UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015 · 2020-04-04 · 4, 000 PLUS...

KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 1.

U A P H O L D I N G S L I M I T E D ANNUAL REPORT & FINANCIAL STATEMENTS 2015

C O R P O R AT EG O V E R N A N C E

F I N A N C I A L S TAT E M E N T S

30 Corporate Governance Report

40 Directors’ Report

42 Statement of Directors’

Responsibilities

43 Report of the Independent

Auditors

44 Consolidated Statement of

Profit or Loss

45 Consolidated Statement of

Other Comprehensive Income

46 Consolidated Statement

of Financial Position

47 Company Statement of

Financial Position


of Changes in Equity

50 Company Statement of

Changes in Equity


of Cash Flows

52 Notes to Financial Statements

CONTENTS

B U S I N E S SR E V I E W

20 Group CEO’s Report

26 Sustainability and CSR Report

29 Five Year Financial Highlights

16

26 C S R

40 D I R E C T O R S ’ R E P O R T

C H A I R M A N ’ SS TAT E M E N T

02 UAP Old Mutual at a Glance

03 Old Mutual Plc at a Glance

04 Board of Directors

14 UAP Old Mutual Management

KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA2.

ANNUAL REPORT & FINANCIAL STATEMENTS 2015 U A P H O L D I N G S L I M I T E D

The UAP Old Mutual Group is part of the Old Mutual Emerging Markets (OMEM). As part of OMEM, UAP Old Mutual is able to leverage technology, technical expertise and the ability to offer broad career growth prospects for employees.

CUSTOMERSEGMENTS

RetailBusiness

Corporate

Our customers can now be assured of holistic solutions and unrivalled convenience to enable them realise their dreams.PETER MWANGI GROUP CEO, UAP OLD MUTUAL GROUP

Quick facts about the Group

6COUNTRIES

Kenya, Uganda, South Sudan,

Rwanda, DR Congo and Tanzania.

1.2M I L L I O N

Customers

4, 000P L U S

Employees & agents

The UAP Old Mutual Group is comprised of Faulu, UAP and Old Mutual, forming one of the largest financial services groups with a growing footprint in East and Central Africa. The Group was formed in 2015 as a result of the acquisition of a controlling stake by Old Mutual in Faulu Microfinance Bank in 2014 and UAP Holdings in 2015.

The merger process kicked off in June 2015 with Old Mutual Africa (OMA) assigning UAP Holdings as the board of reference to provide strategic oversight for the East Africa businesses, with their headquarters in Nairobi.

The Group pursues an integrated financial services model to avail to customers a comprehensive range of financial solutions which include Investment, Insurance, Banking and Savings through a wider and more accessible distribution network.

UAP OLD MUTUAL GROUP - EAST AFRICA AT A GLANCE

Banking Business Non Banking Businesses

The UAP Old Mutual Group will operate under the banner of:

The business will drive two key brands in the market.

12 Properties in 4 countries

At 33 storeys high, theUAP Old Mutual Tower is the Group’s flagship property project

Service & Distribution

Outlets

OUTLETS160+



PLC AT A GLANCEOLD MUTUAL IS AN INTERNATIONAL INVESTMENT, SAVINGS, INSURANCE & BANKING GROUP

The Business Model:

Old Mutual Emerging MarketsAn African financial services leader, providing long-term savings, protection, investment and lending to retail and corporate customers

15 Countries across Africa

NedbankIs one of South Africa’s four largest banking groups witha wide range of wholesaleand retail banking services

7m customers in9 African Countries

Old Mutual WealthIs the leading wealth management business in the UK and international markets

3, 000 UK financial advisors

Old Mutual Asset ManagementA diverse range of investment strategies and products for institutions, delivered worldwide through seven US-based boutiques

£ 168.2bn funds under management

Headquartered in London, we do business in Africa, Europe, the Americas and Asia.

From our origins in South Africa, we have expanded through organic growth and strategic acquisitions.

18.9 MCustomers

64, 043Employees

In Over 30Countries

£327.9 BnFunds under

management

Old Mutual began in Cape Town in 1845 as South Africa’s first mutual life insurance company, offering financial security in uncertain times. Today, 171 years on, Old Mutual plc is made up of four strong businesses comprising Old Mutual Emerging Markets, Nedbank, Old Mutual Wealth and OM Asset Management serving a combined 18.9 million customers.

Our customers are at the heart of everything we do. We know that we can only be successful with their continued support and trust – we aim to be their most trusted financial partner, helping them achieve their lifetime financial goals, while in-vesting their funds in ways that will secure a positive future for themselves and their families.

Currently, our 4 businesses have a central reporting structure. Going forward, we will be working towards actively managingthe separation of our four strong businesses to realise their full potential as standalone entities, in a manner consistent

with our responsible business values.


BOARD OF DIRECTORS

1

2

3

4

5 68

7


1. Peter de Beyer 2. Ralph Mupita

3. Anisha Archary4. David Marshall

5. A.K. Maina6. Dr. Peter Muthoka

7. Dr. Joseph Barrage Wanjui8. James Wambugu


BOARD OF DIRECTORS (CONTINUED)

9

10

11

12

13

14

15


9. James Muguiyi10. Mike Harper

11. Rose Ogega12. Susan Omanga

13. Paul Truyens14. Peter Mwangi

15. Tavaziva Madzinga



BOARD OF DIRECTORS & PROFILES

James Muguiyi is a Non-Executive Director at UAPHL, having previously served as Group Managing Director. During his tenure as the Group MD he oversaw the growth of the Group’s business in Kenya and expansion into Uganda in 2004 and South Sudan in 2006. He presided over the group restructuring in 2008 and the demerger of the Life Insurance Business from General Insurance Business in Kenya. Between 1988 and 2001, he was the Deputy Managing Director. During this time, he oversaw the merger of Provincial Insurance with Union Insurance to form UAP Provisional Insurance in 1994. Mr. Muguiyi is a director of several other companies and is Chairman of Centum Investment Company Limited, a company listed on the Nairobi Securities Exchange. He is a Fellow of the Institute of Certified Public Accountants of Kenya (FCPA (K)) where he was at one time the Chairman. He is also a Certified Company Secretary (CPS (K)) and a Chartered Management Accountant (ACMA).James Muguiyi

Director

Dr. Peter Muthoka is an Independent Director of the Board, and he is the current Chairman of the Faulu Micro Finance Bank, which is a member of the UAP Old Mutual Group. He is also the Chairman of the UAP Old Mutual Foundation. He previously served as the Group Chairman of Kenya Commercial Bank. He is the Chairman of the Board of Fellows of the Kenya Institute of Management (KIM) and Chairman of the Board of Trustees of the Management University of Africa (MUA). He has been a corporate leader and an entrepreneur with long and varied experience in public and private sectors in the fields of management, education, finance, investment, export promotion, agriculture, real estate, corporate governance, international diplomacy and community voluntary work. In recognition of his exemplary service rendered to the Kenyan Public Service and international organizations, he was awarded the medal of Moran of the Burning Spear (MBS) in 2004 and the medal of Elder of the Burning Spear (EBS) in 2012 by H.E The President of the Republic of Kenya.

Dr. Peter MuthokaEBS, MBS, FKIB, FKIMIndependent Director

Peter de BeyerDeputy Chairman

Peter de Beyer, is the Deputy Chairman of the Board having been appointed in June 2015. He joined Old Mutual in 1978 and has served the business in various arms and capacities as Development Actuary and Executive General Manager. In September 2000, Peter became Deputy Managing Director, South Africa, responsible for all Retail Business. In December 2003, Mr de Beyer, as Deputy MD, was given responsibility for Old Mutual Service, Mr de Beyer retired from Old Mutual in November 2008 and continues to serve on its several boards.

Dr. Joseph Barrage Wanjui CBSChairman

Dr. JB Wanjui, the Chairman of the Board has a long and illustrious career in the Kenyan corporate scene, the most prominent being the Chief Executive of East Africa Industries (which later became Unilever). He is a graduate of Ohio Wesleyan University, (BA Physics and Mathematics) and Columbia University, (MSC Engineering). Dr. Wanjui was the Chancellor of the University of Nairobi and was previously the Chairman of CfC Stanbic Bank Limited. He is also chairman and Board member of a number of other Kenyan and international organizations. Dr. Wanjui has been a director of the Company since 1986 and the Chairman of the Board since 1998. In recognition of his exemplary contributions to positive change in society, he received the Chief of the Order of the Burning Spear (CBS) of the Republic of Kenya award.



BOARD OF DIRECTORS & PROFILES (CONTINUED)

Mike HarperIndependent Director

Mike was appointed Chairman of Mutual & Federal in May 2012. Having worked in the Old Mutual Group since 1979, Mike has served in several executive positions including Strategy Director for Old Mutual Emerging Markets, leading strategic work across Asia, Latin America, South Africa and Africa markets. He also served as Distribution Executive on the OM Group Long Term Savings executive in London. Mike served on the Boards of Old Mutual Unit Trust, Old Mutual Investment Group and the Council of the Botanical Society of South Africa.

Ralph is currently the Chief Executive Officer, Old Mutual Emerging Markets. Ralph joined Old Mutual in 2001 in Old Mutual’s Individual Life business. He has served as Managing Director Old Mutual Unit Trust and Strategy Director within Old Mutual South Africa(OMSA) and Chief Executive Officer for Old Mutual Emerging Markets: Life and Savings. In February 2012, Ralph took up the position of CEO of Old Mutual SA and Emerging Markets. He is an engineer by training, (BSc. Eng Hons.), and obtained a Masters of Business Administration (MBA) from the University of Cape Town in 2000. He is a graduate of Harvard Business School’s GMP programme, and has also attended executive programmes at London Business School and INSEAD.

Ralph MupitaDirector

Tavaziva MadzingaDirector

Tavaziva is the Chief Executive Officer of Old Mutual Southern and East Africa. Previously he was Group Chief Executive Officer: East & West Africa, Chief Operating Officer of Old Mutual Africa Holdings, and Managing Director of Old Mutual Kenya (OMK). Tava joined Old Mutual Kenya in 2007 as the Strategy executive and then as the Deputy Chief Executive of Old Mutual Life Assurance Company (Kenya) in 2008. In 2010, he was appointed as the Managing Director of OMK, a position he held until July 2013 where his responsibilities included oversight of the development of a considerably widened product offering and increased accessibility to clients across the country. He was appointed as COO of Old Mutual Africa Holdings in August 2013. Tavaziva holds a Bachelor of Business Science in Actuarial Science from the University of Cape Town in South Africa. He is also a qualified Actuary and a Fellow of the Institute of Actuaries (FIA) and the Actuarial Society of South Africa (FASSA).

Paul TruyensIndependent Director

Paul currently serves on the Board of Old Mutual South Africa, where he is chairman of the Risk Committee and of the Committee for Customer Affairs; a member of the audit committee, and on the board of Old Mutual Kenya. He is also a non-executive director of Infrastructure Finance Corporation (INCA), where he has been on the board since its inception in 1996. Paul was a senior manager with PwC in the Netherlands from 2002 to 2007. Prior to that, he enjoyed a 20-year actuarial career with Southern Life in Cape Town, ending as chief actuary and CFO, and a member of the executive directors’ committee.




A.K Maina is the Managing Director of Kenya Railways. He previously served as General Counsel and Group Secretary & Head of Legal Services for UAP Holdings; a role that saw him provide legal advisory and company secretarial services to the twelve(12) operational businesses in East Africa.He attained a Bachelor of Laws at University of Nairobi and subsequently admitted as an advocate of the High Court. He is a Certified Public Secretary and holds various professional memberships. This includes: Law society of Kenya, East Africa Law Society and is a Fellow at Institute of Certified Public Secretaries of Kenya (ICPSK)

A.K. MainaIndependent Director

Susan is the CEO and founder of Exclamation Marketing Ltd. She previously served in senior marketing positions at Colgate Palmolive, Boots Kenya, Barclays Bank, and Standard Chartered. From 2004 -2012 she served as a non-executive Director in the Group Board of KCB where she was also Chairman of KCB Foundation, Director S & L Mortgages for 2 years and Director KCB Uganda for 4 years. Susan sits on the Board of Longhorn Publishers and Kenya Tea Packers Limited (KETEPA). She is also an advisory board Member at the University of Nairobi’s Green Horn Mentorship programme, a member of the Marketing Society of Kenya, the Public Relations Society of Kenya (PRSK) and the International Advertising Association (IAA). Susan holds an Associate of Applied Science Degree in Business Management from North West Community College, Powel, Wyoming and a Bachelor of Science Degree in Business Management with a Minor in Advertising from Rocky Mountain College in Billings Montana.Susan Omanga

Independent Director

David is a qualified accountant with a wealth of corporate finance skills and experience in the Americas, Europe and Asia, and he is highly regarded in merchant and investment banking circles. He is a South African by birth and a graduate of Hilton College and the University of Cape Town. Before to joining Old Mutual, Mr Marshall was the Managing Director for Credit Suisse’s Southern Africa ultra-high net worth business in London, and has worked for many global companies, including UBS, Deloitte, Standard Corporate and Merchant Bank. At UBS Wealth Management he advised the board on its global strategic acquisitions. Earlier in his career he was involved in the LSE listing of Anglo American and the unbundling of De Beers from Anglo.

David MarshallDirector

Rose is a qualified accountant and is currently the Managing Director of Bloom consultancy. She has extensive experience spanning over 25 years advising and managing both large, complex organizations and emerging startup ventures. Her work as a consultant, accountant, corporate governance specialist, entrepreneur, and non-executive director has centered on helping organizations deal with the challenges and opportunities of unprecedented changes in their operating environment.She has held several non-executive directorships including Barclays Bank of Kenya, Old Mutual Life Assurance Company Ltd, Old Mutual Asset Managers Kenya Ltd, and Old Mutual Investment Services Kenya Ltd.

Rose OgegaIndependent Director




Anisha is the Human Resources Director of Old Mutual Emerging Markets. The Emerging Markets portfolio spans South Africa, the rest of Africa, Colombia, Mexico, India & China and has a combined workforce of 31 000 employees. Previously Anisha held the position of Executive Vice President Global Passenger Services, Product & Marketing of SAA where she spent 12 years. She holds a Masters Degree in Psychology and has completed Leadership Programmes in Switzerland, South Africa and Harvard Business School. She has spent the last 28 years in the Corporate World learning & contributing across the Transport, Retail and Financial Services sectors. She has lived and worked in South Africa and India and her work has allowed for extensive travel across the African continent where her passion for building teams across boundaries and integrating new acquisitions into the Old Mutual business can be seen.

Anisha ArcharyDirector

James Wambugu is the Group Managing Director, General Insurance for UAP Old Mutual and an Executive Director of UAP Holdings. Mr. Wambugu joined UAP in July 2003 and has been involved in the development of the Group’s risk and quality management systems, business expansion and strategy development. He previously worked for PricewaterhouseCoopers in Kenya and the UK, Lonrho Africa and African Lakes Corporation in the fields of audit, transaction structuring and support and risk management. Mr. Wambugu has extensive experience across many countries in Africa. He holds an MBA and Bachelor of Commerce degrees from the University of Nairobi and a diploma in Advanced Management Programme (AMP) from IESE Business School, Barcelona and Strathmore Business School, Nairobi. He is a Qualified Risk Manager (MIRM) and a Certified Public Accountant of Kenya (CPA (K).

James WambuguExecutive Director

Peter MwangiGroup CEO

Peter serves as the Group Chief Executive Officer for UAP Old Mutual group. He joined Old Mutual Kenya as the Group Chief Executive in October 2014 from the Nairobi Securities Exchange (NSE) where he had been the Chief Executive for 6 years, in which capacity he is credited, amongst other things, with the successful demutualization and self-listing of the NSE. Prior to this, Peter was the Managing Director of Centum Investment Company which is Kenya’s largest publicly quoted investment company. Early in his career, Peter served in the Kenya Air Force and held the rank of Captain.

Peter holds a Bachelor of Science in Electrical Engineering from the University of Nairobi, and has a passion for financial services. He is a Certified Public Accountant and a Chartered Financial Analyst.



UAP OLD MUTUAL SUBSIDIARIES DIRECTORS

Martin Hudson British

Mark Weston New Zealander

Paul Truyens Dutch

BettyAnn MbocheKenyan

James MuguiyiKenyanChairman

UAP INSURANCE KENYA

Prof. J.H. KimuraKenyan

George OdoKenyan

Peter MwangiKenyan

James WambuguKenyan

Lotfi BaccoucheAustralian

Prof. Patrick WekeKenyan

Hannah-Gitonga MwangiKenyan

Joseph LesiewKenyan

Gary PalserSouth African

Kamau KuriaKenyanChairman

UAP LIFE ASSURANCE KENYA

Mary-Ann MusangiKenyan

Joseph MucheruKenyan

Jackson TheuriKenyan

Patricia KiwanukaKenyan

Susan OmangaKenyanChairperson

UAP INVESTMENT KENYA



UAP OLD MUTUAL SUBSIDIARIES DIRECTORS(CONTINUED)

Peter MwangiKenyan

Sophie NkuutuUgandan

Kamau KuriaKenyan

Dr. Sam SejjaakaUganda

Anthony GithukaKenyan

Dr. William KalemaUgandanChairman

UAP LIFE ASSURANCE UGANDA

Johannes! GawaxabNamibian

Peter MwangiKenyanAlternate

Mark WestonNew Zealander

Mary Barbiye KyeyuneUgandan

James WambuguKenyan

Andrew KasiryeUgandan

George MutemaUgandan

Zipporah MungaiKenyan

James MuguiyiKenyan

UAP INSURANCE UGANDA

Prof. GordonWavamunnoUgandanChairman



UAP INSURANCE DRC

Francis OgutuKenyan

Dr Sam SejjaakaUgandanChairman

James MuguiyiKenyan

Zipporah MungaiKenyan

UAP FINANCIAL SERVICES UGANDA

Johannes! GawaxabNamibian

Patricia KiwanukaKenyan

James WambuguKenyanAlternate

Peter MwangiKenyan

Wainaina KenyanjuiKenyan

Philip CoulsonKenyan

David KuriaManaging Director - Kenyan


Prof. Scopas DimaSouth Sudanese

UAP INSURANCE SOUTH SUDAN

UAP OLD MUTUAL SUBSIDIARIES DIRECTORS(CONTINUED)

Kevin TerryZimbabwean

Jackson TheuriKenyanChairman



UAP OLD MUTUAL SUBSIDIARIES DIRECTORS(CONTINUED)UAP INSURANCE TANZANIA

Mark WestonNew Zealander

Joseph WeremaTanzanian

Perece KirigitiTanzanian

Kevin TerryZimbabwean

Gideon NkadimengSouth African

Charles WashomaTanzanian

Moses Stewart KaluwaTanzanian

Nick ItungaKenyan

Peace MasozeraRwandese

Yvonne MakoloRwandese

Richard MugishaRwandeseChairman

UAP INSURANCE RWANDA

George OdoKenyan

James WambuguKenyan




Nick ItungaManaging Director,UAP Insurance Tanzania

Anthony GithukaManaging Director,UAP Life Assurance Uganda

UAP OLD MUTUAL MANAGEMENT

Nkirote Mworia NjiruGroup Company Secretary &Legal Counsel

Isaac NzyokaGroup MD - Health

James WambuguGroup MD - General Insurance

Charity WainainaGroup Head Marketing

Charles NjugunaMD - Faulu

EXECUTIVE MANAGEMENT

Zipporah MungaiManaging Director,UAP Insurance Uganda

SUBSIDIARIES LEADERSHIP TEAM

James WambuguManaging Director,UAP Insurance Kenya

Tichaona MakoneseManaging Director,UAP Insurance DRC

Peter MwangiGroup CEO

Patricia KiwanukaGroup MD -Asset Management

Jackson TheuriGroup Chief Financial Officer

Kevin TerryGroup Chief Operations Officer

Jerim OtienoGroup MD - Life

Pauline WanjohiManaging Director,UAP Insurance Rwanda

David KuriaManaging Director,UAP Insurance South Sudan

Peter Ng’enoGeneral Manager,UAP Investments Kenya

Mwanzo MosetiPrincipal OfficerUAP Life Assurance Kenya

Francis KajuraManaging DirectorUAP Financial Services Uganda

Risingtogether

“We are committed to investing in the East African region for the long term.”

Dr. Joseph B. Wanjui CBS,

CHAIRMAN



CHAIRMAN’S STATEMENTOn behalf of the Board of Directors of the Company, it gives me great pleasure to present the Annual Report and Financial Statements for the year ended 31st December 2015.

The past twelve months have been momentous for the UAP Group following the completion of the acquisition of a 60.7% stake by the Old Mutual Group (“Old Mutual”) in UAP Holdings Limited. This followed the sale of shares by Dr. Christopher J. Kirubi, Centum Investments Limited (“Centum”) and Private Equity investors: AfricInvest Fund II Limited, AfricInvest Financial Sector Fund (“AfricInvest”), Aureous Africa Fund LLC (“Aureous”) and Swedfund International Aktiebolag (“SwedFund”). I wish to thank Dr. Kirubi, Centum and the Private Equity investors for their valuable contribution to the growth of the Company which saw it rise from a Kenya-based insurance company to an East African financial services provider. I also thank them for their role in the identification of Old Mutual as a suitable strategic partner on their exit.

It is with pride that I present to you, the proposed merger of UAP Group and Old Mutual Kenya entities including Faulu Micro Finance Bank Limited to form the UAP Old Mutual Group in East Africa. This merger presents the UAP Group with an opportunity to become part of a larger integrated financial services provider, as well as provide our clients with access to tailored investment, savings, insurance and banking products. The combined business platform will enable the Group realize product, cost and operational synergies that will translate to better products for our customers and returns for our investors. I will provide further details on the merger later in my report.

Global and Local Economic ReviewThe global economy had a generally flat performance with most asset classes posting poor returns. The key themes for the year were falling commodity prices and the strengthening of the United States Dollar. Commodity exporters experienced deterioration in their terms of trade and economic performance however commodity importers realized cost savings from falling commodity prices especially oil. The rise of the U.S. Dollar also affected companies with dollar exposure such as foreign denominated revenues and dollar based borrowings. Locally, save for the Rwandan Franc, our East African economies deteriorated due to the weakening of local currencies, spikes in yields and poor returns especially from the equity markets. The region’s largest equity market, the Nairobi Securities Exchange (“NSE”), registered negative performance with the key benchmark indices performing poorly and impacting insurance and investment companies with equity holdings on the NSE.

Business and Financial PerformanceThe Group delivered improved performance in the underlying results despite a challenging macroeconomic environment. We reported Gross Earned Premiums of KES 16.9Bn representing a growth of 13.7% with the Net Earned Premiums growing by 72% to close at KES 12.1Bn. The core underwriting business remains strong and we expect to continuously improve performance. The Group was however affected by volatile market conditions and adverse currency movements resulting in poor equity performance which impacted our subsidiaries. We registered a decline of 28.1% in investment income as a result of exchange losses and fair value movements. This, combined with a 20.1% growth in expenses and commissions as well as the full year financing cost of our Corporate Bond reduced our Profit after Tax by 46.2% to close the year at KES 896.6Mn.

On the Property side of the business, we achieved several milestones which include the completion of the Equatoria Tower Juba, increased letting at Nakawa Business Park,

Uganda and the anticipated completion of UAP Old Mutual Tower in Nairobi by quarter 3, 2016.

UAP Old Mutual Group Integration Over the course of the 2015 financial year, UAP - Old Mutual Group made various public announcements as regards the merger which seeks to catapult the Group to be the leading financial services provider in East and Central Africa. The integration activities commenced in earnest in July 2015 with the reorganization of the Group along functional lines and the unveiling of the Group Executive Team charged with focusing and consolidating the different lines of business of the new Group.

At the helm, the Board appointed Mr. Peter Mwangi as the Group Chief Executive Officer of the Group with effect from 1st July 2015 as we bade the former Managing Director, Mr. Dominic Kiarie farewell, who opted to leave the Group to pursue other interests. Dominic had served the Group for a period of four (4) years where under his leadership, the Group successfully entered new markets in Tanzania, Rwanda and the Democratic Republic of Congo.

The key focus area in the short term is to consolidate the life and asset management businesses in Kenya subject to regulatory and shareholder approval as both UAP and Old Mutual have competing businesses in the market. The merger of these entities is aimed at improving operational efficiencies and delivering economies of scale by leveraging on the widened customer base and strong balance-sheet of the combined entities.

As we consolidate and integrate our existing businesses, we remain committed to the development of the Capital Markets in East Africa through the listing of UAPHL’s Shares on the Nairobi Securities Exchange Limited (“NSE”) within the next 18 to 30 months subject to favourable market conditions as the Group consolidates its footprint in East Africa.

In the meantime, we shall operate in East and Central Africa in the brand name and style of UAP – Old Mutual Group. This Dr. Joseph B. Wanjui CBS,

CHAIRMAN



CHAIRMAN’S STATEMENT (CONTINUED)

entails dual branding across all our markets with the joint marks of “UAP” and “Old Mutual” to support the business vision as we transition our UAP subsidiaries, customers, advisers, employees, shareholders and other stakeholders seamlessly into the Old Mutual Group.

Governance and Board Developments The regulatory framework for insurance companies within East Africa continues to evolve with regulators developing, enhancing and implementing a Risk Based approach to supervision. In Kenya, the Insurance Act has been amended to adopt a risk based model on the computation of capital aimed at ensuring insurance companies are appropriately capitalized based on the level of risk carried by the company. These regulations are welcome as they seek to create a sustainable insurance industry by encouraging companies to put in place adequate structures to monitor the level of risk taken which has a direct impact on the capital requirements of the company.

On the governance front, the Companies Act, 2015 Kenya has come into force which significantly impacts the fiduciary duties of directors as stewards of the Company. Directors now have a legal obligation to at all times promote the success of the company and act in its best interest by exercising independent judgment and avoiding conflicts of interest. We welcome these changes and continue to implement good governance practices as we believe these are the key drivers for change in culture and performance.

Within our board structure, several changes were made to the composition of executive and non-executive directors across the Group on the exit of key shareholders.

I wish to welcome Mr. Peter de Beyer as the Deputy Chairman of the Board, Dr. Peter Muthoka EBS, Mr. Ralph Mupita, Mr. Tavaziva Madzinga, Mr. Michael Harper, Mr. Paul Truyens, Mr. David Marshall, Mrs. Rose Ogega, Ms. Anisha Archary and Mr. A.K. Maina as new directors on the Board, as I thank those directors who left us during the year for their valued contribution. Further details of the Boards composition are included in the Corporate Governance Statement that forms part of this Annual Report.

We shall continue to strengthen our existing board structures through the implementation of a robust directors’ training and development program geared at enhancing diversity and fulfilling our responsibilities to stakeholders as well as regional regulators.

Dividend Recommendation On consideration of the overall financial performance of the Group, the Board has noted the decline in profitability as compared to prior year and does not recommend the declaration of a dividend or payment of the same for the year ended 31st December 2015. We instead recommend that the revenues generated for the year be ploughed back to the business to strengthen our capital base as the Group gears up to grow its underwriting margins and meet the anticipated increase in capital due to the regulatory changes described above.

