1. GENERAL

AlJazira Takaful Taawuni Company (the "Company"), is a Saudi Joint Stock Company incorporated in the Kingdom of Saudi Arabia pursuant to the Council of Ministers’ resolution No. 137 dated 27 Rabi' Al-Thani 1431H (corresponding to 12 April 2010) and Royal Decree No. M/23 dated 28 Rabi' Al-Thani 1431H corresponding to 13 April 2010. The Company obtained its Commercial Registration 4030251980 on 2 Ramadan 1434H corresponding to 10 July 2013 and Ministry of Commerce and Industry’s Resolution dated 24 Sha’baan 1434H corresponding to 03 July 2013. The Company operates only in the Kingdom of Saudi Arabia. The Company has the following branches and the assets, liabilities and results of operations of these branches and offices are included in these condensed interim financial statements:

The registered office address of the Company is:

Al Musadia Plaza (3), Al Madinah Road,

P.O. Box 5215, Jeddah 21422, Kingdom of Saudi Arabia.

The objectives of the Company are to engage in providing insurance products that include protection and saving insurance products and related services in accordance with its By-Laws and applicable regulations in the Kingdom of Saudi Arabia. On 13 Jumada al-Thani 1442H (corresponding to 26 January 2021), the Company amended its By-Laws to include the objective of practicing general insurance and health insurance business. The Company received license number TMN/34/201312 dated 15 Safar 1435H (corresponding to 18 December 2013) from the Saudi Central Bank (SAMA) to conduct insurance business. The Company is owned 98.33% by Saudi shareholders’ and the general public subject to Zakat and 1.67% by non-Saudi shareholders’ subject to income tax.

Further to receipt of regulatory approvals, shareholders of the Company and Solidarity Saudi Takaful Company (“Solidarity”) in the Extra Ordinary General Meeting held on 13 Jumada al-Thani 1442H (corresponding to 26 January 2021) approved the proposed merger of the Company and Solidarity pursuant to Articles 191-193 of the Companies Law and Article 49 (a) (1) of the Merger and Acquisitions Regulations issued by the Capital Markets Authority of the Kingdom of Saudi Arabia (the “CMA”). On 16 Rajab 1442 (corresponding to 28 February 2021), the Company announced the enforcement of the decision to merge Solidarity into the Company and transfer all the assets and liabilities of Solidarity to the Company after both the Company and Solidarity had fulfilled the merger terms according to the merger agreement concluded between the two companies as described in the shareholders ’circular and the offering document issued by the Company. Please refer to note 4 for details.

2. BASIS OF PREPARATION

1. Basis of presentation

The condensed interim financial statements of the Company as at and for the period ended 30 June 2021 have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting (“IAS 34”) as endorsed in the Kingdom of Saudi Arabia and other standards and pronouncements issued by the Saudi Organisation for Chartered and Professional Accountants (“SOCPA”) (referred to as “IFRS as endorsed in KSA”).

The condensed interim financial information 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 employee benefits which are recognized at the present value of future obligations using Projected Unit Credit Method.

The Company’s condensed statement of financial position is presented in order of liquidity. Except for property and equipment, intangible assets, right of use assets, goodwill, statutory deposit, employee benefits, lease liabilities, outstanding claims, claims incurred but not reported, premium deficiency reserve, unit reserves, mathematical reserve, and other technical reserves, 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.

The condensed interim financial statements do not include all of the information required for full annual financial statements and should be read in conjunction with the annual financial statements of the Company as at and for the year ended 31 December 2020 (“last annual Financial Statements”) except the impact of merger with Solidarity (refer note 4). The condensed interim financial statements may not be considered indicative of the expected results for the full year. These condensed interim financial statements are expressed in Saudi Arabian Riyals (SAR) and are rounded off to the nearest thousands.

2. Critical judgments, accounting estimates and assumptions

The preparation of condensed interim financial statements requires management to make judgments, estimates, and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income, and expense. Actual results may differ from these 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. In preparing these condensed interim financial statements, the significant judgments made by the management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the financial statements for the year ended 31 December 2020. However, the Company has reviewed the key sources of estimation uncertainties disclosed in the last annual financial statements against the backdrop of COVID-19 pandemic and the estimation uncertainties associated with the assets and liabilities transferred as a result of its merger with Solidarity. Management will continue to assess the situation and reflect any required changes in future reporting periods.

