| Notes forming part of accounts [line items] | | |
| Disclosure of notes and other explanatory information [text block] | OpinionWe have audited the financial statements of Salama Cooperative Insurance Company (the “Company”), which comprise the statement of financial position as at 31 December 2019, and the related statement of income, statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at 31 December 2019, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (“IFRSs”) as endorsed in the Kingdom of Saudi Arabia and other standards and pronouncements issued by Saudi Organization for Certified Public Accountants (‘SOCPA”) (collectively referred to as “IFRS as endorsed in KSA”).Basis for OpinionWe conducted our audit in accordance with International Standards on Auditing (“ISAs”) that are 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, that are 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.Key Audit MattersKey audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, a description of how our audit addressed the matter is provided in that context:Key Audit Matters How our audit addressed the key audit mattersValuation of ultimate claim liabilities arising from insurance contractsAs at 31 December 2019, outstanding claims including claims Incurred but Not Reported (IBNR) amounted to Saudi Riyals 169,539 thousands as disclosed in Note 13 to the financial statements.The estimation of ultimate insurance contract liabilities involves a significant degree of judgment. The liabilities are based on the best-estimate of ultimate cost of all claims incurred but not settled at a given date, whether reported or not, together with the related claims handling costs. In particular, estimates of IBNR and the use of actuarial statistical projections involve significant judgment. A range of methods e.g. Chain ladder method, Bornhuetter ferguson method, expected loss ratio method etc. are used by the actuary to determine these provisions. Underlying these methods are a number of explicit or implicit assumptions relating to the expected settlement amount and settlement patterns of claims.We considered this as a key audit matter since use of management assumptions and judgments could result in material overstatement / understatement of the Company’s profitability and the ultimate liability.The Company’s policies for claims and related judgments and estimates are disclosed in notes 2 and 3 to the financial statements respectively. Liabilities for outstanding claims including IBNR, claims incurred and claims development table have been disclosed in note 7 and 13 to the financial statements. Segment wise disclosure of claim related liabilities and expense have been given in note 21 to the financial statements. The Company’s approach to claim related risk management has been disclosed in note 29 to the financial statements. We understood and evaluated key controls around the claims handling and provision setting processes of the Company including completeness and accuracy of claims data used in the actuarial reserving process.We evaluated the competence, capabilities and objectivity of the management’s expert by examining their professional qualifications and experiences and assessing their relationship with the entity.In obtaining sufficient audit evidence to assess the integrity of data used as inputs into the actuarial valuations, we tested on sample basis, the completeness and accuracy of underlying claims data utilized by the Company’s actuary in estimating the IBNR by comparing it to the accounting records.In order to challenge management’s methodologies and assumptions, we were assisted by our internal actuary to understand and evaluate the Company’s actuarial practices and the provisions established. In order to gain comfort over the actuarial report issued by management’s expert, our internal actuary performed the following:- Evaluated whether the Company’s actuarial methodologies were consistent with those used in the industry and with prior periods. We sought sufficient justification for any significant differences.- Assessed key actuarial assumptions including claims ratios, and expected frequency and severity of claims. We challenged these assumptions by comparing them with our expectations based on the Company’s historical experience, current trends and our own industry knowledge. - Reviewed the appropriateness of the calculation methods and approach along with the assumptions used and sensitivities to the key assumptions.Other Information included in the Company’s 2019 Annual ReportManagement is responsible for the other information. Other information comprises the information included in the Company’s 2019 annual report but does not include financial statements and our auditors’ report thereon. The annual report is expected to be made available to us after the date of this auditors’ report. Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.In connection with our audit of the financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. When we read the other information, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.Responsibilities of Management and Those Charged with Governance for the Financial StatementsManagement is responsible for the preparation and fair presentation of the financial statements in accordance with IFRSs as endorsed in KSA, the applicable requirements of the Companies’ Law, the Company’s By-Laws and for such internal control as management determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.Those charged with governance are responsible for overseeing the Company’s financial reporting process.Auditors’ Responsibilities for the Audit of the Financial StatementsOur objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs that are endorsed in the Kingdom of Saudi Arabia will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.As part of an audit in accordance with ISA that are endorsed in the Kingdom of Saudi Arabia, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication | 1 |
| Disclosure of general information about reporting entity [abstract] | | |
| Disclosure of general information about reporting entity [text block] | Salama Cooperative Insurance Company (“the Company”) is a Saudi Joint Stock Company incorporated in the Kingdom of Saudi Arabia as per the Ministry of Commerce and Industry’s Resolution number 1121K dated 29 Rabi Al-Thani 1428H (corresponding to 16 May 2007). The Company is registered in Jeddah under Commercial Registration No. 4030169661 dated 6 Jamad Al-Awwal I428H (corresponding to 23 May 2007). The Registered Office address of the Company is:Salama Tower;Al Madinah RoadP.O. Box 4020;Jeddah 21491;Kingdom of Saudi Arabia.The objective of the Company is to transact cooperative insurance operations and related activities in the Kingdom of Saudi Arabia. The Company was listed on the Saudi Stock Exchange on 23 May 2007. The Company started its operations on 1 January 2008. The Company is fully owned by the general public and Saudi shareholders.The Company received the approval letters from the Saudi Arabian Monetary Authority (SAMA) and Ministry of Commerce and Investment regarding the amendment of the Company’s by-laws to be in accordance with the new companies’ regulations. The Company’s general assembly was held on 11 Ramadan 1438H (corresponding to 6 June 2017) and accordingly the new by-laws was approved. | |
