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RNS
GBGI Limited  -  GBGI   

2017 Full Year Results

Released 07:00 23-Apr-2018

RNS Number : 7046L
GBGI Limited
23 April 2018
 

GBGI Limited

2017 Full Year Results

 

 

23 April 2018

 

GBGI Limited

 

("GBGI" or the "Company" and, together with its subsidiary undertakings, the "Group")

 

2017 Full Year Results

 

GBGI Limited (AIM: GBGI), a leading integrated provider of international benefits insurance,   announces its full year results for the twelve months ended 31 December 2017.

 

Financial Highlights

 

·     Strong top line growth, with Gross Written Premiums ("GWP") up 17.5 percent to US$193.9 million (CY 20161: US$165.0 million)

 

·     A steady  underwriting track record drives higher retention, leading Net Written Premiums ("NWP") to rise 15.3 percent to US$104.5 million (CY 2016: US$90.6 million)

 

·     Total revenues increased by 30.6 percent to US$155.9 million (CY 2016: US$119.4 million)

 

·     As previously announced, in light of currency controls, GBGI has reorganised its activities in the Angolan market. This has resulted in a one-off impairment allowance of US$12.3 million against receivables related to the Angolan business

 

·     Operating income, excluding the US$12.3 million asset impairment,  was US$14.2 million (CY 2016: US$12.1 million) and EBITDA was US$14.9 million2 (CY 2016: US$12.6 million)

 

·     Net profit before tax (unadjusted) was US$3.6 million (CY 2016: US$11.2 million)

 

·     Dividend policy adjusted to conserve the strength of the Group's solvency position and ensure growth opportunities can be self-funded

 

Business Highlights

 

·     Admission to AIM in February 2017 improved corporate governance and transparency resulting  in commercial benefit

 

·     The Group's strategic partnership with the global insurer AXA evolved, facilitating the Group's entry into new Latin American markets and creating a new product line focused on the needs of individuals

 

·     The acquisition and incorporation of QHM into GBG Assist performed well in its first full year of operation, and the Group is now leveraging the cost containment network across the entire set of group policies

 

·     The TieCare International business won its largest-ever group medical insurance account, cementing its position as the market leader in the international educational employee benefits segment

 

·     Two hires were incorporated into the senior manager leadership team; David Carter was hired as Regional Vice-President for GBG Asia Pacific and Cathy Garner as Global Head of Life and Long Term Disability

 

·     Ongoing robust sales in the Latin American individual private medical market, offering a strong platform to increase group business and enter new countries in Latin America in CY 2018

                                           

·     Reorganised management structure in GBGI's Chinese operations; now fully optimised to offer high quality product and service offerings

 

·     Ready to comply with the General Data Protection Regulation (GDPR)'s requirements coming into force on 25 May 2018

 

Capital Position and Solvency

 

Following the developments in Angola and the potential impact on the Company's solvency position, the Board is focused on reinforcing its solvency ratio to support its credit rating.

 

As such, the Board has revised its dividend policy with the objective of conserving the strength of the Group's solvency position, to ensure growth opportunities can be self-funded and to distribute excess capital to shareholders.

                                                                     

Dividend

 

Consistent with the Board's prudent approach to maintaining capital adequacy, the Board has determined to declare a semi-annual base dividend of US$0.014 per share (equivalent to £0.01 per share at current exchange rates) beginning in the first half period of 2018. The Company has also determined to declare a further base dividend of US$0.014 per share in respect of subsequent half-year periods. Going forward, such payments will be subject to the availability of distributable profits at the relevant time and other factors, including the solvency capital requirements of GBG Insurance Limited (GIL) and the need for GIL to maintain its insurer financial strength rating with A.M. Best.

 

Additionally, as part of its dividend policy, the Company has decided to assess annually, alongside its full year results, whether it would declare an additional ordinary dividend. The amount of the additional ordinary dividend will be subject to the Board's determination of excess capital, after taking into consideration the Company's then current capital position less any capital required to achieve its solvency and credit rating objectives and less any capital required to support the Company's future growth. It is expected that the first time the Company would declare such an additional dividend would be in 2019.

 

Payment of the first base dividend of US $0.014 per share will be made on 15 June 2018.  The ex-dividend date will be 31 May 2018 and the associated record date will be 1 June 2018.

 

A copy of the Dividend Currency Election form, which when completed should be sent to Link Asset Services, The Registry, Beckenham Road, Beckenham, Kent, BR3 4TU, can be found on the Company's website www.gbg.com/investors. The dividend is capable of being paid in sterling rather than US dollars, provided that the relevant shareholder has registered to receive their dividend in sterling under the Company's Dividend Currency Election or registers to do so by the close of business on 1 June 2018.

 

Outlook

 

We continue to successfully operate a niche, differentiated insurance model benefitting from structural growth drivers. We have been in our market for many years, and have developed a deep broker network supported by an invested, integrated operations platform.

 

Going forward we will continue our focus on growing profitability within the context of improving risk adjusted returns and delivering consistent underwriting excellence, which is the foundation of our profitable operations. In addition, we continue to invest in our platform to support both sales efforts and outstanding service levels, underpinning our growth potential and control of risks.

 

Looking forward, we continue to see opportunities to develop the business across our diversified portfolio.

 

GBGI's CEO, Bob Dubrish, commented:

 

"2017 marked another year of growth for GBGI as we made our successful transition to a quoted company in the first quarter. We continued to make significant progress driven by our global, well-diversified approach, delivering GWP growth of 17.5 percent to US$193.9 million and growth in adjusted operating profit of 17.1 percent to US$14.2 million.

 

"The decisions taken in Angola followed our standard risk assessment procedures. Although the outcome of the restructuring of our operations in the country is disappointing, we firmly believe we took the right course of action. Looking across the breadth of our portfolio, I am confident this is a non-recurring event.

 

"The strength of our offering rests on our proven ability to write risks in an agile, flexible manner whilst maintaining our focus on delivering underwriting profit. We have a strong market position and continue to be one of the leading providers of international benefits insurance given our presence in 120 jurisdictions.

 

"We continue to focus on profitable growth and looking forward, we continue to see opportunities to develop the business across our diversified portfolio."

 

For further information please contact:

 

GBGI Limited    

 

Bob Dubrish (CEO)

+1 949 421 3180

Eric Dickelman (CFO)

+1 949 421 3390

 

Canaccord Genuity (Nominated Adviser and Broker)

 

+44 (0)20 7523 8000

Sunil Duggal

Andrew Buchanan

Emma Gabriel

 

 

 

Instinctif Partners (Financial PR)

Giles Stewart

Rui Videira

Lewis Hill

+44 (0)20 7457 2020

 

 

 

Notes to Editors

 

GBGI is a leading integrated provider of international benefits insurance, operating globally across over 120 jurisdictions. Trading principally as "The Global Benefits Group" or "GBG", the Group distributes and underwrites health, life and disability, and travel insurance, with a client base that spans multinational corporations, expatriates, local HNWIs, international schools, non-profit organisations and international students. GBGI is a fully integrated insurance group providing services from policy sales to claims administration and servicing and is committed to delivering high levels of customer service. GBGI is incorporated in Guernsey.

 

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement this inside information is now considered to be in the public domain.

 

Key:

1 CY 2016: 12 months ended 31 December 2016

2 Excludes IPO-related expenses of US$0.4 million and US$12.3 million asset impairment in Angolan business

 

Chief Financial Officer's review

A Strong Financial Performance

This is GBGI's maiden set of annual results since changing its accounting year end to 31 December in alignment with our policy year, and I am delighted to report on a strong underlying financial performance for the 2017 Calendar Year. 

These underlying results demonstrate the good progress we have made in developing our business over the years from an agency model through to a resilient and diversified full service, integrated insurer writing profitable insurance business across 120 jurisdictions. We are well placed to continue to grow the business in 2018 and beyond, whilst we have taken decisive steps to minimise the impact of the developments in Angola.

Gross written premiums ("GWP") for the period increased 17.5 percent from US$165.0 million to US$193.9 million, net revenues increased 30.6 percent from US$119.4 million to US$155.9 million, and our profit after tax, including the Angola impairment, was US$3.5 million (CY 2016: US$11.0 million).

Trading Highlights (excluding Angola impairment of US$12.3 million in 2017 unless stated otherwise)

 

US$' 000

US$' 000

 

12 months to 31 December 2017

12 months to 31 December 2016

Gross Written Premiums

193,937

165,031

Total Revenue

155,929

119,366

Total Net Claims and Other Expenses 1

141,721

107,232

EBITDA 1

14,914

12,600

Operating income 1

14,208

12,134

Profit before Tax 1

15,830

11,237

Profit After Tax 1

15,790

10,962

EPS (US$) 2

.04

.16

1          Excluding US$12.3 million in relation to Angola impairment in 2017

2          Includes the impact of Angola impairment in 2017

 

EBITDA

The Group's adjusted earnings before interest, depreciation and amortisation (EBITDA) grew 18.4 percent for the year from US$12.6million in CY 2016 to US$14.9million in CY 20171. This increase is reflective of the Group's continuing ability to deliver operating income.

 

                                                 Year ended 31 December

                                                      US$' 000

EBITDA Calculation

2017

2016

Operating income1

14,208

12,134

Depreciation and amortization

706

467

Total EBITDA

14,914

12,600

1 Excluding US$12.3 million in relation to Angola impairment in 2017. Does not include  IPO-related expenses of US$0.4 million

Income Statement

Gross Written Premiums ("GWP")

We delivered strong growth in GWP during the year. GWP in CY 2017 was US$193.9 million, growth of 17.5 percent over the prior year period. 

Medical remains the primary product line for the business, representing 77.4 percent of GWP in the year. Performance in Travel, was up 48.8 percent to US$18.3 million and our high margin Life and Disability continued to deliver profitable growth, increasing to US$24.9 million.

                                                         Year ended

                                                          US$ million

Product

31 December 2017

31 December 2016

Medical

150.1

129.0

Life and Disability

24.9

22.9

Travel

18.3

12.3

Specialty

0.6

0.7

Total GWP

193.9

165.0

 

Medical

Our medical insurance products include a variety of group and individual plans with a range of benefits and levels of cover including emergency evacuation, maternity cover, dental cover, wellness programmes and pre-existing conditions.

Total Medical GWP grew 16.4 percent in CY 2017 to US$150.1 million (CY 2016: US$129.0 million) as a result of premium growth across nearly all our geographic regions. 

Life and Disability

Our life insurance products are typically annually renewable term life policies, although a small number of policies with slightly longer terms (up to 18 months) may be written. Term life benefits are set at either a fixed sum or as a multiple of the insured's salary. We also write both long-term and short-term disability products with benefits typically set as a proportion of the insured's salary.

Total Life and Disability GWP grew 8.7 percent in CY 2017 to US$24.9 million (CY 2016: US$ 22.9 million). 

Travel

We have continued to see strong growth in Travel, supplemented by the addition of student based travel insurance products.  Travel GWP was US$18.3 million, a 48.8 percent increase over the prior year (CY 2016: US$12.3 million).

Net Written Premiums ("NWP")

NWP grew 15.3 percent in CY 2017 to US$104.5 million (CY 2016: US$90.6 million), which reflects both growth in GWP and higher risk retention. Higher retention levels have been a contributing factor behind the growth in our profitability and attest to the consistency of our underwriting performance over a sustained period, the confidence in the quality of our underwriting process and our rich data histories. Looking forward we expect retention levels to remain broadly around 60 percent for at least policy year 2019. 

Total Revenue

Total revenues grew 30.6 percent to US$155.9 million in CY 2017, as a result of the overall growth of GWP across the medical products platform and the increased levels of retention.  Growth in the Commission and Fees income was impacted by a lower Profit Share of US$393,000 in CY 2017 (CY 2016: US$3.1 million). However, the lower Profit Share fee was offset by higher Administrative Services Only (ASO) fees of US$4.4 million in CY 2017 (CY 2016: US$631,000). All other fee rates were in line with expectations.

Expenses

                                               Year ended

                                                US$ million

 

31 December 2017

31 December 2016

Net Claims

62.1

41.3

Administrative Expenses

53.9

35.9

Commission Expense

38.0

30.0

 

Given the Group's higher risk retention level, net claims were US$62.1 million, a 50.5 percent increase over the prior year.  The Net Claims expense was generally within expectations with the exception of the booking of a higher than normal loss expense for one of the programmes the Group had been reinsuring.

The profitability of the Company's medical risk underwriting for policy years 2016 and 2017 were in line with our expectations. The policy year 2017 medical underwriting results continue to show an improving trend compared with the previous policy year.  The underwriting results for Life and Disability continue to deliver excellent profitability, in line with the results from prior years.

Administrative expenses, including the $12.3 million Angola impairment, were US$53.9 million, increasing 50.0 percent from US$35.9 million in CY 2016.  Without the US$12.3 million impairment, the Administrative expenses increase was 15.9 percent. The increase in administrative expenses year on year was driven by costs associated with being a PLC, continued investment in GBGI's operational platform and associated infrastructure, and certain one-off expenses.  The expense increases were offset by improved operational cost management processes that were implemented throughout the calendar year.

Commission expenses increased 26.4 percent from US$30.3 million to US$38.0 million.  However, the expense was broadly in line with the growth in premium, and in line with our expectations.

Profitability

Group operating income, inclusive of the Angola impairment, was US$2.0 million (CY 2016 US$12.1 million).  As noted, absent the Angola impairment, the Company's operating income would have been US$14.2 million, a 17.1 percent increase over CY 2016; a result that, combined with the GWP and Revenue results, is indicative of the underlying strength of the business.

Angola    

Pursuant to the Board's vigilance in managing risk exposure and in light of the Angolan AOA currency devaluation and GBGI's view on the inability to transfer funds to USD (or equivalent currency) in a timely manner, the Group reorganized its approach in the Angolan market. Under the new approach, GBGI will transfer its risk book and operations to its local partners, while GBG Insurance Ltd. will continue as an excess of loss reinsurer to its local partner in Angola. 

In return for transferring the business, our insurance partner agreed to pay GBG, Inc. a settlement amount of US$17.5 million, to be paid in the Angolan AOA currency over the next 3 years.

However, it subsequently became clear that the Company's ability to convert the AOA currency received by it under the settlement agreement into a tangible western currency (USD, GBP, or Euro) would be significantly delayed or possibly never converted. 

As a result, the Board has taken the decision to take an impairment allowance against Angolan receivables of US$12.3 million.  This impairment is shown in the profit and loss statements in Administrative Expenses in the CY 2017. It is important to note that the Board and Management view the decisions that have been made in Angola to be a necessary part of our overall risk assessments and part of our commitment to our shareholders and other stakeholders to continuously review the risks and returns in each region and make prudent strategic, business and financial decisions as a result of those reviews.

Earnings per share

Earnings per share (EPS) was US$0.04, calculated with reference to post tax profit of US$3.2 million and weighted average number of shares in issue of 84,518,229.

Dividend

Consistent with the Board's prudent approach to maintaining capital adequacy, the Board has determined to declare a semi-annual base dividend of US$0.014 per share (equivalent to £0.01 per share at current exchange rates) beginning in the first half period of 2018. Going forward, such payments will be subject to the availability of distributable profits at the relevant time and other factors, including the solvency capital requirements of GBG Insurance Limited (GIL) and the need for GIL to maintain its insurer financial strength rating with A.M. Best.

