| COMMERCIAL UNION (Life Insurance) |
|
|
|
|
|
|
|
Annual Report 1996 |
|
| Contents |
|
| COMPANY
INFORMATION |
|
2 |
|
|
|
| CHAIRMAN'S
STATEMENT |
|
3 |
|
| REPORT
OF THE DIRECTORS |
|
4 |
|
| AUDITORS'
REPORT TO THE MEMBERS |
7 |
|
| BALANCE
SHEET |
|
8 |
|
| REVENUE ACCOUNT |
|
10 |
|
| PROFIT
& LOSS ACCOUNT |
|
14 |
|
| CASH
FLOW STATEMENT |
|
16 |
|
| NOTES
TO THE ACCOUNTS |
|
18 |
|
| CLASSIFIED
SUMMARY OF THE ASSETS |
23 |
|
| PATTERN
OF SHAREHOLDING |
|
24 |
|
| NOTICE
OF ANNUAL GENERAL MEETING |
25 |
|
| STATEMENT
U/S 160(1)(b) OF THE |
26 |
|
| COMPANIES
ORDINANCE, 1984 |
|
|
|
|
| FORM
OF PROXY |
|
|
|
| Company
Information |
|
|
|
|
|
| Chairman |
|
James Stephen Rattray |
|
|
|
| Managing
Director & |
Moin M. Fudda |
|
| Chief
Executive |
|
|
|
| Directors |
|
Christopher Charles
Pountain |
|
|
Stephen Robert Corfield |
|
|
|
Naseem S. Mirza |
|
|
Irtiza Husain |
|
|
Husain Lawai |
|
|
| Company
Secretary |
Iftekhar Alam |
|
| Auditors |
|
A.F. Ferguson & Co. |
|
| Legal
Advisors |
Orr Dignam & Co. |
|
| Registered
Office |
16/2, KSB Building |
|
|
|
Sir Agha Khan Road, |
|
|
|
Lahore. |
|
|
|
| Chairman's
Statement |
|
|
| Among
the far reaching economic decisions taken by Government in recent years |
|
| have
been the demonopolisation of life insurance business in Pakistan and |
|
| opening
of the market to the private sector and foreign investment. This will |
|
| contribute
substantially to improvement of the national economy. Commercial |
|
| Union
(cu) acknowledges the Government's consideration in granting |
|
| permission
to incorporate a fully-fledged life insurance company in Pakistan with |
|
| local
participation. |
|
|
| High
levels of savings and investment are an important driving force behind |
|
| rapid
economic growth in many Asian countries. A vibrant life insurance market |
|
| is
central to this activity, through mobilising sums of money in the form of |
|
| policyholders'
and shareholders' funds for reinvestment in the economy. Such |
|
| funds
can be directed to various types of investment, to support both the public |
|
| and
private sectors. |
|
|
| From
the viewpoint of the individual or corporation, the immediate role of a life
insurer is to provide access to a |
| range
of financial services. These include protection against death and other
contingencies as well as savings for |
| various
needs, in particular retirement provision. In doing so, the life industry
generates a wide range of employment |
| opportunities. |
|
|
| An
important feature of life business is its long-term nature, and life insurers
need a long investment outlook. The |
| life
insurer will seek to optimise the investment return for its policyholders,
which is aided by limiting any |
|
| constraints
placed on life insurers in choosing their investment portfolios. |
|
|
| Furthermore,
development of the life insurance market in Pakistan would be significantly
enhanced by restoration of |
| much
needed tax relief in the form of rebates on contributions to personal pension
and life insurance policies. |
|
|
| Commercial
Union Life Assurance Company (Pakistan) Limited has the largest
capitalisation of the private life |
|
| insurers,
at 300 million Rupees, of which CU subscribed 51%. The other shareholders are
Muslim Commercial Bank |
|
| with
10% and the public 39%. We aim to meet a wide range of customer needs,
offering both group and individual |
|
| life
business, and look forward to playing a full part in the successful growth
and development of the life market in |
| Pakistan. |
|
|
| Karachi.
