Notes to the Financial Statements

Saudi Reinsurance Company (the “Company”) is a Saudi Joint Stock Company registered in the Kingdom of Saudi Arabia under commercial registration number 1010250125 (Entity number: 7001556021) dated 12 Jumad Al-Awal 1429H (corresponding to 17 May 2008) with a branch in the Federal Territory of Labuan, Malaysia with license number IS2014146. The address of the Company’s registered office is at 4130 Northern Ring Road Al Wadi, Unit number 1, Riyadh 13313-6684, Kingdom of Saudi Arabia.

The objective of the Company is to transact cooperative reinsurance and related activities inside and outside the Kingdom of Saudi Arabia.

Statement of compliance

The financial statements of the Company as at and for the year ended 31 December 2025 have been prepared in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board (“IFRS”) 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”).

The Company’s statement of financial position is not presented using a current/non-current classification. However, the following balances would generally be classified as current: cash and bank balances, financial investments at fair value through income statement, prepaid expenses, deposits and other assets, accrued expenses and other liabilities, and provision for zakat and tax. All other financial statement line items would generally be classified as non-current unless stated otherwise.

As required by the Saudi Arabian Insurance Regulations (the Implementation Regulations), the Company maintains separate books of accounts for “Reinsurance Operations” and “Shareholders’ Operations”. Accordingly, assets, liabilities, revenues and expenses clearly attributable to either operation, are recorded in the respective books of accounts.

Basis of measurement

These financial statements have been prepared under the going concern basis and the historical cost convention, except for reinsurance and retrocession contracts which are measured at the present value of estimated fulfilment cash flows that are expected to arise as the Company fulfils its contractual obligations and a contractual service margin (“CSM”) in accordance with IFRS 17, the measurement at fair value of financial investments at fair value through income statement, financial investments at fair value through other comprehensive income, and employees’ end of service benefits (EOSB) measured at present value of future obligations using projected unit credit method.

Functional and presentation currency

These financial statements have been presented in Saudi Riyals (“X”), which is the functional and presentational currency of the Company. All financial information presented has been rounded off to the nearest X.

Fiscal year

The Company’s fiscal year is aligned with the calendar year i.e. it begins at 1 January and ends at 31 December.

The material accounting policies adopted in the preparation of these financial statements are set out below.

Amendments to existing standards

Following standard, interpretation or amendment are effective from the annual reporting period beginning on 1 January 2025 and are adopted by the Company, however, they do not have any significant impact on the financial statements of the year unless otherwise stated below:

New standards not yet effective

The following standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Company’s financial statements are disclosed below. The Company intends to adopt these standards, if applicable, when they become effective. Further, the Company has chosen not to early adopt the amendments and revisions to the International Financial Reporting Standards, which have been published and are mandatory for compliance for the Company with effect from future dates.

The Company anticipates that the application of these new standards and amendments in the future will not have a significant impact on the amounts reported.

Reinsurance and retrocession contracts

(i) Classification

Contracts under which the Company accepts significant reinsurance risk are classified as reinsurance contracts. Contracts held by the Company under which it transfers significant reinsurance risk related to underlying reinsurance contracts are classified as retrocession contracts. Reinsurance and retrocession contracts also expose the Company to financial risk.

The Company does not underwrite any reinsurance or retrocession contracts that contain embedded derivatives or distinct investment components. Furthermore, the Company's reinsurance portfolio does not contain any non-insurance components that will need to be unbundled from reinsurance contracts.

(ii) Aggregation and recognition of reinsurance and retrocession contracts

Reinsurance contracts

Reinsurance contracts are aggregated into groups for measurement purposes. Groups of reinsurance contracts are determined by identifying portfolios of reinsurance contracts, each comprising contracts subject to similar risks and managed together, and dividing each portfolio into annual cohorts (i.e. by year of issue) and each annual cohort into three groups based on the profitability of contracts:

• any contracts that are onerous on initial recognition;
• any contracts that, on initial recognition, have no significant possibility of becoming onerous subsequently; and
• any remaining contracts in the annual cohort.
• Reinsurance contract issued by the Company is recognized from the earliest of:
• the beginning of its coverage period (i.e. the period during which the Company provides services in respect of any premiums within the boundary of the contract);
• when the first payment from the insurer becomes due or, if there is no contractual due date, when it is received from the insurer; and
• when facts and circumstances indicate that the contract is onerous.

When the contract is recognized, it is added to an existing group of contracts or, if the contract does not qualify for inclusion in an existing group, it forms a new group to which future contracts are added. Groups of contracts are established on initial recognition and their composition is not revised once all contracts have been added to the group.

Retrocession contracts

Groups of retrocession contracts are established such that each group comprises a single contract. Some retrocession contracts provide cover for underlying contracts that are included in different groups. However, the Company concludes that the retrocession contract’s legal form of a single contract reflects the substance of the Company’s contractual rights and obligations, considering that the different covers lapse together and are not sold separately. As a result, the retrocession contract is not separated into multiple reinsurance components that relate to different underlying groups.

A group of retrocession contracts initiated by the Company is recognized on the following date.

