OUR MISSION
chosen market by 2018.
To create an enabling environment
in 2014 in order to be the leading
provider of innovative insurance
Directors, Senior Management and other corporate information 2 - 6
Directors’ Report 7
Chairman’s Statement 9 - 12
Corporate Governance Report 13 - 16
Corporate Social Investment 17 - 18
Statement of Directors’ Responsibilities 19
Report of the Independent auditor 20
FINANCIAL STATEMENTS
Financial Highlights 22 - 24
Consolidated statement of profit or loss 25 - 26
Company statement of profit or loss 27
Statement of comprehensive income 28
Consolidated statement of financial position 29 - 31
Company statement of financial position 32 - 34
Consolidated statement of changes in equity 35 - 37
Company statement of changes in equity 38 - 40
Consolidated statement of cash flows 41
Company statement of cash flows 42
Notes 43 - 103
SUPPLEMENTARY INFORMATION
Consolidated revenue account 104 - 105
Company revenue account 106 - 107
Financial Record 108
DIRECTORS
The Directors who held office during the year and to the date of this report were: P N Gethi - Chairman
J H D Milne - Managing Director J M Kyungu - Executive Director G R May - Non- Executive Director M L du Toit - Non- Executive Director S Sejpal (Ms) - Non- Executive Director S C Wenman - Non- Executive Director C W Mwangi (Ms) - Non- Executive Director
COMPANY SECRETARY
C Kioni (Ms) | P O Box 30390 - 00100 | Nairobi
SENIOR MANAGEMENT
J H D Milne - Managing Director J M Kyungu - Executive Director
S Lugalia - Director (Finance & Administration) A P Ngunjiri - Director (Medical)
B N Hiuhu (Mrs) - Director (Underwriting & Claims) B Irungu - Senior Manager (Claims) I K Kamau - Senior Manager (IT) M Mati (Ms) - Senior Manager (HR) D Mathenge - Senior Manager (Finance) E Adiedo - Senior Manager (Marketing) J Maluki (Ms) - Senior Manager (Medical) C Onyango - Senior Manager (Underwriting)
INDEPENDENT AUDITOR
PricewaterhouseCoopers, Certified Public Accountants | PwC Tower, Waiyaki Way / Chiromo Road P.O. Box 43963 - 00100 | Nairobi
BANKERS
CfC Stanbic Bank Limited
CfC Stanbic Centre, Chiromo Road | P.O. Box 72833 - 00200, Nairobi Commercial Bank of Africa Limited
COMPANY DETAILS REGISTERED HEAD OFFICE
CfC House, Mamlaka Road
P. O. Box 30390 - 00100 Nairobi Kenya Tel: (+254) 20 2783000
Cell: 0711 039 000, 0734 101 000 Fax: (+254) 20 2727800
E: info_heritage.co.ke
Mombasa Branch
Social Security House, Nkrumah Road P. O. Box 84886 - 80100 Tel: (+254) 41 2224724 / 2316638 Cell: (+254) 773 372 548 Fax: (+254) 41 2224725 E: info_mombasa@heritage.co.ke Eldoret Branch
Imperial Court, Waiganjo Street / Uganda Road P. O. Box 6120 - 30100 Tel: (+254) 53 20 62532 Cell: (+254) 773 372 546 Fax: (+254) 53 20 31788 E: info@eldoret@heritage.co.ke www.heritagetanzania.com Naivasha Branch
CfC Heritage House, Moi Road P. O. Box 1319 - 320117 Tel: (+254) 50 2020466 / 673 Cell: (+254) 773 372 547 Fax: (+254) 50 2020467 E: info_naivasha@heritage.co.ke Nanyuki Branch
Silver Plaza, Nyeri / Nanyuki Road P. O. Box 1615 - 10400 Tel: (+254) 62 31915 Cell: (+254) 773 372 545 Fax: (+254) 62 31914 E: info_nanyuki@heritage.co.ke Nakuru Branch
Polo Centre, Tom Mboya Street, off Kenyatta Avenue P. O. Box 4362 - 20100
Tel: (+254) 51 2213776 Fax: (+254) 51 2213774 E: info_nakuru@heritage.co.ke
Meru Branch
Nakumatt - Mwitu Center Bld, Meru / Nanyuki Road P. O. Box 1911 - 60200
Tel: (+254) 64 30710 Fax: (+254) 64 30709
Email: info_meru@heritage.co.ke
Thika Branch
Zuri Centre, 4th Floor, Kenyatta Highway P. O. Box 7048 - 01000
Tel: (+254) 67 20406 Fax: (+254) 67 20407
Email: Info_thika@heritage.co.ke
Machakos Branch
Town Plaza, 2nd Floor, Ngei Road P. O. Box 786 - 90100
Tel: (+254) 44 20625 Fax: (+254) 44 20624
E: info_Machakos@heritage.co.ke
Kitui Branch
Muli Mall, 1st Floor, Kilungya Street P. O. Box 1322 - 90200
Tel: (+254) 44 442 2314 Fax: (+254) 44 442 2315 E: info_Kitui@heritage.co.ke
Kisii Branch
Royal Towers, 2nd Floor, Hospital Road, P. O. Box 2003 - 40200
Tel: (+254) 711 028 564 E: info@heritage.co.ke
SUBSIDIARIES Heritage Tanzania
The Heritage Insurance Co. Tanzania Ltd Oyster Bay Office Complex, Plot No. 368 Msasani Road, Dar-es-salaam, Tanzania
Tel: 007222664204-9 Fax: 007222664210 E: info@heritagetazania.com www.heritagetanzania.com
Azali Limited
CfC House Mamlaka Road P. O Box 30390 - 00100 Nairobi Kenya
JOSEPH M KYUNGU
PETER NDERITU GETHI CLAIRE W MWANGI JOHN HD MILNE GAYLING MAY
PETER NDERITU GETHI (Chairman)
Mr Gethi holds a BSc (Hons) degree in Agricultural Economics and has expansive managerial experience in Agricultural Business Management. He has been a General Manager with Kilimanjaro Plantations Ltd (TZ) and Senior Group Manager with SCEM Ltd (formerly Standard Chartered Estate Management). He currently works both as an Agricultural Consultant and is involved with Real Estate Development as Managing Director of Nebange Ltd. He is also the Chairman of CfC Life Assurance Limited, director of Heritage Insurance Company (Tanzania) Limited, CfC Stanbic Holdings Limited and CfC Stanbic Bank Limited. He serves on the Audit & Risk Committees of Liberty Kenya Holdings Limited and Heritage Insurance Company (Tanzania) Limited.
GAYLING MAY
Mr May has an extensive accounting background and is a member of the Institute of Certified Public Accountants of Kenya (ICPAK) and a fellow of the Institute of Chartered Accountants in England and Wales (FCPA). He has worked in the UK, USA and for the most part, Kenya, and has a history of 37 years with PricewaterhouseCoopers, 32 of which was as a Partner/Regional Senior Partner. He is currently the Regional Representative of the Eastern Africa Association, a business information service based in Nairobi, but operating throughout East Africa. He holds various directorships in banks, insurance companies, manufacturing entities and an aircraft ground handling Company. He is the Chairman of the Audit and Risk Management Committee of both Heritage Insurance Company Kenya Limited and CfC Life Assurance Company Limited.
