Qatar Re Annual Report 2015

Page 1

ANNUAL REPORT 2015 CREATING LASTING VALUE


About Qatar Re

Overview

1 2 4

About Qatar Re At a glance Creating lasting value

Strategy and performance

8 Letter from the Chairman of the Board of Directors and the Chief Executive Officer 10 Key events 11 Financial performance overview 14 Risk management

A GLOBAL MULTI-LINE REINSURER

Corporate governance

17 Board and Committee Structure 18 Board of Directors 20 Executive Committees

Key financial data 2011–2015 Gross written premiums in US$m

$1,156.2 2014: $535.9m

1,156.2

1,200 1,000 800

535.9

600

336.6

400

GLOBAL PRESENCE, CUSTOMER PROXIMITY

Financial statements

22 Independent Auditor’s Report 23 Consolidated statement of financial position 24 Consolidated statement of income 25 Consolidated statement of comprehensive income 25 Consolidated statement of changes in equity 26 Consolidated statement of cash flows 27 Notes to the consolidated financial statements

Qatar Re, licensed as a Class 4 Insurer by the Bermuda Monetary Authority, is a global multi-line reinsurer writing all major property & casualty and specialty lines of business. We serve our clients through teams of seasoned underwriters, actuaries, claim professionals, engineers and other specialists, combining in-depth technical and business expertise with industry experience across all markets.

Through our headquarters in Bermuda, with branch and representative offices in Dubai, London, Singapore and Zurich, we are close to the world’s major reinsurance markets and the core operations of our clients. Our clients value us for our technical expertise, outstanding service, industry thought-leadership and customer focus.

200

115.6

103.2

0

2011

2012

2015

$25.0m

2014: $15.9m

25.0

30 15.9

20 3.3

0

Qatar Re is backed by a parental guarantee from Qatar Insurance Company S.A.Q. (QIC) and benefits from QIC’s substantial and growing capital base. QIC has a market capitalisation in excess of USD 4.5 billion.

2014

Net profit in US$m

10

BUILT ON A STRONG CAPITAL BASE

2013

-10

-9.9

-20

2011

2012

0.5

2013

2014

2015

Full financial-year combined ratio in %

94%

2014: 108% 140 120

121

112

119

108

100

94

80 60 40

CREATING LASTING VALUE

QATAR RE IS RATED A (STABLE) BY S&P GLOBAL AND A (EXCELLENT) BY A. M. BEST.

20 0

2011

2012

2015

$67.5m/$64.7m 2014: $32.9m/$27.7m

67.5 64.7

75 50 21.6

0 -25

-14.5 2011 Gross

Qatar Re Annual Report 2015 1

2014

Gross/net technical income in US$m

25

WWW.QATARREINSURANCE.COM

2013

32.9

27.7

11.2

-3.9 2012 Net

2013

2014

2015

Overview  Strategy and performance  Corporate governance  Financial statements

In this Report


Qatar Re Annual Report 2015 2

By line of business in % 12% 3% 4% 3% 52%

14%

12% Casualty

Energy

Property

Marine & Aviation

Agriculture

Other & Multi-lines

Credit and Surety

By domicile of reinsured in % 15%

1% 1%

18%

65 %

Europe

Asia

Americas

Africa

Qatar Re Annual Report 2015 3

Oceania

Singapore (under application)

Credit and Financial Risks We help our specialized insurance company clients diversify their reinsurance panels, with capital not dependent on western equity markets, and offer credit, surety and political risk covers on a proportional and nonproportional basis.

Property Facultative Our global Property team underwrites all types of industrial risks, from manufacturing and processing industries to telecommunication, transportation, financial services and hospitality.

Gross written premiums 2015

Dubai

Property Per Risk (outside North America) We offer lead quotation services for both proportional and non-proportional per-risk treaty reinsurance for property portfolios. We support our primary insurance partners with innovative programme solutions and a strong understanding of their portfolios.

Agriculture We offer traditional reinsurance as well as indemnity- and index-based products in risk classes such as Multi-Peril, Crop-Hail, Livestock, Aquaculture, Bloodstock, Forestry, and Greenhouse.

Engineering We supply solutions for both stand-alone engineering treaties and combined placements. Our products span the full range of engineering risks, including Construction, Machinery Breakdown and Business Interruption.

At Qatar Re we are close to the world’s major reinsurance markets and the core operations of our clients. Combining longterm client support with flexible products, our aim is to provide solutions that meet the needs of our customers wherever they are. Headquartered in Bermuda, Qatar Re has branch and representative offices in Dubai, London, Zurich, Doha and Singapore.

Doha

North American Property Our dedicated unit operating from our headquarters in Bermuda focuses on any type of short-tail treaty reinsurance within North America. We are a quoting market for both proportional and non-proportional per-risk and catastrophe business.

Marine & Aviation (MAT) Our MAT unit underwrites a worldwide account covering insurance exposures emanating from four separate industries: aviation, satellite, marine and offshore energy. We support MAT insurers, taking an active role in helping them to adapt and innovate.

Energy We have vast experience in underwriting large and complex risks in the refining and petrochemical sector, both in the upstream and downstream industry sectors. We cover all classes of oil and gas exploration and development, on a facultative as well as a treaty basis.

Zurich

International Catastrophe The International Catastrophe unit focuses on any type of Cat Treaty insurance outside North America. We write all types of traditional property products – including proportional, non-proportional, per-event and annual aggregates.

Casualty Our multi-lingual Casualty team operates around the world, using their deep knowledge of local markets and technical expertise to provide quotations and reinsurance structuring on a proportional as well as non-proportional basis. We target lines in Motor, Public and Products Liability, Employers’ Liability, Workers’ Compensation, Professional Indemnity and Directors’ and Officers’ Liability.

London

We serve our markets through ten dedicated lines of business, each offering a unique accumulation of highly specialist knowledge and experience.

SIX STRATEGICALLY IMPORTANT LOCATIONS

Bermuda

OUR WELL-DIVERSIFIED PORTFOLIO SERVING TEN KEY MARKETS

Overview  Strategy and performance  Corporate governance  Financial statements

At a glance


Overview  Strategy and performance  Corporate governance  Financial statements

CREATING LASTING VALUE

INCREASING OUR GLOBAL PRESENCE AND PROXIMITY TO OUR BUSINESS PARTNERS

The move to Bermuda has positioned Qatar Re closer to its US client base and provides an opportunity to further develop and expand our participation in the North American markets. Similarly, the establishment of a branch office at the Dubai International Financial Centre (DIFC) – an important reinsurance hub – has brought us closer to our client base in the MENA and certain Asia regions. The same philosophy applies to the establishment of a base in Singapore.

Qatar Re Annual Report 2015 4

Qatar Re Annual Report 2015 5


BUILDING A MODERN REINSURER

At Qatar Re, we have concentrated on building the Company around what we believe are the essential value drivers of our time: Proximity to our clients and brokers, commitment to excellent financial security, developing knowledge intense products and services and focus on innovative i.e. non-replicative entrepreneurship.

Qatar Re Annual Report 2015 6

Qatar Re Annual Report 2015 7

Overview  Strategy and performance  Corporate governance  Financial statements

CREATING LASTING VALUE


On behalf of the Board of Directors we would like to express our long-term commitment and support to Qatar Re and its strategy. Left: Sunil Talwar Chairman of the Board of Directors Right: Gunther Saacke Chief Executive Officer

Building a modern Reinsurer Successfully operating against a background of sharply increased volatility in the economic and political environment coupled with the generally downwardtrending parameters of our industry – this, in brief, was the measure of challenge for any reinsurance operation in the year 2015. Despite these challenges, building Qatar Re has benefited from our still young and legacy-free operation, which has enabled us to maintain a strong focus. Undistracted by the legacies of past, largely out-dated operating models the Qatar Re team has shaped the Company’s strategy mix and operating model around a series of value-driving elements that we believe make a truly modern reinsurer and have set us in contrast to larger market tracking competitors attempting to defend what appears to have become an unrecoverable state of affairs.

Qatar Re Annual Report 2015 8

From the outset in December 2009 and more so from 2013 when Qatar Re embarked on its large scale expansion plan, we have concentrated on building the Company around what we believe are the essential value drivers of our time: Proximity to our clients and brokers, commitment to excellent financial security, having the most advanced capturing and integration of data, developing knowledge‑intense products and services and focus on innovative i.e. non-replicative entrepreneurship. Looking back on the year we again recorded substantial bottom and top line growth for Qatar Re. A strong level of organic portfolio expansion was fuelled by the wealth of long-term relationships built between our underwriters and their clients and brokers. At the same time, we continued to benefit from a number of major, generally complex and bespoke transactions. Qatar Re remains firmly committed to supporting innovative, rather than ‘replicative’ entrepreneurship in insurance where we see the potential for innovation in product design, risk management, distribution or financing. To date, we have successfully offered tailored reinsurance solutions to such

ventures, unlocking valuable efficiency gains for our clients. More generally we emphasize the linkages between reinsurance on the one side and private equity investment on the other: by providing our capacity to promising insurers, to ‘follow the fortunes’, where we can offer structured reinsurance and support significant innovative capabilities and efficiently fund growth. No need for us to track a declining market Our business is not immune or sheltered from fierce and increasingly irresponsible price competition. Qatar Re’s distinct focus on knowledge-intense areas and client segments has yielded low dependency on highly commoditised lines and segments of business, where business is ‘traded’ rather than ‘underwritten’. Furthermore, we have systematically integrated technically informed capital assessment and management into the underwriting process in order to achieve both enhanced capital efficiency for our clients and optimised, capital-efficient portfolio ‘behaviour’ for Qatar Re. This approach positions us strategically to deliver robust performance under the prevailing conditions of a generally declining environment.

Substantial premium growth in 2015 Gross written premiums in 2015 more than doubled to USD 1.16 billion. Qatar Re took advantage of specific project-based opportunities, such as the UK motor business where we entered into a quota share structure with predictable returns over a working range of deductible loss ratios, in a market which shows signs of strong primary rate increases. We also recorded significant growth in US agricultural reinsurance. Net written premiums and net premiums earned for these two segments alone grew almost twofold to USD 343 million and USD 245 million, respectively. Strong underwriting performance on calendar and accident-year basis Net profit for 2015 rose by 57% to USD 25 million, primarily driven by significant improvement in net underwriting results. The loss and administrative expense ratios on net earned premiums improved considerably. Benchmarked against gross written premiums Qatar Re’s administrative expense ratio came in well below the industry average. Despite being a start-up on a trajectory of high growth, our Company’s costs have been well controlled, with major investments carefully channelled towards analytical, convergence, specialist underwriting and Enterprise Risk Management skills. Overall, Qatar Re’s combined ratio improved from 108% to 94%, based on net premiums earned. We consider this a strong performance given the fact that our still young portfolio did not enjoy any tailwinds from positive prior-year reserve developments which, for the industry as a whole, accounted for a relief of more than 5 combined ratio percentage points in the 2015 results. On the contrary, as a relatively young and growing company, in agreement with QIC, we further strengthened our reserves in 2015, as we remain committed to a very conservative and prudent reserving philosophy. In addition, we did not benefit either from below average natural disaster losses, as less than 8% of our gross premiums are written in the property catastrophe line. In 2015, the global reinsurance industry as a whole benefited from catastrophe loss ratios coming in at

Qatar Re Annual Report 2015 9

almost 5 percentage points below the 10 year average. Against this backdrop, we have every reason to look at our calendar and accident-year underwriting performance with pride and satisfaction. Qatar Re’s favourable underwriting result was offset by a decrease in investment income, reflecting realised capital losses on our equity portfolio, primarily in the Gulf Cooperation Council (GCC) countries. However, our investment yield continues to outperform most of our peers in Bermuda or London. New operating platforms in Bermuda and Dubai In 2015 we continued to enhance the proximity to our clients with the opening of a branch office in Dubai and our re‑domicile to Bermuda. The move to Bermuda and our regulatory status as a ‘Class 4’- Reinsurer in a Solvency II-equivalent jurisdiction served to boost to our position in the US, Latin America and Europe where clients and brokers alike are looking for opportunities to diversify the security on their reinsurance panels. The Dubai branch helped us to further grow our facultative book of business. The fast evolving, strong endorsement of Qatar Re especially amongst US cedants reflects our focus on and commitment to the US market. It is also a reflection of our security and expertise in combining traditional catastrophe and solvency relief products. However, with both of these developments only occurring very late in the calendar year we are only beginning to experience the effects. Furthermore, we benefited from business assumed through QIC’s newly opened European Economic Area branch in Malta. Capitalising on our growing franchise 2016 will be a year of deepening our current book of business on the back of what has developed into a robust franchise. In addition, we will further strengthen our internal processes across Qatar Re’s global operating platform. The recent appointment of a Chief Risk Officer, Chief Operating Officer and Global Head of Compliance demonstrate that we are very serious about building our capability to achieve this objective. Furthermore we will build out our geographical footprint and continue to invest in specialist and entrepreneurial know-how.