May 05, 1997 |
|
James Stephen Rattray |
|
|
|
Chairman |
|
|
|
| Report
of the Directors |
|
|
| The
Directors have pleasure in presenting their Second Annual Report together
with the company's Audited |
|
| Accounts
for the year ended 31 st December, 1996. |
|
|
|
|
| INCORPORATION |
|
| The
life insurance market in Pakistan was reopened to private local insurers in
1990 and |
|
| to
foreign insurers in 1994. Permission to transact life insurance business was
granted to |
|
| this
company early in the following year after considerable effort. The company
was |
|
| incorporated
and registered in the province of the Punjab on the 29th June 1995. |
|
|
|
| The
Corporate Law Authority granted approval to the Company's prospectus on the
15th |
|
| May
1996 which was published on the 18th May 1996. Ten million out of thirty
million |
|
| shares
of the first issue of its capital were thereafter floated for public
subscription opened |
|
| on
the 26th May 1996. Actual subscriptions exceeded six fold the number offered. |
|
| Computerised
balloting for selection of successful candidates was conducted by a well |
|
| known
balloting agency. A statement showing the pattern of shareholding in the
company |
|
| as
at the 31st December 1996 is attached. A licence was granted by the
Controller of |
|
| Insurance
to the company on 20th June, 1996. Reinsurance arrangments with world |
|
| known
reinsurers, Munich Re and Swiss Re were finalised and it commenced group life |
|
| insurance
business on the 30th June, 1996. Up to the 31st December, 1996 the company |
|
| issued
61 group life insurance policies, covering over 12,000 lives, with a
clientele of |
|
| reputable
multinationals and local organisations operating in Pakistan. |
|
|
|
| Arrangements
preparatory to launching of individual life insurance business from the 1st
January 1997 including |
|
| establishment
of branch offices at Karachi and Lahore, and introduction of two new
products, namely Secure Life |
|
| and
Secure Education were also completed before the advent of the new year. |
|
|
| PARENT
COMPANY |
|
| The
company's parent company is the Commercial Union Assurance Company plc which
is incorporated in the |
|
| United
Kingdom and holds 51% shares of its issued capital. |
|
|
| INVESTMENT |
|
| The
company's investment strategy is aimed at achieving reasonable returns,
subject to ensuring the security of |
|
| shareholders'
money and interests of policyholders. |
|
|
|
| At
present the opportunities for investment available to the company are
limited. These include FIB's, TFC's, term |
| deposits
with banks and a leasing company with maturities varying from 7 days to 10
years. The current accounts of |
| the
company with various banks are also profit bearing. For the time being the
company has kept away from the |
|
| capital
market, in view of its present erratic performance, and also from real
estate. |
|
|
|
| HUMAN
RESOURCES AND TRAINING |
|
| Well
qualified and experienced persons were selected and |
|
| appointed
to managerial and other positions in the group life, |
|
| individual
life marketing, underwriting and aetuarial, finance and |
|
| accounts
and information technology departments. |
|
|
| Branch
Managers, Unit Managers and Development Officers were |
|
| recruited
to market individual life business. Professional trainers |
|
| were
appointed and intensive training was imparted to all field staff |
|
| to
enable them to promote and develop sales of life insurance |
|
| policies
vigorously and efficiently. |
|
|
| DIRECTORS |
|
| During
the year Mr. Viquar H. Siddiqui and Mr. Michael J. Ridding resigned as
Directors and in their places |
|
| Mr.
