var textForPages = ["ANNUAL REPORT AND FINANCIAL STATEMENTS 20162016ANNUAL REPORT AND FINANCIAL STATEMENTS 1","ANNUAL REPORT AND FINANCIAL STATEMENTS 20162","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016TABLE OFCONTENTSCompany Information 6Group Structure 7Board of Directors 8Management Team 10Chairman’s Statement 14 - 16Financial Highlights 18Corporate Governance Statement 20 - 21Corporate Social Responsibility 24 - 25Report of the Directors 26Statement of Directors’ Responsibilities 27Report of the Consulting Actuary 28Independent Auditor’s Report 29 - 31FINANCIAL STATEMENTS 36 37 Statement of Comprehensive Income 38 Statement of Financial Position 39 Statement of Changes in Equity 40 - 47 Statement of Cash Flows 48 - 74 Accounting Policies Notes to the Financial Statements SUPPLEMENTARY INFORMATION 75 Underwriting Revenue Account 3","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 STRONG & FEARLESS4","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 MISSION We put smiles on thefaces of our stakeholders. VISION We are the region’s most respected group, creating and protecting wealth. 5","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 COMPANY INFORMATION The board of directors and senior management were as follows: BOARD OF DIRECTORS REGISTERED OFFICE J N Gitoho - Chairman Apollo Centre, 07 Ring Road Parklands, Westlands P O Box 30065 - 00100 D M Ndonye Nairobi A K M Shah* PRINCIPAL BANKERS S M Shah Commercial Bank of Africa Limited P O Box 30437 - 00100 R Schnarwiler** Nairobi Standard Chartered Bank Kenya Limited R M Ashley* P O Box 30001 - 00100 Nairobi P Shah* (Appointed on 30 September 2016) INDEPENDENT AUDITOR B M Shah (Resigned on 30 September 2016) PricewaterhouseCoopers *British **Swiss Certified Public Accountants (Kenya) PwC Tower, Waiyaki Way/ Chiromo Road, SECRETARY Westlands P.O. Box 43963 – 00100 P H Shah Nairobi Certified Public Secretary (Kenya) APPOINTED ACTUARY SENIOR MANAGEMENT Alexander Forbes Financial Services (East Africa) Limited J Kigochi - Chief Finance Officer Landmark Plaza, Argwings Kodhek Road P O Box 52439 – 00200 Nairobi P Khimasia - Chief Business Development Officer HEAD OFFICE SJ Njoroge - Chief Operations Officer Apollo Centre, 07 Ring Road Parklands, Westlands M Naul - Director of Operations P O Box 30065 - 00100 Nairobi Tel: +254 (0) 20 2862000 C Kamau - Director of Business Development A Mabuka - Director of Business Development S Gichuhi - Head of Health Business Development S Goswami - Head of Health Claims L Kuria - Head of Care Team C Wambua - Head of Micro Insurance & Agribusiness J Tonui - Group Head of Corporate Communications J Bogonko - Group Head of Customer Service C Ngala - Group Head of Internal Audit J Nyakomitta - Group Chief Information Officer J Nguli - Group Head of Human Resources6","Apollo Investments Limited KENMAC (Holding55C%ompany) APA InsMurINaOnRcITeIES Apollo SWISS AREPA Life Limited18% As2s7u%rance Limited Investments (General Insurance) Limited (Life Insurance & Pension) (Holding Company) 40%APA Insurance GordAoPnA LCifoe urt Gordon Court AAppoollloloAsAsestset APA Insurance Limited AssLuirmanicteeLdimited Limited M(MAsasaentn&aaLWLgigemeiamltemhitMmeeiatdnnaeetgeCdnmeotnt.) Co. (uganda) Limited (General Insurance) (Life Insurance & Pension) (Property Management) (Asset & Wealth (General Insurance) Management) (Property Management) Reliance34% Insurance (Tanzania) Limited Reliance(General Insurance) APA Insurance Insurance (Uganda) Limited 34% (Tanzania) Limited (General Insurance) (General Insurance) 7","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016BOARD OFDIRECTORS1 23 4 58","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 1 A SHOK SHAH - Director 2 SM SHAH - Director 3 JAMES GITOHO - Chairman 4 DANIEL NDONYE - Director 5 PIYUSH SHAH - Director 6 RICHARD M ASHLEY - Director 7 RETO SCHNARWILER - Director 8 JOHN PIPER - Swiss Re Board Observer6 7 9 PRATUL SHAH - Company Secretary POWER OF THE PRIDE A pride of lions bring to the table the best of individual skills bonded together with sound5communication and focus on ambitious goals. The success is often a result of great teamwork. Meet the Board of Directors, our pride.689 9","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 MANAGEMENT TEAM 1 3 4 5 2 8 67 1. JACKIE TONUI - Group Head of Corporate Communications 2. SHEILA GICHUHI – Head of Health Business Development 3. JAMES NYAKOMITTA - Group Chief Information Officer 4. MANJU NAUL – Director of Operations 5. CAROLINE KAMAU - Director of Business Development 6. CHRIS NGALA – Group Head of Internal Audit 7. JUDITH BOGONKO – Group Head of Customer Service 8. SJ NJOROGE – Chief Operations Officer 9. LUCY KURIA - Head Of Care Team 10. SHALINI GOSWAMI – Head of Health Claims10","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 10 11 12913 15 1411. AMOS MABUKA - Director of Business Development KEEPING THE12. CHARLES WAMBUA – Head of Micro Insurance/Agri Business PRIDE ALIVE13. JOHN KIGOCHI – Chief Finance Officer14. JULIANA NGULI - Group Head of Human Resources While the male lions provide15. PARUL KHIMASIA – Chief Business Development Officer protection, it’s the lionesses that do the majority of the hunting and feed the entire pride. Right from strategizing and marking the prey to stealthily closing in, chasing it and finally bringing it down. Hunting is pure teamwork. Meet the APA management team that steers the company. 11","12","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 MARINE INSURANCE A lion may be the king ofthe jungle but he does not like water and swimming unless it is absolutely necessary. Even the king is wary of the dangers of certain water-dwellingpredators in the wild, such as crocodiles. Similarly, when you have marine cargo, do not fear. Choose APA Marine Comprehensive Insurance Cover to protect your goods, freight and other interests from the port of loading to the final destination. 13","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 CHAIRMAN’S STATEMENT JAMES GITOHO In the United States, the Federal Reserve Bank raised interest rates by 25bps during their December 2016 meeting to between 0.50% CHAIRMAN - 0.75%, from 0.25% - 0.50% previously. This was one of their most significant monetary policy announcement during 2016 and the It’s my great pleasure to present the 2016 annual report and second rate hike in ten years. Indeed, by the end of 2016 there financial statements for APA Insurance Limited. The company was uncertainty on the policy direction to be adopted by the new continued to perform well despite the various challenges in our administration that would inevitably affect the global economies. operating environment. Economy and business environment overview Global overview Kenya continued to experience dynamic changes and development The global economic growth rate remained flat at 3.1% in 2016 focusing on improving the lives and incomes of its citizens through as a result of a slowdown in both the developed and emerging creating stable macroeconomic policies despite a volatile global economies. business environment. There is continued investment in key sectors to spur economic growth. Consistent with its performance in recent One of the significant and unexpected geo-political event during years, economic growth continued and was estimated at 5.9%, a 2016 was Brexit, where the United Kingdom voted to leave the five-year high. This growth culminated from a stable macroeconomic European Union. This step may eventually lead to a decline in intra- environment, low oil prices, and slow rebound in tourism, strong regional trade, create uncertainty over jobs in the UK and hurt remittance inflows, and public spending. Despite slowing down in consumer spending. Both the United Kingdom and the Eurozone the second half of the year, Kenya’s economy continued to be a star region will feel the impact of this decision but in different measures performer in the East African region. The Kenya Shilling remained and expectation is that administrators will work hard to minimise relatively stable during the year. any adverse impact. The annual inflation increased to close the year at 6.28% an increase from 5% in May 2016. This was due to food shortages following failed rains, in the latter part of the year, resulting to an overall consumer price index to rise to 175.18 in December 2016 compared to 164.72 in December 2015. The equity market continued its bearish run with NASI, NSE 20 and NSE 25 losing 8.5%, 21.1% and 15.8%, respectively. The enactment of the Banking (Amendment) Act 2015 that imposed an interest rate cap, saw a major fall in the values of banking stocks and reduced rates on deposits. Yields on government securities remained relatively stable during the year given the improved liquidity position in the money market. The insurance sector has seen several mergers and acquisitions in addition to several global brands entering the market. Several major banks have obtained licences as insurance agents and have increased the distribution but unfortunately increased competition. The Insurance Regulatory Authority has proposed some regulations on bancassurance through amendment to the Act. The Insurance Regulatory Authority, has embarked on the implementation of a Risk Based Capital (RBC) framework. Coming on top of the Risk Based Supervision (RBS) framework, it places strong emphasis on ensuring the adequacy of the insurers and reinsurers risk management system, with minimum capital levels being based on their specific risk profile. The board and management remain vigilant towards ensuring that the Company is compliant with these guidelines and regulatory requirements. Due to the overcapacity, the insurance industry continues to be fraught with unhealthy business competition leading to undercutting, high levels of fraudulent claims, fragmented approach to common industry issues and inadequate capacity to underwrite specialised risks like oil & gas and some of the mega infrastructure projects. The motor private class continue to erode the industry performance with recurring huge underwriting losses.14","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016CHAIRMAN’SSTATEMENT (continued)Claims in the commercial vehicle class are slowly increasing and Awards and recognitionrequires insurers to change their approach in order to generateadequate returns from these classes. During the year, the company received various awards and accolades, thanks to the unwavering support of our clients and business partners.The industry will no doubt, see a shift in the regulatory structure Some of the awards were:from the proposed establishment of the Financial ServicesAuthority (FSA). This will merge the Capital Markets Authority • Socially responsible corporate award – winner(CMA), the Insurance Regulatory Authority (IRA), the RetirementBenefits Authority (RBA) and the Sacco Societies Regulatory • General insurer of the year – 1st runners upAuthority (SASRA). This is intended to provide consolidatedsupervision and eliminate regulatory gaps. We hope that this • Marketing initiative of the year – 2nd runners upmove will not lead to bureaucracies but will enhance efficienciesand improve on the industry performance and benchmarking. • Judges choice of the most improved general insurerFinancial performance These awards which are wide ranging is a clear testimony of the commitment by our staff and I congratulate the team.The company continued to review the book in line with its strategicinitiatives of optimizing a profitable market share. This initiative Regional presencecontributed to a 2.7% decline in premium income to Shs 8.99billion from Shs 9.24 billion in 2015. The underwriting result was The Apollo group has operations in Kenya, Uganda and Tanzania withimpacted by both the premium shortfall and certain exceptional elaborate branch network for prompt service. APA footprint in Kenyaitems amounting to Shs 178 million. The company registered an stands at more than 30 and still growing in line with our businessunderwriting loss of Shs 127.4 million against Shs 78.5 million plans. Nanyuki and Nyali offices were the recent additions and weprofit in 2015. The medical portfolio registered an underwriting expect their positive contributions and reach going forward.profit of Shs 84.9 million (2015: Shs 2.4 million). In Tanzania, our associate company, Reliance Insurance CompanyThe profit before taxation for the year is Shs 808.5 million from (Tanzania) Limited where we are the largest single shareholder wasShs 863.2 million in 2015, a 6.3% decrease. Despite the decrease, equally affected by heavy competition and deteriorating underwritingthe capital adequacy ratio improved in the year. The board has practices. The company had a 30% premium income decline to Kenyaconsidered and recommends a dividend of Shs 200 million (2015: shillings 1.19 billion and a total asset base of Kenya shillings 1.93Nil), a clear testament of the confidence and positive outlook in billion.your company. Changes to the boardOther comprehensive income In September, Mr. Budhichand Mepa Shah resigned as a director ofAs enumerated on the micro economic highlights, the real the company. BM Shah is a founding director of the company and hasimpact by the company was felt through the marked to immensely contributed to it’s growth and development. The boardmarket revaluations. In 2016, the company recognised other appreciates and acknowledges the invaluable contribution by BMcomprehensive loss amounting to Shs 270.5 million (2015: Shs Shah as director in the board over the years.491.7 million) mainly due to fall of quoted equities with a fairvalue loss of Shs 307.8 million (2015: Shs 338.8 million). This has The board also accepted the nomination of Mr. Piyush Mepa Shah tonecessitated a rebalancing of our quoted equities portfolio and replace Mr. BM Shah in the board. I welcome Mr. Piyush Shah to thecreation of core and trading stocks to cushion against such falls. Board and look forward to tapping his vast knowledge and experienceThe overall portfolio has reduced by 28% in the year to Shs 1.5 as we take the group to the next level.billion. OutlookDespite the impact of the fair value loss on some financial assets,the shareholders’ funds grew by 7.8% to Shs 5.26 billion. The In our effort to streamline processes and provide an enhancedmanagement and board continue to monitor the adequacy and customer experience, the company embarked on replacing itsmix of these reserves in light of the Risk Based Capital model to current systems with a new integrated general insurance system. Theensure an adequate buffer above the regulatory requirements is implementation commenced in 2016, and went live on 2nd May 2017.maintained at all times. It is expected that as all the modules are incorporated, clients will see a major improvement in our processes and service delivery. 2017 being an election year, we are cautiously optimistic that the resilience and economic growth targets will be achieved in the midst of intense political competition. Needless to state that the economy still remains vulnerable to the electioneering cycle as the business community and investors take a wait and see approach. Tourism will generally be affected due to perceived threats. The economy is still engulfed with the drought that has adversely impacted several counties in 2016/7 and the national food basket provision is at risk. 15","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 CHAIRMAN’S STATEMENT (continued) Appreciation Finally, to my fellow directors, thank you for your commitment, support and considered advice that is so essential in this extremely On behalf of the Board, I wish to express our sincere gratitude to competitive and specialised industry. our clients, insurance intermediaries, reinsurers, business partners, suppliers, service providers, shareholders and the regulatory Chairman authorities for the business and support throughout the year. 15 March 2017 I recognise and appreciate the management and staff of the company for the loyalty, dedication and hard work that has made these results possible.16","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 MOTOR INSURANCE Lions wander a territory of 100 square miles (259square kilometers) in search of food and water.Fortunately we have modern cars to take us wherever we go and products like APA Bima Bamba that offer flexible insurance payment plans to make our car ownership experience even more comfortable. 