| COMMERCIAL UNION LIFE ASSURANCE |
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| ANNUAL
REPORT 1997 |
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| Contents |
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| COMPANY
INFORMATION |
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|
| CHAIRMAN'S
STATEMENT |
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|
| REPORT
OF THE DIRECTORS |
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| AUDITORS'
REPORT TO THE MEMBERS |
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| BALANCE
SHEET |
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|
| REVENUE
ACCOUNT |
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|
| PROFIT
& LOSS ACCOUNT |
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| CASH
FLOW STATEMENT |
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| NOTES TO THE ACCOUNTS |
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| CLASSIFIED
SUMMARY OF THE ASSETS |
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| PATTERN
OF SHAREHOLDING |
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| NOTICE
OF ANNUAL GENERAL MEETING |
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|
| Company
Information |
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|
|
| Chairman |
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|
James Stephen Rattray |
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| Managing
Director & |
|
Moin M. Fudda |
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| Chief
Executive |
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|
|
| Directors |
|
|
Christopher Charles
Pountain |
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|
Stephen Robert Corfield |
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|
Naseem S. Mirza |
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|
Irtiza Husain |
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Shaikh Mukhtar Ahmed |
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| Company
Secretary |
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Iftekhar Alam |
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| Auditors |
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|
A.F. Ferguson & Co. |
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| Legal
Advisors |
|
Orr Dignam & Co. |
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| Registered
Office |
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16/2, KSB Building |
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|
Sir Agha Khan Road, |
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|
Lahore. |
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| Chairman's
Statement |
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| The
Company's mission is to become the pre-eminent life insurer in the private
sector whilst meeting the Commercial Union |
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| Group's
long term objectives. The Company commenced writing group life insurance on
30 June 1996, as a first step to |
|
| providing
employee benefits services to corporate clients. This was followed by the
launch of individual life business from |
|
| 1
January 1997 through field branches in Karachi and Lahore, with a third
branch opened in Islamabad in March 1997. With |
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| its
highly-qualified, experienced and devoted professional staff, I look forward
to continued good progress. |
|
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| The
Company has an innovative approach and is placing emphasis on building
long-term relationships with its customers. |
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| New
products have been launched and more are planned for the future in order to
expand the customer base and build a |
|
| reputation
for product innovation. The Company will seek to satisfy all the life
insurance needs of its customers, the key |
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| to
success in the increasingly customer-oriented insurance market. |
|
|
| It
is pleasing to note that deficiencies in the Insurance Act have attracted the
attention of Government. Hopefully many of |
|
| the
constraints will soon be overcome on acceptance of recommendations of an
industry Task Force. The impending Insurance |
|
| Regulatory
Authority is expected to pave the way for development, expansion and control
of insurance business. |
|
|
| An
aspect that warrants urgent and serious attention is the level of savings in
the country. The savings rate (as a percentage |
|
| of
GDP) stood at 11.8% for 1996/97 and on average 13.4% during the preceding
five years, well below prevailing levels |
|
| in
other developing Asian countries. Proposals submitted to reinstate tax relief
on life and pensions business would provide |
|
| a
boost to the savings rate, and thereby mobilise funds for investment that are
much-needed by the Government for financing |
|
| development. |
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|
|
| Report
of the Directors |
|
|
| The
Directors have pleasure in presenting their Third Annual Report with the
Company's Audited Accounts for the year |
|
| ended
31st December, 1997. |
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|
| BUSINESS
PROGRESS |
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|
| INDIVIDUAL
LIFE: |
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|
| The
Company commenced individual life operations from January |
|
| 01,
1997 from two branches, one in Karachi and the other in Lahore. |
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| One
more branch was opened in Islamabad towards the end of |
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| March,
1997. Those branches were the main distribution channels for |
|
| direct
sales. The Company continued to offer its two main products |
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| namely,
Secure Life and Secure Education along with various |
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| supplementary
benefits. |
|
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| In
1998, the Company has plans to open a few more branches. |
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| Arrangements
are in hand to establish a branch in Mirpur, Azad |
|
| Kashmir,
before the end of March 1998. The Company shall |
|
| establish
other distribution channels also and shall present new |
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| products
as well. |
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|
|
| EMPLOYEE
BENEFIT SERVICE |
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| The
Company commenced its group life business on June 30, 1996 and made
satisfactory progress in 1997 by offering |
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| coverage
to a large number of corporate clients. The Company has plans to introduce
group health as well as group pension |
|
| schemes
in 1998. |
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|
| PARENT
COMPANY |
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| 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. |
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|
| INVESTMENT: |
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| The
Company continued to invest its funds into diversified fields in order to get
good return. Its investments included |
|
| Government
Securities, Term Finance Certificates, Equities, Deposits with leasing
companies and banks. The Company |
|
| earned
an impressive investment income of Rs. 35.7 million. In addition, the Company
also realised capital gain of Rs. 0.7 |
|
| million.
