Qatar Re
Annual Report 2014
TABLE OF CONTENTS 2
Letter from the Chairman
4
CEO Business Review
8
Executive Committee
10
Underwriting Performance
38
Risk Management
42
Actuarial and Capital Management
4 6
Human Resources
48
Corporate Governance
52
Performance Overview
56
Investments
Financial Statements
62
Balance Sheet
63
Income Statement
66
Notes to the Financial Statements
91
Independent Auditor’s Report
92
About our parent company
AT A GLANCE BUILDING A GLOBAL REINSURER Established in 2009, Qatar Reinsurance Company LLC (Qatar Re) is the reinsurance affiliate of Qatar Insurance Company (QIC), the largest composite insurer in the Middle East, based in Doha, Qatar. Qatar Re, also headquartered in Doha, has branch offices in Zurich and Bermuda as well as representative offices in L ondon and Singapore. The Company is authorized and regulated by the Qatar Financial Centre Regulatory Authority (QFCRA), being a registered company at the Qatar Financial Centre (QFC Registration Code 0117). Qatar Re is backed by a full parental guarantee by QIC Group with a net equity of USD 1.6 billion and a market capitalization of USD 4 billion as of 31 December 2014. Qatar Re is rated “A/Stable” by Standard and Poor’s and A (Excellent) by A. M. Best and benefits from QIC’s strong and growing capital base.
Qatar Re is a global multi-line reinsurer with a focus on specialty and knowledge-intense business. It writes all major property, casualty and specialty lines. Qatar Re’s teams of highly experienced underwriting and financial professionals serve the Company’s cedants through a combination of in-depth technical and business expertise and acknowledged industry experience across all reinsurance markets. Qatar Re’s strong capital base offers high security and instant diversification to its cedants’ reinsurance panels.
SERVING GLOBAL REINSURANCE MARKETS Headquartered in Doha, Qatar Re has branch offices in Zurich, Bermuda and representative offices in London and Singapore. Qatar Re is well-positioned to serve all reinsurance markets.
London Zurich Bermuda
Doha Dubai (under application)
Singapore
STRONG FINANCIAL PERFORMANCE Qatar Re recorded gross written premiums of USD 535.9 million in the financial year 2014 compared with USD 336.6 million in 2013, an increase of 59%. Underwriting profitability is measured at a gross level, before internal retrocession. Qatar Re cedes 70% of its treaty business to QIC Group. The Company’s investment result in 2014 was USD 27.4 million, compared
with USD 19.6 million in 2013. Investable assets increased from USD 384.7 million in 2013 to USD 414.6 million in 2014. Net income was USD 15.9 million in 2014, up from USD 0.5 million in 2013. In 2014 shareholders’ equity amounted to USD 225 million, compared with USD 120 million in 2013.
A WELL-DIVERSIFIED PORTFOLIO GWP by domicile of reinsured 3%
2013
2014
4%
4% 48%
20%
Europe Americas Asia Africa Oceania
3%
52%
27%
25%
Europe Americas Asia Africa Oceania
14%
GWP by line of business 21%
2013
2014
29%
7% 4% 15% 17% 7%
EXCELLENT RATING • AM Best “A/Excellent” • S&P “A/Stable”
Motor/Casualty Marine & Aviation Property Energy Agriculture Credit & Surety Others/Multi Lines
6%
1% 34%
19% 6% 12%
22%
Motor/Casualty Marine & Aviation Property Energy Agriculture Credit & Surety Others/Multi Lines
DYNAMIC GROWTH • Gross written premiums of USD 535.9 million, up from USD 336.6 million (59%) • Net underwriting income of USD 27.7 million, up from USD 11.2 million (147%) • Investment income of USD 27.4 million, up from USD 19.6 million (40%) • Net profit of USD 15.9 million, up from USD 0.5 million
OUR KEY FINANCIAL DATA Gross written premiums
Net profit in USD million
in USD million 535.9
400
10
336.6
5
300
0
3.3
115.6
103.2
2011
2012
0.5
–9.9
0
200 100
15.9
15
500
–5
2013
2014
–10
2011
Gross and net underwriting income
Investment income
in USD million
in USD million
2012
2013
2014
32.9 30
27.7 21.6
20
19.6 18
0
12 –3.9
–10 –20
2012
13.2 8.3
6
–14.5
2011
27.4
24 11.2
10
30
2013
Gross income: before applying quota share cession Net income: after quota share cessions
2014
0
2011
2012
2013
2014
Qatar Re Annual Report 2014
n behalf of the Board of D irectors we would “ O like to express our long term commitment and support to Qatar Re and its strategy.” Sheikh Jassim Bin Hamad Bin Jassim Bin Jabor Al-Thani is Chairman of Qatar Islamic Bank and of QInvest, CEO of Al Mirqab Capital LLC as well as Board member of Credit Suisse since 2010. Sheikh Jassim Bin Hamad Bin Jassim Bin Jabor Al-Thani Chairman
e are delighted about Qatar Re’s strong “ W growth and performance in 2014.”
Khalifa Abdulla Turki Al-Subaey is Group President and CEO of Qatar Insurance arent company. Company, Qatar Re’s p He is Qatar Re’s Managing Director. Khalifa Abdulla Turki Al-Subaey Managing Director
atar Re is actively p rogressing on its journey “ Q towards building a global franchise.” Gunther Saacke joined Qatar Re as CEO in February 2013. Under his tenure Qatar Re has been turned into a highly efficient global reinsurance company with business written in all major property and casualty lines. Gunther Saacke Chief Executive Officer
2
Qatar Re Annual Report 2014
LETTER FROM THE CHAIRMAN
It is with great honour that we present to you Qatar Re’s annual report for the year ended 31 December 2014, which introduces the Company, its people, its book of business and financials. In addition, we elaborate on our underwriting philosophy and highlight our lines of business, be it property, casualty and specialty lines as well as our achievements in Risk Management, Capital Management, Corporate Governance and Investments. In Qatar Re’s brief history the Company has been able to grow rapidly, increase the diversification of its portfolio, attract top industry talent and position itself as a well-respected multi-line reinsurer with a focus on specialty and knowledge-intense business. The year 2014 marked our first full underwriting year following Qatar Re’s strategic repositioning in 2013, and we have every reason to be proud of our performance. We generated gross written premiums of USD 536 million, a net underwriting result of USD 28 million and a total income of USD 55 million, which includes investment income of USD 27 million. Investment management is one of the areas where Qatar Re benefits greatly from the capabilities of its parent company QIC.
Qatar Re is actively progressing on its journey towards building a global franchise and further enhancing the diversification of its business, both in terms of products offered and regions served. Our clients benefit not only from Qatar Re’s teams of highly experienced under writing and financial professionals, but also from a combination of in-depth technical and business expertise across all reinsurance markets. In addition, Qatar Re’s strong and distinct capital base offers high security and instant diversification to our cedants’ reinsurance panels. Our contribution to shareholders in earnings per share amounted to: Earnings per share in USD 0,231
0,011
2013
2014
We would like to express our gratitude and appreciation to Qatar Re’s management team for leading the Company with skill, an entrepreneurial mind set, dedication and rigor. QIC remains fully committed to Qatar Re, its strategy and business model for the long term.
Sheikh Jassim Bin Hamad Bin Jassim Bin Jabor Al-Thani Chairman
Khalifa Abdulla Turki Al-Subaey Managing Director
3
Gunther Saacke Chief Executive Officer
Qatar Re Annual Report 2014
CEO BUSINESS REVIEW Strategic overview
I am pleased to report on Qatar Re’s performance during the financial year 2014. Since the strategic repositioning of the Company in early 2013 we have established a diversified book of business, employing our capital more efficiently.
A typical reinsurance start-up would be able to write a book based on a single class or territory. Diversifi cation would be sought later. Qatar Re has been very different in that respect. From the very beginning, we have positioned ourselves as a global reinsurer. We have focused on knowledge-intensive specialty business served by strong teams with acknowledged technical expertise. As a result we are already being asked to take lead positions. Catastrophe business represents less than 10% of our overall portfolio and we have no ambitions to increase this proportion. In 2014 we were able to take an entrepreneurial approach to reinsurance, working closely with our c lients to improve the overall quality of their portfolio and risk profile. We are particularly keen to build relationships with clients who possess a superior access to and knowledge of their preferred areas of business. It is our mission to add value to our clients by providing meaningful line sizes or bespoke technical support. We want brokers and clients to find us easy to do business with. Our strong teams are not paralysed by a complex matrix structure. Experience and empowerment enable our underwriters to take swift and yet balanced and thought-through decisions. These decisions are based on an integrated portfolio view, which enables us to write business with capital efficiency. Each and every risk is assessed based on its impact on our overall portfolio.
Our financial performance in 2014 demonstrates the virtues of our chosen business model. We made significant progress in growing our book of business and boosting profitability, firmly establishing ourselves as a global Top 50 reinsurer. Strong premium and income growth Gross written premiums grew to USD 536 million, an increase of almost 60% year-over-year. Net income amounted to USD 16 million, up from USD 0.5 million in the previous year. This improvement needs to be set against a backdrop of investments in staff and infrastructure as well as prior-year underwriting losses unrelated to our current portfolio. Gross written premiums in USD million 535.9
336.6
2013
2014
In 2014 we continued to benefit from our parent company QIC’s excellent investment management capabilities. We generated investment income of USD 27 million on investable assets of USD 415 million and our asset allocation is commensurate with our A-rated financial strength and robust Enterprise Risk Management framework.
5
Qatar Re Annual Report 2014
I am pleased with our underwriting performance in 2014. The net underwriting result was USD 28 million, compared with USD 11 million in the previous year. The technical margin on our net written premiums (after significant intra-group cessions) increased from 8% in 2013, to 15% during the reporting period. This performance demonstrates our commitment to technical excellence and profitability. Furthermore our portfolio increased in diversification. The combined share of the three largest classes (motor/casualty, property, agriculture) decreased from 75% to 61%. At the same time, we broadened our footprint in the Americas, which now accounts for 24% of our total portfolio, up from 14%. By contrast our European business decreased its share from 52% to 48% in the same reporting period. Underwriting income in USD million 27.7
19.6
I am gratified to see that the benefits of careful risk selection have enhanced our resilience to the continuing decline in market rating levels. Business growth and profitability were underpinned by further investments into our infrastructure, primarily analytics, enterprise risk management, exposure management tools and our ReMetrica based capital model. Performance overview Gross 足p erformance 2014
Gross 足p erformance 2013
% change
Gross written premiums
535,878
336,578
59%
Net written premiums
512,655
316,962
62%
Net premiums earned
371,997
200,412
86%
Total revenue
295,490
166,738
77%
in USD 1,000
Incurred claims
(262,573)
(145,151)
81%
Net underwriting profit
32,917
21,587
52%
Net investment income
27,414
19,648
40%
(39,166)
(30,293)
29%
21,165
10,942
93%
General expenses Net profit
2013
6
2014
Further expansion of our team and platform In 2014, we made a number of senior hires. Michael Gertsch, former CEO, Gulf Re, joined us to help expand our facultative book of business. Stephan Rappaz, who joined us as Global Head of Casualty from New Re, will be instrumental in establishing a meaningful presence in this line of business.
Qatar Re Annual Report 2014
expect to generate further “ We profitable growth in 2015.” During the year we successfully recruited a replacement for the retiring CUO Willi Schürch. Willi is one of the most recognised figures in the Swiss reinsurance market having held senior roles at Swiss Re and P artnerRe. His experience has contributed to the strong technical base of our firm and I want to thank him for his leadership. Alastair Speare-Cole, former CEO of JLT Re joined us as our new CUO in January 2015 and will help lead us into the next phase of our development. Our new Bermuda branch became fully operational under the stewardship of Luke Roden. As a result, our North American business has grown considerably. In line with the Company’s expansion plans our headcount grew to 107 as per December 31, 2014. With additional scale, our cost-efficiency improved. Measured against gross written premiums, our administrative expense ratio reduced from 8.8% to 7.1%. We expect this trend to continue into 2015. Our overall solid performance was achieved despite severe headwinds from an increasingly competitive and challenging trading environment. Global reinsurance markets continue to be awash with excess capital both from new entrants and retained earnings. Demand remains anaemic as global economic growth is slowing and insurance penetration, while increasing, takes time. Primary insurers are retaining more risk as they increase capital through retained earnings. This is in spite of the availability of attractively priced reinsurance capacity. Therefore, the mismatch between global supply and demand was further aggravated in 2014. Against this backdrop we take pride in having significantly grown our book of business and at the same time improving our underwriting profitability.
We are close observers of the current wave of mergers and acquisitions in the global reinsurance markets. There are more opportunities for us than there are concerns. Inevitably there will be individuals who will not feel at home in the newly merged entities. We can provide the right home for those who share our culture. And cedants want constancy and choice. We represent both. Momentum to be maintained in 2015 We expect to generate further profitable growth in 2015. We have no doubt that reinsurance buyers will continue to welcome a well-diversified and technically versatile reinsurer backed by long-term capital. I would like to take this opportunity to thank our parent company QIC. They are fully committed to growing Qatar Re and have a long-term perspective. QIC built its franchise steadily and systematically over the last 50 years and now has a leading role in the Middle East insurance market. My particular gratitude goes to our clients, of course. Their trust and loyalty is the strongest testament we can think of as it validates our business model. Finally I would like to thank our staff whose strong commitment to our vision has enabled Qatar Re to develop so successfully.
7
Qatar Re Annual Report 2014
EXECUTIVE COMMITTEE
Gunther Saacke Chief Executive Officer
Mark Cockroft Chief Actuary
Peter Frei Chief Risk Officer
Michael Gertsch Head of Global Facultative and Head of Underwriting Operations
Qatar Re’s Executive Committee is represented by all core functional heads. It includes: Gunther Saacke, Chief Executive Officer Gunther started his career in 1991 and over the last two decades has worked for a number of reputable reinsurance companies, establishing a track record of successfully building high-profile teams of industry specialists across all major business lines.
Peter Frei, Chief Risk Officer Peter has 25 years of experience in leadership positions in the insurance and reinsurance industry. His areas of expertise include underwriting, enterprise e xposure management, major event loss reserving, retrocession and model development.
