Mutual Benefits AGM Report - 2018

2017 Annual Report + Accounts52 Summary Of Significant Accounting Policies Strategic Report Governance Financial Statements Appendiceslosses that have not yet been incurred). The present The determination of what is 'significant' orvalue of the estimated future cash flows is discounted 'prolonged' requires judgement. In making thisat the financial asset's original effective interest rate. judgement, the Group evaluates, among other factors, the duration or extent to which the fair valueThe carrying amount of the asset is reduced through of an investment is less than its cost. Thethe use of an allowance account and the loss is determination of what is 'significant' is 20% andrecognized in the statement of profit or loss. Interest 'prolonged' is six months.income (recorded as investment income in thestatement of profit or loss) continues to be accrued 2.3.10.2 Financial liabilitieson the reduced carrying amount and is accrued usingthe rate of interest used to discount the future cash 2.3.10.2.1 Initial recognition and measurementflows for the purpose of measuring the impairment Financial liabilities are classified at initial recognition,loss. Loans together with the associated allowance as borrowing, payables and other payables asare written off when there is no realistic prospect of appropriate.future recovery and all collateral has been realised orhas been transferred to the Group. If, in a subsequent All financial liabilities are recognized initially at fairyear, the amount of the estimated impairment loss value. The Group's financial liabilities include tradeincreases or decreases because of an event occurring payables, other accrual and payables.after the impairment was recognised, the previouslyrecognised impairment loss is increased or reduced by 2.3.10.2.2 Subsequent measurementadjusting the allowance account. If a write-off is later Subsequent measurement of financial liabilitiesrecovered, the recovery is credited to finance costs in depends on their classification.the statement of profit or loss. i. Payables and other payables2.3.10.1.4 Impairment of financial assets Subsequent to initial recognition, they are measured at amortized cost using the effective interest rateii. Available-for-sale financial investments method. If the due date of the liability is less than oneFor AFS financial investments, the Group assesses at year discounting is omitted.each reporting date whether there is objectiveevidence that an investment or a group of ii. Interest bearing loans and borrowingsinvestments is impaired. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortisedIn the case of equity investments classified as AFS, cost using the EIR method. Gains and losses areobjective evidence would include a 'significant or recognised in profit or loss when the liabilities areprolonged' decline in the fair value of the investment derecognised as well as through the EIR amortisationbelow its cost. 'Significant' is evaluated against the process.original cost of the investment and 'prolonged'against the period in which the fair value has been Amortised cost is calculated by taking into accountbelow its original cost. Where there is evidence of any discount or premium on acquisition and fee orimpairment, the cumulative loss – measured as the costs that are an integral part of the EIR. The EIRdifference between the acquisition cost and the amortisation is included in finance cost in thecurrent fair value, less any impairment loss on that statement of profit or loss.investment previously recognised in the statement ofprofit or loss – is removed from OCI and recognised in 2.3.10.2.3 Derecognition of financial liabilitiesthe statement of profit or loss. Impairment losses on A financial liability is derecognised when theequity investments are not reversed through profit or obligation under the liability is discharged or cancelledloss; increases in their fair value after impairment are or expires. When an existing financial liability isrecognized directly in OCI. replaced by another from the same lender on

2017 Annual Report + Accounts Strategic Report Governance Summary Of Significant Accounting Policies 53Financial Statements Appendicessubstantially different terms, or the terms of an generate economic benefits by using the asset in itsexisting liability are substantially modified, such an highest and best use or by selling it to another marketexchange or modification is treated as a derecognition participant that would use the asset in its highest andof the original liability and the recognition of a new best use.liability, and the difference in the respective carryingamounts is recognised in the profit or loss. The Group uses valuation techniques that are appropriate in the circumstances and for which2.3.11 Deposit liabilities sufficient data are available to measure fair value,Deposits liabilities include current, term and savings maximising the use of relevant observable inputs anddeposits with the Group by depositors. Deposits from minimising the use of unobservable inputs.customers are initially recognized in liabilities at fairvalue less transaction cost and subsequently All assets and liabilities for which fair value ismeasured at amortised cost. measured or disclosed in the financial statements are categorized within the fair value hierarchy, describedInterest paid on the deposits is expensed as finance as follows, based on the lowest level input that iscost in profit or loss' during the period in which the significant to the fair value measurement as a whole:Group has the obligation to pay the interest. Depositsare derecognised when repaid to customers on Ÿ Level 1 — Quoted (unadjusted) market prices indemand or used to offset amount(s) due from the active markets for identical assets or liabilitiescustomer as agreed in the contract. Ÿ Level 2—Valuation techniques for which the lowest2.3.12 Fair value measurement level input that is significant to the fair valueThe Group measures financial instruments and non- measurement is directly or indirectly observablefinancial assets such as investment properties at fairvalue at each reporting date. Also, fair values of Ÿ Level 3—Valuation techniques for which the lowestfinancial instruments measured at amortised cost are level input that is significant to the fair valuedisclosed in Note 3.5. measurement is unobservableFair value is the price that would be received to sell an For assets and liabilities that are recognised in theasset or paid to transfer a liability in an orderly financial statements on a recurring basis, the Grouptransaction between market participants at the determines whether transfers have occurred betweenmeasurement date. The fair value measurement is Levels in the hierarchy by re-assessing categorizationbased on the presumption that the transaction to sell (based on the lowest level input that is significant tothe asset or transfer the liability takes place either: the fair value measurement as a whole) at the end of each year.Ÿ In the principal market for the asset or liability, orŸ In the absence of a principal market, in the most 2.3.12 Fair value measurement - Continued The Group's management determines the policies and advantageous market for the asset or liability procedures for both recurring fair value measurement, such as investment properties andThe principal or the most advantageous market must unquoted Available-for-sale (AFS) financial assets,be accessible to by the Group. The fair value of an and for non-recurring measurement, such as assetsasset or a liability is measured using the assumptions held for distribution in discontinued operation.that market participants would use when pricing theasset or liability, assuming that market participants External valuers are involved for valuation ofact in their economic best interest. significant assets, such as investment properties and significant liabilities, such as contingentA fair value measurement of a non-financial asset consideration. Involvement of external valuers istakes into account a market participant's ability to decided upon annually by the management after discussion with and approval by the audit committee.

2017 Annual Report + Accounts54 Summary Of Significant Accounting Policies Strategic Report Governance Financial Statements AppendicesSelection criteria include market knowledge, estimate of the most appropriate model assumptions.reputation, independence and whether professional For discounted cash flow techniques, estimatedstandards are maintained. future cash flows are based on management's best estimates and the discount rate used is a market-At each reporting date, the valuation committee related rate for a similar instrument. The use ofanalyses the movements in the values of assets and different pricing models and assumptions couldliabilities which are required to be re-measured or re- produce materially different estimates of fair values.assessed as per the Group's accounting policies. Forthis analysis, the valuation committee verifies the The fair value of floating rate and overnight depositsmajor inputs applied in the latest valuation by with credit institutions is their carrying value. Theagreeing the information in the valuation carrying value is the cost of the deposit and accruedcomputation to contracts and other relevant interest. The fair value of fixed interest bearingdocuments. deposits is estimated using discounted cash flow techniques. Expected cash flows are discounted atThe management, in conjunction with the Group's current market rates for similar instruments at theexternal valuers, also compares the changes in the fair reporting date.value of each asset and liability with relevant externalsources to determine whether the change is 2.3.12 Fair value measurement - Continuedreasonable. If the fair value cannot be measured reliably, these financial instruments are measured at cost, being theFor the purpose of fair value disclosures, the Group fair value of the consideration paid for the acquisitionhas determined classes of assets and liabilities on the of the investment or the amount received on issuingbasis of the nature, characteristics and risks of the the financial liability. All transaction costs directlyasset or liability and the level of the fair value attributable to the acquisition are also included in thehierarchy as explained above. cost of the investment.The fair value of financial instruments that are 2.3.13 Impairment of non-financial assetsactively traded in organised financial markets is The Group assesses at each reporting date whetherdetermined by reference to quoted market bid prices there is an indication that an asset may be impaired. Iffor assets and offer prices for liabilities, at the close of any such indication exists, or when annual impairmentbusiness on the reporting date, without any testing for an asset is required, the Group estimatesdeduction for transaction costs. the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's orFor units in unit trusts and shares in open ended cash-generating unit's (CGU) fair value less costs toinvestment companies, fair value is determined by sell and its value in use. The recoverable amount isreference to published bid values in an active market. determined for an individual asset, unless the asset does not generate cash inflows that are largelyFor other financial instruments not traded in an active independent of those from other assets or Group ofmarket, the fair value is determined by using assets.appropriate valuation techniques. Valuationtechniques include the discounted cash flow method, Where the carrying amount of an asset or CGUcomparison to similar instruments for which market exceeds its recoverable amount, the asset isobservable prices exist and other relevant valuation considered impaired and is written down to itsmodels. recoverable amount. In assessing value in use, the estimated future cash flows are discounted to theirTheir fair value is determined using a valuation model present value using a pre-tax discount rate thatthat has been tested against prices or inputs to actual reflects current market assessments of the time valuemarket transactions and using the Group's best of money and the risks specific to the asset. In

2017 Annual Report + Accounts Strategic Report Governance Summary Of Significant Accounting Policies 55Financial Statements Appendicesdetermining fair value less costs to sell, recent market goodwill as at 31 December.transactions are taken into account, if available. If nosuch transactions can be identified, an appropriate 2.15 Impairment of non-financial assets - Continuedvaluation model is used. These calculations are The recoverable amount of the banking CGU havecorroborated by valuation multiples, quoted share been determined based on a value in use calculation.prices for publicly traded subsidiaries or other The calculation requires the Group to make anavailable fair value indicators. estimate of the expected future cash flows from each of the CGUs and discount these amounts using aImpairment losses of continuing operations are suitable rate which reflects the risk of those cashrecognized in the profit or loss in those expense flows in order to calculate the present value of thosecategories consistent with the function of the cash flows.impaired asset. Previously recorded impairment losses for goodwillFor assets excluding goodwiill, an assessment is made are not reversed in future periods.at each reporting date as to whether there is anyindication that previously recognized impairment Intangible assetslosses may no longer exist or may have decreased. If Intangible assets with indefinite useful lives aresuch indication exists, the Group makes an estimate tested for impairment annually at 31 December, eitherof the asset's or CGU's recoverable amount. individually or at the cash generating unit level, as appropriate and when circumstances indicate that theA previously recognized impairment loss is reversed carrying value may be impaired.only if there has been a change in the estimates usedto determine the asset's recoverable amount since the 2.3.14 Pledged assetslast impairment loss was recognized. If that is the Financial assets transferred to external parties thatcase, the carrying amount of the asset is increased to do not qualify for de-recognition are reclassified inits recoverable amount. That increased amount the statement of financial position from financialcannot exceed the carrying amount that would have assets (held-for-trading, held to maturity or availablebeen determined, net of amortization, had no for sale) to pledged assets, if the transferee hasimpairment loss been recognized for the asset in prior received the right to sell or re-pledge them in theyears. Such reversal is recognized in the profit or loss event of default from agreed terms.unless the asset is carried at revalued amount, inwhich case, the reversal is treated as a revaluation Initial recognition of pledged assets is at fair value,increase. whilst subsequent measurement is based on the classification and measurement of the financial assetThe following criteria are also applied in assessing in accordance with IAS 39.impairment of goodwill: 2.3.15 Trade receivablesGoodwill Trade receivables (premium receivable) are initiallyGoodwill is tested for impairment annually and when recognized at fair value and subsequently measuredcircumstances indicate that the carrying value may be at amortised cost less provision for impairment.impaired. Discounting is omitted where the effect of discounting is immaterial.Impairment is determined for goodwill by assessingthe recoverable amount of the cash-generating units, An allowance for impairment is made when there isto which the goodwill relates. Where the recoverable objective evidence such as the probability of solvencyamount of the cash-generating units is less than their or significant financial difficulties of the debtors thatcarrying amount an impairment loss is recognised. the Group will not be able to collect the amount dueThe Group performs its annual impairment test of under the original terms of the invoice. Impaired debts

2017 Annual Report + Accounts56 Summary Of Significant Accounting Policies Strategic Report Governance Financial Statements Appendicesare derecognized when they are assessed as 2.3.16.2 Prepaid reinsuranceuncollectible. Prepaid reinsurance are those proportions of premiums written in a year that relate to periods ofIf in a subsequent period the amount of the risk after the statement of financial position date andimpairment loss decreases and the decrease can be is reported under reinsurance assets in the statementrelated objectively to an event occurring after the of financial position. Prepaid reinsurance premiumsimpairment was recognized, the previous recognized are deferred over the term of the underlying directimpairment loss is reversed to the extent that the insurance policies for risks-attaching contracts andcarrying value of the asset does not exceed its over the term of the reinsurance contract for losses-amortised cost at the reversed date. Any subsequent occurring contracts.reversal of an impairment loss is recognized in theprofit or loss. 2.3.17 Other receivables and prepayment Other receivables are made up of prepayments and2.3.16 Reinsurance other amounts due from parties which are not directly linked to insurance or investment contracts. Except2.3.16.1 Reinsurance ceded to reinsurance prepayment and other receivables that are notcounterparties financial assets, these are measured at amortisedThe Group cedes insurance risk in the normal course costs. Discounting is omitted where the effect ofof business for most of its businesses. Reinsurance discounting is immaterial.assets represent balances due from reinsurancecompanies. Amounts recoverable from reinsurers are 2.3.18 Deferred expensesestimated in a manner consistent with theoutstanding claims provision or settled claims Deferred acquisition costs (DAC)associated with the reinsurer's policies and are in Those direct and indirect costs incurred during theaccordance with the related reinsurance contract. financial period arising from the acquiring or renewing of insurance contracts are deferred to theReinsurance assets are reviewed for impairment at extent that these costs are recoverable out of futureeach reporting date, or more frequently, when an premiums. All other acquisition costs are recognizedindication of impairment arises during the reporting as an expense when incurred.year. Impairment occurs when there is objectiveevidence as a result of an event that occurred after Subsequent to initial recognition, DAC for generalinitial recognition of the reinsurance asset that the insurance are amortized over the period in which theGroup may not receive all outstanding amounts due related revenues are earned. The DAC asset for lifeunder the terms of the contract and the event has a insurance is amortised over the expected life of thereliably measurable impact on the amounts that the contracts as a constant percentage of expectedGroup will receive from the reinsurer. The impairment premiums. The deferred acquisition costs forloss is recorded in the statement of profit or loss reinsurers are amortised in the same manner as the underlying asset amortisation and is recorded in the2.18 Reinsurance–continued statement of profit or loss.2.3.16.1 Reinsurance ceded to reinsurance Changes in the expected useful life or the expectedcounterparties - Continued pattern of consumption of future economic benefitsGains or losses on buying reinsurance are recognised embodied in the asset are accounted for by changingin the statement of profit or loss immediately at the the amortization period and are treated as a change indate of purchase and are not amortised. Ceded an accounting estimate.reinsurance arrangements do not relieve the Groupfrom its obligations to policyholders. An impairment review is performed at each reporting date or more frequently when an indication of