Future Prospects and StrategyWe are committed to investing in the East African region for the long term and our outlook is positive given improved governance, stable macroeconomics and the underlying resilience of economies in the region. Insurance penetration remains low with Life penetration at 0.1% in Uganda, 0.6% in Tanzania and 1.1% in Kenya. Similarly, Property & Casualty penetration is also low at 0.6% in Uganda, 0.01% in Tanzania and 1.9% in Kenya. This suggests that we still have substantial room to grow our underwriting business. Our focus is to achieve profitable growth sustained by a robust product pipeline and excellent customer service. With currency stabilization, steady macroeconomic factors, range-bound inflation and good weather, the operating environment should become supportive for business in the region and this will drive investment returns.

Furthermore, we now have an integrated business and we stand to reap great benefits through strengthened operations, learnings on best practices, greater product innovation, driven and motivated employees and a strong combined brand for the East African business. I look forward to walking this journey with you in 2016 and beyond.

Appreciation I wish to sincerely thank the Board of Directors for their continued dedication and service in steering the Group, our customers, business partners and intermediaries who anchor our business and our valued shareholders for their continued support. I wish to specially recognize management and staff for their diligence and loyalty throughout the year. I look forward to strengthening our current relationships and building new ones as we explore new and better ways to serve our clients and partners long into the future.

Dr. JB Wanjui CBS - Group Chairman



Soar towardsyour dreams



CHAIRMAN’S STATEMENT“Our people remain at theheart of the successful Integration of UAP Old Mutual Group.”

Peter Mwangi,

GROUP CEO



GROUP CHIEF EXECUTIVE OFFICER’S REPORT

I am pleased to present to you, UAP Holdings Limited performance for the year ended 31st December 2015. The year under review marked a significant turning point in the Group’s history following the acquisition of a 60.7% stake jointly held by Old Mutual Life Assurance Company (South Africa) Limited and Old Mutual Holdings Limited (Kenya) (“Old Mutual”) through the acquisition of shares in UAP Holdings Limited valued at KES 23.3 Bn from a diverse group of investors including Centum Investment Limited, the Abraaj Group, AfricInvest and Swedfund.

The merger of the UAP and Old Mutual Groups seeks to combine leading businesses in General Insurance, Medical Insurance, Life Assurance, Asset Management, Property, Stock Brokerage and Banking (under Faulu) aimed at delivering quality service to our valued customers as we strive to become East Africa’s premier financial services provider. I will share more details of the rationale for this merger, the anticipated benefits and key milestones so far later in my report.

Economic OutlookOur underlying business displayed great resilience operating in a very challenging macroeconomic environment. Key events that negatively impacted our business were substantial deterioration of regional currencies against the U.S dollar – the Rwandese Franc (“RWF”) lost 8%, the Kenya Shilling (“KES”) 13%, Uganda Shilling (“UGX”) 22%, Tanzania Shilling (“TZS”) 24% while the South Sudanese Pound experienced depreciation greater than 500%. The interest rate environment spiked in October 2015 with elevated yields especially on Treasury Bills in Kenya. Corporates in East Africa faced rises in inputs and borrowing costs and those with foreign denominated borrowings particularly USD were hard hit. Several listed companies on the Nairobi Securities Exchange (“NSE”) issued profit warnings on the decline in earnings by more than 25% as compared to the prior year souring investor sentiment. This in turn adversely impacted equity markets which deteriorated significantly registering negative performance with the NSE 20 at -21.0% and the NASI -10.6%.

Insurance Industry Regulators within the East Africa Market continued to collaborate by enhancing their efforts on regional supervision of insurance companies. Critical to the business is the move to adopt and implement a Risk Based approach to Supervision. In Kenya, the Insurance Regulatory Authority (“IRA”) is on course to implement changes in Regulations on the minimum capital requirements an insurer should hold for short-term, long-term and composite insurers as well as restrictions on inadmissible assets which impacts computation on solvency margins. Similar Regulations in Rwanda and Uganda are anticipated to be implemented in 2016 with an expectation that there will be increased scrutiny on insurers to ensure that they are adequately governed and capitalised to facilitate the

continued stability of the industry. Overall, the Group remains adequately capitalised with shareholder funds of KES 16.4Bn as at December 31, 2015.

Further changes in the implementation of tax laws may continue to drive the cost of insurance higher. For instance, in Kenya, Excise duty on insurance commissions has been implemented with the Group already submitting remittances as required while Uganda and Tanzania, Regulators have implemented a charge of VAT at 18% for all insurance policies underwritten.

In the Democratic Republic of Congo (DRC), we welcomed the liberalisation of the insurance industry following amendments to the insurance laws which now allow foreign insurers entry into the market effective March 2016. This is a welcome development for the Group as we expect to generate more revenue given the high demand for insurance cover in the country. We currently note that the governance structure required to lead the industry standards through a Regulator body to oversee the insurance sector has not been fully developed, a key step towards full liberalisation. Further, the minimum capital base required to operationalize an insurance are restrictive as the minimum capital requirement is USD10 Million.

Performance in the year:Despite the challenges experienced on the macroeconomic front, the Group registered 14% growth (18% for our General Business and -12% for the Life Business) in Gross Written Premium (GWP). Our gross written premiums have grown at a Compounded Annual Growth Rate (“CAGR”) of 25.3% between 2011 and 2015, reflecting our ability to provide our customers with relevant and cost effective products.

Peter Mwangi,

GROUP CEO



GROUP CEO’S REPORT (CONTINUED)

GWP BY REGION 2015 GWP BY REGION 2014

RWANDA 4%

SOUTHSUDAN

10%

UGANDA21%

KENYA 56%

RWANDA 2%

SOUTHSUDAN

9%

UGANDA19%

KENYA 56%

GWP BY REGION 2015 GWP BY REGION 2014

RWANDA 4%

SOUTHSUDAN

10%

UGANDA21%

KENYA 56%

RWANDA 2%

SOUTHSUDAN

9%

UGANDA19%

KENYA 56%

20.0

15.0

10.0

0.5

-

GWP

2011

7.39.1

6.5

12.7

9.0

14.8

11.3

16.9

12.1

5.2

2012 2013 2014 2015

NEP

2011 – 2015 Gross Written Premium and Net Earned Premium (KES Bn)

Our regional expansion strategy served us well as we continue to diversify our income streams. We continued to review our branch networks to provide our customers with easier access to our products; we therefore launched new branches in Tanzania and Rwanda, incurring expenses that we will recoup by generating greater volumes of business revenue going forward. Our subsidiaries outside Kenya contributed 44% of our top line compared to 38% in 2014 and we continue to bolster subsidiary performance despite encountering adverse conditions particularly in South Sudan where political conflicts and massive currency depreciation deepened investor anxiety.

The Group registered positive financial metrics in 2015, for instance, our asset base increased by 16% to KES 49Bn with internally generated cash flows enabling us to bolster our property investments across the East African region and support further growth.

The deterioration in the operating environment due to currency depreciation, substantial increases in yields and poor equity market performance dampened our investment income for 2015. Investment Income for the period declined by KES 800Mn due to fair value movement of listed equities on the NSE. Additionally, weakening of the UGX led to an unrealised foreign exchange loss of KES 530Mn on dollar denominated borrowings used to support the Uganda Property business.

As a result of this, the Profit before Tax (“PBT”) closed at KES 693Mn compared to KES 2.3Bn in 2014, a decline of 70%. Other events that impacted the financial performance for the period include reduced property revaluation gains in Uganda and Kenya, incremental finance costs in 2015 (full year financing costs for the UAP Corporate Bond issued in mid-2014) and one-off increases in bad debt provisions for premium debtors in the General and Life Businesses.




Given the financial performance of the Group, the Board does not recommend the declaration of a dividend for the year ended 2015 due to reduced profitability in the business. Additionally, we want to ensure that we have sufficient capital to support our business in view of the proposed transition to a Risk Based Capital framework in Kenya.

Remaining Merger Transactions between UAPHL and Old Mutual The Board of Directors has reviewed and approved the proposal to reorganize the legal entities of UAP and Old Mutual that are based in Kenya. The reorganization is necessary so as to enable the Group to realize revenue and cost synergies through the creation of new distribution channels, improved products, and savings from shared resources such as Information Technology (“IT”), Human Resources (“HR”), Marketing and Legal.

The Board considered various avenues for achieving the reorganization. It was determined that the most optimal way would be to merge the legal entities within UAP Holdings Limited (UAPHL) and Old Mutual Holdings Limited (OMHL) that carry out similar businesses by creating a linkage in the ownership structures of UAPHL and OMHL. To this end, it was agreed to bring the operating subsidiaries within OMHL under UAPHL which is already publicly trading its shares. The particular OMHL entities to be acquired by UAPHL are:

OMHL Subsidiary Proposed% Stake to beAcquired by UAPHL

i. Old Mutual Life Assurance Company (“OMLAC”)

100

ii. Old Mutual Investment Group (“OMIG”)

100

iii. Old Mutual Investment Services (“OMIS”)

100

iv. Old Mutual Securities (“OMS”) 70

v. Faulu Microfinance Bank (“Faulu”) 25

The Company appointed the following transaction advisors to carry out legal and financial due diligence of the OMHL subsidiaries: • Pacifis Advisory Services Ltd – Lead Transaction Advisor • PricewaterhouseCoopers (PwC) – Financial Advisors • Coulson Harney – Legal Advisors

The proposed transaction requires your approval as well as that of the Capital Markets Authority (CMA), Insurance Regulatory Authority (IRA), Retirement Benefits Authority (RBA), and Central Bank of Kenya (CBK).

The details of the proposed transaction are currently being reviewed by the aforementioned regulators. Once their approval is received, the details shall be availed by way of a Shareholders Circular in due course.

Managed Separation of the Old Mutual Plc GroupIn March 2016, following a strategic review, Old Mutual Plc announced the proposed structural review of its operations by separating its four (4) constituent business units, that is: 1. Old Mutual Emerging Markets (“OMEM”) – A financial

services provider with a strong retail affluent and wealth proposition which is also the Holding Company for all business in Africa, South America and Asia. UAP Old Mutual Group falls under this cluster;

2. Nedbank – a leading South African bank providing a wide range of wholesale and retail banking services and a growing insurance, asset management and wealth offering;

3. Old Mutual Wealth – a leading United Kingdom (“U.K”) and cross border wealth management business;

2,500.0

2,000.0

1,500.0

500.0

0.02011

1,209.9

1,748.0

2,211.72,296.2

693.2

2012 2013 2014 2015

2011 – 2015 Profit before Tax (KES Mn)




4. Old Mutual Asset Management – a United States (“U.S”) based company providing a diverse range of investment strategies and products, delivered through a multi-boutique model to institutional investors around the world.

The underlying rationale for the managed separation of these business units is that each business is viable to function separately and is better placed to manage its own capital requirements while maximising shareholder value. The managed separation is expected to be completed by 2018 and is aimed at unlocking cost savings and reduce the conglomerate discount that investors currently apply to the Group.

For the UAP Old Mutual Group, there will be no immediate changes that impact the day to day operations of the Group within East Africa. We shall continue to offer the full range of financial services, savings and investments products while providing our customers with the value and service to which they are accustomed. We remain focused on executing our strategy, providing our customers with first class service, and creating value for all our stakeholders.

OutlookThe next twelve (12) months present a mixed outlook: further currency deterioration within East Africa, weather related inflationary shocks, rising political temperatures, insecurity and a tepid global economy could create challenges for our businesses in East Africa. Nevertheless, we are committed to investing in East Africa and are ready to adapt and respond to changing macroeconomic and political conditions. The

long-term thesis for investment remains solid. With low insurance penetration and financial inclusion, growing disposable income and consumer education, our market has great potential. We are also poised to reap great gains from the merger as we draw on shared experiences and better management capacity. The combined UAP Old Mutual Group platform creates numerous opportunities for the realisation of revenue and cost synergies which will boost our profitability and returns to investors and stakeholders.

AppreciationFirst, I wish to thank you, our valued shareholder, and I assure you that Management and staff are doing their utmost to meet profitability and returns expectations for 2016 and beyond. I would also like to express my thanks and appreciation to our customers who form the core of our business. Additionally, I thank our Board members for their oversight and guidance especially during the merger process. I also thank our business partners and intermediaries for their continued support as we grow the business. Finally, my thanks go to my colleagues in the businesses in East Africa, your work drives our business.

Yours Sincerely,

Peter K. MwangiGroup Chief Executive OfficerUAP Old Mutual Group



SUSTAINABILITY AND CSR REPORT 2015 (CONTINUED)

Plantingour future



SUSTAINABILITY AND CSR REPORT 2015

Promoting a Better -Simple -Life UAP recognizes that businesses need to go beyond the interests of their companies, to the communities they serve. The corporate social responsibility framework in place holds us accountable to our employees, clients, shareholders and society at large; in regards to the Organization’s efforts towards giving back to the communities in which we serve.

Our focus areas across East Africa is pegged on: Education, Health, Financial Literacy, the Environment and Sports

Better… StaffQuick statistics;• Number of staff training - 34• Number of staff trained - 600• Number of proffessional courses undertaken - 7

Our employees are the lifeblood of our business, they may be termed as the catchment for the business success. As a business we strive to ensure we empower and equip our people through provision of career enhancing opportunities as well as training.

The inclusion into the wider Old Mutual Group presents prospects for skills transfer and capacity building. Individuals in the Group’s job swap program will see various individuals from Risk and Underwriting department transfer to London for training in 2016.

As part of enhancing our customer service, we always look to programs that will positively impact our service delivery. Our businesses run a series of trainings for their teams to manage Customer Service.

Better. Simple… HealthOur contribution to impacting healthcare in the region goes beyond rendering health insurance services.The state of an individual’s health influences the quality of life they live and the contribution they make to society. We value the opportunity to provide support to through medical camps, walks or runs, fundraisers and wellness clinics.In December 2015, our Uganda Business initiated a partnership with Uganda America Sickle Cell Research Fund. This will go a long way in supporting efforts towards curbing Sickle Cell. In Kenya, the business participated in a blood drive for the Kenyatta National Hospital in August 2015; this served as patient support following our participation in renovation work at the hospital’s Accident and Emergency unit through the UAP Old Mutual Foundation.

UAP Uganda makes donation to American Sickle Cell Foundation

UAP Kenya Staff participate in blood drive

Cabinet Secretary Ministry of Health Dr. Cleopa Mailu unvelis refurbished A&E unit at KNH & later met with Old Mutual Foundation Trustees



SUSTAINABILITY AND CSRREPORT 2015 (CONTINUED)Better. Simple… EducationQuick statistics;• Number of years of sponsorship - 12 years• Value of sponsorship - Kshs. 3,062,802

Education is a means of developing our greatest abilities to inspire the hopes and dreams of our children; equipping them to better our nation. UAP provides long term education sponsorship for bright and disadvantaged children.Support for our next generation goes beyond the financial aspect as staff engage in mentorships forums which serve to give encouragement and a sense of belonging to the beneficiaries.

In Tanzania, the UAP business supported technology literacy though donation of computers to Sokoine and Moringe Primary Schools in Dar les Salam.The drama festivals express individualism and help our children to discover, demonstrate and nurture their gifts. Through drama, a unique stage is set to allow them learn and share core messages to society. The support of UAP in this space has been to promote culture and learning, which will serve to inspire and motivate the next generation. In South Sudan the business partnered with the United National Children Education Fund (UNICEF) to sponsor the first ever Inter -School, College and University Drama Festival in the country. The two day event attracted a record 30 education institutions drawn from the length and breadth of South Sudan.

More…**pics of school/beneficiaries**pics of TZ donation***Pics from Juba

Better. Simple… Financial LiteracyAs a business looking to empower the people of the region, financial literacy engagements have become a necessary tool to engage on financial awareness. In particular, harnessing a savings culture to enable individuals plan for the achievements and comforts they aspire to.

In conjunction with Old Mutual, UAP supported the second (2nd) edition of the Great Talks forum. This is a financial dialogues opportunity which seeks to bring together a seasoned panel of industry players, financial opinion leaders and subject matter experts to share insights from their professions and business set-ups with the public. The sessions are interactive and are aimed at empowering attendees on wisdom around investments, savings and insurance protection. In attendance in 2015 was Deputy President of the Republic of Kenya Hon. William Ruto and Cabinet Secretary for Industrialization Adan Mohamed. The forum opened up a new avenue of top level management engagement through the Fireside chat. The chat as well as the public forum were hosted by the key guest, renowned international public speaker and venture capitalist, Vusi Thembekwayo.

In Kenya, financial awareness was interlinked with comedy in a bid to make it interesting and saw the business support the Churchill show.

UAP Tanzania donates computers to Sokoine & Moringe Schools Dr. Wanjui & Peter Mwangi share a moment with Vusi Thembekwayo

UAP Kenya at the Churchill roadshowA boy performs at drama festival sponsored by UAP South Sudan



SUSTAINABILITY AND CSR REPORT 2015 (CONTINUED)Better. Simple… EnvironmentQuick statistics:• Number of Water Towers in Kenya-Five (5) Namely: Mt. Kenya, Aberdare Range, Mau Complex, Mt.

Elgon and Cherangani Hills

• Number of trees planted at Ndakaini to date-100,000• Ndakaini Dam water dependency-Provides over 70% of

Nairobi’s water

• Number of participants at the annual Marathon-Over 3,500 participants, with close to 10,000 spectators

• Number of professional athlete participants since 2003-30

The environment and the economy arereally two sides of the same coin. If we

cannot sustain the environment,we cannot sustain ourselves.

Wangari Maathai, Nobel laureate

The words of environmentalist Wangari Maathai continue to echo in every decision we make towards playing our role in environmental conservation. With water being the very essence of life on earth, UAP realised the necessity of providing clean water and improving water catchment areas. In Kenya, through collaborative work with Ndakaini Dam Conservation Association (NDEKA) we not only continue to impact Aberdare catchment area but also realized the 12th edition of the Ndakaini Marathon.

The 2015 edition was special to the business as it came in the backdrop of the completed merger transaction with Old Mutual. The event gave staff of the UAP Old Mutual Group an opportunity to run and connect together as we will continue to do, as we build a one stop financial services centre for Africa.

The improvement of the water catchment within Ndakaini has improved the quality of rainfall in the area; allowing residents sustain their agricultural activities. The Group and conservation teams have their sights on a greater ambition to plant trees in the larger Mau region and into the Aberdare ranges.

Our environmental initiatives are coupled with sports, which allows participants showcase their talent in a fun and serene environment. Ndakaini has been the favourite training ground for a number of athletes owing to the high altitude and hard terrain of the marathon course. The 12th edition of the UAP Ndakaini Half Marathon successfully took place on September 2015, and Matthew Kisorio emerged the winner

in the mens 21KM while Pauline Korikwiang was top in the womens 21km race.

The marathon gave the public a chance to run alongside track stars and thereafter enjoy a relaxing day away from the city hustle and bustle at the Marathon village.

““ Crowd cheers on Paralympic hero Henry Wanyoike at Ndakaini Marathon

Winner of 12th edition Marathon Mathew Kisorio at the finish line

Cabinet Secretary Ministry of Water and Irrigation Eugene Wamalwa awards winners at the 2015



FIVE-YEAR FINANCIAL HIGHLIGHTS

2015 2014 2013 2012 2011 Shs’000 Shs’000 Shs ‘000 Shs ‘000 Shs’000 Gross written premium 16,868,231 14,832,735 12,737,286 9,054,770 7,253,140Gross earned premium 15,332,794 14,158,444 11,559,860 8,462,797 6,602,606Net earned premium 12,069,426 11,263,533 9,014,382 6,533,244 5,194,451Investment and Other Income 4,441,502 5,424,470 3,726,954 2,957,379 1,558,619 Total Income 16,510,928 16,688,003 12,741,336 9,490,623 6,753,070 Net claims payable and policy owners’ benefits payable (7,986,649) (8,074,794) (5,754,811) (3,938,295) (2,926,773)Commissions payable and Operating and other expenses (7,831,123) (6,316,980) (4,774,785) (3,804,377) (2,614,602)Share of associates loss - - - - (1,783)Profit before income tax 693,156 2,296,229 2,211,740 1,747,951 1,209,912 Income tax expense 203,443 (629,042) (401,339) (366,920) (290,228) Profit after income tax 896,599 1,667,187 1,810,401 1,381,031 919,684 Non-controlling interests (251,115) (181,211) (152,825) (99,025) (37,469) NET PROFIT ATTRIBUTABLE TO SHAREHOLDERS 645,484 1,485,976 1,657,576 1,282,006 882,215 Other Comprehensive income (loss) 60,028 1,128,625 1,730,955 735,900 (691,470) Total Comprehensive income (loss) 956,627 2,795,812 3,541,356 2,116,931 228,214 Dividends - 359,414 359,414 419,130 204,000 Total distributions - 359,414 359,414 419,130 204,000 Total Assets 48,724,654 42,083,725 33,109,989 24,657,973 14,510,400 Total Equity 17,795,261 17,198,048 14,761,650 11,620,312 4,647,300

16.5 48.7Kshs Kshs

BILLION

The Group’s totalincome 2015

The Group’s totalassets as at the end of 2015

BILLION



CORPORATE GOVERNANCE REPORT FOR THEFINANCIAL YEAR ENDED 31ST DEC 2015Further to the transaction completed in January 2015 where Old Mutual Life Assurance Company (South Africa) Limited acquired forty nine million three hundred and thirty two thousand four hundred and forty five (49,332,445) ordinary shares of UAP Holdings Limited (‘UAPHL’) being twenty three decimal three three per cent (23.33%) of the issued shares, Old Mutual Holdings Limited in June 2015 completed the purchase of seventy eight million nine hundred and nineteen thousand, eight hundred and eighty nine (78,919,889) ordinary shares in UAPHL, being thirty seven decimal three three per cent (37.33%) of the total issued ordinary shares in UAPHL from AfricInvest Fund II Limited, AfricInvest Financial Sector Fund, Aureos Africa Fund LLC and Swedfund International Aktiebolag (‘the Acquisition’). On completion of the Acquisition, Old Mutual Group acquired effective control of UAPHL and an integration plan for the two Groups in East Africa was effected which included a review of the governance and management structures of the Combined Group.

The alignment of the corporate governance structures, adoption of a new Group Operating Model and revision of the governance policies to reflect the governance framework of the combined UAP-Old Mutual group resulted in re-focused commitment to good corporate governance, strengthening of Board and Management accountability and overall public confidence in the Group.

Board of Directors The UAP Groups’ management vests in its Board of Directors as prescribed in the Memorandum and Amended Articles of Association. The Board’s main objective is to establish and monitor the strategic direction for the Group; ensuring competent management of the business; establish and oversee adequate internal control systems; monitor compliance with laws and regulations and report performance to shareholders.

In the first half of the year, the composition of the Board was targeted toward ensuring fair representation of all the major shareholders, as well as, optimization of the incumbent skill and experience to facilitate effective execution of its mandate. In the second half of the year, the composition of the Board was focused on ensuring maximum synergy of skill, experience, diversity and geographical mix. In consequence of these far reaching shareholder and governance changes, during the year under review, nine (9) members of the Board retired and were replaced. The composition of the GroupBoard was as follows:

NO. NAME OF BOARD MEMBER MEMBERSHIP NATIONALITY PROFESSION COMMENT

1. Dr. Joseph Barrage Wanjui Chairman Kenyan Engineer/Entrepreneur -

2. Dr. Christopher J. Kirubi Non-Executive Member Kenyan Entrepreneur Resigned on 27/01/15

3. Mr. James Muguiyi Non-Executive Member Kenyan Finance/Insurer -

4. Mr. James Mworia Non-Executive Member Kenyan Financial Analyst/Lawyer Resigned on 27/01/15

5. Mr. Peter Njoka Non-Executive Member Kenyan Investment Resigned on 23/06/15

6. Skander Oueslati Non-Executive Member Tunisian Engineer/ Investment Resigned on 23/06/15

7. Mr. Jonas Armtoft Non-Executive Member Swedish Lawyer Resigned on 23/06/15

8. Mr. Lotfi Baccouche Independent, Non-Executive Member

Australian Engineer/Insurer /Risk Management

Resigned on 29/06/15

9. Ms. Susan Omanga Independent, Non-Executive Member

Kenyan Marketing Resigned 29/06/15 and Re-appointed 19/08/15

10. Ms. Susan Githuku Independent, Non-Executive Member

Kenyan Human Resource Resigned 29/06/15

11. Mr. Dominic Kiarie Executive Member Kenyan Investment/Business Resigned 18/08/15

12. Mr. James Wambugu Executive Member Kenyan Audit and Risk Management

-

13. Davinder Sikand Alternate to Peter Njoka Kenyan Investment Resignation of Principal on 23/06/15

14. George Odo Alternate to Skander Oueslati Kenyan Finance Resignation of Principal on 23/06/15



CORPORATE GOVERNANCE REPORT (CONTINUED)

APPOINTMENTS

NO. NAME OF BOARD MEMBER MEMBERSHIP NATIONALITY PROFESSION COMMENT

1. Mr. Peter de Beyer Deputy Chairman South African Actuary Appointed on 29/06/15

2. Mr. Ralph Mupita Non-Executive Member South African Engineer Appointed on 19/06/15

3. Mr. Tavaziva Madzinga Non-Executive Member Zimbabwean Actuarial Science Appointed on 19/06/15

4. Dr. Peter Wanyaga Muthoka EBS

Independent, Non-Executive Member

Kenyan Management Consultant Appointed on 23/06/15

5. Mr. David Marshall Non-Executive Member South African/British

Accountant Appointed on 23/06/15

6. Mr. Peter King’ori Mwangi Group Chief Executive Officer/Executive Member

Kenyan Engineer Appointed on 23/06/15

7. Mr. Paul Truyens Independent, Non-Executive Member

Dutch Actuary Appointed on 29/06/15

8. Mr. Michael John Harper Independent, Non-Executive Member

South African Actuary Appointed on 29/06/15

9. Ms. Rose Ogega Independent, Non-Executive Member

Kenyan Accountant/ Financial Consultant

Appointed on 29/06/15

10. Ms. Anisha Archary Non-Executive Member South African Human Resource Appointed on 19/08/15

11. Ms. Susan Omanga Independent, Non-Executive Member

Kenyan Marketing Re-appointed on 19/08/15

12. Mr. Atanas Kariuki Maina Non-Executive Member Kenyan Lawyer Appointed on 19/08/15

Board AppointmentsAll directors have a fixed tenure of office and are required to retire at least every three years with a provision for re-election subject to a favourable performance evaluation by the Board.

Group Operating ModelIn company law the Board of Directors has the responsibility and fiduciary duty to take decisions for the company and to ensure such decisions are in the best interest of that company. Shareholders are not involved in the day-to-day running of the company.

In a Group context this gives rise to a dynamic tension between the interests of the shareholder and the duty of directors (often appointed by the shareholder) to take decisions in the best interest of the company, without undue influence being exerted by the interests of the Group.

During the period under review, following the acquisition of a controlling stake in the company by the Old Mutual Group of companies, the ultimate shareholder, Old Mutual plc, rolled out the Group Operating Model to UAP Holdings Limited which was adopted for implementation commencing 1st July 2015. The substance behind the model is as follows:

1. Principles of governance have been incorporated to facilitate effective and dynamic management and oversight of the Group.

2. As the ultimate beneficial shareholder, Old Mutual plc, is a public listed holding company of entities which carry out regulated activities, adherence to the Group Operating Model is required to ensure that adequate procedures, systems and controls are in place to enable the Group to comply with its legal and regulatory requirements.

3. It is recognized that membership of a financial services Group requires Directors, Executive Officers and Employees to act in a manner which reflects such Group membership, the potential implications of their actions on other members of the Group and the various regulatory requirements which have Group-wide implications.