Mark Cockroft, Chief Actuary Mark has almost 20 years of experience in general insurance actuarial work, primarily gathered with London market and international reinsurance operations.
Michael Gertsch, Head of Global Facultative and Head of Underwriting Operations Michael is a seasoned professional in the insurance industry with over 25 years of experience in various treaty and facultative underwriting positions.
8
Qatar Re Annual Report 2014
Luke Roden Global Head of Catastrophe and Branch Manager Bermuda
Alok Sahi Head of Finance Doha
Luke Roden, Global Head of Catastrophe and Branch Manager Bermuda Luke has a highly successful track record developing and maintaining large, profitable portfolios of treaty reinsurance business over the last 20+ years. He is a respected market leader with extensive experience in treaty lines: Cat XL, Pro-rata, Risk XL and Retro XL. Alok Sahi, Head of Finance Doha Alok has over 14 years of experience in the financial services industry of which the last 11 years have been managing finance departments across a spectrum of QIC Group entities.
Parvez A N Siddiqui Head of Finance Zurich
Alastair Speare-Cole Chief Underwriting Officer
Parvez A N Siddiqui, Head of Finance Zurich Parvez has over 15 years of experience in the insurance industry heading finance, reinsurance, operations, IT and human resources functions at various positions held. He first joined the QIC Group in 2004, before moving to Qatar Re. Alastair Speare-Cole, Chief Underwriting Officer Alastair’s industry career spans more than 30 years with vast experience across all traditional reinsurance lines as well as alternative solutions, among various brokers, and has earned himself a reputation of a wellrecognised, charismatic and inspiring leader.
9
Alastair Speare-Cole Chief Underwriting Officer
Qatar Re Annual Report 2014
UNDERWRITING PERFORMANCE Well-positioned with a global presence
In 2014 the capital base of the global insurance industry was estimated at USD 3 trillion, with reinsurance accounting for one tenth of this amount. In comparison, pension funds hold more than USD 30 trillion in assets. At the other end of the spectrum, capital in the retrocession market is estimated at just USD 30 billion.
Market trends Since the financial crisis capital markets have shown an increasing interest in dedicated reinsurance capital. This has been stimulated by the low returns available elsewhere and because Insurance Linked Securities such as catastrophe bonds maintained their value during the crisis, thus demonstrating that their behaviour was uncorrelated. Capital market interest in the insurance industry has manifested itself in two broad but distinct categories. There has been a growing appetite to invest directly in risk rather than in equity or debt of risk takers. There has also been a parallel trend for some fund managers to acquire policyholders’ funds to invest by teaming up with traditional carriers. While the latter may be a more ephemeral trend we believe that investing directly in risk is here to stay.
Diversification effects Thus, the pricing of catastrophe reinsurance has become more a function of the dynamics of the capital markets, rather than the supply vs. demand dynamics of traditional insurance and reinsurance capital. In 2014 the capital markets were keen to take on catastrophe risk at much lower multiples of modelled losses compared with reinsurers’ traditionally priced risk. The peak peril risk, i.e. risk that could not be diversified away by the insurance industry, used to command a high price to transfer. In contrast, the very same risk now offers a diversification of risk for the capital markets and they are happy to accept it at a lower price.
Pension funds are continually looking for yield from uncorrelated assets. Catastrophe risk, longevity risk and other risks can now be modelled with increasing credibility and this has stimulated some pension funds to allocate a small amount of capital to our industry. If all pension funds allocated just 1% of their assets to reinsurance risk the industry’s global dedicated capital base would double and easily absorb the biggest conceivable insured catastrophe loss.
11
Qatar Re Annual Report 2014
New realities Overall, available reinsurance capacity continued to grow in 2014, in part driven by low catastrophe losses and positive prior-year loss developments. At the same time, global demand for insurance was stagnant and fell short of economic growth. Global Reinsurer Capital in USD billion 600 505
470
500 410
385
400
400 340
6%
–17%
455
368
6% 7%
11%
–3%
Overall, the mismatch between demand and supply continued to increase in 2014, exerting further p ressure on reinsurance rates as well as terms and conditions across most classes and geographies.
18% 18%
300 200
575
540
Another significant trend is that the ability to model risk has blossomed in the last decade. And it is now possible to build sophisticated capital models and some regulators and rating agencies support or even demand this as the basis for solvency calculation. A side effect has been that larger cedants and those with a broad spread of classes are seeing the attraction of retaining more of their diversified risk which would have formerly been ceded as reinsurance.
388 321
378
447
428
24
28
466
490
511
50
64
100 17
0
22
19
22
39
2006 2007 2008 2009 2010 2011 2012 2013 2014 Traditional Capital Alternative Capital Global Reinsurer Capital
Source: Company reports, Aon Benfield Analytics
Available reinsurance capacity “ continued to grow in 2014.”
12
Qatar Re Annual Report 2014
ambition is to build a company “ Oofurlasting value.” Underwriting philosophy Despite the difficult rating environment we believe that a successful reinsurance business can be built to suit today’s world, and more importantly, that of tomorrow. At Qatar Re we recruited experienced reinsurance professionals that are confident in attracting more business as we grow. We are able to build the Company free of the legacy issues that some established competitors are struggling with. Relationships matter Traditionally catastrophe business was central to the economics of a reinsurer. As outlined earlier this model is no longer so attractive. However, in comparison to traditional reinsurers our economic capital is driven by other lines of business rather than our peak peril catastrophe risk. We also have the advantage of attracting class and geographic expertise without being shackled to traditional silos. This in turn allows us to consider structures and relationships that our competitors struggle with.
Our ambition is to build a company of lasting value. But unlike many of the new reinsurance operations that were started in the last decade we are not a v ehicle for private equity-style grow-and-sell. Quite the contrary. We aim to become a global top ten reinsurer recognised for the quality of its security and the constancy of the partnerships with our stakeholders, particularly brokers and cedants. Customized solutions Our response to the current market is to tailor our approach to our clients around three distinct propositions. • First, we provide capital and capacity to insurance entrepreneurs and Lloyd’s syndicates. • Second, we offer client, geographic and class intimacy, where relationship reinsurance still m atters. • Third, we take a portfolio-managed approach to commoditized reinsurance, and thereby offer sustainable and competitive pricing.
13
Qatar Re Annual Report 2014
Review of 2014 We rebranded from Q-Re LLC to Qatar Re in April 2014. While this was a visible external change, there has also been a fundamental transformation during the last 24 months. We have significantly grown our book of business and established a global franchise with an emphasis on specialty lines. Our branding reflects the transition from regional to global reinsurer. We have encountered considerable appetite to trade with a company that has an independent capital base, largely uncorrelated with the capital supplying many of our competitors. In 2014, Qatar Re made significant progress in strengthening its position in all three of our chosen client propositions. Our results and income growth were as follows: Gross and net underwriting income in USD million 32.9 30
27.7 21.6
20
0 –3.9
–10 –20
–14.5
2011
2012
Before applying quota share cession After quota share cessions
14
2013
This form of reinsurance now accounts for about 20% of our entire book. It is underwritten on a proportional basis and therefore shares the same risk/reward characteristics of insurance rather than excess of loss reinsurance. There is every likelihood that for 2015 this will represent a growing proportion and we have a strong pipeline of niche opportunities. Client and class intimacy, where relationship reinsurance matters We have substantially grown our headcount of reinsurance professionals enhancing our class and geographic knowledge. This part of our portfolio accounts for over 70% of our business. While this market suffers from overcapacity and competition we have been able to make headway due in part to the personal franchise of our underwriters. A key factor is that we work hard with clients and brokers to understand their business needs and to offer innovative structures. We are happy to consider contract structures that cut across traditional industry silos. While we may not follow the “rules” as others might see them, we take care to base our decision making on a sound understanding of the fundamentals.
11.2
10
Capital and capacity to insurance entrepreneurs and Lloyd’s syndicates We have established a Lloyd’s Corporate Member to facilitate the provision of capacity to carefully selected partners.
2014
We have a flat structure, and brokers and clients have direct access to decision makers ensuring we act with speed and flexibility.
Qatar Re Annual Report 2014
Outlook 2015 GWP by line of business 21%
2014
29%
7% 4% 15%
Motor/Casualty Marine & Aviation Property Energy Agriculture Credit & Surety Others/Multi Lines
17% 7%
Portfolio-managed approach to commoditized Âreinsurance Catastrophe business, which is increasingly commoditised, accounts for less than 10% of our business. We will continue to support our clients in this area, especially when we have a wider relationship across other lines of business. But we believe that to deliver the pricing levels demanded by the market and at the same time protect our own balance sheet requires an emphasis on creating a balanced portfolio. And our aim for 2015 will be to create a greater spread of territories and cedants.
We have started strongly in 2015. Our January renewals and new business grew our portfolio by 25% to USDÂ 432 million (annualised). We would expect to write roughly 55% of our total portfolio in January with new business contributing significantly. Entrepreneurial spirit We are seeing substantial opportunities in our support of insurance entrepreneurs and we expect this area to grow in real terms, but also as a proportion of our overall portfolio. We will further diversify our book of business by liability lines as two new underwriters joined us in January. We are taking steps to get closer to our client base in Asia, North America and the Middle East. GWP by domicile of reinsured 3%
2014
4% 48%
20%
Europe Americas Asia Africa Oceania
25%
In conjunction with our parent company we have now established QIC Europe Limited which is based in Malta. This operation has rating-agency-graded insurance paper which is passported into the EEA and allows us to support Managing General Agency (MGA) business. We see substantial growth for the Group from this initiative and also for Qatar Re as we support this operation with Quota Share Reinsurance.
15
Marc T端ller Head of 足Agriculture
Qatar Re Annual Report 2014
Agriculture
Enduring growth The agriculture direct market has been growing steadily over the past couple of years and reached almost USD 30 billion at the end of 2014. The reinsurance market development follows this trend. In North America growth was mainly due to price increases of agricultural commodities. In recent years a steep growth could also be observed in Asia (mainly China and India) where the main drivers have been government premium subsidies and, to a lesser extent, the availability of reinsurance capacity. Growth has led to increased reinsurance placements, but due to the soft P&C market we have seen new capacity enter the market. But our main competition has still been coming from established markets with a long track record using quality data.
Broad geographic portfolio We have achieved a balanced agriculture portfolio, both in terms of lines of business and geographical spread. The team wrote business in more than 30 countries and our portfolio is spread equally between the Americas, Europe and Asia. Our major markets in 2014 were the US, China, India and Italy. The largest part of the business was multi-peril crop insurance followed by pure hail and livestock insurance. In addition we have small books of aquaculture and forestry insurance. The team finished the year with a positive result despite some severe hail losses we suffered in important markets, and a couple of sizable losses that hit our bloodstock account. Optimizing performance The team aims to further grow the portfolio with a stronger focus on non-proportional solutions, other classes such as livestock insurance, and some ini tiatives on the direct side. We will also continue to focus on our capacity allocation in order to maintain a good portfolio mix in terms of underlying risks and geographic distribution.
n Agriculture growth has led to “ Iincreased reinsurance placements.” GWP for Agriculture in 2014
15%
17
Qatar Re Annual Report 2014
Aviation and Marine
Continued diversification The above average loss activity in 2014 in the airline sector was the exception in an otherwise benign year for major loss events in the aerospace and marine sector. However, significant 2014 deteriorations were reported on some prior-year marine events. The aviation and marine business line continues to be highly sought after as these classes are seen as having long term profitability and they diversify reinsurers’ port folios away from property catastrophe risk. The result is that this class suffers like most classes from a surplus of capacity. Encouraging performance Our team underwrote programs that covered insurance exposures emanating from four separate global industries, being aviation, satellite, marine, and offshore energy. These all share a common risk characteristic of low frequency but high severity losses.
We take a very analytical approach to pricing these sectors and so, despite market conditions, we were pleased to see solid growth in all four sectors. Whilst each of these sectors individually has substantial annual volatility, when viewed as a whole, the combination offers substantial profit, particularly when viewed over the long term. During the year our team continued to reposition the former regionally-focused book of business to build a global portfolio. We made good progress on offshore energy and satellites. In all lines our portfolio remains skewed towards the Eastern hemisphere. However, Western hemisphere brokers are now more comfortable trading significant volumes of business with a reinsurance company with Middle Eastern capital. As the degree of acceptance increases, we expect a more balanced distribution. Ample potential We believe that our recent arrival in the market, armed with our current capacity and analytical capability still leaves considerable head room for growth. This will in turn improve the ratio of retained premium to actual exposure in the portfolio.
and Marine continue “ Atoviation be highly sought after.” GWP for Aviation and Marine in 2014
4%
18
Patrick Cove Head of Aviation and Marine
Stephan Rappaz Head of Casualty
Qatar Re Annual Report 2014
Casualty
Gradual market entry We saw further increased competition on reinsurance prices and softening of contractual terms across many liability classes. An attraction of this class is that cedants seek long term relationships. Reinsurance panels were generally stable on casualty business, so as a newcomer there are limited opportunities this year to join existing programs. Significant opportunities ahead Our strong position in the UK motor excess of loss market continued to be well-appreciated by clients and brokers. The newly established casualty underwriting team focuses on all major long-tail classes (proportional and non-proportional), such as professional indemnity, public and products liability, D&O, employer’s liability, worker’s compensation and motor business. In addition, we believe that Qatar Re’s strong positioning on other lines of business has helped develop our liability strategy. We saw our greatest opportunities
on new placements and start-ups. A major part of our work during 2014 was to look at supporting MGA’s or Lloyds ventures and we expect the fruits of this labour will be seen in 2015. Diversification is key Our main focus in casualty was on Europe, Middle East and Asia. Now we intend to target other territories, such as US and South Africa in a bid to diversify ourselves away from a dominance by any one legal system. Our goal is to become a global casualty player and build a book of long-tail business which is well-balanced between developed and developing countries and across the different long-tail classes of business.
e saw our greatest opportunities “ W in new placements and start-ups.” GWP for Casualty in 2014
29%
21
Stefano Lorenzini Head of Credit & Surety
Qatar Re Annual Report 2014
Credit & Surety
Substantial capacity Capacity in the credit and surety reinsurance market remained abundant in 2014. Competition in the primary market intensified during the year with rate decreases for credit and surety. The reinsurance market had another year of positive results. As a consequence, some credit insurers retained more risk and reduced the number of reinsurers on their panels. Well-positioned across all markets We achieved a balanced portfolio with a spread of cedants across European, Asian, and Latin American markets. The team worked hard to deepen its relationships with existing clients. We also supported various start-ups and companies that entered the credit and surety business for the first time. Our focus is on small and medium-sized credit and surety companies and has given us the opportunity to transfer our know-how and help a number of clients to structure their reinsurance treaties and accept our capacity. We are proud
that despite the size of our highly specialised team we are well-recognised for our innovative solutions and customer-focused approach. Building the business We have strengthened our marketing activities and continue to build our business with existing and new clients. We have also been presented with opportu nities in the Middle East emanating from our Group’s reputation. We also saw opportunities in political risks and trade finance, where banks have intensified their cooperation with insurance companies.
ompetition in the primary market “ Cintensified during the year.” GWP for Credit & Surety in 2014
7%
23
Qatar Re Annual Report 2014
Energy
Declining rates Softening of rates during 2014 continued with single digit price reductions in the downstream market, being typical on loss free renewals. Global energy capacity figures reached a peak and stand at about USD 6 billion. As a result, rates are at an all-time low. The sharpest drop in prices was experienced in the upstream market where rate reductions were often more than 10%. Overall capacity is a major issue so is the tactic of the existing leaders in the market who are aggressively defending their signings. The collapse of the oil price not only reduced business interruption exposures, but we have also seen some upstream projects suspended or abandoned.
