takaful pakistan limited r… · mr. ashraf ali velji mr. haseeb ahmed chief executive officer syed...

TAKAFUL PAKISTAN LIMITED

ANNUAL REPORT 2016

Takaful Pakistan Limited

Annual Report 2016

2

CONTENTS

Corporate Information 03

Vision, Mission and Ambition 05

Management Team 06

Branches 06

Director’s Report 07

Six Years Glance 11

Pattern of Shareholding 12

Shariah Audit Report 13

Review Report to the Members on Compliance with Code of Corporate Governance 16

Statement of Compliance with the Code of Corporate Governance 18

Auditor’s Report to the Members 23

Financial Statements 25


Annual Report 2016

3

CORPORATE INFORMATION

Directors Syed Abdul Razzaq (Chairman)

Syed Tariq Husain

Mr. Ahmad Shuja Kidwai

Dr. Mumtaz A. Hashmi

Mr. Aadil Saleh

Mr. Ashraf Ali Velji

Mr. Haseeb Ahmed

Chief Executive Officer Syed Tariq Husain

Chief Financial Officer and

Company Secretary

Muhammad Irfan

Shariah Advisor Mufti Sajjad Ashraf Usmani

Auditor Riaz Ahmed & Co.

Chartered Accountants

Legal Advisors K- Legal

Advocates, Consultants, Attorneys

Mohsin Tayebaly & Co.

Corporate Legal Consultants, Barristers &

Advocates High Courts & Supreme Court

Head office 6th floor, Business Centre,

Plot No 19-1-A, Block -6, P.E.C.H.S.,

Shahrah-e-Faisal, Karachi-75400, Pakistan.

UAN : (021) 111-875-111

Tel : (+92-21) 34373171-80

(10 Lines)

Fax : (+92-21) 34373195-6

E-mail : [email protected]

Website : www.takaful.com.pk


Annual Report 2016

4

Bankers Meezan Bank Limited

Bank Islami Pakistan Limited

Dubai Islamic Bank Limited

Al Baraka Bank (Pakistan) Limited

Habib Bank Limited (Islamic Banking Division)

Faysal Bank Limited (Islamic Banking Division)

Askari Bank Limited ( Islamic Banking Division)

Bank AlFalah Limited (Islamic Banking Division)

Habib Metropolitan Bank (Islamic Banking Division)

National Bank of Pakistan (Islamic Banking Division)

Bank of Khyber (Islamic Banking Division)

UBL (Islamic Banking Division)

NRSP Micro Finance Bank Limited (Islamic Banking Division)

BOARD COMMITTEES

Audit Committee

Syed Abdul Razzaq (Chairman) Dr. Mumtaz A. Hashmi Mr. Ashraf Ali Velji

Human Resource Committee Aadil Saleh (Chairman) Ahmed Shuja Kidwai Dr. Mumtaz A. Hashmi

Investment Committee Mr. Ashraf Ali Velji (Chairman) Syed Tariq Husain Syed Abdul Razzaq


Annual Report 2016

5

OUR VISION

To spread Takaful benefits beyond borders, beyond Time!

OUR MISSION

To deliver Takaful as a viable alternative to conventional insurance.

To become the ‘top-of-the-mind’ Takaful brand for our Participants in terms of competitiveness,

service standards and business ethics

To give value for money to our shareholders and make Takaful Pakistan their prized asset.

To become an ideal organization for our employees that encourages them to achieve self-actualization

and growth.

To contribute positively and proactively for the welfare of our society at large as well as for the

preservation of our environment.

OUR AMBITION

To be a role model for the contemporary insurance industry and eventually bring it in conformity with

the Shariah compliant Takaful mode of insurance.


Annual Report 2016

6

MANAGEMENT TEAM Syed Tariq Husain Chief Executive Officer

Muhammad Irfan Chief Financial Officer and Company Secretary

Moeen ud Din Branch Head – Lahore

Raza Ali Branch Head – Peshawar

Ghulam Mustafa Branch Head – Faisalabad

Jawwad Bin Yousuf Head of Motor & Accident Underwriting

Muhammad Ayaz Head of Fire / Engineering and Administration

Shaikh Azeemuddin Head of Human Resources

Ikram Ullah Khan Head of Marine Underwriting

Rana Muhammad Javed Head of Claims

Tahera Fatima Head of Retakaful

BRANCHES / OFFICES

Branch Branch Address

Karachi 6th floor, Business Centre,

Plot No 19-1-A, Block -6, P.E.C.H.S.,

Shahrah-e-Faisal, Karachi.

UAN: (021) 111-875-111

Fax: (021) 34373195-6

Lahore 130-E/1, Main Boulevard

Gulberg-III, Lahore.

UAN: (042) 111-875-111

Fax: (042) 35716790

Peshawar 6th Floor, State Life Building,

34-The Mall, Peshawar Cantt,

Peshawar.

UAN: (091) 111-875-111

Fax: (091) 5260107

Faisalabad Office # 3, 2nd floor, Wahab

Centre, Main Susan Road,

Faislabad.

UAN: (041) 111-875-111

Fax: (041) 8720063


Annual Report 2016

(Rupees in thousands)

2 0 1 6 2 0 1 5 2 0 1 4 2 0 1 3 2 0 1 2 2 0 1 1

BALANCE SHEET

Paid up capital 300,000 300,000 300,000 300,000 300,000 300,000

Accumulated Profit/(Loss) (85,630) (107,391) (136,878) (142,971) (158,799) (166,216)

Qard-e-hasna (34,835) (20,239) (11,211) - - -

Shareholders’ Equity 179,534 172,370 151,911 157,029 141,201 133,784

Participants’ Takaful Fund 500 - - 5,015 33,773 43,094

Cash and Bank Balances PTF 118,782 148,869 182,212 184,737 176,768 176,658

Cash and Bank Balances SHF 119,350 178,885 105,068 97,282 73,884 62,537

Investments PTF 63,328 47,196 10,008 4,316 4,671 9,881

Investments SHF 75,478 20,773 25,517 34,671 35,499 47,890

Total Assets PTF 310,453 334,416 355,537 304,313 302,929 304,486

Total Assets SHF 248,859 243,026 221,639 209,328 195,170 179,416

Total Liabilities PTF 309,953 334,416 355,536 304,810 270,781 257,333

Total Liabilities SHF 69,325 70,657 69,728 52,299 53,969 44,968

REVENUE

Gross Contribution Revenue 219,457 333,568 274,350 220,515 212,218 165,283

Net Contribution Revenue 239,063 262,210 169,408 160,723 151,066 148,768

Net Claims 128,690 134,056 93,986 101,788 78,292 73,584

Gross Wakala Fee 87,783 133,427 109,740 88,206 84,887 66,113

Earned Wakala Fee 115,760 131,099 93,529 89,222 77,295 72,074

Underwriting Result PTF (23,001) (27,162) (27,769) (38,910) (22,268) (6,112)

Investment Income PTF (Net) 8,889 9,970 11,549 10,009 13,001 10,516

Investment Income SHF 9,196 10,450 4,766 9,947 6,521 12,619

Surplus/(Deficit) PTF (14,096) (9,028) (16,226) (28,758) (9,322) 4,321

Profit/(loss) Before Tax 24,092 33,704 10,970 17,758 9,529 6,003

Profit/(loss) After Tax 21,198 30,426 8,632 15,527 8,448 3,907

Total Comprehensive income / (loss) 21,760 29,486 6,093 15,828 7,417 3,243

Earnings Per Share 0.71 1.01 0.29 0.52 0.15 0.13

Dividend % 0% 0% 0% 0% 0% 0%

Bonus % 0% 0% 0% 0% 0% 0%

Key Financial Data


11


Annual Report 2016

From To

1 100 -

101 500 3,500

501 5000 4,500

5001 600000 500,500

600001 2100000 2,044,500

2100001 2600000 2,550,000

2600001 3000000 5,999,500

3000001 6000000 10,198,000

6000001 9000000 8,699,500

1

2

2

1

7

1

1

1

Shares Held

Pattern of Shareholding

As at 31 December 2016

Number of

shareholders

Shareholdings

Categories of shareholders Shareholders Shares held Percentage

%

Associated Companies, Undertakings and Related Parties

House Building Finance Company Limited 8699500

Al Baraka Bank Pakistan Limited 5099000

Sitara Chemical Industries Limited 2999500

3 16,798,000 55.99

Directors

Dr. Mumtaz Ahmed Hashmi 500

Haseeb Ahmed 500

Ahmed Shuja Kidwai 500

Syed Abdul Razzaq 500

Syed Tariq Husain 500500

5 502,500 1.68

Joint Stock Company 2 3004500 10.02

Foreign Investors 3 9693500 32.31

Individuals/Others 3 1500 0.01

Total 16 30,000,000 100

Shareholder holding 5% or more voting interest

House Building Finance Company Limited 8,699,500

Al Baraka Bank Pakistan Limited 5,099,000

Al-Buhaira National Insurance Company Limited 5,099,000

Arif Habib Corporation Limited 3,000,000

Sitara Chemical Industries Limited 2,999,500

Mal-Alkhaleej Investments 2,550,000

Emirates Investment Group 2,044,500

29,491,500 12


Annual Report 2016


BALANCE SHEET

AS AT 31 DECEMBER 2016

2015

Shareholders' Participants' Aggregate Aggregate

Fund Takaful Fund

SHARE CAPITAL AND RESERVES

Authorised share capital

3.1 700,000,000 - 700,000,000 500,000,000

Issued, subscribed and paid-up share capital 3.2 300,000,000 - 300,000,000 300,000,000

Accumulated losses (85,630,516) - (85,630,516) (107,391,175)

Qarda-e-hasna to waqf (34,835,319) - (34,835,319) (20,238,961)

179,534,165 - 179,534,165 172,369,864

WAQF / PARTICIPANTS' TAKAFUL FUND (PTF)

Ceded money - 500,000 500,000 500,000

Accumulated deficit - (34,835,319) (34,835,319) (20,738,961)

Qard-e-hasna from Shareholders' Fund - 34,835,319 34,835,319 20,238,961

- 500,000 500,000 -

Underwriting provisions

Provision for outstanding claims (including IBNR) - 111,271,947 111,271,947 96,859,677

Provision for unearned contributions - 73,195,413 73,195,413 143,138,661

Contribution deficiency reserve - 2,305,153 2,305,153 4,684,834

Unearned re-takaful rebate - 3,345,497 3,345,497 3,212,086

Total underwriting provisions - 190,118,010 190,118,010 247,895,258

Creditors and accruals

Contributions received in advance - 1,073,312 1,073,312 509,893

Amounts due to takaful/re-takaful companies - 84,398,303 84,398,303 59,684,818

Taxation - provision less payment - - -

Unearned wakala fees 29,278,165 - 29,278,165 57,255,465

Wakala fees payable and other account balances - 23,612,843 23,612,843 10,137,095

Mudarib fees payable - 3,452,972 3,452,972 2,051,097

Accrued expenses 961,485 - 961,485 1,352,615

Other creditors and accruals 4 39,085,751 7,297,541 46,383,292 26,186,569

69,325,401 119,834,971 189,160,372 157,177,552

69,325,401 309,952,981 379,278,382 405,072,810

TOTAL EQUITY AND LIABILITIES 248,859,566 310,452,981 559,312,547 577,442,674

CONTINGENCIES AND COMMITMENTS 5

(Continued)

25

70,000,000 (31 December 2015: 50,000,000) ordinary

shares of Rs. 10 each

2016

Note

----------------------------------------------(Rupees)----------------------------------------------


Annual Report 2016


BALANCE SHEET

AS AT 31 DECEMBER 2016

2015


Fund Takaful Fund

Cash and bank deposits

Cash and other equivalents 98,337 433,510 531,847 191,146

Current and saving accounts 6,871,379 17,619,748 24,491,127 21,953,312

Deposits maturing within 12 months 112,380,000 100,729,000 213,109,000 305,610,000

6 119,349,716 118,782,258 238,131,974 327,754,458

Long term deposits 7 1,718,034 - 1,718,034 1,523,034

Investments 8 75,477,669 63,328,452 138,806,121 67,969,401

Current assets - others

Contributions due but unpaid 9 - 19,345,273 19,345,273 28,104,385

Amounts due from other takaful / retakaful companies 10 - 3,272,859 3,272,859 3,121,043

Salvage recoveries accrued - 750,000 750,000 250,000

Taxation - payment less provision 7,893,844 - 7,893,844 8,695,445

Accrued investment income 11 3,698,417 2,888,309 6,586,726 5,392,810

Re-takaful recoveries against outstanding claims - 26,177,730 26,177,730 19,214,059

12 23,612,843 - 23,612,843 10,137,095

Mudarib fees receivable 3,452,972 - 3,452,972 2,051,094

Deferred wakala fees - 29,278,165 29,278,165 57,255,465

Deferred commission expense 3,722,575 - 3,722,575 5,833,341

Prepayments 13 1,375,634 17,523,747 18,899,381 29,033,921

Sundry receivables 14 1,136,298 29,106,188 30,242,486 873,155

44,892,583 128,342,271 173,234,854 169,961,813

Fixed assets 15

Tangibles

Leasehold improvements 1,540,377 - 1,540,377 1,564,094

Furniture and fixtures 2,046,388 - 2,046,388 3,323,553

Office equipment 2,038,785 - 2,038,785 2,415,088

Computers 767,114 - 767,114 1,167,553

Motor vehicles 1,028,900 - 1,028,900 1,763,680

7,421,564 - 7,421,564 10,233,968

TOTAL ASSETS 248,859,566 310,452,981 559,312,547 577,442,674

The annexed notes from 1 to 30 form an integral part of these financial statements.