| Disclosure of basis of preparation of financial statements [text block] | These financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) as endorsed in the Kingdom of Saudi Arabia (“KSA”), and other standards and pronouncements issued by Saudi organization for Certified Public Accountants (‘SOCPA”) (referred to as “IFRS as endorsed in KSA”). The financial statements of the Company as at and for the year ended 31 December 2019 were prepared in compliance with IFRS as endorsed in KSA.On 17 July 2019, SAMA instructed the insurance companies in the Kingdom of Saudi Arabia to account for the Zakat and income taxes in the statement of income. This aligns with the IFRS as endorsed in the Kingdom of Saudi Arabia and other standards and pronouncements issued by the Saudi Organization for Certified Public Accountants (“SOCPA”).Accordingly, the Company changed its accounting treatment for Zakat and income tax by retrospectively adjusting the impact in line with International Accounting Standard (8) Accounting Policies, Changes in Accounting Estimates and Errors (as disclosed in note 3 (b) to the financial statements).The financial statement is prepared under the going concern basis and the historical cost convention, except for the measurement of investments (excluding held-to-maturity) at their fair value and re-measurement of employee benefit obligations. The Company’s statement of financial position is presented in order of liquidity. Except for property and equipment, right of use assets, intangible assets, statutory deposit, Employee benefits, outstanding claims, claims incurred but not reported, all other assets and liabilities are of short-term nature, unless, stated otherwise.As required by the Saudi Arabian Insurance Regulations (the Implementation Regulations), the Company maintains separate books of accounts for “Insurance Operations” and “Shareholders’ Operations”. Accordingly, assets, liabilities, revenues and expenses clearly attributable to either operation, are recorded in the respective accounts.Similarly, in the past, the Company’s annual financial statements presented separately the statements of financial position, income, comprehensive income and cash flows for the insurance operations and shareholders operations. The basis of allocation of expenses from joint operations is determined and approved by the management and the Board of Directors. The statement of financial position, statements of income and statement of comprehensive income and cash flows of the insurance operations and shareholders’ operations which are presented on pages 52 to 58 of the financial statements have been provided as supplementary financial information and to comply with the requirements of the guidelines issued by SAMA implementing regulations. SAMA implementing regulations requires the clear segregation of the assets, liabilities, income and expenses of the insurance operations and the shareholders’ operations. Accordingly, the statements of financial position, statements of income, comprehensive income and cash flows prepared for the insurance operations and shareholders operations as referred to above, reflect only the assets, liabilities, income, expenses and comprehensive gains or losses of the respective operations.The inclusion of separate information of the insurance operations with the financial information of the Company in the statements of financial position, statement of income, statement of comprehensive income, statement of cash flows as well as certain relevant notes to the financial statements represents additional supplementary information required as required by the implementing regulations.During 2018, under the supervision of SAMA, the insurance companies’ management prepared and adopted the illustrative financial statements for the insurance sector in the Kingdom of Saudi Arabia. In preparing the Company level financial statements in compliance with IFRS as modified by SAMA, the balances and transactions of insurance operations are combined with those of shareholders’ operations. Inter-operation balances and transactions, if any, are eliminated in full. The accounting policies adopted for the insurance and shareholders’ operations are uniform for like transactions and events in similar circumstances. | 2 |
| Disclosure of accounting framework used in preparation of financial statements [text block] | The significant accounting policies applied in the preparation of these financial statements are summarized below. Certain comparative figures have been reclassified and regrouped to conform with the current year’s presentation as disclosed in note 3 (a) to these financial statements. These policies have been consistently applied to each of the years presented except for the change in the accounting of Zakat and income tax and new IFRS standards, IFRIC interpretations and amendments thereof, adopted by the Company as explained below:a) New IFRS, IFRIC and amendments thereof, adopted by the CompanyThe Company has adopted the following new standards, amendments and revisions to existing standards, which were issued by the International Accounting Standards Board (IASB):Standard/ Amendments Description IFRS 16 Leases (see below)IFRIC 23 Uncertainty over Income Tax TreatmentsIAS 28 Long term interests in associates and joint ventures IAS 19 Plan amendments, curtailments or settlements IFRS 3,11 and IAS 12, 23 Annual Improvements to IFRS 2015 - 2017 cycle.IFRS 16 - LeasesIFRS 16 - “Leases”, applicable for the period beginning on or after 1 January 2019. The new standard eliminates the current dual accounting model for lessees under IAS 17, which distinguishes between on-balance sheet finance leases and off-balance sheet operating leases. Instead, IFRS 16 proposes on-balance sheet accounting model. The Company has decided not to early adopt this new standard.IFRS 16 ‘Leases’ replaces IAS 17 ‘Leases’ along with three Interpretations (IFRIC 4 ‘Determining whether an Arrangement contains a Lease’, SIC 15 ‘Operating Leases-Incentives’ and SIC 27‘Evaluating the Substance of Transactions Involving the Legal Form of a Lease’). The new Standard has been applied using the modified retrospective approach, with the cumulative effect of adopting IFRS 16 being recognized in equity as an adjustment to the opening balance of retained earnings for the current period. Prior periods have not been restated.3. SIGNIFICANT ACCOUNTING POLICIES – (continued)a) New IFRS, IFRIC and amendments thereof, adopted by the Company – (continued)IFRS 16 – Leases – (continued)For contracts in place at the date of initial application, the Company has elected to apply the definition of a lease from IAS 17 and IFRIC 4 and has not applied IFRS 16 to arrangements that were previously not identified as lease under IAS 17 and IFRIC 4.The Company has elected not to include initial direct costs in the measurement of the right-of-use asset for operating leases in existence at the date of initial application of IFRS 16, being 1 January 2019. At this date, the Company has also elected to measure the right-of-use assets at an amount equal to the lease liability adjusted for any prepaid or accrued lease payments that existed at the date of transition.Instead of performing an impairment review on the right-of-use assets at the date of initial application, the Company has relied on its historic assessment as to whether leases were onerous immediately before the date of initial application of IFRS 16.On transition, for leases previously accounted for as operating leases with a remaining lease term of less than 12 months and for leases of low-value assets the Company has applied the optional exemptions to not recognize right-of-use assets but to account for the lease expense on a straight line basis over the remaining lease term.For those leases previously classified as finance leases, the right-of-use asset and lease liability are measured at the date of initial application at the same amounts as under IAS 17 immediately before the date of initial application.On transition to IFRS 16, the weighted average incremental borrowing rate applied to lease liabilities recognized under IFRS 16 was 4.4%.The Company has benefited from the use of hindsight for determining lease term when considering options to extend and terminate leases.The following is a reconciliation of total operating lease commitments at 31 December 2018 to the lease liabilities recognized at 1 January 2019: SR’000 Total operating lease commitments as at 31 December 2018 34,379Discounted using the lessee's incremental borrowing rate at date of initial application (7,338)Total lease liabilities recognised under IFRS 16 at 1 January 2019 27,041The adoption of the other relevant new and amended standards and interpretations applicable to the Company did not have any significant impact on these financial statements.b) Change in accounting for Zakat and income taxAs mentioned in note 2, the basis of preparation has been changed for the year ended 31 December 2019 as a result of the issuance of latest instructions from SAMA dated 23 July 2019. Previously, Zakat and income tax were recognized in the statement of changes in equity as per the SAMA circular no 381000074519 dated 11 April 2017. With the latest instructions issued by SAMA dated 23 July 2019, the Zakat and income tax shall be recognized in the statement of income. The Company has accounted for this change in the accounting for Zakat and income tax retrospectively. The change has resulted in reduction of reported income of the Company for the year ended 31 December 2018 by SR 6,000 thousand. The change had no impact on the statement of cash flows for the year then ended.3. SIGNIFICANT ACCOUNTING POLICIES – (continued)b) Change in accounting for Zakat and income tax – (continued)Income taxThe income tax expense or credit for the period is the tax payable on the current period’s taxable income, based on