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CONTENTS
Mission	3
To our stakeholders	 4
Highlights 6
Economic overview	 7
Financial highlights	 10
Underwriting	12
Insur...
3-2
To bring world class
financial services to
Mongolia.
Being a lifelong partner
for our customers in
providing value add...
TO OUR STAKEHOLDERS
OYBEK N. KHALILOV
CEO
5-4
With mid-year parliamentary elections and a tough economic environment, the 2016 year was challenging in
Mongolia but ...
HIGHLIGHTS
7-6
BALANCE OF PAYMENTS
Proxy loss of the balance of payments as of the year end of 2016 has decreased by USD 249.9 millio...
Foreign direct investment
FOREIGN DIRECT INVESTMENT
Due to the domestic and international economic difficulty, there has n...
9-8
INTERNATIONAL RESERVES
International reserve is USD 1,296.3 million as of the year end 2016, which is lower than previ...
FINANCIAL HIGHLIGHTS
Total Assets +22% YOY
Reserve fund +13% YOY
GWP +4% YOY
Investment +26% YOY
Net income +265% YOY
Earn...
11-10
Claim +16% YOY
GWP by Lines
GWP by Channels
Opex +6% YOY
UNDERWRITING
Tenger Insurance strategy to serve different customer segments with a broad range of products through wide
di...
13-12
In order to enhance the capacity building of our underwriters we have conducted several trainings on property,
const...
INSURANCE MARKET OVERVIEW
There are in total 15 general insurance companies and 1 life insurance company in the market as ...
15-14
Tenger Insurance is sharing 8 percent and 9 percent of the market by total gross premium and total net premium
respe...
INSURANCE MARKET OVERVIEW
Sufficient reserves are indicator of ability to meet future liabilities as well as the solvency ...
17-16
As for the market, as shown in the graph above, the main line is Property line. Its total gross premium reached
MNT ...
OPERATIONS
MAJOR CHANGES IN OPERATIONS
Tenger Insurance became fully compliant with the new accounting rules introduced by...
19-18
HR MANAGEMENT
Through strategic partnerships and collaboration, we recruit, develop and retain a high performing and...
21-20
FUTURE STRATEGY
12,000 12,000
28%
9,004
9,004
Actual-16
Actual-16
Property
Directsale
A&H
Broker
Vehicle
Banks
CDLI
Partne...
23-22
Tenger Insurance will continue to play the role it has always played – reducing fear and enabling the future – but
o...
Internal control function is embedded in responsibilities of each department with Internal Auditor being the main
monitori...
25-24
INTERNAL CONTROL
Taking risks is an inherent part of entrepreneurial behavior. A structured risk management process ...
THE COMPANY’S
Shareholders Meeting (ShM)
Board of Directors (BoD)
Chief Executice Officer (CEO)Risk Management Committee (...
27-26
(ORG CHART) AS FOLLOWS:
The Tenger Financial Group, LLC (the “Shareholder”) become a sole shareholder of the “Tenger...
The Company’s Board consisted (6) six directors (1) one of it concerning as an independent director. All members
of the Bo...
29-28
TSEVEGJAV Gumenjav
Board member, Appointment in August 2014
Tsevegjav Gumenjav was appointed as Chief Executive Offi...
YOSHIAKI Matsuoka
Board member, Appointment in May 2014
М. Yoshiaki Matsuoka was appointed as a non-executive director of
...
31-30
ATTENDANCE OF THE BOARD MEETING IN 2016
In total (17) seventeen Board meetings held in 2016 and (4) four of its conc...
Tenger Insurance LLC has successfully sponsored the team of
Bayanzurkh Disctrict`s 84th school in the 10th annual competit...
33-32
To the Shareholder of Tenger Insurance LLC
Opinion
We have audited the financial statements of Tenger Insurance (“th...
INDEPENDENT AUDITORS REPORT
TENGER INSURANCE LLC
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2016
(IN THOUSAND S OF ...
35-34
TENGER INSURANCE LLC
STATETMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2016
(IN THOUSAND S OF MONGOL...
INDEPENDENT AUDITORS REPORT
TENGER INSURANCE LLC
STATEMENT OF CASHFLOW
FOR THE YEAR ENDED 31 DECEMBER 2016
(IN THOUSAND S ...
37-36
TENGER INSURANCE LLC
STATEMENT OF CHANGES IN EQUITY
AS AT 31 DECEMBER 2016
(IN THOUSAND S OF MONGOLIAN TOGROGS)
Dolgorsuren:
“We are grateful for collaboration and risk management
support we receive from Tenger Insurance”
… Our compan...
