TANANIA REINSURANCE COMPANY LTD I ANNUAL REPORT …

TANZANIA REINSURANCE COMPANY LTD I ANNUAL REPORT 20191


Directors Report and Annual Financial

Statementsfor the year ended31 December 2019

ISO 9001:2015

Tanzania Reinsurance Company Ltd I Annual Report 20194

CONTENTS

Company information 1 - 2

Directors’ Report 3 - 11

Statement of Directors’ Responsibilities 12

Declaration of Head of finance 13

Report of the consulting actuary 14

Report of Independent Auditors 15 - 19

Financial Statements:

Statement of Profit or Loss and Other Comprehensive Income 20

Statement of Financial Position 21

Statement of Changes in Equity 22

Statement of Cash Flows 23

Notes to the Financial Statements 24 - 66

Appendix 1 – Revenue Account 67

Tanzania Reinsurance Company Ltd I Annual Report 20195


BOARD OFDIRECTORS

MR. WILSON NDESANJOBoard Chairman | TAN-RE

Mr. Ndesanjo is the Chairman of Corporate Insurance Brokers Limited, an Executive Director of Roldo Limited and Board member of Insurance Group of Tanzania Insurance Company. He is the TAN-RE’s Board Chairman.

MR. WILLIAM ERIOVice Chairman | TAN-RE Chairperson Finance and Investment Committee, Member Human Resources and RemunerationCommittee.

Mr. Erio is the Director General of National Social Security Fund (NSSF), Chairman of ZEP-RE (PTA Reinsurance Company) and also a Board member of Mayfair Insurance Company. He is the Vice Chairman of TAN-RE Board and a Chairperson of the TAN-RE Finance and Investment Committee and member of Human Resources and Remuneration Committee.

MR. KHAMIS SULEIMANBoard Member | TAN-RE Audit and Risk Committee

Mr. Khamis Suleiman is the CEO of Sanlam Life Assurance Tanzania and Chairman of Association of Tanzania Insurers. He is the Chairperson of TAN-RE Audit and Risk Committee and a member of Human Resources and Remuneration Committee.


BOARD OFDIRECTORS

MR. RAHIM IBRAHIMBoard Member | TAN-RE Investment Committee

Mr. Ibrahim is the Director of Tanganyika Arms. He is a member of the TAN-RE Board Finance and Investment Committee.

MS. SABRA MACHANOBoard Member | TAN-REAudit and Risk Committee, Finance and Investment Committee & Human Resources andRemuneration Committee

Ms. Sabra Machano is the Director General of Zanzibar Social Security Fund (ZSSF). She is a member of TAN-RE Audit and Risk Committee, Finance and Investment Committee & Human Resources and Remuneration Committee.

MR. HOSEA KASHIMBABoard Member | TAN-RE Finance and Investment Committee & Audit and Risk Committee

Mr. Hosea Kashimba is the Director General of Public Service Social Security Fund (PSSSF). He is a member of TAN-RE Finance and Investment Committee & Audit and Risk Committee.


BOARD OFDIRECTORS

MR. SURESH KUMARBoard Member | TAN-REAudit and Risk Committee & Human Resources and Remuneration Committee

Mr. Suresh Kumar is the Chief Executive Officer of Metropolitan General Insurance Company, He is a member of both TAN-RE Audit and Risk Committee & Human Resources and Remuneration Committee.

MR. JUSTINE MWANDUBoard Member | TAN-RE Finance and Investment Committee

Mr. Justine Mwandu is the Chairman of MO Assurance Company. He is the member of TAN-RE Finance and Investment Committee.

MR. RONALD KASAPATUChairperson | TAN-REHuman Resources and Remuneration Committee, Member Audit and Risk Committee

Mr. Ronald Kasapatu is the Director of Operations of ZEP-RE (PTA Reinsurance Company). He is a member of both the TAN-RE Board Audit & Risk Committee and the Human Resources & Remuneration Committee.


MANAGEMENTTEAM

TAN-RE Senior Management Team seated: Mr. Rajab S. Kakusa (Chief Executive Officer), standing from right to left: Mr. Gregory D. Ngonyani (Chief Finance and Administration Officer), Mr. Ernest Korosso (Head Internal Auditor) and Mr. Alex Ndossy (Chief Operating Officer).


REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS

8th Floor, TANRE House Longido StreetPlot No. 406 - UpangaP .O. Box 1505Dar es Salaam, TanzaniaTelephone: 255-22-2922341-3Facsimile: 255-22-2922344Email: [email protected]: www.tan-re.co.tz

DIRECTORS

Name Nationality Position Age RemarksMr. Wilson Ndesanjo Tanzanian Chairman 63Mr. William Erio Tanzanian Director 56Mr. Geoffrey Msella Tanzanian Director 67Mr. Charles Sumbwe Zambian Director 60Mr. Ronald Kasapatu Zambian Director 55Mr. Rahim Ibrahim Tanzanian Director 30Ms. Sabra Machano Tanzanian Director 34Mr. Eliud Sanga Tanzanian Director 58 Resigned 29/03/2019Mr.Suleiman Khamis Tanzanian Director 56Mr. Hosea Kashimba Tanzanian Director 50 Appointed 29/03/2019

MEMBERS OF THE AUDIT AND RISK COMMITTEE

Name Nationality Position RemarksMr. Charles Sumbwe Zambian ChairmanMr. Geoffrey Msella Tanzanian MemberMs. Sabra Machano Tanzanian MemberMr. Ronald Kasapatu Zambian MemberMr. Suleiman Khamis Tanzanian Member

MEMBERS OF THE FINANCE & INVESTMENTS COMMITTEE

Name Nationality Position RemarksMr. William Erio Tanzanian ChairmanMr. Geoffrey Msella Tanzanian MemberMs. Sabra Machano Tanzanian Member Mr. Rahim Ibrahim Tanzanian Member Mr. Eliud Sanga Tanzanian Member Resigned 29/03/2019Mr. Hosea Kashimba Tanzanian Member Appointed 29/03/2019

COMPANYINFORMATION


MEMBERS OF THE HUMAN RESOURCES & REMUNERATIONS COMMITTEE

Name Nationality Position RemarksMr. Ronald Kasapatu Zambian ChairmanMr. Charles Sumbwe Zambian MemberMr.Hosea Kashima Tanzanian Member Appointed 29/03/2019Mr. William Erio Tanzanian MemberMs. Sabra Machano Tanzanian MemberMr.Eliud Sanga Tanzanian Member Resigned 29/03/2019

KEY MANAGEMENT

Name PositionMr. Rajab Kakusa Chief Executive OfficerMr. Jean Claude Razafimandimby Chief Underwriting and Training Officer Mr. Gregory Ngonyani Chief Finance and Administration OfficerMr. Ernest Koroso Internal Auditor

MAIN BANKERS

CRDB Bank PLCPPF Tower Branch P.O. Box 268Dar es Salaam

Barclays Bank Tanzania LimitedBarclays HouseOhio StreetP.O. Box 5137Dar es Salaam

COMPANY SECRETARY

CRB Africa LegalTanzanite HouseAli Hassan Mwinyi RoadP.O. Box 79958Dar es Salaam

INDEPENDENT AUDITORS

Ernst & YoungCertified Public AccountantsTanhouse Tower (4th Floor),Plot No. 34/1, Ursino South,New Bagamoyo Rd,P. O. Box 2475Dar es Salaam, Tanzania

COMPANYINFORMATION


Dear Esteemed Shareholders, Ladies and Gentlemen.

On behalf of the Board of Directors of TAN-RE, I have the privilege and honour to present to you the Annual Report incorporating the Audited Financial Statements, Auditors Report and the results of the Actuarial Valuation for the financial year ended on 31st December 2019. I am delighted to report that the financial performance for year 2019 exhibits sustained growth in earnings to shareholders. I wish to give a brief overview of the economic environments touching

on key developments, which affected the Company’s business during this reporting period.

OPERATING ENVIRONMENT AND COMPANY MARKETS

Much as the Tanzanian insurance market is still in its infancy stage as far as insurance is concerned, the market is growing at a phenomenal rate. During the year under review, the company witnessed growth in the local insurance market due to increased investments in mega projects undertaken by the 5th Phase Government of the United Republic of Tanzania. These include inter alia the construction of the Standard Gauge Railway line from Dar es Salaam to Dodoma, the Kinyerezi I and II gas-to-electricity projects and Mwalimu Nyerere (Stigler’s Gorge) Hydroelectric generation project. The local aviation market witnessed major recitation of the national airline through purchase of modern passenger planes.

The year 2019 witnessed various mega infrastructural projects in the city of Dar es Salaam such as Ubungo Interchange, Selander Bridge and the Dar Rapid Transit Phase II connecting the city of Dar es salaam. All these projects required insurance and ultimately reinsurance where TAN-RE played a major role On regional and international market penetration forays, the company writes substantial business from diversified

classes mix of business and geographical sources.

As at the close of year 2019, TAN-RE was trading with over 249 companies across 49 countries spread across Africa, the Middle East and Asia. Diversification of TAN-RE portfolio remains critical to its business strategy.

OPERATIONAL RESULTS

Gross Premium income booked by the company in year 2019 increased by 27% from TZS 111.5 (USD

CHAIRMAN’SSTATEMENT


48.5 million) to TZS 141.4 (USD 61.5 million) billion in comparison to 2018 performance. However, claims incurred by the company during the same period increased by 23% to TZS 51.2 (USD 22.3 million) billion compared to TZS 41.6 (USD 18.1 million) billion incurred year 2018. The increase being mainly attributed by run off medical claims which has prompted the company to review writing medical business in order to protect the shareholders’ value.

I wish to inform the esteemed shareholders that despite the increase in claims expenses, the company managed to achieve a 31% growth in underwriting profit, TZS 9.3 (USD 4 million) billion in absolute amounts compared to TZS 7.1 (USD 3.1 million) billion recorded in year 2018.

Ultimately the company posted a profit after tax amounting to TZS 7.2 (USD 3.1 million) billion as compared to TZS 6.3 (USD 2.7 million) billion posted in the year 2018, representing an increase of 14%.

FUTURE OUTLOOK

As part of the company’s 5 year strategic objectives which was set in 5 years ago, the company desired to establish itself among the dependable regional players, this objective was achieved as TAN-RE is now among the household names in Africa.

The Board reviewed the company’s strategies and during the last quarter of year 2019 adopted a new five-year (2020-2024) strategic plan which aims at consolidating the company’s local market with a particular focus on growing the company’s share of business in the market while steadily pursuing its expansion into the foreign markets.

In line with the new strategic thrust, the company strategically reviewed its vision and mission, as well as the core values in order to incorporate a more focused approach to value addition to the shareholders and other stakeholders. These changes will lead to a stronger and more dynamic company, with robust capacity and increased market share which will result in increased value to our shareholders.

CHAIRMAN’SSTATEMENT

The company is closely watching the developments of the recent COVID-19 pandemic and is vigilant on the expected negative impacts including financial impact directly on asset and liability sides of balance sheets, as well as operational impact with financial consequences. The company expects a general reduction in premiums as a results slowdown in economic activity. The company’s supply chain disruptions which include inability of ceding companies to pay their reinsurancepremium dues. However, the company continues to review the developments of the pandemic and make necessary adjustments as necessary.

I wish to affirm to the shareholders that the company’s is fully equipped to continue operating through various means including ensuring safety of its most valuable assets (employees).

APPRECIATION

On behalf of TAN-RE Board of Directors, I wish to extend gratitude to our clients and business partners for their continued support, our shareholders for their unwavering commitment and inspiration, and to the 5th phase Government of the United Republic of Tanzania for creating an enabling business environment. I would also like to thank the Management and staff for their dedication, loyalty and hard work.

Lastly, I would like to thank my colleagues in the Board for their very positive contribution in providing oversight to the Management.

I wish you all the best in 2020 as I urge you to stay safe

______________________

MR. WILSON NDESANJOCHAIRMAN


am delighted to be introducing TAN RE’s year 2018 Annual Report, with a sense of pride about our company and dedicated team of employees. As we continue to reflect on our progress during the last decade - a period of profound economic challenges and global catastrophic losses; it is remarkable to see how much we have consistently accomplished in terms of financial performance as well as our steadfast dedication to the growing clientele across the 49 countries in Africa, Middle East and South East Asia. Despite the overall increase in underwriting losses recorded globally, we have continued to demonstrate

resilience, effective risk management and favourable performance as well as expansion of our shareholders equity.

OPERATING RESULTS

2018 was another strong year for TAN-RE, with the company generating record revenue and net income. We recorded growth in gross premium by 41%, from TZS 78.9 billion in year 2017 to TZS 111.5 billion in year 2018, while the incurred claims increased to TZS 41.6 billion from TZS 38.1 billion experienced in year 2017. This growth translated into impressive net or gross profit margins in underwriting by 14%, to reach TZS 7.1billion in 2018. We have delivered record results and we have confidence that we will continue to deliver in the future. Each line of business grew revenue and net income for the year under review while continuing to make significant investments in products, markets and operations. Collectively, these gains have resulted to ncreased total dividend amounting to TZS 1.56 billion to be paid to our esteemed shareholders, representing an increase of 13% compared to the previous year.

MARKET AND BUSINESS DEVELOPMENT

Sufficient size and scale has become a more important characteristic for reinsurers. Likewise, for TAN-RE, we embarked on a

strategic expansion of our operations and presence in the Southern Africa region. Entering our second year of operations with our sister company Ezulwini Re which is based in the kingdom of eSwatini (formerly Swaziland). While we continue to extend our presence in the region, we are also mindful of the challenges encountered along the way, including capital requirements, other regulatory and operational - risk management. Learning from these challenges have made us stronger and better equipped for the next phase of expansion and growth with size of our operations. However, size


CEO’SSTATEMENT

alone is no substitute for underwriting expertise and prudent risk management practices to mitigate and absorb inevitable volatility from unforeseen events. Hence, our company commitment to invest more in higher standards of operations, quality benchmarks and prudent underwriting skills to ensure sustainable growth and realization of our vision – to be among the best Reinsurers in Africa.

FINANCIAL STRENGTH RATING

In year 2018, the Global Credit Rating (GCR) of South Africa accorded TAN-RE a rating of A (single A) for Domestic currency claims paying ability and B (Single B) for International currency claims paying ability. In recent years, TAN-RE has increased its underwriting risk appetite within the limits of our enterprise risk management, supported by its large capital base. The company is now offering larger limits and new products to existing clients, and actively seeking new clients where possible. Another driver attributing to increased financial strength of the company is the commendable regulatory changes with our domestic market, including enforcement of a cash and carry policy in the Tanzanian Insurance Market, and restriction on ceding certain risks outside Tanzania.

QUALITY MANAGEMENT SYSTEM

In 2018, we continued to accelerate investments in products, markets and operations. We continued to broaden our commitment to quality operations by maintaining our ISO 9001:2015 certification status for a fourth year in a row. During the last review period, we continued forgoing unfavourable businesses across our portfolio and increasingly focused on high performing markets for good results to our shareholders.

BEST-PRESENTED FINANCIAL STATEMENTS

TAN-RE has continued to gain recognition as a leader in financial reporting by the National Board of Accountants and Auditors (NBAA) of Tanzania. Over the years, TAN-RE has actualized a stringent and meticulous systems driving excellence in financial management and accountability. We are proud to be

the champions in corporate governance practices and transparency in accounting and financial reporting procedures. In year 2018, The NBAA crowned TAN-RE a 2nd winner of the Best Presented Financial Statements in the Insurance category

ENTERPRISE RISK MANAGEMENT (ERM)

ERM has been a fundamental part of our business strategy 2015-2019. Prudent risk management systems and approaches integral to our operations, provides TAN-RE with a competitive edge among other international reinsurers. TAN-RE has sustained improvements widely across operational and risk management practices in conformity to the ISO 9001:2015 standard. With 4 successful years of ISO certification, integrated ERM frameworks have become part of our DNA and us with an iterative approach and commitment for continuous improvement.

