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Xplico Insurance Company Limited Annual Report and Financial Statement 2012 Xplico Insurance Company Limited Annual Report and Financial Statement 2012

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Table of Contents Company Information

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Chairman’s Statement

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Company Philosophy 6 Corporate Social Responsibility

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Classes of Business 2013 Aviation 8 Corporate 9 Maisha Poa 10 Report of the Directors 11 Statement of Directors’ Responsibilities 12 Report of the Independent Auditor 13 Financial Statements Statement of Comprehensive Income 14 Balance Sheet 15 Statement of Changes in Equity 16 Cash Flow Statement 17 Notes Forming Part of the Financial Statements 18 - 34 Supplementary Information: General Insurance Business Revenue Account Appendix

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Xplico Insurance Company Limited Annual Report and Financial Statement 2012


Company Information

• International • Specialist • Innovative • Ethical

Board of Directors

Keith. D. Beekmeyer - Chairman

Anil K. Mahan

- Managing Director

Isaac K. Ng’ang’a

- Non Executive Director

Lee W. Waruingi

- Non Executive Director

Stephen Karoki

Senior Management

Stephen Karoki

Registered Office

Park Place 5th Floor, Limuru Road,

P.O. Box 38106-00623, Nairobi.

Company Secretary

Sabre Registrars, Nairobi.

Independent Auditors

Mawji Sennik & Company

Certified Public Accountants,

P. O. Box 66249 - 00800, Nairobi.

Principal Bankers

Standard Chartered Bank Kenya Limited, Nairobi

UBA Kenya Bank Limited, Westlands Nairobi.

- General Manager

Xplico Insurance Company Limited Annual Report and Financial Statement 2012

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Chairman’s Statement

The Kenyan economy grew by 4.7% up from 4.5% in 2011. This growth is

Xplico Insurance Company Limited recorded a gross premium written Kshs.

attributable to positive trends in some of the macroeconomic parameters;

540 million (2011- Kshs. 249 million) and net income Kshs. 28 million (2011-

increased domestic demand, modest growth in credit, notable growths in

Kshs. 7 million which is a growth of 116% and 300% respectively on the year

agriculture, wholesale and retail trade, and transport and Communication.

2011. This growth is appreciable given that the company started operating

It is envisaged that this trend will be maintained in 2013 and growth is

in July 2010 and was setting up systems and structures along with. My

projected at 5.5%. Further, the economic environment in 2012 in Kenya

company continues to focus on growth in premium income and profitability

was characterized by high interest rates with the 91 day Treasury bill rate

and is a cardinal strategic objective in our 2013-2017 Corporate Plan. The

being 20.6% and 8.3% at the beginning and end of the year respectively.

company continues on to strengthen its management and to improve on

The inflation rate also dropped from 18.3% in January to 3.2% at close of the

systems and structures.

year. The Kenya Shilling strengthened marginally with the average exchange rate to the US Dollar reducing from 86.34 in January 2012 to close the year

As Chairman of the Board of Directors, what is of upmost importance to

at 85.99. The Nairobi Securities Exchange, 20 share price index, appreciated

both myself and the Board is to focus and concentrate on our clients, our

by 28.2% during the year 2012.

reinsurers, and our dedicated and loyal staff who have diligently served Xplico over the last two years and assisted in creating the Company we all

Insurance industry in Kenya recorded a growth of 16% in 2011 down from

work for today. A Company that not only applies cutting-edge analysis to

23% in 2010.Growth in 2012 is projected at 20%.

its decision making processes but also shares the insight it gleans with its clients. As a result of this, Xplico can deliver flexibility and creativity in its

In 2012 there were a few legislative changes among them; introduction of

underwriting which in turn delivers solutions to its clients supported by

micro insurance class of business, repeal of Form 70-3, enhanced oversight

strong risk assessment from Xplico’s internal risk evaluation team.

on branches, power to the Commissioner of Insurance to assume control

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over part or all the assets of a troubled insurer and establishment of medical

In 2013, Xplico will become known as a specialist Insurer and will be at the

business as a class of insurance business.

forefront of delivering innovative and bespoke client solutions in a flexible

Xplico Insurance Company Limited Annual Report and Financial Statement 2012


“The uniqueness of Xplico is to challenge the traditional perimeters of the insurance industry; be forward thinking and innovative; and to become a market leader in Africa for the 21st Century� and focused manner. It will support a range of classes of business that reflect the changing demographics and fortunes of dynamics of Kenya and East Africa. This will benefit its clients, support its reinsurers, and deliver to our staff and shareholders steady growth in written income as well as maintaining underwriting profits. On behalf of the Board of Directors and the management, I wish to record our appreciation to our customers, brokers and agents for their continued support. I take the opportunity to thank all the employees of Xplico Insurance for their hard work and commitment to the Company and customers. Finally, I thank my fellow directors for their contribution and support during the past year.

Keith. D. Beekmeyer

Xplico Insurance Company Limited Annual Report and Financial Statement 2012

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Company Philosophy Africa’s insurance industry continues to be characterized by untapped markets and low insurance penetration despite being a magnet for international investment.

Since information technology is at the core of our philosophy, Xplico is clearly setting the benchmark in implementing business systems and processes to ensure that our clients claims are settled in a timely and accurate manner.

Remarkable economic growth and individual knowledge of insurance products available has accelerated the demand for financial products and services. At Xplico, we have responded by developing solutions to provide the security required for financial loss, unpredictable risks and maintenance of health. Unlike many other Kenyan insurance companies, we have a team of experienced underwriters who have actively worked with both the Lloyds market and European financial institutions. As a result of this, our insurance solutions are innovative, affordable and relevant to the needs of Kenyans and the Kenyan economy. Since information technology is at the core of our philosophy, Xplico is clearly setting the benchmark in implementing business systems and processes to ensure that our clients claims are settled in a timely and accurate manner. Consistent client satisfaction remains our priority and this is why we continue to invest in our people and our processes. The Xplico culture remains one of ensuring a quality personal service to both our private and corporate clients.

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Xplico Insurance Company Limited Annual Report and Financial Statement 2012


CSR Statement A great Prime Minister once quoted:

“Responsibility is the Price of Greatness�. The above statement characterises Xplico’s belief and values in respect of Corporate Social Responsibility in our operations and policies. We can write down statements indicative of our objective, however, we choose to walk this journey through the eyes of the communities we support and the lives we change, where our strength gives hope, and our innovation gives way to a progress. A majority of our efforts remain behind the scenes, but if you look a little closer our hand print remains. We believe that our people, who through their own quest for greatness contribute to making this Company truly great, are a reflection of our passion and zeal towards the communities, partners, clients and investors we serve.

Xplico Insurance Company Limited Annual Report and Financial Statement 2012

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Aviation Kenya is the second biggest hub in respect to general aviation aircraft on the continent of Africa.