• Retrocession contracts that provide proportionate coverage: The later date on which any underlying reinsurance contract is initially recognized and the beginning of the coverage period of the group of retrocession contracts. This applies to the Company’s quota share retrocession contracts.
• Other retrocession contracts: The beginning of the coverage period of the group of retrocession contracts. This applies to the Company’s excess of loss retrocession contracts.

However, if the Company recognizes an onerous group of underlying reinsurance contracts on an earlier date and the related retrocession contract was entered into before that earlier date, then the group of retrocession contracts is recognized on that earlier date.

(iii) Reinsurance acquisition cashflows

Reinsurance acquisition cash flows arise from the costs of selling, underwriting and starting a group of reinsurance contracts (issued or expected to be issued) that are directly attributable to the portfolio of reinsurance contracts to which the group belongs. Reinsurance acquisition cash flows are allocated to groups of reinsurance contracts under a systematic and rational method and considering, in an unbiased way, all reasonable and supportable information that is available without undue cost or effort. If reinsurance acquisition cash flows are directly attributable to a group of contracts, then they are allocated to that group. If reinsurance acquisition cash flows are directly attributable to a portfolio but not to a group of contracts, then they are allocated to groups in the portfolio under a systematic and rational method. At each reporting date, the Company revises the amounts allocated to groups to reflect any changes in assumptions that determine the inputs to the allocation method used. Amounts allocated to a group are not revised once all contracts have been added to the group.

(iv) Contract boundaries

The measurement of a group of contracts includes all of the future cash flows within the boundary of each contract in the group, determined as follows.

Reinsurance contracts

Cash flows are within the contract boundary if they arise from substantive rights and obligations that exist during the reporting period in which the Company can compel the insurer to pay premiums or has a substantive obligation to provide services. A substantive obligation to provide services ends when: the Company has the practical ability to reassess the risks of the particular insurer and can set a price or level of benefits that fully reflects those reassessed risks; or the Company has the practical ability to reassess the risks of the portfolio that contains the contract and can set a price or level of benefits that fully reflects the risks of that portfolio, and the pricing of the premiums up to the reassessment date does not take into account risks that relate to periods after the reassessment date. The reassessment of risks considers only risks transferred from insurers to the Company, which may include both insurance and financial risks, but excludes lapse and expense risks. The Company writes contracts on both a risk-attaching and losses-occurring basis and distinction is made depending on the basis of the contract being valued for determining the contract boundary. In particular: For contracts written on a losses-occurring basis, the coverage period will be equal to the duration between the effective dates of the contract i.e., the term of the contract being valued. For contracts written on a risk-attaching basis, the coverage period will be equal to duration between the attachment point of first attaching risk and expiry date of last attaching risk i.e., the term of the contract being valued plus term of the last underlying risk that attaches to the contract.

Retrocession contracts

Cash flows are within the contract boundary if they arise from substantive rights and obligations that exist during the reporting period in which the Company is compelled to pay amounts to the retrocessionaire or has a substantive right to receive services from the retrocessionaire. A substantive right to receive services from the retrocessionaire ends when the retrocessionaire: has the practical ability to reassess the risks transferred to it and can set a price or level of benefits that fully reflects those reassessed risks; or has a substantive right to terminate the coverage Treaty retrocession contracts are written on a losses-occurring and risk attaching basis, renewed annually. However, the quota share arrangement covering all risk written in the KSA region is written on a risk-attaching basis. At initial recognition of the risk-attaching retrocession contract, it would be necessary to allow for expected new business to be written over the year in the best estimate cash flows. Given the uncertainty in contract duration of the business expected to be written over the course of the year, this creates a contract boundary that depends on the duration of the underlying ceded risks. This quota share retrocession contract will thus be recognized on the earlier of when retrocession coverage starts or when onerous underlying contracts are recognized. However, to the extent that the group of underlying contracts are recognized after the group of retrocession contracts, the latter will only be recognized when the group of underlying contracts are recognized. These groups are recognized when the coverage of the first retrocession contract in that group starts or when onerous underlying contracts are recognized, depending on which is earlier.

(v) Measurement

Reinsurance contracts – Initial measurement

On initial recognition, the Company measures a group of reinsurance contracts as the total of (a) the fulfilment cash flows, which comprise estimates of future cash flows, adjusted to reflect the time value of money and the associated financial risks, and a risk adjustment for non-financial risk; and (b) the CSM. The fulfilment cash flows of a group of reinsurance contracts do not reflect the Company’s non-performance risk.

The risk adjustment for non-financial risk for a group of reinsurance contracts, determined separately from the other estimates, is the compensation required for bearing uncertainty about the amount and timing of the cash flows that arises from non-financial risk.

The CSM of a group of reinsurance contracts represents the unearned profit that the Company will recognize as it provides services under those contracts. On initial recognition of a group of reinsurance contracts, if the total of (a) the present value of future cash flows, and (b) risk adjustment is a net inflow, then the group is not onerous. In this case, the CSM is measured as the equal and opposite amount of the net inflow, which results in no income or expenses arising on initial recognition.

If the total is a net outflow, then the group is onerous. In this case, the net outflow is recognized as a loss in statement of income. A loss component is created to depict the amount of the net cash outflow, which determines the amounts that are subsequently presented in statement of income as reversals of losses on onerous contracts and are excluded from reinsurance revenue.

