in place which allows management to give unbiased ratings linked with deserved salary increment upon review of individual performance of employee besides giving feed back & document his/her strengths & areas needed to be improved which are monitored closely throughout the year.

4. Recognition & Incentives: Reliance fi rmly believes in recognizing the employees for a job well done and at the same time takes this opportunity to motivate the non-performers by showing them the success of others. Towards achievement of this policy, we have a Performance Linked Variable (PLV) incentive bonus system whereby employees are gainfully awarded bonus based on their achievements obtained purely on performances.

5. Uniformity of Policies & Procedures: In order to be fare to each & every employee on all HR issues, the company has a comprehensive HR Manual containing standardized and uniform policies and procedures applicable for employees across the company. This provides a congenial and enabling working atmosphere for employees to grow and pursue a long term career with the company and help bring down employee dissatisfaction & grievances signifi cantly.

66

Corporate governance is the system by which companies are directed and controlled by the management in the best interest of all the stakeholders, thereby ensuring greater transparency and better and timely fi nancial reporting.

The maintenance of eff ective corporate governance remains a key priority of the Board of Reliance Insurance Limited (RIL). To exercise clarity about directors responsibilities towards the shareholders, corporate governance must be dynamic and remain focused on the business objectives of the Company and create a culture of openness and accountability. RIL considers that its corporate governance practices comply with all the aspects of BSEC Notifi cation No. SEC/CMMRRCD/2006-158/134/Admin/44 dated 07 August 2012. In addition, to establishing high standards of corporate governance, RIL also considers best governance practices in its activities. The independent role of Board of Directors, separate and independent role of Chairman and Chief Executive Offi cer, distinct role of Company Secretary and Chief Financial offi cer, diff erent Board Committees allows RIL to achieve excellence in best corporate governance practices.

Board of Directors

Composition

The Board of RIL considers that its membership should comprise of directors with an appropriate mix of skills, experience and personal attributes that allow the directors, individually and the board, collectively, to discharge their responsibilities and duties, under the law, effi ciently and eff ectively, understand the business of the company and assess the performance of the management.

The Board of RIL comprise of sixteen directors who possess a wide range of skills and experience over a range of professions, business and service. All of them are nominated by their respective institutions except for two independent directors. Each of our directors brings in independent judgment and considerable knowledge to perform their roles eff ectively. The Board of directors ensure that the activities of the company are always conducted with adherence to strict and highest possible ethical standards and in the best interests of the stakeholders.

The Directors are appointed by the shareholders in the Annual General Meeting (AGM). Casual vacancies, if any, are fi lled by the Board in accordance with the stipulations of the Companies Act, 1994 and Article of the Company. In addition, one third of the directors retires from the board every year in the AGM, but remains eligible for re – election.

Role and Responsibilities of the Board

The Board is committed to the company seeking to achieve superior fi nancial performance and long term prosperity, while meeting stakeholder’s expectations of sound

corporate governance practice .The Board determines the corporate governance arrangements for the company. As with all its business activities, the Board is proactive in respect of corporate governance and puts in all place those arrangements which it consider are in the best interest of the company and its shareholders, and consistent with its responsibilities to other stakeholders.

The Board of Directors is in full control of the company’s aff airs and is also fully accountable to the shareholders. They fi rmly believe that the success of the company largely depends on the credible corporate governance practices adopted by the Company. Taking this into consideration, the Board of Directors of RIL set out its strategic focus and oversees the business and related aff airs of the company. The Board also formulates the strategic objectives and policy framework for the company. In discharging the above responsibilities, the Board caries out, the following functions as per the charter of the Board.

Determine, monitor and evaluate strategies, policy, management performance criteria and business plan.

Periodic and timely reporting to the shareholders on the aff airs, progress and performance of the company

Ensuring proper decision making and accountability structure throughout the Company so that the staff down the line is fully accountable to the corporate management.

Delegation to Board Committees and management and approval of transactions in excess of delegated level

Approval of annual budgets including major capital expenditure proposals

Critical evaluation of all proposals which require Board’s approval and \ or directives

Regular review of fi nancial performance and overdue situation

Appointment and evaluation of the performance of the top management positions

Ensuring that the senior management team has the necessary skill and experience to perform their function eff ectively, in the best interest of the Company

Monitoring the adequacy, appropriateness and operation of internal controls.

Role of the Chairman

The Chairman of the Board is not the Chief Executive of the Company. The role of Chairman and Managing Director & CEO are independent and separate. The Chairman runs the Board while the CEO & Managing Director takes all executive decisions as delegated and empowered by the Board.

Report on Corporate Governance

67


Information

about corporate governance

Code of Conduct for The Board Members

As a leading non-life Insurance Company in Bangladesh, the Board of Directors of Reliance Insurance Limited is committed to demonstrating the high standards of ethical behavior in their relationships with the Company’s customers, shareholders, employees, regulators and the public. The Board of Directors is accountable for establishing the framework that creates culture of integrity and objectivity. Board members are also responsible for complying with laws and regulations as well as avoiding behavior that might compromise the company’s success.

The following Code of Conduct for members of the board of directors of Reliance Insurance Limited serves as ethical decision making guidelines:

1. Avoiding Confl icts of Interest

Directors should avoid any confl icts between their interests and the Company’s interests. A confl ict of interest can occur when a director’s personal interest is adverse to the interests of the company or when a director (or a family member) receives improper personal benefi ts as a result of his/her position as a director. To avoid any appearance of impropriety, directors must hold themselves to the highest ethical standards, understanding that the perception of a confl ict can be as damaging as an actual confl ict of interest

2. Pursuing Business Opportunities

Directors may not compete for, or pursue either personally or on behalf of another fi rm, company business opportunities, including opportunities that are discovered through the use of Reliance Insurance property, information or their position as a director.

4. Company Property

In carrying out their duties and responsibilities, Board member shall endeavor to ensure that management is causing the Company’s assets, proprietary information and resources to be used by the Company and its employees only for legitimate business purposes of the Company.

5. Maintaining Confi dentiality

It is essential to handle all non-public information carefully and appropriately. Directors should maintain the confi dentiality of company information entrusted to them, regardless of the source. Directors may disclose certain non-public information if it is legally mandated or the director has the authority to do so.

6. Fair Dealing

In carrying out their duties and responsibilities, Board members shall endeavor to deal fairly, and should promote fair dealing by the Company, its employees and agents, with customers, suppliers and employees.

7. Compliance With Laws and Regulations

In carrying out their duties and responsibilities, Board members shall comply, and endeavor to ensure that the management is causing the Company to comply, with applicable laws, rules and regulations. In addition, if any Board member becomes aware of any information that he or she believes constitutes evidence of a material violation of any securities or other laws, rules or regulations applicable to the Company or the operation of its business, by the Company, any employee or another Board member, then such Board member should bring such information to the attention of the CEO & Managing Director of the Company.

8. Avoiding Insider Trading

Board members shall not do insider trading with respect to the purchase and sale of the Company’s securities. Board members shall not buy or sell securities while in possession of material non-public information about the issuer of that security, whether the issuer is the Company or another company. Board members shall not also pass such information on to someone who may buy or sell.

9. Compensation from Non-Company Sources

Directors may not accept compensation (in any form) from any source other than the Company for services performed for the company.

10. Gifts

Directors and members of their families may accept gifts of nominal value as long as they aren’t being made to infl uence the directors’ actions and don’t create the appearance of a confl ict of interest

Board Meetings

The meetings of the Board of Directors of RIL are normally held at the Registered and Corporate Head Offi ce of the Company. The meetings are held frequently to discharge its responsibilities and functions as mentioned above. Meeting is scheduled well in advance and the notice of each Board Meeting is given, in writing, to each Director by the Company Secretary.

The Company Secretary prepares the detailed agenda for the meeting. The Board papers comprising the agenda, explanatory notes and proposed regulations are circulated to the directors in advance for their review. The Members of the Board have complete access of all information of the company enabling them to work effi ciently. The Members of the Board are also free to recommend inclusion of any matter in the agenda for discussion. The Company Secretary and Chief Financial Offi cer always attends the Board Meeting and other senior management is invited to attend Board Meeting to provide additional inputs to the items being discussed by the Board and make necessary presentations.

68

Internal Control

The Board is responsible for ensuring that the Company has an adequate and eff ective control system in place. Although no system of internal fi nancial control can provide absolute assurance against material mis-statement or loss, The company’s internal control system have been designed to provide the directors with reasonable assurance that assets are safeguarded against unauthorized use by the employees / or management and / or third parties, transactions are authorized and properly recorded and material error and irregularities are either prevented or detected with in a reasonable period of time.

Properly designed management structure, clearly defi ned responsibilities, delegation or authorities, establishment of accountability at each level and system of periodic reporting and monitoring performance are the key elements of the internal control framework employed in RIL.

Audit Committee

Audit committee of Reliance Insurance Limited is the Sub-Committee of the Board of Directors. Audit Committee comprises of fi ve Directors nominated by the Board of Directors. The Committee is headed by a director who is an Independent Director of the Company. The Chief Internal Audit & Control offi cer has direct access to the Committee and the Committee is directly reportable to the Board. It operates according to the Terms of Reference approved by the Board and in compliance with Section 3.00 of the Bangladesh Securities and Exchange Commission Notifi cation No. SEC/CMRRCD/2006-158/134/Admin/44 dated 07 August 2012. Role of the Committee:

(i) Oversee the fi nancial reporting process.

(ii) Monitor choice of accounting policies and principles.

(iii) Monitor Internal Control Risk management process.

(iv) Oversee hiring and performance of external auditors.

(v) Review along with the management, the annual fi nancial statements before submission to the board for approval.

(vi) Review along with the management, the quarterly and half yearly fi nancial statements before submission to the board for approval.

(vii) Review the adequacy of internal audit function.

(viii) Review statement of signifi cant related party transactions submitted by the management.

(ix) Review Management Letters/ Letter of Internal Control weakness issued by statutory auditors.

(x) When money is raised Repeat Public Off ering (RPO)/Rights Issue, the company shall disclose to the Audit Committee about the uses/applications of funds

by major category (capital expenditure, sales and marketing expenses, working capital, etc), on a quarterly basis, as a part of their quarterly declaration of fi nancial results. Further, on an annual basis, the company shall prepare a statement of funds utilized for the purposes other than those stated in the off er document/prospectus.

Human Capital

RIL believes that Human capital is vitally important for the Company’s success. It is prime asset of the Company. It is the stock of competencies, knowledge and personality attributes embodied in the ability to perform jobs as to produce economic value to the Company. Human capital can be increased through education, training and experience. Reliance insurance Limited has the following policy to increase human capital:

1. Establish and administer transparent policies that enable Company to develop and implement opportunities of recruitment, promotion, remuneration, benefi ts, rewards and recognition system, transfer and training and performance management system without any regard to age, sex, race, political belief and religion.

2. Create a climate of trust and support within the company which encourage the employees to work well together as a team and at the same time, to encourage them to be innovative and creative in order to achieve company goals.

3. Develop an eff ective internal communication and involvement mechanism which encourage employees to identify them with the company and its activities.

4. Adopt and institute a planned and systematic approach to anticipated changes and develop plans for preparing employees for technological and environmental changes and accordingly Identify employees’ training and developmental needs and provide them with necessary development opportunities for them to advance in their career.

5. Ensure that the employment opportunities conform to the established and acceptable practices of the country.

6. Ensure that there are proper manpower planning and forecasting system in place to ensure that there will be enough people with the right skills and talents to meet company’s current and future growths and needs.

7. Ensure that people with high capabilities proven by track record reach key management positions regardless of their sex, religion, cast creed, and more importantly age and seniority in addition to putting in place succession plans for all senior management positions in the company.

70

Performance Indicators

71


Summ

ary of our perform

ance

72

Value Added Statement

Particulars2013

(BDT mn)%

2012

(BDT mn)%

Value Added

Gross premium 1,638.89 1,490.80

VAT & stamp duty 283.36 289.62

Investment & other income 230.26 163.96

Total Value Added 2,152.50 100% 1,944.38 100%

Distribution of Value Addition

To Government

VAT & Stamp Duty 283.36 13% 289.62 15%

Tax 129.10 6% 93.99 5%

To Employees

as remuneration 154.99 7% 150.97 8%

To Shareholders

as dividends 118.07 5% 123.20 6%

Retained in business

Reserve & Surplus 158.99 7% 80.73 4%

Others

Net Claims Incurred 169.20 8% 142.96 7%

Net Reinsurance Cost 755.66 35% 691.23 36%

Management Expenses 360.54 17% 407.81 21%

Additional reserve for Unexpired Risks 22.59 1% (36.13) -2%

Total Distribution 2,152.50 100% 1,944.39 100%

73


Summ

ary of our perform

ance

Economic Value AddedEconomic Value Added (EVA) is the fi nancial performance measure that attempts to measure the true economic profi t of an organization. It provides a measurement of a company’s economic achievement (success or failure) over a period of time. Such a metric is useful for investors who wish to determine how well a company has added value for its investors and it can be compared against company’s peers for a quick analysis of how well the company is operating in its industry. Companies which earn higher returns than cost of capital create value, and companies which earn lower returns than cost of capital are deemed harmful for shareholder value. Economic value added is calculated by taking a company’s net profi t after tax less cost of capital.

(BDT mn)

Particulars 2013 2012 2011

*Average shareholders’ equity at the end 1480.45 1,272.28 1,129.95

**Cost of equity (%) 11.20 13.45 13.46

Economic Value Added 111.25 32.81 68.25

Net profi t after tax 277.06 203.93 220.34

Less: Cost of equity 165.81 171.12 152.09

*Land revaluation reserve and fair value adjustment of shares were not considered while computing average shareholders’ equity.

*It is the opportunity cost i.e. the expected risk free return on investments, plus a risk premium. Interest on Bangladesh Government Sanchaya Patra plus 2% risk premium has been assumed to be the cost of equity.