Xplico is the first Kenyan insurance company with expertise and full underwriting capacity for this sector.

In 2013, Xplico will also be offering insurance to Kenyan aviation operations. Our research demonstrates that aviation insurance within the Kenyan Insurance market is not well developed since local insurance companies lack the capacity to cater for this specialist sector. The majority of aviation cover is placed by local retail brokers with international insurance companies outside Kenya by either dealing directly with London or via South African wholesale brokers. While these limitations might act as logistical restrictions to growth, the aviation industry in Kenya has in fact been growing. The number of licensed aircraft has increased from 968 in 2009 to 1029 in 2011. The industry is likely to expand further due to increased trade between East African countries and the rest of the world; increased tourism and the expansion of Kenyan airport facilities. Furthermore, aircraft acquisition has also been made easier over recent years. Xplico has recognised the importance for a local insurance company to offer insurance solutions by providing aviation hull and liability insurance to owners and operators of aircraft. It has therefore recruited a specialist general aviation underwriter who has 25 years of experience within the Lloyd’s aviation insurance market.

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Xplico Insurance Company Limited Annual Report and Financial Statement 2012


Corporate

Xplico’s exponential growth in retail underwriting over the past two years has seen the company set up a vibrant Corporate Division to cater for both SMEs and well established companies. We go beyond simply providing insurance solutions that suit your business needs. We provide decisive financial solutions, creating a niche market for Xplico in corporate insurance. With a team of experienced local and international staff, the Corporate Division provides tailor made insurance policies created to protect your business and advise you of market trends and new products. We work with a number of reputable insurance brokers, including AON and Alexander Forbes to ensure quality services for all our clients. When working with corporate entities who retain their own inhouse risk management departments, we collaborate in order to ascertain the most suitable cover available; which businesses that have issues based on significant debt burdens and SMEs without established risk management departments, we advise on current insurance arrangements and recommend service providers that will assist in reviving your business.

Xplico Insurance Company Limited Annual Report and Financial Statement 2012

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Maisha Poa

At Xplico we believe that health is the most valuable asset for every man, woman and child - no matter their social status. We recognize the value of each policy holder and are guided by our commitment to offer comprehensive medical insurance with the flexibility to create an insurance plan that works for every family. This ensures that every family will have access to medical insurance through a network of trusted hospitals, clinics and doctors and the convenience of a 24 hour customer care centre. To achieve our objective, we have put in place, as a backbone to our programme, a team that includes risk management, real time claims verification, dynamic insurance software and a team of professionals with over 15 years’ experience in medical insurance. We know that dealing with health concerns can be difficult. These matters are most often dealt with in times of illness and difficult decisions have to be made. We are committed to the ideal of universal medical care for all. We are passionate about pioneering affordable health insurance in Kenya and through out Africa.

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Xplico Insurance Company Limited Annual Report and Financial Statement 2012


Report of the Directors’

The Directors submit their report together with the audited financial statements for the year ended 31st December, 2012 which disclose the state of affairs of the company.

Incorporation

Directorate

The company is incorporated in Kenya under the Companies Act and is domiciled in Kenya.

The directors who held office during the period to the date of this report are set out on page 1.

Principal Activity

Auditors

The company transacts all classes of general insurance business as defined by the Insurance Act.

The company’s auditors, Mawji Sennik and Company, continue in office in accordance with Section 159(2) of the Companies Act (Cap 486).

Results and Dividend The net profit for the period of Kshs. 28,542,564 (2011: Kshs 7,149,496) has been added to retained earnings.The directors do not recommend the declaration of a dividend for the period.

Financial Risk Management Objectives & Policies The company’s activities expose it to a variety of financial risks, including loss risk (claims), credit risk and the effects of changes in equity market prices, foreign currency exchange rates and interest rates. The company’s overall risk management programme focuses on the acceptable level of loss risk and the unpredictability of financial markets and seeks to minimize potential adverse effects on its financial performance. The company has policies in place to ensure that insurance is sold to customers with an appropriate claim and credit history.

BY ORDER OF THE BOARD S. C. HANDA

SECRETARY NAIROBI.

Date: 14th March, 2013

Xplico Insurance Company Limited Annual Report and Financial Statement 2012

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Statement of Directors’ Responsibilities The Kenyan Companies Act (Cap. 486) requires the directors to prepare financial statements for each financial year that give a true and fair view of the state of affairs of the company as at the end of the financial year and of its profit or loss for that year. It also requires the directors to ensure that the company maintains proper accounting records, which disclose with reasonable accuracy the financial position of the company. The directors are also responsible for safeguarding the assets of the company. The directors accept responsibility for the preparation and fair presentation of financial statements that are free from material misstatement whether due to fraud or error. They also accept responsibility for: i. designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of the financial statements; ii. selecting and applying appropriate accounting policies; and iii. making accounting estimates and judgments that are reasonable in the circumstances. The directors are of the opinion that the financial statements give a true and fair view of the state of financial affairs of the company as at 31 December 2012 and of its profit and loss and cashflow for the year then ended in accordance with the International Financial Reporting Standards and requirements of the Companies Act (Cap.486). Nothing has come to the attention of the directors to indicate that the company will not remain a going concern for at least the next twelve months from the date of this statement. Approved by the board of directors on 14th March, 2013 and signed on its behalf by:

................................ ..................................... Director Director

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Xplico Insurance Company Limited Annual Report and Financial Statement 2012

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


Report Of the Independent Auditor We have audited the accompanying financial statements on pages 14 to 34 which comprise the balance sheet at 31st December, 2012, and the income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Directors’ responsibility for the financial statements As stated on page 12, the directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatements, whether due to fraud or error, selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of the risks of material misstatements of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for

the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluation the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis of our opinion.

Opinion In our opinion, the financial statements give a true and fair view of the financial position of the company at 31st December, 2012 and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards and the Kenyan Companies Act.

Report on other legal requirements The Kenyan Companies Act requires us to expressly report to you, based on our audit, that: i. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purpose of our audit. ii. In our opinion, proper books of account have been kept by the company, so far as appears from our examination of those books; and iii. The balance sheet of the company is in agreement with the books of account. Date: 14th March, 2013

Certified Public Accountants NAIROBI.