26

2016

Note

----------------------------------------------(Rupees)----------------------------------------------

Wakala fees receivable and other account balances


Annual Report 2016


PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED 31 DECEMBER 2016

Fire and

property

damage

Marine,

aviation and

transport

Motor Health Miscellaneous 2016

Aggregate

2015

Aggregate

Note

PARTICIPANTS' TAKAFUL FUND (PTF)

Net contribution revenue 8,745,295 7,848,342 174,685,935 47,428,612 354,904 239,063,088 262,209,880

Net claims (1,458,546) (316,104) (80,253,927) (46,507,532) (154,023) (128,690,132) (134,055,900)

Wakala fee (11,911,785) (9,567,585) (74,986,775) (18,971,446) (322,614) (115,760,205) (131,098,929)

Direct expenses 16 (595,447) (918,178) (29,976,207) 708,369 (55,702) (30,837,165) (35,018,344)

Retakaful rebate earned 5,788,871 4,889,691 4,572 - 160,524 10,843,658 12,485,563

Contribution deficiency reversal/(charge) - - - 2,379,681 - 2,379,681 (1,684,834)

Net underwriting results 568,388 1,936,166 (10,526,402) (14,962,316) (16,911) (23,001,075) (27,162,564)

Investment income 11,853,040 13,293,752

Less: Mudarib's share (2,963,260) (3,323,438)

Net investment income 8,889,780 9,970,314

Other income 17 37,494 8,196,986

Bank charges (22,557) (32,563)

Deficit before tax (14,096,358) (9,027,827)

Provision for taxation - -

Total deficit transferred to balance of Waqf / Participants' Takaful Fund (14,096,358) (9,027,827)

SHAREHOLDERS' FUND (SHF)

Wakala fee 115,760,205 131,098,929

Commission expense (13,181,272) (17,545,784)

Management expenses 18 (57,656,288) (56,207,945)

44,922,645 57,345,200

Mudarib's share of PTF investment income 2,963,260 3,323,438


Gain/(loss) on sale of fixed assets 15,000 (5,390)

Other income 19 1,140,793 932,570 Gain on sale of Fixed Assets -

General and administration expenses 20 (34,145,660) (38,341,971)

Profit for the year before taxation 24,092,311 33,703,958

Provision for taxation - Current 21 (2,894,005) (3,277,473)

Profit after tax 21,198,306 30,426,485

Earnings per share-basic and diluted 0.71 1.01


27

--------------------------------------------------------------(Rupees)-----------------------------------------------------------------------


Annual Report 2016


STATEMENT OF COMPREHENSIVE INCOME


2016 2015


Profit for the year 21,198,306 30,426,485

Other comprehensive income

Items that will not be reclassified to profit or loss

Actuarial gain / (loss) on defined benefit plan for the year 562,353 (939,964)

Total comprehensive income for the period 21,760,659 29,486,521


28

………. (Rupees) ………


Annual Report 2016


STATEMENT OF CHANGES IN EQUITY / FUND


Balance as at 31 December 2014 300,000,000 (136,877,696) (11,211,134) 151,911,170

Total comprehensive income for the year ended 31 December 2015

Profit after tax for the year - 30,426,485 - 30,426,485

Other compreshensive loss - (939,964) - (939,964)

Total comprehensive income - 29,486,521 - 29,486,521

Transaction with owners - Qard-e-Hasna contributed to Waqf* - - (9,027,827) (9,027,827)


Total comprehensive income for the year ended 31 December 2016

Profit after tax for the year - 21,198,306 - 21,198,306

Other compreshensive income - 562,353 - 562,353

Total comprehensive income - 21,760,659 - 21,760,659

Transaction with owners - Qard-e-Hasna contributed to Waqf* - - (14,596,358) (14,596,358)


Balance as at 31 December 2014 500,000 (11,711,134) 11,211,134 -

Deficit for the year ended 31 December 2015 - (9,027,827) - (9,027,827)

Qard-e-Hasna contributed by Shareholders' fund 9,027,827 9,027,827

Balance as at 31 December 2015 500,000 (20,738,961) 20,238,961 -

Deficit for the year ended 31 December 2016 - (14,096,358) - (14,096,358)

Qard-e-Hasna contributed by Shareholders' fund* - - 14,596,358 14,596,358

Balance as at 31 December 2016 500,000 (34,835,319) 34,835,319 500,000

* In compliance of Rule 20 of Takaful Rules, 2012


29

SHAREHOLDERS' FUND

--------------------------------------(Rupees)--------------------------------------

WAQF / PARTICIPANTS' TAKAFUL FUND

Issued,

subscribed and

paid up share

capital

Accumulated loss Qard-e-Hasna Total

--------------------------------------(Rupees)--------------------------------------

Cede moneyAccumulated

deficitQard-e-Hasna Total


Annual Report 2016


STATEMENT OF CASH FLOWS


2016 2015

OPERATING ACTIVITIES

a) Takaful activities

Contributions received 227,695,995 342,926,484

Net re-takaful payments (26,179,345) (1,245,547)

Claims paid (148,841,569) (165,879,957)

Retakaful and other recoveries 27,100,036 -

Commissions paid (11,300,924) (16,321,817)

Commissions received 10,977,069 -

Other takaful payments (88,493,453) (23,132,878)

Net cash (used in) / flows from takaful activities (9,042,191) 136,346,285

b) Other operating activities

Income tax paid (2,092,404) (2,959,887)

Payment of retirement benefits (3,500,000) (2,390,718)

General administrative and management expenses paid (25,373,695) (86,705,049)

Other operating payments / receipts (967,116) 600,712

Advances to employees and agents (250,600) (248,948)

Net cash used in other operating activities (32,183,815) (91,703,890)

Total cash (used in) / flows from all operating activities (41,226,006) 44,642,396

INVESTING ACTIVITIES

Profit / return received 21,402,559 28,806,787

Other income 1,174,844 -

Investments made (417,649,624) (58,800,000)

Proceeds from disposal of investments 349,103,511 27,630,320

Net payments / proceeds from encashment of term deposits (171,508,998) 3,400,000

Fixed capital expenditure (992,509) (646,605)

Proceeds from disposal of fixed assets 15,000 96,560

Total cash (used in) / flow from all investing activities (218,455,217) 487,062

FINANCING ACTIVITIES

Security deposits paid (195,000) -

Ijarah rentals paid (1,255,260) (1,255,260)

Total cash used in all financing activities (1,450,260) (1,255,260)

Net cash (used in) / flows from all activities (261,131,483) 43,874,198

Cash and cash equivalents at the beginning of year 286,154,457 242,280,259

Cash and cash equivalents at end of the period 25,022,974 286,154,457

(Continued)

30

31 December

-------------------- Rupees --------------------


Annual Report 2016

2016 2015

Reconciliation to profit and loss account

Operating cash flows (41,226,006) 44,642,396

Depreciation (3,804,913) (3,993,671)

Gain / (loss) on disposal of fixed assets 15,000 (5,390)

Impairment of Sukuks 3,841,278 1,000,000

Ijarah rentals (1,255,260) (1,255,260)

Income tax paid 2,092,404 2,959,887

Provision for staff retirement benefits (2,025,930) (1,877,894)


Increase in assets other than cash 3,972,106 (69,086,327)

Decrease in liabilities other than running finance 25,794,428 26,287,145

Other Income 1,178,287 -

Profit before taxation 9,995,953 21,398,659

Breakup of profit / (loss) after tax

Participant's Takaful Fund (14,096,358) (9,027,827)

Shareholders' Fund 24,092,311 30,426,486

9,995,953 21,398,659

Definition of cash and cash equivalents

Cash for the purpose of the statement of cash flows consists of:

Cash and other equivalents 531,847 191,146

Current and other accounts 24,491,127 21,953,312

Deposits maturing within 3 months - 264,010,000

25,022,974 286,154,458

31

-------------------- Rupees --------------------

Cash and cash equivalents for the purpose of Statement of Cash Flows consist of cash and stamps in hand,balances

with banks,short term deposits with maturities of three months or less from balance sheet date and highly liquid short

term investments that are convertible to known amount of cash are subject to insignificant risk of change in value



Annual Report 2016


STATEMENT OF CONTRIBUTIONS


Business underwritten inside Pakistan

Opening Closing Opening Closing

a b c d=a+b-c e f g h=e+f-g

Direct and facultative

Fire and property damage 30,637,261 12,095,010 12,952,807 29,779,464 21,408,219 7,508,489 7,882,539 21,034,169 8,745,295 8,133,020

Marine, aviation and transport 24,115,802 4,200,552 4,397,392 23,918,962 16,192,846 2,493,674 2,615,900 16,070,620 7,848,342 6,912,351

Motor 126,220,676 109,711,381 48,465,117 187,466,940 12,735,283 45,722 - 12,781,005 174,685,935 187,890,035

Health 37,703,812 16,691,374 6,966,574 47,428,612 - - - - 47,428,612 59,199,307

Miscellaneous 779,713 440,344 413,523 806,534 408,109 225,307 181,786 451,630 354,904 75,167

Sub Total 219,457,264 143,138,661 73,195,413 289,400,512 50,744,457 10,273,192 10,680,225 50,337,424 239,063,088 262,209,880

Treaty

Proportional / non proportional - - - - - - - - - -

Grand total 219,457,264 143,138,661 73,195,413 289,400,512 50,744,457 10,273,192 10,680,225 50,337,424 239,063,088 262,209,880

Note: The Company does not underwrite business outside Pakistan.


32

ClassContribution

written

Unearned contribution reserve Contribution

earned

Re-takaful

ceeded

Prepaid re-takaful contribution

ceded Re-takaful

expense

Net contribution revenue

2016 2015

----------------------------------------------------------------------------------------------------------------------- (Rupees) --------------------------------------------------------------------------------------------------------------


Annual Report 2016


STATEMENT OF CLAIMS



Opening Closing Opening Closing

a b c d=a-b+c e f g h=e-f+g i=d-h

Direct and Facultative

Fire and property damage 1 3,588,617 13,659,414 15,749,181 5,678,384 3,073,974 11,953,601 13,099,465 4,219,838 1,458,546 (407,722)

Marine, aviation and transport 1,413,672 4,331,157 6,086,823 3,169,338 798,076 1,479,215 3,534,373 2,853,234 316,104 (158,552)

Motor 99,408,539 69,672,226 77,757,064 107,493,377 23,112,000 5,796,750 9,924,200 27,239,450 80,253,927 83,237,009

Health 44,203,931 8,335,894 10,639,495 46,507,532 - - - - 46,507,532 51,779,592

Miscellaneous 226,810 860,986 1,039,384 405,208 115,986 234,493 369,692 251,185 154,023 (394,427)

Sub Total 148,841,569 96,859,677 111,271,947 163,253,839 27,100,036 19,464,059 26,927,730 34,563,707 128,690,132 134,055,900

Treaty .

Proportional / non proportional - - - - - - - - - -

Grand total 148,841,569 96,859,677 111,271,947 163,253,839 27,100,036 19,464,059 26,927,730 34,563,707 128,690,132 134,055,900



33

Re-takaful and

other recoveries

received

Re-takaful and other recoveries

in respect of outstanding claims

Re-takaful and

other

recoveries

revenue

Net claims expense

2016 2015

Class

--------------------------------------------------------------------------------------------------------------------------(Rupees)-------------------------------------------------------------------------------------------------------------------------------------------

Claims paid Outstanding claims

Claims expense


Annual Report 2016


STATEMENT OF EXPENSES - PARTICIPANTS' TAKAFUL FUND



Opening Closing

a b c d=a+b-c e f g=d+e-f


Fire and property damage 12,254,904 4,838,004 5,181,123 11,911,785 595,447 5,788,871 6,718,361 7,258,307

Marine, aviation and transport 9,646,321 1,680,221 1,758,957 9,567,585 918,178 4,889,691 5,596,072 4,271,181

Motor 50,488,270 43,884,552 19,386,047 74,986,775 29,976,207 4,572 104,958,410 116,379,568

Health 15,081,525 6,676,550 2,786,629 18,971,446 (708,369) - 18,263,077 25,441,755

Miscellaneous 311,885 176,138 165,409 322,614 55,702 160,524 217,792 280,899

Total 87,782,905 57,255,465 29,278,165 115,760,205 30,837,165 10,843,658 135,753,712 153,631,710

Treaty -

Proportional / non proportional - - - - - - - -

Grand total 87,782,905 57,255,465 29,278,165 115,760,205 30,837,165 10,843,658 135,753,712 153,631,710

* Rebate from retakaful operators is arrived at taking impact of opening and closing unearned rebate



34

-------------------------------------------------------------------------------------(Rupees)------------------------------------------------------------------------------------------------

Class Gross wakala feeDeferred wakala fee Wakala fee

expired

Other direct

expenses

Rebate from

retakaful

operators *

Net underwriting expense

2016 2015


Annual Report 2016


STATEMENT OF EXPENSES - SHAREHOLDERS' FUND



Opening Closing

a b c d = a+b-c e f = d+e


Fire and property damage 3,678,341 1,482,660 1,763,785 3,397,216 8,049,088 11,446,304 9,675,330

Marine, aviation and transport 3,116,217 587,206 562,172 3,141,251 6,335,756 9,477,007 6,763,353

Motor 3,312,679 3,093,593 1,196,862 5,209,410 33,160,970 38,370,380 45,813,043

Health 887,479 627,142 158,941 1,355,680 9,905,626 11,261,306 11,250,500

Miscellaneous 75,790 42,740 40,815 77,715 204,848 282,563 251,504

Total 11,070,506 5,833,341 3,722,575 13,181,272 57,656,288 70,837,560 73,753,730

Treaty

Proportional / non proportional - - - - - - -

Grand total 11,070,506 5,833,341 3,722,575 13,181,272 57,656,288 70,837,560 73,753,730



35

------------------------------------------------------------------------------------- (Rupees) ------------------------------------------------------------------------------------------

Class Commission paid

or payable

Deferred commission Net commission

expense

Other

management

expense

Net underwriting expense

2016 2015


Annual Report 2016


STATEMENT OF INVESTMENT INCOME


2016 2015

Income from non-trading investments

PARTICIPANTS' TAKAFUL EQUITY (PTF)

Profit on bank deposits and placement 7,125,830 10,881,214

Available for sale

Gain on sale of Islamic mutual fund units 4,448,507 2,024,090

Dividend income 278,703 388,448

4,727,210 2,412,538

Less: Mudarib's fee (2,963,260) (3,323,438)



Profit on bank deposits and placement 10,513,542 9,992,612

Available for sale

Gain on sale of Islamic mutual fund units 1,830,777 -

Dividend income 544,323 -

2,375,100 -

Held to maturity

Return on government securities - 737,486

Return on other securities 232,854 728,013

Amortization of premium on sukuk (71,945) -

Provision for impairment of sukuk (3,841,278) (1,000,000)

(3,680,369) 465,499

Less: Investment related expenses (12,000) (8,000)



36

---------------------- Rupees -----------------------


Annual Report 2016

37


NOTES TO THE FINANCIAL STATEMENTS


1 THE COMPANY AND ITS OPERATIONS

1.1 Takaful Pakistan Limited ("the Company / Takaful operator") is an unlisted public limited

company incorporated in Pakistan on 02 June 2006 under the Companies Ordinance, 1984.

The Company is established with the objective to carry out General Takaful Business as

specified under the Insurance Ordinance, 2000, Insurance Rules, 2002 and Takaful Rules,

2012. The Company commenced commercial operations from 12 March 2007. The registered

office of the Company is at 6th Floor, Business Centre, 19-1-A, Block-6, P.E.C.H.S, Shahrah-e-

Faisal, Karachi, in the province of Sindh. The Company operates with 5 (2015: 5) branches in

Pakistan.

1.2 For the purpose of carrying on the takaful business, the Company has formed a Waqf for

Participants' equity. The Waqf, namely Takaful Pakistan Waqf (hereinafter referred to as the

Participants' Takaful Fund or PTF) was formed on 22 January 2007 under the Trust deed

executed by the Company with a cede money of Rs. 500,000. The cede money is required to

be invested in Shariah compliant investments and profit thereon is utilized to pay benefits to

participants or defray PTF expenses. The accounts of the Waqf are maintained by the

Company in a manner that the assets and liabilities of the Waqf remain separately identifiable.

These financial statements have been prepared such that the financial position and results of

operations of the Waqf and the Company are shown separately. Waqf deed also governs the

relationship of shareholders and participants for management of takaful operations, investment

of participants' funds (PTF) and investment of shareholders' funds (SHF) approved by the

Shariah Board established by the Company.

1.3 Securities and Exchange Commission of Pakistan (SECP) vide its SRO no. 828(1)/2015 dated

18th August 2015 increased the minimum paid up capital requirement for Non-Life

Insurance/Takaful Companies from Rs. 300 million to Rs. 500 million as per the following

schedule:

Rupees By 30 June 2016 350 million

By 31 December 2016 400 million

By 30 June 2017 450 million

By 31 December 2017 500 million

As at 31 December 2016, the Company is short by Rupees 100 million with the minimum

capital requirement. The Company in its 10th Annual General Meeting (AGM) held on 29th

April 2016 has resolved to increase the paid up capital by Rupees 50 million through issuance

of 8,710,802 ordinary shares of Rupees 10 each at a discount of Rupees 4.26/share by way of

right issue under section 86 of the Companies Ordinance, 1984, for which the approval from

the SECP has been granted through letter No. ID/OSM/Takaful/2016/7926 dated 27


Annual Report 2016

38

December2016. The Companycould not undergo the process for such right issue of shares

within the prescribed timeline. On Company’s request, SECP has granted extension of sixty

days (i.e. till 30thApril 2017) vide letter no. ID/OSM/Takaful/Pak/2017/8608 dated 24 February

2017. The Company expects to issue such capital within the extended timelines.

After such issues of right shares, the increased paid up capital of the Company would be

Rupees 350 millionwhereby the Company would still be short by Rupees 50 million with

minimum capital requirement. The Company is currently negotiating with the certain potential

investors to raise paid up capital by way other than right issue of shares to meet the gradually

increasing minimum capital requirements and intends to seek approval from shareholders in its

forthcoming AGM in this respect.Moreover the Company has a commitment of financial support

from sponsors, in case of any adverse financial implications arising from the ultimate outcome

of pending litigations disclosed in note 5 to the financial statements.