 

Additionally, as part of its dividend policy, the Company has decided to assess annually, alongside its full year results, whether it would declare an additional ordinary dividend. The amount of the additional ordinary dividend will be subject to the Board's determination of excess capital, after taking into consideration the Company's then current capital position less any capital required to achieve its solvency and credit rating objectives and less any capital required to support the Company's future growth. It is expected that the first time the Company would declare such an additional dividend would be in 2019.

 

Payment of the first base dividend of US $0.014 per share will be made on 15 June 2018.  The ex-dividend date will be 31 May 2018 and the associated record date will be 1 June 2018.

 

A copy of the Dividend Currency Election form, which when completed should be sent to Link Asset Services, The Registry, Beckenham Road, Beckenham, Kent, BR3 4TU, can be found on the Company's website www.gbg.com/investors. The dividend is capable of being paid in sterling rather than US dollars, provided that the relevant shareholder has registered to receive their dividend in sterling under the Company's Dividend Currency Election or registers to do so by the close of business on 1 June 2018.

 

 

Balance Sheet

Net Assets & Working Capital

Net assets at CY 2017 were US$48.5 million (CY 2016: US$33.4 million), with growth driven by the combined effect of growth in GWP, cash generation, IPO related restructuring and equity raise.

Net Cash

The Group's operating activities continue to be highly cash generative and during CY 2017 cash inflow from operating activities was US$23.0 million. The business is prudently financed, in keeping with the commercial demands of our business. Cash and cash equivalents at 31 December 2017 was US$93.1 million.

Insurance Liabilities and Reserves

Total gross insurance liabilities as at CY 2017 of US$131.1 million comprises US$89.6 million of unearned premiums, which are deferred to be recognised in subsequent periods (CY 2016: US$92.1 million), and outstanding claims liabilities of US$41.4 million (CY 2016: US$42.2 million).  Unearned premiums decreased 2.7 percent from the prior period due to timing of booked premium and the overall increase in GWP.  Outstanding claim liabilities was approximately even to the prior period reflecting timing and overall improvements in the underwriting result

The provisioning for outstanding claims liabilities is an area of significant judgement as it estimates the cost required to settle all unpaid claims, both reported and incurred but not reported (IBNR), at the balance sheet date. The Group manages this risk by applying a consistent reserving methodology to each of its product areas and measuring actual loss amounts against the reserves quarterly. In addition, the Group engages an independent third party to review the reserves and reserve methodologies annually.

Reinsurance Contracts

The Group uses excess of loss reinsurance arrangements to manage its risk exposure, therefore protecting its solvency and underwriting capability. Excess of loss reinsurance is designed to prevent large claims from having a material impact on performance whilst our quota share arrangements allow us to benefit from our underwriting excellence without having to fully allocate capital to back the policy underwritten.

In recent periods, we have actively sought to increase our risk retention levels as our consistent underwriting performance gives us confidence that we are able to generate underwriting returns. Overall, our proven approach to risk structuring is to maximise return whilst reducing volatility risk caused by the accumulation of losses and large individual claims.

Reinsurance assets, comprising reinsurers' share of outstanding claims liabilities, remained at CY 2016 levels with CY 2017 at US$23.8 million (CY 2016: US$23.8 million) due to the Group's increased risk retention levels.  Reinsurance assets have been impacted by our strategic decision to retain more of the risk across all of our product areas. However, we anticipate that we will maintain our current risk retention levels into the near future. 

Capital position and solvency

Following the developments in Angola and the potential impact on the Company's solvency position, the Board is focused on improving its solvency ratio to support its credit rating.

The Board has revised its dividend policy with the objective of conserving the strength of the Group's solvency position, to ensure growth opportunities can be self-funded and to distribute excess capital to shareholders.

 

Key:

1 CY 2017: 12 months ended 31 December 2017

 

 

GBGI Limited

Consolidated statement of comprehensive income

For the years ended 31 December 2017 and 2016 (unaudited)

 

 

 

 

31 December  2017

31 December 2016 (unaudited)

 

Notes

 

USD'000

USD'000

Income

 

 

 

 

Gross premiums written

4

 

193,937

165,031

Outward reinsurance premiums

4

 

(89,487)

(74,436)

Net premiums written

 

 

104,450

90,595

Change in the gross provision for unearned premiums

4

 

2,167

(8,801)

Change in the provision for unearned premiums, reinsurers' share

4

 

5,879

(2,015)

Change in net provision for unearned premiums

 

 

8,046

(10,816)

Earned premiums, net of reinsurance

 

 

112,496

79,779

Commission and fees

7

 

43,433

39,587

Total revenue

4

 

155,929

119,366

Claims incurred, net of reinsurance

 

 

 

 

Claims paid -  gross amount

 

 

(106,191)

(77,296)

-   reinsurers' share

 

 

43,652

39,900

Net claims paid

 

 

(62,539)

(37,396)

Change in the provision for outstanding claims

 

 

 

 

-   gross amount

 

 

825

222

-   reinsurers' share

 

 

(404)

(4,095)

Change in net provision for claims

 

 

421

(3,873)

Net claims

13

 

(62,118)

(41,269)

Administrative expenses

12

 

(53,889)

(35,933)

Commission expense 

8

 

(37,968)

(30,030)

Total net claims and other expenses

 

 

(153,975)

(107,232)

Operating income

 

 

1,954

12,134

Investment income

5

 

377

195

Other income / (expense)

6

 

1,342

(432)

Finance costs

9

 

(97)

(660)

Profit before income tax

 

 

3,576

11,237

Income tax expense 

15

 

(40)

(275)

Profit after income tax

 

 

3,536

10,962

Total comprehensive income after tax

 

 

3,536

10,962

Profit and total comprehensive income after tax attributable to:

 

 

 

 

Owners of the Group

 

 

3,196

10,844

Non-controlling interests

 

 

340

118

 

Basic earnings per share

16

 

0.04

0.16

 

Diluted earnings per share

16

 

0.04

0.16

 

The accompanying notes form an integral part of these consolidated financial statements.
 

 

GBGI Limited

Consolidated statement of financial position

As at 31 December 2017 and 2016 (unaudited)

 

 

 

31 December  2017

31 December 2016 (unaudited)

 

Notes

 

USD'000

USD'000

ASSETS

 

 

 

 

Intangible assets

17

 

10,690

6,734

Property, plant and equipment

18

 

820

891

Investments

10

 

249

-

Reinsurers share of technical provisions

23

 

53,524

59,424

Tax assets

15

 

57

257

Trade and other receivables

20

 

75,930

102,158

Deferred acquisition costs on unearned premium

8

 

14,035

16,489

Cash and cash equivalents

21

 

93,053

67,990

Total assets

 

 

248,358

253,943

 

 

 

 

 

LIABILITIES

 

 

 

 

Insurance liabilities

23

 

131,065

134,371

Other insurance liabilities

24

 

49,707

56,994

Borrowings:

      Redeemable Preferred Stock

26

 

250

250

      Class D shares

26

 

-

5,500

Deferred tax liabilities

15

 

940

1,088

Other liabilities

29

 

2,354

-

Trade and other payables

29

 

15,520

22,316

Tax liabilities

15

 

-

-

Total liabilities

 

 

199,836

220,519

 

 

 

 

 

Net assets

 

 

48,522

33,424

 

 

 

 

 

EQUITY

 

 

 

 

Called up share capital

27

 

88

34

Share premium

 

 

44,817

22,105

Treasury stock

28

 

(1,467)

(11,993)

Retained earnings

 

 

4,416

22,950

Attributable to the equity holders of the parent

 

 

47,854

33,096

Non-controlling interests

 

 

668

328

Total equity

 

 

48,552

33,424

The accompanying notes form an integral part of these consolidated financial statements.

The financial statements of GBGI Limited were approved by the Board of Directors and authorised for issue on 19 April 2018. They were signed on its behalf by:

Eric Dickelman

Chief Financial Officer

22 April 2018

GBGI Limited

Consolidated statement of changes in equity

For the years ended 31 December 2017 and 2016 (unaudited)

 

 

 

Called up share capital

Share Premium

Treasury Stock

Retained Earnings

Total

Non-controlling interests

Equity attributable to equity holders of the entity

2017

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

At 31 December 2016 (unaudited)

34             

22,105

(11,993)

22,950

33,096

328

33,424

 

 

 

 

 

 

 

 

Distribution to Class B and Class C common shareholders

-

-

-

(16,513)

(16,513)

-

(16,513)

Shares exchanged and converted to ordinary shares in reorganisation

33

(12,026)

11,993

-

-

-

-

Shares repurchased for repayment of note receivable

-

-

(1,467)

-

(1,467)

-

(1,467)

 

 

 

 

 

 

 

 

Shares issued in current period

21

39,522

-

-

39,543

-

39,543

Cost of issuance of equity shares

-

(5,151)

-

-

(5,151)

-

(5,151)

Dividends paid

 

-

-

(5,217)

(5,217)

 

(5,217)

Share-based payments

-

367

-

-

367

-

367

Profit and total comprehensive income

-

-

 

3,196

3,196

340

3,536

Total equity as at 31 December 2017

88

44,817

(1,467)

4,416

47,854

668

48,522

 

 

 

 

 

 

 

 

 

Called up share capital

Share Premium

Capital Redemption Reserve

Retained Earnings

Total

Non-controlling interests

Equity attributable to equity holders of the entity

2016 (unaudited)

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

At 31 December 2015 (unaudited)

              34

        22,105

       (11,993)

         12,106

22,252

210

22,462

 

 

 

 

 

 

 

 

Profit and total comprehensive income

(unaudited)

  - 

  - 

 -

10,844

10,844

118

10,962

Total equity as at 31 December 2016 (unaudited)

              34

        22,105

       (11,993)

22,950

33,096

328

33,424

The accompanying notes form an integral part of these consolidated financial statements.

GBGI Limited

Consolidated cash flow statement

For the years ended 31 December 2017 and 2016 (unaudited)

 

 

 

31 December   2017

31 December   2016 (unaudited)

 

Notes

 

USD'000

USD'000

Cash flows from operating activities

 

 

 

 

Profit before taxation

 

 

3,576

11,237

Adjustments for:

 

 

 

 

Share-based payments

11

 

367

-

Depreciation of property, plant and equipment

12

 

129

437

Amortisation of intangible assets

12

 

577

30

Loss on disposal of property, plant and equipment

 

 

105

-

Finance costs

9

 

97

660

Impairment for other receivables

20

 

12,254

-

Operating profit before working capital changes

 

 

17,105

12,364

 

 

 

 

 

Changes in working capital (net of change from acquisition)

 

 

 

 

Decrease/(increase) in other receivables

 

 

20,676

(26,373)

Increase in gross insurance liabilities

 

 

(3,306)

9,706

(Decrease)/increase in other liabilities

 

 

(17,358)

7,045

Decrease in reinsurers share of technical provisions

 

 

5,899

5,073

Cash generated from operations

 

 

23,016

7,815

 

 

 

 

 

Income taxes refunded/ (paid)

 

 

11

(233)

Net cash generated from operating activities

 

 

23,027

7,582

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

Purchases of property and equipment

18

 

(163)

(570)

Purchase of intangibles

17

 

(3,735)

(2,138)

Purchase of investments

10

 

(249)

-

Purchase of business, net of cash acquired

32

 

(882)

-

Net cash used in investing activities

 

 

(5,029)

(2,708)

 

 

 

 

 

Cash flows from financing activities

34

 

 

 

Dividends paid to holders of Class D shares

9

 

(97)

(660)

Ordinary dividends paid

22

 

(5,217)

-

Proceeds from the issuance of ordinary shares

27

 

12,379

-

Net cash (used) / generated by financing activities

 

 

7,065

(660)

 

 

 

 

 

Net change in cash and cash equivalents

 

 

25,063

4,214

Cash and cash equivalents at the beginning of the period

 

 

67,990

63,776

Cash and cash equivalents at the end of the period

 21

         

93,053

67,990

The accompanying notes form an integral part of these consolidated financial statements.   

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

1.      Accounting Policies

 

a)   General information

GBGI Limited ('GBGI' or the "Group") was incorporated as Saxton Lane Company Limited in Guernsey in 2008 and is a multiple line insurance group writing substantially all lines of expatriate health insurance products and long term liability insurance products.

 

GBGI is a Guernsey corporation located at Level 5, Mill Court La Charroterie, St. Peter Port, Guernsey GY1 1EJ.  Its registration number is 48728.

 

b)   Basis of preparation

The financial statements represent the consolidated financial statements for the Group for the years ended 31 December 2017 with comparative unaudited 2016. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') and IFRC Interpretations issued by the International Accounting Standards Board as adopted by the European Union.

 

The Group changed its financial year end from 30 June to 31 December, effective 31 December 2017.

 

The financial statements have been prepared using the historical cost convention.  Outstanding claims liability and reinsurance and other recoveries are carried at management's best estimate of the amounts at which these will be settled based on the information currently available to them. These policies have been consistently applied to all periods presented.

 

The preparation of the consolidated financial statements requires the use of certain critical accounting estimates. The areas involving a higher degree of judgement of complexity, or areas where assumptions or estimates are significant are disclosed in Note 2 below.

 

The presentation currency of the financial statements is US Dollars, rounded to the nearest thousands ($'000) unless otherwise indicated. The Group's functional currency is US Dollars. The presentation and functional currency of the Group and its subsidiaries is deemed to be US Dollars.

 

c)    Going concern

The Directors have prepared a cash flow forecast covering a period extending beyond 12 months from the financial statements presented as at 31 December 2017.

 

The Directors have taken into account the historical positive cash flows, growth in business and the inherent risks and uncertainties facing the business, and have derived forecast assumptions that are the Directors' best estimate of the future development of the business.  For these reasons, they continue to adopt the going concern basis of accounting in preparing the consolidated financial statements. The consolidated financial statements do not include any adjustments that would result from the going concern basis of preparation being inappropriate.

 

d)    New accounting standards and amendments

 

i)    Standards, amendments and interpretations effective or early adopted as at January 1, 2017 and relevant for the Group's operations

 

Below are the new accounting standards or amendments to and interpretations of standards relevant to the Group that have been implemented for the financial year beginning January 1, 2017, with no material impact on the Group's financial position or performance. Amendments resulting from the IASB annual improvements project have no impact on the Group's financials.

 

New standards/interpretations

 

Effective Date

IAS 7

Disclosure Initiative

1 January 2017

IAS 12

Recognition of Deferred Tax Assets for Unrealised Losses

1 January 2017

       

 

ii)   New standards, interpretations and amendments not yet effective

 

The new International Financial Reporting Standards ('IFRS') and International Accounting Standards ('IAS') and amendments detailed below are not mandatory until the effective dates stated. Early adoption is permitted where the standards has been endorsed by the EU.