Christopher C. Pountain and Mr. Husain Lawai were inducted Directors, being
nominees of the Commercial |
|
| Union
Assurance Company plc - U.K. and the Muslim Commercial Bank Limited,
respectively. The Board records |
|
| its
appreciation oŁ the valuable services rendered to the company by the outgoing
Directors. |
|
|
|
|
| AUDITORS |
|
| The
Auditors, Messrs. A. F. Ferguson & Co., Chartered Accountants, are due to
retire at the conclusion of the Annual |
| General
Meeting and being eligible, offer themselves for reappointment, |
|
|
|
| FUTURE
PROSPECTS |
|
| It
is expected that appropriate measures will be adopted by the new government
to create an environment conducive |
|
| to
growth of life insurance activity in the country. Given awareness of benefits
of life insurance among the |
|
| population,
there is great potential for development and expansion of the business. The
capital base of the company |
| provides
strong support to enable it to achieve its goals. The company aims at
increasing the size of the market by |
| introducing
innovative plans for life insurance which will enable Pakistani households to
secure their future against |
| various
contingencies. |
|
|
|
| GRATITUDE |
|
|
| The
directors thank the Ministry of Commerce, Corporate Law Authority, the
Registrar Joint Stock Companies, the |
|
| Controller
of Insurance, the State Bank of Pakistan and the Karachi Stock Exchange for
their co-operation and |
|
| objective
consideration in granting permissions, approvals, registrations, enlistment,
licences and certificates, etc., |
| required
by the company at various stages. |
|
|
| The
directors also thank all employees and field officers of the company for
their dedication and diligence in |
|
| performance
of their duties and responsibilities to help the company to achieve its
goals. |
|
|
|
| On
behalf of the Board of Directors |
|
|
Moin M. Fudda |
|
| Karachi.
May 05, 1997 |
|
Managing Director &
Chief Executive |
|
|
|
|
| Auditors'
Report to the Member |
|
| We
have audited the annexed Balance Sheet of Commercial Union Life Assurance
Company (Pakistan) Limited as at |
|
| December
31, 1996, and the related Revenue Account, Profit and Loss Account and Cash
Flow Statement, together |
|
| with
the notes forming part thereof, for the year then ended and we state that we
have obtained all the information |
| and
explanations which to the best of our knowledge and belief were necessary for
the purposes of our audit and after |
| due
verification thereof, we report that: |
|
|
| (a)
in our opinion, proper books of account have been kept by the Company as
required by the Companies |
|
| Ordinance, 1984; |
|
|
| (b)
in our opinion: |
|
| (i)
the Balance Sheet, Revenue Account and Profit and Loss Account together with
the notes thereon, |
|
| have
been drawn up in conformity with the provisions of the Insurance Act, 1938
and are in |
|
| agreement
with the books of account and are further in accordance with the accounting
policies stated |
|
| therein; |
|
|
| (ii)
the expenditure incurred during the year was for the purpose of the Company's
business: |
|
| (iii)
the business conducted, investments made and expenditure incurred during the
year was in accordance |
|
| with
the objects of the Company; |
|
|
| (c)
we have verified the cash and bank balances and the securities relating to
the Company's loans and |
|
| investments
by actual inspection or by the production of certificates, from the loanees,
custodians of |
|
| investment
and Company's bankers; |
|
|
| (d)
no part of the assets of the Life Insurance Fund has been directly or
indirectly applied in contravention of the |
| provisions
of the Insurance Act, 1938 relating to the application and investment of Life
insurance Funds; |
|
|
|
|
| (e)
in our opinion and to the best of our information and according to the
explanations given to us and as shown |
|
| by
the books of the Company, the Balance Sheet, Revenue Account. Profit and Loss
Account and the Cash |
|
| Flow
Statement, together with the notes forming part thereof, give the information
required by the Insurance |
|
| Act,
1938, in the manner so required, and respectively gives a true and fair view
of the Company's affairs as |
|
| at
December 31, 1996 and of the loss and the cash flows for the year then ended;
and |
|
|
|
|
| (f)
in our opinion no zakat was deductible at source under the Zakat and Ushr
Ordinance, 1980. |
|
|
| Karachi.