www.tengerdaatgal.mn
+(976)-1800-1889
insurance@tengerinsurance.mn
/tengerinsurance
Tenger Insurance LLC 2016, Annual report
Tenger Insurance LLC 2016, Annual report
Tenger Insurance LLC 2016, Annual report
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Tenger Insurance LLC 2016, Annual report

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Tenger Insurance LLC 2016, Annual report

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Tenger Insurance LLC 2016, Annual report

  1. 1. CONTENTS Mission 3 To our stakeholders 4 Highlights 6 Economic overview 7 Financial highlights 10 Underwriting 12 Insurance market overview 14 Operational highlights 18 Future strategy 20 Risk management 22 Governing structure 27 Board of directors 28 Independent auditors report 33 Customers’ impressions 38
  2. 2. 3-2 To bring world class financial services to Mongolia. Being a lifelong partner for our customers in providing value added financial solutions embracing the highest standards of triple bottom line mission: People, Planet, and Profit. Our core values describe how we should act in order to accomplish the tasks leading to achieving our vision and mission. They create desired culture, as they are the principles that guide the behaviors of all employee. OUR VISION OUR MISSION CORE VALUES OUR VALUES MISSION
  3. 3. TO OUR STAKEHOLDERS OYBEK N. KHALILOV CEO
  4. 4. 5-4 With mid-year parliamentary elections and a tough economic environment, the 2016 year was challenging in Mongolia but proved to be yet another successful year for Tenger Insurance. The company posted a net profit of MNT 1.5 billion, a fourfold increase over the prior year 2015, while total assets grew by 22% and return on equity was 24.7%. These results were achieved through improved underwriting guidelines, favorable claims develop- ment and savings in operating expenses. Gross written insurance premiums totaled MNT 9.0 billion in 2016, a 4.0% increase compared to the same period last year. There were changes in the share of premiums written by distribution channel in 2016: premiums through inter- mediaries decreased, with banc assurance reducing by 12.2% due to more restrictive bank lending activities, whereas direct sales from head office increased by 10.0% and sales through branches grew by almost 40% compared to 2015. During the 2016 year gross written premium by product line increased on average by 10.2% with the exception of liability insurance, due mainly to the limited insurance budgets of legal entities. Insurance losses across all types of insurance decreased by MNT 76 million, resulting in a fall in the overall paid claims ratio by 6%, the loss ratio for 2016 falling to 37.2% compared to 43.0% last year. Tenger Insurance LLC is acknowledged in Mongolia as the insurer best able to assess risk and technically price the insurance cover in line with its stated risk appetites. The result has been consistently higher net income than the average for the Mongolian insurance market. Tenger Insurance has made considerable efforts to develop the insurance sector, while our insurance services meet international standards including the quality and financial reliability of reinsurance protection. During the last two years our reinsurance capacity increased from USD 2 million in 2015 to USD 10 million by the end of year 2016. Tenger Insurance is setting the standards for other insurance companies in terms of technical underwriting ability and innovations in the insurance field, including its on-line insurance platform. Tenger Insurance was the first to introduce new accounting policies and to upgrade core IT systems in accor- dance with the new requirements of the Financial Regulatory Committee. Monthly analysis of data received from branches has been implemented. The MIIS system finally supported the direct input and import of claims data. By simplifying the processes and production with the banc assurance channel, we have achieved significant re- duction in headcount and improved operational risk management, internal reporting and actual expense savings. More granular analysis are now available on the performance of individual insurance products, including product value, product awareness, client satisfaction, and service quality feedback. With new analytical capabilities we are able to recognize trends and leverage those trends to add more value to our customers. Tenger Insurance provides insurance coverage to 61 corporates from the Top 100 Companies of Mongolia. In the first quarter of 2016, Tenger Insurance held a one-week training workshop on underwriting and actuarial practice for all employees, as well as other market practitioners, including representatives from the regulator, conducted by invited international insurance experts. In May, the company organized the first Financial Insurance Forum of Mongolia, in cooperation with one of the leading international insurance brokers, Willis Towers Watson. High priority is given to customer service and claim handling; our fast and efficient service is regarded as the best in the market, with settlement conducted on average within three working days. At Tenger Insurance the monitoring of the claim approval and settlement process is based on the principles of clarity and fairness. During 2016 the company won a number of international awards: Best Insurance Company in Mongolia by International Finance Magazine and Best Online Insurance Company in Mongolia by Global Banking and Finance Review. Oybek N. Khalilov CEO
  5. 5. HIGHLIGHTS
  6. 6. 7-6 BALANCE OF PAYMENTS Proxy loss of the balance of payments as of the year end of 2016 has decreased by USD 249.9 million to USD -18.2 million. The main reason of this decline was the decrease of current account loss. Specifically, compared to previous year’s performance, the profit of capital and financial account decreased by USD 58.0 million and the loss of current account decreased by USD 412.0 million. The decrease of current account loss is explained by increase of goods balance profit and decrease of income balance loss. Following these improvements, the exposure on international reserve will be lightened. INFLATION Inflation rate (UB) has been decreasing constantly to -0.6% as of August 2016, since August 2014. This defla- tion continued for 4 months. The reason of decrease in inflation rate is thinner total demand as consequence of economic difficulty. As of the end of the year 2016, inflation rate was 0.5%. It is expected that inflation rate will be around 5.0% in the year 2017. This is under the target rate but there are still risks on importing goods’ inflation and supply-driven (gasoline, meat, wheat etc.) inflation. ECONOMIC OVERVIEW Balance of payments (In USD million) Inflation Source: XacBank
