Sanlam 2019 Annual Report Website

EVERY PROMISE NEEDS A Keeper Annual Report and Financial Statements 2019 Statements and Financial Report Annual

Annual Report and Financial Statements

2019 1 Annual Report and Financial Statements 2019 2 KEEPING OUR Annual Report and Financial Statements 2019 Statements and Financial Report Annual With our corePromise business being General and Life insurance our focus is to gain trust from our shareholders because they have entrusted us to take care of them. Our brand positioning is to make sure we keep all the promises we make to our clients so that they can be able to keep the promises they have made to others.

3 Annual Report and Financial Statements 2019 4 people tolivethebest possible life withinit. cr is committedtohelp living inandenable Sanlam KenyaPlc eate aworldwor (Mission) Purpose NEEDS A PROMISE EVER Vision, MissionandV th Y Keeper cr client-centric wealth eation, management T o betheleaderin and pr Vision otection. Cor DriveInnovationand Superior Per Guar ActwithIntegrityand Accountability Respect,Nur LeadwithCourageandServePride alues e V d ourstakeholders’T alues tur e andCar e rust for mance and resolute W conviction. W and deep-r we do. purposeful inwhat deter committed, r r doing businesswith we havebeen For over100years, eadiness, r e aredetermined mined and ooted esolve esolute, e ar e and sensible W don’ over fancyandwe choose functional solid natur W right thing. sensible thingisthe customers, the it comestoour dr e aresolid e takeprideinour essing. When t dowindow e -we ver W deserve. the r know toshowyou the onlywaywe no shor thor methodical and Our appr exceptionally well. W e doitver e dowhatwe y well ough, wetake espect you tcuts. Itis oach is y , for good W W for good. done andwedoit Our workisnever best possiblelives. people livetheir value thatenables - tocr positive dif make ar e doit e desir eate lasting eal and e to fer ence EVERY PROMISE NEEDS A

Keeper We are determined We are solid We do it very, We do it and resolute and sensible very well for good For over 100 years, We take pride in our We do what we do We desire to we have been solid nature - we exceptionally well. make a real and Vision, Mission and Values doing business with choose functional Our approach is positive difference readiness, resolve over fancy and we methodical and - to create lasting and deep-rooted don’t do window thorough, we take value that enables conviction. We are dressing. When no shortcuts. It is people live their committed, resolute, it comes to our the only way we best possible lives. determined and customers, the know to show you Our work is never purposeful in what sensible thing is the the respect you done and we do it 2019 Statements and Financial Report Annual we do. right thing. deserve. for good.

Purpose Vision Core Values (Mission) To be the leader in Lead with Courage and Serve with Pride client-centric wealth Sanlam Kenya Plc Respect, Nurture and Care creation, management Act with Integrity and Accountability is committed to help and protection. Guard our stakeholders’ Trust create a world worth living in and enable Drive Innovation and Superior Performance people to live the best possible life within it. 5

Annual Report and Financial Statements 2019

NEEDS A PROMISE EVER

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n n h n a a m e e o i s i n d d e e s y l , , , , , , l insurance industr the Kenyanlife share of6%in estimated market The ﬁrmenjoysan countries. a presencein44 in theworldwith insurance groups internationally active one ofthe50largest Globally life. 236,507 undergroup individual lifeand policyholders under ser ving 99,401 6% 44 , Sanlamis y , ABOUT US EVERY PROMISE NEEDS A Keeper To our investors and stakeholders

anlam Kenya, formerly Pan Africa Insurance Holdings, Sanlam operates through a number of subsidiaries,

associated companies and joint ventures. Sanlam Life is

the Nairobi Securities Exchange that provides a the largest operating subsidiary and the holding company

44 S of most of Sanlam’s operations in emerging markets.

Globally, Sanlam is

the distinctive Kenyan market needs. one of the 50 largest

Sanlam has a decentralised management structure and internationally active Through its subsidiaries Sanlam Life Insurance Limited and insurance groups

Sanlam General Insurance Limited, Sanlam Kenya is well Personal Finance, Sanlam Emerging Markets, Sanlam in the world with E E C positioned to meet unique client needs in the General and Investment Group, Santam and Sanlam Corporate. The a presence in 44 X C E N E L L Customer Life Insurance space. countries. solutions to individual and institutional clients across all Founded on a rich heritage and good corporate citizenship, market segments. Sanlam’s areas of expertise include Sanlam Kenya currently features a branch network of 22 client experience centres across Kenya’s major towns. The investments and wealth. Excellence insurance industry in Kenya, serving 99,401 policyholders The Group also has stakes in operations based in under individual life and 236,507 under group life. Namibia, Botswana, Swaziland, Zimbabwe, Mozambique, Mauritius, Malawi, Zambia, Tanzania, Rwanda, Uganda, Globally, Sanlam is one of the 50 largest internationally active Kenya, Nigeria, Morocco, Angola, Algeria, Tunisia, Ghana,

It has been our quest to transform into an 6% 2019 Statements and Financial Report Annual insurance groups in the world with a presence in 44 countries. Niger, Mali, Senegal, Guinea, Burkina Faso, Côte d’Ivoire, The ﬁrm enjoys an organisation that guarantees excellent client Our vision is to be the leader in client-centric wealth creation, Togo, Benin, Cameroon, Gabon, Republic of the Congo, estimated market management and protection, to be a leading player in Pan- Madagascar, Lebanon, Saudi Arabia, India, Malaysia and share of 6% in service and offers great products. Going forward, we the United Kingdom and has interests in the USA, Australia, the Kenyan life Burundi, Lesotho and the Philippines. insurance industry, will focus on accelerated organic business growth, serving 99,401 policyholders under while pursuing a market leadership position through individual life and 236,507 under group high quality and differentiated service provision. life. Through its subsidiaries Sanlam Life Insurance Limited and Sanlam General Insurance Limited, Sanlam Kenya is well positioned to meet unique client needs in the General and Life Insurance space.

7 Annual Report and Financial Statements 2019 8 Nairobi P.O. Box 30645-00100 Kenyatta Avenue National BankofKenya Limited Nairobi P.O. Box 74145-00200 Kenyatta Avenue Branch Family BankLimited Nairobi P.O. Box 74956 -00200 Ukulima Branch Co-operative BankofKenya Limited Nairobi P.O. Box 30001 -00100 Kenyatta Avenue Limited Standard Chartered BankofKenya Nairobi P.O. Box 46661-00100 Barclays Plaza Barclays BankofKenya Limited Principal Bankers Nairobi P.O. Box 44041-00100 Sanlam Tower, Waiyaki Way, Westlands LR No. 1870/V/72 Registered office Nairobi P.O Box 44041-00100 Sanlam Tower, Waiyaki Way, Westlands Principal placeofbusiness Company information Mama NginaStreet 12th Floor, House International Waruhiu &Company Advocates Nairobi 4th Floor, CapitalHillSquare, UpperHill Ayugi & Njonjo Advocates Nairobi Loita Street 6th Floor, FinanceHouse Simba & Advocates Nairobi ValleySpring Crescent MMC Arches Mungai AdvocatesMuriu Nairobi Williamson House, 4thNgongAvenue Kaplan &Stratton Advocates Legal advisers Nairobi P.O. Box 43963-00100 Westlands PwC Tower, Waiyaki Way/ChiromoRoad PricewaterhouseCoopers LLP Independent auditor Nairobi P.O. Box 44041-00100 Westlands Waiyaki Way Sanlam Tower Emma Wachira Company secretary Sanlam at a Glance Contents

Company Information 8

Five Year Group Review 26

Corporate Governance 54 - 64

Risk management 68 - 76

Report of the Directors 78 - 80

Statement of Directors’ Responsibilities 82

Director’s Remuneration Report 83 - 85

Report of the Statutory Actuary - Sanlam Life Insurance Limited 86

Report of the Statutory Actuary - Sanlam General Insurance Limited 87

Embedded Value Report 88 - 90

Report of the Independent Auditor 91 - 95

Financial Statements: Annual Report and Financial Statements 2019 Statements and Financial Report Annual Flashback Consolidated and Company Statement of Profit or Loss 96 Consolidated and Company Statement of Other Comprehensive Income 97

Consolidated and Company Statement of Financial Position 98 - 99

Consolidated Statement of Changes in Equity 100

Company Statement of Changes in Equity 101

Consolidated Statement of Cash flows 102

Company Statement of Cash flows 103

Notes to the Financial Statements 104 - 196

9 Corporate Governance

10 Annual Report and Financial Statements 2019 NEEDS A PROMISE EVER

Y Keeper trust andwe must deliver whatwe have promised to the Innovation As we strive to make products thataddress the market needs we keep are inmindthatpartnerships built on Pr oduct market. Sanlam at a Glance 13 Annual Report and Financial Statements 2019 EVEREVEY RY PROMISEPROMISE NEEDSNEEDS A A KKeepereeper SanlamSanlam at at PProductroduct aa Glance Glance InnovationInnovation 9 9 1 1 ements 2 0 ements 2 0 Annual Report and Financial Statements 2019 Statements and Financial Report Annual inancial Sta t inancial Sta t t and F t and F epo r epo r ual R ual R An n An n

13 13

11 12 Annual Report and Financial Statements 2019 Sanlam Sanlam at aGlance a t aglance believe diversiﬁcation This iswhatmakesus W our stakeholders.W What unitesusisour lives inameaningful differences anddraw is keytooursuccess way is wedoitforgood. e’re inthebusiness because onlywhen on sustainableand transform people’ enduring valuefor job isneverdone. strengths, canwe of helpingpeople W on ourcollective . Whatdrivesus while delivering we embraceour make themost ealthsmiths™. of theirmoney e s Understanding howourbusinesscreates shared value strengthen theirfinancial resilience andprosperity. ability to create shared value for ourmaterial stakeholders. This way, we The cornerstone ofourpurpose, to build aworld of Wealthsmiths

the benefitof: have means thatorganisations Creating livingin aworldworth resilience andprosperity to enableeconomic,socialandregulatory funds undermanagement through Sanlam’s soundinvestmentofclient Sanlam productsandservices our salesagentsasdistributionpartnersfor Technical partnershipswithregulators Facilitatingsustainableeconomicgrowth Opportunitiestogeneratefeeincomefor This contributes to amutually beneficial value ecosystem for individuals, organisations andsociety. economic growth stakeholders insupportofinclusive of technicalpartnerships client fundsundermanagement sector throughSanlam’s investmentof benefit of: in meansthatsocietyhasthe Creating living aworldworth Collaborationandtrustbetween Trust inthefinancialsectorasaresult Stabilityandliquidityinthefinancial Economicempowermentandchoice the benefitof: in meansthatindividualshave Creating living aworldworth shareholders development andfinancialsecurity remuneration thatleadstocareer that meetindividualneedsandexpectations treatment andarangeoffinancialsolutions protection throughsoundadvice,fair Growthinshareholdervalueforallour Employmentopportunitiesandfair Wealth creation,managementand TM , isour Our StakeholderNetwork and client-centricengagement.Thisincludesestablishedrelationshipswith multipletertiar Development intheGroupOfficeprovidesasupportfunctionformanaging stakeholderrelationshipsthroughface-to-face hub iscollatedandreportedtotheSocial,EthicsSustainability(SES) committeeonaquarterlybasis.GroupMarket The stakeholderhubisacentraliseddatabasethatser report totheSanlamstakeholderhubonaquarterlybasisall engagementactivitiesandconcernsraised. Each businessclustermanagesstakeholderengagementaccordingtothe specificfocusintheiroperations.Theclusters business clusters. policy isinplace.Stakeholderengagementcontinuousanddependson theneedsofvariousstakeholdersand Development furtherfacilitatescrossselling andcollaborationbetweenclusterstoexecuteonmarketopportunities. trade unions,governmentdepartments,privatesectorinstitutionsandaffinity groupssuchaschur Sanlam’ Stakeholder r Sanlam overtime.ReadmoreaboutgovernanceresponsibilitiestostakeholdersintheonlineGovernanceReport. stakeholders, andbalancingtheneeds,interestsexpectationsofallmaterialstakeholdersinbest inclusive manner The SanlamBoardandexecutivemanagementareresponsibleformanaginginasustainablestakeholder Gover select materialstakeholdersonthebasisoftheirimpactSanlam’ s stakeholderstrategyguidesengagementwithmaterialstakeholders.An approvedstakeholdercommunication Sanlam’ mutually beneficialfinancialr While weoperateinanextendeduniverseofstakeholders,identifyand our primar nance ofstakeholderr and thesuccessfulexecutionofourstrategy . Thisincludesoverseeingthestrategicrisksthatrelatetointer s strategicintentistocr elations y per for mance tar elationships get formeasuringshar esilience andpr eate sustainablevalueforallstakeholders. ves asanissuelog.Theinformationinthestakeholder osperity isr . Sanlam’ eholder valuecr face betweenSanlamandits s abilitytocr eflected inRoGEV y institutionsinSouthAfrica, ches. GroupMarket s business eation. eate , - Stakeholder Business partners Shareholders Government Regulators Employees gr Society Clients oup Group level Providers offinancialcapitalataSanlam conduct regulation prudential andmarket environment forfinancialser Providers offinancialstabilityanda sustainable enterprise developmentprogrammes Partners toSanlam’ which humanresour financial solutionsisgenerated,andfrom The basefromwhichdemandforSanlam’ appropriate Co-investors inSanlambusinesseswhere Sanlam toconductitsbusinessactivities Providers ofproductsandser business model support theactivitiesunderlyingSanlam’ Providers ofskillsandexpertisethat support offinancialresilienceandprosperity management andprotectiongoalsin solutions toachievetheirwealthcreation, Consumers ofSanlam’ The basisofour r elationship s education,socialand ces areemployed s financial vices through vices thatenable s s a Sanlam t aglance Sanlam overtime. in thebestinterestsof material stakeholders expectations ofall needs, interestsand and balancingthe and itsstakeholders, between Sanlam relate totheinterface strategic risksthat overseeing the manner stakeholder in asustainableand managing Sanlam responsible for management are and executive The SanlamBoard . Thisincludes -inclusive

Sanlam at a Glance Our Stakeholder Network

Stakeholder The basis of our group relationship

Consumers of Sanlam’s financial Sanlam’s strategic intent is to create sustainable value for all stakeholders. solutions to achieve their wealth creation, While we operate in an extended universe of stakeholders, we identify and management and protection goals in select material stakeholders on the basis of their impact on Sanlam’s business Clients support of financial resilience and prosperity and the successful execution of our strategy. Sanlam’s ability to create mutually beneficial financial resilience and prosperity is reflected in RoGEV, The Sanlam Board our primary performance target for measuring shareholder value creation. and executive management are Providers of skills and expertise that responsible for support the activities underlying Sanlam’s managing Sanlam Employees business model in a sustainable and stakeholder- inclusive manner. This includes Governance of stakeholder relationships overseeing the The Sanlam Board and executive management are responsible for managing Sanlam in a Providers of financial capital at a Sanlam strategic risks that relate to the sustainable and stakeholder-inclusive manner. This includes overseeing the strategic risks that Group level relate to the interface between Sanlam and its stakeholders, and balancing the needs, interests interface between Shareholders Sanlam and its and expectations of all material stakeholders in the best interests of Sanlam over time. Read stakeholders, more about governance responsibilities to stakeholders in the online Governance Report. and balancing the Providers of products and services that enable needs, interests Stakeholder relations and expectations Sanlam to conduct its business activities Sanlam’s stakeholder strategy guides engagement with material stakeholders. An approved of all material Co-investors in Sanlam businesses where stakeholder communication policy is in place. Stakeholder engagement is continuous and stakeholders in the Business partners appropriate depends on the needs of the various stakeholders and business clusters. best interests of Sanlam over time. Each business cluster manages stakeholder engagement according to the specific focus in 2019 Statements and Financial Report Annual their operations. The clusters report to the Sanlam stakeholder hub on a quarterly basis on all The base from which demand for Sanlam’s stakeholder engagement activities and concerns raised. financial solutions is generated, and from which human resources are employed The stakeholder hub is a centralised stakeholder database that serves as an issue log. Society The information in the stakeholder hub is collated and reported to the Social, Ethics and Sustainability (SES) committee on a quarterly basis. Group Market Development in the Group Office provides a support function for managing stakeholder relationships through face-to- face and client-centric engagement. This includes established relationships with multiple Partners to Sanlam’s education, social and tertiary institutions in South Africa, trade unions, government departments, private sector enterprise development programmes institutions and affinity groups such as churches. Group Market Development further facilitates Government crossselling and collaboration between clusters to execute on market opportunities.