May 05, 1997 |
|
A.F. Ferguson & Co. |
|
|
Chartered Accountants |
|
|
|
| Balance
Sheet as at December 31, 1996 |
|
|
|
Note |
1996 |
1995 |
|
|
|
|
Rupees |
Rupees |
|
|
|
|
| SHARE
CAPITAL |
|
|
|
| Authorised |
|
|
|
| 50,000,000
(1995: 50,000,000) ordinary |
|
| shares
of Rs. 10 each |
|
|
500,000,000 |
500,000,000 |
|
|
|
|
========== |
========== |
|
| Issued,
subscribed and paid-up |
|
| 30,000,000
(1995: 3,500) ordinary |
|
| shares
of Rs. 10 each fully paid in cash |
3 |
300,000,000 |
35,000 |
|
| Advance
shares subscription money received |
|
- |
2,630,895 |
|
| Accumulated
loss |
|
-7,559,835 |
- |
|
|
|
292,440,165 |
2,665,895 |
|
|
|
---------- |
---------- |
|
| Balance
of life insurance fund |
|
5,168,828 |
- |
|
|
|
| LIABILITIES
AND PROVISIONS |
|
| Estimated
liability in respect of outstanding |
|
| claims,
whether due or intimated |
|
705,000 |
- |
|
| Amounts
due to other persons or bodies carrying |
|
| on
insurance business |
|
|
675,473 |
- |
|
| Sundry
creditors (including outstanding and |
|
| accruing
expenses and taxes) |
|
4 |
16,052,679 |
5,000 |
|
|
|
|
---------- |
---------- |
|
|
|
17,433,152 |
5,000 |
|
|
| COMMITMENTS |
|
5 |
-- |
-- |
|
|
---------- |
---------- |
|
|
315,042,145 |
2,670,895 |
|
|
========== |
========== |
|
| The
annexed notes form an integral part of these accounts. |
|
|
| LOANS
- on personal security |
|
|
224.49 |
-- |
|
|
| INVESTMENTS
- at cost |
|
| Deposit
with State Bank of Pakistan |
|
| 10
years Federal Investment Bonds |
|
|
24,400,000 |
-- |
|
| 5
years Term Finance Certificates of an |
|
|
|
| associated
company- ICI Pakistan Limited |
|
10,000,000 |
-- |
|
| 3
years Federal Investment Bonds |
|
|
24,897,500 |
-- |
|
|
|
---------- |
---------- |
|
|
|
59,297,500 |
-- |
|
|
| PRELIMINARY
AND DEFERRED EXPENSES |
|
6 |
7,996,768 |
1,994,400 |
|
| FURNITURE,
FIXTURES, OFFICE EQUIPMENT, |
|
| COMPUTERS
AND VEHICLES |
|
7 |
15,217,401 |
-- |
|
| CAPITAL
WORK-IN-PROGRESS |
|
|
18,261,055 |
-- |
|
| CURRENT
ASSETS |
|
| Outstanding
premiums |
|
|
1,366,989 |
-- |
|
| Interest,
return on deposits and rents |
|
| accrued
but not due |
|
|
10,288,787 |
-- |
|
| Sundry
debtors, advances, deposits and |
|
| prepayments |
|
|
8 |
9,541,523 |
-- |
|
|
|
| Cash |
|
| At
banks on deposit accounts |
|
|
191,400,000 |
-- |
|
| At
banks on current accounts |
|
|
1,376,230 |
676,495 |
|
| Cash
and stamps in hand |
|
|
71,407 |
-- |
|
|
|
|
---------- |
---------- |
|
|
|
|
214,044,936 |
676,495 |
|
|
|
---------- |
---------- |
|
|
|
315,042,145 |
2,670,895 |
|
|
========== |
========== |
|
| We
certify that: |
|
| 1.
The investments in stocks and shares shown in the Balance Sheet have been
valued at the lower of cost and |
|
| market
value. The market values have been ascertained from the published quotations
as on December 31, 1996. |
|
| 2.
The value of all the assets in Pakistan have been reviewed as at December 31,
1996 and in our belief the assets |
| set forth in the Balance Sheet are shown in
the aggregate amounts not exceeding their realisable or market value |
| under the several headings given therein. |
|
| 3.