2017 Annual Report + Accounts Strategic Report Governance Summary Of Significant Accounting Policies 57Financial Statements Appendicesimpairment arises. When the recoverable amount is all the risks and benefits incidental to ownership ofless than the carrying value, an impairment loss is the leased items are operating leases.recognized in the profit or loss. DAC are alsoconsidered in the liability adequacy test for each Operating lease payments are recognised as anreporting period. expense in the statement of profit or loss on a straight-line basis over the lease term.DAC are derecognized when the related contracts areeither settled or disposed of. Contingent rental payable is recognised as an expense in the period in which they are incurred. All other2.3.19 Inventories and work in progress leases are considered finance leases.The Group recognises property as inventory under the Group as a lessorfollowing circumstances: Leases where the Group does not transfer substantially all of the risk and benefits of ownershipŸ property purchased for the specific purpose of of the asset are classified as operating leases. resale; Rental income is recognised as revenue in theŸ property constructed for the specific purpose of statement of profit or loss on a straight line basis over resale (work in progress under the scope of IAS 18, the lease term. Initial direct costs incurred in ''Revenue'); and negotiating and arranging an operating leaseare added to the carrying amount of the leased asset andŸ property transferred from investment property to recognised over the lease term on the same basis as inventories. This is permitted when the Group rental income. Contingent rents are recognised as commences the property's development with a revenue in the period in which they are earned. All view to sale. other leases are considered finance leases.They are valued at the lower of cost and net realisable Advances to customers under finance leasevalue. Cost comprises direct materials and, where Advances to customers under finance lease are statedappropriate, labour and production overheads that net of principal repayments. Finance lease income ishave been incurred in bringing the inventories and recognised in a manner which provides a constantwork in progress to their present location and yield on the outstanding principal over the lease term.condition. 2.3.21 Investment propertiesCost is determined using weighted average cost. Net Investment properties held for rental income andrealisable value represents the estimated selling price capital appreciation are measured initially at cost,less estimated costs to completion and costs to be including transaction costs. The carrying amountincurred in marketing, selling and distribution. includes the cost of replacing part of an existing investment property at the time that cost is incurred2.3.20 Leases if the recognition criteria are met; and excludes theThe determination of whether an arrangement is a costs of day-to-day servicing of an investmentlease, or contains a lease, is based on the substance of property. Subsequent to initial recognition,the arrangement and requires an assessment of investment properties are stated at fair value, whichwhether the fulfilment of the arrangement is reflects market conditions at the reporting date.dependent on the use of a specific asset or assets and Gains or losses arising from changes in the fair valuesthe arrangement conveys a right to use the asset, of investment properties are included in the profit oreven if that asset is not explicitly specified in an loss in the year in which they arise.arrangement. Fair values are evaluated annually by an accreditedGroup as a lesseeLeases that do not transfer to the Group substantially

2017 Annual Report + Accounts58 Summary Of Significant Accounting Policies Strategic Report Governance Financial Statements Appendicesexternal, independent valuer, applying a valuation The useful lives of intangible assets are assessed to bemodel. either finite or indefinite.Investment properties are derecognised either when Intangible assets with finite lives are amortised overthey have been disposed of, or when the investment the useful economic life and assessed for impairmentproperty is permanently withdrawn from use and no whenever there is an indication that the intangiblefuture economic benefit is expected from its disposal. asset may be impaired. The amortisation period (fiveAny gains or losses on the retirement or disposal of an years) and the amortisation method (straight line) forinvestment property are recognised in the profit or an intangible asset with a finite useful life areloss in the year of retirement or disposal. reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern ofTransfers are made to or from investment property consumption of future economic benefits embodied inonly when there is a change in use evidenced by the the asset are accounted for by changing theend of owner-occupation, commencement of an amortisation period or method, as appropriate, andoperating lease to another party or completion of are treated as changes in accounting estimates. Theconstruction or development. For a transfer from amortisation expense on intangible assets with finiteinvestment property to owner-occupied property, the lives is recognised in the profit or loss in the expensedeemed cost for subsequent accounting is the fair category consistent with the function of thevalue at the date of change in use. If owner-occupied intangible asset.property becomes an investment property, the Groupaccounts for such property in accordance with the 2.3.23 Intangible assets - continuedpolicy stated under property and equipment up to the Intangible assets with indefinite useful lives aredate of the change in use. tested for impairment annually either individually or at the cash generating unit level. Such intangibles are2.3.22 Investments in subsidiaries not amortised. The useful life of an intangible assetInvestments in subsidiaries are carried in the separate with an indefinite life is reviewed annually tostatement of financial position at cost less allowance determine whether indefinite life assessmentfor impairment losses. Where, there has been continues to be supportable. If not, the change in theimpairment in the value of investments in useful life assessment from indefinite to finite is madesubsidiaries, the loss is recognised as an expense in on a prospective basis.the period in which the impairment is identified. Ondisposal of an investment, the difference between the Gains or losses arising from derecognition of annet disposal proceeds and the carrying amount is intangible asset are measured as the differencecharged or credited to the statement of profit or loss between the net disposal proceeds and the carryingaccount. amount of the asset and are recognised in the profit or loss when the asset is derecognized.2.3.23 Intangible assetsIntangible assets acquired separately are measured 2.3.24 Property, plant and equipmenton initial recognition at cost. The cost of intangible Property and equipment (excluding building) is statedassets acquired in a business combination is their fair at cost, excluding the costs of day-to-day servicing,value as at the date of acquisition. Following initial less accumulated depreciation and accumulatedrecognition, intangible assets are carried at cost less impairment losses. Replacement or major inspectionany accumulated amortisation and any accumulated costs are capitalized when incurred and if it isimpairment losses. Internally generated intangible probable that future economic benefits associatedassets, excluding capitalized development costs, are with the item will flow to the entity and the cost of thenot capitalized and expenditure is reflected in the item can be measured reliably.profit or loss in the year in which the expenditure isincurred. Building is measured at fair value less accumulated

2017 Annual Report + Accounts Strategic Report Governance Summary Of Significant Accounting Policies 59Financial Statements Appendicesdepreciation and impairment losses recognised after An item of property and equipment is derecognizedthe date of the revaluation. Valuations are performed upon disposal or when no further future economicfrequently to ensure that the fair value of a revalued benefits are expected from its use or disposal. Anyasset does not differ materially from its carrying gain or loss arising on derecognition of the assetamount. (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) isAny revaluation surplus is recorded in other included in the profit or loss in the year the asset iscomprehensive income and hence, credited to the derecognized.asset revaluation reserve in equity, except to theextent that it reverses a revaluation decrease of the 2.3.25 Statutory depositsame asset previously recognised in the profit or loss, Statutory deposit represents fixed deposit with thein which case, the increase is recognised in the profit Central Bank of Nigeria in accordance with sectionor loss. A revaluation deficit is recognized in the profit 10(3) of the Insurance Act, 2003. The deposit isor loss, except to the extent that it offsets an existing recognised at cost in the statement of financialsurplus on the same asset recognised in the asset position being 10% of the statutory minimum capitalrevaluation reserve. requirement of N3 billion for General insurance business and of N2 billion for life business. InterestAccumulated depreciation as at the revaluation date income on the deposit is recognised in the statementis eliminated against the gross carrying amount of the of profit or loss in the period the interest is earned.asset and the net amount is restated to the revaluedamount of the asset. Upon disposal, any revaluation 2.3.26 Deposit for sharesreserve relating to the particular asset being sold is Deposit for shares are amounts that the Company hastransferred to retained earnings. placed with (asset) or received from subsidiary, associate or another company (liability) for theLand is not depreciated. Depreciation on property, ultimate purpose of equity investment in the relevantplant and equipment is calculated using the straight- company for which relevant regulatory formalitiesline method to allocate the cost to the residual values have not been completed at the reporting date.over the estimated useful lives as follows; Deposits for shares are carried at cost less accumulated impairment losses, if any.Building 2%Leasehold building over the 2.3.27 Insurance contracts remainder of the The Group issues contracts that transfer insuranceLeasehold improvements life of the lease risk or financial risk or both. Insurance contracts areFurniture and fittings 20% those contracts where a party (the policy holder)Plant and machinery 20% transfers significant insurance risk to another partyMotor vehicles 20% (insurer) and the latter agrees to compensate theComputer and office equipment 25% policyholder or other beneficiary if a specified 20% uncertain future event (the insured event) adversely affects the policyholder, or other beneficiary. SuchThe assets' residual values, and useful lives and contracts may also transfer financial risk when themethod of depreciation are reviewed and adjusted, if insurer issues financial instruments with aappropriate, at each financial year end and adjusted discretionary participation feature. These areprospectively, if appropriate. computed in compliance with the provisions of Sections 20, 21, and 22 of the Insurance Act 2003 asImpairment reviews are performed when there are follows:indicators that the carrying value may not berecoverable. Impairment losses are recognised in the 2.3.27.1 General insurance contractsprofit or loss as an expense.

2017 Annual Report + Accounts60 Summary Of Significant Accounting Policies Strategic Report Governance Financial Statements AppendicesThese contracts are accident and casualty and are expected to be incurred in the future when theproperty insurance contracts. Accident and casualty premiums are recognised. The liability is determinedinsurance contracts protect the Group's customers as the sum of the expected discounted value of theagainst the risk of causing harm to third parties as a benefit payments and the future administrationresult of their legitimate activities. Damages covered expenses that are directly related to the contract, lessinclude both contractual and non-contractual events. the expected discounted value of the theoreticalThe typical protection offered is designed for premiums that would be required to meet the benefitsemployers who become legally liable to pay and administration expenses based on the valuationcompensation to injured employees (employers' assumptions used. The liability is based onliability) and for individual and business customers assumptions as to mortality, persistence,who become liable to pay compensation to a third maintenance expenses and investment income thatparty for bodily harm or property damage (public are established at the time the contract is issued.liability). 2.3.27.3 Annuity contractsProperty insurance contracts mainly compensate the These contracts insure customers from consequencesGroup's customers for damage suffered to their of events that would affect the ability of theproperties or for the value of property lost. Customers customers to maintain their current level of income.who undertake commercial activities on There are no maturity or surrender benefits. Thetheir premises could also receive compensation for annuity contracts are fixed annuity plans. Policythe loss of earnings caused by the inability to use the holders make a lump sum payment recognised as partinsured properties in their business activities of premium in the period when the payment was(business interruption cover). made. Constant and regular payments are made to annuitants based on terms and conditions agreed at(i) Reserves for unearned premium the inception of the contract and throughout the lifeIn compliance with Section 20 (1) (a) of Insurance Act of the annuitants. The annuity funds are invested in2003, the reserve for unearned premium is calculated long term government bonds and reasonable moneyon a time apportionment basis in respect of the risks markets instruments to meet up with the payment ofaccepted during the year. monthly/quarterly annuity payments. The annuity funds liability is actuarially determined based on(ii) Reserves for outstanding claims assumptions as to mortality, persistence,The reserve for outstanding claims is maintained at maintenance expenses and investment income thatthe total amount of outstanding claims incurred and are established at the time the contract is issued.reported plus claims incurred but not reported(“IBNR”) as at the reporting date. The IBNR is based (i) Life fundon the liability adequacy test. This is made up of net liabilities on policies in force as computed by the actuaries at the time of the actuarial2.3.27 Insurance contracts - Continued valuation.2.3.27.2Life business Liability adequacy testThese contracts insure events associated with human At each end of the reporting period, liability adequacylife (for example, death or survival). These are tests are performed by an Actuary to ensure thedivided into the individual life, group life and annuity adequacy of the contract liabilities net of related DACcontracts. assets. In performing these tests, current best estimates of future contractual cash flows and claimsIndividual life contracts are usually long term handling and administration expenses, as well asinsurance contracts and span over one year while the investment income from the assets backing suchgroup life insurance contracts usually cover a period liabilities, are used. Any deficiency is immediatelyof 12 months. A liability for contractual benefits that charged to profit or loss initially by writing off DAC

2017 Annual Report + Accounts Strategic Report Governance Summary Of Significant Accounting Policies 61Financial Statements Appendicesand by subsequently establishing a provision for current period are measured at the amount expectedlosses arising from liability adequacy tests “the to be recovered from or paid to the taxationunexpired risk provision”. authorities. The tax rates and tax laws used to compute the amount are those that are enacted or2.3.28 Investment contracts substantively enacted by the reporting date.Investment contracts are those contracts thattransfer financial risk with no significant insurance Current income tax assets and liabilities also includerisk. Investment contracts can be classified into adjustments for tax expected to be payable orinterest linked and unitised fund. Interest linked recoverable in respect of previous periods.investment contracts are measured at amortised costwhile unitised funds are measured at fair value. Current income tax relating to items recognisedInvestment contracts with guaranteed returns directly in equity or other comprehensive income is(interest linked) and other business of a savings recognised in equity or other comprehensive incomenature are recognized as liabilities. Interest accruing and not in the profit or loss.to the life assured from investment of the savings isrecognized in the profit or loss account in the year it is Management periodically evaluates positions taken inearned while interest due to depositors is recognized the tax returns with respect to situations in whichas an expense. The net result of the deposit applicable tax regulations are subject toadministration revenue account is transferred to the interpretation and establishes provisions, wherestatement of profit or loss of the group. appropriate.Tax/back duty assessments are recognized when assessed and agreed to by the GroupThe Group's investment contracts are classified into with the Tax authorities, or when appealed, upongroup and individual. Individual investment contract receipt of the results of the appeal.liabilities are derecognised when settled at maturity,surrendered or used to offset policy loans. Group 2.3.30.2 Deferred taxinvestment contract liabilities are derecognised when Deferred tax is provided using the liability method inpaid, refunded or cancelled. Actuarial differences respect of temporary differences at the reportingarising on valuation of the liabilities at the reporting date between the tax bases of assets and liabilitiesdate is recognised in the statement of profit or loss. and their carrying amounts for financial reporting purposes at the reporting date.2.3.29 Deferred revenue Deferred tax liabilities are recognized for all taxableRental income temporary differences, except:Rental income arising from operating leases oninvestment properties is accounted for on a straight Ÿ When the deferred tax liability arises from theline basis over the lease terms and is included in initial recognition of goodwill or of an asset orinvestment income. liability in a transaction that is not a business combination and, at the time of the transaction,Reinsurance commission affects neither the accounting profit nor taxableThis relates to commissions receivable on outwards profit or loss.reinsurance contracts which are deferred andamortized on a straight line basis over the term of the Ÿ In respect of taxable temporary differencesexpected premiums payable. associated with investments in subsidiaries, associates and interests in joint arrangements,2.3.30 Taxes when the timing of the reversal of the temporary differences can be controlled and it is probable2.3.30.1 Current income tax that the temporary differences will not reverse inCurrent income tax assets and liabilities for the the foreseeable future