4. It is further noted that, in the discharge of their duties, the Board is required to adhere to the overriding principle, subject to the overriding principle, which ensures that no action endorsed or taken by the Board is contrary to, or in conflict with the:

• Laws, regulations or guidelines of Kenya or the country in which the Company is incorporated or carrying on business;

• Fiduciary duties or similar obligations of a director or an executive employee;

• Provisions of the Memorandum and Articles of Association in force from time to time; or

• Specific statutory and regulatory obligations imposed upon any individual or the Company.




Board CharterThe Board Charter adopted by the Group defines the Board’s roles and responsibilities as well as functions and structures in a way that supports the members in carrying out their strategic oversight function.

In consequence of the adoption of the Group Operating Model, the Board Charter and Committee Terms of Reference adopted by the Board of Directors in April 2013, were amended to take into account the structure of the combined UAP-Old Mutual Group and the responsibilities accorded to UAP Holdings Limited and its appointed Board Committees for the oversight of the governance framework of the Group. The Board Charter (‘Charter’) specifically sets out the scope, mandate and corporate governance practices adopted by the Board of UAP Holdings Limited. The Charter recognizes that the Board of the company is required to act as strategic controller and to provide oversight in respect of all the Business Operations that form part of the UAP Old Mutual Group in East Africa which comprise businesses carrying out, inter alia, Long-term and Short-term Insurance Operations; Asset Management Operations, Property Operations and Banking Operations. These operations include business operations in Kenya, Uganda, Tanzania, South Sudan, Rwanda, DR Congo and Mauritius.

Members have been made aware of their individual and collective roles with the purpose of ensuring the Company maximizes long term value for all its stakeholders.

The key components of the Charter remain as follows:• Terms of Reference of the Board.• Independence of Directors.• Authorities of the Board and its’ structure. • The Terms of Reference of the Chairman of the Board and

those of the Managing Director.• Procedures for dealing with related party transactions.• Board committees and their Terms of Reference.

Conflict of InterestBoard Members are required to deal at arms-length in any matter that relates to the Group and to disclose any conflict of interest in relation to matters that are brought before them for deliberation. A director must refrain from discussing or voting on matters of potential conflict of interests. The Board has implemented strict guidelines which require that all directors declare their interests and a register of interests will be maintained by the Group Company Secretary. Individual Board members are also required to declare their interest before participating in board meetings and are excluded from deliberations in the case of any potential conflicts of interest.

Separation of Role of Chairman from Group Chief

Executive OfficerThe Group Chairman is responsible for managing the Board and providing leadership to the Group while the Group Chief Executive Officer is responsible to the Board for strategically overseeing and managing the business units in the UAP – Old Mutual Group in accordance with instructions given by the Board. The Group Chief Executive Officer directs the implementation of Board decisions/instructions and the general management of the business units with the assistance of the Managing Directors, Chief Executives, General Managers and management teams.

Board Committees The Board has delegated its authority to the standing Board Committees to enable it effectively carry out its mandate. These Committees of the Board are listed below and each has its own Terms of Reference setting forth the purposes, goals and responsibilities of the Committee as well as qualifications for committee membership, procedures for committee member appointment and removal, committee structure, operations and it’s reporting to the Board. During the period under review, the Board constituted three (3) ad hoc committees to attend to special projects and re-constituted the Board Committees on the 29th of June 2015. The details are set out below:

(i) Finance & Investment Committee – Active until 28th June 2015 The Finance & Investments Committee had the responsibility

to oversee and advise the Board on:

a. The investment strategy framework of the Company’s investment portfolios;

b. The current global investment portfolio allocations, including asset type and geographical location, and ensure these remain consistent with the Company’s current strategy, risk framework and risk appetite;

c. Recommendation for major investment and divestiture proposals;

d. The operational framework of the global investment portfolios of the Company, including the use of both internal and external fund management resources;

e. The performance generated by the investment assets of the Company, both in absolute terms and relative to benchmark targets;

f. Proposed changes in investment strategy that would lead to the disposition of the Company’s investment portfolios that were outside the limits established by the Risk Committee; and

g. Financing mechanisms and vehicles of the investment portfolios of the Company.

The Committee met two (2) times within the year and during the period under review the Members of the Committee were:



CORPORATE GOVERNANCE REPORT (CONTINUED) CORPORATE GOVERNANCE REPORT (CONTINUED)

1. Mr. Skander Oueslati (Chairman)2. Mr. James Muguiyi3. Ms. Susan Omanga4. Mr. Davinder Sikand5. Mr. Dominic Kiarie

(ii) Audit Committee – Reconstituted on 29th June 2015 The delegated role of the Committee is to assist the Board in the oversight of:

a. The integrity of the financial statements. b. The auditor’s qualifications and independence. c. The performance of the Groups internal audit

function and the external auditors. d. The compliance by the Group with legal and

regulatory requirements. e. The effective management by the Group of financial

risks. f. Review the adequacy and effectiveness of UAP’s

internal control and financial controls systems.

The Committee meets at least four (4) times a year or at such other times as the Chairman of the Committee shall require. During the period under review the Members of the Committee were:

MEMBERS PRIOR TO 29 JUNE 2015

MEMBERS AFTER 29 JUNE 2015

1. Mr. George Odo (Chairman) Ms. Rose Ogega (Chairman)

2. Mr. Kamau Kuria Mr. Peter De Beyer

3. Mr. Lotfi Baccouche Mr. Paul Truyens *

4. Ms. Susan Omanga Ms. Susan Omanga

*Chairman of the Risk & Compliance Committee

(iii) Risk and Governance Committee – Reconstituted and Renamed to Risk & Compliance Committee on 29th June 2015

The Terms of Reference of the Committee are to oversee and advise the Board on:a. the Company’s overall risk appetite, tolerance, limits,

and their alignment with the Company’s strategy;b. identification and measurement of material risks

requirements inherent in the Company’s strategy; c. systems of risk management, internal control and

compliance and their adequacy to identify assess, mitigate and reports risks;

d. reviewing reports on any material breaches of risk limits and the adequacy of proposed action;

e. reviewing the Company’s risk culture and management initiatives to strengthen it;

The Committee meets at least four times a year or at such other times as the Chairman of the Committee shall require.

During the period under review the Members of the Committee were:

MEMBERS PRIOR TO 29 JUNE 2015

MEMBERS AFTER 29 JUNE 2015

1. Mr. Lotfi Baccouche (Chairman)

Mr. Paul Truyens (Chairman)

2. Mr. Peter Njoka Mr. Peter de Beyer

3. Mr. George Odo Ms. Rose Ogega*

4. Mr. Philip Coulson Mr. James Muguiyi

5. Mr. James Wambugu Mr. Peter Mwangi

6. Ms. Zipporah Mungai

7. Mr. Dominic Kiarie

*Chairperson of the Audit Committee

(iv) Nominations, Remuneration and Human Resource Committee – Reconstituted/ Split into Remuneration Committee and Corporate Governance & Nominations Committee on 29th June 2015The delegated role of the Remuneration Committee is to:a. Set review and make recommendations to the Board

on the remuneration and benefits arrangements of non-executive directors.

b. Set, review and make recommendations to the Board for approval, the Combined Group remuneration and benefits philosophy, policies and practices.

c. In conjunction with the Board, approve the Directors’ Remuneration Policy and/or Annual Remuneration Statement to be included in the Annual Financial Statements report having regard to the fulfilment of the provisions of the Capital Markets Authority or securities disclosure requirements.

d. Determine the remuneration, incentive structure and benefits of the Group Chief Executive Officer and members of the Executive Leadership Team as recommended by the Group Chief Executive Officer based on an evaluation of their performance.

e. Establishing annual and long-term performance goals and objectives for the Group Chief Executive Officer and reviewing the goals approved by the Group Chief Executive Officer for the members of the Executive Leadership Team.

The Committee meets at least four (4) times a year or at such other times as the Chairman of the Committee shall require. During the period under review the Members of the Committee were:




MEMBERS OF NOMINATIONS, REMUNERATION & HUMAN RESOURCE COMMITTEE PRIOR TO 29 JUNE 2015

MEMBERS OF REMUNERATION COMMITTEE AFTER 29 JUNE 2015

1. Ms. Susan Githuku (Chairman)

Dr. Peter Muthoka (Chairman)

2. Dr. JB Wanjui Mr. Tavaziva Madzinga

3. Mr. James Muguiyi Mr. James Muguiyi

4. Mr. Peter Njoka Ms. Anisha Archary

5. Mr. Jonas Armtoft

6. Mr. George Odo

The delegated role of the Corporate Governance and Nominations Committee is to:

a. Assist the Board in its determination and evaluation of the adequacy, efficiency and appropriateness of the corporate governance structure and practices of the Combined Group.

b. Provide guidance to the Board on strategy in regard to sound corporate governance in the Groups investments, as deemed appropriate and relevant.

c. Make recommendations to the Board on sound corporate governance practices in the Combined Group, and to the extent relevant or appropriate, its investments.

d. Promote the overall effectiveness of corporate governance within the Group, and to the extent appropriate or relevant, its investments, in accordance with the recommendations of the relevant local and international reports on best practice corporate governance and other requirements of good corporate practice other than in respect of risk management, compliance and internal control which remain the remit of the Audit Committee and Risk & Compliance Committee.


1. Mr. Peter de Beyer (Chairman)2. Dr. JB Wanjui3. Dr. Peter Muthoka4. Mr. A.K. Maina5. Ms. Anisha Archary

The Board has constituted the following Ad Hoc Committees of the Board:

(v) Integration Committee The Integration Committee was constituted on the 19th of August 2015 as a specialised Committee of the Board and its delegated role is to:

a. Oversee that management prepares and implements in a timely manner an effective plan across the combined entities and their subsidiaries (the Group) to integrate the businesses of Old Mutual and UAP.

b. Ensure that the integration plan complements and supports the Group’s rolling business strategy as adopted by the Board.

c. Ensure management prepares ambitious but prudent business growth and the cost synergy targets resulting from the integration plan and continues to monitor and report on the realisation of these targets throughout the integration process.

d. Oversee the Combined Group’s post acquisition activities including reviewing reports from the Steering Committee consisting of management initiatives, processes and proposed strategies to be implemented to capture the synergies and opportunities for value creation from the merger;

e. Oversee organizational development and the drive for cultural change to deliver integration, innovation and development of the Combined Group for the benefit of shareholders and stakeholders;

f. Review and make recommendations to the Board concerning acquisitions and divestitures of major assets or business units including determining strategic action on duplicated functions;

The members of the Committee are:1. Mr. Tavaziva Madziga (Chairman)2. Dr. JB Wanjui3. Mr. James Muguiyi 4. Mr. Ralph Mupita5. Mr. David Marshall

(vi) Project Saffron Ad Hoc Oversight Committee The Committee was constituted on the 18th of November 2015 to oversee and ensure transparency in the acquisition of the Old Mutual businesses by UAP taking into account the provisions of the Capital Markets Act and the Guidelines for Corporate Governance practices of Public Listed Companies in Kenya. The committee is primarily constituted of Independent non-executive directors and its key mandate is to:

· Review the proposed transaction and offer processes of UAP and Old Mutual entities.

· Review the terms of the Transaction to ensure that they are fair and on arm’s length basis and in the ordinary course of business to the Company and would apply on the same basis if the transaction did not involve a Related Party;

· Review all disclosures to be made to all stakeholders including regulators, shareholders and the public




Outgoing Director Dr. Chris Kirubi & the Chairman Dr. Wanjui reflect on the success of working together

Outgoing Director Peter Njoka receives appreciation from James Muguiyi

Outgoing Director Dominic Kiarie receives appreciation from the Chairman Dr. Wanjui

Outgoing Director James Mworia with the Chairman Dr. Wanjui

A section of the exiting Directors and current leadership at the event





1. Ms. Susan Omanga (Chairman)2. Mr. Paul Truyens3. Mr. James Muguiyi4. Mr. Lotfi Baccouche 5. Prof. Patrick Weke6. Mr. A.K. Maina

(vii) UAP Holdings Tower Committee The delegated role of the UAP Holdings Tower Committee is to:

a) Provide oversight, advice and issue resolution to the Management, Project Manager and Project Team and to make such recommendations to the Board on the project as are appropriate.

b) Oversee property planning and development activity in the context of the Group strategy and Business Plans, as well as, prudent environmental sustainability practices.

c) Review and recommend financial assumptions used to develop the capital budget and allocation on the project.

d) Evaluate the commercial feasibility of any part of the project e) Ensure that the Group has in place appropriate procedures

for cost estimating, competitive tendering of bids, awarding of contracts, contract administration, cost control and payment to contractors for all site work, new construction, alterations and major repair.

f) Ensure the Group has appropriate maintenance programs in place for the buildings and facilities.

MEMBERS OF THE UAPHL TOWER COMMITTEE PRIOR TO 29 JUNE 2015

MEMBERS OF UAPHL TOWER COMMITTEE AFTER 29 JUNE 2015

1. Mr. James Muguiyi (Chairman)

Mr. James Muguiyi (Chairman)

2. Mr. George Odo Mr. Philip Coulson

3. Mr. Philip Coulson Mr. Peter Levett

4. Ms. Susan Omanga Ms. Susan Omanga

5. Mr. Dominic Kiarie Mr. Peter Mwangi

Board Meetings and Information to DirectorsThe Board meets at least once every quarter but the business may warrant the convening of special meetings from time to time. All Board meetings are scheduled in advance of the respective year through an Annual Calendar of Board Meetings including a rolling calendar, which facilitates planning and availability of the members. Board Committee meetings are scheduled in advance of the Board Meeting so that all technical matters are appropriately addressed and reported to the Board for ratification or approval.The directors are given appropriate and timely information on key activities of the business regularly and on request in

order to carry out their roles. Specifically the directors are provided with all available information in respect of items to be discussed at a meeting of the Board or Committee prior to the meeting. They may also seek independent professional advice, at the Company’s expense, concerning the affairs of the Group in consultation with the Group Chief Executive Officer and the Group Company Secretary.

Board AttendanceDuring the Financial Year under review nine (9) Board Meetings and thirty two (32) Committee Meetings were held. A review of attendance to meetings by individual members during the period under review indicates that all members gave sufficient time and attention to the affairs of the Board.

The average attendance of eligible board members to attend Board meetings was 78% whereas the average attendance of Board Committee meetings by eligible members was 80%. The highest average attendance during Board committee members was 93% with the lowest average attendance being 60%.

Board Oversight The Board is responsible for the formulation, implementation and monitoring of the Group’s Strategic Plan thus providing appropriate strategic direction for the Group. In the same vein, the Board defines the Vision, Mission and Core Values to enable realisation of the set strategic plan.

The Board has delegated the day to day operations of the Group to the Management which is headed by the Group Chief Executive Officer. The Group’s business is therefore conducted in accordance with a carefully formulated strategy, annual business plans and budgets which set out clear objectives. Roles and responsibilities have been clearly defined with approved authority being delegated. Performance against the objectives is reviewed and discussed monthly and quarterly by the management teams in the Group.

The Managing Directors/Chief Executive Officers and General Managers as well as their respective Management teams prepare annual business review report which is presented to the Group Board during its annual retreat for consideration and approval. Each subsidiary board is expected to monitor the performance of each subsidiary. Consolidation of the financial position is undertaken on a quarterly basis and presented to the Board. This way performance trends, forecasts as well as actual performance against budgets and prior periods are closely monitored. The Board ensures that the Group espouses proper corporate governance practices by confirming that the requisite codes of conduct, procedures and practices are existent, relevant



and adhered to. The Board also achieves this by ensuring that the Group complies with all the statutory requirements.The Board is responsible for managing the Group’s risks and the Board and Management have been trained on risk management. The Board recognises and honours its responsibility to its stakeholder and in this case Board Members are fully aware of their responsibility to discharge their function in good faith, with prudence, diligence and due care.

Performance and Evaluation The Board has put in place a performance evaluation system to enable it set its objectives and review its performance annually against these objectives. Due to the number of changes effected in the governance structures during the period under review, the Board held a strategy session on 20th August 2015 to set out the strategic objectives against which it would be evaluated in 2016. The evaluation exercise once scheduled will be conducted by an independent evaluator and the results communicated to the Board through the approved process.

Board Development Board development programmes were carried out during the period under review in accordance with the needs identified and/or analysed for each Member and for the Board as a whole. In particular a Board Orientation Session was held on the 30th of July 2015 for the new members of the Board. Thereafter, the Board was developed in accordance with the Board induction and development plan to address areas of improvement for individual members and to provide up to date information on new areas of business and risk for the group including:- corporate governance training, risk management training, training on anti-money laundering legislation as well as training on the Group Operating Model.

Board Remuneration The Board is remunerated in accordance with the approved Board Remuneration Policy which encompasses Directors Fees, Sitting Allowance and Directors’ Medical Cover.

Statement of Compliance The Board is satisfied that the Group has, to the best of their knowledge, complied with all applicable laws and conducted its business affairs in accordance within the law. In accordance with the Group Operating Model, the Board has reviewed the attestation of Management in this regard and to the knowledge of the Board no director, employee or agent of the Group acted or committed any indictable offence under the Anti-Corruption laws in conducting the business of the Group in the period under review nor was involved or been used as a conduit for money laundering or any other activity incompatible with the relevant laws.

The Board continues to abide by its Charter, the internal codes of conduct, the Memorandum and Amended Articles of Association of the Company and the Terms of Reference of Board Committees.

The Group continues to comply with all the statutory requirements relevant to its operation as a body corporate and complies with relevant regulatory guidelines as issued from time to time.

Group Company SecretaryThe Group Company Secretary co-ordinates the Board activities and ensures, in conjunction with the Chairman and Group Chief Executive Officer, that the Board meetings are held procedurally. The Group Company Secretary links flow of information between the Management and the Board as well as ensures the Board receives adequate and timely information and that Management receives feedback in a similar manner.

All Board Members have direct access to the Group Company Secretary who is also responsible for implementing and monitoring good corporate governance practices at the Board. The Secretary ensures that the business of the Board meets all statutory requirements, keeps all legal and regulatory requirements under review and briefs the Board accordingly about these developments.

In the year under review, the Group Company Secretary assisted by the Deputy Group Company Secretaries performed this function.




ShareholdingAt 31 December 2015, the top ten shareholders in the Company were:

No. of shares Holdings %1. OLD MUTUAL HOLDINGS LIMITED 78,919,889 37.33%

2.OLD MUTUAL LIFE ASSURANCE COMPANY (SOUTH AFRICA) LIMITED 49,332,445 23.33%

3.BAWAN LTD 43,258,299 20.46%

4.MUGUIYI JAMES NGATIA 12,611,247 5.97%

5.ESTATE OF THE LATE WILLIAM KIMUTAI MARTIN 2,341,480 1.11%

6.ANDREW STEPHEN GRAY SMITH 1,789,189 0.85%

7.GENGHIS NOMINEES A/C 017 1,544,900 0.73%

8.STANDARD CHARTERED NOMINEE A/C 9230 1,403,000 0.66%

9.TIMOTHY MICHAEL JOHN OWEN-BURKE 1,371,562 0.65%

10.SAYANI INVESTMENTS LIMITED 1,194,957 0.57%

The shareholders profile as at 31 December 2015 was as follows:

No. of shareholders No. of shares Holdings %

Shares Range 001 to 100,000 1037 7,141,380 3.51100,001 to 1,000,000 26 9,120,081 4.31Above 1,000,000 11 194,885,428 92.18 1074 211,146,889 100.00

No. of No. of shares Holdings % shareholderIndividual investors Kenyan 880 29,310,759 13.86East African 31 209,600 0.10Foreign 9 777,965 0.37

Corporate investors Kenyan 150 131,724,845 62.30East African 2 49,200 0.023Foreign 2 49,347,520 23.34

Summary 1074 211,419,889 99.993

The directors’ direct and indirect interest in the ordinary share capital of the Company on 31 December 2015 was as follows: No. of shares Holdings %Dr JB Wanjui CBS 43,258,299 20.46

JN Muguiyi 12,611,247 5.97

AK Maina 111,300 0.05


Rise to bring yourdreams to life



DIRECTORS’ REPORT

The Directors submit their report together with the audited financial statements for the year ended 31 December 2015 which disclose the state of affairs of the Company and the Group.

Principal activities

The Group is engaged in the business of insurance, premium financing, investment management, insurance brokerage, property and stock broking services. These activities are carried out through the Group’s subsidiaries in Kenya, Uganda, Tanzania, Southern Sudan, Rwanda and Democratic Republic of Congo. These activities are briefly described below:

Insurance business:- The Group has seven subsidiary undertakings that underwrite all classes of life and non-life insurance risks as defined by the Kenyan Insurance Act, other than industrial life insurance. They also issue investment contracts to provide their customers with asset management solutions for their savings and retirement needs, and provide premium financing services. These operations are carried out in Kenya, Uganda South Sudan and Rwanda.

The Group also operates an insurance brokerage business in the Democratic Republic of Congo.

Stock broking: - The Group has a subsidiary - UAP Financial Services Limited, a Ugandan based Company that provides stock broking services.

Property: - The Group holds investment in three property companies based In Kenya, Uganda and South Sudan. Results 2015 2014 Kshs ’000 Kshs ’000Profit for the year 896,599 1,667,187Profit attributable to shareholders of the company 645,484 1,485,976

DividendsDuring the year, no interim dividend was paid (2014: Nil). The Directors recommend the payment of no dividend (2014: Kshs 359 million). DirectorsThe directors of the Company, who held office to the date of this report, are:-



DIRECTORS’ REPORT (CONTINUED)

DIRECTORS NAME DATE OF APPOINTMENT

Dr JB Wanjui CBS – Chairman *

Mr Peter De Beyer ** Appointed on 29 June 2015

Mr Peter Mwangi (Group Chief Executive Officer) * Appointed on 23 June 2015

Mr Dominic Kiarie * Resigned on 18 August 2015

Dr CJ Kirubi EBS * Resigned on 27 January 2015

Mr JN Muguiyi *

Mr James Mworia * Resigned on 27 January 2015

Mr Lotfi Baccoucche***** Resigned on 29 June 2015

Mrs Susan Omanga * Resigned on 29 June 2015Re-appointed on 19 August 2015

Mrs Susan Wakhungu – Githuku * Resigned on 29 June 2015

Mr Jonas Armtoft ****** Resigned on 23 June 2015

Mrs Joyce Anne Wainaina- (Alternate Dr JB Wanjui CBS) *

Mr Peter Gichuru Njoka – (Alternate Davinder Sikand) * Resigned on 23 June 2015

Mr Skander Oueslati - (Alternate George Odo) ******* Resigned on 23 June 2015

Mr James Wambugu *

Mr Ralph Mupita ** Appointed on 19 June 2015

Mr Tavaziva Madzinga *** Appointed on 19 June 2015

Dr Peter W Muthoka, EBS* Appointed on 23 June 2015

Mr David Marshall ** Appointed on 23 June 2015

Mrs Rose Ogega * Appointed on 29 June 2015

Mr Paul Truyens **** Appointed on 29 June 2015

Mr Michael Harper ** Appointed on 29 June 2015

Mrs Anisha Archary ** Appointed on 19 August 2015

Mr AK Maina * Appointed on 19 August 2015

Kenyan* South African** Zimbabwean *** Dutch **** Australian ***** Swedish ****** Tunisian *******

Auditor

The Company’s auditors, KPMG Kenya who were appointed during the year, have expressed willingness to continue in office in accordance with the Companies Act, 2015 Section 723(1).

Approval of the financial statements

The financial statements set out on pages 6 to 85 were approved at a meeting of the Directors held on 8 March 2016.By order of the Board

Nkirote Mworia NjiruSecretary8 March 2016



STATEMENT OF DIRECTORS’ RESPONSIBILITIES

The Directors are responsible for the preparation and presentation of the financial statements of UAP Holdings Limited set out on pages 44 to 119 which comprise the consolidated statement of financial position at 31 December 2015, and the consolidated statements of profit or loss, other comprehensive income, changes in equity and cash flows for the year then ended, together with the company statement of financial position at 31 December 2015, the company statement of changes in equity and a summary of significant accounting policies and other explanatory information.

The Directors’ responsibilities include: determining that the basis of accounting described in Note 2 is an acceptable basis for preparing and presenting the financial statements in the circumstances, preparation and presentation of financial statements in accordance with International Financial Reporting Standards and in the manner required by the Kenyan Companies Act and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatements, whether due to fraud or error.

Under the Kenyan Companies Act, the Directors are required to prepare financial statements for each financial period which give a true and fair view of the state of affairs of the Group and Company as at the end of the financial period and of the operating results of the Company for that period. It also requires the Directors to ensure the Company keeps proper accounting records which disclose with reasonable accuracy the financial position 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 judgments and estimates, in conformity with International Financial Reporting Standards and in the manner required by the Kenyan Companies Act. 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.

The Directors further accept responsibility for the maintenance of accounting records which may be relied upon in the preparation of financial statements, as well as adequate systems of internal financial control.

The Directors have made an assessment of the Company’s ability to continue as a going concern and have no reason to believe the Company will not be a going concern for at least the next twelve months from the date of this statement.

Approval of the financial statementsThe financial statements, as indicated above, were approved by the Board of Directors on 8 March 2016 and were signed on its behalf by:

Dr JB Wanjui CBS Peter MwangiChairman Group Chief Executive Officer



REPORT OF THE INDEPENDENT AUDITORS TOTHE MEMBERS OF UAP HOLDINGS LIMITEDReport on the financial statementsWe have audited the accompanying consolidated financial statements of UAP Holdings Limited (the ‘Company’) and its subsidiaries (together, the ‘Group’) set out on pages 44 to 119. These financial statements comprise the consolidated statement of financial position at 31 December 2015 and the consolidated statements of profit or loss, other comprehensive income, changes in equity and cash flows for the year then ended, together with the statement of financial position of the Company standing alone at 31 December 2015, the statement of changes in equity of the company for the year then ended and a summary of significant accounting policies and other explanatory information.

Directors’ responsibility for the financial statementsThe Directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and in the manner required by the Kenyan Companies Act and for such internal control, as the Directors determine necessary to enable the preparation of financial statements that are free from material misstatements, whether due to fraud or error.

Auditor’s responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal 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 evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.

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

Opinion

In our opinion the accompanying financial statements give a true and fair view of the state of financial affairs of UAP Holdings Limited Group and Company at 31 December 2015 and of the financial performance and cash flows of the Group for the year then ended in accordance with International Financial Reporting Standards and the Kenyan Companies Act.

Report on other legal requirements As required by the Kenyan Companies Act, we report to you based on our audit, that:i) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for

the purposes of our audit;ii) in our opinion proper books of account have been kept by the company, so far as appears from our examination of those

books; andiii) the Company’s statement of financial position is in agreement with the books of account.

The engagement partner responsible for the audit resulting in this independent auditors’ report is CPA Jacob Gathecha – P/No 1610.