No part of the assets of Life Insurance Fund has been directly or indirectly
applied in contravention of the |
|
| provisions
of the Insurance Act, 1938 relating to the application and investment of Life
Insurance Fund. |
|
|
| James
Stephen Rattray |
Irtiza Husain |
|
Moin M. Fudda |
|
| Chairman |
|
Director |
|
Managing Director & |
|
|
|
Chief Executive |
|
|
|
|
|
| Revenue
Account for the year December 31, 1996 |
|
|
|
|
|
Note |
1996 |
|
|
|
|
Rupees |
|
|
|
|
|
|
| Claims
under policies (including provision for |
|
|
|
| claims
due or intimated), less reinsurances |
|
|
|
| By death |
|
|
|
- |
|
| By
maturity |
|
|
|
- |
|
| Under
group insurance |
|
|
|
1,679,044 |
|
|
|
|
|
---------- |
|
|
|
|
1,679,044 |
|
|
|
|
|
|
| Expenses
of management |
|
|
|
| 1.
(a) Commission to insurance agents |
|
|
| (less
that on reinsurance) |
|
|
- |
|
| (b)
Allowances and commission |
|
|
| (other
than commission included |
|
|
| in
sub-item (a) preceding) |
|
- |
|
| 2.
Salaries and other benefits (other than to |
|
| agents
and those contained in item No. 1) |
|
8,733,071 |
|
| 3.
Travelling expenses |
|
|
|
2,579,258 |
|
| 4.
Directors' fees |
|
|
|
- |
|
| 5.
Auditors' remuneration |
|
9 |
143,212 |
|
| 6.
Medical fees |
|
|
|
8,281 |
|
| 7.
Law charges |
|
|
- |
|
| 8.
Advertisement |
|
|
1,717,137 |
|
| 9.
Printing and stationery |
|
|
979,455 |
|
| 10.
Other expenses of management |
|
|
|
| Policy
stamps |
|
|
7,291 |
|
| Staff
welfare |
|
|
595,186 |
|
| Postage,
telegram and telephone |
|
865,370 |
|
| Electricity
and gas |
|
|
114,777 |
|
| Entertainment |
|
|
640,883 |
|
| Vehicle
maintenance |
|
|
1,470,073 |
|
| Professional
charges |
|
|
1,437,253 |
|
| Training
expenses |
|
|
408,998 |
|
| Computer
expenses |
|
|
4,780,004 |
|
| Miscellaneous
expenses |
|
|
735,104 |
|
|
|
---------- |
|
|
|
11,054,939 |
|
|
|
|
---------- |
|
|
carried forward |
|
|
26,894,397 |
|
|
|
|
|
| Premiums,
less reinsurances |
|
|
|
| (i)
First year premium where the maximum |
|
|
| premiums
paying period is: |
|
|
|
| Two years |
|
|
|
-- |
|
| Three
years |
|
|
-- |
|
| Four years |
|
|
-- |
|
| Five years |
|
|
-- |
|
| Six years |
|
|
-- |
|
| Seven
years |
|
-- |
|
| Eight
years |
|
-- |
|
| Nine years |
|
|
-- |
|
| Ten years |
|
|
-- |
|
| Eleven
years |
|
-- |
|
| Twelve
years or over (including |
|
|
| throughout
life) |
|
-- |
|
| (ii)
Renewal premiums |
|
|
-- |
|
| (iii)
Single premiums |
|
-- |
|
| (iv)
Group premiums |
|
|
7,900,392 |
|
| (v)
Consideration for annuities granted, |
|
|
| less
reinsurances |
|
|
-- |
|
|
|
| Interest,
return on deposits, dividends and rents |
10 |
23,282.06 |
|
| Loss
transferred to profit and loss account |
|
7,559.84 |
|
|
|
|
|
|
|
---------- |
|
|
carried forward |
|
38,742,283 |
|
|
|
|
|
brought forward |
|
26,894,397 |
|
|
| 11.
Rent of other offices occupied by the company |
|
2,017,060 |
|
| 12.
Bad debts |
|
-- |
|
| 13.
Depreciation expenses |
|
774,970 |
|
| 14.