Niches of profitable growth continue to exist, but are harder to come by, placing a growing premium on Qatar Re’s entrepreneurial and individualised client approach. We expect to see accelerated growth in the Americas as well as the Middle East, Africa and Asia, on the back of our Bermuda ‘Class 4’ status and the fully operational Dubai branch office, respectively. Our Asian book will gain additional momentum as soon as we have turned the local representative office in Singapore into a fully-fledged branch operation. We would like to take this opportunity to thank our Parent Company QIC. Based on a long-term vision and perspective, QIC is fully committed to growing Qatar Re, in a similar manner to building its own franchise steadily and systematically into what is now the Middle Eastern region’s No. 1 Insurer by net profit, premium income and assets. Our particular gratitude goes to our brokers and clients. Without their trust and loyalty, we would not have advanced to the global Top 35 reinsurer league within just three years. Finally, we are very grateful to our staff. Their commitment and willingness to go the extra mile in a fast-paced start-up environment are absolutely the vital ingredients to our success, today and tomorrow. We look forward to working with all our stakeholders towards our ultimate objective of building a leading and broadly diversified global reinsurer whose mission is to make the marketplace more diverse, efficient and entrepreneurial. Whilst ambitious, we will continue to proceed in a measured and prudent manner. Sunil Talwar Chairman of the Board of Directors Gunther Saacke Chief Executive Officer

Overview  Strategy and performance  Corporate governance  Financial statements

Letter from the Chairman of the Board of Directors and the Chief Executive Officer


2009

Q-Re launched as a regional player – Q-Re is launched as a regional P&C reinsurer by QIC Group. – The Company’s focus is on the Middle East, with some business in Africa and Asia. – It has premiums of USD 110 million by 2012, and a staff of 25.

2013

Repositioning as a global reinsurer – Gunther Saacke is appointed as CEO to lead a team of senior and well‑known reinsurance professionals, tasked with transforming Q-Re into a global multi-line reinsurer with a focus on specialty lines. – A new management team is assembled, with the appointment of a new Chief Underwriting Officer, Chief Risk Officer; Chief Actuary and business and regional executives. – Q-Re opens a new Zurich branch and a representative office in London.

2014

On track to becoming a global multi-line reinsurer – Q-Re achieves its first full year renewal and is rebranded as Qatar Re, with close to 100 employees serving our client base from our headquarters in Doha, branch offices in Zurich and Bermuda and representative office in London. – In the first half of 2014, Qatar Re writes gross premiums of USD 327 million (+55% over the prior year period), while net profit for the first six months of 2014 is USD 16 million.

Financial performance overview

– Based on our cedants’ trust in our capital strength and our underwriting skills, Qatar Re is on course to write full‑year gross premiums in excess of USD 0.5 billion. – Qatar Re further strengthens its franchise by expanding into liability and facultative property lines of business and growing its presence in the Americas and Asia.

2015

Qatar Re seizes growth opportunities in a continuously challenging market and strengthens its presence in Asia and in the Americas, while maintaining its footprint in Europe and the Middle East. JANUARY – Qatar Re grows its January renewals portfolio by 25% to US$ 432 million – on a constant foreign exchange basis, this volume represents an increase of 25% from the 2014 expiring renewable base of business of USD 344 million. – Qatar Re appoints Alastair SpeareCole as Chief Underwriting Officer – bringing his vast experience across all traditional reinsurance lines as well as alternative solutions to further boost the expansion of Qatar Re’s franchise. APRIL – Annual Results 2014 – Qatar Re continues to post significant business growth and improving profitability. Gross written premiums are up by 60% to USD 536 million, net income is USD 16 million and investment income grows by 40% to USD 27 million.

SEPTEMBER – Qatar Re announces its intention to transfer its seat of incorporation from the Qatar Financial Centre to Bermuda in the 4th quarter of 2015. The Company will become a Class 4 Insurer authorised by the Bermuda Monetary Authority and will merge with Antares Reinsurance Limited, resulting in Qatar Re’s capital base increasing to approximately USD 500 million. – Qatar Re seizes growth opportunities in a continuously challenging market – in the first half year of 2015, the Company increases its Gross written premiums to USD 463.6 million (up 42% from the same period in 2014). Gross underwriting income is USD 40.4 million (2014 first half: USD 28.1 million). Net profit is USD 13.4 million (2014 first half: USD 16.0 million).

GWP growth of

115.8%

to USD 1,156.2 million

Shareholders’ equity increased by

136%

to USD 531.7 million

Underwriting result increased by

134%

to USD 64.7 million

NOVEMBER – Qatar Re receives regulatory approval to domicile in Bermuda, with the Company licensed as Class 4 Insurer by the Bermuda Monetary Authority. This move marks a significant milestone on our journey to becoming one of the most sought after partners in our industry. – Qatar Re receives regulatory approval from the Dubai Financial Services Authority for its branch office in the Dubai International Financial Centre. The establishment of the branch brings us closer to our client base in the MENA and Asia regions.

USD thousand

Gross written premiums (GWP) Investments & Cash Net technical provisions Shareholders’ equity Profit/Loss of the year During the reporting period Qatar Re continued to execute its long-term business plan, showing consistent growth in key indicators over the past three years. The Company has enhanced its income base as the operating platform has matured and our underwriters have made significant strides towards delivering consistent revenue generation. The underwriting result (net technical result before administrative expenses), grew by 134% in 2015 to USD 64.7 million. Shareholders’ equity increased to USD 531.7 million, reflecting the commitment by QIC to invest in Qatar Re’s future growth. Premium growth and portfolio changes Gross Written Premiums USD million 1,500

1,156.2

1,000 535.9 336.6

500

0

THE COMPANY HAS ENHANCED ITS INCOME BASE AS THE OPERATING PLATFORM HAS MATURED Qatar Re Annual Report 2015 10

Key Figures

Qatar Re Annual Report 2015 11

115.6

103.2

2011

2012

2013

2014

2015

Gross premiums written increased by 115.8% to USD 1,156.2 million in 2015 versus USD 535.9 million in 2014. This growth resulted in an 81.4% increase in net premiums earned to USD 245.0 million in 2015 as compared with USD 135.1 million in the previous year. The main drivers for the increase in gross premiums written were the Agriculture and Casualty and Motor lines of business, which saw

2015

2014

2013

1,156,203 625,274 386,149 531,748 24,983

535,878 414,596 194,540 225,542 15,928

336,578 384,712 202,624 166,179 540

increases of USD 77.0 million and USD 449.9 million, respectively. In both segments, Qatar Re brought to bear its ability to attract large proportional treaties. In addition, the Company continued to benefit from the strong personal franchises of its teams. Clients and brokers want Qatar Re to be involved and increasingly acknowledge its strong financial security. As a result, the Company while suffering from declining market prices can grow without actively competing on price. Growth in Agriculture reinsurance was primarily recorded in the US where margins are still attractive but are expected to come under considerable pressure as reinsurers try to diversify away from their traditional Property & Casualty and Specialty classes. As in all other segments, Qatar Re is prepared to let business go to protect its margins. The Motor book benefited from a few major and bespoke transactions with entrepreneurial insurance entities. While the UK dominates this expansion in proportional Motor business, the Company has also built a significant position in other countries where primary rates have hardened.

Overview  Strategy and performance  Corporate governance  Financial statements

Key events


In the Property per Risk line of business, Qatar Re has made further progress in expanding its footprint as an increasing number of (major) insurers now include the Company on their panel of reinsurers. Having said this, the line’s future potential is limited by strained margins. In Aviation reinsurance, Qatar Re has decided to concentrate its ongoing exposure to satellite business and three core cedants with very different accounts, all focused away from the high end airline exposures where rates are insufficient. Qatar Re’s traditional Marine book continued to expand in 2015, whereas its inwards retrocession business saw a consolidation. In light of slowing global trade and GDP growth, Qatar Re has adopted a careful approach to Credit and Surety, Structured Finance and Structured Reinsurance in 2015. The Company has reduced exposure in some recession hit territories and has surrendered line size on accounts where the margins are challenged. In 2015, Qatar Re also supported one new Lloyd’s start up syndicate. As its own platform develops and Antares has become an important part of the QIC Group, Qatar Re’s appetite has shifted towards those syndicates that are specialist and provide diversity. In addition to making significant changes to its Treaty portfolio, Qatar Re has successfully repositioned its Facultative business by building scale among high quality energy, engineering and property risks.

Pleasing underwriting result Net Technical result (including QIC quota share/before administrative expenses)

64.7 10

60

27.4

600

19.6

2011 0 -14.5

2012

10.7

8.3

200 65,903

-3.9

11.2 2013

0 2014

2015

-15

Combined Ratio (Net) in % 121.3

111.6

118.5

108.2

100

93.8

50 2011

2012

2013

2014

531,748

400

13.2

27.7

30

2015

Contributing to the favourable underwriting result for 2015 was a decrease in the net loss ratio on net earned premiums to 67.6% for 2015 from 84.3% for 2014. The reduction in the year-on-year claims ratio was attributable to lower claims from treaty property and energy business and an improved performance from the facultative book. In line with Qatar Re’s established prudent approach, technical reserves were strengthened in the amount of USD 10.5 million. Despite an increase in total administrative expenses to USD 49.6 million in 2015 from USD 38.8 million in 2014, the expense ratio dropped to 20.2% in 2015, from 28.7% in 2014. The net commission ratio to net earned premium amounted to 6.0% in 2015 versus a positive ratio of 4.8% in 2014. The overall result is a combined ratio of 93.8% in 2015 against 108.2% in 2014 (Net Commissions represent acquisition costs on assumed business net of ceding commissions earned on outward ceded business, including the Group Quota share facilities). The calculation of the combined ratio excludes the Board of Directors remuneration included in operating and administrative expenses.

Qatar Re Annual Report 2015 12

USD million

20

90

0

Shareholder’s Equity, 2011 – 2015

USD million 30

USD million

150

Investment Income

2011

2012

2013

2014

2015

The improved net underwriting result has been largely offset by decreased investment income (USD 10.7 million in 2015 versus USD 27.4 million in 2014). This decline reflects write downs and the recognition of realized losses on the devaluation of our equity portfolio in the GCC countries. Qatar Re’s total investment yield, including capital gains and losses, declined from an exceptional 6.9% to 2.4% year-on-year. Net Profit USD million 25.0

30

0

2011

120,941 2012

166,179

2013

2011 0

-15

3.3 2012

0.5 2013

2014

2015

-9.9

Net profit for 2015 was USD 25.0 million as compared with USD 15.9 million for 2014, an increase of 56.8%. This development was largely driven by strongly improved underwriting results of USD 64.7 million in 2015 versus USD 27.7 million in the previous year. This favourable underwriting result was substantially offset by a decrease in investment income to USD 10.7 million in 2015 versus USD 27.4 million in 2014, a 62% decrease due to negative trends in stock markets.

2014

2015

Total Shareholder’s equity has increased in 2015 by USD 306.2 million to USD 531.7 million. This development is a result of net profits of USD 25.0 million and a capital contribution from QIC in the amount of USD 49.4 million. It was partially offset by unrealised capital losses on the investment portfolio of USD 11.9 million. There was also an additional capital contribution of USD 243.7 million associated with the merger of the Antares Re legacy capital provision vehicle with Qatar Re effective December 31, 2015. Equity movement, 2011 – 2015 USD million

15.9 15

225,542

Equity as on December 31, 2011 65,903 Fresh contributions 432,064 Fair value reserves (10,978) Dividend paid – Retained earnings 44,759 Equity as on December 31, 2015 531,748

Qatar Re Annual Report 2015 13

SHAREHOLDER’S EQUITY INCREASED TO $531.7M, REFLECTING THE COMMITMENT BY QIC TO INVEST IN QATAR RE’S GROWTH.

Overview  Strategy and performance  Corporate governance  Financial statements

Financial performance overview continued


OUR APPROACH TO RISK MANAGEMENT IS BUILT ON STRONG FOUNDATIONS THAT WERE VITAL TO OUR INITIAL DEVELOPMENT AS QATAR RE.

Echoing the words of our Chairman and our Chief Executive, the next chapter in the development of Qatar Re is about building a leading and broadly diversified global reinsurer: risk management is very much integral to that development. Our approach to risk management is built on strong foundations that were vital to our initial development as Qatar Re. We have significant internal expertise in the area of exposure management. Our team continues to develop and broaden their, already deep, expertise and this will remain an important feature of how we manage risk. This expertise is vital to managing exposure in a manner that allows us to be entrepreneurial and flexible enough to meet the needs of our customer base. Our approach enables us to be effective and responsive in a highly competitive market and thus generate superior underwriting results. As the Company develops, other areas of risk management become increasingly important and, with the Company’s move to Bermuda during the year, our Board decided to recruit a new Chief Risk Officer to address the risk agenda, with less dependency on resources from the wider QIC Group. Andrew Smith joined us in this role on 1 May 2016. We have made significant corporate progress towards being a leading global reinsurer during 2015: – We have completed our move to Bermuda as a Class 4 reinsurer. This has allowed us to refresh our corporate governance arrangements and the risk function now supports a dedicated, Board level Risk and Capital Committee. – Our growing geographic footprint means that a new suite of corporate level risks needs to be actively managed, echoing again the comments our Chairman and our Chief Executive when they discuss how we are capitalizing on our growing franchise.

Qatar Re Annual Report 2015 14

– Our internal capital model has reached a level of maturity and its use as a management tool is bearing fruit, helping us manage our portfolio and plan for the future. The key challenges ahead for risk management include: – Providing the full suite of risk management skills to support the requirements and expectations of the Board Risk Committee, full Board, our Parent Company, regulators and rating agencies. – Managing the risk of a dynamic and ambitious company, making sure that all opportunities are validated from a risk perspective and pre-empting potential exposures across the complete risk landscape. – Using greater insight into the risks we run when facilitating the optimal deployment of capital. – Building on the success of our underwriting discipline to think more clearly of our customer base as encompassing both cedants and capital providers, as we seek to bring together risk and capital in a way that delivers against customer demands, while providing a superior return to the shareholder. We will continue to invest in building the enterprise. We are proud of having built a culture that is very much risk aware, but are conscious this is an area that will continue to grow as we continue on our journey that started as an underwriting platform and is increasingly becoming a fully-fledged corporate platform.

Key components of our existing risk management framework

ENTERPRISE RISK MANAGEMENT

INTERNAL MODEL

EXPOSURE MANAGEMENT

Our existing enterprise risk management framework is built using a ‘three lines of defence’ model. Risk appetite is approved by the Board and risk owners manage their own risks, subject to a quarterly attestation process and independent oversight. Further work is underway on risk management information and on equipping ourselves to deal with an increasing volume of emerging risks entering our assessment process.