1.4 The admissible assets of the Participations’ Takaful Fund (PTF)are not in excess of its total

liabilities as at 31 December 2016 as required under Takaful Rules, 2012. The management

believes that the requirement of having PTF’s admissible assets in excess of its total liabilities

is confined to the Window Takaful Operations only and the Company being dedicated Takaful

Company is not subject to such requirement. The Company has approached SECP for

clarification in respect of this matter, the response to which is awaited.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these financial statements are

set out below. These accounting policies have been consistently applied during the year unless

otherwise stated.

2.1 BASIS OF PREPARATION

a) Statement of compliance

These financial statements have been prepared in accordance with approved accounting

standards as applicable in Pakistan. Approved accounting standards comprise of such

International Financial Reporting Standards (IFRS) issued by the International Accounting

Standards Board as are notified under the Companies Ordinance, 1984, provisions of and

directives issued under the Companies Ordinance, 1984, the Insurance Ordinance, 2000,

Securities and Exchange Commission (Insurance) Rules, 2002 {SEC (Insurance) Rules, 2002}

and Takaful Rules, 2012. In case requirements differ, the provisions or directives of the

Companies Ordinance, 1984, Insurance Ordinance, 2000, SEC (Insurance) Rules, 2002 and

Takaful Rules, 2012 shall prevail.

b) Basis of presentation

These financial statements have been prepared on the format of financial statements issued by

the SECP through SEC (Insurance) Rules, 2002 vide SRO 938 dated 12 December 2002, with


Annual Report 2016

39

appropriate modifications based on the advice of the Shariah Board of the Company. These

financial statements reflect the financial position and results of operations of both the SHF and

PTF in a manner that the assets, liabilities, income and expenses of the SHF and PTF remain

separately identifiable.

c) Accounting convention

These financial statements have been prepared under the historical cost convention except

certain investments which are stated at lower of cost and market value. Accrual basis of

accounting has been used except for cash flow information.

d) Functional and Presentation Currency

Items included in these financial statements are measured using the currency of primary

economic environment in which the Company operates. These financial statements are

presented in Pakistani Rupees, which is the Company's functional and presentation currency.

e) Critical accounting estimates and judgments

The preparation of these financial statements in conformity with approved accounting

standards requires the Operations to make judgments, estimates and assumptions that affect

the application of accounting policies and the reported amounts of assets, liabilities, income

and expenses. Estimates, assumptions and judgments are continually evaluated and are based

on historical experience and other factors, including reasonable expectations of future events.

Revisions to accounting estimates are recognized prospectively commencing from period of

revision.

In particular, information about judgments made by the management in the application of

approved accounting standards, as applicable in Pakistan, that have significant effect on the

financial statements, and estimates that have a significant risk of resulting in a material

adjustment in the subsequent years is included in following notes:

(i) classification of takaful contracts (note 2.2); (ii) provision for unearned contribution (note 2.2.1); (iii) provision for contribution due but unpaid and amount due from other takaful / re-takaful

operators (note 2.2.2); (iv) provision for outstanding claims including IBNR (note 2.2.3); (v) contribution deficiency reserve (note 2.2.4); (vi) provision for unearned wakala fee (note 2.4); (vii) classification of investments (note 2.7); (viii) taxation (note 2.9); (ix) residual values and useful lives of fixed assets (note 2.10); (x) allocation of management expenses (note 2.11); (xi) impairment (note 2.18); and (xii) segment reporting (note 2.19)


Annual Report 2016

40

f) Amendments to published approved standards that are effective in current year and are

relevant to the Company

The following amendments to published approved standards and interpretation are mandatory

for the Company's accounting periods beginning on or after 01 January 2016:

- IAS 1 – Presentation of Financial Statements - Disclosure Initiative (Amendment)

Annual Improvements 2012-2014 cycles (amendments are effective for annual periods

beginning on or after 1 January 2016). The new cycle of improvements contain amendments to

the following standards:

- IFRS 5–Non-current Assets Held for Sale and Discontinued Operations

- IFRS 7–Financial Instruments - Disclosures

- IAS 19– Employee Benefits

- IAS 34– Interim Financial Reporting

There is no financial impact of such amendments on these financial statements.

g) Amendments to published approved standards that are effective in current year and are

not relevant to the Company

There are other amendments to published standards that are mandatory for accounting periods

beginning on or after 01 January 2016 but are considered not to be relevant or do not have any

significant impact on the Company's financial statements and are therefore not detailed in

these financial statements.

h) Standards and amendments to published approved standards that are not yet effective

but relevant to the Company

Following standards and amendments to existing standards have been published and are

mandatory for the Company's accounting periods beginning on or after 01 January 2017 or

later periods:

Effective date (accounting periods

beginning on or after)

- IFRS 9 'Financial Instruments 01 January 2018

- IFRS 15 ‘Revenue from Contracts with Customers’ 01 January 2017

- IFRS 16 ‘Leases’ 01 January 2017


Annual Report 2016

41

The above amendments are not likely to have an impact on the Company’s financial

statements.

i) Standards, interpretations and amendments to published approved accounting

standards that are not effective in current year and not considered relevant to the

Company

There are other standards and amendments to published approved standards that are

mandatory for accounting periods beginning on or after 01 January 2017 but are considered

not to be relevant or do not have any significant impact on the Company's financial statements

and are therefore not detailed in these financial statements.

2.2 TAKAFUL CONTRACTS

The takaful contracts are based on the principles of Wakala. The takaful contracts so agreed

usually inspire concept of tabarru (to donate for benefit of others) and mutual sharing of losses

with the overall objective of eliminating the element of uncertainty.

Contracts under which the Participant Takaful Fund (PTF) accepts significant takaful risk from

another party (the policy holder) by agreeing to compensate the policyholder if a specified

uncertain future event (the takaful event) adversely affects the policy holder, are classified as

takaful contracts. Takaful risk is significant if a takaful event could cause the PTF to pay

significant benefits due to the happening of the takaful event compared to its non-happening.

Once a contract has been classified as a takaful contract, it remains a takaful contract for the

remainder of its lifetime even if the takaful risk reduces significantly during this period, unless

all rights and obligations are extinguished or expire.

The PTF underwrites non-life takaful contracts that can be categorized into Fire, Property and

Damage, Marine, Aviation and Transport, Motor, Health and Miscellaneous contracts.

Contracts may be concluded for a fixed term of one year, less than one year and in some

cases for more than one year. However, most of the contracts are for twelve months duration.

Takaful contracts entered into by the PTF under which the contract holder is another takaful

operator / insurer (inward retakaful / reinsurance) of a facultative nature are included within the

individual category of takaful contracts, other than those which fall under the Treaty.

Fire takaful provides coverage against damages caused by Fire, riot and strike, explosion,

earthquake, atmospheric damage, flood, electric fluctuation and other related perils.

Marine, aviation and transport takaful provides coverage against cargo risk, terminals,

damagesoccurred in between the points of origin and final destination and other related perils.

- IAS 12 (Amendments), 'Income Taxes' 01 January 2017

- IAS 7 (Amendments), ‘Statement of Cash Flows’ 01 January 2017

- IFRS 15 (Amendments), ‘Revenue from Contracts with Customers

01 January 2018


Annual Report 2016

42

Motor takaful provides comprehensive car coverage, indemnity against third party loss and

other related covers.

Health takaful provides basic hospital care and major medical care including maternity care and outpatient care. Miscellaneous takaful provides cover against burglary, loss of cash in safe and cash in transit, money, engineering losses, travel and other coverage. The terms of the takaful contracts are in accordance with the generally accepted principles and norms of insurance business suitably modified with guidance by the Shariah Board of the Takaful operator.

2.2.1 CONTRIBUTION

Contributions including administrative surcharge received / receivable (if any) under a takaful

policy are recognised as written at the time of issuance of policy. Contributions are stated gross

of commission payable to intermediaries and exclusive of taxes and duties levied on

contributions.

Contribution income under a policy is recognised over the period of takaful from the date of

inception of the policy to which it relates to its expiry as follows:

i) For direct business, evenly over the period of the policy.

ii) For proportional re-takaful business, evenly over the period of the underlying takaful policies.

Revenue from contribution is recognised after taking into account the unearned portion of

contribution which is calculated using the 1/365 method for all classes except for marine class

where marine class earned contribution is calculated using 1/120 method. The unearned

portion of contribution income is recognised as a liability.

Administrative surcharge recovered from insurer is recognised as part of contribution in the

case of co-takaful policies (Leader Follower case) on proportionate basis.

Contribution due but unpaid represents the amount due from participants on account of takaful

contracts. These are recognised at cost, which is the fair value of the consideration to be

received less provision for impairment, if any.

If there is an objective evidence that any contribution due but unpaid is impaired, the Company

reduces the carrying amount of that contribution receivable and recognizes the loss in profit

and loss account.

Provision for impairment in contribution receivables is estimated on a systematic basis after

analyzing the receivables as per their ageing.


Annual Report 2016

43

Amount due from other takaful / re-takaful companies are carried at cost less provision for

impairment, if any. Cost represents the fair value of consideration to be received in the future.

The unearned portion of contribution written net of wakala is set aside as a reserve and is

recognized as a liability. Such reserve is calculated according to the ratio of the unexpired

period of the policy and the total period, both measured to the nearest day.

2.2.2 Re-takaful

The Company cedes retakaful in the normal course of business for the purpose of limiting its

net loss potential through the diversification of its risks. Assets, liabilities, income and expense

arising from ceded retakaful contracts are presented separately from the assets, liabilities,

income and expense from the related takaful contracts because the retakaful arrangements do

not relieve the PTF from its direct obligations to its policyholders. These retakaful contracts

include both facultative and treaty arrangements contracts and are classified in same

categories of takaful contracts for the purpose of these financial statements.

Re-takaful contribution is recognised evenly as expense after taking into account the proportion

of deferred contribution expense which is calculated using 1/365 method other than marine

business in which it is calculated using 1/120 method. The deferred portion of contribution

expense is recognised as a prepayment.

Claim recoveries receivable from the re-takaful are recognised as an asset at the same time as

the claims which give rise to the right of recoveries are recognised as a liability and are

measured at the amount expected to be received, after considering impairment relating thereto.

Amount due to takaful / re-takaful companies represent the balance due to re-takaful

companies. Amounts due to / from retakaful operators are carried at cost less provision for

impairment, if any. Cost represents the fair value of the consideration to be received / paid in

the future for services rendered.

Re-takaful assets or liabilities are derecognised when the contractual rights are extinguished or

expired.

Rebate income from retakaful is spread and recognised as revenue in accordance with the

pattern of recognition of retakaful contribution to which it relates.

2.2.3 Claims

Claims expense include all claims occurring during the year, whether reported or not, related

internal and external claim handling costs that are directly related to the processing and

settlement of claims, a reduction for the value of salvage and other recoveries, and any

adjustments to claims outstanding from previous years.


Annual Report 2016

44

Outstanding claims comprise the estimated cost of claims incurred but not settled at the

reporting date, whether reported or not. Provisions for reported claims not paid as at the

balance sheet date is made on the basis of individual case estimates. In addition, a provision

based on management’s judgment and the Company’s prior experience is maintained for the

cost of settling claims incurred but not reported (IBNR) at the reporting date, by taking into

account the claims intimated in the month following the reporting date.

Any difference between the provisions at the reporting date and settlements in the following

year is included in the financial statement of that year.

2.2.4 Contribution deficiency reserve

The Company is required as per Takaful Rules, 2012 to maintain a provision in respect of

contribution deficiency for the class of business where the unearned contribution reserve is not

adequate to meet the expected future liability, after re-takaful from claims, and other

supplementary expenses expected to be incurred after the reporting date in respect of the

unexpired policies in that class of business at the reporting date. The movement in the

contribution deficiency reserve is recorded as an expense in the profit and loss account.

The Company determines adequacy of liability of contribution deficiency by carrying out

analysis of its loss ratio of expired periods. For this purpose average loss ratio of last few years

inclusive of claim settlement cost but excluding major exceptional claims are taken into

consideration to determine ultimate loss ratio to be applied on unearned contribution. The

liability of contribution deficiency in relation to Health takaful is calculated in accordance with

the advice of the actuary.

2.3 TAKAFUL SURPLUS

Takaful surplus attributable to the participants is calculated after charging all direct costs and

setting aside various reserves and charity. Allocation to participants, if applicable, is made after

deducting the claims paid to them during the year.

2.4 WAKALA AND MUDARIB FEES

The Takaful Operator manages the general takaful operations for the participant and charges

40% of gross contribution as wakala fee to meet the general and administrative expenses of

the Company.

The Takaful Operator manages the participants' investment as Mudarib and charges 25% of

the general takaful investment income as Modarib's share earned by the Participants' Takaful

Fund.

Wakala and Mudarib fee is recognised on the same basis on which related revenue is

recognised. Unexpired portion of wakala fee is disclosed as a liability of Shareholders' Fund

(SHF) and an asset of Participants' Takaful Fund (PTF).


Annual Report 2016

45

2.5 QARD-E-HASNA

When the PTF including reserves are insufficient to meet their current payments less receipts,

the deficit is funded by way of interest free loan (Qard-e-Hasna) from the Shareholders' fund.

2.6 CASH AND CASH EQUIVALENTS

For the purpose of statement of cash flows, cash and cash equivalents consist of cash and

stamps in hand, balances with banks, short term deposits with maturities of three months or

less from balance sheet date and highly liquid short term investments that are convertible to

known amount of cash and are subject to insignificant risk of change in value.

2.7 INVESTMENTS

All investments are initially recognized at cost being the fair value of the consideration given

and include any transaction costs, except for held for trading investments in which case

transaction costs are charged to profit and loss account..

All purchases and sales of investments that require delivery within the time frame established

by regulations or market convention are accounted for at the trade date. Trade date is the date

when the Company commits to purchase or sell the investment.

All investments are de-recognised when the rights to receive cash flows from the investments

have expired or have been transferred and the Company has transferred substantially all risks

and rewards of ownership

These investments are recognised and classified as follows:

Held-to-maturity

Investments with fixed maturity, where management has both the intent and ability to hold to

maturity, are classified as 'held-to-maturity'.

Investments classified as held to maturity are recognized initially at fair value being the cost,

plus attributable transaction costs.

Subsequently, these are measured at amortized cost less provision for impairment, if any. Any

contribution paid or discount availed on acquisition of 'held-to-maturity' investments is deferred

and amortized over the term of investment using the effective yield.

Profit on held to maturity investment is recognized on a time proportion basis.

These are reviewed for impairment at year end and any losses arising from impairment are

charged to the profit and loss account.


Annual Report 2016

46

Available-for-sale

Investments which are intended to be held for an undefined period of time but may be sold in

response to the need for liquidity, changes in interest rates, equity prices or exchange rates are

classified as available-for-sale.

Quoted

Subsequent to initial recognition at cost, quoted investments are stated at the lower of cost or

market value (market value on an individual investment basis being taken as lower if the fall is

other than temporary) in accordance with the requirements of the SEC (Insurance) Rules,

2002. The Company uses Mutual Funds Association of Pakistan (MUFAP) quotations at the

reporting date to determine the market value.

A fall in market value of a security is treated as “other than temporary (i.e. impaired)”, if there is

a significant or prolonged decline in fair value of security below its cost. Reversals due to

subsequent increase in the market value of these securities upto its original cost is recognised

as income in the profit and loss account.

