Net loss for the year before zakat and income tax Net profit attributable to insurance business - - Net loss for the year attributable to shareholders before zakat. Saudi Enaya Cooperative Insurance Company (a joint-stock company incorporated in the Kingdom of Saudi Arabia), "the Company", was established pursuant to Royal Decree No. The company has a license to carry out insurance business in the Kingdom of Saudi Arabia according to cooperative principles in accordance with Royal Decree no.
As of the date of incorporation, the Company is 77% owned by the Saudi shareholders and the general public and 23% owned by non-Saudi shareholders. While each board of both companies reached an agreement on the terms under which the company will be merged into Amana. The Company announced to its shareholders on 15 July 2021 that the General Authority for Competition (“GAC”) issued a non-objection certificate to complete the merger pursuant to GAC certificate issued with reference number 5 dated 6 Zul-Hijjah 1442H.
The company announced on 18 Rabi-Al-Thani 1443, corresponding to November 23, 2021, the approval of the Saudi Central Bank on the potential merger.
BASIS OF PREPARATION (a) Basis of compliance
As required by the Saudi Arabian Insurance Regulations, the Company maintains separate books of account for Insurance Operations and Shareholder Operations and presents the supplementary information accordingly (note 32). Similarly, the Company's annual financial statements have in the past presented separately the statements of financial position, income, comprehensive income and cash flows for the insurance operations and shareholder operations. SAMA implementing regulations require the clear separation of the assets, liabilities, income and expenses of the insurance operations and the shareholder operations.
When preparing financial statements at company level in accordance with IFRS, balances and transactions in the insurance activities are aggregated and combined with the activities of the shareholders. These financial statements are presented in Saudi Arabian Riyal (SAR), which is also the Company's functional currency.
BASIS OF PREPARATION – (continued)
NOTES TO THE FINANCIAL STATEMENTS – (continued) FOR THE YEAR ENDED DECEMBER 31, 2022. d) Critical accounting judgments, estimates and assumptions – (continued). In these cases, fair values are estimated from observable data related to similar financial instruments or using models. When valuation techniques (for example, models) are used to determine fair values, they are validated and reviewed periodically by qualified personnel independent of those who obtained them.
All models are certified before they are used, and models are calibrated to ensure that outputs reflect actual data and comparative market prices. To the extent practical, models use only observable data; however, areas such as credit risk (both own credit risk and counterparty risk), volatilities and correlations require management to make estimates.
SIGNIFICANT ACCOUNTING POLICIES
The fair value of financial instruments where no active market exists or where quoted prices are not otherwise available is determined using valuation techniques. These standards will introduce significant changes in the accounting for insurance and reinsurance contracts and financial instruments and are expected to have a material impact on the Company's financial statements in the period of initial application. The Company estimates that, with the adoption of IFRS 17 and IFRS 9, the impact of these changes (before Zakat) is a reduction in the Company's total capital of SAR 4.8 million on 1 January 2022.
The impact on equity at 01 January 2023 is currently being estimated and shall be disclosed in the financial statements for the period ending 31 March 2023. The above change in equity will affect the solvency ratio of the Company, which will be estimated and disclosed in the financial statements for the period ending 31 March 2023.
Insurance Contracts
SIGNIFICANT ACCOUNTING POLICIES – (continued) b. Standards issued but not yet effective (continued)
Insurance Contracts (continued)
SIGNIFICANT ACCOUNTING POLICIES – (continued) b. Standards issued but not yet effective (continued)
Insurance Contracts (continued) (III) Transition Impact
Financial Instruments
Financial Instruments (continued)
Financial Instruments (continued) Financial assets – Impairment
SIGNIFICANT ACCOUNTING POLICIES – (continued) c. Standards issued but not yet effective (continued)
Financial Instruments (continued) Financial liabilities (continued)
SIGNIFICANT ACCOUNTING POLICIES – (continued) ii. Revenue Recognition
Reinsurance contracts that do not transfer significant insurance risk are recognized directly in the balance sheet. Dividend income on equity instruments classified as investments at fair value through profit or loss (FVSI) is recognized when the right to receive payment arises. Gross outstanding claims include the gross estimated costs of claims that have arisen but not yet settled as of the date of the balance sheet, together with the associated costs of processing claims, whether reported by the insured or not.
Provisions for reported damages that have not been paid on the balance sheet date are made on the basis of individual judgment. In addition, a provision is maintained based on the management's assessment and the Company's previous experience for costs for settlement of incurred but not reported claims, including related claim processing costs on the balance sheet date. Furthermore, the Company does not discount its liability for unpaid claims, as virtually all claims are expected to be paid within one year from the balance sheet date.
The balance sheet includes an asset or liability representing the payments due from reinsurers, the portion of losses recoverable from reinsurers and the premiums due to reinsurers. Changes in the expected useful life or expected consumption pattern of future economic benefits embodied in the asset are accounted for by changing the depreciation period and are treated as a change in accounting estimate. If assumptions regarding the future profitability of these policies are not realized, the amortization of these costs may be accelerated and may also require additional amortization to the income statement.
Deferred policy acquisition costs are also taken into account in the liability test at each reporting date. At each financial position date, liability coverage tests are performed to ensure the adequacy of the insurance contracts' obligations, net of related deferred policy acquisition costs. Any deficiencies in the carrying amount are expensed immediately in the income statement by establishing a provision for losses as a result of liability tests accordingly.
SIGNIFICANT ACCOUNTING POLICIES– (continued) vii. Receivables
Changes in fair value are recognized in the income statement of the year in which they arise. Income from special commissions and income from dividends on financial assets held by FVSI are reflected in the income statement as trading income or income from financial instruments of FVSI. Investments with fixed or determinable payments and a fixed maturity that the company has the positive intention and ability to hold to maturity are classified as held-to-maturity investments.
