insuring dreams. protecting the future · 2014 2015 2016 15.3% 17,674 20,212 23,316 shareholders...

Insuring Dreams.Protecting the Future

Annual Report 31 DECEMBER 2016

Zenith General Insurance Company Limited

Financial Highlights...........................................................................................................................................1-3Corporate information…………………………………............................................................. .......................4Directors' report………………………………………………………………………………. ....................5-13Management's discussion and analysis……………………………………………...…………… ................14-22 Statement of directors' responsibilities………………………………......................…………..........................23Corporate governance report ………………………………………………................……….................24-28Independent auditor's report……………………………………………...................………….................29-31Reporting entity.................................................................................................................................................32Statement of compliance with International Financial Reporting Standard............................................................32Basis of preparation.....................................................................................................................................32-37Signicant accounting policies........................................................,,,,,,,,,,,....................................................37-47 Required technical and other reserves by NAICOM……………………………………………......................47Consolidated and separate statement of prot or loss and other comprehensive income...................................48Consolidated and separate statement of nancial position..................................................................................49Consolidated and separate statement of changes in equity............................................................................50-51Consolidated and separate statement of cash ows……………..................……………………......................52

Notes to the nancial statement1. Risk management……………………………………………………….............................................53-1012. Operating segment............................................................................................................... ...................1023. Financial assets and liabilities...............................................................................................................103-1064. Gross premium written............................................................................................................................1075. Gross premium income. ..........................................................................................................................1076. Reinsurance expenses........................................................................................................................107-1087. Fees and commission income ...................................................................................................................1088. Claims expenses.... ...........................................................................................................................108-1099. Underwriting expenses..............................................................................................................................10910. Investment income ..................................................................................................................................10911. Other operating income ..........................................................................................................................11012. Management expenses......................................................................................................................110-11113. Taxation....................................................................................................................................................11114. Cash and cash equivalents.........................................................................................................................11215. Financial assets Investment securities - held to maturity ……………………………….........……………................112-113 Investment securities - available for sale …………………………………………………….............113-114 Loans and receivables........................................................................................................................114-115 Trade receivables...............................................................................................................................115-11616. Reinsurance assets.............................................................................................................................116-11717. Deferred acquisition cost..........................................................................................................................11718. Other receivables and prepayments..................................................................................................117-11819. Investment in subsidiaries.................................................................................................................118-11920. Intangible assets.......................................................................................................................................11921. Property and equipment ..................................................................................................................120-123 22. Statutory deposit.....................................................................................................................................12423. Insurance contract liabilities...............................................................................................................124-12624. Investment contract liabilities....................................................................................................................12725. Trade payables.........................................................................................................................................12726. Provisions and other payables ..........................................................................................................127-128

ContentsZenith General Insurance Company Limited

Annual Report, 31 December 2016

27. Current income tax liabilities.....................................................................................................................12828. Deferred taxation..............................................................................................................................129-13029. Share capital & Share premium.................................................................................................................130 30. Statutory contingency reserves..........................................................................................................130-13131. Retained earnings.....................................................................................................................................13132. Fair value reserves....................................................................................................................................13133. Earnings per share....................................................................................................................................13134. Discontinued operations...................................................................................................................132-13335. Directors and employees.........................................................................................................................13436. Related party transaction..........................................................................................................................13537. Transactions with directors.......................................................................................................................13638. Contingent liabilities.................................................................................................................................13639. Capital commitments...............................................................................................................................13640. Litigations…………………..............………………………………………………………...................13641. Events after the reporting date.................................................................................................................13642. Contravention, nes and penalties...........................................................................................................136

Other national informationI. Hypothecation of insurance assets ......................................................................................................138-139ii. Age analysis of outstanding claims...............................................................................................................140iii. General business revenue account......................................................................................................141-142iv. Statement of value added...........................................................................................................................143v. Financial summary...............................................................................................................................144-145

ContentsZenith General Insurance Company Limited


GPW (=N=M)

YEAR AMOUNT

10,136

10,906

11,116

2014

2015

2016 1.93%

1.93%

GPW (N M)

10

,13

6

10

,90

6

11

,11

6

2014 2015 2016

PBT (=N=M)

YEAR AMOUNT

4,347

4,607

5,236

2014

2015

2016 13.65%

2014 2015 2016

13.65%

4,3

47

4,6

07

5,2

36

1

PBT (N M)

Zenith General Financial HighlightsZenith General Insurance Company Limited




2014 2015 2016

14.1%

4,5

30

2,9

26

3,3

39

CLAIMS INCURRED (N'M)

2014 2015 2016

15.3%

17,6

74

20,2

12

23,3

16

SHAREHOLDERS FUND(N'M)

14.11%

SHAREHOLDERS FUND (=N=M)

23,316

YEAR AMOUNT

17,674

20,212

2014

2015

2016 15.36%

NET CLAIMS INCURRED (=N=M)

AMOUNT

4,530

2,926

3,339

YEAR

2014

2015

2016

2



TOTAL ASSETS (=N=M)

AMOUNT

29,529

34,108

36,6267.38%

2014 2015 2016

7.38%

29

,52

9

34

,10

8 36

,62

6

TOTAL ASSETS (N'M)

YEAR

2014

2015

2016

3

34.108

Name of Directors Jim Ovia Chairman

Ebelechukwu Nwachukwu Managing Director

Chukwuemeke Igumbor Non-Executive Director

Joseph Onwubuya Non-Executive Director

Elaine Delaney Non-Executive Director

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

Victor Abulele Non-Executive (Independent) Director

Registered Ofce 13th and 14th Floor,

Civic Towers, Ozumba Mbadiwe Avenue,

Victoria Island,

Lagos.

RC Number 6761

Company Secretary Emeka Anyaeji

13th and 14th Floor,

Civic Towers, Ozumba Mbadiwe,

Victoria Island,

Lagos.

Auditor PricewaterhouseCoopers

Landmark Towers

5B Water Corporation Drive, Oniru, Lagos

Tel +234 1 271700

www.pwc.com/ng

Major Banker(s) Zenith Bank Plc

First Bank of Nigeria Limited

First CityMonument Bank Limited

Diamond Bank Plc

Actuary HR Nigeria Limited

Reinsurers Africa Reinsurance Corporation

Munich Reinsurance Company Limited

Ghana Reinsurance Company Limited

Swiss Reinsurance Company Limited

Continental Reinsurance Plc

Waica Reinsurance Corporation

4


Annual Report, 31 December 2016Corporate Information


Annual Report, 31 December 2016Chairman’s statement

Distinguished Stakeholders, it gives me great pleasure to present you our nancial results for the year ended December 31, 2016. 2016 was

a year full of trials and challenges for the country and for businesses in general with the start of the economic recession and the fall in value of the naira. However, despite the harsh operating environment, we were able to weather the storm and demonstrate resilience by improving on our 2015 nancial results.

Economic climateNigeria's economy went into recession ofcially in 2016, the rst since 1991. Most sectors of the economy were plagued with dwindling revenues, excessive ination, depreciation of the naira, and declining external reserves. The Gross domestic product in Africa's most-populous country declined by -2.06 percent compared to the previous year.

Lower prices and a generally low output of oil, Nigeria's biggest export, cut government revenue by about half and reduced the foreign currency available to import rened fuel and factory inputs. A weakening naira contributed to ination accelerating to the highest level in more than a decade, prompting the Central Bank to increase its key lending rate to a record 14 percent. Nigeria's economic issues were further aggravated by a ve-month delay in approving spending plans for 2016 needed to stimulate business activity.However, there is light at the end of the tunnel for Nigerian Economy based on the gradual increase in the

country's foreign reserve, and the persuasive approach employed by the Federal Government which brought relative calmness to the Niger Delta region thereby increasing crude oil production and its prices at international market make us to believe that the worst may have been over and our economy is on its way out of recession and also poised for a rebound.

The Insurance industry also had its share of volatility with increased competition and rate rivalry in the industry, 2016 was indeed a turbulent year. The market was undeniably tougher than it has been in the previous years.

Financial performanceDespite the array of challenges confronting the economy, Zenith General insurance Company Limited was able to thrive in the midst of it all and grow its prots year on year by 13%.

The gross premium written was increased marginally to 8.4 billion as against 8.1billion recorded the previous year. Our prot before tax was increased from 4.6 billion to 5.2 billion while the earning per share (basic) increased from 310 kobo to 319 kobo respectively. With the gradual recovery of all economic indicators and relative stability of Naira, we hope to have better results from all indications in the year 2017.

ConclusionI hereby express my sincere appreciation to everyone who has played a part in the Company's 2016 story – the Board of Directors, the Management Team, our dedicated and hardworking employees, our investors, developmental partners, regulators and our highly esteemed customers who believed and remained with us.

We say thank you for allowing us support your best interest.

Regards.

Jim OviaChairman, Zenith General Insurance Co. Ltd.

5

IntroductionThe Chairman, distinguished Shareholders, fellow board members, Ladies and Gentlemen. It gives me great pleasure to present the results of our company for the last nancial year ended 31st December 2016.

We thought 2015 was challenging due to some certain events that occurred, especially the general election and change of government from one political party to another but 2016 proved to be even more challenging for businesses to thrive.

Economic OutlookAt the start of 2016,we had high expectations of the economy and operating environment more so that the incoming government was to prepare and implement their full budget for the year hoping that the successful implementation will translate to an economic boost, but the reverse was the case as the economy slipped to recession within the year under review.

Ination rate became very high (18.55%) and prices of goods and stable consumable became high thereby reducing most individual’s disposable income. Insurance companies were denitely affected by the massive slow-down in economic activity as the volume of revenue

generated nosedived below projections for the year.

Financial scorecardIn spite of all these challenges, our Company was able to emerge with good performance and remain protable with a moderate growth ratio. Our gross premium written was increased to 11.1billion as against 10.9billion recorded the previous year. Our prot before tax was increased from 4.6billion to 5.2billion while earning per share (basic) was increased from 310kobo to 319kobo respectively.

As we all know that our company is in the business of paying claims, we were able to do this creditably well within the year as our total claims paid in 2016 was to the tune of 3.3 billion. This translates to an increase of 13% from the position in 2015, however we still maintained a healthy claims ratio of 30%

Industry DevelopmentOur regulator, the National Insurance Commission (NAICOM) brought again to the forefront the Risk Based supervision model and a draft roadmap for implementation was released in October 2016.We anticipate that this may lead to a number of mergers and capital raising for the industry but we assure our stakeholders that Zenith Insurance would remain strong and adequately capitalized.

Business OutlookZenith Insurance is strategically growing its branch network with the opening of agency ofces in Uyo, Aba and Ikeja. In 2017, we intend to expand this signicantly covering major cities within the shortest possible time. We are also revamping our retail strategy with the aim of building our retail portfolio to over 30% of the overall portfolio.

We are improving on our channels of distribution to make use of innovative technology to leverage on our robust network and organizational synergies. We are committed to excellent service delivery which we are reputed for in the industry.

Staff TrainingIn order to improve on the overall productivity of our staff, training and professional development have continued to receive deserved attention. Series of seminars and professional trainings are organized periodically for our staff to sharpen their skills. As it is our usual practice that every member of staff must attend at least one job related training and one skill


Annual Report, 31 December 2016MD/Chief Executive's Statement

6

7

related within the year and we intend to continue this as we believe that our staff are our greatest assets.

Let me state here that as we continue to expand, we shall also continue to recognize and reward the dedication and hard work of every member of staff who have distinguished themselves in their various functions.

ConclusionOnce again I would like to thank everyone – the Board of Directors, Distinguished Shareholders, valuable Customers and Brokers who have helped us and have become part and parcel of our success story. You are indeed the reason why we exist.

May 2017 be a more prosperous year for everyone.

Thank you.

Ebelechukwu NwachukwuManaging Director/CEO


Annual Report, 31 December 2016MD/Chief Executive's Statement

8

The directors have the pleasure in submitting their annual report together with the audited Consolidated and Separate nancial statements

for the year ended 31 December 2016 which discloses the state of affairs of the Zenith General Insurance Company Limited ("the Company") and its subsidiaries ("together referred to as "the Group").

Legal form and principal activityThe Company was incorporated in 1970 as Piccadilly Insurance Company Limited and it was traded in this name until 2003 when it was acquired by Zenith Bank Plc. The name was changed to Zenith General Insurance Company Limited in 2004. Zenith General Insurance Company Limited is incorporated in Nigeria under the Companies and Allied Matters Act as a private limited company and it is domiciled in Nigeria. By 2015 Zenith Bank relinquished its stake in the company to Veritas Registrars in line with regulatory requirements to divest its core banking operations.

For the year ended 31 December 2016

The registered ofce of the Company is: 13th & 14th Floor, Civic Towers, Ozumba Mbadiwe Avenue, Victoria Island, Lagos.

Up until April 2016, the Company has two wholly owned subsidiaries, Zenith Life Assurance and Zenith Medicare Limited. Zenith Life Assurance is a private limited liability company incorporated on 30 March 2001 to carry out the business of life assurance.

Zenith Medicare Limited engages in the provision of health care services through health care providers and for that purpose is accredited with the National Health Insurance Scheme. Zenith Life Assurance Company Limited, one of the subsidiaries, was disposed during the year.

The principal activities of the Group are the provision of Marine insurance, Motor insurance, Accident insurance, Fire insurance, other non-life insurance services, Health insurance, Life assurance till April 2016, Claims settlement and other investment activities.

Operating results

Highlights of the Group’s nancial performance is as follows:

Gross premium written

Prot before taxation Taxation

Prot after taxation

Prot attributable to the group Prot from discontinued operation

Retained earnings for the year Retained earnings beginning of year Dividend declared

Retained earnings, end of year

Earning per share - basic (in kobo)

Prot for the year

31-Dec-2016

5,254,794 8,152,269

(1,450,000)

11,957,063

453k

Company

31-Dec-2016

N'000

8,441,433

7,064,083 (495,591)

6,568,492

6,568,492

-

6,568,492 (1,313,698)

3,253,301 10,807,361

(1,450,000)

12,610,662

319k

Group

N'000

11,116,350

5,236,732 (624,126)

4,612,606

4,612,606 16,555

4,629,161 (1,375,860)

Directors’ Report

3,874,8787,054,891

(2,777,500)

8,152,269

334k

Company

31-Dec-2015

N'000

8,171,513

5,734,785(891,187)

4,843,598

4,843,598

-

4,843,598(968,720)

3,194,922 10,389,939 (2,777,500)

10,807,361

310k

Group

31-Dec-2015

N'000

10,906,124

4,607,937 (1,155,561)

3,452,376

3,452,376 1,040,737

4,493,113 (1,298,191)



Zenith General Insurance Company LimitedAnnual Report, 31 December 2016

Jim Ovia

9

Chairman

Ebelechukwu Nwachukwu Managing Director

Chukwuemeke Igumbor Non-Executive





Retirement of DirectorsNo director retired during the period

Dividend During the 2015 nancial year, the directors declared and paid a nal dividend of N1 per share on the issued and paid up capital of 1,450,000,000 ordinary share of N1.00 each for the year ended 31 December 2015 amounting to N1.45billion. Subsequent to year end and subject to approval at the next Annual General Meeting, the

directors proposed a nal dividend of N2.42 (2015: N1.45) per share on the issued and paid up capital of N1,450,000,000 ordinary shares of N1.00 each for the nancial year ended 31 December 2016 amounting to N3.509billion (2015: N1.45billion). The nal dividend proposed is not reected in the nancial statement.

Directors proposed a nal dividend of N2.42 (2015: N1.45) per share on the issued and paid up capital of N1,450,000,000 ordinary shares of N1.00 each

Directors

Directors' Report

10

Major shareholding

Veritas Registrars Limited

Blakeney LP

Heviben LP and others

Blakeney Investors

Ron Stanley LP

Austin Alpha LP

Onyx LP

Palo Alto LP

Menafrika LP

CC Development Partners LP

Ithaca LP

Blakeney Sand Hill LP

Jim Ovia

Veritas Registrars Limited Blakeney LP


31-Dec-2015

No. of shares % holding

65.12

11.74

5.35

4.79

4.08

2.98

1.70

1.24

1.24

0.73

0.70

0.33

944,275,000

170,300,000

77,425,000

69,300,000

59,200,000

43,200,000

24,700,000

18,000,000

18,000,000

10,600,000

10,200,000

4,800,000

- 0.00

1,450,000,000 100.00

31-Dec-2016


1,449,999,999 99.99

- -

- -

- -

- -

- -

- -

- -

- -

- -

- -

- -

1 0.01

1,450,000,000 100.00

31-Dec-2015

944,275,000 65.12


31-Dec-2016

1,449,999,999 99.99


According to the register of members as

at 31 December 2016, no individual

shareholder held more than 5%

170,300,000 11.74

- - 77,425,000 5.34

- -

According to the Register of Members, analysis of shareholders based on geographical location is provided below:

31 December 2016

Number of holding

Local shareholders1 - 1,000,000,000

Foreign shareholders1 - 1,000,000,000

31 December 2015

Number of holding

Local shareholders1 - 1,000,000,000

Foreign shareholders1 - 1,000,000,000

Number of shareholders

Number of shares held

Percentagesharesolding

2 1,450,000,000 100.00

- - 0.00

2 1,450,000,000 100

Number of shareholders

Number of shares held

Percentagesharesolding

1 944,275,000 65.12

11 505,725,000 34.88

12 1,450,000,000 100

of the issued of the issued capital of the Company except the following;

For the year ended 31 December 2016


Directors' Report

None of the directors has notied the Company, for the purpose of section 277 of the Companies and Allied Matters Act, of their direct or indirect interest in contracts or proposed contracts with the Group during the year.

Property and equipmentInformation relating to changes in property and equipment during the year is given in Note 21 to the nancial statements.

Employment of disabled personsThe Group operates a non-discriminatory policy on recruitment. Applications by disabled persons are always fully considered, bearing in mind the respective aptitudes and abilities of the applicants concerned. In the event of members of staff becoming disabled, every effort is made to ensure that their employment with the Group continues and that appropriate training is arranged. It is the policy of the Group that the training, career development

and promotion of disabled persons should, as far as possible, be identical with those of other employees. During the year under review there was no disabled person in its employment.

Employee health, safety and welfareThe Group's employees are adequately insured against occupational hazards. In addition, medical facilities at specied limits are provided to employees and their immediate families at the Group's expense.

Employee training and involvementThe Group places considerable value on the involvement of its employees and has continued its practice of keeping them informed on matters affecting them as employees and the various factors affecting the performance of the Group. This is achieved through regular meetings between management and staff of the Group.


Directors' Report

11

The number and percentage of male and female employed during the nancial year vis-a-vis total workforce was as follow:

Total

Total

Gender analysis of the Board and top management is as follows:

60%17%40%50%

0%0%

100%0%

80%

Male Female31 December 2016 Male Female Total

Number

Employees 65 64 129

Gender analysis of the Board and top management is as follows:

Board 5 2 7 71% 29%

Top Management 11 15 26 42% 58%

Detailed analysis of the Board and top management is as follows:

Assistant Manager

Deputy ManagerManager

Senior ManagerPrincipal Manager

Assistant General ManagerDeputy General ManagerExecutive Director /CEONon-executive Director

Total

12

31 December 2015

Employees

Percentage

50% 50%

Number PercentageNumber

BoardTop Management

Detailed analysis of the Board and top management is as follows:

Assistant ManagerDeputy ManagerManager

Senior ManagerPrincipal ManagerAssistant General ManagerDeputy General Manager

Executive Director /CEO

Non-executive Director

Donations and giftsThe Group made no contributions to charitable and non-political organizations during the year. (2015: Nil)

The Group did not purchase any of its own shares during the year. (2015:Nil)Acquisition of own shares

2 5 7

1 2 3

1 1 2

0 2 2

0 2 2

0 0 0

3 0 3

0 1 1

4 1 5

29%33%50%

0%0%0%

100%50%80%

71%67%50%

100%100%

0%0%

50%20%

11 14 2 5

5 2 7 29%7 12 19 63%

12 14 26

71%37%

Male FemaleMale Female Total

Number PercentageNumber PercentageNumber

44 56 100 44% 56%

3 2 51 5 62 3 52 2 40 3 30 0 03 0 30 1 14 1 5

40%83%60%50%

100%0%0%

100%20%

15 17 32

Gender analysis


Directors' Report

Events after reporting dateThere was no material event subsequent to year end that could impact on the nancial statements.

Auditors Messrs Price waterhouseCoopers (chartered accountants) were appointed as auditor of the company subsequent to the expiration of the tenor of the former auditors- Messrs KPMG Professional Services. The new auditors, Messrs PricewaterhouseCoopers (Chartered Accountants) have indicated their willingness to continue as auditors of the company in accordance with section 357 (2) of the Companies and Allied Matters Act.

By Order of the Board

Emeka AnyaejiCompany SecretaryFRC/2014/NBA/000z0000240913th & 14th Floor, Civic TowerCivic Tower, Ozumba MbadiweVictoria Island, Lagos6th February, 2017

13

Zenith General Insurance Company LimitedAnnual Report, 31 December 2016Directors' Report

This Management’s Discussion and Analysis

(“MD&A”) is designed to provide the reader with

a greater understanding of the Group’s business,

business strategy and performance, as well as how it

manages risk and capital resources.

It is intended to enhance the understanding of the audited

annual consol idated nancia l s tatements and

accompanying notes, and should therefore be read in

conjunction with these documents. Reference in this

MD&A to the “Company” or to “Zenith General

Insurance Company Limited” means, as the context may

require, Zenith General Insurance Group and all or some

of its subsidiaries.

The Company ’s quarterly and annual nancial

statements, its annual returns and other nancial

documents are available in our various ofces nationwide

and with the National Insurance Commission. Unless

otherwise indicated, all nancial information presented in

this MD&A, including tabular amounts, is in Nigeria Naira

and is prepared in accordance with International Financial

Reporting Standards (“IFRS”).

The CBN had in August 2010 directed banks under its

supervision to divest from their subsidiaries including

insurance companies to enable them to concentrate on

their core banking business. Hence, Zenith Bank and

other shareholders divested its entire shareholding in the

Company to Veritas Registrars Limited which now has

99.99% shareholding in the Company.

Forward-Looking Statements(a) This Annual Report – Financial Review for Zenith General

Insurance Company limited contains forward-looking

statements about the Company’s objectives, plans, goals,

aspirations, strategies, nancial condition, results of

operations, cash ows, performance, prospects and

opportunities. These forward-looking statements are

typically identied by words such as “anticipate”, “expect”,

“believe”, “foresee”, “could”, “estimate”, “goal”,“intend”,

“plan”, “seek”, “strive”, “will”, “may” and “should” and

similar expressions, as they relate to the Company and its

management.

The forward-looking statements in this document reects

the Company’s expectations as at 6 February 2017 when

the Company’s Board of Directors approved this

14

document, and are subject to change after this date.

These forward-looking statements are not historical

facts but reect the Company’s current expectations

concerning future results and events. They also reect

management’s current assumptions regarding the risks

and uncertainties referred to below and their

respective impact on the Company. The Company

does not undertake any obligation to update publicly or

to revise any such forward looking statements, unless

required by applicable legislation or regulation.

In this Annual Report – Financial Review, forward

looking statements include the Company’s expectation

that:

(i) Its revenue in 2017 will be approximately 15billion

Naira; This income expectation is associated with

improved patronage, diversied marketing strategies

especially in the rst Quarter of the year when

signicant policies are reviewed.

In addition, the Company’s expectation with regard to

its net earnings in 2017 is based in part on the

assumptions that Nigeria would emerge from current

recession and grow whilst tax rates will be similar to

those in 2016.

These forward-looking statements are subject to a

number of risks and uncertainties that could cause

actual results or events to differ materially from current

expectations, including, but not limited to:

Ÿ failure to realize revenue growth, anticipated cost

savings or operating efciencies from the

Company’s major initiatives, including investments

in the Company’s IT systems, including the

Company ’s IT systems implementation, or

unanticipated results from these initiatives; the

inability of the Company’s IT infrastructure to

support the requirements of the Company’s

business; heightened competition, whether from

current competitors or new entrants to the

marketplace; changes in economic conditions

including the rate of ination or deation, changes in

interest and currency exchange rates and derivative

and commodity prices; public health events

including those related to food safety;

Management’s Discussion and AnalysisZenith General Insurance Company Limited


15

Ÿ the inability of the Company to manage receivables to

minimize the impact of inability to collect the

premiums due;

Ÿ failure by the Company to maintain appropriate

records to support its compliance with accounting, tax

or legal rules, regulations and policies;

Ÿ failure of the Company to manage her relationship

with Brokers and Insurance Agents;

Ÿ reliance on the performance and retention of third-

party service providers including those associated with

the Company’s

Ÿ supply chain and apparel business;

Ÿ supply and quality control issues with vendors;

Ÿ changes to or failure to comply with laws and regulations affecting the Company and its business;

Ÿ changes in the Company’s income, commodity, other tax and regulatory liabilities including changes in tax laws, regulations or future assessments;

Ÿ the risk that the Company would experience a nancial loss if its counter parties fail to meet their obligations in accordance with the terms and conditions of their contracts with the Company; and

Ÿ the inability of the Company to collect on its Brokers/Insurance Companies receivables.

This is not an exhaustive list of the factors that may affect the Company’s forward-looking statements. Other risks and uncertainties not presently known to the Company or that the Company presently believes are not material could also cause actual results or events to differ materially from those expressed in its forward-looking statements. Additional risks and uncertainties are discussed in the Company’s Enterprise Risks and Risk Management section of this MD&A. Readers are cautioned not to place undue reliance on these forward-looking statements, which reect the Company’s expectations only as of the date of this MD&A. The Company disclaims any intention or obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

(b) Overview of Our Business and Strategy The Company was incorporated in 1970 as Piccadilly Insurance Company Limited and it was traded in this name until 2003 when it was acquired by Zenith Bank Plc and other Investors. The name was changed to Zenith General Insurance Company Limited in 2004. Zenith General Insurance Company Limited is incorporated in Nigeria under the Companies and Allied Matters Act as a private limited company and it is domiciled in Nigeria. The Company has now been acquired by Veritas registrers limited.

The Company has two subsidiaries: Zenith Life Assurance Limited and Zenith Medicare Limited. Zenith Life Assurance is a private limited liability company incorporated on 30 March 2001 to carry out the business of life assurance. Zenith Medicare Limited engages in the provision of health care services through health care providers and for that purpose is accredited with the National Health Insurance Scheme. The Company divested its interest in Zenith life during the year. The principal activities of the Group are the provision of Marine, Motor, Accident, Fire, other non-life insurance services and Health Insurance.

( c) Vision and strategiesTo be the trusted and best provider of insurance and nancial services.

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

Ÿ Professionalism

Ÿ Integrity

Ÿ Customer focus

Ÿ Team work

Ÿ Innovation

Ÿ Empathy

We operate from 13 locations, four within Lagos, Abuja, Kano, Ibadan, Enugu, Port harcourt, Warri, Asaba, Uyo, Benin.

Each branch or operational ofce is situated strategically to serve a wider area.



Management’s Discussion and Analysis

Mission

Ensuring peace of mind and creating value to people in a world of uncertainities.

Ÿ Operational excellence

Ÿ Improved competitiveness

Ÿ Stronger relationships with clients

Ÿ Geographical diversication and growth of markets

and offerings

Ÿ Building sustainable people and organizational

capabilities

Ÿ Financial strength and exibility

Ÿ Corporate social responsibility

Ÿ Innovative product offering

Ÿ Equipped workforce

The Company has enjoyed a steady growth in its commitment to providing integrated nancial services to its customers from various sectors of the economy. The Company's growth, since its acquisition, is premised upon sound business standards backed by being an former associate (formerly a subsidiary) of Zenith Bank Plc, one of the leading and most respected banks in Nigeria and the uncompromising integrity and dedication of its directors.

Our Board

Our Business

The Company offers unique, customer based products to clients in various sectors.

The services we offer include;

General Business Services Life Insurance Services Investment linked services Other nancial services such as Guarantees and bonds.

Our Reinsurance

The Company underwrites with the support of various reinsurance companies and brokers to ensure its risk management is always optimal. We also consult with reinsurance companies and brokers on technical issues/alliance.Our Reinsurers are: Munich Reinsurance, Africa Reinsurance, Continental Reinsurance, Ghana Reinsurance, CICA Reinsurance and the WAICA Pool. We also get special technical support from Reinsurance

solutions of Mauritius. On our special risk segments, we liaise with international brokers and have their agreement to work with us. They are Marsh and HSBC Insurance brokers.Our Life insurance, though a localized reinsurer is required, we liaise with Hannover Life Re of South Africa and are working towards an alliance for products and advisory support.

16

Strategic Priorities Include:




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

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

Relationship Management and Alliances all t together to increase our competitive advantage.

17

The Company is proud to be of service to companies in all sectors.

Our clientele base spans across all major industries including Oil & Gas, Transportat ion, Marine, Power, Construction, Engineering, Ministries, Government, Missions, embassies and individuals.

Our Clients Our Core Values

Professionalism

Integrity

Customer Focus

Team work

Innovation

Empathy

Our Branch Network

We have specialized strategically located underwriting ofces in Ikeja, Apapa, Abuja, Enugu, Port Harcourt, Kano, Warri, Ibadan, Uyo, Asaba, Benin and Aba.

Zenith Insurance Group

Group Shared Services

Customer care, Products,Human Resources,Internal Control/Compliance, CreditControl, CorporateAffairs.

Zenith General Underwriting Zenith Life

FinancialControl

Reinsurance&

Our Operating Structure




Change

2016N'000

2015N'000 %

The Group has identied specic key nancial performance indicators to measure the progress of

short and lo n g t e r m objectives.

11,116,350

11,186,820

(3,740,190)

7,446,630

907,176

8,353,806

5,236,732 (624,126)

4,612,606

10,906,124

10,935,922

(3,350,331)

7,585,591

1,196,358

8,781,949

4,607,937(1,155,561)

3,452,376

1.9%

2.3%

11.6%

-1.8%

-24.2 %

-4.9%

13.6%-46.0%33.6%

1.08%

10.23%

10.44%

33.14%

26.24%

10.23%

19.53%

35.83%

35.80%

15.36

-1.83%

22.79%

0.69%

648.37%

210,226

75%

1.93%

Group

2016

Key Financial Performance Indicators

InvestmentsInvestment yield% growth, Investment income

Protability

Solvency and reserves

Net premium/Shareholders' funds

Policyholders' funds/Shareholders' funds

Solvency ratio

% growth, Shareholders' funds

% growth, Net premiums

Liquidity

Policyholders' funds/Liquid assets

Trade receivables/Total assets

Cash claims cover

Trade receivables/Shareholders' funds

Business volumes and trendsGrowth in gross premium writte n (in thousands of naira)Premium growth rate Renewal rates

Underwriting prot ratio

Operating ratio

Average return on investment

Return on equity

Financial trends and ratios

Items

(e)


Gross premium income

Reinsurance expense

Net premium income

Fees and commission income

Net underwriting income

Prot or loss before taxationIncome tax expensProt after tax

18

36 42%.

15.11%

15.12%

25.95%

45.07%

37.46%

24.51%

16.60%

24.17%

1.34%

877.41%

1,808,556

14.51%

70%

Group

2015

2.07%

15.12%

25.49%

(d) Revenue and Underwriting Activities

Current period Prior period




Underwriting performance

Capital adequacy

Gross risk ratio

Net risk ratio

of efcient and prompt claims settlement and ability to

generate more income on investment which will arise

because of the increase in Investible funds(Liquidity).

(g) Financial instruments

The Company discloses information on the

classication and fair value of its nancial instruments, as

well as on the nature and extent of risks arising from

nancial instruments, and related risk management in

the 2016 audited annual consolidated nancial

statements.

(h) Disclosure Controls and ProceduresManagement is responsible for establishing and

maintaining a system of disclosure controls and

procedures to provide reasonable assurance that all

material information relating to the Company and its

subsidiaries is gathered and reported to senior

management on a timely basis so that appropriate

decisions can be made regarding public disclosure.

(I) Internal Control over Financial ReportingManagement is also responsible for establishing and

maintaining adequate internal controls over nancial

reporting to provide reasonable assurance regarding

the reliability of nancial reporting and the preparation

of nancial statements for external purposes in

accordance with IFRS. It should be recognized that due

to inherent limitations, any controls, no matter how

well designed and operated, can provide only

reasonable assurance of achieving the desired control

object ives and may not prevent or detect

misstatements. Projections of any evaluations of

effectiveness to future periods are subject to the risk

that controls may become inadequate because of

changes in conditions, or that the degree of

compliance with the policies or procedures may

deteriorate. Additionally, management is required to

(f) Insurance Industry Regulatory FrameworkImpact of reforms on insurance industryThe Company being a major player in the Nigerian

insurance industry has witnessed tremendous changes in

recent times owing to the new reforms embarked upon

by NAICOM. These reforms include the introduction of

Risk Based Supervision, migration to International

Financial Reporting Standard(IFRS) from the Nigerian

Generally Accepted Accounting Principles (NGAAP),

Market Conduct Reforms, Claims Settlement Reforms,

prudential guidelines by NAICOM, Financial Inclusion,

etc, all geared towards developing the industry and

improving the general perception about insurance.

Sufce it to say that these reforms are in line with the

Federal Government's vision 2020 of deepening

insurance penetration to become the insurance industry

of choice among the emerging markets in terms of

capacity, safety, transparency and efciency in its fourth

year of the commencement of the 'No premium no

cover' (NPNC) policy, Zenith General Insurance is

consolidating the gains of the regulatory reform. Though

not so much enthusiasm was expressed about the

enforcement of the 'NPNC' policy at its inception, now

reviewing the performance in its fourth year the

experience has been a positive one in improved cash

ows and liquidity.

Leveraging on the complementary strength of NPNC

regulatory framework, further gains were recognized as

Gross Premiums grew to N11.09 billion and premium

receivables sustained to nil in line with the regulators drive

to stem its unhealthy growth, whilst our investment

income went up by 10%.

Management believes that this positive development

which has enhanced the performance of the company in

terms of nancial stability and capacity and increased

protability which obviously has been achieved as a result

19

154.22%

221.87%

209.75%

313.11%

Underwriting performance ratioRetention ratio

Claims (loss) ratio

Expense ratio

Combined ratio

36.42%69.51%

29.73%

12.87%

42.61%

33.14%75.15%

30.04%

11.97%

42.01%



Management’s Discussion and Analysis (Continuation)

use judgment in evaluating controls and procedures.

Changes in Internal Control over Financial Reporting.Management has also evaluated whether there were

changes in the Company's internal controls over nancial

reporting that occurred during the period beginning on

1st January 2016 and ended on 31st December 2016

that materially affected, or are reasonably likely to

materially affect, the Company's internal control over

nancial reporting. Management determined that no

material changes occurred during this period.

(j) Enterprise Risks Management

The Company is committed to establishing a framework

that ensures risk management is an integral part of its

activities. To ensure the continued growth and success of

the Company, risks are identied and managed through

an Enterprise Risk Management (“ERM”) program. The

Board has approved an ERM policy and oversees the

ERM program through approval of the Company's risks

and risk prioritization. The ERM program assists all areas

of the business in managing appropriate levels of risk

tolerance by bringing a systematic approach,

methodology and tools for evaluating, measuring and

monitoring key risks.