Expanding into new markets Our energy portfolio was originally focused on the Middle Eastern, African and Asian business. Over the past two years we have developed this into a global account by expanding into the European and Latin American markets. Our strategy is to write a truly global account and to further increase our geographical diversification. We recently entered the US and Canadian energy market and want to increase diversification by writing not only petrochemicals but the whole range of chemical products. Cautious development Our aim is to increase our geographic diversification and establish ourselves as a recognized lead market. While market conditions do not encourage us to grow quickly, our aim is to position the portfolio for current profitability and rapid expansion should the rating level change.
ur strategy is to write a truly “ Oglobal book of business.� GWP for Energy in 2014
7%
24
Peter Bitterlin Head of Energy
Johannes Goebel Head of 足Engineering
Qatar Re Annual Report 2014
Engineering
Competition on the rise Engineering reinsurance as a class has been profitable for the last 12 years. But the current glut of capacity drives increasing competition. The class is sought after as an easy diversifier when written in conjunction with property treaties. Consequently, more and more standalone engineering transactions are being folded into combined property or non-marine treaties. On a likefor-like basis, engineering excess-of-loss rates were 10–15% lower than 2013, but terms and conditions have otherwise remained stable. Facultative and direct markets also faced rate reductions. Attritional losses are a key issue for this part of the book with deductibles being an important control for reinsurers. We have seen no erosion of deductible levels and the majority of this book remains acceptable. Remaining steadfast 2014 was a year of consolidation. We focused on enhancing our existing client relationships and demonstrating our lead capabilities. We launched a series of initiatives to cover niche products and run-off schemes.
London still proved to be the largest source of business for engineering treaties. But we increased our efforts to develop further in other markets, especially in Western and Southern Europe. Specialized products Engineering activities reflect the growth in the underlying economies. Our target is to follow this growth. Qatar Re only lead a small number of treaties, but it is our intention to offer more lead lines as companies and brokers come to appreciate our knowledge and experience in the class. We successfully launched reinsurance offerings for alternative energy production (on- and offshore), which we will continue to quote both for single risks and treaties in this segment. We also focus on long-term covers, e.g. decennial reinsurance, backing selected partners that have a strong track record in this segment. Gaining a reputation for product development, supporting companies that in turn, provide special solutions for their target clients is an essential activity for us.
reflects the growth “ Einngineering the underlying economies.” GWP for all Property in 2014
17%
27
Qatar Re Annual Report 2014
Global Facultative
Challenging market environment Stagnating economies, especially in the Eurozone and the US, and a slowdown in China, presented the biggest challenge in 2014. Governments were comparatively reluctant to invest in new and large-scale construction projects. There were limited short-term opportunities in the energy production infrastructure developments, mainly power and water in emerging markets. Significant excess capacity and fierce competition especially between brokers, added to the uphill battle. As a result, insurers and reinsurers were faced with declining margins. While terms and conditions continued to be under pressure there was also a trend towards much stricter and more effective risk management. There is an in- creasing appreciation of the risks associated with production outage. This appreciation and the risk miti gation measures that accompany it will have a major impact on frequency and severity of loss; far larger than corrected rating levels alone. So, although pricing is under pressure, there are risks where the ratio of premium to risk is improving.
Focus on in-depth technical expertise Our facultative team succeeded in expanding its book of business geographically despite the difficult market place. We have started the transition from a Middle East and Northern Africa account, towards a truly global portfolio. At the same time we also broadened the client segment we serve. Previously we focused on SMEtype enterprises. We started this year to selectively provide cover for heavy industries. These require sound risk management at the primary level and technical assessment from insurers and reinsurers. To do this we have hired some highly experienced underwriters that were able to execute this transition. Aspiration for lead quotations Over the next few years we will aim to develop not only as a respected and solid following market, but increasingly as a recognised market lead.
n Facultative there is a trend “ Itowards stricter and more effective risk management. ” GWP for all Property in 2014
17%
28
Michael Gertsch Head of Global 足Facultative and Head of Underwriting Operations
Michael Roth Head of Property Catastrophe 足International
Qatar Re Annual Report 2014
Property Catastrophe International
Rates under pressure The international catastrophe reinsurance market was driven by three factors in 2014. First, cedants increased their retentions. As a result, demand for cat reinsurance declined. Second, traditional reinsurance capital reached a historical peak due to an absence of losses. Third, alternative market capacity continued to enter the reinsurance sector. Consequently the downward pressure on reinsurance rates remained strong.
International diversification We use vendor models as well as our own proprietary pricing and modelling tools. We employ strict accumulation controls and take an integrated portfolio management approach. Our aim is to create a well-diversified book of geographic exposures to complement our North America exposures.
Selective expansion We pursued a selective underwriting approach, that allowed us to carefully grow in a difficult market. Unlike many of our competitors we are not faced with having to defend a market share. This book represents a small part of Qatar Re’s overall portfolio and this allows us the luxury to build very selectively. We have obtained a good geographic spread of business with the portfolio not dominated by any one territory.
e take an integrated portfolio “ W management approach.� GWP for all Property in 2014
17%
31
Luke Roden Global Head of 足Catastrophe and Branch Manager Bermuda
Qatar Re Annual Report 2014
Global Catastrophe and US Property
Terms and conditions remain acceptable Many of the same market dynamics apply to both the International and North American property catastrophe books. In the US some clients were able to increase underlying rates, countering part of the overlying reinsurance rate reduction. Terms and conditions remain mostly acceptable, while the market demonstrates continued discipline. Consistent market penetration We continued to attract new clients and programs as well as increase our renewal book. Our multi-class offering assisted our catastrophe team in building overall relationships with cedants and brokers. Cedants are beginning to recognize our commitment to the market. As a consequence, we are able to differentiate Qatar Re from collateralised capital market offerings, which continue to pour into the market. We find that the fast, efficient service and flexibility we can offer, aided by our flat management structure, also differentiates us from many of our conventional market competitors.
Our team attended all major market conferences and met regularly with brokers and clients. Our growing momentum meant that our opinion was sought more frequently. This is the success factor for building and increasing our influence on reinsurance panels. We focus on providing coverage above frequency catastrophe layers. Whenever possible, the team participated evenly across programs, above our desired level of attachment. Relationships matter We aim to capture an even larger share of the market- place, not only in catastrophe business, but also across all property lines in North America. We see particular potential with relationship-driven business, where reinsurance purchasing is essential to operation.
e see particular potential “ W in relationship-driven business.� GWP for all Property in 2014
17%
33
Manfred Dennler Head of Property per Risk
Qatar Re Annual Report 2014
Property per Risk
Excess capacity There was an abundance of capacity for property risk treaty business both on an excess of loss and on a proportional basis. Outside the US this led to a softening of terms and conditions. Within the US terms and conditions weakened although they were coupled to underwriting discipline and the requirement for more capacity. Disciplined growth Our underwriting team continued to build its business on an actuarially-driven underwriting approach. We maintained our underwriting discipline and allocated risk capacity to business that offered acceptable returns and prospects for continuity and growth.
Committed to the long-run Our treaty book is planned to grow steadily over the coming years both in terms of the numbers of cedants and the shares on their programs. A core discipline is to build strong partnerships with cedants that share our philosophy of creating long-term, mutually beneficial relationships. Our experienced team of underwriters will continue to position us as a quoting market for both proportional and non-proportional per risk programs. We aim to grow on a global basis as diversification leads to a more efficient use of capital, which can in turn be reflected in our ability to price attractive- ly for the client whilst making an acceptable return.
We offer a wide range of products in the property per risk line of business. We underwrote a worldwide portfolio with all traditional property treaty products. We write risk excess of loss programs to protect the cedant’s from major individual risk losses. In addition, there is a demand for proportional treaties, particularly for capital relief.
continues to position “ Musyasteam a quoting market.” GWP for all Property in 2014
17%
35
Beatrix M端nger Head of Structured Finance and Reinsurance
Qatar Re Annual Report 2014
Structured Finance and Reinsurance
Niche market potential The structured finance market, in particular mortgage indemnity insurance and residual value insurance, only started to re-emerge from the devastation caused in the 2007 and 2008 financial crash. It still remains a niche market with few players and limited capacity. Highly tailor-made solutions Our small team entered the structured finance and reinsurance market this year, and slowly began building a portfolio. Our team has seen some opportunities in various products and geographical areas such as mortgage indemnity. We have stringent limits and exposure control mechanisms when analysing and structuring each deal, and each deal tends to be unique. This means that we spend many hours often spread over many months before we close a single transaction.
Innovative and out-of-the-box transactions We aim to build a reputation for thoughtful and imaginative solutions in this niche class. In other classes there is a body of relatively similar business to target. But in this sector much of what we do now, and hope to do in the future, will depend on one-off opportunities brought to us by brokers or developed through relationships with our current client base and that of the rest of our Group.
Finance and Reinsurance “ InweStructured aim to build a reputation for thoughtful and imaginative solutions.�
37
Peter Frei Chief Risk Officer
Qatar Re Annual Report 2014
RISK MANAGEMENT
At Qatar Re, Enterprise Risk Management (ERM) is considered a core driver for success. The ERM framework is underpinned by three distinct yet interrelated pillars: Capital Management, Exposure Management and Risk Management. This allows for an integrated approach to the management of insurance, operational, credit, market, liquidity and Group risks.
Enterprise Risk Management Ultimately the Board of Directors is responsible for Enterprise Risk Management at Qatar Re. The Board is committed to maintaining sound risk management practices in order to protect the interests of its stakeholders. To facilitate this the Board of Directors has delegated the responsibility for the ongoing management of risk to subject-matter experts and to the Qatar Re Risk Committee. The Risk Committee is made up of senior members of staff from across the orga nization and provides oversight and assurance to the Board of Directors on both the strength of the ERM Framework and the current and future risk environment. Over the course of 2014 Qatar Re made significant progress in further embedding ERM within the business. Key enhancements were implemented in the areas of risk appetite, exposure monitoring and control, risk governance, economic capital modelling and risk reporting. This important work will continue in 2015 and is driven by the desire to adopt and integrate market leading risk, exposure and capital management practices across Qatar Re in what is an increasingly challenging regulatory environment across the markets and in the locations where Qatar Re is licensed.
Assessment, Control and Mitigation Qatar Re maintains a risk register containing all relevant risks to the Company. The risk register is regularly reviewed and where required adjustments are made in order to reflect the actual threat situation. It is also used as a data basis for describing operational risks within the capital modelling process. The risk register lists all relevant risks related to var ious categories (e.g. insurance, operational, etc.) with an impact and a probability risk score. Preventative and predictive controls are defined and a control scoring is applied to the design and performance of all control actions. An overall score allows the Company to decide if mitigation measures or specific actions are required in order to reduce risks. In addition to quantifiable risks, Qatar Re also assesses emerging risks, which it defines as risks that could happen in future, but their consequences – severity and frequency – are difficult to quantify. The analysis and assessment of emerging risks enable Qatar Re to be prepared for fast changing and new risks.
39
Qatar Re Annual Report 2014
Exposure Management Natural Catastrophe Exposure Management Overall losses from catastrophe events pose the highest threat to a reinsurance portfolio. These events usually have a large geographical footprint. A number of reinsurance contracts in the portfolio can be hit and result in multiple claims. For natural catastrophe exposure management, Qatar Re follows a multi-tier approach. Depending on the significance of a specific peril region to the port folio, information is collected in a consistent manner, always by individual contract: Tier-1: Risk Rate on Line Approach On a worldwide basis, Risk Rate on Line (RROL) and exposed limits are collected whenever a contract is considered to be exposed in a given peril-region. Data is generally gathered on country level. For several large countries, a split into sub-country regions has been defined (e.g. US, Canada, Australia). For every region and peril combination, a capacity limit is set which must not be exceeded at any point in time. Tier-2: Scenario Approach Peril regions with a significant exposure to the Qatar Re portfolio are monitored using a scenario approach. For every contract with exposure in the wider scenario region, the potential loss to a specific scenario event is calculated and tracked. For every scenario, a capacity limit is defined which must not be exceeded at any point in time. The scenarios are reviewed on an annual basis and represent the impact of a 250-year event on the Qatar Re portfolio. Tier-3: Probabilistic Modelling Approach This approach is currently under development. In peril- regions with peak exposure to the Qatar Re portfolio, an event loss-table from a defined probabilistic reference model is required for every exposed contract. The event-by-event roll-up results in a portfolio event loss-table, which subsequently allows the calculation of exceedance probability (EP) curves and any derived statistics, such as 250-year probable maximum losses, Value-at-Risk or Tail-Value-at-Risk.
