2014 ICEA LION General... · Annual Report and Financial Statements 2014 - ICEA LION General...

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PROTECTING AND CREATING WEALTH ANNUAL REPORT AND 2014 FINANCIAL STATEMENTS Voted 2014 General Insurer of the Year

Transcript of 2014 ICEA LION General... · Annual Report and Financial Statements 2014 - ICEA LION General...

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PROTECTING AND CREATING WEALTH

ANNUAL REPORT AND2014

FINANCIAL STATEMENTS

Voted 2014General Insurer of

the Year

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OUR PEOPLE AND CUSTOMERS HAVE SPOKEN

CROWNED KING OF THE FINANCIAL JUNGLE: THINK BUSINESS INSURANCE AWARDS 2014

General Insurer of the Year1st Runner’s Up - Customer Service | 1st Runner’s Up - Risk Management

2nd Runner’s Up - Fraud Detection & Prevention Initiative2nd Runner’s Up - Training

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Annual Report and Financial Statements 2014 - ICEA LION General Insurance

Chairman's Statement 2 - 5

Corporate Information 6 - 8

Board of Directors 9 - 12

Management Team 13 - 16

Directors' Report 17 - 18

Corporate Governance Statement 19 - 24

Corporate Social Responsibility 25 - 26

Statement of Directors' Responsibilities 27 - 28

Report of Parent Company Consulting Actuary 29 - 30

Independent Auditor's Report 31 - 32

Financial Performance Highlights 33 - 34

Financial Statements

Consolidated Statement of Comprehensive Income 36

Consolidated Statement of Financial Position 37

Company Statement of Financial Position 38

Consolidated Statement of Changes in Equity 39

Company Statement of Changes in Equity 40

Consolidated Statement of Cash Flows 41

Notes to the Financial Statements 42 - 81

Appendices

Company Statement of Comprehensive Income 83

Consolidated Revenue Accounts 84

Company Revenue Accounts 85

TABLE OF CONTENTS

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CHAIRMAN’S STATEMENT

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Annual Report and Financial Statements 2014 - ICEA LION General Insurance

Dr. C W Obura

CHAIRMAN’S STATEMENT

I am delighted to present the financial statements for ICEA LION General Insurance Company Limited for the year ended 31st December 2014.

The year 2014 saw the Company maintain a profitable trend with continued growth being achieved in market share, assets and profitability across the East African markets in which the Group is represented.

THE ECONOMY

The economy grew by 5% in 2014 compared to 6% in 2013. This growth was supported by increased government spending, low oil prices, increase in exports of goods and services and relative stability of the Kenya Shilling against major currencies. Strong growth in the building & construction, financial & insurance activities, whole sale & retail trade, agricultural and manufacturing sectors at rates of 13%, 8%, 7%, 4% and 3% respectively contributed significantly to the GDP growth during the year, as did growth in the real estate and information & communication sectors albeit at slightly lesser rates.

Overall, the agricultural sector retained its traditional position as the largest share to GDP at 27%, followed by manufacturing, wholesale & retail trade, real estate, financial & insurance activities and construction sectors with shares of 10%, 8%, 8%, 7% and 5% respectively. On the downside however, the hospitality sector continued to be negatively affected by a decline in tourism manifest in the number of international visitor arrivals which declined from 1.5 million in 2013 to 1.4 million in 2014. Factors that impacted negatively on the tourism sector included security concerns, negative travel advisories and fear of spread of Ebola across Africa.

Inflation remained relatively low due to strong monetary policy with Annual average inflation increased from 6% in 2013 to 7% in 2014. The modest increase in the rate of inflation was attributed to increases in the cost of several food and non-food items which outweighed notable falls in the cost of electricity and petroleum products including petrol, diesel and kerosene. Headline inflation on the other hand decreased to 6% in as at December 2014 from 7% at December 2013. The exchange rate was relatively stable in line with Central Bank of Kenya (CBK) targets with the Kenya Shilling depreciating by 1.5% against the US dollar, but appreciating by 2.8% against both the Pound Sterling and the Euro to close the year at Kshs 90.60, Kshs 140.95 and Kshs 110.17 respectively. The CBK adopted monetary policy measures in 2014 that contributed to the easing of inflationary pressure, and retained the Central Bank Rate (CBR) at 8.5% throughout the period in an effort to anchor inflationary expectations. Interest rates remained stable, with the 91-day Treasury bill rate settling at 8.6% in December 2014.

All stock market indicators maintained the vibrant trend that started in mid-2013 but at a slower pace. The total number of shares traded increased by 7.4 per cent to 8.1 billion

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CHAIRMAN’S STATEMENT

a slower pace. The total number of shares traded increased by 7.4 per cent to Kshs 8.1 billion in 2014 compared to an increase of 39% recorded in 2013. The value of shares traded recorded a growth of 39% from Kshs 156 billion in 2013 to Kshs 216 billion in 2014. The Nairobi Securities Exchange (NSE) 20 share index rose by 4% from 4,927 points in 2013 to 5,113 points in December 2014. The Nairobi All Share Index (NASI) on the other hand closed at 162.9 points, 19% higher than the previous year’s 136.7 points.

Kenya’s economy is projected to grow by 5% in 2015. Inflation is expected to ease in 2015 supported by lower prices of oil and electricity. Improved external environment and a sustained strong internal demand are likely to favour growths in many sectors of the economy this year. The ratio of current account to GDP is expected to remain close to the level of 2014. The Government’s fiscal policies in the 2015/16 national budget will focus on re-orientation of expenditure from recurrent to development while private sector investment is anticipated to remain vibrant. Other macroeconomic indicators are expected to remain stable and supportive of growth in 2015. Investments in the construction industry is likely to remain robust against a background of stable interest rates coupled with the ongoing government infrastructural projects and the private sector’s resilient participation especially in the real estate development.

THE INSURANCE INDUSTRY

As at 31st December 2014, the industry’s total gross written premiums grew to Kshs 157.8 billion from the Kshs 131.6 billion recorded in 2013, representing a growth of 20.4%. Premium income reported under general business was Kshs 101.30 billion, up from Kshs 86.7 billion in 2013 and representing 64.2% of industry’s total gross premiums. Life assurance business premium on the other hand amounted to Kshs 56.48 billion, up from Kshs 44.3 billion in 2013 and representing 35.8% of industry’s total gross premiums. Claims incurred under general insurance business were Kshs 41.89 billion in 2014, representing a sharp increase of 25.3% (2013:13.6%) from Kshs 33.4 billion recorded in 2013. The industry loss ratio deteriorated to 59.7% in the year (2013:57.2%).

The increasing capitalization in the insurance industry saw common stock holders’ equity grow significantly during the year. As at 31st December 2014, the shareholders’ funds amounted to Kshs 122.54 billion representing a growth of 24.8% over Kshs 98.21 as at the end of 2013. The shareholders’ funds comprised Kshs 31.1 billion in paid up capital, Kshs 48.16 billion in retained earnings and Kshs 43.28 billion in other reserves.

The insurance industry asset base was Kshs 426.31 billion as at 31st December 2014, which was a growth of 19% from Kshs 358 billion in 2013. Liabilities on the other hand amounted to Kshs 303.8 billion during the same period. Insurers held a total of Kshs 352 billion (83%) of their assets in income generating investments as at the end of 2014. Investments under general insurance business were Kshs 127.1 billion (36% of total investments for the industry) against life assurance business investments of Kshs 225.7 billion (64% of total investments for the industry).

During the year, the Finance Act 2014 was passed. One of the major items passed by the said Act was the re-introduction of the Capital Gains Tax, which had previously been charged from the year 1975 until its suspension in 1985 in order to encourage investment in the real estate sector as well as to spur growth in the stock market. The tax, now charged at 5%, is applicable on gains, which will accrue to a company or an individual in instances where property is sold, exchanged, conveyed or disposed of in any manner. The reintroduction of this tax has serious ramifications for insurance companies given the significant investments by insurers in the property and stock markets.

FINANCIAL PERFORMANCE

The Group

At the gross premium level, the Group had yet another successful year, significantly growing its consolidated gross premium to Kshs 6.1 billion up from Kshs 5.4 billion in the previous year. Investment and related income amounted to Kshs 801.8 million, compared to Kshs 569.3 million realized in the previous year, bringing the Group’s consolidated revenue for the year to over Kshs 6.9 billion up from Kshs 5.9 billion in the previous year. The loss ratio for the Group was 51% in 2014, up from 47% recorded in 2013 and a reflection of the deteriorating claims experience that was manifest across the market during the year.

The Group’s comprehensive pre-tax profit grew by 17% to close at Kshs 1.0 billion above that for the year 2013 of Kshs 861 million on the back of prudent underwriting, effective claims management and investment income management strategies by the Group. Total assets grew by 11% to Kshs 11.8 billion up from Kshs 10.6 billion in 2013 on account of the growth in assets and diverse investment strategies, while shareholders’ funds increased by 17% to Kshs 3.7 billion up from Kshs 3.2 billion in 2013 supported by a consistent growth in assets value and corporate profitability.

The Company

In terms of top line performance, the business grew by 15% in 2014 to take gross premium income to Kshs 5.3 billion, up from Kshs 4.6 billion written in the previous year. Overall loss ratio increased from 48% in 2013 to 52% in 2014 with total claims incurred increasing by 31% from Kshs 1.2 billion in the previous year to Kshs 1.6 billion. Ultimately, an underwriting profit of Kshs 301 million was realized which was slightly below Kshs 373 million achieved in the previous year.

Investment income was Kshs 742 million, significantly up from Kshs 672 million earned in the previous year as a result of improved market yields and growth in the investment portfolio during the year.

Overall, profit before tax was Kshs 826.2 million, down from Kshs 872.6 million earned

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Annual Report and Financial Statements 2014 - ICEA LION General Insurance

CHAIRMAN’S STATEMENT

in the previous year. However, comprehensive income for the year was Kshs 936 million compared to Kshs 870 million in 2013 owing to a marginally lower fair value gain on our investment properties and lower market yields compared to the previous year. Both total assets and shareholders’ funds grew by 10% from Kshs 9.7 billion in 2013 to Kshs 10.7 billion in 2014 and by 17% from Kshs 2.99 billion in 2013 to Kshs 3.5 billion in 2014 respectively.

Dividend

On the back of this strong performance, the Board of Directors is pleased to recommend a dividend of Kshs 6.67 per share amounting to Kshs 200 million in respect of the year ended 31st December 2014 (dividend in 2013 was similarly Kshs 6.67 per share amounting to Kshs 200 million).

Subsidiary - ICEA LION General Insurance Company (Tanzania) Limited

Tanzania has had a strong and consistent economic growth in recent years and is considered a rising investment hotspot. The real GDP for the year 2014 is yet to be officially released, despite strong indications that it is averaging 7% compared to the projected growth of 7%. The economy is expected to grow by 7% in 2015 and 7.3% in 2016.

The insurance industry market performance report for 2013 was released by TIRA in December 2014. The report indicates that in 2013 the insurance industry grew by 17% which was slightly lower than the rate of 18% recorded in 2012. It is expected that the industry growth rate in 2014 remained consistent with that witnessed in the prior two years, and that more or less the same growth rate will hold for 2015. As at December 2014, there were twenty nine (29) insurers and one reinsurer registered in Tanzania. With these numbers in market, competition predictably remained quite stiff and fierce in 2014 and is expected to continue even more in 2015.

Our subsidiary, ICEA LION General Insurance (Tanzania) Limited contributed Tshs 16.7 billion (Kshs 835 million) to the Group’s gross written premium, up from Tshs 14.8 billion (Kshs 740 million) in the previous year. However, market conditions remained unfavorable due to stiff competition, frequency and magnitude of claims. In spite of a significant strengthening on all other key financial performance parameters, the subsidiary however realized an underwriting loss of Tshs 629 million (Kshs 31.5 million) down from an underwriting profit of Tshs 456.2 million (Kshs 22.8 million) in 2013, this mainly as a result of a significant change in accounting policy during the year.

That notwithstanding, the company recorded an overall profit before tax of Tshs 416 million (Kshs 20.8 million) slightly down from the Tshs 685 million (Kshs 34.3 million) recorded in the previous year on the back of continued good investment income performance.

Total assets grew by 25% to close at Tshs 23.4 billion (Kshs 1,170 million) in 2014, up from Tshs 18.8 billion (Kshs 940 million) in the previous year largely resulting from increased investment activity as the business generated surplus investable funds.

OUTLOOK

The Company has performed commendably and retained its market share in spite of the daunting challenges present in the highly competitive business environment. In spite of the increasingly competitive environment in which the Company operates, we are determined to remain at the frontier of performance excellence even as we continue to deliver innovative products and superior services to its customers. During the year under review, our quest for process excellence saw the augmentation of an electronic documentation management system (EDMS) to our world class core IT systems which has resulted in the creation a seamless and paperless office environment with the vital attendant benefits of faster business process turnaround times and enhanced efficiencies all round.

The Company’s relentless pursuit for business excellence and market leadership saw it win the following key awards at the annual Think Business Awards for the Insurance Industry: General Insurer of the Year; Winner - Customer Service; Winner – Risk Management; Runners up – Fraud Detection & Prevention; Runners Up – Training. With that welcome vindication, and with a firm resolve not to at all rest on our laurels, it is our view the future is indeed bright for ICEA LION General and both the Board and Management will continue to pursue strategies and policies that will help ensure that we maintain our preeminence in the industry both locally and regionally this year and in coming years.

APPRECIATION

I wish to conclude by thanking all our customers and intermediaries for their enduring trust, support and loyalty to the ICEA LION Group,which indeed inspires our quest for even greater performance as we go forward. We are equally grateful to our various business associates and service providers for the invaluable support they continue to give us in our various corporate activities.

Finally, I wish to thank my fellow directors for the role they continue to play, both on the Board itself and on the various committees of the Board, in guiding the affairs of the Company, and last but not least, the management and staff in all our business units for their vital contribution during the year.

Dr. Chris W OburaChairman

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CORPORATE INFORMATION

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CORPORATE INFORMATION

DIRECTORSDr C W Obura ChairmanJ P M NdegwaA S M Ndegwa (Alternate - P K Mugambi)D N Ndegwa (Alternate - E M Ndegwa)J K MuiruriJ K KimeuD G M Hutchison*S O Oluoch

*British

AUDIT, RISK & COMPLIANCE COMMITTEEJ K Muiruri ChairmanJ P M NdegwaA S M NdegwaD G M HutchisonJ K Kimeu

BOARD ICT COMMITTEED G M Hutchison ChairmanA S M NdegwaJ K MuiruriJ K Kimeu

FINANCE & INVESTMENT COMMITTEEA S M Ndegwa ChairmanJ K KimeuJ K Muiruri

NOMINATION & REMUNERATION COMMITTEEJ P M Ndegwa ChairmanA S M NdegwaJ K KimeuJ K Muiruri

SHARED SERVICESN K Munyi (Mrs) General Manager, Finance & StrategyM M Mahinda General Manager, Human Resources & AdministrationD Maseke (Mrs) Manager, Risk and ComplianceR N Gitonga (Mrs) Manager, Marketing and Communications

ICEA LION GENERAL INSURANCE COMPANY LIMITED (TANZANIA)

K Ravinarayanan Chief Executive Officer M B Misiko Assistant General ManagerC G Kagima Operations ManagerA N Mendes Chief Finance OfficerM Selemani Claims Manager

SECRETARY

Kennedy M OntitiFirst Chartered Securities Limited ICEA LION Centre, Chiromo RoadP.O. Box 30345 - 00100Nairobi

MANAGEMENT - ICEA LION GENERAL INSURANCE COMPANY LIMITED ( KENYA)

S O Oluoch Chief Executive OfficerA O Odhiambo General Manager, Business Development & Marketing (joined on

1.01.2015)C C Njoroge Assistant General Manager, Special Projects

(retired on 31.01.2015)S M Kagiri (Mrs) Assistant General Manager, Business Development, RetailP N Mukuria Assistant General Manager, Business Development, CommercialJ K Onsongo Assistant General Manager, Business Development, CommercialJ N Muiru (Mrs) Assistant General Manager, OperationsM Otieno Assistant General Manager, ICT (resigned in Dec 2014)L N Matolo Financial ControllerK Nyakeri Internal AuditorD M Ndegwah Manager, Information TechnologyL W Karanja (Mrs) Manager, UnderwritingJ N Njenga Manager, Reinsurance and Risk SurveyE Musunzar Business Development Manager, RetailD N Kimaiyo (Mrs) Business Development Manager, RetailJ W Waithaka (Mrs) Manager, ClaimsA S Abdo Regional Manager, Coast

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CORPORATE INFORMATION

SUBSIDIARIES - ICEA LION GENERAL INSURANCE COMPANYLIMITED (TANZANIA)

ICEA LION General Insurance Company Limited (Tanzania)Plot No. 331Kambarage Road, Mikocheni ‘’A’’P.O. Box 1948Dar-es-SalaamTanzania