Providers of financial stability and a sustainable environment for financial services through prudential and market Regulators conduct regulation

13 14 Annual Report and Financial Statements 2019 USA Sanlam at aGlance Developed Markets Sanlam PanAfrica–indirectpresence Sanlam PanAfrica–directpresence

The Gambia

Senegal Ireland Côte d’Ivoire Guinea Morocco

Burkina Faso Luxembourg Togo Mali Ghana Algeria Benin France United Kingdom Republic ofTheCongo Nigeria Niger Tunisia Gabon Cameroon Namibia Angola South Africa Burundi Botswana Rwanda Zambia Lesotho Zimbabwe Malawi Saudi Arabia Swaziland Uganda Tanzania Mozambique Madagascar Kenya Lebanon Our GlobalPresence active insurancegroups intheworldwithadirect SEM, Sanlamhasthemostextensiveinsurance and indirect presence in44countries. Through Sanlam is one of the 50 largest internationally internationally Sanlam isoneofthe50largest footprint ontheAfricancontinent. Mauritius India Malaysia Philippines Australia

Sanlam at a Glance Sanlam Group plc structure

United Kingdom

Ireland

Luxembourg

France Sanlam Group

Tunisia USA Lebanon

Morocco

Algeria

Saudi Arabia Niger

Mali

Burkina Faso Senegal India Sanlam Pan Africa Guinea Philippines The Gambia Benin Togo Nigeria

Côte d’Ivoire Cameroon Malaysia Ghana Uganda Sanlam Investments Gabon Rwanda Kenya

East Africa 2019 Statements and Financial Report Annual Burundi Republic of The Congo Tanzania Sanlam Pan Africa – direct presence Malawi Angola Sanlam Kenya Zambia Sanlam Pan Africa – indirect presence Mozambique Mauritius Zimbabwe Madagascar

Botswana Developed Markets Swaziland Namibia Lesotho Sanlam General Sanlam Life Australia South Africa

15 16 Annual Report and Financial Statements 2019 T See youallattheCapeTown Marathon! in Nairobi. showcasing thetruesportsmanship spiritweexperiencedhere We hopeTeam KenyarepresentsuswellattheMarathon, Town Marathon. all-expenses paidtriptoSouthAfricarunthe Sanlam Cape the staffwinnersofmonthlongcampaign.They allwonan public winnerswhileBrianMabongaandRaymond Kimutaiwere Lorin Otieno,KennedyOchieng,VictorOnditiemerged the final 2basedontheircommitmenttofitness. The nomineeswerethenshortlistedto6,andstaffvotedforthe ‘fit’ lifeandwouldappreciatetheopportunitytorunamarathon. Internally, staffwereaskedtonominatecolleagueswholiveavery session atthegym. training fitness challengesculminatinginahighintensityinterval aseriesofoutdoor competition, duringwhichtheyunderwent Participants werethenshortlistedforthesecondstageof about apersonwhohadpositiveimpactontheirlife. prepare foramarathonas2-memberteamorsharestory submitting theirphotosorvideosshowcasinghowtheywould The firststageofthecompetition,involvedparticipants one tolivetheirbestlifeandachievegoals. the importanceofcollaboratingwithrightpartnerinorderfor marathon” on9thAugust.Thecampaignaimedtodemonstrate Kenya rolledoutasocialmediacampaigndubbed“Lifeis Championed bythecorporatecommunicationsteam,Sanlam resilience thathasbecomesynonymouswithathletesinKenya. Life isaMarathon At SanlamKenya, company recognizeandcelebratethetenacity Marathon inauniqueandengagingwaythatsawthe his year, SanlamKenyagearedupfortheCapeTown Sanlam at aGlance Flashback Sanlam at a Glance Annual Report and Financial Statements 2019 Statements and Financial Report Annual

Sanlam Kenya Group CEO Banca Women Event 17 Dr Patrick Tumbo Strikes a Chief guest Rose Kimotho with Susan Mavungo, Head signature “Bolt” pose with the of Premier Unit and Grace Mwamba of Prestige and campaign winners. Malls, ABSA Bank. 18 Annual Report and Financial Statements 2019 Sanlam at aGlance Caroline Laichema Golfers picturedwithSanlam GeneralCEO Sanlam GolfatThika GolfClub Sanlam at a Glance Annual Report and Financial Statements 2019 Statements and Financial Report Annual

Sanlam Golf at Nyali Golf Club 13th Sanlam Summer School of Financial Journalism Sanlam General CEO Caroline Laichena (right) with a club member. Group Chief Executive Officer, Sanlam Kenya Dr Patrick Tumbo, Neville Otuki Second 19 runners-up (African Growth Story) for Sanlam Financial Journalism Awards 2019 Position: Independent business Journalist 20 Annual Report and Financial Statements 2019 Sanlam at aGlance Group CEODr. PatrickTumbo flankedbyKevinMworia(left),ChiefFinanceOfficer andCarolineLaichena, CEO GeneralInsuranceatthestrategylaunch. innewoperatingstrategy Sanlam Kenyaaffirmsfocusoninsurance services Sanlam at a Glance Annual Report and Financial Statements 2019 Statements and Financial Report Annual

Embakasi Garisson Sanlam Life CEO Stella Njunge during the handing over of refurbished Games Room to General Matari Eastern Command, Embakasi Barracks

21 22 Annual Report and Financial Statements 2019 Sanlam at aGlance on CommandantKAPCC Col.PaulKindochimu Business DevelopmentManager GeraldCheruiyotpayingacourtesycall Sanlam Stakeholder Engagement Sanlam at a Glance Annual Report and Financial Statements 2019 Statements and Financial Report Annual

Think Business Awards Our team bagged the following awards during the Think Business awards: Life Insurance Best Customer Service, 1st Position. Fraud, Prevention and Detection - 1st Position. Other awards include: 23 Customer champion of the year-Runners-up, Best claim settlement - Winner, Training Excellence and Impact - Winner, Best customer centric Life Insurance Company - 1st Position, Best insurer Product distribution and Marketing 2nd Position and Best Training Company - 1st Position at the Agents Choice Awards. 24 Annual Report and Financial Statements 2019 GCEO Dr. Patrick Tumbo duringthe OSEAISanlamcocktail atRadissonBlu. General LinetMachariachatting withSanlam OSEAI Chairperson PattyMartin(L) and Secretary SANLAM OESAIcocktail. Sanlam at aGlance Sanlam at a Glance Annual Report and Financial Statements 2019 Statements and Financial Report Annual

Sompo partnership 25 H.E. Ryoichi Horie, Japan’s Ambassador to Kenya (R) with Sanlam Life Kenya CEO, Stella Njunge and Sompo Insurance Head of Johannesburg office, Dan Taoka toast to the launch of a business partnership between Sanlam and Sompo in Nairobi. 26 Annual Report and Financial Statements 2019 Five-year group review Profit/ (loss)before tax and share ofprofit ofassociate Statement ofprofit orloss: Profit/(loss) attributed to shareholders Gross premium income Insurance business: Net premium income Net benefits andclaimspaid Total equity Statement offinancialposition: Long term policyLong term liabilities General policy liabilities Share capital Total assets Key indicators: Basic earnings pershare Basic earnings Dividends pershare Dividends (KShs. m) Market capitalisation atyear end(KShs. m) Annual High Group share prices attheNSE: Annual Low Share atyear price end * Price before bonus issue KShs.m 19,589 27,109 (0.43) KShs. 4,797 4,257 3,802 8,640 5,182 1,513 2015 141* (62) 720 51 55 60 - - KShs.m 20,432 28,443 KShs. 5,225 4,832 4,478 3,932 3,996 1,415 2016 0.63 720 317 90 65 28 28 - - KShs.m 20,124 29,811 KShs. 6,370 4,534 4,052 1,438 3,996 5,416 2017 0.21 251 720 31 31 28 18 - - KShs.m (2,130) (2,017) 20,042 29,102 (14.01) 6,346 5,372 1,587 KShs. 1,222 5,124 3,168 2018 720 28 20 22 - - KShs.m 29,027 19,605 KShs. 6,991 5,647 4,836 1,735 2,478 2019 0.79 .2 7. 1 550 947 720 113 26 16 - - Kshs 6,991 million Gross Premium Income

Kshs 5,647 million Net Premium Income Annual Report and Financial Statements 2019 Statements and Financial Report Annual Kshs 4,836 million Policyholder benefits incurred

27 28 Annual Report and Financial Statements 2019 NEEDS A PROMISE EVER Y Operational why ourpromise isto always improve to ourservices themby adopting revised business modelsthatbenefit bothparties. It isbecauseofourclients thatwe are Sanlam. And thatis Keeper Ef Together we shallachieve ourgoals. ﬁciency 19 Annual Report and Financial Statements 2019 Annual Report and Financial Statements 2019 Statements and Financial Report Annual

Our Leadership

29 30 Annual Report and Financial Statements 2019 Occupation: Lawyer, partnerin Academic Qualifications:LLD Bachelor ofLaw(University December 2001;appointedas ((Hon.) UniversityofNairobi), Advocate oftheHighCourt Kenya, member, Instituteof Professional Qualification: Professional Qualification: Simba &Advocates. Appointed totheboardon Dr. JohnPNSimbaOGW, Academic Qualifications: Appointed totheboardin chairman inMarch 2002. Certificate inRealEstate, Corporate Development Occupation: Directorof Management (LSE),BA Advanced Management Hotel Developmentand Program (Harvard), Program (Harvard), Directors (Kenya) MBA (IMD),MSC Rohan Patel(44) Geography (LSE) 16th May2015. Dar-es-Salaam) MBS, EGH(75) Investment. (Chairman)

Leadership Our Board ofDirectors-SanlamKenyaPLC Management –Tanzania (Institute ofFinance and Riskmanagement Advanced DiplomaInsurance Professional Qualification: MBA (ESIM) Academic Qualifications: Africa (SPA) East Africa–SanlamPan (T) ltd,RegionalExecutive, Occupation: CEOSanlamLife 18th August2016 Appointed totheboardon Julius NyakiaMagabe(46) Institute ofManagement. (Kenya), FellowoftheKenya Fellow oftheInstituteBankers Professional Qualification: Education (UniversityofNairobi) (University ofNairobi),BAin Academic Qualifications:MBA Occupation: Banker August 2009 Appointed totheboardon18th Susan Mudhune(70)

Our Leadership Board of Directors - Sanlam Kenya PLC

Dr. Patrick Tumbo (56) Freda Britz (54) Appointed to the board on 2nd Appointed to the board on 8th August 2018 November 2018 Occupation: Group Chief Executive Occupation: Qualified Chartered Officer, Sanlam Kenya Plc; Regional Accountant Executive, East Africa – Sanlam Pan Academic Qualifications: Africa Bachelor of Commerce, Academic Qualifications: BCom Rand Afrikaans University; (Insurance) University of Nairobi, Post Graduate Diploma in MBA Strategic Management Accountancy (Honours) & CTA: University of Nairobi Rand Afrikaans University Professional Qualification: Professional Qualification: Chartered Insurer (ACII) Chartered Accountant (SA), registered Auditor IRBA, Chartered Management Accountant (ACMA)

Cornie Foord (62) 2019 Statements and Financial Report Annual Nelius Bezuidenhout (37) Appointed to the board on 8th Appointed to the Board on 8 November 2018 November 2018 Occupation: Chief Operating Occupation: Executive: Finance, Officer - Sanlam Pan Africa Sanlam Pan Africa Life Academic Qualifications: B Professional Qualifications: Fellow Compt University of South of Actuarial Society of South Africa Africa; B Compt (HONS) CTA –University of South Africa; M

Comm (Business Management) ; University of Johannesburg

31 32 Annual Report and Financial Statements 2019 (Continued) Board ofDirectors-SanlamKenyaPLC Occupation: of Commerce fromthesame Dr. GraceMirigoMwai(40) of Nairobiandisanalumni in BusinessAdministration studies attheUniversityof degree fromtheUniversity United StatesInternational of NairobiandaBachelors (MBA) fromtheUniversity Appointed totheBoardon Appointed totheBoardon currently pursuingfurther University Africa,Masters Academic Qualification: Academic Qualification: Leadership Development Program (WLDP).She’s Administration fromthe Bachelor ofCommerce program management Doctorate inBusiness Ms. RoseAgutu(57) of theCLAWomen’s Occupation: Banker 10th May 2019 10th May 2019 Compliance and university. London 2

2 Annual Report and Financial Statements 201 Senior Management Chief Finance Officer Kevin Mworia Group ChiefExecutiveOfficer Dr PatrickT umbo , SanlamKenya Group Head ofITandInnovation Simon Ngura Chief ExecutiveOfficer Stella Njunge , SanlamLife Group Head ofMarketingand CorporateCommunications Lilian Onyach General insuranceCEO Caroline Laichena Group CompanySecretar Emma W achira yChief LegalOfficer NEEDS A PROMISE EVER Y Keeper OUR LEADERSHIP Senior OUR Management LEADERSHIP

Dr Patrick Tumbo Stella Njunge Caroline Laichena Emma Wachira Group Chief Executive Officer, Sanlam Kenya Chief Executive Officer, Sanlam Life General insurance CEO Group Company SecretaryChief Legal Officer 1 Annual Report and Financial Statements 2019 Statements and Financial Report Annual ements 2 0 inancial Sta t t and F epo r ual R An n EVERY PROMISE 22 NEEDS A

Kevin Mworia Simon Ngura Lilian Onyach 33 Chief Finance Officer Group Head of IT and Innovation Group Head of Marketing and Corporate Communications Keeper 34 Annual Report and Financial Statements 2019 NEEDS A PROMISE EVERY Keeper Leadership Our Dr. JohnSimba, OGW, MBS,EGH (GroupChairman) keeps itspromises. a businessthat our reputationas and willcement another century, will betherefor business that strong androbust foundation fora plans aretolaya Our immediate Our Leadership Chairman’s statement

Dear Shareholder Overall, as was the case globally and in sub-Saharan following the scraping of interest rate cap during the year Africa, economic growth in Kenya remained sluggish during which we expect will begin to manifest itself in a renewed On behalf of the Board of Directors, it gives me pleasure the year. Growth was largely impacted by depressed output business vigor, especially in the SME sector, following to present to you the reports and accompanying financial in the crucial agricultural sector, due to delayed long rains enhanced access to credit. But as alluded to above, the statements for the year ended December, 2019. followed by severe flooding. This negatively impacted food emergence of a new faceless and vicious enemy which prices, increasing household inflation. It was a mixed bag has unleashed devastation whose scale in human lives The opportunity for the insurance Overview of fortunes for cash crops the combined effect of which and bearing on economies across the globe is yet to be industry to deepen The year 2019 was a difficult one for businesses across resulted in reduced export earnings. Although a rebound in quantified will gravely impact our plans. Even in the worst penetration lies in the region. Although the region’s economies remained the agricultural sector and the projection of better prospects of times, opportunities emerge. We shall remain awake to growing long- term insurance, relatively stable – with growth averaging 6 percent for the in 2020 was expected, this will be countered by the locust these opportunities. in tandem with East African countries – there were some unexpected invasion and global economic slowdown caused by the general insurance shocks that dampened business operations. Corona pandemic. Our near term plans will be to continue strengthening our that currently accounts for more foundations for a strong and robust business that will be than half the total On the global arena, growth was muted averaging 3.5 As a business, we were not spared the challenges faced there for another century, and will cement our reputation as premiums. percent on the back of a slow-down in manufacturing by the industry. We endured a tough year characterized a business that keeps its promises. activities and uncertainties surrounding trade and by a major business restructuring that is expected to lay geopolitics especially between America and China. The the foundation for future growth. The restructuring was Insurance penetration Brexit debacle also added to the uncertainties that led to a necessitated by the need to re-align the business to current Like the rest of sub-Saharan Africa, insurance uptake has slow-down in the global economy. realities and prepare it for take-off. remained a serious challenge. In Kenya, Insurance uptake still remains under 3 per cent. Obviously, this is way below Operations However, all was not doom and gloom. There was a silver the critical mass that is essential for the industry to remain In Kenya, the insurance industry faced tight liquidity lining in the financial sector during the year under review viable. This scenario also throws up opportunities for us driven by constrained access to credit by individuals, small to develop products and distribution infrastructure which 2019 Statements and Financial Report Annual and medium-sized enterprises as a result of the effects resonates with potential customers. The bulk of the current of the interest rate cap. Business operations across the Other opportunities to grow coverage is for general insurance. It is however expected board were affected leading to staff layoffs and reduced insurance penetration lie that economic growth will result in increased insurance production capacity. in untapped segments such penetration. As economies improve and the middle class as micro-insurance which grows, uptake of insurance products will grow in tandem. Experts in the financial sector had repeatedly warned that delivers affordable solutions controlling lending rates would not automatically lead to to lower-income segments. The opportunity for the insurance industry to deepen increased access to credit. penetration lies in growing long-term insurance, in tandem Comprising significant with general insurance that currently accounts for more The ripple effects of the rate caps impacted the insurance proportions of the population, than half the total premiums. This calls for innovative industry, leading to a slowdown in uptake of insurance this population offers an solutions in the long term insurance business classes such by individuals and businesses compounded by a tepid attractive opportunity for the as Pensions, Life Assurance, Group Life, Group Credit, operating environment. industry. Annuities and Investments.

