spi insurance company limited

www.saudipakinsurance.com.pk

Annual Report | for the year ended December 31, 2012

GROWING VALUES

SAUDI PAK INSURANCE COMPANY LIMITED

A commitment to

Growing ValuesSAUDI PAKINSURANCE



GROWING VALUES

“Saudi Pak insurance Company Limited” has always lived up to its name by

being one step ahead in the insurance industry, and finding new and affordable

insurance solutions. we have refocused our strategy to better use of expertise in

our business to secure our customers. we are trying to manage our business to

reduce volatility improve returns and accelerate growth through prudent

management and hard working. we will capture a profitable share of the many

opportunities we see around the country -helping customers achieve lifetime

financial security and creating long lasting values for shareholders. This is how

saudi pak is growing value.

Saudi Pak Insurance Company Limited.Major Share Holders of

United International Group

Silk Bank Limited

SAUDI PAK LEASING COMPANY LIMITED

In the Name of ALLAH, The Most Beneficent, The Most Merciful

”

”

Our strategy is based on key principles of execution, financial and underwriting discipline, and above all, focusing on our core business of insurance.

Contents

What is inside?

Overview

Business review& Governance

Financial Highlights

Financial Statements

Vision MissionAbout Us

At Saudi PakAt a GlanceFive Year At a Glance

Company InformationOur Core ManagementServices We OfferBoard of DirectorsSenior ManagementA Message from the ChairmanDirectors’ Report to the Members

Pattern of ShareholdingAuditor’s Report to the MembersBalance SheetProfit and Loss AccountStatement of Comprehensive IncomeStatement of Changes in EquityStatement of Cash FlowsStatement of PremiumsStatement of ClaimsStatement of ExpensesStatement of Investment IncomeNotes to the Financial StatementsOur Network

When we think about our future, the word that comes to mind is promise. Our promise to our people, our customers, our investors, our

communities and our suppliers is thatwe are going to build the best

insurance company in the Pakistan.

We believe we are well on our way.

1

Vision 6

Mission 7

About Us 8

6 Saudi Pak Insurance Company Limited

Our vision is to be the quality insurance service provider, recognized and appraised by performance and product development to cater the changing needs of customers and continuous growth of human resources.

Vision

We wish to become a dynamic insurance service provider, maintaining credibility and reputation while growing revenues over the coming years and improving insurance products by utilizing latest technologies. Saudi Pak Insurance Company Limited focusing to build up a team of professionals by imparting exhaustive training, education and career orientation for the benefit of the insurance industry. We shall endeavor our utmost to render the best possible services to our clients.

Mission

Annual Report | for the year ended December 31, 2012 7


About Us

Ownership & Paid Up Capital

The company commenced its operations with a paid up capital of Rs. 200 million which has been raised to Rs. 325 million with an authorized capital of Rs. 500 million, thus providing a strong base for operations and substantial capacity for accommodating large industrial risks.

Professional Strength

The company is manned by duly qualified and experienced professionals of all discipline of insurance having substantial knowledge

of underwriting various products and claims management.

Claim Management

Claims are the end product of the insurance. At Saudi Pak Insurance, we believe in the philosophy that every claim is a service to the client and therefore must be handled in the most professional and judicious manner. We therefore give great emphasis to expeditious claim handling including assistance to the client in the risk management, loss mitigation, fast settlements

and early payments. For this purpose the Company’s claim department is led by a veteran who is assisted by a very efficient technical team of professionals. Believing in the quality of service the company employs the leading loss adjusters of the country who have foreign affiliation and years of experience to their credit.

Major Shareholders:

United International GroupSaudi Pak Industrial & Agricultural Investment Company Ltd.Silk Bank Ltd.Saudi Pak Leasing Co. Ltd.

Saudi Pak Insurance Company is a

general Insurance Company providing

insurance coverage to various

renowned companies and financial

institutions of Pakistan. Saudi Pak

Insurance started its operations from

April 14, 2005 and since then it has

managed to emerge as one of the

successful company of the insurance

industry. Fortunately to its credit, it is

jointly supported by the strong Saudi

Pak Group, UIG Group and Silk Bank

Limited.


Branches

With 29 online branches across Pakistan, Saudi Pak Insurance enjoys unique position when it comes to client service. A suitable number of strategically located branches and desirable for an insurance company which plans to expand its operations nationwide in order to provide services to its clients who may situated at remote and far reaching places. With the above credentials we are Confident that our company has desired financial strength

and expertise to provide coverage to Clients various insurance requirements and hope that they will consider us to be the potential insurers of your valuables assets.

Technology is oneof the key

success factors in the business today. It serves as the backbone for all operational functions. The Company intends to establish itself as a technology oriented financial institution. The company has adopted top level

technologies like Oracle and IBM Servers and invested generously towards the infrastructure which is providing online real time branch connectivity which serves as means for data warehousing, catering of basic transaction and meeting the clients’ needs.

Over the course of 2012,we expect to see improvement

in our insurance operations,in terms of policy growth.

2

At Saudi Pak 12

At a Glance 13

Five Year At a Galance 15


we are in a very solid position.

We are realizing the full benefits of investments made in growth of projects over the past several years that enhance our low-cost advantages. We’re visualizing solid market fundamentals in our business. These factors are allowing us to deliver sustainable returns to shareholders.

At the same time, we are quickly refilling our pipeline with very attractive near-term growth projects characteristic of similar projects, we’ve mastered in the past. We’re driving future growth - capitalizing on emerging trends in the Insurance and planning multiple expansions that our assets are ideally suited for.

Strong balance sheet

Exciting visible growth

Record financial performance Rating by: PACRA

A-

At Saudi Pak

Premium Written(Rs’ooo)

(Rs’ooo)

(Rs’ooo)

(Rs’ooo)

(Rs’ooo)

20122011

317,859217,873

46Percentage

Net Premium

20122011

183,60693,467

96Percentage

Net Claims

20122011

36,88416,467

125Percentage

Underwriting Results

20122011

59,43421,020

183Percentage

Investment Income

20122011

11,87614,848

-20 Percentage

Earnings Per Share

20122011

2.310.75

208 Percentage


At a Glance“Excellence is not an act but a habit”


(RUPEES IN MILLIONS)

2012 2011 2010 2009 2008

Financial Data:

Paid up capital 325.00 325.00 325.00 325.00 325.00

Equity 257.49 182.54 158.14 200.87 200.73

Underwriting Provisions 245.78 228.72 228.63 299.82 401.26

Investment at cost 93.66 82.34 77.63 100.49 78.61

Total Assets (book value) 529.82 428.87 401.97 522.70 634.71

Fixed Assets (WDV) 56.61 32.79 25.98 31.28 38.27

Cash and bank deposits 70.41 62.99 50.67 32.39 99.82

Assets - Others 309.15 250.75 247.68 358.54 417.99

OPERATING DATA:

Gross Premium 317.86 217.87 193.60 230.46 282.47

Net Premium 183.61 93.47 82.07 124.85 145.28

Net Claims expenses 36.88 16.43 69.76 69.94 103.30

Management expenses 134.73 66.55 63.89 73.70 99.03

Underwriting Profit / (Loss) 59.43 21.02 (41.54) (8.22) (44.63)

Investment Income / (Loss) 10.21 7.45 3.26 10.79 (12.60)

Profit / (Loss) before Tax 23.86 25.34 (41.54) 1.47 (59.88)

Provision for Tax (51.08) 0.93 1.18 0.62 -

Profit / (Loss) after Tax 74.95 24.40 (42.73) 0.85 (59.88)

FINANCIAL RATIOS:

Profit before tax / Gross Premium (%) 7.5% 11.6% -21.5% 0.6% -21.2%

Profit before tax / Net Premium (%) 13.0% 27.1% -50.6% 1.2% -41.2%

Profit after tax / Gross Premium (%) 23.6% 11.2% -22.1% 0.4% -21.2%

Profit after tax / Net Premium (%) 40.8% 26.1% -52.1% 0.7% -41.2%

Management Expenses to Gross Premium (%) 42.4% 30.5% 33.0% 32.0% 35.1%

Management Expenses to Net Premium (%) 73.4% 71.2% 77.8% 59.0% 68.2%

Underwriting Profit / Net Premium (%) 32.4% 22.5% -50.6% -6.6% -30.7%

Net Claims / Net Premium (%) 20.1% 17.6% 85.0% 56.0% 71.1%

Return on Assets (%) 14.1% 5.7% -10.6% 0.2% -9.4%

LIQUIDITY / LEVERAGE RATIOS:

Current Ratio (Times) 1.20 1.27 1.22 1.21 1.19

Total Assets Turnover (Times) 1.67 1.97 2.08 2.27 2.25

Fixed Assets Turnover (Times) 0.18 0.15 0.13 0.14 0.14

Total Liability / Equity (Times) 1.06 1.35 1.54 1.60 2.16

Return on Capital Employed (%) 9.3% 13.9% -26.3% 0.7% -29.8%

Paid up Capital / Total Assets (%) 61.3% 75.8% 80.9% 62.2% 51.2%

Equity / Total Assets (%) 48.6% 42.6% 39.3% 38.4% 31.6%

RETURN TO MEMBERS:

Return on Equity -PBT (%) 9.3% 13.9% -26.3% 0.7% -29.8%

Return on Equity -PAT (%) 29.1% 13.4% -27.0% 0.4% -29.8%

Earnings per Share (Rs.) 2.31 0.75 (1.31) 0.03 (2.63)

Breakup Value per Share (Rs.) 7.92 5.62 4.87 6.18 6.18

Five years at a glance


Five years at a glance ( Continue)

(59.43)

21.02 (41.54)

8.22

44.63

Underwriting Profit / (Loss)

2012

201020092008

2011 2012

201020092008

2011

Earnings per Share

44%

Deferred Tax

11% 18%

10%

18%

Investments

Receivables Other Assets

Assets 2012

Fixed Assets

5%

0%

46%

49%

Underwritin g Provisiions Deferred Liabilities

Creditors & Accruals Equity

Liabilities 2012

5%

0%

2.31

0.75

(1.31)

0.03

(2.63)


Five years at a glance ( Continue)

93.4

7

82.0

7

124.

85 145.

28

-

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

180.00

200.00

2 0 1 2 2 0 1 1 2 0 1 0 2 0 0 9 2 0 0 8

Net Premium

183.

61

Gross Premium

317.

86

217.

87

193.

60

230.

46 28

2.47

-

50.00

100.00

150.00

200.00

250.00

300.00

350.00

2 0 1 2 2 0 1 1 2 0 1 0 2 0 0 9 2 0 0 8

93.6

6

82.3

4

77.6

3

100.

49

78.6

1

-

20.00

40.00

60.00

80.00

100.00

120.00

2 0 1 2 2 0 1 1 2 0 1 0 2 0 0 9 2 0 0 8

Investments

257.

49

182.

54

158.

14

200.

87

200.

73

-

50.00

100.00

150.00

200.00

250.00

300.00

2 0 1 2 2 0 1 02 0 1 1 2 0 0 9 2 0 0 8

Equity

Given the high cost of customeracquisition in the insurance sector,

insurers need to build customeradvocacy and minimise the value

leakage of existing customers.

3

Board of Directors 20

Company Information 22

Our Core Management 25

Services we offer 28

Senior Management 32

A Massage from the Chairman 34

Directors’ Report to the Members 35


Mian M. A. ShahidChief Executive Officer

Syed Ammar Ali ZaidiDirector

Mr. Adnan AfridiChairman

Board of Directors


Mr. Muhammad Saeed AkhterDirector

Mr. Abdul Majeed Director

Ms.Perveen Akhtar MalikDirector

Shiekh Aftab AhmedDirector


Company Information

Audit CommitteeSyed Ammar Ali Zaidi (Chairman)

Mr. Muhammad Saeed Akhter (Member)

Mr. Abdul Majeed (Member)

Chief Internal AuditorMian Mohsin Aslam

AuditorsM/s Avais Hyder Liaquat Nauman

Chartered Accountants

M/s Sarwars


Tax ConsultantM/s Muhammad Bilal & Company


Registered OfficeSuite # 204-A, Second Floor,

Madina City Mall, Abdullah Haroon Road,

Karachi.

Phone # (021) 37010190, 35221805-6

Fax # (021) 37010191

Head Office1st Floor, UIG House,

6 - D, Upper Mall

Lahore.

Phone # (042) 35776561-64

Fax # (042) 35776560

E-mail: [email protected]

Website: www.saudipakinsurance.com.pk

ChairmanMr. Adnan Afridi

Managing Director & Chief ExecutiveMian M. A. Shahid

DirectorsMs. Parveen Akhter Malik

Mr. Muhammad Saeed Akhter

Mr. Abdul Majeed

Syed Ammar Ali Zaidi

Sheikh Aftab Ahmed

Chief Financial OfficerMr. Naeem Tariq

Company SecretaryMr. Noshad Ahmed

Legal AdvisorsM/s Mandviwalla & Zafar

M/s Abdullah Associates

Human Resources CommitteeMs. Parveen Akhter Malik (Chairperson)

Mian M. A. Shahid (Member)

Syed Ammar Ali Zaidi (Member)

Risk Management CommitteeMr. Adnan Afridi (Chairman)

Mian M. A. Shahid (Member)

Ms. Parveen Akhter Malik (Member)


Managing Director & Chief Executive Officer Mian M. A. Shahid

Deputy Managing Director Mr. Shaheryar Akbar Raja

Advisors Maj. Gen (R) Asif Duraiz Akhter

Mr. Naseer Ahmed(Former Member Revenue CBR)

(Former Additional Secretary Military Finance)

(Former Additional Secretary Finance)

Mr. Azizullah Memon(Former President Bolan Bank & UBL)

General Manager Admin Mr. Jamil Ahmed

Chief Manager Underwriting Mr. Imtiaz Ali

Chief Manager Health Mr. Muneer Khan

Manager Claims Motor Mr. Khalid Nazeer bajwa

Manager Claims Non Motor Mr. Naveed ul Haq Nomani

Chief Manager Accounts Mr. Faisal Akbar (FCA)

Manager I.T Mr. Munir Ahmed

Manager Re-Insurance Mr. Asif Azeem

Key Management Personnel


Company Information

Apna Microfinance Bank

Bank Al-Falah Limited

Bank Al-Falah Islamic

Bank Al-Habib Limited

Habib Bank Limited

HSBC Bank Limited

KASB Bank Limited

National Bank of Pakistan

NIB Bank

SILKBANK Limited

Sindh Bank Limited

Soneri Bank Limited

Standard Chartered Bank Limited

State Bank of Pakistan

Tameer Microfinance Bank

The Bank Of Punjab

United Bank Limited

Allied Bank Limited

Askari Bank Limited

Faysal Bank Limited

Habib Metropolitan Bank Limited

Summit Bank Limited

MCB Bank Limited

SME Bank Limited

Dubai Islamic Bank Limited

Samba Bank Limited

Bankers


We are well positioned to outperform in

an environment which remains challenging.