AUDITORSPricewaterhouseCoopersCertified Public Accountants (Kenya)PwC Tower, Waiyaki Way/Chiromo Road Westlands P.O. Box 43963 – 00100Nairobi

ADVOCATESKaplan and Stratton AdvocatesWilliamson House4th Ngong AvenueP.O. Box 40111, 00100Nairobi

BANKERSNIC Bank LimitedNIC HouseP.O. Box 44599, 00100Nairobi

Standard Chartered Bank LimitedKenyatta Avenue BranchP.O. Box 30003, 00100Nairobi

CONSULTING ACTUARIESAlexander Forbes Financial Services (E.A.) LimitedLandmark Plaza, 10th FloorArgwings Kodhek RdP.O. Box 52439, 00200Nairobi

BRANCHES

ICEA Building, 15th FloorKenyatta AvenueP.O. Box 30190 – 00100NairobiTel: 020 2750000

Ambank HouseP.O. Box 46143 – 00100NairobiTel: 020 2226921

Unga House Branch Unga House, Muthithi RoadP.O. Box 46143 – 00100NairobiTel: 020 3742094

Upperhill BranchWilliamson House, 7th Floor4th Ngong AvenueP.O. Box 30190 – 00100NairobiTel:020 2710400

Tulip House Branch Mombasa RoadP.O. Box 46143 – 00100NairobiTel: 020 2492437/9

Karen BranchKaren Office Park, Langata RdAcacia Block, 1st FloorP.O. Box 30190 -00100NairobiTel: 0715567368

Nakuru Branch Seguton Building1st FloorP.O. Box 3066 – 20100Nakuru

Mombasa BranchStandard Chartered Building2nd FloorP.O. Box 90101 – 80100MombasaTel: 041 2224646-8

Eldoret BranchSakong HouseP.O. Box 4807 – 30100EldoretTel: 053 2033237Tel: 051 2211158

Nyeri BranchKonahauthi BuildingKimathi WayP.O. Box 1803 – 10100NyeriTel: 061 2032106

Kisumu BranchAl Imran PlazaOginga Odinga StreetP.O. Box 3122 – 40100KisumuTel: 057 20202599

Nyali BranchK K Building, 1st FloorLinks Road, NyaliP.O. Box 90101-80100MombasaTel: 0701752748

Thika BranchZuri Centre, 4th FloorKenyatta HighwayP.O. Box 46143-00100Nairobi.Tel: 0719071000

Meru BranchTuskys BuildingMwendato RoadTel: 0719071000

UPCOUNTRY BRANCHES:

REGISTERED OFFICEICEA LION CentreRiverside ParkChiromo Road, WestlandsP.O. Box 30190 - 00100NairobiTel: 254 (0) 20 4449982-9Mobile: 254 719071000Email: [email protected]

NAIROBI BRANCHES:

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BOARD OF DIRECTORSBOARD OF DIRECTORS

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Annual Report and Financial Statements 2014 - ICEA LION General Insurance

BOARD OF DIRECTORS

Standing (left to right): K M Ontiti - Company Secretary | J P M Ndegwa - Director | A S M Ndegwa - Director | J K Kimeu - Director | P K Mugambi - Alternate Director

Seated (left to right): J K Muiruri - Director | S O Oluoch - Chief Executive Officer | Dr C W Obura - Chairman | D G M Hutchison - Director | E M Ndegwa - Director

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Annual Report and Financial Statements 2014 - ICEA LION General Insurance

BOARD OF DIRECTORS

S O Oluoch

Chief Executive Officer

Dr. C W Obura

Chairman

J P M Ndegwa

Director

E M Ndegwa

Director

A S M Ndegwa

Director

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Annual Report and Financial Statements 2014 - ICEA LION General Insurance

BOARD OF DIRECTORS

Director

J K Muiruri

Director

P K Mugambi

Alternate Director

D G M Hutchison

Director Company Secretary

J K Kimeu

K M Ontiti

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MANAGEMENT TEAM

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MANAGEMENT TEAM

Steven O Oluoch

Chief Executive Officer

Alvin O Odhiambo

General Manager,Business Development and Marketing

Naomi K Munyi

General Manager,Finance and Strategy

Micah M Mahinda

General Manager,Human Resources and Administration

Sh

ared

Ser

vice

s

Susan M Kagiri

Assistant General Manager,Business Development, Retail

Peter N Mukuria

Assistant General Manager,Business Development, Commercial

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MANAGEMENT TEAM

Jane N Muiru

Assistant General Manager,Operations

Leonard N Matolo

Financial Controller

Kevin Nyakeri

Internal Auditor

Nkatha Gitonga-Kinuthia

Manager, Marketing and Communications

Dorothy Maseke

Manager, Risk and Compliance

James K Onsongo

Assistant General Manager,Business Development, Commercial

Sh

ared

Ser

vice

s

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Annual Report and Financial Statements 2014 - ICEA LION General Insurance

MANAGEMENT TEAM

Evelyn Musunzar

Business Development Manager,Retail

Jane W Waithaka

Manager, Claims

Dorcas N Kimaiyo

Business Development Manager,Retail

Dominic M Ndegwah

Manager, Information Technology

Lucy W Karanja

Manager, Underwriting

John N Njenga

Manager, Reinsurance and RiskSurvey

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DIRECTORS’ REPORT

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Annual Report and Financial Statements 2014 - ICEA LION General Insurance

The directors have the pleasure of presenting their 36th annual report to the members together with the audited financial statements of ICEA LION General Insurance Company Limited (the “company”) and its subsidiary, for the year ended 31 December 2014 which show the group’s and the company’s state of affairs.

PRINCIPAL ACTIVITIESThe principal activity of the company and its subsidiary, ICEA LION General Insurance Company Limited (Tanzania), is the transaction of general insurance business.

GROUP RESULTS

RESULTS AND DIVIDENDProfit for the year of Ksh 591,909,000 (2013: Ksh 444,236,000) has been added to retained earnings. During the year, no interim dividend was declared (2013: Ksh Nil). The directors recommend the approval of a final dividend of Ksh 200,000,000 (2013: Ksh 200,000,000).

DIRECTORSThe directors who held office during the year and to the date of this report are set out on page 7.

AUDITORPricewaterhouseCoopers were appointed auditors during the year and have expressed their willingness to continue in office in accordance with Section 159 (2) of the Companies Act.

BY ORDER OF THE BOARD

Secretary 27 March 2015 Nairobi

DIRECTORS’ REPORT

2014Ksh’ 000

2013Ksh’ 000

Continuing operationsIncome 848,152 673,443Income Tax (248,534) (241,728)

Profit for the year from continuing operations 599,618 431,715

Discontinued operationsProfit for the year from discontinued operations - 25,490

Profit for the year 599,618 457,205

Attributable to non-controlling interest (7,709) (12,969)

Profit attributable to equity holders of the parent company transferred to retained earnings 591,909 444,236

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CORPORATE GOVERNANCE STATEMENT

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ICEA LION General Insurance Company Limited subscribes to and fully embraces the principles of good corporate governance. It is therefore committed to the objective of achieving the highest standards possible, in terms of accountability, integrity, fairness, responsibility and transparency. In pursuit of this objective, the Company has put in place formal structures to support corporate governance. These structures are regularly reviewed in order to strengthen and improve them.

The key features of the current corporate governance practices are as follows:

BOARD OF DIRECTORS

The Company’s Board is responsible for development of corporate governance practice and ensuring compliance by all the Company’s organs. It does this through Board Committees and by having in place business principles and practices, internal control and risk management processes that seek to ensure preservation and growth of the stakeholders’ value.

BOARD CHARTER AND WORK PLAN

The Board Charter contains provisions that ensure that the Board observes best practices in corporate governance and details, among other things; the size, role and functions of the Board; appointments, training, induction and tenure of directors and Board performance evaluation and remuneration of directors. The work plan has a formal schedule of matters specifically reserved for the Board’s attention to ensure it exercises full control over all significant matters. It sets out the schedule of meetings of the Board and its committees and the main business to be dealt with during those meetings. Additional meetings are scheduled when need arises.

BOARD COMPOSITION AND APPOINTMENTS

The current Board of Directors consists of the Chief Executive Officer, and seven (7) non-executive directors. The Board is composed of directors with a good mix of skills, experience and competencies in the relevant fields of expertise. The directors have been approved by the Insurance Regulatory Authority and meet the “fit and proper person criteria” as required by the Authority. They have also filled in “fit and proper declaration forms” in compliance with the “Guidelines on Suitability of Persons” released by the Authority. Appointments to the Board are made after careful consideration.

BOARD MEETINGS AND INFORMATION FOR DIRECTORS

The Board meets at least three times a year on pre-set dates, to review and monitor the implementation of strategies/business plans, review quarterly financial results, approve financial reports and maintain an effective control over strategic, financial, operational and compliance issues. Special meetings are arranged as necessary. In carrying out the above responsibilities, the Board delegates its authority to the Chief Executive Officer to

oversee the day to day operations of the Company.

The notice of Board meetings is given in advance in accordance with the Company’s Articles of Association and is distributed together with the agenda and board papers to all the directors beforehand, covering regular business progress reports and discussion papers on specific matters. The Company Secretary is always available to attend to matters to do with the Board of Directors and Board Committees.

All reports from the Insurance Regulatory Authority, Kenya Revenue Authority, auditors, actuaries and rating agencies are reviewed at Board meetings and appropriate action taken.

The General Manager (Finance and Strategy) is usually in attendance at all regular meetings of the Board and its committees to ensure that any necessary information is readily available for appropriate decision-making.

ROLE OF THE CHAIRMAN AND THE CHIEF EXECUTIVE OFFICER

The Chairman is responsible for managing the Board and providing strategic leadership to the Company while the Chief Executive Officer is responsible to the Board for running the business in accordance with instructions given by the Board. The Chief Executive Officer directs the implementation of Board decisions and instructions and the general management of the business with the assistance of the senior management team.

COMMITTEES OF THE BOARD

The Board has constituted several committees to assist it in discharging its responsibilities and obligations more effectively without abdicating its responsibility for performance and compliance.

The committees consist of at least two non-executive directors.Some members of the executive management of the Company attend the meetings by invitation. They report on their activities regularly to the Board.

The current committees are:

(a) Audit Risk and Compliance Committee

This committee is chaired by a non-executive director. There are 5 other non-executive directors who sit in this committee. The First Chartered Securities Group Planning & Projects Director, the Chief Executive Officer, General Manager (Finance and Strategy), Financial Controller, Internal Audit Manager and Risk and Compliance Manager attend by invitation.

Issues related to ethics and policy protection are dealt with by this committee although the Board is in the process of reconstituting an appropriate committee to deal with this.

CORPORATE GOVERNANCE STATEMENT

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The committee meets three times a year and is responsible for ensuring that the systems and controls, procedures and policies of the Company, as well as risk management activities, are properly established, monitored and reported on. The committee meets to review external auditors’ plans and reports, internal audit reports and any proposals/reports that affect the Company’s internal control environment and corporate risk management/exposure and compliance.

The Audit Risk and Compliance Committee is also responsible for monitoring and providing effective supervision of the management’s financial reporting process to ensure accurate and timely financial reporting. Additionally, the committee is responsible for ensuring entrenchment of good corporate governance practices in the Company. This committee is responsible to the Board.

(b) Finance and Investments Committee

This committee is chaired by a non-executive director. Two other non-executive directors also sit in this committee. The Chief Executive Officer, The First Chartered Securities Group Planning & Projects Director, The General Manager (Finance and Strategy) and Chief Executive Officer of ICEA LION Asset Management Ltd attend by invitation.

This committee meets regularly to review the financial and investment strategies, approve or recommend to the Board for approval investment projects in accordance with the Company’s investment policy, and review the performance of the investment portfolio and monitor special projects.

Issues related to assets and liability management are dealt with by this committee.

(c) ICT Committee

This committee is composed of four non-executive directors one of whom is chair. The First Chartered Securities Group Information System Manager, the First Chartered Securities Group Planning & Projects Director, the Chief Executive Officer, the General Manager (Finance and Strategy),the Assistant General Manager (ICT) as well as the Risk and Compliance Manager attend by invitation. This committee meets regularly to review the ICT strategy including ICT security and Business Continuity Plans (BCP), approve or recommend to the Board for approval of ICT projects and review recommendations on the annual ICT budgets.

(d) Nominations and Remuneration Committee

The Nominations and Remuneration Committee is chaired by a non-executive director and includes three other non-executive directors. The committee meets at least three times a year or more frequently as required. This committee is responsible for making recommendations to the Board on executive remuneration and incentive policies, recruitment, retention and termination policies for senior management, remuneration framework for directors, among others. The committee is also responsible for development

of a process for evaluation of the performance of the Board, its committees and directors as well as succession planning for directors and key members of executive management. This committee is responsible to the Board. The following tables are summaries of the attendance record of the directors at the full and the Board Committee meetings. A record of attendance is kept by the Group Company Secretary. The record of attendance at meetings is also noted in the minutes of the meetings.

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

11.03.2014 29.07.2014 31.10.2014

Board Audit, Risk and Compliance Committee

Date

04.03.2014 25.06.2014 21.10.2014

Board ICT Committee

Date

21.03.2014 29.08.2014 21.11.2014

Board of Directors

Date

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Attended

Not Attended X

PRINCIPAL OFFICER AND SENIOR MANAGEMENT

The Company in its commitment to strengthen efficiency and execution capability has a strong management team in place as set on page 1 with the requisite qualifications and experience in their respective fields. This team has been approved by the Authority and meet the “fit and proper person criteria” as required by the Authority. They have also filled in “fit and proper declaration forms” in compliance with the “Guidelines on Suitability of Persons” released by the Authority.

SYSTEM OF INTERNAL CONTROL AND RISK MANAGEMENT

Like every financial service institution, the Company is exposed to a variety of risks which can have a negative impact. The Company has therefore put in place a strong integrated risk management process in the daily business activities and strategic planning to ensure sustainable value creation. The Company has strong corporate governance structures that promote effective identification, monitoring and management of risk. These structuresinclude well developed and documented internal procedures, clearly defined reporting

lines and well structured, regular training programs for staff. The latter are intended to enable staff attain a clear appreciation of the business risk; the likely consequences of not giving adequate attention to, or failure to properly manage risk; and of the universally accepted and internally prescribed techniques of effectively managing risk.

The Company has established a fully-fledged risk management and compliance function, headed by a senior officer. This position is the focal point of in-house risk management, compliance monitoring and authentication, and related activities. This function has coordinated the setup of the risk appetite by the Board of Directors which has been cascaded to the senior management team. Regular risk assessment exercises are also conducted by this function in a bid to integrate risk management into the business. In 2014, the Company was the 1st runner up under the Risk Management Category at the Think Business Awards.

The Company has also put in place an independent internal audit function, headed by a senior officer, which reviews the adequacy and effectiveness of the Company’s adherence to its internal controls as well as reporting on strategies, policies and procedures.

The internal control systems are designed to manage rather than eliminate the risk of failure to achieve business objectives and can provide only reasonable and not absolute assurance against material financial misstatements or loss. The systems are designed to:

• Identify and manage business risks;• Identify and adopt best business practices;• Maintain compliance with appropriate legislation and internal policies and procedures;• Maintain proper accounting records;• Provide reliable financial information; and• Safeguard assets.

The Board satisfies itself that the internal control framework is operating effectively through:

• Having terms of reference for the Board and each of its committees;• A clear organizational structure with documented delegation of authority;• Defined procedures for the approval of major transactions;• Establishment and monitoring of the Internal Control framework by the management; and• Review of the internal and external audit reports.

COMPLIANCE AND ANTI-MONEY LAUNDERING PROGRAM

The sustained success of the Company is based on trust, respect and the responsible, integrity-enriched behaviour of all employees. With its compliance and anti-money laundering program, the Company follows local and international guidelines and standards for rules-compliant and values-based corporate leadership.These include the Corporate Governance Guidelines and Anti-Money Laundering

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

17.06.2014 21.10.2014

Nomination and Remuneration Committee

Date

04.03.2014 17.06.2014 21.10.2014

Board Finance and Investment Committee

Date

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Guidelines by the Insurance Regulatory Authority (IRA), the Retirement Benefits Authority (RBA), the UK Corporate Governance Code, the Organisation for Economic Co-operation and Development (OECD) Principles on Corporate Governance, The King III Report, and Financial Action Task Force (FATF) among others. By recognizing and supporting these local and international principles, the Company manages the risk of violating legal and regulatory provisions and requirements (compliance risks). This also means that our customers benefit from the fact that sustainability and social responsibility are integrated into corporate behaviour.

