ANNUAL REPORT 2012
We are a financially strong and innovative insurance provider leading the insurance industry in the Caribbean. At NAGICO, we provide our customers with exceptional value through our competitive and flexible products, expertise and responsive service offered throughout our regional network of branch offices, agents and brokers in the Caribbean and future markets. The NAGICO experience is shaped by the many cultures of the Caribbean, which enhances the quality of life for our customers and the communities in which they live.
This is the NAGICO Way
Contents
30 Years 19 Territories 1 Group
Chairman’s Statement
7
CEO’s Statement
9
CFO’s Statement
11
Statement of Corporate Governance
13
Group Board Of Directors
15
Independent Auditors’ Report
16
Consolidated Statement of Financial Position
18
Consolidated Statement of Comprehensive Income
19
Notes to the Consolidated Financial Highlights
20
NAGICO Distribution Network
26
We are smarte r today becau se of lessons the past. Our from financial integ rity is solid be we respond to cause current marke t trends. Our future is secu re because of the futures we secure for oth ers.
FUTURE
CHAIRMAN’S STATEMENT I am pleased to report that 2012 was a year of consolidation for the NAGICO Group. There was considerable expansion territorially in 2011 which led to a planned increased premium income for 2012. I have observed that in both Europe and America the number of Insurance Companies has declined dramatically in the last two decades due to the fact that only the fittest could survive. Indeed, here in the Caribbean quite rightly, regulators have become more demanding which in itself is increasing the costs to all insurance companies and the consumers. At NAGICO we believe we have the best IT systems, a full range of products and a strong balance sheet. These are the factors I believe that will continue to drive NAGICO forward in even the toughest market conditions. I would like at this point to thank NAGICO’s dedicated Management Team who have taken the Company through the expansion program which it has deliberately embarked on in the last few years. I and my fellow board members believe in NAGICO’s corporate plan and we believe we have the correct management and capital base to take us forward as one of the strongest Insurance Companies in the region. We therefore look forward to serving our customers all over the Caribbean with even better service and the right products at the right price whilst maintaining the highest financial standards of any insurance institution in the region.
Michael Bishop Chairman of the NAGICO Group Board of Directors May 31, 2013
7
LEADERSHIP ose who know True leadership comes from th over their own how to motivate others to disc an merely leading pathways to success rather th them there by the hand.
Imran McSood Amjad, ACII NAGICO Group Chief Executive Officer May 31, 2013
CEO’S STATEMENT The Macro Economic conditions in 2012 in most of the islands where we operate were not conducive to growth or profits. In addition the political situation has been unstable, resulting in changes in Governments on several islands. However, I am pleased to state that the NAGICO Group continues to grow and generate acceptable returns. We celebrated our 30th Anniversary in 2012 and having been the CEO from inception, I am proud to say that we marked the occasion with historic achievements. NAGICO commenced operations on St. Maarten in 1982 with a mere US$75,000 in paid in capital. By the end of 2012, the enclosed financial statement shows premium income of over US$108 million, assets of over US$170 million and net assets of over US$77 million. 2012 was a particularly good year with earnings surpassing US$10 million, mainly from operating income, but also from asset revaluation in accordance with IFRS rules. The above results justify NAGICO’s strategy of growth, profitability and spreading risks by expanding in new markets. In 2012, we acquired majority shares in VINSURE, a leading insurer in St. Vincent, established offices in Grenada and the Bahamas and strengthened our management structure. We continue to place emphasis on education and now have over 20 qualified Chartered Insurers and Accountants and established the NAGICO Information Technology Centre (NITC) in the Dominican Republic to enhance our state of the art Insurance Software programs. I take this opportunity to recognize and thank our Shareholders, Management, Staff, Directors, Agents, Brokers, Reinsurers and many Associates who have been instrumental in our phenomenal success. Whilst there will be many challenges, we look to the future with great optimism, certain in our quest for growth, profits and excellence. 9
