Prima Re Annual Report

Covering your risks beyond

2017

Annual Report and Financial Statements

TABLE OF CONTENTS 2

2017 Prima - Re Annual Report

Chairman’s Report Managing Director’s Report Performance Highlights 2016 Gross Written Premium by Class Board of Directors Senior Management + Corporate Information Directors’ Report to Members Statement of Directors’ Responsibilities Report of the independent auditors to the members of Prima Reinsurance Income Statement Statement of Comprehensive Income Statement of Changes in Equity Statement of Financial Position Statement of Cashflows Notes to the Financial Statements Notice of the 12th Annual General Meeting Form of Proxy Notes

3 6 7 8-9 10 11 14-19 22 23 - 25 I26 27 28 29 30 31-50 52 53 56

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Chairman’s Report I have the pleasure once more of presenting the results of Prima Reinsurance Plc for the year ended 31 December 2016.

Economic Overview

David Kombe Chairman

2016 remained a challenging year for the business world. Globally, the slowdown in the global economy continued in 2016 with economic activity in emerging markets and developing economies recording disappointing outturn.

On the home front, the pace of economic activity remained sluggish with growth projected at 3 percent due to continued electricity shortages, low exports and subdued private sector consumption and investment. The power deficit which started in June 2015 continued throughout 2016.

Prima Re remains confident about its future prospects particularly as it enters its 10th year of operation in 2017.

General elections were held on August 2016 which saw the peaceful re-election of His Excellency Mr. Edgar C. Lungu SC and ensured a smooth continuation of the economic recovery program. In his ministerial statement to Parliament in October 2016, the Honourable Minister of Finance, Hon. Felix Mutati admitted that Zambia was in a dire situation economically. This was due to both external and domestic challenges. He went on to set out the country’s Economic Recovery Programme to ensure that the country shifts back to levels of growth the country needs in order to prosper.

The deterioration of the Kwacha exchange rate against the US Dollar continued through the year, although the Kwacha performed better in 2016 from 2015, remaining fairly stable against major currencies due to tight monetary policies by Bank of Zambia, having started the year at a rate of K10.98/USD and

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2017 Prima - Re Annual Report

ending the year at K9.92/USD. The high inflation rates persisted in 2016, remaining in double digit figures from the beginning of the year hitting a high of 22.9% in February, until the last quarter of the year when it finally dropped to single digits in November, ending the year with a rate of 7.5%. A tightening of monetary policy by the central bank helped stabilize the exchange rate and put inflation on a downward trajectory although this led to tight liquidity conditions. All these factors have led to a subdued performance in the insurance and reinsurance industry in the country.

Industry Review With regard to the insurance industry, competition remained stiff as insurance companies continue to front large risks to foreign markets. Without any market protection measures in place the country continues to lose millions of dollars in the externalisation of funds through reinsurance.

Prima Re recorded an increase in its Gross Written Premium of 9% and continues to strive to provide increased capacity to the domestic market.

The Pensions and Insurance Authority (PIA) allowed for the writing of Life Business and Prima Re established the new division in the year.

The share price of shares for Prima Re remained stable at K 2.90 with the Company being amongst the top ten most active stocks by volume as well as by turnover.

The earnings per share increased from 0.06 to 0.10 during the year under review, an increase of over 60%.

Prima Re increased its market outreach and now has business emanating from over 15 countries within Africa. The Company continues to restrict its business portfolio to the African continent.

The two year moratorium on minimum capital requirement, as subscribed under the SI 71 (2015) comes to an end on 31 October 2017.

Prima Re has already attained and exceeded the minimum capital requirement.

Dividend The Directors recommend that no dividend be proposed for the year ended 31 December 2016.

Outlook As we go forward into 2017, we expect monetary policy easing which should enhance credit access and reduce the tight squeeze on liquidity. The Economic Recovery Programme embarked on by Government is expected to be supported by the IMF and this will increase investor confidence.

The new Insurance Bill is expected to be tabled before Parliament in 2017 and it is hoped that the regulators can introduce “local content” (where local capacity is exhausted before a risk is externalised) and “no premium no cover” regulations which will strengthen the domestic market and eliminate the huge debtors problem in the market, bringing it line with other markets in the region. The operating environment remains challenging going into 2017.

However, Prima Re remains confident about its future prospects particularly as it enters its 10th year of operation in 2017.

Prima Re relies on its solid strategies to support growth and deliver shareholder value.

On behalf of the Board of Directors and management, I wish to thank all our business partners for their support and loyalty during the year as well as the staff and management for their commitment and efforts.

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Managing Director’s Report

Exhilda Lumbwe Managing Director Prima Reinsurance Plc (Prima Re) continued to enjoy support from both the domestic and international markets leading to significant growth of the top line of 9%. The domestic market remained the major driver of the growth although substantial business was derived from the international markets within Africa such as Ethiopia, Kenya, Sudan, Uganda and Zimbabwe.

The claims paid were high during the year but there was equally a high recovery rate from the retrocessionnaires which brought down the net loss ratio to below 25%. The Company achieved a positive technical result driven mainly by a large earned premium release resulting into an operating surplus.

The large exchange gains of the previous period became exchange losses during the year under review, resulting into positive deferred tax. The profit after tax increased by over 70% compared to the previous period.

Shareholders’ funds increased by 6% whilst liabilities reduced by 4%. There was negligible growth in assets.

The Life Division was set up during the year and although some business came through,

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2017 Prima - Re Annual Report

Prima Re has continued to enjoy support from both the domestic and international markets resulting in sustainable growth.

this was very moderate and more significant business is expected during 2017.

Looking Ahead Prima Re is focused on strengthening its balance sheet through new investment opportunities so as to compete more favourably on the international platform within the African continent.

As the Company celebrates its 10th Anniversary in 2017, it will continue to seek new markets within the continent and extend its geographical reach whilst consolidating its position in the existing markets.

On the domestic front, the Government’s economic recovery plan should see revived economic activity in many sectors which will have a positive impact on the insurance industry and Prima Re can look forward to robust growth in the medium term.

Performance Highlights Gross Written Premium (Kwacha)

36.3M 33.2M 30.4M 25.5M 21.7M 16M

Year Timeline

2011

2012

2013

2014

2015

2016

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2017 Prima - Re Annual Report

Life Business

Written m per Class

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Post Box 658, PB E891, Lusaka Telephone: +260 211 221158 Cell: +260 971 695149 Fax: +260 211 221159 Email: primare@prima-re.com Plot 187C, Namambozi Road, Fairview, Lusaka.