Transmission of Annual Financial Statements for the Year Ended December 31, 2025

PICIC INSURANCE LIMITED

ANNUAL REPORTS

Company Information

Vision and Mission Statement and Core Values Chairman Review Report (English)

Chairman Review Report (Urdu)

Director's Report to the Members on Financial Statements (English) Director's Report to the Members on Financial Statements (Urdu) Key Financial highlights

Pattern of Share Holding

Statement of Compliance with the Code of Corporate Governance

Review Report to the Members of Statement of Compliance with the Best Practices of Code of Corporate Governance

Auditors' Report to the Members of PICIC Insurance Limited Financial Statements

Notice of Annual General Meeting

Proxy Form (English / Urdu)

Company Information

Board of Directors

Mr. Irshad Ali Shaban Ali Kassim Mr. Abu Ahmed

Mr. Munawar Ali Kassim

Mr. Muzaffar Ali Shah Bukhari Mr. Moiz Ali*

Mr. Haji Ashraf Dhedhi* Ms. Nudrat Fatima*

Mr. Hafiz Muhammad Hassan Saeed* Mr. Muhammad Abdul Rasheed*

Mr. Muhammad Afzal Shehzad* Mr. Muhammad Ali*

Managing Director / CEO Mr. Moiz Ali

Board Audit Committee Mr. Muzaffar Ali Shah Bukhari Mr. Muhammad Afzal Shehzad Mr. Muhammad Ali

Board Human Resources & Remuneration Committee Mr. Muzaffar Ali Shah Bukhari Mr. Muhammad Afzal Shehzad Mr. Moiz Ali

Acting CFO & Company Secretary Mr. Abdul Muhammad

Auditors Naveed Zafar Ashfaq Jaffery & Co.

Chartered Accountants

Legal Advisor Soomro Law Associates

Bankers Habib Metropolitan Bank Limited

Shares Registrar F.D. Registrar Services (SMC- Pvt) Ltd.

1705, 17thFloor, Saima Trade Tower -A,

I.I. Chundrigar Road, Karachi

Registered & Head Office 3rdFloor, Nadir House, I.I. Chundrigar Road, Karachi

Tel: 021-32410781

Fax: 021-32410782

https://www.picicinsurance.com (*Pending SECP approval)

PICIC Insurance shall emerge as the leading insurance and risk management services organization in Pakistan. We are in the business of providing solutions to mitigate insurable risk exposure of our clients. We shall do this on the basis of thorough risk evaluation and product knowledge.

PICIC Insurance shall fully satisfy the needs and expectations of all its stakeholders:

• We shall put the interest of our clients first and ensure that they make informed decisions with respect to the products and services that we offer them.

• We shall give our employees a congenial work environment and shall give them opportunities for personal growth and development strictly on the basis of merit.

• We shall strive to continually provide above average returns to our shareholders.

• We shall support the development of the communities in which we live and work.

Integrity

We make sure that our business interactions and relations with all the stakeholders are delimited with honesty, loyalty and transparency

Our commitment is to persistently strive for better and better, while we keep on building upon our achievement.

We define our growth through nurturing and supplementing growth for our stakeholders.

We have a strong commitment to set high bars of quality service standards for our internal and external clients; this will be supported with the pillars of expertise, steadiness, dedication and business acumen

Chairman's Review Report

I am pleased to present Chairman's Review report as required under section 192 of the Companies Act, 2017.

As required under the Code of Corporate Governance, an annual evaluation of the Board of Directors of PICIC Insurance Limited has been carried out. The purpose of this evaluation is to ensure that the Board's overall performance and effectiveness is measured and benchmarked against expectations in the context of objectives set for the Company.

For the financial year ended December 31, 2025, the Board's overall performance and effectiveness has been assessed as satisfactory, it is based on an evaluation of integral components, including vision, mission and values; engagement in strategic planning; formulation of policies; monitoring the organization's business activities; monitor financial resource management; effective fiscal oversight; equitable treatment of all employees and efficiency in carrying out the Board's business. Improvement is an ongoing process leading to action plans.

The Board of Director of your company received agendas and supporting written material including follow up material including follow up materials in sufficient time prior to the board and its committee meetings. The board meets frequently enough to adequately discharge its responsibilities. The non-executive and independent directors are equally involved in important decisions.

I would like to thank my fellow directors who had carried their responsibilities diligently.

Moiz Ali

Managing Director / CEO Karachi: April 03, 2026

DIRECTORS' REPORT

The Directors 'of your Company are pleased to present the annual report together with the audited financial statements for the year ended December 31, 2025.

Message from the Chairman

For the financial year ended December 31, 2025, the Board's overall performance and effectiveness has been assessed as satisfactory, it is based on an evaluation of integral components, including vision, mission and values; engagement in strategic planning; monitor financial resource management. Improvement is an ongoing process leading to action plans.

The Company has stopped underwriting and is in the process of merger with Crescent Star Foods (Private) Limited which is pending before The High Court of Sindh. The Board has full confidence that once the merger is completed your company will unfold the Business Plan and strategy after approval from the Board.

Future Outlook

Crescent Star Foods (Pvt.) Limited is in the process of merger with and into the Company which is pending approval by The Sind High Court. Whereby the Company will be doing FMCG business.

The Company has filed modified scheme of arrangement whereby the company has accepted the SECP given swap ratio which is

263.593 Further as per modified Scheme the Company will not surrender its insurance license. As per directions of the honorable High Court Special Resolution approving the modified scheme was passed by the shareholders in the AGM and report submitted in the High Court. It is expected that the modified scheme of arrangement will be approved by the High Court at an early date.

The management is confident that after the merger, the Company will have adequate resources to effectively enter a new phase with diversified interests to protect stake holders interest. The Company will unfold the Business Plan and strategy after the merger is approved enabling the Company to remain a going concern.

Financial Highlights

The comparative financial highlights of your Company for the year ended December 31, 2025 and 2024 are as follows:

2025 2024

……Rupees in '000…….

Auditors

The auditors M/s. Naveed Zafar Ashfaq Jaffery & Co. Chartered Accountants retire at the conclusion of the Annual General Meeting.

Auditor's Report

The auditors opinion of the Company not being a going concern is based on the fact that the business of the Company is suspended. However, keeping the future outlook of the Company due to merger of Crescent Star Foods (Pvt.) Ltd with and into the Company, the business activities of the company will be revived. Hence the Company will remain a going concern.

Statement of Corporate and Financial Reporting Framework

The corporate laws, rules and regulations framed thereunder spell out the overall functions of the Board of Directors of the Company. The Board is fully aware of its corporate responsibilities envisaged under the Code of Corporate Governance, prescribed

by the Securities and Exchange Commission of Pakistan and adopted by the Stock Exchanges for all listed companies, and is pleased to certify that:

1. The financial statements, prepared by the Company, present fairly its state of affairs, the result of its operations, cash flows and changes in equity.