Our reputation is carried on th e voices of those we serv e well. It lights our path into new markets and lays the fo undation for o continued suc ur cess and secu re position in Caribbean. the
REPUTATION
Justin Woods Chief Financial Officer May 31, 2013
CFO’S STATEMENT Financial Results NAGICO’s audited consolidated financial statements for the year ended 31 December 2012 have shown significant improvements in the Group’s performance with an increase in net profit before taxation of $11 million compared to $5 million in the previous year; this represents an increase of $6 million or 120% which was mainly attributed to the growth in insurance premium revenue which increased to $109 million or 28% over the previous year and a relatively stable loss ratio of 34%. Additionally, during 2012, we have experienced growth in our investment income of $2 million and other operational income of $5 million. We have continued to be conservative in our investment approach as proven by our investment securities amounting to $61 million which primarily comprised government securities and term deposits. NAGICO continues to be a very liquid group with liquid assets accounting for approximately 69% of the investment portfolio and 55% of total net assets which is mainly due to the retention of capital since the shareholders of the Group have a “no dividend” policy. Consequently, the Group continues to be solvent and maintain adequate risk-adjusted capitalization for its current business profiles. Overall, total assets and equity have grown to $170 million and $77 million respectively. Outlook Given the changes we have seen within the various governments throughout the region, regulators, consumer spending and the global economy, we are introducing new financial measures to become more efficient and effective, thereby avoiding any significant adverse effect on the Group and staff as we strongly believe that our human resources are our most valuable asset. Therefore, for 2013, the Group has budgeted further growth in our operating results which we plan to achieve through a number of cost cutting measures and through growing our new operations within the developing and new markets which we operate. 11
STRENGTH mmitment to Our strength is born from our co our resilience our community. It is evidence of ering events and to catastrophic weather, life-alt threaten our insurmountable challenges that customers’ way of life.
John D.K. Lawrence Head of Group Compliance May 31, 2013
STATEMENT OF CORPORATE GOVERNANCE The NAGICO Group and its subsidiaries now undertake operations in 19 jurisdictions throughout the Caribbean region, of which 18 involve licensed insurance activities. Most jurisdictions have their own separate insurance regulatory body, as a result of which NAGICO is required to report to 15 different regulatory bodies. The two main home regulatory bodies are the Central Bank of Curaçao & St Maarten and the Anguilla Financial Services Commission. Other regulatory bodies include the Prudential Control Authority, part of the Banque de France based in Paris, covering NAGICO’s activities in French St Martin and the other French overseas territories and the Dutch Central Bank covering activities in the BES islands. It should be noted that the Dutch based regulatory bodies require NAGICO to have a Supervisory Board, made up entirely of independent board members. Given such diverse regulatory reporting, Corporate Governance and the related activity of internal and external Compliance have now taken on an even more important role within the Group. Basically Corporate Governance refers to the processes, structures and information, including accountability, used for directing and overseeing the management of an institution. A number of Caribbean regulators issue Corporate Governance Guidelines and the Group follows these very closely. Proactive corporate governance and compliance ongoing Group projects through 2012/2013 include review of the current senior management structure; establishment of a risk management program; putting in place a business continuity plan, given the ongoing possibility of a catastrophe occurrence in the region; strengthening existing internal audit and Audit Committee functions; reviewing how senior management reports to the various boards; maintaining more regular contact with regulatory bodies, including formal presentations; ensuring regulatory compliance by all NAGICO offices with local legislation and regulations; reviewing existing internal Anti Money Laundering manuals and procedures, particularly where long-term insurance is involved and which is more susceptible to AML risks. Finally NAGICO is reviewing the impact of a new insurance regulatory regime within the European Union, entitled Solvency II, which is scheduled to come into effect during 2014. This new regime will bring in more stringent reporting and compliance requirements. 13