 

New standards/interpretations

 

Effective Date

IFRS 9

Financial instruments

1 January 2018

IFRS 15

Revenue from contracts with customers

1 January 2018

IFRS 16

Leases

1 January 2019

IFRS 17

Insurance Contracts

1 January 2021

IFRIC 22

Foreign Currency Transactions and Advance Consideration

1 January 2018

 

 

 

Amended standards

 

 

IFRS 2

Classification and Measurement of Share-based Payment Transactions

1 January 2018

IFRS 4

Applying IFRS 9 with IFRS 4

1 January 2018

IAS 20

Transfers of Investment Property

1 January 2018

IAS 28

Long-term Interests in Associates and Joint Ventures

1 January 2019

IFRS 9

Prepayment Features with Negative Compensation

1 January 2021

       

 

The Group will apply the standards detailed above for the reporting periods beginning on the effective dates set out above.

 

The following new standards, interpretations and amendments, which are not yet effective and have not been adopted early in this financial statements, will or may have an effect on the Group's future financial statements:

 

● IFRS 9 Financial Instruments, effective annual periods beginning on or after 1 January 2018, endorsed by the EU.  IFRS 9 is a replacement for IAS 39 'Financial Instruments' and covers three distinct areas. Phase 1 contains new requirements for the classification and measurement of financial assets and liabilities. Phase 2 relates to the impairment of financial assets and requires the calculation of impairment on an expected loss basis rather than the current incurred loss basis. Phase 3 relates to less stringent requirements for general hedge accounting.

 

The Group performed a high-level impact assessment of all three aspects of IFRS 9. This preliminary assessment is based on currently available information and may be subject to changes arising from further detailed analyses or additional reasonable and supportable information being made available to the Group in the future. Overall, the Group expects no significant impact on its balance sheet and equity, except for the effect of applying the impairment requirements of IFRS 9. The group plans to defer the application of IFRS 9 until the earlier of the effective date of the new insurance contracts standard of 1 January 2021, applying the temporary exemption from applying IFRS 9 as introduced by the amendments.

 

Amendments to IFRS 4 Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts

In September 2016, the IASB issued amendments to IFRS 4 to address issues arising from the different effective dates of IFRS 9 and the upcoming new insurance contracts standard. The amendments introduce two alternative options for entities issuing contracts within the scope of IFRS 4, notably a temporary exemption and an overlay approach. The temporary exemption enables eligible entities to defer the implementation date of IFRS 9 for annual periods beginning before 1 January 2021 at the latest. An entity may apply the temporary exemption from IFRS 9 if: (i) it has not previously applied any version of IFRS 9 before and (ii) its activities are predominantly connected with insurance on its annual reporting date that immediately precedes 1 April 2016. The overlay approach allows an entity applying IFRS 9 to reclassify between profit or loss and other comprehensive income an amount that results in the profit or loss at the end of the reporting period for the designated financial assets being the same as if an entity had applied IAS 39 to these designated financial assets. An entity can apply the temporary exemption from IFRS 9 for annual periods beginning on or after 1 January 2018. An entity may start applying the overlay approach when it applies IFRS 9 for the first time. The Group performed an assessment of the amendments and reached the conclusion that its activities are predominantly connected with insurance as at 31 December 2017. The Group intends to apply the temporary exemption in its reporting period starting on 1 January 2018.

 

● IFRS 15 Revenue from Contracts with Customers, effective annual periods beginning on or after 1 January 2018, endorsed by the EU, sets out to clarify the principles of revenue recognition and establish a single framework for revenue recognition. This standard replaces the previous standard IAS 11 Construction Contracts, IAS18 Revenue and revenue related IFRICs.

 

The Group expects to apply IFRS 15 fully retrospective. Given insurance contracts are scoped out of IFRS 15, the Group does not expect the impact of applying IFRS 15 to be significant to the Group.

 

● IFRS 16 Leases, effective annual periods beginning on or after 1 January 2019, endorsed by the EU sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, i.e. the customer ('lessee') and the supplier ('lessor'). IFRS 16 completes the IASB's project to improve the financial reporting of leases and replaces the previous leases Standard, IAS 17 Leases, and related Interpretations.

 

The impact of this new standard on the Group is still being considered.

 

● IFRS 17 Insurance Contracts, effective annual periods beginning on or after 1 January 2021, not yet endorsed by the EU, sets out the requirements that a company should apply in reporting information about insurance contracts it issues and reinsurance contracts it holds. IFRS 17 supersedes IFRS 4. IFRS 17 will provide comprehensive guidance on accounting for insurance contracts and investment contracts with discretionary participation features. For general insurance contracts, IFRS 17 will introduce mandatory discounting of loss reserves expected to be paid in more than one year as well as risk adjustment, for which confidence level equivalent disclosure will be required. Further, IFRS 17 is expected to have a significant impact on accounting for life insurance contracts as well as on the presentation of insurance contract revenue in the financial statements.

 

The impact of this new standard on the Group is still being considered.

 

● IFRIC 22, effective annual periods beginning on or after 1 January 2018, endorsed by the EU, clarifies how to determine the date of transaction for the exchange rate to be used on initial recognition of a related asset, expense or income where an entity pays or receives consideration in advance for foreign currency-denominated contracts. For a single payment or receipt, the date of the transaction should be the date on which the entity initially recognises the non-monetary asset or liability arising from the advance consideration (the prepayment or deferred income/contract liability).  If there are multiple payments or receipts for one item, a date of transaction should be determined as above for each payment or receipt. Insurance contracts (including reinsurance contracts) that the entity issues or reinsurance contracts that the entity holds are outside the scope of IFRIC 22. The Group performed a high level impact assessment of IFRIC 22. This preliminary assessment is based on currently available information and may be subject to changes arising from further detailed analyses or additional reasonable and supportable information being made available to the Group in the future. Overall, the Group expects no significant impact from this Interpretation.

 

e)   Basis of consolidation

The consolidated financial statements incorporates the assets and liabilities of all entities controlled by the Group as at 31 December 2017 and 2016 (unaudited) and the results of all controlled entities for the financial years then ended. Control is the power over the investee, exposure, or rights, to variable returns from its involvement with the investee and the ability to use its power over the investee to affect the amount of the investor's returns.  The effects of all transactions between controlled entities are eliminated in full. Non-controlling interests in the results and equity of the controlled entities are shown separately in the consolidated statement of comprehensive income and consolidated statement of financial position.

 

Business combinations are accounted for using the acquisition method when control of an entity of business is obtained. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the controlled entity acquired, the difference is recognised directly in profit or loss.

 

Non-controlling interests in an acquiree are recognised at the non-controlling interest's proportionate share of the acquiree's net identifiable assets.

 

f)    Insurance contracts

A contract is recognised as an insurance contract if it transfers significant insurance risk. Such contracts may also transfer financial risk. Insurance risk is transferred to the Group where it agrees to compensate a policyholder if a specified uncertain event, other than those caused by changes in a financial variable such as interest and foreign exchange rates, adversely affects the policyholder. All of the Group's insurance products are classified as insurance contracts.

 

The results are determined on an annual basis whereby the incurred cost of claims, commission and related expenses are charged against the earned proportion of premiums, net of reinsurance as follows:

 

i)    Premiums written

Premiums written relate to business incepted during the year, together with any additional premiums arising on insurance contracts recognised in prior years. Written premiums include estimates of premiums due but not yet receivable or notified to the Group, less allowance for cancellations. Premiums are stated net of taxes collected on behalf of third parties.

 

ii)   Unearned premiums

Unearned premiums represent the proportion of premiums written that relate to periods of insurance coverage to be provided in periods subsequent to the reporting date. Unearned premiums are earned as revenue over the period of the contract on a time apportionment basis, unless there is a marked unevenness in the incidence of risk over the period covered by the insurance. In these cases, premiums are recognised based on the assessed incidence of risk.

 

iii)  Acquisition costs

Acquisition costs, which represent commissions due to internal employees and third party brokers for the sale of insurance policies are deferred and amortised over the period in which the related premiums are earned.

 

iv)  Claims incurred

Claims incurred comprise claims and related expenses paid in the year and changes in the provisions for outstanding claims, including provision for claims incurred but not reported and related expenses, together with any adjustments to claims outstanding from previous years.

 

 

v)   Claims provisions and related reinsurance recoveries

Provision is made at the reporting date for the estimated cost of claims incurred but not settled at the reporting date, including the cost of claims incurred but not yet reported to the Group. Although the Group takes all reasonable steps to ensure that it has appropriate information regarding its claim exposures, given the uncertainty in establishing claims provisions, it is likely that the final outcome will be different from the original liability established and may result in significant adjustments to the amounts provided. Adjustments to the amounts provided are reflected in the consolidated financial statements in the accounting period in which the adjustments are made.

 

The Group does not discount liabilities for unpaid claims.

 

The estimation of claims incurred but not recorded ('IBNR') is generally subject to a greater degree of uncertainty than the estimation of the cost of settling claims already notified to the Group, where more information about the claim event is generally available.  The in-house underwriting team conducts the IBNR review using standard actuarial methodologies to evaluate and determine the IBNR reserves for of the Group.

 

vi)  Reinsurance

The Group cedes reinsurance in the normal course of business, with retention limits set for each line of business. The contracts entered into by the Group with reinsurers, under which the Group is compensated for losses on one or more contracts issued by the Group and that meet the classification requirements for insurance contracts, are classified as reinsurance contracts. Outward reinsurance premiums are recognised in the same accounting period as the related premium income. Reinsurance claims recoveries are recognised in the same accounting period as the related insurance claims are accounted for.

 

The amounts recoverable from reinsurers are estimated based upon the gross provisions, having due regard to their collectability and the terms of the related reinsurance contract. The reinsurance recoveries in respect of estimated claims incurred but not reported are assumed to be consistent with the historical pattern of such recoveries, adjusted to reflect changes in the nature and extent of the reinsurance program over time. The recoverability of reinsurance recoveries is assessed having regard to market data on the financial strength of each of the reinsurers.

 

Gains and losses on buying reinsurance are recognised immediately at the point of purchase and not amortised.

 

The reinsurers' share of claims incurred, in the profit or loss, reflects the amounts received or receivable from reinsurers in respect of those claims incurred during the period. The reinsurance premiums due are primarily premiums payable for reinsurance contracts and are recognised in the profit or loss as outward reinsurance premiums when due.

 

g)    Foreign Currencies

 

Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rate of exchange at the reporting date.

 

Non-monetary items are measured at historical cost and are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.

 

The Group is exposed to gains and losses that result from the effect of changes in foreign currency exchange rates on foreign currency denomination transactions. Gains and losses which result from transactions denominated in foreign currency are reported in the consolidated statement of comprehensive income.

 

h)    Property, plant and equipment

Property, plant and equipment is stated at cost (or deemed cost) less accumulated depreciation and any accumulated impairment losses. Cost includes expenditure that is directly attributable to bringing the asset to its working condition for its intended use.

 

Property, plant and equipment are depreciated to their residual values over their useful lives. Depreciation is calculated on the straight line method to reduce their carrying value to the residual amount as follows:

         

          Equipment                                                                      5 years

          Furniture and fixtures                                                    5-7 years

          Leasehold improvements                                              7 years or lease term, if shorter

         

The residual values, length of the economic lives and depreciation method applied are reviewed on a regular basis, and at least at every reporting date, and adjusted as appropriate. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. Gains and losses on disposal of property and equipment are determined by reference to their carrying amount.

 

i)     Intangible assets

Costs of implementing new software systems are capitalised as incurred.  Amortisation of software does not commence until the system is fully installed and operational. Intangible assets acquired are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. The amortisable intangible assets represent computer software and development costs and are reported net of accumulated amortisation.

 

The amortisable intangible assets are amortised on a straight-lined basis over its estimated useful life of 3-5 years and is assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation of intangible assets is carried out only when the implementation is complete and the asset is in use.

 

j)     Goodwill

Goodwill arises on the acquisition of subsidiaries and represents the excess of the fair value of consideration transferred over the Group's interest in the net fair value of the identifiable net assets, liabilities and contingent liabilities of the entity acquired and the fair value of non-controlling interest in the acquiree.

 

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the CGUs, or groups of CGUs, that is expected to benefit from the synergies of the combination. Goodwill is tested for impairment annually, or more frequently if circumstances indicate impairment may have occurred. If the recoverable amount of the cash generating unit is less than its carrying amount. The impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to that unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss is recognised in profit or loss. Impairment losses so recognised are not subsequently reversed.

 

k)    Cash and cash equivalents

Cash and cash equivalents include cash in hand and deposits held on call, together with other short term highly liquid investments which are not subject to significant changes in value and have original maturities of less than three months. 

 

l)     Tax

The charge for tax is based on the results for the year determined in accordance with the relevant tax laws and regulations that are enacted, or substantively enacted, at the reporting date in each jurisdiction.

 

Deferred tax is provided in full on all temporary differences arising between the carrying amounts in the consolidated financial statements and the tax bases of the assets and liabilities. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. Deferred tax is calculated based on the tax rates that have been enacted or substantively enacted at the end of the reporting period and which are expected to be in force when the relevant deferred tax asset is realised or the relevant deferred tax liability is settled. Deferred tax balances are not discounted.

 

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority within the Group.

 

m)   Employee benefits

Share-based payments

A transaction is accounted for as a share-based payment where the Group receives services from employees and pays for these in shares and similar equity instruments.

 

The Group makes equity-settled share-based payments to certain employees. Equity-settled share-based schemes are measured at fair value (excluding the effect of non-market-based vesting conditions) at the date of grant, measured by use of an appropriate valuation model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of nontransferability, exercise restrictions and behavioural considerations.

 

The fair value determined at the grant date of the equity-settled share-based payments is expensed over the vesting period, based on the Group's estimate of shares that will eventually vest.

 

Share options are forfeited when an employee ceases to be employed by the Group.

 

Short-term employee benefits

Short-term employee benefits, including compensated absences, are benefits to be paid within one year after the end of the reporting period in which the related services are rendered. A liability and expense are recognised for the undiscounted amount expected to be paid for short-term employee benefits in the period in which the employee renders services in exchange for the benefits.

 

Other long-term employee benefits

The Group and its subsidiaries make payments to defined contribution benefit arrangements on behalf of employees.  The charge to the profit or loss represents the amounts payable by the Group for the year.  The assets relating to these arrangements are held separately to those of the Group.

 

n)    Operating segments

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker has been identified as the Chief Executive Officer.

 

The Board considers that the Group's insurance activities constitute only one operating and reporting segment, as defined under IFRS 8. Management reviews the performance of the Group by reference to total results.

 

The total profit measures are operating profit and profit for the year, both disclosed on the face of the consolidated profit or loss. No differences exist between the basis of preparation of the performance measures used by management and the figures in the Group financial statements.

 

o)    Financial assets

The Group's financial assets are loans and receivables. Financial assets are recognised when the Group becomes party to the provisions of the contract.

 

Loans and receivables

These investments are initially recognised at cost, being the fair value of the consideration paid for the acquisition of the investment. All transaction costs directly attributable to the acquisition are also included in the cost of the investment. After initial measurement, loans and receivables are measured at amortised cost less allowance for impairment. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.  The Group's loans and receivables financial assets comprise all short-term trade and other receivables (excluding prepayments) and cash and cash equivalents included in the statement of financial position.

 

Short term receivables are measured at cost, less any impairment.  Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less.