Certified Public AccountantsNairobi8 March 2016



CONSOLIDATED STATEMENT OF PROFIT OR LOSS

2015 2014 Notes Kshs’000 Kshs’000

Gross written premium 5 (b) 16,868,231 14,832,735 Gross earned premium 5 (b) 15,332,794 14,158,444 Reinsurance ceded 5 (b) (3,263,368) (2,894,911)Net earned premium 12,069,426 11,263,533 Investment income 6 3,310,189 4,603,772 Commissions earned 5 (b) 1,025,069 790,499 Other income 7 106,244 30,199

Total Income 16,510,928 16,688,003 Claims and policy owners’ benefits payable 8 (9,200,243) (9,071,155)Less: Amount recoverable from reinsurers 5 (b) 1,213,594 996,361 Net claims payable` (7,986,649) (8,074,794)Operating and other expenses 9 (5,199,370) (4,375,071)Commissions payable 5 (b) (2,053,824) (1,648,599)Total expenses & commissions (7,253,194) (6,023,670)Finance costs 37 (a) (577,929) (293,310)Profit before tax 693,156 2,296,229 Income tax expense 11 203,443 (629,042)

Profit for the year (of which Kshs 993,341,000 (2013: Kshs 905,142,000)

has been dealt with in the accounts of the company) 896,599 1,667,187 Profit attributable to: Owners of the parent 645,484 1,485,976 Non-controlling interest 251,115 181,211

Profit for the year 896,599 1,667,187

Basic and diluted EPS 12 3.05 7.03

The notes on pages 52 to 119 are an integral part of these financial statements.



2015 2014 Notes Kshs’000 Kshs’000 Profit for the year 896,599 1,667,187 Other comprehensive income Items that will be recycled to profit or loss Exchange differences on translating foreign operations 413,668 (35,418)

Total items that will be recycled to profit or loss 413,668 (35,418)Items that will not be recycled to profit or loss Gains/(losses) on revaluation of equity investments: Listed ordinary shares 24 (302,594) 1,111,897 Unlisted ordinary shares 24 12,046 1,337 Remeasurement of retirement benefit obligations (63,092) 50,809

Total items that will not be recycled to profit or loss (353,640) 1,164,043

Total other comprehensive income for the year, net of tax 60,028 1,128,625

Total comprehensive income for the year 956,627 2,795,812 Total comprehensive income attributable to: Owners of the parent 719,383 2,640,935 Non-controlling interests 237,244 154,877

Total 956,627 2,795,812


CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME



2015 2014 Notes Kshs’000 Kshs’000 CAPITAL EMPLOYED Share capital 13 1,057,099 1,057,099 Share premium 13 4,612,626 4,612,626 Fair value reserve for equity investments 14 1,598,214 2,254,205 Retained earnings 15 8,463,518 7,646,416 Proposed dividend 16 - 359,414 Translation reserve 17 292,700 (132,272)Statutory reserve 17 418,827 346,011

Shareholders’ funds 16,442,984 16,143,499 Non-controlling Interest 1,352,277 1,054,549

Total equity 17,795,261 17,198,048 REPRESENTED BY: Assets Goodwill 18 240,030 240,030 Property and equipment 19 (a) 403,343 436,361 Intangible assets 20 (a) 81,722 112,987 Investment properties 21 (a) 19,794,286 15,122,307 Deferred income tax asset 22 569,613 83,640 Retirement benefit asset 23 311,550 285,918 Equity investment at fair value through Other Comprehensive Income 24 (a) 2,554,729 3,734,740 Equity investment at fair value through profit or loss 24 (b) 2,003,448 2,353,888 Mortgage loans receivable 26 255,259 255,437 Current income tax recoverable 11 27,900 113,477 Reinsurers’ share of insurance liabilities 27 2,977,367 2,509,829 Deferred acquisition cost 28 432,292 428,748 Receivables arising out of direct insurance arrangements 2,364,365 2,486,192 Receivables arising out of reinsurance arrangements 970,510 706,371 Other receivables 29 (a) 746,174 1,550,187 Corporate bonds 30 1,855,820 1,588,613 Government securities 31 (ii) 7,541,079 5,875,753 Deposits with financial institutions 32 3,845,043 3,173,707 Cash and bank balances 32 1,750,124 1,025,540

Total assets 48,724,654 42,083,725 Liabilities Deferred income tax liability 22 617,074 720,786 Insurance contract liabilities 33 8,146,877 7,720,435 Payable under deposit administration contracts 34 4,423,199 3,633,021 Unit-linked investment contracts 35 1,007,721 1,040,828 Borrowings 37 7,477,300 3,981,001 Provision for unearned premium 38 6,373,812 5,364,573 Current income tax payable 11 109,397 42,063 Creditors arising from reinsurance arrangements 1,105,790 884,799 Other payables 39 1,668,223 1,498,171

Total liabilities 30,929,393 24,885,677

Net Assets 17,795,261 17,198,048


The financial statements on pages 44 to 119 were approved for issue by the board of directors on 8 March 2016 and signed on its behalf by:

Dr JB Wanjui CBS (Chairman) Peter Mwangi (Group Chief Executive Officer)

CONSOLIDATED STATEMENT OFFINANCIAL POSITION



Notes 2015 2014 Kshs’000 Kshs’000 CAPITAL EMPLOYED Share capital 13 1,057,099 1,057,099 Share premium 13 4,612,626 4,612,626 Retained earnings 1,749,478 756,137 Proposed Dividend 16 - 359,414

Total equity 7,419,203 6,785,276 REPRESENTED BY: Assets Property and equipment 19 (b) 92,123 91,423 Intangible assets 20 (b) 50,703 61,936 Investment properties 21 (b) 5,474,671 3,635,242 Investment in subsidiaries 25 5,341,907 3,199,099 Deferred tax asset 22 97,382 - Amounts due from subsidiaries 44 2,243,013 2,186,511 Other receivables 29 (b) 111,487 696,711 Deposits with financial institutions 32 208,811 1,248,062Cash and bank balances 10,805 16,862

Total assets 13,630,902 11,135,846 Liabilities Borrowings 37 (b) 4,903,538 2,078,647 Amounts due to subsidiaries 44 939,842 1,991,496 Deferred tax liability 22 - 61,442 Other payables 39 (b) 368,319 218,985

Total liabilities 6,211,699 4,350,570

Net Assets 7,419,203 6,785,276


The financial statements on pages 44 to 119 were approved for issue by the board of directors on 8 March 2016 and signed on its behalf by:

Dr JB Wanjui CBS (Chairman) Peter Mwangi (Group Chief Executive Officer) Attributable to owners of the parent

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COMPANY STATEMENT OF CHANGES IN EQUITY



Share Capital Retained Proposed Total & Share Earnings Dividends premium Notes Kshs’000 Kshs’000 Kshs’000 Kshs’000

Balance at 1 January 2014 5,669,725 210,409 359,414 6,239,548Profit for the year - 905,142 - 905,142

Other comprehensive income - - - -Total comprehensive income for the year - 905,142 - 905,142Transactions with owners 2013 Dividend paid 16 - - (359,414) ( 359,414) 2014 Final dividend proposed 16 - (359,414) 359,414 -

Total transactions with owners - (359,414) - ( 359,414)

Balance at 31 December 2014 5,669,725 756,137 359,414 6,785,276

Balance at 1 January 2015 5,669,725 756,137 359,414 6,785,276 Profit for the year - 993,341 - 993,341

Other comprehensive income - - - -

Total comprehensive income for the year - - - - Transactions with owners - 2014 Dividend paid 16 - - (359,414) ( 359,414)2015 Final dividend proposed 16 - - - -

Total transactions with owners - - (359,414) ( 359,414)

Balance at 31 December 2015 5,669,725 1,749,478 - 7,419,203


CONSOLIDATED STATEMENT OF CASH FLOWS



2015 2014 Notes Kshs’000 Kshs’000 Cash flow from operating activities Cash generated from operations 40 889,938 1,290,811 Tax paid 11 (210,280) (371,270)

Net cash generated from operating activities 679,658 919,541 Cash flow from investing activities Purchase of property and equipment 19 (a) (153,749) (212,763)Purchase of intangible assets 20 (a) (33,501) (49,066)Net purchase of government securities (1,666,975) (1,176,179)Purchase of equity investments 24 (c) (1,998,857) (2,138,982)Net purchase of corporate bonds (199,437) (1,084,377)Additions to investment properties 21 (a) (3,077,504) (1,350,067)Mortgage loans advanced 26 (89,094) (110,784)Mortgage loans repaid 26 65,601 85,236 Proceeds from sale of equity investments 24 (c) 3,202,181 3,036,057 Proceeds from disposal of fixed assets 8,563 - Rent, interest and dividends received 2,332,376 1,714,173

Net cash used in investing activities (1,610,396) (1,286,752)Cash flow from financing activities Dividends paid 16 (359,414) (359,414)Proceeds from borrowings 37 (a) 3,373,589 1,938,326 Payments on loan and interest costs on borrowings 37 (a) (689,166) (301,231)

Net cash generated from / (used in) financing activities 2,325,009 1,277,681

Increase in cash and cash equivalents 1,394,271 910,470 Movement in cash and cash equivalents At 1 January 4,296,593 3,386,123 Increase during the year 1,394,271 910,470

At 31 December 32 5,690,864 4,296,593




1 General information

The Company is incorporated in Kenya under the Companies Act as a limited liability company, and is domiciled in Kenya. The address of its registered office is Bishops Garden Towers, Bishops Road, P.O. Box 43013 - 00100 Nairobi.

The Company has seven subsidiary companies that operate as insurance companies and three property Companies in Kenya, Uganda and South Sudan. Four of the Company’s insurance subsidiaries are short term (“general”) insurance companies, two are long term (“life”) insurance companies and one is a composite insurance company selling both general and life insurance. Long term business comprises life assurance business, deposit administration business and investment contracts. Life assurance business relates to the underwriting of risks relating to death of an insured person, and includes contracts subject to the payment of premiums for a term dependent on the termination or continuance of the life of an insured person. Short term (general) insurance business relates to all other categories of short term insurance business, analysed into several sub-classes of business based on the nature of the assumed risks. The Group also holds investments in UAP Financial Services Limited Uganda and UAP Investments Kenya that provides stock broking services and fund management services. UAP Properties (Uganda) Limited and UAP Properties (South Sudan) Limited are property holding companies for Nakawa Business Park and Equatorial Towers which are located in Kampala and South Sudan respectively. The Group also holds an investment in UAP DRC sarl which offers insurance brokerage services.

2 Summary of significant accounting policies The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies

have been consistently applied to all years presented, unless otherwise stated.

(a) Basis of preparation

The financial statements are prepared in compliance with International Financial Reporting Standards (IFRS).

(a) Basis of measurement

The measurement basis used is the historical cost basis except where otherwise stated in the accounting policies below. For those assets and liabilities measured at fair value, fair value is the price that would be received to sell an asset or paid

to transfer a liability in an orderly transaction between market participants at the measurement date. When measuring the fair value of an asset or a liability, the company uses market observable data as far as possible. If the fair value of an asset or a liability is not directly observable, it is estimated by the company using valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs (e.g. by use of the market comparable approach that reflects recent transaction prices for similar items or discounted cash flow analysis). Inputs used are consistent with the characteristics of the asset / liability that market participants would take into account.

Fair values are categorised into three levels of fair value hierarchy based on the degree to which the inputs to the measurements are observable and the significance of the inputs to the fair value measurement in its entirety. See note 4 (e).

(b) Use of estimates

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 3.

(c) Statement of Compliance

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) and the Kenyan Companies Act.

For Kenyan Companies Act reporting purposes in these financial statements, the balance sheet is represented by the statement of financial position and the profit and loss account is presented in the statement of comprehensive income.

NOTES TO THE FINANCIAL STATEMENTS

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)



2 Summary of significant accounting policies (continued)

(a) Basis of preparation (continued)

Changes to standards and new interpretations effective in 2015

New and amended standards adopted by the Group The standards below have been adopted by the Group for the first time for the financial year beginning on 1 January 2015

and none has a material impact on the Group.

(i) New standards, amendments and interpretations effective and adopted during the year Defined benefit plans – Employee contributions (Amendments to IAS 19) The amendments introduced reliefs that reduce the complexity and burden of accounting for certain contributions from

employees or third parties. Such contributions are eligible for practical expedience if they are:

• set out in the formal terms of the plan; • linked to service; and • independent of the number of years of service.

When contributions are eligible for practical expedience, a company is permitted (but not required) to recognise them as a reduction of the service cost in the period in which the related service is rendered.

The amendments apply retrospectively for annual periods beginning on or after 1 July 2014.

The adoption of these changes did not affect the amounts and disclosures of the Group’s defined benefits obligations.

(ii) New and amended standards and interpretations in issue but not yet effective for the year ended 31 December 2015.

New standard or amendments Effective for annual periodsbeginning on or after

• Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28)

1 January 2016

• Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11)

1 January 2016

• Amendments to IAS 41 - Bearer Plants (Amendments to IAS 16 and IAS 41) 1 January 2016

• Amendments to IAS 16 and IAS 38 – Clarification of Acceptable Methods of Depreciations and Amortisation

1 January 2016

• Equity Method in Separate Financial Statements (Amendments to IAS 27)

1 January 2016

• IFRS 14 Regulatory Deferral Accounts 1 January 2016

• Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28)

1 January 2016

• Disclosure Initiative (Amendments to IAS 1) 1 January 2016

• IFRS 15 Revenue from Contracts with Customers 1 January 2018

• IFRS 9 Financial Instruments (2014) 1 January 2018

• IFRS 16 Leases 1 January 2019

All Standards and Interpretations will be adopted at their effective date (except for those Standards and Interpretations that are not applicable to the entity).






(ii) New and amended standards and interpretations in issue but not yet effective for the year ended 31 December 2015 (continued)

Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28)

The amendments require the full gain to be recognised when assets transferred between an investor and its associate or joint venture meet the definition of a ‘business’ under IFRS 3 Business Combinations. Where the assets transferred do not meet the definition of a business, a partial gain to the extent of unrelated investors’ interests in the associate or joint venture is recognised. The definition of a business is key to determining the extent of the gain to be recognised.

The amendments will be effective from annual periods commencing on or after 1 January 2016.

The adoption of these changes will not affect the amounts and disclosures of the Group’s financial statements.

Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11) The amendments require business combination accounting to be applied to acquisitions of interests in a joint operation

that constitutes a business.

Business combination accounting also applies to the acquisition of additional interests in a joint operation while the joint operator retains joint control. The additional interest acquired will be measured at fair value. The previously held interest in the joint operation will not be remeasured.

The amendments apply prospectively for annual periods beginning on or after 1 January 2016 and early adoption is permitted. The adoption of these changes will not affect the amounts and disclosures of the financial statements.

Amendments to IAS 41- Bearer Plants (Amendments to IAS 16 and IAS 41) The amendments to IAS 16 Property, Plant and Equipment and IAS 41 Agriculture require a bearer plant (which is a living

plant used solely to grow produce over several periods) to be accounted for as property, plant and equipment in accordance with IAS 16 Property, Plant and Equipment instead of IAS 41 Agriculture. The produce growing on bearer plants will remain within the scope of IAS 41.

The new requirements are effective from 1 January 2016, with earlier adoption permitted.

The amendment will not have a significant impact on the Group’s financial statements as the Company does not have bearer plants.

Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38)

The amendments to IAS 16 Property, Plant and Equipment explicitly state that revenue-based methods of depreciation cannot be used for property, plant and equipment.

The amendments to IAS 38 Intangible Assets introduce a rebuttable presumption that the use of revenue-based amortisation methods for intangible assets is inappropriate. The presumption can be overcome only when revenue and the consumption of the economic benefits of the intangible asset are ‘highly correlated’, or when the intangible asset is expressed as a measure of revenue.

The amendments apply prospectively for annual periods beginning on or after 1 January 2016 and early adoption is permitted.

The Directors are assessing the impact of the adoption of the amendments on the financial statements of the Group.







Equity Method in Separate Financial Statements (Amendments to IAS 27) The amendments allow the use of the equity method in separate financial statements, and apply to the accounting not only

for associates and joint ventures but also for subsidiaries.

The amendments apply retrospectively for annual periods beginning on or after 1 January 2016 with early adoption permitted.

The Directors are assessing the full impact of the adoption of these changes on the amounts and disclosures of the Group.

IFRS 14 Regulatory Deferral Accounts

IFRS 14 provides guidance on accounting for regulatory deferral account balances by first-time adopters of IFRS. To apply this standard, the entity has to be rate-regulated i.e. the establishment of prices that can be charged to its customers for goods and services is subject to oversight and/or approval by an authorised body.

The standard is effective for financial reporting years beginning on or after 1 January 2016 with early adoption is permitted.

The adoption of this standard is not expected to have an impact the financial statements of the Group’s given that it is not a first time adopter of IFRS.

Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28)

The amendment to IFRS 10 Consolidated Financial Statements clarifies which subsidiaries of an investment entity are consolidated instead of being measured at fair value through profit and loss. The amendment also modifies the condition in the general consolidation exemption that requires an entity’s parent or ultimate parent to prepare consolidated financial statements. The amendment clarifies that this condition is also met where the ultimate parent or any intermediary parent of a parent entity measures subsidiaries at fair value through profit or loss in accordance with IFRS 10 and not only where the ultimate parent or intermediate parent consolidates its subsidiaries.

The amendment to IFRS 12 Disclosure of Interests in Other Entities requires an entity that prepares financial statements in

which all its subsidiaries are measured at fair value through profit or loss in accordance with IFRS 10 to make disclosures required by IFRS 12 relating to investment entities.

The amendment to IAS 28 Investments in Associates and Joint Ventures modifies the conditions where an entity need not

apply the equity method to its investments in associates or joint ventures to align these to the amended IFRS 10 conditions for not presenting consolidated financial statements. The amendments introduce relief when applying the equity method which permits a non-investment entity investor in an associate or joint venture that is an investment entity to retain the fair value through profit or loss measurement applied by the associate or joint venture to its subsidiaries.

The amendments apply retrospectively for annual periods beginning on or after 1 January 2016, with early application permitted.








Disclosure Initiative (Amendments to IAS 1) The amendments provide additional guidance on the application of materiality and aggregation when preparing financial

statements.

The amendments apply for annual periods beginning on or after 1 January 2016 and early application is permitted.


IFRS 15 Revenue from Contracts with Customers This standard replaces IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15

Agreements for the Construction of Real Estate, IFRIC 18 Transfer of Assets from Customers and SIC-31 Revenue – Barter of Transactions Involving Advertising Services.

The standard contains a single model that applies to contracts with customers and two approaches to recognising revenue: at a point in time or over time. The standard specifies how and when an IFRS reporter will recognise revenue as well as requiring such entities to provide users of financial statements with more informative, relevant disclosures. The standard provides a single, principles based five-step model to be applied to all contracts with customers in recognising revenue being: Identify the contract(s) with a customer; Identify the performance obligations in the contract; Determine the transaction price; Allocate the transaction price to the performance obligations in the contract; and recognise revenue when (or as) the entity satisfies a performance obligation.

IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption is permitted.

IFRS 9: Financial Instruments (2014) On 24 July 2014 the IASB issued the final IFRS 9 Financial Instruments Standard, which replaces earlier versions of IFRS 9 and

completes the IASB’s project to replace IAS 39 Financial Instruments: Recognition and Measurement.

This standard introduces changes in the measurement bases of the financial assets to amortised cost, fair value through other comprehensive income or fair value through profit or loss. Even though these measurement categories are similar to IAS 39, the criteria for classification into these categories are significantly different. In addition, the IFRS 9 impairment model has been changed from an “incurred loss” model from IAS 39 to an “expected credit loss” model.

The standard is effective for annual periods beginning on or after 1 January 2018 with retrospective application, early

adoption is permitted.

The Company early adopted IFRS 9: Financial Instruments (2009) on classification and measurement of financial assets in 2009 and IFRS 9: Financial Instruments (2010) on classification and measurement of financial liabilities in 2010 in advance of its effective date. The standard replaced parts of IAS 39 relating to classification and measurement of financial Instruments.

The adoption of this standard is expected to have a significant impact on the financial statements of the Group. The Directors are assessing the full impact of the adoption of these changes on the amounts and disclosures of the Group.







IFRS 16: Leases On 13 January 2016 the IASB issued IFRS 16 Leases, completing the IASB’s project to improve the financial reporting of

leases. IFRS 16 replaces the previous leases standard, IAS 17 Leases, and related interpretations.

IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, i.e. the customer (‘lessee’) and the supplier (‘lessor’). The standard defines a lease as a contract that conveys to the customer (‘lessee’) the right to use an asset for a period of time in exchange for consideration. A company assesses whether a contract contains a lease on the basis of whether the customer has the right to control the use of an identified asset for a period of time.

The standard eliminates the classification of leases as either operating leases or finance leases for a lessee and introduces a single lessee accounting model. All leases are treated in a similar way to finance leases. Applying that model significantly affects the accounting and presentation of leases and consequently, the lessee is required to recognise:

a) Assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A company recognises the present value of the unavoidable lease payments and shows them either as lease assets (right-of-use assets) or together with property, plant and equipment. If lease payments are made over time, a company also recognises a financial liability representing its obligation to make future lease payments.

b) depreciation of lease assets and interest on lease liabilities in profit or loss over the lease term; and c) separate the total amount of cash paid into a principal portion (presented within financing activities) and interest

(typically presented within either operating or financing activities) in the statement of cash flows

IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently. However, compared to IAS 17, IFRS 16 requires a lessor to disclose additional information about how it manages the risks related to its residual interest in assets subject to leases.

The standard does not require a company to recognise assets and liabilities for: a) short-term leases (i.e. leases of 12 months or less) and; b) leases of low-value assets

The new Standard is effective for annual periods beginning on or after 1 January 2019. Early application is permitted insofar as the recently issued revenue Standard, IFRS 15 Revenue from Contracts with Customers is also applied).






(b) Insurance contracts

Classification

The Group issues contracts that transfer insurance risk. Insurance contracts are those contracts that transfer significant insurance risk. As a general guideline, the group defines as significant insurance risk, the possibility of having to pay benefits on the occurrence of an insured event that are at least 10% more than the benefits payable if the insured event did not occur.

Insurance contracts are classified into two main categories, depending on the duration of risk and as per the provisions of the Insurance Act: long term insurance business and short term insurance business.

i Long term insurance business Includes business of all or any of the following classes, namely; group life business, ordinary life business, deposit

administration business and unit linked business.

Life insurance business means the business of, or in relation to, the issuing of, or the undertaking of liability to pay money on death (not being death by accident or in specified sickness only) or on the happening of any contingency dependent on the termination or continuance of human life (either with or without provision for a benefit under a continuous disability insurance contract), and include a contract which is subject to the payment of premiums for term dependent on the termination or continuance of human life and any contract securing the grant of an annuity for a term dependent upon human life.

Superannuation business means life assurance business, being business of, or in relation to, the issuing of or the undertaking of the liability under superannuation, group life and permanent health insurance policy.

ii Short term insurance business Means insurance business of any class or classes not being long term insurance business. Classes of general

insurance include aviation insurance, engineering insurance, fire insurance - domestic risks, fire insurance - industrial and commercial risks, liability insurance, marine insurance, motor insurance-private vehicles, motor insurance - commercial vehicles, personal accident insurance, theft insurance, workmen’s compensation and employer’s liability insurance and miscellaneous insurance (i.e. class of business not included under those listed above)

Motor insurance business means the business of affecting and carrying out contracts of insurance against loss of, or damage to, or arising out of or in connection with the use of, motor vehicles, inclusive of third party risks but exclusive of transit risks.

Personal accident insurance business means the business of affecting and carrying out contracts of insurance against risks of the persons insured sustaining injury as the result of an accident or of an accident of a specified class or dying as the result of an accident or of an accident of a specified class or becoming incapacitated in consequence of disease or of disease of a specified class.

Fire insurance business means the business of affecting and carrying out contracts of insurance, otherwise than incidental to some other class of insurance business against loss or damage to property due to fire, explosion, storm and other occurrences customarily included among the risks insured against in the fire insurance business.





(b) Insurance contracts (continued)

Recognition and measurement

i Premium income

For long term insurance business, premiums are recognised as revenue when they become payable by the contract holder. Premiums are shown before deduction of commission.

For short term insurance business, premium income is recognised on assumption of risks, and includes estimates

of premiums due but not yet received 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 financial reporting date, and is computed using the 365ths method. Premiums are shown before deduction of commission and are gross of any taxes or duties levied on premiums.

ii Claims

For long term insurance business, benefits are recorded as an expense when they are incurred. Claims arising on maturing policies are recognised when the claim becomes due for payment. Death claims are accounted for on notification. Surrenders are accounted for on payment.

For short term insurance business, 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 financial reporting date, but not settled at that date. Outstanding claims are computed on the basis of the best information available at the time the records for the year are closed, and include provisions for claims incurred but not reported (“IBNR”). Outstanding claims are not discounted.

iii Commissions payable and deferred acquisition costs (“DAC”)

Commissions payable are based on the premium written and are recorded as an expense in the period in which they are incurred.

A proportion of commission payable is deferred and amortised over the period in which the related premium is earned. Deferred acquisition costs represent a proportion of acquisition costs that relate to policies that are in force at the period end.

iv Liability adequacy test

At each financial reporting date, liability adequacy tests are performed to ensure the adequacy of the insurance contract liabilities net of related DAC. In performing these tests, current best estimates of future contractual cash flows and claims handling and administration expenses, as well as investment income from the assets backing such liabilities, are used. Any deficiency is immediately charged to profit or loss.





(b) Insurance contracts (continued)

Recognition and measurement (continued)

v Reinsurance contracts held

Contracts entered into by the Group with reinsurers under which the Group is compensated for losses on one or more contracts issued by the Group and that meet the classification requirements for insurance contracts are classified as reinsurance contracts held. Contracts that do not meet these classification requirements are classified as financial assets. Insurance contracts entered into by the Group under which the contract holder is another insurer (inwards reinsurance) are included with insurance contracts.

The benefits to which the Group is entitled under its reinsurance contracts held are recognised as reinsurance assets. These assets consist of short-term balances due from reinsurers, as well as longer term receivables that are dependent on the expected claims and benefits arising under the related reinsured insurance contracts. Amounts recoverable from or due to reinsurers are measured consistently with the amounts associated with the reinsured insurance contracts and in accordance with the terms of each reinsurance contract. Reinsurance liabilities are primarily premiums payable for reinsurance contracts and are recognised as an expense when due.

The Group assesses its reinsurance assets for impairment on a quarterly basis. If there is objective evidence that the reinsurance asset is impaired, the Group reduces the carrying amount of the reinsurance asset to its recoverable amount and recognises that impairment loss in profit or loss. The Group gathers the objective evidence that a reinsurance asset is impaired using the same process adopted for financial assets held at amortised cost. The impairment loss is also calculated following the same method used for these financial assets. These processes are set out under Note 2(j).

vi Receivables and payables related to insurance contracts and investment contracts

Receivables and payables are recognised when due. These include amounts due to and from agents, brokers and insurance contract holders.

If there is objective evidence that the insurance receivable is impaired, the Group reduces the carrying amount of the insurance receivable accordingly and recognises that impairment loss in the income statement. The Group gathers the objective evidence that an insurance receivable is impaired using the same process adopted for financial assets classified at amortised cost. The impairment loss is also calculated under the same method used for these financial assets. These processes are described under Note 2 (j).

vii Salvage and subrogation reimbursements

Some insurance contracts permit the Group to sell (usually damaged) property acquired in settling a claim (for example, salvage). The Group may also have the right to pursue third parties for payment of some or all costs (for example, subrogation). Estimates of salvage recoveries are included as an allowance in the measurement of the insurance liability for claims, and salvage property is recognised in other assets when the liability is settled. The allowance is the amount that can reasonably be recovered from the disposal of the property.

Subrogation reimbursements are also considered as an allowance in the measurement of the insurance liability for claims and are recognised in other assets when the liability is settled. The allowance is the assessment of the amount that can be recovered from the action against the liable third party.