2. The Company has maintained proper books of accounts as required under the Companies Act, 2017.

3. The Company has followed consistently appropriate accounting policies in preparation of the financial statements. Changes wherever made, have been adequately disclosed and accounting estimates are on the basis of prudent and reasonable judgment.

4. Approved Accounting Standards as applicable in Pakistan have been followed in preparation of financial statements and any departure therefrom, if any, has been adequately disclosed.

5. The system of internal control is sound, effectively implemented and monitored. The process of review will continue to strengthen the system for its effective implementation.

6. There are no significant doubts upon the Company's ability to continue as a going concern.

7. The Board of Directors does not recommend any Dividend for the year ended December 31, 2025.

8. The Company has followed the best practices of the Code of Corporate Governance and there is no material departure there from.

9. Key operating and financial data for last six years is annexed with the report.

10. All major decisions relating to the investments / disinvestments of funds, changes in the policies are taken by the Investment Committee / Board of directors.

11. Decisions regarding appointment of CEO, CFO & Company Secretary and Head of Internal Audit, and fixing or changing of remuneration are taken and approved by the Board.

12. Outstanding taxes and duties are given in the financial statements.

Board Meetings and Attendance

During the year under review five meetings were held and attended as follows:

Name No. of meetings eligible to

attend during the tenure

No. of meetings

attended

The Board has developed a mechanism to evaluate its own performance by adopting self- evaluation methodology through an agreed questionnaire. The mechanism devised is based on the emerging and leading trends on the functioning of the Board and improving its effectiveness. The evaluation exercise is carried out every year.

Managing Director's performance is monitored and evaluated by the Board against the job description set by the Board.

Board Committee Meetings

Board has constituted various committees at Board level for effective control and operation.

Audit Committee

During the year 2025, four meetings were held and attendance was as follows: Attendance

Mr. Muzaffar Ali Shah Bukhari (Chairman) -

Mr. Muhammad Afzal Shehzad 4

Mr. Muhammad Ali 4

Human Resource and Remuneration Committee

During the year 2025, one meeting of Human Resource and Remuneration Committee were held and attendance was as follows: Attendance

Mr. Muzaffar Ali Shah Bukhari (Chairman) -

Mr. Muhammad Afzal Shehzad 1

Mr. Moiz Ali 1

Investment Committee

During the year 2025, four meetings were held and attendance was as follows:

Attendance

Mr. Moiz Ali 4

Mr. Muhammad Afzal Shehzad 4

Mr. Muhammad Ali 4

Mr. Abdul Muhammad 4

Pattern of Shareholding

A statement showing the pattern of shareholding is attached with this report.

Trading of Company's Share

No trading in the shares of the Company was carried out by the Directors, CEO and Executives (employees with basic salary of Rs.0.5M or above) or their spouses or minor children, if any.

Compliance with the Code of Corporate Governance

The requirements of the Code set out by the stock exchanges in their listing regulations, relevant for the year ended December 31, 2025, have been duly complied with.

Code of Conduct

The Board has adopted a statement of Code of Conduct for directors and employees. Acknowledgment for compliance are obtained and held by the Company.

Certificate of the Directors and Principal Officer under Section 46(6) of the Insurance Ordinance, 2000

We certify that:

1. in our opinion the annual statutory accounts of the Company set out in the forms attached to the statements have been drawn up in accordance with the Ordinance and rules made there under;

2. the Company has at all times in the year complied with the provisions of the Ordinance and the rules made thereunder. With regard to paid-up capital, solvency (refer notes to the financial statements note: 1.2) and reinsurance arrangements; and

3. as at the date of the statement, the Company continues to be in compliance with the provisions of the Insurance Ordinance, 2000 and the rules made there under relating to paid-up capital, solvency (refer notes to the financial statements note: 1.2) and reinsurance arrangements.

Acknowledgement

The Board of Directors would like to express its sincere appreciation to the Company's valued clients, reinsurers, brokers, business partners and other stakeholders. The Board would also like to thank the Securities and Exchange Commission of Pakistan, the Stock Exchanges and the Central Depository Company for their continued guidance and support. The Company's accomplishments would not have been possible without the dedication and commitment of the Company's motivated & dedicated employees; they deserve special recognition on behalf of the Board.

Haji Ashraf Dhedhi Moiz Ali

Director Managing Director / CEO

Karachi: April 03, 2026

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Key Financial Highlights

PICIC INSURANCE LIMITED

Pattern of Shareholding

Information as required under Code of Corporate Governance As at December 31, 2025

Shareholder's Category

Number of Number of Shareholders Shares Held

Mutual Funds

Directors, Chief Executive Officer, and their spouse minor children.

Salim Sozer Securities (Pvt) Ltd 3,050,000

PICIC INSURANCE LIMITED

Pattern of Shareholding Additional Inforamtion As at December 31, 2025

Mr. Irshad Ali Shaban Ali Kassim 1,000

Mr. Munawar Ali Kassim 1,000

Mr. Muzaffar Ali Shah Bukhari 500

Mr. Abu Ahmed

Mr. Moiz Ali 500

Related Parties.

Total 3,220 35,000,000 100.00

PICIC INSURANCE LIMITED

Pattern of Shareholding as at December 31, 2025

STATEMENT OF COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE FOR INSURERS, 2016 & LISTED COMPANIES (CODE OF CORPORATE GOVERNANCE) REGULATIONS, 2019

PICIC INSURANCE LIMITED ("the Company")

FOR THE YEAR ENDED DECEMBER 31, 2025

This statement is being presented in compliance with the Code of Corporate Governance for Insurers, 2016 (the Code) for the purpose of establishing a framework of good governance, whereby the Insurer is managed in compliance with the best practices of corporate governance and the Listed Companies (Code of Corporate Governance) Regulations, 2019 (the Regulations).

The Company has applied the principles contained in the Code and the Regulations in the following manner:

1. The total number of directors are eleven (11), as per the following:

   1. Male: 10

   2. Female: 1

2. The Company encourages representation of independent non-executive directors and directors representing minority interests on its Board of Directors (the Board). At present the Board includes:

   Category	Names
   Independent Directors	Mr. Muzaffar Ali Shah Bukhari
   Executive Directors	Mr. Moiz Ali CEO
   Non-Executive Directors	Mr. Abu Ahmed Mr. Irshad Ali Shaban Ali Kassim Mr. Munawar Ali Kassim Mr. Hafiz Muhammad Hassan Saeed* MS. Nudrat Fatima* Mr. Muhammad Abdul Rasheed* Mr. Haji Ashraf Dhedhi* Mr. Afzal Shehzad* Mr. Muhammad Ali* *subject to the sound and prudent approval from SECP

   The independent director meets the criteria of independence as laid down under the Code, Regulations and Companies Act, 2017.

3. The directors have confirmed that none of them is serving as a director in more than seven listed companies, including this Company.