The standards for conduct established by the Company’s Code of Business Conduct and Ethics serve to implement these guidelines and principles which are obligatory for all employees. The Code of Conduct and other internal guidelines adopted on its basis provide all employees with clear guidance on conduct that is in accordance with the values of Company. They provide employees with practical guidelines for making their own decisions and avoiding potential conflicts of interest. These guidelines also help employees recognize when they are approaching a critical limit, such as the acceptance of gifts or invitations from business partners. The Code of Business Conduct and Ethics also forms the basis for guidelines and controls to ensure fair dealings with the Company’s customers. In cases of doubt, the compliance department provides advice. The tasks of the compliance team includes advising the business units on laws, provisions and other regulations, the creation, implementation and monitoring of compliance with internal guidelines and standards as well as regular training of employees on the rules which are applicable to them.

A major component of the compliance program is a whistle-blower system that allows employees to alert the compliance and audit departments confidentially about irregularities. Employees who voice concerns about irregularities in good faith should not fear retribution in any form, even if the charge later turns out to be unfounded. To transmit the principles of the Code of Conduct and other compliance guidelines and controls effectively, the Company has developed interactive training programs.

ACTUARIAL FUNCTION

The Company has set up an in-house actuarial function. This function evaluates and provides advice to the insurer regarding, at a minimum, technical provisions, premium and pricing activities, and compliance with related statutory and regulatory requirements. The Company has further contracted the “Appointed Actuary” who is a Fellow of The Actuarial Society of Kenya in compliance with the Actuarial Function guidelines released by the Authority. The “Appointed Actuary” has been approved by the Authority and has access to the Board to whom it periodically reports to. During the year, the appointed actuary together with the in-house actuarial function generated the technical liabilities that the company used in its audited financial statements. In addition, the team produced the company Financial Condition Report (FCR).

CONFLICT OF INTEREST

The directors are required to act in the best interest of the Company at all times. It is the Company’s policy to ensure that directors avoid putting themselves in positions whereby their interests conflict with the Company’s interests. Any business transacted with thedirectors or their companies must be at arm’s length.

The Board has adopted a policy, which also applies to management and staff, which ensures that directors, management and staff disclose all possible conflict of interest sources and are required to exclude themselves in decisions where conflict of interest may arise.

DIRECTORS’ EMOLUMENTS

The aggregate amount of emoluments paid to directors for services rendered during the financial year is disclosed in Note 42(c) to the financial statements for the year ended 31 December 2014.

RELATED PARTY TRANSACTIONS

There have been no materially significant related party transactions, pecuniary transactions or relationships between the Company and its Directors or Management except those disclosed in Note 42(a) to the financial statements for the year ended 31 December 2014.

COMPLIANCE WITH THE LAW

The Board is satisfied that the Company has, to the best of their knowledge, put in place mechanisms to ensure compliance with all the applicable laws. To the knowledge of the Board, no director, employee or agent of the Company acted or committed any indictable offence in conducting the affairs of the Company nor been involved or been used as a conduit for money laundering or any other activity in contravention with the relevant laws

CONDUCT OF BUSINESS AND PERFORMANCE REPORTING

The Company business is conducted in accordance with a carefully formulated strategy, annual business plans and budgets which set out very clear objectives. Roles and responsibilities have been clearly defined with approved authority being delegated. Performance against the objectives is reviewed and discussed on a regular basis by the management team. Management prepares a quarterly business review report which is presented to the Board. Any issues arising are discussed. In this way, performance trends, forecasts as well as actual performance against budget are closely monitored.

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

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DISCLOSURE OF INFORMATION AND RELATIONSHIP WITH THE INSURANCE REGULATORY AUTHORITY

The Company shares information on its financial position and the risks to which it is subject to. This information gives a well-rounded view of the Company and includes financial position, performance, and corporate governance among others. This information is shared with the Authority and other relevant stakeholders.

ACCOUNTABILITY, AUDIT AND SHAREHOLDER RELATIONS

The Board recognises its responsibility to present a balanced and understandable assessment of the Company’s financial position and prospects. The Company’s financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) and the requirements of the Companies Act and are audited in accordance with International Auditing Standards. The directors recognise and have confirmed their responsibility over the financial statements and have provided other information in this annual report that they consider useful to shareholders and other stakeholders.

RESPONSIBILITY FOR STAFF WELFARE AND TRAINING

As part of its policy, the Company recognises the need for diversity, equal opportunities, gender sensitivity and provision of a safe and conducive work environment for its entire staff. The Company assists its staff to undertake continuous professional and development training programmes to fulfil their potential. This process is appropriately managed to align staff development with the Company’s strategic and business goals and objectives, and is reinforced with appropriate remuneration and incentive systems. The Company endeavours to offer superior working environment. During the year 2014, the company won the top position in the insurance industry for the Best Company to work for organised by Deloitte.

CORPORATE SOCIAL RESPONSIBILITY

The Company recognises its social responsibilities to improve societal well-being. To this end it sponsors education of needy children, supports organisations that are involved in the support of the needy and the disadvantaged members of the society as well as those involved in environmental protection and conservation. This approach gives the Company continuing good will and support to be able to deliver on our visions and mission.

Director

27 March 2015

Director

27 March 2015

CORPORATE GOVERNANCE STATEMENT (CONTINUED)

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CORPORATE SOCIAL RESPONSIBILITY

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CORPORATE SOCIAL RESPONSIBILITY

Corporate Social Responsibility (CSR) is an integral part of our corporate ethos and recognizes that good CSR embraces all aspects of sustainable development as we continue to affect the communities in which our businesses operate. In 2014, the company supported CSR activities in the spheres of education, health and environment. Below are some highlights from the activities we supported. In 2015, we will seek to utilize our Corporate Social Investment initiatives as a strategic tool to ensure that we adhere to our Group’s corporate governance sustainability policy that enhances the sustainability of social and natural environments. We will also wish to support a single and impactful cause that the Group can be associated with for posterity.

Our representatives are overjoyed at receiving a trophy in commemoration of our support for diabetesOur team support IRA’s Cerebral Palsy of Kenya Charity Walk

Staff members step out for children with diabetes

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STATEMENT OF DIRECTORS’ RESPONSIBILITIES

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The Companies Act, CAP 486, Laws of Kenya requires the directors to prepare financial statements for each financial year that give a true and fair view of the state of affairs of the Group and the Company as at the end of the financial year and of the Group’s profit or loss for that year. It also requires the directors to ensure that the company maintains proper accounting records that disclose, with reasonable accuracy, the financial position of the Group. The directors are also responsible for safeguarding the assets of the Group.

The directors accept responsibility for the preparation and fair presentation of the annual financial statements that are free from material misstatement whether due to fraud or error. They also accept responsibility for:

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

(ii) selecting and applying appropriate accounting policies; and

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

The directors are of the opinion that the financial statements give a true and fair view of the state of the financial affairs of the Group and company as at 31 December 2014 and of the Group’s profit/loss and cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Kenyan Companies Act.

Nothing has come to the attention of the directors to indicate that the Company and its subsidiaries will not remain a going concern for at least twelve months from the date of this statement.

Approved by the board of directors on 27 March 2015 and signed on its behalf by:

Director Director

STATEMENT OF DIRECTORS’ RESPONSIBILITIES

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REPORT OF THE PARENT COMPANYCONSULTING ACTUARY

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I have conducted an actuarial valuation of the insurer’s insurance liabilities as at 31 December 2014.

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 2014.

ActuaryJames I. O. OlubayiFellow of the Institute of Actuaries27 March 2015

REPORT OF THE PARENT COMPANY CONSULTING ACTUARY

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INDEPENDENT AUDITOR’S REPORT

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We have audited the accompanying consolidated financial statements of ICEA LION General Insurance Company Limited (the “Company”) and its subsidiaries (together, the “Group”), as set out on pages 36 to 81. These financial statements comprise the Consolidated and Company statement of financial position as at 31 December 2014 and the consolidated statement of comprehensive income, consolidated and Company statement of changes in equity and the consolidated statement of cash flow for the year then ended and a summary of significant accounting policies and other explanatory notes.

Directors' responsibility for the financial statements

The directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act, CAP 486, Laws of Kenya. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor's responsibility

Our responsibility is to express an opinion of these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the

circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.

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

Opinion

In our opinion the accompanying financial statements give a true and fair view of the financial position of the Group and the Company as at 31 December 2014 and of the Group’s financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards and the Companies Act, CAP 486, Laws of Kenya.

Report on Other Legal Requirements

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

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

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

The engagement partner responsible for the audit resulting in this independent auditors’ report is FCPA Richard Njoroge – P/No 1244

Certified Public AccountantsNairobi, Kenya30 March 2015

INDEPENDENT AUDITOR’S REPORT

Report on the Financial Statements

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FINANCIAL PERFORMANCE HIGHLIGHTS

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FINANCIAL PERFORMANCE HIGHLIGHTS

Gross Written Premium(Kshs Million)

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

02012 2013 2014

4,8975,352

6,134

Comprehensive Income Before Tax(Kshs Million)

1,100

1,000

900

800

700

600

500

400

02012 2013 2014

854861

1,004

Total Assets(Kshs Million)12,000

11,000

10,000

9,000

8,000

7,000

6,000

5,000

02012 2013 2014

9,928

10,625

11,829 Shareholders’ Funds(Kshs Million)4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

02012 2013 2014

2,751

3,189

3,745

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FINANCIAL STATEMENTS

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Notes2014

Ksh ’000Restated 2013

Ksh ’000

Continuing operations:Gross earned premiums 5 5,778,630 5,035,797Less: Reinsurance premiums ceded (2,499,946) (2,364,717)

Net earned premiums 3,278,684 2,671,080

Commissions earned 439,626 348,861Investment income 6 790,449 568,052Foreign exchange gains 11,445 1,215

Total income 4,520,204 3,589,208

Claims incurred 7 (1,674,506) (1,255,772)Commissions incurred (764,138) (526,320)Operating and other expenses 8 (1,233,408) (1,133,673)

Total expenses (3,672,052) (2,915,765)

Profit before income tax 848,152 673,443

Income tax expense 10(a) (248,534) (241,728)

Profit for the year from continuing operations 11 599,618 431,715

Discontinued operations:Profit for the year from discontinued operations 39 - 25,490

Profit for the year 599,618 457,205

Other comprehensive income, net of tax; Items that may subsequently be classified to profit or lossExchange differences on translating net assets of foreign subsidiary (8,334) (5,614)Change in fair value of available for sale equity instruments 164,256 167,651

Other comprehensive income for the year, net of tax 155,922 162,037

Total comprehensive income for the year 755,540 619,242

Profit attributable to:Owners of the parent 591,909 444,236Non-controlling interest 7,709 12,969

599,618 457,205

Total comprehensive income attributable to:Owners of the parent 725,712 581,397Non-controlling interest 29,828 37,845

755,540 619,242

Earnings per share (basic and diluted) 12 Ksh 19.73 Ksh 14.81

The notes on pages 42 to 81 are an integral part of these financial statements.

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Notes2014

Ksh ’000Restated 2013

Ksh ’000

ASSETSInvestment properties 14(a) 2,355,000 2,167,500Property and equipment 15(a) 184,078 83,995Intangible assets 16 22,243 9,175Kenya motor insurance pool 19 83,041 75,423Available-for-sale equity instruments 20 1,069,605 567,363Receivables arising out of reinsurance arrangements 542,601 478,904Receivables arising out of direct insurance arrangements 656,279 567,540Reinsurers’ share of technical provisions and reserves 21 2,436,833 2,312,789Deferred acquisition costs 22 278,281 337,490Deferred merger acquisition costs 23 185,000 277,500Other receivables 24 139,978 70,043Current income tax 10(d) 19,606 619Government securities held to maturity 25(a) 2,504,453 2,327,256Government securities available for sale 25(b) 507,725 294,017Corporate bonds held to maturity 26 282,990 291,576Deposits with financial institutions held to maturity 27 513,596 622,123Deferred income tax 33(c) 12,140 13,171Cash and bank balances 36,017 128,292

Total assets 11,829,466 10,624,776

EQUITY AND LIABILITIESEquity attributable to owners of the parentOrdinary shares 29 600,000 600,000Revaluation reserve 30(a) 518,853 381,589Contingency reserve 30(b) 49,090 42,106Currency translation reserve 30(c) (43,344) (39,883)Retained earnings 2,274,499 1,899,574Proposed dividends 200,000 200,000

3,599,098 3,073,386Non-controlling interests 145,577 115,749

3,744,675 3,189,135

LIABILITIESOutstanding claims provision 31 4,021,395 3,946,663Deferred income tax 33(c) 479,042 426,449Unearned premiums reserve 34 2,611,868 2,268,282Payables arising from reinsurance arrangements 547,708 435,575Deferred reinsurance commissions 35 176,640 159,855Other payables 36 248,138 189,001Current income tax 10(d) - 9,816

Total liabilities 8,084,791 7,435,641

Total equity and liabilities 11,829,466 10,624,776

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

The financial statements on pages 36 to 81 were approved by and authorised for issue by the board of directors on 27 March 2015 and were signed on its behalf by:

Director Director Principal officer

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COMPANY STATEMENT OF FINANCIAL POSITION

Notes2014

Ksh ’000Restated 2013

Ksh ’000

ASSETSInvestment properties 14(b) 2,355,000 2,167,500Property and equipment 15(b) 179,128 83,995Intangible assets 16 22,243 9,175Investment in subsidiaries - at cost 18(a) 50,147 50,147Kenya motor insurance pool 19 83,041 75,423Available-for-sale equity instruments 20 909,833 459,199Receivables arising out of reinsurance arrangements 445,725 432,642Receivables arising out of direct insurance arrangements 594,700 542,023Reinsurers’ share of technical provisions and reserves 21 1,944,333 1,902,907Deferred acquisition costs 22 244,870 247,389Deferred merger acquisition costs 23 185,000 277,500Other receivables 24 113,716 44,594Current income tax 10(d) 13,433 -Due from subsidiary company 13,714 29,526Government securities held to maturity 25(a) 2,447,605 2,243,305Government securities available for sale 25(b) 507,725 294,017Corporate bonds held to maturity 26 282,990 291,576Deposits with financial institutions held to maturity 27 250,433 441,276Cash and bank balances 24,273 100,504

Total assets 10,667,909 9,688,607

EQUITY AND LIABILITIESEquityShare capital 29 600,000 600,000Revaluation reserve 30(a) 451,314 341,840Retained earnings 2,233,773 1,850,556Proposed dividends 200,000 200,000

Total equity 3,485,087 2,992,396

LIABILITIESOutstanding claims provision 31 3,780,249 3,810,118Deferred income tax 33(c) 479,042 426,449Unearned premiums reserve 34 2,124,029 1,817,776Payables arising from reinsurance arrangements 447,837 385,378Deferred reinsurance commissions 35 131,880 86,011Other payables 36 219,785 160,663Current income tax 10(d) - 9,816

Total liabilities 7,182,822 6,696,211

Total equity and liabilities 10,667,909 10,624,776

The financial statements on pages 36 to 81 were approved by and authorised for issue by the board of directors on 27 March 2015 and were signed on its behalf by:

Director Director Principal officer

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Share capitalKsh ‘000

Available for salereserve

Ksh ‘000

Contingency reserve

Ksh ‘000

Currency translation

reserveKsh ‘000

Retained earningsKsh ‘000

Proposed dividendsKsh ‘000

Non-controlling

interestKsh ‘000

TotalKsh ‘000

Balance as at 1 January 2013 600,000 241,249 36,536 (36,704) 1,651,382 180,000 78,325 2,750,788

Changes in equity 2013Profit for the year - - - - 444,236 - 12,969 457,205Other comprehensive income for the year - 140,340 - (3,179) - - 24,876 162,037Transfer to contingency reserve - - 5,570 - (5,570) - - -Transactions with ownersWithholding tax on issue of bonus shares - - - - (474) - (421) (895)Dividends- 2012 final dividend paid - - - - (180,000) - (180,000)- 2013 proposed dividends - - - - (200,000) 200,000

Balance as at 31 December 2013 600,000 381,589 42,106 (39,883) 1,889,574 200,000 115,749 3,189,135

Balance as at 1 January 2014 (as previously reported) 600,000 381,589 42,106 (39,883) 1,983,598 200,000 115,749 3,283,159Prior period adjustment (note 30(d)) - - - - (94,024) - - (94,024)

Balance as at 1 January 2014 (Restated) 600,000 381,589 42,106 (39,883) 1,889,574 200,000 115,749 3,189,135Changes in equity 2014Profit for the year - - - - 591,909 - 7,709 599,618Other comprehensive income for the year - 137,264 - (3,461) - - 22,119 155,922Transfer to contingency reserve - - 6,984 (6,984) - - -Transactions with ownersDividends- 2013 final dividend paid - - - - - (200,000) - (200,000)- 2014 proposed dividends - - - - (200,000) 200,000 - -

Balance as at 31 December 2014 600,000 518,853 49,090 (43,344) 2,274,499 200,000 145,577 3,744,675

The notes on pages 42 to 81 are an integral part of these financial statements.