Agency development and recruitment |
|
1,887,836 |
|
|
| Preliminary
and deferred expenses amortized |
|
1,999,192 |
|
|
|
| Balance
of Life Fund at the end of the year |
|
| as
shown in the balance sheet |
|
5,168,828.00 |
|
|
|
|
---------- |
|
|
|
|
38,742,283 |
|
|
|
|
========== |
|
|
| We
certify that to the best of our knowledge and belief, and according to the
information and explanations given to |
| us,
and so far as appears from our examination of the Company's books of account
all expenses of management, |
|
| wherever
incurred, whether directly or indirectly in respect of life insurance
business transacted by the Company in |
| Pakistan,
have been fully debited in the above Revenue Account as expenses. |
|
|
| We
further certify that, to the best of our knowledge and belief, the Company
has not paid to any person any |
|
| commission
in any form outside Pakistan in respect of life insurance business transacted
by it in Pakistan, and that |
| the
Company has not received outside Pakistan from any person any commission in
any form in respect of life |
|
| insurance
business. |
|
|
| Karachi.
May 05, 1997 |
|
A.G. Ferguson & Co. |
|
|
|
|
Chartered Accountants |
|
|
|
|
|
|
Note |
1996 |
|
|
|
|
Rupees |
|
|
|
brought forward |
|
38,742,283 |
|
|
|
---------- |
|
|
38,742,283 |
|
|
|
|
========= |
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
| It
is hereby certified that all expenses of management whether directly or
indirectly in respect of Life Insurance |
| business
transacted by the company in Pakistan have been fully debited in the above
Revenue Account. |
|
|
|
| Profit
and Loss Account for the year ended December 31, 1996 |
|
|
|
1996 |
|
|
Rupees |
|
|
| Taxes
on the insurer's profit (not applicable |
|
| to
any particular fund or account) |
|
- |
|
|
| Expenses
of management (not applicable to any |
|
| particular
fund or account) |
|
- |
|
|
| Loss
on realization of investments (not charged |
|
| to
reserves or any particular fund or account) |
- |
|
|
| Depreciation
of investments (not charged to |
|
| reserves or any
particular fund or account) |
- |
|
|
| Loss
transferred from revenue account |
|
7,559,835 |
|
| Other
expenditure |
|
- |
|
|
---------- |
|
|
|
7,559,835 |
|
|
|
========== |
|
|
| Interest,
dividends and rents (not applicable |
|
| to
any particular fund or account) |
|
- |
|
|
| Less:
Income-tax thereon |
|
- |
|
|
| Profit
on realization of (investments not |
|
| credited
to reserves or any particular fund |
|
| or account) |
|
- |
|
|
| Appreciation
of investments (not credited to |
|
| reserves
or any particular fund or account) |
- |
|
|
| Profit transferred from
revenue account |
- |
|
|
| Transfer
fees |
|
- |
|
|
| Other
income |
|
- |
|
|
| Balance
being loss for the year carried to |
|
| balance
sheet |
|
7,559,835 |
|
|
---------- |
|
|
|
7,559,835 |
|
|
========== |
|
| The
annexed notes form an integral part of these accounts. |
|
|
| James
Stephen Rattray |
Irtiza Husain |
|
Moin M. Fudda |
|
| Chairman |
|
Director |
|
Managing Director & |
|
|
|
Chief Executive |
|
|
|
| Cash
Flow Statement for the year ended December 31, 1996 |
|
|
|
|
|
|
1996 |
1995 |
|
|
|
|
Rupees |
Rupees |
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
|
| Loss
for the year |
|
(7,559,835) |
-- |
|
| Add/(less)
adjustments for non cash charges |
|
| and
other items: |
|
| Depreciation |
|
|
774,970 |
-- |
|
| Amortization
of preliminary and deferred expenses |
1,999,192 |
-- |
|
| Investment
income |
|
|
(23,282,056) |
-- |
|
| Balance
of life insurance fund |
|
5,168,828 |
-- |
|
|
|
|
----------- |
----------- |
|
| Loss
before working capital changes |
|
(22,898,901) |
-- |
|
|
|
|
| increase
in current assets |
|
|
|
| Outstanding
premiums |
|
(1,366,989) |
-- |
|
| Sundry
debtors, advances, deposits and |
|
|
| prepayments |
|
(9,541,523) |
-- |
|
|
|
|
----------- |
----------- |
|
|
(10,908,512) |
-- |
|