the applicable income tax rate, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.IFRIC Interpretation 23 Uncertainty over Income Tax Treatment The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of IAS 12 Income Taxes. It does not apply to taxes or levies outside the scope of IAS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatmentsThe Interpretation specifically addresses the following: Whether an entity considers uncertain tax treatments separately; The assumptions an entity makes about the examination of tax treatments by taxation authorities; How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates; and How an entity considers changes in facts and circumstances An entity has to determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments. The approach that better predicts the resolution of the uncertainty needs to be followed. The Company applies significant judgment in identifying uncertainties over income tax treatments. Upon adoption of the Interpretation, the Company considered whether it has any uncertain tax positions, particularly those relating to transfer pricing. The Company’s tax filings include deductions related to transfer pricing and the taxation authorities may challenge those tax treatments. The Company determined, based on its tax compliance and transfer pricing study that it is probable that its tax treatments will be accepted by the taxation authorities. The Interpretation did not have an impact on the financial statements of the Company.ZakatThe Company is subject to Zakat in accordance with the regulations of the General Authority of Zakat and Income Tax (“GAZT”). Zakat expense is charged to the profit or loss. Zakat is not accounted for as income tax and as such no deferred tax is calculated relating to Zakat.Impact on the statement of Income:The change in the accounting policy for Zakat and income tax has the following impact on the line items of the statements of income and changes in shareholders' equity:As at and for the year ended 31 December 2018:Account Financial statement impacted Before the restatement Effect ofrestatement As restated SR’000 SR’000 SR’000 Zakat Statement of income - (6,000) (6,000)Net income for the period attributable to shareholders Statement of income 16,343 (6,000) 10,343Earnings per share for the year Statement of income 0.65 (0.24) 0.41Zakat (retained earnings) Statement of changes in equity (6,000) 6,000 -Total comprehensive income for the yearStatement of comprehensive income and statement of changes in equity 17,422(6,000) 11,4223. SIGNIFICANT ACCOUNTING POLICIES – (continued)b) Change in accounting for Zakat and income tax – (continued)The financial impact of adoption of accounting policy for deferred tax is not material to the financial statements, therefore prior period amounts have not been restated. As required under IAS (8) Accounting Policies, Changes in Accounting Estimates and Errors, the balances as of 1 January 2018 were not presented in the statement of financial position as change in the accounting policy has not resulted in restatement of the amounts relating to year ended 31 December 2017. c) Standards issued but not yet effectiveStandards issued but not yet effective up to the date of issuance of the Company’s financial statements are listed below. The listing is of standards and interpretations issued, which the Company reasonably expects to be applicable at a future date. The Company intends to adopt these standards when they are effective.Standard/Interpretation Description Effective from periods beginning on or after the following dateAmendments to IFRS 3 Definition of business 1 January 2020Amendments to IAS 1 & IAS 8 Definition of material 1 January 2020IFRS 17 Insurance Contracts See note belowIFRS 9 Financial Instruments See note belowIFRS 17 – Insurance ContractsOverviewThis standard has been published on 18 May 2017, it establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts and supersedes IFRS 4 – Insurance contracts.The new standard applies to insurance contracts issued, to all reinsurance contracts and to investment contracts with discretionary participating features provided the entity also issues insurance contracts. It requires to separate the following components from insurance contracts:i. Embedded derivatives, if they meet certain specified criteria;ii. Distinct investment components; andiii. Any promise to transfer distinct goods or non-insurance services.These components should be accounted for separately in accordance with the related standards (IFRS 9 and IFRS 15). MeasurementIn contrast to the requirements in IFRS 4, which permitted insurers to continue to use the accounting policies for measurement purposes that existed prior to January 2015, IFRS 17 provides the following different measurement models:The General model is based on the following “building blocks”a) The fulfillment cash flows (“FCF”), which comprise: Probability-weighted estimates of future cash flows, an adjustment to reflect the time value of money (i.e. discounting) and the financial risks associated with those future cash flows, and a risk adjustment for non-financial risk;3. SIGNIFICANT ACCOUNTING POLICIES – (continued)c. Standards issued but not yet effective – (continued)IFRS 17 – Insurance Contracts – (continued)b) The Contractual Service Margin (“CSM”). The CSM represents the unearned profit for a group of insurance contracts and will be recognized as the entity provides services in the future. The CSM cannot be negative at inception; any net negative amount of the fulfillment cash flows at inception will be recorded in profit or loss immediately. At the end of each subsequent reporting period the carrying amount of a group of insurance contracts is remeasured to be the sum of: The liability for remaining coverage, which comprises the FCF related to future services and the CSM of the group at that date; and the liability for incurred claims, which is measured as the FCF related to past services allocated to the group at that date.The CSM is adjusted subsequently for changes in cash flows related to future services but the CSM cannot be negative, so changes in future cash flows that are greater than the remaining CSM are recognized in profit or loss. The effect of changes in discount rates will be reported in either profit or loss or other comprehensive income, determined by an accounting policy choice.The Variable Fee Approach (“VFA”) is a mandatory model for measuring contracts with direct participation features (also referred to as ‘direct participating contracts’). This assessment of whether the contract meets these criteria is made at inception of the contract and not reassessed subsequently. For these contracts, the CSM is also adjusted for in addition to adjustment under GMM, the CSM is also adjusted for; i. Changes in the entity’s share of the fair value of underlying items, ii. Changes in the effect of the time value of money and financial risks not relating to the underlying items.In addition, a simplified Premium Allocation Approach (“PAA”) is permitted for the measurement of the liability for the remaining coverage if it provides a measurement that is not materially different from the general model or if the coverage period for each contract in the group is one year or less. With the PAA, the liability for remaining coverage corresponds to premiums received at initial recognition less insurance acquisition cash flows. The general model remains applicable for the measurement of incurred claims. However, the entity is not required to adjust future cash flows for the time value of money and the effect of financial risk if those cash flows are expected to be paid/received in one year or less from the date the claims are incurred.Effective dateThe IASB issued an Exposure Draft Amendments to IFRS 17 during June 2019 and received comments from various stakeholders. The IASB is currently re-deliberating issues raised by stakeholders. For any proposed amendments to IFRS 17, the IASB will follow its normal due process for standard-setting. The effective date of IFRS 17 and the deferral of the IFRS 9 temporary exemption in IFRS 4, is currently 1 January 2021. Under the current exposure draft, it is proposed to amend the IFRS 17 effective date to reporting periods beginning on or after 1 January 2022. This is a deferral of 1 year compared to the previous date of 1 January 2021. Earlier application is permitted if both IFRS 15 – Revenue from Contracts with Customers and IFRS 9 – Financial Instruments have also been applied. The Company intend to apply the standard on its effective date.TransitionRetrospective application is