AXA Mansard 2018 Annual Report

DCSL Corporate Services Limited

235 Ikorodu Road Abuja Office:
Ilupeju, Lagos Statement Hotel, Plot 1002
1st Avenue, Off Shehu Shagari
Way, Abuja

P. O. Box 965, Marina Tel: +234 9 461 4902
Lagos, Nigeria RC NO. 352393
Tel: +234 9 1271 7817
April 2019 www.dcsl.com.ng
The Chairman
Board of Directors
Axa Mansard Insurance Plc.
Santa Clara Court
Plot 1412, Ahmadu Bello Way
Victoria Island
Lagos

REPORT OF THE EXTERNAL CONSULTANTS ON THE The Board has the responsibility for putting in place adequate
PERFORMANCE OF THE BOARD OF DIRECTORS OF AXA corporate governance structures and practices in the Company
MANSARD INSURANCE PLC. FOR THE YEAR ENDED 31 and for the formulation of policies that will ensure that the
DECEMBER 2018 Company carries on its business in accordance with its Articles
DCSL Corporate Services Limited was engaged by AXA Mansard and Memorandum of Association as well as in conformity
Insurance Plc. to undertake an appraisal of its Board of Directors, with applicable laws, codes and regulations to guarantee the
for the year-ended 31st December 2018. Our appraisal entailed Company’s sustainability. As Consultants, our responsibility is
a review of the Company’s corporate and statutory documents, to draw conclusions on the effectiveness of these structures,
the Minutes of Board and Committee meetings, policies in place policies and processes based on our review of the Board’s activities
and other ancillary documents made available to us. We also and performance during the year-ended 31 December 2018.
administered Questionnaires, Board and Peer Review Surveys Our review of the corporate governance standards and
to the Directors. processes affirm that the Board has substantially complied
The exercise was conducted on a test basis to ascertain the with the provisions of the NAICOM Code, SEC Code, NCCG Code
extent of compliance by the Board, and by extension, the and other relevant corporate governance best practices. The
Company with corporate governance practices, with particular Peer Assessment undertaken indicate that individual Directors
reference to the provisions of the National Insurance Commission performed satisfactorily against the parameters used for the
(NAICOM) Code of Corporate Governance, the Securities and appraisal and remain committed to enhancing the Company’s
Exchange Commission (SEC) Code of Corporate Governance growth. In our opinion, the Board has displayed substantial
2011 (SEC Code), the Nigerian Code of Corporate Governance and admirable commitment to developing and monitoring
2018 (NCCG) and other relevant international best practices. the Company’s strategies and achieving improvement in its
Our mandate is to identify lapses (if any) and where necessary, performance. We also confirm that the Board has made concerted
recommend possible remedies in respect of the lapses observed. effort to comply with the recommendations emanating from
Benchmarking against the NCCG Code is a proactive measure previous evaluation exercises.
as reporting compliance with the Code becomes effective Details of other key findings are contained in our Report.
for entities whose accounting reference periods end after 1st Yours faithfully,
January 2020. For: DCSL Corporate Services Ltd
The review covered the following seven key corporate governance
themes: Bisi Adeyemi
1. Board Structure and Composition Managing Director
2. Strategy and Planning
3. Board Operations and Effectiveness
4. Measuring and Monitoring of Performance
5. Risk Management and Compliance
6. Corporate Citizenship; and
7. Transparency and Disclosure.

Directors: l Abel Ajayi (Chairman) l Obi Ogbechi l Adeniyi Obe l Adebisi Adeyemi (Managing Director)

KPMG Professional Services Telephone 234 (1) 271 8955
KPMG Tower 234 (1) 271 8599
Bishop Aboyade Cole Street
Victoria Island Lagos Internet www.kpmg.com/ng
PMB 40014, Falomo
Lagos

Independent Auditor’s
Report

To the Shareholders of AXA Mansard Insurance PLC

Report on the Audit of the Consolidated and Separate Financial Statements

Opinion

We have audited the consolidated and separate financial statements of AXA Mansard Insurance Plc (“the Company”) and its
subsidiaries (together, “the Group”), which comprise the consolidated and separate statements of financial position as at 31
December 2018, the consolidated and separate statements of comprehensive income, consolidated and separate statements
of changes in equity and consolidated and separate statements of cash flows for the year then ended, and notes, comprising
significant accounting policies and other explanatory information, as set out on pages 56 to 169.
In our opinion, the accompanying consolidated and separate financial statements give a true and fair view of the consolidated
and separate financial position of the Company and its subsidiaries as at 31 December 2018, and of its consolidated and separate
financial performance and its consolidated and separate cash flows for the year then ended in accordance with International
Financial Reporting Standards (IFRSs) and in the manner required by the Companies and Allied Matters Act, Cap C.20, Laws of the
Federation of Nigeria, 2004 and the Financial Reporting Council of Nigeria Act, 2011 the Insurance Act 2003 and relevant National
Insurance Commission of Nigeria (“NAICOM”) Guidelines and Circulars.

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards
are further described in the Auditor’s Responsibilities for the Audit of the consolidated and separate Financial Statements section
of our report. We are independent of the Group and Company in accordance with the International Ethics Standards Board for
Accountants’ Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to
our audit of the consolidated and separate financial statements in Nigeria and we have fulfilled our other ethical responsibilities
in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated
and separate financial statements of the current period. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Valuation of insurance contract liabilities

The Company has significant life and non-life insurance contract liabilities. The valuation of insurance contract liabilities involves
high estimation uncertainties and significant judgment over uncertain future outcomes.
Provisions for reported claims are based on historical experience. However, the eventual liabilities may differ from the estimated
amounts. Furthermore, the estimated liability for claims that have occurred but are yet to be reported in respect of non-life
insurance contracts involve economic assumptions about inputs such as inflation rate, ultimate loss ratio and discount rates;
hence the eventual outcome is uncertain.

KPMG Professional Services, a Partnership established under Partners: Adekunle A. Elebute Adegoke A. Oyelami Adetola P. Adeyemi
Nigeria law, is a member of KPMG International Coorperative Adebisi O. Lamikanra Ajibola O. Olomola Ayobami L. Salami Ayodele H. Othihiwa
("KPMG International"), a swiss entity. All rights reserved. Adewale K. Ajayi Chibuzor N. Anyanechi Ehile A. Aibangbee Goodluck C. Obi
Registered in Nigeria No BN 986925 Ayodele A. Soyinka Ijeoma T. Emezie-Ezigbo Joseph O. Tegbe Kabir O. Okunlola
Ibitomi M. Adepoju Mohammed M. Adama Nneka C. Eluma Oguntayo I. Ogungbenro
Lawrence C. Amadi Oladapo R. Okubadejo Oladimeji I. Salaudeen Olanike I. James
Olabimpe S. Afolabi Olusegun A. Sowande Olutoyin I. Ogunlowo Oluwafemi O. Awotoye
Olumide O. Olayinka Temitope A. Onitiri Tolulope A. Odukale Victor U. Onyenkpa
Oluwatoyin A. Gbagi

52 AXA Mansard Annual Report & Accounts 2018

The actuarial assumptions used in the valuation of life insurance contract liabilities are judgmental, particularly with respect to
mortality rates and discount rates. The level of complexity, the assumptions and judgment involved in estimating these amounts
make insurance contract liabilities a matter of significance to our audit.
The Group’s accounting policy on valuation of insurance contract liabilities and related disclosures are shown in notes 2.2(j)
(accounting policy), note 2.3(b) (critical accounting estimates and judgments) and note 20 (insurance contract liabilities).

How the matter was addressed in our audit

Our audit procedures included the following:
• We evaluated the design, implementation and operating effectiveness of key controls instituted by the Company which

includes management review of data used for the valuation of insurance contract liabilities.
• We tested the accuracy and completeness of the underlying data used in actuarial valuations by checking the claims paid,

outstanding claims and underwriting data.
• We used our actuarial specialists to challenge the appropriateness of the methodology used by the Company’s external

actuary in calculating the insurance contract liabilities. This involved an assessment of the appropriateness the valuation
methods, taking into account available industry data and specific product features of the Company.
• With the assistance of our actuarial specialist, we evaluated the reasonableness of the actuarial assumptions used by the
Company’s external actuary including assumptions on the projected cash flows, basic chain ladder runoff period, inflation
rate, mortality and discount rate by comparing them to Company specific data and market experience.
• We considered the Company’s valuation methodology and assumptions for consistency between reporting periods as well
as indicators of possible management bias. We were also assisted by our actuarial specialists in this regard.

Goodwill impairment assessment

Management’s assessment of impairment of the Group’s goodwill through the value in use model relies on significant judgments.
These judgments include the determination of cash generating units (CGUs), forecast of cash flows, discount rates applied and
assumptions underlying the forecast growth and terminal growth rates.
The judgments made in the model and in the assumptions have a significant impact on the valuation of the cash generating units.
The Group’s accounting policy on goodwill and related disclosures are shown in notes 2.2(g) (ii) (accounting policy), note 2.3(d)
(critical accounting estimates and judgments) and note 17(c) (goodwill).

How the matter was addressed in our audit

Our audit procedures included the following:
• We assessed the allocation of goodwill to the CGUs in relation to the requirements of the relevant accounting standards, and

consideration of how the business is monitored and managed.
• We challenged the underlying assumptions for the forecast cash flows, the discount rates applied to the cash flows and the

terminal growth rates used in determining the terminal values in the context of the historical experience of the CGUs as well
as our knowledge of the market and wider economic environment.
• We considered the adequacy of the Group’s disclosures about the key assumptions, giving due consideration to the requirements
of the relevant accounting standard.

Valuation of Investment Property

The valuation of the Group’s investment property is a key audit matter due to the significance of the balance and judgment
required in assessing the key valuation assumptions and methodology.
The investment property is valued annually using the income capitalization methodology. Key assumptions in the valuation
methodology include capitalization rate, vacancy rate, estimated expenses and future rental income.
The Group’s accounting policy on investment property and related disclosures are shown in notes 2.2(f) (accounting policy), note
2.3(e) (critical accounting estimates and judgments) and note 15 (investment property).

AXA Mansard Annual Report & Accounts 2018 53

How the matter was addressed in our audit
Our audit procedures included the following:
• We assessed the appropriateness of the valuation methodology adopted by giving due consideration to the requirements

of the relevant accounting standards and the Group accounting policies.
• We challenged key assumptions applied in the valuation of the property, including the capitalization rates, vacancy rate,

estimated expenses and future rental income, by comparing the assumptions to publicly available sales information, historical
data, market experience and property specific attributes such as location and asset condition.

Other Information

The Directors are responsible for the other information which comprises the Corporate Information, Corporate addresses, Vision,
Mission and values, 2018 Corporate Social Responsibility initiatives, Complaints and feedback, Sustainability report, Corporate
governance report, Enterprise Risk management, Management discussion and analysis, Report on Internal Control and Risk
Management System, Directors’ report, Statement of directors’ responsibilities, Report of the audit and compliance committee,
General business revenue account, Life business revenue account, Annuity disclosures, Five year financial highlights and Value
added statement (but does not include the financial statements and our auditor’s report thereon), which we obtained prior to
the date of this auditor’s report, and the Chairman’s statement and report from the Executives which is expected to be made
available to us after that date.
Our opinion on the consolidated and separate financial statements does not cover the other information and we do not express
any form of assurance conclusion thereon.
In connection with our audit of the consolidated and separate financial statements, our responsibility is to read the other information
identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent
with the consolidated and separate financial statements or our knowledge obtained in the audit, or otherwise appears to be
materially misstated. When we read the report, if we conclude that there is a material misstatement therein, we are required to
communicate the matter to the audit committee

Responsibilities of the Directors for the Consolidated and separate Financial Statements

The Directors are responsible for the preparation of consolidated and separate financial statements that give a true and fair view
in accordance with IFRSs and in the manner required by the Companies and Allied Matters Act, Cap C.20, Laws of the Federation of
Nigeria, 2004 and the Financial Reporting Council of Nigeria Act, 2011, the Insurance Act 2003 and relevant NAICOM Guidelines and
Circulars, and for such internal control as the directors determine is necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated and separate financial statements, the directors are responsible for assessing the Group and
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the Group and Company or to cease operations, or
have no realistic alternative but to do so.

Auditor’s Responsibilities for the Audit of the Consolidated and separate Financial
Statements

Our objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout
the audit. We also:
• Identify and assess the risks of material misstatement of the consolidated and separate financial statements, whether due

to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient
and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is
higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations,

54 AXA Mansard Annual Report & Accounts 2018

or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate

in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group (and Company)’s
internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by the directors.
• Conclude on the appropriateness of directors’ use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group
(and Company)’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to
draw attention in our auditor’s report to the related disclosures in the consolidated and separate financial statements or, if
such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the
date of our auditor’s report. However, future events or conditions may cause the Group (and Company) to cease to continue
as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated and separate financial statements, including
the disclosures, and whether the consolidated and separate financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within
the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision
and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with the audit committee regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the audit committee a statement that we have complied with relevant ethical requirements regarding independence,
and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence,
and where applicable, related safeguards.
From the matters communicated with the audit committee, we determine those matters that were of most significance in the
audit of the consolidated and separate financial statements of the current period and are therefore the key audit matters. We
describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when,
in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements

Compliance with the requirements of Schedule 6 of the Companies and Allied Matters Act, Cap C.20, Laws of the Federation of
Nigeria, 2004 and Section 28(2) of the Insurance Act 2003.
In our opinion, proper books of account have been kept by the Company, so far as appears from our examination of those books
and the Company’s statement of financial position and statement of comprehensive income are in agreement with the books
of account.

Penalties

The Company paid penalties in respect of contravention of the requirements of the National Insurance Commission of Nigeria’s
Operational Guidelines during the year ended 31 December 2018. Details of penalties paid are disclosed in note 48 to the financial
statements.Lagos, Nigeria

Oluwafemi O. Awotoye, FCA 55
FRC/2013/ICAN/00000001182
For: KPMG Professional Services
Chartered Accountants
26 March 2019
Lagos, Nigeria

AXA Mansard Annual Report & Accounts 2018

CFionnasnocliiadlaPtoedsiSttioante ment of

As at 31 December 2018 (All amounts in thousands of Naira unless otherwise stated)

Notes Group 31-De c-17 Parent 31-De c-17
31-Dec-18 31-Dec-18
8 5,333,318
ASSETS 5,238,705 4,218,348 4,779,865
Cash and cash equivalents 9.1 -
Investment securities: 9.2 3,266,048 22,691,784 3,266,048 -
– Fair value through profit or loss 9.3 22,313,670 3,272,242 17,888,088 17,677,702
– Available-for-sale assets 10 1,961,018 3,073,457 3,272,242
Financial assets designated at fair value 11 3,073,457 10,165,983
Trade receivables 12 3,615,646 572,586 251,383
Reinsurance assets 13 12,549,017 494,584 12,504,524 10,115,242
Deferred acquisition cost 14 909,097
Other receivables 15 436,772 3,843,254 415,213 481,077
Loans and receivables 16 1,507,844 14,072,384 779,072 649,146
Investment properties 17 323,287 7,562,215
Investment in subsidiaries 18 311,449 - 3,040,000
Intangible assets 19 17,525,962 1,648,896 4,997,374 -
Property and equipment 1,672,516 190,086 3,919,573
Statutory deposit 20 - 1,667,654
TOTAL ASSETS 1,588,175 500,000 500,000 218,772
21.1 1,843,362 66,565,076 1,437,960
LIABILITIES 21.2 53,435,737
Insurance liabilities 500,000 500,000
Investment contract liabilities: 22 73,770,107
– At amortised cost 23 50,865,177
– Liabilities designated at fair value 24
Trade payables 25 22,538,993 21,167,952 16,964,677 17,824,172
Other liabilities 26
3,691,424 3,108,070 3,691,424 3,108,070
Current income tax liabilities 27.1 3,073,457 3,272,242 3,073,457 3,272,242
Borrowings 27.2 11,180,754 8,524,336 11,108,223 8,511,603
Deferred tax liability 27.3 2,658,787 2,333,758 1,572,156 1,358,567
TOTAL LIABILITIES 27.4
27.5 773,819 444,688 257,967 234,959
EQUITY 27.6 3,493,234 3,295,031 - -
Share capital 27.7 - -
Share premium 837,061 656,407
Contingency reserve 28 48,247,529 42,802,484 36,667,904 34,309,613
Other reserves
Treasury shares 5,250,000 5,250,000 5,250,000 5,250,000
Fair value reserves 4,443,453 4,443,453 4,443,453 4,443,453
Retained earnings 4,139,090 3,615,451 4,139,090 3,615,451
2,663,582 2,625,479 2,634,904 2,595,103
SHAREHOLDERS' FUNDS (304,924) (304,924) (304,924) (304,924)
(550,226) (549,906)
Total equity attributable to the owners of the parent 5,262,379 426,131 1,155,216 268,842
Non-controlling interest in equity 4,229,226 687,639
TOTAL EQUITY 20,903,354 16,767,833
TOTAL LIABILITIES AND EQUITY 20,284,816 16,555,564
Signed on behalf of the Board of Directors on 26 March 2019 20,903,354 16,767,833
4,619,224 20,284,816 - 16,555,564
3,477,776 -
25,522,578 16,767,833
73,770,107 23,762,592 53,435,737 16,555,564
66,565,076 50,865,177

Mrs. Ngozi Ola-Israel Mr. Adekunle Ahmed Mr. Olusola Adeeyo
FRC/2017/ANAN/00000017349 FRC/2017/CIIN/00000017019 FRC/2013/NIM/00000001919
Chief Financial Officer Chief Executive Officer Chairman

56 AXA Mansard Annual Report & Accounts 2018

CCoonmsporleihdeantseidvSetIantceommeen t of

for the year ended 31 December 2018 (All amounts in thousands of Naira unless otherwise stated)

Group Parent
31-Dec-18
Notes 31-De c-17 31-Dec-18 31-De c-17

Continuing operations 30 33,923,949 26,824,830 23,026,817 20,602,218
Gross written premium 30 32,701,781 26,198,134 23,296,043 21,248,558
Gross premium income 30 (13,001,500) (12,409,890) (12,879,257) (12,292,959)
Re-insurance expenses 30 19,700,281 13,788,244 10,416,786 8,955,599
Net premium income 31 1,781,955 1,545,494
Fee and commission on insurance contracts 21,482,236 15,333,738 1,781,955 1,545,494
Net underwriting income 32 12,198,741 10,501,093
Claims: 32 (16,468,206) (15,849,634)
Claims expenses (gross) 33 4,337,629 6,311,560 (8,748,745) (11,487,731)
Claims expenses recovered from reinsurers 20.3 4,311,699 6,295,447
Underwriting expenses 20.4 (3,355,411) (2,936,829) (2,759,527)
Changes in individual life reserves (234,893) (9,363) (3,030,407) (9,363)
Changes in annuity reserves 34 177,000 (234,893) (265,049)
Net underwriting expenses 35 (265,049) 177,000
Total underwriting profit 15 (15,543,881) (12,749,315) (8,226,223)
Investment income 36 5,938,355 (7,525,346) 2,274,870
Net gains/(losses) on financial instruments 37 5,089,463 2,584,423 4,673,395 2,906,647
Net gains on investment property 202,913 5,119,126 3,226,956 691,241
Profit on investment contracts 38 233,074 (219,783) 57,278 -
Other income 39 298,958 2,055,384 - 249,899
Total investment income 40 465,771 298,958 528,577
Expenses for marketing and administration 14 6,290,179 249,899 445,003 4,376,364
Employee benefit expense 10.1 173,720 4,028,195 (1,388,125)
Other operating expenses (1,835,353) 7,378,346 (1,819,330)
(Impairment)/writeback of other assets 41 (2,590,264) (1,692,052) (1,533,836) (2,024,132)
(Impairment)/writeback of premium receivables (2,835,711) (2,399,937) (1,751,534) 5,930
Results of operating activities 42 (1,098,632) (2,280,103) (2,479,161) 20,578
Finance cost (1,098,632) 1,446,155
Profit before tax 28 (44,644) 5,930 -
Income tax expense 3,823,930 26,180 (10,164) 1,446,155
Profit for the year (443,857) 3,622,787 1,828,263 (78,334)
Profit attributable to: 3,380,073 (390,687) 1,367,821
Owners of the parent (897,791) 3,232,100 -
Non-controlling interest 2,482,282 (556,991) 1,828,263
2,675,109 (207,047)
Other comprehensive income: 2,204,212 1,621,216
Items that may be subsequently reclassified to the 278,070 1,977,878
profit or loss account: 697,231 1,621,216 1,367,821
Changes in available-for-sale financial assets (net of 2,482,282 - -
taxes) 2,675,109
Items that will not be subsequently reclassified to 1,621,216 1,367,821
profit or loss account
Other comprehensive income for the year 27.6 (976,357) 1,413,078 (818,748) 1,126,772
Total comprehensive income for the year
Attributable to: - - - -
Owners of the parent
Non-controlling interests (976,357) 1,413,078 (818,748) 1,126,772
Total comprehensive income for the year 1,505,925 4,088,187 802,468 2,494,593
Earnings per share:
Basic (kobo) 1,227,855 3,381,730 802,468 2,494,593
Diluted (kobo) 28 278,070 706,457 - -

