The National Insurance Act (as amended), Chapter 32:01 of 1971 mandates that the Board “… operate and manage a system of National Insurance.”
“To efficiently deliver social protection through a sustainable and innovative National Insurance System.”
“To maximise contributions and pay relevant benefits in a timely manner through good governance and quality customer service from an empowered staff, cutting-edge technology, and prudent fund management.”
FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
Core Values
2
Corporate Information
4
Service Centres
4
National Insurance Benefits
5
Chairman’s Review
6
Corporate Governance Structure
9
Executive and Senior Management Structure
14
Executive Director’s Report
18
Financial Statements
31
Year in Review
70
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Customer Satisfaction
Mutual Respect
We recognise that meeting and exceeding the expectations of our customers must guide our decision-making and behaviour.
We value and respect each other as persons, professionals, and team members subscribing to the same mission, vision and values.
Trustworthiness
Transparency
We are a company that is trusted by our stakeholders.
Service Delivery We are committed to timely, high-quality service.
We are honest, open, clear, and timely in communicating and conducting our business affairs with each other, our customers, and business associates.
Integrity We are committed to high standards of personal and professional integrity and ethical behaviour.
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FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
In serving our valued customers we are guided by our core values which identify what is truly important to us.
Fairness
Teamwork
We strive to be fair and equitable in our treatment of all customers.
We promote collaborative development as we work, learn, and strive for excellence together.
Loyalty
Employee Development & Recognition
We are committed to protecting the assets and ensuring the best interests of NIBTT and will avoid doing anything to tarnish its reputation and corporate image.
We support and value our employees whose commitment and drive demonstrate a loyalty to the NIBTT’s traditions of yesterday and the vision of tomorrow.
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HEAD OFFICE
BANKERS
AUDITORS
14-19 Queen’s Park East Port of Spain Trinidad and Tobago, W.I. Tel: (868) 625-2171-8 NIBTT Hotline: 625-4NIS (4647) Email: customercare@nibtt.net Website: www.nibtt.net
First Citizens 9 Queen’s Park East Port of Spain Trinidad and Tobago, W.I.
Ernst & Young 5-7 Sweet Briar Road, St. Clair, Port of Spain Trinidad, W.I.
ARIMA COLLECTION CENTRE Shops of Arima
RIO CLARO 2461 Naparima/Mayaro Road
ARIMA Cor. Woodford and Sorzano Streets
SANGRE GRANDE Henderson Street
BARATARIA 35-36 Fifth Street
SIPARIA Grell Street
CHAGUANAS Market and Ramsaran Streets
SOUTH REGIONAL 27 Harris Promenade, San Fernando
COUVA 2 Captain Watson Street Exchange Lots
TOBAGO Fircon Building, 9 Bacolet Street, Scarborough
POINT FORTIN 7A Techier Main Road PRINCES TOWN Marlson’s Building Charlotte and High Streets
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Republic Bank Limited 9-17 Park Street Port of Spain Trinidad and Tobago, W.I.
TUNAPUNA Eastern Main Road WOODBROOK 4 Luis Street
FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
There are 23 Benefits in seven categories
SICKNESS The Sickness Benefit is paid to an insured person who is employed but unable to work and suffers loss of pay as a result of illness not related to an accident on the job. The period of illness must be certified by a registered medical practitioner and must be for four or more days. This benefit is intended to provide financial assistance during certified periods of illness. The benefit you receive, however, may not cover full loss of earnings.
MATERNITY The Maternity Benefit is paid to a pregnant insured woman using her National Insurance contributions. A special maternity grant, however, is paid to a pregnant woman using the father’s contributions when the mother does not have sufficient contributions for the benefit. The pregnancy must have lasted at least 26 weeks or have resulted in a live birth. Both the maternity benefit and the special maternity grant are paid as a lump sum. The maternity benefit consists of an allowance for up to 14 weeks and a grant per child, while the special maternity grant is a single payment per child.
INVALIDITY The Invalidity Benefit is paid to an insured person who is medically certified as unable to work for a year or more because of a mental or bodily disease or illness, not caused by a job-related injury.
EMPLOYMENT INJURY The Employment Injury Benefit is paid to an insured person who is injured in the course of and as a result of his/her employment and comprises a range of individual benefits including Injury Benefit, Disablement Benefit, Death Benefit and Medical Expenses. These benefits are intended to provide financial assistance for various contingencies in the case of a job-related injury or accident.
An insured person does not have to experience any loss of earnings in order to access these benefits.
RETIREMENT The Retirement Benefit is paid to an insured person who has made contributions to the NIBTT and has attained retirement age. This benefit is intended to supplement one’s retirement income and can either be in the form of a pension, payable for life, or a lump sum/one-time grant payment. The number of contributions made over an insured’s working life determines whether a pension or grant is paid. A pension is paid where the insured has a minimum of 750 contributions and a grant where the insured has contributed less than 750 contributions. The minimum pension or grant payable is $3,000.00.
FUNERAL GRANT The Funeral Grant is a lump sum, one-time payment that is made to the person who met the costs of the funeral expenses for a deceased insured. It is intended to ease the funeral-related costs for a deceased insured and does not include the cost of items such as food, flowers, rental of chairs, etc.
SURVIVOR’S The Survivor’s Benefit is paid to certain dependents of a deceased insured person who has died other than by a job-related accident. If the insured person died as a result of a job-related accident or injury, an application for Death Benefit can be made. The benefit is payable to a widow, widower, child, stepchild, disabled child, orphan or dependent parent of a deceased insured person who has made a least 50 contributions. Survivor’s Benefit is intended to provide financial assistance in the event of the death of a breadwinner.
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A N N U A L
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R E P O R T
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FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
At June 2018, the National Insurance Board of Trinidad and Tobago (NIBTT) had completed two years of its three-year strategic plan. The focus of this strategic plan is on strengthening the compliance function, updating customer contribution records, maximising investment income while controlling operating costs, and enhancing service delivery. All of these strategies are with a view to implementing the recommendations of the 9th Actuarial Review, ultimately to ensure the sustainability of the National Insurance Fund. The findings of the 9th Actuarial Review were reinforced by the 10th Actuarial Review which was completed in 2018 and cautioned that there had been little reform of the National Insurance System since its inception in 1972, and the need for reform was
important if National Insurance is to remain a part of our social safety net as we move forward in the next two decades. Our primary concern continues to be the future sustainability of the Fund. The year 2018 has been a year in which the NIBTT, while concentrating on improving compliance and service to the public, also acknowledged that there were challenges which required the support of our stakeholders. Accordingly, we sought to sensitise our stakeholders to the reality that the ability of the Fund to pay benefits under the current structure of our National Insurance System would mean that from as early as 2019, we would have to start liquidating assets in order to pay benefits.
BILLIONS
PROJECTED EVOLUTION OF TOTAL NIS ASSETS
Current TT$
Constant 2013 TT$
Source 10th Actuarial Review Report
The changing demography of Trinidad and Tobago has been the underlying cause of the inability of contribution income to meet benefit expenditure. Our labour force is shrinking, due largely to a reducing birth rate, and also due to migration. This means that contribution income is not keeping pace with our ageing population, who are living longer. The
consequence of these phenomena – which are by no means unique to Trinidad and Tobago – is that the quantum of contributions paid by employees and employers to the Fund is falling, and the amount to be paid out, particularly in respect of pensions, is increasing.
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PROJECTED POPULATION OF TRINIDAD AND TOBAGO (2013-2063) Year Total Age 0-15
16-59
60 & over
2013 1,345,095 2023 1,405,033 2033 1,415,917 2043 1,397,164 2053 1,344,383 2063 1,269,073
859,449 835,973 823,246 767,941 689,148 657,358
192,286 276,853 334,053 386,949 426,065 404,723
293,360 292,207 258,618 242,274 229,170 206,991
Ratio of persons 16-59 to 60 & over 4.5 3.0 2.5 2.0 1.6 1.6
Source: 10th Actuarial Review Report
The solution to this problem requires the support of Government and the general public, as it involves significant policy change – it is twofold: • •
the retirement age must be increased from 60 to 65; and contributions by Employers and Employees to the Fund must be increased from 13.2% to 15.6% (in 2018).
In addition, the parameters of the system should be automatically adjusted, and the minimum National Insurance pension should be frozen to give, at most, 80% of the minimum wage. Fortunately, in 2018 the Fund performed well, despite the poor performance of the local and international markets. On average, the yield on the investment portfolio during the financial year 2018 was 5.71%. Greater flexibility in the investments that the Fund is permitted to make would further assist in improving the return to the Fund. However, the parameters set by the First Schedule to the National Insurance Act, Chapter 32:01, restrict the ability of the Investment Committee to take full advantage of the international markets. In 2018, the Minister of Finance did adjust these parameters by allowing the NIBTT to invest up to 30% of its investments (an increase of 10%) in certain specified international markets. Recognising that greater flexibility also brings greater risk, we continue to work with the Ministry of Finance in order to widen the scope of our permissible investments. I particularly wish to thank the Investment Committee of the NIBTT for its sterling support over the past year. The Investment Committee comprises not only Directors of the NIBTT, but also independent persons selected from Government, Business and Labour, with extensive experience in finance. These individuals give selflessly of their time and are often required to attend meetings at short notice. Our second challenge is the age of the National Insurance Scheme in Trinidad and Tobago. The NIBTT was established in 1972 and at that time would have
8
been dynamic and cutting edge. Some 47 years later, there has been little accomplished in terms of reform. The Act is now dated and difficult to operate in a fastpaced and technologically driven world. The NIBTT has embarked on an exercise to revise, update and modernise the legislation. The recommendations for amendments to the Act are expected to be completed in 2019 after which they will be presented to the Ministry of Finance. Hand in hand with this exercise is the need to improve our service to the public. This cannot be achieved in today’s world without embracing technology. To this end, in 2018 we launched the project to acquire an end-to-end ICT solution. This project is progressing and is expected to be fully implemented within a three-year time frame. Policy change, legislative change and technological change are three major components of the strategic plan of the NIBTT in 2018. Looking forward, the next few years will be turbulent as these three initiatives will impact and impose significant change to every aspect of the NIBTT’s operations. We applaud the commitment of our management and staff to the critical role that the NIBTT plays in Trinidad and Tobago. We will be depending on their continued dedication and support as they embrace the changes whilst continuing to serve the public. Change is not always easy, but it will be both exciting and fulfilling to be part of the Team responsible for this transformational strategy. To my fellow Directors who are an integral part of this process, I wish to thank you for your sterling support and dedication to the NIBTT over the past year.
Jacqueline Quamina Chairman
FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
The NIBTT is governed by a tripartite Board with its investments managed by the Investment Committee.
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The Board of Directors is a tripartite body with equal representation by Government, Business and Labour, an independent Chairman and the Executive Director, who is an ex-officio member. Directors are appointed for a period of not more than two years but may be reappointed. The NIBTT reports to Parliament through the Ministry of Finance.
10
FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
Michael Toney, Chairman until November 2017; Selby Leslie, Director (Government) until November 2017; Pradeep Subrian, Director (Government) until November 2017; Walton Hilton-Clarke, Director (Business) until July 2017; Keston Nancoo, Director (Business) until July 2017; Ruben Mc Sween, Director (Business) until July 2017
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A N N U A L
12
R E P O R T
2 0 1 7 - 2 0 1 8
FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
Audit, Risk and Compliance Committee
Stakeholder Relations Committee
Robin Lewis
Chairman (Business)
Jacqueline Quamina
Chairman
Ann Chan Chow
Member (Labour)
Robin Lewis
Member (Business)
Patrick Ferreira
Member (Government)
Muriel Alfred-James
Member (Government)
Selby Leslie
Chairman until November 2017
Charmaine Alleyne
Member (Labour)
John Boisselle
Member until July 2017
Michael Toney
Chairman until November 2017
Keston Nancoo
Member until July 2017
Selby Leslie
Member until November 2017
Walton Hilton-Clarke Member until July 2017
Tenders Committee John Boisselle
Chairman (Labour)
Gwendoline Mc Laren Member (Business) Muriel Alfred-James
Member (Government)
Niala Persad-Poliah
Executive Director (ex-officio)
Sarah Baboolal
Executive Manager, Legal Services (ex-officio, non-voting)
Ermine De Bique-Meade Chairman (Labour)
Ruben Mc Sween
Chairman until July 2017
Marilyn Gordon
Member (Government)
Pradeep Subrian
Member until November 2017 Chairman Aug – Nov 2017
Niala Persad-Poliah
Executive Director (ex-officio)
Navin Rajkumar
Executive Manager Investments (ex-officio, non-voting)
Selby Leslie
Member until November 2017
Human Resources Committee Gwendoline Mc Laren Chairman (Business) Muriel Alfred-James
Member (Government)
Joseph Remy
Member (Labour)
Niala Persad-Poliah
Executive Director (ex-officio)
Michael Gopaul
Executive Manager, Human Resources (Ag.) (ex-officio, non-voting)
Keston Nancoo
Riverwoods Management Committee Gwendoline Mc Laren Member (Business)
Walton Hilton-Clarke Member until July 2017
Actuarial Review Committee Douglas Camacho
Chairman (Business)
Sylvan Wilson
Member (Labour)
Chairman until July 2017
Patrick Ferreira
Member (Government)
Niala Persad-Poliah
Executive Director (ex-officio)
John Boisselle
Member until July 2017
Pradeep Subrian
Member until November 2017
Feyaad Khan
Executive Manager, Policy, Planning and Actuarial Services (ex-officio, non-voting)
Selby Leslie
Member until November 2017
Keston Nancoo
Chairman until July 2017
Nominations & Governance Committee Jacqueline Quamina
Chairman
Ann Chan Chow
Member (Labour)
Douglas Camacho
Member (Business)
Patrick Ferreira
Member (Government)
Robin Lewis
Chairman (Business)
Niala Persad-Poliah
Executive Director (ex-officio)
John Boisselle
Member (Labour)
Michael Toney
Chairman until November 2017
Gwendoline Mc Laren Member (Business)
Selby Leslie
Member until November 2017
Douglas Camacho
Member (Business)
Muriel Alfred-James
Member (Government)
Walton Hilton-Clarke Member until July 2017
I.C.T Oversight Committee
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Financial Year The financial year of the NIBTT is the 12-month period ending June 30.