 

Impairment of financial assets

All financial assets are assessed at the end of each reporting period as to whether there is any objective evidence of impairment as a result of one or more events having an impact on the estimated future cash flows of the asset.

An impairment loss in respect of loans and receivables financial assets is recognised in the profit or loss and is measured as the difference between the asset's carrying amount and best estimate of the recoverable amount, which is an approximation of the amount that the Group would receive for the asset if it were to be sold at the reporting date.

 

In a subsequent period, if the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

 

p)    Financial liabilities

The Group's financial liabilities are all categorised as loans and payables. Financial liabilities are recognised when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. 

 

Loans and payables

The Group's loans and payables comprise all trade and other payables (excluding other taxes and social security costs and deferred income), insurance liabilities, redeemable preferred shares and Class D shares. Short term payables are measured at cost. They represent balances where the Group is not able to avoid settlement in cash or another financial asset.

 

Shares issued by the Group are classified as a financial liability to the extent that they meet the definition of a financial liability. Both the redeemable preferred stock and Class D shares are classified as a financial liability as the Group has contractual obligation to deliver cash and, in this case, payment of dividends which are accrued and paid annually. The redeemable preferred stocks and Class D shares, are measured initially at fair value, net of transaction costs and are measured subsequently at amortised cost and interest is recognised in profit or loss.

 

A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires.

When an existing financial liability is replaced by another from the same party on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the profit or loss.

 

q)    Commission and fees 

 

The Group earns a managing general underwriter and agency commission income for underwriting, marketing, and administration. Commission income is recognised as one unit of account on a pro-rata basis over the policy period.  The Group also earns a fronting fee on the policies it writes. Fees vary from 3% to 5.5% of premiums written. Income is recognised on a pro-rata basis over the contract period and is included in commission and fees on the consolidated statements of income. The Group also charges a policy administrative fee, which is invoiced in addition to the insurance premium. Such fees are recognised as revenue over the policy term, which matches with the period the services are rendered.

 

Profit commission is a commission paid by the insurance and reinsurance carriers based on overall profit of business placed with the carriers during a particular contractual year. Profit commission is recorded at the earlier date of when the amounts are received from the reinsurance carriers or when the commission can be reasonably estimated and earned by the Group.

 

r)    Share capital

Financial instruments issued by the Group are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset.

 

Apart from redeemable preferred stocks and Class D shares, the Group's common shares are classified as equity instruments. Any dividends paid for the redeemable preferred stocks and class D shares are classified as finance costs.  Any dividends on the equity instruments are reported against the accumulated retained earnings in the statement of changes in equity.

 

s)    Investment income

Interest income is recognised in the statement of profit or loss as it accrues and is calculated by using the effective interest rate method.

 

 

 

t)    Deferred acquisition cost

Those direct and indirect costs incurred during the financial period arising from acquiring or renewing of insurance contracts and/or investment contracts are deferred to the extent that these costs are recoverable out of future premiums from insurance contract. All other acquisition costs are recognised as an expense when incurred.

 

Subsequent to initial recognition, this deferred acquisition cost ("DAC") asset for life insurance is amortised over the expected life of the contracts as a constant percentage of expected premiums. DAC for general insurance and health products are amortised over the period in which the related revenues are earned. The deferred acquisition costs for reinsurers are amortised in the same manner as the underlying asset amortisation and is recorded in the statement of profit or loss.

 

Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method and are treated as a change in an accounting estimate.

 

An impairment review is performed at each reporting date or more frequently when an indication of impairment arises. When the recoverable amount is less than the carrying value, an impairment loss is recognised in the statement of profit or loss.

 

DACs are derecognised when the related contracts are either settled or disposed of.

 

2.            Critical accounting estimates, assumptions and judgments

The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

 

The key areas in which critical estimates and assumptions are applied are described below:

 

a)   Liability for unpaid claims and loss adjustment expenses

The estimation of the ultimate liability arising from claims made under insurance contracts is the Group's most critical accounting estimate. There are several sources of uncertainty that need to be considered in the estimate of the liability that the Group will ultimately pay for such claims.

 

Provision is made at the reporting date for the estimated cost of claims incurred but not settled at the reporting date. The liability for outstanding claims includes the cost of claims reported but yet to be paid, claims incurred but not reported, and the estimated expenses to be incurred in settling claims. There is the potential that the amounts at which claims are settled could differ to the amounts at which they are currently provided.

 

The estimation of insurance liabilities is subject to considerable variability as it requires the use of informed estimates and judgments. These estimates and judgments are based on numerous factors, and may be revised as additional experience becomes available or as regulations change. The Group takes all reasonable steps to ensure that it has appropriate information regarding its claims exposures.

 

In arriving at booked claims provisions, management also took into consideration changes or uncertainties which may create distortions in the underlying statistics or which might cause the cost of unsettled claims to increase or reduce when compared with the cost of previously settled claims including:

 

·           changes in patterns of claim incidence, reporting and payment;

·           the impact of inflation (both economic/wage and superimposed);

·           changes in the mix of business;

·           the impact of large losses;

·           medical and technological developments;

·           changes in policyholder behavior.

 

There is the potential that the amounts at which claims are settled and, the related reinsurance recoveries, could differ materially from the amounts at which they are disclosed in the consolidated statement of financial position.

 

The methods used to analyse past claim experience and to project future claim experience are largely determined by the available data and the nature of the portfolio. The projections given by the different methodologies assist in setting the range of possible outcomes. The most appropriate estimation technique is selected taking into account the characteristics of the business class and the extent of the development of each accident year.

 

b)   Estimate of reinsurance recoveries

The Group's reinsurance premiums, loss expense and reserves related to reinsurance business are accounted for on a basis consistent with those used in accounting for the original policies issued and terms of the reinsurance contracts. Loss expenses related to ceded premiums have been netted against the total loss expenses which are included in expenses on the consolidated statements of income.

 

The Group also enters into a personal accident excess of loss reinsurance agreement where minimum deposit premiums are paid by the Group. The Group's gross loss reserve is ultimately based on management's reasonable expectations of future events as is the estimate of future recoveries from reinsurers. It is reasonably possible that the expectations associated with these amounts could change in the next year and that the effects of such changes could be material to the consolidated financial statements.

 

c)   Intangible assets

Goodwill is subject to an annual impairment review and more frequently if events or changes in circumstances indicate that the carrying amount may be impaired. This requires an estimation of the recoverable amount of the CGU to which goodwill is allocated. Details of the key assumptions used in the estimation of the recoverable amounts are contained in Note 17.

 

The key area in which critical judgements are applied are described below:

 

a)   GBG Philippines

The Group's Directors have considered the power they exert over the Group's participation in GBG Philippines. Notwithstanding the fact the Group holds 28% of the shares it is their opinion that they have the power over the investee to affect the investor's returns and that GBGI controls GBG Philippines. The Directors have the ability to control the operation, additional funding, and business decision making of GBG Philippines.  As such GBG Philippines has been consolidated as if it were a subsidiary (see Note 19).

 

3.            Management of insurance and financial risk

The management of risk is a fundamental concern of the Group's management. This note summarises the key risks to the Group and the policies and procedures put in place by management to manage them. The components of insurance, market, credit, liquidity and operational risk are considered below:

 

 

a)         Insurance Risk

Insurance risk refers to fluctuations in the timing, frequency, and severity of insured events relative to the expectations at the time of underwriting. Insurance risk can also refer to fluctuations in the timing and amount of claim settlements and reserves.

 

Insurance risk is historically the single most significant risk area within the Group. It is split between four principal key risks, which are all managed through the application of controls as well as the use of reinsurance to offset exposures through the transfer of risk.   These four key risks are as follows:

 

Failure of pricing: The Group faces the risk of incorrect pricing of products resulting in financial losses or reduced profit, through being set too high (therefore losing market share) or too low (therefore resulting in an unacceptable profit contribution for that product). The Group seeks to manage this through the setting and review of pricing guidelines relevant to each business line and the application of a strict hierarchy of underwriting authorities is in place to ensure that policies are underwritten with management oversight.

 

Ineffective strategy/failure of product: When an inappropriate strategy or product is introduced for a specific business line or the Group as whole, there is an increased risk that material financial and reputational losses will occur. The Group seeks to manage this through the use of processes and procedures in place over the production, review and analysis of annual business.

 

Failure to manage risk aggregation/accumulation: The Group may be exposed to an increased likelihood of disproportionate losses for specific perils if insured risks are overly focused on a specific geographical area or type of policy cover. The Group seeks to manage this through the use of pre-bind rules and authorities to manage significant risks within line and cross-line exposures. 

 

Adverse reserve development: The Group may be exposed to reserve shortfalls or distortions through failing to set sufficient case reserves or through failing to adopt a robust and consistent reserve strategy across products offered to insured and countries. The Group seeks to manage this through monitoring adherence to established policies and procedures in place governing claims reserving practices.

 

Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provisions and are in accordance with the reinsurance contracts. The Group purchases excess of loss insurance, as part of its risks mitigation programme to limit the maximum net loss.

 

Concentration of insurance risk

The Group monitors its risk concentration levels through an annual review of the Risk Appetite statement, during its annual Own Risk and Solvency Assessment reviews and through quarterly reviews of the premium by region to ensure that premiums in any given country or region are not exceeding the stated Risk Appetite.

 

Impairment of insurance receivables 

With the exception of Angola, no material amount of insurance premium is past due or impaired, hence the Group has determined that an allowance for impairment for insurance premiums is not required. However, in February 2018, the Group entered into a new contractual relationship with its insurance partner in Angola, effective 31 December 2017, resulting in a Settlement Agreement with the insurance partner of all outstanding claims.  The amount of the settlement with the insurance partner was $17,500,000 consisting primarily of fees due to the Group's managing general underwriting (MGU) subsidiary, GBG, Inc.   

 

In reviewing the terms of this Settlement Agreement, the Group has determined that $12,254,700 of the settlement amount should be impaired. This determination is based upon the Group's assessment of the probability that the Angolan AOA settlement amount would be transferred to the Group in a tangible currency within the next 2-3 years.  The Group received advice on the subject from various third parties.  As a result, the Group determined that, over the term of the Settlement Agreement (three years), it would be difficult for the Group to transfer the Angolan Kwanza payments made by the insurance partner to the Group into a tangible currency of USD, GBP or Euros.

 

This business restructuring may have a negative impact in the Group's insurance rating.

           

Claims development

The loss development tables presented below show the cumulative provisions for insurance claims, whether reported or not, and related loss adjustment expenses arising for each accident year from 2011 onwards. The historical net insurance claims provision for all outstanding claims arising for accident years prior to 2011 are shown cumulatively as one figure in the left hand column. All amounts shown in the tables have been stated at constant exchange rates based on the rates prevailing as at 31 December 2017.

 

Insurance Claims - Gross

As at 31 December 2017

 

 

2011 and prior

2012

2013

2014

2015

2016

2017

Total

 
 

Accident Year

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

 

Estimate of ultimate

 

 

 

 

 

 

 

 

 

claims costs:

 

 

 

 

 

 

 

 

 

Balance at end of 6 months

1,274

3,205

5,707

10,064

12,197

13,173

 

 

 

Balance at end of 12 months

 

 

 

 

 

47,401

62,353

 

 

Balance at end of 18 months

30,997

34,706

42,675

65,390

69,709

 

 

 

 

Balance at end of 24 months

 

 

 

 

75,329

92,822

 

 

 

Balance at end of 30 months

44,526

40,168

46,232

68,684

 

 

 

 

 

Balance at end of 36 months

 

 

 

68,894

77,978

 

 

 

 

Balance at end of 42 months

45,016

40,016

46,903

 

 

 

 

 

 

Balance at end of 48 months

 

 

46,863

69,205

 

 

 

 

 

Balance at end of 54 months

44,324

39,942

47,109

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cumulative claims payments:

 

 

 

 

 

 

 

 

 

Balance at end of 6 months

485

978

1,131

2,661

2,025

3,859

 

 

 

Balance at end of 12 months

 

 

 

 

 

21,878

34,473

 

 

Balance at end of 18 months

21,984

22,150

31,724

45,460

46,880

 

 

 

 

Balance at end of 24 months

 

 

 

 

66,067

87,120

 

 

 

Balance at end of 30 months

40,725

35,651

44,989

64,902

 

 

 

 

 

Balance at end of 36 months

 

 

 

65,380

74,274

 

 

 

 

Balance at end of 42 months

42,724

37,553

45,778

 

 

 

 

 

 

Balance at end of 48 months

 

 

45,769

67,877

 

 

 

 

 

Balance at end of 54 months

44,070

38,601

45,894

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current estimate of
 cumulative claims

44,324

39,942

47,109

69,205

77,978

92,822

62,353

433,733

 

Cumulative payments to date

44,070

38,601

45,894

67,877

74,274

87,120

34,473

392,309

 

Total loss reserve
 (Note 25)

254

1,341

1,215

1,328

3,704

5,702

27,880

41,424

 

 

 

Insurance Claims - Net of Reinsurance

As on 31 December 2017

 

 

2011 and prior

2012

2013

2014

2015

2016

2017

Total

 
 

Accident Year

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

 

Estimate of ultimate

 

 

 

 

 

 

 

 

 

claims costs:

 

 

 

 

 

 

 

 

 

Balance at end of 6 months

319

338

743

1,713

5,286

9,276

 

 

 

Balance at end of 12 months

 

 

 

 

 

25,491

35,617

 

 

Balance at end of 18 months

7,210

5,642

7,913

12,053

34,019

 

 

 

 

Balance at end of 24 months

 

 

 

 

38,381

52,399

 

 

 

Balance at end of 30 months

8,451

5,903

8,839

13,397

 

 

 

 

 

Balance at end of 36 months

 

 

 

13,252

38,391

 

 

 

 

Balance at end of 42 months

8,415

6,083

8,786

 

 

 

 

 

 

Balance at end of 48 months

 

 

8,780

13,324

 

 

 

 

 

Balance at end of 54 months

8,433

6,268

8,795

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cumulative claims payments:

 

 

 

 

 

 

 

 

 

Balance at end of 6 months

121

77

118

497

1,011

2,641

 

 

 

Balance at end of 12 months

 

 

 

 

 

12,194

21,295

 

 

Balance at end of 18 months

4,817

3,703

6,039

8,878

23,388

 

 

 

 

Balance at end of 24 months

 

 

 

 

33,966

50,236

 

 

 

Balance at end of 30 months

8,292

5,662

8,543

12,652

 

 

 

 

 

Balance at end of 36 months

 

 

 

12,780

37,575

 

 

 

 

Balance at end of 42 months

8,376

5,944

8,635

 

 

 

 

 

 

Balance at end of 48 months

 

 

8,647

13,230

 

 

 

 

 

Balance at end of 54 months

8,433

6,093

8,769

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current estimate of
 cumulative claims

8,433

6,268

8,795

13,324

38,391

52,399

35,617

163,227

 

Cumulative payments to date

8,433

6,093

8,769

13,230

37,575

50,236

21,295

145,631

 

Total loss reserve
 (Note 25)

-

175

26

94

816

2,163

14,322

17,596

 

 

