Questions:
Please solve above questions as much as you can using Financial Statements given below. I will up-vote you life-time.
3. Environment Factors: a. Macro-economic Factors of the country: Economic Growth, Unemployment Rate, GDP etc. for the last year. b. Economic Sector Analysis of the company and its main competitors. 5. Common Size Analysis for the Income Statement only for the last year. 6. Profitability Analysis: a. ROA. b. Profit Margin. Assets Turnover. OMAN UNITED INSURANCE COMPANY SAOG STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2020 Note 2020 RO 2019 RO 3 3 Gross written premiums Reinsurance premium ceded Net insurance premium revenue Movement in unearned premium reserve Net premium earned Commission income Total insurance revenue 3 30,908,180 (15,059,235) 15,848,945 160,136 16,009,081 2,420,161 18,429,242 31,160,027 (14.894.677) 16,265,350 2,356,522 18,621,872 2.326.242 20,948,114 3 3 3 3 3 3 Gross claims paid Reinsures' share of claims Net claims paid Movement in outstanding claims - net Net claims incurred Commission expenses Total insurance cost Net underwriting results Investment income - net Other operating income Total net income General and administration expenses Profit before taxation Taxation Profit for the year Other comprehensive income Items that will be reclassified to profit or loss: Net change in fair value of available-for-sale investments Total comprehensive income for the year (18,099,991) 10,240,417 (7,859,574) (165,672) (8,025,246) (2,497,172) (10,522,418) 7,906,824 2,106,129 366,148 10,379,101 (5,157,546) 5,221,555 (967,228) 4,254,327 (20,685,277) 9.465,207 (11,220,070) 590,349 (10,629,721) (2.294,886) (12.924.607) 8,023,507 534,350 754,764 9,312,621 (4,879.063) 4.433,558 (1.029.165) 3,404,393 4 5 6 7 11(a) (49,499) 4,204,828 515,478 3,919,871 Earnings per share 8 0.043 0.034 STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2020 Note 2020 RO 2019 RO ASSETS Non-current assets Property and equipment Investment property Available-for-sale investments Deposits Reinsurance contract assets 9 10 11 12 22 1,603,240 2,142,352 976,624 41,400,000 6,861,000 52,983,216 1,606,480 2,215,979 1,655,444 43,150,000 7,918,000 56,545,903 Current assets Financial assets at fair value through profit or loss Insurance and other receivables Deposits Reinsurance contract assets Cash and cash equivalents 13 15 12 22 4,304,329 7,212,165 17,146,400 23,726,982 1,936,502 54,326,378 107,309,594 6,509,162 7,798,841 7,886,505 27,005,880 474,973 49.675,361 106,221,264 16 Total assets 17 EQUITY AND LIABILITIES EQUITY Share capital Share premium Retained earnings Legal reserve General reserve Fair value reserve Contingency reserve Total equity 18 19 10,000,000 871,519 5,899,195 3,333,334 100,000 255,240 10,000,000 30,459,288 10,000,000 871,519 4,644,868 3,333,334 100,000 304,739 10,000,000 29,254.460 20 22 LIABILITIES Non-current liabilities Insurance contract liabilities Employees' end of service benefits Deferred tax liability Lease liability 23 14 24(a) 8,141,000 846,912 125,481 294,082 9,407,475 9,573,000 892,029 96,042 127,445 10,688,516 Current liabilities Bank overdraft Insurance contract liabilities Trade and other payables Lease liability Tax liability 16 22 24 24(a) 7(c) 2,405,907 48,522,345 15,470,715 68,206 975,658 67,442,831 76,850,306 107,309,594 51,420,707 13,753,914 82,077 1,021,590 66,278,288 76.966.804 106,221,264 Total liabilities Total equity and liabilities Net assets per share 26 0.305 0.293 PricewaterhouseCoopers LLC Initialled for Identificacation purpose only Initial co.... D Date ........ ..2.1. FEB 2021 OMAN UNITED INSURANCE COMPANY SAOG STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2020 Note Share capital RO Share premium RO Retained earnings RO Legal reserve RO General reserve RO FaFair value r reserve RO Contingency reserve RO Total Equity RO 10,000,000 871,519 4.240,475 3,333.334 100.000 ( (210.739) 10.000.000 28,334,589 3,404,393 3,404,393 At 1 January 2019 Comprehensive income: Profit for the year Other comprehensive income: Net change in fair value of available-for-sale investments Total comprehensive income Transactions with owners: Dividend paid At 31 December 2019 11(a) 515.478 515,478 3,919,871 3,404,393 515,478 21 (3,000,000) 4.644,868 (3,000,000) 29,254,460 10.000.000 871,519 3,333,334 100,000 304.739 10,000,000 10,000,000 871,519 4,644,868 3,333,334 100,000 304,739 10,000,000 29,254,460 4,254,327 4,254,327 At 1 January 2020 Comprehensive income: Profit for the year Other comprehensive income: Net change in fair value of available-for-sale investments Total comprehensive income Transactions with owners: Dividend paid At 31 December 2020 11(a) (49,499) (49,499) (49,499) 4,204,828 4,254,327 21 (3,000,000) 5,899,195 (3,000,000) 30,459,288 10,000,000 871,519 3,333,334 100,000 255,240 10,000,000 9 OMAN UNITED INSURANCE COMPANY SAOG STATEMENT OF CASHFLOWS FOR THE YEAR ENDED 31 DECEMBER 2020 Note 2020 RO 2019 RO Cash flow from operating activities Cash generated from operating activities Tax paid Net cash generated from operating activities 32 70) 6,012,484 (983,721) 5,028,763 1,387,251 (876,144) 511,107 9 (369,219) 3,175,003 Cash flow from investing activities Purchase of property and equipment Proceeds from sale of property and equipment Purchase of investments Proceeds from sale of investments Brokerage expenses paid Liquidation of deposits Placement of deposits Interest received Dividend received Net cash (used in) / generated from investing activities (404,117) 191 (395,314) 1,991,706 (4,471) 7,450,000 (14,850,000) 2,642,536 596,328 (2,973,141) 15,100,000 (18,800.000) 2,473,351 492.891 2.072.026 Cash flow from financing activities Dividend paid 21 (3,000,000) (3,000,000) (944,378) 474,973 (416,867) 891.840 Net change in cash and cash equivalents Cash and cash equivalents at the beginning of the year (Bank overdraft)/Cash and cash equivalents at the end of the year 16 (469,405) 474,973 RO OMAN UNITED INSURANCE COMPANY SAOG 22 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020 (CONTINUED) 3 Net underwriting result 2020 2019 General General business Life Total business Life Total RO RO RO RO RO Revenue Gross written premiums 26,056,783 4,851,397 30,908,180 24,545,603 6,614,424 31,160,027 Reinsurance premium ceded (11,894,124) (3,165,111) (15,059,235) (10,057,962) (4,836,715). (14,894,677) Net retained premium 14,162,659 1,686,286 15,848,945 14,487,641 1,777,709 16,265,350 Movement in unearned premium reserve (net) (229,864) 390,000 160,136 1,771,522 585,000 2,356,522 Commission earned on reinsurance 1,941,203 478,958 2,420,161 1,617,327 708,915 2,326,242 Total insurance revenue 15,873,998 2,555,244 18,429,242 17.876,490 3,071,624 20,948,114 Costs Gross claims paid 12,767,146 5,332,845 18,099,991 13,676,008 7,009,269 20,685,277 Reinsurance share (6,362,369) (3,878,048) (10,240,417) (4,620,968) (4,844,239) (9,465,207) Net claims paid 6,404,777 1,454,797 7,859,574 9,055,040 2,165,030 11,220,070 Movement in outstanding claims reserve (net) 198,616 (32,944) 165,672 (224,400) (365,949) (590,349) Net claims incurred 6,603,393 1,421,853 8,025,246 8,830,640 1,799,081 10,629,721 Commission expenses 1,981,375 515,797 2,497,172 1,605,371 689,515 2,294,886 Total insurance cost 8,584,768 1,937,650 10,522,418 10,436,011 2,488,596 12.924,607 Net underwriting result 7,289,230 617,594 7,906,824 7.440,479 583,028 8,023,507 The underwriting result before reinsurance recoveries are analysed as follows: The underwriting result before reinsurance recoveries are analysed as follows: 2020 Underwriting result before Net retained reinsurance premium recoveries RO RO Net retained premium RO 2019 Underwriting result before reinsurance recoveries RO Motor Fire Marine Household and others Life and medical Total 13,087,867 110,553 58,796 905,443 1,686,286 15,848,945 6,112,713 1,489,972 457,181 5,544,538 1,036,974 14,641,378 13,320,983 85,022 100,587 981,050 1,777,709 16,265,351 6,386,974 1,157,027 337,550 909,408 1,088,747 9,879,706 The net claims ratios are as follows: 2020 % 2019 % Motor Fire Marine