BOARD OF DIRECTORS
Michael Bishop
Francis Bowman
Ronald Knowles
Ron Verhaar
NAGICO Group Chairman
Board Member – NAGICO NV, Life, Ltd, Bahamas, Grenada, St. Lucia, Trinidad & Tobago, Audit Committee
Board Member – NAGICO NV, Life, Trinidad & Tobago, Audit Committee
Board Member – NAGICO NV & Life
Mark Teelucksingh Board Member NAGICO Trinidad & Tobago
Lisa Fulchan Board Member NAGICO Trinidad & Tobago
15
Dawn Davies Board Member NAGICO Bahamas
Edward Lord Board Member NICL Grenada
INDEPENDENT AUDITORS’ REPORT The accompanying Consolidated Financial Highlights, which comprise the consolidated balance sheet as at December 31, 2012 and the consolidated statement of comprehensive income for the year then ended and related notes, are derived from the audited consolidated financial statements of Nagico Holdings Limited for the year ended December 31, 2012. We expressed an unmodified audit opinion on those financial statements in our report dated April 23, 2013. The Consolidated Financial Highlights do not contain all the disclosures required by International Financial Reporting Standards. Reading the summary financial statements, therefore, is not a substitute for reading the audited consolidated financial statements of Nagico Holdings Limited. Management’s Responsibility for the Consolidated Financial Highlights Management is responsible for the preparation of Consolidated Financial Highlights of the audited financial statements in accordance with International Financial Reporting Standards. Auditor’s Responsibility Our responsibility is to express an opinion on the Consolidated Financial Highlights based on our procedures, which were conducted in accordance with International Standard on Auditing (ISA) 810, “Engagements to Report on Summary Financial Statements.”
Opinion In our opinion, the Consolidated Financial Highlights derived from the audited consolidated financial statements of Nagico Holdings Limited for the year ended December 31, 2012 are consistent, in all material respects, with those financial statements, in accordance with International Financial Reporting Standards. We report that the management report, to the extent we can assess, is consistent with the consolidated financial statements.
aarten Sint M 3 . , 201 1 3 ts B.V y n a t Ma n u Acco A KPMG esselaer R K . r M.L.M irecto D g gin Mana
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CONSOLIDATED FINANCIAL HIGHLIGHTS Consolidated Statement Of Financial Position As At December 31, 2012 Assets
2012
2011
Property, plant and equipment Retirement benefit asset Investment properties Investment securities Investment in associate Intangible assets Deferred tax asset Receivables Unearned reinsurance premiums-net Claims receivable reinsurance Insurance receivables-net Prepayments and other current assets
16,016,684 7,921,719 26,829,521 61,310,518 1,119,387 3,201,441
14,027,727 7,517,031 20,476,120 53,857,449 124,675 582,718 1,930,598
3,360,572 2,026,597 16,900,224 4,599,184 26,886,577
3,522,939 1,232,808 12,198,174 3,162,102 20,116,023
Cash and cash equivalents
26,746,293
23,801,004
170,032,140
142,433,345
2012
2011
10,000 43,514,753 552,621 15,663 31,630,130 75,723,167 1,664,212 77,387,379
10,000 43,514,753 687,301 21,167,103 65,379,157 65,379,157
80,729,861 4,604,338 910,972 6,399,590 92,644,761
68,353,574 1,585,341 2,842,147 698,228 3,574,898 77,054,188
170,032,140
142,433,345
(in U.S. dollars)
Equity and liabilities (in U.S. dollars)
Equity Share capital Additional paid in capital Revaluation reserves Other reserves Retained earnings Shareholders' equity Minority interests Total equity Liabilities Gross insurance liabilities Pension liabilities Deferred tax payable Current tax payable Accounts payable and accrued liabilities
CONSOLIDATED FINANCIAL HIGHLIGHTS Consolidated Statement Of Comprehensive Income For The Year Ended December 31, 2012 2012
2011
108,808,246 (28,566,004) (16,769,235) 63,473,007
84,774,595 (25,566,639) (12,412,756) 46,795,200
Investment income Other income
2,856,764 8,748,891 11,605,655
1,083,387 3,925,889 5,009,276
Total revenues
75,078,662
51,804,476