17","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 FINANCIAL GROSS WRITTEN PREMIUM HIGHLIGHTS TOTAL ASSETS 18000 10000 9242 8996 16000 9000 14000 15702 16334 8000 7804 12000 7000 10000 14405 6000 5000 8000 13296 4000 6554 6000 3000 4000Shs millions 2000 5590 2000 Shs millions 1000 9489 0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 PROFIT BEFORE TAX GROSS CLAIMS PAID 1000 838 863 7000 5969 5974 900 808 6000 800 5000 700 609 4000 600 3000 500 281 2000 400Shs millions 1000 5558 300 Shs millions 200 0 3900 100 0 2712 2012 2013 2014 2015 2016 2012 2013 2014 2015 201618","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 JAMII PLUS Lions are the only social cat species living in a close-knit family structure called a Pride. All members of the pride have a sense of loyaltytowards each other. While females may hunt and bring up the young ones, the larger males guard and protect the pride’s territory.The APA Jamii Plus Coveris a comprehensive health insurance product thatcovers all family membersfrom the age of 3 months to 75 years. After all, family comes first. 19","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 CORPORATE GOVERNANCE STATEMENT INTRODUCTION Below are the key features of the existing corporate governance practices within the company which are reviewed and improved on Good corporate governance is key to the integrity of corporations, a regular basis: financial institutions and markets and is central to the health of our economies and their stability. Corporate governance plays a 1 Board of directors leading role in making certain how corporations and their boards and management are directed, controlled and held to account. The Board of Directors consists of seven directors out of which Corporate governance therefore encompasses the systems, three are independent non-executive directors. The Chairman practices and procedures by which the individual corporation of the Board is a non-executive director and the Board meets regulates itself in order to remain competitive, ethical, sustainable formally at least four times a year. and fair. The Board is responsible for setting the direction of the company The Board of APA Insurance Limited follows principles of through the establishment of strategic objectives, key policies openness, integrity and accountability in its stewardship of the and the approval of budgets. It monitors the implementation of company’s affairs. It recognises the developing nature of corporate strategies and policies through a structured approach to reporting governance and assesses the company’s compliance with generally by executive management and consequent accountability. accepted corporate governance practice on a regular basis, directly and through its Board committees and Management. The role of The directors are actively involved in and bring strong independent the Board is to ensure conformance by focusing on and providing judgement on Board deliberations and discussions. These the company overall strategic direction and policy-making as well as directors have a wide range of knowledge and experience of performance review through accountability and ensuring appropriate local and international markets that is applied to the formulation monitoring and supervision. The Board is also responsible for the of strategic objectives and decision making. overall system of internal control and for reviewing its effectiveness. The controls are designed to both safeguard the company’s assets All directors have access to the advice and services of the and ensure the reliability of financial information. Company Secretary and are entitled to obtain independent professional advice on the company’s affairs. A senior management team, comprising executive directors, divisional directors and senior managers meets regularly to consider The Board meets regularly and retains full and effective control issues of operational and strategic importance to the company. over the company in all strategic, financial, operational and compliance areas. In 2016, four board meetings were held and the attendance by the directors was as follows: Director Total board meetings in the year that Number of board meetings the director was eligible to attend attended JN Gitoho - Chairman DM Ndonye 44 AKM Shah 44 SM Shah 44 R Schnarwiler 44 R M Ashley 44 P Shah (Appointed on 30 September 2016) 44 1120","GOVERNANCE STATEMENT ANNUAL REPORT AND FINANCIAL STATEMENTS 2016CORPORATEGOVERNANCE STATEMENT (continued)To assist the Board in the discharge of its responsibilities, Board 2 Internal controlscommittees have been established. All the Board committees meetat least four times a year. The committees are as follows:- The company has implemented and maintains internal controls designed to provide reasonable assurance as to the integrity and (a) Audit and risk committee reliability of the financial statements and to adequately safeguard and maintain accountability of the company’s assets. Such The audit and risk committee comprises three non-executive controls are based on established policies and procedures and are directors. The committee is responsible for, inter alia, implemented by trained personnel with appropriate segregation developing and advising on audit and financial controls and of duties. The effectiveness of the system of internal controls is compliance issues of the company. It also defines the scope of monitored regularly through internal audit function, operational the internal audit function and acts as a liaison between the meetings and the annual external audit. external auditors and management. The current members of the committee are R Schnarwiler (Chairman), JN Gitoho, SM 3 Related party transactions and directors’ Shah and DM Ndonye. remuneration (b) Information and communication technology The related parties’ transactions with the group companies during (ICT) committee the year ending, 31 December 2016 are detailed under note 35 of these annual report and financial statements. The ICT committee comprises one non-executive director, the professional nominated under shareholders agreement. The The remuneration for non-executive directors consists of fees and committee provides guidance to the Board on ICT requirements sitting allowances for their services in connection with the Board for the company, provide assurance that the ICT systems in and committee meetings. These fees and allowances are approved place are able to generate accurate and timely management by the members at the annual general meetings. reports and also review ICT budgets and recommend for their adoption by the Board. The committee also ensures that there The aggregate amount of directors remuneration for services are business continuity plans in place for the company. The rendered during the year ending 31 December 2016 are contained current members of the committee are PH Shah (Chairman) and under note 35 of these annual report and financial statements. AKM Shah. 4 Social and environmental responsibilities (c) Investment committee The Board is conscious of the company’s social and environmental The Board has an investment committee comprising three non- responsibilities. Particular attention is given to projects with a executive directors and the Executive Director. This committee long time positive impact to the society and environment. These is responsible for determining the company’s overall investment include employees’ welfare programmes, education and health strategy and monitoring its implementation. The current activities, empowering the youth and provision of clean and safe members of the committee are DM Ndonye (Chairman), SM drinking water. The company encourages staff to participate and Shah, RM Ashley and AKM Shah. actively supports them in various causes. (d) Remuneration committee 5 Going concern The remuneration committee currently consists of three non- The directors confirm that the company has adequate resources executive directors and the Executive Director. Its primary to continue in business for the foreseeable future and therefore objective is to ensure that the right calibre of management the continued use of going concern as a basis of preparing the is recruited and retained and set guidelines for remuneration financial statements is appropriate. of staff. The non-executive directors on the committee are responsible for agreeing the terms of service in respect of the executive directors. The committee is also responsible for ensuring that the terms and conditions of service for management and staff is fair, appropriate and reflect the market conditions. The current members of the committee are JN Gitoho (Chairman), R Schnarwiler, DM Ndonye, P Shah and AKM Shah.James Gitoho Ashok ShahChairman Director15 March 2017 21","ANNUAL REPORT AND FINANCIAL STATEMENTS 201622","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 CORPORATE SOCIALRESPONSIBILITY 23","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 CORPORATE SOCIAL RESPONSIBILITY “ O UR PROJECTS FOCUS ON IMPACTING POOF LSIFIET”I.VELY Apollo Group CEO Ashok Shah, helps a resident of Kyandune village fetch water from a borehole. Pumping the water is Utooni Development Organisation Board Member ON THE QUALITY Esther Ithao. Overview APA Apollo Foundation As an insurance company, we provide essential services to the APA Apollo Foundation, previously known as ‘Amini Poa Maji community. We play a role in connecting people with each other, Maisha,’ is the umbrella trust funded by APA/Apollo Group and with other communities and key community services. The operation contributes towards the construction of sand dams. The trust has of our services touches on all members of the community with the been in existence since 2006 and has constructed 14 sand dams potential to impact positively on their quality of life. We also operate in arid and semi-arid areas of Kenya (Machakos, Makueni and from a significant number of properties and have responsibility Kajiado counties). to those living and working nearby as well as being a significant employer; directly employing over 400 staff. The strategic goal is to enhance food security for all in society by providing communities in semi-arid areas, accessibility to reliable Our relationships with the local communities we serve are therefore water supply. This is achieved by the construction of sand dams very important to us and are an essential part in the growth of our on dry river beds to harness the water that only flows during rainy business. When developing our products & services, we have a role seasons. The water is retained in the sand that is deposited behind to play in improving services for the community as a whole and not the dam. An artisan well with a hand pump is provided for easy just our individual customers. access by the community. The natural filtration through the sand gives clean drinking water that is used both for agriculture and Our objective remains to support sustainable projects that uplift the household. standards of communities that we partner with. In 2016, over 3,500 households that required water, the communities The group’s corporate social responsibility programs focus on four partnered with APA staff members and the Utooni Development key pillars: Organization; a non-government organisation that specializes in the construction of sand dams and built the three dams that will support 1. Sustainable clean water supply to communities these households in the long term. 2. Empowering the youth Some of the objectives that this project has met include: 3. Education and health activities and • Enhancing water security for all in the community 4. Environment conservation. • Increasing accessibility to clean water • Increase in food supply24","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016CORPORATESOCIAL RESPONSIBILITY (continued)• Reducing commuting for long distance to fetch water for women and the children• Ensuring that the community at large is able to participate in other income generating activities as long hours spent in fetching water have been reducedYouth initiative programmes APA Insurance CFO, John Kigochi presenting a scholarship cheque to the best girl and boy from Cheleta Primary School in the 2016 KCPE.(a) Education fund Apollo Group CEO Ashok Shah, at a tree planting exercise at CheletaThe APA bursary scheme was created to educate the top Primary School.achieving boy and girl from Cheleta Primary School and hailingfrom Githogoro village in the outskirts of Runda. The bursary fund 1, 5 0 0 NUMBER OF TREEScurrently in its 10th year and has 12 students benefitting from the PLANTED EVERY YEAR.program. APA promotes sporting activities by supporting the Runda Youth SportsCheleta School’s overall performance has greatly improved since Association (RYSA) football team.the bursary program was introduced with the mean score risingby over 50%. This is due to competition amongst the pupils. The 25bursary caters for the secondary education tuition and necessarypersonal effects.(b) Youth empowerment through sportsAPA promotes sporting activities by supporting the Runda YouthSports Association (RYSA) football team. The sponsorship includesthe fees for RYSA to participate in various leagues and providesthe football kits, logistics and team allowances.The RYSA football team participates in the Nairobi County leaguewhich is under the Football Kenya Federation. Overall the teamis currently at sixth position in a league of 13 teams. In addition,APA organizes tournaments for the team in order to boost andcontinue to nurture the soccer talents and positively engage theyouth in Mji wa Huruma and Githogoro villages.Environment conservationOur commitment to protecting and conserving the environment iscore to our business and it is our objective to plant and maintain atleast 1,500 trees every year. In partnership with Egerton University,we have created the Ngongogeri Park and every year we plant1500 seedlings with our staff and Egerton students. We are alsokey partners and sponsors in the annual “Run for Mau” marathon.Through the APA Apollo Foundation sand dam projects, we askthe benefiting communities to plant trees along the river bedsto help curb soil erosion, provide food as well as beautifying thelandscape. A minimum of ten trees are allocated for planting andmaintenance to each household that benefits from the sand dam.We have also partnered with “Friends of Karura” and “GreenlineProject” to plant trees in both the Karura forest and NairobiNational park in an effort to curb urban encroachement.Environment conservation has been embraced at departmentallevel by the APA staff through its annual departmental CSRactivities.","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 REPORT OF THE DIRECTORS The directors submit their report together with the audited financial for the year ended 31 December 2016, which disclose the state of affairs of APA Insurance Limited (the ‘Company’). The annual report and financial statements have been prepared in accordance with sections 147 to 163 of the repealed Companies Act - Cap 486, which remain in force under the transition rules contained in the Sixth Schedule, the Transitional and Saving Provisions of the Companies Act 2015. Incorporation The company is incorporated in Kenya under the Kenyan Companies Act as a private company limited by shares, and is domiciled in Kenya. The address and the registered office is set out in page 6. The company has investments in the following associated companies; • Reliance Insurance Company (Tanzania) Limited, incorporated in Tanzania as a private company limited by shares and is domiciled in Tanzania • G ordon Court Limited, incorporated in Kenya as a private company limited by shares and is domiciled in Kenya Principal activities The principal activity of the company is the transaction of general insurance business. Results and dividends Profit for the year of Shs 649,578,000 (2015: Shs 734,966,000) has been added to retained earnings. The directors recommend the payment of Shs 200,000,000 dividends in respect of the year (2015: Nil). Directors The directors who held office during the year and to the date of this report are set out on page 6. Auditor PricewaterhouseCoopers have confirmed their willingness to continue as auditors in office in accordance with Section 159 (2) of the repealed Companies Act (CAP 486). By order of the Board P H Shah Company Secretary Nairobi 15 March 201726","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016STATEMENT OFDIRECTORS’ RESPONSIBILITIESThe Kenyan Companies Act 2015 requires the directors to prepare financial statements for each financial year which give a true and fair viewof the financial position of the Company at the end of the financial year and its financial performance for the year then ended. The directorsare responsible for ensuring that the company keeps proper accounting records that are sufficient to show and explain the transactions ofthe company; disclose with reasonable accuracy at any time the financial position of the company; and that enables them to prepare financialstatements of the company that comply with prescribed financial reporting standards and the requirements of the Kenyan Companies Act2015. They are also responsible for safeguarding the assets