ga insurance limited annual financial report 2016 · mombasa branch westlands branch kisumu branch...

GA Insurance Limited

Annual Financial Report 2016

To be the most trustedInsurance company

We are committed

while maximizing our stakeholders value

IntegrityWe keep our promisesRespect We value our stakeholdersEnthusiasmWe enjoy what we doProfessionalismWe excel in what we doTransparency We are clear and accessible

VISION

MISSION, VISION & VALUES

V AL UES

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I S S I O N

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Corporate Information 2

Financial Highlights 3

Chairman’s Statement 4 - 5

Board of Directors 6

Senior Management Team 7

Corporate Social Responsibility 8

GA Team 9

Directors’ Report 10

Statement of Corporate Governance 11 - 12

Statement of Directors’ Responsibilities 13

Report of the Independent Auditor’s 14 - 17

Financial Statements:

Consolidated Statement of Comprehensive Income 18

Company Statement of Comprehensive Income 19

Consolidated Statement of Financial Position 20

Company Statement of Financial Position 21

Consolidated Statement of Changes in Equity 22 - 23

Company Statement of Changes in Equity 24

Consolidated Statement of Cash Flows 25

Notes 26 - 82 Supplementary Information

General Business Revenue Account - GA Insurance Limited 83

General Business Revenue Account - GA Insurance Tanzania Limited 84

Life Business Revenue Account - GA Life Assurance Limited 85

TABLE OF CONTENTS

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DIRECTORS

S.B.R. Shah (Chairman)Sachit S. Raja ShahV. Srivastava* (Principal Officer and Chief Executive Officer)Amb. B. A. Kiplagat Sarit S. Raja ShahM. Soundararajan*J. M. Kyungu (Appointed 9 November 2016)S. G. Muthaura (Appointed 8 December 2016) P. J. Ransley (Resigned on 30 September 2016)* Indian

COMPANY SECRETARY

N. P. Kothari FCPS (Kenya)

INDEPENDENT AUDITOR

PricewaterhouseCoopers PwC Tower, Waiyaki Way/Chiromo RoadWestlands P.O. Box 43963 - 00100Nairobi

CONSULTING ACTUARY

Mr. Saket SinghalC1702, Palm Beach Residency, Sector4Nerul (W), Navi Mumbai, MaharashtraIndia – 400706

REGISTERED OFFICE & PRINCIPAL PLACE OF BUSINESS

GA Insurance HouseRalph Bunche Road P.O. Box 42166 - 00100Nairobi

BRANCH OFFICES

Mombasa Branch Westlands Branch Kisumu BranchBiashara Building The Westwood Bon Accord HouseNyerere Avenue Vele Close, Ring Road, Temple RoadP.O. Box 84081 – 80100 Parklands, Westlands P.O. Box 7706 - 40100Mombasa Nairobi Kisumu

BANKERS

I&M Bank Limited 2ndNgong Avenue P.O. Box 30238 - 00100 Nairobi

CORPORATE INFORMATION

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3GA FINANCIAL HIGHLIGHTS

Shareholders Funds Premium Portfolio 2016

Gross Premium Growth in Assets

in Kshs Million

2012 2013 2014 2015 2016

2,352

3,089

4,3254,782

3,817

1,000

500

1,500

2,500

3,500

4,500

5,000

0

2,000

3,000

4,000

300 450 450 450

2,5302,245

1,6261,402

3,000

2,500

2,000

1,500

1,000

500

0

Capital

2012 2013 2014 2015 2016

2,843

Medical22%

Engg6%

Misc22%

Motor23%

Fire21%

Marine5%

700

2012

2013

2014

2015

2016 10,610

10,751

8,923

5,543

7,073

1% Aviation

Shareholder Funds

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64 CHAIRMAN’S STATEMENT

I am pleased to present the annual report and financial statements of GA Insurance Limited for the year ended 31st December 2016.

In an increasingly competitive industry, the company returned a resilient performance with gross written premiums growing 11% to Kshs 4.8 billion. Impeccable underwriting, diligent monitoring of risks, improved customer value propositions and excellent intermediary relationships were pivotal to the company delivering above-market returns to shareholders.

In preparation for the Risk Based Capital regime, the company’s share capital was increased from Kshs 450 million to Kshs 700 million. The company instituted a Board Nomination and Remuneration committee to strengthen its policy oversight over its human resources.

I am happy to note that the company continues to keep pace with evolving customer needs and introduced mobile money and credit card payment solutions. We recognise that premium customer experiences are at the heart of what GA stand for. We continually strive to earn credibility in the market by prompt settlement of our obligations.

I congratulate management and staff for the company being awarded a GCR credit rating of “A” which signifies strong claims paying ability and a stable outlook.

Operational Environment

The economy marginally expanded to achieve a Gross Domestic Product (GDP) growth rate of 5.8% 2016 up from 5.7% in 2015.

The US dollar remained stable against the Kenya shilling averaging Kshs 101.7. The equities market performed dismally with the NSE 20 share index declining from 4,040 points at the start of the year to 3,186 points at the end of the year.

The overall inflation decreased from 7.78% in January 2016 to 6.35% in December 2016. Average interest rates for the 91-day Treasury bill decreased during the year from 11.36% in January 2016 to 8.44% in December 2016 with a low of 6.16% in July 2016. Over the same period the Central Bank Rate (CBR) decreased from 11.5% to 10%.

The insurance industry was characterised by rampant price undercutting, exorbitant underwriting costs, increasing levels of fraudulent claims and uncertainties over the impact of the risk based capital and new investment guidelines.

GA’s Performance

I am pleased to report that the Company’s gross written premium grew by 11% to Kshs 4,782 million up from Kshs 4,325 million in 2015 leading to an underwriting profit of Kshs 289 million. Group profit before tax stood at Kshs 745 million while group profit after tax was Kshs 547 million. The group’s investment income rose 20% from Kshs 717 million in 2015 to Kshs 866 million.

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5CHAIRMAN’S STATEMENT CONT’D

Total group assets grew from Kshs 13.3 billion to Kshs 14.9 billion, while group investments amounted to Kshs 11.5 billion being 55% increase from Kshs 7.4 billion in 2015. The company’s subsidiaries, GA Insurance Tanzania Limited and GA Life Assurance, contributed Kshs 4.3 billion to the group’s asset base.

The company posted strong returns with shareholders funds growing 12% from Kshs 2.5 billion to Kshs 2.8 billion. Profit before tax grew 51% from Kshs 534 million to Kshs 714 million.

Our subsidiary, GA Life Assurance, commendably grew its assets by 63% to Kshs 4 billion and declared interest of 10.5% on its retirement funds which grew 70% from Kshs 2.3 billion in 2015 to Kshs 3.9 billion in 2016. GA Insurance Tanzania wrote premiums of Kshs 222 million up from Kshs 135 million in 2015 and increased its asset base to Kshs 454 million, an increase of 49% from Kshs 305 million in 2015. The company increased its capital investment in GA Insurance Tanzania by Kshs 48 million to Kshs 156 million.

The Board of Directors recommended the dividend of Kshs 227.5 million for the year 2016.

Looking Forward

This being an election year, with its attendant political uncertainties, business activity levels are expected to be relatively subdued. The effects of the severe drought and interest capping law are expected to constrain underwriting and investment returns. The insurance industry is expected to continue its reorganisation amidst the entry of new players, mergers and new capital requirements.

We are leveraging innovation and technology in product development and delivery to match the changing needs of our clients. The company will focus on consolidating its gains and harnessing its competitive strengths while remaining committed to profitably enhancing its geographical footprint. The company remains confident of meeting its 2017 targets and safeguarding shareholders wealth.

Appreciation

I am immensely grateful to our customers and intermediaries for their confidence in the Board and Management. The Company’s excellent performance would not have been possible without your patronage and loyalty.

I thank my fellow directors for their dedication and wise counsel in making GA the most trusted insurance company. I welcome to the board new directors, Mr J.M. Kyungu and Ms S.G. Muthaura, and look forward to benefitting from their advice and invaluable experiences.

I am grateful to the Commissioner of Insurance and CEO of the Insurance Regulatory Authority for his support during the year. I would also like to commend the management and the staff for their steadfast devotion to the Company.

SBR Shah, MBSChairman

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66 BOARD OF DIRECTORS

From Left to Right Seated:

Sachit S Shah S B R Shah, MBS Suzanne Muthaura M Soundararajan Sarit S Raja Shah Executive Director Chairman Non - Executive Director Non-Executive Director Non-Executive Director

From Left to Right Standing:

Joseph Kyungu Vijay Srivastava N. P. Kothari Non-ExecutiveDirector CEO&PrincipalOfficer CompanySecretary

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7GA SENIOR MANAGEMENT

Vijay SrivastavaCEO&PrincipalOfficer

Atia YahyaHead of Health

Winnie MuchombaRisk & Compliance Manager

Henry MwauraHuman Resources Manager

Kaushal Kumar ChiefOperatingOfficer

Helen OmitiLegal Manager

Allan MbiyuICT Manager

Sundeep VaghelaHead of Marketing & Corporate Affairs

Isaac NduguBranch Manager - Westlands

Francis Kamau General Manager, Operations

Thaddeus AkamaFinance Manager

Mukesh Shah TreasuryManager

Steve Ngari Underwriting Manager

Zafir Din Branch Manager - Mombasa

Anne KamoniHead of Internal Audit

Amos MirasiBranch Manager - Kisumu

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68 CORPORATE SOCIAL RESPONSIBILITY

We pride in our continued partnership with the communities, through the four key pillars of Education scholarships, Health, Environmental conservation and Charity support through our business and social partners.

The company has for the last 7 years supported over 3000 less fortunate women from the Kibera slums through the Kipepeo Trust Foundation. The self-help group have ventured in recycling of waste paper. The programme has enhanced greater opportunity for the women to manage environmental pollution while making a sustainable livelihood.

.

EDUCATION SCHOLARSHIPS:

SCHOOL FEEDING AND SANITARY TOWELS:

HEALTHCARE:

ENVIRONMENT:

We pride in our continued partnership with the communities, through the four key pillars of Education scholarships, Health, Environmental conservation, and Charity support through our business and social partners.

During the year, the company launched two major sustainable programme benefitting more than 1,450 beneficiaries in Loreto Primary and Charage Primary and Secondary schools.

We support Loreto Primary school for the annual school Uji feeding programme benefitting over 1000 pupils. Additionally, over 450 girls from Charage Primary and Secondary schools have benefitted with enough annual supply of sanitary towels. At GA, our purpose is to ensure equal oppurtunity and education access to all.

GA Health support programmes is channelled through our charity partners the Kenya Kamili Organization. The initiative is in its fifth year of sustainability. The programme supports over 7,700 patients in three mental health clinics in Nairobi and eighteen outreach mental health clinics in other parts of Kenya. In addition to the training of nurses.

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for the year ended 31st December 2016 9GA TEAM

GA staff taking photos using Insta booth at end year party

Team celebrating after winning competitionduring team building

Look at those poses!

Indoor activities before the main outdoor team building action

GA Insurance basketball team with the HRM and Marketing Manager

Outdoor activities team in action

Team concentrating hard

GA staff cutting cake in celebration of a wonderful year

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6for the year ended 31st December 201610

The directors submit their report together with the audited financial statements for the year ended 31 December 2016 which disclose the state of affairs of GA Insurance Limited (the “Company”) and its subsidiaries (collectively the “Group”). The annual report and financial statements have been prepared in accordance with section 147 to 163 of the repealed companies Act Cap 486, which remain inforce under the transition rules contained in the sixth schedule, the transition and saving provisions of the companies Act 2015.

Principal Activities

The Company underwrites general classes of insurance business as defined by the Insurance Act, while its subsidiaries GA Life Assurance Limited and GA Insurance Tanzania Limited underwrite life and general insurance business respectively.

Capitalization Issue –Share Capital

On 29th November 2016, the Company made a capitalization issue of Kshs 250,000,000/- being part of accumulated reserves of the Company and allotted a total of 12,500,000 Ordinary Shares of Kshs 20/- each to the existing shareholders, thus increasing the issued capital to Kshs 700,000,000/-

Group Financial Results

2016 2015

Shs’000 Shs’000

Profit before taxation 745,050 533,470

Taxation charge (198,351) (179,921)

Profit for the year transferred to retained earnings 546,699 353,549

Dividend

The Directors propose a final dividend of Shs 6.5/- per share (2015: Shs 9 per share) amounting to Shs 227,500,000/- for the year ended 31 December 2016.

Directors

The directors who held office during the year and to the date of this report are set out on page 2.

Independent Auditor

PricewaterhouseCoopers, having expressed their willingness to continue in office, the Board of Directors recommends their reappointment as auditors of the Company in accordance with Section 719(2) of the Companies Act, 2015.

By the order of the Board

N P KothariSecretary

24 March 2017

DIRECTOR’S REPORT

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for the year ended 31st December 2016 11

GA Insurance Limited is committed to the best principles of Corporate Governance. Consequently, the Company emphasises on compliance with the rules, regulations and laws of the land in the conduct of its business. The Company’s main purpose is the pursuit of earning credibility in the market and increasing value for the stakeholders. The decision making processes are run with the values of integrity, responsibility, accountability and transparency in mind.

Board of Directors

The Board Charter details the mandate of the Board, its functions as well as the manner in which it will conduct its business.

The Directors of the Company during the year are listed on page 2.

The Directors are known for their competencies, integrity and experience in the field of banking, finance, manufacturing, business and social services. Though the overall responsibility of monitoring and controlling the operational and financial performance of GA Insurance vests with the Board, the day to day management of the Company has been delegated to the Executive Director.

The Board of Directors meets at least quarterly and is chaired by a non-executive director. The schedule below indicates Board meeting attendance for the year.

Date 23.03.2016 23.06.2016 26.09.2016 24.11.2016

Suresh BR Shah Chairman √ X X √

Sachit S. Raja Shah Member √ √ √ √

Sarit S. Raja Shah Member √ √ √ √

Phillip J. Ransley Member √ X X X

Madabhushi Soundararajan Member √ √ √ √

Bethuel A. Kiplagat Member √ √ X X

Joseph Kyungu Member X X X √

Vijay Srivastava Principal Officer √ √ √ √

√ Attended X Not Attended

Board Committees

The Board has instituted various committees to assist it in fulfilling its role of monitoring key activities of GA Insurance. The Board reviews the reports and minutes of the committees and is accountable for its decisions and functions.

Board Audit Committee

The Board Audit Committee comprises of the Executive Director and two Non-Executive Directors. The Chief Executive Officer, the Group Internal auditor and Internal Audit Manager are regular invitees to the meetings. Its key objective is to assist the Board in providing an independent review of the effectiveness of the financial reporting process and internal control system of GA Insurance. The committee reviews the performance and findings of the Internal Audit and Compliance function and recommends appropriate remedial action at least quarterly.

STATEMENT OF CORPORATE GOVERNANCE

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The schedule below indicates the attendance by directors of committee meetings during the year.

Date 17.03.2016 06.06.2016 13.09.2016 14.11.2016

Madabhushi Soundararajan Chairman √ √ √ √




√ Attended

Board Investment Committee

The Board Investment Committee comprises three Non-Executive Directors, the Executive Director, the Chief Executive Officer and the Treasury Manager. Its key objective is to oversee the Investment Policy of the organisation. The Committee is mandated to ensure that the Company holds sufficient assets of appropriate nature, term and liquidity to enable it to meet the liabilities of the Company as they become due. It meets quarterly to monitor the Credit Committee strategy with the objective of ensuring the optimum utilization of funds.

The schedule below indicates the attendance by directors of committee meetings during the year:

Date 17.03.2016 06.06.2016 13.09.2016 14.11.2016

Phillip J. Ransley Chairman √ √ X X

Madabhushi Soundararajan Member √ √ √ √





Board Risk Management Committee

The Board Risk Management Committee comprises two Non-Executive Directors, the Executive Director, the Chief Executive Officer and the Group Internal auditor. The Internal Audit Manager and Risk & Compliance Manager are regular invitees to the meetings. Its key objective is to oversee the implementation of an effective Risk Management Framework. The committee reviews the performance and findings of the Risk Management and Compliance function and recommends appropriate improvement on specific risk and compliance areas at least quarterly.