MARKET TRAINING AND SEMINARS

As we all know, TAN-RE obtains most of its income from the Tanzanian market and for the same reason, the company continued to position itself to ensure it continues to satisfy the needs of the local insurance market by equipping its clients with the much needed underwriting and claims management skills through provision of tailor made market trainings.

To solidify its presence in the Tanzanian market, TAN-RE continues to support the market by offering a range of services such as training to address the issue of skills gaps among local practitioners.

Through TAN-RE’s Customer of the Year Awards program, in year 2018, TAN-RE fully sponsored Six (06) individuals from the Tanzania market to undergo Advanced General Insurance training at the National Insurance Academy (NIA) in Pune, India.

HUMAN CAPITAL AND STAFF DEVELOPMENT

Human capital is our biggest asset, and for that reason, TAN-RE support programs for employees’ development, which also serves to attract, retain, and


CEO’SSTATEMENT

develop the workforces needed by the company. In year 2018, we continued to invest in staff training through local and international training opportunities, seminars and workshops. TAN-RE continued to sponsor staff for professional qualifications such as CII, CPA and ACCA. Already we are seeing most of our staff being awarded certificates and diploma from the professional bodies such as the Chartered Institute of Insurers and the Association of Chartered Certified Accountants and National Board of Accountants and Auditors.

TAN-RE continued to expose its Directors to special skill requirements necessitated by the annual director’s performance evaluations. We are therefore confident that TAN-RE has the right people and processes in place to support the Company’s growth strategy.

FUTURE PROSPECTS

Going forward we remain committed to scale our operations to meet existing protection gap and potential for high economic losses in the region. Increasing natural disasters, including heavy rains, floods, excessive draught etc. threatens our resilience and potential for continued growth and expansion. Driven by our impatient optimism, TAN-RE shall continue to leverage on ongoing success, build on experiential learning and work with our partners on further diversifying our risk portfolio. TAN-RE shall be at the forefront in ensuring availability of ample capacity for underwriting newer risks inherent to ongoing mega investments in transportation (railways, marine and aviation), mining, hydro power energy, agriculture development, political risks, terrorism etc. To achieve this mission, the company shall continue to invest in its human capital, technology and enterprise risk management systems.

APPRECIATION

On behalf Management and Staff, we wish to express sincere gratitude to our clients and business partners for their continued support and to our shareholders for their trust, commitment and inspiration as we reach newer heights and expanded scope of our operations. We are grateful to the TAN-RE Board of Directors

for their vision and leadership in pursuit of TAN-RE strategic objectives. I wish to reaffirm our unreserved commitment and dedication towards fulfilment of the company’s mandate on national interest, while generating profit and value to shareholders.

I wish you all the best in 2019.

______________________

MR. RAJAB S. KAKUSACHIEF EXECUTIVE OFFICER


CEO’SSTATEMENT


1. INTRODUCTION

The Directors have pleasure in presenting their annual report together with the audited financial statements for the year ended 31December 2019.

The financial statements for the year ended 31 December 2019 were approved by the Board of Directors and authorised for issue as indicated on the statement of financial position.

2. PRINCIPAL ACTIVITIES

The Company transacts all classes of reinsurance business (both short term and long term) in conformity with the Insurance Act, 2009.

3. MISSION, VISION AND VALUES

Vision:‘’To be among the most profitable Reinsurance Companies in Africa.’’

Mission:‘’To provide sustainable reinsurance capacity and security in our market through the use of dedicated staff and modern technology in the best interest of our customers, shareholders and other stakeholders.’’

Core Values:Professionalism, Integrity, Customer Focus

For the strategic plan period 2020-2024, TAN-RE shall pursue the following objectivesin order to effectively provide solutions to the themes derived from the strategic perspectives as identified and used in the companies performance evaluation system.

To be among the top 15 profitable reinsures in Africa by year 2024. To achieve minimum return on shareholders fund of 10% per annum. To achieve customer satisfaction index above 95% annually. To improve the quality and efficiency of business processes. To nurture and develop professional and technical skills within the company.

In order to ensure achievementof the above objectives, the company has identified strategic measures, targets and key performance indicators to ensure implementation of the plan is effectively monitored and progress measured and reported to the respective implementation supervision levels. Within each of the strategic perspective and strategic objectives the company has earmarked key strategies and activities, which have to be completed within the next 5 years.

The above objectives have also taken into considerationthe Political, Economic, Social, Technological Environmental & Legal (PESTEL) Analysis, Strengths and Weaknesses, Opportunities & Challenges (SWOC) and stakeholder analysis which was conducted as part of the strategic planning process as well as benchmarking against the strategic plans from our peer African reinsurance companies.

DIRECTOR’S REPORTfor the year ended 31 December 2019


3. MISSION, VISION AND VALUES (continued)

During the planning process, significant consideration was given to lessons learnt from the expiring strategic plan enabling the company to come up with improved strategic responses to ensure an effective strategic focus.

In order to ensure a focused approach, the company has identified key strategic imperatives which must be addressed in order to assure effective implementation of identified strategies and ultimate achievement of the strategic objectives. The current strategic plan is ambitious in its objectives and implementation will require adequate resources and relentless commitment from the Board, Management and Staff.

4. DEVELOPMENT IN BUSINESS

During the year under review, gross premium registered was TZS 141.4 billion up by 27% from TZS 111.5 billion recorded in year 2018. The positive variance was attributed by Management efforts to market the business on both local and foreign markets, coupled with the massive projects currently being undertaken by the 5th phase Government of the United Republic of Tanzania such a improvements on county’s road networks, Mwalimu Nyerere hydro power project in Rufiji, Standard gauge railway line and revival of National Airline carrier, Air Tanzania Corporation Limited (ATCL).

On the other side claims incurred in year 2019 were TZS 51.2billion as compared to TZS 41.6 billion incurred in year 2018 . A series of medical claims experienced in the market during the year under review were the main reason for the increase in claims incurred.

5. FINANCIAL RESULTS

The Company’s gross premium written and accounted for per class of business was as follows:

2019TZS

2018TZS

Fire 38,709,899,981 32,648,958,267

Engineering 5,994,605,905 6,509,318,373

Accident 24,083,004,379 14,773,361,000

Motor 23,344,370,413 19,572,840,335

Marine 5,913,358,113 3,466,924,303

Aviation 11,671,851,547 10,407,798,837

Medical 20,965,115,941 14,970,047,185

Life 10,712,057,329 9,172,643,598

141,394,263,608 111,521,892,498

The operations for the year resulted in an underwriting profit of TZS 9.4 billion (2018: TZS 7.1billion) as reported in Appendix 1.




6. STRATEGIC BUSINESS FOCUS AND FUTURE OUTLOOK

The Company’s overall strategic focus for year 2020 will be to strive to become among the most profitable reinsurer in Africa and renew its commitment to provide sustainable reinsurance capacity and security to its markets through the use of dedicated staff and modern technology. The Company will continue to strengthen its manpower by increasing its capacity and training. Additionally, the Company will continue to conduct market trainings in order to equip markets with the much needed underwriting skills.

The Company will continue to increase its efforts to grow both local and international business with emphasis on solidifying its presence in the local market. The company will strive to achieve a higher credit rating by internationally recognised agencies in year 2020.

7. EVENTS AFTER THE REPORTING PERIOD

POTENTIAL IMPACT OF CORONA VIRUS TO BUSINESSIn view of the pandemic which has affected the global market. The company is aware of the impact of this pandemic both at macro and micro level. To this end management continues to assess the effects of the Coronavirus on two fronts namely financial assets and non-financial assets.

Management is fully aware of the consequences posed on the company on both its reinsurance receivables and payables. The company continues to assess its debtors’ ability to honor their obligations to the company due to discounted operations or reduced operations by its debtors. These debtors include trade customers such as insurance companies and retrocessionaires. This will affect the company’s ability to collect outstanding premiums from insurance companies and also failing to collect reinsurance recoveries which will adversely affect the company’s

cash flows. Resultantly, the company may fail to meet its obligations to its creditors due to weak cash flows. Further management continues to assess Security of its investments which are in various financial instruments with different financial institutions.

Management is aware and continues to monitors safety of its employees and the associated costs in the event of an employee or a group of employees being affected by Coronavirus. The associated costs include payments of their salaries and other contractual benefits. Cost pertaining to safety and health of employees. The company will continue to update company’s’ budgets and cash flows as the impact of Coronavirus continues to unfold. The company will also comply with all statutory requirements, laws and any such declarations made by the government. Management shall continue to monitor the developments to ensure it doesn’t affect the going concern of the business.

8. ACCOUNTING POLICIES

The annual financial statements are prepared on the underlying assumption of a going concern. The Company’s accounting policies, which are laid out on note 3 to be subject to an annual review to ensure continuing compliance with International Financial Reporting Standards and Tanzania Insurance Act, 2009 with its subsequent amendments.


9. ACQUISITIONS AND DISPOSALS

There was no material disposal or acquisition of business during year 2019 (2018: Nil).

10. DIRECTORS’ INTEREST

Mr. Geoffrey Msella held 97,411 shares valued at TZS 97,411,000 This represents 0.24% of the ordinary shares capital reported as at 31 December 2019.

11. SHARE CAPITAL AND SHAREHOLDING

The authorised share capital of the Company is TZS 100,000,000,000 for 100,000,000 ordinary shares with a nominal value TZS 1,000 per share.

The paid up capital is made up as follows:

2019TZS

2018TZS

Capital allotted and subscribed 60,000,000,000 60,000,000,000

Capital unsubscribed (20,147,006,611) (21,147,006,611)

Subscribed and paid up capital 39,852,993,389 38,852,993,389

Share capital at 1 January 38,852,993,389 32,642,699,000

Subscribed and paid up during the year 1,000,000,000 6,210,294,389

39,852,993,389 38,852,993,389

The paid up capital of the Company as at 31 December 2019 is as stated below:

2019 2018

ClusterNumber of

sharesAMOUNT

TZS %Number of

sharesAMOUNT

TZS %

Individual Tanzanians 416,672 416,672,000 1.1 416,672 416,672,000 1.1

Foreign Investor 3,336,033 3,336,033,000 8.4 3,336,033 3,336,033,000 8.6

Corporate bodies 767,934 767,934,000 1.9 767,934 767,934,000 2.0

Insurance Companies 12,141,105 12,141,105,000 30.5 12,141,105 12,141,105,000 31

Insurance Brokers &Loss assessors 654,415 654,415,000 1.6 654,415 654,415,000 1.7

Pension Funds 22,536,834 22,536,834,000 56.5 21,536,834 21,536,834,000 55.4

Total 39,852,993 39,852,993,000 100.0 38,852,993 38,852,993,000 100

The shares of the Company are not publicly traded. There is only one class of shares. There were no changes in shareholding during the year.



12. DIRECTORS

The Directors who held office during the year under review were:

Name Nationality Position Age Remarks

Mr. Wilson Ndesanjo Tanzanian Chairman 63

Mr. William Erio Tanzanian Director 56

Mr. Geoffrey Msella Tanzanian Director 67

Mr. Charles Sumbwe Zambian Director 60

Mr. Ronald Kasapatu Zambian Director 55

Mr. Rahim Ibrahim Tanzanian Director 30

Ms. Sabra Machano Tanzanian Director 34

Mr. Eliud Sanga Tanzanian Director 58 Resigned 29/03/2019

Mr.Suleiman Khamis Tanzanian Director 56

Mr. Hosea Kashimba Tanzanian Director 50 Appointed 29/03/2019

All Directors are Non-Executive Directors

13. DIRECTORS’ FEES AND SITTING ALLOWANCES

The fees and allowances for services rendered by the Non-Executive Directors of the Company were as follows:

FEES

2019Amount

TZS

2018Amount

TZS

Chairman of the Board of Directors 10.0 million 10.0 million

Other Directors 80.0 million 100.0 million

SITTING ALLOWANCES

Chairman of the Board of Directors 10.5 million 10.5 million

Other Directors 264.1 million 229.9 million

14. SOLVENCY AND GOING CONCERN

The Insurance Act, 2009 pursuant to section 20(1) and regulation 21(3) (c) of the Insurance Regulations made under the Act requires that, the admissible assets of a reinsurer to exceed all liabilities of the Company by TZS 11,790 million or 33% of the net premiums written during the year, whichever is the greater. At 31 December 2019 the Company had admissible assets of TZS 72,372 million and 33% of net premium amounted to TZS 29,548 million. The admissible assets exceeded its liabilities by TZS 31,582 million which is above the minimum solvency margin required of TZS 29,548 million by TZS 2,034 million.



14. SOLVENCY AND GOING CONCERN (continued)

The Directors consider the Company to be solvent. Nothing has come to the attention of the Directors to indicate that the Company will not remain as a going concern for at least twelve months from the date of this statement. The Directors consider the Company to be solvent within the meaning ascribed by the Insurance Act, 2009 with its subsequent regulations.

15. ADMINISTRATIVE EFFICIENCY

Set-out below are details of matters which are deemed to demonstrate the administrative efficiency of the Company:

a) Labour TurnoverLabour turnover is low and does not affect the operations of the Company. In year 2019, there was no employee who left the Company.

b) Compliance with the Insurance ActThe Company where applicable, appraised the Commissioner of Insurance on matters of compliance. In ensuring that the Company operates in line with the requirements of the Insurance Act, 2009 the Company has been doing the following: Providing reserves as per the requirement of the Insurance regulation no. 22 (2) (a) and (b) of the Insurance Act, 2009; Timely submission of annual returns as per Insurance regulation no.28,29 and 30 of Insurance Act, 2009; Maintaining the percentage of assets to be held in approved Tanzanian securities as per regulation no. 20 (1) up to (3) of the Insurance Act, 2009; Maintaining a capital adequacy as per regulation no.18 (1) (a) of Insurance Act, 2009; Appointment of Chief Finance Officer as per regulation 9 (1) (a) and (b) of Insurance Act, 2009.

16. EMPLOYEES WELFARE

a) Management and Employee RelationshipThe relationship between the Management and employees of the Company during the year was good. Various meetings between Management and employees were convened during the year under review to ensure effective communication between Management and employees as depicted below: Weekly informal staff meetings to enhance effective communication and dialogue between Management and employees. Quarterly meetings between Management and employees to review Company’s performance on the preceding quarter and the strategies to be taken during the next quarter to ensure that the Company operates efficiently to achieve its desired objectives; and, Monthly departmental meetings where head of departments obtain feedback from their respective staff on issues emanating from quarterly meetings held between Management and employees.

b) Medical FacilitiesThe Company meets the entire medical expenses for each employee and his/her immediate family members as per the Company’s medical scheme.



16. EMPLOYEES WELFARE (continued)

c) TrainingDuring the year, the Company organised for internal technical trainings in areas such as basic insurance, reinsurance accounting and reinsurance underwriting. Additionally, several staff attended various seminars and workshops both locally and internationally in a bid to improve on their technical skills. The seminars included those organised by the National Board for Accountants and Auditors (NBAA), Comprehensive Technical Programme in General Insurance in Pune India for TAN- RE staff and three local Insurance companies, Life Insurance workshop organized jointly by TAN- RE and ZEP- RE, Proficiency in short term reinsurance practice and claims organized by College of Insurance, Nairobi Kenya.

