2013 - intra africa assurance | homeintraafrica.co.ke/assets/files/2013 final report.pdf · 2013...

2013IN

TRA A

FRICA ASSURANCE

CO

M P A N Y L I M I T ED

Williamson House, 4th Ngong AvenueP. O. Box 43241-00100 GPO, Nairobi, Kenya.

Tel: 2712607/8/9/10/11Fax: 2712612, 2723288

Email: [email protected]

HEAD OFFICE

INTRA AFRICA ASSURANCE COMPANY LIMITED • 2013 ANNUAL REPORT & FINANCIAL STATEMENTS

2013 • ANNUAL REPORT & FINANCIAL STATEMENTS For the year ended 31 December 2013

Contents

Corporate Information 4

Report of the Directors 5 - 6

Statement of Directors' Responsibilities 7

Report of the Independent Auditor 8

Report of the Independent Auditor to the Commissioner

of Insurance on the Financial Statements 9

Statement of Comprehensive Income 12 - 13

Revenue Account - Detailed 14 - 15

Statement of Financial Position 16

Statement of Changes in Equity 17

Cash Flow Statement 18

Notes to the Financial Statements 19 - 38

Corporate Social Responsibilities 31

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INTRA AFRICA ASSURANCE COMPANY LIMITEDAnnual Report and Financial Statements

For the year ended 31 December 2011

INTR

A

AFRICA ASSURANCE

CO

MP A N Y L I M I T E

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5INTRA AFRICA ASSURANCE COMPANY LIMITED • 2013 ANNUAL REPORT & FINANCIAL STATEMENTS

2013 • ANNUAL REPORT & FINANCIAL STATEMENTS For the year ended 31 December 2013 Corporate information

Registered office and Principal place of businessWilliamson House

4th Ngong Avenue

P. O. Box 43241 - 00100

NAIROBI.

Company secretaryLeading Secretaries

P. O. Box 14317 - 00800

NAIROBI.

Company actuaryAlexander Forbes Financial Services (East Africa) Limited

P. O. Box 52439 - 00200

NAIROBI.

Telephone: + 254 (020) 3861175/76/79

Wireless: + 254 (020) 2517101/3

Mobile: + 254 722 440270

Fax: + 254 (02) 3861169

Email: [email protected]

Website: www.mazars.co.ke

Principal bankersBarclays Bank of Kenya Limited

Moi Avenue Branch

NAIROBI.

Commercial Bank of Africa

Corner Ragati & Mara Roads

NAIROBI.

Bank of India

Kenyatta Avenue

NAIROBI.

I&M Bank

Parklands Road, Centre Point Branch

NAIROBI.

Independent auditorMAZARS

Certified Public Accountant (K)

3 Floor, The Green House

Ngong Road

P. O. Box 61120 - 00100

NAIROBI

DirectorsRobert T Gachecheh

Archibald Githinji

H G Mkangi Bharat

K Patel Praful

C Patel Ramesh

C Patel Jitendra C Patel

Michael G. Muriithi

Hellen W. Macharia - appointed 26 July 2013




Report of the Directors

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 the company.

IncorporationThe company is domiciled in Kenya where it is incorporated as a private company limited by shares under the

Kenyan Companies Act. The address of the registered office is set out in page 1.

Principal activitiesThe principal activity of the company is the transaction of non-life insurance business.

Results for the yearThe results for the year are summarised below:-

2013 2012 Kshs Kshs

Total comprehensive income before tax 82,018,579 113,952,051

Taxation (5,501,848) 22,384,886)

Net comprehensive income after tax transferred to reserves 76,516,731 91,567,165

Dividends

The Directors propose payment of first and final dividend at the rate of 2.5 per cent on the paid up capital of Kshs

300,000,000 amounting to Kshs 7,500,000 (2012: Kshs. 7,500,000)

Financial statementsAt the date of this report, the directors were not aware of any circumstances which would have rendered the values attributed to the assets in the financial statements misleading.

DirectorsThe directors who held office during the year and to the date of this report are listed on page 1.

In accordance with the Company’s Articles of Association, Mr. Robert T Gacheche and Mr. Ramesh C. Patel retire by rotation and being eligible, offer themselves for re-election.


2013 • ANNUAL REPORT & FINANCIAL STATEMENTS For the year ended 31 December 2013 Report of the Directors | Continued

Directors’ benefitsSince the annual general meeting of the company to the date of this report, no director has received or become entitled to receive any benefit other than director’s fees and amounts received under employment contracts for executive directors.

The aggregate amount of emoluments for directors’ services in the financial year is disclosed in note 4 (a).

AuditorThe company’s auditor MAZARS, Certified Public Accountant (K) has indicated willingness to continue in office in accordance with Section 159(2) of the Companies Act (Cap. 486).

By order of the board

LEADING SECRETARIES Company secretary

2014



The Kenyan Companies Act requires the directors to prepare financial statements for each financial year that give a true and fair view of the state of afairs of the company as at the end of the financial year and of its profit or loss for that year. It 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 misstatement whether due to fraud or error. They also accept responsibility for:

i) designing,implementing and maintaining internal control relevant to the preparation and fair presentation of the financial statements;

ii) selecting and applying appropriate accounting policies; and

iii) making accounting estimates and judgements that are reasonable in the circumstances.

The directors are of the opinion that the financial statements give a true and fair view of the state of the financial affairs of the company as at 31st Decmber 2013 and of its 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 twelve months from the date of this statement.

Approved by the board of directors on 2014 and signed on its behalf by:

R. T Gachecheh P. C Patel M. G. Muriithi Chairman Director Principal Officer

Statement of directors’ responsibilities



We have conducted an actuarial valuation of the non-life insurance business of Intra Africa Assurance

Company Limited as at 31 December 2013.

The valuation was conducted in accordance with generally accepted actuarial principles and in accordance with the requirements of the Kenyan Insurance Act. Those principles require prudent provision for future out go under contracts, generally based upon the assumptions that current conditions will continue. Provision is therefore not made for all possible contingencies.

In completing the actuarial valuation, We have retied upon the audited financial statements of the company.

In our opinion, the actuarial value of the liabilities of the non-life insurance business represents a prudent estimate of the projected future obligations of the non-life business as at 31 December 2013.

Alexander Forbes Financial Services (East Africa) LimitedConsulting actuary

2014

Report of the consulting actuary



Report on the financial statementsWe have audited the accompanying financial statements of Intra Africa Assurance Company Limited, set out on pages 8 to 33 which comprise the statement of financial position as at 31 December 2013 and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Directors’ responsibility for the financial statementsThe directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and the requirement of the Kenya Companies Act. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s responsibilityOur responsibility is to express an independent opinion on these 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 the audit to obtain reasonable assurance that the financial statements are free of 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 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 audit opinion.

OpinionIn our opinion the accompanying financial statements give a true and fair view of the state of the financial affairs of the company as at 31 December 2013 and of its 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.