required. However, if full retrospective application for a group of insurance contracts is impracticable, then the entity is required to choose either a modified retrospective approach or a fair value approach.Presentation and DisclosuresThe Company expects that the new standard will result in a change to the accounting policies for insurance contracts together with amendments to presentation and disclosures.3. SIGNIFICANT ACCOUNTING POLICIES – (continued)c. Standards issued but not yet effective– (continued)IFRS 17 – Insurance Contracts – (continued)ImpactThe Company is currently assessing the impact of the application and implementation of IFRS 17. As of the date of the publication of these financial statements, the financial impact of adopting the standard has yet to be fully assessed by the Company. The Company has undertaken a Gap Analysis and the key areas of Gaps are as follows: Impact Area Summary of ImpactFinancial Impact The company is currently undergoing a financial impact assessment exercise to assess the financial impact of implementing IFRS 17.Data Impact Data impact is likely to be insignificant as majority of the company’s contracts, being less than a year, would qualify for measurement under the premium allocation approach, which is more or less similar to the current approach adopted by the Company under IFRS 4.IT Systems The company is in the process of finalizing its assessment of IT system requirements and these requirements are being documented for onboarding an IT vendor for providing Actuarial and Financial solutions for managing change required under IFRS 17.Process Impact The company is currently undergoing an operational impact assessment exercise to assess the operational impact of implementing IFRS 17. Since, majority of the company’s contracts would be measured under the premium allocation approach, the process impact is expected to be moderate.Impact on RI Arrangements The reinsurance contracts held by the Company are under review and are being assessed to determine the applicable measurement model under IFRS 17.Impact on Policies & Control Frameworks The company has hired an external consultant to modify their current policies and control framework to be in line with IFRS 17 requirements.IFRS 9 - Financial Instruments (including amendments to IFRS 4, Insurance Contracts) This standard was published on 24 July 2014 and has replaced IAS 39. The new standard addresses the following items related to financial instruments: Classification and measurementIFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost, fair value through other comprehensive income or fair value through profit or loss. A financial asset is measured at amortized cost if both: i. the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows and ii. the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding (“SPPI”).The financial asset is measured at fair value through other comprehensive income and realized gains or losses would be recycled through profit or loss upon sale, if both conditions are met: i. the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows and for sale andii. the contractual terms of cash flows are SPPI, Assets not meeting either of these categories are measured at fair value through profit or loss. Additionally, at initial recognition, an entity can use the option to designate a financial asset at fair value through profit or loss if doing so eliminates or significantly reduces an accounting mismatch. For equity instruments that are not held for trading, an entity can also make an irrevocable election to present in other comprehensive income subsequent changes in the fair value of the instruments (including realized gains and losses), dividends being recognized in statement of income.Additionally, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is recognized in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in statement of income.Impairment The impairment model under IFRS 9 reflects expected credit losses, as opposed to incurred credit losses under IAS 39. Under the IFRS 9 approach, it is no longer necessary for a credit event to have occurred before credit losses are recognized. Instead, an entity always accounts for expected credit losses (“ECL”) and changes in those expected credit losses. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition.Hedge accounting IFRS 9 introduces new requirements for hedge accounting that align hedge accounting more closely with Risk Management. The requirements establish a more principles-based approach to the general hedge accounting model. The amendments apply to all hedge accounting with the exception of portfolio fair value hedges of interest rate risk (commonly referred to as “fair value macro hedges”). For these, an entity may continue to apply the hedge accounting requirements currently in IAS 39. This exception was granted largely because the IASB is addressing macro hedge accounting as a separate project.Effective date The published effective date of IFRS 9 was 1 January 2018. However, amendments to IFRS 4 – Insurance Contracts: Applying IFRS 9 – Financial Instruments with IFRS 4 – Insurance Contracts, published on 12 September 2016, changes the existing IFRS 4 to allow entities issuing insurance contracts within the scope of IFRS 4 to mitigate certain effects of applying IFRS 9 before the IASB’s new insurance contract standard (IFRS 17 – Insurance Contracts) becomes effective. 3. SIGNIFICANT ACCOUNTING POLICIES – (continued)c. Standards issued but not yet effective – (continued)IFRS 9 - Financial Instruments (including amendments to IFRS 4, Insurance Contracts) – (continued)The amendments introduce two alternative options:1. apply a temporary exemption from implementing IFRS 9 until the earlier ofa. the effective date of a new insurance contract standard; orb. annual reporting periods beginning on or after 1 January 2021. The IASB is proposing to extend the effective date of IFRS 17 and the IFRS 9 temporary exemption in IFRS 4 to 1 January 2022. Additional disclosures related to financial assets are required during the deferral period. This option is only available to entities whose activities are predominately connected with insurance and have not applied IFRS 9 previously; or2. adopt IFRS 9 but, for designated financial assets, remove from profit or loss the effects of some of the accounting mismatches that may occur before the new insurance contract standard is implemented. During the interim period, additional disclosures are required.The Company has performed a detailed assessment beginning 1 January 2017: (1) The carrying amount of the Company’s liabilities arising from contracts within the scope of IFRS 4 (including deposit components or embedded derivatives unbundled from insurance contracts) were compared to the total carrying amount of all its liabilities; and (2) the total carrying amount of the company’s liabilities connected with insurance were compared to the total carrying amount of all its liabilities. Based on these assessments the Company determined that it is eligible for the temporary exemption. Consequently, the Company has decided to defer the implementation of IFRS 9 until the effective date of the new insurance contracts standard. Disclosures related to financial assets required during the deferral period are included in the Company’s financial statements.Impact assessmentAs at 31 December 2019, the Company has total financial assets and insurance related assets amounting to SR 613,859 thousand and SR 128,647 thousand, respectively. Currently, financial assets held at amortized cost consist of cash and cash equivalents and certain other receivables amounting to SR 428,104 thousand (2018: SR 549,763 thousand). Other financial assets consist of available for sale investments amounting to SR 1,923 thousand (2018: SR 1,923 thousand). The Company expect to use the FVOCI classification of these financial assets based on the business model of the Company for debt securities and strategic nature of equity investments. However, the Company is yet to perform a detailed assessment to determine whether the debt securities meet the SPPI test as required by IFRS 9. Other financial assets have a fair value of SR 183,832 thousand as at 31 December 2019 with a fair value change during the year of SR 9,027 thousand. Credit risk exposure, concentration of credit risk and credit quality of these financial assets are mentioned in note 29. The Company financial assets have low credit risk as at 31 December 2019 and 2018. The above is based on high-level impact assessment of IFRS 9. This preliminary assessment is based on currently available information and may be subject to changes arising from further detailed analyses or additional reasonable and supportable information being made available to the Company in the future. Overall, the Company expects some effect of applying the impairment requirements of IFRS 9: However, the impact of the same is not expected to be significant. At present it is not possible to provide reasonable estimate of the effects of application of this new standard as the Company is yet to perform a detailed review. | 3 |
