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 98.03% by Saudi shareholders’ and the general public subject to Zakat and 1.97% 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 transferred 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 31 March 2022 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 under the historical cost basis, except for available for sale investments held to cover unit-linked liabilities and fair value through income statement (FVIS) investments that are measured at fair value and defined benefits obligations, which are recognised at the present value of future obligation using Projected Unit Credit Method. Further, the financial statements are prepared using the accrual basis of accounting and the going concern assumption.

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 of and for the year ended 31 December 2021. 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 2021. Management will continue to assess the situation and reflect any required changes in future reporting periods.

3. Seasonality of operations

Other than normal seasonality in the Medical Insurance Business in the Kingdom of Saudi Arabia, there are no seasonal changes that may affect the 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 2021. 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 2022, replacing, amending, or adding to the corresponding accounting policies set out in the 2021 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 2022, and are accordingly adopted by the Company:

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 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. Interest is also accreted on the CSM at rates locked in at initial recognition of a contract (i.e. discount rate used at inception to determine the present value of the estimated cash flows). Moreover, the CSM will be released into profit or loss based on coverage units, reflecting the quantity of the benefits provided and the expected coverage duration of the remaining contracts in the group.

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 Company intends to apply the Standard on its effective date i.e. 01 January 2023. The IASB issued an Exposure Draft Amendments to IFRS 17 proposing certain amendments to IFRS 17 in June 2019 and received comments from various stakeholders. On 17 March 2020, the IASB completed its discussion on the amendments to IFRS 17 Insurance Contracts that were proposed for public consultation in June 2019. It decided that the effective date of the Standards will be deferred to annual reporting periods beginning on or after 01 January 2023. Earlier application is permitted if both IFRS 15 – Revenue from Contracts with Customer and IFRS 9 have also been applied.

Transition

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 in May 2021 and the First Dry Run financial statements were submitted to SAMA on 15th December 2021. 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. Following are the main areas under design phase and status of the progress made so far by the Company:

Impact Area	Summary of Impact
Governance and control framework	The Company has put in place a comprehensive IFRS 17 governance program which includes establishing an oversight steering committee for monitoring the progress of implementation and assigning roles and responsibilities to various stakeholders.
Operational area	The Company is in the progress of designing operational aspects of the design phase which includes establishing a comprehensive data policy and data dictionary. Also, the Company is finalizing architectural designs for various sub-systems. The Company has progressed through the assessment of business requirements and currently working on vendor selection while finalizing various processes needed for transition and assessment of new resources needed.
Technical and financial area	The Company has completed various policy papers encompassing various technical and financial matters after concluding on policy decisions required under the IFRS 17 standard. The policy decisions are taken after due deliberations among various stakeholders. Currently the majority of policy papers have been approved by the Company's IFRS 17 project steering committee.
Assurance plan	The Company is working along with other stakeholders to finalize the assurance plan for transitional and post-implementation periods.
Systems	The Company is considering an acquisition of IFRS 17 calculation system to accommodate the calculation of Insurance contracts and Reinsurance held contracts in-line with IFRS 17.The company has selected a system vendor to update the above through an IFRS 17 engine
Financial Impact	Work is in progress to calculate the full financial impact of IFRS 17 in comparison to IFRS 4.

The Company has started its implementation process and has set up a project team, supervised by a steering committee. Further the Company is preparing to submit second dry run financial statements and results with SAMA by 31 May 2022.

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 2023. On 17 March 2020, the International Accounting Standards Board (IASB) decided to extend the effective date of IFRS 17 and the IFRS 9 temporary exemption in IFRS 4 from 01 January 2021 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 predominantly 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 detailed assessment beginning 01 January 2021 which included below:

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 assessment

As at 31 March 2022, the Company has total financial assets and insurance-related assets amounting to SAR 2,469,962 thousand (31 December 2021: SAR 1,937,676 thousand) and SAR 112,419 thousand (31 December 2021: SAR 129,468 thousand), respectively. Currently, financial assets held at amortized cost consist of cash and cash equivalents and certain other receivables amounting to SAR 481,691 thousand (31 December 2021: SAR 784,474 thousand). Other financial assets consist of available for sale investments amounting to SAR 1,487,240 thousand (31 December 2021: SAR 1,524,882 thousand). The Company expects 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. Investment in funds classified under available for sale investments will be at FVOCI under IFRS 9. As at 31 March 2022, these securities are measured at a fair value of SAR 1,487,240 thousand (31 December 2021: SAR 1,524,882 thousand) with changes in fair value during the period of SAR 23,306 thousand (31 December 2021: SAR 216,905 thousand). Other financial assets have a fair value as at 31 March 2022 of SAR 163,060 thousand (31 December 2021: 155,875 thousand) with a fair value change during the year of SAR 1,163 The above is based on a 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. The Company is still finalizing its assessment to measure the impact of applying and implementing IFRS 9. The Company, however, does not expect IFRS 9 to have a material impact on the classification and measurement of financial assets. The management is in the process of building non-performance risk quantification for certain reinsurance held arrangements based on the IFRS 9 ECL simplified approach.