The schedule below indicates the attendance by directors of committee meetings during the year:

Date 17.03.2016 06.06.2016 13.09.2016 14.11.2016

Sarit S. Raja Shah Chairman √ √ √ √

Madabhushi Soundararajan Member √ √ X √




STATEMENT OF CORPORATE GOVERNANCE CONT’D

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The Company’s Act 2015 requires the directors to prepare financial statements for each financial year which give a true and fair view of the financial position of the Group and the Company at the end of the financial year and its financial performance for the year then ended. The directors are responsible for ensuring that the Group and the Company keep proper accounting records that are sufficient to show and explain the transactions of the Group and the Company; disclose with reasonable accuracy at any time the financial position of the Group and the Company; and that enables them to prepare financial statements of the Group and the Company that comply with prescribed financial reporting standards and the requirements of the Company’s Act. They are also responsible for safeguarding the assets of the Group and the Company and for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors accept responsibility for the preparation and presentation of these financial statements in accordance with International Financial Reporting Standards and in the manner required by the Companies Act 2015. They also accept responsibility for:

i. Designing, implementing and maintaining internal control as they determine necessary to enable the preparation of financial statements that are free from material misstatements, whether due to fraud or error;

ii. Selecting suitable accounting policies and then apply them consistently; andiii. Making judgements and accounting estimates that are reasonable in the circumstances

In preparing the financial statements, the directors have assessed the Group’s and the Company’s ability to continue as a going concern and disclosed, as applicable, matters relating to the use of going concern basis of preparation of the financial statements. Nothing has come to the attention of the directors to indicate that the Group and the Company will not remain a going concern for at least the next twelve months from the date of this statement.

The directors acknowledge that the independent audit of the financial statements does not relieve them of their responsibility.

Approved by the board of directors on 24 March 2017 and signed on its behalf by:

SBR Shah Sachit ShahDirector Director

STATEMENT OF DIRECTOR’S RESPONSIBILITIES

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To the Shareholders of GA Insurance Limited

Report on the audit of the consolidated financial statements

Our opinion

We have audited the accompanying consolidated financial statements of GA Insurance Limited (the Company) and its subsidiaries (together, the Group) set out on pages 18 to 82, which comprise the consolidated statement of financial position at 31 December 2016 and the consolidated statement of profit or loss, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statements of cash flows for the year then ended, together with the separate statement of financial position of the Company at 31 December 2016, statement of profit or loss, statement of comprehensive income and the statement of changes in equity of the Company for the year then ended, and the notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the financial statements give a true and fair view of the financial position of the Group and the Company at 31 December 2016 and of the financial performance and cash flows of the Group for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Kenyan Companies Act 2015.

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 financial statements section of our report.

We are independent of the company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Kenya, and we have fulfilled our ethical responsibilities in accordance with these requirements and the IESBA Code.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

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

Valuation of insurance contract liabilities

REPORT OF THE INDEPENDENT AUDITOR’S

General insurance business

The insurance contract liabilities included in Note 26 to the financial statements are made up of reported claims and incurred but not reported (“IBNR”) claims.

The gross contract liabilities represent the ultimate cost of settling all claims arising from incidents occurring prior to the end of each reporting period, but not settled at that date.

The estimation of the expected ultimate claims involves significant judgement given the size of the liability and the inherent uncertainty in estimating expected future claims incurred.

A range of methods may be used to determine these provisions. Underlying these methods are a number of

explicit or implicit assumptions relating to the expected settlement amount and settlement patterns of claims. As disclosed in Note 26 to the financial statements, the Group uses historical experience to estimate the ultimate cost of claims. This involves the analysis of historical claims development factors and the selection of estimated development factors based on this historical pattern. The selected development factors are then applied to claims data for each accident year that is not fully developed to produce an estimated ultimate claims cost for each accident year.

The incurred but not reported claims are determined annually by the company’s consulting actuaries on the basis of the information available at the time the records for the year are closed.

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for the year ended 31st December 2016 15REPORT OF THE INDEPENDENT AUDITOR’S CONT’D

General insurance business (cont’d)

How our audit addressed the key audit matter

We evaluated and tested controls around the claim handling and settling and how the claims are valued and management’s review process over insurance contract liabilities

On a sample basis, we validated the accuracy of the underlying company data used by the appointed actuary. We also performed reconciliations between the claims data reported and the data used by the appointed actuary to calculate the reserves.

Using our internal actuarial specialists, we applied our industry knowledge and experience and compared the methodology, models and assumptions used against recognised actuarial practices. We noted that the valuation methods used were consistent with generally accepted actuarial practice and adhered to the Insurance Regulatory Authority (IRA) guidelines on valuation of technical liabilities.

We further checked that the insurance contract liabilities reported in the financial statements were consistent with the results of the independent actuarial valuation.

We also reviewed the related disclosures in the notes to the financial statements.r audit addressed the Key audit mat

Life insurance business

The liability for life insurance contracts is either based on current assumptions or on assumptions established at inception of the contract, reflecting the best estimate at the time and subsequently adjusted to include a margin for risk and adverse deviation. The main assumptions used relate to the future experience of mortality rates, expenses to be incurred, rate of return of the fund assets and policy withdrawals/lapses.

As disclosed in Note 26 to the financial statements, additional qualitative judgement is used to assess the extent to which past trends may not apply in future, (for example to reflect one-off occurrences, changes in external or market factors such as public attitudes to claiming, economic conditions, levels of claims’ inflation, withdrawals, as well as internal factors such as portfolio mix, policy conditions and claims underwriting) in order to arrive at the estimated actuarial liability that present the likely outcome from the range of possible outcomes, taking account of all the uncertainties involved. A margin for adverse deviation may also be included in the liability valuation.

The group uses consulting actuaries to calculate the policyholder contract liabilities at the end of each reporting period.

How our audit addressed the key audit matter

We assessed whether the methodology used by the actuary is consistent with generally accepted actuarial principles and adheres to the Insurance Regulatory Authority (IRA) guidelines on valuation of technical liabilities.

We also checked that the assumptions used to perform the valuation are supportable by the company and industry experience.

We checked that the change in valuation method from Net Premium Valuation to Gross Premium Valuation method has been correctly applied.

We also observed that the assumptions used in the valuation were suitable for the business and consistent with the company experience as observed in previous valuation exercises.

We checked that the policyholder contract liabilities reported in the financial statements were consistent with the results of the independent actuarial valuation.

We also reviewed the related disclosures in the notes to the financial statements.

Other information

The directors are responsible for the other information. The other information comprises of the information included in the annual report but does not include the financial statements and our auditor’s report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

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6for the year ended 31st December 201616 REPORT OF THE INDEPENDENT AUDITOR’S CONT’D

Responsibilities of management and those charged with governance for the consolidated financial statements

The directors are responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards and the requirements of the Kenyan Companies Act 2015, and for such internal control as the directors determine 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, the directors are responsible for assessing the Group’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 the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

The directors are responsible for overseeing the Group’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.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

• Conclude on the appropriateness of the directors’ 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 Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

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

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for the year ended 31st December 2016 17REPORT OF THE INDEPENDENT AUDITOR’S CONT’D

Auditor’s responsibilities for the audit of the financial statements (cont’d)

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

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

Report on other legal requirements

As required by the Kenyan Companies Act 2015 we report to you, based on our audit, that:

i) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;

ii) in our opinion proper books of account have been kept by the company, so far as appears from our examination of those books;

iii) the company’s statement of financial position and statement of comprehensive income are in agreement with the books of account.

The engagement partner responsible for the audit resulting in this independent auditors’ report is Kang’e Saiti – P/No 1652

Certified Public Accountants, Nairobi

PricewaterhouseCoopers, 29th March 2017

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Notes 2016 2015Shs’000 Shs’000

Insurance premium revenue 6 5,030,332 4,479,832Less: Insurance premium ceded to reinsurers (2,498,829) (2,170,402)

Net insurance premiums revenue 2,531,503 2,309,430

Unearned insurance premiums brought forward 1,019,601 905,622Unearned insurance premiums carried forward (1,047,758) (1,019,601)

Net earned premiums 2,503,346 2,195,451

Investment income 7 852,334 657,818Net gains/(losses) on financial assets held at fair value through profit & loss 7 (33,844) 33,630Commissions earned 626,970 577,206Other income 7 47,828 25,556

Net income 3,996,634 3,489,661

Claims incurred 2,443,770 3,752,801Less: amounts recoverable from reinsurers (663,683) (2,217,278)

Net claims incurred 8 1,780,087 1,535,523

Operating and other expenses 9 786,226 815,075Commissions payable 685,271 605,593

1,471,497 1,420,668

Profit before income tax 745,050 533,470

Income tax expense 10 (198,351) (179,921)

Profit for the year 546,699 353,549

Other comprehensive income, net of taxItems that will not be restated to profit or lossNet gains on financial assets held at fair value through other comprehensive income, net of tax 18,121 31,721

Total comprehensive income 564,820 385,270

Total Comprehensive income attributed to:

Non-controlling interest

(2,796)

(6,127)Equity holders of the company 567,616 391,397

Total 564,820 385,270

The notes on pages 26 to 82 are an integral part of these financial statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

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Notes 2016 2015Shs’000 Shs’000

Insurance premium revenue 6 4,782,084 4,324,695Less: reinsurance premium ceded (2,338,026) (2,063,886)

Net insurance premiums revenue 2,444,058 2,260,809

Unearned insurance premiums brought forward 994,752 888,141Unearned insurance premiums carried forward (1,006,666) (994,752)

Net earned premiums 2,432,144 2,154,198

Investment income 7 485,240 424,961Net gains on financial assets held at fair value through profit & loss 7 (59,932) (43,944)Commissions earned 581,074 547,974Other income 7 51,017 25,388

Total income 3,489,543 3,108,577

Claims incurred 2,061,275 3,448,463Amounts recoverable from reinsurers (624,750) (2,165,914)

Net claims incurred 8 1,436,525 1,282,549

Operating and other expenses 9 684,305 710,666Commissions payable 654,802 581,592

1,339,107 1,292,258

Profit before income tax 713,911 533,770

Income tax expense 10 (191,049) (177,985)

Profit for the year 522,862 355,785

Other comprehensive income, net of taxItems that will not be restated to profit or lossNet gains on financial assets held at fair value through other comprehensive income, net of tax 18,121 31,721

Total comprehensive income 540,983 387,506


COMPANY STATEMENT OF COMPREHENSIVE INCOME

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Notes 2016 2015Shs’000 Shs’000

CAPITAL EMPLOYEDShare capital 12 700,000 450,000Retained earnings 13 1,113,610 1,060,306Revaluation reserve 14(a) 829,766 829,766Statutory reserve 23,971 5,280Other reserves 14(b) 224,091 205,970

Equity attributable to owners of the company 2,891,438 2,551,322Non-controlling interest 66,809 46,078Total equity 2,958,247 2,597,400

ASSETSProperty and equipment 15 1,204,074 1,222,393Intangible asset 16 26,216 30,302Investment property 17 2,427,062 2,178,211Equity investments at FVTPL - quoted 18 397,826 418,258Equity investments at FVTOCI - unquoted 18 206,870 184,898Loans receivable 19 211,637 297,446Deferred tax asset 29 27,020 17,113Receivables arising out of reinsurance arrangements 649,290 541,340Receivables arising out of direct insurance arrangements 748,953 781,397Reinsurers’ share of insurance contract liabilities 21 2,167,894 2,938,236Other receivables 22 83,411 64,498Deferred acquisition costs 23 289,155 256,466Government securities at Amortised cost 24 3,869,005 2,068,765Government securities at FVTPL 24 872,806 670,305Corporate bonds and commercial paper 20 423,346 445,291Deposits with financial institutions 33 1,154,636 1,125,187Tax recoverable 25,590 9,530Cash and bank balances 33 65,332 42,852

Total assets 14,850,123 13,292,489

LIABILITIESInsurance contract liabilities 26 4,534,124 5,241,060Payables under deposit administration contracts 25 3,823,466 2,282,523Unearned premium 28 1,945,795 1,829,889Deferred tax liability 29 7,191 1,584Current income tax 128 -Creditors arising from reinsurance arrangements 1,015,646 804,522Creditors arising from direct insurance arrangements 1,826 1,468Other payables 30 336,200 331,543Dividends payable 227,500 202,500

Total liabilities 11,891,876 10,695,089

Net assets 2,958,247 2,597,400

The financial statements on pages 18 to 82 were approved for issue by the board of directors on 24 March 2017 and signed on its behalf by:

SBR Shah - Director Sachit Shah – Executive Director V. Srivastava - Principal Officer

CONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 31st December 2016

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Notes 2016 2015Shs’000 Shs’000

CAPITAL EMPLOYEDSharecapital 12 700,000 450,000Retained earnings 13 1,089,455 1,044,092Revaluation reserve 14 (a) 829,766 829,766Other reserves 14 (b) 224,091 205,970

Shareholders’ funds 2,843,312 2,529,828

REPRESENTED BY:AssetsPropertyandequipment 15 1,196,682 1,214,035Intangible asset 16 2,973 5,775Deferred income tax 29 27,020 17,113Investmentproperty 17 1,396,070 1,380,843EquityinvestmentsatFVTPL-quoted 18 345,934 383,094EquityinvestmentsatFVTOCI-unquoted 18 206,870 184,898Loans receivable 19 211,637 297,446Receivables arising out of reinsurance arrangements 625,442 529,781Receivables arising out of direct insurance arrangements 677,250 752,470Reinsurers’ share of insurance contract liabilities 21 2,062,593 2,864,359Other receivables 22 49,755 40,294Deferredacquisitioncosts 23 289,356 257,525Government securities at Amortised cost 24 1,708,959 1,023,462GovernmentsecuritiesatFVTPL 24 341,813 349,816Corporate bonds and commercial paper 20 279,677 301,680Investment in subsidiaries 37 356,109 308,827Depositswithfinancialinstitutions 33 756,893 808,614Tax recoverable 22,793 6,492Cash and bank balances 33 52,413 24,859

Total assets 10,610,239 10,751,383

LiabilitiesInsurance contract liabilities 26 4,457,734 5,184,363Unearned premium 28 1,850,421 1,771,540Creditors arising from reinsurance arrangements 930,369 757,209Otherpayables 30 300,903 305,943Dividendspayable 227,500 202,500

Total liabilities 7,766,927 8,221,555

Net assets 2,843,312 2,529,828

The financial statements on pages 18 to 82 were approved for issue by the board of directors on 24 March 2017 and signed on its behalf by:

SBR Shah - Director Sachit Shah – Executive Director V. Srivastava - Principal Officer

COMPANY STATEMENT OF FINANCIAL POSITION as at 31st December 2016

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NotesShare

capital

Revenuereserves

undistributable

Revenuereserves

distributableRevaluation

reserve TotalYear ended 31 December 2015

At start of year 450,000 174,249 890,807 829,766 2,344,822Comprehensive income

Profit for the year - - 355,785 - 355,785

Other comprehensive income

Net change on financial assets at fair value through other comprehensive income instruments - 31,721 - - 31,721Total other comprehensive income

- 31,721 - - 31,721Transactions with owners

Dividends

- Transferred to dividends payable 11 - - (202,500) - (202,500)

Transactions with owners - - (202,500) - (202,500)At 31 December 2015 450,000 205,970 1,044,093 829,766 2,529,829

Year ended 31 December 2016

At start of year 450,000 205,970 1,044,093 829,766 2,529,829Comprehensive incomeProfit for the year - - 522,862 - 522,862Other comprehensive incomeNet change on financial assets at fair value through other comprehensive income

- 18,121 - - 18,121Total other comprehensive income

- 18,121 - - 18,121Transactions with owners (250,000)Increase in share capital 250,000 - - - -Dividends- Transferred to dividendsPayable - - (227,500) - (227,500)Transactions with owners 250,000 - (477,500) - (227,500)

At 31 December 2016 700,000 224,091 1,089,455 829,766 2,843,312


COMPANY STATEMENT OF CHANGES IN EQUITY

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Notes 2016 2015Shs’000 Shs’000

Operating activitiesCash generated from operations 34 1,760,243 1,024,557Income tax paid (227,014) (240,050)

Net cash generated from operating activities 1,533,229 784,507

Investing activitiesPurchase of property and equipment 15 (19,723) (36,279)Purchase of computer software 16 (4,729) (29,351)Purchase of quoted shares 18 (64,124) (137,358)Purchase of investment property 17 (225,970) (473,398)Purchase of treasury bonds – Amortised cost 24 (2,734,173) (1,360,192)Purchase of treasury bonds – FVTPL 24 (948,520) (609,984)Purchase of corporate bonds and commercial paper 20 (35,622) (83,503)Loans advanced 19 (56,273) (80,666)Loans repaid 19 142,082 75,860Proceeds from disposal of property and equipment 5,410 815Proceeds from disposal of quoted shares 18 3,773 25,448Proceeds from redemption of corporate bonds 20 57,567 51,877Proceeds from treasury bonds – Amortised cost 957,622 410,003Proceeds from treasury bonds – FVTPL 790,500 327,093Net rental income received 60,729 58,270Interest received 743,076 551,584Dividends received 26,048 21,480

Net cash used in investing activities (1,302,327) (1,288,301)

Financing activitiesProceeds from issue of share capital 23,527 -Dividends paid 11 (202,500) (225,000)

Net cash used in financing activities (178,973) (225,000)

Increase/(decrease) in cash and cash equivalents 51,929 (728,794)

Movement in cash and cash equivalents

At start of year 33 1,168,039 1,896,833Increase 51,929 (728,794)

At end of year 33 1,219,968 1,168,039


CONSOLIDATED STATEMENT OF CASH FLOWS

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6NOTES TO THE FINANCIAL STATEMENTS CONT’D for the year ended 31st December 201626

1. General information

GA Insurance Limited is incorporated in Kenya under the Companies Act as a private limited liability Company, and is domiciled in Kenya. The address of its registered office is:

GA Insurance HouseRalph Bunche Road PO Box 42166 00100 Nairobi GPO

The Company deals in general insurance business. For the Kenyan Companies Act reporting purposes, the balance sheet is represented by the statement of financial position and profit or loss account by the statement of comprehensive income in these financial statements.

