Massy United Insurance Ltd. · Massy United Insurance Ltd. Notes to Consolidated Financial Statements September 30, 2016 (expressed in thousands of Barbados dollars) (1) 1 Incorporation,

Massy United Insurance Ltd.

Consolidated Financial StatementsSeptember 30, 2016(expressed in thousands of Barbados dollars)

Massy United Insurance Ltd.Corporate Information

Directors

D. N. O’Brien - (appointed as Chairman - January 20, 2016)E. G. Warner - (resigned as Chairman - January 20, 2016)G. A. A. KingP. G. SymmondsJ. I. O’ConnellH. H. H. HallP. D. RajkumarsinghF. F. Delmas

Secretary

Natalie. M. Brace

Auditor

PricewaterhouseCoopers SRL

Attorneys-at-Law

Elliott MottleyLeslie HaynesPKH Cheltenham

Bankers

CIBC FirstCaribbean International Bank

Massy United Insurance Ltd.Consolidated Statement of Changes in EquityFor the year ended September 30, 2016

(expressed in thousands of Barbados dollars)

Sharecapital

$

Retainedearnings

$

Revaluationsurplus

$

Propertycatastrophe

reserve$

Currencytranslation

reserve$

Total$

Non-controlling

interest$

Totalequity

$

Balance as of September 30, 2014 8,900 107,879 11,339 23,948 – 152,066 15,919 167,985

Total comprehensive income for the year – 9,438 – – 9,438 182 9,620

Dividend paid – (31,000) – – – (31,000) – (31,000)

Transfer to property catastrophe reserve – (3,301) – 3,301 – – – –

Balance as of September 30, 2015 8,900 83,016 11,339 27,249 – 130,504 16,101 146,605

Total comprehensive income for the year – 11,507 – – (2,804) 8,703 (59) 8,644

Transfer to property catastrophe reserve – (3,832) – 3,832 – – – –

Balance as of September 30, 2016 8,900 90,691 11,339 31,081 (2,804) 139,207 16,042 155,249

The accompanying notes form an integral part of these financial statements.

Massy United Insurance Ltd.Consolidated Statement of Comprehensive IncomeFor the year ended September 30, 2016


2016$

2015$

RevenueGross premium earned (note 11) 247,436 233,855Reinsurance premium ceded (note 11) (148,914) (151,933)

Net premiums earned 98,522 81,922Reinsurance commission 25,369 25,372Net investment income (note 7) 8,626 7,726Property income/(losses), net 25 (738)Other losses (178) (568)

132,364 113,714

ExpensesLosses incurred (note 11) 89,101 56,609Losses recoverable from reinsurers (note 11) (35,389) (11,943)

Net claims incurred 53,712 44,666Policy acquisition costs 29,913 25,263General and administrative expenses (note 16) 33,756 30,886Other expenses 306 538

117,687 101,353

Income from operating activities 14,677 12,361

Share of income from associated companies (note 8) 788 696

Income before taxation 15,465 13,057

Taxation (note 10) (4,573) (2,969)

Net income for the year 10,892 10,088

Other comprehensive income/(loss):Defined benefit plans (note 13) 556 (468)Retranslation of foreign currency operations (2,804) –

Total comprehensive income for the year 8,644 9,620

Attributable to:Equity holders of the parent 8,703 9,438Minority interest (59) 182

8,644 9,620


Massy United Insurance Ltd.Consolidated Statement of Cash FlowsFor the year ended September 30, 2016


2016$

2015$

Cash flows from operating activitiesIncome before taxation 15,465 13,057

Adjustments for:Depreciation 1,168 984Investment income (7,225) (8,286)Gain on disposal of investments (41) (122)Unrealised (gain)/loss on investments (1,360) 682Share of income from associated companies (788) (696)Pension plan expense 664 634Other post retirement benefit expense 314 226Gain on disposal of fixed assets (21) –

Operating income before working capital changes 8,176 6,479Decrease in accounts receivable 9,161 474(Decrease)/increase in accounts payable (10,509) 21,207(Decrease)/increase in general insurance liabilities (4,355) 2,320

Cash generated from operations 2,473 30,480Pension and other post retirement contributions paid (435) (433)Income taxes paid (2,746) (1,174)

Net cash (used in)/from operating activities (708) 28,873

Cash flows from investing activitiesPurchase of fixed assets (2,580) (3,507)Purchase of investments (52,230) (24,050)Sale/maturities of investments 54,499 22,917Proceeds from sale of fixed assets 82 –Acquisition of customer list - Guyana Agency (1,600) –Dividends from associated companies 44 230Net change in short-term deposits 2,334 15,951Investment income received 8,242 8,696

Net cash from investing activities 8,791 20,237

Cash flows from financing activitiesDividends paid – (31,000)

Effect of exchange rate changes (1,760) –

Net increase in cash and cash equivalents 6,323 18,110

Cash and cash equivalents - beginning of the year 52,164 34,054

Cash and cash equivalents - end of year 58,487 52,164


Massy United Insurance Ltd.Notes to Consolidated Financial StatementsSeptember 30, 2016


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1 Incorporation, ownership and registered office

Massy United Insurance Ltd. is incorporated under the laws of Barbados, with its registered office located atThe MassyDome, Warrens, St. Michael. The principal activities of the Company and its subsidiaries (“theGroup”) are primary insurance, reinsurance and management services.

The Company is a subsidiary of Massy (Barbados) Limited, the ultimate parent being Massy Holdings Ltd., aCompany incorporated in Trinidad and Tobago.

The Board of Directors have authorised the issue of the financial statements and have the power to amend thefinancial statements after the date of issue.

2 Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are setout below. These policies have been consistently applied to all the years presented, unless otherwise stated.

a) Basis of preparation

The consolidated financial statements have been prepared in accordance with International FinancialReporting Standards ("IFRS") and IFRIC interpretations. The consolidated financial statements have beenprepared under the historical cost basis, except for land and buildings and financial assets classified as fairvalue through profit or loss which are measured at fair value.

The preparation of financial statements in conformity with IFRS requires the use of certain criticalaccounting estimates. It also requires management to exercise its judgement in the process of applying theGroup's accounting policies. The areas involving a higher degree of judgement or complexity, or areaswhere assumptions and estimates are significant to the consolidated financial statements are disclosed inNote 3.

i) Standards, amendments and interpretations adopted by the Group

The Group has adopted the following new and amended standards and interpretations as ofOctober 1, 2015:

Amendment to IAS 19,’Employee benefits’, regarding defined benefit plans (effective annualperiods on or after 1 July 2014 although endorsed for annual periods on or after 1 February 2015).These narrow scope amendments apply to contributions from employees or third parties todefined benefit plans. The objective of the amendments is to simplify the accounting forcontributions that are independent of the number of years of employee service, for example,employee contributions that are calculated according to a fixed percentage of salary.



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2 Summary of significant accounting policies …continued

a) Basis of preparation …continued

i) Standards, amendments and interpretations adopted by the Group …continued

Annual improvements 2012 (effective annual periods on or after 1 July 2014 although endorsedfor annual periods on or after 1 February 2015). These amendments include changes from the2010-12 cycle of the annual improvements project, that affect 7 standards:

- IFRS 2, ‘Share-based payment’- IFRS 3, ‘Business combinations’- IFRS 8, ‘Operating segments’- IFRS 13, ‘Fair value measurement’- IAS 16, ‘Property, plant and equipment’ and IAS 38, ‘Intangible assets’- Consequential amendments to IFRS 9, ‘Financial instruments’, IAS 37, ‘Provisions, contingent

liabilities and contingent assets’, and- IAS 39, ‘Financial instruments - Recognition and measurement’.

Annual improvements 2013 (effective annual periods on or after 1 July 2014 although endorsedfor annual periods on or after 1 January 2015). The amendments include changes from the 2011-13 cycle of the annual improvements project that affect 4 standards:

- IFRS 1, ‘First time adoption’- IFRS 3, ‘Business combinations’- IFRS 13, ‘Fair value measurement’ and- IAS 40, ‘Investment property’

i) Standards, amendments and interpretations that are not yet effective for the financial yearbeginning October 1, 2016 and not early adopted by the Group. The impact of the followingstandards has not yet been evaluated:

Amendment to IFRS 11, ‘Joint Arrangements’ (effective January 1, 2016) on acquisition of aninterest in a joint operation. This amendment adds new guidance on how to account for theacquisition of an interest in a joint operation that constitutes a business. The amendment specifiesthe appropriate accounting treatment for such acquisitions.

Amendments to IAS 16, ‘Property, plant and equipment’ and IAS 38, ‘Intangible Assets’, ondepreciation and amortisation (effective January 1, 2016). In this amendment the IASB hasclarified that the use of revenue based methods to calculate the depreciation of an asset is notappropriate because revenue generated by an activity that includes the use of an asset generallyreflects factors other than the consumption of the economic benefits embodied in the asset. TheIASB has also clarified that revenue is generally presumed to be an inappropriate basis formeasuring the consumption of the economic benefit embodied in an intangible asset.