JOSEPH M KYUNGU (Executive Director)
Mr Kyungu is the Executive Director of Heritage Insurance Company Kenya Limited. He has vast knowledge and experience acquired over his 38 years in service working for Heritage Insurance. He has seen the Company through its transition over the years to its present day as one of the leading insurance players in the industry.
JOHN MILNE
Mr Milne is the Managing Director of the Heritage Insurance Company Kenya Limited. He is also a director of CfC Life Assurance Company Limited and Heritage Insurance Company (Tanzania) Limited a subsidiary of Heritage Insurance Company Kenya Limited. He has vast knowledge and experience in the insurance industry in Kenya and Tanzania. He holds an LLB (Hons) Degree.
CLAIRE W. MWANGI
Ms Mwangi is a career banker having held various Executive Director positions in CfC Stanbic Bank Kenya Limited. She was responsible for global markets business in Kenya and South Sudan and had regional responsibility for Uganda, Tanzania and Mauritius. She has also worked with Citibank in Kenya, Mauritius and Tanzania. She also holds various directorships in banks and financial services companies. She has an MBA in Finance. Ms Mwangi is a member of the Company’s Investment Committee.
SONAL SEJPAL MIKE DU TOIT STUART WENMAN CAROLINE KIONI
MIKE DU TOIT
Mr. du Toit is the Liberty Africa Regional Managing Director for East Africa responsible primarily for Strategic Growth initiatives. He joined Liberty in 2010, prior to which he was the Managing Director of CfC Stanbic Bank Limited having led the merger of Stanbic and CfC Groups. As a career banker, he has extensive experience in the financial services field across sub-Sahara Africa having worked and lived in, amongst others, Botswana, Mozambique, South Africa and Uganda. He is the Chairman of the Investment Committee. He also sits in the boards of Heritage Insurance Company (Tanzania) Limited and CfC Life Assurance Company Limited.
SONAL SEJPAL
Ms Sejpal is a consultant lawyer with Anjarwalla and Khanna Advocates, a member of the Africa Legal Network. She has an excellent reputation in Kenya as a corporate finance and commercial lawyer. She advises clients on a range of corporate matters, including mergers and acquisitions, joint ventures, schemes of arrangements, project finance, aviation, oil and gas projects, employment matters, commercial contracts and general corporate advice on an ad hoc basis. She is also a director of CfC Life Assurance Company Limited.
STUART WENMAN
Mr Wenman is an Executive Director of Liberty South Africa in charge of Insurance in Africa and is responsible for the strategy and commercial results of all the Life and Short Term Insurance businesses outside of South Africa for Liberty Holdings. He has vast experience in actuarial science, risk management and insurance. He has a Bsc in Actuarial Science degree, is also a Director of CfC Life Assurance Company Limited. He is a member of both Company’s Audit and Risk Management and Investment committees.
CAROLINE KIONI
Caroline Kioni joined Liberty Kenya Holdings Limited, the parent Company of Heritage Insurance Company Kenya Limited as Regional Head, Legal and Company Secretary with effect from 14 March 2011. Her prior assignment was at UAP Group, where she worked as the Group Company Secretary and Chief Legal Advisor for East Africa, a position she held from 2007 until taking up this role. Caroline began her career as a Legal Officer in Southern Credit Banking Corporation in the year 1997 and was promoted in the year 2000 to the position of Company Secretary. Between 2001 to 2007, she worked for Bollore’ Africa Logistics as Regional Company Secretary. She holds a Masters in Business Administration from Moi University, has a Bachelor of Law degree from the University of Nairobi and a Diploma in Legal Studies from the Kenya School of law. She is also a Certified Public Secretary from the Institute of Certified Public Secretaries of Kenya and a registered member of the Law Society of Kenya.
BEATRICE HIUHU ISAAC KAMAU ALBERT NGUNJIRI
SENIOR
MANAGEMENT
TEAM
JOHARI MALUKI MARY MATI STEVE LUGALIA CHRISTOPHER ONYANGOMISSING: J H D MILNE, J KYUNGU
ELIUD ADIEDO
BONIFACE IRUNGU
The Directors submit their report together with the audited financial statements for the year ended 31 December 2013 which disclose the state of affairs of Heritage Insurance Company Kenya Limited (the ‘Company’) and its subsidiaries (together the ‘Group’).
Principal activities
The Group underwrites all classes of non-life insurance risks as defined by the Insurance Act, with the exception of bonds investments. It also has interests in investment properties.
Results and dividends
Profit for the year ended 31 December 2013 of Shs 733 million (2012: Shs 941 million) has been added to retained earnings. During the year the directors paid Shs 200 million as the interim dividend for 2013. The directors do not propose payment of a final dividend (2012: Shs 400 million).
Directors
The directors who held office during the year are as shown on page 2.
Auditor
The Company’s auditor, PricewaterhouseCoopers, will continue in office in accordance with Section 159(2) of the Companies Act.
By order of the Board
C Kioni SECRETARY 31 March 2014
talents to add value.
2) Take initiative and responsibility.
3) Respect and appreciate constructive criticism and
the opinion of others.
4) Focus on set goals and deadlines.
5) Be proud ambassadors of our Company and Group.
6) Put our customers at the centre of our thinking
and serve them with diligence.
7) Encourage teamwork, respect and trust for one
another.
8) Take ownership for the consequences of our
actions.
9) Perform our duties with care, integrity and honesty
10) Deliver beyond expectations.
It gives me great pleasure to present to you the Annual Report and Financial Statements for Heritage Insurance Company Kenya Limited for the year ended 31 December 2013.
THE BUSINESS ENVIRONMENT Macro-Economic Environment
Kenya entered 2013 on a strong economic footing and peaceful elections earlier in the year gave it an additional boost. Although there was anxiety before the elections, which may have negatively affected some businesses, the environment settled well after the elections and this was a major boost not just for businesses but also the Country’s image. Relatively stable macro-economic factors and generally prudent monetary policies favored economic growth in 2013. GDP grew by 5.2%, 4.3% and 4.4% in the first, second and third quarters of 2013 led by growth in the agriculture, construction, and financial services sectors and to some extent, manufacturing.
Overall growth in 2013 is likely to be approximately 5.0% up from 4.6 percent in 2012, helped by relatively low inflation, a stable exchange rate and manageable fiscal deficit.
As mentioned, the Kenyan Shilling was relatively stable throughout 2013, closing at Shs 86.3 to the US dollar, virtually the same as at the end of 2012. Consistent monetary policy action by the Central Bank and rising foreign exchange reserves helped buoy the Shilling. Increased foreign investment and greater investor confidence in the economy also played its part. The outlook for 2014 is that the Shilling is likely to weaken gradually, but that forex reserves will remain strong.
Year on year inflation declined during 2013 to stand at 6.8% at the year end, broadly within the CBK’s policy range. It is expected that inflation is unlikely to be a major threat in 2014. CBK eased monetary policy in 2013 by cutting the Central Bank Rate (CBR) from 11.0% to 8.5% during the year, following containment in inflation and a need to stimulate private sector credit growth. Short term rates varied in response to changes in liquidity conditions. Lower spending by both the central and county governments affected market liquidity. Treasury bill yields dropped during the year with 91-day and 182-91-day rates averaging 8.8% and 9.4% from 12.7% and 13.4% in the previous year. The outlook for 2014 is that
interest rates are likely to fall, albeit marginally.