GA Life Assurance Limited, a fully owned subsidiary domiciled in Kenya, deals in life insurance business. It underwrites life risks relating to insured persons, issues investment contracts and administers pension funds.

GA Insurance Tanzania Limited, domiciled in Tanzania, is a general insurance underwriter in which the Company owns a 66.67% controlling interest.

2. Significant accounting policiesThe principal accounting policies adopted in the preparation of these financial statements are set out below and relate to both the Company’s and the Group’s activities. These policies have been consistently applied to all years presented, unless otherwise stated.

(a) Basis of preparation

The consolidated financial statements of GA Insurance Limited have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and IFRS Interpretations Committee (IFRS IC) applicable to companies reporting under IFRS. The measurement basis applied is the historical cost basis, except where otherwise stated in the accounting policies below. The financial statements are presented in Kenya Shillings (Shs), rounded to the nearest thousand.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 3.

Changes in accounting policies and disclosures

(a) New and amended standards adopted by the Group

The following standards have been adopted by the group for the first time for the financial year beginning on or after 1 January 2016:

Amendment to IAS 27;The IASB has made amendments to IAS 27 Separate Financial Statements which will allow entities to use the equity method in their separate financial statements to measure investments in subsidiaries, joint ventures and associates.

IAS 27 currently allows entities to measure their investments in subsidiaries, joint ventures and associates either at cost or as a financial asset in their separate financial statements. The amendments introduce the equity method as a third option. The election can be made independently for each category of investment (subsidiaries, joint ventures and associates). Entities wishing to change to the equity method must do so retrospectively.

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NOTES TO THE FINANCIAL STATEMENTS CONT’D for the year ended 31st December 2016 27

2. Significant accounting policies (continued)

Changes in accounting policy and disclosures (continued)

(a) New and amended standards adopted by the Group (continued)

Annual Improvements to IFRSs 2012-2014 Cycle. The latest annual improvements, effective 1 January 2016, clarify:

• IFRS 5 – when an asset (or disposal group) is reclassified from ‘held for sale’ to ‘held for distribution’ or vice versa, this does not constitute a change to a plan of sale or distribution and does not have to be accounted for as such.

• IFRS 7 – specific guidance for transferred financial assets to help management determine whether the terms of a servicing arrangement constitute ‘continuing involvement’ and, therefore, whether the asset qualifies for de- recognition.

• IFRS 7 – that the additional disclosures relating to the offsetting of financial assets and financial liabilities only need to be included in interim reports if required by IAS 34.

• IAS 19 – that when determining the discount rate for post-employment benefit obligations, it is the currency that the liabilities are denominated in that is important and not the country where they arise.

• IAS 34 – what is meant by the reference in the standard to ‘information disclosed elsewhere in the interim financial report’ and adds a requirement to cross-reference from the interim financial statements to the location of that information and make the information available to users on the same terms and at the same time as the interim financial statements.

Amendments to IAS 1, ‘Presentation of Financial Statements’: The amendments are made in the context of the IASB’s Disclosure Initiative, which explores how financial statement disclosures can be improved. The amendments, effective 1 January 2016, provide clarifications on a number of issues, including:

• Materiality – an entity should not aggregate or disaggregate information in a manner that obscures useful information. Where items are material, sufficient information must be provided to explain the impact on the financial position or performance.

• Disaggregation and subtotals – line items specified in IAS 1 may need to be disaggregated where this is relevant to an understanding of the entity’s financial position or performance. There is also new guidance on the use of subtotals.

• Notes – confirmation that the notes do not need to be presented in a particular order.

•OCI arising from investments accounted for under the equity method – the share of OCI arising from equity-accounted investments is grouped based on whether the items will or will not subsequently be reclassified to profit or loss. Each group should then be presented as a single line item in the statement of other comprehensive income.

According to the transitional provisions, the disclosures in IAS 8 regarding the adoption of new standards/accounting policies are not required for these amendments.

Amendments to IFRS 11; The amendments to IFRS 11 clarify the accounting for the acquisition of an interest in a joint operation where the activities of the operation constitute a business. They require an investor to apply the principles of business combination accounting when it acquires an interest in a joint operation that constitutes a business.

This includes:

• measuring identifiable assets and liabilities at fair value• expensing acquisition-related costs• recognising deferred tax, and• recognising the residual as goodwill, and testing this for impairment annually.

NOTES TO THE FINANCIAL STATEMENTS CONT’D

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Existing interests in the joint operation are not re-measured on acquisition of an additional interest, provided joint control is maintained.

The amendments also apply when a joint operation is formed and an existing business is contributed.

Amendments to IAS 16 and IAS 38; The IASB has amended IAS 16 Property, Plant and Equipment to clarify that a revenue-based method should not be used to calculate the depreciation of items of property, plant and equipment.

IAS 38 Intangible Assets now includes a rebuttable presumption that the amortisation of intangible assets based on revenue is inappropriate. This presumption can be overcome if either

• The intangible asset is expressed as a measure of revenue (ie where a measure of revenue is the limiting factor on the value that can be derived from the asset), or

• It can be shown that revenue and the consumption of economic benefits generated by the asset are highly correlated.

Amendments made to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in associates and joint ventures clarify that:

• The exception from preparing consolidated financial statements is also available to intermediate parent entities which are subsidiaries of investment entities

• An investment entity should consolidate a subsidiary which is not an investment entity and whose main purpose and activity is to provide services in support of the investment entity’s investment activities.

• Entities which are not investment entities but have an interest in an associate or joint venture which is an investment entity have a policy choice when applying the equity method of accounting. The fair value measurement applied by the investment entity associate or joint venture can either be retained, or a consolidation may be performed at the level of the associate or joint venture, which would then unwind the fair value measurement.

As these amendments merely clarify the existing requirements, they do not affect the Group’s accounting policies or any of the disclosures.

IFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of financial assets and financial liabilities. The complete version of IFRS 9 was issued in July 2014. It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through OCI and fair value through P&L. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in OCI not recycling. There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the ‘hedged ratio’ to be the same as the one management actually use for risk management purposes.

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Contemporaneous documentation is still required but is different to that currently prepared under IAS 39. The standard is effective for accounting periods beginning on or after 1 January 2018. The Group has early adopted this standard as early adoption is permitted.

(b) New standards and interpretations not yet adopted by the Group

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2016, and have not been applied in preparing these financial statements.

IFRS 15, ‘Revenue from contracts with customers’ deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18 ‘Revenue’ and IAS 11 ‘Construction contracts’ and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2018 and earlier application is permitted.

IFRS 16,’Leases’ After ten years of joint drafting by the IASB and FASB they decided that lessees should be required to recognise assets and liabilities arising from all leases (with limited exceptions) on the balance sheet. Lessor accounting has not substantially changed in the new standard.

The model reflects that, at the start of a lease, the lessee obtains the right to use an asset for a period of time and has an obligation to pay for that right. In response to concerns expressed about the cost and complexity to apply the requirements to large volumes of small assets, the IASB decided not to require a lessee to recognise assets and liabilities for short-term leases (less than 12 months), and leases for which the underlying asset is of low value (such as laptops and office furniture).

A lessee measures lease liabilities at the present value of future lease payments. A lessee measures lease assets, initially at the same amount as lease liabilities, and also includes costs directly related to entering into the lease. Lease assets are amortised in a similar way to other assets such as property, plant and equipment.

This approach will result in a more faithful representation of a lessee’s assets and liabilities and, together with enhanced disclosures, will provide greater transparency of a lessee’s financial leverage and capital employed.

One of the implications of the new standard is that there will be a change to key financial ratios derived from a lessee’s assets and liabilities (for example, leverage and performance ratios).

IFRS 16 supersedes IAS 17, ‘Leases’, IFRIC 4, ‘Determining whether an Arrangement contains a Lease’, SIC 15, ‘Operating Leases – Incentives’ and SIC 27, ‘Evaluating the Substance of Transactions Involving the Legal Form of a Lease’. The standard is effective for annual periods beginning 1 January 2019. Early adoption is permitted only if IFRS 15 is adopted at the same time.

Recognition of Deferred Tax Asset for Unrealised Losses - Amendment to IAS 12;Amendments made to IAS 12 in January 2016 clarify the accounting for deferred tax where an asset is measured at fair value and that fair value is below the asset’s tax base. Specifically, the amendments confirm that:

• A temporary difference exists whenever the carrying amount of an asset is less than its tax base at the end of the reporting period.

• An entity can assume that it will recover an amount higher than the carrying amount of an asset to estimate its future taxable profit.

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(b) New standards and interpretations not yet adopted by the Group (continued)

• Where the tax law restricts the source of taxable profits against which particular types of deferred tax assets can be recovered, the recoverability of the deferred tax assets can only be assessed in combination with other deferred tax assets of the same type.

• Tax deductions resulting from the reversal of deferred tax assets are excluded from the estimated future taxable profit that is used to evaluate the recoverability of those assets.

The amendment to IAS 12 is effective 1 January 2017.

Disclosure Initiative – Amendments to IAS 7;Effective 1 January 2017, entities will be required to explain changes in their liabilities arising from financing activities. This includes changes arising from cash flows (eg drawdowns and repayments of borrowings) and on cash changes such as acquisitions, disposals, accretion of interest and unrealized exchange differences.

Changes in financial assets must be included in this disclosure if the cash flows were,or will be included in cash flows from financing activities. This could be the case, for example, for assets that hedge liabilities arising from financing liabilities.

Entities may include changes in other items as part of this disclosure, for example, by providing a,net debt, reconciliation. However, in this case the changes in other items must be disclosed separately from the changes in liabilities arising from financing activities. The information may be disclosed in tabular format as a reconciliation from opening and closing balances, but a specific format is not mandated.

There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.

(b) Consolidation

i) Subsidiaries

Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

The group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets.

Investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments. Cost also includes direct attributable costs of investment.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value over any previous equity interest in the acquiree over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in profit or loss.

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(b) Consolidation (continued)

i) Subsidiaries (continued)

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised in profit or loss.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IFRS 9 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

ii) Changes in ownership interests in subsidiaries without change of control Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

(iii) Disposal of subsidiaries When the group ceases to have control, any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

The consolidated financial statements incorporate the financial statements of GA Insurance Limited and its subsidiaries GA Life Assurance Limited and GA Insurance Tanzania Limited made up to 31 December 2016.

(c) Segment information

An operating segment is a component of the Group that engages in business activities from which it may earn revenue and incur expenses that relate to transactions with any of the Group’s other components, whose operating results are reviewed by the Board of Directors, to make decisions about resources allocated to each segment and assess its performance, and for which discrete information is available.

Group costs are allocated to segments on a reasonable and consistent basis. Transactions between segments are generally accounted for in accordance with Group policies as if the segment were a stand alone business with intra segment revenue and cost being eliminated in head office.

The Chief Operating Decision Maker within the Group is the GA Insurance Limited Board of Directors. The Group results are analysed across operating segments based on a combination of geographical areas and products and services. There are 2 geographical segments: Kenya and Tanzania. There are 2 product segments: General insurance business and Life assurance business.

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(c) Segment information (continued)

The segments are individually considered by management when making decisions and they are the basis for resource allocation and performance measurement by the Board of Directors. There are no reconciling differences between the primary financial statements of the Group and the reported segmental information.

All transactions between business segments are conducted on an arm’s length basis, with intra-segment revenue and costs being eliminated on consolidation. Income and expenses directly associated with each segment are included in determining business segment performance.

(d) Insurance contracts

I. Classification

The Group issues contracts that transfer insurance risk or financial risk or both. Insurance contracts are those contracts that transfer significant insurance risk. Such contracts may also transfer financial risk. As a general guideline, the Group defines as significant insurance risk, the possibility of having to pay benefits on the occurrence of an insured event that are at least 10% more than the benefits payable if the insured event did not occur.

Insurance contracts are classified into two main categories; long term and general insurance business, depending on the duration of risk and in accordance with the provisions of the Insurance Act.

(a) Long term insurance business

Includes insurance business of all or any of the following classes, namely, life assurance business (ordinary life and Group life), superannuating business, industrial life assurance business and bond investment business and business incidental to any such class of business.

Life assurance business means the business of, or in relation to, the issuing of, or the undertaking of liability to pay money on death (not being death by accident or in specified sickness only) or on the happening of any contingency dependent on the termination or continuance of human life (either with or without provision for a benefit under a continuous disability insurance contract), and include a contract which is subject to the payment of premiums for term dependent on the termination or continuance of human life and any contract securing the grant of an annuity for a term dependent upon human life. Superannuating business means life assurance business, being business of, or in relation to, the issuing of or the undertaking of liability under superannuating, Group life and permanent health insurance policy.

(b) Short term insurance business

Classes of Short term insurance include aviation, engineering insurance, fire insurance - domestic risks, Fire insurance - industrial and commercial risks, liability insurance, marine insurance, motor insurance - private vehicles, motor insurance - commercial vehicles, personal accident insurance, theft insurance, workmen’s Compensation and employer’s liability insurance, medical insurance and miscellaneous insurance (i.e. class of business not included under those listed above).

Motor insurance business means the business of affecting and carrying out contracts of insurance against loss of, or damage to, or arising out of or in connection with the use of, motor vehicles, inclusive of third party risks but exclusive of transit risks

Personal Accident insurance business means the business of affecting and carrying out contracts of insurance against risks of the persons insured sustaining injury as the result of an accident or of an accident of a specified class or dying as the result of an accident or of an accident of a specified class.

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(d) Insurance contracts (continued)

I. Classification (continued)

(b) Short term insurance business (continued)

Fire insurance business means the business of affecting and carrying out contracts of insurance, otherwise than incidental to some other class of insurance business against loss or damage to property due to fire, explosion, storm and other occurrences customarily included among the risks insured against in the fire insurance business.

Medical insurance business means the business of affecting and carrying out contracts of insurance against the person insured falling sick and incurring a cost to meet the medical expenses. Medical insurance business is classified into two categories: inpatient and outpatient cover.

II. Recognition and measurement

(i) Premium income

For long term insurance business, premiums are recognised as revenue when they become payable by the contract holder. Premiums are shown before deduction of commission. For General business, Premium income is recognised on assumption of risks, and includes estimates of premiums due but not yet received, less an allowance for cancellations, and less unearned premium. Unearned premiums represent the proportion of the premiums written in periods up to the accounting date that relates to the unexpired terms of policies in force at the financial reporting date, and is computed using the 1/24th method. Premiums are shown before deduction of commission and are gross of any taxes or duties levied on premiums.

(ii) Deferred acquisition costs

A proportion of commission payable is deferred and amortised over the period in which the related premium is earned. This is computed using the 1/24th method. Deferred acquisition costs represent a proportion of acquisition costs that relate to policies that are in force at the year end.

(iii) Claims incurred

For long term insurance business, benefits are recorded as an expense when they are incurred. Claims arising on maturing policies are recognised when the claim becomes due for payment. Death claims are accounted for on notification. Surrenders are accounted for on payment.

A liability for contractual benefits that are expected to be incurred in the future is recorded when the premiums are recognised. The liability is determined as the sum of the expected discounted value of the benefit payments and the future administration expenses that are directly related to the contract, less the expected discounted value of the theoretical premiums that would be required to meet the benefits and administration expenses based on the valuation assumptions used (the valuation premiums). The liability is based on assumptions as to mortality, persistency, maintenance expenses and investment income that are established at the time the contract is issued. A margin for adverse deviations is included in the assumptions. Where insurance contracts have a single premium or a limited number of premium payments due over a significantly shorter period than the period during which benefits are provided, the excess of the premiums payable over the valuation premiums is deferred and recognised as income in line with the decrease of un-expired insurance risk of the contracts in-force or, for annuities in force, in line with the decrease of the amount of future benefits expected to be paid. The liabilities are recalculated at each financial reporting date using the assumptions established at inception of the contracts.