2017 Annual Report + Accounts62 Summary Of Significant Accounting Policies Strategic Report Governance Financial Statements AppendicesDeferred tax assets are recognized for all deductible Deferred tax assets and deferred tax liabilities aretemporary differences, carry forward of unused tax offset, if a legally enforceable right exists to set offcredits and unused tax losses, to the extent that it is current tax assets against current income taxprobable that taxable profit will be available against liabilities and the deferred taxes relate to the samewhich the deductible temporary differences, and the taxable entity and the same taxation authority.carry forward of unused tax credits and unused taxlosses can be utilized except: 2.3.31 ProvisionsŸ Where the deferred tax asset relating to the General deductible temporary difference arises from the Provisions are recognized when the Group has a initial recognition of an asset or liability in a present obligation (legal or constructive) as a result of transaction that is not a business combination a past event, and it is probable that an outflow of and, at the time of the transaction, affects neither resources embodying economic benefits will be the accounting profit nor taxable profit or loss. required to settle the obligation and a reliable estimate can be made of the amount of the obligation.Ÿ In respect of deductible temporary differences Where the Group expects some or all of a provision to associated with investments in subsidiaries, be reimbursed, the reimbursement is recognized as a associates and interests in joint arrangements separate asset, but only when the reimbursement is deferred tax assets are recognised only to the virtually certain. The expense relating to any provision extent that it is probable that the temporary is presented in the profit or loss net of any differences will reverse in the foreseeable future reimbursement. If the effect of the time value of and taxable profit will be available against which money is material, provisions are discounted using a the temporary differences can be utilized current pre-tax rate that reflects, where appropriate, the risks specific to the liability.2.3.30 Taxes Contingent liabilities are possible obligations that2.3.30.2 Deferred tax - Continued arise from past events whose existence will beThe carrying amount of deferred tax assets is confirmed only by the occurrence, or non-occurrence,reviewed at each reporting date and reduced to the of one or more uncertain future events not whollyextent that it is no longer probable that sufficient within Group's control. Contingent liabilities are nottaxable profit will be available to allow all or part of recognized in the financial statements but arethe deferred income tax asset to be utilized. disclosed.Unrecognized deferred tax assets are reassessed ateach reporting date and are recognized to the extent Onerous contractsthat it has become probable that future taxable profit A provision is recognized for onerous contracts inwill allow the deferred tax asset to be recovered. which the unavoidable costs of meeting the obligations under the contract exceed the expectedDeferred tax assets and liabilities are measured at the economic benefits expected to be received under it.tax rates that are expected to apply to the year when The unavoidable costs reflect the least net cost ofthe asset is realized or the liability is settled, based on exiting the contract, which is the lower of the cost oftax rates (and tax laws) that have been enacted or fulfilling it and any compensation or penalties arisingsubstantively enacted at the reporting date. from failure to fulfill it.Deferred tax relating to items recognized outside 2.3.32 Trade payableprofit or loss is recognized outside profit or loss. Trade payable (Insurance payables) are recognisedDeferred tax items are recognized in correlation to the when due and measured on initial recognition at fairunderlying transaction either in other comprehensive value of the consideration received less directlyincome or directly in equity. attributable transaction costs. Subsequent to initial

2017 Annual Report + Accounts Strategic Report Governance Summary Of Significant Accounting Policies 63Financial Statements Appendicesrecognition, they are measured at amortised cost (i). Non-life businessusing the EIR method. In compliance with Section 21 (2) of Insurance Act 2003, the contingency reserve is credited with the2.3.33 Equity greater of 3% of total premiums, or 20% of the net profits. This shall accumulate until it reaches the2.3.33.1 Share capital amount of greater of minimum paid-up capital or 50Shares are classified as equity when there is no percent of net premium.obligation to transfer cash or other assets.Incremental costs directly attributable to the issue of (ii). Life businessequity instruments are recognised in equity, net of tax In compliance with Section 22 (1) (b) of Insurance Actas a deduction from the proceeds. Where any member 2003, the contingency reserve is credited with theof the Group purchases the Company's equity share higher of 1% of gross premiums or 10% of net profit.capital (treasury shares), the consideration paid,including any directly attributable incremental costs, 2.3.33.5 Revaluation reserveis reported as a separate component of equity Revaluation reserve represents the fair valueattributable to the Company's equity holders. Where differences on the revaluation of items of property,such shares are subsequently sold, reissued or plant and equipment as at the statement of financialotherwise disposed of, any consideration received is position date. If an asset's carrying amount isincluded in equity attributable to the Company's increased as a result of a revaluation, the increase isequity holders, net of any directly attributable recognised in other comprehensive income andincremental transaction costs and the related income accumulated in revaluation reserve. The increase istax effects. recognised in profit or loss to the extent that it reverses a revaluation decrease of the same asset2.3.33.2 Treasury shares previously recognised in profit or loss. If an assetsWhen shares recognised as equity are repurchased, carrying amount is decreased as a result of athe amount of the consideration paid, which includes revaluation,the decrease is recognised in profit ordirectly attributable costs, is recognised as a loss, however, the decrease shall be recognised indeduction from equity. Repurchased shares are other comprehensive income to the extent of anyclassified as treasury shares and are presented in the credit balance existing in the revaluation surplus intreasury shares reserve. When treasury shares are respect of that asset.sold or reissued subsequently, the amount received isrecognised as an increase in equity and the resulting The revaluation surplus in respect of an item ofsurplus or deficit on the transaction is presented property, plant and equipment is transferred towithin share premium. retained earnings when the asset is derecognised. This involves transferring the whole of the surplus2.3.33.3 Foreign currency translation reserve when the asset is retired or disposed. The amount ofThe assets and liabilities of foreign operations are the surplus transfered is the difference betweentranslated to Naira at closing functional currency depreciation based on the revalued carrying amountrates at the reporting date. The income and expenses of the asset and the depreciation based on the asset'sof foreign operations are translated to Naira at spot original cost. Transfers from revaluation reserve torates at the dates of the transactions. Foreign retained earnings are not made through profit or loss.currency differences on the translation of foreignoperations are recognized in other comprehensive 2.3.34 Earnings per shareincome and accumulated in foreign currency The Group presents basic earnings per share (EPS)translation reserves in the statement of financial data for its ordinary shares. Basic EPS is calculated byposition. dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted2.3.33.4 Contingency reserve average number of ordinary shares outstanding

2017 Annual Report + Accounts64 Summary Of Significant Accounting Policies Strategic Report Governance Financial Statements Appendicesduring the period excluding treasury shares held by financial assets and financial liabilities, and introducesthe Company. new rules for hedge accounting and a new impairment model for financial assets. It replaces the guidance inDiluted earnings per share amounts are calculated by IAS 39 that relates to the classification anddividing the net profit by the weighted number of measurement of financial instruments. The Groupordinary shares outstanding during the year plus the intends to adopt these standards, if applicable, whenweighted number of ordinary shares that would be they become effective.issued on conversion of all the dilutive potentialordinary shares into ordinary shares. The Group has reviewed its financial assets and liabilities and is expecting the following impact from2.3.35 Retirement obligations and Employee the adoption of the new standard on 1 January 2018:benefits Classification and measurement:The Group operates the following contribution and A debt instrument is generally measured at amortisedbenefit schemes for its employees: cost if both of the following conditions are met: (a) the asset is held within a business model whose2.3.35.1 Defined contribution pension scheme objective is to hold financial assets in order to collectThe Group operates a defined contributory pension contractual cash flows andscheme for eligible employees. Company contributes (b) the contractual terms of the financial asset give10% of the employees' Basic, Housing and Transport rise on specified dates to cash flows that are solelyallowances in line with the provisions of the Pension payments of principal and interest on the principalReform Act 2014. The Company pays the amount outstanding.contributions to a pension fund administrator. The A debt instrument is normally measured at fair valueCompany has no further payment obligations once through other comprehensive income (FVOCI) if boththe contributions have been paid. The contributions of the following conditions are met:are recognised as employee benefits expense when (a) the asset is held within a business model whosethey are due. Prepaid contributions are recognised as objective is achieved by both collecting contractualan asset to the extent that a cash refund or a cash flows and selling financial assets andreduction in the future payments is available. (b) the contractual terms of the financial asset give rise on specified dates to cash flows that are solely2.3.35.2 Short-term benefits payments of principal and interest on the principalWages, salaries, annual leave, bonuses and non- amount outstanding.monetary benefits are recognised as employee benefitexpenses in the statement of profit or loss and paid in A debt instrument that is not measured at amortisedarrears when the associated services are rendered by cost or at FVOCI must be measured at Fair valuethe employees of the Company. through profit or loss (FVTPL). An entity may irrevocably designate a debt instrument as measured2.3.36 Standards issued but not yet effective at FVTPL at initial recognition. This is allowed if doing so eliminates or significantly reduces a measurementThe standards and interpretations that are issued, or recognition inconsistency (sometimes referred tobut not yet effective, up to the date of issuance of the as an 'accounting mismatch').Group's financial statements are disclosed below. TheGroup intends to adopt these standards, if applicable, IMPACTwhen they become effective. From the results, the Group does not expect significant impact on its debt financial assets such asIFRS 9 financial instruments other receivables, staff loans, cash & cash equivalentIFRS 9 Financial instruments addresses the and short term deposit. These instruments areclassification, measurement and de-recognition of currently measured at amortised cost and are

2017 Annual Report + Accounts Strategic Report Governance Summary Of Significant Accounting Policies 65Financial Statements Appendicesexpected to be measured at amortised cost under and the fair value will be recognised in the openingIFRS 9 as they are held to collect contractual cash retained earnings at the date of transition. It isflows. estimated that on adoption of the new standard on 1The Group expects medium impact on the treasury January 2018, the fair value of equity instrumentsbills currently measured at amortised cost. The would increase by N1million with a correspondingtreasury bills are held to collect contractual cash flow, increase in retained earnings.manage liquidity and match the duration of insuranceliabilities. Hence, the business model is achieved both FINANCIAL LIABILITIESby collecting contractual cash flows and selling. There will be no impact on the Group's accounting forTreasury bills would therefore be measured at Fair financial liabilities, as the new requirements onlyvalue through other comprehensive income under affect financial liabilities that are designated at fairIFRS 9. value through profit or loss and the Group does not have such liabilities. The de-recognition rules haveEQUITY INSTRUMENT been transferred from IAS 39 Financial Instruments:Equity instruments and derivatives are normally Recognition and Measurement and have not beenmeasured at FVTPL. However, on initial recognition, changed.an entity may make an irrevocable election (on aninstrument-by-instrument basis) to present in OCI Impairment of financial assets:the subsequent changes in the fair value of an IFRS 9 requires an entity to recognise a loss allowanceinvestment in an equity instrument within the scope for expected credit losses on: debt instrumentsof IFRS 9. This option only applies to instruments that measured at amortised cost, debt instrumentsare neither held for trading nor contingent measured at fair value through other comprehensiveconsideration recognised by an acquirer in a business income, and lease receivables.combination to which IFRS 3 applies. For the purposeof this election, 'equity instrument' is used as defined In applying the IFRS 9 impairment requirements, anin IAS 32 Financial Instruments: Presentation. entity needs to follow one of the approaches below: • The general approachAlthough most gains and losses on investments in • The simplified approachequity instruments designated at FVOCI will be • The purchased or originated credit-impairedrecognised in OCI, dividends will normally be approachrecognised in profit or loss.Meanwhile, gains or losses recognised in OCI are never The general approachreclassified from equity to profit or loss. Using the general approach to recognisingConsequently, there is no need to review such impairment is based on a three-stage process which isinvestments for possible impairment. intended to reflect the deterioration in credit quality of a financial instrument.2.3.36 Standards issued but not yet effective Simplified approach for trade receivablesIFRS 9 financial instruments–continued IFRS 9 states that an entity shall always measure the loss allowance at an amount equal to lifetimeIMPACT expected credit losses for:Quoted equity and unquoted equity would be (a) trade receivables or contract assets that resultmeasured at FVTPL except the Group makes an from transactions that are within the scope of IFRS 15,irrecoverable option to designate at FVOCI. and that:Unquoted equity previously measured at cost because (I) do not contain a significant financing componentit does not have quoted price in an active market must in accordance with IFRS 15 (or when the entity appliesbe measured at fair at the date of transition. Hence, the practical expedient in accordance with IFRS 15(63);any difference between the previous carrying amount or

2017 Annual Report + Accounts66 Summary Of Significant Accounting Policies Strategic Report Governance Financial Statements Appendices(ii) contain a significant financing component in probabilities to arrive at an unbiased and probabilityaccordance with IFRS 15, if the entity chooses as its weighted amount that reflects the time value ofaccounting policy to measure the loss allowance at an money, based on reasonable and supportableamount equal to lifetime expected credit losses. That information that is available without undue cost oraccounting policy shall be applied to all such trade effort at the reporting date about past events,receivables or contract assets but may be applied current conditions and forecasts of future economicseparately to trade receivables and contract assets. conditions.IFRS 9 states that an entity shall measure expected The Group will take the followings intocredit losses of a financial instrument in a way that consideration:reflects: · The period over which to estimate ECLs(a) an unbiased and probability-weighted amount · Probability–weighted outcomesthat is determined by evaluating a range of possible · The time value of money (Mutual Benefits will ignoreoutcomes; the need to consider explicitly the time value of(b) the time value of money; and money, because the effect is considered immaterial)(c) reasonable and supportable information that is · Reasonable and supportable information.available without undue cost or effort at the The ECLs in respect of receivables are recognized as areporting date about past events, current conditions loss allowance against the gross carrying amount ofand forecasts of future economic conditions. the asset, with the resulting loss being recognized profit or loss.2.3.36 Standards issued but not yet effective IFRS 15 Revenue from Contracts with CustomersIFRS 9 financial instruments–continued The IASB has issued a new standard for the recognition of revenue. This will replace IAS 18 whichSimplified approach for trade receivables - continued covers contracts for goods and services and IAS 11When measuring expected credit losses, an entity which covers construction contracts.need not necessarily identify every possible scenario. IFRS 15 applies to all entities and all contracts withHowever, it shall consider the risk or probability that a customers to provide goods or services in the ordinarycredit loss occurs by reflecting the possibility that a course of business, except for the following contracts,credit loss occurs and the possibility that no credit which are specifically excluded:loss occurs, even if the possibility of a credit loss · Lease contracts within the scope of IAS 17 Leases (oroccurring is very low. IFRS 16 Leases)The maximum period to consider when measuring · Insurance contracts within the scope of IFRS 4expected credit losses is the maximum contractual Insurance Contractsperiod (including extension options) over which the · Financial instruments and other contractual rightsentity is exposed to credit risk and not a longer period, or obligations within the scope of IFRS 9 Financialeven if that longer period is consistent with business Instruments or IAS 39 Financial Instruments:practice. Recognition and Measurement · IFRS 10 Consolidated Financial StatementsIMPACT · IFRS 11 Joint Arrangements, IAS 27 SeparateIn measuring the loss allowance, the general approach Financial Statements and IAS 28 Investments inwill be used for the term loan, staff loan and Treasury Associates and Joint Venturesbill (carried at amortised cost and FVTOCI). · Non-monetary exchanges between entities in theThe Group has a policy choice either to use the general same line of business to facilitate sales to customersapproach or the simplified approach in recognizing or potential customersimpairment for lease receivables.The Group is required to estimate the reasonablypossible loss scenarios and the respective