3. Seasonality of operations

There are no seasonal changes that may affect insurance operations of the Company.

3. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies used in the preparation of these condensed interim financial statements are consistent with those used in the preparation of the annual financial statements for the year ended 31 December 2020. Based on the adoption of amendments to existing standards and in consideration of the current economic environment, the following accounting policies are applicable effective 01 January 2020, replacing, amending or adding to the corresponding accounting policies set out in 2020 annual financial statements.

1. Amendments to existing accounting standards

The Company has adopted the following amendment and revision to existing standards and interpretations, which were issued by the International Accounting Standards Board (IASB), have been effective for the first time in 2021 and are accordingly adopted by the Company:

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16: Profit Rate Benchmark Reform

The amendments provide temporary relief that address the impact on financial reporting when an interbank offered rate (IBOR) is replaced with an alternative nearly risk-free profit rate (RFR). The amendments include the following practical expedients:

• A practical expedient to require contractual changes, or changes to cash flows that are directly required by the reform, to be treated as changes to a floating profit rate, equivalent to a movement in a market rate of profit;

• Permit changes required by IBOR reform to be made to hedge designations and hedge documentation without the hedging relationship being discontinued; and

• Provide temporary relief to entities from having to meet the separately identifiable requirement when an RFR instrument is designated as a hedge of a risk component.

The adoption of the amended standards and interpretations applicable to the Company did not have any significant impact on these condensed interim financial statements.

2. Standards issued but not yet effective

Standards issued but not yet effective up to the date of issuance of the Company’s condensed interim 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.

IFRS 17 – Insurance Contracts

Overview

This 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:

1. embedded derivatives, if they meet certain specified criteria;

2. distinct investment components; and

3. 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).

Measurement

In 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”:

2. 1. 1. the fulfilment cash flows (FCF), which comprise:

3. probability-weighted estimates of future cash flows,

4. an adjustment to reflect the time value of money (i.e. discounting) and the financial risks associated with those future cash flows,

5. and a risk adjustment for non-financial risk;

2. 1. 2. 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 fulfilment 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:

3. the liability for remaining coverage, which comprises the FCF related to future services and the CSM of the group at that date;

4. 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 general model;

1. changes in the entity’s share of the fair value of underlying items,

2. 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 date

The 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 January 1, 2023. Earlier application is permitted if both IFRS 15 – Revenue from Contracts with Customers and IFRS 9 – Financial Instruments have also been applied. The Company intends to apply the standard on its effective date.

Transition

A retrospective 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 Disclosures

The 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.

Impact

The Company has completed the design of IFRS 17 requirements. As of the date of the publication of these condensed interim 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 Impact
Financial Impact	Company is still assessing full financial impact
Data Impact / IT Systems	Conceptual design of New chart of accounts has been developed for PAA/ GMM / VFA Actuarial and accounting data requirements have been developed at more granular level Discount rates will need to be stored for group of contracts and tracked for interest accretion calculation under GMM / VFA Embedded risk adjustment calculation in the actuarial system. Confidence interval numbers to be sourced for risk adjustment. Conceptual design for identification of key inputs for onerous contracts test as well as defining ‘facts and circumstance’ for PAA contracts has been developed Conceptual design for calculation and tracking of contractual service margin
Process Impact	Conceptual design for Finance, actuarial, underwriting and IT processes has been built suitable for IFRS 17 together with new set of governance framework. New controls dealing with IFRS 17 will be developed during the implementation phase New reconciliation processes to be put in place between accounting, actuarial and underwriting data sources Conceptual design for new accounting policies each suitable for measurement model and technical decisions have been identified for each area Monitor terms and conditions attaching to insurance contracts Conceptual design for new expense allocation process, acquisition costs, claims settlement costs and underwriting costs has been put in place to identify profitability at a contract level. System to track coverage period for future products need to be put in place
Impact on Policies & Control Frameworks	New Steering committee for IFRS 17 has been established Project plan for design and implementation has been set up at activities level

The Company has started with their implementation process and have set up an implementation committee. The Company submitted IFRS 17 Phase 3 Implementation plan report to SAMA in May 2021 to comply with the regulatory requirement for the design phase. SAMA has issued instructions to the Company for Phase 4 in July 2021 where the results of first dry run needs to be submitted by 30 November 2021.