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COMPANY STATEMENT OF CHANGES IN EQUITY

Share capitalKsh ’000

Available forsale reserve

Ksh ’000

Retainedearnings Ksh ’000

Proposed dividendsKsh ’000

TotalKsh ’000

Balance as at 1 January 2013 600,000 344,142 1,410,888 180,000 2,535,030

Changes in equity 2013Profit for the year - - 639,668 - 639,668Other comprehensive income - (2,302) - - (2,302)

Total comprehensive income for the year - (2,302) 639,668 - 637,366

Transactions with ownersDividends:- 2012 final dividend paid - - - (180,000) (180,000)- 2013 proposed dividend - - (200,000) 200,000 -

Balance as at December 2013 600,000 341,840 1,850,556 200,000 2,992,396

Balance as at 1 January 2014 600,000 341,840 1,850,556 200,000 2,992,396

Changes in equity 2014Profit for the year - - 583,217 - 583,217Other comprehensive income - 109,474 - - 109,474

Total comprehensive income for the year - 109,474 583,217 - 692,691

Transactions with ownersDividends:- 2013 final dividend paid - - - (200,000) (200,000)- 2014 proposed dividends - - (200,000) 200,000 -

Balance as at 31 December 2014 600,000 451,314 2,233,773 200,000 3,485,087

The notes on pages 42 to 81 are an integral part of these financial statements.

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Notes2014

Ksh ’000Restated 2013

Ksh ’000

Cash flows from operating activitiesCash generated from operations 40(a) 527,297 121,296Interest income 424,594 320,807Income tax paid 10(c) (224,103) (198,594)

Net cash generated from operating activities 727,788 243,509

Cash flows from investing activitiesPurchase of property and equipment 15 (147,589) (50,195)Proceeds from sale of property and equipment 1,500 1,016Purchase of intangible assets 16 (32,701) (13,539)

Proceeds on disposal of available for sale investment - Karen Office Park 39 - 1,160,000

Purchase of government securities (359,937) (1,030,25)

Proceeds of sale of equity instruments available for sale 40,272 23,046

Purchase of equity instruments available for sale 20 (374,608) (80,723)

Net movement in deposits maturing after 3 months (63,343) (61,178)

Rental income 149,819 135,494

Dividend income 21,172 17,303

Net cash (used in)/generated from investing activities (765,875) 100,999

Cash flows from financing activitiesDividends paid to shareholders of parent company 13 (200,000) (180,000)

Net cash used in financing activities (200,000) (180,000)

Net (decrease)/increase in cash and cash equivalents (238,087) 164,508

Cash and cash equivalents at beginning of year 602,539 437,051

Effect of exchange rate changes on translation of foreign subsidiary balances (3,318) 980

Cash and cash equivalents at year end 40(b) 361,134 602,539

The notes on pages 42 to 81 are an integral part of these financial statements.

CONSOLIDATED STATEMENT OF CASH FLOWS

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1 - GENERAL INFORMATION

ICEA LION General Insurance Company 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:

ICEA LION CentreChiromo RoadPO Box 30190,00100Nairobi

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, available for sale financial assets and financial assets and liabilities, 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 3.

Changes in accounting policy and disclosures

(i) New and amended standards adopted by the Group

The following standards have been adopted by the Group for the first time for the financial year beginning on or after 1 January 2014 and have a material impact on the Group:

Amendment to IAS 32, ‘Financial instruments: Presentation’ on offsetting financial assets and financial liabilities.

This amendment clarifies that the right of set-off must not be contingent on a future event. It must also be legally enforceable for all counterparties in the normal course of business, as well as in the event of default, insolvency or bankruptcy. The amendment also considers settlement mechanisms. The amendment did not have a significant effect on the Group financial statements.

Amendments to IAS 36, ‘Impairment of assets’, on the recoverable amount disclosures for non-financial assets.

This amendment removed certain disclosures of the recoverable amount of CGUs which had been included in IAS 36 by the issue of IFRS 13.

Amendment to IAS 39, ‘Financial instruments: Recognition and measurement’ on the novation of derivatives and the continuation of hedge accounting.

This amendment considers legislative changes to ‘over-the-counter’ derivatives and the establishment of central counterparties. Under IAS 39 novation of derivatives to central counterparties would result in discontinuance of hedge accounting. The amendment provides relief from discontinuing hedge accounting when novation of a hedging

NOTES TO THE FINANCIAL STATEMENTS

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instrument meets specified criteria. The Group has applied the amendment and there has been no significant impact on the Group financial statements as a result.

Other standards, amendments and interpretations which are effective for the financial year beginning on 1 January 2014 are not material to the Group.

(ii) New standards and interpretations not yet adopted

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2014, and have not been applied in preparing these financial statements. None of these is expected to have a significant effect on the financial statements of the Group, except the following as set out below:

IFRIC 21, ‘Levies’, sets out the accounting for an obligation to pay a levy if that liability is within the scope of IAS 37 ‘Provisions’.

The interpretation addresses what the obligating event is that gives rise to pay a levy and when a liability should be recognised. The Group is not currently subjected to significant levies so the impact on the Group is not material.

IFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of financial assets and financial liabilities.

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

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 2017 and earlier application is permitted. The Group is assessing the impact of IFRS 15.

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

NOTES TO THE FINANCIAL STATEMENTS (continued)2 - Summary of Significant Accounting Policies (continued)(a) Basis of preparation (continued)Changes in accounting policy and disclosures (continued) | (i) New and amended standards adopted by the Group (continued)

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(b) Basis of consolidation

The consolidated financial statements incorporate the financial statements of the company and the entities controlled by the Company and its subsidiaries. Control is achieved when the company:

• Has power over the investee

• Is exposed, or has rights, to variable returns from its involvement with the investee; and

• Has the ability to use its power to affect its returns

The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company’s voting rights in an investee are sufficient to give it power, including:

• The size of the Company’s holding of voting relative to the size and dispersion of holdings of other vote holders;

• Potential voting rights held by the company, other vote holders or other parties;

• Rights arising from other contractual arrangements; and

• Any additional facts and circumstances that indicate that the company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders meetings

i) Subsidiaries

Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the datethe company gains control until the date when the Company ceases control of the subsidiary. Profit or loss and each component of other comprehensive income are attributed to the owners of the company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interest having

a deficit balance.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

The consolidated financial statements incorporate the financial statements of the company and its subsidiary ICEA LION General Insurance Company (Tanzania) Limited made up to 31 December.

ii) Investment in subsidiary companies

In the separate financial statements, investments in subsidiaries are either accounted for at cost or where fair value can be reliably determined, at their fair values. Investment in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably determined are measured at cost.

Investments accounted for at cost are restated to the lower of their carrying amounts and their net recoverable amounts, when classified as held for sale. Investments accounted for at fair value are not restated even if they are classified as held for sale.

(c) Kenya Motor Insurance Pool

The Kenya Motor Insurance Pool balances represent the group’s share of the surplus and net assets of the pool. Results of the company’s share of the two Kenya Motor Insurance Pools are accounted for in profit or loss in accordance with the Pool’s accounting year which runs from October of the previous year to September of the current year. As a result, the Pool’s results for the 4th quarter of the group’s accounting year are accounted for in the subsequent year.

(d) Income recognition

Premium income is recognised on assumption of risks, and includes estimates of premiums due but not yet received, less unearned premiums. Unearned premiums represent the proportion of the premiums written in periods up to the accounting date which relateto the unexpired terms of policies in force at the end of each reporting period, and are calculated using the 365th basis for all classes of business.

Commissions receivable are recognised as income in the period in which they are earned. To achieve this a proportion of reinsurance commissions receivable is deferred and recognised as income over the period of the policy. Investment income is stated net of investment expenses. Interest income for all interest bearing financial instruments is recognised using the effective interest rate method. Dividends income on available for sale equities is recognised as income in the period in which the right to receive payment

NOTES TO THE FINANCIAL STATEMENTS (continued)2 - Summary of Significant Accounting Policies (continued)

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is established. Rental income is recognised as income in the period in which it is earned.

Results of the company’s share of the two Kenya Motor Insurance Pools are accounted for in profit or loss in accordance with the Pool’s accounting year which runs from October of the previous year to September of the current year. As a result, the Pool’s results for the 4th quarter of the Group’s accounting year are accounted for in the subsequent year.

(e) Reinsurance

The Group 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 the consolidated statement of comprehensive income 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 group 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 group will receive from the reinsurer. The impairment loss is recognized in the statement of comprehensive income.

Ceded reinsurance arrangements do not relieve the group from its obligations to policyholders. The group also assumes reinsurance risk in the normal course of business for life insurance and non-life insurance contracts where applicable. Premiums and claims on assumed reinsurance are recognised as revenue or expenses in the same manner as they would be if the reinsurance were considered direct business, taking into account 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 derecognized when the contractual rights are extinguished or expire or when the contract is transferred to another party.

(f) Commissions payable and deferred acquisition costs A proportion of commissions payable is deferred and amortised over the period in which the related premium is earned. Deferred acquisition costs represent a proportion of commissions payable and other acquisition costs that relate to the unexpired term of the policies that are in force at the year end.

(g) Customer contracts Payments made by the Company to acquire an Insurance portfolio are capitalised as an intangible asset and amortized over a period of 5 years. (h) 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 provisions represent the estimated ultimate cost of settling all claims arising from incidents occurring prior to the end of each reporting period, but not settled at that date. Outstanding claims provisions 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”) at the end of each reporting period based on the group’s experience but subject to the minimum percentage set by the Commissioner of Insurance. Outstanding claims are not discounted.

(i) General insurance contract liabilities General insurance contract liabilities are recognised when contracts are entered into and premiums are charged. These liabilities are known as the outstanding claims provision, which are based on the estimated ultimate cost of all claims incurred but not settled at the end of each reporting period, whether reported or not, together with related claims handling costs and reduction for the expected value of salvage and other recoveries. Delays can be experienced in the notification and settlement of certain types of claims and therefore the ultimate cost of this category of claims cannot be known with certainty at the end of each reporting period. The liability is calculated at the reporting date using a range of standard actuarial claim projection techniques, based on empirical data and current assumptions that may include a margin for adverse deviation. The liability is not discounted for the time value of money. No provision for equalisation or catastrophe reserves is recognised. The liabilities are derecognised when the contract expires, is discharged or is cancelled.

The provision for unearned premiums represents premiums received for risks that have not yet expired. Generally the reserve is released over the term of the contract at which time it is recognised as premium income.

(j) Foreign currency translation i) Functional and presentation currency Items included in the financial statements of each of the group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “Functional Currency”). The consolidated financial statements are presented in Kenya

NOTES TO THE FINANCIAL STATEMENTS (continued)2 - Summary of Significant Accounting Policies (continued)(d) Income recognition (continued)

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Shillings rounded to the nearest thousand (“Ksh”), which is the Group’s presentation currency.

ii) Transactions and balances

In preparing the financial statements of individual entities in the group, transactions in foreign currencies during the year are recorded at rates ruling at the transaction dates. Assets and liabilities at the end of each reporting period which are expressed in foreign currencies are translated at rates ruling at that date. The resulting differences are dealt with in the statement of comprehensive income in the year in which they arise.

The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates. For the purpose of the consolidated financial statements, the results and financial position of each group entity are expressed in Kenya shillings, which is the functional currency of the company and the presentation currency for the consolidated financial statements.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the group’s foreign operations are translated to Kenya shillings using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are classified as equity and recognised in other comprehensive income and accumulated in equity under the groups’ currency translation reserve. Such differences are recognised in profit or loss in the period in which the foreign operation is disposed of.

(k) Retirement benefit obligations The group operates two defined contribution pension schemes for its employees. The assets of these schemes are held in separate trustee administered funds. The schemes are funded by contributions from both the employees and the employer. Contributions are determined by the rules of the schemes.

The group also contributes to the statutory defined contribution pension schemes, the National Social Security Fund (NSSF) in Kenya and Tanzania. Contributions to these schemes are determined by local statute. The group’s obligations to retirement benefits schemes are charged to the statement of comprehensive income as they fall due. There is no further obligation to the group.

(l) Income taxes

Income tax expense is the aggregate amount charged/ (credited) in respect of currenttax and deferred 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.

i) Current tax

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

ii) 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 group and it is probable that the temporary difference will not reverse in the foreseeable future. Generally the group is unable to control the reversal of the temporary difference for associates unless there is an agreement in place that gives the group 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 sufficienttaxable 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

NOTES TO THE FINANCIAL STATEMENTS (continued)2 - Summary of Significant Accounting Policies (continued)(j) Foreign currency translation (continued)(i) Functional and presentation currency (continued)

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NOTES TO THE FINANCIAL STATEMENTS (continued)2 - Summary of Significant Accounting Policies (continued)(l) Income taxes (continued)(ii) Deferred income tax (continued)

the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on the same entity.

(m) Investment properties Investment properties comprise land and buildings and parts of buildings held to earn rentals and/or for capital appreciation. Investments include property interests held under operating leases. Investment properties are carried at fair value, representing market value determined by external independent valuers. Changes in their carrying amount between the statement of financial position dates are accounted for through profit or loss. On disposal of an investment property, the difference between the net disposal proceeds and the carrying amount is charged or credited to profit or loss. (n) Dividends payable Dividends payable on ordinary shares are charged to equity in the period in which they are declared. Dividends declared after the reporting date are not recognised as liabilities at the end of each reporting period. Proposed dividends are shown as a separate component of equity.

(o) Property and equipment All property and equipment are initially recorded at cost. Buildings are subsequently carried at their revalued amounts based on annual valuations by external independent valuers, less accumulated depreciation. The last revaluation was carried out as at 31 December 2014. All other property and equipment are stated at historical cost less accumulated depreciation and less any accumulated impairment losses. Increases in the carrying value of buildings arising on revaluation are credited to the revaluation reserve. Decreases that offset previous increases of the same asset arecharged against the revaluation reserves; all other decreases are charged to the statement of comprehensive income.

Depreciation

Depreciation is calculated on the straight line basis to write down the cost of each asset, or the revalued amount, to its residual value over its estimated useful life at the following rates:

Buildings: 4%

Furniture, fixtures and fittings and office equipment: 12.5% - 20%

Motor vehicles: 25%

Computer equipment: 30%

Property and equipment is periodically reviewed for impairment. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. The impairment loss is recognised in the statement of comprehensive income. Gains and losses on disposal of property and equipment are determined by reference to their carrying amounts. On disposal of revalued assets, amounts in the revaluation reserves relating to that asset are transferred to retained earnings.

(p) Intangible assets Intangible assets comprise of computer software costs which are stated at cost less accumulated amortisation and any impairment losses. Amortisation is calculated to write off the cost of computer software on a straight line basis over its estimated useful life of 3 years. (q) Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to a company within the group as a lessee. All other leases are classified as operating leases. Payments to acquire leasehold interest in land are treated as prepaid operating lease rentals and amortised over the term of the lease.

i) The group as lessor

Rental income from operating leases is recognised on the straight-line basis over theterm of the relevant lease.

ii) The group as lessee

Rentals payable under operating leases are charged to income on the straight-line basis over the term of the relevant lease.

(r) Financial instruments

A financial asset or liability is recognised when the group becomes party to the contractual provisions of the instrument.

Financial assets - Classification

The group classifies its financial assets into the following categories: financial assets at

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fair value through profit or loss, loans and receivables, held-to-maturity financial assets and available-for-sale financial assets. The classification adopted for a particular financial asset depends on the purpose for which the asset was acquired. Management determines the classification of its financial asset at initial recognition and re-evaluates this at every reporting date.

i) Insurance receivables

Insurance receivables are recognised when due and measured on initial recognition at the fair value of the consideration received or receivable. Subsequent to initial recognition, insurance receivables are measured at amortised cost, using the effective interest rate method. The carrying value of insurance receivables is reviewedfor impairment whenever events or circumstances indicate that the carrying amount may not be recoverable, with the impairment loss recognized in the profit or loss.

ii) Loans and receivables

Loans and receivables are non-derivative financial assets with measurable or determinable payments that are not quoted in an active market. Receivables arising from insurance and reinsurance contracts are also classified in this category and are reviewed for impairment as part of the impairment review of loans and receivables.

iii) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months of the end of the reporting period.

iv) Held-to-maturity financial assets

Held-to-maturity investments are non-derivative financial assets with fixed or determinablepayments and fixed maturities that the Group’s management has the positive intention and ability to hold to maturity, other than:

• those that the Group upon initial recognition designates as at fair value through profit or loss;

• those that the Group 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 consolidated 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 consolidated statement of profit or loss as ‘Net gains/(losses) on investment securities’. Held-to-maturity investments are corporate bonds.

Recognition and measurement

Regular purchases and sales of financial assets are recognised on the trade-date – the date on which the group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in the statement of profit or loss. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost using the effective interest method.

Gains or losses arising from changes in the fair value of the financial assets at fair value through profit or loss’ category are presented in the statement of profit or loss within other (losses)/gains – net’ in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the statement of profit or loss as part of other income when the group’s right to receive payments is established.