2017 Annual Report + Accounts Strategic Report Governance Summary Of Significant Accounting Policies 67Financial Statements Appendices2.3.36 Standards issued but not yet effective unchanged from today's accounting under IAS 17. Lessors will continue to classify all leases using theIFRS 15 Revenue from Contracts with Customers - same classification principle as in IAS 17 andcontinued distinguish between two types of leases: operating and finance leases.IMPACTIFRS 15 applies to all contracts with customers other IFRS 16 also requires lessees and lessors to make morethan specific contracts excluded from its scope.All extensive disclosures than under IAS 17.IFRS 16 isinsurance contracts and fees received for the various effective for annual periods beginning on or after 1components of service relating to these contracts are January 2019. Early application is permitted, but notsubject to the insurance guidance rather than IFRS 15. before an entity applies IFRS 15. A lessee can choose toHence, IFRS 15 would not have any significant impact apply the standard using either a full retrospective oron the Company. a modified retrospective approach. The standard's transition provisions permit certain reliefs. In 2018,IFRS 16 Leases The Group will continue to assess the potential effectIFRS 16 was issued in January 2016 and it replaces IAS of IFRS 16 on its financial statements.17 Leases, IFRIC 4 Determining whether anArrangement contains a Lease, SIC-15 Operating IFRS 2 Classification and Measurement of Share-Leases-Incentives and SIC-27 Evaluating the based Payment TransactionsSubstance of Transactions Involving the Legal Form of —Amendments to IFRS 2a Lease. IFRS 16 sets out the principles for the The IASB issued amendments to IFRS 2 Share-basedrecognition, measurement, presentation and Payment that address three main areas: the effects ofdisclosure of leases and requires lessees to account vesting conditions on the measurement of a cash-for all leases under a single on-balance sheet model settled share-based payment transaction; thesimilar to the accounting for finance leases under IAS classification of a share-based payment transaction17. The standard includes two recognition exemptions with net settlement features for withholding taxfor lessees–leases of 'low-value' assets (e.g., personal obligations; and accounting where a modification tocomputers) and short-term leases (i.e., leases with a the terms and conditions of a share-based paymentlease term of 12 months or less). At the transaction changes its classification from cashcommencement date of a lease, a lessee will recognise settled to equity settled.a liability to make lease payments (i.e., the leaseliability) and an asset representing the right to use the On adoption, entities are required to apply theunderlying asset during the lease term (i.e., the right- amendments without restating prior periods, butof-use asset). Lessees will be required to separately retrospective application is permitted if elected for allrecognise the interest expense on the lease liability three amendments and other criteria are met. Theand the depreciation expense on the right-of-use amendments are effective for annual periodsasset. beginning on or after 1 January 2018, with early application permitted. The Group is assessing theLessees will be also required to remeasure the lease potential effect of the amendments on itsliability upon the occurrence of certain events (e.g., a consolidated financial statements.change in the lease term, a change in future leasepayments resulting from a change in an index or rate 2.3.36 Standards issued but not yet effectiveused to determine those payments). The lessee willgenerally recognise the amount of the IFRS 17 Insurance Contractsremeasurement of the lease liability as an adjustmentto the right-of-use asset. In May 2017, the IASB issued IFRS 17 Insurance Contracts, a comprehensive new accounting standardLessor accounting under IFRS 16 is substantially for insurance contracts covering recognition and

2017 Annual Report + Accounts68 Summary Of Significant Accounting Policies Strategic Report Governance Financial Statements Appendicesmeasurement, presentation and disclosure, which the recognised amounts from insurance contractsreplaces IFRS 4 Insurance Contracts. and the nature and extent of risks arising from these contracts.In contrast to the requirements in IFRS 4, which arelargely based on grandfathering previous local IFRS 17 is effective for annual reporting periodsaccounting policies for measurement purposes, IFRS beginning on or after 1 January 2021, with17 provides a comprehensive model (the general comparative figures required. Early application ismodel) for insurance contracts, supplemented by the permitted, provided the entity also applies IFRS 9 andvariable fee approach for contracts with direct IFRS 15 on or before the date it first applies IFRS 17.participation features that are substantially Retrospective application is required. However, if fullinvestment-related service contracts, and the retrospective application for a group of insurancepremium allocation approach mainly for short- contracts is impracticable, then the entity is requiredduration which typically applies to certain non-life to choose either a modified retrospective approach orinsurance contracts. a fair value approach.The main features of the new accounting model for The Group started a project to implement IFRS 17 andinsurance contracts are, as follows: has been performing a high-level impact assessmentŸ The measurement of the present value of future of IFRS 17. The Group expects that the new standard will result in an important change to the accounting cash flows, incorporating an explicit risk policies for insurance contract liabilities of the Group adjustment, remeasured every reporting period and is likely to have a significant impact on profit and (the fulfilment cash flows); total equity together with presentation andŸ A Contractual Service Margin (CSM) that is equal disclosure. and opposite to any day one gain in the fulfilment cashflows of a group of contracts. The CSM 2.3.37 Changes in accounting policy and disclosures represents the unearned profitability of the insurance contracts and is recognised in profit or New and amended standards and interpretations loss over the service period (i.e., coverage period);Ÿ Certain changes in the expected present value of The Group applied for the first time certain standards future cash flows are adjusted against the CSM and amendments, which are effective for annual and thereby recognised in profit or loss over the periods beginning on or after 1 January 2017. The remaining contractual service period; Group has not early adopted any other standard,Ÿ The effect of changes in discount rates will be interpretation or amendment that has been issued reported in either profit or loss or other but is not yet effective. comprehensive income, determined by an accounting policy choice; The nature and the impact of each new standard andŸ The recognition of insurance revenue and amendment is described below. Although these new insurance service expenses in the statement of standards and amendments applied for the first time comprehensive income based on the concept of in 2017, they did not have a material impact on the services provided during the period; annual consolidated financial statements of theŸ Amounts that the policyholder will always receive, Group. regardless of whether an insured event happens (non-distinct investment components) are not Amendments to IAS 7: Disclosure Initiative presented in the income statement, but are The amendments require entities to provide recognised directly on the balance sheet; disclosure of changes in their liabilities arising fromŸ Insurance services results (earned revenue less financing activities, including both changes arising incurred claims) are presented separately from the from cash flows and non-cash changes (such as insurance finance income or expense; foreign exchange gains or losses). The Group has noŸ Extensive disclosures to provide information on

2017 Annual Report + Accounts Strategic Report Governance Summary Of Significant Accounting Policies 69Financial Statements Appendicessuch liability classified as such and therefore these assumptions and estimates could result in outcomesamendments did not affect the Group's financial that require a material adjustment to the carryingstatements. amount of the asset or liability affected in future periods.Amendments to IAS 12 Income Taxes: Recognition ofDeferred Tax Assets for Unrealised Losses Estimates and assumptionsThe amendments clarify that an entity needs to In the process of applying the Group's accountingconsider whether the tax law restricts the sources of policies, management has made the followingtaxable profits against which it may make deductions judgements which have the most significant effect onon the reversal of deductible temporary difference the amounts recognise in the financial statements:related to unrealised losses. Furthermore, theamendments provide guidance on how an entity The key assumptions concerning the future and othershould determine future taxable profits and explain key sources of estimation uncertainty at the reportingthe circumstances in which taxable profits may date, that have a significant risk of causing materialinclude the recovery of some assets for more than adjustment to the carrying amounts of assets andtheir carrying amount. liabilities within the next financial year, are described below.The Group applied amendments retrospectively.However, their application has no effect on the The Group based its assumption and estimates onGroup's financial position and performance as the parameters available when the financial statementsGroup's accounting policy has been consistent with were prepared. Existing circumstances andthe amendments. assumptions about future developments, however, may change due to market changes or circumstancesAnnual Improvements 2014-2016 Cycle arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur.Amendments to IFRS 12 Disclosure of Interests in Estimates and judgements are continually evaluatedOther Entities: Clarification of the scope of disclosure and based on historical experience and other factors,requirements in IFRS 12 including expectations of future events that areThe amendments clarify that the disclosure believed to be reasonable under the circumstances.requirements in IFRS 12, other than those inparagraphs B10–B16, apply to an entity's interest in a Non-life insurance contract liabilitiessubsidiary, a joint venture or an associate (or a Non-life insurance contract liabilities include theportion of its interest in a joint venture or associate) outstanding claims provision, the provision forthat is classified (or included in a disposal Company unearned premium and the provision for premiumthat is classified) as held for sale. During 2017 and deficiency. The outstanding claims provision is based2016, the Group had no interests classified as such, on the estimated ultimate cost of all claims incurredand therefore these amendments did not affect the but not settled at the reporting date, whetherGroup's financial statements. reported or not, together with related claims handling costs and a reduction for the expected value of2.3.38 Significant accounting judgments, estimates salvage and other recoveries. Delays can beand assumptions experienced in the notification and settlement of certain types of claims. Therefore, the ultimate cost ofThe preparation of the Group's financial statements these cannot be known with certainty at the reportingrequires management to make judgements, estimates date. The liability is calculated at the reporting dateand assumptions that affect the reported amounts of using a range of standard actuarial claim projectionrevenues, expenses, assets and liabilities, and the techniques, based on empirical data and currentdisclosure of contingent liabilities, at the end of the assumptions that may include a margin for adversereporting period. However, uncertainty about these deviation. The liability is not discounted for the time

2017 Annual Report + Accounts70 Summary Of Significant Accounting Policies Strategic Report Governance Financial Statements Appendicesvalue of money. No provision for equalisation or economic conditions, levels of claims inflation, judicialcatastrophe reserves is recognised. The liabilities are decisions and legislation, as well as internal factorsderecognised when the obligation to pay a claim such as portfolio mix, policy features and claimsexpires, is discharged or is cancelled. handling procedures) in order to arrive at the estimated ultimate cost of claims that present theThe provision for unearned premiums represents that likely outcome from the range of possible outcomes,portion of premiums received or receivable that taking account of all the uncertainties involved.relates to risks that have not yet expired at thereporting date. The provision is recognised when Life insurance contract liabilitiescontracts are entered into and premiums are charged, Life insurance liabilities are recognised whenand is brought to account as premium income over contracts are entered into and premiums are charged.the term of the contract in accordance with the These liabilities are measured using the net premiumpattern of insurance service provided under the method. The liability is determined as the sum of thecontract. discounted value of the expected future benefits, claims handling and policy administration expenses,The ultimate cost of outstanding claims is estimated policyholder options and guarantees and investmentby using a range of standard actuarial claims income from assets backing such liabilities, which areprojection techniques, such as Chain Ladder method. directly related to the contract, less the discounted value of the expected premiums that would beThe main assumption underlying these techniques is required to meet the future cash outflows based onthat a Group's past claims development experience the valuation assumptions used. The liability is eithercan be used to project future claims development and based on current assumptions or calculated using thehence ultimate claims costs. As such, these methods assumptions established at the time the contract wasextrapolate the development of paid and incurred issued, in which case, a margin for risk and adverselosses, average costs per claim and claim numbers deviation is generally included. A separate reserve forbased on the observed development of earlier years longevity may be established and included in theand expected loss ratios. measurement of the liability. Furthermore, the liability for life insurance contracts comprises the provision2.3.38 Significant accounting judgments, estimates for unearned premiums and premium deficiency, asand assumptions - Continued well as for claims outstanding, which includes an estimate of the incurred claims that have not yet beenNon-life insurance contract liabilities reported to the Group. Adjustments to the liabilitiesHistorical claims development is mainly analysed by at each reporting date are recorded in the statementaccident years, but can also be further analysed by of profit or loss in 'Gross change in contract liabilities'.geographical area, as well as by significant business Profits originated from margins for adverselines and claim types. Large claims are usually deviations on run-off contracts are recognised in theseparately addressed, either by being reserved at the statement of profit or loss over the life of theface value of loss adjuster estimates or separately contract, whereas losses are fully recognised in theprojected in order to reflect their future development. statement of profit or loss during the first year of run-In most cases, no explicit assumptions are made off. The liability is derecognised when the contractregarding future rates of claims inflation or loss expires, is discharged or cancelled.ratios. Instead, the assumptions used are thoseimplicit in the historical claims development data on The estimation of the ultimate liability arising fromwhich the projections are based. Additional claims made under insurance contracts is the Group'squalitative judgement is used to assess the extent to most critical accounting estimate. There are severalwhich past trends may not apply in future, (e.g., to sources of uncertainty that need to be considered inreflect one-off occurrences, changes in external or the estimate of the liability that the company willmarket factors such as public attitudes to claiming, ultimately pay for such claims. The uncertainty arises

2017 Annual Report + Accounts Strategic Report Governance Summary Of Significant Accounting Policies 71Financial Statements Appendicesbecause all events affecting the ultimate settlementof the claims have not taken place and may not takeplace for some time.Changes in the estimate of the provision may becaused by receipt of additional claim information,changes in judicial interpretation of contract, orsignificant changes in severity or frequency of claimsfrom historical records. The estimates are based onthe company's historical data and industryexperience. The ultimate claims liability computationis subjected to a liability adequacy test by an actuarialconsultant using actuarial models.2.3.38 Significant accounting judgments, estimatesand assumptions - ContinuedFair value investment propertyThe valuation of investment properties is based onthe price for which comparable land and propertiesare being exchanged hands or are being marketed forsale. Therefore, the market-approach Method ofValuation. By nature, detailed information onconcluded transactions is difficult to come by. Thepast transactions and recent adverts are being reliedupon in deriving the value of the subject properties. Atleast, eight properties will be analysed and comparedwith the subject property.Impairment on loans and receivablesIn accordance with the accounting policy, the Grouptests annually whether premium receivables andloans and receivable have suffered any impairment.The recoverable amounts of the premium receivableshave been determined based on the incurred lossmodel. These calculations required the use ofestimates based on passage of time and probability ofrecovery.

72 Financial Statements 57 - Statement of Financial position 58 - Statement of Profit or Loss and Other Comprehensive Income 59 - Statement of Changes in Equity 060 - Statement of Cash Flows 61 - Notes to the Financial Statements 105 - Statement of Value Added 106 - Financial Summary 107 - Revenue Account 108 - E-Dividend Mandate Form 109 - Proxy Form 110 - Corporate Directory 55 112

2017 Annual Report + Accounts Strategic Report Governance Consolidated And Separate 73Financial Statements Appendices Statements Of Profit Or Loss For the year ended 31 December 2017 GROUP COMPANY Notes 2017 2016 2017 2016 N'000 N'000 N'000 N'000Gross premium written 4.1 14,037,879 12,143,610 7,298,974 6,586,846Gross premium income 4.1 13,352,960 11,982,537 6,986,273 6,660,747Premiums ceded to reinsurers 4.2 (1,885,655) (1,711,110) (1,046,287) (1,515,476)Net premium income 4.3 11,467,305 10,271,427Fee and commission income 5,939,986 5,145,271Net underwriting income 5 309,646 430,522 142,249 312,481 11,776,951 10,701,949 6,082,235 5,457,752Net benefits and claims 6 5,154,205 3,348,883 1,914,071 1,004,168Change in life fund 38.1.2(ii) (4,270) (161,532) - -Change in annuity reserve 38.1.2(iii) (22,252) 354,038 - -Underwriting expenses 2,972,533Net underwriting expenses 7 2,944,601 6,513,922 1,621,939 1,581,501 8,072,284 3,536,010 2,585,669Underwriting profit 3,704,667 4,188,027 2,546,225 2,872,083Profit on investment contracts 8 891,899 555,466 - -Investment income 9 1,597,262 979,765 896,167 560,027Net fair value gain/(loss) on assets at 10FVTPL 11 38,341 (58,750) 123,731 (53,475)Other income 12Impairment charge no longer required 13 477,649 257,485 38,312 93,715Impairment charges 14 2,011 61,682 - 28,247Employee benefit expenses 15 -Management expenses 16 (169,137) (10,574) -Net foreign exchange gain/(loss) (1,939,809) (1,914,606) (846,284) (931,921)Result of operating activities 17 (3,451,213) (3,364,345) (1,931,345) (1,893,745) 18 (1,890,120) (1,923,877)Finance costs 22,285 (1,195,970) 22,285 (1,248,946)Finance income 19 1,173,955 849,091Profit/(loss) before income tax -Income tax expense 52 (39,432) (27,681) - -Profit/(loss) after income tax 200,570 154,985 - (1,248,946) 1,335,093 (1,068,666) 849,091 (141,581)Profit/(loss) attributable to: (312,585) (277,620) (243,815) (1,390,527)Owners of the parent 1,022,508 (1,346,286) 605,276Non-controlling interests 1,036,481 (1,350,866) 605,276 (1,390,527) - - (13,973) 4,580 605,276 (1,390,527) 1,022,508 (1,346,286)Earnings/(loss) per share:Basic and diluted (kobo) 21 13 (17) 8 (17)The accompanying summary of significant accounting policies and notes to the consolidated andseparate financial statements are an integral part of these consolidated and separate financialstatements.