35 36 Annual Report and Financial Statements 2019 playing field for thoseinthe arena. amending existing ones–allfocusing oncreating alevel theyear, during industry introducing new guidelineswhile Regulatory changescontinued to impacton theinsurance Regulatory changes to manipulateopportunities thesystem. Database System thatfacilitates information sharing, limits wide initiatives suchastheIntegrated Motor Insurance public. Minimizinghumanintervention, through industry- the industry, leading to loss by insurers and the insured be able to combat fraud that has continued to plague By embracing technology, will theinsurance industry channels whilerevolutionizing thecustomer experience. digital transformation isopeningupalternative distribution and makingitpossible to roll outlow-cost solutions. This by enhancingefficiency,industry lowering operating costs of Internet Things, are for opening up fresh the opportunities Technological developments, suchasBlockchain and lies intapping technology to reach new market segments. ingrowing the businessThe biggestopportunity however lead to increased uptake ofourproducts. insurance aswell astheavailable solutionsisexpected to and relevant government agenciesonthegeneral role of In additionto this, sustained awareness by theindustry population offers anattractive for theindustry. opportunity ofthepopulation,this Comprising significantproportions delivers affordable solutionsto lower-income segments. in untapped segmentssuchasmicro-insurance which to growOther opportunities insurance penetration lie Leadership Our Chairman’s statement concerted globaleffortconcerted to tackle thismenacewillbear fruits We however remain optimisticandbelieve that the as awhole. Kenya willbenoexception. andtheglobaleconomy on theglobalinsurance industry This is expected to have the single most significant impact meaning thatglobaltrade outputwillbeatanall-timelow. air travel islimited andeconomies are putonlockdown, global scaleisexpected to beseverely weakened as but it will definitely be enormous. Economic growth on a The real impact on global GDP is yet to be fully determined comes toas the world with the Covid-19 terms pandemic. Going forward, theoutlookfor 2020iscautiously optimistic acrossinsurance theEast industry Community.African under development, andisexpected to the harmonize At theregional level, the East Insurance Bill remainsAfrica result, increase intheindustry. trust . industry are expected to enhance discipline in the sector and as a claims payment to returns theregulator. These changes combat fraud andinsurers to submitpremium levy and requires direct submissionofpremiums to insurers to policy holders whenaninsurance company isindistress, came into effect. Itsprovisions, inter alia,aimsto protect During theyear, theInsurance Amendment Act of2019 its provisions. offsite. As abusiness, we have to comply purposed with handles significantcustomer data someofwhichis kept expected to becauseit impactontheinsurance industry aims to regulate handlingandprocessing ofdata andis recently assented to by President Kenyatta. Uhuru The law istheData importance ProtectionOf critical Act that was CHAIRMAN. Dr. John .P.N.Simba, EGH,MBS,OGW. THANK YOU. our clients. Letusnow allpulltogether anddeliver onthepromise to create alevel playing field intheindustry. gratitude alsogoto theIRAfor itsunwavering efforts to it to take advantage ofemerging opportunities. Our we neededto restructuresupport thebusiness positioning shareholders, businesswhohave partners given usthe shown exemplary leadership. Specialthanksto our leadership ofGroup CEO, Dr. Patrick Tumbo whohas the dedicationofmanagementandstaff underthe wouldThe turnaround nothave been possible without andwe canseeachangeinfortunes. thecorner turned through. Itisthrough theirdedicationthatwe have finally the business thedifficult during phasethatwe have been of Directors for thetimeandeffort thatthey have putinto Finally, Iwould like to record my appreciation to theBoard Conclusion waters. ready to rebound aswe emerge into lesstempestuous As abusiness we believe theraging we storm shallride back onitsfeet before long. to and the global economy medium term, will be in the short Our Leadership

EVERY PROMISE NEEDS A Keeper Resilience Many times our stakeholders have gone through challenges that required us to come through for them and most of the time we have been able to keep this promise. We have protected them against negative un expected events. Annual Report and Financial Statements 2019 Statements and Financial Report Annual

37 38 Annual Report and Financial Statements 2019 NEEDS A PROMISE EVERY Keeper wetu Viongozi Dkt. JohnSimba,OGW, MBS,EGH(Mwenyekiti) zake. inayotimiza ahadi zetu kamabiashara hilo litakolezasifa karne nyingine,na itakayodumu kwa biashara thabiti msingi wa ilikuwa kuweka kwanza kabisa Mipango yetuya Viongozi wetu Taarifa Ya Mwenyekiti

Mwenyehisa mpendwa, watu na biashara kutochukua bima kwa wingi ukizingatia za usoni. Mabadiliko hayo yalisababishwa na haja ya mazingira magumu ya uendeshaji biashara. kuiweka vyema biashara yetu kuendana na uhalisia na pia Kwa niaba ya Bodi ya Wakurugenzi, nina furaha kujiandaa kwa ukuaji. kukuwasilishia ripoti na taarifa za kifedha za mwaka Kwa jumla, kama ilivyokuwa duniani na Afrika kusini mwa uliomalizika Desemba 2019. jangwa la Sahara, kasi ya ukuaji wa uchumi wa Kenya Hata hivyo, yalitokea mazuri pia. Kulitokea matumaini Mipango yetu ya ilipungua mwaka huo. Ukuaji sana uliathiriwa na kushuka katika sekta ya kifedha mwaka huo baada ya kuondolewa hivi karibuni zaidi itakuwa kuendelea Kwa ufupi kwa uzalishaji katika sekta ya kilimo kutokana na kuchelewa kwa kikomo kwenye viwango vya riba. Tunatarajia kwamba kuongeza nguvu Mwaka 2019 ulikuwa na changamoto nyingi kwa biashara kwa mvua ya masika na baadaye mafuriko. Hili liliathiri matunda ya hatua hiyo yataanza kujidhihirisha kupitia msingi wa kanda hii. Ingawa mataifa katika kanda hii yalisalia kuwa bei ya vyakula, na kuongeza gharama ya matumizi kwa kufufuliwa kwa mchangamko katika biashara, hasa sekta biashara thabiti itakayodumu kwa imara kiuchumi – ukuaji wa uchumi ukiwa kwa kadiri asilimia watu wengi nyumbani. Mazao ya biashara yaliathiriwa pia ya biashara ndogo na za wastani, kutokana na kupatikana karne nyingine, na 6 katika mataifa ya Afrika Mashariki – kulitokea changamoto na kusababisha kushuka kwa mapato kutoka kwa uuzaji kwa mikopo. hilo litakoleza sifa zisizotarajiwa zilizoathiri shughuli za kibiashara. wa bidhaa nje ya nchi. Ingawa sekta ya kilimo ilitarajiwa zetu kama biashara inayotimiza ahadi kujikwamua na hali kuimarika mwaka 2020, hii itaathiriwa Kama nilivyoeleza hapa juu, kutokea kwa adui huyu hatari zake. Kimataifa, ukuaji wa uchumi haukuwa wa kuridhisha sana na uvamizi wa nzige na janga la virusi vya Corona. ambaye amesababisha vifo vingi na madhara makubwa ambapo kwa kadiri ulikua kwa asilimia 3.5. Hii ilichangiwa ya kiuchumi duniani kwa kiwango ambacho bado na kupungua kwa shughuli za utengenezaji wa bidhaa Kama biashara, hatukusazwa na changamoto zilizoathiri hakijabainika kutaathiri pakubwa mipango yetu. Hata katika na kutotabirika kwa biashara na siasa za dunia hasa sekta hii. Tulikumbana na mwaka mgumu ulioambatana nyakati ngumu zaidi, fursa hujitokeza. Tutakuwa macho kutokana na mzozo kati ya Marekani na Uchina. Kujiondoa na mabadiliko makubwa katika muundo wa biashara kuzitambua. kwa Uingereza kutoka Umoja wa Ulaya pia kulichangia yetu ambayo tunatarajia yataweka msingi wa ukuaji siku kutotabirika huku ambako kulipunguza kasi ya ukuaji wa Mipango yetu ya hivi karibuni zaidi itakuwa kuendelea uchumi wa dunia. kuongeza nguvu msingi wa biashara thabiti itakayodumu Fursa ya sekta ya bima kuenea kwa karne nyingine, na hilo litakoleza sifa zetu kama Uendeshaji shughuli zaidi imo katika ukuaji wa bima biashara inayotimiza ahadi zake. 2019 Statements and Financial Report Annual Nchini Kenya, sekta ya utoaji bima ilikabiliwa na uhaba ya muda mrefu, sambamba na wa pesa kutokana na watu binafsi, biashara ndogo na za bima ya kawaida ambayo kwa Kukumbatiwa kwa uwekaji bima wastani kutoweza kupata mikopo kufuatia sheria iliyoweka sasa inahusisha zaidi ya nusu Sawa na ilivyo katika maeneo mengine Afrika kusini mwa kikomo kwenye viwango vya riba. Shughuli za kibiashara ya malipo yote ya bima. Hii jangwa la Sahara, kiwango cha chini cha watu kujiwekea ziliathirika kote na kulisababisha watu kufutwa kazi na bima imekuwa changamoto kubwa. Nchini Kenya, bado uzalishaji kushuka. inahitaji uvumbuzi na ubunifu ni asilimia 3 pekee ya watu waliojiwekea bima. Kiwango katika vitengo vya bima za hiki bila shaka kipo chini sana ya kiwango kinachohitajika Wataalamu katika sekta ya kifedha mara kwa mara kipindi kirefu kama vile Malipo kufanikisha sekta ya bima inayonawiri. Hali hii hata hivyo walionya kwamba kudhibitiwa kwa riba hakungesababisha ya Uzeeni, Bima ya Maisha, Bima inatoa fursa kwetu kuanzisha huduma mbalimbali na kutolewa zaidi kwa mikopo. ya Maisha ya kuwekwa na kundi, miundo ya usambazaji inayowaridhisha wateja watarajiwa. Bima ya Mikopo ya kundi, Bima Sehemu kubwa ya bima ambayo watu wamejiwekea ni Madhara yaliyotokana na kuwekwa kikomo kwenye bima ya kawaida. Hata hivyo, inatarajiwa kwamba ukuaji viwango vya riba yaliathiri sekta ya bima, kwa kuwafanya ya Malipomwaka na Bima ya wa uchumi utachochea utachangia watu zaidi kujiwekea Uwekezaji. 39 40 Annual Report and Financial Statements 2019 wateja hasarakubwa. watoaji bimana umewasababishia sekta hii,ambapo kuwa tatizokwa umeendelea ulaghai ambao kukabiliana na ya bimaitaweza teknolojia, sekta Kwa kukumbatia wetu Viongozi kama Blockchain naMtandao kwa KilaKifaa maarufu vile mfumowenye msingiwa sarafu zakidijitali maarufu katika soko labima. Uvumbuzi wa kiteknolojia kama imo katika kutumiateknolojia kufikiamaeneomapya Fursa kubwa zaidikatika kukuza biashara hata hivyo kuchangia watu zaidikujiwekea bima. bima naainambalimbalizazilizopo kunatarajiwa katika sekta hiipamojanaserikali kuhusuumuhimu wa Kadhalika, kutolewa kwa uhamasishozaidi nawadau fursa kwa nzuri sekta hiiya bima. Watu wa kipato chachininiwengi katika jamiinani mfano bimaya kuangazia watu wa mapato ya chini. kuangazia maeneoambayo hayajaangaziwa sanakwa Fursa nyingine zakuenezazaidi utoaji bima ni Malipomwaka naBimaya Uwekezaji. kuwekwa nakundi,Bimaya Mikopo ya kundi,Bimaya Malipo ya Uzeeni, Bimaya Maisha,Bimaya Maishaya katika vitengo vya bimazakipindikirefu kama vile malipo yote ya bima. Hiiinahitaji uvumbuzi naubunifu kawaida ambayo kwa sasainahusisha zaidiya nusu ya wa bimaya muda mrefu, sambambanabima ya Fursa ya sekta ya bimakueneazaidiimokatika ukuaji pia lawatu kujiwekea bima. mapato ya wastani kuongezeka, kutatokea ongezeko bima. Mataifa yanavyoimarika kiuchuminawatu wa Taarifa Ya Mwenyekiti maelezo mengikuhusuwateja, baadhizikiwekwa nje sekta inayohusika nakushughulikia taarifa nyingi na wa data nainatarajiwa sekta ya kuathiri bimakwani ni hiiinalengaSheria kudhibitiukusanyaji naushughulikiaji ilipitishwa nakuidhinishwa Kenyatta. naRais Uhuru Muhimu zaidiilikuwa ya Sheria Kuhifadhi Data ambayo mazingira ya kibiashara. – yote yakiangazia kuweka usawa nahakikwenye mwongozo mpya, nakanuni zilizokuwepo kubadilishwa ya bimamwaka huo, ambapo kulitolewa na sheria Mabadiliko ya yaliendelea sekta kisheria kuathiri Mabadiliko ya kisheria kupunguza uwezekano wa watu kufanya ulaghai. Bima ya Magari inawezekana kubadilishanataarifa, na wahudumu wote kwa mfano Mfumowa Hazinadata ya kwa binadamu, kupitiamikakati inayokumbatiwa na na wateja hasara kubwa. Kupitia kupunguzakuhusika kwa sekta hii,ambapoumewasababishia watoaji bima kukabiliana naulaghaiambaoumeendeleakuwa tatizo Kwa kukumbatia teknolojia, sekta ya bima itaweza ubora wakuimarisha hudumaanayopokea mteja. kidijitali yanatoa njia mbadala ya kutoa huduma na pia huduma zagharama ya chini. Mabadiliko haya ya kupunguza gharama nakuwezesha kutolewa kwa kwenye sekta hii. Hii ni kupitia kurahisisha utendakazi, kama of Internet Things, unafunguafursa mpya Hali Kenya haitakuwa tofauti. sekta ya bima dunianinauchumiwa duniakwa jumla. ndiyo inayotarajiwa kuwakubwa naathari zaidikwa kiwango chabiashara dunianikitakuwa chinisana. Hii mengi kufunga shughuli nyingi. Hii ina maanakwamba pakubwa nakupunguakwa safari zandegenamataifa Ukuaji wa uchumidunianiunatarajiwa kuathiriwa bado haijabainika lakinibilashaka itakuwa kubwa. la Covid-19. kamiliAthari kwenye uchumi wa dunia yenye kwani tahadhari ulimwengu unakabiliwa najanga Tukisonga mbele, mustakabali wa 2020niwa matumaini sekta zabimakatika Jumuiya ya Afrika Mashariki. badoinaandaliwa,Mashariki nainatarajiwa kuoanisha Katika ngazi ya kanda, ya Sheria Bimaya Afrika pia katika sekta hii. nidhamu katika sekta hii jambo litakaloongeza uaminifu serikali. Mabadiliko haya yanatarajiwa kuongeza taarifa zamalipoya adanamalipoya madai kwa ya bimakuzuiaulaghainakampuni zabimakuwasilisha malipo ya bimakutumwa mojakwa mojakwa kampuni ya bimaitakumbwa na matatizo ya kifedha. Inahitaji inalenga kuwalinda waliojiwekea bimaiwapo kampuni 2019 ilianzakutekelezwa. Miongonimwa mengine, Katika mwaka huo, ya Sheria Bima(Marekebisho) ya maagizo ya hiyo. sheria ya kampuni yetu. Kama biashara, tumejiandaakufuata Viongozi wetu

Hata hivyo tunasalia kuwa na matumaini na tunaamini kwao ambapo hatimaye tumevuka hatua muhimu na Sasa, tushikane pamoja sote na tutimize ahadi yetu kwa kwamba juhudi za kimataifa za kukabiliana na janga hili sasa tunaanza kuona mabadiliko mazuri. Mabadiliko wateja wetu. zitazaa matunda katika kipindi kifupi au cha wastani, na haya hayangewezekana bila kujitolea kwa wasimamizi kwamba uchumi wa dunia utajikwamua muda si mrefu. na wafanyakazi chini ya uongozi wa Afisa Mkuu Mtendaji ASANTENI wa Kundi, Dkt. Patrick Tumbo ambaye amekuwa kiongozi Kama biashara, tunaamini kwamba tutahimili mawimbi na mzuri katika yote. Shukrani za kipekee pia kwa wenyehisa kujikwamua dhoruba itakapopita. na washirika wetu wa kibiashara waliotuunga mkono tulipohitaji kubadilisha muundo wa kampuni kuiweka sawa Dkt. John P. N. Simba, EGH, MBS, OGW Hitimisho kutumia vyema fursa zinazoibuka. Shukrani zetu pia ziifikie Hatimaye, ningependa kutoa shukrani zangu kwa Bodi ya Mamlaka ya Usimamizi wa Bima (IRA) kwa kujitolea kwao Wakurugenzi kwa muda wao na juhudi zao kwa biashara kuhakikisha usawa na haki katika sekta hii. hii katika kipindi kigumu tulichopitia. Ni kupitia kujitolea Mwenyekiti Annual Report and Financial Statements 2019 Statements and Financial Report Annual

41 42 Annual Report and Financial Statements 2019 NEEDS A PROMISE EVERY value. better shareholder improvement for have roomfor but westill across theboard, performance with notable performed well, business also The general Keeper Leadership Our Dr. PatrickTumbo, GroupCEO,Sanlam Our Leadership GCEO’s statement

Operating environment We continued marshalling resources in re-orienting the A change in regulator-prescribed interest rate risk margin The year 2019 was a mixed bag for Sanlam Kenya PLC. It business in line with changing customer experience needs, from 20% to 10% contributed additional operating margins was marked by a challenging operating environment on the listening to them more, and acting expeditiously in claims to the bottom line. The Life Business’ solvency stood at 168 back of muted sectoral growth, increased cases of fraud settlement. per cent, an improvement from the previous year. across the industry, heightened competition and regulatory The performance changes. 2019 Performance The performance especially the growth in Gross Written especially the growth in Gross Written Gross written premiums for our General Insurance business Premiums was also positively impacted with the continued Premiums was also Nevertheless, the year marked the start of Sanlam’s grew by 30 per cent compared to the previous year. This support of our business partners and in particular the positively impacted recovery, getting back to profitability following the losses revenue growth was supported by improved investment brokers, agents and the banks and our direct sales teams. with the continued support of our we incurred in 2018 as a result of a series of extraordinary performance. As at the end of the year, our general business partners events. We are now starting to see the fruits of the insurance business was solvent, and going forward, we Outlook for 2020 and in particular the turnaround strategy that the business put in place at the expect the business to become more robust. The year 2020 will not be easy for any business, and we brokers, agents and the banks and our beginning of the year. are no exception. Our recovery trajectory will take a hit from direct sales teams. Our Life business recorded a complete turnaround with the impact of the COVID-19 pandemic that has disrupted At the macro level, the Kenyan economy recorded lower earnings after-tax going back to profitability. New business businesses across the world. It has led to a marked decline levels of economic growth, averaging 5.4% for the first pipeline reflected the continued efforts towards increasing in global growth projections which in turn is expected three quarters of 2019, compared to an average of 6.0% our clients’ footprint. Claims on the other hand increased as to impact businesses. In Kenya for instance, growth is in a similar period in 2018.This was mainly driven by a the business assumed a more prudent posture in claims projected to be severely dampened to 1 percent, compared slowdown in agricultural activities and decreased output in provisioning, while taking into consideration the increasing to earlier projections of 5.6 percent for 2020. This will of the transport sector. importance of ‘Treating Customers Fairly’. course cascade down to all the sectors of the economy. The year 2020 will not be easy for any business, and we are At the same time, the yield curve declined in the first ten Despite these unexpected circumstances, implementation no exception. Our months of the year impacting our investments. The trend of our business growth strategy remains on course, with recovery trajectory 2019 Statements and Financial Report Annual will take a hit from however changed towards the end of the year with the Some of the strategic initiatives a focus on sustainably growing the contribution of our the impact of the repeal of the interest rates cap in November 2019. The and partnerships that we invested insurance business to Group revenues, while enhancing COVID-19 pandemic increase in yields is expected to be gradual across the yield our asset management business. This is expected to that has disrupted in for our General and Life businesses across the curve but more pronounced on the short end of the curve. business lines during 2019, which sustainably grow shareholder value. world.