IFRS 9 - Financial Instruments

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 measurement

IFRS 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:

1. the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows and;

2. 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:

1. the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows and for sale and;

2. 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 profit or loss.

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 profit or loss.

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 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 01 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. The amendments introduce two alternative options:

1. 1. 1. 1. apply a temporary exemption from implementing IFRS 9 until the earlier of

1. the effective date of a new insurance contract standard; or

2. annual reporting periods beginning on or after 01 January 2021. The IASB is proposing to extend the effective date of IFRS 17 and the IFRS 9 temporary exemption in IFRS 4 to 01 January 2023. 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; or;

1. 1. 1. 2. 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 preliminary assessment beginning 01 January 2020:

(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 condensed interim financial statements.

Impact assessment

The Company is currently assessing the impact of the application and implementation of IFRS 9. As of the date of the publication of these condensed interim financial statements, the financial impact of adopting the standard has yet to be fully assessed by the Company. However, the Company expects the classification and measurement of financial assets to be impacted from the implementation of IFRS 9 as the company is yet to perform a detailed review.

4. BUSINESS COMBINATION

The Company signed a non-binding Memorandum of Understanding (the "MOU") with Solidarity on 23 Shawwal 1440H (corresponding to 26 June 2019) to evaluate a potential merger between the two companies. On 04 Muharram 1442H (corresponding to 23 August 2020), the Company announced entry into a binding merger agreement with Solidarity (the "Merger Agreement") in an effort to acquire all shares held by the shareholders in Solidarity through the submission of an offer to exchange shares without any cash consideration, such exchange to be effected by way of increasing the capital of the Company through the issuance of new ordinary shares to all shareholders in Solidarity (the "Merger"). The Company received approval from Saudi Central Bank (SAMA) and Capital Market Authority on the merger transaction on 15 Rabi al-Thani 1442H (corresponding to 30 November 2020) and 08 Jumada al-Awwal 1442H (corresponding to 23 December 2020), respectively.

During the period, the shareholders of the Company and Solidarity in the Extra Ordinary General Meeting held on 13 Jumada al-Thani 1442H (corresponding to 26 January 2021) approved the proposed merger of the Company and Solidarity to be effected by way of a merger pursuant to Articles 191, 192, and 193 of the Companies Law issued under Royal Decree No. M3 dated 28 Muharram 1437H (corresponding to 10 November 2015), through the issuance of 0.482656120 new shares in the Company for each share in Solidarity, subject to the terms and conditions of the Merger Agreement.

On 14 Rajab 1442 (corresponding to 26 February 2021), the objection period for creditors ended, and there were no outstanding objections from the creditors of Solidarity as on this date. Further, on 16 Rajab 1442 (corresponding to 28 February 2021), the Company announced the enforcement of the decision to merge Solidarity into the Company and transfer all the assets and liabilities of Solidarity to the Company after both the Company and Solidarity had fulfilled the merger terms according to the merger agreement concluded between the two companies as described in the shareholders ’circular and the offering document issued by the Company. On this date, the net assets and business activities of Solidarity were transferred to the Company in exchange for newly issued shares of the Company. Solidarity was de-listed from Tadawul, following the transfer; however, the commercial registration of Solidarity was not cancelled as of 30 June 2021.

The merger has been accounted for using the acquisition method under IFRS 3 – Business Combinations (the “Standard”) with the Company being the acquirer and Solidarity being the acquiree. The Company has accounted for the acquisition based on provisional fair values of the acquired assets and assumed liabilities as at 28 February 2021 (“acquisition date”). Adjustment to the provisional values and their impact on the goodwill and acquired net assets of the Company will be finalized within twelve months of the date of acquisition as allowed by the Standard.

Purchase consideration

The purchase consideration was determined to be SAR 317,950 thousand, which consisted of the issue of 12,066,403 new shares to the shareholders of Solidarity.

The fair value of the newly issued shares of the Company was determined based on the closing market price of the ordinary shares of SAR 26.35 per share on the Tadawul on the last trading date prior to the acquisition date of 28 February 2021. Issue costs which were directly attributable to the issue of the shares were not material. As a result, there was an increase in share capital and share premium of SAR 120,664 thousand and SAR 197,286 thousand, respectively.