With regard to the capital market, the Nairobi Securities Exchange (NSE) continued the good performance that began in 2012 with equities ending 2013 on a firm note. Market performance was to an extent driven by the US Federal Reserve’s quantitative easing programme which sparked increased global risk appetite. A lower political risk premium after peaceful general elections improved investor confidence, while sustained company earnings and attractive valuations boosted most equities. The NSE 20 index climbed 19.2% to 4,927 points at year end and the 2014 outlook with higher economic growth and a stable macroeconomic environment should prove positive for equities.
Government bonds reflected a positive performance in 2013, whilst the yield curve corrected downwards slightly by an average of 0.07% across all tenors. Lower inflationary pressures and CBK’s policy easing measures led to lower yields. Secondary market trading declined due to volatility in money market interest rates. Liquidity conditions and uncertainty over the direction of interest rates negatively affected bond trading. Anchored inflation expectations and improved liquidity conditions are factors likely to stabilize bond yields in 2014.
Overall, we expect relative stability this year in key macro-economic indicators - inflation, interest rates and exchange rate - triggering strong consumer demand and increased economic growth. This is expected to result in good economic growth .The improved performance will largely be driven by the mining sector, credit consumption and county government spending. This provides significant opportunities to the insurance sector.
The Country expects the multinational oil companies’ confirmations of the commercial amounts of oil finds in Turkana and off the coast to spur greater economic activity. Although Industry experts indicate that Kenya could see its first oil in the next 5 -6 years, the infrastructure required will provide huge opportunities for the insurance sector. In addition, there will be increased opportunities in the SME sector which is expected to grow to service the Oil and Gas sector. Your Company has put in place robust strategies to take advantage of the opportunities provided by these developments in the economy.
The Socio-Political environment
The coalition government led by President Uhuru Kenyatta, elected on March 4, 2013 under the August 2010 Constitution, is facing a major test in implementing the new devolved system of government. County Governors are pushing for a referendum to amend the Constitution to increase the share of national revenue to the 47 counties, from 15% to 40%. They contend that the present allocation is not sufficient for the Counties to fund the public services expected of them by the population.
But government reports indicate that many Counties have simply not used the funds allocated to them, thus raising issues about their capacity while others have used their allocations for non-priority expenditure. The Central Government also has to deal with the aftermath of a number of crises, including the September 21, 2013 terrorist attack on an up- market mall in Nairobi.
A major fire on August 7 severely damaged Nairobi’s Jomo Kenyatta International Airport, disrupting domestic and international flights for weeks before normal flight schedules were restored.
These challenges constrain the pace of democracy, reforms and accountability. The new administration, with 18 Cabinet Secretaries appointed by the President and publicly vetted by the National Assembly, has promised to tackle fundamental issues such as youth unemployment, regional imbalances and land reforms, all of which pose political risk and insecurity particularly in areas with high poverty levels.
There is nevertheless progress in the implementation of some of the key policy and legislative processes arising from the new Constitution, including an independent judiciary, establishment of a new Supreme Court and appointment of a new Chief Justice. This new judicial system has already demonstrated its independence and authority in a number of cases.
Electoral disputes have been discharged within the timelines set under the Constitution, and the new Chief Executive of the Ethics and Anti-Corruption Authority also recently assumed office. Police reforms are also underway, following the recruitment of an Inspector-General, who heads a combined police force that was previously under two separate administrations.
Recent political reforms have strengthened Kenya’s governance record, though overall there is still much to do. The most pressing challenge in the country is to effectively implement the new devolved system of governance, while
also strengthening the capacity to cope with domestic and external shocks.
Youth unemployment, poverty and vulnerability to climate change remain critical development challenges. Recent political and economic developments have stimulated development opportunities for Kenya but concerns remain in vital areas, including food security, governance and corruption.
One of the biggest opportunities for the Company lies in the implementation of the devolved government. The Company has already identified counties with the greatest opportunities for our business and strategies are being implemented to take advantage of these new markets. The strategies will focus on developing effective distribution channels and appropriate products for the counties.
Regulatory environment
The Kenyan insurance industry continues to experience year-on-year growth in premiums. This is expected to rise to 20% in 2013 given that higher economic growth is expected in the year ahead. The Insurance Regulatory Authority’s (IRA) response to industry problems and challenges as well as innovation, global trends and local growth highlights the necessity for a robust regulatory framework.
In response to the increased incidence of fraud and the generally poor level of compliance, the IRA has responded with higher levels of monitoring insurance companies. In this context, in 2013, the IRA released 16 guidelines all of which are now in force. One key change calls for all insurers to have a risk management function, an actuarial function, a compliance function and an internal audit function. I am pleased to confirm that your Company has all these functions in place and that they are operating effectively.
There are also indications that the capital requirements for insurance companies may be reviewed in future. There is likely to be company specific capital requirements, reflecting all risks associated with insurance activities, investments and financial decisions, and all operational activities.
I am pleased to inform you that your Company’s capital position is one of the strongest in the industry and we shall be able to meet any stipulated capital requirements.
On a more specific note, the Finance Act, 2013 received Presidential Assent on 24th October 2013. Under this law an amendment was introduced to the Customs and Excise Act which called upon all financial institutions to apply a levy of 10% on all fees, charges and commissions with effect from 18th June 2013. This has led to higher costs, but more significantly,
the amendment proposed that all persons registered under the Insurance Act would be required to apply the levy too. However, it is not clear whether premiums, re-insurance and brokerage commissions are to be included, and the matter has yet to be resolved in Court.
Business Performance in Kenya a. Change in Accounting policy
In 2013 our holding company, Liberty Kenya Holdings Limited, reviewed its treatment of insurance liabilities (both long-term and short-term) and the relevant matching assets and recommended that the measurement of these liabilities should be aligned to Standard Bank and Liberty Holding Limited’s accounting policies which are modeled on best practice. The change in accounting policy for the Company affects only the accounting for financial assets backing the liabilities – there is therefore no change in the basis of valuing liabilities.
Accordingly, from 2013, the Company’s policy has been to fair value all financial instruments through the Income Statement at “Fair Value through Profit or Loss” as opposed to the former treatment where unrealised surpluses/losses were carried in the Statement of Financial Position for Available-for-Sale assets and were held at amortised cost for “Held-to-Maturity” assets
Management believes that this fresh policy provides reliable and more relevant financial information as it ensures that IFRS performance reporting will better reflect the economic reality of occurrences within the reporting period in terms of asset changes.In accordance with International Accounting Standard (IAS) 8, the Statements of Financial Position and Profit or Loss for 2011 and 2012 have therefore been re-stated and disclosed in the 2013 financial report to ensure uniform comparison with prior years.
b. Financial performance
Whilst the economic environment in 2013 was fairly stable, the insurance sector continues to experience challenges due to the high number of players that has resulted in rampant premium rate undercutting and the poor levels of insurance penetration. Despite the challenging business environment, the Company continues to perform well.