AXA Mansard Annual Report & Accounts 2018 1,505,925 4,088,187 802,468 2,494,593

43 21.35 19.16 15.71 13.25
43 21.02 18.86 15.46 13.04

57

58 AXA Mansard Annual Report & Accounts 2018 Consolidated Statements of Changes in Equity

(All amounts in thousands of Naira unless otherwise stated)

Year ended 31 December 2018

Group Share Share Contingency Capital Share Treasury Fair value Retained Total Non
Capital premium reserve and other scheme shares reserves earnings 20,284,816 Controlling
In thousands of Naira 5,250,000 statutory reserves 426,131 4,229,226
Balance at 1 January 2018 4,443,453 3,615,451 95,103 (304,924) interest Total equity
re se rve s 3,477,776 23,762,592
2,530,376

Total comprehensive income for the year -- - -- - - 2,204,212 2,204,212 278,070 2,482,282
Profit for the year - -
Transfer to contingency reserves - - 523,639 - - - - (523,639) - -
Transfer to statutory reserves 19,118
Other comprehensive income -- - (1,698) - - - (17,420) (19,118)
Changes in fair value of available-for-sale financial
assets -- - - - - (976,357) - (976,357) (12,950) (989,307)
Total comprehensive income for the year
Transactions with owners, recorded directly in - - 523,639 (1,698) - - (976,357) 1,663,153 1,208,737 284,238 1,492,975
equity
Dividends to equity holders -- - -- - - (630,000) (630,000) - (630,000)
Equity-settled share-based payments expense -- - - 39,801 - - - 39,801 - 39,801
Additional subsidiary investment with NCI -- - -- - --- 857,210 857,210
Total transactions with owners of equity -- - - 39,801 - - (630,000) (590,199) 857,210 267,011

Balance at 31 December 2018 5,250,000 4,443,453 4,139,090 2,528,678 134,904 (304,924) (550,226) 5,262,379 20,903,354 4,619,224 25,522,578

AXA Mansard Annual Report & Accounts 2018 Consolidated Statements of Changes in Equity (cont’d)
(All amounts in thousands of Naira unless otherwise stated)

Year ended 31 December 2017 Share Share Contingency Capital Share Treasury Fair value Retained Total Non Total
Capital premium reserve and other scheme shares reserves earnings 17,409,998 Controlling equity
Group 5,250,000 4,443,453 statutory reserves (986,947) 3,221,949 20,186,002
3,173,900 (304,924) interest
Balance at 1 January 2017 reserves 93,900 2,776,004
2,518,667

Total comprehensive income for the year -
Profit for the year
Transfer to contingency reserves -- - -- - - 1,977,877 1,977,877 697,231 2,675,108
Transfer to statutory reserves
Other comprehensive income - - 441,551 - - - - (441,551) -- -
Changes in fair value of available-for-sale financial
assets -- - 11,709 - - - (7,025) 4,684 (4,684) -
Total comprehensive income for the year
Transactions with owners, recorded directly in --
equity
Dividends to equity holders -- - -- 1,413,078 - 1,413,078 9,225 1,422,303
Equity- settled share-based payments expense
Total transactions with owners of equity - - 441,551 11,709 - - 1,413,078 1,529,301 3,395,639 701,772 4,097,411
Changes in ownership interest
Acquisition of subsidiary with NCI -- - -- - - (522,024) (522,024) - (522,024)
Total changes in ownership interests -- - - 1,203 - - - 1,203 - 1,203
-- - - 1,203 - - (522,024) (520,821) - (520,821)

-- - -- - --- --
-- - -- - --- --

Balance at 31 December 2017 5,250,000 4,443,453 3,615,451 2,530,376 95,103 (304,924) 426,131 4,229,226 20,284,816 3,477,776 23,762,592

59

60 AXA Mansard Annual Report & Accounts 2018 Statement of Changes in Equity

(All amounts in thousands of Naira unless otherwise stated)
Year ended 31 December 2018

Parent Share Share Contingency Capital Share Treasury Fair value Retained Total
Capital premium reserve reserves scheme shares reserves earnings 16,555,564
In thousands of Naira 5,250,000 4,443,453 2,500,000 reserve 268,842 687,639
Balance at 1 January 2018 3,615,451 95,103 (304,924) 1,621,216
Total comprehensive income for the year 1,621,216 -
Profit for the year -- -- -- - (523,639)
Transfer to contingency reserves -- - (818,748)
Other comprehensive income - - 523,639 - - 802,468
Changes in fair value of available-for-sale financial 1,097,577
assets -- -- - - (818,748)
Total comprehensive income for the year - - (818,748)
Transactions with owners, recorded directly in - - 523,639 -
equity
Contributions by and distributions to owners -- -- - - - (630,000) (630,000)
Dividends to equity holders -- -- 39,801 - - - 39,801
Equity- settled share-based expense for the year -- -- 39,801 - -
Total transactions with owners (630,000) (590,199)
5,250,000 4,443,453 4,139,090 2,500,000 134,904 (304,924) (549,906)
Balance at 31 December 2018 1,155,216 16,767,833

AXA Mansard Annual Report & Accounts 2018 Statement of Changes in Equity (cont’d)
(All amounts in thousands of Naira unless otherwise stated)

Year ended 31 December 2017
Parent

Balance at 1 January 2017 Share Share Contingency Other Share Treasury Fair value Retained Total
Total comprehensive income for the year Capital premium reserve reserves scheme shares reserves earnings
Profit for the year 5,250,000 4,443,453 2,500,000 reserve (857,930) 14,581,792
Transfer to contingency reserves 3,173,900 (304,924) 283,393
Other comprehensive income - - 93,900 1,367,821
Change in fair value of available-for-sale financial assets - -- - -- 1,367,821 -
Total comprehensive income for the year - - 441,551 - - -- (441,551) -
Transactions with owners, recorded directly in - -- - - --
equity - -- - - 1,126,772 - 1,126,772
Equity- settled share-based transactions - 441,551 - - 1,126,772 - 2,494,593
Dividends to equity holders - - - 926,270
Transfer of vested portion of equity settled share based - - 1,203
payment to retained earnings - -- - 1,203 - - - (522,024)
Total transactions with owners -- - - - (522,024)
- -- - - - - -
-
-- 1,203 - - (520,821)
(522,024)
Balance at 31 December 2017 5,250,000 4,443,453 3,615,451 2,500,000 95,103 (304,924) 268,842 16,555,564
687,639

61

CASHFLOW STATEMENT

for the year ended 31 December 2018

In thousands of Naira Notes Group Parent
Cash flows from operating activities 31-Dec-2018 31-Dec-2017 31-Dec-2018 31-Dec-2017

Cash premium received 21.1 & 21.2 27,964,659 25,680,844 18,400,952 20,628,750
Cash paid as reinsurance premium 21.1 & 21.2 (11,885,750) (12,585,884) (11,763,507) (12,468,953)
Fee income received
Cash received on investment contract liabilities 32 1,804,619 1,545,495 1,804,619 1,545,495
Cash paid to investment contract holders 11f 1,481,715 2,139,664 1,481,715 2,139,218
Claims paid 10.2a (1,564,391) (1,641,481) (1,564,391) (1,641,481)
Cash received from reinsurers on recoveries for claims paid 33 (16,412,022) (10,016,114) (9,396,907) (6,325,575)
Cash received from coinsurers on recoveries and claims paid 3,154,617 3,154,617
Underwriting expenses paid 11 295,258 277,419
Employee benefits paid 22 324,389 1,810,749 324,389 1,810,749
Rent received (3,413,223) (3,036,107) (3,096,271) (2,852,863)
Other operating expenses paid 24 (2,395,418) (2,236,950) (1,595,529) (1,683,408)
Reinsurance premium paid in advance 1,247,540
Premium received in advance 937,800 (5,587,578) - -
Changes in working capital (4,419,910) (3,734,011) (4,351,934)
Income tax paid (1,833,795) - (1,833,795)
Net cash from operating activities 4,424,590 -
Cash flows from investing activities 5,694,996 2,040,025 5,694,996 4,424,590
Purchases of property, plant and equipment (561,714) (276,827) (2,123,123) 1,502,007
Dividend received (383,027) 1,763,198 (228,752)
Investment income received (944,741) (184,039) 1,273,255
Purchase of intangible assets (2,307,162)
Proceeds from the disposal of property and equipment
Purchase of fair value through profit or loss financial assets 18 (615,113) (358,902) (556,130) (298,496)
Sale of available-for-sale financial assets 523,049 354,307 1,268,370 594,954
Purchase of available-for-sale financial assets 34 1,957,126
Increase in loans and receivables 17 2,756,755 2,360,495 1,801,394
Repayment of loans and receivables 18 (33,695) (29,066) (28,025) (25,916)
Proceeds from disposal of loans and receivables - debt 9.1a 22,723 25,257 22,206 24,848
Proceeds from disposal of financial assets designated at fair value- 9.2c - -
Convertible debt 9.2c (3,251,303) (3,251,303)
Net cash used in investing activities 14d 66,942,582 25,252,237 54,612,453 20,758,811
Cash flows from financing activities 14a &14d (64,078,404) (54,555,665) (20,451,511)
Dividend paid (25,319,511) (1,968,660)
Interest and principal repayment on borrowings (85,886) (556,604) (69,436)
Borrowed funds received 48,358 63,358 2,847,370 240,491
Net cash used in financing activities - 460,384 309,752
Net increase/decrease in cash and cash equivalents - 401,194 - 164,887
Cash and cash equivalent at beginning of year -
Effect of exchange rate changes on cash and cash equivalent 1,150,553
Cash and cash equivalent at end of year 2,229,066 2,653,149 2,246,965

(630,000) (522,024) (630,000) (522,024)
25 (4,174,439) (2,093,075) - -
25 3,447,605 - -
-
(1,356,834) (2,615,099) (630,000) (522,024)
(690,197) 1,901,784
(72,509) 1,801,248 4,779,865 2,878,081
8 5,174,283 3,388,593
128,680 -
136,931 (15,558) 4,218,348 4,779,865
8 5,238,705 5,174,283

62 AXA Mansard Annual Report & Accounts 2018

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2018

1 General information National Insurance Commission (NAICOM) consolidated and separate financial
guidelines and circulars. statements are described in note 2.3.
Reporting entity The consolidated financial statements
comprises the consolidated statement of 2.1.1 Changes in
AXAMansardInsuranceplc(‘theCompany’ comprehensive income, the consolidated accounting policy
or ‘the parent’) and its subsidiaries statement of financial position, the and disclosures
(together ‘the Group’) underwrite life consolidated statements of changes
and non-life insurance contracts. The in equity, the consolidated statement (a) Standards and interpretations
Group also issues a diversified portfolio of cash flows and the notes. effective during the reporting
of investment contracts to provide its year
customers with asset management (A) Basis of measurement Amendments to the following standard
solutions for their savings and retirement became effective in the annual period
needs as well as provide pension These consolidatedandseparate financial starting from 1st January, 2018. The new
administration and management services statements have been prepared on reporting requirements as a result of
to its customers. All these products are the historical cost basis except for the the amendments and/or clarifications
offered to both domestic and foreign following: have been evaluated and their impact
markets. The Group does business in „„ n on-derivative financial instruments or otherwise are noted below:
Nigeria and employs about 299 people.
The Company is a public limited company designated at fair value through IFRS 15: Revenue from
incorporated and domiciled in Nigeria. profit or loss. Contracts with
The address of its registered office is at „„ available-for-sale financial assets Customers
‘Santa Clara Court, Plot 1412, Ahmadu are measured at fair value.
Bello Way Victoria Island, Lagos, Nigeria. „„ investment property is measured In May 2014, the IASB issued IFRS 15
The Company is listed on the Nigerian at fair value. RevenuefromContractswithCustomers,
Stock Exchange. The consolidated „„ i nsurance liabilities measured at effective for periods beginning on
financial statements were authorised present value of future cashflows. 1 January 2018 with early adoption
for issue by the board of directors on „„ share based payment at fair value permitted. This new standard will
26 March 2019. or an approximation of fair value replace IAS 18 which covers contracts
allowed by the relevant standards for goods and services and IAS 11
2 Summary of signiFIcant „„ i nvestment contract liabilities at fair which covers construction contracts.
accounting policies value. IFRS 15 defines principles for recognising
revenue and will be applicable to all
2.1 Basis of presentation (B) Use of estimates and contracts with customers. However,
and compliance with judgements insurance contracts, interest and
IFRS fee income intergral to financial
The preparation of the consolidated and instruments and rental income (leases)
These financial statements have separatefinancialstatementsinconformity will continue to fall outside the scope
been prepared in accordance with with IFRS requires management to make of IFRS 15 and will be regulated by the
the International Financial Reporting judgements, estimates and assumptions other applicable standards (e.g. IFRS 4:
Standards (IFRS) and IFRS Interpretations that affect the application of policies and Insurance contracts, IFRS 9: Financial
Committee (IFRIC) Interpretations reported amounts of assets and liabilities, Instruments and IFRS 16: Leases).
applicable to companies reporting under income and expenses. Actual results The new standard is based on the
IFRS. These financial statements are also may differ from these estimates. principle that revenue is recognised
in compliance with Financial Reporting Information about significant areas of when control of a good or service
Council of Nigeria Act, Companies estimation uncertainties and critical transfers to a customer – so the notion
and Allied Matters Act of Nigeria, the judgements in applying accounting of control replaces the existing notion
Insurance Act of Nigeria and relevant policies that have the most significant of risks and rewards.
effect on the amounts recognised in the Revenue under IFRS 15 will need to
be recognised as goods and services
AXA Mansard Annual Report & Accounts 2018 are transferred, to the extent that the
transferror anticipates entitlement

63

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

to goods and services. The following Thisstandarddoesnothaveanysignificant „„ retrospectively for each period
five step model in IFRS 15 is applied in impact and have been adopted by the presented
determining when to recognise revenue, Group.
and at what amount: „„ prospectively to items in scope
a) I dentify the contract(s) with a Amendments to IFRS 2 that are initially recognised on or
- Share Based Payment after the beginning of the reporting
customer. - Classification period in which the interpretation
b) Identifytheperformanceobligations and measurment of is first applied, or
share based payment
in the contract. transactions „„ p rospectively from the beginning of
c) Determine the transaction price. a prior reporting period presented
d) Allocate the transaction price to The amendments made to IFRS 2 in June as comparative information.
2016 clarify the measurement basis for
the performance obligations in cash-settled share-based payments and The Group have chosen to apply this
the contract. the accounting for modifications that interpretation prospectively to items
e) Recognise revenue when (or as) change an award from cash-settled to in scope that are initially recognised on
the entity satisfies a performance equity-settled. They also introduce an or after the beginning of the reporting
obligation. exception to the classification principles period in which the interpretation is
Key changes to current practice are: in IFRS 2. Where an employer is obliged to first applied.
„„ Any bundled goods or services that withhold an amount for the employee’s
are distinct must be separately tax obligation associated with a share- Amendments to IFRS 4:
recognised, and any discounts based payment and pay that amount to Applying IFRS 9 financial
or rebates on the contract price the tax authority, the whole award will instruments with IFRS 4
must generally be allocated to the be treated as if it was equity-settled insurance contracts
separate elements. provided it would have been equity-
„„ Revenue may be recognised earlier settled without the net settlement feature. In September 2016, the IASB published an
than under previous standards if the These amendments do not have any amendment to IFRS 4 which addresses
consideration varies for any reasons material impact and have been adopted the concerns of insurance companies
(such as for incentives, rebates, by the Group. about the different effective dates of
performance fees, royalties, success IFRS 9 Financial instruments and the
of an outcome etc) – minimum Interpretation 22 forthcoming new insurance contracts
amounts must be recognised if they Foreign Currency standard; IFRS 17. The amendment
are not at significant risk of reversal. Transactions and Advance provides two different solutions for
„„ The point at which revenue is Consideration insurance companies: a temporary
able to be recognised may shift: exemption from IFRS 9 (i.e. the ‘deferral
some revenue which is currently The interpretation clarifies how to approach’) for entities that meet specific
recognised at a point in time at the determine the date of transaction for requirements (applied at the reporting
end of a contract may have to be the exchange rate to be used on initial entity level), and the ‘overlay approach’.
recognised over the contract term recognition of a related asset, expense Both approaches are optional. Effective
and vice versa. or income where an entity pays or date is 1 January 2018 or when the entity
„„ There are new specific rules on receives consideration in advance for first applies IFRS 9.
licences, warranties, non-refundable foreign currency-denominated contracts.
upfront fees and, consignment For a single payment or receipt, the IFRS 4 (including the amendments) will
arrangements, to name a few. date of the transaction should be be superseded by the forthcoming new
„„ T he standard also specifies a the date on which the entity initially insurance contracts standard. Accordingly,
comprehensive set of disclosure recognises the non-monetary asset both the temporary exemption and
requirements regarding the nature, or liability arising from the advance the ‘overlay approach’ are expected to
extent and timing as well as any consideration (the prepayment or cease to be applicable when the new
uncertainty of revenue and the deferred income/contract liability). insurance standards becomes effective.
corresponding cash flows with If there are multiple payments or
customers. receipts for one item, a date of The Group is eligible to apply IFRS 9
transaction should be determined as deferral approach since IFRS 9 has
above for each payment or receipt. not been previously applied by the
Entities can choose to apply the Group and the activities of the Group
interpretation: are predominantly connected with
insurance. To determine if the Group’s
activities are predominantly connected
with insurance, we have assessed the

64 AXA Mansard Annual Report & Accounts 2018

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

ratio of the Group’s liabilities connected with insurance - including investment contracts measured at fair value through profit
or loss (FVTPL) - compared with it’s total liability. See assessment below:

LIABILITIES ADMISSIBLE ADMISSIBLE FOR
FOR AS REPORTED PREDOMINANCE
Trade payables
Current income tax liability AS REPORTED PREDOMINANCE (A) TEST (B)
Insurance liabilities (A) TEST (B)
Investment contract liabilities:
- At amortised cost Group Parent
- Financial liabilities designated at fair value
Other liabilities: 31-Dec-15 31-Dec-15 31-Dec-15 31-Dec-15
- Deferred income
- Premium received in advance 1,641,069 1,641,069 1,639,272 1,639,272
- Due to investment brokers
- Creditors and accruals 202,654 202,654 144,206 144,206
- Unclaimed dividend
- Cash settled share based payment liability 12,916,775 12,916,775 12,293,840 12,293,840
Borrowings
Deferred tax liability 2,656,066 2,656,066 2,656,066 2,656,066
7,657,492 7,657,492 4,130,895 4,130,895

970,349 453,696 453,696 453,696
559,165 559,165 559,165 559,165
11,479 11,409
570,138 - 421,229 -
65,049 - 65,049 -
22,725 - 22,725 -
4,028,230 - -
286,941 - - -
31,588,132 - - -
26,086,917 22,397,552 21,877,140
Score = (B/A)%
82.6% 97.7%

Given a score of 82.6% for the Group a) Its activities are predominantly of the activities from which the
(Parent: 97.7%), we assessed whether the connectedwithinsurancecontracts; Group earns income and incur
Group engages in a significant activity expenses are insurance-related
unconnected with insurance. Based on b) As at 31 December 2015, which is
our assessment, we concluded that the the reporting date that immediately Fair value disclosures
Group does not engage in a significant precedes 1 April 2016, the carrying
activity unconnected with insurance amount of its liabilities arising a) Financial assets with contractual
since majority of the activities from from insurance contracts was terms that give rise to cash flows
which the Group earns income and =N=26.09b (Parent: =N=21.88b) which that are solely payments of principal
incur expenses are insurance-related. was 82.6% (Parent: 97.7%) of and interest (SPPI)
The Group has elected to apply the the total carrying amount of
temporary exemption from IFRS 9 all its liabilities as at that date. The Group financial assets with
(deferral approach) and qualifies for c) The company’s activities have contractual terms that give rise to
the temporary exemption based on remained the same and are cash flows that are solely payments of
the following; predominantly connected with principal and interest on the principal
insurance contracts. The majority amount outstanding are as follows:

AXA Mansard Annual Report & Accounts 2018 65

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

Other
financial
instruments
Loan and at amortised Carrying
Group receivables cost amount Fair value
31 Dec 2018
5,238,705 - 5,238,705 5,238,705
Cash and cash equivalent 311,449 - 311,449 311,449
Loans and receivables -
Trade receivables 3,615,646 - 3,615,646 3,615,646
Reinsurance assets (less prepaid reinsurance, IBNR & Reserves) 6,943,206 - 6,943,206 6,943,206
Other receivables (less prepayment) 500,000
Statutory deposit 820,817 500,000 820,817 820,817
- 500,000 500,000
17,429,823 17,429,823
16,929,823

Other
financial
instruments
Loan and at amortised Carrying
Parent receivables cost amount Fair value
31 Dec 2018
Cash and cash equivalent 4,218,348 - 4,218,348 4,218,348
Loans and receivables 323,287 - 323,287 323,287
Trade receivables 572,586 - 572,586 572,586
Reinsurance assets (less prepaid reinsurance, IBNR & Reserves) -
Other receivables (less prepayment) 6,936,148 - 6,936,148 6,936,148
Statutory deposit 274,078 500,000 274,078 274,078
- 500,000 500,000 500,000

12,324,447 12,824,447 12,824,447

The financialassetslistedabove are short financial assets have been disclosed in These are financial assets that meet the
term in nature and are receivable within note 4.3.1 of this financial statements. definition of financial assets designated
12 months from the end of the reporting b) Financial assets with contractual at fair value through profit or loss in line
period and as such the carrying amount of with IFRS 9; or that are managed and
these financial assets are deemed to be a terms that do not give rise to cash whose performance is evaluated on a
reasonable approximation of its fair value. flows that are solely payments of fair value basis. They are listed as follows:
The credit risk rating grades of these principal and interest.

