TCI NIB Annual Report 2019-2020

TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Notes to Financial Statements, continued Year ended March 31, 2020 21. Financial instruments, continued (c) Market risk, continued (iii) Fair value, continued Carrying Level 1 2019 Level 3 Amount US$ US$ Fair Value US$ Level 2 – US$ – – Financial assets measured at FVOCI: 216,027,818 165,787,214 50,240,604 Equity securities 43,174,852 – 43,174,852 5,205,917 Government securities 12,182,799 12,182,799 Debt securities – – 5,205,917 Long-term receivables, net of current 5,205,917 – – portion ––– Long-term deposits, net of current 276,591,386 165,787,214 105,598,255 portion Observable prices or model inputs are usually available in the market for listed debt and equity securities. Availability of observable market prices and model inputs reduces the need for management judgement and estimation and also reduces the uncertainty associated with determining fair values. Availability of observable market prices and inputs varies depending on the products and markets and is prone to changes based on specific events and general conditions in the financial markets. The fair value of investment in private equity funds is determined using FINANCIAL unadjusted net asset value (level 2 valuation). The unadjusted net asset value STATEMENTS is used when the units in a fund are redeemable at the reportable net asset value at, or approximately at, the measurement date. 2020 If the inputs used to measure the fair value of an asset or liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. NIB’s equity securities at FVOCI are listed on US and non-US stock exchanges. For such investments, a twenty percent increase in value at the reporting date would have decreased other comprehensive loss in the statement of income, expenses and reserves by US$41,668,782 (2019: US$43,205,564) and an equal change in the opposite direction would have increased other comprehensive loss in the statement of income, expenses and reserves by US$41,668,782 (2019: US$43,205,564). The method applied to determine the fair value of long-term receivables at the reporting date was a discounted cash flow model. This valuation model considers the present value of any expected payment, discounted using a risk- adjusted discount rate. 56 99

TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Notes to Financial Statements, continued Year ended March 31, 2020 21. Financial instruments, continued (c) Market risk, continued (iii) Fair value, continued The value of NIB’s investment holdings with TCI Bank has been reduced by management’s best estimate following TCI Bank entering provisional and then full liquidation. A 10% decrease in provision on the gross, non-secured, non- equity, balance would have increased the change in fair value and net income in the statement of income, expenses and reserves for the year by US$1.75 million (2019: US$1.75 million). 22. Capital management Under the Regulations NIB is required to maintain the three following reserves on the following basis: (a) The minimum level of the Long-Term Benefit Reserve shall be equivalent to the expenditure for benefits under the Long-Term Benefit Branch during the three previous financial years. (b) The minimum level of the Short-term Benefit Reserve shall be equivalent to one- fourth of the expenditure for benefits under the Short-Term Benefit Branch during the two previous financial years. (c) An Employment Injury Benefit Reserve shall be constituted to finance injury benefit, disablement grant, death grant and medical care by transferring thereto annually as much of the excess of income over expenses of the Employment Injury Benefit Branch as is needed to maintain the level of the Employment Injury Benefit Reserve at one-half of the amount paid for the said benefits in the two previous financial years. The Disablement and Death Benefit Reserves has no such minimum requirement. The Employment Injury Benefit Reserve at March 31, 2020 and 2019 was determined as follows: FINANCIAL Paid benefits Required STATEMENTS 2020 2019 reserve at March 31, 2020 2020 Injury benefit US$ 247,854 383,258 315,556 Death grant 2,390 – 1,195 US$ 250,244 383,258 316,751 Paid benefits Required 2019 2018 reserve at March 31, 2019 Injury benefit US$ 383,258 328,245 Death grant – 2,390 355,752 – 1,195 Accrued employment injury costs (note 13) – 330,635 216,791 US$ 383,258 573,738 100 57

TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Notes to Financial Statements, continued Year ended March 31, 2020 22. Capital management, continued At March 31, 2019 NIB management decided to include in the Employment Injury Benefits Reserve the accrued employment injury costs of US$216,791 as these were the expected amounts that would ultimately be paid from this reserve. At March 31, 2020 accrued employment injury costs was fully settled by NIB with NHIB. In August 2019 and March 2020, NIB made payments to NHIB of US$58,000 and US$66,000 towards medical costs in connection with employment injuries during the year ended March 31, 2019 and 2020, respectively. The remaining accrued employment injury costs of US$92,791 were reversed during the year ended March 31, 2020. During the year ended March 31, 2020 US$256,987 was transferred to the Disablement and Death Benefit Reserve from the Employment Injury Benefit Reserve (2019: US$389,639) so as to maintain the required reserve for Employment Injury Benefit at March 31, 2020 and March 31, 2019. There was no change to NIB’s management of capital during the years ended March 31, 2020 and 2019. NIB has complied with the above regulatory imposed capital requirements at the year-end. NIB is not subject to any externally imposed capital requirements. 23. Actuarial review Actuarial present value of promised retirement benefits FINANCIAL STATEMENTS NIB has elected to apply IAS 26 for retirement benefits which requires the actuarial present value of promised retirement benefits to be recognised on the statement of 2020 financial position, in the notes to the financial statements or in an accompanying actuarial report. NIB has chosen to disclose the actuarial present value of promised retirement benefits in the notes to these financial statements. The 9th actuarial review of NIB was conducted by Trinity Consulting Ltd. (the Actuary) at March 31, 2019 and a report issued on July 25, 2019 (the 8th actuarial review of NIB was conducted by the Actuary at March 31, 2016 and a report issued on March 9, 2017). NIB provides retirement and other benefits to qualifying beneficiaries. A summary of these benefits is disclosed at note 3(e)(iv) to these financial statements. NIB currently finances the reserves (the Fund) by considering expected cash inflows from contributors and cash outflows to beneficiaries over an extended period, alongside the assets that have accumulated to date from contributions exceeding benefit payments. The actuarial present value of promised retirement benefits has been calculated on an accrued benefits basis using a current salary approach. Under this methodology the actuarial present value of promised retirement benefits at March 31, 2019, the date of NIB’s latest actuarial review, was US$636 million (March 31, 2016: US$459 million). The next actuarial review is scheduled to be conducted as at March 31, 2022. 58 101

TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Notes to Financial Statements, continued Year ended March 31, 2020 23. Actuarial review, continued Actuarial present value of promised retirement benefits, continued The key assumptions and methods used in this calculation were as follows:  Inflation – 2.1% per annum (2016: 2.3% per annum)  Discount rate – 4.5% per annum (2016: 4.5% per annum)  Average retirement age – 65 years old (2016: 65 years old)  Other than in death, all active insured persons at March 31, 2019 are assumed to reach age 65 (2016: age 65) and qualify for a retirement pension  Mortality rate – United Nations rates for Latin America with adjustments for the TCI experience (2016: United Nations rates for Latin America with adjustments for the TCI experience). The calculation of the actuarial present value of promised retirement benefits is sensitive to the key assumptions and methods used. The Fund had total reserves of US$282 million at March 31, 2019 (2016: US$191 million). At March 31, 2019 there was therefore a shortfall of US$354 million (2016: US$268 million) between the total reserves of the Fund of US$282 million (2016: US$191 million) and the actuarial present value of promised retirement benefits of US$636 million (2016: US$459 million. The Directors are considering ways in which this shortfall can be addressed. FINANCIAL All key assumptions remained the same for the actuarial present value of promised STATEMENTS retirement benefits calculations at March 31, 2019 and at March 31, 2016 with the exception of the inflation rate, which decrease from 2.3% to 2.1%. 2020 There would be no significant impact on the actuarial present value of promised retirement benefits at March 31, 2019 if the inflation rate assumption had remained the same. If the discount rate had increased from 4.5% to 5% the actuarial present value of promised retirement benefits at March 31, 2019 would have decreased by US$61 million to US$575 million. The actuarial present value of promised retirement benefits at March 31, 2019 and 2016 can be classified as follows: Vested Unvested Total At March 31, 2019 US$ 122,300,000 513,400,000 635,700,000 At March 31, 2016 US$ 80,500,000 378,500,000 459,000,000 Vested benefits are benefits, the rights to which, under the conditions of National Insurance (Benefit) Regulations, are not conditional on continued employment. 102 59

TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Notes to Financial Statements, continued Year ended March 31, 2020 23. Actuarial review, continued Actuarial present value of promised retirement benefits, continued The conditions for the promised retirement benefits to become vested are as follows: (a) An insured person other than a temporarily resident employed person has attained the age of sixty-five years; and (b) has retired from insurable employment or shows to the satisfaction of NIB that the insured person is no longer substantially employed in insurable employment; and (c) satisfies the relevant contribution conditions; I. that not less than one hundred and fifty contributions (three years) have been paid by the insured person; and II. that not less than five hundred contributions (ten years), including those referred to above, have been paid by or credited to the insured person. The actuarial present value of long-term benefits, other than promised retirement benefits The actuarial present value of long-term benefits, other than promised retirement benefits, was quantified by the Actuary at March 31, 2018, 2019 and 2020 and recognised in NIB’s financial statements in accordance with IAS 37, as follows: Present value at Change reporting date during the year At March 31, 2020 US$ 40,102,000 2,944,000 At March 31, 2019 US$ 37,158,000 1,038,000 At March 31, 2018 US$ 36,120,000 3,840,000 The change in present value of long-term benefits, other than promised retirement FINANCIAL benefits, of US$2,944,000 during the year ended March 31, 2020 (2019: US$1,038,000) STATEMENTS was recognised in the statement of income, expenses and reserves. 2020 The details of the actuarial present value of long-term benefits, other than promised retirement benefits, at the reporting date was as follows: Long-term benefit branch 2020 2019 Change Invalidity pension US$ during the year Survivors’ benefit US$ Non-contributory old aged pension US$ 15,507,000 Employment injury benefit branch 15,512,000 12,819,000 2,688,000 Employment injury benefit 15,120,000 392,000 Total 3,503,000 (334,000) 34,522,000 3,837,000 2,746,000 5,580,000 31,776,000 40,102,000 5,382,000 198,000 37,158,000 2,944,000 60 103

TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD Notes to Financial Statements, continued Year ended March 31, 2020 23. Actuarial review, continued The actuarial present value of long-term benefits, other than promised retirement benefits, continued The key assumptions and methods used in this calculation of present value of other long- term benefits for 2020 and 2019 were as follows:  Inflation – 2.1% per annum (2019: 2.1% per annum)  Discount rate – 4.5% per annum (2019: 4.5% per annum)  For widows/widowers pension – assume to be paid for life (2019: assume to be paid for life)  For orphan pension – assume to be paid until age of 21 (2019: assume to be paid until age of 21)  For invalidity pensions NIB is liable for insured persons who are invalid and less than sixty years of age.  For employment injuries NIB is liable for the period the insured person is incapacitated. 24. Commitments At the reporting date NIB had committed to contribute capital to the following private equity funds: FINANCIAL Strategic Value Special Situations Original Contributions Remaining STATEMENTS Feeder Fund III, L.P. Commitment Commitment US$ 2020 Portfolio Advisors Private Equity US$ 2,275,000 US$ Fund 2015 (Offshore), L.P. 2,500,000 4,137,916 225,000 4,484,958 NB Strategic Co. – Investment Cayman 5,000,000 3,267,571 862,084 Partners III L.P. 4,262,041 5,000,000 3,457,624 515,042 Portfolio Advisors Private Equity Fund 5,000,000 2,991,665 1,732,429 2017 (Offshore), L.P. 5,000,000 825,000 737,959 Pretium Residential Real Estate Fund II 1,812,677 Offshore, L.P. 5,000,000 27,514,452 1,542,376 5,000,000 2,008,335 EnTrustPermal Special Opportunities Fund IV Ltd. 2,500,000 1,675,000 Madison International Real Estate 5,000,000 3,187,323 Liquidity Fund VII (Intl), L.P. 40,000,000 12,485,548 Angelo Gordon Energy Credit Opportunities Offshore Holdings IV, L.P. Blackrock Private Opportunities Fund IV (Cayman), L.P. 104 61

TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD FINANCIAL STATEMENTS Notes to Financial Statements, continued 2020 Year ended March 31, 2020 24. Commitments, continued (a) In 2015 NIB committed to contribute US$2.5 million to the capital of Strategic Value Special Situations Feeder Fund III, L.P. (Strategic Value Fund), a private equity fund. This obligation to contribute capital to the Strategic Value Fund is irrevocable, unconditional and not subject to any defense, counterclaim or offset of any kind whatsoever. At March 31, 2020 NIB had a remaining contribution commitment to the Strategic Value Fund of US$225,000 (2019: US$225,000). (b) In 2016 NIB committed to contribute US$5 million to the Portfolio Advisors Private Equity Fund 2015 (Offshore), L.P. (2015 Portfolio Advisors Fund), a private equity fund. This obligation to contribute capital to the Portfolio Advisors Fund is irrevocable and can only be withdrawn or cancelled with the consent of certain partners in accordance with the terms and conditions stipulated in the 2015 Portfolio Advisors Fund’s partnership agreement. At March 31, 2020 NIB had a remaining contribution commitment to the 2015 Portfolio Advisors Fund of US$0.86 million (2019: US$1.16 million). (c) In 2016 NIB committed to contribute US$5 million to the NB Strategic Co. – Investment Cayman Partners III L.P. (NB Strategic Fund), a private equity fund. This obligation to contribute capital to the NB Strategic Fund is irrevocable and can only be withdrawn or cancelled with the consent of certain partners in accordance with the terms and conditions stipulated in the NB Strategic Fund’s partnership agreement. At March 31, 2020 NIB had a remaining contribution commitment to the NB Strategic Fund of US$0.52 million (2019: US$1.43 million). (d) In 2018 NIB committed to contribute US$5 million to the Portfolio Advisors Private Equity Fund 2015 (Offshore), L.P. (2017 Portfolio Advisors Fund), a private equity fund. This obligation to contribute capital to the Portfolio Advisors Fund is irrevocable and can only be withdrawn or cancelled with the consent of certain partners in accordance with the terms and conditions stipulated in the Portfolio Advisors Fund’s partnership agreement. At March 31, 2020 NIB had a remaining contribution commitment to the 2017 Portfolio Advisors Fund of US$1.73 million (2019: US$2.92 million). (e) In 2018 NIB committed to contribute US$5 million to the Pretium Residential Real Estate Fund II Offshore, L.P. (Pretium Fund), a private equity fund. This obligation to contribute capital to the Pretium Fund is irrevocable and can only be withdrawn or cancelled with the consent of certain partners in accordance with the terms and conditions stipulated in the Pretium Fund’s partnership agreement. As at the date of approval of these financial statements At March 31, 2020 NIB had a remaining contribution commitment to the Pretium Fund of US$0.74 million (2019: US$0.37 million). 62 105