Household and others Life and medical 47 89 123 45 68 55 30 30 64 76 The net claims ratio is calculated by dividing the net claims incurred (gross claims less reinsurance and other recoveries) by the net earned premiums (gross premiums less premiums ceded). Investment income - net 2020 RO 2019 RO 68,534 70,841 Profit on sale of financial assets at fair value through profit or loss Fair value loss on financial assets at fair value through profit or loss [note 13(a)] Interest income Dividend income Profit on sale of available-for-sale investments Brokerage on purchase and sale of shares Impairment loss on available-for-sale investments (note 11(a)] (1,076,833) 2,752,034 596,328 37,489 (4,471) (266,952) 2,106,129 (1.246,063) 2,462,221 463,220 505,128 (13,066) (1.707,931) 534,350 5 Other operating income 2020 RO 2019 RO Rental income from investment property Other income 249,185 116,963 366,148 277,559 477,205 754,764 6 General and administration expenses Salaries and employee related costs (note 6(a)] Office related expenses Provision for doubtful insurance and other receivables (note 15(a)] Depreciation (note 9) Directors' remuneration and sitting fees (note 25(a)] Repairs and maintenance Depreciation on right-of-use assets (IFRS16) [note 24(b)] Business promotion Corporate social responsibility Depreciation on investment property (note 10) Rent Board secretary fees Miscellaneous 2020 RO 3,448,104 321,808 290,000 279,937 187,000 163,008 89,139 85,369 79,261 73,628 40,548 8,400 91.344 5,157,546 2019 RO 3,284,674 339,563 290,000 270,975 145,000 160,277 84,445 54,243 30,000 73.452 50,967 8,400 87,067 4,879,063 (a) Salaries and employee related costs Salaries and employee related costs included in underwriting results and general and administration expenses are as follows: 2020 RO 2019 RO Salaries and allowances Social security costs End of service benefits (note 23) 3,141,037 218,522 88,545 3,448,104 3,045,121 153,776 85,777 3.284.674 (b) 7 Taxation 2020 2019 RO RO Current tax - For the year 937,789 991,222 Deferred tax - For the year (note 14) 29,439 37,943 Tax expense 967,228 1.029,165 (a) The Company's assessments up to 2017 has been completed by the Oman Taxation Authorities at the Ministry of Finance. The Board of Directors believes that additional taxes, if any, in respect of open tax assessments would not be significant to the Company's financial position as at 31 December 2020. The Company is liable to income tax, in accordance with the income tax laws of the Sultanate of Oman, at the rate of 15% on profits. (2019-15%) Reconciliation of income tax expense 2020 2019 RO RO Accounting profit for the year 5,221,555 4,433,558 Tax liability at the rate of 15% (2019 - 15%) 783,233 665,034 Non-deductible expenses 261,016 501.296 Tax exempt income (104,268) (152,638) Others 27,247 15,473 Tax expense 967,228 1,029,165 (c) The movement in the current tax liability during the ycar is as follows: 2020 2019 RO RO PricewaterhouseCoopers LLC At 1 January Initialled for identification purpose only 1,021,590 906,512 Charge for the year 991,222 Paid during the year Initial... WC.... Date ... 2.1 FEB 2021 937,789 (983,721) (876,144) At 31 December 975,658 1,021,590 Earnings per share The earnings per share have been derived by dividing the profit for the year attributable to shareholders by the weighted average number of shares outstanding. As there are no dilutive potential shares, the diluted earnings per share are identical to the basic earnings per share. 2020 2019 Profit for the year (RO) 4,254,327 3,404,393 Average number of shares outstanding during the year (number of shares) 100,000,000 100,000,000 Earnings per share (RO) 0.043 0.034 Property and equipment Details of movements in property and equipment are set out on pages 49 and 50. (b) Land and buildings with a carrying value of RO 320,180 (2019- RO 357,709) have been mortgaged to a commercial bank for the bank facilities provided. (c) In accordance with the law governing the operations of insurance companies within the Sultanate of Oman, the head office building of the Company with a carrying value of RO 398,969 (market value of RO 1,000,000 is under lien with the Canital Market Authority Insurance Division 2019 - RO 418.925 (market value of RO 1,000,000). 