  7. 7. Foreign direct investment FOREIGN DIRECT INVESTMENT Due to the domestic and international economic difficulty, there has not been much foreign direct investment recovery since 2013. As of the end of the year 2016, net foreign direct investment plunged to USD -4,130.5 billion as the result of increasing cash outflow which was caused by big corporations’ loan repayments to foreign investors. GROSS DOMESTIC PRODUCT GDP growth was respectively +7.8% and +2.3% for the year 2014 and 2015. However as of the year end of 2016, it was +1.0%. The proportion of net tax in GDP growth has been negative for the last 11 months. It is because of the shrinkage of trade industry and base tax payments which was caused by the economic difficulty and slowness driven by deficit of balance of payments. RGDP Consensus AVG forecast (%) ECONOMIC OVERVIEW
  8. 8. 9-8 INTERNATIONAL RESERVES International reserve is USD 1,296.3 million as of the year end 2016, which is lower than previous year’s perfor- mance by USD 26.8 million (2.0%). The reasons of comparably stable international reserve are the increase of gold sold to Bank of Mongolia and increase of currency inflow to Mongolia. The Bank of Mongolia has bought 18.3 tons of gold as of December, 2016. International reserve can cover 4.9 months’ worth of import which is slightly lower than previous year’s performance. Foreign exchange reserves Mongolia: GDP Growth and Commodity Prices, 2000-15 Mongolian RGDP is comparably high volatile and shows same pattern as of the commodity prices index. This indicates that Mongolian dependence on mining industry should be lowered and changes have to be applied on budget planning. It is anticipated that unemployment rate is to increase from 9.4% to 11-13% in 1H2017. Source: IMF
  9. 9. FINANCIAL HIGHLIGHTS Total Assets +22% YOY Reserve fund +13% YOY GWP +4% YOY Investment +26% YOY Net income +265% YOY Earned premium -1% YOY
  10. 10. 11-10 Claim +16% YOY GWP by Lines GWP by Channels Opex +6% YOY
  11. 11. UNDERWRITING Tenger Insurance strategy to serve different customer segments with a broad range of products through wide distribution channels including 19 branches, 9 commercial banks, 13 brokers, 9 partnership companies and over 350 agents continues to strengthen our competitive position. Since demand for insurance services is increasing day to day we are delivering our services for individuals and corporates using all potential distribution channels in order to increase sufficiency and accessibility. Using our broad distribution channels we provided our services for above 62 thousand individuals and 12 thousand entities which is 20% and 11% increase compare to the previous reporting year respectively. In reporting period we focused on the following priorities: • better serve our customers through innovation, effectiveness and efficiency; • achieve target economic returns on capital; • launch new insurance products; • proactively manage investments; • build and acquire long-term growth platforms. We have conducted Risk management, health and safety trainings for over 100 corporate clients. In order to mitigate fire risk within manufacturing companies fire risk survey and trainings were provided jointly with professional institutions. During the reporting period we successfully participated in open bids of international organizations and provided insurance services. We actively participated in all major exhibitions, conferences and events occurred in Ulaanbaatar as well as in rural areas. The first financial line forum was organized successfully for corporates, commercial banks and non-bank institutions, international organizations and government entities jointly with Mongolian National Chamber of Commerce & Industry and international broker company. In order to introduce our combined vehicle own damage and drivers liability insurance package we participate in the largest motor fair as a main sponsor. Vehicle insurance products mainly sold through our branches and distribution channels such as banc assurance, brokers, agents and partnership companies. It is our strategy to serve all consumer segments with unique products and in innovative ways while leveraging our claims, pricing and operational capabilities.
  12. 12. 13-12 In order to enhance the capacity building of our underwriters we have conducted several trainings on property, construction all risk, third party liability, professional indemnity, health and accident insurance and bank’s loyalty insurance products. With the purpose to fulfill needs of our clients contracts liability and professional indemnity insurance was developed according to international standard and introduced to the market. Bank credit card holders travel accident insurance product which covers medical expenses due to accident up to USD 50,000 with worldwide coverage was introduced and launched in the market jointly with “A” rated reinsurance company. 11th season of livestock index based insurance started in April 2016, company’s 10 branches 216 active agents through more than thousand herders family involved 339 thousand livestock insured accumulating net premium of MNT 181 million. Tenger Insurance have paid 52 million tugrug for 2016 severe weather disaster recovery for herder’s family. DISTRIBUTION CHANNELS During reporting period new branch was opened at auto complex center to provide combined motor package and personal accident insurance to reach our remote individuals and clients. Cooperation agreements signed with additional 6 brokers, 2 nonbanking financial institutions and National Investment Bank to deliver compulsory property, special purpose and heavy machinery, combined motor and livestock insurance. Tenger Insurance provided professional training for 109 agents and 66 of them passed FRC exams in 2016. FOREIGN RELATIONS AND PARTNERS Tenger insurance LLC cooperates with reinsurance companies and brokers based on their credit rating, solvency and financial capability. Within the scope of policy and strategic plan of reinsurance, the company effectively collaborates with world-class reinsurance companies as well as with professional insurance brokerage companies according to the ratings of global rating agencies such as Standard and Poor’s, Moody’s, Fitch and A.M.Best as well as criteria of Financial Regulatory Committee. In 2016 we established partnership and collaborated with following reinsurance companies as well as brokering companies such as AIG (Singapore), Sirius International, Trust Re, QBE Australia, Zurich International Programs Hub Malaysia, Aviva (UK), Mai Reinsurance Brokers and Skala Reinsurance Brokers.