17. DISABLED PERSONS

It remains the Company’s policy to accept disabled persons for employment for those vacancies that they are able to fill. Opportunities for advancement are provided to each disabled person when a suitable vacancy arises with the organisation and all necessary assistance is given with initial training. Where an employee becomes disabled during the course of his or her employment, the Company will seek suitable alternate employment and necessary training thereof.

18. EQUAL OPPORTUNITIES EMPLOYER

The Company’s policy is not discriminatory against people with regards to race, gender, religion or disability.

19. GENDER PARITY

The Company had a total of 31 employees, of whom 12 were female and 19 were male (2018: 28).

20. DIVIDEND

The Directors recommended payment of dividend of TZS 2.17 billion equals 30% of annual distributable profit of TZS 7.23 billion.

21. RESERVES

The Company had retained earnings of TZS 8.6billion, (2018: TZS 6.9) and contingency reserve TZS 24. 3 billion, (2018: TZS 20.3). Detailed movement of reserves during the year is set out on Note 21.

22. TRANSACTIONS WITH RELATED PARTIES

Transactions with related parties are disclosed in Note 30 to the financial statements.

23. INDEPENDENT AUDITORS The Auditors, Ernst & Young, having expressed their willingness to continue in office, will be proposed for re- ap-pointment at the next Annual General Meeting.



24. CORPORATE GOVERNANCE

Enterprise Corporate Governance is the process by which companies are directed and controlled. In broad terms it can be explained as “an internal system encompassing policies, processes and people, which serve the needs of Shareholders and other stakeholders, by directing and controlling Management activities with good business plans, objectivity and integrity. Sound corporate governance is reliant on external marketplace commitment and legislation, plus a healthy Board culture which safeguards policies and processes”.

The objective of the concept of enterprise corporate governance is to promote the highest standard of governance by establishing a series of Management and social responsibility principles that all companies should strive to achieve.

The Directors recognize the need to conduct the business and operation of the Company with integrity and in accordance with generally accepted corporate governance principles. The Directors will continue to focus attention on maintaining the highest standards of corporate governance and business ethics in the Company’s operations.

Board of DirectorsMembers of the Board are mentioned on page 1. The Board is chaired by an independent non-executive director (Mr Wilson Ndesanjo) and includes nine other non-executive directors. The majority of the members of the Board have vast experience in insurance business that is applied in the overall Management of the Company. Directors’ fees and other emoluments and related party transactions are disclosed in Note 30 to these financial statements. Ordinary board meetings are held quarterly to review the Company’s performance against budget and business plans, as well as to formulate and implement Company strategy.

The Board has three sub-committees (Audit & Risk Committee, Finance & Investments Committee and Human Resources & Remunerations Committee), whose chairpersons report to the Board of Directors. During the year 2019, the Board had convened 9 meetings (2018: 8 meetings).

Audit & Risk CommitteeThe Audit & Risk Committee meets on a quarterly basis. The responsibilities of this committee are the review of financial information and monitoring of the effectiveness of Management information and internal control systems.

In addition, the committee has a responsibility to deliberate on the significant findings arising from internal and external audit reviews and from inspections by the Tanzania Insurance Regulatory Authority (TIRA). During the year 2019, the Audit & Risk Committee met six times (2018: six meetings).

Finance & Investments CommitteeThe Finance & Investments Committee meets on a quarterly basis. The responsibilities of this committee are the review of the Company’s investment policies to ensure that all investments are being performed in conformity with approved investment policies and in line with the requirement of insurance regulation as issued under the Insurance Act, 2009. The committee is also responsible to oversee all company’s IT related matters. During the period, the Finance& Investments Committee met four times (2018: four meetings).



24. CORPORATE GOVERNANCE (continued)

Human Resources and Remunerations Committee The Human Resources and Remunerations Committee was set up by the Board in year 2011 to periodically address matters related to staffing and remunerations of Company employees and Directors. The Committee meets semi-annually. In year 2019, the Human Resources and Remunerations Committee met once (2018: once).

25. POLITICAL CONTRIBUTIONS AND DONATIONS

The Company did not make any political donations during the year.

26. CORPORATE SOCIAL RESPONSIBILITY

This is a concept that organisations have an obligation to consider the interests of its stakeholders (customers, employees, shareholders, communities, and environmental considerations) in all aspects of their operations. Amongst the initiative and endeavours that TAN-RE participates include financial support of various non-govern-mental organizations and schools. A sound environment for all is the key to overall social and economic success of any country. TAN-RE recognizes the importance of a clean and healthy environment and support various activities geared towards achievement and its improvement. During the period ended 31 December 2019, TAN-RE donated TZS 29 million to various schools, charitable organisations and social organisations (2018: TZS 16 million).

27. COMPLIANCE WITH LAWS AND REGULATIONS

There were no serious prejudicial matters during the year to report as required by Tanzania Financial Reporting Standard No. 1 (Directors’ Report).

28. STATEMENT OF COMPLIANCE

The director’s report has been prepared in full compliance with Tanzania Financial Reporting Standard No. 1 (Directors Report).

Approved and authorised for issue by the Board of Directors and signed on its behalf by:

______________________

MR. WILSON NDESANJOCHAIRMAN OF THE BOARD OF DIRECTORS

Date: 17/04/2020



The Tanzanian Companies Act, 2002, requires the Directors of the Company to prepare the financial statements for each financial year that give true and fair view of the state of affairs of the Company as at the end of the financial year and of its operating results for that year. It also requires the Directors to ensure that the Company keeps proper accounting records that disclose, with reasonable accuracy, the financial position of the Company. They are also responsible for safeguarding the assets of the Company.

The Directors accept responsibility for the annual financial statements, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgements and estimates, in conformity with International Financial Reporting Standards and the requirement of the Tanzanian Companies Act, 2002. The Directors are of the opinion that the financial statements give a true and fair view of the state of the financial affairs of the Company and of its operating results and in compliance with International Financial Reporting Standards. The Directors further accept responsibility for the maintenance of accounting records that may be relied upon in the preparation of financial statements, as well as adequate systems of internal financial control. The Directors also accept responsibilities of safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud, error and other irregularities.

Furthermore, Directors accept their responsibilities laid out under various sections of the Insurance Act, 2009 with its subsequent regulations and assert that the same has been complied with in all material respects.

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

______________________ ______________________

MR. WILSON NDESANJO MR. RAJABU KAKUSACHAIRMAN OF THE BOARD CHIEF EXECUTIVE OFFICER

Date: 17/04/2020

STATEMENT OF DIRECTORS’ RESPONSIBILITIESfor the year ended 31 December 2019


The National Board of Accountants and Auditors (NBAA) according to the power conferred under the Auditors and Accountants (Registration) Act. No. 33 of 1972, as amended by Act No. 2 of 1995, requires financial statements to be accompanied with a declaration issued by the Head of Finance/Accounting responsible for the preparation of financial statements of the entity concerned.

It is the duty of a Professional Accountant to assist the Board of Directors/Governing Body/Management to discharge the responsibility of preparing financial statements of an entity showing true and fair view of the entity position and performance in accordance with International Financial Reposting Standards (IFRS) and statutory financial reporting requirements. Full legal responsibility for the preparation of financial statements rests with the Board of Directors/Governing Body as under Directors Responsibility statement on an earlier page.

I Gregory Ngonyani being the Head of Finance/Accounting of Tanzania Reinsurance Company Limited (TAN-RE) hereby acknowledge my responsibility of ensuring that financial statements for the year ended 31 December 2019 have been prepared in compliance with International Financial Reporting Standards (IFRS) and statutory requirements.

I thus confirm that the financial statements give a true and fair view position of Tanzania Reinsurance Company Limited (TAN-RE) as on that date and that they have been prepared based on properly maintained financial records.

Signature: ______________________

Position: CHIEF FINANCE AND ADMINISTRATION OFFICER

NBAA Membership No: ACPA 577

Date: 17/04/2020

DECLARATION OF THE HEAD OF FINANCE/ACCOUNTINGfor the year ended 31 December 2019


I have conducted an actuarial valuation for the purpose of calculating suitable actuarial estimates as at 31 December 2019 for the Unearned Premium Reserves (UPR), Outstanding Claims Reserves (OCR), and the Premium Deficiency Reserve (PDR) of Tanzania Reinsurance Company Limited (TAN-RE).

The valuation was conducted in accordance with generally accepted actuarial principles and in accordance with the requirements of the Tanzania Insurance Act and Insurance Regulations. These principles require prudent provision for future outgo under policies, generally based upon the assumptions that current conditions will continue. In completing the actuarial valuation, I have relied upon the valuation data as provided by the Company.

In my opinion, the actuarial estimates of the reserves of the Company as at 31 December 2019 are adequate and may be provided accordingly.

Darshan RupareliaFellow of the Institute of Actuaries, U.KConsulting and Principal ActuaryActuarial and Risk Consulting (T) LimitedP.O. Box 38568, Dar es Salaam, Tanzania.

21 April 2020

REPORT OF THE CONSULTING ACTUARYfor the year ended 31 December 2019


To the shareholders of

TANZANIA REINSURANCE COMPANY LIMITED (TAN-RE)

OpinionWe have audited the financial statements of Tanzania Reinsurance Company Limited (TAN-RE) set out on pages 21 to 78 which comprise the statement of financial position as at 31 December 2019, and the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respect, the financial position of the Company as at 31 December 2019, and of its financial performance and its cash flows for the year ended in accordance with International Financial Reporting Standards (IFRSs) and the requirements of the Companies Act, 2002 and the and Insurance Act, 2009 of Tanzania.

Basis for OpinionWe conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Tanzania, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code.

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

Key Audit MattersKey audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provided the basis for our audit opinion on the accompanying financial statements.

INDEPENDENTAUDITORS’ REPORT



TANZANIA REINSURANCE COMPANY LIMITED (TAN-RE) (continued)

No. Key audit matter How our audit addressed the key audit matter

1. Valuation of investment properties

Investment property represents a significant portion of the Company’s total assets (25%) and was valued at a fair value amount of TZS 25.0 billion as at year-end (2018: TZS 25.0 billion).The Company uses external valuers to determine the value of the investment property at least annually. The valuation of the investment property at fair value is dependent on estimates and assumptions such as property rates, occupancy rates, discount rates, maintenance status and costs and financial stability of tenants. Historical and current market information and trends are used. The disclosures relating to the assumptions are critical to the financial statements, given the estimation uncertainty and sensitivity of the valuations. Given the size and complexity of the valuation of investment property and the importance of the related disclosures, we considered this to be a key audit matter.

We have challenged the assumptions and estimates made by management of Tanzania Reinsurance Company Limited (TAN-RE) and the external appraiser in the valuation methodology about the appropriateness of the property related data supporting the (movements in) fair value of the investment properties. Amongst other, we have considered the objectivity, independence and expertise of the external appraisers.

We also assessed the appropriateness of the disclosures relating to the (sensitivity of the) assumptions.

This has been properly disclosed in note 13

2. Valuation of insurance contract liabilities

As at 31 December 2019, insurance contract liabilities mounted to TZS 30,436 million (2018: TZS 24,526 million). The total insurance contract liabilities as at 31 December 2019 represented 68% of the Company’s total liabilities. This is an area that involves significant judgement over uncertain future outcomes, including primarily the timing and ultimate full settlement of policyholder liabilities.

This matter was considered significant to our audit because of the sensitivity of the valuation of the insurance contract liabilities to changes in the key assumptions. We also considered there to be a risk that the disclosures in note 2.6 (a) which are significant to the understanding of the Company’s insurance contracts liabilities are not complete.

On sample basis, we assessed the design and tested the operating effectiveness of key internal controls over the insurance contracts liabilities valuation process including management’s determination and approval process for determining the value of unearned premium and incurred but not reported insurance liabilities.

We checked whether approach used in calculating the insurance contract liabilities was in accordance with the Company’s accounting policies and that the inputs used were supported and in line with the audited financial statements.

We also assessed the adequacy of the disclosures in the financial statements regarding the insurance contract liabilities to determine whether they were in accordance with IFRS.

INDEPENDENT AUDITORS’ REPORT




Other Information included in the Company’s 2019 Director’s Report Other information consists of the information included in the Company’s information, Directors’ Report, Director’s responsibilities and in the declaration by the head of finance other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information.

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

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

The directors are responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act, 2002 and the Insurance Act, 2009 of Tanzania, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

The directors are responsible for overseeing the Company’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial StatementsOur objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.





Auditor’s Responsibilities for the Audit of the Financial Statements (continued) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

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

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

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

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

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

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

INDEPENDENT AUDITORS’ REPORT




Report on other Legal and Regulatory RequirementsThis report, including the opinion, has been prepared for, and only for, the Company’s members as a body in accordance with the Companies Act, 2002 of Tanzania and for no other purposes.

As required by the Companies Act, 2002 of Tanzania, we report to you, based on our audit, that: We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

In our opinion, proper books of account have been kept by the Company, so far as appears from our examination of those books;

The Directors’ Report is consistent with the financial statements;

Information specified by law regarding directors’ remuneration and transactions with the Company is disclosed; and

The Company’s statement of financial position and statement of profit or loss and other comprehensive income are in agreement with the books of account.

As required by the Insurance Act, 2009 of Tanzania, we report to you, based on our audit, that; The Insurance Act, 2009 pursuant to section 20(1) and regulation 21(3) (c) of the Insurance Regulations made under the Act requires that, the admissible assets of a reinsurer to exceed all liabilities of the Company by TZS 11,790 million or 33% of the net premiums written during the year, whichever is the greater. At 31 December 2019 the Company had admissible assets of TZS 72,372 million and 33% of net premium amounted to TZS 29,548 million. The admissible assets exceeded its liabilities by TZS 31,582 million which is above the minimum solvency margin required of TZS 29,548 million by TZS 2,034 million.