Unquoted

Unquoted investments are stated at cost less accumulated impairment (if any), in the value of

such investments.

2.8 FAIR VALUES

The fair value of financial assets at fair value through profit or loss, held to maturity investments

and available-for-sale financial assets is determined by reference to their quoted closing bid

price at the reporting date.

2.9 TAXATION

Income tax expense comprises current and deferred tax. Income tax expense is recognised in

the profit and loss account, except to the extent that it relates to items recognised directly in

other comprehensive income or equity, in which case it is recognised in other comprehensive

income or equity respectively.

2.9.1 Current

Provision for current taxation is based on the taxable income for the year determined in

accordance with the prevailing law for taxation on income using prevailing tax rates after taking

into account available tax credits and rebates, if any. The charge for current tax includes

adjustments to charge for prior years, if any


Annual Report 2016

47

2.9.2 Deferred

Deferred tax is recognised using the balance sheet method, providing for all temporary

differences between the carrying amounts of assets and liabilities for financial reporting

purposes and the amounts used for taxation purposes. The amount of deferred tax provided is

based on the expected manner of realisation or settlement of the carrying amount of assets

and liabilities, using the rate enacted or substantively enacted at the reporting date

The Company recognises a deferred tax asset to the extent that it is probable that taxable

profits in the foreseeable future will be available against which the related tax losses and

deductible temporary differences can be utilised. Deferred tax assets are reduced to the extent

that it is no longer probable that the related tax benefit will be realised.

2.10 FIXED ASSETS

2.10.1 Tangible

Tangible fixed assets are stated at cost less accumulated depreciation and impairment in

value, if any. Depreciation is calculated on a straight line basis, whereby the depreciable

amount of an operating asset is written off over its estimated useful life, using the following

rates:

Annual ratesof depreciation

(%)

Leasehold improvements 10

Furniture and fixtures 10

Office equipments 10

Computers 33.33

Vehicles 20

Depreciation on acquisitions during the year is charged from the date on which the assets is

available for use whereas on disposals, depreciation is charged upto the date of disposal.

Normal repairs and maintenance are charged to income as and when incurred. Subsequent

costs are included in the asset's carrying amount or recognised as a separate asset, as

appropriate, only when it is possible that the future economic benefits associated with the item

will flow to the Company and the cost of the item can be measured reliably.

The assets residual values and useful lives are reviewed, at each reporting date.

An item of fixed assets is derecognised upon disposal or when no future economic benefits are

expected from its use or disposal.

Gain or loss on disposal of the assets is recognised in the profit and loss account in the period

of disposal.


Annual Report 2016

48

2.10.2 Intangible

Intangible assets comprise software licenses, and are stated at cost less accumulated

amortisation and impairment in value, if any. Amortisation is charged over the useful life of the

asset on a systematic basis to profit and loss account by applying the straight line method.

2.10.3 Capital work-in-progress

Capital work-in-progress is stated at cost less any impairment in value. It includes advances

made to suppliers in respect of tangible and intangible assets.

The assets residual values and useful lives are to be reviewed, at each reporting date.

2.11 EXPENSES

Expenses allocated to the takaful business represent only directly attributable expenses.

Expenses not directly allocable to takaful business are charged to Shareholders' Fund. All

indirect and common expenses are allocated between management expense and general and

administrative expenses in the ratio of 70% and 30% respectively.

2.12 COMMISSION

Commission incurred in obtaining and recording policies is deferred and recognised as an

asset. These costs are charged to profit and loss account based on the pattern of recognition of

contribution revenue.

2.13 REVENUE RECOGNITION

2.13.1 Participants Takaful Fund (PTF)

Contribution income under a policy is recognised over the period of takaful contract.

Administrative surcharge recovered from insurer is recognised as part of contribution in the

case of co-takaful policies (Leader Follower case) on proportionate basis.

2.13.2 Shareholders Fund (SHF)

The Takaful Operator manages the general takaful operations for the participants and charges

40% of the gross contribution written net of administrative surcharge on co-takaful inward as

wakala fee against the services. It is recognized upfront on the issue of takaful policy.

The Takaful Operator also manages the participants' investment as Modarib and charges 25%

of the investment income earned by the participants' fund as Modarib's fee. It is recognized on

the same basis on which related revenue is recognized.

PTF / SHF

( i ). Profit on Islamic investment products is recognised on accrual basis.

( ii ). Dividend income is recognised when the right to receive dividend is established.


Annual Report 2016

49

( iii ). Gain or loss on sale of investments is included in the profit and loss account in the

period of disposal.

( iv ). Income on held to maturity investments is recognised on time proportionate basis

using effective interest method.

2.14 IJARAH

Ijarah rentals are recognised as an expense on accrual basis as and when the rentals become

due.

2.15 FOREIGN CURRENCY TRANSACTIONS

Foreign currency transactions are translated into Pak Rupees (functional currency) using the

exchange rates prevailing at the date of transaction. Monetary assets and liabilities in foreign

currencies are translated into Pak Rupees using the exchange rate at the reporting date.

Foreign exchange gains and losses resulting from the settlement of such transactions and from

translation at the year end exchange rates of monetary assets and liabilities denominated in

foreign currencies are recognized in the profit and loss account

2.16 FINANCIAL INSTRUMENTS

Financial assets and financial liabilities other than those arising out of takaful contracts are

recognized at the time when the Company becomes a party to the contractual provisions of the

instrument. At the time of initial recognition, financial assets and liabilities are measured at fair

values which is the cost of consideration given or received for it. Financial assets are

derecognized when the contractual right to receive future cash flows from the asset expires or

is transferred along with the risk and reward of the asset. Financial liabilities are derecognized

when obligation specified in the contract is discharged, cancelled or expired. Any gains or

losses on derecognition of the financial assets and liabilities are recognized in the profit and

loss account of the current period.

2.17 OFF SETTING OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

Financial assets and liabilities other than those relating to takaful contracts are only off-set and

the net amount is reported in the balance sheet when the Company has a legally enforceable

right to set-off the recognized amounts and it intends either to settle on net basis, or to realise

the asset and settle the liability simultaneously.

2.18 IMPAIRMENT

The carrying amounts of assets (other than deferred tax asset) are reviewed at each balance

sheet date to determine whether there is any indication of impairment. If such indication exists,

the recoverable amount of such asset is estimated. An impairment loss is recognized wherever

the carrying amount of the asset exceeds its recoverable amount. Impairment losses are

recognized in profit and loss account. A previously recognized impairment loss is reversed only


Annual Report 2016

50

if there has been a change in the estimates used to determine the asset's recoverable amount

since the last impairment loss was recognized. If that is the case, the carrying amount of the

asset is increased to its recoverable amount. That increased amount cannot exceed the

carrying amount that would have been determined, net of depreciation, had no impairment loss

been recognized for the asset in prior years. Such reversal is recognized in profit and loss

account.

2.19 BUSINESS SEGMENT

A business segment is a group of assets and operations engaged in providing products or

services that are subject to risks and returns that are different from those of other business

segments. The Company accounts for segment reporting using the classes or sub classes of

business (Takaful Business Statutory Funds) as specified under the Insurance Ordinance,

2000 and SEC (Insurance) Rules, 2002 as the primary reporting format.

The Company has five primary business segments for reporting purposes namely fire, marine,

motor, health and miscellaneous.

The fire and engineering takaful segment provides takaful covers against damages caused by

fire, riot and strike, explosion, earthquake, atmospheric damage, flood, engineering losses,

electric fluctuation and impact.

Marine takaful segment provides coverage against cargo risk, war risk and damages occurring

in inland transit and other related perils.

Motor takaful provides comprehensive vehicle coverage and indemnity against third party loss

and other related covers.

Health takaful provides basic hospital care and major medical care including maternity care and

outpatient care.

Miscellaneous takaful provides cover against burglary, loss of cash in safe and cash in transit,

personal accident, money, travel and other coverages.

Assets and liabilities are allocated to particular segments on the basis of contribution earned.

Those assets and liabilities which cannot be allocated to a particular segment on a reasonable

basis are reported as unallocated corporate assets and liabilities.

2.20 STAFF RETIREMENT BENEFITS 2.20.1 Defined Contribution Plan

The Company maintains an approved contributory provident fund scheme for all its permanent

employees. Contributions are made by both the Company and the employees to the fund at the

rate of 10 percent per annum of basic salary. Contributions made by the Company are

recognised as an expense.


Annual Report 2016

51

2.20.2 Defined Benefit Plan

The Company operates an approved defined gratuity scheme for all its permanent employees

who attain the minimum qualification period for entitlement to gratuity. Contributions to the

scheme are made in accordance with actuarial valuation using Projected Unit Credit Actuarial

Cost Method.

2.20.3 Employees’ Compensated Absences

The Company accounts for the liability in respect of employees' compensated absences in the

period in which these are earned.

2.21 Appropriations

Appropriations of profit, if any, are recognised in the period in which these are approved.

2.22 CREDITORS, ACCRUALS AND PROVISIONS

Liabilities for creditors and other amounts payable are carried at cost which is the fair value of

the consideration to be paid for the goods and / or services received, whether or not billed to

the Company.

2.23 PROVISIONS

Provisions are recognized when the Company has a present, legal or constructive obligation as

a result of past events and, it is probable that an outflow of resources embodying economic

benefits will be required to settle the obligation and a reliable estimate of the amount can be

made. Provisions are reviewed at each reporting date and adjusted to reflect the current best

estimate.

2.24 EARNING PER SHARE

The Company presents basic and diluted earnings per share (EPS) for its shareholders. Basic

EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the

Company by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share are calculated if there is any potential dilutive effect on the

Company's reported net profits.


Annual Report 2016

3. SHARE CAPITAL

3.1 Authorized share capital

2016 2015 Note 2016 2015

70,000,000 50,000,000 Ordinary shares of Rs. 10 each 700,000,000 500,000,000

3.1.1

3.2 Issued, subscribed and paid - up share capital

2016 2015 Note 2016 2015

30,000,000 30,000,000 Ordinary shares of Rs. 10 each, fully paid in cash 300,000,000 300,000,000

3.3 Shareholders of the Company are:

Holding Holding

% %

House Building Finance Company Limited 8,700,000 29.00 8,700,000 29.00

Al-Bhuaira National Insurance Company 5,100,000 17.00 5,100,000 17.00

Al Baraka Bank (Pakistan) Limited 5,100,000 17.00 5,100,000 17.00

Sitara Chemical Industries Limited 3,000,000 10.00 3,000,000 10.00

Arif Habib Corporation Limited 3,000,000 10.00 3,000,000 10.00

Mal Al Khaleej Investment LLC 2,550,000 8.50 2,550,000 8.50

Emirates Investment Group LLC 2,045,500 6.82 2,045,500 6.82

Syed Tariq Husain 500,000 1.67 - -

Trust Securities and Brokerage Limited 4,500 0.01 504,500 1.68

30,000,000 100 30,000,000 100

4. OTHER CREDITORS AND ACCRUALS

2015

Notes Shareholders' Participants' Aggregate Aggregate

Fund Takaful Fund

Commission payable to agents 7,091,693 - 7,091,693 7,322,111

Federal excise duty - 380,279 380,279 2,254,058

Federal insurance fee - 106,610 106,610 212,952

Withholding tax - 164,521 164,521 211,233

Contribution due to other re-takaful / insurance companies - 359,665 359,665 4,588,189

Payable to staff gratuity fund 4.1 781,435 - 781,435 2,817,858

Provision for compensated absences 256,054 - 256,054 256,054

Security deposit 960,381 - 960,381 539,325

Tracker installation fee payable - 3,651,726 3,651,726 4,670,490

Other payables 1,093,973 2,634,740 3,728,713 3,314,299

Payable to PTF 28,902,215 - 28,902,215 -

39,085,751 7,297,541 46,383,292 26,186,569

52

Number of shares ---------- Rupees ----------

The authorized capital has been increased from 50 million ordinary shares of Rupees 10 each to 70 million of ordiary shares of Rupees

10 each under the authority of special resolution duly passed in the 10th Annual General Meeting of the Company held on 29th April

2016.

Number of shares ---------- Rupees ----------

--------------------------------- Rupees ------------------------------

2016 2015

Number of

shares

Number of

shares

2016


Annual Report 2016

4.1 Staff gratuity fund

2016 2015

Discount rate 9.50% 11%

Expected rate of increase in salary of employees 8.50% 10%

Expected rate of return on plan assets 9.50% 11%

Normal retirement age 60 years 60 years

4.1.1

Salary increase risk

Discount rate risk

Mortality / withdrawal risk

This is the risk that the actual mortality/withdrawal experience is different than that assumed by the Company.

Investment risk

This is the risk that the assets are underperforming and are not sufficient to meet the liabilities.

4.1.2 Number of employees under the scheme

The number of employees covered under the scheme is 59 (2015: 62).

4.1.3

2016 2015

Note Rupees Rupees

Liability recognised in the balance sheet

Present value of defined benefit obligation 4.1.5 6,795,142 8,189,605

Fair value of plan assets 4.1.6 (6,013,707) (5,371,747)

Liability recognised in the balance sheet 781,435 2,817,858

4.1.4 Movement in liability during the year

Opening balance 2,817,858 2,390,718

Charge for the year (2,036,423) 427,140

Closing balance 781,435 2,817,858

4.1.5 Reconciliation of present value of defined benefit obligation

Opening balance of defined benefit obligation 8,189,605 5,376,516

Current service cost 1,911,659 1,551,995

Interest cost 694,921 764,855

Actuarial (Gain) / loss on defined benefit obligation (314,826) 724,821

Benefits paid during the year (3,686,217) (228,582)

Closing balance of defined benefit obligation 6,795,142 8,189,605

4.1.6 Reconciliation of fair value of plan assets

Opening balance of fair value of plan assets 5,371,747 2,985,798

Expected return on plan assets 580,650 438,956

Contribution received 3,500,000 2,390,718

Benefits paid (3,686,217) (228,582)

Actuarial gain/(loss) on plan assets 247,527 (215,143)

Closing balance of fair value of plan assets 6,013,707 5,371,747

53

The fair value of the scheme's assets and liabilities for past services of the employees at the latest valuation date are as follows:

The Company operates an approved funded gratuity scheme for all permanent employees. Latest actuarial valuation was carried out

as at 31 December 2016.

Rate per annum

The scheme typically exposes the Company to actuarial risks such as: salary increase risk, discount rate risk, mortality/ withdrawal risk

and investment risk defined as follow:

The following significant assumptions were used for valuation of this scheme:

This is the risk that the salary at the time of cessation of service is higher than that assumed. This is a risk to the Company because

the benefits are based on the final salary; if the final salary is higher than what we have assumed, the benefits will also be higher.

The discount rate is based on the yield on government bonds. If the market yield of bonds varies, the discount rate would vary in the

same manner and would affect the present value of obligation and fair value of assets.


Annual Report 2016

2016 2015

Note Rupees Rupees

4.1.7 Charge for the year

Recognised through profit and loss account

Current service cost 1,911,659 1,551,995

Interest on obligation 694,921 764,855

Expected return on plan assets (580,650) (438,956)

2,025,930 1,877,894

Recognised through other comprehensive income

Actuarial (gain) / loss for the year (562,353) 939,964

Total gratuity expense for the year 1,463,577 2,817,858

4.1.8 Gratuity cost allocation

Management expenses 18.1 1,418,151 1,314,526

General and administrative expenses 20.1 607,779 563,367

2,025,930 1,877,893

4.1.9 Composition of fair value of plan assets

Fair Value Percentage Fair Value Percentage

(Rupees) (%) (Rupees) (%)

Unitised Fund 5,925,517 99.5% 5,161,391 96.1%

Cash 30,128 0.5% 210,356 3.9%

5,955,645 5,371,747

4.1.10 Sensitivity analysis

(Rupees) (Percentage)

Base 6,795,142

Discount rate Increase by 1% 5,987,095 -11.89%

Decrease by 1% 7,634,477 12.35%

Salary growth rate Increase by 1% 7,647,788 12.55%

Decrease by 1% 5,963,144 -12.24%

4.1.11

5. CONTINGENCIES AND COMMITMENTS

5.1 Contingencies

5.1.1

5.1.2

54

The estimated gratuity cost for the year ending 31 December 2017 before allowing for the impact of net actuarial loss or gain is

Rs.1,303,098 (2015:Rs. 2,229,205).