Whereas the operating environment was generally we intend to solidify this year, Some of the strategic initiatives and partnerships that we challenging, we managed to return the group to full- are expected to begin bearing invested in for our General and Life business lines during year profitability during the year. This was underpinned fruit into the future. For instance, 2019, which we intend to solidify this year, are expected to by execution of our corporate turnaround strategy that our general insurance business begin bearing fruit into the future. For instance, our general mainly focused on leveraging operational efficiencies while has leveraged on Sanlam Group’s insurance business has leveraged on Sanlam Group’s maintaining laser-focus on our clients. Performance during proven competencies in running proven competencies in running profitable medial insurance the year was driven by robust growth across our insurance books across Africa. This was in addition to restructuring subsidiaries, with a significant rise in revenues recorded. profitable medial insurance books reinsurance agreements with a view to enhancing capacity across Africa. while improving underwriting results of the medical book. 43 44 Annual Report and Financial Statements 2019 experience. improve ourclient innovative effortsto ingredient ofour remains akey the CustomerFairly market. Treating of theKenyan distinct needs tailored tothe solutions thatare suite offinancial a comprehensive continue providing ensure thatwe and processesto innovating products consistently proposition by customer value enhancing the on continually Our priorityis a comprehensive suite offinancialsolutions that are and processes to ensure thatwe continue providing value proposition by consistently innovating products isoncontinually enhancingthecustomerOur priority whileexploring emergingpartners business leads. to sustainably grow ourclientfootprint through current aggressively promoting existing mobile-basedproducts point for thebusiness in2020, dedicatingefforts towards leveraged oninformation technologies willremain afocal solutions to customers. Process andproduct innovation with businessanddiversifying partners ourinsurance The focus isto continue strengthening engagements Our Leadership GCEO’s statement at thetop ofouragendainefforts to reach theunder- way to increase ourfootprint, withtheuseoftechnology As abusiness, we willcontinue innovating onthebest with alllaws andcodesofbusiness bestpractice. corporate citizen. The business willcontinue complying to continuously improve itsstanding asaresponsible a focal pointfor thebusiness inallitsdealingsasitseeks At thesametime, goodgovernance practices willremain of ourinnovative efforts to improve ourclientexperience. Treating theCustomer Fairly remains akey ingredient tailored to thedistinctneeds oftheKenyan market. Group ChiefExecutive Officer Dr.Patrick Tumbo customers. other’s competencies inour endeavor to reach more like-minded institutionsthatwillallow ustap into each markets.served We with willalsoenhancepartnerships Our Leadership GCEO’s statement We Treat our Customers Fairly.

Our Life business recorded a complete turnaround with earnings after-tax going back to profitability. New business pipeline reflected the continued efforts towards increasing our clients’ footprint. Claims on the other hand increased as the business assumed Annual Report and Financial Statements 2019 Statements and Financial Report Annual a more prudent posture in claims provisioning, while taking into consideration the increasing importance EVERY of ‘Treating Customers PROMISE Fairly’. NEEDS A Keeper

45 46 Annual Report and Financial Statements 2019 NEEDS A PROMISE EVERY wateja wetu. kuwaangazia vyema zetu hukutukiendelea uendeshaji washughuli ulioangazia kulainisha wetu wamabadiliko utekelezaji wamkakati Hii ilichangiwana faida kwamwakahuo. mwishowe inaandikisha kuhakikisha kampuni magumu, tulifanikiwa jumla yalikuwa ya kibiasharakwa Ingawa mazingira Keeper wetu Viongozi Dkt. PatrickTumbo, Mkurugenzimkuu wa kundi,Sanlam Viongozi wetu Taarifa ya Mkurugenzi Mkuu wa Kundi

Mazingira ya kibiashara kuwaangazia vyema wateja wetu. Matokeo katika mwaka ushuru. Mfumo mpya wa kufuatilia biashara ulidhihirisha Mwaka 2019 ulikuwa na mabaya na mema kwa Sanlam huo yaliongozwa na ukuaji mkubwa katika kampuni zetu kuendelea kwetu kuongeza juhudi katika kuongeza wateja Kenya PLC. Ulikuwa ni mwaka wenye mazingira ya tanzu za bima, ambapo ongezeko kubwa la mapato wetu. Madai ya malipo pia yaliongezeka huku kampuni yetu kibiashara yenye changamoto nyingi kutokana na lilishuhudiwa. ikikumbatia msimamo wa busara katika kutenga pesa za kupungua kwa kasi ya ukuaji katika sekta hii, ongezeko la malipo ya madai ya bima. Tulifanya hivi kwa kutilia maanani Jumla ya visa vya ulaghai katika sekta hii, ongezeko la ushindani na Tuliendelea kuweka pamoja rasilimali zetu katika kuipa umuhimu wa ‘Kuwashughulikia Wateja kwa Haki’. malipo ya bima mabadiliko ya kisheria. biashara yetu mwelekeo mpya kuambatana na mahitaji tuliyopokea kwa ya kuboresha huduma kwa wateja, kuwasikiliza zaidi, na Mabadiliko katika kipimo cha kiwango cha hatari ya riba biashara yetu ya Bima ya Kawaida Hata hivyo, ni mwaka ulioashiria mwanzo wa kujikwamua kuharakisha malipo ya madai ya malipo ya bima. kinachohitajika kutoka kwa 20% hadi 10% yalichangia iliongezeka kwa Sanlam na kurejelea katika utengenezaji faida baada kuongezeka kwa kipimo cha uthabiti wa biashara yetu. kwa asilimia 30 ya hasara tuliyopata mwaka 2018 kutokana na matukio Matokeo ya 2019 Kipimo cha uwezo wa kulipa madeni kwa Biashara ya Bima ukilinganisha na mwaka mbalimbali. Sasa, tumeanza kuona matunda ya mkakati Jumla ya malipo ya bima tuliyopokea kwa biashara yetu ya ya Maisha kilikuwa asilimia 168, ambapo tuliimarika kutoka uliotangulia. wetu wa kubadilisha mambo ambao tulianza kuutekeleza Bima ya Kawaida iliongezeka kwa asilimia 30 ukilinganisha mwaka uliotangulia. Mapato hayo mwanzoni mwa mwaka. na mwaka uliotangulia. Mapato hayo yalisaidiwa na matokeo yalisaidiwa na matokeo mazuri mazuri kutoka kwa uwekezaji. Kufikia mwisho wa mwaka Matokeo, na hasa ukuaji wa Jumla ya Malipo ya Bima, kutoka kwa Kwa jumla, uchumi wa Kenya uliandikisha kiwango cha chini huo, biashara yetu ya bima ya kawaida ilikuwa katika hali yalisaidiwa pia na usaidizi kutoka kwa washirika wetu uwekezaji. cha ukuaji, kwa kukua kwa kadiri ya 5.4% kwa robo tatu ambapo inaweza kulipa madeni yote, na tukisonga mbele, katika biashara na hasa mawakala au madalali, maajenti za kwanza za mwaka 2019, ukilinganisha na 6.0% katika tunatarajia biashara hiyo kuwa imara zaidi. na mabenki na wauzaji wetu wa moja kwa moja. kipindi sawa mwaka 2018. Hii sana ilitokana na kupungua kwa shughuli za kilimo na kupungua kwa uzalishaji katika Biashara yetu ya Bima ya Maisha ilibadilisha mkondo Mustakabali wa 2020 sekta ya uchukuzi. kabisa na ikaanza kuandikisha faida baada ya kutozwa Mwaka 2020 hautakuwa mzuri kwa biashara, na hatutasazwa. Mkondo wetu wa kujikwamua utaathiriwa na Annual Report and Financial Statements 2019 Statements and Financial Report Annual Katika kipindi hicho pia, mapato ya riba kutoka kwa hati Kama biashara, tutaendelea janga la COVID-19 ambalo limeathiri biashara kote duniani. za dhamana na hati nyingine za kifedha pia yalishuka Janga hilo limeathiri makadirio ya ukuaji wa uchumi duniani, kwa miezi kumi ya kwanza mwaka huo jambo lililoathiri kuvumbua njia bora zaidi za jambo litakaloathiri pia biashara. Kenya kwa mfano, ukuaji Mwaka 2020 uwekezaji wetu. Mtindo huu hata hivyo ulibadilika mwishoni kupanua biashara yetu, kwa unatarajiwa kushuka hadi asilimia 1, ukilinganisha na hautakuwa mzuri kwa biashara, na mwa mwaka baada ya kuondolewa kwa sheria iliyoweka kutumia teknolojia kama makadirio ya awali ya ukuaji wa asilimia 5.6 kwa mwaka hatutasazwa. Mkondo kikomo viwango vya riba Novemba 2019. Ongezeko la ajenda yetu kuu katika kufikia 2020. Hii bila shaka itaathiri sekta zote za uchumi. wetu wa kujikwamua mapato ya riba linatarajiwa kuendelea taratibu, lakini utaathiriwa na janga watu ambao hawajafikiwa na la COVID-19 ambalo litakuwa kubwa mwishoni mwa mwaka. huduma za bima. Tutaimarisha Licha ya matukio haya yasiyotarajiwa, utekelezaji wa mkakati limeathiri biashara wetu wa ukuaji wa biashara unaendelea, tukiangazia zaidi kote duniani. Ingawa mazingira ya kibiashara kwa jumla yalikuwa pia ushirikiano na mashirika kukuza mchango wa biashara ya bima kwa mapato ya magumu, tulifanikiwa kuhakikisha kampuni mwishowe yenye mtazamo sawa na wetu Kundi. Tutafanya hivyo tukiendelea kuangazia biashara ya inaandikisha faida kwa mwaka huo. Hii ilichangiwa na kutuwezesha kufaidi kutokana usimamizi wa mali. Hii inatarajiwa kuongeza thamani kwa utekelezaji wa mkakati wetu wa mabadiliko ulioangazia na nguvu za kila shirika katika wenyehisa kwa njia endelevu. kulainisha uendeshaji wa shughuli zetu huku tukiendelea kuwafikia wateja zaidi.

47 48 Annual Report and Financial Statements 2019 Taarifa yaMkurugenzi MkuuwaKundi utasalia kuwa kipaumbele kwa biashara yetu mwaka 2020, wa kuangazia shughulinahudumazenyewe zabima za bimatunazotoa kwa wateja. Uvumbuzi naubunifu washirika wetu wa kibiashara nakuongezaainaya huduma Lengo kuu ni kuendelea kuboresha wetu na ushirikiano faida kutoka kwa bimaya matibabu. kutoka kwa kampuni nyingine kwa lengo ya kuimarisha ni pamojanakubadilishamakubalianoya mzigowa bima kuendesha biashara yenye ya bimaya matibabu Afrika. Hii kawaida imetumiasifa zaustadi wa Kundi laSanlam katika matunda sikusijazo. Kwa mfano, biashara ya bimaya Bima ya Maisha katika mwaka 2019 inatarajiwa kuzaa tulioweka kwa biashara zetu zaBimaya Kawaida na Baadhi ya mikakati tuliyoanza kutekeleza na ushirikiano yetu katika shughulizake zote hukutukiendelea kujizatiti Kadhalika, zautawala desturi bora zitaongoza biashara wateja. muhimu katika juhudizetu hizizakuboresha hudumakwa Kenya. Kuwashughulikia Wateja kwa Hakikutasalia kiungo kutoa hudumazinazokidhi mahitaji ya kipekee ya soko la zetu zabimanashughulizetu kuhakikishatunaendelea wateja kwa kutumiauvumbuzi naubunifu katika bidhaa Kipaumbele chetu ni kuendelea kuboresha huduma wka mabadiliko sokoni. wateja. Hiinikupitiawashirika wa sasahukutukifuatilia zetu zakutolewa kwa njiaya simu ilikuongezaidadiya tukielekeza juhudizetu katika kutangaza bimanahuduma Mkurugenzi Mkuuwa kundi PatrickDkt. Tumbo wateja zaidi. kufaidi kutokana na nguvu za kila shirika katika kuwafikia mashirika yenye mtazamo sawa nawetu kutuwezesha na hudumazabima. Tutaimarisha na piaushirikiano ajenda yetu kuukatika kufikia watu ambaohawajafikiwa za kupanua biashara yetu, kwa kutumia teknolojia kama Kama biashara, tutaendelea kuvumbua njiabora zaidi namaadilimemayasheria kibiashara. kuwa kampuni ya kuwajibika. Biashara yetu itaendelea kutii We Treat our Customers Fairly.

Our Life business recorded a complete turnaround with earnings after-tax going back to profitability. New business pipeline reflected the continued efforts towards increasing our clients’ footprint. Claims on the other hand increased as the business assumed a more prudent posture in claims provisioning, while taking into 2019 Statements and Financial Report Annual consideration the increasing importance of ‘Treating Customers Fairly’.

EVERY PROMISE NEEDS A Keeper 49 50 Annual Report and Financial Statements 2019 Date: 15 June 2020 Group Company Secretary Emma Wachira By Order ofthe Board 10. 9. 8. 7. 6. 5. 4. 3. 2. 1. AGENDA questions inadvance ofthemeeting, asdetailed intheNotes below: able to register for, to theproposed accessinformation pertaining business, follow themeetinginmannerdetailed below andto vote electronically orby proxy. Shareholders may ask business detailed below. Due to ongoingGovernment ofKenya restrictions onpublic gatherings, shareholders willnotbeable to attend the Annual General Meetinginperson but willbe NOTICE ISHEREBY GIVENthatthe74th Annual General MeetingoftheCompany willbe held viaelectronic communication on Thursday 9thJuly 2020 at 11.00a.m. to conductthe Notice oftheAnnualGeneralMeeting

To transact any oftheChairfor other business withthepermission which48hours’ noticehadbeen given to theCompany Secretaryat theregistered office oftheCompany. Annual General Meetingandto theDirectors authorise to fixtheir remuneration. To note thattheauditors, PricewaterhouseCoopers LLPwillcontinue inoffice inaccordance withSection721(2)oftheCompanies Act No. 17 of2015 untiltheconclusionofnext To approve theDirectors’ remuneration. elected toasmembers continueoftheCommittee: serving In accordance withtheprovisions ofSection769 oftheCompanies Act, 2015 thefollowing Directors, beingmembers ofthe Audit, Actuarial, RiskandCompliance Committee be To electDirectors: To note thattheDirectors donotrecommend thepayment ofDividendfor thefinancial year ended31December2019. the Directors, the Auditor and theStatutory Actuary. To consider, andifapproved, adopttheBalanceSheetand Accounts for theyear ended31December2019 theGroup ChiefExecutive, togetheroftheChairman, withthe reports To theminutes confirm oftheprevious Annual General Meetingheldon 10th May 2019. To read theNoticeconvening themeeting. To table theproxies andnote thepresence ofaquorum. 6.3 MrJulius Magabe retires by rotation inaccordance withtheCompany’s of Articles Association andheoffers himselffor re-election. herself for re-election. 6.2 Ms Rose Agutu who was appointed a director on 10th May 2019 retires this being the first Annual General Meeting to be held since her appointment and being eligible, offers herself for re-election. 6.1 DrGrace Mwai whowas appointed adirector on10th May 2019 retires thisbeingthefirst Annual General Meeting to beheldsinceherappointmentandbeingeligible, offers e) Rose Agutu e) Foordd) Cornie c) Julius Magabe b) NeliusBezuidenhout a) Freda (ChairPerson) Britz Note: 1. In view of the ongoing Coronavirus 2019 (COVID-19) pandemic and the related Public Health Regulations and directives passed by the Government of Kenya precluding inter alia public gatherings, it is impracticable, as contemplated under section 280 of the Companies Act 2015, for Sanlam Kenya Plc to hold a physical Annual General Meeting (AGM) in the manner prescribed in its Articles of Association.