of the company and for taking reasonable steps for the prevention and detectionof fraud and other irregularities.The directors accept responsibility for the preparation and presentation of these financial statements in accordance with International FinancialReporting Standards and in the manner required by the Kenyan Companies Act 2015. They also accept responsibility for: i. Designing, implementing and maintaining internal control as they determine necessary to enable the preparation of financial statements that are free from material misstatements, whether due to fraud or error; ii. Selecting suitable accounting policies and then apply them consistently; andiii. M aking judgements and accounting estimates that are reasonable in the circumstancesIn preparing the financial statements, the directors have assessed the company’s ability to continue as a going concern and disclosed, asapplicable, matters relating to the use of going concern basis of preparation of the financial statements. Nothing has come to the attention ofthe 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.The directors acknowledge that the independent audit of the financial statements does not relieve them of their responsibility.Approved by the board of directors on 15 March 2017 and signed on its behalf by:James Gitoho Ashok ShahChairman Director 27","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 REPORT OF THE CONSULTING ACTUARY TO THE MEMBERS OF APA INSURANCE LIMITED I have conducted an actuarial valuation of the insurer’s insurance liabilities as at 31 December 2016. The valuation was conducted in accordance with generally accepted actuarial principles and in accordance with the requirements of the Insurance Act, Cap. 487 of the Laws of Kenya. Those principles require that prudent principles for future outgo 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, I have relied upon the audited financial statements of the company. In my opinion, the insurer’s insurance liabilities reserves of the company were adequate as at 31 December 2016. Name of Actuary James I. O. Olubayi Fellow of the Institute of Actuaries (FIA) 15 March 201728","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016INDEPENDENT AUDITOR’S REPORT TO THEMEMBERS OF APA INSURANCE LIMITEDReport on the Financial StatementsOpinionWe have audited the accompanying financial statements of APA Insurance Limited (the “Company”) as set out on pages 36 to 74, whichcomprise the statement of financial position at 31 December 2016 and the statement of comprehensive income, statement of changes inequity and statements of cash flows for the year then ended, and the notes to the financial statements, including a summary of significantaccounting policies.In our opinion, the financial statements give a true and fair view of the financial position of the Company at 31 December 2016 and ofthe financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards and therequirements of the Kenyan Companies Act 2015.Basis for opinionWe conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are furtherdescribed in the Auditor’s responsibilities for the audit of the financial statements section of our report.We are independent of the company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics forProfessional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements inKenya, and we have fulfilled our ethical responsibilities in accordance with these requirements and the IESBA Code.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.Key audit mattersKey audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements ofthe current period. These matters were addressed in the context of our audit of the financial statements as a whole and in forming our opinionthereon.Key audit matter How our audit addressed the key audit matterDetermination of insurance contract liabilities Our procedures included:The insurance contract liabilities included in note 27a) of • We evaluated and tested controls around the claim handling and settlingthe financial statements is made up of reported claims and and how the claims are valued and managements review process overincurred but not reported (“IBNR”) claims. this valuation;The gross contract liabilities represent the ultimate cost of • We checked a sample of claims by comparing the recorded amounts tosettling all claims arising from incidents occurring prior to the the source documents such as the loss assessors reports;end of each reporting period, but not settled at that date. • W e performed reconciliations between the claims data and that used toThe estimation of outstanding claims involves significant calculate the reserves;judgement given the size of the liability and the inherentuncertainty in estimating expected future claims incurred. • W e performed a review of the methodology and assumptions usedThe IBNR reserve is determined annually by the Company’s by the appointed actuary to compute the actuarial reserves as atconsulting actuaries on the basis of the best information 31 December 2016. The valuation methods used are consistent withavailable at the time the records for the year are closed. generally accepted actuarial practice and adheres to the Insurance Regulatory Authority (IRA) guidelines on valuation of technical liabilities. • We compared the assumptions used to general industry practice. 29","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF APA INSURANCE LIMITED (continued) Report on the Financial Statements (continued) Key audit matters (continued) Key audit matter How our audit addressed the key audit matter Valuation of premium debtors Our procedures included the following: Premium debtors comprise a significant proportion of the assets • We evaluated and tested controls of the underwriting process which of the Company. included how premium is booked in the system to ascertain that the premium debtor balance was supported by valid debit notes; The nature of the insurance industry in Kenya is such that a significant amount of premium is received through intermediaries • O n a sample basis, we verified the make up of the outstanding debtor (agents/brokers). balances by reviewing the signed debit notes; The judgement involved in estimating the impairment provision • W e tested the process management has applied in making the required for uncollectable debtors is subjective and thus makes impairment provisions; this an area of significance. • We validated the debtors ageing and challenged management on the recoverability of overdue balances. Other information The directors are responsible for the other information. The other information comprises the information included in the annual report but does not include the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of management and those charged with governance for the financial statements The directors are responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards and the requirements of the Kenyan Companies Act 2015, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. The directors are responsible for overseeing the Company’s financial reporting process. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.30","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016INDEPENDENT AUDITOR’S REPORT TO THEMEMBERS OF APA INSURANCE LIMITED (continued)O ther information (continued)Auditor’s responsibilities for the audit of the financial statements (continued)• O btain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.• E valuate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.• O btain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the Company audit. We remain solely responsible for our audit opinion.We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings,including any significant deficiencies in internal control that we identify during our audit.We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, andto communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and whereapplicable, related safeguards.From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the Company’sfinancial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unlesslaw or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter shouldnot be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the publicinterest benefits of such communication.Report on other legal requirementsAs required by the Kenyan Companies Act 2015 we report to you, based on our audit, that: i) w e have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit; ii) in our opinion proper books of account have been kept by the company, so far as appears from our examination of those books; iii) the company’s statement of financial position and statement of comprehensive income are in agreement with the books of account.The engagement partner responsible for the audit resulting in this independent auditor’s report is FCPA Richard Njoroge- P/No.1244.Certified Public Accountants Nairobi15 March 2017 31","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 An estimated 3There White are Rhinos 40,000 only African Elephants left in the are killed each year world.32","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 SAVE OUR ANIMALS BEFORE IT’S TOO LATE Poaching is a persistent global problem with a profound effect on the East African region. The international demand for ivory and rhino horn is fueling catastrophic declines in the elephant and rhino populations in Kenya, Tanzania and throughout Africa. High Target Species such as the Lion, Elephant and Rhino are being hunted to extinction. These animals are the most difficult to protect, as poachers go to the most extreme lengths to kill them. If we do not act now, it will only be a matter of time before the majestic roar of our lions will be quiet forever. Save our animals. African Lions are at risk2020of extinctiobny 33","ANNUAL REPORT AND FINANCIAL STATEMENTS 201634","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 FINANCIAL S TAT E M E N T S Statement of Comprehensive Income 36 Statement of Financial Position 37 Statement of Changes in Equity 38 Statement of Cash Flows 39 Accounting Policies 40 - 47 Notes to the Financial Statements 48 - 74 SUPPLEMENTARY INFORMATION Underwriting Revenue Account 75 35","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2016 Notes 2016 2015 Shs’000 Shs’000 Gross written premium 8,995,974 9,242,369 Gross earned premium 3 9,760,177 8,476,172 Less reinsurance premium ceded (2,508,709) (2,107,579) Net earned premium 7,251,468 6,368,593 Investment income 4 1,109,951 Commissions earned 436,097 Other income 885,251 5 3,531 528,876 Total income 8,801,047 1,037 Net incurred claims 6 (5,244,122) Operating and other expenses 7 (1,715,352) 7,783,757 Commissions payable (1,074,123) (4,386,337) (1,617,054) Profit from operating activities 767,450 (1,048,363) Share of profits of associates 15(a) 41,032 732,003 Profit before income tax 808,482 131,197 9(a) (158,904) Income tax expense 863,200 Profit for the year 649,578 (128,234) Other comprehensive income, net of tax: 15(b) (22,499) 734,966 Items that may subsequently be reclassified to profit or loss 16 (307,836) (914) Change in fair value of available for sale financial assets : 21(b) 76,122 (338,779) Unquoted equity investments (122,239) Quoted equity investments 15(a) (14,306) Government securities 15(a) (2,787) (10,596) Share of other comprehensive income of associates 856 (20,852) Exchange differences on translation of foreign operations 30 Deferred tax on other comprehensive income 1,616 Other comprehensive loss for the year, net of tax (270,450) (491,764) Total comprehensive income for the year 379,128 243,202 attributable to the owners of the company Shs Earnings per share – basic and diluted Shs The notes on pages 48 to 74 are an integral part of these financial statement 58.80 10 51.9736","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016STATEMENT OF FINANCIAL POSITIONAS AT 31 DECEMBER 2016ASSETS Notes 2016 2015Property and equipment 12 Shs’000 Shs’000Intangible assets 13Investment properties 14 105,198 95,236Investment in associates 15(a) 35,847 63,525Investment in unquoted equity 15(b) 1,160,000Available for sale quoted equity investments 16 1,225,000 573,974Current income tax 9(c) 597,913 52,027Deferred income tax 30 14,707 2,090,961Loans receivable 17Receivables arising out of reinsurance arrangements 1,499,914 -Receivables arising out of direct insurance arrangements 18 20,458 173,081Reinsurers’ share of insurance liabilities and reserves 19Deferred acquisition costs 20 215,639 94,602Other receivables 21(a) 106,879 504,059Government securities - held to maturity 21(b) 700,117 1,672,662 22 1,637,471 2,024,968 - available for sale 23 2,006,261 247,733Deposits with financial institutions 32(b) 198,074 119,218Commercial paper and corporate bonds 100,118 2,233,723Cash and bank balances 3,206,546 2,215,518 3,341,598 2,048,194Total assets 990,747 300,001 291,763 32,480 39,724 15,701,962 16,333,974EQUITY AND LIABILITIES 24 1,250,000 1,250,000Equity 25(a) 222,886 490,549 25(b) (27,910) (25,123)Share capitalAvailable for sale reserve 26 3,618,039 3,168,461Translation reserve 11 200,000 -Retained earningsProposed dividends 5,263,015 4,883,887Total equity 27(a) 6,821,504 5,904,162 28 3,445,393 4,209,596Liabilities 29 278,138 187,896Insurance contract liabilities 32(b) 348,899 396,770Provision for unearned premium 177,025 106,475Payables arising from reinsurance arrangements 9(c)Other payables - 13,176Bank overdraftCurrent income taxTotal liabilities 11,070,959 10,818,075Total equity and liabilities 16,333,974 15,701,962The financial statements on pages 36 to 74 were authorised for issue by the Board of Directors on 15 March 2017 and signed on its behalf by:James Gitoho Ashok ShahChairman DirectorThe notes on pages 48 to 74 are an integral part of these financial statements 37","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2016 Property Available Trans- Total Share revaluation for sale lation Retained Proposed Shs’000 capital reserve reserve reserve earnings dividends Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 4,740,685 Year ended 31 750,000 54,281 961,461 (4,271) 2,879,214 100,000 734,966 December 2015 (491,764) At 1 January 2015 - - - - 734,966 - Changes in equity - - 2015: - - (470,912) (20,852) - - (100,000) Profit for the year - (54,281) - - 54,281 - Other comprehensive income - - - - - (100,000) for the year 500,000 - - - (500,000) - Transfer of property revaluation reserve Transactions with owners: Dividends and bonus shares: -2014 final paid dividend -Bonus Issue of shares At 31 December 2015 1,250,000 - 490,549 (25,123) 3,168,461 - 4,883,887 Year ended 31 1,250,000 - 490,549 (25,123) 3,168,461 - 4,883,887 December 2016 - - 649,578 At 1 January 2016 - -- - 649,578 - (270,450) - (267,663) Changes in equity 2016: - (2,787) - Profit for the year 1,250,000 Other comprehensive income -- - (200,000) 200,000 - for the year - 222,886 (27,910) 3,618,039 200,000 5,263,015 Transactions with owners: Dividends -2016 proposed dividend At 31 December 2016 The notes on pages 48 to 74 are an integral part of these financial statements38","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 31 DECEMBER 2016Cash flows from operating activities Notes 2016 2015 Shs ‘000 Shs ‘000Cash generated from operations 32(a)Interest received 29,893 963,655Income tax paid 9(c) 748,881 543,144Net cash generated from operating activities (234,240) (193,386) 544,534 1,313,413Cash flows from investing activities 12 (42,834) (29,210) 3,531 1,700Purchase of property and equipment 13 -Proceeds from sale of property and equipment 16 (11,840)Purchase of intangible assets (56,391) (175,733)Purchase of quoted shares 15(b) 425,568Proceeds from sale of quoted shares 17 331,055Proceeds from sale of unquoted shares 17 - 5,000Loans advanced (53,218)Loan repayments received 23 (42,518)Net purchase of government securities 40,941 78,956Maturity of deposits maturing after 90 days (1,602,950)Net redemption/purchase of commercial bonds (1,236,336) 210,929 213,413 8,238 (2,234)Net cash used in investing activities (1,066,186) (867,747)Cash flows from financing activities 11 - (100,000) - (100,000)Dividends paidNet cash used in financing activities (521,652) 345,666Net (decrease) /increase in cash and cash equivalents 32(b) 1,704,211 1,358,545 (521,652) 345,666Movement in cash and cash equivalents 1,182,559 1,704,211At 1 January(Decrease) /increaseAt 31 DecemberThe notes on pages 48 to 74 are an integral part of these financial statements 39","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of these financial statements are set out below: 1 General information APA Insurance Limited (“the Company”) is in the transaction of general insurance business and is incorporated in Kenya under the Companies Act as a private limited liability company. The Company is domiciled in Kenya and the address of its registered office is disclosed under page 6. For the Kenyan Companies Act reporting purposes, the balance sheet is presented by statement of financial position and the profit and loss account is presented by the statement of comprehensive income. 