Any gain or loss on such investments is recognized in the income statement when the investment ceases to exist or is impaired. Investments classified as held to maturity generally cannot be sold or reclassified without affecting the Company's ability to use that classification and cannot be classified as a hedged item with respect to commission rate or prepayment risk, reflecting the long-term nature of these investments. However, sales and reclassifications in any of the following circumstances will not affect the Company's ability to use this classification.
Sales or reclassifications attributable to non-recurring isolated events beyond the Company's control and which could not reasonably have been anticipated. Derecognition of a financial instrument occurs when the entity no longer controls the contractual rights that make up the financial instrument, which usually occurs when the instrument is sold or when all cash flows attributable to the instrument are transferred to an independent third party. the customer and the company also transferred almost all the risks and rewards of ownership. Financial assets and financial liabilities are set off and the net amount is reported in the statement of financial position only if there is a currently enforceable legal right to set off the recognized amounts and there is an intention to net settle or realize the assets and settle the liability at the same time.
Revenues and expenses are not offset in the statement of comprehensive income unless required or permitted by any accounting standard or interpretation. All normal purchases and sales of financial assets are recognized/derecognized on the trade date (ie the date the company commits to buy or sell the asset). Conventional purchases or sales are purchases or sales of financial assets that require the settlement of assets within a time frame generally determined by market regulation or convention.
SIGNIFICANT ACCOUNTING POLICIES - (continued) v. Impairment of financial assets
SIGNIFICANT ACCOUNTING POLICIES– (continued) ix. Property and Equipment
The Company operates an end-of-service indemnity plan for its employees based on the prevailing Saudi Labor Laws. Accruals are made against the present value of expected future payments in respect of services rendered by the employees up to the end of the reporting period using the projected unit credit method. The Company is subject to zakat and income tax in accordance with the regulations of the Zakat, Taxation and Customs Authority (“ZATCA”).
Any dividend payments to the Company's shareholders are recognized as a liability in the Company's annual accounts in the period in which the dividends are approved by the Company's shareholders. The Company's main cash flows come from insurance activities, which are classified as cash flows from operating activities. Foreign currency transactions are recorded in Saudi Riyals at the exchange rate prevailing on the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are converted into Saudi Riyals at the exchange rate prevailing on the balance sheet date. Non-monetary items that are valued in terms of historical cost in a foreign currency are translated using the exchange rate on the date of the initial transaction and are not subsequently adjusted. Since the Company's foreign currency transactions are primarily in U.S. dollars, foreign exchange gains and losses are not significant.
A segment is a distinguishable component of a company engaged in the provision of products or services (a business segment) that is subject to risks and rewards that differ from those of other segments. Business segments are reported in a manner consistent with internal reporting to the main business decision maker. In accordance with the company's articles of association, the company allocates 20% of the shareholders' net operating profit to the statutory reserves every year, until it forms a reserve in the amount of the share capital.
SIGNIFICANT ACCOUNTING POLICIES– (continued) xxiii. Fair values
GOING CONCERN
CASH AND CASH EQUIVALENTS
SHORT TERM MURABAHA DEPOSITS
PREMIUMS RECEIVABLE - NET
REINSURERS’ BALANCE RECEIVABLE
REINSURERS’ BALANCE RECEIVABLE (continued)
INVESTMENTS
DEFERRED POLICY ACQUISITION COST
INTANGIBLE ASSETS - NET
PROPERTY AND EQUIPMENT - NET
RIGHT-OF-USE-ASSETS 1 RIGHT-OF-USE ASSET, NET
- LEASE LIABILITIES
STATUTORY DEPOSIT
PREPAID EXPENSES AND OTHER ASSETS
TECHNICAL RESERVES
- Net outstanding claims and reserves
- Movement in unearned premiums
COMMITMENTS AND CONTINGENCIES
ACCRUED AND OTHER LIABILITIES
END OF SERVICE INDEMNITIES
- Movement of defined indemnities obligation
- Principal actuarial assumptions
MOVEMENT IN OUTSTANDING RESERVES AND OTHER TECHNICAL RESERVES
FAIR VALUES OF FINANCIAL INSTRUMENTS
OPERATING SEGMENTS
TRANSACTIONS AND BALANCES WITH RELATED PARTIES
ZAKAT AND INCOME TAX – (continued) a. Charge for the year
SHARE CAPITAL
STATUTORY RESERVE
CAPITAL MANAGEMENT
LOSS PER SHARE
GENERAL AND ADMINISTRATIVE EXPENSES
OTHER INCOME
RISK MANAGEMENT
RISK MANAGEMENT– (continued) Insurance risk
RISK MANAGEMENT– (continued)
RISK MANAGEMENT– (continued) Market risk
RISK MANAGEMENT– (continued) Commission rate risk (continued)
RISK MANAGEMENT– (continued) Credit risk (continued)
RISK MANAGEMENT– (continued) Liquidity risk
RISK MANAGEMENT– (continued) Operational Risk
SUPPLEMENTARY INFORMATION (continued) a) Statement of financial position – (continued)
SUPPLEMENTARY INFORMATION (continued) b) Statement of income
SUPPLEMENTARY INFORMATION (continued) b) Statement of income (continued)
SUPPLEMENTARY INFORMATION (continued) c) statement of comprehensive income
SUPPLEMENTARY INFORMATION (continued) d) Statement of cash flows
SUPPLEMENTARY INFORMATION (continued) d) Statement of cash flows Statement – (continued)
APPROVAL OF THE FINANCIAL STATEMENTS