2. On 29 April 2020, the High Court of Kenya in Miscellaneous Application No. E680 of 2020, made under the provisions of Section 280 of the Companies Act, 2015 (the Companies Act) issued an order granting special dispensation to any company listed on the Nairobi Securities Exchange to convene and conduct a general meeting via electronic means subject to receipt of a No Objection from the Capital Markets Authority (CMA).

3. Sanlam Kenya Plc has convened and is conducting this virtual annual general meeting following receipt of a No Objection from the CMA.

4. Shareholders wishing to participate in the meeting should register for the AGM by dialling *483* 810# on their Safaricom mobile telephone or on their Airtel & Telkom mobile telephone and following the various prompts regarding the registration process. Shareholders will incur KES 1 on Safaricom and Telkom and KES 3 on Airtel for such registration. A Shareholder domiciled outside of Kenya can send an email to Image Registrars via HYPERLINK [email protected] providing their details i.e Name, Passport/ID no.and Mobile telephone number requesting to be registered. Image registrars shall register the shareholder and send them an email notification once registered.

5. In order to complete the registration process, shareholders will need to have their ID/Passport Numbers which were used to purchase their shares and their CDSC Account Number at hand. For assistance shareholders should dial the following helpline number: 0709 170 000 from 9:00 a.m. to 3:00 p.m. from Monday to Friday. Any shareholder outside Kenya should dial the helpline number to be assisted to register.

6. Registration for the AGM opens on 16th June 2020 at 9:00 am and will close on 6th July 2020 at 4.00p.m. Shareholders will not be able to register after 6th July 2020 at 4.00 p.m.

7. In accordance with Section 283 (2) (c) of the Companies Act, the following documents may be viewed on the Company’s website https://www.sanlam.com/kenya (i) a copy of this Notice and the proxy form; (ii) the Company’s audited financial statements for the year 2019; (iii) a copy of the High Court Order in Miscellaneous Application No. E680 of 2020; and (iv) a copy of the No Objection issued by the CMA.

8. A shareholder entitled to attend and vote at the meeting and who is unable to attend electronically is still entitled to appoint a proxy to attend and vote on his behalf. A proxy need not be a shareholder of the Company. To be valid, a proxy form, which is available from the Company’s head office or the Share Registrar’s offices, must be completed and signed by the shareholder or the duly authorised attorney of the shareholder and must be either emailed to [email protected] or lodged at the offices of the Company’s Share Registrar’s Image Registrars, 5th Floor, Absa Towers (formerly Barclays Plaza), Loita Street, Kenya so at to arrive not later than 11.00 a.m. on 7th July 2020. A proxy form is attached to this Notice and is available on the Company’s website via this link: https://www.sanlam.com/kenya. Physical copies of the proxy form are also available at the following address: Image Registrars Limited offices, 5th Floor Absa Towers (formerly Barclays Plaza), Loita Street.

9. Any person appointed as a proxy should submit his/her mobile telephone number to the Image Registrars no later than 7th July 2020 at 11.00a.m.. Any proxy registration that is rejected will be communicated to the shareholder concerned no later than 8th July 2020 to allow time to address any issues. Annual Report and Financial Statements 2019 Statements and Financial Report Annual 10. Shareholders wishing to raise any questions or clarifications regarding the AGM may do so by: a. sending their written questions by email to [email protected]; b. to the extent possible, physically delivering their written questions with a return email address to the registered office of the Company at Sanlam Tower, 12th Floor, Waiyaki Way, Westlands, Nairobi, or to Image Registrars offices at 5th floor, Absa Towers (formerly Barclays Plaza), Loita Street; or c. sending their written questions with a return email address by registered post to the Company’s address at P. O. Box 10493-00100 Nairobi.

11. Shareholders must provide their full details (full names, ID/Passport Number/CDSC Account Number) when submitting their questions and clarifications.

12. All questions and clarification must reach the Company on or before 6th July 2020 at 4.00 p.m. A full list of all questions received, and the answers thereto will be published on the Company’s website not later than 12 hours before the start of the general meeting and responses to the common questions will also be addressed at the AGM.

13. The AGM will be streamed live via a link which shall be provided to all shareholders who will have registered to participate in the AGM.

14. Duly registered shareholders and proxies will receive a short message service (SMS) prompt on their registered mobile numbers, 24 hours prior to the AGM acting as a reminder of the AGM. A second SMS prompt shall be sent one hour ahead of the AGM, reminding duly registered shareholders and proxies that the AGM will begin in an hours’ time and providing a link to the livestream.

15. Duly registered shareholders and proxies may follow the proceedings of the AGM using the livestream platform and may access the agenda. Duly registered shareholders and proxies may vote (when prompted by the chairman) via the USSD prompts or on the live-stream platform.

16. Results of the AGM shall be published within 24 hours following conclusion of the AGM. 51 52 Annual Report and Financial Statements 2019 Tarehe: 15 Juni 2020 Katibu wa Kampuni wa Kundi Emma Wachira Kwa Agizo laBodi 10. 9. 8. 7. 6. 5. 4. 3. 2. 1. ilivyoelezwa katika sehemu ya ‘Fahamu Kuwa’ hapachini: huo kwa njiailiyoelezwa hapachininapiakupiga kura kwa njiaya kielektroniki aukupitiamwakilishi. Wenyehisa wanaweza kuulizamaswali yao mapemakabla ya mkutano, kama Mkutano Mkuuwakuhudhuria KilaMwaka kwa kufika wenyewe mkutanoni, lakini wataweza kujisajili, kupata maelezokuhusu nahabari yanayopangwa kujadiliwa, kufuatiliamkutano tano asubuhi (11.00 a.m.) kutekeleza mambo yaliyoorodheshwa hapa chini. Kutokana na hatua ya Serikali ya Kenya kupiga mikusanyiko marufuku ya watu, wenyehisa hawataweza ILANI INATOLEWA HAPA kwamba Mkutano Mkuuwa KilaMwaka wa 74 wa Kampuni utafanyika kwa njiaya mawasiliano ya kielektroniki mnamo Alhamisi tarehe 9Julai 2020saa Ilani Ya MkutanoMkuuWa KilaMwaka

ya Kampuni. Kutekeleza shughuliyoyote ilenyingine ya kibiashara kwa idhiniya Mwenyekiti, ambapoilaninilazimaiwe imetolewa saa48awali kwa Katibu wa Kampuni katika afisiiliyosajiliwa kwa Mkutano Mkuuwa KilaMwaka ujaonakuwapa idhini Wakurugenzi kuamua malipoyao. Kutambua kuwa wakaguzi wa hesabu, PricewaterhouseCoopers LLPwataendelea kuhudumu kwa mujibu wa zaKampuni Kifungu721(2)chaSheria Na. 17 ya 2015 hadi kumalizika Kuidhinisha malipoya Wakurugenzi. naUtimizwajiHatari wa wachaguliwe Sheria kuendelea kuhudumu kama wanachama wa Kamati hiyo: Kwa mujibu wa maelezo katika Kifungu769 zaKampuni, chaSheria 2015, Wakurugenzi wafuatao, ambaoniwanachama wa Kamati ya Ukaguzi wa Hesabu, Utakwimu wa Bima, Kuwachagua Wakurugenzi: Kutambua kwamba Wakurugenzi hawapendekezi kulipwa kwa Mgawo wa Faida kwa mwaka wa kifedha uliomalizika 31Desemba2019. Wakurugenzi, Mkaguzi wa Hesabu, naMtakwimu wa Bima. Kutathmini, naiwapo itakubalika, kuidhinisha Taarifa zaKifedha zamwaka uliokamilika mnamo31Desemba2019 zaMwenyekiti, pamojanaripoti MkuuMtendaji wa Kundi, Kuthibitisha kumbukumbu zaMkutano Mkuuwa KilaMwaka uliopita ulioandaliwa tarehe 10 Mei2019. Kusoma Ilaniya kuitishwa kwa mkutano. Kuwasilisha majinaya wawakilishi nakuthibitishauwepo wa idadiya kutosha ya watu wanaohitajika kuandaamkutano. e) Rose Agutu e) Foordd) Cornie c) Julius Magabe b) NeliusBezuidenhout a) Freda (Mwenyekiti) Britz 6.3 BwJulius Magabe anastaafu kwa mzunguko zaKuundwa kuambatana naSheria kwa Kampuni naanajiwasilisha kutaka kuchaguliwa tena. kwa sababu anahitimu, amejiwasilisha kutaka kuchaguliwa tena. 6.2 BiRose Agutu aliyeteuliwa kuwa mnamo23 mkurugenzi 2019Aprili anastaafu nahuuukiwa ndioMkutano Mkuuwa kwanza wa KilaMwaka kuandaliwa tangu ateuliwe, na kwa sababu anahitimu, amejiwasilisha kutaka kuchaguliwa tena. 6.1 DktGrace Mwai aliyeteuliwa kuwamnamo23 mkurugenzi 2019Aprili anastaafu nahuuukiwa ndioMkutano Mkuuwa kwanza wa KilaMwaka kuandaliwa tangu ateuliwe, na Fahamu kuwa: 1. Kutokana na mlipuko unaoendelea wa Virusi vya Corona (COVID-19) na kanuni na maagizo ya Afya ya Umma ambayo yamepitishwa na Serikali ya Kenya ambapo miongoni mwa mengine mikusanyiko ya watu imepigwa marufuku, haiwezekani, kama ilivyokusudiwa kwenye kifungu cha 280 cha Sheria za Kampuni za mwaka 2015, kwa Sanlam Kenya Plc kuandaa Mkutano Mkuu wa Kila Mwaka (AGM) ambapo wenyehisha watahudhuria wenyewe kwa namna ilivyoelezwa kwenye Sheria za Kuundwa kwa Kampuni. 2. Mnamo 29 Aprili 2020, Mahakama Kuu ya Kenya katika ombi la mahakamani Nambari E680 la mwaka 2020, lililowasilishwa chini ya Kifungu 280 cha Sheria za Kampuni, 2015 (Sheria za Kampuni) ilitoa agizo lililotoa idhini maalum kwa kampuni yoyote iliyoorodheshwa katika Soko la Hisa la Nairobi kuitisha na kuandaa mkutano mkuu wa kila mwaka kwa njia za kielektroniki mradi tu kusiwe na pingamizi kutoka kwa Mamlaka ya Masoko ya Mtaji (CMA). 3. Sanlam Kenya Plc imeitisha na itaandaa mkutano huu mkuu wa kila mwaka kwa njia ya simu na video mtandaoni baada ya kutopokea pingamizi lolote kutoka kwa CMA. 4. Wenyehisa ambao wangependa kushiriki katika mkutano huu wa AGM wanafaa kujisajili kwa kupiga simu *483* 810# katika mtandao wa simu wa Safaricom, Airtel au Telkom na kufuata maelekezo watakayopewa kuhusu kujisajili. Wenyehisa watatozwa KES 1 kwenye mitandao ya Safaricom na Telkom na KES 3 katika Airtel kwa shughuli hiyo ya kujisajili. Mwenyehisa anayeishi nje ya Kenya anaweza kutuma barua pepe kwa Image Registrars kupitia KIUNGANISHI [email protected] na kutoa maelezo kumhusu, hususan Jina, Nambari ya Pasipoti/Kitambulisho na Nambari ya simu wakiomba kusajiliwa. Image Registrars watamsajili mwenyehisa huyo na kumtumia barua pepe ya uthibitisho pindi baada ya kusajiliwa. 5. Ili kukamilisha shughuli hiyo ya kujisajili, wenyehisa watahitajika kuwa na nambari ya kitambulisho/pasipoti waliyoitumia kununua hisa zao na nambari ya akaunti ya CDSC. Kwa usaidizi, wenyehisa wanafaa kupiga nambari hii ya simu ya msaada: 0709 170 000 kati ya saa tatu asubuhi (9:00 a.m.) na saa tisa mchana (3:00 p.m.) kuanzia Jumatatu hadi Ijumaa. Mwenyehisa yeyote aliye nje ya Kenya anafaa kupiga simu hiyo ya msaada ili kusaidiwa kujiandikisha. 6. Shughuli ya kujisajili kwa ajili ya AGM itaanza mnamo 16 Juni 2020 saa tatu asubuhi (9:00 a.m.) na kufungwa tarehe 6 Julai 2020 saa kumi alasiri (4:00 p.m). 7. Kuambatana na Kifungu 283 (2) (c) cha Sheria za Kampuni, stakabadhi zifuatazo zinaweza kutazamwa kwenye tovuti ya Kampuni katika https://www.sanlam.com/kenya (i) nakala ya Ilani hii na fomu ya uwakilishi; (ii) taarifa za kifedha za Kampuni zilizokaguliwa za mwaka 2019; (iii) nakala ya Agizo la Mahakama Kuu katika Ombi la Mahakamani Nambari E680 la 2020; na (iv) nakala ya Kutokuwa na Pingamizi iliyotolewa na CMA. 8. Mwanachama aliye na haki ya kuhudhuria mkutano huu na kupiga kura, ambaye atashindwa kuhudhuria mkutano huu kwa njia ya kielektroniki, bado ana haki ya kumteua mwakilishi wa kuhudhuria mkutano na kupiga kura kwa niaba yake. Mwakilishi huyo si lazima awe mwenyehisa wa Kampuni. Ili kukubalika, fomu ya uwakilishi, ambayo inapatikana katika afisi kuu za Kampuni au afisi za Msajili wa Hisa, inafaa kujazwa na kutiwa saini na mwenyehisa au wakili aliyeidhinishwa na mwenyehisa. Fomu hiyo inafaa kutumwa kwa njia ya barua pepe kwa [email protected] au itumwe kwa afisi za Msajili wa Hisa wa Kampuni ambaye ni Image Registrars, Ghorofa ya 5, jumba la Absa Towers (zamani ikiitwa Barclays Plaza), Loita Street, Kenya na ifike kabla ya saa tano asubuhi (11.00 a.m.) mnamo 7 Julai 2020. Fomu ya uwakilishi imeambatishwa kwenye Ilani hii na inapatikana pia katika tovuti ya Kampuni kupitia kiunganishi (link) hiki https://www.sanlam.com/kenya Nakala za karatasi za fomu za uwakilishi pia zinapatikana katika anwani ifuatayo: Image Registrars, Ghorofa ya 5, jumba la Absa Towers (zamani ikiitwa Barclays Plaza), Loita Street. 9. Mtu yeyote atakayeteuliwa kuwa mwakilishi anafaa kutuma nambari yake ya simu kwa Image Registrars kabla ya saa tano asubuhi (11.00 p.m.) 7 Julai 2020. Iwapo usajili wa mwakilishi utakataliwa, majibu yatatumwa kwa mwenyehisa mhusika kabla ya 8 Julai 2020 kumpa muda wa kutatua masuala yatakayokuwepo. 10. Wenyehisa wenye nia ya kuuliza maswali au ufafanuzi kuhusu AGM hii wanaweza kufanya hivyo kwa:

a. Kutuma maswali yao kwa maandishi kama barua pepe kwa [email protected];

b. Iwapo itawezekana, kuwasilisha maswali hayo yakiwa kwa njia ya maandishi na yakiwa na anwani ya barua pepe ya kupokelewa majibu kwa afisi zilizosajiliwa za Kampuni katika Sanlam 2019 Statements and Financial Report Annual Tower, Ghorofa ya 12, Waiyaki Way, Westlands, Nairobi, au kwa afisi za Image Registrars, Ghorofa ya 5, jumba la Absa Towers (zamani ikiitwa Barclays Plaza), Loita Street; au c. Kwa kutuma maswali yao kwa njia ya maandishi yakiwa na anwani ya barua pepe ya kupokelewa majibu kwa anwani ya posta ya Kampuni iliyosajiliwa ambayo ni S.L.P. 10493-00100 Nairobi.