Market Value Added (MVA) is the diff erence between the total market value (based on the quoted price in the main bourse) and total book value of the Company’s shares. The higher the MVA, better the Company’s position. A high MVA indicates the Company has created substantial wealth for the shareholders. A negative MVA means that the value of management’s action and investments are less than that value of the capital contributed to the Company by the capital market (or that wealth and value have been destroyed).

As of December 31, 2013 the total share market value of Reliance Insurance Limited stood at Taka 4,140.40 million whereas the book value of the Shareholder’s Equity stood 3,371.00 million, resulting a Market Value Added of Taka 769.40 million. The calculation of Market Value is given below:

ParticularsNumbers of

Shares

Value Per Share

(Taka)

Total Value

(Taka in Million)

Market Value 51,949,755 79.70 4,140.40

Book Value 51,949,755 64.89 3,371.00

Market Value Added 769.40

Market Value Added Statementfor the year ended December 31, 2013

74

Contribution to the National EconomyReliance Insurance Limited recognizes that the company has certain responsibilities to the society for their development and the development of the nation as a whole. For this, company made signifi cant contribution to the Government each year by payment of Tax, VAT, Stamp duty etc. During the year 2013 company contributed Tk. 364.74 million to the national exchequer as against Tk. 358.87 million in 2012.

Company also make an economic impact by creating employment and trained them to serve the country. Reliance Insurance Limited employed as many as 338 employees as on 31st December 2013. During the year 2013 company spent Tk. 0.83 million for training and HR development. Company

also paid a total amount of Tk.154.99 million as salary and allowances to its employees and employees of the company paid Tk. 5.90 million as taxes to the Government with highest payment of Tk. 2.72 million by an individual employees. In addition to the above, over the past many years Reliance Insurance Limited has been paying a satisfactory dividend to its shareholders placing it among the top ranking non-life insurance company in the country.

Year-wise contribution to the National Exchequer (BDT mn)

75


Summ

ary of our perform

ance

Bangladesh Non-Life Insurance Market

Composition & Reliance Share

Bangladesh non-life insurance Premium in 2012 was Taka 21,475 million. Last 6 year’s Premium growth and penetration rate (Non-life insurance premium as % of GDP) is shown in the chart below:

The non life market in Bangladesh is comprised of 43 insurance companies (45 in 2013) including one state enterprise. The Premium income of top 7 Non-life Insurance companies in 2012 and their respective market shares are shown below. It may be observed that no single insurer has a large market share. The top 7 private sector insurers collectively account for a market share of 41.45% :

Bangladesh Non-Life Insurance Market

Top 7 Non-Life Insurers Premium Income In 2012 (BDT mn) Top 7 Non-Life Companies Market Share In % 2012

Bangladesh Market Premium Growth Rate

76

Risk Defi ned

Risk is an integral part of our day to day life and is associated with the probability of an unfortunate event to occur with its possible consequences. The fundamental features of risk lie in the unpredictable, uncertain nature of the events, possible combination of hazards/threats to any venture/life, causing the possibility of loss. Risks may be categorized into two fundamental types, viz, speculative risks (where there are chances of gain/loss) and pure/operational risk (which is rather associated with unpredictable consequence of loss).

Risk Management

FrameworkAn organization needs to understand critically the risks to which it is exposed and the possible quantum of loss associated with such risks. One single incident may cause a chain of damage that ultimately be viewed as unacceptable to the shareholders. On clear understanding of the risk, the management of an organization can make decisions about the acceptability or otherwise in relation to those exposures. Risk management thus enables a management to eff ectively deal with uncertainty and its associated risks along with the opportunity for capacity building. The fundamental objective of risk management is preservation of assets and earning power from loss or destruction.

Risk management framework of an enterprise is greatly infl uenced by the risk perception of its management. Risk perception may vary from one to another depending on the risk factors pertaining to the nature of venture, socio-economic threats, volatility of political and legal environment, possibility of act of God to occur in relation to geographical strata/position, etc. and fi nally the fi nancial strength of the entrepreneur.

The basic facets of a risk management framework are: i) identifi cation of risk, ii) analysis of risk factors, iii) evaluation of risk, iv) control/mitigation of risk, and last but not the least v) risk inspection at regular interval and risk fi nancing upon review of the ensuing risk factors for loss minimization.

Risk Mitigation Methodology

Although risk can never be eliminated in full, risk, however, can be minimized. Risk management decisions, therefore, involve physical loss prevention measures and risk fi nancing tools towards minimizing risk.

Physical loss preventive measures

include

compliance of safety rules guided by Factories Act and Building Code

installation of fi re fi ghting equipment and performance of fi re drill at regular interval, and

maintenance of clean and wholesome environment for the personnel as well as for the overall workplace, etc.

Risk fi nancing tools include

Decisions regarding partial risk retention with acceptance limit and spreading / transfer of the remaining portion of risk. One of the vital risk minimizing tools is insurance; because insurance is a mechanism of spreading or transferring the risk of one onto the shoulders of many. It has two fundamental features: one is shifting of risk from one individual to a group, and the other is sharing of losses on equitable basis by all members of the group.

Whilst it becomes almost impossible for an individual to bear the entire loss of his property or interest by himself arising out of unforeseen contingency, risk fi nancing method allows the aggrieved individual to shift the burden of loss on others within the group.

Risk Management & Control Environment

Reliance Insurance ensures proper risk

management of their clients which benefi ts

them as saving resources

77


Risk managem

ent &

control environment

Insurance Risk and its Mitigation

Insurance is a mechanism of spreading the risk of one onto the shoulders of many. It has two fundamental characteristics: one is shifting of risk from one individual to a group and the other is sharing of losses on equitable basis by all members of the group. Whilst it becomes somewhat impossible for a man to bear by himself 100% loss to his own property or interest arising out of an unforeseen contingency, insurance is a method which distributes the burden of the loss on a number of persons within the group formed for this particular purpose.

From an individual point of view, insurance is an economic device whereby the individual substitutes a small certain cost (the premium) for a large uncertain fi nancial loss (the risk insured against) which would exist if it were not for the insurance contract.

One of the prime objectives of Reliance Insurance is the creation of the counterpart of risk which is security. Insurance does not take away the risk. The insurance company does not guarantee that the event insured against will not happen. The house may still burn down, the car may still be involved in an accident but at least a large element of the cost involved will be met by insurance company.

Reliance Insurance imparts technical expertise in a professional manner to the clients and loss adjusters and renders connoisseur counsels to minimize losses. In turn, the loss adjusters and clients can improve the risk to a substantial degree and minimise the possibility of the number of misfortunes. The handling of salvage after loss by the loss adjusters also contributes much to the reduction of losses.

An organisation needs to understand critically the risks to which it is exposed. One incident may cause a chain of damage that becomes unacceptable to the stakeholders. One type of incident

may cause fairly low damage but happen frequently then logically the risk is unacceptable.

On clear understanding of the risk an organisation is exposed, the organisation can make decisions about the acceptability or otherwise of those exposures. Once an understanding of those risks that have either a potential level of impact or a frequency of incident that is unacceptable has been established, then something needs to be done to bring these risks down to the acceptable level.

Reliance Insurance, through their professionals, undertakes pre-insurance surveys of large and complicated risks which thus ultimately facilitates in the defence of national property and wealth. Services basically aim at reducing the happening of the casualty itself rather than minimising the extent of loss after the happening of the casualty.

Apart from this, Reliance Insurance attempts proper handling of salvage (residue after incidence) with the ultimate object of minimizing the extent of loss which has already occurred thereby contributing to the economy or at least safeguarding the depreciation of the economy.

Without such an understanding insurance premiums and other monies spent on managing the wrong risks can be wasted. Furthermore, potentially damaging exposures can be missed, leading to direct loss or even destruction of the Company.

Risk management ensures proper understanding of the right level of risk acceptance, risk control and risk related expenditure. Furthermore, the risk and recovery planning expenditure can neither be less nor more, than the organization needs it to be.

The pre-underwriting inspection of fi re hazards to the insurable property

Reliance Insurance through their expert professionals imparts responsiveness with the clients with a view to achieve the objectives how to analyze the risk factors associated with diff erent activities, observe how risk can aff ect decision making processes, how operational risk can be managed properly with the help of insurance.

78

is of paramount importance. Before accepting risks it is prudent and essential to have the risks of the subject matter to be inspected for underwriting and reinsurance purposes. On the basis of the pre-inspection report the underwriter may recommend segregation of risk by installation of fi re proof door to reduce premium, cleanliness of factory premises and to reduce fi re hazards. Recommended fi re prevention measures not only reduce fi re hazards but also help the insured to get rebate on the rate of premium.

Reliance Insurance assumes pre-inspection of risk which is very helpful for reinsurance purpose as well. Without pre-inspection it is diffi cult to segregate “risks” and make retention and cession to reinsurers. Inspection surveyor’s advice for risk improvement largely contributes towards reducing the possibility of hazards rather than minimizing the extent of loss after the happening of the casualty.

Risk can be considered as a state of nature or a state of the world in which we live. Perceived risk might be zero, whereas the actual risk is not zero. An eff ective framework for managing risk ensures full identifi cation and awareness of signifi cant risks, which are then measured in a consistent manner across asset classes and businesses. A proper set of management controls for non quantifi able risks should also form part of this framework. It should link risk-taking activities to capital consumption and performance evaluation at various levels – product, customer, profi t – centre, business – unit and enterprise.

Reliance Insurance almost universally has embarked upon an upgrading of their fi nancial risk management and control systems to reduce their exposure to risk and better manage the amount they accept. Insurance Management of risk is a science though it is one of the most inexact of the social sciences.

Risk management exists to provide value for its stakeholders.

Risk management enables management to eff ectively deal with uncertainty and associated risk & opportunity, enhancing the capacity to build value. Reliance Insurance always considers and forecasts risk factors well so that risk can be minimized through employing risk management tools. Value maximization encompasses – aligning risk appetite & strategy, enhancing risk response decisions, reducing operational surprises and losses, identify and managing multiple and cross – enterprise risks, seizing opportunities and improving deployment of capital.

Reliance Insurance through their expert professionals imparts responsiveness with the clients with a view to achieve the objectives how to analyze the risk factors associated with diff erent activities, observe how risk can aff ect decision making processes, how operational risk can be managed properly with the help of insurance.

Reliance Insurance ensures proper risk management of their clients which benefi ts them as saving resources: time, assets, income, property, and people are all valuable resources that can be saved if fewer claims occur, protecting the reputation and public image of the clientele, preventing or reducing legal liability and increasing the stability of operations, protecting people from harm, protecting the environment, enhancing the ability to prepare for various circumstances, reducing liabilities, assisting in clearly defi ning insurance needs.

Reliance Insurance, through its eff ective risk management practice, cannot eliminate risks but the endeavour shows that the Company is committed to loss reduction or prevention and makes the client a better risk to insure as well.

79


Risk managem

ent &

control environment

For sake of establishing an effi cient risk management system, disclosure of risk in respect of date and time of occurrence of incident and its corresponding extent of loss, internal enquiry report in order to fi nd out the possible cause of such incident, measures taken to control the loss, regular safety compliance & maintenance records, etc. must be documented so that proactive measures for loss prevention can be prescribed. It is also essential for an enterprise to ensure all environmental safety compliance and as such must not be responsible for any casualty due to any default/negligence in construction and maintenance of the factory / offi ce premise. Risk disclosure is therefore vital for risk management, especially, in case of risk identifi cation, risk control and risk fi nancing.

Risk reporting disclosure helps identifi cation of physical hazards based on risk factors, analysis on measures to control risks and last but most vitally to decide on the extent of risk fi nancing. Reliance Insurance through their expert professionals imparts responsiveness with the clients with a view to achieve the objectives of how to analyse the risk factors associated with diff erent activities, observe how risks can aff ect decision making process, and how operational risks can be managed properly with the help of insurance.

Risk reporting disclosure ensures transparency of the existing risk management system that Reliance Insurance always encourages its client to maintain. It helps keeping records to aid risk inspection properly and thus arrange for proper insurance protection and provide further advisory support for better risk management.

Reliance Insurance thus ensures proper risk management of their clients which benefi ts them as saving resources: time, assets, income, property, and people are all valuable resources that can be saved if fewer claims occur, protecting the reputation and public image of the clientele, preventing or reducing legal liability and increasing the stability of operations, protecting people from harmful events, and thereby protecting the environment by enhancing competence and effi ciency, reducing liabilities, assisting in clearly defi ning insurance needs.

Reliance Insurance though cannot eliminate risks of its clientele but through its experience of effi cient risk management practice endeavours to set forth its commitment to help its clients in loss minimization or provide advisory support for loss prevention and thus makes the client to manage a better risk to insure as well. Our concerted eff orts thus aid to control overall manufacturing and business environment.

Disclosure of Risk Reporting

80

Claims Management consists of services or advisory support in respect of claims for compensation, restitution, repayment or any other remedy for loss or damage. Underwriting and claims settlement are the two vital aspects of operation of an insurance company. The basis of insurance is risk pooling, which carries the obligation of paying losses. A client obtains an insurance policy by paying a price termed as premium, with the expectation that upon happening of a loss against some named perils to the subject matter of insurance, the fi nancial losses will be indemnifi ed. Hence, out of any insurance contract, the client has the following expectations from the insurer:a) Adequate insurance coverage, which does not leave him

high and dry in time of need, with right pricing.

b) Timely delivery of defect-free policy documents with relevant guidelines endorsements/warranties/conditions.

c) Should a claim happen, quick settlement to the satisfaction of the insured.

Excellence in claims handling is a competitive edge for an insurance company and it is a service that clients greatly value. Payment of legitimate insurance claims for losses that the insured have reasonably suff ered is the primary reason for buying insurance.

Claims management is one of the crucial functions of an insurance company as it is the ultimate test of a responsible and effi cient insurer. Reliance Insurance has its corporate philosophy on claims management setting out broad approaches aimed at providing high quality service and expeditious settlement of claims. It specifi es the nature of claims service and also the IT enabled interactive process to monitor the status of the claim.