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ii) Standards, amendments and interpretations that are not yet effective for the financial yearbeginning October 1, 2016 and not early adopted by the Group. The impact of the followingstandards has not yet been evaluated: …continued

IFRS 14 ‘Regulatory Deferral Accounts’ (effective January 1, 2016) permits first-time adopters tocontinue to recognise amounts related to rate regulation in accordance with their previous GAAPrequirements when they adopt IFRS. However, to enhance comparability with entities thatalready apply IFRS and do not recognise such amounts, the standard requires that the effect ofrate regulation must be presented separately from other items.

Amendments to IAS 27, ‘Separate Financial Statements’ (effective January 1, 2016) on theequity method. These amendments allow entities to use the equity method to account forinvestments in subsidiaries, joint ventures and associates in their separate financial statements.

Amendments to IFRS 10, ‘Consolidated Financial Statements’ and IAS 28, ‘Investments inassociates and joint ventures’. These amendments address an inconsistency between therequirements in IFRS 10 and those in IAS 28 in dealing with the sale or contribution of assetsbetween an investor and its associate or joint venture. The main consequence of the amendmentsis that a full gain or loss is recognised when a transaction involves a business (whether it ishoused in a subsidiary or not). A partial gain or loss is recognised when a transaction involvesassets that do not constitute a business, even if these assets are housed in a subsidiary.

Annual improvements 2014 (Annual periods beginning on or after 1 January 2016). These set ofamendments impacts 4 standards: IFRS 5, ‘Non-current assets held for sale and discontinuedoperations’ regarding methods of disposal. IFRS 7, ‘Financial instruments: Disclosures’, (withconsequential amendments to IFRS 1) regarding servicing contracts. IAS 19, ‘Employee benefits’regarding discount rates. IAS 34, ‘Interim financial reporting’ regarding disclosure ofinformation.

Amendment to IAS 1, ‘Presentation of Financial statements’ on the disclosure initiative (Annualperiods beginning on or after 1 January 2016). These amendments are as part of the IASBinitiative to improve presentation and disclosure in financial reports. Effective for annual periodsbeginning on or after 1 January 2016.

Amendment to IFRS 10 and IAS 28 on investment entities applying the consolidation exception.Annual periods beginning on or after 1 January 2016). These amendments clarify the applicationof the consolidation exception for investment entities and their subsidiaries.

IFRS 15 ‘Revenue from contracts with customers’ (effective January 1, 2018) is a converged standardfrom the IASB and FASB on revenue recognition. The standard will improve the financialreporting of revenue and improve comparability of the top line in financial statements globally.



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ii) Standards, amendments and interpretations that are not yet effective for the financial yearbeginning October 1, 2016 and not early adopted by the Group. The impact of the followingstandards has not yet been evaluated: …continued

Amendments to IAS 7 Statement of cash flows on disclosure initiative (Annual periods beginningon or after 1 January 2017). These amendments to IAS 7 introduce an additional disclosure thatwill enable users of financial statements to evaluate changes in liabilities arising from financingactivities. The amendment is part of the IASB’s Disclosure Initiative, which continues to explorehow financial statement disclosure can be improved.

Amendments to IAS 12, ‘Income taxes’ on Recognition of deferred tax assets for unrealizedlosses (effective 1 January 2017). These amendments on the recognition of deferred tax assets forunrealized losses clarify how to account for deferred tax assets related to debt instrumentsmeasured at fair value.

IFRS 9 ‘Financial instruments’ (effective January 1, 2018). This standard replaces the guidance inIAS 39. It includes requirements on the classification and measurement of financial assets andliabilities; it also includes an expected credit losses model that replaces the current incurred lossimpairment model.

IFRS 16 ‘Leases’ (Annual periods beginning on or after 1 January 2019 with earlier applicationpermitted if IFRS 15, ‘Revenue from Contracts with Customers’, is also applied.) Thisstandard replaces the current guidance in IAS 17 and is afar-reaching change in accounting bylessees in particular. Under IAS 17, lessees were required to make a distinction between a financelease (on balance sheet) and an operating lease (off balance sheet). IFRS 16 now requires lesseesto recognize a lease liability reflecting future lease payments and a ‘right-of-use asset’ forvirtually all lease contracts. The IASB has included an optional exemption for certain short-termleases and leases of low-value assets; however, this exemption can only be applied by lessees.For lessors, the accounting stays almost the same. However, as the IASB has updated theguidance on the definition of a lease (as well as the guidance on the combination and separation ofcontracts), lessors will also be affected by the new standard. At the very least, the new accountingmodel for lessees are expected to impact negotiations between lessors and lessees. UnderIFRS 16, a contract is, or contains, a lease if the contract conveys the right to control the use of anidentified asset for a period of time in exchange for consideration.



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b) Consolidation

Subsidiaries are all entities over which the Group has the power to govern the financial and operatingpolicies generally accompanying a shareholding of more than one half of the voting rights. The existenceand effect of potential voting rights that are currently exercisable or convertible are considered whenassessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date onwhich control is transferred to the Group. They are deconsolidated from the date that control ceases.

Inter-company transactions, balances and unrealised gains on transactions between Group companies areeliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changedwhere necessary to ensure consistency with the policies adopted by the Group.

The Group consist of the following subsidiary and associated companies:

Equity Country of Incorporation

United Reinsurance ICC Inc. 100% St. LuciaUI Management Inc. 60% BarbadosUnited Services Inc. 100% BarbadosUnited Insurance Company N.V. 100% ArubaUnited Insurance (Grenada) Co. Ltd. 20% GrenadaCSGK Finance Holdings Limited 20% Barbados

Transactions and non-controlling interest

The Group treats transactions with non-controlling interests as transactions with equity owners of theGroup. For purchases from non-controlling interests, the difference between any consideration paid andthe relevant share acquired of the carrying value of the net assets of the subsidiary is recorded in equity.Gains or losses on disposals to minority interests are also recorded in equity.

When the Group ceases to have control or significant influence, any retained interest in the entity is re-measured to its fair value, with the change in carrying amount recognised in the statement ofcomprehensive income. The fair value is the initial carrying amount for the purposes of subsequentlyaccounting for the retained interest as an associate, joint venture or financial asset. In addition, anyamounts previously recognised in other comprehensive income in respect of that entity are accounted foras if the Group had directly disposed of the related assets or liabilities. This may mean that amountspreviously recognised in other comprehensive income are reclassified to the statement of income.

Non-controlling interest includes $15,000 of capital issued by United Reinsurance ICC Inc. to Massy(Barbados) Limited. This capital has no voting or distribution rights.



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b) Consolidation …continued

Associates

Associates are all entities over which the Group has significant influence but not control, generallyaccompanying a shareholding between 20% and 50% of the voting rights. Investments in associates areaccounted for using the equity method of accounting and are initially recognised at cost. The Group’sinvestment in associates includes goodwill identified on acquisition, net of accumulated impairment loss.

The Group’s share of its associates’ post-acquisition profits or losses is recognised in the statement ofcomprehensive income, and its share of post acquisition movements in other comprehensive income isrecognised in other comprehensive income. The cumulative post-acquisition movements are adjustedagainst the carrying amount of the investment. When the Group’s share of losses in an associate equals orexceeds its interest in the associate, including any other unsecured receivables, the Group does notrecognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of theGroup’s interest in the associates. Unrealised losses are also eliminated unless the transaction providesevidence of an impairment of the asset transferred. Accounting policies of associates have been changedwhere necessary to ensure consistency with the policies adopted by the Group.

c) Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand and short-term deposits with an originalmaturity date of three months or less. Cash and cash equivalents are shown net of bank overdrafts wherethe right of offset exists.

d) Financial assets

The Group determines the classification of its investments at initial recognition, into the categories of fairvalue through profit and loss, held to maturity or loans and receivables.

Investments at fair value through profit or loss

Financial assets at fair value through profit or loss are so designated on acquisition where they are part of aportfolio of investments whose performance is evaluated on a fair value basis in accordance withdocumented investment strategies. For investments that are actively traded in organized financial markets,fair value is determined by reference to stock exchange quoted market prices at the close of business onthe financial statement date.



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d) Financial assets …continued

Investments at fair value through profit or loss …continued

For securities where there is no quoted market price, fair value has been estimated by management on thebasis of recent trades of the same investment or by reference to the current market value of otherinstruments with similar attributes. All marketable security transactions are recognized on the trade date.Realized and unrealized gains and losses are recorded in the consolidated statement of comprehensiveincome.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are notquoted in an active market.

Loans and receivables are carried at amortised cost less provision for impairment.

e) Impairment of assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. Ifsuch indication exists, or when annual impairment testing for an asset is required, the Group estimates theasset’s recoverable amount. An asset’s recoverable amount is the higher of fair value less costs to sell orits value in use. The recoverable amount is determined for an individual asset, unless the asset does notgenerate cash inflows that are largely independent of those from other assets.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is anyindication that previously recognized impairment losses may no longer exist or may have decreased.

If such indication exists, the Group makes an estimate of the recoverable amount. A previous impairmentloss is reversed only if there has been a change in the estimates used to determine the asset’s recoverableamount since the last impairment loss was recognized. If that is the case, the carrying amount of the assetis increased to its recoverable amount. That increased amount cannot exceed the carrying amount thatwould have been determined, net of depreciation, had no impairment loss been recognized for the asset inprior years. Such reversal is recognized in the consolidated statement of comprehensive income unless theasset is carried at revalued amount, in which case the reversal is treated as a revaluation increase.