The results of the ERM program and other business

planning processes are used to identify emerging risks to

the Company, prioritize risk management activities and

develop a risk-based internal audit plan. Risk is not

eliminated through the ERM program. Risks are identied

and managed within understood risk tolerances. The

ERM program is designed to:

Ÿ Promote a culture of awareness of risk management

and compliance within the Company;

Ÿ Facilitate corporate governance by providing a

consolidated view of risks across the Company and

insight into the methodologies for identication,

assessment, measurement and monitoring of the

risks;

Ÿ Assist in developing consistent risk management

methodologies and tools across the organization;

Ÿ Ensure that resources are acquired economically,

used efciently and adequately protected; and

Ÿ Enable the Company to focus on its key risks in the

business planning process and optimize nancial

pe r f o rmance t h rough r e spon s i b l e r i s k

management.

Risk identication and assessments are important elements to the Company's ERM framework. An annual ERM assessment is completed to assist in the update and identication of nancial, operational or reputational risks affecting the Company and to effectively prioritize the risks.

The annual ERM assessment is carried out primarily through interviews and risk assessments with senior management. Risks are assessed and evaluated based on the Company's vulnerability to the risk and the potential impact that the underlying risk would have on the Company's ability to execute its strategies and achieve its objectives. Risk owners are assigned relevant risks and metrics are developed for the top risks for monitoring.

Management provides a quarterly update to the Audit Committee of the status of the top risks based on signicant changes from the prior update, anticipated impacts in future quarters and signicant changes in key risk metrics. In addition, the long-term (1-3 year) risk level is assessed in order to monitor potential long term impacts on the risk which may assist in risk mitigation planning activities.

The Internal Audit and Risk Management group manages the ERM program through the development of the risk framework and methodologies, completion of the annual ERM assessment, continuous monitoring of the key risks and quarterly reporting to the Audit Committee. The accountability for oversight of the management of each risk is allocated by the Audit Committee to either the full Board or to a Committee of the Board. The operating, nancial and reputational risks and risk management strategies are discussed below.

Each of these risks has the potential to negatively affect the Company's nancial performance. The Company has risk management strategies, including insurance programs, that are intended to mitigate the potential impact of these risks. However, these strategies do not guarantee that the associated risks will be mitigated or not materialize or that events or circumstances will not occur that could negatively affect the Company's nancial condition or performance.

20




21

Enterprise Risk Management

Signicant risks that the Company faces are as follows:

Risk

Reputational Risk

Insurance Risk

Reinsurance Risk

Claims Risk

Credit Risk

Compliance Risk

Market RiskOperational

Risk




Final approval of the Annual Budget is provided by

the Board of Directors in the rst quarter of the

current year. The Annual Budget is a key tool used

by management to monitor the Company’s performance

and progress against key nancia l object ives.

Furthermore, the gures set in the Annual Budget have an

impact on management’s compensation, as these gures

are used in determining part of their performance bonus.

The Annual Budget is updated during the year to reect

current information as the Company prepares forecasts

of its annual expected results in the rst, second and third

quarters (“Quarterly Forecasts”), which are presented to

the Board of Directors. In addition, the performance of

each individual project (i.e., its estimated revenues and

costs to complete) is continuously reviewed by its

respective project manager and, depending on the size

and risk prole of the project, by key management

personnel, including the divisional manager, the Chief

Financial Ofcer and the Chief Executive Ofcer.

Budgeted and forecasted marketing, general and

administrative expenses, net nancial expenses, and

income tax expense are derived from detailed analysis

and are inuenced by the level of anticipated activities

and protability. In regards to its OCI budget and

forecast, expected results based on assumptions

specic to each investment are used. One of the key

management tools for monitoring the Company’s

performance is the monthly evaluation and analysis of

actual results compared to the Annual Budget or the

Quarterly Forecasts, for revenues, gross margin and

protability. This enables management to analyze its

performance and, if necessary, take remedial actions.

Result by category of activity. These include; Non-Life Insurance Revenues, Investment Income, etc.

The Company prepares a formal annual budget (“Annual Budget”) in the rst quarter of each year, which is the basis of the Company’s nancial outlook.

Apart from the changes stated in note (IV), The Group's accounting policies adopted are consistently applied in the current and preceeding periods.

The budget information is prepared for individual Lines of business which will form the primary basis of the Company’s consolidated Annual Budget.

Insurance Lines of business level

The Company reports its results under eight categories of activity. The Company regularly analyzes the results of these categories independently as they generate different underwriting margin yields and have different risk proles.

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

Consolidated level

22

(k) Accounting Policies and Changes

(l) How We Analyze and Report Our Results

Result By Lines Of Non-Life Insurance Business.

(m) How We Budget and Forecast Our Results

Board of directors




23

The directors accept responsibility for the

preparation of the annual consolidated nancial

statements that give a true and fair view of the

statement of nancial position of the Group and

Company at the end of the year and of its comprehensive

income as required by the Companies and Allied Matters

Act of Nigeria and the Insurance Act of Nigeria. The

responsibilities include ensuring that the Group:

Ÿ keeps proper accounting records that disclose, with

reasonable accuracy, the nancial position of the

Group and comply with the requirements of the

Companies and Allied Matters Act and the Insurance

Act;

Ÿ establishes adequate internal controls to safeguard its

assets and to prevent and detect fraud and other

irregularities;

Ÿ prepares its nancial statements using suitable

accounting policies supported by reasonable and

prudent judgements and estimates, which are all

consistently applied;

Ÿ The directors accept responsibility for the nancial

Victor AbuleleDirector(FRC/2013/ICAN/00000004830)6 February 2017

Ebelechukwu NwachukwuManaging DirectorFRC/2013/IODN/000000027686February2017

statements, which have been prepared using

appropriate accounting policies supported by

reasonable and prudent judgements and estimates,

in conformity with;

1. International Financial Reporting Standards (IFRS) as

issued by the International Accounting Standards

Board (IASB);

2. the requirements of the Insurance Act;

3. relevant guidelines and circulars issued by the

National Insurance Commission (NAICOM);

4. The requirements of the Companies and Allied

Matters Act.

5. Financial Reporting Council Act of Nigeria

The directors further accept responsibility for the

maintenance of accounting records that may be relied

upon in the preparation of nancial statements, as well

as adequate systems of internal nancial control.

Nothing has come to the attention of the directors to

indicate that the company will not remain a going

concern for at least twelve months from the date of this

statement.

By order of the Board

Statement of Directors’ responsibilities in relation to the Financial Statements.



Zenith General Insurance Company Limited ("the Company") has in place an effective governance mechanism that not only ensures proper over-sight of its business by the Directors and other principal organs of the Company, but

No of shares % Holding No of shares % Holding

Veritas Registrars Limited 144,999,999 99.99% 944,275,000 65.12%

Jim Ovia 1

Blakeny Investors LP

-

0.00% 170,300,000 11.74%


-

0.00% 335,425,000 23.14%

2016 2016 2015 2015

During the year, Veritas Registrars Limited acquired the entire shares of the Company hitherto held by Blakeney Investors LP and and its afliates. Also one unit (1) of share was alloted to Jim Ovia for purposes of meeting minimum number of two (2) shareholders; which acquisitions and transfers were approved by NAICOM via letter of 'No-Objection' dated December 23, 2016.

c. Board of DirectorsThe Board is responsible for driving the Corporate Governance mechanism of the Company. Besides possessing the requisite academic qualications and experience in Board affairs, Directors are well abreast of their responsibilities and are conversant with the Company's business. They are therefore able to exercise sound judgment on matters relating to its business.

d. Board StructureThe Board is made up of a non-executive chairman, four (4) non-executive directors, two (2) independent non-executive director and a managing director.

The Managing Director is responsible for the day to day running of the Company, assisted by the Management Committee. The Company is presently undergoing the process of screening, selecting and recruiting an Executive Director, who will be Head, Technical/ Operational Matters.

b. Shareholding

The Company's shareholders are:

a. Introduction

also carries on its business in a manner that engenders public trust and condence while meeting the expectations of all stakeholders.

0.01%

e. The Board is responsible for:Ÿ Reviewing and providing guidance for the

Company's corporate and business strategy, major plans of action and risk policy.

Ÿ Review and approval of annual budgets and business plans; setting performance objectives, monitoring implementation and corporate performance.

Ÿ Overseeing major capital expenditures, acquisitions and divestitures.

Ÿ Monitoring the effectiveness of the governance practices under which the Company operates and making appropriate changes as necessary.

Ÿ Ensuring the integrity of the Company's accounting and nancial reporting systems, including the internal audit function and that appropriate systems of control and risk monitoring are in place.

Ÿ Establishment of the various Committees of the Board including the terms of reference and review of reports of such Committees to address key areas of the Company's business.

24

Corporate Governance ReportZenith General Insurance Company Limited


Mr. Jim Ovia Chairman

Ebelechukwu Nwachukwu Executive Director /CEO



Chukwuemeke Igumbor Non-Executive Director



NAME POSITION

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

f. Board CommitteesThe Board carries out its oversight functions using its various Board Committees. This makes for efciency and allows for deeper attention to specic matters for the board. The Committees are set up in line with statutory and regulatory requirements. Membership of the Committees of the Board is intended to make the best use of the skills and experience of non-executive directors in particular.

The Committees have well dened terms of reference and Charters dening their scope of responsibilities in such a way as to avoid overlap of functions. The Committees of the Board meet quarterly but may hold extraordinary sessions as business of the Company demand.

The following are the current standing Committees of the Board:i. Finance, Investment and General Purpose Committee

This Committee is made up of four (4) members. It is chaired by a non-executive Director. The Committee considers large scale procurement by the Company, as well as matters bordering on staff welfare, discipline, staff remuneration and promotion.

The membership of the Committee is as follows:Elaine Delaney Victor Abulele Joe Onwubuya Chuks Igumbor

Committee's Terms of ReferenceŸ Consideration and recommendation to the Board, of

all nancial and administrative matters whose aggregate monetary value is beyond the limit of the Company's Management approving power.

25

Board of Directors

Chairman

MemberMemberMember

Ÿ Consideration and recommendation of staff compensation package.

Ÿ Setting limit of approval of commission by Management.

Ÿ Approving commission payment in excess of Management approval limit, standardization of process and mode of payment of commission in line with cashless policy and in compliance with Anti Money Laundering requirements.

Ÿ Consideration and recommendation for promotion of senior management staff.

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

Ÿ Major investment by the Company, approve and allocate resources as appropriate.

ii. Enterprise Risk Management and Governance CommitteeThe Committee has oversight responsibility for the overall risk assessment of various areas of the Company's operations and Compliance with the code of corporate governance as well as global best practice.

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

Prof. Oyewusi Ibidapo-Obe Chairman (Independent)Victor Abulele Member (Independent)Joseph Ndidi Onwubuya MemberElaine Delaney MemberChukwuemeke Igumbor Member

Committee's Terms of ReferenceŸ The primary responsibility of the Committee is to

ensure that sound policies, procedures and practices are in place for the risk-wide management of the Company's material risks and to report the results of


Annual Report, 31 December 2016Corporate Governance Report

the Committee's activities to the Board of Directors.

Ÿ Design and implement risk management practices, specically provide ongoing guidance and support for the renement of the overall risk management framework and ensuring that best practices are incorporated;

Ÿ Ensure and monitor risk management practices, specically determine which enterprise risks are most signicant and approve resource allocation for risk monitoring and improvement activities, assign risk owners and approve action plans;

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

iii. Audit and Compliance CommitteeThe Committee is established in furtherance with statutory and regulatory requirements. The Committee's membership consists of an Independent Non-Executive Director as Chairman and two (2) Non-executive Directors. The Committee meets every quarter, but could also meet at any other time, should the need arise.

26

The membership of the Committee is as follows:Mr. Abulele Victor Chairman (Independent)Prof. Oyewusi Ibidapo-Obe Member (Independent)Elaine Delaney Member

Committee's Terms of ReferenceTo meet with the Chief Financial Ofcer, Internal Auditor and any other executive both individually and/or together, as the Committee deems appropriate at such times as the Committee shall determine to discuss and review:

Ÿ major investment requests by the company, approve & allocate resources as appropriate;

Ÿ the performance and results of the external and internal audits, including the independent auditors' management letter, and management's responses thereto;

Ÿ the effectiveness of the Company's system of internal controls, including computerized in format ions sys tems and secur i t y ; any recommendations by the independent auditor and internal auditor regarding internal control issues and any actions taken in response thereto; and, the internal control certication and attestation required to be made in connection with the Company's quarterly and annual nancial reports.



27

The table below shows the frequency of meetings of the Board of Directors and the respective Board Committees and indicating members’ attendance at various meetings held during the year under review.

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

Committee members attended all committee meetings as scheduled and held during their term; depending on

the date of becoming a member of the board.

5 4

5 N/A

4 4

5 4

5 4

5 N/A

5 4

5 4

Dec-16 Dec-15

Audit and Compliance Committee

Finance, Investment &General Purpose

Committee

Enterprise RiskManagement &

Governance Committee

Finance & GeneralPurpose Committee

Staff Matters,Enterprise RiskManagement &

Governance Committee

Board

4 3 3

4 N/A

4 34 3 3

4 3 3

4 34 3

4

Attendance

Mr. Jim Ovia

Mrs. Elaine Delaney

Mrs. Ebelechukwu Nwachukwu

Mr. Chukwuemeke Igumbor

Mr. Onwubuya Joseph Ndidi

Mr. Abulele Victor

Profesor Oyewusi Ibidapo-Obe

4 3

4 3

4 3

31 December 2016 Directors

Number of Meetings

Attendance

Mr. Jim Ovia

Mrs. Elaine Delaney

Mrs. Ebelechukwu Nwachukwu

Mr. Chukwuemeke Igumbor

Mr. Onwubuya Joseph Ndidi

Mr. Abulele Victor

Prof. Oyewusi Ibidapo-Obe

31 December 2015 Directors

Number of Meetings

Members

Number of Meetings

Attendance

Mr. Abulele Victor

Elaine Delaney

Profesor Oyewusi Ibidapo-Obe

4

N/A

4

N/A

4

4

4

4

N/A

N/A

N/A

N/A

N/A

N/A

Board And Board Committee Meetings



f. Whistle Blowing Procedure

Zenith General Insurance has a whistle-blowing policy which provides the procedure for reporting suspected

breaches of the Company’s internal policies, laws and regulations. There is a special portal created on the Company's

intranet dedicated for whistle blowing.

g. Relationship with Shareholders

Zenith General Insurance maintains an effective communication with its shareholders which enables them understand

the business, nancial condition and operating performance and trends.

28



To the members of Zenith General Insurance Company Limited

Report on the audit of the consolidated and separate nancial statements

In our opinion, the consolidated nancial statements give a true and fair view of the consolidated and separate

nancial position of Zenith General Insurance Company Limited ("the company") and its subsidiary (together "the

group") as at 31 December 2016, and of their consolidated and separate nancial performance and their

consolidated and separate cash ows for the year then ended in accordance with International Financial Reporting

Standards and the requirements of the Companies and Allied Matters Act, the Nigerian Insurance Act and the

Financial Reporting Council of Nigeria Act.

What we have audited

Zenith General Insurance Company Limited's consolidated and separate nancial statements comprise:

Ÿ the consolidated and separate statements of nancial position as at 31 December 2016;

Ÿ the consolidated and separate statements of comprehensive income for the year then ended;

Ÿ the consolidated and separate statements of changes in equity for the year then ended;

Ÿ the consolidated and separate statements of cash ows for the year then ended; and

Ÿ the notes to the consolidated and separate nancial statements, which include a summary of signicant

accounting policies.

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under

those standards are further described in the Auditor's responsibilities for the audit of the consolidated and separate

nancial statements section of our report.

We believe that the audit evidence we have obtained is sufcient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Group in accordance with the International Ethics Standards Board for Accountants'

Code of Ethics for Professional Accountants (IESBA Code). We have fullled our other ethical responsibilities in

accordance with the IESBA Code.

Other information

The directors are responsible for the other information. The other information comprises: Directors' report,

Corporate governance report, Management commentary and analysis, Statement of director's responsibilities, Report of

the audit committee, Hypothecation, General business revenue accounts, Aging of outstanding claims, Statement of

value added and Five year nancial summary but does not include the consolidated and separate nancial statements

and our auditor's report thereon.

Independent auditor’s report

Our Opinion

29

PricewaterhouseCoopers Chartered Accountants, Landmark Towers, 5B Water Corporation Road, Victoria Road, Victoria Island, Lagos.



30

Our opinion on the consolidated and separate nancial statements does not cover the other information and we do

not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated and separate nancial statements, our responsibility is to read the

other information identied above and, in doing so, consider whether the other information is materially inconsistent

with the consolidated and separate nancial statements or our knowledge obtained in the audit, or

otherwise appears to be materially misstated. If, based on the work we have performed on the other information that

we obtained prior to the date of this auditor's report, we conclude that there is a material misstatement of this other

information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the directors and those charged with governance for the consolidated and separate nancial

statement

The directors are responsible for the preparation of the consolidated and separate nancial statements that give a

true and fair view in accordance with International Financial Reporting Standards and the requirements of the

Companies and Allied Matters Act, the Financial Reporting Council of Nigeria Act and the Nigerian Insurance Act, and

for such internal control as management determines is necessary to enable the preparation of consolidated and

separate nancial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated and separate nancial statements, management is responsible for assessing the Group's

ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going

concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has

no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group's nancial reporting process.

Auditor’s responsibilities for the audit of the consolidated and separate nancial statements

Our objectives are to obtain reasonable assurance about whether the consolidated and separate nancial statements

as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that

includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted

in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud

or error and are considered material if, individually or in the aggregate, they could reasonably be expected to

inuence the economic decisions of users taken on the basis of these consolidated and separate nancial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism

throughout the audit. We also:

Ÿ Identify and assess the risks of material misstatement of the consolidated and separate nancial statements,

whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit

evidence that is sufcient and appropriate to provide a basis for our opinion. The risk of not detecting a material

misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion,

forgery, intentional omissions, misrepresentations, or the override of internal control.

Ÿ Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are

appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the

Group's internal control.



Ÿ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and

related disclosures made by management.

Ÿ Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on

the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast

signicant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty

exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated and

separate nancial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are

based on the audit evidence obtained up to the date of our auditor's report. However, future events or

conditions may cause the Group to cease to continue as a going concern.

Ÿ Evaluate the overall presentation, structure and content of the consolidated and separate nancial statements,

including the disclosures, and whether the consolidated and separate nancial statements represent the

underlying transactions and events in a manner that achieves fair presentation.

Ÿ Obtain sufcient appropriate audit evidence regarding the nancial information of the entities or business

activities within the Group to express an opinion on the consolidated and separate nancial statements. We are

responsible for the direction, supervision and performance of the group audit. We remain solely responsible for

our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and

timing of the audit and signicant audit ndings, including any signicant deciencies in internal control that we identify

during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical

requirements regarding independence, and to communicate with them all relationships and other matters that may

reasonably be thought to bear on our independence, and where applicable, related safeguards.

Report on other legal requirements

The Companies and Allied Matters Act requires that in carrying out our audit we consider and report to you on the

following matters. We conrm that:

I) we have obtained all the information and explanations which to the best of our knowledge and belief were

necessary for the purposes of our audit;

ii) the company has kept proper books of account, so far as appears from our examination of those books and

returns adequate for our audit have been received from branches not visited by us;

iii) the company's statements of nancial position and comprehensive income are in agreement with the books of

account.

For: PricewaterhouseCoopers Chartered Accountants Lagos, Nigeria

Engagement Partner: Anthony Oputa

FRC/2013/ICAN/00000000980

31

01 March 2017



Statement of Signicant Accounting Policies

32

(c) Use of estimates and judgmentThe preparation of nancial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income, and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under circumstances, the results of which form the basis of making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised thus;

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

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

Judgments made by management in the application of IFRSs that have signicant effect on the nancial

i Reporting EntityZenith General Insurance Company Limited was incorporated in 1970 as Piccadily Insurance Company and it traded with this name until 2003 when it was acquired by Zenith Bank Plc. The name was changed to Zenith General Insurance Company Limited in 2004. Zenith General Insurance Company Limited is incorporated in Nigeria under the Companies and Allied Matters Act as a private limited company and it is domiciled in Nigeria.

The principal activities of the Group are the provision of marine insurance, motor insurance, accident insurance, re insurance, other non-life insurance services, health insurance, claims settlement and other investment activities. Up until April 2016, the Company has two wholly owned subsidiaries, Zenith Life Assurance and Zenith Medicare Limited.

The Group divested its interest in Zenith Life Assurance during the year. Zenith Life Assurance is a private limited liability company incorporated on 30 March 2001 to carry out the business of life assurance. Zenith Medicare Limited engages in the provision of health care services through health care providers and for that purpose is accredited with the National Health Insurance Scheme.

In the year 2015, Zenith Bank concluded with the divestment of its non-core banking operations in line with regulatory directions on the scope of banking operations in Nigeria. Hence, relinquished its stake in the Company to Veritas Registrars Limited.

Going concernThese nancial statements have being prepared on the going concern basis. The Group has no intention or need to reduce substantially its business operations. The management believes that the going concern assumption is appropriate for the Group due to sufcient capital adequacy ratio and projected liquidity, based on historical experience that short term obligations will be renanced in the normal course of business. Liquidity ratio and continuous evaluation of current ratio of the Group is carried out by the group to ensure that there are no going concerns threats to the operation of the Group.

II Statement of compliance with international nancial reporting standards.The nancial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee

(IFRIC) Interpretations applicable to companies reporting under IFRS and in the manner required by Companies and Allied Matters Act of Nigeria, the Insurance Act of Nigeria, the Financial Reporting Council of Nigeria Act (FRC Act) and Nigerian Insurance Commission (NAICOM) guidelines and circulars.

The nancial statements were authorized for issue by the directors on 6th February 2017.

iii Basis of preparation(a) Functional and presentation currencyThese consolidated nancial statements are presented in Naira, which is the Group's functional currency; except where indicated, nancial information presented in Naira has been rounded to the nearest thousands.

(b) Basis of measurementThese consolidated nancial statements have been prepared in accordance with the going concern principle under the historical cost basis except for the following:Ÿ Available-for-sale nancial assets are measured at fair

value

Ÿ Held-to-maturity nancial assets, loans & receivables & trade receivables are carried at amortised cost



statements and estimates with a signicant risk of material adjustment are disclosed in the notes to the accounts.The impairment on trade receivables is provided in Notes 1.2.8.The fair value and fair value hierarchy is provided in Notes 1.3.5.Income tax exposure is provided in below;

Income Tax ExposureCurrent Tax: The current income tax charge is calculated on taxable income on the basis of the tax laws enacted or substantively enacted at the reporting date. The Company applies Section 16 of the Company Income Tax Act. It states that an Insurance business shall be taxed as;

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

Ÿ a Nigerian company whose prot accrued in part outside Nigeria, the prot on which tax may be imposed, shall be ascertained by taking the gross premium interest and other income receivable in Nigeria less reinsurance and deducting from the balance so arrived at, a reserve fund for unexpired risks at the percentage consistently adopted by the company in relation to its operation as a whole for such risks at the end of the period for which the prots are being ascertained, subject to the limitation below: An insurance company, other than a life insurance company, shall be allowed as deductions from its premium the following reserves for tax purposes

(a) for unexpired risks, 45 percent of the total premium in case of general insurance business other than marine insurance business and 25 percent of the total premium in the case of marine cargo insurance;

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

(d) RegulationThe Company is regulated by the NAICOM under the National Insurance Act of Nigeria. The Act species certain provisions which have impact on nancial reporting as follows:

(i) section 20 (1a) provides that provisions for unexpired risks shall be calculated on a time apportionment basis of the risks accepted in the year;

(ii) section 20 (1b) requires provision for outstanding claims to be credited with an amount equal to the total estimated amount of all outstanding claims with a further

33

amount representing 10 per centum of the estimated gure for outstanding claims in respect of claims incurred but not reported at the end of the year under rev iew. Under IFRS the Incurred but not Reported(IBNR) claims are included in the reserves is as determined by the Actuary;

(iii) sections 21 (1a) and 22 (1b) require maintenance of contingency reserves for general businesses at specied rates as set out under note VI to cover uctuations in securities and variation in statistical estimates;

(iv) section 22 (1a) requires that the maintenance of a general reserve fund (insurance contract fund) which shall be credited with an amount equal to the net liabilities on policies in force at the time of the actuarial valuation and an additional 25 percent of net premium for every year between valuation date;

(v) section 24 requires the maintenenance of a margin of solvency to be calculated in accordance with the Act.

The FRC Act provides that in the matters of nancial reporting if there is any inconsistency between the FRC Act and of other Act or law, the FRC Act shall supercede the other Act or law. The FRC Act provides that IFRS shall be the national nancial reporting framework in Nigeria. Consequently, the following provision of the National Insurance Act, which conict with the provisions of IFRS have not been adopted:

Ÿ the requirement to provide 10 per cent for outstanding claims in respect of claims incurred but not reported (IBNR) at the end of the year under review under section 20 (1b);

Ÿ the requirement for additional provision of 25 per cent of net premium to general reserve fund under

section 22 (1a).

(iv) Changes in accounting policies Except for the changes below, the Group and Company has consistently applied the accounting policies as set out in Note 3 to all periods presented in these nancial statements.

The following new standards and amendments to standards, including any consequential amendments to other standards, with a date of initial application are applicable to the Group as of 1 January 2016.

Statement of Signicant Accounting Policies Zenith General Insurance Company Limited


New and amended standards and interpretations The accounting policies adopted are consistent with those of the previous nancial period.

Standards and interpretations effective during the reporting periodAmendments to the following standard(s) became effective in the reporting period from 1st January, 2016. They do not have any material impact on the accounting policies, nancial position or performance of the Company.

Amendments to IFRS 11 - Accounting for Acquisitions of Interests in Joint Operations Amendments to IFRS 11 Joint Arrangements require an acquirer of an interest in a joint operation in which the activity constitutes a business (as dened in IFRS 3 Business Combinations) to:

Ÿ apply all of the business combinations accounting principles in IFRS 3 and other IFRSs, except for those principles that conict with the guidance in IFRS 11.

Ÿ disclose the information required by IFRS 3 and other IFRSs for business combinations.

The amendments apply both to the initial acquisition of an interest in joint operation, and the acquisition of an additional interest in a joint operation (in the latter case, previously held interests are not remeasured). The Company does not have any interest in joint operations and does not plan to acquire interests in same. Hence, the amendment does not impact the company.

Amendments to IAS 1 - Presentation of nancial statementsAmendments to IAS 1 is to clarify guidance on materiality and aggregation, the presentation of subtotals, the structure of nancial statements and the disclosure of accounting policies. These amendments are intended to assist entities in applying judgement when meeting the presentation and disclosure requirements in IFRS, and do not affect recognition and measurement. The amendment does not in any way affect the company nor its nancial statements and accounting policies.

Amendments to IAS 27 - Separate nancial statements Amendments to IAS 27 is to restore the option to use the equity method to account for investments in subsidiaries, joint ventures and associates in an entity's separate nancial statements. The amendment does not affect the company nor its nancial statements and accounting policies.

34

Amendments to IAS 16 – Property, Plant and EquipmentAmendments to IAS 16 is to clarify that the use of revenue based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reects factors other than the consumption of the economic benet embodied in the asset. The IASB has also claried that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benets in an intangible asset. The Company's property, plant and equipment are depreciated using the straight line method and is therefore not impacted by the amendment.

IAS 38 – Intangible AssetsAmendment to IAS 38 introduced a rebuttable presumption that a revenue-based amortization method for intangible assets is inappropriate for the same reasons as stated in amendment to IAS 16 above. The amendment stated that there are limited circumstances where the rebuttable presumption can be overcome.

This is when the intangible asset is expressed as a measure of income and when it can be demonstrated that revenue and consumption of economic benets of the intangible asset are highly correlated although there are no clear details as to the admissible evidence that is required to overcome the presumption.

Amortisation is recognised in prot or loss on a straight-line basis over the estimated useful life of Company's intangible asset, hence the amendment does not impact the Company.

IAS 41 – Agriculture and IAS 16 – Property, Plant and EquipmentThe amendment seeks to move biological assets that meet the denition of a “Bearer Plant” (e.g. Fruit trees) away from the fair value measurement approach as prescribed by IAS 41, Agriculture and bring it within the scope of IAS 16, Property, Plant and Equipment. This will enable entities to measure bearer plants at cost subsequent to initial recognition or at revaluation.

The amendment also introduced an appropriate denition of a bearer plant. The Company does not have any operational business related to Agriculture and therefore is not in any way impacted by the standard or its amendments.



IFRS 14- Regulatory deferral accounts IFRS 14 is designed as a limited scope standard to provide an interim, short-term solution for rate-regulated entities that have not yet adopted International Financial Reporting Standards (IFRS). Its purpose is to allow rate-regulated entities adopting IFRS for the rst-time to avoid changes in accounting policies in respect of regulatory deferral accounts until such time as the International Accounting Standards Board (IASB) can complete its comprehensive project on rate regulated activities. This standard would not have an impact on the Company as it is not a rst time preparer of IFRS nancial statements. This is in addition to the fact that the regulators of the countries where we operate do not allow creation of any regulatory deferral account.

Amendments to IFRS 10 - Consolidated Financial Statements The amendments address issues that have arisen in applying the investment entities exception under IFRS 10. The amendments to IFRS 10 clarify that the exemption from presenting consolidated nancial statements applies to a parent entity that is a subsidiary of an investment entity, when the investment entity measures all of its subsidiaries at fair value.

Furthermore, the amendments to IFRS 10 clarify that only a subsidiary of an investment entity that is not an investment entity itself and that provides support services to the investment entity is consolidated. All other subsidiaries of an investment entity are measured at fair value. These amendments do not have any impact on the Company as no member of the Company is an investment entity.

35

Amendments to IAS 34 – Interim Financial Reporting IAS 34 to clarify that the required interim disclosures must either be in the interim nancial statements or incorporated by cross reference between the nancial statements and wherever they are included within the greater interim nancial report (e.g. management commentary or risk report).

Amendments to IFRS 5 - Non Current Asset Held for Sale and Discontinued OperationsIFRS 5 with specic guidance on changes in disposal methods, for cases in which an entity reclassies an asset from held for sale to held for distribution or vice versa and cases for which held for distribution accounting is discontinued. The amendment claries that changing from one of these disposal methods to the other should not be considered to be a new disposal plan, rather it is a continuation of the original plan.

Standards and interpretations issued/amended but not yet effectiveThe following new or revised standards and amendments which have a potential impact on the Company are not yet effective for the year ended 31 December 2016 and have not been applied in preparing these nancial statements. However, the Company's assessments of the new standards and amendments is that they are not expected to have signicant impact on the it's operations and nancial position.

Amendments to IAS 12 1-Jan-17

IFRS 15 1-Jan-18

Amendments to IAS 7 1-Jan-17

IFRS 9 1-Jan-18

IFRS 16 1-Jan-19

Financial instruments

Leases

Income Taxes

Revenue from Contracts with Customers

Statement of Cash Flows

Standard EffectiveContent

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

Commentaries on these new standards /amendments are provided below.Amendments to IAS 12 – Income TaxesAmends IFRS 12 to clarify accounting treatment for deferred tax assets for unrealised losses on debt instruments measured at fair value. The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable prots against which it may make deductions on the reversal of that deductible temporary difference. Furthermore, the amendments provide guidance on how an entity should determine

future taxable prots and explains in which circumstances taxable prot may include the recovery of some assets for more than their carrying amount.

IFRS 15 - Revenue from Contracts with CustomersIFRS 15 provides a single, principles based ve-step model to be applied to all contracts with customers. The ve steps in the model are Identication of the contract with the customer, Identication of the pe r fo rmance ob l i g a t i ons i n t he con t r ac t , Determination of the transaction price, Allocation of



the transaction price to the performance obligations in the contracts, and Recognition of revenue when (or as) the entity satises a performance obligation.

Amendments to IAS 7 - Statement of Cash FlowsAmends IAS 7 to include disclosures that enable users of nancial statements to evaluate changes in liabilities arising from nancing activities. The amendment species that the following changes arising from nancing activities are disclosed (to the extent necessary): (i) changes from nancing cash ows; (ii) changes arising from obtaining or losing control of subsidiaries or other businesses; (iii) the effect of changes in foreign exchange rates; (iv) changes in fair values; and (v) other changes.

IFRS 9 - Financial instrumentsIFRS 9 is part of the IASB's project to replace IAS 39. It addresses classication, measurement and impairment of nancial assets as well as hedge accounting.

IFRS 9 replaces the multiple classication and measurement models in IAS 39 with a single model that has only three classication categories: amortised cost, fair value through OCI and fair value through prot or loss. It includes the guidance on accounting for and presentation of nancial liabilities and derecognition of nancial instruments which was previously in IAS 39. Furthermore for non-derivative nancial liabilities designated at fair value through prot or loss, it requires that the credit risk component of fair value gains and losses be separated and included in OCI rather than in the income statement.

IFRS 9 also requires that credit losses expected at the balance sheet date (rather than only losses incurred in the year) on loans, debt securities and loan commitments not held at fair value through prot or loss be reected in impairment allowances. The company is yet to quantify the impact of this change although it is expected to lead to an increased impairment charge than recognized under IAS 39.

Furthermore, the IASB has amended IFRS 9 to align hedge accounting more closely with an entity's risk management. The revised standard establishes a more principles-based approach to hedge accounting and addresses inconsistencies and weaknesses in the current model in IAS 39. The Company is yet to quantify the impact of these changes on its nancial statements.

IFRS 16 – Leases This is a new standard introduced by IASB to replace existing standard IAS 17 - Leases. IFRS 16 requires lessees

to account for all leases under a single on-balance sheet model in a similar way to nance leases under IAS 17. The standard includes two recognition exemptions for lessees – leases of 'low-value' assets (e.g., personal computers) and short-term leases (i.e. leases with a lease term of 12 months or less ) . At the commencement date of a lease, a lessee will recognise a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset).

Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset. Lessees will be required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognise the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset.

Lessor accounting substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor continues to classify its leases as operating leases or nance leases, and to account for those two types of leases differently. Other standards and interpretations issued that are effective for annual periods beginning after January 1, 2016, have not been applied in preparing these nancial statements and the Company is yet to assess the full impact of the amendments arising from these standards.

V Signicant Accounting policiesSignicant accounting policies are dened as those that reect signicant judgements and uncertainties, and potentially give rise to different results under different assumptions and conditions.

Except for the changes explained in Note IV(Changes in accounting policies ) above, the Group consistently applied the following accounting policies to all periods presented in the nancial statements.

(a) Basis of consolidationBusiness combinations are accounted for using the acquisition method as at the acquisition date – i.e. when control is transferred to the Group. The consideration transferred in the acquisition is generally measured at fair value, as are the identiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is

36



recognised in prot or loss immediately. Transaction costs are expensed as incurred, except if they are related to the issue of debt or equity securities.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in prot or loss.Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classied as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognised in prot or loss.

(i) SubsidiariesSubsidiaries are investees controlled by the Group. The Group 'controls' an investee if it is exposed to, or has rights to, variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The nancial statements of subsidiaries are included in the consolidated nancial statements from the date on which control commences until the date when control ceases. The nancial statements have been prepared using uniform accounting policies for like transactions and other events in similar circumstances. Investment in subsidiary are carried at cost in the Group's separate nancial statements and are reviewed for impairment annually. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount.