Insurance Claims - Gross

As at 31 December 2016 (unaudited)

 

 

2011 and prior

2012

2013

2014

2015

2016

Total

 
 

Accident Year

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

 

Estimate of ultimate

 

 

 

 

 

 

 

 

claims costs:

 

 

 

 

 

 

 

 

Balance at end of 6 months

1,274

3,205

5,707

10,064

12,197

13,173

 

 

Balance at end of 12 months

 

 

 

 

 

47,529

 

 

Balance at end of 18 months

30,997

34,706

42,675

65,390

69,937

 

 

 

Balance at end of 24 months

 

 

 

 

75,557

 

 

 

Balance at end of 30 months

44,526

40,168

46,232

68,684

 

 

 

 

Balance at end of 36 months

 

 

 

68,895

 

 

 

 

Balance at end of 42 months

45,016

40,016

46,903

 

 

 

 

 

Balance at end of 48 months

 

 

46,863

 

 

 

 

 

Balance at end of 54 months

44,519

40,039

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cumulative claims payments:

 

 

 

 

 

 

 

 

Balance at end of 6 months

485

978

1,131

2,661

2,025

3,859

 

 

Balance at end of 12 months

 

 

 

 

 

21,878

 

 

Balance at end of 18 months

21,984

22,150

31,724

45,460

46,880

 

 

 

Balance at end of 24 months

 

 

 

 

66,067

 

 

 

Balance at end of 30 months

40,725

35,651

44,989

64,902

 

 

 

 

Balance at end of 36 months

 

 

 

65,380

 

 

 

 

Balance at end of 42 months

42,724

37,553

45,778

 

 

 

 

 

Balance at end of 48 months

 

 

45,769

 

 

 

 

 

Balance at end of 54 months

43,724

38,335

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current estimate of
 cumulative claims

44,519

40,039

46,863

68,895

75,557

47,529

323,402

 

Cumulative payments to date

43,724

38,335

45,769

65,380

66,067

21,878

281,153

 

Total loss reserve
 (Note 25)

795

1,704

1,094

3,515

9,490

25,651

42,249

 

 

Insurance Claims - Net of Reinsurance

As on 31 December 2016 (unaudited)

 

 

2011 and prior

2012

2013

2014

2015

2016

Total

 
 

Accident Year

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

 

Estimate of ultimate

 

 

 

 

 

 

 

 

claims costs:

 

 

 

 

 

 

 

 

Balance at end of 6 months

319

338

743

1,713

5,286

9,276

 

 

Balance at end of 12 months

 

 

 

 

 

25,497

 

 

Balance at end of 18 months

7,210

5,642

7,913

12,053

34,018

 

 

 

Balance at end of 24 months

 

 

 

 

38,379

 

 

 

Balance at end of 30 months

8,451

5,903

8,839

13,397

 

 

 

 

Balance at end of 36 months

 

 

 

13,253

 

 

 

 

Balance at end of 42 months

8,415

6,083

8,786

 

 

 

 

 

Balance at end of 48 months

 

 

8,789

 

 

 

 

 

Balance at end of 54 months

8,456

6,058

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cumulative claims payments:

 

 

 

 

 

 

 

 

Balance at end of 6 months

121

77

118

497

1,011

2,641

 

 

Balance at end of 12 months

 

 

 

 

 

12,194

 

 

Balance at end of 18 months

4,817

3,703

6,039

8,878

23,388

 

 

 

Balance at end of 24 months

 

 

 

 

33,966

 

 

 

Balance at end of 30 months

8,292

5,662

8,543

12,652

 

 

 

 

Balance at end of 36 months

 

 

 

12,780

 

 

 

 

Balance at end of 42 months

8,376

5,944

8,635

 

 

 

 

 

Balance at end of 48 months

 

 

8,647

 

 

 

 

 

Balance at end of 54 months

8,433

6,012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current estimate of
 cumulative claims

8,456

6,058

8,789

13,253

38,379

25,497

100,432

 

Cumulative payments to date

8,433

6,012

8,647

12,780

33,966

12,194

82,032

 

Total loss reserve
 (Note 25)

23

46

142

473

4,413

13,303

18,400

 

 

 

Sensitivity analysis

 

Key assumptions

The Group develops these estimates for the claims liability on the assumption of the information which is currently available, including potential claims which have been reported to the Company, experience of the development of similar claims and case law. This includes assumptions made on the average claim costs, number of claims for each accident year, legislative changes, and changes in inflation rates, changes in patterns of claim incidence, reporting and payment. 

 

The key assumptions selected are average claim costs or number of claims for each incident year as these factors can be quantified whereas other assumptions like legislative changes or change in patterns of claim incidence are not easily quantifiable.  It is assumed that the increase or lower of one of these key assumptions by 5% will result in 3 possible scenarios:

(i)    Scenario 1: the gross written premium increase or decrease by 5% but the loss reserve ratio remains the same; and

(ii)   Scenario 2: The gross written premium increase or decrease by 5% but with no change to claims recoverable from reinsurers.

(iii)  Secenario 3: The net claims increase or decrease by 5%.

The 5% is the sensitivity rate that represents management's assessment of the reasonably possible change in the average claim cost or number of claims for each accident year in the next 12 months.

The following tables demonstrate the impact of a 5 percent change (lower/higher) in the following key assumptions, with all other assumptions held constant, to the profit before tax and equity for each reported year:

2017

 

 

 

 

 

 

 

Change in assumptions

 

Scenarios

Impact on gross premium

written

USD'000

Impact on recoverable from reinsurers

USD'000

Impact on net premium written

 USD'000

Impact on net claims

USD'000

Impact on profit

 USD'000

+/- 5% average premium written

Scenario 1

9,697

(4,474)

5,223

-

5,223

Scenario 2

9,697

-

9,697

-

9,697

+/- 5% net claims

Scenario 3

-

-

-

3,106

3,106

 

2016 (unaudited)

 

 

 

 

 

 

 

Change in assumptions

 

Scenarios

Impact on gross premium written

USD'000

Impact on recoverable from reinsurers

USD'000

Impact on net premium written

 USD'000

Impact on net claims

 USD'000

Impact on profit

 USD'000

+/- 5% average premium written

Scenario 1

8,252

(3,722)

4,350

-

4,350

Scenario 2

8,252

-

8,252

-

8,252

+/- 5% net claims

Scenario 3

-

-

-

2,063

2,063

 

 

b)         Market Risk

Market risk is the risk that the Group is adversely affected by movements in the value of its financial assets or liability arising from market movements such as interest rates and foreign exchange rates or other price risk. A description of the Group's principal risk relating to market risk is shown below, along with a summary description of controls the Group applies in seeking to mitigate this risk:

 

Currency risk

The Group sells 21% of its insurance policies to foreign customers in foreign currency denominations. At each period end, foreign currency monetary items are translated using the closing rate. Currency risk arises where assets and liabilities are settled in currencies other than the functional currency of the Group. Currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group has no significant concentration of currency risk.

 

 

USD'000

USD

 CAD

EUR

GBP

Indian Rupee

China

Renminbi

Others

Total
31 December  2017

Cash and cash equivalent

81,735

999

5,380

1,889

2,430

447

173

93,053

 

 

 

 

 

 

 

 

 

USD'000

USD

 CAD

EUR

GBP

Indian Rupee

China

Renminbi

Others

Total
31 December 2016 (unaudited)

Cash and cash equivalent

60,595

1,497

2,621

1,311

1,455

442

69

67,990

 

 

Sensitivity Analysis

The impact of 10% movement in the key foreign exchange rates of US$ as shown below will result in an increase/decrease of profit before tax and financial assets/ (liabilities) by USD 1,115,000 (2016 (unaudited): USD 732,000).

 

Impact of 10% movement in foreign exchange rate of US$:

 

USD'000

 

 CAD

EUR

GBP

Indian Rupee

China

Renminbi

Total
31 December 2017

Cash and cash equivalent

 

100

538

189

243

45

1,115

 

 

 

 

 

 

 

 

USD'000

 

 CAD

EUR

GBP

Indian Rupee

China

Renminbi

Total
31 December 2016 (unaudited)

Cash and cash equivalent

 

150

262

131

145

44

732

 

Interest rate risk

The Group is not exposed to interest rate risk through borrowing activities. The Company does not enter into financial instrument transactions for trading or speculative purposes or to manage interest rate exposure. As at 31 December 2017 and 2016, the Group had no debt.

 

Fair value hierarchy

The Groups financial assets and liabilities are classified as loans and receivables. Therefore, a fair value hierarchy is not separately disclosed. In the opinion of the Directors the amounts at which the financial assets and liabilities are disclosed in the consolidated financial statements is a reasonable approximation of their fair value.

 

c)         Financial Risk

A description of each of the Group's principal risks attached to financial risk is shown below; along with a summary description of controls the Group applies in seeking to mitigate these risks:

 

Credit risk

Credit risk is defined as the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Group has exposure to credit risk principally through its holdings of reinsurance assets. No material insurance premium receivables are past due, hence no material impairment risk has been identified by the Directors.  There has been no change in the Group's processes in respect of credit risk over the period.

 

The Group faces a risk of material losses if their main reinsurers fail or are unable to pay their contractual share of claims payable. The Group seeks to manage this through annual review of the financial strength and creditworthiness of reinsurance counterparties as well as tracking overall exposures to individual reinsurers. In addition, a list of approved reinsurers is maintained, and an established process is in place to ensure that approval is obtained before reinsurance cover is taken out with a reinsurer not on the approved list (this may include requiring collateralisation).

 

The Group faces a risk of material losses and cash flow issues if third party obligors are unable to pay amounts due. The Group seeks to manage this risk through the utilisation of processes and procedures in place to ensure that the Group only utilises approved bank operating accounts. In addition, the Group has controls in place to ensure that brokers used are subject to credit checks prior to and during the period where they provide services to the Group, where it is possible to do so.

 

The following table provides an analysis of the major categories of financial assets with credit risk exposure and the credit rating of those financial assets based upon the ratings published by various agencies i.e. Standard & Poor's or equivalent, Moody's Investors Service, Fitch Ratings and A.M. Best Company.

 

As at 31 December 2017

 AAA

 AA

 A

 BBB

 Below investment

 Not rated

  Total 

grade 

 

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

Financial assets

 

 

 

 

 

 

 

Insurance premium receivable

-

-

-

-

-

52,156

52,156

Reinsurers share of technical provisions

1,519

14,761

37,244

-

-

-

53,524

Other receivables

2,040

1,563

2,216

-

-

17,955

23,774

Cash at bank and in hand

-

-

93,053

-

-

-

93,053

Total

3,559

16,324

132,513

-

-

70,111

222,507

Financial liabilities

 

 

 

 

 

 

 

Insurance liabilities

 

 

 

 

 

 

131,065

Other insurance liabilities

 

 

 

 

 

 

49,707

Trade and other payables

 

 

 

 

 

 

17,873

Redeemable preferred stock

 

 

 

 

 

 

250

Total

 

 

 

 

 

 

198,895

 

 

 

 

 

 

 

 

Net amount

 

 

 

 

 

 

23,612

As at 31 December 2016 (unaudited)

 AAA

 AA

 A

 BBB

 Below investment

 Not rated

  Total 

grade 

 

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

Financial assets

 

 

 

 

 

 

 

Insurance premium receivable

-

-

-

-

-

81,330

81,330

Reinsurers share of technical provisions

36,697

9,205

13,522

-

-

-

59,424

Other receivables

583

1,683

3,254

-

-

15,308

20,828

Cash at bank and in hand

-

-

67,990

-

-

-

67,990

Total

37,280

10,888

84,766

 

 

96,638

229,572

Financial liabilities

 

 

 

 

 

 

 

Insurance liabilities

 

 

 

 

 

 

134,371

Other insurance liabilities

 

 

 

 

 

 

56,994

Trade and other payables

 

 

 

 

 

 

22,316

Redeemable preferred stock

 

 

 

 

 

 

250

Class D shares

 

 

 

 

 

 

5,500

Total

 

 

 

 

 

 

219,431

 

 

 

 

 

 

 

 

Net amount

 

 

 

 

 

 

10,141

                             

 

The financial assets and liabilities are classified as loan and receivables.  The amounts disclosed are, in the opinion of management, comparable to fair value.

 

 

 

d)   Liquidity risk

Liquidity risk is defined as the risk that the Group will encounter difficulty in meeting obligations associated with its financial liabilities, primarily insurance claims, as they fall due. This risk is mitigated by holding funds predominately in liquid financial assets i.e. cash and cash equivalents and constant monitoring of expected asset and liability maturities. The Group further manages this risk through monthly reviews of the Group cash accounts as well as review and approval of forward looking reviews of cash requirements into the next quarter. The Group's Treasury department is also operationally responsible to ensure that sufficient funding required for future expected cash requirements are available and that the sources of funding are appropriately diversified. There has been no change in the Group's processes in respect of liquidity risk over the period.

 

The following table provides an analysis of the maturity profile of financial liabilities, including insurance liabilities:

 

 Less than one year

 One to
two years

 Two to
three years

More than three years

 Carrying value in statement of financial position

 
 

As at 31 December 2017

USD'000

USD'000

USD'000

USD'000 

USD'000

 

Insurance liabilities:

 

 

 

 

 

 

Loss reserves (Note 23)

35,706

5,718

-

-

41,424

 

Reinsurance premium payable

(Note 24)

40,863

6,544

-

-

47,407

 

Unearned premium (Note 23)

89,641

-

-

-

89,641

 

Premium deposits and credits to

Customers (Note 24)

2,300

-

-

-

2,300

 

Borrowings:

 

 

 

 

 

 

Redeemable Preferred Stock

(Note 26)

-

-

-

250

250

 

Total

168,510

12,262

-

250

181,022

 

 

 

 Less than one year

 One to
two years

 Two to
three years

More than three years

 Carrying value in statement of financial position

 
 

As at 31 December 2016 (unaudited)

USD'000

USD'000

USD'000

USD'000 

USD'000

 

Insurance liabilities:

 

 

 

 

 

 

Loss reserves (Note 23)

38,556

3,693

-

-

42,249

 

Reinsurance premium payable

(Note 24)

47,328

4,533

-

-

51,861

 

Unearned premium (Note 23)

92,122

-

-

-

92,122

 

Premium deposits and credits to

customers (Note 24)

5,133

-

-

-

5,133

 

Borrowings:

 

 

 

 

 

 

Redeemable Preferred Stock

(Note 26)

-

-

-

250

250

 

Class D shares (Note 26)

660

660

660

3,520

5,500

 

Total

183,799

8,886

660

3,770

197,115

 

 

 

e)         Operational risk

Operational risk is defined by the Group as the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events. It is intrinsic to the Group's operations but is actively mitigated and managed. A description of each of the Group's three principal risks attached to operational risk is shown below; along with a summary description of the controls the Group applies in seeking to mitigate these risks. There has been no change in the Group's processes in respect of operational risk over the period.

 

IT systems failure: The Group potentially faces a risk of business interruptions and inefficiencies if IT systems fail.  Such business interruptions would impact on the profitability of the Group and has the potential to cause reputational damage. The Group seeks to manage this risk through having procedures in place to back-up data together with other controls designed to minimise external threats/unauthorised access.