4. All the resident directors of the Company are registered as taxpayers and none of them has defaulted in payment of any loan to a banking company, a DFI or an NBFI or being a member of a stock exchange has been declared as a defaulter by that stock exchange.

5. Casual vacancies occurring on the Board were filled by the directors within 90 days.

6. The Company has prepared a "Code of Conduct" which has been disseminated among all directors and employees of Company along with its supporting policies and procedures.

7. The Board has developed a vision / mission statement, overall corporate strategy and significant policies of the Company. A complete record of significant policies along with the dates on which they were approved or amended has been maintained by the Company.

8. All powers of the Board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration and terms and conditions of employment of the Chief Executive Officer, other executive directors and the key officers, have been taken by the Board. Decisions on relevant matters have been taken by the Board / shareholders as empowered by the relevant provisions of the Act and these Regulations.

9. The meetings of the Board were presided over by the Chairman and, in absence, by a Director elected by the Board for this purpose and the Board met at least once in every quarter. Written notices of the Board meetings, along with agenda and working papers, were circulated at least seven (7) days before the meetings. The minutes of the meetings were appropriately recorded and circulated.

10. The Board have a formal policy and transparent procedure for remuneration of directors in accordance with the Act and Regulations.

11. While almost all the directors are professionals and senior executives who possess wide experience of duties of directors, the Company apprises its directors of new laws and regulations and amendments in the existing ones. The Board has not arranged any Directors' training program during the year ended December 31, 2025.

12. There was no new appointment of Chief Financial Officer (CFO) or Company Secretary or Head of Internal Audit during the year.

13. The financial statements of the Company were duly endorsed by Chief Executive Officer and Chief Financial Officer before approval of the Board.

14. The Board has formed the following Management Committees:

    1. Underwriting, Reinsurance and Co-insurance Committee

       Names	Category
       Mr. Moiz Ali	Chairman
       Mr. Muhammad Afzal Shehzad	Member
       Abdul Muhammad	Member

    2. Claims Settlement Committee

       Names	Category
       Mr. Moiz Ali	Chairman

       Mr. Muhammad Ali	Member
       Mr. Haji Ashraf Dhedhi	Member

    3. Risk Management & Compliance Committee

       Names	Category
       Mr. Moiz Ali	Chairman
       Mr. Muhammad Afzal Shehzad	Member
       Mr. Abdul Muhammad	Member

15. The Board has formed the following Board Committees comprising of members given below;

    1. Ethics, Human Resource & Remuneration Committee

       Names	Category
       Mr. Muzaffar Ali Shah Bukhari	Chairman
       Mr. Muhammad Afzal Shehzad	Member
       Mr. Moiz Ali	Member

    2. Investment Committee

       Names	Category
       Mr. Moiz Ali	Chairman
       Mr. Muhammad Afzal Shehzad	Member
       Mr. Muhammad Ali	Member
       Mr. Abdul Muhammad	Acting Chief Financial Officer

16. The Board has formed an Audit Committee. It presently comprises of one member which is an independent director, and the chairman is an independent director. The Composition of the audit committee is as follow:

    Names	Category
    Mr. Muzaffar Ali Shah Bukhari	Independent Director / Chairman
    Mr. Muhammad Afzal Shehzad	Director
    Mr. Muhammad Ali	Director

17. The board may constitute a separate committee The function of Nomination are Designated as the nomination committee being performed by the Board

18. The Board is responsible for setting the company's At present the board provides Sustainability strategies, priorities and targets to governance and oversight in relation create Long term corporate value. The board to the Company's initiatives on

    may establish a Dedicated sustainability committee environmental, social and governance having at least one Female director. (ESG) matters. Nevertheless, the

    The requirements introduced recently By SECP through notification dated June 12, 2024 will be complied with in Due course.

19. The meetings of the committees except Ethics, Human Resource and Remuneration Committee were held at least once every quarter prior to approval of interim and final results of the Company. The terms of references of the Committees have been formed and advised to the Committees for compliance.

20. The Board has established a system of sound internal control, which is effectively implemented at all levels within the Company. The Company includes all the necessary aspects of internal control given in the Code.

21. The statutory auditors of the Company have been appointed from the panel of auditor approved by the Commission in term of section 48 of the Insurance Ordinance, 2000 (Ordinance No. XXXIX of 2000). The statutory auditors of the Company have confirmed that they have been given a satisfactory rating under the Quality Control Review program of the Institute of Chartered Accountants of Pakistan and registered with Audit Oversight Board of Pakistan, that they or any of the partners of the firm, their spouses and minor children do not hold shares of the Company and that the firm and all its partners are in compliance with International Federation of Accountants (IFAC) guidelines on Code of Ethics as adopted by the Institute of Chartered Accountants of Pakistan and that they and the partners of the firm involved in the audit are not a close relative (spouse, parent, dependent and non-dependent children) of the Chief Executive Officer, Chief Financial Officer, Head of Internal Audit, Company Secretary or director of the Company.

22. The statutory auditors or the persons associated with them have not been appointed to provide other services except in accordance with the Act, the Regulation, or any other regulatory requirement and the auditors have confirmed that they have observed IFAC guidelines in this regard.

23. The Directors' report for this year has been prepared in compliance with the requirements of the Code and the Regulations and fully describes the salient matters required to be disclosed.

24. The Directors, Chief Executive Officer and other executives do not hold any interest in the shares of the Company other than that disclosed in the pattern of shareholding.

25. The Company has complied with all the corporate and financial reporting requirements of the Code.

26. The Board has set up an effective internal audit function and the head of internal audit is conversant with the policies and procedures of the Company.

27. The Chief Executive Officer, Chief Financial Officer, Compliance Officer and the Head of Internal Audit possess such qualification and experience as is required under this Code. Moreover, the persons heading the underwriting, claims, reinsurance, risk management and grievance functions possess qualification and experience of direct relevance to their functions, as required under section 12 of the Insurance Ordinance, 2000 (Ordinance No .XXXIX of 2000):

    Names	Designation
    Mr. Moiz Ali	Chief Executive Officer
    Mr. Abdul Muhammad	Acting Chief Financial Officer & Company Secretary

28. The Board ensures that the investment policy of the Company has been drawn up in accordance with the provision of the Code.

29. The Board ensures that the risk management system of the Company is in place as per Code.

30. The Company has set up a risk management function, which carries out its tasks as covered under the Code.

31. The Board ensures that as part of the risk management system, the Company get itself rated from JCR-VIS which is being used by its management function/department and the respective committee as a risk monitoring tool. The rating assigned by the rating agency on December 22, 2014 is "BBB+".

32. The Board has set up a grievance department/function, which fully complies with the requirements of the Code.

33. The Company has not obtained any exemption(s) from the Securities and Exchange Commission of Pakistan (SECP) in respect of the requirements of the Code.