Our internal capital model has been under development over the past couple of years and, while already subject to use and validation, will be handed over to ‘business as usual’ during the coming year. As a young company, our limited suite of internal historic data means our model will continue to evolve as the availability of data provides a greater variety of approaches. Continued evolution of the model is a key focus, along with bringing greater independence to our validation.

We continue to develop and enhance our exposure management database, platform and modules, while also working to further improve data quality. While we look at a variety of measures, the focus remains on moving towards using a probabilistic modelling approach where we are able. Superior data and modelling will remain a differentiator for us and across increasingly diverse lines of business.

Each element of our existing risk management framework contributed to our Own Risk and Solvency Assessment completed during 2015 and shared with both our previous and current regulators. The migration to a similar assessment on a Bermuda Commercial Insurers Solvency Self-Assessment is underway.

Qatar Re Annual Report 2015 15

Andrew Smith Andrew succeeds Peter Frei as Chief Risk Officer, while Peter remains with Qatar Re as Head of Underwriting Risk. Andrew joins Qatar Re from a ‘Big 4’ public accounting firm, having worked with Qatar Re in the lead up to and during the company being re-domiciled to Bermuda. Having lived in Bermuda for the last five years, Andrew has supported other companies that have established operations in Bermuda (on topics such as risk management, the economic balance sheet and model validation) and performed work for both the Association of Bermuda Insurers (ABIR) and Reinsurers and the Bermuda International Long Term Insurers and Reinsurers Association (BILTIR) in relation to Bermuda’s achievement of equivalence with Solvency II. Prior to moving to Bermuda, Andrew worked as a consultant in London with a particular focus on risk management frameworks within the insurance sector.

Overview  Strategy and performance  Corporate governance  Financial statements

Risk management


In 2015, the Qatar Insurance Group embarked on a restructuring of its international operations. As part of this restructuring, ownership of Qatar Re was transferred from the previous shareholders (details can be found in the Company’s 2014 Annual Report) to QIC Capital LLC, a limited liability company registered in the Qatar Financial Centre in Doha, Qatar, in mid-December 2015. The Company’s ultimate parent continues to be Qatar Insurance Company S.A.Q. The restructuring also led to the transfer of Qatar Re’s seat of incorporation from the Qatar Financial Centre in Doha, Qatar, to Bermuda. The key drivers of the Company’s choice of Bermuda were: (i) the existence of a well-established Solvency II equivalent regulatory regime; (ii) the consolidation of capital through a merger with Antares Reinsurance Limited (a Bermudadomiciled Class 3a Insurer and QIC group subsidiary); and (iii) proximity to the US and wider North American markets.

THE COMPANY’S RISK MANAGEMENT AND INTERNAL CONTROL SYSTEMS FORM AN INTEGRAL PART OF THE CORPORATE GOVERNANCE FRAMEWORK.

Qatar Re Annual Report 2015 16

The process of continuation was completed in the 4th quarter of 2015 and led to various changes in the composition of the Company’s Board of Directors, its committee structure and the wider corporate governance framework. This section of the Annual Report focuses on the Company’s revised corporate governance framework. Details of the previous framework can be found in the Corporate Governance section of the Company’s 2014 Annual Report. Qatar Re has established a sound and effective corporate governance framework that is appropriate to the size, nature, complexity and risk profile of the Company and that allows for the sound and prudent management of the Company’s activities to ensure the protection of policyholders

and other stakeholders. This framework has been developed with reference to the Company’s constitution, Bermuda Companies Act Legislation and rules and guidance issued by the Bermuda Monetary Authority. The Company’s risk management and internal control systems form an integral part of the corporate governance framework. Further details on the Company’s approach to risk management can be found in the Risk Management section of this report. Qatar Re’s internal control system is formed of a wide range of policies, procedures, systems and controls that support the oversight and management of the Company’s business and affairs, the efficiency of its operations, the effectiveness of its risk management, compliance with legal and regulatory requirements and the pursuit and achievement of strategic objectives. The Company has established various internal control functions – compliance, internal audit, actuarial and finance – that form a key part of the internal control framework and that operate in conjunction with the Risk Management function. These functions are adequately resourced by individuals with the skills and competencies to appropriately discharge their responsibilities. Day-to-day management and oversight of the internal control system rests with the department heads of the internal control functions and the Company’s senior executives. Ultimate responsibility for the establishment and maintenance of the Company’s internal control system and the wider corporate governance framework rests with the Board of Directors.

Name of Director

Designation

Age

Nationality

Sunil K. Talwar Ali Saleh N. Al Fadala George A. Prescott David J. Forcey David Sykes Gunther Saacke Alastair Speare-Cole

Non-Executive Director & Chairman Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Executive Director Executive Director

63 59 71 73 55 58 56

Canadian Qatari British British British German British

Board of Directors The Board of Directors is responsible for ensuring: (i) the Company is effectively directed and managed; (ii) its activities are conducted with due care, skill and integrity; and (iii) that corporate governance policies and practices are developed and applied in a sound and prudent manner. The Board’s oversight responsibilities include: (i) the development of high-level strategy and objectives; (ii) the review and approval of business plans and budgets; (iii) the appointment of senior executives; (iv) the approval of the financial statements; and (v) the review and approval of significant policies and procedures. The Board meets at least quarterly and at other times as required, and carries out its duties within established Terms of Reference. The Board is provided with accurate, appropriate, and timely information to enable it to monitor and review key areas, including the performance of the Company and the key risks to which it is exposed. The Company’s continuation from the Qatar Financial Centre to Bermuda led to the formation of a new Board in late November of 2015. The current Board includes three independent NonExecutive Directors (two of whom were members of the previous Board), two Non-Executive Directors (non-independent) and two Executive Directors, providing an appropriate balance of skills, experience, knowledge and independent challenge. The composition of the current Board along with biographical details for each member are set out below. Qatar Re Board Meetings in 2015 – 29 January 2015 – 03 May 2015 – 12 August 2015 – 25 October 2015 – 09 December 2015

Qatar Re Annual Report 2015 17

Board and Committee Structure Board of Directors Purpose: The Board is responsible for setting corporate strategy, reviewing and monitoring managerial performance at an acceptable level of risk. The Board will direct and govern Qatar Re’s activities and protect the interests of stakeholders.

Investment Committee Purpose: To assist the Board in the coordination and oversight of Qatar Re’s investment portfolio.

Chief Executive Officer

Reserving Committee Purpose: To assist the CEO in the oversight and management of technical reserves in Qatar Re’s financial balance sheet.

Audit Committee Purpose: To assist the Board in its oversight of the integrity of the financial statements, effectiveness of internal control, and oversight of internal and external auditors.

Executive Management Committee Purpose: To assist the CEO in ensuring the effective management of the organisation in accordance with its objectives and values.

Risk and Capital Committee Purpose: To assist the Board overseeing and challenging the risk management and capital management activities.

Underwriting / Portfolio Management Committee Purpose: To assist the CEO in developing and setting the underwriting policies and strategy and providing oversight of the overall portfolio.

Overview  Strategy and performance  Corporate governance  Financial statements

Corporate governance


Board of Directors The Company’s continuation from the Qatar Financial Centre to Bermuda led to the formation of a new Board in late November of 2015. The current Board includes three independent NonExecutive Directors, two Non-Executive Directors (non-independent) and two Executive Directors, providing an appropriate balance of skills, experience, knowledge and independent challenge.

Executive Directors

GUNTHER SAACKE

Executive Director

Gunther Saacke started his career in 1991 with Hannover Re. Over the last two decades he has established a track record of successfully building and integrating high-profile teams of industry specialists across all major property, casualty and specialty lines. More recently he worked as Head of Reinsurance at Endurance in London and served as founding Chief Executive and Chief Underwriting Officer of Novae Re, a multi-line reinsurance operation in the Lloyd’s market. Mr Saacke combines outstanding entrepreneurship with a consistent focus on risk management, portfolio efficiency and optimisation. Mr Saacke graduated in Philosophy from the Sorbonne and the University of Hamburg.

Qatar Re Annual Report 2015 18

Non-Executive Directors

ALASTAIR SPEARE-COLE

Executive Director

SUNIL K. TALWAR

ALI SALEH N. AL FADALA

Non-Executive Director & Chairman

Non-Executive Director

Alastair Speare-Cole has more than 30 years’ experience in reinsurance across all lines of business and has held senior positions with firms including JLT Re and Aon Re UK. He joined Qatar Re from JLT Towers Re where he had served as Chief Executive Officer since 2012.

Sunil Talwar is the Qatar Insurance Group’s Deputy CEO, Chief Financial Officer and Head of International Operations. He joined the Group in 1986 and has played a leading role in elevating the Group to its position as one of the leading insurance groups in the region.

Ali Saleh N. Al Fadala is the Qatar Insurance Group’s Senior Deputy Group President and CEO. Mr Al Fadala joined the Group in 1986 and has held various roles including as Chief Executive Officer of Al Damaan Islamic Insurance Company.

Mr Speare-Cole graduated from the University of Oxford in Geology and Geophysics and is a Fellow of the Chartered Insurance Institute and the Geological Society of London.

In addition to his overall financial and general management responsibilities, Mr Talwar is responsible for executing the QIC Group’s investment strategy, which involves the management of assets in excess of USD 2 billion. He has been instrumental in driving the Group’s international growth and in implementing its strategy of diversifying its revenue base.

GEORGE ANDREW PRESCOTT

Independent Non-Executive Director

Mr Al Fadala also serves on the boards of various other QIC Group companies and affiliates including Q Life & Medical Company LLC, QIC Europe Limited and Al Damaan Islamic Insurance Company. He is also a director of Qatari Unified Bureau Insurance WLL and Commercial Bank of Qatar QSC.

George Prescott was Deputy Chief Executive of Ecclesiastical Insurance Group (EIG) from 1997 until his retirement in 2009, following an industry career spanning four decades. In his role with EIG he was responsible for the Group’s investment, finance, internal audit and compliance functions. Mr Prescott also served for a number of years as a Non-Executive Director on the boards of Mapfre Reinsurance, Commerce Insurance (US), Mapfre USA and was a member of the Association of British Insurers’ Investment Committee. He is also currently a Non-Executive Director on the boards of Capital Gearing Trust plc, J.P. Morgan Cazenove Pension Trustee Limited and Giles Insurance Brokers Ltd. Mr Prescott holds a degree in Spanish and French from the University of London. He is also a qualified Chartered Accountant and Fellow of the Institute of Chartered Accountants in England and Wales.

Mr Talwar is a qualified Chartered Accountant and a member of the Institute of Chartered Accountants of India.

Qatar Re Annual Report 2015 19

DAVID JOHN FORCEY

Independent Non-Executive Director

David Forcey is a senior market figure with over four decades of experience in international and reinsurance broking. Prior to his retirement he held various senior positions and directorships at Aon Limited, including as Managing Director, Deputy Chairman and Chairman. Before joining Aon in 1996, Mr Forcey held senior roles with Steel Burrell Jones Group plc and Jardine Thompson & Graham Limited. Mr Forcey is an Associate of the Chartered Insurance Institute.

DAVID SYKES

Independent Non-Executive Director

Mr David Sykes has 20 years’ experience in insurance management and accounting in Bermuda. Most recently he was Senior Vice President with Marsh IAS Management Services in Bermuda. Mr Sykes has worked with a variety of insurance companies including those in the professional sports, healthcare, energy and marine industries. He has also been instrumental in providing formation and management services to several new insurance and reinsurance companies in Bermuda including sidecars, Lloyds’ syndicates and Bermuda reinsurance groups. Mr Sykes holds a degree in Applied Mathematics from the University of Warwick. He is also a Member of the Institute of Chartered Accountants of England and Wales and an Associate of the Chartered Insurance Institute.

Overview  Strategy and performance  Corporate governance  Financial statements

Corporate governance continued


Committees of the Board The Board has appointed various committees to assist it in the effective discharge of its duties, although it continues to retain ultimate responsibility. Terms of Reference have been established for each committee.

Financial statements

Audit Committee The Audit Committee is composed of George Prescott (Chairman), David Forcey and David Sykes and meets at least quarterly. The Committee’s role is to assist the Board in providing independent oversight of the effectiveness of internal controls and in monitoring the performance of the internal and external audit functions. Its key responsibilities include providing assurance on the integrity and/or activities of: – Financial reports and statements – The Risk Management and wider internal control system – Internal and external Audit functions. The Chairman of the Audit Committee reports regularly to the Board on key findings, risks and issues identified by both internal and external audit and by the Committee in the discharge of its oversight responsibilities. The Audit Committee also performs the role of the Remuneration Committee. Risk and Capital Committee The Risk and Capital Committee is composed of George Prescott (Chairman), David Forcey, Sunil Talwar and Gunther Saacke and meets at least quarterly. The Committee’s role is to assist the Board in providing oversight of the Company’s risk management, capital management and exposure management activities. Its key responsibilities include: – Oversight of current and future potential risk exposures, including determination and monitoring of actual exposures against risk appetite and tolerances – Providing guidance on the implementation of the risk management framework, including risk appetite and risk reporting – Ensuring the maintenance of sufficient economic and regulatory capital and allocation of capital – Promoting a risk aware culture.

