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The Mediterranean and Gulf Insurance and Reinsurance Co. announces its Annual financial results for the period ending on 2018-12-31

MEDGULF 8030 2.25% 20.86 0.46
Element List Current Year Previous Year %Change
Gross written premiums (GWP) 2,069,473 2,665,838 -22.37
Net written premiums (NWP) 1,803,470 2,171,159 -16.935
Net incurred claims 1,664,912 2,082,440 -20.049
Net profit (loss) of policy holders investment 9,284 10,286 -9.741
Profit (Loss) Insurance Operations minus policy holders investments from operations -222,743 -400,685 -44.409
Net profit (loss) of shareholders capital investment 15,039 7,986 88.317
Net Profit (Loss) before Zakat -204,527 -388,026 -47.29
Total Comprehensive Income -214,707 -388,336 -44.711
Total Share Holders Equity (after deducting minority equity) 672,164 498,586 34.814
Pre operating expenses (first operation year) - - -
Profit (Loss) per Share -3.81 -8.28
All figures are in (Thousands) Saudi Arabia, Riyals
Element List Explanation
Reason for increase (decrease) in net profit for current year compared to last year The reason behind the decrease in net loss during the current year compared to the previous year is the decrease in general and administrative expense by 15.1%. In addition, during the previous year, the company has strengthened its doubtful debt provisions amounting to SR 295.3 million comparing to SR 27.1 million during the current year, a decrease of 90.8%. Also, the company has written off discontinued ERP system amounting to SR 26 million during the previous year.

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 realized gain on available for sale investment.

Type of the external auditor's opinion Qualified opinion
External auditor's report containing reservation Qualified Opinion

We have audited the financial statements of The Mediterranean and Gulf Cooperative Insurance and Reinsurance Company, (A Saudi Joint Stock Company) (the “Company”), which comprise of Statement of financial position as at 31 December 2018 and statements of comprehensive income and the statements of changes in shareholders’ equity and cash flows for the year then ended, and the accompanying notes which form an integral part of these financial statements.

In our opinion, except for the effects of the matters described in the Basis for Qualified Opinion section of our report, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at 31 December 2018, and the results of its operations and its cash flows for the year then ended in accordance with International Financial Reporting Standards (“IFRS”) as modified by Saudi Arabian Monetary Authority (“SAMA”) for the accounting of zakat and income tax.

Basis of Qualified Opinion

1) As disclosed in note 10 to the accompanying financial statements, all reinsurance treaties up to the underwriting year 2014 were managed by the Medgulf Group Corporate Reinsurance Center (“CRC”), a related party, who dealt with the Company’s transactions, along with those of other related parties, on a consolidated basis with the reinsurers and brokers. All transactions with reinsurers and brokers were routed through CRC and the settlement of balances with these reinsurers and brokers were also made by CRC. The Company, together with CRC, have now initiated an exercise to separate the Company’s transactions and balances with the respective reinsurers and brokers from those of other related parties. This exercise is still on-going and on completion certain parties included in the policyholders’ and reinsurance balances receivable under note 9 amounting to Saudi Riyals 117.24 million may be identified as receivable from related parties and therefore may need to be disclosed under due from related parties. The underlying transactions with such related parties will then also require disclosure under related party transactions. Accordingly, management is currently unable to provide a complete list of all related parties balances and transactions which impacts both the presentation and disclosure of related party balances and transactions. Consequently, we were unable to determine whether any adjustments to the presentation and disclosure of the related party balances and transactions were necessary in the accompanying financial statements.

2) As disclosed in note 6, the Company is accounting for its reinsurance transactions related to the general line of business based on their understanding of the contractual terms of the reinsurance agreements. However, such accounting of reinsurance transactions may be subject to different interpretations. As a result, the Company’s financial statements may require adjustments, if the terms of reinsurance agreements are interpreted differently. Management is still securing clarity on the terms of the reinsurance agreements. In the absence of information in this regard, we were unable to determine whether adjustments would be required in the accompanying financial statements.

We conducted our audit in accordance with International Standards on Auditing (“ISAs”) as endorsed in the Kingdom of Saudi Arabia. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the professional code of conduct and ethics, as endorsed in the Kingdom of Saudi Arabia that are relevant to our audit of the financial statements, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Emphasis of Matters

We draw attention to note 2 to the accompanying financial statements, which details various communications from SAMA to the Company. The Company did not meet the solvency margin requirements as at 31 December 2018. The deficiency in solvency margin along with other matters as set forth in note 2 indicate that a material uncertainty exists that may cast significant doubt on the Company’s ability to continue as a going concern. However, the accompanying financial statements are prepared using the going-concern assumption since during the year the Company has successfully issued SAR 400 million in right shares improving the financial position of the Company and based on management’s assessment on the company abilities to continue as a going concern. Our opinion is not further modified in respect of this matter.

Reclassifications in annual financial results We reclassified some comparative numbers within the previous year statement of financial information in order to comply with the current year, there was no financial impact on net income after the reclassification.
Additional Information Basic and diluted earnings/ losses per share (EPS) for the period was calculated by dividing the net income before zakat for the period by the weighted average number of shares issued and outstanding during the period amounting to 40 million shares before the capital increase and 80 million shares after the capital increase dated 18/10/2018. The loss per share for the current period based on the weighted average number of shares is SR 3.81 compared to SR 8.28 for the previous year (adjusted).

The total insurance operations comprehensive loss during the current year is 4,312 thousand comparing to 252 thousand during the previous year, an increase of 1,611.1%. The total shareholders` comprehensive loss during the current year is 210,395 thousand compared to 388,084 thousand during the previous year, a decrease of 45.8%.

In reference to the financial results for the year end 31-12-2018, The Mediterranean and Gulf Insurance and Reinsurance Co. announces that its accumulated losses has decrease below 35% and reach 273,529 thousand which consist of 34.19% of the paid capital amounting to 800,000 thousand. The company shall apply the procedures and instructions issued by the Capital Market Authority for the listed companies whose accumulated losses amounting to 20% or more of its capital, based on the decision of CMA board no. 4-48-2013 dated 15/01/1435 H corresponding to 18/11/2013 and amended by the Board of the Capital Market Authority number 1-77-2018 dated 5/11/1439H corresponding to 18/7/2018G.

The reasons behind the decrease in accumulated losses during the year end 2018 below 35% is mainly due to the increase in capital by issuing right issue amounting to SR 400 million during October 2018.

The company will than announce to the public without delay any change in its accumulated losses, whether in the event of decrease below 20% or above 35% of the capital according to the requirements of the procedures and instructions mentioned.

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