Changes in the fair value of monetary and non-monetary securities classified as available for sale are recognised in other comprehensive income. When securities classified as available for sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the statement of profit or loss as ‘gains and losses from investment securities’. Interest on available-for-sale securities calculated using the effective interest method is recognised in the statement of profit or loss as part of other income. Dividends on available-for-sale equity instruments are recognised in the statement of profit or loss as part of other income when the group’s right to receive payments is established.

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 (NSE). The quoted market price used for financial assets held by the group 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

NOTES TO THE FINANCIAL STATEMENTS (continued)2 - Summary of Significant Accounting Policies (continued)(r) Financial instruments (continued)Financial assets - Classification (continued)

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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:

• 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.

Reclassification of financial assets

Financial assets other than loans and receivables are permitted to be reclassified out of the held-for-trading category only in rare circumstances arising from a single event that is unusual and highly unlikely to recur in the near-term. In addition, the Group may choose to reclassify financial assets that would meet the definition of loans and receivables out of the held-for-trading or available-for-sale categories if the Group has the intention and ability to hold these financial assets for the foreseeable future or until maturity at the date of reclassification.

Reclassifications are made at fair value as of the reclassification date. Fair value becomes the new cost or amortised cost as applicable, and no reversals of fair value gains or losses recorded before reclassification date are subsequently made. Effective interest rates for financial assets reclassified to loans and receivables and held-to-maturity categories aredetermined at the reclassification date. Further increases in estimates of cash flowsadjust effective interest rates prospectively.

i) De-recognition of financial assets

Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where the group has transferred substantially all risks and rewards of ownership.

ii) Classification as debt or equity

Debt and equity instruments issued by the Group are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

(s) Financial liabilities and equity instruments

i) Equity instruments

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 Group are recognised at the proceeds received, net of direct issue costs.

ii) Financial liabilities

Financial liabilities are classified as other financial liabilities. Other financial liabilities are subsequently measured at amortised cost 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 (including all feesand points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

iii) De-recognition of financial liabilities

The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

(t) Cash and cash equivalents

For the purposes of the consolidated cash flow statement, cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

NOTES TO THE FINANCIAL STATEMENTS (continued)2 - Summary of Significant Accounting Policies (continued)(r) Financial instruments (continued)Determination of fair value (continued)

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NOTES TO THE FINANCIAL STATEMENTS (continued)2 - Summary of Significant Accounting Policies (continued)

(u) Impairment of non-financial assets At each end of the reporting period, the group 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 and the impairment loss is recognised in the statement of comprehensive income. Whereit is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash generating unit to which the asset belongs.

(v) 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.

3 - CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINITY

In the process of applying the entity’s accounting policies, the directors are required tomake judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision only affects that period or in the period of the revision and future periods if the revision affects both current and future periods.

The following are the critical judgements and key assumptions concerning the future and other sources of estimation uncertainty that directors have made in applying the group’s accounting policies:

(a) The ultimate liability arising from claims made under insurance contracts

The main assumption underlying techniques applied in the estimation of this liability isthat a 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 toreflect one-off occurrences, changes in external or market factors such as public attitudesto 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.

(b) Held -to-maturity financial assets

The group follows the guidance of IAS 39 on classifying non-derivative financial assets with fixed or determinable payments and fixed maturity as held-to-maturity. This classification requires significant judgment. In making this judgment, the group evaluates its intention and ability to hold such assets to maturity. If the group fails to hold these financial assets to maturity other than for the specific circumstances – for example, selling an insignificant amount close to maturity – it will be required to reclassify the entire class as available-for-sale. The assets would therefore be measured at fair value not amortised cost.

(c) Receivables

Critical estimates are made by the directors in determining the recoverable amount of receivables and valuation of investment property.

(d) Valuation of investment properties

Estimates are made in determining valuations of investment properties. The group management uses experts in determination of the values to adopt.

4 - RISK MANAGEMENT

(a) Governance framework

The primary objective of the group’s risk and financial management framework is to protect the group’s shareholders from events that hinder the sustainable achievement offinancial performance objectives, including failing to exploit opportunities. Management recognises the critical importance of having efficient and effective risk management systems in place. The group has a clear organisational structure with documented delegated authorities and responsibilities from the board of directors to management.

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(b) Management of Insurance and financial risk

The group’s activities expose it to a variety of risks. The group classifies the various risksit is exposed to into insurance risk and financial risk. Financial risks include credit risk, liquidity risk and market risk which includes the effect of changes in equity market prices, foreign currency exchange rates and interest rates. The group’s overall risk management programme focuses on the unpredictability of financial markets, identification and management of risks. It 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. The group has put in place investment policies which help manage liquidity and seek to maximise return within an acceptable level of interest rate risk.

(i) Insurance risk

Insurance risk in the group arises from:

(a) Fluctuations in the timing, frequency and severity of claims and claims settlements relative to expectations;

(b) Unexpected claims arising from a single source;

(c) Inaccurate pricing of risks or inappropriate underwriting of risks when underwritten;

(d) Inadequate reinsurance protection or other risk transfer techniques; and

(e) Inadequate reserves

(a), (b) and (c) can be classified as the core insurance risk, (d) relates to reinsurance planning, while (e) is about reserving.

Core insurance risk

This risk is managed through:

• Diversification across a large portfolio of insurance contracts;

• Careful selection guided by a conservative underwriting philosophy;

• Continuous monitoring of the business performance per class and per client and corrective action taken as deemed appropriate;

• A minimum of one review of each policy at renewal to determine whether the risk remains within the acceptable criteria;

• Having a business acceptance criteria which is reviewed from time to time based on the experience and other developments; and

• Having a mechanism of identifying, quantifying and accumulating exposures to contain them within the set underwriting limits.

Reinsurance planning

Reinsurance purchases are reviewed annually to verify that the levels of protection being sought reflect developments in exposure and risk appetite of the group. The basis of these purchases is underpinned by the group’s experience, financial modelling by and exposure of the reinsurance broker. The reinsurance is placed with providers who meet the group’s counter party security requirements.

Claims reserving

The group’s reserving policy is guided by the prudence concept. Estimates are made of the estimated cost of settling a claim based on the best available information on registration of a claim, and this is updated as and when additional information is obtained and annual reviews done to ensure that the reserves are adequate. Management is regularly provided with claims settlement reports to inform on the reserving performance.

Short-term insurance contracts

The Group principally issues the following types of general insurance contracts: Aviation, engineering, fire, liability, marine, motor, personal accident, theft workmen compensation and various miscellaneous general risk classes. The risks under these policies usually cover twelve months duration. These risks on these contracts do not vary significantly in relation to the location of the risk insured by the Group, type of risk insured and by industry. The risk exposure is mitigated by diversification across a large portfolio of insurance contracts and geographical areas. The variability of risks is improved by careful selection and implementation of underwriting strategies, which are designed to ensure that risks are diversified in terms of type of risk and level of insured benefits. This is largely achieved through diversification across industry sectors and geography. Furthermore, strict claim review policies to assess all new and ongoing claims, regular detailed review of claims handling procedures and frequent investigation of possible fraudulent claims are all policies and procedures put in place to reduce the risk exposure of the Group.

The Group further enforces a policy of actively managing and promptly pursuing claims, in order to reduce its exposure to unpredictable future developments that can negatively impact the business. Inflation risk is mitigated by taking expected inflation into account when estimating insurance contract liabilities. The Group has also limited its exposure by imposing maximum claim amounts on certain contracts as well as the use of reinsurance arrangements in order to limit exposure to catastrophic events (e.g. earthquakes and flood damage).

NOTES TO THE FINANCIAL STATEMENTS (continued)4 - Risk Management (continued)

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NOTES TO THE FINANCIAL STATEMENTS (continued)4 - Risk Management (continued)(b) Management of Insurance and financial risk (continued)(i) Insurance risk (continued) | Short-term insurance contracts (continued)

The purpose of these underwriting and reinsurance strategies is to limit exposure to catastrophes based on the Group’s risk appetite as decided by management. The Board of Directors may decide to increase or decrease the maximum tolerances based on market conditions and other factors.

The table below sets out the concentration of general insurance contract liabilities by type of contract:

GROUP31 December 2014

Gross LiabilitiesKsh ‘000

Reinsurance Share

Ksh ’000Net Liabilities

Ksh ’000

Motor 1,932,540 (229,768) 1,702,772Fire 486,822 (325,967) 160,855Engineering 225,469 (189,527) 35,942Marine 193,209 (107,926) 85,283Aviation 100,416 (88,745) 11,671Accident and other miscellaneous classes 1,076,965 (238,496) 838,469Agriculture 5,974 (2,815) 3,159

4,021,395 1,183,244 2,838,151

31 December 2013Motor 1,688,004 (223,089) 1,464,915Fire 722,278 (579,687) 142,591Engineering 123,693 (89,387) 34,306Marine 187,701 (77,699) 110,002Aviation 199,468 (186,592) 12,876Accident and other miscellaneous classes 1,022,553 (187,247) 835,306Agriculture 2,966 (263) 2,703

3,946,663 (1,343,964) 2,602,699

COMPANY31 December 2014Motor 1,853,268 (212,567) 1,640,701Fire 472,123 (317,750) 154,373Engineering 136,257 (104,804) 31,453Marine 175,145 (92,973) 82,172Aviation 100,416 (88,745) 11,671Accident and other miscellaneous classes 1,037,066 (235,641) 801,425Agriculture 5,974 (2,815) 3,159

3,780,249 1,055,295 2,724,954

31 December 2013Motor 1,620,493 (202,384) 1,418,109Fire 705,217 (569,928) 135,289Engineering 110,505 (85,831) 24,674Marine 167,718 (76,535) 91,183Aviation 199,468 (186,592) 12,876Accident and other miscellaneous classes 1,003,751 (181,772) 821,979Agriculture 2,966 (263) 2,703

3,810,118 1,303,305 2,506,813

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The geographical concentration of the Group’s general insurance contract liabilities is disclosed below. The disclosure is based on the countries where the business is written.

Key assumptions

The principal assumption underlying the liability estimates is that the Group’s future claims development will follow a similar pattern to past claims development experience. This includes assumptions in respect of average claim costs, claim handling costs, claim inflation factors and claim numbers for each accident year. Additional qualitative judgements are used to assess the extent to which past trends may not apply in the future, for example: once–off occurrence; changes in market factors such as public attitude to claiming: economic conditions: as well as internal factors such as portfolio mix, policy conditions and claims handling procedures.

Judgement is further used to assess the extent to which external factors such as judicial decisions and government legislation affect the estimates. Other key circumstances affecting the reliability of assumptions include variation in interest rates, delays in settlement and changes in foreign currency rates.

Sensitivities

The general insurance claim liabilities are sensitive to the key assumptions that follow. It has not been possible to quantify the sensitivity of certain assumptions such as legislative changes or uncertainty in the estimation process.

The following analysis is performed for reasonably possible movements in key assumptions with all other assumptions held constant, showing the impact on gross and net liabilities and profit before tax.

The correlation of assumptions will have a significant effect in determining the ultimate claims liabilities, but to demonstrate the impact due to changes in assumptions, assumptions had to be changed on an individual basis. It should be noted that movements in these assumptions are non–linear.

31 December 2014Gross Liabilities

Ksh ‘000

Reinsurance Share

Ksh ’000Net Liabilities

Ksh ’000

Kenya 3,780,249 (1,055,295) 2,724,954Tanzania 241,146 (127,949) 113,197

Total 4,021,395 (1,183,244) 2,838,151

31 December 2013Kenya 3,810,118 (1,303,305) 2,506,813Tanzania 136,545 (40,659) 95,886

Total 3,946,663 (1,343,964) 2,602,699

NOTES TO THE FINANCIAL STATEMENTS (continued)4 - Risk Management (continued)(b) Management of Insurance and financial risk (continued)(i) Insurance risk (continued) | Short-term insurance contracts (continued)

31 December 2014Average claim processing cost +18% 12,209 - 12,209

31 December 2013 Average claim processing cost +10% 10,347 - 10,347

-

-

Impact onNet Liabilities

Ksh’ 000

Impact on Profitbefore Tax

Ksh’ 000

Impact onGross Liabilities

Ksh’ 000

+18%

+10%

Changesin Assumptions

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The uncertainty about the amount and timing of claims payments is typically resolved within one year and the claims development history is generally short, its reduction has no significant impact on the gross liabilities and profit before tax. The method used for deriving sensitivity information and significant assumptions did not change from the previous period.

ii) Financial risk

(a) Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risks, equity price risk and foreign exchange currency risk. The sensitivity analyses presented below are based on a change in one assumption while holding all other assumptions constant:

(i) Foreign exchange currency risk Foreign exchange currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The group’s financial assets are primarily denominated in the same currencies as its insurance contract liabilities, which mitigate the foreign currency exchange rate risk. The currency risk is also effectively managed by ensuring that the transactions between the group and other parties are designated in the functional currencies of the individual group companies. At 31 December 2014, if the Kenya shilling had weakened/strengthened by 5% against the US dollar with all other variables held constant, the profit before tax for the year would have been Ksh 572,229 (2013: Ksh 388,394) higher/lower, mainly as a result of US dollar denominated deposits with financial institutions in Kenya and in Tanzania.

(ii) Interest rate risk

The group is exposed to the risk that the level of interest income and in effect the cash flows will fluctuate due to changes in market interest rates. To manage this, the group ensures that the investment maturity profiles are well spread. An increase/decrease of 5 percentage points in interest yields would result in an increase/(decrease) in profit before tax for the year by Ksh 20,076,332 (2013: Ksh 16,099,500).

(iii) Equity price risk

Equity price risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market.

The group is exposed to equity securities price risk as a result of its holdings in equity investments which are listed and traded on the Nairobi Securities Exchange and on the Dar-es-Salaam Stock Exchange which are classified as available for sale financial assets. Exposure to equity price risk in aggregate is monitored in order to ensure compliance with the relevant regulatory limits for solvency purposes.

The group has a defined investment policy which sets limits on the group’s exposure to equity securities both in aggregate terms and by category/share. This policy of diversification is used to manage the group’s price risk arising from its investments in equity securities.

At 31 December 2014, if equity market indices had increased/decreased by 5%, with all other variables held constant, other comprehensive income for the year would increase/decrease by Ksh 53,480,250 (2013: Ksh 28,368,150).

NOTES TO THE FINANCIAL STATEMENTS (continued)4 - Risk Management (continued)(b) Management of Insurance and financial risk (continued)(i) Insurance risk (continued) | Sensitivities (continued)

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(b) Credit risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss to the group by failing to discharge a contractual obligation. The following policies and procedures are in place to mitigate the group’s exposure to credit risk:

• Net exposure limits are set for each counterparty or group of counterparties i.e. limits are set for investments and cash deposits, and minimum credit ratings for investments that may be held • Reinsurance is placed with counterparties that have a good credit rating • Ongoing monitoring by the management credit committee

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 group. Management information reported to the directors include details of provisions for impairment on receivables and subsequent write offs. Exposures to individual policyholders and groups of policyholders are collected within the ongoing monitoring of the controls associated with regulatory solvency. The table below shows the carrying amounts of financial assets bearing credit risk.

GROUP31 December 2014

Fully performingKsh ‘000

Past due but not impaired

Ksh ‘000ImpairedKsh ’000

TotalKsh ’000

Receivable arising out of direct insurance arrangements 445,673 210,606 235,067 891,346Provision for doubtful debts - - (235,067) (235,067)

445,673 210,606 - 656,279

Receivable arising out of reinsurance arrangements 560,769 - (18,168) 542,601Government securities held to maturity 2,504,453 - - 2,504.453Government securities available for sale 507,725 - - 507,725Corporate bonds held to maturity 282,990 - - 282,990Deposits with financial institutions held to maturity 513,596 - - 513,596Other receivables - rent receivable 94,939 - - 94,939Cash and bank balances 36,017 - - 36,017

4,946,162 210,606 (18,168) 5,138,600

31 December 2013

Receivable arising out of direct insurance arrangements 381,998 185,542 210,993 778,533Provision for doubtful debts - - (210,993) (210,993)

381,998 185,542 - 567,540

Receivable arising out of reinsurance arrangements 478,904 - - 478,904Government securities held to maturity 2,327,256 - - 2,327,256Government securities available for sale 294,017 - - 294,017Corporate bonds held to maturity 291,576 - - 291,576Deposits with financial institutions held to maturity 622,123 - - 622,123Other receivables - rent receivable 38,600 - - 38,600Cash and bank balances 128,292 - - 128,292

4,562,766 185,542 - 4,748,308

NOTES TO THE FINANCIAL STATEMENTS (continued)4 - Risk Management (continued)(b) Management of Insurance and financial risk (continued)(ii) Financial risk (continued)

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The debt that is past due and not impaired continues to be paid. The finance department is actively following this debt.