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Statement of Comprehensive Income

For The Year Ended 31st December 2012

2012 KShs.

2011 KShs.

540,378,870

249,618,383

468,063,438 (13,667,768)

172,839,394 (9,392,376)

454,395,670

163,447,018

13,281,906 1,274,729

1,097,312 115,011

468,952,305

164,659,341

146,833,979 (5,767,864)

67,985,716 (16,256,575)

141,066,115

51,729,141

235,447,781 53,615,961

76,219,765 26,364,233

289,063,742

102,583,998

38,822,448 (11,649,884)

10,346,202 (3,196,706)

27,172,564

7,149,496

Other comprehensive income: Surplus on revaluation of property, plant and equipment

1,370,000

-

Other comprehensive income for the year, net of tax

1,370,000

-

28,542,564

7,149,496

166.70

59.58

Income

Notes

Gross written premium Gross earned premium Less: Outwards reinsurance

4

Net earned premiums Investment income Commission earned

Claims payable Amounts recoverable from third parties

5

6

Net claims payable Operating and other expenses Commissions payable

Profit before tax Taxation

7

9

Profit for the year after tax

Total comprehensive income for the year attributable to shareholders of the company Earnings per share

14

Xplico Insurance Company Limited Annual Report and Financial Statement 2012

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Balance Sheet

As at 31st December 2012

2012 KShs.

2011 KShs.

407,500,000 34,322,060 1,370,000

300,000,000 7,149,496 -

443,192,060

307,149,496

97,107,064 59,000,000 37,000,000 29,359,227 258,516,969 201,494,071 61,515,347

30,991,304 57,500,000 15,000,000 267,731,221 71,364,231

743,992,678

442,586,756

92,508,216 149,094,421 15,770,672 34,542,284 751,518 8,133,507

42,468,750 76,778,989 10,884,831 2,107,984 3,196,706

Total liabilities

300,800,618

135,437,260

NET ASSETS

443,192,060

307,149,496

CAPITAL EMPLOYED

Notes

Share capital Retained earnings Revaluation surplus

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Shareholders' fund REPRESENTED BY: Property and equipment Investment property Government securities held to maturity Receivables arising out of insurance contracts Other receivables Deposit with financial institutions Cash and Bank balances

12 13 14 15 16 17

Total assets LIABILITIES Insurance contracts liablities Provision for unearned premium Other payables Borrowing Creditors arising from reinsurance arrangements Taxation payable

18 19 20 21

The financial statements were approved for issue by the Board of Directors on 14th March, 2013 and were signed on its behalf by: Director

Director

Principal Officer Xplico Insurance Company Limited Annual Report and Financial Statement 2012

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Statement of Changes in Equity Share capital KShs.

Retained earnings KShs.

Revaluation Surplus KShs.

KShs.

-

-

-

-

300,000,000

-

-

300,000,000

-

7,149,496

-

7,149,496

As at 31st December 2011

300,000,000

7,149,496

-

307,149,496

Issue of share capital

107,500,000

-

-

107,500,000

Net profit for the year

-

27,172,564

-

27,172,564

Surplus on revaluation of investment property

-

-

1,370,000

1,370,000

407,500,000

34,322,060

1,370,000

443,192,060

As at 1st July 2010 Issue of share capital Net profit for the year

As at 31st December 2012

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For The Year Ended 31st December 2012

Xplico Insurance Company Limited Annual Report and Financial Statement 2012

Total


Cash Flow Statement Cash flows from operating activities

For The Year Ended 31st December 2012

Notes

Profit before income tax Adjustments for: Depreciation Increase in premium and claim reserves

2012 KShs.

2011 KShs.

38,822,448

10,346,202

26,242,466 122,354,898

13,591,840 119,247,739

Operating profit before working capital changes Increase in trade and other receivables Increase in trade and other creditors

187,419,812

143,185,781

(20,144,975) 3,529,375

(267,731,221) 12,992,815

Cash (used in) generated from operations

170,804,212

(111,552,625)

(6,713,083)

-

164,091,129

(111,552,625)

(92,358,226) (130,000) (22,000,000)

(44,583,144) (57,500,000) (15,000,000)

Net cash used in investing activities

(114,488,226)

(117,083,144)

Cash flow from financing activities Proceeds from loans Loan repayment Proceeds from issue of shares

67,000,000 (45,000,000) 107,500,000

300,000,000

Net cash generated from financing activities

129,500,000

300,000,000

Net increase in cash and cash equivalents Cash and cash equivalents at 1 Jan 2012

179,102,903 71,364,231

71,364,231 -

250,467,134

71,364,231

Income tax paid Net cash (used in) generated from operating activities Cash flows from investing activities Purchase of fixed assets Purchase of investment property Purchase of government securities

Cash and cash equivalents at 31 December 2012

12

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Financial Statements

For The Year Ended 31st December 2012

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES estimates are reviewed at the end of each reporting period, and any revisions The significant accounting policies adopted in the preparation of these general to such estimates are recognised in the year in which the revision is made. The purpose financial statements are set out below: areas involving the judgements of most significance to the financial statements, and the sources of estimation uncertainty that have a significant risk of resulting a. Basis of Preparation in a material adjustment within the next financial year, are disclosed in Note 2. The financial statements are prepared on a going concern basis in compliance with International Financial Reporting Standards (IFRS). They are presented in b. New and Revised Standards Kenya Shillings, which is also the functional currency. The measurement basis i. Adoption of new and revised standards used is the historical cost basis except where otherwise stated in the accounting The following new and revised standards and interpretations have become policies below. effective for the first time for the financial year beginning 1st January 2011 and have been adopted by the company where relevant to its operations: The financial statements comprise a statement of comprehensive income, balance - IAS 24 - Related Party Disclosures sheet, statement of changes in equity, statement of cash flows, and notes. Income - IAS 32 (Amendment) - Classification of Rights Issues and expenses, excluding the components of other comprehensive income, are - IFRIC 14 (Amendment) - Prepayments of a Minimum Funding Requirement recognised in the statement of comprehensive income. Other comprehensive - IFRIC 19 - Extinguishing Financial Liabilities with Equity Instruments income is recognised in the statement of comprehensive income and comprises - The annual improvements project published in May 2010. items of income and expense (including reclassification adjustments) that are not The adoption of the above has had no material effect on the company’s accounting recognised in the statement of comprehensive income as required or permitted policies or disclosures. by IFRS. Reclassification adjustments are amounts reclassified to the statement of comprehensive income in the current period that were recognised in other ii. New and revised standards and interpretations which have been issued but comprehensive income in the current or previous periods. Transactions with are not yet effective the owners of the company in their capacity as owners are recognised in the The following revised standards and interpretations have been published but are statement of changes in equity. not yet effective for the year beginning 1st January 2011. The company has not early adopted any of these amendments or interpretations. The preparation of financial statements in conformity with International - IAS 12 (Amendment) - Income Taxes: the amendment requires that a rebuttable Financial Reporting Standards requires the use of estimates and assumptions. It presumption be made that the carrying property of investment property carried also requires management to exercise its judgement in the process of applying at fair value will be recovered through sale. It is effective for accounting periods the accounting policies adopted by the company. Although such estimates and beginning on or after 1st January 2012. assumptions are based on the directors’ best knowledge of the information available, actual results may differ from those estimates. The judgements and

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Xplico Insurance Company Limited Annual Report and Financial Statement 2012