Signed by Deokari Mkenda (ACPA 3438)0n behalf of Ernst & YoungCertified Public Accountants Dar Es Salaam

Date: _____________ 2020



STATEMENT OF PROFIT/LOSS & COMPREHENSIVE INCOMEfor the year ended 31 December 2019

Notes2019

TZS2018

TZS

Gross Premiums 9 141,394,263,608 111,521,892,498

Premiums ceded to retrocessioners 9 (51,867,001,577) (43,331,685,660)

Net Premiums 89,527,262,031 68,190,206,838

Fees and commission income 10 10,954,085,863 10,367,486,636

Investment income 11 1,974,701,424 2,155,348,417

Fair value (loss)/gain 12 (470,362,102) 795,430,814

Other operating revenue 13 407,222,114 442,016,851

Other income 12,865,647,299 13,760,282,718

Total revenue 102,392,909,330 81,950,489,556

Gross benefits and claims paid 14 (53,671,926,526) (47,857,172,450)

Claims ceded to reinsurers 14 5,897,783,516 6,578,640,348

Gross change in unearned insurance premium 14 (2,511,268,925) (945,429,861)

Gross change in outstanding claims 14 (3,402,172,191) (475,698,825)

Net benefits and claims (53,687,584,126) (42,699,660,788)

Operating and administration expenses 15 (11,674,637,374) (11,304,532,556)

Provision for impairment- reinsurance receivables 23 (940,628,020) (1,441,028,413)

Depreciation & amortization 19 & 21 (455,844,280) (418,119,868)

Fees and commission expense 16 (26,777,660,701) (19,419,228,919)

Total other expenses (39,848,770,375) (32,582,909,756)

Total claims and other expenses (93,536,354,501) (75,282,570,544)

Profit before tax 8,856,554,829 6,667,919,010

Income tax expense 17 (1,625,465,364) (412,901,073)

Profit for the year 7,231,089,464 6,255,017,937

Other comprehensive income, net of taxes - -

Total comprehensive income for the year 7,231,089,464 6,255,017,937


Notes2019

TZS2018

TZS

Assets

Property and equipment 18 1,002,841,080 868,548,908

Intangible assets 20 141,364,644 335,013,516

Investment Property 19 25,048,632,199 25,048,632,199

Tax recoverable 17 - 331,486,139

Deferred tax asset 17 1,893,839,735 1,537,729,739

Other receivables 24 3,403,347,640 5,334,370,940

Investment in Government securities 22 5,129,882,552 4,989,963,442

Financial assets - through profit or loss 21 11,810,143,672 12,280,505,773

Reinsurance assets 23 53,788,919,473 40,150,263,963

Deposits with Financial institutions 26 11,145,098,582 10,256,476,048

Cash and cash equivalent 25 1,281,666,014 502,229,607

Total Assets 114,645,735,591 101,635,220,274

Equity and Liabilities

Equity

Issued share capital 27 39,852,993,389 38,852,993,389

Retained earnings 8,636,512,973 6,992,369,299

Share Premium 27 348,613,700 348,613,700

Contingency reserve 24,282,938,732 20,255,992,943

Total equity 73,121,058,794 66,449,969,331

Liabilities

Insurance contract liabilities on unearned premiums 32 22,827,550,723 20,316,281,798

Insurance contract liabilities on outstanding claims 32 7,612,162,242 4,209,990,050

Amount payable to reinsurance companies 28 6,670,253,423 9,370,005,588

Tax payable 17 760,459,133 -

Other payables 29 3,654,251,276 1,288,973,507

Total liabilities 41,524,676,797 35,185,250,943

Total equity and liabilities 114,645,735,591 101,635,220,274

These financials statements were approved by the Board of Directors and authorised for issue on: 17th April 2020 and were signed on their behalf by:

Name: Wilson Ndesanjo Title: Chairman of the Board Signature________________

Name: William Erio Title: Vice Chairman Signature________________

Name: Rajabu Kakusa Title: Chief Executive Officer Signature________________

STATEMENT OF FINANCIAL POSITIONas at 31 December 2019


STATEMENT OF CHANGES IN EQUITYfor the year ended 31 December 2019

Note 23 Share

capital RetainedEarnings

Note 21Contingency

reserve

Note 20 Share

premium

TZS TZS TZS TZS TZS

At 1 January 2019 38,852,993,389 6,992,369,299 20,255,992,943 348,613,700 66,449,969,331

Paid up share capital 1,000,000,000 - - - 1,000,000,000

Dividend paid - (1,560,000,000) - - (1,560,000,000)

Profit for the year - 7,231,089,464 - - 7,231,089,464

Contingency reserve - (4,026,945,789) 4,026,945,789 - -

At 31 Dec 2019 39,852,993,389 8,636,512,973 24,282,938,732 348,613,700 73,121,058,795

At 1 January 2018 32,642,699,000 5,224,326,805 17,113,789,040 348,613,700 55,329,428,545

Paid up share capital 5,450,000,000 - - - 5,450,000,000

Bonus share 760,294,389 - - - 760,294,389

Dividend paid - (1,344,771,541) - - (1,344,771,541)

Profit for the year - 6,255,017,937 - - 6,255,017,937

Contingency reserve - (3,142,203,903) 3,142,203,903 - -

At 31 Dec 2018 38,852,993,389 6,992,369,299 20,255,992,943 348,613,700 66,449,969,331


Notes2019

TZS2018

TZS

Operating activities

Profit before tax 8,856,554,829 6,667,919,010

Adjustment to reconcile profit before tax to the net cash flows

Non-cash:

Depreciation of property and equipment 19 262,195,407 237,404,855

Amortisation of intangible assets 21 193,648,873 180,715,012

Loss/(gain) on fair value through profit or loss 12 470,362,102 (795,430,814)

Provision for impairment- reinsurance receivables 23 940,628,020 1,441,028,413

Foreign exchange (loss)/gain 7 29,405,415 (91,746,605)

Movement in items in the statement of financial position:

Increase in reinsurance assets 23 (10,870,951,788) (11,329,223,343)

Decrease/(increase) in other receivables 24 1,931,023,300 (1,825,523,382)

Increase in unearned premium reserves 22 (2,511,268,925) (945,429,861)

Increase in outstanding claims 22 3,402,172,192 475,698,825

(Decrease)/increase in amount payable to reinsurance companies 24 (2,699,752,165) 4,352,258,417

Decrease increase in other payables 25 2,365,277,769 (70,409,695)

Tax paid (800,000,000) (1,138,600,623)

Cash generated from operating activities 1,569,295,030 (2,696,365,150)

Investing Activities

(Purchases) /sale of government securities 21 (1,028,541,644) (2,195,679,084)

Purchase of property and equipment 19 (396,487,579) (51,733,449)

Purchase of intangible assets 21 - (265,319,261)

Net cash flows used in investing activities (1,425,029,223) (2,512,731,794)

Financing activities

Proceeds from issue of shares 20 1,000,000,000 5,450,000,000

Dividend paid (1,560,000,000) (500,000,000)

Net cash flows from financing activities (560,000,000) 4,950,000,000

Net decrease in cash and cash equivalents (415,734,193) (259,096,944)

Cash and cash equivalent at 1st January 3,765,150,209 4,024,247,153

Cash and cash equivalents at the end of the year 26 3,349,416,014 3,765,150,209

STATEMENT OF CASH FLOWSas at 31 December 2019


1. CORPORATE INFORMATION

Tanzania Reinsurance Company Limited is a limited liability Company incorporated and domiciled in United Republic of Tanzania. The Company’s shares are not publicly traded.

The Company is incorporated under the Tanzanian Companies Ordinance CAP 212, which was replaced by Tanzanian Companies Act, 2002 in year 2002. The address of its registered office and principal place of business is:

8th Floor, TANRE HousePlot No. 406 - Longido Street, UpangaP .O. Box 1505Dar es Salaam, TanzaniaTelephone: 255-22-2922341-3Facsimile: 255-22-2922344Email: [email protected]: www.tan-re.co.tz

The principal activities of the Company are to transact all classes of reinsurance business (both short term and long term) in conformity with the Insurance Act, 2009.

The financial statements of Tanzania Reinsurance Company Limited for the year ended 31 December 2019 were approved and authorised for issue in accordance with a board resolution as indicated on the statement of financial position.

2. BASIS OF PREPARATION

The financial statements have been prepared on an historical cost basis except for investment properties and those financial assets and financial liabilities that have been measured at fair value, in accordance with International Financial Reporting Standards (IFRS). The financial statements are presented in Tanzanian Shillings (TZS) except when otherwise indicated.

The Company presents its statement of financial position broadly in order of liquidity. An analysis regarding recovery or settlement within twelve months after the reporting date (current) and more than 12 months after the reporting date (non-current) is presented in the notes.

Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position only when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settled the liability simultaneously.

Statement of complianceThe financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), and comply with the Tanzanian Companies Act, 2002 and the Tanzanian Insurance Act, 2009.

NOTES TO THE FINANCIAL STATEMENTSfor the year ended 31 December 2019


3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Revenue recognition

Gross premiumsGross general written premiums comprise the total premiums receivable for the whole period of cover provided by contracts entered into with the ceding companies during the accounting period and are recognised on the date on which the policy commences. Premiums include any adjustments arising in the accounting period for premiums receivable in respect of business written in prior accounting periods

Unearned premiums are those proportions of premiums written in a year that relate to periods of risk after the reporting date. Unearned premiums are calculated on a daily pro rata basis. The proportion attributable to subsequent periods is deferred as a provision for unearned premiums.

Retrocession premiumsRetrocession premiums written comprise the total premiums payable for the whole cover provided by contracts entered into during the period and are recognised on the date on which the policy incepts. Premiums include any adjustments arising in the accounting period in respect of retrocession contracts incepting in prior accounting periods

Fees and commission incomeCeding companies are charged for policy administration services, and other contract fees. These fees are recognised as revenue over the period in which the related services are performed. If the fees are for services provided in future periods then they are deferred and recognised over those future periods

Investment incomeInterest income is recognised in the statement of comprehensive income as it accrues and is calculated by using the effective interest rate method. Fees and commissions that are an integral part of the effective yield of the financial asset or liability are recognised as an adjustment to the effective interest rate of the instrument. Investment income also includes dividends when the right to receive payment is established. For listed securities, this is the date the security is listed as ex dividend

(b) Property and equipment Property and equipment is stated at cost, excluding the costs of day to day servicing, less accumulated depreciation and impairment in value. Replacement or major inspection costs are capitalised when incurred and it is probable that future economic benefits associated with the item will flow to the entity and the cost of the item can be measured reliably. Depreciation is calculated to write off the cost of equipment over the estimated useful life of each category using the straight-line method at the following current estimated annual rates:

Motor vehicles 25.0%Office furniture and fittings 12.5%Office equipment 12.5%Computers 33.3%



3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(b) Property and equipment (continued)The assets’ residual values, useful lives and method of depreciation are reviewed and adjusted if appropriate at each financial year-end. Impairment reviews take place when events or changes in circumstances indicate that the carrying value may not be recoverable. Impairment losses are recognised in the statement of comprehensive income as an expense. An item of equipment is de-recognised upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising on de-recognition of the assets, (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of comprehensive income in the year the asset is de-recognised.

(c) Intangible assetsIntangible assets acquired are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is charged against profits in the year in which the expenditure is incurred.

Intangible assets are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and treated as changes in accounting estimates. The amortisation expense on intangible assets is recognised in the statement of comprehensive income. The annual rates of amortisation which have been consistently applied are:

Description Rate (%)

Computer software 25 – 33.33

(d) Investment propertiesInvestment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair values of investment properties are included in profit or loss in the period in which they arise, including the corresponding tax effect. Fair values are determined based on after three year revaluation performed by an accredited external independent valuer.

Investment properties are derecognised either when they have been disposed of or when they are permanently withdrawn from use and no future economic benefit is expected from their disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in profit or loss in the period of recognition.

(e) LeasingThe determination of whether an arrangement is a lease or it contains a lease, is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.




(e) Leasing (continued)

Company as a lesseeLeases that do not transfer to the Company substantially all the risks and benefits incidental to ownership of the leased items are operating leases. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognized as an expense in the period in which termination takes place.

(f) Financial assets

Initial recognition and measurementFinancial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or loss and loans and receivables. The Company determines the classification of its financial assets at initial recognition. Financial assets are recognised initially at fair value plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.

The classification depends on the purpose for which the investments were acquired or originated. Financial assets are classified as at fair value through profit or loss where the Company’s documented investment strategy is to manage financial investments on a fair value basis, because the related liabilities are also managed on this basis.

The Company’s financial assets include cash and cash equivalent, re insurance assets, loan and other receivables.

Subsequent measurementThe subsequent measurement of financial assets depends on their classification as follows:

Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include financial assets held for trading and those designated upon initial recognition at fair value through profit or loss. Investments typically bought with the intention to sell in the near future are classified as held for trading. This category includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by IAS 39. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. For investments designated as at fair value through profit or loss, the following criteria must be met:

Classes of financial instruments

Financial assets Category

Investment in Government securities Loans and receivables

Financial assets at fair value through profit and loss At fair value through profit and loss

Reinsurance assets Loans and receivables

Other receivables except prepayments and deposits Loans and receivables

Deposits with Financial institutions Loans and receivables

Cash and cash equivalent Loans and receivables




(f) Financial assets (continued)

Classes of financial instruments (continued)

Financial liabilities

Insurance contract liabilities on unearned premiums Financial liabilities at amortised cost

Insurance contract liabilities on outstanding claims Financial liabilities at amortised cost

Amount payable to reinsurance companies Financial liabilities at amortised cost

Other payables Financial liabilities at amortised cost

The designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the assets or liabilities or recognising gains or losses on a different basis.

The assets and liabilities are part of a group of financial assets, financial liabilities, or both, which are managed, and their performance evaluated on a fair value basis, in accordance with a documented risk Management or investment strategy.

These investments are initially recorded at fair value. Subsequent to initial recognition, they are re-measured at fair value. Changes in fair value are recorded in ‘Fair value gains and losses’. Interest is accrued and presented in ‘Investment income’ or ‘Finance cost’, respectively, using the effective interest rate (EIR).

Dividend income is recorded in ‘Investment income’ when the right to the payment has been established.

Loans and other receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. These investments are initially recognised at cost, being the fair value of the consideration paid for the acquisition of the investment. All transaction costs directly attributable to the acquisition are also included in the cost of the investment. After initial measurement, loans and receivables are measured at amortised cost. Gains and losses are recognised in the statement of comprehensive income when the investments are derecognised or impaired, as well as through the amortisation process.

Derecognition of financial assetsWhen the Company has transferred its right to receive cash flows from an asset or has entered into a pass-through arrangement and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Company’s continuing involvement in the asset.

In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.





Impairment of financial assetsThe Company assesses at each reporting date whether a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Financial assets carried at amortised costFor financial assets carried at amortised cost, the Company first assesses individually whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Company determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss on assets carried at amortised cost has been incurred, the amount of the impairment loss is measured as the difference between the carrying amount of the asset and the present value of estimated future cash flows (excluding future expected credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate.

Offsetting of financial instrumentsFinancial assets and financial liabilities are offset and the net amount is reported in the statement of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously. Income and expense will not be offset in the statement of comprehensive income unless required or permitted by any accounting standard or interpretation, as specifically disclosed in the accounting policies of the Company.

Fair value of financial instrumentsThe fair value of financial instruments that are actively traded in organised financial markets is determined by reference to quoted market bid prices for assets and offer prices for liabilities, at the close of business on the reporting date, without any deduction for transaction costs.

For financial instruments where there is not an active market, the fair value is determined by using appropriate valuation techniques. Valuation techniques include the discounted cash flow method, comparison to similar instruments for which market observable prices exist, options pricing models, credit models and other relevant valuation models.





Fair value of financial instruments (continued) Certain financial instruments are recorded at fair value using valuation techniques because current market transactions or observable market data are not available. Their fair value is determined using a valuation model that has been tested against prices or inputs to actual market transactions and using the Company’s best estimate of the most appropriate model assumptions. Models are adjusted to reflect the spread for bid and ask prices to reflect costs to close out positions, counterparty credit and liquidity spread and limitations in the models. Also, profit or loss calculated when such financial instruments are first recorded (Day 1 profit or loss) is deferred and recognised only when the inputs become observable or on derecognition of the instrument.

(g) RetrocessionThe Company cedes insurance risks in the normal course of business for all of its businesses. Retrocession assets represent balances due from retrocessionaires. Amounts recoverable from retrocessionaires are estimated in a manner consistent with the outstanding claims provision or settled claims associated with the retro cessions and are in accordance with the related contracts. Retrocession assets are reviewed for impairment at each reporting date or more frequently when an indication of impairment arises during the reporting year. Impairment occurs when there is objective evidence as a result of an event that occurred after initial recognition of the retrocession asset that the Company may not receive all outstanding amounts due under the terms of the contract and the event has a reliably measurable impact on the amounts that the Company will receive from the retrocessionaires. The impairment loss is recorded in the statement of comprehensive income.

Gains or losses on buying retrocession are recognised in the statement of comprehensive income immediately at the date of purchase and are not amortised. Retrocession arrangements do not relieve the Company from its obligations to ceding companies.

(h) Insurance receivablesInsurance 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 reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable, with the impairment loss recorded in the statement of comprehensive income. An impairment loss is recognized when the receivables carrying amount exceeds its present value of the expected cash flows discounted at the original effective interest rate.

(i) Cash and cash equivalentsCash and cash equivalents comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less in the statement of financial position.

For the purpose of the cash flow, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdraft.