Qatar Re Annual Report 2015 20

The Chairman of the Risk and Capital Committee reports regularly to the Board on matters including the status of material risks, changes to the Company’s risk profile and environment, emerging risks, capital adequacy and exposure management. Investment Committee The Investment Committee is composed of Sunil Talwar (Chairman), George Prescott, David Sykes and Gunther Saacke and meets at least quarterly. The Committee’s role is to assist the Board in providing oversight of the performance and management of the Company’s investment portfolio. Its key responsibilities include:

22 Independent Auditor’s Report 23 Consolidated statement of financial position 24 Consolidated statement of income 25 Consolidated statement of comprehensive income 25 Consolidated statement of changes in equity 26 Consolidated statement of cash flows 27 Notes to the consolidated financial statements

– Development and maintenance of an appropriate investment strategy – Monitoring the implementation of the investment strategy, the asset allocation and the values of the invested assets – Monitoring the performance of the investment manager and investment advisers. The Chairman of the Investment Committee reports regularly to the Board on matters including the performance of invested assets, material changes in asset allocation, liquidity and market outlook. Executive Management Committees The Company has also established various Management Committees, including an Executive Management Committee, Reserving Committee and Underwriting/Portfolio Management Committee. These Committees are composed of senior executives and subject matter experts from within the business and report to the Board and relevant committees via the Chief Executive Officer. Terms of Reference have been established for each committee and they generally meet at least once a quarter.

Qatar Re Annual Report 2015 21

Overview  Strategy and performance  Corporate governance  Financial statements

Corporate Governance continued


The Shareholder Qatar Reinsurance Company Limited Bermuda Report on the consolidated financial statements We have audited the accompanying consolidated financial statements of Qatar Reinsurance Company Limited (previously Qatar Reinsurance Company LLC) (the ‘Company’) and its subsidiary (together the ‘Group’), which comprise the consolidated statement of financial position as at December 31, 2015 and the consolidated statements of income, comprehensive income, changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management’s responsibility for the financial statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Group’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of the Group as at December 31, 2015 and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards.

Consolidated statement of financial position As at December 31, 2015

December 31, 2015 USD (’000)

December 31, 2014 USD (’000)

5 6 7 8 9

319,699 988,004 855,141 305,575 2,374 2,470,793

128,169 305,354 341,878 286,427 1,868 1,063,696

10 11 7

138,776 558,979 1,241,290 1,939,045

79,932 221,804 536,418 838,154

12 13 19 14

1,000 – 495,368 (12,943) 48,323 531,748

200,549 2,652 – (999) 23,340 225,542

2,470,793

1,063,696

Notes

Assets Cash and cash equivalents Premiums and other receivables Reinsurance contract assets Investments Property and equipment Total assets Liabilities and equity Liabilities Provisions, reinsurance and other payables Due to related parties Reinsurance contract liabilities Total liabilities Equity Share capital Share premium Contributed Surplus Fair value reserve Retained earnings Total equity Total liabilities and equity

These consolidated financial statements were approved by the Board of Directors on February 22, 2016 and signed on their behalf by following signatories: Doha – Qatar February 22, 2016

For Deloitte & Touche Qatar Branch Sunil Talwar Chairman of the Board of Directors

Qatar Re Annual Report 2015 22

Qatar Re Annual Report 2015 23

Gunther Saacke CEO and Board Member

Overview  Strategy and performance  Corporate governance  Financial statements

Independent Auditor’s Report


Consolidated statement of comprehensive income For the year ended December 31, 2015

Notes

Gross written premiums Premiums ceded to reinsurers Net premiums Movement in net unexpired premium reserve Net earned premiums

15 15

Gross claims paid Reinsurance recoveries Movement in net outstanding claims Net commissions Net underwriting results

15 15 15 15

Investment income Total income Operating and administrative expenses Depreciation Profit for the year

Qatar Re Annual Report 2015 24

December 31, 2015 USD (’000)

December 31, 2014 USD (’000)

1,156,203 (812,777) 343,426 (98,390) 245,036

535,878 (357,723) 178,155 (43,069) 135,086

(195,716) 123,304 (93,219) (14,673) 64,732

(178,305) 112,015 (47,564) 6,448 27,680

16

10,673 75,405

27,414 55,094

17 9

(49,483) (939) 24,983

(38,340) (826) 15,928

15

December 31, 2015 USD (’000)

December 31, 2014 USD (’000)

Profit for the year

24,983

15,928

Other comprehensive income Net changes in fair value of available-for-sale investments Total comprehensive income for the year

(11,944) 13,039

(4,665) 11,263

Consolidated statement of changes in equity For the year ended December 31, 2015

Balance as at January 1, 2014 Profit for the year Net changes in fair value on available-for-sale investments Total comprehensive income for the year Shares issued during the year Balance as at December 31, 2014 Profit for the year Net changes in fair value on available-for-sale investments Total comprehensive income for the year Merger of Antares Re with the Group (Note 23) Shares issued during the year Reduction of share capital (Note 12) Balance as at December 31, 2015

Qatar Re Annual Report 2015 25

Share Capital USD (’000)

Share premium USD (’000)

Contributed Surplus USD (’000)

Fair value reserve USD (’000)

Retained earnings USD (’000)

Total equity USD (’000)

152,449 –

2,652 –

– –

3,666 –

7,412 15,928

166,179 15,928

– – 48,100 200,549 –

– – – 2,652 –

– – – –

(4,665) (4,665) – (999) –

– 15,928 – 23,340 24,983

(4,665) 11,263 48,100 225,542 24,983

– – – 32,967 (232,516) 1,000

– – – 16,483 (19,135) –

– – 243,717 – 251,651 495,368

(11,944) (11,944) – – – (12,943)

– 24,983 – – – 48,323

(11,944) 13,039 243,717 49,450 – 531,748

Overview  Strategy and performance  Corporate governance  Financial statements

Consolidated statement of income For the year ended December 31, 2015


Notes to the consolidated financial statements For the year ended December 31, 2015

December 31, 2015 USD (’000)

December 31, 2014 USD (’000)

24,983

15,928

939 (10,673) 165 – 15,414

826 (27,379) 165 (35) (10,495)

Movements in working capital Insurance and other receivables Insurance reserves Provisions, insurance and other payables Due to related parties Cash generated from/(used in) operations Employees’ end of service benefits paid Net cash generated from/(used in) operating activities

(591,420) 191,609 51,409 337,186 4,198 (32) 4,166

(166,631) (8,084) 40,535 104,226 (40,449) (100) (40,549)

Investing activities Net cash movements in investments Purchase of property and equipment Investment income received Proceeds from sales of property and equipment Net cash generated from/(used in) investing activities

95,447 (1,456) 10,673 – 104,664

(110,223) (416) 27,379 35 (83,225)

49,450 49,450

48,100 48,100

158,280 33,250 128,169 319,699

(75,674) – 203,843 128,169

Notes

Operating activities Profit for the year Adjustments for: Depreciation of property and equipment Investment income Provision for employees’ end of service benefits Gain on disposal of property and equipment

Financing activity Proceeds from new shares issued Net cash generated from financing activity Increase/(decrease) in cash and cash equivalents Add: Cash and cash equivalents from business combinations Cash and cash equivalents at beginning of the year Cash and cash equivalents at the end of the year

5

1. Legal status and principal activities Qatar Reinsurance Company Limited (previously known as ‘Qatar Reinsurance Company LLC’) (the ‘Parent Company’) is a company engaged in the business of reinsurance and registered under the laws of Bermuda Monetary Authority (BMA) as a Class 4 insurer. The Parent Company was authorized for Continuance by Bermuda Monetary Authority on November 24, 2015 under the name ‘Qatar Reinsurance Company Limited’ and Registration No. 50986. Previously, the Company was incorporated in Qatar Financial Centre Doha, Qatar (QFC) on December 6, 2009 with the name and registration number of ‘Qatar Reinsurance Company LLC’ and No. 00117 respectively and conducted its business under legal supervision of Qatar Financial Centre Regulatory Authority (QFCRA). With effect from December 2, 2015, the Parent Company changed its legal domicile from QFC Qatar to Bermuda, after obtaining the regulatory approval from QFCRA. The address of the Parent Company’s registered office is Clarendon House, 2 Church Street, Hamilton HM11, Bermuda. The consolidated financial statements incorporate the financial information of the Parent Company and its subsidiary (the ‘Group’) all of which having December 31 as financial year end. The Parent Company is fully owned by a single shareholder – QIC Capital LLC, Doha, Qatar (2014: 55.38% owned by Qatar Insurance Company S.A.Q and 40.00% owned by QIC International LLC). The ultimate parent company of the Group is Qatar Insurance Company S.A.Q Doha, Qatar. The Parent Company operates from Bermuda and has branches in Switzerland, United Arab Emirates and representative offices in Singapore and United Kingdom. Subsidiary The Parent Company holds 100% share capital of Qatar Reinsurance Services LLC, Doha Qatar. The subsidiary is a limited liability company registered with QFC, Qatar and primarily engaged in providing management services to the Group. The incorporation date of the subsidiary is October 13, 2015. 2. Application of new and revised International Financial Reporting Standards (IFRS) In the current financial year, the Group has adopted certain new and revised standards and interpretations, which are mainly: – IAS 24 – Amendments to disclose the amount paid to management entity for providing key managerial personnel as related party transaction; – IFRS 8 – Amendment resulting in additional disclosure about judgments involved in deciding whether or not to aggregate operating segments. The revised standards issued by IASB and IFRIC interpretations which are effective from the accounting period commencing January 1, 2015, had no significant effect on the consolidated financial statements of the Group for the year ended December 31, 2015. The following IASB Standards and IFRIC interpretations issued but, are not mandatory for the year ended December 31, 2015, have not yet been adopted by the Group: – IFRS 9 – ‘Financial Instruments’ was issued to replace IAS 39 – ‘Financial Instruments: Recognition and Measurement’. IFRS 9 simplifies the mixed measurement model and establishes two primary measurement categories for financial assets: amortized cost and fair value. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. IFRS 9 Financial Instruments will be applicable for annual periods beginning on or after January 1, 2018; – Certain consequential amendments to IFRS 7 ‘Financial Instrument disclosures’ and IAS 39 (Revised) due to application of IFRS 9, detailed above. The Group is currently in the process of evaluating the potential effect of these amendments in the presentation of the consolidated financial statements. A number of new standards, amendments to standards and interpretations that are not yet effective for the year ended December 31, 2015 have not been applied in preparing these consolidated financial statements. The Group does not expect the proposed amendments which will become mandatory for the consolidated financial statements for the year 2016 or thereafter, to have a significant impact on the consolidated financial statements.

Qatar Re Annual Report 2015 26

Qatar Re Annual Report 2015 27

Overview  Strategy and performance  Corporate governance  Financial statements

Consolidated statement of cash flows As at December 31, 2015


3. Significant accounting policies Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Basis of preparation The consolidated financial statements have been prepared on the historical cost basis except for available for sale financial assets and held for trade financial instruments that are measured at fair value. These consolidated financial statements are presented in United States Dollars (USD) and rounded to the nearest thousand (USD ’000), unless otherwise indicated. Prior year financial statements were presented in Qatari Riyals (QR). Change in presentation and functional currency was due to transfer of the Group’s legal domicile to Bermuda. The principal accounting policies are set out below: a) Consolidation, translation and financial instruments i) Basis of consolidation Subsidiaries The Parent Company, on incorporating a subsidiary, has decided to prepare the consolidated financial statement in compliance with IFRS 10. Accordingly, this is the first year of preparing these consolidated financial statements of the Group.   The consolidated financial statements incorporate the financial statements of the Parent Company and entities controlled by the Parent Company directly or indirectly as at December 31 of each year. Subsidiaries are all entities over which the Group has control. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiary companies are prepared for the same reporting period as the Parent Company, using consistent accounting policies. Control is achieved when the Parent Company directly or indirectly (i) has power over the investee, (ii) has exposure or rights to variable returns from its involvement with the investee and (iii) has the ability to use its power to effect those returns. The Parent Company reassesses whether or not it controls an investee and facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. Profit or loss and each component of other comprehensive income are attributed to the owners of the Parent Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Parent Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. All significant intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to owners of the Parent Company. Non-controlling interests represent the portion of profit or loss and net assets not held by the Group and are presented separately in the consolidated statement of income and within equity in the consolidated statement of financial position, separately from parent shareholders’ equity. When the Group ceases to control, any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognized in the consolidated statement of income. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognized in other comprehensive income are reclassified to the consolidated statement of income.

Qatar Re Annual Report 2015 28

Business combination Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognized in consolidated statement of income as incurred. At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their fair value. Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held in equity interest in the acquiree (if any) over the net of the acquisitiondate amounts of the identifiable assets acquired and liabilities assumed as at date of acquisition. If the net of the acquisition date amounts of identifiable asset acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree (if any), the excess is recognized immediately in the consolidated statement of income as a bargain purchase gain. Common control transactions Business combinations involving the transfer of business and net assets in a transaction under common control, are accounted for at the carrying values of the underlying net assets of the transferred business. There are no bargain gain or goodwill on transfer of assets recognized by the Group on common control transactions. Goodwill Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any. For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groups of cashgenerating units) that is expected to benefit from the synergies of the combination. A cash-generating unit to which goodwill has been allocated is tested for impairment at least annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognized directly in the consolidated statement of income. An impairment loss recognized for goodwill is not reversed in subsequent periods On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.   ii) Foreign currency Foreign operations The individual financial statements of the Group entities are presented in the currency of the primary economic environment in which they operate (functional currency). For the purpose of these consolidated financial statements, the results and financial position of each subsidiary are expressed in the presentation currency of the Parent Company. The assets and liabilities of foreign operations are translated to United States Dollars using exchange rates prevailing at the reporting date. Income and expenses are also translated to United States Dollars at the exchange rates prevailing at the reporting date, which do not significantly vary from the average exchange rates for the year. Foreign currency translation reserve is not shown separately under equity due to insignificance of the amount. Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Exchange differences are recognized in other comprehensive income. Foreign currency transactions Foreign currency transactions are recorded in the respective functional currencies of Group entities at the rates of exchange prevailing at the date of each transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the respective functional currencies at the rate of exchange prevailing at the year end. The resultant exchange differences are included in the consolidated statement of income.