Related Bodies The National Insurance Appeals Tribunal The National Insurance Appeals Tribunal (NIAT) is an independent body comprising 11 members appointed by the President of the Republic of Trinidad and Tobago in accordance with Section 60 of the National Insurance Act. This body functions as a tribunal of fact for persons aggrieved by decisions of the Board with respect to their claims.
Subsidiaries of the NIBTT National Insurance Property Development Company Limited (NIPDEC) NIPDEC is a fully owned subsidiary of the NIBTT. Its mission is to develop, manage and sell property, goods and services in partnership with the NIBTT and other organisations in Trinidad and Tobago, utilising a project management approach to bring value to their shareholders and stakeholders.
100%
Home Mortgage Bank (HMB) HMB is a subsidiary of the NIBTT. Its purpose is to develop and maintain a mortgage market in Trinidad and Tobago, contribute to the mobilisation of long-term savings to support the development of a system of real property and housing finance, provide leadership in the home finance industry and promote growth of the capital market.
100%
Trinidad & Tobago Mortgage Finance Company Limited (TTMF)
51%
TTMF is a subsidiary of the NIBTT. Its mission is to provide mortgage financing for the purchase of residential properties.
Executive and Senior Management Structure The Executive Director is the Chief Executive Officer of the NIBTT and is responsible for carrying out the decisions of the Board of Directors. The Executive Director leads a team of executive managers who oversee the operations of the NIBTT.
Operational Structure The operations of the NIBTT are divided into eight Business Units as follows: Finance & Accounting
Investments
14
Planning, Policy & Actuarial Services
Insurance Operations
Human Resources
Legal Services
Risk
Technology
FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
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There are four departments that report to the Executive Director: Corporate Projects, Corporate Secretariat, Corporate Communications and Facilities, Services and Security.
Office of the Executive Director David Millette
Corporate Secretary up to December 2017
Lauren Sandiford
Corporate Secretary (Ag.) w.e.f. June, 2017
Romila Bhagwandeen Assistant Corporate Secretary (Ag.) w.e.f. July 2017 Debra Modeste
Executive Assistant (Ag.)
Clint Connelly
Manager, Corporate Projects
Theresa Taitt
Manager, Facilities, Services and Security
Jennilynn Howe-Dopwell Manager, Corporate Communications up to September 2017 Cheryl Isacc Monroe
Manager, Corporate Communications (Ag.) September – December 2017 and June – December 2018
Ryan Isava
Manager, Corporate Communications (Ag.) June – August 2017 and December – February 2018
Investments Viveka Goolcharan
Manager, Investments (Fixed Income)
Christopher Clarke
Manager, Investments (Equities) up to July 2017
Amrit Seunarine Manager, Investments (Equities) Shanaz Mohammed Jaikaran
Senior Investment Analyst up to November 2017
Schinelle Dyer
Senior Investment Analyst w.e.f. June 2018
Debra Gross
Manager, Mortgages (Ag.)
Finance and Accounting Business Unit
Andy Edwards
Actuarial Associate
Denise Nicholas
Manager, Research and Development (Ag.)
Insurance Operations Business Unit Emrice Henry Manager, Insurance Operations Patricia George- Lezama
Area Operations Manager – Area I
Sherwin Williams
Area Operations Manager – Area III
Hilarie Hoyte
Area Operations Manager – Area II (Ag.)
Ryan Isava Manager, Customer Relations Patricia Charles
Manager, Contribution Income and Compliance
Human Resources Business Unit Isha Khan
Manager, Employee/ Industrial Relations
Bianca Attong Manager, Human Resource Services Daya Mc Farlane
Manager, Organisation Development (Ag.)
Legal Services Business Unit Ashook Balroop
Manager, Legal Services
Rishi Ramrattan
Manager, Procurement
Edmund Christo
Legal Officer
Valini Dhanraj Chadee Legal Officer up to January 2018 Nera Narine-Ramdeen Legal Officer up to December 2017 Shazard Mohammed
Legal Officer w.e.f. June 2018
Technology Business Unit Curtis Richards
Manager, IT Infrastructure up to January 2018
Jennifer Creese Manager, Budgets and Controls
Mikhail Noel
Manager, IT Development
Annabelle Holder
Adrian Fortune
Manager, IT Security
Roy Jack
Manager, Database, Administration and Support (Ag.)
Lawrance Hernandez
Manager, IT Infrastructure (Ag.) w.e.f. January 2018
Darien Peters
ICT End-to-End Project Co-ordinator (Ag.)
Karen Davis-Holder
Financial Accountant
Manager, Settlements
Risk Business Unit
16
Policy Planning and Actuarial Services Business Unit
Donna Lawrence
Manager, Compliance
Moses Mohammed
Manager, Business Continuity Risk (Ag.)
FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
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A N N U A L
18
R E P O R T
2 0 1 7 - 2 0 1 8
FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
The economic environment in Trinidad and Tobago over the current reporting period resulted in changes to the labour market that have directly impacted the National Insurance Board of Trinidad and Tobago (NIBTT). Based on the most recent data from the Central Statistical Office, the unemployment rate increased from 4% in the third quarter (Q3) of Financial Year (FY) 2017 to 5.1% in the same quarter of FY2018. This is reflective of a decline in the number of persons with jobs in the country from approximately 613,600 workers in Q1 of FY2017 to 602,000 workers in Q1 of FY2018. Despite these challenges, the NIBTT has remained focused on improving customer service, while creating an environment that fosters strong interagency collaboration, robust internal and external monitoring systems, as well as providing a platform for continuous stakeholder engagement.
experienced by our customers, is indicative of the NIBTT’s commitment to service. Notwithstanding this positive outcome, we aim to continually improve our operations and, through annual independent customer satisfaction surveys, the NIBTT will continue to receive valuable feedback from our customers. This, in turn, will positively impact the NIBTT and further highlight improvements which can be made to the National Insurance System.
Over the course of the financial year, the NIBTT was able to make considerable strides toward successfully rationalising its contribution collections processes. These changes have contributed to an increase in the collection of contribution income, notwithstanding job losses which occurred throughout the labour market. Complementing these changes in our contribution collection processes were revisions to the investment policy – within statutorily stipulated boundaries – to ensure optimal returns on our investments while still adhering to best-practice standards in portfolio and risk management.
I congratulate the entire NIBTT family for achieving yet another successful financial year. The hard work and dedication to duty, despite the many challenges in our operating environment, ensured that the organisation achieved its targets. I am optimistic about the future of the NIBTT and of its capacity to continue a growth momentum with each succeeding year. The NIBTT is a noble institution administering a critical service in the national interest: the responsibilities are weighty, and the expectations are high. However, we have emerged triumphant yet another year.
While these initiatives have been successful in strengthening the income side of our operational equation, the management of the NIBTT remains cognisant of the need to advance the implementation of key recommendations of the 9th Actuarial Review, inclusive of incrementally increasing the age for receiving a full pension to 65 years. This measure will address the expenditure side of our operations so that financial balance may be restored, thereby ensuring the long-term sustainability of the National Insurance System. During the reporting period, the NIBTT was successful in meeting its commitment to its customers, which resulted in a Customer Satisfaction score of 91%. This high level of satisfaction
Over the years, feedback of this type has been instrumental in helping us to develop projects which push the boundaries required for efficient service delivery. In this regard, the NIBTT partnered with government agencies, such as the Ministry of Social Development and Family Services and the Ministry of Labour and Small Enterprise Development, to strengthen data-sharing relationships, all with the aim of improving service delivery.
The NIBTT has remained focused on improving customer service, while creating an environment that fosters strong inter-agency collaboration, robust internal and external monitoring systems, as well as providing a platform for continuous stakeholder engagement. 19
A N N U A L
R E P O R T
2 0 1 7 - 2 0 1 8
Performance FY2016 FY2017 FY2018 Indicators
% Increase/ % Increase/ Decrease Decrease 2016-2017 2017-2018
Claims
Benefit Recipients
186,839 191,840 197,379 2.68% 2.89%
Long-Term Beneficiaries
153,823 160,420 166,078 4.29% 3.53%
New Claims Paid
43,554 40,948 41,086 -5.98% 0.34%
Compliance Customer Base
673,606
644,410
625,422
-4.33%
-2.95%
Insured Contributors
514,561
479,036
452,234
-6.90%
-5.59%
Employers
20,479 21,342 20,869 4.21% -2.22%
Employers Surveyed
4,589 4,512 2,315
-1.68% -48.69%
Financial Contribution Income
$4,251.70Mn
$4,608.24Mn
$4,669.61Mn
8.39%
1.33%
Investment Income Realised
$1,007.27Mn
$935.94Mn
$1,991.24Mn
-7.08%
112.75%
Miscellaneous Income
$2.32Mn
$0.18Mn
($0.92)Mn
-92.24%
-608.33%
Benefit Expenditure
$4,513.24Mn
$4,748.50Mn
$4,895.77Mn
5.21%
3.10%
Administrative Cost
$225.99Mn
$214.05Mn
$214.01Mn
-5.28%
-0.02%
Administrative Cost as a % of Contribution Income
5.32% 4.64% 4.58% -0.68* -0.06*
Administrative Cost as a % of Total Income
5.35% 3.50% 3.28% -1.85* -0.22*
Net Yield of Investment Portfolio 1.81% 6.26% (realised & unrealised)/ Overall Investment Portfolio Return ***
5.71%
4.45*
-0.55*
Total Funds
$25.24Bn
$26.40Bn
$27.83Bn
4.60%
5.42%
Total Assets
$25.49Bn
$26.61Bn
$27.99Bn
4.39%
5.19%
*Percentage Points *** Return based on Investment Portfolio – Excludes Cash Balances from NIBTT’s Pension Plan A/c, MAT Securities (Mortgages), Funeral Grant Cash Account and other cash accounts
Some of our key operational statistics include:
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1. Contribution income in FY2018 was $4,669.61Mn, an increase of 1.33% over the figure recorded for the previous year.
4. Total Funds increased by 5.42% from $26.40Bn as at June 30, 2017 to $27.83Bn as at June 30, 2018.
2. The number of beneficiaries increased by 5,539 or 2.89% to 197,379 in FY2018 compared with 191,840 in FY2017.
5. Total Assets increased by 5.19% from $26.61Bn as at June 30, 2017 to $27.99Bn as at June 30, 2018.
3. Benefit Expenditure amounted to $4,895.77Mn and represented an increase of 3.10% over the previous year.
6. Administration expenses as a percentage of contribution income decreased marginally from 4.64% in FY2017 to 4.58% in FY2018.
FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
7. The customer base decreased by 18,988 persons or 2.95% to a total of 625,422 in FY2018. 8. The active employer population decreased by 2.22% from 21,342 in FY2017 to a total of 20,869 at the end of FY2018.
These initiatives, coupled with the diligence of staff and synergistic teamwork among departments, came together and resulted in an overall customer satisfaction score of 91%, according to an independent survey conducted by Market Facts and Opinion (2000) Ltd.
CUSTOMER SERVICE DELIVERY
EMPLOYER AND EMPLOYEE REGISTRATION
Enhancing service delivery to improve Customer Satisfaction is one of six strategic objectives to be achieved in the current strategic planning period (FY2017 – FY2019). In keeping with this objective, many initiatives have been implemented during the reporting period aimed at improving our service delivery. Some of the major initiatives included:
During FY2018, the number of employers registering with the National Insurance Board decreased by 291 or 13% to 1,928 compared to the previous year’s figure of 2,219. The active employer population also decreased from 21,342 in FY2017 to 20,869 at the end of FY2018. This represents a decrease of 473 employers or a 2.22% drop over the reporting period.
1. A revision of processes to improve the time taken to resolve queries from customers
The NIBTT registered a total of 16,373 new employed persons during FY2018, an increase of 6% or 854 persons over the 15,519 new registrants in FY2017.
2. The roll-out of ‘Coaching and Mentoring’ training for managers and supervisors within the organisation 3. Customer Service Charter training for all staff 4. The completion of the Customer Service Policy 5. Relocation of the Tobago Service Centre to a new convenient location
BENEFIT ADMINISTRATION Beneficiaries received a total of $4,895.77Mn in benefit payments in FY2018. This represented an increase in expenditure of 3.10% over the previous reporting period.
MILLIONS
Benefit Expenditure 2016 - 2018
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A N N U A L
R E P O R T
2 0 1 7 - 2 0 1 8
LONG-TERM BENEFITS Consistent with population ageing and projections for the evolution of the NIS, the long-term benefits branch showed an increase in the number of recipients and the value of benefits paid. This benefit group consists of Retirement Pension, Retirement
Grant, Invalidity and Survivors’ Benefit recipients, whose number increased by 5,658 or 3.53% from 160,420 in the previous year to 166,078 in FY2018. Payment to this group totalled $4,575.31Mn or 93.5% of total benefit expenditure.