8 9 FINANCIAL POSITION AS AT 31st DECEMBER 2020: Management's focus is always on a conservative approach coupled with sustainability & sound financial stability of the Company. Following are the indicators of the soundness of the financial position of the Company as at 31st December 2020. Total assets of the Company stood at RO. 105.37 Million as at 31st December '20. Shareholders' equity amounted to RO. 30.46 Million as at 31st December '20. The schedule below demonstrates the details of investment portfolio of the Company for the years 2018 to 2020. 2020 2019 2018 Description RO. % RO. % RO. % Fixed income Investments 59,757,414 90.23 53,521,407 85.40 51,575,543 80.44 3,600,534 5.44 6,154,678 9.82 9,418,456 14.69 2,142,352 3.24 2,215,979 3.54 2,289,432 3.57 Investment in Equities Investment in Immovable properties Immovable properties (Self occupied) Total 719,149 1.09 776,634 1.24 834,291 1.30 66,219,449 100 62,668,698 100 64,117,722 100 In line with our strategies of stability, conservativeness, sustainability and consistent reward to shareholders, we have gradually reduced our exposure from the equity investments and increased our exposure in fixed income instruments. From the above table, one can observe that the Company's investments in equities are divested and invested in fixed income securities. Fixed income investments increased from RO 51.57 1 a million in 2018 to RO 59.78 million in 2020, with an increase of 15.86%. Meanwhile, the Company's equity investments decreased from RO 9.42 million in 2018 to RO 3.60 million in 2020, with a decrease of 61.77%. It is worth mentioning that, the increase in fixed income Investments was increased despite cash dividend distribution of RO 6 million, during the last two years. Moreover, the immovable properties have been accounted based on cost less depreciation method and the combined market value is around RO. 8.15 Million, having an appreciation of about RO. 5/- Million, which has not been recognized in the accounts. Thirdly: - Performance of Investments Operations: - In compliance with the Capital Market Authority's investment guidelines, the Company's funds invested in well-diversified classes of assets and high-quality liquid investments based on the operational liquidity requirements. During 2020, the MSM30 Index decreased by 8.10 %. Accordingly, the equity investment's performance of the Company has also affected negatively. Notwithstanding the lackluster performance of MSM30 Index, the Company's overall investment portfolio was able to achieve reasonable results as detailed in the table: - Description 2020 2019 2018 2,059,796 878,415 Net Interest Income 2,752,034 2,462,222 Dividend Income 596,328 463,220 Profit on sale of investments 101,553 562,903 Other income 116,961 477,205 Rental income 249,185 277,558 Change in market value of FVTPL investments (1,076,832) (1,246,062) 546,201 598,277 302,032 (2,086,530) Impairment on AFS investments (266,952) (1,707,932) (848,190) Net Investment Income 2,472,277 1,289,114 1,450,002 The table below elaborates on the performance of COMPANY and improvement over the years. Description 2020 2019 2018 Combined Ratio 81.60% 82.72% 88.45% Fifthly: - Net Profit Despite fierce competition and the lackluster performance of MSM, the Company has performed well in core business and investments. The net profit of the Company is detailed below: - Description 2020 2019 2018 7,268,027 7,906,824 2,472,277 8,023,508 1,289,114 9,312,622 1,450,002 10,379,101 8,718,029 Gross insurance operations results Net investment & other income Gross combined operational results Management expenses (including bad debts provision) Profit before income tax provision Income tax provision (5,157,547) (4,879,063) (4,648,775) 5,221,554 4,433,559 4,069,254 (967,227) (1,029,166) (934,542) Net profit after income tax 4,254,327 3,404,393 3,134,712 3. Environment Factors: a. Macro-economic Factors of the country: Economic Growth, Unemployment Rate, GDP etc. for the last year. b. Economic Sector Analysis of the company and its main competitors. 