The unit price of the policyholders fund continued to appreciate consistently
throughout the year. |
|
|
| HUMAN
RESOURCES AND TRAINING: |
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| The
Company regarded its employees as the most important factor for total quality
management and as such it continued |
|
| to
appoint qualified and experienced persons and provided them adequate training
for transacting its business efficiently. |
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|
| DIRECTORS: |
|
| During
the year Mr. Husain Lawai was replaced by Shaikh Mukhtar Ahmed as the nominee
director of the Muslim |
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| Commercial
Bank Ltd. |
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|
| AUDITORS: |
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| The
Auditors, Messrs. A. F. Ferguson & Co., Chartered Accountants, are due to
retire at the conclusion of the Annual |
|
| General
Meeting and being eligible, have offered themselves for reappointment. |
|
|
| FUTURE
PROSPECTS: |
|
| During
the year 1997 a task force was set up by the Ministry of Commerce in order to
review the Insurance Act, 1938 and |
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| to
recommend amendments to its outmoded provisions regarding full scale
development of the insurance industry in |
|
| Pakistan.
The Managing Director of the Company was one of the members of the Task
Force. The Task Force submitted its |
|
| recommendations
to Government early in October 1997. Efforts are being made to persuade the
Government to implement |
|
| those
recommendations as early as possible. The Federal Government later declared
its intention to establish a broad based |
|
| autonomous
body by the name of Pakistan Insurance Regulatory Authority (PIRA) to promote
growth of the insurance |
|
| industry
and to protect interests of policy holders. Opening up of life insurance
business to private companies, both local |
|
| as
well as foreign, has improved awareness on life insurance among the general
public. This alongwith introduction of |
|
| innovative
products will help the Company further to attain satisfactory growth and
profitability. |
|
|
| Government
had further been moved to restore tax relief on insurance premia which was
allowed for a considerably long |
|
| time
in the past but had subsequently been withdrawn. As a result, life insurance
premia did not keep pace with growth of |
|
| GDP
and saving rate declined. The Minister of Commerce had been persuaded by the
Company to support the proposal. |
|
| He
had advised that the matter should be taken up with the Ministry of Finance
which was primarily concerned with the |
|
| matter.