40
Loss
Safety Margin
Diversification Effect
250 y
Return Period
Capacity Limit Sum of Limits/Scenario EP Curve (RROL) EP Curve (Prob. Model)
Capacity Limit: Capacity limits are defined by region, peril and line of business. For specific regions, devi ating limits can be set, depending on Qatar Re’s risk appetite. Capacity limits are defined by scenario and tracked on top of all tier 1 regions. Sum of Limits: Exposed limits are summed up within the peril region. Scenario Loss: Scenario losses are added up by scenario. Where available, event losses from probabilistic catastrophe models are used. If not available, the Qatar Re Risk Management team is developing its own representative footprints, which are applied to the underlying insured values. For individual locations covered by facultative business, functionality using Geographic Information System (GIS) technology has been implemented to calculate these scenario losses. EP Curve (RROL based): The RROL-methodology is based on the assumption that the RROL represents the probability of a layer being hit by an event. By sorting RROL and limit values an approximate portfolio curve can be derived. This methodology assumes full spatial correlation within the region and therefore is considered conservative. For any given return period, the VaR from the EP curve must be smaller or equal to the sum of limits.
Qatar Re Annual Report 2014
2014 Qatar Re made significant “ Ipnrogress in Entreprise Risk Management.” EP Curve (Probabilistic model based): By using a probabilistic cat model to derive the portfolio EP curve, diversification within the region is taken into account. The EP curve is therefore likely to be generally lower than the RROL-based curve. Non-Natural Catastrophe Exposure Management Qatar Re measures non-NatCat exposure focusing on Per-Risk scenarios, where the methodologies depend very much on the nature of the business underwritten. On a general basis, per-risk limits are defined in Qatar Re’s underwriting guidelines. They limit the maximum loss that any individual contract might trigger. A number of lines of business however cover the same underlying original risks through multiple reinsurance contracts (Per-Risk Accumulation). Here is an example from the aviation business: The insurance policy for an airline might be split over multiple primary insurance companies. Some of them might have a reinsurance contract with Qatar Re. In case of a loss, claims might come through these multiple reinsurance contracts. Qatar Re is currently consolidating the various exposure-monitoring tools into the company-wide exposure management platform (EMT). One common Exposure Management Platform Qatar Re’s Risk Management team is building up a central platform for all exposure management related data. In order to seamlessly integrate the workflows into the Qatar Re underwriting processes the Company decided to focus on an in-house development, which allows for a close interface with all the relevant systems. A key assumption is to always use data available in other systems and to avoid any double entry of information. Furthermore, the additional workload for the underwriting units must be kept to a minimum.
The basic components of EMT are: 1. EMT Database Central database which holds all exposure management relevant data. 2. EMT Platform & Modules Modules for specific types of risk can be plugged into the platform. Depending on risk type and workflow specifics, the end-user applications might be developed with different interfaces or technology. All modules connect to the underlying EMT database. 3. Data Inflow Contract data is loaded near-real-time from the contract system of reference into the EMT database, ensuring that the data always reflects the latest status. Data from pricing tools is currently imported via specific data loads and triggered manually. For future versions, an automatic import, similar to contract data, is planned. 4. Data Outflow These risk–type-specific modules implement their own reporting. In parallel, Qatar Re-wide reporting can be run on the central EMT DB, e.g. consolidated input to the Capital Model. Exposure Data Completeness and Data Quality Qatar Re has decided to develop a central exposure data repository called EMT (Exposure Management Tool), because it considers it important to systematically record and subsequently aggregate, monitor and report exposure data. In order to ensure reliable risk assessments and well-founded decisions, it is essential that recorded data is complete and of high quality. Therefore, specific data completeness checks have been developed and implemented. Data is tested on a regular basis, at least after every major renewal. In addition, data quality is tested when exposure data is manually recorded or batch-uploaded into the EMT. Test results are published on Qatar Re’s intranet and are accessible to all stakeholders. There is a close interaction between data owners and risk management in order to ensure that highly reliable exposure data is captured.
41
Mark Cockroft Chief Actuary
Qatar Re Annual Report 2014
ACTUARIAL AND CAPITAL MANAGEMENT Qatar Re is building a strong actuarial backbone for its decision-making processes. In 2014, its actuarial team performed a vital role in supporting many areas of the Company, such as pricing, underwriting, reserving, planning, capital and risk management, and management information. The actuaries provide high-quality, value-added services in close conjunction with the usiness in question: to not just provide a number, but also the explanation b and identification of relevant issues as well.
Most actuaries at Qatar Re are involved in pricing and underwriting, supporting the Company’s philosophy of understanding the risk and appropriately pricing all business it writes. Actuaries sit with underwriters in most Qatar Re offices but are also able to support business written in other locations. The team has developed a suite of proprietary models to assist pricing and to undertake ad hoc pricing if needed.
Qatar Re defines the capital required as sufficient to withstand the expected financial impact from a onein-200-year event or series of events in a given year. Its capital management therefore assesses the risks which affect the level and speed of claims payments as well as other effects that might influence the appropriate level of share capital, in order for policyholders to be protected in all but the most extreme situations.
Pricing information is captured in the Company’s systems and used to drive reserving, planning and capital modelling at a granular level. Indeed, reserving at Qatar Re is initially performed at the contract level, before it is reviewed at an aggregated line of business level.
A number of metrics are maintained to help assess required capital, including internal, regulatory and rating agency risk factor-based models. The internal risk factors are reviewed by a respected external consultancy, which agreed the reasonableness of the factors. The actual level of capital is monitored against solvency-required capital and reported to management, the Technical Committee and the Board of Directors on a quarterly basis, or more frequently, if a major financial loss event is known or predicted.
At Qatar Re, policyholders’ interests are managed in a four-step security process: 1. Profits are retained within the financial year, each class of business and across classes of business. 2. The portfolio is covered through an outwards reinsurance protection, including a whole-account quota-share treaty with QIC. 3. Qatar Re’s own share capital including retained earnings from prior years provides policyholder security. 4. Policyholders benefit from an evergreen parental guarantee issued by QIC in favour of Qatar Re’s policyholders.
43
Qatar Re Annual Report 2014
Qatar Re is also in the process of developing an in-house stochastic solvency-capital model. When in use it will provide a detailed rationale for the required level of capital, given the risks faced by the Company. The capital model will be used to perform risk-adjusted return on capital calculations by class of business, provide strategic information about it and guide the necessary decision-making processes. This forms a part of a wider risk management project in conjunction with QIC Group Enterprise Risk Management. In addition to assessing the appropriate level of capital, Qatar Re has a capital management action plan, which defines how to respond to a certain decline of capital in any one year. It is approved by the Board of Directors, the management of Qatar Re and by the QIC Group. Capital structure • The issued and fully paid in cash share capital consists of 73,000,000 (2013: 55,491,290) ordinary shares of QR 10 each, USD 2.75 each • The authorized share capital comprised of 73,000,000 shares (2013: 73,000,000 shares) of QR 10 each. • During the reporting year, the Company made right share offers of 17,508,710 (2013: 18,250,000) shares at QR 10, totaling QR 175,087 thousand or USD 48 million (2013: QR 182,500 thousand or USD 50 million) to the existing shareholders at the proportion of their shareholding in the Company as at March 16, 2014. The shares were fully subscribed and allotted to the shareholders after due approval from the shareholders and competent authorities.
44
Equity in USD 1,000
2014
2013
200,549
152,449
2,652
2,652
Fair value reserve
(999)
3,666
Retained earnings
23,341
7,412
225,543
166,179
Share capital Share premium
Total equity
Capital Adequacy The capital adequacy filing with the regulator over the years as per prudential returns of QFCRA has been as follows: Particulars in USD 1,000
2014*
2013
Eligible capital (A)
197,461
159,401
Regulatory capital required (B)
137,286
87,139
144%
183%
Solvency (A/B) * based on regulations effective 1 January 2015
Reserves The technical reserves for Qatar Re are calculated and reviewed on a monthly basis by the actuarial department and supplied to the finance department for inclusion in the monthly financial reporting. Initial gross reserves are set using pricing information recorded in the Company’s systems per contract and adjusted based on actual claims performance within each class of business against expected. The gross reserves are netted down for expected recoveries on outwards reinsurance.
Qatar Re Annual Report 2014
e are building a strong actuarial “ W backbone.” In addition to monthly monitoring, reserves are also monitored quarterly in a full actuarial reserving exercise prior to the financial quarter end. This exercise adopts a consistent, prudent reserving philosophy, taking into account the uncertainties in estimating insurance liabilities. Estimated ultimate reserves for unpaid losses (including expenses) are calculated by the actuarial department, with the liability based on the expected ultimate cost of settling the claims. The reserves include: • Case reserves for known but unpaid losses at the balance sheet date. • IBNR reserves for claims where the insured event has occurred but has not been reported as at the balance sheet date. • IBNR reserves for claims where the case reserve has been booked, but the quantum is expected to change. • Loss adjustment expenses contained in all of the above. The process of establishing ultimate reserves follows established actuarial techniques, requiring the use of assumption and expert judgment. Ultimate reserves are calculated per contract, based on a number of f actors including original pricing expectations, exposures, claims experience to date and information on the speed of payment and reporting. Within this process, the Company also considers any known issues such as changes in business mix, changes in terms and conditions, inflation, large or catastrophe losses, changes to the legal and social environment or changes to the claims processes adopted by its cedants. Qatar Re also uses industry benchmarks to compare and validate its assumptions.
Estimates may be revised over time as additional experience and other data become available, or if improved methodologies are developed. When the actuarial estimation of ultimate reserves is completed, the results are reported and challenged within a reserving committee that meets quarterly and comprises various senior representatives from management, underwriting, finance, actuarial and claims. Any agreed changes to the reserves are documented and implemented by the actuarial department. If disagreement occurs, this is also documented and referred to the Qatar Re Technical Committee for resolution. Reserves held in the financials in USD 1,000
2014
2013
153,578
167,198
Gross insurance contract liabilities Claims reported unsettled Claims incurred but not reported
92,760
76,622
Unearned premiums
290,080
144,767
Total
536,418
388,587
83,942
46,910
Reinsurers’ share of insurance contract liabilities Claims reported unsettled Claims incurred but not reported
61,382
46,618
Unearned premiums
196,554
92,435
Total
341,878
185,963
Claims reported unsettled
69,636
120,288
Claims incurred but not reported
31,378
30,004
Net insurance contract liabilities
Unearned premiums Total
93,526
52,332
194,540
202,624
45
Qatar Re Annual Report 2014
HUMAN RESOURCES
Qatar Re strives to develop a culture of entrepreneurship, dialogue, access to decision-makers and accountability of all employees.
With the ambition to build a global reinsurer, Qatar Re has built a performance-oriented workforce over the past two years. We have recruited a group of highly experienced professionals with in-depth technical and business expertise, setting up new teams in all key areas. Thanks to our high standards of employment, we have been able to quickly establish a global team that nurtures a culture of entrepreneurship and dialogue and that promotes the international experience of our employees. Experience abroad and the transfer of knowledge are an advantage for both our people and the Company. Qatar Re also values diversity, be it by gender, nationality, religious affiliation or cultural background. We have 21 different nationalities working across all our offices worldwide.
At the end of 2014, Qatar Re employed 107 people worldwide, almost 20% more than in the previous year. This increase is primarily due to the addition of new business lines and the staffing of the corresponding support functions. Employees by Business Area
2014
6% 10%
50% 16%
5% 5%
8%
Actuarial Claims Finance & Technical Accounting IT Management & Administration Risk Management Underwriting
In parallel, all relevant HR processes have been developed and established and their implementation remains a key focus of the executive management team.
entrepreneurial spirit is translating into “ Oa urself-confident and performance-oriented workforce. ”
46
Mariana Barbosa Head of Human Resources
Qatar Re Annual Report 2014
CORPORATE GOVERNANCE
Qatar’s Financial Regulator The QFC Regulatory Authority is the regulatory body in charge of licensing Qatar Re. It is the independent regulator of the Qatar Financial Centre (QFC), established to authorise and regulate firms and individuals conducting financial services in or from the QFC. Through its work in policy development, supervision and enforcement, the QFC Regulatory Authority operates to the highest international standards of regulation and best practice. Since its establishment in 2005 the QFC Regulatory Authority has built a principle-based regulatory regime modelled closely on other major financial centres, embracing transparency, predictability and accountability. It reports to the Qatar National Board, the ultimate supervisory body for the financial services sector in Qatar. The QFC Regulatory Authority (QFCRA) adopts a riskbased approach to regulation and focuses on areas that present the greatest risk to its regulatory objectives. Accordingly, the QFC Regulatory Authority: • maintains close relationships with regulated firms, including directors and senior management, who bear the primary responsibility for meeting the prudential and compliance responsibilities of the firms concerned; • engages with other regulators to ensure that international efforts at supervision and regulation are coordinated and coherent and to avoid undue duplication; • focuses on monitoring enhancements to the international supervisory standards laid down by the Basel Committee, the International Association of Insurance Supervisors, and the International Organisation of Securities Commissions;
48
• engages in periodic risk assessments of firms using methodology drawn from the extensive international supervisory experience; and • initiates a number of thematic reviews covering areas such as asset liability management (ALM), in addition to ongoing supervisory coverage of individual firms. The Qatar Financial Centre (QFC) is a financial and business centre established to grow and develop Qatar’s financial services sector. The QFC is operated by the QFCA, which is responsible for the commercial strategy and business development for the centre and provides the respective administrative functions. Regulatory systems are developed and operated by the QFCRA. There is also a QFC Appeals Body that considers appeals arising from Regulatory Authority decisions, and a QFC Tribunal that administers and enforces the commercial laws of the QFC. The Regulatory Authority, the Appeals Body and the Tribunal have been established to operate transparently, objectively and fairly. Their decision-making, financing and operations are structured to ensure appropriate and resilient independence while being fully supported by the Government of Qatar.
Qatar Re Annual Report 2014
Ownership of Qatar Re Qatar Re is a subsidiary of the QIC registered at Qatar Financial Centre, Doha Qatar. The Company’s paid up and authorized capital as of 31 December 2014 was
Qatari Riyals 730 million or USD 200 million. The nominal value of each share is QR 10 per share or USD 2.74. Its shareholding as of 31 December 2014 was:
Name of shareholder
No. of shares held
% age holding
Qatar Insurance Company S.A.Q.
