| Reasons of annual financial results |
The reason behind the net profit during the current period compared to net loss during the same period of the previous year is the decrease in net claims incurred by 24.6% due to the decrease in outstanding claims reserves, and the increase in realized gain on sale of available for sale investments by 1,674.6% due to the liquidation of some available for sale investments. The reason behind the increase in shareholders investments income during the current period compared to the same period of the previous year is the increase in special commission income by 44.9%, and the increase in realized gain on sale of available for sale investments by 1,647.6% due to the liquidation of some available for sale investments. |
| External auditor's report containing reservation |
1. The auditors report draws attention to the fact that these interim condensed financial statements are prepared in accordance with IAS 34 and not in accordance with the standard on interim financial reporting issued by the Saudi Organization for Certified Public Accountants (SOCPA). 2. The auditors draw attention to Note 33 of the accompanying financial statements which states that on 30 March 2016, the Saudi Arabian Monetary Authority (SAMA) issued a letter to the Company that highlighted the deteriorating solvency margin of the Company and the rectification measures to be taken by the Company according to Article 68 of the Insurance Implementing Regulations. The Company was not able to meet the solvency margin requirement by 30 September 2016 as instructed by SAMA and had not submitted the final approved plan as required by the aforesaid letter. On 27 December 2016, SAMA issued another letter binding the Company to provide an approved plan to meet the requirement of solvency margin by 18 January 2017 and take necessary measures to ensure fulfillment of the rights of the policy holders. The detailed plan has subsequently been provided to SAMA after approval by the Company's board of directors. The Company continues to take the necessary actions as advised by SAMA, through implementation of corrective action plan as advised by the consultant and approved by the Company's board of directors, which is expected to gradually improve the Company's financial position and increase the solvency margin. 3. The auditors also draw attention to Note 2 of the accompanying financial statements which states that during the year ended 31 December 2016, SAMA issued a letter to the Company that highlighted certain weaknesses in claims processing including non-compliance with legal limits for settling claims and required the submission of a detailed report regarding the corrective actions taken or to be taken by the management. SAMA also prohibited the Company from issuing any new motor insurance policies with effect from 29 November 2016. The Company was however allowed to add vehicles to existing insurance policies and renew insurance policies issued prior to 29 November 2016. On 22 January 2017, SAMA issued another letter that highlighted certain additional matters related to claims including ineffectiveness of system used to handle and process claims and certain actions that needed to be taken by the Company. SAMA also instructed the Company to take serious actions and provide a detailed plan with procedures and timeframes approved by the Company's board of directors to address the current situation. The detailed plan was subsequently submitted to SAMA after approval by the Company's board of directors. The Company continues to take the necessary actions and believes that it will be able to resolve the matter in the near future. On 2 March 2017, SAMA permitted the Company to issue new motor insurance policies effective 5 March 2017 and instructed the Company to submit a monthly report for the actions taken in regards to the improvement on the current information technology system and the migration process from old information technology system to the new system. |
| Reclassifications in annual financial results |
We reclassified some numbers within the annual financial results for comparative reasons in order to comply with the current period, there was no financial impact on net income or accumulated surplus after the reclassification. |
| Other notes |
Basic and diluted earnings per share for the period was calculated by dividing the net income for the period by the weighted average number of shares issued and outstanding during the period amounting to 100 million shares. The total shareholders, equity (no minority interest) at current period is 952,520 thousand comparing to 912,131 thousand riyals during the same period of the previous year with a increase of 4.4%. |
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