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f) Derecognition of financial assets

A financial asset is derecognized when:

The rights to receive cash flows from the asset have expired; The Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay

them in full without material delay to a third party under a ‘pass-through’ arrangement; The Group has transferred its rights to receive cash flows from the asset and either has transferred

substantially all the risks and rewards of the asset, or has neither transferred nor retained substantiallyall the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its right to receive cash flows from an asset and has neither transferrednor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the assetis recognized to the extent of the Group’s continuing involvement in the asset. Continuing involvementthat takes the form of a guarantee over the transferred asset is measured at the lower of the originalcarrying amount of the asset and the maximum amount of consideration that the Group could be requiredto repay.

g) Revenue recognition

Premium income:

Premiums written are recognized on policy inception and earned on a pro rata basis over the term of therelated policy coverage. Estimates of premiums written as at the balance sheet date but not yet received,are assessed based on estimates from underwriting or past experience and are included in premiumsearned. Premiums ceded are expensed on a pro-rata basis over the term of the respective policy.

Investment income:

Interest income is recognized in the income statement for all interest bearing instruments on an accrualbasis using the effective yield method based on the initial transaction price.

Investment income also includes dividends when the right to receive payment is established.

h) Insurance and reinsurance contracts

Insurance and reinsurance contracts are defined as those containing significant insurance risk at theinception of the contract, or those where at the inception of the contract there is a scenario withcommercial substance where the level of insurance risk may be significant. The significance of insurancerisk is dependent on both the probability of an insured event and the magnitude of its potential effect.Once a contract has been classified as an insurance contract, it remains an insurance contract for theremainder of its lifetime, even if the insurance risk reduces significantly during the period.



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h) Insurance and reinsurance contracts …continued

At each financial statement date a liability adequacy test is performed to ensure the adequacy of insuranceliabilities. If the test indicates that the provision for claims and claims expenses is inadequate theliabilities are adjusted to correct the deficiency with the resulting charge being included in the statement ofcomprehensive income.

In the normal course of business, the Group seeks to reduce the losses to which it is exposed that maycause unfavorable underwriting results by reinsuring a certain level of risk with reinsurance companies.Reinsurance premiums are accounted for on a basis consistent with that used in accounting for the originalpolicies issued and or the terms of the reinsurance contracts. The Group may receive a ceding commissionin connection with ceded reinsurance, which is earned in a manner consistent with the premiums ceded.

Reinsurance contracts ceded do not relieve the Group from its obligations to policyholders. The Groupremains liable to its policyholders for the portion reinsured, to the extent that the reinsurers do not meet theobligations assumed under the reinsurance agreements.

i) Unearned premium reserve

Written premiums in respect of insurance business are reflected in the financial statements evenly over theterms of the policies. Unearned premiums represent the unearned portion of the premiums written onpolicies in force at the end of the year.

At each financial statement date, a liability adequacy test is performed, to ensure the adequacy of unearnedpremiums net of related deferred acquisition costs. In performing the test, current best estimates of futurecontractual cash flows, claims handling and policy administration expenses, as well as investment incomefrom assets backing such liabilities, are used. Any inadequacy is immediately charged to the consolidatedstatement of comprehensive income by establishing an unexpired risk provision.

j) Outstanding claims reserve and property catastrophe reserve

Outstanding claims consist of estimates of the ultimate cost of claims incurred that have not been settled atthe financial statement date, whether reported or not, together with related claims handling costs.Significant delays may be experienced in the notification and settlement of certain types of generalinsurance claims, such as general liability business. Outstanding claims reserves are not discounted for thetime value of money.

Estimates are calculated using methods and assumptions considered to be appropriate to the circumstancesof the Group and the business undertaken. This provision, while believed to be adequate to cover theultimate cost of losses incurred, may ultimately be settled for a different amount. It is continuallyreviewed and any adjustments are recorded in operations in the period in which they are determined.

Unallocated loss adjustment expenses (ULAE) are included in the outstanding claims reserve at year end.The estimate of the reserve is arrived at by examining the overhead expenses allocated to the claimsfunction. This estimate is reviewed by the actuary annually.



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j) Outstanding claims reserve and property catastrophe reserve …continued

The principal assumption underlying the estimates is past claims development experience. This includesassumptions in respect of average claim costs and claim numbers for each accident year. In addition,larger claims are separately assessed by loss adjusters. Judgment is used to assess the extent to whichexternal factors such as judicial decisions and government legislation affect the estimates. The ultimateliabilities will vary as a result of subsequent developments. Differences resulting from reassessment of theultimate liabilities are recognized in subsequent periods.

In addition to the above reserves, the Group transfers from its retained earnings, as permitted inSection 155 of the Insurance Act, 1996 - 32, 25% of net premium income earned arising from its propertybusiness into a reserve established to cover claims made by the Group’s policyholders arising from acatastrophic event, which is included as a separate component of equity.

k) Amounts receivable from reinsurance companies

Amounts receivable from reinsurance companies consist primarily of amounts due in respect of cededinsurance liabilities. Recoverable amounts are estimated in a manner consistent with the outstandingclaims reserve or settled claims associated with the reinsured policies and in accordance with the relevantreinsurance contract.

If amounts receivable from reinsurance companies are impaired, the Group reduces the carrying amountaccordingly and recognizes an impairment loss in the consolidated statement of comprehensive income. Areinsurance asset is impaired if there is objective evidence that the Group may not receive all, or part, ofthe amounts due to it under the terms of the reinsurance contract.

l) Deferred acquisition costs and reinsurance commissions

Deferred acquisition costs, which are reflected net of deferred reinsurance commission income, andincluded in other accounts receivable, relate to commissions and other costs of acquiring insurance whichvary with, and are primarily related to, the production of new and renewal business. Acquisition costs onpremiums written and reinsurance commissions vary with and are directly related to the production ofbusiness. These costs and revenues are deferred and recognised over the period of the policies to whichthey relate.



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m) Currency

Functional and presentation currency

These financial statements are expressed in Barbados dollars which in the Group’s presentationalcurrency.

The results and financial position of the various agents and branches that have a functional currency otherthan the Group’s presentational currency are translated as follows:

i) Income, other comprehensive income, movements in equity and cash flows are translated at averageexchange rates for the year.

ii) Assets and liabilities are translated at the exchange rates ruling on September 30.iii) Resulting exchange differences are recognised in other comprehensive income.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange ratesprevailing at the date of the transactions. Foreign exchange gains and losses resulting from the settlementof such transactions and from the translation at year-end exchange rates of monetary assets and liabilitiesdenominated in foreign currencies are recognised in the statement of comprehensive income.

Translation differences on non-monetary financial assets and liabilities carried at fair value such asequities held at fair value through profit or loss are recognised as part of the fair value gain or loss in thestatement of comprehensive income.

n) Premium and other receivables

Premium and other receivables are initially recognised at fair value and subsequently measured atamortised cost using the effective interest method, less provision for impairment. A provision forimpairment of receivables is established when there is objective evidence that the Group will not be able tocollect all amounts due according to the original terms of receivables. Significant financial difficulties ofthe debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default ordelinquency in payments are considered indicators that the trade receivable is impaired. The amount ofthe provision is the difference between the asset’s carrying amount and the present value of estimatedfuture cash flows, discounted at the effective interest rate. The amount of the provision is recognised inthe consolidated statement of comprehensive income within ‘selling, general and administration expenses’.



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o) Property, plant and equipment

Property, plant and equipment including freehold land and buildings are recognised initially at cost. Landand buildings are revalued periodically to reflect market conditions based on directors’ valuations whichare reviewed for reasonableness by a qualified independent valuer.

Increases in the carrying amount arising on revaluation of land and buildings are credited to othercomprehensive income and shown as revaluation surplus in equity. Decreases that offset previousincreases of the same asset are charged as other comprehensive income and debited against revaluationsurplus directly in equity, all other decreases are charged directly to income. Any accumulateddepreciation at the date of revaluation is eliminated against the gross carrying amount of the asset, and thenet amount is compared to the revalued amount of the asset. Upon disposal, any revaluation surplusrelating to the particular asset being sold is transferred to retained earnings.

Plant and equipment is stated at cost, excluding the costs of day-to-day servicing, less any accumulateddepreciation and accumulated impairment in value. Subsequent expenditure related to repairs andmaintenance is expensed during the financial period in which they are incurred. The carrying values ofplant and equipment are reviewed for impairment when events or changes in circumstance indicate that thecarrying amount may not be recoverable. Gains and losses on disposals are computed as the differencebetween carrying amounts and proceeds received and are included in the statement of comprehensiveincome.

Depreciation is provided on buildings on a straight line basis over a period of 50 years. Depreciation ofgeneral equipment is provided on a straight-line basis at rates varying from 10% to 25% to write off thecost of the assets over their estimated useful lives.

p) Current and deferred income tax

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted atthe financial statement date in the countries where the Group operates and generates taxable income.

Deferred income tax is provided in full, using the liability method, on temporary differences arisingbetween the tax bases of assets and liabilities and their carrying amounts in the financial statements.Deferred income tax is determined using tax rates (and laws) that have been enacted or substantiallyenacted by the balance sheet date and are expected to apply when the related deferred income tax asset isrealised or the deferred income tax liability is settled.

