NOTES TO THE FINANCIAL HIGHLIGHTS
Statement of Compliance
The financial highlights of the Group have been prepared in accordance with the Provisions for the Disclosure of Consolidated Financial Highlights of Insurance Companies issued by the Central Bank of Curacao and St. Maarten, the Landsverordening Toezicht verzekeringsbedrijf (P.B. 1990,77) and the Landsbesluit Financiele eisen verzekeringsbedrijf (P.B. 1992,52). The financial highlights have been derived from the general insurance and life insurance annual statements (the "Annual Statements") of Nagico N.V. and NAGICO Life Insurance N.V. and the consolidated financial statements of Nagico Holdings Limited.The publication of the consolidated financial highlights of Nagico Holdings Ltd. is on a purely voluntary basis.
Basis of Preparation
Items included in the financial statements of the companies are stated in Antillean Guilders (NAf). The functional currency of the companies is U.S. dollars (USD). Except as indicated, financial information is presented in NAf and has been rounded to the nearest thousand.
Basis of Consolidation
The ARAS report for NAGICO N.V. from which the financial highlights were derived were prepared on an unconsolidated basis in keeping with the instructions of the Central Bank of Curacao and St. Maarten. NAGICO Life Insurance N.V. does not have any subsidiary. The consolidated financial highlights of NAGICO Holdings Ltd. are derived from the consolidated financial statements for that company, inclusive of all subsidiaries.
Basis of Estimates
The preparation of the financial statements requires the Group to make estimates and assumptions that affect items reported in the balance sheet and profit and loss statement. Notably the insurance liabilities are prone to estimates and assumptions. Although these estimates and assumptions are based on management's best knowledge of current facts, circumstances and, to some extent, future events and actions, actual results ultimately may differ, possibly significantly from those estimates.
• Real Estate: Investment properties are carried at market value. Buildings and improvements classified as fixed assets are depreciated over 10 – 25 years.
• Unconsolidated affiliated companies are accounted for at net equity value.
• Stocks are carried at fair value.
• Bonds and other fixed income securities: Where the Group has the positive intent and ability to hold government bonds to maturity, they are stated at amortized cost less impairment losses. Amortization of discounts and premiums is recorded in the profit and loss statement under interest income.
• Other loans and Deposits with financial institutions: Other loans are carried at cost. Deposits with financial institutions represent trading investments and deposits maturing within one year. The trading investments are held principally for resale in the near term and are recorded at their market values. Realized and unrealized gains and losses on trading investments are accounted for in the profit and loss statement. The fixed deposits are held to maturity and are stated at amortized cost less impairment losses.
Current Assets and Other Assets
• Cash and cash equivalents include cash on hand and cash invested in short-term financial instruments purchased that are readily convertible to known amounts of cash, maturing within 90 days of the date of purchase and which are deemed to present insignificant risk of changes in value due to changing interest rates.
• Receivables are carried at their original invoice amounts less a provision for doubtful debts. The provision is determined in line with the guidelines established by the Central Bank of Curacao and St. Maarten.
Provision for Insurance Obligations
• General Insurance: The estimated amounts to settle casualty and health claims at year-end are provided for. These amounts are increased by a provision for incurred but not yet reported (IBNR) claims. The related portions recoverable from reinsurers are recorded as claims receivable. IBNR is evaluated against actual settlements paid in the subsequent year and may be adjusted upwards or downwards.
• Life Insurance: The policy premium method is used to value the policy liabilities. This is a cash flow valuation method that explicitly identifies all revenues and expenditures related to a company's policy liabilities. The policy cash flows consist of the policy premiums and payments. The policy payments are death and maturity benefits, expenses to service and administer the policies, reinsurance premiums, reinsurance benefits and commissions payable. The projected cash flows are discounted to present value. Supplementary benefits were valued using unearned premium reserve method. For Group life insurance, the unearned net premium method has been used to calculate the policy liability.
Current and Other Liabilities
Current and Other Liabilities are stated at cost unless otherwise stated.
Technical Information on Risk Coverage and Reinsurance
The Company's risk exposure is managed through geographic and product diversification and through the purchase of reinsurance externally. Claims are payable on a claims-occurrence basis. The Group is liable for all insured events that occur during the term of the contract, even if the loss is discovered after the end of the contract term. As a result, claims may be settled over a long period of time. The method for measuring claims provision is described separately in these Notes.
