PricewaterhouseCoopers, License No. 25,
Jameel Square, P.O. Box 16415, Jeddah 21464, Kingdom of Saudi Arabia T: +966 (12) 610-4400, F: +966 (12) 610-4411, www.pwc.com/middle-east
The Board of Directors
United Cooperative Assurance Company P.O. Box 5019
Jeddah 21422
Kingdom of Saudi Arabia Dear Sirs
Report of factual findings in connection with proposed adjustment of statutory reserve with accumulated losses
This report is produced in accordance with the terms of our agreement dated September 12, 2021.
The directors of United Cooperative Assurance Company (the “Company”) have proposed the absorption of accumulated losses through the existing statutory reserve of the Company. The Company’s directors and management remain solely responsible for this and for the creation and maintenance of all accounting and other records supporting it.
We have performed the procedures agreed with you and listed below in connection with proposed absorption of accumulated losses through statutory reserves of the Company. Our work was performed in accordance with the International Standard on Related Services (ISRS) 4400
“Engagements to perform agreed-upon procedures regarding financial information”, as endorsed in the Kingdom of Saudi Arabia. The procedures were performed solely to assist the Company in relation to the registration of such absorption of losses through statutory reserves with the Ministry of Commerce of the Kingdom of Saudi Arabia. We performed the following procedures:
1. Traced the amounts of statutory reserve and accumulated losses from the general ledger of the Company as of March 31, 2021.
2. Obtained from management and read the Board of Directors' resolution dated June 2, 2021 related to the proposed absorption of losses against the statutory reserve of the Company as of March 31, 2021.
3. Obtained from management and read the Shareholders’ resolution passed in the Ordinary General Meeting dated August 18, 2021 related to the approval of proposed absorption of losses against the statutory reserve of the Company.
4. Obtained from management the journal entry dated August 19, 2021 for recording of the proposed adjustment of statutory reserve against the accumulated losses of the Company; and 5. Obtained from management the general ledger of the Company as of August 19, 2021 and
confirmed that the journal entry for the proposed adjustment of statutory reserve against accumulated losses was recorded in the respective general ledger accounts.
6. Obtained from the management the unaudited interim statement of financial position as of March 31, 2021 before and after the proposed adjustment of statutory reserves against the accumulated losses of the Company as mentioned in procedure 4 and 5 above and checked its mathematical accuracy.
We report our findings below:
1. With respect to procedure 1, we traced the amounts of statutory reserve amounting to Saudi Riyals 31,944 thousands and accumulated losses amounting to Saudi Riyals 137,015 thousands from the general ledger of the Company as of March 31, 2021.
2 2. With respect to procedure 2, we obtained from management and read the Board of Directors' resolution dated June 2, 2021 related to the proposed absorption of losses against the statutory reserve of the Company. No exceptions were noted.
3. With respect to procedure 3, we obtained from management and read the Shareholders’ resolution passed in the Ordinary General Meeting dated August 18, 2021 related to the approval of proposed absorption of losses against the statutory reserve of the Company. No exceptions were noted.
4. With respect to procedure 4 and 5, obtained from management the journal entry dated August 19, 2021 for recording of the proposed adjustment of statutory reserve against the accumulated losses of the Company and obtained the general ledger to record the following:
Before absorption of
losses Adjustment
After absorption of losses Saudi Riyals In thousands
Statutory reserves as of March
31, 2021 31,944 (31,944) -
Accumulated losses as of March
31, 2021 (137,015) 31,944 (105,071)
5. With respect to procedure 6, we obtained the unaudited interim statement of financial position as of March 31, 2021, before and after proposed adjustment of statutory reserves against the accumulated losses of the Company, presented as Annexure A to this report and checked its mathematical accuracy. No exceptions were noted.
Our procedures, as stated in our agreement, did not constitute either an audit or review made in accordance with International Standards on Auditing or International Standards on Review Engagements, as endorsed in the Kingdom of Saudi Arabia, the objective of which would be the expression of assurance on the proposed absorption of accumulated losses through statutory reserves of the Company. We do not express such assurance. Had we performed additional procedures or had we performed an audit or review in accordance with International Standards on Auditing or International Standards on Review Engagements, as endorsed in the Kingdom of Saudi Arabia, other matters might have come to our attention that we would have reported to you. This report relates only to the recording of the proposed absorption of losses in the Company’s books of accounts and does not extend to any financial statements of the Company taken as a whole.
This report is solely for your use in connection with the purpose specified above and as set out in our agreement. No part of this report is to be copied or distributed to any other party except as permitted under the terms of our agreement. We do not accept any liability or responsibility to any third party.
Our obligations in respect of this report are entirely separate from, and our responsibility and liability are in no way changed by, any other role we may have (or may have had) as auditors of the Company or otherwise. Nothing in this report, nor anything said or done in the course of or in connection with the services, will extend any duty of care we may have in our capacity as auditors of any financial statements of the Company.
PricewaterhouseCoopers
Ali A. Alotaibi License Number 379 September 14, 2021
UNITED COOPERATIVE ASSURANCE COMPANY Annexure A (A Saudi Joint Stock Company)
INTERIM STATEMENT OF FINANCIAL POSITION AS AT MARCH 31, 2021
March 31, 2021 (Unaudited) Before proposed adjustment of statutory reserve with accumulated losses
March 31, 2021 (Unaudited) After proposed adjustment of statutory reserve with accumulated losses SAR‘000 SAR‘000 ASSETS
Cash and cash equivalents 24,136 24,136
Premiums and reinsurers’ receivable – net 270,857 270,857
Reinsurers’ share of unearned premiums 194,350 194,350
Reinsurers’ share of outstanding claims 36,785 36,785
Reinsurers’ share of claims incurred but not reported 125,116 125,116
Deferred policy acquisition costs 14,117 14,117
Investments 280,427 280,427
Prepaid expenses and other assets 69,568 69,568
Property and equipment – net 10,242 10,242
Intangible assets 5,640 5,640
Right-of-use assets – net 6,700 6,700
Goodwill 78,400 78,400
Statutory deposit 60,000 60,000
Accrued commission income on statutory deposit 5,197 5,197
TOTAL ASSETS 1,181,535 1,181,535
LIABILITIES
Policyholders payable 10,605 10,605
Accrued and other liabilities 59,233 59,233
Reinsurers balances payable 142,758 142,758
Unearned premiums 291,679 291,679
Unearned reinsurance commission 29,859 29,859
Outstanding claims 61,557 61,557
Claims incurred but not reported 168,057 168,057
Premium deficiency reserve 25,501 25,501
Other technical reserves 15,963 15,963
Employees’ defined benefit obligations 9,740 9,740
Lease liabilities 6,081 6,081
Surplus from insurance operation 37,053 37,053
Zakat and income tax payable 16,384 16,384
Accrued commission income on statutory deposit payable to
SAMA 5,197 5,197
TOTAL LIABILITIES 879,667 879,667
Fair value reserve on investments - insurance operations (1,751) (1,751) TOTAL LIABILITIES AND INSURANCE OPERATIONS
RESERVE 877,916 877,916
EQUITY
Share capital 400,000 400,000
Statutory reserve 31,944 -
Accumulated losses (137,015) (105,071)
Fair value reserve on investments 6,566 6,566
Re-measurement reserve of employees’ defined benefit
obligations 2,124 2,124
TOTAL EQUITY 303,619 303,619
TOTAL LIABILITIES, INSURANCE OPERATIONS
RESERVE AND EQUITY 1,181,535 1,181,535