  13. 13. INSURANCE MARKET OVERVIEW There are in total 15 general insurance companies and 1 life insurance company in the market as the end of 2016. Tenger Insurance is one of the market leaders. Tenger Insurance is among the top 3 companies sharing 10 percent of the market by total assets and it is second by total equity amounted MNT 6.9 billion. 11,48512,305 16,654 17,309 Tenger Insurance Tenger Insurance Tenger Insurance Tenger Insurance Bodi Insurance Mongol Insurance Practical Insurance Ganzam Insurance MIG Insurance Bodi Insurance Mongol Insurance Bodi Insurance Mongol Insurance Mandal Insurance MIG Insurance MIG Insurance Mandal Insurance MIG Insurance Bodi Insurance Mongol Insurance 30,375 5,115 9,578 6,871 5,969 5,137 9,004 24,725 20,148 13,093 11,308 5,9866,466 6,867 10,458 14,174 Total Assets 3rd 5th 2nd 4th Total premium Total equity Net premium Source: MIA Source: MIA
  14. 14. 15-14 Tenger Insurance is sharing 8 percent and 9 percent of the market by total gross premium and total net premium respectively, therefore positioning as 6th and 4th premium. 809954 1,023 1,035 1,504 The main factor of company efficiency is net profit after tax. Tenger Insurance leading the whole market by the net profit of MNT 1.5 billion as well as by the highest ROE of 22 percent. As for paid claim amount, Tenger Insurance paid in total MNT 2.4 billion, positioning itself 7th in the market. The lower claim amount is a feature of proper underwriting, sufficient premium and solid risk management internally and externally. Tenger Insurance Bodi Insurance Khaan Insurance Ganzam Insurance Tenger Insurance Khaan Insurance Bodi Insurance Ganzam Insurance MIG Insurance MIG Insurance 25% 22% 21% 20% 16% 16% 20% 15% 10% 5% 0% 1st Net income ROE Source: MIA Tenger Insurance MIG Insurance Mongol Insurance Mandal Insurance Practical Insurance Ard Insurance Bodi Insurance 6,704 2,386 2,596 2,839 3,153 4,116 4,954 7th Total paid claim Source: MIA 17,972 6,286 6,357 8,877 9,697 Tenger Insurance MIG Insurance Bodi Insurance Mongol Insurance Mandal Insurance Total reserve 3rd Source: MIA
  15. 15. INSURANCE MARKET OVERVIEW Sufficient reserves are indicator of ability to meet future liabilities as well as the solvency ratio. Tenger Insurance is again among top 3 companies by total reserve fund placing almost MNT 9 billion for reserves. For the solvency ratio, the company kept its solvency ratio above the required level and was constantly increasing it during 2016 reaching 116.3 percent by the end of the year. Source: MIA Loss ratio Combined ratio Expense ratio Source: MIA Tenger Insurance loss and expense ratios at 37% and 44% are comparably low among the market leaders. loss ratio of 37 percent and expense ratio of 44 percent. Thus, its combined ratio of 81percent is a very good indicator of our leading position on efficiency and profitability. 116.3%
  16. 16. 17-16 As for the market, as shown in the graph above, the main line is Property line. Its total gross premium reached MNT 31.8 billion and shared 28 percent of the insurance market in 2016. The Compulsory Driver’s Liability Insurance (CDLI) and Vehicle lines contributed MNT 27.8 billion and MNT 14.5 billion and shared 25 percent and 13 percent in the market respectively. The 5 product lines shown in the graph above made up 84 percent in total premium. The similar picture can be in the premium income split of our company. Vehicle insurance contributed MNT 2.3 billion and made up 25 percent of the company total premium income, whereas Property line and CDLI shared 23 percent and 21 percent respectively. 83 percent in total premium income of the company is contributed by the top 5 insurance lines of the company: Vehicle, Property, CDLI, CAR and Liability. Market TOP 5 products, in total premium share Tenger Insurance’s Top products, in total premium share
  17. 17. OPERATIONS MAJOR CHANGES IN OPERATIONS Tenger Insurance became fully compliant with the new accounting rules introduced by Financial Regulatory Committee of Mongolia during Q1, 2016. The new accounting system enables financial reporting in accordance with IFRS, along with adequate allocation of insurance reserves and pro-rata recognition of insurance premium related book entries, including acquisition expenses, in alliance with their effective dates. At the same time our core system HeavenPro went a major upgrade aligned with these accounting changes. The upgrade involved advancements and automation in several core insurance modules, such as recognition of commission, receivables, classification of earned premium, reinsurance, claims, policy production and reserving. The new core insurance system also enabled remote branches to access the system via web. As a result we reached not only operational efficiency within both back and front offices, which increased staff productivity and reduced headcount, but also benefited our clients and partner companies. Insurance intermediaries such as agents and brokers have now greater web access to our system in producing policies and obtaining reports. Partner companies selling our policies through our system: • Banks: ХасBank, NIBank • Brokers: Ersdeliin shiidel, Sureg Kharaatsai, Smart Brokers, Tod Capital, Tsagaan Gerelt • Partners: XacLeasing As part of goal to improve operational productivity the IT team succeeded in a number of automation solutions, including integration of claims part of MIIS - third party platform with our system, implementation of business letter and document retention system, and internal legal document sharing platform. As of end of 2016, we continue our cooperation with following IT vendor companies: Infosoft LLC, IT Zone LLC, Trikom LLC, Mogul Service and Support LLC, MMIA on MIIS, Softline LLC. IT SYSTEM FAILURES In 2016, long term system failure occurred twice in the core system: 1. Failure in onsite electrical wiring caused halt in Central server for 20 hours. Operation resumed within 2 hours. 2. Core system migration required shutting down the central server for 4 hours. The data was restored within 2 hours.