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II. Recognition and measurement (continued)

(iii) Claims incurred (continued)

For General business, claims incurred comprise claims paid in the year and changes in the provision for outstanding claims. Claims paid represent all payments made during the year, whether arising from events during that or earlier years. Outstanding claims represent the estimated ultimate cost of settling all claims arising from incidents occurring prior to the financial reporting date, but not settled at that date. Outstanding claims are computed on the basis of the best information available at the time the records for the year are closed, and include provisions for claims incurred but not reported (“IBNR”). Outstanding claims are not discounted.

(iv) Commissions

Commissions payable and earned are recognised in the period in which the related premiums are written.

(v) Liability adequacy test

At each financial reporting date, liability adequacy tests are performed to ensure the adequacy of the contract liabilities net of DAC. In performing these tests, current best estimates of future contractual cash flows and claims handling and administration expenses, as well as investment income from the assets backing such liabilities, are used. Any deficiency is immediately charged to profit or loss.Long-term insurance contracts are measured based on the assumptions set out at the inception of the contract. When the liability adequacy test requires the adoption of new best estimate assumptions, such assumptions (without margins for adverse deviation) are used for the subsequent measurement of these liabilities.

(vi) Reinsurance contracts held

Contracts entered into by the Group with reinsurers under which the Group is compensated for losses on one or more contracts issued by the Group and that meet the classification requirements for insurance contracts are classified as reinsurance contracts held. Contracts that do not meet these classification requirements are classified as financial assets. Insurance contracts entered into by the Group under which the contract holder is another insurer (inwards reinsurance) are included with insurance contracts.

The benefits to which the Group is entitled under its reinsurance contracts held are recognised as reinsurance assets. These assets consist of short-term balances due from reinsurers, as well as longer term receivables that are dependent on the expected claims and benefits arising under the related reinsured insurance contracts. Amounts recoverable from or due to reinsurers are measured consistently with the amounts associated with the reinsured insurance contracts and in accordance with the terms of each reinsurance contract. Reinsurance liabilities are primarily premiums payable for reinsurance contracts and are recognised as an expense when due.The Group assesses its reinsurance assets for impairment on a quarterly basis. If there is objective evidence that the reinsurance asset is impaired, the Group reduces the carrying amount of the reinsurance asset to its recoverable amount and recognises that impairment loss in the profit or loss statement. The Group gathers the objective evidence that a reinsurance asset is impaired using the same process adopted for financial assets held at amortised cost. The impairment loss is also calculated following the same method used for these financial assets.

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II. Recognition and measurement (continued)

(vii) Receivables and payables related to insurance contracts and investment contracts

Receivables and payables are recognised when due. These include amounts due to and from agents, brokers and insurance contract holders.

If there is objective evidence that the insurance receivable is impaired, the Group reduces the carrying amount of the insurance receivable accordingly and recognises that impairment loss in the profit or loss statement. The Group gathers the objective evidence that an insurance receivable is impaired using the same process adopted for loans and receivables. The impairment loss is also calculated under the same method used for these financial assets. These processes are described in Note 2 (j).

(viii) Salvage and subrogation reimbursements

Some insurance contracts permit the Group to sell (usually damaged) property acquired in settling a claim (for example, salvage). The Group may also have the right to pursue third parties for payment of some or all costs (for example, subrogation).

Estimates of salvage recoveries are included as an allowance in the measurement of the insurance liability for claims, and salvage property is recognised in other assets when the liability is settled. The allowance is the amount that can reasonably be recovered from the disposal of the property.

Subrogation reimbursements are also considered as an allowance in the measurement of the insurance liability for claims and are recognised in other assets when the liability is settled. The allowance is the assessment of the amount that can be recovered from the action against the liable third party.

(e) Investment property

Properties held for long-term rental yields that are not occupied by the Group are classified as investment properties.

Investment property comprises freehold land and buildings. It is carried at fair value. Fair value is based on active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. These valuations are reviewed every three years by an independent valuation expert. Investment property that is being redeveloped for continuing use as investment property, or for which the market has become less active, continues to be measured at fair value.

Changes in fair values are recorded in profit or loss.

Property located on land that is held under an operating lease is classified as investment property as long as it is held for long-term rental yields and is not occupied by the Group. The initial cost of the property is the lower of the fair value of the property and the present value of the minimum lease payments. The property is carried at fair value after initial recognition.

If an investment property becomes owner-occupied, it is reclassified as property and equipment, and its fair value at the date of reclassification becomes its cost for subsequent accounting purposes.

If an item of property and equipment becomes an investment property because its use has changed, any difference arising between the carrying amount and the fair value of this item at the date of transfer is recognised in other comprehensive income as a revaluation of property and equipment. However, if a fair value gain reverses a previous impairment loss, the gain is recognised in the profit or loss statement. Upon the disposal of such investment property, any surplus previously recorded in equity is transferred to retained earnings; the transfer is not made through profit or loss.

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(f) Property and equipment

Land and buildings are shown at fair value, based on valuations every three years, by external independent valuers, less subsequent depreciation for buildings. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. All other property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the profit or loss during the financial period in which they are incurred.

Freehold land is not depreciated. Depreciation on other assets is calculated using the straight line method to allocate their cost or revalued amounts to their residual values over their estimated useful lives, as follows:

Free hold buildings 50 yearsMotor vehicles 4 yearsComputers 4-8 yearsFurniture, fixtures and equipment 8 yearsLeasehold improvements 8 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each financial reporting date.

An asset’s carrying amount is written down immediately to its estimated recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are included in profit or loss. When revalued assets are sold, the amounts included in the revaluation reserve relating to that asset are transferred to retained earnings.

(g) Intangible assets

Intangible assets represent computer software. Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses.

Intangible assets are amortised on a straight line basis over the useful economic life from the date it is available for use, currently at 30% and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method is reviewed at each financial year end.

Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense is recognised in profit or loss.

Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is derecognised.

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(h) Revenue recognition

(i) Insurance premium revenue

The revenue recognition policy relating to insurance contracts is set out under note 2(d)ii above.

(ii) Commissions

Commissions receivable are recognised as income in the period in which they are earned.

(iii) Interest income

Interest income for all interest-bearing financial instruments, including financial instruments measured at fair value through profit or loss, is recognised within ‘investment income’ (Note 6) in the statement of comprehensive income using the effective interest rate method. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income.

(iv) Dividend income

Dividend income for equities is recognised when the right to receive payment is established – this is the ex-dividend date for equity securities.

(i) Financial assets

The Group classifies its financial assets into the following categories: financial assets at fair value through profit or loss (FVTPL), financial assets at fair value through other comprehensive income (FVTOCI) and financial assets at amortised cost. Management determines the appropriate classification of its financial assets at initial recognition.

i) Classification of financial assets

The Group classifies a financial asset as an ‘equity instrument’ if it is a non-derivative and meets the definition of ‘equity’ for the issuer (under IAS 32 Financial Instruments: Presentation). All other non-derivative financial assets are classified as ‘debt instruments’.

a) Debt instruments at amortised cost

Debt instruments are measured at amortised cost using the effective interest method if both of the following conditions are met:• The asset is held within a business model whose objective is to hold assets in order to collect contractual

cash flows; and• The contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of

principal and interest on the principal amount outstanding.

Debt instruments meeting the above criteria are measured initially at fair value plus transaction costs (except if they are designated as at FVTPL). They are subsequently measured at amortised cost using the effective interest method less any impairment, with interest revenue recognised on an effective yield basis in investment income.

Subsequent to initial recognition, the Group assesses whether reclassification of debt instruments from amortised cost to FVTPL is required, if the objective of the business model changes so that the amortised cost criteria are no longer met.

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(i) Financial assets (continued)

i) Classification of financial assets (continued)

a) Debt instruments at amortised cost (continued)

The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts the estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

The Group may irrevocably elect at initial recognition to classify a debt instrument that meets the amortised cost criteria above as at FVTPL if that designation eliminates or significantly reduces an accounting mismatch had the financial asset been measured at amortised cost.

The Group’s receivables out of direct insurance and reinsurance arrangements, certain investments in government securities, corporate bonds, mortgage loans, loans to policy holders, deposits with financial institutions, reinsurer’s share of insurance liabilities, receivables from related parties and other receivables are classified in this category. The assets in this category had a total carrying value of Shs 9,308,255,000 at the reporting date (2015: Shs 5,376,306,000). The Company’s assets in this category at the end of the year were Shs 6,396,664,000 (2015: Shs 3,785,099,000)

b) Financial assets at fair value through profit or loss

This category has two sub-categories: financial assets held for trading, and those designated at fair value through profit or loss at inception. A financial asset is classified as held for trading if acquired principally for the purpose of selling in the short term. Financial assets are designated at fair value through profit or loss when doing so significantly reduces or eliminates a measurement inconsistency; or they form part of a Group of financial assets that is managed and evaluated on a fair value basis in accordance with a documented risk management or investment strategy and reported to key management personnel on that basis. Investments in equity instruments are classified as at FVTPL, unless the Group designates an investment that is not held for trading as at FVTOCI at initial recognition.

Debt instruments that do not meet the amortised cost criteria or that meet the criteria but the entity has chosen to designate as at FVTPL at initial recognition, are measured at FVTPL. Subsequent to initial recognition, the Group is required to reclassify debt instruments from FVTPL to amortised cost if the objective of the business model changes so that the amortised cost criteria starts to be met and the instrument’s contractual cash flows meet the amortised cost criteria. Reclassification of debt instruments designated as at FVTPL at initial recognition is not permitted.

Certain equity investments of the Group, government securities and certain corporate bonds are classified in this category. The assets in this category had a total fair value of Shs 1,270,632,000 at the financial reporting date (2015: Shs 1,088,563,000). The Company’s assets in this Category at the end of the year were Shs 687,747,000 (2015: Shs 732,910,000).

c) Equity instruments at fair value through other comprehensive income

At initial recognition, the Group can make an irrevocable election (on an instrument-by-instrument basis) to designate investments in equity instruments as at FVTOCI. Designation at FVTOCI is not permitted if the equity investment is held for trading. A financial asset is held for trading if:

• It has been acquired principally for the purpose of selling it in the near term; or• On initial recognition it is part of a portfolio of identified financial instruments that the Group manages

together and has evidence of a recent actual pattern of short-term profit-taking; or• It is a derivative that is not designated and effective as a hedging instrument or a financial guarantee.

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c) Equity instruments at fair value through other comprehensive income (continued)

Investments in equity instruments at FVTOCI are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognised in other comprehensive income and accumulated in the fair value reserve. Where the asset is disposed of, the cumulative gain or loss previously accumulated in the investments revaluation reserve is not reclassified to profit or loss, but is reclassified to retained earnings.

Dividends on these investments in equity instruments are recognised in the profit or loss statement when the Group’s right to receive the dividends is established in accordance with IAS 18 Revenue, unless the dividends clearly represent a recovery of part of the cost of the investment. Dividends earned are recognised in the profit or loss statement and are included in the ‘investment income’ line item. Dividend income recognised during the year amounted to Shs 26,046,000 (2015: Shs 21,480,000). None of the equity investments at FVTOCI were derecognized in the year.

Certain of the Group’s equity investment in unquoted companies are classified in this category as they are held for strategic purposes as opposed to trading. The Group’s assets in this category had a total carrying value of Shs 206,870,000 at the reporting date (2015: Shs 184,898,000). The Company’s assets in this category were Shs 206,870,000 at the reporting date (2015: 184,898,000).

Fair values of quoted investments in active markets are based on current bid prices. Fair values for unlisted equity securities are estimated using valuation techniques. These include the use of recent arm’s length transactions, discounted cash flow analysis and other valuation techniques commonly used by market participants. Equity securities for which fair values cannot be measured reliably are recognised at their net asset value less impairment.

ii) De-recognition of financial assets

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset.

iii) Financial liabilities

Financial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other financial liabilities’.

iv) Impairment of Financial assets

The Group assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that have occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

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c) Equity instruments at fair value through other comprehensive income (continued)

Objective evidence that a financial asset or group of assets is impaired includes observable data that comes to the attention of the Group about the following events:

• significant financial difficulty of the issuer or debtor;• a breach of contract, such as a default or delinquency in payments;• it becoming probable that the issuer or debtor will enter bankruptcy or other financial reorganisation;• the disappearance of an active market for that financial asset because of financial difficulties; or• observable data indicating that there is a measurable decrease in the estimated future cash flow from a group

of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the Group, including:üAn adverse change in the payment status of issuers or debtors in the Group; orüNational or local economic conditions that correlate with defaults on the assets in the Group.

a) Impairment of financial assets carried at amortised cost

The Group assesses whether objective evidence of impairment exists individually for financial assets. If there is objective evidence that an impairment loss has been incurred on investments carried at amortised cost, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with exception of receivables arising out of reinsurance or direct insurance arrangements, where the carrying amount is reduced through an allowance account. The impairment is recognised directly through the profit or loss statement.

b) Impairment of financial assets carried at fair value through other comprehensive income

The Group assesses at reporting date whether there is objective evidence that a financial asset at fair value through other comprehensive income financial asset is impaired, If any such evidence exists, the cumulative loss – measured as the difference between the acquisition cost and current fair value, less any impairment loss on the financial asset previously recognised in the profit or loss statement. Impairment losses recognised directly through other comprehensive income and transferred to retained earnings on disposal of the financial asset.

(j) Impairment of non-financial assets

Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). The impairment test also can be performed on a single asset when the fair value less cost to sell or the value in use can be determined reliably. Non-financial assets that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

(k) Foreign currency translation

(i) Functional and presentation currency

Items included in the financial statements of each of the group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the Functional Currency’). The consolidated financial statements are presented in currency - Kenya Shillings which is the group’s presentation currency.

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(k) Foreign currency translation (continued)

(ii) Transactions and balances

Foreign currency transactions are translated into the Functional Currency of the respective entity using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income.

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the statement of comprehensive income within ‘finance income or cost’. All other foreign exchange gains and losses are presented in the statement of comprehensive income within ‘other income’.

(l) Share capital

Ordinary shares are classified as ‘share capital’ in equity. Any premium received over and above the par value of the shares is classified as ‘share premium’ in equity.

(m) Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less, and bank overdrafts.

(n) Employee benefits

The Group operates a defined contribution scheme. A defined contribution scheme is a post-employment benefit plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.

The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

(o) Income tax expense

(i) Current income tax

The tax expense for the period comprises current and deferred income tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity respectively.

The current income tax charge is calculated on the basis of tax laws enacted or substantively enacted at the reporting date. The directors periodically evaluate positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. They establish provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

(ii) Deferred income tax

Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, if the deferred income tax arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

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(o) Income tax expense (continued)

(ii) Deferred income tax (continued)

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current income tax assets against current income tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on the same entity.

(p) Actuarial liabilities and assumptions

In the process of applying the Group’s accounting policies, management made judgements in determining:• actuarial liabilities (see note 26 for the carrying amounts of these liabilities and assumptions respectively)• Valuation of unquoted investments• Fair valuation technique and model of financial assets• Classification of financial assets. As disclosed in note 2 (i)• whether land and building meet criteria to be classified as investment property as disclosed in note 2(e)

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

(q) Dividends

Dividends payable to the Group’s shareholders are charged to equity in the period in which they are declared. Proposed dividends are shown as a separate component of equity until declared.

3. Critical accounting estimates

The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimation of incurred but not yet reported claims (IBNR) is the Company’s most critical accounting estimate. There are several sources of uncertainty that need to be considered in the estimate of the liability that the Company will ultimately pay for such claims. Note 26 contains further details on this process.

4. Management of insurance and financial risk

The Group’s activities expose it to a variety of risks, including insurance risk, financial risk, credit risk, and the effects of changes in property values, debt and equity market prices, foreign currency exchange rates and interest rates. The Group’s overall risk management programme focuses on the identification and management of risks and seeks to minimise potential adverse effects on its financial performance, by use of underwriting guidelines and capacity limits, reinsurance planning, credit policy governing the acceptance of clients, and defined criteria for the approval of intermediaries and reinsurers.

Investment policies are in place which help manage liquidity, and seek to maximise return within an acceptable level of interest rate risk.

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4. Management of insurance and financial risk (continued)

This section summarises the way the Group manages key risks:

(a) Insurance risk

The risk under any one insurance contract is the possibility that the insured event occurs and the uncertainty of the amount of the resulting claim. By the very nature of an insurance contract, this risk is random and therefore unpredictable.

For a portfolio of insurance contracts where the theory of probability is applied to pricing and provisioning, the principal risk that the Group faces under its insurance contracts is that the actual claims and benefit payments exceed the carrying amount of the insurance liabilities. This could occur because the frequency or severity of claims and benefits are greater than estimated. Insurance events are random and the actual number and amount of claims and benefits will vary from year to year from the level established using statistical techniques.