Overall profit before tax stood at Sh 711.1 million (2012 – Sh 974 million, as re-stated). It should be noted in this context, that the 2012 accounts included a profit of Sh 216.1 million in respect of the Life Assurance business which was subsequently transferred to CfC Life, a fellow subsidiary of Liberty Kenya Holdings Ltd. Also, with the change in accounting policy for
the valuation for financial assets, a profit of Sh. 55.2 million arising from fair value gains on shares and bonds was realised. The effect of this change on future results will depend on the market movements in interest rates and equity prices. With this modification in policy, the Company has moved to align assets to better match liabilities in order to run a more capital efficient business with a strong focus on the technical results. The Company registered growth in gross written premium of 4% in 2013, up from Sh 3.407 billion in 2012 to Sh 3.549 billion. Some business during the year was lost to competition as a result of premium undercutting and our declining to renew certain poor performing accounts. Your Company’s focus has always been on profitable underwriting rather than growth in volumes. However, we recognise the fact that premiums must increase and in this respect the Company is implementing a number of strategies in its distribution channels and new products that will go a long way to ensure that we achieve a greater market share.
With respect to claims, the Company’s overall Net Incurred Claims Ratio at 37.6% improved significantly over 2012 (40.8%). As a matter of record, a report published by the IRA indicated that the net incurred claims ratio for the short term industry as a whole for 2013 is likely to be approximately 57%. Operating and other expenses were tightly controlled at Sh 936.6 million, down from Sh 1.0 billion in 2012. The result of the above has led to a 52% improvement in the underwriting profit from Sh 209.4 million in 2012 to Sh 318.3 million in 2013. Whilst events that give rise to claims are always unpredictable, the good overall result stems from a combination of measures adopted by Management to generate greater returns from previously poor performing classes of business. Overall, thus, your Company has achieved profit after tax of Sh 536.9 million.
Business Performance in Tanzania
The Tanzania insurance industry continues to grow, with 22 registered short term underwriters at 31st December 2012 and 18% uplift in gross premiums written during that year. The general insurance underwriting result for the industry as a whole, however, is an accumulated loss of Tsh 11.9 billion in 2012 compared to Tsh 8.3 billion in 2011. Underwriting results have consistently deteriorated over the last three years, suggesting a need for insurers to improve their underwriting practices, and rates in most, if not all, classes of business. The Company has remained focused in ensuring that sound underwriting practices are maintained. Consequently it is one of the few companies in the market that consistently
reports an underwriting profit.
Despite significant premium undercutting in the market during 2013, our subsidiary company in Tanzania achieved premium growth of 18%, at Tsh 45.9 billion, and endorsed its position as one of the top underwriters in the market. However, claims costs increased from Tsh 5.5 billion (51% claims ratio) in 2012 to Tsh 6.4 billion (52% claims ratio) in 2013.
During the year, the Company experienced an unprecedented number of large claims on Fire and Engineering policies. Though these did not have much impact on the 2013 financial results, because of the conservative strategy we follow in net retentions, our reinsurers have been affected very badly. They have thus revised their 2014 rates significantly.
As a result of the said claims experience, our underwriting surplus dropped from Tsh 902.8 million in 2012 to Tsh 419.3 million in 2013 and overall profit before tax slipped from Tsh 5.6 billion to Tsh 1.7 billion. It needs to be said, however, that in 2012 the Company earned Tsh 3.6 billion from the disposal of one of its associates, Alliance Insurance Corporation Limited. Excluding the capital gains on the sale of shares in Alliance, Profit Before Tax was Tsh 1.69 billion compared to Tsh 1.95 billion in 2012. The drop is mainly due to the unfavorable claims experience and slight increase in expenses.
However, the Company has robust strategies in place to help ensure that in 2014 it maintains its position as the top general insurer. Meanwhile, the shareholding arrangements concerning our associate, Strategis Insurance Tanzania Limited, should be finalized in the course of 2014. We also expect to benefit from full utilization of our IT systems. In addition, we expect to take advantage of “bancassurance” opportunities in the market, paving the way for participation of banks in the distribution of insurance products to remote parts of the country.
Consolidated Results
Our consolidated group’s Gross Written Premiums rose to Sh 5.7 billion from Sh 5.5 billion while the Profit Before Tax at the year end was Sh 906.0 million. This is less than 2012 because of the transfer to our co-subsidiary, CfC Life Assurance Limited, of all previous long term business, in addition to the prior year profit on sale of one of our associates in Tanzania.
Outlook for the future
Looking to 2014 and beyond, we expect market conditions to remain favorable but not without challenges. The outlook for Kenya’s economy is positive, but the attainment of high economic growth is hinged on the progressive implementation
of the Constitution, the success of devolution and a sustained conducive socio-economic and political climate.
In the wider region, there are changes, challenges and opportunities and our ambitious 5-year strategy covering the period 2014-18 addresses these.
Meanwhile, we look to better discipline in the Insurance Sectors in both Kenya and Tanzania and firm regulatory control over widespread rate-cutting particularly in the motor class of business.
In all we are confident that 2014 will be another good year for your Company.
Appreciation
In closing, let me express my thanks and appreciation to our Managing Director, John Milne, who will be retiring this year after 20 years of successfully steering the Company to the heights that it has reached. I wish him well in his retirement. I would also like to thank all Directors for their advice, guidance and time - this is well appreciated.
Special thanks also go to the following:
• our clients, brokers, agents, intermediaries and all other business partners – we recognize your support and assistance and we are most grateful for this.
• the Regulatory Authorities in both Kenya and Tanzania – we appreciate their importance and value the relationships we have with them and
• our staff without whom we could never have achieved the results we have – your unselfish efforts are valued. And finally, I would like to thank the shareholders for continuing to believe in the Company’s vision for growth and profitability.
P.N Gethi
Chairman 31 March 2014
Introduction
Corporate Governance is the system by which corporations are directed, controlled and held to account. This encompasses the systems, practices and procedures by which the individual corporation regulates itself in order to remain competitive, sustainable and relevant.
The Board of Heritage Insurance Company Kenya Limited follows principles of openness, integrity and accountability in its stewardship of the Company’s affairs. It recognises the developing nature of corporate governance and assesses the Company’s compliance with generally accepted corporate practices on a regular basis, directly and through its Board committees and Management.
The role of the Board is to ensure conformance by focusing on and providing the Company overall strategic direction and policy-making as well as performance review through accountability and ensuring appropriate monitoring and supervision. Whilst the day to day running of the business of the Company is delegated to the Managing Director, the Board is responsible for the overall system of internal control and for reviewing its effectiveness. The controls are designed to both safeguard the Company’s assets and ensure the reliability of financial information, so that the Company’s objectives of increased growth in profitability and shareholder value are realised. Set out below are the key features of the existing corporate governance practices within the Company.
Board of Directors
The Board of Directors consists of two executive directors and six non-executive directors who have been chosen for their business acumen and wide range of skills and experience. The Chairman is a non-executive director and the Board meets formally at least four times a year. During the year five meetings were held and the attendance by the directors was as follows:
P – Present A – Absent with apologies
The Board is responsible for setting the direction of the Company through the establishment of strategic objectives, key policies and the approval of budgets. It monitors the implementation of strategies and policies through a structured approach to reporting by executive management and consequent accountability.
The non-executive directors are actively involved in and bring strong independent judgement on Board deliberations and discussions. These directors have a wide range of knowledge and experience of local and international markets that is applied to the formulation of strategic objectives and decision making.
The Board meets regularly and retains full and effective control over the Company. To assist the Board in the discharge of its responsibilities, a number of Board committees have been established, details of which are provided below.
All directors have access to the advice and services of the Company Secretary and are entitled to obtain independent professional advice at the Company’s expense. A senior management team, comprising executive directors and senior managers meets regularly to consider issues of operational and strategic importance to the Company.