Report of the Independent Auditor



Report on other legal requirements

As required by the Kenya Companies Act 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 purpose 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; and

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 auditor’s report is CPA Owen

Koimburi - P/No 445

MAZARS

Certified Public Accountants (K) Nairobi. 2014

Report of the Independent Auditor



2013 2012 Kshs Kshs

INCOME

Gross premium 814,310,703 726,921,412Less: Reinsurance premium ceded (197,879,035) (135,450,231)

Net premium written 616,431,668 591,471,181 Unearned premium brought forward 243,071,227 230,649,479Unearned premium carried forward (286,367,734) (243,071,227)

Net earned premium 573,135,162 579,049,433 INSURANCE OUT-GO

Claims paid 373,130,969 324,367,581Provisions as at 31 December 384,309,656 372,256,736Provisions as at 01 January (372,256,736) (349,179,338)

Total claims incurred 385,183,889 347,444,978

Commissions 6,660,066 29,500,289Premium tax 13,778,650 12,053,045Management expenses 186,124,555 183,099,768 Total insurance out-go 591,747,160 572,098,080 UNDERWRITING RESULT (18,611,998) 6,951,353

OTHER INCOME

Investment income 46,610,735 50,959,679Gain on disposal of non-current assets 399,000 243,200Rent 12,237,555 10,470,211Share of pool surplus - 1,016,178Other income 20,389 7,797,274Fair value gain on investment property 32,025,000 25,850,000 91,292,679 96,336,542

NET INCOME (carried forward) 72,680,680 103,287,895

Statement of comprehensive income



Note 2013 2012 Kshs Kshs

NET INCOME (brought forward) 72,680,680 103,287,895

OUT - GO (OTHERS) Directors’ fees 5,827,200 4,156,800Depreciation 6 3,634,246 5,615,698Amortisation 8 3,971,615 2,638,033Bad and doubtful debts 3,490,640 -Finance cost 716,397 1,229,757Foreign exchange (gain)/loss - 159,217 Total out - go (others) 17,640,097 13,799,505

PROFIT BEFORE TAX 4 55,040,583 89,488,390

Taxation 5 (5,501,848) (22,384,886) PROFIT AFTER TAX 49,538,735 67,103,504

OTHER COMPREHENSIVE INCOME:

Revaluation surplus 6 14,675,000 10,150,000Gain / (loss) in fair values 12,302,996 14,313,662 26,977,996 24,463,662 TOTAL COMPREHENSIVE INCOME 76,516,731 91,567,166

DIVIDEND Proposed payment of first and final 7,500,000 7,500,000

Statement of comprehensive income



Workmens Car/ Fire Fire Motor Motor Personal compensation Misc/ Aviation engineering domestic industrial Liability Marine private commercial accident Theft sation bond 2013 2012 Kshs Kshs Kshs Kshs Kshs Kshs Kshs Kshs Kshs Kshs Kshs Kshs Kshs KshsGross premium written - 48,109,163 18,431,103 74,088,536 5,449,254 76,622,363 169,773,950 169,589,286 20,786,547 59,614,743 107,000,956 64,844,802 814,310,703 726,921,412Less: Reinsurance premium ceded (30,947,834) (4,025,305) (43,976,468) (139,960) (30,203,118) (4,198,800) (6,438,160) (3,273,924) (30,182,278) (3,219,080) (41,274,108) (197,879,035) (135,450,231)Net premium - 17,161,329 14,405,798 30,112,068 5,309,294 46,419,246 165,575,150 163,151,126 17,512,623 29,432,465 103,781,876 23,570,694 616,431,668 591,471,181 Unearned premium c/fwd - 5,753,949 6,611,760 11,681,651 1,949,445 21,352,581 82,359,919 75,054,487 6,927,524 15,824,554 40,594,847 18,257,018 286,367,734 243,071,227Unearned premium brought forward - 5,414,210 6,174,548 14,061,514 1,299,440 13,068,271 68,390,874 63,695,350 5,526,985 14,776,642 37,759,812 12,903,581 243,071,227 230,649,479 (Increase)/decrease inUnearned premium reserves - (339,739) (437,212) 2,379,863 (650,005) (8,284,310) (13,969,045) (11,359,137) (1,400,539) (1,047,912) (2,835,035) (5,353,437) (43,296,507) (12,421,748)

Net earned premium - 16,821,590 13,968,587 32,491,931 4,659,290 38,134,936 151,606,105 151,791,989 16,112,084 28,384,553 100,946,841 18,217,257 573,135,162 579,049,433

Insurance out-goClaims paid - 12,806,320 13,670,378 13,334,492 2,479,080 50,313,160 105,321,422 90,625,399 20,855,593 27,028,515 34,707,084 1,989,527 373,130,969 324,367,581Provisions c/f 31.12.13 - 12,317,509 3,080,014 29,892,264 9,997,148 34,927,590 65,828,238 90,770,333 16,951,920 16,362,616 67,630,688 7,279,436 355,037,755 345,206,873IBNR c/f 31. 12.13 - 1,055,701 145,029 429,651 213,882 1,378,470 8,226,213 8,209,749 924,725 1,997,249 4,638,442 2,052,790 29,271,901 27,049,863Provisions brought forward - 15,585,911 6,824,537 13,179,172 2,260,318 31,196,416 88,170,907 81,775,334 9,237,149 25,013,351 84,004,239 15,009,402 372,256,736 349,179,338 Total claims incurred - 10,593,620 10,070,884 30,477,235 10,429,792 55,422,804 91,204,965 107,830,146 29,495,089 20,375,029 22,971,975 (3,687,650) 385,183,889 347,444,978Net commissions - (4,397,143) 942,618 (7,734,428) 666,166 2,401,913 9,413,956 9,705,677 1,647,863 (6,875,784) 10,761,230 (9,872,002) 6,660,066 29,500,289Premium tax - 383,595 322,002 673,073 118,675 1,037,576 3,700,981 3,646,799 391,447 657,882 2,319,761 526,859 13,778,650 12,053,045Management expenses - 5,181,669 4,349,667 9,091,998 1,603,081 14,015,765 49,993,540 49,261,633 5,287,738 8,886,799 31,335,761 7,116,904 186,124,555 183,099,768 Total insurance out-go - 11,761,741 15,685,171 32,507,878 12,817,714 72,878,058 154,313,442 170,444,255 36,822,137 23,043,926 67,388,727 (5,915,889) 591,747,160 572,098,080 Underwriting result - 5,059,849 (1,716,584) (15,947) (8,158,424) (34,743,122) (2,707,337) (18,652,266) (20,710,053) 5,340,627 33,558,114 24,133,147 (18,611,998) 6,951,353

Revenue account



Note 2013 2012 Kshs KshsASSETSNon-current assets Property and equipment 6 121,621,248 107,623,283Investment property 7 251,525,000 219,500,000Intangible asset 8 3,974,972 3,945,837Mortgages 9 12,733,143 13,699,095Financial assets 10 282,836,105 302,533,110Deferred tax 11 1,877,572 1,175,923 674,568,040 648,477,248 Current assets Business receivables 12 354,131,815 334,268,680Other receivables 13 102,214,603 86,921,774Amount due from reinsurance 14 52,759,071 13,800,676Cash and cash equivalents 15 212,482,014 198,118,280Tax recoverable 5 20,415,947 232,373 742,003,451 633,341,783Total assets 1,416,571,492 1,281,819,031 EQUITY AND LIABILITIES