Reinsurance contracts – Subsequent measurement

The carrying amount of a group of reinsurance contracts issued at each reporting date is the sum of the liability for remaining coverage and the liability for incurred claims;

• the Liability for Remaining Coverage (LRC) comprises (a) the fulfilment cash flows that relate to services that will be provided under the contracts in future periods and (b) any remaining CSM at that
• the liability for incurred claims (LIC) includes the fulfilment cash flows for incurred claims and expenses that have not yet been paid, including claims that have been incurred but not yet reported.

The fulfilment cash flows of groups of reinsurance contracts are measured at the reporting date using current estimates of future cash flows, current discount rates and current estimates of the risk adjustment for non-financial risk. Changes in fulfilment cash flows are recognized as follows.

Changes relating to future services	Adjusted against the CSM (or recognised in the reinsurance service result in profit or loss if the group is onerous).
Changes relating to current or past services	Recognized in the reinsurance service result in statement of income
Effects of the time value of money, financial risk and changes therein on estimated future cash flow	Recognized as reinsurance finance income or expenses

The carrying amount of the CSM at each reporting date is the carrying amount at the start of the year, adjusted for:

• the CSM of any new contracts that are added to the group in the year;
• interest accreted on the carrying amount of the CSM during the period,
• changes in fulfilment cash flows that relate to future services, except to the extent that:
• any increases in the fulfilment cash flows exceed the carrying amount of the CSM, in which case the excess is recognized as a loss in profit or loss and creates a loss component; or
• any decreases in the fulfilment cash flows are allocated to the loss component, reversing losses previously recognized in statement of income;
• the effect of any currency exchange differences on the CSM; and
• the amount recognized as reinsurance revenue because of the services provided in the period.

Changes in fulfilment cash flows that relate to future services comprise:

• experience adjustments arising from premiums received in the year that relate to futures services and related cash flows, measured at the discount rates determined on initial recognition;
• changes in estimates of the present value of future cash flows in the liability for remaining coverage, measured at the discount rates determined on initial recognition, except for those that arise from the effects of the time value of money, financial risk and changes therein;
• changes in the risk adjustment for non-financial risk that relate to future service.

Retrocession contracts

To measure a group of retrocession contracts, the Company applies the same accounting policies as are applied to reinsurance contracts with the following modifications. The carrying amount of a group of retrocession contracts at each reporting date is the sum of the asset for remaining coverage and the asset for incurred claims. The asset for remaining coverage comprises (a) the fulfilment cash flows that relate to services that will be received under the contracts in future periods and (b) any remaining CSM at that date.

The Company measures the estimates of the present value of future cash flows using assumptions that are consistent with those used to measure the estimates of the present value of future cash flows for the underlying reinsurance contracts, with an adjustment for any risk of non-performance by the retrocessionaire. The effect of the non-performance risk of the retrocessionaire is assessed at each reporting date and the effect of changes in the non-performance risk is recognised in the reinsurance service result.

The risk adjustment for non-financial risk is the amount of risk being transferred by the Company to the retrocessionaire. The Company does not adjust the risk adjustment for non-financial risk for the risk that the actual effect of non-performance of the retrocessionaire differs from the adjustment included in the fulfilment cash flows.

On initial recognition, the CSM of a group of retrocession contracts represents a net cost or net gain on purchasing retrocession. It is measured as the equal and opposite amount of the total of (a) the fulfilment cash flows, (b) any amount arising from the derecognition of any assets or liabilities previously recognised for cash flows related to the group, (c) any cash flows arising at that date and (d) any income recognised in profit or loss because of onerous underlying contracts recognised at that date. However, if any net cost on purchasing retrocession coverage relates to insured events that occurred before the purchase of the group, then the Company recognises the cost immediately in the statement of income as an expense.

The carrying amount of the CSM at each reporting date is the carrying amount at the start of the year, adjusted for:

• the CSM of any new contracts that are added to the group in the year;
• interest accreted on the carrying amount of the CSM during the year, measured at the discount rates on nominal cash flows that do not vary based on the returns on any underlying items determined on initial recognition;
• income recognized in profit or loss in the year on initial recognition of onerous underlying contracts;
• reversals of a loss-recovery component to the extent that they are not changes in the fulfilment cash flows of the group of retrocession contracts;
• changes in fulfilment cash flows that relate to future services, measured at the discount rates determined on initial recognition, unless they result from changes in fulfilment cash flows of onerous underlying contracts, in which case they are recognized in profit or loss and create or adjust a loss-recovery component;
• the effect of any currency exchange differences on the CSM; and
• the amount recognized in profit or loss because of the services received in the year.

Retrocession of onerous underlying reinsurance contracts

The Company adjusts the CSM of the group to which a retrocession contract belongs and as a result recognizes income when it recognizes a loss on initial recognition of onerous underlying contracts, if the retrocession contract is entered into before or at the same time as the onerous underlying contracts are recognized. The adjustment to the CSM is determined by multiplying:

• the amount of the loss that relates to the underlying contracts; and
• the percentage of claims on the underlying contracts that the Company expects to recover from the retrocession contracts.
• changes in the risk adjustment for non-financial risk that relate to future service.