Benefit Number of Benefit Type Beneficiaries Expenditure
% of Total % of Total Long-Term Long-Term Beneficiaries Expenditure
Retirement Pension
112,795
$3,938,677,059.56
68%
86%
Retirement Grant
5,110
$169,749,423.51
3%
3%
Survivor’s Benefit
44,305
$391,616,776.30
27%
9%
Invalidity
3,868
$75,269,332.09
2%
2%
Total
166,078
$4,575,312,591.46
100%
100%
% of Total Beneficiaries
84.1%
% of Total Benefit 93.5% Expenditure
86% 2% 9% 3%
Long-Term Benefits Retirement Pension Invalidity Survivor’s Benefit Retirement Grant
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FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
SHORT-TERM BENEFITS The short-term benefits branch showed an increase in the number of recipients, but a decrease in the value of benefits paid. This benefit group consists of Sickness Benefit, Maternity Benefit, Special Maternity Grant and Funeral Grant. The number of recipients
of these benefits increased marginally by 0.85% from 26,034 in the previous year to 26,254 in FY2018. Payment to this group totalled $239.88Mn or 4.9% of total benefit expenditure.
Benefit Number of Benefit Type Beneficiaries Expenditure
% of Total % of Total Short-Term Short-Term Beneficiaries Expenditure
Sickness Benefit
10,338
$54,299,934.64
39%
23%
Maternity Benefit
7,142
$123,769,618.37
28%
52%
Special Maternity Grant
1,084
$4,221,250.00
4%
1%
Funeral Grant
7,690
$57,586,652.00
29%
24%
Total
26,254
$239,877,455.01
100%
100%
% of Total Beneficiaries
13.3%
% of Total Benefit Expenditure
4.9%
23% 52% 1% 24%
Short-Term Benefits Sickness Benefit Maternity Benefit Special Maternity Grant Funeral Grant
23
A N N U A L
R E P O R T
2 0 1 7 - 2 0 1 8
EMPLOYMENT INJURY BENEFITS The Employment Injury benefits branch showed a decrease in the number of recipients and the value of benefits paid. This group comprises Disablement Pension and Grant, Death Benefit, Medical Expenses and Employment Injury. The number of recipients of
these benefits decreased by 339 persons or 6.3% from 5,386 in the previous year to 5,047 in FY2018. Payment to this group totalled $80.58Mn or 1.6% of total benefit expenditure.
Benefit Number of Benefit Type Beneficiaries Expenditure
% of Total % of Total EIB EIB Beneficiaries Expenditure
Disablement Pension
3,180
$51,356,430.52
63%
64%
Disablement Grant
66
$ 2,208,885.47
1%
3%
Death
452
$10,067,826.26
9%
12%
Medical Expenses
67
$
1%
0%
Injury Allowance
1,282
$16,830,382.98
26%
21%
Total
5,047
$80,581,595.11
100%
100%
% of Total Beneficiaries
2.6%
118,069.88
% of Total Benefit 1.6% Expenditure
Employment Injury Benefit 21%
0%
12%
3%
64% Disablement Pension
24
Disablement Grant
Death
Medical Expenses
Injury Allowance
FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
APPEALS Claimants continued to exercise their right of appeal whenever they felt aggrieved by decisions of the Board in respect of their claims for benefits. This is in accordance with Section 62(1) of the National Insurance Act (NI Act) which states that: “Appeals from decisions of the Board shall lie to the Appeals Tribunals on questions of fact only and to the High Court on questions of law or partly of law and
partly of fact and from the High Court to the Court of Appeal.� For the financial year, 249 appeals notices were received by the Appeals Tribunal, of which 174 or 70% of the appellants were issued responses. The table below records the appeals received and responses issued for financial years 2016, 2017 and 2018.
Financial Year
No. of Appeals Received
Responses Issued
2016
215
153
2017
213
207
2018
249
288
Total
677
648
Appeal Hearings There were no appeal hearings this financial year. The term of the members of the Tribunal expired during the previous financial year and a quorum remains pending to date.
RECIPROCAL AGREEMENTS Canada and Trinidad and Tobago During the financial year, 77 applications were made by persons in Canada accessing Trinidad and Tobago benefits through Service Canada and 45 applications were made through the Service Centres. A total of 101 enquiries were received for persons in Canada accessing benefits there. For the financial year, there were no applications received from persons in Trinidad and Tobago wishing to access benefits in Canada. As at June 30, 2018, there were 192 applications awaiting responses from Canada for persons applying for Trinidad and Tobago benefits. CARICOM and Trinidad and Tobago During this financial period, 1 application was made through CARICOM member offices by persons
accessing Trinidad and Tobago benefits and 28 enquiries were received from CARICOM member offices in respect of Trinidad and Tobago benefits. There were no applications received in Trinidad and Tobago from persons wishing to access benefits in other CARICOM jurisdictions, and 37 applications were made through the Service Centres accessing Trinidad and Tobago Benefits. Responses are awaited from 34 persons who applied for Trinidad and Tobago benefits under this agreement.
REVENUE Contribution Income During the reporting period, a total of $4,669.61Mn was paid in contributions, an increase of 1.33%, compared to the $4,608.24Mn paid in the last reporting period. The number of employers, however, fell by 2.22% from 21,342 at the end of FY2017 to 20,869 employers at the end of FY2018. Income from penalties and interest for the period amounted to $18.91Mn. A comparison of contribution income for the financial years 2014 to 2018 shows a measure of fluctuation in the contribution income figure over the last five years.
Contribution Income for FY2014 to FY2018
FY2014 FY2015 FY2016 FY2017 FY2018
Contribution Income
$3,624.03
$4,261.47
$4,251.70
$4,608.24
$4,669.61
% Increase/Decrease
-
17.6%
-0.2%
8.4%
1.3%
25
A N N U A L
R E P O R T
2 0 1 7 - 2 0 1 8
MILLIONS
Contribution Income
INVESTMENT Asset Allocation as at June 30, 2018
0.003% 12.75% 3.41% 1.22%
34.17%
48.45%
Fixed Income
26
Equity
Real Estate
Mutual Fund
Cash and Cash Equivalents
Mortgages
FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
Asset Class
Market Value as at June 30, 2018
Current Asset Allocation
Fixed Income
$9,081,283,000
34.17%
Equity* $12,877,690,000 48.45% Real Estate
$324,700,000
1.22%
Mutual Fund
$906,922,000
3.41%
Cash and Cash Equivalents
$3,387,875,000
12.75%
Mortgages $740,000 Total
0.003%
$26,579,210,000 100.00%
*Equity includes fair value of investment in subsidiary companies
The market value of NIBTT’s investment portfolio as at June 30, 2018 stood at $26.58 billion, reflecting a 5.27% or $1.33 billion increase over the Fund size as at June 30, 2017 which stood at $25.25 billion. The increase in the Fund’s market value was attributable to realised income from the fixed income and equity portfolios totalling $1.96 billion. This increase however, was partially offset by net unrealised losses and withdrawals from the Investment’s Cash Account to pay benefits of TT$330 million. There continues to be a shortfall in contribution income to meet liquidity requirements. The Equity Portfolio accounts for the largest asset class of the total fund, with a market value of $12.88 billion. There was an overall decline by approximately 0.12% or $16 million over the prior financial year mainly due to our focus on reducing single entity concentration risk. Additionally, during the financial year, the NIBTT was successful in its participation of the Trinidad and Tobago NGL Limited’s (TTNGL’s) Additional Public Offering (APO). Due to sluggish local economic conditions, the domestic stock market benchmarked against the All T&T Index reported a slight positive return of 0.36% for the financial year. Despite this, the NIBTT’s domestic equity portfolio outperformed the All T&T Index by 628 basis points, primarily due to the portfolio’s overweight position in its TTNGL holdings, which significantly outperformed the All T&T Index. As at June 30, 2018, the Fixed Income portfolio increased by 8.53% or $713 million to $9.08 billion
with a purchase yield to maturity of 5.06%. During the year, $1.85 billion in new securities were purchased while $1.02 billion matured. The NIBTT’s fixed income portfolio invests in high-quality debt instruments as the portfolio is primarily invested in Government and government-guaranteed instruments which accounts for approximately 60% of the fixed income portfolio. During late April 2018, S&P Global Ratings revised its outlook on the Republic of Trinidad and Tobago to “Negative” from “Stable” with an affirmed “BBB+” credit rating. It is expected that moderately higher energy prices and higher production levels will lead to a mild economic recovery and smaller current account deficit. The rating agency believes that there continues to exist uncertainty about whether this improvement will be sufficient to mitigate the impact that imbalances such as exchange rate pressure, restrictions on accessing foreign currency, negative yield differentials on short-term treasury securities relative to those of the US and historical gas supply shortages, will have on the local economy. Meanwhile, Moody’s held the country’s “Ba1” rating steady in May 2018, although, according to its rating criteria, still puts the country at the highest tier of junk bond (high-risk) investment status. The credit rating is supported with a “Stable” outlook. The top two countries in which the portfolio is invested are Trinidad and Tobago (81%) and North America (19%) whilst the largest industry sector exposures are Financial/Banks (35%) and Sovereign (22%).
Year-on-Year Total Realised Investment Income
2018-2017
2017-2016
‘000 ‘000
Interest Income
$783,260.00
$386,548.00
Dividend Income
$384,684.00
$382,362.00
Gain on Sale of Foreign Equities
$692,958.00
$117,411.00
Gain/(Loss) from Foreign exchange
($13,069.00)
$6,301.00
Gain/ (Loss) on Sale of Bonds
($4,167.00)
$15,548.00
Other Income
$116,338.00
$104,905.00
Total Realised Investment Income
$1,960,004.00
$1,013,075.00
27
A N N U A L
R E P O R T
2 0 1 7 - 2 0 1 8
Year-on-Year Net Unrealised Investment Income Asset Class
2018-2017
2017-2016
‘000 ‘000
Equity ($136,908) $256,157 Bonds
($13,884) $66,479
Subsidiaries
($8,623) $0
Other
($1,121) $70,433
Total
($160,536)
As highlighted in the tables preceding the asset classes that contributed to most of the net unrealised investment loss movement over the period, were equities and bonds. However, this negative unrealised movement was mitigated by a total realised investment income of $1.96 billion. Key drivers for the portfolio’s realised investment income were interest income from bonds, dividend income from equity holdings and realised gains on the sale of international equities.
There was a continued focus on strengthening our corporate governance framework during the reporting period. To ensure continued strategic alignment with the NIBTT’s subsidiaries, key appointments were made to the Boards of the National Insurance Property Development Co. Ltd. (NIPDEC), the Trinidad and Tobago Mortgage Finance Co. Ltd. (TTMF) and the Home Mortgage Bank (HMB).
OPERATIONAL HIGHLIGHTS
Efficient Information and Communication Technology (ICT) systems are critical components for the NIBTT as it works to achieve the strategic objective “enhancing service delivery and improving customer satisfaction.” In this regard, we are proud to advise of a near perfect overall system uptime of 99.53% was achieved. Other technological achievements over the financial year included successful implementation of an Enterprise Document Management system, as well as the timely back-up of critical ICT data within stipulated time frames.
10th Actuarial Review In accordance with the National Insurance Act, Section 70(1), yet another Actuarial Review of the National Insurance System (NIS) was successfully completed in FY2018. The 10th Actuarial Review was conducted by the International Labour Organisation, and the report was submitted to the Board of Directors in June 2018. The report was reviewed by the Board on June 28, 2018, at which time the Board of Directors accepted the recommendations which related to the key parameters of the NIS. It is anticipated that the 10th Actuarial Review of the NIS will be laid in Parliament during the second quarter of the upcoming financial year. Risk and Corporate Governance The NIBTT operates in an environment of growing uncertainty that threatens the fulfilment of its mandate and the achievement of all its strategic objectives. As such, risk management forms an important component of the planning and monitoring activities, as well as general business processes of the organisation as evidenced by the institution of our Enterprise Risk Management Framework. The key elements of this framework work together to create a sustainable process for managing risks, which significantly increases the likelihood of the organisation achieving its strategic and operational goals. Through the continuous review and development of our policies the NIBTT has successfully developed mechanisms to mitigate risk. Additionally, at the end of the reporting period a total of 31 policies were approved for implementation.
28
$393,069
Technology
In our effort to transform into a customer-centric organisation, the NIBTT has embarked upon the acquisition of an ICT solution which, when implemented, will facilitate a seamless integration and extension of the capabilities of our current systems. This ICT solution will revolutionise the service experienced by NIBTT’s customers and provide an end-to-end delivery of our products and services to all stakeholders. We anticipate that this ICT solution will be benchmarked both locally and regionally. In this regard, the NIBTT engaged the services of a consultant to provide advisory services in relation to the design and implementation of this solution. Legal Services Through court agreements, promissory notes and litigation actions, a total of $1,166,946.76 in contribution arrears, penalties and interest was recovered from 41 non-compliant employers. Additionally, 13 judgements were obtained against employers or directors of employer businesses for arrears of contribution payments in the sum of $2,101,525.54.
FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
Our efforts in this regard, demonstrate our commitment to safeguarding the National Insurance Fund to ensure its sustainability. Human Resources The approved staff structure of the NIBTT for the reporting period was 711 employees. The empowerment of staff is a key element in the mission of the NIBTT, as we recognise that this is the foundation for us achieving the levels of service to which we aspire. The NIBTT continues to ensure that we retain the right people and equip them with the right skills to excel in their respective functions. In accordance with the revised organisational structure, key positions were filled including that of Chief Operations Officer – Business Services, while five appointments were made at the Senior Management Level. Staff professionalism and commitment was reflected in 96% of employees earning performance ratings of “good” or higher. Another significant achievement was the completion of 100% of planned training programmes for staff at all levels in the organisation. Additionally, in an effort to support positive engagements and work life balance, an Employee Engagement Plan programme was developed. The key activities in this programme completed during the financial year, included: •
The roll-out of the NIBTT professional promoting a benchmark level of professionalism for all employees
•
Leadership, strategic thinking, coaching and mentoring, and Industrial Relations sensitisation for the management team
•
The roll-out of the Customer Service Charter detailing the standards of customer service to which all employees should follow.
•
Foundational Training and a career planning workshop for new recruits
•
Execution of the staff development training plan for staff at all levels of the organisation
Other social activities organised for staff and their families included: •
The Independence Day “Light It Up” fireworks viewing event.
•
The NIBTT Staff Cook-Out held at La Vega Estate in September 2017.
COLLABORATIONS Ministry of Labour and Small Enterprise Development (MOLSED) In support of an initiative of the Ministry of Labour and Small Enterprise Development, the NIBTT was invited to sit on the Inter-Ministerial Committee for the Development of a Labour Migration Policy for Trinidad and Tobago. Members of this Cabinet-appointed committee are due to receive their instruments of appointment at the beginning of the next financial year. The NIBTT participated in the National Tripartite Advisory Council as part of a discussion on the development of a National Severance Benefit Framework. Preliminary discussions saw the NIBTT assuming the lead role in guiding the development of a framework for the rationalisation of a Guarantee mechanism under the Act. Discussions are ongoing on this matter. The University of the West Indies (The UWI) Given the modern, global challenge of population ageing and the concomitant impact on social security systems of this phenomenon, the NIBTT partnered with the Institute for Gender and Development Studies of The UWI, St Augustine to host a conference titled: Connecting the Dots – WorkLife Balance and Ageing, on the UWI campus at St Augustine on the April 26-27, 2018. Along with academic luminaries who specialised in the study of ageing, the Executive Director delivered the feature address on the second day of the conference and took the opportunity to share with the participants findings and recommendations of the 9th Actuarial Review of the NIS, much of which are attempts to mitigate the impact which ageing has wrought on the system. The International Social Security Association (ISSA) The NIBTT partnered with ISSA to host a Customised Training and an Academy Workshop on ISSA Guidelines on Good Governance with a focus on good governance, strategic planning and risk management. The training and workshop was held at the NIBTT’s Corporate Headquarters in Port of Spain over the period June 25-29, 2018. Participants included representatives from the Social Insurance agencies of Anguilla, the British Virgin Islands, St Lucia, and Turks and Caicos.
29
A N N U A L
R E P O R T
2 0 1 7 - 2 0 1 8
IMF Article IV Consultations 2018 A team from the NIBTT met with an IMF delegation that visited Trinidad and Tobago as part of their annual Article IV Consultation held with member countries. NIBTT representatives met with the IMF delegation on June 27, 2018 and discussed matters related to the conduct of actuarial reviews, investments, pension reform as well as general aspects of good governance and sustainability of the NI Fund.
APPRECIATION I would like to extend my heartfelt appreciation to all our stakeholders who partnered with the NIBTT as we executed the work plan of the second year of our Strategic Plan, Vision 2019 “From Strategy to Action: Working Together”. Your recommendations have afforded the feedback necessary for ongoing monitoring and evaluation. These processes will contribute to the ultimate attainment of the NIBTT’s strategic goals as these are intrinsically linked to fund sustainability and exceptional customer service. I also wish to express my deepest appreciation for the continued encouragement and support of our Chairman, the Board of Directors and all Committees of the Board. Your wisdom and guidance have positively impacted our undertakings as we remain unswervingly on the path to organisational transformation and long-term success of the NIS.
30
The cornerstone of every successful organisation is committed and loyal employees, and at the NIBTT, we are blessed with an exceptional cadre of staff. The service and performance improvements that we have achieved this year, could only have been attained through the hard work and dedication of our staff. I thank all our dedicated employees. I take this opportunity to also thank my fellow executives and senior managers, who have demonstrated “true grit”, compassion and loyalty to the efficient administration of the NIBTT during the past year. In FY2018, the NIBTT was successful in navigating the course to a new horizon in our future as an organisation. The coming financial year will surely bring its own set of unique challenges; however, I am confident in our ability to triumph over any adversity. We will continue to equitably engage with all of our stakeholders as we consistently provide quality service to our valued customers.
Niala Persad-Poliah Executive Director 28 September 2018
FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
31
A N N U A L
R E P O R T
2 0 1 7 - 2 0 1 8
STATEMENT OF MANAGEMENT’S RESPONSIBILITIES
Management is responsible for the following: •
Preparing and fairly presenting the accompanying special purpose financial statements of the National Insurance Board of Trinidad and Tobago (‘the Board’ or ‘NIBTT’) which comprise the statement of financial position as at 30 June 2018 and the statements of comprehensive income, cash flows and changes in funds for the year then ended, and a summary of significant accounting policies and other explanatory information;
•
Ensuring that the Board keeps proper accounting records;
•
Selecting appropriate accounting policies and applying them in a consistent manner;
•
Implementing, monitoring and evaluating the system of internal control that assures security of the Board’s assets, detection/prevention of fraud, and the achievement of entity’s operational efficiencies;
•
Ensuring that the system of internal control operated effectively during the reporting period;
•
Producing reliable financial reporting that comply with laws and regulations, including the National Insurance Act 35 of 1971; and
•
Using reasonable and prudent judgment in the determination of estimates.
In preparing these audited special purpose financial statements, management utilised the financial reporting provisions of the National Insurance Act. Where the financial reporting provisions of the National Insurance Act is not clear reference is made to International Financial Reporting Standards, as issued by the International Accounting Standards Board and adopted by the Institute of Chartered Accountants of Trinidad and Tobago to determine the Board’s alternative accounting treatments. Where International Financial Reporting Standards presented alternative accounting treatments, management chose those considered most appropriate in the circumstances. Nothing has come to the attention of management to indicate that the Board will not remain a going concern up to the date the accompanying special purpose financial statements have been authorised for issue. Management affirms that it has carried out its responsibilities as outlined above.
Niala Persad-Poliah Brendon Nelson Executive Director Executive Manager, Finance and Accounting 27 September 2018 27 September 2018
32
FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
INDEPENDENT AUDITOR’S REPORT ON SPECIAL PURPOSE FINANCIAL STATEMENTS
TO THE DIRECTORS OF THE NATIONAL INSURANCE BOARD OF TRINIDAD AND TOBAGO REPORT ON THE AUDIT OF THE SPECIAL PURPOSE FINANCIAL STATEMENTS Our Opinion We have audited the special purpose financial statements of The National Insurance Board of Trinidad and Tobago (“the Board”), which comprise the statement of financial position as at 30 June 2018, and the statement of comprehensive income, statement of cash flows and the statement of changes in funds for the year then ended and, notes to the special purpose financial statements, including a summary of significant accounting policies. In our opinion, the accompanying special purpose financial statements present fairly, in all material respects, the financial position of the Board as at 30 June 2018 and its financial performance and its cash flows for the year then ended in accordance with the financial reporting provisions of The National Insurance Act. Other Matter The special purpose financial statements of The National Insurance Board of Trinidad and Tobago for the year ended 30 June 2017, were audited by another auditor who expressed an unqualified opinion on those statements on 31 October 2017. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Special Purpose Financial Statements section of our report. We are independent of the Board in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis of Matter – Basis of Accounting and Restriction on Distribution and Use We draw attention to Note 4 of the special purpose financial statements, which describes the basis of accounting. The special purpose financial statements are prepared to assist the Finance Minister of the Government of Trinidad and Tobago in meeting their reporting requirements under the National Insurance Act. As a result, the special purpose financial statements may not be suitable for another purpose. Our report is intended solely for the Government of Trinidad and Tobago, and may be made available to the Inspector of Financial Institutions of the Central Bank of Trinidad and Tobago and should not be distributed to or used by parties other than those stipulated. Our opinion is not modified in respect of this matter. Other Information Included in the Board’s 2018 Annual Report Other information consists of the information included in the Board’s 2018 Annual Report, other than the special purpose financial statements and our auditor’s report thereon. Management is responsible for the other information. The Board’s 2018 Annual Report is expected to be made available to us after the date of this auditor’s report. Our opinion on the special purpose financial statements does not cover the other information and we will not express any form of assurance conclusion thereon. In connection with our audit of the special purpose financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the special purpose financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
33
A N N U A L
R E P O R T
2 0 1 7 - 2 0 1 8
INDEPENDENT AUDITOR’S REPORT ON SPECIAL PURPOSE FINANCIAL STATEMENTS (continued)
Report on the Audit of the Special Purpose Financial Statements (continued) Responsibilities of Management and the Audit, Risk and Compliance Committee for the Special Purpose Financial Statements Management is responsible for the preparation and fair presentation of the special purpose financial statements in accordance with the financial reporting provisions of The National Insurance Act, and for such internal control as management determines is necessary to enable the preparation of special purpose financial statements that are free from material misstatement, whether due to fraud or error. In preparing the special purpose financial statements, management is responsible for assessing the Board’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 Board or to cease operations, or has no realistic alternative but to do so. The Audit, Risk and Compliance Committee is responsible for overseeing the Board’s financial reporting process. Auditor’s Responsibilities for the Audit of the Special Purpose Financial Statements Our objectives are to obtain reasonable assurance about whether the special purpose 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 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 special purpose financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: •
• • •
•
34
Identify and assess the risks of material misstatement of the special purpose 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 Board’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 Board’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 special purpose 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 Board to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the special purpose financial statements, including the disclosures, and whether the special purpose financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
INDEPENDENT AUDITOR’S REPORT ON SPECIAL PURPOSE FINANCIAL STATEMENTS (continued)
Report on the Audit of the Special Purpose Financial Statements (continued) Auditor’s Responsibilities for the Audit of the Special Purpose Financial Statements (continued) We communicate with the Audit, Risk and Compliance Committee 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.
Port of Spain TRINIDAD: 27 September 2018
35
A N N U A L
R E P O R T
2 0 1 7 - 2 0 1 8
STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2018 (Expressed in Trinidad and Tobago Dollars)
As at 30 June Notes 2018 $’000 Assets Property, plant and equipment Investment properties Investment in subsidiary companies Financial assets at fair value through profit or loss Mortgage advances Property being developed for sale Other assets Post-employment benefit Cash and cash equivalents
5 6 7
520,337 324,700 1,991,865
526,954 328,750 2,000,488
8 9 10 11 16 12
20,874,030 740 16,030 871,782 6,536 3,387,875
20,186,557 2,635 18,709 819,576 – 2,730,401
Total assets
27,993,895 26,614,070
Funds, reserves and liabilities Long-term benefits fund Short-term benefits fund Employment injury benefit fund
26,541,756 479,755 805,816
13 13 13
Total funds Revaluation reserve
14
Total funds and reserves Other liabilities Post-employment benefit
15 16
Total liabilities Total funds, reserves and liabilities
24,840,004 502,439 1,058,687
27,827,327 26,401,130 72,624
93,944 –
129,182 11,134
93,944
140,316
27,993,895 26,614,070
These special purpose financial statements have been authorised for issue on 27 September 2018.
Chairman Executive Director
72,624
27,899,951 26,473,754
The accompanying notes form an integral part of these special purpose financial statements.
36
2017 $’000
Executive Manager, Finance and Accounting
FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2018 (Expressed in Trinidad and Tobago Dollars)
Year ended 30 June Notes 2018 2017 $’000 $’000 Income Contributions Employers in compliance Employers in arrears Voluntary Refunds
Total net contributions Net realised investment income 17 Net unrealised investment (loss)/income 18 Revaluation of subsidiaries 7 Penalties and interest Miscellaneous income Loss on disposal
4,232,822 437,155 101
4,044,981 565,176 79
4,670,078 (472)
4,610,236 (2,000)
4,669,606 4,608,236 1,991,243 (151,913) (8,623) 18,911 (915) –
935,940 393,069 149,433 23,594 175 (4)
Total income
6,518,309 6,110,443
Expenditure Benefits expenditure Long-term Short-term Employment injury
4,575,312 4,423,233 239,878 240,188 80,582 85,078
Total benefits expenditure
4,895,772 4,748,499
Administrative expenditure Staff salaries, allowances and benefits 19 Board of Directors’ expenses Depreciation 5 Other expenses 20
136,623 943 15,683 60,761
134,963 1,031 5,792 72,262
Total administrative expense
214,010
214,048
Other Pension expense
5,224
13,476
Total other
5,224
13,476
Total expenditure
5,115,006 4,976,023
Surplus of income over expenditure
1,403,303 1,134,420
Remeasurement of defined benefit liability
16
Total comprehensive income
22,894
22,154
1,426,197 1,156,574
The accompanying notes form an integral part of these special purpose financial statements.