Experience shows that the larger the portfolio of similar insurance contracts, the smaller the relative variability about the expected outcome will be. In addition, a more diversified portfolio is less likely to be affected across the board by a change in any subset of the portfolio. The Group has developed its insurance underwriting strategy to diversify the type of insurance risks accepted and within each of these categories to achieve a sufficiently large population of risks to reduce the variability of the expected outcome.

Factors that aggravate insurance risk include lack of risk diversification in terms of type and amount of risk, geographical location and type of industry covered.

Note 5 and the following tables disclose the concentration of insurance liabilities by the class of business in which the contract holder operates and by the maximum insured loss limit included in the terms of the policy. The amounts are the maximum insured loss limit amounts of the insurance liabilities (gross and net of reinsurance) arising from insurance contracts:

Class of business Maximum insured loss2016 2015

General Insurance Business Total TotalShs’000 Shs’000

Aviation Gross 2,339,700 2,339,700Net 5,557 5,557

Motor Gross 26,000 26,000Net 3,000 3,000

Fire Gross 19,897,000 16,982,000Net 6,500 5,000

Personal accident Gross 250,000 250,000Net 3,000 3,000

Marine Gross 487,000 487,000

Net 3,000 3,000Medical Gross 10,000 10,000

Net 2,000 2,000Others Gross 563,876 563,876

Net 3,000 3,000

Long term Insurance business

Group Life Gross 16,000 16,000Net 300 300

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(b) Financial risk

The Group is exposed to financial risk through its financial assets, financial liabilities (investment contracts and borrowings), reinsurance assets and insurance liabilities. In particular the key financial risk is that the proceeds from its financial assets are not sufficient to fund the obligations arising from its insurance contracts. The most important types of risk are credit risk, liquidity risk, market risk and other operational risks. Market risk includes currency risk, interest rate risk and equity price risk.

These risks arise from open positions in interest rate, currency and equity products, all of which are exposed to general and specific market movements. The risks that the Group primarily faces due to the nature of its investments and liabilities are interest rate risk and equity price risk.

The Group manages these positions within a Board Investment Committee (BIC) framework that has been developed to achieve long-term investment returns in excess of its obligations under insurance and investment contracts. The principal technique of the Group’s BIC is to match assets to the liabilities arising from insurance and investment contracts by reference to the type of benefits payable to contract holders.

Market risk

(i) Foreign exchange risk

The Group is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities. However, the Group has minimal transactions denominated in foreign currency hence the exposure is low.

The Group manages foreign exchange risk arising from future commercial transactions and recognised assets and liabilities.

At 31 December 2016, if the Shilling had weakened/strengthened by 10% against the US dollar with all other variables held constant, the post tax profit for the year would have been Shs 334,217 (2015: Shs 290,539) higher/lower, mainly as a result of US dollar bank balances.

(ii) Price risk

The Group is exposed to equity securities price risk because of investments in quoted shares classified at fair value through profit or loss. The Group is not exposed to commodity price risk. To manage its price risk arising from investments in equity and debt securities, the Group diversifies its portfolio. Diversification of the portfolio is done in accordance with limits set by the Group. All quoted shares held by the Group are traded on the Nairobi Stock Exchange (NSE).

At 31 December 2016, if the NSE Index had increased/decreased by 10% with all other variables held constant and all the Group’s equity instruments moved according to the historical correlation to the index, post tax profit for the year would have been Shs 10,363,234 (2015: Shs 12,307,978) higher/lower.

(iii) Cash flow and fair value interest rate risk

Fixed interest rate financial instruments expose the Group to fair value interest rate risk. Variable interest rate financial instruments expose the Group to cash flow interest rate risk.

The Group’s fixed interest rate financial instruments are government securities, deposits with financial institutions and mortgage loans. These are held at amortised cost thus no fair value risk.

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(b) Financial risk

Credit risk

The Group has exposure to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due. Key areas where the Group is exposed to credit risk are:

• receivables arising out of direct insurance arrangements;• receivables arising out of reinsurance arrangements; and• reinsurers’ share of insurance liabilities.

Other areas where credit risk arises include cash and cash equivalents, mortgage loans, Government securities and deposits with banks and other receivables.

The Group has no significant concentrations of credit risk. The Group structures the levels of credit risk it accepts by placing limits on its exposure to a single counterparty, or groups of counterparty. Such risks are subject to an annual or more frequent review. Limits on the level of credit risk by category and territory are approved periodically by the Board Investment Committee (BIC) and ratified quarterly by the Board of Directors.

Reinsurance is used to manage insurance risk. This does not, however, discharge the Group’s liability as primary insurer. If a reinsurer fails to pay a claim for any reason, the Group remains liable for the payment to the policyholder. The creditworthiness of reinsurers is considered on an annual basis by reviewing their financial strength prior to finalisation of any contract.

The exposure to individual counterparties is also managed by other mechanisms, such as the right of offset where counterparties are both debtors and creditors of the Group. Management information reported to the Group includes details of provisions for impairment on loans and receivables and subsequent write-offs. BIC makes regular reviews to assess the degree of compliance with the Group procedures on credit. Exposures to individual policyholders and groups of policyholders are collected within the ongoing monitoring of the controls associated with regulatory solvency. Where there exists significant exposure to individual policyholders, or homogenous groups of policyholders, a financial analysis equivalent to that conducted for reinsurers is carried out by the BIC of the Group.

The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings if available or historical information about counterparty default rates. None of the Group’s credit risk counter parties are rated except the Government of Kenya, the issuer of the Group’s government securities which has a B+ (2015: B+) credit rating.

The Group classifies counterparties without an external credit rating as below:

Group 1 - new customers/related parties.Group 2 - existing customers/related parties with no defaults in the past.Group 3 - existing customers/related parties with some defaults in the past. All defaults were fully recovered.

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(b) Financial risk (continued)

Credit risk (continued)

Maximum exposure to credit risk before collateral held

GROUP Credit rating orclassification

2016Shs’000

2015Shs’000

Corporate bonds and commercial paper Group 2 423,345 445,291Other receivables Group 2 83,411 64,498Receivables arising out of reinsurance arrangements Group 3 649,292 541,340Receivables arising out of direct insurance arrangements Group 3 748,953 781,397Reinsurers’ share of insurance liabilities Group 2 2,167,894 2,938,236Government securities – Amortised cost B+ 3,869,005 2,068,765Government securities - FVTPL B+ 872,806 670,305Loans receivable Group 3 211,637 297,446Deposits with financial institutions Group 2 1,154,636 1,125,187Tax recoverable Group 2 25,589 9,530Bank balances Group 2 65,331 42,852

10,271,899 8,984,847

Maximum exposure to credit risk before collateral held

COMPANY Credit rating orclassification

2016Shs’000

2015Shs’000

Corporate bonds and commercial paper Group 2 279,677 301,680Other receivables Group 2 49,755 40,294Receivables arising out of reinsurance arrangements See note below 625,444 529,781Receivables arising out of direct insurance arrangements See note below 677,250 752,470Reinsurers’ share of insurance liabilities Group 2 2,062,593 2,864,359Government securities – Amortised cost B+ 1,708, 959 1,023,462Government securities - FVTPL B+ 341,813 349,816Loans receivable Group 3 211,637 297,446Deposits with financial institutions Group 2 756,893 808,614Tax recoverable Group 2 22,792 6,493Bank balances Group 2 52,412 24,859

6,789,225 6,999,274

No collateral is held for any of the above assets. All receivables that are neither past due or impaired are within their approved credit limits, and no receivables have had their terms renegotiated.

None of the above assets are past due or impaired except for the following amounts in;• receivables arising out of direct insurance arrangements • receivables arising out of reinsurance arrangements

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Financial assets that are past due or impaired.

Receivables arising out of direct insurance arrangements are summarised as follows:

GROUP 2016 2015Shs’000 Shs’000

Past due but not impaired 748,953 781,397Impaired 18,889 27,962

Gross 767,842 809,359Allowance for impairment (18,889) (27,962)

Net 748,953 781,397

Allowance for impairmentAt start of year 27,962 20,063Recoveries (23,626) (3,915)Impairment allowance for the period 14,553 11,814

At end of year 18,889 27,962

Receivables arising out of direct insurance arrangements are summarised as follows:

COMPANY 2016 2015Shs’000 Shs’000

Past due but not impaired 677,250 752,470Impaired 18,889 27,962

Gross 696,139 780,432Allowance for impairment (18,889) (27,962)

Net 677,250 752,470

Allowance for impairmentAt start of year 27,962 20,063Recoveries (23,626) (3,915)Impairment allowance for the period 14,553 11,814

At end of year 18,889 27,962

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Receivables arising out of direct insurance arrangements past due but not impaired;

GROUP 2016 2015Shs’000 Shs’000

Past due but not impaired:- by up to 30 days 162,909 183,638- by 31 to 60 days 258,319 223,404- by 61 to 150 days 230,074 242,346- over 151 days 97,651 132,009

Total past due but not impaired 748,953 781,397

Receivables arising out of direct insurance arrangements past due but not impaired;

COMPANYPast due but not impaired:- by up to 30 days 149,331 174,660- by 31 to 60 days 250,721 219,548- by 61 to 150 days 197,878 240,336- over 151 days 79,320 117,926

Total past due but not impaired 677,250 752,470

All receivables arising out of direct insurance arrangements that are past due by more than 365 days are considered to be impaired, and are carried at their estimated recoverable value.

Receivables arising out of reinsurance arrangements are summarised as follows;GROUP 2016 2015

Shs’000 Shs’000- by up to 3 months 89,528 72,194- by 3months to 12 months 421,154 357,614- by 1 year to 5 years 123,871 98,874- over 5 years 14,739 12,658

649,292 541,340

Receivables arising out of reinsurance arrangements are summarised as follows;

COMPANY- by up to 3 months 84,069 72,194- by 3months to 12 months 414,248 348,416- by 1 year to 5 years 112,388 96,513- over 5 years 14,739 12,658

625,444 529,781

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Receivables arising out of direct insurance arrangements individually impaired

Of the total gross amount of impaired receivables, the following amounts have been individually assessed:

Direct insurance arrangementsGROUP 2016 2015

Shs’000 Shs’000Individually assessed impaired receivables - brokers 6,985 1,587 - agents 1,858 2,149 - direct clients 10,046 24,226

18,889 27,962

Of the total gross amount of impaired receivables, the following amounts have been individually assessed:

COMPANY Direct insurance arrangements2016 2015

Shs’000 Shs’000Individually assessed impaired receivables - brokers 6,985 1,587 - agents 1,858 2,149 - direct clients 10,046 24,226

18,889 27,962Liquidity risk

Liquidity risk is the risk that the Group is unable to meet its payment obligations associated with its financial liabilities as they fall due and to replace funds when they are withdrawn.

The Group is exposed to daily calls on its available cash for claims settlement and other administration expenses. The Group does not maintain cash resources to meet all of these needs as experience shows that a minimum level of reinvestment of maturing funds can be predicted with a high level of certainty. The Board sets limits on the minimum level of bank overdraft facilities that should be in place to cover expenditure at unexpected levels of demand.

The table below presents the cash flows payable by the Group under financial liabilities by remaining contractual maturities (other than insurance contract liabilities which are based in expected maturities) at the financial reporting date. All figures are in thousands of Kenya Shillings

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4. Management of Insurance and financial risk (continued)


GROUPUp to 3 months

3-12 months 1-5 years

Over 5 years Total

As at 31 December 2016: Shs’000 Shs’000 Shs’000 Shs’000 Shs’000LiabilitiesInsurance contract liabilities 754,543 4,815,457 807,183 102,735 6,479,918Payables under deposit administration contracts - - - 3,823,465 3,823,465Creditors arising from reinsurance ar-rangements 126,150 684,218 183,050 22,228 1,015,646Creditors arising from direct insurance arrangements 1,826 - - - 1,826Dividends payables - 227,500 - - 227,500Tax payable - 128 - - 128Other payables 319,378 16,822 - - 336,200

Total financial liabilities 1,201,897 5,744,125 990,233 3,948,428 11,884,683

GROUPUp to 3 months


Over 5 years Total

As at 31 December 2015: Shs’000 Shs’000 Shs’000 Shs’000 Shs’000LiabilitiesInsurance contract liabilities 825,109 5,241,354 891,074 113,412 7,070,949Payables under deposit administration contracts - - - 2,282,523 2,282,523Creditors arising from reinsurance ar-rangements 99,267 539,222 147,799 18,234 804,522Creditors arising from direct insurance arrangements 1,469 - - - 1,469Dividends payables - 202,500 - - 202,500Other payables 325,389 6,154 - - 331,543

1,251,234 5,989,230 1,038,873 2,414,169 10,693,506

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COMPANYUp to 3 months


Over 5 years Total

As at 31 December 2016: Shs’000 Shs’000 Shs’000 Shs’000 Shs’000LiabilitiesInsurance contract liabilities 754,543 4,643,694 807,183 102,735 6,308,155Creditors arising from reinsurance ar-rangements 111,889 621,576 174,674 22,228 930,367Dividends payables - 227,500 - - 227,500Other payables 300,903 - - - 300,903

Total financial liabilities 1,167,335 5,492,770 981,857 124,963 7,766,925

COMPANYUp to 3 months


Over 5 years Total

As at 31 December 2015: Shs’000 Shs’000 Shs’000 Shs’000 Shs’000LiabilitiesInsurance contract liabilities 825,111 5,126,306 891,074 113,412 6,955,903Creditors arising from reinsurance ar-rangements 91,576 504,118 143,281 18,234 757,209Dividends payables - 202,500 - - 202,500Other payables 305,943 - - - 305,943

Total financial liabilities 1,222,630 5,832,924 1,034,355 131,646 8,221,555

Fair values estimation

Effective 1 January 2009, the Group adopted the amendment to IFRS 7 for financial instruments that are measured in the statement of financial position at fair value, this requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:

§ Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities. This level includes listed equity securities on the Nairobi Securities Exchange.

§ Level 2 – Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

§ Level 3–Inputsfortheassetorliabilitythatarenotbasedonobservablemarketdata(thatis,unobservableinputs).

All the Group’s financial assets at fair value are in active markets and are based on quoted market prices at the financial reporting date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, pricing service, or regulatory agency, and those prices represent actual and regular occurring market transactions on an arm’s length basis.

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The following table presents financial assets that are measured at fair value at 31 December 2016.

GROUP31 December 2016 Level 1 Level 2 Level 3 Total

Shs’000 Shs’000 Shs’000 Shs’000- Equity investments - quoted 397,826 - - 397,826

- Equity investments - unquoted - - 206,870 206,870- Investment property - 2,427,062 - 2,427,062- Government securities 872,806 - - 872,806

1,270,632 2,427,062 206,870 3,904,564

31 December 2015 Level 1 Level 2 Level 3 Total Shs’000 Shs’000 Shs’000 Shs’000

- Equity investments - quoted 418,258 - - 418,258- Equity investments - unquoted - - 184,898 184,898- Investment property - 2,178,211 - 2,178,211- Government securities 670,305 - - 670,305

1,088,563 2,178,211 184,898 3,451,672

COMPANY31 December 2016 Level 1 Level 2 Level 3 Total

Shs’000 Shs’000 Shs’000 Shs’000- Equity investments - quoted 345,934 - - 345,934- Equity investments - unquoted - - 206,870 206,870- Investment property - 1,396,070 - 1,396,070- Government securities 341,813 - - 341,813

687,747 1,396,070 206,870 2,290,687

31 December 2015

- Equity investments - quoted 383,094 - - 383,094- Equity investments - unquoted - - 184,898 184,898- Investment property - 1,380,843 - 1,380,843 - Government securities 349,816 - - 349,816

732,910 1,380,843 184,898 2,298,651

There are no financial liabilities measured at fair value as at 31 December 2016 (2015: Nil).