2 Summary of significant accounting policies The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated. (a) Basis of preparation The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”). The measurement basis applied is the historical cost basis, except for investment properties and available for sale financial assets, which have been measured at fair value. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires the directors to exercise judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or where assumptions and estimates are significant to the financial statements, are disclosed in Note 2(v). Changes in accounting policy and disclosures (i) New and amended standards adopted by the Company The following standards and amendments have been applied by the Company for the first time for the financial year beginning 1 January 2016: Amendments to IAS 1, ‘Presentation of Financial Statements’: The amendments are made in the context of the IASB’s Disclosure Initiative, which explores how financial statement disclosures can be improved. The amendments, effective 1 January 2016, provide clarifications on a number of issues, including: • Materiality – an entity should not aggregate or disaggregate information in a manner that obscures useful information. Where items are material, sufficient information must be provided to explain the impact on the financial position or performance. • D isaggregation and subtotals – line items specified in IAS 1 may need to be disaggregated where this is relevant to an understanding of the entity’s financial position or performance. There is also new guidance on the use of subtotals. • Notes – confirmation that the notes do not need to be presented in a particular order. • O CI arising from investments accounted for under the equity method – the share of OCI arising from equity-accounted investments is grouped based on whether the items will or will not subsequently be reclassified to profit or loss. Each Company should then be presented as a single line item in the statement of other comprehensive income. According to the transitional provisions, the disclosures in IAS 8 regarding the adoption of new standards/accounting policies are not required for these amendments. The Company has elected to adopt the following two amendments early: Annual Improvements to IFRSs 2012-2014 Cycle. The latest annual improvements, effective 1 January 2016, clarify: • I FRS 7 – specific guidance for transferred financial assets to help management determine whether the terms of a servicing arrangement constitute ‘continuing involvement’ and, therefore, whether the asset qualifies for de recognition. • IFRS 7 – that the additional disclosures relating to the offsetting of financial assets and financial liabilities only need to be included in interim reports if required by IAS 34. Amendment to IAS 27;The IASB has made amendments to IAS 27 Separate Financial Statements which will allow entities to use the equity method in their separate financial statements to measure investments in subsidiaries, joint ventures and associates. IAS 27 currently allows entities to measure their investments in subsidiaries, joint ventures and associates either at cost or as a financial asset in their separate financial statements. The amendments introduce the equity method as a third option. The election can be made independently for each category of investment (subsidiaries, joint ventures and associates). Entities wishing to change to the equity method must do so retrospectively. As these amendments merely clarify the existing requirements, they do not affect the Company’s accounting policies or any of the disclosures.40","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016ACCOUNTINGPOLICIES (continued)2 Summary of significant accounting policies (continued)(a) Basis of preparation (continued) Changes in accounting policy and disclosures(continued) (ii) New standards and interpretations not yet adopted IFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of financial assets and financial liabilities. The complete version of IFRS 9 was issued in July 2014. It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through OCI and fair value through P&L. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in OCI not recycling. There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. Contemporaneous documentation is still required but is different to that currently prepared under IAS 39. The standard is effective for accounting periods beginning on or after 1 January 2018. Early adoption is permitted. The Company is yet to assess the impact of IFRS 9. A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2016, and have not been applied in preparing these financial statement. None of these is expected to have a significant effect on the financial statements of the Company, except the following set out below: IFRS 15, ‘Revenue from contracts with customers’ deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18 ‘Revenue’ and IAS 11 ‘Construction contracts’ and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2018 and earlier application is permitted. The Company is yet to assess the impact of IFRS 15. IFRS 16,’Leases’ After ten years of joint drafting by the IASB and FASB they decided that lessees should be required to recognise assets and liabilities arising from all leases (with limited exceptions) on the balance sheet. Lessor accounting has not substantially changed in the new standard. The model reflects that, at the start of a lease, the lessee obtains the right to use an asset for a period of time and has an obligation to pay for that right. In response to concerns expressed about the cost and complexity to apply the requirements to large volumes of small assets, the IASB decided not to require a lessee to recognise assets and liabilities for short-term leases (less than 12 months), and leases for which the underlying asset is of low value (such as laptops and office furniture). A lessee measures lease liabilities at the present value of future lease payments. A lessee measures lease assets, initially at the same amount as lease liabilities, and also includes costs directly related to entering into the lease. Lease assets are amortised in a similar way to other assets such as property, plant and equipment. This approach will result in a more faithful representation of a lessee’s assets and liabilities and, together with enhanced disclosures, will provide greater transparency of a lessee’s financial leverage and capital employed. One of the implications of the new standard is that there will be a change to key financial ratios derived from a lessee’s assets and liabilities (for example, leverage and performance ratios). IFRS 16 supersedes IAS 17, ‘Leases’, IFRIC 4, ‘Determining whether an Arrangement contains a Lease’, SIC 15, ‘Operating Leases – Incentives’ and SIC 27, ‘Evaluating the Substance of Transactions Involving the Legal Form of a Lease’. The standards is effective for annual periods beginning 1 January 2019. Early adoption is permitted only if IFRS 15 is adopted at the same time. Recognition of Deferred Tax Asset for Unrealised Losses - Amendment to IAS 12;Amendments made to IAS 12 in January 2016 clarify the accounting for deferred tax where an asset is measured at fair value and that fair value is below the asset’s tax base. Specifically, the amendments confirm that: • A temporary difference exists whenever the carrying amount of an asset is less than its tax base at the end of the reporting period. • An entity can assume that it will recover an amount higher than the carrying amount of an asset to estimate its future taxable profit. • Where the tax law restricts the source of taxable profits against which particular types of deferred tax assets can be recovered, the recoverability of the deferred tax assets can only be assessed in combination with other deferred tax assets of the same type. • T ax deductions resulting from the reversal of deferred tax assets are excluded from the estimated future taxable profit that is used to evaluate the recoverability of those assets. The amendment to IAS 12 is effective 1 January 2017. 41","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 ACCOUNTING POLICIES (continued) 2 Summary of significant accounting policies (continued) (b) Investment in associates Associates are all entities over which the Company has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor’s share of the profit or loss of the investee after the date of acquisition. The Company’s investment in associates includes goodwill identified on acquisition. If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate. The Company’s share of post-acquisition profit or loss is recognised in the statement of profit or loss, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the Company’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Company does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate. The Company determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Company calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount adjacent to ‘share of profit/ (loss) of associates in the statement of profit or loss. Profits and losses resulting from upstream and downstream transactions between the Company and its associate are recognised in the Company’s financial statements only to the extent of unrelated investor’s interests in the associates. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Company. Dilution gains and losses arising in investments in associates are recognised in the statement of profit or loss. (c) Income recognition Premium income is recognised on assumption of risks, and includes estimates of premium due but not yet received less an allowance for unearned premium. Unearned premium represent the proportion of the premium written in periods up to the accounting date that relate to the unexpired terms of policies in force at the reporting date, and is calculated using the 1/365th (2015: 1/24th) method on written premium less reinsurance premium ceded. Commissions receivable are recognised as income in the period in which they are earned. Investment income is stated net of investment expenses. Interest income is recognised on a time proportion basis that takes into account the effective yield on the asset. Dividends receivable are recognised as income in the period in which the right to receive payment is established. Rental income from operating leases is recognised on a straight line basis over the terms of the leases. (d) Claims incurred Claims incurred comprise claims paid in the year and changes in the provision for outstanding claims. Claims paid represent all payments made during the year, whether arising from events during that or earlier years. Outstanding claims represent the estimated ultimate cost of settling all claims arising from incidents occurring prior to the reporting date, but not settled at that date. Outstanding claims are computed on the basis of the best information available at the time the records for the year are closed, and include provisions for claims incurred but not reported (“IBNR”). Outstanding claims are not discounted. (e) Reinsurance The company assumes and cedes reinsurance in the normal course of business, with retention limits varying by line of business. Premiums on reinsurance assumed are recognised as income in the same manner as they would be if the reinsurance were considered direct business. Premiums ceded and claims reimbursed are presented on a gross basis in profit and loss and statement of financial position as appropriate. Reinsurance assets represent balances due from reinsurance companies. Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision or settled claims associated with the reinsurer’s policies and are in accordance with the related reinsurance contract. Impairment occurs when there is objective evidence as a result of an event that occurred after initial recognition of the reinsurance asset that the company may not receive all outstanding amounts due under the terms of the contract and the event has a reliably measurable impact on the amounts that the company will receive from the reinsurer. The impairment loss is recognised in the profit or loss.42","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016ACCOUNTINGPOLICIES (continued)2 Summary of significant accounting policies (continued)(e) Reinsurance (continued)Ceded reinsurance arrangements do not relieve the company from its obligations to policyholders. The company also assumes reinsurancerisk in the normal course of business for non-life insurance contracts where applicable. Premiums and claims on assumed reinsurance arerecognised as revenue or expenses in the same manner as they would be if the reinsurance were considered direct business, taking intoaccount the product classification of the reinsured business. Reinsurance liabilities represent balances due to reinsurance companies.Amounts payable are estimated in a manner consistent with the related reinsurance contract.Reinsurance assets or liabilities are derecognised when the contractual rights are extinguished or expire or when the contract istransferred to another party.(f) Insurance contract receivablesInsurance receivables are recognised when due and measured on initial recognition at the fair value of the consideration received orreceivable. Subsequent to initial recognition, insurance receivables are measured at amortised cost, using the effective interest method.The carrying value of insurance receivables is reviewed for impairment whenever events or circumstances indicate that the carryingamount may not be recoverable, with the impairment loss recognised in profit or loss.(g) Deferred acquisition costsDeferred acquisition costs represent a proportion of acquisition costs that relate to policies that are in force at the year end. A proportionof commission payable is deferred and amortised over the period in which the related premiums are earned.(h) Property and equipmentAll items of property and equipment are initially recorded at cost. Property and equipment are stated at historical cost less anyaccumulated depreciation.Depreciation is calculated on property and equipment on the straight line basis to write down the cost of each asset, to its residual valueover its estimated useful life as follows:Furniture, fixtures and fittings and office equipment 8 yearsMotor vehicles 4 yearsComputer equipment 3 yearsAssets’ residual values and their estimated useful lives are reviewed at the reporting date and adjusted if appropriate. Where thecarrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount.Gains and losses on disposal of property and equipment are determined by comparing the proceeds with their carrying amounts andare recognised within ‘Other gains / (losses)’ in the income statement.(i) Intangible assets – computer softwareIntangible assets comprise of computer software costs which are stated at cost less accumulated amortisation and any impairmentlosses. Amortisation is calculated to write off the cost of computer software on a straight line basis over its estimated useful life of5 years.(j) Investment propertyInvestment properties comprise land and buildings and parts of buildings held to earn rentals and/or for capital appreciation. They arecarried at fair value, determined annually by independent external valuers. Fair value is based on active market prices as adjusted, ifnecessary, for any difference in the nature, condition or location of the specific asset.Investment properties are not subject to depreciation. Changes in their carrying amounts between the reporting dates are dealt withthrough the profit or loss.Upon disposal of an investment property, the difference between the net disposal proceeds and the carrying amount is charged orcredited to profit or loss for the year.(k) Financial assets ClassificationThe company classifies its financial assets into the following categories: loans and receivables, held-to-maturity financial assets andavailable-for-sale financial assets. The classification adopted for a particular financial asset depends on the purpose for which the assetwas acquired. 