(j) Taxes

Current income taxCurrent tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date. Current income tax assets and liabilities also include adjustments for tax expected to be payable or recoverable in respect of previous periods.

Current tax relating to items recognised directly in equity or other comprehensive income is recognised in equity or other comprehensive income and not in the statement of comprehensive income. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Deferred taxDeferred tax is provided using the liability method on temporary differences at reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences, except: when the differed income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, effects neither the accounting profit nor taxable profit or losses, and

Deferred tax assets are recognized for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and carry-forward of unused tax credits and tax losses can be utilized except:

when the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss, and

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognised directly in equity is recognised in equity and not in the statement of comprehensive income.




(j) Taxes (continued)

Deferred tax (continued)Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to the set off current tax assets against current income tax liabilities and the deferred tax taxes relate to the same taxable entity and the same taxation authority

(k) Foreign currency translation

Transactions and balances The Company’s financial statements are presented in TZS which is the Company’s functional currency. Items included in the financial statements are measured using that functional currency. The resulting differences from translation and conversion as well as on settlement or realizing monetary items are dealt with in the profit or loss in the year in which they arise.

Transactions in foreign currencies are initially recorded at the functional currency rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the reporting date. All differences are taken to the statement of comprehensive income.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction and are not subsequently restated. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined

(l) Insurance contract liabilities

Non-life insurance (which comprises general insurance and healthcare) contract liabilities For non-life insurance contracts, estimates have to be made both for the expected ultimate cost of claims reported at the reporting date and for the expected ultimate cost of claims incurred but not yet reported at the reporting date (IBNR). It can take a significant period of time before the ultimate claims cost can be established with certainty and for some type of policies, IBNR claims form part of the statement of financial position liability. The ultimate cost of outstanding claims is estimated by using a range of standard actuarial claims projection techniques.

The main assumption underlying these techniques is that a Company’s past claims development 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 but can also be further analysed by significant business lines and claim types.




(l) Insurance contract liabilities (continued)

Non-life insurance (which comprises general insurance and healthcare) contract liabilities (continued)Large claims are usually separately addressed, either by being reserved at the face value of loss adjuster estimates or separately projected in order to reflect their future development. In most cases, no explicit assumptions are made regarding future rates of claims inflation or loss ratios. Instead, the assumptions used are those implicit in the historical claims’ development data on which the projections are based. Additional qualitative judgement is used to assess the extent to which past trends may not apply in future, (for example to reflect one-off occurrences, changes in external or market factors such as public attitudes to claiming, economic conditions, levels of claims inflation, judicial decisions and legislation, as well as internal factors such as portfolio mix, policy features and claims handling procedures) in order to arrive at the estimated ultimate cost of claims that present the likely outcome from the range.

Initial recognition and measurementAll Insurance liabilities are recognised initially at fair value plus directly attributable transaction cost.

Derecognition insurance payablesInsurance payables are derecognised when the obligation under the liability is discharged, cancelled or expired.

(m) Non-insurance financial liabilities

Initial recognition and measurementFinancial liabilities within the scope of lAS 39 are classified as financial liabilities at fair value through profit or loss, other payables. For purposes of subsequent measurement, financial liabilities are classified as financial liabilities at amortised cost

Derecognition of financial liabilitiesA financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

Pensions and other post-employment benefitsThe Company’s employees are members of state owned pension schemes, the National Social Security Fund (NSSF) and Public Services Social Security Fund (PSSSF). The Company contributes to the scheme 10% of the basic salary of each employee and the employee contributes 10%.

The Company’s contributions to the fund are charged to the statement of comprehensive income in the year to which they fall due. The Company does not have post-employment benefit plan.

(n) Provisions Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.




(n) Provisions (continued)Where the Company expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of comprehensive income net of any reimbursement.

If the effect of the time value of money is material, provisions are discounting using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost

(o) Onerous contractsA provision is recognised for onerous contracts in which the unavoidable costs of meeting the obligations under the contract exceed the expected economic benefits expected to be received under it. The unavoidable costs reflect the least net cost of exiting the contract, which is the lower of the cost of fulfilling it and any compensation or penalties arising from failure to fulfil it.

(p) Equity movements Ordinary share capitalThe Company has issued ordinary shares that are classified as equity. Incremental external costs that are directly attributable to the issue of these shares are recognised in equity, net of tax. The Company also issue bonus shares to shareholders that are classified as equity. The cost of issue is recognised in equity.

(q) Dividends on ordinary share capitalDividends on ordinary shares are recognised as a liability and deducted from equity when they are approved by the Company’s shareholders. Interim dividends are deducted from equity when they are approved and paid. Dividends for the year that are approved after the reporting date are dealt with as an event after the reporting date.

(r) Realised gains and lossesRealised gains and losses recorded in the statement of comprehensive income on investments include gains and losses on financial assets and investment properties. Gains and losses on the sale of investments are calculated as the difference between net sales proceeds and the original or amortised cost and are recorded on occurrence of the sale transaction.

(s) Gross benefits and claimsGeneral reinsurance claims include all claims occurring during the year, whether reported or not, related internal and external claims handling costs that are directly related to the processing and settlement of claims, a reduction for the value of salvage and other recoveries, and any adjustments to claims outstanding from previous years.

(t) Retrocession claimsRetrocession claims are recognised when the related claim is recognised according to the terms of the relevant contract.

(u) Finance costInterest paid is recognised in the statement of comprehensive income as it accrues and is calculated by using the effective interest rate method. Accrued interest is included within the carrying value of the interest bearing financial liabilities.



4. CHANGES IN ACCOUNTING POLICY AND DISCLOSURES

New and amended standards and interpretationsThe accounting policies adopted are consistent with those of the previous financial year. Changes from the following new or revised standards and interpretations, amendments to existing standards and interpretations and improvements to IFRSs that were effective for the current reporting period did not have material impact on the accounting policies, financial position or performance of the Company.

The accounting policies adopted are consistent with those of the previous financial year. Changes from the following new or revised standards and interpretations, amendments to existing standards and interpretations and improvements to IFRSs that were effective for the current reporting period did not have material impact on the accounting policies, financial position or performance of the Company. The nature and the effect of these changes are disclosed below:

IFRS 15: Revenue from Contracts with CustomersIFRS 15 was issued in May 2014 and establishes a new five-step model that will apply to revenue arising from contracts with customers. Under IFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.

IFRS 15 applies to all contracts with customers with effect from 1st January 2018 using either a full or modified retrospective application, except for the following:-

Lease contracts within the scope of IFRS 16,

Contracts within the scope of IFRS 17 Insurance Contracts. However, an entity may choose to apply this Standard to insurance contracts that have as their primary purpose the provision of services for a fixed fee in accordance with paragraph 8 of IFRS 17,

Financial instruments and other contractual rights or obligations within the scope of IFRS 9 Financial Instruments, IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IAS 27 Separate Financial Statements and IAS 28 Investments in Associates and Joint Ventures; and

Non-monetary exchanges between entities in the same line of business to facilitate sales to customers or potential customers.

IFRS 9: Financial instrumentsIn July 2014, the IASB issued the final version of IFRS 9 Financial Instruments that replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. IFRS 9 brings together all three aspects of the accounting for financial instruments project: classification and measurement, impairment and hedge accounting. IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted. Except for hedge accounting, retrospective application is required but providing comparative information is not compulsory. For hedge accounting, the requirements are generally applied prospectively, with some limited exceptions.



4. CHANGES IN ACCOUNTING POLICY AND DISCLOSURES (continued)

IFRS 9: Financial instruments (continued)The company meets the eligibility criteria of the temporary exemption from adoption of IFRS 9 and has deferred the application of IFRS 9 until the effective date of IFRS 17 – Insurance contracts of annual reporting periods beginning on or after 1 January 2021, temporary exemption is applied as introduced by the amendments to IFRS 4 in applying IFRS 9 disclosed below:-

Amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance ContractsIn September 2016, the IASB issued amendments to IFRS 4 to address issues arising from the different effective dates of IFRS 9 and the upcoming new insurance contracts standard (IFRS 17). The amendments introduce two alternative options for entities issuing contracts within the scope of IFRS 4, notably a temporary exemption and an overlay approach. The temporary exemption enables eligible entities to defer the implementation date of IFRS 9 for annual periods beginning before 1 January 2021 at the latest.

An entity may apply the temporary exemption from IFRS 9 if: (i) it has not previously applied any version of IFRS 9 before and (ii) its activities are predominantly connected with insurance on its annual reporting date that immediately precedes 1 April 2016. The overlay approach allows an entity applying IFRS 9 to reclassify between profit or loss and other comprehensive income an amount that results in the profit or loss at the end of the reporting period for the designated financial assets being the same as if an entity had applied IAS 39 to these designated financial assets.

An entity can apply the temporary exemption from IFRS 9 for annual periods beginning on or after 1 January 2018. An entity may start applying the overlay approach when it applies IFRS 9 for the first time. During 2016, the Company performed an assessment of the amendments and reached the conclusion that its activities were predominantly connected with insurance as at 31 December 2015.

The Company has applied the temporary exemption from IFRS 9 and, therefore, continue to apply IAS 39 to its financial assets and liabilities in its reporting period starting on 1 January 2019

5. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the Company’s financial statements requires Management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in future periods.

Judgements In the process of applying the Company’s accounting policies, Management has made the following judgements, which have the most significant effect on the amounts recognised in the financial statements. There is no judgement that needs to be disclosed during the year.



5. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (contd)

Estimates and assumptionsThe key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

a) Valuation of investment propertyThe Company carries its investment properties at fair value, with changes in fair value being recognised in the statement of profit or loss. The Company engaged an independent valuation specialist to assess fair value as at 31 December 2019 for investment properties. For investment properties, a valuation methodology based on a DCF model was used, as there is a lack of comparable market data because of the nature of the properties.

b) Current and deferred tax assets/liabilityUncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. Differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded. The Company establishes provisions, based on reasonable estimates, for possible consequences of audits by the Tanzania Revenue Authority. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the Company and the responsible tax authority. Such differences of interpretation may arise on a wide variety of issues, depending on the conditions prevailing in Tanzania.

Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based on the likely timing and the level of future taxable profits together with future tax planning strategies.

c) Impairment of financial assetsThe Company assesses, at each reporting date, whether there is objective evidence that a financial asset or a group of financial assets is impaired. An impairment exists if one or more events that has occurred since the initial recognition of the asset (an incurred ‘loss event’), has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and observable data indicating that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

d) ClaimsThe Company made significant estimates of liabilities arising from claims made under insurance contracts. The main assumption underlying estimation of claims is the Company’s past claims development experience. Large claims are usually separately addressed, either by being reserved at the face value of loss adjustor estimates or separately projected in order to reflect their future development. In most cases, no explicit assumptions are made regarding future rates of claims inflation or loss ratios. Instead, the assumptions used are those implicit in the historic claims development data on which the projections are based.



5. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (contd)

d) Claims (continued)Additional qualitative judgement is used to assess the extent to which past trends may not apply in future, (for example to reflect one-off occurrences, changes in external or market factors such as 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 into account of all the uncertainties involved.

e) Unearned premium reserve (UPR)Estimates have been made to determine the amount of unearned premium (UPR). Unearned premium represent the proportion of the premiums written in periods up to the accounting date that relates to the unexpired terms of policies in force at the balance sheet date. UPR was computed using 1/24th method on the assumption that contracts incepted in a given month will be spread evenly through that month.

6. STANDARDS ISSUED, REVISED OR AMENDED BUT NOT YET EFFECTIVE

IFRS 16 Leases IFRS 16 was issued in January 2016 and it replaces IAS 17 Leases, IFRIC 4 Determining whether an arrangement contains a lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of transactions involving the legal form of a lease. The scope of the new standard includes leases of all assets, with certain exceptions. A lease is defined as a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration.

Key features

IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under IAS 17.

At the commencement date of a lease, lessee will recognise a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset).

The new standard includes two recognition exemptions for lessees – leases of ’low-value’ assets (e.g., personal computer) and short-term leases (i.e., leases with a lease term of 12 months or less).

Reassessment of certain key considerations (e.g., lease term, variable rents based on an index or rate, discount rate) by the lessee is required upon certain events.

Lessor accounting under IFRS 16 is substantially unchanged from today’s accounting under IAS 17. Lessors will continue to classify all leases using the same classification principle as in IAS 17 and distinguish between two types of leases: operating and finance leases.

IFRS 16, which is effective for annual periods beginning on or after 1 January 2019, requires lessees and lessors to make more extensive disclosures than under IAS 17. The standard allows to choose either a full retrospective or a modified retrospective transition approach



6. STANDARDS ISSUED, REVISED OR AMENDED BUT NOT YET EFFECTIVE (continued)

IFRS 16 Leases (continued)The Company has lease agreements for office and residential houses which 90 percent are of 12 months or less. No significant impact is expected to the company as the lessee, future minimum lease liability is disclosed under note 41.

IFRS 17 Insurance ContractsIASB issued IFRS 17 Insurance Contracts in May 2017, a comprehensive new accounting standard for insurance contracts covering recognition and measurement, presentation and disclosure, which replaces IFRS 4 Insurance Contracts

In contrast to the requirements in IFRS 4, which are largely based on grandfathering previous local accounting policies for measurement purposes, IFRS 17 provides a comprehensive model (the general model) for insurance contracts, supplemented by the variable fee approach for contracts with direct participation features that are substantially investment-related service contracts, and the premium allocation approach mainly for short duration which typically applies to certain non-life insurance contracts.

The main features of the new accounting model for insurance contracts are, as follows

The measurement of the present value of future cash flows, incorporating an explicit risk adjustment, re- measured every reporting period (the fulfilment cash flows).

A Contractual Service Margin (CSM) that is equal and opposite to any day one gain in the fulfilment cash flows of a group of contracts. The CSM represents the unearned profitability of the insurance contracts and is recognised in profit or loss over the service period (i.e., coverage period).

Certain changes in the expected present value of future cash flows are adjusted against the CSM and thereby recognised in profit or loss over the remaining contractual service period.

The effect of changes in discount rates will be reported in either profit or loss or other comprehensive income, determined by an accounting policy choice.

The recognition of insurance revenue and insurance service expenses in the statement of comprehensive income based on the concept of services provided during the period.

Amounts that the policyholder will always receive, regardless of whether an insured event happens (non- distinct investment components) are not presented in the income statement, but are recognised directly on the balance sheet.

Insurance services results (earned revenue less incurred claims) are presented separately from the insurance finance income or expense.

Extensive disclosures to provide information on the recognised amounts from insurance contracts and the nature and extent of risks arising from these contracts.



6. STANDARDS ISSUED, REVISED OR AMENDED BUT NOT YET EFFECTIVE (continued)

IFRS 17 is effective for annual reporting periods beginning on or after 1 January 2021, with comparative figures required. Early application is permitted, provided the entity also applies IFRS 9 and IFRS 15 on or before the date it first applies IFRS 17. Retrospective application is required. However, if full retrospective application for a group of insurance contracts is impracticable, then the entity is required to choose either a modified retrospective approach or a fair value approach

The Company plans to adopt the new standard on the required effective date together with IFRS 9 (see amendment to IFRS 4 above). The Company started a project to implement IFRS 17 and has been performing a high-level impact assessment of IFRS 17. The Company expects that the new standard will result in an important change to the accounting policies for insurance contract liabilities of the Company and is likely to have a significant impact on profit and total equity together with presentation and disclosure.

Other amendments issued but not yet effective which the Company does not expect to have an impact on its financial statements are listed below:

IAS 1 and IAS 8 - Presentation of Financial Statements and Accounting Policies Changes in Estimates and Errors.

IFRIC 22 - Foreign Currency Transactions and Advance Consideration.

