TAKAFUL PAKISTAN LIMITED ANNUAL REPORT 2016
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
Takaful Pakistan Limited
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
Takaful Pakistan Limited
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
Takaful Pakistan Limited
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.
Takaful Pakistan Limited
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
7
8
9
10
Takaful Pakistan Limited
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
TAKAFUL PAKISTAN LIMITED
11
Takaful Pakistan Limited
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
13
14
15
16
17
18
19
20
21
22
23
24
Takaful Pakistan Limited
Annual Report 2016
TAKAFUL PAKISTAN LIMITED
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)----------------------------------------------
Takaful Pakistan Limited
Annual Report 2016
TAKAFUL PAKISTAN LIMITED
BALANCE SHEET
AS AT 31 DECEMBER 2016
2015
Shareholders' Participants' Aggregate Aggregate
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
Takaful Pakistan Limited
Annual Report 2016
TAKAFUL PAKISTAN LIMITED
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
Investment income 9,196,273 10,450,111
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
The annexed notes from 1 to 30 form an integral part of these financial statements.
27
--------------------------------------------------------------(Rupees)-----------------------------------------------------------------------
Takaful Pakistan Limited
Annual Report 2016
TAKAFUL PAKISTAN LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2016
2016 2015
SHAREHOLDERS' FUND (SHF)
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
The annexed notes from 1 to 30 form an integral part of these financial statements.
28
………. (Rupees) ………
Takaful Pakistan Limited
Annual Report 2016
TAKAFUL PAKISTAN LIMITED
STATEMENT OF CHANGES IN EQUITY / FUND
FOR THE YEAR ENDED 31 DECEMBER 2016
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)
Balance as at 31 December 2015 300,000,000 (107,391,175) (20,238,961) 172,369,864
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 2016 300,000,000 (85,630,516) (34,835,319) 179,534,165
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
The annexed notes from 1 to 30 form an integral part of these financial statements.
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
Takaful Pakistan Limited
Annual Report 2016
TAKAFUL PAKISTAN LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2016
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 --------------------
Takaful Pakistan Limited
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)
Investment income 21,414,559 22,727,773
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
The annexed notes from 1 to 30 form an integral part of these financial statements.
Takaful Pakistan Limited
Annual Report 2016
TAKAFUL PAKISTAN LIMITED
STATEMENT OF CONTRIBUTIONS
FOR THE YEAR ENDED 31 DECEMBER 2016
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.
The annexed notes from 1 to 30 form an integral part of these financial statements.
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) --------------------------------------------------------------------------------------------------------------
Takaful Pakistan Limited
Annual Report 2016
TAKAFUL PAKISTAN LIMITED
STATEMENT OF CLAIMS
FOR THE YEAR ENDED 31 DECEMBER 2016
Business underwritten inside Pakistan
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
Note: The Company does not underwrite business outside Pakistan.
The annexed notes from 1 to 30 form an integral part of these financial statements.
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
Takaful Pakistan Limited
Annual Report 2016
TAKAFUL PAKISTAN LIMITED
STATEMENT OF EXPENSES - PARTICIPANTS' TAKAFUL FUND
FOR THE YEAR ENDED 31 DECEMBER 2016
Business underwritten inside Pakistan
Opening Closing
a b c d=a+b-c e f g=d+e-f
Direct and Facultative
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
Note: The Company does not underwrite business outside Pakistan.
The annexed notes from 1 to 30 form an integral part of these financial statements.
34
-------------------------------------------------------------------------------------(Rupees)------------------------------------------------------------------------------------------------
Class Gross wakala feeDeferred wakala fee Wakala fee
expired
Other direct
expenses
Rebate from
retakaful
operators *
Net underwriting expense
2016 2015
Takaful Pakistan Limited
Annual Report 2016
TAKAFUL PAKISTAN LIMITED
STATEMENT OF EXPENSES - SHAREHOLDERS' FUND
FOR THE YEAR ENDED 31 DECEMBER 2016
Business underwritten inside Pakistan
Opening Closing
a b c d = a+b-c e f = d+e
Direct and Facultative
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
Note: The Company does not underwrite business outside Pakistan.
The annexed notes from 1 to 30 form an integral part of these financial statements.
35
------------------------------------------------------------------------------------- (Rupees) ------------------------------------------------------------------------------------------
Class Commission paid
or payable
Deferred commission Net commission
expense
Other
management
expense
Net underwriting expense
2016 2015
Takaful Pakistan Limited
Annual Report 2016
TAKAFUL PAKISTAN LIMITED
STATEMENT OF INVESTMENT INCOME
FOR THE YEAR ENDED 31 DECEMBER 2016
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)
Net investment income 8,889,780 9,970,314
SHAREHOLDERS' FUND (SHF)
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)
Net investment income 9,196,273 10,450,111
The annexed notes from 1 to 30 form an integral part of these financial statements.
36
---------------------- Rupees -----------------------
Takaful Pakistan Limited
Annual Report 2016
37
TAKAFUL PAKISTAN LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
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
Takaful Pakistan Limited
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
Takaful Pakistan Limited
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)
Takaful Pakistan Limited
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
Takaful Pakistan Limited
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
Takaful Pakistan Limited
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.
Takaful Pakistan Limited
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.
Takaful Pakistan Limited
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).
Takaful Pakistan Limited
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.
Takaful Pakistan Limited
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
Takaful Pakistan Limited
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.
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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.
Takaful Pakistan Limited
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
Takaful Pakistan Limited
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.
Takaful Pakistan Limited
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.
Takaful Pakistan Limited
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
Takaful Pakistan Limited
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.
Takaful Pakistan Limited
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.
Takaful Pakistan Limited
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
Shareholders' Participants' Aggregate Aggregate
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)-------------------------------------
Takaful Pakistan Limited
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
Takaful Pakistan Limited
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:
Opening balance 1,580,780 8,431,428
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:
Opening balance 4,686,950 4,667,878
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
Takaful Pakistan Limited
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
Shareholders' Participants' Aggregate Aggregate
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
Takaful Pakistan Limited
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
Takaful Pakistan Limited
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.
Takaful Pakistan Limited
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
Takaful Pakistan Limited
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:
Takaful Pakistan Limited
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
Takaful Pakistan Limited
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.
Takaful Pakistan Limited
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
Takaful Pakistan Limited
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
Takaful Pakistan Limited
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)
Takaful Pakistan Limited
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.
Takaful Pakistan Limited
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)------------------------------------------------------------------
Takaful Pakistan Limited
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
Takaful Pakistan Limited
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 )------------------------------------------------
Takaful Pakistan Limited
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
Takaful Pakistan Limited
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
Financial liabilities
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)----------------------------------------------------------------------------------------------------------
Takaful Pakistan Limited
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
Financial liabilities
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
Takaful Pakistan Limited
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.
Takaful Pakistan Limited
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 _________________.