Further, SAMA has issued instructions dated 8th February 2022, where the Company was required to submit an Operational Gap Assessment by 31 March 2022, which the Company has duly submitted on 4 April 2022. Moreover, under the same instructions, SAMA has directed insurance companies to submit the results of first dry run of IFRS 9 together with IFRS 17 by 31 May 2022, which the Company is currently preparing.

4. BUSINESS COMBINATION

As disclosed in note 1, on 28 February 2021, the Company had completed a statutory merger with Solidarity during the year-ended 31 December 2021. Following the merger, the assets, liabilities, and all the business activities of Solidarity were transferred to the Company in exchange for newly issued shares of the Company.

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 Saudi Exchange on the last trading date prior to the acquisition

date of 28 February 2021. As a result, there was an increase in share capital and share premium of SAR 120,664 thousand and SAR 197,286 thousand, respectively during the year-ended 31 December 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 fair values of the acquired assets and assumed liabilities as of 28 February 2021 (“acquisition date”). During the year ended 31 December 2021, the Company completed the process of allocating the purchase consideration to the identifiable assets and liabilities in accordance with the requirements of IFRS 3. Accordingly, Goodwill amounting to SAR 232,948 thousand is recognised in the statement of financial position as a net result of purchase consideration paid amounting to SAR 317,950 thousand and fair value of net assets acquired amounting to SAR 85,002 thousand (refer below).

Identifiable assets acquired and liabilities assumed

The following table summarises the fair value of assets acquired, and liabilities assumed as at 28 February 2021.

1. 1. 1. This amount represents the statutory deposit of Solidarity Saudi Takaful Company which was acquired through a business combination. During the year ended 31 December 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 481,587 thousand (31 December 2021: SAR 466,815 thousand) with a maturity of 12 to 30 years. The average coupon rate on Sukuk is 1.83% to 5.65% per annum (31 December 2021: 1.83% to 5.65%).

The movement in the held to maturity investments for the period / year ended 31 March 2022 and 31 December 2021 is as follows:

8.2 FVIS investments

The fair value through income statement (“FVIS”) investments represent an investment in ‘AlJazira Capital’ managed by a founding shareholder, amounting to SAR 156,784 thousand (31 December 2021: SAR 150,388 thousand), investment in shares of companies listed on Tadawul, amounting to SAR 4,354 thousand (31 December 2021: SAR 3,564 thousand) and investment in Najm, amounting to SAR 1,923 thousand (31 December 2021: SAR 1,923 thousand).

Movement in FVIS investments for the period/year ended 31 March 2022 and 31 December 2021 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 Riyal (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. 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.

1. In addition to the disclosures set out in notes 5, 6, 7, 8 and 16, following are the details of major related party transactions during the three-month period ended:

2. Amount due from a related party

3. Amount due to a related party

4. Premium receivable, net shown in the condensed interim statement of financial position includes SAR 8,653 thousand (31 December 2021: SAR 9,233 thousand) from Bank AlJazira (the founding shareholder).

5. Outstanding claims shown in the statement of financial position includes SAR 29,268 thousand (2021: SAR 41,974 thousand) to Bank AlJazira (the founding shareholder).

5. CASH AND CASH EQUIVALENTS

1. Cash and cash equivalents include amount SAR 64,995 thousand (31 December 2021: SAR 39,169 thousand) held with Bank AlJazira “the founding shareholder” as at 31 March 2022.

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 55,000 thousand as at 31 March 2022 (31 December 2021: SAR 47,066 thousand). As a result of the bonus share issue on 30 November 2021, the Company deposited a further amount of SAR 7,934 thousand during the period ended 31 March 2022. The amount of statutory deposit cannot be withdrawn without SAMA’s approval. This deposit is held with Bank AlJazira “the founding shareholder”.

1. MOVEMENT IN UNEARNED PREMIUM

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

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 period ended 31 March 2022 and year ended 31 December 2021 is as follows:

1. Zakat

2. Income tax

Status of assessments

The Company has submitted its Zakat and income tax returns for the years 2014 to 2021 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.

9. UNIT RESERVES

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 a 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.