FINANCIAL TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD STATEMENTS Notes to Financial Statements, continued 2020 Year ended March 31, 2020 24. Commitments, continued (f) In 2019 NIB committed to contribute US$5 million to the EnTrustPermal Special Opportunities Fund IV Ltd. (EnTrustPermal Fund), a private equity fund. This obligation to contribute capital to the EnTrustPermal Fund is irrevocable and can only be withdrawn or cancelled with the consent of certain partners in accordance with the terms and conditions stipulated in the EnTrustPermal Fund’s partnership agreement. At March 31, 2020 NIB had a remaining contribution commitment to the EnTrustPermal Fund of US$1.54 million (2019: US$4.8 million). (g) In 2019 NIB committed to contribute US$5 million to the Madison International Real Estate Liquidity Fund VII (Intl), L.P. (Madison Fund), a private equity fund. This obligation to contribute capital to the Madison Fund is irrevocable and can only be withdrawn or cancelled with the consent of certain partners in accordance with the terms and conditions stipulated in the Madison Fund’s partnership agreement. At March 31, 2019 NIB had a remaining contribution commitment to the Madison Fund of US$2.01 million (2019: US$5 million). (h) In 2020 NIB committed to contribute US$2.5 million to the Angelo Gordon Energy Credit Opportunities Offshore Holdings IV, L.P. (Angelo Gordon Fund), a private equity fund. This obligation to contribute capital to the Angelo Gordon Fund is irrevocable and can only be withdrawn or cancelled with the consent of certain partners in accordance with the terms and conditions stipulated in the Angelo Gordon's Fund’s partnership agreement. At March 31, 2020 NIB had a remaining contribution commitment to the Angelo Gordon Fund of US$1.68 million. (i) In 2020 NIB committed to contribute US$5 million to the Blackrock Private Opportunities Fund IV (Cayman), L.P. (Blackrock Fund), a private equity fund. This obligation to contribute capital to the Blackrock Fund is irrevocable and can only be withdrawn or cancelled with the consent of certain partners in accordance with the terms and conditions stipulated in the Blackrock Fund’s partnership agreement. At March 31, 2020 NIB had a remaining contribution commitment to the Blackrock Fund of US$3.19 million. 25. Contingent liabilities In the ordinary course of its activities NIB is a party to several legal actions. NIB is contingently liable for costs and damages in the event of any adverse finding by the TCI court (the Court) in relation to any of these legal actions. However, it is not possible to predict the decision of the Court or estimate the amount of such awards, if any. Accordingly, no provision has been made in these financial statements regarding these legal proceedings. Management is of the opinion that the resolution of these matters will not have a material impact on NIB’s financial statements. 106 63

TURKS AND CAICOS ISLANDS NATIONAL INSURANCE BOARD FINANCIAL STATEMENTS Notes to Financial Statements, continued Year ended March 31, 2020 2020 26. Subsequent events (a) COVID-19 outbreak On March 11, 2020, the COVID-19 outbreak was declared a global pandemic by the World Health Organization causing significant disruption in global and local economies. As a result, economic uncertainties have arisen which are likely to negatively impact the financial performance of NIB for the year ended March 31, 2021 and possibly beyond. Due to the significant uncertainties regarding this matter as at the date of approval of these financial statements the financial impact on NIB could not be reasonably ascertained. (b) Investments in financial assets measured at FVOCI At March 31, 2020 NIB had US$271 million of financial assets measured at FVOCI held at UBS Financial Services Inc. and managed by various investment managers. From April 1, 2020 to August 31 2020 NIB reported a US$43.76 million increase in fair value of its financial assets measured at FVOCI. In June 2020 NIB committed to contribute US$5 million to the Canyon Distressed Opportunity Fund III (Cayman), L.P. (Canyon Fund), a private equity fund. This obligation to contribute capital to the Canyon Fund is irrevocable and can only be withdrawn or cancelled with the consent of certain partners in accordance with the terms and conditions stipulated in the Canyon Fund’s partnership agreement. (c) Unemployment benefit On October 13, 2020 the National Insurance (Amendment) Bill 2020 was passed in the House of Assembly. This Bill commits NIB to pay up to US$4.2 million of unemployment assistance benefits in 2020. 27. Going concern As disclosed at note 26 to these financial statements the COVID-19 pandemic has caused significant disruption in both global and local economies. However, on the basis of various assessments, forecasts and representations, management believes the risk that NIB will be unable to meet its obligations as they fall due is low and NIB will continue as a going concern for the foreseeable future. 64 107

Annual Rep t 2020 FINANCIAL YEAR