Action was being taken accordingly. If the proposal went through, it would
help growth of life insurance business. |
|
|
| As
a part of the 50th anniversary celebrations of Pakistan's independence, |
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| Royal
Yacht Britannia visited Pakistan in March 1997. A large British |
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| trade
delegation led by the Lord Mayor of London, Alderman, Roger |
|
| Cork,
also visited Karachi. A seminar was held by British Invisibles at the |
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| Royal
Yacht on the 3rd March, 1997. It was attended by 200 delegates and |
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| was
summed up by the Lord Mayor. This Company participated in that |
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| seminar
as one of the large British interests in Pakistan. Mr. James Rattray, |
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| Chairman
of the Company, made a presentation at the seminar in which he |
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| emphasized
the role of, and benefits of, a strong life insurance industry, in |
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| the
context of the over-all theme of financing for Pakistan's future. He also |
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| gave
an overview of economic issues and underscored importance of |
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| savings
for economic growth. |
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|
|
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| The
Company also partook in a Quality Trade Exhibition, organized by the her h
...... |
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| British
High Commission, at the occasion of the Her Majesty the Queen of |
|
| England's
visit and put up a booth for displaying its products. |
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|
| GRATITUDE: |
|
| The
directors thank the Ministry of Commerce, the Corporate Law Authority, the
Registrar Joint Stock Companies, the |
|
| Controller
of Insurance, the State Bank of Pakistan and the Karachi Stock Exchange for
their continuous co-operation |
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| throughout
the year. |
|
|
| Besides,
the directors thank all employees and field officers of the Company for their
dedication and diligence in |
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| performance
of their duties to help the Company achieve its goals. |
|
|
| The
directors also express their gratitude to the Company's shareholders as well
as its policyholders for their faith and |
|
| confidence
in the Company. |
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|
|
| Auditors'
Report to the Members |
|
|
| We
have audited the annexed Balance Sheet of Commercial Union Life Assurance
Company (Pakistan) Limited as at |
|
| December
31, 1997, 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; |
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|
|
|
|
| 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
consistently applied except for the change |
|
| in
an accounting policy as explained in note 2.6 with which we concur; |
|
|
| (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; |
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|
|
|
| (c)
we have verified the cash and bank balances and the securities relating to
the Company's loans and investments by |
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| actual
inspection or by the production of certificates, from the loanees, custodians
of investment and Company's |
|
| bankers; |
|
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|
|
|
| (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, 1997 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. |
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|
|
|
|
|
|
A.F. FERGUSON & CO |
|
| Karachi:
March 20, 1998 |
|
CHARTERED ACCOUNTANTS |
|
|
|
| Balance
Sheet as at December 31, 1997 |
|
|
|
|
Note |
1997 |
1996 |
|
|
|
|
Rupees |
Rupees |
|
| SHARE
CAPITAL |
|
|
|
|
|
|
| Authorised |
|
|
|
| 50,000,000
(1996: 50,000,000) ordinary |
|
| shares
of Rs. 10 each |
|
|
500,000,000 |
500,000,000 |
|
|
|
|
========== |
========== |
|
| Issued,
subscribed and paid-up |
|
|
|
| 30,000,000
(1996: 30,000,000) ordinary |
|
|
| shares
of Rs. 10 each fully paid in cash |
3 |
300,000,000 |
300,000,000 |
|
|
|
|
|
| Accumulated
loss |
|
|
(36,106,396) |
(7,559,835) |
|
|
|
|
---------- |
---------- |
|
|
|
|
263,893,604 |
292,440,165 |
|
| Balance
of life insurance fund |
|
|
14,170,655 |
5,168,828 |
|
|
|
|
|
| LIABILITIES
AND PROVISIONS |
|
|
| Estimated
liability in respect of outstanding |
|
| claims,
whether due or intimated |
|
|
2,900,000 |
705,000 |
|
| Amounts
due to other persons or bodies carrying |
|
|
| on
insurance business |
|
|
3,091,806 |
675,473 |
|
| Sundry
creditors (including outstanding and |
|
|
| accruing
expenses and taxes) |
|
4 |
17,988,434 |
16,052,679 |
|
|
|
|
---------- |
---------- |
|
|
|
|
23,980,240 |
17,433,152 |
|
|
|
|
---------- |
---------- |
|
| COMMITMENTS |
|
5 |
- |
- |
|
|
|
|
---------- |
---------- |
|
|
|
|
302,044,499 |
315,042,145 |
|
|
|
|
========== |
========== |
|
|
|
|
|
|
| The
annexed notes form an integral part of these accounts. |
|
|
| We
certify that: |
|
|
| 1.
The investments in stocks and shares shown in the Balance Sheet have been
valued at the market value. The market values |
|
| have been ascertained from the published
quotations as on December 31, 1997. |
|
|
| 2.