Qatar Re Annual Report 2015 29

Overview  Strategy and performance  Corporate governance  Financial statements

Notes to the consolidated financial statements For the year ended December 31, 2015 continued


3. Significant accounting policies continued iii) Financial instruments Financial instruments represent the Group’s financial assets and liabilities. Financial assets include cash and cash equivalents, insurance and other receivables and investments. Financial liabilities include short-term borrowings and other payables. Financial asset or liability is initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in the consolidated statement of income. Recognition The Group initially recognizes cash and cash equivalents, insurance and other receivables, short-term borrowings and other payables at the date that they originate. All other financial assets and liabilities are initially recognized at the trade date or settlement date when the Group becomes a party to the contractual provisions of the instrument. De-recognition The Group derecognizes a financial asset when the contractual rights to receive cash flows from that asset expire or it transfers the right to receive the contractual cash flow of that asset in a transaction in which substantially all the risks and rewards of ownership of the financial assets are transferred. Any interest in the transferred financial assets that is created or retained by the Group is recognized as a separate asset or liability. The Group derecognizes a financial liability when its contractual obligations are discharged or cancelled or expired.   Measurement The measurement of financial assets and liabilities is disclosed under accounting policy for respective financial assets and liabilities. Fair values of financial instruments Fair value is the amount for which an asset could be exchanged or a liability settled between knowledgeable willing parties on an arm’s length transaction at the measurement date. Differences can therefore arise between the book values under the historical cost method and fair value estimates. Underlying the definition of fair value is a presumption that an enterprise is a going concern without any intention or need to liquidate, curtail materially the scale of its operations or undertake a transaction on adverse terms. Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognized in the profit or loss as they arise. Fair values of marketable investments are determined by reference to their bid prices at the close of business at the reporting date. In respect of unquoted available for sale financial assets, the fair value is determined based on various valuation techniques, as deemed appropriate. The fair values of the Group’s other financial assets and financial liabilities are not materially different from their carrying values. Impairment of financial asset At each reporting date, the Group assesses whether there is objective evidence that any financial asset is impaired. Financial assets are impaired when objective evidence demonstrates that a loss event has occurred after the initial recognition of the asset, and that the loss event has an impact on the future cash flows of the asset that can be estimated reliably.

b) Reinsurance operations i) Premiums and other receivables Premiums and other receivables are recognized when due and measured on initial recognition at the fair value of the consideration received or receivable. The carrying value of the receivables is reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable, with the impairment loss recorded in the consolidated statement of income. After initial measurement, premiums and other receivables are measured at amortised cost as deemed appropriate. Premiums receivables are derecognized when the derecognition criteria for financial assets, as described in Note 3 (a) (iii), have been met.   ii) Reinsurance contract assets The Group cedes insurance risk in the normal course of business as part of its businesses model. Reinsurance assets represent balances recoverable from reinsurance companies. Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision or settled claims associated with the reinsurers’ policies and are in accordance with the related reinsurance contract. Reinsurance assets are reviewed for impairment at each reporting date, or more frequently, when an indication of impairment arises during the reporting year. Impairment occurs when there is objective evidence as a result of an event that occurred after initial recognition of the reinsurance asset that the Group may not receive all outstanding amounts due under the terms of the contract and the event has a reliably measurable impact on the amounts that the Group will receive from the reinsurer. The impairment loss is recorded in the income statement. iii) Reinsurance and other payables Reinsurance and other payables are recognized when due and measured on initial recognition at the fair value of the consideration received less directly attributable transaction costs. Subsequently, reinsurance and other payables are measured at amortised cost, as deemed appropriate. iv) Gross written premiums Gross written premiums are recognized when written and include an estimate for written premiums receivable at period end. Gross written premiums comprise the total premiums receivable for the whole period of cover provided by reinsurance contracts entered into during the accounting period. Gross written premiums also include any adjustments arising in the accounting period for premiums receivable in respect of business written in prior accounting periods. Premium on reinsurance contracts are recognized as revenue (earned premiums) proportionally over the period of coverage. The portion of premium received on in-force contracts that relates to unexpired risks at the reporting date are reported as the unearned premium reserve. v) Premiums ceded to reinsurers Reinsurance premiums comprise the total premiums payable for the reinsurance cover provided by retrocession contracts entered into during the period and are recognized on the date on which the policy incepts. Reinsurance premiums also include any adjustments arising in the accounting period in respect of retrocession contracts incepting in prior accounting periods. Unearned reinsurance premiums are those proportions of premiums written in a year that relate to periods of risk after the reporting date. vi) Reinsurance contract liabilities Reinsurance contract liabilities include the outstanding claims provision and the provision for unearned premium. Reinsurance contract liabilities are recognized when contracts are entered into and premiums are charged.

Objective evidence that financial assets are impaired can include default or delinquency by a customer or insurer or reinsurer, indications that the customer or insurer or reinsurer will enter bankruptcy or the disappearance of an active market for a security. In addition for an investment in equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment. Impairment loss on assets are recognized in the consolidated statement of income and reflected as an allowance against receivables or investments.

Provision for outstanding claims Provision for outstanding claims is recognized at the date the claims are known and covers the liability for losses and loss adjustment expenses based on loss reports from independent loss adjusters and management’s best estimate.

Qatar Re Annual Report 2015 30

Qatar Re Annual Report 2015 31

Claims provision also includes liability for claims incurred but not reported as at the reporting date. The liability is calculated at the reporting date using a range of historic trends, empirical data and standard actuarial claim projection techniques. The current assumptions may include a margin for adverse deviations. The liability is not discounted for the time value of money.

Overview  Strategy and performance  Corporate governance  Financial statements

Notes to the consolidated financial statements For the year ended December 31, 2015 continued


3. Significant accounting policies continued Unexpired risks reserve The provision for unearned premiums represents that portion of premiums received or receivable, after deduction of the reinsurance share, which relates to risks that have not yet expired at the reporting date. The provision is recognized when contracts are entered into and premiums are charged, and is brought to account as premium income over the term of the contract in accordance with the nature and type of reinsurance contract written by the Group. Reinsurance contract liabilities are derecognized when the contract expires, discharged or cancelled by any party to the insurance contract. At each reporting date, the Group reviews its unexpired risk and a liability adequacy test is performed in accordance with IFRS 4 to determine whether there is any overall excess of expected claims and deferred acquisition costs over unearned premiums. This calculation uses current estimates of future contractual cash flows after taking account of the investment return expected to arise on assets relating to the relevant non-life insurance technical provisions. If these estimates show that the carrying amount of the unearned premiums (less related deferred acquisition costs) is inadequate, the deficiency is recognized in the income statement by setting up a provision for premium deficiency. vii) Gross claims paid Gross claims paid include all claims paid during the year and the related external claims handling costs that are directly related to the processing and settlement of claims. viii) Commission earned and paid Commissions earned and paid are recognized at the time the policies are underwritten or deferred and amortised over the same period over which the corresponding premiums are recognized in accordance with the earning pattern of the underlying reinsurance contract. c) Investment activities The Group classifies its investments into financial assets at fair value through profit or loss and available for sale financial assets. The classification depends on the purpose for which the investments were acquired or originated. i) Non-derivative financial instruments All investments are initially recognized at cost, being the fair value of the consideration given including acquisition charges associated with the investment. Financial assets at fair value through profit or loss (Held for trading) Financial assets at fair value through profit or loss include financial assets held for trading and those designated upon initial recognition at fair value through profit or loss. Investments typically bought with the intention to sell in the near future are classified as held for trading. These investments are carried at fair value (marked to market) with any gain or loss arising from the change in fair value included in the profit or loss in the year in which it arises.   Available for sale – Quoted Subsequent to initial recognition, investments which are classified ‘available for sale – quoted’ are re-measured at fair value. The unrealised gains and losses on re-measurement to fair value are recognized in other comprehensive income and accumulated under the heading of fair value reserve until the investment is sold, collected or otherwise disposed of, or the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is included in the consolidated statement of income for the year.

iii) Investment income Interest income Interest income is recognized in the income statement as it accrues and is calculated by using the effective interest rate method, except for short-term receivables when the effect of discounting is immaterial. Dividend income Dividend income is recognized when the right to receive the dividends is established or when received. d) General i) Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less in the consolidated statement of financial position. The cash equivalents are readily convertible to cash. ii) Property and equipment Property and equipment, including owner-occupied properties, are carried at historical cost less accumulated depreciation and accumulated impairment losses. Subsequent expenditure is capitalized only when it is probable that future economic benefits associated with the expenditure will flow to the Group. Ongoing repairs and maintenance are charged to the consolidated statement of income during the financial period they are incurred.   The assets’ residual values, useful lives and method of depreciation applied are reviewed and adjusted, if appropriate, at each financial year end and adjusted prospectively, if appropriate. Impairment reviews are performed when there are indicators that the carrying value may not be recoverable. Impairment losses are recognized in the consolidated statement of income as an expense. An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is recognized in the consolidated statement of income in the year the asset is derecognized. iii) Depreciation Depreciation is provided on a straight-line basis on all property and equipment and investment properties, other than freehold land which is determined to have an indefinite life. The rates of depreciation are based upon the following estimated useful lives: Buildings Furniture and fixtures Motor vehicles

15 to 20 years 2 to 5 years 3 years

Depreciation methods, useful lives and residual values are reviewed and adjusted if appropriate at each financial year end. iv) Impairment of non-financial assets An assessment is made at each reporting date to determine whether there is objective evidence that an asset or group of assets is impaired. If such evidence exists, the estimated recoverable amount of that asset is determined and an impairment loss is recognized for the difference between the recoverable amount and the carrying amount. Impairment losses are recognized in the consolidated statement of income.

Available for sale – Unquoted shares and private equity The fair value of these investments cannot be reliably measured due to the nature of their cash flows, these investments are therefore carried at cost less any provision for impairment.

v) Provisions The Group recognizes provisions in the consolidated financial statements when the Group has a legal or constructive obligation (as a result of a past event) that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. The provision is created by charging the consolidated statement of income for any obligations as per the calculated value of these obligations and the expectation of their realisation at the reporting date.

ii) Fair value reserve This represents the unrealised gain or loss of the year-end fair valuation of available for sale investments. In the event of a sale or impairment, the cumulative gains or losses recognized under the investments fair value reserve are included in the consolidated statement of income for the year.

vi) Employees’ end of service benefits Provision is made for amounts payable in respect of employees’ end of service benefits based on contractual obligations or respective local labour laws of the Group entities, whichever is higher, and is calculated using the employee’s salary and period of service at the reporting date.

Qatar Re Annual Report 2015 32

Qatar Re Annual Report 2015 33

Overview  Strategy and performance  Corporate governance  Financial statements

Notes to the consolidated financial statements For the year ended December 31, 2015 continued


3. Significant accounting policies continued vii) Taxation Previously, the Company was subject to tax at zero percent as per QFC tax regulations applicable in Qatar. In Bermuda, there is no tax on reinsurance activities based on the tax assurance certificate issued in favour of the parent company by the Ministry of Finance.

For certain line of businesses (non-life), in order to estimate the liabilities, the expected loss ratios are calculated for all underlying insurance contracts. The amounts estimated as the difference between the current estimated losses and the reported loses are set aside as the incurred but not reported reserve for the losses that have been incurred but which are not yet known or have still to be reported.

viii) Share capital The Group has issued ordinary shares that are classified as equity instruments. Incremental external costs that are directly attributable to the issue of these shares are recognized in equity.

Impairment of insurance and other receivables An estimate of the collectible amount of insurance and other receivables is made when collection of the full amount is no longer probable. This determination of whether these insurance and other receivables are impaired entails the Group evaluating, the credit and liquidity position of the policyholders and the insurance companies, historical recovery rates including detailed investigations carried out as at reporting date and feedback received from their legal department. The difference between the estimated collectible amount and the book amount is recognized as an expense in the statement of income. Any difference between the amounts actually collected in the future periods and the amounts expected will be recognized in the statement of income at the time of collection.

ix) Segment reporting An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are reviewed regularly by the management to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. 4. Critical judgements and key sources of estimation uncertainty In the application of the Group’s accounting policies, which are described in Note 3, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

As of December 31, 2015 the net carrying values of insurance receivable and reinsurance receivables amounted to USD 770,677 thousand (2014: USD 184,758 thousand) and provision for impairment on insurance receivable and reinsurance receivable amounted to USD 355 thousand (2014: USD 355 thousand). Liability adequacy test At each reporting, liability adequacy tests are performed to ensure the adequacy of insurance contract liabilities. The Group makes use of the best estimates of future contractual cash flows and claims handling and administration expenses, as well as investment income from the assets backing such liabilities in evaluating the adequacy of the liability. Any deficiency is immediately charged to the statement of income.

Critical judgements in applying accounting policies The following are the critical judgements, apart from those involving estimations, that management has made in the process of applying its accounting policies and that have the most significant effect on the amounts recognized in financial statements:

5. Cash and cash equivalents

Classification of investments Quoted securities are classified either held for trading or as available for sale. The Group invests substantially in quoted securities either locally or overseas and management has primarily decided to account for them for their potential long-term growth rather than the short-term profit basis. Consequently, such investments are recognized as available for sale rather than at fair value through profit or loss.

Cash in hand and bank balances Time deposits (with original maturity of less than 3 months)

Financial assets are classified as fair value through profit or loss where the assets are either held for trading or designated as at fair value through profit or loss. The Group invests in mutual and managed funds for trading purpose. Impairment of financial assets The Group determines whether available for sale financial assets are impaired when there has been a significant or prolonged decline in their fair value below cost. This determination of what is significant or prolonged requires considerable judgement by the management. In making this judgement and to record whether impairment occurred, the Group evaluates among other factors, the normal volatility in share price, the financial health of the investee, industry and sector performance, changes in technology and operational and financial cash flows.   Key sources of estimation uncertainty The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the statement of financial position date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year: Claims made under insurance contracts Claims and loss adjustment expenses are charged to income as incurred based on the estimated liability for compensation owed to contract holders or third parties damaged by the contract holders. Liabilities for unpaid claims are estimated using the input of assessments for individual cases reported to the Group and management estimations for the claims incurred but not reported. The method for making such estimates and for establishing the resulting liability is continually reviewed. Any difference between the actual claims and the provisions made are included in the statement of income in the year of settlement. As of December 31, 2015 estimate for unpaid claims amounted to USD 194,233 thousand (2014: USD 101,014 thousand).