Group Available for Carrying Fair value
sale amount
31 Dec 2018
Quoted equity securities 144,385 144,385 144,385
Investment funds 4,873,442 4,873,442 4,873,442
5,017,827 5,017,827 5,017,827
Parent
Available for Carrying Fair value
31 Dec 2018 sale amount
Quoted equity securities
Investment funds 110,923 110,923 110,923
3,336,899 3,336,899 3,336,899
3,447,822 3,447,822 3,447,822

66 AXA Mansard Annual Report & Accounts 2018

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

c) The table below provides an estimation of the expected impacts of IFRS 9 adoption on the classification and measurement

of financial assets as at 31 December 2018 and 1 January 2018.

FINANCIAL ASSETS IAS 39 classification IFRS 9 Group Parent
31 December 2018 Loans and receivables classification & Carrying Amount Carrying
Cash and cash equivalent Amount
Investment Securities: FVTPL measurement 1 January 2018 1 January 2018
– Fair value through profit or loss Amortised cost 5,238,705 4,218,348
– Available-for-sale assets Available for sale
Available for sale FVTPL 3,266,048 3,266,048
Government & corporate bonds Available for sale
Tenored deposits with maturity above 90 days Available for sale FVTOCI 10,879,158 9,809,282
Treasury bills Available for sale FVTOCI 515,184 459,119
Unquoted equity securities Available for sale FVTOCI
Quoted equity securities FVTOCI 5,787,634 4,057,998
Investment funds FVTPL FVTPL 113,867 113,867
Financial assets designated at fair value Loans and receivables FVTPL 144,385 110,923
Trade receivables Loans and receivables FVTPL
Reinsurance assets (less prepaid reinsurance, IBNR & Reserves) Loans and receivables Amortised cost 4,873,442 3,336,899
Other receivables (less prepayment) Loans and receivables Amortised cost 3,073,457 3,073,457
Loans and receivables Loans and receivables Amortised cost 3,615,646
Statutory deposit Amortised cost 6,943,206 572,586
Amortised cost 6,936,148
820,817
311,449 274,078
500,000 323,287
500,000

FINANCIAL ASSETS IAS 39 classification IFRS 9 "Group "Parent
31 December 2018 Loans and receivables classification & Carrying Amount Carrying
Cash and cash equivalent 1 January 2018" Amount
Investment Securities: FVTPL measurement 1 January 2018"
– Fair value through profit or loss Amortised cost 5,333,318 4,779,865
– Available-for-sale assets Available for sale
Available for sale FVTPL --
Government & corporate bonds Available for sale
Tenored deposits with maturity above 90 days Available for sale FVTOCI 15,314,518 13,347,980
Treasury bills Available for sale FVTOCI 326,733 326,733
Unquoted equity securities Available for sale FVTOCI
Quoted equity securities FVTOCI 4,298,543 2,303,661
Investment funds FVTPL FVTPL 94,889 94,889
Financial assets designated at fair value Loans and receivables FVTPL 238,297 198,283
Trade receivables Loans and receivables FVTPL
Reinsurance assets (less prepaid reinsurance, IBNR & Reserves) Loans and receivables Amortised cost 2,418,804 1,406,156
Other receivables (less prepayment) Loans and receivables Amortised cost 3,272,242 3,272,242
Loans and receivables Loans and receivables Amortised cost 1,961,018
Statutory deposit Amortised cost 6,600,736 251,383
Amortised cost 6,596,350
398,797
3,843,254 323,803
7,562,215
500,000
500,000

The measurement basis of all financial assets are expected to remain unchanged even after IFRS 9 adoption. Hence, there will
be no change in the gross carrying amounts of the financial assets upon the adoption of IFRS 9.

AXA Mansard Annual Report & Accounts 2018 67

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

d) The expected impacts of IFRS 9 adoption on shareholder’s funds with the corresponding impact on net income:

i) The Fair value reserves on quoted equities and investment funds will be reclassified from other comprehensive income

(OCI) to profit or loss as follows:

Group Parent Group Parent

31 Dec 2018 31 Dec 2018 1 Jan 2018 1 Jan 2018

Fair value on quoted equity securities 82,257 90,275 136,469 124,462
Fair value on Investment Funds (18,222) (8,177) 110,095 121,561
82,098 246,564 246,023
64,035

We have not completed the Expected Credit Loss (ECL) model, hence we do not have estimates for the impairment charge to the
statement of comprehensive income.

Amendments to IAS 40: application, an entity shall reassess the A number of standards, interpretations
Investment Property classification of property held at that date and amendments are effective for
and, if applicable, reclassify property annual period beginning on or after 1
On December 8, 2016, the IASB published applying paragraphs 7–14 to reflect January 2019 and earlier application
Transfers of Investment Property the conditions that exist at that date. is permitted; however, the group has
(Amendments to IAS 40) to clarify transfers These amendments do not have any not early adopted the following new or
ofpropertyto,orfrom,investmentproperty. material impact and have been adopted amended standards in preparing these
An entity shall apply those amendments by the Group. consolidated and separate financial
to changes in use that occur on or after (b) New and amended standards and statements as it plans to adopt these
the beginning of the annual reporting standards at their respective effective
period in which the entity first applies interpretations not yet adopted by dates:
the amendments (the date of initial the Group
application). At the date of initial

New or amended standards Summary of the requirements Possible impactonConsolidatedfinancialstatements
IFRS 16 Leases
Thisnewstandardrequireslesseestorecognise The actual impact of applying IFRS 16 of the financial
nearly all leases on the balance sheet that statements in the period of initial application will
will reflect their right to use an asset for a depend on future economic conditions, including
period of time; and the associated liability the Group’s borrowing rate at 1 January 2019, the
for payments. This standard will improve a composition of the Group’s lease portfolio at that
lessee’s EBITDA (earnings before interest, date, the Group’s latest assessment of whether it
taxes, depreciation and Amortization), but will exercise any lease renewal options and the
also involve significant judgement as to what extent to which the Group chooses to use practical
a lease is and what should be classified as expedients and recognition exemptions.
a lease. This also sheds more light to what
represents contingent rental payments In addition, the nature of expenses related to
and separating out the rental element from operating leases will now change as IFRS 16 replaces
various service components of the lease. the straight-line operating lease expense with a
IFRS 16 is effective for annual reporting depreciation charge for right-of-use assets and
periods beginning on or after 1 January 2019 interest expense on lease liabilities.

No significant impact is expected for the Group
consolidated financial statements resulting from
the application of IFRS 16.

68 AXA Mansard Annual Report & Accounts 2018

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

New or amended standards Summary of the requirements Possible impactonConsolidatedfinancialstatements
IFRS 9: Financial
instruments IFRS 9, released in July 2014, replaces The Group will adopt IFRS 9 ‐ Financial Instruments
the existing guidance in IAS 39 Financial from 1 January 2022. The estimated impact of the
instruments: Recognition and measurement. adoption of the standard on the Group’s equity
IFRS 9 includes revised guidance on the as at 1 January 2022 is based on the assessments
reclassificationandmeasurementoffinancial summarised below. The actual impact of adopting
instruments, a new expected credit loss the standard at 1 January 2022 are subject to change
modelforcalculatingimpairmentonfinancial until the Group presents its first financial statement
assets and new general hedge accounting that includes the date of initial application.
requirements. It also carries forward the
guidance on recognition and derecognition Classification and measurement
of financial instruments from IAS 39. IFRS The Group currently categorizes the majority of its
9 is effective for annual reporting periods financial assets as available for sale with the fair
beginning on or after 1 January 2018 with value changes recognised in other comprehensive
early adoption permitted. income. Under IFRS 9, the Group has designated

these investments as measured at fair value through
OCI. Consequently, all fair value gains and losses
will be reported in OCI, no impairment losses will be
recognised in profit or loss and no gains or losses
will be reclassified to profit or loss on disposal..

Based on its assessment, the Group does not
believe that the new classification requirements will
have a material impact on its accounting for Trade
receivables, loans, investment in debt securities and
investments in equity securities that are managed
on a fair value basis.

The above intended classification may change due
to the continuous assessment of the requirement
of the standard and review of business practices
until the first set of financial statement under IFRS
9 is issued.

Impairment:
The Group believes that impairment losses are
likely to increase for assets in the scope of IFRS 9
impairment model, although they are not expected
to be highly volatile.

The approach to impairment assessment under
IFRS 9 will be determined by the final classification
adopted in 2022
Prepayment Features with
Negative Compensation This amendment was published to address The Group will adopt the amendment alomg with
(Amendments to IFRS 9) the concerns about how IFRS 9 ‘Financial the effective date of IFRS 9 (2022) at the earliest.
Instruments’ classifies particular prepayable
financial assets. In addition, the IASB clarifies The impact of the adoption of this amendment on
an aspect of the accounting for financial the Group is being assessed.

liabilities following a modification.

The amendments are to be applied
retrospectively for fiscal years beginning on
or after 1 January 2019, i. e. one year after
the first application of IFRS 9 in its current
version. Early application is permitted so
entities can apply the amendments together
with IFRS 9 if they wish so.

AXA Mansard Annual Report & Accounts 2018 69

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

New or amended standards Summary of the requirements Possible impactonConsolidatedfinancialstatements
IFRS 17: Insurance
Contracts IFRS17wasissuedinMay2017asreplacement The Group is assessing the potential impact of the
for IFRS 4 Insurance Contracts. It requires a new standard which will be effective for annual
currentmeasurementmodelwhereestimates reporting periods beginning on or after 1 January
are re-measured each reporting period. 2022.

The standard allows a choice between
recognising changes in discount rates either
in the statement of profit or loss or directly
in other comprehensive income. The choice
is likely to reflect how insurers account for
their financial assets under IFRS 9.

An optional, simplified premium allocation
approach is permitted for the liability for
the remaining coverage for short duration
contracts, which are often written by non-
life insurers.

There is a modification of the general
measurement model called the ‘variable
fee approach’ for certain contracts written
by life insurers where policyholders share
in the returns from underlying items. The
results of insurers using this model are
therefore likely to be less volatile than under
the general model.

2.2 Significant investee entity; and to the extent that there is no evidence
accounting policies (c) the ability to use power over the of impairment. Accounting policies of
subsidiaries have been changed where
The group has consistently applied investee to affect the amount of necessary to ensure consistency with the
the following accounting policies to all the investor’s returns. policies adopted by the Group.
periods presented in these consolidated Investment in subsidiaries in the separate
financial statements. (b) Consolidated financial statement of the parent entity
structured entities is measured at cost less impairment.
(a) Consolidation
(i) Subsidiaries (iii) Business combinations
IFRS 10 defines the principle of control Subsidiaries are all entities over which The Group applies the acquistion method
and establishes control as the basis the group exercises control. to account for Business Combinations and
for determining which entities are The financial statements of subsidiaries acquisition-related costs are expensed
consolidated in the group financial are consolidated from the date the Group as incurred.
statements. acquires control, up to the date that such The consideration transferred in the
The Group controls an investee entity effective control ceases. acquisition is generally measured at fair
when it is exposed, or has rights, to In the separate financial statements, value as are the identifiable net assets
variable returns from its involvement investments in subsidiaries are measured acquired.
with the investee entity and has the at cost. If the business combination is achieved
ability to affect those returns through in stages, fair value of the acquirer’s
its power over the investee entity. (ii)Transactions eliminated on previously held equity interest in the
The Group applies the following three consolidation acquiree is re-measured to fair value at
elements of control as set out by the Inter-company transactions, balances the acquisition date through profit or loss.
principle of control in IFRS 10 when and unrealised gains on transactions Any contingent consideration to be
assessing control of an investee: between companies within the Group are transferred by the Group is recognised
(a) power over the investee entity; eliminated on consolidation. Unrealised at fair value at the acquisition date.
(b) exposure, or rights, to variable losses are also eliminated in the same
manner as unrealised gains, but only AXA Mansard Annual Report & Accounts 2018
returns from involvement with the

70

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

Subsequent changes to the fair value in respect of that entity are accounted translated into the functional currency
of the contingent consideration that for as if the Group had directly disposed using the exchange rates prevailing at
is deemed to be an asset or liability is of the related assets or liabilities. This the dates of the transactions. Foreign
recognised in compliance with IAS 39 may mean that amounts previously exchange gains and losses resulting from
either in profit or loss or as a change to recognised in other comprehensive the settlement of such transactions
other comprehensive income. Contingent income are reclassified to profit or loss. and from the translation at period-end
consideration that is classified as equity The Group derecognises the assets and exchange rates of monetary assets
is not re-measured, and its subsequent liabilities of the subsidiary, and any and liabilities denominated in foreign
settlement is accounted for within equity. related non-controlling interests and currencies are recognised in profit or loss.
Goodwill is initially measured as other components of equity. Monetary items denominated in foreign
the excess of the aggregate of the currency are translated using the closing
consideration transferred and the fair (c) Segment reporting rate as at the reporting date. Non-
value of non- controlling interest over monetary items measured at historical
the net identifiable assets acquired and An operating segment is a component cost denominated in a foreign currency
liabilities assumed. If this consideration of the Group that engages in business are translated with the exchange rate
is lower than the fair value of the net activities from which it can earn revenues as at the date of initial recognition;
assets of the subsidiary acquired, the and incur expenses, including revenues non monetary items (e.g. investment
difference is recognised in profit or loss. and expenses that relate to transactions property) in a foreign currency that are
(iv) Non- controlling interests with any of the Group’sother components, measured at fair value are translated
Non-controlling Interest (NCI) are whose operating results are reviewed using the closing rate as at the date
measured initially at their proportionate regularly by the Executive Management when the fair value was determined.
share of the acquiree’s identifiable net Committee to make decisions about Foreign exchange gains and losses are
assets at the acquisition date. resources allocated to each segment presented in profit or loss within ‘Net
(v) Changes in ownership interests and assess its performance, and for losses/gains on financial instruments’.
in subsidiaries without change in which discrete financial information is In the case of changes in the fair value of
control available. monetary assets denominated in foreign
Transactionswithnon-controllinginterests Operating segments are reported in currency and classified as available-
that do not result in loss of control are a manner consistent with the internal for-sale, a distinction is made between
accounted for as equity transactions – reporting provided to the chief operating translation differences resulting from
that is, as transactions with the owners decision-maker. The chief operating changes in amortised cost of the security
intheircapacityasowners.The difference decision-maker, which is responsible and other changes in the carrying amount
between fair value of any consideration for allocating resources and assessing of the security. Translation differences
paid and the relevant share acquired performance of the operating segments, on non-monetary financial assets and
of the carrying value of net assets of the has been identified as the Management liabilities such as equities measured at
subsidiary is recorded in equity between Underwriting and Investment Committee fair value through profit and loss are
retained earnings and Non controlling (MUIC) that makes strategic decisions. recognised in profit or loss as part of net
interests. Gains or losses on disposals gain/loss on financial assets. Translation
to non-controlling interests are also (d) Foreign currency differences on non-monetary financial
recorded in equity. translation assets such as equities classified as
(vi) Disposal of subsidiaries available for sale are included in other
When the Group ceases to have control, (i) Functional and presentation comprehensive income.
any retained interest in the entity is currency
re-measured to its fair value at the date (iii) Group companies
when control is lost, with the change in Itemsincludedinthe financialstatements The results and financial position of all
carrying amount recognised in profit or of each of the Group’s entities are the group entities (none of which has
loss. The fair value is the initial carrying measured using the currency of the the currency of a hyper-inflationary
amount for the purposes of subsequently primary economic environment in which economy) that have a functional currency
accounting for the retained interest as the entity operates (the ‘functional different from the presentation currency
an associate, joint venture or financial currency’). The consolidated financial are translated into the presentation
asset. In addition, any amounts previously statements are presented in thousands currency as follows:
recognisedinothercomprehensiveincome of Naira (NGN) which is the Group’s „„ A ssets and liabilities for each
presentation currency.
statement of financial position
(ii) Transactions and balances presented are translated at the
Foreign currency transactions are

AXA Mansard Annual Report & Accounts 2018 71

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

closing rate on the reporting date; at fair value through profit or loss is „„ Separate assets held to match
„„ i ncomeandexpensesforeachincome recognised in profit or loss as part of insurance and investment contracts
other income when the Group’s right to liabilities that are linked to the
statement are translated at average receive payments is established. changes in fair value of these assets.
exchange rates (unless this average Changes in the fair value of monetary Thedesignationoftheseassetstobe
is not a reasonable approximation and non-monetary securities classified at fair value through profit or loss
of the cumulative effect of the rates as available for sale are recognised in eliminates or significantly reduces
prevailing on the transaction dates, other comprehensive income. a measurement or recognition
in which case income and expenses When securities classified as available- inconsistency (sometimes referred
are translated at the rate on the dates for-sale are sold or impaired, the to as ‘an accounting mismatch’)
of the transactions); and accumulated fair value adjustments that would otherwise arise from
„„ a ll resulting exchange differences are recognised in other comprehensive measuring assets or liabilities or
recognised in other comprehensive income are included in profit or loss as recognising the gains and losses
income. net realised gains on financial assets. on them on different bases; and
Interest on available-for-sale securities
(e) Financial assets calculated using the effective interest „„ M anaged and whose performance
method is recognised in profit or loss. is evaluated on a fair value basis.
Recognition and measurement of Dividends on available-for-sale equity Information about these financial
financial assets instruments are recognised in profit or assets is provided internally on a
The Group initially recognises loans and loss when the Group’s right to receive fair value basis to the Group’s key
receivables on the date on which they are payments is established. Both are management personnel. The Group’s
originated. Regular-way purchases and included in the investment income line. investment strategy is to invest in
sales of financial assets are recognised equity and debt securities and to
on trade-date which is the date on ClassiFIcation of evaluate them with reference to
which the Group becomes a party to the financial assets their fair values. Assets that are part
contractual provisions of the instrument. of these portfolios are designated
Financial assets are initially recognised at Financial assets are classified into the upon initial recognition at fair value
fair value, plus transaction costs that are following categories: fair value through through profit or loss.
directly attributable to its acquisition or profit and loss, loans and receivables,
issue (for all financial assets not initially held-to-maturity and available-for- (ii) Loans and receivables
recognised at fair value through profit sale. The classification by the Group is
or loss). Financial assets carried at fair determined by management at initial Loans and receivables are non-derivative
value through profit or loss are initially recognition and depends on the intention financial assets with fixed or determinable
recognised at fair value, and transaction for which the investments were acquired. payments that are not quoted in an
costs are expensed in profit or loss. active market other than:
Available-for-sale financial assets and (i) Financial assets at fair „„ those that the Group intends to
financialassetsatfairvalue throughprofit value through profit or
orlossaresubsequentlycarriedatfairvalue. loss sell in the short term which are
Loans and receivables and held-to- declassified as fair value through
maturity financial assets are carried Held for trading profitorlossandthose thatthe group
at amortised cost using the effective A financial asset is classified into the upon initial recognition designates
interest method. held for trading category if acquired as fair value through profit or loss.
Initial recognition of pledged assets is at principally for the purpose of selling „„ those that the Group upon initial
fairvalue,whilstsubsequentmeasurement in the short term, if it forms part of a recognition designates as Available
is based on the classification  and portfolio of financial assets in which there for Sale
measurement of the financial asset in is evidence of short-term profit-taking. „„ t hose for which the holder may
accordance with IAS 39. Financial assets designated at fair not recover substantially all of its
Gains and losses arising from changes value through profit or loss upon initial initial loans and receivables other
in the fair value of the ‘financial assets recognition than because of credit risk. Loans
at fair value through profit or loss’ Other financial assets designated as at and receivables include trade
category are included in profit or fair value through profit or loss at initial receivables, reinsurance assets
loss in the period in which they arise. recognition are those that are: and other receivables (financial
Dividend income from financial assets assets).