(c) Liquidity risk

Ultimate responsibility for liquidity risk management rests with the board of directors, which has developed and put in place an appropriate liquidity risk management framework for the management of the group’s short, medium and long-term funding and liquidity management requirements. The group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

The table on the following page analyses the group’s financial liabilities into relevant maturity groupings based on the remaining period at the end of each reporting period to the contractual maturity date. The amounts disclosed in the table below are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying amounts, as the impact of discounting is not significant.

COMPANY31 December 2014

Fully performingKsh ‘000

Past due but not impairedKsh ‘000

ImpairedKsh ’000

TotalKsh ’000

Receivable arising out of direct insurance arrangements 414,884 179,817 235,067 829,767Provision for doubtful debts - - (235,067) (235,067)

414,884 179,817 - 594,700

Receivable arising out of reinsurance arrangements 463,893 - (18,168) 445,725Government securities held to maturity 2,447,605 - - 2,447,605Government securities available for sale 507,725 - - 507,725Corporate bonds held to maturity 282,990 - - 282,990Deposits with financial institutions held to maturity 250,433 - - 250,433Other receivables - rent receivable 90,202 - - 90,202Cash and bank balances 24,273 - - 24,273

4,482,005 179,817 (18,168) 4,643,654

31 December 2013Receivable arising out of direct insurance arrangements 368,978 173,045 210,993 753,016Provision for doubtful debts - - (210,993) (210,993)

368,978 173,045 - 542,023

Receivable arising out of reinsurance arrangements 432,642 - - 432,642Government securities held to maturity 2,243,305 - - 2,243,305Government securities available for sale 294,017 - - 294,017Corporate bonds held to maturity 291,576 - - 291,576Deposits with financial institutions held to maturity 441,276 - - 441,276Other receivables - rent receivable 34,357 - - 34,357Cash and bank balances 100,504 - - 100,504

4,206,655 173,045 - 4,379,700

NOTES TO THE FINANCIAL STATEMENTS (continued)4 - Risk Management (continued)(b) Management of Insurance and financial risk (continued)(ii) Financial risk (continued) | (b) Credit risk (continued)

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(d) Fair value hierarchy

The table on the following page 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) 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).

The table on the following page presents the company's financial assets and liabilities measured at fair value at 31 December 2014 and 31 December 2013

GROUPAt 31 December 2014

0 - 1 YearKsh ‘000

Over 1 YearKsh ’000

TotalKsh ’000

Outstanding claims provision 4,021,395 - 4,021,395Payables arising from reinsurance arrangements 547,708 - 547,708Other payables 248,138 - 248,138

4,817,241 - 4,817,241

At 31 December 2013Outstanding claims provision 3,946,663 - 3,946,663Payables arising from reinsurance arrangements 435,575 - 435,575Other payables 189,001 - 189,001

4,571,239 - 4,571,239

COMPANYAt 31 December 2014Outstanding claims provision 3,780,249 - 3,780,249Payables arising from reinsurance arrangements 447.837 - 447,837Other payables 219,785 - 219,785

4,447,871 - 4,447,871

At 31 December 2013Outstanding claims provision 3,810,118 - 3,810,118Payables arising from reinsurance arrangements 385,378 - 385,378Other payables 160,663 - 160,663

4,356,159 - 4,356,159

NOTES TO THE FINANCIAL STATEMENTS (continued)4 - Risk Management (continued)(b) Management of Insurance and financial risk (continued)(ii) Financial risk (continued) | (b) Liquidity risk (continued)

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31 December 2014Available for sale - Equity instruments 1,069,605 - - 1,069,605- Government bonds 507,725 - - 507,725

Total 1,577,330 - - 1,577,330

31 December 2013 Available for sale - Equity instruments 567,363 - - 567,363- Government bonds 294,017 - - 294,017

Total 861,380 - - 861,380

- -

-

- -

-

Level 3Ksh ‘000

TotalKsh ‘000

Level 2Ksh ‘000

1,069,605 507,725

1,577,330

567,363 294,017

861,380

Level 1Ksh ‘000

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 group, 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.

(iii) Capital risk management The Group has established the following capital management objectives, policies and approach to managing the risks that affect its capital position:

• Allocation of capital efficiently and support the development of business by ensuring that returns on capital employed meet the requirements of its capital providers and of its shareholders. • Aligning the profile of assets and liabilities taking account of risks inherent in the business.

NOTES TO THE FINANCIAL STATEMENTS (continued)4 - Risk Management (continued)(b) Management of Insurance and financial risk (continued)(ii) Financial risk (continued) | (d) Fair value heirarchy (continued)

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• Maintaining financial strength to support new business growth and to satisfy the requirements of the policyholders, regulators and stakeholders. • Maintaining strong credit ratings and healthy capital ratios in order to support its business objectives and maximize shareholders value.

The operations of the group are also subject to regulatory requirements within the jurisdictions in which it operates. Such regulations not only prescribe approval and monitoring of activities, but also impose certain restrictive provisions (e.g. capital adequacy) to minimize the risk of default and insolvency on the part of the insurance companies to meet unforeseen liabilities as these arise.

The group has met all of these requirements throughout the financial year. The Kenyan and Tanzania Insurance Acts require each insurance company to hold the minimum level of paid up capital as follows:

Composite insurance companies 450,000 N/AGeneral insurance companies 300,000 58,600Long-term insurance companies 150,000 58,600

450,000 300,000 150,000

KenyaKsh ‘000

TanzaniaKsh ‘000

Both companies are in compliance with the capital requirements as at 31 December 2014.

The solvency margin of the Company as at 31 December 2014 and 2013 is illustrated below:

5 - GROSS EARNED PREMIUMS

Motor 2,007,853 1,548,851Fire 1,056,944 839,433Aviation and Marine 1,173,535 1,167,032Other 652,178 666,176Theft 204,378 204,677Personal accident 242,874 234,448Engineering 440,868 375,180

Total 5,778,630 5,035,797

2,007,853 1,056,944 1,173,535 652,178 204,378 242,874 440,868

5,778,630

2014Ksh ‘000

2013Ksh ‘000

Admitted assets 9,598,076 9,096,437 1,163,841 986,227Admitted liabilities 7,182,822 6,696,211 915,684 765,470Margin 2,415,254 2,400,226 248,157 220,757Required margin 463,228 378,500 28,575 22,161

1,163,841 915,684 248,157 28,575

2014Ksh ‘000

2013Ksh ‘000

2014Ksh ‘000

Kenya

2013Ksh ‘000

Tanzania

9,598,076 7,182,822 2,415,254 463,228

NOTES TO THE FINANCIAL STATEMENTS (continued)4 - Risk Management (continued)(b) Management of Insurance and financial risk (continued)(iii) Capital risk management (continued)

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6 - INVESTMENT INCOME

Fair value gains on investment properties (note 14(a)) 187,500 92,876Interest on deposits with financial institutions 66,198 55,389Rental income from investment properties 149,819 135,494Interest on government securities 302,841 211,232Dividends receivable on equity instruments 21,712 17,303Other interest income 55,555 54,186Gain on disposal of equity instruments 6,824 1,572

790,449 568,052

187,500 66,198 149,819 302,841 21,712 55,555 6,824

790,449

2014Ksh ‘000

2013Ksh ‘000

7 - CLAIMS INCURRED

Gross claims incurred 2,135,746 1,936,541Less: amounts recoverable from reinsurers (461,240) (680,769)

Net claims incurred 1,674,506 1,255,772

2,135,746 (461,240)

1,674,506

2014Ksh ‘000

2013Ksh ‘000

8 - OPERATING AND OTHER EXPENSES

Employee benefit expense (note 9) 555,733 502,096Impairment charge for doubtful premiums receivable 42,241 15,426Depreciation (note 15(a)) 46,194 28,323Operating lease rentals 76,912 43,953Rebranding and marketing - 17,322Repairs and maintenance 36,033 39,807Other expenses 318,117 323,644Auditors’ remuneration, inclusive of VAT 5,228 6,545Directors’ emoluments - fees for services as directors 6,259 6,021 - other emoluments 33,666 4 7,769Amortisation of prepaid operating lease rentals (note 17) - 25Amortisation of deferred merger acquisition cost (note 23) 92,500 92,500Amortisation of intangible assets (note 16) 20,525 7,956Interest payable to a related party - 2,286

1,233,408 1,133,673

555,733 42,241 46,194 76,912 - 36,033 318,117 5,228

6,259 33,666 - 92,500 20,525 -

1,233,408

2014Ksh ‘000

Restated 2013Ksh ‘000

4

NOTES TO THE FINANCIAL STATEMENTS (continued)

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9 - EMPLOYEE BENEFIT EXPENSES

Salaries and benefits 515,017 466,326Defined contribution retirement schemes - Group pension fund 35,861 31,085 - National Social Security fund 4,855 4,685

555,733 502,096

2014Ksh ‘000

Restated 2013Ksh ‘000

10 - INCOME TAX EXPENSE

(a) Tax expense

b) Reconciliation of tax expense to expected tax based on accounting profit

The group’s income tax expense is computed in accordance with income tax rules applicable to general insurance companies.

Profit before income tax 848,152 673,443 826,172 872,558 Tax calculated at a tax rate of 30% (2013: 30%) 254,446 202,033 247,852 261,767Tax effect of: - Income not subject to tax (37,971) (38,463) (37,971) (76,736) - Expenses not deductible for tax purposes 30,654 64,181 31,670 33,882

2014Ksh ‘000

2013Ksh ‘000

2014Ksh ‘000

GROUP

2013Ksh ‘000

COMPANY

NOTES TO THE FINANCIAL STATEMENTS (continued)

Current income tax expense

201,238 200,670 196,368 191,977Deferred income tax charge (note 33(b)) - Current year charge 45,891 27,081 45,183 26,936 - Prior year under provision 7,410 13,977 7,410 13,977 - Prior year over provision - current tax (6,005) - (6,005) -

47,296 41,058 46,588 40,913

248,534 241,728 242,956 232,890

196,368

45,183 7,410 (6,005)

46,588

242,956

2014Ksh ‘000

2013Ksh ‘000

2014Ksh ‘000

GROUP

2013Ksh ‘000

COMPANY

201,238

45,891 7,410 (6,005)

47,296

248,534

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- Prior year deferred income tax under provision 7,410 13,977 7,410 13,977 - Prior year over provision - current tax (6,005) - (6,005) -

Income tax expense 248,534 241,728 242,956 232,890

c) Tax payable movement

d) Analysed as follows:

Current tax recoverable (19,606) (619) (13,433) -Current tax payable - 9,816 - 9,816

(19,606) 9,197 (13,433) 9,816

11 - PROFIT FOR THE YEAR

A profit of Ksh 583,217,000 (2013: Ksh 639,668,000) has been dealt with in the books of the company, ICEA LION General Insurance Company Limited.

12 - EARNINGS PER SHARE

Basic earnings per share have been calculated by dividing the profit for the year attributable to equity holders of the parent company by the number of ordinary shares in issue at the end of the reporting period.

There were no potentially dilutive shares outstanding at 31 December 2014 or 31 December 2013. Diluted earnings per share are therefore the same as basic earnings per share.

At 1 January 9,197 26,994 9,816 12,979 Current taxation expense 201,238 200,670 196,368 191,977Prior year over provision/adjustments (6,005) (19,999) (6,005) -Tax paid (224,103) (198,594) (213,612) (195,140)Exchange differences 67 126 - -

At 31 December (19,606) 9,197 (13,433) 9,816

2014Ksh ‘000

2013Ksh ‘000

2014Ksh ‘000

GROUP

2013Ksh ‘000

COMPANY

NOTES TO THE FINANCIAL STATEMENTS (continued)10 - Income Tax Expense (continued)(b) Reconciliation of tax expense to expexted tax based on accounting profit (continued)

Profit attributable to ordinary shareholders (Ksh ’000) 591,909 444,236Number of ordinary shares for basic earnings per share 30,000 30,000

Basic and diluted earnings per share (Ksh) 19.73 14.81

2014Ksh ‘000

Restated 2013Ksh ‘000

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13 - DIVIDENDS

No interim dividend has been declared in the year (2013 -Nil).

At the annual general meeting scheduled for 27 March 2015, a final dividend in respect of 2014 of Ksh 6.67 per share amounting to Ksh 200,000,000 is to be proposed by the directors. The final proposed dividend for the year is subject to approval by shareholders at the annual general meeting and has not been included as a liability in these financial statements.

The total dividend for the year ended 31 December 2014 will therefore be Ksh 6.67 per share (2013: Ksh 6.67 per share) amounting to a total of Ksh 200,000,000 (2013: Ksh 200,000,000).

The dividend is payable subject to, where applicable, deduction of withholding tax as required under the Kenya Income Tax Act.

14 - INVESTMENT PROPERTIES

At 1 January 2,167,500 3,148,571Fair value gain 187,500 92,876Disposal (note 39) - (1,160,000)Transfer from property and equipment (note 15(a)) - 84,250Transfer from prepaid operating lease rentals (note 17) - 1,803

At 31 December 2,355,000 2,167,500

At 1 January 2,167,500 1,988,571Fair value gain 187,500 92,876Transfer from property and equipment (note 15(a)) - 84,250Transfer from prepaid operating lease rentals (note 17) - 1,803

At 31 December 2,355,000 2,167,500

2014Ksh ‘000

2013Ksh ‘000

a) GROUP

b) COMPANY

The investment properties were last revalued at 31 December 2014 by Lloyd Masika Limited, independent valuers on the basis of open market value for existing use.

Rental income arising from investment properties during the year amounted to Ksh 149,819,122 (2013: Ksh 160,985,463). Expenses relating to investment property amounted to Ksh 44,721,108 (2013: Ksh 45,079,931).

The table on the next page analyses the non-financial assets 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) 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).

NOTES TO THE FINANCIAL STATEMENTS (continued)

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Valuation technique used to derive level 2 fair values

Level 2 fair value of land and building has been valued on the basis of highest best use that is Market Value for existing use. Leasehold considerations and tenancies have been reflected in the valuation.

15 - PROPERTY & EQUIPMENT

Cost or valuation At 1 January 2013 88,571 64,512 74,575 123,049 - 350,707Additions - 18,757 5,773 8,318 17,347 50,195Disposal of Karen Office Park - - - (10,219) - (10,219)Disposals - (8,545) - (95) - (8,640)Transfer to investment properties (88,571) - - - - (88,571)Exchange difference on translation - (163) (40) 136 - (67)

At 31 December 2013 - 74,561 80,308 121,189 17,347 293,405 At 1 January 2014 - 74,561 80,308 121,189 17,347 293,405Additions - 11,835 17,129 118,625 - 147,589Disposals - (9,526) (164) (287) - (9,977)Transfer to furniture & fittings - - - 17,347 (17,347) -Exchange difference on translation - (384) (103) (358) - (845)

At 31 December 2014 - 76,486 97,170 256,516 - 430,172

Depreciation At 1 January 2013 - 59,147 65,259 73,637 - 198,043Charge for the year 4,321 9,121 5,702 9,179 - 28,323Eliminated on disposal - (8,545) - (22) - (8,567)Transfer to investment properties (4,321) - - - - (4,321)Eliminated on discontinued operation - - - (4,051) - (4,051)Exchange difference on translation - (16) (2) 1 - (17)

At 31 December 2013 - 59,707 70,959 78,744 - 209,410

Work in progressKsh ‘000

TotalKsh ‘000a) GROUP

74,575 5,773 - -

- (40)

80,308

80,308 17,129 (164) - (103)

97,170

65,259 5,702 -

- - (2)

70,959

Computer equipment

Ksh ‘000

Furniture fittings & office equipment

Ksh ‘000

88,571 - - - (88,571) -

-

- - - - -

-

- 4,321 - (4,321) - -

-

LeaseholdbuildingKsh ‘000

Motor vehiclesKsh ‘000

NOTES TO THE FINANCIAL STATEMENTS (continued)14 - Investment Properties (continued)

GROUP AND COMPANYAt 31 December 2014Investment property - 2,355,000 - 2,355,000

At 31 December 2013Investment property - 2,167,500 - 2,167,500

-

-

Level 3Ksh ‘000

TotalKsh ‘000

Level 2Ksh ‘000

-

-

Level 1Ksh ‘000

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The long leasehold building was revalued at 31 December 2014 by Lloyd Masika Limited, independent valuers on the basis of open market value for existing use. On the basis of open market value for existing use. Fully depreciated assets at 31 December 2014 amounted to Ksh 168,558,771 (2013 – Ksh 161,669,745). The normal annual depreciation on these assets would have been Ksh 37,772,886 (2013 – Ksh 30,595,659). If the property and equipment was stated at the historical cost basis the net book value would be Ksh 188,700,151 (2013 – Ksh 89,971,000).