The Directors’ Affairs Committee
The Remuneration Committee of the Company has been superseded by the Directors’ Affairs Committee of Liberty Kenya Holdings Limited.
The Committee, at an overall level, checks the remuneration levels and conditions of service of staff, other than executives, to ensure that these are fair, appropriate and in line with the Company’s remuneration philosophy.
Audit and Risk Committee
The Board has constituted an Audit and Risk Committee to be responsible for the oversight of effective internal controls, risk management and compliance of all the companies in the group. The Committee consists of four non-executive directors, two of whom are independent directors. The Committee met as follows during the year:
11.02.2013 24.04.2013 10.05.2013 06.06.2013 06.11.2013
G R May - Chairman P P P P P
M L du Toit - Member P P P P P
S C Wenman-Member P P P P P
S Sejpal - Member A P P P P
P – Present A – Absent with apologies
Director 21.02.2013 02.05.2013 01.08.2013 19.11.2013 10.12.2013 J H D Milne P P P P P J M Kyungu P P A P P C W Mwangi P P P P P S C Wenman P P P A A G R May P P P P P P N Gethi P P P P P M L du Toit P P P P P S Sejpal P P P P P
All members of the Committee have appropriate qualities and skills and are independent of management.
The Audit and Risk Committee plays the key role of reinforcing best practice in Corporate Governance particularly in the areas of internal controls and risk management.
The Committee meets at least four times every year to approve the financial statements, review risk management, compliance and internal control matters and acts as the primary focus of the Company’s relationship with the external auditors. The Committee has a constructive working relationship with management and regularly invites them to attend Committee meetings.
The Committee provides oversight responsibility for financial reporting and ensures the integrity of published financial information, which starts with the procedure for managing financial risks and internal financial controls. On a quarterly basis, the Committee will discuss the financial statements with management and annually with the external auditors. The Committee reviews the capabilities, qualifications, and resources, scope of work and findings of the internal audit function. It requests presentations and information from management on specific issues.
Investment Committee
The Company’s investments are managed by professional asset managers in accordance with a Board-approved investment strategy. The asset managers are monitored by an Investment Committee that has been established by the Board. The members of this Committee include three non-executive directors, the Managing Director, and appropriate personnel from the Finance department. The Committee meets at least quarterly and is responsible for determining and monitoring the Company’s overall investment strategy. In particular the Committee monitors performance of the Company’s investment portfolio and ensures that the appointed investment managers comply with the set benchmarks and performance standards. The Committee met in the year as follows:
11.02.2013 24.04.2013 10.05.2013 06.06.2013 06.11.2013 M L du Toit - Chairman P P P P P C W Mwangi - Member P P P P P S C Wenman-Member P P P P P J H D Milne - Member P P P P P P – Present
Management and Operational Committees
For effective implementation of the Strategic Plan and operations, several Management Committees have been constituted. The members of these committees are mainly the executive management team and other senior managers. Three of the key committees are as follows:
1) The Management Board
This is a Committee of Management and comprises the Managing Director, the Executive Director, and three Divisional Directors. The Committee meets monthly and its main mandate is to deal with strategic and operational issues and to improve communication and coordination within the various business units. The meetings also review the Company’s performance and progress of implementation of the Strategic Plan. It also deals with any significant operational or strategic issues that affect or require the involvement of other companies within the Group.
2) Credit Management Committee
The Company has a Credit Management Committee. This is a Committee of Management and is chaired by the Director (Finance and Administration).
The members of this Committee are as follows: S Lugalia - Chairman P Butiko - Secretary J H D Milne - Member J M Kyungu - Member A Kinya - Member A P Ngunjiri - Member J Kinuthia - Member D Mathenge - Member E Adiedo - Member
The Committee meets monthly or whenever the need arises. Its main responsibilities are:
a) To ensure compliance with the Company’s Credit Policy. b) To ensure that all monies owed to the Company are
promptly collected in accordance with the stipulated credit terms and other arrangements.
c) Take appropriate measures for dealing with defaulters d) Recommend to the Board, through the Managing
Director, provisions for doubtful debts and write off of any un-collectible debts.
3) The Human Resources Committee
This is a Committee of Management and comprises the Managing Director, Director (Finance & Administration), Director (Medical) and the Human Resources Manager, who is also the secretary to the Committee.
The Committee’s main responsibilties are as follows: • Develop general and specific policies on staff
remuneration, terms and conditions of service and performance management;
• Ensure that the Company’s human resource policies are in line with the best market practice;
• Review employment equity, skills development and succession planning;
• Ensure that salary reviews for the staff are consistent with those of the market and with the performance of the Company;
• Make recommendations on senior staff appointments and promotions;
• Ensure compliance with the relevant legislation in respect of all matters relating to human resources; • Develop and review a code of ethics and evaluate all
cases of unethical behaviours;
The Commitee meets bi-monthly or as required and its recommendations are made to the Management Board. The Committee may seek external professional advice if deemed necessary in order to carry out its responsibilities.
Internal Control and Risk Management
The Company has implemented and maintains internal controls designed to provide reasonable assurance as to the integrity and reliability of the financial statements and to adequately safeguard and maintain accountability of the Company’s assets.
Such controls are based on established policies and procedures and are implemented by trained personnel with appropriate segregation of duties. The effectiveness of the system of internal controls is monitored regularly through operational meetings, the internal audit function and the annual external audit.
Corporate Social Investment (CSI)
The Board is conscious of the Company’s social responsibilities of achieving commercial success in ways that honour ethical values, compliance, with legal requirements and respect for people, communities and natural environment.
The Board considers the impact of the Company’s and Group’s actions and operates in a way that balances
short-term profit needs with society’s long-short-term needs. It has instituted a set of policies, practices and programs that are integrated throughout business operations and decision-making processes that are supported and rewarded by top management.
This process involves the balancing and management of the internal stakeholder relationships and interests so as to add value to the business and achieve a sustainable positive impact on society.
Internally, the business has developed a code of conduct for all employees that enables them to make the right decisions, fit into the company culture and expectations and deters unethical behaviour. It recognises the positive role of business in upholding and promoting adherence to universal standards of human rights. The code attempts to articulate the core values of the business and reminds individuals of some of their more obvious responsibilities.
Staff welfare programs have been developed and implemented to improve on their interests and contribution to the business. This involves the financial support of a staff social club for socialising, leisure and development, employee development and career advancement activities such as free professional education support and encouraging of employee volunteering in the community.
In recognition of the importance of Corporate Social Investment to the business, the Company has constituted a Committee for Corporate Social Responsibility. This Committee has set guidelines for the Company’s CSI involvement. To support the Company’s CSI activities, the Board has committed an allocation of 2 % of the Company’s annual Profit After Tax (with a minimum of Shs 2.5M) to go towards the financing of the Company’s CSI activities. The Board and management, in evaluation of the stakeholder analysis, have identified the following sectors of the economy as requiring the attention and intervention of the business: i) Health sector especially the care for terminally ill ii) Education sector particularly for under privileged
children
Some of the key highlights of the Company’s CSI activities during the year included:
a) Participated in the Mater Heart Run, a key initiative of the Mater Hospital that is focused on providing heart surgery to needy children from all over the country.
b) A major medical camp at Ndurarua Primary School, in the Riruta area of Nairobi. A huge number of residents of this poor suburb of Nairobi benefited from the services that we provided in conjunction with the Kenya Society for the Blind.
c) The Company is currently sponsoring seventeen children from needy families through their Secondary, College and University education.