| Disclosure of statement of compliance [text block] | During 2018, under the supervision of SAMA, the insurance companies' management prepared and adopted the illustrative financial statements for the insurance sector in the Kingdom of Saudi Arabia. In preparing the Company level financial statements in compliance with IFRS as modified by SAMA, the balances and transactions of insurance operations are combined with those of shareholders' operations. Inter-operation balances and transactions, if any, are eliminated in full. The accounting policies adopted for the insurance and shareholders' operations are uniform for like transactions and events in similar circumstances. | |
| Description of initial application of standards or interpretations [text block] | The significant accounting policies applied in the preparation of these financial statements are summarized below. Certain comparative figures have been reclassified and regrouped to conform with the current year's presentation as disclosed in note 3 (a) to these financial statements. These policies have been consistently applied to each of the years presented except for the change in the accounting of Zakat and income tax and new IFRS standards, IFRIC interpretations and amendments thereof, adopted by the Company as explained below:a) New IFRS, IFRIC and amendments thereof, adopted by the CompanyThe Company has adopted the following new standards, amendments and revisions to existing standards, which were issued by the International Accounting Standards Board (IASB):Standard/ Amendments Description IFRS 16 Leases (see below)IFRIC 23 Uncertainty over Income Tax TreatmentsIAS 28 Long term interests in associates and joint ventures IAS 19 Plan amendments, curtailments or settlements IFRS 3,11 and IAS 12, 23 Annual Improvements to IFRS 2015 - 2017 cycle.IFRS 16 - LeasesIFRS 16 - “Leases”, applicable for the period beginning on or after 1 January 2019. The new standard eliminates the current dual accounting model for lessees under IAS 17, which distinguishes between on-balance sheet finance leases and off-balance sheet operating leases. Instead, IFRS 16 proposes on-balance sheet accounting model. The Company has decided not to early adopt this new standard.IFRS 16 ‘Leases’ replaces IAS 17 ‘Leases’ along with three Interpretations (IFRIC 4 ‘Determining whether an Arrangement contains a Lease’, SIC 15 ‘Operating Leases-Incentives’ and SIC 27‘Evaluating the Substance of Transactions Involving the Legal Form of a Lease’). The new Standard has been applied using the modified retrospective approach, with the cumulative effect of adopting IFRS 16 being recognized in equity as an adjustment to the opening balance of retained earnings for the current period. Prior periods have not been restated. | 3 |
| Disclosure of new standards and amendments in standards [text block] | The Company has adopted the following new standards, amendments and revisions to existing standards, which were issued by the International Accounting Standards Board (IASB):Standard/ Amendments Description IFRS 16 Leases (see below)IFRIC 23 Uncertainty over Income Tax TreatmentsIAS 28 Long term interests in associates and joint ventures IAS 19 Plan amendments, curtailments or settlements IFRS 3,11 and IAS 12, 23 Annual Improvements to IFRS 2015 - 2017 cycle.IFRS 16 - LeasesIFRS 16 - “Leases”, applicable for the period beginning on or after 1 January 2019. The new standard eliminates the current dual accounting model for lessees under IAS 17, which distinguishes between on-balance sheet finance leases and off-balance sheet operating leases. Instead, IFRS 16 proposes on-balance sheet accounting model. The Company has decided not to early adopt this new standard.IFRS 16 ‘Leases’ replaces IAS 17 ‘Leases’ along with three Interpretations (IFRIC 4 ‘Determining whether an Arrangement contains a Lease’, SIC 15 ‘Operating Leases-Incentives’ and SIC 27‘Evaluating the Substance of Transactions Involving the Legal Form of a Lease’). The new Standard has been applied using the modified retrospective approach, with the cumulative effect of adopting IFRS 16 being recognized in equity as an adjustment to the opening balance of retained earnings for the current period. Prior periods have not been restated.For contracts in place at the date of initial application, the Company has elected to apply the definition of a lease from IAS 17 and IFRIC 4 and has not applied IFRS 16 to arrangements that were previously not identified as lease under IAS 17 and IFRIC 4.The Company has elected not to include initial direct costs in the measurement of the right-of-use asset for operating leases in existence at the date of initial application of IFRS 16, being 1 January 2019. At this date, the Company has also elected to measure the right-of-use assets at an amount equal to the lease liability adjusted for any prepaid or accrued lease payments that existed at the date of transition.Instead of performing an impairment review on the right-of-use assets at the date of initial application, the Company has relied on its historic assessment as to whether leases were onerous immediately before the date of initial application of IFRS 16.On transition, for leases previously accounted for as operating leases with a remaining lease term of less than 12 months and for leases of low-value assets the Company has applied the optional exemptions to not recognize right-of-use assets but to account for the lease expense on a straight line basis over the remaining lease term.For those leases previously classified as finance leases, the right-of-use asset and lease liability are measured at the date of initial application at the same amounts as under IAS 17 immediately before the date of initial application.On transition to IFRS 16, the weighted average incremental borrowing rate applied to lease liabilities recognized under IFRS 16 was 4.4%.The Company has benefited from the use of hindsight for determining lease term when considering options to extend and terminate leases.The following is a reconciliation of total operating lease commitments at 31 December 2018 to the lease liabilities recognized at 1 January 2019: SR’000 Total operating lease commitments as at 31 December 2018 34,379Discounted using the lessee's incremental borrowing rate at date of initial application (7,338)Total lease liabilities recognised under IFRS 16 at 1 January 2019 27,041The adoption of the other relevant new and amended standards and interpretations applicable to the Company did not have any significant impact on these financial statements. | 3 |
| Disclosure of issued IFRS not yet adopted [text block] | IFRS 17 – Insurance ContractsOverviewThis standard has been published on 18 May 2017, it establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts and supersedes IFRS 4 – Insurance contracts.The new standard applies to insurance contracts issued, to all reinsurance contracts and to investment contracts with discretionary participating features provided the entity also issues insurance contracts. It requires to separate the following components from insurance contracts:i. Embedded derivatives, if they meet certain specified criteria;ii. Distinct investment components; andiii. Any promise to transfer distinct goods or non-insurance services.These components should be accounted for separately in accordance with the related standards (IFRS 9 and IFRS 15). MeasurementIn contrast to the requirements in IFRS 4, which permitted insurers to continue to use the accounting policies for measurement purposes that existed prior to January 2015, IFRS 17 provides the following different measurement models:The General model is based on the following “building blocks”a) The fulfillment cash flows (“FCF”), which comprise: Probability-weighted estimates of future cash flows, an adjustment to reflect the time value of money (i.e. discounting) and the financial risks associated with those future cash flows, and a risk adjustment for non-financial risk;b) The Contractual Service Margin (“CSM”). The CSM represents the unearned profit for a group of insurance contracts and will be recognized as the entity