Identifiable assets acquired and liabilities assumed

The following table summarises the provisional fair values of assets acquired and liabilities assumed as at 28 February 2021:

4.1 This amount represents the statutory deposit of Solidarity Saudi Takaful Company which was acquired through a business combination. During the period ended 30 June 2021, the amount was fully withdrawn upon receipt of SAMA approval.

8. INVESTMENTS

8.1 Held to maturity investments

Held to maturity investments represents Sukuk of SAR 368,121 thousand (31 December 2020: SAR 198,264 thousand) with a maturity of 12 to 30 years and Murabaha deposit of SAR Nil (31 December 2020: SAR 178,522 thousand) with a maturity of three years held with Bank AlJazira “the founding shareholder”. The average coupon rate on Sukuk is 1.83% to 5.65% per annum (31 December 2020: 4.01% to 4.10%), and the commission rate on Murabaha deposits is 3.00% to 3.20% per annum as at 31 December 2020.

The movement in the held to maturity investments for the period / year ended 30 June 2021 and 31 December 2020 is as follows:

8.2 FVIS investments

The fair value through income statement (“FVIS”) investments represent investments in mutual funds managed by ‘AlJazira Capital’, a founding shareholder, amounting to SAR 123,629 thousand (31 December 2020: SAR 53,479 thousand), investment in quoted equity shares amounting to SAR 3,305 thousand (31 December 2020: SAR 2,984 thousand) and investment in Najam, amounting to SAR 1,923 thousand (31 December 2020: SAR Nil).

8. INVESTMENTS (continued)

8.2 FVIS investments (continued)

The movement in FVIS investments for the period / year ended 30 June 2021 and 31 December 2020 is as follows:

7. AVAILABLE FOR SALE INVESTMENTS HELD TO COVER UNIT-LINKED LIABILITIES

Investment of Insurance operations comprises of units of mutual funds denominated in Saudi Arabian Riyals (SAR) and United States Dollars (USD) managed by AlJazira Capital “the founding shareholder”.

The movement in the available for sale investments held to cover unit-linked liabilities during the period / year is as follows:

6. PREMIUM RECEIVABLE, NET

Movement in provision for impairment loss during the period / year was as follows:

13. TRANSACTIONS WITH RELATED PARTIES

The Company in the normal course of business, enters into transactions with other entities that fall within the definition of the related party contained in the International Accounting Standard (IAS) – 24. Related parties represent major shareholders’, directors and key management personnel of the Company and entities controlled, jointly controlled, or significantly influenced by such parties. All transactions with such related parties are conducted on normal terms and conditions approved by management.

13.1. In addition to the disclosures set out in notes 5, 6, 7 and 8 following are the details of major related party transactions during the six-month period ended:

13.2. Amount due from a related party

13.3. Amount due to a related party

13.4. Premium receivable, net shown in condensed statement of financial position includes SAR 7,441 thousand (31 December 2020: SAR 2,356 thousand) from Bank AlJazira (the founding shareholder).

13.5. Due from reinsurers, net shown in statement of financial position includes SAR 2,595 thousand (31 December 2020: SAR Nil) from Solidarity Group Holding.

13.6. Outstanding claims shown in statement of financial position includes SAR 43,599 thousand (31 December 2020: SAR 41,250 thousand) to Bank AlJazira (the founding shareholder).

5. CASH AND CASH EQUIVALENTS

5.1. Cash and cash equivalents include the amount SAR 39,924 thousand (31 December 2020: SAR 105,532 thousand) held with Bank AlJazira “the founding shareholder” as at 30 June 2021.

5.2. Murabaha deposits earn a commission at an average rate of is 0.10% to 1.70% per annum (31 December 2020: 3.00% to 3.20% per annum).

16. STATUTORY DEPOSIT

As required by the Implementation Regulations, the Company is required to deposit 10% of its paid-up capital in a bank designated by SAMA which amounted to SAR 47,066 thousand as at 30 June 2021. As a result of the merger of the Company and Solidarity, the Company deposited an additional amount of SAR 12,066 thousand to meet the requirements of implementing regulations. The amount of statutory deposit cannot be withdrawn without SAMA’s approval. This deposit is held with Bank AlJazira “the founding shareholder”.