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The following table presents the changes in Level 3 instruments for the year ended 31 December 2016 and 31 December 2015

GROUP 2016 2015Shs’000 Shs’000

At start of year 184,898 139,582Transfer to Level 1 (3,915) -Total gains recognised in other comprehensive income 25,887 45,316

At end of year 206,870 184,898

The following table presents the changes in Level 3 instruments for the year ended 31 December 2016 and 31 December 2015


At start of year 184,898 139,582Transfer to Level 1 (3,915) -

Total gains recognised in other comprehensive income 25,887 45,316

At end of year 206,870 184,898

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Fair value estimation (continued)

Financial assets by category

GROUP

Financial assetsAmortised

cost

Fair value through

P&L

Fair value through

OCI TotalAt 31 December 2016 Shs’000 Shs’000 Shs’000 Shs’000Equity instruments at market value-quoted - 397,826 - 397,826Equity instruments at directors valuation-unquoted - - 206,870 206,870Government securities 3,869,005 872,806 - 4,741,811Loans receivable 211,637 - - 211,637Receivables arising out of reinsurance arrangements 649,292 - - 649,292Receivables arising out of direct insurance arrangements 748,953 - - 748,953Other receivables 83,411 - - 83,411Corporate bonds and commercial paper 423,346 - - 423,346Tax recoverable 25,588 - - 25,588Deposits with financial institutions 1,154,636 - - 1,154,636Cash and cash equivalents 65,332 - - 65,332

7,231,200 1,270,632 206,870 8,708,702

Financial assetsAmortised

cost

Fair value through

P&L

Fair value through

OCI TotalAt 31 December 2015 Shs’000 Shs’000 Shs’000 Shs’000Equity instruments at market value-quoted - 418,258 - 418,258Equity instruments at directors valuation-unquoted - - 184,898 184,898Government securities 2,068,765 670,305 - 2,739,070Loans receivable 297,446 - - 297,446Receivables arising out of reinsurance arrangements 541,340 - - 541,340Receivables arising out of direct insurance arrangements 781,397 - - 781,397Other receivables 64,498 - - 64,498Corporate bonds and commercial paper 445,291 - - 445,291Tax recoverable 9,530 - - 9,530Deposits with financial institutions 1,125,187 - - 1,125,187Cash and cash equivalents 42,852 - - 42,852

5,376,306 1,088,563 184,898 6,649,767

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Fair value estimation (continued)

Financial risk (continued)

COMPANY

Fair value through

P&L

Fair value through

OCI TotalFinancial assetsAt 31 December 2016 Shs’000 Shs’000 Shs’000

Equity instruments at market value-quoted - 345,934 - 345,934Equity instruments at directors valuation-unquoted - - 206,870 206,870Government securities 1,708,959 341,813 - 2,050,772Loans receivable 211,637 - - 211,637Receivables arising out of reinsurance arrangements 625,444 - - 625,444Receivables arising out of direct insurance arrangements 677,250 - - 677,250Other receivables 49,755 - - 49,755Corporate bonds and commercial paper 279,677 - - 279,677Tax recoverable 22,791 - - 22,791Deposits with financial institutions 756,893 - - 756,893Cash and cash equivalents 52,413 - - 52,413

4,384,819 687,747 206,870 5,279,436

At 31 December 2015 Shs’000 Shs’000 Shs’000 Shs’000

Equity instruments at market value-quoted - 383,094 - 383,094Equity instruments at directors valuation-unquoted - - 184,898 184,898Government securities 1,023,462 349,816 - 1,373,278Loans receivable 297,446 - - 297,446Receivables arising out of reinsurance arrangements 529,781 - - 529,781Receivables arising out of direct insurance arrangements 752,470 - - 752,470Other receivables 40,294 - - 40,294Corporate bonds and commercial paper 301,680 - - 301,680Tax recoverable 6,493 - - 6,493Deposits with financial institutions 808,614 - - 808,614Cash and cash equivalents 24,859 - - 24,859

3,785,099 732,910 184,898 4,702,907 Financial liabilitiesAll the Group’s financial liabilities are measured at amortised cost. The carrying value of the Group’s financial liabilities at the end of 2016 and 2015 is as shown on note 4 (b).

Amortised cost

Shs’000

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(c) Capital management

The Group’s objectives when managing capital, which is a broader concept than the ‘equity’ on the statement of financial position are:§ to comply with the capital requirements as set out in the Insurance Act;§ to comply with regulatory solvency requirements as set out in the Insurance Act; § to safeguard the Group’s ability to continue as a going concern, so that it can continue to provide returns to

shareholders and benefits for other stakeholders; and§ to provide an adequate return to shareholders by pricing insurance and investment contracts commensurately with the level of risk.

The group has different capital requirements depending on the country in which it operates. The Group operates in Kenya and Tanzania.

In Kenya, the solvency and capital adequacy margins are calculated based on Kenyan Solvency Law, which requires the application of a formula that contains variables for expenses and admitted assets, as contained in section 41-1 of the Insurance Act.

The Insurance Act requires a General insurance company to hold the minimum level of paid up capital of Shs 300 million or 10% of gross premium written, whichever is higher. Long term insurance companies are required to hold the minimum level of paid up capital of Shs 150 mliion.

General insurance businesses are required to keep a solvency margin i.e. admitted assets less admitted liabilities equivalent to the higher of Shs 10 million or 15% of the net premium income during the preceding financial year.

Long term insurance businesses are required to keep a solvency margin i.e. admitted assets less admitted liabilities, equivalent to the higher of Shs 10 million or 5% of the total admitted liabilities.

In Tanzania, the Group is required to hold regulatory capital for its general insurance business with the rules issued by the insurance regulator as per Government notice published on 25th March 2003 and Government notice 189 published on 9th July 2003.

The table below summarises regulatory capital requirements and the capital maintained by Kenya insurance subsidiary at 31 December:

2016 2015

Regulatory requirement

Maintained by the

CompanyRegulatory

requirement

Maintained by the

CompanyShs’000 Shs’000 Shs’000 Shs ‘000

Long-termCapital at 31 December 150,000 200,000 150,000 200,000Short-termCapital at 31 December 479,000 700,000 440,000 450,000

Capital at 31 December 629,000 900,000 590,000 650,000

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5. Segment Information

Operating Segment results 31 December 2016General

InsuranceLife

Insurance TotalShs’000 Shs’000 Shs’000

Insurance premium revenue 5,004,355 25,977 5,030,332Less: reinsurance premium ceded (2,470,750) (28,079) (2,498,829)

Net insurance premiums revenue 2,533,605 (2,102) 2,531,503

Unearned insurance premiums brought forward 1,019,601 - 1,019,601Unearned insurance premiums carried forward (1,047,758) - (1,047,758)

Net earned premiums 2,505,448 (2,102) 2,503,346

Investment income 504,943 347,391 852,334Net gains on financial assets held at Fair Value through profit or loss (59,932) 26,088 (33,844)Commissions earned 611,692 15,278 626,970Other income 47,790 38 47,828

Total income 3,609,941 386,693 3,996,634

Claims incurred 2,112,776 330,994 2,443,770Amounts recoverable from reinsurers (650,475) (13,208) (663,683)

Net claims incurred 1,462,301 317,786 1,780,087

Operating and other expenses 745,303 40,923 786,226Commissions payable 681,875 3,396 685,271

1,427,178 44,319 1,471,497

Profit before income tax 720,462 24,588 745,050

Income tax expense (191,805) (6,546) (198,351)

Profit for the year 528,657 18,042 546,699

Other comprehensive income, net of tax

Net gains on financial assets held at Fair Value through other comprehensive income, net of tax 18,121 - 18,121

Total comprehensive income 546,778 18,042 564,820

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5. Segment Information (continued)

Operating Segment results 31 December 2015General

InsuranceLife

Insurance TotalShs’000 Shs’000 Shs’000

Insurance premium revenue 4,459,434 20,398 4,479,832Less: reinsurance premium ceded (2,147,280) (23,122) (2,170,402)

Net insurance premiums revenue 2,312,154 (2,724) 2,309,430

Unearned insurance premiums brought forward 905,622 - 905,622Unearned insurance premiums carried forward (1,019,601) - (1,019,601)

Net earned premiums 2,198,175 (2,724) 2,195,451

Investment income 442,567 215,251 657,818Net gains on financial assets held at Fair Value through profit or loss (43,944) 77,574 33,630Commissions earned 570,617 6,590 577,207Other income 25,517 39 25,556

Total income 3,192,931 296,730 3,489,661

Claims incurred 3,521,502 231,299 3,752,801Amounts recoverable from reinsurers (2,215,952) (1,326) (2,217,278)

Net claims incurred 1,305,550 229,973 1,535,523

Operating and other expenses 756,807 58,268 815,075Commissions payable 603,654 1,939 605,593

1,360,461 60,207 1,420,668

Profit before income tax 526,920 6,550 533,470

Income tax expense (177,985) (1,936) (179,921)

Profit for the year 348,935 4,614 353,549

Other comprehensive income, net of tax

Net gains on financial assets held at Fair Value through other compre-hensive income, net of tax 31,721 - 31,721

Total comprehensive income 380,656 4,614 385,270

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6. Gross written premiums

The premium income of the Group and Company can be analysed between the main classes of business as shown below:

GROUP 2016 2015Shs’000 Shs’000

General insurance business:Medical 1,088,572 990,903Fire 1,079,894 923,487Motor commercial 605,906 495,407Workmen compensation 475,127 473,410Motor private 532,080 383,474Theft 309,518 310,006Marine 255,979 284,750Engineering 276,042 270,702Miscellaneous 144,960 146,878Personal accident 103,590 86,421Public liability 82,026 66,822Aviation 49,549 27,174

5,003,243 4,459,434

Life Insurance business:Group life 27,089 20,398

Total 5,030,332 4,479,832


General insurance business:Medical 1,071,523 976,261Fire 1,006,342 875,638Motor commercial 588,456 487,129Workmen compensation 475,127 470,606Motor private 492,371 363,355Theft 309,518 310,006Marine 250,865 282,405Engineering 266,718 263,704Miscellaneous 134,155 144,449Personal accident 69,344 62,916Public liability 76,671 64,290Aviation 40,994 23,936

4,782,084 4,324,695

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7. Investment income

GROUP 2016Shs’000

2015Shs’000

Interest on bank deposits 148,560 210,159Interest from government securities 510,060 250,689Rental income from investment properties 60,729 58,270Interest income-commercial loans 13,004 20,140Dividends receivable from equity investments 26,046 21,480Interest income-commercial paper 51,950 53,902Gain on sale of quoted shares and government securities 22,484 26,484Mortgage loan interest receivable 17,107 14,330Bank interest income 2,394 2,364

Total 852,334 657,818

Net Gains on Financial Assets at Fair ValueFair value gain on Investment properties 22,882 225,923Fair value loss on Equities – Quoted (FVTPL) (83,493) (140,590)Fair value( loss)/gain on Treasury bonds –FVTPL 26,767 (51,703)

Total (33,844) 33,630

Other IncomeGain on disposal of property and equipment (318) 815Premiums tax recoveries 22,347 12,383Bad debts recoveries 23,626 7,297Foreign exchange gain/(loss) (1,425) 1,719Other 3,598 3,342

Total 47,828 25,556

COMPANY

Interest on bank deposits 107,968 136,268Interest from government securities 224,402 122,220Rental income from investment properties 58,133 58,270Interest income-commercial loans 13,004 20,140Dividends receivable from equity investments 24,138 20,470Interest income-commercial paper 34,008 36,362Gain on sale of quoted shares & government securities 4,770 15,084Mortgage loan interest receivable 17,107 14,330Bank interest income 1,710 1,817

Total 485,240 424,961

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7. Investment income (continued)

COMPANY 2016Shs’000

2015Shs’000

Net Gains/(losses) on Financial Assets at Fair ValueFair value gain on Investment properties - 107,552Fair value (loss)/gain on Equities – Quoted (FVTPL) (71,929) (128,767)Fair value loss on Treasury bonds –FVTPL 11,997 (22,729)

Total (59,932) (43,944)

Other IncomeGain on disposal of property and equipment (318) 815Premiums tax recoveries 22,347 12,383Bad debts recoveries 23,626 7,297

Foreign exchange gain/(loss) (1,210) 108Other 6,572 4,785

Total 51,017 25,388

8. Claims payable

GROUPClaims incurred by principal class of business: 2016 2015General Business Shs’000 Shs’000

Motor commercial 338,592 260,902Workmen compensation 188,363 317,514Motor private 432,748 224,545Theft 126,016 114,633Medical 211,161 191,693Fire 86,128 85,626Marine 36,325 29,628Engineering 28,049 28,168Public liability 6,491 14,647Personal accident 6,460 17,022Miscellaneousv 2,019 21,090Aviation (51) 82

1,462,301 1,305,550Life Insurance businessInterest on deposit administration contracts 317,079 229,368Increase in insurance contract liabilities 707 605

317,786 229,973

Total 1,780,087 1,535,523

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8. Claims payable (continued)


Claims incurred by principal class of business:General Business

Motor commercial 336,463 257,362Workmen compensation 188,395 317,482Motor private 423,054 219,761Theft 126,016 114,633Medical 208,647 188,818Fire 82,824 83,186Marine 35,551 29,551Engineering 27,472 27,404Public liability 6,262 14,647Personal accident (2,290) 13,737Miscellaneous 4,182 15,886Aviation (51) 82

1,436,525 1,282,549

9. Operating and other expensesGROUP 2016 2015

Shs’000 Shs’000

Staff costs 444,878 384,811Marketing and administrative expenses 251,409 325,748Depreciation (Note 15) 32,314 35,825Amortisation (Note 16) 8,815 7,754Impairment charge - investments - 25,000Impairment charge for doubtful receivables-premium debtors 14,735 11,814Occupancy costs 26,739 16,976Auditors’ remuneration (inclusive of VAT) 7,336 7,147

786,226 815,075

COMPANY

Staff costs 392,752 341,845Marketing and administrative expenses 218,882 299,629Depreciation (Note 15) 29,516 33,939Amortisation (Note 16) 4,152 7,754Impairment charge for doubtful receivables-premium debtors 14,735 11,814Occupancy costs 20,247 11,856Auditors’ remuneration (inclusive of VAT) 4,021 3,829

684,305 710,666

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10. Income tax expense

GROUP 2016 2015Shs’000 Shs’000

Current income tax 210,417 205,223Deferred income tax(credit)/charge (Note 29) (12,066) (25,302)

198,351 179,921

The Company’s current tax charge is computed in accordance with income tax rules applicable to Kenyan Insurance Companies. A reconciliation of the tax charge is shown below:

2016 2015Shs’000 Shs’000

Profit before tax 745,051 533,470

Tax calculated at a tax rate of 30% (2015:30%) 223,515 160,041Tax effect of income not subject to tax (162,332) (135,295)Tax effect of expenses not deductible for tax purposes 137,168 155,175

Income tax expense 198,351 179,921

COMPANY

Current income tax 208,722 204,486Deferred income tax (credit)/charge - Note 29 (17,673) (26,501)

191,049 177,985

The Company’s current tax charge is computed in accordance with income tax rules applicable to Kenyan Insurance Companies. A reconciliation of the tax charge is shown below:

2016 2015Shs’000 Shs’000


Tax calculated at a tax rate of 30% (2015:30%) 214,173 160,131Tax effect of income not subject to tax (152,367) (114,402)Tax effect of expenses not deductible for tax purposes 129,243 132,256

Income tax expense 191,049 177,985

11. Dividends

Proposed dividends are accounted for as a separate component of equity until they have been ratified at an annual general meeting. A final dividend in respect of the year ended 31 December 2016 of Shs 6.5/- per share(2015: Final Shs 9 per share ) was proposed.

Payment of dividends is subject to withholding tax at the rate of either 5% or 10%, depending on the residence of the individual shareholders.

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12. Share capital

GROUP & COMPANY Number ofShares

(Thousands)

Ordinary shares

Shs ‘000

Balance as at 31 December 2015, 1 January 2016 22,500 450,000Increase in share capital 12,500 250,000Balance as at 31 December 2016 35,000 700,000

The total authorised number of ordinary shares is 35,000,000 with a par value of Shs 20 per share.

All authorised shares are issued and fully paid.

13. Retained earnings

The retained earnings balance represents the amount available for dividend distribution to the shareholders of the Group.

14. Reserves

(a) Revaluation reserve

GROUP & COMPANYThe revaluation reserve represents solely the surplus revaluation of freehold land and buildings net of deferred income tax and is non-distributable. Freehold land and buildings are classified under property and equipment.

2016Shs ‘000

2015Shs ‘000

At beginning of year 829,766 829,766Gain on revaluation - -

At the end of the year 829,766 829,766

(b) Other reserves

GROUP & COMPANY Other reserves represents the cumulative net change in fair value of investment properties, which is maintained until respective properties are derecognised. It also includes net change in fair value of unquoted equities. The reserves are not available for distribution as dividends.