40,425,948
55.37801%
QIC International LLC
29,200,000
40.00000%
Sheikh Khalid Bin Mohammed Bin Ali Al-Thani
441,464
0.60475%
Mr. Abdullah Bin Khalifa Al-Attiya
441,464
0.60475%
Sheikh Saud Bin Khalid Bin Hamad A.J. Al-Thani
362,634
0.49676%
Perlier Investment Company
362,634
0.49676%
Jaidah Investment Real Estate Development Company
441,464
0.60475%
Al Mirqab Capital Company
441,464
0.60475%
Broog Trading Co (WLL)
441,464
0.60475%
Wadi Al Sail Fund No. 9
441,464
0.60475%
73,000,000
100.0000%
Total
Members of the Board of Directors Name of the Director
Designation
Nationality
Country of Residence
Sheikh Jassim Bin Hamad Bin Jassim Bin Jabor Al-Thani
Chairman
Qatari
Qatar
Sheikh Saoud Bin Khalid Bin Hamad Al-Thani
Director
Qatari
Qatar
Khalifa Abdulla Turki Al-Subaey
Managing Director
Qatari
Qatar
George Andrew Prescott
Non-executive independent director
British
United Kingdom
David John Forcey
Non-executive independent director
British
United Kingdom
49
Qatar Re Annual Report 2014
Sheikh Jassim Bin Hamad Bin Jassim Bin Jabor Al-Thani, Chairman of the Board, Qatar Re Sheikh Jassim is a Qatari national and a businessman. Since April 2005 Sheikh Jassim Bin Hamad J.J. Al Thani has been Chairman of the Board of Directors of Qatar Islamic Bank. He is also Chairman of QInvest, the first Islamic investment bank founded in Qatar; Damaan Islamic Insurance Co. (BEEMA); and a Board member of Credit Suisse since 2010. He is CEO of Al Mirqab Capital LLC, Qatar, a family enterprise, and a member of the Board of Directors of Qatar Navigation Company and Qatar Insurance Company. Sheikh Jassim Bin Hamad J. J. Al Thani completed his studies in the State of Qatar and graduated as an Officer Cadet from the Royal Military Academy in England. Sheikh Saoud Bin Khalid Bin Hamad Al-Thani, Director, Qatar Re Sheikh Saoud is a Qatari national. He is a businessman and former Minister of the State of Qatar. He is Chairman of the Board of Directors of Qatar Electricity & Water Company. In addition to his Board membership at Qatar Re he is also a member of Board of Directors at Q Life & Medical Insurance Company, which also belongs to the QIC Group. Khalifa A. Al-Subaey, Managing Director, Qatar Re Khalifa A. Al-Subaey is a native of the State of Qatar. In the mid-1980’s Al-Subaey was appointed as General Manager of Qatar Insurance Company (QIC). In February of 2007 Al-Subaey founded QIC International LLC. In recent years he has internationalized the company with remarkable success. Today, he is Group President and Chief Executive Officer of QIC.
the general Qatari Petroleum Association (now Qatar Petroleum) from 1982 until 1986. George Andrew Prescott, Non-Executive Independent Director, Qatar Re George Andrew Prescott is a British national and a Non-Executive Independent Director of Qatar Re. He was Deputy Chief Executive of Ecclesiastical Insurance Group (EIG) from 1997 until his retirement in 2009, following an industry career spanning four decades. At EIG his principal responsibilities included investments and finance, internal audit and compliance. He also served as a member of the Association of British Insurers’ Investment Committee. In addition to Qatar Re, other present directorships include Capital Gearing Trust plc, JPMorgan Cazenove Pension Trustee Limited and Giles Insurance Brokers Ltd (Chairman of Audit and Risk Committee). David John Forcey, Non-Executive Independent Director, Qatar Re David John Forcey is a British national and a Non-Executive Independent Director of Qatar Re. He is a senior market figure in the international insurance and reinsurance broking industry, bringing to the table more than four decades of professional experience. Prior to his retirement he held numerous executive positions and directorships at Aon Limited, including Deputy Chairman, Aon Re UK and Chairman, Aon Re Global, Aon Limited. Before joining Aon in 1996 he performed various senior roles at Steel Burrell Jones Group plc (including Chairman of Meacock Samuelson & Devitt plc) and Jardine Thompson & Graham Limited.
Mr. Al-Subaey serves on the Boards of various business entities in banking, real estate development and insurance. He is also a great believer in sports activities for the youth of Qatar and serves in senior positions of national sporting organizations.
Qatar Re’s Board of Directors oversee the conduct of the Company’s business. They are responsible for ensuring the effective dominance of Governance over key affairs of the Company including appointment of executive management, approval of business strategies, evaluation of performance, internal audit and compliance and assessment of major risks.
Mr. Al-Subaey holds a degree in Economics and Political Science from Central Michigan University. Prior to joining QIC he was General Insurance Coordinator in
For effective discharge of its duties the Board may rely on constituted Board Committees and the Executive Management in order to apply the approved business
50
Qatar Re Annual Report 2014
strategies, resolve day-to-day operational issues and maintain and promote high ethical standards. The Board must also ensure that its membership comprises Executive, Non-Executive and Independent Members to ensure that a single individual or small group will not control the Board resolution-taking process. The Board and its appointed Board Committees meet at the invitation of the Chairman as often as the business requires or at least quarterly. The agenda of the meeting together with relevant supporting documentation is made available to all concerned well in advance of the date fixed for the meeting. The conduct at Board meetings as regards notice, quorums, resolutions etc. is governed by the provisions in that respect in Articles of Association of the Company to the extent allowed by the QFC Companies Regulations. Minutes of discussion are recorded and kept together with copies of resolutions passed at each meeting of the Board or its Committees. Technical Committee As an important part of the Company’s governance, the Technical Committee is the operational arm of the Board with the following areas of responsibility: I. Underwriting guideline and policies II. Operational review by line of business III. Business performance review IV. Aggregations and claims review V. Business strategy review VI. Risk management review VII. Capital adequacy review VIII. Compliance and ALM review IX. Investment and other advisory The Technical Committee is represented by: I. David John Forcey,Non-executive independent director, Qatar Re II. George Andrew Prescott, Non-executive independent director, Qatar Re III. Sunil Kumar Talwar, Group CFO & Deputy CEO, QIC Group (Ex-Officio member and Group representative) IV. Gunther Saacke, CEO, Qatar Re (Ex-Officio member and Management Representative)
The Board of Directors as well as the Technical Committee met five times during 2014 calendar year on following dates: Main Board Meetings
Technical Committee Meetings
27 January 2014
26 January 2014
22 April 2014
21 April 2014
21 July 2014
4 June 2014
2 November 2014
18 October 2014
21 December 2014
21 December 2014
Reserving Committee Qatar Re’s Reserving Committee is responsible for the Company’s financial standing review. It has been established as an executive committee with the purpose of assisting Qatar Re’s management, its Board of Directors and Technical Committee in overseeing and managing the Company’s technical reserves. The main areas of responsibility of the Reserving Committee are: Reserve Process • Review the actuarial reserving process • Monitor compliance with internal and external audits of reserves • Monitor compliance with accounting standards in jurisdictions where Qatar Re has to publish financial statements Reserve valuation • Review and amend, as appropriate, the technical reserves gross and net of retrocession recommended by the actuarial function • Sign-off final reserves Reserve uncertainty • Monitor reserve in run-off against previously set reserves • Mitigate future adverse reserve movements by agreeing on reserves that cause uncertainty in reserving either due to factors known at the time of the reserves’ setting or due to factors that have not yet manifested themselves but which may affect claims values in the future.
51
Parvez Siddiqui Head of Finance Zurich
Qatar Re Annual Report 2014
PERFORMANCE OVERVIEW
Financial performance is a key driver of economic decisions at Qatar Re. We constantly strive to add value to shareholders and to maintain financial credibility with our customers.
Qatar Re’s growth is supported by the strong capital base of its parent company through a quota share arrangement. For the underwriting years 2013 and 2014 the quota share ratio is based on a 30% retention at Qatar Re and a 70% cession to the parent company. The quota share arrangement does not cover the facultative portfolio of Qatar Re. While the financials of Qatar Re reflect the actual net financial results after this arrangement is accounted for, the management views its performance at gross level – before the quota share cessions to Group.
Financial performance at gross level for the year 2013 saw an underwriting income of USD 21.6 million and a net result after expenses and investment income of USD 10.9 million. The 2013 net result of USD 0.5 million was due to the retention of legacy account under the quota share. The development of the legacy portfolio was negative in 2013 which further impacted the performance of 2014. The legacy portfolio performance is expected to have a reduced impact on Qatar Re’s financials with an endorsement to include the legacy book effective 1 October 2014 under the Group Quota Share.
In 2014, gross and net underwriting income came in at USD 32.9 million and USD 27.7 million, respectively. The combined ratio at gross level was 102% compared with a net combined ratio of 108%. In the previous year, the gross combined ratio was 105% against a net combined ratio of 120%. We expect to improve our gross combined ratio as the revenue recognition improves during 2015 which covers the operational costs being incurred during the build-up phase of the Company.
atar Re is supported by the strong “ Q capital base of its parent company.”
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Qatar Re Annual Report 2014
The incurred claims ratio at gross level for 2014 was 71% while the net ratio amounted to 84%, as a result of a higher claims ratio on the legacy portfolio not ceded internally. For 2013, the incurred claims ratio was 72% at gross level and 82% at net level, attrib utable to adverse developments affecting the prior- year portfolio. Gross and net underwriting income
Gross and net combined ratio in % 140 120
121
112
120 105
100
102
108
80
in USD million 60
32.9 30
27.7 21.6
20
2011
2012
2013
2014
Before applying quota share cession After quota share cessions
11.2
10
40
0 –3.9
–10 –14.5
–20
2011
2012
Before applying quota share cession After quota share cessions
54
2013
2014
The following income and expenditure table provides a detailed comparison between gross underwriting and Qatar Re’s net results:
Qatar Re Annual Report 2014
2014
2013
Gross Performance
Internal C ession
Total
Gross Performance
535,878
–
535,878
336,578
Group Quota-share cession
(23,223)
(334,500)
(357,723)
(19,616)
(185,919)
(205,535)
Net Written Premium
512,655
(334,500)
178,155
316,962
(185,919)
131,043
in USD 1,000
Gross written premiums
Change in unearned premium
Internal C ession
Total
336,578
(140,658)
97,589
(43,069)
(116,550)
88,597
(27,953)
Net premiums earned
371,997
(236,911)
135,086
200,412
(97,322)
103,090
Acquisition cost earned
(78,216)
–
(78,216)
(33,996)
–
(33,996)
1,709
55,539
57,248
322
15,203
15,525
–
27,416
27,416
–
10,741
10,741
Net Commission Earned
(76,507)
82,955
6,448
(33,674)
25,944
(7,730)
Total Revenue
295,490
(153,956)
141,534
166,738
(71,378)
95,360
(178,306)
–
(178,306)
(88,237)
–
(88,237)
40,636
71,379
112,015
24,579
6,359
30,938
(102,303)
–
(102,303)
(20,525)
–
(20,525)
(26,774)
–
(26,774)
(62,395)
–
(62,395)
4,174
77,340
81,514
1,427
54,617
56,044
(262,573)
148,719
(113,854)
(145,151)
60,976
(84,175)
32,917
(5,237)
27,680
21,587
(10,402)
11,185
(38,754)
–
(38,754)
(30,293)
–
(30,293)
(412)
–
(412)
–
–
–
Net investment income
27,414
–
27,414
19,648
–
19,648
Net profit
21,165
(5,237)
15,928
10,942
(10,402)
540
63%
84%
72%
63%
82%
RI Commission earned Overrider Group Quota-share
Gross claims paid Reinsurance recoveries Gross outstanding claims (reported) IBNR & Provisions Reinsurance share of outstanding claims Incurred Claims Net underwriting profit General and Administration Expenses Board Expenses
Ratios Claims incurred
71%
Acquisition cost
21%
Combined ratio
102%
17% 108%
105%
120%
55
Alok Sahi Head of Finance Doha
Qatar Re Annual Report 2014
INVESTMENTS
In 2014, Qatar Re’s total investments amounted to USD 414.6 million compared to USD 384.7 million in 2013.
The Company’s investment income from fixed-income securities, equities and cash deposits increased from USD 13.9 million in the previous year to USD 18.9 million in 2014. At the same time, Qatar Re’s profit on sale of available for sale financial assets grew from USD 6.8 million in 2013 to USD 10.1 million in 2014. The total investment result for the year 2014 came in at USD 27.4 million compared with USD 19.6 million in the previous financial year. Regular income from the various asset classes accounted for 73% of total investment revenues, with the remainder being attributable to trading activities. While Qatar Re’s investment portfolio primarily benefited from profitable trading activities, the Company was also able to increase its interest income on bonds, from dividends as well as on cash and deposits. In 2014, Qatar Re’s fixed-income and equity investments grew significantly whilst cash and deposits were reduced sharply. Total available for sale financial assets increased from USD 179.2 million in 2013 to USD 284.7 million in 2014. This includes Qatari public shareholding companies, quoted shares and bonds,
minus margin collateral. Overall, the asset allocation is commensurate with its A-rated financial strength rating and advanced Enterprise Risk Management framework. Qatar Re’s investments activities are steered by its Board of Directors. Based on a mandate from the Board of Directors, QIC Group’s treasury unit is responsible for the management of the investment portfolio. This mandate includes well-defined parameters for taking every-day investment decisions and implementing opportunity-based investment activities. Any deviations need to be ratified or pre-approved by Qatar Re’s Board of Directors.
atar Re’s investment portfolio “ Q benefited from profitable trading activities.”