Financial Statements - IFRS 7 (Amendment) - Disclosures - Transfers of financial assets: The amendments improve the disclosure requirements in relation to transferred financial assets and are effective for accounting periods beginning on or after 1st July 2011. - IAS 1 (Amendment) - Presentation of financial statements: the amendment will require entities to group items of other comprehensive income according to whether or not they will be subsequently reclassified to profit or loss. It is effective for accounting periods beginning on or after 1st July 2012. - IAS 19 (Amendment) - Employee Benefits: The key amendments include elimination of the ‘corridor approach’, modification of accounting for termination payments, and changes to the disclosure requirements for defined benefit plans. The amendments are effective for accounting periods beginning on or after 1st January 2013. - IFRS 9 - Financial Instruments will eventually replace IAS 39 - Financial Instruments, Recognition and Measurement. The new standard will be effective for annual periods beginning on or after 1st January 2015. The chapters published to date cover recognition, derecognition, classification and measurement of financial assets and financial liabilities. Most gains or losses on financial assets measured at fair value will then be recognised in profit or loss, but the company will be able to make an irrevocable election to present changes in fair value of investments in equity instruments in other comprehensive income. - IAS 27 (Revised) - Separate Financial Statements; IAS 28 (Revised) Investments in Associates and Joint Ventures; IFRS 10 - Consolidated Financial Statements; IFRS 11 - Joint Arrangements; IFRS 12 ¬ Disclosure of Interests in Other Entities: these revised and new standards become effective for accounting periods beginning 1st January 2013, and have to be adopted simultaneously if adopted earlier. IFRS 10 establishes new principles of control, which determines whether an investee should be consolidated: it replaces parts of IAS 27, which will then deal only with separate financial statements of a parent, and SIC 12 - Consolidation of Special Purpose Entities. IFRS 11 establishes new principles for determining the nature of a joint arrangement, and eliminates the ‘proportionate consolidation’ method for

For The Year Ended 31st December 2012

joint ventures. The revised IAS 28 deals with the application of the equity method of accounting for associates and joint ventures. IFRS 12 sets out revised disclosure requirements for subsidiaries, joint arrangements, associated and unconsolidated structured entities. - IFRS 13 - Fair Value Measurement: the new standard defines fair value, sets out a framework for measuring fair value, and requires disclosures about fair value measurements. IFRS 13 applies when other standards require or permit fair value measurements: it does not introduce any new requirements to measure an asset or a liability at fair value. The new standard is effective for accounting periods beginning on or after 1st January 2013. - IFRIC 20 - Stripping costs in the production phase of a surface mine: the Interpretation clarifies when production stripping should lead to the recognition of an asset and how that asset should be measured, both initially and in subsequent periods. The Interpretation is effective for accounting periods beginning on or after 1st January 2013. The Directors have assessed the potential impact of the above and expect that they will not have a significant impact on the company’s financial statements for 2012, other than the amendment to IAS 12, which will result in the write back of the deferred tax liability in respect of investment property. IFRS 9, when adopted, will result in changes in the classification of financial assets, with the four existing classes being reduced to two: amortised cost and fair value. c. Translation of foreign currencies On initial recognition, all transactions are recorded in the functional currency (the currency of the primary economic environment in which the company operates), which is Kenya Shillings.

Xplico Insurance Company Limited Annual Report and Financial Statement 2012

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Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) c. Translation of Foreign Currencies (continued) Transactions in foreign currencies during the year are converted into the functional currency using the exchange rate prevailing at the transaction date. Monetary assets and liabilities at the balance sheet date denominated in foreign currencies are translated into the functional currency using the exchange rate prevailing as at that date. The resulting foreign exchange gains and losses from the settlement of such transactions and from year-end translation are recognised on a net basis in the statement of comprehensive income in the year in which they arise, except for differences arising on translation of non-monetary available-for-sale financial assets, which are recognised in other comprehensive income. d. Income Recognition Premium income is recognized on assumption of risks, and includes estimates of premiums due but not yet received, less an allowance for cancellations, and less unearned premium. Unearned premiums 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, and computed using the 1/24th method. Commissions receivable are recognized as income in the period in which they are earned. Investment income is stated net of investment expenses. Interest income is recognized on a time proportion basis that takes into account the effective yield on the asset. Income arising on investments held by the general business is credited to the statement of comprehensive income.

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Xplico Insurance Company Limited Annual Report and Financial Statement 2012

For The Year Ended 31st December 2012

e. Reinsurance The company assumes and cedes reinsurance in the normal course of business, with retention limits varying by line of business. Premiums on reinsurance assumed are recognized as revenue in the same manner as they would be if the reinsurance were considered direct business. Premiums ceded and claims reimbursed are presented on a gross basis in the statement of comprehensive income and balance sheet as appropriate. f. Claims Incurred Claims incurred comprise claims paid in the year and changes in the provision for outstanding claims. Claims paid represent all payments made during the year, whether arising from events during that or earlier years. Outstanding claims represent the estimated ultimate cost of settling all claims arising from incidents occurring prior to the balance sheets date, but not settled at that date. Outstanding claims are computed on the basis of the best information available at the time the records for the year are closed, and include provisions g. Property and Equipment All categories of property, plant and equipment are initially recognised at cost. Cost includes expenditure directly attributable to the acquisition of the assets. Computer software, including the operating system, that is an integral part of the related hardware is capitalised as part of the computer equipment. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the company and the cost of the item can be measured reliably. Repairs and maintenance expenses are charged to the statement of comprehensive income in the year in which they are incurred.


Financial Statements

For The Year Ended 31st December 2012

Depreciation is calculated using the reducing balance method to write down the cost or the revalued amount of each asset to its residual value over its estimated useful life using the following annual rates: 25.0% - Motor Vehicles 30.0% - Computers 12.5% - Furniture and Fittings 12.5% - Office Equipment

As no parts of items of property, plant and equipment have a cost that is significant in relation to the total cost of the item, the same rate of depreciation is applied to the whole item. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Gains and losses on disposal of property, plant and equipment are determined by reference to their carrying amount and are taken into account in determining operating profit. On disposal of revalued assets, amounts in the revaluation surplus reserve relating to that asset are transferred to retained earnings. h. Impairment of Non-Financial Assets Non-financial assets that are carried at amortised cost are reviewed at the end of each reporting period for any indication that an asset may be impaired. If any such indication exists, an impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.

i. Investment Properties Investment property is property held to earn rentals or for capital appreciation or both. Investment property, including interest in leasehold land, is initially recognised at cost including the transaction costs. Subsequently, investment property is carried at fair value representing the open market value at the balance sheet date determined by annual valuations carried out by external registered valuers. Gains or losses arising from changes in the fair value are included in determining the profit or loss for the year to which they relate. Subsequent expenditure on investment property where such expenditure increases the future economic value in excess of the original assessed standard of performance is added to the carrying amount of the investment property. All other subsequent expenditure is recognised as an expense in the year in which it is incurred. j. Financial Instruments The company classifies its investments into the following categories: i. Held-to maturity investments which are non-derivative financial assets with fixed or determinable payments and fixed maturity that an entity has a positive intention to hold to maturity. ii. Loans and receivables which comprise non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, and excludes assets which the entity intends to sell immediately or in the near term or those which the entity upon initial recognition designates as at fair value through profit or loss or as available-for-sale financial assets.