Our Core Management


Our Core Management


Fire

Fire is not friendly with anyone, but our Fire policy is. The basic cover and the most essential for any business concern safeguards insurer’s interest against fire, which can be extended to include additional perils like Riot & Strike Damages, Malicious Damages, Earthquake Fire & Shock, Explosion, Impact Damage, Aircraft Damage, Atmospheric Disturbance and Burglary & House Breaking .


Marine

This type of insurance relates to cargo handling while in transit in different modes of transportation. The Marine Cargo insurance is classified into three classes – Institute Cargo Clause A, B & C, offered to the client depending on their needs.


Motor

A motor vehicle, being automobile, is exposed to several risks. We at Saudi Pak Insurance, offer comprehensive motor insurance for vehicles of all types i.e. private, commercial and motorcycle.


Miscellaneous

This specialized insurance policy indemnifies an insured for any liability arising due to violation of duties out of negligence by the insured. Architects, Engineers, Consultants, Doctors, Surveyors etc can benefitfrom this cover.


Mian M. A ShahidChief Executive Officer

Mr. Naseer AhmedAdvisor

Maj. Gen. (R) Asif Duraiz AkhterAdvisor

Mr. Shaheryar Akber RajaDeputy Managing Director

Mr.Azizulllah MemonAdvisor

Senior Management


Mr, Naeem TariqChief Financial Officer

Mr. Khalid Nazeer Bajwa Manager Claims Motor

Mr. Munir AhmedManager I.T

Mr. Asif AzeemManager Re-Insurance

Mr. Muneer KhanChief Manager Health

Mr. Faisal AkbarChief Manager Accounts

Mr. Imtiaz AliChief Manager Underwriting

Mr. Noshad AhmedCompany Secretary

Mian Mohsin AslamChief Internal Auditor


A Message from the

Chairman

SPICL achieved unprecedented record results for 2012. This performance success is the direct result of the remarkable efforts of our employees and our management to create a more robust, highly dynamic,continuously improving.

“We believe the

challenges we face

as a society present

us with an opportunity

to add value for

everyone, including

our shareholders.”

Despite economic conditions being impacted by deteriorating law and order conditions and political instability in the country, the year end results are reflective of the management’s continuing commitment in meeting the expectations of the shareholders who have invested and have trust in us. This has been made possible through attention to several core issues, including but not limited to, investing in the infrastructure and enhancing the geographical reach of the Company with a clear vision. I am confident that going forward, the Company will reap healthy returns from these investments.

During the year 2012, the Company continued to improve its performance and achieved outstanding results. Despite the challenges of the future in the form of increasing competition, difficult socio economic and political situation of the country, we remain committed to our vision, mission & core values. The Company is

geared up to meet the challenges of tomorrow and will continue to capitalize on new investments made in infrastructure, human resources and geographical outreach opportunities.

I would like to extend my appreciation to the management for their commitment, dedication and hard work in achieving these excellent results. I would also like to express my sincere appreciation to the Board members whose valuable guidance has always enlightened us in our decision making. Finally I express my gratitude to our stakeholders, regulators and our valued customers for their support and continued confidence in SPICL.

Adnan AfridiChairman

Karachi: March 28, 2013


Directors‘ Report to the members

The Board of Directors is pleased to present the annual report of the Company together with the audited financial statements for the year ended December 31, 2012.

Economic Review

Pakistan’s economy witnessed a modest improvement in FY12 – real GDP grew by 3.7 percent during the year, compared with 3.0 percent in FY11. Although the economy underperformed compared with the growth target of 4.2 percent, this outcome was expected given the energy shortages; security concerns; and floods in two consecutive years. Nevertheless, growth was more broad-based compared to FY11, as it was evenly distributed across agriculture, industry and the services sector.

On the external front, remittances posted yet another year of strong growth, which not only helped narrow the current account deficit, but also contributed to economic activity. In overall terms, the external sector has been less worrying than anticipated at the beginning of the year; however, as financial inflows dried up, the burden of financing the current account deficit and external debt, has fallen on the country’s FX reserves.

The macro economic landscape was dominated by discount rate cuts by SBP from 12 percent to 9.5 percent on the back of easing inflation. However, the Rupee remained under pressure throughout the year due to external debt obligations.

Performance Analysis 2012

In 2012, despite a challenging economic environment, the total assets of the Company have recorded a growth of 23.5 percent to Rs. 529 million. The Company has shown an immense improvement across all segments of operations and business. Also, the Company has underwritten premium of Rs. 317.86 million (2011: Rs. 217.87 millions) posting an increase of Rs.100 million (46 percent) over the last year, with an increase of Rs. 90.14 million (96 percent) in the net premium income during the year.

The Company has invested into the infrastructure to increase our geographical reach forming a foundation for the future growth of our organization consequently resulting in an increase in expenses from Rs. 64 million to Rs. 115 million respectively. The Management is confident that this investment will provide a strong base to further increase revenues in the years to come.

Dear Shareholders,

December 31,2012

December 31,2011

Inc / (Dec)in %

(Rupees in thousands)

The Financial highlights are given hereunder:

Premium Written 317,859 217,873 46

Net Premium 183,606 93,467 96

Net Claims 36,884 16,427 125

Management & other expenses 115,266 64,690 78

Underwriting results 59,434 21,020 183

Investment and other Income 11,876 14,848 -20

Profit for the year before Tax 23,859 25,337 -6

Profit for the year after Tax 74,944 24,402 207

E.P.S. 2.31 0.75 208

Credit Rating

The Company is rated “A-“ by PACRA.


During the year 2012 the Directors Mr. Farrukh Shauket Ansari and Mr. Mohammad Zahid Ahmed resigned, while Syed Ammar Ali Zaidi, Sheikh Aftab Ahmad and Mr. Abdul Majeed joined the Board as Directors.

Mr. Kamal Uddin Khan joined on January 2nd, 2012 and resigned on subsequent date i.e. July 30, 2012.

The Board appreciates the contribution of the outgoing Directors especially value additions made by outgoing Chairman Mr. Kamal Uddin Khan.

Change of Company Offices

The registered office shifted from Islamabad Capital territory to province of Sindh. The registered office is now situated at Suite No. 204-A, 2nd floor, Madina City Mall, Abdullah Haroon Road, Karachi.

The Management has shifted it’s Head office from 2nd floor, Nizam Chambers, 7 Shahrah-e-Fatima Jinnah Lahore to UIG House, 1st floor, 6-D, Upper Mall, Lahore.

Pattern of Shareholding

A statement of pattern of shareholding as on December 31, 2012 is annexed with this report.

Auditors

The present auditors M/s. Avais Hyder Liaquat Nauman, Chartered Accountants and M/s. Sarwars, Chartered Accountants, retire and being eligible, have offered themselves for re-appointment.

The board appointed M/s. Avais Hyder Liaquat Nauman, Chartered Accountants as statutory auditors of the Company for the year ending December 31, 2013 till the next AGM.

Future Outlook

Future economic environment will remain challenging; however the Management remains confident that SPICL will continue to grow despite current conditions on the back of investments made in infrastructure, human resources and improvement in credit rating. The Management will strive to further improve the risk management measures and diversify risk to achieve its financial targets.

Acknowledgement

We take this opportunity to express our deepest gratitude to our customers and business partners for their continued support and trust and our sincere appreciation to our Insurance brokers and Re-Insurers for their valuable support. We

Board MeetingsDuring the year 2012, five meetings of the Board of Directors were held, with attendance record as under:

Name of Director Number ofMeeting Held

Number ofMeetings attend

Mr. Muhammad Akram Shahid 5 5

Ms. Parveen Akhter Malik 5 5

Mr. Muhammad Saeed Akhter 5 5

Mr. Adnan Afridi 5 4

Mr. Syed Ammar Ali Zaidi 3 2 (New appointment)

Mr. Sheikh Aftab Ahmad 2 1 (New appointment)

Mr. Abdul Majeed 4 4 (New appointment)

Mr. Farrukh Shauket Ansari 1 1 (Resigned)

Mr. Mohammad Zahid Ahmed 2 2 (Resigned)

Mr. Kamal Uddin Khan 3 2 (Joined & Resigned)

Directors’ Report to the members


Directors’ Report to the members

would like to extend our appreciation to Securities Exchange Commission of Pakistan and State Bank of Pakistan for their guidance. We are also thankful to our clients for their patronage and Shareholders for their continue support. We are also equally thankful to our associates, staff and colleagues for their committed services to SPICL and look forward to their continued support.

For and on behalf of the Board of Directors

(Mian M. A. Shahid)Chief Executive Officer / Director

Karachi: March 28, 2013

In order to deliver and grow, your

Company depends greatly on

management at every level.

In 2012 we delivered a good result for our shareholders by executing on ourunderwriting strategies, improving

our customer orientation and protecting our strong capital position.

4

Pattern of Shareholding 40

Auditor’s Report to the Members 42

Balance Sheet 44

Profit and Loss Account 46

Statement of Comprehensive Income 47

Statement of Changes in Equity 48

Statement of Cash Flows 49

Statement of Premiums 51

Statement of Claims 52

Statement of Expenses 53

Statement of Investment Income 54

Notes to the Financial Statements 55

Our Network 93


Categories of Shareholders

List C Directors, C.E.O & Their Spouse and Minor ChildrenSr. No. Name Shares Held Percentage

1 Shiekh Aftab Ahmad Director 500 0.0015 2 Mr. Abdul Majeed Director 500 0.0015 3 Mr. Adnan Afridi Director 500 0.0015 4 Miss Parveen A. Malik Director 500 0.0015 5 Mr. Muhammad Saeed Akhtar Director 500 0.0015 6 Syed Ammar Ali Zaidi Director 500 0.0015 7 Mian Muhammad Akram Shahid MD & CEO 2,450,000 7.5385

Spouse

8 Mrs. Shagufta Parveen Shahid 583,333 1.7949 General Share Holders

9 Mrs. Khalida Rasheed 500,000 1.5385 10 Mrs. Zahida Sultan 500,000 1.5385 11 Mr. Abdul Hamid 458,334 1.4103

List A Associated Companies, Undertaking & Related Parties

12 Saudi Pak Industrial & Agricultural Investment Company Ltd. 11,998,500 36.9185 13 Silk Bank Limited ( Formerly Saudi Pak Commercial Bank Ltd.) 7,499,000 23.0738 14 United Track System (Pvt.) Limited. 4,841,666 14.8974 15 Saudi Pak Leasing Company Ltd. 2,499,500 7.6908 16 UIG Global Services Limited 1,166,667 3.5897

Total 32,500,000 100.000

No. of Share Holders Shareholdings From Total Shares Held

6 Shareholding form 1 to 500 shares 3,000

4 -do- 501 600,000 “ 2,041,667

1 -do- 600,001 “ 1,500,000 “ 1,166,667

2 -do- 1,500,001 “ 2,500,000 “ 4,949,500

2 -do- 2,500,001 “ 7,500,000 “ 12,340,666

1 -do- 7,500,001 “ 20,000,000 “ 11,998,500

16 32,500,000

Pattern of ShareholdingHeld by the shareholders As at December 31, 2012

Financial StatementFor the year ended December 31, 2012


Avais Hyder Liaquat Nauman Sarwars(Chartered Accountants) (Chartered Accountants)

Avais Chambers, Office # 12, II-Floor Lahore Centre, 1/C-5, Sikander Malhi Road 77-D Main Boulevard, Gulberg-III,Canal Park, Gulberg II, Lahore – Pakistan.Lahore - Pakistan Telephone: (92-42) 35782920-22Telephone: (92-42) 35872731/2/3 Telefax: (92-42) 35773825Telefax: (92-42) 35872734 E-mail: [email protected] E-mail: [email protected]

We have audited the annexed financial statements comprising of:

(i) Balance Sheet;(ii) Profit and Loss Account;(iii) Statement of Comprehensive Income;(iv) Statement of Changes in Equity;(v) Statement of Cash Flows;(vi) Statement of Premiums;(vii) Statement of Claims;(viii) Statement of Expenses; and(ix) Statement of Investment Income

of Saudi Pak Insurance Company Limited (“the Company”) as at 31 December, 2012 together with the notes forming part thereof, for the year then ended.

It is the responsibility of the Company’s Board of Directors to establish and maintain a system of internal control, and prepare and present the financial statements in conformity with the approved Accounting Standards as applicable in Pakistan and the requirements of the Insurance Ordinance, 2000 (XXXIX of 2000) and the Companies Ordinance, 1984 (XLVII of 1984). Our responsibility is to express an opinion on these statements based on our audit.

We conducted our audit in accordance with the Auditing Standards as applicable in Pakistan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting policies used and significant estimates made by management, as well as, evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion:

(a) proper books of accounts have been kept by the Company as required by the Insurance Ordinance, 2000 and Companies Ordinance, 1984;

(b) the financial statements together with the notes thereon have been drawn up in conformity with the Insurance Ordinance, 2000 and the Companies Ordinance, 1984, and accurately reflect the books and records of the Company and are further in accordance with accounting policies consistently applied;

Auditors’ Report to the members


(c) the financial statements together with the notes thereon present fairly, in all material respects, the state of the Company’s affairs as at 31 December 2012 and of the profits, its comprehensive income, its cashflows and changes in equity for the year then ended in accordance with approved accounting standards as applicable in Pakistan, and give the information required to be disclosed by the Insurance Ordinance, 2000 and the Companies Ordinance, 1984; and

(d) no Zakat was deductible at source under the Zakat and Usher Ordinance, 1980.