57
Qatar Re Annual Report 2014
Net Investment Income
Fixed income
in USD 1,000
2014*
2013
Regionwise Exposure 3%
2014
1% 37%
Interest on Bonds
12,807
10,172
Profit from sale of investment
10,077
6,793
Interest on Cash and Deposits
3,841
3,300
Dividend Income
2,281
467
Other Expenses/Income
(1,592)
(1,084)
Total
27,414
19,648
13%
Qatar ME-ex Qatar Asia Europe Africa LATAM
22% 24%
* based on regulations effective 1 January 2015
Sectorwise Exposure
Funds for investment in USD 1,000
Fixed Income
2014
2013
201,491
139,805
83,235
39,468
Equity
1,701
1,596
Cash and Deposits
128,169
203,843
Total
414,595
384,712
Mutual Funds
2% 2% 3% 3%
2014
5%
51%
34%
Exposure Ratings
Average Duration (Fixed Income)
4.56
Net Investment Yield
6.86%
2014
1% 2% 72% 25%
58
Financials Sovereign Exploration Refining Life Insurances Real Estate Others
A– or better BBB– to A– Not rated Below BBB–
Qatar Re Annual Report 2014
Equity exposure Equity exposure in Qatar – sectorwise 2% 3% 3% 4%
3%
58%
5%
10%
12%
Banks Energy Real Estate Health Care Telecom Transport Utilities Food Beverage Others
Equity exposure in GCC – sectorwise 4%
4%
Liquidity Liquidity management is at the core of investments and cash flow management at Qatar Re. The maturity profile and invested funds available for sale are carefully monitored to ensure the availability of funds for the reinsurance operations and obligations. The overall cash flow projections are based on business profiles and specific large pay-outs that may be needed. Qatar Re’s Board of Directors has the mandate to maintain a minimum of 15% of funds as cash and 10% of total investments in available for sale assets. The Company held an average of available funds at 64% of invested funds during last four financial years. in %
2% 28%
4% 7% 7%
19% 11% 14%
Banks Materials Capital Goods Telecom Real Estate Consumer Services Food Beverage Diversified Financials Insurance Retailing
100 80
71.9
67.9
63.7
60 40
51.4 48.6 32.1
28.1
36.3
20 0
2011
2012
2013
2014
Cash or available for sale Fixed income
59
FINANCIAL STATEMENTS
Qatar Re Annual Report 2014
BALANCE SHEET
Notes
December 31, 2014
December 31, 2013
Cash and cash equivalents
5
128,169
203,843
Receivables
6
305,354
138,723
Reinsurance contract assets
7
341,878
185,963
Investments
8
286,427
180,869
Property and equipment
9
in USD 1,000
Assets
Total assets
1,868
2,278
1,063,696
711,676
Liabilities and equity Liabilities Provisions, reinsurance and other payables
10
79,932
39,332
Due to related parties
11
221,803
117,578
7
536,418
388,587
838,153
545,497
Reinsurance contract liabilities Total liabilities Equity Share capital
12
200,549
152,449
Share premium
13
2,652
2,652
Fair value reserve
14
Retained earnings Total equity Total liabilities and equity These financial statements were approved by the Board of Directors on January 29, 2015.
62
(999)
3,666
23,341
7,412
225,543
166,179
1,063,696
711,676
Qatar Re Annual Report 2014
INCOME STATEMENT
Notes
December 31, 2014
December 31, 2013
Gross written premiums
15
535,878
336,578
Premiums ceded to reinsurers
15
(357,723)
(205,535)
178,155
131,043
in USD 1,000
Net premiums Movement in net unexpired premium reserve
15
(43,069)
(27,953)
Net commissions
15
6,448
(7,730)
141,534
95,360
Net earned revenue Gross claims paid
15
(178,306)
(88,238)
Reinsurance recoveries
15
112,015
30,938
Movement in net outstanding claims
15
(47,563)
(26,875)
27,680
11,185
Net underwriting results Investment income
16
Total income Operating and administrative expenses
17
Profit for the year Basic and diluted earnings per share
19
27,414
19,648
55,094
30,833
(39,166)
(30,293)
15,928
540
0.231
0.011
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Qatar Re Annual Report 2014
STATEMENT OF COMPREHENSIVE INCOME
December 31, 2014
December 31, 2013
15,928
540
Net unrealized loss of available-for-sale financial assets
(4,665)
(5,440)
Total comprehensive income/(loss) for the year
11,263
(4,900)
in USD 1,000
Profit for the year Other comprehensive loss
STATEMENT OF CHANGES IN EQUITY
in USD 1,000
Balance at January 1, 2013 Profit for the year
Share Capital
Share premium
Fair value reserve
Retained earnings
Total equity
102,311
2,652
9,106
6,872
120,941
–
–
–
540
540
Net unrealized loss on available-for-sale financial assets
–
–
(5,440)
–
(5,440)
Total comprehensive loss for the year
–
–
(5,440)
540
(4,900)
Shares issued during the year
50,137
–
–
–
50,137
Balance at December 31, 2013
152,448
2,652
3,666
7,412
166,178
–
–
–
15,928
15,928
Profit for the year Net unrealized loss on available-for-sale financial assets
–
–
(4,665)
–
(4,665)
Total comprehensive income for the year
–
–
(4,665)
15,928
11,263
48,101
–
–
–
48,101
200,549
2,652
(999)
23,340
225,542
Shares issued during the year Balance at December 31, 2014
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Qatar Re Annual Report 2014
STATEMENT OF CASH FLOWS
in USD 1,000
Note
December 31, 2014
December 31, 2013
15,928
540
Operating activities Profit for the year
Adjustments for: Depreciation of property and equipment
825
586
Interest income and investment income
(27,379)
(19,697)
Provision for employees’ end of service benefits Property and equipment written off (Gain)/loss on disposal of property and equipment
165
165
–
1,118
(35)
50
(10,496)
(17,238)
(166,631)
(118,873)
–
3,050
(8,084)
54,829
Movements in working capital Receivables Due from a related party Reinsurance reserves Provisions, reinsurance and other payables
40,535
25,833
Due to related parties
104,226
117,578
Cash generated from operations
(40,450)
65,179
(100)
(33)
(40,550)
65,146
(110,223)
(112,841)
Employees’ end of service benefits paid Net cash (used in)/generated from operating activities Investing activities Net cash movements in investments Purchase of property and equipment
(417)
(2,372)
27,379
19,698
36
–
(83,225)
(95,515)
Proceeds from new shares issued
48,101
50,137
Net cash generated from a financing activity
48,101
50,137
(Decrease)/increase in cash and cash equivalents
(75,674)
19,766
Cash and cash equivalents at beginning of the year
203,843
184,077
128,169
203,843
Interest and investment income received Proceeds from sales of property and equipment Net cash (used in)/generated from investing activities Financing activity
Cash and cash equivalents at the end of the year
5
65
Qatar Re Annual Report 2014
NOTES TO THE FINANCIAL STATEMENTS
1. LEGAL STATUS AND PRINCIPAL ACTIVITIES Qatar Reinsurance Company LLC (Previously known as “Q-Re LLC”) (the “Company”) is a company engaged in the business of reinsurance and was authorized by the Qatar Financial Centre Regulatory Authority (QFCRA) on December 6, 2009 (QFC No. 00117). The Company is incorporated as a Limited Liability Company (LLC) under the companies’ regulations by QFC companies’ registration office. The company is 40.00% (2013: 39.74%) owned and controlled by QIC International LLC (the Parent Company). Qatar Insurance Company S.A.Q., the ultimate parent company, owns 55.38% (2013: 55.64%) of the Company. The Company commenced its commercial operations as at January 1, 2010. The Company operates in the State of Qatar and has branches in Switzerland, Bermuda and a representative office in United Kingdom. During the year, based on the decision of Board of Director and Shareholders, the Company has amended its name to “Qatar Reinsurance Company LLC” from its previous registered name of “Q-RE LLC.” Accordingly, the records with QFC Companies Registration Office are legally updated to reflect the amendment.
2. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING S TANDARDS (IFRS) In the current financial year, the Company has adopted certain new and revised standards and interpretations, which is mainly: • IAS 36 – Certain amendments arising from recoverable amount disclosures for non-financial assets The revised standards issued by IASB and IFRIC interpretations which are effective from the accounting period commencing January 1, 2014, had no significant effect on the financial statements of the Company for the year ended December 31, 2014. The following IASB Standards and IFRIC interpretations issued but, are not mandatory for the year ended December 31, 2014, have not yet been adopted by the Company: • 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 c ontractual 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. • Amendments reinstating the equity method as an accounting option for investments in subsidiaries, joint ventures and associates in an entity’s separate financial statements. The Company is currently in the process of evaluating the potential effect of these amendments in the presentation of the financial statements. A number of new standards, amendments to standards and interpretations that are not yet effective for the year ended December 31, 2014 have not been applied in preparing these financial statements. The Company does not expect the proposed amendments which becomes mandatory for the financial statements for the year 2014 or there after, to have a significant impact on the financial statements.
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Qatar Re Annual Report 2014
3. SIGNIFICANT ACCOUNTING POLICIES
Statement of compliance The 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 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 financial statements are presented in Qatari Riyals (QR) and rounded to the nearest thousand, and it is converted into USD for presentation purpose. The principal accounting policies are set out below:
A)
FOREIGN CURRENCY TRANSLATION Foreign operations The financial statements of the Company are presented in the currency of the primary economic environment in which the Company operates (functional currency). For the purpose of these financial statements, the results and financial position of Company is expressed in the functional currency Company. The assets and liabilities of foreign operations are translated to Qatari Riyals using exchange rates prevailing at the reporting date. Income and expenses are also translated to Qatari Riyals 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.
Foreign currency transactions Foreign currency transactions are recorded in the respective functional currencies of branches 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 functional currency at the rate of exchange prevailing at the year end. The resultant exchange differences are included in the statement of income. B)
FINANCIAL INSTRUMENTS Financial instruments represent the Company’s financial assets and liabilities. Financial assets include cash and cash equivalents, receivables, reinsurance contract assets and investments. Financial liabilities include reinsurance 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 recognised immediately in the statement of income.
Recognition The Company initially recognizes cash and cash equivalents, receivables, reinsurance and other payables on the date they originate. All other financial assets and liabilities are initially recognized on the trade date or settlement date at which the Company becomes a party to the contractual provisions of the instrument.
De-recognition The Company 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 Company is recognized as a separate asset or liability. The Company 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 in an arm’s length transaction on the measurement date. Differences can therefore arise between the book values under the historical cost method and fair value estimates.
67
Qatar Re Annual Report 2014
Underlying the definition of fair value is a presumption that an enterprise is in 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 Company’s other financial assets and financial liabilities are not materially different from their carrying values.
Identification and measurement of impairment At each reporting date, the Company assesses whether there is an 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. 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 as profit or loss and reflected in an allowance against receivables or investments.
C) I.
REINSURANCE OPERATIONS Receivables 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 statement of income. After initial measurement, receivables are measured at amortized cost, as deemed appropriate.
II.
Reinsurance contract assets The Company cedes reinsurance risk in the normal course of business as part of its business 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.
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. After initial measurement, reinsurance and other payables are measured at amortized 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 premiums comprise the total premiums receivable for the whole period of cover provided by reinsurance contracts entered into during the accounting period. Gross 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 reinsurance cover provided by the 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 reinsurance premium written in a year that relate to periods of risk after the reporting date.
VI. Reinsurance contract liabilities Reinsurance contract liabilities are recognized when contracts are entered into and premiums are charged.
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Qatar Re Annual Report 2014
Provision for outstanding claims Provision for outstanding claims is recognized at the date the claims are known and covers the liability for loss and loss adjustment expenses based on loss reports from independent loss adjusters and management’s best estimate. 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 current assumptions that may include a margin for adverse deviations. The liability is not discounted for the time value of money.
Unexpired risk reserve The provision for unearned premiums represents that portion of premiums received or receivable, after deduction of the reinsurance share that relates to risks that have not yet expired at the reporting date. The provision is recognised when contracts are entered into and premiums are charged, and is brought to account as premium income over the term of the underlying reinsurance contract, depending upon the nature and type of reinsurance contract written. Reinsurance contract liabilities are derecognised when the contract expires, discharged or cancelled by any party to the reinsurance contract.
VII. Gross claims paid Gross claims include all claims paid during the year and the related internal and external claims handling costs that are directly related to the processing and settlement of claims. VIII. Commission earned and paid Commissions earned and paid by the Company have been deferred and are amortized over the same period over which the corresponding premiums are recognized. D)
INVESTMENT ACTIVITIES The Company 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) These investments are carried at fair value with any gain or loss arising from the change in fair value included in the statement of income 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 unrealized gains and losses on re-measurement to fair value are reported as a separate component of equity 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 statement of income for the year.
II.
Fair value reserve This represents the unrealized gain or loss on year-end fair valuation of available for sale investments. In the event of sale or impairment, the cumulative gains or losses recognized under the investments fair value reserve are included in statement of income for the year.
III. Investment income Interest income Interest income is recognized on a time proportionate basis taking account of the principal invested and the interest rate applicable.
Dividend income Dividend income is recognized when the right to receive the dividends is established or when received.
E) I.
GENERAL Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand and short-term deposits with an original maturity of six months or less in the statement of financial position. The cash equivalents are readily convertible to cash.
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Qatar Re Annual Report 2014
II.
Property and equipment Property and equipment are carried at historical cost less accumulated depreciation. Subsequent expenditure is capitalised only when it is probable that future economic benefits associated with the expenditure will flow to the Company. Ongoing repairs and maintenance are charged to statement of income during the financial period in which they are incurred. The assets’ residual values, useful lives and method of depreciation applied are reviewed 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 recognised in the statement of income as an expense. An item of property and equipment is derecognised 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 recognised in the statement of income in the year the asset is derecognised. Depreciation is provided on a straight line basis on all property and equipment other than freehold land which is determined to have an indefinite life. The rates of depreciation are based upon the following estimated useful lives: Furniture and fixtures – 2 to 5 years Motor vehicles – 3 years Depreciation methods, useful lives and residual values are reviewed and adjusted if appropriate at each reporting date.
III. Impairment of non-financial assets An assessment is made at each reporting date to determine whether there is objective evidence that an asset or Company of assets may be 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 statement of income. IV. Provisions The Company recognizes provisions in the statement of financial position when the Company has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. The provision is created by charging the statement of income for any obligations or contingent liabilities as per the calculated value for these obligations and the expectation of their realization at the reporting date. V.