Reliance Insurance manages the claims rather than handling them. The claim handling process starts with the notifi cation of loss to Reliance Insurance and the company appoints a licensed loss adjuster immediately upon receipt of the intimation. In order to ensure speedy disposal of claims, the insured and/or their agent are always requested to submit all available supporting documents without delay. A list of minimum requirement of supporting documents/papers for claims arising under each class of business is maintained at the Head Offi ce.

Reliance Insurance undertakes all necessary steps expeditiously in an orderly sequence: contact the insured, arrange to inspect the loss through a loss adjuster, ascertain

quantum of loss and company’s liability etc. Reliance Insurance also suggests their clients the preventive measures to be adopted to avert/minimize the loss and to take steps to protect the salvage.

As soon as Reliance Insurance receives all necessary papers along with survey report from the loss adjuster, the company quickly scrutinizes all documents against its check list of requirements, verifi es the loss adjustment made by the surveyor and if in order, proceeds with the settlement of claim without any loss of time. Besides settlement of claims that are possible to dispose off during the accounting period, adequate provision for outstanding claims, if any, are also maintained against unsettled claims.

In recognition to the claims services, Reliance Insurance has been awarded a Credit Rating of AA+ in claims pay-ability by the Credit Rating Information and Services Limited (CRISL).

Outstanding Claims (IBNR and IBNER) with aging thereof

Apart from claims settled in an accounting period, outstanding liabilities against insurance claims may exist or arise in respect of claims which have been reported but not yet settled (IBNER) or against which have been incurred but not yet reported (IBNR). In general, there might be a delay in the insurer’s settlement of the claim, typical reasons are: (i) reporting delay (time gap between claims occurrence and claims reporting at the insurance company); and (ii) settlement delay, because it usually takes time to evaluate the whole size of the claim. The time diff erence between claims occurrence and claims closing (fi nal settlement) can take days (e.g. in case of property insurance) but it can also take years (typically in case of liability insurance).

Provisions are created by setting aside a portion of net premium so that the insurer is able to settle all the outstanding claim liabilities that are proximately caused by perils falling within the scope of insurance contracts. The following formula is usually applied to calculate the provision for such outstanding claims:

Total IBNR = “Pure IBNR” + “IBNER”

For sake of proper accounting practice, reserve for each outstanding claims are maintained in respect of the fi nancial years. Reserve for claims incurred but not reported (IBNR) and Reserve for claims incurred but not enough reported (IBNER) are the two terms that can be regarded as of identical

Claims Management & Details of

Outstanding Claims (IBNR & IBNER) with

Aging Thereof

81


Specifi c areas for insurance sector

meaning. In some types of work, especially in reinsurance and in the London market, IBNR provisions include any IBNER provisions.

Sometimes, the provision for claims incurred on or before the valuation date is referred to as the True IBNR or the pure IBNR.

The liability for outstanding claims in the Balance Sheet of a non-life insurance company includes a provision for both IBNR and IBNER. Technically, there is a practice of creating reserve against future liability arising out of claims which have occurred but have not yet been settled.

Incurred But Not Reported (IBNR) Losses Reserve

IBNR refers to the losses that are not fi led with the insurer or re-insurer until years after the insurance policy is sold. It is a reserve to provide for claims in respect of claim events that have occurred before the accounting date but have still to be reported to the insurer by that date. In case of a re-insurer, the reserve needs also to provide for claims that, although known to the cedant, have not yet been reported to the re-insurer as being liable to involve the re-insurer.

IBNR refl ects the total amount owed by the insurer to all valid claimants who have had a covered loss but have not yet reported it. Since the insurer knows neither how many of these losses (the frequency) have occurred, nor the severity of each loss, IBNR is necessarily an estimate. The quality of this estimation is often used as a tool in assessing the fi nancial accounting skills of a given insurer. Insurers track IBNR by policy periods (when incepted), along with other categorizations.

The characteristics of IBNR makes it look more like a reserve or provision for the particular types of losses not reported, hence gives a better estimation of profi ts for the insurer’s current business period.

Incurred But Not Enough Reported (IBNER) Loss Reserve

IBNER refers to a reserve refl ecting expected changes (increases and decreases) in estimates for reported claims only. The abbreviation is sometimes stated as applying to “incurred but not enough reserved”.

Some liability claims may be fi led long after the event that caused the injury to occur. Asbestos-related diseases, for instance, do not show up until decades after the exposure. Reserve for such outstanding claims also has to be created adequately against IBNER losses.

IBNER also refers to estimates made about claims already reported but where the full extent of injury is not yet known, such as, workmen’s compensation claim where the degree to which work-related injuries prevents a worker from earning what he or she earned before the injury unfolds over time. Reliance Insurance regularly adjusts reserves for such losses as and when new information becomes available.

As per the existing directives of our local Insurance Regulatory body IDRA (Insurance Development and Regulatory Authority) of Bangladesh, quarterly reporting of all outstanding claims with aging thereof including their specifi c reasons for delay in settlement of such respective outstanding claims is mandatory. Reliance Insurance maintains an adequate provision against each of such outstanding claims with respective aging thereof. Under the current Insurance Laws of Bangladesh, it is not yet obligatory to provide reserves for IBNR and/or IBNER claims. However, in accordance to the solvency margin regulations proposed under Insurance Act 2010, such reserves will be required to be maintained in the manner to be prescribed by the relevant Rules.

Solvency margin is the amount by which the assets of an insurer exceed its liabilities, and will form part of the insurer’s shareholder’s funds. Method of valuations of assets and liabilities of an insurer are prescribed in the insurance regulations. The regulations stipulate the minimum solvency margin, which an insurer must maintain at all times. The solvency of an Insurance Company corresponds to its ability to pay claims. The solvency of insurance Company or its fi nancial strength depends chiefl y on whether suffi cient technical reserves have been set up for the obligations entered into and whether the Company has adequate capital as security.

Moreover solvency margin assists fi nancial investment managers when making a decision on the risk or reward capability of a company to return dividends to stockholders. In Bangladesh regulations for solvency margin for non-life insurance Company has not yet been fi nalized by the regulator.

Solvency Margin

82

2013 2012

R/I premium ceded as % of gross premium 57.03 56.99

Commission Paid as % of Gross Premium 14.02 19.17

Net R/I Commission Earned as % of Gross Premium 10.92 10.63

Net R/I Commission Earned as % of Net Premium 25.42 24.71

Management Expenses (Revenue A/C) as % of Gross Premium 14.21 14.88

Management Expenses (Revenue A/C) as % of Net Premium 33.06 34.61

Combined ratio as % on Gross Premium 86.03 *87.58

Combined ratio as % on Net Premium 67.50 *71.13

Net Claims Incurred as % of Gross Premium 10.32 9.59

Net Claims Incurred as % of Net Premium 24.03 22.30

Underwriting Result as % of Gross Premium 13.97 12.42

Underwriting Result as % of Net Premium 32.50 28.87

Accounting Ratios Partaining

to the Insurance Sector

* Combined Ratios 2012 has been restated.

83


Specifi c areas for insurance sector

Review of Assets QualityReliance insurance Limited always focuses on the superior assets quality so that these will bring highest value to the Company, ensure satisfactory return to the stakeholders and ensure sustainable development. To perform the said objectives, company has the policy to review of its assets periodically and as a result of continuous monitoring and development of the assets quality, Company could achieve the hefty growth for the past years. Following fi gures showing fi ve years growth of the assets may demonstrate how the Company maintains its assets quality to increase value to the Company.

Reliance ensures high degree of liquidity of its assets - around 60% of its assets comprise of cash and quickly disposable shares and securities. Its share investment portfolio comprise of investments into companies with strong fundamentals. Notwithstanding rather adverse performance of stock markets in Bangladesh during the year 2013, Reliance could earn its investment income better than 2012, which bear testimony to the prudent investment policies followed by the Company.

Position of Total Assets

YearProperty, plant &

equipmentsInvestments

Cash, Fixed

Deposit and

Bank Balances

Other assets Total

2009 352.14 190.52 759.87 577.76 1,880.29

2010 539.78 2,673.34 791.89 600.92 4,605.93

2011 1,403.49 1,539.70 864.80 722.85 4,530.84

2012 1,387.94 1,254.70 1,228.74 539.36 4,410.74

2013 1,378.88 1,301.27 1,559.30 556.93 4,796.38

Position of Investable Assets

Particulars 2013 % 2012 %

Share & Debentures

Long term 1,236.96 29.1 1,209.04 31.2

Short term 64.32 1.5 45.66 1.2

Total 1,301.27 30.7 1,254.70 32.4

Cash in Bank 1,559.30 36.7 1,228.74 31.7

Fixed assets and other 1,384.89 32.6 1,392.44 35.9

Total 4,245.47 100.0 3,875.88 100.0

Total assets (BDT mn) Investable Assets (BDT mn)

85


Financial perform

ance

The Audit Committee of the Reliance Insurance Limited comprises of fi ve Directors nominated by the Board of Directors. The Chief of Internal Control & Audit Division has direct access to the Committee and the Committee directly reports to the Board. It operates according to the Terms of Reference as approved by the Board and in compliance with section 3 of the Securities and Exchange Commission Notifi cation No.SEC/CMRRCD/2006-158/134/Admn/44 dated 07 August 2012. The Audit Committee comprises of the following members:

Mr. Anis-uz-Zaman Khan, Chairman

Mr. Habibullah Khan, Member

Mr. Md. Khalilur Rahman Choudhury, Member

Mr. Amanullah Chowdhury, Member

Mr. Atiqur Rahman, Member

During the year under review i.e. 2013, four (4) meetings of the Audit Committee were held to carry out the following tasks:

Reviewed and discussed the Management Report by External Auditor for the year ended December 31, 2013 and management’s response (s) to the report.

Reviewed the appointment of External Auditors.

Reviewed quarterly and half yearly Financial Statements.

Reviewed various reports of Internal Control & Audit Division on operational, fi nancial procedures and

Branch activities and recommended appropriate measures to the management arising out of the fi ndings of such reports.

Reviewed the status report of Audit Plan 2013 and also approved the Audit Plan for 2014

During its meeting held on February 22, 2014, the Audit Committee reviewed and examined the internal audit reports on the draft annual fi nancial statements for the year 2013 and recommended the audited accounts for the year 2013 to the Board of Directors for their consideration and approval.

The Audit Committee is of the view that the internal control and procedures are adequate to present a true and fair view of the activities and fi nancial status of the Company. Finally, the Audit Committee would like to convey their appreciation to the members of the Board, key Management personnel and Internal Audit Division for the cooperation and support received during the year 2013.

Anis-uz-Zaman Khan

ChairmanAudit Committee

Report of the Audit Committee

86

The fi nancial statements are prepared in accordance with Bangladesh Accounting Standards issued by the Institute of Chartered Accountants of Bangladesh and in compliance with Insurance Act 2010, Company Act 1994, the Securities and Exchange Rules 1987 and the Listing Regulations of the Dhaka and Chittagong Stock Exchanges.

We are responsible for establishing and maintaining proper internal control system. We have designed such control or caused such control to be designed under our supervision, to ensure that material information relating to the Company is made known to us and for safeguarding the Company’s assets and preventing and detecting fraud and error.

We have evaluated the eff ectiveness of the Company’s internal control system and are satisfi ed that the internal control system were eff ective as of the end of the period under review. Moreover signifi cant estimates and accounting policies that involve a high degree of complexity and judgment were discussed with our external auditors and the audit committee of the Board.

We certify to the Board that:-

(i) We have reviewed fi nancial statements for the year and that to the best of our knowledge and belief;

a) these statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading;

b) these statements together present a true and fair view of the Company’s aff airs and are in compliance with existing accounting standards and applicable laws.

(ii) There are, to the best of our knowledge and belief, no transaction entered into by the Company during the year which are fraudulent, illegal or violation of the Company’s code of conduct.

Mohammed Sabir Ahmed Akhtar Ahmed Chief Financial Offi cer Managing Director & CEO

Responsibility Statement of Chief

Executive Offi cer & Chief Financial Offi cer Including Duties as per Condition No. 6 of Corporate Governance Guidelines

87

Financial perform

ance

We have audited the accompanying Statement of Financial Position of Reliance Insurance Limited as at 31 December, 2013 and the related Statement of Comprehensive Income, Statement of Cash Flows, Statement of Change in Equity and Notes for the period from January 1, 2013 to December 31, 2013.

Respective Responsibilities of Directors and Auditors:

The preparation of these fi nancial statements is the responsibility of the company’s management. Our responsibility is to express an independent opinion on these fi nancial statements based on our audit.

Basis of Audit opinion:

We conducted our audit in accordance with Bangladesh Standard on Auditing (BSA). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatements. An audit also includes examining, on a test basis, evidence supporting the amount and disclosures in the fi nancial statements. An audit also includes assessing the accounting principles used and signifi cant estimates made by the management, as well as evaluating the overall fi nancial statements presentation. We believe that our audit provides a reasonable basis for our opinion.

Opinion:

In our opinion, the fi nancial statements are prepared in accordance with Bangladesh Accounting Standards (BAS), give a true and fair view of the state of Company’s aff airs as at December 31, 2013 and of the results of its operations and its cash fl ows for the period then ended and comply with the companies Act 1994, The Insurance Act 2010, the Securities and Exchange Rules 1987, Bangladesh Accounting Standards and other applicable laws and regulations.