(ii) Non-controlling interests (NCI)NCI are measured at their proportionate share of the acquiree's identiable net assets at the acquisition date. Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

(iii) Transactions eliminated on consolidationIntra-group balances and transactions, and any unrealised income and expenses (except for foreign currency transaction gains or losses) arising from intra-group transactions, are eliminated in preparing the consolidated nancial statements. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

(b) Foreign currency transactionsTransactions denominated in foreign currencies are recorded in Naira at the rate of exchange ruling at the date of each transaction. Any gain or loss arising from a change in exchange rates subsequent to the date of the

transact ion is included in the statement of comprehensive income.Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at the exchange rate on that date. Exchange gains arising from the revaluation of monetary assets and liabilities are recognized in the statement of comprehensive income while those on non-monetary items are recognized in other comprehensive income. For non-monetary nancial investments available-for-sale, unrealized exchange differences are recorded directly in equity until the asset is disposed or impaired.

Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the spot exchange rate at the date on which the fair value is determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated using the spot exchange rate at the date of the transaction.

Foreign currency differences arising from translation are generally recognised in prot or loss. However, foreign currency differences arising from the translation of available for sale nancial instruments are recognised in OCI.

(c ) Segment reportingA segment is a distinguishable component of the Group that is engaged in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. The Group's primary format for segment reporting is based on business segments. Where applicable, segment results that are reported include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

Recognition and measurement of insurance contracts (d) Insurance contractsShort-term insurance contracts under General business is determined and accounted for on an annual basis whereby the incurred cost of claims, commission and related expenses are charged against the earned proportion of premiums, net of reinsurance costs. Long term insurance contracts are insurance contracts which provide insurance cover over a long duration, generally more than one annual insurance period. This comprises mainly of the Group's life insurance business

37



and individual life products; for which the gross premium relates to premium written to cover assumed insurance risk liability covering more than one insurance period. These contracts insure events associated with human life (for example, death or survival) over a long duration.

(i) Premiums-Gross premium writtenGross premium comprise the premiums on insurance contracts entered into during the year, irrespective of whether they relate in whole or in part to a later accounting period. It is recognised at the point of attachment of risk to a policy before deducting cost of reinsurance cover and unearned portion of the premium. Gross premium on life contract are recognised in the life fund account when payable by the policy holder. Gross life insurance written premium comprise the total premium receivable for the whole period of cover provided by contracts entered into during the accounting period and are recognised on the date of inception of the policy. Premiums on reinsurance inward are included in gross written premiums and accounted for as if the reinsurance was considered direct business, taking into account the product classication of the reinsured business.

Gross premium incomeGross premium income Gross premium income and annuity considerations are stated gross of commission and net of unearned premiums and are recognised when due. Premium income relates to risks assumed during the period.

Unearned premiums are those proportions of premiums written in the year that relate to periods of risks after the reporting date. It is computed separately for each insurance contract using a time proportionate basis, or another suitable basis for uneven risk contracts.

(iii) ReinsuranceThe Group cedes reinsurance in the normal course of business for the purpose of limiting its net loss potential on policies written. Reinsurance expense comprise written premiums ceded to reinsurers, adjusted for the reinsurers' share of the movement in the provision for the unearned premiums. Reinsurance arrangements do not relieve the Group from its direct obligations to its policyholders. Outward reinsurance premiums are accounted for in the same accounting period as the premiums for the related direct insurance or reinsurance business assumed.

Premium ceded, claims reimbursed and commission recovered are presented in the income statement and statement of nancial position separately from the gross amounts.

Reinsurance assetsReinsurance assets represent balances due from reinsurance contracts. Reinsurance assets consist of short-term balances due from reinsurers, as well as longer term receivables that are dependent on the expected claims and benets arising under the related reinsured insurance contracts. Amounts recoverable from or due to reinsurers are measured consistently with the amounts associated with the reinsured insurance contracts and in compliance with the terms of each reinsurance contracts.

Prepaid reinsurancePrepaid reinsurance cost is determined on a time apportionment basis and is reported as reinsurance assets in the statement of nancial position. Premiums include any adjustments arising in the accounting period in respect of reinsurance contracts incepting in prior accounting periods.

Reinsurance recoveries and recoverableReinsurance recoverable are estimated in manner consistent with the outstanding claims provision and claims incurred associated with the reinsurer's polices and are in accordance with the related insurance contract. They are measured at their carrying amount less impairment charges. Amounts recoverable under reinsurance contracts are assessed for impairment at each statement of nancial position date. If there is objective evidence of impairment, the Group reduces the carrying amount of its insurance assets to its recoverable amount and recognizes the impairment loss in the income statement as a result of an event that occurred after its initial recognition, that the Group may not recover all amounts due and that the event has a reliably measurable impact on the amounts that the Group will receive from the reinsurer.

(iv) Commission earned Commissions are recognized on ceding business to the reassurer and are credited to the prot and loss account over the period the service is provided.

(v) Claims incurred General BusinessClaims incurred consist of claims and claims handling expenses paid during the nancial year together with the surplus or decit on actuarial valuation of claims liability at the end of every accounting period. The surplus or decit in outstanding claims is actuarially determined using the chain ladder and ination adjusted chain ladder method and the Group's data base of policies underwritten and emerging claims over each of the past eight (8) underwriting years.

38



Provision for outstanding claimsThe provision for outstanding claims represent the Group's estimate of the ultimate cost of settling all claims incurred but unpaid at the statement of nancial position date whether reported or not. The provision includes an allowance for claims management and handling expenses.

Reinsurance claims recoveries and recoverableReinsurance recoverable are recognized as reinsurance assets when the Group records the liability for the claims and are not netted off claims expense but are presented separately in the statement of prot or loss and other comprehensive income.

(vi) Underwriting expenses Underwriting expenses are made up of acquisition and maintenance expenses. Acquisition expenses are those incurred in obtaining and renewing insurance contracts. They include commission paid, policy expenses, and indirect expenses such as salaries of underwriting staff. Maintenance expenses are those incurred in servicing existing policies/contract. Maintenance expenses are charged to the relevant segments of the revenue account in the accounting period in which they are incurred.

Underwriting expenses for insurance contracts and investment contracts are recognized as expense when incurred, with the exception of acquisition costs which are recognized on a time apportionment basis in respect of the service provided.

(e) Investment incomeInvestment income comprises interest income earned on short-term deposits, rental income and income earned on trading of securities including all realised and unrealised fair value changes, interest and dividends Investment income is accounted for on an accrual basis. Interest income is recognised in the income statement as it accrues and is calculated using the effective interest rate method. Fees and commissions that form an integral part of the effective yield of a nancial instrument are recognised as an adjustment to the effective interest rate of the instrument. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash ow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income.

(f) Dividend incomeDividend is recognised as earned in the prot or loss account in the period in which the right of receipt is established and is stated net of withholding tax.

(g) Employee benets/Personnel expensesShort-term benetsShort-term employee benet obligations include wages, salaries and other benets which the Group has a present obligation to pay, as a result of employees' services provided up to the statement of nancial position date. The accrual is calculated on an undiscounted basis, using current salary rates. A provision is recognised for the amount expected to be paid under short-term cash bonus or prot-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

Post employment benetsThe Group operates a dened contributory retirement scheme as stipulated in the Pension Reform Act 2014. Under the dened contribution scheme, the Group pays xed contributions of 13% to a separate entity – Pension Fund Administrators; employees also pay a xed contribution of 5% to the same entity. Once the contributions have been paid, the Group retains no legal or constructive obligation to pay further contributions if the Fund does not hold enough assets to nance benets accruing under the retirement benet plan. The Group's obligations are recognized in the statement of comprehensive income in the period it which they arise.

(h) Management expensesManagement expenses are expenses other than claims, investment expenses, employees benet and underwriting expenses. They include depreciation expenses, admin expenses and other expenses. They are accounted for on an accrual basis.

(I) Leases Lease payments - LeasesPayments made under operating leases are recognised in statement of comprehensive income account on a straight line basis over the terms of the Lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. Minimum lease payments made under nance leases are apportioned between the nance expense and the reduction of the outstanding liability. The nance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is conrmed.

39



Lease assets – LessorAssets held by the Company under leases that transfer to the Company substantially all of the risks and rewards of ownership are classied as nance leases. The leased asset is initially measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

Lease assets – LessorIf the Company is the lessor in a lease agreement that transfers substantially all of the risks and rewards incidental to ownership of the asset to the lessee, then the arrangement is classied as a nance lease and a receivable equal to the net investment in the lease is recognised and presented within loans and advances.

(j) Income taxIncome tax comprises current and deferred tax. Income tax expense is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current taxCurrent tax is the expected tax payable on taxable income for the year, using tax rates enacted or substantively enacted at the statement of nancial position date, and any adjustment to tax payable in respect of previous years.

(ii) Deferred taxationDeferred taxation which arises from timing differences in the recognition of items for accounting and tax purposes, is calculated using the liability method. Deferred taxation is provided fully on timing differences, which are expected to reverse, at the rate of tax likely to be in force at the time of reversal. A deferred tax asset is recognised to the extent that it is probable that future taxable prots will be available against which the associated unused tax losses and deductible temporary differences can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benet will be realised.

Deferred tax is not recognised for the following temporary differences; the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting not taxable prot, differences relating to investments in subsidiaries to the extent that they probably will not reverse in the foreseeable future and differences arising from investment property measured at fair value whose

carrying amount will be recovered through use. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable and that the related tax benet will be realised.

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

(k) Earnings per shareThe Group presents basic and diluted EPS data for its ordinary shares. Basic EPS is calculated by dividing the prot or loss that is attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the prot or loss that is attributable to ordinary shareholders and the weighted-average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees. Adjusted earnings per share is determined by dividing the prot or loss attributable to ordinary shareholders by the weighted average number of ordinary shares adjusted for the bonus shares issued.

(l) Cash and cash equivalentCash and cash equivalent include notes and coins on hand, unrestricted balances held with banks and highly liquid nancial assets with original maturities of three months or less from the acquisition date that are subject to an insignicant risk of changes in their fair value, and are used by the Group in the management of its short term commitment.

(m) Financial assets and liabilities(i) ClassicationThe classication of nancial assets depends on the purpose for which the investments were acquired or originated. The Group classies its nancial assets into the following categories:

Ÿ nancial assets at fair value through prot or loss;Ÿ held-to-maturity investments;Ÿ loans and receivables, andŸ available-for-sale nancial assets

The Group's nancial assets include cash and short term deposits, trade and other receivables, quoted and unquoted equity instruments, bonds and treasury bills.

The Group's nancial liabilities are classied as other

40



nancial liabilities. They include: investment contract liabilities, creditors and accruals. All nancial instruments are initially recognized at fair value, which includes directly attributable transaction costs for nancial instruments not classied as at fair value through prot and loss. Financial instruments are derecognized when the rights to receive cash ows from the nancial instruments have expired or where the Group has transferred substantially all risks and rewards of ownership.

(ii) Subsequent measurementSubsequent to initial measurement, nancial instruments are measured either at fair value or amortised cost, depending on their classication.

(iii) Derecognition: Financial assetsThe Group derecognises a nancial asset when the contractual rights to the cash ow from the nancial asset expires; or transfers its right to receive the contractual cash ows in a transaction in which substantially all the risks and rewards of the nancial assets are transferred or in which the Group neither transfers nor retains substantially all risks and rewards of ownership and it does not retain control of the asset.

(iv) Derecognition: Financial liabilitiesThe Group derecognises a nancial liability when its contractual obligations are discharged, cancelled or expired.

(v) Financial assets held at fair value through prot or lossFinancial assets at fair value through prot or loss include nancial assets held for trading. Financial assets classied as trading are acquired principally for the purpose of selling in the short term.

These investments are initially recorded at fair value. Subsequent to initial recognition, they are remeasured at fair value, with gains and losses arising from changes in this value recognized in the statement of comprehensive income in the period in which they arise. The fair values of quoted investments in active markets are based on current bid prices. The fair values of unquoted equities, and quoted equities for which there is no active market, are established using valuation techniques corroborated by independent third parties. These may include reference to the current fair value of other instruments that are substantially the same and discounted cash ow analysis. Interest earned and dividends received while holding trading assets at fair value through prot or loss are included in investment income. Interest income are recognised using effective interest rate.

(vi) Held-to-maturityHeld-to-maturity investments are non-derivative nancial assets with xed determinable payments and xed maturities that management has both the positive intention and ability to hold to maturity other than:

Ÿ those that the Group designates as available for sale.

Ÿ those that meet the denition of loans and receivables.

Subsequent to initial recognition, held-to-maturity investments are carried at amortised cost using effective interest method less any impairment losses. A sale or reclassication of more than insignicant amount of held-to-maturity investment would result in the reclassication of all held-to-maturity investments to Available-for-sale, and would prevent the Group from classifying investment security as held-to-maturity for the current and following two nancial years. However, sales and reclassication in any of the following circumstances would not trigger a reclassication;

Ÿ sales or reclassication that are so close to maturity that changes in the market rate interest would not have a signicant effect in the nancial asset's fair value;

Ÿ sales or reclassication after the Group has collected substantially all of the assets' original principals; and

Ÿ sales or reclassication attributable to non-recurring isolated events beyond the Group's control that could not have been reasonably anticipated.

(vii) Available-for-saleAvailable for sale nancial investments are non-derivative instruments which includes equity and debt securities. The Group classies as available-for-sale those nancial assets that are generally not designated as another category of nancial assets, and strategic capital investments held for an indenite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices.

Available-for-sale nancial assets are carried at fair value, with the exception of investments in equity instruments where fair value cannot be reliably determined, which are carried at cost. Fair values are determined in the same manner as for investments at fair value through prot or loss. Unrealised gains and losses arising from changes in the fair value of available-

41



for-sale nancial assets are recognised in other comprehensive income while the investment is held, and are subsequently transferred to the statement of comprehensive income upon sale or de-recognition of the investment.

Dividends received on available-for-sale instruments are recognised in income statement when the Group right to receive payment has been established. Interest income on available-for-sale investments are recognised in the prot and loss account using effective interest rates

(viii) Loans and receivables Loans and receivables include non-derivative nancial assets with xed or determinable payments that are not quoted in an active market, other than those classied by the Group as at fair value through prot or loss or available-for-sale. Loans and receivables consist primarily of staff loans, premium debtors, due from reinsurers, other receivables. These are managed in accordance with a documented policy. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. Loans granted at below market rates are fair valued by reference to expected future cash ows and current market interest rates for instruments in a comparable or similar risk class and the difference between the historical cost and fair value is accounted for as employee benets under staff costs.

Trade receivablesTrade receivables arising from insurance contracts represent premium debtors with determinable payments that are not quoted in an active market and the Group has no intention to sell. Receivables are stated net of impairment determined in line with the specic and incurred loss model.

(ix) Fair value measurementFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access at that date. The fair value of a liability reects its non-performance risk.When available, the Group measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as active if transactions for the asset or liability take place with sufcient frequency and volume to provide pricing information on an ongoing basis.

If there is no quoted price in an active market, then the

Group uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

The best evidence of the fair value of a nancial instrument at initial recognition is normally the transaction price – i.e. the fair value of the consideration given or received. If the Group determines that the fair value at initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique that uses only data from observable markets, then the nancial instrument is initially measured at fair value, adjusted to defer the difference between the fair value at initial recognition and the transaction price. Subsequently, that difference is recognised in prot or loss on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable market data or the transaction is closed out.

If an asset or a liability measured at fair value has a bid price and an ask price, then the Group measures assets and long positions at a bid price and liabilities and short positions at an ask price. Portfolios of nancial assets and nancial liabilities that are exposed to market risk and credit risk that are managed by the Group on the basis of the net exposure to either market or credit risk are measured on the basis of a price that would be received to sell a net long position (or paid to transfer a net short position) for a particular risk exposure.

Those portfolio-level adjustments are allocated to the individual assets and liabilities on the basis of the relative risk adjustment of each of the individual instruments in the portfolio. The Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which the change has occurred.

(x) Amortised cost measurementThe amortised cost of a nancial asset or liability is the amount at which the nancial asset or liability is measured at initial recognition, minus principal repayments, plus or minus the cumulative amortisation using the effective interest rate method of any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment.

42



(xi) Impairment of nancial assetsThe carrying amounts of nancial assets are reviewed at each reporting date to determine whether there is any objective evidence of impairment. A nancial asset is considered to be impaired if objective evidence indicates that one or more events that have occurred since the initial recognition of the asset have had a negative effect on the estimated future cash ows of that asset and can be reliably estimated. For nancial assets measured at amortised cost, the Group rst assesses whether objective evidence of impairment exists individually for nancial assets that are individually signicant and, on the other hand, collectively for nancial assets that are not individually signicant. Individually signicant nancial assets are tested for impairment on an individual basis. The remaining nancial assets are assessed in groups that share similar credit risk characteristics. An impairment loss in respect of a nancial asset measured at amortised cost is calculated as the difference between its carrying value and the present value of the estimated future cash ows discounted at the original effective interest rate. Observable data or evidence that the group uses to determine if an impairment allowance is required on a nancial asset include:

Ÿ signicant nancial difculty of a counter party;

Ÿ a breach of contract such as default of contractual terms or delinquency in interest or principal payment;

Ÿ it is probable that the counter party will enter bankruptcy or other nancial reorganisation; and

Ÿ observable data which indicates that there is a measurable decrease in the estimated future cashow from a group of assets since the initial recognition of those assets although the decrease cannot yet be identied with the individual nancial assets.

Available-for-sale nancial assets are impaired if there is objective evidence of impairment, resulting from one or more loss events that occurred after initial recognition but before the statement of nancial position date, that have an impact on the future cash ows of the asset.

All impairment losses are recognized through statement of prot or loss and other comprehensive income. If any loss on the nancial asset was previously recognized directly in equity as a reduction in fair value, the cumulative net loss that had been recognized in equity is transferred to the statement of comprehensive income and is recognized as part of the impairment loss. The amount of the loss recognized in the statement of

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

The Group assesses the premium debtors on both specic and collective impairment tests bases. Specic impairment on premium debtors are assessed on individually signicant receivables based on impairment triggers identied by the Group. The amount of loss recognised in the income statement is the difference between the carrying amount and discounted present value of expected cash ows.

Loans and receivables, including premium debtors not specically impaired are then assessed for collective impairment. Loans and receivables not individually signicant are collectively assessed for impairment by grouping together the receivables with similar risk characteristics. In assessing collective impairment, the Group uses statistical modelling of historical trends of the probability of default, the timing of recoveries and the amount of loss incurred, adjusted for management's judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends. Default rates, loss rates and the expected timing of future recoveries are regularly benchmarked against actual outcomes to ensure that they remain appropriate. Subsequent decreases in the amount relating to an impairment loss, that can be linked objectively to an event occurring after the impairment loss was previously recognized in the income statement, is reversed through the statement of comprehensive income.

(xii) Offsetting nancial instrumentsFinancial assets and liabilities are set off and the net amount presented in the statement of nancial position when, and only when, the Group has a legally enforceable right to set off the recognized amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

(n) Other receivables and prepaymentsOther receivables are stated after deductions of amount considered bad or doubtful of recovery. When a debt is deemed not collectible, it is written-off against the related provision/receivable or directly to the prot and loss account to the extent not previously provided for. Any subsequent recovery of written-off debts is credited to the prot and loss account.

43



Prepayments are carried at cost less amortised amounts.

(o) Deferred acquisition costsAcquisition costs comprise insurance commissions, brokerage and other related expenses arising from the generation and conclusion of insurance contracts. The proportion of acquisition costs that correspond to the unearned premiums are deferred as an asset and recognized in the subsequent period. They are recognised on a basis consistent with the related provisions for unearned premiums.

(p) Investment in subsidiariesInvestment in subsidiaries are carried in the Company's separate nancial statements at cost less allowance for impairment.

(q) Intangible assetsSoftware Software acquired by the Group is measured at cost less accumulated amortisation and any accumulated impairment losses.

Recognition of software acquired is only allowed if it isprobable that future economic benets to this intangible asset are attributable and will ow to the Group. Software acquired is initially measured at cost. The cost of acquired software comprises its purchase price, including any import duties and non-refundable purchase taxes, and any directly attributable expenditure on preparing the asset for its intended use. After initial recognition, software acquired is carried at its cost less any accumulated amortisation and any accumulated impairment losses. Maintenance costs is not included.

Internally developed software is capitalized when the Group has the intention and demonstrates the ability to complete the development of the software and to use it in a manner that will generate future economic benets, and can reliably measure the costs to complete the development. The capitalised costs include all costs directly attributable to the development of the software. Internally developed software is stated at capitalised cost less accumulated amortisation and impairment.

Subsequent expenditure on software assets is capitalised only when it increases the future economic benets embodied in the specic asset to which it relates. All other expenditures are expensed as incurred. Amortisation is recognised in prot or loss on a straight-line basis over the estimated useful life of the software, from the date that it is available for use. The estimated useful life of software is three years subject to annual reassessment.

Upon disposal of software or when no future economic benets are expected to ow from its use, such software are derecognised from the books. Gains or losseson disposal of assets are determined by comparing proceeds with their carrying amounts and are recognised in prot or loss in the year of derecognition.

® Property and Equipment(i) Recognition measurement Property and Equipment comprise leasehold land and buildings and other properties owned by the Group. Items of property and equipment are carried at cost less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the assets.

Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benets associated with the item will ow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to the statement of prot or loss and other comprehensive income during the nancial period in which they are incurred. Subsequent costs on replacement parts on an item of property are recognized in the carrying amount of the asset and the carrying amount of the replaced or renewed component is derecognized.

(iii) DepreciationDepreciation is calculated on property and equipment on a straight line basis to write down the cost of each asset to its residual value over its estimated useful life. Depreciation methods, useful lives and residual values are reassessed at each reporting date. No depreciation is charged on item of property and equipment until they are brought into use. Depreciation begins when an asset is available for use and ceases at the earlier of the date that the asset is derecognised or classied as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.

Depreciation reduces an asset's carrying value to its residual value at the end of its useful life, and is allocated on a straight line basis over the estimated useful lives, as follows:Leasehold Land - Over the lease period Building & Leasehold - 20% (or period of primaryimprovements lease where shorter)Ofce equipment - 20%

44



Computer equipment - 33.33%Motor vehicles - 25%

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

(iv) De-recognitionUpon disposal of any item of property and equipment or when no future economic benets are expected to ow from its use, such items are derecognized from the books. Gains and losses on disposal of assets are determined by comparing proceeds with their carrying amounts and are recognized in the statement of prot or loss and other comprehensive income in the year of de-recognition.

(s) Impairment of non-nancial assetsThe carrying amounts of the Group's non-nancial assets, other than deferred tax assets, are considered to be impaired when there exists any indication that the asset's recoverable amount is less than the carrying amount. Impairment losses are recognised in prot or loss.

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

Impairments or losses of non-nancial assets, related claims for or payments of compensation from third parties and any subsequent purchase or construction of replacement assets are separate economic events and are accounted for separately. Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Reversals of impairment losses are recognised in prot or loss.

(t) Statutory depositStatutory deposit represents 10% of required minimum paid-up capital of the Group deposited with and held by the Central Bank of Nigeria (CBN) in pursuant to Section 10(3) of the Insurance Act 2003. Statutory deposit is measured at cost.

(u) Classication of insurance contracts liabilities

The Group issues contracts that transfer insurance risk or nancial risk or both. Contracts under which the Group accepts signicant insurance risk from another party (the policyholder) by agreeing to compensate the policy holder or other beneciary if a specied uncertain future event (the insured event) adversely affects the policy holder or other beneciary are classied as insurance contracts. Insurance risk is risk other than nancial risk, transferred from the holder of the contract to the issuer. Financial guarantees are contracts that requires the Group to make specic payments to reimburse the holder for a loss it incurs because a specied debtors fails to make payments when due in accordance with the terms of a debt instrument.

Contracts that transfer nancial risks but not signicant insurance risk are classied as investment contracts. Financial risk is the risk of a possible future change in one or more of a specied interest rate, security price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index or other variable, provided in the case of a non-nancial variable that the variable is not specic to a party to the contract. Insurance contracts may also transfer some nancial risk.

Recognition and measurement of insurance contracts liabilitiesLiabi l i t ies ar is ing from nancia l guarantees, commitments and insurance contract are initially measured at fair value and the initial fair value is amortised over the life of the guarantees, commitments or insurance contract. The liability is subsequently carried at the higher of this amortised amount and the present value of any expected payment to settle the liability when a payment under the contracts has become probable. Short term insurance contracts under General business is determined and accounted for on an annual basis whereby the incurred cost of claims, commission and related expenses are charged against the earned proportion of premiums, net of reinsurance costs.

Life insurance contract liabilitiesThe Life insurance contract liabilities represents the liability due to policy holders at the end of every reporting period. The liability in the life fund account is determined by an actuarial valuation using a liability adequacy test model.

Group Life Business

45



An unexpired premium reserve is included for group life business, with an allowance for acquisition expenses as a percentage of premium. An allowance is made for IBNR (Incurred But Not Reported) claims in Group Life to take care of the delay in reporting claims.

Individual BusinessIndividual risk business comprises term assurance and mortgage protection policies, for which a gross premium method of valuation is adopted. Reserves are calculated via a cash ow perfected approach taking into account future gross premiums, expenses and benet payments (death). Future cash ows are discounted back to the valuation date at the valuation interest rate.

Life Savings Plan / Deposit Administration(v) Investment contract liabilitiesThe reserve for l i fe savings plan and deposit administration fund are taken as the amount standing to the credit of the policy holders as at valuation date. Where policies still have active term assurance life covers, these are valued alongside the regular term assurance policies using the gross premium method of valuation.

(w) Reinsurance liabilitiesReinsurance liabilities are primarily premiums payable for the reinsurance contracts entered into by the Group and are recognised as an expense when incurred.

(x) Trade and other payablesTrade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. The fair value of a non-interest bearing liability is its discounted repayment amount. However, there would be no need to discount should the due date of the liability be less than one year.

(y) SalvagesSome non-life insurance contracts permits the Group to sell (usually damaged) property acquired in settling a claim. The Group may also have the right to pursue third parties for payment of some or all costs. Estimates of salvage recoveries are included as an allowance in the measurement of the insurance liability for claims. Salvage property is recognised in other assets when the liability is settled . The allowance is the amount that can reasonably be recovered from the disposal of the property.

(z) SubrogationSubrogation reimbursements are, like salvages, considered as an allowance in the measurement of the insurance liability for claims and are recognised in other

assets when the liability is settled. The allowance is the assessment of the amount that can be recovered from the action against the liable third party.

(aa) ProvisionsA provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outow of economic benets will be required to settle the obligation. Provisions are determined by discounting the expected future cash ows at a rate that reects current market assessments of the time value of money and the risks specic to the obligation. The unwinding of the amount is recognised as a nance cost

(ab) Share Capital & ReservesShare CapitalThe Company has only one class of shares, ordinary shares. Ordinary shares are classied as equity. When new shares are issued, they are recorded in share capital at their par value. The excess of the issue price over the par value is recorded in the share premium reserve. All ordinary shares rank equally with regard to the Company's residual assets. Holders of these shares are entitled to dividends as declared from time to time and are entitled to one vote per share at general meetings of the Company. Incremental costs directly attributable to issue of shares are recognized as deductions from equity net of any tax effects.

(ac) Fair value reservesThe fair value reserve comprises the cumulative net change in the fair value of available-for-sale nancial assets until the assets are derecognised or impaired.

(ad) DividendsDividend distribution to the Group's shareholders is recognized as a liability in the nancial statements in the period in which the dividends are approved by the Group's shareholders. Dividends that are proposed but not yet declared are disclosed in the notes to the nancial statements.

Dividends on the Group's ordinary shares are recognised in equity in the period in which they are paid or, if earlier, the period approved by the Group's shareholders.

(ae) Contingent liabilitiesA contingent liability is a possible obligation that arises from past events and whose existence will be conrmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly

46



47

within the control of the Group or the Group has a present obligation as a result of past events which is not recognised because it is not probable that an outow of resources will be required to settle the obligation; or the amount cannot be reliably estimated. Contingent liabilities normally comprise of legal claims under arbitration or court process in respect of which a liability is not likely to crystallise.

(af) Actuarial valuation(i) Life businessActuarial valuation of the life fund is conducted annually to determine the net liabilities on the existing policies and the adequacy of the assets representing the insurance fund as at the date of valuation. All decits arising therefrom are charged to the statement of other comprehensive income while the surplus is appropriated to the shareholders and credited to the statement of comprehensive income.

(ii) General businessActuarial valuation of the claims payable under general business is conducted annually using the discounted ination adjusted basic chain ladder method. Additional reserve for IBNR is charged into the Statement of prot or loss and other comprehensive income.

VI Required technical and other reserves by NAICOM(a) Contingency reserve The Group maintains contingency reserves in accordance with the provisions of the Insurance Act 2003 to cover uctuations in securities and variations in statistical estimates. For general business, the reserve is calculated at the rate equal to the higher of 3% of total premium or 20% of net prot until the reserve reaches the greater of minimum paid up capital or 50% of net premium for general business. Contingency reserve for life business is credited with the higher of 1% of gross premiums and 10% of net prot.

(b) Technical reserves These are recognised in compliance with the provisions of the Insurance Act 2003 as follows:(i) Reserve for unearned premiums and unexpired riskThe reserve for unearned premium is calculated on time apportionment basis in respect of risk accepted during the year. A provision for the additional unexpired risk reserve is recognised for an underwriting year where it is envisaged that the estimated cost of claims and expenses would exceed the unearned premium reserve.

(ii) Reserves for outstanding claimsThe reserve for outstanding claims is maintained at the total amount of outstanding claims incurred and reported plus claims incurred but not reported (IBNR) at the reporting date.

Reserving methodology and assumptionsData segmentation The data used for reserving is segmented into the eight classes as per the Insurance Act 2003 of Nigeria:

Ÿ Motor vehicle insurance businessŸ Fire insurance businessŸ General accident insurance businessŸ Marine, aviation and transport insurance businessŸ Oil and gas insurance businessŸ EngineeringŸ Bonds, credit and surety ship; andŸ Miscellaneous

The valuation methodology is presented in notes 1.7.1 of the nancial statement.




Gross premium incomeReinsurance expenses

Net premium income



Claims expensesUnderwriting expenses

Underwriting prot/results

Investment income

Prot on disposal of subsidiary

Other operating income

Net income

Impairment loss on premium debtors

Impairment loss on available-for-sale investment

Management expenses

Prot before income taxTaxation

Total tax charge for the year

Prot from continuing operations

Discontinued operations

Prot from discontinued operations

Prot for the year

Other comprehensive income:

Items that are or may be reclassied to prot orloss

Fair value changes on available for sale nancialassets:

- Net reclassication adjustment on impairment

- Changes in fair value of available-for-sale nancial

assets

Other comprehensive income, net of tax

Total comprehensive income for the year

Prot/Total Comprehensive Income attributableto:

Owners of the parent company

Earnings per share for prot attributable to the equity

holders of the Company during the year

– Basic/diluted (in kobo)

The notes on pages 53 to 136 form an integral part of these nancial statements.