At 1 January 2014 - 59,707 70,959 78,744 - 209,410Charge for the year - 8,380 9,086 28,728 - 46,194Reclassification of software licence - - 892 - - 892Elimination on disposal - (9,400) (164) (87) - (9,651)Exchange difference on translation - (511) (124) (116) - (751)

At 31 December 2014 - 58,176 80,649 107,269 - 246,094

Net Book Value

At 31 December 2014 - 18,310 16,521 149,247 - 184,078

At 31 December 2013 - 14,854 9,349 42,445 17,347 83,995

Work in progressKsh ‘000

TotalKsh ‘000

Computer equipment

Ksh ‘000

Furniture fittings & office equipment

Ksh ‘000

LeaseholdbuildingKsh ‘000

Motor vehiclesKsh ‘000

NOTES TO THE FINANCIAL STATEMENTS (continued)15 - Property & Equipment (continued)

Cost or valuation At 1 January 2013 88,571 48,980 70,770 107,513 - 315,834Additions - 18,757 4,623 6,714 17,347 47,441Portfolio transfer - - - - - -Disposals - (8,544) - - - (8,544)Transfer to investment properties (88,571) - - - - (88,571)

At 31 December 2013 - 59,193 75,393 114,227 17,347 266,160 At 1 January 2014 - 59,193 75,393 114,227 17,347 266,160Additions - 11,416 16,540 117,445 - 145,401Disposals - (9,132) (164) (276) - (9,572)Transfer to furniture & fittings - - - 17,347 (17,347) -

At 31 December 2014 - 1,477 91,769 248,743 - 401,989

Depreciation At 1 January 2013 - 44,339 61,934 66,164 - 172,437Charge for the year 4,321 8,453 5,372 8,539 - 26,684Portfolio transfer - (8,544) - - - (8,544) Disposals (4,321) - - - - (4,321)Eliminate on revaluation

At 31 December 2013 - 44,248 67,306 74,703 - 186,257

Work in progressKsh ‘000

TotalKsh ‘000a) COMPANY

Computer equipment

Ksh ‘000

Furniture fittings & office equipment

Ksh ‘000

LeaseholdbuildingKsh ‘000

Motor vehiclesKsh ‘000

6

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The long leasehold building was revaluedat 31 December 2014 by Lloyd Masika Limited, independent valuers on the basis of open market value for existing use.

Fully depreciated assets at 31 December 2014 amounted to Ksh 147,906,954 (2013 – Ksh 143,513,878). The notional annual depreciation on these assets would have been Ksh 33,746,572 (2013 – Ksh 26,466,024).

If the property and equipment were stated at the historical cost basis the net book value would be Ksh 188,700,151 (2013 – Ksh 79,904,000).

16 - INTANGIBLE ASSETS – COMPUTER SOFTWARE

Cost At 1 January 43,403 29,864Additions 32,701 13,539

At 31 December 76,104 43,403

Depreciation At 1 January 34,228 26,272 Reclassification of software licence (892) -Charge for the year 20,525 7,956

At 31 December 53,861 34,228

Net book Value 22,243 9,175

2014Ksh ‘000

2013Ksh ‘000GROUP AND COMPANY

At 1 January 2014 - 44,248 67,306 74,703 - 186,257Charge for the year - 8,306 8,750 27,915 - 44,971Reclassification of software licence - - 892 - - 892Disposals - (9,019) (164) (76) - (9,259)

At 31 December 2014 - 43,535 76,784 102,542 - 222,861

Net book Value

At 31 December 2014 - 17,942 14,985 146,201 - 179,128

At 31 December 2013 - 14,945 8,087 39,524 17,347 79,904

Work in progressKsh ‘000

TotalKsh ‘000

Computer equipment

Ksh ‘000

Furniture fittings & office equipment

Ksh ‘000

LeaseholdbuildingKsh ‘000

Motor vehiclesKsh ‘000

NOTES TO THE FINANCIAL STATEMENTS (continued)15 - Property & Equipment (continued)

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17 - PREPAID OPERATING LEASE RENTALS – LEASEHOLD LAND

Cost At 1 January and 31 December - 2,349 Transfer to investment properties(note 14) - (2,349)

- -Amortisation At 1 January - 521 Charge for the year - 25Transfer to investment properties (note 14) - (546)

At 31 December - -

Net book Value - -

2014Ksh ‘000

2013Ksh ‘000GROUP AND COMPANY

18 - INVESTMENT IN SUBSIDIARIES

(a) At Cost

ICEA LION General Insurance Company (Tanzania) Limited 53% Tanzania 50,147 50,147

2014Ksh ‘000

2013Ksh ‘000

Beneficialownership

Country ofincorporation

The principal activity of ICEA LION General Insurance Company (Tanzania) Limited is the underwriting of the general insurance business. All subsidiary undertakings are included in the consolidation. The proportion of the voting rights in the subsidiary undertakings held directly by the parent company do not differ from the proportion of ordinary shares held. The parent company further does not have any shareholdings in the preference shares of subsidiary undertakings included in the group.

The total non-controlling interest for the period is, which is wholly attributed to ICEA LION General Insurance Company (Tanzania) Limited.

Set out below is the summarised financial information for the subsidiary whose non-controlling interest is material to the group:

ICEA LION General Insurance Company (Tanzania) Limited

Summarised statement of financial position

2014Ksh ‘000

2013Ksh ‘000

CurrentTotal assets 1,230,008 1,011,744 Total liabilities 915,517 765,470

Net assets 314,491 246,274

NOTES TO THE FINANCIAL STATEMENTS (continued)

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Summarised statement of comprehensive incomeGross earned premiums 830,748 705,812

Underwriting loss (37,457) (2,061)

Profit before income tax 21,980 36,431 Income tax expense (5,578) ( 8,838)Other comprehensive income 54,782 53,918

Total comprehensive income 71,184 81,511

Total comprehensive income allocated to non-controlling interests 29,828 37,845

Summarised cash flowsNet cash generated from operating activities 50,046 18,060 Net cash (used in)/generated from investing activities (51,524) (116,054)

Net decrease in cash and cash equivalents (1,478) (97,994)

Cash and cash equivalents at beginning of year 90,154 190,138 Exchange (loss)/gains on cash and cash equivalents (3,726) (1,990)

Cash and cash equivalents at end of year 86,428 90,154

b) At Fair Value

COMPANYBeneficial

OwnershipCountry of

Incorporation2014

Ksh ’0002013

Ksh ’000

Karen Office Park Limited 100% Kenya - -

Movement in fair value of subsidiary

At 1 January - 1,160,000Reclassified from investment property (note 14) - -Acquired from Karen Office Park - -Fair value gain - -Disposal (note 39) - (1,160,000)

At 31 December - -

NOTES TO THE FINANCIAL STATEMENTS (continued)18 - Investment in Subsidiaries (continued)(a) At Cost (continued)

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GROUP AND COMPANY2014

Ksh ’0002013

Ksh ’000

At 1 January 75,423 72,926

Net increase in the group’s share of net assets of the pool 7,618 2,497

At 31 December 83,041 75,423

GROUP COMPANY

2014Ksh ’000

2013Ksh ’000

2014Ksh ’000

2013Ksh ’000

At 1 January 567,363 340,530 459,199 286,589Additions 374,608 80,723 374,608 80,351Disposals (33,448) (21,474) (33,448) (21,474)Fair value gains 164,256 167,651 109,474 113,733Exchange difference on translation (3,174) (67) - -

At 31 December 1,069,605 567,363 909,833 459,199

GROUP COMPANY

2014Ksh ’000

2013Ksh ’000

2014Ksh ’000

2013Ksh ’000

Reinsurer’s share of- unearned premiums 1,253,589 968,825 889,038 599,602- outstanding claims (note 32) 1,183,244 1,343,964 1,055,295 1,303,305

2,436,833 2,312,789 1,944,333 1,902,907

19 - KENYA MOTOR INSURANCE POOL

This represents the group’s share of the net assets of the pool. This balance is recoverable from the pool through a refund of the amount due upon discontinuation of the pool as well as a share of investment income generated by the pool’s investments annually. The movement in the amount due is shown below:

20 - AVAILABLE FOR SALE QUOTED EQUITY INSTRUMENTS

21 - REINSURERS' SHARE OF TECHNICAL PROVISIONS AND RESERVES

NOTES TO THE FINANCIAL STATEMENTS (continued)

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2014Ksh ’000

2013Ksh ’000

At 1 January 277,500 370,000

Additions - -

Amortised during the year (92,500) (92,500)

At 31 December 185,000 277,500

GROUP COMPANY

2014Ksh ’000

2013Ksh ’000

2014Ksh ’000

2013Ksh ’000

Staff receivables 40,469 26,006 38,990 25,252Sundry receivables 54,470 12,594 51,212 9,105Prepayments 45,039 31,443 23,514 10,237

139,978 70,043 113,716 44,594

22 - DEFERRED ACQUISITION COSTS

GROUP COMPANY

2014Ksh ’000

2013Ksh ’000

2014Ksh ’000

2013Ksh ’000

At 1 January 337,490 282,671 247,389 208,509(Decrease)/increase in the year (59,209) 54,819 (2,519) 38,880

At 31 December 278,281 337,490 244,870 247,389

23 - DEFERRED MERGER ACQUISITION COSTS - GROUP AND COMPANY

24 - OTHER RECEIVABLES

NOTES TO THE FINANCIAL STATEMENTS (continued)

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Deposits maturing:- Within 3 months 301,377 474,247 250,433 411,881- Beyond 3 months 212,219 147,876 - 29,395

513,596 622,123 250,433 441,276

25 (a) GOVERNMENT SECURITIES HELD TO MATURITY

GROUP COMPANY

2014Ksh ’000

Restated2013

Ksh ’0002014

Ksh ’0002013

Ksh ’000

Treasury bills and bond maturity- Within 3 months 23,740 - - -- Within 4 to 12 months 4,728 24,608 4,728 24,609- Within 1 to 5 years 411,525 213,349 378,416 130,005- Over 5 years 2,064,460 2,089,299 2,064,461 2,088,691

2,504,453 2,327,256 2,447,605 2,243,305

(b) GOVERNMENT SECURITIES AVAILABLE FOR SALE

- Over 5 years 507,725 294,017 507,725 294,017

26 - CORPORATE BONDS HELD TO MATURITY

Corporate bonds maturing:- Within 1 to 10 years 282,990 291,576 282,990 291,576

27 - DEPOSITS WITH FINANCIAL INSTITUTIONS HELD TO MATURITY

NOTES TO THE FINANCIAL STATEMENTS (continued)

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GROUP COMPANY

2014%

2013%

2014%

2013%

Government securities 13.1 12.6 11.1 11.0Corporate bonds 12.1 11.8 12.1 11.8Deposits with financial institutions 11.6 12.8 11.7 11.9

28 - WEIGHTED AVERAGE EFFECTIVE INTEREST RATES

The following table summarises the weighted average effective interest rates realised during the year on interest-bearing investments:

29 - SHARE CAPITAL : GROUP AND COMPANY

The following table summarises the weighted average effective interest rates realised during the year on interest-bearing investments:

Number of shares

Ksh ’000

Ordinary shares

Ksh ’000

Balance at 1 January 2013, 31 December 2013 and 31 December 2014 30,000 600,000

The total authorised number of ordinary shares is 30,000,000 with a par value of Ksh 20 per share. All issued shares are fully paid.

30 - RESERVES

(a) Available for sale revaluation reserve

The revaluation reserve represents the surplus or deficit on the revaluation of available for sale equity instruments as well as surplus on revaluation of leasehold buildings (included within property and equipment), net of deferred tax. This reserve is not distributable.

(b) Contingency reserve

The contingency reserve relates to the Company’s subsidiary, ICEA LION General Insurance Company (Tanzania) Limited. According to Tanzania Insurance Act 2009, a contingency reserve is required to be maintained. This reserve shall not be less than 3% of the net premium written or 20% of net profit, whichever is the greater. The reserve shall accumulate until it reaches the minimum paid up share capital of the company or 50% of the net earned premiums, whichever is greater. This reserve is not distributable.

NOTES TO THE FINANCIAL STATEMENTS (continued)

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(c) Currency translation reserve

For consolidation purposes, the statement of financial position of the subsidiary, ICEA LION General Insurance Company (Tanzania) Limited, is translated into Kenya Shillings at year end rate of exchange, while the statement of other comprehensive income is translated into Kenya Shillings at the average rate of exchange for the year. The resulting translation differences are dealt with through other comprehensive income and accumulated in equity under the group’s currency translation reserve. This reserve is not distributable.

(d) Prior period adjustment

In the course of preparing the consolidated financial statements, management identified an error in the consolidation adjustments of Ksh 94,024,000 in prior year consolidated financial statements. The error had overstated retained earnings and investment in government securities. The impact which is restricted to the year ended 31 December 2013 has been corrected by reducing retained earnings and government securities held to maturity by Ksh 94,024,000.

31 - OUTSTANDING CLAIMS PROVISION

GROUP COMPANY

2014Ksh ’000

2013Ksh ’000

2014Ksh ’000

2013Ksh ’000

At 1 January 3,946,663 3,781,148 3,810,118 3,604,039Claims incurred and claim handling expenses 2,135,746 1,936,523 1,938,411 1,877,536Payment for claims and claims handling expenses (2,056,661) (1,768,7960 (1,968,280) (1,671,457)Exchange difference on translation (4,353) (2,212) - -

At 31 December 4,021,395 3,946,663 3,780,249 3,810,118

NOTES TO THE FINANCIAL STATEMENTS (continued)30 - Reserves (continued)

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32 - MOVEMENTS IN INSURANCE LIABILITIES AND REINSURANCE ASSETS

2014

Gross outstandingclaims provision

Ksh ‘000

Reinsurance share

Ksh ’000Net

Ksh ’000

At 1 January 2014Notified claims 3,527,345 (1,238,371) 2,288,974Incurred but not reported 419,318 (105,593) 313,725

Total at beginning of year 3,946,663 (1,343,964) 2,602,699

Claims paid in year (2,056,661) 620,014 (1,436,647)Increase in liabilities:- Arising from current year claims 1,137,959 (376,878) 761,081- Arising from prior year claims 997,787 (82,416) 915,371

Total at end of year 4,021,395 (1,183,244) 2,838,151

Notified claims 3,493,941 (1,037,276) 2,456,665

Incurred but not reported 527,454 (145,968) 381,486

Total at end of year 4,021,395 (1,183,244) 2,838,151

2013At 1 January 2013Notified claims 3,329,204 (971,877) 2,357,327

Incurred but not reported 451,944 (144,605) 307,339

Total at beginning of year 3,781,148 (1,116,482) 2,664,666

Claims paid in year (1,768,796) 440,396 (1,328,400)

Increase in liabilities:- Arising from current year claims 1,261,212 (622,089) 639,123

- Arising from prior year claims 675,311 (45,789) 629,522

Exchange difference on translation (2,212) - (2,212)

Total at end of year 3,946,663 (1,343,964) 2,602,699

Notified claims 3,527,345 (1,238,371) 2,288,974

Incurred but not reported 419,318 (105,593) 313,275

Total at end of year 3,946,663 (1,343,964) 2,602,699

NOTES TO THE FINANCIAL STATEMENTS (continued)

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NOTES TO THE FINANCIAL STATEMENTS (continued)

33 - DEFERRED INCOME TAX

Deferred taxation is calculated, on all temporary differences under the liability method using the income tax rates of 30% applicable in both Kenya and Tanzania.