Capital and reserves Share capital 16 300,000,000 300,000,000Revaluation reserves 17 263,772,036 217,072,036Retained earnings 137,624,598 115,307,867Proposed dividend 7,500,000 7,500,000 708,896,634 639,879,903

Non - current liabilities Provision for unearned premium 1 (n) 286,367,734 243,071,227Provision for outstanding claims 1 (o) 384,309,656 372,256,736 670,677,390 615,327,963

Current liabilities Other payables 18 20,143,287 17,607,458Borrowings 19 16,854,181 9,003,707 36,997,468 26,611,165 Total equity and liabilities 1,416,571,492 1,281,819,031

The financial statements on pages 8 to 33 were authorised for issue by the board of directors on 2014 and were signed on its behalf by:

R. T Gachecheh P. C Patel M. G. MuriithiChairman Director Principal Officer

Statement of financial position as at 31



Note Share Revaluation Retained Proposed reserve earnings earnings dividend Total Kshs Kshs Kshs Kshs Kshs

At 1 January 2012 300,000,000 181,072,036 67,240,701 7,500,000 555,812,737

Changes in equity in 2012

Profit for the year - 36,000,000 55,567,166 - 91,567,166 Dividend paid (year 2011) - - - (7,500,000) (7,500,000)

Proposed dividend for the year - (7,500,000) 7,500,000 - At 31 December 2012 300,000,000 217,072,036 115,307,867 7,500,000 639,879,903

At 1 January 2013 300,000,000 217,072,036 115,307,867 7,500,000 639,879,903

Changes in equity in 2013

Profit for the year - 46,700,000 29,816,731 - 76,516,731

Dividend paid (year 2012) - - - (7,500,000) (7,500,000) Proposed dividend for the year - - (7,500,000) 7,500,000 -

At 31 December 2013 300,000,000 263,772,036 137,624,598 7,500,000 708,896,634

Statement of changes in equity



Note 2013 2012 Kshs Kshs

Cash flows from operating activities

Total comprehensive income 76,516,731 91,567,166

Adjustments for: Revaluation surplus (14,675,000) (10,150,000)Gain / (loss) in fair values (12,302,996) (14,313,662)Taxation 5,501,848 22,384,886(Gain) on disposal (399,000) (243,200)Depreciation 3,634,246 5,615,698Amortisation of intangible asset 3,971,615 2,638,033Premium and claims reserves 55,349,427 35,499,146Investment income (46,610,735) (50,959,679)Fair value gain on investment property (32,025,000) (25,850,000) Operating profit before working capital changes 38,961,136 56,188,388(Increase) in receivables (35,155,967) (70,881,346)Increase/(decrease) in payables 2,535,829 (2,792,518)(Decrease) in amount due from reinsurers (38,958,395) 12,743,841(Decrease) in amount due to reinsurers - - Cash generated from operations (32,617,398) (4,741,635)Investment income 46,610,735 50,959,680Income tax paid (26,387,072) (25,373,886)Net cash from operating activities (12,393,734) 20,844,159 Cash flows from investing activities Purchase of property and equipment (2,958,211) (6,179,962)Purchase of computer software (4,000,750) (3,480,000)Proceeds from sale of non current asset 400,000 244,200Net mortgage loans movement 965,955 766,565Net movement in government securities 32,000,000 (6,999,999)Net cash used in investing activities 26,406,994 (15,649,196) Cash flows from financing activities Payments of short term borrowings (7,145,819) -Proceeds from short term borrowings 24,000,000 -Dividend paid to shareholders (7,500,000) (7,500,000)Net cash (used in) / from financing activities 9,354,181 (7,500,000)

Increase/(decrease) in cash and cash equivalents 23,367,441 (2,305,037)At start of the year 189,114,573 191,419,610

At end of the year 15 212,482,014 189,114,573

Statement of cash flows



1 Summary of significant accounting policies

The significant accounting policies adopted in the preparation of these general purpose financial statements are set out below:

a) Basis of preparationThe financial statements are prepared on a going concern basis in compliance with International Financial Reporting Standards (IFRS). They are presented in Kenya Shillings, which is also the functional currency (see (c) below), rounded to the nearest shilling (Kshs). The measurement basis used is the historical cost basis except where otherwise stated in the accounting policies below.

The preparation of financial statements inconformity with International Financial Reporting Standards requires the use of estimates and assumptions. It also requires management to exercise its judgement in the process of applying the accounting policies adopted by the company. Although such estimates and assumptions are based on the directors’ best knowledge of the information available, actual results may differ from those estimates. The judgements and estimates are reviewed at the end of each reporting period, and any revisions to such estimates are recognised in the year in which the revision is made. The are as involving the judgements of most significance to the financial statements, and the sources of estimation uncertainty that have a significant risk of resulting in a material adjustment within the next financial year, are disclosed in Note 2.

b) New and revised standardsi) Adoption of new and revised standards

All new and revised standards and interpretations that have become effective for the first time in the financial year beginning 1st January 2013 have been adopted by the company. Of those, the following have had an effect on the company’s financial statements:

• Amendments to IAS 1 titled Presentation of Items of Other Comprehensive Income (issued in June

• 2011): These amendments, that are effective retrospectively, enhance the presentation of the components of other comprehensive income. Entities are required to group items presented in OCI based on whether or not they will be reclassified to profit or loss subsequently. The title ‘Statement of comprehensive income’ was changed to ‘Statement of profit or loss and other comprehensive income’ although use of this title is not mandatory.

• Amendments to IAS 1 Presentation of Financial Statements (Annual Improvements to IFRSs

• 2009–2011 Cycle, issued in May 2012): The amendments clarify that additional comparative information is not necessary for periods beyond the minimum required by IAS 1. However, if voluntarily presented, it should be in accordance with IFRS, without triggering a requirement to provide a complete set of financial statements. They also clarify that, in the case of changes in accounting policies retrospectively or a retrospective restatement or reclassification which has a material effect on the information in the statement of financial position at the beginning of the preceding period, entities should present the statement of financial position at the end of the current period and the beginning and end of the preceding period. However, other than disclosure of certain specified information, related notes are not required to accompany the opening statement of financial position as at the beginning of the preceding period.

• Amendment to IAS 16 Property, Plant and Equipment (Annual Improvements to IFRSs 2009–2011

Cycle, issued in May 2012): The amendment clarifies that items such as spare parts, stand-by equipment and servicing equipment should be recognised as PPE when they meet the definition in IAS 16 and as inventory otherwise.

Notes to the Financial Statements



• Revised IAS 27 Separate Financial Statements (issued in May 2011): The revised and re-titled standard now only deals with the requirements for separate financial statements, which have been carried over largely unchanged from IAS 27 Consolidated and Separate Financial Statements. The standard mainly requires that when an entity prepares separate financial statements, investments in subsidiaries, associates, and joint ventures are accounted for either at cost, or in accordance with IFRS 9 Financial Instruments / IAS 39 Financial Instruments: Recognition and Measurement. It also deals with the recognition of dividends, certain group reorganisations and includes a number of disclosure requirements.