43","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 ACCOUNTING POLICIES (continued) 2 Summary of significant accounting policies (continued) (k) Financial assets (continued) Classification (continued) Management determines the classification of its financial asset at initial recognition and re-evaluates this at every reporting date. i) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Receivables arising from insurance contracts are also classified in this category and are reviewed for impairment as part of the impairment review of loans and receivables. ii) Available-for-sale financial assets This classification represents financial assets that are not (a) financial assets at fair value through profit or loss, (b) loans and receivables, or (c) financial assets held-to-maturity. iii) Held-to-maturity financial assets Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Company’s management has the positive intention and ability to hold to maturity, other than: • those that the Company upon initial recognition designates as at fair value through profit or loss; • those that the Company designates as available for sale; and • those that meet the definition of loans and receivables Interest on held-to-maturity investments are included in the statement of profit or loss and are reported as ‘Interest and similar income’. In the case of an impairment, it is been reported as a deduction from the carrying value of the investment and recognised in the statement of profit or loss as ‘Net gains/(losses) on investment securities’. Recognition and measurement Financial assets are initially recognised at cost plus transaction costs. Available-for-sale financial assets subsequently carried at fair value. Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method. Gains and losses arising from changes in the fair value of available-for-sale financial assets are recognised in other comprehensive income and accumulated in investment revaluation reserve in the statement of changes in equity, until the financial asset is derecognised or impaired, at which time the cumulative gain or loss previously recognised in equity is recognised in the statement of profit or loss. Effective interest method The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated cash receipts (including all fees, transaction costs and premiums or discounts) through the expected life of the financial asset, or where appropriate, a shorter period. Determination of fair value For financial instruments traded in active markets, the determination of fair values of financial assets and financial liabilities is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This includes listed equity securities and quoted debt instruments on major exchange (Nairobi Securities Exchange). The quoted market price used for financial assets held by the company is the current bid price. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. If the above criteria are not met, the market is regarded as being inactive. For example a market is inactive when there is a wide bid-offer spread or significant increase in the bid-offer spread or there are few recent transactions. For all other financial instruments, fair value is determined using valuation techniques. In these techniques, fair values are estimated from observable data in respect of similar financial instruments, using models to estimate the present value of expected future cash flows or other valuation techniques, using inputs existing at the dates of the statement of financial position Fair values are categorised into three levels in a fair value hierarchy based on the degree to which the inputs to the measurement are observable and the significance of the inputs to the fair value measurement in its entirety:44","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016ACCOUNTINGPOLICIES (continued)2 Summary of significant accounting policies (continued)(k) Financial assets (continued) Determination of fair value (continued) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). Transfers between levels of the fair value hierarchy are recognised by the company at the end of the reporting period during which the change occurred. Impairment of financial assets Financial assets are assessed for indicators of impairment at each reporting date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. Objective evidence of impairment for receivables could include the company’s past experience of collecting payments, an increase in the number of delayed payments past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in the profit or loss for the year. Derecognition of financial assets The company derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the company recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the company retains substantially all the risks and rewards of ownership of a transferred financial asset, the company continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.(l) Financial liabilities and equity instruments issued by the company Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement. Classification as debt or equity An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs. Other financial liabilities Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs and are subsequently measured at amortised cost using the effective interest method, with interest expense recognised using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. Derecognition of financial liabilities The company derecognises financial liabilities when, and only when, the company’s obligations are discharged, cancelled or they expire.(m) Cash and cash equivalents For the purposes of the statement of cash flows, cash and cash equivalents include cash in hand, deposits held at call with banks and other short term liquid investments which are readily convertible into known amounts of cash and which were within three months of maturity when acquired, less advances from banks repayable within three months from the dates of the advances. 45","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 ACCOUNTING POLICIES (continued) 2 Summary of significant accounting policies (continued) (n) Translation of foreign currencies The financial statements are presented in Kenya Shillings (Shs) rounded to the nearest thousand, which is the Company’s functional and reporting currency. In preparing the financial statements, transactions in currencies other than the Company’s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences on monetary items are recognised in profit or loss in the period in which they arise. (o) Accounting for leases Leases of assets where a significant proportion of the risks and rewards of ownership are retained by the company as a lessee are classified as finance leases. All other leases are classified as operating leases. Payments made under operating leases are charged to income on the straight-line basis over the term of the lease. (p) Employee entitlements Employee entitlements to long service awards are recognised when they accrue to employees. A provision is made for the estimated liability for such entitlements as a result of services rendered by employees up to the reporting date. The estimated monetary liability for employees’ accrued annual leave entitlement at the reporting date is recognised as an expense in profit or loss. (q) Retirement benefit obligations The company operates a defined contribution scheme for its employees. The assets of the scheme are held in separate trustee administered fund, which is funded from contributions from both the company and employees. Contributions are determined by the rules of the scheme. The company also contributes to the statutory defined contribution pension scheme, the National Social Security Fund (NSSF). Contributions to this scheme are determined by local statute. The Company’s obligations to these schemes are charged to profit or loss as they fall due. (r) Income tax expense Income tax expense is the aggregate amount charged /(credited) in respect of current income tax and deferred income tax in determining the profit or loss for the year. Tax is recognised in the profit or loss 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 income 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 nor 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 recognised only to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilised. Deferred income tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries, associates and joint arrangements, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the company and it is probable that the temporary difference will not reverse in the foreseeable future. Generally the company is unable to control the reversal of the temporary difference for associates. Only where there is an agreement in place that gives the company the ability to control the reversal of the temporary difference not recognised. Deferred income tax assets are recognised on deductible temporary differences arising from investments in subsidiaries, associates and joint arrangements only to the extent that it is probable the temporary difference will reverse in the future and there is sufficient taxable profit available against which the temporary difference can be utilised. Recognised and unrecognised deferred tax assets are reassessed at the end of each reporting period and, if appropriate, the recognised 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. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current income tax assets against current income tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on the same entity.46","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016ACCOUNTINGPOLICIES (continued)2 Summary of significant accounting policies (continued)(s) Dividend distribution Dividend distributions to the company’s shareholders are recognised as a liability in the financial statements in the year in which the dividends are approved by the shareholders. Proposed dividends are shown as a separate component of equity.(t) Share capital Ordinary 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. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds. Shares are classified as equity when there is no obligation to transfer cash or other assets.(u) Critical accounting judgements and key sources of estimation uncertainty In the process of applying the company’s accounting policies, management has made estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. i) Critical judgments in applying the company’s accounting policies The key areas of judgment in applying the company’s accounting policies are dealt with as follows: The ultimate liability arising from claims made under insurance contracts The main assumption underlying techniques applied in the estimation of this liability is that the company’s past claims experience can be used to project future claims development and hence, ultimate claims costs. As such, these methods extrapolate the development of paid and incurred losses, average costs per claim and claim numbers based on the observed development of earlier years and expected loss ratios. Historical claims development is mainly analysed by accident years. Additional qualitative judgment is used to assess the extent to which past trends may not apply in future, (for example to reflect one-off occurrences, changes in external or market factors such as public attitudes to claiming, economic conditions, levels of claims’ inflation, judicial decisions and legislation, as well as internal factors such as portfolio mix, policy conditions and claims handling procedures) in order to arrive at the estimated ultimate cost of claims that present the likely outcome from the range of possible outcomes, taking account of all the uncertainties involved. A margin for adverse deviation may also be included in the liability valuation. Held-to-maturity investments The company follows the guidance of IAS 39 in classifying non-derivative financial assets with fixed or determinable payments and fixed maturity as held-to-maturity. This classification requires significant judgement. In making this judgement, the company evaluates its intention and ability to hold such investments to maturity. If the company fails to hold these investments to maturity other than for the specific circumstances - for example, selling more than an insignificant amount close to maturity - it will be required to reclassify the entire class as available-for-sale. The investments would therefore be measured at fair value not amortised cost. ii) Key sources of estimation uncertainty Impairment losses At each reporting date, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash generating unit to which the asset belongs. Receivables Critical estimates are made by the directors in determining the recoverable amount of receivables and valuation of investment property. Valuation of investment properties Estimates are made in determining valuations of investment properties. The management uses experts in determination of the values to adopt. 47","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 NOTES TO THE FINANCIAL STATEMENTS 1 Incorporation and registered office APA Insurance Limited is incorporated in Kenya under the Companies Act and is domiciled in Kenya. The address of its registered office is Apollo Centre, 07 Ring Road, Parklands, Nairobi. 2 Risk management objectives and policies The Company’s activities expose it to a variety of risks, including insurance risk, financial risk and credit risk. These risks result in changes in property values, debt and equity market prices, foreign currency exchange rates and interest rates. The Company’s’ overall risk management programme focuses on the identification and management of risks and seeks to minimise potential adverse effects on its financial performance, by use of underwriting guidelines and capacity limits, reinsurance planning, credit policy governing the acceptance of clients, and defined criteria for the approval of intermediaries and reinsurers. Investment policies are in place, which help manage liquidity, and seek to maximise return within an acceptable level of interest rate risk. The disclosures below summarise the way the company manages key risks: 2.1 Insurance risk The risk under any one insurance contract arises from the possibility that the insured event occurs and the uncertainty of the amount of the resulting claim. By the very nature of an insurance contract, this risk is random and therefore unpredictable. For a portfolio of insurance contracts where the theory of probability is applied to pricing and provisioning, the principal risk that the Company faces under its insurance contracts is that the actual claims and benefit payments exceed the carrying amount of the insurance liabilities. This could occur because the frequency or severity of claims and benefits payable are greater than estimated. Insurance events are random and the actual number and amount of claims and benefits payable will vary from year to year from the level established using statistical techniques. Experience shows that the larger the portfolio of similar insurance contracts, the smaller the relative variability of the expected outcome will be. In addition, a more diversified portfolio is less likely to be affected across the board by a change in any subset of the portfolio. The company has developed its insurance underwriting strategy to diversify the type of insurance risks accepted and within each of these categories to achieve a sufficiently large population of risks to reduce the variability of the expected outcome. Factors that aggravate insurance risk include lack of risk diversification in terms of type and amount of risk, geographical, local and type of industry covered. Short-term insurance contracts The company engages in short term insurance contracts and funds the insurance liabilities with a portfolio of equity and debt securities exposed to market risk. An analysis of the Company’s financial assets and its short term insurance liabilities is presented as follows;48","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016NOTES TO THE 2016 2015 Shs’000 Shs’000FINANCIAL STATEMENTS (continued) 3,206,546 2,233,7232 Risk management objectives and policies (continued) 291,763 300,001 2.1 Insurance risk (continued) 3,341,598 2,215,518 Debt securities held to maturity: 1,499,914 2,090,961 -Government bonds and treasury bills -Commercial paper & corporate bonds 49,832 27,578 Debt securities available for sale: 57,047 67,024 -Government bonds 1,637,471 1,672,662 -Equity securities-listed securities 700,117 504,059 Mortgage loans (Note 17) 59,060 219,988 Other loans (Note 17) 1,182,559 1,704,211 Receivables arising out of insurance arrangements 12,025,907 11,035,725 Receivables arising out of reinsurance arrangements Deposits with financial institutions maturing after 90 days 6,821,504 5,904,162 Cash and cash equivalents (Note 32(b)) (1,028,507) (1,019,543) Total 278,138 187,896 Short – term insurance liabilities: 6,071,135 5,072,515 Insurance contract liabilities Less: assets arising from reinsurance contracts Payables arising from reinsurance arrangements TotalShort-term insurance liabilities are not directly sensitive to the level of market interest rates, as they are un-discounted and contractuallynon-interest bearing. However, due to the time value of money and the impact of interest rates on the level of bodily injury incurred by thecompany’s policyholders (where a reduction of interest rate would normally produce a higher insurance liability), the company matches thecash flows of assets and liabilities in this portfolio by estimating their mean duration.The mean duration of liabilities is calculated using historical claims data to determine the expected settlement pattern for claims arisingfrom the insurance contracts in force at the reporting date (both incurred claims and future claims arising from the unexpired risks at thereporting date). 