 

Non-IT systems failure: The Group also potentially faces a risk of business interruptions and inefficiencies from a wide range of potential issues, such as insufficient or inadequately skilled staff, accounting errors, errors in processing such as mis-matching reinsurance contracts, poor customer service, badly executed projects and extreme events such as fires or natural disasters that affect the Group's offices and staff. The Group seeks to manage these risks through the claims audits, implementation of training, development of policies and appropriate procedures and continued system enhancements.

 

Legal, regulatory or compliance breach: The Group operates in a highly regulated insurance environment, whereby breaches of the regulations the Group works within may lead to significant financial penalties and reputational damage. The Group seeks to manage this risk through a number of policies and procedures in place covering regulatory requirements. These policies are reviewed periodically by key senior management and the Group's legal department to ensure that they provide a basic framework within which the Group is compliant with local and regional regulatory requirements. The Group also has a Regulatory and Compliance Working Group that meets regularly to review key metrics that pertain to regulatory and compliance and discuss any open issues that fall within the purview of regulatory and compliance.

 

Capital risk management

The Group's capital management objectives are:

·      to ensure the Group's ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders; and

·      to provide an adequate return to shareholders by pricing products and services commensurate with the level of risk.

 

To meet these objectives, the Group reviews its budgets and forecasts on a regular basis to ensure there is sufficient capital to meet the needs of the Group through to profitability and positive cash flow.

 

The capital structure of the Group consists of shareholders' equity as set out in the Group's Statement of Changes in Equity. All working capital requirements are financed from existing cash resources and borrowings.

 

In accordance with the Insurance Business (Bailiwick of Guernsey) Law 2002, the minimum capital requirement of GBG Insurance Limited ("GIL"), being a licensed insurer writing general insurance business, is £100,000 (equivalent to $135,000) as at 31 December 2017 and 2016.

 

Similarly, in accordance with the Insurance Business (Bailiwick of Guernsey) Law 2002, the minimum capital requirement of Global Security Life Insurance Ltd ("GSLIL"), being a licensed insurer writing general insurance business, is £250,000 (equivalent to $337,500) as at 31 December 2017 and 2016.  This company ceased writing business on 1 October 2016 and is currently in run off.

 

4.         Segment Information

 

For management purposes, the Group has categorised all its revenue and profit in one reportable segment - provision of specific and customised health, disability, life and travel insurance products to meet the needs of expatriates, third country local nationals, and high net worth local nationals worldwide.  

 

In the normal course of business, the Group engages in reinsurance ceded transactions as part of its overall underwriting strategy. Reinsurance includes quota share, excess of loss, and facultative treaties on all policies written. Reinsurance ceded does not discharge the Group from its liabilities to the original policyholders in respect of the risk being reinsured.

 

 

 

 

 

 

 

 

31 December 2017

31 December 2016 (unaudited)

 

 

 

 

USD'000

USD'000

Gross premiums written

 

 

 

 

Gross written premium in period

 

 

 

193,937

165,031

Change in the gross provision for unearned premiums

 

 

2,167

(8,801)

 

 

 

 

196,104

156,230

Outward reinsurance premiums

 

 

 

 

 

Premium ceded to reinsurers in period

 

 

(89,487)

(74,436)

Change in unearned premium provision

 

 

5,879

(2,015)

 

 

 

 

(83,608)

(76,451)

Earned premiums, net of reinsurance

 

 

112,496

79,779

 

 

 

 

 

 

Commission and fees

 

 

 

43,433

39,587

Total revenue

 

 

155,929

119,366

 

Geographic segment

The following analysis of the Group's total revenue is based on the geographic location of the Group operating entities, the corresponding segment assets are based on the geographical location of the Group's non-current assets and loss reserves (gross, reinsurers share and net).  The Group does not have the geographical analysis of the revenue by location of the customers and the cost to produce this information would be excessive.

 

Total revenue

Region

 

31 December 2017

31 December 2016 (unaudited)

 

 

USD'000

USD'000

America

 

29,039

24,717

Asia

 

5,277

3,618

Europe

 

-

725

Guernsey

 

121,613

90,306

Total

 

155,929

119,366

 

Non-current assets (excluding income tax assets)

Region

 

31 December 2017

31 December 2016 (unaudited)

 

 

USD'000

USD'000

America

 

11,350

7,625

Asia

 

160

-

 

 

11,510

7,625

 

 

Loss reserve

Region

 

 

31 December 2017

31 December 2016 (unaudited)

 

 

 

USD'000

USD'000

Guernsey

 

 

41,424

42,249

Total

 

 

41,424

42,249

 

 

 

 

 

 

 

 

 

 

Reinsurers share of loss reserve

 

Region

 

 

31 December 2017

31 December 2016 (unaudited)

 

 

 

USD'000

USD'000

Guernsey

 

 

(23,828)

(23,849)

Total

 

 

 (23,828)

(23,849)

 

 

Net insurance liabilities

 

Region

 

31 December 2017

31 December 2016 (unaudited)

 

 

USD'000

USD'000

Guernsey

 

17,596

18,400

Total

 

17,596

18,400

         

 

 

5.         Investment income

 

 

 

 

31 December 2017

31 December 2016 (unaudited)

 

 

 

 

USD'000

USD'000

Cash and cash equivalents

 

 

 

377

195

 

 

6.         Other (income) /expense

 

 

 

 

31 December 2017

31 December    2016 (unaudited)

 

 

 

 

USD'000

USD'000

Net foreign exchange (gains)/loss

 

 

 

(1,735)

432

Indirect Initial Public Offering ("IPO") expenses

 

 

 

393

-

Total

 

 

 

(1,342)

432

 

 

 

 

 

 

 

7.         Commission and fees

 

 

 

 

31 December 2017

31 December    2016 (unaudited)

 

 

 

 

USD'000

USD'000

Earned commission income

 

 

 

30,175

27,168

Earned administration fee - other

 

 

 

4,387

631

Earned fronting fee income

 

 

 

8,330

7,310

Administration fees - other

 

 

 

148

1,373

Profit commission

 

 

 

393

3,105

 

 

 

 

43,433

39,587

 

 

8.         Commission expense

 

 

 

 

31 December 2017

31 December  2016 (unaudited)

 

 

 

 

USD'000

USD'000

Commission paid and payable

 

 

40,422

25,950

 

 

 

 

 

Closing deferred acquisition costs

 

 

14,035

16,489

Opening deferred acquisition costs

 

 

(16,489)

(12,409)

Change in deferred acquisition costs

 

 

(2,454)

4,080

 

 

 

 

37,968

30,030

 

 

9.         Finance costs

 

 

 

 

 

 

31 December 2017

31 December 2016 (unaudited)

 

 

 

 

 

 

USD'000

USD'000

Dividend paid on Class D shares

 

 

 

97

660

 

 

10.       Investments

 

 

 

 

31 December 2017

31 December 2016 (unaudited)

 

 

 

 

USD'000

USD'000

Equity securities - at cost

 

 

 

249

-

 

In January 2017, Global Benefits Group (GBG) entered into a strategic partnership with a new Georgia-based insurance company, JSC Risk Management and Insurance Company, known as Global Benefits Georgia.  The Group invested $248,551 into Global Benefits Georgia for 15% ownership of the authorised shares.  The Group is a minority shareholder and does not control the investee, therefore the Group did not include Global Benefits Georgia in the consolidated financial statements.

 

The Group has not disclosed fair values for investment in Global Benefits Georgia as fair values or fair value ranges for the investment cannot be reliably estimated. There is no active market for this investment.

 

11.       Share-based payment arrangements

 

a)   Description of share-based payment arrangements

On 22 February 2017, as part of the initial public offering, the Group established share option programmes that entitle employees to purchase shares in the Group. Under this programmes, holders of vested options are entitled to purchase shares at the market price of the shares at grant date. All options are to be settled by the physical delivery of shares. The key terms and conditions related to the grants under these programmes are as follows:

 

Grant date

Number of instruments

Vesting conditions

Contractual life of options

 22 February 2017

2,328,900

3 years' service from grant date

10 years

 

The options will vest at 33.33% per year for a three year period from the grant date.

 

b)   Measurement of fair values

The fair value of the employee share options has been measured using the Black-Scholes formula. The inputs used in the measurement of the fair values at grant date of the share-based payment plans were as follows:

 

 

Fair value at grant date

 

 

 

£0.25

Share price at grant date

 

 

 

£1.50

Exercise price

 

 

 

£1.50

Expected volatility (weighted-average)

 

 

 

22.0%

Expected life (weighted-average)

 

 

 

6 years

Expected annual dividend yield

 

 

 

5.0%

Risk-free interest rate (based upon government bonds)

 

 

 

2.4%

 

Expected volatility was based upon peer group volatility using a six year historical average.  Expected life was estimated using the simplified method, based on the mid-point between the vesting period and the contractual term for the grants.

 

For the year ended 31 December 2017 the total expense for the share-based payments was $366,966 and is included in Administrative Expenses.  Below is an overview of shares provided in the employee stock option plan.

 

The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the year:

 

 

2017

Total

Outstanding at 1 January 2017

 

-

-

Number of shares conditionally granted

 

2,328,900

2,328,900

Number of shares allocated

 

-

-

Number of shares forfeited

 

-

-

Number of shares vested

 

-

-

Outstanding at 31 December 2017

 

2,328,900

2,328,900

 

There were no options outstanding as at 31 December 2016 (unaudited).  There were no options exercisable as at 31 December 2017.

 

 

 

 

12.       Profit for the year is after charging the following:

 

 

 

 

31 December 2017

31 December 2016 (unaudited)

 

 

 

 

USD'000

USD'000

Amortisation of intangible assets

 

 

577

30

Depreciation of property, plant and equipment

 

 

129

437

Payments to defined contribution pension arrangements

 

 

271

551

Distribution and marketing costs

 

 

 

1,967

1,821

Employee compensation

 

 

 

17,995

15,370

Other staff costs

 

 

 

2,951

2,793

Network fees

 

 

 

-

612

Operating lease payments

 

 

 

1,653

1,503

Other office costs

 

 

 

771

969

Transportation costs

 

 

 

2,075

1,992

Professional and legal fees

 

 

 

8,120

5,202

Auditors' fees

 

 

 

793

223

Restructuring expenses

 

 

 

-

1,125

Impairment allowance

 

 

 

12,254

-

Staff welfare and entertainment

 

 

 

91

105

Office costs - printing, postage, telecoms and IT

 

 

 

1,144

905

License and software fees

 

 

 

416

88

Bank charges

 

 

 

2,116

1,778

Dues and subscriptions

 

 

 

148

317

Other overheads

 

 

 

418

112

 

 

 

 

53,889

35,933

 

 

 

13.       Net claims

 

 

 

 

 

 

 

 

31 December 2017

 

 

Gross

Reinsurance

Net

 

 

USD'000

USD'000

USD'000

Gross claims paid

 

106,191

(43,652)

62,539

Movement in insurance loss reserve

 

(825)

404

(421)

 

 

105,366

(43,248)

62,118

 

 

 

31 December 2016 (unaudited)

 

 

Gross

Reinsurance

Total

 

 

USD'000

USD'000

USD'000

Gross claims paid

 

77,296

(39,900)

37,396

Movement in insurance loss reserve

 

(222)

4,095

3,873

 

 

77,074

(35,805)

41,269

 

14.       Employee costs

The table below sets out the employee costs incurred by the Group:

 

 

 

31 December 2017

31 December 2016 (unaudited)

 

 

 

USD'000

USD'000

Wages and salaries and commission

 

 

15,490

13,153

Social security costs

 

 

1,046

739

Other benefit costs

 

 

1,459

1,478

Total

 

 

17,995

15,370

 

The average number of persons employed directly by the Group (including directors) during the year were:

 

 

 

 

31 December 2017

31 December 2016 (unaudited)

 

 

 

Number

Number

Staff

 

 

 

 

Operations

 

 

177

165

Finance and administration

 

 

63

57

Technology

 

 

12

12

Sales and marketing

 

 

34

32

Executive

 

 

13

14

Total

 

 

299

280

 

Key management personnel

 

 

 

31 December 2017

31 December 2016 (unaudited)

 

 

 

USD'000

USD'000

Wages and salaries

 

 

4,397

5,134

Social security costs

 

 

183

199

Pension costs

 

 

113

134

Total

 

 

4,693

5,467

 

 

Highest paid Director

 

 

 

31 December 2017

31 December 2016 (unaudited)

 

 

 

USD'000

USD'000

Wages and salaries

 

 

450

1,202

Social security costs

 

 

14

25

Total

 

 

464

1,227

 

 

15.       Income tax expense

GBGI and GIL are assessed at the Company standard rate of 0% in accordance with the Guernsey corporate income tax regime.

 

The Group does not file a consolidated return with its foreign subsidiaries. The Group files US federal and state returns and its foreign subsidiaries file returns in their respective jurisdictions. GBG files a consolidated US federal income tax return with its subsidiaries ICS, GBGH, GBG US, GAS, GIS and GBGC (Note 19 for company's full name). Income taxes currently payable are based on the taxable income for the period.

 

Income tax expense for the years ended 31 December 2017 and 2016 (unaudited) are shown below:

 

i)       Analysis of the tax charge for the year

 

 

 

 

 

31 December 2017

31 December     2016 (unaudited)

 

 

 

 

USD'000

USD'000

 

 

 

 

 

Current tax on profits for the period

 

 

 

 

 

     US domestic tax

 

 

25

9

     Foreign tax

 

 

163

34

 

 

 

188

43

(Decrease)/increase in deferred income tax  

 

 

(148)

232

Income tax expense

 

 

 

40

275

 

ii) Analysis of the factors affecting the tax (credit)/expense for the year

The tax assessed for the year is lower than the standard rate of corporation tax in United States. The differences are explained below:

 

 

 

 

 

31 December   2017

31 December 2016 (unaudited)

 

 

 

 

USD'000

USD'000

Profit before tax

 

 

3,576

11,237

Tax at effective rate in Guernsey

 

-

-

Higher rates of current income tax in foreign jurisdictions

 

188

155

Change in deferred taxes assets

 

(4,084)

(3,125)

Unrecognised deferred tax assets

 

3,936

3,245

Current tax expense for the year

 

 

 

40

275

 

The Group has US federal and US state carried forward losses and accelerated temporary differences excluding the tax amortisation of goodwill amounting to $29,650,000 and $25,370,000 as at 31 December 2017 (2016 (unaudited): $20,190,000 and $2,261,000). The losses are available to offset future taxable income which expires in varying amounts beginning in 2033 for US federal and state tax purposes.  Any foreign net operating losses do not expire.   As the timing and extent of taxable profits are uncertain, the deferred tax asset of $10,394,000 (2016 (unaudited): $6,458,000) arising on these losses and accelerated temporary differences has not been recognised in the consolidated financial statements.