___________________________________ _______________________

AVAIS HYDER LIAQUAT NAUMAN SARWARS

Chartered Accountants Chartered Accountants

Audit Engagement Partner: Syed Ali Adnan Tirmizey Rashid Sarwar

Date: March 29, 2013

Place: Lahore


Note2012 2011

Rupees Rupees

Share Capital And Reserves

Authorized Share Capital

50,000,000 (2011 : 50,000,000)

ordinary shares of Rs.10 each 500,000,000 500,000,000

Issued, subscribed and paid up share capital 5 325,000,000 325,000,000

Accumulated (loss) (67,510,963) (142,455,661)

257,489,037 182,544,339

Underwriting Provisions

Provision for outstanding claims (including IBNR) 80,911,792 112,663,524

Provision for unearned premium 145,874,535 105,136,280

Additional provision for unexpired risks 6,741,166 2,000,656

Commission income unearned 12,250,183 8,920,405

245,777,676 228,720,865

Deferred Liabilities

Staff retirement gratuity 6 2,294,644 944,644

Creditors And Accruals

Premium received in advance 1,660,784 -

Amount due to other insurers/re-insurers 7,576,658 3,555,785

Accrued expenses 7 6,790,489 4,346,136

Other creditors and accruals 8 8,235,495 8,761,420

24,263,426 16,663,341

Total Liabilities 272,335,746 246,328,850

Total Equity And Liabilities 529,824,783 428,873,189

Contingencies And Commitments 9 - -

Balance SheetAs at December 31, 2012

Mian M.A. Shahid Adnan Afridi Chief Executive Officer Chairman


Balance SheetAs at December 31, 2012

Note2012 2011

Rupees Rupees

Cash And Bank Deposits 10

Cash and other equivalents 918,117 377,987

Current and other accounts 28,434,551 16,977,051

Deposits maturing within 12 months 40,966,000 45,431,000

Cash with State Bank of Pakistan 89,639 200,000

70,408,307 62,986,038

Loans To Employees 11 501,116 347,149

Investments 12 93,659,604 82,342,045

Deferred Tax Asset 13 52,003,623 -

Current Assets - Others

Premium due but unpaid 14 48,702,076 61,160,304

Amount due from other insurers/re-insurers 15 45,544,938 41,811,499

Prepaid reinsurance premium ceded 49,466,557 38,815,241

Accrued investment income 16 3,758,916 3,359,440

Reinsurance recoveries against outstanding claims 17 71,288,878 80,478,357

Taxation - payment less provision 4,541,771 3,874,189

Deferred commission expense 20,759,255 13,022,299

Prepayments 18 5,801,962 3,268,005

Sundry receivables 19 6,777,826 4,614,720

256,642,179 250,404,054

Fixed Assets 20

Tangible

Office improvements 10,330,878 8,368,591

Furniture and fixture 2,892,391 2,114,786

Office equipment 4,645,249 3,894,015

Computer equipment 2,124,800 2,066,562

Motor vehicles 36,361,369 16,030,865

56,354,687 32,474,819

Intangible

Computer software 255,267 319,084

TOTAL ASSETS 529,824,783 428,873,189

The annexed notes 1 to 32 form an integral part of these financial statements.

Sheikh Aftab Ahmed Syed Ammar ALi Zaidi Director Director


Note

2012 2011

Fire and Property Damage

Marine Aviation And

TransportMotor Miscellneous Aggregate Aggregate

- - - - - - - - - - - - - - - - - R u p e e s - - - - - - - - - - - - - - - -

Revenue AccountNet premium revenue 34,047,317 16,094,142 82,970,819 50,494,457 183,606,735 93,467,937

Net claims (5,154,961) (2,272,662) (32,924,651) 3,468,563 (36,883,711) (16,426,926)

Premium deficiency reserve (6,741,166) - 1,025,018 975,638 (4,740,510) -

Management expenses 21 (30,199,156) (6,412,718) (23,306,687) (7,895,701) (67,814,262) (54,160,156)

Net commission (1,150,449) (1,878,567) (7,047,551) (4,657,071) (14,733,638) (1,860,655)

Underwriting Results (9,198,415) 5,530,195 20,716,948 42,385,886 59,434,614 21,020,200

Investment income 10,211,896 7,452,909

Other income 22 1,664,495 7,394,908

General and administration expenses 21 (47,451,896) (10,530,488)

Profit before tax 23,859,109 25,337,529

Less: Taxation

Current 23 (918,034) (934,679)

Deferred 13 52,003,623 -

51,085,589 (934,679)

Profit after tax 74,944,698 24,402,850

Profit And (Loss) Appropriation Account

Balance at commencement of year (142,455,661) (166,858,511)

Comprehensive income 74,944,698 24,402,850

Balance of accumulated (loss) at end of the year (67,510,963) (142,455,661)

Earnings Per Share

- basic and diluted 24 2.31 0.75


Profit and Loss Accountfor the year ended December 31, 2012

Mian M.A. Shahid Adnan Afridi Sheikh Aftab Ahmed Syed Ammer Ali Zaidi Chief Executive Officer Chairman Director Director


Note2012 2011

Rupees Rupees

Profit / (loss) after tax 74,944,698 24,402,850

Other comprehensive income - -

74,944,698 24,402,850


Statement of Comprehensive Incomefor the year ended December 31, 2012



Share capitalAccumulated (loss)/ profit

Total

- - - - - - - - - R u p e e s - -- - - -- - - -

Balance as at January 01, 2011 325,000,000 (166,858,511) 158,141,489

Comprehensive income/(loss) for the year - 24,402,850 24,402,850

Balance as at December 31, 2011 325,000,000 (142,455,661) 182,544,339

Balance as at January 01, 2012 325,000,000 (142,455,661) 182,544,339

Comprehensive income/(loss) for the year - 74,944,698 74,944,698

Balance as at December 31, 2012 325,000,000 (67,510,963) 257,489,037


Statement of Changes In Equityfor the year ended December 31, 2012



Note2012 2011

Rupees Rupees

Operating Cash Flows

a) Underwriting activities

Premium received 331,978,178 188,933,588

Reinsurance premium paid (100,144,619) (87,552,285)

Claims paid (134,925,215) (74,138,498)

Reinsurance and other recoveries received 71,745,812 56,614,123

Commission paid (45,396,608) (27,867,185)

Commission received 26,255,792 20,437,270

Other underwriting payments (56,363,501) (42,894,728)

Net cash flow from underwriting activities 93,149,839 33,532,285

b) Other operating activities

Income tax paid (1,585,617) (789,365)

General and administrative expenses paid (47,451,896) (10,530,488)

Other operating payments (4,697,063) (2,443,229)

Other operating receipts 1,918,428 1,926,711

Loan (disbursed)/ refunded (153,967) 525,328

Net cash flow from other operating activities (51,970,115) (11,311,043)

Total cash flow from operating activities 41,179,724 22,221,242

Investment Activities

Profit/ return received 9,773,120 5,071,701

Dividend received 39,300 36,000

Payments for investments (11,317,559) (4,908,801)

Proceeds from disposal of investments - 200,000

Fixed capital expenditure (32,252,316) (12,544,118)

Proceeds from disposal of fixed assets - 2,234,017

Total cash flow from investing activities (33,757,455) (9,911,201)

Financing Activities

Total cash inflow from financing activities - -

Net cash inflow/(outflow) from all activities 7,422,269 12,310,041

Cash at the beginning of the year 62,986,038 50,675,997

Cash at the end of the year 70,408,307 62,986,038


Statement of Cash Flowsfor the year ended December 31, 2012


Note2012 2011

Rupees Rupees

Reconciliation to Profit and Loss Account

Operating cash flows 41,179,724 22,221,242

Depreciation/ amortization expenses (8,436,265) (4,122,555)

(Loss)/ gain on disposal of fixed assets - 631,302

Provision for doubtful debts (6,256,996) (338,696)

Premium deficiency reserve (4,740,510) -

(Decrease) / Increase in assets other than cash 13,167,646 1,996,190

(Increase)/ Decrease in liabilities (21,266,386) (2,502,863)

Other income 10,172,596 7,416,909

Dividend income 39,300 36,000

Reversal/ (Provision) for taxation 51,085,589 (934,679)

Profit after taxation 74,944,698 24,402,850

Definition of cash

Cash comprises of cash in hand, policy stamps and bank balances which are readily convertible to cash in hand and which are used in the cash management function on a day-to-day basis.

Cash for the purpose of statement of cash flows consists of:

Cash and cash equivalents 10

Cash and other equivalents

Cash and other equivalents 918,117 377,987

918,117 377,987

Current and other accounts

Current accounts 26,104,724 13,423,411

PLS savings accounts 2,329,827 3,553,640

28,434,551 16,977,051

Deposits maturing within 12 months 40,966,000 45,431,000


70,408,307 62,986,038

The annexed notes I to 32 from an integral part of these financial statements.

Statement of Cash Flowsfor the year ended December 31, 2012



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Rupees Rupees

Income from trading investments

(Loss)/gain on trading - -

Dividend income - -

- -

Income from non-trading investments

Held to maturity

Return on government securities 5,228,398 4,276,287

Return on TDRs 4,953,564 3,153,873

Available-for-sale

Dividend income 39,300 36,000

10,221,262 7,466,160

(Loss)/gain on sale of non-trading investments

- Available-for-sale - -

Impairment (loss) on non-trading investments

- Available-for-sale - -

Provision for impairment in the value of

-Available-for-sale-investments - -

Investment related expenses 12.4 (9,366) (13,251)

Net investment income 10,211,896 7,452,909


Statement of Investment Incomefor the year ended December 31, 2012



1 LEGAL STATUS AND NATURE OF BUSINESS

Saudi Pak Insurance Company Limited (the Company) is an unquoted public limited company incorporated in Islamabad, Pakistan on February 15, 2005 under the Companies Ordinance, 1984. The Company is engaged in non-life insurance business mainly comprising of fire, marine, motor and miscellaneous. The Company commenced its commercial operations on April 13, 2005. The registered office of the Company is situated at Suite # 204-A, Second Floor, Madina City Mall, Abdullah Haroon Road, Karachi and principal office of the Company is situated at UIG House 6-D, 1st Floor, Upper Mall, Lahore, Pakistan.

2 BASIS OF PREPARATION

These financial statements have been prepared in accordance with the format of financial statements issued by the Securities and Exchange Commission of Pakistan (SECP) through Securities and Exchange Commission (Insurance) Rules, 2002 [SEC (Insurance) Rules, 2002].

2.1 Statement of compliance

These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. Approved accounting standards comprises of such International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance, 1984, the Insurance Ordinance, 2000 and SEC (Insurance) Rules, 2002. In case requirements differ, the provisions or directives of the Companies Ordinance. 1984, Insurance Ordinance, 2000 and SEC (Insurance) Rules, 2002 shall prevail.

The SECP has allowed the insurance companies to defer the application of International Accounting Standard-39 (IAS-39) “Financial Instruments: Recognition and Measurement” in respect of valuation of ‘available-for-sale investments’. Accordingly, the requirements of IAS-39, to the extent required by SECP as aforesaid, have not been considered in the preparation of these Financial Statements.

2.2 Basis of measurement

These financial statements have been prepared under the historical cost convention except that certain financial instruments are carried at fair value and staff retirement benefits are stated at present value.

2.3 Functional and presentation currency

These financial statements are presented in Pakistan Rupees, which is also the Company’s functional and presentation currency. All financial information presented in Pakistan rupees are rounded off to nearest rupees unless otherwise stated.

2.4 Use of estimates and judgments

The preparation of financial statements in conformity with the requirements of approved accounting standards as applicable in Pakistan requires management to make certain judgments,accounting estimates and assumptions. It also requires the management to exercise its judgment in the process of applying the Company’s accounting policies. Actual results may differ from these estimates and associated assumptions are continually evaluated and are based on historical experience, statutory requirements and other factors considered reasonable in the circumstances. Revision to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected. The estimates and assumptions that are expected to have a significant effect on the assets and liabilities, income and expenses have been disclosed in note 4.24 to these financial statements.

Notes to the Financial Statementsfor the year ended December 31, 2012



3 APPLICATON OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS

3.1 Standards, interpretations and amendments to published approved accounting standards that are not yet effective

The following revised standards, amendments and interpretations with respect to the approved accounting standards as applicable in Pakistan would be effective from the dates mentioned below against the respective standards:

Effective Date

Standard (accounting periods beginning on or after)

IFRS-7 Financial Instruments: Disclosures- (Amendments)

-Amendments enhancing disclosures about offsetting January 01, 2013

of financial assets and financial liabilities

Presentation of Financial Statements-Presentation of July 01, 2012

items of comprehensive income

IAS-27 Separate Financial Statements January 01, 2013

IAS-28 Investments in Associates and Joint Ventures January 01, 2013

IAS-32 Financial Instruments: Presentation (Amendment) January 01, 2014

IAS-19 Employee Benefits - (Amendments) January 01, 2013

The company expects that adoption of the above revisions and amendments of the standards will not materially effect the company’s financial statements in the period of initial application.

In addition to the above, the following new standards have been issued by IASB which are yet to be notified by the SECP for the purpose of applicability in Pakistan.

IASB Effective Date

Standard (annual periods beginning on or after)

IFRS-9 -Financial Instruments: Classification and Measurement January 01, 2015

IFRS-10 -Consolidated Financial Statements January 01, 2013

IFRS-11 -Joint Arrangements January 01, 2013

IFRS-12 -Disclosure of Interest in other Entities January 01, 2013

IFRS-13 -Fair Value Measurement January 01, 2013


4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies adopted in the preparation of these financial statements are consistent with those of the previous financial year.