• Revised IAS 28 Investments in Associates and Joint Ventures (issued in May 2011): The revised

• and re-titled standard prescribes the accounting for investments in associates and sets out the requirements for the application of the equity method when accounting for investments in associates and joint ventures. It defines “significant influence”, provides guidance on how the equity method of accounting is to be applied (including exemptions from applying the equity method in some cases) and prescribes how investments in associates and joint ventures should be tested for impairment.

• Amendment to IAS 32 Financial instruments: Presentation (Annual Improvements to IFRSs

• 2009–2011 Cycle, issued in May 2012): The amendment clarifies that income tax relating to distributions to holders of an equity instrument and to transaction costs of an equity transaction should be accounted for in accordance with IAS 12.

• Amendments to IFRS 7 titled Disclosures - Offsetting Financial Assets and Financial Liabilities

• (issued in December 2011): The amendments allow investors to bridge differences in the offsetting reporting requirements of IFRS and US GAAP and introduce new disclosures that provide better information on how companies mitigate credit risk, including on related collateral pledged or received.

• IFRS 10 Consolidated Financial Statements (issued in May 2011 and amended in June 2012 for its transitional provisions): The new standard replaces all of the guidance on control and consolidation in IAS 27 Consolidated and Separate Financial Statements and SIC-12 Consolidation— Special Purpose Entities. The core principle that a consolidated entity presents a parent and its subsidiaries as if they are a single economic entity remains unchanged, as do the consolidation procedures. IFRS 10 introduces a single consolidation model that identifies control as the basis for consolidation for all types of entities, where control is based on whether an investor has power over the investee, exposure/rights to variable returns from its involvement with the investee and the ability to use its power over the investee to affect the amount of the returns. The new standard also includes guidance on participating and protective rights and on agent/principal relationships.

• IFRS 11 Joint Arrangements (issued in May 2011 and amended in June 2012 for its transitional provisions): The new standard (that replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly Controlled Entities—Non-Monetary Contributions by Venturers) requires a party to a joint arrangement to determine the type of joint arrangement in which it is involved by assessing its rights and obligations, and then account for those rights and obligations in accordance with that type of joint arrangement. Joint arrangements are either joint operations or joint ventures:

• In a joint operation, parties have rights to the assets and obligations for the liabilities relating to the arrangement. Joint operators recognise their assets, liabilities, revenue and expenses in relation to their interest in the joint operation.

• In a joint venture, parties have rights to the net assets of the arrangement. A joint venturer applies the equity method of accounting for its investment in a joint venture in accordance with IAS 28

Investments in Associates and Joint Ventures (2011). Unlike under IAS 31, the use of “proportionate consolidation” is not permitted.

• IFRS 12 Disclosure of Interests in Other Entities (issued in May 2011 and amended in June 2012 for its transitional provisions): The new standard combines, enhances and replaces the disclosure requirements for subsidiaries, joint arrangements, associates and unconsolidated structured entities. It requires extensive disclosure of information that enables users of financial statements to evaluate the nature of, and risks associated with, interests in other entities and the effects of those interests on an entity’s financial position, financial performance and cash flows.




• IFRS 13 Fair Value Measurement (issued in May 2011): The new standard defines fair value, sets

• out a single framework for measuring fair value and requires disclosures about fair value measurements. IFRS 13 applies when other standards require or permit fair value measurements. It does not introduce any new requirements to measure an asset or a liability at fair value, change what is measured at fair value in IFRS or address how to present changes in fair value. Specific transitional provisions have been given to entities such that they need not apply the disclosure requirements set out in the Standard in comparative information provided for periods before the initial application of the Standard.

• IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine (issued in October 2011): The interpretation provides guidance on the accounting for waste removal (stripping) costs in the production phase of a mine. Such stripping costs should be recognised as an asset if they generate a benefit of improved access to an identifiable component of the ore body, it is probable that the benefits will flow to the entity and the costs can be measured reliably. Capitalised stripping costs are amortised over the useful life of the identified component. On transition, existing production stripping costs must be written off to retained earnings, unless they can be attributed to an identifiable

• Revised IAS 19 Employee Benefits (issued in June 2011): The key amendments include elimination of the “corridor approach”, modification of accounting for termination benefits and improvement of the recognition, presentation and disclosure requirements for defined benefit plans. The amendments have to be applied retrospectively in accordance with IAS 8 (except for changes to the carrying value of assets that include employee benefit costs in the carrying amount).

The adoption of the above where relevant has had no material effect on the company’s accounting policies or disclosures.

ii) New and revised standards and interpretations which have been issued but are not yet effective

All new and revised standards and interpretations that have become effective for the first time in the financial year beginning 1st January 2013 have been adopted by the company. Of those, the following have had an effect on the company’s financial statements:

Amendments to IAS 32 titled Offsetting Financial Assets and Financial Liabilities (issued in December 2011) – The amendments address inconsistencies in current practice when applying the offsetting criteria in IAS 32, mainly by clarifying the meaning of “currently has a legally enforceable right of set-off” and that some gross settlement systems may be considered equivalent to net settlement. They are effective for annual periods beginning on or after 1 January 2014, with retrospective application.

• Amendments to IAS 36 titled Recoverable Amount Disclosures for Non-Financial Assets (issued in May 2013) – The amendments reduce the circumstances in which the recoverable amount of assets or cash-generating units is required to be disclosed, clarify the disclosures required, and introduce an explicit requirement to disclose the discount rate used in determining impairment (or reversals) where recoverable amount (based on fair value less costs of disposal) is determined using a present value technique. They are effective for annual periods beginning on or after 1 January 2014.

• Amendments to IAS 39 titled Novation of Derivatives and Continuation of Hedge Accounting (issued in June 2013) – The amendments permit the continuation of hedge accounting in a situation where the counterparty to a derivative designated as a hedging instrument is replaced by a new central counterparty (known as ‘novation of derivatives’), as a consequence of laws or regulations, if specific conditions are met. They are effective for annual periods beginning on or after 1 January 2014.

• Amendments to IFRS 10, IFRS 12 and IAS 27 titled Investment Entities (issued in October 2012) – The amendments define “investment entities” and provide them an exemption from the consolidation of subsidiaries; instead, an investment entity is required to measure the investment in each eligible subsidiary at fair value through profit or loss in accordance with IFRS 9 / IAS 39 (the exception does not apply to subsidiaries that provide services relating to the investment entity’s investment activities).




An investment entity is required to account for its investment in a relevant subsidiary in the same way in its consolidated and separate financial statements, and additional disclosures are introduced. The amendments are effective for annual periods beginning on or after 1 January 2014, retrospectively with some transitional provisions. The Directors do not anticipate any effect on the company’s consolidated financial statements as the parent company is not an investment entity.

• IFRIC 21 Levies (issued in May 2013) – The interpretation provides guidance on when to recognise a liability for a levy imposed by a government. The obligating event for the recognition of a liability is the activity that triggers the payment of the levy in accordance with the relevant legislation. It also provides guidance on recognition of a liability to pay levies: the liability is recognised either progressively if the obligating event occurs over a period of time, or when the minimum threshold is reached if an obligation is triggered on reaching that minimum threshold. The interpretation is effective for annual periods beginning on or after 1 January 2014.