5. Common Size Analysis for the Income Statement only for the last year. 6. Profitability Analysis: a. ROA. b. Profit Margin. Assets Turnover. OMAN UNITED INSURANCE COMPANY SAOG STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2020 Note 2020 RO 2019 RO 3 3 Gross written premiums Reinsurance premium ceded Net insurance premium revenue Movement in unearned premium reserve Net premium earned Commission income Total insurance revenue 3 30,908,180 (15,059,235) 15,848,945 160,136 16,009,081 2,420,161 18,429,242 31,160,027 (14.894.677) 16,265,350 2,356,522 18,621,872 2.326.242 20,948,114 3 3 3 3 3 3 Gross claims paid Reinsures' share of claims Net claims paid Movement in outstanding claims - net Net claims incurred Commission expenses Total insurance cost Net underwriting results Investment income - net Other operating income Total net income General and administration expenses Profit before taxation Taxation Profit for the year Other comprehensive income Items that will be reclassified to profit or loss: Net change in fair value of available-for-sale investments Total comprehensive income for the year (18,099,991) 10,240,417 (7,859,574) (165,672) (8,025,246) (2,497,172) (10,522,418) 7,906,824 2,106,129 366,148 10,379,101 (5,157,546) 5,221,555 (967,228) 4,254,327 (20,685,277) 9.465,207 (11,220,070) 590,349 (10,629,721) (2.294,886) (12.924.607) 8,023,507 534,350 754,764 9,312,621 (4,879.063) 4.433,558 (1.029.165) 3,404,393 4 5 6 7 11(a) (49,499) 4,204,828 515,478 3,919,871 Earnings per share 8 0.043 0.034 STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2020 Note 2020 RO 2019 RO ASSETS Non-current assets Property and equipment Investment property Available-for-sale investments Deposits Reinsurance contract assets 9 10 11 12 22 1,603,240 2,142,352 976,624 41,400,000 6,861,000 52,983,216 1,606,480 2,215,979 1,655,444 43,150,000 7,918,000 56,545,903 Current assets Financial assets at fair value through profit or loss Insurance and other receivables Deposits Reinsurance contract assets Cash and cash equivalents 13 15 12 22 4,304,329 7,212,165 17,146,400 23,726,982 1,936,502 54,326,378 107,309,594 6,509,162 7,798,841 7,886,505 27,005,880 474,973 49.675,361 106,221,264 16 Total assets 17 EQUITY AND LIABILITIES EQUITY Share capital Share premium Retained earnings Legal reserve General reserve Fair value reserve Contingency reserve Total equity 18 19 10,000,000 871,519 5,899,195 3,333,334 100,000 255,240 10,000,000 30,459,288 10,000,000 871,519 4,644,868 3,333,334 100,000 304,739 10,000,000 29,254.460 20 22 LIABILITIES Non-current liabilities Insurance contract liabilities Employees' end of service benefits Deferred tax liability Lease liability 23 14 24(a) 8,141,000 846,912 125,481 294,082 9,407,475 9,573,000 892,029 96,042 127,445 10,688,516 Current liabilities Bank overdraft Insurance contract liabilities Trade and other payables Lease liability Tax liability 16 22 24 24(a) 7(c) 2,405,907 48,522,345 15,470,715 68,206 975,658 67,442,831 76,850,306 107,309,594 51,420,707 13,753,914 82,077 1,021,590 66,278,288 76.966.804 106,221,264 Total liabilities Total equity and liabilities Net assets per share 26 0.305 0.293 PricewaterhouseCoopers LLC Initialled for Identificacation purpose only Initial co.... D Date ........ ..2.1. FEB 2021 OMAN UNITED INSURANCE COMPANY SAOG STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2020 Note Share capital RO Share premium RO Retained earnings RO Legal reserve RO General reserve RO FaFair value r reserve RO Contingency reserve RO Total Equity RO 10,000,000 871,519 4.240,475 3,333.334 100.000 ( (210.739) 10.000.000 28,334,589 3,404,393 3,404,393 At 1 January 2019 Comprehensive income: Profit for the year Other comprehensive income: Net change in fair value of available-for-sale investments Total comprehensive income Transactions with owners: Dividend paid At 31 December 2019 11(a) 515.478 515,478 3,919,871 3,404,393 515,478 21 (3,000,000) 4.644,868 (3,000,000) 29,254,460 10.000.000 871,519 3,333,334 100,000 304.739 10,000,000 10,000,000 871,519 4,644,868 3,333,334 100,000 304,739 10,000,000 29,254,460 4,254,327 4,254,327 At 1 January 2020 Comprehensive income: Profit for the year Other comprehensive income: Net change in fair value of available-for-sale investments Total comprehensive income Transactions with owners: Dividend paid At 31 December 2020 11(a) (49,499) (49,499) (49,499) 4,204,828 4,254,327 21 (3,000,000) 5,899,195 (3,000,000) 30,459,288 10,000,000 871,519 3,333,334 100,000 255,240 10,000,000 9 OMAN UNITED INSURANCE COMPANY SAOG STATEMENT OF CASHFLOWS FOR THE YEAR ENDED 31 DECEMBER 2020 Note 2020 RO 2019 RO Cash flow from operating activities Cash generated from operating activities Tax paid Net cash generated from operating activities 32 70) 6,012,484 (983,721) 5,028,763 1,387,251 (876,144) 511,107 9 (369,219) 3,175,003 Cash flow from investing activities Purchase of property and equipment Proceeds from sale of property and equipment Purchase of investments Proceeds from sale of investments Brokerage expenses paid Liquidation of deposits Placement of deposits Interest received Dividend received Net cash (used in) / generated from investing activities (404,117) 191 (395,314) 1,991,706 (4,471) 7,450,000 (14,850,000) 2,642,536 596,328 (2,973,141) 15,100,000 (18,800.000) 2,473,351 492.891 2.072.026 Cash flow from financing activities Dividend paid 21 (3,000,000) (3,000,000) (944,378) 474,973 (416,867) 891.840 Net change in cash and cash equivalents Cash and cash equivalents at the beginning of the year (Bank overdraft)/Cash and cash equivalents at the end of the year 16 (469,405) 474,973 RO OMAN UNITED INSURANCE COMPANY SAOG 22 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020 (CONTINUED) 3 Net underwriting result 2020 2019 General General business Life Total business Life Total RO RO RO RO RO Revenue Gross written premiums 26,056,783 4,851,397 30,908,180 24,545,603 6,614,424 31,160,027 Reinsurance premium ceded (11,894,124) (3,165,111) (15,059,235) (10,057,962) (4,836,715). (14,894,677) Net retained premium 14,162,659 1,686,286 15,848,945 14,487,641 1,777,709 16,265,350 Movement in unearned premium reserve (net) (229,864) 390,000 160,136 1,771,522 585,000 2,356,522 Commission earned on reinsurance 1,941,203 478,958 2,420,161 1,617,327 708,915 2,326,242 Total insurance revenue 15,873,998 2,555,244 18,429,242 17.876,490 3,071,624 20,948,114 Costs Gross claims paid 12,767,146 5,332,845 18,099,991 13,676,008 7,009,269 20,685,277 Reinsurance share (6,362,369) (3,878,048) (10,240,417) (4,620,968) (4,844,239) (9,465,207) Net claims paid 6,404,777 1,454,797 7,859,574 9,055,040 2,165,030 11,220,070 Movement in outstanding claims reserve (net) 198,616 (32,944) 165,672 (224,400) (365,949) (590,349) Net claims incurred 6,603,393 1,421,853 8,025,246 8,830,640 1,799,081 10,629,721 Commission expenses 1,981,375 515,797 2,497,172 1,605,371 689,515 2,294,886 Total insurance cost 8,584,768 1,937,650 10,522,418 10,436,011 2,488,596 12.924,607 Net underwriting result 7,289,230 617,594 7,906,824 7.440,479 583,028 8,023,507 The underwriting result before reinsurance recoveries are analysed as follows: The underwriting result before reinsurance recoveries are analysed as follows: 2020 Underwriting result before Net retained reinsurance premium recoveries RO RO Net retained premium RO 2019 Underwriting result before reinsurance recoveries RO Motor Fire Marine Household and others Life and medical Total 13,087,867 110,553 58,796 905,443 1,686,286 15,848,945 6,112,713 1,489,972 457,181 5,544,538 1,036,974 14,641,378 13,320,983 85,022 100,587 981,050 1,777,709 16,265,351 6,386,974 1,157,027 337,550 909,408 1,088,747 9,879,706 The net claims ratios are as follows: 2020 % 2019 % Motor Fire Marine Household and others Life and medical 47 89 123 45 68 55 30 30 