A loss-recovery component is created or adjusted for the group of retrocession contracts to depict the adjustment to the CSM, which determines the amounts that are subsequently presented in the statement of income as reversals of recoveries of losses from the retrocession contracts and are excluded from the allocation of retrocession premiums paid.

(vi) Derecognition

The Company derecognizes a contract when it is extinguished – i.e. when the specified obligations in the contract expire or are discharged or cancelled.

A contract is derecognized from the group of contracts by making the following adjustments:

• the fulfiment cash flows allocated to the group are adjusted to eliminate those that relate to the rights and obligations derecognized
• the CSM of the group is adjusted for the change in the fulfilment cash flows, except where such changes are allocated to a loss component or where the group has no remaining coverage period; and
• the number of coverage units for the expected remaining services is adjusted to refiect the coverage units derecognized from the group.

(vii) Presentation

Portfolios of reinsurance contracts that are assets and those that are liabilities, and portfolios of retrocession contracts that are assets and those that are liabilities, are presented separately in the statement of financial position.

Income and expenses from retrocession contracts are presented separately from income and expenses from reinsurance contracts. Income and expenses from retrocession contracts, other than retrocession finance income or expenses, are presented on a net basis as ‘net expenses from retrocession contracts’ in the reinsurance service result.

The Company does not disaggregate changes in the risk adjustment for non-financial risk between the reinsurance service result and reinsurance finance income or expenses. All changes in the risk adjustment for non-financial risk that relate to current or past services are included in the reinsurance service result. Reinsurance revenue and reinsurance service expenses exclude any investment components and are recognized as follows.

Reinsurance revenue

The Company recognizes reinsurance revenue as it provides services under groups of reinsurance contracts. Reinsurance revenue relating to services provided for each year represents the total of the changes in the liability for remaining coverage that relate to services for which the Company expects to receive consideration, and comprises the following items.

• A release of the CSM, measured based on coverage units provided.
• Changes in the risk adjustment for non-financial risk relating to current services.
• Claims and other insurance service expenses incurred in the year, generally measured at the amounts expected at the beginning of the year.
• Other amounts, including experience adjustments for premium receipts for current or past services.

In addition, the Company allocates a portion of premiums that relate to recovering reinsurance acquisition cash flows to each period in a systematic way based on the passage of time. The Company recognizes the allocated amount, adjusted for interest accretion at the discount rates determined on initial recognition of the related group of contracts, as reinsurance revenue and an equal amount as reinsurance service expenses.

Release of CSM

The amount of the CSM of a group of reinsurance contracts that is recognized as reinsurance revenue in each year is determined by identifying the coverage units in the group, allocating the CSM remaining at the end of the year (before any allocation) equally to each coverage unit provided in the year and expected to be provided in future years, and recognizing in the statement of income the amount of the CSM allocated to coverage units provided in the year. The number of coverage units is the quantity of services provided by the contracts in the group, determined by considering for each contract the quantity of benefits provided and its expected coverage period. The coverage units are reviewed and updated at each reporting date.

Loss components

The Company establishes a loss component of the liability for remaining coverage for onerous groups of reinsurance contracts. The loss component determines the amounts of fulfilment cash flows that are subsequently presented in statement of income as reversals of losses on onerous contracts and are excluded from reinsurance revenue when they occur. When the fulfilment cash flows are incurred, they are allocated between the loss component and the liability for remaining coverage excluding the loss component on a systematic basis.

The systematic basis is determined by the proportion of the loss component relative to the total estimate of the present value of the future cash outflows plus the risk adjustment for non- financial risk at the beginning of each year (or on initial recognition if a group of contracts is initially recognised in the year).

Changes in fulfilment cash flows relating to future services are allocated solely to the loss component. If the loss component is reduced to zero, then any excess over the amount allocated to the loss component creates a new CSM for the group of contracts.

Reinsurance service expenses

Reinsurance service expenses arising from reinsurance contracts are recognised in statement of income generally as they are incurred. They exclude repayments of investment components and comprise the following items.

• Incurred claims and other reinsurance service expenses;
• Amortization of reinsurance acquisition cash flows. This is equal to the amount of reinsurance revenue recognised in the year that relates to recovering reinsurance acquisition cash flows.
• Losses on onerous contracts and reversals of such losses.
• Adjustments to the liabilities for incurred claims that do not arise from the effects of the time value of money, financial risk and changes therein.

Net expenses from retrocession contracts

Net expenses from retrocession contracts comprise an allocation of retrocession premiums paid less amounts recovered from retrocessionaire. The Company recognises an allocation of retrocession premiums paid in statement of income as it receives services under groups of retrocession contracts. The allocation of retrocession premiums paid relating to services received for each period represents the total of the changes in the asset for remaining coverage that relate to services for which the Company expects to pay consideration. For a group of retrocession contracts covering onerous underlying contracts, the Company establishes a loss-recovery component of the asset for remaining coverage to depict the recovery of losses recognised:

• on recognition of onerous underlying contracts, if the retrocession contract covering those contracts is entered into before or at the same time as those contracts are recognized; and
• for changes in fulfilment cash flows of the group of retrocession contracts relating to future services that result from changes in fulfilment cash flows of the onerous underlying contracts.