Travel Agents Association of Pakistan (TAAP) raised a demand for distribution of surplus in Amaan Travel Participation Takaful Fund

(PTF) and the profit thereon aggregating to Rs. 120,000,000. TAAP filed a case on October 10, 2012 in the Insurance Tribunal of Sindh

for recovery of Rs. 546,534,125 inclusive of compensation/ damages for premature termination of the agreement of Rs. 386,534,125

in respect of Amaan Travel and Health Takaful Package. A commission was appointed for recording evidences of the parties which is

yet to issue its report to Tribunal along-with evidence based on which the case shall be disposed off by the Tribunal. The management,

based on the advice of its legal counsel, is confident that the Company has good defence in the case and as such no loss is likely to

arise from this litigation and accordingly, no provision has been made in these financial statements.

Present value

of obligation

% change from

base

20152016

Significant actuarial assumptions for the determination of the defined obligation are discount rate, and expected rate of salary increase.

The sensitivity analysis below have been determined based on reasonably possible changes of the respective assumptions occurring

at the end of the reporting period, while holding all other assumptions constant:

There are few cases filed by policy holders against the Company before Insurance Tribunals at Lahore for the recovery of claims,

contribution amounts and liquidated damages aggregating Rupees 23,560,845 (2015: Rs 14,986,318). These claims are not

acknowledged by the Company as the management, based on the advice of its legal advisors, is confident that the Company has good

defence in these cases and as such no loss is likely to arise from these litigations and accordingly, no provision has been made in

these financial statements.


Annual Report 2016

5.1.4

5.2 Commitments

Commitments under Ijarah arrangements and the period in which these payments will become due are:

2016 2015

Rupees Rupees

Not later than one year 1,255,260 1,255,260

Later than one year but not later than five years 1,046,580 2,301,840

2,301,840 3,557,100

6. CASH AND BANK DEPOSITS 2015

Note Shareholders' Participants' Aggregate Aggregate

Fund Takaful Fund

Cash and other equivalents

- Cash in hand 98,337 - 98,337 91,891

- Policy stamps and bond papers - 433,510 433,510 99,255

98,337 433,510 531,847 191,146

Current and other accounts

- Current accounts 3,467 40,842 44,309 194,412

- PLS savings accounts 6.1 6,867,912 17,578,906 24,446,818 21,758,900

6,871,379 17,619,748 24,491,127 21,953,312

Deposits maturing within 12 months

-Term deposits 6.2 112,380,000 100,729,000 213,109,000 305,610,000

119,349,716 118,782,258 238,131,974 327,754,458

6.1

6.2

2016 2015

7. LONG TERM DEPOSITS Note Rupees Rupees

Ijarah 517,900 517,900

Rent 268,590 73,590

Others 7.1 931,544 931,544

1,718,034 1,523,034

7.1

8. INVESTMENTS 2015


Fund Takaful Fund

Held to maturity

Sukuks Certificates 8.1 44,327,458 - 44,327,458 19,963,645

Less: Provision for impairment (19,839,403) - (19,839,403) (15,998,125)

24,488,055 - 24,488,055 3,965,520

Available for sale

Quoted - Units Of Islamic Funds 8.2 50,989,614 63,328,452 114,318,066 64,003,881

75,477,669 63,328,452 138,806,121 67,969,401

55

2016

----------------------------------(Rupees)--------------------------------

These represent term deposits maintained with Islamic commercial banks under profit and loss sharing basis having maturity upto 1 year and carry

expected profit at rates ranging from 5.0% to 10.0% (2015: 5% to 10.78%) per annum. These include term deposits amounting to Rs. 30,000,000

maintained with Dubai Islamic Bank (Pakistan) Limited on which lien is marked in favour of State Bank of Pakistan in compliance of section 29 of

Insurance Ordinance, 2000 and Takaful Rules, 2012.

Note

These represent balances maintained with Islamic commercial banks under profit and loss sharing basis carrying expected profit rates ranging from

1.76% to 2.65% (2015: 2.6% to 7.3%) per annum.

Deposits against :

Assistant Commissioner (Sindh Revenue Board) [AC-SRB] issued a show cause notice to the Company alleging that the Company had

received re-insurance services liable to Sindh Sales Tax @ 16% during the period from July 2011 to June 2014 and required the

Company to show cause as to why not the tax of Rs. 31,561,209 should be levied and recovered from the Comapny. The Company vide

C.P No. 1330 of 2016 had challenged the aforesaid SCN before the Honorable Sindh High Court [SHC]. The SHC restrained the AC-SRB

from any coercive action till the next date of hearing. The management, based on the advice of its legal counsel, is confident that the

Company has good defence in the case and as such no loss is likely to arise from this litigation and accordingly, no provision has been

made in these financial statements.

This include deposits amounting to Rs. 875,000 (2015: Rs. 875,000) in respect of enlistment of hospitals and other medical institutes on panel.

2016

----------------------------------------------(Rupees)-------------------------------------


Annual Report 2016

8.1 Sukuk Certificates

NoteNumber of

certificatesMaturity date Effective yield Profit Payment Market value Face value 2016 2015

Agritech Limited - Sukuk Certificate 8.1.1 3,000 06 August 2019 6 months Semi-annually NPA* 15,000,000 - -

KIBOR + 2%

Quetta Textile Mills Limited - Sukuk Certificates 8.1.2 2,000 26 March 2020 6 months Quarterly NPA* 10,000,000 - 3,965,520

KIBOR + 1.75%

TPL Trakkar Limited - Sukuk Certificates 10 13 April 2021 12 months Quarterly 10,700,000 10,000,000 10,330,555 -

KIBOR + 3%

Pak Elektron Limited - Sukuk Certificates 14 25 November 2017 3 months Quarterly 14,280,000 14,000,000 14,157,500 -

KIBOR + 2.5%

8.1.1

8.1.2

* Non performing assets

8.2 Units of Islamic Fund - Available for sale

Sector / name of investee scheme Cost Market value Cost Market value

Participants' Takaful Fund

Meezan Cash Fund 103,654 - (103,654) - - - 5,193,043 5,313,281

NAFA - Islamic Stock Fund 1,015,874 847,551 (1,863,425) - - - 11,401,086 11,198,181

Meezan Asset Allocation Plan II - 108,990 - 108,990 5,526,454 7,193,331 - -

Al-Ameen Islamic Aggressive Income Fund - 199,426 (196,824) 2,602 264,095 265,618 - -

Meezan Islamic Income fund - 433,505 - 433,505 22,682,426 22,798,031 - -

NAFA - Aggressive Income Fund - 5,702,036 (5,702,036) - - - - -

NAFA Islamic Asset Allocation funds - 2,717,684 (2,717,684) - - - - -

Al Ameen Islamic Asset Allocation Fund - 170,004 (170,004) - - - - -

NAFA - Riba Free Savings Fund 2,996,520 7,845,447 (7,491,347) 3,350,620 34,855,477 35,024,691 30,602,197 31,313,930

4,116,048 18,024,642 (18,244,974) 3,895,717 63,328,452 65,281,671 47,196,326 47,825,392

Shareholders' Fund

ABL Islamic Financial Planning Fund 67,925 65,531 (133,455) - - - 6,800,000 6,799,694

ABL Islamic Income Fund - 1,412,391 (697,287) 715,104 7,324,093 7,384,520 - -

Meezan Islamic Income fund - 443,632 (190,404) 253,228 13,249,724 13,317,253 - -

Meezan Asset Allocation Fund - 382,827 (382,827) - - - - -

MCB Islamic Income Fund - 155,187 155,187 16,000,000 16,048,232 - -

NAFA - Riba Free Savings Fund - 2,819,598 (2,819,598) - - - - -

Al-Ameen Islamic Aggressive Income Fund - 103,158 (103,158) - - - - -

Al Ameen Islamic Asset Allocation Fund (UBL) - 87,939 (87,939) - - - - -

MCB Pakistan Islamic Stock Fund - 306,513 306,513 4,000,000 4,110,345 - -

Meezan Capital Preservation Plan II 201,601 8,044 - 209,645 10,415,797 11,792,542 10,007,555 10,269,556

269,526 5,784,820 (4,414,668) 1,639,677 50,989,614 52,652,892 16,807,555 17,069,250

8.2.1

56

Had the Company followed International Accounting Standard (IAS) 39 “Financial Instruments: Recognition and Measurement” in respect of recognition of gain / (loss) on measurement of available for sale securities directly into equity, the investments of the

Company would have been increased by Rs. 1.663 million (2015: increased by Rs. 0.89 million) and the net equity would have increased by the same amount.

--------------------------------- Rupees ------------------------------Number of Units

------------------- Rupees --------------------

This includes investment aggregated to Rs. 15 million (31 December 2015: Rs. 15 million) in sukuks issued by Agritech Limited (the investee company) against which the investee company had not made payments at the contractual dates i.e. 06 August 2010

and 06 February 2011. In 2011, a restructuring agreement was signed between the investee company and the Investment Agent of the sukuk certificates, whereby, certain terms included in the original trust deed dated 22 July 2008 were amended, including the

repayment period which was extended from 06 August 2015 to 06 August 2019. Further, in lieu of accrued overdue profit, zero coupon Term Finance Certificates (TFCs) were issued by Agritech Limited on 17 October 2011 which were to be repaid by the

investee company within three and a half years from the date of issuance of such TFCs. However, the investee company defaulted on the installment due based on the restructuring agreement as well as in making payments in respect of zero coupon term

finance certificates. Therefore, the management has neither recorded TFCs issued in lieu of profit in the books of accounts nor accrued any profit on outstanding principal amount and has fully provided for the outstanding principal, on prudence basis.

An agreement for restructuring of these sukuks was executed between the Investment Agent of these sukuks and Quetta Textile Mills Limited on 24 June 2013. According to the restructuring terms, repayment of principal of Rs. 8 million will be made to the

Company over a period of 7 years till 26 March 2020 in twenty nine quarterly installments whereas the profit shall be received by the Company at the rate of 6 monthly KIBOR and a spread of 1.75% with effect from 26 March 2013.However, the investee

company defaulted on the installment on due dates under restructuring agreement. Therefore, outstanding balance of Rupees 3,841,278 has been fully provided for on prudence basis.

2015Purchased during

the year

Redeemed

during the year

20162015 2016


Annual Report 2016

9. CONTRIBUTION DUE BUT UNPAID Note 2016 2015

Unsecured

Considered good 19,345,273 28,104,385

Considered doubtful 2,664,580 1,580,780

22,009,853 29,685,165

Provision against contribution due but unpaid 9.1 (2,664,580) (1,580,780)

19,345,273 28,104,385

9.1 Movement of provision against contribution due but unpaid:


Charge for the year 1,083,800 764,362

Bad debts written off - (7,615,010)

Closing balance 2,664,580 1,580,780

10. AMOUNTS DUE FROM OTHER TAKAFUL COMPANIES / RETAKAFUL COMPANIES

Unsecured

Considered good 3,272,859 3,121,043

Considered doubtful 4,683,507 4,686,950

7,956,366 7,807,993

Provision against amount due from other takaful companies 10.1 (4,683,507) (4,686,950)

3,272,859 3,121,043

10.1 Movement of provision against amount due from other takaful companies:


Charge for the year - 19,072

Reversal during the year (3,443) -

Closing balance 4,683,507 4,686,950

11. ACCRUED INVESTMENT INCOME

2015Shareholders' Participants' Aggregate Aggregate

Fund Takaful Fund

Return on term deposits 3,465,563 2,888,309 6,353,872 5,392,810

Return on Sukuk certificates 232,854 - 232,854 -

3,698,417 2,888,309 6,586,726 5,392,810

12. WAKALA FEE RECEIVABLE AND OTHER ACCOUNT BALANCES

2016 2015

Note Rupees Rupees

(Restated)

Considered good 23,612,843 10,137,095

Considered doubtful - -

23,612,843 10,137,095

Provision for doubtful balances 12.1 - -

23,612,843 10,137,095

57

---------- Rupees ----------

----------------------------------------------------------- (Rupees) -------------------------------------------------------------

2016


Annual Report 2016

2016 2015

12.1 Movement of provision for doubtful balances Rupees Rupees

(Restated)

Opening balance - 4,510,772

Reversal during the year - (4,510,772)

Closing balance - -

13. PREPAYMENTS

2015Shareholders' Participants' Aggregate Aggregate

Fund Takaful Fund

Prepaid re-takaful ceded - 10,680,225 10,680,225 10,273,192

Prepaid expenses 1,375,634 6,843,522 8,219,156 18,760,729

1,375,634 17,523,747 18,899,381 29,033,921

14. SUNDRY RECEIVABLES

2015


Fund Takaful Fund

Return on bank balances and deposits 18,204 156,004 174,208 70,261

Advances to employees and agents 421,944 - 421,944 171,344

Others 696,150 47,969 744,119 631,550

Inter account balance - 28,902,215 28,902,215 -

1,136,298 29,106,188 30,242,486 873,155

58

----------------------------------------------------------- (Rupees) -------------------------------------------------------------

----------------------------------------------------------- (Rupees) -------------------------------------------------------------

2016

2016


Annual Report 2016

15. FIXED ASSETS

15.1 Tangibles Assets

(%)

Leasehold improvements 4,156,141 426,000 4,582,141 2,592,047 449,717 3,041,764 1,540,377 10

-

Furniture and fixtures 12,771,650 12,771,650 9,448,097 1,277,165 10,725,262 2,046,388 10

-

Office equipment 5,990,449 228,020 6,218,469 3,575,361 604,323 4,179,684 2,038,785 10

- -

Computers 17,641,074 338,489 17,910,403 16,473,521 738,928 17,143,289 767,114 33.33

(69,160) - (69,160)

Vehicles 4,134,278 - 4,134,278 2,370,598 734,780 3,105,378 1,028,900 20

44,693,592 992,509 45,616,941 34,459,624 3,804,913 38,195,377 7,421,564

(69,160) (69,160)

15.1.1 It includes fully depreciated assets having cost of Rupees 16,894,307 (2015: Rupees 15,570,733).

15.1.2 Tangibles Assets

(%)

Leasehold improvements 4,156,141 - 4,156,141 2,176,433 415,614 2,592,047 1,564,094 10

Furniture and fixtures 12,465,495 306,155 12,771,650 8,174,452 1,273,645 9,448,097 3,323,553 10

Office equipments 5,952,119 112,850 5,990,449 3,021,980 580,652 3,575,361 2,415,088 10

(74,520) (27,271)

Computers 17,527,982 227,600 17,641,074 15,586,212 947,116 16,473,521 1,167,553 33.33

(114,508) (59,807)

Vehicles 4,134,278 - 4,134,278 1,593,954 776,644 2,370,598 1,763,680 20

44,236,015 646,605 44,693,592 30,553,031 3,993,671 34,459,624 10,233,968

(189,028) (87,078)

15.2 Intangibles Assets

Intangible assets in use having cost of Rupees 13,841,107 (2015: Rupees 13,841,107) are fully amortized.