N'000 N'000

319k 310k 334k

Group Company

2016

N'000

Group

2015

453k

N'000

Company

120 6 2015

(75,487) 822,837 414,408

11,116,350

11,186,820

(3,740,190)

7,446,630

907,176

8,353,806

(3,339,170)

(1,331,076)

3,683,560

2,319,060

-

2,150,553

8,153,173

-

-

8,153,173

(2,916,441)

5,236,732

(624,126)

(624,126)

4,612,606

16,555

4,629,161

4,553,674 5,315,950 5,258,006

4,553,674 5,315,950 5,258,006

- 922,774 499,791

4,553,674 5,315,950 5,258,006

(75,487) (99,937) (85,383)

(72,421)

6,496,071

6,496,071

-

6,496,071

(72,421)

10,906,124 8,171,513

10,935,922 8,019,023

(3,350,331) (3,350,331)

7,585,591 4,668,692

1,196,358 851,656

8,781,949 5,520,348

(2,926,165) (830,306)

(1,322,278) (1,130,278)

4,533,506 3,559,764

2,099,777 3,701,210

- -

365,486 333,910

6,998,769 7,594,884

(3,771) -

(499,791) (499,791)

6,495,207 7,095,093

(1,887,270) (1,360,308)

4,607,937 5,734,785

(1,155,561) (891,187)

(1,155,561) (891,187)

3,452,376 4,843,598

1,040,737 -

4,493,113 4,843,598

8,441,433

8,555,214

(3,740,190)

4,815,024

577,861

5,392,885

(1,014,977)

(1,171,698)

3,206,210

2,099,251

1,805,000

2,066,173

9,176,634

-

-

9,176,634

(2,112,551)

7,064,083

(495,591)

(495,591)

6,568,492

-

6,568,492

34b

15(d)(iv)

4

56

7

89

10

11

32

12

13

34

32

33

Notes

48


Annual Report, 31 December 2016Statements of prot or loss and other comprehensive income for the year ended 31 December 2016

49

Group Group Company Company

2016 2015 2016 2015 N'000 N'000 N'000 N'000

AssetsCash and cash equivalents Investment securities held to maturity

Investment securities available for sale

Loans and receivables

Trade receivables

Reinsurance assets

Deffered acquisition cost

Other receivables and prepayments Deferred tax asset

Investment in subsidiary

Intangible assets

Property and equipment

Statutory deposits

Total assets

Liabilities

Insurance contract liabilities

Investment contract liabilities

Trade payables

Provision and other payables

Curent income tax liabilities

Deferred tax liability

Total liabilities

Net assets

Equity

Ordinary share capital

Share premium

Statutory contingency reserve

Retained earnings

Fair value reserves

Total equity

These nancial statements were approved and authorized by the Board of Directors on 6 February 2016 and signed on behalf

of the Board of Directors by the Directors listed below:

Additionally certied by:

Njum Onyemenam

Chief Financial Ofcer

FRC/2013/ICAN/00000001188


Victor AbuleleDirector(FRC/2013/ICAN/00000004830)6 February 2017

Ebelechukwu NwachukwuManaging DirectorFRC/2013/IODN/000000027686February2017

Notes

6,519,599 7,381,532 3,078,850

22,673,726 19,775,161 14,230,457

1,117,370 468,279 356,289

28,693 34,479 29,731

252,246 455,930 29,851

3,674,481 2,426,151 1,929,443

448,625 516,047 516,047

103,422 359,811 2,144,656

763,365

2,400,000

40,633 61,285 17,759

1,468,109 1,366,207 948,077

300,002 500,002 300,002

36,626,906 34,108,249 25,981,162

8,346,317 8,243,504 5,488,465

634,392

1,923,243 1,361,238 1,012,971

1,725,092 1,773,284 1,538,639

958,168 1,852,047 1,093,109

357,740 31,112 19,477

13,310,560 13,895,577 9,152,661

23,316,346 20,212,672 16,828,501

1,450,000 1,450,000 1,450,000

4,138,423 4,138,423 4,138,423

5,116,439 3,740,579 3,014,566

12,610,662 10,807,361 8,152,269

822 76,309 73,243

23,316,346 20,212,672 21,874,572 16,828,501

---

-

- -

14

15(a)

15(b)

15(c )

15(d)

16

17

18

28(b)

19

20

21

22

23

24

25

26

27

28(a)

29(a)

29(b)

30

31

32

3,469,556

22,673,726

1,117,370

24,094

37,741

3,674,481

448,625

74,554

400,000

17,052

1,084,824

300,002

33,322,025

7,076,092

1,571,793

1,642,748

829,740

327,080

11,447,453

21,874,572

1,450,000

4,138,423

4,328,264

11,957,063

822

-

-


Annual Report, 31 December 2016Statements of nancial position

as at 31 December 2016

As at 1 January 2015 17,674,222

Profit for the year 4,493,113

Fair value adjustment on AFS investment (99,937)Impairment on AFS investment 922,774

Total comprehensive income for the year 5,315,950

As at 31 December 2015 20,212,672

Profit for the year 4,629,161

Fair value adjustment on AFS investment (75,487)

Impairment on AFS investment

Transfer to contingency reserve-

Group


Transactions with owners of the Company

Final dividends to shareholders for 2014 nancial year

Interim dividend declared


On disposal of subsidiary



Final dividends to equity share holders

as at 31 December 20164,138,423 23,316,346

Share

capital

Share

premium

Retained

earnings

Fair value

reserves

Statutory

contingency

reserve Total

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

-

(1,377,500)

(1,400,000)

4,553,674

1,450,000

1,450,000

1,450,000

-

-

-

-

-

-

-

-

-

-

-

4,138,423

-

-

-

-

4,138,423

-

-

-

-

-

-

-

-

10,389,939

4,493,113

-

4,493,113

(1,298,191)

10,807,361

4,629,161

-

(1,375,860)

12,610,662

(1,377,500)

(1,400,000)

4,629,161

(1,450,000)

-

-

-

-

-

-

922,77

(746,528)

(99,937)

822,837

76,309

(75,487)

822

(75,487)

-

-

-

-

-

-

2,442,388

1,298,191

3,740,579

1,375,860

5,116,439

-

-

-

- (1,450,000)

50

Transfer to contingency reserve

Consolidated and separate statements of changes in equityZenith General Insurance Company Limited


Company

Share

capital

Share

premium

Retained

earnings

Statutorycontingency

reserve Total

N'000 N'000 N'000

Fair value

reserves

N'000 N'000 N'000

1,450,000 4,138,423 7,054,891 (341,165) 2,045,846 14,347,995

- - 4,843,598 - - 4,843,598

- - - (85,383) - (85,383)

499,791 499,791

- - 4,843,598 414,408 - 5,258,006

- - (968,720) - 968,720 -

- - (1,377,500) - - (1,377,500)

- - (1,400,000) - - (1,400,000)

1,450,000 4,138,423 8,152,269 73,243 3,014,566 16,828,501

- - 6,568,492 - - 6,568,492

- - - (72,421) - (72,421)

-

- - 6,568,492 (72,421) - 6,496,071

- - (1,313,698) - 1,313,698 -

- - (1,450,000) - - (1,450,000)

As at 1 January 2015

Prot for the year


Fai r value adjustment on A FS i nvestment

Impairment on AFS investment



Transf er to conti ngency reserve

Final dividends to share holders for 2014 nancial year

Interim dividend declared

As at 31 December 2015

Profit for the year


Fair value adjustment on AFS investment

Impairment (reversal) on AFS investment -



Transfer to contingency reserve

Final dividends to equity share holders (2015)

as at 31 December 2016 1,450,000 4,138,423 11,957,063 822 4,328,264 21,874,572

51

Consolidated and separate statements of changes in equityZenith General Insurance Company Limited


Premium received from policy holders 11,571,907 14,072,212 8,751,661 8,174,668

Re-insurance receipt in respect of claims/reinsurance

Receipts from customers on investment contract liabilities

Cash paid to and on behalf of employees

Reinsurance premium paid

Commission received

Interest on investment

Other income received

Claims paid

Cash paid to suppliers

Commission paid

Other underwriting expense paid

Tax paid

Net cash from operating activities

Cash ows from investing activities:

Proceeds f rom redemption of treasury bi l l s

Proceeds from redemption of bonds 2,387,467 - 2,242,247 -

Purchase of treasury bills (16,241,763) (11,584,632) (16,241,763) (8,169,528)

Purchase of property and equipment 21 (305,733) (503,405) (291,274) (144,202)

Proceeds from sale of property and equipment

Purchase of intangible assets 20 ( (33,573) (4,872) (16,933)

Redemption/maturity of placement 374,680 31,525 374,68 31,525

Purchase of bonds (2,172,704) - (2,053,357) -

Purchase of f i xed deposi ts (965,676) - (965,676) -

Liquidation /(Purchase) of avai lable for sale investments (1,067,927) 2,369,733 (1,067,927) -

Proceed on disposal on available for sale investments ,316 716 - 243,473 -

Dividend received

Changes in loans and receivables

Proceed on disposal of subsidiary 1,234,963

Net cash used in investing activities (3,338,447) (279,257) (842,807) (1,863,183)

Cash ows from nancing activities:

Dividend paid (1,590,000) (2,006,800) (1,590,000) (2,006,800)

Net cash used in nancing activities

(Decrease)/Increase in cash and cash equivalents (861,933) 1,817,351 390,706 (1,010,692)

Cash and cash equivalents at beginning of year 7,381,532 5,528,505 3,078,850 4,053,866

Net increase/(decrease) in cash and cash equivalents (861,933) , ,1 817 351 390,706 (1,010,692)

Effect of movements in exchange rates on cash held - 35,676 - 35,676

Cash and cash equivalents at end of year 6,519,599 7,381,532 3,469,556 3,078,850


52

2,013,166 1,546,769 1,549,385 882,822

- 214,796 - -

(1,031,393) (942,694) (776,837) (647,834)

(3,635,460) (4,387,087) (3,464,293) (3,743,941)

1,131,646 1,357,650 802,331 851,656

2,319,060 1,871,133 2,099,251 1,355,745

817,786 65,819 144,398 34,838

(4,615,572) (5,914,728) (2,633,892) (1,735,159)

(2,494,644) (849,578) (2,043,076) (591,014)

(1,251,159) (1,738,815) (1,089,514) (1,012,478)

(64,545) (71,294) (64,545) (71,294)

27 (694,278) (1,120,775) (451,357) (638,718)

4,066,514 4,103,408 2,823,512 2,859,291

11,300,000 9,428,830 ,,11 300 000 5,795,811

)11,442

,12 972 1,159 11,025 2,302

1,800,000 11,106 1,800,000 637,842

- - 5,637 -

- 3,805,000 -

(1,590,000) (2,006,800) (1,590,000) (2,006,800)

Note N'000 N'000 N'000 N'000


2016 2015 2016 2015


Annual Report, 31 December 2016Consolidated and separate statements of cash owsfor the year ended 31 December 2016

I. Risk Management1.1 Enterprise Risk ReviewZenith Insurance Group's business operations are largely diversied and spread across different geographical locations. This necessitates the need for proper identication, measurement, aggregation and effective management of risks and efcient utilisation of capital to derive an optimal risk and return ratio.

Risks associated with the business of the Group include underwriting insurance risks, operational risks, nancial risks, credit risks, liquidity risk, reinsurance risk, claims management risks, regulatory risks, market risks (which includes currency risk, interest rate risk and other price risks) as well as other risks such as legal risks, reputational risk, political risk, strategic risk, emerging market risk.

1.1.1 Risk Management Philosophy/StrategyThe Group's risk management philosophy is to proactively manage all risks by aligning our people, technology and processes with the best risk management practices. The Group considers sound risk management to be the foundation of a long lasting nancial institution therefore the Group continues to adopt a holistic and integrated approach to risk management and therefore, brings all risks together under one or a limited number of oversight functions.

Our aim is to ensure that our risk management framework is appropriate to the size of the organization, aligned with our strategy, embedded in our decision making process and is responsive to our constantly changing environment. We view risk management as a shared responsibility therefore the Group aims to build a shared perspective on risks, one that is grounded in consensus. Our primary objectives are to ensure that;

Ÿ Risk Management is governed by well dened policies which are clearly communicated across the Group.

Ÿ Risk related issues are taken into consideration in all business decisions.

Ÿ The Group continually strives to maintain a conservative balance between risk and revenue considerations. All risks are identied, effectively managed and that returns are commensurate with the risk taken. The Company only underwrites a high quality portfolio of risks and payouts for claims arising as a result of errors/lapses are kept to the barest minimum.

Procedures are in place that support proper assessment of risk factors presented by potential policy holders before the inception of the risks.

1.1.2 Risk Management ApproachThe Group addresses the challenge of risks comprehensively through an Enterprise-wide risk management framework by applying leading practices that is supported by a robust governance structure consisting of board level and Enterprise Risk management committees. The Board drives the risk governance and compliance process through its committees. The Board committee provides oversight on the systems of internal control, nancial reporting and compliance. The Board Risk Committee sets the risk philosophy, policies and strategies as well as provides guidance on the various risk elements and their management.

The Group addresses the challenge of risks comprehensively through an Enterprise-wide risk management framework by applying leading practices that is supported by a robust governance structure consisting of board level and Enterprise Risk management committees. The Board drives the risk governance and compliance process through its committees. The Board committee provides oversight on the systems of internal control, nancial reporting and compliance. The Board Risk Committee sets the risk philosophy, policies and strategies as well as provides guidance on the various risk elements and their management.

The key features of the Group's risk management policy are:Ÿ The Board of Directors provides overall risk

management direction and oversight.

Ÿ The Group's risk appetite is approved by the Board of Directors.

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

Ÿ The Group manages its credit, market, operational and liquidity risks in a co-ordinated manner within the organisation.

Ÿ The Group's risk management function is independent of the business divisions.

Ÿ The Group's internal audit function reports to the Board Audit Committee and provides independent validation of the business units' compliance with risk policies and procedures and the adequacy and effectiveness of the risk management framework on an enterprise-wide basis.

53



Risk Management

The Group continually modies and enhances its risk management policies and systems to reect changes in markets, products and international best practices. Training, individual responsibility and accountability, together with a disciplined and cautious culture of control, lie at the heart of the Group's management of risk.

Shareholders

Board of Directors

Board Enterprise Risk Management Committee Statutory AuditCommittee

Business and support units Risk Management Department

MD/CEO Risk Management Committee

InternalAudit

ExternalAudit

1st Line of

defense

2nd line of

defense

3rd Line of

defense

54

1.1.3 Risk Management StructureOur risk management governance structure is designed in line with the “three lines defence” model. In this model, risk management responsibilities and accountabilities reside at all levels, from the Board downwards.

First Line of defence – Risk OwnershipOur rst line of defense comprises business units and functions with direct responsibility for managing and controlling risk. The process for evaluating and measuring risk is integrated into their day to day activities. The primary responsibilities and objectives of this line of defence include:

Ÿ Identifying, reporting and priotising existing and emerging risks;

Ÿ Implementing polices and managing risk exposures by using appropriate procedures and internal controls and;

Ÿ Identifying risk events and losses, reporting and escalating material risks and implementing remedial actions to address these issues.

Second Line of Defence- Risk OversightOur second line of defence comprises functions with direct responsibility for providing independent risk oversight, coordination, facilitation, monitoring and challenge of the effectiveness and integrity of our risk management processes. They provide support, training and counsel to business units in relation to risk

management and report on risk management activities to the Board and executive management. Their responsibilities and objectives include:

Ÿ Establishing risk policy, standards and limits and monitoring adherence;

Ÿ Providing risk oversight and independent reporting to executive management and the board;

Ÿ Assisting the rst line defence in implementing the Company's risk management framework and policy;

Ÿ Establishing a measurable and systematic process for risk assessment and governance reporting;

Ÿ Ensuring the effectiveness of risk management activities and allocating resources to execute risk management initiatives;

Ÿ Providing analytics, guidance and coordination among the different business units;

Ÿ Providing independent review and reporting on the effectiveness of risk management policy as implemented by the rst line of defence.


Annual Report, 31 December 2016Risk Management

The third line of defence comprises functions with direct responsibility for assessing and providing independent assurance on the adequacy, appropriateness, effectiveness and integrity of the Company's overall risk management framework, policy and actions.

The Board of Directors is committed to managing compliance with a robust compliance framework to enforce compliance with applicable laws, rules and standards issued by the industry regulators and other law enforcement agencies, market conventions, codes of practices promoted by industry associations and internal policies. The compliance function, under the leadership of the Chief Compliance Ofcer of the Group has put in place a robust compliance framework, which includes:

Ÿ Comprehensive compliance manual, the manual details the roles and responsibilities of all stakeholders in the compliance process,

Ÿ Review and analysis of all relevant laws and regulations, which are adopted into policy statements to ensure business is conducted professionally;

Ÿ Review of the Insurance's Anti Money Laundering Policy in accordance with changes in the Money Laundering Prohibition Act 2011 and Anti Terrorism Act 2011;

Ÿ Incorporation of new guidelines in the Insurance's Know Your Customer policies in line with the increasing global trend as outlined in the Central Bank of Nigeria's Anti Money Laundering/Combating Finance of Terrorism Compliance Manual.

The Group's culture emphasizes high standard of ethical behaviour at all levels of the Group, therefore the Group's board of directors promotes a sound organisation with the highest ethical standards.

1.1.4 Methodology for risk ratingThe risk management strategy is to develop an integrated approach to risk assessments, measurement, monitoring and control that captures all risks in all aspects of the Group's activities. All activities in the Group have been proled and the key risk drivers and threats in them identied. Mitigation and control techniques are then determined in tackling each of these threats. These techniques are implemented as risk policies and procedures that drive the strategic direction and risk appetite as specied by the board. Techniques employed in meeting these objectives culminate in the following roles for the risk control functions of the Group:

Ÿ Develop and implement procedures and practices that translate the board's goals, objectives, and risk tolerances into operating standards that are well understood by staff.

Ÿ Establish lines of authority and responsibility for managing individual risk elements in line with the Board's overall direction.

Ÿ Risk identication, measurement, monitoring and control procedures.

Ÿ Establish effective internal controls that cover each risk management process.

Ÿ Ensure that the group's risk management processes are properly documented.

Ÿ Create adequate awareness to make risk management a part of the corporate culture of the Group.

Ÿ Ensure that risk remains within the boundaries established by the Board.

Ÿ Ensure that business lines comply with risk parameters and prudent limits established by the Board.

The NAICOM Guidelines on Risk Management prescribes quantitative and qualitative criteria for the identication of signicant activities and sets a threshold of contributions for determining signicant activities in Insurance and its subsidiaries. This practice is essentially to drive the risk control focus of nancial institutions. Zenith General Insurance applies a mix of qualitative and quantitative techniques in the determination of its signicant activities under the prescribed broad headings. The criteria used in estimating the materiality of each activity is essentially based on the following:

Ÿ The strategic importance of the activity and sector.

Ÿ The contribution of the activity/sector to the total assets of the Insurance.

Ÿ The net income of the sector.

Ÿ The risk inherent in the activity and sector.

Risk Management structures and processes are continually reviewed to ensure, their adequacy and appropriateness for the Group's risk and opportunities prole as well as bringing them up to date with changes in strategy, business environment, evolving thoughts and trends in risk management.

55



1.2.1 Credit Metrics and Measurement ToolsOver the years, Zenith General Insurance and its subsidiaries have been able to devote resources and harness its credit data into developing models to improve the determination of economic and nancial threats due to credit risk. As a result some key factors are considered in credit risk measurement.1. Adherence to the strict credit selection criteria which includes dened target market, credit history, the capacity and character of customers.2. The possibility of failure to pay over the period stipulated in the contract.3. The size of the credit limit in case default occurs.

1.2.2 Credit Risk ManagementThis is the risk that the insurer may be unable to manage the settlement process by which insurers fulls their contractual obligation to policyholders. All insurers should have in place a claims management policy and procedure for ensuring that claims are handled fairly and promptly. In establishing and maintaining effective claims handling systems and procedures, Zenith General Insurance shall consider the following factors

Ÿ Appropriate systems and controls shall be maintained to ensure that all liabilities or potential liabilities notied to the insurer are recorded promptly and accurately. Accordingly, the systems and controls in place should ensure that a proper record is established for each notied claim;

Ÿ Suitable controls shall be maintained to ensure that estimates for reported claims and additional estimates based on Guideline For Developing 195:198A Risk Management Framework For Insurers And Reinsurers In Nigeria statistical evidence are appropriately made on a consistent basis and are properly categorized;

Ÿ Regular reviews of the actual outcome of the estimates made shall be carried out to check for inconsistencies and to ensure that procedures remain appropriate. The reviews should include the use of statistical techniques to compare the estimates with the eventual cost of settling the claims, after deducting the amounts already paid at the time the estimates were made;

Ÿ A functional systems shall be in place to ensure that claim les without activity are reviewed on a regular basis;

Appropriate systems and procedures should be in

56

1.1.5 Risk AppetiteThe Group's risk appetite establishes the boundaries for the aggregate level or types of risks the Group is willing to assume in order to achieve it's business objectives. The risk appetite process aims at balancing the positive and the negative aspects of risk taking. Our dened risk appetite is consistent with our business strategy and risk culture. It is reviewed by the Board of Directors annually, at a level that minimizes erosion of earnings or capital due to avoidable losses or from frauds and operational inefciencies. This reect the conservative nature of Zenith Insurance Group as far as risk taking is concerned.

1.2 Credit RiskCredit risk is dened as the likelihood that a customer or counterparty is unable to meet the contracted nancial obligations resulting in a default situation and/or nancial loss. Credit exposures arise principally in credit-related risk that is embedded in premium credits and investments.

The Group has dedicated credit standards, policies and procedures to control and monitor intrinsic and concentration risks through all credit levels of selection, underwriting, administration and control. Some of the policies are:

Ÿ Credit is only extended to suitable and well identied customers and never where there is any doubt as to the ethical standards and record of the debtor.

Ÿ Exposures to any industry or customer will be determined by the regulatory guidelines, clearly dened internal policies, debt service capability and balance sheet management guidelines.

Ÿ Credit is not extended to Direct customers

Ÿ Credit is not given to a customers (Brokers or Insurance Companies) where the ability of the customer to meet obligations is based on the most optimistic forecast of events. Risk considerations will always have priority over business and prot considerations

Ÿ The primary source of repayment for all credits must be from an identiable cash ow from the counterparty's normal premium collections from the insured.

The consequences for non-compliance with the credit policy and credit indiscipline are communicated to all staff and implemented.



57

place to assess the validity of notied claims by reference to the underlying contracts of insurance and reinsurance treaties;

Suitable systems shall be adopted to accommodate the use of suitable experts such as loss adjusters, lawyers, actuaries, accountants etc. as and when appropriate, and to monitor their use; and

Appropriate procedures shall be put in place to identify and handle large or unusual claims, including system to ensure that senior management are involved from the outset in the processing of claims that are signicant because of their size or nature.

1.2.3 Categories Of Credit RisksZenith General Insurance is exposed to the following categories of credit risk.

Direct Default Risk: This a credit risk that Zenith General Insurance will not receive the cash ows or assets to which it is entitled because brokers, clients and other receivables which Zenith General Insurance has a bilateral contract defaults on their obligations.

Concentration Risk: This is the exposure to losses due to excessive concentration of business activities to individual counterparties, groups of individual counter parties or related entities, counter parties in specic geographical locations, industry sectors, specic products etc

Counterparty Risk: This is the risk that a counter party is not able or willing to meet its nancial obligations to the company's as they fall due. The company shall therefore ensure the establishment of principles, policies and processes and structure for the management of credit risk.

(a) Other debt instrumentsWith respect to other debt instruments, the Group takes the following into consideration in the management of the associated credit risk:

Ÿ External ratings of such instruments/institutions by rating agencies like Fitch; Standard & Poor's; Agusto & Co. etc.

Ÿ Internal and external research and market intelligence reports

Ÿ Regulatory agencies reports

In addition to the above, we have put in place a conservative limits structure which is monitored from time to time in order to limit our risk exposures on these securities.

Control mechanisms for the credit risk rating systemThe company's credit risk rating system is reviewed periodically to conrm that the rating criteria and procedures are appropriate given the current portfolio and external conditions. As all models materially impacting the risk rating process are reviewed in accordance with the Groups model risk policy. Furthermore, the ratings accorded to customers are regularly reviewed, incorporating new nancial information available and the experience in the development of the Insurancing relation. The regularity of the reviews increases in the case of clients who reach certain levels in the automatic warning systems.

1.2.4 Credit ProcessesZenith operates a well-dened Credit Evaluation, Credit analysis and Approval Process System. Credits are originated from the branches/business groups and subjected to reviews at various levels

As part of credit appraisal process, the Group will have to satisfy itself in the following areas:

a) Ensure that only credit requests that meet the approved risk acceptance criteria shall be

processed;

b) The track record of the Premium debtor.

c) Assess/evaluate the repayment capacity of the premium debtor.

d) The Proposed terms and conditions and covenants.

e) Comply with the guidelines for the building credit relationships and creating quality assets in accordance with the company's risk management policies.

f) Approval from appropriate authority.

1.2.5 Group Credit Risk ManagementZenith's dynamic and proactive approach in managing credit risk is a key element in achieving its strategic objective of maintaining and further enhancing its asset quality and credit portfolio risk prole. The



58

conservative, prudent and well-established credit standards, policies and procedures, risk methodologies and framework, solid structure and infrastructure, risk monitoring and control enable the Group to deal with the emerging risks and challenges with a high level of condence and determination.The framework for credit Risk at Zenith Insurance Group is well dened and institutionally predicated on:Ÿ Clear tolerance limits and risk appetite set at the

Board level, well communicated to the business units and periodically reviewed and monitored to adjust as appropriate.

Ÿ Well-dened target market and risk asset acceptance criteria.

Ÿ Rigorous nancial, credit and overall risk analysis for each counter party transaction.

Ÿ Portfolio quality examined on regular basis according to key performance indicators mechanism and periodic stress testing.

Ÿ Concentrations are continuously assessed.

Ÿ Early warning system is continually validated and modied to ensure proper functioning for risk identication.

Ÿ Systematic credit limits management enabling the Group to monitor its credit exposure on daily basis at borrower, industry, credit risk rating and credit facility type levels.

Annual and interim individual credit reviews to ensure detection of weakness signs or warning signals and considering proper remedies.

These are intended to identify any inherent risks in the

portfolios resulting from changes in market conditions and are supplemented by independent reviews from our Group Internal Audit.Additionally, the Group continues to upgrade and ne-tune the above in line with the developments in the nancial services industry environment and technology.

1.2.6 “No premium no cover policy”As a result of the growing challenges arising from huge levels of outstanding premium reported in the nancial statements of insurance Companies, a revised guideline dated 1 January 2013 was issued by NAICOM on Insurance premium collection and remittance in which it was specied that there shall be no outstanding premium in the books of any insurer as covers granted on credit are not recognised by the law. In compliance with this policy, all insurance policies written during the year were provided on a strict "no premium no cover basis".

The Group's exposure to credit risk arising from premium is limited to transactions with brokers who have a 30 day credit period within which to remit outstanding premiums. We consider our credit exposure in this regard to be low.

1.2.7 Concentration of Risks of Financial Assets with Credit Risk ExposureThe Group monitors concentrations of credit risk by counter party and industry sector. An analysis of concentrations of credit risk at 31 December 2016 and 31 December 2015 respectively is set out below:

Analysis of credit exposure by business segmentThe following table breaks down the Group's main credit exposure at their gross amounts, as at 31 December 2016 and 31 December 2015 respectively. For this table, the Group has allocated exposures to groups based the nature of the outstanding receivables.



Company

2015

Unimpaired

37,740

214,506 - - -

Gross 37,74 466,164

Impairment allowance

- - (10,234) -

- - - -

252,246 455,9 29,851

Company

2015

N'000

North East - - - -

North Central - - - -

North West - - - -

South East - - - -

South South - - - -

South West 37,741 455,930

37,741 455,930

Exposure to credit risk

Investment Securities - HTM

Reinsurance assets (excluding prepayment)

Investment Securities AFS

Statutory Deposit

Trade Receivables

Loans and Receivables

Receivables from related parties

Other receivables (excluding prepayment)

Gross

Specic impairment

Collective impairment

Outstanding premium debtors represents receivables collectible within a 30 day period as at the year end. Hence,there are no specic nor collective Impairment.

At 31 December 2016, the maximum exposure to credit risk for trade and other receivables by geographic regionwas as follows.

Premium

Debtors

Premium

Debtors

Premium

Debtors

Premium

Debtors

Specic impairment

Collective impairment

IndividuallyCollectively

Group Company2016 2016

N'000 N'000

22,673,726 22,673,726 19,775,161

2,411,896 2,365,186 1,090,955 594,247

1,117,370 1,117,370 468,279 356,289

300,002 300,002 500,002 300,002

252,246 37,741 455,930 29,851

28,693 24,094 34,479 29,731

- - 60 24,351

8,540 - 3,357 -

26,792,473 26,518,119 22,328,223 15,564,928

- - (8,847) (8,847)

- - - -

26,792,473 26,518,119 22,319,376 15,556,081

N'000

466,164

N'000

29,851

2015

59

252,246 29,851

Company

2016

N'000

Group

2016

N'000

252,246

252,246

Group

2015

N'000

29,851

29,851

2016

N'000

37,741

Group Company

2016

N'000

37,741

Group

14,230,457

N'000

2015N'000

2015

Group Company

1.2.8 Credit quality



60

Impairment Specic ImpairmentThe specic component of the total allowance for impairment applies to trade receivables evaluated individually for impairment and is based upon management's best estimates of the present value of the cash ows that are expected to be received. In estimating these cash ows, management makes judgement about a debtor's nancial situation and the net realisable value of expected cash ow and underlying collateral (if possible). Each impaired asset is assessed on its merits, and the workout strategy and estimate of cash ows considered recoverable are independently approved by the credit review team.

Collective impairmentCollective impairment for premium debts for which no objective evidence of impairment exists. Collective impairment are calculated based on the incurred loss model.

1.3 Market riskThe Group undertakes activities which give rise to a considerable level of market risks exposures(i.e. the risk that the fair value of future cash ows of our trading and investment positions or other nancial instrument will uctuate because of changes in market prices). Market risks can arise from adverse changes in interest rates, foreign exchange rates, equity prices, commodity prices and other relevant factors such as Market volatilities. The objective of market risk management activities is to continually manage and control market risk exposure within acceptable parameters, while optimizing the return on risks taken.

1.3.1 Management of market riskThe Group has an independent Market Risk Management unit which assesses, monitors , manages and reports on market risk taking activities across the group. We have continued to enhance our Market Risk Management Framework. The operations of the unit is guided by the mission of "inculcating enduring market risk management values and culture, with a view to reducing the risk of losses associated with market risk-taking activities, and optimizing risk-reward trade-off.”

The Group's market risk objectives, policies and processes are aimed at instituting a model that objectively identies, measures and manages market risks in the Group and ensure that:

1. The individuals who take or manage risk clearly understand it.

2. The Group's risk exposure is within established limits.

3. Risk taking decisions are in line with business strategy and objectives set by the Board of Directors.

4. The expected payoffs compensate for the risks taken.

5. Sufcient capital, as a buffer, is available to take risk.

Zenith General Insurance Group currently does not offer very complex derivative products. However, we are already building capacity (both systems and training/knowledge base) to enable us handle these products as at when they are introduced.



61

Group - 31 December 2016

Fixed rate instruments Above 5 years

Carrying

amount

N’000

1 - 3 months

N’000

3 -6 months

N’000

6 - 12 months

N’000

1 - 5 years

N’000 N’000

Assets

Cash and cash equivalents 6,519,599 6,519,599 - - - -

Investment securities HTM 22,673,726 7,148,376 4,410,273 6,978,052 4,137,025 -

Loans and receivables 28,693 - - 28,693 - -

Investment securities - AFS 995,634 - 95,639 4 - - -

Statutory deposit 300,002 - - - - 300,002

30,517,654 13,667,975 5,405,907 7,006,745 4,137,025 300,002

Liabilities - - - - - -

Total interest re-pricing gap 30,517,654 13,667,975 5,405,907 7,006,745 4,137,025 300,002

Cummulative 30,517,654 13,667,975 19,073,882 26,080,627 30,217,652 30,517,654

Interest Rate RiskThe Group is exposed to a considerable level of interest rate risk-especially on the Investment contracts ( i.e. the risk that the future cash ows of a nancial instrument will uctuate because of changes in market interest rates). Similar to the last nancial year, interest rate was fairly volatile.

These changes could have a negative impact on the Net Interest Income, if not

properly managed. The Group however, has a signicant portion of its liabilities in non-rate sensitive liabilities. This greatly assists it in managing its exposure to interest rate risks. Sensitivities analysis are carried out from time to time to evaluate the impact of rate changes on the net interest income (ranging from 1 basis point to 100 basis points). The assessed impact has not been signicant on capital or earnings of the Group.

A summary of the Group's interest rate gap position on non-trading portfolios was as follows:



62

500,002

Fixed rate instruments

Carrying

amount 1 - 3 months 3 -6 months 6 - 12 months 1 - 5 years Above 5 years

N’000 N’000 N’000 N’000 N’000 N’000

Assets

Cash and cash equivalents 7,381,532 7,381,532 - -

Investment securities HTM 19,775,161 1,980,445 1,091,166 11,227,630 5,475,920

Loans and receivables 34,479 - - 34,479

Statutory deposits 500,002 - - -

27,691,174 9,361,977 1,091,166 11,262,109 5,475,920

Liabilities

Investment contract liabilities 634,392 129,035 165,021 133,080 207,256

634,392 129,035 165,021 133,080 207,256

Total interest re-pricing gap 27,056,782 9,232,942 926,145 11,129,029 5,268,664

Cummulative 27,056,782 9,232,942 10,159,087 21,288,116 26,556,780

- -

-

- -

-

500,002

-

500,002

27,056,782

Group -31 December 2015



A summary of the Company’s interest rate gap position on non-trading portfolios was as follows:


Assets

Cash and cash equivalents 3,469,553 3,469,556 - - - -

Investment securities HTM 22,673,725 7,148,376 4,410,273 6,978,052 4,137,02 -

Investment securities AFS 995,645 995,644

Statutory deposit 300,002 300,002

Loans and receivables 24,094 - - 24,094 - -

27,463,019 10,617,932 4,410,273 7,997,790 4,437,027 -

Liabilities

L ia b ilitie s - - - - - -

- - - - - -

Total interest re-pricing gap 27,463,019 10,617,932 4,410,273 7,997,790 4,437,027 -

Cummulative 27,463,019 10,617,932 15,028,205 23,025,995 27,463,022 27,463,022

63

Company - 31 December 2016



Carrying

amount

N’000

1 - 3 months

N’000

3 -6 months

N’000

6 - 12 months

N’000

1 - 5 years

N’000

Above 5 years

N’000

3,078,850 3,078,850 - -

14,230,457 - 367,425 9,326,102 4,536,930

300,002 300,002

29,731 - - 29,731

17,639,040 3,078,850 367,425 9,355,833 4,836,932

- - - -

- - - -

17,639,040 3,078,850 367,425 9,355,833 4,836,932

17,639,040 3,078,850 3,446,275 12,802,108 17,639,040

- -

-

- -

-

- -

- -

-

17,639,040

64


Assets

Total interest re-pricing gap

Cummulative

Cash and cash equivalents

Investment securities HTM

Statutory Deposit


Liabilities

Liabilities

Company - 31 December 2015



Carrying

amount

N’000

1 - 3 months

N’000

3 -6 months

N’000

6 - 12 months

N’000

1 - 5 years

N’000

Above 5 years

N’000

Sensitivity analysis

Group Company

Notes

Group

2016 2015 2016 2015

N’000 N’000 N’000Risk sensitive assets:

Cash and cash equivalents 5,025,681 6,770,717 2,712,081

Investment securities - HTM 22,673,726 19,775,161 14,230,457

Investment securities - AFS 995,634 - -

Statutory Deposit 300,002 500,002 300,002

Loans and receivables 28,693 34,479

N’000

3,070,649

22,673,726

995,634

300,002

24,094 29,731

29,023,736 27,080,359 27,064,105 17,272,271

Risk sensitive liabilities:

Inves tment contra ct lia bilities

14

15a

15b

22

15c

24 - 634,392 - -

- 634,392 - -

Group

31 December 2016

Increased by

100bp

Decreased by

100bp

N’000

At reporting

date +1% -1%

Interest income 2,921,282 11% 9% 3,211,519 2,631,045

Interest expense -

10%

0% 1% -1% 290,237 (290,237)

Net interest income 2,921,282 3,501,756 2,340,808

Impact on net interest income (580,474) 580,474

Interest rate

Company

65



66

Increased by

100bp

Decreased by

100bp

N’000

At reporting

date

2,921,282 11% 3,192,085 2,650,479

- 0%

+1%

12%

1%

-1%

10%

-1% 270,804 (270,804)

2,921,282 3,462,889 2,379,675

(541,607) 541,607

Increased by

100bp

Decreased by

100bp

N’000

At reporting

date +1% -1%

2,020,997 7% 8% 6% 2,291,638 1,750,356

2,020,997 2,291,638 1,750,356

(270,641) 270,641

Increased by

100bp

Decreased by

100bp

N’000

At reporting

date +1% -1%

1 ,858,691 11% 12% 10% 2,031,414 1,685,968

1,858,691 2,031,414 1,685,968

(172,723) 172,723

Interest rate

Interest rate

Interest rate

Interest income

Interest expense

Company

31 December 2016

Interest income

Net interest income

Impact on net interest income

Company

31 December 2015

Interest income

Net interest income


Interest rate movements affect reported equity through impact of increase or decrease in net interest income on the retained earnings.

Net interest income


Group - 31 December 2015



67

Tota l Na ira Us Dolla r Pound

3,469,556 2,309,394 16

23,815,190 20,002,748

,3 593

12,462 -

37,741 37,741 - -

,,2 411 896 2,411,896 - -

300,002 300,002 - -

30,034,385 25,061,781 16,055

Euro

193

-

-

-

-

193 16

1,571,793 1,347,322 - - -

1,574,923 - - -1,574,923

3,146,716 2,922,245 - - -

26,887,669 22,139,536 16,055 193 16

3,847,416 3,847,416 - - -

Assets

In thousands of Naira


Investment securities

Trade receivables

Reinsurance assets (excluding prepaid

reinsurance)

Statutory deposit

Total nancial assets

Liabilities

Tra de pa ya bles

Other payables (excluding non-nancial liabilities)

Total nancial liabilities

Net nancial assets/liabilities

Net policyholders' assets 23,040,253 18,292,120 16,055 193 16

1.3.3. Foreign exchange risk

The table below summaries the Company’s nancial instruments at carrying amount, categorised by currency:

31 December 2016

Foreign exchange risk is the exposure of the Company's nancial condition to the changes in foreign exchange rates. The Company is exposed to exchange rate risk as a result of cash balances denominated in currencies other than naira.