The value of all the assets in Pakistan have been reviewed as at December 31,
1997 and in our belief the assets set forth |
|
| in
the Balance Sheet are shown in the aggregate amounts not exceeding their
realisable market value under the several |
|
| headings
given therein. |
|
|
|
|
|
| LOANS-on
personal security |
|
|
|
|
|
112,243 |
224,485 |
|
| INVESTMENTS |
|
|
| Deposit
with State Bank of Pakistan |
|
| 10
years Federal Investment Bonds |
|
|
24,400,000 |
24,400,000 |
|
| Pakistan
Government Securities |
|
|
| 10
years Defence Saving Certificates |
|
12,500,000 |
- |
|
| 3
years Special Saving Certificates |
|
57,000,000 |
- |
|
| 3
years Federal Investment Bonds |
|
|
|
|
|
- |
24,897,500 |
|
| 5
years Term Finance Certificates |
|
|
|
| ICI
Pakistan Limited |
|
8,480,089 |
10,000,000 |
|
| Sui
Southern Gas Co. Ltd. |
|
5,024,750 |
- |
|
| Packages
Limited |
|
2,507,000 |
- |
|
| Certificates
of Investments |
|
87,500,000 |
92,400,000 |
|
| Investment
in associated company under Musharika. |
|
|
|
| Arrangement |
|
|
2,500,000 |
- |
|
| Ordinary
shares and stocks of companies incorporated |
|
|
| in Pakistan |
|
6 |
15,100,213 |
- |
|
|
|
|
---------- |
---------- |
|
|
|
|
215,012,052 |
151,697,500 |
|
| PRELIMINARY
AND DEFERRED EXPENSES |
|
7 |
5,997,576 |
7,996,768 |
|
| FURNITURE,
FIXTURES, OFFICE EQUIPMENTS, |
|
| COMPUTERS
AND VEHICLES |
|
8 |
48,028,653 |
15,217,401 |
|
| CAPITAL
WORK-IN-PROGRESS |
|
|
359,000 |
18,261,055 |
|
| CURRENT
ASSETS |
|
|
|
|
|
| Outstanding
premiums |
|
3,112,375 |
1,366,989 |
|
| Interest,
return on deposits and rents accrued |
|
| but not due |
|
|
11,054,251 |
10,288,787 |
|
| Sundry
debtors, advances, deposits and prepayments |
9 |
11,223,010 |
9,541,523 |
|
| Cash |
|
|
|
| At
banks on deposit accounts |
|
|
- |
99,000,000 |
|
| At
banks on current accounts |
|
|
6,943,472 |
1,376,230 |
|
| Cash
and stamps in hand |
|
|
201,867 |
71,407 |
|
|
|
|
---------- |
---------- |
|
|
|
|
32,534,975 |
121,644,936 |
|
|
|
|
---------- |
---------- |
|
|
|
|
302,044,499 |
315,042,145 |
|
|
|
|
========== |
========== |
|
|
|
|
|
|
| 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. |
|
|
|
| Revenue
Account for the year ended December 31, 1997 |
|
|
|
Note |
1997 |
1996 |
|
|
|
Rupees |
Rupees |
|
|
|
|
| Claims
under policies (including provision for |
|
| claims
due or intimated), less reinsurances |
|
| By death |
|
|
- |
- |
|
| By maturity |
|
|
- |
- |
|
| Under
group insurance |
|
|
13,394,048 |
1,679,044 |
|
|
|
|
---------- |
---------- |
|
|
|
|
13,394,048 |
1,679,044 |
|
|
|
|
| Expenses
of management |
|
|
|
| 1.
(a) Commission to insurance agents |
|
|
|
| (less
that on reinsurance) |
|
|
6,931,688 |
- |
|
| (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) |
|
21,094,449 |
8,969,473 |
|
| 3.
Travelling expenses |
|
|
|
3,892,165 |
2,579,258 |
|
| 4.
Directors' fees |
|
|
|
- |
- |
|
| 5.