The Group's reinsurance program includes catastrophe and excess of loss treaties, all purchased from leading reinsurers. The level of coverage bought annually is in relation to the level of risks being carried by the Group, loss experiences and catastrophe models developed by reinsurers. None of the reinsurance program is provided by affiliated companies.
There are no contingent liabilities other than those that have been disclosed in the ARAS filings of 2010 for NAGICO N.V. and NAGICO Life N.V.
Capital and/or Surplus Commitments
There are no surplus or capital commitments.
There are no subsequent events which would require disclosure or revision to the financial statements.
INDEPENDENT AUDITOR'S REPORT
The Board of Directors of
NAGICO Group of Companies
We have audited the general insurance and life insurance annual statements (the "Annual Statements") of National General Insurance Corporation (Nagico) N.V. ("Nagico N.V.") and NAGICO Life Insurance N.V., and the consolidated financial statements of Nagico Holdings Limited for the year ended December 31, 2010, from which these financial highlights consisting of a balance sheet, a profit and loss statement, and explanatory notes to the financial highlights were derived, in accordance with International Standards on Auditing.
These financial highlights have been completed in accordance with the "Provisions for the Disclosure of Consolidated Financial Highlights of Insurance Companies", the "Landsverordening Toezicht verzekeringsbedrijf (P.B. 1990, 77)" and the "Landsbesluit financiële eisen verzekeringsbedrijf (P.B. 1992, 52)".
In our auditors' reports dated June 30, 2011 and July 18, 2011, respectively, we expressed an unqualified opinion on the Annual Statements of Nagico N.V. and NAGICO Life Insurance N.V. We also expressed an unqualified opinion on the consolidated financial statements of NAGICO Holdings Limited in our auditors' report dated June 30, 2011.
In our opinion, the disclosed financial highlights are consistent, in all material respects, with the Annual Statements of Nagico N.V. and NAGICO Life Insurance N.V. and the consolidated financial statements of Nagico Holdings Limited from which they have been derived.
Without qualifying our opinion, we draw attention to the financial highlights of Nagico N.V., which are presented, on an unconsolidated basis for the years 2010 and 2009. The unconsolidated figures for 2009 have been derived from the 2010 Annual Statements of Nagico N.V. in which 2009 comparatives are presented on a consolidated basis.
For a better understanding of the financial position, the results of operations for the period and the scope of our audit, the financial highlights should be read in conjunction with the Annual Statements of Nagico N.V. and NAGICO Life Insurance N.V. and the consolidated financial statements of NAGICO Holdings Limited from which they have been derived and our auditors' reports thereon.
July 18, 2011
KPMG ACCOUNTANTS B.V.
S. Agarwal, FCA
Considering that NAGICO N.V. was impacted by three storms during the 2010 (Earl, Otto and Tomas), and that our economies have still not fully recovered from the downturn, we are satisfied with our results for the year 2010. Net earned premiums increased by 6%, but the impact of the three storms significantly reduced our realized profits. Claims expenses actually increased by 23% for NAGICO N.V. and 33% for the Group. However, NAGICO N.V. is one of the strongest companies operating in the local markets with a shareholders' equity of NAf. 47 million. NAGICO Life, which is very small, is in its early growth phase. It realized net premium growth of 77% for the year 2010. Both companies are subsidiaries of NAGICO Holdings Ltd., which boasts total assets of NAf. 169.5 million and total shareholders equity of NAf. 88 million.
NAGICO remains positive about the future, even though we expect the economic challenges to drag on for some time. Significant growth is not expected in the core markets for NAGICO N.V. (Dutch Caribbean islands), but the Group is expecting very good growth in the wider Caribbean, including the French Overseas Territories. The outlook for NAGICO Life is also very exciting as it looks towards more organic growth and the expected synergies from a pending Group acquisition.
NAGICO continues to be there for our valued policyholders when we are needed most and we also stand with our communities as a partner. We are sure that you are as proud as we are that NAGICO N.V., which started in St. Maarten in 1982, is now the leading non-life insurer in the Dutch Caribbean and North Eastern Caribbean in both premium income and shareholders equity.