11. Wenyehisa ni sharti waandike maelezo kamili kuwahusu (majina kamili, Nambari ya Kitambulisho/Nambari ya Pasipoti/Nambari ya Akaunti ya CDSC) wanapowasilisha maswali yao au maombi ya ufafanuzi. 12. Maswali yote na maombi ya ufafanuzi yanafaa kuifikia Kampuni mnamo au kabla ya 6 Julai 2020 saa kumi alasiri (4.00 p.m.). Orodha kamili ya maswali yaliyopokelewa na majibu yaliyotolewa itachapishwa katika tovuti ya Kampuni zaidi ya saa 12 kabla ya mkutano mkuu kuanza na majibu ya maswali yatakayoulizwa sana yataangaziwa pia katika AGM. 13. Matukio ya AGM yatapeperushwa moja kwa moja kupitia kiunganishi ambacho kitatumwa kwa wenyehisa wote watakaokuwa wamejiandikisha kushiriki katika AGM. 14. Wenyehisa na wawakilishi waliojiandikisha watapokea ujumbe mfupi (SMS) kwenye namba zao za simu zilizosajiliwa, saa 24 kabla ya AGM kufanyika kuwakumbusha kuhusu AGM. SMS ya pili itatumwa saa moja kabla ya AGM kufanyika, kuwakumbusha wenyehisa waliojisajili na wawakilishi kwamba AGM itaanza katika muda wa saa moja na ujumbe huo pia utakuwa na kiunganishi cha kufuatilia matukio moja kwa moja.. 15. Wenyehisa na wawakilishi waliosajiliwa wanaweza kufuatilia matukio ya AGM wakitumia kiunganishi cha matangazo ya moja kwa moja na wanaweza kupata pia ajenda. Wenyehisa na wawakilishi waliosajiliwa wanaweza kupiga kura (wakiombwa kufanya hivyo na mwenyekiti) kwa kutumia huduma ya USSD au huduma ya matangazo ya moja kwa moja. 16. Maelezo ya yaliyotokea katika AGM yatachapishwa katika kipindi cha saa 24 baada ya kukamilika kwa AGM.

53 54 Annual Report and Financial Statements 2019 NEEDS A PROMISE EVERY Keeper We have putupmechanisms, processes and Governance relations to resolve any possible conflicts of interest between our stakeholders and Corporate management. Corporate Governance Annual Report and Financial Statements 2019 Statements and Financial Report Annual

55 56 Annual Report and Financial Statements 2019 to carry out such work asdeemednecessary. outsuchwork to carry its subsidiaries. The Board advisor’s alsocallsuponindependentexpert where necessary Chief Executive Officer to oversee theday to day business operations oftheCompany and outtheaboveIn carrying responsibilities, theBoard delegates to theGroup itsauthority society. including customers andsuppliers andtheimpactofCompany’s operations to the of its employees, the need to forge and foster good relationships with diverse stakeholder’s the board taKShs theinterests cognisanceoftheimpactitsdecisionsinlongterm, objectives, aimedatpromoting andprotecting shareholder value, are achieved. Indoingso, for formulating theCompany’s policiesandstrategies that business andensuring According to theCompany’s Corporate Governance Guidelines, theBoard isresponsible The Board ofDirectors isresponsible for providing strategic leadership to theCompany. Board Leadership Board aswell astheCompany’s Charter of Articles Association. Code) standards andthestringent ofcorporategovernance prescribed intheGroup’s Code ofCorporate Governance Practices for Issuers to ofSecurities thePublic 2015 (the Act, 2015, theCapital Markets Act, Cap 485A,andtheCapital Markets (CMA) Authority and responsible decision making within the organization in compliance with the Companies The Group to ascribes its governance framework that provides a solid structure for effective growth invalue for thebenefit ofallourstakeholders. Company’s strategic andoperational objectives withafocus ofrevitalizing andaccelerating in thelongrun. The corporategovernance continue to principles beentrenched inthe maximises shareholder value, increases profitability andguarantees asustainable business Insurer inKenya whoremained focused onsoundcorporategovernance practices that (theGroup)its subsidiaries continued to implementitsstrategic visionofbeingaleading accountable by shareholders. In2018, theBoard ofDirectors ofSanlam Kenya PLCand of Sanlam Kenya PLC (Sanlam or the Company) and through which the Company is held Corporate Governance refers to the practices andprocedures thatgovern theleadership Statement ofCommitmentandComplianceonCorporate Governance Practices Board leadership &responsibilities Statement on corporate governance fortheyearended31December2019 Statement oncorporategovernance offer themselves for re-election. Inevery year, new directors whoare appointed the during Board ofDirectors retires by rotation every three years andthe directors are eligible to In accordance with theprovisions oftheCompany’s of Articles Association, athird ofthe Re-election to theBoard Kenya PLCon9May 2019. a) Annual Report: The following changes to the Board of Directors have taken place from the date of the last toChanges theBoard members oftheBoard ofDirectors: female directors thusbalancingtheboard composition. The table below shows thecurrent independent non-executive directors. Duringtheyear, theBoard additional welcomed two non- executive directors representing theinterests mainshareholders ofthetwo andthree theGroup ChiefExecutivethe Chairman, Officer (astheonly Executive Director), five In the year ended 2019 the Board composition was of ten comprised directors who are: Board CompositionandIndependence Dr Grace Mwai Rose Agutu Cornie Foord Nelius Bezuidenhout Freda Britz Susan Mudhune Rohan Patel Julius Nyakia Magabe Dr.Patrick Tumbo Dr. John P. N. Simba Name Rose Agutu andDrGrace Mwai were appointed asNon-Executive Directors ofSanlam

Management Compliance andProgram Banking Management and Operations, Accounting Management Actuarial, Financial Consulting and Accounting andManagement Banking andFinancial Services Development &Investment Management, Real Estate, Hotel Insurance andRiskManagement Insurance, Strategy, Management Corporate Governance andethics Legal, Strategy, Leadership, Experience &ProfessionalIndustry Director Independent &Non-Executive Director Independent &Non-Executive Non- Executive Director Non- Executive Director Director Independent &Non-Executive Non- Executive Director Non- Executive Director Non- Executive Director Executive Director Group ChiefExecutive Officer & Director &Non-ExecutiveBoard Chairman Role Statement on corporate governance for the year ended 31 December 2019 year to fill any casual vacancies, are subject to election by the shareholders during the In dispensing its duties, the Board requires each Director to observe a code of conduct Annual General Meeting and thereafter offer themselves for re-election every three years. aligned to his/her duties and responsibilities to the Group and shareholders, and act within limitations as defined in the Board Charter while observing principles of good corporate The following members of the Board, this being the first Annual General Meeting since governance. Each Director commits to uphold and promote effective and responsible use their appointment are eligible for re-election at the 2020 AGM: of resources and undertaKShs to act in good faith, with care and prudence in the best interest of the Group while exercising his/her power and executing his/her duties. a) Dr Grace Mwai b) Rose Agutu 2019 Board Attendance Register Name Meetings Attended Board Programme Dr. John P. N. Simba 4/4 Dr. Patrick Tumbo 4/4 The Company’s annual Board programme is designed to enable the Board to drive the Julius Nyakia Magabe 4/4 In dispensing its strategy forward across all elements of the company’s business model. The Board thus Rohan Patel 4/4 duties, the Board meets quarterly or more often, in accordance with the requirements of the business. The Susan Mudhune 4/4 requires each Director to observe a code Board’s work plan and calendar of meetings are prepared annually in advance. Adequate Freda Britz 4/4 of conduct aligned Nelius Bezuidenhout 4/4 notice is given for meetings. The agenda and board papers are circulated at least seven to his/her duties Cornie Foord 4/4 days before the meeting. and responsibilities Dr Grace Mwai 3/3 to the Group and Rose Agutu 3/3 shareholders, and Board Responsibilities act within limitations *Appointed to the Board on 23rd April 2019 as defined in the Board Charter while Sanlam Kenya Plc’s Articles of Association and the Board Charter enumerate responsibilities observing principles of the Directors which include strategy, capital and liquidity management, review and approval Board Effectiveness of good corporate of financial results, board administration and governance. governance. Division of Responsibilities Firstly, the boards responsibility in strategy involves monitoring the Company’s performance against clearly defined measures agreed between the board and management as well as The roles of the Board Chairman and the Group Chief Executive Officer are separate with 2019 Statements and Financial Report Annual the approval of major acquisitions and disposals and approvals of major capital projects. each having distinct and clearly spelt out responsibilities and duties. The Board also approves Group’s annual budget as recommended by the Audit Committee. The Chairman is responsible for the overall leadership of the Board and ensuring its Secondly, the board is also responsible for monitoring the capital and liquidity requirements effectiveness. The Chairman is also responsible for ensuring that the interests of the vis a vis the statutory requirements. The board is also charged with the review and approval of Company’s shareholders are safeguarded. The Chairman is also accountable to the Board half yearly and yearly financial results prior to subsequent dissemination to the shareholders. for leading the direction of the Company’s corporate and financial strategies and for the overall supervision of the policies governing the conduct of the business. In addition, the board is also charged with the responsibility of administration and governance in the following respects: approving company policies; setting the terms of reference for The Group Chief Executive Officer, an executive director, has together with the management board committees and determining the composition of board committees; conducting board team of the Company, the overall responsibility for the performance of the Group and evaluations; maintaining board succession; reviewing risk management and internal controls provides leadership to facilitate successful planning and execution of the objectives and amongst others. strategies agreed upon by the Board.

57 58 Annual Report and Financial Statements 2019 Board anypotential may haveinterests has been observed has beenobserved conflict ofinterest, which theyhaveor avoid situationsin those oftheGroup whether director that conflictwith statutory dutyto statutory are obligatedto indirect, realor which comesto their attention, perceived. The disclose tothe The Directors by theBoard. management asappropriate. the Board andits committees theNon-Executive and between Directors andsenior each meeting. The Company secretaryensures timely information disseminationwithin The board receives upto high-quality date information for review ingoodtimeaheadof Board Information meetings. transaction istabled onrelatedA report for party theBoard’s review attheQuarterly declaration ofany interest they may have inthebusiness underdiscussion. At every meeting oftheBoard, anagendaitem exists whichrequires members to make a discussion ordecisiononthematter. conflict ofinterest, obligates him/her to declare itand exclude himself/herself from any come to theattention ofaDirector thatamatter theGroup may concerning result ina areor related outatanarms’ carried parties length. An acknowledgement thatshouldit Group by hasbeenobserved theBoard. All business directors transactions withallparties, to avoid situationsinwhichthey have ormay have interests thatconflict withthoseofthe comes to their attention, whether direct or indirect, real or perceived. The statutory duty The Directors are obligated to discloseto theBoard any potential conflict ofinterest, which Director’s Conflict of Interest The Directors’ biographies abridged appearonpage30,31and32ofthis Annual Report. gender diversitysupported intheseniormanagementroles. a result ofmulti-cultural influences. andinternational TheBoard hasalsopromoted and and geographic representation to ensure board deliberations are as balancedandrich The Board appreciates thebenefits ofdiversity and takes cognisanceofgenderinclusion with varied experience alignedto andexpertise theneedsofbusiness. The Non-executive directors comefrom andprofessional broad industry backgrounds, Balance andDiversity Statement on corporate governance fortheyearended31December2019 Statement oncorporategovernance landscape. controls; sustainability: to thesociety. In2018 theBoard engaged inthefollowing activitiesinaneffort to promote tothe longterm, meettheexpectation ofstakeholders andinform theGroup’s commitment The Board places considerable emphasis on the need for the business to be sustainable for Sustainability the Board members oftheirobligations underthereferenced code. development andimplementation oftheCorporate Governance Code andregularly update Group Company are SecretaryinliaisonwiththeBoard responsible Chairman for the and theBoard. EachDirector hasdirect accessto theGroup Company Secretary. The Committees liaisonintheflow Management andistheprimary ofinformation between Kenya (ICPSK),plays role thecritical ofcoordinating theactivitiesofBoard andBoard The Group Company Secretary, a member of the Institute of Certified Secretaries of Group Company Secretary training inthefollowing areas: In pursuit of continuous professional development 2019, during the Directors received subsidiaries. developments emphasisonregulations thatdirectly withparticular impactSanlam andits The Board anditscommittees alsoreceive updates quarterly onlegal andregulatory at enabling thenew directors to fully take uptheirroles andexecute theirresponsibilities. programme onallareas ofbriefings ofthe Company’s business. Theinductionisaimed newEvery Director receives afullinductiononappointment. This inductionincludesafull Induction, Training andProfessional Development Reviewing theCompany’s regulatory strategy inthecontext ofthecurrent regulatory Monitoring complianceto theCompany’s standards ofbusiness conductandinternal Corporate Governance Training by theCentre for Corporate Governance Professionally linked continuous professional development programmes; Statement on corporate governance for the year ended 31 December 2019

Board Evaluation vi.Distinguishes the roles of the Chairman and Chief Executive Officer as separate roles; Board evaluation of both the board and its committees was conducted in the year 2019 The Board Charter also comprises a Work Plan setting out the schedule of Board meetings for the period January 1, 2019 to December 31, 2019 as prescribed in the Code. The and the main business to be dealt with at those meetings. Executive and non-executive directors participated in the evaluation process. The findings Board Policies in Place of the evaluation exercise are made to the Board. In the year 2019 the Group continued to adhere to the following policies as set up by the In summary the findings of the evaluation showed that the board functions effectively and board: its committees execute their mandates efficiently. i.Conflict of Interest Policy: This policy outlines the conduct of directors and management Shareholder Engagement and bars their engagement directly or indirectly to any business activity that competes The Board delights in opportunities to engage its shareholders. The annual general or conflicts with the Company’s interest or those of its clients unless fully disclosed. All meeting (AGM) presents such opportunity to the Board. At the AGM, the Chairman and Directors are required to disclose to the company secretary any real or perceived conflicts Group Chief executive explain the Company’s performance and answer any questions on appointment, annually and on an ongoing basis of any circumstance which may give from shareholders. All Directors attend the AGM. The Board also informs its shareholders rise to any actual or potential conflict of interest with their roles as Directors. of the performance of the Group through the issuance of Annual Reports and quarterly The Board delights ii.Code of Ethics: This outlines the ethical principles that are designed to prevent publications of its financial performance in the Daily Newspapers which are also available in opportunities employees and Directors from engaging in activities that would compromise the Group’s to engage its on the Group’s website www.sanlam.com/kenya. integrity, respect for diversity, impartiality or reputation. shareholders. The The advance issuance of the AGM Notice as provided for in the Kenyan Companies annual general iii.Gift Policy: This outlines the policy on receipt and issue of gifts by employees and is Act also gives shareholders an opportunity to place items on the Agenda by submitting meeting (AGM) designed to prevent the unfair granting of a gift or a favour. This is in line with the Bribery presents such questions and appoint proxies to represent them where they are unable to attend. Act No. 47 of 2016, as well as the Anti-Corruption and Economic Crimes Act, 2003. opportunity to the The Group also holds investor briefings regularly to promote engagement with key Board. At the AGM, iv.Financial Crime Combating Policy: This outlines the guidelines of combating financial stakeholders such as the Capital Markets Authority, the Nairobi Securities Exchange the Chairman and crime and unlawful conduct. This policy is in line with the provisions of the Proceeds of Group Chief executive amongst others. The purpose of such briefings is to inform the investor of relevant events- Crime and Anti-Money Laundering Act (POCAMLA) and the Capital Markets Authority explain the Company’s market influenced events and internal company events. Guidelines on the Prevention of Money Laundering and Terrorism Financing in the Capital performance and GOVERNANCE POLICIES Markets. In addition, the Company upholds a Zero Tolerance Approach which stipulates answer any questions zero tolerance to financial crimes and unlawful conduct. It further outlines consequences from shareholders. Board Charter All Directors attend of committing a financial crime and/or unlawful act. the AGM

The Board activities are regulated by the provisions of the Board Charter which is reviewed 2019 Statements and Financial Report Annual v.Procurement Policy: Sanlam maintains a procurement policy that governs the annually with the latest review being conducted on 18th February 2020. The Charter sets out the responsibilities of the Board, which include, amongst others: procurement of goods and services. This policy and related procedures are necessary to ensure that procurement is able to generate value in the acquisition of goods and services i.Sets out the frequency of board meetings to at least one meeting every three months. while satisfying the needs of the business. The policy ensures that the most appropriate The Board is however mandated to hold meetings of the board as frequently as the board considers appropriate; and effective controls are applied in the purchase of goods and services for the company’s needs. ii.Conduct of board meetings and procedures, and the nomination, appointment, induction, training, remuneration and evaluation of members of Board; vi.Whistle blowing policy: Sanlam maintains a whistle blowing policy (enshrined in the iii.Powers delegated to the Board committees; staff handbook) that provides a platform for employees to raise concerns regarding any iv.Policies and practices of the Board on matters of corporate governance, directors’ wrong doing, and the policy details how such concerns are addressed. declarations and conflict of interest; v.Distinguishes the responsibilities of the board from management; vii.Schedule of Offences: This defines the different instances of unlawful conduct and the respective sanctions