The loss-recovery component determines the amounts that are subsequently presented in statement of income as reversals of recoveries of losses from the retrocession contracts and are excluded from the allocation of retrocession premiums paid. It is adjusted to reflect changes in the loss component of the onerous group of underlying contracts, but it cannot exceed the portion of the loss component of the onerous group of underlying contracts that the Company expects to recover from the retrocession contracts.

Reinsurance finance income and expenses

Reinsurance finance income and expenses comprise changes in the carrying amounts of groups of reinsurance and retrocession contracts arising from the effects of the time value of money, financial risk and changes therein. The Company presents reinsurance finance income and expenses in the Statement of Income.

Financial assets and financial liabilities

(i) Recognition and initial measurement

The Company recognizes deposits with financial institutions on the date on which they are originated. All other financial instruments (including regular-way purchases and sales of financial assets) are recognized on the trade date, which is the date on which the Company becomes a party to the contractual provisions of the instrument.

A financial asset or financial liability is initially measured at fair value plus, for a financial asset or financial liability not measured at FVIS, transaction costs that are directly attributable to its acquisition or issue.

Trade date accounting

All regular way purchases and sales of financial assets are recognized / derecognized on the trade date (i.e., the date that the Company commits to purchase or sell the assets). Regular way purchases or sales are purchases or sales of financial assets that require settlement of assets within the time frame generally established by regulation or convention in the marketplace.

(ii) Classification and subsequent measurement

On initial recognition, a financial asset is either classified as measured at amortized cost, FVOCI or FVIS. Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVIS:

• it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
• its contractual terms give rise on specified dates to cash flows that are Solely Payment of Principal and Interest (SPPI).

A financial asset is measured at FVOCI if it meets both of the following conditions and is not designated as at FVIS:

• it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
• its contractual terms give rise on specified dates to cash flows that are SPPI.

The Company elects to present changes in the fair value of certain equity investments that are not held for trading in OCI. The election is made on an instrument-by-instrument basis on initial recognition and is irrevocable.

Debt instruments

Classification and subsequent measurement of debt instruments depend on:

• the Company’s business model for managing the financial assets; and
• the contractual cash flow characteristics of the financial assets.

The business model reflects how the Company manages the assets in order to generate cash flows. That is, whether the Company’s objective is solely to collect the contractual cash flows from the assets or is to collect both the contractual cash flows and cash flows arising from the sale of assets. If neither of these is applicable, then the financial assets are measured at FVIS.

Where the business model is to hold assets to collect contractual cash flows or to collect contractual cash flows and sell, the Company assesses whether the financial instruments’ cash flows represent solely payments of principal and profit. In making this assessment, the Company considers whether the contractual cash flows are consistent with the financing agreement i.e. profit includes only consideration for the time value of resources, credit risk, other basic lending risks and a profit margin that is consistent with a basic lending arrangement. Where the contractual terms introduce exposure to risk or volatility that are inconsistent with a basic lending arrangement, the related financial asset is classified and measured at FVIS.

Based on these factors, the Company classifies its debt instruments into one of the following three measurement categories:

• Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and profit, and that are not designated at FVIS, are measured at amortized cost. The carrying amount of these assets is adjusted by any expected credit loss allowance. Profit income from these financial assets is included in ‘Special commission income’ using the effective profit method.
• Fair value through other comprehensive income (FVOCI): Financial assets that are held for collection of contractual cash flows and for selling the assets, where the assets’ cash flows represent solely payments of principal and profit, and that are not designated at FVIS, are designated as fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, special commission income and foreign exchange gains and losses on the instrument’s amortized cost which are recognized in the statement of income. When the financial asset is derecognised, the cumulative gain or loss previously recognized in OCI is reclassified from equity to statement of income.
• Fair value through statement of income (FVIS): Financial assets that are held for trading purpose or assets that do not meet the criteria for amortized cost or FVOCI are measured at FVIS. A gain or loss on a debt instrument that is subsequently measured at FVIS is presented in the statement of income in the period in which it arises.

Equity instruments

Equity instruments are instruments that meet the definition of equity from the issuer’s perspective; that is, instruments that do not contain a contractual obligation to pay and that evidence a residual interest in the issuer’s net assets. The Company will classify all equity investments at FVIS, except where the Company’s management has elected, at initial recognition, to irrevocably designate an equity investment at FVOCI. The Company’s policy is to designate equity investments as FVOCI when those investments are held for purposes other than to generate investment returns. When this election is used, transaction costs are made part of the cost at initial recognition and subsequent fair value gains and losses (unrealized) are recognized in OCI and are not subsequently reclassified to the statement of income, including on disposal. Impairment losses (and reversal of impairment losses) are not reported separately from other changes in fair value. Dividends, when representing a return on such investments, continue to be recognized in the statement of income as ‘Dividend income’ included in “Net income / (loss) from financial investments measured at FVIS” when the Company’s right to receive payments is established.

Financial liabilities

The Company classifies its financial liabilities into one of the following categories:

• financial liabilities at FVIS, and:
• financial liabilities at amortized cost.

Financial liabilities at FVIS are measured at fair value. Net gains and losses, including any interest expenses and foreign exchange gains and losses, are recognized in the statement of income. Financial liabilities measured at amortized cost are measured under the effective profit method. Interest expenses and foreign exchange gains and losses are recognized in the statement of income. Any gain or loss on derecognition is also recognized in the statement of income.