Qatar Re Annual Report 2015 34

2015 USD (’000)

2014 USD (’000)

27,035 292,664 319,699

20,792 107,377 128,169

2015 USD (’000)

2014 USD (’000)

The average interest rate on time deposits is 1.77% (2014: 1.45%) per annum. 6. Premiums and other receivables

Premiums receivables Due from insurance companies Provision for bad and doubtful receivables Other receivables Deferred commission Accrued deposit premium Accrued income Prepayments Local debtors Advances against indemnity Other receivables

Qatar Re Annual Report 2015 35

771,032 (355) 770,677

185,113 (355) 184,758

144,018 68,413 3,953 473 132 38 300 217,327 988,004

80,577 38,963 – 833 185 38 – 120,596 305,354

Overview  Strategy and performance  Corporate governance  Financial statements

Notes to the consolidated financial statements For the year ended December 31, 2015 continued


7. Reinsurance contract liabilities and reinsurance contract assets

8. Investments

Gross reinsurance contract liabilities Claims reported unsettled Claims incurred but not reported Unearned premiums

Retrocedants share of reinsurance contract liabilities Claims reported unsettled Claims incurred but not reported Unearned premiums

Net reinsurance contract liabilities Claims reported unsettled Claims incurred but not reported Unearned premiums

2015 USD (’000)

2014 USD (’000)

181,559 423,567 636,164 1,241,290

153,578 92,760 290,080 536,418

118,966 291,927 444,248 855,141

83,942 61,382 196,554 341,878

62,593 131,640 191,916 386,149

69,636 31,378 93,526 194,540

Movements in claims provision during the year are as follows: 2015 Reinsurance contract Retrocedant’s share liabilities USD (’000) USD (’000)

As at January 1 Claims incurred during the year Claims paid during the year Transfer to QIC Group SPC* As at December 31

246,338 554,504 (195,716) – 605,126

145,324 388,873 (123,304) – 410,893

Net USD (’000)

101,014 165,631 (72,412) – 194,233

2014 Reinsurance contract Retrocedant’s share liabilities USD (’000) USD (’000)

243,820 287,469 (178,305) (106,646) 246,338

93,528 173,615 (112,015) (9,804) 145,324

Net USD (’000)

150,292 113,854 (66,290) (96,842) 101,014

Movements in provision for unearned premium during the year are as follows: 2015 Reinsurance contract Retrocedant’s share liabilities USD (’000) USD (’000)

As at January 1 Premiums written during the year Premiums earned during the year Transfer to QIC Group SPC* As at December 31

290,080 1,156,203 (810,119) – 636,164

196,554 812,777 (565,083) – 444,248

Net USD (’000)

93,526 343,426 (245,036) – 191,916

2014 Reinsurance contract Retrocedant’s share liabilities USD (’000) USD (’000)

144,767 535,878 (385,206) (5,359) 290,080

92,435 357,723 (250,121) (3,483) 196,554

Net USD (’000)

52,332 178,155 (135,085) (1,876) 93,526

Held for trading investments Managed funds Available-for-sale investments Qatari public shareholding companies Quoted shares – International Bonds Less: Margin collateral Total available for sale investments – net Total

December 31, 2014 USD (’000)

12,753

1,701

63,017 11,862 217,943 292,822 305,575

442,175 (240,684)

61,281 21,954 201,491 284,726 286,427

Fixed income instrument purchases have been financed using short-term borrowings which typically roll on every coupon payment date. These are normally priced using LIBOR plus spread which ranges from 50 bps to 150 bps. These borrowings carried an average interest rate of 0.94% in 2015 (2014: 0.70%). 9. Property and equipment Furniture and fixtures USD (’000)

Motor vehicle USD (’000)

Total USD (’000)

Cost At January 1, 2014 Additions during the year Disposals during the year At December 31, 2014 Additions during the year Disposals during the year At December 31, 2015

2,920 341 (24) 3,237 1,456 – 4,693

208 75 (16) 267 – (21) 246

3,128 416 (40) 3,504 1,456 (21) 4,939

Accumulated depreciation At January 1, 2014 Charge during the year Disposals during the year At December 31, 2014 Charge during the year Disposals during the year At December 31, 2015

794 747 (24) 1,517 852 – 2,369

56 79 (16) 119 87 (10) 196

850 826 (40) 1,636 939 (10) 2,565

Net Book Value: At December 31, 2015 At December 31, 2014

2,324 1,720

50 148

2,374 1,868

* During the previous year 2014, the Parent Company has commuted the claims outstanding and related insurance reserves as at September 30, 2014 relating to certain reinsurance policies written on or before December 31, 2012 to a related party – Qatar Insurance Company SAQ for a total consideration of USD 98.72 million.

Qatar Re Annual Report 2015 36

634,355 (416,412)

December 31, 2015 USD (’000)

Qatar Re Annual Report 2015 37

Overview  Strategy and performance  Corporate governance  Financial statements

Notes to the consolidated financial statements For the year ended December 31, 2015 continued


10. Provisions, reinsurance and other payables

Deferred commission Due to reinsurance companies Accrued expenses Other payables: Employees’ end of service benefits (Note 10.1) Board of Directors remuneration payable Local creditors

2015 USD (’000)

2014 USD (’000)

100,396 23,762 11,780

53,364 15,672 8,598

635 – 2,203 138,776

502 588 1,208 79,932

2015 USD (’000)

2014 USD (’000)

10.1. Employees’ end of service benefits

Balance at the beginning of the year Charge for the year Payments made during the year Balance at the end of year

502 165 (32) 635

437 165 (100) 502

11. Due to related parties This represents balance due to Qatar Insurance Company S.A.Q (the ‘ultimate parent company’) and its subsidiaries for transactions which occurred during the year. Pricing policies, terms and payment for these transactions are approved by the Parent Company’s management. 12. Share capital The authorized share capital of the Parent Company is 1,200,000 ordinary shares of USD 1.00 each (2014: 73,000,000 shares of QR 10 each). The issued and fully paid in cash share capital is 1,000,000 ordinary shares of USD 1.00 each (2014: 73,000,000 ordinary shares of QR 10 each). The movement in the share capital of the Parent Company is as follows: No. of shares

Par value

Total in QR (’000)

Total in USD (’000)

55,491,290 17,508,710 73,000,000 12,000,000

QR 10 QR 10 QR 10 QR 10

554,913 175,087 730,000 120,000

152,449 48,100 200,549 32,967

85,000,000 – (ii) Share capital on change of legal domicile 85,000,000 Less: Reduction in share capital(iii) (84,000,000) As at December 31, 2015 1,000,000

QR 10 – USD 1 USD 1 USD 1

850,000 – – – –

233,516 (148,516) 85,000 (84,000) 1,000

Authorized share capital

73,000,000 shares of QR 10 each – 73,000,000 shares of QR 10 each –

As at January 1, 2014 Issuance of rights shares As at December 31, 2014 Issuance of rights shares(i)

85,000,000 shares of QR 10 each

Share capital before change of legal domicile Less: Reduction in share capital(ii)

– 500,000,000 shares of USD 1 each (498,800,000) shares of USD 1 each 1,200,000 shares of USD 1 each

(ii) Pursuant to change of legal domicile to Bermuda, the Parent Company has modified its authorized capital to 500,000,000 equity shares of USD 1 each. Immediately after the change in legal jurisdiction, the paid up share capital of the Parent Company stood at 85,000,000 shares of USD 1 each. Additional paid up capital amounting to USD 148,516 thousand was cancelled and transferred to ‘Contributed Surplus’ account in the consolidated statement of changes in equity. (iii) On December 31, 2015, the authorized share capital of the Parent Company reduced from 500,000,000 equity shares of USD 1 each to 1,200,000 equity shares of USD 1 each. On the same date, the issued and paid up share capital of the Company reduced to 1,000,000 equity shares of USD 1 each. Additional paid up capital cancelled amounting to USD 84,000 thousand is transferred to ‘Contributed Surplus’ account in the consolidated statement of changes in equity.

13. Share premium The share premium reflects the amount received in excess of the par value of the shares issued. During the year, the amount is fully transferred to ‘Contributed Surplus’ account in the consolidated statement of changes in equity. 14. Fair value reserve The fair value reserve arose from the revaluation of available for sale investments as per the accounting policies detailed in Note 3. 15. Segment information For management reporting purposes, the Group is organized into two business segments – Marine Aviation and Fire and General. These segments are the basis on which the Group reports its operating segment information. No operating segments have been aggregated in arriving at the reportable segment of the Group. Segment statement of income for the year ended December 31, 2015

Marine and Aviation USD (’000)

Gross written premiums Premiums ceded to reinsurers Net premiums Movement in net unexpired premium reserve Net earned premiums Gross claims paid Reinsurance recoveries Movement in net outstanding claims Net commissions Net underwriting results Investment income Total income Operating and administrative expenses Depreciation Segment results

Total Underwriting USD (’000)

Investments USD (’000)

Unallocated (Expenses)/ Income USD (’000)

Total USD (’000)

39,974 (28,403)

1,116,229 (784,374)

1,156,203 (812,777)

– –

– –

1,156,203 (812,777)

1,076 (660)

11,571

331,855

343,426

343,426

416

(381) 11,190

(98,009) 233,846

(98,390) 245,036

– –

– –

(98,390) 245,036

(407) 9

(15,560) 9,579 (4,160) 90 1,139

(180,156) 113,725 (89,059) (14,763) 63,593

(195,716) 123,304 (93,219) (14,673) 64,732 – 64,732 – – 64,732

– – – – – 10,399 10,399 – – 10,399

– – – – – 274 274 (49,483) (939) (50,148)

(195,716) 123,304 (93,219) (14,673) 64,732 10,673 75,405 (49,483) (939) 24,983

– – (5) 49 53 – – (169) – (116)

* The Parent Company has obtained a licence to operate a branch in Dubai, United Arab Emirates (UAE) as at November 8, 2015, and the operational performance of the branch is included for informative purposes only.

(i) The Parent Company made rights share offer of 12,000,000 shares at a price of QR 15 (including share premium of QR 5 per share) totalling to QR 180,000 thousand (USD 49,450 thousand) to the existing shareholders as at March 31, 2015, which was fully subscribed and paid by the shareholders. The share capital increase of QR 120,000 thousand (USD 32,967 thousand) and contribution towards share premium of QR 60,000 thousand (USD 16,483 thousand) was recognized in the consolidated statement of changes in equity; after obtaining the QFC’s regulatory approval to increase the authorized share capital to 85,000,000 equity shares of QR 10 each.

Qatar Re Annual Report 2015 38

Fire and General USD (’000)

The Group’s Dubai Branch Performance included in Total* USD (’000)

Qatar Re Annual Report 2015 39

Overview  Strategy and performance  Corporate governance  Financial statements

Notes to the consolidated financial statements For the year ended December 31, 2015 continued


17. Operating and administrative expenses

15. Segment information continued Segment statement of income for the period ended December 31, 2014

Marine and Aviation USD (’000)

Gross written premiums Premiums ceded to reinsurers Net premiums Movement in net unexpired premium reserve Net earned premiums Gross claims paid Reinsurance recoveries Movement in net outstanding claims Net commissions Net underwriting results Investment income Total income Operating and administrative expenses Depreciation Segment results

Fire and General USD (’000)

Total Underwriting USD (’000)

Investments USD (’000)

Unallocated (Expenses)/ Income USD (’000)

Total USD (’000)

The Group’s Dubai Branch Performance included in Total USD (’000)

21,885 (12,729)

513,993 (344,994)

535,878 (357,723)

– –

– –

535,878 (357,723)

– –

9,156

168,999

178,155

178,155

(2,150) 7,006

(40,919) 128,080

(43,069) 135,086

– –

– –

(43,069) 135,086

– –

(18,423) 9,296 (3,535) (63) (5,719)

(159,882) 102,719 (44,029) 6,511 33,399

(178,305) 112,015 (47,564) 6,448 27,680 – 27,680 – – 27,680

– – – – – 27,379 27,379 – – 27,379

– – – – – 35 35 (38,340) (826) (39,131)

(178,305) 112,015 (47,564) 6,448 27,680 27,414 55,094 (38,340) (826) 15,928

– – – – – – – – – –

Segment assets and liabilities Assets and liabilities of the Group are commonly used across the operating segments. 16. Investment income 2015 USD (’000)

Interest income Dividends (Loss)/Profit on sale of available for sale financial assets Impairment losses on investments Other gains/(losses)

20,072 1,873 (3,232) (8,155) 115 10,673

2014 USD (’000)

16,932 2,281 8,208 – (7) 27,414

Employees related costs Rental expenses Maintenance and IT expenses Professional fees Travel expenses Board of Directors’ remuneration (Note 18) Miscellaneous expenses

2015 USD (’000)

2014 USD (’000)

30,986 2,796 2,845 1,277 1,120 824 9,635 49,483

25,031 3,004 2,753 607 916 412 5,617 38,340

18. Board of Directors’ remuneration In accordance with the Articles of Association of the Parent Company, the Board of Directors’ remuneration for the year 2015 has been proposed at USD 824 thousand (2014: USD 412 thousand). 19. Contributed Surplus The Contributed Surplus recognized in the consolidated statement of changes in equity is non-distributable to the shareholders as a dividend in the normal course of business. The Contributed Surplus as at year end comprises of the following:

(i) On cancellation of shares after change in legal domicile (ii) On merger of Antares Re business as on December 31, 2015

2015 USD (’000)

2014 USD (’000)

251,651 243,717 495,368

– – –

20. Related parties a) Transaction with related parties These represent transaction with related parties. Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions and Directors of the Group and companies of which they are key management personnel. Pricing policies and terms of these transactions are approved by the Group’s management and are negotiated under normal commercial terms. Significant related party transactions were:

Reinsurance premium to QIC Claims Commission from QIC

2015 USD (’000)

2014 USD (’000)

790,240 115,740 186,839

334,500 71,379 103,430

2015 USD (’000)

2014 USD (’000)

1,562 195 1,757

1,140 161 1,301

b) Compensation of key management personnel

Salaries and other short-term benefits Employees’ end of service benefits Total

Outstanding related party balances at reporting date are unsecured and interest free. Also, the Board of Directors’ remuneration proposed for the year ended December 31, 2015 is detailed in Note 18.