During the year, the Company spent a total of Shs 3.3 million on CSI activities and Shs 16.8 million on employee training. The operations of the business are conducted in a manner that improves the work environment. The Company has developed health and safety procedures and systems in line with the NEMA requirements and best practices. Where possible, activities are conducted in a manner that reduces air, water, solid waste and noise pollution.
Deliberate attempts are made to review possible environmental abuse by clients and business recommendations made by management and the Board to eliminate this.
The Company and Group provide equal opportunities of employment. An HIV/AIDS policy has been in place for the last five years and appropriate support is provided to staff members as necessary.
The products of the business are designed not to be defective or harmful to the society. Clear and accurate product descriptions are provided for every policy. The pricing of products is done based on a pricing model that is commercially sound and avoids misleading and anti-competitive pricing. Our products ensure that the consumers are protected as demonstrated by the positive evaluation, reputation and trust.
Our advertising campaigns give full and truthful disclosures about our products. Responsible customer education is carried out internally and through our vast distribution network and this is encouraged by our good business practices.
BEYOND ZERO CAMPAIGN
CSI Patron Steve Lugalia (centre)
with other staff from Liberty
Kenya Group present a cheque
of Shs 750,000 to First Lady
Margaret Kenyatta towards
supporting The Beyond Zero
Campaign. The campaign is in
support of maternal healthcare
for disadvantaged mothers.
MATER HEART RUN
Director – Health Business,
Mr. Albert Ngunjiri (centre) and CSI
Chairperson Joy Kaguri, presents a
cheque of Shs 250,000 to the
Chairman of the Board of Trustees
of Mater Heart Fund in support of
the Mater Heart Run. In the picture
is a young girl who is a
beneficiary of the Heart Fund.
MATER HEART RUN
Some of the staff who participated
in the Mater Heart Run where the
Company donated Shs 250,000.
KAWANGWARE MEDICAL CAMP
Residents of Kawangware registering
during a medical camp held by the
Company. The purpose of the camp was
to screen and treat eyesight related
ailments for the local members of the
community. This was done in conjuction
with the Kemya Society for the Blind.
EYE CLINIC
Some of the enthusiastic children who
were screened and treated during
a medical camp organized by the
Company in Ndurarua Primary School,
Kawangware.
KENYA SOCIETY FOR THE
BLIND MOUNTAIN CLIMB
Members of staff who climbed
Mt. Longonot during the Kenya
Society for the Blind Annual
Charity Climb. This climb is meant
to raise funds for the society’s
operations. Heritage is a corporate
member of the society. This year
we donated Shs 100,000.
The Kenyan Companies Act requires the directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the company as at the end of the financial year and of its profit or loss for that year. It is also requires the directors to ensure that the company maintains proper accounting records that disclose, with reasonable accuracy, the financial position of the company. The directors are also responsible for safeguarding the assets of the company.
The directors accept responsibility for the preparation and fair presentation of financial statements that are free from material misstatements whether due to fraud or error. They also accept responsibility for:
(i) Designing, implementing and maintaining internal controls 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 and applying appropriate accounting policies; (iii) Making accounting estimates and judgments that are
reasonable in the circumstances.
The Directors are of the opinion that the financial statements give a true and fair view of the financial position of the company at 31 December 2013 and of the Company’s financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Kenyan Companies Act.
Nothing has come to the attention of the Directors to indicate that the company will not remain a going concern for at least the next twelve months from the date of this statement. Approved by the board of directors on 31 March 2014 and signed on its behalf by:.
P N GETHI J H D MILNE
Report on the financial statements
We have audited the accompanying financial statements of Heritage Insurance Company Kenya Limited (the ‘Company’) and its subsidiaries (together, the ‘Group’) as set out on pages 25 to 103. These financial statements comprise the consolidated statement of financial position at 31 December 2013, and the consolidated statement of profit or loss, consolidated statement of comprehensive income, consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, together with the 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 a summary of significant accounting policies and other explanatory notes.
Directors’ responsibility for the financial statements
The directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and with the requirements of the Companies Act and for such internal control, as the directors determine necessary to enable the preparation of financial statements that are free from material misstatements, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform our audit to obtain reasonable assurance that the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Opinion
In our opinion the accompanying financial statements give a true and fair view of the state of the Group and of the Company’s financial affairs at 31 December 2013 and of its profit and cash flows for the year then ended in accordance with International Financial Reporting Standards and the Kenyan Companies Act.
Report on other legal requirements
The Kenya’s Companies Act requires that in carrying out our audit we consider and report to you on the following matters. We confirm 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 profit or loss are in agreement with the books of account.
The engagement partner responsible for the audit resulting in this independent auditor’s report is Kang’e Saiti - P/No. 1652.
Certified Public Accountants 11 April 2014
Nairobi
Profit before tax Gross written premiums
Kenya Shs - Millions Kenya Shs - Millions 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 0 100 200 300 400 500 600 700 800 900 1,000 1,100 1,200 1,300 2004 2004 2,078.3 424.1 454.8 469.2 304.5 475.3 780.4 1,213.7 906.0 711.1 974.0 646.9 278.5 129.1 158.6 364.3 357.2 197.1 346.5 281.3 1,0386 1,116.5 1,308.6 1,505.2 1,712.2 1,919.0 2,477.1 3,248.9 3,406.7 3,549.1 2,263.8 2,242.1 3,068.1 3,841.7 4.297.9 5,399.8 5,530.4 6,027.0 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013
Underwriting proft Shareholders funds Kenya Shs - Millions Kenya Shs - Billions 0 0 0.5 1.0 1.5 2.0 2.5 3.0 -50 50 100 150 200 250 300 350 400 -100 258.6 333.0 144.7 54.4 39.5 47.2 113.4 70.9 45.0 -16.7 -49.8 2.09 1.90 1.44 1.85 1.75 1.301.53 1.74 1.58 1.84 1.79 1.66 2.10 2.02 1.69 2.07 2.40 2.32 2.59 2.72 10.4 22.3 28.4 5.8 7.8 -17.1 139.4 209.4 310.4 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Total assets Kenya Shs - Billions 0 2 4 6 8 10 12 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 3.48 3.80 4.48 4.52 4.47 5.06 6.16 5.98 4.81 4.66 6.04 5.60 6.41 6.73 6.78 8.57 8.60 9.57 8.01 9.89