(iii) Profit on financial instruments

Profit on financial instruments held at amortized cost is recognized in the statement of income under the effective profit method. The effective profit rate is calculated on initial recognition of a financial instrument and is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to:

• the gross carrying amount of the financial asset; or
• the amortized cost of the financial liability.

The amortized cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured on initial recognition minus the principal repayments, plus or minus the cumulative amortisation under the effective interest method of any difference between that initial amount and the maturity amount and, for financial assets, adjusted for any loss allowance.

The calculation of the effective profit rate includes transaction costs and fees paid or received that are an integral part of the effective profit rate. Transaction costs are incremental costs that are directly attributable to the acquisition or issue of a financial asset or financial liability.

(iv) Impairment

The Company measures loss allowances at an amount equal to lifetime Expected Credit Losses (ECL), except for the following, for which they are measured as 12-month ECL:

• debt investment securities that are determined to have low credit risk at the reporting date; and
• other financial instruments on which credit risk has not increased significantly since their initial recognition.

Financial instruments for which 12-month ECL are recognised are referred to as ‘Stage 1’ financial instruments. 12-month ECL are the portion of ECL that result from default events on a financial instrument that are possible within the 12 months after the reporting date.

Financial instruments for which lifetime ECL are recognized because of a significant increase in credit risk since initial recognition but that are not credit-impaired are referred to as ‘Stage 2’ financial instruments. Lifetime ECL are the ECL that result from all possible default events over the expected life of the financial instrument.

Financial instruments for which lifetime ECL are recognized and that are credit-impaired are referred to as “Stage 3” financial instruments.

(v) Derecognition

Financial assets

The Company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset. On derecognition of a financial asset, the difference between the carrying amount at the date of derecognition and the consideration received is recognised in the statement of income.

Financial liabilities

The Company generally derecognises a financial liability when its contractual obligations expire or are discharged or cancelled. On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid is the statement of income.

(vi) Cash and bank balances.

Cash and cash equivalents comprise of cash in hand, cash at banks and restricted cash

(vii) Offsetting

Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.

Income and expenses are presented on a net basis only when it is required or permitted by an accounting standard – e.g. gains and losses arising from a group of similar transactions such as the gains and losses on financial assets measured at FVTPL.

End of service benefits

The Company operates an end of service benefit plan for its employees based on the prevailing Saudi Labor Laws. Accruals are made at the present value of expected future payments in respect of services provided by the employees up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period of high-quality corporate bonds with terms and currencies that match, as closely as possible, the estimated future cash outflows. The benefit payments obligation is discharged as and when it falls due. Remeasurements (actuarial gains/ losses) as a result of experience adjustments and changes in actuarial assumptions are recognised in statement of other comprehensive income.

Short term employee benefits

Short term employee benefits obligation are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short term cash bonus or any other benefits if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

Share-based payment plan

The Company operates a Long-Term Incentive Plan (LTIP) under which eligible employees are granted equity settled share-based awards. The LTIP is equity-settled and subject to time-based vesting over a three-year performance cycle, starting 1 January 2024 and ending 31 December 2026. Vesting occurs in two tranches:

• First Vesting: Q1 of the year following the performance period (i.e., Q1 2027).
• Second Vesting: 12 months after the first vesting date (i.e., Q1 2028).

Vesting is also conditional upon the achievement of Company-wide performance targets.

Zakat

The Company is subject to Zakat in accordance with the regulations of the Zakat, Tax and Customs Authority (“ZATCA”). Zakat expense is charged to the statement of income. Zakat is not accounted for as income tax and as such no deferred tax is calculated relating to zakat. Adjustments arising from the final zakat assessments are recorded in the period in which such assessments are made.

Withholding tax

The Company withholds taxes on certain transactions with non-resident parties in the Kingdom of Saudi Arabia as required under Saudi Arabian Income Tax Law. Withholding taxes paid on behalf of non-resident parties, which are not recoverable from such parties, are expensed.

Value Added Tax (VAT)

Output VAT related to revenue is payable to tax authorities on the earlier of:

• collection of receivables from customers or
• delivery of services to customers.

Input VAT is generally recoverable against output VAT upon receipt of the VAT invoice. The tax authorities permit the settlement of VAT on a net basis. VAT that is not recoverable is charged to statement of income as expense. Adjustments arising from the final VAT assessments are recorded in the period in which such assessments are made.

Foreign currency transactions

Transactions in foreign currencies are translated into the functional currency of the Company at the exchange rates at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Groups of reinsurance and retrocession contracts that generate cash flows in a foreign currency, including the CSM, are treated as monetary items.

Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value is determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction.

Foreign currency differences arising on translation are recognised in the statement of income.

Provisions

Provisions are recognized when the Company has an obligation (legal or constructive) as a result of past events, and it is more likely than not that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated.

Special commission income

Special commission income is recognized on an effective yield basis taking account of the principal outstanding and the applicable special commission rate.

Dividend income

Dividend income is recognized when the right to receive payment is established, which is generally when shareholders approve the dividend.