72 Trade receivables
These are non-derivative financial assets
with fixed determinable payments that
are not quoted in an active market. After

AXA Mansard Annual Report & Accounts 2018

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

initial recognition, they are measured at loans and receivables. respect of similar financial instruments,
amortisedcostusingthe effective interest Interest income on held-to-maturity using models to estimate the present
method less impairment. Discounting is investments are included in the value of expected future cash flows
omitted where the effect of discounting consolidated profit or loss and are or other valuation techniques, using
is immaterial. Trade receivables are reported as interest income. In the case inputs (for example, NIBOR yield curve,
made up of premium receivables and of an impairment, it is reported as a foreign exchange rates, volatilities and
coinsurance receivables. deduction from the carrying value of counterparty spreads) existing at the
„„ P remium receivables relate to the investment and recognised in the reporting date.
consolidated profit or loss as ‘Net gains/ For more complex instruments the Group
receivables from agents, brokers (losses) on financial assets’. Held-to- uses internally developed models which
and insurance companies in respect maturity investments are largely bonds. are usually based on valuation models
of premium income. and techniques generally recognised as
„„ Coinsurance recoverables relate (iv) Available-for-sale standard within the industry. Valuation
to only claims recoverables from financial assets models are used primarily to value
coinsurers for claims settled to unlisted debt securities for which markets
policy holders on behalf of coinsurers Available-for-sale investments are were or have become illiquid. Some of
based on agreed terms. financial assets that are intended to the inputs to these models may not
be held for an indefinite period of time, be market observable and therefore
Reinsurance assets which may be sold in response to needs estimated based on assumptions. The
The Company cedes businesses to for liquidity or changes in interest rates, impact of financial instruments valuation
reinsurers in the normal course of business exchangeratesorequitypricesorthatare reflecting non-market observable inputs
for the purpose of limiting its net loss not classified as loans and receivables, (Level 3 valuations) is disclosed in the
potential through the transfer of risks. held-to-maturity investments or fair note to the financial statements.
Reinsurance arrangements do not relieve value through profit or loss.
the Company from its direct obligations ReclassiFIcation of
to its policyholders. Reinsurance assets Determination of fair FInancial assets
are measured at amortised costs. value of financial assets
Reinsurance assets relate to prepaid Financial assets other than loans and
reinsurance, reinsurers’ share of IBNR For financial instruments traded in receivablesare permittedtobe reclassified
claims and claims recoverables. active markets, the determination of fair out of the held-for-trading category only
values of financial assets and financial in rare circumstances arising from a single
Other receivables liabilities is based on the market approach event that is unusual and highly unlikely
Other receivables are made up of other (transaction price paid for an identical to recur in the near-term. In addition, the
amounts due from parties which are not or a similar instrument). This includes Group may choose to reclassify financial
directly linked to insurance or investment listed equity securities and quoted debt assets that would meet the definition of
contracts. These are measured at instruments on major exchanges. loans and receivables out of the held-for-
amortised costs. Discounting is omitted A financial instrument is regarded as trading or available-for-sale categories
where the effect of discounting is quoted in an active market if quoted if the Group has the intention and ability
immaterial. prices are readily and regularly available to hold these financial assets for the
from an exchange, dealer, broker, industry foreseeable future or until maturity at
(iii) Held-to-maturity group, pricing service or regulatory the date of reclassification.
FInancial assets agency, and those prices represent Financial assets classified as held to
actual and regularly occurring market maturitycanbe reclassfiedasavailable for
Held-to-maturity investments are non- transactions on an arm’s length basis. sale assets. In making this reclassification,
derivative financial assets with fixed If the above criteria are not met, the the entire portfolio becomes tainted
or determinable payments and fixed market is regarded as being inactive. For and the group cannot designate any
maturities that the Group’s management example, a market is inactive when there instrument as held to maturity for the next
has the positive intention and ability to is a wide bid-offer spread or significant two years after a sale or reclassification.
hold to maturity, other than: increase in the bid-offer spread or there Fair values changes upon tainting of the
„„ t hose that the Group upon initial are few recent transactions. HTM portfolio are recognised in Other
For all other financial instruments, fair
recognition designates as at fair value is determined using valuation
value through profit or loss; techniques. In these techniques, fair values
„„ those that the Group designates as are estimated from observable data in
available-for-sale; and
„„ those that meet the definition of

AXA Mansard Annual Report & Accounts 2018 73

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

Comprehensive income prospectively. because of financial difficulties; or impairment loss is reversed by adjusting
„„ Observable data indicating that the allowance account. The amount of
Reclassifications are made at fair value the reversal is recognised in profit or loss.
as of the reclassification date. Fair value there is a measurable decrease in The discount rate is the yield at the
becomes the new cost or amortised the estimated future cash flow from reporting date on government bonds that
cost as applicable, and no reversals of a group of financial assets since the have maturity dates approximating the
fair value gains or losses recorded before initial recognition of those assets, terms of the Group’s obligations and that
reclassification date are subsequently although the decrease cannot yet are denominated in the same currency
made. Effective interest rates for financial be identified with the individual in which the benefits are expected to be
assets reclassified to loans and receivables financial assets in the Group. paid.
and held-to-maturity categories are The Group first assesses whether When the financial asset at amortised
determined at the reclassification date. objective evidence of impairment exists cost is uncollectible, it is written off
Further increases in estimates of cash for financial assets that are individually against the related allowance for
flows adjust effective interest rates significant. If the Group determines that impairment. Such loans are written off
prospectively. no objective evidence of impairment after all the necessary procedures have
exists for an individually assessed been completed and the amount of the
Impairment of financial financial asset, whether significant or loss has been determined. Impairment
assets not, it includes the asset in a group of charges relating to Investment securities
(A) Financial assets financial assets with similar credit risk are classified as net gains/loss of financial
carried at amortised cost characteristics and collectively assesses assets while those on receivables are
them for impairment. Assets that are classified as operating expenses.
The Group assesses at each end of individually assessed for impairment Assets that are subject to amortisation
the reporting period whether there is and for which an impairment loss is are reviewed for impairment whenever
objective evidence that a financial asset or continues to be recognised are not events or changes in circumstances
or group of financial assets is impaired. included in a collective assessment of indicate that the carrying amount may
A financial asset or group of financial impairment. not be recoverable. An impairment loss
assets is impaired and impairment losses is recognised for the amount by which
are incurred only if there is objective If there is objective evidence that an the asset’s carrying amount exceeds
evidence of impairment as a result of impairment loss has been incurred its recoverable amount.
one or more events that have occurred on loans and receivables or held-
after the initial recognition of the asset to-maturity investments carried at (B) Assets classified as
(a ‘loss event’) and that loss event (or amortised cost, the amount of the loss available for sale
events) has an impact on the estimated is measured as the difference between
future cash flows of the financial asset the asset’s carrying amount and the The Group assesses at each reporting
or group of financial assets that can be present value of estimated future cash date whether there is objective evidence
reliably estimated. Objective evidence flows (excluding future credit losses that a financial asset or a group of
that a financial asset or group of assets that have been incurred) discounted financial assets is impaired. In the
is impaired includes observable data at the financial asset’s original effective case of equity investments classified
that comes to the attention of the Group interest rate. The carrying amount of as available-for-sale, a significant or
about the following events: the asset is reduced through the use of prolonged decline in the fair value of the
an allowance account, and the amount of security below its cost is an objective
„„ Trade receivables are outstanding the loss is recognised in profit or loss. If evidence of impairment resulting in the
for more than 30 days a held-to- maturity investment or a loan recognition of an impairment loss. In
has a variable interest rate, the discount this respect, a period of 12 months or
„„ R einsurancerecoverableoutstanding rate for measuring any impairment loss longer is considered to be prolonged.
more than 90 days is the current effective interest rate If any such quantitative evidence exists
determined under contract. The Group for available-for-sale financial assets,
„„ S ignificant financial difficulty of the may measure impairment on the basis the asset is considered for impairment,
issuer or debtor; of an instrument’s fair value using an taking qualitative evidence into account.
observable market price. The cumulative loss measured as: the
„„ A breach of contract, such as a difference between the acquisition
default or delinquency in payments; If in a subsequent period, the amount of cost and the current fair value, less
the impairment loss decreases and the any impairment loss on that financial
„„ I t becoming probable that the issuer decrease can be related objectively to asset previously recognised in profit
or debtor will enter bankruptcy or an event occurring after the impairment
other financial re-organisation; was recognised (such as improved
credit rating), the previously recognised
„„ T he disappearance of an active
market for that financial asset

74 AXA Mansard Annual Report & Accounts 2018

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

or loss is removed from equity and (f) Investment property investment property occupied by the
recognised in the consolidated profit or owner is considered immaterial to the
loss. Impairment losses recognised in Property held for rental yields and capital total lettable space and to the value of
the consolidated profit or loss on equity appreciation that is not occupied by the the investment property.
instruments are not reversed through companies in the Group is classified as
the consolidated profit or loss. investment property. Investment property (g) Intangible assets
If in a subsequent period the fair value comprises freehold land and building.
of a debt instrument classified as Investment properties are measured Intangible assets represents cost
available for sale increases and the initially at cost, including transaction associated with the acquisition of
increase can be objectively related to costs. The carrying amount includes software and inherent goodwill on
an event occurring after the impairment the cost of replacing part of an existing business combination.
loss was recognised in profit or loss, the investment property at the time that cost
impairment loss is reversed through is incurred if the recognition criteria are (i) Computer software
the consolidated profit or loss. met; and excludes the costs of day-to- Software acquired by the Group is
day servicing of an investment property. measured at cost less accumulated
Derecognition of Subsequently, it is carried at fair value, amortization and any accumulated
financial assets adjusted if necessary, for any difference impairment losses.
in the nature, location or condition of Costs associated with maintaining
A financial asset is derecognised if either the specific asset. If this information is computer software programmes are
the entity has transferred contractual not available, the Group uses alternative recognised as an expense when incurred.
rights to receive cash flows from the valuation methods such as discounted Development costs that are directly
asset or if the entity has retained the cash flow projections or recent prices in attributable to the design and testing
contractual rights to receive the cash less active markets. These valuations are of identifiable and unique software
flows from the asset but has assumed reviewed annually by an independent products controlled by the Group are
a contractual obligation to pass on the valuation expert. recognised as intangible assets when
cash flows under an arrangement that Changes in fair values are recorded in the following criteria are met:
meets the conditions stated below: profit or loss. Property located on land „„ It is technically feasible to complete
„„ the entity has no obligation to pay that is held under an operating lease is
classified as investment property as the software product so that it will
amounts to the eventual recipient long as it is held for long-term rental be available for use;
unless it collects equivalent amounts yields and is not occupied by the „„ M anagementintendstocompletethe
on the original asset companies in the consolidated Group. software product and use or sell it;
„„ the entity is prohibited from selling The initial cost of the property shall be „„ There is an ability to use or sell the
or pledging the original asset other the fair value (where available). When not software product;
than as security to the eventual available the initial cost shall be used. „„ It can be demonstrated how the
recipient The property is carried at fair value after software product will generate
„„ the entity has an obligation to remit initial recognition. probable future economic benefits;
those cash flows without material Investment properties are derecognized „„ Adequate technical, financial and
delay either when they have been disposed other resources to complete the
A financial liability shall be derecognised of, or when the investment property is development and to use or sell the
when the obligation specified in the permanently withdrawn from use and software product are available; and
contract is either discharged, cancelled no future economic benefit is expected „„ T he expenditure attributable to
or expired. from its disposal. the software product during its
Properties could have dual purposes development can be reliably
Offsetting FInancial whereby part of the property is used for measured.
instruments own activities. The portion of a dual use
property is classified as an investment Directly attributable costs that are
Financial assets and liabilities are offset property only if it could be sold or leased capitalisedaspartofthe software product
and the net amount reported in the out separately under a finance lease or include the software development
statement of financial position only if the portion occupied by the owner is employee costs, capitalised borrowing
when there is a legally enforceable right immaterial to the total lettable space. costs and an appropriate portion of
to offset the recognised amounts and Currently, the group occupies less than directly attributable overheads. Internally
there is an intention to settle on a net 10% of the lettable space (264sqm
basis, or to realise the asset and settle out of 6,902sqm). The portion of the
the liability simultaneously.

AXA Mansard Annual Report & Accounts 2018 75

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

developed software is stated at capitalized from the synergies of the combination. using the straight-line method to allocate
cost less accumulated amortization and Goodwill is monitored at the operating the cost less the residual values over the
any accumulated impairment losses. segment level. estimated useful lives as follows.
Other developmentexpendituresthatdo Goodwill impairment reviews are
not meet these criteria are recognised as undertaken annually or more frequently Building 50 years
an expense when incurred. Development if events or changes in circumstances Vehicles 5 years
costs previously recognised as an indicate a potential impairment. The Branding, furniture 2-5 years
expense are not recognised as an asset carrying value of goodwill is compared and fittings and
in a subsequent period. Subsequent to the recoverable amount, which is the equipment 3 years
expenditure on software assets is higher of value in use and the fair value Computer equipment
capitalised only when it increases the less costs to sell. Any impairment is
future economic benefits embodied in recognised immediately as an expense Leasehold improvements are depreciated
the specific assets to which it relates. and is not subsequently reversed. over the lower of the useful life of the
Computer software development costs asset and the lease term.
recognised as assets are amortised (iii) License fee
over their useful lives, which does not The Group applies the cost model in The assets residual values and useful lives
exceed five years. The residual values recognising intangible assets acquired are reviewed at the end of each reporting
and useful lives are reviewed at the in a business combination. Licenses period and adjusted if appropriate.
end of each reporting period and are acquired in a business combination are
adjusted as appropriate. recognised at fair value at the acquisition An asset’s carrying amount is written
Subsequent expenditure is capitalized date. Subsequently, they are carried at down immediately to its recoverable
only when it increases the future cost less accumulated amortisation and amount, if the asset’s carrying amount
economic benefits embodied in the impairment losses. Licenses acquired in is greater than its estimated recoverable
specific assets to which it relates. a business combination are amortised amount.
Amortization is calculated to write off on a straight line basis over a period of
the cost of intangible assets less their 25 years. Property and equipment are dercognised
estimated residual values using the at the disposal date or at the date when
straight line method over their useful (h) Property and it is permanently withdrawn from use
lives, and is generally recognised in profit equipment without the ability to be disposed of. Gains
or loss. Amortisation methods, usefiul and losses on disposals are determined
lives and residual values are reviewed Land and buildings comprise mainly by comparing the proceeds with the
at each reporting date and adjusted if outlets and offices occupied by the Group. carrying amount. These are included
appropriate. Land is carried at cost. All other property within other income in the Statement
and equipment are stated at historical of Comprehensive Income.
(ii) Goodwill cost less accumulated depreciation
Goodwill arises on the acquistion of and accumulated impairment charges. If an investment property becomes
subsidiaries and represents the excess Historical cost includes borrowing owner-occupied, it is reclassified as
of the consideration transferred over the cost and all other expenditure that is property, plant and equipment, and its
Group’s interest in the fair value of the directly attributable to the acquisition fair value at the date of reclassification
net identifiable assets, liabilities and of the items. becomes its cost for subsequent
contingent liabilities of the acquiree Subsequent costs are included in the accounting purposes.
and the fair value of the non-controlling asset’s carrying amount or recognised
interest in the acquiree. Subsequent to as a separate asset, as appropriate, only If an item of property, plant and equipment
initial recognition, goodwill is measured when it is probable that future economic becomes an investment property because
at cost less accumulated impairment benefits associated with the item will its use has changed, any difference
losses. flow to the Group and the cost of the arising between the carrying amount
For the purpose of impairment testing, item can be measured reliably. All other and the fair value of this item at the
goodwill acquired in a business repairs and maintenance are charged to date of transfer is recognised in other
combination is allocated to each of the profit or loss during the financial period comprehensive income as a revaluation
Cash Generating Units (CGU)’s or groups in which they are incurred. of property, plant and equipment.
of CGUs, that is expected to benefit Land is not depreciated. Depreciation on However, if a fair value gain reverses a
property and equipment is calculated previous impairment loss, the gain is
recognised in profit or loss. Upon the
disposal of such investment property any
surplus previously recorded in equity is

76 AXA Mansard Annual Report & Accounts 2018

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

transferred to retained earnings net of for the value of property lost. Customers plans. Policy holders make a lump sum
associated tax; the transfer is not made who undertake commercial activities payment recognised as part of premium
through profit or loss. on their premises could also receive in the period when the payment was
compensation for the loss of earnings made. Constant and regular payments
(i) Statutory deposit caused by the inability to use the insured are made to annuitants based on terms
properties in their business activities and conditions agreed at the inception
Statutory deposit represents 10% of (business interruption cover). of the contract and throughout the life
the paid up capital of the Company Non- life insurance contracts protect the of the annuitants. The annuity funds
deposited with the Central Bank of Nigeria Group’scustomersfromtheconsequences are invested in long tailed government
(CBN) in pursuant to Section 10(3) of the of events (such as death or disability) that bonds and reasonable money markets
Insurance Act, 2003. Statutory deposit would affect the ability of the customer instruments to meet up with the payment
is measured at cost. or his/her dependents to maintain their of monthly/quarterly annuity payments.
current level of income. Guaranteed The annuity funds liability is actuarially
(j) Insurance contracts benefits paid on occurrence of the determined based on assumptions as
specifiedinsurance event are eitherfixed to mortality, persistency, maintenance
The Group issues contracts that transfer or linked to the extent of the economic expenses and investment income that
insurance risk or financial risk or both. loss suffered by the policyholder. There are established at the time the contract
Insurance contracts are those contracts are no maturity or surrender benefits. is issued.
where a party (the policy holder) transfers
significant insurance risk to another (ii) Life insurance contracts (2) R ecognition and
party (insurer) and the latter agrees to Thesecontractsinsure eventsassociated measurement
compensate the policyholder or other with human life (for example, death).
beneficiary if a specified uncertain future These are divided into the individual
event (the insured event) adversely affects life, group life and Annuity contracts. (i) Non-life insurance contracts
the policyholder, or other beneficiary. „„ Individual life contracts are usually premium and claims
Such contracts may also transfer long term insurance contracts and These contracts are accident, casualty and
financial risk when the insurer issues span over one year while the group property insurance contracts. Accident
financial instruments with a discretionary life insurance contracts usually cover and casualty insurance contracts protect
participation feature. a period of 12 months. A liability for the Group’s customers against the risk of
contractual benefits that are expected causing harm to third parties as a result
(1) T ypes of Insurance to be incurred in the future when the of their legitimate activities. Damages
Contracts premiums are recognised. The liability is covered include both contractual and
determined as the sum of the expected non-contractual events. The typical
The group classifies insurance contract discountedvalue ofthe benefitpayments protection offered is designed for
into life and non-life insurance contracts. and the future administration expenses employers who become legally liable to
(i) Non-life insurance contracts that are directly related to the contract, pay compensation to injured employees
T hesecontractsare accidentandcasualty less the expected discounted value of (employers’ liability) and for individual
and property insurance contracts. the theoretical premiums that would and business customers who become
Accident and casualty insurance contracts be required to meet the benefits and liable to pay compensation to a third
protect the Group’s customers against administration expenses based on party for bodily harm or property damage
the risk of causing harm to third parties the valuation assumptions used. The (public liability). Property insurance
as a result of their legitimate activities. liability is based on assumptions as to contracts mainly compensate the Group’s
Damagescoveredincludebothcontractual mortality, persistency, maintenance customers for damage suffered to their
and non-contractual events. The expenses and investment income that properties or for the value of property lost.
typical protection offered is designed are established at the time the contract Customers who undertake commercial
for employers who become legally is issued. activities on their premises could also
liable to pay compensation to injured „„ Annuity contracts receive compensation for the loss of
employees (employers’ liability) and for These contracts insure customers from earnings caused by the inability to use
individual and business customers who consequences of events that would affect the insured properties in their business
become liable to pay compensation to the ability of the customers to maintain activities. Life insurance contracts
a third party for bodily harm or property their current level of income. There are protects the Group’s customers from
damage (public liability). no maturity or surrender benefits. The the consequences of events (such as
Property insurance contracts mainly annuity contracts are fixed annuity death or disability) that would affect
compensate the Group’s customers for the ability of the customer or his/her
damage suffered to their properties or dependents to maintain their current
level of income. Guaranteed benefits
AXA Mansard Annual Report & Accounts 2018 paid on occurrence of the specified