The principal temporary differences arise from depreciation on property, plant and equipment and taxlosses carried forward. Deferred tax assets relating to the carry forward of unused tax losses arerecognised to the extent that it is probable that future taxable profit will be earned against which theunused tax losses can be utilised.



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q) Pension plan

Pension obligations

The Group’s pension scheme is generally funded through payments to insurance companies or trustee-administered funds, determined by periodic actuarial calculations. The Group has both defined benefit anddefined contribution plans. A defined contribution plan is a pension plan under which the Group paysfixed contributions into a separate entity. The Group has no legal or constructive obligations to payfurther contributions if the fund does not hold sufficient assets to pay all employees the benefits relating toemployee service in the current and prior periods. A defined benefit plan is a pension plan that is not adefined contribution plan.

Defined benefit plans define an amount of pension benefit that an employee will receive on retirement,usually dependent on one or more factors such as age, years of service and compensation. The liabilityrecognised in the consolidated statement of financial position in respect of defined benefit pension plans isthe present value of the defined benefit obligation at the consolidated financial statement date less the fairvalue of plan assets. The defined benefit obligation is calculated annually by independent actuaries usingthe projected unit credit method. The present value of the defined benefit obligation is determined bydiscounting the estimated future cash outflows using interest rates of long-term government securities thatare denominated in the currency in which the benefit will be paid, and that have terms to maturityapproximating the terms of the related pension liability. All actuarial gains and losses arising fromexperience adjustments and changes in actuarial assumptions are charged or credited to equity in othercomprehensive income in the period in which they arise. Past service costs are recognised immediately inthe consolidated statement of income.

For defined contribution plans, the Group pays contributions to administered pension insurance plans. TheGroup has no further payment obligations once the contributions have been paid. The contributions arerecognised as employee benefit expense when they are due. Prepaid contributions are recognised as anasset to the extent that a cash refund or a reduction in the future payments is available.

Other post-employment obligations

The Group provides post-retirement healthcare benefits through the Massy Barbados Medical Scheme totheir retirees and registered dependants. The entitlement to these benefits is usually conditional on theemployee remaining in service up to retirement age and the completion of a minimum service period. Theexpected costs of these benefits are accrued over the period of employment using the same accountingmethodology as used for defined benefit pension plans. Actuarial gains and losses arising from experienceadjustments and changes in actuarial assumptions are charged or credited to the statement ofcomprehensive income in the period in which they arise. These obligations are valued by independentqualified actuaries.



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q) Pension plan …continued

Bonus plans

The Group recognises a liability and an expense for bonuses when at least one of the following conditionsis met:

There is a formal plan and the amounts to be paid are determined before the time of issuing thefinancial statements; or

Past practice has created a valid expectation by employees that they will receive a bonus and theamount can be determined before the time of issuing the financial statements.

Liabilities for bonus plans are expected to be settled within 12 months and are measured at the amountsexpected to be paid when they are settled.

r) Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor areclassified as operating leases. Payments made under operating leases (net of any incentives received fromthe lessor) are charged to the statement of comprehensive income on a straight line basis over the period ofthe lease.

s) Dividend distributions

Dividend distributions on the Group’s common shares are recorded in the period in which the directorsapproved the declaration of the dividend.

t) Provisions

Provisions are recognised when: the Group has a present legal or constructive obligation as a result of pastevents; it is more likely than not that an outflow of resources will be required to settle the obligation; andthe amount has been reliably estimated. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required insettlement is determined by considering the class of obligations as a whole. A provision is recognisedeven if the likelihood of an outflow with respect to any one item included in the same class of obligationsmay be small.

Provisions are measured at the present value of the expenditures expected to be required to settle theobligation using a pre-tax rate that reflects current market assessments of the time value of money and therisks specific to the obligation. The increase in the provision due to passage of time is recognised asinterest expense.



(15)


u) Intangible assets

Intangible assets represent customer lists acquired on acquisition of the rights, benefits and interests ininsurance portfolios. These are initially recognised at fair value and amortised on a straight line basis overthe estimated useful life of the assets.

3 Significant accounting judgments, estimates and assumptions

The preparation of the Group’s financial statements requires management to make judgments, estimates andassumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure ofcontingent liabilities, at the reporting date. However, uncertainty about these assumptions and estimates couldresult in outcomes that could require a material adjustment to the carrying amount of the asset or liabilityaffected in the future.

Liabilities on insurance contracts

The estimation of the ultimate liability arising from claims made under insurance contracts is a criticalaccounting estimate. There are several sources of uncertainty that need to be considered in the estimate of theliability that the Group will ultimately pay for such claims.

Claim liabilities are based on estimates due to the fact that the ultimate disposition of claims incurred prior tothe date of the financial statements, whether reported or not, is subject to the outcome of events that may notyet have occurred. The estimated cost of claims include direct expenses to be incurred in settling claims, net ofthe expected subrogation value and other recoveries. Significant delays are experienced in the notification andsettlement of certain types of claims, particularly in respect of casualty contracts. Events which may affect theultimate outcome of claims include inter alia, jury decisions, court interpretations, legislative changes andchanges in the medical condition of claimants.

Management engages an independent actuary to assist in the computation of the estimate of claim liabilities.The ultimate liability arising from claims may be mitigated by recovery arising from reinsurance contracts held.

Post- retirement benefits

The cost of the defined benefit pension plan and other post employment medical benefits is determined usingactuarial valuations. These actuarial valuations involve making assumptions about discount rates, expectedrates of return on assets of the plan, future pension increases, future salary increases, proportion of employeesopting for early retirement, future changes in the NIS ceiling and inflation. Due to the long-term nature of theplan, such estimates are subject to significant uncertainty. Assumptions used are disclosed in Note 13.

Revaluation of property, plant and equipment

The Group carries its land and buildings at fair value, with changes in fair value being recognized in othercomprehensive income. The Group utilizes independent valuers, but the nature of the process is such that it issubject to significant judgment, for example through the use of valuation techniques where there is a lack ofcomparable market data.



(16)

4 Cash and cash equivalents

2016$

2015$

Cash on hand 13 18Cash at bank and short-term deposits 58,474 52,146

58,487 52,164

The cash and short-term deposits with an original maturity of less than 90 days earned interest at varying ratesbetween 0.05% and 0.25% (2015 - 0.05% and 0.25%) per annum.

The cash and short-term deposits are held across countries in which the Group conducts its business.

5 Short-term deposits

The majority of these deposits mature after 90 days, and within one year of the financial statement date, exceptfor a few held as statutory deposits which have maturity dates more than one year but less than three years. Theinterest rates on these deposits ranged from 0.05% and 4.00% (2015 - 0.20% to 5.50%) per annum.

The Group’s deposits are held at financial institutions throughout the Caribbean region.

6 Accounts receivable

2016$

2015$

Amounts receivable from reinsurance companies (see below) 83,091 101,506Amounts receivable from policyholders and brokers 62,892 63,645Other accounts receivable 20,463 10,456

166,446 175,607

The following amounts are included in other accounts receivable:

2016$

2015$

Deferred acquisition costs 17,691 17,336Deferred reinsurance commission income (12,134) (12,155)

5,557 5,181



(17)

6 Accounts receivable …continued

Amounts receivable from reinsurance companies is comprised as follows:

2016$

2015$

Reinsurers’ share of outstanding claims reserves (note 11) 20,255 10,840Reinsurers’ share of unearned premium reserves (note 11) 62,836 90,666

83,091 101,506

Amounts receivable from policyholders and brokers are generally non-interest bearing and on 30 - 90 dayterms.

As at September 30, 2016, receivables with a nominal value of $14,965 (2015 - $14,382) were impaired andprovided for in the amounts of $9,165 (2015 - $8,902). Movements in the provision for impairment ofreceivables were as follows:

2016$

2015$

As of October 1 8,902 8,550Charge for the year 263 352

As of September 30 9,165 8,902

As of September 30, 2016 and 2015, the aging analysis of amounts due from policyholders and brokers thatwas past due but not impaired is as follows:

Past due but not impaired

Total$

1 - 30 days$

30 - 60 days$

60 - 90 days$

Over90 days

$

2016 44,311 8,288 7,603 14,037 14,383

2015 43,931 5,833 14,051 3,873 20,174

With respect to amounts due from policyholders and brokers, that are past due but not impaired, there are noindications as of the reporting date that the debtors will not meet their payment obligations.



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7 Financial assets

The Group’s mortgages, bonds, debentures and treasury bills yield income at a rate of interest, which reflects thenature, security and market conditions prevailing at the time of issue or renewal. Mortgages are repayable overthe period to maturity in annual instalments. Bonds, debentures and treasury bills are repayable in full onmaturity. The initial period to maturity does not exceed twenty years for bonds, debentures, treasury bills andmortgages. Coupon rates from fixed rate investments range between 0% and 9.75% (2015 - 3.00% and 9.75%)per annum.