4.1 Adoption of new and amended international financial reporting standards (IFRSs)

The Company has adopted the following new and amended IFRS and IFRIC interpretations which become effective during the year:

Standard and Interpretation

Effective date

(accounting periodsbeginning on or after)

IFRS - 7 - Financial Instruments:

Disclosures - (Amendment) July 01, 2011

IAS - 12 - Income Taxes (Amendment) -

Recovery of underlying Assets January 01, 2012

The adoption of the above standard, amendments, interpretations and improvements did not have any material effect on the financial statements.

4.2 Insurance contracts

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

Once a contract has been classified as an insurance contract it remains an insurance contract for the remainder of its lifetime, even if the insurance risk reduces significantly during this period, unless all rights and liabilities are extinguished or expired.

Insurance contracts are classified into following main categories, depending on the nature and duration of risk and whether or not the terms and conditions are fixed.

- Fire and property damages

- Marine, aviation and transport

- Motor

- Miscellaneous

Fire and property insurance contracts mainly compensate the Company’s customers for damage suffered to their properties or for the value of property lost.

Marine Insurance covers the loss or damage of vessels, cargo, terminals and any transport of property by which cargo is transferred, acquired or held between the points of origin and final destination.



Motor insurance provides protection against losses incurred as a result of theft, traffic accidents and against third party liability that could be incurred in an accident.

Other various types of insurance are classified in miscellaneous category which includes mainly engineering, crop and livestock, personal accident, worker compensation, travel, products of financial institutions etc.

The Company does not issue any insurance contracts with discretionary participation features (DPF) or any investment contracts.

4.3 Premium

Premium written under a policy is recognized as income over the period of insurance from the date of issuance of the policy to which it relates to its expiry. Where the pattern of incidence of risk varies over the period of the policy, premium is recognized as revenue in accordance with the pattern of the incidence of risk. The portion of premium written relating to the unexpired period of coverage is recognized as unearned premium by the Company. This liability is calculated by applying 1/24 method as specified in the SEC (Insurance) Rules, 2002.

Premium income includes administrative surcharge that represents documentation and other charges recovered by the Company from policy holders in respect of policies issued, at the rate of 5% of the premium written restricted to a maximum of Rs. 2,000 per policy.

Receivables under insurance contracts are recognized when due, at the fair value of the consideration receivable less provision for doubtful debts, if any. If there is objective evidence that the receivable is impaired, the Company reduces the carrying amount of the receivable accordingly and recognizes that impairment loss in the profit and loss account.

Pakistan Reinsurance Company Limited (PRCL) retrocession business is booked on the basis of PRCL statements.

4.4 Reinsurance ceded

The Company enters into reinsurance contracts in the normal course of business in order to limit the potential for losses arising from certain exposures. Outward reinsurance premiums are accounted for in the same period as the related premiums for the direct or accepted reinsurance business being reinsured.

Reinsurance liabilities represent balances due to reinsurance companies. Amounts payable are estimated in a manner consistent with the related reinsurance contract. Reinsurance assets represent balances due from reinsurance companies. Amounts recoverable from reinsurers are estimated in a manner consistent with the provision for outstanding claims or settled claims associated with the reinsurance policies and are in accordance with the related reinsurance contract.

Reinsurance assets are not offset against related insurance liabilities. Income or expenses from reinsurance contract are not offset against expenses or income from related insurance assets.

Reinsurance assets or liabilities are derecognized when the contractual rights are extinguished or expired.



The Company assesses its reinsurance assets for impairment on balance sheet date, if there is an objective evidence that the reinsurance asset is impaired, the Company reduces the carrying amount of the reinsurance asset to its recoverable amount and recognizes that impairment loss in the profit and loss account.

4.5 Claim expense

General insurance claims include all claims occurring during the year, whether reported or not, related internal and external claims handling costs that are directly related to the processing and settlement of claims, a reduction for the value of salvage and other recoveries and any adjustments to claims outstanding from previous years.

The Company recognizes liability in respect of all claims incurred up to the balance sheet date which is measured at the undiscounted value of the expected future payments. The claims are considered to be incurred at the time of the incident giving rise to the claim except as otherwise expressly indicated in an insurance contract. The liability for claims include amounts relating to unpaid reported claims, claims incurred but not reported (IBNR) and expected claims settlement costs.

Provision for liability in respect of unpaid reported claims is made on the basis of individual case estimates. Provision for IBNR is based on the management’s best estimate which takes into account the past trends, expected future patterns of reporting of claims and the claims actually reported subsequent to the balance sheet date.

4.6 Reinsurance recoveries against outstanding claims

Claims recoveries from the reinsurer are recognized as an asset at the same time as the claims which give rise to the right of recovery are recognized as a liability and are measured at the amount expected to be received. Claims expenses are reported net of reinsurance in the profit and loss accounts.

4.7 Commission expense and other acquisition costs

Commission expense and other acquisition costs are charged to the profit and loss account at the time the policies are accepted. Commission income from reinsurers is recognized at the time of issuance of the underlying insurance policy by the Company. This income is deferred and brought to account as revenue in accordance with the pattern of recognition of the reinsurance premium to which it relates. Profit commission, if any, which the Company may be entitled to under the terms of reinsurance is recognized on accrual basis.

4.8 Premium deficiency reserves

The Company is required as per SEC (Insurance) Rules, 2002, to maintain a provision in respect of premium deficiency for the class of business where the unearned premium liability is not adequate to meet the expected future liability, after reinsurance from claims and other supplementary expenses expected to be incurred after the balance sheet date in respect of the unexpired policies in that class of business at the balance sheet date. The movement in the premium deficiency reserve is recorded as an expense/ income in profit and loss account for the year.



Percentage (%)

- Fire and property damage 90%

- Marine, aviation and transport 51%

- Motor 50%

- Miscellaneous 30%

The Company determines adequacy of liability of premium deficiency by carrying out analysis of its loss ratio of expired periods. For this purpose average loss ratio of last 3 years inclusive of claim settlement cost but excluding major exceptional claims are taken in to consideration to determine ultimate loss ratio to be applied on unearned premium.

4.9 Creditors, accruals and provisions

Liabilities for creditors and other amounts payable are carried at cost which is the fair value of the consideration to be paid in the future for the services received, whether or not billed to the Company.Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of’ the amount can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate.

4.10 Taxation

Income tax expense comprises current and deferred tax. Income tax expense is recognized in the profit and loss account, except to the extent that it relates to items recognized directly in other comprehensive income or below equity, in which case it is recognized in other com-prehensive income or below equity.

4.10.1 Current

Provision of current tax is based on the taxable income for the year determined in accordance with the prevailing law for taxation of income. The charge for current tax is calculated using prevailing tax rates or tax rates expected to apply to the profit for the year, if enacted. The charge for current tax also include adjustments, where considered necessary, relating to prior year arising from assessments made during the current year.

4.10.2Deferred

Deferred tax is accounted for using the balance sheet liability method in respect of all temporary differences at the balance sheet date between the tax bases and carrying amounts of assets and liabilities for financial reporting purposes. Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognized to the extent that it is

For this purpose, loss ratios for each class are estimated based on historical claim development. Judgment is used in assessing the extent to which past trends may not apply in future or the effetcts of one-off claims. If these ratios are adverse, premium deficiency is determined. The loss ratios estimated on these basis for the unexpired portion are as follows:



probable that taxable profits will be available against which the deductible temporary differences, unused tax losses and tax credits can be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on the tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Deferred tax is charged or credited in the profit and loss account, except in the case of items credited or charged to equity in which case it is included in equity.

4.11 Staff retirement benefits (Defined benefit plan)

The Company operates an approved defined gratuity scheme for all its permanent employees who attain the minimum qualification period for entitlement to gratuity. Contributions to the fund are made based on actuarial recommendations and in line with the provisions of the Income Tax Ordinance, 2001. The most recent actuarial valuation was carried out for the year ended December 31, 2012 using the Projected Unit Credit Method. Actuarial gains/ losses are recognized over the average remaining service life of the employees. Detail of the scheme given in note 6 to the financial statements.

4.12 Cash and cash equivalents

Cash and cash equivalents include cash and balances with banks in current and deposit accounts and stamps in hand.

4.13 Investments

4.13.1 Recognition

All investments are initially recognized at cost, being the fair value of the consideration given and include transaction costs, except for held for trading in which case transaction costs are charged to the profit and loss account. These are recognized and classified as follows: -

- Investment at fair value through profit and loss (held for trading)

- Held to maturity

- Available for sale

4.13.2 Measurement

4.13.2.1 Investment at fair value through profit or loss -held for trading

Investments which are acquired principally for the purposes of generating profit from short term fluctuation in market price or are part of the portfolio in which there is recent actual pattern of short term profit taking are classified as held for trading.

Subsequent to initial recognition, these investments are remeasured at fair value. Gains or losses on investments on remeasurement of these investments are recognized in the profit and loss account.



4.14 Amount due to other insurers/reinsurers

Liabilities for other insurers / reinsurers are carried at cost which is the fair value of consideration to be paid in the future for services.

4.15 Fixed assets

4.15.1 Tangible

These are stated at cost less accumulated depreciation and impairment losses, if any.

Depreciation on all fixed assets is charged to profit and loss account on the reducing balance method so as to write-off depreciable amount of an asset over its useful life

4.13.2.2 Held to maturity

Investments with fixed maturity, where management has both the intent and the ability to hold to maturity, are classified as held to maturity and are initially measured at cost.

At subsequent reporting date, these are measured at amortized cost less provision for impairment, if any. Any premium paid or discount availed on acquisition of held to maturity investment is deferred and amortized over the term of the investment using the effective yield method.

4.13.2.3 Available for sale

Available for sale investments are those non-derivative investments that are designated as available for sale or are not classified in any other category. These are primarily those investments that are intended to be held for an undefined period of time or may be sold in response to the need for liquidity are classified as available for sale. It also includes investments in associated undertakings where the Company does not have significant influence. The Company follows trade date accounting for ‘regular way purchase and sales’ of investments.

Subsequent to initial recognition at cost, these are stated at lower of cost or market value (market value being taken as lower if fall is other than temporary) in accordance with the requirements of the S.R.O. 938 issued by the Securities and Exchange Commission of Pakistan (SECP) in December 2002. The Company uses latest stock exchange quotation to determine the market value of its quoted investments whereas, impairment of unquoted investments is computed by reference to net assets of the investee on the basis of the latest available audited / unaudited financial statements.

Dividend income and entitlement of bonus shares are recognized when the Company’s right to receive such dividend and bonus shares is established.

Gain/ (loss) on remeasurment of available for sale investments are taken to non-owner changes in equity.



4.16 Impairment

A financial asset is assessed at each balance sheet date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.

The carrying amount of non-financial assets is reviewed at each balance sheet date to determine whether there is any indication of impairment of any asset or a group of assets. If such indication exists, the recoverable amount of such assets is estimated. The recoverable amount of an asset is greater of its value in use and its fair value less costs to sell. An impairment loss is recognized if the carrying amount of an asset exceeds its estimated recoverable amount.

at the rates stated in note 20. Depreciation on additions to fixed assets is charged from the month in which an asset is available for use, while no depreciation is charged for the month in which the asset is disposed off.

The assets’ residual values and useful lives are reviewed, at each financial year end, and adjusted if impact on depreciation is significant.

Subsequent costs are included in an asset’s carrying amount or recognized as a separate asset as appropriate, only when it is probable that future benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the profit and loss account as and when incurred.

An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the assets is recognized in the profit and loss account in the year when asset is derecognized.

4.15.2 Intangible

These are recorded initially at cost and subsequently carried at cost less accumulated amortization and accumulated impairment losses, if any.

Intangible assets having finite useful lives are stated at cost less accumulated amortization and accumulated impairment losses, if any. Intangible assets are amortized using the straight line method from the month, when these assets are put to use, over their estimated useful life.

Amortization on addition and deletion of intangible assets during the year is charged to profit and loss account in proportion to the period of use.

The useful life and amortization method are reviewed and adjusted, if appropriate, at the balance sheet date. Software development costs are only capitalized to the extent that future economic benefits are expected to be derived by the Company.



4.20 Offsetting of financial assets and liabilities

Financial assets and financial liabilities are only offset and the net amount reported in the balance sheet when there is a legally enforceable right to set off the recognized amount and the Company intends to either settle on a net basis, or to realize the asset and settle the liability simultaneously.

4.21 Financial instruments

All the financial assets and financial liabilities are recognized at the time when the Company become a party to the contractual provisions of the instrument and derecognized when the Company losses control of contractual rights that comprises the financial assets and in the case of financial liabilities when the obligation specified in the contract is discharged, cancelled or expired. At the time of initial recognition all financial assets and financial liabilities are measured at cost, which is the fair value of the consideration given or received for it. Any gain or loss on derecognition of financial assets and financial liabilities is included in the profit and loss account for the year.

4.22 Segment reporting

A business segment is a distinguishable component of the Company that are subject to risks and returns that are different from those of other business segments. The Company accounts for segment reporting of operating results using the classes of business as specifiedunder the Insurance Ordinance, 2000 and SEC (Insurance) Rules, 2002. The reported

All impairment losses are recognized in the profit and loss account. Provisions for impairment are reviewed at each balance sheet date and adjusted to reflect the current best estimates. Changes in the provisions are recognized as income or expense.

4.17 Investment income

Income from held to maturity investments is recognized on a time proportion basis taking into account the effective yield method on the investments.

Dividend income and element of bonus are recognized when the right to receive the same is established, i.e., at the time of the closure of share transfer books of the Company declaring the dividend and / or bonus.

4.18 Management Expenses

Expenses of management are allocated to various classes of business in proportion to the respective premium written for the year. Expenses not allocable to the underwriting business are charged as general and administrative expenses.

4.19 Foreign currency transactions and translation

Foreign currency transactions are translated into Pak Rupees using the exchange rates prevailing at the dates of the transactions. All monetary assets and liabilities in foreign currencies are translated into Pak Rupees at the rates of exchange prevailing at the balance sheet date. Foreign exchange gains and losses on translation are recognized in the profit and loss account.



4.23 Dividend distributions and appropriations

Dividend distributions and appropriations are recorded in the period in which the distributions and appropriations are approved.