34. We confirm that all requirements of regulations 3, 6, 7, 8, 27, 32, 33 and 36 of the Regulation and all material requirement of Code have been complied.

For and on behalf of the Board of Directors

PICIC Insurance Limited

Moiz Ali

Managing Director & CEO Karachi: April 03, 2026

INDEPENDENT AUDITOR'S REVIEW REPORT

To the members of PICIC Insurance Limited

Review Report on the Statement of Compliance contained in Listed Companies (Code of Corporate Governance) Regulations, 2019 and Code of Corporate Governance for Insurers, 2016

We have reviewed the enclosed Statement of Compliance with the Listed Companies (Code of Corporate Governance) Regulations, 2019 and the Code of Corporate Governance for Insurers, 2016 (both herein referred to as 'the Regulations') prepared by the Board of Directors of PICIC Insurance Limited ('the Company') for the year ended December 31, 2025 in accordance with the requirements of regulation 36 of the Listed Companies (Code of Corporate Governance) Regulations, 2019 and provision lxxvi of the Code of Corporate Governance for Insurers, 2016.

The responsibility for compliance with the Regulations is that of the Board of Directors of the Company. Our responsibility is to review whether the Statement of Compliance reflects the status of the Company's compliance with the provisions of the Regulations and report if it does not and to highlight any non-compliance with the requirements of the Regulations. A review is limited primarily to inquiries of the Company's personnel and review of various documents prepared by the Company to comply with the Regulations and Code.

As a part of our audit of the financial statements we are required to obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. We are not required to consider whether the Board of Directors' statement on internal control covers all risks and controls or to form an opinion on the effectiveness of such internal controls, the Company's corporate governance procedures and risks.

The Regulations require the Company to place before the Audit Committee, and upon recommendation of the Audit Committee, place before the Board of Directors for their review and approval, its related party transactions distinguishing between transactions carried out on terms equivalent to those that prevail in arm length transaction and transactions which are not executed at arm lengths price and recording proper justification for using such alternative pricing mechanism and also ensure compliance with the requirements of Section 208 of the Companies Act, 2017. We are only required and have ensured compliance of this requirement to the extent of the approval of the related party transactions by the Board of Directors upon recommendation of audit committee. We have not carried out procedures to assess and determine the Company's process for identification of related parties and that whether the related party transactions were undertaken at arm's length price or not.

Following instances of non-compliance with the requirements of regulations were observed which are not stated in the Statement of Compliance:

1. There is only one independent director appointed on the Board contrary to the requirement of the Regulation 6(1) of Listed Companies (Code of Corporate Governance) Regulations 2019 and Code of Corporate Governance for Insurers, 2016.

2. The positions of the Chairman of the Board and the Chief Executive Officer of the company are held by one person contrary to the requirements of Regulation 9(1) of Listed Companies (Code of Corporate Governance) Regulations 2019.

3. The board has not made carry arrangements to carry out orientation courses. Furthermore, the directors (excluding exempted directors) have not acquired the certification of directors training program as per requirements of Regulation 16 and 17 of Listed Companies (Code of Corporate Governance) Regulations 2019 and Code of Corporate Governance for Insurers, 2016.

4. There is no formal approval regarding terms and conditions of employment of Chief Finance Officer and Company Secretary as per requirements of Regulation 20 of Listed Companies (Code of Corporate Governance) Regulations 2019 and Code of Corporate Governance for Insurers, 2016.

5. The acting CFO does not possess such qualification and experience as per requirements of Regulation 22 of Listed Companies (Code of Corporate Governance) Regulations 2019.

6. The positions of Chief Financial Officer and Secretary are held by one person, contrary to the requirements of Regulation 24 of Listed Companies (Code of Corporate Governance) Regulations 2019 and Code of Corporate Governance for Insurers, 2016.

7. The company has not established an effective internal audit function as required by the Regulation 31(1) of Listed Companies (Code of Corporate Governance) Regulations 2019.

   Based on our review, except for the matters mentioned above, nothing has come to our attention which causes us to believe that the Statement of Compliance does not appropriately reflect the Company's compliance, in all material respects, with the requirements contained in the Regulations as applicable to the Company for the year ended December 31, 2025.

   Naveed Zafar Ashfaq Jaffery & Co.

   Chartered Accountants

   Engagement Partner: Azeem Hussain Siddiqui Karachi

   Date: April 03, 2026

   UDIN: CR2025102328WIwAryla

   INDEPENDENT AUDITORS' REPORT

   To the Members of PICIC Insurance Limited Report on the Audit of the Financial Statements

   Adverse Opinion

   We have audited the annexed financial statements of PICIC Insurance Limited (the 'Company'), which comprises the statement of financial position as at December 31, 2025, the statement of profit or loss account, the statement of comprehensive income, the statement of cash flows and the statement of changes in equity for the year then ended, and notes to the financial statements, including a summary of material accounting policy information and other explanatory information, 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 the audit.

   In our opinion, because of the significance for the matters discussed in the Basis for Adverse Opinion paragraph of our report, to the best of our information and according to the explanations given to us, the statement of financial position, the statement of profit or loss account, the statement of comprehensive income, the statement of cash flows and the statement of changes in equity together with the notes forming part thereof, do not conform with the accounting and reporting standards as applicable in Pakistan and do not give the information required by the Insurance Ordinance, 2000 and the Companies Act, 2017, in the manner so required and respectively do not give a true and fair view of the state of Company's affairs as at December 31, 2025 and of the loss, total comprehensive loss, the changes in equity and its cash flows for the year then ended.

   Basis for Adverse Opinion

   1. The Company's losses have been accumulated to Rs. 383.993 million as at December 31, 2025 which turn the equity into negative amounting to Rs. 29.158 million. Further, the operating cash flows of the Company are also negative since 2011. These circumstances, along with the inability of the Company to meet the minimum solvency requirement and sizeable decline in business activities, indicate the material uncertainty that may cast significant doubt on the Company's ability to continue as a going concern and therefore the Company may be unable to realize its assets and discharge its liabilities in the normal course of business. However, the financial statements have been prepared on a going concern basis. In our opinion, Management's use of the going concern assumption in the financial statements is inappropriate.

   2. The Company entered into an agreement during the year with counterparty, as disclosed in Note 11.1 to the financial statements, to charge interest on loan at KIBOR plus 3% from the date of first disbursement, i.e from 2016 to 2025. Accordingly, the Company has recognized interest expense and payable amounting to Rs. 17.048 million during the year. However, this treatment has resulted in an overstatement of interest expense by Rs. 11.804 million, as disclosed in Note

      18.1 to the financial statements. Had the Company accounted for such interest by restating comparative figures and adjusting opening retained earnings, the interest expense for the year ended December 31, 2025 would have been lower by Rs. 11.804 million. Furthermore, the opening balance of other creditors and accruals as at January 1, 2025 would have been higher by Rs. 11.804 million, with a corresponding decrease in retained earnings by the same amount.