77

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

insurance event are either fixed or charged to profit or loss as incurred. future revenue margins. It is calculated by
linked to the extent of the economic Premiums are recognised as revenue applying to the reinsurance commission
loss suffered by the insured. There when they become payable by the income the ratio of prepaid reinsurance
are no maturity or surrender benefits. contract holders. Premium are shown to reinsurance cost.
For all these contracts, premiums are before deduction of commission.
recognised as revenue (earned premiums) (iv) Salvages (viii) Receivables and payables
proportionally over the period of coverage. Some non-lifeinsurancecontractspermit related to insurance contracts
The portion of premium received on in- the Group to sell (usually damaged) Receivables and payables are recognised
force contracts that relates to unexpired property acquired in the process of when due. These include amounts
risks at the reporting date is reported settling a claim. The Group may also due to and from agents, brokers and
as the unearned premium liability. have the right to pursue third parties insurance companies (as coinsurers)
Premiums are shown before deduction for payment of some or all costs of and reinsurance companies.
of commission. damages to its clients property (i.e. „„ R eceivables and payables to agents,
Claims and loss adjustment expenses are subrogation right).
charged to income as incurred based on Salvage recoveries are used to reduce the brokers and insurance companies
the estimated liability for compensation claim expense when the claim is settled. (as coinsurers)
owed to contract holders or third parties (v) Subrogation Thecompany’sreceivablesandpayablesto
damaged by the contract holders. Subrogation is the right for an insurer agents, brokers and insurance companies
They include direct and indirect claims to pursue a third party that caused (as coinsurers) relate to premium and
settlement costs and arise from events an insurance loss to the insured. This commission.
that have occurred up to the end of the is done as a means of recovering the If there is objective evidence that the
reporting period even if they have not amount of the claim paid to the insured insurance receivable is impaired, the
yet been reported to the Group. The for the loss. A receivable for subrogation Group reduces the carrying amount
Group does not discount its liabilities is recognised in other assets when the of the insurance receivable accordingly
for unpaid claims. Liabilities for unpaid liability is settled and the Company has and recognises that impairment loss
claims are estimated using the input of the right to receive future cash flow from in the income statement. The Group
assessments for individual cases reported the third party. gathers the objective evidence that
to the Group and statistical analyses for (vi) Deferred policy acquisition an insurance receivable is impaired
the claims incurred but not reported, costs (DAC) using the same methodology adopted
and to estimate the expected ultimate Acquisition costs comprise all direct and for financial assets held at amortised
cost of more complex claims that may indirect costs arising from the writing of cost. The impairment loss is calculated
be affected by external factors (such as both life and non-life insurance contracts. under the same method used for these
court decisions). Deferred acquisition costs represent a financial assets.
proportion of commission which are „„ R einsurance and coinsurance
(ii) Life insurance contracts incurred during a financial period and contracts held
premium and claims . are deferred to the extent that they Contracts entered into by the Group with
Premiumsarerecognisedasrevenuewhen are recoverable out of future revenue reinsurersand thatmeetthe classification
they become payable by the contract margins. For the non life business, it is requirements for insurance contracts
holders. Premium are shown before calculated by applying to the acquisition are classified as reinsurance contracts
deduction of commission. Life insurance expenses the ratio of unearned premium held. Contracts that do not meet these
premium are recognised as premium in to written premium; while no assets classification requirements are classified
the statement of comprehensive income. are established in respect of deferred as financial assets.
Claims and other benefits are recorded acquisition cost for the life business. Reinsurance assets consist of short-
as an expense when they are incurred. (vii) Deferred income term balances due from reinsurers, as
Deferred income represent a proportion well as longer term receivables that
(iii) Annuity premium and claims of commission received on reinsurance are dependent on the expected claims
Annuity premiums relate to single contracts which are booked during a and benefits arising under the related
premium payments and recognised as financial year and are deferred to the reinsuredinsurancecontracts.Reinsurance
earned premium income in the period extent that they are recoverable out of liabilities are primarily premiums
in which payments are received. Claims payable for reinsurance contracts and
are made to annuitants in the form of are recognised as an expense when
monthly/quarterly payments based on due. The Group has the right to set-off
the terms of the annuity contract and

78 AXA Mansard Annual Report & Accounts 2018

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

re-insurance payables against amount (i) General insurance contracts Borrowings are subsequently stated at
due from re-insurance and brokers in line Reserves for unearned premium amortised cost; any difference between
with the agreed arrangement between In compliance with Section 20 (1) (a) the proceeds (net of transaction costs)
both parties. of Insurance Act 2003, the reserve for and the redemption value is recognised
The Group assesses its reinsurance unearned premium is calculated on a in the income statement over the period
assets for impairment on a quarterly time apportionment basis in respect of the borrowings using the effective
basis. If there is objective evidence that of the risks accepted during the year. interest method.
the reinsurance asset is impaired, the Fees paid on the establishment of loan
Group reduces the carrying amount of Reserves for outstanding claims facilities are recognised as transaction
the reinsurance asset to its recoverable The reserve for outstanding claims cost of the loan to the extent that it is
amount and recognises that impairment is maintained at the total amount probable that some or all of the facility
loss in the income statement. The of outstanding claims incurred and will be drawn down. The fee is deferred
Group gathers the objective evidence reported plus claims incurred but not until the drawdown occurs. To the extent
that a reinsurance asset is impaired reported (“IBNR”) as at the reporting there is no evidence that it is probable
using the same process adopted for date. The IBNR is based on the liability that some or all of the facility will be
financial assets held at amortised cost. adequacy test. drawn down, the fee is capitalised and
The impairment loss is calculated using amortised over the period of the facility
the number of days that the receivable Reserves for unexpired risk to which it relates
has been outstanding. A provision for additional unexpired Borrowings are classified as current
risk reserve (AURR) is recognised for an liabilities unless the group has an
(k) Investment underwriting year where it is envisaged unconditional right to defer settlement
contracts that the estimated cost of claims and of the liabilities for at least 12 months
expenses would exceed the unearned after the date of the statement offinancial
Investmentcontractsarethosecontracts premium reserve (UPR). position.
that transfer financial risk with no Borrowing costs are interest and other
significant insurance risk. Investment (ii) Life business costs incurred by the Group directly
contracts can be classified into interest Life fund attributable to the acquisition and
linked and unitised fund. Interest linked This is made up of net liabilities on policies construction of qualifying assets
investment contracts are measured at in force as computed by the actuaries which are assets that necessarily take
amortised cost while unitised funds are at the time of the actuarial valuation or a substantial period of time to get ready
measured at fair value. as at reporting period end. for its intended use or sale.
Investment contracts with guaranteed Borrowing costs are capitalized as part
returns (interest linked) and other business Liability adequacy test of the cost of a qualifying asset only
of a savings nature are recognised as At each end of the reporting period, when it is probable that they will result
liabilities. Interest accruing to the life liability adequacy tests are performed in future economic benefits to the Group
assured from investment of the savings by an Actuary to ensure the adequacy of and the costs can be measured reliably.
is recognised in profit and loss account the contract liabilities net of related DAC Other borrowing costs are recognised
in the year it is earned while interest paid assets. In performing these tests, current as an expense in the period in which
and due to depositors is recognised best estimates of future contractual they are incurred.
as an expense. The net result of the cash flows and claims handling and Whenthecarryingamountortheexpected
deposit administration revenue account administration expenses, as well as ultimate cost of the qualifying asset
is transferred to the profit or loss of the investment income from the assets exceeds its recoverable amount or net
group. Unitised funds contracts sell units backing such liabilities, are used. Any realizable value, the carrying amount is
under seven portfolios with the value of deficiency is immediately charged to written down or written off. Investment
each unit determined by the value of profit or loss initially by writing off DAC income earned on the temporary
the underlying assets for each portfolio. and by subsequently establishing a investment of specific borrowings pending
provision for losses arising from liability their expenditure on qualifying assets
(l) Technical reserves adequacy tests “the unexpired risk is deducted from the borrowing costs
provision”. eligible for capitalisation.
These are computed in compliance
with the provisions of Sections 20, 21, (m) Financial liabilities (ii) Trade and other payables
and 22 of the Insurance Act 2003 as Trade and other payables are recognised
follows: (i) Borrowings
Borrowings are recognised initially at fair
value, net of transaction costs incurred.

AXA Mansard Annual Report & Accounts 2018 79

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

initially at fair value and subsequently obligation. The increase in the provision difference and it is probable that the
measured at amortised cost using the due to passage of time is recognised as temporary difference will not reverse
effective interest method. The fair value interest expense. in the foreseeable future.
of a non-interest bearing liability is its Deferred income tax assets and
discounted repayment amount. If the (o) Current and deferred liabilities are offset when there is a legally
due date of the liability is less than one income tax enforceable right to offset current tax
year discounting is omitted. assets against current tax liabilities and
(iii) Financial guarantee contracts The tax expense for the period comprises when the deferred income tax assets and
Financial guarantees are contracts that current tax (company income tax, tertiary liabilities relate to income taxes levied
require the Group to make specified education tax) and deferred tax. Tax is by the same taxation authority on either
payments to reimburse the holder for recognised in profit or loss, except to the the taxable entity or different taxable
a loss it incurs because a specified extent that it relates to items recognised entities where there is an intention to
debtor fails to make payment when in other comprehensive income or settle the balances on a net basis.
due in compliance with the original or directly in equity. In this case, the tax is The tax effects of carry-forwards of
modified terms of a debt instrument. also recognised in other comprehensive unused losses or unused tax credits
Financial guarantee liabilities are initially income or directly in equity, respectively. are recognised as an asset when it is
recognised at their fair value, which is the Thecurrentincometaxchargeiscalculated probable that future taxable profits will
premium received, and then amortised on the basis of the tax laws enacted be available against which these losses
over the life of the financial guarantee. or substantively enacted at the end can be utilised.
Subsequent to initial recognition, the of the reporting period. Management Deferred tax related to fair value
financial guarantee liability is measured periodically evaluates positions taken remeasurement of available-for-sale
at the higher of the present value of any in tax returns with respect to situations investments, which are charged or
expected payment and the unamortised in which applicable tax regulation is credited directly in other comprehensive
premium when a payment under the subject to interpretation and establishes income, is also credited or charged
guarantee has become probable. Financial provisions where appropriate. directly to other comprehensive income
guarantees are included within other Deferred income tax is recognised, and subsequently recognised in the
liabilities in line with the requirements using the liability method, on temporary consolidated income statement together
of IAS 39. differences arising between the tax bases with the deferred gain or loss.
of assets and liabilities and their carrying
(n) Provisions amounts in the consolidated financial (p) Equity and Reserves
statements. However, if the deferred
Provisions are recognised when: the income tax arises from initial recognition (i) Share capital
Group has a present legal or constructive of an asset or liability in a transaction Shares are classified as equity when
obligation as a result of past events; it is other than a business combination that there is no obligation to transfer cash or
more likely than not that an outflow of at the time of the transaction affects other assets. Incremental costs directly
resources will be required to settle the neither accounting nor taxable profit attributable to the issue of equity
obligation; and the amount has been or loss, it is not accounted for. Deferred instruments are shown in equity as a
reliably estimated. Provisions are not income tax is determined using tax rates deduction from the proceeds, net of tax.
recognised for future operating losses. (and laws) that have been enacted or WhereanymemberoftheGrouppurchases
Where there are a number of similar substantively enacted by the end of the the Company’s equity share capital
obligations, the likelihood that an reporting period and are expected to (treasury shares), the consideration
outflow will be required in settlement apply when the related deferred income paid, including any directly attributable
is determined by considering the class tax asset is realisable or the deferred incremental costs (net of income taxes),
of obligations as a whole. A provision income tax liability is payable. is reported as a separate component of
is recognised even if the likelihood of Deferred income tax assets are recognised equity attributable to the Company’s
an outflow with respect to any one item to the extent that it is probable that equity holders. Where such shares are
included in the same class of obligations future taxable profit will be available subsequently sold, reissued or otherwise
may be small. against which the temporary differences disposed of, any consideration received
Provisions are measured at the present can be utilised. is included in equity attributable to
value of the expenditures expected to Deferred income tax is provided on the Company’s equity holders, net of
be required to settle the obligation temporary differences arising on any directly attributable incremental
using a pre-tax rate that reflects current investmentsinsubsidiariesandassociates, transactioncostsandtherelated income
market assessments of the time value except where the Group controls the tax effects.
of money and the risks specific to the timing of the reversal of the temporary
AXA Mansard Annual Report & Accounts 2018
80

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

(ii) Share premium (vii) Capital reserves and are gross of any taxes or duties
Share premium represents surplus on This refers to reserves arising from levied on premiums. Where insurance
the par value price of shares issued. business restructuring. contracts have a single premium or a
The share premium is classified as an (viii) Retained earnings limited number of premium payments
equity instrument in the statement of Retained earnings comprise the due over a significantly shorter period
financial position. undistributed profits from previous than the period during which benefits
(iii) Fair value reserves years, which have not been reclassified are provided, the excess of the premiums
Fair value reserves represents the fair to the other reserves. payable over the valuation premiums
value gains or losses on valuation of (ix) Dividends is deferred and recognised as income
financial assets measured at fair value Dividend on the Company’s ordinary in line with the decrease of unexpired
through equity. shares are recognised in equity in the insurance risk of the contracts in force
(iv) Treasury shares period in which they are approved by or, for annuities in force, in line with
When shares recognised as equity the Company’s shareholders. Dividend the decrease of the amount of future
are repurchased, the amount of the distributiontotheCompany’sshareholders benefits expected to be paid.
consideration paid, which includes directly is recognised as equity in the financial (b) Rendering of services: Revenue
attributable costs, net of tax effects, is statements in the period in which the arising from asset management and
recognised as a deduction from equity. dividend is paid to the Company’s other related services offered by the
Repurchased shares are classified as shareholders. Group are recognised in the accounting
treasury shares and are presented in the periodinwhichtheservicesare rendered.
treasury shares reserve. When treasury (q) Earnings per share Fees consist primarily of investment
shares are sold or reissued subsequently, management fees arising from services
the amount received is recognised as The Group presents basic and diluted rendered in conjunction with the
an increase in equity and the resulting earnings per share (EPS) data for its issue and management of investment
surplus or deficit on the transaction is ordinary shares. Basic EPS is calculated contracts where the Group actively
presented within share premium. by dividing the profit or loss attributable manages the consideration received
(v) Contingency reserves to ordinary shareholders of the Company from its customers to fund a return that
by the weighted average number of is based on the investment profile that
(a) Non-life business ordinary shares outstanding during the the customer selected on origination
In compliance with Section 21 (2) of year excluding treasury shares held by of the instrument.
Insurance Act 2003, the contingency the Company. These services comprise the activity of
reserve is credited with the greater of Diluted EPS is determined by adjusting trading financial assets and derivatives
3% of total premiums, or 20% of the the profit or loss attributable to ordinary in order to reproduce the contractual
net profits. This shall accumulate until shareholders and the weighted average returns that the Group’s customers
it reaches the amount of greater of number of ordinary shares outstanding expect to receive from their investments.
minimum paid-up capital or 50% of for the effects of all dilutive potential Such activities generate revenue that is
net premium. ordinary shares which comprise share recognised by reference to the stage of
(b) Life business options granted to staff. completion of the contractual services.
In compliance with Section 22 (1) (b) In all cases, these services comprise an
of Insurance Act 2003, the contingency (r) Revenue recognition indeterminate number of acts over the life
reserve is credited with the higher of 1% of the individual contracts. For practical
of gross premiums or 10% of net profit. Revenue comprises premium, value for purposes, the Group recognises these
(vi) Statutory reserves services rendered, net of value-added fees on a straight-line basis over the
In accordance with the provisions of tax, after eliminating revenue within the estimated life of the contract. Certain
Section 69 of the Pension Reform Act Group. Revenue classes are recognised upfront payments received for asset
2004, the statutory reserve is credited as follows: management services (‘front-end fees’)
with an amount equivalent to 12.5% of net (a) Premiumincome:forshortduration aredeferredand amortisedinproportion
profit after tax or such other percentage life insurance contracts, premiums are to the stage of completion of the service
of the net profit as the National Pension recognised as revenue (earned premiums) for which they were paid.
Commission may from time to time proportionally over the period of coverage. The Group charges its customers for
stipulate. The portion of premium received on in- asset management and other related
force contracts that relates to unexpired services using the following different
AXA Mansard Annual Report & Accounts 2018 risks at the reporting date is reported as approaches:- Front-end fees are charged
the unearned premium liability. Premiums to the client on inception. This approach
areshownbeforedeductionofcommission
81

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

is used particularly for single premium recognised within investment income and 2014. The Group pays contributions
contracts. The consideration received finance cost respectively in the income to pension fund administrators on a
is deferred as a liability and recognised statementusing the effective interest rate mandatory basis. The Group has no
over the life of the contract on a straight- method. When a receivable is impaired, further payment obligations once the
line basis; and Regular fees are charged the Group reduces the carrying amount contributions have been paid. The
to the customer periodically (monthly, to its recoverable amount, being the contributions are recognised as employee
quarterly or annually) either directly or estimated future cash flow discounted at benefits expense when they are due.
by making a deduction from invested the original effective interest rate of the Prepaid contributions are recognised as
funds. Regular charges billed in advance instrument, and continues unwinding an asset to the extent that a cash refund
are recognised on a straight-line basis the discount as interest income. or a reduction in the future payments
over the billing period; fees charged at is available.
the end of the period are accrued as (u) Operating (b) Short-term benefits
a receivable that is offset against the expenditure Wages, salaries, paid annual leave and
financial liability when charged to the sick leave, bonuses and non-monetary
customer. (i) Reinsurance expenses benefits are recognised as employee
(c) Dividend income: dividend income Reinsurance cost represents outward benefit expense and accrued when the
foravailable-for-saleequities isrecognised premium paid to reinsurance companies associated services are rendered by the
when the right to receive payment is less the unexpired portion as at the end employees of the Group.
established, this is the ex-dividend date of the accounting year. (c) Share based payment
for equity securities. They are reported (i) Equity-settledsharebasedpayment
within other income. (ii) Underwriting expenses The group operates an equity share-
(d ) Net gains/(losses) on financial Underwriting expenses comprise based compensation plans. The fair
acquisition costs and other underwriting value of equity-settled share options
assets expenses. Acquisition costs comprise all is determined on the grant date and
Net realised gains/(losses) on financial direct and indirect costs arising from the accounted for as staff costs over the
assets comprises gains less losses writing of insurance contracts. Examples vesting period of the share options, with
related to trading and available-for-sale of these costs include, but are not limited a corresponding increase in equity. At the
investment, and includes all realised and to, commission expense, supervisory levy, end of each reporting period, the group
unrealised fair value changes and foreign superintending fees and other technical revisits its estimates of the number of
exchange differences and realised gain expenses. Other underwriting expenses options that are expected to vest based
or loss on available-for-sale investment. are those incurred in servicing existing on the non market and service conditions.
(e) Net fair value gain on non financial policies/contract. These expenses are It recognises the impact of the revision
charged in the accounting year in which to initial estimates, if any, in profit or
assets they are incurred. loss with a corresponding adjustment
Net fair value gain on non financial assets to equity. On vesting of share options,
at fair value represents fair value gains (iii) Other operating expenses amounts previously credited to the share-
on the Group’s non financial instruments Other expenses are expenses other than based payment reserve are transferred
such as investment property. claims expenses, employee benefit, to retained earnings through an equity
expensesformarketingandadministration transfer. On exercise of equity-settled
(s) Changes in life fund and underwriting expenses. They include share options, proceeds received are
estimates wages for contract staff, professional fee, credited to share capital and premium.
depreciation expenses and other non- The grant date fair value of equity-settled
Actuarial valuation of the life fund is operating expenses. Other operating share-based payments awards granted
conducted annually to determine the expenses are accounted for on accrual to employees is generally recognised
net liabilities on the existing policies and basis and recognised in profit or loss as an expense, with a corresponding
the adequacy of the assets representing upon utilization of the service. increase in equity, over the vesting period
the insurance fund as at the date of of the awards. The amount recognised
valuation. All deficits arising therefrom (iv) Employee benefits as an expense is adjusted to reflect the
are charged to profit or loss. (a) Defined contribution plans number of awards for which the related
The Group operates adefinedcontributory services and unobservable performance
(t) Investment income pension scheme for eligible employees. conditions are expected to be met, such
Employees and the Group contribute that the amount ultimately recognised is
Interest income and expenses for all 7.5% and 10.5% respectively of each based on the number of awards that meet
interest-bearing financial instruments qualifying staff’s salary in line with the
including financial instruments measured provisions of the Pension Reform Act
at fair value through profit or loss, are