IFRIC23 - Uncertainty Over Income Tax Treatments.

7. RISK MANAGEMENT FRAMEWORK

(a) Governance frameworkThe primary objective of the Company’s risk and financial Management framework is to protect the Company’s shareholders from events that hinder the sustainable achievement of the financial performance objectives, including failing to exploit opportunities. Key Management recognises the critical importance of having efficient and effective risk Management systems in place.

The Company has established a Risk Management function with clear terms of reference from the Board of Directors, its committees and the associated executive Management committees. This is supplemented with clear organizational structure with documented delegated authorities and responsibilities from the Board of Directors to executive Management committees and senior managers. Lastly, a Company policy framework which sets out the risk profiles for the Company, risk Management, control and business conduct standards for the Company’s operations has been put in place.

Each policy has a member of senior Management charged with overseeing compliance with the policy throughout the Company.

The Board of Directors approves the Company risk Management policies and meets regularly to approve any commercial, regulatory and organisational requirements of such policies. These policies define the Company’s identification of risk and its interpretation, limit structure to ensure the appropriate quality and diversification of assets, align underwriting and retrocession strategy to the corporate goals, and specify reporting requirements.



7. RISK MANAGEMENT FRAMEWORK (continued)

(b) Capital Management objectives, policies and approachThe Company has established the following capital Management objectives, policies and approach to managing the risk that affect its capital position.

To maintain the required level of stability of the Company thereby providing a degree of security to ceding companies.

To allocate capital efficiently and support the development of business by ensuring that returns on capital employed meet requirements of its shareholders.

To retain financial flexibility by maintaining strong liquidity.

To align the profile of assets and liabilities taking account of risks inherent in the business.

To maintain financial strength to support new business growth and satisfy the requirements of ceding companies, regulators and stakeholders.

To maintain strong credit ratings and healthy capital ratios in order to support its business objectives and maximise shareholders value

The operations of the Company are also subject to regulatory requirements of TIRA (Tanzania Insurance Supervisory Authority). Throughout the financial year, the Company have met all of those TIRA requirements.

In reporting financial strength, capital and solvency is measured using the rules prescribed by the TIRA. These regulatory capital tests are based upon required levels of solvency capital and a series of prudent underwriting expertise.

The Company’s capital Management policy for its reinsurance and non-reinsurance business is to hold sufficient capital to cover the statutory requirements based on the TIRA directives, including any additional amounts required by the regulator.

Approach to capital Management:The Company seeks to optimise the structure and source of capital to ensure that consistently maximise returns to the shareholders.

The Company’s approach to managing capital involves managing assets, liabilities and risks in a co-ordinated way, assessing shortfalls between reported and required capital levels on a regular basis and taking appropriate actions to influence the capital position of the Company in light of changes in economic conditions and risk characteristics. The Company has just completed its five years strategic plan document in which a specific target risk adjusted rates of return are aligned to performance objectives and ensure that the Company is focused on the creation of value for shareholders.

The capital requirements are routinely forecast on a periodic basis, and assessed against both forecast available capital and the expected internal rate of return including risk and sensitivity analyses. The process is ultimately subject to an approval by the Board.



7. RISK MANAGEMENT FRAMEWORK (continued)

(c) Regulatory frameworkRegulators are primarily interested in protecting the rights of the policyholders and monitor them closely to ensure that the Company is satisfactorily managing affairs for their benefit. At the same time, the regulators are also interested in ensuring that the Company maintains an appropriate solvency position to meet unforeseen liabilities arising from economic shocks or natural disasters.

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

(d) Asset liability Management frameworkFinancial risks arise from open positions in the interest rate, currency and equity products, all of which are exposed to general and specific market movements. The main risk that the Company faces due to the nature of its investments is interest rate risk. The Company manages these positions within an asset liability Management framework that has been developed to achieve long-term investment returns in excess of its obligations under insurance and investment contracts. The principal technique of the Company’s asset liability Management framework is to match assets to the liabilities arising from the reinsurance and investment contracts by reference to the type of benefits payable to contract holders. For each distinct category of liabilities, a separate portfolio of assets is maintained. The Company’s asset liability Management framework is also integrated with the Management of the financial risks associated with the Company’s other financial assets and liabilities not directly associated with insurance and investment liabilities.

The Company’s asset liability Management framework also forms an integral part of the reinsurance risk Management policy, to ensure in each period sufficient cash flow is available to meet liabilities arising from reinsurance and investment contracts.

8. RISK MANAGEMENT POLICY

(a) Insurance RiskThe principal risk the Company faces under retrocession contracts is that the actual claims and the benefit payments or the timing thereof, differ from expectations. This is influenced by the frequency of claims, actual benefits paid and subsequent development of long-term claims. Therefore, the objective of the Company is to ensure that sufficient reserve is available to cover these liabilities.

The above risk exposure is mitigated by diversification across a large portfolio of retrocession contract and geographical areas. The variability of risk is also improved by careful selection and implementation of underwriting strategy guideline, as well as the use of retrocession arrangements.

The Company purchase retrocession cover as part of its risk mitigation programme. Retrocession ceded is placed on both a proportional and non-proportional basis. The majority of proportional retrocession programme is quota-share which is taken out to reduce the overall exposure of the Company to certain classes of business. Non-proportional retrocession is primarily excess-of-loss programme designed to mitigate the Company’s net exposure to catastrophe losses. Retention limits for the excess-of-loss retrocession vary by class of business and territory.




8. RISK MANAGEMENT POLICY (continued)

(a) Insurance Risk (continued)Amounts recoverable from retrocessionaires are estimated in a manner consistent with the outstanding claims provisions and are in accordance with the retrocession contracts. Although the Company has retrocession arrangement, it is not relieved of it direct obligations to its ceding companies and thus a credit exposure exists with respect to retro ceded reinsurance, to the extent that any retrocessionaires are unable to meet its obligations assumed under such retrocession agreements.

The Company’s placement of retrocession is diversified such that it is neither dependant on single retrocessionaires nor the operations of the Company are substantially dependent upon any single retrocession contract. There is no single counterparty exposure that exceeds 5% of the total retrocession assets at the reporting date.

The table below sets out the concentration of insurance contract liabilities (outstanding claims) by type of contract.

Class of insurance Year 2019 Year 2018

Gross TZS

Reinsurance TZS

NetTZS

GrossTZS

ReinsuranceTZS

NetTZS

Fire 1,719,091,953 143,257,662 1,575,834,290 1,161,787,720 105,617,065 1,056,170,655

Engineering 470,611,771 28,897,213 441,714,558 162,447,559 10,627,410 151,820,149

Accident 1,637,713,850 257,432,284 1,380,281,566 481,091,905 43,062,252 438,029,653

Motor 3,108,770,697 165,973,748 2,942,796,949 1,224,471,139 204,078,523 1,020,392,616

Marine 444,585,337 20,208,425 424,376,912 141,380,605 6,732,410 134,648,195

Aviation 453,982,299 37,831,859 416,150,440 141,043,251 12,822,114 128,221,137

Life 451,531,693 20,524,168 431,007,526 785,927,477 37,425,118 748,502,359

Medical - - - 558,815,548 26,610,264 532,205,284

8,286,287,601 674,125,359 7,612,162,241 4,656,965,205 446,975,156 4,209,990,048

Significant amount of risks are geographically situated in Dar es Salaam.




(a) Insurance Risk (continued)The table below sets out the concentration of insurance contract liabilities (Unearned Premium reserve) by type of contract:

Class of insurance Year 2019 Year 2018

GrossTZS

ReinsuranceTZS

NetTZS

GrossTZS

ReinsuranceTZS

NetTZS

Fire 5,385,022,683 220,677,977 5,164,344,706 4,179,644,765 181,777,576 3,997,867,189

Engineering 1,859,757,408 53,300,753 1,806,456,655 1,510,676,986 43,905,068 1,466,771,918

Accident 2,425,267,084 96,121,277 2,329,145,807 4,287,890,755 79,177,329 4,208,713,427

Motor 5,276,265,568 8,253,439 5,268,012,128 5,150,553,288 6,877,866 5,143,675,423

Marine 1,451,624,674 20,066,296 1,431,558,378 1,162,255,583 16,529,074 1,145,726,510

Aviation 1,058,293,168 111,887,889 946,405,279 707,885,634 92,164,653 615,720,981

Life 3,546,281,714 15,642,744 3,530,638,970 2,137,518,163 12,885,292 2,124,632,871

Medical 2,350,988,800 - 2,350,988,800 1,613,250,876 - 1,613,250,876

Total 23,353,501,099 525,950,375 22,827,550,723 20,749,676,051 433,316,858 20,316,359,194

Key assumptionsThe principal assumption underlying the liability estimates is that the Company’s future claims development will follow a similar pattern to past claims development experience. This includes assumptions in respect of average claims cost, claims handling costs, claim inflation factors and claim numbers for each accident year. Additional qualitative judgments are used to assess the extent to which past trends may not apply in future. Judgment 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 delays in settlement and change in foreign currency rates.




(a) Insurance Risk (continued)

SensitivitiesThe 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, profit before tax and equity. The correlation of assumptions will have a significant effect in determining the ultimate claims liabilities.

2019Change in

assumptionsImpact on

gross liabilitiesImpact on

profit before taxImpact

on equity

Average claim cost 5% 3,927,895,523 304,199,461 3,623,696,062

2018Change in

assumptionsImpact on

gross liabilitiesImpact on

profit before taxImpact

on equity

Average claim cost 5% 3,483,705,768 261,923,312 3,221,782,456

Claims developmentThe development of insurance liabilities provides a measure of the Company’s ability to estimate the ultimate value of claims. The table below illustrates how the estimates of total claims outstanding from its insurance business for each year have changed at successive year ends and reconciles the cumulative claims to the amount appearing in the statement of financial position.

Net estimate of ultimate claim costs - 2019Underwriting year

2015TZS’000

2016TZS’000

2017TZS’000

2018TZS’000

2019TZS’000

TotalTZS’000

- At end of claim year 7,598,619 8,843,156 312,187,870 224,183,624 2,093,794,085 2,646,607,355

- one year later 8,014,107 21,199,191 400,047,299 621,116,519 1,050,377,116

- two years later 9,218,357 9,012,877 199,312,254 217,543,488

- three years later 8,429,595 9,833,201 18,262,796

- four years later -

Current estimates of cumulative claims 10,592,328 8,429,595 9,833,201 199,312,254 621,116,519 2,932,485,654

Cumulative payments (7,904,601) (8,615,290) (11,181,893) (281,756,871) (624,696,210) (934,154,864)

Liability 524,994 1,217,911 188,130,361 339,359,648 1,469,097,876 1,998,330,790

Incurred but not reported (IBNR) 5,613,830,996

Total gross claims liability included in the statement of financial position 7,612,161,786



(a) Insurance Risk (continued)

Claims development (continued)

Net estimate of ultimate claim costs - 2018Underwriting year

2014TZS’000

2015TZS’000

2016TZS’000

2017TZS’000

2018TZS’000

TotalTZS’000

- At end of claim year 7,655,807 7,598,619 8,843,156 400,047,299 621,116,519 1,045,261,400

- one year later 7,844,386 8,014,107 21,199,191 199,312,254 224,183,624

- two years later 9,218,357 8,429,595 9,833,201 27,481,153

- three years later 10,592,328 10,592,328

- four years later -

Current estimates of cumulative claims 10,592,328 8,429,595 9,833,201 199,312,254 621,116,519 849,283,897

Cumulative payments (9,920,515) (7,904,601) (8,615,290) (11,181,893) (11,181,892) (48,804,191)

Liability 671,813 524,994 1,217,911 188,130,361 609,934,627 800,479,707

Incurred but notreported (IBNR) 3,409,510,342

Total gross claimsliability included in the statement of financial position 4,209,990,048

(b) Credit riskCredit risk is the risk that one party to a financial instrument will cause a financial loss to the other party by failing to discharge an obligation.

The following policies and procedures are in place to mitigate the Company’s exposure to credit risk.

A Company credit risk policy setting out the assessment and determination of what constitutes credit risk for the Company. Compliance with the policy is monitored and exposures and breaches are reported to the Company risk committee. The policy is regularly reviewed for pertinence and for changes in the risk environment.

Net exposure limits are set for each counterparty or group of counterparties, geographical and industry segment (i.e. limits are set for investments and cash deposits, foreign exchange trade exposures and minimum credit ratings for investments that may be held).

The Company further restricts its credit risk exposure by entering into master netting arrangements with counterparties with which it enters into significant volumes of transactions.





(b) Credit risk (continued) However such arrangements do not generally result in offset of statement of financial position assets and liabilities, as transactions are usually settled on gross basis. However, the credit risk associated with such balances is reduced in the event of a default, when such balances are settled on a net basis

Retrocession is placed with counterparties that have a good credit rating and concentration of risk is avoided by following policy guidelines in respect of counterparties’ limit that are set each year by the Board of Directors and are subject to regular reviews. At each reporting date, Management performs assessment of creditworthiness of retrocessionaires and updates the reinsurance purchase strategy, ascertaining suitable allowance for impairment.

The credit risk in respect of customer balances, incurred on non-payment of premiums or contributions will only persist during the grace period specified in the policy document or trust deed until expiry, when the policy is either paid up or terminated. The commission paid to intermediaries is netted off against amounts receivable from them to reduce the risk of doubtful debts.

Maximum exposure to credit riskMaximum Credit exposure shows the exposure to credit risk for the recognised components of the statement of financial position and unrecognised items. The Company had a gross total credit risk exposure of TZS 61.147 billion as at 31 December 2019 as depicted below:-

2019 2018

TZS Million TZS Million

Government securities 5,130 4,989

Reinsurance assets 53,789 40,150

Deposits with Financial institutions 11,145 10,256

Other receivables except prepayments 3,300 5,250

Cash and bank balances 1282 502

74,645 61,147




(b) Credit risk (continued)

The following table shows the carrying amounts of financial assets bearing credit risk:

2019 Fullyperforming

Past due but not impaired

Past due and impaired Total

Government securities 5,129,882,552 - - 4,989,963,442

Reinsurance assets 53,788,919,473 2,029,870,675 1,441,028,413 40,150,263,963

Other receivables 3,299,900,229 - - 5,250,783,500

Deposits with Financial institutions** 11,145,098,582 - - 10,256,476,048

Cash and cash equivalent 1,281,666,014 - - 502,229,607

74,645,466,850 2,029,870,675 1,441,028,413 61,149,716,560

2018 Fully

performing Past due butnot impaired

Past due and impaired Total

Government securities 4,989,963,442 - - 5,079,490,416

Reinsurance assets 36,679,364,875 2,029,870,675.00 1,441,028,413 28,966,015,257

Other receivables 5,250,783,500 - - 3,508,847,558

Deposits with Financial institutions** 10,256,476,048 - - 8,832,452,857

Cash and cash equivalent 502,229,607 - - 403,413,153

57,678,817,472 2,029,870,675 1,441,028,413 46,790,219,242

**These are fixed deposit in Commercial Bank that are regulated by Bank of Tanzania. The assets are not credit rated as there is no credit rate Agency in Tanzania. However there is no indication of impairment as at year end.

As at 31 December, the ageing analysis of trade receivables is as follows:

Total 0 - 3 months 3 - 6 months 6 - 12 months > 12 months

2019 53,788,919,473 13,447,229,868 20,170,844,802 10,085,422,401 10,085,422,401

2018 41,097,413,500 24,829,715,524 5,233,042,660 5,227,115,543 5,807,539,774



(c) Liquidity riskLiquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial instruments. In respect of catastrophic events there is also a liquidity risk associated with the timing differences between gross cash out flows and expected retrocession recoveries.