      We conducted our audit in accordance with International Standards on Auditing (ISAs) as applicable in Pakistan. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants as adopted by the Institute of Chartered Accountants of Pakistan (the Code) and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our adverse opinion.

      Emphasis of Matter

      Without further modifying our opinion, we draw attention to the note 12 to the financial statements which describes the uncertainty related to the ultimate outcome of contingencies and hence no provision has been made in the enclosed financial statements.

      Key Audit Matters

      Except for the matter described in the Basis for Adverse Opinion section, we have determined that there are no other key audit matters to communicate in our report.

      Information Other than the Financial Statements and Auditors' Report Thereon

      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 auditor's report thereon.

      Our opinion on the financial statements does not cover the Other Information and we do 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 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. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. As described in the Basis for Adverse Opinion section above, management use of going concern is inappropriate. Accordingly, we have concluded that the other information is materially misstated with respect to this matter.

      Responsibilities of Management and Board of Directors for the Financial Statements

      Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting and reporting standards as applicable in Pakistan and the requirements of Insurance Ordinance, 2000 and, Companies Act, 2017 (XIX of 2017), 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.

      Board of Directors are responsible for overseeing the Company's financial reporting process.

      Auditors' Responsibilities for the Audit of the Financial Statements

      Our objective is 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 ISAs as applicable in Pakistan will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the 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 ISAs as applicable in Pakistan, we exercise professional judgment and maintain professional skepticism 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 auditor's 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 auditor's 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 the Board of Directors 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 the Board of Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

      From the matters communicated with the Board of Directors, 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 auditor's 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.

      Report on Other Legal and Regulatory Requirements

      Based on our audit, we further report that in our opinion:

      1. except for the effects of the matters described in the Basis for Adverse Opinion section of the report, proper books of account have been kept by the Company as required by the Insurance Ordinance, 2000 and the Companies Act, 2017 (XIX of 2017);

      2. because of the significance of matters described in Basis for Adverse Opinion section, the statement of financial position, the statement of profit or loss account, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows together with the notes thereon have not been drawn up in conformity with the Insurance Ordinance, 2000, the Companies Act, 2017 (XXI of 2017), however are in agreement with the books of account

      3. except for the effects of the matters described in the Basis for Adverse Opinion section of the report investments made, expenditure incurred and guarantees extended during the year were for the purpose of the company's business; and

      4. no zakat was deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980)

         The engagement partner on the audit resulting in this independent auditor's report is Azeem Hussain Siddiqui

         Naveed Zafar Ashfaq Jaffery & Co.

         Chartered Accountants

         Karachi

         Date: April 03, 2026

         UDIN: AR202510232laV63Ajog

         PICIC INSURANCE LIMITED STATEMENT OF FINANCIAL POSITION AS AT DECEMBER 31, 2025

         Note

         2025 2024

         -------(Rupees in '000')-----

         ASSETS
         Property and equipment	7	15		26
         Investments - Mutual funds	8	84,789		78,967
         Taxation - payments less provisions		26,308		26,308
         Cash and bank	9	6		6
         Total Assets		111,118		105,307
         EQUITY AND LIBILITIES
         Authorised share capital
         125,000,000 Ordinary share of Rs.10 each		1,250,000		1,250,000
         Capital and reserves attributable to Company's
         equity holders
         Ordinary share capital	10	350,000		350,000
         Reserves		4,835		8,128
         Accumulated loss		(383,993)		(369,102)
         Total Equity		(29,158)		(10,974)
         Liabilities
         Underwriting provisions		-		-
         Outstanding claims including IBNR		57,715		57,715
         Amounts due to other insurers / reinsurers		17,658		17,658
         Other creditors and accruals	11	64,708		40,713
         Unclaimed dividend		195		195
         Total Liabilities		140,276		116,281
         Total Equity and Liabilities		111,118		105,307
         Contingencies and Commitments	12	-		-

         The annexed notes from 1 to 30 form an integral part of these financial statements.

         Chief Executive / Principal Officer Director Director Director Chief Financial Office

         PICIC INSURANCE LIMTIED

         STATEMENT OF PROFIT OR LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 2025

         Note

         2025 2024

         ------------(Rupees in '000')------------

         Net insurance premium	13	-		-
         Net insurance claims	14	-		-
         Net commission and other acquisition costs	15	-		-
         Insurance claims and acquisition expenses		-		-
         Management expenses	16	(6,658)		(7,061)
         Underwriting results		(6,658)		(7,061)
         Investment income	17	12,154		12,580
         Other expenses	18	(17,348)		(301)
         Results of operating activities		(11,852)		5,218
         (Loss) / profit before taxation		(11,852)		5,218
         Taxation	19	(3,039)		(1,882)
         (Loss) / profit after taxation		(14,891)		3,336
         (Loss) / earning per share - basic and diluted	20	(0.43)		0.10

         The annexed notes from 1 to 30 form an integral part of these financial statements.

         Chief Executive / Principal Officer Director Director Director Chief Financial Officer

         PICIC INSURANCE LIMTIED

         STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31, 2025

         Note

         2025 2024

         ------------(Rupees in '000')------------

         (Loss) / profit after taxation	(14,891)		3,336
         Other comprehensive income:
         Item that may be subsequently classified to profit or loss account
         Unrealised (loss)/ gain on investments - available for sale	(3,293)		1,636
         Other comprehensive income for the year	(3,293)		1,636
         Total comprehensive income for the year	(18,184)		4,972

         The annexed notes from 1 to 30 form an integral part of these financial statements.

         Chief Executive / Principal Officer Director Director Director Chief Financial Officer

         PICIC INSURANCE LIMTIED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2025
         	2025		2024
         	- (Rupees		n '000')--------
         Operating cash flows
         (a) Underwriting activities
         Premiums received	-		-
         Management expenses paid	(6,078)		(3,758)
         Cash outflow from underwriting activities	(6,078)		(3,758)
         (b) Other operating activities
         Income tax paid	3,039		1,882
         Other charges	-		-
         Cash inflow from other operating activities	3,039		1,882
         Net cash outflow from operating activities	(3,039)		(1,876)
         Investment activities
         Dividends received	12,154		12,580
         Investment in mutual funds	(12,154)		(12,580)
         Payments for investments	3,039		1,882
         Fixed capital expenditure	-		(32)
         Cash inflow from investing activities	3,039		1,850
         Net (decrease) in cash and cash equivalents	-		(26)
         Cash and cash equivalents at beginning of the year	6		32
         Cash and cash equivalents at end of the year	6		6
         Reconciliation to profit and loss account
         Operating cash flows	(3,039)		(1,876)
         Depreciation / amortisation expense	(11)		(7)
         Net investment Income	12,154		12,580
         Increase in liabilities	(23,995)		(7,361)
         (Loss) / profit after tax	(14,891)		3,336

         i

         The annexed notes from 1 to 30 form an integral part of these financial statements.