Consolidated Statement of Profit or Loss - for the year ended 31 December 2013
Notes Long term Short term Total
business business 2013
Shs’000 Shs’000 Shs’000
Gross earned premiums 3 - 5,773,599 5,773,599 Less: reinsurance premium ceded - (3,172,157) (3,172,157)
Net earned premiums - 2,601,442 2,601,442
Investment income 4 - 643,229 643,229 Commissions earned - 566,066 566,066 Other income 5 - 8,574 8,574
Net income - 3,819,311 3,819,311
Claims and policyholder benefits 6 - 6,463,348 6,463,348 Less: amounts recoverable from re-insurers - (5,406,739) (5,406,739)
Net claims payable - 1,056,609 1,056,609
Operating and other expenses 7 - 1,236,059 1,236,059 Commissions payable - 613,287 613,287
Operating profit - 913,356 913,356
Share of loss from associates 17 - (7,387) (7,387)
Profit before income tax - 905,969 905,969
Income tax expense 9 - (172,680) (172,680)
Profit for the year - 733,289 733,289
Attributable to:
Owners of the Company - 652,276 652,276 Non-controlling interests - 81,013 81,013
Consolidated Statement of Profit or Loss - for the year ended 31 December 2012
Notes Long term Short term Total
business business 2012
(Restated) (Restated) (Restated)
Shs’000 Shs’000 Shs’000
Gross earned premiums 3 1,017 5,511,377 5,512,394 Less: reinsurance premium ceded (28) (2,822,191) (2,822,219)
Net earned premiums 989 2,689,186 2,690,175
Investment income 4 424,395 625,308 1,049,703 Commissions earned 6,364 594,178 600,542 Other income 5 - 212,103 212,103
Net income 431,748 4,120,775 4,552,523
Claims and policyholder benefits 6 174,054 1,808,671 1,982,725 Less: amounts recoverable from re-insurers 4,661 (671,575) (666,914)
Net claims payable 178,715 1,137,096 1,315,811
Operating and other expenses 7 35,503 1,307,023 1,342,526 Commissions payable 1,433 698,313 699,746
Operating profit 216,097 978,343 1,194,440
Share of profit from associates 17 - 19,229 19,229
Profit before income tax 216,097 997,572 1,213,669
Income tax expense 9 (2,931) (269,508) (272,439)
Profit for the year 213,166 728,064 941,230
Attributable to:
Owners of the Company 213,166 677,443 890,609 Non- Controlling interests - 50,621 50,621
213,166 728,064 941,230
Company Statement of Profit or Loss – for the year ended 31 December 2013
Notes Long term Short term Total
business business 2013
Shs’000 Shs’000 Shs’000
Gross earned premiums 3 - 3,438,808 3,438,808 Less: reinsurance premium ceded - (1,502,399) (1,502,399)
Net earned premiums - 1,936,409 1,936,409
Investment income 4 - 416,801 416,801
Commissions earned - 383,453 383,453
Other income 5 - 2,456 2,456
Net income - 2,739,119 2,739,119
Claims and policyholder benefits 6 - 1,299,534 1,299,534 Less: amounts recoverable from re-insurers - (589,104) (589,104)
Net claims payable - 710,430 710,430
Operating and other expenses 7 - 936,615 936,615 Commissions payable - 380,948 380,948
Profit before income tax - 711,126 711,126
Income tax expense 9 - (174,215) (174,215)
Profit for the year - 536,911 536,911
Company Statement of Profit or Loss – for the year ended 31 December 2012
Notes Long term Short term Total
business business 2012
(Restated) (Restated) (Restated)
Shs’000 Shs’000 Shs’000
Gross earned premiums 3 1,017 3,361,544 3,362,561 Less: reinsurance premium ceded (28) (1,259,361) (1,259,389)
Net earned premiums 989 2,102,183 2,103,172
Investment income 4 424,395 599,267 1,023,662 Commissions earned 6,364 392,106 398,470 Other income 5 - 12,600 12,600
Net income 431,748 3,106,156 3,537,904
Claims and policyholder benefits 6 174,054 1,435,442 1,609,496 Less: amounts recoverable from re-insurers 4,661 (595,779) (591,118)
Net claims payable 178,715 839,663 1,018,378
Operating and other expenses 7 35,503 1,010,660 1,046,163 Commissions payable 1,433 497,914 499,347
Profit before income tax 216,097 757,919 974,016
Income tax expense 9 (2,931) (115,457) (118,388)
Consolidated statement of comprehensive income
Long term Short term Total Long term Short term Total
business business 2013 business business 2012
(Restated) (Restated) (Restated)
Notes Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000
Profit for the year - 733,289 733,289 213,166 728,064 941,230
Other comprehensive income net of tax:
Items that will not be reclassified to profit or loss:
- Share of other comprehensive income in associate - 6,065 6,065 - - -- Currency translation - 11,115 11,115 - 6,711 6,711
Total other comprehensive income - 17,180 17,180 - 6,711 6,711
Total comprehensive income for the year - 750,469 750,469 213,166 734,775 947,941
Attributable to:
Owners of the Company - 665,206 665,206 213,166 681,576 894,742 Non-controlling interests - 85,263 85,263 - 53,199 53,199 Total comprehensive income for the year - 750,469 750,469 213,166 734,775 947,941
Company statement of comprehensive income
Long term Short term Total Long term Short term Total
business business 2013 business business 2012
(Restated) (Restated) (Restated)
Notes Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000
Profit for the year - 536,911 536,911 213,166 642,462 855,628 Other comprehensive income net of tax:
Items that will not be reclassified to profit or loss:
- Other comprehensive income - 6,067 6,067 5,629 - 5,629
Total other comprehensive income - 6,067 6,067 5,629 - 5,629
Total comprehensive income for the year - 542,978 542,978 218,795 642,462 861,257
Consolidated statement of financial position at 31 December 2013
Notes Long term Short term Total
business business 2013
Capital Employed Shs’000 Shs’000 Shs’000
Share capital 11 - 500,000 500,000 Retained earnings 14 - 1,728,113 1,728,113 Statutory reserve 15 - 144,733 144,733 Currency translation reserve - (25,213) (25,213) Non-controlling interests - 374,805 374,805
Total Equity - 2,722,438 2,722,438
REPRESENTED BY:
Assets
Property and equipment 18 - 121,325 121,325 Intangible assets 19 - 3,722 3,722 Investment property 20 - 247,000 247,000 Equity investments at fair value through profit or loss (quoted) 21(i) - 354,045 354,045 Equity investments at fair value through profit or loss (unquoted) 21(ii) - 156,697 156,697 Government securities at fair value through profit or loss 21(iii) - 1,614,816 1,614,816 Corporate bond and short term notes - 172,390 172,390 Investment in associates 17 - 70,042 70,042 Loans and receivables 22 - 379,889 379,889 Receivables arising out of reinsurance arrangements - 329,309 329,309 Receivables arising out of direct insurance arrangements - 734,933 734,933 Reinsurers’ share of insurance liabilities 23 - 3,745,124 3,745,124 Other receivables 25 - 340,511 340,511 Deferred acquisition costs 24 - 118,459 118,459 Current income tax - 24,684 24,684 Deferred income tax asset 33 - 65,037 65,037 Deposits with financial institutions 27 - 1,240,606 1,240,606 Cash and bank balance 37(i) - 168,885 168,885
Total assets - 9,887,474 9,887,474
Liabilities
Insurance contract liabilities 29 - 3,762,406 3,762,406 Unearned premium 32 - 2,545,845 2,545,845 Current income tax - 6,421 6,421 Creditors arising from reinsurance arrangements - 472,820 472,820 Amounts due to related companies 34 - 45,590 45,590 Creditors arising from direct insurance arrangements - 34,616 34,616 Deferred acquisition income 24 - 76,324 76,324 Other payables 34 - 221,014 221,014