64 76 The net claims ratio is calculated by dividing the net claims incurred (gross claims less reinsurance and other recoveries) by the net earned premiums (gross premiums less premiums ceded). Investment income - net 2020 RO 2019 RO 68,534 70,841 Profit on sale of financial assets at fair value through profit or loss Fair value loss on financial assets at fair value through profit or loss [note 13(a)] Interest income Dividend income Profit on sale of available-for-sale investments Brokerage on purchase and sale of shares Impairment loss on available-for-sale investments (note 11(a)] (1,076,833) 2,752,034 596,328 37,489 (4,471) (266,952) 2,106,129 (1.246,063) 2,462,221 463,220 505,128 (13,066) (1.707,931) 534,350 5 Other operating income 2020 RO 2019 RO Rental income from investment property Other income 249,185 116,963 366,148 277,559 477,205 754,764 6 General and administration expenses Salaries and employee related costs (note 6(a)] Office related expenses Provision for doubtful insurance and other receivables (note 15(a)] Depreciation (note 9) Directors' remuneration and sitting fees (note 25(a)] Repairs and maintenance Depreciation on right-of-use assets (IFRS16) [note 24(b)] Business promotion Corporate social responsibility Depreciation on investment property (note 10) Rent Board secretary fees Miscellaneous 2020 RO 3,448,104 321,808 290,000 279,937 187,000 163,008 89,139 85,369 79,261 73,628 40,548 8,400 91.344 5,157,546 2019 RO 3,284,674 339,563 290,000 270,975 145,000 160,277 84,445 54,243 30,000 73.452 50,967 8,400 87,067 4,879,063 (a) Salaries and employee related costs Salaries and employee related costs included in underwriting results and general and administration expenses are as follows: 2020 RO 2019 RO Salaries and allowances Social security costs End of service benefits (note 23) 3,141,037 218,522 88,545 3,448,104 3,045,121 153,776 85,777 3.284.674 (b) 7 Taxation 2020 2019 RO RO Current tax - For the year 937,789 991,222 Deferred tax - For the year (note 14) 29,439 37,943 Tax expense 967,228 1.029,165 (a) The Company's assessments up to 2017 has been completed by the Oman Taxation Authorities at the Ministry of Finance. The Board of Directors believes that additional taxes, if any, in respect of open tax assessments would not be significant to the Company's financial position as at 31 December 2020. The Company is liable to income tax, in accordance with the income tax laws of the Sultanate of Oman, at the rate of 15% on profits. (2019-15%) Reconciliation of income tax expense 2020 2019 RO RO Accounting profit for the year 5,221,555 4,433,558 Tax liability at the rate of 15% (2019 - 15%) 783,233 665,034 Non-deductible expenses 261,016 501.296 Tax exempt income (104,268) (152,638) Others 27,247 15,473 Tax expense 967,228 1,029,165 (c) The movement in the current tax liability during the ycar is as follows: 2020 2019 RO RO PricewaterhouseCoopers LLC At 1 January Initialled for identification purpose only 1,021,590 906,512 Charge for the year 991,222 Paid during the year Initial... WC.... Date ... 2.1 FEB 2021 937,789 (983,721) (876,144) At 31 December 975,658 1,021,590 Earnings per share The earnings per share have been derived by dividing the profit for the year attributable to shareholders by the weighted average number of shares outstanding. As there are no dilutive potential shares, the diluted earnings per share are identical to the basic earnings per share. 2020 2019 Profit for the year (RO) 4,254,327 3,404,393 Average number of shares outstanding during the year (number of shares) 100,000,000 100,000,000 Earnings per share (RO) 0.043 0.034 Property and equipment Details of movements in property and equipment are set out on pages 49 and 50. (b) Land and buildings with a carrying value of RO 320,180 (2019- RO 357,709) have been mortgaged to a commercial bank for the bank facilities provided. (c) In accordance with the law governing the operations of insurance companies within the Sultanate of Oman, the head office building of the Company with a carrying value of RO 398,969 (market value of RO 1,000,000 is under lien with the Canital Market Authority Insurance Division 2019 - RO 418.925 (market value of RO 1,000,000). 