         Chief Executive / Principal Officer Director Director Director Chief Financial Officer

         PICIC INSURANCE LIMTIED STATEMENT OF CHANGES IN EQUITY

         FOR THE YEAR ENDED DECEMBER 31, 2025

         Capital Reserve	Revenue reserves
         Issued, subscribed and paid-up share	Accumulated loss	Surplus on remeasurment of availabe for sale	Total
         capital		investments

         ---------------------------------------- (Rupees in '000') ------------------------------------------

         Balance as at January 01, 2024	350,000	(372,438)	6,492	(15,946)
         Profit for the year ended December 31, 2024	-	3,336	-	3,336
         Other comprehensive income	-	-	1,636	1,636
         Balance as at December 31, 2024	350,000	(369,102)	8,128	(10,974)
         Profit for the year ended December 31, 2025	-	(14,891)	-	(14,891)
         Other comprehensive income	-	-	(3,293)	(3,293)
         Balance as at December 31, 2025	350,000	(383,993)	4,835	(29,158)

         The annexed notes from 1 to 30 form an integral part of these financial statements.

         Chief Executive / Principal Officer Director Director Director Chief Financial Officer

         PICIC INSURANCE LIMITED

         NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2025

         1. STATUS AND NATURE OF BUSINESS

            1. PICIC Insurance Limited (the Company) was incorporated on April 23, 2004 as a public limited company under the repealed Companies Ordinance, 1984 (repealed by Companies Act 2017) and registered as a non-life insurance company by the Securities and Exchange Commission of Pakistan (SECP) under the Insurance Ordinance, 2000. It is engaged in providing all classes of non-life insurance business. The Company is listed on the Pakistan Stock Exchange Limited. The registered office of the Company is situated at 3rd Floor, Nadir House, I.I. Chundrigar Road, Karachi.

            2. As per Section 11 of the Insurance Rules 2017, the company is required to maintain minimum paid up capital of Rs. 500 million net off any discount offered on issue of shares. Currently, the company does not meet the said requirement.

            3. In accordance with the requirements of the Insurance Ordinance, 2000 and as mentioned in the Insurance Rules, 2017, the minimum solvency requirement (i.e excess of admissible assets over liabilities) is Rs 150 million. The Company is not meeting the minimum solvency requirement as at December 31, 2025.

            4. The company has discontinued the insurance business and has applied for surrendering of insurance license to SECP. However, SECP has rejected the application. The company has, filed a petiton in Honourable Sindh High Court against the order of SECP.

            5. The company has been reporting recurring losses in prior years, therefore, the Company's accumulated losses amounted to Rs 387.178 million (2024 : Rs. 369.102 million) which have turned the company's equity into negative amounting to Rs. 32.343 million (2024 : Rs. 10.974 million). Further, the operating cash flows of the Company are also negative since 2011. These financial statements have been prepared under the going concern basis for the reason stated below (Refer note 1.6)

            6. Merger of Crescent Star Foods (Private) Limited into PICIC Insurance Limited

               In the EOGM held on July 06, 2017 , the shareholders of the Company approved the scheme of merger of PICIC Insurance Limited and Crescent Star Foods (Private) Limited (CSF) a going concern, whereby CSF would be merged with and into the Company. The intention of the management is to convert the Company into a FMCG Company. Keeping in line with this intention, the management commenced proceedings for surrendering the insurance license and has filed a petition before the Honourable Sindh High Court for the merger scheme which is pending till date.

               In this regard, the Company has also entered into an agreement with Crescent Star Insurance Limited (parent company of CSF) for the transfer of insurance related assets and liabilities subject to approval from the SECP and successful surrender of insurance license.

               Based on the above intention and the transfer of operations of Crescent Star Foods (Private) Limited, to the Company, the management is confident that the company will continue as a going concern.

         2. BASIS OF PREPARATION AND STATEMENT OF COMPLIANCE

            1. Statement of compliance

               These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of:

               • International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board as are notified under the Companies Act, 2017;

               • provisions of and directives issued under the Companies Act 2017, the Insurance Ordinance, 2000 Insurance Accounting Regulations, 2017, and Insurance Rules, 2017.

               In case requirements differ, the provisions or directives of the Companies Act 2017, Insurance Ordinance, 2000, Insurance Accounting Regulations 2017 and Insurance Rules, 2017, shall prevail.

               The Securities and Exchange Commission of Pakistan (SECP) vide its S.R.O 89(1)/2017 dated February 09, 2017 has prescribed format of the presentation of annual financial statements for general insurance companies. These financial statements have been prepared in accordance with the format prescribed by the SECP.

            2. Standards, Amendments and Interpretations to Accounting and Reporting Standards

               1. Standards, interpretations of and amendments to the existing accounting standards that have become effective during the year

                  There are certain new and amended standards, interpretations and amendments that are mandatory for the Company's accounting periods beginning on or after January 01, 2025 but are considered not to be relevant or do not have any significant effect on the Company's operation and therefore not detailed in these financial statements.

               2. Standards, interpretations and amendments not effective at year end

                  The following standards, amendments and interpretations are only effective for accounting periods, beginning on or after the date mentioned against each of them. These standards, interpretations and the amendments are either not relevant to the company's operations or are not expected to have significant impact on the Company's annual audited financial statements other than certain additional disclosures.

                  Standards, amendments or interpretation

                  Effective date (annual periods beginning on or after)

                  • IFRS 16 - 'Leases' (amendments)

                  • IAS 1 - 'Presentation of financial statements' (amendments)

                  • IAS 7 - Statement of cash flows (amendments)

                  • IAS 21 - 'The effects of changes in foreign exchange rates (amendments)

                  • IFRS 7 - 'Financial instruments - disclosures (amendments)

                  • IFRS 9 - 'Financial instruments

                    January 01, 2024

                    January 01, 2024

                    January 01, 2024

                    January 01, 2025

                    January 01, 2024

                    January 01, 2026

                    The above standards, amendments to approved accounting standards and interpretations are not likely to have any material impact on the Company's financial statements.

                    Other than the aforesaid standards, interpretations and amendments, IASB has also issued the following standards and interpretation, which have not been notified locally or declared exempt by the SECP:

                  • IFRS 1 - First Time Adoption of International Financial Reporting Standards

                  • IFRS 18 - Presentation and Disclosures in Financial Statements

                  • IFRS 19 - Subsidiaries without Public Accountability: Disclosures

                  • IFRIC 12 - Service Concession Arrangements

               3. Temporary exemptions from IFRS 17 and IFRS 09

                  1. IFRS 17 - Insurance Contracts

                     Pursuant to the requirements of Securities and Exchange Commission of Pakistan SRO 1715 (I) / 2023 dated 21 November 2023 IFRS 17 "Insurance Contracts", is applicable to the companies engaged in insurance / takaful and re-insurance / re-takaful business from financial years commencing on or after 01 January 2026.