59

Written Down

Value 31

December

Depreciation

Rate

At the

beginning of

year

Additions /

disposal

At the end of

the year

At the

beginning of

year

For the year

charge /

(disposal)

At the end of the

year

----------------------------------------------------------------------------------------------------- (Rupees) ------------------------------------------------------------------------------------------

2016

Cost Accumulated depreciation

----------------------------------------------------------------------------------------------------- (Rupees) ------------------------------------------------------------------------------------------

2015

Cost Accumulated depreciation

At the

beginning of

year

Additions /

disposal

At the end of

the year

At the

beginning of

year

For the year

charge /

(disposal)

At the end of the

year

Written Down

Value 31

December

Depreciation

Rate


Annual Report 2016

Note 2016 2015

16. DIRECT EXPENSES - PTF

Tracker fees 29,283,649 33,918,488

Inspection fees 111,750 44,000

Doubtful debts 1,083,800 783,434

Others 357,966 272,422

30,837,165 35,018,344

17 OTHER INCOME - PTF

Liabilities no longer payable written back - 3,686,214

Reversal of provision for doubtful debt 10.1 3,443 -

Wakala fee no longer payable written back - 4,510,772

Others 34,051 -

37,494 8,196,986

18. MANAGEMENT EXPENSES - SHF

Salaries, wages and benefits 18.1 42,414,131 42,198,385

Rent, rates and taxes 4,919,030 4,430,497

Utilities 1,351,069 1,185,026

Communications 1,323,744 1,187,615

Printing and stationery 910,933 1,133,937

Travelling and entertainment 1,027,929 1,226,467

Repairs and maintenance 1,199,822 1,035,862

Vehicles running and maintenance 815,842 941,485

Advertisement and promotions 251,063 342,671

Ijarah rentals 878,682 878,682

Fees and subscription 953,396 723,238

Other expenses 1,610,647 924,080

57,656,288 56,207,945

18.1

19. OTHER INCOME - SHF

Income from non - financial assets 942,759 929,195

Other income 198,034 3,375

1,140,793 932,570

20. GENERAL AND ADMINISTRATION EXPENSES - SHF

Salaries, wages and benefits 20.1 18,177,485 18,085,022

Depreciation 15.1 3,804,913 3,993,671

Shariah board honorarium 1,519,975 1,511,270

Legal and professional 2,866,142 2,486,417

Rent, rates and taxes 2,108,156 1,898,785

Utilities 579,029 507,868

Communications 567,319 508,978

Printing and stationery 390,400 485,973

Travelling and entertainment 440,541 525,629

Repairs and maintenance 514,209 443,941

Vehicles running and maintenance 349,646 403,494

Advertisement and promotions 107,599 146,859

Ijarah rentals 376,578 376,578

Fees and subscription 408,598 309,959

Takaful expense 449,881 472,455

Auditors' remuneration 20.2 790,126 709,176

Bank charges 4,786 9,862

Donation 15,000 70,000

Penalty - 5,000,000

Other expenses 675,277 396,034

34,145,660 38,341,971

20.1

60

----------------Rupees----------------

These include Rupees 1,579,950 (2015: Rupees 1,750,118 ) in respect of employees provident fund and Rupees

1,418,150 (2015: Rupees 1,314,526) in respect of staff retirement gratuity.

These include Rupees 677,121 (2015: Rupees 750,050) in respect of employee provident fund and Rupees 607,779

(2015: Rupees 563,367) in respect of retirement gratuity.


Annual Report 2016

Note 2016 2015

20.2 Auditors' remuneration

Audit fee 306,000 306,000

Half yearly review fee 144,000 144,000

Other certification 192,000 150,000

Out of pocket expenses 148,126 109,176

790,126 709,176

21. TAXATION

Current - for the year 21.2 2,894,005 3,277,473

21.1

21.2

21.3

2016 201522 EARNINGS PER SHARE - BASIC AND DILUTED

There is no dilutive effect on the basic earnings per share which is based on:

Net profit after tax for the period - Rupees 21,198,306 30,426,485

Weighted average number of ordinary shares - Number 30,000,000 30,000,000

Basic earnings per share - Rupees 0.71 1.01

23. REMUNERATION OF DIRECTORS, CHIEF EXECUTIVE OFFICER AND OTHER EXECUTIVES

Directors Executives Total

Managerial remuneration 2,307,582 - 8,978,961 11,286,543

Directors' fee for attending meetings - 1,585,300 - 1,585,300

Retirement benefits 477,584 - 1,789,841 2,267,425

House rent 1,038,414 4,040,544 5,078,958

Utilities 230,754 - 897,885 1,128,639

Medical expenses 76,500 - 416,500 493,000

Others 919,500 - 4,987,732 5,907,232 5,050,334 1,585,300 21,111,463 27,747,097

Number of persons 2 7 9 18

Directors Executives Total

Managerial remuneration 2,438,710 - 12,387,086 14,825,796

Directors' fee for attending meetings - 1,100,000 - 1,100,000

Retirement benefits 447,097 - 2,315,403 2,762,500

House rent 1,097,419 - 5,574,189 6,671,608

Utilities 243,871 - 1,238,709 1,482,580

Medical expenses 102,000 - 593,900 695,900

Others 252,000 - 5,037,668 5,289,668 4,581,097 1,100,000 27,146,955 32,828,052

Number of persons 1 7 13 21

* This includes remuneration to the outgoing Chief Executive Officer amounting to Rupees 3,578,084

61

----------------Rupees----------------

The relationship between tax expense and accounting profit has not been presented in these financial statements as the

income of the Company is subject to tax under section 113 of Income Tax Ordinance, 2001.

----------------Rupees----------------

--------------------------------------------------------------------(Rupees)--------------------------------------------------------------------

2015

--------------------------------------------------------------------(Rupees)--------------------------------------------------------------------

The Company files a consolidated return in respect of PTF and SHF in line with the practice followed by other takaful

companies in Pakistan and hence a single charge in SHF has been recorded in these financial statements. The Company

has filed income tax returns up to tax year 2015 which are deemed to be assessed under the provisions of section 120 of

the Income Tax Ordinance, 2001.

The Company has not recognised deferred tax asset amounting to Rupees 8.625 million as at 31 December 2016 on net

deductible temporary differences aggregating to Rupees 27.824 million as at 31 December 2016 as a matter of prudence.

The net deductible temporary difference includes unabsorbed tax depreciation/amortization amounting to Rupees 12.693

million respectively.

2016

Chief Executive

Officer

Chief Executive

Officer


Annual Report 2016

23.1

24. RELATED PARTIES TRANSACTIONS AND BALANCES

Transactions with related parties during the year and comparatives are as follows:

Status 2016 2015

Contribution written Associate 26,318,973 15,003,072

Contribution written Director 87,469 52,275

Contribution received Associate 22,107,378 15,516,476

Contribution received Director 104,550 -

Claims incurred / (Reversed) Associate 3,268,822 (2,849,839)

Claims incurred Director 104,550 -

Claims paid Associate 2,748,435 17,680

Claims paid Director 67,955 -

Profit on bank deposit Associate 128,385 140,566

Contribution to provident fund Associate 2,257,071 2,500,168

Contribution to gratuity fund Associate 3,500,000 2,390,718

Status 2016 2015

Balances with related parties as at 31 December are as follows:

Contribution receivable Associate 7,060,761 2,849,166

Contribution receivable Director - 52,275

Claims outstanding Associate 3,423,409 2,903,022

Claims outstanding Director 25,000 -

Payable to Gratuity fund Associate (781,435) (2,817,858)

Provident fund asset / (liability) - -

Bank deposits Associate 77,151 272,765

62

----------(Rupees)----------

----------(Rupees)----------

The Chief Executive Officer and some other executives are provided with free use of Company maintained cars in accordance with their

entitlements.

Related parties comprise of associated companies, entities under common control, entities with common Directors, major shareholders

and key management personnel of the Company. Transactions with related parties are carried out at arm's length prices determined under

"Comparable controlled price method". Transactions and balances with related parties have been disclosed in relevent notes to the

financial statements. Other transactions and balances not elsewhere disclosed are summarized as follows:


Annual Report 2016

25. SEGMENT REPORTING

2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015

SEGMENT ASSETS

Segment assets 21,739,382 30,852,695 17,111,929 15,307,745 89,562,820 80,252,338 26,753,618 21,932,293 553,264 624,410 155,721,013 148,969,481

Unallocated corporate assets 403,591,534 428,473,193

Total assets 559,312,547 577,442,674

SEGMENT LIABILITIES

Segment liabilities 42,880,503 69,885,444 33,752,943 30,790,850 176,660,899 270,470,014 52,770,984 36,965,872 1,091,301 4,071,461 307,156,630 412,183,641

Unallocated corporate liabilities 252,155,917 165,259,033

Total liabilities 559,312,547 577,442,674

63

--------------------------------------------------------------------------------------------------------------------------- Rupees --------------------------------------------------------------------------------------------------------------------------------

Class of business wise revenue and results have been disclosed in the profit and loss account prepared in accordance with the requirement of Insurance Ordinance, 2000 and the SEC (Insurance) Rules, 2002 and Takaful Rules 2012.

The following table presents information regarding segment assets, liabilities as at 31 December 2016 and 31 December 2015, unallocated capital expenditures and non-cash expenses during the current and last period:

Fire & Property Damage Marine, Aviation & Transport Motor Health Miscellaneous Total


Annual Report 2016

26. MANAGEMENT OF TAKAFUL AND FINANCIAL RISK

26.1 Takaful risk management

Takaful risk

(a) Frequency and severity of claims

-

-

-

(b) Sources of uncertainty in the estimation of future claim payments

64

The risk under any one takaful contract is the possibility that the covered event occurs and the uncertainty of the amount of the resulting

claim. By the very nature of a takaful contract, this risk is random and therefore unpredictable. The principal risk that the Company faces

under its takaful contracts is that the actual claims exceed the carrying amount of the takaful liabilities. This could occur because the

frequency or severity of claims is greater than estimated takaful events are random, and the actual number and amount of claims will vary

from year to year from the level established.

Experience shows that the larger the portfolio of similar takaful contracts, the smaller the relative variability about the expected outcome

will be. In addition, a more diversified portfolio is less likely to be affected by a change in any subset of the portfolio. The Company has

developed its takaful underwriting strategy to diversify the type of takaful risks accepted and within each of these categories to achieve a

sufficiently large population of risks to reduce the variability of the expected outcome.

Factors that aggravate takaful risk include lack of risk diversification in terms of type and amount of risk, geographical location and type of

industry covered.

Political, environmental, economical and climatic changes give rise to more frequent and severe extreme events (for example, fire,

theft, steal, riot and strike, explosion, earthquake, atmospheric damage, hurricanes, typhoons, river flooding, electric fluctuation,

terrorism, war risk, damages occurring in inland transit, burglary, loss of cash in safe and cash in transit, travel and personal accident,

money losses, engineering losses and other events) and their consequences (for example, subsidence claims). For certain contracts,

the Company has also limited the number of claims that can be paid in any policy year or introduced a maximum amount payable for

claims in any policy year.

Takaful contracts which is divided into direct and facultative arrangements are further subdivided into five segments: fire, marine,

motor, health and miscellaneous. The takaful risk arising from these contracts is concentrated in the territories in which the Company

operates, and there is a balance between commercial and personal properties / assets in the overall portfolio of covered properties /

assets. The Company underwrites takaful contracts in Pakistan.

The Company manages these risks through its underwriting strategy, adequate re-takaful arrangements and proactive claims

handling.

The underwriting strategy attempts to ensure that the underwritten risks are well diversified in terms of type and amount of risk,

industry and geography. The Company has the right to re-price the risk on renewal. It also has the ability to impose deductibles

and reject fraudulent claims. Takaful contracts also entitle the Company to pursue third parties for payment of some or all costs

(for example, subrogation). The claims payments are limited to the extent of sum covered on occurrence of the covered event.

The Company has entered into re-takaful cover / arrangements, with foreign re-takaful operators having good credit rating by

reputable rating agencies, to reduce its exposure to risks and resulting claims. Keeping in view the maximum exposure in respect

of key zone aggregates, a number of proportional and non-proportional facultative re-takaful arrangements are in place to protect

the net account in case of a major catastrophe. The effect of such re-takaful arrangements is that the Company recovers the

share of claims from re-takaful companies thereby reducing its exposure to risk. Apart from the adequate event limit which is a

multiple of the treaty capacity or the primary recovery from the proportional re-takaful arrangements, any loss over and above the

said limit would be recovered under non-proportional treaty which is very much in line with the risk management philosophy of the

Company.

In compliance of the regulatory requirement, the re-takaful agreements are duly submitted with Securities and Exchange

Commission of Pakistan (SECP) on an annual basis.

The Company has claim department dealing with the mitigation of risks surrounding claims incurred whether reported or not. This

department investigates and settles all claims based on surveyor's report / assessment. The unsettled claims are reviewed

individually at least semi-annually and adjusted to reflect the latest information on the underlying facts, contractual terms and

conditions, and other factors. The Company actively manages and pursues early settlements of claims to reduce its exposure to

unpredictable developments.

Claims reported and otherwise are analysed separately. The development of large losses / catastrophes is analysed separately. The

shorter settlement period for claims allows the Company to achieve a higher degree of certainty about the estimated cost of claims

including IBNR. However, the longer time needed to assess the emergence of a subsidence claim makes the estimation process more

uncertain for these claims.


Annual Report 2016

Assumed net loss ratio

Class 2015

%

Fire and property damage 5.01

Marine, aviation and transport 2.29

Motor (44.30)

Health (87.47)

Miscellaneous 524.73

(c) Process used to decide on assumptions

(d) Changes in assumptions

(e) Sensitivity analysis

65

The analysis of exposure described in paragraph (c) above is also used to test the sensitivity of the selected assumptions to changes

in the key underlying factors. Assumptions of different levels have been used to assess the relative severity of subsidence claims

given past experience. The key material factor in the Company’s exposure to subsidence claims is the risk of more permanent

changes in geographical location in which Company is exposed.

The risks associated with the takaful contracts are complex and subject to a number of variables which complicate quantitative

sensitivity analysis. The Company makes various assumptions and techniques based on past claims development experience. This

includes indications such as average claims cost, ultimate claims numbers and expected loss ratios. The Company considers that the

liability for takaful claims recognised in the balance sheet is adequate. However, actual experience may differ from the expected

outcome.

As the Company enters into short term takaful contracts, it does not assume any significant impact of changes in market conditions on

unexpired risks. However, results of sensitivity testing assuming 10% change in the claim incidence net of recoveries showing effect

on underwriting results and balance of waqf fund is set out below:

The Company uses assumptions based on a mixture of internal and market data to measure its related claims liabilities. Internal data

is derived mostly from the Company’s monthly claims reports, surveyor's report for particular claim and screening of the actual takaful

contracts carried out to derive data for the contracts held. The Company has reviewed the individual contracts and in particular the

industries in which the participant companies operate and the actual exposure years of claims. This information is used to develop

related provision for outstanding claims (both reported and non-reported).

The choice of selected results for each accident year of each class of business depends on an assessment of the technique that has

been most appropriate to observe historical developments. Through this analysis, the Company determines the need for an IBNR or

an unexpired risk liability to be held at each reporting date.

The Company has not changed its assumptions for the takaful contracts as disclosed in above (b) and (c).

The estimated cost of claims includes direct expenses to be incurred in settling claims, net of the expected subrogation value, re-

takaful and other recoveries. The Company takes all reasonable steps to ensure that it has appropriate information regarding its

claims exposures. However, given the uncertainty in establishing claims provisions, it is likely that the final outcome may be different

from the original liability established. The liability comprises amount in relations to unpaid reported claims, claims incurred but not

reported (IBNR), expected claims settlement costs and a provision for unexpired risks at the end of the reporting period.

Liability in respect of outstanding claims is based on the best estimate of the claims intimated or assessed. In calculating the

estimated cost of unpaid claims (both reported and not), the Company estimation techniques are a combination of loss-ratio-based

estimates (where the loss ratio is defined as the ratio between the ultimate cost of takaful claims and takaful contribution earned in

prior financial years in relation to such claims) and an estimate based upon actual claims experience using predetermined basis where

greater weight is given to actual claims experience as time passes.