(c) Revenue recognition

i Insurance premium revenue

The revenue recognition policy relating to insurance contracts is set out under note 2 (b) above.

ii Commissions

Commissions receivable are recognised as income in the period in which they are earned.

iii Interest income

Interest income is recognised on a time proportion basis that takes into account the effective yield on the asset. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income.

iv Dividend income

Dividends are recognised as income in the period in which the right to receive payment is established.

v Rental income

Rental income is recognised as income in the period in which it is earned. All investment income is stated net of investment expenses.

vi Fee income

Fee income consists primarily of administration fees arising from services rendered in relation to the issue and management of deposit administration and investment contracts. Fees are recognised in the accounting period in which the services are rendered and are presented in the income statement within ‘other income’.

(d) Investment contracts

The Group issues investment contracts without fixed terms (unit-linked) and investment contracts with fixed and guaranteed terms (fixed interest rate). The investment contracts include funds administered for a number of retirement benefit schemes.

Investment contracts without fixed terms are financial liabilities whose fair value is dependent on the fair value of underlying financial assets, and are designated at inception as at fair value through profit or loss. The Group designates these investment contracts to be measured at fair value through profit or loss because it eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as ‘an accounting mismatch’) that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases.

The best evidence of the fair value of these financial liabilities at initial recognition is the transaction price (i.e. the fair value received) unless the fair value of that instrument is evidenced by comparison with other observable current market transactions in the same instrument or based on a valuation technique whose variables include only data from observable markets. When such evidence exists, the Group recognises profit at inception.





(d) Investment contracts (continued)

The fair value of financial liabilities for investment contracts without fixed terms is determined using the current unit values in which the contractual benefits are denominated. These unit values reflect the fair values of the financial assets contained within the Group’s unitised investment funds linked to the financial liability. The fair value of the financial liabilities is obtained by multiplying the number of units attributed to each contract holder at the financial reporting date by the unit value for the same date.

For investment contracts with fixed and guaranteed terms, the amortised cost basis is used. In this case, the liability is initially measured at its fair value less transaction costs that are incremental and directly attributable to the acquisition or issue of the contract.

Subsequent measurement of investment contracts at amortised cost uses the effective interest method. This method requires the determination of an interest rate (the effective interest rate) that exactly discounts to the net carrying amount of the financial liability, the estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period if the holder has the option to redeem the instrument earlier than maturity.

The Group re-estimates at each reporting date the expected future cash flows and recalculates the carrying amount of the financial liability by computing the present value of estimated future cash flows using the financial liability’s original effective interest rate. Any adjustment is immediately recognised as income or expense in the income statement.

(e) Property and equipment

All categories of property and equipment are initially recorded at cost and subsequently stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

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 Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to the income statement during the financial period in which they are incurred.

Depreciation is calculated using the straight line method to write down their cost to their residual values over their estimated useful lives, as follows:

- Motor vehicles – 5 years - Computers & computer equipment – 3 years - Office equipment – 5 years - Furniture & fittings – 8 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each financial reporting date. An asset’s carrying amount is written down immediately to its estimated recoverable amount if the asset’s carrying amount

is greater than its estimated recoverable amount.

Gains and losses on disposal of property and equipment are determined by comparing proceeds with carrying amount and are included in the income statement.





(f) Investment properties

Buildings, or part of a building, (freehold or held under a finance lease) and land (freehold or held under an operating lease) held for long term rental yields and/or capital appreciation and are not occupied by the Group are classified as investment property under non-current assets. Investment property is carried at fair value, representing open market value determined annually by external valuers. Properties under construction and development sites with projected use as Investment properties are valued at projected fair values taking into account current market conditions, outstanding investment costs and a risk loading according to the progress of the project. Changes in fair values are included in investment income in the income statement.

(g) Intangible assets

The Group’s intangible assets relate to computer software and goodwill (note 2(r)).

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives of three years.

Development costs that are directly associated with the production of identifiable and unique software products controlled by the Group, and that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets if:-

- It is technically feasible to complete the software product so that it will be available for use; - Management intends to complete the software product and use or sell it; - There is an ability to use or sell the software product; - It can be demonstrated how the software product will generate probable future economic benefits; - Adequate technical, financial and other resources to complete the development and use or sell it are available; and, - The expenditure attributable to the software product during its development can be reliably measured.

Direct costs include the software development, employee costs and an appropriate portion of relevant overheads. Other development expediture that do not meet these criteria are recognised as an expense as incurred. Development costs that have been expensed are not recognised as an asset in a subsequent period.

Computer software development costs recognised as assets are amortised over their estimated useful lives (not exceeding three years). Costs associated with maintaining computer software programmes are recognised as an expense as incurred.

(h) Impairment of non-financial assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. 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. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.





(i) Financial assets

Classification and measurement

The Group classifies its financial assets as subsequently measured at either amortised cost or fair value on the basis of both the Group’s business model for managing the financial assets and the contractual cash flow characteristics of the financial asset. A financial asset is measured at amortised cost if both of the following conditions are met:

a. the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows. b. the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of

principal and interest on the principal amount outstanding. The Group’s corporate bonds, government securities, receivables, mortgage loans, cash at bank and deposits with financial

institutions are classified at amortised cost. The carrying values of various categories of Financial asset and Financial liabilities are shown in note 43.

All financial assets that do not meet the above criteria are measured at fair value. Equity investments for life business are classified at fair value through profit or loss. Equity investment for non life business are classified at fair value through other comprehensive income (note 24).

Recognition and de-recognition

Financial assets are recognised when the Group becomes a party to the contractual provisions of the asset. Initial recognition of financial asset is at fair value plus, for all financial assets except those carried at fair value through profit or loss, transaction costs. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where the Group has transferred substantially all risks and rewards of ownership.

Equity investments are carried at fair value. Gains and losses arising from changes in the fair value of equity investments are recognised in other comprehensive income. When equity investments are derecognised, the cumulative gain or loss previously recognised in other comprehensive income are transferred to retained earnings. Dividends on equity instruments are recognised in the income statement when the Group’s right to receive payment is established.

Fair values of quoted investments in active markets are based on current bid prices. Fair values for unlisted equity securities are estimated using valuation techniques. These include the use of recent arm’s length transactions, discounted cash flow analysis and other valuation techniques commonly used by market participants.

(j) Impairment of financial assets

Assets carried at amortised cost:

The Group assesses at each financial reporting date whether there is objective evidence that a financial asset or a group of financial assets measured at amortised cost is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.





(j) Impairment of financial assets (continued)

Objective evidence that a financial asset or group of assets is impaired includes observable data that comes to the attention of the Group about the following loss events:

a. significant financial difficulty of the borrower; b. a breach of contract, such as default or delinquency in interest or principal repayments; c. the Group granting to the borrower, for economic or legal reasons relating to the borrower’s financial difficulty, a

concession that the Group would not otherwise consider; d. it becoming probable that the borrower will enter bankruptcy or other financial reorganisation; e. the disappearance of an active market for that financial asset because of financial difficulties; or f. observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of

financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the Group, including:

- adverse changes in the payment status of borrowers in the Group; or - national or local economic conditions that correlate with defaults on the assets in the Group.

The estimated period between a loss occurring and its identification is determined by management for each identified portfolio.

The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If the Group 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 financial assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial instrument’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price.

The calculation of the present value of the estimated future cash flows of a collateralised financial asset reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable.

For the purposes of a collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk characteristics (i.e. on the basis of the Group’s grading process that considers asset type, industry, geographical location, collateral type, past-due status and other relevant factors). Those characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors’ ability to pay all amounts due according to the contractual terms of the assets being evaluated.

Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of the contractual cash flows of the assets in the Group and historical loss experience for assets with credit risk characteristics similar to those in the Group. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently.





(j) Impairment of financial assets (continued)

When a loan is uncollectible, it is written off against the related provision for loan impairment. Such loans are written off after all the necessary procedures have been completed and the amount of the loss has been determined. Subsequent recoveries of amounts previously written off decrease the amount of the provision for loan impairment in the income statement.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the previously recognised impairment loss is reversed by adjusting the allowance account. The amount of the reversal is recognised in the income statement.

Loans that are either subject to collective impairment assessment or individually significant and whose terms have been renegotiated are no longer considered to be past due but are treated as new loans. In subsequent years, the renegotiated terms apply in determining whether the asset is considered to be past due.

(k) Accounting for leases

Leases of property and equipment where the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Assets acquired under finance leases are capitalised at the inception of the lease at the lower of their fair value and the estimated present value of the underlying lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in non-current liabilities. The interest element of the finance charge is charged to the income statement over the lease period. Property and equipment acquired under finance leases is depreciated over the estimated useful life of the asset.

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease.

(l) Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less, and bank overdrafts.

(m) Employee benefits

i Retirement benefit obligations

The Group operates a defined benefit scheme for employees. A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation d an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

The liability recognised in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation.





(m) Employee benefits (continued)

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Past-service costs are recognised immediately in income.

ii Other entitlements

Employee entitlements to long service awards are recognised when they accrue to employees. A provision is made for the estimated liability for such entitlements as a result of services rendered by employees up to the financial reporting date.

The estimated monetary liability for employees’ accrued annual leave entitlement at the financial reporting date is recognised as an expense accrual.

(n) Current and deferred income tax

The tax expense for the period comprises current and deferred income tax. Tax is recognised in the profit or loss except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

The current income tax charge is calculated on the basis of the tax enacted or substantively enacted at the reporting date. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying values in the financial statements. However, if the deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates and laws that have been enacted or substantively enacted at the reporting date and are expected to apply when the related deferred income 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 the temporary differences can be utilised. Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

(o) Functional currency and translation of foreign currencies

i Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in ‘Kenyan Shillings (Kshs), which is the Group’s presentation currency.





(o) Functional currency and translation of foreign currencies (continued)

ii Transactions and balances

Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in profit or loss within ‘finance income or cost’. All other foreign exchange gains and losses are presented in profit or loss within ‘other income’ or ‘other expenses’.

Translation differences related to changes in amortised cost are recognised in profit or loss, and other changes in carrying amount are recognised in other comprehensive income.

Translation differences on non-monetary financial assets and liabilities, such as equities held at fair value through profit or loss, are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets, such as equities classified as available-for-sale financial assets, are included in other comprehensive income.

iii Group balances

The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(i) assets and liabilities for each statement of financial position presented are translated at the closing rate at the end of the reporting period;

(ii) income and expenses for each income statement amount are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and

(iii) all resulting exchange differences are recognised in other comprehensive income.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are recognised in equity.

(p) Dividends

Dividends payable to the Group’s shareholders are charged to equity in the period in which they are declared. Proposed dividends are shown as a separate component of equity until declared.





(q) Consolidation

(i) Subsidiaries

Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity when the group is exposed to, or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases.

The group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets.

Acquisition-related costs are expensed as incurred.

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised in profit or loss.

Any contingent consideration to be transferred by the group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.

The excess of the consideration transferred the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If the total of consideration transferred, non-controlling interest recognised and eviously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the income statement.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. When necessary amounts reported by subsidiaries have been adjusted to conform with the group’s accounting policies.

(ii) Changes in ownership interests in subsidiaries without change of control

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.





(q) Consolidation (continued)

(iii) Disposal of subsidiaries

When the group ceases to have control any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

(iv) Associates

Associates are all entities over which the group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor’s share of the profit or loss of the investee after the date of acquisition. The group’s investment in associates includes goodwill identified on acquisition.

If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate. The group’s share of post-acquisition profit or loss is recognised in the income statement, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate. The group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount adjacent to ‘share of profit/(loss) of associates in the income statement Profits and losses resulting from upstream and downstream transactions between the group and its associate are recognised in the group’s financial statements only to the extent of unrelated investor’s interests in the associates. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the group.Dilution gains and losses arising in investments in associates are recognised in the income statement.

(r) Goodwill

Goodwill arises on the acquisition of subsidiaries, associates and joint ventures and represents the excess of the consideration transferred over the Company’s interest in net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree and the fair value of the non-controlling interest in the acquiree.

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the CGUs, or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.

Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently reversed.





(s) Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision- maker (CODM). The CODM is the person or group that allocates resources to and assesses the performance of the operating segments of an entity. The group has determined the UAP Holdings Board of Directors to be its CODM.

All transactions between business segments are conducted on an arm’s length basis, with intra-segment revenue and costs being eliminated in head office. Income and expenses directly associated with each segment are included in determining business segment performance.

(t) Comparatives Where necessary, comparatives figures have been restated to conform to changes in presentation in the current year.

3 Critical accounting estimates and judgments in applying accounting policies

The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

i Future benefit payments from long-term insurance contracts

The estimation of future benefit payments from long-term insurance contracts is one of the Group’s most critical accounting estimates. There are several sources of uncertainty that need to be considered in the estimate of the liability that the Group will ultimately pay for such claims. Note 33 contains further details on this process.

The determination of the liabilities under long-term insurance contracts is dependent on estimates made by the Group. Estimates are made as to the expected number of deaths for each of the years in which the Group is exposed to risk. The Group bases these estimates on standard mortality tables that reflect historical mortality experience. The estimated number of deaths determines the value of the benefit payments and the value of the valuation premiums. The main source of uncertainty is that epidemics such as AIDS could result in future mortality being significantly worse than in the past for the age groups in which the Group has significant exposure to mortality risk. However, continuing improvements in medical care and social conditions could result in improvements in longevity in excess of those allowed for in the estimates used to determine the liability for contracts where the Group is exposed to longevity risk. For contracts without fixed terms and with discretionary participation in profits, it is assumed that the Group will be able to increase mortality risk charges in future years in line with emerging mortality experience. Estimates are also made as to future investment income arising from the assets backing long-term insurance contracts. These estimates are based on current market returns as well as expectations about future economic and financial developments. The average estimated rate of investment return is 12.25% p.a.(2014:13.5% p.a.).

ii Claims reserving and determination of IBNR

The estimation of future contractual cash flows in relation to reported losses and losses incurred but not reported is a key accounting estimate. There are several sources of uncertainty that need to be considered in the estimate of the liability that the Group will ultimately pay for such claims. Case estimates are computed on the basis of the best information available at the time the records for the year are closed. Further details on the process used to estimate claims incurred but not reported and amounts recorded as liabilities at the end of the current and previous year are set out in note 33 of the financial statements.




3 Critical accounting estimates and judgments in applying accounting policies (continued)

iii Fair value of financial assets

Fair values of certain financial assets recognised in the financial statements are determined using valuation techniques based on assumptions that are not supported by prices from current market transactions or observable market data.

The fair values of financial instruments that are not quoted in active markets are determined by using valuation techniques. Where valuation techniques (for example models) are used to determine fair values, they are validated and periodically independently reviewed by qualified senior personnel. All models are certified before they are used, and models are calibrated to ensure that outputs reflect actual data and comparative market prices. To the extent practical, models use observable data, however, areas such as credit risk (both own and counterparty), volatilities and correlations require management to make estimates.

iv Recoverable amount of receivables

Critical estimates are made by the directors in determining the recoverable amount of impaired receivables. This process is set out in note 2(j). The carrying amounts of receivables are shown on note 4(b).

v. Goodwill impairment

Critical estimates have been made by Directors in determining whether the goodwill is impaired. These assumptions are disclosed on note 18.

4 Risk Governance and Risk Management System

Risk management objectives

Risk management is a central part of the Group’s strategic management process hence we continuously seek to enhance the risk management capabilities of the Group. It is anticipated that our risk management practices will increase the probability of success, and reduce both the potential of failure and the uncertainty associated with achieving the group’s overall objectives.

The objectives of the Group’s risk management activities are to achieve sustained competitive advantage via a rigorous, group wide risk management system that is fully aligned to the Group values, strategic business initiatives and processes. At a strategic level, our risk management objectives are to:

• Identify the Group’s significant risks in relation to the corporate strategies pursued; • Formulate the Group’s risk appetite and ensure that business profile and plans are consistent with it; • Optimise risk/return decisions by taking them as closely as possible to the business, while establishing strong and

independent review and challenge structures; • Ensure that business growth plans are properly supported by effective risk infrastructure; • Manage risk profile to ensure that specific financial deliverables remain possible under a range of adverse business

conditions; and • Help executives improve the control and co-ordination of risk taking across the business.

Our risk management strategy defines the extent of the risks we are prepared to incur for our clients and shareholders. The development of our risk strategy is embedded in the annual planning cycle and hence in our business strategy. That is, Integrating Strategy, Risk and Performance management takes place at strategy setting, first with a full Executive management consensus on clearly defined business objectives. Once Executive management have defined the objectives, they then identify the key risks that may present an opportunity to pursue those business objectives, or impede their ability to achieve them.




4 Risk Governance and Risk Management System (continued)

Organisational structure

To ensure that our risk management operates efficiently and effectively, we have established a specific risk management function within UAP Global Services as a Shared Service for the entire Group. Our Risk Management supervises risk management Group-wide with the support of decentralised structures in all units of the Group. It is headed by the Group Risk and Compliance Manager (GCRM), who is supported by interdisciplinary teams of highly qualified staff. The Group’s activities expose it to a variety of risks, including insurance risk and financial risk.

The Group’s overall risk management programme focuses on the identification and management of risks and seeks to minimise potential adverse effects on its financial performance, by use of underwriting guidelines and capacity limits, reinsurance planning, credit policy governing the acceptance of clients, and defined criteria for the approval of intermediaries and reinsurers. Investment policies are in place which help manage liquidity, and seek to maximise return within an acceptable level of interest rate risk. Management Framework ensure that staff in our risk management structure and the Group as a whole are kept informed of our risk strategy, organisation and processes, enabling the risks incurred to be actively controlled.

Risk Management Framework

In order to achieve its mission and objectives, the Group has developed an Enterprise Risk management framework to provide a guide within which key risks affecting the group are identified, measured and managed. This risk management framework also provides management with proven risk management guidelines that support their decision-making responsibilities and processes, together with managing the risks that impact on the objectives of the Group.

At the heart of the risk management framework is a governance process with clear responsibilities for taking, managing, monitoring and reporting risks. The Group articulates the roles and responsibilities for risk management throughout the organization, from the Board of Directors and the Group Chief Executive Officer (CEO) to its businesses and functional areas, thus embedding risk management in the business

The UAP Risk Management Framework is the Group’s main risk governance document; it specifies the Group’s Target Risk Management Operating Model including Risk management authorities and responsibilities, procedures and reporting requirements. The risk management framework also classifies the risks the Group faces into broad risk categories. The Group regularly enhances the ERM Framework to reflect new insights and changes in the Group’s environment.

One of the key elements of the Group’s risk management framework is to foster risk transparency by establishing risk reporting standards throughout the Group. The Group regularly reports on its risk profile, current risk issues, adherence to its risk policies and improvement actions both at a local and on a Group level. The Group has procedures in place for the timely referral of risk issues to senior management and the Board of Directors.

The implementation of the framework is driven by a risk management culture and awareness that permeates throughout the Group and is supported by a set of policies and procedures; tools and robust reporting mechanisms. The Group continues to consciously take risks for which it expects an adequate return. This approach requires sound judgment and an acceptance that certain risks can and will materialize in the future.




4 Risk Governance and Risk Management System (continued)

Significant risks

According to our classification, significant risks are risks that could have a long-term adverse effect on the Group’s assets, financial situation or profitability. We have applied this definition consistently to the individual business units and legal entities, taking account of their individual risk tolerance. The section below summarises the significant risks faced by the group and how they are managed.

(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 Group 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 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 smaller the relative variability about the expected outcome will be. In addition, a more diversified portfolio is less likely to be affected by a change in any subset of the portfolio. The group has developed its insurance underwriting strategy to diversify the type of insurance risks accepted and within each of these categories to achieve a sufficiently large population of risks to reduce the variability of the expected outcome. Factors that aggravate insurance risk include lack of risk diversification in terms of type and amount of risk, geographical location and type of industry covered.

The following tables disclose the concentration of insurance risk by the class of business in which the contract holder operates and by the maximum insured loss limit included in the terms of the policy. The amounts are the maximum insured loss limit of the insurance liabilities (gross and net of reinsurance) arising from insurance contracts.

Year ended 31 December 2015

Maximum insured loss Total(Amounts presented in Shs ‘000) Kshs 0-15m Kshs 15-250m Kshs 250-1000m Kshs’000

General insurance business Motor Gross 1,919,728 6,060,049 28,950,593 36,930,370 Net 1,365,548 1,154,350 1,414,660 3,934,558 Fire Gross 2,555,146 12,937,311 438,922,406 454,414,863 Net 2,530,467 6,743,866 393,824,162 403,098,495 Accident Gross 1,002,771 13,184,201 121,260,056 135,447,028 Net 861,541 8,363,131 9,486,530 18,711,202 Other Gross 1,216,131 12,068,053 261,734,871 275,019,055 Net 813,673 2,032,127 148,438,162 151,283,962

Life assurance business Ordinary life Gross 7,035,591 207,421 324,466 7,567,478 Net 7,035,591 207,421 318,627 7,561,639 Group life Gross 122,100 8,769,286 603,208,545 612,099,931

Net 120,715 7,012,321 347,652,041 354,785,077

Total Gross 13,851,467 53,226,321 1,454,400,937 1,521,478,725

Net 12,727,535 25,513,216 901,134,182 939,374,933




4 Management of insurance and financial risk (Continued)

(a) Insurance risk (continued)

Year ended 31 December 2014 Class of business

Maximum insured loss Total(Amounts presented in Shs ‘000) Kshs 0-15m Kshs 15-250m Kshs 250-1000m Kshs’000General insurance business Motor Gross 4,408,647 9,706,147 29,801,063 43,915,857 Net 3,008,472 4,338,726 1,401,268 8,748,466Fire Gross 1,953,844 22,035,557 465,136,394 489,125,795 Net 1,941,969 12,926,165 424,428,386 439,296,520Accident Gross 3,416,087 18,279,058 136,641,696 158,336,841 Net 2,986,386 12,114,477 12,714,023 27,814,886Other Gross 1,729,969 18,428,253 280,998,139 301,156,361 Net 1,546,671 5,266,738 159,691,031 166,504,440Life assurance business Ordinary life Gross 5,480,030 76,472 - 5,556,502 Net 5,480,030 76,472 - 5,556,502Group life Gross 156,624,959 289,952,470 1,573,376,035 2,019,953,464

Net 144,927,847 140,592,989 166,487,878 452,008,714

Total Gross 173,613,536 358,477,957 2,485,953,327 3,018,044,820

Net 159,891,375 175,315,567 764,722,586 1,099,929,528

The concentration by sector or maximum insured loss at the end of the year is broadly consistent with the prior year.

(b) Financial risk

The Group 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 types of risk are credit risk, liquidity risk and market risk. Market risk includes currency risk, interest rate risk, equity price risk and other price risks.

These risks arise from open positions in interest rate, currency and equity prices, all of which are exposed to general and specific market movements. The risks that the Group primarily faces due to the nature of its investments and liabilities are liquidity rate risk and equity price risk.

The Group manages these risks through policies set out by the Finance and Investment Committee of the Board (FIC). These policies have been developed to achieve long-term investment returns in excess of the Group’s obligations under insurance and investment contracts. The principal technique is to match assets to the liabilities arising from insurance 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.





(b) Financial risk (continued)

Market risk

i Foreign exchange risk The Group underwrites some short term insurance policies contracted in US dollars and maintains foreign currency

denominated current accounts with local banks. Additionally, the group invests in offshore stock exchange markets and places deposits in local financial institutions denominated in foreign currencies. This exposes the group to onward foreign exchange risk arising from the various currency exposures, primarily with respect to the Uganda shillings, US dollar, Euro and Sterling Pound. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities.

At 31 December 2015, if the Shilling had weakened/strengthened by 10% against the US dollar with all other variables held constant, the post-tax profit for the year would have been Kshs 201 million (31 December 2014: Kshs 39 million) higher/lower, mainly as a result of US dollar earnings. At 31 December 2015, and 31 December 2014, the group had no significant exposure with respect to Uganda Shillings, Euro and the Sterling Pound.

ii Price risk The Group is exposed to equity securities price risk because of investments in quoted and unquoted shares classified

either as fair value through profit or loss or other comprehensive income. The Group is not exposed to commodity price risk. To manage its price risk arising from investments in equity securities, the Group diversifies its portfolio. Diversification of the portfolio is done in accordance with policies set out by the Board. All quoted shares held by the Group are traded on the various Stock Exchanges across the region.

At 31 December 2015, if the NSE Index had increased/decreased by 10% with all other variables held constant and all the Group’s equity instruments moved according to the historical correlation to the index, equity would have been Kshs 40 million higher/ lower (31 December 2014: Kshs 597 million). Movement in the USE would not have had a material impact on the Group’s equity 31 December 2015 and 31 December 2014 as investments in the USE Index are not material. Investment in shares of Centum Investment Company Limited at 31 December 2015 comprised of 3% (31 December 2014: 32%) respectively of the Group’s total equity portfolio. There was no other concentration of price risk.

iii Interest rate risk

Fixed interest rate financial instruments expose the Company and Group to fair value interest rate risk. Variable interest rate financial instruments expose the company to cash flow interest rate risk. The Group’s fixed interest rate financial instruments are government securities, deposits with financial institutions and borrowings. The Company’s variable interest rate financial instruments are quoted corporate bonds, which are always the treasury bills rate plus some basis points. No limits are placed on the ratio of variable rate financial instruments to fixed rate financial instruments.

Investment contracts with fixed and guaranteed terms, government securities and deposits with financial institutions held to maturity are accounted for at amortised cost and their carrying amounts are not sensitive to changes in the level of interest rates. At 31 December 2015, if interest rates on quoted corporate bonds had been 2% higher/lower with all other variables held constant, post-tax profit for the year would have been Kshs 37 million (31 December 2014: Kshs 29 million) lower/higher, mainly as a result of higher/lower interest income on floating rate quoted corporate bonds.






Credit risk

The Group has exposure to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due. Key areas where the Group is exposed to credit risk are:

• Receivables arising out of direct insurance arrangements; • Receivables arising out of reinsurance arrangements; • Reinsurers’ share of insurance liabilities; • Corporate bonds; • Government securities; and • Mortgage loans receivable.

The Group has no significant concentrations of credit risk. The Group structures the levels of credit risk it accepts by placing limits on its exposure to a single counterparty, or groups of counterparty, and to geographical and industry segments. Such risks are subject to an annual or more frequent review. Limits on the level of credit risk by category and territory are approved quarterly by the Board of Directors.

Reinsurance is used to manage insurance risk. This does not, however, discharge the Group’s liability as primary insurer. If a reinsurer fails to pay a claim for any reason, the Group remains liable for the payment to the policyholder. The creditworthiness of reinsurers is considered on an annual basis by reviewing their financial strength prior to finalisation of any contract.

The exposure to individual counterparties is also managed by other mechanisms, such as the right of offset where counterparties are both debtors and creditors of the Group. Management information reported to the Group includes details of provisions for impairment on loans and receivables and subsequent write-offs. Finance and Investment committee of the Group Board makes regular reviews to assess the degree of compliance with the Group procedures on credit. Exposures to individual policyholders and groups of policyholders are collected within the ongoing monitoring by the management credit committee.

The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings if available or historical information about counterparty default rates. None of the group’s credit risk counter parties are rated except the Government of Kenya, the issuer of the Group’s government securities which has B+ rating. The Company classifies counterparties without an external credit rating as below:

Group 1 - new customers/related parties. Group 2 - existing customers/related parties with no defaults in the past. Group 3 - existing customers/related parties with some defaults in the past. All defaults were fully recovered.