• IFRS 9 - Financial Instruments will eventually replace IAS 39 - Financial Instruments, Recognition and Measurement. The effective date is not currently determined. The chapters published to date cover recognition, derecognition, classification and measurement of financial assets and financial liabilities, and hedge accounting. Most gains or losses on financial assets measured at fair value will then be recognised in profit or loss, but the company will be able to make an irrevocable election to present changes in fair value of investments in equity instruments in other comprehensive income.

The Directors have assessed the potential impact of the above and expect that they will not have a significant impact on the company’s financial statements for 2014.

c) Translation of foreign currenciesOn initial recognition, all transactions are recorded in the functional currency which is Kenya Shillings. Transactions in foreign currencies during the year are converted into the functional currency using the exchange rate prevailing at the transaction date. Monetary assets and liabilities at the balance sheet date denominated in foreign currencies are translated into the functional currency using the exchange rate prevailing as at that date. The resulting foreign exchange gains and losses from the settlement of such transactions and from year-end translation are recognised on a net basis in the profit and loss account in the year in which they arise, except for differences arising on translation of non-monetary available-for-sale financial assets, which are recognised in other comprehensive income.

d) Revenue recognitionRevenue represents the fair value of consideration received or receivable for the sale of services in the course of the company’s activities. It is recognised when it is probable that future economic benefits will flow to the company and the amount of revenue can be measured reliably. It is stated net of Value Added Tax, rebates and trade discounts.

• Premium income from premiums written net of reinsurance.

• Rental income from operating leases is recognised on a straight line basis over the period of the lease.

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

• Interest income is recognised on a time proportion basis using the effective interest method.

• Kenya Motor Insurance Pool (1985): The Company’s share of the pool results and balance is accounted for on the basis of the figures contained in the pool’s annually audited accounts.

e) Income taxIncome tax expense is the aggregate amount charged/(credited) in respect of current tax and deferred tax in determining the profit or loss for the year. Tax is recognised in the profit and loss account except when it relates to items recognised in other comprehensive income, in which case it is also recognised in other comprehensive income, or to items recognised directly in equity, in which case it is also recognised directly in equity.




Current tax: Current income tax is the amount of income tax payable on the taxable profit for the year, and any adjustment to tax payable in respect of prior years, determined in accordance with the Kenyan Income Tax Act.

Deferred income tax: Deferred income tax is provided in full on all temporary differences except those arising on the initial recognition of an asset or liability, other than a business combination, that at the time of the transaction affects neither the accounting or taxable profit or loss. Deferred income tax is determined using the liability method on all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes, using tax rates and laws enacted or substantively enacted at the balance sheet date and expected to apply when the related deferred income tax asset is realised or the deferred tax liability is settled.

Deferred income tax assets are recognized only to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilised. Recognised and unrecognized deferred tax assets are reassessed at the end of each reporting period and, if appropriate, the recognized amount is adjusted to reflect the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

f) Property and equipmentProperty and equipment are initially stated at cost or subsequently at revaluation, less accumulated depreciation and any impairment in value.

Subsequent costs are included in the assets carrying amount or recognized as a separate asset as appropriate, only where it is probable that future economic benefits associated with the item will flow to the company and the cost of the item can be reliably measured. All other repair and maintenance costs are charged to the profit and loss account in the financial period in which they are incurred.

Increases in the carrying amount arising on revaluation are recognised in other comprehensive income and accumulated in equity under the heading of revaluation surplus. Decreases that offset previous increases of the same asset are recognised in other comprehensive income. All other decreases are charged to the profit and loss account. Annually, the difference between depreciation charge based on the revalued carrying amount of the asset charged to the profit and loss account and depreciation based on the asset’s original cost is transferred from the revaluation surplus reserve to retained earnings.

Depreciation is calculated on the straight line basis, at annual rates estimated to write off carrying values of the property and equipment over their expected useful lives using the following annual rates:

Leasehold land and building Over the years term of the lease

Motor vehicles 20%

Furniture and equipment 5%

Computers and related equipment 30%

The carrying values of property and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying values may not be recovered.

If any such indications exist where the carrying values exceed the recoverable amount, property and equipment are written down to their recoverable amounts.

Gains and losses on disposal of property, plant and equipment are determined by reference to their carrying amounts and are taken into account in determining operating profit / (loss).




g) Investment propertyInvestment property is property held to earn rentals or for capital appreciation or both. Investment property, including interest in leasehold land, is initially recognised at cost including the transaction costs. Subsequently, investment property is carried at fair value representing the open market value at the statement of financial position date determined by annual valuations carried out by external registered valuers/directors. Gains or losses arising from changes in the fair value are included in determining the profit or loss for the year to which they relate.

h) Intangible assetSoftware license costs and computers software that is not an integral part of the related hardware are initially recognised at cost, and subsequently carried at cost less accumulated amortisation and accumulated impairment losses. Costs that are directly attributable to the production of identifiable computer software products controlled by the company are recognised as intangible assets. Amortisation is calculated using the straight-line method to write down the cost of each licence or item of software to its residual value over its estimated useful life using an annual rate of 30%.

i) Financial instrumentsClassification: The company classifies its financial instruments into the following categories:

i) Financial assets and financial liabilities at fair value through profit or loss, which comprise financial assets and financial liabilities acquired or incurred principally for the purpose of selling or repurchasing in the near term or to generate short-term profit-taking.

ii) Held-to-maturity investments, which comprise non-derivative financial assets with fixed or determinable payments and fixed maturity that the company has a positive intention and ability to hold to maturity.

iii) Loans and receivables, which comprise non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, and excludes assets which the entity intends to sell immediately or in the near term or those which the entity upon initial recognition designates as at fair value through profit or loss or as available-for-sale financial assets.

iv) Available-for-sale financial assets, which comprise non-derivative financial assets that are designated as available-for-sale financial assets, and not classified under any of the other categories of financial assets.

v) Financial liabilities, which comprise all financial liabilities except financial liabilities at fair value through profit or loss.

Recognition and measurementFinancial assets:

All financial assets are recognised initially using the trade date accounting which is the date the company commits itself to the purchase or sale. Financial assets carried at fair value through profit or loss are initially recognised at fair value and the transaction costs are expensed in the proft and loss account. All other categories of financial assets are recorded at the fair value of the consideration given plus the transaction cost.

Subsequently, held-to-maturity investments and loans and receivables are carried at amortised cost using the effective interest method, while all other financial assets are carried at their fair values, without deduction for transaction costs that may be incurred on sale.

Amortised cost is the amount at which the financial asset or liability is measured on initial recognition minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount and the maturity amount, and minus any reduction for impairment or uncollectibility. Fair value is the amount for which an asset can be exchanged, or a liability settled, between knowledgeable willing parties in an arm’s length transaction. The fair value for quoted shares is determined




Recognition and measurement (Continued)Financial assets (Continued)

using the quoted bid price at the balance sheet date while that of non- quoted shares is determined using valuation techniques and/or Investment in equity shares classified as available-for-sale assets for which there is no active market and whose fair value cannot be reliably measured are carried at cost.

The company assesses at each balance sheet whether there is objective evidence that a financial asset is impaired. If any such evidence exists, an impairment loss is recognised. Impairment loss is the amount by which the carrying amount of an asset exceeds its recoverable amount. In the case of held-to maturity investments and loans and receivables, the recoverable amount is the present value of the expected future cashflows, discounted using the asset’s effective interest rate.