provides services in the future. The CSM cannot be negative at inception; any net negative amount of the fulfillment cash flows at inception will be recorded in profit or loss immediately. At the end of each subsequent reporting period the carrying amount of a group of insurance contracts is remeasured to be the sum of: The liability for remaining coverage, which comprises the FCF related to future services and the CSM of the group at that date; and the liability for incurred claims, which is measured as the FCF related to past services allocated to the group at that date.The CSM is adjusted subsequently for changes in cash flows related to future services but the CSM cannot be negative, so changes in future cash flows that are greater than the remaining CSM are recognized in profit or loss. The effect of changes in discount rates will be reported in either profit or loss or other comprehensive income, determined by an accounting policy choice.The Variable Fee Approach (“VFA”) is a mandatory model for measuring contracts with direct participation features (also referred to as ‘direct participating contracts’). This assessment of whether the contract meets these criteria is made at inception of the contract and not reassessed subsequently. For these contracts, the CSM is also adjusted for in addition to adjustment under GMM, the CSM is also adjusted for; i. Changes in the entity’s share of the fair value of underlying items, ii. Changes in the effect of the time value of money and financial risks not relating to the underlying items.In addition, a simplified Premium Allocation Approach (“PAA”) is permitted for the measurement of the liability for the remaining coverage if it provides a measurement that is not materially different from the general model or if the coverage period for each contract in the group is one year or less. With the PAA, the liability for remaining coverage corresponds to premiums received at initial recognition less insurance acquisition cash flows. The general model remains applicable for the measurement of incurred claims. However, the entity is not required to adjust future cash flows for the time value of money and the effect of financial risk if those cash flows are expected to be paid/received in one year or less from the date the claims are incurred.Effective dateThe IASB issued an Exposure Draft Amendments to IFRS 17 during June 2019 and received comments from various stakeholders. The IASB is currently re-deliberating issues raised by stakeholders. For any proposed amendments to IFRS 17, the IASB will follow its normal due process for standard-setting. The effective date of IFRS 17 and the deferral of the IFRS 9 temporary exemption in IFRS 4, is currently 1 January 2021. Under the current exposure draft, it is proposed to amend the IFRS 17 effective date to reporting periods beginning on or after 1 January 2022. This is a deferral of 1 year compared to the previous date of 1 January 2021. Earlier application is permitted if both IFRS 15 – Revenue from Contracts with Customers and IFRS 9 – Financial Instruments have also been applied. The Company intend to apply the standard on its effective date.TransitionRetrospective application is required. However, if full retrospective application for a group of insurance contracts is impracticable, then the entity is required to choose either a modified retrospective approach or a fair value approach.Presentation and DisclosuresThe Company expects that the new standard will result in a change to the accounting policies for insurance contracts together with amendments to presentation and disclosures.ImpactThe Company is currently assessing the impact of the application and implementation of IFRS 17. As of the date of the publication of these financial statements, the financial impact of adopting the standard has yet to be fully assessed by the Company. The Company has undertaken a Gap Analysis and the key areas of Gaps are as follows: Impact Area Summary of ImpactFinancial Impact The company is currently undergoing a financial impact assessment exercise to assess the financial impact of implementing IFRS 17.Data Impact Data impact is likely to be insignificant as majority of the company’s contracts, being less than a year, would qualify for measurement under the premium allocation approach, which is more or less similar to the current approach adopted by the Company under IFRS 4.IT Systems The company is in the process of finalizing its assessment of IT system requirements and these requirements are being documented for onboarding an IT vendor for providing Actuarial and Financial solutions for managing change required under IFRS 17.Process Impact The company is currently undergoing an operational impact assessment exercise to assess the operational impact of implementing IFRS 17. Since, majority of the company’s contracts would be measured under the premium allocation approach, the process impact is expected to be moderate.Impact on RI Arrangements The reinsurance contracts held by the Company are under review and are being assessed to determine the applicable measurement model under IFRS 17.Impact on Policies & Control Frameworks The company has hired an external consultant to modify their current policies and control framework to be in line with IFRS 17 requirements. | 3 |
| Disclosure of critical accounting judgements, estimates and assumptions, general [text block] | d. Critical accounting judgments, estimates and assumptionsThe preparation of the financial statements requires the use of estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting year. Although these estimates and judgments are based on management’s best knowledge of current events and actions, actual results ultimately may differ from those estimates.Estimates and judgments are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.Following are the accounting judgments and estimates that are critical in preparation of these financial statements:i) The ultimate liability arising from claims made under insurance contractsThe estimation of the ultimate liability arising from claims made under insurance contracts is the Company’s most critical accounting estimate. There are several sources of uncertainty that need to be considered in the estimate of the liability that the Company will ultimately pay for such claims. Estimates are made at the end of the reporting period both for the expected ultimate cost of claim reported and for the expected ultimate costs of claims incurred but not reported (“IBNR”). Liabilities for unpaid reported claims are estimated using the input of assessments for individual cases reported to the Company. At the end of each reporting period, prior year claims estimates are reassessed for adequacy and changes are made to the provision.The provision for claims incurred but not reported (IBNR) is an estimation of claims which are expected to be reported subsequent to the date of statement of financial position, for which the insured event has occurred prior to the date of statement of financial position. The primary technique adopted by management in estimating the cost of notified and IBNR claims, is that of using the past claims settlement trends to predict future claims settlement trends. A range of methods such as Chain Ladder Method, Bornhuetter-Ferguson Method and Expected Loss Ratio Method are used by the actuaries to determine these provisions. Actuary had also used a segmentation approach including analyzing cost per member per year for medical line of business. Underlying these methods are a number of explicit or implicit assumptions relating to the expected settlement amount and settlement patterns of claims.ii) Impairment of financial assetsThe Company determines that financial assets are impaired when there has been a significant or prolonged decline in the fair value of the financial assets below its cost. The determination of what is significant or prolonged requires judgment. A period of 12 months or longer is considered to be prolonged and a decline of 25% from original cost is considered significant as per Company policy. In making this judgment, the Company evaluates among other factors, the normal volatility in share price, the financial health of the investee, industry and sector performance, changes in technology, and operational and financing cash flows.iii) Impairment of receivablesA provision for impairment of receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments are considered indicators that the receivable is impaired.iv) Fair value of financial instrumentsFair values of available-for-sale investments are based on quoted prices for