37
A N N U A L
R E P O R T
2 0 1 7 - 2 0 1 8
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2018 (Expressed in Trinidad and Tobago Dollars)
Year ended 30 June 2018 2017 $’000 $’000 Cash flows from operating activities Surplus of income expenditure Adjustments: Unrealised investment loss/(income) Foreign exchange losses Bad debts written back Depreciation Pension expense Revaluation of subsidiaries Adjustments to property, plant and equipment profit Surplus before working capital changes Decrease in mortgage advances Decrease investment property Decrease in property being developed for sale Increase in other assets Increase in other liabilities Net cash generated by operating activities
1,403,303
151,913 (393,069) 2,290 – (165) – 15,683 5,792 5,224 13,476 8,623 (149,433) 12,353 – 1,599,224 611,186 1,895 4,050 2,679 (152,772) (35,239)
3,294 1,224 13,288 (36,718) (28,094)
1,419,837 564,180
Cash flows from investing activities Purchase of property, plant and equipment Purchase of investments Sale/maturity of investments
(21,419) (5,936,308) 5,195,364
(184,081) (4,624,596) 3,773,499
Net cash used in investing activities
(762,363)
(1,035,178)
Net increase/(decrease) in cash and cash equivalents
657,474
(470,998)
Cash and cash equivalents at beginning of the period
2,730,401
3,201,399
Cash and cash equivalents at the end of the period
3,387,875
2,730,401
The accompanying notes form an integral part of these special purpose financial statements.
38
1,134,420
FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
STATEMENT OF CHANGES IN FUND FOR THE YEAR ENDED 30 JUNE 2018 (Expressed in Trinidad and Tobago Dollars)
Fund at beginning of year
Long-term Short-term Employment benefits benefits injury benefits
Total funds
2018 2017 2018 2017 2018 2017 2018 2017 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 24,840,004
23,875,856
502,439
468,284
1,058,687
900,416
26,401,130 25,244,556
Income Contribution Penalty income Revaluation of subsidiaries Realised investment income Unrealised investment (loss)/ income Miscellaneous (loss)/income
4,155,950 18,500
4,101,330 280,176 276,494 233,480 230,412 4,669,606 4,608,236 23,073 126 162 285 359 18,911 23,594
(8,623)
149,433
–
–
–
–
(8,623)
149,433
1,948,045
915,253
13,223
6,443
29,975
14,244
1,991,243
935,940
(148,430)
380,138
(1,066)
4,027
(2,417)
8,904
(151,913)
393,069
(915)
171
–
–
–
–
(915)
171
Total income
5,964,527
5,569,398
292,459
287,126
261,323
253,919
6,518,309
6,110,443
3,938,677 3,778,457 391,617 368,283 75,269 73,354 169,749 203,139 – – – – – – – – –
– – – – 57,587 54,300 123,770 4,221 –
– – – – 55,112 58,591 122,636 3,849 –
– – – – – – – – 80,582
– – – – – – – – 85,078
3,938,677 391,617 75,269 169,749 57,587 54,300 123,770 4,221 80,582
3,778,457 368,283 73,354 203,139 55,112 58,591 122,636 3,849 85,078
Expenditure Benefits Expenditure Retirement benefit Survivor’s benefit Invalidity benefit Retirement grant Funeral grant Sickness benefit Maternity benefit Special maternity Employment injury Administrative expense Pension expense
4,575,312 4,423,233 239,878 240,188 190,469 5,109
190,503 13,178
12,841 36
12,843 93
10,700 79
10,702 205
214,010 5,224
214,048 13,476
Total expenditure
4,770,890
4,626,914
252,755
253,124
91,361
95,985
5,115,006
4,976,023
Excess O/C income Transfers Fund at end of year
1,193,637 22,388 485,727 26,541,756
80,582 85,078 4,895,772 4,748,499
942,484 39,704 34,002 169,962 157,934 1,403,303 1,134,420 21,664 158 153 348 337 22,894 22,154 – (62,546) – (423,181) – – – 24,840,004
479,755
502,439
805,816 1,058,687
27,827,327 26,401,130
The accompanying notes form an integral part of these special purpose financial statements.
39
A N N U A L
R E P O R T
2 0 1 7 - 2 0 1 8
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Expressed in Trinidad and Tobago Dollars)
1. Incorporation and principal activity The National Insurance Board of Trinidad and Tobago (NIBTT) was incorporated under the National Insurance Act No. 35 of 1971 (The National Insurance Act), as subsequently amended, and commenced operations in 1972. The principal activity of NIBTT is to carry out the requirements of The National Insurance Act in providing social security benefits to the insurable population of Trinidad and Tobago. The registered office is located at 14-19 Queen’s Park East, Port-of-Spain, Trinidad and Tobago. 2. Actuarial review Section 70 (1) of The National Insurance Act requires an Actuarial Review of the National Insurance System (NIS) at intervals not exceeding five years. The 10th Actuarial Review was conducted as at 30 June 2016 and was completed by International Social Security System (ISSA) on 30 June 2018. The main objectives of this review were to assess the long-term financial condition of the National Insurance Fund and recommend possible ways to improve contribution and benefit provisions. In general, contribution payments and benefit calculations are based on a system of wage classes. The contribution amount is paid by the employer and the employee in a proportion of two-thirds/one-third. Benefits are grouped into three funds: long-term benefits, short-term benefits and employment injury benefits. Each fund is credited with contribution income and investment income from which benefit expenditures and administrative expenses are met. Presently the fund is meeting all of its obligations. 3. Legislative amendments The following legislative amendments were proposed in line with recommendations of the 9th Actuarial Report: i.
The increase in the maximum insurable earnings from $12,000 to $13,600, this increase is in the order of 13.3 percent and is intended to cover an additional $1,600 of insured income which is in line with the increase in the national wage; ii. maintenance of the minimum monthly retirement pension at its present level of $3,000, at least until the beginning of 2017; and iii. increase in the contribution rate by 13.2 percent. The increase in the contribution maximum earnings and the increase in the contribution rates were announced in the national budget to take effect from 4 July 2016. However, this amendment only took effect on 5 September 2016 due to legislative delays. 4. Summary of significant accounting policies The principal accounting policies adopted in the preparation of the special purpose financial statements are set out below. The policies have been consistently applied to all years presented, unless otherwise stated. a. Basis of preparation
These special purpose financial statements are prepared in accordance with the financial reporting provisions of The National Insurance Act. In cases where the financial reporting provision is not clear or does not address particular situations, reference is made to International Financial Reporting Standards (IFRS) for guidance in determining NIBTT’s accounting policy. The Board and management of NIBTT are currently reviewing its financial reporting framework to determine whether it can in the future prepare its special purpose financial statements in accordance with IFRS.
40
FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30th June 2017 (Expressed in Trinidad and Tobago Dollars)
4. Summary of significant accounting policies (continued) a. Basis of preparation (continued)
These special purpose financial statements are the parent company unconsolidated financial statements of the NIBTT. NIBTT does not prepare consolidated financial statements. Further, these special purpose financial statements are prepared on the historical cost basis, except for the following items in the statement of financial position: • • • • •
Financial assets at fair value through profit or loss are measured at fair value; Investment properties are measured at fair value; Investments in subsidiary companies are measured at fair value; Artwork and freehold properties classified as property, plant and equipment are measured at fair value; The defined benefit asset/liability is recognised as plan assets, plus unrecognised past service cost, less the present value of the defined benefit obligation and based on actuarial valuations.
The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Information about critical estimates in applying accounting policies that have the most significant effect on the amounts recognised in the audited special purpose financial statements is included in Note 4n. b. Investments in subsidiary companies
Subsidiaries are all entities over which the NIBTT has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. These are as follows: Companies National Insurance Property Development Company Limited (NIPDEC) Trinidad and Tobago Mortgage Finance Company Limited (TTMF) Home Mortgage Bank (HMB)
Percentage Ownership 2018 2017 100%
100%
51% 100%
51% 100%
Investments in subsidiaries are initially recorded at cost and adjusted to fair market value based on valuations conducted by an independent professional valuator. Gains and/or losses arising from the change in fair value are included in the statement of comprehensive income. Investments in subsidiaries are valued by an independent valuator and are based on the assumption that they will continue to operate as going concerns and that the principal activities and legal structure of the companies will remain unchanged.
41
A N N U A L
R E P O R T
2 0 1 7 - 2 0 1 8
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Expressed in Trinidad and Tobago Dollars)
4. Summary of significant accounting policies (continued) c. Foreign currency i. Functional and presentation currency Items included in these special purpose financial statements are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). These special purpose financial statements are presented in Trinidad and Tobago dollars, which is NIBTT’s functional and presentation currency, unless otherwise stated. ii. Foreign currency
Transactions in foreign currencies are initially recorded at the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are expressed in Trinidad and Tobago dollars at the rate of exchange ruling on the reporting date as obtained from the Central Bank of Trinidad and Tobago. All differences arising are taken to the statement of comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. d. Cash and cash equivalents Cash and cash equivalents, for the purpose of the statement of cash flows, represent cash and bank balances and highly liquid investments with a maturity period of three months or less. e. Financial assets NIBTT’s financial assets and financial liabilities are recognised in the statement of financial position when it becomes party to the contractual obligation of the instrument. A financial asset is derecognised when the right to receive the cash flows from the asset has expired or where NIBTT has transferred all the risks and rewards of ownership of the asset. A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires. All “regular way” purchases and sales are recognised at settlement date. i. Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are subsequently carried at fair value based on quoted prices for investments traded in active markets; or valuation techniques, including recent arm’s length transactions, discounted cash flows analysis and other valuation techniques commonly used by market participants, for investments not traded in active markets. Where discounted cash flow techniques are used, estimated future cash flows are based on management’s best estimates and the discount rate is a market-related rate at the reporting date for an instrument with similar terms and conditions. Held-for-trading securities are initially recognised at cost and subsequently remeasured at fair value based on quoted bid prices at the reporting date. Where the instrument is not actively traded or quoted on an active market, fair value is determined using discounted cash flow analysis. Gains and losses arising from sales and changes in fair values of these financial assets are recognised in the statement of comprehensive income in the period in which they arise. All related unrealised gains and losses are included in the statement of comprehensive income. Interest earned is reported as interest income.
42
FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Expressed in Trinidad and Tobago Dollars)
4. Summary of significant accounting policies (continued) e. Financial assets (continued) ii. Loans and advances Loans and advances are financial assets with fixed or determinable payments and are not quoted in an active market created by NIBTT providing money to a debtor other than those created with the intention of short-term profit sharing. Such assets are stated at amortised cost, net of any advances for credit losses using the effective interest method. Loans and advances include mortgage advances. Mortgage advances are measured net of provisions for impairment. A mortgage advance is classified as impaired (non-performing) when there is objective evidence that NIBTT will not be able to collect all amounts due according to the original contractual terms of the loan. Objective evidence of impairment includes observable data that comes to the attention of NIBTT such as: • • • •
Significant financial difficulties of the borrower Actual delinquencies Adverse change in the payment status of a borrower Bankruptcy or reorganisation by the borrower.
If there is objective evidence that an impairment loss on mortgage advance has been incurred, the amount of the allowance for impairment is measured as the difference between the carrying amount and the recoverable amount, being the present value of expected future cash flows, including amounts recoverable from guarantees and collateral, discounted at the original effective interest rate of loans. The allowance which is made during the year, less amounts released and recoveries of bad debts previously written off, is charged against the statement of comprehensive income. When a loan is deemed uncollectible, it is written off against the related allowance for losses. f.
Impairment of financial assets The carrying amounts of NIBTT’s assets that are not carried at fair value, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated and an impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in the statement of comprehensive income. i. Losses on loans and advances
NIBTT reviews its problem loans and advances at each reporting date to assess whether an allowance for impairment should be recorded in the statement of comprehensive income. In particular, judgment by management is required in the estimation of the amount and timing of future cash flows when determining the level of allowance required. Such estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowance. In addition to specific allowances against individually significant loans and advances, NIBTT also makes a collective impairment allowance where applicable, against exposures which, although not specifically identified as requiring a specific allowance, have a greater risk of default than when originally granted. This takes into consideration factors such as any deterioration in country risk, industry, and technological obsolescence, as well as identified structural weaknesses or deterioration in cash flows.
43
A N N U A L
R E P O R T
2 0 1 7 - 2 0 1 8
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Expressed in Trinidad and Tobago Dollars)
4. Summary of significant accounting policies (continued) g. Investment properties Investment properties are properties held by NIBTT to earn rental income or for capital appreciation or both. Property held for a currently undetermined future use is regarded as investment properties as such property is regarded as held for capital appreciation. Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the production or supply of goods or services or for administrative purposes. If these portions can be sold separately or leased out separately under a finance lease, the entity accounts for the portions separately as investment properties or property plant and equipment (Note 4 h.) respectively. If the portions cannot be sold separately, the property is investment property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purposes. Otherwise it is considered property plant and equipment (Note 4 h.) Investment properties are initially measured at cost. After initial recognition, investment properties are measured at fair value based on valuations conducted by an independent professional valuator. Gains and losses arising from the change in fair value are included in the statement of comprehensive income. The valuators have adopted standard valuation methods and assumed good title, vacant possession and no unduly restrictive covenants or onerous or unusual outgoings running with the land. h. Property, plant and equipment Property held for future use as owner-occupied property, property held for future development and subsequent use as owner-occupied property, property occupied by employees and owner-occupied property awaiting disposal are deemed to be property, plant and equipment. Property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses except for artwork and freehold properties which are stated at valuations conducted by independent professional valuators every 3 years. Freehold properties were professionally valued in June 2016 using the investment method note 14. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, only when it is probable that future economic benefits associated with the item will flow to NIBTT and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they are incurred. If an asset’s carrying value is increased as a result of a revaluation, the increase is credited directly to reserves under the heading revaluation reserve. If an asset’s carrying value is decreased as a result of a revaluation, the decrease is debited directly to equity to the extent of any credit balance existing in the revaluation reserve in respect of that asset. Any decrease in excess of this amount is recognised in the statement of comprehensive income. Additionally, for those assets that are revalued as at the statement of financial position date, the accumulated depreciation for the revalued assets are credited to the revaluation reserve. The accumulated depreciation for revaluated assets is therefore brought to zero. Depreciation is provided on a straight-line basis at varying rates sufficient to write-off the cost/market value respectively of the assets over their estimated useful lives. The rates used are as follows:
44
FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Expressed in Trinidad and Tobago Dollars)
4. Summary of significant accounting policies (continued) h. Property, plant and equipment (continued) Freehold and leasehold properties Improvements to premises: Owned Leased Machinery, equipment, furniture and fixtures Machinery Artwork and motor vehicles
– 2% on buildings – Equal annual instalments over a period of ten years – Equal annual instalments over the period of the lease – 7.5% - 25% – 25%
Gains and losses on disposal of property, plant and equipment are determined by comparing proceeds with their carrying amount and are recognised in the revenue and expenditure accounts. i.