  18. 18. 19-18 HR MANAGEMENT Through strategic partnerships and collaboration, we recruit, develop and retain a high performing and diverse workforce and foster a healthy, safe, and productive work environment for employees in order to maximize individual and organizational potential and position Tenger Insurance as an Employer of Choice. CLAIMS SERIVCE As the purpose of any insurer is to shield its customer from financial losses arisen from probable risks, we aimed at shortening the loss indemnity approval period, with end result of 3.5 days on average. Net losses reimbursed to customers amounted to MNT 2.4 billion for 3,524 claims with loss ratio of 37%. Our effort in making a difference to our customers shows that old standards can be and should be broken in order to bring out lasting and positive impact in the lives of people. Under increased digitalization, providing the client with timely information on indemnity progress via emails and mobile phones was part of natural progress within the technological awareness goal of the company. APPROVAL PERIOD IN DAYS NUMBER OF CLAIMS AMOUNT MNT BILLION APPROVAL PERIOD IN DAYS NUMBER OF CLAIMS AMOUNT MNT BILLION 2016 3.5 3524 2.4 2015 5.2 4507 2.8 2014 5.5 4143 2.6
  19. 19. 21-20
  20. 20. FUTURE STRATEGY 12,000 12,000 28% 9,004 9,004 Actual-16 Actual-16 Property Directsale A&H Broker Vehicle Banks CDLI Partnership Liability Agent Financaillines Branches Budget-17 Budget-17 739 975 758 224 463 1,092 355 113 182 16 2 77 11,500 11,500 0 0 2,000 2,000 4,000 4,000 6,000 6,000 8,000 8,000 10,000 10,000 GWP by lines Net income Total assets GWP by channels Gross writen premium Total reserve 4,631 Actual Budget 7,112 6,994 7,846 8,877 9,303
  21. 21. 23-22 Tenger Insurance will continue to play the role it has always played – reducing fear and enabling the future – but only by partnering with clients, collaborating and encouraging diversity of thoughts, investing in innovation, and using data to help clients achieve better outcomes. Because of our customer-centric approach, we announce the following motto for 2017: “We are always together to make every moment of happiness!” In 2017 we will contribute to the improvement in intrinsic value of Tenger Insurance and sustainable profitability by delivering high growth of gross premium - 28%, improving our technology infrastructure and new on-line insurance platform, and through simplified cost structure and further empowerment of employees. Commercial and Consumer priorities are as follows: COMMERCIAL CONSUMER • Build a more customer-centric culture • Challenging ourselves to make effective underwriting decisions • Increase direct sales up to 60 corporates from MNCCI Top 100 • First choice provider in Financial line • Secure growth in Health Insur- ance and Travel Insurance • Performance management and employee development plans • Customer-focused organization • Culture of teamwork, empowerment to achieve efficiency, customer intimacy, and innovation • Provide customers with differentiated Best customer experience across channels in vehicle insurance and mortgage insurance • Enhance our business model (i.e. on- line, mobile, and customer self-service) • Become absolute leader in banc assurance • Performance management and em- ployee engagement plans
  22. 22. Internal control function is embedded in responsibilities of each department with Internal Auditor being the main monitoring unit directly reporting to the Board of Directors (BOD). Internal audits were performed on HR and Finance activities covering periods of 2013-2016. District taxation authority performed inspection of reports for 2011-2015, as well as FRC inspected the company operations for 2015 and H1 2016. The inspections resulted in improvements of the company operations in areas of claims, reinsurance, finance and human resources management. TENGER INSURANCE IMPROVED ITS POLICIES TO AN INTERNATIONAL LEVEL IN FIVE IMPORTANT AREAS IN 2016. In the updated Underwriting policy, Tenger Insurance is a step closer to the international underwriting operation as underwriters’ job functions and work instructions are clearly specified and distinguished from sales staff. Particularly, underwriters started to study the potential client’s main operations and conduct risk evaluation in order to offer the most suitable insurance coverage specifically tailored for the client. This approach is also useful when potential clients are willing to purchase coverage for uninsurable risks. For such cases, skills and experience of underwriters are crucial in order to come to an optimal solution that is win-win for both sides. Premium payment by installments is one way of our customer care. However, sometimes delay in payments means termination of the insurance coverage and this can cause an issue when it comes to claims. This was recognized as our faults in communication with customers. Therefore, to eliminate this type of misunderstanding and improve our customer care, we had clearly defined in our procedure the steps to follow when it comes to partial payments by schedule and payment delays. Within the above improvements from the risk management side, underwriters will be reporting on policies with premium partial payments on a regular basis as well as constantly monitoring profitability and risk level of their respective portfolios or lines. The updated Risk management policy also defines the risks that should be under observation and within this underwriters came out with appetites for all insurance lines and products. For insurance, customers evaluate our service when it comes to claims. Therefore, customer care in claims is more important than customer care in sales. Accordingly, the Claim handling policy was enriched with dedicated section on customer complaints and defined our responsive actions to be taken if complaints occur. Another essential part of our operation is information technology as our operations are fully automated and we are the one of two insurance companies in the market with comprehensive insurance software, which can be accessed through web from everywhere by our staff. In this case, its safety and emergency backup plans are crucial for us. Thus, the Information Technology policy was supplied with Emergency response plan procedure for information catastrophes, Database procedure, Software development and maintenance procedure, Social media user authorization procedure and Electron mail procedure. In the beginning of 2016, the Financial Regulatory Committee (FRC) approved the new accounting standard. Tenger Insurance was the first to implement the new standard by introduce new accounting internal policy in accordance with the new regulatory requirements. RISK MANAGEMENT