The following policies and procedures are in place to mitigate the Company’s exposure to liquidity risk:

A Company liquidity risk policy setting out the assessment and determination of what constitute liquidity risk for the Company. Compliance with the policy is monitored and exposures and breaches are reported to the Company risk committee. The policy is regularly reviewed for pertinence and for changes in the risk environment.

Setting up contingency funding plans which specify minimum proportions of funds to meet emergency calls as well as specifying events that would trigger such plans.

The Company’s catastrophic excess of loss retrocession contracts contains clauses permitting the immediate draw (cash calls) down of funds to meet claim payments should claim events exceed a certain size.

A Company liquidity risk policy setting out the assessment and determination of what constitutes liquidity risk for the Company. Compliance with the policy is monitored and exposures and breaches are reported to the Company risk committee. The policy is regularly reviewed for pertinence and for changes in the risk environment. The table below shows details of the expected maturity profile of the Company’s undiscounted obligations with respect to its financial liabilities and estimated cash flows of recognised insurance contract liabilities.

2019Carrying

amountContractual

cash flowsWithin

1 yearOver

1 year

TZS TZS TZS TZS

Insurance contract liabilities 22,827,550,723 22,827,550,723 22,827,550,723 -

Insurance contract liabilities on outstanding claims 7,612,162,242 7,612,162,242 7,612,162,242 -

Amount payable to reinsurance companies 6,670,253,423 6,670,253,423 6,670,253,423 -

Other payables 3,654,251,276 3,654,251,276 3,654,251,276 -

35,185,250,945 35,185,250,945 35,185,250,945 -




(c) Liquidity risk (continued)

2018Carrying

amountContractual

cash flowsWithin

1 yearOver

1 year

TZS TZS TZS TZS

Insurance contract liabilities 20,316,281,798 20,316,281,798 20,316,281,798 -

Insurance contract liabilities on outstanding claims 4,209,990,050 4,209,990,050 4,209,990,050 -

Amount payable to reinsurance companies 9,370,005,588 9,370,005,588 9,370,005,588 -

Other payables 1,288,973,509 1,288,973,509 1,288,973,509 -

29,388,899,752 29,388,899,752 29,388,899,752 -

(d) Market riskMarket 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: foreign exchange rates (currency risk), market interest rates (interest rate risk) and market prices (price risk).

A Company market risk policy setting out the assessment and determination of what constitutes market risk for the Company. Compliance with the policy is monitored and exposures and breaches are reported to the Company’s risk committee. The policy is reviewed regularly for pertinence and for changes in the risk environment.

(e) Currency riskCurrency 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 Company’s principal transactions are carried out in TZS and its exposure to foreign exchange risk arises primarily with respect to US dollar.

The exposure to foreign exchange risk is mitigated by entering into retrocession contracts which are denominated in US dollar and maintaining some of the fixed deposits in US dollar.

At 31 December 2018 the Company reported a net foreign exchange gain of TZS 132,289 million (2018: TZS 514,180 million). A change of +/ (-) 5% in the exchange rate at the end of year 2019, could have resulted to a change of +/ (-) TZS 7 million (2018: 21 million) on profit before tax for the year. The effect for the year on profit after tax and equity would be +/ (-) TZS 14 million (2018: TZS 15 million). The assumed movement in basis points for the currency risk sensitivity analysis is based on the currently observable market environment.




(f) Interest rate risk Interest risk is the risk that the value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

Floating rate instruments expose the Company to cash flow interest risk, whereas fixed rate instruments expose the Company to fair value interest risk.

The Company’s interest risk policy requires it to invest fixed rate instruments. So far the Company does not have variable rate instruments. Interest on fixed interest rate instruments is priced at inception of the financial instrument and is fixed until maturity.

At 31 December 2019 the Company reported investment income of TZS 2.1 billion (2018: TZS 1.9 billion). A change of +/ (-) 5% in the interest rate at the end of year 2019, could have resulted to a change of +/ (-) TZS 100 million (2018: TZS 90 million) on profit before tax for the year. The effect for the year on profit after tax would be +/ (-) TZS 70 million (2018: TZS 50 million). The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment.

(g) Price riskEquity price risk is the risk that the fair value of future cash flows of a financial instruments 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 Company is exposed to equity securities price risk as a result of its holdings in quoted equity investments, classified as available-for-sale. Exposure to equity price risk in aggregate are monitored in order to ensure compliance with the relevant regulatory limits for solvency purposes. Investments held are listed and traded on the Dar es Salaam Stock Exchange.

The Company uses a policy of diversification to manage the price risk arising from its investments in equity securities. Listed equity securities represent 26% (2017: 31%) of total equity investments.

Based on a sensitivity rate of 10 percentage points, all other variables held constant, the value of the Company’s equity interest would increase/decrease by TZS 116,974,000 (2018 – TZS 104,673,000). A 10 percentage point increase or decrease represents management’s assessment of the reasonably possible change in stock exchange indices.

(h) Operational risksOperational risk is the risk of loss arising from system failure, human error, fraud or external events. When controls fail to perform, operational risk can cause damage to reputation, have legal or regulatory implications or can lead to financial loss. The Company cannot expect to eliminate all operational risks, but by initiating a rigorous control framework and by monitoring and responding to potential risks, the Company is able to manage the risks. Controls include effective segregation of duties, access controls, authorisation and reconciliation procedures, staff education and assessment processes, including the use of internal audit. Business risk such as changes in environment, technology and the industry are monitored through the Company’s strategic planning and budgeting process.




9. CONTINGENCIES AND COMMITMENTS

(a) Legal proceeding and regulations

Legal claims Litigation is a common occurrence in the Insurance industry due to the nature of the business undertaken. The Company has formal controls and policies for managing legal claims. Once professional advice has been obtained and the amount of loss reasonably estimated, the Company makes adjustments to account for any adverse effects which the claims may have on its financial standing.

Operating lease commitments – Company as lesseeThe Company has entered into commercial leases for office space and residential houses. These leases have remaining term of three months to four years with a renewal option. All the operating leases are cancellable with one month to three month notice period. However the office premises of the Company at Dar es Salaam, the minimum period after which you can give cancellation notice is after the expiry of two years. Hence as at the end of December 2017, the lease had completed one year.

Future minimum lease payments under operating leases as at 31 December are as follows:-

2019 2018

Within one year 244,166,430 237,498,142

244,166,430 237,498,142

Operating lease commitments – Company as lessorThe Company has entered into commercial property leases on its investment property. The Company has determined based on an evaluation of the terms and conditions of the arrangements, such as the lease term not constituting a major part of the economic life of the commercial property and the present value of the minimum lease payments not amounting to substantially all of the fair value of the commercial property, that it retains all the significant risks and rewards of ownership of these properties and accounts for the contracts as operating leases.

Future minimum lease outstanding payments under operating leases as at 31 December 2018 are as follows:-

2019 2018

Within one year 997,159,361 949,675,582

997,159,361 949,675,582

(b) Capital commitmentsThe Company has no capital commitment as at the reporting date.



10. GROSS PREMIUM INCOME

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

2019TZS

2018TZS

Fire 38,709,899,981 32,648,958,267

Engineering 5,994,605,905 6,509,318,373

Accident 24,083,004,379 14,773,361,600

Motor 23,344,370,413 19,572,840,335

Marine 5,913,358,113 3,466,924,303

Aviation 11,671,851,547 10,407,798,837

Medical 20,965,115,941 14,970,047,185

Life 10,712,057,329 9,172,643,598

Total Gross Premium 141,394,263,608 111,521,892,498

Premium ceded to reinsurers (51,867,001,577) (43,331,685,660)

Net premiums 89,527,262,031 68,190,206,838

11. FEES AND COMMISSION INCOME

Commission income 9,309,352,887 7,270,827,854

Outward charges 1,644,732,977 3,039,267,973

Brokerage outward - 57,390,809

10,954,085,863 10,367,486,636

12. INVESTMENT INCOME

Interest on fixed deposits 741,978,404 772,992,445

Dividend received 200,762,167 184,429,099

Rent income 753,231,605 848,003,846

Interest on treasury bills 278,729,249 349,923,026

1,974,701,425 2,155,348,417

13. FAIR VALUE GAINS

Loss on financial assets at fair value through profit or loss(Note 16) (470,362,102) 795,430,814

(470,362,102) 795,430,814



14. OTHER OPERATING REVENUE

2019TZS

2018TZS

Foreign exchange transaction gain (29,405,415) 91,746,605

Miscellaneous income 17,476,379 16,282,513

Management fees 419,151,150 333,987,733

407,222,114 442,016,851

15. NET BENEFIT AND CLAIMS

Gross claims paid 53,671,926,527 47,857,172,450

Changes in contract liabilities-ceded(note 22) 2,511,268,925 945,429,861

Changes in contract liabilities-claims(note 22) 3,402,172,191 475,698,825

Claims ceded to retrocessionaires (5,897,783,516) (6,578,640,348)

53,687,584,127 42,699,660,787



16. OPERATING AND ADMINISTRATION EXPENSES

2019TZS

2018TZS

Audit fees 86,420,000 77,385,000

Advertising and publicity 879,046,530 780,757,175

Board expenses 723,876,974 636,688,226

Board seminars 230,633,274 222,219,821

City service levy 424,118,694 364,836,882

Communication expenses 136,029,212 118,083,114

Computer training and implementation 222,538,760 248,029,160

Conferences and seminars 348,599,830 265,832,188

Donations 29,200,000 16,720,578

Household services 33,119,908 32,021,200

Library, books and subscription 92,048,333 41,068,639

Office rent 245,511,875 244,166,430

Rental expenses 233,181,485 327,616,188

Reinsurance levy 2,118,118,470 1,826,209,410

Staff costs(*) 5,106,064,584 5,170,794,387

Financial cost 46,847,368 275,237,422

Other specified expenses 719,282,079 656,866,736

11,674,637,374 11,304,532,556

(*)Staff costs include:

Salaries 2,533,563,120 2,348,646,025

Education and furniture allowance 277,081,401 451,109,662

Gratuity 212,732,691 228,000,110

Skills and Development Levy 116,706,164 131,737,422

Workers Compesation Fund 36,689,278 27,429,654

Social security costs 286,689,476 248,631,347

Medical expenses 128,242,825 113,156,973

Staff welfare 165,722,031 97,181,733

Training 384,898,460 279,271,929

Travel and subsistence allowance 722,574,165 723,087,272

Leave passage 241,164,973 522,542,260

5,106,064,584 5,170,794,387



17. FEES AND COMMISSION EXPENSES

2019TZS

2018TZS

Commission expense 25,236,325,497 18,641,264,981

Charges inward 261,949,026 391,482,240

Brokerage inward 1,279,386,177 386,481,698

26,777,660,701 19,419,228,919

18. TAXATION

Income tax expense

Current income tax charge 1,950,541,137 1,063,407,759

Deferred tax credit (356,109,996) (650,506,686)

1,594,431,141 412,901,073

Tax reconciliation:

Profit before taxation 8,753,107,417 6,667,919,010

Tax applicable rate of 30% (2018:30%) 2,625,932,225 2,000,375,703

Non deductible expenses 110,401,809 581,178,721

Non deductible income (1,141,902,894) (1,040,245,218)

Income tax expense 1,594,431,141 1,541,309,206

Deferred tax liability /(asset)

Opening balance (1,537,729,739) (887,223,053)

Credit for the year (356,109,996) (650,506,686)

Closing balance (1,893,839,735) (1,537,729,739)

Reconciliation of Deferred tax

Deferred income tax is calculated in full on all temporary timing differences, under the liability method using a principal tax rate of 30%. The movement on the deferred tax account is as follows:

Accelerated depreciation of property and equipment 294,998,250 210,499,503

Incurred but not reported (IBNR) (185,837,897) (411,127,625)

Provision (2,003,000,088) (1,337,101,617)

(1,893,839,735) (1,537,729,739)

Corporate tax payable

Balance as at 1 January (331,486,139) (154,844,472)

Charge for the year 1,950,541,137 1,063,407,760

Payment during the year (800,000,000) (1,138,600,623)

Withholding tax deducted at source (89,630,088) (101,448,804)

729,424,910 (331,486,139)



19. PROPERTY, PLANT AND EQUIPMENT

Motor Vehicles

TZS

OfficeEquipment

TZS

OfficeFurniture& Fittings

TZSComputers

TZSTotal

TZS

Cost

As at 1 January 2018 415,336,115 755,924,393 583,377,815 181,265,155 1,935,903,477

Additions - 29,212,096 15,635,000 6,886,353 51,733,449

Disposal (4,522,881) - (4,774,280) (9,297,161)

As at 31 December 2018 415,336,115 780,613,608 599,012,815 183,377,228 1,978,339,765

Additions 347,856,188 22,566,140 9,965,000 16,100,252 396,487,579

At 31 December 2019 763,192,302 803,179,748 608,977,815 199,477,479 2,374,827,344

Depreciation

At 1 January 2018 324,431,108 128,376,260 293,881,711 132,732,643 879,421,722

Charge for the year 57,152,177 94,584,246 74,514,102 11,154,331 237,404,855

Disposal - (2,261,441) - (4,774,280) (7,035,721)

As at 31 December 2018 381,583,285 220,699,065 368,395,813 139,112,694 1,109,790,857

Charge for the year 75,287,743 94,852,142 75,047,852 17,007,670 262,195,407

At 31 December 2019 456,871,027 315,551,207 443,443,665 156,120,365 1,371,986,264

Carrying amountAt 31 December 2019 306,321,275 487,628,541 165,534,150 43,357,115 1,002,841,080

At 31 December 2018 33,752,830 559,914,543 230,617,002 44,264,533 868,548,908

20. INVESTMENT PROPERTY

The investment property constitutes the value of land and building at plot number 406, Longido Street Upanga Dar es Salaam. Major part of the building is leased.

2019TZS

2018TZS

Opening balance 25,048,632,199 25,048,632,199

25,048,632,199 25,048,632,199



21. INTANGIBLE ASSETS

2019TZS

2018TZS

Cost

At 1 January 909,616,728 644,297,466

Additions - 265,319,261

At 31 December 909,616,728 909,616,728

Amortisation

At 1 January 574,603,211 393,888,199

Amortisation for the year 193,648,873 180,715,012

At 31 December 768,252,084 574,603,211

Carrying amount 31 December 141,364,644 335,013,516

21. FINANCIAL INSTRUMENTS

At fair value through profit or loss:

CRDB Shares (2,757,325 shares)

At 1 January 496,320,750 529,408,800

Fair value (loss) /gain during the year (181,984,275) (33,088,050)

At 31 December 314,336,475 496,320,750

TWIGA SHARES (100,000 shares)

At 1 January 206,000,000 146,000,000

Fair value (loss) /gain during the year (6,000,000) 60,000,000

At 31 December 200,000,000 206,000,000

Africa - Re Shares (8,000 shares)

At 1 January 5,773,338,400 5,082,418,800

Fair value (loss) /gain during the year 113,266,640 690,919,600

At 31 December 5,886,605,040 5,773,338,400

Uganda -Re Shares (450 shares)

At 1 January 533,663,757 456,064,493

Fair value (loss) /gain during the year 103,506,890 77,599,264

At 31 December 637,170,648 533,663,757

EZULWINI Shares (450 shares)

At 1 January 5,271,182,866 4,410,000,000

Fair value (loss) /gain during the year (499,151,357) 861,182,866

4,772,031,509 5,271,182,866

Total carrying amount 11,810,143,672 12,280,505,773



22. INVESTMENT OF GOVERNMENT SECURITIES

2019TZS

2018TZS

Treasury bills (**) 4,913,000,000 4,989,963,442

Accrued interest 216,882,552 -

5,129,882,552 4,989,963,442

Government securities for less than three months 1,041,300,000 717,498,864

Government securities for more than three months 4,088,582,552 4,272,464,578

5,129,882,552 4,989,963,442

(*) These are Government securities (Treasury bills) maturing within twelve months and earn interest at the rate “between” 9.5% - 15%.