2016Shs ‘000

2015Shs ‘000

At beginning of year 205,970 174,249Revaluation gains - gross 25,887 45,316- tax (Note 30) (7,766) (13,595)Reclassification - -

Total other reserves 224,091 205,970

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15. Property and equipment GROUP

Land & Buildings

Furniture & equipment

Motor Vehicles

Computer & office

equipmentLeasehold

improvementTotal

Shs 000 Shs 000 Shs 000 Shs 000 Shs 000 Shs 000Year ended 31 December 2016

At 1 January 2016Cost or valuation 1,170,000 68,061 45,547 61,946 32,515 1,378,069Accumulated depreciation (9,000) (50,565) (31,102) (45,952) (19,058) (155,677)

Net book amount 1,161,000 17,496 14,445 15,994 13,457 1,222,392

Opening net book amount 1,161,000 17,496 14,445 15,994 13,457 1,222,392Additions - 4,948 1,447 6,253 7,075 19,723Disposals - - (7,638) - - (7,638)Depreciation charge (9,000) (5,705) (4,223) (8,435) (4,949) (32,312)Accumulated depreciation on disposal - - 1,909 - - 1,909

Closing net book amount 1,152,000 16,739 5,940 13,812 15,583 1,204,074

At 31 December 2016Cost or valuation 1,170,000 73,009 39,356 68,199 39,590 1,390,154Accumulated depreciation (18,000) (56,270) (33,416) (54,387) (24,007) (186,080)

Net book amount 1,152,000 16,739 5,940 13,812 15,583 1,204,074

Year ended 31 December 2015Opening net book amount 1,170,000 17,365 11,378 10,457 12,739 1,221,939Additions - 5,246 13,584 12,666 4,782 36,279Disposals - - (2,035) - - (2,035)Depreciation charge (9,000) (5,115) (10,517) (7,129) (4,064) (35,825)Accumulated depreciation on disposal - - 2,035 - - 2,035

Net book amount 1,161,000 17,496 14,445 15,994 13,457 1,222,393

Cost or valuation 1,170,000 68,061 45,547 61,946 32,515 1,378,070Accumulated depreciation (9,000) (50,565) (31,102) (45,952) (19,058) (155,677)

Net book amount 1,161,000 17,496 14,445 15,994 13,457 1,222,393

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15. Property and equipment (continued)

COMPANY

Land & Buildings

Furniture & equiment

MotorVehicles

Compuer & office

equimentLeasehold

improvement TotalShs 000 Shs 000 Shs 000 Shs 000 Shs 000 Shs 000


At 1 January 2016Cost or valuation 1,170,000 64,125 39,624 59,210 32,515 1,365,474Accumulated depreciation (9,000) (49,781) (27,909) (45,691) (19,059) (151,440)

Net book amount 1,161,000 14,344 11,715 13,519 13,456 1,214,034

Opening net book amount 1,161,000 14,344 11,715 13,519 13,456 1,214,034Additions - 4,621 550 5,645 7,075 17,891Disposals - (7,638) - - (7,638)Depreciation charge (9,000) (5,186) (2,702) (7,679) (4,949) (29,516)Accumulated depreciation on disposal - - 1,911 - - 1,911

Closing net book amount 1,152,000 13,779 3,836 11,485 15,582 1,196,682

At 31 December 2016Cost or valuation 1,170,000 68,746 32,536 64,855 39,590 1,375,727Accumulated depreciation (18,000) (54,967) (28,700) (53,370) (24,008) (179,045)

Net book amount 1,152,000 13,779 3,836 11,485 15,582 1,196,682

Year ended 31 December 2015Opening net book amount 1,170,000 14,872 8,529 10,090 12,739 1,216,230Additions - 4,183 12,375 10,404 4,782 31,744Disposals - (2,035) - - (2,035)Depreciation charge (9,000) (4,711) (9,189) (6,975) (4,064) (33,939)Accumulated depreciation on disposal - - 2,035 - - 2,035

Net book amount 1,161,000 14,344 11,715 13,519 13,457 1,214,035

Cost or valuation 1,170,000 64,125 39,624 59,210 32,515 1,365,475Accumulated depreciation (9,000) (49,781) (27,909) (45,691) (19,059) (151,439)

Net book amount 1,161,000 14,344 11,715 13,519 13,457 1,214,035

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15. Property and equipment (continued)

GROUP & COMPANY

The Group’s land and buildings were last revalued in 2014, by Llyod Masika Limited, professional valuers, on the basis of open market value for existing use of Shs 1,170 million.

If land and buildings were stated on a historical cost basis, the amounts would be as follows:

2016 2015Shs’000 Shs’000

Cost 338,790 338,790Accumulated depreciation (81,306) (74,531)

Net book amount 257,484 264,259

Included in property and equipment are assets with a gross value of Shs 94,248,098 (2015 – Shs 58,402,904) which are fully depreciated and still in use. Such assets would have attracted a notional depreciation of Shs 17,126,045 (2015– Shs 14,252,457).

16. Intangible assets – computer software

GROUP 2016 2015Shs’000 Shs’000

At start of year 30,302 8,705Additions 4,729 29,351Amortisation charge (8,815) (7,754)


COMPANY

At start of year 5,775 8,705Additions 1,350 4,824Amortisation charge (4,152) (7,754)


17. Investment Property

GROUP

At start of year 2,178,211 1,478,891Additions 225,970 473,398Fair value gains 22,881 225,922

At end of year 2,427,062 2,178,211

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17. Investment property (Continued)


2015Shs’000

At start of year 1,380,843 1,273,291Additions 15,227 -Fair value gains - 107,552

At end of year 1,396,070 1,380,843

18. Equity investmentsGROUP 2016

Shs’0002015

Shs’000Quoted securitiesAt start of year 418,258 429,721Additions 64,124 137,358Transfer from unquoted equities 3,915 -Disposals (4,978) (8,231)Fair value loss (83,493) (140,590)

At end of year 397,826 418,258

Unquoted securitiesAt start of year 184,898 139,582Transfer to quoted equities (3,915) -Fair value gain 25,887 45,316

At end of year 206,870 184,898

COMPANY

Quoted securitiesAt start of year 383,094 401,663Additions 35,832 112,511Transfer from unquoted equities 3,915 -Disposals (4,978) (2,313)Fair value loss (71,929) (128,767)

At end of year 345,934 383,094

Unquoted securitiesAt start of year 184,898 139,582Transfer to quoted equities (3,915) -Fair value gain 25,887 45,316

At end of year 206,870 184,898

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18. Equity investments (continued)

Quoted Equity securities are designated as fair value through profit and loss upon initial recognition. Unquoted equities are designated as fair value through other comprehensive income upon initial recognition. Unquoted securities are valued by the directors who believe their valuation to be the best representation of fair value.

19. Loans receivableGROUP & COMPANY 2016

Shs’0002015

Shs’000At start of year 297,446 292,640Loans advanced 49,825 66,679Interest due 6,448 13,987Loan repayments (142,082) (75,860)

At end of year 211,637 297,446

The weighted average effective interest rate on the loans was 15.90% (2015: 15.83%).There are no impaired loans and receivables at 31 December 2016 (2015: Nil).

2016Shs’000

2015Shs’000

Due within 12 months 7,069 3,070Due after more than 12 months 204,568 294,376

211,637 297,446

20. Corporate bonds and commercial papers 2016 2015GROUP Shs’000 Shs’000At start of year 445,291 438,666Additions 35,622 83,502Impairment - (25,000)Repayments (57,567) (51,877)

At end of year 423,346 445,291

COMPANY Shs’000 Shs’000At start of year 301,680 309,350Additions 35,564 44,207Repayments (57,567) (51,877)

At end of year 279,677 301,680

The weighted average effective interest rate on the corporate bonds and commercial papers was 12.98% (2014: 12.62%). There are no impaired corporate bonds and commercial papers at 31 December 2016 (2015: Nil).

GROUP 2016Shs’000

2015Shs’000

-Within 1 year 10,162 10,177- In 1-5 years 413,184 435,114- After 5 years - -

423,346 445,291

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20. Corporate bonds and commercial papers (continued)


2015Shs’000

- Within 1 year 10,162 10,177- In 1-5 years 269,515 291,503- After 5 years - -

279,677 301,680

21. Reinsurers’ share of insurance liabilitiesGROUP 2016

Shs’0002015

Shs’000Reinsurers’ share of:-unearned premium 898,037 810,287-notified claims outstanding 1,202,053 2,053,879-claims incurred but not reported 67,804 74,070

2,167,894 2,938,236

COMPANYReinsurers’ share of:-unearned premium 843,755 776,787-notified claims outstanding 1,159,537 2,020,072-claims incurred but not reported 59,301 67,500

2,062,593 2,864,359

Amounts due from reinsurers in respect of claims already paid by the Company on contracts that are reinsured are included in receivables arising out of reinsurance arrangements on the statement of financial position.

22. Other receivablesGROUP 2016 2015

Shs’000 Shs’000Prepayments 21,339 8,704Utilities and rental deposit 2,273 805Others 59,799 54,989

83,411 64,498


2015Shs’000

Prepayments 8,598 5,548Utilities and rental deposit 2,273 805Others 38,884 33,941

49,755 40,294

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23. Deferred acquisition cost

GROUP 2016 2015Shs’000 Shs’000

At start of year 256,466 236,737Additions 289,155 256,466Charge for the year (256,466) (236,737)

At end of year 289,155 256,466


At start of year 257,525 232,966Additions 289,356 257,525Charge for the year (257,525) (232,966)

At end of year 289,356 257,525

24. Government securities GROUP 2016

Shs’0002015

Shs’000At amortised costTreasury bills and bonds maturing:- Within 1 year 722,216 742,214- In 1-5 years 1,115,689 388,240- After 5 years 2,031,100 938,311

3,869,005 2,068,765

The movement of Government securities in the year is shown below

At start of the year 2,068,765 1,118,576Additions 2,734,173 1,360,192Maturities (933,933) (410,003)

At end of the year 3,869,005 2,068,765

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24. Government securities (Continued)


At amortised costTreasury bills and bonds maturing:- Within 1 year 372,042 350,526- In 1-5 years 540,212 258,821- After 5 years 796,705 414,115

1,708,959 1,023,462

At start of the year 1,023,462 697,454Additions 1,199,259 525,253Maturities (513,762) (199,245)

At end of the year 1,708,959 1,023,462

There are no impaired amortised cost investments at 31 December 2016 (2015: Nil).Government securities classified as held to maturity are designated in this category upon initial recognition.

GROUP 2016Shs’000

2015Shs’000

At fair value through profit & lossTreasury bills and bonds maturing:- Within 1 year - 20,590- In 1-5 years 379,404 265,916- After 5 years 493,402 383,799

872,806 670,305

The movement of Government securities in the year is shown below

At start of the year 670,305 429,854Additions 948,520 609,984Maturities (790,500) (327,092)Fair value (loss)/gain 44,481 (42,441)

At end of the year 872,806 670,305

COMPANY At fair value through profit & lossTreasury bills and bonds maturing:- Within 1 year - 20,590- In 1-5 years 40,536 37,777- After 5 years 301,277 291,449

341,813 349,816

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24. Government securities (continued)

COMPANY

At fair value through profit & loss

The movement of Government securities in the year is shown below2016 2015

Shs’000 Shs’000At start of the year 349,816 80,391Additions 200,040 450,137Maturities (220,040) (157,984)Fair value (loss)/gain 11,997 (22,728)

At end of the year 341,813 349,816

Amounts held under lien are disclosed in Note 36.

25. Amounts payable under deposit administration contractsDeposit administration contracts are recorded at amortised cost. Movements in amounts payable during the year were as shown below. The liabilities are shown inclusive of the interest accumulated to 31 December. Interest was declared and credited to the customer accounts at weighted average of 10.50% (2015: 12.25%)

GROUP 2016Shs’000

2015Shs’000

At 1 January 2,282,523 1,533,684Pension fund deposits received 1,485,138 688,488Withdrawals (261,274) (169,018)Interest payable to policyholders 317,079 229,369

At 31 December 3,823,466 2,282,523

26. Insurance contract liabilities

GROUP 2016 2015Shs’000 Shs’000

Long term Insurance contracts- Actuarial liabilities 466 359- Claims reported and claims handling expenses - 1,260Short term non-life insurance contracts- Claims reported and claims handling expenses 4,287,984 5,021,988- Claims incurred but not reported 245,674 217,453

Total – Long term & short term 4,534,124 5,241,060

Movements in short term insurance liabilities and reinsurance assets are shown in note 27.

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26. Insurance contract Liabilities (continued)

Short term non-life insurance contracts

Gross claims reported, claims handling expenses liabilities and the liability for claims incurred but not reported are net of expected recoveries from salvage and subrogation. The expected recoveries at the end of 2016 and 2015 are not material.

The Company uses historical experience to estimate the ultimate cost of claims. This involves the analysis of historical claims development factors and the selection of estimated development factors based on this historical pattern. The selected development factors are then applied to claims data for each accident year that is not fully developed to produce an estimated ultimate claims cost for each accident year.

The development of insurance liabilities provides a measure of the Company’s ability to estimate the ultimate value of claims. The table below illustrates how the C ompany’s estimate of total claims outstanding for each accident year has changed at successive year ends.

Accident year 2012 2013 2014 2015 2016Shs’000 Shs’000 Shs’000 Shs’000 Shs’000

Estimate of ultimate claims costs:- at end of 268,999 432,801 477,204 484,627 1,117,900- one year later 65,288 84,528 112,147 432,581- two years later 6,402 18,801 137,216- three years later 7,969 71,016- four years later 33,534

Current estimate of cumulative claims 382,192 607,146 726,567 917,208 1,117,900

Cumulative payments to date (112,237) (178,298) (213,368) (269,352) (328,289)

Liability in the statement of financial position 269,955 428,848 513,199 647,856 789,611Liability in respect of prior years 589,425 - - - -

Total gross claims liability included in the statement of financial position 859,380 428,848 513,199 647,856 789,611

Long term Insurance Contracts

The Group determines its liabilities on long term contracts based on assumptions in relation to future deaths, voluntary terminations, and investment returns and administration expenses. A margin for risk and uncertainty is added to these assumptions. The liabilities are determined on the advice of the consulting actuary and actuarial valuations are carried out on an annual basis.


Long term Insurance contracts- Actuarial liabilities - -Short term non-life insurance contracts- Claims reported and claims handling expenses 4,224,715 4,976,135- Claims incurred but not reported 233,019 208,228

Total – Long term & short term 4,457,734 5,184,363

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27. Movements in short term insurance liabilities and reinsurance assets

Short term insurance businessGROUP 2016 2015

Gross Reinsurance Net Gross Reinsurance NetShs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000

Notified claims 5,021,988 2,053,879 2,968,109 3,714,746 1,069,936 2,644,810Incurred but not reported 217,453 74,070 143,383 185,152 49,335 135,817

Total at the beginning of year 5,239,441 2,127,949 3,111,492 3,899,898 1,119,271 2,780,627

Cash paid for claims settled in year (2,023,810) (848,852) (1,174,958) (2,179,810) (1,204,772) (975,038)Increase in liabilities - arising from current year claims 1,219,027 (7,130) 1,226,157 3,248,889 2,181,050 1,067,839

- arising from prior year claims 99,827 (424) 100,251 270,464 32,400 238,064

Total at end of year (704,956) (856,406) 151,450 1,339,543 1,008,678 330,865


Total at end of year 4,534,124 1,270,324 3,263,800 5,239,441 2,127,949 3,111,492

Short term insurance business

COMPANY 2016 2015Gross Reinsurance Net Gross Reinsurance Net

Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000


Total at the beginning of year 5,184,363 2,087,572 3,096,791 3,893,101 1,113,708 2,779,393

Cash paid for claims settled in year (1,993,982) (835,455) (1,158,527) (2,155,702) (1,192,061) (963,641)Increase in liabilities - arising from current year claims 1,167,526 (32,855) 1,200,381 3,176,500 2,133,525 1,042,975- arising from prior year claims 99,827 (424) 100,251 270,464 32,400 238,064

Total at end of year (726,629) (868,734) 141,105 1,291,262 973,864 317,398


Total at end of year 4,457,734 1,218,838 3,238,896 5,184,363 2,087,572 3,096,791

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28. Provisions for unearned premium

GROUPThe unearned premium provision represents the liability for short term business contracts where the Group’s obligations are not expired at the year end. Movements in the reserves is shown below:

2016 2015Gross Reinsurance Net Gross Reinsurance Net


At beginning of year 1,829,889 810,287 1,019,602 1,631,948 726,326 905,622

Increase in the period 115,906 87,750 28,156 197,941 83,962 113,979

At end of year 1,945,795 898,037 1,047,758 1,829,889 810,288 1,019,601

COMPANY 2016 2015Gross Reinsurance Net Gross Reinsurance Net


At beginning of year 1,771,540 776,787 994,753 1,603,936 715,795 888,141Increase in the period 78,881 66,968 11,913 167,604 60,992 106,611

At end of year 1,850,421 843,755 1,006,666 1,771,540 776,787 994,752

29. Deferred income taxDeferred tax is calculated using the enacted income tax rate of 30% (2015: 30%) The movement on the deferred income tax account is as follows:

GROUP 2016Shs’000

2015Shs’000

At start of year – as previously reported 15,529 3,820*Actuarial surplus - -At start of year – adjusted 15,529 3,820Profit or loss statement charge (Note 10) 12,066 25,303Charge to other comprehensive income (Note 10) (7,766) (13,595)

At end of year 19,829 15,529

*To recognise deferred tax on actuarial surplus.