Investments are comprised as follows:

Carryingvalue

$Fair value

$

September 30, 2016

Fair value through income statement:Quoted equities 38,252 38,252Quoted bonds 5,514 5,514

43,766 43,766

Loans and receivables:Government debentures, guaranteed bonds, deposits,treasury bills and notes 78,222 81,958Corporate bonds and debentures 20,710 21,581Mortgage loans 1,935 1,935

100,867 105,474

Accrued interest 3,627 3,627

148,260 152,867



(19)

7 Financial assets …continued

Investments are comprised as follows:

Carryingvalue

$Fair value

$

September 30, 2015

Fair value through income statement:Quoted equities 38,135 38,135

Loans and receivables:Government debentures, guaranteed bonds, deposits,treasury bills and notes 96,068 118,181Corporate bonds and debentures 10,288 13,186Mortgage loans 2,056 2,056

108,412 133,423

Accrued interest 4,642 4,642

151,189 176,200



(20)

7 Financial assets …continued

Couponrate

Current$

1 to 5years

$

Over 5years

$Total

$

September 30, 2016

Interest bearing assets:Quoted bonds 0% 5,514 – – 5,514Debentures 5.88 - 8.50% 1,000 7,000 11,500 19,500Treasury bills, notes andDeposits 3.00 - 8.50% 1,667 21,256 11,085 34,008Bonds 2.80 - 9.75% 419 19,823 25,182 45,424Mortgages 6.00 - 8.50% – 257 1,678 1,935

8,600 48,336 49,445 106,381

September 30, 2015

Interest bearing assets:Debentures 5.25 - 8.50% – 7,111 11,500 18,611Treasury bills, notes andDeposits 3.00 - 8.50% 7,735 10,132 10,775 28,642Bonds 4.25 - 9.75% 3,844 17,355 37,904 59,103Mortgages 6.00 - 8.50% – 189 1,867 2,056

11,579 34,787 62,046 108,412

Investment income is comprised as follows:

2016$

2015$

Interest on deposits 292 812Interest on bonds, debentures and notes 6,099 6,417Interest on mortgages 104 108Interest on term payments for premium policies 635 694Dividends received 193 132Bank (charges)/interest (31) 141Premium on debentures (67) (18)Unrealised gain/(loss) on investments 1,360 (682)Realised gain on disposal of investments 41 122

8,626 7,726



(21)

8 Investment in associated companies

2016$

2015$

At beginning of year 5,845 5,379Share of income 788 696Dividends from associated companies (44) (230)

6,589 5,845

Associated companiesShare of associates’ statement of financial position:

Current assets 43,591 40,983Non-current assets 246 321Current liabilities (822) (19)Non-current liabilities (36,426) (35,440)

Net assets 6,589 5,845

Share of the associates’ revenue and profitRevenue 3,717 3,587Net income 788 696



(22)

9 Property and equipment

Generalequipment

$

Freeholdland andbuildings

$Total

$

Year ended September 30, 2016

Opening net book value 7,000 18,714 25,714Additions 2,580 – 2,580Disposals (61) – (61)Depreciation charge (886) (282) (1,168)

Closing net book value 8,633 18,432 27,065

At September 30, 2016

Cost/revaluation 16,842 19,280 36,122Accumulated depreciation (8,209) (848) (9,057)

Net book value 8,633 18,432 27,065

Year ended September 30, 2015

Opening net book value 4,194 18,997 23,191Additions 3,507 – 3,507Disposals – – –Depreciation charge (701) (283) (984)

Closing net book value 7,000 18,714 25,714

At September 30, 2015

Cost/revaluation 14,323 19,280 33,603Accumulated depreciation (7,323) (566) (7,889)CheckNet book value 7,000 18,714 25,714

In 2013, the Group had its freehold land and buildings revalued by an independent valuer at $19,280. The fairvalue has been designated as level 3 within the fair value hierarchy as it was determined from inputs that arenot based on observable market data.



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9 Property and equipment …continued

See below for the cumulative valuation adjustments, which are included in the revaluation surplus:

$

Valuation at 1996 1,043Valuation at 2006 255Valuation at 2008 9,864Valuation at 2013 177

11,339

10 Taxation

The tax charge is comprised as follows:

2016$

2015$

Current tax 2,186 1,588Deferred tax 2,387 1,381

4,573 2,969

2016$

2015$

Deferred tax asset:Balance - beginning of year 5,360 6,585Deferred tax charge for the year - through statement of income (2,387) (1,381)Deferred tax credit for the year - through othercomprehensive income – 156

Balance - end of year 2,973 5,360

The deferred tax asset comprises:

2016$

2015$

Accelerated depreciation (177) (17)Pension liability 1,923 1,926Provisions 117 502Unutilized tax losses 1,110 2,949

2,973 5,360



(24)

10 Taxation …continued

Tax losses of the Group which are available for set off against future taxable income for corporation tax purposes are as follows:

Incomeyear

Broughtforward

$Adjustments

$

Broughtforwardsub total

$Utilised

$Incurred

$

Carriedforward

$Expiry

date

2010 220 – 220 (220) – – 20162011 3,633 261 3,894 (2,637) – 1,257 20172012 4,963 – 4,963 (4,963) – – 20172013 490 – 490 – – 490 20192014 389 (389) – – – – n/a2015 476 1,513 1,989 – – 1,989 20212016 – – – – 30 30 2022

10,171 1,385 11,556 (7,820) 30 3,766

These losses are as computed by the Group in its corporation tax returns and have not yet been confirmed or disputed by the respective RevenueAuthorities. The company has not recognised a potential deferred tax asset of $2,866 (2015 - $1,999), arising from tax losses of $7,479 (2015 - $9,756),since it is uncertain that taxable income will be available in the respective territories against which the tax losses can be utilised before they expire.



(25)

10 Taxation …continued

The tax on the Group’s income before taxation differs from the theoretical amount that would arise using thebasic rate of corporation tax as follows:

2016$

2015$

Income before taxation 15,465 13,057

Tax calculated at a tax rate of 25% (1% United Reinsurance ICCInc.) 4,701 3,264Income taxed at other rates (1,470) (1,235)Tax allowances (27) (27)Income not subject to tax (879) (291)Share of income from associated companies (195) (166)Movement in deferred tax not recognised 754 397Overseas taxes not recoverable 338 –Items not deductible for tax 1,746 628Prior year (over)/under provisions of current and deferred tax (107) 399Losses expiring unutilised 72 –Interest on government bonds subject to tax at 12.5% (360) –

Tax charge 4,573 2,969

11 General insurance liabilities and insurance operations

2016$

2015$

Total outstanding claims 116,246 98,876Unearned premium reserve 109,140 130,865

225,386 229,741

The Group assumes property, auto, marine and general liability risks from third parties and related companies.The Group seeks to reduce the losses to which it is exposed by reinsuring certain level of risk with reinsurancecompanies.



(26)

11 General insurance liabilities and insurance operations …continued

Movement in total outstanding claims may be analyzed as follows:

Grossamount

$

Reinsurers’share

$Net

$

September 30, 2016

Balance - beginning of year 98,876 10,840 88,036Currency translation adjustment (921) (269) (652)Losses incurred 89,101 35,389 53,712Losses paid (70,810) (25,705) (45,105)

Balance - end of year 116,246 20,255 95,991

Grossamount

$

Reinsurers’share

$Net

$

September 30, 2015

Balance - beginning of year 102,875 24,281 78,594Losses incurred 56,609 11,943 44,666Losses paid (60,608) (25,384) (35,224)




(27)


Movement in insurance liabilities and reinsurance assets:

2016

Gross$

Reinsurance$

Net$

Total at beginning of year 98,876 10,840 88,036Translation adjustment (921) (269) (652)Losses paid or recovered during the year (70,810) (25,705) (45,105)

27,145 (15,134) 42,279

Increase in liabilities arising from- current year losses 44,830 13,182 31,648- prior year losses 45,269 22,338 22,931Decrease in IBNR & ULAE (998) (131) (867)

Loss and loss expenses for the year 89,101 35,389 53,712

Total at end of year 116,246 20,255 95,991

2015

Gross$

Reinsurance$

Net$

Total at beginning of year 102,875 24,281 78,594Losses paid or recovered during the year (60,608) (25,384) (35,224)

42,267 (1,103) 43,370

Increase in liabilities arising from- current year losses 38,016 7,018 30,998- prior year losses 30,106 16,638 13,468Decrease in IBNR & ULAE (11,513) (11,713) 200

Loss and loss expenses for the year 56,609 11,943 44,666

Total at end of year 98,876 10,840 88,036



(28)


Movement in the unearned premium reserve may be analyzed as follows:

Grossamount

$

Reinsurers’share

$Net

$

September 30, 2016

Balance - beginning of year 130,865 90,666 40,199Currency translation adjustment (2,226) (1,526) (700)Premiums written 227,937 122,610 105,327Premiums earned (247,436) (148,914) (98,522)


Grossamount

$

Reinsurers’share

$Net

$

September 30, 2015

Balance - beginning of year 124,546 95,611 28,935Premiums written 240,174 146,988 93,186Premiums earned (233,855) (151,933) (81,922)


12 Accounts payable

Accounts payable are comprised as follows:

2016$

2015$

Reinsurance creditors 16,160 32,383Profit commission payable to agents 966 905Other accounts payable 30,206 24,553

47,332 57,841



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13 Post-retirement benefits

i) Pension plan

The company operates a non-contributory defined benefit plan for its eligible employees, the assets ofwhich are held in a separate trustee-administered fund. The pension plan is funded by payments from theemployer, taking into account of the recommendations of independent qualified actuaries.