We also report that:

a) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit and made due verifi cation thereof;

b) The company Management has followed relevant provision of laws and rules in managing the aff airs of the company and proper books of accounts, record and other statutory books have been properly maintained and (where applicable) proper returns adequate for the purposes of our audit have been received from branches not visited by us.

c) In our opinion, the Company has kept proper books of accounts as required by law so far as it appeared from our examination of those books;

d) As per section 63(2) of the Insurance Act 2010, we certify that to the best of our knowledge and belief and according to the information and explanation given to us, all expenses of management wherever incurred and whether incurred directly or indirectly, in respect of insurance business of the company transacted in Bangladesh during the year under report have been duly debited to the related Revenue Account and the Statement of Comprehensive Income of the Company.

e) We certifi ed that to the best of our information and as shown by its books, the company during the year under report has not paid any commission to any person in any form outside Bangladesh in respect of any of its business re-insured abroad.

c) The Company’s Statement of Financial Position, Statement of Comprehensive Income and its Statement of cash fl ows dealt with by the report are in agreement with the books of account and returns;

d) The expenditure incurred was for the purpose of the company’s business.

Dated: Dhaka Malek Siddiqui Wali Feb 23, 2014 Chartered Accountants

Auditors’ Report To the Shareholders of Reliance Insurance Limited

88

Statement of Financial Positionas of December 31, 2013

Particulars Notes 2013

Taka

2012

Taka

Shareholders' Equity & Liabilities

Shareholders' equity 3,370,996,113 3,195,762,743

Share capital 3.00 519,497,550 472,270,500

Reserves and surplus 4.00 2,851,498,563 2,723,492,243

Liabilities and Provisions 1,425,385,043 1,214,979,528

Balance of funds and accounts 5.00 282,444,612 259,855,804

Premium deposit 6.00 251,753,177 200,503,495

Deferred liability for employees gratuity 54,614,110 49,172,724

Unpaid dividend 1,653,463 1,128,658

Estimated liability in respect of outstanding claims whether due or intimated 7.00 196,262,490 156,333,453

Amounts due to other persons or bodies carrying on insurance business

8.00 120,199,981 119,559,663

Outstanding refundable premium 9.00 1,170,933 753,827

Sundry creditors 10.00 517,286,277 412,037,833

Overdrawn on current account - 15,634,071

Total shareholders’ equity & liabilities 4,796,381,156 4,410,742,271

The annexed notes 1 to 35 form an integral part of these fi nancial statements

Dated, Dhaka Shahnaz Rahman Atiqur Rahman

Feb 23, 2014 Chairman Director

89


Financial perform

ance

Statement of Financial Positionas of December 31, 2013

Particulars Notes 2013Taka

2012 Taka

Assets

Non-Current assets 2,686,168,932 2,647,137,848

Property, plant & equipments 11.00 1,378,876,088 1,387,936,600

Fixed assets under construction 12.00 6,018,702 4,503,702

Investments 13.00 1,301,274,142 1,254,697,546

Current assets 2,098,059,011 1,752,348,533

Inventories 14.00 7,534,978 6,586,977

Sundry debtors (including advances, deposits and prepayments) 15.00 386,744,366 370,881,595

Premium control account 16.00 38,820,473 56,108,142

Interest receivable account 17.00 74,840,275 60,874,278

Amount due from other persons or bodies carrying on insurance business

18.00 30,816,576 29,158,979

Cash and cash equivalents 1,559,302,343 1,228,738,562

Cash in hand 385,671 440,246

Cash at bank 19.00 74,970,912 121,252,556

Fixed deposit 20.00 1,483,945,760 1,107,045,760

Deferred tax assets 12,153,213 11,255,890

Total assets 4,796,381,156 4,410,742,271

Md. Khalilur Rahman Choudhury

DirectorAkhtar Ahmed

Managing Director & CEOMalek Siddiqui Wali

Chartered Accountants

90

Statement of Comprehensive IncomeFor the year ended December 31, 2013

Profi t & Loss Appropriation Account


Taka

2012

Taka

Expenses of management 52,981,917 51,129,862

(Not applicable to any particular fund or account)Director’s meeting attendance fees 580,750 546,250Fees and charges 338,813 439,200Advertisement and sign board 3,974,059 2,421,617Donations 400,000 1,705,535Subscriptions 1,886,864 1,174,967Legal and Professional fees 1,065,612 927,529Employees welfare expenses 170,000 191,000Securities services 381,040 461,580Tax deduction at source 1,341,109 2,883,725Depreciation 21,893,010 20,265,395Registration fees 5,501,910 4,977,210Bonus 15,000,000 14,718,354Audit fees 448,750 417,500Profi t before tax 406,162,778 297,920,768

129,102,678 93,994,263

Provision for companies income tax 21.00 130,000,000 94,000,000 Deferred tax assets/(liabilities) (897,322) (5,737)

Profi t after tax transferred to profi t & loss appropriation account 277,060,100 203,926,505

Total 459,144,695 349,050,630


Taka

2012

Taka

188,490,449 187,314,028

Reserve for exceptional losses 4.01 70,422,824 64,113,028 Dividend for the year- 2012 118,067,625 123,201,000 Balance transferred to balance sheet (Note-4) 321,874,336 233,304,686 Total 510,364,786 420,618,713


Taka

2012

Taka

Weighted average no. of outstanding shares 51,949,755 51,949,755

Earnings per share 5.33 3.93(Basic earnings per share-par value Tk. 10 each)

The annexed notes 1 to 35 form an integral part of these fi nancial statements



91


Financial perform

ance

Statement of Comprehensive IncomeFor the year ended December 31, 2013

Profi t & Loss Appropriation Account

Other Comprehensive Income


Taka

2012

Taka

Profi t/(Loss) transferred from: 228,882,154 185,094,327

Fire revenue account 33,441,776 (14,225,409)Marine revenue account 162,358,914 146,172,618 Miscellaneous revenue account 33,081,464 53,147,118

Interest and dividend income 22.00 187,415,622 140,947,090

Other Income 23.00 42,846,919 23,009,213

Total 459,144,695 349,050,630


Taka

2012

Taka

Opening Balance of Appropriation account 233,304,686 216,692,208

Net Profi t after tax for the year brought down 277,060,100 203,926,505

Total 510,364,786 420,618,713


Taka

2012

Taka

Profi t after tax 277,060,100 203,926,505

Other comprehensive income: (32,936,878) (374,085,647)

Changes in fair value the shares available-for-sale 13.04 (32,936,878) (374,085,647)

Total Comprehensive Income for the year 244,123,222 (170,159,142)





92

Fire Insurance Revenue AccountFor the year ended December 31, 2013


Taka

2012

Taka

Claims under policies less re-insurances 32,771,749 45,124,613

Claims paid during the year 137,950,535 188,156,165

Paid/Adjusted on PSB 109,209 40,639

Paid on re-insurance acceptance - 516,475

Recovered/adjusted on reinsurance ceded (105,125,471) (149,224,101)

Claims outstanding at the end of the year 468,503,774 149,552,402

Recoverable on reinsurance cedence (439,121,383) (120,007,487)

Claims outstanding at the end of the previous year (29,544,915) (23,909,480)


Commission 121,933,980 145,079,049

Profi t/(Loss) transferred to Statement of Comprehensive Income 33,441,776 (14,225,409)

Balance of account at the end of the year 5.00 77,968,988 78,468,565

as shown in the Statement of fi nancial position being reserve for unexpired risks @ 40% of premium income of the year

Total 385,819,422 377,458,572



93


Financial perform

ance

Fire Insurance Revenue AccountFor the year ended December 31, 2013


Taka

2012

Taka

Balance of Account at the beginning of the year 78,468,565 80,554,973

Premium less reinsurances 194,922,469 196,171,414 Premium underwritten 847,168,202 831,551,197

Premium refunded (7,792,736) (9,227,507)

Premium on PSB 3,093,169 2,794,350

Reinsurance premium on PSB (2,093,180) (1,615,542)

Premium on reinsurance accepted 1,229,335 1,634,977

Reinsurance premium ceded (646,682,321) (628,966,061)

Commission on reinsurances 112,428,388 100,732,185 Commission earned on re-insurance ceded 112,138,028 100,493,827

Commission earned on PSB 290,360 238,358

Total 385,819,422 377,458,572





94

Marine Insurance Revenue AccountFor the year ended December 31, 2013


Taka

2012

Taka

Claims under policies less re-insurances 40,423,002 23,642,016

Claims paid during the year 67,904,069 72,741,367

Paid/adjusted on PSB 3,041,745 87,867

Recovered/adjusted on PSB (2,666,656) (21,782)

Paid on re-insurance acceptance - 130,055

Recovered/adjusted on reinsurance ceded (37,831,650) (30,079,122)

Claims outstanding at the end of the year 107,791,831 127,156,000

Recoverable on reinsurance cedence (20,717,074) (50,056,737)

Claims outstanding at the end of the previous year (77,099,263) (96,315,632)


Commission 61,145,575 96,037,617

Profi t/(Loss) transferred to Statement of Comprehensive Income 162,358,914 146,172,618

Balance of account at the end of the year 5.00 113,596,189 107,441,703

as shown in the Statement of fi nancial position being reserve for unexpired risks @ 40% of premium income of the year (Marine Cargo)

113,058,201 101,768,881

as shown in the Statement of fi nancial position being reserve for unexpired risks @ 100% of premium income of the year (Marine Hull)

537,988 5,672,822

Total 438,657,002 432,641,120



95


Financial perform

ance

Marine Insurance Revenue AccountFor the year ended December 31, 2013

Particulars Notes2013

Taka

2012

Taka

Balance of Account at the beginning of the year 107,441,703 126,121,468

Premium less reinsurances 282,107,515 260,095,024

Premium underwritten 422,840,071 386,766,224

Premium refunded (5,779,254) (423,063)

Premium on PSB 14,746,254 13,175,428

Reinsurance premium on PSB (9,925,129) (9,855,947)

Premium on reinsurance accepted 4,121,495 2,922,225

Reinsurance premium ceded (143,895,922) (132,489,843)

Commission on reinsurances 49,107,784 46,424,628

Commission earned on re-insurance ceded 44,479,840 44,119,949

Profi t commission 2,747,985 460,659

Commission earned on PSB 1,879,959 1,844,020

Total 438,657,002 432,641,120

Md. Khalilur Rahman ChoudhuryDirector

Akhtar AhmedManaging Director & CEO

Malek Siddiqui WaliChartered Accountants

96

Miscellaneous Insurance Revenue AccountFor the year ended December 31, 2013

Particulars Notes

2013 2012

Total

Taka

Motor

Taka

Misc.

Taka

Total

Taka

Claims under policies less re-insurances 50,456,982 45,552,145 96,009,127 74,194,877

Claims paid during the year 52,490,739 15,607,646 68,098,385 63,122,078

Paid/adjusted on PSB 83,343 471,095 554,438 1,964,137

Recovered/adjusted on PSB - (458,004) (458,004) (1,752,023)

Recovered/adjusted on reinsurance ceded - (2,301,759) (2,301,759) (2,248,053)

Claims outstanding at the end of the year 29,203,900 72,312,100 101,516,000 68,677,000

Recoverable on reinsurance cedence - (21,710,659) (21,710,659) (18,987,726)

Claims outstanding at the end of the previous year (31,321,000) (18,368,274) (49,689,274) (36,580,537)

Expenses of management 24,363,328 27,627,842 51,991,170 39,534,850

Commission 21,526,269 25,113,997 46,640,266 44,647,150

Profi t/(Loss) transferred to Statement of

Comprehensive Income

60,297,745 (27,216,281) 33,081,464 53,147,118

Balance of account at the end of the year 5.00 65,684,843 25,194,594 90,879,437 73,945,536

as shown in the Statement of fi nancial position being reserve for unexpired risks @ 40% of premium income of the year

Total 222,329,167 96,272,297 318,601,464 285,469,532



97


Financial perform

ance

Miscellaneous Insurance Revenue AccountFor the year ended December 31, 2013

Particulars Notes

2013 2012

Total

Taka

Motor

Taka

Misc.

Taka

Total

Taka

Balance of Account at the beginning of the

year

57,820,749 16,124,787 73,945,536 89,308,577

Premium less reinsurances 164,212,107 62,986,483 227,198,590 184,863,843

Premium underwritten 167,071,072 169,758,389 336,829,461 243,128,016

Premium refunded (1,802,014) (680,640) (2,482,654) (1,209,500)

Premium on PSB 1,820,578 23,091,247 24,911,825 19,704,466

Reinsurance premium on PSB (115,352) (22,494,820) (22,610,172) (18,065,285)

Reinsurance premium ceded (2,762,177) (106,687,693) (109,449,870) (58,693,855)

Commission on reinsurances 296,311 17,161,027 17,457,338 11,297,112

Commission earned on re-insurance ceded 296,311 14,795,080 15,091,391 9,449,498

Profi t Commission - - - 362,739

Commission earned on PSB - 2,365,947 2,365,947 1,484,874

Total 222,329,167 96,272,297 318,601,464 285,469,532





98

Classifi ed Summary of AssetsAs at December 31, 2013

(Amount in Taka)

Particulars2013

Book Value

2012

Book Value

Non Current Assets:

Property, Plant & Equipments

Land 1,182,187,500 1,182,187,500

Building 156,536,850 165,744,900

Furniture & fi xtures 15,144,565 16,134,341

Offi ce equipments & IT installation 4,191,796 3,439,198

Air coolers 1,589,943 453,208

Vehicles 14,573,523 14,343,778

Fans 53,920 70,722

Electrical equipments 4,126,085 4,947,754

Telephone installation 471,906 615,199

Sub Total 1,378,876,088 1,387,936,600

Fixed Assets Under Construction 6,018,702 4,503,702

Investments

Bangladesh Govt. treasury bond 25,000,000 4,500,000

Debentures 1,998,059 2,358,292

Shares of listed companies 1,131,099,996 1,110,671,258

Shares of unlisted companies 1,569,450 1,569,450

Orascom bond 8,000,000 12,000,000

IDLC 29,318,637 26,798,546

Mutual fund 104,288,000 96,800,000

Sub Total 1,301,274,142 1,254,697,546



99


Financial perform

ance

Classifi ed Summary of Assets (contd...)As at December 31, 2013

Particulars2013

Book Value

2012

Book Value

Current Assets

Fixed deposits & SND accounts with bank 1,550,773,583 1,221,677,661

Cash in hand & current account with bank 5,528,760 5,060,901

Remittance in transit 3,000,000 2,000,000

Premium control account 38,820,473 56,108,142

Interest accrued & overdue 370,000 536,280

Interest accrued but not due 74,470,275 60,337,998

Sundry debtors 386,744,366 370,881,595

Stock of Stationery 1,058,384 1,014,768

Stamps in hand 6,476,594 5,572,209

Amount due from other persons or bodies carrying on insurance business 30,816,576 29,158,979