Segmental reporting

The Company has identified its operating segments based on the internal reports reviewed by the Chief Operating Decision Maker (CODM) for performance evaluation and resource allocation. The CODM monitors the financial and operational performance of the Company at a more detailed level; however, for external reporting purposes, the Company has aggregated its operating segments into two reportable segments in accordance with the criteria set out in IFRS 8. The aggregation is based on similarities in economic characteristics and the nature of products. The reportable segments are as follows:

Reportable segment	Products and services
Property and Casualty (P&C)	These contracts provide coverage for property and casualty risks, including Engineering, Fire, Marine, General Accident, Specialty, IDI, Motor and other business segments (Whole Accounts, Aviation, Energy, Agriculture and Political Risk etc). These lines share common risk factors, pricing methodologies, and claims-handling processes, focusing on indemnifying insurers against property damage, liability risks, and financial losses.
Life and Health (L&H)	This segment includes Health and Life insurance business lines. These products provide coverage for personal well-being, healthcare expenses, and life protection.

Contingencies and commitments

Contingent liability is:

(a) a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity; or

(b) a present obligation that arises from past events but is not recognized because:

(i) it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

(ii) the amount of the obligation cannot be measured with sufficient reliability.

Contingent assets are not recognized in the Consolidated Financial Statements and are disclosed, unless the probability of an inflow of resources embodying economic benefits is remote. Commitments represent binding agreements of the Company to carry out specified courses of action involving in a transfer of cash or other asset to the respective counterparties.

The preparation of the Company’s Financial Statements requires the use of estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Financial Statements and the reported amounts of revenues and expenses during the reporting year. Although these estimates and judgments are based on Management’s best knowledge of current events and actions, actual results ultimately may differ from those estimates.

Estimates and judgments are continuously being evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The key assumptions concerning the future and other key sources of estimation uncertainty at the statement of financial position date are discussed below:

(i) Fulfillment cash flows

Fulfillment cash flows comprise estimates of future cash flows, an adjustment to reflect the time value of money and the financial risks related to future cash flows, to the extent that the financial risks are not included in the estimates of future cash flows, and a risk adjustment for non-financial risk.

Bank balances include call account balance of X 8.70 million (2024: X 5.09 million). Cash at banks are placed with counterparties which have credit ratings of BBB+ and above as per Moody’s ratings methodology.

(i) Financial investments held by the Company consist of the following as at:

(iii) The movement of financial investments is as follows:

* These represent restricted funds placed with Custodian as required by Lloyd’s. These earn an average interest of 4.37% (2024: 4.98%). These funds serve as collateral for participation in Lloyd’s Syndicates for the underwriting years 2023, 2024, and 2025. Funds at Lloyds are neither past due nor impaired and are classified as Stage 1.

The Company has deposited an amount of X 169.81 million (2024: X 89.1 million) with a local bank, which has been rated “A1” by Moody’s Rating agency representing the statutory deposit of 10% of its paid-up capital as required by the Implementing Regulations of the “Law on Supervision of Cooperative Insurance Companies” issued by Insurance Authority. This statutory deposit cannot be withdrawn without the consent of the Insurance Authority. The accrued commission on the deposit and accrued commission income payable to Insurance Authority as at 31 December 2025 amounted to X 6.78 million.

During the period, the Company settled the accrued commission payable to Insurance Authority relating to previous statutory deposit. As at 31 December 2024, the accrued commission on the deposit was X 22.31 million, while the accrued commission income payable to Insurance Authority was X 29.05 million. The balance of X 6.73 million, maintained in a separate account and presented within cash and bank balances as restricted cash as at 31 December 2024, was also utilized towards the settlement of this obligation.

In 2020, the Company obtained a margin loan amounting to X 23,116,816. During 2021, additional drawdown was made amounting to X 33,680,203. Both of margin loans were fully collateralized against underlying bonds and sukuk. As at 31 December 2025, the fair value of collateral against margin loan payable amount to X 113,904,555 (2024: X 151,340,899).

As at 31 December 2025, the outstanding balance of margin loan payable is X 56,797,019 (2024: X 56,797,019). The loan has no fixed maturity and carries a floating special commission payable on quarterly basis.

Average commission rate for the year ended 31 December 2025 was 3.49% (2024: 3.17%).

The movement in provision for employees’ end of service benefits for the years ended 31 December are as follows:

(a) Zakat

Zakat charge for the year of X 46,380,653 (2024: X 29,668,654) is based on the following:

(b) Income tax

Income tax for the year of X 481,293 (2024: X 1,235,577) is based on the following:

(c) The movement of the provision for Zakat and income tax is as follows:

Status of Zakat and Tax assessment

The Company has filed its tax/Zakat returns for the year ended 31 December 2024 and obtained the final Zakat certificate up to 2024. However, it is ZATCA’s discretion to issue further assessments for 2022, 2023 and 2024.In October 2021, the ZATCA issued assessments for the years 2019 and 2020 with additional zakat and income tax liability amounting to X3.1 million and X 4.2 million, respectively. The Company filed an appeal with Tax Committee for Resolution of Tax Violations and Disputes (Level 1) against this additional amount. On 8 September 2022, the Tax Violations and Disputes Committee (Level 1) concluded its hearing with the Company and ZATCA by issuing its verbal ruling wherein it overturned the ZATCA’s assessment and ruled in favor of the Company. Following the issuance of the written ruling, the ZATCA submitted an appeal to the Appellate Committee for Tax Violations and Disputes at the GSZTCC (i.e., GSZTCC level 2) on 30 October 2022 and 10 November 2022. GSZTCC level 2 notified the Company about the appeal for the Company to submit a response. The Company responded to this on 27 December 2022. In December 2023, GSZTCC (Level 2) issued its final ruling whereby it upheld ZATCA’s appeal and cancelled the ruling issued in favor of the Company. The Company has settled this amount. Considering this decision, the Company has recorded zakat provision for the years 2021 and 2022 amounting to X 4.6 million and X 6.3 million, respectively against non-deduction of deferred acquisition costs and excess of loss premiums from zakat base.

In October 2025, ZATCA issued the zakat and income tax assessments for the years ended 31 December 2021 and 2022 with additional liabilities amounting to X 6.06 million and X 8.03 million, respectively. ZATCA has not allowed the claim of investments in government Sukuks amounting to X 72.89 million from the zakat base which has resulted in an increase in zakat liability by X 1.9 million for the year 2021. ZATCA requested the Company to submit a zakat refund request relating to the investment in government sukuks after finalizing the assessment. The Company has filed an appeal against the assessment with ZATCA, awaiting ZATCA decision.

Status of VAT assessment

ZATCA’s assessment of VAT return – tax years 2021 & 2022

On 22 June 2023 ZATCA audited the Company for the years 2021 and 2022. On 8 October 2024, ZATCA concluded additional VAT on retrocession commission for 2021 and 2022 amounting to X 3.7 million. ZATCA issued a final assessment of X 3.7 million. While the Company intends to object to the assessment and escalate the matter to the GSTCC Level 2, it has reassessed the recoverability of the deposit in light of the circumstances of the case and the outcome of similar case for tax year 2020. Accordingly, the Company has expensed the VAT deposit previously recorded under prepaid expenses, deposits and other assets during the period.

Objectives are set by the Company to maintain healthy capital ratios in order to support its business objectives and maximize shareholders’ value. The Company manages its capital requirements by assessing shortfalls between reported and required capital levels on a regular basis. Adjustments to current capital levels are made in light of changes in market conditions and risk characteristics of the Company’s activities. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders or issue shares.

The issued and paid-up capital of the Company was X 1,698 million at 31 December 2025 (2024: X 891 million) consisting of 169.8 million shares (2024: 89.1 million shares) of SR 10 each.

During 2024, the Board of Directors had recommended to increase the Company’s capital by issuing new ordinary shares (representing 30% of the Company’s current capital) with a nominal value of X 10 per share, at an offer price of X 16 per share and with a total offer value of 427,680,000 which was fully subscribed by the Public Investment Fund (PIF), a sovereign wealth fund of the Kingdom of Saudi Arabia. An application for the increase was approved by the CMA on 25 November 2024 (corresponding to 23/05/1446H). The Extraordinary General Assembly (EGM) approved the issue of shares on 24 December 2024 (corresponding to 23/06/ 1446H) to increase the Company’s share capital. Consequently, all relevant regulatory formalities were completed during the period.

The Company incurred incremental transaction costs amounting to X 8.7 million in relation to the issue of shares and is included in “Share Premium” as of 31 December 2025.

On 16 March 2025 (corresponding to 16/09/1446H), the Board of Directors recommended an increase in the Company’s capital by 46.6%. The capital increase was executed as follows:

• Issuance of 51,480,000 bonus shares to existing shareholders, granting 4 additional shares for every 9 shares held, representing a 44.44% increase in capital.
• Allocation of 2,500,000 shares for the establishment of the Company's long-term incentive share plan for employees, representing an additional 2.16% of the Company’s capital.

On 9 October 2025, the capital increase related to bonus shares was approved by the shareholders’ in the Extraordinary General Assembly. Shareholding structure of the Company is as below.

	31 December 2025
	Issued & Paid up
	No. of shares	Value per share	X
Public Investment Fund (PIF)	38,609,700	10	386,097,000
Treasury shares	2,500,000	10	25,000,000
General public	128,700,300	10	1,287,003,000
	169,810,000	10	1,698,100,000

	31 December 2024
	Issued & Paid up
	No. of shares	Value per share	X
General public	89,100,000	10	891,000,000
	89,100,000	10	891,000,000

In accordance with the Company’s by–laws and Article 70 (2g) of the Insurance Implementing Regulations issued by Insurance Authority, a minimum of 20% of the annual net income is required to be transferred to a statutory reserve until this reserve equals the paid-up capital of the Company. This reserve is not available for distribution.

The Company’s Long-Term Incentive Plan (LTIP), approved by the Board on 17 November 2024 and ratified by shareholders on 9 October 2025, grants equity-settled awards to eligible employees to support retention and align interests with long-term shareholder value. The LTIP follows a three-year performance cycle (1 January 2024 to 31 December 2026) with vesting in two tranches (Q1-2027 and Q1-2028), which depends on time and Company-wide performance targets. For the year ended 31 December 2025, the Company recognized a share-based payment expense of X 11,117,647 in the financial statements.