Xplico Insurance Company Limited Annual Report and Financial Statement 2012

21


Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) j. Financial instruments (continued) iii) Financial assets at fair value through profit or loss which comprise financial assets or financial liabilities designated by the company at fair value through profit or loss and which are managed and their performance evaluated on a fair value basis in accordance with the company’s investment strategy. Financial assets All financial assets are recognised initially using the trade date accounting which is the date the company commits itself to the purchase or sale. Financial assets carried at fair value through profit or loss are initially recognised at fair value and the transaction costs are expensed in the statement of comprehensive income. All other categories of financial assets are recorded at the fair value of the consideration given plus the transaction cost. Subsequently, held-to-maturity investments, loans and receivables are carried at amortised cost using the effective interest method, while all other financial assets are carried at their fair values, without deduction for transaction costs that may be incurred on sale. Amortised cost is the amount at which the financial asset or liability is measured on initial recognition minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount and the maturity amount, and minus any reduction for impairment or uncollectibility. Fair value is the amount for which an asset can be exchanged, or a liability settled, between knowledgeable willing parties in an arm’s length transaction. The fair value for quoted shares is determined using the quoted bid price at the balance sheet date while that of non-quoted shares is determined

22

Xplico Insurance Company Limited Annual Report and Financial Statement 2012

For The Year Ended 31st December 2012

using valuation techniques. Investment in equity shares classified as availablefor-sale assets for which there is no active market and whose fair value cannot be reliably measured are carried at cost. The company assesses at each balance sheet whether there is objective evidence that a financial asset is impaired. If any such evidence exists, an impairment loss is recognised. Impairment loss is the amount by which the carrying amount of an asset exceeds its recoverable amount. In the case of held-to-maturity investments and loans and receivables, the recoverable amount is the present value of the expected future cash flows, discounted using the asset’s effective interest rate. Changes in fair value of financial assets at fair value through profit or loss are recognised in the statement of comprehensive income. Changes in fair value for available-for-sale financial assets are recognised in other comprehensive income, except for impairment losses (measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that asset previously recognised in profit or loss), which are recognised in the statement of comprehensive income. In the year of sale, the cumulative gain or loss recognised in other comprehensive income is recognised in the statement of comprehensive income as a reclassification adjustment. Changes in the carrying values and impairment losses of held-to-maturity investments and loans and receivables are recognised in the statement of comprehensive income. Trade and other receivables not collectible are written off against the related provision. Subsequent recoveries of amounts previously written off are credited to the statement of comprehensive income in the year of recovery.


Financial Statements

For The Year Ended 31st December 2012

All financial assets are classified as non-current except financial assets at fair value through profit or loss, those with maturities of less than 12 months from the balance sheet date, those which the directors have the express intention of holding for less than 12 months from the balance sheet date or those that are required to be sold to raise operating capital, in which case they are classified as current assets. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or the company has transferred substantially all risks and rewards of ownership.

balance sheet date and those which the company does not have an unconditional right to defer settlement for at least 12 months after the balance sheet date. Financial liabilities are derecognised only when the obligation specified in the contract is discharged or cancelled or expire.

The directors classify financial assets as follows: * Term and call deposits with financial institutions, financial investment and government securities are classified as ‘held-to-maturity investment’ where the management have positive intent and ability to hold to maturity and are carried at amortised cost using the effective interest method.

l. Receivables Outstanding premiums are carried at the amortised invoice amount less any provision for impairment. A provision for impairment is established when there is objective evidence that the company will not be able to collect all the amounts due according to the original terms of receivables. The amount of the provision is the difference between the carrying amount and the recoverable amount, being the present value of expected cash flows, discounted at the market rate of interest for similar borrowers.

Financial liabilities All financial liabilities are recognised initially at fair value of the consideration given plus the transaction cost with the exception of financial liabilities carried at fair value through profit or loss, which are initially recognised at fair value and the transaction costs are expensed in the statement of comprehensive income. Subsequently, all financial liabilities are carried at amortised cost using the effective interest method except for financial liabilities through profit or loss which are carried at fair value. All financial liabilities are classified as non-current except financial liabilities at fair value through profit or loss, those expected to be settled in the company’s normal operating cycle, those payable or expected to be paid within 12 months of the

Insurance contracts liabilities, creditiors arising from reinsurance arrangements and other payables are classified as financial liabilities by the directors and are carried at amortised cost.

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

Xplico Insurance Company Limited Annual Report and Financial Statement 2012

23


Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) n. Borrowing costs Borrowing costs, net of any temporary investment income on those borrowings, that are attributable to acquisition, construction or production of a qualifying asset are capitalised as part of the asset. The net borrowing cost capitalised is either the actual borrowing cost incurred on the amount borrowed specifically to finance the asset; or in the case of general borrowings, the borrowing cost is determined using the overall weighted average cost of the borrowings on all outstanding borrowings during the year less any specific borrowings directly attributable to the asset and applying this rate to the borrowing attributable to the asset. Capitalisation of borrowing costs ceases when all activities necessary to prepare the qualifying asset for its intended use or sale are complete. All other borrowing costs are recognised in the profit or loss in the year in which they are incurred. o. Taxation Income tax expense is the aggregate amount charged/(credited) in respect of current tax and deferred tax in determining the profit or loss for the year. Tax is recognised in the statement of comprehensive income except when it relates to items recognised in other comprehensive income, in which case it is also recognised in other comprehensive income, or to items recognised directly in equity, in which case it is also recognised directly in equity. i. Current tax Current income tax is the amount of income tax payable on the taxable profit for the year, and any adjustment to tax payable in respect of prior years, determined in accordance with the Kenyan Income Tax Act.

For The Year Ended 31st December 2012

ii. Deferred tax Deferred income tax is provided in full on all temporary differences except those arising on the initial recognition of an asset or liability, other than a business combination, that at the time of the transaction affects neither the accounting nor taxable profit or loss. Deferred income tax is determined using the liability method on all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes, using tax rates and laws enacted or substantively enacted at the balance sheet date and expected to apply when the related deferred income tax asset is realised or the deferred tax liability is settled. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilised. Recognised and unrecognised deferred tax assets are reassessed at the end of each reporting period and, if appropriate, the recognised amount is adjusted to reflect the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. p. Cash and cash equivalents Cash and cash equivalents include cash in hand and demand and term deposits, with maturities of three months or less from the date of acquisition, that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, net of bank overdrafts. q. Employee entitlements The estimated monetary liability for employees’ accrued annual leave entitlement at the balance sheet date is recognised as an employment cost accrual.