                     IFRS 17, replaces IFRS 4 Insurance Contracts. The new standard will apply to all entities that issue insurance and reinsurance contracts, and to all entities that hold reinsurance contracts. This standard requires entities to identify contracts and its terms and to assess whether they meet the definition of an insurance contract or includes components of an insurance contract. Insurance contracts are required to account for under the recognition / derecognition of IFRS 17. Companies subject to the requirement of SRO 1715 will also be required to adopt requirements of IFRS-9 from the date of transition. On initial application of IFRS 17, comparative information for insurance contracts is restated in accordance with IFRS 17, whereas comparative information for related financial assets might not be restated in accordance with IFRS 9 if the insurer is initially applying IFRS 9 at the same date as IFRS 17.

                  2. IFRS 9 - Financial instruments and amendment to IFRS 4 Insurance Contracts - applying IFRS 9 with IFRS 4

                     SECP through its S.R.O.506(I)/2024 has directed that the applicability period of optional temporary exemption from applying IFRS 9 Financial Instruments as given in para 20A of IFRS 4 Insurance Contracts is extended for annual periods beginning before 01 January 2026, subject to fulfilling the same conditions as are prescribed by para 20B of IFRS 4.

                     IFRS 9 replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS

                     9 includes revised guidance on the classification and measurement of financial instruments, a new expected credit loss model for calculating impairment on financial assets, and new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39.

                     Amendment to IFRS 4 'Insurance Contracts- Applying IFRS 9 'Financial Instruments with IFRS 4 (effective for annual periods beginning on or after July 01, 2018). The amendment address issue arising from the different effective dates of IFRS 9 and the forthcoming new standard IFRS 17 'Insurance Contracts'. The amendments introduce two alternative options for entities issuing contracts within the scope of IFRS 4, notably a temporary exemption and an overlay approach. The temporary exemption enables eligible entities to defer the implementation date of IFRS 9. The overlay approach allows an entity applying IFRS 9 from July 01, 2018 onwards to remove from profit or loss the effects of some of the accounting mismatches that may occur from applying IFRS 9 before IFRS 17 is applied.

                  3. IFRS 9 - Financial Instruments

                     As an insurance company, the management has opted temporary exemption from the application of IFRS 9 as allowed by International Accounting Standards Board (IASB) for entities whose activities are predominantly connected with insurance. Additional disclosures, as required by the IASB, for the financial assets with contractual cash flows that meet the 'Solely for Payment of Principal and Interest' (SPPI) criteria excluding those held for trading and for the financial assets that do not meet the SPPI criteria for being eligible to apply the temporary exemption from the application of IFRS 9.

                     IFRS 9 defines the terms "principal" as being the fair value of the financial asset at initial recognition, and the "interest" as being compensation for (i) the time value of money, and (ii) the credit risk associated with the principal amount outstanding during a particular period of time.

                     The table below set out the fair values as at the end of reporting period and the amount of change in the fair value during that period for the following two groups of financial assets separately:

                     1. financial assets with contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest ("SPPI") on the principal amount outstanding, excluding any financial asset that meets the definition of held for trading in IFRS 9, or that is managed and whose performance is evaluated on a fair value basis, and

                        As at December 31, 2025
                        Fail the SPPI test		Pass the SPPI test
                        Fair value	Change in unrealised gain/ (loss)	Fair value	Change in unrealised gain/ (loss)
                        ---------------------------- Rupees ('000') ----------------------------

                     2. all other financial assets

                        Description

                        Financial assets
                        Cash and bank balances * Investments in equity securities - available for sale	-84,789	-(3,293)	-	6	- -
                        	84,789	(3,293)		6	-

                        As at December 31, 2024
                        Fail the SPPI test		Pass the SPPI test
                        Fair value	Change in unrealised gain/ (loss)	Fair value	Change in unrealised gain/ (loss)
                        		Rupees ('000')

                        * The carrying amounts of these financial assets measured applying IAS 39 are a reasonable approximation of their fair value.

                        Description

                        Financial assets
                        Cash and bank balances * Investments in equity securities - available for sale	-78,967	-1,636	-	6	- -
                        	78,967	1,636		6	-

                        * The carrying amounts of these financial assets measured applying IAS 39 are a reasonable approximation of their fair value.

         3. BASIS OF MEASUREMENT

            These financial statements have been prepared under historical cost convention except for certain investments which are stated at their fair values. Accrual basis of accounting has been used except for cash flow information.

         4. FUNCTIONAL AND PRESENTATION CURRENCY

            These financial statements are presented in Pakistan Rupees (rounded upto thousand) which is the Company's functional and presentation currency.

         5. MATERIAL ACCOUNTING POLICY INFORMATION

            The accounting policies set out below have been applied consistently to all period presented in these financial statements except for format for preparation of these financial statements as disclosed.

            1. Property and Equipment

               These are stated at cost less accumulated depreciation and accumulated impairment losses if any. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the assets' carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance expenditure are charged to the profit and loss account during the financial period in which they are incurred.

               Depreciation is calculated on a straight-line basis over the estimated useful life of the asset. The useful lives and depreciation method are reviewed and adjusted, if appropriate, at each reporting date. Depreciation is charged on additions from the date the asset is available for use and depreciation on disposals is charged till the date of disposal.

               An item of fixed asset is derecognised upon disposal or when no future economic benefits are expected from its use or disposal.

               Gains and losses on disposal, if any, of assets are included in profit and loss account.

            2. Insurance contract

               Insurance contracts are those contracts under which the Company as insurer has accepted insurance risk from the insurance contract holders (insured) by agreeing to compensate the insured if a specified uncertain future event (the insured event) adversely affect the insured. Once the contract has been classified as an insurance contract, it remains an insurance contract for the reminder of its tenure, even if the insurance risk reduces significantly during this period, unless all rights and obligations are extinguished or expire.

               Insurance contracts are classified into following main categories, depending on the nature and duration of risk and whether or not the terms and conditions are fixed.

               • Fire and property;

               • Marine, aviation & transport;

               • Motor;

               • Accident & health; and

               • Miscellaneous

               These contracts are normally one year insurance contracts except Marine and some contracts of Fire and property, and miscellaneous class. Normally all Marine insurance contracts and some Fire and property contracts are of three months period.

               These contracts are provided to all types of customers based on assessment of insurance risk by the Company. Normally personal insurance contracts e.g. vehicle are provided to individual customers, whereas, insurance contracts of fire and property, marine and transport, accident and other commercial line products are provided to commercial organization.

               Fire and property insurance contracts mainly compensate the Company's customers for damage suffered to their properties or for the value of property lost. Customers who undertake commercial activities on their premises could also receive compensation for the loss of earnings caused by the inability to use the insured properties in their business activities.

               Marine Insurance covers the loss or damage of vessels, cargo, terminals and any transport or property by which cargo is transferred, acquired or held between the points of origin and final destination.