Sub Total 2,098,059,011 1,752,348,533

Other Assets

Deferred tax assets 12,153,213 11,255,890

Total Assets 4,796,381,156 4,410,742,271

(Amount in Taka)





100

Statement of Cash FlowsFor the year ended December 31, 2013

Particulars2013

Taka

2012

Taka

Cash fl ow from operating activities : 261,723,945 401,532,528

Collection from premium & other income 2,063,183,778 2,389,060,496

Payment for management expense, re-insurance and claim (1,472,658,667) (1,667,379,370)

VAT paid (207,234,986) (208,174,156)

Income tax paid (81,386,323) (69,243,922)

TDS & VDS paid (40,179,857) (42,730,520)

Cash fl ow from investing activities : 127,158,242 12,415,557

Acquisition of fi xed assets (13,873,545) (7,267,215)

Proceeds from disposal of fi xed assets 4,119,973 29,030

Payment against purchase of investments (94,139,474) (85,000,000)

Redeemption of debentures 360,233 720,466

Amortization of OTBL bond 4,000,000 4,000,000

Proceeds from disposal of investments 83,822,000 -

Dividend received 7,734,488 5,955,291

Interest received 155,634,567 93,977,985

Govt. Treasury Bond (20,500,000) -

Cash fl ow from fi nancing activities : (58,318,406) (50,011,489)

Dividend Paid (58,318,406) (50,011,489)

Net increased / (decreased) 330,563,781 363,936,596

Reconciliation: 330,563,781 363,936,596

Cash at the beginning of the year 1,228,738,562 864,801,966

Cash at the end of the year 1,559,302,343 1,228,738,562







101


Financial perform

ance

Sta

tem

en

t o

f C

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es

in S

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Eq

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(Am

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233

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- -

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Cash

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(70,

840,

575)

(70,

840,

575)

(70,

840,

575)

Net

pro

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- -

- -

- -

277

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2

77,0

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102

1.00 Legal form of the Company

Reliance Insurance Ltd was incorporated as a public limited Company in Bangladesh in the year 1988 under the Companies Act 1913 (present 1994). The Company, within the stipulations laid down by Insurance Act 2010 and directives as received from Insurance Development & Regulatory Authority (IDRA) time to time, provides Non-life Insurance services. The company is listed with Dhaka Stock Exchange and Chittagong Stock Exchange as a Publicly Traded Company. The Company carries its insurance activities through thirty one branches throughout the country.

1.01 Principal Activities and Nature of Operations

The principal activity of the company continued to be carrying on non-life insurance business. There were no signifi cant changes in the nature of the principal activities of the Company during the year 2013 under review.

1.02 Date of Financial Statements authorized for issue

Financial Statements of the Company for the year ended December 31, 2013 were authorized for issue on Feb 23, 2014 in accordance with a resolution of the Board of Directors.

2.00 Summary of Signifi cant Accounting and Related Policies

2.01 Basis of preparation

The fi nancial statements of the Company under reporting have been prepared under historical cost convention in a going concern concept and on accrual basis in accordance with Generally Accepted Accounting Principles and practice in Bangladesh. Disclosure of fi nancial information as required by Insurance Act 2010 have been complied with while preparing statement of fi nancial position , statement of comprehensive income and revenue accounts for specifi c classes of insurance business in the form set forth in the fi rst, second and third schedule of the Insurance Act and also in compliance with the Companies Act 1994. In addition, the Bangladesh Securities and Exchange Commission Rules 1987, Listing Regulations of Dhaka Stock Exchange Ltd. (DSE) & Chittagong Stock Exchange Ltd. (CSE), International Accounting Standards (IAS) as adopted by the Institute of Chartered Accountants of Bangladesh (ICAB), as Bangladesh Accounting Standards (BAS) have also been complied with.

2.02 Premium Recognition

Premium is recognized when insurance policies are issued, but the premium of Company’s share of public sector insurance business (PSB) is accounted for in the year in which the statements of account from Sadharan Bima Corporation are received. Up to 31 December 2013 statements of account for the period 01 July 2012 through 30 June 2013 have been received and, accordingly, the Company’s share of PSB for that period has been recognized in these fi nancial statements.

2.03 Accounting Estimates

Preparation of fi nancial statements requires Management to make judgments, estimates and assumptions that aff ect the application of policies and reported amount of assets and liabilities, income and expenses. The estimates and underlying assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments amount carrying values of assets and liabilities that are not readily apparent from other sources. While Management believes that the amounts included in the fi nancial statements refl ect the company’s best estimates and assumptions, actual result could diff er from estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions of the accounting estimates are recognized in the period in which the estimates are revised.

Signifi cant areas requiring the use of Management estimates in these fi nancial statements relate to the useful life of depreciable assets and provisions for loans. However, assumptions and judgments made by Management in the application of accounting policies that have signifi cant eff ect on the fi nancial statements are not expected the result in material adjustment to the carrying amount of assets and liabilities in the next year.

2.04 Functional and presentation currency

The Financial Statements are presented in Bangladeshi Taka which is the Company’s functional currency.

Reliance Insurance Limited Notes to the Financial Statements For the Year ended 31 December 2013

103


Financial perform

ance

2.05 Materiality and aggregation

Each material class of similar items is presented separately in the Financial Statements. Item of a dissimilar nature or function are presented separately unless they are immaterial.

2.06 Foreign currency transaction

All foreign exchange transactions are converted to Bangladeshi Taka, which is the reporting currency, at the rate of exchange prevailing at the time the transaction were eff ected. Insurance contracts which were underwritten in foreign currency are converted to Bangladeshi Taka at the rate of exchange prevailing at the time of underwriting and revenue is recognized accordingly.

2.07 Property, plant and equipment

2.07.01 Recognition and measurement

Property, Plant and Equipment are recognized if it is probable that future economic benefi ts associated with the asset will fl ow to the Company and cost of the asset can be measured reliably. Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use and the cost of dismantling and removing the items and restoring the site on which they are located.

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment. When revalued assets are sold, the relevant amount included in the revaluation reserve is transferred to retained earnings.

2.07.02 Subsequent cost

The cost of replacing a component of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefi ts associated with the part will fl ow to the Company and its cost can be measured reliably. The carrying amount of the replaced component is de-recognised.

2.07.03 Revaluations

Revaluation on freehold land and building is performed by professionally qualifi ed valuers. The frequency of revaluations depends upon the movements in the fair values of the items of property, plant and equipment being revalued. Usually Land and buildings are revalued every two to three years. The revaluation surplus is recognised in the net carrying amount of the assets and is transferred to revaluation reserve after restating the asset at the revalued amount. Any revaluation loss is directly recognised in the Statement of Comprehensive Income but any revaluation loss arising from an asset which has been previously recognized in the revaluation reserve is debited to the extent of any credit balance existing in the revaluation reserve in respect of that asset.

2.07.04 Depreciation

Depreciation on fi xed assets is charged on straight-line method on the estimated useful lives of the assets. Depreciation of an asset begins when the asset is available for use. Full month’s depreciation has been charged on additions in irrespective of date when the related assets are put in to use and no depreciations is charged for the month of disposal. Asset category wise depreciation rates are as follows:

Particulars Rate

Offi ce Building (SPL Tower) 5%Furniture & Fixture 10%Motor Vehicles 20%Offi ce & Electrical Equipments 15%Miscellaneous Items 20%

104

2.07.05 De-recognition

An item of property, plant and equipment is de-recognised upon disposal or when no future economic benefi ts are expected from its use. Any gain or loss arising on de-recognition of the asset is included in the statement of Comprehensive income in the year the asset is de-recognized.

2.07.06 Impairment of assets

The carrying amounts of the company’s non fi nancial assets, other than deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. An impairment loss is recognized if the carrying amount of an asset or its cash generating unit exceeds its estimated recoverable amount. Impairment losses are recognised in the statement of comprehensive income. Considering the present conditions of the assets, management concludes that there is no such indications exist.

2.08 Investment In Shares

All investments of RIL are initially recognized at cost, being the fair value of the consideration given which include transaction cost and these are classifi ed into the following categories:

2.08.01 Held To Maturity

Investments with fi xed maturity that the management has the intent and ability to hold to maturity are classifi ed as held to maturity and are initially measured at cost.

2.08.02 Held for Trading

These fi nancial assets are acquired principally for the purpose of generating profi t from short-term fl uctuation in prices.

2.08.03 Available for Sale

Available for sale investments are those non-derivative investments that are designated as available for sale or are not classifi ed in any other category. These are primarily those investments that are intended to be held for an undefi ned period of time or may be sold in response to the need for liquidity are classifi ed as available for sale. The Company follows trade date accounting for ‘regular way purchase and sales’ of investments.

2.09 Employee Benefi ts

2.09.01 Defi ned Contribution Plan

Company operates a provident fund, recognized by the Income Tax Authorities. Confi rm employees of the Company are eligible for the said provident fund. Employees of the Company will contribute ten percent of their basic salary and the employer will make a matching contribution. The provident fund is wholly administered by a Board of Trustees and no part of the fund is included in the assets of the Company.

2.09.02 Gratuity

The Company operates a gratuity scheme under which a regular confi rmed employee is entitled to benefi t at a graduated scale based on the length of service. The Length of service for the purpose of gratuity shall be reckoned from the date of joining in the regular service of the Company. Calculation of gratuity is made on the basis of last drawn basic salary. An employee will receive one month’s basic salary for each completed year of service if he/she completed fi ve years & above but less than ten years of continuous services and two month’s basic salary for each completed year of service if he/she completed ten years & above of continuous services. Gratuity will be payable only on their separation from the company.

2.09.03 Other benefi ts

In addition to the above, Reliance Insurance Limited is providing other benefi ts to its employees like Performance Linked Variable Bonus ( PLV), Group Life Scheme (GLS), Group Medical Benefi ts plan, House Building Loan Scheme and Car/Motor Cycle Loan Scheme subject to fulfi llment of certain terms and conditions.

105


Financial perform

ance

2.10 Investment Income Recognition

2.10.01 Interest and dividend

Interest on debentures, Bangladesh Government Treasury Bond and FDRs are recognized on accrual basis after making provision for income tax deductible at source. Interest on STD/SND account, cash dividend on investment in shares and other income are recognized as and when amount credited to our account. For stock dividend that received by the company against its investment, number of shares increased and average cost of investment decreased.

2.10.02 Other Income

Other income is recognized on an accrual basis. Net gains and losses of the revenue nature on the disposal of Property, Plant & Equipment and other non-current assets including investments have been accounted for in the Statement of Comprehensive Income, having deducted from the proceeds on disposal, the carrying amount of the assets and related selling expenses.

2.11 Expenses and Taxes

2.11.01 Recognition of Expenses

Expenses are recognised in the Statement of Comprehensive Income on the basis of a direct association between the cost incurred and the earning of specifi c heads of income. All expenditure incurred has been charged to the Statement of Comprehensive Income in the running of the business and in maintaining the property, plant and equipment in a state of effi ciency.

2.11.02 Borrowing Costs

Borrowing costs that are directly attributable to the acquisition and construction of a qualifying asset form part of the cost of that asset and, therefore, should be capitalised. Other borrowing costs are recognised as an expense.

2.12 Income tax

Income tax expense comprises current tax and deferred tax. Income tax expense is recognized in the Statement of Comprehensive Income.

2.12.01 Current Tax

The tax currently payable is based on taxable profi ts for the year. Taxable profi ts diff ers from profi ts as reported in the Statement of Comprehensive Income because it excludes items of income or expenses that are taxable or deductible in other year or are never taxable or deductible. Company’s liability for current tax is calculated using tax rates that have been enacted the balance sheet date.

2.12.02 Deferred tax assets

Deferred tax is recognized on diff erences between the carrying amounts of assets and liabilities in the fi nancial statements and the corresponding tax bases used in the computation of taxable profi t and are accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognized for all taxable temporary diff erence. Deferred tax assets are generally recognized for all deductible temporary diff erences to the extent that it is probable that taxable profi ts will be available against which such diff erences can be utilized. Deferred tax is charged or credited to the Statement of Comprehensive Income.

2.13 Reserve or Contingencies Accounts

2.13.01 Reserve for exceptional losses

As per Para 6 of the 4th schedule, to meet the exceptional losses, Company sets aside ten percent of the premium income of the year in which it is set aside from the balance of the profi t to the Reserve for exceptional losses

2.13.02 Land revaluation reserve

The Land revaluation surplus is transferred to revaluation reserve after restating the asset at the revalued amount. Any revaluation loss is directly recognized in the Statement of Comprehensive Income but any revaluation loss arising from an asset which has been previously recognized in the revaluation reserve is debited to the extent of any credit balance existing in the revaluation reserve in respect of that asset.

106

2.14 Segment Reporting

A business segment is a distinguishable component of the Company that is engaged in providing services that are subject to risks and returns that are diff erent from those of other business segments. The Company accounts for segment reporting of operating results using the classes of business .The performance of segments is evaluated on the basis of underwriting results of each segment. The Company has four primary business segments for reporting purposes namely fi re, marine, motor and miscellaneous.

2.15 Earnings per share

The Company presents basic earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profi t or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period.

2.16 Statement of Cash Flows

The Statement of Cash Flows has been prepared in accordance with BAS -7 and the cash from the operating activities has been presented under direct method.