59 60 Annual Report and Financial Statements 2019 corporate governance to long-termsuccess inculcating aculture through thecreation The SanlamCodeof line withtheGroups valuable contributor of Professionalism, Vision andMission of therightculture Conduct continues wealth creationin to beinplaceand is gearedtowards is engrainedasa Customer centric At Sanlam,good in organisation. of theCompany Integrity, and Statements. communicates “Open” and “Closed” for periods trading initsshares to itsemployees and To ensure compliancewithprevention ofinsiderdealingrequirements, theCompany andthepublication period offinancial reporting results. information to themarket, andincludes, but isnotlimited to, theendofGroup’s season. precedingThe closedseasonistheperiod therelease ofany material, non-public influence over theGroup are notallowed to dealinthe Group’s shares theclosed during associates, orany ofthecompanies/businesses /organisations thatexercise significant Group’s policy isthatdirectors, management,staff members, orany oftheirrelatives and and theNairobi Exchange’s Securities regulations onprevention ofinsidertrading, the release ofmaterial non-public information. Incompliancewiththeabove mentioned Act insider information thatthey have oroughtto have, leadingupto inperiods particularly Markets Act, Cap 485Anotto abuse orplacethemselves undersuspicionofabusing As a listed entity, Directors and Employees of Sanlam are required under the Capital Insider Trading applied inalldealingswithcustomers, suppliers andotherstakeholders. the code of ethics and high standardsobserve of integrity. Further, these standards are standards ofbusiness practice. The Board, Managementandemployees are required to The Group conductsitsbusiness incompliancewithlegal andhighethical principles Groups Vision andMissionStatements. culture ofProfessionalism, Integrity, andCustomer wealth creation centric inlinewith the Sanlam Code ofConduct continues to beinplaceandisgeared towards inculcatinga successoftheCompanyterm through thecreation culture oftheright inorganisation. The At Sanlam, good corporate governance is engrained as a valuable contributor to long- Code ofConduct iv.We doitfor good. iii.We doitvery, well; very and ii.We are solidandsensible; i.We are andresolute; determined Way” inlinewiththeMissionand Vision andwhichisdriven by four key principles: The Group alsocontinues to inculcate andcascadethecorporateculture of “The Sanlam Statement on corporate governance fortheyearended31December2019 Statement oncorporategovernance Attendance 2019 Table 1: Audit, Actuarial, RiskandComplianceCommittee Membership and year 2019 were asfollows: The members oftheCommittee, and theirattendance to thefour meetingsheldinthe Attendance atMeetingsin2019 Audit, Actuarial, Riskand ComplianceCommittee The Board hasthree committees asfollows: decision made. discussions held at the Committee meeting and seeks the Board’s ratification for any Board. At every quarter, ofeachCommittee theChairperson presentsonthe areport Annual performance reviews ofeachCommittee are outandpresented carried to the and theCommittee’s mandate, anddutiesaswell processes. asworking authorities the powers delegated by theBoard to eachCommittee, membership oftheCommittee Each Board Committee isgoverned bywhichcontains provisions aCharter relating to provide theirexpertise. providersservice are on occasion invited to the Board as circumstances dictate to executive directors. Executive management and Group consultants, and experts several Board Committees abalancedmixofindependentandnon- comprising To assisttheBoard better discharge itsresponsibilities, theBoard hasconstituted Board Committees avert any incidencesofinsidertrading. Secretary always advisesthedirectors, managementandstaff oftheclosedseasonto no insiderdealingatSanlam Kenya for thefinancial year 2019. TheGroup Company directors oncase-by-case basis. To thebestofCompany’s knowledge, there was 1 2. 3. 4 Member Freda (ChairPerson) Britz Julius Magabe Cornie FoordCornie Nelius Bezuidenhout Directorship Status Independent &Non-Executive Non-Executive Non-Executive Director Non-Executive Director scheduled in2019 Number ofMeetings 4/4 4/4 4/4 4/4 Statement on corporate governance for the year ended 31 December 2019

To review the actual portfolio compositions against these benchmarks on a Mandate and Role of the Audit, Actuarial, Risk and Compliance Committee quarterly basis;

The Audit, Risk & Compliance Committee’s duties are based on six broad functions namely To review the performance of investments and make recommendations where the Internal Control, Risk Management & Compliance, Financial Reporting, Internal Audit, appropriate; External Audit, Compliance with laws and regulations; and Compliance with the Company’s To approve the acquisition and disposal of significant investments; Code of Conduct and ethical guidelines functions. To review the performance of the property investments

The Committee is responsible for the internal audit & risk management function by The Investment Committee has established an Investment Sub-Committee whose ensuring the Group’s management acts on audit and risk management reports; reviews mandate is to review the performance of the property portfolio on a monthly basis the performance and considers the independence of the external auditors; confirms that all and to report to the Investment Committee. regulatory compliance is considered in the preparation of financial statements; and invites a representative of the external auditors when reviewing the audited results. Nomination and Remuneration Committee The Company, The Committee assesses effectiveness of the Group’s internal control and risk management Table 3: Nomination and Remuneration Committee Membership and through its Registrar, Image Registrars & compliance framework. It reviews the impact of significant accounting and reporting Attendance 2019 Limited, files returns issues such as professional and regulatory pronouncements; meets the management and regularly in line with Member Directorship Status Number of Meetings both external & internal auditors to review the financial statements and results of the audit the requirement of scheduled in 2019 the Capital Markets process; and assesses if generally accepted accounting principles have been consistently 1 Susan Mudhune (Chairperson) Non-Executive Director 4/4 Act and the Nairobi applied within preparation of preliminary announcements & interim financial statements. 2. Julius Magabe Non-Executive Director 4/4 Securities Exchange nvestment Committee 3. Dr John PN Simba Non-Executive Director 4/4 listing regulations on shareholding and 4 Rohan Patel Non-Executive Director 4/4 other transactions Attendance at Meetings in 2019 related to shareholders. Table 2: Investment Committee Membership and Attendance 2019

Member Directorship Status Number of Meetings Annual Report and Financial Statements 2019 Statements and Financial Report Annual scheduled in 2019 1 Rohan Patel (Chairman) Non-Executive Director 4/4 2. Nelius Bezuidenhout Non-Executive Director 4/4 3. Julius Magabe Non-Executive Director 4/4 4 Dr John PN Simba Chairman of the Board 4/4

Mandate and Role of the Investment Committee

The primary mandates of the Investment Committee are: To establish appropriate investment guidelines for the Life & GeneralBusinesses;

To set investment benchmarks;

61 62 Annual Report and Financial Statements 2019 participate inany The Directorsare only paidsubject pension scheme to attendanceat quarterly basis. Both theannual fees andsitting the registerof allowances are the boardand/ not eligiblefor of theGroup’s or committee The directors’ but thesitting remuneration confirmed by are paidona fee isannual membership attendance . and donot allowance schemes. meetings Resources, NominationandRemuneration functions. Resources. The Committee’s dutiesare basedonthree broad functionsnamely theHuman The Committee monitors the policies and practices of the Group in relation to the Human Mandate andRole oftheNominationandRemuneration Committee consultation, professional andbusiness counselas andwhentheneedarises, in relationtothebusiness oftheGroup, theavailability ofthedirectorsfor adhoc thedemandsandrequirementsmade on thedirectors requirement whileconsidering remuneration are competitive, incentivises performance andreflectsregulatory procedures andpolicies. Ingeneral theremuneration policyensuresthatdirectors The BoardsRemuneration thatgovern policyoutlinestheprinciples theremuneration Board Remuneration related remuneration. considers any recommendations oftheGCEOregarding payment ofperformance for &thecriteria salaries payment ofbonuses to allstaff andmonitors itsoperation, policiesandprocedurestermination for executive directors andseniormanagers; their The Committee reviews theGroup’s remuneration, recruitment, retention, incentive and the various committees andindividualDirectors. for appointmentandre-selection to theBoard; evaluation oftheperformance oftheBoard, enable itto discharge itsresponsibilities; transparent procedure for selectingnew directors The Committee andadvisestheBoard ontheappropriate supports size andcompositionto and recommends amendmentsto theBoard for approval. with theorganisation’s strategy. Further itreviews theGroup’s HumanResource policies system enhancement&reviews, andcapacity inline andconditionsofservice theterms training anddevelopment policy for operational efficiency, ofperformance andreward optimum establishment; policiesandprocedures onstaff recruitment andselection,staff The Committee continually reviews theorganizational structure, core functionsand Remuneration Function NominationFunction HumanResource Function Statement on corporate governance fortheyearended31December2019 Statement oncorporategovernance shareholders aremaintainedby ImageRegistrars. and respondstocorrespondence directlyfromshareholders. The officialregistersof information. The Share Registrar, ImageRegistrar, isresponsible for theshare register The share register iskept attheoffices oftheGroup andacomputer database stores this viewing ontheGroup’s website, www.sanlam.com/kenya the Group together withrelevant information suchastheshare are price madeavailable for (2)dailyresults newspapers inatleasttwo ofnationalcirculation. The financialposition of at theannual general meeting; by publication ofthehalf-year results andtheyear-end The Board disclosesto shareholders thefinancialpositionofGroup three timesa year: Disclosure ofInformation to shareholders in Tablebelow: Details ofthedirectors’ shareholding in the Group asatDecember31,2019 are summarised regulations onshareholding andothertransactions related to shareholders. with therequirement oftheCapital Markets Act andtheNairobi Exchange Securities listing The Company, through itsRegistrar, ImageRegistrars Limited, files regularlyreturns inline Shareholding Report. 2017, theDirectors’ isprovided inPage Remuneration report pg83-85ofthisAnnual (General) (Amendment)(No. 2)Regulations,2017 whichwere gazetted inSeptember In compliancewiththedisclosurerequirementsunderCMACodeandCompanies Group’s remuneration schemes. are noteligible inany for ofthe pensionschememembershipanddonotparticipate Both theannual fees basis. andsittingallowance arepaidonaquarterly The Directors by theregisterofattendance.at theboardand/orcommitteemeetingsconfirmed The directors’ fee isannual but thesittingallowances areonlypaidsubjecttoattendance -value tothebusiness. thisGroup.of directorsneededtorun The directorsare, continuously expected toadd experiences andthecalibre andrelatedcompaniesbenchmarks, international industry 1. 2. Name (Alternate to Rohan Patel) BALOOBHAI CHHOTABHAI PATEL DR JOHNPNSIMBA No. of Shares 29,913,267 106,950 Statement on corporate governance for the year ended 31 December 2019

The Registers of Directors are kept at the head office of the Group and are available Top 10 Local Institution’ Shareholders as at December 31, 2018 for the perusal by shareholders on any working day during working hours. The Group publishes the annual report and audited accounts, which are sent out to all shareholders, Names Shares Percentages entitled to attend the annual general meeting. 1 HUBRIS HOLDINGS LIMITED 82,278,000 93.03%

The Group has an authorised share capital of Kenya Shillings Two Billion (KShs. 2B) 2 MAYFAIR INSURANCE COMPANY LTD 1,132,050 1.28% divided into 400 Million shares of Kenya Shillings Five (KShs 5/-) each. 144 Million shares 3 Standard Chartered Nominees A/C 9595 852,600 0.96% are currently issued. 4 KENYA REINSURANCE CORPORATION LIMITED 511,200 0.58% 5 THAMMO HOLDINGS LIMITED 457,949 0.52% Top Shareholders in the Group 6 APA INSURANCE LIMITED 440,057 0.50% The top 10 shareholders, based on the Group’s Register of Members, as at 31 December 7 CARBACID INVESTMENTS LIMITED 390,000 0.44% 2019 are shown in Tables here follows: 8 FIRST TEN LIMITED 320,400 0.36% Top Ten Local Individual Shareholders as at 31st December 2019 9 PUBLIC TRUSTEE ESTATE OF E.N.KAMAU 298,440 0.34% The Registers of RE:PT/646/79/613/SMA Names Shares Percentages Directors are kept 10 C.K.PATEL LIMITED 176,400 0.20% at the head office 1 Amarjeet Baloobhai Patel & 29,913,267 56.01% 11 OTHERS – 151 1,580,679 1.79% of the Group and Baloobhai Chhotabhai Patel are available for 2 PETER KINGORI MWANGI 1,673,570 3.13% 88,437,775 100.00% the perusal by shareholders on any 3 ANJAY VITHALBHAI PATEL 847,800 1.59% working day during 4 ANILKUMAR VIRPAR MALDE 452,550 0.85% Distribution of Shareholders working hours. The Group publishes the 5 SHERALI GULAMHUSSEIN HABIB PARPIA 399,000 0.75% The Capital Markets Act requires the Group to provide information on the distribution of annual report and 6 ADAN ABDULLA MOHAMED 389,250 0.73% the shareholders based on the number of shares owned and based on their nationality. audited accounts, This information is presented in the Tables here follows: which are sent out 7 PATEL DAHILAXMI MANGALBHAI 360,003 0.67% to all shareholders, 8 JOHN RICHARD GITHERE 300,000 0.56% Range Records Range Total Percentage entitled to attend the annual general 9 MUCHERU,ELIJAH MUCHERU 289,700 0.54% 1 1 to 500 932 153,558 .11 % meeting.

10 BID,KEVAL BID 275,000 0.51% 2 501 to 1000 271 207,187 .14% 2019 Statements and Financial Report Annual 11 OTHERS - 3409 18,511,465 34.66% 3 1001 to 5000 1,986 5,222,122 3.62 % 4 5001 to 10000 227 1,658,074 1.15% 5 10001 to 50000 277 6,027,806 4.19% 6 50001 to 100000 43 2,995,020 2.08% 7 100001 to 500000 49 10,527,746 7.31% 8 500001 to 1000000 3 2,211,600 1.54% 9 1000001 to 2000000000 4 114,996,887 79.86% 3,792 144,000,000 100.00%

63 64 Annual Report and Financial Statements 2019 matters. management to ensure thattheGroup optimisesits tax positionandcomplieswithalltax PwC are thegroup’s tax advisors. They were appointed by theBoard andliaisewith Tax Advisors Compliance Committee. The Company’s auditors internal directly report to theBoard Audit, Risk, Actuarial and Internal Auditors auditors andhave outthecompany’s carried auditfor 2019. board meetings. PricewaterhouseCoopers were appointed as thecompany’s external The auditor’s independently report and directly to the Board at the half year and end year and give their opiniononthereasonableness ofthefinancialstatements. balanced andfair view ofthefinancialpositionGroup, the auditorsexternal examine Whereas thedirectors are responsible for preparing theaccountsandfor presenting a External Auditors and procedures. Itsmeetingsare convened onamonthly basis. the statutory and regulatory framework, and guidelines and adherence to Group policies ExCo’s mandate andresponsibilityisimplementingtheBoard’s decisions, compliancewith (EXCO). This Committee theBoard andManagement. asalinkbetween serves The Group ChiefExecutive andSeniorManagementmakeup theExecutive Committee Executive Committee (ExCo) Noting Items b) Shareholders basedonNationality InvestorsForeign Individuals Local Institutions Local Investor Pool Statement on corporate governance fortheyearended31December2019 Statement oncorporategovernance Records 3,419 3,792 212 161 144,000,000 53,411,605 88,437,775 2,150,620 Shares Percentage 61.42% 100.00% 37.09% 1.49% Chairman Dr. John PNSimba into theforeseeablea goingconcern future. andthey haveconcern noreason to believe thattheGroup willnotbe anditssubsidiaries affairs oftheGroup’s positionandprospects. The Board thatthebusiness reports isagoing opinion ofthedirectors, afair, balancedandunderstandable assessment ofthestate ofthe 31 December2019. andauditedThe annual report financialstatements present, inthe The Board andaudited submitsthisannual report financialstatements for the year ending Going concern committee for discussion. maintenance. Monthly from reports Llyod Masika are tabled before the Investment sub- the managementofthesecommercial collectionofrent, properties, general repairs and and commercial properties. Llyod Masikamanagers are responsible theproperty for A significantcomponentoftheInvestments withintheGroup of comprises residential Llyod Masika board meetingswhere thehalfresults andtheendyear results are beingconsidered. policy liabilities. independently report anddirectlyThe statutory actuaries to theBoard at Companies respectively. They dothisby independently valuing theCompanies assetsand responsible for examining thefinancialsoundnessofGroup’s Life andGeneral Insurance Giles Waugh (ofDeloitte, South andZamara areAfrica) theGroup’s statutoryactuaries Statutory Actuary Group ChiefExecutive Officer Dr. Patrick Tumbo Statement on corporate governance for the year ended 31st December 2019 EVERY PROMISE NEEDS A Keeper

Our People

With 100 years experience in 2019 Statements and Financial Report Annual this field. Hard work and good service is a promise we don’t take for granted. Our staff are empowered to enable those that they serve. As the company evolves so does our people.