49","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 NOTES TO THE FINANCIAL STATEMENTS (continued) 2 Risk management objectives and policies (continued) 2.1 Insurance risk (continued) The tables below show the contractual timing of cash flows arising from assets and liabilities included in the company’s Asset Liability Management framework for management of short term insurance contracts as of 31 December 2016 and 31 December 2015. Contractual cash flows (undiscounted) 31 December 2016 Total No stated 0-1 year 1-5 years > 5 years Amount Maturity Financial assets: Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Debt securities held to maturity: 3,206,546 - 1,738,929 973,238 494,379 -Government bonds and treasury bills-fixed rate 291,763 - 291,763 - -Commercial paper and corporate bonds - 1,483,731 Government bonds - available for sale 3,341,598 - 196,881 1,660,986 Quoted equity securities- available for sale 1,499,914 1,499,914 - - - Mortgage loans - - 4,404 Other loans 49,832 - 43,849 45,428 Insurance and reinsurance receivables 57,047 - 13,198 372,564 - Deposits with financial institutions maturing after 2,337,588 1,965,024 - 90 days - - Cash and cash equivalents (Note 32(b)) 59,060 51,443 7,617 - 1,182,559 1,182,559 - Total 12,025,907 1,499,914 5,148,034 3,169,549 2,208,410 Short term insurance liabilities: 6,821,504 - 3,658,487 2,630,581 532,436 Insurance contracts (1,028,507) (89,917) Less assets arising from reinsurance contracts - (494,345) (444,245) Payables arising from reinsurance arrangements 278,138 - - 278,138 - Total Difference in contractual cash flows 6,071,135 - 3,442,280 2,186,336 442,519 5,954,772 1,499,914 1,705,754 983,213 1,765,89150","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016NOTES TO THEFINANCIAL STATEMENTS (continued)2 Risk management objectives and policies (continued) 2.1 Insurance risk (continued) Contractual cash flows (undiscounted)31 December 2015 Total No stated 0-1 year 1-5 years > 5 yearsFinancial assets: Amount Maturity Shs’000 Shs’000 Shs’000 Shs’000 Shs’000Debt securities held to maturity: 2,233,723 - 760,850 736,285 736,588-Government bonds and treasury bills-fixed rate 300,001 - 4,586 295,415 --Commercial paper and corporate bonds - 897,004Government bonds - available for sale 2,215,518 2,090,961 225,583 1,092,931Quoted equity securities- available for sale 2,090,961 - - - -Mortgage loans - 26,223Other loans 27,578 - 1,355 50,931 -Insurance and reinsurance receivables 67,024 16,093 257,224 -Deposits with financial institutions maturing 2,176,721 - 1,919,497 -after 90 days - -Cash and cash equivalents (Note 32(b)) 219,988 - 219,988 - 1,704,211 1,704,211Total 11,035,725 2,090,961 4,852,163 2,263,082 1,829,519Short term insurance liabilities: 5,904,162 - 3,153,786 2,088,443 661,933 (1,019,543) - (544,602) (360,637) (114,304)Insurance contracts - 187,896 -Less assets arising from reinsurance contracts 187,896 - -Payables arising from reinsurance arrangements 5,072,515 2,797,080 1,727,806 547,629 2,090,961Total 5,963,210 2,055,083 535,276 1,281,890Difference in contractual cash flows 51","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 NOTES TO THE FINANCIAL STATEMENTS (continued) 2 Risk management objectives and policies (continued) 2.2 Financial risk factors The company is exposed to a range of financial risks through its financial assets, financial liabilities, reinsurance assets and insurance liabilities. In particular, the key financial risk is that the proceeds from its financial assets are not sufficient to fund the obligations arising from insurance policies as they fall due. The most important components of this financial risk are market risk (including interest rate risk, equity price risk and currency risk), credit risk and liquidity risk. These risks arise from open positions in interest rate, currency and equity products, all of which are exposed to general and specific market movements. The risks that the company primarily faces due to the nature of its investments and liabilities are interest rate risk and equity price risk. The company’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the company’s financial performance. It manages these positions with an Asset Liability Management (ALM) framework that has been developed to achieve investment returns in excess of obligations under insurance contracts. The company produces regular reports at portfolio and asset and liability class levels that are circulated to the company’s key management personnel. The principal technique of the company’s ALM is to match assets to the liabilities arising from insurance contracts by reference to the type of benefits payable to contract holders. The company’s ALM is also integrated with the management of the financial risks associated with the company’s other financial assets and liabilities not directly associated with insurance and investment liabilities (in particular, borrowings and investments in foreign operations). The company does not use hedge accounting. The company has not changed the processes used to manage its risks from previous periods. The notes below explain how financial risks are managed using the categories utilised in the company’s ALM framework. (a) Market risk (i) Interest rate risk Interest rate risk arises primarily from investments in fixed interest securities and deposits with financial institutions. The sensitivity analysis for interest rate risk illustrates how changes in the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates at the reporting date. For financial instruments and insurance contracts described in this note, the sensitivity is solely associated with the former, as the carrying amounts of the latter are not directly affected by changes in market risks. The company’s management monitors the sensitivity of reported interest rate movements on a monthly basis by assessing the expected changes in the different portfolios due to a parallel movement of plus 5 percentage points in all yield curves of financial assets and financial liabilities. These particular exposures illustrate the company’s overall exposure to interest rate sensitivities included in the company’s ALM framework and its impact on the company’s profit or loss. An increase/decrease of 5 percentage points in interest yields would result in additional profit/loss for the period of Shs 397 million (2015: Shs 345 million). (ii) Price risk The company is exposed to equity securities price risk as a result of its holdings in equity investments, classified as financial assets available for sale. Exposures to equity shares in aggregate are monitored in order to ensure compliance with the relevant regulatory limits for solvency purposes. Investments held are listed and traded on the Nairobi Securities Exchange. Investment management meetings are held monthly. At these meetings, senior investment managers meet to discuss investment return and concentration of the equity investments. Listed equity securities represent 71% (2015:77%) of total equity investments. If equity market indices had increased/decreased by 5%, with all other variables held constant, and all the company’s equity investments moving according to the historical correlation with the index, equity would have increased/decreased by Shs 75 million (2015: Shs105 million). (iii) Foreign exchange risk Foreign currency exchange risk arises when future commercial transactions or recognised assets and liabilities are denominated in a currency that is not the company’s functional currency. Currently, management believes that there is minimal risk of significant losses due to exchange rate fluctuations.52","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016NOTES TO THEFINANCIAL STATEMENTS (continued)2 Risk management objectives and policies (continued) 2.2 Financial risk factors (continued) (b) Credit risk The company has exposure to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due. Key areas where the company is exposed to credit risk are: • reinsurers’ share of insurance liabilities and reserves; • amounts due from reinsurers in respect of claims already paid; • amounts due from insurance contract holders; • amounts due from insurance intermediaries; • amounts due from corporate bond issuers; • cash and deposits held with banks and • rental receivables The company manages the levels of credit risk it accepts by placing limits on its exposure to a single counterparty, or Companys of counterparties and to geographical and industry segments. Such risks are subject to regular reviews. Reinsurance is used to manage insurance risk. This does not, however, discharge the company’s liability as primary insurer. If a reinsurer fails to pay a claim, the company remains liable for the payment to the policyholder. The creditworthiness of reinsurers is considered on annual basis by reviewing their financial strength prior to finalisation of annual contracts. In addition, management assesses the credit worthiness of all reinsurers and intermediaries by reviewing credit grades provided by rating agencies and other publicly available financial information. The recent payment history of reinsurers is also used to update the reinsurance purchasing strategy. The exposure to individual counterparties is also managed through other mechanisms such as the right of offset where counterparties are both debtors and creditors of the company. Management information reported to the directors include details of provisions for impairment on receivables and subsequent write offs. Exposures to individual policyholders and Companys of policyholders are collected within the on-going monitoring of the controls associated with regulatory solvency. Where there exists significant exposure to individual policyholders, or homogenous Companys of policyholders, a financial analysis is carried out by the management. The amount that best represents the Company’s maximum exposure to credit risk as at 31 December 2016 is made up as follows: Fully Past due Impaired Total performing but not Shs’000 Shs’000 Shs’000 impaired Shs’000Government securities 6,548,144 - - 6,548,144Mortgage loans 49,832 - - 49,832Other loans receivable 57,047 - - 57,047Insurance and reinsurance receivables 885,796 867,450Provision for impairment 1,451,792 - (867,450) 3,205,038Other Receivables - - - (867,450)Deposits with financial institutions maturing after 90 days - - 48,572Cash and cash equivalents 48,572 - - 59,060Commercial papers and corporate bonds 59,060 - - 1,182,559 885,796 1,182,559Total 291,763 - 291,763 9,688,769 10,574,565 53","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 NOTES TO THE FINANCIAL STATEMENTS (continued) 2 Risk management objectives and policies (continued) 2.2 Financial risk (continued) (b) Credit risk (continued) The amount that best represented the company’s maximum exposure to credit risk as at 31 December 2015 was as follows: Fully Past due Impaired Total performing but not Shs’000 Shs’000 Shs’000 impaired Shs’000 Government securities 4,449,241 - - 4,449,241 Mortgage loans 27,578 - - 27,578 Other loans receivable 67,024 - - 67,024 Insurance and reinsurance receivables 613,303 701,906 Provision for impairment 1,563,418 - (701,906) 2,878,627 Other Receivables - - - (701,906) Deposits with financial institutions maturing after 90 days - - 112,279 Cash and cash equivalents 112,279 - - 219,988 Commercial papers and corporate bonds 219,988 - - 1,704,211 613,303 - 1,704,211 Total 300,001 300,001 8,443,740 9,057,043 The customers under the fully performing category of receivables under insurance and reinsurance contracts are paying their debts as they continue trading with the company. Receivables in the impaired category are fully provided for and they continue being pursued for settlement. (c) Liquidity risk Liquidity risk is the risk that cash may not be available to pay obligations when due at a reasonable cost. The primary liquidity risk of the company is the obligation to pay claims to policyholders as they fall due. The projected settlement of these liabilities is modelled, on a regular basis, using actuarial techniques. The board sets limits on the minimum proportion of maturing funds available to meet such calls and on the minimum level of borrowing facilities that should be in place to cover anticipated liabilities and unexpected levels of demand. The table below provides a contractual maturity analysis of the company’s financial liabilities:54","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016NOTES TO THEFINANCIAL STATEMENTS (continued)2 Risk management objectives and policies (continued) 2.2 Financial risk (continued) (c) Liquidity risk (continued)At 31 December 2016 6 months Between More than Total or on 6 months 1 year Shs’000Insurance contract liabilitiesPayables arising from reinsurance arrangements demand and Shs’000 6,821,504Bank overdraft Shs’000 1 year 278,138Other payables Shs’000 3,163,017 177,025 2,073,392 - 348,899Total 278,138 1,585,095 - 177,025 - - 7,625,566At 31 December 2015 348,899 - - 3,163,017Insurance contract liabilities 2,877,454Payables arising from reinsurance arrangements 1,585,095Bank overdraftOther payables 808,510 2,345,275 2,750,377 5,904,162 187,896 - - 187,896Total 106,475 - - 106,475 396,770 - - 396,770 1,499,651 2,345,275 2,750,377 6,595,303(d) Fair value hierarchyThe table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) orindirectly (that is, derived from prices) (Level 2).Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).The following table presents the company’s financial assets and liabilities measured at fair value at 31 December 2016 and 31 December2015 55","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 NOTES TO THE FINANCIAL STATEMENTS (continued) 2 Risk management objectives and policies (continued) 2.2 Financial risk (continued) (d) Fair value hierarchy (continued) At 31 December 2016 Level 1 Level 2 Level 3 Total Shs’000 Shs’000 Shs’000 Shs’000 Available for sale - Government securities 3,341,598 - - 3,341,598 - Quoted equity investments – available for sale 1,499,914 - - 1,499,914 - Investment in unquoted equity 14,707 - 14,707 - Total 14,707 - 4,856,219 4,841,512 At 31 December 2015 2,215,518 - - 2,215,518 2,090,961 - - 2,090,961 Available for sale 52,027 - 52,027 - Government securities - - Quoted equity investments – available for sale 52,027 - 4,358,506 - Investment in unquoted equity 4,306,479 Total There were no transfers between levels 1 and 2 during the year. The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry Company, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used for financial assets held by the company is the current bid price. These instruments are included in level 1. Instruments included in level 1 comprise primarily Nairobi Securities Exchange (“NSE”) equity investments and government bonds classified as available for sale. The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. Specific valuation techniques used to value financial instruments include • Quoted market prices or dealer quotes for similar instruments • The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves. • The fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date, with the resulting value discounted back to present value. Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining financial instruments. There was no movement in level 3 during the year.56","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016NOTES TO THEFINANCIAL STATEMENTS (continued)2 Risk management objectives and policies (continued) 2.3 Capital management The company maintains an efficient capital structure consistent with the company’s risk profile and the regulatory and market requirements of its business. The company’s objectives in managing its capital are: • to match the profile of its assets and liabilities taking account of the risks inherent in the business; • to maintain financial strength to support business growth; • to satisfy the requirements of its policyholders, regulators and rating agencies; • to retain financial flexibility by maintaining strong liquidity and access to a range of capital markets • to allocate capital efficiently to support growth • to safeguard the company’s ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders; and • to provide an adequate return to shareholders by pricing insurance contracts commensurately with the level of risk. An important aspect of the company’s overall capital management process is the setting of a target risk-adjusted rate of return which is aligned to performance objectives and ensures that the company is focused on the creation of value for shareholders. The company has a number of sources of capital available to it and seeks to optimise its equity/debt structure in order to ensure that it can consistently maximise returns to shareholders. The company considers not only the traditional sources of capital funding but the alternative sources of capital including reinsurance, as appropriate, when assessing its deployment and usage of capital. The company manages as capital, all items that are eligible to be treated as such for regulatory purposes. The Company is regulated by the Insurance Regulatory Authority in Kenya. The Insurance Act Requires each insurance company to hold the minimum level of paid up capital for general insurance companies at the minimum amount of Shs 300 Million (Shs 600 million by 30th June 2018). General insurance businesses are required to keep a solvency margin, i.e. admitted assets less admitted liabilities, equivalent to the higher of Shs 10 million or 15% of the net premium income during the preceding financial year. The solvency margin of the Company as at 31 December 2016 and 2015 is illustrated below.Admitted assets 2016 2015Admitted liabilities Shs’000 Shs’000Margin 14,351,223 13,320,136Required margin 11,312,467 10,794,354 3,038,756 2,525,782 1,048,968 868,760 57","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 NOTES TO THE FINANCIAL STATEMENTS (continued) 2 Risk management objectives and policies (continued) 2.3 Capital management (continued) The constitution of capital managed by the Company is as shown below: 2016 2015 Shs’000 Shs’000 Share capital 1,250,000 1,250,000 Investment revaluation reserve 222,886 490,549 Translation reserve (27,910) (25,123) Retained earnings Proposed dividends 3,618,039 3,168,461 200,000 - Total attributable to equity holders 5,263,015 4,883,887 3 Gross earned premium The company underwrites general insurance business only. This has been analysed into several sub-classes of business based on the nature of the assumed risks as shown below: 2016 2015 Shs’000 Shs’000 Engineering 182,058 262,453 Fire 782,811 681,150 Liability 151,448 138,859 Marine and transit 212,619 250,421 Motor 3,799,070 3,294,630 Personal accident (including medical) 3,317,582 2,589,229 Theft 168,508 180,338 Workmen’s compensation 667,237 664,991 Other 478,844 414,101 Total 9,760,177 8,476,17258","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016NOTES TO THE 2016 2015 Shs’000 Shs’000FINANCIAL STATEMENTS (continued) 548,730 368,642 4 Investment income 203,328 160,332 Interest from government securities 5,468 14,170 Bank deposit interest 60,177 54,680 Loan interest receivable 124,474 76,663 Rental income from investment properties 102,774 (6,236) Dividends receivable from equity investments Realised gain/ (loss) from trading in available for sale financial assets 65,000 217,000 Fair value gain on investment properties (Note 14) Total 1,109,951 885,251 5 Other income 3,531 1,037 3,531 1,037 Gains on disposal of property and equipment Total 2016 2015 Shs’000 Shs’000 6 Net incurred claims 59,376 62,965 Engineering 97,041 146,145 Fire 27,426 109,063 Liability Marine and transit 6,537 73,466 Motor 2,878,927 2,383,552 Personal accident and Medical 1,465,010 1,201,540 Theft Workmen’s compensation 83,016 22,695 Other 576,472 362,979 Total 50,317 23,932 5,244,122 4,386,337 59","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 NOTES TO THE 2016 2015 Shs’000 Shs’000 FINANCIAL STATEMENTS (continued) 597,411 615,469 7 Operating and other expenses 5,213 4,861 6,658 5,472 Employee benefits (Note 8) Auditors’ remuneration 63,049 59,147 Directors emoluments – fees 32,942 ]29,336 - other 19,685 19,870 Depreciation (Note 12) Amortisation (Note 13) 165,544 183,590 Impairment charge for doubtful receivables 99,673 86,776 Operating lease rentals – land and buildings 12,392 12,476 Repairs and maintenance expenditure 90,511 92,466 Premium and reinsurance levies 22,627 22,407 Policyholders compensation fund contributions 25,752 24,066 Printing and stationery 21,647 24,335 Telecommunications expenses 24,485 19,779 Travelling expenses Advertisement and promotion costs 163,988 117,343 Marketing expenses 253,739 267,200 Other 110,036 Total 1,715,352 32,461 1,617,054 8 Employee benefits 2016 2015 The following are included in employee benefits expense: Shs’000 Shs’000 - salaries and wages - group life premium 514,800 549,184 - medical expenses 10,088 6,688 - other retirement benefit costs 38,254 - social security benefit costs 33,420 27,767 Total 849 31,052 597,411 778 615,46960","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016NOTES TO THE 2016 2015 Shs’000 Shs’000FINANCIAL STATEMENTS (continued) 200,606 200,625 9 Income tax expense (41,702) (72,391) (a) Tax charge 158,904 128,234 Current income tax 808,482 863,200 Deferred income tax credit (Note 30) 242,545 258,960 (208,725) (176,439) Income tax expense 128,334 56,563 (b) Reconciliation of expected tax based on accounting profit to (3,250) (10,850) taxation expense 158,904 128,234 Profit before income tax 13,176 5,937 Tax calculated at tax rate of 30% (2015: 30%) 200,606 200,625 Tax effect of income not subject to tax (234,240) (193,386) Tax effect of expenses not tax deductible (20,458) Deferred tax on fair value gains on investment properties at CGT rate 13,176 Tax charge 20,458 - - (c) Current income tax 13,176 (20,458) 13,176 At 1 January Current tax charge for the year (Note 9(a)) Paid in the year At 31 December Analysed as follows: Tax recoverable Tax payable Net tax (receivable) /payable10 Earnings per shareBasic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted averagenumber of ordinary shares in issue during the year, 2016 2015 Shs’000 Shs’000Profit for the year (Shs’000) 649,578 734,966Weighted average number of ordinary shares in issue (thousands) 12,500 12,500Earnings per share (Shs) – basic and diluted 51.97 58.80 61","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 NOTES TO THE FINANCIAL STATEMENTS (continued) 11 Dividends At the annual general meeting to be held in May 2017, a first and final dividend in respect of the year ended 31 December 2016 of Shs 16 (2015: Shs Nil) per share amounting to a total of Shs 200,000,000 (2015:Shs Nil) is to be proposed. No interim dividend was paid during the year. Payment of dividends is subject to withholding tax at the rate of 5% or 10%, depending on the residence of the individual shareholders. 12 Property and equipment Motor Fittings and Total vehicles equipment Shs’ 000 Year 2015 Shs’ 000 Shs’ 000 Cost 17,213 201,809 219,022 At 1 January 2015 3,209 26,001 29,210 Additions (5,264) - (5,264) Disposal 15,158 227,810 242,968 At 31 December 2015 13,383 109,614 122,997 Depreciation 991 28,345 29,336 - (4,601) At 1 January 2015 (4,601) Charge for the year 9,773 137,959 147,732 Eliminated on disposal 5,385 89,851 95,236 At 31 December 2015 Net book value 15,158 227,810 242,968 At 31 December 2015 11,300 31,534 42,834 (7,350) - (7,350) Year 2016 19,108 278,452 Cost 259,344 Additions 9,773 137,959 147,732 Disposal 4,160 28,782 32,942 (7,349) (71) (7,420) At 31 December 2016 6,584 166,670 173,254 Depreciation 12,524 92,674 105,198 At 1 January 2016 Charge for the year Eliminated on disposal At 31 December 2016 Net book value At 31 December 201662","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016NOTES TO THE 2016 2015 Shs’000 Shs’000FINANCIAL STATEMENTS (continued) 127,618 115,778 13 Intangible assets – computer software - 11,840 - Cost (7,993) 127,618 At 1 January 119,625 Additions Reclassified to other receivables 64,093 44,223 19,685 19,870 At 31 December 83,778 64,093 Amortisation 35,847 63,525 At 1 January Charge for the year At 31 December Net book value: At 31 December14 Investment properties 2016 2015 Shs’000 Shs’000At 1 January 1,160,000 943,000Fair value gain (Note 4) 65,000 217,000 At 31 December 1,225,000 1,160,000 Investment properties were last revalued on 31 December 2016, by Axis Real Estate Limited, independent valuers, on the basis of openmarket value for existing use.The table below analyses the non-financial assets carried at fair value, by valuation method. The different levels have been defined asfollows:• Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2).Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).At 31 December 2016 Level 1 Level 2 Level 3 Total Shs’000 Shs’000 Shs’000 Shs’000Investment property - 1,225,000 - 1,225,000At 31 December 2015 - 1,160,000 - 1,160,000Investment propertyValuation technique used to derive level 2 fair valuesLevel 2 fair value of land and building has been derived using the sales comparison approach. Sales prices of comparable land andbuildings in close proximity are adjusted for differences in key attributes such as property size. 63","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 NOTES TO THE FINANCIAL STATEMENTS (continued) 15 Equity investments (a) Investment in associates 2016 2015 Shs’000 Shs’000 At I January 573,974 474,225 Share of after tax profit 41,032 131,197 Share of investment revaluation reserve, net of tax (14,306) (10,596) Translation adjustment (2,787) (20,852) At 31 December 597,913 573,974 This comprises 1,907,400 (2015: 1,907,400) ordinary shares of Tanzania Shillings 1,000 each representing 34% shareholding in Reliance Insurance Company (Tanzania) Limited, an insurance company incorporated in Tanzania and 200,000 ordinary shares of Kenya Shillings 20 each representing 40% shareholding in Gordon Court Limited, a property development company incorporated in Kenya. Both associates have 31 December as their reporting date. Summarised financial information in respect of the company’s share of results and net assets in the associates is set out below: 2016 2015 Sh’000 Sh’000 Total assets: 1,929,912 2,177,563 1,013,531 990,327 Reliance Insurance Company (Tanzania) Limited Gordon Court Limited Total liabilities: 1,285,532 1,570,962 66,472 71,002 Reliance Insurance Company (Tanzania) Limited Gordon Court Limited Net assets: 644,380 606,600 947,060 919,325 Reliance Insurance Company (Tanzania) Limited Gordon Court Limited Company’s share of net assets of associate: 219,089 206,244 378,824 367,730 Reliance Insurance Company (Tanzania) Limited Gordon Court Limited Total revenue: 1,194,005 1,696,637 128,523 121,710 Reliance Insurance Company (Tanzania) Limited Gordon Court Limited Profit for the year: 88,056 134,121 27,735 213,990 Reliance Insurance Company (Tanzania) Limited Gordon Court Limited Company’s share of profit for the year: 29,938 45,601 11,094 85,596 Reliance Insurance Company (Tanzania) Limited Gordon Court Limited64","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016NOTES TO THE 2016 2015 Shs 000 Shs 000FINANCIAL STATEMENTS (continued) 52,027 57,941 15 Equity investments (continued) - (5,000) (b) Investment in unquoted shares (22,499) (914) (14,821) - At 1 January 14,707 Disposals 52,027 Fair value loss Transfer to quoted shares - Note 16 2016 2015 At 31 December Shs 000 Shs 000 16 Available for sale quoted equity investments 2,090,961 2,593,973 56,391 175,733 At 1 January 14,821 - Additions (339,966) Transfer from unquoted investments (Note 15(b)) (354,423) (338,779) Disposals (307,836) Fair value loss through other comprehensive income 1,499,914 2,090,961 At 31 December 2016 2015 17 Loans receivable Shs 000 Shs 000 Mortgage loans 27,578 12,857 26,997 - At 1 January (4,743) Loans advanced (4,192) Repayments received - 18,913 Transfer from deposits with financial institutions At 31 December 49,832 27,578 Other loans 67,024 118,183 26,221 23,605 At 1 January (36,198) (74,764) Loans advanced 57,047 67,024 Repayments received 106,879 94,602 At 31 December 94,602 131,040 Total 53,218 23,605 (40,941) (78,956) Summary 18,913 - 94,602 At 1 January 106,879 Loans advanced 65 Loan repayments Transfer from deposits with financial institutions At 31 December","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 NOTES TO THE 2016 2015 Shs’000 Shs’000 FINANCIAL STATEMENTS (continued) - 3,066 17 Loans receivable (continued) 4,404 1,355 45,428 23,157 Maturity profile of mortgage loans 49,832 27,578 Within 1 year In 1 to 5 years 20,759 16,093 In over 5 years 36,288 50,931 Total - - 57,047 67,024 Maturity profile of other loans Loans maturing: Within 1 year In 1 to 5 years Over 5 years Total Book amount of: 49,832 27,578 57,047 67,024 - Mortgage loans - Other loans Total loans receivable at 31 December 106,879 94,602 Lending commitments Mortgage loans approved by the directors but not disbursed at 31 December 20,369 25,000 There is no undue concentration of credit risk with respect to mortgage and other loans. Weighted average effective interest rates are disclosed under note 31. 18 Reinsurers’ share of insurance liabilities and reserves 2016 2015 Shs’000 Shs’000 Reinsurers’ share of: - provision for unearned premiums (Note 28) 977,754 1,005,455 - notified claims outstanding (Note 27 (b)) 866,678 788,165 - claims incurred but not reported (Note 27(b)) 161,829 231,348 Total 2,006,261 2,024,968 Amounts due from reinsurers in respect of claims already paid by the company on contracts that are reinsured are included in receivables arising out of reinsurance arrangements in the statement of financial position. Movements in the above reinsurance assets are shown in notes 27 and 28.66","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016NOTES TO THE 2016 2015 Shs’000 Shs’000FINANCIAL STATEMENTS (continued) 247,733 222,34319 Deferred acquisition costs 198,074 247,733 (247,733) (222,343) At 1 January Additions 198,074 247,733 Amortisation for the year At 31 December20 Other receivables 2016 2015 Shs’000 Shs’000 Due from related companies (Note 35(iii)) Staff advances 1,360 3,284 Sundry deposits and prepayments 7,671 6,689 Rental receivables 70,491 24,819 Other receivables 14,373 9,779 Total 6,223 74,647 The carrying value of the above receivables approximates their fair value 100,118 119,21821 Government securities 2016 2015 Shs’000 Shs’000 (a) Held to maturity 388,173 - Treasury bills and bonds at amortised cost maturing: 1,350,756 760,850 Within 90 days 736,285 After 90 days but within a year 973,238 736,588 In 1 to 5 years 494,379 Over 5 years 2,233,723 3,206,546 Total(b) Available for sale 2,215,518 2,103,168 2,345,000 830,171Government treasury and infrastructure bonds: (452,092)At 1 January (465,042) (143,490)Additions (830,000) (122,239)Maturities during the yearDisposals 76,122 2,215,518Fair value gain /(loss) through other comprehensive income 3,341,598At 31 DecemberThese bonds are carried at fair values based on the Nairobi Securities Exchange prices as at 31 December. Weighted average effectiveinterest rates are disclosed under note 31.The treasury bonds include bonds under lien as required by Insurance Act with a carrying value of Shs 742 million (2015: Shs 722 million). 67","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 NOTES TO THE 2016 2015 Shs’000 Shs’000 FINANCIAL STATEMENTS (continued) 22 Deposits with financial institutions Deposits maturing: 931,687 1,878,206 Within 90 days 156,560 269,988 (97,500) (100,000) After 90 days but within a year 990,747 2,048,194 Less provision for impairment Total The deposit with financial institutions includes Shs 97.5 Million deposit with Imperial Bank Limited (in receivership). The directors have made full impairment provision for this deposit. Weighted average effective interest rates are disclosed under note 31. 23 Commercial paper and corporate bonds 2016 2015 Shs’000 Shs’000 At 1 January Additions 300,001 297,767 Maturities during the year - 71,800 (69,566) (8,238) At 31 December 291,763 300,001 Weighted average effective interest rates are disclosed under note 31. 