In estimating the liability for the cost of reported claims not yet paid, the Company considers any information available from surveyor's

assessment and information on the cost of settling claims with similar characteristics in previous periods. Claims are assessed on a

case-by-case basis separately.

The principal assumption underlying the liability estimation of IBNR and Contribution Deficiency Reserves is that the Company's future

claim development will follow similar historical pattern for occurrence and reporting. The management uses qualitative judgement to

assess the extent to which past occurrence and reporting pattern will not apply in future. The judgement includes external factors e.g.

treatment of one-off occurrence claims, changes in market factors, economic conditions etc. The internal factors such as portfolio mix,

policy conditions, and claims handling procedures are further used in this regard.

The assumed net of retakaful loss ratios for each class of business is as follows:

The risks associated with takaful contracts are complex and subject to a number of variables that complicate quantitative sensitivity

analysis. This exposure is geographically concentrated in Pakistan only.

Assumed net loss ratio

2016

%

16.68 4.03

45.94 98.06 43.40


Annual Report 2016

2016 2015 2016 2015

10% increase in deficit

Fire and property damage (145,855) 40,772 (145,855) 40,772

Marine, aviation and transport (31,610) 15,855 (31,610) 15,855

Motor (8,025,393) (8,323,701) (8,025,393) (8,323,701)

Health (4,650,753) (5,177,959) (4,650,753) (5,177,959)

Miscellaneous (15,402) 39,443 (15,402) 39,443

(12,869,013) (13,405,590) (12,869,013) (13,405,590)

10% decrease in deficit

Fire and property damage 145,855 (40,772) 145,855 (40,772)

Marine, aviation and transport 31,610 (15,855) 31,610 (15,855)

Motor 8,025,393 8,323,701 8,025,393 8,323,701

Health 4,650,753 5,177,959 4,650,753 5,177,959

Miscellaneous 15,402 (39,443) 15,402 (39,443)

12,869,013 13,405,590 12,869,013 13,405,590

Concentration of takaful risk

The maximum class wise risk exposure (in a single policy) is as follows:

2016 2015 2016 2015 2016 2015

Fire and property and damage 630,000,000 630,000,000 628,000,000 628,000,000 2,000,000 2,000,000

Marine, aviation and transport 208,714,000 109,983,000 206,714,000 107,983,000 2,000,000 2,000,000

Motor 9,900,000 14,000,000 9,400,000 13,500,000 500,000 500,000

Health 700,000 700,000 - - 700,000 700,000

Miscellaneous 1,500,000 1,000,000 1,050,000 550,000 450,000 450,000

850,814,000 755,683,000 845,164,000 750,033,000 5,650,000 5,650,000

Claims development table

Analysis on gross basis

Accident year 2012 2013 2014 2015 2016 Total

and before

Estimate of ultimate claims cost:

At the end of accident year 312,814,755 57,227,095 51,476,770 60,999,342 70,484,997 553,002,959

One year later 58,677,162 19,559,603 4,567,165 11,366,394 - 94,170,324

Two years later 32,006,261 14,374,301 6,090,688 - - 52,471,250

Three years later 22,143,054 11,874,430 - - - 34,017,484

Four years later 11,455,438 - - - - 11,455,438

Estimate of cumulative claims 614,414,167 136,408,320 161,686,586 166,138,755 171,756,660 1,250,404,488

Cumulative payments to date (602,958,729) (124,533,890) (155,595,898) (154,772,361) (101,271,663) (1,139,132,541)

11,455,438 11,874,430 6,090,688 11,366,394 70,484,997 111,271,947

66

Liability recognised in the

balance sheet

----------------------------------------------------------------------------(Rupees )-----------------------------------------------------------------------------

The following table shows the development of claims over a period of time on gross basis. The disclosure goes back to the period when the earliest material claim

arose for which there is still uncertainty about the amount and timing of the claims payments. For each class of business, the uncertainty about the amount and

timings of claims payment is usually resolved within a year. Further, claims with significant uncertainties are not outstanding as at 31 December 2016.

-------------------------------------------------- (Rupees) -----------------------------------------------------

Underwriting results Balance of Waqf

--------------------------------------- (Rupees) ---------------------------------------

A concentration of risk may also arise from a single takaful contract issued to a particular type of participant, within a geographical location or to a particular types

of commercial business. In order to minimise the financial exposure arising from large claims, the Company, in the normal course of business, enters into

agreement with other re-takaful operators, who are dispersed over several geographical regions.

Gross sum insured NetRe-takaful


Annual Report 2016

26.2 Fair value of financial instruments

\

26.3

As at 31 December 2016Loans and

receivables

Held-to-

maturity

Available-for-

saleTotal

Rupees Rupees Rupees Rupees

Financial assets - Participants' Takaful Fund

Cash and bank balances 118,782,258 - - 118,782,258

Contribution due but unpaid 19,345,273 - - 19,345,273

Amounts due from other takaful/ re-takaful operators 3,272,859 - - 3,272,859

Salvage recoveries accrued 750,000 - - 750,000

Accrued investment income - - 2,888,309 2,888,309

Re-takaful recoveries against outstanding claims 26,177,730 - - 26,177,730

Investments - - 63,328,452 63,328,452

Sundry receivable 156,004 - - 156,004

168,484,124 - 66,216,761 234,700,885

Financial assets - Shareholder's Fund

Cash and bank balances 119,349,716 - - 119,349,716

Accrued investment income - - 3,698,417 3,698,417

Wakala and modarib fee receivable 27,065,815 - - 27,065,815

Investments - 24,488,055 50,989,614 75,477,669

Long term deposits 1,718,034 - - 1,718,034

Sundry receivables 440,148 - - 440,148

148,573,713 24,488,055 54,688,031 227,749,799

As at 31 December 2016

Participants'

Takaful Fund

Shareholder's

Fund

Rupees Rupees

Financial liabilities

Provision for outstanding claims (including IBNR) 111,271,947 -

Contribution received in advance 1,073,312 -

Amounts due to other takaful / re-takaful operators 84,398,303 -

Wakala and modarib fee payable 27,065,815 -

Other creditors and accruals 7,297,541 10,107,532

231,106,918 10,107,532

26.4 Operational risk

-

- requirements for the reconciliation and monitoring of transactions;

- compliance with regulatory and other legal requirements;

67

requirements for appropriate segregation of duties between various functions, roles and responsibilities;

The Company’s objective is to manage operational risk so as to balance limiting of financial losses and damage to its reputation with achieving its

objective of generating returns for stakeholders.

At amortized cost

The Company’s accounting policy on fair value measurements of its investments is discussed in note 2.8 to these financial statements.

The primary responsibility for the development and implementation of controls over operational risk rests with the board of directors. This

responsibility encompasses the controls in the following areas:

Financial instruments by categories

Level 3: Valuation techniques (non market observable)

Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the processes, technology and infrastructure

supporting the Company’s operations, either internally within the Company or externally at the Company’s service providers, and from external

factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of

investment management behaviour. Operational risks arise from all of the Company’s activities.

The carrying values of all financial assets and liabilities reflected in these financial statements approximate to their fair values except for

available-for-sale investments which are stated at lower of cost and market value in accordance with the requirements of the SEC

(Insurance) Rules, 2002. The carrying and fair value of these investments have been disclosed in note 10 to the financial statements.

Since the financial assets are not stated at exact fair values, therefore, analysis under following groups from level 1 to level 3 based on

the degree to which fair value is observable is not produced:

Level 1: Quoted Market prices

Level 2: Valuation techniques (market observable)


Annual Report 2016

- documentation of controls and procedures;

-

- ethical and business standards; and

- risk mitigation, including insurance, where this is effective.

26.5 FINANCIAL RISK MANAGEMENT

26.6 Risk management framework

26.7 Credit risk

Exposure to credit risk

68

The Company's activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (including

currency risk, interest rate risk and price risk). The Company's overall risk management policy focuses on the

unpredictability of financial markets and seeks to minimize potential adverse effects on the Company's financial

performance. In particular, the key financial risk is that in the long-term its investment proceeds are not sufficient to

fund the obligations arising from its takaful and investment contracts.

The Board of Directors has overall responsibility for establishment and oversight of the Company's risk management

framework. The Board is responsible for developing and monitoring the Company’s risk management policies.

The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to

set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and

systems are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Company,

through its training and management standards and procedures, aims to develop a disciplined and constructive

control environment in which all employees understand their roles and obligations.

The audit committee oversees compliance by management with the Company’s risk management policies and

procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the

Company. The Audit Committee is assisted in its oversight role by an outsourced Internal Audit function. Internal Audit

undertakes both regular and adhoc reviews of risk management controls and procedures, the results of which are

reported to the Audit Committee.

Credit risk is the risk, which arises with the possibility that one party to a financial instrument will fail to discharge its

obligation and cause the other party to incur a financial loss. The Company attempts to control credit risk by

monitoring credit exposures by undertaking transactions with a large number of counterparties in various industries

and by continually assessing the creditworthiness of counterparties.

Re-takaful is used to manage takaful risk. This does not, however, discharge the Company’s liability as primary

takaful operator. If a Re-takaful operator fails to pay a claim for any reason, the Company remains liable for the

payment to the participant. The creditworthiness of Re-takaful operators is considered on an annual basis by

reviewing their financial strength prior to finalisation of any contract.

requirements for the periodic assessment of operational risks faced, and the adequacy of controls and procedures

to address the risks identified;

Senior management ensures that the Company's staff have adequate training and experience and fosters effective

communication related to operational risk management.

The Company structures the levels of credit risk it accepts by placing limits on its exposure to a single counter party,

or groups of counterparties, and to geographical and industry segments. Such risks are subject to an annual or more

frequent review. Limits on the level of credit risk by category and territory are approved regularly by the Board of

Directors.


Annual Report 2016

The carrying amount of financial assets represents the maximum credit exposure, as specified below:

2016 2015

Note Rupees Rupees

Financial assets

Held to maturity

Sukuk certificates 24,488,055 3,965,520

24,488,055 3,965,520Available-for-sale

Quoted - units of Islamic fund 114,318,066 64,003,881

Other financial assets at amortised cost

Bank deposits 237,600,127 327,563,312

Long term deposits 1,718,034 1,523,034

Contributions due but unpaid 19,345,273 28,104,385

Amounts due from other takaful / re-takaful companies 3,272,859 3,121,043

Accrued investment income 6,586,726 5,392,810

Re-takaful recoveries against outstanding claims 26,177,730 19,214,059

Wakala fee receivable and other account balances 23,612,843 10,137,095

Mudarib fee receivable 3,452,972 2,051,094

Sundry receivables 30,242,486 873,155

352,009,050 397,979,987

490,815,171 465,949,388

Financial assets

Secured 26.7.1 26,177,730 19,214,059

Unsecured 464,637,441 446,735,329

490,815,171 465,949,388

Not past due 442,019,309 415,509,902

Past due 26.7.1 51,670,189 50,439,487

493,689,498 465,949,389

The age analysis of financial assets is as follows:

Gross value Impairment Carrying value Gross value Carrying value

Not past due 442,019,309 - 442,019,309 416,509,902 (1,000,000) 415,509,902

Past due

Upto 1 year 32,361,765 - 32,361,765 36,722,513 - 36,722,513

1-2 years 5,035,419 - 5,035,419 12,650,938 (2,231,180) 10,419,758

Over 2 years 39,470,549 (25,197,544) 14,273,005 22,331,890 (19,034,674) 3,297,216

Total 518,887,042 (25,197,544) 493,689,498 488,215,243 (22,265,854) 465,949,389

26.7.1

69

Exposures to individual participants and groups of participants are collected within the ongoing monitoring of the

controls associated with regulatory solvency. Where there exists significant exposure to individual participants, or

homogenous groups of participants, a financial analysis equivalent to that conducted for Re-takaful operators is

carried out by the Company's risk department.

It comprises retakaful recoveries against outstanding claims amounting to Rs.26,177,730 which are past due but not

impaired and are secured against amount due to re-takaful companies.

2016 2015

Impairment

-----------------------------------------------------------(Rupees)------------------------------------------------------------------


Annual Report 2016

Rating 2016 2015

Short term Long term Agency Rupees Rupees

Al Baraka Bank (Pakistan) Limited A-1 A JCR-VIS 77,151 272,765

Askari Bank Limited ( Islamic Banking) A-1+ AA+ PACRA 5,084 5,084

Bank AlFalah Limited (Islamic Banking) A-1+ AA PACRA 72,940 241,169

Bank Islami Pakistan Limited A-1 A+ PACRA 50,048,605 30,119,865

Burj Bank Pakistan Limited A-1 A JCR-VIS - 50,010,285

Dubai Islamic Bank Limited A-1 A+ JCR-VIS 80,007,509 136,051,895

Faysal Bank Limited (Islamic Banking) A-1+ AA PACRA 9,986,895 12,547

Habib Bank Limited (Islamic Banking) A-1+ AAA JCR-VIS 4,968 4,968

Habib Metropolitan Bank (Islamic Banking) A-1+ AA+ PACRA 965,261 516,056

Meezan Bank Limited A-1+ AA JCR-VIS 76,374,477 109,802,781

National Bank of Pakistan (Islamic Banking) A-1+ AAA PACRA 11,746 11,605

The Bank of Khyber (Islamic Banking) A A1 PACRA 43,296 512,161

UBL Ameen A-1+ AAA JCR-VIS 2,197 2,131

NRSP MicroFinance Bank Limited A-1 A PACRA 20,000,000 -

237,600,129 327,563,312

26.8 Concentration of credit risk

Industry

(Rupees) % (Rupees) %

Textiles 12,421,680 41.5% 17,157,256 37.6%

Banks 6,603,676 22.0% 10,565,738 32.6%

Automobiles 230,137 0.8% 220,438 0.5%

Cement - 0.0% 5,211 0.4%

Chemical and fertilizer 524,709 1.8% 621,050 3.4%

Distribution 794,012 2.6% 162,674 1.3%

Education 178,889 0.6% 928,665 2.4%

NGOs 43,954 0.1% 1,040,238 3.8%

Petroleum 209,578 0.7% 1,013,188 0.5%

Food and allied 974,671 3.3% 860,091 0.9%

Leather 3,147 0.0% 26,447 1.4%

Engineering 1,243,037 4.1% 180,746 4.1%

Housing 497,801 1.7% 33,035 0.5%

Pharmaceuticals 7,545 0.0% 553,276 1.6%

Takaful 1,056,448 3.5% 50,970 0.1%

NBFIs 198,248 0.7% 268,879 0.3%

Individual 241,071 0.8% 329,208 1.9%

Paper 1,214,135 4.1% 1,136,116 0.7%

IT Industry 260,569 0.9% 548,074 0.6%

Oil mills 2,420,674 8.1% 296,705 2.3%

Others 842,238 2.8% 1,495,153 3.1%

29,966,219 100% 37,493,158 100%

70

The credit quality of the Company's bank balances and deposits can be assessed with reference to external credit ratings as follows:

Rating

The Company has made investment in other sukuk certificates and units of Islamic fund.