Expenses Insurance claims and loss adjustment expenses net of recoveries from reinsurers Personnel expenses Administration expenses Other operating expenses Amortization other intangible assets Amortization deferred acquisition cost Depreciation Total expenses Result before taxation
36,568,073 12,757,341 4,089,208 9,369,149 49,851 174,753 1,057,737 64,066,112 11,012,550
28,221,556 9,829,795 2,623,429 4,986,067 391,935 826,620 46,879,402 4,925,074
Taxation Net result after taxation
(1,023,008) 9,989,542
842,188 5,767,262
Other comprehensive income Change in fair value of equity securities Change in other comprehensive income Comprehensive income for the year
15,663 15,663 10,005,205
5,767,262
Attribution: Comprehensive income for the year attributable to shareholders Comprehensive income for the year attributable to minority interests Comprehensive income for the year
9,934,964 70,241 10,005,205
5,767,262 5,767,262
(in U.S. dollars)
Revenues Insurance premium revenue Insurance premium ceded to reinsurers Commissions Net insurance premium revenue
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NOTES TO THE CONSOLIDATED FINANCIAL HIGHLIGHTS AS PER DECEMBER 31, 2012 General NAGICO Holdings Limited (the “Company”) was incorporated in Anguilla on July 15, 1999. The Company’s principal activity is to manage its subsidiaries. The address of the Company’s registered office is Caribbean Commercial Centre, The Valley, Anguilla. The consolidated financial statements of the Company as at and for the year ended December 31, 2012 include the Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”) and the Group’s interest in associates. The Group is primarily involved in the offering of property and casualty insurance including fire, motor, public liability, health and marine insurance and on a lesser scale, life insurance. The Group conducts business through subsidiaries and their branches and agents in St. Maarten, St. Martin, French Overseas Territories (mainly Guadeloupe and Martinique), Anguilla, British Virgin Islands, Antigua, Aruba, Curaçao, Bonaire, Dominica, St. Kitts and Nevis, Montserrat, Saba, St. Eustatius, St. Vincent and the Grenadines, Trinidad & Tobago and St. Lucia. A significant portion of the Company’s casualty and life insurance business is reinsured. On May 18, 2012, a subsidiary company (NAGICO Ltd.) purchased 54,54% of the shares of St. Vincent Insurances Limited (Vinsure), a company incorporated in St. Vincent and the Grenadines, from Cooper Gay (Holdings) Limited. Vinsure is primarily involved in the offering of property and casualty insurance including fire, motor and public liability insurance and conducts business through agents located in St. Vincent and the Grenadines.
In June 2012, the Company sold it’s remaining 25% shares of Grensure Fire and General Insurances Limited (“Grensure”). Grensure is registered under the Insurance Act of 1973 of Grenada, to conduct general business and acts as correspondents for Lloyds Insurance Brokers. The financial statements were approved by the Board of Directors on April 23, 2013. Basis of Preparation The principal accounting policies adopted in the preparation of the consolidated financial statements of NAGICO Holdings Limited and its subsidiaries (the “Group”) are set out below. These explanatory notes are an extract of the detailed notes included in the consolidated financial statements and are consistent in all material respects with those from which they have been derived. Statement of Compliance The consolidated financial statements, from which the consolidated financial highlights have been derived, are prepared in accordance with International Financial Reporting Standards (“IFRS”).
Basis of Estimates The preparation of the financial statements requires the Group to make estimates and assumptions that affect items reported in the statement of financial position and statement of comprehensive income. Notably the insurance liabilities are prone to estimates and assumptions. Although these estimates and assumptions are based on management’s best knowledge of current facts, circumstances and, to some extent, future events and actions, actual results ultimately may differ, possibly significantly from those estimates.
For financial statement presentation purposes certain 2011 balances have been reclassified in order to be in conformity with the 2012 presentation. Basis of Consolidation Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies. Subsidiaries are fully consolidated from the date on which control is transferred to the Group until the date that control ceases. The following subsidiaries have been consolidated as of December 31, 2012.