Properties being developed for sale (Inventory) Properties available for sale are carried at cost less provisions for impairment. The provision is estimated as the difference between the cost and the selling price of the units available for sale less the estimated cost to complete the units.
j. Provisions Provisions for environmental restoration, restructuring costs and legal claims are recognised when: the NIBTT has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Restructuring provisions comprise lease termination penalties and employee termination payments. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense. k. Basis of allocation Contribution income and other income have been allocated to the various fund accounts on the basis set out in the Actuarial Review. i. Contribution income
Contribution income is allocated as follows:
Long-term benefits fund Short-term benefits fund Employment injury benefit fund
2018 2017 % % 89 6 5
89 6 5
100 100
45
A N N U A L
R E P O R T
2 0 1 7 - 2 0 1 8
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS 30th June 2017 (Expressed in Trinidad and Tobago Dollars)
4. Summary of significant accounting policies (continued) k. Basis of allocation (continued) ii. Other income Other income comprising investment income less expenses, penalty income and pension asset income is allocated to the benefit funds in the ratio of their opening fund balances. Investment expenses comprise direct staff costs and overhead expenses of the investments department and other direct expenses including mortgage management fees and provisions for diminution in value of investments. iii. Fund ratios Based on the recommendations of the Eighth Actuarial Review and maintained in the Ninth Actuarial Review, NIBTT implemented the following: short-term benefit fund and employment injury benefit fund balances will be maintained at 2.0 times and 10 times the respective benefits incurred during the current year, the remaining excess of income over expenditure is to be allocated to the long-term benefit fund. These fund allocations are based solely on the ratios recommended by the independent actuary and do not represent NIBTT’s liability to beneficiaries at 30 June 2018. l.
Revenue recognition i. Contribution and benefits Contribution income is generally accounted for on the cash basis. An accrual is made at the statement of financial position date to take account of all collections up to 15 July of the following year that relate to the current year. Where the 15 July occurs on a weekend or a public holiday, the following working day will be used to process the accrual. Contribution arrears and related penalty and interest are recognised when received as a result of uncertainty in collection and the challenge in estimating and determining contributors in default. Benefit expenditure is generally accounted for on a cash basis. Benefits paid in the final month of the year which relate to the following year are reflected as a prepayment at the statement of financial position date. ii. Investment income Income from investments is accounted for on the accrual basis. Interest from commercial loans and debentures is not accrued where instalments are in arrears for more than twelve months.
m. Employee benefits i. Short term Employee benefits are all forms of consideration given by NIBTT in exchange for service rendered by its employees. These include current or short-term benefits such as salaries, bonuses, NIS contributions, annual leave, and non-monetary benefits such as medical care and loans; postemployment benefits such as pensions; and other long-term employee benefits such as termination benefits. Employee benefits that are earned as a result of past or current service are recognised in the following manner: short-term employee benefits are recognised as a liability, net of payments made, and charged as expense. Post-employment benefits are accounted for as described on the next page.
46
FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS 30th June 2017 (Expressed in Trinidad and Tobago Dollars) 4. Summary of significant accounting policies (continued) m. Employee benefits (continued) ii. Post employment NIBTT contributes to a defined benefit staff pension plan which covers all qualifying employees. Members contribute 5% (2017: 5%) of their pensionable salaries to the Plan whilst NIBTT currently contributes 14% (2017: 14%). All permanent employees are eligible for membership and temporary employees under certain conditions. The liability recognised in the statement of financial position in respect of defined benefit pension plan is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation. In countries where there is no deep market in such bonds, the market rates on the government bonds are used. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Past-service costs are recognised immediately in income. n. Determination of fair values A number of NIBTT’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/ or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. i. Financial assets at fair value through profit or loss As stated in Note 4 e, financial assets at fair value through profit or loss are measured at their fair values based on quoted market prices. Where the instrument is not actively traded or quoted on recognised exchanges, fair value is determined using discounted cash flow analysis recent arm’s length transaction and other valuation techniques. Professional valuations are also used to value these securities. Where fair value cannot be reliably measured, the investment is stated at cost less impairment losses. The NIBTT uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation techniques. Level 1 Included in the Level 1 category are financial assets and liabilities that are measured in whole or in part by reference to published quotes in an active market. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm’s length basis.
47
A N N U A L
R E P O R T
2 0 1 7 - 2 0 1 8
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Expressed in Trinidad and Tobago Dollars) 4. Summary of significant accounting policies (continued) n. Determination of fair values (continued) i. Financial assets at fair value through profit or loss (continued) Level 2 Included in the Level 2 category are financial assets and liabilities that are measured using a valuation technique based on assumptions that are supported by prices from observable current market transactions and for which pricing is obtained via pricing services, but where fair values based on broker quotes, investments in private equity funds with fair values obtained via fund managers and assets that are valued based using its own models whereby the majority of assumptions are market observable. Level 3 Included in the Level 3 category are financial assets and liabilities that are not quoted as there are no active markets to determine a price. These financial instruments are held at cost, being the fair value of the consideration paid for the acquisition of the investment, and are regularly assessed for impairment. 30 June 2018 Investment securities Bonds Equities Mutual funds
Level 1 $’000
Level 2 $’000
Level 3 $’000
Total $’000
821,958 7,709,286 550,039 9,081,283 10,450,969 378,106 56,750 10,885,825 854,149 – 52,773 906,922 12,127,076 Level 1 $’000
8,087,392
659,562
Level 2 $’000
Level 3 $’000
20,874,030
30 June 2017 Investment securities Bonds Equities Mutual funds
356,359 7,895,171 116,233 8,367,763 10,457,678 378,851 56,751 10,893,280 873,526 – 51,988 925,514
11,687,563
8,274,022
Total $’000
224,972
20,186,557
2018 $’000
2017 $’000
Movements in Level 3 financial instruments measured at fair value
Balance beginning of period 224,972 657,202 Purchases 1,203,228 117,582 Repayments (773,681) (549,232) Transfer out – – Net unrealised gain/(loss) 5,043 (580) Balance at end of period
48
659,562
224,972
FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Expressed in Trinidad and Tobago Dollars)
4. Summary of significant accounting policies (continued) n. Determination of fair values (continued) ii. Investment in subsidiaries An external, independent valuation company, having appropriate recognised professional qualifications and experience was contracted to value NIBTT’s investment in subsidiaries. In determining the value of subsidiaries, three (3) valuation methods were considered. Under the market approach, the trading multiples method was applied; under the cost approach, the based valuation method and under the income approach, the excess return model was used. The values derived from these approaches were considered baseline. The baseline values were then applied using an average of the lows and highs of each method. A price range was created and from these scenarios a point estimate was derived using probability estimates for each scenario. iii. Investment properties and property, plant and equipment at fair value An external, independent valuation company, having appropriate recognised professional qualifications and recent experience in the location and category of property being valued, was used by NIBTT to value its investment property portfolio. The fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably and willingly. iv. Other The carrying amounts of financial assets and liabilities, included under other assets, cash and cash equivalents and other liabilities, approximate their fair values because of the short-term maturities on these instruments. The carrying values of fixed deposits are assumed to approximate fair value due to their term to maturity not exceeding one year. 30 June 2018
Level 1 $’000
Level 2 $’000
Level 3 $’000
Total $’000
Properties, plant and equipment Investment properties Investment in subsidiaries
– – –
520,337 324,700 –
– – 1,991,865
520,337 324,700 1,991,865
–
845,037
1,991,865
2,836,902
30 June 2017
Level 1 $’000
Level 2 $’000
Level 3 $’000
Total $’000
Properties, plant and equipment Investment properties Investment in subsidiaries
– – –
526,954 328,750 –
– – 2,000,488
526,954 328,750 2,000,488
–
855,704
2,000,488
2,856,192
49
A N N U A L
R E P O R T
2 0 1 7 - 2 0 1 8
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS 30th June 2017 (Expressed in Trinidad and Tobago Dollars)
4. Summary of significant accounting policies (continued) n. Determination of fair values (continued) (iv) Other (continued) Movements in Level 3 financial instruments measured at fair value
50
2018 $’000
2017 $’000
Balance brought forward Adjustment
2,000,488 (8,623)
1,843,607 156,881
Balance at end of period
1,991,865
2,000,488
FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS 30th June 2017 (Expressed in Trinidad and Tobago Dollars) 5. Property, plant and equipment Year ended 30 June 2018
Land Machinery freehold/ equipment leasehold furniture Motor buildings and fittings vehicles Art Total $’000 $’000 $’000 $’000 $’000
Cost/valuation at beginning of year 504,004 85,498 3,299 1,295 594,096 Purchases 19,193 2,226 – – 21,419 Transfers – – – – – Revaluation/(disposal) – – – – – Adjustments/transfers (9,890) (3,452) 174 – (13,168) At the end of year
513,307
84,272
3,473
1,295
602,347
Accumulated depreciation at beginning of year Current year charge Revaluation Disposal/adjustments
10,649 54,394 2,096 3 67,142 9,909 4,903 783 88 15,683 – – – – – – (815) – – (815)
At the end of year
20,558
58,482
2,879
91
82,010
492,749
25,790
594
1,204
520,337
Net book value Year ended 30 June 2017 Cost/valuation at beginning of year Purchases Transfers Revaluation/(disposal) Adjustments/transfers
340,886 67,152 3,045 1,295 412,378 180,096 3,731 254 – 184,081 (16,978) 16,978 – – – – (2,363) – – (2,363) – – – – –
At the end of year
504,004
Accumulated depreciation at beginning of year Current year charge Revaluation Disposal/adjustments At the end of year Net book value
85,498
3,299
1,295
594,096
9,069 53,317 1,322 – 63,708 1,580 3,435 774 3 5,792 – – – – – – (2,358) – – (2,358) 10,649
54,394
2,096
3
67,142
493,355
31,104
1,203
1,292
526,954
Note: Valuation of land and freehold and leasehold buildings has been expressed by way of open market values as determined by valuations conducted by independent professional valuators every 3 years.
51
A N N U A L
R E P O R T
2 0 1 7 - 2 0 1 8
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Expressed in Trinidad and Tobago Dollars)
5. Property, plant and equipment (continued) In 2014, the National Insurance Board of Trinidad and Tobago initiated the development of lands previously held for investment situated at Queen’s Park East, Port of Spain. A decision was taken that the development would see about 40% of the structure being used for Head Office operations and the other 60% to generate rental revenue. As a result, reclassification of the investment property to property, plant and equipment was made. Construction started in March 2015, with the structure being a Class A building with Leed Gold certification. It was completed in January 2017 at a cost of $372 million and was officially occupied in February 2017. 6. Investment properties Depreciation 1 July 2017 Additions in fair value Adjustments 2018 $’000 $’000 $’000 $’000 $’000 Buildings Land
97,850
–
(3,550)
230,900
–
(500)
328,750
–
(4,050)
– 94,300 – 230,400 –
324,700
Depreciation 1 July 2016 Additions in fair value Adjustments 2017 $’000 $’000 $’000 $’000 $’000 Buildings
114,500
–
Land
236,724
–
(5,824)
351,224
–
(22,474)
(16,650)
– 97,850 – 230,900 –
328,750
Rental income from investment properties during the year amounted to $6.8 million (2017: $6.7 million). Direct operating expenses incurred on investment properties during the year amounted to $0.4 million (2017: $4.6 million). The valuation of the investment properties was conducted as at June 2018 by an independent professional valuator in accordance with the Royal Institute of Chartered Surveyors valuation – professional standards. The Income Approach which considers a property’s potential cash flow and analyses the present worth of the anticipated future benefits to the owner over an assumed holding period was the methodology used to value the buildings. The Market Approach and Residual technique were utilised for the valuation of land. The Market Approach measures the value of a property by comparing recent sales or offerings of similar or substitute property and related market data. The Residual Technique begins with an estimate of gross proceeds of sale that are expected from the sale of developed lots in the proposed subdivision. All costs (hard and soft) associated with the development of the proposed subdivision, together with an allowance for entrepreneurial profit are then deducted from the estimated gross proceeds of sale. Development costs obtained from engineers and entrepreneurial profit is based on discussions with developers. This technique was utilised in the valuation of the lands at Palmiste. For all other properties where the Market Approach was adopted, the value in the financial statements are based on their highest and best use.