Concentration of credit risk occurs when a number of counterparties have a similar type of business activities. As a result, any change

in economic, political or other conditions would effect their ability to meet contractual obligations in similar manner. Sector-wise

analysis of gross "contribution due but unpaid" and "amount due from other takaful companies" at the reporting date is as follows:

2016 2015


Annual Report 2016

26.8.1 The age analysis of "contributions due but unpaid" at the reporting date is as follows:

Note Gross Impairment Gross Impairment

Upto 1 year 26.8.2 19,345,273 - 28,104,386 -

1-2 years 1,989,946 1,989,946 1,580,779 1,580,779

Over 2 years 674,634 674,634 - -

Total 22,009,853 2,664,580 29,685,165 1,580,779

26.8.2 This includes following amounts due from related patries which are past due but not impaired:

2016 2015

Name Status

Contribution receivable Associate 7,060,761 2,849,166

Contribution receivable Director - 52,275

7,060,761 2,901,441

26.8.3

Gross Impairment Gross Impairment

Upto 1 year 2,216,411 - 3,121,041 -

1-2 years 1,940,829 - 650,403 650,401

Over 2 years 4,683,507 4,683,507 4,036,549 4,036,549

Total 8,840,747 4,683,507 7,807,993 4,686,950

Amount due from other takaful companies, re-takaful recoveries against outstanding claims

Amount due

from re-

takaful

companies

Re-takaful

recoveries

against

outstanding

claims

Prepaid re-

takaful

contribution

ceded

Total

A or above - 3,864,804 - 3,864,804

BBB or above - 22,312,926 10,680,225 32,993,151

- 26,177,730 10,680,225 36,857,955

71

Re-takaful agreement does not relieve the Company from its obligation to participants and as a result the Company remains liable for

the portion of outstanding claims covered by re-takaful to the extent that re-takaful fails to meet the obligation under the re-takaful

agreements.

The management monitors exposure to credit risk through regular review of credit exposure, assessing creditworthiness of

counterparties and prudent estimates of provision for doubtful debts.

2016 2015

-----------------------------------------(Rupees)-----------------------------------------

The age analysis of "amount due from other takaful companies" at the reporting date is as follows:

2016 2015

---------------------------------------(Rupees)---------------------------------------

-----------------------------------------(Rupees)-----------------------------------------

In common with other takaful companies, in order to minimise the financial exposure arising from large claims, the Company, in the

normal course of business, enters into agreement with re-takaful companies.

The Company enters into re-takaful / co-takaful arrangements with re-takaful and takaful companies having sound credit ratings

accorded by reputed credit rating agencies. The Company is required to comply with the requirements of circular No. 24 / 2010 dated

October 27, 2010 issued by SECP which requires a takaful operator to place at least 80% of their outward treaty cessions with re-

takaful companies rated 'A' or above by Standard & Poors or equivalent rating by any other reputed international rating agency, with

the balance (20%) being placed with entities rated at least 'BBB' by Standard & Poors or equivalent rating by any other reputed

international rating agency. An analysis of all re-takaful assets relating to outward treaty cessions recognised by the rating of the entity

from which it is due is as follows:

2016

------------------------------------------------(Rupees )------------------------------------------------


Annual Report 2016

Amount due

from re-takaful

companies

Re-takaful

recoveries

against

outstanding

claims

Prepaid re-

takaful

contribution

ceded

Total

A or above - 6,148,499 3,287,421 9,435,920

BBB or above - 13,065,560 6,985,771 20,051,331

- 19,214,059 10,273,192 29,487,251

Upto 1 year 10,800,081 - 5,497,086 -

1-2 years 1,104,644 - 10,419,758 -

Over 2 years 14,273,005 - 3,297,216 -

Total 26,177,730 - 19,214,060 -

26.9 Liquidity risk

Carrying

amount

Contractual cash

flows

Less than one

year1-2 years 2-3 years 3-5 years

Financial liabilities at amortised cost

Provision for outstanding claims 111,271,947 111,271,947 111,271,947 - - -

Amount due to re-takaful companies 84,398,303 84,398,303 84,398,303 - - -

Accrued expenses 961,485 961,485 961,485 - - -

Wakala fee payable and other account balances 23,612,843 23,612,843 23,612,843 - - -

Mudarib fee payable 3,452,972 3,452,972 3,452,972 - - -

Other creditors and accruals 46,383,292 46,383,292 46,383,292 - - -

270,080,842 270,080,842 270,080,842 - - -

Carrying

amount

Contractual cash

flows

Less than one

year1-2 years 2-3 years 3-5 years

Financial liabilities at amortised cost

Provision for outstanding claims 88,471,003 88,471,003 88,471,003 - - -

Amount due to Re-takaful companies 59,684,818 59,684,818 59,684,818 - - -

Accrued expenses 1,352,615 1,352,615 1,352,615 - - -

Wakala fee payable and other account balances 10,137,095 10,137,095 10,137,095 - - -

Mudarib fee payable 2,051,097 2,051,097 2,051,097 - - -

Other creditors and accruals 20,434,414 20,434,414 20,434,414 - - -

182,131,042 182,131,042 182,131,042 - - -

26.10 Market risk

26.11 Currency risk

72

Impairment Gross Impairment

2015

------------------------------------------------(Rupees )------------------------------------------------

The age analysis of "re-takaful recoveries against outstanding claims" at the reporting date is as follows:

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company's income or value

of its financial instruments. The objective of market risk management is to manage and control market risk exposures with acceptable parameters, while

optimising the return. The Company is exposed to currency risk, interest rate risk and other price risk.

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Currency

risk arises mainly where receivables and payables exist due to transactions based on currencies other than Pak Rupees. The Company is not exposed to

currency risk as there are no assets or liabilities recoverable/repayable in foreign currencies.

The table below analyses the Company's financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the maturity

date:

2016

-------------------------------------------------------------------- (Rupees) --------------------------------------------------------------------

2015

-------------------------------------------------------------------- (Rupees) --------------------------------------------------------------------

--------------------------------------------(Rupees)--------------------------------------------

In respect of the aforementioned takaful and re-takaful assets, the Company takes into account its track record of recoveries and financial position of the

counterparties while creating provision for impairment. Further, re-takaful recoveries are made when corresponding liabilities are settled.

Liquidity risk is the risk that the Company will encounter difficulty in meeting its financial obligations as they fall due. Liquidity risk arises because of the

possibility that the Company could be required to pay its liabilities earlier than expected or difficulty in raising funds to meet commitments associated with

financial liabilities as they fall due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to

meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation.

The diversified funding sources and assets of the Company are managed with liquidity in mind, maintaining a healthy balance of cash and cash equivalents

and readily marketable securities.

2016 2015

Gross


Annual Report 2016

26.12 Profit rate risk

Effective rate %

per annumUpto one month

Over one month

to three months

Over three

months to six

months

Over six months

to one year

Over one year to

five yearsOver five years Sub Total

Financial assets

Cash and bank deposits 1.76 - 15 79,426,818 96,529,000 41,600,000 20,000,000 - - 237,555,818 576,156 238,131,974

Investments 7 - 8.25 - - - 14,157,500 10,330,555 - 24,488,055 114,318,066 138,806,121

Contribution due but unpaid - - - - - - - 19,345,273 19,345,273

Amounts due from other

takaful companies - - - - - - - 3,272,859 3,272,859

Accrued investment income - - - - - - - 6,586,726 6,586,726

Re-takaful recoveries against

outstanding claims - - - - - - - 26,177,730 26,177,730

Wakala fee receivable - - - - - - - 23,612,843 23,612,843

Long term deposits - - - - - - - 1,718,034 1,718,034

Mudarib fee receivable - - - - - - - 3,452,972 3,452,972

Sundry receivables - - - - - - - 30,242,486 30,242,486

79,426,818 96,529,000 41,600,000 34,157,500 10,330,555 - 262,043,873 229,303,145 491,347,018


Outstanding claims - - - - - - - 111,271,947 111,271,947

Amounts due to takaful /

re-takaful companies - - - - - - - 84,398,303 84,398,303

Accrued expenses - - - - - - - 961,485 961,485

Wakala fee payable - - - - - - - 23,612,843 23,612,843

Mudarib fee payable - - - - - - - 3,452,972 3,452,972

Other creditors and accruals - - - - - - - 46,383,292 46,383,292

- - - - - - - (270,080,842) (270,080,842)

Inter risk sensitivity gap 79,426,818 96,529,000 41,600,000 34,157,500 10,330,555 - 262,043,873 (40,777,697) 221,266,176

Cumulative halal profit rate

risk sensitivity gap-2016 79,426,818 175,955,818 217,555,818 251,713,318 262,043,873 262,043,873

73

Profit rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market halal profit rates. Majority of the profit rate exposure arises from balances held in profit and loss

sharing accounts and term deposits with reputable banks.

At the balance sheet date, the profit rate profile of the Company’s significant halal profit-bearing financial instruments is:

TotalNon profit

bearing

2016

Profit bearing

----------------------------------------------------------------------------------------------------------(Rupees)----------------------------------------------------------------------------------------------------------


Annual Report 2016

Effective rate %

per annumUpto one month

Over one month

to three months

Over three

months to six

months

Over six months

to one year

Over one year to

five yearsOver five years Sub Total

Financial assets

Cash and bank deposits 2.6% - 10.78% 175,258,900 110,510,000 21,600,000 20,000,000 - - 327,368,900 385,558 327,754,458

Investments 5.0 % - 10.78% - - - - 3,965,520 - 3,965,520 64,003,881 67,969,401

Contribution due but unpaid - - - - - - - 28,104,385 28,104,385

Amounts due from other

takaful companies - - - - - - - 3,121,043 3,121,043

Accrued investment income - - - - - - - 5,392,810 5,392,810

Re-takaful recoveries against

outstanding claims - - - - - - - 19,214,059 19,214,059

Wakala fee receivable - - - - - - - 10,137,095 10,137,095

Security deposit - - - - - - - 1,523,034 1,523,034

Mudarib fee receivable - - - - - - - 2,051,094 2,051,094

Sundry receivables - - - - - - - 873,155 873,155

175,258,900 110,510,000 21,600,000 20,000,000 3,965,520 - 331,334,420 134,806,114 466,140,534


Outstanding claims - - - - - - - 88,471,003 88,471,003

Amounts due to takaful /

re-takaful companies - - - - - - - 59,684,818 59,684,818

Accrued expenses - - - - - - - 1,352,615 1,352,615

Wakala fee payable - - - - - - - 10,137,095 10,137,095

Mudarib fee payable - - - - - - - 2,051,097 2,051,097

Other creditors and accruals - - - - - - - 20,434,414 20,434,414

- - - - - - - (182,131,042) (182,131,042)

Inter risk sensitivity gap 175,258,900 110,510,000 21,600,000 20,000,000 3,965,520 - 331,334,420 (47,324,928) 284,009,492

Cumulative halal profit rate

risk sensitivity gap-2015 175,258,900 285,768,900 307,368,900 327,368,900 331,334,420 331,334,420

Cash flow sensitivity analysis for variable rate instruments

Shareholders' Fund

74

Non profit

bearingTotal

The Company is exposed to cash flow profit rate risk in respect of its deposits with banks and investment in sukuk certificates. In case of 100 basis points (bp) increase / decrease in profit rates at year end, assuming that all other

variables remain constant, the net income before tax would have been higher / lower by Rs. 1,455,892 (2015: Rs. 1,434,250).

----------------------------------------------------------------------------------------------------------(Rupees)----------------------------------------------------------------------------------------------------------

2015

Profit bearing


Annual Report 2016

Participant's Takaful Fund

Cash flow sensitivity analysis for fixed rate instruments

26.13 Other price risk

Sensitivity analysis

26.14 Capital risk management

75

The carrying value of available for sale investments subject to price risk is based on net asset values as of the balance

sheet date and are stated at lower of cost or market value ( market value being taken as lower if fall is other than

temporary) in accordance with the requirement of the S.R.O. 938 issued by the Securities and Exchange Commission of

Pakistan (SECP) in December 2002.

The Company is exposed to cash flow profit rate risk in respect of its deposits with banks. In case 100 basis points (bp)

increase / decrease in profit rates at year end on bank deposits, assuming that all other variables remain constant, the

net deficit and balance of Waqf would have been higher / lower by Rs. 1,119,097 (2015: Rs. 1,470,317).

The Company does not have any fixed rate financial assets and liabilities at fair value through profit or loss, therefore a

change in interest rates at the reporting date would not affect profit or loss.

The sensitivity analysis prepared is not necessarily indicative of the effects on loss for the year and assets / liabilities of

the Company.

Price risk is the risk of changes in the fair value of mutual funds units as a result of change in the net asset value of the

units of funds. The Company is exposed to price risk since it has investment in Islamic funds amounting to Rupees

114.318 million (2015: Rupees. 64.004 million) at the reporting date. The Company policy is to manage price risk

through diversification and selection of securities within specified limits set by internal risk management guidelines and

ensuring compliance with the requirements of Takaful Rules, 2012.

The Management monitors the fluctuations of prices of mutual funds on regular basis. The Company also has necessary

skills for monitoring and managing the units of mutual funds in line with fluctuations of the market.

As the entire investment portfolio of mutual funds has been classified in the AFS category, a 10% decrease in

redemption values of investment in SHF and PTF at the reporting date would have decreased investment value by

Rupees 11.793 million ( 31 December 2015: Rupees 6.489 million) and equity would have been lower by the same

amount.

However, a 10% increase in redemption values of investment in SHF at the reporting date would not have an impact on

investment values as any increases are restricted to the amount of lower of cost or market value (if the fall is other than

temporary) as per the Company’s policy and the requirement of the S.R.O. 938 issued by the Securities and Exchange

Commission of Pakistan (SECP) in December 2002.

The sensitivity analysis prepared is not necessarily indicative of the effects on profit / equity and assets of the Company.

The Company's objective when managing capital is to safeguard the Company's ability to continue as a going concern

so that it can continue to provide returns for shareholders and benefits for other stakeholders; and to maintain a strong

capital base to support the sustained development of its businesses.

The Company manages its capital structure by monitoring return on net assets and makes adjustments to it in the light

of changes in economic conditions. In order to maintain or adjust the capital structure, the Company may adjust the

amount of dividend paid to shareholders or issue new shares. Currently, the Company is not in compliance with the

minimum paid up capital requirement set by the Securities and Exchange Commission of Pakistan (SECP) through its

S.R.O. 828(1)/2015 dated 18 August 2015 for insurance companies / takaful operator for the year ended 31 December

2016. The Company is in the process of raising capital through right issue more fully disclosed in note 1.3 to these

financial statements.The Company manages its capital structure by monitoring return on net assets and makes

adjustments to it in the light of changes in economic conditions. In order to maintain or adjust the capital structure, the

Company may adjust the amount of dividend paid to shareholders or issue new shares.


Annual Report 2016

27. PROVIDENT FUND

2016 2015

Rupees Rupees

(Un-audited) (Audited)

Size of the fund- net assets 8,858,751 12,231,433

Cost of investments made 9,000,000 13,587,692

Percentage of investments made 101.59% 111.09%

Fair value of investments made 9,732,221 13,381,000

Fair Value Percentage Fair Value Percentage

(Rupees) (%) (Rupees) (%)

Bank balances 285,871 3% 294,831 15%

Term deposit certificates 7,000,000 78% 7,000,000 85%

Mutual Funds 2,446,350 25% 6,105,718 0%

28. NUMBER OF EMPLOYEES

29. DATE OF AUTHORISATION

30. GENERAL

Figures have been rounded off to nearest Rupee unless otherwise mentioned.

76

The Company operates approved funded contributory provident fund (the Fund) for its employees. Detail of net assets and

investments of the fund, based on their un-audited financial statements as at 31 December 2016 are as follows:

2016 2015

The investment out of provident funds have been made in accordance with the provision of section 227 of the Companies

Ordinance, 1984 and the rules formulated for the purpose.

The average number of employees for the year ended 31 December 2016 were 67 (2015: 73) and number of employees as at 31

December 2016 were 60 (2015: 75).

The breakup of fair value of investments, based on un-audited financial statements of the Fund, is as under:

(Un-audited) (Audited)

These financial statements have been approved and authorised for issue by the Board of Directors on _________________.

takaful pakistan limited r… · mr. ashraf ali velji mr. haseeb ahmed chief executive officer syed...

Documents