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29. Deferred tax ( continued)

Deferred tax assets and liabilities and deferred tax (charge)/credit in profit or loss are attributable to the following items


1.1.16

Shs’000

Crto P/L

Shs’000

Charged to OCI

Shs’000

31.12.16

Shs’000

Property and equipment- on historical cost basis (22,745) 2,895 - (19,850)Fair value movement on quoted equities 32,636 21,578 - 54,214Fair value movement on unquoted equities (21,380) - (7,766) (29,146)Unrealised exchange gains (33) 363 - 330Treasury bonds - FVTPL 8,960 (3,599) - 5,361Provisions 19,675 (3,564) - 16,111Actuarial Surplus (1,584) (5,607) - (7,191)

Net deferred tax asset/ (liability) 15,529 12,066 (7,766) 19,829


1.1.15

Shs’000

Crto P/L

Shs’000

Charged to OCI

Shs’000

31.12.15

Shs’000

Property and equipment- on historical cost basis 6,732 (29,477) - (22,745)Fair value movement on quoted equities (5,897) 38,533 - 32,636Fair value movement on unquoted equities (7,785) - (13,595) (21,380)Unrealised exchange gains (637) 604 - (33)Treasury bonds - FVTPL (3,755) 12,715 - 8,960Provisions 15,549 4,126 - 19,675Actuarial surplus (385) (1,199) - (1,584)


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29. Deferred income tax (continued)

Deferred tax is calculated using the enacted income tax rate of 30% (2015: 30%) The movement on the deferred income tax account is as follows:


At start of year 17,113 4,206Profit or loss statement charge (Note 10) 17,673 26,502Charge to other comprehensive income (Note 10) (7,766) (13,595)

At end of year 27,020 17,113

Deferred tax assets and liabilities and deferred tax (charge)/credit in profit and loss are attributable to the following items


1.1.16

Shs’000

Crto P/L

Shs’000

Charged to OCI

Shs’000

31.12.16

Shs’000

Property and equipment - on historical cost basis (22,745) 2,895 - (19,850)Fair value movement on quoted equities 32,636 21,578 - 54,214Fair value movement on unquoted equities (21,380) - (7,766) (29,146)Unrealised exchange gains (33) 363 - 330Treasury bonds - FVTPL 8,960 (3,599) - 5,361Provisions 19,675 (3,564) - 16,111



1.1.15

Shs’000

Crto P/L

Shs’000

Charged to OCI

Shs’000

31.12.15

Shs’000

Property and equipment - on historical cost basis 6,732 (29,477) - (22,745)Fair value movement on quoted equities (5,897) 38,533 - 32,636Fair value movement on unquoted equities (7,785) - (13,595) (21,380)Unrealised exchange gains (637) 604 - (33)Treasury bonds - FVTPL (3,755) 12,715 - 8,960Provisions 15,548 4,126 - 19,675


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30. Other payables 2016 2015GROUP Shs’000 Shs’000

Accrued expenses 26,201 8,538Leave accrual 4,142 8,826Other liabilities 305,857 314,179

336,200 331,543

COMPANYAccrued expenses 11,916 7,079Leave accrual 2,128 7,145Other liabilities 286,859 291,719

300,903 305,943

31. Contingent liabilities

In common with the insurance industry in general, the Group is subject to litigation arising in the normal course of insurance business. Directors are of the view that no material claims will crystallise.

The Group has given guarantees in the ordinary course of business amounting to Shs174,818,134 (2015 – Shs 174,818,134) to third parties for which the Group has secured by counter guarantees or other form of securities

32. CommitmentsGROUP

Operating lease commitments

The Group leases out its investment property under operating leases. Operating lease rentals are receivable as follows:

2016 2015Shs’000 Shs’000

Not later than 1 year 61,413 54,812Later than 1 year and not later than 5 years 261,084 82,490

322,497 137,302

COMPANY

Not later than 1 year 35,685 54,812Later than 1 year and not later than 5 years 100,433 82,490

136,118 137,302

During the year ended 31 December 2016, Shs 60,729,443 (2015 – Shs 58,270,317) was recognised as net rental income in the Group’s consolidated statement of comprehensive income, and Shs 25,873,127 (2015 – Shs 24,534,823) in respect of direct operating costs was recognised in the Group’s consolidated statement of comprehensive income relating to the investment property.

During the year ended 31 December 2016, Shs 58,133,053 (2015 – Shs 58,270,317) was recognised as net rental income in the Company’s statement of comprehensive income, and Shs 25,164,677 (2015 – Shs 24,534,823) in respect of direct operating costs was recognised in the Company’s statement of comprehensive income relating to the investment property.

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33. Cash and cash equivalents

GROUP For the purposes of the statement of cash flows, cash and cash equivalents comprise the following:

2016 2015Shs’000 Shs’000

Cash and bank balances 65,332 42,852Deposits with financial institutions 1,154,636 1,125,187

1,219,968 1,168,039


` Cash and bank balances 52,413 24,859Deposits with financial institutions 756,893 808,614

809,306 833,473

34. Cash generated from operations - GROUP

Reconciliation of profit before tax to cash generated from operations:


Adjustments for:Interest income (743,076) (551,584)Net rental income (60,729) (58,270)Dividend income (26,046) (21,480)Depreciation (Note 15) 32,312 35,825Amortisation charge (Note 16) 8,815 7,754Impairment charge - 25,000Loss/(gain) on sale of equipment 318 (815)Loss/(gain) on sale of quoted shares 1,206 (26,484)Gain on sale of government securities (23,689) -Fair value gain on investment property (22,882) (225,923)Fair value loss on Equity investments (FVTPL) 83,493 140,590Fair value gain/(loss) on Treasury bonds (FVTPL) (44,482) 51,703Changes in:- technical provisions 1,720,255 1,192,812- deferred acquisition costs (32,688) (19,729)- trade and other payables 5,331 172,519- trade and other receivables (18,921) (31,039)- premiums outstanding 32,444 (111,049)- amounts due from bodies engaged in insurance business (107,950) (200,029)- amounts due to bodies engaged in insurance business 211,481 111,286

Cash generated from operations 1,760,243 1,024,557

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35. Related party transactions

The Company is related to other Companies through common shareholdings or common directorships.

In the normal course of business, insurance policies are sold to related parties at terms and conditions similar to those offered to major clients.

(i) Transactions with related parties 2016 2015Shs’000 Shs’000

Gross earned premium:- Related parties – directors 1,356 1,977- Related parties – other 236,690 124,150

Net claims incurred

- Related parties 11,477 102,836

(ii) Outstanding balances with related parties

Amounts due from related partiesKey management personnel 43,990 27,205Other receivables 1,035 1,099

45,025 28,304

(iii) Loans to directors and employees

At start of year 191,285 152,462Loans advanced during the year 52,350 83,553Loan repayments received (39,071) (44,730)

At end of year 204,564 191,285

The related interest income in 2016 was Shs 17,107,424 (2015 – Shs 14,329,992).The above loans were given on standard terms and conditions and the average interest rate during the year was 8% (2015 – 8%).

One director holds a car loan with the Company of Shs 4,508,795 (2015 Nil).

(iv) Directors’ remuneration2016 2015

Shs’000 Shs’000

Directors’ fees 4,187 2,472Other remuneration 68,470 63,570

72,657 66,042

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35.

(v)

Related party (Continued)

Included in the Group’s bank deposits are balances with related companies amounting to Shs 320,980,267 (2015 – Shs 295,802,890).

(vi) The Group holds a corporate bond of Shs 201,343,061 (2015 – Shs 201,893,698) from a related party.

(vii) The Group holds shares in a related party amounting to Shs 137,716,600 (2015 – Shs 141,560,000).

36. Assets held under lien

Treasury bonds include bonds with a face value of Shs.610,000,000 (2015 – Shs 610,000,000) for short term business and Shs 232,000,000 (2015- Shs 142,000,000) for long term business which are held under lien in favour of the Commissioner of Insurance in accordance with Section 32 of the Insurance Act.

37. Investment in subsidiaries

2016 2015Shs’000 Shs’000

Entity Holding Investment InvestmentGA Life Assurance Limited 100% 200,000 200,000GA Insurance Tanzania Limited 66.67% 156,109 108,827

356,109 308,827

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7,85

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8113

1,23

560

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128,

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400,

911

497,

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284,

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319

47,6

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r(5

2)(4

2,29

1)(2

9,17

8)(8

9,73

5)(9

7,51

8)(7

9,60

5)(4

93,9

28)

(959

,821

)(8

,858

)(3

9,36

7)(2

1,79

3)(1

85,0

28)

(991

,831

)(5

7,78

0)(3

,096

,787

)(2

,779

,355

)

Tota

l cla

ims

incu

rred

(50)

27,4

7227

,023

55,8

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262

35,5

5042

3,05

433

6,46

4-

208,

648

(2,2

91)

126,

016

188,

395

4,18

31,

436,

525

1,28

2,54

9

Exp

ense

s:

Com

mis

sion

s pa

yabl

e1,

754

52,2

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186,

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11,9

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,409

40,8

6351

,199

-10

0,52

313

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43,6

1387

,701

13,5

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4,80

258

1,59

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Com

mis

sion

s re

ceiv

able

(5,6

75)

(62,

147)

(3,7

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(255

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)(1

,702

)(4

0,22

8)(1

,118

)(9

8)-

(180

,819

)(1

,311

)(5

30)

(2,3

72)

(26,

026)

(581

,074

)(5

47,9

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ium

tax

404

2,62

686

19,

046

755

2,47

04,

847

5,79

3-

10,5

4968

23,

032

4,67

71,

336

47,0

7842

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Expe

nses

of m

anag

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t5,

008

32,5

8210

,684

112,

249

9,36

631

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60,1

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-13

0,89

58,

469

37,6

2758

,041

16,5

7458

5,36

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4,09

5

Tota

l exp

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s1,

490

25,2

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,411

52,1

1720

,326

31,4

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4,73

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8,77

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4821

,211

83,7

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8,04

75,

405

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171

700,

328

Und

erw

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(773

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288

17,6

4723

,318

33,5

8061

,311

(126

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,015

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,128

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,076

75,0

1910

7,87

738

,098

289,

448

171,

321

GA

IN

SU

RA

NC

E L

TD

AN

NU

AL

FIN

AN

CIA

L R

EP

OR

T 2

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Gen

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ss r

even

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ccou

nt –

GA

Insu

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ia L

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Trav

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ent

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Com

pens

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n

Bon

dsTo

tal

Tota

l

Shs’

000

Shs’

000

Shs’

000

Shs’

000

Shs’

000

Shs’

000

Shs’

000

Shs’

000

Shs’

000

Shs’

000

Shs’

000

Shs’

000

Shs’

000

Shs’

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Gro

ss p

rem

ium

s w

ritt

en

9,32

473

,552

512

5,35

55,

114

39,7

9817

,450

18,0

7234

,246

8,55

5-

10,2

9422

2,27

113

4,73

9

Re-

insu

ranc

e pr

emiu

ms

(6,7

14)

(62,

293)

(274

)(1

,617

)(4

,023

)(8

,877

)(5

,875

)(1

3,55

4)(1

2,03

4)(8

,165

)-

(9,2

97)

(132

,724

)(8

3,39

4)

Net

wri

tten

pre

miu

ms

2,61

011

,259

238

3,73

81,

091

30,9

2111

,575

4,51

822

,212

390

-99

789

,547

51,3

45

Une

arne

d pr

emiu

ms

brou

ght

forw

ard

339

2,89

566

673

654

8,99

43,

050

325

6,53

1-

1,02

313

524

,685

17,4

81

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arne

d pr

emiu

ms

carr

ied

forw

ard

(843

)(3

,035

)(1

53)

(1,4

70)

(594

)(1

6,89

8)(7

,029

)(8

23)

(8,9

83)

(247

)-

(1,0

17)

(41,

092)

(24,

846)

Net

ear

ned

prem

ium

s2,

106

11,1

1915

12,

941

1,15

123

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7,59

54,

020

19,7

6014

31,

023

115

73,1

4043

,980

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ims:

Cla

ims

paid

1,01

143

83

3614

96,

307

1,81

32,

375

4,30

1-

--

16,4

3310

,175

Cla

ims

outs

tand

ing

at t

he

end

of t

he y

ear

325

5,02

23

193

702

6,72

724

61,

077

8,34

0-

-2,

269

24,9

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ims

outs

tand

ing

at t

he

begi

nnin

g of

the

yea

r

(759

)(2

,156

)-

-(7

6)(3

,340

)70

(938

)(3

,891

)-

32(4

,437

)(1

5,49

5)(3

,135

)

Tota

l cla

ims

incu

rred

577

3,30

46

229

775

9,69

42,

129

2,51

48,

750

-32

(2,1

68)

25,8

4022

,844

Exp

ense

s:

Com

mis

sion

s pa

yabl

e1,

355

15,1

9414

553

827

3,59

51,

460

-3,

607

-16

430

427

,073

14,3

40

Com

mis

sion

s re

ceiv

able

(2,3

71)

(20,

541)

-(1

47)

(1,1

04)

(826

)(4

06)

(2,7

39)

(1,2

97)

(557

)(2

3)(6

07)

(30,

618)

(14,

919)

Prem

ium

tax

3224

92

1817

135

5961

116

29-

3575

32,

223

Expe

nses

of m

anag

emen

t3,

249

25,6

2817

81,

866

1,78

213

,867

6,08

06,

297

11,9

332,

981

-3,

587

77,4

4857

,090

Tota

l exp

ense

s2,

265

20,5

3019

42,

290

1,52

216

,771

7,19

33,

619

14,3

592,

453

141

3,31

974

,656

58,7

34

Und

erw

riti

ng lo

ss

(736

)(1

2,71

5)(4

9)42

2(1

,146

)(3

,448

)(1

,727

)(2

,113

)(3

,349

)(2

,310

)91

4(1

,035

)(2

7,29

1)(3

7,59

8)

GA

IN

SU

RA

NC

E L

TD

AN

NU

AL

FIN

AN

CIA

L R

EP

OR

T 2

01

6

85

Long Term Business–Revenue account – GA Life Assurance Limited

Group Other Total Total Life 2016 2015 Shs’ 000 Shs’ 000 Shs’ 000 Shs’ 000

Gross earned premium 30,391 - 30,391 24,080Reinsurance premiums ceded (28,079) - (28,079) (23,122)

Net earned premium 2,312 - 2,312 958

Investment income 1,915 349,114 351,029 270,781Commission earned 15,278 - 15,278 6,590

Total income 19,505 349,114 368,619 278,329

Claims and policy holder benefits Life and death claims (600) - (600) (600)Surrenders and annuity payments - - - -Maturities - - - -Decrease /(increase) in insurance contractliabilities (107) - (107) (5)Interest payable on deposit administrationcontracts - (317,079) (317,079) (229,368)Net claims and policyholder benefits payable (707) (317,079) (317,786) (229,973)

Expenses Operating and other expenses (10,793) (17,954) (28,747) (42,421)Commissions payable (1,313) (2,083) (3,396) (1,939)Total expenses and commissions (12,106) (20,037) (32,143) (44,360)

Profit before taxation 6,692 11,998 18,690 3,996Taxation - - - -

Profit after taxation 6,692 11,998 18,690 3,996

LIFE BUSINESS REVENUE ACCOUNT for the year ended 31st December 2016

GA

IN

SU

RA

NC

E L

TD

AN

NU

AL

FIN

AN

CIA

L R

EP

OR

T 2

01

686

GA

IN

SU

RA

NC

E L

TD

AN

NU

AL

FIN

AN

CIA

L R

EP

OR

T 2

01

6

87

GA

IN

SU

RA

NC

E L

TD

AN

NU

AL

FIN

AN

CIA

L R

EP

OR

T 2

01

688

www.gakenya.com

HEAD OFFICE

GA Insurance Limited4th floor, GA Insurance House

Ralph Bunche RoadP.O. Box 42166 Nairobi 00100 GPO

Tel: [email protected]

BRANCHES

WESTLANDS

2nd Floor, The WestwoodP.O. Box 42166 - 00100, Nairobi

Tel: 0733 [email protected]

MOMBASA

Upper Mezzanine FloorBiashara Building, Nyerere AvenueP.O.Box 84081 - 80100, Mombasa

Tel: 041 2319804/[email protected]

KISUMU

Ground Floor, Bon Accord HouseTemple Road

P.O.Box 7706 - 40100, KisumuTel: 057 2023121

[email protected]

GA Life Assurance LtdGA Insurance HouseRalph Bunche Road

P.O. Box 42166, Nairobi 00100 [email protected]

GA Insurance Tanzania LtdIT Plaza, Unit No.4-1. 4th FloorOhio Street / Garden AvenuePO Box 75908, Dar es Salaam

[email protected]

OUR SUBSIDIARIES

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