Insurance Contract liabilities



68

Total Naira Us Dollar Euro Pound

Assets

In thousands of Naira

Cash and cash equivalents 3,078,850 2,565,495 2,438 154 7

Investment securities 14,616,477 13,001,157 8,049 - -

Trade receivables 29,851 - - -

Other receivables (excluding prepayments) 1 ,815,504

29 851,

1,815,504 - - -

R eins ura nce a s s ets (exc luding prepa id reins ura nc 594,247 594,247

Statutory deposit 300,002 300,002 --

-

Total nancial assets 20,434,931 18,306,256 10,487 154 7

Liabilities

Tra de pa ya bles 1,012,971 1,012,971 - - -

Other pa ya bles (exc luding non-fina nc ia l lia bilities ) 14,701,105 14,701,105 - - -

Total nancial liabilities 15,714,076 15,714,076 -- -Net nancial assets/liabilities 4,720,855 2,592,180 10,487 154 7

Insurance contract liabilities 2,146,008 5,488,465 - - -

Net policyholders' assets 2,574,847 (2,896,285) 10,487 154 7

31 December 2015

Company



1.3.4 Equity and commodity price riskThe Group is exposed to equity price risk by holding investments quoted on the Nigerian Stock Exchange (NSE) and other non-quoted investments. Equity securities quoted on the NSE is exposed to movement based on the general movement of the all share index and movement in prices of specic securities held by the Group.

The Group does not deal in commodities and is therefore not exposed to any commodity price risk.

1.3.5 Fair valuation methods and assumptions(i) Cash and balances with central bank Cash and balances with central bank represent cash held (including mandatory central bank statutory deposit requirements of 2016: N300 million, 2015: N500 million) . The fair value of these balances approximates carrying amounts.

ii) Trade receivablesTrade receivables represents balances with contract holders, reinsurers and co-insurers.

(iii) Treasury bills and investment securitiesTreasury bills represent short term instruments issued by the Central Bank of Nigeria. The fair value of treasury bills and bonds at fair value through prot or loss are determined with reference to quoted prices (unadjusted) in active markets foridentical assets. The estimated fair value of treasury bills and bonds at amortized cost represents the discounted amount of estimated future cash ows expected to be received. Expected cash ows are discounted at current market rates to determine fair value

Fair value and fair value hierarchyThe determination of fair value for nancial assets and nancial liabilities for which there is no observable market price requires the use of certain valuation techniques. For nancial instruments that trades infrequently and have little price transparency, fair value is less objective, and

requires varying degrees of judgment depending on liquidity, concentration, uncertainty of market factors, pricing assumptions and other risks affecting the specic instrument. The Company measures fair value using the following fair value hierarchy that reects the signicance of the inputs used in making the measurement.

Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.

Level 2: Valuation techniques based on observable inputs, either directly -i.e. as prices - or indirectly - i.e. derived from prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less that active; or other valuation techniques where all signicant inputs are directly or indirectly observable from market data.

Level 3: Valuation techniques using signicant unobservable inputs. This category includes all instruments where the valuation techniques includes inputs not based on observable data and unobservable inputs have a signicant effect on the instrument's valuation. This category includes instruments that are valued based on quoted prices for similar instruments where signicant unobservable adjustments or assumptions are required to reect differences between the instruments.

In some cases, if the inputs used to measure the fair value of an asset or a liability is categorised in different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level of input that is signicant to the entire measurement.

The table below analyses nancial instruments measured at fair value at the end of the reporting period, by the level of the fair value hierarchy into which the fair value measurement is categorized.

69



In thousands of naira: Note

Group

31-Dec-16 Level 1 Level 2 Level 3 Total

Equity securities 15(b) ,3 248 118,488 - 121,736

995,634 995,634

998,882 118,488 - 1,117,370


Group


Equity securities 15(b) 409,638 58,641 - 468,279

409,638 58,641 - 468,279


Company



995,634 995,634

998,882 118,488 - 1,117,370


Company



317,916 38,373 - 356,289

70

Group Company



Group

In thousands of naira:

2016

Financial Asset Category Level 1 Level 2 Level 3 Total fair value

Total

Carrying

amount

Cash and cash equivalents Loans and receivables - 6,520,321 - 6,520,32 6,519,599

Investment securities Held to Maturity &

Available for sale 20,658,731 - - 20,658,731 23,819,789

Trade receivables Loans and receivables - 240,638 - 240,63 252,246

Reinsurance assets (exclude prepaid

reinsurance)


- - 2,411,896 2,411,896 2,411,896

Other receivables (excluding prepayments) Loans and receivables - - (10,044) (10,044) (9,321)

20,658,731 6,760,959 2,401,852 29,821,54 32,994,209

Liabilities

- - 1,347,323 1,347,323 1,923,243Trade payables

Provision and other payables Other nancial liabilities - - 2,301,012 2,301,012 1,725,092

- - 3,648,335 3,648,33 3,648,335

The following table sets out the fair values of nancial instruments not measured at fair value and analyses of them by the level in the fair value hierarchy intowhich each fair value measurement is categorised.

71

Financial instruments not measured at fair value

Other nancial liabilities



72


2015


Total

Carrying

amount

Cash and cash equivalents Loans and reeivables - 7,381,532 - 7,381,532 7,381,532


Available for sale

15,488,583 - - 15,488,583 20,243,440



reinsurance)

Loans and receivables - - 1,090,955 1,090,955 1,090,955

Other receivables (excluding prepayments) Loans and receivables - - (5,430) (5,430) (5,430)

15,488,583 7,837,462 1,085,525 24,411,570 29,166,427

Liabilities

Investment contract liabilities Other financial liabilities - - 634,392 634,392 634,392

Trade payables Other financial liabilities - - 1,036,750 1,036,750 1,361,238

Provision and other payables Other financial liabilities - - 2,097,772 2,097,772 1,773,284

- - 3,768,914 3,768,914 3,768,914

Group



73


2016


Total

Carrying

amount

Cash and cash equivalents Loans and receivables - 3,469,556 - 3,469,556 3,469,556


Available for sale 20,658,731 1,493,435 22,152,166 23,791,096



reinsurance)


- - 2,411,896 2,411,896 2,411,896

Other receivables (excluding prepayments) Loans and receivables

- - --

20,658,731

-

5,000,732 2,411,896 28,071,359 29,710,289

Liabilities

Trade payables Other financial liabilities - - 1,571,793 1,571,793 1,347,323

Provision and other payables Other financial liabilities - - 1,642,748 1,642,748 1,867,218

- - 3,214,541 3,214,541 3,214,541

Company




2015

Financial Asset Category

Cash and cash equivalents Loans and receivables


Available for sale

Trade receivables Loans and receivables

Reinsuranc assets (exclude prepaid

reinsurance)


Other receivables (excluding prepayments) Loans and receivables

Liabilities

Trade payables Other financial liabilities

Provision and other payables Other financial liabilities

75

Level 1 Level 2 Level 3 Total fair value

Total

Carrying

amount

- 3,078,850 - 3,078,850 3,078,850

10,395,597 - - 10,395,597 14,586,746

- 29,851 - 29,851 29,851

- - 594,247 594,247 594,247

- - 1,815,504 1,815,504 1,815,504

10,395,597 3,108,701 2,409,751 15,914,049 20,105,198

- - ,0 ,971 12 1 1,012,971 1,012,971

- - 1,538,639 ,,1 538 639 1,538,639

- - 2,551,610 2,551,610 2,551,610

Company



1.4 Liquidity risk

Liquidity risk is the potential loss arising from the Group’s

inability to meet its obligations as they fall due or to fund

increases in assets without incurring unacceptable cost or

losses. Liquidity risk is not viewed in isolation, because

nancial risks are not mutually exclusive and liquidity risk is

often triggered by consequences of other risks such as

insurance claim risk, credit, market and operational risks.

1.4.1 Liquidity risk management processThe Group has a sound and robust liquidity risk

management framework that ensures that sufcient

liquidity, including a cushion of unencumbered and high

quality liquid assets are maintained at all times, to enable

the Group withstand a range of stress events, including

those that might involve claim loss or signicant

impairment of funding sources.

The Group’s liquidity risk exposure is monitored and

managed by the Asset and Liability Management Team on

a regular basis. This process includes:

a. Projecting cash ows and considering the level of

liquid assets necessary in relation thereto;

b. Monitoring balance sheet liquidity ratios against

internal and regulatory requirements;

c. Maintaining a diverse range of funding sources with

adequate back-up facilities;

d. Managing the concentration and prole of debt

maturities;

e. Maintaining liquidity and funding contingency plans.

These plans identify early indicators of stress

conditions and describe actions to be taken in the

event of difculties arising from systemic or other

crises while minimizing any adverse long-term

implications for the business.

f. Regular conduct of stress testing, coupled with

testing of contingency funding plans from time to

time.

The Maximum Cumulative Outow has remained

positive all through the short tenor maturity buckets.

Assessments are carried out on Contractual and

Behavioural bases. These reveal very sound and robust

liquidity position of the Group.

The Group maintains adequate liquid assets and

marketable securities sufcient to manage any liquidity

stress situation.

76



The table below sets out the classication of each class of nancial assets and liabilities, and their maturity proles:

Carrying 1-3 4-6 1-5

Note Amount months months Years Total

N'000 N'000 N'000

7-12

months

N'000 N'000

Above 5

Years

N'000 N'000

Cash and cash equivalents 14 6,519,599 6,520,321 - - - - 6,520,321

Investment securities - HTM 15a 22,673,726 1,980,445 1,091,166 11,227,630 5,475,920 - 19,775,161

Investment securities - AFS 15b 1,117,370 - - - - 468,279 468,279

Loans and receivables 15c 28,693 - - - 34,479 - 34,479

Trade receivables 16a 252,246 42,809 - 413,121 - - 455,930

Reinsurance assets (less

prepaid reinsurance)

16b 2,411,896 763,973 598,241 123,094 926,588 - 2,411,896

Statutory deposit 22 300,002 - - - - 500,002 500,002

9,307,548 1,689,407 11,763,845 6,436,987 968,281 30,166,068

Trade payables 25 1,923,243 1,347,323 - - - - 1,347,323

Provision and other payables 26 1,725,092 1,725,092 - - - - 1,725,092

3,072,415 - - - - 3,072,415

77

31 December 2016Group



78

Carrying 1-3 4-6 7-12 1-5 Above 5

Note Amount months months months Years Years Total

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


Investment securities - HTM 15a 19,775,161 5,180,762 4,143,675 962,358 6,067,737 - 16,354,532

Investment securities - AFS 15b 468,279 - - - - 2,838,012 2,838,012

Loans and receivables 15c 34,479 - - - 34,479 - 34,479

Trade receivables 16a 455,930 33,006 - 222,866 - - 255,872



16b 1,090,955 - 1,703,586 503,031 - 2,206,617


10,742,273 4,143,675 2,888,810 6,605,247 3,338,014 27,718,019

Investment contract liabilities 24 634,392 - - 232,340 187,256 - 419,596

Trade payables 25 1,361,238 1,010,497 127,350 - - - 1,137,847

Provision and other payables 26 1,773,284 - - - - - -

1,010,497 127,350 232,340 187,256 - 1,557,443

31 December 2015Group



Carrying 1-3 4-6 7-12 1-5 Above 5


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


Investment securities - HTM 15a 22,673,726 7,148,377 4,410,273 6,978,052 4,137,025 - 22,673,727

Investment securities - AFS 15b 1,117,370 - - 995,634 121,736 - 1,117,370

Loans and receivables 15c 24,094 - - 24,094 - - 24,094

Trade receivables 16a 37,741 37,741 - - - - 37,741



16b 2,365,186 763,973 598,241 123,094 926,588 - 2,411,896


11,419,647 5,008,514 8,120,874 5,185,349 300,002 30,034,386

Trade payables 25 1,571,793 1,347,323 - - 1,347,323

Provision and other payables 26 1,867,217 1,867,217 - - - - 1,867,217

3,214,540 - - - - 3,214,540

79

31 December 2016Company




Investment securities - HTM

Investment securities - AFS

Trade receivables



Statutory deposit

Other receivables (less

prepayment)

Trade payables

Provision and other payables

80

Carrying 1-3 4-6 7-12 1-5 Above 5


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

14 3,078,850 3,078,850 - - - - 3,078,850

15a 14,230,457 367,425 9,326,102 4,536,930 - 14,230,457

15b 356,289 - - - - 356,289 356,289

16a 29,851 29,851 - - - 29,851

16b 594,247 - - 297,122 297,125 - 594,247

22 300,002 - - - - 300,002 300,002

18 1,815,504 1,815,504 - - - - 1,815,504

4,924,205 367,425 9,623,224 4,834,055 656,291 20,405,200

25 1,012,971 297,631 341,580 373,760 - - 1,012,971

26 1,538,639 1,538,639 - - - - 1,538,639

1,836,270 341,580 373,760 - - 2,551,610

31 December 2015Company



1.5 Underwriting riskUnderwriting is the process by which an insurer appraises a risk being presented by the proposer and decides whether or not to accept the risk and the consideration (premium) to receive. Weaknesses in the systems and controls surrounding the underwriting process can expose an insurer to the risk of unexpected losses which may threaten the capital adequacy of the insurer. Zenith General Insurance underwriting process is subjected to internal audit and peer review processes to ensure effectiveness.

In addition, there is a process for assessing brokers’ procedures and systems to ensure that the quality of information provided to Zenith General Insurance is of a suitable standard; and in the case of reinsurers, audits of ceding companies to ensure that reinsurance assumed is in accordance with treaties.

The government through the Nigeria Content Bill has empowered insurers to underwrite 70 per cent of risks in the country, which has also paved way for insurers to improve their operations. The factors that Zenith General Insurance uses to classify risks is considered highly objective and clearly related to the likely cost of providing coverage, practical to administer, consistent with applicable law, and designed to protect the long-term viability of the insurance program.

Underwriting Process Risk – This is risk from exposure to nancial losses related to the selection and acceptance of risks to be insured.

Mispricing Risk – Risk that insurance premium will be too low to cover the Company’s expenses related to underwriting, claim handling and administration.

Brokers’ Underwriting Risk – This is the risk that brokers may:

(I) Be inadequately trained to assess the risk and offer professional advise to the client.(II) Fail to remit premium collected to the Insurer

1.5.1 Underwriting Risk AppetiteThe following factors constitute the basis for Zenith General Insurance underwriting risk appetite:

Ÿ Risk not understood shall not be underwritten;

Ÿ Unquantiable risks would not be underwritten;

Ÿ Extreme caution shall be taken underwriting risk with low safety standards or businesses with excessively high risk prole;

Ÿ Businesses and opportunities that can create systemic risk exposure will be adequately evaluated;

Ÿ Caution will be exercised when underwriting discrete (one-off) risks, particularly where there is no requisite experience or know-how;

Ÿ Compliance will be fully achieved on NAICOM's KYC guidelines.

Zenith General Insurance develops own products through its research and development unit. We always ensure that our marketers interact with our customers in order to get a feedback. These feedbacks guide us in product development that meets their individual / corporate needs. The limits, standard and exposure are guided by prudent underwriting procedure and Reinsurance treaties.

Underwriting Responsibilities:The Underwriting unit has the following responsibilities:Ÿ Ensure adherence to reinsurance strategy and

delegated limits;

Ÿ Manage risk appetite by adhering to delegated authority standards;

Ÿ Ensure compliance with the underwriting plan, policies and manuals and implement correct sign-off process for variations;

Ÿ Manage underwriting risk exposure and ensure a high quality policy standards;

Ÿ To put in place, records of all exposures in the different lines of insurance business;

Ÿ Demonstrate skills and capability in executing underwriting activities;

Ÿ Review the suitability of cover and contact terms, and ensure that all words used are correct, appropriate and authorized.

The overall strategy motive that forms the basis for Zenith Insurance underwriting policies is to achieve growth in gross written premium/market share and also

81



to price (underwrite) risks to ensure that the company makes a targeted return on equity.

1.5.3 Underwriting Risk Management and Control:Risk management and Control department of Zenith General Insurance is responsible for the following:

• Ensure compliance with the regulatory requirements at it relates to underwriting;

• Coordinate issues tracking activities and ensure action plans are developed for all identied gaps;

• Collaborate with the underwriting risk committee to develop appetite and tolerance limits;

• Identify and manage the Company’s underwriting risk;

• Review and approve reinsurance and retrocession arrangements as mandated by NAICOM.

1.5.4 Risk Pricing ProcessesGood and prudent pricing is a key element of an insurance underwriting process. Stakeholders and decision takers in underwriting are made to know the prot implications of underwriting pricing decisions. It is important to know that appropriate pricing is necessary to maintain the quality of insurance portfolio in terms of risk underwritten. Although all risks can be priced, but not all risks should be underwritten.

1.5.4 Risk Reporting And MonitoringThere is regular reporting and monitoring process for each class of insurance business. This is to evaluate the level of performance of each of the insurance portfolio. The level of information reported ranges from a Prot/Loss account to reporting on risk segments. Some of the elements reported are listed below:

• Gross Premium written;

• Types of risks written;

• Lines of Business written

• Policy volumeAlso monitoring activities include:

• Peer review processes established within the underwriting department;

• Risk management and control review

Ÿ Monthly underwriting Risk Committee meetings where result and performances are discussed

1.5.5 Insurance riskInsurance risk is the risk that future risk claims and expenses will exceed the value placed on insurance liabilities. It occurs due to the uncertainty of the timing and amount of future cash ows arising under insurance contracts. The timing is specically inuenced by future mortality, longevity, morbidity, persistency and expenses about which assumptions are made in order to place a value on the liabilities. Deviations from assumptions will result in actual cash ows differing from those projected in the policyholder liability calculations. As such, each assumption represents a source of uncertainty.

Claims management risk This is the risk that the insurer may be unable to manage the settlement process by which insurers full their contractual obligation to policyholders. All insurers are required to have in place a claims management policy and procedure for ensuring that claims are handled fairly and promptly. In establishing and maintaining effective claims handling systems and procedures, Zenith Insurance considers the following factors:

Ÿ Appropriate systems and controls shall be maintained to ensure that all liabilities or potential liabilities notied to the insurer are recorded promptly and accurately.

Ÿ Accordingly, the systems and controls in place should ensure that a proper record is established for each notied claim;

Ÿ Suitable controls shall be maintained to ensure that estimates for reported claims and additional estimates based on Guideline For Developing a Risk Management Framework For Insurers and Reinsurers in Nigeria statistical evidence are appropriately made on a consistent basis and are properly categorized;

Ÿ Regular reviews of the actual outcome of the estimates made shall be carried out to check for inconsistencies and to ensure that procedures remain appropriate. The reviews should include the use of statistical techniques to compare the estimates with the eventual cost of settling the claims, after deducting the amounts already paid at the time the estimates were made;

82



Ÿ A functional systems shall be in place to ensure that claim les without activity are reviewed on a regular basis;

Ÿ Appropriate systems and procedures should be in place to assess the validity of notied claims by reference to the underlying contracts of insurance and reinsurance treaties;

Ÿ Suitable systems shall be adopted to accommodate the use of suitable experts such as loss adjusters, lawyers, actuaries, accountants etc. as and when appropriate, and to monitor their use; and

Ÿ Appropriate procedures shall be put in place to identify and handle large or unusual claims, including system to ensure that senior management are involved from the outset in the processing of claims that are signicant because of their size or nature.

1.7 Claims experience riskIn terms of the short-term insurance contracts held by the Group, the claims experience risk for these policies is that the number of claims and/or the monetary claim amounts are worse than that assumed in the pricing basis.

The Group manages this risk by charging premiums which are appropriate to the risks under the insurance contracts.Under the short-term insurance products, the Group also holds a concentration risk, which is the risk of a large number of claims from a single event or in a particular geographical area. This risk is reduced by diversifying over a large number of uncorrelated risks, as well as taking out catastrophe reinsurance.

Outstanding claims: represents the estimated ultimate cost of settling all claims arising from incidents occurring as at the date of the statement of nancial position. Provision for outstanding claims of N2,146,008,965 (See table 1.7.1.2(d) below) was actuarially determined based on information presented below:

1.7.1 Reserving Methods and Assumptions - 31 December 2016The provision for outstanding claims, including IBNR, was determined for each line of business on both gross and net of reinsurance basis. A yearly cohort from year 2007 has been adopted in building the historical claims. In some cases, only the year of accidents or settlement was given and hence made it impossible to identify the exact period of the year when the accident or settlement was made. However, where such cases arose, we have assumed that the accident or settlement was made in the same year.

The calculations were carried out using the following two (2) approaches explained below;

I. The Basic Chain Ladder Method (BCL): The Basic Chain Ladder method forms the basis to the reserving methods explained below. Historical incremental claims paid were grouped into 10 years cohorts by class of business – representing when they were paid after their accident year e.g. a year after 2008 etc. These cohorts are called loss development triangles.

The incremental paid claims (2007-2016) are cumulated to the valuation date and projected to their expected ultimate claim estimate. The gross claim reserve are then derived from the difference between the cumulated paid claims and the estimated ultimate claim.

ii.The Ination Adjusted Chain Ladder Method (IACL): Under this method, the historical paid losses are inated using the corresponding ination index in each of the accident years to the year of valuation and accumulated to their ultimate values for each accident year to obtain the projected outstanding claims. These projected outstanding claims are further multiplied by the future ination index from the year of valuation to the future year of payment of the outstanding claims. We have adopted the following ofcial ination index below;

83



Year Ination

Index

Accumulate d Ination

Index

2007 6 .60% 193.16%

2008 15 .10% 174.01%

2009 13 .90% 138.93%

2010 1 1 .80% 109.77%

201 1 10 .30% 87.63%

2012 12 .00% 70.11%

2013 8 .00% 51.88%

2014 8 .30% 40.63%

2015 9 .60% 29.85%

2016 18 .48% 18.48%

2017+ 15.00% 16.00%

The calculation are on two bases;Ÿ By discounting the claims estimated to the valuation

date at a discount rate of 16% p.a.

Ÿ With no discounting

Ÿ Our methods assume the future claims follow a regression pattern from the historical data. Hence payment patterns will be broadly similar in each accident year. Thus the proportionate increases in the known cumulative payments from one development year to the next used to calculate the expected cumulative payments for the future development periods.

Ÿ The run off period is four (4) years

Assumptions

Ÿ An implicit assumption of the chain ladder is that weighted past average ination will remain unchanged in to the future.

Ÿ We assume gross claim amount includes all related claim expenses. If this is not the case, we will hold a separate reserve to cover claim expenses.

Ÿ The UPR is calculated on the assumption that risk will occur evenly during the duration of the policy.

Ÿ BF method adopted assumes past experience is not fully representative of the future.

Ÿ Stochastic approach samples the loss development factors with replacement

31 December 2016 Table 1.7.1.1: Incremental Chain Ladder

Accident year

Incremental Chain Ladder- Yearly Projections (N'000)

1 2 3 4 5 6 7 8 9

2007 209,822 249,208 52,975 5,852 - - 3,508 - -

2008 641,990 1,117,162 137,668 13,682 64 4,617 534 - -

2009 319,059 258,853 21,242 21,433 33,303 8,721 2,378 - -

2010 381,860 612,537 139,397 10,317 14,489 2,430 378 - -

2011 611,985 793,540 183,072 260,680 11,441 21,574 - - -

2012 700,985 711,118 244,236 23,870 10,848 - - - -

2013 1,002,934 776,582 59,138 5,143 - - - - -

2014 850,639 673,868 75,548 - - - - - -

2015 952,427 758,775 - - - - - - -

2016 1,731,100 - - - - - - - -

84



Applying discounting, the gross claims reserve will reduce from N4,190 million above to N3,841 million leading to a net position of N1,725 million as detailed in Table 1.7.1.2(b) below Adjusting for ination, the gross claims reserve will increase from N4,190 million above to N4,207 million leading to a net position of N1,588 million as detailed in Table 1.7.1.2(c) below;

31 December 2016

Table1.7.1.2(b): Discounted Basic Chain Ladder Method

Summary of Expected Outstanding Claims (Net of Reinsurance) - Discounted

171,715

88,034

163,419

462,326

71,084

200,800

3,057

690,426

1,850,861TOTAL 4,190,292 2,339,431

Aviation 3,057 -

Oil & Gas 690,426 -

Engineering 202,162 131,078

Bond 210,654 9,854

55,558

Fire 2,404,774 1,942,448

Motor 243,554 71,839

Gen Accident 216,688 128,654

Class of Business

Gross

Outstanding

Claims

N'000

Estimated

Reinsurance

Recoveries

N'000

Net Outstanding

Claims

N'000

Marine 218,977

3,840,716 (2,115,673) 1,725,043

3,056 - 3,056

690,426 - 690,426

179,598 (114,335) 65,263

210,654 (9,855) 200,799

194,802 (50,976) 143,826

2,151,122 (1,759,177) 391,945

222,107 (66,247) 155,860

TOTAL

Aviation

Oil &Gas

Engineering

Bond

Marine

Fire

Motor

Gen. Accident 188,951 (115,083) 73,868

Class of Business

Gross

Outstanding

Claims

Estimated

Reinsurance

Recoveries

Net

Outstanding

Claims

N ‘000 N ‘000 N ‘000

85



86

31 ember 2016Dec

Claims Data

The discounted ination adjusted basic chain ladder method resulted in a gross outstanding claims reserve of

The claims data has seven risk groups – (Marine, Motor, Engineering, Bond, Fire, General Accident, and Oil & Gas).

The combined claims data, for all lines of business between 2007 and 2016, are summarized in Table 3.2a below;

Table 1.7.1.2(d): Discounted Ination Adjusted Basic Chain Ladder Method

690,426 - 690,426

3,847,415 (2,365,185) 1,482,230

210,654 (9,855) 200,799

3,057 - 3,057

2,137,995 (1,993,823) 144,172

183,821 (110,633) 73,188

208,463 (135,432) 73,031

170,591 (45,076) 125,515

N ‘000 N ‘000

242,408 (70,366) 172,042

Oil &Gas

TOTAL

Bond

Aviation

Fire

Engineering

Gen. Accident

Marine

Motor

Class of Business

Gross

Outstanding

Claims

Estimated

Reinsurance

Recoveries

N ‘000

Net

Outstanding

Claims

Should we allow for discounting, our gross claims reserve will reduce from N4,207 million above to N3,847

Table 1.7.1.2(c): Ination Adjusted Basic Chain Ladder Method

690,426 - 690,426

4,207,851 (2,618,884) 1,588,967

210,654 (9,854) 200,800

3,057 - 3,057

2,397,973 (2,201,886) 196,087

206,676 (127,125) 79,551

239,971 (154,593) 85,378

193,032 (49,122) 143,910

N ‘000 N ‘000 N ‘000

266,062 (76,304) 189,758

Oil & Gas

TOTAL

Bond

Aviation

Fire

Engineering

Gen. Accident

Marine

Motor

Class of Business

Gross

Outstanding

Claims

Estimated

Reinsurance

Recoveries

Net

Outstanding

Claims

net position of N1,482 million as detailed in Table 1.7.1.2(d) below;million leading to a

leading to a net outstanding claims of N1,552 million.N2,146 million

31 December 2016



Accident year 1 2 3 4 5 6 7

2007 174,822 249,208 52,487 5,852 - - 3,508

2008 381,706 223,679 35,747 12,967 64 4,293 534

2009 314,513 226,224 21,242 21,433 28,383 796 275

2010 380,660 228,275 46,793 10,064 13,416 1,082 387

2011 445,872 389,773 52,825 28,547 10,757 21,573 -

2012 629,117 464,905 104,856 11,863 2,679 - -

2013 606,232 381,775 41,368 5,142 - - -

2014 723,250 528,533 75,547 - - - -2015 844,548 409,786 - - - - -

2016 820,742 - - - - - -

A further summary of this data for each individual class of business is detailed below;

Cumulative Claims Development Pattern: Motor

Cumulative Claims Development Pattern: Marine

Accident year

2007 23,700 49,557 7,702 230 - -

2008 81,090 21,706 8,267 12,530 - 8

2009 48,946 5,836 1,895 12,162 131 -

2010 58,127 53,300 1,243 1,229 5,592 600

2011 51,678 70,298 13,902 7,249 875 17,890

2012 106,066 118,566 3,257 - - -

2013 89,817 56,370 6,694 183 - -

2014 86,638 64,039 10,563 - - -

2015 134,241 54,913 - - - -

2016 46,795 - - - - -



178,990 62,958 1,178 1,346 3,152 -

237,222 95,514 1,654 552 - -

273,979 85,804 5,640 510 - -

357,935 134,520 11,231 - - -

491,150 90,035 - - - -

422,870 - - - - -

106,065 98,730 1,411 1,841 - -

190,418 51,077 226 - - 378

200,715 70,474 3,329 4,708 63 -

183,366 68,088 18,975 244 56 449

1 2 3 4 5 6

1 2 3 4 5 6


87

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Accident year



Accident year 1 2 3 4 5 6 7 8 9

2007 35,687 38,050 30,225 3,517 - - 3,508 - -

2008 60,846 67,357 2,496 16 64 3,907 534 - -

2009 41,929 74,466 5,083 4,365 13,090 - 275 - -

2010 61,451 61,441 7,386 1,085 3,767 - 387 - -

2011 54,536 88,023 9,298 18,455 1,274 796 - - -

2012 153,334 107,981 24,706 2,587 1,905 - - - -

2013 94,308 47,593 5,501 2,932 - - - - -

2014 72,547 91,312 9,602 - - - - - -

2015 90,052 70,952 - - - - - - -

2016 104,299 - -

Cumulative Claims Development Pattern: Fire

Cumulative Claims Development Pattern: Engineering


Accident year 1 2 3 4 5 6

2007 4,309 8,621 57 - - -

2008 1,320 3,934 881 - - -

2009 2,316 22,168 - - 539 669

2010 5,266 2,428 13,908 - 3,800 -

2011 27,803 18,646 279 - 11 -

2012 3,677 14,113 3,265 1,643 - -

2013 7,322 12,821 - - - -

2014 20,449 26,464 1,922 - - -

2015 18,178 35,433 - - - -

2016 24,544 - - - - -


1.7.2 Reserving Methods and Assumptions - 31 December 2015

Reserving Methods and Assumptions - 31 December 2015 The provision for outstanding claims, including IBNR, was determined for each line of business on both gross and net of reinsurance basis. A yearly cohort from year 2006 has been adopted in building the historical claims. In some cases, only the year of accidents or settlement was given and hence made it impossible to identify the exact period of the year when the accident or settlement was made. However, where such cases arose, we have assumed that the accident or settlement was made in the same year.

88

Cumulative Claims Development Pattern: General Accident


2007 5,061 54,251 13,092 264 - -

2008 48,032 79,605 23,877 421 - -

2009 20,608 53,279 10,935 198 14,560 127

2010 72,450 43,019 5,281 7,506 201 33

2011 132,865 149,848 28,168 1,497 5,445 2,887

2012 128,818 128,732 71,974 7,081 774 -

2013 140,806 179,187 23,533 1,517 - -

2014 185,681 212,198 42,229 - - -

2015 110,927 158,453 - - - -

2016 222,234 - - - - -




We have carried out our calculations using the following two (2) approaches explained below;

i. The Basic Chain Ladder Method (BCL): The Basic Chain Ladder method forms the basics to the reserving methods explained below. Historical incremental claims paid were grouped into 9 years cohorts by class of business – representing when they were paid after their accident year e.g. a year after 2008 etc. These cohorts are called loss development triangles.

The incremental paid claims (2006-2015) are cumulated to the valuation date and projected to their expected ultimate claim estimate. The gross claim reserve are then derived from the difference between

Assumptions

Year Inflation

Index

2007 6.60%

2008 15.10%

2009 13.90%

2010 11.80%

2011 10.30%

2012 12.00%

2013 8.00%

2014 8.30%

2015 9.60%

2016+ 10.00%

89

the cumulated paid claims and the estimated ultimate claim.

ii. The Ination Adjusted Chain Ladder Method (IACL): Under this method, the historical paid losses are inated using the corresponding ination index in each of the accident years to the year of valuation and accumulated to their ultimate values for each accident year to obtain the projected outstanding claims.

These projected outstanding claims are further multiplied by the future ination index from the year of valuation to the future year of payment of the outstanding claims. We have adopted the following ofcial ination index below;

Ÿ The calculation are on two bases;

Ÿ By discounting the claims estimated to the valuation date at a discount rate of 10% p.a.

Ÿ With no discounting

Ÿ Our methods assume the future claims follow a regression pattern from the historical data. Hence payment patterns will be broadly similar in each accident year. Thus the proportionate increases in the known cumulative payments from one development year to the next used to calculate the expected cumulative payments for the future development periods.

Ÿ The run off period is four (4) years.Ÿ An implicit assumption of the chain ladder is that

weighted past average ination will remain unchanged in to the future.

Ÿ We assume gross claim amount includes all related claim expenses. If this is not the case, we will hold a separate reserve to cover claim expenses.

Ÿ The UPR is calculated on the assumption that risk will occur evenly during the duration of the policy.

Ÿ BF method adopted assumes past experience is not fully representative of the future.

Ÿ Stochastic approach samples the loss development factors with replacement



31 December 2015

Summary of Expected Outstanding Claims (Net of Reinsurance)

N'000 N'000 N'000

2,327,743 (635,579) 1,692,164

Aviation 4,061 - 4,061

Oil & Gas 965,367 - 965,367

Engineering 95,332 (46,453) 48,879

Bond 58,459 - 58,459

Marine 163,571 (62,542) 101,029

Fire 521,335 (331,443) 189,892

127,360

Table 1.7.2.1(a): Basic Chain Ladder Method

Class of Business

Gross

Outstanding

Claims

Estimated

Reinsurance

Recoveries

Net Outstanding

Claims

Table 1.7.2.1: Incremental Chain Ladder

Incremental Chain Ladder

Motor 223,562 (26,445) 197,117

Gen Accident 296,056 (168,696)

Applying discounting, the gross claims reserve will reduce from N2,327 million above to N2,135 million leading to a net

position of N1,537 million as detailed in Table 1.7.2.1(b) below

Adjusting for ination, the gross claims reserve will increase from N2,327 million above to N2,335 million leading to a net

position of N1,704 million as detailed in Table 1.7.2.1(c) below

Accident year 1 2 3 4 5 6 7 8

2007 209,822 249,208 52,975 5,852 - - 3,508 -

2008 641,990 1,117,162 137,668 13,682 64 4,617 534 -

2009 319,059 258,853 21,242 21,433 33,303 8,721 2,378 -

2010 381,860 612,537 139,397 10,317 14,489 2,430 - -

2011 611,985 793,540 183,072 260,680 11,441 - - -

2012 700,985 711,118 244,236 23,870 - - - -

2013 1,002,934 776,582 59,138 - - - - -

2014 850,639 673,868 - - - - - -

2015 952,427 - - - - - - -


31 December 2015



90

Summary of Expected Outstanding Claims (Net of Reinsurance) - Discounted

31 December 2015

31 December 2015

Oil &Gas -

TOTAL (594,247)

Bond -

Aviation -

Fire (315,531)

Engineering (45,319)

Gen. Accident (148,724)

Marine (68,297)

N ‘000 N ‘000

Motor

870,996

2,146,009

52,744

3,664

,494 989

66,634

291,235

151,742

214,005 (16,376)

Table 1.7.2.1(d): Discounted Ination Adjusted Basic Chain Ladder Method

Class of Business

Gross

Outstanding

Claims

Estimated

Reinsurance

Recoveries

Oil & Gas 965,367

TOTAL 2,335,867

Bond 58,459

A viation 4,061

F ire 528,243

E ngineering 71,211

Gen. A ccident 316,638

Marine 164,530

N ‘000

Motor 227,358

-

(631,101)

-

-

(335,208)

(48,088)

(158,095)

(72,028)

N ‘000

(17,682)

Table 1.7.2.1(c): Ination Adjusted Basic Chain Ladder Method

Class of Business

GrossOutstanding

Claims

EstimatedReinsurance

Recoveries

Table1.7.2.1(b): Discounted Basic Chain Ladder Method

Should we allow for discounting, our gross claims reserve will reduce from N2,335 million above to N2,146 million

net position of N1,551 million as detailed in Table 1.7.2.1(d) below

91

leading to a

31 December 2015

870,996

1,551,762

52,744

3,664

179,458

21,315

142,511

83,445

N ‘000

197,629

Net

Outstanding

Claims

965,367

1,704,766

58,459

4,061

193,035

23,123

158,543

92,502

N ‘000

209,676

NetOutstanding

Claims

TOTAL 2,135,624 (598,224) 1,537,400

Aviation 3,664

Oil &Gas 870,996

Engineering 89,115 (43,856) 45,259

Bond 52,744

Marine 150,929 (59,302) 91,627

Fire 487,406 (311,775) 175,631

Motor 210,216 (24,790) 185,426

Gen. Accident 270,554 (158,501) 112,053

Class of Business

Gross

Outstanding

Claims

N ‘000 N ‘000 N ‘000

3,664

870,996

52,744

Net

Outstanding

Claims

-

-

-

Estimated

Reinsurance

Recoveries



The discounted ination adjusted basic chain ladder method resulted in a gross outstanding claims reserve of N2,384 million leading to a net outstanding claims of N1,573 million.