The last actuarial review of the pension plan for eligible employees was carried out as at September 30,2016 and the amounts recognised in the statement of financial position are as follows:

2016$

2015$

Present value of funded obligations 15,115 14,873Fair value of plan assets (9,595) (9,180)

Liability recognised 5,520 5,693

2016$

2015$

Accrued benefit obligationBenefit obligation at beginning of year 14,873 14,888Current service costs 217 241Interest cost 1,138 1,128Actuarial gains (298) (241)Benefit payments (815) (1,143)

Benefit obligation at the end of year 15,115 14,873

2016$

2015$

Plan assetsFair value at beginning of year 9,180 9,948Actual return on plan assets 836 (19)Employer contributions 398 401Other expenses (4) (7)Benefit payments (815) (1,143)

Fair value at end of year 9,595 9,180



(30)

13 Post-retirement benefits …continued

i) Pension plan …continued

The amounts recognised in the consolidated statement of comprehensive income are as follows:

2016$

2015$

Current service cost 217 241Interest on obligation 1,138 1,128Expected return on plan assets (695) (742)Other expenses 4 7

Total included in staff costs 664 634

The amounts recognised in other comprehensive income are as follows:

2016$

2015$

Expected return on plan assets 695 742Actual return on plan assets (836) 19Actuarial gains (298) (241)

(439) 520

The principal actuarial assumptions used were:

2016%

2015%

Assumed discount rate 7.75 7.75Expected return on plan assets 7.75 7.75Expected rate of future salary increases 2.00 2.00Expected inflationary salary increases 3.75 3.75Expected rate of pension increases 0.75 0.75Future changes in NIS ceiling 3.50 3.50

Expected contributions to the pension plan for the year ending September 30, 2017 are $368.



(31)



The composition of plan assets is as follows:

2016%

2015%

Cash and cash equivalents 3 –Equities 55 59Bonds 25 25Real estate 17 16Mortgage loans – –

Maturity:

The expected maturity analysis of undiscounted pension benefits is as follows:

1 year$

2 - 5 years$

6 - 10 years$

At September 30, 2016 742 3,697 7,148

At September 30, 2015 775 3,533 6,701

The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is:

Impact on defined benefit obligation

Change inAssumption

Increase inobligation

Decrease inObligation

Discount rate 1.00% 13,571 16,970Salary growth rate 0.50% 15,451 14,807Life expectancy 1 year 15,498 –

The above sensitivity analyses are based on a change in an assumption while holding all other assumptionsconstant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated.

When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions thesame method (present value of the defined benefit obligation calculated with the projected unit creditmethod at the end of the year) has been applied as when calculating the pension plan liability recognisedwithin the balance sheet.

The methods and types of assumptions used in preparing the sensitivity analysis did not change comparedto the previous period.



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Mortality:

Assumptions regarding future mortality are set based on actuarial advice in accordance with publishedstatistics and experience.

At September 30, 2016, a male aged 65 retiring has a life expectancy of 19.99 years while a female aged65 retiring has a life expectancy of 22.25 years.

Contributions to the Company’s defined contribution plan amounted to $137 (2015 - $135).

ii) Other post-retirement benefits

The Company offers post-retirement medical benefits to its employees, pensioners and their dependants.These medical benefits are offered under a scheme, which is insured with the Company.

The last actuarial review of the medical plan for eligible employees was carried out as at September 30,2016 and the amounts recognised in the balance sheet are determined as follows:

Post retirement medical plan

2016$

2015$

Present value of funded obligations 2,171 2,011Fair value of planned assets – –

Liability recognised on balance sheet 2,171 2,011

2016$

2015$

Accrued benefit obligationBenefit obligation at beginning of year 2,011 1,717Current service cost 93 63Interest cost 162 137Past service cost 51 22Actuarial (gains)/losses (117) 99Benefit payments (29) (27)

Benefit obligation at the end of the year 2,171 2,011



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ii) Other post-retirement benefits …continued

2016$

2015$

Plan assetsEmployer contributions 37 31Benefit payments (29) (27)Other expenses (8) (4)

Fair value at end of year – –

The amounts recognised in the consolidated statement of comprehensive income are as follows:

2016$

2015$

Current service cost 93 63Past service cost 51 22Interest on obligation 162 137Other expenses 8 4

Total included in staff costs 314 226

The amounts recognised in other comprehensive income are as follows:

2016$

2015$

Actuarial gains/(losses) (117) (99)

The principal actuarial assumptions used were:

2016%

2015%

Assumed discount rate 7.75 7.75Future medical claims/premium inflation 4.50 4.50



(34)


ii) Other post-retirement benefits …continued

The maturity analysis of undiscounted post-employment benefits is as follows:

1 year$

2 - 5 years$

6 - 10 years$

At September 30, 2016 65 343 756

At September 30, 2015 63 326 683

Items included in other comprehensive income that will not subsequently reclassified to income are asfollows:

2016$

2015$

Pension plan – adjustments 439 (520)Medical plan – actuarial (gains)/losses 117 (99)Deferred tax adjustments – 151

556 (468)

14 Share capital

Authorized:The Company is authorized to issue an unlimited number of shares of one class designated as ordinaryshares which have no par value.

Issued:2016

$2015

$

Common shares - 4,200,000 (2015 - 4,200,000) 8,900 8,900

No dividends were declared or paid in 2016. Dividends totalling $31million ($7.38 per share) were declaredand paid in 2015.



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15 Related party transactions

a) The Group provides insurance cover for its parent and fellow subsidiary companies. During the year, thetotal premiums charged amounted to $8,663 (2015 - $10,918).

b) Amounts due from or to related companies are interest free, unsecured and payable on demand.

c) Included in mortgages is an amount of $365 (2015 - $396) due by key management personnel.

d) During the year the company paid claims to related parties of $198 (2015 - $38).

e) The Group holds the following shares in companies which are associated with its ultimate Parent:

Number of shares Fair value

2016 2015 2016$

2015$

Almond Resorts Inc. 131,770 131,770 – –

Compensation of key management personnel

Key management personnel of the Group include all executive directors and senior management. The summaryof compensation of key management personnel for the year is as follows:

2016$

2015$

Salaries and other short-term employee benefits 3,782 4,063Post employment pension and medical benefits 118 141

3,900 4,204

16 Expenses by nature

2016$

2015$

Depreciation (note 9) 1,168 984Advertising costs 2,058 4,354Salaries and other employee benefits 16,844 15,781Provision for impairment of receivables 263 352Audit and consultancy fees 1,416 907Legal fees 85 945Other expenses 11,922 7,563

33,756 30,886



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17 Risk management

Governance framework

The primary objective of the Group’s risk and financial management framework is to protect the Group’sshareholders from events that hinder the sustainable achievement of financial performance objectives, includingfailing to exploit opportunities. Key management recognizes the critical importance of having efficient andeffective risk management systems in place.

The framework provides a basis for identification of risk and its interpretation, aligning underwriting andreinsurance strategy to corporate goals, and ensuring the appropriate quality and diversification of assetsthrough its investment policy guidelines.

Capital management framework

The Group’s objectives when managing its capital are:

To safe guard the Group’s ability to continue as a going concern so that it can continue to provide returnsfor shareholders and benefits for other stakeholders;

To comply with the capital requirements set by the regulators of the insurance market within which itoperates; and

To maintain a strong capital base to support the development of its business.

Capital adequacy is managed at the operating level and reviewed by management at least annually. Capitaladequacy is assessed from the perspective of the solvency requirements set out in the local Insurance Acts inBarbados and the other territories in which the Company operates.

Also, as part of assessing the adequacy of its capital base the Group retains the services of an independentactuarial firm to annually assess the adequacy of its insurance reserves.

The principal capital resources at the financial statement date are given below:

2016$

2015$

Shareholders’ equity 139,207 130,504



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17 Risk management …continued

Insurance risk

The primary risk the Group has through its insurance contracts is that the actual claims payments or timingthereof, differ from expectations. This is influenced by the frequency of claims, severity of claims, andsubsequent development of claims.

The aforementioned insurance risk exposure is also mitigated by diversification across a relatively largeportfolio of insurance contracts and geographical areas. The variability of risk is also augmented by carefulselection and execution of underwriting guidelines throughout our agency network, as well as the use ofreinsurance arrangements.

The majority of insurance business ceded is placed on a quota share basis with retention limits varying byproduct line and territory. The amounts recoverable from reinsurers are in accordance with reinsurancecontracts. Although the Group has reinsurance arrangements, it is not relieved of its direct obligations to itspolicyholders and thus a credit exposure exists with respect to ceded insurance, to the extent that any reinsureris unable to meet its obligations assumed under such reinsurance agreements.

The Group primarily issues the following types of general insurance contracts: motor, household, commercialand business interruption within the Caribbean region. The risks under these policies usually cover duration oftwelve months or less.

The most significant risk for these general insurance and reinsurance contracts arise from natural disasters.