4.24 Critical accounting judgments and key sources of estimation uncertainty

In the process of applying the Company’s accounting policies, as described in note 4, the management has made the following estimates and judgments which are significant to financial statements: -

- classification of investments (Note 4.13);

- determining the residual values and useful lives of fixed assets (Note 4.15);

- impairment (Note 4.16);

- accounting for post employment benefits (Note 4.11);

- recognition of taxation and deferred tax (Note 4.10);

- provisions for obligations (Note 4.9);

- recognition of outstanding claims incurred but not reported (Note 4.5);

- calculation of premium deficiency reserves (Note 4.8).

- allocation of management expenses (Note 4.18).

- segmental reporting (Note 4.22).

operating segments are also consistent with the internal reporting provided to Board of Directors which are responsible for allocating resources and assessing performance of the operating segments. 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 fire, marine, motor and miscellaneous.

The fire and property damage insurance segment provides insurance covers against damages caused by fire, riot and strike, explosion, earthquake, atmospheric damage, flood and electric fluctuation and engineering losses.

Marine insurance segment provides coverage against cargo risk, war risk and damages occurring in inland transit.

Motor insurance provides comprehensive vehicle coverage and indemnity against third party losses.

Miscellaneous insurance provides cover against loss of cash in safe and cash in transit, personal accident, money, and other coverage.

Financing, investment and income taxes are managed on an overall basis and are therefore, not allocated to any segment. The accounting policies of operating segment are the same as those described in the summary of significant accounting policies.

Assets, liabilities and capital expenditures that are directly attributable to segments have been assigned to them while the carrying amount of certain assets pertaining to two or more segments have been allocated to segments on the net premium revenue basis. Those assets and liabilities which can not be allocated to a particular segment on the above basis are reported as unallocated corporate assets and liabilities.



6 STAFF RETIREMENT GRATUITY

Staff Retirement Gratuity 2,294,644 944,644

2,294,644 944,644

6.1 Staff retirement gratuity-payable to the fund

The actuarial valuations are carried out annually and contributions are made accordingly. Following were the

significant assumptions used for valuation of the scheme:-

- - - -

Discount rate 12% (2011:13%) per annum

Expected rate of increase in the salary of employees 10% (2011:11%) per annum

Expected interest rate on plan assets of the fund 12% (2011: 13%) per annum

Expected service length of the employees 14.6 years (2011: 14.6 years)

5 Issued, subscribed and paid up share capital`Note 2012 2011

Rupees Rupees

2012 2011

(Number of Shares)

25,000,000 25,000,000 Ordinary shares of Rs. 10/- 250,000,000 250,000,000

each fully paid in cash

7,500,000 7,500,000 Ordinary shares of Rs. 10/- 75,000,000 75,000,000

each issued as fully paid right shares

32,500,000 32,500,000 325,000,000 325,000,000

Detail of the holdings of the associated companies and directors are as follows:

Saudi Pak Industrial & Agricultural Investment Company

Limited - Associated Company 119,985,000 178,318,333

Silk Bank Limited - Associated Company 74,990,000 74,990,000

Saudi Pak Leasing Company Limited 24,995,000 24,995,000

United Track System (Pvt.) Limited - Associated Company 48,416,660 8,750,000

UIG Global Services Limited 11,666,667 11,666,667

Directors 24,530,006 5,863,333

General Share Holders 20,416,667 20,416,667

325,000,000 325,000,000



Note 2012 2011

Rupees Rupees

6.1.1 Reconciliation of payable / (receivable) to defined benefit plan

Present value of defined benefit obligations 3,674,382 3,898,507

Fair value of plan assets (982,251) (2,354,170)

Unrecognized actuarial gains / (losses) (397,487) (599,693)

2,294,644 944,644

6.1.2 Movement in payable / (receivable) to defined benefit plan

Opening balance 944,644 565,377

Charge to profit and loss account 1,914,355 1,259,527

Contributions (564,355) (880,260)

Closing balance 2,294,644 944,644

6.1.3 Charges for defined benefit plan

Current service cost 1,706,142 1,092,268

Interest cost 604,744 868,092

Expected return on plan assets (417,515) (707,907)

Recognition of loss 20,984 7,074

Amount charged to profit and loss account 1,914,355 1,259,527

6.1.4 Movement in present value of defined benefit obligation

Opening balance 3,898,507 5,623,277

Current service cost 1,706,142 1,092,268

Interest cost 604,744 868,092

Benefit paid during the year (1,993,295) (3,399,755)

Actuarial (loss) / gain (541,716) (285,375)

Closing balance 3,674,382 3,898,507



Note 2012 2011

Rupees Rupees

6.1.5 Movement in fair value of plan assets

Opening balance 2,354,170 4,404,737

Expected return on plan assets 417,515 707,907

Contribution to the fund 564,355 880,260

Benefit paid during the year (1,993,295) (3,399,755)

Actuarial (loss) / gain (360,494) (238,979)

Closing balance 982,251 2,354,170

6.1.6 Actual return on plan assets

Expected return on plan assets 417,515 707,907

Actuarial (loss) on assets (360,494) (238,979)

57,021 468,928

6.1.7 Composition of fair valueof plan assets

2012 2012 2011

Fair Value Percentage Fair Value Percentage

Rupees Rupees

Cash and bank balances 982,251 100% 2,354,170 100%

982,251 100% 2,354,170 100%

6.1.7.1 Reconciliation with bank statementNote 2012 2011

Rupees Rupees

Balance as per bank statement as at December 31 982,251 2,354,170

Less: Unpresented cheques as at December 31 - -

Composition of fair value of plan assets 982,251 2,354,170



7 ACCRUED EXPENSES Note2012 2011

Rupees Rupees

Audit fee payable 450,000 440,000

Salaries wages and benefits payable 5,485,622 3,795,525

Utilities payable 430,870 74,776

Others 423,997 35,835

6,790,489 4,346,136

8 OTHER CREDITORS AND ACCRUALS

Commission 1,969,467 2,150,933

Tracker charges - 1,301,253

Rent 18,000 335,925

Customer deposit - 754,800

Government levies payable 5,344,242 3,989,459

Liabilities against cancelled policies 81,614 36,966

Withholding tax 183,187 40,717

Others 638,985 151,367

8,235,495 8,761,420

9 CONTINGENCIES AND COMMITMENTS

There is no known contingency or commitment as at December 31, 2012 (2011: Nil).

6.1.8 Historical information2012 2011 2010 2009

-- - - - - - - Rupees - - - - - - - -

Present value of defined benefit

obligation 3,674,382 3,898,507 5,623,277 3,867,244

Fair value of plan assets (982,251) (2,354,170) (4,404,737) (4,354,853)

(Surplus)/ deficit 2,692,131 1,544,337 1,218,540 (487,609)

Expected adjustments

Actuarial (gain)/ loss on obligation (541,716) (285,375) 640,827 (508,116)

Actuarial gain/ (loss) on assets (360,494) (238,979) (70,066) 93,113



10 CASH AND BANK DEPOSITS Note 2012 2011

Rupees Rupees

Cash and other equivalents

Cash in hand 567,619 293,341

Policy and revenue stamps in hand 350,498 84,646

918,117 377,987

Current and other accounts


PLS saving accounts 10.1 & 10.2 2,329,827 3,553,640

28,434,551 16,977,051

Deposits maturing within 12 months

Related party 10.3 39,966,000 41,931,000

Others 1,000,000 3,500,000

40,966,000 45,431,000


70,408,307 62,986,038

10.1 This includes bank balance of Rs. 1,201,626 (2011: Rs. 953,597) with Silk Bank Limited - a related party, that

carries profit rate ranging between 5 % to 11% (2011: 5% to 11%) per annum.

10.2 Other PLS saving accounts carry profit rate of 5% (2011: 5%) per annum.

10.3 This represents term deposits with Silk Bank Limited - a related party carrying return at the rate ranging between

11% to 12% (2011: 11.5% to 13.5%) per annum. The above deposits are due to mature upto July 2013.

11 LOANS TO EMPLOYEES - secured, considered good. Note 2012 2011

Rupees Rupees

Due from - executives 11.1 20,000 133,881

- others 481,116 213,268

501,116 347,149

11.1 These represent short term advances to employees of the company in accordance with the terms of

their employment. These advances are recoverable in monthly installments over a period of one year.


11.2 Reconciliation of carrying amount of loans 2012 2011

Executives Others Executives Others

Opening balance 133,881 213,268 336,662 535,815

Disbursements 40,000 603,279 100,000 287,000

Repayments (153,881) (335,431) (302,781) (609,547)

Closing balance 20,000 481,116 133,881 213,268


12 INVESTMENTS Note2012 2011

Rupees Rupees

The investment comprise the following:

Held to maturity

Government Securities 12.1 48,201,543 36,883,984

At fair value through profit and loss - heldfor trading

Ordinary shares of listed companies 12.2 - -

Available for sale 12.3

Ordinary shares of listed companies 12.3.1 684,686 684,686

Ordinary shares of unlisted companies 12.3.2 45,000,000 45,000,000

Provision for impairment in value of investments 12.3.3 (226,625) (226,625)

45,458,061 45,458,061

93,659,604 82,342,045

12.1 These bonds are held in favour of State Bank of Pakistan in accordance with the requirement of Section 29 of the Insurance Ordinance, 2000. These bonds have a face value of Rs. 48 million (Rs. 32.7 million with SBP and Rs. 15.3 million with NBP) and carry mark-up ranging from 9% to 12% (2011: 11% to 13.5%) per annum and would mature up to August 2021.

Market value of Pakistan Investment Bonds is Rs. 46 million ( 2011: 37.33 million) and Treasury Bills is Rs. 1.9 million (2011: nil).

12.2 At fair value through profit and loss - held for trading investments - quoted shares

Ordinary shares of listed companies - (Face value of Rs.10/- each)

Number of shares Carrying (Market) Value

2012 2011 Name of investee entity 2012 2011

- - - - Rupees - - - -

Fixed Line

Telecommunication

Callmate Telips

32,000 32,000 Telecome Limited* - -

*Trading in shares has been suspended.



12.3 Available for sale - investments

12.3.1 Ordinary shares of listed companies - (Face value of Rs.10/- each)

Number of shares Carrying (Market) Value


Oil and Gas

4,125 3,300 Pakistan Petroleum Limited* 449,394 449,394

Financial Services

16,065 16,065 Saudi Pak Leasing Company Limited** 226,625 226,625

Chemicals

900 900 Fatima Fertilizer Company Limited 8,667 8,667

21,090 20,265 684,686 684,686

* Bonus shares credited to CDC account on September 19, 2012 at the rate of one share for every four shares held.

** These shares are deposited into CDC account and blocked on the instructions of Securities and Exchange Commission of Pakistan (SECP) in accordance with Circular No. 9 of 2006 issued by the SECP, which requires promoters / majority shareholders of company to deposit their shares into CDC blocked account.

The market value of available for sale - equity securities as at December 31, 2012 is Rs. 805,230 (December 31, 2011: Rs. 583,795).

12.3.2 Ordinary shares of unlisted companies - (Face value of Rs.10/- each)

Number of shares Cost


- - - - Rupees - - - -

4,500,000 4,500,000 Pace Barka Properties Limited 45,000,000 45,000,000

12.3.3 Movement in provision for impairment is as follows:

Balance at January 01 226,625 226,625

Charge during the year - -

Reversal during the year - -

Balance at December 31 226,625 226,625

12.4 Investment related expenses (refer the statement of investment income)

Brokerage commission 9,366 9,251

Custodian fees - 4,000

9,366 13,251



13 Deffered taxation Note2012 2011

Rupees Rupees

The asset / (liability) for deferred taxation comprises timing differences relating to:

Provision for doubtful receivable 5,059,516 -

Unused tax losses 46,944,107 -

52,003,623 -

14 Premium due but unpaid

Unsecured

- Considered good 48,702,076 61,160,304

- Considered doubtful 2,563,267 2,745,354

51,265,343 63,905,658

Provision for doubtful receivables 14.1 (2,563,267) (2,745,354)

48,702,076 61,160,304

14.1 Provision for doubtful receivables

Balance at the beginning of the year (2,745,354) (2,907,541)

Reversal/ (charge) for the year 182,087 162,187

Balance at the end of the year (2,563,267) (2,745,354)

15 Amount due from other insurers/reinsurers

Unsecured- Considered good 45,544,938 41,811,499

- Considered doubtful 11,892,492 5,453,409

57,437,430 47,264,908

Provision for doubtful receivables 15.1 (11,892,492) (5,453,409)

45,544,938 41,811,499

15.1 Provision for doubtful receivables

Balance at the beginning of the year (5,453,409) (4,952,526)

Charge for the year (6,439,083) (500,883)

Balance at the end of the year (11,892,492) (5,453,409)

16 Accrued investment income

Interest accrued on Pakistan Investment Bonds 1,752,864 1,241,143

Interest accrued on Term Deposit Receipts 2,006,052 2,118,297 3,758,916 3,359,440



Note2012 2011

Rupees Rupees

17 Reinsurance recoveries against outstanding claims

These are unsecured and considered good.