Claims DataThe claims data has seven risk groups – (Marine, Motor, Engineering, Bond, Fire, General Accident, and Oil & Gas).The combined claims data, for all lines of business between 2007 and 2015, are summarized in Table 3.2a below.

92

1 2 3 4 5 6

2007 174,822 249,208 52,487 5,852 - -

2008 381,706 223,679 35,747 12,967 64 4,293

2009 314,513 226,224 21,242 21,433 28,383 796

2010 380,660 228,275 46,793 10,064 13,416 1,082

2011 445,872 389,773 52,825 28,547 10,757 -

2012 629,117 464,021 66,434 8,639 - -

2013 606,232 348,790 41,368 - - -

2014 722,639 486,536 - - - -

2015 808,299 - - - - -

A further summary of this data for each individual class of business is detailed below

Cumulative Claims Development Pattern: Motor


2007 106,065 98,730 1,411 1,841 - -

2008 190,418 51,077 226 - - 378

2009 200,715 70,474 3,329 4,708 63 -

2010 183,366 68,088 18,975 244 56 449

2011 178,990 62,958 1,178 1,346 3,152 -

2012 237,222 95,514 1,654 552 - -

2013 273,979 85,804 5,640 - - -

2014 357,953 134,520 - - - -

2015 486,386 - - - -

Cumulative Claims Development Pattern: Marine


2007 23,700 49,557 7,702 230 - -

2008 81,090 21,706 8,267 12,530 - 8

2009 48,946 5,836 1,895 12,162 131 -2010 58,127 53,300 1,243 1,229 5,592 600

2011 51,678 70,298 13,902 7,249 875 -2012 106,066 118,566 3,257 - - -

2013 89,817 56,370 6,694 - - -

2014 86,638 64,039 - - - -

2015 102,746 - - - - -



Accident year




Cumulative Claims Development Pattern: General Accident

1 2 3 4 5 6 7 8Accident year

2007 35,687 38,050 30,225 3,517 - - 3,508 -

2008 60,846 67,357 2,496 16 64 3,907 534 -

2009 41,929 74,466 5,083 4,365 13,090 - 275 -

2010 61,451 61,441 7,386 1,085 3,767 - - -

2011 54,536 88,023 9,298 18,455 1,274 - - -

2012 153,334 107,981 24,706 2,587 - - - -

2013 94,308 47,593 5,501 - - - - -

2014 72,547 89,460 - - - - - -

2015 90,052 - - - - - - -

Cumulative Claims Development Pattern: Fire

Accident year

Cumulative Claims Development Pattern: Engineering


2007 4,309 8,621 57 - - -

2008 1,320 3,934 881 - - -

2009 2,316 22,168 0 - 539 669

2010 5,266 2,428 13,908 - 3,800 -

2011 27,803 18,646 279 - 11 0

2012 3,677 14,113 3,265 1,643 0 0

2013 7,322 12,821 - 0 0 0

2014 19,820 26,464 0 0 0 0

2015 18,178 0 0 0 0 0


1 2 3 4 5 6

2007 5,061 54,251 13,092 264 - -

2008 48,032 79,605 23,877 421 - -

2009 20,608 53,279 10,935 198 14,560 127

2010 72,450 43,019 5,281 7,506 201 33

2011 132,865 149,848 28,168 1,497 5,445 -

2012 128,818 127,848 33,552 3,857 - -

2013 140,806 146,202 23,533 - - -

2014 185,681 172,053 - - - -

2015 110,927 - - - - -



93



1.8 Reinsurance riskThis is the risk of inadequate reinsurance cover which may be triggered by a situation such as the insolvency of a reinsurer, omission to cede risk to the treaty, wrong cession to the treaty, assumption of risks without reinsurance cover , acceptance of risks above automatic capacity and there is already market saturation and non-payment of reinsurance premium as at when due. Zenith General Insurance ensures that it maintains adequate reinsurance arrangements and treaties in respect of the classes or category of insurance business authorized to transact. Zenith General Insurance has put in place a documented policy stating:

Ÿ Systems for the selection of reinsurance brokers and other reinsurance advisers;

Ÿ Systems for selecting and monitoring reinsurance programmes;

Ÿ Clearly dened managerial responsibilities and controls;

Ÿ Presence of a well resourced reinsurance department that prepares clear methodologies for determining all aspects of a reinsurance programme.

Ÿ Senior management that should review an insurer’s reinsurance management systems on a regular basis.

The strategy for assessing and managing the impact of our business plans on present and future regulatory capital forms an integral part of the Group’s strategic plan. Specically, the Group considers how the present and future capital requirements will be managed and met against projected capital requirements. This is based on t h e G r o u p ' s a s s e s s m e n t a n d a g a i n s t t h e supervisory/regulatory capital requirements taking

account of the Group business strategy and value creation to all its stakeholders.

1.9 Capital managementThe Group prides itself in maintaining very healthy capital adequacy ratio in all its areas of operations. Capital levels are determined either based on internal assessments or regulatory requirements.

The Capital Adequacy of the Group is reviewed regularly to meet regulatory requirements and standard of international best practices in order to adopt and implement the decisions necessary to maintain the capital at a level that ensures the realisation of the business plan with a certain safety margin.

The Group undertakes a regular monitoring of capital adequacy and the application of regulatory capital by deploying internal systems based on the guidelines provided by the National Insurance Commission (NAICOM) and the regulatory authorities of the subsidiaries for supervisory purposes.

The Group has consistently met and surpassed the minimum capital adequacy requirements applicable in all areas of operations.Most of the Group's capital is Tier 1 (Core Capital) which consists of essentially share capital, and reserves created by appropriations of retained earnings.

The Group’s capital plan is linked to its business expansion strategy which anticipates the need for growth and expansion in its branch network and IT infrastructure. The capital plan sufciently meets regulatory requirements as well as provides adequate cover for the Group’s risk prole. The Group's capital adequacy remains strong and the capacity to generate and retain reserves continues to grow.

94



Admissible assets

Financial assets


(less offshore bank balances, investments and pledged funds) 3,469,556 3,078,850

Financial assets HTM 22,673,726 14,230,457

Financial assets AFS 1,117,370 356,289

Trade receivables 37,741 29,851

Investments in subsidiary 400,000 24,228,837 2,400,000 17,016,597

Other Assets:

Reinsurance assets 3,674,481 1,929,443

Deferred acquisition costs 448,625 516,047

Staff loans and advances 24,094 29,731

4,147,200 2,475,221Statutory deposits

300,002 300,002Property and equipment

1,084,824 948,077Total admissible assets

33,230,419 23,818,747

Less: total liabilities

Reserves for unexpired risks 3,228,676 3,342,457

Reserves for outstanding claims 3,847,416 2,146,008

1,571,793 1,012,971

Provision and other payables 1,642,748 1,538,639

Current income tax liabilities 829,740 1,093,109

(11,120,373) (9,133,184)

Excess of admissible assets over liabilities - solvency margin 22,110,046 14,685,563

Trade payables

Group's solvency margin ratio The table below shows the computation of the Group's solvency margin ratio for the year ended 31 December 2016 as well as the 2015 comparatives.

Solvency MarginThe Insurance Act of Nigeria (Section 24) prescribed that an insurer shall, in respect of its business other than life insurance business, maintain a margin of solvency being the excess of the value of its admissible assets in Nigeria over its liabilities in Nigeria.

The solvency margin, which is determined as the excess of admissible assets over total liabilities shall not be less than 15% of the gross premium income less reinsurance premiums paid out during the year under review or the minimum paid up capital, which ever is greater.

The Company's position is as follows:

95

Higher of;

Gross premium income 8,019,023

Less: Reinsurances (3,350,331)

Net premium

15% of Net premium

or

Minimum capital base: Non-life business

The higher thereof:

Excess of margin of solvency over statutory minimum

Solvency ratio

4,668,692

700,304

8,555,214

(3,740,190)

4,815,024

722,254

3,000,000

3,000,000

19,110,046

637%

3,000,000

11,685,563

390%

3,000,000

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

2016 2015



Information on Actuary

O.O Okpaise

FRC/NAS/00000000738

Regulatory Capital Requirement

Associate, Society of Actuaries, USA

96

The Company's solvency margin of N22,110,047,000 (2015; N14,685,563,000.00) is greater than the minimum capital by N19,110,047,000 (2015; N11,685,563,000.00).

NAICOM requires the Company to maintain a minimum capital of N3billion (General business).The Company's (General business) capital base was N21billion (2015:N16.8billion).



1.10. Operational riskOperational Risk is the risk of loss resulting from inadequate and/or failed internal processes, people and systems or from external events, including legal risk and any other risks that is deemed t on an ongoing basis but exclude reputation and strategic risk. Operational risk exists in all products and business activities. Operational Risk is considered a critical risk faced by the Group.

The group proactively identies, assesses and manages all operational risks by aligning the people, technology and processes with best risk management Practices towards enhancing stake holders' value and sustaining industry leadership.Operational risk objectives includes the following:

Ÿ To provide clear and consistent direction in all operations of the group;

Ÿ To provide a standardised framework and appropriate guidelines for creating and managing all operational risk exposures;

Ÿ To enable the group identify and analyse events (both internal and external) that impact on its business.

The basic principles that guide the operational risk activities include:

Operational risks are identied by the assessments covering risks facing each business unit and risks inherent in processes, activities and products.

Risk assessment incorporates a regular review of risks identied to monitor signicant changes. Risk mitigation, including insurance, is considered where this is cost-effective.

The Operational Risk Unit constantly identies and assesses the operational risk inherent in all material products, activities, processes and systems. It also ensures that before new products, activities, processes and systems are introduced or undertaken, the operational risk inherent in them is identied clearly and subjected to adequate assessment procedures.

The techniques employed by the group in its measurements include the following: Key Control Self Assessment (KCSA): Key Risk Indicators (KRIs) and the Risk Register. These tools have been quite useful in the identication, measurement and analyses of operational risk in the group. These are subject to review from time to time.

Training and sensitisation on operational risk is carried out on an ongoing basis across the group. There was no signicant operational risk incidence during the nancial year.

1.11 Strategic riskStrategic risk examines the impact of design and implementation of business models and decisions, on earnings and capital as well as the responsiveness to industry changes. This responsibility is taken quite seriously by the Board and Executive management of the Group and deliberate steps are taken to ensure that the right models are employed and appropriately communicated to all decision makers in the Group. The execution, processes and constant reviews ensures that strategic objectives are achieved. This has essentially driven the Group's sound Insurance culture and performance record to date.

1.12 Legal riskLegal risk is dened as the risk of loss due to defective contractual arrangements, legal liability (both criminal and civil) incurred during operations by the inability of the organisation to enforce its rights, or by failure to address identied concerns to the appropriate authorities where changes in the law are proposed.

The Group manages this risk by monitoring new legislation, creating awareness of legislation amongst employees, identifying signicant legal risks as well as assessing the potential impact of these.

Legal risks management in the Group is also being enhanced by appropriate product risk review and management of contractual obligations via well documented Service Level Agreements and other contractual documents. The Group also has a team of well experienced professionals who handle legal issues across the Group.

1.13 Reputational riskIt is recognised that the Group's reputation may suffer adversely due to bad publicity, non-compliance with regulatory rules and legislation, which may lead to a signicant drop in new business and/or a signicant increase in the number of lapses and/or withdrawals.The Group promotes sound business ethics among its employees.

The Group also strives to maintain quality customer services and procedures, and business operations that enable compliance with The Group did not record any issue with major reputational effect in the nancial year.

97



1.14 Taxation riskTaxation risk refers to the risk that new taxation laws will adversely affect the Group and/or the loss of non-compliance with tax laws.

The taxation risk is managed by monitoring applicable tax laws, maintaining operational policies that enable the Group to comply with taxation laws and, where required, seeking the advice of tax specialists.

This risk is well managed across the Group.

1.15 Regulatory riskThe Group manages the regulatory risk which it is potentially exposed to by monitoring new regulatory rules and applicable laws, and the identication of signicant regulatory risks. The Group strives to maintain appropriate procedures, processes and policies that enable it to comply with applicable regulation.

The Group has continued to maintain zero tolerance posture for any regulatory breaches in all its area of operations. The strengthening of Compliance Group during the nancial year has further enhanced the process of management of regulatory risk across the Group.

1.15.1 Persistency riskPersistency risk relates to the risk that policyholders may withdraw their benets and terminate their contracts prior to the contractual maturity date of the contract. Expenses such as commission and acquisition expenses are largely incurred at the outset of the contract. These up front costs are expected to be recouped over the term of a contract from fees and charges from the contract. Therefore, if the contract is terminated before the contractual date, expenses might not have been fully recovered, resulting in losses being incurred.

Where a surrender benet is payable, the benet amount on withdrawal normally makes provision for recouping any outstanding expenses. However, losses may still occur if the expenses incurred in respect of the policy exceed the value of the policy, or where the withdrawal benet does not fully allow for the recovery of all unrecouped expenses. This may either be due to the application of a regulatory minimum surrender benet applying, or because of product design.

1.15.2 Expense riskThere is a risk that the Group may experience a loss due to actual expenses being higher than those assumed when pricing and valuing policies. This may be due to inefciencies, higher than expected ination, lower than

expected volumes of new business or higher than expected terminations resulting in smaller in-force policies.

To manage this risk, the Group performs expense investigations annually and sets pricing and valuation assumptions to be in-line with the actual expenses experience, with allowance for ination.

The Group's exposure to unexpected increases in the ination rate is expected to be minimal due to the short-term nature of their business and their ability to review premium rates at renewals (typically on an annual basis).

1.15.3 Business volume riskThere is a risk the Group may not sell sufcient volumes of new business to meet the expenses associated with distribution and administration. A signicant portion of the new business acquisition costs are variable and relate directly to sales volumes.

1.15.4 Capital adequacy riskThere is a risk that the capital held by the Group to back to its insurance liabilities may prove to be inadequate on a regulatory solvency basis. This may then lead to intervention by the Regulator and may further lead to a fall in the reputation of the group (see Reputational risk below for further details). At an extreme, the Regulator may require the Group to close new business. This will have a further negative impact on the Group.

This risk is monitored and assessed by performing annual valuations on the life insurance liabilities performed by an independent valuation actuary, calculating the outstanding claims reported (OCR) and Incurred But Not Reported (IBNR) contingency reserves, monitoring any regulatory rules applying to the assets and the adequacy of the assets to back the liabilities and adopting an investment strategy which is aimed at investing in admissible assets and maintaining adequate capital.

In addition, sensitivity and scenario analysis are performed to assess the Group capital adequacy under various scenarios and to ensure that the Group will remain nancially sound under some stress economic conditions.

1.15.5 Asset liability matching riskDue to the short-term nature of the Group's insurance business, most of the liability cash ows will be of short-term nature. The asset liability matching risk lies in the

98



risk that the cash inows from the assets held will not match liability cash outows in terms of timing and/or amounts. Therefore, the risk arises that the Group will be unable to meet policyholder obligations. In this case, the asset liability mismatch risk is similar to liquidity risk described under liquidity risk (section 1.4).

1.15.6 Assumption riskIn determining the value of insurance liabilities, assumptions need to be made regarding future rates of mortality, morbidity, termination rates, expenses and investment performance. The uncertainty of these rates may result in actual experience being different from that assumed and hence actual cash ows being different from those projected, and, in the extreme, that the actual claims and benets exceed the liabilities. The risk is mitigated to an extent through:

The addition of margins, specically where there is evidence of moderate or extreme variation in experience;The use of appropriate sources of data; andRegular actual versus expected investigations.

Due to the short-term nature of the Group's business, exposure to unexpected changes in trends in experience is minimal since premium rates are reviewable at renewal.

1.15.7 Data riskData risk is the risk that data used in the policyholders' liabilities valuation calculations are inaccurate or incomplete and, therefore, are not a true and accurate view of the insurance contracts held by the Group. The data could be inaccurate or incomplete due to incorrect data or valuation extracts between the policy administration system and the actuarial valuation model and/or incorrect capturing of data on the policy administration system.

This risk is managed by the Group through regular data integrity testing in order to assess the appropriateness, accuracy and credibility of the various data sets as well as investigations into data exceptions reported. Where insufcient internal data is available, the Group makes use of external sources to derive its pricing and valuation assumptions. Frequent monitoring of these external sources is performed, including actual versus expected investigations.

1.15.8 Model riskThere is a risk that the Group may suffer a loss if the model used to calculate the insurance liabilities does not project expected cash ows under the insurance

contracts accurately. The expected cash ow projections may be inaccurate either due to the model itself being incorrect, inappropriate to the policies being valued or inaccurate and/or the underlying assumptions used in the model being inappropriate.

The Group makes use of an independent valuation actuary to value its liabilities. The models being used to value the liabilities are, therefore, not internal to but belong to an external third party. The model risk underlying the use of third party models are addressed by:

·Regular actual versus expected cash ow investigations to assess the appropriateness of the external models; and

Detailed investigations are performed annually to ensure the integrity of the data used in the valuation process.

1.16 Sustainability ReportZenith Insurance Group is committed to sustainable development and the responsible stewardship of resources. This implies developing solutions that link economic success with social responsibility, which requires balancing short and long term goals and interests and integrating economic, environmental and social considerations into business decisions across the board.

1.16.1 External Principles (a) Sustainable Lending Sustainability of the environment is central to the Group, and its wider social and environmental impact is of concern. Zenith General Insurance Company goes beyond concerted efforts to minimise energy usage internally and dispose of waste responsibly, to also having in place lending policies that promote sustainable lending and ensure high environmental standards.

(b) Integrating environmental impact considerations into business decisions across the groupZenith has established an environmental guideline, management system and governance model that integrates environmental impact considerations into lending decisions across the group with initial focus on some signicant sectors/industries. The Group's lendingpolicies has been redesigned to ensure that are facilitiesnot extended to industries that engage in illegal activities, pollute the environment, have no proper pol lut ion control methods, are involved in manufacturing and selling arms, as well as those engaged in activities that involve harmful or exploitative

99



forms of forced labour or child labour.Zenith has in place an Environmental and Social Management System (ESMS) where the Group does a social and environmental risk analysis for borrowers and takes measures to avoid, mitigate and minimise the risks identied. The ESMS of the Insurance identies E n v i r o n m e n t a l & S o c i a l ( E & S ) r i s k s i n t h e projects/companies the Insurance nances and encourages mitigatory action by these groups to minimize such risks at a very early stage of the credit evaluation.

1.16.2 Internal Principles(a) Waste Reduction & RecyclingThe Insurance continually promotes reduced paperless culture where employees are encouraged to use electronic communications, online approvals and other web- based applications, and to print documents only when required. Document workows are automated, which minimizes paper usage.

(b) Employee RelationsZenith General Insurance Group believes that its people are the driving force behind its success and the main competitive advantage that positions it ahead of competition. The group is of the view that its future lies in a committed team of individuals who are convinced of their future at the organisation.

To this end, Zenith General Insurance remains committed to creating a healthy, safe and fullling work environment that supports personal growth, encourages individuality and instigates team spirit. The group organizes numerous training programs covering soft skills, negotiation skills to personality development and encourages all staff to participate actively.

(C ) DiversityZenith Insurance Group recognizes the need to promote a diverse workforce as a means to attracting top-ight talent and enhancing its competitive advantage. It further recognizes that each employee brings to the workplace experiences and capabilities that are as unique as the individual.

The Group treats all employees fairly and does not discriminate on the basis of gender, race, colour, nationality, religious belief or any other distinctive attribute. Furthermore, we take steps to assure that underrepresented groups continue to have access to available opportunities within the organisation and that they are upwardly mobile within the system at all managerial levels within the group.(d) Occupational Health & Safety

The health and safety of employees, customers and other stakeholders is of paramount importance to the group. The group constantly seek to identify and reduce the potential for accidents or injuries in all its operations. There is ongoing training of health and safety ofcers in line with the group's health and safety policy. There is also adequate communication of the health and safety policies across the group to ensure staff are conversant with its content.

(e) Supply Chain ManagementThe Group will continue to work in active partnership with its suppliers to help them manage their own social and environmental risks, particularly those rms which have more signicant impacts than it does and those in countries, where the regulatory framework is sometimes not as stringent as our standards. The group is also committed to treating its suppliers with respect, especially in areas such as contract terms and conditions and payment terms.

1.17 Internal control & audit and risk management proceduresThe Internal Control function is an independent appraisal activity, established by Management of Zenith General Insurance Company Ltd to conduct reviews and investigations into manual and computer operations and management systems and report ndings and recommendations to management for guidance and decision-making.

The mission of Internal Control is to provide independent appraisal of all activities of Zenith General Insurance Company Limited with the aim of adding value, improve operational efciency, business effectiveness, risk management and ensure that effective controls are in place. The Internal Control Department provides Management with assurance that the controls which govern the company's activities, computer systems and operations are properly conceived and are being effectively administered.

The major objective of the Internal Control Department is to examine and evaluate whether the Zenith General Insurance Company Limited framework for risk management, control, and corporate governance processes are adequate and functional while also advising the Executive Management and the Audit Committee on areas of improvement in internal control and risk management systems.

The Board has adopted a holistic and integrated

100



approach to Internal Control, Governance, Risk Management and Compliance framework. This allows for a mutual and well coordinated approach to managing underwriting, operational, investments, credit, liquidity, and legal/regulatory risks.

As a matter of utmost importance Zenith General Insurance has implemented various activities aimed at maintaining a world-class internal control environment that is capable of minimising risk in various areas of its activities.

In carrying out its duties, the Internal Control Department has full and unrestricted access to all of the company's activities, records, and computer systems necessary for the execution of the agreed audit plans.

Given the dynamic nature of the business of insurance, and indeed all businesses, the Internal Control Department of Zenith General Insurance regularly reviews internal control measures and builds necessary checks and balances through the issuance of circulars, procedures or policies in line with the dictates of events within and outside the company.

The Internal Control function of the company is currently conducted on Risk-based approach which focuses on risk as its objectives. This is aimed at providing, on a continuous basis, an independent assurance to the Board that:

Ÿ The risk management processes which management has put in place within the company are operating as intended.

Ÿ The risk management processes are sound.

Ÿ The responses which management has made to risks which they wish to address are both adequate and effective in reducing those risks to a level acceptable to the Board.

Ÿ A sound framework of controls is in place to sufciently mitigate those risks which management wishes to treat.

Ÿ There is a process in place of reducing potential loss due to risks to an acceptable level while maximising returns from opportunities.

Ÿ To help Management direct resources to the best opportunities that can create maximum returns with minimum risk while promoting continuous improvement.

Organisation and reporting line The Internal Control and Audit Department reports to the Board of Directors through the Board Audit Committee of the company. The department currently operates via ve (5) sub-units as listed below:

(1) Underwriting review unitConducts regular reviews to determine cases of improper assessments where they exist, of the risk factors presented by a policyholder ; (2) Investment / liquidity appraisal unitReviews Investment risks due to uctuations in interest rates earned on money market placements and movements in prices in the capital market with the aim of guiding against substantial diminution in investments. It also reviews on regular basis, the company's ability to meet obligations as and when due and make recommendations to management as appropriate;

(3) Credit review & monitoring unitRegularly reviews and monitors the nancial health of Re-insurers/Co-insurers and other debtors so as to identify in advance and put measures in place to mitigate the impact of sudden loss of capacity of these parties to pay their obligations as they fall due.

(4) Claims review & evaluation unit Reviews all claims notications, making sure proper due diligence is carried out in order to ensure only genuine and properly substantiated claims are settled. All disputes arising from claims are properly investigated and resolved in a timely manner.

(5) Regulatory compliance unitRegularly reviews to ensure that regulatory reserves (reserve for unexpired risk, contingency reserve, reserve for claims payable) fall within the benchmark prescribed by law; otherwise, it reports any exceptions observed. In addition, it also ensures that regulatory returns are rendered as and when due while also ensuring adherence to all KYC details on policy holders, especially as regards proper identication. It also ensures effective monitoring and reporting of all cash and suspicious transactions in compliance with the law.

101



2. Operating SegmentsThe Group has three reportable segments, as described below, which are the Group's strategic business segments. The following summary describes the operations in each of the Group's reportable segments:

General Insurance business: Includes non-life insurance transactions with individual and corporate customers-Health Care: Includes health insurance policies with individual and corporate customers. Investment Management: Includes income generated from the Group's investment and other sources

Group

In thousands of Naira 2016 2016 2015 2016 2015

External revenues 5,392,885 5,520,348 2,928,645 3,293,877 3,871,173 12,192,703 9,148,135

Other revenue - - - - - - - -

Total revenue 5,392,885 5,520,348 2,928,645 3,293,877 12,192,703 9,148,135

Investment income - - - - 2,099,251 9,148,135

Expenses

Personnel expenses (804,734) (641,988) (232,358) - (1,037,092)

Other expenses (2,917,285) 718,320 (224,690) - (3,141,975)

Operating Surplus before tax 1,670,866 5,596,680 2,471,597 10,112,887

Income tax expense (495,591) (891,187) (129,383) - (624,974)

Operating Surplus after tax 1,175,275 4,705,493 2,342,214

2,848,23

(203,120)

(242,518)

9

(178,173)

2,670,066 9,487,913

(845,108)

475,802

17,926,964

(1,069,360)

16,857,604

Assets & Liabilities

Reportable segment assets 37,026,90232,106,007 23,450,486 3,704,877 3,373,886 2,530,676 29,355,048

Reportable segment liabilities 9,477,625 7,594,545 1,832,447 1,762,247 1,642,748 1,538,639 12,952,820 10,895,431

Geographical segment

Nigeria is the Company's primary geographical segment as all the Company’s income is derived in Nigeria. Accordingl y, no further geographical

Generalbusiness

2015

Generalbusiness Health Care Health Care

2016

Investmentmanagement Total Total

102

Information regarding the results of each reportable segment is included below. Performance is measured based on segment prot before income tax, as included in the internal management reports that are reviewed by the Group’s Management Committee. Segment prot is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. Inter-segment pricing is determined on an arm’s length basis.

2015

333,910

333,910

3,701,210

-

-

4,035,120

Investmentmanagement

-

4,035,120

3,871,173

2,099,251

5,970,424

5,970,424

1,216,018

segments information is reported.

Operating SegmentsZenith General Insurance Company Limited


Accounting classication measurement basis and fair values

The table below sets out the Company’s classication of each class of nancial assets and liabilities, and their fair values.

Group

31 December 2016 Loans and Designated Held to Others Total carrying FairNote receivables at fair value maturity amount value

N'000 N'000

Available-for-sale

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

Cash and cash equivalents 14 6,519,599 - - - - 6,519,599 6,519,599

Investment securities - HTM 15a - - - 22,673,726 - 22,673,726 22,152,166

Investment securities - AFS 15b - - 1,117,370 - - 1,117,370 1,117,370

Loans and receivables 15c 28,693 - - - - 28,693 28,693

Trade receivables 16a 252,247 - - - - 252,247 252,247

Reinsurance assets (less prepaid

insurance) 16b

2,411,896 - - - - 2,411,896 2,411,896


9,512,437 - 1,117,370 22,673,726 - 33,303,533 32,781,973

Investment contract liabilities 24 - - - - - -

Trade payables 25 - - - - 1,347,323 1,347,323 1,347,323

Provision and other payables 26 - - - - 2,301,012 2,301,012 2,301,012

- - - - 3,648,335 3,648,335 3,648,335

103

3. Financial assets and Liabilities

Financial assets and Liabilities



Loans and Designated Available- Held to Others Fair

Note receivables at fair value for-sale maturity

Total carrying

amount value

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



Investment securities - AFS 15b - - 468,279 - - 468,279 468,279




insurance) 16b

1,090,955 - - - - 1,090,955 2,426,151


9,462,898 - 468,279 19,775,161 - 29,706,338 26,754,956

Investment contract liabilities 24 - - - - 634,392 634,392 634,392

Trade payables 25 - - - - 1,036,750 1,036,750 1,036,750


- - - - 3,768,914 3,768,914 3,768,914

104

Group

31 December 2015




Loans and Available- Others Fair

Note receivables

Designated

at fair value for-sale

Held to

maturity

Total carrying

amount value

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



Investment securities - AFS 15b - 1,117,370 - - 1,117,370 1,117,370




reinsurance) 16b

2,411,896 - - - - 2,411,896 2,411,896


6,243,289 - 1,117,370 22,673,726 - 30,034,385 29,512,825

Trade payables 25 - - - - 1,347,323 1,347,323 1,347,323


- - - - 3,214,541 3,214,541 3,214,541

105

Company

31 December 2016




Loans and Held to Others Fair

Note receivables

Designated

at fair value

Available-

for-sale maturity value

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

Total carrying

amount

N'000 N'000

Cash and cash equivalents 14 366,769 - - 2,712,081 - 3,078,850 3,078,850


Investment securities - AFS 15b - - 356,289 - - 356,289 356,289




reinsurance) 16b594,247 -

Statutory deposit 22 300,002 - - - -

1,320,600 - 356,289 16,942,538 -

Trade payables 25 - - - -

Provision and other payables 26 - - - -

- - - -

1,012,971

1,538,639

2,551,610

594,247

300,002

18,619,427

1,012,971

1,538,639

2,551,610

1,929,443

300,002

16,119,763

1,012,971

1,538,639

2,551,610

106

Company

31 December 2015




4 Gross premium written

Fire

Accident

Motor

Marine

Bond

Engineering

Aviation

Oil & gas

Medical plans


5 Gross premium income

Short term insurance contract:

Gross premium

Increase/(decrease) in unearned premium (see note 23(d))

6 Reinsurance expenses

Reinsurance premium ceded (see note (a))

Increase/(decrease) in prepaid reinsurance (see note (b)

a Analysis of reinsurance premium ceded is as follows:

Fire

Accident

Motor

Marine

Bond

Engineering

Aviation

Oil & Gas

107

11,116,350 10,906,124 8,441,433 8,171,513


2016 2015 2016 2015

N’000 N’000 N’000 N’000

1,642,688 1,605,556 1,642,688 1,605,556

1,868,543 1,811,909 1,868,543 1,811,909

1,522,205 1,368,235 1,522,205 1,368,235

905,720 978,542 905,720 978,542

530,762 490,982 530,762 490,982

369,393 299,959 369,393 299,959

32,132 30,021 32,132 30,021

1,569,990 1,586,309 1,569,990 1,586,309

2,674,917 2,734,611 - -


2016 2015 2016 2015

N’000 N’000 N’000 N’000

11,116,350 10,906,124 8,441,433 8,171,513

70,470 29,798 113,781 (152,490)

11,186,820 10,935,922 8,555,214 8,019,023

Group Group Company

2016 2015 2016

N’000 N’000 N’000

Company

2015

N’000

3,553,466 3,595,842 3,553,466 3,595,842

186,724 (245,511) 186,724 (245,511)

3,740,190 3,350,331 3,740,190 3,350,331

1,051,765 1,094,696 1,051,765 1,094,696

914,243 806,533 914,243 806,533

233,191 240,902 233,191 240,902

344,784 376,972 344,784 376,972

12,148 19,920 12,148 19,920

291,238 253,919 291,238 253,919

35,810 1,759 35,810 1,759

670,287 801,141 670,287 801,141

3,553,466 3,595,842 3,553,466 3,595,842


2016 2015 2016 2015

N’000 N’000 N’000 N’000

Notes to the nancial statementsZenith General Insurance Company Limited


108

Group Company

2016 2016

N’000

Group

2015

N’000 N’000

Company

2015

N’000

Fire 85,047 (178,148) 85,047 (178,148)

Accident (40,973) (33,829) (40,973) (33,829)

Motor 1,473 (26,475) 1,473 (26,475)

Marine (20,308) 9,054 (20,308) 9,054

Bond 4,930 (5,519) 4,930 (5,519)

Engineering (25,391) (12,034) (25,391) (12,034)

Aviation - - - -

Oil & Gas 181,946 1,440 181,946 1,440

186,724 (245,511) 186,724 (245,511)

c Analysis of increase in unexpired reinsurance premium

Group Company

31-Dec-16 31-Dec-16

N’000

Group

31-Dec-15

N’000 N’000

Company

31-Dec-15

N’000

Movement in prepaid reinsurance - - - -

Unexpired reinsurance premium - 18,910 - -

- 18,910 - -

d Analysis of reinsurance expenses

Fire 916,548 916,548

Accident 772,704 772,704

Motor 214,427 214,427

Marine 386,026 386,026

Bond 14,401 14,401

Engineering 241,885 241,885

Aviation 1,759 1,759

Oil & Gas 802,581

1,136,812

873,270

234,664

324,476

17,078

265,847

35,810

852,233 802,581

1,136,812

873,270

234,664

324,476

17,078

265,847

35,810

852,233

3,740,190 3,350,331 3,740,190 3,350,331

7 Fees and commission income


2016 2015 2016 2015

N’000 N’000 N’000 N’000

Direct commission (see note 25c) 348,589 563,913 219,211

Reinsurance commission (see note 25c) 558,587 632,445 632,445

907,176 1,196,358

64,731

,513 130

577,861 851,656

8 Claims expenses

Direct claims paid 4,615,572 2,633,892 1,735,159

Changes in outstanding claims 2,043,921

3,831,019

(238,522) 1,701,408 (238,521)

Total claims and loss adjustment expenses 6,659,493 3,592,497 4,335,300 1,496,638

Claims recoveries and recoverable from reinsurance (see

(a) below) (3,320,323) (3,320,323) (666,332)

Net claims and loss adjustment expense 3,339,170

(666,332)

2,926,165 1,014,977 830,306

Notes to the nancial statements

Group Company

31-Dec-16 31-Dec-16

N’000

Group

31-Dec-15

N’000 N’000

Company

31-Dec-15

N’000

Group Company

2015 2015

Group

2016

N’000 N’000

Company

2016

N’000 N’000



,159 378

Recoveries and recoverable on paid claims

Recoverable on outstanding claims

a Claims recoverable from reinsurance

9 Underwriting expensesUnderwriting expenses are categorised into comission/acquistion expenses and other underwriting expenses. Commission/Acquisition

expenses are those incurred in obtaining and renewing insurance contracts. They include commissions or brokerage paid to agents or

brokers . Other underwriting expenses are those incurred in servicing existing policies/contracts. These include processing cost,

preparation of statistics and reports, and other incidental costs attributable to maintenance.