24 Share capital Number of Share shares Capital Balance as at 1 January 2015, 31 December 2015 and 31 December 2016 Shs’000 12,500,000 1,250,000 The total authorised number of ordinary shares is 12,500,000 with a par value of Shs 100 per share. All issued shares are fully paid. 25 Reserves (a) Available for sale reserve (AFS) The AFS reserve represents net surpluses /(deficits) that arise on the revaluation of available-for-sale financial assets. This reserve is non-distributable. Where a revalued financial asset is sold, the portion of the reserve that relates to that financial asset, and is effectively realised, is recognised in profit and loss. Where a revalued financial asset is impaired, the portion of the reserve that relates to that financial asset is recognised in profit and loss. The movement in this reserve is shown in the statement of changes in equity. (b) Translation reserve The translation reserve relates to translation gains and losses arising from translating the financial Statements of the foreign operation in Tanzania. The movement in this reserve is shown in the statement of changes in equity.68","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016NOTES TO THEFINANCIAL STATEMENTS (continued)26 Retained earnings The retained earnings balance represents the amount available for distribution to the shareholders of the company, with the exception of cumulative fair value gains on the company’s investment properties amounting to Shs 627,825,000 (2015: Shs 562,825,000) whose distribution is subject to restrictions imposed by legislation.27 (a) Insurance contract liabilities 2016 2015 Shs’000 Shs’000 Short term non – life insurance contracts - claims reported and claims handling expenses 5,599,264 4,959,342 - provision for claims incurred but not reported 1,222,240 944,820 Total 6,821,504 5,904,162(b) Movements in insurance contract liabilities and reinsurance assets Gross 2016 Net Gross 2015 Net Shs ‘000 Re- Shs ‘000 Shs ‘000 Re- Shs ‘000 insurance insurance Shs ‘000 Shs ‘000At 1 January: 4,959,342 788,165 4,171,177 4,733,645 923,116 3,810,529Notified claims 944,820 231,348 713,472 713,439 182,415 531,024Incurred but not reported 1,019,513 1,105,531Total at 1 January 5,904,162 1,638,827 4,884,649 5,447,084 1,714,857 4,341,553Cash paid for claims settled in year 5,974,180 4,335,353 5,558,097 3,843,240Increase in liabilities:- a rising from current year claims 2,705,070 523,701 2,181,369 1,617,646 444,474 1,173,172-arising from prior year claims 3,983,619 1,212,933 2,770,686 4,397,530 1,184,364 3,213,166Total increase in liabilities 6,688,689 1,736,634 4,952,055 6,015,176 1,628,838 4,386,338Change in outstanding claims 917,342 8,994 908,348 457,078 (86,018) 543,096Total at 31 December 6,821,504 1,028,507 5,792,997 5,904,162 1,019,513 4,884,649Notified claims 5,599,264 866,678 4,732,586 4,959,342 788,165 4,171,177Incurred but not reported 1,222,240 161,829 1,060,411 944,820 231,348 713,472Total at 31 December 6,821,504 1,028,507 5,792,997 5,904,162 1,019,513 4,884,649 69","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016 NOTES TO THE FINANCIAL STATEMENTS (continued) 28 Provision for unearned premium The provision for unearned premium represents the liability for short term business contracts where the company’s obligations have not expired at the year end. Movements in the reserves are shown below: At 1 January Gross Re- 2016 Gross Re- 2015 (Decrease) /increase Shs’000 insurance Net Shs’000 insurance Net At 31 December 4,209,596 Shs’000 Shs’000 3,491,399 Shs’000 Shs’000 (764,203) 718,197 1,005,455 3,204,141 911,789 2,579,610 3,445,393 (27,701) (736,502) 4,209,596 93,666 624,531 977,754 2,467,639 1,005,455 3,204,141 The company adopted 1/365th method of calculating the unearned premium reserve from 1/24th method in the current year. The change in the method has resulted in unearned premium reserve reduction of Shs 444,346,000 gross (net: Shs 267,288,000) that has been booked through the Statement of Comprehensive Income. 29 Other payables 2016 2015 Shs’000 Shs’000 Accrued expenses Accrued leave pay 82,369 130,506 Rental deposits - 14,086 Other liabilities 17,241 Total 17,849 248,681 234,937 348,899 396,770 The carrying value of the above receivables approximates their fair value. 30 Deferred income tax Deferred income tax is calculated using the enacted capital gains tax rate of 5% for investments property and available for sale cumulative reserves and 30% for the assets (2015: 30%). Deferred tax assets and liabilities, and the deferred tax charge / (credit) in the statement of profit or loss (P/L) and in other comprehensive income (OCI) are attributable to the following items: 2016 2015 Shs’000 Shs’000 At 1 January (173,081) (99,074) Credit to profit or loss (Note 9(a)) (41,702) (72,391) Credit to other comprehensive income (856) At 31 December (1,616) (215,639) (173,081)70","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016NOTES TO THEFINANCIAL STATEMENTS (continued)30 Deferred income tax (continued) Deferred income tax assets and liabilities, and the deferred income tax charge / (credit) in the statement of profit or loss (P/L) and in other comprehensive income (OCI) are attributable to the following items:Year ended 31st December 2016 At 1 Jan (Credited)/ (Credited)/ At 31 Dec 2016 charged Charged 2016Deferred income tax asset to P/L to OCI Shs’000 Shs’000 Shs’000 Shs’000Property and equipment on historical cost basisProvision for doubtful debts 1,387 4,711 - 6,098Impairment provision for fixed deposit (186,125) (49,663) - (235,788) - (30,000)Deferred income tax liability (30,000) - - (259,690) (214,738) (44,952)Available for sale investmentsInvestment property 982 - (856) 126 40,675 3,250 - 43,925Net deferred tax asset 41,657 3,250 44,051 (173,081) (41,702) (856) (215,639) (856)Year ended 31st December 2015 At (Credited)/ (Credited)/ At 1 Jan 2015 charged Charged 31 DecDeferred income tax asset to P/L to OCI Shs’000 Shs’000 Shs’000 2015Property and equipment on historical cost basis Shs’000Provision for doubtful debtsImpairment provision for fixed deposit (449) 1,836 - 1,387 (131,048) (55,077) - (186,125) (30,000) - (30,000) - (131,497) (83,241) - (214,738)Deferred income tax liability 2,598 - (1,616) 982 29,825 10,850 - 40,675Available for sale investments 32,423 10,850 41,657Investment property (99,074) (72,391) (1,616) (173,081) (1,616)Net deferred tax asset 71","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016NOTES TO THEFINANCIAL STATEMENTS (continued)31 Weighted average effective interest rates The following table summarises the weighted average effective interest rate at 31 December on the principal interest-bearing investments: 2016 2015 % %Mortgage loans 10 10Government securities 12 13Deposits with financial institutions 9 15Commercial bonds 13 12Other loans 10 10 32 Notes to the Statement of Cash Flows 2016 2015 Shs’000 Shs’000 (a) Cash generated from operations 808,482 863,200 Reconciliation of profit before tax to cash generated from operations; Profit before income tax (748,881) (543,147) Adjustments for: 32,942 29,336 Interest income 19,685 19,870 Depreciation (Note 12) (3,531) (1,037) Amortisation of intangible assets (Note 13) 6,236 Gain on disposal of property and equipment (Note 5) (102,774) Gain on sale of available for sale financial assets (Note 4) (65,000) (217,000) Gain in fair value of investment property (Note 14) (41,032) (131,197) Share of profits from associates (Note 15(a)) (100,109) 26,261 (Loss) /profit before working capital changes Changes in working capital: 171,847 1,167,627 - technical provisions 42,366 98,277 - trade and other payables (84,211) - trade and other receivables 29,893 (328,510) 963,655 Cash generated from operations 39,724 32,480 (b) For the purposes of the statement of cash flows, cash and cash 931,687 1,778,206 equivalents comprise the following: 388,173 (177,025) - Cash and bank balances 1,182,559 (106,475) Deposits with financial institutions maturing within 90 days (Note 22) 1,704,211 Treasury bills and bonds maturing within 3 months (Note 21(a)) Bank overdraft Total (c) Bank overdraft The bank overdraft balance represents a book overdraft.72","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016NOTES TO THEFINANCIAL STATEMENTS (continued)33 Contingent liabilities In common with the insurance industry in general, the company is subject to litigation arising in the normal course of insurance business. The directors are of the opinion that the outstanding litigation in this respect will not have a material effect on the financial position or profits of the company. The company is aware that Kenya Revenue Authority (KRA) has made claims on the players in insurance industry in respect of certain taxes, which have been subject of intense negotiations between all the stakeholders. Based on the available information including expert opinions received and ongoing stakeholder discussions, the directors are of the opinion that there still exists uncertainty as regards some of the taxes and accordingly no provision has been made for these taxes until the matter is clarified or fully concluded. The Company has issued financial guarantees against counter indemnities from third parties for an aggregate outstanding exposure of Shs. 45,000,000 as at 31 December 2016 (2015: Shs. 13,538,000). No loss is expected to arise on these guarantees.34 CommitmentsCapital commitmentsCapital commitments at the end of the year for which no provision has been made in these financial statements are as follows: 2016 2015 Shs’000 Shs’000Authorised and contracted for 36,049 54,824Authorised but not contracted for 162,770 354,154Total 198,819 408,978Operating lease commitments 2016 2015 Shs’000 Shs’000The future minimum lease payments under non-cancellable operating leases are as follows: 86,023 82,398Not later than 1 year 213,486 117,066Later than 1 year and not later than 5 yearsLater than 5 years 2,958 6,133 73","ANNUAL REPORT AND FINANCIAL STATEMENTS 2016NOTES TO THEFINANCIAL STATEMENTS (continued)35 Related parties The company is controlled by Apollo Investments Limited, a company incorporated in Kenya which owns 100% of the company’s shares. In the normal course of business, insurance policies are sold to related parties. Transaction with related parties during the year and related outstanding balances are disclosed below:(i) Insurance business transacted with related parties 2016 2015 Shs’000 Shs’000 Gross written premium: - Parent company 861 849 - Other related parties 3,852 3,912 Total 4,713 4,761(ii) Mortgage loans advanced to staff 49,832 27,578(iii) Outstanding balances with related parties 1,306 2,715 - 145 Due from APA Life Assurance Limited - Due from Reliance Insurance Company (Tanzania) Limited 75 136 Due from Gordon Court Limited 124 288 Due from Apollo Asset Management Company Limited (145) Due from / to APA Insurance (Uganda) Limited 1,360 3,284 Total (Note 20) --(iv) Loans to directors -- -- At 1 January Loans advanced -- Loan repayments At 31 December(v) Directors’ and key management remuneration 6,658 5,472 63,049 59,147 Directors’ fees 131,396 129,775 Directors’ other remuneration Remuneration to key management personnel (included in staff costs (Note 8)) 201,103 194,394 Total ---000---74","SUPPLEMENTARY INFORMATION ANNUAL REPORT AND FINANCIALUNDERWRITING REVENUE ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2016 STATEMENTS 2016 Motor Work- men’s Enginee- Fire Fire Marine Motor Commer- Personal Compen- Miscella- Total TotalClass of Insurance Aviation ring Domestic Industrial Liability & Transit Private cial Medical Accident Theft sation neuos 2016 2015Business Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000Gross premium written 82,422 221,535 74,951 654,217 121,030 206,696 1,504,091 1,849,614 2,973,054 103,968 153,093 618,668 432,636 8,995,974 9,242,369Change in gross UPR (7,521) 39,477 (7,385) (46,258) (30,418) (5,923) (182,878) (262,487) (235,452) (5,108) (15,415) (48,569) 43,735 (764,503) 766,197Gross earned premium 89,943 182,058 82,336 700,475 151,448 212,619 1,686,969 2,112,101 3,208,506 109,076 168,508 667,237 388,901 9,760,177 8,476,172Less: reinsurance (89,168) (127,786) (18,931) (561,427) (77,806) (68,510) (23,056) (40,071) (1,315,519) (1,488) (11,475) (19,760) (153,712) (2,508,709) (2,107,579)payable 775 54,272 63,405 139,048 73,642 144,109 1,663,913 2,072,030 1,892,987 107,588 157,033 647,477 235,189 7,521,468 6,368,593Net earned - 68,575 24,047 362,490 88,005 88,571 1,218,708 1,195,914 2,444,987 41,842 141,224 229,904 70,333 5,974,600 5,558,097premium 4,352 (9,952) (2,408) (48,841) (55,697) (103,663) 407,215 334,123 (140,260) 112,756 (25,759) 377,148 68,328 917,342 457,078Gross claims paid (4,111) 753 (223) (238,024) (4,882) 21,629 (45,628) (231,405) (917,209) (77,106) (32,449) (30,580) (88,585) (1,647,820) (1,628,837)Change in grossoutstanding claims 241 59,376 21,416 75,625 27,426 6,537 1,580,295 1,298,632 1,387,518 77,492 83,016 576,472 50,076 5,244,122 4,386,338Less: ReinsurancerecoverableNet incurredclaimsCommissions receivable (2,764) (39,509) (1,957) (82,737) (4,607) (16,701) - (720) (248,718) - 529 (4,155) (34,758) (436,097) (528,874)Commissions payable 385 43,198 16,026 126,681 16,524 34,695 159,115 198,049 259,959 21,629 17,851 136,726 43,285 1,074,123 1,048,367Expenses of 11,628management 1,596 34,369 101,496 18,777 32,067 309,847 374,642 409,272 16,130 23,751 95,981 67,119 1,496,675 1,384,271 25,697Total expenses (783) 38,058 145,440 30,694 50,061 468,962 571,971 420,513 37,759 42,131 228,552 75,646 2,134,701 1,903,764and commissionsUnderwriting 1,317 (43,162) 16,292 (82,017) 15,522 87,511 (385,344) 201,427 84,956 (7,663) 31,886 (157,547) 109,467 (127,355) 78,491profit / (loss)Key ratios % % 72.32 68.87Loss ratio (net claims incurred/net earned premium) 11.94 11.34Commissions ratio (commissions payable/gross written premium) 16.63 14.98Expense ratio (management expenses/gross written premium)75","ANANNUNALUARELPROEPROT RT ANADNFDINFAINACNIACLIAL STASTTEAMTEMNTESNTS 20126016 GLOBETROTTER TRAVEL INSURANCE Young male lions need to leave the pride once they are around 3 years old. These are the most challenging times for the young lions as they are away from the comforts of what they once called home, exposed to the dangers of hunting in the wild and fighting to establish territory. Thanks to APA Globetrotter Travel Insurance, you don’t have to worry when you are away for work or pleasure. This comprehensive cover provides security for all unexpected emergencies with 24x7 assistance at your disposal.76","","HEAD OFFICE ANNUAL REPORT AND FINANCIALAPA INSURANCE LIMITEDApollo Centre, Ring Road Parklands, Westlands STATEMENTSP.O. Box 30065 - 00100 Nairobi 2016Tel: +254 (0) 20 286 2000 / 364 1000E-mail: info@apainsurance.orginfo@apalife.co.ke NYERI 1st Floor, Peak Business Centre, off Kenyatta HighwayBRANCH OFFICES P.O. Box 2443 - 10100, NyeriCITY CENTRE Tel: 061 203 0332 | 020 286 23076th Floor, Hughes Building, Kenyatta Avenue Fax: 061 203 0332P.O. Box 30065 - 00100, Nairobi E-mail: apa.nyeri@apainsurance.orgTel: +254 (0) 20 286 2000 / 364 1000Fax: 020 286 2220 EMBUE-mail: info@apainsurance.org info@apalife.co.ke 2nd Floor, Sparko Building, Kenyatta Highway P.O. Box 1817 - 60100, EmbuNAKURU Tel: 068 2230103 | 020 286 2317Giddo Plaza, George Morara Road Fax: 068 2230104P.O. Box 14188 - 20100, Nakuru E-mail: apa.embu@apainsurance.orgTel: 051 221 3412/6 | 020 286 2337Fax: 051 221 3449 KISIIE-mail: apa.nakuru@apainsurance.org 2nd Floor Mocha Place - Kisii Kisumu Highway P.O. Box 3479 - 40200, KisiiMOMBASA Tel: 058 2031773 | 020 286 2327Apollo House, Moi Avenue Fax: 058 2031773P.O. Box 81821 - 80100, Mombasa E-mail: apa.kisii@apainsurance.orgTel: 041 222 19 41/ 2 | 041 2220758/9Pilot Line: 020 286 2400 MACHAKOSE-mail: apamombasa@apainsurance.org ABC Imani Plaza, Ngei Road P.O. Box 2475-90100, MachakosKISUMU Tel: 044 2021455 | 0202 286 2347Ground Floor, Tuff Foam Mall - Jomo Kenyatta Highway E-mail: apa.machakos@apainsurance.orgP.O. Box 632 - 40100, KisumuTel: 057 202 4860 | 020 286 2325 GROUP COMPANIESFax: 057 202 4860E-mail: apa.kisumu@apainsurance.org APA INSURANCE (UGANDA) LIMITED AHA Towers, 5th Floor, 7 Lourdel Road - Nakasero, KampalaNAIVASHA P.O. Box 75611st Floor, Eagle Centre, Mbari Kaniu Road Tel: +256 200907003 | +256 200 907004P.O. Box 1819 - 20117, Naivasha Fax: +256 (414) 425 1120Tel: 050 202 0086 | 020 086 2353 E-mail: apa.uganda@apainsurance.orgFax: 050 202 0086E-mail: apa.naivasha@apainsurance.org APA LIFE ASSURANCE LIMITED Apollo Centre, Ring Road, ParklandsELDORET P.O. Box 30389 - 00100, Nairobi1st Floor, Zion Mall, Uganda Road Tel: +254 (0) 20 364 1000P.O. Box 3600 - 30100, Eldoret E-mail: info@apalife.co.keTel: 053 203 0937 | 020 286 2334 Website: www.apalife.co.keFax: 053 203 0938E-mail: apa.eldoret@apainsurance.org APOLLO ASSET MANAGEMENT COMPANY LIMITED Apollo Centre, Ring Road, ParklandsTHIKA P.O. Box 30389 - 00100, Nairobi5th Floor, Zuri Centre, Kenyatta Highway Tel: +254 (0) 20 364 1000P.O. Box 4400 - 01002, Thika E-mail: assetmanagement@apollo.co.keTel: 067 2220196 | 020 286 2300 Website: www.apolloassetmanagement.co.keFax: 067 220197E-mail: apa.thika@apainsurance.org GORDON COURT LIMITED Apollo Centre, Ring Road, ParklandsMERU P.O. Box 30389 - 00100, Nairobi2nd Floor, Twin Plaza, Ghana Road Tel: +254 020 364 1900P.O. Box 3298 - 60200, Meru E-mail: info@apollocentre.orgTel: 064 3131823 | 020 268 2312Fax: 064 3131821 ASSOCIATE COMPANYE-mail: apa.meru@apainsurance.org RELIANCE INSURANCE COMPANY (TANZANIA) LTD. 3rd & 4th Floor Reliance House Plot No. 356, United Nations Road, Upanga P.O. Box 9826, Dar es Salaam Tel: +255 (22) 212 0088 - 90 Fax: +255 (22) 211 2903 E-mail: insure@reliance.co.tz www.apainsurance.org78"]; var positionForPages = [];