24

Xplico Insurance Company Limited Annual Report and Financial Statement 2012


Financial Statements r. Comparative Figures Where necessary, comparative figures have been adjusted to conform to changes in the presentation for the current year. 2. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS IN APPLYING ACCOUNTING POLICIES In the process of applying the accounting policies adopted by the company, the directors make certain judgements and estimates that may affect the carrying values of assets and liabilities in the next financial period. Such judgements and estimates are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the current circumstances. The directors evaluate these at each financial reporting date to ensure that they are still reasonable under the prevailing circumstances based on the information available. a. Significant judgements made in applying the company’s accounting policies The judgements made by the directors in the process of applying the company’s accounting policies that have the most significant effect on the amounts recognised in the financial statements include: i. The ultimate liability arising from claims made under insurance contracts The estimation of the ultimate liability arising from claims under insurance contracts is the company’s most critical accounting estimate. There are several sources of uncertainty that need to be considered in the estimate of the liability up to the time the company eventually settles the claim.

For The Year Ended 31st December 2012

iii. Income taxes Significant estimates are required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. iv. Impairment losses on receivables The company regularly reviews its receivables to assess impairment. In determining whether an impairment loss should be recorded in the statement of comprehensive income, management makes judgements as to whether there is any observable data indicating that there is a measurable decrease in the estimated future cash flows of any receivables. v. Held-to-maturity financial assets The company follows the guidelines of IAS 39 ‘Financial Instruments: Recognition and Measurement’ on classification of financial assets with determinable payments and fixed maturity as held-to-maturity. This classification requires significant judgement. In making this judgement, management evaluates its intention and ability to hold such assets to maturity. If the company fails to keep these assets to maturity other than for the specific circumstances, for example selling an insignificant amount close to maturity, it will be required to reclassify the entire class as available-for-sale. The assets would therefore be measured at fair value and not at amortised cost.

ii. Property, plant and equipment Critical estimates are required in determining the depreciation rates for property, plant and equipment. The management determines the rates of depreciation based on their assessment of the estimated useful lives of various items of property, plant and equipment. Xplico Insurance Company Limited Annual Report and Financial Statement 2012

25


Financial Statements 3. RISK MANAGEMENT OBJECTIVES AND POLICIES The Company’s activities expose it to a variety of financial risks, including insurance risk, financial risk, credit risk, and the effects of changes in property values, debt and equity market prices, foreign currency exchange rates and interest rates. The Company’s overall risk management programme focuses on the identification and management of risks and seeks to minimise potential adverse effects on its financial performance, by use of underwriting guidelines and capacity limits, reinsurance planning, credit policy governing the acceptance of clients, and defined criteria for the approval of intermediaries and reinsurers. Investment policies are in place which help manage liquidity, and seek to maximize return within an acceptable level of interest rate risk. This section summarises the way the Company manages key risks: a. Insurance Risk The risk under any one insurance contract is the possibility that the insured event occurs and the uncertainty of the amount of the resulting claim. By the very nature of an insurance contract, this risk is random and therefore unpredictable. For a portfolio of insurance contracts where the theory of probability is applied to pricing and provisioning, the principal risk that the Company faces under its insurance contracts is that the actual claims and benefit payments exceed the carrying amount of the insurance liabilities. This could occur because the frequency or severity of claims and benefits are greater than estimated. Insurance events are random and the actual number and the amount of claims and benefits will vary from year to year from the level established using statistical techniques. Experience shows that the larger the portfolio of similar insurance contracts, the

26

Xplico Insurance Company Limited Annual Report and Financial Statement 2012

For The Year Ended 31st December 2012

smaller the relative variability about the expected outcome will be. In addition, a more diversified portfolio is less likely to be affected across the board by a change in any subset of the portfolio. The Company has developed its insurance underwriting strategy to diversify the type of insurance risks accepted and within each of these categories to achieve a sufficiently large population of risks to reduce the variability of the expected outcome. Factors that aggrevate insurance risk include lack of risk diversification in terms of type and amount of risk, geographical location and type of industry covered. b. Financial Risk The Company is exposed to financial risk through its financial assets, financial liabilities (investment contracts and borrowings), reinsurance assets and insurance liabilities. In particular the key financial risk is that the proceeds from its financial assets are not sufficient to fund the obligations arising from its insurance and investment contracts. The most important component of this financial risk are interest rate risk, currency risk, credit risk and liquidity risk. These risks arise from open positions in interest rate, currency and equity products, all of which are exposed to general and specific market movements. The main risk that the company faces due to the nature of its investments and liabilities is interest rate risk and credit risk.


Financial Statements c. Interest rate risk This risk arises from the instability of the interest rate. To hedge against this, the Company enters into defined period investments. The Company also has an investment policy set by the board that ensures that the Company only invests in approved institutions. The weighted average effective interest rates on the principal interest bearing instruments are disclosed in Note 14. As at 31 December 2012 the company had fixed deposits with financial institutions and Government securities of KShs.238,494,071 d. Credit risk Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Credit risk mainly arises from financial assets, and is managed on a company-wide basis. The company does not grade the credit quality of financial assets that are neither past due nor impaired. Credit risk on financial assets with banking institutions is managed by dealing with institutions with good credit ratings and placing limits on deposits that can be held with each institution. Credit risk on trade receivables is managed by ensuring that credit is extended to customers with an established credit history. The credit history is determined by taking into account the financial position, past experience and other relevant factors. Credit is managed by setting the credit limit and the credit period for each customer. The utilisation of the credit limits and the credit period is monitored by management on a monthly basis.

For The Year Ended 31st December 2012

The following policies and procedures are in place to mitigate the Company’s exposure to credit risk: • Net exposure limits are set for each class of policy. • Reinsurance is placed with counterparties that have a good credit rating. • The Company sets the maximum amounts and limits that may be advanced to corporate counterparties by reference to their long-term credit ratings. It is management’s opinion that all of the Company’s financial assets which have exposure to credit risk are fully performing. e. Liquidity risk Liquidity risk is the risk that the company will encounter difficulty in meeting obligations associated with financial liabilities. The board has developed a risk management framework for the management of the company’s short, medium and long-term liquidity requirements thereby ensuring that all financial liabilities are settled as they fall due. The company manages liquidity risk by continuously reviewing forecasts and actual cash flows, and maintaining banking facilities to cover any shortfalls. The table below analyses assets and liabilities into the relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date.