Total liabilities - 7,165,036 7,165,036
Total net assets - 2,722,438 2,722,438
The financial statements on pages 25 to 103 were approved for issue by the Board of Directors on 31 March 2014 and signed on its behalf by:
P N GETHI G R MAY J H D MILNE Director Director Principal Officer
Consolidated statement of financial position at 31 December 2012
Notes Long term Short term Total
business business 2012
(Restated) (Restated) (Restated)
Capital Employed Shs’000 Shs’000 Shs’000
Share capital 11 - 500,000 500,000 Retained earnings 14 - 1,276,182 1,276,182 Statutory reserve 15 - 133,113 133,113 Proposed dividends - 400,000 400,000 Currency translation reserve - (26,868) (26,868) Non controlling interests - 310,714 310,714
Total Equity - 2,593,141 2,593,141
REPRESENTED BY:
Assets
Property and equipment 18 - 127,875 127,875 Intangible assets 19 - 4,316 4,316 Investment property 20 - 261,600 261,600 Equity investments at fair value through profit or loss (quoted) 21(i) - 201,029 201,029 Equity investments at fair value through profit or loss (unquoted) 21(ii) - 212,387 212,387 Government securities at fair value through profit or loss 21(iii) - 1,786,886 1,786,886 Corporate bond and short term notes - 403,484 403,484 Investment in associates 17 - 45,047 45,047 Loans and receivables 22 - 269,916 269,916 Receivables arising out of reinsurance arrangements - 198,889 198,889 Receivables arising out of direct insurance arrangements - 630,679 630,679 Reinsurers’ share of insurance liabilities 23 - 1,920,560 1,920,560 Other receivables 25 - 551,819 551,819 Deferred acquisition costs 24 - 95,951 95,951
Current income tax - 1,131 1,131
Deferred income tax asset 33 - 50,205 50,205 Deposits with financial institutions 27 - 1,014,266 1,014,266 Cash and bank balances 37(i) - 235,021 235,021
Total assets - 8,011,061 8,011,061
Liabilities
Insurance contract liabilities 29 - 2,193,927 2,193,927 Unearned premium 32 - 2,288,019 2,288,019 Current income tax - 128,930 128,930 Creditors arising from reinsurance arrangements - 348,780 348,780 Amounts due to related companies 34 - 76,927 76,927 Creditors arising from direct insurance arrangements - 45,413 45,413 Deferred acquisition income 24 - 83,574 83,574 Other payables 34 - 252,350 252,350
Total liabilities - 5,417,920 5,417,920
Consolidated statement of financial position at 31 December 2011
Notes Long term Short term Total
business business 2011
(Restated) (Restated) (Restated)
Capital Employed Shs’000 Shs’000 Shs’000
Share capital 11 150,000 350,000 500,000 Retained earnings 14 (218,795) 976,787 757,992 Statutory reserve 15 273,980 160,705 434,685 Currency translation reserve - (27,249) (27,249) Non-controlling interests - 294,760 294,760
Total Equity 205,185 1,755,003 1,960,188
REPRESENTED BY:
Assets
Property and equipment 18 25,186 142,012 167,198 Intangible assets 19 - 19,413 19,413 Investment property 20 - 468,253 468,253 Equity investments at fair value through profit or loss (quoted) 21(i) 249,790 366,887 616,677 Equity investments at fair value through profit or loss (unquoted) 21(ii) 29,115 198,395 227,510 Government securities at fair value through profit or loss 21(iii) 1,024,875 1,028,128 2,053,003 Corporate bond and short term notes 222,726 404,895 627,621 Investment in associates 17 - 364,906 364,906 Loans and receivables 22 48,369 241,094 289,463 Receivables arising out of reinsurance arrangements - 199,216 199,216 Receivables arising out of direct insurance arrangements - 740,012 740,012 Reinsurers’ share of insurance liabilities 23 14,383 2,036,495 2,050,878 Other receivables 25 634 95,563 96,197 Deferred acquisition costs 24 - 139,124 139,124 Current income tax - 40,212 40,212 Deferred income tax 33 1,966 35,434 37,400 Deposits with financial institutions 27 212,316 536,518 748,834 Cash and bank balances 37(i) 9 321,406 321,415
Total assets 1,829,369 7,377,963 9,207,332
Liabilities
Insurance contract liabilities 29 45,026 2,344,514 2,389,540 Amounts payable under deposit administration contracts 31 1,648,645 - 1,648,645 Unearned premium 32 - 2,266,074 2,266,074
Current income tax 32,978 - 32,978
Creditors arising from reinsurance arrangements 4,793 481,567 486,360 Amounts due to related companies 34 - 47,086 47,086 Amount (due to long-term) / from short term business (174,801) 174,801 -Creditors arising from direct insurance arrangements 24,374 48,358 72,732 Deferred acquisition income 24 - 79,950 79,950 Other payables 34 13,034 139,585 152,619 Bank overdraft 37(i) 30,135 41,025 71,160
Total liabilities 1,624,184 5,622,960 7,247,144
Company statement of financial position at 31 December 2013
Notes Long term Short term Total
business business 2013 Capital Employed Shs’000 Shs’000 Shs’000 Share capital 11 - 500,000 500,000 Retained earnings 14 - 1,285,450 1,285,450 Total Equity - 1,785,450 1,785,450 REPRESENTED BY: Assets
Property and equipment 18 - 91,609 91,609 Intangible assets 19 - 3,722 3,722 Investment property 20 - 147,000 147,000 Investment in subsidiary 16 - 88,370 88,370 Equity investments at fair value through profit or loss (quoted) 21(i) - 128,640 128,640 Equity investments at fair value through profit or loss (unquoted) 21(ii) - 132,428 132,428 Government securities at fair value through profit or loss 21(iii) - 1,396,845 1,396,845 Corporate bond and short term notes - 147,085 147,085 Loans and receivables 22 - 379,889 379,889 Receivables arising out of reinsurance arrangements - 90,213 90,213 Receivables arising out of direct insurance arrangements - 225,977 225,977 Reinsurers’ share of insurance liabilities 23 - 863,272 863,272 Deferred acquisition costs 24 - (281) (281) Other receivables 25 - 205,383 205,383 Deferred income tax 33 - 51,518 51,518 Deposits with financial institutions 27 - 620,373 620,373 Cash and bank balances 37(i) - 86,873 86,873
Total assets - 4,658,916 4,658,916
Liabilities
Insurance contract liabilities 29 - 1,118,291 1,118,291 Unearned premium 32 - 1,497,502 1,497,502 Current income tax - 6,421 6,421 Creditors arising from reinsurance arrangements - 11,279 11,279 Amount due to related companies 34 - 45,590 45,590 Creditors arising from direct insurance arrangements - 34,616 34,616 Other payables 34 - 159,767 159,767
Total liabilities - 2,873,466 2,873,466
Total net assets - 1,785,450 1,785,450
The financial statements on pages 25 to 103 were approved for issue by the Board of Directors on 31 March 2014 and signed on its behalf by:
P N GETHI G R MAY J H D MILNE Director Director Principal Officer
Company statement of financial position at 31 December 2012
Notes Long term Short term Total
business business 2012
(Restated) (Restated) (Restated)
Capital Employed Shs’000 Shs’000 Shs’000 Share capital 11 - 500,000 500,000 Retained earnings 14 - 942,472 942,472 Proposed dividend - 400,000 400,000 Total Equity - 1,842,472 1,842,472 REPRESENTED BY: Assets
Property and equipment 18 - 97,157 97,157 Intangible assets 19 - 4,043 4,043 Investment property 20 - 180,000 180,000 Investment in subsidiary 16 - 88,370 88,370 Equity investments at fair value through profit or loss (quoted) 21(i) - 102,389 102,389 Equity investments at fair value through profit or loss (unquoted) 21(ii) - 188,171 188,171 Government securities at fair value through profit or l