2.17 Status of Compliance of Bangladesh Accounting Standards and Bangladesh Financial Reporting

Standards

In preparing Financial Statements, we applied following BAS and BFRS:

Name of the BAS BAS No.Status of

application

Presentation of Financial Statements 1 Applied Inventories 2 Applied Cash fl ow Statements 7 Applied Accounting Policies, Changes in Accountng estimates and errors 8 Applied Event after Balance Sheet date 10 Applied Construction Contacts 11 N/AIncome Tax 12 Applied Property, Plant & Equipments 16 Applied Leases 17 N/ARevenue Recognition 18 Applied Employee Benefi ts 19 Applied Accounting for Govt. Grants and Discloser of Govt. Assistants 20 N/AThe eff ects of Changes in Foreign Exchange Rates 21 Applied Borrowing Costs 23 Applied Related Party Disclosures 24 Applied Accounting for Investments 25 Applied Consolidated Financial Statements and Accounting for Investment in subsidiary

27 N/A

Accounting for Investment in Associates 28 N/AInterests in Joint Venture 31 N/AEarnings Per Share 33 Applied Provisions, Contingent Liabilities and Contingent Assets 37 Applied Intangible Assets 38 Applied Financial Instruments: Recognition & Measurement 39 Applied Investment Property 40 Applied Agriculture 41 N/A

107


Financial perform

ance

Name of the BFRS BFRS No.Status of

application

First Adoption of BFRSs 1 N/AShare based payment 2 N/ABusiness Combination 3 N/AInsurance Contracts 4 Applied Non- Current assets Held for Sales and Discontinued Operation 5 N/AExploration for and Evaluation of Mineral Resources 6 N/AFinancial Instruments: Disclosure 7 Applied Operating Segments 8 Applied

2.18 General

The fi nancial statements are prepared in Bangladeshi Taka (BDT), rounded off to the nearest taka. These are prepared on the historical cost basis and therefore, do not take into consideration the eff ect of infl ation.

Previous year’s fi gures have been rearranged, whenever necessary, to confi rm the current year presentation.

3.00 Authorized, Issued, Subscribed and Paid up Capital

Particulars2013 2012

% Taka % Taka

Authorized:

200,000,000 ordinary shares of Tk.10 each2,000,000,000 2,000,000,000

Issued, subscribed and paid up:

Group A—Sponsors:24,835,580 ordinary shares of Tk.10 each fully paid in cash

47.81 248,355,800 47.81 225,778,000

Group B—Others:27,114,175 ordinary shares of Tk.10 each fully paid in cash

52.19 271,141,750 52.19 246,492,500

1) Employees 0.036 187,019 0.04 170,100

2) Bank, ICB’s MF, Insurance companies, BSRS 5.390 28,000,959 3.94 18,599,000

3) ICB Investors’ accounts 0.037 192,214 0.61 2,902,800

4) General public 46.730 242,761,558 47.60 224,820,600

Total 100.00 519,497,550 100.00 472,270,500

Classifi cation of shareholders’ by holding

The distribution schedule of shareholdings as on December 31, 2013 was as under

HoldingsNumber of Holders Total Holding %

2013 2012 2013 2012

Group-A

800,000-2,500,000 4 4 11.76 11.762,500,001-4,000,000 6 6 36.05 36.05Group-B

10-5,000 1,437 1,123 3.23 3.995,001-10,000 48 56 0.67 0.8810,001-50,000 86 79 3.64 3.3650,001-100,000 10 9 1.37 1.36100,001-300,000 11 10 3.87 4.01300,001-600,000 7 8 6.45 7.81600,001-4,000,000 11 9 32.96 30.78Total 100 100

108

4.00 Reserves & Surplus

Particulars Notes2013

Taka

2012

Taka

Reserve for exceptional losses 4.01 635,444,631 565,021,807Capital reserve 2,379,041 428,319 Retained earnings 321,874,336 233,304,686 General reserve 1,250,000 1,250,000 Land revaluation reserve 1,109,678,226 1,109,678,226 Fair value reserve 13.04 780,872,327 813,809,205Total 2,851,498,563 2,723,492,243

4.01 Reserve for Exceptional Losses

As per paragraph 6 of the Fourth Schedule of Income Tax Ordinance 1984, as earlier, for the year 2013, 10% of the net premium was transferred to reserve for exceptional losses. Details calculation as under:

Particulars2013

Taka

2012

Taka

Opening Balance 565,021,807 500,908,779Add: Provision made for the year (10% of net premium Tk 704,228,236) 70,422,824 64,113,028Total 635,444,631 565,021,807

5.00 Balance of funds and accounts

Balance of fund and account consist as follows:

Business2013

Taka

2012

Taka

Fire Insurance 77,968,988 78,468,565

Marine Insurance 113,596,189 107,441,703

Misc. Insurance 90,879,437 73,945,536

Total 282,444,612 259,855,804

6.00 Premium Deposit

The above mentioned amount includes premium received against cover notes for which policies have not been issued within 31st December 2013. While the risks against non-marine and marine hull have been assumed from the issuance of cover notes, risks against marine cargo have not been assumed until shipment advices are provided and accordingly, policies are issued.

The class wise summary of the premium deposit is as follows:

BUSINESS2013

Taka

2012

Taka

Fire Insurance 4,097,845 4,959,265

Marine cargo Insurance 245,755,969 195,368,059

Miscellaneous Insurance 1,899,363 176,171

Total 251,753,177 200,503,495

109


Financial perform

ance

7.00 Estimated Liability in respect of Outstanding Claims whether Due or Intimated

BUSINESS2013

Taka

2012

Taka

Fire 29,382,391 29,544,915

Marine cargo 85,317,711 75,459,846

Marine hull 1,757,047 1,639,418

Motor 50,601,441 31,321,000

Miscellaneous 29,203,900 18,368,274

Total 196,262,490 156,333,453

All the claims against which the Company received intimations within 31st December 2013 have been taken into consideration while estimating the liability in respect of outstanding claims.

8.00 Amount due to other Persons or Bodies carrying on Insurance Business

PARTICULARS2013

Taka

2012

Taka

Co-insurance premium payable 41,345,294 17,112,200

Co-insurance salvage payable 88,418 88,418

Green Delta Insurance Co. Ltd. for reinsurance ceded 4,389,617 4,599,995

Sadharan Bima Corp. & Others for reinsurance ceded 73,681,552 97,759,050

Port Folio Premium Withdrawal/Transfer (Cedence) 695,100 -

Total 120,199,981 119,559,663

9.00 Outstanding Refundable Premium

BUSINESS2013

Taka

2012

Taka

Fire 824,467 467,722

Marine cargo 280,401 243,174

Motor 1,066 1,066

Miscellaneous 64,999 41,865

Total 1,170,933 753,827

110

10.00 Sundry Creditors

Particulars2013

Taka

2012

Taka

Statutory Audit fee 287,500 287,500

Special Audit fee 780,000 650,000

Premium received in advance 46,262,667 53,885,016

VAT payable (4,357,314) (4,180,069)

Bills payable 21,911,896 20,920,527

Tax payable on misc. items 1,440,472 5,281,746

VAT payable on money receipt 14,064,105 7,709,045

VAT payable on misc. items 356,687 138,183

Insurance stamps on deposit premium 39,054,568 23,450,142

Provision for income tax ( Note 21.00) 339,529,199 286,457,458

Employees’ income tax 989,304 168,115

(Short)/Excess collection of premium (218,372) 201,007

Liability for income tax deductible at source 7,409,952 6,068,843

Installment audio - video A/C (Transcom) - 22

Agency Commission Payable 49,530,312 10,750,492

Group Hospitalization Insurance Premium Payable (5,968) (1,463)

Deposit against cancel document 251,269 251,269

Total 517,286,277 412,037,833

11.00 Property, plant and equipment

Assets Land &

Building

Motor

Vehicle &

Bicycle

Furniture &

Fixtures

Offi ce &

Electrical

Equipments

ComputersTelephone

Installation

Software

Installation

Signboard

& HoardingTotal

Cost

Balance at 01.01.2013

1,366,348,500 38,322,735 25,622,485 16,029,015 10,310,824 1,718,141 3,507,618 1,015,580 1,462,874,898

Additions - 7,332,925 2,514,590 2,137,976 1,271,366 - 616,688 - 13,873,545Disposals/ adjustments

- 2,356,325 1,555,709 1,504,864 128,400 - - - 5,545,298


1,366,348,500 43,299,335 26,581,366 16,662,127 11,453,790 1,718,141 4,124,306 1,015,580 1,471,203,145

Accumulated Depreciation


18,416,100 23,978,957 9,488,145 10,214,281 7,329,699 1,102,942 3,394,618 1,013,557 74,938,298

Charge for the year 9,208,050 7,094,451 2,497,426 1,725,984 1,070,997 143,293 150,794 2,015 21,893,010Disposals/ Adjustments

- 2,347,596 548,769 1,498,080 109,806 - - - 4,504,251


27,624,150 28,725,812 11,436,801 10,442,185 8,290,890 1,246,235 3,545,412 1,015,572 92,327,057

Carrying Amount

Balance at

31.12.20131,338,724,350 14,573,523 15,144,565 6,219,941 3,162,901 471,906 578,894 8 1,378,876,088


1,347,932,400 14,343,778 16,134,341 5,814,733 2,981,126 615,199 113,000 2,023 1,387,936,600

111


Financial perform

ance

12.00 Fixed assets under construction

Fixed assets under construction are stated at cost and closing balances stand Tk. 6,018,702 & Tk. 4,503,702 for the year ended 2013 & 2012 respectively. These are expenses of a capital nature directly incurred in property, plant and equipment, waiting for capitalization.

13.00 Investments

The investments comprise the following:

Investment Classifi cation Notes2013

Taka

2012

Taka

Held to maturity 13.01 34,998,059 18,858,292

Held for trading 13.02 29,318,637 26,798,546

Available for sale 13.03 1,236,957,446 1,209,040,708

Total 1,301,274,142 1,254,697,546

13.01 Held to maturity

Investments with fi xed maturity that the management has the intent and ability to hold to maturity are classifi ed as held to maturity. During the year 2013 Company hold the following investments:

Sl. # Types2013

Taka

2012

Taka

1 OTBL Bond 8,000,000 12,000,000

2 BD Govt. Treasury Bond (5 & 10 yrs) 25,000,000 4,500,000

3 14% Debenture-Beximco Textiles 1,998,059 2,358,292

Total 34,998,059 18,858,292

13.02 Held for trading

These fi nancial assets are acquired principally for the purpose of generating profi t from short-term fl uctuation in prices. Company appointed IDLC Finance Limited as portfolio manager to deal with held for trading securities. As per IDLC’s statement, value of securities as of 31st December’13 was Tk. 2.93 crore. So Tk. 0.25 crore was recognized as gain in the accounts for the year 2013.

13.03 Available for sale

Available for sale investments are those non-derivative investments that are designated as available for sale or are not classifi ed in any other category. These are primarily those investments that are intended to be held for an undefi ned period of time or may be sold in response to the need for liquidity are classifi ed as available for sale. The Company follows trade date accounting for ‘regular way purchase and sales’ of investments. As of December 31, 2013 Company designated the following shares as available for sale. Details are as follows:

Sl.

No.Name of the Company

No. of Shares as on

31/12/2013

Value at cost as on

31/12/2013

Fair Market Value as on 31/12/2013

Value at cost as on

31/12/2012


1 IDLC BD Ltd. 11,261,250 86,762,760 708,332,625 86,762,760 796,083,750

2 National Housing & Fin. Ltd. 5,123,295 41,148,560 168,044,076 24,621,800 123,950,700

3 CDBL 571,181 1,569,450 1,569,450 1,569,450 1,569,450

4 AB Bnak Ltd. 36,000 993,960 943,200 - -

5 Bank Asia Ltd. 295,076 1,558,759 6,786,748 577,500 4,741,266

6 Brac Bank Ltd. 34,000 993,358 1,108,400 - -

7 Esatern Bank Ltd. 30,000 815,288 873,000 - -

8 Mercantile Bank Ltd. 330,213 1,276,953 5,514,557 1,276,953 5,839,882

112

Sl.