2017 Annual Report + Accounts74 Consolidated And Separate Statements Strategic Report Governance Of Other Comprehensive Income Financial Statements Appendices For the year ended 31 December 2017 GROUP COMPANY 2017 2016 2017 2016 N'000 N'000 N'000 N'000Profit/(loss) for the year 1,022,508 (1,346,286) 605,276 (1,390,527)Other comprehensive income:Items that may be reclassified to the 49,966 722,011 --profit or loss account in subsequent 49,966 722,011 --periods:Foreign currency translation gainItems that will never be reclassified to 211,756 - 72,617 -the profit or loss account: (21,785) - (21,785) - 189,971 - 50,832 -Revaluation gain on land and buildingEffect of tax at 30% 50,832 -Total other comprehensive income for the 239,937 722,011year, net of taxTotal comprehensive income for the year, 1,262,445 (624,275) 656,108 (1,390,527)net of taxTotal comprehensive income/(loss) attributable to:Owners of the parent 1,219,883 (628,855) 656,108 (1,390,527) 4,580 - -Non-controlling interests 42,562 (624,275) 656,108 (1,390,527) 1,262,445The accompanying summary of significant accounting policies and notes to the consolidated and separatefinancial statements are an integral part of these consolidated and separate financial statements.

2017 Annual Report + Accounts Strategic Report Governance Consolidated And Separate Statements 75Financial Statements Appendices Of Financial Position As at 31 December 2017 GROUP COMPANY Notes 2017 2016 2017 2016 N'000 N'000 N'000 N'000ASSETSCash and cash equivalents 22 8,345,638 10,734,374 3,249,277 3,804,953 - -Financial assets 110,952 110,952 849,524 64,097 21,553 64,097Fair value through profit or loss 23 12,245,702 849,374 633,143 21,553 16,840,317 12,410,169 4,457,954 770,941Available-for-sale investment securities 23 168,064 8,214,636 168,064 2,030,905 629,280 278,159 91,188Loans and receivables 23 2,455,731 91,188 1,086,826 102,994Held-to-maturity 23 993,182 462,616 560,682 1,057,693 145,055 1,871,739 134,044 319,213Assets pledged as collateral 24 485,283 888,020 312,182 147,965 907,822 420,049 235,053Trade receivables 25 8,566,000 340,338 - 1,332,864 56,000 -Reinsurance assets 26 43,994 8,726,390 15,387 56,000 3,922,931 2,925,601 33,305Other receivables and prepayments 27 73,531 4,000,000 3,152,644 - 4,024,297 300,000 4,000,000Finance lease receivables 29 500,000 410,588 300,000 480,588 - 390,588Deferred acquisition costs 28 500,000 - 1,543 460,588 18,720,412 -Inventories 30 57,691,606 1,543 16,579,092Investment properties 31 51,465,813Intangible assets 33Property, plant and equipment 34Investments in subsidiaries 32Statutory deposits 35Deposit for investment in equity 36Goodwill 37Total assetsLIABILITIES 38 10,299,090 7,401,872 4,352,606 3,822,730Insurance contract liabilities 39 26,564,221 25,956,771 - -Investment contract liabilities 40 2,858,296Trade payables 41 1,161,224 1,270,219 1,028,272 452,495Other liabilities 42 259,268 1,710,996 235,695 287,412Deposit liabilities 44 687,173 203,845 -Current income tax liabilities 43 6,509,170 503,843 422,005 -Borrowings 45.1 1,063,084 6,258,070 217,733Deferred tax liabilities 1,147,429 6,509,170 6,258,070Total liabilities 49,401,526 705,821 729,917 44,453,045 13,253,569 11,768,357EQUITY 46.2 4,000,000 4,000,000 4,000,000 4,000,000Share capital 47 (250) (250) (250) (250)Treasury shares 48 - -Foreign currency translation reserve 49 911,064 906,502Contingency reserve 50 2,801,764 2,533,160 2,398,485 2,179,515Revaluation reserve 51 1,467,403 1,288,563 1,339,395 1,288,563Accumulated losses (1,079,247) (1,838,814) (2,270,787) (2,657,093)Total shareholders’ fund 8,100,734 6,889,161 5,466,843 4,810,735The accompanying summary of significant accounting policies and notes to the consolidated andseparate financial statements are an integral part of these consolidated and separate financialstatements.

2017 Annual Report + Accounts76 Consolidated And Separate Statements Strategic Report Governance Of Financial Position Financial Statements Appendices As at 31 December 2017 GROUP COMPANY Notes 2017 2016 2017 2016 N'000 N'000 N'000 N'000Total equity attributable to the:Owners of the parent 52 8,100,734 6,889,161 5,466,843 4,810,735Non-controlling interests in equity 189,346 123,607 - -Total equity 8,290,080 7,012,768 5,466,843 4,810,735Total liabilities and equity 57,691,606 51,465,813 18,720,412 16,579,092The consolidated and separate financial statements and accompanying summary of significantaccounting policies and notes to the consolidated and separate financial statements were approved andauthorised for issue by the Board of Directors on 22 February 2018 and were signed on its behalf by:Dr. Akin Ogunbiyi Mr. Olusegun OmosehinFRC/2013/CIIN/00000003114 FRC/2013/CIIN/00000003103Chairman Managing Director Mr. Abayomi Ogunwo FRC/2015/ICAN/00000011225 Chief Finance OfficerThe accompanying summary of significant accouting policies and notes to the consolidated and separatefinancial statements are an integral part of these consolidated and separate financial statements.

Group Attributable to equityholders of the Company Strategic ReportFor the year 31 December 2017 Financial Statements Foreign Share Treasury currency Non - 2017 Annual Report + Accounts capital Total controlling shares translation Contingency Revaluation Accumulated Total interests equity Note reserve reserve reserve losses N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000As at 1 January 2016 4,000,000 (250) 184,491 2,292,040 1,288,563 (246,828) 7,518,016 127,154 7,645,170Total comprehensive income for the year: - -- - - (1,350,866) (1,350,866) 4,580 (1,346,286) GovernanceLoss for the year - - 722,011 AppendicesOther comprehensive income - - 722,011 -- - 722,011 - 722,011Total comprehensive income for the year, net of tax - - (1,350,866) (628,855) 4,580 (624,275)Transactions with owners of equity -- -- -- - (8,127) (8,127)Dividend -- - 241,120 - (241,120) ---Transfer to contingency reserve -- - 241,120 - (241,120) - (8,127) (8,127)Total transactions with owners of equityAs at 31 December 2016 4,000,000 (250) 906,502 2,533,160 1,288,563 (1,838,814) 6,889,161 123,607 7,012,768Total comprehensive income for the year: - -- -- 1,079,247 1,036,481 (13,973) 1,022,508 Consolidated And Separate StatementsProfit for the year - - 4,562 - 178,840 1,036,481 183,402 56,535 239,937 Of Changes In EquityOther comprehensive income - - 4,562 - 178,840 42,562 1,262,445Total comprehensive income for the year, net of tax - 1,219,883 For the year ended 31 December 2017 1,036,481Transactions with owners of equityAdditions during the year 52 - - - - -- - 14,867 14,867 - - - - - (8,310) (8,310) 8,310 -Changes in equity - - - 268,604 - (268,604) - - - - - 268,604 - (276,914) - 23,177Transfer to contingency reserve (8,310) 14,867 (250) 911,064Total transactions with owners of equityAs at 31 December 2017 4,000,000 2,801,764 1,467,403 (1,079,247) 8,100,734 189,346 8,290,080The accompanying summary of significant accounting policies and notes to the consolidated and separate financial statements are an integralpart of these consolidated and separate financial statements. 77

Company Share Treasury Contingency Revaluation Accumulated 78 Consolidated And Separate StatementsFor the year 31 December 2017 capital shares reserve reserve losses Total Of Changes In Equity N'000 N'000 N'000 N'000 N'000 N'000 For the year ended 31 December 2017As at 1 January 2016 4,000,000 (250) 1,981,910 1,288,563 (1,068,961) 6,201,262Total comprehensive income for the year:Loss for the year - - - - (1,390,527) (1,390,527)Total comprehensive income for the year, net of tax - - - - (1,390,527) (1,390,527)Transactions with owners of equity - - 197,605 - (197,605) -Transfer to contingency reserve - - 197,605 - (197,605) -Total transactions with owners of equity (250) 2,179,515 1,288,563 (2,657,093) 4,810,735As at 31 December 2016 4,000,000Total comprehensive income for the year:Profit for the year - - - - 605,276 605,276Other comprehensive income -Total comprehensive income for the year, net of tax - - - 50,832 - 50,832 - - 50,832 605,276 656,108Transactions with owners of equity - - 218,970 - (218,970) -Transfer to contingency reserve - - 218,970 - (218,970) -Total transactions with owners of equity (250) 2,398,485 1,339,395 (2,270,787) 5,466,843As at 31 December 2017 4,000,000 2017 Annual Report + AccountsThe accompanying summary of significant accounting policies and notes to the consolidated and separate financial statements are an Strategic Report Governanceintegral part of these consolidated and separate financial statements. Financial Statements Appendices

2017 Annual Report + Accounts Strategic Report Governance Consolidated And Separate Statements 79Financial Statements Appendices Of Cash Flows As at 31 December 2017 GROUP COMPANY Notes 2017 2016 2017 2016 N'000 N'000 N'000 N'000Cash flows from operating activities 14,131,483 12,092,836 7,464,644 6,610,209Cash received from insurance contract policy holders 11,985,338 12,338,438 - - (13,419,003) (12,227,691) - -Cash received from investment contract policy holders 39 172,423 359,597 262,001 561,388 (1,108,287) (1,192,863)Cash withdrawal by investment contract policy holders 39 (1,410,546) (1,798,578) (2,038,841) (1,487,493) (4,870,058) (3,220,168) 837,996 253,039Commission received 2,270,525 (1,042,574) (991,304) (2,299,574) 406,640 (846,284) (931,921)Reinsurance paid 26.2 (1,939,809) (2,323,825) 896,167 560,027 (1,914,606) 38,312 93,715Claims paid 6 1,597,262 678,219 979,765 (3,227,659) (1,776,363)Claims recovered from reinsurers 6 412,470 (4,529,326) (85,425) (232,806)Commission paid 28.1 (2,484,433) 1,060,472 1,263,838 (235,386)Payments to employees 14 2,221,126 (283,812) 2,538,424Investment income 9Other cash receivedCash paid to brokers, suppliers and other providers ofservicesIncome tax paid 44Net cash flows from operating activities 53Investing activities: (1) (0) (18,759) (9,631)Purchase of intangible assets 33 (21,796) (716,340) (13,725) (514,185) (366,979) (151,758) 13,600Purchase of property, plants and equipments 34 21,986 587,119 8,903 742,500 1,895 (8,525)Proceeds from sale of properties, plant and equipment 227,959 28,721 (8,527) -Receipts on finance lease recievables 29.1 - 1,691,491 - (1,766,043) 2,050,001 (7,693,808) -Additions to finance lease receivables 29.1 (16,252,540) (3,565,863) - 9,401,338 - 1,831,196 -Receipts on loans and advances - - (113,001) 75,000 (113,001) (20,000) (20,553-)Purchase of held-to-maturity financial assets (20,000) (20,553-) (1,831,219) (6,115,011) -Proceeds from held-to-maturity financial assets - (1,889,533) (4,898,114)Proceeds from sale of investment propertiesAdditions to deposit for sharesPurchase of available-for-sale investmentsNet cash flows used in investing activitiesFinancing activities 14,867 - - -Increase in non-controlling interests]Net cash flows used in financing activities 14,867 - - -Net decrease in cash and cash equivalents (2,662,121) (3,576,587) (829,061) (567,382)Effectsof exchange ratechanges on cash and cash 273,385 261,098equivalents 273,385 294,855Cash and cash equivalents as at 1 January 10,734,374 14,016,106 3,804,953 4,111,237Cash and cash equivalents as at 31 December 22 8,345,638 10,734,374 3,249,277 3,804,953 3,804,953Operational cash flows from interest and dividends 10,734,374 -Interest received - -Interest paid 200,570 154,985 202 -Dividend received (39,432) (27,681) 35,948 35,948 202The accompanying summary of significant accounting policies and notes to the consolidated and separatefinancial statements are an integral part of these consolidated and separate financial statements.

2017 Annual Report + Accounts80 Notes To The Consolidated And Separate Strategic Report Governance Financial Statements Financial Statements Appendices For the year ended 31 December 2017 3.1 Management of Insurance and financial risks3.1.1 Insurance risks management The principal risk the Group faces under insurance contracts is that the actual claims and benefit payments or the timing thereof, differ from expectations. This is influenced by the frequency of claims, severity of claims, actual benefits paid and subsequent development of long–term claims. Therefore, the objective of the Group is to ensure that sufficient reserves are available to cover these liabilities. The risk exposure is mitigated by diversification across a large portfolio of insurance contracts and geographical areas. The variability of risks is also improved by careful selection and implementation of underwriting strategy guidelines, as well as the use of reinsurance arrangements. The Group purchases reinsurance as part of its risks mitigation programme. Reinsurance ceded is placed on both a proportional and non–proportional basis. The majority of proportional reinsurance is quota–share reinsurance which is taken out to reduce the overall exposure of the Group to certain classes of business. Non–proportional reinsurance is primarily excess–of–loss reinsurance designed to mitigate the Group’s net exposure to catastrophe losses. Retention limits for the excess–of–loss reinsurance vary by product line and territory. Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision and are in accordance with the reinsurance contracts. Although the Group has reinsurance arrangements, it is not relieved of its direct obligations to its policyholders and thus a credit exposure exists with respect to ceded insurance, to the extent that any reinsurer is unable to meet its obligations assumed under such reinsurance agreements. The Group’s placement of reinsurance is diversified such that it is neither dependent on a single reinsurer nor are the operations of the Group substantially dependent upon any single reinsurance contract. (a) Life insurance contracts Life insurance contracts offered by the Group include: whole life, term assurance, annuities plan, anticipated endowment insurance, mortgage protection, Individual Savings and Protection, Child Education, Mutual Education Guarantee Assurance and Keyman assurance policy. Term Assurance is a form of Life insurance policy that pays out a lump sum (Sum Assured) in the event of the death of the policy holder. The insurance can be extended to cover permanent disability and medical expenses insurred as a result of an accident. Mortgage Protection policy is a reducing term assurance scheme which guarantees the payment of balance outstanding in respect of the loan given by a financial institution (Mortgage) to a Life Assured (Mortgagor) should he die before the loan is fully repaid. Endowment assurance policy pays to the beneficiaries of a deceased assured compensation which is equal to the Sum Assured selected by him/her from the commencement of the policy. It also guarantees that the capital sum (Sum Assured) all the accrued reversionaty bonuses over the years be paid in the event that he/she survives till the end of the insurance year. Individual Savings and Protection Plan is an anti-inflationary and income protection plan designed to assist all categories of individual cultivate a consistent savings culture and provide for their beneficiairies at death.