 

Deferred tax asset and liabilities

 

 

 

 

 

31 December 2017

31 December 2016 (unaudited)

 

 

 

 

 

USD'000

USD'000

 

 

 

 

 

 

Tax assets

 

 

 

 

57

257

Tax liabilities

 

 

 

 

-

-

Tax assets

 

 

 

 

57

257

 

 

 

 

 

 

Deferred tax:

 

 

 

 

 

 

Deferred tax liabilities

 

 

 

 

(940)

(1,088)

 

 Deferred tax liabilities

 

 

 

 

31 December 2017

31 December 2016 (unaudited)

 

 

 

 

 

USD'000

USD'000

Intangible assets - goodwill

 

 

(940)

(1,088)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Movement on the deferred tax liabilities

 

 

 

As at 1 January

 

 

 

 

(1,088)

(865)

Credit/(charge) in the profit or loss

 

148

(232)

Adjustment for previous year

 

-

9

As at 31 December

 

 

 

 

(940)

(1,088)

 

 

16.       Earnings per share

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Group by the weighted average number of ordinary shares in issue during the year, excluding ordinary shares purchased by the Group and held as treasury shares, and share-based payments for employees. Diluted earnings per share is calculated based on the profit attributable to ordinary shareholders and weighted-average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares.  The diluted earnings per share is the same as the basic earning per share as the share-based payments are anti-dilutive.

 

 

 

Profit attributable to the equity holders (USD'000)

Weighted average number of ordinary shares in issue (in numbers)

Per share (USD)

At 31 December 2017

 

 

 

Basic earnings per share (USD)

3,196

84,029,160

0.04

Effect of potentially dilutive shares related to stock options

-

489,069

-

Diluted earnings per share (USD)

 

3,196

84,518,229

0.04

 

 

 

 

At 31 December 2016

 

 

 

Basic earnings per share (USD)

10,844

66,418,950

0.16

Diluted earnings per share (USD)

 

10,844

66,418,950

0.16

 

As at 31 December 2017, the total number of potentially dilutive shares related to outstanding stock options was 2,328,900 (31 December 2016 (unaudited): zero).   

 

On 20 February 2017, the Company effectively performed a 1-for-1950 share split. Each common share, issued and outstanding as at such effective date, were effectively exchanged and converted into 1,950 ordinary shares. All share and per share amounts have been restated to reflect the share spilt for all periods presented.

 

 

17.       Intangible assets

 

 

 

Goodwill

Software development

Total

 

 

USD'000

USD'000

USD'000

Cost as at 31 December 2015 (unaudited)

 

3,820

1,286

5,106

Additions (unaudited)

 

-

2,138

2,138

Cost as at 31 December 2016 (unaudited)

 

3,820

3,424

7,244

Additions

 

798

3,735

4,533

Cost as at 31 December 2017

 

4,618

7,159

11,777

 

 

 

 

 

Accumulated amortisation as at 31 December  2015 (unaudited)

 

-

(480)

(480)

Charge for the year (unaudited)

 

-

(30)

(30)

Amortisation as at 31 December 2016 (unaudited)

 

-

(510)

(510)

Charge for the year

 

-

(577)

(577)

Accumulated amortisation as at 31 December 2017

 

-

(1,087)

(1,087)

 

 

 

 

 

Net book value 2016 (unaudited)

 

3,820

2,914

6,734

Net book value 2017

 

4,618

6,072

10,690

 

The balance of goodwill as at 31 December 2017 and 2016 (unaudited) was $4,618,817 and $3,820,461. The goodwill balance relates to the acquisition of the business assets of TieCare International, Inc. and GBG Holdings, Inc. in November 2005 and the acquisition of Quality Health Management, LLC in January 2017. The amortisation on software has been charged to the profit or loss as indicated in Note 12.

Goodwill and impairment review

The Group has goodwill that has been acquired through business combinations but does not hold any intangible assets that have indefinite lives.

The approach of the Group is to test impairment at the cash generating unit ('CGU') level. This is the lowest level of unit at which the Group is effectively able to manage and monitor performance, cash flow and goodwill. The Group has one CGU, namely the insurance business.

The goodwill has been allocated for impairment testing purposes to this cash generating unit. The valuation is performed on a value-in-use basis.

In order to evaluate the recoverable amounts relating to the CGU based on value in use, the following key information should be noted.

·    The recoverable amounts have been determined using the cash flow forecast from its most recent financial plans projected for a five-year period and then with a terminal value, with a discount rate applied.

 

·    The financial plans have been prepared at the cash generating unit level based on historical trends adjusted for expected events. These individual plans have been aggregated as the basis for the cash flow forecast.

 

·    The discount rate has been calculated as the weighted average cost of capital. The post-tax discount rates calculated was 14.0%.  

 

·    The perpetual growth rate of 3% reflects the maturity, penetration and profile of the cash generating unit. The growth rate is consistent with forecasts included in industry reports specific to the industry in which the CGU operates.

 

Sensitivity to changes in assumptions

With regard to the assessment of value in use for the insurance cash generating unit, management does not believe a reasonably possible change in any of the above key assumptions would cause the carrying value of the units to exceed the recoverable amount, as the recoverable amount exceeded the carrying value.

 

18.       Property, plant and equipment

 

 

Leasehold improvements

Equipment

Furniture & fixtures

Total

 

USD'000

USD'000

USD'000

USD'000

 

 

 

 

 

Cost as at 31 December 2015 (unaudited)

507

471

729

1,707

Additions (unaudited)

83

451

36

570

Cost as at 31 December 2016 (unaudited)

590

922

765

2,277

 

 

 

 

 

Accumulated depreciation as at 31 December 2015 (unaudited)

(234)

(284)

(431)

(949)

Charge for the year (unaudited)

(57)

(281)

(99)

(437)

Accumulated depreciation as at 31 December 2016 (unaudited)

(291)

(565)

(530)

(1,386)

 

 

 

 

 

Net book value as at 31 December 2015 (unaudited)

273

187

298

758

Net book value as at 31 December 2016 (unaudited)

299

357

235

891

 

 

Leasehold improvements

Equipment

Furniture & fixtures

Total

 

USD'000

USD'000

USD'000

USD'000

 

 

 

 

 

Cost as at 1 January 2017

590

922

765

2,277

Additions

-

42

121

163

Disposals

(337)

(9)

-

(346)

Cost as at 31 December 2017

253

955

886

2,094

 

 

 

 

 

Depreciation as at 1 January 2017

(291)

(565)

(530)

(1,386)

Charge for the year

(11)

(36)

(82)

(129)

Disposals

247

9

(15)

241

Depreciation as at 31 December 2017

(55)

(592)

(627)

(1,274)

 

 

 

 

 

Net book value as at 31 December 2016 (unaudited)

299

357

235

891

Net book value as at 31 December 2017

198

363

259

820

 

19.       Investments in group undertakings

 

The Group's operating subsidiaries as at 31 December 2017 are as follows:

 

Name of subsidiary

Principal activity

Country of business / Place of

Proportion of ordinary shares held by the Group

incorporation

 

 

 

 

2017

2016 (unaudited)

 

 

 

 

%

%

GBG Insurance Limited (GIL) (1)

Insurance business

Guernsey

 

100

100

Global Benefits Group Europe B.V. (GBE) (1)

Broker

Netherlands

 

100

100

Global Benefits Group Inc. (GBG US)

Services

Delaware

 

100

100

International Claims Services (ICS)

Claims Payer for International Claims

Delaware

 

100

100

GBG Administrative Services (GAS)

Licensed US Third Party Administrator

California

 

100

100

Global Benefits Group US

Licensed Broker US

California

 

100

100

Shanghai (GBG) Enterprise Management Consulting LLC

Consulting

China

 

100

100

Global Benefits Group Canada (GBGC)

Shell - Dormant

Canada

 

100

100

GBG Services (India)

Administration

India

 

74

74

GBG Holdings Inc. (GBGH)

Premium Collection

Delaware

 

100

100

GBG Philippines Inc.

Administration and Sales

Philippines

 

28

16

GBG Insurance Services Inc. (GIS)

Shell - Dormant

California

 

100

100

Global Security Life Insurance Limited (GSLIL) (1)

Insurance

Guernsey

 

100

100

Global Security Life Insurance Limited(1)

Insurance - inactive - pending license approval

Delaware

 

100

100

GBG Assist Inc.

New - inactive

Delaware

 

100

100

Quality Health Management LLC

Licensed US Third Party Administrator

 

Florida

 

100

-

 

Note:

(1) are directly held subsidiaries, all others are indirectly held.

 

Movements in and the closing balance of non-controlling interests are disclosed in the consolidated statement of comprehensive income and consolidated statement of financial position.

 

The Group's Directors have considered the power they exert over the Groups participation in GBG Philippines.  Notwithstanding the fact the Group holds 28% of the shares it is their opinion that they have the power over the investee to affect the investor's returns and that GBGI controls GBG Philippines. The Directors have the ability to control the operation, additional funding, and business decision making of GBG Phillipines. As such GBG Philippines has been consolidated as if it were a subsidiary.

 

20.       Trade and other receivables

 

 

 

31 December 2017

31 December 2016 (unaudited)

 

 

 

USD'000

USD'000

Insurance premium receivables

 

52,156

81,330

Profit commissions receivables

 

3,865

2,945

Other receivables

 

17,500

3,990

Impairment allowance

 

(12,254)

-

Prepaid expenses and other current assets

 

4,942

7,295

Other trade receivables

 

4,757

-

Claim deposits

 

4,964

5,118

Note receivable - related party (Note 33)

 

-

1,467

Stock subscription receivables

 

-

13

 

 

 

75,930

102,158

 

As at 31 December 2016, the other receivables balance consists of an amount owed to the Group from a third party administrator for claims that were paid on behalf of the Group by the third party administrator that were not in accordance with policy benefits or were not approved by the Group.

 

In February 2018, the Group entered into a new contractual relationship with its insurance partner in Angola, effective 31 December 2017, resulting in a Settlement Agreement with the insurance partner of all outstanding claims.  The amount of the settlement with the insurance partner was $17,500,000 consisting primarily of fees due to the Group's managing general underwriting (MGU) subsidiary, GBG, Inc.  As at 31 December 2017, the other receivables balance consists of the net amount owed to the Group.  However, this amount would be paid to a certain group of brokers associated with the Group's Angolan business upon the payment of Angolan Kwanza to the Group and then the Angolan Kwanza being transferred into a tangible currency. 

 

 

 

 

31 December 2017

31 December 2016 (unaudited)

Analysis of trade and other receivables

 

 

USD'000

USD'000

Neither past due nor impaired

 

70,684

102,158

Past due but not impaired

 

-

-

Other receivables impaired

 

17,500

-

Gross carrying value

 

88,184

102,158

Less: impairment allowance

 

(12,254)

-

Net carrying value

 

 

75,930

102,158

 

 

Amount USD'000

Development of impairment allowance

 

Balance as at 1 January 2016

-

Increase in allowance for impairments

-

Balance as at 31 December 2016

-

 

 

 

Balance as at 1 January 2017

-

Increase in allowance for impairments

12,254

Balance as at 31 December 2017

12,254

 

 

21.       Cash and cash equivalents

 

 

 

31 December 2017

31 December 2016 (unaudited)

 

 

 

USD'000

USD'000

Cash and cash equivalents

 

 

54,138

48,227

Restricted cash

 

 

38,915

19,763

Total

 

 

93,053

67,990

 

In its capacity as a managing general agent, the Group collects premiums from its customers. The Group deducts its administrative fees and the authorised commissions associated with the sale of the policies and claims administration from these premiums. The net premium not reserved for claims payment is then remitted to the respective carriers. Unremitted insurance premiums are held in a fiduciary capacity until the Group disburses them and is classified as restricted cash. The Group invests these unremitted funds only in cash and money market accounts.

 

22.       Dividends

The Group declared and paid an ordinary dividend of $5,217,445 in the year ended 31 December 2017.  The Group did not declare any ordinary dividends for the year ended 31 December 2016 (unaudited). The Group has paid a sum of $97,000 in 2017 and $660,000 in 2016 (unaudited) to the class D shareholders (Note 9).   The Group was required to pay a distribution to Class B and Class C common shareholders in accordance with contractual obligations triggered upon admission in the amount of $16,513,000.

 

23.       Net insurance liabilities

 

 

 

 

 

31 December 2017

31 December 2016 (unaudited)

 

 

 

 

 

USD'000

USD'000

Gross

 

 

 

 

 

 

Loss reserve Including IBNR

 

 

 

 

41,424

42,249

Unearned premiums 

 

 

 

 

89,641

92,122

Total insurance liabilities, gross

 

 

 

131,065

134,371

Reinsurance

 

 

 

 

 

 

Reinsurers share of technical provisions

 

 

 

 

 

 

Reinsurers share of loss reserve Including IBNR

 

 

 

 

(23,828)

(23,849)

Unearned premiums

 

 

 

 

(29,696)

(35,575)

Total reinsurers share of technical provisions

 

 

(53,524)

(59,424)

 

Net

 

 

 

 

 

 

Loss reserve Including IBNR

 

 

 

 

17,596

18,400

Unearned premiums

 

 

 

 

59,945

56,547

Total insurance liabilities, net

 

 

 

77,541

79,947

 

This impact of the reinsurance arrangements entered into by the Group can be seen in the consolidated statement of comprehensive income and the statement of financial position.

 

The Group establishes claim reserves, which are estimates of future payments of reported and unreported claims and claim adjustment expenses, with respect to insured events that have occurred. Reserving is a complex process dealing with uncertainty, requiring the use of informed estimates and judgements. Any changes in estimates or judgements are reflected in the results of operations in the year in which estimates and judgements are changed.

 

24.       Other insurance liabilities

 

 

 

 

31 December

2017

31 December 2016 (unaudited)

 

 

 

 

USD'000

USD'000

Reinsurance premium payable

 

 

 

47,407

51,861

Premium deposits and credits to customers

 

 

2,300

5,133

Total other insurance liabilities

 

 

49,707

56,994

 

 

25.       Movements in insurance liabilities and reinsurance assets: claims provision movement

 

 

 

 Gross

 Reinsurance

 Net

 

 

 

USD'000

USD'000

USD'000

At as 1 January 2016 (unaudited)

 

 

 

 

Brought forward as at 1 January 2016 (unaudited)

 

 

42,471

27,738

14,733

Claims settled in cash in the year

 

 

(77,296)

(39,900)

(37,396)

Increase/(decrease) in liabilities

 

 

 

 

 

Arising from current year claims

 

 

81,783

38,643

43,140

Arising from prior year claims

 

 

(4,709)

(2,632)

(2,077)

At as 31 December 2016 (unaudited)

 

 

42,249

23,849

18,400

Brought forward as at 1 January 2017

 

 

23,849

18,400

Claims settled in cash in the year

 

 

(106,191)

(43,652)

(62,539)

Increase/(decrease) in liabilities

 

 

 

 

 

     Arising from current year claims

 

 

105,405

44,179

61,226

     Arising from prior year claims

 

 

(39)

(548)

509

At as 31 December 2017

 

 

41,424

23,828

17,596

 

The financial impact of the reinsurance arrangement entered into by the Group are disclosed in the consolidated statement of comprehensive income and consolidated statement of financial position.