Details of the Company’s subsidiaries and associate as at December 31, 2012 are as follows: Name of subsidiary or associate
Place of incorporation and operation
Proportion of ownership interest
Principal activity
National General Insurance Corporation (NAGICO) N.V NAGICO Insurance Company Ltd. (NICL) NAGICO Aruba N.V. NAGICO Investments Ltd. NAGICO Life N.V. NAGICO Finance B.V. Pasha N.V. Zonoever N.V. NAGICO Reinsurance Company Blue Chip Ltd. NAGICO Road and Claims Services GTM Insurance Company Limited British American Insurance Company N.V. British American Insurance Company (Aruba) N.V. St. Vincent Insurance Ltd. NAGICO Insurance Company Limited, Bahamas NICL General Insurance Company Ltd., Grenada NAGICO (St. Lucia) Limited The Grenadines Insurance Limited
St. Maarten Anguilla Aruba Anguilla St. Maarten St. Maarten St. Maarten St. Maarten Anguilla St. Kitts Aruba Trinidad & Tobago Curacao Aruba St Vincent & the Grenadines Bahamas Grenada St. Lucia St Vincent & the Grenadines
100% 100% 100% thru NAGICO N.V. 100% 100% 100% thru NAGICO N.V. 100% thru NAGICO N.V. 100% thru NAGICO N.V. 100% 100% 100% thru NAGICO N.V. 100% thru NAGICO N.V. 100% 100% thru BAICO N.V. 54.54% thru NICL 100% thru NICL 100% thru NICL 100% thru NICL 54.54% thru St. Vincent Insurance Ltd.
Non-life insurance Non-life insurance Non-life insurance Investments Life insurance Investments Real estate Real estate Inactive Inactive Road assistance service Non-life insurance Life insurance Life insurance Non-life insurance Non-life insurance Non-life insurance Non-life insurance None-trading
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Financial instruments
Classification The Group’s non-derivative financial instruments comprise financial assets at fair value through profit or loss, loans and receivables (including fixed deposits), held to maturity instruments, and trade and other payables.
Held-to-maturity assets If the Company has the intent and ability to hold debt securities to maturity, then such financial assets are classified as held to maturity. Held-to-maturity financial assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, held-to-maturity financial assets are measured at amortized cost using the effective interest method, less any impairment losses. Held-to-maturity financial assets comprise debt securities.
Loans and Receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, and other than those that the Group intends to sell in the short term or that it has designated as at fair value through profit or loss. Receivables arising from insurance contracts are also classified in this category and are reviewed for impairment as part of the impairment review of loans and receivables.
Interest on loans and receivables are included in the statement of comprehensive income and is reported as ‘Investment income’.
Financial assets at fair value through profit or loss This category has two sub-categories: financial assets held for trading and those designated at fair value through profit or loss at inception. A financial asset is classified into the ‘financial assets at fair value through profit or loss’ category at inception if acquired principally for the purpose of selling in the short term, if it forms part of a portfolio of financial assets in which there is evidence of short-term profittaking, or if so designated by management. This includes investments in equities. Financial assets designated as at fair value through profit or loss at inception are those that are: • Held in internal funds to match insurance and investment contracts liabilities that are linked to the changes in fair value of these assets. The designation of these assets to be at fair value through profit or loss eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as ‘an accounting mismatch’) that would otherwise arise from measuring assets or liabilities or recognizing the gains and losses on them on different bases. •
Managed and whose performance is evaluated on a fair value basis. Information about these financial assets is provided internally on a fair
value basis to the Group’s key management personnel. The Group’s investment strategy is to invest in equity and debt securities and to evaluate them with reference to their fair values. Assets that are part of these portfolios are designated upon initial recognition at fair value through profit or loss.
period whether there is objective evidence that a financial asset or group of financial assets is impaired.
Recognition and Measurement Financial assets are initially recognized at fair value plus, in the case of all financial assets not carried at fair value through profit or loss, transaction costs that are directly attributable to their acquisition. Financial assets carried at fair value through profit or loss are initially recognized at fair value, and transaction costs are expensed in the statement of profit or loss. Loans and receivables are carried at amortized cost using the effective interest method. Other non-derivative financial instruments not measured at fair value are measured at amortized cost using the effective interest method, less any impairment losses. Financial assets are derecognized when the rights to receive cash flows from them have expired or where they have been transferred and the Group has also transferred substantially all risks and rewards of ownership.