2017 Annual Report + Accounts Strategic Report Governance Notes To The Consolidated And Separate 81Financial Statements Appendices Financial Statements For the year ended 31 December 2017 A plan holder starts making a compulsory and regular savings for a number of years, which shall not be less than five years. Flexibility in the frequency of the premium payment is allowed. Annuity Plan is a contract to pay a set amount (the annuity) every month or quarter while the annuitant (the person on whose life the contract depends) is still alive. Annuities are usually expressed in terms of the annual amount payable although in practive they can be payable monthly, quarterly, half-yearly or yearly. There are Immediate Annuity Plan, Deferred Annuity Plan, Guaranteed Annuity Plan, Annuity Certain and Increasing Annuity. The main risks that the Group is exposed to are as follows: Mortality risk–risk of loss arising due to policyholder death/health experience being different than expected Longevity risk–risk of loss arising due to the annuitant living longer than expected Investment return risk–risk of loss arising from actual returns being different than expected Expense risk–risk of loss arising from expense experience being different than expected Policyholder decision risk – risk of loss arising due to policyholder experiences (lapses and surrenders) being different than expected(a) Life insurance contracts - Continued These risks do not vary significantly in relation to the location of the risk insured by the Group, type of risk insured or by industry. The Group’s underwriting strategy is designed to ensure that risks are well diversified in terms of type of risk and level of insured benefits. This is largely achieved through diversification across industry sectors and geography, the use of medical screening in order to ensure that pricing takes account of current health conditions and family medical history, regular review of actual claims experience and product pricing, as well as detailed claims’ handling procedures. Underwriting limits are in place to enforce appropriate risk selection criteria. For example, the Group has the right not to renew individual policies, it can impose deductibles and it has the right to reject the payment of fraudulent claims. Insurance contracts also entitle the Group to pursue third parties for payment of some or all costs. The Group further enforces a policy of actively managing and promptly pursuing claims, in order to reduce its exposure to unpredictable future developments that can negatively impact the Group. For contracts for which death or disability is the insured risk, the significant factors that could increase the overall frequency of claims are epidemics, widespread changes in lifestyle and natural disasters, resulting in earlier or more claims than expected. Group life reinsurance retention limits of N15,000,000 on any single life insured and N10,000,000 on all high risk individuals insured are in place. The insurance risk described above is also affected by the contract holder’s right to pay reduced premiums or no future premiums, to terminate the contract completely or to exercise guaranteed annuity options. As a result, the amount of insurance risk is also subject to contract holder behaviour.

2017 Annual Report + Accounts82 Notes To The Consolidated And Separate Strategic Report Governance Financial Statements Financial Statements Appendices For the year ended 31 December 2017The following tables show the concentration of life insurance contract liabilities. COMPANY GROUP 31 Dec-2017 31 Dec-2017Whole life and term assurance N'000 N'000 N'000 N'000 N'000 N'000Credit Life Assurance Scheme Gross Reinsurance Net Gross Reinsurance NetTotal - 5,392,973 1,070,169 4,322,804 - - - 21,662 - 21,662 - - - - - 5,414,635 1,070,169 4,344,466 - -Whole life and term assurance 3,329,739 31 Dec-2016 2,558,671 31 Dec-2016 - 20,085Credit Life Assurance Scheme 20,085 771,068 -- - 2,578,756 --Total 3,349,824 -- 771,068The geographical concentration of the Group’s life insurance contract liabilities is shown below. The disclosureis based on the countries where the business is written. The analysis would not be materially different if basedon the countries in which the counterparties are situated. GROUP COMPANY 31 Dec-2017 31 Dec-2017Nigeria N'000 N'000 N'000 N'000 N'000 N'000Liberia Gross Reinsurance NetTotal Gross Reinsurance Net 5,156,574 1,070,169 4,086,405 - - - - - - - 258,061 1,070,169 258,061 5,414,635 4,344,466Nigeria 3,210,013 31 Dec-2016 2,438,945 31 Dec-2016 -Liberia 139,811 139,811 -Total 771,068 -- - 3,349,824 - 2,578,756 -- -- 771,068

2017 Annual Report + Accounts Strategic Report Governance Notes To The Consolidated And Separate 83Financial Statements Appendices Financial Statements For the year ended 31 December 2017(a) Life insurance contracts - Continued Key assumptions Material judgement is required in determining the liabilities and in the choice of assumptions. Assumptions in use are based on past experience, current internal data, external market indices and benchmarks which reflect current observable market prices and other published information. Assumptions and prudent estimates are determined at the date of valuation and no credit is taken for possible beneficial effects of voluntary withdrawals. Assumptions are further evaluated on a continuous basis in order to ensure realistic and reasonable valuations. The key assumptions to which the estimation of liabilities is particularly sensitive are, as follows: Mortality and morbidity rates Assumptions are based on standard industry and national tables, according to the type of contract written and the territory in which the insured person resides. They reflect recent historical experience and are adjusted when appropriate to reflect the Group’s own experiences. An appropriate, but not excessive, prudent allowance is made for expected future improvements. Assumptions are differentiated by sex, underwriting class and contract type. An increase in rates will lead to a larger number of claims (and claims could occur sooner than anticipated), which will increase the expenditure and reduce profits for the shareholders. Longevity Assumptions are based on standard industry and national tables, adjusted when appropriate to reflect the Group’s own risk experience. An appropriate, but not excessive, prudent allowance is made for expected future improvements. Assumptions are differentiated by sex, underwriting class and contract type. An increase in longevity rates will lead to an increase in the number of annuity payments to be made, which will increase the expenditure and reduce profits for the shareholders. Lapse and surrender rates Lapses relate to the termination of policies due to non–payment of premiums. Surrenders relate to the voluntary termination of policies by policyholders. Policy termination assumptions are determined using statistical measures based on the Group’s experience and vary by product type, policy duration and sales trends. An increase in lapse rates early in the life of the policy would tend to reduce profits for shareholders, but later increases are broadly neutral in effect. Discount rate Life insurance liabilities are determined as the sum of the discounted value of the expected benefits and future administration expenses directly related to the contract, less the discounted value of the expected theoretical premiums that would be required to meet these future cash outflows. Discount rates are based on current industry risk rates, adjusted for the Group’s own risk exposure. A decrease in the discount rate will increase the value of the insurance liability and therefore reduce profits for the shareholders.

Life insurance contracts - Continued 84 Notes To The Consolidated And SeparateSensitivities Financial StatementsThe following analysis is performed for reasonably possible movements in key assumptions with all other assumptions held constant, showing theimpact on gross and net liabilities, profit before tax and equity. The correlation of assumptions will have a significant effect in determining the For the year ended 31 December 2017ultimate claims liabilities, but to demonstrate the impact due to changes in assumptions, assumptions had to be changed on an individual basis. Itshould be noted that movements in these assumptions are non–linear. Sensitivity information will also vary according to the current economicassumptions, mainly due to the impact of changes to both the intrinsic cost and time value of options and guarantees. When options andguarantees exist, they are the main reason for the asymmetry of sensitivities. The method used for deriving sensitivity information and significantassumptions made did not change from the previous period. GROUP COMPANYLife insurance contracts N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 31 Dec-2017 Increase/ Increase/ Increase/ Increase/ (decrease) on Increase/ (decrease) on Increase/ (decrease) on (decrease) on Increase/ (decrease) on Increase/ gross Change in gross (decrease) on profit before equity liabilities (decrease) on profit before (decrease) on assumptions liabilities net liabilities tax net liabilities tax equityMortality/morbidity rate +10% 28,478 28,478 28,478 19,935 - -- -Longevity +10% 3,211 3,211 3,211 2,248 - -- -Lapse and surrenders rate +10% - - - - -- -Discount rate - - -- - +1% (28,197) (28,197) (28,197) (19,738)Mortality/morbidity rate -10% (24,693) (24,693) (24,693) (17,285) - -- -Longevity -10% (3,099) (3,099) (3,099) (2,169) - -- -Lapse and surrenders rate -10% - - - - - -- -Discount rate 32,484 32,484 32,484 22,739 - -- - -1% GROUP COMPANY31 Dec-2016 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 Financial Statements Appendices Strategic Report 2017 Annual Report + Accounts Increase/ Increase/ Increase/ Increase/ Increase/ (decrease) on Increase/ (decrease) on Increase/ (decrease) on (decrease) on gross Increase/ (decrease) on equity liabilities Change in gross (decrease) on profit before (decrease) on profit before (decrease) on assumptions liabilities net liabilities tax net liabilities tax equityMortality/morbidity rate +10% 20,396 19,676 19,676 13,773 - -- - GovernanceLongevity +10% 19,636 19,636 19,636 13,746 - -- -Lapse and surrenders rate +10% - -- -Discount rate - - - - - -- - +1% (29,290) (29,290) (29,290) (20,503)Mortality/morbidity rate -10% (20,396) (19,676) (19,676) (13,773) - -- -Longevity -10% (19,636) (19,636) (19,636) (13,746) - -- -Lapse and surrenders rate -10% - -- -Discount rate - - - - - -- - -1% 31,932 31,932 31,932 22,353

2017 Annual Report + Accounts Strategic Report Governance Notes To The Consolidated And Separate 85Financial Statements Appendices Financial Statements For the year ended 31 December 2017(b) Non–life insurance contracts The Group principally issues the following types of general insurance contracts: motor, general accident, Bond, Marine, Fire, Aviation and Oil and Gas. Risks under non–life insurance policies usually cover twelve months duration.For general insurance contracts, the most significant risks arise from climate changes, natural disastersand terrorist activities. For longer tail claims that take some years to settle, there is also inflation risk.These risks do not vary significantly in relation to the location of the risk insured by the Group, type of riskinsured and by industry.The above risk exposure is mitigated by diversification across a large portfolio of insurance contracts andgeographical areas. The variability of risks is improved by careful selection and implementation ofunderwriting strategies, which are designed to ensure that risks are diversified in terms of type of risk andlevel of insured benefits. This is largely achieved through diversification across industry sectors andgeography. Furthermore, strict claim review policies to assess all new and ongoing claims, regular detailedreview of claims handling procedures and frequent investigation of possible fraudulent claims areestablished to reduce the risk exposure of the Group. The Group further enforces a policy of activelymanaging and promptly pursuing claims, in order to reduce its exposure to unpredictable futuredevelopments that can negatively impact the business. Inflation risk is mitigated by taking expectedinflation into account when estimating insurance contract liabilities.The Group has also limited its exposure by imposing maximum claim amounts on certain contracts as wellas the use of reinsurance arrangements in order to limit exposure material events.The table below sets out the concentration of non–life insurance contract liabilities by type of contract: GROUP COMPANY31 Dec-2017 N'000 N'000 N'000 N'000 N'000 N'000 Net Net Gross Reinsurance Gross Reinsurance liabilities liabilities liabilities of liabilities liabilities of liabilitiesMotor 1,867,929 321,288 1,546,642 1,389,265 52,426 1,336,839Fire 529,626 174,017 355,609 476,441 144,143 332,298General Accident 787,840 505,111 787,840 505,111Marine 1,292,951 82,746 393,352 1,292,951 82,746 393,352Aviation & Oil and Gas 476,098 20,582 702,903 476,098 20,582 702,903 723,485 1,386,472 723,485 1,087,737 31 Dec-2016 4,890,089 3,503,617 4,358,240 3,270,503 GROUP COMPANY N'000 Net N'000 N'000 N'000 N'000 N'000 Net liabilities Gross Reinsurance Gross Reinsurance liabilities liabilities of liabilities liabilities of liabilitiesMotor 1,394,413 78,995 1,315,418 1,188,028 40,315 1,147,713Fire 434,744 241,838 192,906 411,812 237,540 174,272General Accident 1,108,042 214,568 893,474 214,568 893,474Marine 359,582 90,636 268,946 1,108,042 90,636 268,946Aviation & Oil and Gas 755,266 474,635 280,631 359,582 474,635 280,631 4,052,047 1,100,672 2,951,375 755,266 1,057,694 2,765,036 3,822,730

2017 Annual Report + Accounts86 Notes To The Consolidated And Separate Strategic Report Governance Financial Statements Financial Statements Appendices For the year ended 31 December 2017(b) Non–life insurance contracts - ContinuedKey assumptionsThe principal assumption underlying the liability estimates is that the Group’s future claims developmentwill follow a similar pattern to past claims development experience. This includes assumptions in respect ofaverage claim costs, claim handling costs, claim inflation factors and claim numbers for each accident year.Additional qualitative judgements are used to assess the extent to which past trends may not apply in thefuture, for example: one–off occurrence; changes in market factors such as public attitude to claiming:economic conditions: as well as internal factors such as portfolio mix, policy conditions and claims handlingprocedures.Change in assumptions and sensitivity analysisSensitivity analyses are performed to test the variability around the reserves that are calculated at a bestestimate level. The estimated claim amounts can never be an exact forecast of future claim amounts andtherefore looking at how these claim amounts can vary can provide valuable information for businessplanning and risk appetite considerations.A sensitivity analysis was done to determine how the IBNR reserve amount would change if we were toconsider the 75th percentile as opposed to our best estimate figures included in reserve reviews as at 31December 2017. The 75th percentile is a generally accepted level of prudency.Results based on the Normal DistributionWe use the Normal distribution as a proxy for the distribution of the IBNR claims reserve with a mean equalto the best estimate reserve calculated for each class of business.In order to determine the standard deviation of the distributions we equated the 0.5th percentile of thedistributions to be equal to 0 thereby assuming that the IBNR reserve % cannot be negative.Through the use of the mean and the 0.5th percentile we were able to calculate the implied standarddeviations for each class.Change in assumptions and sensitivity analysisThe results based on fitting a Normal distribution to the best estimate IBNR reserves as at 31 December2017 are as follows:Class of Business Best estimate 75th percentile using Normal distributionFire N'000 N'000 N'000 N'000General AccidentMarine & Aviation Gross IBNR Net IBNR Gross IBNR Net IBNRMotorOil & Gas 96,188 91,379 121,375 115,306Total 106,009 98,589 133,768 124,404 103,461 97,254 130,553 122,720 106,012 103,362 133,772 130,428 162,605 162,605 205,184 205,184 574,275 553,189 724,652 698,042Overall there is a 26.3% increase from the best estimate calculated and that at the 75th percentile.The 75th percentile is generally regarded as a prudent level for IBNR reserves. More importantly, thedifference between the best estimate and the 75th percentile provides management with an indication ofthe variability inherent in the IBNR reserves.Based on the assumption that reserves follow a Normal distribution, there is only a 25% chance that thegross IBNR reserves required by Mutual Benefits will exceed N725 million as at 31 December 2017.