18 Prepayments

Prepaid expenses 3,048,354 3,179,576

Tracker Charges 149,674 -

Other 2,603,934 88,429

5,801,962 3,268,005

19 Sundry receivables - unsecured, considered good

Deposit against office premises 2,947,597 2,376,097

Other receivables 3,830,229 2,238,623

6,777,826 4,614,720



20O

WN

ED A

SS

ETS

DES

CRI

PTIO

N

TAN

GIB

LEIN

TAN

GIB

LEG

RAN

D

TOTA

LO

ffice

Im

prov

emen

tsFu

rnit

ure

and

Fixt

ure

Offi

ce

Equi

pmen

tC

ompu

ter

Equi

pmen

tM

otor

Ve

hicl

esTO

TAL

Com

pute

r S

oftw

are

- -

- -

- -

- -

- -

- -

- -

- -

- -

- -

- -

- -

- -

Rup

ees

- -

- -

- -

- -

-- -

- -

- -

- -

- -

- -

- -

- -

CO

ST

Bala

nce

as a

t Ja

nuar

y 0

1, 2

011

14,

612,

951

1,9

47,2

10

5,9

10,0

52

3,6

89,

556

23,

00

6,20

4 4

9,16

5,97

3 4

,68

2,19

6 5

3,8

48,1

69

Addi

tions

dur

ing

the

year

995

,367

1

,437

,277

1

,68

1,91

6 1

,666

,138

6

,763

,420

1

2,54

4,11

8

-

12,

544,

118

Dis

posa

ls (9

21,5

35)

(137

,263

) (5

74,9

73)

(41,

500

) (1

,88

3,31

5) (3

,558

,58

6) -

(3

,558

,58

6)

Bala

nce

as a

t D

ecem

ber

31, 2

011

14,

686,

783

3,2

47,2

24

7,0

16,9

95

5,3

14,1

94

27,

88

6,30

9 5

8,1

51,5

05

4,6

82,

196

62,

833

,70

1

Bala

nce

as a

t Ja

nuar

y 0

1, 2

012

14,

686,

783

3,2

47,2

24

7,0

16,9

95

5,3

14,1

94

27,

88

6,30

9 5

8,1

51,5

05

4,6

82,

196

62,

833

,70

1

Addi

tions

dur

ing

the

year

2,9

45,2

31

1,2

40,9

83

1,4

81,

421

770

,869

2

5,8

13,8

12

32,

252,

316

-

32,

252,

316

Dis

posa

ls -

-

-

-

-

-

-

-

Bala

nce

as a

t D

ecem

ber

31, 2

012

17,

632,

014

4

,48

8,2

07

8,4

98,4

16

6,0

85,

063

5

3,70

0,1

21

90

,40

3,8

21

4,6

82,

196

95,

08

6,0

17

Dep

reci

atio

n

Bala

nce

as a

t Ja

nuar

y 0

1, 2

011

5,7

84,

612

98

8,4

87

3,0

05,

164

2,9

77,6

80

1

0,8

33,8

30

23,

589,

773

4,2

83,

341

27,

873

,114

Cha

rge

for t

he y

ear

88

7,62

5 2

06,

279

473

,795

2

96,8

62

2,1

78,2

23

4,0

42,7

84

79,

771

4,1

22,5

55

Dep

reci

atio

n on

dis

posa

l (3

54,0

45)

(62,

328

) (3

55,9

79)

(26,

910

) (1

,156

,60

9) (1

,955

,871

) -

(1

,955

,871

)

Bala

nce

as a

t D

ecem

ber

31, 2

011

6,3

18,1

92

1,1

32,4

38

3,1

22,9

80

3

,247

,632

1

1,8

55,4

44

25,

676,

686

4,3

63,1

12

30

,039

,798

Bala

nce

as a

t Ja

nuar

y 0

1, 2

012

6,3

18,1

92

1,1

32,4

38

3,1

22,9

80

3

,247

,632

1

1,8

55,4

44

25,

676,

686

4,3

63,1

12

30

,039

,798

Cha

rge

for t

he y

ear

98

2,94

4 4

63,3

78

730

,18

7 7

12,6

31

5,4

83,

308

8

,372

,448

6

3,8

17

8,4

36,2

65

Dep

reci

atio

n on

dis

posa

l -

-

-

-

-

-

-

-

Bala

nce

as a

t D

ecem

ber

31, 2

012

7,3

01,

136

1,5

95,8

16

3,8

53,1

67

3,9

60,2

63

17,

338

,752

3

4,0

49,1

34

4,4

26,9

29

38

,476

,063

WD

V as

at

Dec

embe

r 31,

20

11 8

,368

,591

2

,114

,78

6 3

,894

,015

2

,066

,562

1

6,0

30,8

65

32,

474,

819

3

19,0

84

32,

793,

903

WD

V as

at

Dec

embe

r 31,

20

12 1

0,3

30,8

78

2,8

92,3

91

4,6

45,2

49

2,1

24,8

00

3

6,36

1,36

9 5

6,35

4,68

7 2

55,2

67

56,

609,

954

Rate

of d

epre

ciat

ion

(%)

10%

15%

15%

30%

15%

20%



21M

AN

AG

EMEN

T A

ND

GEN

ERA

L A

DM

INIS

TRAT

IVE

EXPE

NS

ESN

ote

20

12

20

11

Man

agem

ent

Expe

nses

Gen

eral

&

Adm

inis

trat

ion

Expe

nses

T

otal

*

Man

agem

ent

Expe

nses

Gen

eral

&

Adm

inis

trat

ion

Expe

nses

T

otal

- -

- -

- -

- -

- -

- -

- -

- -

- -

- -

- R

upee

s -

- -

- -

- -

- -

- -

- -

- -

- -

- -

- -

Sal

arie

s, w

ages

and

ben

efits

21.1

3

1,28

0,7

06

23,

931,

580

5

5,21

2,28

6 2

8,8

63,5

13

5,0

93,5

61

33,

957,

074

D

irect

ors

fee

and

expe

nses

-

1,0

70,6

82

1,0

70,6

82

-

612

,777

6

12,7

77

Rent

exp

ense

s 6

27,6

00

1

0,7

74,5

66

11,

402,

166

4,8

23,5

86

851

,221

5

,674

,80

7 U

tiliti

es 5

,747

,438

1

,014

,254

6

,761

,692

3

,130

,259

5

52,3

99

3,6

82,

658

Le

gal a

nd p

rofe

ssio

nal e

xpen

ses

2,5

55,9

97

451

,058

3

,00

7,0

55

1,7

24,9

36

30

4,40

1 2

,029

,337

D

epre

ciat

ion

20 7

,116

,58

1 1

,255

,867

8

,372

,448

3

,436

,366

6

06,

418

4

,042

,78

4 Am

ortiz

atio

n 5

4,24

4 9

,573

6

3,8

17

67,

80

5 1

1,96

6 7

9,77

1 Ve

hicl

e ex

pens

es 4

,476

,396

6

,70

3,19

1 1

1,17

9,58

7 4

,648

,993

8

20,4

11

5,4

69,4

04

Insu

ranc

e -

-

-

4

66,7

22

82,

363

549

,08

5 Tr

acke

r mon

itorin

g fe

e 9

86,

648

-

9

86,

648

2

78,7

22

-

278

,722

S

ervi

ce c

harg

es 9

85,

235

-

98

5,23

5 1

,265

,872

-

1

,265

,872

Pr

intin

g an

d st

atio

nery

exp

ense

s 8

93,7

23

157

,716

1

,051

,439

8

06,

362

142

,299

9

48,6

61

Trav

elin

g an

d co

nvey

ance

exp

ense

s 7

21,7

04

127

,360

8

49,0

64

596

,28

4 1

05,

227

70

1,51

1 Ad

vert

isem

ent

590

,729

1

04,

246

694

,975

3

22,4

47

56,

902

379

,350

Com

pute

r mai

nten

ance

78

4,92

3 1

38,5

16

923

,439

2

51,1

98

44,

329

295

,527

Offi

ce c

lean

ing

and

mai

nten

ance

1,4

55,7

41

256

,896

1

,712

,637

7

71,6

16

136

,168

9

07,7

84

Cre

dit

ratin

g fe

e 6

07,7

50

10

7,25

0

715

,00

0

255

,00

0

45,

00

0

30

0,0

00

Sub

scrip

tion

and

perio

dica

ls 6

6,60

9 1

1,75

4 7

8,3

63

63,

504

11,

207

74,

711

Com

mun

icat

ion

569

,323

1

00

,469

6

69,7

92

260

,78

6 4

6,0

21

30

6,8

07

Audi

tor’s

rem

uner

atio

n21

.2 -

6

54,0

00

6

54,0

00

-

5

50,0

00

5

50,0

00

Insp

ectio

n fe

e 8

4,46

3 1

4,90

5 9

9,36

8

91,

818

1

6,20

3 1

08

,022

Con

fere

nce

/ sem

inar

-

-

-

12,

240

2

,160

1

4,40

0

Ente

rtai

nmen

t 1

,215

,58

0

214

,514

1

,430

,094

8

39,5

41

148

,154

9

87,

695

Bank

cha

rges

-

226

,80

3 2

26,8

03

-

142

,38

2 1

42,3

82

Prov

isio

n fo

r dou

btfu

l deb

ts 6

,274

,922

-

6

,274

,922

3

38,6

96

-

338

,696

Mis

cella

neou

s 7

17,9

48

126

,697

8

44,6

45

843

,891

1

48,9

22

992

,813

67,

814

,261

4

7,451

,896

1

15,2

66,1

57

54,

160

,156

1

0,5

30,4

88

6

4,69

0,6

44

*C

omm

on e

xpen

ses

are

allo

cate

d on

the

bas

is o

f 85%

to

man

agem

ent

(und

erw

ritin

g) e

xpen

ses

and

15%

to

gene

ral a

nd a

dmin

istr

atio

n ex

pens

es h

owev

er in

the

cur

rent

yea

r’s fi

nanc

ial s

tate

men

ts S

alar

ies

wag

es a

nd b

enefi

ts, R

ent

expe

nses

and

Veh

icle

exp

ense

s ar

e al

loca

ted

on a

ctua

l bas

is.



21.1

This

incl

udes

cha

rge

for

defin

ed b

enefi

t am

ount

ing

Rs. 1

.9 m

illio

n (2

011

: Rs.

1.2

mill

ion)

.

21.2

Aud

itor

s’ r

emun

erat

ion

Ava

is H

yder

Lia

quat

N

aum

an

SA

RWA

RS

20

12

Ava

is H

yder

Lia

quat

N

aum

an

SA

RWA

RS

20

11

CA’

s C

A’s

Rup

ees

CA’

s C

A’s

Rup

ees

Annu

al a

udit

fee

18

0,0

00

1

80

,00

0

360

,00

0

150

,00

0

150

,00

0

30

0,0

00

Fee

for h

alf y

early

rev

iew

65,

00

0

65,

00

0

130

,00

0

50

,00

0

50

,00

0

10

0,0

00

Fee

for r

egul

ator

y re

turn

3

0,0

00

3

0,0

00

6

0,0

00

3

0,0

00

3

0,0

00

6

0,0

00

Out

of p

ocke

t 5

2,0

00

5

2,0

00

1

04,

00

0

45,

00

0

45,

00

0

90

,00

0

327

,00

0

327

,00

0

654

,00

0

275

,00

0

275

,00

0

550

,00

0

22O

ther

inco

me

Not

e20

1220

11

Rupe

esRu

pees

Inte

rest

on

PLS

sav

ing

acco

unts

1

38,0

42

1,7

72,6

80

Gai

n on

sal

e of

fixe

d as

sets

-

631

,30

2

Exch

ange

gai

n / (

loss

) (6

6,0

90)

(12,

365)

Bala

nces

writ

ten

back

1,0

57,3

36

3,6

19,7

89

Mis

cella

neou

s in

com

e 5

35,2

07

1,3

83,

502

1,6

64,4

95

7,3

94,9

08



23 Taxation

The numerical reconciliation between the average tax rate and applicable tax rate has not been presented in these financial statements as during the year the Company has paid minimum tax u/s 113 of Income Tax Ordinance, 2001 due to available tax losses.

24 Earnings per share Note2012 2011

Rupees Rupees

Basic earnings per share are calculated by dividing the net profit for the year by the weighted average number of shares as at the year end as follows:

Profit after tax for the year 74,944,698 24,402,850

(Number of shares)

Weighted average number of ordinary shares outstanding during the year of Rs. 10/- each 32,500,000 32,500,000

(Rupees per share)

Earnings per share of Rs. 10/- each 2.31 0.75

24.1 No figure of diluted earnings per share has been presented as the company has not issued any instrument

which would have an impact on earnings per share when exercised.

25 Remuneration of chief executive, directors and executives

Aggregate amount charged in the financial statements for the year for remuneration, including all benefits to Chairman, Chief Executive, and Directors of the Company are as follows:



Description

Chief Executive Executives Total

2012 2011 2012 2011 2012 2011

Rupees Rupees Rupees Rupees Rupees Rupees

Managerial Remuneration 2,925,000 2,681,250 10,941,890 3,758,424 13,866,890 6,439,674

House rent allowance 990,000 907,500 3,037,714 1,345,900 4,027,714 2,253,400

Utilities 292,500 268,125 951,681 402,838 1,244,181 670,963

Medical allowance 292,500 268,125 951,681 402,838 1,244,181 670,963

Total 4,500,000 4,125,000 15,882,966 5,910,000 20,382,966 10,035,000

Number of persons 1 1 20 8 21 9

25.1 In addition to the above, these executives are entitled to free use of company maintained vehicles.

26 Administrative surcharge Note2012 2011

Rupees Rupees

Net premium revenue include administrative surcharge, class wise details of which is given below:

Direct and facilitative

Fire and property damage 1,213,002 584,008

Marine 1,099,947 390,498

Motor 3,525,875 1,555,174

Miscellaneous 202,387 181,051

6,041,211 2,710,731



27O

pera

ting

Seg

men

t

Cla

ss o

f bus

ines

s w

ise

reve

nue

and

resu

lts h

ave

been

dis

clos

ed in

the

pro

fit a

nd lo

ss a

ccou

nt p

repa

red

in a

ccor

danc

e w

ith t

he re

quire

men

ts o

f Ins

uran

ce O

rdin

ance

, 20

00

and

The

SEC

(Ins

uran

ce) R

ules

, 20

02.

The

com

pany

has

four

prim

ary

busi

ness

seg

men

ts fo

r rep

ortin

g pu

rpos

e na

mel

y fir

e, m

arin

e, m

otor

and

mis

cella

neou

s.

Asse

ts a

nd li

abili

ties,

whe

reve

r po

ssib

le, h

ave

been

ass

igne

d to

the

fol

low

ing

segm

ents

bas

ed o

n sp

ecifi

c id

entifi

catio

n or

allo

cate

d on

the

bas

is o

f gr

oss

prem

ium

w

ritte

n by

the

seg

men

ts.