Changes in fair value of financial assets at fair value through profit or loss are recognised in the profit and loss account.

Changes in fair value for available-for-sale financial assets are recognised in other comprehensive income, except for impairment losses (measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that asset previously recognised in profit or loss), which are recognised in the profit and loss account. In the year of sale, the cumulative gain or loss recognised in other comprehensive income is recognised in the profit or loss account as a reclassification adjustment.

Changes in the carrying values and impairment losses of held-to-maturity investments and loans and receivables are recognised in the profit and loss account. Trade and other receivables not collectible are written off against the related provision. Subsequent recoveries of amounts previously written off are credited to the profit and loss account in the year of recovery.

Financial liabilities:

All financial liabilities are recognized initially at fair value of the consideration given plus the transaction cost with the exception of financial liabilities carried at fair value through profit or loss, which are initially recognized at fair value and the transaction costs are expensed in the statement of comprehensive income.

Subsequently, all financial liabilities are carried at amortised cost using the effective interest method except for financial liabilities through profit or loss which are carried at fair value.

Presentation

All financial assets are classified as non-current except financial assets at fair value through profit or loss, those with maturities of less than 12 months from the statement of financial position date, those which the directors have the express intention of holding for less than 12 months from the statement of financial position date or those that are required to be sold to raise operating capital, in which case they are classified as current assets.

All financial liabilities are classified as non-current except financial liabilities at fair value through profit or loss, those expected to be settled in the company’s normal operating cycle, those payable or expected to be paid within 12 months of the statement of financial position date and those which the company does not have an unconditional right to defer settlement for at least 12 months after the balance sheet date.




i) Financial instruments (Continued)Derecognition

Financial assets are derecognized when the rights to receive cash flows from the investments have expired or the company has transferred substantially all risks and rewards of ownership.

Financial liabilities are derecognized only when the obligation specified in the contract is discharged or cancelled or expires.

Offsetting

Financial assets and liabilities are off set and the net amount reported in the statement of financial position only when there is a legally enforceable right to set off the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.

j) Cash and cash equivalentsCash and cash equivalents include cash in hand and demand and term deposits, with maturities of three months or less from the date of acquisition, that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, net of bank overdrafts. In the statement of financial position, bank overdrafts are included as borrowings under current liabilities.

k) Share capital and share premiumOrdinary shares are recognised at par value and classified as ‘share capital’ in equity. Any amounts received over and above the par value of the shares issued are classified as ‘share premium’ in equity.

l) DividendsDividends on ordinary shares are recognised as a liability in the year in which they are declared. Proposed dividends are accounted for as a separate component of equity until they have been declared at an annual general meeting.

m) LeasesOperating leases: Leases of assets where a significant proportion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made/received under operating leases are charged/credited to the profit and loss account on a straight line basis over the lease period. Prepaid operating lease rentals are recognised as assets and are subsequently amortised over the lease period.

n) Unearned premium provisionUnearned premium reserve is calculated per class as follows:

i) Employers liability, fire, motor vehicles, miscellaneous and accident - 40% of net premiums.

ii) Marine and goods in transit - 25% of net premium . Net premium is as adjusted for excess of loss treaties.

o) Outstanding claims provisionsProvision of reserves for notified claims as at the end of the year under review are determined on an individual case basis after taking into account possible trends in settlement and anticipated inflation, any difference between original provisions on claims and subsequent re-estimates or settlements will be reflected in the underwriting results of the year in which claims are re-estimated or finally settled.

Outstanding claims also include provisions for claims incurred but not reported at statement of financial position date.




p) Provision for liabilities and chargesProvisions are recognized when the company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made.

q) Other provisionsProvisions for bad debts are made on an individual account basis depending on the results of a continuous assessment of the prospects for recovery. In cases of secured debts, provisions will only be made when the forced sale value of the security held is less than the balance outstanding and the servicing of the debt is considered as giving cause for concern.

r) Post-employment benefit obligationsThe Company operates a defined contribution pension scheme for all permanent employees. The scheme is administered independently by Chancery Wright Insurance Brokers Limited and is funded by contributions from both the company and employees. The scheme funds are managed by Old Mutual Assets Managers (K) Ltd.

The company also contributes to a statutory defined contribution scheme, the National Social Security Fund (NSSF). Contributions are determined by local statutes and are currently limited to Kshs 200 per employee per month.

2 Significant judgements and key sources of estimation uncertaintyIn the process of applying the accounting policies adopted by the company, the directors make certain judgements and estimates that may affect the carrying values of assets and liabilities in the next financial period. Such judgements and estimates are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the current circumstances. The directors evaluate these at each financial reporting date to ensure that they are still reasonable under the prevailing circumstances based on the information available.

a) Significant judgements made in applying the company’s accounting policiesThe judgements made by the directors in the process of applying the company’s accounting policies that have the most significant effect on the amounts recognised in the financial statements include:

i) Property, plant and equipment: critical estimates are made by the directors in determining depreciation rates for the property and equipment.

ii) Whether it is probable that future taxable profits will be available against which temporary differences can be utilised; and

iii) Whether the company has the ability to hold ‘held-to maturity’ investments until they mature. If the company were to sell other than an insignificant amount of such investments before maturity, it would be required to classify the entire class as ‘available-for-sale’ and measure them at fair value.

b) Key sources of estimation uncertaintyKey assumptions made about the future and other sources of estimation uncertainty that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year include:

i) Whether assets are impaired.

ii) The classification of financial assets.

iii) Contingencies and provisions.




3 Risk management objectives and policiesa) Financial risk management

The company’s activities expose it to a variety of financial risks including credit, liquidity and market risks. The company’s overall risk management policies are set out by the board and implemented by the management, and focus on the unpredictability of changes in the business environment and seek to minimise the potential adverse effects of such risks on the company’s performance by setting acceptable levels of risk. The company does not hedge against any risks.

i) Credit risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Credit risk mainly arises from financial assets, and is managed on a company-wide basis. The company does not grade the credit quality of financial assets that are neither past due nor impaired.

Credit risk on financial assets with banking institutions is managed by dealing with institutions with good credit ratings and placing limits on deposits that can be held with each institution.

Credit risk on trade receivables is managed by ensuring that credit is extended to customers with an established credit history. The credit history is determined by taking into account the financial position, past experience and other relevant factors. Credit is managed by setting the credit limit and the credit period for each customer. The utilisation of the credit limits and the credit period is monitored by management on a monthly basis.

The maximum exposure of the company to credit risk as at the balance sheet date is as follows:

Fully Past due but Past due and performing not impaired impaired Total Kshs ‘000’ Kshs ‘000’ Kshs ‘000’ Kshs ‘000’

31 December 2013

Receivables and due from reinsurance 197,958 258,388 - 456,346Due from reinsurers 52,759 - - 52,759Cash and bank balances 212,482 - - 212,482 Gross financial assets 463,199 258,388 - 721,588 31 December 2012

Receivables and due from reinsurance 161,326 273,665 - 434,991Cash and bank balances 198,118 - - 198,118Gross financial assets 359,444 273,665 - 633,109

Past due amounts are those beyond the maximum established credit period of 90 days and represent slow but paying customers. The receivables continue to be serviced even though this is not done on the contractual dates. The finance department is actively following these receivables.

ii) Liquidity risk

Liquidity risk is the risk that the company will encounter difficulty in meeting obligations associated with financial liabilities. The board has developed a risk management framework for the management of the company’s short, medium and long-term liquidity requirements thereby ensuring that all financial liabilities are settled as they fall due. The company manages liquidity risk by continuously reviewing forecasts and actual cash flows, and maintaining banking facilities to cover any shortfalls.