Auditors' remuneration |
|
10 |
397,733 |
143,212 |
|
| 6.
Medical fees |
|
|
287,438 |
8,281 |
|
| 7.
Law charges |
|
|
65,000 |
- |
|
| 8.
Advertisements |
|
|
4,009,136 |
1,717,137 |
|
| 9.
Printing and stationery |
|
|
3,289,729 |
979,455 |
|
| 10.
Other expenses of management |
|
|
|
| Policy
stamps |
|
|
303,959 |
7,291 |
|
| Staff
welfare |
|
|
2,292,706 |
595,186 |
|
| Postage,
telegram and telephone |
|
|
3,393,225 |
865,370 |
|
| Electricity
and gas |
|
|
819,098 |
114,777 |
|
| Entertainment |
|
|
1,434,917 |
640,883 |
|
| Vehicle
maintenance |
|
|
4,099,616 |
1,470,073 |
|
| Professional
charges |
|
|
2,554,937 |
1,437,253 |
|
| Training
expenses |
|
|
89,047 |
408,998 |
|
| Computer
expenses |
|
|
3,509,930 |
4,780,004 |
|
| Insurance
expenses |
|
|
704,266 |
- |
|
| Bank
charges and brokerage |
|
|
437,533 |
15,609 |
|
| Miscellaneous
expenses |
|
|
1,418,084 |
483,093 |
|
|
|
|
---------- |
---------- |
|
|
|
|
21,057,318 |
10,818,537 |
|
|
|
|
---------- |
---------- |
|
|
carried forward |
|
73,878,704 |
26,894,397 |
|
|
|
|
|
|
|
|
|
| Balance
of Life Fund at the beginning of the year |
|
5,168,828 |
- |
|
| 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) |
|
10,339,717 |
- |
|
| (ii)
Renewal premiums |
|
|
- |
- |
|
| (iii)
Single premiums |
|
|
- |
- |
|
| (iv)
Group premiums |
|
|
30,485,430 |
7,900,392 |
|
| (v)
Consideration for annuities granted, less reinsurances |
- |
- |
|
|
|
|
|
| Interest,
return on deposits, dividends and rents |
11 |
35,713,271 |
23,282,056 |
|
| Loss
transferred to profit and loss account |
|
27,378,663 |
7,559,835 |
|
|
|
|
---------- |
---------- |
|
|
carried forward |
|
109,085,909 |
38,742,283 |
|
|
|
|
|
|
|
brought forward |
|
73,878,704 |
26,894,397 |
|
|
|
|
|
|
| 11.
Rent of other offices occupied by the company |
|
6,128,695 |
2,017,060 |
|
| 12.
Bad debts |
|
|
- |
- |
|
| 13.
Depreciation expense |
|
|
9,231,075 |
774,970 |
|
| 14.
Agency development and recruitment |
|
3,677,588 |
1,887,836 |
|
|
|
|
|
|
| Preliminary
and deferred expenses amortized |
|
1,999,192 |
1,999,192 |
|
|
|
|
|
|
| Balance
of Life Fund at the end of the year |
|
|
|
| as
shown in the balance sheet |
|
|
14,170,655 |
5,168,828 |
|
|
|
|
---------- |
---------- |
|
|
|
|
109,085,909 |
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. |
|
|
|
|
|
brought forward |
109,085,909 |
38,742,283 |
|
|
|
|
---------- |
---------- |
|
|
|
|
|
109,085,909 |
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, 1997 |
|
|
|
|
1997 |
1996 |
|
|
|
|
Rupees |
Rupees |
|
|
|
|
| Loss
brought forward from previous year |
|
7,559,835 |
- |
|
|
|
|
| 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) |
|
1,899,338 |
- |
|
|
|
|
| Loss
transferred from revenue account for the year |
27,378,663 |
7,559,835 |
|
|
|
|
|
| Other
expenditure |
|
|
- |
- |
|
|
|
---------- |
---------- |
|
|
|
|
36,837,836 |
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) |
|
731,440 |
- |
|