Impairment of Assets Financial assets carried at amortized cost The Group assesses at each end of the reporting
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Investment securities 2012
2011
27,845,034 33,465,484 61,310,518
18,830,884 35,026,565 53,857,449
27,845,034 31,438,016 59,283,050
18,830,884 33,013,655 51,844,539
1,873,246 154,222 2,027,468 61,310,518
1,874,351 138,559 2,012,910 53,857,449
27,845,034 33,264,807 200,677 61,310,518
18,830,884 34,888,006 138,559 53,857,449
(in U.S. dollars)
Long term investments Short term investments Investments can be broken down into the following categories Investments held to maturity Long term investments - held to maturity Short term investments - held to maturity Other categories of investments Short term investments - loans Short term investments - available for sale
Investments can be broken down into the following categories Long term investments - Level 2 Short term investments - Level 2 Short term investments - listed
Contingent Asset
NICL General Insurance Company Ltd., Grenada As at December 31, 2012 there is a loss of ED 297,712 that will attract utilizable tax losses. Given the business started operations in January 11 2012 management has assumed that the recoverability of the tax losses is still in doubt because a trend in profitable growth is not yet fully established.
Nagico (St. Lucia) Limited As at December 31, 2012 there is a loss of ED 1,983,133 that will attract utilizable tax losses. Given the business started operations in January 11, 2012 management has assumed that the recoverability of the tax losses is still in doubt because a trend in profitable growth is not yet fully established.
Nagico Life As at December 31, 2012 there is a cumulative loss of USD 941,268 that will attract utilizable tax losses. Management has assumed that these losses may not be realized given the fluctuation in profits and losses over the years and as such the losses have not been recognized on the statement of financial position.
Contingencies and commitments Certain pending litigations exist for which the outcome is uncertain at this time and for which no provision has been made. A provision is made where a potential liability is assessed as being probable. Solvency requirement margin for insurance company CBCS requires a life insurance business to have a minimum solvency margin equal to 4% of the technical provision of previous year. The general insurance business is required to maintain a solvency margin as per the requirement of the regulators where the Group entities operate. The Group entities are in compliance with the solvency margin requirements where these entities operate as of and for the year ended December 31, 2012.
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NAGICO DISTRIBUTION NETWORK Anguilla NAGICO Branch Office Carlyn Carty- Acting Manager Fairplay Management Services Quincy Gumbs
Antigua
Brysons Insurance Agency Marjorie Parchment Ruthlyn Herbert
Aruba
Aruba Branch Office Detlef Hooyboer
Bahamas
Bahamas Branch Office Vibert Williams
Bonaire
Dominica
Dominica Branch Office Merle Lawrence
I.F. Rivers Enterprises N.V. Ivan Rivers
French Antilles
St. Kitts
(Martinique/Guadeloupe) Cooper Gay
Grenada Grenada Branch Office Fabian Walthrus
Montserrat Judith Greer & Associates Inc. Judith Greer
Nevis
Nevis Branch Office Laurenn Barry
Saba
Bonaire Branch Office Christopher Hill Johannes William
Saba Branch Office Rudy Zagers
Curacao
Saint Martin
Curacao Branch Office Johannes William British American/ NAGICO Life Koos Oosterwaal
Carmen Suares-Mars
(French Side)
Saint Martin Branch Office Tracy Harris
St. Eustatius
A.R.C. Agency N.V. Arlene Cuvalay
St. Kitts Branch Office Adrian Smith Advantage Capital Management Ltd. Austin Julius
St. Lucia
St. Lucia Branch Office Royron Adams
St. Maarten NAGICO Executive Office
St. Vincent VINSURE Samuel Goodluck
BVI
(Tortola / Virgin Gorda)
Century Insurance Agency Shan Mohamed
Trinidad & Tobago
Trinidad Branch Office Christopher Henriques For a complete overview of NAGICO Agents and Brokers, please visit www.nagico.com
eter St. # 28 C.A. Cannegi St. Maarten Philipsburg, 2.2739 Tel: 1-721.54 2.4476 Fax: 1-721.54 om info@nagico.c nagico.com