52
FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Expressed in Trinidad and Tobago Dollars)
7. Investment in subsidiary companies The investments in subsidiary companies comprise the following companies reported at fair value:
2018 $’000
2017 $’000
NIPDEC TTMF HMB
228,636 673,229 1,090,000
263,314 550,134 1,187,040
1,991,865
2,000,488
HMB $’000
Total $’000
Movement in the carrying value of investments in subsidiaries is as follows: 2018
NIPDEC $’000
TTMF $’000
Balance as at 30 June 2017 Purchases Market value adjustments
263,314 – (34,678)
550,134 – 123,095
Balance as at 30 June 2018
228,636
673,229
2017
NIPDEC $’000
TTMF $’000
1,187,040 – (97,040) 1,090,000 HMB $’000
2,000,488 – (8,623) 1,991,865 Total $’000
Balance as at 30 June 2016 Purchases Market value adjustments
208,580 – 54,734
449,966 – 100,168
1,184,709 7,800 (5,469)
1,843,255 7,800 149,433
Balance as at 30 June 2017
263,314
550,134
1,187,040
2,000,488
The cost of investment in subsidiaries is as follows: NIPDEC 2018 $’000
TTMF $’000
HMB $’000
Total $’000
Balance as at 30 June 2017 Purchases
25,000 –
7,200 –
496,404 –
528,604 –
Balance as at 30 June 2018
25,000
7,200
496,404
528,604
2017
NIPDEC $’000
TTMF $’000
HMB $’000
Total $’000
Balance as at 30 June 2016 Purchases
25,000 –
7,200 –
488,604 7,800
520,804 7,800
Balance as at 30 June 2017
25,000
7,200
496,404
528,604
Shares were purchased on March 14, 2017 in HMB to the value of $7.8 million dollars.
53
A N N U A L
R E P O R T
2 0 1 7 - 2 0 1 8
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Expressed in Trinidad and Tobago Dollars)
8. Financial assets at fair value through profit or loss Investments comprise: Bonds (8 i.) Equities (8 ii.) Mutual funds (8 iii)
2018 $’000
2017 $’000
9,081,283 10,885,825 906,922
8,367,763 10,893,280 925,514
20,874,030
20,186,557
The analysis below shows the composition of the various investment categories. i.
Bonds Foreign 747,399 285,129 Government 5,762,368 5,550,586 Corporate 2,571,516 2,532,048
9,081,283
8,367,763
Local and corporate bonds earn interest at rates varying between to 1.50% and 12.25% (2016: 0.21% and 12.25%). ii. Equities Quoted Foreign 3,639,725 3,879,097 Local 6,811,244 6,578,582 Unquoted 434,856 435,601
10,885,825
10,893,280
ii. Mutual funds Quoted Foreign Local Unquoted
90,567 763,582 52,773
86,045 787,481 51,988
906,922
925,514
9. Mortgage advances Mortgage balances are stated net of the provisions for impairment as follows: Gross mortgage advances Provision for non-performing advances
54
49,976 (49,236) 740
54,381 (51,746) 2,635
FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Expressed in Trinidad and Tobago Dollars)
9. Mortgage advances (continued) The movement in the provision for non-performing advances was as follows: Provisions as at 1 July Movement for the year Provisions at end of period
2018 $’000
2017 $’000
51,746 (2,510)
51,746 –
49,236
51,746
Mortgage advances earn interest at an average effective rate of 8.00% (2017: 8.00%). 10. Property being developed for sale In 2004, the NIBTT commenced development of a residential gated community in D’Abadie, O’meara known as Riverwoods, comprising of single-family homes and townhouses. The development was successfully completed in 2017. The carrying value of properties being developed for sale was arrived at as follows:
2018 $’000
2017 $’000
Cost as at 1 July Units sold
23,379 (17,179)
31,997 (8,618)
Additional units for sale
6,200 9,830
23,379 –
Less: Provision for diminishing value
16,030 –
23,379 (4,670)
16,030
18,709
4,670 (4,670)
27,628 (22,958)
The movement in the provision for diminution in value of Property being developed for sale: Provisions as at 1 July Movement for the year Provisions at end of year
–
4,670
55
A N N U A L
R E P O R T
2 0 1 7 - 2 0 1 8
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Expressed in Trinidad and Tobago Dollars)
11. Other assets i. Other assets
2018 $’000
2017 $’000
Investment income receivable 75,008 68,013 Sundry debtors 87,677 89,845 Prepayments 345,934 324,200 Contributions receivable 363,163 337,518 Claims receivable – –
871,782
819,576
335,419 (335,419)
739,965 (739,965)
Claims receivable: Clico Investment Bank Limited (CIB) Gross amount Provision for impairment Carrying amount
–
–
Over the period September 2008 to January 2009, the NIBTT deposited sums of money with Clico Investment Bank Limited (CIB) as Investment Note Certificates (INC). In November 2009, legal action was initiated by the NIBTT due to breach on the part of CIB claiming the sums of US$102,506,129 and TT$46,493,563. On 27 September 2011, judgment was awarded in favour of the NIBTT in the sums of both claims with interest at the rate of 6% per annum from the dates of maturity of each deposit to the date of judgment. On or about October 2011, CIB was placed in compulsory liquidation and Deposit Insurance Corporation (DIC) appointed Liquidator. By letters dated 31 July 2017, the DIC acknowledged and admitted the NIBTT’s claims up to date of appointment of the Liquidator (17 October 2011) as follows: • •
TT$45,200,876 and TT$6,577,051 principal and interest respectively; and US$99,652,121 and US$14,943,218 principal and interest respectively.
DIC also advised that these amounts have been admitted by the Liquidator and are listed among the other unsecured creditors of Clico Investment Bank Limited – In Compulsory Liquidation for which settlement can take place only after the secured creditors have been settled. In light of this, the NIBTT has adopted a prudent approach and maintained the full provision on this debt established in 2013. The NIBTT remains committed to exhausting all efforts to recover this debt. By letter dated 18 April 2018, the DIC advised that, pursuant to the Order of the High Court (CV2010-01442) dated 25 January 2018, the Liquidator has been ordered to pay liability instruments: i.
56
Interest at a rate of 6% per annum to those creditors previously entitled to a contractual rate of more than 6% per annum, and to maintain the original rate where that rate of interest was less than 6% per annum, up to the date of the Winding Up Order namely, 17 October 2011.
FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Expressed in Trinidad and Tobago Dollars)
11. Other assets (continued) i.
Other assets (continued) The Liquidator has also been ordered to:
ii. Convert to Trinidad and Tobago Dollars all foreign currency instruments as at the date of the Winding Up Order namely, 17 October 2011 and to make any and all dividend distribution in Trinidad and Tobago Dollars. As a direct result of the above, on 1 May 2018 an amount of TT$358,177,860 was received and a second payment on 14 May 2018 to the value of TT$46,367,839 was also recovered, totalling $404,545,699. 12. Cash and cash equivalents
2018 $’000
Cash at bank (TT$) Cash at bank (US$) Money Market Fund (TT$) Money Market Fund (US$)
2017 $’000
2,776,470 167,764 2,487 441,154
2,450,562 97,012 2,461 180,366
3,387,875
2,730,401
13. Benefits fund The benefits fund comprises the following funds: • Long-term benefits fund which is held to cover retirement pensions, retirement grants, invalidity and survivors’ benefits in respect of qualifying persons. • Short-term benefits fund which is held to cover sickness and maternity benefits and funeral grants in respect of qualifying persons. • Employment injury benefits fund which is held to cover employment injury benefits to eligible insured persons. As described in Notes 2 and 4, the benefits fund balances do not represent NIBTT’s liability to beneficiaries but instead reflects the allocation of the accumulated fund based on the application of certain ratios as advised by NIBTT’s Actuary. 14. Revaluation reserve The revaluation reserve reflects gains or losses on revaluation of freehold properties.
2018 $’000
2017 $’000
Opening balance for the period
72,624
72,624
Closing balance for the period
72,624
72,624
57
A N N U A L
R E P O R T
2 0 1 7 - 2 0 1 8
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Expressed in Trinidad and Tobago Dollars)
15. Other liabilities
2018 $’000
2017 $’000
Sundry creditors and accruals Provision for other payables
76,453 17,491
116,868 12,314
93,944
129,182
16. Post-employment benefit The amounts recognised in the statement of financial position are as follows: Net liability in statement of financial position Present value of defined benefit obligation Fair value of assets
2018 $’000 967,372 (973,908)
2017 $’000 960,938 (949,804)
(Surplus)/deficit (6,536) 11,134 Effect of asset ceiling – – Net defined benefit (asset)/liability Movement in present value of defined benefit obligation Defined benefit obligation at start of year Current service cost Interest cost Members’ contributions Past service cost Re-measurements -Experience adjustments -Actuarial (gains)/losses from changes in demographic assumptions -Actuarial gains from change in financial ass umptions Benefits paid Defined benefit obligation at end of year
(6,536) 960,938 21,410 51,783 6,735 –
11,134 933,290 24,222 50,197 4,112 –
(34,099)
(9,076)
– – (39,395)
– – (41,807)
967,372
960,938
The defined benefit obligation is allocated between the Plan’s members as follows: Active Deferred members Pensioners
2018
2017
54% 1% 45%
54% 1% 45%
The weighted average duration of the defined benefit obligation 15.6 years. 97% of the value of the benefits for active members is vested. 24% of the defined benefit obligation for active members is conditional on future salary increases.
58
FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Expressed in Trinidad and Tobago Dollars)
16. Post-employment benefit (continued) Movement in fair value of plan assets Fair value of plan assets at start of year Interest income Return on plan assets, excluding interest income Board contributions Members’ contributions Benefits paid Administrative expense allowance
2018 $’000 949,804 51,792 (11,205) 16,177 6,735 (39,395) –
2017 $’000 913,478 49,527 13,078 11,416 4,112 (41,807) –
Fair value of plan assets at end of year 973,908 949,804 Actual return on plan assets
40,587
62,605
Asset allocation Regionally listed equities (prices quoted on regional exchanges) Overseas equities (developed markets outside of CARICOM) TT$ Gov’t and Gov’t Guaranteed bonds (no quoted market prices) TT$ corporate bonds (no quoted market prices) US$ bonds (no quoted market prices) Mortgages (no quoted market prices) Local equity/income mutual fund Cash and cash equivalents
228,112 143,881 486,167 66,788 21,466 91 3,901 23,502
234,546 128,682 455,697 83,717 11,417 85 3,761 31,899
Fair value of plan assets at end of year 973,908 949,804 All asset values as at 30 June 2018 were provided by the Plan’s Investment Manager (First Citizens Asset Management Limited). The majority of the Plan’s government bonds were issued by the Government of Trinidad and Tobago, which also guarantees many of the corporate bonds held by the Plan.
2018 $’000
2017 $’000
Expense recognised in profit or loss Current service cost Net Interest on net defined benefit liability Past service cost Administrative expense allowance
21,410 (9) – –
24,222 670 – –
Net pension cost
21,401
24,892
59
A N N U A L
R E P O R T
2 0 1 7 - 2 0 1 8
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Expressed in Trinidad and Tobago Dollars)
16. Post-employment benefit (continued)
2018 $’000
2017 $’000
Re-measurements recognised in other comprehensive income Experience gains Effect of asset ceiling
(22,894) –
(22,154) –
Total amount recognised in other comprehensive income
(22,894)
(22,154)
Reconciliation of opening and closing statement of financial position entries Opening defined benefit liability Net pension cost Re-measurements recognised in other comprehensive income Board contributions paid
11,134 21,401 (22,894) (16,177)
19,812 24,892 (22,154) (11,416)
(6,536)
11,134
Closing defined benefit liability Discount rate General salary increases Salary increases due to age, merit and promotion Total individual salary increases Future pension increases Life expectancy at age 60 for current pensioner in years -Male -Female Life expectancy at age 60 for current members age 40 in years -Male -Female
2018 5.5% 4.0% 1.0% 5.0% 3.0%
2017 5.5% 4.0% 1.0% 5.0% 3.0%
21.0 25.1
21.0 25.1
21.4 25.4
21.4 25.4
Sensitivity analysis 1%pa lower 1%pa higher $’000 $’000 Discount rate Future salary increases Future pension increases
162,885 (29,229) (98,746)
(127,276) 33,840 119,518
An increase of one year in the assumed life expectancies shown above would increase the defined benefit obligation at 30 June 2018 by $22.7 million. These sensitivities were calculated by recalculating the defined benefit obligations using the revised assumptions. Funding The Board meets the balance of the cost of funding the defined benefit Pension Plan and the Board must pay contributions at least equal to those paid by members, which are fixed. The funding requirements are based on regular (at least every 3 years) actuarial valuations of the Plan and the assumptions used to determine the funding required may differ from those set out above. The Board expects to pay contributions of $11.5 million to the Pension Plan during 2018/19. This increase is based on the completion of the negotiations for the outstanding period.
60
FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Expressed in Trinidad and Tobago Dollars)
17. Net realised investment income
Interest income Recovery of investment note certificates (CIB) (Note 11 i.) Dividend income Rental income Miscellaneous income Income – mutual funds Income – foreign equity Income – foreign bonds Gain on sale of foreign equities (Loss)/gain from foreign exchange (Loss)/gain on sale of mutual funds Total realised investment income Investment income/(expense) Net realised investment income
2018 $’000 378,714 404,546 384,684 6,791 3,778 17,175 70,488 18,106 692,958 (13,069) (4,167)
2017 $’000 386,548 – 382,362 6,702 7,142 27,998 58,567 4,496 117,411 6,301 15,548
1,960,004 31,239
1,013,075 (77,135)
1,991,243
935,940
148,140 (285,048) 2,929 – (4,050) (24,408) 10,524
(186,572) 442,729 4,533 87,150 (21,250) 115 66,364
(151,913)
393,069
18. Net unrealised investment losses
Local equity Foreign equity Mutual funds Gains from foreign exchange Investment property valuation Foreign bonds Local bonds
19. Staff salaries, allowances and benefits
Pension contributions Salaries and other related expenses Group health plan National insurance contributions Training Travelling and subsistence Other
11,281 113,761 2,208 7,011 759 1,186 417
11,246 111,639 2,179 6,904 1,081 1,348 566
136,623
134,963
61
A N N U A L
R E P O R T
2 0 1 7 - 2 0 1 8
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Expressed in Trinidad and Tobago Dollars)
20. Other expenses
2018 $’000
2017 $’000
Janitorial Advertising and publicity Bank charges Electricity Insurance Legal and professional Printing stationery and office supplies Rent Repairs and maintenance – equipment Repairs and maintenance – premises Security Pension administration Telephone Other
2,888 1,338 1,709 3,397 2,094 6,529 2,126 6,627 2,680 5,540 8,088 4,256 7,237 6,252
3,445 3,265 1,534 2,761 2,081 10,909 3,282 8,349 2,652 6,477 8,997 2,694 6,016 9,800
60,761
72,262
As at 30 June 2018, administrative expenses amounted to 4.44% (2017: 4.64%) of contribution income and this did not exceed the limit established by NIBTT of 7.5%. 21. Contingent liabilities and capital commitments i.