Fire

Mar

ine

Mot

orM

isce

llane

ous

Tota

l

2012

2011

2012

2011

2012

2011

2012

2011

2012

2011

- -

- -

- -

- -

- -

- -

- -

- -

- -

- -

- -

- -

- -

- -

- -

R u

p e

e s

- -

- -

- -

- -

- -

- -

- -

- -

- -

- -

- -

- -

- -

- -

- -

- -

-

Seg

men

t A

sset

s

Seg

men

t as

sets

137

,321

,80

9 11

9,28

7,94

6 12

,692

,855

7,

050

,80

1 10

0,2

91,4

17

31,

562,

911

60

,813

,717

7

7,38

6,0

42

311

,119

,798

2

35,2

87,7

00

Una

lloca

ted

corp

orat

e as

sets

218

,70

4,98

5 1

93,5

85,

489

Con

solid

ated

Tot

al A

sset

s 5

29,8

24,7

83

428

,873

,18

9

Seg

men

t Li

abili

ties

Seg

men

t lia

bilit

ies

131

,128

,364

9

7,38

3,8

76

8,8

11,3

32

7,3

14,4

19

61,

660

,463

4

3,27

9,0

65

45,

013

,00

9 8

2,29

8,6

32

246

,613

,168

2

30,2

75,9

92

Una

lloca

ted

corp

orat

e lia

bilit

ies

25,

722,

578

1

6,0

52,8

58

Con

solid

ated

tot

al li

abili

ties

272

,335

,746

2

46,3

28,8

50

Cap

ital e

xpen

ditu

re 1

4,36

2,65

3 4

,321

,58

0

3,0

49,8

75

60

0,5

39

11,

08

4,61

0

2,7

34,4

55

3,7

55,1

78

4,8

87,

545

32,

252,

316

12,

544,

119

Dep

reci

atio

n 3

,169

,167

1

,420

,263

6

72,9

65

197

,364

2

,445

,856

8

98,6

64

828

,593

1

,60

6,26

4 7

,116

,58

1 4

,122

,555



28 Transactions with related parties

The related parties comprise of Saudi Pak Industrial & Agricultural Investment Company Limited, Silk Bank Limited, Saudi Pak Leasing Company Limited and United Track Systems (Pvt.) Limited on the basis of related group companies, entities under common control, entities with common directors, major shareholders, directors, key management personnel and employee retirement benefits fund. Amount due to/from and other significant transactions, other than those disclosed elsewhere in these financial statements, are as follows:

Transactions and balances with parentand associated companies

As at December

2012 2011

Rupees Rupees

Insurance premium

Balance at beginning of the period 32,421,665 3,289,321

Gross insurance premium written 19,729,050 61,743,773

(including administrative surcharge,

government levies and policies stamps)

Received / adjusted during the period 50,605,198 32,611,429

Balance at end of the period 1,545,517 32,421,665

Insurance claim expense

Outstanding claims at beginning of the period 6,946,040 7,099,794

Gross claim expense for the period 9,980,483 5,158,774

Claim paid during the period 11,828,944 5,312,528

Outstanding claims at end of the period 5,097,579 6,946,040

Other transactions during the year with parent and associated companies

Rental expense 1,887,000 1,083,900

Bank charges 74,989 126,011

Tracker charges 828,000 427,950

Profit on term deposit receipts 4,944,193 1,083,032

Profit on bank deposits 79,168 1,823,352

Advisory fee to Silk Bank Limited - -



29 FINANCIAL RISK MANAGEMENT OBJECTIVES & POLICIES

The Company is exposed to a variety of financial risks: credit risk, liquidity risk, market risk (comprising currency risk, interest rate risk and other price risk) that could result in a reduction in Company’s net assets or a reduction in the profits. The Company’s overall risk management program focuses on unpredictability of financial markets and seeks to minimize potential adverse effects on the financial performance. Overall risks arising from the company’s financial assets and liabilities are limited. The Company consistently manages its exposure to financial risks without any material change from previous year in the manner described in the notes below. The Board of Directors has the overall responsibility for the establishment and oversight of Company’s risk management framework. The Board is also responsible for developing and monitoring the Company’s risk management policy.

29.1 Credit Risk

Credit risk is the risk, which arises with the possibility that one party to a financial instrument will fail to discharge its obligation and cause other party to incur a financial loss. The Company attempts to control credit risk by monitoring credit exposures by undertaking transactions with a large number of counterparties in various industries and by continually assessing the credit worthiness of counterparties.

2012 2011

Rupees Rupees

Other balances with associated companies

Term deposits 39,966,000 41,931,000

Profit and loss sharing accounts 1,026,666 958,638


Accrued investment income 2,006,052 2,118,297

Transactions during the year with other related parties(Key management personnel)

Contribution to the provident fund - 770,489

Contribution to defined benefit plan 564,355 880,260

Remuneration of key management personnel 20,382,966 10,035,000

Balances with other related parties

(Key management personnel)

(Payable) / receivable from defined benefit plan (2,294,644) (944,644)

Loan to key management personnel 20,000 133,881



Concentration of credit risk arises when a number of counterparties have a similar type of business activities. As a result, any change in economic, political or other conditions would affect their ability to meet contractual obligations in similar manner. The Company’s credit risk exposure is not significantly different from that reflected in the financial statements. The management monitors and limits the Company’s exposure to credit risk through monitoring of clients exposure and conservative estimates of provision for doubtful assets, if any. The management is of the view that it is not exposed to the significant concentration of credit risk as its financial assets are adequately diversified in entities of sound financial standing, covering various industrial sectors.

The carrying amount of financial assets represents the maximum credit exposure, as specified below: -

2012 2011

Rupees Rupees

Bank deposits 69,400,551 62,408,051

Loan to employees 501,116 347,149

Investments 45,000,000 45,000,000

Premium due but unpaid 48,702,076 61,160,304

Amount due from other insurers/re-insurers 45,544,938 41,811,499

Accrued investment income 3,758,916 3,359,440

Reinsurance recoveries against outstanding claims 71,288,878 80,478,357

Sundry receivables 6,777,826 4,614,720

290,974,301 299,179,520

The Company did not hold any collateral against the above during the year. The impairment provision is written off when the Company expects that it cannot recover the balance due. During the year receivables of Rs. 6.44 million (2011: Rs. 0.5 million) were further provided for and the provision of Rs. 0.18 million (2011: Rs. 0.16 million) were reversed due to recoveries. The movement in the provision for doubtful debt account is shown in note 14 and 15 to the financial statements. The remaining past due balances were not impaired as they relate to a number of policy holders and other insurers / reinsurers for whom there is no recent history of default and/or Company held their credit balances in other accounts.

2012 2011

Rupees Rupees

The age analysis of receivables is follows: -

Up to 1 year 54,279,994 78,410,809

1-2 years 22,057,011 15,788,777

2-3 years 12,456,246 9,133,902

Over 3 years 19,909,522 7,837,078

108,702,773 111,170,566



2012 2011

Rupees Rupees

Sector wise analysis of premium due but unpaid

Banks 657,539 4,015,036

Leasing companies 786,903 599,211

Textiles 11,530,605 23,997,756

Cement 180,534 1,917,058

Chemicals 996,164 1,908,157

Glass and ceramics 119,832 248,730

Hospital 265,829 -

Hotel - 45,576

Petrol/CNG pumps 1,105,930 925,470

Pharmaceuticals 67,649 282,342

Sugar factories 1,793,333 -

Telecommunications - 617,513

Oil Mills 117,909 -

Showrooms 1,012,924 429,520

Insurance - 195,478

Miscellaneous 32,630,192 28,723,811 51,265,343 63,905,658

The credit quality of Company’s bank balances and term deposit receipts can be assessed with reference to external credit ratings as follows: -

Ratings Ratings Agency

2012 2011

Short Term Long Term Rupees Rupees

Bank Al-Falah Limited A1+ AA PACRA 290,149 823,082

Bank Al-Habib Limited A1+ AA+ PACRA 1,192,974 1,006,347

Habib Bank Limited A-1+ AA+ JCR-VIS 4,227,855 4,127,806

HSBC Bank Limited P1 A1 MOODY’S 24,372 15,766

KASB Bank Limited A3 BBB PACRA 1,196,010 5,000

National Bank of Pakistan A1+ AAA JCR-VIS 21,651 337,560

Silkbank Limited A-2 A- JCR-VIS 46,767,796 47,921,241

Sindh Bank Limited A-1 AA- JCR-VIS 738,136 429,582

Soneri Bank Limited A1+ AA- PACRA 435,588 581,954

Standard Chartered Bank A1+ AAA PACRA 1,098,789 2,579,238

The Bank Of Punjab A1+ AA- PACRA 2,777,240 4,372,582

United Bank Limited A-1+ AA+ JCR-VIS 77,746 207,893

NIB Bank Limited A1+ AA- PACRA 368,770 -

Tameer Micro Finance Bank A-1 A JCR-VIS 70,750 -

Apna Micro Finance Bank A3 BBB PACRA 10,112,724 -

69,400,551 62,408,051



The credit quality of amount due from other insurers and re-insurers can be assessed with reference to external credit rating as follows: -

Amount due from

other insurers/ reinsurers

Reinsurance recoveries

against outstanding

claims

Other reinsurance

assets2012 2011

- - - - - - - - - - - Rupees - - - - - - - - - - - -

A or above (including PRCL) 54,896,640 39,584,588 31,851,222 126,332,450 112,368,487

A- 1,167,212 21,892,278 17,615,335 40,674,825 46,610,198

BBB 956,744 - - 956,744 3,114,448

Others 416,834 9,812,012 - 10,228,846 4,465,373

Total 57,437,430 71,288,878 49,466,557 178,192,865 166,558,506

29.2 Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities. The Company finances its operations entirely through equity.

The following are the contractual maturities of financial liabilities, including estimated interest payments on an undiscounted cash flow basis: -

2012

Carrying amount

Contractual cash flows

up to one year

More than one year

- - - - - - - - - - - - Rupees - - - - - - - - - - - -

Financial liabilities

Provision for outstanding claims 80,911,792 80,911,792 80,911,792 -

Amount due to other insurer / reinsurers 7,576,658 7,576,658 7,576,658 -

Accrued expenses 6,790,489 6,790,489 6,790,489 -

Other creditors and accruals 8,235,495 8,235,495 8,235,495 -

103,514,434 103,514,434 103,514,434 -



2011

Carrying amount

Contractual cash flows

up to one year

More then one year

- - - - - - - - - - - - Rupees - - - - - - - - - - - -

Financial liabilities

Provision for outstanding claims 112,663,524 112,663,524 112,663,524 -

Amount due to other insurer / reinsurers 3,555,785 3,555,785 3,555,785 -

Accrued expenses 4,346,136 4,346,136 4,346,136 -

Other creditors and accruals 8,761,420 8,761,420 8,761,420 -

129,326,865 129,326,865 129,326,865 -

29.3 Market risk

Market risk means that the fair value or future cash flows of a financial instrument will fluctuate because of the changes in the market prices. The objective is to manage and control market risk exposures within the acceptable parameters, while optimizing the return. The market risks associated within the Company’s business activities are the interest / markup rate risk and price risk. The Company is not exposed to material currency risk.

29.3.1 Interest /mark up rate risk

Interest /mark up rate risk is the risk that value of the financial instrument or future cash flows of a financial instrument will fluctuate due to changes in the market /mark up rates. Sensitivity to interest /mark up rate risk arises from the mismatch of financial assets and liabilities that mature or re-price in a given period. The Company manages these mismatches through risk management strategies where significant changes in gap position can be adjusted.

At the balance sheet date, the interest rate profile of the Company’s significant interest bearing financial instrument was as follows: -

2012 2011 2012 2011

(Effective interest rate) Carrying amounts

- - - - Rupees - - - -

Financial assets

Floating rate financial instruments

Bank deposits including term deposit receipts 5% to 12% 5% to 13.25% 43,295,827 48,984,640

Fixed rate financial instruments

Investments 9% to 12% 11 % to 13.5% 48,201,543 36,883,984

The company does not have any variable rate financial liabilities as at December 31, 2012.



Sensitivity analysis

The Company does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore, a change in interest rate will not effect fair value of any financial instrument. For cash flow sensitivity analysis of variable rate instruments a hypothetical change of 100 basis points in interest rates at the reporting date would have decreased/ (increased) profit for the year by the amounts shown below.

It is assumed that the changes occur immediately and uniformly to each category of instrument containing interest rate risk. Variations in market interest rates could produce significant changes at the time of early repayments. For these reasons, actual results might differ from those reflected in the details specified below. The analysis assumes that all other variables remain constant.

Increase/ (decrease) in basis points

Effect on profit before tax

Effect on equity

As at December 31, 2012

Cash flow sensitivity - variable rate financial assets 100 432,958 281,423

(100) (432,958) (281,423)

As at December 31, 2011

Cash flow sensitivity - variablerate financial assets

100 489,846 318,400

(100) (489,846) (318,400)


29.3.2 Price risk

Price risk represents the risk that the fair value of a financial instrument will fluctuate because of changes in the market prices (other than those arising from interest/mark up rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all or similar financial instruments traded in the market. The Company is exposed to equity price risk since it has investments in quoted equity securities amounting to Rs. 458,061 (2011 : Rs. 458,061) at the balance sheet date.

The carrying value of investments subject to equity price risk are based on quoted market prices as of the balance sheet date except for unquoted securities which are carried at cost less impairment and available for sale equity instruments which are stated at lower of cost or market value (market value on an individual investment basis being taken as lower if the fall is other than temporary) in accordance with the requirements of the SEC (Insurance) Rules, 2002 vide S.R.O. 938 dated December 2002.

Market prices are subject to fluctuation and consequently the amount realized in the subsequent sale of an investment may significantly differ from the reported market value. Furthermore, amount realized in the sale of a particular security may be affected by the relative quantity of the security being sold. The Company has no significant concentration of price risk.


29.4 Fair value of financial instruments

29.4.1 Fair value is the amount for which an asset could be exchanged, or a liability settled, between

knowledgeable willing parties in an arms length transaction.

The carrying amount of the financial assets and liabilities reflected in the financial statements approximate their fair values.