  23. 23. 25-24 INTERNAL CONTROL Taking risks is an inherent part of entrepreneurial behavior. A structured risk management process allows management to take risks in a controlled manner. In order to provide a comprehensive view of Tenger Insurance’s business activities, risks and opportunities are identified in a structured way combining elements of a top-down and bottom-up approach. Within risk management activities, we have developed company Risk Appetite, where we identified risks that can affect our day-to-day operations and defined these risks’ measures and corresponding tolerance levels in order to monitor and report on a regular basis. All relevant risks and opportunities are prioritized in terms of impact and likelihood, considering quantitative and qualitative aspects and reported to the top management in a monthly basis. Within the Risk Appetite we consider the following classes of risks: 2 Indemnities paid MNT 1.3 million paid Out of 3 claim calls 2 onsite claim inspection 1 claim on each working hour
  24. 24. THE COMPANY’S Shareholders Meeting (ShM) Board of Directors (BoD) Chief Executice Officer (CEO)Risk Management Committee (RMC) Business Development Committee (BDC) Sales Department (SD) Branches Management Brokers Management Banc Assurance Executive Committee Management (ECM) Chief Underwriting Officer(CUO) Consumer insurance Department (CID) Corporate Insurance Department (BEID) Risk Management Department (RMD) Reinsurance Unit (RU) GOVERNANCE RELATED PARTY TRANSACTIONS Tenger Insurance had transactions with parent company Tenger Financial Group LLC, and other daughter companies XacBank, XacLeasing and XacSecurity. RELATED PARTY TRANSACTIONS SUMMARY REPORT MNT Total income from related parties 446,738,628 Total expense to related parties 479,513,414 DIVIDEND POLICY AND DISTRIBUTION The company shareholders have right to declare dividend distribution once retained earnings are audited by the external auditor, currently by Deloitte Onch Audit LLC. Dividends were not distributed in 2016.
  25. 25. 27-26 (ORG CHART) AS FOLLOWS: The Tenger Financial Group, LLC (the “Shareholder”) become a sole shareholder of the “Tenger Insurance” LLC (the “Company”) since August 2013 and the company management aim to establish a good governing structure of the company for the successful business growth and improve this structure time to time as required and needed. Tenger Insurance is a wholly-owned subsidiary of TenGer Financial group, one of the leading Mongolian financial services groups, providing a range of banking and financial services. TenGer Financial Group is majority-owned by broad base of recognized institutional investors. Shareholders of TenGer Financial Group are located across the globe, including the largest international financial institutions, local and foreign reputable companies and investment funds. No other company in the banking and financial sector of Mongolia has currently such a diverse shareholding structure. It is our competitive advantage and driving force in growing our banking business leveraging on knowledge, capital and network of our shareholders. Risk Management & Audit Committee (RMAC) Governance, Nomination &Compensation Committee (GNNC) Lawyer (L) Marketing (M) Human Recourses (HR) Chief Operation Officer (COO) Internal Auditor (IA) Business Development Unit (BDU) Claim Department (CD) Global Accounts Unit (GAU) Financial Department (FD)
  26. 26. The Company’s Board consisted (6) six directors (1) one of it concerning as an independent director. All members of the Board of Directors have many years of executive management experience in financial services industry. BOLDOO Magvan Chairman of Board, Appointment in April 2016 Mr. Bold Magvan was appointed as the Chief Executive Officer of the XacBank since July 2014 and he has served as non-executive director on the Board of Directors of XacBank since 2009. Mr. Bold has been working as the CEO and executive director of TenGer Financial Group since January 2011. Prior to his current appointment, Mr. Bold worked for XacBank for 2 years as the CEO and for over 3 years as the President. Bold is a senior banking professional with more than 20-year expertise in public and private global financial institutions, including the World Bank and the International Monetary Fund. From 1996 to 2000, Bold was the Deputy Governor of the Bank of Mongolia (Central Bank). In his prior professional career, Bold served as Deputy Director at the Market Research Institute, CEO of the Mongolian Export-Import Bank, member of the boards of the International Investment Bank and the International Bank for Economic Cooperation in the Russian Federation and advisor for Da Afghanistan Bank (Central Bank), Islamic State of Afghanistan. Mr.Bold holds a Master’s Degree in International Affairs with a major in economic policy management from the Columbia University, New York. Bold is the chairman of the boards of the Credit Information Bureau LLC and Development Solutions NGO in Mongolia. Bold has served as Vice President of the Mongolian Bankers Association since 2007 and was elected as President in December 2011. Bold has served the Honorary Consul of the Republic of Iceland in Mongolia since 2008. AMARTUVSHIN Hanibal Board member, Appointment in September 2014 Amartuvshin Hanibal joined XacBank as President in July 2014 and he had worked as the Managing Director of Tenger Financial Group for 3 years. Amar has experience on project finance and leveraged finance for over 10 years and he was the Managing Director and Head of Risk Management Department at JSC Kazkommertsbank (KKB), the largest commercial bank in Kazakhstan. Prior to joining Kazkommertsbank, Amar has worked in ABN AMRO Bank in various global offices including London, Amsterdam and Chicago. As part of ABN AMRO Bank’s Structured Debt Unit, Amar worked on several high-profile transactions in the oil and gas, power and telecom sectors in Europe. Amar has started his career at Cash Management Unit of ABN AMRO and transferred to the Risk Management Department. Amar holds a bachelor’s degree in business administration from the European University of Brussels, Belgium and a MBA from the Harvard Business School, Boston, USA. BOARD OF DIRECTORS