Xplico Insurance Company Limited Annual Report and Financial Statement 2012

27


Financial Statements

For The Year Ended 31st December 2012

90 days As 31 December 2011 KShs Millions Assets Property and equipment - Investment properties - Recievables arising out of Insurance contracts Other receivables - Deposits with financial institution 201 Government securities - Cash and bank balances 62 263 Liabilities and shareholders’ funds

1 year KShs Millions

1-5 years KShs Millions

Over 5 years KShs Millions

- -

- -

97 59

29 258

- -

-

- - 288

37 - 37

156

Insurance contract liabilities Unearned premium Creditors arising from reinsurance arrangements Taxation payable Other payables Borrowings Shareholders’funds Total liabilities and Shareholders’ funds Net liquidity gap

93 149 1 - - - - 243 45

- - - - - - - - 37

443 443 (287)

- - - 8 16 34 - 58 205

The Company manages its investments in such a way as to meet its liabilities as they fall due.

28

Xplico Insurance Company Limited Annual Report and Financial Statement 2012


Financial Statements

For The Year Ended 31st December 2012

3. RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) Capital management The Company’s objectives when managing capital are:-

4. Gross earned premiums The company is organised into one main division, general insurance. General insurance business relates to all other categories of insurance business written by the company, analysed into several sub-classes of business based on the nature - to comply with the insurance capital requirements required by Insurance Act of the assumed risks. (Cap 487); - to safeguard the company’s ability to continue as a going concern so that it can The premium income of the company can be analysed between the main classes continue to provide returns for shareholders and benefits for other of business as shown below. stakeholders; 2012 2011 - to provide an adequate return to shareholders by pricing insurance and General insurance business KShs. KShs. investment contracts commensurately with the level of risk; and Motor 442,137,450 167,326,478 - to maintain a strong capital base to support the development of its business. Fire 839,831 546,411 Personal accident 75,184 52,315 The Insurance Act (Cap.487) specifies the minimum amount and type of capital that Others 25,010,973 4,914,190 must be held for Insurance companies. The minimum required capital (presented Gross earned premiums 468,063,438 172,839,394 in the table below) must be maintained at all times throughout the year. 5. Investment income The table below summarizes the minimum required capital and the regulatory Interest from government securities 2,092,207 1,097,312 capital held: Bank deposit interest 11,189,699 13,281,906 1,097,312 2012 2011 6. Claims payable KShs. KShs. Motor 142,548,329 66,177,738 Fire 539,479 (119,129) Capital held 407,500,000 300,000,000 Personal accident 3,133 3,412 Others 3,743,038 1,923,695 Required minimum capital 300,000,000 300,000,000 146,833,979 67,985,716

The company is subject to solvency regulations in respect of its insurance and investment contracts, and had compiled with those regulations at 31 December 2012. Xplico Insurance Company Limited Annual Report and Financial Statement 2012

29


Financial Statements

For The Year Ended 31st December 2012

2012 2011 10. Earnings per share 7. Operating and other expenses KShs. KShs. Earnings per share are calculated by dividing the profit attributable to Staff costs (Note 8) 57,051,470 11,266,923 shareholders by the number of ordinary shares in issue during the year. Auditor’s remuneration 3,000,000 1,100,000 2012 2011 Depreciation on property and KShs. KShs. equipment (Note 12) 26,242,466 13,591,840 Total profit after tax (KShs.) 27,172,564 7,149,496 Repairs and maintenance expenditure 1,075,224 290,649 Number of shares in issue 163,000 120,000 Others 148,078,621 49,970,353 Earnings per share (KShs.) 235,447,781 76,219,765 - Basic 166.70 59.58 8. Staff costs - Diluted 166.70 59.58 Salaries and wages 57,051,470 11,266,923 11. Share capital 9. Taxation Authorised This comprises: 200,000 Ordinary shares Current tax 11,649,884 3,196,706 (2011: 120,000 ) of KShs. 2,500/- each 500,000,000 300,000,000 Tax expense 11,649,884 3,196,706 Issued and fully paid 163,000 Ordinary shares The tax on the company’s profit before taxation differs from the theoretical (2011: 120,000) of KShs. 2,500/- each 407,500,000 300,000,000 amount that would arise using the basic rate as follows: Profit before tax 40,192,448 10,346,202 The authorised share capital was increased to Kshs. Five Hundred Million at Tax calculated at the rate of 30% 12,057,734 3,103,861 the Annual General Meeting held on 10th December 2012 by the creation of Tax effect of: additional 80,000 Ordinary share of Kshs 2,500/- each ranking pari passu in Items not subject to tax (8,283,740) (4,077,552) all respects with the existing shares. The total authorised number of ordinary Expenses not deductible shares is 200,000 with a par value of Kshs 2,500/- per share. for tax purposes 7,875,890 4,170,397 11,649,884 3,196,706

30

Xplico Insurance Company Limited Annual Report and Financial Statement 2012


Financial Statements

For The Year Ended 31st December 2012

12. Property and equipment Cost

Motor Vehicle KShs.

Computers KShs.

Furniture & Fitting KShs.

Office equipment KShs.

Total KShs.

5,200,000 - 5,200,000

16,219,049 50,608,237 66,827,286

20,561,673 33,819,248 54,380,921

2,602,422 7,930,741 10,533,163

44,583,144 92,358,226 136,941,370

At 1st January 2012 Additions At 31st December 2012

Depreciation At 1st January 2012 1,950,000 7,298,572 3,855,314 487,954 13,591,840 Charge for the year 812,500 17,858,614 6,315,701 1,255,651 26,242,466 At 31st December 2012 2,762,500 25,157,186 10,171,015 1,743,605 39,834,306 Net book values At 31st December 2012 At 31st December 2011

2,437,500 3,250,000

41,670,100 59,528,714

44,209,906 50,525,607

8,789,558 10,045,209

97,107,064 30,991,304

Xplico Insurance Company Limited Annual Report and Financial Statement 2012

31


Financial Statements

For The Year Ended 31st December 2012

13. Investment Properties 2012 2011 2012 2011 KShs. KShs. 15. Trade and other receivables KShs. KShs. Land At 1st January 2012 57,500,000 Deposits and prepayments 43,754,449 55,443,530 Additions 130,000 57,500,000 Other receivables 4,623,938 23,898,179 Fair Value Gains 1,370,000 Related party (Note 23) 210,138,582 188,389,512 At 31st December 2012 59,000,000 57,500,000 258,516,969 267,731,221 The leasehold land and buildings were professionally valued on an open 16. Deposits with financial institutions market basis by Redfearn International Limited Registered Valuers, Real Short term Estate Managers & Land Development on 7th February 2013 and the revalued business amounts have been incorporated in the financial statements. Maturing within 90 days 201,494,071 201,494,071 2012 2011 Maturing within 14. Government securities KShs. KShs. 90-360 days - - At 1st January 2012 15,000,000 Maturing over one year - - Additions 22,000,000 15,000,000 201,494,071 201,494,071 At 31st December 2012 37,000,000 15,000,000 Weighted Average Effective Interest Rates Investments in government securities are stated at the year end redemption Deposits with financial institutions 10.38% value. 2012 2011 17. Cash and cash equivalents Weighted Average Effective Cash and bank balances 61,515,347 71,364,231 Interest Rates % % Deposit with financial institution 201,494,071 Government securities 10.15 6.57 263,009,418 71,364,231