82 AXA Mansard Annual Report & Accounts 2018

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

the related service and unobservable on the liability is recognised using the (a) Fair value of financial
performance conditions at the vesting Group’s incremental borrowing rate. assets
date. For share-based payment awards
with non vesting conditions, the grant (b) Leased assets (i) Impairment of available-for-sale
date fair value of the share based payment Leases of property, plant and equipment equity financial assets
is measured to reflect such conditions that transfer to the Group substantially
and there is no true-up for differences all of the risks and rewards of ownership The Group determines that available-for-
between expected and actual outcomes. are classified as finance leases. The sale equity financial assets are impaired
(ii) Cash-settled share based payment leased assets are measured initially at when there has been a significant or
The fair value of the amount payable an amount equal to the lower of their prolonged decline in the fair value
to employees in respect of share fair value and the present value of the below its cost. This determination of
appreciation rights, which are settled in minimum lease payments. Subsequent what is significant or prolonged requires
cash, is recognised as an expense, with to initial recognition, the assets are judgment. In making this judgment, the
a corresponding increase in liabilities, accounted for in accordance with the Group evaluates among other factors,
over the period in which the employees accounting policy applicable to that the normal volatility in share price, the
become unconditionally entitled to asset. Assets held under other leases financial health of the investee, industry
payment. The liability is remeasured at are classified as operating leases and are and sector performance, changes
each reporting date and at settlement not recognised in the Group’s statement in technology, and operational and
date based on the fair value of the share of financial position. financing cash flow. In this respect, a
appreciation rights. Any changes in the (c) Lease payments decline of 20% or more is regarded as
fair value of the liability are recognised Payments made under operating leases significant, and a period longer than 12
in profit or loss. are recognised in profit or loss on a months is considered to be prolonged.
straight-line basis over the term of the If any such quantitative evidence exists
(d) Termination benefits lease. Lease incentives received are for available-for-sale financial assets,
Termination benefits are expensed at the recognised as an integral part of the the asset is considered for impairment,
earlier of when the Group can no longer total lease expense, over the term of the taking qualitative evidence into account.
withdraw the offer of those benefits lease. Minimum lease payments made For the year ended 31 December 2018,
and when the Group recognises costs under finance leases are apportioned if the decline in the value of the AFS
for a restructuring if benefits are not between the finance expense and the equity instruments were considered
expected to be settled wholly within reduction of the outstanding liability. prolonged, an impairment of =N=21
the 12 months of the reporting date, The finance expense is allocated to million (2017: =N=67 million) would have
then they are discounted. each period during the lease term so been adjusted for in the Statement of
as to produce a constant periodic rate Comprehensive Income.
(v) Leases of interest on the remaining balance of
the liability. (ii) Fair value of unquoted equity
(a) Determining whether an The Group leases some welcome centers financial instruments
arrangement contains a lease and branches under the operating lease
At inception of an arrangement, the Group arrangement. The lease payments are The fair value of financial instruments
determines whether the arrangement is recognised as an expense in profit or where no active market exists or where
or contains a lease. At inception or on loss over the lease term. quoted pricesarenototherwiseavailable
reassessment of an arrangement that are determined by using the income
contains a lease, the Group separates 2.3 Critical accounting approach. In these cases the fair values
payments and other consideration estimates and are estimated from observable data using
required by the arrangement into judgments valuation models. The models used
those for the lease and those for other to determine fair values are validated
elements on the basis of their relative The Group makes estimates and and periodically reviewed by qualified
fair values. If the Group concludes for assumptions that affect the reported personnel independent of those that
a finance lease that it is impracticable amounts of assets and liabilities within the sourced them. All models are certified
to separate the payments reliably, then financial year. Estimates and judgments before they are used, and models are
an asset and a liability are recognised are continually evaluated and based on calibrated to ensure that outputs reflect
at an amount equal to the fair value of historical experience and other factors, actual data and comparative market
the underlying asset; subsequently, including expectations of future events prices. Changes in assumptions about
the liability is reduced as payments that are believed to be reasonable under these factors could affect the reported
are made and an imputed finance cost the circumstances. fair value of financial instruments.

AXA Mansard Annual Report & Accounts 2018 83

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

(b ) Liabilities arising of =N=7.7 million (2017: =N=3.9 million) in the date. The estimation of the fair value
from insurance Statement of Comprehensive Income. requires the determination of the most
contracts appropriate model which is dependent
(c ) Impairment for on the terms of the grant. The estimate
(i) Claims arising from non-life insurance receivables also requires making assumption on the
contracts most appropriate inputs for the valuation
The Group tests periodically whether model on items such as expected
Claims on non-life insurance contracts premium receivables have suffered any life of the share option, volatility and
are payable on a claims-occurrence impairment. With the no premium no dividend yield. The assumptions used
basis. The Group is liable for all insured cover policy, all premium transactions in estimating the fair value of the share
events that occur during the term of the are paid for immediately except in the based payments have been disclosed
contract. There are several variables case of brokered transactions. For in Note 45.
that affect the amount and timing of brokered transactions, the period is
cash flows from these contracts. These extended for 30 days if credit notes (g) Current income tax
mainly relate to the inherent risks of have been received from the broker. If
the business activities carried out by all insurance receivables within 30 days General Business:
individual contract holders and the risk and reinsurance receivables within 90 „„ T he current income tax charge is
management procedures adopted. The days were deemed as impaired, a total
estimated cost of claims includes direct impairment of =N=704 million (2017: =N=251 calculated on taxable income on
expenses to be incurred in settling claims, million) would have been recognised in the basis of the tax laws enacted
net of the expected subrogation value the income statement See note 10.1 (a) or substantively enacted at the
and other recoveries. The Group takes for details. reporting date. The Company applies
all reasonable steps to ensure that it Section 16 of the Company Income
has appropriate information regarding (d) Intangibles (goodwill) Tax Act. It states that an Insurance
its claims exposures. However, given business shall be taxed as:
the uncertainty in establishing claims Goodwill represents the cost of acquisition „„ a n insurance company, whether
provisions, it is likely that the final less the aggregate of the fair value of proprietary or mutual, other than
outcome will prove to be different from the the purchased entity’s identifiable net a life insurance company; or
original liability established. A sensitivity assets and liabilities. Goodwill has been „„ a Nigerian company whose profit
analysis was done to determine how the recognised by the group at the acquisition accrued in part outside Nigeria,
IBNR reserve amount would change if ofAXAMansardPensionsLimited(formerly the profit on which tax may be
we were to consider the 75th percentile Penman Pensions Limited) in 2015 and imposed, shall be ascertained by
as opposed to the best estimate figures AXA Mansard Health Limited in 2013. taking the gross premium interest and
included in the reserve reviews as at Additional judgments and assumptions other income receivable in Nigeria
31 December 2018 and an additional are as disclosed in note 17(c). Based on less reinsurance and deducting
gross provision of =N=170 million (2017: the impairment assessment carried out from the balance so arrived at, a
=N=72 million) would have been reported. as at 31 December 2018, no charge has reserve fund for unexpired risks at
been recognised. See note 17 for details the percentage consistently adopted
(ii) Liabilities arising from life insurance of the sensitivity performed for goodwill. by the company in relation to its
contracts operation as a whole for such risks
(e) Investment property at the end of the period for which
The liabilities for life insurance contracts the profits are being ascertained,
are estimated using appropriate and TheGroup’sInvestmentproperty-Mansard subject to the limitation below:
acceptable base tables of standard Place- is accounted for in the books of APD An insurance company, other than
mortality according to the type of Limited. The property was valued using a life insurance company, shall be
contract being written. Management the income approach. The valuation was allowed as deductions from its
make various assumptions such as based on market data such as discount premium the following reserves for
expenses inflation, valuation interest rates, rental risk and reversionary rates. tax purposes.
rate, mortality and further mortality Management estimated the market value (a) for unexpired risks, 45 percent of
improved in estimating the required of the leasehold interest based on the the total premium in case of general
reserves for life contracts. However if highest and best use of the property. insurance business other than marine
the group should change its basis for insurance business and 25 percent of
mortality by -5%, the group would have f) Share based payments the total premium in the case of marine
recognised an actuarial valuation surplus cargo insurance;
The Group measures the cost of equity
settled transactions using fair value
of the equity instrument at the grant

84 AXA Mansard Annual Report & Accounts 2018

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

(b) for other reserves, claims and The reserves have been analysed gross of from the total future claims to give the
outgoings of the company an amount reinsurance. However, net IBNR reserve is resulting IBNR figure per accident half-
equal to 25 percent of the total premium. calculated by multiplying the gross IBNR year period.
reserve by a factor that is calculated as
Life: the ratio of the gross incurred claims to IBNR = Ultimate claim amount (excl.
the net incurred claims over the past extreme large losses)
Thecurrentincometaxchargeiscalculated three years.
on taxable income on the basis of the tax minus paid claims to 31
laws enacted or substantively enacted Reserving methodology December, 2018 (excl. extreme
at the reporting date. Current tax also large losses)
includes any tax arising from dividend. For the Engineering, Energy, Fire, Marine
Hull and Aviation classes of business, m inus claims outstanding
Minimum tax claims paid data was sub-divided into (excl. extreme large losses)
large and attritional claims. This was
The Company is subject to the Companies to allow for separate reserves to be
IncomeTaxAct(CITA).Totalamountof tax calculated for attritional and large claims Assumptions underlying
payable under CITA is determined based as the large claims are expected to behave the BCL
on the higher of two (2) components differently from the attritional claims
namely Company income tax (based in terms of reporting and settlement. The Basic Chain Ladder Method assumes
on taxable income (or loss) for the year; The limits used are given in the table that past experience is indicative of future
and Minimum tax (determined based below: experience i.e. that claims recorded
on the sum of the highest of 0.25% of to date will continue to develop in a
revenue of =N=500,000, 0.5% of gross Class Large Claim similar manner in the future. An implicit
profit, 0.25% of paid up share capital Definition assumption is that, for an immature
and 0.5% of net assets and 0.125% of Engineering accident year, the claims observed thus
revenue in excess of =N=500,000). Taxes Marine Hull (=N=’000) far tell something about the claims yet to
based on taxable profit for the year are Fire 100,000 be observed. A further assumption is that
treated as current income tax in line 200,000 it assumes consistent claim processing,
with IAS 12; whereas taxes which are 300,000 a stable mix of types of claims, stable
based on gross amounts are outside inflation and stable policy limits.
the scope of IAS 12 and therefore are Claims of such a large nature are expected
disclosed separately. to have a very short reporting delay, Loss Ratio method
Where the minimum tax is higher than the and as such, no new large claims are
Company Income Tax (CIT), a hybrid tax expected to be reported. Due to the limited data in Energy and
situation exits. In this situation, the CIT Aviation portfolios, using the Basic
is recognized in the income tax expense The methodologies governing the Chain Ladder method was therefore
line in the profit or loss and the excess attritional claim reserve calculations inappropriate. The Loss ratio method is
amount is presented above income tax are described below: often used when there is little experience
line as minimum tax. (claims history) in the line of business.
Basic Chain Ladder We allowed for expected experience
Non life Business and Life Method (BCL) to date and the average assumed
Actuarial Valuation ultimate loss ratio in carrying out the
Development factors were calculated calculation.
Non life business using the last 1 to 10 years’ data by
Reserving accident period. Ultimate development IBNR= Expected average ultimate
factors were calculated and judgment was annual loss ratio
AXA Mansard Insurance Plc (“AXA applied in the selection of these factors.
Mansard”) commissioned QED Actuaries & m ultipliedbyearnedpremium
Consultants to calculate non life business Ultimate development factors were then minus experience to date
reserves as at 31 December 2018. applied to the paid data per accident
The eight (8) classes of business that were period and an ultimate claim amount is Assumptions underlying
reviewed are Aviation, Oil and Energy, calculated. The future claims (the ultimate the Loss Ratio Method
Engineering, Fire, General Accident, claim amount less paid claims to date)
Marine Cargo, Marine Hull and Motor. wereallocatedtofuturepaymentperiods An estimate of the average ultimate
in line with the development patterns loss ratio needed to be assumed. We
calculated above. The outstanding claims based the loss ratios off of experience
reported to date are then subtracted that has been seen to date in previous
accident years.

AXA Mansard Annual Report & Accounts 2018 85

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

Unearned Premium Sensitivity Analysis gross best estimate reserves to the
Reserve (UPR) and gross reserves calculated at the 75th
Deferred Acquisition Cost A sensitivity analysis was done to percentile and a 14.9% increase from
(DAC) determine how the IBNR reserve amount the gross best estimate reserves to the
would change if we were to consider the gross reserves calculated on the 90th
The unearned premium reserve and 75th percentile and 90th percentile as percentile. In conclusion, there is only
deferred acquisition cost were calculated opposed to our best estimate figures a 25% chance that the IBNR reserves
using a time-apportionment basis, in (whichwouldrepresentthe50thpercentile) required will exceed NGN 2,492 million
particular, the 365ths method. In the included in reserve reviews as at 31 and only a 10% chance that the IBNR
calculations, it was assumed that both December 2018. The 75th percentile is reserves required will exceed NGN 2,667
the start and end date were included in a generally accepted level of prudency. million as at 31 December 2018.
the coverage period. Overall, there is 7.3% increase from the

In thousands on naira Gross IBNR - Attritional Reserves
Aviation
Energy Best Estimate 75th Percentile 90th Percentile
Engineering
Fire 22,405 23,535 24,214
General Accident
Marine Cargo 1,033,744 1,129,674 1,187,231
Marine Hull
Motor 142,133 150,539 161,290

536,335 547,328 563,665

250,099 266,613 286,477

44,648 58,648 90,559

34,988 45,959 70,967

257,158 269,520 282,932

2,321,511 2,491,816 2,667,335

Life & Savings Reserving policyholders at the valuation date. The movement in the annuity portfolio
Valuation methods Where policies have active life cover is analysed below:
this has been valued using a cashflow
Individual Life projection approach as described above At 31 December 2017 Number Annual
for other risk business. New entrants of Annuity
Individual risk business comprises whole Additional Funds (=N='000)
life assurances, credit life business, term Annuity Deaths annuity
assurances of various descriptions, At 31 December policies 288,411
including mortgage protection and Annuities are reserved for using a 2018 -
annuity. For all individual risk business discounted cash flow approach. Here, 404
the gross premium method of valuation reserves were set equal to the present - 1,187
was adopted. value of future annuity payments plus 4 3,969
Reserves were calculated via a cashflow expenses, with allowance being made 293,567
projection approach, taking into account for any guaranteed periods as required. (2)
future office premiums, expenses and As at 31 December 2017, the Company 406
benefit payments including an allowance had underwritten 404 annuity policies
for rider benefits and surrenders where with annual annuity payment of =N=295.4 Group Life
applicable. Future cashflows were million. for the year ended 31 December
discounted back to the valuation date 2018, the Company did not underwrite Reserves for Group Life comprise an
at the valuation rate of interest. any new annuity policies but received Unexpired Premium Reserve (UPR) and
The reserve for the individual deposit additional annuity premium from existing a reserve for Incurred But Not Reported
based policies has been taken as the customers. Claims (IBNR) to make an allowance for
amount standing to the credit of the the delay in reporting of claims. The
UPR represents the unexpired portion
of the premium for each scheme, net
of an expense margin reflecting the
acquisition cost loadings. The adequacy

86 AXA Mansard Annual Report & Accounts 2018

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

of the UPR is then tested by comparing Expense Withdrawals
against an Additional Unexpired Risk
Reserve (AURR), which is calculated Expense for Individual Life (including Surrenders are permitted for the Whole
using pooled industry claims data for annuity) and individual deposit-based Life Plan. An allowance has been made in
the underlying assumptions. An AURR business were reserved explicitly at =N=5,000 the valuation for exits by surrender using
was held in cases where the UPR was per policy per annum excluding AIP, for the rates: Single premium policies-0%,
deemed insufficient to meet claims which an expense of =N=750 was used. Year 1 (lapse without value) - 10%, Year 2
in respect of the unexpired period. Credit Life Expenses were reserved for (lapse without value) - 7.5%, Year 3 - 5%,
An allowance was made for IBNR (Incurred at =N=500 per policy annum. All expenses Years 4 and above - 2.5%. The payment
But Not Reported) claims in Group Life to were assumed to increase with inflation of the surrender value at the exit date has
take care of the delay in reporting claims. at 11% pa. been allowed for within the cashflows.
This was based on an Ultimate Loss Ratio The account balance has been held for
approach, which uses historical claims Future maintenance investment and deposit linked policies
experience to estimate the pattern of expenses that have lapsed by the valuation date
future emerging claims, from which the but the funds have not been paid out.
IBNR portion is determined. The regulatory maintenance expenses A provision has also been made for the
are derived from the best estimate reinstatement of life cover assuming a
Assumptions used maintenance expenses plus a prudence reinstatement rate of 20%. No allowance
margin for adverse deviations.Some has been made in the valuation for the
The assumptions used for the insurance expense lines were removed from reinstatement of traditional policies
contracts disclosed in this note are as the reported Individual Life operating that lapsed before the valuation date.
follows: expenses which were identified as being An allowance has been made for future
directly attributable to new business, lapses at the following rates: Single
Valuation interest rate e.g. advertising, sales promotion and premium policies: 0%, Year 1 - 10%,
merchandising. 35% of the remaining Year 2 - 7.5%, Year 3 - 5% whilst Year 4
The proposed valuation interest rate is reportedoperatingexpenseswasallocated and above - 2.5%.
based on current market risk-free yields to new business. We allowed for a notional
with adjustments. This is in line with the expense per policy of =N=500 pa for Credit Reinsurance Agreements
requirements of IFRS 4 (Paragraph 24). Life business. This is predominantly short
The use of a risk-free rate also implies term retail business from our financial Reinsurance is allowed for in the valuation
that future investment margins (in institution partners which requires less by having gross and reinsurance ceded
excess of the risk-free return) will not policy administration compared to other records in the policy files. For IFRS
be capitalized upon, which satisfies Individual Life business. The remaining compliance purposes all reserves were
paragraph 27 of IFRS 4. Further, the expenses were apportioned over the reported gross of reinsurance, with the
result is a “fair value” liability calculation remaining Individual Life policies to value of the reinsurance asset calculated
which aids the comparability of accounts estimate the 2018 maintenance expense and reported separately.
between insurers. incurred which was =N=5,000 per policy
We adopted net valuation interest rates per annum. Health Reserving
of 14.21% pa for all long term business
14.78% pa for Annuity business. as at 31 Commission The product offerings from the Health
December 2018, the average yield on 20 business includes products under the
year FGN bonds was 15.37%. For the Commission rates are set as known, and Corporate, Personal and Internationals
purpose of determining the valuation understood to be 10% of each premium plans. IBNR (Incurred But Not Reported)
interest rate for individual risk business, for all individual products (excluding was calculated for products under each
we considered a prudence margin of annuity). plan.
0.25% whilst for Annuity, an additional
margin of 0.25% for reinvestment risks Mortality and Future Reserving Methodology
were deducted from the gross yield. These Improvements and Assumptions
made some allowance for the volatility of
the “risk free” yields as well as duration The Mortality Table used in the valuation For the Corporate plans, ulimate claims
mismatch between available bonds and is the UK’s Mortality of Assured Lives were projected using Basic Chain Ladder
the liabilities. Future tax was taken into A6770 (1967-70) table. The exception is (“BCL”) and Bornhuetter Ferguson (“BF”)
account by deducting 6% of the gross the annuity business for which the UK’s methods. Paid claims and outstanding
yield less the margins to arrive at net Pension Annuitants table, PA90 (rated claims are then deducted from the
rates to adopt for valuation purposes. -1) was used. ultimate claims to determine the IBNR.
For the Personal plans and International
Plans, the Loss Ratio (“LR”) method is