2017 Annual Report + Accounts Strategic Report Governance Notes To The Consolidated And Separate 87Financial Statements Appendices Financial Statements For the year ended 31 December 2017(b) Non–life insurance contracts - Continued Claims development table The following tables show the estimates of cumulative incurred claims, including both claims notified and IBNR for each successive accident year at each reporting date, together with cumulative payments to date. Basic Chain Ladder method (BCL) Development factors were calculated using the last 3, 4, 5, 6 and 7 years of data by accident year or quarter. Ultimate development factors are calculated for each of the permutations and the most appropriate pattern is selected. Ultimate development factors are applied to the paid data per accident year or quarter and an ultimate claim amount is calculated. The future claims (the ultimate claim amount less paid claims to date) are allocated to future payment periods in line with the development patterns calculated. The outstanding claims reported to date are then subtracted from the total future claims to give the resulting IBNR figure per accident year or quarter. For cases where there were large losses that had been reported but not paid, and therefore would not have influenced the development patterns, the total case reserve were excluded from the calculation of the IBNR. i.e. IBNR = Ultimate claim amount (excl. extreme large losses) minus paid claims to date minus claims outstanding (excl.extreme large losses) Assumptions underlying the BCL The Basic Chain Ladder Method assumes that past experience is indicative of future experience i.e. that claims recorded to date will continue to develop in a similar manner in the future. An implicit assumption is that, for an immature accident year, the claims observed thus far tell you something about the claims yet to be observed. A further assumption is that it assumes consistent claim processing, a stable mix of types of claims, stable inflation and stable policy limits. If any of these assumptions are invalidated, the results of the reserving exercise may prove to be inaccurate. Loss Ratio method For two (2) of the classes namely Energy and Aviation, there were very limited data. A BCL method was therefore inappropriate. Expected experience to date was considered as well as the average assumed Ultimate Loss ratio in carrying out the calculation. Average delay durations were calculated from the data provided. In the absence of any data, various options were provided. The IBNR is then calculated as: Expected % of claims to still arise in future based on average delay X average ultimate loss ratio assumed X earned premium for the current year

2017 Annual Report + Accounts88 Notes To The Consolidated And Separate Strategic Report Governance Financial Statements Financial Statements Appendices For the year ended 31 December 2017(b) Non–life insurance contracts - Continued Assumptions underlying the Loss Ratio Method It was assumed that the average delay in reporting of claims will continue into the future. If it is expected that these delay assumptions no longer hold, an adjustment needs to be made to allow for this change in reporting. If the delay period in reporting is expected to have increased from previous years, the results shown in the report will be understated. Additionally, an estimate of the average ultimate loss ratio will need to be assumed. Loss ratios provided were used to obtain the average loss ratio as well asexperience that has been seen to date in previous accident years. Although a reasonability check was not conducted on the loss ratios by comparing the loss ratios to industry figures, if the loss ratios average is not indicative of future experience, the IBNR calculated could be under/over estimated. Unearned premium provision was calculated using a time – apportionment basis, in particular, the 365ths method. The same approach was taken for deferred acquisition cost. Combined ratio for financial year 31 December 2017 was calculated per class of business, taking into account the additional movement in claims reserves as at 31 December 2017 as a result of the IBNR figures calculated during the reserving exercise. This combined ratio was then applied to the UPR per class of business to determine the expected future underwriting experience for the unexpired risk period, and to ascertain whether the UPR held as at 31 December 2016 was deemed sufficient. The Additional Unexpired Risk Reserve (AURR) is limited to a minimum of 0, i.e. there is no allowance for reduction in the UPR due to expected future profits arising from premiums written which will be earned in future.N'000 DEVELOPMENT YEARSFireAccident Year 0 12 3 45 6 5,1562011 - - 3,934 4,216 15,851 4,8512012 - 102,043 130,776 147,379 146,058 146,194 5,1562013 65,907 129,803 178,620 172,7672014 113,696 249,224 171,111 265,3882015 116,753 175,298 253,1312016 172,707 258,930 168,480 595,602 334,676 151,0452017 120,098Total 915,298 727,431 589,159N'000General accident DEVELOPMENT YEARSAccident Year 0 12 3 45 62011 23,9632012 - - 12,523 19,191 21,182 23,7312013 - 110,695 149,335 157,475 167,234 176,644 23,9632014 100,719 232,932 276,502 298,189 323,7642015 143,805 247,812 274,905 284,8662016 123,635 243,841 263,7052017 99,258 225,092 759,720 512,180 200,375Total 147,474 976,970 1,060,372 614,890

2017 Annual Report + Accounts Strategic Report Governance Notes To The Consolidated And Separate 89Financial Statements Appendices Financial Statements For the year ended 31 December 2017(b) Non–life insurance contracts - Continued Development claim tablesN'000 DEVELOPMENT YEARSMarine and AviationAccident Year 0 12 3 45 6 21,5352011 - - 928 3,600 3,601 21,5352012 - 42,875 42,875 47,443 47,443 47,443 21,5352013 16,618 30,488 32,750 32,887 32,8872014 37,397 114,189 118,499 118,4992015 66,774 167,852 169,546 83,931 68,9782016 68,699 111,224 202,4292017 87,343 364,598 276,831 466,628TotalN'000 DEVELOPMENT YEARSMotorAccident Year 0 12 3 45 6 22,7682011 - - 12,737 14,463 16,833 21,0652012 78 166,258 175,766 177,804 178,493 178,493 22,7682013 469,160 715,356 729,823 731,234 731,2342014 557,713 747,192 761,284 761,5582015 473,318 698,490 709,0932016 563,864 741,647 1,685,059 926,560 199,5582017 630,155 2,388,703 3,068,943Total 2,694,288N'000 DEVELOPMENT YEARSOil & Gas 0 12 3 45 6Accident Year 131,018 - - 21,623 123,839 123,856 131,0182011 - 28,401 53,577 63,815 68,398 68,398 131,0182012 73,620 85,390 97,481 97,481 97,4812013 25 35,571 35,571 36,1902014 -2015 14 1,948 1,948 321,326 289,735 199,4152016 27,566 1,7132017 101,225 210,200 153,022Total

2017 Annual Report + Accounts90 Notes To The Consolidated And Separate Strategic Report Governance Financial Statements Financial Statements Appendices For the year ended 31 December 20173.1.2 Financial risks management (a) Introduction and overview The Group is exposed to a range of financial risks through its financial instruments, insurance assets and insurance liabilities. The key financial risk is that in the long term its investments proceeds are not sufficient to fund the obligations arising from its insurance and investment contracts. The most important components of the financial risks are: (a) Credit risk (b) Liquidity risk (c) Market risk (a) Credit risk Mutual Benefits Assurance Group is exposed to risk relating to its loan receivables, finance lease receivable, statutory deposits, bank balances, reinsurance receivables and trade receivables. Its receivables comprise trade receivables from customers, reinsurers and coinsurers recoverables and other receivables. There are no financial assets that are classified as past due and impaired whose terms have been negotiated. Trade receivables The Group has placed more responsiveness on effective management of credit risk exposure that relates to trade receivables. In general, the regulator has laid great emphasis on “No Premium, No Cover” and this has positively changed the phase of credit management within the industry. The Group defines credit risk as the risk of counterparty’s failure to meet its contractual obligations. Credit risk arises from insurance cover granted to parties with payment instruments or payments plan issued by stating or implying the terms of contractual agreement. Stringent measures have been placed by the regulator to guide against credit default. Credit risk exposure operates from the level of brokered transactions with little emphasis placed on direct business. The Company’s credit risk exposure to brokered business is very low as the Company requires brokers to provide credit note which is due 30 days from receipt before incepting insurance cover on behalf of their clients. The Group credit risk originates from reinsurance recoverable transactions, brokers and agents. Impairment model Premium debtors, which technically falls under receivables is recognized at a fair value and subsequently measured at amortized cost, less provision for impaired receivables. The following policies and procedures are in place to mitigate the Group's exposure to credit risk: 1 The impairment of the premium debtors is to be assessed at two different levels, individually or collectively. However, based on NAICOM’s “No Premium No Cover” guidelines which state that “all insurance covers shall now be provided on a strict ‘no premium no cover’ basis”, only cover for which payment has been received shall be booked. Hence, there should be no outstanding direct transactions. For brokered businesses, on the other hand, payment has to be made not later than 30 days after a credit note has been issued. In line with this guidelines, the Company uses the aging of receivables as the major parameter in calculating impairment.

2017 Annual Report + Accounts Strategic Report Governance Notes To The Consolidated And Separate 91Financial Statements Appendices Financial Statements For the year ended 31 December 20172 Reinsurance is placed with counterparties that have a good credit rating and concentration of risk is avoided by following policy guidelines in respect of counterparties’ limits that are set each year by the board of director and are subject to regular reviews. At each reporting date, management performs an assessment of creditworthiness of reinsurers and updates the reinsurance purchase strategy, ascertaining suitable allowance for impairment.3 The Group sets the maximum amounts and limits that may be advances to corporate counterparties by reference to their long-term credit worthness.4 The credit risk in respect of customer balances incurred on non-payment of premiums or contributions will only persist during the grace period specified in the policy document until expiry, when the policy is either paid or fully provided for and Commission paid to intermediaries is netted off against amounts receivable from them to reduce the risk of doubtful debts.5 Net exposure limits are set for each counterparty i.e limits are set for investments and cash deposits, foreign exchange trade exposures and minimum credit ratings for investments that may be held.3.1.2 Financial risks management (a) Credit risk Maximum exposure to credit risk The maximum exposure is shown gross, before the effect of mitigation. The maximum risk exposure presented below does not include the exposure that arises in the future as a result of the changes in values. The credit risk analysis below is presented in line with how the Group manages the risk. The Group manages its credit risk exposure based on the carrying value of the financial instruments. Below is the analysis of the group’s and company's maximum exposure to credit risk at the year end. GROUP COMPANYMaximum exposure to credit risk 2017 2016 2017 2016 N'000 N'000 N'000 N'000Cash and cash equivalentsLoans and receivables 8,335,080 10,726,024 3,243,960 3,800,276Held-to-maturity 12,245,701 12,410,169 633,143 770,941Trade receivables 16,840,317 8,214,636Reinsurance assets 4,457,954 2,030,905Other receivables 629,280 462,616Finance lease receivables 1,875,018 274,994 278,159 102,994Statutory deposit 106,617 564,810 98,580Deposit for investment in equity 148,841 420,049 252,834 50,109 145,055 500,000 134,044 147,965 500,000 300,000 300,000 480,588 460,588 410,588 390,588 41,199,880 33,575,693 10,275,492 7,692,358

(a) Credit risk - Continued 92 Notes To The Consolidated And Separate Concentration of credit risk All credit risk are concentrated across many industries in Nigeria. The Group monitors concentration of credit risk by sector. Financial Statements GROUP COMPANY For the year ended 31 December 2017 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 Total Financial Total31 Dec-2017 Financial Manufac Oil & Gas Public sector Manufac Oil & Gas Public sector turing turing sector & Other sector & Other -Cash and cash equivalents 8,335,080 - - - 8,335,080 3,243,960 - - - 3,243,960 - 10,162,578 - 12,245,701 633,143 - - - 633,143Loans and advances 2,083,123 - - 16,840,317 - - - - - - 4,457,954 - - - 4,457,954Held-to-maturity 16,840,317 - - - 629,280 278,159 - - - 278,159 - - 124,331 1,875,018 564,810 - - 219,619 564,810Trade receivables 629,280 - - 145,055 33,215 - - 134,044 252,834 - - - 148,841 - - - - 134,044Reinsurance assets 1,875,018 - 145,055 300,000 - 300,000 - - 500,000 - 410,588 -Other receivables 24,510 - 480,588 269,386 N'000 410,588 353,663 410,588 10,643,166 480,588 9,511,241 Manufac 10,275,492Finance lease receivables - 41,199,880 COMPANY GROUP N'000 turingStatutory deposit 500,000 FinancialDeposit for invest. in equity - 30,287,328 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 Total Total31 Dec-2016 Financial Manufac Oil & Gas Public sector Oil & Gas Public sector turing sector & Other sector & OtherCash and cash equivalents 10,726,024 -- - 10,726,024 3,800,276 -- - 3,800,276 - 10,010,310 1,473,091 12,410,169 770,941 -- - 770,941Loans and advances 926,768 -- -- - 2,030,905 Financial Statements Appendices Strategic Report 2017 Annual Report + Accounts -- - 8,214,636 2,030,905 -- - 102,994Held-to-maturity 8,214,636 -- - 462,616 102,994 -- - 98,580Trade receivables 462,616 -- - 274,994 98,580 -- - 50,109 -- 106,617 106,617 50,109 -- - 147,965Reinsurance assets 274,994 -- 420,049 420,049 147,965 -- - 300,000 - 500,000 300,000Other receivables - - 390,588 - 390,588 - 390,588 - 10,400,898 70,000 460,588 - - 390,588 - 7,692,358Finance lease receivables - 2,069,757 33,575,693 7,301,770Statutory deposit 500,000Deposit for invest. in equity - Governance 21,105,038

(a) Credit risk - Continued Strategic Report Financial StatementsCredit quality 2017 Annual Report + AccountsThe table below provides information regarding the credit risk exposure of the Company by classifying assets according to the Company's credit ratingsof counter parties: GROUP COMPANY N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 Governance Appendices31 Dec-2017 non non Past non non Past Total Investment investment investment due due Total Investment investment investment but not 3,243,960 impaired 633,143 grade grade grade un- but not grade grade grade un- satisfactory satisfactory impaired satisfactory satisfactory - 4,457,954 - 278,159Cash and cash equivalents 8,335,080 - - - 8,335,080 3,243,960 - - 564,810 633,143 - - - 252,834Loans and advances 12,245,701 - - - 12,245,701 12,906 134,044 4,457,954 300,000Held-to-maturity 16,840,317 - - - 16,840,317 278,159 - - - 410,588 551,904 - - -Trade receivables 629,280 - - - 629,280 - 10,275,492 -Reinsurance assets 1,795,967 - - 79,051 1,875,018 12,906 N'000Other receivables 148,841 - - - 148,841 252,834 - - TotalFinance lease receivables 145,055 - - - 145,055 134,044 - - 3,800,276 770,941Statutory deposit 500,000 - - - 500,000 300,000 - - 2,030,905Deposit for invest. in equity 480,588 - - - 480,588 410,588 - - 102,994 Notes To The Consolidated And Separate 98,580 Financial Statements 41,120,829 - - 79,051 41,199,880 10,262,586 - - 50,109 147,965 For the year ended 31 December 2017 GROUP COMPANY 300,000 390,588 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 7,692,35831 Dec-2016 non non Past non non Past Investment investment investment due due Total Investment investment investment but not impaired grade grade grade un- but not grade grade grade un- satisfactory satisfactory impaired satisfactory satisfactory - -Cash and cash equivalents 10,726,024 - - - 10,726,024 3,800,276 - - -Loans and receivables 12,410,169 - - - 12,410,169 770,941 - - - 14,787Held-to-maturity 8,214,636 - - - 8,214,636 2,030,905 - - -Trade receivables 462,616 - - - 462,616 102,994 - - - -Reinsurance assets 206,246 - - 68,749 274,994 83,793 - - - 14,787Other receivables 106,617 - - - 106,617 50,109 - -Finance lease receivables 420,049 - - - 420,049 147,965 - -Statutory deposit 500,000 - - - 500,000 300,000 - -Deposit for invest. in equity 460,588 - - - 460,588 390,588 - - 33,506,945 - - 68,749 33,575,693 7,677,571 - - 93

(a) Credit risk - Continued COMPANY 94 Notes To The Consolidated And Separate Age analysis of financial assets past due but not impaired GROUP Financial Statements N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 For the year ended 31 December 2017 < 30 days 31 to 60 days > 61 days31 Dec-2016 Total past–due Total past–due < 30 days 31 to 60 days > 61 days but not impaired but not impairedReinsurance assets 12,906 66,145 - 79,051 12,906 -- 12,906 12,906 66,145 - 79,051 12,906 -- 12,90631 December 2015Reinsurance assets 51,561 17,188 - 68,749 11,830 2,957 - 14,787 51,561 17,188 - 68,749 11,830 2,957 - 14,787Impaired financial assetsAt 31 December 2017, there are impaired loans and receivables of N119,425,000 (2016: N29,118,000) and no impaired trade receivables (2016: Nil).For assets to be classified as ”past–due and impaired”, contractual payments must be in arrears for more than 90 days. No collateral is held as securityfor any past due or impaired assets.The Group records impairment allowances for loans and receivables in a separate impairment allowance account. A reconciliation of the allowance forimpairment losses for loans and receivables is, as follows: GROUP COMPANY 31 Dec-2017 31 Dec-2016 31 Dec-2017 31 Dec-2016 Financial Statements Appendices Strategic Report 2017 Annual Report + Accounts N'000 N'000 N'000 N'000At 1 JanuaryCharge for the year 29,118 62,553Amounts written off 90,307 - - (33,435) 119,425 29,118Collateral GovernanceThe amount and type of collateral required depends on an assessment of the credit risk of the counterparty. Collateral is mainly obtained for securitieslending and for cash purposes. Management monitors the market value of the collateral, requests additional collateral when needed and performs animpairment valuation when applicable.