The table below summarises the maturity analysis for financial liabilities to their remaining contractual maturities

Less than Between Between Over one month 1-3 months 3-12 months 1 year Kshs ‘000’ Kshs ‘000’ Kshs ‘000’ Kshs ‘000’

31 December 2013

Other payables 15,315 4,829 - - Borrowings - bank loan - 16,854 - Gross financial liabilities 15,315 4,829 16,854 - 31 December 2012

Other payables 11,952 5,036 - -Borrowings - bank overdraft - 9,004 - - Gross financial liabilities 11,952 14,040 - -

iii) Market risk

Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate because of changes in market price and comprises of:

Interest rate risk

Short term bank deposits: If the interest rates on the company’s short term bank deposits at the year- end were to increase/decrease by 5%, with all other factors remaining constant, the profit for the year would be lower/higher by Kshs. 2,330,537.

Borrowings: If the interest rates on the company’s borrowings at the year-end were to increase/decrease by 5%, with all other factors remaining constant, the profit for the year would be lower/higher by Kshs. 25,138.

Currency risk

The Company transactions are largely denominated in Kshs and as a result not over - exposed to currency risk.Nevertheless the company is exposed to foreign exchange risk aring from various currencies,primarily with respect to the US Dollar. This is the case particularly on reinsurance transactions that involve foreign based reinsurance companies and to a limited extent on the dollar denomianted investments.

At 31 December 2013 if the shilling weakened/strengthened by 5% against the US dollar with all other variables held constant, post tax profit for the year would have been Kshs. 6,091 ( 2012: Kshs. 7,961) higher/ lower, mainly as a result of US dollar bank balances.

Other price risk

Other price risk arises on financial instruments because of changes in the price of a financial instrument. The company is exposed to other price risk on its investment in quoted shares. If the price of available- for-sale financial assets decreased/increased by 5%, with other factors remaining constant, other comprehensive income would decrease/increase by Kshs 615,150 (2012: Kshs. 715,683). (Incase of financial assets at fair value through profit or loss, the impact would be on profit).




b) Capital managementThe company’s objective in managing its capital is to ensure that it supports the development of its business and is able to continue as a going concern, while at the same time maximising the return to its shareholders. The company is subject to minimum capital requirements of an insurer dealing with general insurance business of Kshs. 300,000,000 as per the Kenyan Insurance Act.

The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to stakeholders through the organization of the debt and equity balance.

The capital structure of the company is as shown below.

2012 2011 Kshs ‘000’ Kshs ‘000’

Share capital 300,000 300,000Revaluation reserves 263,772 217,072Retained earnings 137,625 115,308Proposed dividend 7,500 7,500 708,897 639,880

Consistent with others in the industry, the company monitors capital of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings less cash and cash equivalents. The gearing ratio at the year-end was Nil, (2012: Nil).

4 Profit before tax

a) Items charged

2013 2012 Kshs Kshs

Profit before taxation for the year was arrived at after charging:

Auditors remuneration 2,210,670 2,009,700Depreciation 3,634,246 5,615,698Director remuneration - as remuneration 20,248,948 20,174,904 - as fees 4,156,800 3,600,000

b) Management expensesManagement expenses are allocated to each class of business in the proportion that the net premium from that class bears to the total net premium. Directors fees, bad debts and depreciation of fixed assets are not allocated to the revenue accounts but are charged directly to the income statement.




5 Taxation 2013 2012 Kshs Kshs Statement of comprehensive income

Corporation tax at 30% on taxable profit for the year (2012: 30%) 5,297,161 23,207,937Under/(over) provision in prior years 906,336 227,478Deferred tax (Note 11) (701,649) (1,050,530)Tax charge 5,501,848 22,384,886 Reconciliation of tax expense to tax based accounting profit/(loss). Accounting profit before tax 55,040,583 89,488,390 Tax thereon at 30% (2012: 30%) 16,512,175 26,846,517Effect of - items not subjected to income tax (15,431,737) (9,664,318) - expenses not deductible for tax purpose 4,216,723 6,025,739Under/(over) provision in prior years 906,336 227,478Deferred tax (701,649) (1,050,529) 5,501,848 22,384,886 Statement of financial position Balance as at 1 January (232,373) 1,706,098Corporation tax for the year 5,297,161 23,207,937Under/(over) provision in prior years 906,336 227,478 5,971,125 25,141,513Tax paid (26,387,072) (25,373,886)Balance as at 31 December (20,415,947) (232,373)




6 Property and equipment

Office equipment Leasehold Motor , furniture Computer buildings vehicles & fittings Equipment Total Kshs Kshs Kshs Kshs Kshs

Cost or valuation:

At 1 January 2012 106,350,000 9,618,570 23,030,405 25,602,479 164,601,454Investment property* (20,000,000) - - - (20,000,000) 86,350,000 9,618,570 23,030,405 25,602,479 144,601,454 Revaluation 10,150,000 - - - 10,150,000Addition - 4,449,555 814,184 916,223 6,179,962Disposal - (1,050,000) - - (1,050,000) At 31 December 2012 96,500,000 13,018,125 23,844,589 26,518,702 159,881,416 At 1 January 2013 96,500,000 13,018,125 23,844,589 26,518,702 159,881,416Revaluation 14,675,000 - - - 14,675,000Addition 1,741,000 388,384 828,827 2,958,211Disposal - (1,965,070) - - (1,965,070) At 31 December 2013 111,175,000 12,794,055 24,232,973 27,347,529 175,549,557

Depreciation:

At 1 January 2012 - 8,538,571 15,984,725 23,168,139 47,691,435Disposal - (1,049,000) (1,049,000) Charge for the year - 2,535,625 1,177,892 1,902,181 5,615,698 At 31 December 2012 - 10,025,196 17,162,617 25,070,320 52,258,133 At 1 January 2013 - 10,025,196 17,162,617 25,070,320 52,258,133Disposal - (1,964,070) - - (1,964,070) Charge for the year - 1,457,111 1,114,353 1,062,782 3,634,246At 31 December 2013 - 9,518,237 18,276,970 26,133,102 53,928,309 Net book value:

At 31 December 2013 111,175,000 3,275,818 5,956,003 1,214,427 121,621,248 At 31 December 2012 96,500,000 2,992,929 6,681,972 1,448,382 107,623,283

Value of leasehold building is per valuation carried out during the year by Messrs Primeland (M) Valuers based on an open market value on 31 December 2013. Messrs Primeland (M) Valuers is an independent registered valuer who holds a recognised and relevant professional qualification and has recent experience in the location and category of investment property being valued.