The Group utilizes a claims review policy which concentrates on review of large and personal injury claimswhere there is the potential for greater exposure, and performs periodic review of claims handling proceduresthroughout the agency network. The Group also enforces a policy of actively managing its claims portfolio inorder to reduce its exposure to unpredictable future developments that can negatively impact the Group.

The Group has also limited its exposure by its utilization of reinsurance arrangements in order to limit exposureto catastrophic events. Amounts recoverable from reinsurers are estimated in a manner consistent with theoutstanding claims provision and are in accordance with the reinsurance contracts. The Group’s reinsurancecoverage is placed with reputable third party reinsurers.



(38)


Insurance risk …continued

The table below sets out the concentration of general insurance contract liabilities by type of contract.

2016 2015

Generalliabilities

$

Reinsurers’share of

liabilities$

Netliabilities

$

Generalliabilities

$


liabilities$

Netliabilities

$

Fire 25,013 (15,313) 9,700 16,507 (8,673) 7,834Motor 49,733 (94) 49,639 59,561 (4) 59,557Employers liability 20,190 – 20,190 11,077 (149) 10,928Engineering 3,122 (2,720) 402 1,529 (1,068) 461Other accident 16,152 (1,268) 14,884 8,527 (443) 8,084Marine 2,036 (860) 1,176 1,675 (503) 1,172

116,246 (20,255) 95,991 98,876 (10,840) 88,036

The geographical concentration of the Group’s general insurance contract liabilities is noted below. Thedisclosure is based on the countries where the business is written.

2016 2015

Generalliabilities

$


liabilities$

Netliabilities

$

Generalliabilities

$


liabilities$

Netliabilities

$

Barbados 54,947 (2,000) 52,947 52,069 (246) 51,823St. Lucia 4,051 (1,621) 2,430 3,255 (347) 2,908Antigua 2,998 (305) 2,693 3,818 (723) 3,095St. Vincent 1,050 (23) 1,027 818 (76) 742Trinidad 27,878 (10,983) 16,895 14,111 (4,686) 9,425Other Caribbean 21,040 (5,323) 15,717 20,523 (4,762) 15,761Asia and Europe 4,282 – 4,282 4,282 – 4,282

116,246 (20,255) 95,991 98,876 (10,840) 88,036



(39)



Sensitivities

If the insurance liabilities and related reinsurers’ share were to increase by 10%, the impact on income beforetax and equity would be as follows:

Change inassumptions

Impact ongross

liabilities$

Impact onreinsurers’

share$

Impact onincome

before tax$

Impact onequity

$

September 30, 2016

Average claim cost 10% 11,625 (2,026) 9,599 7,199

September 30, 2015

Average claim cost 10% 9,888 (1,084) 8,804 6,603

Massy United Insurance LtdNotes to Consolidated Financial StatementsSeptember 30, 2016


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Claims development table

The following tables show the estimate cumulative incurred claims, including both claims notified and IBNR for each successive accident year at eachfinancial statement date, together with cumulative payments to date. The liability in respect of prior years includes outstanding claims on theinternational inwards reinsurance program incurred prior to 2008 and on the regional insurance business incurred prior to 2006. This is due tolimitations on the availability of development data with regards to the inwards reinsurance program.

Gross

2007$

2008$

2009$

2010$

2011$

2012$

2013$

2014$

2015$

2016$

Total$

At end of accident year 49,764 90,490 41,493 47,058 86,327 41,173 44,676 55,002 65,724 87,775One year later 49,684 87,129 62,923 58,996 103,952 52,712 47,131 45,381 65,203Two years later 53,677 87,109 66,080 72,806 103,767 52,660 45,309 46,744Three years later 53,789 87,962 64,497 72,457 103,414 46,679 45,515Four years later 51,287 85,702 63,907 72,000 105,241 47,180Five years later 50,653 85,170 62,896 72,306 105,840Six years later 49,805 84,955 61,991 72,567Seven years later 49,722 85,128 62,191Eight years later 49,841 84,926Nine years later 50,121

50,121 84,926 62,191 72,567 105,840 47,180 45,515 46,744 65,203 87,775 668,062Cumulative payments to date 46,327 95,789 78,630 41,842 100,093 39,623 40,578 35,995 46,513 42,945 568,335

Liability recognized - c/fwd 3,794 (10,863) (16,439) 30,725 5,747 7,557 4,937 10,749 18,690 44,830 99,727



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Claims development table …continued

Gross …continued

2007$

2008$

2009$

2010$

2011$

2012$

2013$

2014$

2015$

2016$

Total$

Liability recognized - b/fwd 3,794 (10,863) (16,439) 30,725 5,747 7,557 4,937 10,749 18,690 44,830 99,727

Liability in respect of prioryears 16,519

Total liability 116,246

Net favourable (unfavourable) (357) 5,564 (20,698) (25,509) (19,513) (6,007) (839) 8,258 521development



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Gross less reinsurers’ share

2007$

2008$

2009$

2010$

2011$

2012$

2013$

2014$

2015$

2016$

Total$

At end of accident year 32,562 49,322 40,754 46,258 42,141 30,604 27,228 34,084 50,378 56,375One year later 32,083 52,599 58,592 51,076 64,596 33,367 30,415 33,295 47,732Two years later 32,553 53,433 58,630 64,601 65,233 35,038 28,507 32,544Three years later 33,150 55,387 57,312 64,241 65,092 36,490 28,492Four years later 34,344 53,556 56,635 63,971 67,129 37,062Five years later 33,767 53,007 55,735 64,246 67,759Six years later 33,144 52,804 54,865 64,785Seven years later 33,056 53,976 55,181Eight years later 32,883 52,783Nine years later 33,168

33,168 52,783 55,181 64,785 67,759 37,062 28,492 32,544 47,732 56,375 475,881Cumulative payments to date 29,684 63,684 71,729 34,135 36,781 28,910 47,742 24,084 31,696 24,727 393,172

Liability recognized - c/fwd 3,484 (10,901) (16,548) 30,650 30,978 8,152 (19,250) 8,460 16,036 31,648 82,709



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Gross less reinsurers’ share …continued

2007$

2008$

2009$

2010$

2011$

2012$

2013$

2014$

2015$

2016$

Total$

Liability recognized - b/fwd 3,484 (10,901) (16,548) 30,650 30,978 8,152 (19,250) 8,460 16,036 31,648 82,709

Liability in respect of prioryears 13,282

Total liability 95,991

Net favourable (unfavourable) (606) (3,461) (14,427) (18,527) (25,618) (6,458) (1,264) 1,540 2,646development



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Credit risk

The Group’s exposure to credit risk arises from the possibility that counterparties may default on theirproportion of obligations to the Group, this includes risks which the Group has reinsured. The amount of theGroup’s maximum exposure to credit risk is indicated by the carrying value of its financial assets.

The Group mitigates this risk through the mix of quality of the counterparties, in addition to the mix and qualityof its investment portfolio as shown in Note 7. The Group selects reinsurers with A.M. Best ratings A- orhigher.

The Group also accepts a limited number of risks which are reinsured 100% at inception. These risks areplaced with various reinsurers whose A.M. Best ratings range from A+ to NR. In addition to the A.M. Bestrating, letters of credit or cash deposits may be utilised to mitigate credit risk.

Additional information on the credit risk for trade receivables at the reporting date is disclosed at Note 6.

The total assets bearing credit risk are as follows:

2016$

2015$

Cash and cash equivalents (note 4) 58,487 52,164Short-term deposits (note 5) 22,994 25,328Accounts receivable (note 6) 98,053 79,760Financial assets (note 7) 110,008 113,054

289,542 270,306

Credit risk related to financial assets and cash and short-term deposits

The Group’s exposure to individual counterparty credit risk on its cash and cash equivalents and short-termdeposits exceeding 10% of the total balance is set out below.

2016$

2015$

Guardian Holdings Ltd – 3,492Merrill Lynch 8,222 –CIBC FirstCaribbean International Bank 34,091 14,760Royal Bank of Canada (RBTT) 15,103 6,092Scotia Bank 2,423 6,594Signia Financial Group Inc – 3,001



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Credit risk …continued

a) Cash and cash equivalents and short-term deposits are held with reputable financial institutions with norecent history of default.

The geographic concentration of loans and receivables which includes debentures, bonds, treasury bills,deposits and mortgages is as follows:

2016$

2015$

Barbados 49,029 48,286Trinidad & Tobago 24,384 18,718St. Lucia 17,659 15,416Aruba 2,025 2,024Bahamas 3,508 3,941

St. Vincent 311 448Grenada 836 2,848Other countries 6,694 14,675

104,446 106,356

Barbados 1,484 1,580Grenada 451 476

Total mortgages 1,935 2,056

The most significant concentrations of financial assets held by the Company subject to credit risk areinstruments issued by the Governments of Barbados, Trinidad and Tobago and St Lucia.

The total exposures and related credit ratings are outlined below:

2016$

2015$

Government of Barbados (S&P rating B-) 27,143 38,203Government of Trinidad and Tobago (S&P rating A-) 10,976 8,781Government of St. Lucia (S&P rating - NR) 17,659 18,981

55,778 65,965



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Credit risk …continued

Credit risk on reinsurance balances

b) The concentrations of credit risk exposures held by insurers may be expected to be greater than thoseassociated with other industries, due to the specific nature of insurance and reinsurance markets. TheGroup interacts with a number of counterparties who may be exposed to a single localised ormacroeconomic change. The key exposure to credit risk is the reinsurer’s share of insurance liabilities.