  27. 27. 29-28 TSEVEGJAV Gumenjav Board member, Appointment in August 2014 Tsevegjav Gumenjav was appointed as Chief Executive Officer of XacLeasing in May 2013. Previously, he worked as the Chief Financial Officer of TenGer Financial Group and later as Chief Financial Officer of XacBank. Prior to joining TFG, Tsevegjav worked as a Treasury Manager at multi-brand premium home furnishing company based in San Francisco, USA. During his engagement with the Restoration Hardware, Tsevegjav managed the company’s treasury and risk management functions. He worked in Bluefin Associates, IT software Development Company in San Francisco and also worked as an International Accountant at Wagner Equipment Company based in Denver, USA. Tsevegjav received his M.B.A degree with concentration in Finance and Accounting from Regis University, USA and Bachelor of Science degree in International Business and Information Systems Management from the University of Colorado, USA. ERDENEJARGAL Perenlei Board member, Appointment in May 2016 Erdenejargal Perenlei was appointed as Non-Executive Member of Board of Tenger Financial Group in 2005. Since 2004, she has been Executive Director of Open Society Forum. She also worked at National Committee of Labor and Social Security as an economist during 1982-1988, at Institute of Profession Development for Managers as a teacher during 1988-1991, at Government agency, Research Centre for government and social policies as a specialist and a director during 1991-1992 and at Institute of Mongolian Development as an Executive Director. During 1997-2004 she worked at Open Society Forum as Vice President and also as Director of education, press and health programs. She is specialized on research related with ensuring participation of community on decision making and she has actively participated in related activities for advocacy. In 1982, she was graduated from University of Rostov-on-Don, Russia as psychologist.
  28. 28. YOSHIAKI Matsuoka Board member, Appointment in May 2014 М. Yoshiaki Matsuoka was appointed as a non-executive director of XacBank in March 2016. Yoshiaki serves as Managing director, Global Business Development and Investment Group, Investment and Operation Headquarters, of ORIX Corporation with the responsibilities for leading and managing M&A transactions and negotiations and monitoring portfolio companies as a nominee director of ORIX. Yoshiaki joined ORIX in 1991 as sales associate and has worked since then on different positions including work with ORIX USA Corporation as Senior Vice President. Yoshiaki serves at present on the boards of directors of the Mediterranean & Gulf insurance and Reinsurance Co. B.S.C., DI investment Partners Limited and ORIX Investment and Management Pte. Ltd. Yoshiaki is also a member of the Advisory Committee of Mongolian Opportunity Fund and Abraaj Turkey Fund. He is received his bachelor degree in Physics and a graduated of the Kwansei Gakuin University of Japan in 1991. OYBEK N. Khalilov Board member, Appointment in December 2016 On September 14, 2015 Oybek joined Tenger Financial Group as the CEO of Tenger Insurance LLC, and was nominated to represent XacBank as a Corporate Member at AmCham Mongolia. For 20+ years Mr. Khalilov has worked in the private insurance market area working with American International Group, Inc. He has spent five years from 1994 to 1999 with American International Group, Inc. in London/UK serving as the CEO of political risk JV. He was in charge of AIG general insurance operations in Central Asia and Caucasus from 2000 to 2015. His entire professional career is showcased by major contributions in taking companies to greater levels of financial, competitive, and operational performance. He has an in in-depth knowledge of property, energy, casualty, and financial lines and accident insurance and political risk insurance products for 18 years. Oybek served on the Boards of Directors of American Chamber of Commerce in Kazakhstan and Uzbekistan since 1997. He received his bachelor degree from the Tashkent State University of Economist at republic of Uzbekistan in 1994, specialized in International economics relations. BOARD OF DIRECTORS
  29. 29. 31-30 ATTENDANCE OF THE BOARD MEETING IN 2016 In total (17) seventeen Board meetings held in 2016 and (4) four of its concerning as “regular” or scheduled and (1) one is “un-scheduled” and other (12) twelve is “external online voted”. More detailed info about it can be seen from the below tables. Board of Directors attendance (in person/voting ballot) at meetings as “regular” held in 2016 as follows: No# Meetings: Names: 14 Mar 2016 (Q1) 21 Apr 2016 (US1) 20 June 2016 (Q2) 05 Oct 2016 (Q3) 19 Dec 2016 (Q4) Attendance percentage of each director: 1 Mr. BOLDOO Magvan (BM) N/A Y Y Y Y 80% 2 Mr. AMARTUVSHIN Hanibal (AH) Y Y Y Y Y 100% 3 Mr. TSEVEGJAV Gumanjav (TG) Y Y Y Y VB 100% 4 Mrs. DELGER JARGAL Buyanjargal (DB) Y - N/A 50% 5 Mrs. ERDENEJARGAL Perenlei (EP) - - Y Y VB 60% 6 Mr. YOSHIAKI Matsuoka (YM) - - Yes - VB 50% Board meeting quorum 80% 50% 100% 80% 100% HIGHLIGHTS OF THE BOARD RESOLUTIONS IN 2016 In 2016 a total forty items has been submitted by company’s management to the Board of Directors information, discussion and its approval and twenty item approved by the Board of Directors resolutions. In accordance with the Board of Directors resolution No#15/003 enacted on 23 March 2015, the Board approved “Risk Management Policy “and issuing authority to the management team of the Company, which was up to MNT 25 million for the insurance claim settlement and MNT 5 million for the write-off stated in clause 6.1 accordingly, due to establish the structure for good internal control and appropriate governance of the Company. The Board of directors has reviewed “Risk Management Policy” and above mentioned authority and increased its amount up to 3 billion per year for insurance claim settlement and 25 million to write-off of the bad receivable and approves it for the management of the Company. In terms of these changes the company management believes that, this authority will give an opportunity to speed of insurance claim settlements and not losing time for claim settlement.