GROUP COMPANY

2014Ksh ’000

2013Ksh ’000

2014Ksh ’000

2013Ksh ’000

(a) The deferred income tax liability is attributable to the following items:

Deferred tax liability:Revaluation surplus - Investment properties at 30% 505,990 449,740 505,990 449,740Unrealised exchange loss 30 30 30 30

506,020 449,770 506,020 449,770

Deferred tax assets:Excess depreciation over capital allowances (5,292) (4,720) (4,552) (3,742)Provisions (33,826) (31,722) (22,426) (19,579)

(39,118) (36,492) (26,978) (23,321)

Net deferred tax liability 466,902 413,278 479,042 426,449

(b) Movement in deferred tax income liability is as follows:

At 1 January 413,278 330,605 426,449 385,536Income statement (credit)/charge- current year (note 10(a)) 45,891 27,081 45,183 26,936- prior year under provision (note 10(a)) 7,410 13,977 7,410 13,977Other comprehensive income - current year - - - -Exchange difference on translation 323 251 - -Disposal of subsidiary (note 39) - 41,364 - -

At 31 December 466,902 413,278 479,042 426,449

(c) Analysis of the year end balance is as follows:

Deferred taxation assets (12,140) (13,171) - -Deferred taxation liabilities 479,042 426,449 479,042 426,449

At 31 December 466,902 413,278 479,042 426,449

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34 - UNEARNED PREMIUMS RESERVE

GROUPGross

Ksh ‘000Reinsurance

Ksh ‘000Net

Ksh ‘000

2014

At 1 January 2014 2,268,282 (968,825) 1,299,457Increase in the year 343,586 (284,764) 58,822

At 31 December 2014 2,611,868 (1,253,589) 1,358,279

2013At 1 January 2013 1,955,059 (927,442) 1,027,617Increase in the year 313,223 (41,383) 271,840

At 31 December 2013 2,268,282 (968,825) 1,299,457

COMPANYGross

Ksh ‘000Reinsurance

Ksh ‘000Net

Ksh ‘000

2014

At 1 January 2014 1,817,776 (599,602) 1,218,174Increase in the year 306,253 (289,436) 16,817

At 31 December 2014 2,124,029 (889,038) 1,234,991

2013At 1 January 2013 1,584,249 (626,575) 957,674Increase in the year 233,527 (26,973) 260,500

At 31 December 2013 1,817,776 (599,602) 1,218,174

35 - DEFERRED REINSURANCE COMMISSIONS

GROUP COMPANY

2014Ksh ’000

2013Ksh ’000

2014Ksh ’000

2013Ksh ’000

At 1 January 159,855 158,385 86,011 98,212Increase/(decrease) in the year 16,785 1,470 45,869 (12,201)

At 31 December 176,640 159,855 131,880 86,011

NOTES TO THE FINANCIAL STATEMENTS (continued)

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36 - OTHER PAYABLES

Accrued expenses 193,188 140,403 167,168 116,242Other liabilities 28,780 30,105 26,447 25,928Due to related parties (note 42(b)) 26,170 18,493 26,170 18,493

248,138 189,001 219,785 160,633

37 - CAPITAL COMMITMENTS

GROUP COMPANY

2014Ksh ’000

2013Ksh ’000

2014Ksh ’000

2013Ksh ’000

Approved CAPEX:Property and equipment 71,771 76,741 71,771 76,741

38 - CONTINGENT LIABILITIES

The group operates in the insurance industry and is subject to legal proceedings in the normal course of business. While it is not practicable to forecast or determine the final results of all pending or threatened legal proceedings, management does not believe that such proceedings (including outstanding litigation) will have a material effect on its results and financial position of the group. However provisions for claims have been made as far as management believe the claim will be paid.

39 - BUSINESS REORGANISATION

The company sold its investments in Karen Office Park Limited to a related company, First Chartered Securities Limited on 28 June 2013 under a group reorganization initiative. Further disclosures of the sale of business, under IFRS 5 requirements are provided below:

DISCONTINUING OPERATIONS2014

Ksh ’0002013

Ksh ’000

Rental income - 42,398Less: Operating expenses - (4,912)

Profit before income tax - 37,486Income tax expense - (11,996)

Profit after tax - 25,490

Reclassification on disposal of available for sale investment to profit and loss - 116,035

NOTES TO THE FINANCIAL STATEMENTS (continued)

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The analysis of assets and liabilities, together “disposal group” sold to First Chartered Securities Limited and the consideration received in respect of the transfer are detailed below:

Assets2014

Ksh ’0002013

Ksh ’000

Investment property - 1,160,000Equipment - 4,680Deferred taxation - 41,364VAT recoverable - 68,660Other receivables - 29,262Fixed deposits held to maturity - 41,467Cash and bank balances - 16,735

Total assets - 1,362,168

LiabilitiesShareholders’ loans - 732,032Other payables - 19,537Tax payable - 11,312

Total liabilities - 762,881

Net assets transferred out as at - 599,287

Carrying value of the financial asset transferred out - 1,160,000Consideration on transfer - (1,160,000)

Gain on disposal of available for sale investment - -

NOTES TO THE FINANCIAL STATEMENTS (continued)39 - Business Reorganisation (continued)

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40 - NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOW

(a) Cash generated operations2014

Ksh ’0002013

Ksh ’000

Reconciliation of profit before tax to cash (used in)/ generated from operations;

Profit before income tax 848,152 673,443

Adjustments for:Depreciation (note 15(a)) 46,194 28,323Amortisation of deferred merger acquisition cost 92,500 92,500Gain on disposal of equity instruments available for sale (6,824) (1,572)Gain on sale of property and equipment (1,174) (943)Amortisation of prepaid operating lease rentals (note 17) - -Amortisation of intagibe assets (note 16) 20,525 7,956Fair value gains on investment properties (187,500) (92,876)Rental income (149,819) (135,494)Dividend income (21,712) (17,303)Interest income (424,594) (320,807)Changes in working capital:- Kenya motor insurance pool receivable (7,618) (2,497)- receivables arising out of reinsurance arrangements (63,697) (59,710)- receivables arising out of direct insurance arrangements (88,739) (73,546)- reinsurers share of technical provisions and reserves (124,044) (268,865)- deferred acquisition costs 59,209 (54,819)- other receivables (69,935) 126,596- related party balances - (138,520)- outstanding claims provisions 74,732 165,515- unearned premiums reserves 343,586 313,223- payables arising from reinsurance arrangements 112,133 5,200- deferred reinsurance commissions 16,785 1,470

- other payables 59,137 (126,003)

Cash generated from /(used in) operations 527,297 121,296

(b) Analysis of cash and cash equivalentsCash and bank balances 36,017 128,292Government securities maturing within 3 months (note 25) 23,740 -

Deposits with financial institutions maturing within 3 months (note 27) 301,377 474,247

361,134 602,539

NOTES TO THE FINANCIAL STATEMENTS (continued)

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41 - OPERATING LEASE COMMITMENTS

The group as a lessor

Rental income earned during the year was Ksh 149,819,122 (2013 – Ksh 160, 985,463). At the end of each reporting period, the group had contracted with tenants for the following future lease rentals receivable:

2014Ksh ’000

2013Ksh ’000

Within one year 166,313 150,509In the second to sixth years inclusive 692,370 626,579

858,683 777,088

Leases are negotiated for an average term of 2 years for residential properties and 6 years for commercial properties and rentals are reviewed every two years. The leases are cancellable with a penalty when the tenants do not give three months’ notice to vacate the premises.

The group as a lessee

The future minimum lease payments under operating leases are as follows:

2014Ksh ’000

2013Ksh ’000

Within one year 72,926 53,532In the second year 80,219 58,885

153,145 112,417

NOTES TO THE FINANCIAL STATEMENTS (continued)

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42 - RELATED PARTIES

The company is controlled by First Chartered Securities Limited, a company incorporated and domiciled in Kenya, which is the immediate parent company. The ultimate holding company is Asset Managers Limited. There are several other companies, which are related to ICEA LION General Insurance Company Limited through common shareholdings or common directorships.

In the normal course of business, insurance policies are sold to related parties. Transactions with related parties during the year and related outstanding balances are disclosed below:

GROUP COMPANY

2014Ksh ’000

2013Ksh ’000

2014Ksh ’000

2013Ksh ’000

(a) Transactions with related partiesPremiums received net of commissions (FCS Group Companies) 25,314 24,093 25,314 24,093Premiums paid net of commissions 23,396 47,070 23,396 47,070Management fees - earned - - 5,964 6,046Management fees - expense (ICEA LION Tanzania) 3,140 2,833 3,140 2,833

(b) Balances with related partiesDeposits with financial institutions (NIC Bank) 47,672 52,946 540 36,834Bank balances (NIC Bank) 34,415 116,991 23,814 89,203Interest receivable (NIC Bank) 1,789 1,399 40 390Amounts due from a subsidiary - - 13,714 29,526Premiums receivable from related parties (NAS Holdings Limited) 139 21,055 139 21,055

Due from/(to) related company:ICEA LION Life Assurance (31,813) (26,463) (31,813) (26,463)ICEA LION Asset Management 290 (1,206) 290 (1,206)ICEA LION Trustee Services Ltd. 128 28 128 28ICEA Uganda 588 148 588 148Karen Office Park - 9,000 - 9,000Williamson Development Ltd. 4,637 - 4,637 -

(26,170) (18,493) (26,170) (18,493)

(c) Key management and directors’ remunerationDirectors’ fees 6,375 6,131 2,490 2,470Other remuneration 37,032 62,747 33,666 57,043

43,407 68,878 36,156 59,513

Key management remuneration 141,969 120,064 106,446 75,217

NOTES TO THE FINANCIAL STATEMENTS (continued)

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APPENDICES

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APPENDIX I - COMPANY STATEMENT OF COMPREHENSIVE INCOME

2014Ksh ’000

2013Ksh ’000

Gross premiums earned 4,947,882 4,329,987Less: Reinsurance premiums ceded (1,859,694) (1,806,651)

Net earned premiums 3,088,188 2,523,336

Commissions earned 315,761 295,596Investment income 724,996 539,240Other income 15,403 17,046Foreign exchange gains 2,059 -Reclassification on disposal of available for sale investment to profit and loss - 116,035

Net income 4,146,407 3,491,253

Claims incurred (1,601,537) (1,221,400)

Commissions incurred (629,826) (487,599)

Operating and other expenses (1,088,871) (909,696)

Profit before taxation 826,173 872,558

Tax expense (242,956) (232,890)

Profit for the year 583,217 639,668

Other comprehensive income

Items that may subsequently be classified to profit or loss Gain on revaluation of equity instruments available for sale 109,474 113,733

Reclassification on disposal of available for sale investment to profit and loss - (116,035)

109,474 (2,302)

Items that will not be reclassified to profit or lossSurplus on revaluation of leasehold buildings - -

Tax relating to components of comprehensive income - -

- -

Other comprehensive (loss)/income for the year net of tax 109,474 (2,302)

Total comprehensive income for the year 692,691 637,366

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APPENDIX II - CONSOLIDATED REVENUE ACCOUNTS

Class of insurance business

AviationKsh’000

Engine-ering

Ksh’000

FireDomesticKsh’000

Fire IndustrialKsh’000

LiabilityKsh’000

MarineKsh’000

Motor PrivateKsh’000

Motor Comm

Ksh’000

Personal AccidentKsh’000

TheftKsh’000

Workmen’s Comp

Ksh’000 MedicalKsh’000

Miscell-aneous

Ksh’000

2014Total

Ksh’000

2013Total

Ksh’000

Gross premiums written 897,827 595,825 131,238 992,383 146,444 282,051 1,099,589 984,994 247,562 209,350 335,349 150,975 60,294 6,133,881 5,352,134

Change in gross unearned premiums 8,064 154,957 7,538 59,138 25,172 (1,721) 59,186 17,544 4,688 4,972 12,484 (2,520) 5,749 355,251 316,337

Gross premiums earned 889,763 440,868 123,700 933,245 121,272 283,772 1,040,403 967,450 242,874 204,378 322,865 153,495 54,545 5,778,630 5,035,797

Less: reinsurance premiums ceded 875,356 407,640 25,243 719,739 94,862 131,050 36,534 42,422 85,708 20,434 7,664 6,269 47,025 2,499,946 2,364,717

Net premiums earned 14,407 33,228 98,457 213,506 26,410 152,722 1,003,869 925,028 157,166 183,944 315,201 147,226 7,520 3,278,684 2,671,080

Gross claims paid 59,666 102,257 25,837 383,034 13,994 50,992 538,757 421,292 112,114 88,220 127,969 131,756 772 2,056,660 1,768,796

Change in gross outstanding claims (99,052) 102,775 1,468 (236,515) 58,829 5,994 125,921 120,406 56,850 2,717 (47,627) (8,769) (3,911) 79,086 167,745

(39,386) 205,032 27,305 146,519 72,823 56,986 664,678 541,698 168,964 90,937 80,342 122,987 (3,139) 2,135,746 1,936,541

Less: Reinsurance recoveries (39,702) 168,858 489 44,410 50,688 44,400 14,744 61,978 84,779 1,624 3,098 25,084 790 461,240 680,769

Net claims incurred 316 36,174 26,816 102,109 22,135 12,586 649,934 479,720 84,185 89,313 77,244 97,903 (3,929) 1,674,506 1,255,772

Commissions earned (60,957) (88,661) (5,166) (194,367) (17,765) (37,148) 7,570 (3,817) (22,816) (3,472) 690 - (13,717) (439,626) (348,861)

Commissions incurred 52,029 74,230 22,646 179,541 19,159 41,736 102,204 126,532 41,839 27,633 57,498 15,201 3,890 764,138 526,320

Expenses of management 13,173 25,772 43,310 61,956 17,369 40,829 345,593 212,539 36,581 48,934 120,691 32,006 13,637 1,012,390 863,153

Total expenses and commissions 4,245 11,341 60,790 47,130 18,763 45,417 455,367 335,254 55,604 73,095 178,879 47,207 3,810 1,336,902 1,040,612

Underwriting (loss)/profit - 2014 9,846 (14,287) 10,851 64,267 (14,488) 94,719 (101,432) 110,054 17,377 21,536 59,078 2,116 7,639 267,276

- 2013 19,509 29,507 15,907 18,697 (8,175) 9,027 (53,631) 146,222 95,167 6,412 34,031 48,843 13,180 - 374,696

Key ratios : %

Loss ratio 2 109 27 48 84 8 65 52 54 49 25 66 (52) 51 47

Commissions ratio 6 12 17 18 13 15 9 13 17 13 17 10 6 12 10

Expense ratio 1 4 33 6 12 14 31 22 15 23 36 21 23 17 16

Combined ratio 32 143 89 70 155 38 110 88 89 88 81 99 (2) 92 86

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APPENDIX III - COMPANY REVENUE ACCOUNTS

Class of insurance business

AviationKsh’000

Engine-ering

Ksh’000

FireDomesticKsh’000

Fire IndustrialKsh’000

LiabilityKsh’000

MarineKsh’000

Motor PrivateKsh’000

Motor Comm

Ksh’000

Personal AccidentKsh’000

TheftKsh’000

Workmen’s Comp

Ksh’000 MedicalKsh’000

Miscell-aneous

Ksh’000

2014Total

Ksh’000

2013Total

Ksh’000

Gross premiums written 787,804 264,832 123,765 862,132 134,217 258,448 969,251 910,256 237,472 172,579 329,052 150,975 53,352 5,254,135 4,563,514

Change in gross unearned premiums 7,674 159,001 7,579 56,830 25,397 (3,227) 18,652 13,446 5,039 2,709 11,586 (2,520) 4,087 306,253 233,527

Gross premiums earned 780,130 105,831 116,816 805,302 108,820 261,675 950,599 896,810 232,433 169,870 317,466 153,495 49,265 4,947,882 4,329,987

Less: reinsurance premiums ceded 771,039 80,857 22,755 612,132 85,642 113,579 12,460 18,391 82,764 5,207 6,400 6,269 42,199 1,859,694 1,806,651

Net premiums earned 9,091 24,974 93,431 193,170 23,178 148,096 938,139 878,419 149,669 164,663 311,066 147,226 7,066 3,088,188 2,523,336

Gross claims paid 59,666 93,215 20,856 371,128 11,567 47,545 504,139 407,622 109,863 82,642 127,508 131,756 772 1,968,279 1,671,457

Change in gross outstanding claims (99,052) 25,752 2,271 (235,364) 69,444 7,427 114,211 118,564 38,807 (9,477) (47,389) (8,769) (6,294) (29,869) 206,080

(39,386) 118,967 23,127 135,764 81,011 54,972 618,350 526,186 148,670 73,165 80,119 122,987 (5,522) 1,938,410 1,877,537

Less: Reinsurance recoveries (39,702) 81,822 210 36,462 53,783 29,500 6,942 56,283 83,401 (759) 3,051 25,084 796 336,873 656,137

Net claims incurred 316 37,145 22,916 99,302 27,228 25,472 611,408 469,903 65,269 73,924 77,068 97,903 (6,318) 1,601,537 1,211,400

Commissions earned (46,219) (29,918) (4,897) (162,447) (15,991) (34,474) 10,663 139 (21,000) (377) 868 - (12,108) (315,761) (295,596)

Commissions incurred 40,534 20,919 21,053 150,493 16,896 38,493 89,203 114,676 40,151 22,441 56,689 15,201 3,077 629,826 487,599

Expenses of management 12,660 22,589 39,522 54,286 15,538 37,628 268,917 179,300 35,417 43,438 118,346 32,006 12,427 872,074 737,081

Total expenses and commissions 6,975 13,590 55,678 42,322 16,443 41,647 368,783 294,115 54,568 65,502 175,903 47,207 3,396 1,186,139 929,083

Underwriting (loss)/profit - 2014 1,800 (25,761) 14,836 51,536 (20,493) 80,977 (42,052) 114,401 29,832 25,237 58,095 2,116 9,988 300,512

- 2013 17,100 19,531 18,157 (1,603) (2,407) 28,368 (24,456) 154,321 70,648 (5,098) 33,855 48,829 15,257 - 372,853

Key ratios : %

Loss ratio 3 149 25 51 117 17 65 53 44 45 25 66 (89) 52 48

Commissions ratio 5 8 17 17 13 15 9 13 17 13 17 10 6 12 11

Expense ratio 2 9 32 6 12 15 28 20 15 25 36 21 23 17 16

Combined ratio 80 203 94 73 188 45 104 87 80 85 81 99 (41) 90 85

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NOTES

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NOTES

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NOTES

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