Credit risk (Continued)

Maximum exposure to credit risk before collateral held - Group 31-Dec 31-Dec Credit rating/ 2015 2014 Classification Kshs ’000 Kshs ’000Receivables arising out of reinsurance arrangements Group 2 970,510 706,371Receivables arising out of direct insurance arrangements Group 2 2,364,365 2,486,192Reinsurers’ share of insurance liabilities Group 2 2,977,367 2,509,829Other receivables Group 2 746,174 1,550,187Government securities B+ rating 7,541,079 5,875,753Corporate bonds Group 2 1,855,820 1,588,613Mortgage loans receivable Group 2 255,259 255,437Deposits with financial institutions Group 2 3,845,043 3,173,707Cash at bank Group 2 1,750,124 1,025,540

Total 22,305,741 19,171,629

Maximum exposure to credit risk before collateral held - Company

31-Dec 31-Dec Credit rating/ 2015 2014 Classification Kshs ’000 Kshs ’000Cash at bank Group 2 10,805 16,862Deposits with financial institutions Group 2 208,811 1,248,062Amount due from subsidiaries Group 2 2,243,013 2,186,511Other receivables Group 2 111,487 696,711

Total 2,574,116 4,148,146

No collateral is held for any of the above assets other than for staff mortgage loans and car loans included under other receivables. Properties in relation to staff mortgage loans and motor vehicles in relation to staff car loans are charged to the group as collateral. The fair value of this collateral was Kshs 487 million (2014: Kshs 226 million) and no collateral had been repossessed at as the end of the year. All receivables that are neither past due or impaired are within their approved credit limits, and no receivables have had their terms renegotiated. All receivables are classified in Group 2.






Credit risk (continued)

None of the above assets are either past due or impaired except for the following amounts in the Group’s receivables under direct insurance and reinsurance arrangements.

Credit rating / Receivables arising from Receivables arising classification direct insurance from re-insurance arrangements arrangements 31-Dec 31-Dec 31-Dec 31-Dec 2015 2014 2015 2014 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000Past due but not impaired: - by up to 30 days Group 2 648,702 1,079,359 39,096 159,657 - by 31 to 60 days Group 2 501,160 306,514 93,125 8,496 - by 61 to 150 days Group 2 528,535 573,732 749,271 424,403- by 151 to 360 days Group 2 685,968 526,587 89,018 113,815

Total past due but not impaired 2,364,365 2,486,192 970,510 706,371 Receivables individually determinedto be impaired: Carrying amount before provisionfor impairment 1,246,936 800,817 - - Provision for impairment loss (1,246,936) (800,817) - -

Net carrying amount 2,364,365 2,486,192 970,510 706,371

No collateral is held in respect of the receivables that are past due but not impaired. Movements on the provision for impairment of receivables arising on direct insurance arrangements are as follows:

31-Dec 31-Dec 2015 2014 Kshs ’000 Kshs ’000At 1 January 2015 820,011 800,817Provision in the period 426,925 19,194

At end of year 1,246,936 820,011

All receivables past due by more than 365 days are considered to be impaired, and are carried at their estimated recoverable value.






Credit risk (Continued)

The individually impaired receivables mainly relate to receivables arising out of direct insurance arrangements, the following amounts have been individually assessed:

Individually assessed impaired receivables 31-Dec-15 31-Dec-14 Kshs’000 Kshs’000Brokers 366,300 204,965 Agents 377,113 231,113 Insurance Companies 233,574 156,095 Direct Clients 269,949 227,838

As at year end 1,246,936 820,011

Liquidity risk

Liquidity risk is the risk that the Group is unable to meet its payment obligations associated with its financial liabilities as they fall due and to replace funds when they are withdrawn.

The Group is exposed to daily calls on available cash resources for claims settlement and other administration expenses. The Group does not maintain cash resources to meet all of these needs as experience shows that a minimum level of reinvestment of maturing funds can be predicted with a high level of certainty. The Finance and Investment Committee sets limits on the minimum level of cash balances.

The table below presents the cash flows payable by the Group under financial liabilities by remaining contractual maturities (other than insurance contract liabilities which are based on expected maturities) at the financial reporting date.

Up to 1 1-3 3-12 1-5 Over 5 month months months years years Total As at 1 January 2015 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Liabilities Insurance contract liabilities 1,665,591 431,858 1,242,636 2,323,931 2,482,861 8,146,877 Payable under depositadministration contracts 17,785 32,097 163,384 1,010,798 3,199,135 4,423,199 Unit-linked investment contracts 1,988 40,081 68,061 399,378 498,213 1,007,721 Creditors arising from reinsurancearrangements 843,103 90,037 172,649 1 - 1,105,790 Other payables 297,130 174,012 408,120 787,627 1,334 1,668,223 Borrowings - 2,846,485 180,507 4,089,299 361,009 7,477,300

Total financial liabilities as

at 31 December 2015 2,825,597 3,614,570 2,235,357 8,611,034 6,542,552 23,829,110




4 Management of insurance and financial risk (continued)


Up to 1 1 to 3 3 to 12 1 to 5 Over 5 month month month years years TotalAs at 31 December 2014 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000Liabilities Insurance contract liabilities 2,034,163 1,274,855 1,602,524 2,486,621 322,272 7,720,435Creditors arising from reinsurancearrangements 474,025 77,156 194,569 139,049 - 884,799Payable under depositadministration contracts 3,542,067 820 9,331 79,165 1,638 3,633,021Unit-linked investment contracts 1,001,699 - 4,268 34,861 - 1,040,828Other payables 9,386 107,885 1,165,161 215,739 - 1,498,171Borrowings 3,480 44,351 31,323 3,901,847 - 3,981,001

Total financial liabilities 7,064,820 1,505,067 3,007,176 6,857,282 323,910 18,758,255

Investment contracts and deposit administration contracts can be surrendered before maturity for a cash surrender value specified in the contractual terms and conditions. Prudent liquidity risk management includes maintaining sufficient cash balances to cover anticipated surrenders before the contractual maturity dates. In addition, the Group invests only a limited proportion of its assets in investments that are not actively traded. The Group’s listed securities are considered readily realisable, as they are actively traded on the Nairobi Securities Exchange and Uganda Stock Exchange.

The table below presents the cash flows payable by the Company under financial liabilities by remaining contractual maturities at the financial reporting date. Less than Greater than 1 year 1 year Kshs ’000 Kshs ’000At 31 December 2015: Amounts due to subsidiaries (Note 44(iv)) 939,842 - Other payables 368,319 - Borrowings 2,846,485 2,057,053

4,154,646 2,057,053 At 31 December 2014: Amounts due to subsidiaries (Note 44(iv)) 1,991,496 -Other payables 218,985 -Borrowings 252,898 1,825,749

2,463,379 1,825,749





(c) Capital management

The Group’s objectives when managing capital, which is a broader concept than the ‘equity’ on the statement of financial position, are:

• to comply with the capital requirements as set out in the regulations of the jurisdictions in which the Group entities operate in;

• to comply with regulatory solvency requirements as set out in legislation in the jurisdictions in which the Group entities operate in;

• to safeguard the Group’s ability to continue as a going concern, so that it can continue to provide returns to shareholders and benefits for other stake holders; and

• to provide an adequate return to shareholders by pricing insurance and investment contracts commensurately with the level of risk.

The Group’s paid up capital comprises share capital as disclosed on note 13. The Group manages the minimum paid up capital and regulatory Capital (solvency) held in each subsidiary as capital. Capital adequacy and solvency margin are monitored regularly by the Board of Directors. The required information is filed with the respective authorities.

During the year, the Group held the minimum paid up share capital required. The Group entities also met the solvency margins required in the jurisdictions in which they operate, except for the Life Assurance (Kenya) and General Insurance (Rwanda and Tanzania) subsidiaries. Appropriate measures, including capital injection and business turn-around initiatives, have been instituted to resolve the solvency gaps in these entities.

The table below summarises the capital requirements of the Group’s entities in the various jurisdictions in which the Group operates and the amount of capital held. 31-Dec-15 Kenya Uganda General Life General Life Insurance Assurance Sudan Insurance Insurance Rwanda Tanzania Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000Regulatory capitalrequirements 300,000 150,000 341,190 128,153 96,115 136,524 74,916 Amount of paid up capital 600,000 1,584,593 342,710 214,939 286,018 733,057 940,720 Required solvency margin 7,992,078 428,767 24,887 279,585 691,272 68,217 206,254 Solvency margin byCompany (13,159,930) 841,756 1,300,657 310,759 803,010 35,701 311,408 Surplus/(deficit) over

required margin 5,167,852 412,989 1,275,770 31,174 111,738 (32,516) 105,154

31-Dec-14 Kenya Uganda General Life General Life Insurance Assurance Sudan Insurance Insurance Rwanda Tanzania Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000Regulatory capitalrequirements 300,000 150,000 341,190 70,006 100,000 - - Amount of paid up capital 600,000 644,093 342,710 241,950 199,780 393,567 328,569 Required solvency margin 8,046,000 400,000 389,000 293,000 424,000 64,000 171,000 Solvency margin byCompany 12,322,000 287,000 1,184,000 387,000 503,000 (18,000) (316,000)Surplus/ (deficit) over

required margin 4,276,000 (113,000) 795,000 94,000 79,000 (82,000) (487,000)





(d) Fair values of financial assets and liabilities

The fair value of government securities at 31 December 2015 is estimated at Kshs 5,664 million (2014: Shs 2,959 million) compared to the carrying value Kshs 7,541million (2014: Shs 5,875 million). The fair values of the Group’s other financial assets and liabilities approximate the respective carrying amounts, due to the generally short periods to contractual repricing or maturity dates as set out above. Fair values are based on discounted cash flows using a discount rate based upon the borrowing rate that the directors expect would be available to the Group at the financial reporting date.

(e) Fair values estimation

IFRS 7 and IFRS 13 require disclosure of fair value measurements by the following levels of hierarchy for financial instruments that are measured in the statement of financial position at fair value:

• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1). • Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly

(that is, as prices) or indirectly (that is, derived from prices) (level 2). • Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3). The following table presents the Group’s assets that are measured at fair value at the end of the year.

Year ended 31 December 2015 Level 1 Level 2 Level 3 Total balance Kshs ’000 Kshs ’001 Kshs ’000 Kshs ’000Assets Equity investments 4,429,484 - 128,693 4,558,177 Government securities 320,523 - - 320,523 Corporate bonds 160,418 - - 160,418 Investment Properties - - 19,794,286 19,794,286

Total 4,910,425 - 19,922,979 24,833,404 Year ended 31 December 2014 Level 1 Level 2 Level 3 Total balance Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000Assets Equity investments 5,998,957 - 89,671 6,088,628 Government securities 742,791 - - 742,791 Corporate bonds 132,983 - - 132,983 Investment Properties - - 15,122,307 15,122,307

Total 6,874,731 - 15,211,978 22,086,709

The fair value of financial instruments traded in active markets is based on quoted market prices at the end of each reporting period. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used for financial assets held by the company is the current bid price. These instruments are included in level 1. Instruments included in level 1 comprise of primarily equity investments quoted at Nairobi Securities Exchange and Uganda Stock Exchange.





(e) Fair values estimation (continued)

Financial instruments measured at fair value that are not traded in active markets relate to Group’s investment in the holding company for an investment property and investments in equities that aren’t traded in active markets. Fair value estimate is based on the Group’s share of the net asset of the investee company and on use of rental income and a capitalization rate of 8%. As the investment property of the investee company is measured at their fair value, the net asset value of the investee company approximates its fair value. This estimate is classified as level 3. There were no transfers into or out of level 3 during the year (2014: Nil).

5 (a) Segmental information

Management has determined the operating segments based on the reports reviewed by the Group’s Board of Directors) that are used to make strategic decisions.

The Group reviews its operating segments (business units) by type of business and by geography. Based on this, the group’s operating segments comprise of General Insurance, Life Assurance, Property, Investment management and related Financial Services. The group currently has operations in six countries namely Kenya, Uganda, South Sudan, Rwanda, Tanzania and Democratic Republic of Congo (DRC).

The reportable operating segments derive their revenue primarily from the underwriting of classes and non-life risks as

defined by the Insurance Act and investment property.

Other services offered by the Group that are included within the Kenya and Uganda segments include stock brokerage, investment management and related financial advisory services. The results of these operations are included in the all other segments column as they are not material to the Group.

The Group Board of Directors assesses the performance of the reporting segments based on a measure of revenue and profitability.

The segment information provided to the Group Board of Directors for the reportable segments for the year ended 31

December 2015 is as follows:



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-

678,

590

1,

420,

195

-

16,8

68,2

31

Gro

ss e

arne

d pr

emiu

m

7,82

1,73

8

1,20

6,14

8

1,28

6,44

9

109,

005

-

2,54

2,65

1

497,

075

-

539,

481

1,

330,

247

-

15,3

32,7

94

Net

ear

ned

prem

ium

6 ,

227,

334

8 7

3,18

3

1 ,15

8,38

4

5 2,6

70

- 1 ,

853,

815

4 7

5,45

2

- 4 5

0,84

5

9 77,

743

-

1 2,0

69,4

26

Inte

rest

inco

me

6 42,

983

6 0

8,32

2

6 ,72

6

1 9,1

01

- 7 3

,010

7 5

,442

-

2 4,3

65

6 4,0

43

( 88,

396)

1 ,

425,

596

Oth

er in

vest

men

t inc

ome

442,

454

(3

12,2

43)

181,

139

9,

376

1,

291,

123

11

3,73

8

7,41

8

(55,

121)

88

0

89

205,

740

1,

884,

593

Com

mis

sion

s an

d ot

her i

ncom

e 4 4

2,14

4

1 44,

398

2 6

,537

1 2

,723

-

3 47,

439

8 ,

187

-

2 8,3

87

9 6,3

19

2 5,17

9

1 ,13

1,31

3

Tota

l inc

ome

7,754

,915

1,

313,

660

1,

372,

786

93

,870

1,

291,1

23

2,38

8,00

2

566,

499

(5

5,12

1)

504,

477

1,1

38,19

4

142,

523

16

,510

,928

Cl

aim

s an

d po

licy

owne

rs’ b

enefi

tspa

yabl

e (4

,289

,962

) (1

,035

,516

) (4

95,4

23)

(20,

226)

-

(952

,132)

(3

26,9

94)

- (3

79,7

25)

(486

,671

) -

(7,9

86,6

49)

Fina

nce

cost

(7

,670

) -

- -

- -

- (2

27,4

63)

- (2

3,34

2)

(319

,454

) (5

77,9

29)

Dep

reci

atio

n ( 2

7,95

5)

( 11,

509)

( 1

9,39

8)

- -

( 6,6

56)

( 3,13

8)

( 449

) ( 1

2,07

6)

( 8,3

58)

( 52,

297)

( 1

41,8

36)

Am

ortis

atio

n (2

,386

) -

- -

- -

(99)

-

(4,4

93)

(4,2

05)

(57,

032)

(6

8,21

5)Co

mm

issi

ons

and

othe

r ope

ratin

gex

pens

es

(2,8

81,9

56)

(690

,122)

(4

80,8

87)

(60,

307)

(1

27,3

80)

(1,3

35,0

37)

(349

,530

) (7

8,26

1)

(327

,767

) (5

88,5

29)

(123

,367

) (7

,043

,143

)

Profi

t bef

ore

tax

544,

986

(4

23,4

87)

377,

078

13

,337

1,

163,

743

94

,177

(1

13,2

62)

(361

,294

) (2

19,5

84)

27,0

89

(409

,627

) 69

3,15

6 In

com

e ta

x ex

pens

e (1

13,8

80)

155,

439

-

- (1

93,6

69)

(33,

258)

-

193,

247

-

37,8

97

157,

667

20

3,44

3

Profi

t or (

loss

) aft

er ta

x fo

r the

yea

r 43

1,10

6

(268

,048

) 37

7,07

8

13,3

37

970,

074

60

,919

(1

13,2

62)

(168

,047

) (2

19,5

84)

64,9

86

(251

,960

) 89

6,59

9 Pr

ofit a

ttrib

utab

le to

sha

reho

lder

sof

the

pare

nt

431,

106

(2

68,0

48)

377,

078

13

,337

67

9,05

2

32,2

87

(60,

029)

(1

32,5

05)

(219

,584

) 38

,992

(2

46,2

02)

645,

484

Profi

t att

ribut

able

to N

on-c

ontr

ollin

gin

tere

sts

- -

- -

291,

022

28

,632

(5

3,23

3)

(35,

542)

-

25,9

94

(5,7

58)

251,

115

Profi

t or (

loss

) aft

er ta

x fo

r the

yea

r 43

1,10

6

(268

,048

) 37

7,07

8

13,3

37

970,

074

60

,919

(1

13,2

62)

(168

,047

) (2

19,5

84)

64,9

86

(251

,960

) 89

6,59

9 O

ther

com

preh

ensi

ve in

com

e (4

59,6

23)

- 42

7,25

3

59,5

15

155,

309

(5

8,85

9)

(5,7

17)

(118

,133)

2,

735

(1

3,03

0)

70,5

79

60,0

29

Tota

l com

preh

ensi

ve in

com

e (2

8,51

7)

(268

,048

) 80

4,33

1

72,8

52

1,12

5,38

3

2,06

0

(118

,979

) (2

86,1

80)

(216

,849

) 51

,956

(1

81,3

81)

956,

627

Add

ition

s:

Pr

oper

ty a

nd e

quip

men

t 26

,371

10

,088

19

,473

2,

230

-

8,03

2

11,3

63

- 22

,902

10

,695

42

,596

15

3,74

9 In

vest

men

t pro

pert

y -

- -

- 1,

040,

505

-

- 86

,140

-

- 1,

950,

859

3,

077,

504

Inta

ngib

le a

sset

s -

- -

- -

- 18

3

- 3,

826

12

,416

17

,076

33

,501

Tota

l ass

ets

15,8

59,9

74

9,82

3,48

2

2,25

3,86

9

207,

830

4,

352,

518

4,

467,

659

95

2,42

5

4,19

1,25

1

827,

197

2,

096,

971

3,

691,

478

48

,724

,654

Tota

l equ

ity

7,78

6,18

9

1,24

8,16

6

1,55

7,74

7

136,

178

1,

755,

352

1,

126,

456

10

5,06

7

1,37

1,37

9

214,

800

77

3,19

9

1,72

0,72

8

17,7

95,2

61

5 (a

) Se

gmen

tal i

nfor

mat

ion

(con

tinu

ed)



NOTE

S TO

THE F

INAN

CIAL S

TATE

MEN

TS (C

ONTIN

UED)

Keny

aSo

uth

Suda

nU

gand

aRw

anda

Tanz

ania

5 (a

) Se

gmen

tal i

nfor

mat

ion

(con

tinu

ed)

Year

end

ed 3

1 D

ecem

ber 2

014

G

ener

al

Life

G

ener

al

Life

Pr

oper

ty

Gen

eral

Li

fe

Prop

erty

G

ener

al

Gen

eral

A

ll ot

her

Tota

l

Insu

ranc

e A

ssur

ance

In

sura

nce

In

sura

nce

Ass

uran

ce

In

sura

nce

Insu

ranc

e se

gmen

ts

and

int

ragr

oup

elim

inat

ions

Ksh

s ’00

0 K

shs ’

000

Ksh

s ’00

0 K

shs ’

000

Ksh

s ’00

0 K

shs ’

000

Ksh

s ’00

0 K

shs ’

000

Ksh

s ’00

0 K

shs ’

000

Ksh

s ’00

0 K

shs ’

000

Gro

ss w

ritte

n pr

emiu

m (e

xter

nal)

7,53

2,99

9

1,70

5,67

9

1,18

3,30

1

80,1

82

- 2,

438,

419

33

1,41

4

- 35

8,83

1

1,20

1,91

0

- 14

,832

,735

G

ross

ear

ned

prem

ium

7 ,

600,

587

1 ,

656,

142

1 ,

134,

900

( 4

,225

) -

2,13

9,18

4

3 31,

414

-

2 61,

154

1 ,

039,

288

-

1 4,1

58,4

44

Net

ear

ned

prem

ium

6,

063,

039

1,

342,

882

95

8,77

4

12,1

94

- 1,

710,

070

31

4,78

6

- 21

3,37

0

648,

418

-

11,2

63,5

33

Inte

rest

inco

me

412,

246

50

9,74

9

2,09

6

- 22

8

69,3

17

37,2

42

- 15

,370

31

,482

(4

8,01

6)

1,02

9,71

4 O

ther

inve

stm

ent i

ncom

e 7 2

5,97

8

5 88,

592

1 7

7,174

5 ,

095

3 0

8,87

1

2 11,

252

1 ,

369

8 6

5,52

8

- -

6 90,

199

3 ,57

4,05

8 Co

mm

issi

ons

and

othe

r inc

ome

3 87,

254

1 3

3,06

6

5 7,2

21

1 6,2

80

- 1 4

3,33

0

3 ,32

5

2,23

8

2 6,7

38

9 5,0

35

( 43,

789)

8 2

0,69

8

Tota

l inc

ome

7,58

8,51

7

2,57

4,28

9

1,19

5,26

5

33,5

69

309,

099

2,

133,

969

35

6,72

2

867,

766

25

5,47

8

774,

935

5

98,3

94

16,

688,

003

Clai

ms

and

polic

y ow

ners

’be

nefit

s pa

yabl

e (4

,100

,385

) (2

,144

,673

) (3

71,9

02)

(7,2

57)

- (8

53,9

76)

(148

,523

) -

(182

,130)

(2

65,9

48)

- (

8,07

4,79

4)Fi

nanc

e co

st

(3,5

35)

- (8

,914

) -

- -

- (2

29,7

21)

- (1

,200

) (4

9,94

0)

(

293,

310)

Dep

reci

atio

n (3

3,34

0)

(9,5

24)

(25,

993)

-

- (5

,489

) (2

,239

) (

80)

(9

,351

) (9

,604

) (3

7,32

3)

(

132,

943)

Am

ortis

atio

n (2

,122)

-

- -

- -

(56)

-

(3,7

40)

(6,8

38)

(104

,368

)

(11

7,124

)Co

mm

issi

ons

and

othe

r ope

ratin

gex

pens

es

(2,3

45,0

64)

(648

,033

) ( 5

09,5

40)

(45,

184)

(8

2,58

8)

(1,0

42,3

51)

(234

,219

) (

96,5

50)

(237

,820

) (4

80,11

8)

(52,

136)

(5

,773

,603

)

Profi

t bef

ore

tax

1,10

4,07

1

(227

,941

) 27

8,91

6

(18,

872)

22

6,51

1

232,

153

(2

8,31

5)

541,

415

(1

77,5

63)

11,2

27

35

4,62

7 2,

296,

229

Inco

me

tax

expe

nse

(249

,503

) 5,

314

-

- (4

6,33

1)

(65,

226)

(4

1,89

9)

(190

,800

) -

17,7

04

(5

8,30

1)

(

629,

042)

Profi

t or (

loss

) aft

er ta

x fo

r the

yea

r 85

4,56

8

(222

,627

) 27

8,91

6

(18,

872)

18

0,18

0

166,

927

(7

0,21

4)

350,

615

(1

77,5

63)

28,9

31

29

6,32

6

1,66

7,18

7Pr

ofit a

ttrib

utab

le to

Non

-con

trol

ling

inte

rest

s 85

4,56

8

(222

,627

) 27

8,91

6

(18,

872)

12

6,12

6

88,4

71

(37,

213)

27

6,46

0

(177

,563

) 17

,357

30

0,35

3

1,

485,

976

Profi

t att

ribut

able

to s

hare

hold

ers

of th

e pa

rent

-

- -

- 54

,054

78

,456

(3

3,00

1)

74,1

55

- 11

,574

(

4,0

27)

181

,211

Profi

t or (

loss

) aft

er ta

x fo

r the

yea

r 85

4,56

8

(222

,627

) 27

8,91

6

(18,

872)

18

0,18

0

166,

927

(7

0,21

4)

350,

615

(1

77,5

63)

28,9

31

296,

326

1,

667,

187

Oth

er c

ompr

ehen

sive

inco

me

1,13

1,99

2

- 59

,094

(5

71)

26,5

16

(40,

425)

(7

96)

(75,

205)

(9

0)

2,68

6

25,4

24

1,12

8,62

5

Tota

l com

preh

ensi

ve in

com

e 1,

986,

560

(2

22,6

27)

338,

010

(1

9,44

3)

206,

696

12

6,50

2

(71,

010)

27

5,41

0

(177

,653

) 31

,617

32

1,75

1

2,79

5,81

2 A

ddit

ions

:

Prop

erty

and

equ

ipm

ent

19,1

99

23,8

41

19,4

73

2,23

0

- 8,

032

11

,363

-

22,9

02

10,6

95

95,0

28

212,

763

Inve

stm

ent p

rope

rty

- -

- -

502,

551

-

16,9

09

129,

027

-

- 70

1,58

0

1,3

50,0

67

Inta

ngib

le a

sset

s 88

0

- -

- -

- 18

3

- 3,

826

12

,416

31

,761

4

9,06

6

Tota

l ass

ets

15,9

39,4

79

8,57

3,35

1

1,93

7,04

8

266,

256

1,

750,

017

3,

705,

065

59

8,08

4

4,40

3,11

6

493,

379

1,

376,

744

3,

041,

186

42

,083

,725

Tota

l equ

ity

8,81

4,70

6

575,

714

82

5,89

4

63,3

26

629,

969

1,

157,

741

91

,808

1,

657,

559

92

,160

95

,451

3,

193,

720

17

,198

,048



NOTE

S TO

THE F

INAN

CIAL S

TATE

MEN

TS (C

ONTIN

UED)

5 (a

) Se

gmen

tal i

nfor

mat

ion

(con

tinu

ed)

Prem

ium

s by

sou

rce

coun

try

Ke

nya

Uga

nda

Suda

n Rw

anda

Ta

nzan

ia

Tota

l

Keny

a U

gand

a Su

dan

Rwan

da

Tanz

ania

To

tal

K

shs

’000

K

shs

’000

K

shs

’000

K

shs

’000

K

shs

’000

K

shs

’000

Ksh

s ’0

00

Ksh

s ’0

00

Ksh

s ’0

00

Ksh

s ’0

00

Ksh

s ’0

00

Ksh

s ’0

00Sh

ort -

term

insu

ranc

e

Gro

ss w

ritte

n pr

emiu

m

8,28

5,01

8

3,10

7,80

7

1,5

15,7

25

678,

590

1

,420

,195

15,

007,

335

7,53

2,99

9 2,

438,

419

1,18

3,30

1 35

8,83

1 1,

201,

910

12,7

15,4

60G

ross

ear

ned

prem

ium

7,

821,

738

2,

542,

651

1

,286

,449

53

9,48

1

1,3

30,2

47 1

3,52

0,56

6

7,

600,

587

2,13

9,18

4 1,

134,

900

261,

154

1,03

9,28

8 12

,175

,113

Net

ear

ned

prem

ium

6,

227,

334

1,

853,

815

1

,158

,384

4

50,8

45

977,

743

10,6

68,1

21

6,

063,

039

1,71

0,54

3 95

8,77

4 21

3,37

0 64

8,41

8 9,

594,

144

Long

- te

rm b

usin

ess

G

ross

writ

ten

prem

ium

1,

244,

512

49

7,07

5

119,

309

1,

860,

896

1,70

5,67

9 33

1,41

4 80

,182

-

- 2,

117,

275

Gro

ss e

arne

d pr

emiu

m

1 ,20

6,14

8

4 97,

075

1 0

9,00

5

1 ,81

2,22

8

1 ,

656,

142

3 31,

414

- 4,2

25

- -

1 ,98

3,33

1

Net

ear

ned

prem

ium

8 7

3,18

3

4 75,

452

5 2

,670

1,

401,

305

1,34

2,88

2 3 1

4,31

3 1 2

,194

-

- 1,

669,

389

Gro

ss w

ritte

n pr

emiu

m

9,52

9,53

0

3,6

04,8

82

1,6

35,0

34

67

8,59

0

1,4

20,1

95 1

6,86

8,23

1

9,

238,

678

2,76

9,83

3 1,

263,

483

358,

831

1,20

1,91

0 14

,832

,735

Gro

ss e

arne

d pr

emiu

m

9,0

27,8

86

3

,039

,726

1

,395

,454

539,

481

1

,330

,247

15,

332,

794

9,25

6,72

9 2,

470,

598

1,13

0,67

5 26

1,15

4 1,

039,

288

14,1

58,4

44

Net

ear

ned

prem

ium

7,

100,

517

2

,329

,267

1

,211

,054

4

50,8

45

977,

743

12,0

69,4

26

7,

405,

921

2,02

4,85

6 97

0,96

8 21

3,37

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5(b) (i) Gross earned premium

The premium income of the Group can be analysed between the main classes of business as shown below:-

Gross Written Premium Gross Earned Premium 2015 2014 2015 2014 Kshs’000 Kshs’000 Kshs’000 Kshs’000Short term insurance business Engineering 1,350,685 793,243 1,005,905 569,681Fire 1,621,001 1,407,321 1,499,094 1,554,979Liability 307,130 296,944 299,616 295,855Marine 302,272 247,183 273,067 255,828Motor 3,804,755 3,569,014 3,646,658 3,483,676Workmen’s Compensation 330,371 407,971 342,732 379,967Personal Accident and medical 398,902 408,268 389,002 339,672Theft 627,486 626,785 612,130 580,687Medical 5,898,169 4,513,218 5,126,897 4,253,805Others 366,564 445,513 325,465 460,963

Total 15,007,335 12,715,460 13,520,566 12,175,113 Long term business Ordinary life 702,637 1,169,172 702,637 1,169,172Group life 1,158,259 948,103 1,109,591 814,159

Total 1,860,896 2,117,275 1,812,228 1,983,331

Total 16,868,231 14,832,735 15,332,794 14,158,444

Gross written premium represents the total premiums receivable by the Group before adjusting for the unearned proportion of the premiums. It is reported in the income statement for information purposes only. Revenue comprises gross earned premiums.

