NOTES TO FINANCIAL STATEMENT

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Legal status and activities

1. Legal status and activities

Insurance House P.J.S.C. (the “Company”) is a public joint- stock company registered and incorporated in the Emirate of Abu Dhabi, United Arab Emirates and is engaged in providing all classes of non-life insurance solutions in accordance with Federal Decree Law No. (48) of 2023 Regulating Insurance Activities (previously Federal Law No. 6 of 2007 as amended). The Company was established on 8 December 2010. The Company performs its activities through its head office in Abu Dhabi and branches located in Al Samha, Dubai – Sheikh Zayed Road, Sharjah, Mahawi and Motor World.

On 2 October 2023, the Federal Decree Law No. (48) of 2023 Regulating Insurance Activities was issued and came into effect on 30 November 2023 which repealed the UAE Federal Law No. 6 of 2007. The Companies must within a period not exceeding (6) six months from the date of the enforcement of its provisions from 30 November 2023 (“the transitional period”) comply with the provisions of the UAE Federal Decree Law No. (48) of 2023 Regulating Insurance Activities. The Company will perform the necessary amendments to its Articles of Association in order to align with the new provisions and the requirements as approved by the General Assembly of shareholders and subject to regulatory approvals.

The Company’s ordinary shares are listed on the Abu Dhabi Securities Exchange. The registered office of the Company is P.O. Box: 129921 Abu Dhabi, United Arab Emirates.

The range of products and services offered by the company include but is not limited to accidents and civil responsibility insurance, land, marine and air transportation dangers insurance, health insurance, onshore and offshore oil and gas fields and facilities services.

1.1 Equity

As of 31 December 2023, the Company’s accumulated losses are AED 119,136,157 (31 December 2022: 83,630,247) which resulted in erosion of equity in excess of 50% and had affected the required solvency ratio as prescribed by the Central Bank of the UAE. The shareholders have approved the option of Company’s continuation and the commencement of the implementation plan in the General Assembly Meeting dated 07 July 2023. The management has submitted the revised recovery plan on 22 November 2023 to the Central Bank of UAE.

1.2 Going concern

The Company’s future plan indicates that the Company will be profitable and will generate sufficient cash flow. The Company’s directors are, therefore, confident that the Company will be able to meet its liabilities as and when they fall due and to carry on its business without a significant curtailment of operations. Accordingly, these financial statements have been prepared on a going concern basis. The Company has prepared a recovery plan which is also submitted to Central Bank of UAE which consists of the following key reasons for the issues and planned steps to resolve them.

Key reasons for the accumulated loss leading to solvency deficit:

  • The Company has not utilized technically sound pricing methodologies for the Medical and Motor lines.
  • Financial reporting and control issues:
    • Misstatements in the preparation of the financial statements for the years ended 2020, 2021 and 2022, specifically in relation to recording of medical reinsurance premiums and medical reinsurance claims.
    • Delays in the realization of losses led to delays in pricing correction and increased accumulated losses. If these misstatements had not occurred, it was likely that corrective action, specifically the repricing of medical business, would have been taken in 2020 by the Management and the Board.
  • The selling of unprofitable Motor business due to increased competition in the UAE Motor market.

1.3 Management plan to address going concern

As at 31 December 2023, the Company’s accumulated losses represent 100.30% of the share capital of the Company (31 December 2022: 70.41%) which has resulted in a solvency deficit.

The Company has planned the following key actions to address the solvency deficit by increasing the total Basic Own Funds i.e. Basic Own Funds and Subordinated Liabilities. The actions are as follows.

Increase in basic own funds:

  • Asset allocation: Reallocation of assets from equity to fixed income securities to reduce the inadmissible assets falling under equity (AED 11 million improvements in solvency).
  • Reissuing treasury shares: Raise capital through reissuance of treasury shares (AED 4.6 million).
  • Raise Tier 1 capital: A capital injection of AED 20 million through Tier 1 Capital will also increase the assets for solvency purposes.

Increase in subordinated liabilities:

  • Shareholder Guarantee: Increase subordinated liabilities by means of a shareholder guarantee (AED 75 million).

The company is also planning strategy and other changes in the underwriting, operations and internal control to improve the overall profitability of the business.


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