23. REINSURANCE ASSETS

Due from ceding companies 43,169,191,937 32,660,239,935

Due from retrocessionaires 2,689,234,685 3,630,666,775

Due from reinsurance brokers 14,178,660,644 9,166,897,026

Provisions for impairments (6,248,167,793) (5,307,539,773)

As at 31 December 53,788,919,473 40,150,263,963

Movement in Provision for Impairments

Opening balance 5,307,539,773 3,866,511,360

Charge during the year 940,628,020 1,441,028,413

6,248,167,793 5,307,539,773

Amount receivable from reinsurers are non-interest bearing and are generally on 90 - 120 days terms. Amounts receivable from reinsurers are stated net of debts, which in the Directors’ opinion, cannot be recovered or estimated debts whose further recovery is uncertain at year-end.

As at 31 December, the ageing analysis of amount receivable from reinsurers was as follows:

< 3 months 26,785,446,820 25,776,865,062

3 - 6 months 7,872,794,730 5,233,042,660

6 - 12 months 8,432,763,442 5,227,115,543

> 12 months 10,697,914,481 3,913,240,699

53,788,919,473 40,150,263,963



24. OTHER RECEIVABLES

2019TZS

2018TZS

Prepayments 59,220,728 83,587,440

Sundry Debtors Ezulwini Reins 909,642,911 1,502,899,389

Withholding taxes 323,271,856 884,956,697

Staff loans and advances 775,888,591 742,700,811

Deposits 531,204,307 1,558,250,978

Dividend receivable - 149,760,000

Sundry debtors 700,671,836 412,215,625

3,299,900,229 5,334,370,940

25. CASH AND CASH EQUIVALENTS

Cash and bank balances 1,281,666,014 502,229,607

1,281,666,014 502,229,607

For Cashflow purposes;

Maturity for less than three months (Note 16& 21) 2,067,750,000 3,262,920,602

3,349,416,014 3,765,150,209

26. DEPOSITS WITH FINANCIAL INSTITUTIONS

Fixed deposits with Banks 10,541,000,470 9,868,554,047

Accrued interest 604,098,112 387,922,001

11,145,098,582 10,256,476,048

Deposit less than three months 1,026,450,000 2,221,620,602

Deposit for more than three months 10,118,648,582 8,034,855,446

11,145,098,582 10,256,476,048

As at year end fixed deposits were on account with the following banks:

BOA Bank Limited 1,000,000,000 500,000,000

Azania Bank Limited 943,252,368 -

Bank M Tanzania Limited - 912,492,240

United Bank for Africa (T) Limited 1,229,567,285 1,226,553,770

NIC Bank Limited 500,000,000 -

TZ POSTAL BANK 871,981,825 300,000,000

4,544,801,478 2,939,046,010



26. DEPOSITS WITH FINANCIAL INSTITUTIONS (continued)

2019TZS

2018TZS

Equity Bank Limited 1,452,235,342 1,449,448,176

CRDB BANK 1,100,000,000 1,600,000,000

DTB BANK - 500,000,000

CANARA BANK 800,000,000 800,000,000

TWB BANK - 570,307,600

EXIM BANK 1,143,963,650 -

NMB Bank 1,000,000,000 1,000,000,000

TIB Bank 500,000,000 500,000,000

BankABC - 504,957,450

Accrued interest 604,098,112 392,716,812

15,689,902,078 13,195,524,076

The fixed deposits are kept till maturity and terms renegotiated during maturity. In case of requirement the deposits can be called early.

27. SHARE CAPITAL

The authorized share capital is TZS 100,000,000,000 divided into 100,000,000 shares. Par value of Company’s shares is TZS 1,000 per shares.

The paid up capital is made up as follows:

Capital allotted and subscribed 60,000,000,000 60,000,000,000

Capital unpaid/Addition (21,147,006,611) (21,147,006,611)

Subscribed and paid up capital 38,852,993,389 38,852,993,389

Share capital at 1 January 38,862,993,389 32,652,699,000

Subscribed and fully paid 1,000,000,000 6,210,294,389

39,862,993,389 38,862,993,389

Capital Management (IAS 1 amendment)Externally imposed capital requirements are set and regulated by Commissioner of Insurance. These requirements are put in place to ensure sufficient solvency margins. Further objectives are set by the Company to maintain a strong credit rating and healthy capital ratio in order to support its business objectives and maximize shareholders value.



27. SHARE CAPITAL (continued)

The Company manages its capital requirements by assessing shortfalls between reported and required capital levels on a regular basis. Adjustments to current capital levels are made in light of changes in economic conditions and risk characteristics of the Company’s activities.

The Company fully complied with the externally imposed requirements during the reported financial periods and no changes were made to its capital base, objectives, policies and processes from the previous year.

2019TZS

2018TZS

Share capital

Required capital (regulation 18 (3) (a) 9,742,920,000 8,857,200,000

The Company’s capital exceeds statutory requirements.

Share premium

At 1 January 348,613,700 348,613,700

At 31 December 348,613,700 348,613,700

28. PAYABLE TO REINSURANCE COMPANIES

Reinsurance creditors 6,670,253,423 9,370,005,588

6,670,253,423 9,370,005,588

29. OTHER PAYABLES

Accrued audit fees 86,420,000 38,731,394

Accrued expenses 490,550,694 883,745,368

Withholding Tax Reins Pre 1,669,074,497 -

Provision for gratuity 428,499,168 297,039,475

Premium Levy Payable 859,706,917 -

Provisional for Directors Fee 120,000,000 69,457,270

3,654,251,276 1,288,973,507

Balance as at 1 January 297,039,477 433,917,122

Paid during the year - Note 9 (212,732,691) (228,000,110)

Additional provision 344,192,382 91,122,465

Balance - Note 25 428,499,168 297,039,477



30. RELATED PARTY DISCLOSURES

The Company is owned by pension funds, local insurance companies, one foreign investor (ZEP-RE), local insurance brokers and loss adjusters and Tanzanian individuals.

A large portion of Company’s underwriting business is transacted with local ceding companies that are also shareholders of the Company. The transactions carried out with related parties during the year and balances due from or to them at the year-end are:

(a) Transaction with related parties

2019TZS

2018TZS

Gross earned premiums-Local insurance companies 127,903,851,059 100,939,065,350

Claims paid-Local insurance companies 48,246,678,841 41,189,447,649

176,150,529,900 142,128,512,999

(b) Outstanding balances with related parties

Premium receivables from related parties 30,176,208,757 11,433,188,925

(c) Directors remuneration

Directors’ fees 90,000,000 110,000,000

Other emoluments (sitting allowances) 274,619,022 241,433,287

364,619,022 351,433,287

(d) Key Management Remuneration

Salaries and other short-term employment benefits 1,099,512,600 931,616,640

Long-term benefits 212,732,691 186,323,328

1,312,245,291 1,117,939,968

(e) Remunerations for all staff

Salaries and other short-term employment benefits 2,533,563,070 2,348,646,025

Long-term benefits 286,689,475 214,823,328

2,820,252,545 2,563,469,353



31. CONTINGENCY RESERVES

This is based on 3% and 1% for general and long term business respectively in conformity with the Insurance regulation 27 (2)(b), 3(b).

2019TZS

2018TZS

Movement

As at 1 January 20,255,992,943 17,043,320,922

Increase in the year 4,026,945,789 3,162,203,903

As at 31 December 24,282,938,732 20,205,524,825

Details Opening Charge Closing

Fire 4,474,693,121 1,164,882,813 5,639,575,935

Engineering 1,064,963,476 175,422,800 1,240,386,276

Accident 4,030,981,182 722,678,722 4,753,659,903

Motor 6,878,689,036 700,331,112 7,579,020,148

Marine 1,030,485,393 177,400,743 1,207,886,137

Aviation 442,344,534 350,155,546 792,500,080

Medical 1,374,531,908 628,953,478 2,003,485,386

Life 959,304,294 107,120,573 1,066,424,867

20,255,992,943 4,026,945,789 24,282,938,732

32. INSURANCE CONTRACT LIABILITIES

(a) Unearned premium reserveTechnical liabilities for the period January to December 2019 are made up of unearned premium reserves and provisions for outstanding claims. Unearned premium reserve is calculated using the 1/24 method as shown in revenue account for all classes of re-insurance

The reserve represents the liability for short term business contracts where the Company’s obligations are not expired at period end. Movement in the reserve is as shown below:

At 1 January 20,316,281,798 19,370,851,937

Increase 2,511,268,925 945,429,861

At 31 December 22,827,550,723 20,316,281,798



32. INSURANCE CONTRACT LIABILITIES (continued)

(b) Outstanding claims

2019TZS

2018TZS

At 1 January 4,209,990,050 3,734,291,225

Increase 3,402,172,191 475,698,825

At 31 December 7,612,162,242 4,209,990,050

Year 2019 Year 2018

Unearned Premium Reserve

Outstanding Claims

Unearned Premium Reserve

Outstanding Claims

TZS TZS TZS TZS

Fire 5,151,019,094 2,518,493,050 4,005,120,606 1,118,356,969

Engineering 1,806,293,389 305,199,413 1,466,771,918 151,820,149

Accident 2,327,203,052 597,559,249 4,208,713,427 419,876,585

Motor 5,268,012,128 2,099,150,731 5,143,675,423 1,020,392,616

Marine 1,431,512,644 219,627,874 1,145,726,510 134,471,793

Aviation 946,405,279 133,678,149 615,720,981 128,221,137

Medical 2,350,988,800 1,048,255,797 1,613,250,876 748,502,359

Life 3,530,638,970 70,738,322 2,117,302,058 488,348,441

22,812,073,355 6,992,702,585 20,316,281,799 4,209,990,049

33. EVENTS AFTER THE REPORTING PERIOD

In view of the pandemic which has affected the global market. The company is aware of the impact of this pandemic both at macro and micro level. To this end management continues to assess the effects of the Coronavirus on two fronts namely financial assets and non-financial assets.

Management is fully aware of the consequences posed on the company on both its reinsurance receivables and payables. The company continues to assess its debtors’ ability to honor their obligations to the company due to discounted operations or reduced operations by its debtors. These debtors include trade customers such as insurance companies and retrocessionaires. This will affect the company’s ability to collect outstanding premiums from insurance companies and also failing to collect reinsurance recoveries which will adversely affect the company’s cash flows. Resultantly, the company may fail to meet its obligations to its creditors due to weak cash flows. Further management continues to assess Security of its investments which are in various financial instruments with different financial institutions.



33. EVENTS AFTER THE REPORTING PERIOD (continued)

Management is aware and continues to monitors safety of its employees and the associated costs in the event of an employee or a group of employees being affected by Coronavirus. The associated costs include payments of their salaries and other contractual benefits. Cost pertaining to safety and health of employees. The company will continue to update company’s’ budgets and cash flows as the impact of Coronavirus continues to unfold. The company will also comply with all statutory requirements, laws and any such declarations made by the government. Management shall continue to monitor the developments to ensure it doesn’t affect the going concern of the business.

34. CONTINGENT LIABILITIES AND COMMITMENTS

Legal claims There are no material contingencies as at 31 December 2019, which may possibly result in a loss or gain to the Company or in commitments which it cannot meet, and for which no provision is considered necessary or only partial provision has been made.

Operating lease commitments – Company as lesseeThe Company has entered commercial leases for office space and residential houses. These leases have remaining term of three months to four years with a renewal option. All the operating leases are cancellable with one month to three months notice period. Future minimum lease payments under operating leases as at 31 December are as follows:-

2019TZS

2018TZS

Within one year 245,511,875 244,166,430

245,511,875 244,166,430

Operating lease commitments – Company as lessorThe Company has entered into commercial property leases on its investment property. The Company has determined based on an evaluation of the terms and conditions of the arrangements, such as the lease term not constituting a major part of the economic life of the commercial property and the present value of the minimum lease payments not amounting to substantially all of the fair value of the commercial property, that it retains all the significant risks and rewards of ownership of these properties and accounts for the contracts as operating leases. Future minimum lease outstanding payments under operating leases as at 31 December are as follows:-

Within one year 753,231,605 812,137,210

753,231,605 812,137,210


35. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

Financial instruments not measured at fair valueThe fair value of financial assets and liabilities not measured at fair value approximates the carrying amounts as explained below:

(i) Cash and bank balances, deposits with financial institutions, re insurance assets, Other receivables and other financial assets and liabilitiesCash and bank balances, re insurance assets, and other financial assets and liabilities, these have short term maturities and/or are at market interest rates. The estimated fair value of these instruments is based on discounted cash flows using prevailing market interest rate which is approximately the same as the carrying amount.

(ii) Government securities The fair value for Government securities is based on market prices. Where this information is not available, fair value is estimated using quoted market prices for securities with similar credit, maturity and yield characteristics. The Company invests in treasury bills with maturities of 91 days and 364 days. The carrying amounts of these investment securities are a reasonable approximation of fair value due to the short term nature of the instruments and the interest rates are close to market rates.

IFRS 13 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources; unobservable inputs reflect the Bank’s market assumptions. These two types of inputs have created the following fair value hierarchy:

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities. This level includes listed equity securities and debt instruments on stock exchanges.

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

Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs). This level includes equity investments and debt instruments with significant unobservable components. This hierarchy requires the use of observable market data when available. The Company considers relevant and observable market prices in its valuations where possible.

Amounts in TZS

Level 1 Level 2 Level 3 Total

At 31 December 2019

Investment property - - 25,048,632,199 25,048,632,199

- - 25,048,632,199 25,048,632,199

At 31 December 2018

Investment property - - 25,048,632,199 25,048,632,199

- - 25,048,632,199 25,048,632,199



35. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (continued)

Financial Assets/liabilities

Valuation techniques

Significant Unobservable

InputsRange

(weighted average)

Sensitivityof the inputto fair value

2019 2018

Investment properties DCF method

Estimated rental value per sqm per month $15 - $30 ($20) $14 - $40 ($35)

1% (2018: 4%) increase/decrease

would result toincrease (decrease)

of fair value byTZS 170,000

Rent growth p.a. 1% 4%

Long-term vacancy rate 4% - 12% (7%) 4% - 13% (8.5%)

Discount rate 8.50% 8.30%

At 31 December 2019 At 31 December 2018

Financial assets Loans and

receivables

Fair value through

profit or lossLoans and

receivables

Fair value through profit

or loss

Investment in Governmentsecurities 5,129,882,552 - 5,377,885,444 -

Financial assets-at fair valuethrough Profit and loss - 11,810,143,672 - 12,280,505,773

Reinsurance assets 53,788,919,473 - 40,150,263,963 -

Other receivables except prepayments and deposits 3,299,900,229 - 2,807,575,825 -

Deposits with Financial institutions 11,145,098,582 - 9,868,554,047 -

Cash and cash equivalent 1,281,666,014 - 502,229,607 -

74,645,466,850 11,810,143,672 58,706,508,886 12,280,505,773

Financial liabilities at amortised cost

Financial liabilities At 31 December

2019 At 31 December

2018

Insurance contract liabilities on unearned premiums 22,827,550,723 20,316,281,798

Insurance contract liabilities on outstanding claims 7,612,162,242 4,209,990,050

Amount payable to reinsurance companies 6,670,253,423 9,370,005,588

Other payables 3,654,251,276 1,288,973,509

40,764,217,664 35,185,250,945


TANANIA REINSURANCE COMPANY LTD I ANNUAL REPORT …

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