Qatar Re Annual Report 2015 40

Qatar Re Annual Report 2015 41

Overview  Strategy and performance  Corporate governance  Financial statements

Notes to the consolidated financial statements For the year ended December 31, 2015 continued


21. Financial instruments and risk management The Group in the normal course of its business derives its revenue mainly from assuming and managing insurance and investments risks for profit. Through a robust governance structure, risk and return are evaluated to produce sustainable revenues to reduce earnings volatility and increase shareholders’ return. The Group’s lines of business are mainly exposed to the following risks: – – – – –

Insurance risk, Credit risk, Liquidity risk, Market risk and Operational risk.

a) Governance framework The primary objective of the Group’s risk and financial management framework is to protect the Group’s shareholders from events that hinder the sustainable achievement of the set financial performance objectives. Key management recognizes the critical importance of having efficient and effective risk management systems in place. The Group has established a risk management function with clear terms of reference from the Board of Directors, its committees and the associated executive management committees. This is supplemented with a clear organisational structure with documented delegated authorities and responsibilities from the Board of Directors to executive management committees and senior managers. A group risk management policy framework which sets out the risk profiles for the Group, risk management, control and business conduct standards for the Group’s operations has been put in place. b) Capital management framework The Group has an internal risk management framework for identifying risks to which each of its business units and the Group as a whole is exposed, quantifying their impact on economic capital. The internal framework estimates indicate how much capital is needed to mitigate the risk of insolvency to a selected remote level of risk applied to a number of tests (both financial and nonfinancial) on the capital position of the business. c) Regulatory framework Regulators are primarily interested in protecting the rights of the policyholders and monitor them closely to ensure that the Group is satisfactorily managing affairs for their benefit. At the same time, the regulators are also interested in ensuring that the Group maintains an appropriate solvency position to meet unforeseen liabilities arising from economic shocks or natural disasters. The operations of the Group are also subject to regulatory requirements within the jurisdictions where it operates. Such regulations not only prescribe approval and monitoring of activities, but also impose certain restrictive provisions (e.g. capital adequacy) to minimise the risk of default and insolvency on the part of the insurance companies to meet unforeseen liabilities as these arise. d) Asset liability management (ALM) framework Financial risks arise from open positions in interest rate, currency and equity products, all of which are exposed to general and specific market movements. The main risk that the Group faces due to the nature of its investments and liabilities is interest rate risk. The Group manages these positions within an ALM framework that has been developed to achieve long-term investment returns in excess of its obligations under insurance and investment contracts.   The Group’s ALM is also integrated with the management of the financial risks associated with the Group’s other financial assets and liabilities not directly associated with insurance and investment liabilities. The Group’s ALM also forms an integral part of the insurance risk management policy, to ensure in each period sufficient cash flow is available to meet liabilities arising from insurance and investment contracts. e) Insurance risk The principal risk the Group faces under insurance contracts is that the actual claims and benefit payments or the timing thereof, differ from expectations. This is influenced by the frequency of claims, severity of claims, actual compensation paid and subsequent development of long-term claims. Therefore the objective of the Group is to ensure that sufficient reserves are available to cover these liabilities.

The Group principally issues general insurance contracts which constitute mainly marine, aviation, fire, engineering, agriculture and general. The concentration of insurance risk exposure is mitigated by careful selection and implementation of the underwriting strategy of the Group, which attempts to ensure that the risks underwritten are well diversified across a large portfolio in terms of type, level of insured benefits, amount of risk, industry and geography. Underwriting limits are in place to enforce risk selection criteria. The Group, in the normal course of business, in order to minimise financial exposure arising from large claims, enters into contracts with other parties for reinsurance purposes. Such reinsurance arrangements provide for greater diversification of business, allow management to control exposure to potential losses arising from large risks, and provide additional capacity for growth. A significant portion of the reinsurance is affected under treaty, facultative and excess-of-loss reinsurance contracts. Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision and are in accordance with the reinsurance contracts. Although the Group has reinsurance arrangements, it is not relieved of its direct obligations to its policyholders and thus a credit exposure exists with respect to ceded insurance, to the extent that any reinsurer is unable to meet its obligations assumed under such reinsurance agreements. The Group’s placement of reinsurance is diversified such that it is neither dependent on a single reinsurer nor are the operations of the Group substantially dependent upon any single reinsurance contract. The Group has in place strict claim review policies to assess all new and ongoing claims, regular detailed review of claims handling procedures and frequent investigation of possible fraudulent claims to reduce the risk exposure of the Group. The Group further enforces a policy of actively managing and prompt pursuing of claims, in order to reduce its exposure to unpredictable future developments that can negatively impact the Group.   Key assumptions The principal assumption underlying the liability estimates is that the Group’s future claims development will follow a similar pattern to past claims development experience. This includes assumptions in respect of average claim costs, claim handling costs, claim inflation factors and claim numbers for each accident year. Additional qualitative judgements are used to assess the extent to which past trends may not apply in the future, for example one-off occurrence changes in market factors such as public attitude to claiming, economic conditions, as well as internal factors such as portfolio mix, policy conditions and claims handling procedures. Judgement is further used to assess the extent to which external factors such as judicial decisions and government legislation affect the estimated. Other key circumstances affecting the reliability of assumptions include variation in interest rates, delays in settlement and changes in foreign currency rates. Sensitivities The general insurance claims provisions are sensitive to the key assumptions shown below. It has not been possible to quantify the sensitivity of certain assumptions such as legislative changes or uncertainty in the estimation process. The analysis below is performed for possible movements in key assumptions with all other assumptions held constant, showing the impact on gross and net liabilities, net profit and equity. Change in assumptions

Impact on net profit USD (’000)

Impact on equity USD (’000)

December 31, 2015 Incurred claim cost Incurred claim cost

10% -10%

16,563 (16,563)

(16,563) 16,563

– –

December 31, 2014 Incurred claim cost Incurred claim cost

10% -10%

11,385 (11,385)

(11,385) 11,385

– –

The Group manages the insurance risk through the careful selection and implementation of its underwriting strategy and guidelines together with the adequate reinsurance arrangements and proactive claims handling.

Qatar Re Annual Report 2015 42

Impact on liabilities USD (’000)

Qatar Re Annual Report 2015 43

Overview  Strategy and performance  Corporate governance  Financial statements

Notes to the consolidated financial statements For the year ended December 31, 2015 continued


21. Financial instruments and risk management continued Claims development table The Group maintains strong reserves in respect of its insurance business in order to protect against adverse future claims experience and developments. The following tables show the estimates of cumulative incurred claims, including both claims notified and IBNR for each successive accident year at each reporting date, together with cumulative payments to date. The top half of each table below illustrates how the Group’s estimate of total claims outstanding for each accident year has changed at successive year-ends. The bottom half of the table reconciles the cumulative claims to the amount appearing in the consolidated statement of financial position. With the exception of the proportional and non-proportional reinsurance business, an accident-year basis is considered to be most appropriate for the business written by the Group. Given the nature of reinsurance claims and the difficulties in identifying an accident year for each reported claim, these claims are reported separately and aggregated by reporting year (reporting year basis) – that is, with reference to the year in which the Group was notified of the claims. This presentation is different from the basis used for the claims development tables for the other insurance claims and entities of the Group, where the reference is to the actual date of the event that caused the claim (accident-year basis). Accident year

At end of accident year One year later Two years later Three years later Four years later Five years later Current estimate of cumulative claims incurred Cumulative payments to date Total net outstanding claims provision Current estimate of surplus/(deficiency) % Surplus/(deficiency) of initial gross reserve

2010

2011

2012

2013

2014

2015

43,077 62,295 70,046 74,530 65,445 65,445

86,101 120,261 139,780 123,907 123,907 –

60,188 64,507 45,701 45,701 – –

139,608 135,449 137,259 – – –

241,753 277,443 – – – –

517,004 – – – – –

65,445 (65,445) – –

123,907 (123,907) – –

45,701 (45,701) – –

137,259 (87,685) 49,574 2,349

277,443 (148,825) 128,618 (35,690)

517,004 (90,070) 426,934

0%

0%

0%

2%

-15%

Total

Age analysis of financial assets as at the year end is as follows:

December 31, 2015

Cash and cash equivalents Insurance and other receivables

December 31, 2014

Cash and cash equivalents Insurance and other receivables

31 to 60 days USD (’000)

61 to 90 days USD (’000)

91 to 120 days USD (’000)

Above 120 days USD (’000)

Total USD (’000)

150,357 729,213 879,570

84,084 8,866 92,950

85,258 429 85,687

– 6,398 6,398

– 94,316 94,316

319,699 839,222 1,158,921

< 30 days USD (’000)

31 to 60 days USD (’000)

61 to 90 days USD (’000)

91 to 120 days USD (’000)

Above 120 days USD (’000)

Total USD (’000)

20,792 198,338 219,130

63,814 4,513 68,327

43,563 5,035 48,598

– 4,759 4,759

– 11,261 11,261

128,169 223,906 352,075

Impaired financial assets At December 31, 2015 there are impaired insurance and other receivables of USD 355 thousand (2014: USD 355 thousand). For assets to be classified as ‘past–due and impaired’ contractual payments must be in arrears for more than 90 days. No collateral is held as security for any past due or impaired assets. The Group records all impairment allowances for loans and receivables in a separate impairment allowance account. A reconciliation of the allowance for impairment losses for loans and receivables is as follows:

1,166,759 (561,633) 605,126

f) Credit risk Credit risk is the risk that one party to a financial instrument will cause a financial loss to the other party by failing to discharge an obligation. The following policies and procedures are in place to mitigate the Group’s exposure to credit risk: A credit risk policy setting out the assessment and determination of what constitutes credit risk for the Group has been established and policies and procedures are in place to mitigate the Group’s exposure to credit risk: – Compliance with the receivable management policy is monitored and exposures and breaches are regularly reviewed for pertinence and for changes in the risk environment. – For all classes of financial assets held by the Group, other than those relating to reinsurance contracts, the maximum credit risk exposure to the Group is the carrying value as disclosed in the consolidated financial statements at the reporting date. – Reinsurance is placed with reinsurers approved by the management. To minimise its exposure to significant losses from reinsurer insolvencies, the Group evaluates the financial condition of its reinsurers and monitors concentrations of credit risk arising from similar geographic regions, activities or economic characteristics of the reinsurers.

At January 1 Charged during the year At December 31 (Note 6)

2015 USD (’000)

2014 USD (’000)

355 – 355

355 – 355

g) Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in raising funds to meet commitments associated with financial liabilities. Liquidity requirements are monitored on a daily/weekly/monthly basis and management ensures that sufficient funds are available to meet any commitments as they arise. Maturity profiles The table below summarizes the maturity profile of the financial assets and financial liabilities of the Group based on remaining undiscounted contractual obligations, including interest payable and receivable. For insurance contracts liabilities and reinsurance contract assets, maturity profiles are determined based on estimated timing of net cash outflows from the recognized insurance liabilities. Unearned premiums and the reinsurer’s share of unearned premiums have been excluded from the analysis as they are not contractual obligations.

To minimize its exposure to significant losses from reinsurer insolvencies, the Group evaluates the financial condition of its reinsures and monitors concentrations of credit risk arising from similar geographic regions, activities or economic characteristics of the reinsures. At each reporting date, management performs an assessment of creditworthiness of reinsurers and updates the reinsurance purchase strategy, ascertaining suitable allowance for impairment.