No.Name of the Company

No. of Shares as on

31/12/2013

Value at cost as on

31/12/2013


Value at cost as on

31/12/2012


9 National Bank Ltd. 122,857 1,048,918 1,449,713 59,978 1,212,340

10 One Bank Ltd. 355,226 1,259,432 5,612,571 1,259,432 7,042,760

11 Prime Bank Ltd. 55,102 1,851,195 1,427,142 865,920 659,340

12 Pubali Bank Ltd. 207,706 11,470,236 6,750,445 10,491,938 5,897,298

13 The City Bank Ltd. 53,625 2,832,017 1,083,225 2,832,017 1,306,500

14 Standard Bank Ltd. 112,642 803,952 1,667,102 803,952 1,848,499

15 Uttara Bank Ltd. 114,670 4,830,894 3,566,237 4,315,930 3,417,570

16 Southeast Bank Ltd. 374,180 13,138,483 6,697,822 12,147,033 6,233,600

17 IBBL 27,500 998,920 951,500 - -

18 Delta Life Insurance Co. Ltd. 30,800 6,712,503 8,214,360 - -

19 Eastland Insuarnce Co. Ltd. 26,000 1,473,872 1,222,000 1,473,872 1,132,000

20 FarEast Life Insurance Co. Ltd. 10,350 935,452 993,600 - -

21 Green Delta Insurance Co. Ltd. 1,450 118,315 137,605 2,253,498 1,835,000

22 Meghna Life Insurance 20,000 2,209,232 2,326,000 - -

23 Karnaphuli Insuarnce Co. Ltd 240 - 5,832 - 7,464

24 National Life Insurance 2,000 494,405 652,000 - -

25 Pioneer Insurance Co. Ltd. 49,200 3,355,067 3,266,880 3,355,067 2,993,000

26 Pragai Life Insurance 300 36,578 49,290 - -

27 Pragati Insurance Ltd. 21,500 1,323,403 1,156,700 1,323,403 1,248,000

28 Nitol Insurance Ltd. 22,260 940,145 747,936 902,495 794,000

29 Rupali Insurance Co. Ltd. 24,000 957,414 806,400 957,414 918,000

30 Standard Insurance Ltd. 23,000 1,034,120 913,100 1,034,120 858,000

31 BGIC 20,024 651,596 580,696 651,596 644,773

32 BD Shipping Corporation 1,000 - - 558,746 273,000

33 DESCO 26,450 2,055,439 1,544,680 2,055,439 1,442,000

34 Power Grid Co. BD Ltd. 60,000 3,792,108 3,168,000 - -

35 MJL Bd Ltd. (Mobil) 14,536 1,264,080 1,091,654 1,264,080 1,158,519

36 Jamuna Oil 4,000 - - 981,109 714,000

37 Khulna Power Co. Ltd. 78,324 7,840,125 3,845,708 7,840,125 3,467,176

38 BSRM Ltd. 236,500 20,947,308 16,247,550 11,888,617 6,790,000

39 GrameenPhone Ltd. 245,000 46,761,983 49,220,500 32,030,690 31,290,000

40 MI Cement Co. Ltd. 391 29,449 30,576 29,449 29,512

41 Niloy Cement Ltd. 31 3,100 3,100 3,100 3,100

42 RAK Ceramics (BD) Ltd. 10,004 360,864 533,213 360,864 516,596

43 Singer BD Ltd. 12 1,973 2,242 2,095,248 1,321,005

44 Square Pharmaceuticals Ltd. 568,325 62,299,361 108,095,415 59,453,815 89,304,385

45 Square Textile Ltd. 60,030 6,008,456 5,426,712 6,008,456 5,366,160

46 Standard Ceramic 90 - 3,600 - 2,169

47 Summit Alliance Port Ltd. 82 5,945 2,485 5,945 2,093

48 Maq Enterprise Ltd. 38 3,800 3,800 3,800 3,800

49 ICB Employees Mutual Fund 40,000 1,115,892 228,000 1,115,892 324,000

50 RI Mutual Fund:Scheme One 12,100,000 110,000,000 104,060,000 110,000,000 96,800,000

Total 456,085,119 1,236,957,446 395,231,503 1,209,040,708

* Investment in shares that do not have any quoted market price in the active market and whose fair value cannot be measured reliably, were recognized at cost.

113


Financial perform

ance

13.04 Changes in fair value of the shares available for sale

Particulars 2013

Taka

2012

Taka

Fair value of the investment 1,236,957,446 1,209,040,708

Less: Cost price of the investment 456,085,119 395,231,503

Fair value reserve at December 31 780,872,327 813,809,205

Less: Fair value reserve at Jan 01 813,809,205 1,187,894,852

Fair value adjustment for the year (32,936,878) (374,085,647)

14.00 Inventories

Inventories comprise as follows

Particulars 2013

Taka

2012

Taka

Postage stamps 1,260 1,260

Insurance stamps 6,475,334 5,570,949

Stock of stationery 1,058,384 1,014,768

Total 7,534,978 6,586,977

15.00 Sundry Debtors (including advances, deposits and prepayments)

Particulars2013

Taka

2012

Taka

Advance against Offi ce Space purchase ( Agrabad, Chittagong) 44,046,955 26,933,240

Insurance stamps collectible on outstanding premium 256,980 676,274

Security deposit 2,727,200 1,309,120

Advance against expenses, tax, rent, salary etc. 258,267,499 247,674,829

Advance commission against cover notes 47,620,011 28,109,916

Advance against registration cost-SPL Tower 5,390,954 5,390,954

Receivable Amount 3,881,676 17,079,356

Collection control account: 24,553,092 43,707,906

For premium on policies 8,173,748 12,001,409

For premium on cover notes 16,379,344 31,706,497

Total 386,744,366 370,881,595

Out of the total amount Tk. 24,553,092 mentioned above, Tk. 1,956,908 was realized within February 12, 2014.

16.00 Premium Control Account

Business2013

Taka

2012

Taka

Fire 23,252,460 29,115,923

Marine ( cargo and hull ) 3,248,930 9,422,715

Motor 10,754,725 16,320,448

Miscellaneous 1,564,358 1,249,056

Total 38,820,473 56,108,142

Out of total outstanding Tk.38,820,473 of 2013 as mentioned above, Tk 23,167,661.98 was realized within February 12, 2014.

114

17.00 Interest receivable account

Particulars2013

Taka

2012

Taka

Accrued and overdue: 370,000 350,430

Fixed Deposits 370,000 350,430

Accrued but not due: 74,470,275 60,523,848

Govt. Treasury Bond 740,752 185,850

Fixed Deposits 73,729,523 60,337,998

Total 74,840,275 60,874,278

18.00 Amount due from other persons or bodies carrying on insurance business

Particulars2013

Taka

2012

Taka

Sundry co-insurance claims recoverable 2,024,293 1,290,039

Co-insurance premium recoverable (including refund) 14,615,141 17,265,181

Premium Receivable on SBC (PSB Account) 355,814 -

Re-insurance Premium Receivable 13,821,328 10,603,759

For reinsurance acceptance with SBC 8,470,498 6,693,087

For reinsurance acceptance with GDIL 5,350,830 3,910,672

Total 30,816,576 29,158,979

19.00 Cash at bank

Particulars2013

Taka

2012

Taka

SND accounts 66,827,823 114,631,901

Current accounts 5,143,089 4,620,655

Remittance in transit 3,000,000 2,000,000

Total 74,970,912 121,252,556

20.00 Fixed Deposit (FDR)

Investment in FDR consists of FDR investment in Banks and Non-Banking Financial Institutions total Taka 1,483,945,760 which is easily encashable with a short notice.

21.00 Provision for income tax

Particulars2013

Taka

2012

Taka

Balance as on 1st January 286,457,458 203,060,990

Add: Provision made during the year 130,000,000 94,000,000

Less: Payment & adjustment (65,226,630) -

351,230,828 297,060,990

Less: Tax deducted at source for transfer to advance tax (11,701,629) (10,603,532)

Balance at 31st December 339,529,199 286,457,458

115


Financial perform

ance

Total Tax

Particulars2013

Taka

2012

Taka

Current Tax (as above ) 130,000,000 94,000,000

Deferred Tax (897,322) (5,737)

Total 129,102,678 93,994,263

22.00 Interest & dividend income

Particulars2013

Taka

2012

Taka

Fixed Deposit 168,999,341 125,905,299

SND Accounts 4,428,385 5,179,372

5-years Bangladesh Government Treasury Bond 2,352,702 371,700

Interest on Debenture 601,012 139,120

Dividend on shares 9,667,682 7,431,599

Interest on OTBL Bond 1,366,500 1,920,000

Total 187,415,622 140,947,090

23.00 Other income

Particulars2013

Taka

2012

Taka

Profi t on sale of assets 1,121,878 81,906

Profi t on sale of shares 39,922,140 20,047,758

Service charges income (net) 1,491,336 2,648,205

Sundry income 311,566 231,344

Total 42,846,919 23,009,213

24.00 Audit Fees

Annual audit fees include the following:

Particulars2013

Taka

2012

Taka

Annual audit fee (including VAT) 318,750 287,500

Special audit fee 130,000 130,000

Total 448,750 417,500

116

25.00 Earnings Per Share

25.01 Basic Earnings Per Share

The Company calculates Earnings per Share (EPS) in accordance with BAS 33: Earnings Per Share, which has been shown on the face of the income statement and this has been calculated by dividing the basic earnings by the weighted average number of ordinary shares outstanding for the year. Details of calculations were as follows:

Particulars2013

Taka

2012

Taka

Earnings attributable to ordinary shareholders(Net profi t after taxation and Provision) (Taka)

277,060,100 203,926,505

Ordinary Shares at 1st January 47,227,050 41,067,000

Bonus Shares Issued 4,722,705 6,160,050

Weighted Average number of ordinary Shares outstanding during the year 51,949,755 47,227,050

Restated Weighted Average number of ordinary Shares 51,949,755 51,949,755

Basic earnings Per share (Taka) 5.33 3.93

Earnings Per Share in 2012 was Tk.4.32 while restating EPS of 2012 as per BAS 33, an adjustment has been given for 4,722,705 number of bonus shares in 2013.

25.02 Diluted Earnings per Share

Diluted earnings per share refl ects the potential dilution that could occur if additional ordinary shares are assumed to be issued under securities or contracts that entitle their holders to obtain ordinary shares in future, to the extent such entitlement is not subject to unresolved contingencies.

At 31st December 2013, there was no scope for dilution and hence no dilution EPS is required to be calculated.

26.00 Transactions with related Parties

Reliance insurance, in normal course of business, carried out a number of transactions with other entities that fall within the defi nition of related party contained in Bangladesh Accounting Standard 24: Related Party Disclosures. All transactions involving related parties arising in normal course of business are conducted on an arm’s length basis at commercial rates on the same terms and conditions as applicable to the third parties. Details of transactions with related parties and balances with them as at December 31, 2013 were as follows:

Name of the related party Relationship Nature of

transaction

Premium

Earned in

2013

Premium

Outstanding

up to

31.12.2013

Amount

Realized

Subsequently

Claim paid

in 2013

Kumudini Welfare Trust of Bengal (BD) Ltd. and related Companies

Common Director

Insurance 1,351,937 11,888 - -

Meenhar Fisheries Ltd. and related companies

Common Director

Insurance 10,520,896 - - 665,049

Rangs Limited and related companies

Common Director

Insurance 69,895,675 5,987,208 3,836 31,626,229

Transcom Ltd and related Companies

Common Director

Insurance 224,312,481 - - 27,645,388

Arlinks and related companies

Common Director

Insurance 135,500 - - -

Total 306,216,489 5,999,096 3,836 59,936,666

117


Financial perform

ance

27.00 Contingent liability

There is dispute on claims amounting to Tk. 168,091,153 which has not been admitted by the company. Additionally cases, both in lower and superior courts, by or against the company were pending in respect of insurance claims; net eff ects of which, it is believed, will not materially aff ect the fi nancial statements.

28.00 Number of employees engaged

The number of employees engaged for whole year who received a total remuneration of Tk. 36,000 and above per annum was 338.

29.00 Management expenses

Management expenses as charged to Revenue Accounts amounting to Tk. 232,827,421 represents 14.21% of the gross premium of Tk.1,638,885,168 and 33.06% of net premium of Tk. 704,228,236 in 2013. Moreover, an amount of Tk. 16,777,122 was paid to the Directors and Managing Director & CEO as fees and remuneration.

30.00 Compensation (Board & CEO)

No compensation was allowed to the Chief Executive Offi cer of the Company or any member of the Board for any special services rendered except as noted in note 29.

31.00 Claims

The Company had no claim against it which has not been acknowledged as debt at the balance sheet date.

32.00 Credit facility

There was no credit facility as on 31st December 2013 availed by the Company under any contract other than trade credit available in the course of business.

33.00 Head Offi ce & Branch Offi ces

The registered offi ce of the Company is located at Shanta Western Tower, Level-5, Space No. 503 & 504, 186, Tejgaon Industrial Area, Dhaka-1208, Bangladesh. The Company carries its insurance activities through 31 (thirty One) branches throughout the country.

34.00 Credit Rating Report

Credit Rating Information and Services Limited (CRISL) has reassigned the Claim paying ability (CPA) rating of the Company to AA+ (Pronounced as double A Plus) based on the audited fi nancial statements up to December 31, 2012 and other relevant qualitative and quantitative information up-to the date of rating on August 1, 2013.

35.00 Post balance sheet Events

Board of Directors has recommended15% cash and 15% stock dividend for the year ended December 31, 2013.


Feb 23,2014 Chairman Director

Md. Khalilur Rahman ChoudhuryDirector

Akhtar AhmedManaging Director & CEO

Malek Siddiqui WaliChartered Accountants

118

Dividend Policy and Capital Raising History

One of the prime objectives of Reliance Insurance limited is to provide consistently good return to its shareholders. Below are the dividend percentage and capital raising history. From the history it may be observed that Company has been maintained a stable and attractive dividend policy in line with the sound underwriting and investment results. The Company has also adhered to a policy of timely preparation of its Accounts and holding of AGM, as may be noted from the fi nancial calendar below:

Date Particulars No. of Shares Value in Taka

Cumulative

Paid-up-capital in Taka

1988 As per MOA & AOA 3,00,000 3,00,00,000 3,00,00,000

1995 Initial Public Off erings 3,00,000 3,00,00,000 6,00,00,000

2003 50% Bonus shares 3,00,000 3,00,00,000 9,00,00,000

2004 33.33% Bonus shares 3,00,000 3,00,00,000 12,00,00,000

2005 25% Bonus shares 3,00,000 3,00,00,000 15,00,00,000

2006 20% Cash - - -

2007 20% Bonus shares 3,00,000 3,00,00,000 18,00,00,000

2008 30% Bonus shares 5,40,000 5,40,00,000 23,40,00,000

2009 30% Bonus shares 7,02,000 7,20,00,000 30,42,00,000

2010 35% Bonus Shares 10,64,700 10,64,70,000 41,06,70,000

2011 15% Bonus & 15% Cash 61,60,050 6,16,00,500 47,22,70,500

2012 10% Bonus & 15% Cash 47,22,705 4,72,27,050 51,94,97,550

2013 (Proposed) 15% Bonus & 15% Cash 77,92,463 7,79,24,630 59,74,22,180

Stakeholders’ Information

Financial Calendar

Events for the year 2011 2012 2013 2014

Publication of Financial Statements for the 1st Quarter

May 12, 2011 May 13, 2012 May 14, 2013 -

Publication of Financial Statements for the Half Year

July 29, 2011 July 26, 2012 July 29, 2013 -

Publication of Financial Statements for the 3rd Quarter

October 30, 2011 October 23, 2012 October 28, 2013 -

Announcement of final results March 22, 2011 March 15, 2012 March 20, 2013 February 23, 2014

Record date April 4, 2011 April 29, 2012 April 3, 2013 March 5, 2014

Annual report dispatched April 13, 2011 April 15, 2012 April 11, 2013 March 13, 2014