7 Investments property 2013 2012 Kshs Kshs At 1 January 219,500,000 173,650,000Leasehold building (note 6) - 20,000,000 219,500,000 193,650,000 Fair value gain 32,025,000 25,850,000 At 31 December 251,525,000 219,500,000

Value of investment property is per valuation carried out during the year by Messrs Primeland (M) Valuers based on an open market value on 31 December 2013. Messrs Primeland (M) Valuers is an independent registered valuer who holds a recognised and relevant professional qualification and has recent experience in the location and category of investment property being valued.

8 Intagible assets 2013 2012 Kshs Kshs

Software costsCost At 1 January 7,914,100 4,434,100 Additions 4,000,750 3,480,000 At 31 December 11,914,850 7,914,100 Amortisation At 1 January 3,968,263 1,330,230 Charge for the year 3,971,615 2,638,033 At 31 December 7,939,878 3,968,263 Net book value 3,974,972 3,945,837

9 MortgagesThe company holds collateral against loans to loanees in the form of mortgage. Estimates of fair values are based on the value of collateral assessed at the time of borrowing and are not up dated except when a loan is individually assessed as impaired.

10 Financial assets

2013 2012 Kshs KshsNon-current:

Held-to-maturity investments - Government securities 221,200,000 253,200,000

Available-for-sale financial assets - Equity investments 61,636,105 49,333,110

282,836,105 302,533,110

The fair values of the held-to-maturity assets at the balance sheet date were:

Non-current: Government securities 221,200,000 253,200,000




10 Financial assets (Continued)The fair values of held to maturity investment securities are based on prices published by brokers. Fair values of term deposits are based on discounted cash flows using a discount rate based on current market rates offered for deposits with similar maturity dates.

The categorisation of assets carried at fair value by the levels defined below is as follows:

Level 1 Level 2 Level 3 Total Kshs Kshs Kshs Kshs

At 31 December 2013

Available-for-sale financial assets

Equity investments 61,636,105 - - -

At 31 December 2012

Available-for-sale financial assets

Equity investments 49,333,110 - - -

The levels in fair value hierarchy used above within which the fair value measurement is categorised are defined as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets;

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset, either directly (i.e. as prices) or indirectly (i.e. derived from prices);

Level 3: inputs for the asset that are not based on observable market data.

11 Deferred taxThe deferred income tax is calculated using the enacted income tax rate of 30% (2012: 30%). The movement on the deferred income tax account is as follows:

2013 2012 Kshs Kshs

At the start of the year (1,175,923) (125,394)

Charge/(credit) to profit and loss account (Note 5) (701,649) (1,050,530)

At the end of the year (1,877,572) (1,175,923)




11 Deferred tax (Continued)Deferred tax assets and liabilities, deferred tax charge/ (credit) in the profit and loss account and in equity are attributable to the following items:

Charge/(Credited) 2013 2012 to P & L Kshs KshsAccelerated tax depreciation (701,649) (1,877,572) (1,175,923)

Net deferred tax asset (701,649) (1,877,572) (1,175,923)

12 Business receivableThese are amounts due from agents, brokers and insurance contract holders. If there is abjective evidence that the insurance receivable is impaired, the company reduces the carrying amount of insurance receivable accordingly and recognises that impairment loss in the statement of comprehensive income.

13 Other receivableThese include: deposits and prepayments; sundry receivables and staff loans.

14 Amount due from reinsuranceThese are amounts recoverable from the reinsurers out of reinsurance arrangements and are non interest bearing.

15 Cash and cash equivalents 2013 2012 Kshs KshsShort-term bank deposits 185,307,313 161,741,675

Cash at bank 27,046,993 36,270,547

Cash in hand 127,708 106,058

212,482,014 198,118,280

For the purpose of the cash flow statement, cash and cash equivalents comprise cash in hand and deposits held at call with banks, net of bank overdrafts. In the balance sheet, bank overdrafts are included in borrowings under current liabilities. The year-end cash and cash equivalents comprise the following:

2013 2012 Kshs KshsCash and bank balances as above 212,482,014 198,118,280

Bank overdraft (Note 20) - (9,003,707)

212,482,014 189,114,573




16 Share capital 2013 2012 Kshs KshsAuthorised: 4,000,000 ordinary shares of Kshs 100 each 400,000,000 400,000,000

Issued and fully paid: 3,000,000 ordinary shares of Kshs 100 each 300,000,000 300,000,000

17 Revaluation reserve

At 1 January 217,072,036 181,072,036

Movement during year:

Property and equipment 14,675,000 10,150,000

Investments property 32,025,000 25,850,000

At 31 December 263,772,036 217,072,036

18 Other payable These are the amounts payable to the suppliers at the end of the year.

19 Borrowings 2013 2012 Kshs KshsThe borrowings are analysed as follows:

Current: Bank overdraft - (9,003,707)

Bank loan (16,854,181) -

(16,854,181) (9,003,707)

20 Kenya motor insurance poolThe bank loan is secured by fixed deposits.

Pool (surplus)

deficit for the Company

Pool year year share % 2013 2012

Kshs Kshs Kshs 1985 - 3 .45 - -

1986 (2,809,522) 3.60 - (95,570)

1987 (6,179,250) 3.65 - (217,833)

1988 35,267,374 3.77 - 1,329,580

- 1,016,178

21 Staff costSalaries and wages 85,845,288 83,873,157

Staff welfare 1,096,515 1,419,784

Staff training 1,536,275 2,073,604

Pension contribution 5,978,261 5,390,744 94,456,339 92,757,289



2013 • ANNUAL REPORT & FINANCIAL STATEMENTS For the year ended 31 December 2013 Corporate Social Responsibility

22 Contingent liabilitiesThe company is a defendant in various pending cases in courts of law. These cases arise in the normal course of company business. In the opinion of the directors, after taking appropriate legal advice, the outcome of the pending litigations will not give rise to any material losses to the Company.

23 CurrencyThe financial statements are presented in Kenya Shillings (Kshs).

24 ComparativesWhere necessary comparative figures have been adjusted to conform to changes in presentation in the current year.

25 IncorporationThe company is domiciled and incorporated in Kenya under the Kenyan Companies Act.



Intra Africa Assurance staff at a team building workshop

Intra Africa Assurance members of staff pose for a photo during the team building workshop at Lukenya in October 2013

Corporate S

ocial

Respons

ibility

Intra Africa Assurance

Company Muthoni Gachecheh (right)

presents a Shs 999,999.99 sponsorship cheque to

Kenya Diabetes Management & Information Centre Executive Director Ms Eva Muchemi and Dr Eva Njenga

of....in support of the 2014 annual Golf tournament held at Muthaiga Golf Club on Friday 14th February 2014, Looking

on is Mr Wanjiku Muchemi

INTRA AFRICA ASSURANCE COMPANY LIMITED • 2012 ANNUAL REPORT & FINANCIAL STATEMENTS


34

The Centre Point Building 2nd Flr, Parklands Road

P.O. Box 49884-00100, Nairobi, Kenya

Tel: 3743991/955, Fax 3743460

Mobile: 0736 835 333, 0721 635 333

Email: [email protected], www.intraafrica.co.ke

2013 - intra africa assurance | homeintraafrica.co.ke/assets/files/2013 final report.pdf · 2013...

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