For the purpose of the cash flow statement, the year end cash and cash equivalents comprise the following:

32

Xplico Insurance Company Limited Annual Report and Financial Statement 2012


Financial Statements Cash and bank balances Deposit with financial institution Bank overdraft

For The Year Ended 31st December 2012

2012 2011 KShs. KShs. 61,515,347 71,364,231 201,494,071 263,009,418 71,364,231 (12,542,284) 250,467,134 71,364,231

18. Insurance contracts liabilities Claims reported and claims handling expenses 64,948,675 30,678,000 Claims incurred but not reported 27,559,541 11,790,750 92,508,216 42,468,750 19. Provision for unearned premium As at 1st January 2012 76,778,989 Increase during the year 72,315,432 76,778,989 As at 31st December 2012 149,094,421 76,778,989 20. Other payables Accruals 15,770,672 10,884,831 21. Borrowings Bank overdraft 12,542,284 Bank borrowing 22,000,000 34,542,284 -

22. Commitments Operating rental lease commitments. The future minimum lease payments under operating lease are as follows: 2012 2011 KShs. KShs. Not later than 1 year 35,912,324 4,938,700 Later than 1 year and not later than 5 years 143,649,296 15,096,726 23. Related party transactions The company is related to other companies through common shareholdings or common directorship. The following transactions were carried out with related parties. Other receivables from related parties (Note 15) 210,138,582 188,389,512

24. Directors’ emoluments - Emoluments 11,800,000 25. Contingent Liabilities In common with the insurance industry in general, the company is subject to litigation arising in the normal course of insurance business. The directors are of the opinion that this litigation will not have a material effect on the financial position or profits of the company. The company is subject to solvency regulations in respect of its insurance and investment contracts, and had complied with these regulations at 31st December 2012.

Xplico Insurance Company Limited Annual Report and Financial Statement 2012

33


General Insurance Business Revenue Account in KShs Class of Insurance Business Gross premium written

- 1,051,874

Changeingrossunearnedpremium

(286,391) (277,971)

Gross earned premiums

(286,391) -

Less: reinsurance payable Net earned premiums Gross claims paid Changeingrossoutstandingclaims Less: reinsurance recoverable Net claims incurred Commissions receivable Commissions payable Expenses of management Totalexpensesandcommissions Underwriting profit (loss) 2012

34

Fire Engineering Domestic

Fire Industrial

Liability

95,024 2,344,508

Marine

For The Year Ended 31st December 2012

Motor Motor Personal Private Commercial Accident

Workmen’s Theft Compensation Miscellaneous

2012 TOTAL

2011 TOTAL

9,237 385,090,265 126,913,410

76,447

281,571

889,310

23,627,224 540,378,870

249,618,383

(1,611,840) (72,315,432)

(76,778,989)

(29,096)

(646,958)

47,215 (55,924,419) (13,941,806)

(1,263)

460,472

(103,375)

773,903

65,928

1,697,550

56,452 329,165,846

112,971,604

75,184

742,043

785,935

22,015,384

468,063,438

172,839,394

1,041,469

2,762,701

-

1,839,600

-

-

-

3,731,598

13,667,768

9,392,376

56,452 324,873,446 111,132,004

75,184

742,043

785,935

18,283,786 454,395,670

163,447,018

(286,391) (267,566)

(2,696,773) 1,697,550

-

4,292,400

-

-

-

-

-

77,282,475

26,159,856

-

-

-

-

103,442,331

25,516,966

123,275

408,972

130,507

274,518

961

22,067,973

17,038,025

3,133

2,968,800

76,932

298,552

43,391,648

42,468,750

-

-

-

-

-

(3,988,751)

(1,779,113)

-

-

-

-

(5,767,864)

(16,256,575)

123,275

408,972

130,507

274,518

961

95,361,697

41,418,768

3,133

2,968,800

76,932

298,552 141,066,115

51,729,141

-

-

(323,127)

-

-

-

-

-

-

-

(951,602)

(1,274,729)

(115,011)

124,154

104,283

9,421

233,830

5,431

39,281,729

11,696,346

6,184

23,429

88,166

2,042,988

53,615,961

26,364,233

(129,042) (120,559)

(1,215,107)

764,879

25,436 146,380,867

50,073,650

33,876

334,348

354,125

8,238,274 204,740,748

65,188,318

(16,276)

(1,528,813)

998,709

30,867 185,662,596

61,769,996

40,060

357,777

442,291

9,329,660 257,081,980

91,437,540

(404,778) (660,262)

(1,298,467)

424,323

24,624

31,991 (2,584,534)

266,712

8,655,574

20,280,337

(4,888)

Xplico Insurance Company Limited Annual Report and Financial Statement 2012

43,849,154

7,943,240

56,247,575


Xplico Insurance Company Limited Annual Report and Financial Statement 2012

35


HEAD OFFICE Park Place, 5th Floor, Limuru Road, 2nd Parklands Avenue, P. O. Box 38106 - 00623 Nairobi, Kenya | Tel: 020-3642000 | Mobile: 0700-111999.| Email: info@xplicoinsurance.co.ke

BRANCHES Nairobi City Centre, Njengi House, 7th Floor, Tom Mboya Street P.O. Box 38106-00623 Nairobi, Kenya | Mobile: 0755-666641 Development House, 4th Floor, Tom Mboya Street P.O. Box 38106-00623 Nairobi | Tel: 020-316001/2

Nakuru | Ereto Plaza, 4th Floor P.O. Box 38106-00623 Nairobi | Tel: 051-2210652 Thika | Pushpa Plaza, Kwame Nkrumah Rd P.O. Box 38106-00623 Nairobi | Mobile: 0755666637/8 Kakamega | Tusky’s Mega Mall, 2nd Floor P.O. Box 38106-00623 Nairobi | Mobile: 0755-666604

www.xplicoinsurance.co.ke

36

Xplico Insurance Company Limited Annual Report and Financial Statement 2012

Meru | Edfri House, 2nd Floor P.O. Box 2845-60200, Meru | Tel: 020-31777/ 555 Eldoret |Imperial Court, Mezzanine Wing A P.O. Box 9024-30100, Eldoret | Tel: 053-2033090 Mombasa | Mombasa Trade Centre P.O. Box 38106-00623 Nairobi | Tel: 041-2220632/4


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