marketable securities or estimated fair values. The fair value of commission-bearing items is estimated based on discounted cash flows using commission for items with similar terms and risk characteristics.The fair values of financial instruments where no active market exists or where quoted prices are not otherwise available are determined by using valuation techniques. In these cases the fair values are estimated from observable data in respect of similar financial instruments or using models. Where market observable inputs are not available, they are estimated based on appropriate assumptions. Where valuation techniques (for example, models) are used to determine fair values, they are validated and periodically reviewed by qualified personnel independent of those that sourced them. All models are certified before they are used, and models are calibrated to ensure that outputs reflect actual data and comparative market prices. To the extent practical, models use only observable data; however, areas such as credit risk (both own credit risk and counterparty risk), volatilities and correlations require management to make estimates. v) Useful lives of property and equipmentThe Company's management determines the estimated useful lives of its property and equipment for calculating depreciation. These estimates are determined after considering the expected usage of the assets or physical wear and tear. Management reviews residual values and useful lives annually and future depreciation charges are adjusted where management believes the useful lives differ from previous estimates.vi) Going concernThe Company’s management has made an assessment of the Company’s ability to continue as a going concern and is satisfied that it has the resources to continue in business for the foreseeable future. Furthermore, management is not aware of any material uncertainties that may cast significant doubt upon the Company’s ability to continue as a going concern. Therefore, the financial statements continue to be prepared on the going concern basis. | الأحكام والتقديرات المحاسبية والافتراضات الهامة |
| Disclosure of functional and presentation currency [text block] | b. Functional and presentation currency These financial statements have been presented in Saudi Arabian Riyals (SAR), which is also the functional currency of the Company. All financial information presented in Saudi Arabian Riyal has been rounded to the nearest thousands, except where otherwise indicated. | |
| Disclosure of going concern [text block] | As required by the Saudi Arabian Insurance Regulations (the Implementation Regulations), the Company maintains separate books of accounts for “Insurance Operations” and “Shareholders’ Operations”. Accordingly, assets, liabilities, revenues and expenses clearly attributable to either operation, are recorded in the respective accounts. | |
| Disclosure of summary of significant accounting policies [abstract] | | |
| Disclosure of summary of significant accounting policies, general comment [text block] | The significant accounting policies applied in the preparation of these financial statements are summarized below. Certain comparative figures have been reclassified and regrouped to conform with the current year’s presentation as disclosed in note 3 (a) to these financial statements. These policies have been consistently applied to each of the years presented except for the change in the accounting of Zakat and income tax and new IFRS standards, IFRIC interpretations and amendments thereof, adopted by the Company as explained below | 3 |
| Description of accounting policy for cash and cash equivalents [text block] | Cash and cash equivalents Cash and cash equivalents comprise cash in hand and balances with banks including Murabaha deposits with less than three months’ maturity from the date of acquisition. | |
| Description of accounting policy for premiums/ contributions and insurance/ reinsurance or takaful/ retakaful balance receivables [text block] | Premiums receivable are stated at gross written premiums receivable from insurance contracts, less an allowance for any uncollectible amounts. Premiums and reinsurance balances receivable are recognised when due and measured on initial recognition at the fair value of the consideration received or receivable. The carrying value of receivable is reviewed for impairment and whenever events or circumstances indicate that the carrying amount may not be recoverable, the impairment loss is recorded in "Other general and administrative expenses" in the statement of income. Receivable balances are derecognised when the Company no longer controls the contractual rights that comprise the receivable balance, which is normally the case when the receivable balance is sold, or all the cash flows attributable to the balance are passed through to an independent third party. Receivables disclosed in note 5 fall under the scope of IFRS 4 "Insurance contracts". | |
| Description of accounting policy for deferred policy acquisition costs [text block] | Commissions and other costs directly related to the acquisition and renewal of insurance contracts are deferred and amortized over the terms of the insurance contracts to which they relate, similar to premiums earned. All other acquisition costs are recognized as an expense when incurred. Amortization is recorded in the "Policy acquisition costs" in the statement of income. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortization period and are treated as a change in accounting estimate. An impairment review is performed at each reporting date or more frequently when an indication of impairment arises. If the assumptions relating to future profitability of these policies are not realized, the amortization of these costs could be accelerated and this may also require additional impairment write-offs in the statement of income. Deferred policy acquisition costs are also considered in the liability adequacy test at each reporting date. | |
| Description of accounting policy for income and other taxes including deferred taxes [text block] | The Company is subject to zakat in accordance with the regulations of the General Authority of Zakat and Tax ("GAZT"). Zakat is computed on the Saudi shareholders' share of equity and net income using the basis defined under the Zakat regulations. Zakat is accrued on a quarterly basis. | |
| Description of accounting policy for intangible assets and goodwill [text block] | Separately acquired intangible assets (mention category) are shown at historical cost. They have a finite useful life and are subsequent carried at cost less accumulated amortization and impairment losses. The Company amortizes intangible assets with a limited useful life using straight-line method over the following periods:Software 4 yearsLicenses 4 years | |
| Description of accounting policy for property and equipment [text block] | Property and equipment are stated at cost less accumulated depreciation and any impairment losses. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of income during the financial period in which they are incurred.Land is not depreciated. The cost of other items of property and equipment is depreciated on the straight line method to allocate the cost over estimated useful lives, as follows: Motor vehicle 5 yearsFurniture and fixture 5 yearsComputers and office equipment 3 yearsThe assets’ residual values and useful lives are reviewed at each reporting date and adjusted if appropriate. The carrying values of these assets are reviewed for impairment when event or changes in circumstances indicate that the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amount. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are included in “Other income, net” in the statement of income. | |
| Description of accounting policy for liability adequacy test [text block] | At each statement of financial position date, liability adequacy tests are performed to ensure the adequacy of the insurance contracts liabilities net of related deferred policy acquisition costs. In performing these tests management uses current best estimates of future contractual cash flows and claims handling and administration expenses. Any deficiency in the carrying amounts is immediately charged to the statement of income by establishing a provision for losses arising from liability adequacy tests accordingly. | |
| Description of accounting policy for accounts payable and accruals [text block] | Liabilities are recognised for amounts to be paid in the future for goods or services received, whether billed by the supplier or not. | |