109

Group Group Company Company2016 2015 2016 2015

N’000 N’000 N’000 N’000

308,448 259,224 308,448 259,224

359,616 327,449 359,616 327,449

143,667 147,694 143,638 147,694

149,050 178,066 149,050 178,066

29,572 19,973 29,572 19,973

36,64 32,490 36,670 32,490

2,584 1,938 2,584 1,938

77,575 92,150 77,575 92,150

192,000 - -

32,502 46,812 32,502 46,812

31,396 24,482 31,396 24,482

647 - 647 -

1,331,076 1,322,278 1,171,698 1,130,278

1,266,531 1,250,984 1,107,153 1,058,984

64,545 71,294 64,545 71,294

1,331,076 1,322,278 1,171,698 1,130,278

Group Company Company

2015 2015

Group

2016

N’000 N’000

2016

N’000 N’000

231,169 11,106 13,992 1,807,842

51,248 - 51,248 -

1,815,191 1,534,549 1,812,559 1,534,386

190,818 519,445 190,818 324,305

30,634 34,677 30,634 34,677

2,319,060 2,099,777 2,099,251 3,701,210

Commission on direct premium - re

Commission on direct premium - general accident

Commission on direct premium - motor

Commission on direct premium - marine

Commission on direct premium - bond

Commission on direct premium - engineering

Commission on direct premium - aviation

Commission on direct premium - oil & gas

Commission on direct premium - life

Superintendent fee

Survey fees and car tracker

Browncard expense

Underwriting expenses comprises:

Acquisition cost incurred during the year (commission

expenses (see note 17))

Other underwriting expenses paid

10 Investment income

Dividend income

Gain on AFS disposal

Interest income on nancial assets

Interest income on cash and cash equivalents

Interest income on statutory deposits

Other underwriting expenses paid includes superintendent fees,

survey fees, car trackers and browncard expenses



1,549,385 882,822 1,549,385 882,8221,770,938 (216,490) 1,770,938 (216,490)

3,320,323 666,332 3,320,323 666,332

Group Group Company Company2016 2015 2016 2015

N’000 N’000 N’000 N’000


2016 2015 2016 2015

N’000 N’000 N’000 N’000

1,913,966 330,237

8,038 136

66,655 -

- -

- -

- -

- 8 - -

- -

-

330,237

731

19,073

426

58

3,809

7,052

3,537 3,537

Net foreign exchange translation gain (see (a) below)

Profit from sale of fixed assets

Health check income

Contract cancellation fees

Discount on subscription fee

Excess business acquisition cost refunded

Interest on staff loan

Management fee charged to coinsurers

Sale of Ecowas brown card

Premium bad debt recoveries (see (b)) 555

1,913,966

7,809

-

-

-

-

-

2,797

141,601 -161,894

2,150,553 365,486 2,066,173 333,910

Bonds 772,115 - 772,115 -

Placements with nancial institution 523,777 - 523,777 -

1,295,892 - 1,295,892 -

Cash & cash equivalents 618,074 330,237 618,074 330,237

Net foreign exchange translation gain 1,913,966 330,237 1,913,966 330,237

2,916,441 1,887,270 2,112,551 1,360,308

953,698 779,184 747,414 593,494

18,150 7,379 10,480 8,798

Personnel expenses (see (a) below)

Depreciation and amortization (see note (b))

Directors allowance

Auditors remuneration

Professional fees

Subscription & fees

Corporate branding

Travelling & hotel

Stationery & printing

Fuel & diesel

Ofce repairs

Fines

Advertising

Ofce consumables, electricity and telephone

Administrative expenses

Foreign exchange conversion expense

Rental & service charge expenses

NAICOM levy

Tax - VAT

Other expense

Provision for bad debt

a Personnel expenses

Wages and salaries

Staff related cost (ITF & NSITF)

Pension cost 65,243 50,179 46,840 39,696

1,037,091 836,742 804,734 641,988

12 Management expenses:

(b) Premium bad debt recoveries represents impaired receivables under NGAAP but recovered by our strategic credit control recovery

modalities and efforts.

(a) Amount represents foreign exchange gain on cash, cash equivalent and nancial assets (Eurobonds & placements) held in the

Company as at year end 31 December 2016

110

Group Group Company

2016 2015 2016

Company

2015

N’000 N’000 N’000 N’000

1,037,091 836,742 804,734 641,988

199,072 129,936 156,889 112,802

39,650 44,900 37,100

40,390 35,500 28,000

76,317 43,848

33,250

32,390

68,050 37,777

11,331 35,024 12,140

83,208 69,519 69,509

40,012 30,314 31,848 30,314

31,313 26,210 18,837

22,923 23,321 22,923 19,085

50,751 45,161

11,331

,83 208

31,313

42,163 40,748

248,575 2,028 222,466 2,028

29,921 41,439 29,921 41,355

64,290 80,980 27,464 34,807

436,144 214,834 132,434 95,012

56,463 16,446 56,463 16,446

300,434 42,286 208,688 28,816

43,477 50,305 43,477 50,305

77,413 58,637 73,539 43,239

27,666 6,46 - -

- 53,377 - -

books of the

11 Other operating income



There are no long term employee benets (2015:N11)

b Depreciation and Ammortization

Depreciation 193,493 114,214 151,310 97,080

Ammortisation 5,579 15,722 5,579 15,722

199,072 129,936 156,889 112,802

13 Taxation

Group Group Company

2016 2015 2016

N’000 N’000 N’000

Company

2015

N’000

Company income tax 208,179 1,050,948 106,340 788,343

Tertiary education tax 19,871 55,010 11,007 55,010

National Information Technology Development Agency levy 74,732 38,950 70,641 38,950

Prior year over provision (4,518) - - -

298,264 1,144,908 187,988 882,303

Deferred tax (charge (see note 28(a)) 325,862 10,653 307,603 8,884

Income taxes 624,126 1,155,561 495,591 891,187

Total tax charge 624,126 1,155,561 495,591 891,187

a The effective tax reconciliation for the company is as follows:

Company

Rate 2016

N' 000

Company

2015

N' 000

Prot before tax 7,064,083 5,734,785

Tax using the statutory corporation tax rate 2,119,225 1,720,436

Non-deductible expenses 1,242,467 796,112

Tax-exempt income (2,968,434) (1,691,401)

Change in recognised deductible temporary differences 18,420 (27,920)

Prior year under provision 2,265 -

Tertiary education tax 11,007 55,010

NITDA 70,641 38,950

30%

18%

(42%)

0%

0%

0%

1%

7% 495,591 891,187

b The effective tax reconciliation for the group is as follows:

Group

Prot before tax

Tax using the statutory corporation tax rate

Non-deductible expenses

Tax-exempt income

Change in recognised deductible temporary differences

Prior year under provision 0%

Tertiary education Tax

NITDA

Minimum tax

Rate 2015

Group

2016

N' 000 N' 000

5,236,732 4,607,937

1,571,020 1,642,603

1,360,351 1,864,065

(2,968,434) (2,263,120)

566,157 (190,535)

1,418 -

19,214 55,010

74,400 47,538

- -

30%

26%

(57%)

11%

0%

1%

0%

12% 624,126

Rate

30%

14%

(29%)

0%

0%

1%

1%

16%

Rate

30%

7%

(17%)

0%

0%

1%

1%

0%

22% 1,155,561

111

Group Group Company

2016 2015 2015

N’000 N’000

Company

2016

N’000 N’000



14 Cash and cash equivalents Group Company Company

2016 2016 2015

N’000

Group

N’000 N’000 N’000

Cash and bank balances comprise:

Balances held with banks in Nigeria 610,815 398,907

Placements with nancial institutions 6,770,717 3,070,649

1,493,918

5,025,681

6,519,599 7,381,532 3,469,556

366,769

2,712,081

3,078,850

15 Financial assetsThe Group's nancial assets are summarised below

15(a) Investment securities - held to maturity

Debt securities – fixed interest rate:Quoted Debt securities - Bonds

Quoted Debt securities - Treasury bills

Placements with nancial institution (see (ii) below)

5,674,476

15,505,815

1,493,435

22,673,726

6,434,831

12,972,908

367,422

19,775,161

5,674,476

15,505,815

1,493,435

22,673,726

4,536,930

9,326,105

367,422

14,230,457

At the reporting date, there were no held-to-maturity assets that were overdue but not impaired.

(i) Quoted debt securities - Bonds.

Federal Government Bonds:

13.05% FGN 16 AUG 2016 -

15.10% FGN 27 APR 2017

-

1,348,721

16.00% FGN 29 JUNE 2019 1,179,574

15.54% FGN FEB 2020 431,658

14.5% FGN JUL 2021 419,608

5.13% FGN EUROBOND 12 JUL 2018 221,908

6.75% FGN EUROBOND 28 JAN 2021 426,741

6.38% FGN EUROBOND 16 AUG 2023 659,762

Corporate Bonds:

8.75% DIAMOND BANK BOND 21 MAY 2019 146,058

6.00% GTBANK BOND 8 NOV 2018 401,095

8.00% FIRST BANK OF NIGERIA LIMITED

EUROBOND 23 JUL 2021

81,300

9.25% ACCESS BANK PLC EUROBOND JUN 2021169,322

7.25% ACCESS BANK PLC EUROBOND JUN 2017188,729

5,674,476

2,823,083

2,349,426

-

-

-

145,393

280,711

431,022

93,053

260,682

51,461

-

-

6,434,831

1,348,721

1,179,574

431,658

419,608

221,908

426,741

659,762

146,058

401,095

81,300

169,322

188,729

5,674,476

1,884,093

1,390,515

-

-

-

145,393

280,711

431,022

93,053

260,682

51,461

-

-

4,536,930

(ii)

Fair values for held-to-maturity nancial assets are based on market prices or broker/dealer price quotations. Where this information is

not available, fair value has been estimated using quoted market prices for securities with similar credit, maturity and yield

characteristics.

Placements with nancial institutions comprises of term deposits with maturity of less than 90 days from the value date of the

investment.

Placement with nancial institutions comprises of term deposits with maturity of more than 90 days from the value date of the

investment.

112

The fair value of the held-to-maturity assets in thousand is 2016 : N20,658,731 (2015 : N15,488,583).



2015


2016 2016 2015

N’000

Group

N’000 N’000 N’000

2015


2016 2016 2015

N’000

Group

N’000 N’000 N’000

2015

Movement in Held to maturity nancial assets - Bonds


2016 2015 2016 2015

N’000 N’000 N’000 N’000

Balance, beginning of year 6,434,831 6,050,852 4,536,930 4,152,951

On disposal of subsidiary (1,897,901) - - -

Acquisition during the year 2,172,704 282,893 2,053,357 282,892

Translation gain 800,952 - 772,115 -

Accrued interest 551,357 101,086 554,322 101,087

Redemption (2,387,467) - (2,242,248) -

5,674,476 6,434,831 5,674,476 4,536,930

Movement in Held to maturity nancial assets - Treasury bills


2016 2015 2016 2015

N’000 N’000 N’000 N’000

Balance, beginning of year 12,972,908 9,326,105 6,623,813

On disposal of subsidiary (3,646,803) - - -

Acquisition during the year 16,241,763 16,241,763 11,800,000

Accrued interest 1,237,947 1,237,947 2,297,708

Maturity/disposal during the yea (11,300,000) (11,300,000) (11,395,416)

15,505,815 15,505,815 9,326,105

Movement in Held to maturity nancial assets - Placement

Group Company

2016

Group

2015 2015

N’000 N’000 N’000

Balance, beginning of year 367,422 310,617

Company

2015

N’000

367,422 310,617

Acquisition during the year 965,676 56,058 965,676 56,058

Accrued interest 11,240 747 11,240 747

Translation gain 523,777 - 523,777 -

Maturity/disposal during the year (374,680) - (374,680) -

1,493,435 367,422 1,493,435 367,422

Maturity prole o nvestment securities held to maturity


2016 2015 2015

N’000 N’000

2016

N’000 N’000

Within 12 months 9,693,527

After 12 months 4,536,930

18,536,700

4,137,026

22,673,726

13,340,330

6,434,831

19,775,161

18,536,700

4,137,026

22,673,726 14,230,457

15(b) Investment securities available for sale


2015 2015

N’000

2016

N’000 N’000

409,638 3,248 317,916

Quoted securities - Treasury bills - 995,634 -

Unquoted equity - Mutual funds (see note (ii) below) 58,641 118,488 ,38 373

Group

2016

N’000

3,248

995,634

118,488

1,117,370 468,279 1,117,370 356,289

Equities listed on the Nigerian Stock Exchange (see

note (i) below)

113

10,270,616

11,800,000

2,297,708

(11,395,416)

12,972,908



(i) Equities listed on the Nigerian Stock Exchange Group Group Company Company

2016 2015 2016 2015

N’000 N’000 N’000 N’000

Cost 1,201 1,220,261 1,201

Fair value loss 2,047 (338,256) 2,047

720,106

73,243

Impairment loss - P&L - (472,367) - (475,433)

3,248 409,638 3,248 317,916

Treasury bills Group Group Company Company

2016 2015 2016 2015

N’000 N’000 N’000 N’000

Cost 989,127 - 989,127 -

Fair value gain (2,542) - (2,542) -

Accrued interest 9,049 - 9,049 -

995,634 - 995,634 -

(ii) Unquoted equity securities - Mutual funds Group Group Company Company

2016 2015 2016 2015

N’000 N’000 N’000 N’000

Cost 141,530 95,462 141,530 62,731

Fair value loss - - -

Impairment loss - P&L (23,042) (36,821) (23,042) (24,358)

118,488 58,641 118,488 38,373

(iii) The movement in available for sale assets is as shown below:


2016 2015 2016 2015

N’000 N’000 N’000 N’000Opening balance 468,279 1,315,723 356,289 441,672

On disposal of subsidiary (111,990) - - -

Acquisition during the year 1,067,926 - , ,1 067 926 -

Accrued interest 9,049 - 9 049 -

Fair value changes during the year 822 (847,444)

,

822 (85,383)

Disposals during the year (316,716) - (316,716) -

Closing balance 1,117,370 468,279 1,117,370 356,289

Maturity prole of i nvestment securities available for sale

Group Group Company

2016 2015 2016

N’000 N’000 N’000

Company

2015

N’000

Within 12 months 995,634 - 995,634 -

After 12 months 121,736 121,736 356,289

1,117,370

468,279

468,279 1,117,370 356,289

15(c ) Loans and receivables Group Group Company

2016 2016

N’000

2015

N’000 N’000Staff loans 58,784 64,570 54,185

Company

2015

N’000

59,822

(30,091) (30,091) (30,091) (30,091)

28,693 34,479 24,094 29,731

114

Fair value adjustment on staff lo ans




2016 2015 2016 2015

N’000 N’000 N’000 N’000

Balance, beginning of year 64,570 64,570 59,822 59,822

Repayment during the year (5,786) - (5,786) -

Fair value adjustment on staf oans (30,091) (30,091) (30,091) (30,091)

28,693 34,479 23,945 29,731

Maturity prole of loans and receivables


2016 2015 2016 2015

N’000 N’000 N’000 N’000

Within 12 months 12,988 13,529 12,988 13,529

After 12 months 15,705 20,950 11,106 16,202

28,693 34,479 24,094 29,731

15(d) Trade receivables Group Group Company Company

2016 2015 2016 2015

N’000 N’000 N’000 N’000Due from brokers 37,740 4 66,164 37,741 29,851

Due from direct customers 214,506 - - -

252,246 466,164 37,741 29,851

Less: impairment loss / reversal on trade receivables

Specific (see note (ii) below) - (10,234) - -

Impairment allowance (10,234) - -

252,246 455,930 37,741 29,851

Maturity prole of trade receivables


2016 2015 2016 2015

N’000 N’000 N’000Within 12 months 252,246 455,930 37,741

252,246 455,930 37,741

N’00029,851

29,851

(ii) Movement in specic impairment Group

2016

Group

2015

N’000 N’000

Company

2016

N’000

Company

2015

N’000Balance beginning of year 10,234 –

Specic impairment (write off)/increase (10,234)

6,463

3,771 - -

10,234 –

Details of the impairment model is described on notes 1.2.9 of these nancial statements.


2016 2015 2016 2015

(iii) Impairment charge for the year N’000 N’000 N’000 N’000

Specific (see 15(d) ii above) - - -

-

(10,234)

(10,234) - -

There is no concentration of credit risk with respect to loans and receivables, as the Company has a non-systematical portfolio

dispersed across many industries in Nigeria.

Premium receivables / trade receivables are not admissible by NAICOM (National Insurance Commission) for the purpose of solvency

margin determination.

115



(iv) Aging analysis of trade receivables

The age analysis of trade receivables as at the end of the year are as follows:

0-90 days 194,952 37,741 29,851

91 – 180 days 57,294 - -

16 Reinsurance assets

Reinsurance assets comprise:

Reinsurance prepaid (see note a)

Excess of loss prepayment

Commission receivable -

Reinsurance receivables on

life insurance contract liabilities -

Reinsurance receivables on

paid claims - -

Outstanding claim- general (see note b)

Impairment on reinsurance assets (see note c)

a Movement in reinsurance prepaid

Balance, beginning of year

Cost incurred during the year

Amortised during the year

Balance end of year

b Movement in reinsurance receivables on



Changes in recoverables during the year

Balance end of year 2,411,896 817,021 2,365,185 594,247

c Impairment on reinsurance assets

Balance, beginning of the year

Impairment write off during the year

As at the date of authorisation of the nancial statements,

116


2016 2016 2015

N’000 N’000 N’000

252,246 37,741 29,851


2016 2015 2016 2015

N’000 N’000 N’000 N’000

1,148,471 1,335,196 1,148,471 1,335,196

114,114 114,114 -

106,715 - 106,715

273,934 - -

-

1,335,195 1,089,684 1,335,195 1,089,684

3,553,466 3,595,843 3,553,466 3,595,843

817,021 901,859 594,247 810,737

1,817,649 (84,838) 1,770,938 (216,490)

2,411,896 817,021 594,247

3,674,481 2,532,866

46,710

2,365,186

3,674,481 2,036,158

- (106,715) - (106,715)

3,674,481 2,426,151 3,674,481 1,929,443


2016 2015 2016 2015

N’000 N’000 N’000 N’000

(3,740,190) (3,350,332) (3,740,190) (3 350 332)

1,148,471 1,335,196 1,148,471

, ,

1,335,196


2015 2016 20152016

N’000 N’000 N’000 N’000


2016 2015 2016 2015

106,715 106,715 106,715 106,715

(106,715) - (106,715) -

- 106,715 - 106,715

42,809

413,121

Group

2015

N’000

455,930

outstanding claims

all premium debts had been received.



(v) Maturity prole of reinsurance assets

Within 12 months

After 12 months

17 Deferred acquisition cost

Fire

Gen. Accident

Motor

Marine

Bond

Engineering

Aviation

Oil & Gas

Total deferred acquisition cost

The movement in deferred acquisition cost during the year was as follows

Balance, beginnining of the year 516,047 557,544 516,047 557,544

Acquisition cost incurred during the year

Amortized during the year (see note 9)

Balance, end of the year

18 Other receivables and prepayments

Prepayments

Dividend receivable

Receivables from related parties (see (a) below)

Fee-for-service due from NHIS

Other receivables

Less: impairment of other receivables

Specic impairment (see (b) below)

(a)

(b) Movement in specic impairment on other receivables


Charge for the year - 54,471 - -


Receivables from related parties represents amount receivable from subsidiary Company; Zenith Life Assurance Company Limited

with respect to cash disbursements made by the parent on behalf of the Company. All outstanding balances with these related parties

are to be settled in cash within twelve months of the reporting date. None of the balances are secured nor bear interest.

117

Group Company CompanyGroup

2016 2015 2016 2015

N’000 N’000 N’000 N’0002,031,366 2,445,178 1,632,320

394,785 1,182,593 297,123

2,491,888

1,182,593

3,674,481 2,426,151 3,674,481 1,929,443

Group Group

2016 2015

Company

2016

N’000 N’000 N’000

Company

2015

N’000

78,720 91,801 78,720 91,801

145,127

42,224 50,101 42,224

33,379 37,055 33,379

16,154 21,659 16,154

10,099 15,445 10,099

58 78 58

177,205 107,597 177,205

448,625 516,047 448,625 516,047


2016 2015 2016 2015

N’000 N’000 N’000 N’000

1,199,110 1,209,488 1,039,732 1,017,488

(1,266,532) (1,250,985) (1,107,154) (1,058,985)

448,625 516,047 448,625 516,047

Company Company

2016 2015

N’000 N’000

Group

2016

N’000

Group

2015

N’000


2016 2015 2016 2015

N’000 N’000 N’000 N’000

63,318 63,318 8,847 8,847

83,401

-

-

-

-

83,401

(8,847)

112,743

-

-

45,457

,8 540

166,740

(63,318)

103,422

365,241

-

60

54,471

3,357

423,129

(63,318)

359,811 74,554

329,152

1,800,000

24,351

-

-

2,153,503

(8,847)

2,144,656

63,318 8,847 8,847 8,847

137,970

50,101

37,055

21,659

15,445

78

107,597

137,970 145,127



Maturity prole of other receivables and prepayments

Within 12 months

After 12 months

19 Investment in subsidiaries

(a) Investment in subsidiaries comprise of:

Zenith Medicare Limited (See note (b) )

Zenith Life Assurance Company Limited

( see note (c) )

(b) This represents 100% (2015: 100%) investment in the ordinary share capital of Zenith Medicare Limited.

(c) Zenith Life Assurance was sold during the year. See note 34 for more information.

(d) Signicant restrictions

(e) Condensed nancial information for the subsidiary is as follows:

Condensed statement of prot or loss and other comprehensive income for Zenith Medicare Limited

Condensed statement of prot or loss and other comprehensive income

Net premium income



Claims expenses

Underwriting expenses

Underwriting prot/results

Investment income

Net income

Impairment loss on premium debtors

Management expenses

Prot before taxIncome tax

Prot for the year

The Group does not have signicant restrictions on its ability to access or use its assets and settle its liabilities other than those

resulting from NAICOM guidelines within which insurance Companies operate. This guideline requires insurance businesses to

deposit N300 million and N200 million for general and life assurance businesses respectively, held with the Central Bank of Nigeria.

Zenith Medicare Limited

2016 2015

N’000 N’000

2,644,787 2,903,718

283,858 390,159

2,928,645 3,293,877

(2,218,608) (2,201,445)

(150,000) (201,378)

560,037 891,054

301,560 242,044

861,597 1,133,098

(170,910)(17,097)

(459,799) (445,637)

384,701 516,551

(128,536) (178,173)

256,165 338,378

118

Company

2016

N’000

44,732

29,822

74,554

Company

2016

N’000

400,000

400,000

–

Company

2015

N’000

1,940,463

204,193

2,144,656

Company

2015

N’000

400,000

2,000,000

2,400,000

Group

2016

N’000

53,997

49,425

103,422

Group

2016

N’000

–

–

–

Group

2015

N’000

3,417

356,394

359,811

Group

2015

N’000

–

–

–



Condensed statement of nancial position

Assets


Investment securities available for sale


Trade receivables

Other receivables and prepayments

Intangible assets

Property and equipment

Total assets

Liabilities

2016 2015

N’000 N’000

2,612,651

5,015

4,197

294,331

39,609

24,886

393,197

Provision

3,704,877 3,373,886

N’000

s and other payables

Insurance contract liabilities

Current income tax liabilities

Deferred tax liabilities

Total liabilities

Net assets

Equity

Share capital

Retained earnings

Statutory contingency reserve

Total equity

(f) Financial support given to subsidiaries

(g) Movement in investment in subsidiaires


2016 2015 2016 2015

N’000 N’0

537,379

1,068,182

156,686

26,034

1,788,281

1,585,605

400,000

774,427

411,178

1,585,605

00 N’000 N’000

Balance, beginning of the year 2,400,000 2,400,000

Additions during the year -

-

- - -

Disposals during the year - - (2,000,000) -

Balance, end of year - - 400,000 2,400,000

20 Intangible assets Group Group Company

Softwares 2016 2015 2015

N’000 N’000

Company

2016

N’000 N’000Cost

Beginning of year 159,023 125,450 95,159 78,226

Additions during the year 11,442 33,573 4,872 16,933

Reclassication (7,875) - - -


End of year 123,612 159,023 100,031 95,159

Accumulated amortization:

Beginning of year 97,738 78,707 77,400 61,678

Charge during the year 5,579 19,031 5,579 15,722


End of year 82,979 97,738 82,979 77,400

Net book value: 40,633 61,285 17,052 17,759

Reclassication in the group number relates to a payable item initially recognised in intangible assets.

During the year, the Group did not issue any guarantee to its subsidiary.

119



3,050,041

433,795

1,270,224

128,428

30,660

1,863,107

1,841,770

400,000

944,988

496,782

1,841,770

-

4,599

214,506

28,870

23,581

383,280

N’000

21 Property and equipment

Group

31 December 2016Building

Cost Leasehold & leasehold Computer Ofce

Land improvements

Motor

vehicle equipment equipment Total

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

Balance, beginning of year 1,042,355 277,456 381,523 77,040 274,602 2,052,976

Additions 115,051 122,099 19,123 49,460 305,733

Disposal – (12,287) - (3,095) (15,382)

Reclassification (210,005) 196,162 – 13,843 -

Write-Off - - - - (194) (194)

On disposal of subsidiary - - (1,820) (4,997) (3,987) (10,804)

Balance, end of year 832,350 588,669 489,515 91,166 330,629 2,332,329

Accumulated depreciation

Balance, beginning of year 27,603 212,109 226,996 57,449 162,612 686,769

Charge for the year 7,397 49,420 77,030 14,478 45,168 193,493

Disposal - - (7,809) - (2,640) (10,449)

Reclassication (3,413) - 3,413 - -

Write-Off - - - - (194) (194)

On disposal of subsidiary - - (1,820) (2,499) (1,080) (5,399)

Balance, end of year 31,587 261,529 297,810 69,428 203,866 864,220

Net book value

31 December 2016 800,763 327,140 191,705 21,738 126,763 1,468,109

120



Cost

Building

Leasehold & leasehold Motor Computer Office

Land vehicles equipment equipment Total

N' 000 N' 000 N' 000

Balance, beginning of year 743,272 333,696 1,598,453

Additions 299,083 85,787 492,483

Disposal - (37,960) (37,960)

Balance, end of year 1,042,355 381,523 2,052,976


Balance, beginning of year 20,206 222,669 611,269

Charge for the year 7,397 41,859 113,032

Disposal - (37,532) (37,532)

Balance, end of year 27,603 226,996 686,769

Net book value

31 December 2016 1,014,752

improvements

-

-

N' 000

243,818

33,638

277,456

183,827

28,282

212,109

65,347 154,527

N' 000

64,269

12,771

-

77,040

48,673

8,776

-

57,449

19,591

N' 000

213,398

61,20

-

274,602

135,894

26,718

-

162,612

111,990 1,366,207

121

4

Group

31 December 2015



Cost Leasehold Motor Computer Office

Land

Building

& leasehold

pim rovements vehicles equipment equipment

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

Total

N' 000

Balance, beginning of year 732,350 266,534 315,473 42,803 193,56 1,550,722

Additions - 106,550 122,099 13,212 49,413 291,274

Disposal - - (11,025) - - (11,025)

Balance, end of year 732,350 373,084 426,54 56,015 242,975 1,830,971


Balance, beginning of year 24,190 210,582 200,409 29,868 137,596

Charge for the year 7,397 46,748 60,091 9,038 28,037

Disposal (7,809)

Balance, end of year 31,587 257,330 252,691 38,906 165,633

Net book value

At 31 December 2016 700,763 115,754 173,856 17,109 77,342

602,645

151,311

(7,809)

746,146

1,084,825

122

Company

31 December 2016



Building

Cost Leasehold

Land p

& leasehold

im rovements

Computer

equipment Total

N' 000 N' 000 N' 000

B alance, beginning of year 732,350 243,818 1,415,969

A ddi tions - 22,716 144,202

Disposal - - (9,450)

B alance, end of year 732,350 266,534

Motor

vehicles

N' 000

239,136

85,787

(9,450)

315,473

N' 000

-

31,100

11,702

42,802

Office

equipment

-

N' 000

169,565

23,997

193,562 1,550,721


Balance, beginning of year 16,793 183,827 170,610 25,234 116,384 512,848

Charge for the year 7,397 26,755 37,083 4,633 21,212 97,080

Disposal - - - - (7,284)

Balance, end of year 24,190 210,582 29,867 137,596

Net book value

At Company 708,160 55,952

(7,284)

200,409

115,064 12,935 55,966

602,644

948,077

123

Company

31 December 2015



22 Statutory deposit

Group Group Company

2016 2015 2015

N’000 N’000

Company

2016

N’000 N’000

Statutory deposit 300,002 500,002 300,002 300,002

300,002 500,002 300,002 300,002

Maturity prole of statutory deposit

After 12 months 300,002 500,002 300,002 300,002

300,002 500,002 300,002 300,002

23 Insurance contract liabilities

Insurance contract liabilities comprise:

Outstanding claims (see (i) below)

Unearned premium (see (ii) below)

Life insurance contract liabilities (see (iii) below)

2,146,0084,674,941

3,671,376 3,342,457

--

8,346,317

3,148,469

3,741,846

1,353,189

8,243,504 5,488,465

(i) Outstanding claims is made up of:

Provision for outstanding claims 2,286,211 2,992,524 1,426,705

IBNR claims 862,258 854,892 719,303

3,665,913

1,009,028

4,674,941 3,148,469 3,847,416 2,146,008

Movement in provision for outstanding claims


2015 2016 2015

N’000 N’000 N’000Balance, beginning of year 3,347,585 1,426,705

On disposal of subsidiary - -

Changes in outstanding claims (1,061,374) 1,565,819

2,451,458

-

(1,024,753)

Balance, end of year 2,286,211 2,992,524 1,426,705

Movement in IBNR claims


2015 2016 2015

N’000 N’000 N’000Balance, beginning of year 719,303 (66,929)

On disposal of subsidiary

(66,929)

- - -

Changes in IBNR claims 929,187 135,589 786,232

Balance, end of year

Group

2016

N’000

2,286,211

(501,103)

1,880,805

3,665,913

Group

2016

N’000

862,258

(16,346)

163,116

1,009,028 862,258 854,892 719,303

The statutory deposit balance represents restricted cash balance not available for use in the day to day activities of the group.

(a) This represents amounts deposited with the Central Bank of Nigeria (CBN) pursuant to section 10(3) of the Insurance Act, 2003.

124


2016 2015 2016 2015

N’000 N’000 N’000 N’000

Group Group Company

2016 2015 2015

N’000 N’000

Company

3,847,416

3,228,676

-

7,076,092

2016

N’000 N’000


2016 2015 2016 2015

N’000 N’000 N’000 N’000

The balance in the account as at year end was;



Analysis of provision for outstanding claims is as follows;

Fire

Accident

Motor

Marine

Bond

Engineering

Aviation

Oil & Gas

Group life policies - 501,104 - -

Medical plans

Analysis of IBNR claims is as follows;

Fire

Accident

Motor

Marine

Bond

Engineering

Aviation

Oil & Gas

Medical plans

Analysis of total outstanding claims is as follows

Fire

Accident

Motor

Marine

Bond

Engineering

Aviation

Oil & Gas

Group life policies -

Medical plans

The actuarial valuation of outstanding claims in general business has been presented in Section 1.7.1 of the risk management report.

125


2016 2015 2016 2015

N’000 N’000 N’000 N’000

2,066,819 253,497 2,066,819 253,497

100,555 181,518 100,555 181,518

139,905 59,553 139,905 59,553

81,973 69,318 81,973 69,318

146,153 - 146,153 -

10,885 58,932 10,885 58,932

2,600 2,600 2,600 2,600

443,634 801,287 443,634 801,287

673,389 358,402 - - 3,665,913 2,286,211 2,992,524 1,426,705


2016

Group

2015 2016 2015

N’000 N’000 N’000 N’000

104,221 241,492 241,492

107,908 109,717 109,717

102,504 154,452 154,452

88,618 82,423 82,423

31,457 52,744 52,744

172,936 7,703 7,703

456 ,1 064 1,064

246,791 69,708 69,708

154,137 142,955 -

1,009,028 862,258 719,303

Group Group Company

2016 2015 2015

N’000 N’000 N’000

494,989 494,989

291,235 291,235

214,005 214,005

151,741 151,741

52,744

170,591

177,610

183,821 66,634

3,665

870,995

52,745

66,634

3,664

870,995

501,104 -

501,357 -

2,171,039

208,463

242,408

3,057

690,426

827,526

4,674,941 3,148,469

104,221

107,908

102,504

88,618

31,457

172,936

456

246,792

-

854,892

Company

2016

N’000

2,171,039

208,463

242,408

170,591

177,611

183,821

3,057

690,426

-

-3,847,416 2,146,008



126

(1,353,189)

(ii)


Changes in unearned premium (See note 5)

Balance, end of the year

(iii)

Life insurance contract liabilities comprises:

Movement in life insurance contract


On disposal/changes during the year


Maturity prole o nsurance contract liabilities

Within 12 months

After 12 months

Life insurance contract liabilities: Life insurance contract liabilities is assessed every year by qualied consulting actuaries in

accordance with the Company's accounting policy.

Unearned premium : Premium relating to risk for period not within the accounting period is carried forward as unearned premium.