Annual General Meeting April 30, 2011 April 30, 2012 April 27, 2013 March 30, 2014

Transfer of Stock dividend to BO Accounts

May 5, 2011 May 24, 2012 May 20, 2013 -

Dispatch of sales proceeds of fractional shares

June 16, 2011 June 24, 2012 June 6, 2013 -

119


Stakeholders’ inform

ation

Quarterly Analysis

BDT mn

Particulars2013 2012

Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total

Gross premium income 399.08 422.92 512.00 304.89 1,638.89 381.59 375.33 470.27 263.64 1,490.82

Net premium income 180.57 191.68 105.45 226.53 704.23 179.76 183.57 104.82 172.97 641.13

Net R/I commission earned 38.42 46.74 53.53 40.30 178.99 39.53 35.63 60.77 22.52 158.45

Add : Investment & other income 43.57 46.06 60.01 80.62 230.26 42.83 26.40 60.57 34.16 163.96

Total income 262.56 284.48 218.99 347.45 1,113.48 262.12 245.60 226.16 229.66 963.54

M. expenses with (Cliams allocable) 143.04 198.22 132.20 180.88 654.34 146.62 193.10 131.25 143.53 614.49

M. expenses (Unallocable) 14.09 12.27 12.48 14.14 52.98 11.55 11.84 11.19 16.54 51.13

Total expenses 157.13 210.49 144.67 195.02 707.32 158.17 204.93 142.44 160.07 665.62

Net profi t before tax 105.43 73.99 74.32 152.42 406.16 103.95 40.67 83.72 69.58 297.92 Provision for income tax 22.50 30.00 22.50 54.10 129.10 22.00 13.00 32.50 26.49 93.99

Net profi t after tax 82.93 43.99 51.82 98.31 277.05 81.95 27.67 51.22 43.09 203.93

Earnings per share (EPS) 1.60 0.85 1.00 1.88 5.33 1.58 0.53 0.99 0.83 3.93

120

Sl. No. Name of Shareholders No. of Shares %

1 Sponsors/Directors:

General Produce International Ltd. 1,613,216 3.10

FinAccord Trading Limited 1,613,216 3.10

Trinco Limited 3,187,169 6.14

Rangs Limited 3,187,142 6.13

Transfi n Trading Limited 3,187,078 6.13

Meenhar Fisheries Limited 3,187,395 6.14

Arlinks Limited 3,187,355 6.14

Kumudini Welfare Trust of Bengal (BD) Ltd. 2,793,665 5.38

Prantik Engineering Co. Limited 848,169 1.64

Mr. Shamsur Rahman(Self ) 2,031,175 3.91

Deep Sea Fishers Limited 3,293,338 6.33

Transcom Limited 1,232,476 2.37

Rangs Workshop Ltd. 1,841,497 3.54

Kumudini Handicraft 902,601 1.73

Meenhar Sea Foods Ltd. 450,225 0.87

Sub-Total 29,338,302 62.66

2 General

Institutions/Employees:

Bank/ICB’s MF, Insurance Co’s 2,800,092 5.390

ICB Investors’ Accounts 19,221 0.037

Employees 18,702 0.036

Sub-Total 2,838,015 5.463

Individuals:

General Public (Individuals) 16,556,023 31.877

Sub-Total

Total Holdings 51,949,755 100.00

Shareholding Composition of Reliance Insurance LimitedAs on December 31, 2013

121



ation

Redress of Investors Complaints

Redress of Clients Complaints

Reliance Insurance Limited is committed to maintaining highest standard of conduct and professional behavior in dealing with its shareholders. Share Department of the Company maintains systematic records and information relevant to the shareholders. Share Department offi cials are always ready to help shareholders whenever in need of share related services like share transfer, transmission, dividend warrant issue, dividend warrant re-validation etc. Shareholders of the company are also free to raise their claim, if any, throughout the year. Shareholders get opportunity to speak on various issues relating to the operation of the Company at the Annual General Meeting which is held once a year, in which the Chairman/Managing Director of the Company with the help of CFO and Company Secretary respond to all queries raised by the shareholders

instantaneously. Generally, shareholders raise issues relating to utilization of Company’s resources, yearly, half yearly and quarterly accounts, business turnover and profi tability, declaration of entitlements, issuance of share certifi cates, share transfer and transmission, changes of shareholders address, non-receipt of Annual report, date and time of AGM, minutes of meetings of all AGM/EGM, implementation of decision of the AGM & EGM and so on. It is the responsibility of the Company Secretary to oversee that necessary actions are taken expeditiously so that these issues are resolved to the satisfaction of shareholders.

Insurance being a service industry, clients’ satisfaction is of paramount importance in maintaining existing clientele base and tapping new business, thereby to achieve satisfactory business growth in the long run. Being fully aware of this, Reliance always attends to its clients complaints – whether related to its services or claim settlement. Reliance encourages its clients to come forward with any complaint they may have and the top management is completely accessible to all them. Complaints can be lodged with the management in writing, over telephone, by e-mail or through the web site. During regular meetings with its clients of

various types, the management actively solicits the clients’ views on the Company’s services, shortcomings, if any, and their suggestions. Clients views and complaints are discussed at the management committee meeting held at head offi ce and also during meetings with Branch Managers. This aspect also features prominently at the Annual Conference of the Company.

122

Branch Connectivity

LOCAL OFFICERahmans’ Regnum Centre (4th fl oor), 191 Tejgaon I/ADhaka-1208Phone : 880 (2) 8879293-95Mobile : 01713-440987 email : [email protected]

MOULVI BAZAR31/32, Moulvi Bazar RoadDhaka-1100Phone : 880 (2) 7315489Mobile : 01713-440983email : [email protected]

BANGSHALEastern Bank Building (3rd Floor), 68, Shahid Nazrul Islam Sarani, Bangshal, Dhaka-1100Phone : 880 (2) 9556225Mobile : 01713-010695email : [email protected]

MOTIJHEELRahman Chamber (2nd Floor) 12-13, Motijheel C/A, Dhaka 1000Phone : 880 (2) 9567827Mobile : 01730-097293email : [email protected]

KAWRAN BAZARBSEC Bhaban (3rd Floor) 102 Kazi Nazrul Islam Avenue, Kawran Bazar Dhaka-1215, Phone : 880 (2) 9112468, 8110455Mobile : 01713- 440980email : [email protected]

NEW MARKETKhan Plaza (2nd Floor), 32/1, Mirpur RoadDhaka-1205Phone : 880 (2) 9669449Mobile : 01713-440981email : [email protected]

BIJOYNAGARAkram Tower (6th Floor), 15/5, BijoynagarDhaka-1000Phone : 880 (2) 9341832Mobile : 01755-638298email : [email protected]

MOHAKHALIM.H.B. Bhaban (2nd Floor), 94, Mohakhali C/A, Dhaka-1212Phone : 880 (2) 9886872Mobile : 01713-185581email : [email protected]

UTTARAH.M. Plaza (8th Floor), Plot No. 34, Road No-2, Sector-3 Uttara, Dhaka -1230Phone : 880 (2) 8956076Mobile : 01755-638293email : [email protected]

MOGH BAZARGulfesha Tower (12th Floor)69 Circular Road, Mogh Bazar, Dhaka-1217Phone : 880 (2) 9332798Mobile : 01755-550215email : [email protected]

MYMENSINGH19, G. K. M. C. Saha Raod, (2nd Floor), Chotto BazarMymensinghPhone : 880 (91) 51432Mobile : 01718-353666email : [email protected]

COMILLA163/149, Chatti Patty, RajgonjComilla-3500Phone : 880 (81) 69617Mobile : 01713-440988email : [email protected]

NARAYANGONJ71, B.B. Road, Narayangonj-1400Phone : 880 (2) 7631962Mobile : 01713-440982email : [email protected]

DINAJPURCharu Babur More, Khettri Para, Dinajpur-5200Phone : 880 (531) 63308Mobile : 01713-440995email : [email protected]

PABNATrafi c More, (1st Floor), A. Hamid Road, Pabna-6600Phone : 880 (731) 66073Mobile : 01713-440958email : [email protected]

RAJSHAHIKaimon Plaza, Mia Para, New Natore Rd, Rajshahi-6000Phone : 880 (721) 773364Mobile : 01713-209667email : [email protected]

123



ation

AGRABAD58 Agrabad C/A, Chittagong- 4100Phone : 880 (31) 712221Mobile : 01713-276429email : [email protected]

KHATUNGONJ304, Khatungonj, Chittagong-4100Phone : 880 (31) 615105Mobile : 01713-106641email : [email protected]

JUBILEE ROAD175, Jubilee Road, Chittagong -4000Phone : 880 (31) 616506Mobile : 01713-100891email : [email protected]

JESSORE7, Garikhana Road, Jessore-7400Phone : 880 (421) 68523Mobile : 01713-440990email : [email protected]

KHULNA141, Sir Iqbal Road , Khulna-9000Phone : 880 (41) 725475 Mobile : 01730-033001email : [email protected]

MADARIPURAmin Super Market, Main Road, Madaripur- 7900Phone : 880 (661) 61510Mobile : 01713-014856email : [email protected]

KUSHTIALovely Tower, 55/1, N.S. Road, Kushtia 7000Phone : 880 (71) 71384Mobile : 01713-400508email : [email protected]

THAKURGAONS.M. Ali Road, Thakurgaon-5100Phone : 880 (561) 52323Mobile : 01713-440997email : [email protected]

BOGRAJhaotalabazar, Bogra-5800Phone : 880 (51) 65828Mobile : 01713-440994

NARSHINGDIC & B Road, Narshingdi-1600Phone : 880 (2) 9462677Mobile : 01755-538003

FARIDPUR89/A, Mujib Sarak, Alipur, Faridpur-7800Phone : 880 (631) 64118Mobile : 01711-430375

COX’S BAZAR1065, Bazar Ghata Main Road, Cox’s Bazar-4700Phone : 880 (341) 64892Mobile : 01713-440989

SYLHETKarimullah Market (5th Floor), Bandar Bazar, Sylhet-3100Phone : 880 (821) 724767Mobile : 01713-440999

SIRAJGONJS.S. Road, Sirajgonj-6700Phone : 880 (751) 63350Mobile : 01730-351425

RANGPURStation Road, Rangpur-5400Phone : 880 (521) 63221Mobile : 01713-440996

124

Events Highlight 2013Annual Picnic held on 15th February 2014 at Jinda Park, Jinda-Rupgonj, Narayangonj

RIL T20 Cricket Team

125



ation

126

Glossary

Terms Meaning

Accounting Policies The specifi c principles, bases conventions, rules, and practices adopted by the enterprise in preparing and presenting fi nancial statements

Accrual Accounting The reporting of revenues from sales in the period in which they are sold, regardless of when the cash is received, and the reporting of expenses in the period of purchase, regardless of when the payment is made.

Accounts Receivable Short-term monetary assets that arise from sales on credit to customers at either the wholesale or the retail level.

Account Payable Amount owed to a creditor for delivered goods or completed services.

Amortization Amortization is the systemic allocation of the depreciable amount of an intangible asset over its useful life.

Book Value The total assets of a company less total liabilities; owners' equity; Fixed Assets less Depreciation.

Budget Financial plan that serves as an estimate of future cost, revenues or both.

Cash Flow Statement A fi nancial statement that shows a company's sources and uses of cash during an accounting period.

Cash Flows Infl ows and outfl ows of cash and cash equivalents.

Current Tax The amount of income taxes payable (recoverable) in respect of taxable profi t (tax loss) for a period.

Claim A demand made by the insured or the insured’s benefi ciary for payment of the benefi t as provided by the policy.

Cash Equivalents Short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignifi cant risk of changes in value.

Carrying Amount The amount at which an asset is recognized in the balance sheet after deducting any accumulated depreciation and accumulated impairment loess thereon.

Depreciation The systemic allocation of the depreciable amount of an asset over its useful life.

Earnings Per Share (EPS) EPS is calculated by dividing the profi t or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period.

Fair Market Value Fair market value is the price that two parties are willing to pay for an asset or liability when both parties have full information and are not pressured to close the sale.

Generally Accepted Account Principles (GAAP)

The conventions, rules, and procedures necessary to defi ne accepted accounting practice at a particular time.

Gross premium underwritten That is the total sum before expenses or cost.

Held to maturity investment Financial assets with fi xed or determinable payments and fi xed maturity that an enterprise has the positive intent and ability to hold to maturity other than loans and receivables originated by the enterprise.

Intangible Assets Long-term assets that have no physical substance but have a value based on rights or privileges accruing to the owner.

Interest The cost associated with the use of money for a specifi c period of time.

Marketable Securities An investment in securities which are readily marketable; temporary investments.

Market Value The amount obtainable from the sale or payable on the acquisition, of a fi nancial instrument in an active market.

Net Premium underwritten Gross premium less deductions for commission and ceded re insurance.

127



ation

Terms Meaning

Prepaid Expenses The expenses paid in advance that do not expire during the current accounting period

Premium The price of insurance protection for a specifi ed risk for a specifi ed period of time.

Provision A liability of uncertain timing or amount.

Return on Assets A measure of profi tability that shows how effi ciently a company is using all its assets

Re – insurance Also known as “Insurance for insurers”. The contract between an insurance company and a third party to protect the insurance company from loss.

Reserve for Exceptional Losses A reserve either specifi c or general required by law.

Related Parties Parties are considered to be related if one party has the ability to control the other party or exercise signifi cant infl uence over the other party in making fi nancial and operating decisions.

Related party Transaction A transfer of resources or obligations between related parties, regardless of whether a price is charged.

Tangible Assets Long-term assets that have physical substance

Tax Liability The amount of tax that must be paid based on taxable income and the applicable tax table.

Unpaid Dividend A dividend that is owed to stockholders of record but has yet to be distributed.

Working Capital The amount by which the total current assets exceed total current liabilities.

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Shareholders’ Note

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Shareholders’ Note

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