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 Company, whichever is higher, and is calculated using the employee’s salary and period of service at the reporting date.
VI. Other assets and liabilities All other assets and liabilities which are financial instruments are stated at cost, being the fair value and recognized at amounts to be received or to be paid in the future. VII. Taxation The regulations introducing the new tax regime for the Qatar Financial Centre have been formally approved, and all QFC firms will be subject to the tax with effect from January 1, 2010. Tax will be charged at a rate of 10% on profits generated from a local source. Exemptions, however, have been given to firms carrying on activities in the areas of asset management, reinsurance and captive insurance as these are areas actively being encouraged in Qatar by the QFC. VIII. Earnings per share The Company presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit attributable to ordinary shareholders of the Company by the weighted number of ordinary shares outstanding during the year. Diluted EPS is calculated by adjusting the earnings and number of shares for the effects of all dilutive potential shares. IX. Segment reporting An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with 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.
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Qatar Re Annual Report 2014
4. CRITICAL JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY In the application of the Company’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 recognised 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.
Critical judgements in applying accounting policies The following are the critical judgements, apart from those involving estimations, that management has made in the Âprocess of applying its accounting policies and that have the most significant effect on the amounts recognised in financial statements:
Classification of investments Management decides on the acquisition of an investment whether to classify it as available for sale or financial assets at fair value through profit or loss. The Company classifies investments as financial assets at fair value through profit or loss if the investment is classified as held for trading and upon initial recognition it is designated by the Company as at fair value through profit or loss. All other investments are classified as available for sale.
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:
Impairment of financial assets The Company 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 judgment by the management. In making this judgment and to record whether impairment occurred, the Company 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. Claims made under insurance contract 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 Company 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, 2014 estimate for unpaid claims amounted to USD 101,014 thousand (2013: USDÂ 150,291 thousand). For certain lines of businesses (non-life), in order to estimate the liabilities, the expected loss ratios are calculated for all underlying reinsurance 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.
Impairment of receivables An estimate of the collectible amount of receivables is made when collection of the full amount is no longer probable. This determination of whether these receivables are impaired entails the Company 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. As of December 31, 2014 the net carrying values of receivables amounted to USD 184,759 thousand (2013: USD 114,673 thousand) and provision for impairment on receivables amounted to USD 354 thousand (2013: USD 354 thousand).
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Qatar Re Annual Report 2014
Liability Adequacy Test At each reporting, liability adequacy tests are performed to ensure the adequacy of reinsurance contract liabilities. The Company 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.
5. CASH AND CASH EQUIVALENTS in USD 1,000
Cash in hand and bank balances
2014
2013
20,792
20,186
Time deposits (mature within 6 months)
107,377
183,657
Total
128,169
203,843
2014
2013
185,113
115,027
(354)
(354)
184,759
114,673
Deferred commission
80,577
21,606
Accrued deposit premium
The average interest rate on time deposits is 1.45% (2013: 1.59%) per annum.
6. RECEIVABLES in USD 1,000
Receivables Due from insurance companies Impairment losses on doubtful receivables Total Other receivables 38,963
–
Prepayments
832
1,403
Local debtors
185
959
38
–
–
82
Total
120,595
24,050
Total insurance and other receivables
305,354
138,723
Advances against indemnity Others receivables
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Qatar Re Annual Report 2014
7. REINSURANCE CONTRACT LIABILITIES AND REINSURANCE CONTRACT ASSETS in USD 1,000
2014
2013
153,578
167,198
Gross insurance contract liabilities Claims reported unsettled Claims incurred but not reported
92,760
76,622
Unearned premiums
290,080
144,767
Total
536,418
388,587
Claims reported unsettled
83,942
46,910
Claims incurred but not reported
61,382
46,618
Reinsurers’ share of insurance contract liabilities
Unearned premiums
196,554
92,435
Total
341,878
185,963
Claims reported unsettled
69,636
120,288
Claims incurred but not reported
31,378
30,004
Net insurance contract liabilities
Unearned premiums Total
93,526
52,332
194,540
202,624
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Qatar Re Annual Report 2014
Movements in claims provision during the year are as follows: 2014
in USD 1,000
As at January 1 Claims incurred during the year
Reinsurance contract liabilities
Reinsurers’ share
243,820
93,528
2013
Net
Reinsurance contract liabilities
Reinsurers’ share
Net
150,292
165,198
41,781
123,417
287,470
173,615
113,855
166,860
82,685
84,175
Claims paid during the year
(178,306)
(112,015)
(66,291)
(88,238)
(30,938)
(57,300)
Transfer to QIC Group SPC
(106,646)
(9,804)
(96,842)
–
–
–
246,338
145,324
101,014
243,820
93,528
150,292
As at December 31
Movements in provision for unearned premium during the year are as follows: 2014
in USD 1,000
As at January 1
Reinsurance contract liabilities
Reinsurers’ share
144,767
92,435
2013
Net
Reinsurance contract liabilities
Reinsurers’ share
Net
52,332
25,122
743
24,379
Premiums written during the year
535,878
357,723
178,155
336,578
205,535
131,043
Premiums earned during the year
(385,207)
(250,121)
(135,086)
(216,933)
(113,843)
(103,090)
Transfer to QIC Group SPC As at December 31
(5,358)
(3,483)
(1,875)
–
–
–
290,080
196,554
93,526
144,767
92,435
52,332
During the year, the Company has commuted the claims outstanding and related reinsurance reserves in the books as at September 30, 2014 relating to certain policies issued on or before December 31, 2012 to a related party – Qatar Insurance Company SAQ for a total consideration of USD 98.72 million. The first installment of 25% for the commutation is paid in cash by the Company during the year as per agreement and the balance amount is payable during the financial year 2015.
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Qatar Re Annual Report 2014
8. INVESTMENTS December 31, 2014
December 31, 2013
1,701
1,596
Qatari public shareholding companies
61,281
26,395
Quoted shares
21,954
13,073
in USD 1,000
Held for trading investments Managed funds Available-for-sale financial assets
Bonds Less: Margin collateral
442,175
302,932
(240,684)
201,491
(163,127)
139,805
Total available for sale financial assets – net
284,726
179,273
Total
286,427
180,869
Fixed income instrument purchases have been financed using short-term borrowings which typically roll on every Âcoupon 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 0.70% in 2014 (2013: 0.90%).
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Qatar Re Annual Report 2014
9. PROPERTY AND EQUIPMENT in USD 1,000
Furniture and fixtures
Motor vehicle
Capital work in progress
Total
802
24
1,421
2,247
Cost As at January 1, 2013 Transfer in during the year
1,421
–
(1,421)
–
Additions during the year
2,180
192
–
2,372
Disposals during the year
(365)
(8)
–
(373)
(1,118)
–
–
(1,118)
As at December 31, 2013
2,920
208
–
3,128
Additions during the year
341
75
–
416
Write-off
Disposals during the year As at December 31, 2014
(24)
(16)
–
(40)
3,237
267
–
3,504
563
24
–
587
Accumulated depreciation As at January 1, 2013 Charge for the year
545
41
–
586
(315)
(8)
–
(323)
As at December 31, 2013
793
57
–
850
Charge for the year
747
79
–
826
Disposals
(24)
(16)
–
(40)
1,516
120
–
1,636
As at December 31, 2014
1,721
147
–
1,868
As at December 31, 2013
2,127
151
–
2,278
Disposals As at December 31, 2014 Net Book Value
10. PROVISIONS, REINSURANCE AND OTHER PAYABLES in USD 1,000
2014
2013
Deferred commission
53,364
20,772
Due to reinsurance companies
15,672
11,455
8,598
5,856
502
437
588
275
1,208
74
Accrued expenses
Other payables: Employees’ end of service benefits (Note 10.1) Board of directors remuneration payable Local creditors Other credit balances Total
76
–
463
79,932
39,332
Qatar Re Annual Report 2014
10.1 EMPLOYEES’ END OF SERVICE BENEFITS in USD 1,000
Balance at the beginning of the year Charge for the year Payments made during the year Balance at the end of year
2014
2013
437
305
165
165
(100)
(33)
502
437
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 Company’s management.
12. SHARE CAPITAL The issued and fully paid in cash share capital consists of 73,000,000 (2013: 55,491,290) ordinary shares of USD 2.75 (QR 10) each. The authorized share capital comprised of 73,000,000 shares (2013: 73,000,000 shares) of USD 2.75 (QR 10) each. During the year, the company has made right shares offer of 17,508,710 (2013: 18,250,000) shares at USD 2.75 (QR 10) totaling to USD 48,101 thousand (2013: USD 50,137 thousand) to the existing shareholders at the proportion of their shareholding in the company as at March 16, 2014 and it has been fully subscribed and the shares were fully allotted to the shareholders after due approval from the shareholders and competent authorities.
13. SHARE PREMIUM The share premium reflects the amount received in excess of the par value of the shares issued.
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.
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Qatar Re Annual Report 2014
15. SEGMENT INFORMATION A)
SEGMENT INFORMATION For management reporting purposes, the Company is organized into two business segments – Marine and Aviation, and Property & Casualty. These segments are the basis on which the Company reports its operating segment information.
Segment statement of income for the year ended December 31, 2014
in USD 1,000
Gross written premiums Premiums ceded to reinsurers Net premiums Movement in unexpired net premium reserve Net earned premiums Gross claims paid Reinsurance recoveries Movement in net outstanding claims Net commissions
Un-allocated (Expenses)/ Income Investments
Property & Total Casualty Reinsurance
Total
21,884
513,994
535,878
–
–
535,878
(12,729)
(344,994)
(357,723)
–
–
(357,723)
9,155
169,000
178,155
–
–
178,155
(2,150)
(40,919)
(43,069)
–
–
(43,069)
7,005
128,081
135,086
–
–
135,086
(18,423)
(159,883)
(178,306)
–
–
(178,306)
9,296
102,719
112,015
–
–
112,015
(3,535)
(44,028)
(47,563)
–
–
(47,563)
(63)
6,511
6,448
–
–
6,448
(5,720)
33,400
27,680
–
–
27,680
–
–
–
27,378
36
27,414
(5,720)
33,400
27,680
27,378
36
55,094
Operating and administrative expenses
–
–
–
–
(38,340)
(38,340)
Depreciation
–
–
–
–
(826)
(826)
(5,720)
33,400
27,680
27,378
(39,130)
15,928
Net underwriting results Investment income and other income Total income
Segment results
78
Marine and Aviation
Qatar Re Annual Report 2014
Segment statement of income for the year ended December 31, 2013
in USD 1,000
Gross written premiums
Un-allocated (Expenses)/ Income Investments
Property & Total Casualty Reinsurance
Total
21,340
315,238
336,578
–
–
336,578
(11,496)
(194,039)
(205,535)
–
–
(205,535)
9,844
121,199
131,043
–
–
131,043
Movement in unexpired net premium reserve
(564)
(27,389)
(27,953)
–
–
(27,953)
Net earned premiums
9,280
93,810
103,090
–
–
103,090
20,842
(109,080)
(88,238)
–
–
(88,238)
Premiums ceded to reinsurers Net premiums
Gross claims paid Reinsurance recoveries
4,576
26,362
30,938
–
–
30,938
Movement in net outstanding claims
3,926
(30,801)
(26,875)
–
–
(26,875)
Net commissions
(605)
(7,125)
(7,730)
–
–
(7,730)
38,019
(26,834)
11,185
–
–
11,185
–
–
–
19,698
(50)
19,648
38,019
(26,834)
11,185
19,698
(50)
30,833
Operating and administrative expenses
–
–
–
–
(29,707)
(29,707)
Depreciation
–
–
–
–
(586)
(586)
38,019
(26,834)
11,185
19,698
(30,343)
540
Net underwriting results Investment income and other income Total income
Segment results
Marine and Aviation
Segment assets and liabilities Assets and liabilities of the Company are commonly used across the operating segments.
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Qatar Re Annual Report 2014
16. INVESTMENT INCOME in USD 1,000
Interest income
2014
2013
16,932
12,438
Dividends
2,281
467
Profit on sale of available for sale financial assets
8,208
6,793
(7)
(50)
27,414
19,648
2014
2013
Other losses Total
17. OPERATING AND ADMINISTRATIVE EXPENSE in USD 1,000
Employees related cost
25,031
17,484
Office rent
3,004
3,610
Maintenance & IT hosting
2,753
1,881
Board of directors’ remuneration (Note 18)
412
–
7,140
6,732
38,340
29,707
Other operating expenses Total
18. BOARD OF DIRECTORS’ REMUNERATION In accordance with the Articles of Association of the Company, the Board of Directors’ remuneration for the year 2014 has been proposed at USD 412,000 (2013: nil).
19. BASIC AND DILUTED EARNINGS PER SHARE The basic and diluted earnings per share are the same as there are no dilutive effects on earnings. 2014
Profit for the year (in USD 1,000)
15,928
540
Weighted average number of ordinary shares (in 1,000)
68,731
50,928
0.231
0.011
Basic and diluted earnings per share (in USD)
80
2013
Qatar Re Annual Report 2014
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 Company and companies of which they are key management personnel. Pricing policies and terms of these transactions are approved by the Company’s management and are negotiated under normal commercial terms. Significant transactions were: in USD 1,000
Reinsurance premium to QIC Claims Commission from QIC
B)
2014
2013
334,500
185,918
71,379
62,862
103,430
42,063
2014
2013
1,961
578
44
43
2,005
621
COMPENSATION OF KEY MANAGEMENT PERSONNEL in USD 1,000
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, 2014 is detailed in note 18.
21. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT The Company 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 Company’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 Company’s risk and financial management framework is to protect the Company’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 Company 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 organizational structure with documented delegated authorities and responsibilities from the Board of Directors to executive management committees and senior managers. A Company risk management policy framework which sets out the risk profiles for the Company, risk management, control and business conduct standards for the Company’s operations has been put in place.