2016 2016 2015

N’000

Group

2015

N’000 N’000 N’000

3,741,846 3,771,644 3,342,457 3,189,967

(70,470) (29,798) (113,781) 152,490

3,671,376 3,741,846 3,228,676 3,342,457

Company CompanyGroup

2016

Group

2015 2016 2015

N’000 N’000 N’000 N’0001,353,189 973,290 - -

379,899 - -

- 1,353,189 - -


2015 2016 2015

Group

2016

N’000 N’000 N’000 N’000

7,317,762 6,867,962 4,855,202

1,028,555 208,130 633,263

8,346,317

7,214,949

1,028,555

8,243,504 7,076,092 5,488,465



24 Investment contract liabilities


2016 2015 2016 2015

N’000 N’000 N’000 N’000

Life savings plan - 305,365 - -

Deposit administration - 329,027 - -

- 634,392 - -

25 Trade payablesGroup Group Company Company

2016 2015 2016 2015

N’000 N’000 N’000 N’000

Commission payable 528,833 553,921 177,383 227,165

Reinsurance payable 110,534 53,142 110,534 31,631

Coinsurance payable 125,235 114,965 125,235 114,965

Premium advance deposits (see (a) below) 615,749 297,631 615,749 297,631

Sundry deposits (see (b) below) 318,422 341,579 318,422 341,579

Deferred commission income (see (c) below) 224,470 - 224,470 -

Trade Payables 1,923,243 1,361,238 1,571,793 1,012,971

a

b

Maturity prole of trade payablesc Group Group Company Company

2016 2015 2016 2015

N’000 N’000 N’000 N’000Commission received 1,196,358 851,656

Deferred commission income

1,131,646

(224,470) - -

Comission earned during the period 907,176 1,196,358

802,331

(224,470)

577,861 851,656

Within 12 months 1,808,146 921,653 1,571,793 1,021,971

After 12 months 115,097 115,097 - -

1,923,243 1,036,750 1,571,793 1,021,971

26 Provision and other payables


2016 2015 2016 2015

N’000 N’000 N’000 N’000

Payables to related parties 192,872 - 192,872 -

Accrued audit fees 41,000 30,950 33,000 8,950

Accrued expenses 2,730 9,000 - -

Staff payable (see note a) 93,390 108,286 89,052 61,155

Withholding tax payable 21,069 19,938 19,938 19,938

NAICOM levy payable 46,016 74,205 46,016 46,726

VAT payable on coinsurance premium commision 1,870 1,870 1,870 1,870

Other tax payable (see note b) 3,095 8,355 - -

Dividend Payable (see note c) 1,260,000 1,400,000 1,260,000 1,400,000

Other liabilities and provision (see note d) 63,050 120,680 - -

1,725,092 1,773,284 1,642,748 1,538,639

Premium advance deposit represents various credit balance into the Company's bank account on premiums that r e l a t e s t o future period.

These amounts are warehoused under provision and other payables pending the provision of information from the depositors.

Sundry deposit represents liability for cash inows into the Company's bank accounts for which details are not readily available.

127


2016 2015 2016 2015

N’000 N’000 N’000 N’000



a

b Other tax payable consists of VAT payable, property tax and withholding tax liabilities.

c

d

(b) Maturity prole of provision and other payables


2015 2016 2015

Group

2016

N’000 N’000 N’000 N’000

Within 12 months 1,725,092 1,773,284 1,642,748 1,538,639

1,725,092 1,773,284 1,642,748 1,538,639

27 Current income tax liabilities

The movement in this account during the year was as follows:


2016 2015 2016 2015

N’000 N’000 N’000 N’000

Balance, beginning of year 1,852,047 1,237,673 1,093,109 849,524

Minimum Tax - 425,857 - -

Charge for the year -

Company income tax 208,179 1,050,948 106,340

Education tax 19,871 55,010 11,007

National Information Technology Development

Agency tax

788,343

55,010

74,732 47,538 70,641 38,950

Witholding tax - - -

Prior year under provision 155,796 - -

Total charge for the year 1,309,292 187,988 882,303

On disposal of subsidiary - - -

Payments during the year (1,120,775) (451,357) (638,718)


(4,518)

298,264

(497,865)

(694,278)

958,168 1,852,047 829,740 1,093,109

a Maturity prole of taxation payable


2015 2016 2015

Group

2016

N’000 N’000 N’000 N’000

Within 12 months 958,168 1,852,047 829,740 1,093,109

958,168 1,852,047 829,740 1,093,109

Staff payable consists of provision for staff productivity, staff PAYE payable, staff Industrial Training Fund (ITF) payable

and staff National Housing Fund (NHF) payable.

Dividend payable relates to payable to related parties with respect to dividend declared.

Other liabilities and provision consists of provision for statutory remittance to NHIS, provision for other assets and premium

related credits in the Zenith Medicare's Bank account which had not been properly reconciled as at year end and other account

payables.

-

128



28 Deferred tax

Deferred tax liability


2016 2015 2016 2015

N’000 N’000 N’000 N’000Balance, beginning of year 31,112 20,665 19,477 10,593

Charge during the year recognised in prot or loss 326,628 10,447 307,603 8,884


a Deferred tax asset


2016 2015 2016 2015

N’000 N’000 N’000 N’000Balance, beginning of year 763,365 - - -

(Credit)/charge during the year recognised in prot or loss (766) 763,365 - -



Analysis of deferred tax liability as at year end is as followsGroup Group Company Company

2016 2015 2016 2015

N’000 N’000 N’000 N’000

Property and equipment 135,974 31,112 32,362 19,477

Unrealised exchange difference 541,765 - 603,234 -

Analysis of deferred tax asset as at year end is as follows


2016 2015 2016 2015

N’000 N’000 N’000 N’000

Unrelieved losses - 762,863 - -

Unutilized capital allowance - 502

Maturity prole of deferred tax liability

After 12 months 357,740 31,112 327,08 19,477

No deferred tax was recognised in Other Comprehensive

129


2016 2015 2016 2015

N’000 N’000 N’000 N’000

Income (OCI) during the year

357,740 31,112 327,080 19,477

- 763,365 - -

677,739 31,112 635,596 19,477

- 763,365 - -

357,740 31,112 327,080 19,477



Maturity prole of deferred tax asset


2016 2015 2016 2015

N’000 N’000 N’000 N’000

Within 12 months - 763,365 - -

- 763,365 - -

29 Share capital:


2016 2015 2016 2015Share capital comprises: N’000 N’000 N’000 N’000Authorized:

6,000,000,000 Ordinary sharesof ' N1 each 6,000,000 6,000,000 6,000,000 6,000,000

Issued and fully paid:1,450,000,000 Ordinary shares

of ' N1 each

In issue during the year 1,450,000 1,450,000 1,450,000 1,450,000

All shares rank equally with regard to the Company's residual assets.

b Share premium


2016 2015 2016 2015

N’000 N’000 N’000 N’000

Balance, end of year 4,138,423 4,138,423 4,138,423 4,138,423

30 Statutory contingency reserves


2016 2015 2016 2015

N’000 N’000 N’000 N’000

Balance, beginning of year 3,740,579 2,442,388 3,014,566 2,045,846

Transfer from retained earnings 1,375,860 1,298,191 1,313,698 968,720

Balance, end of year 5,116,439 3,740,579 4,328,264 3,014,566

Share premium comprises additional paid-in capital in excess of the par value. This reserve is not ordinarily available for distribution.

The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per

share at meetings of the Company.

a Ordinary share capital:

130



The statutory contingency reserve is prescribed under section 21 (1&2) of the Insurance Act of Nigeria. The Group is mandated to maintain a statutory contingency reserve to cover for uctuation in securities and variations in statistical estimates.

General BusinessThe statutory contingency reserve is credited with an amount of not less than 3% of the gross premium or 20% of the net prot (which ever is greater) and the amount shall accumulate until it reaches the amount of the minimum paid-up capital or 50% of the premium (whichever is greater).

MedicareThe National Health Insurance Scheme (NHIS) requires health management organizations (HMOs) to make a provision of 5%of the total fee-for-service received from the NHIS in respect of the public sector enrollees during the year.

(a) The movement in this account during the year is as follows:

31 Retained earnings


Final/Interim dividend declared

Profit for the year

Transfer to contingency reserves

Transfer of NCI interests to reserves on full acquisition


32 Fair value reserves

The movement in fair value reserves is as follows:


Fair value loss on available for sale shares

On disposal of subsidiary - Impairment on AFS

Transfer to income statement - Impairment on AFS

securities


33 Earnings per share

Basic earnings per share is calculated by dividing the prot attributable to shareholders by the number of the shares.

Group Company CompanyGroup

2016 2015 2016 2015

N’000 N’000 N’000 N’000

Prot attributable to shareholders (N'000) 4,629,161 4,493,113 6,568,492 4,843,598

Number of shares in issue (Thousands) 1,450,000 1,450,000 1,450,000 1,450,000

Basic earnings per share (in kobo) 319 310 453 334

During the year, the board of directors declared and paid a nal dividend of N1.00 (2015: N0.95) per share on the issued and

paid up capital of 1,450,000,000 ordinary shares of N1.00 each, amounting to N1.45 Billion (2015: N1.38).

Fair value reserves represents the revaluation (mark to market) surplus/decits on available for sale investments. Included in

the Group's 2015 fair value loss is N17,943,000 representing Zenith Life Assurance fair value loss amount.

131


2016 2015 2016 2015

N’000 N’000 N’000 N’000

10,389,939 8,152,269 7,054,891

(2,777,500) (1,450,000) (2,777,500)

4,493,113 6,568,492 4,843,598

10,807,361

(1,450,000)

4,629,161

(1,375,860) (1,298,191) (1,313,698) (968,720)

- - - -

12,610,662 10,807,361 11,957,063 8,152,269

76,309 (746,528) 73,243 (341,165)

- (99,937) - (85,383)

- 422,983 - -

(75,487) 499,791 (72,421) 499,791

822 76,309 822 73,243


2016 2015 2016 2015

N’000 N’000 N’000 N’000



34 Discontinued operations

Prot for the period as at the date of disposal is as follows:

a Profit or loss statement

Group

(1,384,052)

-

(94,454)

-


Unearned premium

Gross premium income

Reinsurance expenses

Net premium income


Net underwriting expenses

Claims expenses

Underwriting expenses

Underwriting prot/result

Investment income

Net income on investment contract

Net income

Impairment loss on AFS investment securities

Management expenses

Results of operating activities/Prot before tax

M inimum Tax

Income taxes

Prot for the year

The Group has no diluted earnings per share since there are no potentially d i l u t iv e instruments.

132

2,750,354 3,363,440

(377,193)

1,366,302 2,986,247

(771,259) (653,152)

595,043 2,333,095

97,061 161,292

692,104

(267,685)

(298,689)

2,494,387

(1,316,675)

(514,455)

125,730 663,257

238,640 890,406

3,337 9,917

(422,983)

(273,190)

273,253 867,407

(425,857)

(81,976) 599,187

191,277 1,040,737

30-Apr-16 31-Dec-15

N’000 N’000

367, 707 1,563,580

In2016,thesubsidiaryof ZenithLifeAssuranceCompanyLimitedwassold. Analysis of the result of discontinued operations and the result recognised in there-measurement of assets or disposal group is as shown below:



b The aggregate book value of the net assets for the subsidiary disposed at the date of disposal is as follows:

Group

Four (4) month

N’000

Assets

Cash and cash equivalents 2,570,037

Investment securities held to maturity 6,402,966

Investment securities available for sale 90,677

Loans and receivables 238,004

Trade receivables 717

Reinsurance assets 698,046

Other receivables and prepayments 13,985

Deferred tax assets 762,599

Intangible assets 16,048

Property and equipment 15,564

Statutory deposits 200,000

11,008,643

Liabilities

Insurance contract liabilities 3,483,551

Investment contrcat liabilities 638,027

Trade payables 302,292

Accruals and other payables 2,026,742

Current income tax liabilities 578,309

Deferred tax liabilities -

7,028,921

Net Assets 3,979,722

Less: Sales proceeds 3,805,000

Loss on disposal of subsidiary (174,722)

Four (4) months prot 191,277

Prot from discontinued operations 16,555

Company

Proceeds on disposal 3,805,000

Cost o nvestments (2,000,000)

Gain on disposal of subsidiary 1,805,000

133



35 Directors and employees

(a) Directors

The remuneration paid to the directors of the Company were

Fees and allowances

The Chairman

The highest paid director

2015 2016

100,000 - 150,000

150,001 - 200,000

Above 200,000 11 11 7 7

(b) Employees

The staff costs for the above employees was:

Wages & salaries

NSITF & ITF 7,379 10,480

Pension costs

(c)

600,001 - 900,000

900,001 - 2,000,000

2,000,001 - 3,000,000

3,000,001 - 4,000,000

4,000,001 - 5,000,000

Above 5,000,000

(d)

Fees and other emoluments (excluding pension contributions)

Pension cost

Other allowances and benets

Fees as Directors

The average number of persons employed (excluding directors)

in the Company during the year was;

Key management personnel compensation for the year comprises

Salaries and short term benet

The number of other directors who received fees and other

The number of employees of the Company, other than directors, who

following ranges:


2015 2016

Number Number Number Number


emoluments in Naira in the following ranges were :

who received emoluments in excess of N100,000 are shown in the

134

disclosed above include amounts paid to :

2016 2015

N'000 N'000

4,750 4,563

38,180 37,993


2016 2015


- - - -

- - - -

188 143 129 99

2016 2015 2016 2015

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

779,184 747,414 593,494

8,798

953,698

18,150

65,243 50,179 46,840 39,696

1,037,092 836,742 804,734 641,988

14 13 14 13

21 9 20 8

39 27 19 16

15 24 0 13

34 30 22 18

65 40 54 31

188 143 129 99

348,893 316,021 114,097

39,079 35,129 823

- 113,217 18,331

39,800 34,200 37,100

427,772 206,976 498,567 170,351

2016 2015


2016 2015 2016 2015


2016 2016 2015

Number

1,898

18,331

44,200

142,547

Group

2015

Number Number Number



36 Related party transactions

i

(a) Premium written from related parties:2016 2015

N'000 N'000

Zenith Bank Plc 947,490 900,415

Zenith Capital Markets Limited 712 167

Zenith Trust Company Limited 150 150

Zenith Securities Limited 602 801

Zenith Pensions Custodian Limited 7,451 1,638

Zenith Registrars (Now Veritas) 359 281

Zenith Medicare Limited 60 -

Cyberspace network Limited 12,776 12,282

Accion Micronance bank 8,714 8,139

Visafone Communications Limited 528 35,259

Peopleplus Management Services Limited 32,165 32,165

Quantum Luxury Properties Limited 13,342 13,386

Quantum Fund Management 1,999 -

1,026,348 1,004,684

(b) Claims paid


Visafone Communications Limited

Cyberspace network Limited

Accion Micronance Bank Ltd

Quantum Luxury Properties Limited

Quantum Fund Management

- 29,831

2,320 467

- 1,671

110 -

185 -

115,428 118,791

ii Account balances

2016 2015

N'000 N'000(c) Bank Accounts


(d) Placements

Zenith Bank Plc ( HTM- Placement With Financial Institutions) 579,8 -

Zenith Bank Plc (Cash and Cash Equivalent) 452 268,194

580,296 268,194

(e) Interest incomeInterest income earned from Zenith Bank Plc 33,487 12,018

(f) Dividend incomeDividend income earned from Zenith Life Assurance Company Limited

The Company is a subsidiary of Veritas Registrars Limited. During the year, the Company had entered into commercial transaction with

related parties. The transactions/balances in respect of related party transaction as at reporting date to other companies in which directors

have interest are set out below:

Transactions

- 2,000,000

135



(g) Investment in managed fund

Zenith Capital Markets Limited 8,538 8,198

2016 2015

N'000 N'000

(h) Federal Government Bonds

Investment in bonds 5,674,475 4,536,930

2016 2015

N'000 N'000

(i) Federal Government Treasury bills

Investment in treasury bills 16,503,991 9,326,105

2016 2015

N'000 N'000(j) Investment in Subsidiaries:

Zenith Assurance Medicare 400,000 400,000

Zenith Life Assurance Company Limited - 2,000,000

400,000 2,400,000

(k) Due to related parties

Zenith Bank Plc

Zenith Life Assurance Company Limited 192,871 -

(l) Due from related parties

Zenith Life Assurance Company Limited - 24,302

Zenith Securities Limited - 49

(m) Rent paid to related parties

Quantum Luxury Properties Limited 206,000.00 206,000.00

37 Transactions with directors

As at reporting date, the Group had no outstanding loan with its directors (2015: Nil)

38 Contingent liabilities

At 31 December 2016, the Group had no contingent liabilities. (2015: Nil)

39 Capital commitments

The Group had no capital commitments as at the balance sheet date. (2015: Nil)

40 Litigations

41 Events after the reporting date

42 Contraventions , Fines and penalties

Contravention Details Fines and Penalties

The Company purchased Bonds (FGN Bonds: N3,379,561; Euro Bonds: N2,294,914) through its related party/former parent, Zenith

Bank Plc during the year.

Transfer of shares N215,000,000

The Company purchased Federal Government Treasury bills elated party/former parent, Zenith Bank Plc during the year.

There were no pending litigation against the Company as at 31 December 2016 (31 December, 2015: Nil)

Contravention of NAICOM operational guidelines


Contravention of PITA and CITA

Late treaty returns

Reinstatement of nancial statements

N500,000

N100,000

Contravention of PITA & CITA N5,000,000


136

On 31st January 2017, the directors proposal a nal dividend of N2.42 (2015:1.45) per share on the issued and paid up capital of 1,450,000,000 ordinary shore of N1.00 each amounting to N3.509 billion (2015:1.45 billion). This is not reected in the nancial statements.



Other National Disclosures

137

Annual Report, 31 December 2016Zenith General Insurance Company Limited

i Hypothecation of insurance assets

I Hypothecation of insurance assets for Company Company Company

2016 2015N'000 N'000

(a) Total assets allocated to insurance fundsInvestment in treasury bills

Shareholders funds 10,151,886 4,401,369

Insurance funds-Unearned Premium 3,228,676 3,342,457

Insurance funds-Outstanding claims 2,125,253 1,582,279

Total insurance funds 5,353,929 4,924,736

15,505,815 9,326,105

Assets

Quoted debt securities - treasury bills 9,326,10515,505,815

15,505,815 9,326,105

Company Company

2016 2015N'000 N'000

(b) Insurance contracts liability accounts

Outstanding claims 3,847,416 2,146,008

Unearned premium 3,228,676 3,342,457

Reinsurable recoverable (2,365,186) (594,247)

4,710,906 4,894,218

Asset designated 5,353,929 4,923,935

II Hypothecation of insurance assets for Group

(a) Investment in placements Group

2016

Group

2015N'000 N'000

Investment in placements

Shareholders funds - 6,503,582

Insurance funds - 634,392

7,137,974

The total assets designated for insurance fund amount of N5,353,930,000 (2015: N4,923,935,000)net liability of N4,664,196,000 2015: N4,894,218,000)

Treasury bills amount of N5.353billion (31 December 2015: N4.92billion)

in accordance with section 26 of the insurance act

Assets allocation was done in accordance with NAICOM guidelines in force to meet the minimum requirement of Section 26(1)(c)of the

Insurance Act 2003 for hypothecation o nvestments representing the insurance funds.

138

have been designated as assets representing insurance funds

is greater than the insurance contract

Note

15a

Note

23

23

16

Note


Annual Report, 31 December 2016Other National Disclosures

Assets

Placements with nancial institution 5,025,681

Placements with nancial institution (HTM)

14

15 1,493,435

6,519,116

6,770,717

367,422

7,138,139

2016 2015

(ii) Note N'000 N'000

Investment in treasury bills


Insurance funds-Unearned Premium 23 3,671,376 3,741,846

Insurance funds-Outstanding claims 23 4,674,941 3,148,469

15,505,815 12,972,908

Assets

Quoted Debt securities - Treasury bills 15a

15,505,815 12,972,908

(c) Investment in government bonds Group Group

2016 2015Note N'000 N'000

Investment in bonds


Insurance funds 300,000 300,000

5,974,476 6,434,831

Assets

Quoted Debt securities - Bonds 5,674,476 6,434,831

5,674,476 6,434,831

(d) Insurance contracts liability and investment contract liabilities accounts

Insurance and investment contracts liability accounts

Outstanding claims - general business 4,674,941 3,148,469

Unexpired risk - general business 3,671,376 3,741,846

Life insurance contract liability - 1,353,189

Life Savings plan - 305,365

Deposit Administration - 329,027

Reinsurable recoverable

Note

23

23

23

24

16 (2,365,186) (817,021)

5,981,131 8,060,875

Asset designated

Investment in placements - 634,392

Investment in treasury bills - insurance fund 4,674,941 3,148,469

Investment in treasury bills - unexpired risks 3,671,376 3,741,846

Investment in bonds 300,000 300,000

8,646,317 7,824,707

The total assets designated for insurance fund amount of N7,681,752,000 (2014: N6,579,606,000)

is greater than the insurance contract net liability and investment contract liability of

N6,659,025,000 (2014: N6,065,524,000)

139

Group

2016

Group

2015N'000 N'000

15,505,815 12,972,908

Note

Asset allocation was done in accordance

with NAICOM guidelines in force to meet

the minimum requirements of the

for hypothecation of i nvestment representingthe insurance funds.



140

The Age Analysis of the oustanding claims reserves liability as at 31 December, 2016

Outstanding Days 0-90 91-180 181-270 271-360 361 TOTAL

Claims per Claimant DAYS DAYS DAYS DAYS DAYS +

1 - 250,000 31,868,622 26,275,927 24,515,044 16,801,773 68,501,315 167,962,681

250,001-500,000 22,763,876 15,313,711 11,699,650 8,824,338 29,309,917 87,911,492

500,000-1,500,000 32,505,235 22,744,377 18,099,760 2,248,399 64,414,897 140,012,668

1,500,001-2,500,000 54,529,690 13,309,637 10,402,878 3,214,190 38,044,433 119,500,828

2,500,001-5,000,000 30,196,379 31,175,191 5,142,703 8,999,730.71 87,567,380 163,081,384

5,000,001,ABOVE 91,170,232 109,199,287 2,669,889,858 16,713,786 281,973,777 3,168,946,940

263,034,034 218,018,130 2,739,749,893 56,802,217 569,811,71 3,847,415,993

The Age Analysis of the oustanding claims reserves liability as at 31 December, 2015

1 - 250,000 61,370 17,197 14,609 13,145 12,875 119,196

250,001-500,000 26,620 10,417 5,262 3,826 5,165 51,290

500,000-1,500,000 49,436 14,405 14,929 8,667 13,938 101,376

1,500,001-2,500,000 32,160 4,445 16,767 2,222 10,779 66,373

2,500,001-5,000,000 75,011 14,445 26,883 - 36,179 152,517

5,000,001,ABOVE 771,294 94,448 496,929 38,890 492,215 1,893,776

1,015,891 155,357 575,379 66,750 571,151 2,384,528

Outstanding Days 0-90 91-180 181-270 271-360 361 TOTAL

Claims per Claimant DAYS DAYS DAYS DAYS DAYS +

Age analysis of outstanding claims

Other National DisclosuresZenith General Insurance Company Limited


for the year 31 December 2016ended

Fire Accident Motor Marine Bond Engineering Aviation Oil & Gas TotalNote N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000

Gross premium written 4 1,641,946 1,868,544 1,522,947 905,720 530,762 369,391 32,133 1,569,990 8,441,433

(Increase)/decrease in

Unearned premium 44,073 13,023 (61,884) (25,090) (45,400) (31,370) 1,555 218,872 113,781

Gross premium income 5 1,686,019 1,881,567 1,461,063 880,630 485,362 338,021 33,688 1,788,862 8,555,212

Reinsurance expenses 6d (1,136,812) (873,270) (249,808) (324,476) (13,950) (268,975) (35,810) (837,089) (3,740,190)

Net premium income 549,207 1,008,297 1,211,255 556,154 471,412 69,048 (2,122) 951,773 4,815,024

Fees and commissions income 7 143,772 171,521 38,474 84,111 17,156 65,384 812 56,631 577,861

Total income 692,979 1,179,818 1,249,729 640,265 488,568 134,432 (1,310) 1,008,404 5,392,885

Direct claims paid 8 (1,332,235) (303,619) (546,530) (130,346) (57,651) (232,538) (16,928) (14,047) (2,633,893)

Changes in provision for outstanding

claims-increase/(decrease) (1,643,006) 82,772 (28,403) (18,849) (157,910) (117,187) 606 180,570 (1,701,407)

Gross claims incurred (2,975,241) (220,847) (574,933) (149,195) (215,561) (349,725) (16,322) 166,523 (4,335,301)

Reinsurance claims

recoveries/recoverable 8 2,596,049 217,490 190,930 40,528 19,855 255,471 - - 3,320,323

Net claims incurred (379,192) (3,357) (384,003) (108,667) (195,706) (94,254) (16,322) 166,523 (1,014,978)

Underwriting Expenses

Acquisition costs (22,110) (706) (7,890) (33,766) - (55) (17) - (64,544)

Expenses for marketing and administration (308,449) (359,617) (143,638) (149,050) (29,572) (36,669) (2,584) (77,575) (1,107,154)

Underwriting expenses and acquisition costs 9 (330,559) (360,323) (151,528) (182,816) (29,572) (36,724) (2,601) (77,575) (1,171,698)

Underwriting (loss)/prot (16,771) 816,138 714,197 348,782 263,291 3,455 (20,233) 1,097,352 3,206,210

141

General business revenue accounts



Gross premium written 4

(Increase)/decrease in

Unearned premium

Gross premium inco 5

Reinsurance expens 6d

Net premium income

Fees and commissions income 7

Total income

Direct claims paid 8

Changes in provision for outstanding

claims-increase/(decrease)

Gross claims incurred

Reinsurance claims

recoveries/recoverable 8

Net claims incurred

Underwriting Expenses

Acquisition costs

Underwriting expenses and

acquisition costs 9

Underwriting prot/(loss)

Fire Accident Motor Marine Bond Engineering Aviation Oil & Gas Total

Note N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000

1,605,556 1,811,909 1,368,235 978,542 490,982 299,959 30,021 1,586,309 8,171,513

(159,022) (65,242) 66,261 74,860 (132,867) (35,557) 2,793 96,284 (152,490)

1,446,534 1,746,667 1,053,402 358,115 264,402 32,814 1,682,593 8,019,023

(916,548) (772,704) (386,025) (14,401) (241,885) (1,759) (802,582) (3,350,331)

529,986 973,963 667,377 343,714 22,517 31,055 880,011 4,668,692

255,005 218,974 153,105 19,826 81,966 805 85,270 851,656

784,991 1,192,937

1,434,496

(214,427)

1,220,069

36,705

1,256,774 820,482 363,540 104,483 31,860 965,281 5,520,348

(361,701) (272,025) (710,304) (206,586) (35,375) (86,189) (15,094) (47,886) (1,735,160)

297,348 (55,390) (89,331) 61,667 13,462 16,331 38,461 (44,026) 238,522

(64,353) (327,415) (799,635) (144,919) (21,913) (69,858) 23,367 (91,912) (1,496,638)

96,255 278,810 103,144 101,683 (2,677) 96,645 (7,159) (369) 666,332

31,902 (48,605) (696,491) (43,236) (24,590) 26,787 16,208 (92,281) (830,306)

(15,052) (151) (5,443) (47,108) - (2,856) (684) - (71,294)

(259,224) (327,449) (147,692) (178,066) (19,974) (32,491) (1,938) (92,150) (1,058,984)

(274,276) (327,600) (153,135) (225,174) (19,974) (35,347) (2,622) (92,150) (1,130,278)

542,617 816,733 407,148 552,071 318, 976 95,923 45,446 780,850 3,559,764

142



for the year 31 December 2015ended

General business revenue accounts

Group Group

2016 2015

N’000 N’000

Net insurance premium revenue 7,446,630 7,585,591

Commission received, investment and other income 5,376,789 3,661,621

Claims incurred, commissions paid, maintenance

& operating expenses (6,549,596) (8,096,714)

Value added 6,273,823 3,150,498

Distribution: %

Applied to pay:

Employees (Staff cost) 1,037,091 16 836,742

Government (Taxes) 624,126 10 1,155,561

Retained in business:

Depreciation and amortisation 199,072 3 129,936

To augument reserve 4,629,161 71 4,493,113

Value added 6,489,450 100 6,615,352

Company Company

2016 2015

N’000 N’000

Net insurance premium revenue 4,815,024 4,668,692

Commission received, investment and other income 6,548,285 3,086,776

Claims incurred, commissions paid, maintenance

& operating expenses (3,337,603) (3,065,893)

Value added 8,025,706 4,689,575

Distribution: %

Applied to pay:

Employees (Staff cost) 804,734 10 641,988

Government (Taxes) 495,591 6 891,187

Retained in business:

Depreciation and amortisation 156,889 2 112,802

To augument reserve 6,568,492 82 3,043,598

Value added 8,025,706 100 4,689,575

143

ii. Statement of value added



For the year ended 31-Dec-2016

Restated

Group 2016 2015 2014 2013 2012

Assets N'000 N'000 N'000 N'000 N'000Cash and cash equivalents 6,519,599 7,381,532 7,269,877 5,039,838

Investment securities held to maturity 22,673,726 19,775,161 12,862,395 10,629,396

Investment securities available for sale 1,117,370 468,279

5,528,505

16,354,532

2,838,012 835,736 691,643

Loans and receivables 28,694 34,479 31,050 21,752

Trade receivables 252,247 455,930 255,872 795,616

Reinsurance assets , ,3 674 481 2,426,151 2,206,617

32,446

118,346

2,283,842 1,456,379

Other receivables and prepayments 103,422 359,811 223,501 318,442 189,361

Deferred tax - 763,365 - - -

Deferred acquisition cost 448,625 516,047 557,544 506,052 203,560

Investment in subsidiary - - - 275 1,391

Statutory deposits 300,002 500,002 500,002 500,002 500,002

Property and equipment 1,468,109 1,366,207 987,184 992,662 420,202

Intangible assets 40,633 61,285 46,744 45,221 46,236

Total Assets 36,626,908 34,108,249 29,529,563 25,765,296 19,995,376

Liabilities

Trade payables 1,923,243 1,036,750 1,137,847 1,615,463 1,555,845

Provision and other payables 1,725,091 2,097,772 1,013,971 317,524 233,634

Insurance contract liabilities 8,346,317 8,243,504 8,025,589 7,223,578 5,104,871

Investment contract liabilities - 634,392 419,596 213,208 60,256

Current income tax liabilities 958,168 1,852,047 1,237,673 1,254,268 1,050,435

Deferred tax liability 357,740 31,112 20,665 12,739 4,281

Total Liabilities 13,310,559 13,895,577 11,855,341 10,636,780 8,009,322

Net assets 23,316,349 20,212,672 17,674,222 15,128,516 11,986,054

Equity

Share capital 1,450,000 1,450,000 1,450,000 1,450,000 1,450,000

Share premium 4,138,423 4,138,423 4,138,423 4,138,423 4,138,423

Other components of equity 17,727,923 14,624,249 12,085,799 9,240,518 6,164,507

23,316,346 20,212,672 17,674,222 14,828,941 11,752,930

Non-controlling interest - - - 299,575 233,124

Total equity 23,316,346 20,212,672 17,674,222 15,128,516 11,986,054

Statement of prot or loss and other

comprehensive Income

Gross premium written 11,116,350 10,906,124 12,461,008 10,408,784 9,522,331

Net premium income 7,446,630 7,585,591 9,444,010 6,874,536 6,771,333

Profit before taxation 5,236,732 4,607,937 4,347,073 3,517,451 2,605,844

Taxation (624,126) (1,155,561) (936,348) (523,046) (479,371)

Profit after taxation 4,612,606 3,452,376 3,410,725 2,994,405 2,126,473

Transfer to contingency reserve (1,375,860) (1,298,191) (652,179) (465,469) (371,159)

Transfer to retained earnings 3,236,746 2,154,185 2,758,546 2,528,936 1,755,314

Earnings per share (basic) 319k 337k 235k 202k 145k

144

2016 2015 2014 2013 2012

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

iii. Financial summary



Company 2016 2015 2014 2012

Assets N'000 N'000 N'000 N

2013

'000 N'000Cash and cash equivalents 3,469,556 3,078,850 4,053,866 3,802,020 2,357,046

Investment securities held to maturity 22,673,726 14,230,457 11,087,381 9,217,628 7,888,935

Investment securities available for sale 1,117,370 356,289 441,672 644,157 513,953

Loans and receivables 24,094 29,731 28,805 31,053 20,184

Trade receivables 37,741 29,851 33,006 - 554,009

Reinsurance assets 3,674,481 1,929,443 1,900,421 2,186,062 1,348,751

Other receivables and prepayments 74,554 2,144,656 929,530 169,851 141,125

Deferred acquisition cost 448,625 516,047 557,544 506,052 203,560

Investment in subsidiary 400,000 2,400,000 2,400,000 2,250,000 2,250,000

Deferred tax asse - - - - -

Statutory deposits 300,002 300,002 300,002 300,002 300,002

Property and equipment 1,084,824 948,077 903,122 892,445 403,359

Intangible assets 17,052 17,759 16,548 28,719 42,355

Total Assets 33,322,025 25,981,162 22,651,897 20,027,989 16,023,279

Liabilities

Trade payables 1,347,323 1,012,971 1,085,642 1,490,568 1,358,087

Provision and other payables 1,867,217 1,538,639 783,647 209,708 117,040

Insurance contract l iabi l i ties 7,076,092 5,488,465 5,574,496 4,854,119 3,107,807

Current income tax l i abi l i ties 829,740 1,093,109 849,524 977,326 962,340

Def erred tax l iabi l i ty 327,080 19,477 10,593 10,705 2,247

Total liabilities 11,447,452 9,152,661 8,303,902 7,542,426 5,547,521

Net assets 21,874,573 16,828,501 14,347,995 12,485,563 10,475,758

Equity

Ordinary share capital 1,450,000 1,450,000 1,450,000 1,450,000 1,450,000

Share premium 4,138,424 4,138,423 4,138,423 4,138,423 4,138,423

Other components of equity 16,286,149 11,240,078 8,759,572 6,897,140 4,887,335

Total equity 21,874,573 16,828,501 14,347,995 12,485,563 10,475,758

Statement of prot or loss and other

Gross premium written 8,441,433 8,171,513 7,720,364 6,492,142 5,909,193

Net premium income 4,815,024 4,668,692 4,798,495 3,623,953 3,476,782

Prot before taxation 7,064,083 5,734,785 3,152,978 2,191,950 2,107,043

Taxation (495,591) (891,187) (485,389) (285,014) (436,532)

Prot after taxation 6,568,492 4,843,598 2,667,589 1,906,936 1,670,511

Transfer to contingency reserve (1,313,698) (968,720) (533,518) (381,386) (334,102)

Transfer to retained earnings 5,254,794 3,874,878 2,134,071 1,525,550 1,336,409

Earnings per share (basic) 453k 334k 184k 132k 115k

145

2016 2015 2014 2012

N'000 N'000 N'000 N

2013

'000 N'000

comprehensive Income

For the year ended 31-Dec-2016iii. Financial summary



146

Headofce Annex Plot 280A Ajose Adeogun Street, Victoria Island, Lagos.

Ikeja 5 Adeniyi Jones Avenue, Ikeja, Lagos.

Abuja Plot 131A, Adetokunbo Ademola Crescent, Wuse 2, Abuja.

23A Presidential Road, Enugu.Enugu

Zenith Bank Building,

135 Broad street, Marina, Lagos

Plot 73, Rumuola Road, Port Harcourt.

89/91 Sapele Road, Opposite Ministry of Works, Benin

56, TafawaBalewa, MuritalaMuhammed Way, Kano.

OPERATIONAL OFFICES

Marina

Port Harcourt

Benin

Kano

Ibadan

Asaba

Warri

Uyo

Aba

Ikeja 2

Apapa

1, Obafemi Awolowo Way, J-Allen Roundabout, Ibadan.

Plot 150, Block 1 Core Area Phase 1, Okpanam Road, Asaba.

Warri-Sapele Road, Opposite Urhobo College, Effurun.

Plot 4, Bank Layout, Udoudema Avenue, Uyo.

1, Eziukwu Road, Aba.

24 Oba Akran Avenue, Ikeja, Lagos

15 Warehouse Road, Apapa, Lagos.












Annual Report, 31 December 2016Branches

insuring dreams. protecting the future · 2014 2015 2016 15.3% 17,674 20,212 23,316 shareholders...

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