Qatar Re Annual Report 2015 44

< 30 days USD (’000)

Qatar Re Annual Report 2015 45

Overview  Strategy and performance  Corporate governance  Financial statements

Notes to the consolidated financial statements For the year ended December 31, 2015 continued


21. Financial instruments and risk management continued December 31, 2015

Financial assets: Non derivatives Available-for-sale investments – Debt securities Held for trading investments – Managed Funds Qatari Public shareholding companies Quoted shares – International Insurance and other receivables Reinsurance contract assets Cash and cash equivalents

December 31, 2015

Financial liabilities: Non derivatives Reinsurance and other payables Due to related parties Insurance contract liabilities

December 31, 2014

Financial assets: Non derivatives Available-for-sale investments – Debt securities Held for trading investments – Managed Funds Qatari Public shareholding companies Quoted shares – International Insurance and other receivables Reinsurance contract assets Cash and cash equivalents

December 31, 2014

Financial liabilities: Non derivatives Reinsurance and other payables Due to related parties Insurance contract liabilities

Qatar Re Annual Report 2015 46

Up to a year USD (’000)

1 to 5 years USD (’000)

Over 5 years USD (’000)

Total USD (’000)

24,196 12,753 63,017 11,862

105,768 – – –

87,979 – – –

217,943 12,753 63,017 11,862

678,083 131,269 319,699 1,240,879

131,448 207,423 – 444,639

29,691 72,201 – 189,871

839,222 410,893 319,699 1,875,389

Up to a year USD (’000)

1 to 5 years USD (’000)

Over 5 years USD (’000)

Total USD (’000)

26,751 446,182 193,321 666,254

– 92,013 305,473 397,486

– 20,784 106,332 127,116

26,751 558,979 605,126 1,190,856

Up to a year USD (’000)

1 to 5 years USD (’000)

Over 5 years USD (’000)

Total USD (’000)

14,253 1,701 61,281 21,954

110,306 – – –

76,932 – – –

201,491 1,701 61,281 21,954

159,465 46,427 128,169 433,250

47,927 73,361 – 231,594

16,514 25,536 – 118,982

223,906 145,324 128,169 783,826

Up to a year USD (’000)

1 to 5 years USD (’000)

Over 5 years USD (’000)

Total USD (’000)

17,970 176,695 78,698 273,363

– 33,549 124,354 157,903

– 11,560 43,286 54,846

17,970 221,804 246,338 486,112

h) Market risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a result of changes in market prices, whether those changes are caused by factors specific to the individual security, or its issuer, or factors affecting all securities traded in the market. The Group limits market risk by maintaining a diversified portfolio and by continuous monitoring of developments in international and local equity and bond markets. In addition, the Group actively monitors the key factors that affect stock and bond market movements, including analysis of the operational and financial performance of investees. i) Currency risk Currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group, with the support of the treasury function of its ultimate parent company, uses certain off balance sheet financial instruments to manage certain foreign currency investment exposures. The table below summarizes the Group’s exposure to foreign currency exchange rate risk at reporting date by categorizing assets and liabilities by major currencies. December 31, 2015

Cash and cash equivalents Insurance and other receivables Reinsurance contract assets Investments Total assets

QAR USD (’000)

EUR USD (’000)

GBP USD (’000)

292,554 – – 63,017 355,571

1,532 90,963 75,764 – 168,259

5,609 470,527 462,571 305 939,012

20,004 426,514 316,806 242,253 1,005,577

319,699 988,004 855,141 305,575 2,468,419

– – –

109,976 15,059 125,035

671,450 46,451 717,901

459,864 77,266 537,130

1,241,290 138,776 1,380,066

QAR USD (’000)

EUR USD (’000)

GBP USD (’000)

Others* USD (’000)

Total USD (’000)

107,377 – – 61,281 168,658

2,773 1,624 38,055 – 42,452

2,221 13,966 143,228 447 159,862

15,798 289,764 160,595 224,699 609,856

128,169 305,354 341,878 286,427 1,061,828

– – –

59,710 540 60,250

224,729 1,130 225,859

251,979 78,262 330,241

536,418 79,932 616,350

Insurance contract liabilities Provisions, reinsurance and other payables Total liabilities December 31, 2014

Cash and cash equivalents Insurance and other receivables Reinsurance contract assets Investments Total assets Insurance contract liabilities Provisions, reinsurance and other payables Total liabilities

* Others mainly represents exposure in reporting currency – United States Dollars.

The Group has no significant concentration of currency risk as Qatari Riyal is pegged to USD at a fixed rate.

Qatar Re Annual Report 2015 47

Others* USD (’000)

Total USD (’000)

Overview  Strategy and performance  Corporate governance  Financial statements

Notes to the consolidated financial statements For the year ended December 31, 2015 continued


21. Financial instruments and risk management continued The analysis that follows is performed for reasonably possible movements in key variables with all other variables held constant, showing the impact on profit before tax and equity due to changes in the fair value of currency sensitive monetary assets and liabilities including insurance contract claim liabilities. The correlation of variables will have a significant effect in determining the ultimate impact on market risk, but to demonstrate the impact due to changes in variables, variables had to be changed on an individual basis.

Changes in variables

Currency

Impact on profit or loss December 31, December 31, 2014 2015 USD (’000) USD (’000)

Euro GBP

+10% +10%

402 1,597 1,999

386 1,505 1,891

Euro GBP

-10% -10%

(402) (1,597) (1,999)

(386) (1,505) (1,891)

The method used for deriving sensitivity information and significant variables did not change from the previous period. ii) Interest rate risk Interest rate risk is the risk that the value of future cash flows from a financial instrument will fluctuate because of changes in market interest rates. The Group invests in securities and has deposits that are subject to interest rate risk. Interest rate risk to the Group is the risk of changes in market interest rates reducing the overall return on its interest bearing securities. The Group’s interest risk policy requires managing interest rate risk by maintaining an appropriate mix of fixed and variable rate instruments. The policy also requires it to manage the maturities of interest bearing financial assets and interest bearing financial liabilities. The Group limits interest rate risk by monitoring changes in interest rates in the currencies in which its cash and investments are denominated and has no significant concentration of interest rate risk. The analysis below is performed for reasonably possible movements in key variables with all other variables held constant, showing the impact on profit or loss and equity.

Currency

Qatari Riyals Qatari Riyals

Qatar Re Annual Report 2015 48

Changes in variables

+50 basis points -50 basis points

December 31, 2015 Impact on Impact on equity profit or loss (USD ’000) (USD ’000)

91 (91)

(4,752) 4,752

December 31, 2014 Impact on Impact on equity profit or loss (USD ’000) (USD ’000)

489 (489)

(18,746) 18,746

The Group’s interest rate risk based on contractual arrangements is as follows:

December 31, 2015

Cash and Cash equivalents Investments

December 31, 2014

Cash and Cash equivalents Investments

Up to 1 year (USD ’000)

1 to 5 years (USD ’000)

Over 5 years (USD ’000)

Total (USD ’000)

319,699 24,196 343,895

– 105,768 105,768

– 87,979 87,979

319,699 217,943 537,642

Up to 1 year (USD ’000)

1 to 5 years (USD ’000)

Over 5 years (USD ’000)

Total (USD ’000)

128,169 14,253 142,422

– 110,306 110,306

– 76,932 76,932

128,169 201,491 329,660

Effective interest rate (%)

1.77% 4.92%

Effective interest rate (%)

1.45% 4.77%

iii) Price risk Price risk is the risk that the fair value of or income from a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. The Group’s equity price risk exposure relates to financial assets and financial liabilities whose values will fluctuate as a result of changes in market prices, principally investment securities not held for the account of unit-linked business. The Group’s price risk policy requires it to manage such risks by setting and monitoring objectives and constraints on investments, diversification plans, limits on investments in each country, sector and market and careful and planned use of derivative financial instruments. The Group has no significant concentration of price risk. The analysis below is performed for reasonably possible movements in key variables with all other variables held constant, showing the impact on profit or loss and equity.

Changes in variables

Qatar Market International Markets Qatar Market International Markets

+10% +10% -10% -10%

December 31, 2015 Impact on Impact on equity profit or loss (USD ’000) (USD ’000)

– 1,275 – (1,275)

6,302 1,186 (6,302) (1,186)

December 31, 2014 Impact on Impact on equity profit or loss (USD ’000) (USD ’000)

– 170 – (170)

6,128 2,195 (6,128) (2,195)

The method used for deriving sensitivity information and significant variables did not change from the previous period. i) Operational risk Operational risk is the risk of loss arising from system failure, human error, fraud or external events. When controls fail to perform, operational risks can cause damage to reputation, have legal or regulatory implications or can lead to financial loss. The Group cannot expect to eliminate all operational risks, but by initiating a rigorous control framework and by monitoring and responding to potential risks, the Group is able to manage the risks. The Group has detailed systems and procedures manuals with effective segregation of duties, access controls, authorisation and reconciliation procedures, staff training and assessment processes etc. with a compliance and internal audit framework. Business risks such as changes in environment, technology and the industry are monitored through the Group’s strategic planning and budgeting process.

Qatar Re Annual Report 2015 49

Overview  Strategy and performance  Corporate governance  Financial statements

Notes to the consolidated financial statements For the year ended December 31, 2015 continued


21. Financial instruments and risk management continued j) Capital management Objectives are set by the Group to maintain a strong credit rating and healthy capital ratios in order to support its business objectives and maximize shareholder’s value. The Group manages its capital requirements by assessing shortfalls between reported and required capital levels on a regular basis. The Group fully complied with the externally imposed capital requirements during the reported financial year and no changes were made to its capital base, objectives, policies and processes from the previous year. k) Classifications and fair values The following table compares the fair values of the financial instruments to their carrying values: December 31, 2015 Carrying amount Fair value USD (’000) USD (’000)

Cash and cash equivalents Loans and receivables: Insurance and other receivables Reinsurance contract assets Investments: Held for trading Available for sale investments

Reinsurance and other payables Due to related parties Insurance contract liabilities

319,699

319,699

December 31, 2014 Carrying amount Fair value USD (’000) USD (’000)

128,169

The following table shows an analysis of financial instruments recorded at fair value by level of the fair value hierarchy:

December 31, 2015 Held for trading Available for sale

December 31, 2014 Held for trading Available for sale

128,169

839,222 410,893

839,222 410,893

223,906 145,324

223,906 145,324

12,753 292,822 1,875,389

12,753 292,822 1,875,389

1,701 284,726 783,826

1,701 284,726 783,826

26,751 558,979 605,126 1,190,856

26,751 558,979 605,126 1,190,856

17,970 221,804 246,338 486,112

17,970 221,804 246,338 486,112

22. Determination of fair value and fair values hierarchy The following table shows an analysis of financial instruments recorded at fair value by level of the fair value hierarchy. The different levels have been defined as follows: – Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities – Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices) – Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Level 1 USD (’000)

Level 2 USD (’000)

Level 3 USD (’000)

Total fair value USD (’000)

– 292,822 292,822

12,753 – 12,753

– – –

12,753 292,822 305,575

– 284,726 284,726

1,701 – 1,701

– – –

1,701 284,726 286,427

23. Business combination under common control Effective December 31, 2015, the Parent Company merged the business of Antares Reinsurance Limited (a Bermuda entity with registration number of EC 40716), a fully owned subsidiary of Antares Holding Limited UK. Antares Holding Limited UK, in turn, owned by Qatar Insurance Company SAQ, the ultimate parent company of the Group. The regulatory close of the transactions was completed on January 25, 2016 by updating the records of Registrar of Companies, Bermuda with an effective date of merger as per the records being December 31, 2015. The transaction is considered as transaction under ‘common control’ as the control of the Parent Company and Antares Reinsurance Limited vested with Qatar Insurance Company SAQ. Accordingly, there is no goodwill or gain on bargain purchase recognized by the Group. The book value of the identifiable assets and liabilities of Antares Reinsurance Limited as at the date of merger were the following: As at December 31, 2015 USD (’000)

Assets Cash and cash equivalents Insurance and other receivables Investments Total assets Liability Provisions, reinsurance and other payables Total liability Book value of net assets merged with the Parent Company

33,250 91,230 126,539 251,019 7,302 7,302 243,717

Net book value of assets transferred to the Parent Company is recognized as ‘Contributed Surplus’ account in the equity. The net cash inflow to the Group out of this merger transaction is USD 33,250 thousand. There is no revenue or operational result of Antares Reinsurance Limited for the year ended December 31, 2015 (or any previous years) included in these consolidated financial statements of the Group.

Qatar Re Annual Report 2015 50

Qatar Re Annual Report 2015 51

Overview  Strategy and performance  Corporate governance  Financial statements

Notes to the consolidated financial statements For the year ended December 31, 2015 continued


Our parent company

QIC is among the highest rated insurers in the Gulf region with a rating of ‘A/Stable’ from Standard & Poor’s and of ‘A/Excellent’ from A.M. Best Europe. Qatar Re and other guaranteed subsidiaries of QIC also share and benefit from these strong ratings.

Founded in 1964, Qatar Insurance Company S.A.Q. (QIC) is the ultimate parent of the QIC Group of companies and a leading publicly-listed insurer with an underwriting footprint across the Middle East, Africa and Asia. QIC is the dominant insurer in Qatar and the largest insurance company in the Middle East and North Africa region by premiums, profitability, total assets and market capitalization. It is listed on the Qatar Exchange (Ticker: QATI) and has a market capitalisation in excess of USD 5.3 billion.

The QIC Group’s insurance operations include QIC Doha, QIC UAE, Q-Life & Medical Insurance Company, Qatar Re, QIC Europe Limited, Kuwait Qatar Insurance Company, Oman Qatar Insurance Company and Antares Managing Agency Limited, a specialist insurer and reinsurer operating in the Lloyd’s market.

QIC performance figures, 2009 – 2015 USD million 3,000 2,293 2,000

1,000

968

818

969 592

591 2009

2012

2013

Market capitalisation

USD million

USD million

8,000

6,623

6,000

2,000 0

1,988

2009

2010

2,135

2011

Qatar Re Annual Report 2015 52

2,267

2012

2014

2015

3,196

2013

8,000 6,000

4,422 1,867

292

Net profit

Total assets

4,000

282

214

170

2011

Gross premium

1,647

970

703

166

2010

Shareholders’ equity

1,042 655

171

154 0

1,627 1,542

1,478

4,000

2014

2015

2,000

1,268

0

2009

1,705

1,588

1,664

2010

2011

2012

3,996

4,159

2014

2015

2,346

2013

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Bermuda Qatar Reinsurance Company Limited 69 Pitts Bay Road Pembroke, HM08 Bermuda Doha Qatar Reinsurance Services LLC 8th Floor, QIC Building Tamin Street, West Bay Area P.O. Box 24938 Doha, Qatar

Dubai Qatar Reinsurance Company Limited Dubai Branch Office 211–212, Level 2 Gate Village 4, DIFC P.O. Box 506752 Dubai, UAE London Qatar Reinsurance Company Limited Representative Office 10 Lime Street Level 1 London EC3M 7AA

Zurich Qatar Reinsurance Company Limited Pembroke (Bermuda), Zurich Branch Bleicherweg 72 8002 Zurich Switzerland


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