AXA Mansard Annual Report & Accounts 2018 87

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

used to project the ultimate claims. Paid Bornhuetter-Ferguson ratio is assumed from previous years’
claims and Outstanding claims are then Method experienceandthereserveiscalculatedas:
deducted from the ultimate claims to (Ultimate Loss Ratio x Earned Premiums)
determine the IBNR. BF method is used to determine reserves - Paid Claims - Outstanding Claims
for periods where there is high variability
Basic Chain Ladder in loss development patterns. This Sensitivity Analysis
Method is the methodology we have used to
determine reserves for the most recent A sensitivity analysis was done to
BCL method is appropriate where there is two (2) months of the Corporate plans. determine how the IBNR reserve amount
significant data as we see for the Corporate This method is based on the expected would change if we were to consider the
plans. The methodology assumes that loss ratios. 75th percentile and 90th percentile as
past experience is indicative of future opposed to our best estimate figures
experience i.e. claims recorded to date Loss Ratio Method (which would represent the 50th
will continue to develop in a similar percentile) included in reserve reviews
manner in the future. LR method is appropriate where as at 31st December 2018. The 75th
there is limited data available as percentile is a generally accepted level
Corporate Platinum we see in the Personal plans and of prudency.
Corporate Gold International plans. An ultimate loss
Corporate Silver
Corporate Bronze Gross IBNR (=N=’000)
Personal Platinum
Personal Gold Best 75th 90th
Personal Silver Estimate Percentile Percentile
Personal Bronze
AXA Mansard International -AMIHP 493,292 507,978 568,019
IMED
Total 609,512 648,014 657,539

Sensitivity analysis 306,005 321,462 393,016

The analysis which follows is performed 216,368 225,371 251,831
for reasonably possible movements in key
assumptions with all other assumptions 2,944 4,107 4,804
held constant, and shows the impact on
gross and net liabilities, profit before tax 5,864 9,306 10,718
and equity. These variables are valuation
interest rate, claims handling expenses, 3,782 5,903 7,140
inflation, lapses and mortality rate.
Movements in these assumptions are 3,961 6,048 7,300
non–linear and sensitivity information
vary according to the current economic 8,298 13,409 16,476
assumptions, mainly due to the impact
of changes to both the intrinsic cost and 3,998 6,031 7,250
time value of options and guarantees.
These variables have been tested by 1,654,023 1,747,629 1,924,095
-/+1%, -/+2%, -/+5% and -/+10%
The results of the changes in the variables A movement of expenses by +10% will
have been summarised below: result in an increase the Life fund liability
The sensitivity analysis of the life to =N=10,285,370 whilst a -10% change
business indicates that a +1% change in will reduce the Life fund liability to
Valuation Interest Rate (VIR) will result =N=10,249,215. Expense inflation moving
in a reduction of the Life fund liability to by +2% will increase the life fund to
=N=10,160,666 whilst a -1% change in VIR =N=10,287,545 whilst a -2% will produce a
will result in additional Life fund liability reduced Life fund liability of =N=10,252,491.
to =N=10,388,788. A 5% increase in the Lapse rate will
The sensitivity analysis also indicates also reduce the Life fund liability to
that an increase of mortality rates by =N=10,267,133 whilst a 5% decrease in the
5% will increase the Life fund liability Lapse rate will increase the Liability to
to =N=10,275,133 whilst a reduction of =N=10,267,191.
mortality rate by 5% will decrease the
Life fund liability to =N=10,259,503.

88 AXA Mansard Annual Report & Accounts 2018

AXA Mansard Annual Report & Accounts 2018 SENSITIVITY OF LIABILITIES TO CHANGES IN LONG TERM VALUATION ASSUMPTIONS FOR THE 31 DECEMBER 2018 VALUATION

=N='000 Base VIR +1% VIR -1% Expenses Expenses Expense Expense Lapses +5% Lapses -5% Mortality Mortality
Individual Traditional 725,525 704,526 752,771 +10% -10% inflation inflation 725,497 725,554 +5% -5%
PRA Regulated Annuities 1,854,619 1,769,123 1,949,000
Individual DA 6,898,383 6,898,383 6,898,383 741,048 710,264 +2% -2% 1,854,619 1,854,619 743,599 707,457
Group Life - UPR 635,357 635,357 635,357 1,857,305 1,851,934 740,562 714,950 6,898,383 6,898,383 1,844,517 1,865,028
Group Life - AURR 6,898,383 6,898,383 1,859,966 1,850,523 6,898,383 6,898,383
Group Life - IBNR 2,026 2,026 2,026 6,898,383 6,898,383 635,357 635,357
Reinsurance 793,350 793,350 793,350 635,357 635,357 635,357 635,357 2,026 2,026 635,357 635,357
Net liability (692,099) (692,099) (692,099) 2,026 2,026 2,026 2,026
% Change in net liability 10,267,162 10,160,666 10,388,788 2,026 2,026 793,350 793,350
-1.04% 793,350 793,350 793,350 793,350 (692,099) (692,099) 793,350 793,350
1.18% (692,099) (692,099) (692,099) (692,099) 10,267,133 10,267,191 (692,099) (692,099)
10,285,370 10,249,215 10,287,545 10,252,491 10,275,133 10,259,503
-0.14% 0.00% 0.00%
0.18% -0.17% 0.20% 0.08% -0.07%

Summary Base VIR +1% VIR -1% Expenses Expenses Expense Expense Lapses +5% Lapses -5% Mortality Mortality
Individual 9,528,528 9,422,032 9,650,154 +10% -10% inflation inflation 9,528,499 9,528,557 +5% -5%
Group 738,634 738,634
Net liability 738,634 738,634 738,634 9,546,736 9,510,581 +2% -2% 10,267,133 10,267,191 9,536,499 9,520,869
% change in liability 10,267,162 10,160,666 10,388,788 738,634 738,634 9,548,911 9,513,857 0.00% 0.00% 738,634 738,634

- -1.04% 1.18% 10,285,370 10,249,215 738,634 738,634 10,275,133 10,259,503
0.18% -0.17% 10,287,545 10,252,491 0.08% -0.07%

0.20% -0.14%

SENSITIVITY OF LIABILITIES TO CHANGES IN LONG TERM VALUATION ASSUMPTIONS FOR THE 31 DECEMBER 2017 VALUATION

=N=’000 Base VIR +1% VIR -1% Expenses Expenses Expense Expense Lapses +5% Lapses -5% Mortality Mortality
Individual Traditional 540,632 516,295 571,909 +10% -10% inflation inflation 540,608 540,655 +5% -5%
PRA Regulated Annuities 2,031,619 1,929,947 2,144,675
Individual DA 6,457,491 6,457,491 6,457,491 560,234 521,346 +2% -2% 2,031,619 2,031,619 555,950 525,347
Group Life - UPR 521,198 521,198 521,198 2,034,735 2,028,503 558,731 528,020 6,457,491 6,457,491 2,020,559 2,043,042
Group Life - AURR 32,682 32,682 6,457,491 6,457,491 2,038,561 2,026,420 6,457,491 6,457,491
Group Life - IBNR 32,682 1,614,767 1,614,767 6,457,491 6,457,491 521,198 521,198
Reinsurance 1,614,767 (839,302) (839,302) 521,198 521,198 521,198 521,198 32,682 32,682 521,198 521,198
Net liability (839,302) 10,233,079 10,503,421 32,682 32,682 32,682 32,682 1,614,767 1,614,767 32,682 32,682
% Change in net liability 10,359,088 -1.27% 1,614,767 1,614,767 1,614,767 1,614,767 (839,302) (839,302) 1,614,767 1,614,767
0.93% (839,302) (839,302) (839,302) (839,302) 10,359,064 10,359,112 (839,302) (839,302)
10,381,806 10,336,686 10,384,129 10,341,277 0.27% -0.27% 10,363,346 10,355,226
0.27% -0.26% -0.16% -0.01% 0.01%
0.20%

89 Summary Base VIR +1% VIR -1% Expenses Expenses Expense Expense Lapses +5% Lapses -5% Mortality Mortality
+10% -10% inflation inflation +5% -5%
Individual 9,029,741 8,903,733 9,174,075 9,029,717 9,029,765
Group 1,329,346 1,329,346 1,329,346 9,052,459 9,007,340 +2% -2% 1,329,346 1,329,346 9,034,000 9,025,880
Net liability 10,359,088 10,233,079 10,503,421 1,329,346 1,329,346 9,054,783 9,011,930 10,359,064 10,359,112 1,329,346 1,329,346
% change in liability 10,381,806 10,336,686 1,329,346 1,329,346 10,363,346 10,355,226
- -1.27% 0.93% 10,384,129 10,341,277 0.27% -0.27%
0.27% -0.26% -0.01% 0.01%
0.20% -0.16%

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

4 Financial Risk or commodity prices. The identification, its Board Finance and Investment
Management management, control, measurement Committee.
and reporting of market risk are aligned The approved stop loss limit below shows
towards the sub-risk categories namely: the percentage of stock positions that
can be sold given a position of events: a
(a) Introduction and „„ Price risk given percentage loss and absolute loss
overview „„ Foreign exchange risk amounts. For example, a combination
„„ Interest-rate risk of 20% loss and =N=10 million loss would
The Group is exposed to a range of require the Company to sell down 25%
financial risks through its financial 4.1.1 Price risk of the position.
instruments, insurance assets and
insurance liabilities. The key financial risk The Group’s management of price risk Stop loss limit analysis
is that in the long term its investments is guided by the following limits:
proceeds are not sufficient to fund the „„ Investment quality and limit analysis Market capitalizations, liquidity and
obligations arising from its insurance „„ Stop loss limit analysis market volatiles are criteria used to
and investment contracts. The most „„ Stock to total loss limit analysis classify certain eligible stocks. These
important components of the financial are in categories A, B and C. Stop
risks are: loss limits (which depict the volume
of loss the Group is willing to accept)
„„ Market risk are ascribed to each stock category.
„„ Credit risk Periodic reviews and reassessments are
undertaken on the performance of the
„„ Liquidity risk stocks. The stop loss limits on categories
Investment quality and of stocks as approved by Management
Underwriting & Investment Committee
4.1 Market risk limit analysis are depicted below

Market risk is the risk of loss in On-or Management Underwriting & Investment
Off-balance sheet positions, as a Committee establishes and approves a
result of adverse movement in foreign list of eligible listed and unlisted stocks
exchange rate, interest rate, and equity aligned with investment approval/dealer
limits as approved by the Board through

CLASS STOP LOSS LIMIT CHARATERISTICS
A 25% Very liquid, high market capitalisation, low market volatility
B 23% Very liquid, moderate market capitalisation, low market volatility
C 20% Liquid, moderate market capitalisation, low market volatility

Maximum losses permissible in Naira 15% Percentage losses 25%
=N=10,000,000 0.0% 20% 50%
=N=15,000,000 25% 25% 75%
=N=20,000,000 50% 50% 100%
>=N=25,000,000 100% 75% 100%
100%

The Group’s Enterprise Risk Management (ERM) function monitors compliance of the Investment arm to these limits and reports
to Management on a weekly basis.


90 AXA Mansard Annual Report & Accounts 2018

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

A summary of the Group’s Stop Loss Limit position on trading equities is as follows:

December 2018
Amounts in thousands of Naira

STOP LOSS LIMIT ANALYSIS ON GROUP'S QUOTED SECURITY PORTFOLIO

SECTOR OF STOCK COST MARKET STOCK % GAIN/ BENCHMARK EXCEP-
PRICE PRICE CLASS LOSS 25% TION
59% 25%
Banking and other financial institutions 40,265 64,039 A 1% 20% NO
6% 25% NO
Building materials 36,818 37,064 A 0% 20% NO
13% 20% NO
Consumer goods 16,914 17,857 C 0% NO
NO
Insurance 4,191 4,191 A

Oil and gas 18,784 21,233 C

Real estate - -C

Total 144,385

STOP LOSS LIMIT ANALYSIS ON COMPANY'S QUOTED SECURITY

COST MARKET STOCK % GAIN/ BENCHMARK EXCEP-
SECTOR OF STOCK PRICE PRICE CLASS LOSS 25% TION
27% 25%
Banking and other financial institutions 24,021.32 30,577 A 1% 20% NO
A 6% 25% NO
Building materials 36,817.66 37,064 C 0% 20% NO
A 13% 20% NO
Consumer goods 16,913.53 17,857 C 0% NO
C NO
Insurance 4,191 4,191

Oil and gas 18,784.11 21,233

Real estate --

Total 110,923

December 2017

Amounts in thousands of Naira

STOP LOSS LIMIT ANALYSIS ON COMPANY'S QUOTED SECURITY

SECTOR OF STOCK COST MARKET STOCK % GAIN/ BENCHMARK EXCEP-
PRICE PRICE CLASS LOSS TION
46% 25%
Banking and other financial institutions 81,451 119,319 A -22% 25% NO
A 57% 20% NO
Building materials 5,438 4,239 C 0% 25% NO
A 28% 20% NO
Consumer goods 34,614 54,196 C 0% 20% NO
C NO
Insurance 27,691 27,691

Oil and gas 18,784 24,052

Real estate 8,800 8,800

Total 238,297

STOP LOSS LIMIT ANALYSIS ON COMPANY'S QUOTED SECURITY

SECTOR OF STOCK COST MARKET STOCK % GAIN/ BENCHMARK EXCEP-
PRICE PRICE CLASS LOSS TION

Banking and other financial institutions 41,437 79,305 A 91% 25% NO
Building materials 5,438 4,239 A -22% 25% NO
Consumer goods 34,614 54,196 C 57% 20% NO
Insurance 27,691 27,691 A 0% 25% NO
Oil and gas 18,784 24,052 C 28% 20% NO
Real estate 8,800 8,800 C 0% 20% NO
Total 198,283

The Group manages its exposure to price risk through adherence to stop loss limits and investment in eligible stocks as approved
by the Board. Potential losses and exception as seen in the schedule above were within the Group’s stated risk appetite.


AXA Mansard Annual Report & Accounts 2018 91

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

The Group further reduces its exposure to Stock to Total Limit holding in a portfolio. The objective of
price risk with relatively low investment Analysis the analysis is to evaluate the Company’s
in quoted equities. The position held on concentration on stocks within each
quoted equities by the Company and Considering the volatility of stocks sector and ultimately exposure to market
Group is less than 2% of its investment (typically quoted stocks), the Group volatility if the price of any of the stocks
portfolio mitigating the effect of price monitors the contribution of stocks should drastically plummet.
volatilities. within each sector to the total stocks

A summary of the Group’s stock to total limit position on equities is as follows:

STOCK TO TOTAL LIMIT ON GROUP'S INVESTMENT EQUITY SECURITY

DEC 2018 DEC 2018 DEC 2017 DEC 2017

SECTOR OF STOCK GROUP GROUP

MARKET % of Total MARKET % of Total
PRICE PRICE

Banking and other financial institutions 87,589 52% 119,319 50%

Building materials 37,064 22% 4,239 2%

Consumer goods 17,857 11% 54,196 23%

Insurance 4,191 2% 27,691 12%

Oil and Gas 21,233 13% 24,052 10%

Real estate - 0% 8,800 4%

Telecommunication - 0% - 0%

Total 167,935 238,297

STOCK TO TOTAL LIMIT ON COMPANY'S INVESTMENT EQUITY SECURITY

DEC 2018 DEC 2018 DEC 2017 DEC 2017

SECTOR OF STOCK PARENT PARENT

MARKET % MARKET %
PRICE PRICE

Banking and other financial institutions 54,127 40% 79,305 40%

Building materials 37,064 28% 4,239 2%

Consumer goods 17,857 13% 54,196 27%

Insurance 4,191 3% 27,691 14%

Oil and Gas 21,233 16% 24,052 12%

Real estate - 0% 8,800 4%

Telecommunication - 0% - 0%

Total 134,473 198,283

92 AXA Mansard Annual Report & Accounts 2018

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

31 December 2018 Gross Increase Increase Decrease Decrease
PRICE RISK SENSITIVITY amount by 13.5% by 20% by 13.5% by 20%
Group
3,266,048 440,916 653,210 (440,916) (653,210)
Investment securities 10,879,158 1,468,686 2,175,832 (1,468,686) (2,175,832)
Financial assets fair valued through profit or loss
Government & corporate bonds 515,184 69,550 103,037 (69,550) (103,037)
Tenored deposits with maturity above 90 days 5,787,634 781,331 1,157,527 (781,331) (1,157,527)
Treasury bills 34,864 (34,864)
Equity securities 258,252 657,915 51,650 (657,915) (51,650)
Investment funds 4,873,442 414,917 974,688 (414,917) (974,688)
Financial assets designated at fair value 3,073,457 3,868,179 614,691 (3,868,179) (614,691)
Impact on profit before tax 5,730,635 (5,730,635)

Parent Gross Increase Increase Decrease Decrease
amount by 13.5% by 20% by 13.5% by 20%
Investment securities
Financial assets fair valued through profit or loss 3,266,048 440,916 653,210 (440,916) (653,210)
Government & corporate bonds 9,809,282 1,324,253 1,961,856 (1,324,253) (1,961,856)
Tenored deposits with maturity above 90 days
Treasury bills 459,119 61,981 91,824 (61,981) (91,824)
Equity securities 4,057,998 547,830 811,600 (547,830) (811,600)
Investment funds 30,347 44,958 (30,347) (44,958)
Financial assets designated at fair value 224,790 450,481 667,380 (450,481) (667,380)
Impact on profit before tax 3,336,899 414,917 614,691 (414,917) (614,691)
3,073,457 2,829,809 4,192,309 (2,829,809) (4,192,309)
31 December 2017
PRICE RISK SENSITIVITY Gross Increase Increase Decrease Decrease
Group amount by 13.5% by 20% by 13.5% by 20%

Investment securities 15,314,518 2,067,460 3,062,904 (2,067,460) (3,062,904)
Government & corporate bonds 326,733 44,109
Tenored deposits with maturity above 90 days 65,347 (44,109) (65,347)
Treasury bills 4,298,543 580,303
Equity securities 333,186 44,980 859,709 (580,303) (859,709)
Investment funds 326,539
Financial assets designated at fair value 2,418,804 441,753 66,637 (44,980) (66,637)
Impact on profit before tax 3,272,242 3,505,144
483,761 (326,539) (483,761)
Parent
654,448 (441,753) (654,448)
Investment securities
Government & corporate bonds 5,192,805 (3,505,144) (5,192,805)
Tenored deposits with maturity above 90 days
Treasury bills Gross Increase Increase Decrease Decrease
Equity securities amount by 13.5% by 20% by 13.5% by 20%
Investment funds
Financial assets designated at fair value 13,347,980 1,801,977 2,669,596 (1,801,977) (2,669,596)
Impact on profit before tax 326,733 44,109
310,994 65,347 (44,109) (65,347)
2,303,661 39,578
293,172 189,831 460,732 (310,994) (460,732)
441,753
1,406,156 58,634 (39,578) (58,634)
3,272,242 2,828,242
281,231 (189,831) (281,231)

654,448 (441,753) (654,448)

4,189,989 (2,828,242) (4,189,989)

AXA Mansard Annual Report & Accounts 2018 93

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

4.1.2 Foreign Exchange Risk

AXA Mansard Insurance Group is exposed to foreign exchange currency risk primarily through undertaking certain transactions
denominated in foreign currency. The Group is exposed to foreign currency risk through its investment in bank balances, fixed
deposits and bonds denominated in foreign currencies.
The carrying amounts of the Group’s foreign currency denominated assets and liabilities at end of the year are as follows:

Group 31 December 2018 31 December 2017

Cash and cash equivalents USD EUR GBP USD EUR GBP
Investment securities -Available-for-sale 47,338
Borrowings 989,586 63,078 48,306 1,841,894 45,963
-
1,888,360 - - 3,027,244 - -

3,479,693 - - 2,482,004 -

Parent 31 December 2018 31 December 2017

Cash and cash equivalents USD EUR GBP USD EUR GBP
Investment securities -Available-for-sale 3,162 19,070
969,280 61,837 1,752,802 31,806
- -
1,577,534 - 3,026,757 -

The following table details the effect of foreign exchange risk on the profit as at 31 December 2018:

31 December 2018

FOREIGN EXCHANGE SENSITIVITY

Group

Increase Increase Decrease Decrease
by 15% by 10% by 10% by 15%

Investment securities exposed to foreign exchange risk Gains/(losses) (165,145)

Cash and cash equivalents 165,145 110,097 (110,097) (283,254)

Investment securities 521,954
356,809
Available-for-sale 283,254 188,836 (188,836) 107,043
249,766
Financial liabilities exposed to foreign exchange risk (84,976)

Borrowings (521,954) (347,969) 347,969

Effect on profit before tax (356,809) (237,872) 237,872

Taxation @ 30% (107,043) (71,362) 71,362

Effect on profit after tax (249,766) (166,511) 166,511

Effect on other components of equity -OCI 84,976 56,651 (56,651)

Parent Increase Increase Decrease Decrease
by 15% by 10% by 10% by 15%
Investment securities exposed to foreign exchange risk 155,142 Gains/(losses)
Cash and cash equivalents 103,428 (103,428) (155,142)
Investment securities
Available-for-sale 236,630 157,753 (157,753) (236,630)
Effect on profit before tax 155,142 103,428 (103,428) (155,142)
Taxation @ 30% 46,543 31,028 (31,028) (46,543)
Effect on profit after tax 108,599 72,400 (72,400) (108,599)
Effect on other components of equity -OCI 70,989 (70,989)
47,326 (47,326)

94 AXA Mansard Annual Report & Accounts 2018

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

31 December 2017 Increase Increase Decrease Decrease
FOREIGN EXCHANGE SENSITIVITY by 15% by 10% by 10% by 15%
Group 1,064,357 Gains/(losses)
1,161,116 (193,519) (290,279)
Investments securities exposed to foreign exchange risk
Cash and cash equivalents 1,664,984 1,816,346 (302,724) (454,087)
Investment securities
Available-for-sale (1,365,102) (1,489,202) (248,200) (372,301)
Financial liabilities exposed to foreign exchange risk (300,745) (328,086) (441,720) (662,580)
Borrowings (90,224) (98,426) (132,516) (198,774)
Effect on profit before tax (210,522) (229,660) (309,204) (463,806)
Taxation @ 30% 499,495 544,904 (90,817) (136,226)
Effect on profit after tax
Effect on other components of equity -OCI Increase Increase Decrease Decrease
by 15% by 10% by 10% by 15%
Parent 992,022 Gains/(losses)
1,082,206 (180,368) (270,552)
Investments securities exposed to foreign exchange risk
Cash and cash equivalents 1,664,716 1,816,054 (302,676) (454,014)
Investment securities 992,022 1,082,206 (180,368) (270,552)
Available-for-sale 297,607
Effect on profit before tax 694,416 324,662 (54,110) (81,165)
Taxation @ 30% 499,415 757,544 (126,257) (189,386)
Effect on profit after tax 544,816 (90,803) (136,204)
Effect on other components of equity -OCI

The method used to arrive at the A significant portion of the Group’s assets Interest rate risk is managed principally
possible risk of foreign exchange rate relate to its capital rather than liabilities, through monitoring interest rate gaps and
was based on statistical analysis. The the value of its interest rate based assets sensitivity analysis across all investment
statistical analysis has been based on exceeds its interest rate based liabilities. portfolios.
main currencies movement for the last As a result, the Company’s investment
five years. This information is then revised income will move with fixed interest The table below, however, details the
and adjusted for reasonableness under rates over the medium to long-term maturity profile of the interest rate
the current economic circumstances. with short-term interest rate fluctuations sensitivity analysis of AXA Mansard
creating unrealized fair value gains or Insurance Plc. as at 31 December 2018,
4.1.3 Interest-rate risk losses in other comprehensive income. holding all other variables constant
The Group’s major exposure to interest- and assuming that all interest rates are
The Company is moderately exposed to rate sensitive liabilities arises from floating and move in line with prevailing
interest-rate risk through its conservative investment-linked products which interest rates. Based on historical data,
investmentapproachwithhighinvestment accounts for a small portion of its business 100 and 500 basis points changes are
in fixed income and money market which are linked to the CBN Monetary deemed to be reasonably possible and
instruments which have fixed interest Policy Rates (MPR). The fluctuations in are used when reporting interest rate
rates rather than floating rates. Interest interest rates cannot significantly impact risk.
rate risk also exists in policies that our statement of financial position as
carry investment guarantees on early interest-rate sensitive liabilities are quite
surrender or at maturity, where claim small compared with assets.
values can become higher than the value
of backing assets as a result of rises or
falls in interest rates.

AXA Mansard Annual Report & Accounts 2018 95

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

31 December 2018 Non 1-3 3-6 >6 Total
interest months months months
GROUP bearing 5,238,705
Cash and cash equivalents 3,709,200 Interest earning assets 3,266,048
Financial assets fair valued through profit or loss 1,529,505 - - 10,879,158
Bonds - 180,548 162,467 2,923,033
Tenored deposits with initial maturity of 90 days and above - - 164,755 10,714,403 515,184
Treasury bills - - 515,184 - 5,787,634
Equity securities - 69,710 509,809 5,208,115
Investment funds 258,252 --- 258,252
Financial assets designated at fair value - - - 4,873,442 4,873,442
Loans and receivables 17,193 130,273 465,244 2,460,747 3,073,457
Statutory deposit 101,479 - - 209,970
Interest bearing liabilities - - - 500,000 311,449
Investment contract liabilities 4,086,124 1,910,036 1,817,460 26,889,709 500,000
– At amortised cost 34,703,329
– Liabilities designated at fair value - 602,806 701,063 2,387,555 3,691,424
Borrowings 17,193 130,273 465,244 2,460,747 3,073,457
Gap 121,803 736,398 2,635,033 3,493,234
Cumulative gap - Sensitivity analysis - 854,882 1,902,705 7,483,335 10,258,115
Increase by 100bp 17,193 1,055,154 (85,246) 19,406,374 24,445,214
Increase by 500bp 1,055,154 969,908 20,376,283 244,452
Decrease by 100bp 1,222,261
Decrease by 500bp 10,552 (852) 194,064 (244,452)
52,758 (4,262) 970,319 (1,222,261)
(10,552)
(52,758) 852 (194,064)
4,262 (970,319)

Non 1-3 3-6 >6 Total
interest Months months months
PARENT bearing
Cash and cash equivalents 2,710,257 Interest earning assets
Financial assets fair valued through profit or loss 1,508,091 - - 4,218,348
Bonds - 180,548 208,714 2,876,786 3,266,048
Tenored deposits with initial maturity of 90 days and above - - 159,524 9,649,758 9,809,282
Treasury bills - - 459,119 - 459,119
Equity securities - 46,506 416,544 3,594,948 4,057,998
Investment funds 224,790 - - - 224,790
Financial assets designated at fair value - - - 3,336,899 3,336,899
Loans and receivables 17,193 130,273 465,244 2,460,747 3,073,457
Statutory deposit 147,310 - - 175,977 323,287
Interest bearing liabilities - - - 500,000 500,000
Investment contract liabilities 3,099,550 1,865,418 1,709,145 22,595,115 29,269,228
– At amortised cost
– liabilities designated at fair value - 602,806 701,063 2,387,555 3,691,424
Gap 17,193 130,273 465,244 2,460,747 3,073,457
Cumulative gap - Sensitivity analysis 17,193 733,079 1,166,307 4,848,302 6,764,881
1,132,340 542,838 17,746,812 22,504,347
1,132,340 1,675,177 19,421,990

Increase by 100bp 11,323 5,428 177,468 225,043
Increase by 500bp 56,617 27,142 887,341 1,125,217
Decrease by 100bp (11,323) (5,428) (177,468) (225,043)
Decrease by 500bp (56,617) (27,142) (887,341) (1,125,217)

96 AXA Mansard Annual Report & Accounts 2018

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

31 December 2017 Non 1-3 3-6 >6 Total
interest months months months
GROUP bearing
Interest earning assets
Cash and cash equivalents 2,882,628
Bonds - 2,450,690 - - 5,333,318
Tenored deposits with initial maturity of 90 days and above -
Treasury bills - - - 15,314,517 15,314,517
Equity securities
Investment funds 333,186 - 326,733 - 326,733
Financial assets designated at fair value -
Loans and receivables - 1,787,017 2,511,526 4,298,543
Statutory deposit 177,734
Total interest earning assets 197,596 - - - 333,186
Interest bearing liabilities
Investment contract liabilities - - - 2,418,804 2,418,804
– At amortised cost 3,591,145
– Liabilities designated at fair value 135,378 879,728 2,079,402 3,272,242
Borrowings
Total interest bearing liabilities 60,973 41,304 3,398,768 3,501,045
Gap
Cumulative gap - Sensitivity analysis - - 500,000 500,000
Increase by 100bp
Increase by 500bp 2,647,041 3,034,782 26,223,018 35,298,389
Decrease by 100bp
Decrease by 500bp - 507,545 590,274 2,010,251 3,108,070
177,734 135,378 879,728 2,079,402 3,272,242
PARENT 68,168 1,005,435 2,221,429 3,295,031
Interest earning assets - 711,090 2,475,437 6,311,082 9,675,343
Cash and cash equivalents 177,734 1,935,951 559,345 19,911,936 25,820,642
Bonds 1,935,951 2,495,296 22,407,232
Tenored deposits with initial maturity of 90 days and above 19,360 258,206
Treasury bills 5,593 199,119 1,291,032
Equity securities 96,798 27,967 995,597 (258,206)
Investment funds (19,360) (5,593) (199,119) (1,291,032)
Financial assets designated at fair value (96,798) (27,967) (995,597)
Loans and receivables
Statutory deposit Non 1-3 3-6 >6 Total
Total interest earning assets interest Months months months
Interest bearing liabilities bearing
Investment contract liabilities 2,534,048 Interest earning assets 4,779,865
– At amortised cost 2,245,817 - - 13,347,980
– Liabilities designated at fair value - - - 13,347,980
Total interest bearing liabilities - 326,733 - 326,733
Gap - - 458,082 1,845,579 2,303,661
Cumulative gap - Sensitivity analysis 293,172 ---
Increase by 100bp - - - 1,406,156 293,172
Increase by 500bp 177,734 135,378 879,728 2,079,402 1,406,156
Decrease by 100bp 267,448 3,005,394 41,304 4,135,034 3,272,242
Decrease by 500bp - - - 500,000 7,449,180
3,272,402 5,386,589 1,705,847 23,314,151
AXA Mansard Annual Report & Accounts 2018 500,000
33,678,989

- 507,545 590,274 2,010,251 3,108,070
177,734 135,378 879,728 2,079,402 3,272,242
177,734 642,922 1,470,002 4,089,653 6,380,312
3,094,668 4,743,666 235,845 19,224,498 27,298,677
4,743,666 4,979,511 24,204,009
272,987
47,437 2,358 192,245 1,364,934
237,183 11,792 961,225 (272,987)
(47,437) (2,358) (192,245) (1,364,934)
(237,183) (11,792) (961,225)

97

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

4.2 Non-financial asset exposed to price risk

The Group is exposed to property risk through its investment in property. AXA Mansard Insurance Group manages such risk by
monitoring the contribution of property to its portfolio.

GROUP'S EXPOSURE TO PROPERTY PRICE RISK Amount % Exposure
Instrument 17,525,962 36.40%
Property 30,617,205 63.60%
Interest Generating Assets 48,143,167

COMPANY'S EXPOSURE TO PROPERTY PRICE RISK Amount % Exposure
Instrument 3,040,000 10%
Property 26,169,678 90%
Interest Generating Assets 29,209,678

4.3 Credit risk The Company has placed stringent attention is paid to high premium
measures to guard against credit default. contributing brokers.
AXA Mansard Insurance Group is exposed Credit risk exposure operates from the The Group credit risk is constantly
to risk relating to its investment securities level of brokered transactions with little reviewed and approved during the
(bonds, treasury bills, fixed deposits and emphasis placed on direct business. Management Underwriting & Investment
loan receivables. Its receivables comprise The Company’s credit risk exposure to Committee (MUIC) meeting. There is also
trade receivables from customers, brokered business is very low as the a Criticized Assets Committee (CAC)
reinsurers and coinsurers recoverable Company requires brokers to provide which is responsible for the assessment
and other receivables. payment within 30 days after which and continued review of the Company’s
impairment trigger is identified and the premium debt and direct appropriate
Collateral held receivable is assessed for impairment. actions in respect of delinquent ones. It
and other credit also ensured that adequate provisions
enhancements, and their Sources of credit risk: are taken in line with IAS 39. Other credit
financial effect risk management measures include:
„„ D irect default risk: risk that the Group „„ F ormulating credit policies with
The group does not hold collateral or will not receive the cash flows or
any other enhancements against any assets to which it is entitled because strategic business units, underwriters,
of its receivables as at 31 December a party with which the Group has a brokers, covering brokers grading,
2018. bilateral contract defaults on one reporting, assessment, legal
or more obligations. procedures and compliance with
Trade receivables regulatory and statutory bodies.
„„ Downgrade Risk: risk that changes „„ I dentification of credit risk drivers
TheGrouphasplacedmoreresponsiveness in the possibility of a future default withintheGroupinordertocoordinate
on effective management of credit risk by an obligor will adversely affect and monitor the probability of default
exposure that relates to trade receivables. the present value of the contract that could have an unfortunate
In general, the regulator has laid great with the obligor today. impact.
emphasis on “No Premium, No Cover” „„ D eveloping and monitoring credit
and this has positively changed the limits. The Group is responsible for
phase of credit management within the „„ Settlement Risk: risk arising from the setting credit limits through grading
industry. The Group defines credit risk lag between the value and settlement in order to categorize risk exposures
as the risk of counterparty’s failure to dates of securities transactions. according to the degree of financial
meet its contractual obligations. Credit loss and the level of priority expected
risk arises from insurance cover granted from management.
to parties with payment instruments Management of credit „„ A ssessment of credit risk. All first-
or payments plan issued by stating risk due to trade hand assessment and review of credit
or implying the terms of contractual receivables
agreement. AXA Mansard Annual Report & Accounts 2018
The Company constantly reviews brokers’
98 contribution to ensure that adequate

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

exposures in excess of credit limits, amortized cost, less provision for based on NAICOM’s “No Premium No
prior to granting insurance cover impaired receivables. Under IFRS, an Cover” guidelines which state that “all
are subject to review process and asset is impaired if the carrying amount insurance covers shall be provided on
approval given during MUIC meeting. is greater than the recoverable amount. a strict ‘no premium no cover’ basis”,
„„ C ontinuous reviewing of compliance The standard favours the use of the only cover for which payment has been
and processes in order to maintain incurred loss model in estimating the received shall be booked. However,
credit risk exposure within acceptable impairment of its receivables. brokers have a 30 day period to make
parameters. By the provisions of IAS 39, the payments from the date of the credit
impairment of the premium debtors is notes. The Company uses the aging of
Impairment model to be assessed at two different levels, receivables as the major parameter in
individually or collectively. However, calculating impairment.
Premium debtors are measured at

Below is the analysis of the group’s maximum exposure to credit risk at the year end.

Maximum exposure to credit risk Group Parent

In thousands of Naira Notes Carrying Carrying Carrying Carrying
amount amount amount amount
Cash and cash equivalents
Financial assets fair valued through profit or loss Dec 2018 Dec 2017 Dec 2018 Dec 2017
Available-for-sale (less equity security)
Financial assets designated at fair value 8 5,238,705 5,333,318 4,218,348 4,779,865
Loans and receivable
Trade receivable 9.1 3,266,048 - 3,266,048 -
Reinsurance assets (less prepaid reinsurance, reserves and IBNR)
Other receivable (less prepayment) 9.2 22,055,418 22,358,598 17,663,298 17,384,530
Statutory deposit
9.3 3,056,264 3,252,548 3,056,264 3,252,548

14 311,449 3,843,254 323,287 7,562,215

10 3,615,646 1,961,018 572,586 251,383

11 6,943,206 6,600,736 6,936,148 6,596,350

13 820,817 398,797 274,078 323,803

19 500,000 500,000 500,000 500,000

45,807,553 44,248,269 36,810,057 40,650,694

The Group’s investment portfolio is instituted limits as approved the MUIC. position has been disclosed as part of
exposed to credit risk through its fixed These limits are based on counter party available for sale assets.
income and money market instruments. credit ratings amongst other factors.
The Group’s exposure to credit risk is 4.3.1 Credit quality
low as Government sector (government Disclosure of treasury
bonds and treasury bills) accounted bills of less than 90 days Except for staff loans included in loans
for largest part 42% (2017: 41%) of the maturity and receivables, other receivables and
investment as at 31 December 2018. trade receivables, all financial assets are
Exposures to credit risks is managed For the purpose of IFRS 7 disclosures, neither past due nor impaired. The credit
through counterparty risks using treasury bills classified as cash and cash quality of the assets are as analysed
equivalents in the statement of financial below:

AXA Mansard Annual Report & Accounts 2018 99

Notes to the financial statements for the year ended 31 December 2018 (cont’d)

Group Unrated A/A- AA B/B+ BB- BBB TOTAL
31 December 2018 132,785 1,497,663 1,900,807 1,258,888 19,280 429,283 5,238,705
In thousands of Nigerian Naira 3,266,048
Cash and cash equivalents - - - 3,266,048 - - 22,055,418
Financial assets fair valued through profit or loss 3,418,624 1,791,829 - 16,318,105 526,691 169 3,056,264
Available-for-sale assets - 2,747,890 111,700 98,883
Financial assets designated at fair value 40,019 57,773 - - 311,449
Loans and receivables 311,449 - - - - - 3,615,646
Trade receivable 3,615,646 - - - - - 6,943,206
Reinsurance assets (less prepaid reinsurance, 6,943,206 - - -
reserves and IBNR) - -
Other receivable (less prepayment) 820,817 - - 500,000 - - 820,817
Statutory deposit - - 1,900,807 24,090,930 - - 500,000
3,347,266 657,670 528,335 45,807,554
15,282,545

31 December 2017 Unrated A/A- AA B/B+ BB- BBB TOTAL
In thousands of Nigerian Naira 64,237 3,589,147 1,671,197 - - 8,738 5,333,318
Cash and cash equivalents - 4,298,543 22,358,598
Available-for-sale - - - 17,733,322 326,733 1,974,342 3,252,548
Financial assets designated at fair value 964,827 29,772 - 283,606 3,843,254
Loans and receivables 3,843,254 - - 1,961,018
Trade receivables 1,961,018 - - - - - 6,600,736
Reinsurance assets (less prepaid reinsurance, 6,600,736 - - - - -
reserves and IBNR) - - -
Other receivables (less prepayment) 398,797
Statutory deposit - - - - - - 398,797
- - 500,000 - - 500,000
12,868,041 4,553,974 1,700,969 18,233,322 610,339 6,281,623 44,248,269

Parent Unrated A/A- AA B/B+ BB- BBB TOTAL
31 December 2018 132,785 1,364,275 1,195,037 769,803 591 755,858 4,218,348
In thousands of Nigeria Naira 3,266,048 3,266,048
Cash and cash equivalents - - - 11,307,141 - - 17,663,298
Financial assets fair valued through profit or loss 2,694,024 3,366,878 - 2,747,890 295,255 - 3,056,264
Available-for-sale - 111,700 98,883
Financial assets designated at fair value 40,019 57,773 - - - 323,287
Loans and receivables 323,287 - - - - - 572,586
Trade receivables 572,586 - - - - - 6,936,148
Reinsurance assets (less prepaid reinsurance 6,936,148 - -
and IBNR) -- - 274,078
Other receivables (less prepayment) 274,078 - -
Statutory deposit - - - 500,000 - - 500,000
4,788,925 1,195,037 18,590,882 407,546 854,741 36,810,058
10,972,926

Parent Unrated A/A- Aa B/B+ BB- BBB TOTAL
31 December 2017 64,237 3,036,762 1,670,128 - - 8,738 4,779,865
In thousands of Nigeria Naira - 3,709,817 17,384,530
Cash and cash equivalents - - - 13,347,980 326,733 1,974,342 3,252,548
964,827 29,772 - 283,606 7,562,215
Available-for-sale 7,562,215 - -
251,383 - - - - - 251,383
Financial assets designated at fair value - - - - - 6,596,350
6,596,350 - - - - -
Loans and receivables 323,803 - - - - 323,803
- - - 500,000 - 5,692,897 500,000
Trade receivables 4,001,589 1,699,900 13,847,980 610,339 40,650,693
14,797,988
Reinsurance and co-insurance recoverable

Other receivables (less prepayment)

Statutory deposit

100 AXA Mansard Annual Report & Accounts 2018