OPERATING PERFORMANCE

Independent Auditors’ Report

TO THE SHAREHOLDERS OF SAUDI REINSURANCE COMPANY
(A SAUDI JOINT STOCK COMPANY)

Opinion

We have audited the Financial Statements of Saudi Reinsurance Company (the “Company”), which comprise the statement of financial position as at 31 December 2023, the statements of income, comprehensive income, changes in equity and cash flows for the year then ended, and notes comprising material accounting policies and other explanatory information.

In our opinion, the accompanying Financial Statements present fairly, in all material respects, the financial position of the Company as at 31 December 2023, and its financial performance and its cash flows for the year then ended in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board (“IFRS Accounting Standards”) that are endorsed in the Kingdom of Saudi Arabia and other standards and pronouncements issued by the Saudi Organization for Chartered and Professional Accountants (“SOCPA”).

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing that are endorsed in the Kingdom of Saudi Arabia. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards), that is endorsed in the Kingdom of Saudi Arabia (the “Code”), that is relevant to our audit of the Financial Statements, and we have fulfilled our other ethical responsibilities in accordance with the Code’s requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Financial Statements of the current period. These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Valuation of reinsurance and retrocession contract assets and liabilities
The key audit matter	How the matter was addressed in our audit
On 1 January 2023, the Company adopted new accounting standard IFRS 17, “Insurance Contracts” which replaced IFRS 4, “Insurance Contracts”. The Company applied IFRS 17 retrospectively from 1 January 2022 and applied the General Measurement Model (“GMM”) to both reinsurance contracts issued and retrocession contracts held. Transition to IFRS 17 is a material change to the recognition, measurement and presentation of insurance contracts. the Company has recognized the impact upon transition to the new standard within equity and has restated the comparative financial information. The new standard has also had a significant impact on the disclosures in the Financial Statements. As at 31 December 2023, the Company held reinsurance and retrocession contract assets and liabilities through the following components, as disclosed in note 8 to the Financial Statements: Reinsurance Contract Assets: SAR 77.8 million Reinsurance Contract Liabilities: SAR 1,287.9 million Retrocession Contract Assets: SAR 439.6 million Retrocessions Contract Liabilities: SAR 0.19 million The measurement of these components includes estimation of the present value of future cash flows, risk adjustment for non-financial risk together with the Contractual Service Margin (“CSM”). These balances involve highly complex calculations and data inputs that are susceptible to a higher degree of estimation i.e., estimated premium income.	Together with our actuarial specialist, on a sample basis, we: assessed the design and implementation and tested the operating effectiveness of key controls over management’s processes for determining reinsurance and retrocession contract assets and liabilities; tested key controls designed and operated by the Company over the transition; considered of the Company’s new accounting policies against the requirements of the accounting standard and our understanding of the business and industry practice; assessed the reasonableness of management’s key judgments in estimates, including selection and application of methods/models, significant assumptions, for: fulfillment cash flows and payment patterns used for calculation of fulfillment cash flows discount rates applied for estimation of present value of fulfillment cash flows risk adjustment for non-financial risk We also analysed the actuarial reserve report issued by the Company’s appointed actuary;
While there is considerable judgment applied by management and inherent uncertainty in selecting assumptions, the assumptions with the greatest estimation uncertainty are related to estimating future cash flows and the risk adjustment. The determination of future cash flows and risk adjustment requires the use of complex formulas as well as models and other computational tools that may be incorrectly designed or configured, and for which inadequate assumptions and/or incomplete or inaccurate input data may be used. Accordingly, valuation of reinsurance and retrocession contract assets and liabilities was identified as a key audit matter due to the significance of the amount involved as well as significant judgments and assumptions used in estimating the reinsurance and retrocession contract assets and liabilities. Refer to the summary of material accounting policies in note 3 relating to the impact related to the initial application of IFRS 17, recognition, measurement, and presentation of reinsurance and retrocession contracts and note 8 for details relating to reinsurance and retrocession contracts.	evaluated the appropriateness and tested the mathematical accuracy of models applied; assessed the reserving methodology on a gross and net of reinsurance basis and performed independent re-projections of Ultimate Loss Ratios (ULRs) and Incurred Expected Loss Ratios (IELRs) by applying our own assumptions, across selected lines of business; tested the completeness, accuracy and relevance of data used to estimate future cash flows associated with groups of contracts including agreeing a sample of claims to underlying information; and evaluated the completeness, accuracy and relevance of disclosures required by IFRS 17, including disclosures about assumptions and major sources of estimation uncertainty.

Other Information

Management is responsible for the other information. The other information comprises the information included in the Annual Report but does not include the Financial Statements and our auditors’ report thereon. The Annual Report is expected to be made available to us after the date of this auditors’ report.

Our opinion on the Financial Statements does not cover the other information and we will not express any form of assurance conclusion thereon

In connection with our audit of the Financial Statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the Financial Statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

When we read the annual report, when made available to us, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the Financial Statements in accordance with IFRS Accounting Standards that are endorsed in the Kingdom of Saudi Arabia and other standards and pronouncements issued by SOCPA, the applicable requirements of the Regulations for Companies, and the Company’s Articles of Association and for such internal control as management determines is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error.

In preparing the Financial Statements, Management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless Management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance, the Board of Directors, are responsible for overseeing the Company’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. “Reasonable assurance” is a high level of assurance, but is not a guarantee that an audit conducted in accordance with International Standards on Auditing that are endorsed in the Kingdom of Saudi Arabia, will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements.

As part of an audit in accordance with International Standards on Auditing that are endorsed in the Kingdom of Saudi Arabia, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the Financial Statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management.
Conclude on the appropriateness of Management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our Auditors’ Report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the Financial Statements, including the disclosures, and whether the Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.