  30. 30. Tenger Insurance LLC has successfully sponsored the team of Bayanzurkh Disctrict`s 84th school in the 10th annual competition “Duulian 2020”. In addition, the accident insurance of all 48 students during the competition was fully covered by Tenger Insurance LLC. We participated jointly with Golden Fund for Development Association we participated in the working community to develop the national curriculum of financial education program for the youth of Mongolia. The national curriculum of financial education is successfully integrated in the general education program for high schools. As a result of these efforts, in the 2016-2017 academic year, 23,000 students are learning the financial education program in nationwide. SOCIAL RESPONSIBILITY In the framework of XacMeadow campaign, Tenger insurance and companies of Tenger Financial Group has planted 39,000 trees and created 30 groves in Ulaanbaatar city 21 other aimags.
  31. 31. 33-32 To the Shareholder of Tenger Insurance LLC Opinion We have audited the financial statements of Tenger Insurance (“the Company”), which comprise the statement of financial position as at 31 December 2016, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at 31 December 2016, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (“IFRS”). Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (“ISA”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Mongolia, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company’s financial reporting process. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with 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 financial statements. The engagement partner on the audit resulting in this independent auditor’s report is Norjinbat Shagdarsuren. Norjinbat Shagdarsuren Director, CPA Deloitte Onch Audit LLC 24 March 2017 INDEPENDENT AUDITORS REPORT
  32. 32. INDEPENDENT AUDITORS REPORT TENGER INSURANCE LLC STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2016 (IN THOUSAND S OF MONGOLIAN TOGROGS)
  33. 33. 35-34 TENGER INSURANCE LLC STATETMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2016 (IN THOUSAND S OF MONGOLIAN TOGROGS)
  34. 34. INDEPENDENT AUDITORS REPORT TENGER INSURANCE LLC STATEMENT OF CASHFLOW FOR THE YEAR ENDED 31 DECEMBER 2016 (IN THOUSAND S OF MONGOLIAN TOGROGS)
  35. 35. 37-36 TENGER INSURANCE LLC STATEMENT OF CHANGES IN EQUITY AS AT 31 DECEMBER 2016 (IN THOUSAND S OF MONGOLIAN TOGROGS)
  36. 36. Dolgorsuren: “We are grateful for collaboration and risk management support we receive from Tenger Insurance” … Our company is successfully operating in the wool and cashmere business for over 20 years with our own established brand “Goyo”. As a major player in cashmere sector we bring our garments near our clients through 8 branch stores in UB and 10 in provinces. Besides success as in any business, we encounter obstacles and challenges. Some of them are sudden danger with little possibility to predict. For instance, our store counters provide all possibilities to view our products from anywhere. And even though we place surveillance cameras through assessing potential shoplifting risks and enroll our customer service staff in suitable risk prevention trainings, our stores still suffer from inventory shortage from shoplifters. Nevertheless, our main solution for this risk is certainly an insurance coverage, specifically designed for such risk. As a result, we continue to be protected from all risks via inventory insurance from Tenger Insurance for 3rd year. During last year holiday high seasons we encountered inventory shortages, on each occasion Tenger Insurance was able to provide first class claim handling service and cleared our company from losses within 3 days. Our surveillance camera records and inventory checklist provide the foundation for compensation of financial losses in such swift manner. We are grateful for the collaboration and risk management support we receive from Tenger Insurance. CUSTOMERS’ IMPRESSIONS Bolormaa: “I used to wrongly interpret insurance as one form of a tax” … You ask me, where I spend my indemnity received, well, undoubtedly, I try to invest in my wellbeing, since this is coverage for what I spent for my health. For example, buy immune boosting vitamins and supplements or spend on gym membership. The company I work for is a foreign invested company and since I started working here six years ago, I am covered by Tenger Insurance health insurance, including my family: my husband and son. Before, I misunderstood personal private insurance as same as state social welfare, with little benefit. Thus, I had the same opinion as many others – paying insurance premium means the same, as paying one form of a tax. [I am covered by Tenger Insurance health insurance, including my family: my husband and son for the last six years.] There’s a saying that illness comes untold. Therefore, bearing in mind our future, financial expenses and our wellbeing, in particular, we chose health insurance of Tenger Insurance. Any member of our family, including me, will be reimbursed in the form of loss indemnity for the expenses spent on treating illnesses. Tumur: “I’ve been grateful for insuring the health of our entire family” In my opinion, the core of a family is staying happy in any hardship. Happiness can be defined by love of husband and wife, by children’s laughter, but most importantly by being healthy and well. And this is the most vital constituent of a happy family. I was greatly pleased, when my wife, Bolormaa, first told us that we are covered by Tenger Insurance health insurance. This insurance policy enabled us, all three of us, to be treated at a clinic of our choice for any illnesses, including the most “common” ones such as cold or tooth ache. We are proud we could make a valuable investment towards our health. We wish all families of Mongolia health, peace and happiness.
  37. 37. www.tengerdaatgal.mn +(976)-1800-1889 insurance@tengerinsurance.mn /tengerinsurance

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