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Qatar Re Annual Report 2014
B)
CAPITAL MANAGEMENT FRAMEWORK The Company has an internal risk management framework for identifying risks to which each of its business units and the Company 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 non-financial) 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 Company is satisfactorily managing affairs for their benefit. At the same time, the regulators are also interested in ensuring that the Company maintains an appropriate solvency position to meet unforeseen liabilities arising from economic shocks or natural disasters. The operations of the Company 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 minimize 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 Company faces due to the nature of its investments and liabilities is interest rate risk. The Company 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 Company’s ALM is also integrated with the management of the financial risks associated with the Company’s other financial assets and liabilities not directly associated with insurance and investment liabilities. The Company’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 Company faces under insurance contracts is that the actual claims and benefits payments or the timing thereof, differ from expectations. This is influenced by the frequency of claims, severity of claims, actual benefits paid and subsequent development of long-term claims. Therefore the objective of the Company is to ensure that sufficient reserves are available to cover these liabilities. The Company manages the insurance risk through the careful selection and implementation of its underwriting strategy guidelines together with the adequate reinsurance arrangements and proactive claims handling. The Company principally issues general insurance contracts which constitute mainly marine, aviation, engineering, agriculture and property and casualty. The concentration of insurance risk exposure is mitigated by diversifying the risk underwritten and ensuring that such risks are across a large portfolio in terms of type, level of insured benefits, amount of risk and industry. Underwriting limits are in place to enforce risk selection criteria. The Company, in the normal course of business, in order to minimize 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 Company 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 Company’s placement of reinsurance is diversified such that it is neither dependent on a single reinsurer nor are the operations of the Company substantially dependent upon any single reinsurance contract. The Company has in place strict claim review 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 Company. The Company 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 Company.
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Qatar Re Annual Report 2014
Key assumptions The principal assumption underlying the liability estimates is that the Company’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 judgments 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. Judgment 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. in USD 1,000
Change in assumptions
Impact on liabilities
Impact on net profit
Impact on equity
December 31, 2014 Incurred claim cost
10%
11,385
(11,385)
–
Incurred claim cost
–10%
(11,385)
11,385
–
Incurred claim cost
10%
8,418
(8,418)
–
Incurred claim cost
–10%
(8,418)
8,418
–
December 31, 2013
Claims development The Company maintains strong reserves in respect of its insurance business in order to protect against adverse future claims experience and developments. The uncertainties about the amount and timing of claim payments are generally resolved within one year.
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 Company’s exposure to credit risk. A credit risk policy setting out the assessment and determination of what constitutes credit risk for the Company has been established and policies and procedures are in place to mitigate the Company’s exposure to credit risk. Compliance with the 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 Company, other than those relating to reinsurance contracts, the maximum credit risk exposure to the Company is the carrying value as disclosed in the financial statements at the reporting date. Reinsurance is placed with reinsures approved by the management, which are generally international securities that are rated by international rating agencies or other GCC rating agencies. To minimize its exposure to significant losses from reinsurer insolvencies, the Company 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.
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Qatar Re Annual Report 2014
Age analysis of financial assets as at the year end is as follows: in USD 1,000
< 30 days
31–60 days
61–90 days
91–120 days
Above 120 days
Total
December 31, 2014 Cash and cash equivalents
20,792
63,814
43,563
–
–
128,169
Reinsurance and other receivables
198,338
4,513
5,035
4,759
11,262
223,907
Total
219,130
68,327
48,598
4,759
11,262
352,076
86,978
–
116,865
–
–
203,843
December 31, 2013 Cash and cash equivalents Reinsurance and other receivables Total
95,209
4,570
3,171
4,018
8,746
115,714
182,187
4,570
120,036
4,018
8,746
319,557
Impaired financial assets At December 31, 2014 there are impaired reinsurance and other receivables of USD 354 thousand (2013: USD 354 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 Company 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: in USD 1,000
At January 1 Charged during the year At December 31
G)
2014
2013
354
354
–
–
354
354
LIQUIDITY RISK Liquidity risk is the risk that the Company 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 following table summarizes the maturity profile of the financial assets and financial liabilities of the Company 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.
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Qatar Re Annual Report 2014
in USD 1,000
Up to a year
1 to 5 years
Over 5 years
Total
14,253
110,306
76,931
201,490
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 Receivables
1,701
–
–
1,701
61,281
–
–
61,281
21,954
–
–
21,954
219,847
4,060
–
223,907
Reinsurance contract assets
145,324
–
–
145,324
Cash and cash equivalents
128,169
–
–
128,169
Total
592,529
114,366
76,931
783,826
17,970
–
–
17,970
December 31, 2014
Financial liabilities: Non derivatives Provision, reinsurance and other payables Due to related parties
221,803
–
–
221,803
Reinsurance contract liabilities
246,338
–
–
246,338
Total
486,111
–
Up to a year
1 to 5 years
Over 5 years
Total
–
104,255
35,550
139,805
in USD 1,000
486,111
December 31, 2013
Financial assets: Non derivatives Available-for-sale investments – Debt securities Held for trading investments – Managed Funds Qatari Public shareholding companies Quoted shares Receivables Reinsurance contract assets
1,596
–
–
1,596
26,395
–
–
26,395
13,073
–
–
13,073
115,714
–
–
115,714
93,528
–
–
93,528
Cash and cash equivalents
203,843
–
–
203,843
Total
454,149
104,255
35,550
593,954
12,267
–
437
12,704
December 31, 2013
Financial liabilities: Non derivatives Provision, reinsurance and other payables Due to related parties
117,578
–
–
117,578
Reinsurance contract liabilities
243,820
–
–
243,820
Total
373,665
–
437
374,102
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Qatar Re Annual Report 2014
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 Company 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 Company actively monitors the key factors that affect stock and bond market movements, including analysis of the operational and financial performance of investees.
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 Company, 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 Company’s exposure to foreign currency exchange rate risk at reporting date by categorizing assets and liabilities by major currencies. in USD 1,000
EUR
GBP
Others*
Total
December 31, 2014 Cash and cash equivalents
2,773
2,221
123,175
128,169
Receivables
1,624
13,966
208,317
223,907
Reinsurance contract assets
–
–
145,324
145,324
Investments
–
447
285,980
286,427
Total assets
4,397
16,634
762,796
783,827
–
–
246,338
246,338
Provisions, reinsurance and other payables
Reinsurance contract liabilities
540
1,130
78,262
79,932
Total liabilities
540
1,130
324,600
326,270
in USD 1,000
EUR
GBP
Others*
Total
December 31, 2013 Cash and cash equivalents
3,103
5,946
194,794
203,843
Receivables
3,843
13,562
98,309
115,714
Reinsurance contract assets
–
–
93,528
93,528
Investments
–
300
180,569
180,869
Total assets
6,946
19,808
567,200
593,954
–
–
243,820
243,820
Reinsurance contract liabilities
Provisions, reinsurance and other payables
878
943
10,883
12,704
Total liabilities
878
943
254,703
256,524
* Others mainly represents exposure in functional and reporting currency Qatari Riyal.
The Company has no significant concentration of currency risk.
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Qatar Re Annual Report 2014
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. Impact on profit or loss Changes in variables
December 31, 2014
December 31, 2013
Euro
+10%
386
607
GBP
+10%
in USD 1,000
Currency
Total
1,505
1,887
1,891
2,494
Euro
–10%
(386)
(607)
GBP
–10%
(1,505)
(1,887)
(1,891)
(2,494)
Total
The method used for deriving sensitivity information and significant variables did not change from the previous period. I.
Interest rate risk The Company is not exposed to interest rate risk as the Company does not have any interest sensitive financial instruments.
II.
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 f actors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market.
III. 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 Company cannot expect to eliminate all operational risks, but by initiating a rigorous control framework and by monitoring and responding to potential risks, the Company is able to manage the risks. The Company 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 Company’s strategic planning and budgeting process.
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Qatar Re Annual Report 2014
IV. Capital management The Company fully complied with the externally imposed capital requirements during the reported financial period.
Classifications and fair values The following table compares the fair values of the financial instruments to their carrying values: December 31, 2014
December 31, 2013
Fair value
Carrying amount
Fair value
128,169
128,169
203,843
203,843
Receivables
223,907
223,907
115,714
115,714
Reinsurance contract assets
145,324
145,324
93,528
93,528
1,701
1,701
1,596
1,596
Available for sale investments
284,726
284,726
179,273
179,273
Total
783,827
783,827
593,954
593,954
17,970
17,970
12,704
12,704
in USD 1,000
Carrying amount
Financial assets Cash and cash equivalents
Loans and receivables:
Held for trading
Financial Liabilities Provisions, reinsurance and other payables
V.
88
Due to related parties
221,803
221,803
117,578
117,578
Insurance contract liabilities
246,338
246,338
243,820
243,820
Total
486,111
486,111
374,102
374,102
Equity price risk The Companyâ&#x20AC;&#x2122;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 Companyâ&#x20AC;&#x2122;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 Company has no significant concentration of price risk.
Qatar Re Annual Report 2014
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. December 31, 2014
December 31, 2013
Changes in variables
Impact on profit or loss
Impact on equity
Impact on profit or loss
Impact on equity
Qatar Market
+10%
–
6,128
–
2,640
International Markets
+10%
170
2,195
160
1,307
Qatar Market
–10%
–
(6,128)
–
(2,640)
International Markets
–10%
(170)
(2,195)
(160)
(1,307)
in USD 1,000
The method used for deriving sensitivity information and significant variables did not change from the previous period.
22. DETERMINATION OF FAIR VALUE AND FAIR VALUES HIERARCHY The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: • Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities • Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly • Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data The following table shows an analysis of financial instruments recorded at fair value by level of the fair value hierarchy: Level 1
Level 2
Level 3
Total fair value
–
1,701
–
1,701
Available for sale
284,726
–
–
284,726
Total
284,726
1,701
–
286,427
–
1,596
–
1,596
in USD 1,000
December 31, 2014 Held for trading
December 31, 2013 Held for trading Available for sale
179,273
–
–
179,273
Total
179,273
1,596
–
180,869
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Qatar Re Annual Report 2014
23. COMMITMENTS AND CONTINGENT LIABILITIES in USD 1,000
2014
2013
Bank guarantees
72,840
785
Total
72,840
785
Operating leases Future minimum lease rentals payables under non-cancellable operating leases as at the year-end are as follows: in USD 1,000
2014
2013
Within one year
1,818
1,971
After one year but not more than five years
7,274
5,912
More than 5 years
1,667
5,748
10,759
13,631
Total
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Qatar Re Annual Report 2014
INDEPENDENT AUDITOR’S REPORT The Shareholders Qatar Reinsurance Company LLC Doha – Qatar
REPORT ON THE FINANCIAL STATEMENTS We have audited the accompanying financial statements of Qatar Reinsurance Company LLC (previously known as Q-RE LLC) (the “Company”), which comprise the statement of financial position as at December 31, 2014 and the 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 financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of 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 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 financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the 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 Company’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 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 financial statements present fairly, in all material respects, the financial position of the C ompany as at December 31, 2014 and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards.
Doha – Qatar January 29, 2015
For Deloitte & Touche Qatar Branch
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Qatar Re Annual Report 2014
ABOUT OUR PARENT COMPANY
Founded in 1964, QIC is a leading publicly-listed composite insurer with an underwriting footprint across the Middle East, Africa and Asia. QIC’s insurance operations primarily consist of QIC Doha, QIC International LLC (QICI), Qatar Re, and Q-Life & Medical Insurance Company. In late June 2014, QIC completed the transaction to acquire the entire share capital of Antares Holdings Limited, a leading specialist insurer and reinsurer operating in the Lloyd’s market in the U.K.
QIC is the largest insurer in Qatar with a significant share of the total gross written premiums in the domestic market. QIC is the largest insurance company in the Middle East North Africa region by profitability and market capitalization and among the largest non-life insurers in Asia by profitability. It is listed on the Qatar Exchange and had a market capitalization of USD 4 billion as at 31 December 2014. 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” by A.M. Best Europe. QICI, Qatar Re and other guaranteed subsidiaries of QIC also share and benefit from these strong ratings.
QIC performance figures 2009 to 2014 in USD million 1,750
1,627 1,542
1,478
1,400 1,050
968
818
700
591
350
171
2009
2011
282
214
170
166
2010
970
703
655
582
154
0
1,042
969
2012
2013
2014
Shareholders’ equity Gross premium Net profit
Total assets
Market capitalisation
in USD million
in USD million
4,422
4,500 3,600
1,800
1,867
1,988
2,135
2,700
2,267
1,800
92
2,339 1,705
1,588
1,540
2010
2011
2012
1,268
900
900 0
4,000
3,600
3,196
2,700
4,500
2009
2010
2011
2012
2013
2014
0
2009
2013
2014
Disclaimer Some of the statements in this annual report may consist of forward-looking statements or statements of Qatar Reâ&#x20AC;&#x2122;s future expectations based on the information available to it currently. There are many factors and conditions, financial or economic, whether owing to market conditions or the happening of c atastrophic events, that may cause actual events or results to be materially different from those that may be anticipated by such statements. Neither Qatar Re, nor its parent and its affiliated companies, make any representation or warranty, whether express or implied, as to the accuracy, completeness of such statements, nor is any representation or warranty made that they will be reviewed, amended or brought up to date. Neither Qatar Re, nor its parent and its affiliated companies, accept any liability whatsoever for any decision made, or action taken or not taken, including the consequences thereof, in connection or conjunction with, directly or indirectly, the information and/or statements Âcontained in this annual report.
Imprint Publisher: Qatar Reinsurance Company LLC, Doha, Qatar Concept and text: Dr. Schanz, Alms & Company Ltd, Zurich Photographer: Markus Bertschi, Fotografie, Zurich Design and typesetting: zusatz polygrafie, Zurich April 2015
Doha Qatar Reinsurance Company LLC 8th Floor, QIC Building Tamin Street, West Bay P.O. Box: 24938 Doha State of Qatar Zurich Qatar Reinsurance Company LLC Doha, Zurich Branch Bleicherweg 72 8002 Zurich Switzerland Bermuda Qatar Reinsurance Company LLC Overbay 106 Pitts Bay Road Pembroke HM08 Bermuda London Qatar Reinsurance Company LLC 足Representative Office Suite 2/10 London Underwriting Centre 3 Minster Court, Mincing Lane London EC3R 7DD United Kingdom www.qatarreinsurance.com