29.4.2 Fair value estimation

The Company has adopted the amendment to IFRS 7 for financial instruments that are measured in the balance sheet at fair value. This amendment requires fair value measurement disclosures using following three level fair value hierarchy that reflects the significance of the inputs used in measured fair value of financial instruments.

- Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

- Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). The Exchange has no items to report in this level.

- Level 3: Inputs for asset or liability that are not based on observable market data (unobservable inputs).

The Company does not have any investments that fall in the above categories.



The table below summarizes Company’s equity price risk as of 31 December 2012 and 2011 and shows the effects of a hypothetical 10% increase and a 10% decrease in market prices as at the year end, The selected hypothetical change does not reflect what could be considered to be the best or worst case scenarios. Indeed, results could be worse in Company’s equity investment portfolio because of the nature of equity markets.

Had all equity investments, other than investment in unquoted securities, been measured at fair values as required by IAS 39 “Financial Instruments Recognition and Measurement”, the impact of hypothetical change would be as follows: -

Fair Value Hypothetical

Estimated fair value after hypothetical

change in prices

Hypothetical Increase/(decrease)

in shareholders’ equity

Hypothetical Increase/

(decrease) in profit/(loss) before tax

Rupees - - - - - - - - Rupees - - - - - - - -

December 31, 2012 805,230 10% increase 885,753 80,523 -

10% decrease 724,707 (80,523) -

December 31, 2011 583,795 10% increase 642,175 58,380 -

10% decrease 525,416 (58,380) -



29.5 Insurance risk

The Company accepts the insurance risk through its insurance contracts where it assumes the risk of loss from persons or organizations that are directly subject to the underlying loss. The Company is exposed to the uncertainty surrounding the timing, frequency and severity of claims under these contracts.

The Company manages its risk through its underwriting and reinsurance strategy within an overall risk management. Reinsurance is purchased to mitigate the effect of potential loss to the Company from individual large or catastrophic events and also to provide access to specialist risks and to assist in managing capital. Insurance policies are written with approved reinsurers on either a proportional or excess of loss treaty basis.

A concentration of risk may also arise from a single insurance contract issued to a particular demographic type of a policyholder, within a geographical location or types of commercial business. The Company minimizes its exposure to significant losses by obtaining reinsurance from a number of reinsurers, who are dispersed over several geographical regions.

Geographical concentration of insurance risk

To optimize benefits from the principal of average and law of large numbers, geographical spread of risk is of extreme importance. There are a number of parameters which are significant in assessing the accumulation of risk with reference to the geographical location, the most important of which is risk survey.

Risk surveys are carried out on a regular basis for the evaluation of physical hazard associated with the commercial/industrial/residential occupation of the insured. Details regarding the fire separation/segregation with respect to the manufacturing processes, storage, utilities, etc are extracted from the layout plan of the insured facility. Such details are formed part of the reports which are made available to the underwriters/reinsurance personnel for their evaluation. Reference is made to the standard construction specification as laid down by IAP (Insurance Association of Pakistan). For instance, the presence of Perfect Party Walls, Double Fire Proof Iron Doors, Physical separation between the building within an insured’s premises. It is basically the property contained within an area which is separated by another property by sufficient distance to confine insured damage from uncontrolled fire and explosion under the most adverse conditions to that one area.

Address look-up and decoding is the essential field of the policy data interphase of IT systems. It provides instant location which is dependent on data collection provided under the policy schedule. All carried underwriting information is punched into the IT system/application through which a number of MIS reports can be generated to assess the concentration of risk.

For Marine risks, complete underwriting details, besides sums insured and premiums, like vessel identification, voyage input (sea/air/inland transit), sailing dates, origin and destination of the shipments, per carry limits, etc are fed into the system. The reinsurance module of the IT system is designed to satisfy the requirement as laid dawn in the proportional treaty agreement.



The risk associated with the insurance contracts are complex and subject to a number of variable which complicate quantitative sensitivity analysis. The Company makes various assumptions and techniques based on past claims development experience. This includes indications such as average claims cost, ultimate claims numbers and expected loss ratios. The Company considers that the liability for insurance claims recognized in the balance sheet is adequate. However, actual experience will differ from the expected outcome.

As the Company enters into short term insurance contracts, it does not assume any significant impact of change in market conditions on unexpired risks. However, some results of sensitivity testing are set out below, showing the impact on profit before tax net of reinsurance.


Gross sum insured Reinsurance Net

2012 2011 2012 2011 2012 2011

- - - - - - - - - - - - - - - - - Rupees - - - - - - - - - - - - - - - - -

Fire 99,204,563,330 54,441,265,184 57,723,767,396 25,723,497,799 41,480,795,934 28,717,767,385

Marine 18,968,252,603 7,649,659,593 8,403,110,601 2,183,212,847 10,565,142,002 5,466,446,746

Motor 7,248,045,792 2,188,166,512 331,635,064 675,441,642 6,916,410,728 1,512,724,870

Miscellaneous 9,484,685,734 2,995,174,470 1,160,078,200 539,131,404 8,324,607,534 2,456,043,066

134,905,547,459 67,274,265,759 67,618,591,261 29,121,283,692 67,286,956,198 38,152,982,067

Reinsurance arrangements

Keeping in view the maximum exposure in respect of key zone aggregates, number of proportional and non proportional reinsurance arrangement are in place to protect the net account in case of a major catastrophic event. Apart from the adequate event limit which is a multiple of the treaty capacity or the primary recovery from the proportional treaty, any loss over and above the said limit would be recovered from the non-proportional treaty which is very much in line with the risk management philosophy of the Company.

In compliance of the regulatory requirement, the reinsurance agreements are duly submitted with Securities and Exchange Commission of Pakistan (SECP) on an annual basis.

The Concentration of risk by type of contracts is summarized below by reference to liabilities.



Pre tax profit/(loss) Shareholders’ equity

2012 2011 2012 2011

- - - - - - - - -- - - - (Rupees) - - - - - - - - - - - - -

10% increase in loss

Fire (515,496) (76,595) (335,072) (49,786)

Marine (227,266) (19,572) (147,723) (12,722)

Motor (3,292,465) (1,058,375) (2,140,102) (687,944)

Miscellaneous 346,856 (488,150) 225,457 (317,298)

(3,688,371) (1,642,692) (2,397,441) (1,067,750)

10% decrease in loss

Fire 515,496 76,595 335,072 49,786

Marine 227,266 19,572 147,723 12,722

Motor 3,292,465 1,058,375 2,140,102 687,944

Miscellaneous (346,856) 488,150 (225,457) 317,298

3,688,371 1,642,692 2,397,441 1,067,750

Claims development tables

The following table shows the development of fire claims over a period of time. The disclosure goes back to the period when the earliest material claims arose for which there is still uncertainty about the amount and timing of the claims payments. For other classes of business the uncertainty about the amount and timings of claims payments is usually resolved within a year. Further claims with significant uncertainties are not outstanding as at December 31, 2012.

Analysis on gross basis

Accident year 2009 2010 2011 2012 Total

- - - - - - - - - - - - - - Rupees - - - - - - - - - - - - - - -

Estimate of ultimate claims cost

At end of accident year 71,107,481 44,778,859 21,156,298 52,312,773 189,355,411

One year later 66,627,526 20,594,452 13,519,664 - 100,741,642

Two years later 28,541,423 11,991,196 - - 40,532,619

Three years later 26,686,621 - - - 26,686,621

Estimate of cumulative claims 192,963,051 77,364,507 34,675,962 52,312,773 357,316,293

Cumulative payments to date (170,989,586) (65,697,828) (32,361,988) (52,086,738) (321,136,140)

Liability recognized in the balance sheet 21,973,465 11,666,679 2,313,974 226,035 36,180,153




30 CAPITAL MANAGEMENT

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as the going concern in order to provide returns for share holders and benefit for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividend to shareholders out of future profit, issue new shares and obtain new financing facilities. Further the Company meets the minimum paid-up capital requirements as required by Securities and Exchange Commission of Pakistan.

31 RECLASSIFICATION AND REARRANGEMENT

Following comparative figures have been reclassified and rearranged wherever necessary for the purpose of better presentation.

From ToAmount

in Rupees

Staff retirement gratuity Other creditors and accruals Deferred Liabilities 944,644

32 DATE OF AUTHORIZATION FOR ISSUE

These financial statements were authorized for issue in the Board of Directors meeting held onMarch 28, 2013.


Karachi Zone

1. Central Office

2nd Floor, State Life Building

No.2-A, Wallace Road,

Karachi.

Ph: 021-32418430,

Fax: 021-32417885

2. Wallace Road Branch,

2nd Floor, State Life Building,

No.2-A, Wallace Road,Karachi.

Ph: 021-32418434

Fax: 021-32417885

3. M.A. Jinnah Road Branch

5th Floor, State Life Building # 6,

Habib Square, M.A. Jinnah Road,

Karachi.

Ph: 021-32415212-32413793-

32416918

Fax: 021-32410944

4. Shahrah-E-Faisal Branch

Suit no.504, 5th Floor, Caesar,s

Tower, National I.T Park,

Shahrah-e-Faisal, Karachi

Ph: 021-32783766-7

Fax: 021-32783768

5. Panorama Centre Branch

Office No. 302-A, Panoprama

Centre 2, Raja ghazanfer Ali Road,

Karachi.

Ph: 021-5655248, 5631178,

Fax: 021-5214682

6. Europa Centre Branch,

3rd Floor, 303-Europa Centre,

No.2, Raja Ghazanfer Ali Khan

Road, Saddar Karachi.

Ph: 021-32218975, 32636179,

Fax # 021-32218974

7. Hyderabad Branch

Mezzanine Floor, Mohsin Plaza,

upper KASB bank, Risala Road,

Hyderabad.

Ph: 022-2780770-2780603,

Fax: 022-2780765

Lahore Zone

8. Brandreth Road Branch

Room No. 215, 2nd Floor,

Shahzadi Rafaqat Market,

83-Brandreth Road, Lahore.

Ph: 042-37381566, 37381577,

Fax: 37672619

9. DHA Branch Lahore

1st Floor, Plaza No. 51-T, Phase II

Commercial, D.H.A Lahore-Cant.

Ph: 042-35707745

10. Empress Tower Brance

Suite No. 14, 1st Floor,

Empress Tower,

Lahore.

Ph: 042-36297548, 36297550

Fax: 042-36297549

11. Sharja Centre Branch

2nd Floor, Sharja Centre,

62-Shadman Market,

Lahore.

Ph: 0423634420

Fax: 042-3634421

12. Corporate Office

98 C.M.A, Colony Abid Majeed

Road, Lahore Cantt.

Ph: 36685023-4

Fax: 36685021

13. Eden Centre Branch

Eden Centre, 3rd floor,

Office No.303, Jail Road Branch,

Lahore.

Ph: 042-37500620-23

14. Raja Chamber Branch

Suit No.10, 11 3rd Floor

Raja Chamber, Mozang Chowk,

Shahrah-e- Fatima Jinnah,

Lahore.

Ph: 042-37521815, 37521816

15. Lahoer Branch

Office Address: 2nd Floor,

Khursheed Plaza, 10 Abbot

Road, Lahore.

Ph: 042-36364420-21

Fax: 042-36278917

Islamabad Offices

16. Islamabad Branch

Senior General Manager

Saudi Pak Insurance Co., Ltd.,

10th Floor, Saudi Pak Tower

61/A, Jinnah Avenue, Blue Area

Islamabad.

Ph: 051-2800352, 2800326,

(Direct) 2800351

Fax: 051-2800356

17. I-8 Markaz Branch,

Office No. 2 & 3 , 2nd Floor, M.B

City Mall, I-8 Markaz,

Islamabad.

Ph: 051- 4864591-92

Fax: 051-4864593

18. Blue Area Branch

106, 1st Floor, Dosal Arcade,

Jinnah Avenue, Blue Area,

Islamabad.

Ph: 051-2272888

Fax: 051-2272999

Our Network


Our Network

19. F-10 Markaz Branch

Office # 304, 305, 3rd Floor,

Capital Business centre, F-10

Markaz, Islamabad.

Ph: 051-2809580-82

Fax: 051-2809583

20. Rawalpindi Branch

2nd Floor, Century Tower,

Opposite State Life Building,

The Mall, Rawalpindi.

Ph: 051-5564773-4

Other City Branches

21. Multan Branch

Room No. 3, 3rd Floor,

Trust Plaza, L.M.Q Road,

Multan.

Ph: 061-4579073-4

Fax: 061-4579075

22. Faisalabad Branch,

2nd Floor, Bilal Plaza, Liaquat

Road, Faisalabad.

Ph: 041-2605688,

2605788-89

Fax: 041-2605689

23. Sub - Office Faisalabad Branch

Room No.14, 15, 2nd Floor,

Taj Plaza, Kotwali Road,

Faisalabad.

Ph No: 041-2644581

24. Sialkot Branch

1st Floor, Saeed Centre, Iqbal

Town Defence Road, Sialkot.

Ph: 052-3572891-96

Fax: 052-3572895

25. Gujrat Branch

Shehroz Plaza, Near Sultan

Public school, G.T Road Gujrat.

Ph: 053-3514094

Fax: 053-3514095

26. Mirpur, Azad Kashmir, Branch

Al- Rahi square, sector C-1,

Mirpur Azad Kashmir.

Ph: 05827-452152

Fax: 05827-452153

27. Gujranwala Branch

Opposite general Bus Stand,

Near P.S.O Petrol Pump,

G.T Road, Gujranwala.

Ph: 055-3842948

28. Peshawar Branch

Deens Trade Centre,

3rd Floor, Room No. 266

Peshawar Cantt.

Ph: 091-5603257

Fax: 091-5603220

29. Jehlum Branch

Flat No.8, soldier Plaza, Civil

Lines, Jehlum.

Ph: 0544-626171

www.saudipakinsurance.com.pk


GROWING VALUES


Head Office:1ST Floor, 6-D, Upper Mall, Lahore. T: (92-42) 35776561-64F: (92-42) 35776560E: [email protected]

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spi insurance company limited

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