All revenue is earned from external customers.

5(b) (ii) Reinsurance ceded and Amounts recoverable from reinsurers

Reinsurance ceded Amounts recoverable from reinsurers 2015 2014 2015 2014 Kshs’000 Kshs’000 Kshs’000 Kshs’000Short term insurance business Engineering 859,548 403,144 40,211 81,518 Fire 954,188 1,021,625 273,491 339,431 Liability 150,602 172,155 137,991 82,070 Marine 117,545 104,446 (22,904) 90,295 Motor 140,132 140,876 291,604 158,916 Workmen’s Compensation 13,672 19,658 (5,489) (14,825)Personal Accident 80,138 76,767 13,347 21,425 Theft 268,242 264,577 48,778 (2,775)Medical 54,589 42,339 86,232 38,678 Others 213,789 335,857 87,042 49,815

Total 2,852,445 2,581,444 950,303 844,548 Long term business 410,923 313,467 263,291 151,813

Total 3,263,368 2,894,911 1,213,594 996,361




5(b) (iii) Commissions earned and Commissions Payable

Commissions earned Commissions Payable 2015 2014 2015 2014 Kshs’000 Kshs’000 Kshs’000 Kshs’000Short-term business 892,016 697,584 1,780,256 1,416,502Long-term business 131,181 91,033 273,568 232,097Brokerage/Investment management 1,871 1,882 - -

Total 1,025,068 790,499 2,053,824 1,648,599

6 Investment income 2015 2014 Kshs ’000 Kshs ’000Interest from government securities 993,887 690,049 Bank deposit interest 393,260 282,077 Loan interest receivable 38,449 57,588 Rental income from investment properties 530,506 422,007 Miscellaneous income 185,232 49,786 (Loss)/ Gain in foreign exchange (184,035) 81,025 Profit/(loss) on sale of equities (56,988) (11,592)Fair value gains on investment properties (note 21 (a)) 1,594,432 2,493,175 Fair value gains on equity assets at fair value through profit or loss (note 24(b)) (329,147) 368,005 Dividends receivable from equity investments 191,041 134,418 Profit on sale of property and equipment 957 1,347 Fair value (losses)/ gains on government securities assets at fair value through profit or loss (47,405) 35,887

Total 3,310,189 4,603,772

7 Other income 2015 2014 Kshs ’000 Kshs ’000Fee income 102,006 26,656Others 4,238 3,543

Total 106,244 30,199

Fee income relates to administration fees arising from services rendered in relation to the issue and management of deposit administration and other investment contracts. There are no individually significant items included in other category.

8 Claims and policyholder benefits payable

i) Short term insurance business 2015 2014 Kshs ’000 Kshs ’000Engineering 100,023 98,461Fire 374,299 419,961Liability 163,330 153,066Marine (1,818) 126,666Motor 2,691,203 2,241,260Workmen’s compensation 124,028 204,651Personal accident 59,081 116,608Theft 103,550 116,218Medical 3,837,857 2,933,862Others 102,663 208,139

Total 7,554,216 6,618,892




8 Claims and policyholder benefits payable (continued)

ii) Long term insurance business 2015 2014 Kshs ’000 Kshs ’000Death, maturity and benefits payable 634,087 516,515Increase in policy owners’ liabilities 902,152 1,736,854Interest payable on deposit administration and unit linked investments contracts 109,788 198,894

Total 1,646,027 2,452,263

Total 9,200,243 9,071,155

9 Operating and other expenses 2015 2014 Kshs ’000 Kshs ’000Staff costs (Note 10) 2,020,485 1,932,000 Depreciation (Note 19) 141,836 132,943Amortisation of intangible assets (Note 20) 68,215 117,124Impairment charge on receivables arising out of insurance arrangements (Note 4(b)) 426,925 19,194 Travel costs 124,705 145,000 Office running costs 546,017 677,806 Directors expenses 110,472 108,000 Consultancy fees and expenses 361,294 254,000 Recurrent property costs 50,706 95,000 Repairs & maintenance costs 41,177 28,000 Publicity & marketing expenses 545,502 471,000 Subscriptions costs 36,830 22,000 Software costs 369,339 142,000 Licenses costs 11,902 9,000 Premium tax costs 170,002 157,000 Other insurance expenses 143,390 25,000 Bank charges and other expenses 30,573 40,004

Total 5,199,370 4,375,071

There are no individually significant items included in other category.

10 Staff costs 2015 2014 Kshs ’000 Kshs ’000 Salaries and wages 1,676,779 1,333,137Social security benefits costs 48,228 36,461Retirement benefit costs: Defined benefits scheme (Note 23) 26,570 63,875Defined contribution scheme 82,032 64,068Other staff costs 186,876 434,459

Total 2,020,485 1,932,000




11 Income tax expense 2015 2014 Kshs ’000 Kshs ’000 Current income tax 363,191 251,693Deferred tax (Note 22) (566,634) 377,349

Total (203,443) 629,042 The tax on the Group’s profit before income tax differs from the theoretical amount that would arise using the statutory

income tax rate as follows:

2015 2014 Kshs ’000 Kshs ’000Profit before tax 693,156 2,296,229 Tax calculated at a tax rate of 30% (2014: 30%); 207,947 926,744 Less: tax effect of income not subject to tax (885,670) (588,257)Add: tax effect of expenses not deductible for tax purposes 593,761 290,555 Prior year over-provision of deferred tax (119,481)

Total (203,443) 629,042

Movement in the tax (payable) / recoverable account is as follows:

2015 2014 Kshs ’000 Kshs ’000At 1 January 2015 71,414 (48,163)Taxation charge (363,191) (251,693)Taxation paid 210,280 371,270

At end of the year (81,497) 71,414

Disclosed as follows; 31-Dec 31-Dec 2015 2014 Kshs ’000 Kshs ’000Current income tax recoverable 27,900 113,477 Current income tax payable (109,397) (42,063)

Total (81,497) 71,414

12 Earnings per share

Basic earnings per share are calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the year. 2015 2014 Kshs’000 Kshs’000Profit attributable to equity holders of the company 645,484 1,485,976Number of shares in issue 211,420 211,420Basic earnings per share 3.05 7.03Diluted earnings per share 3.05 7.03

There were no potentially dilutive shares outstanding at 31 December 2015 or 31 December 2014. Diluted earnings per share are therefore the same as basic earnings per share. There was no change in number of shares during the year ended 31 December 2015.




13 Share capital

The total authorised number of ordinary shares is 220 million (2014: 220 million) with a par value of Kshs 5 per share. At 31 December 2015, 211 million ordinary shares were in issue and were fully paid.

Number of shares Ordinary shares Share premium Kshs ’000 Kshs ’000 Kshs ’000Balance at 1 January 2014, 1 January 2015 and 31 December 2015 211,420 1,057,099 4,612,626

The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets.

14 Fair value reserve for equity investments

The fair value reserves relate to unrealised gains or losses on the Group’s equity investments that are carried at fair value through other comprehensive income. This reserve is not distributable.

15 Retained earnings

The retained earnings balance represents the amount available for dividend distribution to the shareholders of the Company, except for cumulative fair value gains on the investment properties of Kshs 8,297 million (31 December 2014 :Kshs 6,703 million) whose distribution is subject to restrictions imposed by regulation.

16 Dividends

During the year, no interim dividend (2014: Nil) was paid to shareholders in the Company register. The Directors recommend the payment no dividend (2014: Kshs 1.70 per share amounting to Kshs 359 million). Payment of dividends is subject to withholding tax at a rate of either 0%, 5% or 10% depending on the residence of the respective shareholders.

17 i) Translation reserve The translation reserve compiles all foreign currency differences arising from the translation of the financial statements of

foreign operations. ii) Statutory reserve

The statutory reserve represents amounts set up in the Group’s Ugandan subsidiary in accordance with the Ugandan Insurance Act, which requires the following amounts to be appropriated from earnings:

• a contingency reserve calculated at the higher of 2% of gross premium and 15% of net profits of UAP Insurance Uganda Limited.

• a capital reserve, calculated at 5% of net profits of UAP Insurance Uganda Limited.

The reserve is available for distribution to the extent that the minimum amounts required by the Uganda Insurance Act are maintained.




18 Goodwill

The goodwill arose from acquisition of UAP Century Tanzania in 2013 (Kshs 174,363,000) and UAP Insurance Uganda Limited in 2004 (Kshs 65,667,000) and is therefore all allocated to the Tanzania and Uganda Cash Generating Units (CGUs) for the purposes of impairment assessment.

31-Dec 31-Dec 2015 2014 Kshs ’000 Kshs ’000 At start of year: 240,030 240,030Additions - -

Total 240,030 240,030

The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a 5 year period. The growth rates do not exceed the long-term average growth rates for the respective businesses in which CGUs operate.

The key assumptions used for the value in use calculations are:

31 December 2015 31 December 2014 Growth rate % 23 22Discount rate % 13 13

Management determined budgeted profit from operating activities based on past performance and its expectations for the market developments. The weighted average growth rates used are consistent with the forecasts included in industry reports. The discount rates used are pre-tax and reflect specific risks relating to the Tanzania and Uganda segment.




19 Property and equipment

(a) Group

Office Computer Motor Capital Telephone Total furniture equipment Vehicles work-in equipment and progress equipment Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Year ended 31 December 2015: Cost At 1 January 2015 435,725 400,054 104,576 60,212 77,196 1,077,763 Additions 50,812 80,448 7,777 3,115 11,597 153,749 Disposals ( 1,021) - (13,157) - - (14,178)Translation difference (37,187) (18,845) (39,799) (7,645) (2,195) (105,671)

At 31 December 2015 448,329 461,657 59,397 55,682 86,598 1,111,663 Depreciation At 1 January 2015 248,095 295,427 54,078 - 43,802 641,402 Charge for the year 40,909 67,033 21,987 - 11,907 141,836 Accumulated depreciation on disposals 389 (169) (6,792) - - (6,572)Translation difference (27,465) (17,597) (20,711) - (2,573) (68,346)

At 31 December 2015 261,928 344,694 48,562 - 53,136 708,320

Net book amount

At 31 December 2015 186,401 116,963 10,835 55,682 33,462 403,343 Year ended 31 December 2014 Cost At 1 January 2014 364,390 333,306 102,223 13,698 70,413 884,030 Additions 66,595 66,569 13,935 58,939 6,725 212,763 Capitalised 9,566 1,564 - (11,130) - - Disposals ( 5,864) (63) (13,450) - - (19,377)Translation difference 1,038 (1,322) 1,868 (1,295) 58 347

At 31 December 2014 435,725 400,054 104,576 60,212 77,196 1,077,763 At 31 December 2014 Depreciation At 1 January 2014 210,090 248,593 40,758 - 26,134 525,575 Charge for the year 41,181 48,169 26,080 - 17,513 132,943 Accumulated depreciation on disposals (3,164) (55) (13,149) - - (16,368)Translation difference (12) (1,280) 389 - 155 (748)

At 31 December 2014 248,095 295,427 54,078 - 43,802 641,402

Net book amount 187,630 104,627 50,498 60,212 33,394 436,361




19 Property and equipment

(b) Company

Office Computer Motor Telephone Total furniture equipment Vehicles equipment and equipment Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Year ended 31 December 2015 Cost At 1 January 2015 14,954 73,434 13,810 33,221 135,419 Additions 455 51,286 - 377 52,118 Disposals - - (10,716) - (10,716)

At 31 December 2015 15,409 124,720 3,094 33,598 176,821 Depreciation At 1 January 2015 2,476 25,372 4,128 12,020 43,996 Charge for the year 1,961 35,915 2,783 4,956 45,615 Disposals - - (4,913) - (4,913)

At 31 December 2015 4,437 61,287 1,998 16,976 84,698

Net book amount

At 31 December 2015 10,972 63,433 1,096 16,622 92,123 Year ended 31 December 2014 Cost At 1 January 2014 7,122 38,726 13,810 33,148 92,806Additions 7,832 34,708 - 73 42,613

At 31 December 2014 14,954 73,434 13,810 33,221 135,419 At 31 December 2014 Depreciation At 1 January 2014 781 4,505 674 7,162 13,122Charge for the year 1,695 20,867 3,454 4,858 30,874

At 31 December 2014 2,476 25,372 4,128 12,020 43,996

Net book amount 12,478 48,062 9,682 21,201 91,423

Included in equipment are assets with a gross value of KShs 296,663,638 (2014 – KShs 247,013,406) which are fully depreciated and still in use. Such assets would have attracted a notional depreciation of KShs 61,627,567 (2014 – KShs 53,203,772).




20 Intangible assets

(a) Group Computer Work in software progress Total Kshs ’000 Kshs ’000 Kshs ’000Year ended 31 December 2015: Cost At 1 January 2015 520,489 - 520,489 Additions 13,910 19,591 33,501 Transfers - - - Translation difference 3,449 - 3,449

At 31 December 2015 537,848 19,591 557,439 Depreciation At 1 January 2015 407,502 - 407,502 Charge for the year 68,215 - 68,215

At 31 December 2015 475,717 - 475,717 Net book amount

At 31 December 2015 62,131 19,591 81,722 Year ended 31 December 2014: Cost At 1 January 2014 450,939 19,031 469,970Additions 49,066 - 49,066Transfers 19,031 (19,031) - Transfer from work in progress 1,453 - 1,453

At 31 December 2014 520,489 - 520,489Depreciation At 1 January 2014 290,378 - 290,378Charge for the year 117,124 117,124

At 31 December 2014 407,502 - 407,502

Net book amount 112,987 - 112,987

(b) Company

2015 2014 Kshs ’000 Kshs ’000Carrying value At start of year 61,936 131,087 Additions 11,442 26,531 Work in progress - Additions 19,592 -Amortisation charge for the year (42,267) (95,682)

At end of year 50,703 61,936

The intangible assets for the company relate to computer software.




21 Investment properties

(a) Group

2015 2014 Kshs’000 Kshs ’000At start of year 15,122,307 11,412,346Additions 3,077,504 1,350,067Fair value gains unrealised 1,594,432 2,493,175Translation difference 43 (133,281)

At end of year 19,794,286 15,122,307

(b) Company

2015 2014 Kshs ’000 Kshs ’000 At start of year 3,635,242 2,275,274Additions 1,945,929 738,872Fair value gains (106,500) 621,096

At end of year 5,474,671 3,635,242

The Group’s investment properties were revalued in December 2015 and 2014 by Knight Frank Valuers, professional independent valuers in Kenya, South Sudan and Bageine & Company in Uganda respectively on the basis of open market. The open market value of all properties was determined using recent market prices. The rental income earned by the Group from its investment properties leased out under operating leases amounted to Kshs 531 million (2014: Kshs 484m million). Direct operating expenses arising on investment properties amounted to Kshs 49 million (2014: Kshs 62 million). All investment properties are classified as non-current assets.

Details of the Group’s investment properties and information about fair value hierarchy as at 31 December 2014 are as follows: 2015 2014 Kshs ‘000 Kshs ‘000Level 1 - -Level 2 - -Level 3 19,794,286 15,122,307

Fair value as at 31 December 19,794,286 15,122,307

The carrying value of the investment properties is the fair value of the property as determined by a registered independent

valuer having an appropriate recognized professional qualification and experience in the category of the property being valued.

The investment properties are leased to third parties under operating leases and partly occupied by the company. No contingent rents are charged.

There is neither restriction on the realisability of the investment properties nor are there contractual obligations pegged to the investment properties.




21 Investment properties (Continued) All investment properties as at 31 December 2015 are measured at fair value. The table below shows the valuation techniques used in measuring fair value of investment property as well as significant

unobservable inputs used.

Valuation technique Significant unobservable inputs

Inter-relationships between unobservable inputs and fair value measurements

(a) Investment propertyThe estimated fair values would increase / ( decrease) if:;Discounted cash flows: The valuation model considers the present value of net cash flows to be generated from the property taking into account expected rental growth, occupancy rates and other costs not paid by tenants. The net cash flows are discounted using the risk adjusted discount rate.

1. Expected market rental growth – 3.75% - 6%

2. Occupancy rates (90% - 95%)

3. Risk-adjusted discount rate (9%)

1. Expected rental growth were higher /(lower)

2. Occupancy rates were higher / (lower)

3. Risk-adjusted discount rate was lower/(higher)




22 Deferred income tax

Deferred tax is calculated, in full, on all temporary differences under the liability method using a principal tax rate of 30% (2013: 30%).

The movement on the deferred income tax account for the Group is as follows:

31-Dec 31-Dec 2015 2014 Kshs ’000 Kshs ’000At start of year: 637,146 246,813Profit or loss (Note 11) (566,634) 377,349Translation difference (23,051) 12,984

Total 47,461 637,146

Disclosed as follows;

31-Dec 31-Dec 2015 2014 Kshs ’000 Kshs ’000Deferred tax asset (569,613) (83,640)Deferred tax liability 617,074 720,786

Total 47,461 637,146

Deferred tax assets and liabilities and deferred tax charge/(credit) in the income statement for the Group are attributable to the following items:

Year ended 31 December 2015 1-Jan (Charged) Translation 31-Dec 2015 / credited Reserves 2015 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Property and equipment: on historical cost basis (84,380) 132,214 (18) 47,816 Investment property fair value gains (887,902) (10,085) (89,794) (987,781)Other provisions 335,136 444,505 112,863 892,504

Net deferred tax liability (637,146) 566,634 23,051 ( 47,461)

Year ended 31 December 2014 1-Jan (Charged) Translation 31-Dec 2014 / credited Reserves 2014 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Property and equipment: on historical cost basis 16,151 (100,534) 3 ( 84,380)Investment property fair value gains (466,485) (411,491) ( 9,926) (887,902)Other provisions 203,521 134,676 ( 3,061) 335,136

Net deferred tax liability (246,813) (377,349) (12,984) (637,146)




22 Deferred income tax (continued)

The movement on the deferred income tax account for the Company is as follows: 31-Dec 31-Dec 2015 2014 Kshs ’000 Kshs ’000At start of year: 61,442 3,141Profit or loss (Note 11) (158,824) 58,301

Total (97,382) 61,442

Deferred tax assets and liabilities and deferred tax charge/(credit) in the income statement for the Company are attributable to the following items:

Year ended 31 December 2014 1-Jan (Charged) 31-Dec 2014 / credited 2014 Kshs ’000 Kshs ’000 Kshs ’000Property and equipment: - on historical cost basis 18,296 75,605 93,901 Investment property fair value gains - 32,426 32,426 Tax losses c/f (15,155) (43,738) (58,893)Staff gratuity - (5,992) (5,992)

Net deferred tax liability 3,141 58,301 61,442

Year ended 31 December 2015 1-Jan (Charged) 31-Dec 2015 / credited 2015 Kshs ’000 Kshs ’000 Kshs ’000 Property and equipment: - on historical cost basis 93,901 (129,513) (35,612)Investment property fair value gains 32,426 (5,325) 27,101 Tax losses c/f (58,893) (25,158) (84,051)Staff gratuity (5,992) 1,172 (4,820)

Net deferred tax liability 61,442 (158,824) (97,382)




23 Retirement benefit obligation

Description of plan The Group operates a funded defined benefit plan for all employees. The Scheme is open to new entrants. Scheme

members’ contributions are a fixed percentage of pensionable pay with the Group responsible for the balance of the cost of benefits accruing. The Scheme is established under trust. The Scheme funds are invested by a fund manager in a variety of asset classes comprising government securities (Treasury bills and bonds), stocks and shares and commercial paper.

The amounts recognised in the statement of financial position are determined as follows:

2015 2014 Kshs’000 Kshs’000Present value of funded obligations 709,452 651,907 Fair value of plan assets 1,021,002 937,825

Present value of over-funding (311,550) (285,918)

The movement in the fair value of funded obligations is as follows: 2015 2014 Kshs’000 Kshs’000At start of year 651,907 609,232Current service cost 63,937 84,110 Interest cost 90,106 85,082 Remeasurements (36,312) (67,475) Benefits paid (60,186) (59,042)

At end of year 709,452 651,907

The movement in the fair value of the plan assets is as follows:

2015 2014 Kshs’000 Kshs’000At start of year 937,825 794,159Interest on scheme assets 127,473 105,317Remeasurements (99,404) (16,666)Employer contribution 74,183 73,694Employee contribution 41,111 40,363Benefits paid (60,186) (59,042)

At end of year 1,021,002 937,825




23 Retirement benefit obligation (continued)

Plan assets compromise: 2015 2014 Kshs’000 %age Kshs’000 %ageEquity instruments 232,437 22.77% 277,197 29.56%Debt instruments 549,625 53.83% 525,530 56.04%Other 238,940 23.40% 135,098 14.40%

At end of year 1,021,002 100% 937,825 100%

The amounts recognised in the income statement for the year are as follows:

2015 2014 Kshs’000 Kshs’000Current service cost 63,937 84,110 Net Interest cost 90,106 86,891 Return on scheme assets (excluding interest) (127,473) (107,126)

Net charge for the year included in staff costs (note 10) 26,570 63,875

The principal actuarial assumptions used were as follows: 2015 2014- discount rate 15.00% 12.9% - expected rate of return on scheme assets 15.00% 12.9% - future salary increases 9.00% 7.0% - future pension increases 3.20% 2.4%

Sensitivity analysis of the above actuarial assumptions

The sensitivity of the defined benefit obligation to the financial assumptions has been assessed by increasing and decreasing the discount rate assumption by 0.5%.

Defined benefit obligation

Discount rate 14.5% 15.0% 15.5%Total accrued liability 713,803 709,451 706,066Change 1% - 0.5%




24 Equity investments

The Group’s equity investments are measured at fair value with fair value changes recorded through either other comprehensive income or income statements for different portfolios of equity investments, following early adoption of IFRS 9, as follows:

(a) Equity investments at fair value through other comprehensive income

2015 2014 Kshs ’000 Kshs ’000At 1 January 2015 3,734,740 4,140,484Additions 1,173,961 1,086,343Disposals (2,047,337) (2,603,431)Fair value gains recognised in equity (290,548) 1,113,234Translation difference (16,087) (1,890)

At end of the year 2,554,729 3,734,740

(b) Equity investments at fair value through profit or loss

At 1 January 2015 2,353,888 1,366,024 Additions 824,896 1,052,639 Disposals (843,822) (432,626)Fair value gains charged to profit or loss (329,147) 368,005 Translation difference (2,367) (154)

At end of the year 2,003,448 2,353,888

Total 4,558,177 6,088,628

(c) Equity investments 2015 2014

(i) Listed securities Kshs ’000 Kshs ’000At 1 January 2015 5,998,958 5,444,107 Additions 1,977,908 2,111,630 Disposals (2,875,089) (3,036,057)Fair value gains charged to other comprehensive income (302,594) 1,111,897 Fair value gains charged to income statement (329,147) 368,005 Translation difference (40,552) (625)

At end of the year 4,429,484 5,998,957

(ii) Unlisted securities At 1 January 2015 89,671 62,401 Additions 20,949 27,352 Disposals (16,070) - Fair value gains charged to other comprehensive income 12,046 1,337 Translation difference 22,097 (1,419)

At end of the year 128,693 89,671

At end of the year 4,558,177 6,088,628




25 Investments in subsidiaries

Country of 2015 2014 Incorporation Interest held Kshs’000 Kshs’000 UAP Insurance Company Limited (Kenya) Kenya 100% 600,000 600,000 UAP Life Assurance Limited (Kenya) Kenya 100% 1,510,791 560,791 UAP Insurance South Sudan Limited South Sudan 100% 339,442 339,442 UAP Insurance Uganda Limited Uganda 53% 202,507 202,507 UAP Financial Services Limited (Kenya) Kenya 100% 10,000 10,000 UAP Financial Services Limited (Uganda) Uganda 82% 128,845 65,370 UAP Properties Limited (Uganda) Uganda 79% 488,743 488,743 UAP RDC sarl DRC 100% 12,974 12,691 UAP Investments (Kenya) Limited Kenya 100% 125,000 125,000 UAP Insurance Tanzania Limited Tanzania 60% - - UAP Rwanda Limited Rwanda 100% - - UAP Life Assurance Uganda Limited Uganda 53% 172,589 72,589 UAP Properties Limited (South Sudan) South Sudan 70% - - UAP Properties Limited (Mauritius) Mauritius 100% - - UAP Africa Limited (Mauritius) Mauritius 100% 1,751,016 721,966 UAP Global Services Limited Mauritius 100% - - UAP Investments Limited (Mauritius) Mauritius 100% - -

Total 5,341,907 3,199,099

During the year, the Company increased its investments in subsidiaries as follows:

Country of 2015 2014 Incorporation Kshs’000 Kshs’000 UAP Life Assurance Limited (Uganda) Uganda 100,000 72,589UAP Life Assurance Limited (Kenya) Kenya 950,000 - UAP Financial Services Limited (Uganda) Uganda 63,475 19,093UAP SPRL RDC DRC 42,783 20,000UAP Investments (Kenya) Limited Kenya - 25,000UAP Century Tanzania Limited Tanzania 636,550 -UAP Rwanda Limited Rwanda 350,000 150,000

Total 2,142,808 286,682

The investments in UAP Century Tanzania, UAP RDC sarl and UAP Rwanda have been made through UAP Africa Limited (Mauritius).