| Description of accounting policy for provisions [text block] | Provision for outstanding claimsJudgments by management are required in the estimation of amounts due to policyholders and third parties arising from claims made under insurance contracts. Such estimates are necessarily based on assumptions about several factors involving varying degrees of judgment and uncertainty and actual results may differ from management’s estimates resulting in future changes in estimated liabilities. The Company estimates its claims based on its experience of its insurance portfolio. Claims requiring court or arbitration decisions, if any, are estimated individuallyPremium deficiency reserveEstimation of the premium deficiency is highly sensitive to a number of assumptions as to the future events and conditions. It is based on expected loss ratio for the unexpired portion of the risks for written policies. To arrive at the estimate of the expected loss ratio, the actuary considers the claims and premiums relationship which is expected to apply on month to month basis. Based on actuary’s suggestion, the management has used different possibilities for projecting the expected trends in loss ratio. The key assumption used by the management is that past claims pattern are stable and will continue in future. | |
| Description of accounting policy for reserves [text block] | Premium deficiency reserveEstimation of the premium deficiency is highly sensitive to a number of assumptions as to the future events and conditions. It is based on expected loss ratio for the unexpired portion of the risks for written policies. To arrive at the estimate of the expected loss ratio, the actuary considers the claims and premiums relationship which is expected to apply on month to month basis. Based on actuary’s suggestion, the management has used different possibilities for projecting the expected trends in loss ratio. The key assumption used by the management is that past claims pattern are stable and will continue in future. | |
| Description of accounting policy for statutory reserve [text block] | Statutory reservesIn accordance with the Company’s by-laws, the Company shall allocate 20% of its net income from shareholders’ operations each year to the statutory reserve until it has built up a reserve equal to the share capital. The reserve is not available for distribution | |
| Description of accounting policy for employees end of service benefits [text block] | The Company operates an end of service benefit plan for its employees based on the prevailing Saudi Labor Laws. Accruals are made at the present value of expected future payments in respect of services provided by the employees up to the end of the reporting period using the projected unit credit method. Consideration is given to the expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period of high-quality corporate bonds with terms and currencies that match, as closely as possible, the estimated future cash outflows. The benefit payments obligation is discharged as and when it falls due. Re-measurements (actuarial gains/ losses) as a result of experience adjustments and changes in actuarial assumptions are recognized in statement of comprehensive income. | |
| Description of accounting policy for zakat [text block] | Zakat and income taxThe Company is subject to zakat in accordance with the regulations of the General Authority of Zakat and Tax (“GAZT”). Zakat is computed on the Saudi shareholders’ share of equity and net income using the basis defined under the Zakat regulations. Zakat is accrued on a quarterly basis. | |
| Description of accounting policy for fair value measurement [text block] | The fair values of financial assets are based on quoted prices for marketable securities or estimated fair values. The fair value of commission-bearing items is estimated based on discounted cash flow using commission for items with similar terms and risk characteristics. For financial assets where there is no active market, fair value is determined by reference to the market value of a similar financial assets or where the fair values cannot be derived from active market, they are determined using a variety of valuation techniques. The inputs of these models are taken from observable market where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. | |
| Description of accounting policy for cash dividend and non-cash distribution to equity holders [text block] | Dividend distributionDividend distribution to the Company’s shareholders is recognised as a liability in the Company’s financial statements in the period in which the dividends are approved by the Company’s shareholders. | |
| Description of accounting policy for premium/ contributions earned [text block] | Premiums and commission are recorded in the statement of income based on straight line method over the insurance policy coverage period except for long term polices (construction and engineering) and marine cargo. Unearned premiums are calculated on a straight line method over the insurance policy coverage except for: Last three months premium at a reporting date is considered as unearned in respect of marine cargo; Pre-defined calculation for Engineering class of business for risks undertaken that extend beyond a single year. In accordance with this calculation, lower premiums are earned in the first year which gradually increases towards the end of the tenure of the policy; andUnearned premiums represent the portion of premiums written relating to the unexpired period of coverage. The change in the provision for unearned premium is taken to the statement of income in the same order that revenue is recognised over the period of risk.Reinsurance assumedThe Company also assumes reinsurance risk in the normal course of business for Medical insurance contracts where applicable. Premiums and claims on assumed reinsurance are recognised as revenue or expenses in the same manner as they would be if the reinsurance were considered direct business, taking into account the product classification of the reinsured business. Reinsurance liabilities represent balances due to insurance companies. Amounts payable are estimated in a manner consistent with the related reinsurance contract. Premiums and claims are presented on a gross basis for both ceded and assumed reinsurance. Reinsurance assets or liabilities are derecognised when the contractual rights are extinguished or expire or when the contract is transferred to another party.Reinsurance contracts that do not transfer significant insurance risk are accounted for directly through the statement of financial position. These are deposit assets or financial liabilities that are recognised based on the consideration paid or received less any explicit identified premiums or fees to be retained by the reinsured. Investment income on these contracts is accounted for using the EIR method when accrued. | |
| Description of accounting policy for reinsurance premium/ retakaful contributions [text block] | Reinsurance contracts that do not transfer significant insurance risk are accounted for directly through the statement of financial position. These are deposit assets or financial liabilities that are recognised based on the consideration paid or received less any explicit identified premiums or fees to be retained by the reinsured. Investment income on these contracts is accounted for using the EIR method when accrued. | |
| Description of accounting policy for deferred excess of loss premiums/ contributions [text block] | Reinsurance is distributed between treaty, facultative, stop loss and excess of loss reinsurance contracts. Contracts entered into by the Company with reinsurers under which the Company is compensated for losses on one or more contracts issued by the Company and that meet the classification requirements for insurance contracts are classified as reinsurance contracts held. Contracts that do not meet these classification requirements are classified as financial assets. Insurance contracts entered into by the Company under which the contract holder is another insurer (inwards reinsurance) are included with insurance contracts. An asset or liability is recorded in the statement of financial position representing payments due from reinsurers, the share of losses recoverable from reinsurers and premiums due to reinsurers. Amounts receivable from reinsurance is estimated in a manner consistent with the claim liability associated with the insured parties. Reinsurance assets or liabilities are derecognised when the contractual rights are extinguished or expire or when the contract is transferred to another party. | |