Pending litigation and outstanding appeals As at 30 June 2018, there were certain legal proceedings outstanding against NIBTT. No provision has been made as professional advice indicates that it is unlikely that any significant loss will arise.
ii. Industrial relations A provision of $20.3 million (2017: $13.4 million) has been made in the accounts for wage negotiations up to June 2018 for bargaining units A & B staff. 2018 2017 $’000 $’000 20,334 13,382 iii. Capital commitments Capital commitments originally consist principally of amounts relating to the completion of the construction of the head office building of the National Insurance Board of Trinidad and Tobago at a total cost of $372 million and the commencement of the construction of the Tobago office and mall facility in 2016/2017 at an estimated cost of $220 million. The Tobago project never started as the returns on the project did not meet the organisation minimum requirements. Further, the Board executed contracts in the sum of $29.9 million for the completion of phases 3 and 4 of the Riverwoods Housing Development Project, which was completed in 2017. At the end of this financial year, there continues to be small commitments as they relate to the retention on the completed head office building ($1.68 million). Capital commitments
62
2018 $’000 1,680
2017 $’000 23,642
FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Expressed in Trinidad and Tobago Dollars)
22. Related party transactions and balances Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operating decisions. These transactions were carried out on normal terms and conditions at market rates. The following table provides the total amount of balances and transactions, which have been entered into with related parties for the relevant financial year. i.
Transactions with related parties During the years ended 30 June 2018 and 2017, NIBTT carried out the following significant transactions with related parties during the course of normal operations:
2018 $’000
2017 $’000
Net investments/(redemptions) in debt of subsidiary companies Interest received
16,795 62,057
17,323 60,836
78,852
78,159
378,511
391,026
ii. Balances due from related parties The amounts due from related companies comprise the following: Balance due iii. Transactions with key management personnel In addition to their salaries, NIBTT also provides non-cash benefits to executive officers and contributes to a post-employment defined benefit plan on their behalf. The key management personnel compensations are as follows:
2018 $’000
2017 $’000
Short-term employee benefits Post-employment benefits
3,477 1,900
3,784 1,206
Balance due
5,377
4,990
23. Taxation The fund was established under the laws of Trinidad and Tobago and is not subject to income, capital gains or other corporate taxes. The fund’s operations do not subject it to taxation in any other jurisdictions, except for withholding taxes imposed by certain countries on investment income and capital gains for investments domiciled in those countries.
63
A N N U A L
R E P O R T
2 0 1 7 - 2 0 1 8
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Expressed in Trinidad and Tobago Dollars)
24. Financial risk management The NIBTT’s activities expose it to credit risk, liquidity risk and market risk (specifically interest rate risk and currency risk). Its principal financial instruments comprise investment securities, mortgage advances, fixed deposits, cash and cash equivalents and borrowings. Income earned from investments, together with the excess of contributions after benefits are paid, are used to earn above average interest rate margins through the investing in high-quality, high-yielding assets with acceptable levels of risk.
Credit risk Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. NIBTT is mainly exposed to credit risk with respect to its mortgage portfolio, bonds and deposits. NIBTT limits its exposure with respect to its bond portfolio by investing in only bonds issued by the Government of Trinidad and Tobago or institutions with high credit worthiness. In respect to the Mortgage portfolio, constant monitoring is also employed. The necessary contact with mortgagors is maintained to ensure that payments are received in a timely manner, where necessary mortgage re-scheduling is done, which considers the borrowers new financial position. In the event where recovery may seem doubtful, provisions are set aside to cover any potential losses. The carrying amount of loans and advances, investment securities, matured deposits and cash balances at banks represent the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:
Loans and advances 2018 2017 $’000 $’000 Mortgage advances Gross amount 49,976 54,381 Impaired Gross amount Allowance for impairment
Neither past due nor impaired Gross amount
49,236 (49,236)
51,746 (51,746)
–
–
740
2,635
NIBTT granted mortgages based on evaluations of the mortgagees’ financial situation, and reports monthly on the exposure of potential losses from mortgages.
Investment securities The amounts in relation to investment securities are neither past due nor impaired. As such, no provisions have been made against the amounts. NIBTT holds collateral to cover its credit risks associated with specific investment securities considered most at risk.
64
FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Expressed in Trinidad and Tobago Dollars)
24. Financial risk management (continued) Investment securities (continued) The maximum exposure to credit risk for investment securities at the reporting date was:
Concentration by industry type Cash and cash equivalents Bonds Mortgage advances Total credit risk exposure
2018 $’000 3,387,875 9,081,283 740 12,469,898
2017 $’000 2,730,401 8,367,763 2,635 11,100,799
The maximum exposure to credit risk for investment securities at the reporting date by location was:
Concentration by location Trinidad and Tobago North America Caribbean territories Emerging markets
2018 $’000
2017 $’000
12,105,037 306,592 58,269 –
10,787,390 216,600 68,529 28,280
Total geographic concentration
12,469,898
11,100,799
The Board has established a credit quality review process involving regular analysis of the ability of borrowers and other counterparties to meet interest and capital repayment obligations.
i. Bonds The Board limits its exposure to credit risk by investing in liquid securities and with counterparties that have high credit quality. As a consequence, management’s expectation of default is low. The Board has documented investment policies which facilitate the management of credit risk on investment securities and resale agreements. The Board’s exposure and the credit ratings of its counterparties are continually monitored. ii. Cash and cash equivalents Cash and cash equivalents are held in financial institutions which management regards as strong and there is no significant concentration. The strength of these financial institutions is continually reviewed by the Mark to Market Committee. iii. Receivables Exposure to credit risk on receivables is managed through regular analysis of the ability of continuing customers and new customers to meet repayment obligations.
65
A N N U A L
R E P O R T
2 0 1 7 - 2 0 1 8
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Expressed in Trinidad and Tobago Dollars)
24. Financial risk management (continued) Liquidity risk Liquidity risk is the risk that NIBTT will encounter difficulty in meeting obligations associated with financial instruments when they fall due under normal and stress circumstances. To mitigate this risk the daily liquidity position for both operational and the payment of benefits is monitored to ensure that the bank accounts are adequately serviced. Transfers are done between bank accounts and the excess of contribution income over benefit payments are taken up and invested to earn above average interest rate margins through investing in high-quality, high-yielding assets with acceptable risk. The following are the contractual maturities of financial liabilities: As at 30 June 2018 Other liabilities
Up to one year $’000
As at 30 June 2017 Other liabilities
One to five years $’000
Over five years $’000
Total $’000
93,944
–
–
93,944
129,182
–
–
129,182
Parliament mandated that benefit payments be made from current monthly contributions as per the National Insurance Act.
Market Risk – Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market interest rates. NIBTT is primarily exposed to interest rate risk with respect to its fixed rate debentures, government securities and bonds. At the reporting date, the interest rate profile of NIBTT’s interest-bearing financial instruments was: Non 3 mths- 1 yr- Over interest Grand Asset allocation – <1 mth 1-3 mths 1 yr 5 yrs 5 yrs bearing total 2018 $’000 $’000 $’000 $’000 $’000 $’000 $’000 Bonds (local) Bonds (foreign) OMO’s Equities (local) Equities (foreign) Mutual funds (local) Mutual funds (foreign) Investment income receivables Cash and cash equivalents
– 2,502,728
Total
2,681,048 810,707 1,205,414 2,820,093 4,692,930 12,126,722 24,336,914
66
178,320 160,012 611,709 2,462,599 4,371,205 – 7,783,845 – – 68,181 357,494 321,725 – 747,400 – 24,515 525,524 – – – 550,039 – – – – – 7,246,100 7,246,100 – – – – – 3,639,725 3,639,725 – – – – – 816,355 816,355 – – – – – 90,567 90,567 – 626,180
– –
– –
– –
75,008 258,967
75,008 3,387,875
FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Expressed in Trinidad and Tobago Dollars)
24 Financial risk management (continued) Market Risk – Interest rate risk (continued) Non 3 mths- 1 yr- Over interest Asset allocation - <1 mth 1-3 mths 1 yr 5 yrs 5 yrs bearing 2017 $’000 $’000 $’000 $’000 $’000 $’000
Grand total $’000
Bonds (local) Bonds (foreign) OMO’s Equities (local) Equities (foreign) Mutual funds (local) Mutual funds (foreign) Investment income receivables Cash and cash equivalents
161,500 190,449 797,970 2,171,700 4,644,782 – 7,966,401 – – – 216,600 68,529 – 285,129 – 101,457 – 14,776 – – 116,233 – – – – – 7,014,183 7,014,183 – – – – – 3,879,097 3,879,097 – – – – – 839,469 839,469 – – – – – 86,045 86,045 – 2,202,851
Total
2,364,351 474,733 797,970 2,403,076 4,713,311 12,231,530 22,984,971
– 182,827
– –
– –
– –
68,013 344,723
68,013 2,730,401
Fair value sensitivity analysis for variable rate instruments A change of 100 basis points in interest rates at the year end would have increased/(decreased) the total funds by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for 2018. 100bp increase 100bp decrease $’000 $’000 June 2018 (415,085)
415,085
June 2017 (431,814)
431,814
Market Risk – Currency risk The NIBTT is exposed to currency risk with respect to its investments in cash and cash equivalents denominated in United States dollars. Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The portfolio is monitored on a monthly basis.
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NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Expressed in Trinidad and Tobago Dollars)
24. Financial risk management (continued) Market Risk – Currency risk (continued) NIBTT’s exposure to foreign currency risk based on notional amounts was as follows: As at 30 June 2018 Assets Cash and cash equivalents Local bonds Foreign bonds Foreign equities Local equities Mutual funds Foreign mutual funds Mortgage advances Other assets Total financial assets
2,778,957 7,157,494 – 59,500 6,867,467 816,355 – 740 871,782 18,552,295
US $’000 608,918 1,176,388 747,400 3,580,225 378,634 – 90,567 – –
Total $’000 3,387,875 8,333,882 747,400 3,639,725 7,246,101 816,355 90,567 740 871,782
6,582,132 25,134,427
Liabilities Other liabilities
93,944
–
93,944
Total financial liabilities
93,944
–
93,944
Net currency risk exposure As at 30 June 2017 Assets Cash and cash equivalents Local bonds Foreign bonds Foreign equities Local equities Mutual funds Foreign mutual funds Mortgage advances Other assets Total financial assets
18,458,351 TT $’000
6,582,132 25,040,483 US $’000
Total $’000
2,453,023 6,869,398 – 53,830 6,634,804 811,189 – 2,635 819,576
277,378 1,213,236 285,129 3,825,267 379,379 – 114,325 – –
2,730,401 8,082,634 285,129 3,879,097 7,014,183 811,189 114,325 2,635 819,576
17,644,455
6,094,714 23,739,169
Liabilities Other liabilities
129,182
–
129,182
Total financial liabilities
129,182
–
129,182
Net currency risk exposure
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TT $’000
17,515,273
6,094,714 23,609,987
FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
NOTES TO THE SPECIAL PURPOSE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 (Expressed in Trinidad and Tobago Dollars)
24. Financial risk management (continued) Market Risk – Currency risk (continued) The following significant exchange rates were applied during the year: USD
Average mid rate 30 June 30 June 2018 2017 6.7519
6.7652
Reporting date spot rate 30 June 30 June 2018 2017 6.7519
6.7652
Sensitivity analysis A 1% strengthening of TTD against USD at year end would have increased/(decreased) the total funds by the amount shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2017. TTD
Total funds year ended 30 June 2018 2017 $’000 $’000 (59,215)
(58,810)
A 1% weakening of the TTD against USD at year end would have had the equal but opposite effect to the above currencies on the amounts shown above, on the basis that all other variables remain constant. TTD
2018 $’000 59,215
2017 $’000 58,810
25. Staff complement The staff complement as at 30 June 2018 was 645 (2017: 651).
26. Subsequent events There were no subsequent events noted by management up to the date of authorisation of the special purpose financial statements that require adjustment to or disclosure in these special purpose financial statements.
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Connecting the Dots: Work/Life Balance and Ageing UWI Social Work Unit Conference
Light It Up
EDâ&#x20AC;&#x2122;s Open House
ISSA Training and Workshop
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FORGING TRANSFORMATION. FOSTERING SUSTAINABILITY.
Visit by Minister of Finance
Customer Appreciation
Administrative Professionals Week
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Design: Sage Corporate Communications & Publications A Division of Lonsdale Saatchi & Saatchi Advertising Limited Printing: SCRIP-J
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