11. MOVEMENT IN UNEARNED PREMIUM

12. OUTSTANDING CLAIMS INCLUDING CLAIMS INCURRED BUT NOT REPORTED (IBNR)

12.1 Outstanding claims including claims incurred but not reported comprise estimated amount payable in respect of claims reported to the Company and those not reported at the statement of financial position, net of salvage, and other recoveries.

14. ZAKAT AND INCOME TAX

The Zakat and income tax payable by the Company has been calculated in accordance with Zakat and income tax regulations in the Kingdom of Saudi Arabia. The movement in the Zakat and income tax payable during the three-month and six-month period ended 30 June 2021 and year ended 31 December 2020 is as follows:

14.1 Zakat

14.2 Income tax

Status of assessments

The Company has submitted its Zakat and income tax returns for the years 2014 to 2020 with Zakat, Tax and Customs Authority (Formerly known as "the General Authority of Zakat and Income Tax") ("Authority" or "ZATCA") and obtained restricted certificates.

During 2019, ZATCA has issued initial assessments for the years 2014 through 2018, disallowing investments from the Zakat base and withholding tax liability with additional Zakat liability of SAR 41,166 thousand. The Company has filed an appeal against these initial assessments. The Preliminary Appeal Committee (“PAC”) issued their decision upholding ZATCA’s treatment. The Company has filed an appeal against the PAC decision with the Higher Appeal Committee (“HAC”). The management and their independent Zakat and income tax consultant strongly believe that the Company is in a strong position with respect to the aforementioned appeal.

In addition, Solidarity has also submitted its Zakat and income tax returns for the years 2014 to 2020 with ZATCA and obtained restricted certificates. During the previous years, ZATCA has issued the following initial assessments in respect of Solidarity:

• Income tax, zakat and withholding tax for the years amounting to SAR 18.5 million;

• Zakat and income tax assessment for the years from 2013 to 2016 amounting to SAR 22.1 million;

• Withholding tax assessment for 2017 and 2018 amounting to SAR 1.9 million;

• VAT assessment for the year 2018 and for November and December 2019 amounting to SAR 2.8 million;

• Zakat assessment for the year 2017 amounting to SAR 4.2 million.

Solidarity has filed an appeal against these initial assessments and is confident of a favorable outcome. The management of the Company and their independent Zakat and income tax consultant strongly believe that Solidarity is in a strong position with respect to the aforementioned appeal.

10. MATHEMATICAL, PREMIUM DEFICIENCY AND OTHER TECHNICAL RESERVES

Mathematical, premium deficiency, and other technical reserves are created, as per the report received from the Independent Actuary.

10.1Mathematical reserve

10.2Premium deficiency reserve

10.3Other technical reserves

15. EARNINGS PER SHARE

The basic and diluted earnings per share have been calculated by dividing the net income for the period by the weighted average number of ordinary shares issued and outstanding at the period / year end. Diluted earnings per share is not applicable to the Company.

18. OPERATING SEGMENT INFORMATION

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The Chief Operating Decision Maker, who is responsible for allocating resources and assessing the performance of the operating segments, has been identified as Managing Director that makes strategic decisions. For management purposes, the activities of Insurance Operations, which are all in the Kingdom of Saudi Arabia, are reported under four business units, as detailed below:

The medical segment offers comprehensive medical care to the members of organizations and their dependents on a group basis and individuals in a wide network of hospitals and medical centers throughout the Kingdom of Saudi Arabia.

The Motor Segment offers Third-Party Liability Vehicle Insurance product, which solely covers the amounts payable to third parties by the insured and a Vehicle comprehensive Insurance product, which covers all losses or damages incurred to the vehicle, including third party liability.

The general segment offers Fire and property insurance products, Marine insurance products, Engineering insurance products, Other liability insurance contracts, and others.

Life segment offers life insurance products on an individual basis, including unit-linked investment-oriented products to individuals and offers life protection programmers to the members of organizations on a group basis, and credit protection benefits in respect of personal loan given by financing organization. This segment also includes protection benefits in respect of various credit facilities other than personal loans extended by the financing organizations to its customers.

The unallocated assets and liabilities are not reported to the Chief Operating Decision Maker under related segments and are monitored on a centralized basis.

Operating segments do not include Shareholders’ operations of the Company.