(b) Liquidity risk - ContinuedLiquidity risk is the risk that cash may not be available to pay obligations when due at a reasonable cost. The Group mitigates this risk by monitoring Strategic Report 2017 Annual Report + Accountscash activities and expected outflows. The Group’s current liabilities arise as claims are made and clients request for termination of their Financial Statementsinvestment-linked products. The Group has no material commitments for capital expenditures and there is no need for such expenditures in thenormal course of business. Claims payments are funded by current operating cash flow including investment income.The Company’s investment policy requires that a reasonable percentage of the non-life portfolio be held in cash and cash equivalent; this highlights Governanceavailability of liquid marketable securities sufficient to meet its liabilities as at when due. Cash and cash equivalents include treasury bills and term Appendicesdeposits with an original maturity of less than 90 days.The limits are monitored and reported on a weekly and monthly basis to ensure that exposure of the Group’s investment portfolio to this risk isproperly managed.Below is a summary of undiscounted contractual cashflows of financial assets matched with financial liabilities.(b) Liquidity risk - ContinuedGROUP N'000 N'000 N'000 N'000 N'000 N'000 N'000 31 Dec-2017 Carrying 1-6 6-12 1-5 Gross amount Above No maturity total Notes To The Consolidated And Separate months months years 5 years date Financial StatementsCash and cash equivalents 8,345,638 8,629,530 - - - - 8,629,530 For the year ended 31 December 2017Loans and advances 12,245,702 1,240,955 1,991,269 12,378,745 1,077,969 - 16,688,938Fair value through profit or loss -Held-to-maturity financial assets 110,952 110,952 - - - - 110,952Trade receivables 16,840,317 3,826,085 13,781,486 1,118,182 - - 18,725,754Reinsurance assets - 215,417Other receivables 629,280 629,280 - - - - 629,280Finance lease receivables 2,090,435 1,875,018 - - - - 2,090,435Statutory deposit 320,980 - - 17,662 500,000Total financial assets 320,980 38,079 101,187 - 715,417 320,980 145,055 50,136 30,000 300,000 1,095,631 207,064 500,000 30,000 15,840,833 13,898,114 N'000 860,000 41,228,359 16,712,937 N'000 48,262,933 N'000 N'000 - N'000 N'000 536,165 1,238,216 N'000 7,001,183 13,941,714 -Investment contract liabilities 26,564,221 7,001,183 - - - - 28,480,246Insurance contract liabilities 6,078,210 4,839,994 - - - - 6,078,210Trade payables 1,721,930 - - - - 1,721,930Other liabilities 1,721,930 - - - 544,501Deposit liabilities 544,501 544,501 - 2,436,970 1,238,216 268,087Borrowings 259,268 268,087 4,072,200 2,973,135 6,509,170Total financial liabilities 6,509,170 7,001,183 18,013,914 41,677,300 - 43,602,144 14,375,696Total liquidity gap (448,941) 2,337,241 8,839,650 (4,115,799) (1,877,505) (522,799) 4,660,788 95

The need to match the medium to long term tenure of the Group's investment contract liabilities necessitated the 96 Notes To The Consolidated And Separatehigh investment in the landed (investment) properties of N8.5 billion. Included in the investment properties areassets worth N6 billion that may be liquidated in the short to medium term to meet the financial obligations of Financial Statementsthe Group. For the year ended 31 December 2017(b) Liquidity risk - Continued N'000 N'000 N'000 N'000 N'000 N'000 N'000 COMPANY Carrying 1-6 6-12 1-5 Above No maturity Gross amount months months years 5 years date total 31 Dec-2017 3,249,277 4,170,144 - - - - 4,170,144 Cash and cash equivalents 633,143 130,264 130,695 389,595 225,628 - 876,183 Loans and advances 110,952 110,952 - 110,952 Fair value through profit or loss 4,457,954 652,726 - - - - 4,874,582 Held-to-maturity financial assets 278,159 278,159 3,830,736 391,120 - - 278,159 Trade receivables - 178,777 743,587 Reinsurance assets 743,587 564,810 - - - - 316,435 Other receivables - - - - 839,944 Finance lease receivables 316,435 316,435 - - 119,944 300,000 516,000 Statutory deposit 90,000 600,000 - 478,777 12,725,986 Total financial assets 134,044 30,000 18,000 180,000 345,572 4,069,432 1,560,715 Insurance contract liabilities 300,000 18,000 Trade payables Other liabilities 10,223,551 6,271,490 Borrowings Total financial liabilities 1,926,358 1,352,081 --- 574,277 1,926,358 --- - 396,498 Total liquidity gap 396,498 396,498 --- - 142,130 - 4,072,200 2,436,970 - 142,130 142,130 - 4,072,200 2,436,970 6,509,170 Financial Statements Appendices Strategic Report 2017 Annual Report + Accounts 574,277 8,974,156 6,509,170 - 8,974,156 1,890,709 1,249,395 4,380,781 4,069,432 (2,511,485) (2,091,398) (95,500) 3,751,830The need to match the medium to long term tenure of the Company's investment contract liabilities necessitated the high investment in Governancethe landed (investment) properties of N8.5 billion. Included in the investment properties are assets worth N6 billion that may beliquidated in the short to medium term to meet the financial obligations of the Company.

(b) Liquidity risk - Continued Strategic Report 2017 Annual Report + Accounts GROUP Financial Statements 31 Dec-2016 N'000 N'000 N'000 N'000 N'000 N'000 N'000 Cash and cash equivalents Carrying 1-6 6-12 1-5 Above No maturity Gross Governance Loans and advances amount months months years 5 years date total Appendices Fair value through profit or loss Held-to-maturity financial assets 10,734,374 12,344,530 - - - - 12,344,530 Trade receivables 12,410,169 1,285,162 2,035,688 12,629,760 1,188,984 - 17,139,595 Reinsurance assets 64,097 - 64,097 Other receivables 64,097 - - - - - 9,446,832 Finance lease receivables 8,214,636 462,616 9,446,832 - - - 462,616 Statutory deposit 274,994 - - 905,780 1,180,774 Total financial assets 462,616 293,775 - - - - 293,775 Investment contract liabilities 1,180,774 213,900 - - - - 526,186 Insurance contract liabilities 27,500 - 111,696 - 500,000 830,000 Trade payables 293,775 200,590 275,000 - Other liabilities 420,049 14,966,574 27,500 13,016,456 1,188,984 1,405,780 42,288,405 Deposit liabilities 500,000 5,835,432 11,710,610 16,908,674 Borrowings 34,280,490 2,587,230 5,835,432 - 411,649 - 28,991,186 Notes To The Consolidated And Separate Total financial liabilities 25,956,771 477,342 - - - 1,278,681 3,865,911 Financial Statements Total liquidity gap 3,865,911 1,314,453 - - - 477,342 477,342 234,422 - - - - 1,314,453 For the year ended 31 December 2017 1,314,453 - - 3,904,800 - - 234,422 203,845 - 20,813,474 - 6,258,070 6,258,070 10,448,878 5,835,432 (7,797,018) 2,353,270 - 41,141,383 38,076,392 4,517,696 5,875,178 2,764,919 1,278,681 (3,795,902) (1,575,934) 127,099 1,147,021The need to match the medium to long term tenure of the Group's investment contract liabilities necessitated the high investment in thelanded (investment) properties of N8.7 billion. Included in the investment properties are assets worth N6.1 billion that may be liquidatedin the short to medium term to meet the financial obligations of the Group. 97

(b) Liquidity risk - Continued N'000 N'000 N'000 N'000 N'000 N'000 N'000 98 Notes To The Consolidated And Separate COMPANY Carrying 1-6 6-12 1-5 Above No maturity Gross Financial Statements 31 Dec-2016 amount months months years 5 years date total For the year ended 31 December 2017 Cash and cash equivalents 3,804,953 4,375,696 - - - - 4,375,696 Loans and advances 770,941 158,615 159,140 474,387 274,734 - 1,066,877 Fair value through profit or loss 64,097 64,097 - - Held-to-maturity financial assets - 2,335,541 - - - 64,097 Trade receivables 2,030,905 - - - 2,335,541 Reinsurance assets 102,994 102,994 - - - 674,729 Other receivables 842,580 167,851 - - - - 102,994 Finance lease receivables 121,880 121,880 - - - - 842,580 Statutory deposit 147,965 47,929 34,619 111,696 19,496 300,000 121,880 Total financial assets 300,000 16,500 16,500 165,000 - 974,729 213,739 Insurance contract liabilities 751,083 294,230 498,000 Trade payables 8,186,315 5,055,561 2,545,800 556,612 9,621,404 Other liabilities - - - Borrowings 1,709,183 1,152,571 - - - - 1,709,183 Total financial liabilities 358,995 358,995 - - - - 358,995 Total liquidity gap 283,425 283,425 - 3,904,800 2,353,270 283,425 6,258,070 - 3,904,800 2,353,270 556,612 6,258,070 8,609,673 - - 8,609,673 1,794,991 (3,153,717) (2,059,040) 418,117 (423,358) 1,011,731 3,260,570 2,545,800The need to match the medium to long term tenure of the Company's investment contract liabilities necessitated the high Financial Statements Appendices Strategic Report 2017 Annual Report + Accountsinvestment in the landed (investment) properties of N8.7 billion. Included in the investment properties are assets worth N6.1billion that may be liquidated in the short to medium term to meet the financial obligations of the Company. Governance

(c) Market riskCurrency risk Strategic Report 2017 Annual Report + AccountsCurrency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign Financial Statementsexchange rates.The Group’s principal transactions are carried out in Naira and its exposure to foreign exchange risk arise primarily with respect to the USdollar and Yen.The Group’s financial assets are primarily denominated in the same currencies as its insurance and investment contract liabilities. Thus, Governancethe main foreign exchange risk arises from recognised assets and liabilities denominated in currencies other than those in which Appendicesinsurance and investment contract liabilities are expected to be settled.Mutual Benefits Assurance Plc is exposed to foreign exchange currency risk primarily through undertaking certain transactionsdenominated in foreign currency. The Group exposure to foreign currency risk through its investment in short term placements, foreigndomiciliary bank balance and foreign borrowing.Group 31 December 2017 Yen 31 December 2016 Yen USD EURO USD EUROCash and cash equivalents N’000 N’000Borrowings N’000 N’000 - N’000 N’000 - Notes To The Consolidated And SeparateOutstanding claims 1,749,342 3,991 1,717,408 37,172 Financial Statements 6,108,300 5,857,200 - - - - - - For the year ended 31 December 2017 325,388 - 263,698 -Company 31 December 2017 31 December 2016 USD EURO USD EURO Yen YenCash and cash equivalents N’000 N’000 N’000 N’000 N’000 N’000Borrowings 1,607,337 3,991 1,623,683 37,172Outstanding claims - 6,108,300 5,857,200 - - - - - - 325,388 263,698 -\"The following analysis is performed for reasonably possible movements in key variables with all other variables held constant, showing 99the impact on profit before tax and equity due to changes in the fair value of currency sensitive monetary assets and liabilities includinginsurance contract claim liabilities. The correlation of variables will have a significant effect in determining the ultimateimpact ofcurrency risk, but to demonstrate the impact due to changes in variables, variables had to be changed on an individual basis. It should benoted that movements in these variables are non–linear. The method used for deriving sensitivity information and significant variablesdid not change from the previous period.\"

GROUP COMPANY 100 31 DECEMBER 2016 31 DECEMBER 2017 31 DECEMBER 2017 31 DECEMBER 2016 Change in Impact on Impact on Impact on profit Impact on Impact on Impact on Impact on Impact on Notes To The Consolidated And Separate profit profit profit equity Financial Statements variables before tax equity N’000 before tax equity before tax equity before tax For the year ended 31 December 2017 +10% N’000 N’000USD +10% N’000 N’000 145,371 101,760 N’000 N’000 N’000 N’000EURO +10% 142,395 99,677 128,195 89,736 135,998 95,199YEN 3,717 2,602 -10% 399 279 (585,720) (410,004) 399 279 3,717 2,602USD -10% (610,830) (427,581)EURO -10% (610,830) (427,581) (585,720) (410,004)YEN (142,395) (99,677) (145,371) (101,760) (128,195) (89,736) (135,998) (95,199) (399) (279) (3,717) (2,602) (399) (279) (3,717) (2,602) 410,004 410,004 610,830 427,581 585,720 610,830 427,581 585,720(c ) Market risk - Continuedii Interest-rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.Fixed interest rate instruments expose the Group to fair value interest risk. Group does no expose to cash flow interest risk.The Group has no significant concentration of interest rate risk.3.2 Capital ManagementThe National Insurance Commission (NAICOM), sets and monitors capital requirements for Insurance Companies. The individualsubsidiaries are directly supervised by other regulators, i.e, Mutual Benefits Microfinance Bank Limited is regulated by the Central Bank ofNigeria, Mutual Benefits Niger Limited by Conference Interafricaine Des Marches D's assurance (CIMA) and Mutual Benefits LiberiaLimited are being regulated by Central Bank of Liberia respectively.The Group’s policy is to maintain a strong capital base to maintain investor, creditor and market confidence and to sustain the future Financial Statements Appendices Strategic Report 2017 Annual Report + Accountsdevelopment of the business. The impact of the level of capital on shareholders’ return is also recognised and the Group recognises theneed to maintain a balance between the higher returns that might be possible with greater gearing and the advantages and securityafforded by a sound capital position. The Group and its individually regulated operations have complied with all externally imposedcapital requirements.Management uses regulatory capital ratios to monitor its capital base. The allocation of capital between specific operations and activities Governanceis, to a large extent, driven by optimisation of the return achieved on the capital allocated. The amount of capital allocated to eachoperation or activity is based primarily on the regulatory capital, but in some cases the regulatory requirements do not fully reflect thevarying degree of risk associated with different activities. In such cases, the capital requirements may be flexed to reflect differing riskprofiles, subject to the overall level of capital to support a particular operation or activity not falling below the minimum required forregulatory purposes.

The process of allocating capital to specific operations and activities is undertaken independently of those responsible for the operation Strategic Report 2017 Annual Report + Accounts by Group Risk and Group Credit, and is subject to review by the Group Credit Committee or the Group Asset and Liability Management Financial Statements Committee (ALCO), as appropriate. The Group ensures it maintains the minimum required capital at all times throughout the year. The table below summarises the minimum required capital across the Group and the regulatory capital held against each of them. Governance Appendices Capital management objectives, policies and approach Notes To The Consolidated And Separate The Company has established the following capital management objectives, policies and approach to managing the risks that affect its Financial Statements capital position: For the year ended 31 December 20171 To maintain the required level of stability of the Company thereby providing a degree of security to policyholders;2 To allocate capital efficiently and support the development of business by ensuring that returns on capital employed meet the requirements of its capital providers and of its shareholders;3 To retain financial flexibility by maintaining strong liquidity and access to a range of capital markets;4 To align the profile of assets and liabilities taking account of risks inherent in the business;5 To maintain financial strength to support new business growth and to satisfy the requirements of the policyholders, regulators and stakeholders;6 To maintain strong credit ratings and healthy capital ratios in order to support its business objectives and maximise shareholders value. In reporting financial strength, capital and solvency are measured using the rules prescribed by the National Insurance Commission. These regulatory capital tests are based upon required levels of solvency, capital and a series of prudent assumptions in respect of the type of business written. The Company's capital management policy for its insurance business is to hold sufficient capital to cover the statutory requirements based on the NAICOM directives, including any additional amounts required by the regulator. The Company seeks to optimise the structure and sources of capital to ensure that it consistently maximises returns to the shareholders and policyholders. The Company has had no significant changes in its policies and processes to its capital structure during the past year from previous years. 101