 

26.       Redeemable preferred stock and Class D shares

Borrowings consist of redeemable preferred stock and Class D shares

 

 

 

 

 

31 December

2017

31 December 2016 (unaudited)

 

 

 

 

 

USD'000

USD'000

250 Redeemable preferred stock Series A

 

 

 

 

250

250

Class D Shares

 

 

 

 

-

5,500

 

Redeemable preferred stock Series A

The redeemable preferred stock represents 250 non-voting Series A preferred shares of GIL issued for cash with a par value of $1,000 per share issued under the terms of a Preferred Share Agreement dated 27 June 2011. Such shares represent all of the authorised shares of Series A Preferred Shares.

 

The preferred shares accrue dividends ('Investor's Distribution') at 50% of the difference between the underwriting profit and 10% of the net risk premium of insurance premiums received by the Group as a result of the direct marketing efforts of the holder of the redeemable preferred shares.

 

If at the end of any policy year there is an underwriting loss, this loss is carried forward to subsequent policy years and no dividend will be paid until such time that the loss carry forward is applied to underwriting profit of subsequent policy years such that the loss ratio for policy years in aggregate is less than one. The maximum investor premium is equal to eight times the par value of the outstanding preferred shares.

 

The par value and therefore the maximum investor premium the Group will accept can be increased by mutual agreement of the parties.

 

At the option of the investor, and if the investor chooses not to receive its dividend at the end of any policy year in which there are no loss carry forwards, then the investor shall be entitled to apply its distribution to subscribe for and receive additional preferred shares. As there were no related policies in force for the years ended 31 December 2017 and 2016 (unaudited), no dividends were earned.

 

The shares are redeemable by the Group at the earlier of twenty years from the date of issuance and the expiration of any run-off period after termination of a Co-operation Agreement between GIL and the investor or as otherwise agreed between the Group and the investor. The redemption price shall be the par value of the preferred shares or as may be agreed between the Group and the Preferred Shareholder. 

 

In the event of a voluntary or involuntary liquidation, dissolution or winding up of the Group, the investor as a holder of the Series A Preferred Shares shall be entitled to receive only the amount as shall be equal to the investor's distribution it would have received in accordance with the foregoing. The holder of the Series A preferred stocks shall not be required to make additional capital contributions to the Group other than contributions in an amount equal to the underwriting loss without the express prior approval of the Group.

 

Class D shares

On 26 June 2013, the Group entered into an Exchange Agreement and Amendment to the Securities and Exchange Agreement dated 22 September 2010, where 3,000,000 Class D Common, shares were issued to an independent third party and 2,500,000 Class D Common Shares were issued to a shareholder. The agreement requires the Group to comply with certain covenants. As at 31 December 2017 and 2016 (unaudited), the Group was in compliance with its covenants.

The consideration for the issue of the 3,000,000 Class D Common Shares was the cancellation of a Promissory Note issued to the independent third party by the Group on 22 September 2010 which had a maturity date of 22 September 2015. The Group cancelled the note in exchange for the issuance of such shares. In the opinion of the Group, the reasonable present cash value of the shares issued was determined as $3,000,000, which was the amount outstanding on the Promissory Note and that in its opinion, the present cash value of the consideration for the issue of such shares was not less than the amount credited for the issue of the shares.

The consideration for the issue of the 2,500,000 Class D Common Shares was the cancellation of a Promissory Note issued to the independent third party by the Group on 22 September 2010 which had a maturity date of 22 September 2015. The Group cancelled the note in exchange for the issuance of such shares. In the opinion of the Group, the reasonable present cash value of the shares issued was determined as $2,500,000, which was the amount outstanding on the Promissory Note and that in its opinion, the present cash value of the consideration for the issue of such shares was not less than the amount credited for the issue of the shares.

Class D Non-Voting Common Shares accrue dividends at the rate per annum of $0.12 per share, payable quarterly in arrears. Dividends paid on the Class D Non-Voting Common Shares were $97,000 and $660,000 in the years ended 31 December 2017 and 2016 (unaudited), respectively.

As part of an initial public offering on 22 February 2017, 5,500,000 Class D Shares were exchanged for 2,933,333 of Ordinary Shares.  No gain or loss was recorded on the retirement of Class D Shares.

27.       Share capital

On 22 February 2017, the Group began to trade on the Exchange.  The Group's authorised share capital was 87,752,283 Ordinary Shares of $0.001 par value per share.  The Group's issued share capital is summarised in the table below:

 

Class of common share

Issued and fully paid number of shares

Issued nil paid shares

Total issued share capital (number of shares)

Par value

Total issued share capital USD

Voting rights

Dividend rights

Ordinary Shares

87,752,283

-

87,752,283

$0.001

87,752

One vote per share

Eligible

 

Year ended 31 December 2017:

The following transactions took place prior to admission to the Exchange on 22 February 2017:

-     exchanged 2,604 Class A Voting, 18,684 Class A Non-Voting, 9,367 Class B, 355 Class C Voting, and 3,051 Class C Non-Voting Shares, all at $1.00 per share, into 66,418,950 Ordinary shares at $0.001 per share

-     exchanged 5,500,000 Class D Shares at $1.00 per share for 2,933,333 of Ordinary Shares at $0.001 per share.

-     issued 8,858,667 of Ordinary Shares at $0.001 per share in lieu of cash distribution in accordance with contractual obligations triggered upon admission to Class B and Class C shareholders

-     Initial placement of 21,333,333 Ordinary Shares at £1.50 on the exchange.

The called up share capital disclosed in the consolidated statement of financial position represents the difference between issue price and the nominal value of the shares issued by the Group.

Prior to the initial public offering on 22 February 2017, the Company's authorised share capital was 5,537,468 Common Shares of $1.00 each and this includes class D Shares (classified as a financial liability Note 26).  The Company's previously issued share capital is summarised in the table below:

Class of common share

Issued and fully paid number of shares

Issued nil paid shares

Total issued share capital (number of shares)

Par value

Total issued share capital USD

Voting rights

Dividend rights

Class A Voting

2,604

-

2,604

$1.00

2,604

One vote per share

Eligible

Class A Non-Voting

18,684

-

18,684

$1.00

18,684

None

Eligible

Class B Non-Voting

9,367

-

9,367

$1.00

9,367

None

None

Class C Voting

355

-

355

$1.00

355

One vote per share

None

Class C Non-Voting

3,051

-

3,051

$1.00

3,051

None

None

Total

34,061

 

34,061

 

34,061

 

 

 

Share premium

The share premium represents the amounts subscribed for share capital in excess of the par value of the shares.

 

Dividend and Capital Requirements

Payment of dividends to the Group by its insurance subsidiary (GIL) is limited by insurance regulations. The maximum amount of ordinary dividends that GIL may pay to shareholders in a 12-month period is limited to the amount that would not preclude GIL from meeting the margin of solvency or approved asset requirements.  GIL has not declared any dividends for the years ended 31 December 2017 and 2016 (unaudited). All dividends require approval by the Board of Directors.

In accordance with the Insurance Business (Bailiwick of Guernsey) Law 2002, the minimum capital requirement of GIL, being a licensed insurer writing general insurance business, is £100,000 (equivalent to $135,000) as at 31 December 2017 and (equivalent to $123,000) as at 31 December 2016.  

Similarly, payment of dividends to the Group by its insurance subsidiary (GSLIL) is limited by Guernsey insurance regulations. The maximum amount of ordinary dividends that GIL may pay to shareholders in a 12-month period is limited to the amount that would not preclude GSLIL from meeting the margin of solvency or approved asset requirements determined in accordance with the Insurance Business Solvency Rules, 2015.  GSLIL has not declared any dividends for the years ended 31 December 2017 and 2016 (unaudited). All dividends require approval by the Board of Directors.

In accordance with the Insurance Business (Bailiwick of Guernsey) Law 2002, the minimum capital requirement of GSLIL, being a licensed insurer writing general insurance business, is £250,000 (equivalent to $337,500) as at 31 December 2017.  This company ceased writing business on October 1, 2016 (unaudited) and is currently in run off.

28.       Treasury stock

 

 

Amount USD'000

 

 

Balance as at 1 January 2017

(11,993)

Removal of Class A Voting and Class A Non-Voting

11,993

Repurchase of shares as repayment for note receivable

(1,467)

 

Balance as at 31 December 2017

(1,467)

 

 

During the year ended 31 December 2011, the Group purchased 3,280 $1 Class A Voting and 3,280 $1 Class A Non-Voting Common Shares from a shareholder for $12,000,000. The excess of the consideration paid over the nominal value of the shares are classified as treasury stock.

 

Prior to the initial public offering, the Group removed Class A Voting and Class A Non-Voting Shares from the articles.  Prior to admission to trading on the Exchange, a shareholder from GBGI Limited transferred 788,088 Ordinary Shares as repayment on the note receivable of $1,467,167.

 

29.       Trade payables, other payables and other liabilities

 

 

 

 

 

31 December

2017

31 December 2016 (unaudited)

 

 

 

 

USD'000

USD'000

Trade payables

 

 

 

4,581

8,143

Accruals and other payables

 

 

10,939

14,173

 

 

 

 

15,520

22,316

Deferred settlement gain

 

 

 

2,354

-

 

 

 

 

17,874

22,316

 

30.       Contingent liabilities

 

In the normal course of business, the Group engages in reinsurance ceded transactions as part of its overall underwriting strategy. Reinsurance includes quota share, excess of loss and facultative treaties on all policies written. Reinsurance ceded does not discharge the Group from its liabilities to the original policyholders in respect of the risk being reinsured. The Group believes its reinsurance companies are financially stable.

 

The Group is also involved in certain claims and legal proceedings which have arisen in the normal course of business. Management does not believe that the outcome of any current pending claims or legal proceedings in which the Group is currently involved will have a material adverse effect on the Group's consolidated financial position, results of operations or cash flows.

 

In January 2018, the Group entered into an agreement with five managing general agents.  The agreements stipulate that the agents will receive target based incentives in three equal installments over the next three years.  The range of these payments is $89,000 - $520,000, a maximum total payments of $967,000, for each year beginning in 2018.

 

31.       Operating lease commitments

 

The Group has various operating leases for office space and equipment with terms expiring at various dates through December 2022. The future minimum lease payments under non-cancelable operating leases in excess of one year at 31 December 2017 and 2016 (unaudited) are as follows:

 

 

 

 

31 December

2017

31 December

2016 (unaudited)

 

 

USD'000

USD'000

Office space and equipment

 

 

 

Within next 12 months

 

1,035

1,360

More than 12 months and less than 5 years

 

2,063

3,098

More than 5 years

 

-

-

 

 

3,098

4,458

 

Operating lease payments recorded for the years ended 31 December 2017 and 2016 (unaudited) were $1,652,687 and $1,503,212, respectively.

 

32.       Acquisition of subsidiary

 

On 20 January 2017, the Group acquired 100% of the shares and voting interests in Quality Health Management LLC (QHM), a leading third-party administrator and cost containment firm. 

 

For the eleven and a half months ended 31 December 2017, QHM contributed revenue of $1,615,339 and profit of $383,666 to the Group's results.

 

a)   Consideration transferred 

The following table summarises the acquisition date fair value of each major class of consideration transferred.

 

 

USD'000

Cash

 

1,350

Future annual cash payments

 

535

Total consideration transferred

 

1,885

 

b)   Identifiable assets acquired and liabilities assumed

The following table summarises the recognised amounts of assets acquired and liabilities assumed at the date of acquisition.

 

 

USD'000

Trade and other receivables

 

5,715

Cash

 

1,003

Trade and other payables

 

(5,631)

Total identifiable net assets acquired

 

1,087

 

There is a deferred consideration element to the business combination portion of the acquisition of QHM. This element consists of two $325,000 payments to be made on 31 January 2018 and 31 January 2019, respectively.

 

Measurement of fair values

The trade receivables comprise gross contractual amounts due of $5,669,759, of which zero was expected to be uncollectible at the date of acquisition.

 

c)   Goodwill         

Goodwill arising from the acquisition was $798,356.  The goodwill is attributable mainly to QHM's extensive provider network and cost containment strategies. None of the goodwill recognised is expected to be deductible for tax purposes.

 

d)   Acquisition-related costs

The Group incurred acquisition-related costs of $7,358 on legal fees and diligence costs.  These costs have been included in "administrative expenses."

 

33.       Related parties

The Group had a note receivable from a shareholder of GBGI in the amount of $1,760,500. As at 31 December 2017 and 2016 (unaudited) the balance on the note receivable is $0 and $1,467,167, respectively. In April 2014, the Group and the shareholder amended the note receivable to reflect a lump sum principal payment plan being due upon a qualified liquidty event as defined by the agreement. All other term notes remained unchanged, including the payment of interest compounded quarterly at 2.5%. In February 2017, as part of the share capital exchange and initial public offering, the shareholder paid the note receivable with 788,088 of Ordinary Shares.

 

The Group provided advances to various officers of the Group. The total amount of advances outstanding as at 31 December 2017 and 2016 (unaudited) were $230,750 and $228,000, respectively. These advances are included within prepaid expenses and other assets on the consolidated balance sheets.

 

The Group paid for various services associated with an acquisition activity in 2013 that was reviewed but later abandoned that were shared by two shareholders of the Group. As at 31 December 2017 and 2016 (unaudited) the Group has a receivable due from the shareholders for reimbursement of those costs in the amount of zero and $139,999, respectively. The receivable is included within prepaid expenses and other assets on the consolidated balance sheets.

 

The Group has an operating agreement with their Eastern Europe sales representative. The Group pays the representative's operating expenses in exchange for the representative serving as Regional Vice President for Eastern Europe. The operating expense amounted to $1,685,453 and $1,101,712 for the years ended 31 December 2017 and 2016 (unaudited), respectively.

 

On 22 September 2010, the Group entered into a consulting agreement with a minority shareholder. The consulting agreement provided for a minimum annual consulting fee of $219,069, with provisions for increases in fees that are capped at $350,000 for any given 12-month period. In February 2017, the agreement was terminated.  The consulting expense incurred relating to the consulting agreement was $103,974 and $293,574, for the years ended 31 December 2017 and 2016 (unaudited), respectively. 

 

Employment Agreements

The Group has entered into employment agreements with certain officers and employees. Some of these employment contracts do not have a term and expire upon retirement or termination. These agreements have minimum obligations of approximately $720,000 annually and are not included in the table below.

 

Certain employment agreements also include provisions for additional compensation based on performance criteria; some have a provision for additional compensation related to change in control, and some have severance provisions.

 

The Group also has employment agreements with certain officers and employees with terms expiring at various dates through December 2020. Future minimum obligations under such agreements with defined terms are as follows:

 

Years ending 31 December

 

USD'000

 

 

 

2018

 

2,179

2019

 

1,370

2020

 

946

 

 

4,495

 

34.       Notes supporting cash flow statement

 

 

 

Borrowings - Class D shares

Total

Balance as at 1 January 2017

 

5,500

5,500

Cash flows

 

(97)

(97)

Non-cash flows

 

 

 

-   Debt converted into equity

 

(5,500)

(5,500)

-   Dividends accruing in the period

 

97

97

Balance as at 31 December 2017

 

-

-

 

35.       Events after the reporting period

There have been no material events subsequent to the period end and up to 19 April 2018, the date of approval of the financial statements by the Board of Directors.


This information is provided by RNS
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2017 Full Year Results - RNS