8 9 FINANCIAL POSITION AS AT 31st DECEMBER 2020: Management's focus is always on a conservative approach coupled with sustainability & sound financial stability of the Company. Following are the indicators of the soundness of the financial position of the Company as at 31st December 2020. Total assets of the Company stood at RO. 105.37 Million as at 31st December '20. Shareholders' equity amounted to RO. 30.46 Million as at 31st December '20. The schedule below demonstrates the details of investment portfolio of the Company for the years 2018 to 2020. 2020 2019 2018 Description RO. % RO. % RO. % Fixed income Investments 59,757,414 90.23 53,521,407 85.40 51,575,543 80.44 3,600,534 5.44 6,154,678 9.82 9,418,456 14.69 2,142,352 3.24 2,215,979 3.54 2,289,432 3.57 Investment in Equities Investment in Immovable properties Immovable properties (Self occupied) Total 719,149 1.09 776,634 1.24 834,291 1.30 66,219,449 100 62,668,698 100 64,117,722 100 In line with our strategies of stability, conservativeness, sustainability and consistent reward to shareholders, we have gradually reduced our exposure from the equity investments and increased our exposure in fixed income instruments. From the above table, one can observe that the Company's investments in equities are divested and invested in fixed income securities. Fixed income investments increased from RO 51.57 1 a million in 2018 to RO 59.78 million in 2020, with an increase of 15.86%. Meanwhile, the Company's equity investments decreased from RO 9.42 million in 2018 to RO 3.60 million in 2020, with a decrease of 61.77%. It is worth mentioning that, the increase in fixed income Investments was increased despite cash dividend distribution of RO 6 million, during the last two years. Moreover, the immovable properties have been accounted based on cost less depreciation method and the combined market value is around RO. 8.15 Million, having an appreciation of about RO. 5/- Million, which has not been recognized in the accounts. Thirdly: - Performance of Investments Operations: - In compliance with the Capital Market Authority's investment guidelines, the Company's funds invested in well-diversified classes of assets and high-quality liquid investments based on the operational liquidity requirements. During 2020, the MSM30 Index decreased by 8.10 %. Accordingly, the equity investment's performance of the Company has also affected negatively. Notwithstanding the lackluster performance of MSM30 Index, the Company's overall investment portfolio was able to achieve reasonable results as detailed in the table: - Description 2020 2019 2018 2,059,796 878,415 Net Interest Income 2,752,034 2,462,222 Dividend Income 596,328 463,220 Profit on sale of investments 101,553 562,903 Other income 116,961 477,205 Rental income 249,185 277,558 Change in market value of FVTPL investments (1,076,832) (1,246,062) 546,201 598,277 302,032 (2,086,530) Impairment on AFS investments (266,952) (1,707,932) (848,190) Net Investment Income 2,472,277 1,289,114 1,450,002 The table below elaborates on the performance of COMPANY and improvement over the years. Description 2020 2019 2018 Combined Ratio 81.60% 82.72% 88.45% Fifthly: - Net Profit Despite fierce competition and the lackluster performance of MSM, the Company has performed well in core business and investments. The net profit of the Company is detailed below: - Description 2020 2019 2018 7,268,027 7,906,824 2,472,277 8,023,508 1,289,114 9,312,622 1,450,002 10,379,101 8,718,029 Gross insurance operations results Net investment & other income Gross combined operational results Management expenses (including bad debts provision) Profit before income tax provision Income tax provision (5,157,547) (4,879,063) (4,648,775) 5,221,554 4,433,559 4,069,254 (967,227) (1,029,166) (934,542) Net profit after income tax 4,254,327 3,404,393 3,134,712