               Motor insurance provides protection against losses incurred as a result of theft, traffic accidents and against third party liability that could be incurred in an accident.

               Accident and health insurance contract mainly compensate hospitalisation and outpatient medical coverage to the insured. These contracts are generally one year contracts.

               Other types of insurance are classified in miscellaneous category which includes mainly engineering, terrorism, personal accident, worker compensation, travel, products of financial institutions and crop insurance e.t.c.

            3. Deferred commission expense /Acquisition costs

               Commission incurred in obtaining and recording policies of insurance and re-insurance are deferred and recognised as an asset on acquisition of the related policies. Accordingly, these costs are charged to the profit and loss account as an expense based on the pattern of recognition of related premium revenue.

            4. Provision for unearned premium

               Provision for unearned premium represents the portion of premium written relating to the unexpired period of coverage and is recognised as a liability by the Company. This liability is calculated as follows:

               • For marine cargo business, as a ratio of unexpired period to the total period of policy applied on the gross premium of the individual policies; and

               • For other classes / line of business, by applying 1/24th method as allowed by the Insurance Rules, 2017

            5. Premium deficiency reserve

               The Company is required as per Insurance Rules, 2017, to maintain a provision in respect of premium deficiency for the class of business where the unearned premium reserve is not adequate to meet the expected future liability for claims and other expenses expected to be incurred after the balance sheet date in respect of unexpired policies in that class of business at the balance sheet date. The movement in the premium deficiency reserve is recorded as an expense / income in profit and loss account for the year.

               For this purpose, loss ratios for each class are estimated on historical claim development. Judgment is used in assessing the extent to which past trends may not apply in future or the effects of one-off claims. Further, actuarial valuation has been carried out to determine the amount of premium deficiency reserve in respect of accident and health insurance.

            6. Reinsurance contracts held

               The Company enters into reinsurance contracts in the normal course of business in order to limit the potential for losses arising from certain exposures. Outward reinsurance premiums are accounted for in the same period as the related premiums for the direct or accepted insurance business being reinsured.

               Reinsurance liabilities represent balances due to reinsurance companies. Amounts payable are estimated in a manner consistent with the related reinsurance contract. Reinsurance assets represent balances due from reinsurance companies. Amounts recoverable from reinsurers are estimated in a manner consistent with the provision for outstanding claims or settled claims associated with the reinsurance policies and are in accordance with the related reinsurance contract.

               Reinsurance assets or liabilities are derecognised when the contractual rights are extinguished or expire.

               The Company assesses its reinsurance assets for impairment on the balance sheet date. If there is an objective evidence that the reinsurance asset is impaired, the Company reduces the carrying amount of the reinsurance asset to its recoverable amount and recognises that impairment loss in the profit and loss

            7. Receivbales and payables related to insurance contracts

               Receivables and payables relating to insurance contracts are recognized when due. These include premiums due but unpaid, premiums received in advance, premiums due and claims payable to insurance contract holders. These are recognized at cost, which is the fair value of the consideration given less provision for impairment, if any.

               If there is an objective evidence that any premium due but unpaid is impaired, the Company reduces the carrying amount of that insurance receivable and recognizes the loss in profit and loss account.

            8. Segment reporting

               An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses including revenues and expenses that relate to transactions with any of the Company's other components. All operating segments' results are reviewed regularly by the Company's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

               The Company presents segments reporting of operating results using the classes of business as specified under the Insurance Ordinance, 2000 and the Insurance Rules, 2017. The reported operating segments are also consistent with the internal reporting process of the Company for allocating resources and assessing performance of the operating segments. The performance of segments is evaluated on the basis of underwriting results of each segment. All the Company's business segments operate in Pakistan only.

               Based on its classification of insurance contracts issued, the Company has five primary business segments for reporting purposes namely fire, marine, motor, accident and health and miscellaneous. The nature and business activities of these segments are disclosed in note 5.4.

               Assets and liabilities are allocated to particular segments on the basis of premium earned. Those assets and liabilities which cannot be allocated to a particular segment on a reasonable basis are reported as unallocated corporate assets and liabilities. Depreciation and amortisation are allocated to a particular segment on the basis of net premium earned.

            9. Cash and cash equivalents

               Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of cash flow statement, cash and cash equivalents comprise cash in hand, deposits with banks, stamps in hand and short term investments.

            10. Revenue recognition

                • Premium income under a policy is recognised over the period of insurance from the date of inception of the policy to which it relates till its expiry in case of marine cargo business whereas for all other cases of premium income is recognised as a difference between total premium written and provision for unearned premium using 1/24th method as mentioned in note 5.6 to these financial statements.

                • Commission income is being taken to the profit and loss account, on a time proportionate basis, in accordance with the pattern of recognition of reinsurance premium to which they relate.

                • Administrative surcharge recovered by the Company from policy holders is included in income currently.

                • Return on bank balances and government securities is recognised on an accrual basis.

                • Dividend income is recognised when the right to receive the dividend is established.

                • Gain / loss on sale / redemption of investments is included in the profit and loss account in the period of sale / redemption.

                • Income from held to maturity investment is recognised on time proportion basis taking into account the effective yield on the investment. The difference between the redemption and the purchase price of the held to maturity investment is amortised and taken to the profit and loss account over the term of the investment.

            11. Investments

                All investments are initially recognized at cost, being the fair value of the consideration given and includes transaction costs except for investments designated at fair value through profit and loss.

                Held to maturity

                Investments with fixed or determinable payments and fixed maturity, where the Company has positive intent and ability to hold to maturity, are classified as Held-to-Maturity. Subsequently, these are measured at amortized cost using the effective interest method and taking any discount or premium on acquisition.

                Investments at fair value through profit and loss account

                Investments which are acquired principally for the purposes of generating profit from short term fluctuation in price are classified as held-for-trading. Subsequent to initial recognition, these are remeasured at fair value. Gains or losses on investments on remeasurement of these investments are recognized in profit and loss account.

            12. Off-setting of financial assets and financial liabilities

                Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet, if the Company has a legally enforceable right to set-off and the Company intends either to settle the assets and liabilities on a net basis or to realise the asset and settle the liability simultaneously.

            13. Provisions

                Provisions are recognised when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount can be made. Provisions are regularly reviewed and adjusted to reflect the current estimate.

            14. Taxation

                Current

                Provision for current taxation is based on taxable income at the current rate of taxation after taking into account rebates and tax credits available, if any.

                Deferred

                Deferred tax is recognised using the balance sheet liability method on all temporary differences at the balance sheet date between the tax base of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax losses and unused tax credits to the extent that it is probable that the taxable profits will be available against which these can be utilised.

                The carrying amount of the deferred tax asset is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to be utilised.

            15. Impairment of assets

The carrying values of the Company's fixed assets are reviewed at each financial year end for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. If any such indication exists, and where the carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amount. The resulting impairment loss is taken to the profit and loss account.