26 Mortgage loans receivable

2015 2014 Kshs’000 Kshs’000At start of year 255,437 228,307 Loans advanced 89,094 110,784 Loan repayments (65,601) (85,236)Translation difference (23,671) 1,582

At end of year 255,259 255,437

Maturity profile of loans 2015 2014 Kshs’000 Kshs’000Loans maturingWithin 1 year - - In 1-5 years 47,803 29,196 In over 5 years 207,456 226,241

255,259 255,437

There is no concentration of credit risk with respect to mortgage loans.

27 Reinsurers’ share of insurance liabilities

2015 2014 Kshs’000 Kshs’000Reinsurers’ share of: Unearned premium (Note 38) 1,503,737 1,155,712Notified claims outstanding: - short term insurance (Note 36) 992,290 982,207 - long term insurance contract liabilities (Note 36) 245,629 248,620Claims incurred but not reported short term insurance (Note 36) 235,711 123,290

At end of year 2,977,367 2,509,829

Amounts due from reinsurers in respect of claims already paid by the Group on contracts that are reinsured are included in receivables arising out of reinsurance arrangements on the statement of financial position. Movements in the above reinsurance assets are shown in note 36 and 38.

28 Deferred acquisition costs

2015 2014 Kshs’000 Kshs’000At start of year 428,748 323,527 Additions 117,060 304,718 Amortisation charge (86,964) (196,256)Translation difference (26,552) (3,241)

At end of year 432,292 428,748




29 Other receivables and prepayments

(a) Group2015 2014

Kshs ’000 Kshs ’000Prepayments 265,347 960,260Accrued income 54,662 7,601Staff debtors 157,297 106,754Others 268,868 475,572

746,174 1,550,187

(b) Company2015 2014

Kshs ’000 Kshs ’000Prepayments 98,052 688,065Others 13,435 8,646Total 111,487 696,711

Due from related party (note 44 (iv)) 2,243,013 2,186,511

There are no individually significant items under others category.

30 Corporate bonds2015 2014

Kshs ’000 Kshs ’000At 1 January 1,588,613 446,796Purchases/(redemptions) 199,437 1,116,732Fair value gains charged to income statement 67,770 25,085

At 31 December 1,855,820 1,588,613

31 Government securities2015 2014

Kshs ’000 Kshs ’000(i) At fair value through profit or loss:Treasury bills and bonds maturing: In 1-5 years 40,930 - After 5 years 279,593 742,791

At end of the year 320,523 742,791

(ii) At amortised cost: Treasury bills and bonds maturing:Within 91 days 95,697 97,34691 days to 1 year 966,468 274,283In 1-5 years 819,348 1,006,820After 5 years 5,339,043 3,754,513

At end of the year 7,220,556 5,132,962

At end of the year 7,541,079 5,875,753




32 Cash and cash equivalents

For the purposes of the statement of cash flows, cash and cash equivalents for the Group comprise the following:

2015 2014Kshs ’000 Kshs ’000

Cash and bank balances 1,750,124 1,025,540Deposits with financial institutions 3,845,043 3,173,707Treasury bills maturing within 91 days of acquisition date (note 31) 95,697 97,346

At end of the year 5,690,864 4,296,593

Cash and cash equivalents for the Company comprise the following:

2015 2014Kshs ’000 Kshs ’000

Cash and bank balances 208,811 1,248,062 Deposits with financial institutions 10,805 16,862

At end of the year 219,616 4,296,593

33 Insurance contract liabilities2015 2014

Kshs ’000 Kshs ’000Short term insurance contracts - claims reported and claims handling expenses 3,576,809 3,417,187- claims incurred but not reported 1,307,691 941,485

At end of the year 4,884,500 4,358,672

Long term contracts - claims reported and claims handling expenses 3,262,377 3,361,763

Total gross insurance liabilities 8,146,877 7,720,435

Movements in insurance liabilities and reinsurance assets are shown in Note 36.




33 Insurance contract liabilities (continued)

(i) Short term insurance contracts liabilities Gross claims reported, claims handling expenses liabilities and the liability for claims incurred but not reported are net

of expected recoveries from salvage and subrogation. The expected recoveries at the end of 31 December 2015 and 31 December 2014 are not material.

The Group uses chain-ladder techniques to estimate the ultimate cost of claims and the IBNR provision. Chain ladder techniques are used as they are an appropriate technique for mature classes of business that have a relatively stable development pattern. This involves the analysis of historical claims development factors and the selection of estimated development factors based on this historical pattern. The selected development factors are then applied to cumulative claims data for each accident year that is not fully developed to produce an estimated ultimate claims cost for each accident year.

The development of insurance liabilities provides a measure of the Groups’ ability to estimate the ultimate value of claims. The table below illustrates how the Groups’ estimate of total claims outstanding for each accident year has changed at successive year ends.

Year ended 31 December 2015

Accident year 2011 2012 2013 2014 2015 Total Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000Estimate of ultimate claims costs At end of accident year 1,394,376 924,594 940,667 975,431 2,410,190 6,645,258 One years later 1,124,449 1,803,803 1,486,429 3,462,153 - 7,876,834 Two years later 1,143,667 1,523,545 3,080,392 - - 5,747,604 Three years later 1,199,865 2,071,568 - - - 3,271,433 Four years later 1,687,587 - - - - 1,687,587 - Current estimate of cumulative claims 1,687,587 2,071,568 3,080,392 3,462,153 2,410,190 12,711,890 Less: Cumulative payments to date (1,583,881) (1,394,961) (2,161,540) (2,446,957) (2,551,818) (10,139,157)

Liability in the Balance sheet 103,706 676,607 918,852 1,015,196 (141,628) 2,572,733 Liability in respect of prior years - - - - 1,004,076 1,004,076

Incurred but not reported - - - - 1,307,691 1,307,691 Total gross claims liability included

in the balance sheet 103,706 676,607 918,852 1,015,196 2,170,139 4,884,500





(ii) Long term business contracts

The Group determines its liabilities on long term insurance contracts based on assumptions in relation to future deaths, voluntary terminations, investment returns and administration expenses. A margin for risk and uncertainty is added to these assumptions. The liabilities are determined on the advice of the consulting actuary and actuarial valuations are carried out on an annual basis.

Actuarial Valuation assumptions

The latest actuarial valuation of the Life Fund was carried out as at 31 December 2015 by QED Actuaries and Consultants, using both Net Premium Valuation (NPV) method and Gross Premium valuation (GPV) method and has reported based on the Gross Premium Method as per guidance from the insurance Act that requires the higher resulting liability to be used. This method is generally accepted in the actuarial industry as an appropriate method to place a realistic value (with an appropriate allowance for margins) on the liabilities of a life insurance Company. This method is based on a discounted cash flow approach taking into account the expected cash flows from existing in-force business. By setting appropriate assumptions this method determines liabilities which are consistent with the value of assets included in the accounts.

The more significant valuation assumptions are summarised below. The assumptions used for the previous year-end valuation are shown in brackets:

a) Mortality – The Company used SA56-62 (2012: SA56-62) as a base table of standard mortality for the GPV valuation and KE01-03 (2012: A1949/52) for the NPV basis. Statistical methods are used to adjust the rates reflected in the table based on the Company’s experience. An allowance for AIDS is made based on the Actuarial Society of South Africa’s 2003 AIDS tables. For contracts insuring survivorship the a(90) (2014: a(55)) life table was used as a base; no allowance is made for future mortality improvements.

b) Persistency – The Company does not have sufficient historical data to allow statistical methods to be used to determine an appropriate persistency rate. The persistency rates used in the valuation were set according to the experience observed (by the actuary) in the Company’s data.

c) Investment returns are derived with reference to the return on long term fixed interest investments available in Kenya and adjusted to reflect the actual underlying mix of assets. For the current valuation, the rate of return was 12.5%p.a. (2014: 12.5% p.a.) for the GPV basis and 4% p.a (2014: 4% p.a) for the NPV basis.

d) Expenses, tax and inflation – The current level of renewal expenses were taken to be an appropriate expense base. Expenses pertaining to business establishment and expansion were excluded from the valuation assumption. Expense inflation is assumed to be 10% p.a. (2014:10% p.a.). It has been assumed that the current tax legislation and rates continue unaltered. Under the NPV method it is not possible to model expenses, tax and inflation explicitly.





(ii) Long term business contracts

Actuarial valuation assumptions (continued)

Sensitivity analysis

The following table presents the sensitivity of the value of long term insurance liabilities to movements in key assumptions used in the estimation of liabilities. For liabilities under insurance contracts with fixed and guaranteed terms, key assumptions are unchanged for the duration of the contract. For long term insurance contracts without fixed terms and with discretionary participation in profits, the liability is set approximately equal to the value of the underlying asset of the contract. Hence, there is no sensitivity analysis for these types of contracts.

Change in Increase / Increase / variable (decrease) (decrease) in liability in liability 2015 2014Contracts with Fixed and Guaranteed Terms – Variable: Kshs ’000 Kshs ’000Worsening of mortality 10% 20,595 (19,913)Lowering of investment returns p.a. -1% 144,524 197,549Worsening of expense inflation rate 1% 23,410 8,113Worsening of lapse rate 10% (10,515) (20,638)

34 Amounts payable under deposit administration contracts

Deposit administration contracts are recorded at amortised cost. Movements in amounts payable under deposit administration contracts during the period were as shown below. The liabilities are shown inclusive of interest accumulated to the end of the reporting period. Interest was declared and credited to the customers’ accounts at a weighted average rate of 12 % for the year (2013: 13 %).

2015 2014 Kshs ’000 Kshs ’000At start of year 3,633,021 2,812,089 Pension fund deposits received 881,368 830,861 Surrenders and annuities paid (655,031) (341,949)Interest payable to policyholders 567,124 346,078 Administration fees 9,539 (12,121)Translation difference (12,822) (1,937)

At end of the year 4,423,199 3,633,021




35 Unit-linked investment contracts

The benefits offered under these contracts are based on the return of a portfolio of equities and debt securities. The maturity value of the financial liabilities is determined by the fair value of the linked assets. There will be no difference between the carrying amount and the maturity amount at maturity date.

2015 2014 Kshs ’000 Kshs ’000At start of year 1,040,828 923,296 Premium received 114,341 114,620 Interest credited 45,297 198,894 Liabilities released for payment (192,640) (158,336)Administration fees 2,788 (36,030)Translation difference (2,893) (1,616)

At end of the year 1,007,721 1,040,828

36 Movements in insurance liabilities and reinsurance assets

31-Dec-15 31-Dec-14 Gross Reinsurance Net Gross Reinsurance Net Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000Notified claims 3,417,187 (982,207) 2,434,980 3,004,698 (840,637) 2,164,061 Incurred but not reported 941,485 (123,290) 818,195 442,210 (164,019) 278,191 Total at beginning of year 4,358,672 (1,105,497) 3,253,175 3,446,908 (1,004,656) 2,442,252 Cash paid for claims settled in year (3,487,349) 492,425 (2,994,924) (2,636,889) 877,382 (1,759,507)Increase in liabilities - arising from current year claims 3,416,949 (636,280) 2,780,669 2,467,830 (729,378) 1,738,452 - arising from prior year claims 874,455 (28,596) 845,859 1,080,823 (248,845) 831,978 Translation difference (278,227) 49,948 (228,279) Total at year end 4,884,500 (1,228,000) 3,656,500 4,358,672 (1,105,497) 3,253,175 Notified claims 3,576,809 (992,290) 2,584,519 3,417,187 (982,207) 2,434,980 Incurred but not reported 1,307,691 (235,711) 1,071,980 941,485 (123,290) 818,195

Total at year end 4,884,500 (1,228,001) 3,656,499 4,358,672 (1,105,497) 3,253,175 Long term insurance business 31-Dec-15 31-Dec-14 Gross Reinsurance Net Gross Reinsurance Net Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000At 1 January 3,361,763 (248,620) 3,113,143 1,820,972 (161,896) 1,659,076 Premium received/valuation premium 1,445,908 (333,310) 1,112,598 1,957,069 (329,789) 1,627,280 Liabilities released for payments (1,591,515) 332,761 (1,258,754) (416,278) 243,065 (173,213)Translation difference 46,221 3,540 49,761 -

Total at year end 3,262,377 (245,629) 3,016,748 3,361,763 (248,620) 3,113,143

Total at year end 8,146,877 (1,473,630) 6,673,247 7,720,435 (1,354,117) 6,366,318




37 Borrowings

2015 2014 Kshs ’000 Kshs ’000

(a) Group At start of year 3,981,001 2,079,719 Proceeds from borrowings 3,373,589 1,938,326 Interest cost payable 577,929 293,310 Loan and Interest paid (689,166) (301,231)Fair value gain on financial liabilties revaluation (21,594) - Unrealised forex loss on borrowings 303,629 - Translation difference (48,088) (29,123)

At end of the year 7,477,300 3,981,001 2015 2014 Kshs ’000 Kshs ’000

(b) Company At start of year 2,078,647 -Proceeds from borrowings, net of transaction costs 2,616,997 1,967,524 Interest cost payable 489,488 371,123 Loan and Interest paid (260,000) (260,000)Revaluation gain (21,594) -

At end of the year 4,903,538 2,078,647

The breakdown of the borrowings is shown below:

(a) Group 2015 2014 Kshs ’000 Kshs ’000PTA Bank Loan - Uganda 1,607,557 1,449,365 Corporate Bond- UAP Holdings 2,086,109 2,078,647 Norfund Loan - S Sudan properties 511,557 226,495 IFC Loan - S Sudan Properties 511,557 226,495 Old Mutual Short term financing 2,760,520 -

At 30 June 2015 7,477,300 3,981,001

Construction of Nakawa Park, a project undertaken by UAP Properties Uganda, is partly financed through PTA Bank. The borrowings are repayable in 9 years and bear an interest rate of 8.5%.

On 28 July 2014, the group issued Kshs 2 billion 13% Kenya Shilling medium term notes to finance its expansion programme and working capital requirements. The related transaction costs amounting to Kshs 36 million have been netted off against the proceeds and amortised over the tenure of the notes. The notes are repayable on 28 July 2019.

Construction of UAP Equatoria Tower, a project undertaken by UAP Properties South Sudan, is partly financed through Norwegian Investment Fund for Development (Norfund)- USD5m and International Finance Corporation (IFC)- USD 5m. The borrowings are repayable in 7 years beginning 2016 and bear an interest rate of LIBOR plus 6%.

The short term finance from Old Mutual comprises USD 16.5m which bears an interest rate of 3M LIBOR plus 7.5% and Kshs 1billion at interest rate of 12.5%

None of the borrowings was in default at any time during the period.




38 Unearned premium

Unearned premium represents the liability for short term business contracts where the Group’s obligations are not expired at the year end. Movements in the reserve are shown below:

31-Dec-15 31-Dec-14 Gross Reinsurance Net Gross Reinsurance Net Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 At beginning of the year 5,364,573 (1,083,183) 4,281,390 4,775,498 (1,063,508) 3,711,990 Increase in the year 1,331,364 (437,812) 893,552 589,075 (92,204) 496,871 Translation difference (322,125) 17,258 (304,867) - - -

At end of year 6,373,812 (1,503,737) 4,870,075 5,364,573 (1,155,712) 4,208,861

39 Other payables

(a) Group

2015 2014 Kshs ’000 Kshs ’000Deferred income 21,097 19,019Accrued expenses 195,951 350,021Accrued leave 93,439 93,118Withheld taxes 183,479 122,752Other liabilities 1,174,257 913,261

At end of the year 1,668,223 1,498,171

There are no individually significant items under other liabilities category.

(b Company 2015 2014 Kshs ’000 Kshs ’000Accrued expenses 21,460 66,525Other liabilities 346,859 152,460

Total 368,319 218,985

Due to related parties (Note 44 (iv)) 939,842 1,991,496

There are no individually significant items under others category.




40 Cash generated from operations

Reconciliation of profit before tax to cash generated from operations

2015 2014 Khs ’000 Ksh’000 Profit before tax 693,156 2,296,229Adjustments for: Investment income (Note 6) (3,309,232) (4,603,772)Depreciation (Note 19) 141,836 132,943 Amortisation (Note 20) 68,215 117,124 Interest costs (Note 37 (a)) 577,929 293,310 Gain on disposal of property and equipment (Note 6) (957) (1,347)Changes in: Insurance contract liabilities (net) 426,442 2,172,786 Deposit administration contracts 790,178 820,932 Unit-linked contracts (33,107) 117,532 Unearned premium (net) 1,009,239 589,075 Re-insurance and other payables 391,043 348,905 Direct insurance, re-insurance and other receivables 164,372 (786,694)Deferred acquisition costs (3,544) (105,221)Retirement benefit asset (25,632) (100,991)

Cash generated from operations 889,938 1,290,811

41 Contingent liabilities Legal Proceedings The holding Company, UAP Holdings Limited has a pending legal suit against the Company seeking a declaration that the

sale of the property known as Land Reference No. 209/13453 Upper hill, Nairobi and on which the development known as UAP Towers is currently under construction as null and void.

The contingent liability is estimated at KShs 500 Million. Management, based on legal advice, do not foresee the suit being successful and has therefore made no provision in the financial statement.

Tax contingent liabilities In the Directors’ opinion, an amount of KShs 65 million from a formal assessment by the Kenya Revenue Authority on VAT

on salvages for UAP Insurance Company Limited is unlikely to materialize following the company’s objection to the VAT assessment.

In 2015, the Kenya Revenue Authority (KRA) carried out an audit of UAP Life Assurance Company Limited’s tax affairs for the periods January 2011 to December 2014 and issued an assessment of Kshs 68 million under the tax heads of Excise Duty, Value Added Tax (VAT), Pay As You Earn (PAYE) and Corporation Tax. UAP Life Assurance Company Limited has objected to assessments amounting to KShs 36 million.

No provision has been made in the financial statement for the potential tax exposures as well as the KRA assessed amounts as in Directors’ opinion, the exposures and assessments relate to industry-wide tax issues which are yet to be conclusively resolved.

In common with the insurance industry in general, the Group’s insurance subsidiaries are 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 Group.




42 Commitments

Capital expenditure committed but not contracted for at financial reporting date is as follows:

2015 2014 Kshs ’000 Kshs ’000Capital expenditure 1,633,351 2,746,404

The capital expenditure committed but not contracted relates to three major contracts for the construction of investment properties in Kenya, Uganda and Sudan. These projects are estimated to cost approximately Kshs 7.4 billion. They are estimated to take 6 more months to complete.

43 Financial instruments by category

a) Financial assets

The Group’s financial assets are summarised by measurement category in the table below.

2015 2014 Kshs ’000 Kshs ’000At amortised cost 20,715,410 18,428,835At fair value 6,148,508 6,831,419

26,863,918 25,260,254 2015 2014 Kshs ’000 Kshs ’000

(i) Financial assets at amortised cost Government securities 7,220,556 5,132,962 Corporate bonds 586,012 468,141 Receivables arising out of direct insurance arrangements 2,364,365 2,486,192 Receivables arising out of reinsurance arrangements 970,510 706,368 Reinsurers’ share of insurance liabilities 2,977,367 2,509,829 Other receivables 746,174 1,550,187 Deposits with financial institutions 3,845,043 3,173,707 Cash and bank balances 1,750,124 1,025,540 Mortgage loans receivable 255,259 255,437

20,715,410 18,428,835

(ii) Financial assets at fair value Equity investments: At fair value through other comprehensive income 128,693 3,734,740 At fair value through profit or loss 4,429,484 2,353,888 Corporate bonds 1,269,808 1,120,472 Government securities 320,523 742,791

6,148,508 6,831,419




43 Financial instruments by category (Continued)

b) Financial liabilities

Except for unit-linked investment contracts, which are measured at fair value, the Group’s financial liabilities are measured at amortised cost. The carrying value of the Group’s and the Company’s financial liabilities at the end of 2014 and 2015 is shown in note 4(b).

44 Related party transactions

The Group is controlled by UAP Holdings Company Ltd incorporated in Kenya being the ultimate parent of the Group. There are other companies that are related to UAP Holdings Limited through common shareholdings or common directorships

The following transactions were carried out with related parties:

2015 2014 Kshs ’000 Kshs ’000

i) Administration of staff pension scheme- Group Contributions paid 163,485 73,694Benefits paid (76,310) (59,042)

ii) Transactions with related parties - Company Interest paid to UAP Insurance Kenya 159,044 149,791Interest received from UAP Properties South Sudan 28,272 15,467Interest received from UAP Properties Uganda 60,888 30,858Investment management fees paid to UAP Investments Kenya 48,332 78,924

iii) Outstanding balances with related parties - Group Mortgage loans receivable (note 26) 255,259 255,437 Mortgages to staff are fully secured on the mortgage properties and are charged interest at 6% (2014: 6%).




44 Related party transactions (continued)

2015 2014 Kshs ’000 Kshs ’000

iv) Outstanding balances with related parties - Company

Payable to related parties: UAP Insurance 891,746 1,957,926UAP Insurance 48,096 33,570

At end of year 939,842 1,991,496Receivable from related parties: UAP Insurance Company Limited (Kenya) - 170,500UAP Life Assurance Limited (Kenya) 240,410 90,650UAP Life Uganda Limited 114 85UAP Insurance South Sudan 63,786 69,131UAP Insurance Uganda 13,569 13,261UAP Financial Services Uganda 1,326 949UAP Properties Uganda 712,777 570,417UAP Properties South Sudan 61,708 199,227UAP Insurance Rwanda 5,484 7,160UAP SPRL RDC 82,952 49,246UAP Investments Kenya 22,591 9,620UAP Global Services Mauritius 1,015,700 991,890UAP Africa Mauritius 10,771 4,883UAP Properties Limited (Mauritius) 6,740 3,516UAP Insurance Tanzania 834 4,187 UAP Investments (Mauritius) 4,251 1,789

At end of year 2,243,013 2,186,511 The amounts payable to related parties have no specific repayment date.

2015 2014 Kshs ’000 Kshs ’000

v) Loan to directors At start of year 37,697 35,804Loan advanced during the year - 5,077Loans repayments received (12,016) (3,184)

At end of year 25,681 37,697

Loans to directors are fully secured and are charged interest at 6% (2013: 6%).

vi) Key management compensation (a) Group

Salaries (Including executive directors salaries) 444,351 445,821Retirement benefits costs 50,167 110,462

494,518 556,283

(b) Company Salaries (Including executive directors salaries) 116,182 105,997Retirement benefits costs 7,594 7,327

123,776 113,324




44 Related party transactions (continued)

vii) Directors’ emoluments (a) Group

Executive salaries (included in key management compensation above) 135,892 110,135Fees 73,327 69,155Other remuneration 16,830 19,152

226,049 198,442

(b) Company

Executive salaries (included in key management compensation above) 48,215 50,643Fees 16,452 10,748Other remuneration 14,186 12,250

78,853 73,641

45 Operating lease agreements

The Company as a lessor

Rental income earned during the year was KShs 530,506 (2014 – KShs 422,007). At the reporting date, the Company had contracted with tenants for the following future lease receivables:

2015 2014Kshs ’000 Kshs ’000

Within one year 530,506 422,007In second to fifth year inclusive 1,786,566 1,268,802After five years 1,016,454 388,388

Total 3,333,526 2,079,197

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

The Company as a lesseeAt the reporting date, the Company had outstanding commitments under operating leases which fall due as follows:

2015 2014Kshs ’000 Kshs ’000

Within one year 155,410 119,059 In second to fifth year inclusive 688,197 568,395After five years 17,953 12,137

Total 861,560 699,591

Operating lease payments represent rentals payable by the Company for its branch premises. Leases are negotiated for an average term of 6 years.

46 Holding Company

The ultimate holding company is Old Mutual Plc, a company incorporated and domiciled in the United Kingdom



CONTACTS

HEAD OFFICEOff Ngong Road, Ngong LaneP.O. BOX : 60240-00200 NAIROBITEL: 020 3877290-3/ 73872183/ 43867503Fax : 3874857To Call Centre: 0711 074 074 or 0711 074 000Website: www.faulukenya.com

UAP OLD MUTUAL Located at: Nairobi, UpperHillOld Mutual Building, Corner of Hospital & Mara Road Tel: +254 (020) 2829 000Mobile: +254 711 010 000/ 800/ 1or +254 732 101 000/ 800/ 1

AND

Bishops Garden Tower1st Ngong Avenue, Bishops Road P.O Box 43013-00100Nairobi, Kenya Mobile: +254 711 065 000Tel: +254 20 27 19 030

UGANDAKAMPALA

UAP OLD MUTUALUAP Nakawa Business ParkPlot 3-5 New Portbell Road,P.O. Box 1610, Kampala - UgandaTel +256 414 332 700Fax: +256 414 256 388Email: [email protected]

RWANDAKIGALI

UAP OLD MUTUALGrand Pension Plaza - 7th Floor,Avenue de la PaixB.P 6644 Kigali, Rwanda,Tel: +250 25 2500905-7Fax: +250 25 2500908Email: [email protected]

DR CONGOKINSHASA

UAP OLD MUTUALUAP RDC, Sarl - courtier d’Assurances/Insurance brokersBureau n° 3-0-B12, Kavali Center, n° 10/13Croisement des Av. Mutombo Katshi etEquateur Kinshasa/Gombe, RDCTel +243 975 33 88 33Email: [email protected]

TANZANIADAR ES SALAAM

UAP OLD MUTUALBarclays House, 4th Floor, Ohio StreetP.O. Box 71009 Dar es Salaam, Tanzania.Tel: +255 22 213 7324 / 5Fax: +255 22 213 7308Email: [email protected]

SOUTH SUDANUAP OLD MUTUALUAP Equatoria TowerP.O Box 201 Juba, South SudanTel: +211 922 550 040 /+211 22 550 049Email: [email protected]

www.uap-group.com



UGANDAKAMPALA

UAP OLD MUTUALUAP Nakawa Business ParkPlot 3-5 New Portbell Road,P.O. Box 1610, Kampala - UgandaTel +256 414 332 700Fax: +256 414 256 388Email: [email protected]

RWANDAKIGALI

UAP OLD MUTUALGrand Pension Plaza - 7th Floor,Avenue de la PaixB.P 6644 Kigali, Rwanda,Tel: +250 25 2500905-7Fax: +250 25 2500908Email: [email protected]

DR CONGOKINSHASA

UAP OLD MUTUALUAP RDC, Sarl - courtier d’Assurances/Insurance brokersBureau n° 3-0-B12, Kavali Center, n° 10/13Croisement des Av. Mutombo Katshi etEquateur Kinshasa/Gombe, RDCTel +243 975 33 88 33Email: [email protected]

TANZANIADAR ES SALAAM

UAP OLD MUTUALBarclays House, 4th Floor, Ohio StreetP.O. Box 71009 Dar es Salaam, Tanzania.Tel: +255 22 213 7324 / 5Fax: +255 22 213 7308Email: [email protected]

SOUTH SUDANUAP OLD MUTUALUAP Equatoria TowerP.O Box 201 Juba, South SudanTel: +211 922 550 040 /+211 22 550 049Email: [email protected]

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UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015 · 2020-04-04 · 4, 000 PLUS...

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