The effect of a 10% default by reinsurers on the Group’s financial position is as follows:

2016$

2015$

Reinsurer’s share of outstanding claims reserves 2,026 1,084

Liquidity risk

The Group is exposed to calls on its available cash resources mainly from claims arising from insurancecontracts. Liquidity risk is the risk that cash may not be available to pay obligations when due at a reasonablecost. The Group mitigates liquidity risk by holding highly liquid financial assets which may be sold quickly inresponse to needs for liquidity.

The table below summarizes the expected settlement of financial and insurance liabilities:

<1 year$

1 - 5 years$

>5 years$

Total$

September 30, 2016

Accounts payable 47,332 – – 47,332General insurance liabilities:Total outstanding claims 43,144 50,807 22,295 116,246

90,476 50,807 22,295 163,578

September 30, 2015

Accounts payable 57,841 – – 57,841General insurance liabilities:Total outstanding claims 36,016 43,668 19,192 98,876

93,857 43,688 19,192 156,717



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Financial risk

In the course of its business, the Group engages in the purchase and sale of securities and is subject tosignificant market risk arising from fluctuations in the market value of these securities. Market risk comprisesinterest rate, foreign currency and price risk and is the risk that the fair value of future cash flows of a financialinstrument will fluctuate because of changes in market prices.

The Group is exposed to financial risk through its financial assets and liabilities. In particular, the key financialrisk is that the proceeds from its financial assets are not sufficient to fund the obligations arising from theinsurance contracts. The most important components of this financial risk are described below.

Interest rate risk

Differences in contractual re-pricing on maturity dates and changes in interest rates may expose the Group tointerest rate risk. Interest rate risk is the risk that the fair value of future cash flows of a financial instrumentwill fluctuate because of changes in market interest rates. The Group is not exposed to material fair value orcash flow interest rate risk as most of its debt instruments bear interest at fixed rates. Management believes thatthis risk is managed through effective matching of portfolio investments with liability attributes. The Groupmonitors the sensitivity of interest rate movements by analyzing investment returns on a regular basis anddiscussing market trends with the investment managers.

The Group holds $5,514 (2015 - $Nil) of quoted bonds which are carried at fair value (note 7).

Currency risk

Currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate becauseof changes in foreign exchange rates.

The Group utilizes the Barbados dollar as its presentational currency, but some transactions are carried out invarious other currencies which include Eastern Caribbean, Trinidad & Tobago and United States dollars. Withthe exception of the Trinidad and Tobago dollar, all of the currencies are pegged to the United States dollar andas a result the Group is not exposed to material foreign currency risk.

Further since the Group’s financial assets are primarily denominated in the same currencies as its insuranceliabilities, any residual risk is further mitigated.



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Financial risk …continued

Currency risk …continued

The table below discloses the Group’s assets and liabilities denominated by major currency expressed in Barbados dollars.

Barbados$

EasternCaribbean

$Trinidad

$

UnitedStates

$Belizean

$

Arubaand

Curacao$

Guyana$

Total$

September 30, 2016

Total assets 152,030 45,177 38,167 158,856 7,836 32,515 1,324 435,905

Total liabilities 108,423 34,819 57,263 34,914 6,755 31,096 7,386 280,656

September 30, 2015

Total assets 165,351 43,882 48,126 150,266 8,236 24,046 2,184 442,091

Total liabilities 118,548 37,630 54,784 49,876 4,002 25,508 5,138 295,486



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Currency risk …continued

The operating currencies which fluctuate against the Barbados dollar are the Trinidad and Guyana dollars. Thetable below shows the net exposure to foreign currency balances for the Trinidad and Guyana branch operationswhen retranslated to Barbados dollars.

Trinidad$

Guyana$

Total$

2016 (19,096) (6,062) (25,158)

2015 (6,658) (2,954) (9,612)

The approximate effects of a 5% and 10% appreciation or depreciation in Trinidad and Guyana dollar relativeto Barbados dollar on the Group’s financial position is as follows:

2016$

2015$

Appreciation or depreciation of 5% (1,258) (481)Appreciation or depreciation of 10% (2,516) (962)

Price risk

Fair value amounts represents estimates of the consideration that would currently be agreed upon betweenknowledgeable, willing parties who are under no compulsion to act and is best evidenced by a quoted marketvalue, if one exists. The market value of the Group's reported investments are disclosed in note 7 of thefinancial statements. The carrying value of all other financial instruments approximates fair value.

The Group’s investment portfolio is exposed to price risk arising from changes in the market values of theequity securities. The effect of a 5% across the board decline in equity prices on the Group’s net assets wouldbe $1,913 and $1,907 for the years ended September 30, 2016 and 2015, respectively.



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Fair value of financial assets and liabilities

Set out below is a comparison by category of carrying amounts and fair values of all the Group’s financialinstruments that are carried in the financial statements:

Carrying amount Fair value

2016$

2015$

2016$

2015$

Financial assetsCash and cash equivalents 58,487 52,164 58,487 52,164Short-term deposits 22,994 25,328 22,994 25,328Financial assets 148,260 151,189 152,867 176,637Accounts receivable 103,610 84,941 103,610 84,941

Financial liabilitiesAccounts payable 47,332 57,841 47,332 57,841

The carrying amounts of financial assets and liabilities comprising of the Group’s cash and short-term deposits,accounts receivable, accounts payable and bank overdrafts approximate their fair values because of their short-term maturities.

The financial assets carried at fair value by the Group include marketable securities designated as fair valuethrough the profit or loss. The Group has no financial liabilities carried at fair value.

The table below analyses the Group’s financial instruments carried at fair value, by valuation method. Thedifferent levels have been defined as follows:

Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1). Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either

directly (that is, as prices) or indirectly (that is, derived from prices) (level 2). Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs)

(level 3).



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Fair value of financial assets and liabilities …continued

The following table presents the Group’s assets and liabilities that are measured and carried at fair value withinthe financial statements.

Level 1$

Level 2$

Level 3$

Total$

September 30, 2016Quoted equities 17,178 21,023 51 38,252Quoted bonds 5,514 – – 5,514

Total 22,692 21,023 51 43,766

September 30, 2015

Quoted equities 11,537 26,547 51 38,135

The fair value of financial instruments traded in active markets is based on quoted market prices at the financialstatement date. The quoted market price used for financial assets held by the Group is the current bid price.These instruments are included in level 1. Level 1 marketable securities consist mainly of investmentsregularly traded on regional stock exchanges.

The fair value of financial instruments that are not traded in an active market is determined by using valuationtechniques. These valuation techniques maximise the use of observable market data where it is available andrely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrumentare observable, the instrument is included in level 2. Level 2 marketable securities consist mainly ofinvestments in mutual funds where net asset values are published and are readily available.

If one or more of the significant inputs is not based on observable market data, the instrument is included inlevel 3. Level 3 marketable securities consist mainly of untraded investments.

There were no significant transfers of assets between levels during the year.



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Fair value of financial assets and liabilities …continued

The following table presents the Group’s assets and liabilities which are carried at amortised cost but for whichfair value disclosure is included in the financial statements.

Level 1$

Level 2$

Level 3$

Total$

September 30, 2016

Loans and receivables – 54,617 49,877 104,494

September 30, 2015

Loans and receivables – 46,162 62,250 108,412

These items are comprised primarily of corporate and government agency instruments issued in the Caribbean,with significant amounts in Barbados. The fair values of level 3 instruments have been primarily derived frommarket yields of instruments of similar durations in the country of issue. Level 2 instruments are primarilycomprised of deposits.

18 Commitments and contingencies

Contingencies bank

a) In accordance with the terms of a reinsurance agreement with a ceding Company and the regulatoryrequirements for the Group’s general insurance business written in one of the Caribbean territories, theGroup has provided security in the form of a letter of credit in the amount of $2,786 (2015 - $2,852). AtSeptember 30, 2016, the equivalent of $5,000 (2015 - $5,000) in investments had been pledged as security.

b) The Group is subject to legal proceedings and claims that arise in the ordinary course of business. In theopinion of management, the aggregate liability if any, with respect to these matters, will not have amaterially adverse effect on the financial position or results of operations of the Group.



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19 Statutory restrictions on assets

The Group is registered to conduct insurance business under legislation in each relevant jurisdiction. Thislegislation may prescribe a number of requirements with respect to deposits, investment of funds and solvencyfor the protection of policy holders.

In order to satisfy the legislative requirements of the various jurisdictions, investments and cash totalling$82,700 (2015 - $84,546) have been deposited or are held in trust to the order of the regulators.

20 Intangible assets

During the year the Group acquired the rights, benefits and interests in the customer lists of its Guyana agentfor $1,600. The purchase price of the customer list has been recorded as an intangible asset and will beamortised over a period of ten years.

Massy United Insurance Ltd. · Massy United Insurance Ltd. Notes to Consolidated Financial Statements September 30, 2016 (expressed in thousands of Barbados dollars) (1) 1 Incorporation,

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