65 66 Annual Report and Financial Statements 2019 Premium improvingby improved itsrevenues 30% comparedtothe significantly in2019, with GrossWritten The inflation rate In2019 previous year. 5.8% The business 30% Statement on corporate governance fortheyearended31December2019 Statement oncorporategovernance while theemerging after-tax profits were KShs4.4 The profits before tax therefore were KShs23million of 9%from year. prior Management expenses closed at Kshs. 632m a growth 1,027m in2019 inlinewiththegrowth inproduction. Claims incurred grew from Kshs. 733min2018 to Kshs. resultsunderwriting ofthemedicalbook. increasing theCompany’s whileimproving capacity the restructured its reinsurance agreements with a view to books across Africa. Inadditionto this, thecompany competencies profitable inrunning medialinsurance companyPan-African with proven medical services management ofitsmedicaloperations to MCIcare, a In theyear underreview, theCompany outsourced the give to returns longerterm thebusiness. the growth cameatacostin2019 thatisexpected to significantly initsstrategic andassuch, partnerships compared to theprevious year. The business invested 2019, withGross Written Premium improving by 30% The business improved itsrevenues significantly in Earnings Sanlam GeneralBusinessReview KShs632 million 18.5%. The profits after tax KShs4 million The profits before tax KShs23 million 2018 inlinewiththegrowth inproduction. grew from KShs733min2018 to Ksh1,027m in growth of9%from prior year. Claimsincurred Management expenses closed atKshs. 632ma performance upto 18.5%. in Q42019, bringing thefullyear The NSE All Share index gained14.4% bringing thefullyearbringing performance upto 18.5%. The NSE All Share index gained 14.4% inQ42019, curve.the butyield curve moreendof pronounced ontheshort increase inyieldsisexpected to begradual across the repeal of the interest rate cap in November 2019. The year. The trend changedtowards endofyear withthe declined inthe firstThe yield curve ten months ofthe was slightly higherat5.8%compared to 5.7%in2018. 6.4% realized inQ32018. In2019, theoverall inflation Q3 2019 of5.1%was comparatively lower thanthe activities.and electricity Kenya’s economicgrowth in agricultural activitiesanddecreased outputintransport in 2018.Thissimilar period was driven by a slowdown in quarters of2019, compared to anaverage of6.0%ina economic growth, averaging 5.4%for thefirst three The Kenyan economy recorded lower levels of Operating environment in 2020. and isexpected to reflect animproved solvency stance million. The company was solvent attheendofyear

aggressively inorder to increase central to ourbusiness conduct. such managementwill maintain products willbepromoted more on information technologies will Treating Customer Fairly willgo hand inwithourefforts to continue beingafocal pointfor improve customer experience, The shareholders contribution and emerging business leads. the business in2020. Existing the Company’s clientfootprint governance dealingsremains product innovation leveraged return byreturn offering themarket engagements withbusiness cannot gounnoticedandas while upholdingthelaw and best business practice inall Outlook 2020 with bothexisting partners to continue strengthening a competitive clientvalue mobile technology-based its insurance solutionsto partners anddiversifyingpartners its focus onshareholder The Company’s focus is customers. Process and proposition. Statement on corporate governance for the year ended 31 December 2019 Sanlam Life insurance

Earnings Outlook 2020 Operating profits before tax from core operations improved to Kes 964 million compared to a prior year’s operating loss of Kes 853 million. The in-force book KShs964 million Management expects to continued to be profitable while a change in regulated Profits before tax improved to Kes interest rate risk margin from 20% to 10% contributed 964 million compared to a prior year’s continue remaining profitable some additional operating margins. loss of Kes 853 million in 2020 and will focus on New business strain impacts reflected the continued solidifying existing strategic efforts towards increasing Sanlam’s client footprint. Claims on the other hand increased as the business partnerships while seeking assumed a more prudent posturing in claims new partnering opportunities. provisioning, while taking into consideration the Treating Customer Fairly The business increasing importance of Treating Customers Fairly. The 20% implemented operating business implemented operating model changes that The in-force book continued will remain an important model changes had upfront implementation costs and though there are to be profitable while a change that had upfront ingredient of our innovation implementation costs long term benefits, the upfront cost implications were felt in regulated interest rate efforts aimed at improving and though there are in 2019. risk margin from 20% to 10% long term benefits, The earnings after tax therefore, for the period was KShs contributed some additional our client experience. Good the upfront cost 636 million, a significant improvement over a prior year operating margins. governance will remain a implications were felt loss of -KShs 627 million, signaling a complete turn- in 2019. around. Solvency at 168% was an improvement over focal point for the business prior year. as it seeks to continuously Operating environment KShs636 million improve its standing as a good The Kenyan economy recorded lower levels of economic The earnings after tax therefore, for corporate citizen. Compliance growth, averaging 5.4% for the first three quarters the period was KShs 636 million, with all regulation is equally of 2019, compared to an average of 6.0% in a similar a significant improvement over a 2019 Statements and Financial Report Annual period in 2018.This was driven by a slowdown in prior year loss of -KShs 627 million, important and the business agricultural activities and decreased output in transport signaling a complete turn-around. will continue to comply with and electricity activities. Kenya’s economic growth in Q3 2019 of 5.1% was comparatively lower than the 6.4% all laws and codes of best realized in Q3 2018. In 2019, the overall inflation was business practice. slightly higher at 5.8% compared to 5.7% in 2018. The shareholders contribution The yield curve declined in the first ten months of the 168% year. The trend changed towards end of year with the Solvency at cannot go unnoticed and repeal of the interest rate cap in November 2019. The 168% was an as such management increase in yields is expected to be gradual across the improvement yield curve but more pronounced on the short end of will maintain its focus on over prior year. the curve. shareholder return by offering The NSE All Share index gained 14.4% in Q4 2019, the market a competitive client bringing the full year performance up to 18.5%. value proposition.

67 68 Annual Report and Financial Statements 2019 Risk 2019 Statements and Financial Report Annual Management

69 70 Annual Report and Financial Statements 2019 The BoardmeetingsofGroupareheldaccording a)Governance structure The Group'sdoesnothedgeagainstany risks. performance by settingacceptable levels ofrisk. adverse effects ontheGroup's ofsuchrisks environment andseektominimisethepotential on theunpredictabilityofchangesinbusiness and implementedby themanagementandfocus management policiesaresetoutby theboard and market risks. The Group'soverall risk includingcredit,liquidity of financialrisks The Group'sactivitiesexpose itto avariety Risk management Risk Management Sanlam KenyaPlc management strategy disclosure thereof, in and policies, aswell effectiveness and as monitoring the accordance with the Group’s risk Responsible for best practice Board (CMA) and Nairobi Securities Exchange(NSE).(CMA) andNairobiSecurities requirements oftheCapitalMarkets Authority development, governance and corporate results, dividendpolicy, humanresource management, accountingpolicies, financial the Boardfocuses onGroupstrategy, capital the BoardofSanlamKenya Plc. The agendaof for submissionto and preparedtheirreports Boardsconcludetheirmeetings subsidiaries and BoardSub-committeesmeetafterthe are heldfirstandSanlamKenya Plc’s Board and BoardSub-committeesofthesubsidiaries efficiency oftheBoard. MeetingsoftheBoards are scheduledinamannerthatincreasesthe beginning ofeachyear. The Boardmeetings to aBoardcalendarthatisplannedatthe risks facedrisks by thebusiness Assists theSanlam Kenya Business LevelRisk Audit, Actuarialand Identifies andmanages Plc Board infulfilling its Sanlam KenyaPlc Risk Committee Management responsibilities Group businesses onbehalfof Sanlam KenyaPlcGroup the Board, to ensure thatthe businesses achieve optimal Responsible for overseeing Executive Committee Additional committees that may beestablished by a business to assisttheir Executive Committees in certain areas ofrisk in certain risk-adjusted returns Business Level Sanlam Kenya PlcBoard. information fromtheindividualbusinesses tothe depictstheflow management generically ofrisk policies andframeworks. The following diagram a business level, withinthelimitssetby these for mattersat alloperational andrisk-related the individualbusinesses take responsibility management policiesandframeworks while Sanlam Kenya PlcBoardsetstheGrouprisk business model. ofthisphilosophy, Interms the The Groupoperates withinadecentralised the Group issuesthroughout operational efficiencyandrisk for mattersaswell asmonitoring statutory The Boardofeachgroup company isresponsible Management Committees management approval by theSanlam Sanlam Group Risk co-ordinates reporting management policies management across Develops Group risk and guidelinesfor and improves risk Kenya PlcBoard, Management responsibilities the Group Risk Management (continued)

(a)Governance structure (continued) A number of other risk monitoring mechanisms are operating within the Group as part of the overall risk management structure. The most important of these are illustrated in the following table.

Other risk monitoring mechanisms

Asset and Liability Matching Capital Management Determines appropriate investment policies Reviews and oversees the management and guidelines for policyholder portfolios of the Group’s capital base where guarantees are provided

Compliance Group Risk Forum Non-listed Assets Facilitates management of compliance Aids co-ordination and transfer of knowledge The Audit Committee reviews and approves the through analysing of statutory and regulatory between businesses and the Group, and assists valuation of all unlisted assets in the Group for requirements, and monitoring implementation Group Risk Management in identifying risks recommendation to the Sanlam Kenya Plc Board and execution thereof requiring escalation to the Sanlam Kenya Plc Board

Actuarial Chief Financial Officer Monitors and reports on key risks affecting the Group Legal and Corporate Secretarial Ensures that sound financial practices are followed, life insurance operations. Determines capital Reviews and reports on corporate governance

adequate and accurate reporting occurs, and requirements of the life insurance operations and the practices and structures. Reports on applicable 2019 Statements and Financial Report Annual financial statement risk is minimised potential impact of strategic decisions thereon, by legal and compliance matters using appropriate modelling techniques

Sanlam Forensics Investment Committee IT Risk Management Investigates and reports on fraud and Determines and monitors appropriate Manages and reports Group-wide IT risks illegal behaviour in businesses investment strategies for policyholder solutions

Risk Officer Internal Audit Assists business management in their implementation of the Group risk Assists the Sanlam Kenya Plc Board and management by monitoring the management strategy, and to monitor the risk profile of the business adequacy and effectiveness of risk management in businesses

71 72 Annual Report and Financial Statements 2019 iii. ii. i. SRM isahigh-level over-arching approachtoensurethat: Definition (SRM) Sanlam Kenya PlcGroup Strategic RiskManagement below: summarised Strategic RiskManagementisbriefly and relatedcontingencies. The SanlamKenya PlcGroup existpriorities, acrosstheGroup, todealwithdisasters and horizontalrecovery abilities, consistentwithbusiness Business Continuity Policy ensuresthateffective vertical governance totheappropriate level.reported The Group key events andrisk risks inany business intheGroupare The aimoftheGroupEscalationPolicy istoensurethat Sanlam RiskManagementPolicies. that must alsoindicatetheextent ofcompliancewiththe Kenya aretabled managementreports PlcBoard,risk integration.and thedegree ofrisk Sanlam Atthequarterly due todifferent cost/benefitscenarios, complexity ofrisks the Groupdoes, however, frombusiness vary tobusiness businesses. oftheimplementationwithin The maturity Management andhave beenimplementedby all Group were developed Risk by SanlamGroupEnterprise The above policiesSRM,REP, BCPandITRMPpolicies vii. vi. v. iv. iii. ii. i. main policiesare: guidelines oftheBoardanditscommittees. Someofthe ofthepoliciesand aremanagedinterms All risks b) Group policiesandguidelines risk Risk Management(continued)

Group Investment Policy. Assets andLiabilitiesMatching(ALM)Policy; and (ICT) RiskManagementPolicy; Group Information andCommunication Technology Group BusinessContinuity Policy (BCP); Group RiskEscalationPolicy (REP); The GroupStrategic RiskManagement(SRM); Framework RiskManagement(ERM) The GroupEnterprise and corporate culture is fully supportive of, cultureisfullysupportive the and corporate Sufficient organisationalresources areappliedto, practices areinplacetomanage theserisks; and procedures policies, structures, Appropriate identified; achievement oftheGroup’s strategic goalsare whichcouldjeopardiseorenhance All risks i. aimed atmanagingthreeelements ofrisk: goals. The Group’s managementprocessis strategic risk prevent SanlamKenya Plcfrom achieving itsstrategic consequencesofbusiness activitiesthatcould uncertain Risk isinherentindoingbusiness, andincludesallofthe ii. i. of theAudit, RiskandComplianceCommittee). Actuarial, RiskManagerofthebusiness to the chairman Enterprise (fromthe role players shouldbereported towhomtherisk the andaccordinglytodetermine rare toalmostcertain), of insignificanttoextreme), likelihood (onascaleof ofrisk the businesses (onascale toassesstheimpactofrisk Escalation Policy (mentioned above). This policyguides Plc. Grouplevel, inaccordancewiththeGroupRisk areescalatedtotheSanlamKenyaOnly significantrisks management.their busin risk essandtoapplyappropriate businesses areresponsible for in theidentificationofrisks i.Applying adecentralised philosophy, inthattheindividual SRM isachieved by: Philosophy on Group Embedded return risk-adjusted Value. objective ofSRMistooptimisetheGroup’sThe primary Objective v. iv.

management toincreasetheprobability ofsuccess “offensive” function; focusing onactionstaken by ontheupsideasan Opportunity: managingrisk and describing itbothqualitativelyand describing andquantitatively. business iswillingtoacceptinpursuitofitsgoals, thata appetite,risk beingthedegree ofuncertainty defininganddocumentingthebusiness’sClearly new business; and onembeddedvalue/valuesensitivities onreturn of requirements, capitaladequacyrequirementsand measures suchas solvency“value long term atrisk”, Implementing maximum losslimits, by using such decisionsbeingimplemented. way to modellingtechniquesprior ofappropriate onGroupEmbedded return Value isconsideredby The impactofstrategic decisionsontherisk-adjusted in accordancewiththeforegoing; and The organisation’s areindeedbeingmanaged risks procedures andpractices; effective implementationofthesestructures, policies, with theaimofcontinuous managementandimprovement. actionandcommunication, deciding ontheappropriate evaluating againstestablished criteria, therisks risk identification process, identified, analysingtherisks framework for identification,establishing risk arisk Developing evaluation risk definingalogical criteria, Strategic organisational managementcontext: andrisk the business’s managementprocessandincludes: normal Each business hasadocumentedprocessthatlinksinto Process iii. ii.

• • • boundaries), boundaries), Risk managementcontext (settingofscopeand goals, strategies, capabilitiesandvalues), Organisational context (understandingthebusiness’s environment), andthreatsrelative tothebusinessopportunities Strategic context (definingthestrengths, weaknesses, mitigation ofactionsthatcangenerate losses; and “defensive” function; focusing ontheprevention or Hazard: onthedownside managingrisk asa range. performance thatfalls withinadefinedacceptable focusingwith risk, onachieving overall financial associated Uncertainty: managingtheuncertainty and decreasetheprobabilityoffailure. Risk Management (continued)

c) Risk types

The Group is exposed to the following main risks:

Risk type Description Potential significant impact Operational Operational risk is the risk that there is a loss as a result of inadequate or failed internal processes, people or systems and external events. All Group businesses Operational risk includes: Information and technology risk: the risk of obsolescence of infrastructure, deficiency in integration, failures/inadequacies in systems/ networks and the loss of accuracy, confidentiality, availability and integrity of data. Going concern/business continuity risk: the risk that inadequate processes, people, financial controls and resources exist to continue business in the foreseeable future. Legal risk: the risk that the Group will be exposed to contractual obligations which have not been provided for. Compliance risk: the risk of not complying with laws and regulations, as well as investment management mandates. Fraud risk: the risk of financial crime and unlawful conduct occurring within the Group.

General risks General Taxation Taxation risk is the risk of financial loss due to changes in tax legislation that result in the actual tax on shareholders’ fund earnings being All Group businesses higher than expected, with a corresponding reduction in return on Group Embedded Value; or the actual policyholder tax being higher than that assumed in the determination of premium rates and guaranteed policy benefits. Reputational Reputational risk is the risk that the actions of a business (e.g. the treatment of clients, employment equity and social responsibility) harm its All Group businesses reputation and brand. Legislation Legislation risk is the risk that unanticipated new acts or regulations will result in the need to change business practices that may lead to All Group businesses financial loss. Strategic Strategic risk is the risk that the Group’s strategy is inappropriate or that the Group is unable to implement its strategy. All Group businesses Annual Report and Financial Statements 2019 Statements and Financial Report Annual

73 74 Annual Report and Financial Statements 2019 Risk types(continued) Risk Management(continued)

Financial and Business (specific risks) Capital adequacy Insurance Liquidity Credit Market Risk type has beenassumedinthevaluation bases. Capital thatthere istherisk adequacy are risk insufficient assetsto provide for variations inactualfuture experience, worse thanthatwhich profile. Concentration risk: offinanciallossdue therisk to having written large of proportions business withpolicyholdersrisk ofthesame/similar liabilities. Expense risk: oflossdueto therisk actualexpense experience beingworse thanthat assumedinpremium rates andthevaluation ofpolicy Persistency risk: offinanciallossdue therisk to negative lapse, surrender andpaid-up experience. expected experienceofsolutions andvaluation usedinthepricing ofpolicy liabilities. risk:Underwriting that theactualexperience therisk relating to mortality, willdeviate andmedicalrisks disability negatively from the includes: Insurance risk or policy contracts. relating istherisk to risk thedifficulty/inabilityLiquidity to accessing/raising fundsto meetcommitmentsassociated withfinancialinstruments reinsurers thathave acceptable credit ratings. Reinsurance risk: withindividualreinsurers, concentration risk dueto thenature ofthereinsurance market andtherestricted range of toinstrument discharge itscontractual obligations. Credit includes: risk thatthegroup/companyCredit istherisk to afinancial risk willincurafinanciallossfrom orunwillingness theinability ofcounterparty Property risk: thatthevalue therisk ofinvestment willfluctuate properties asa result ofchangesintheenvironment. exchange rates. Foreign Exchange Risk: thatthefairThe risk value orfuture cashflows willfluctuate ofafinancialinstrument becauseofchangesin foreign thatmismatchlosseswillbeincurredrisks inrespect positionfollowing ofamatchedasset/liability changesininterest rates. Interest rate risk: thatthevalue willfluctuate therisk ofanunmatchedfinancialinstrument asa resultofchangesininterest rates andthe risk:Equity thatthefair therisk value ofcashflows willfluctuate prices. ofafinancial instrument as a resultofchangesinequity includes: Market risk thatthefair istherisk Market risk value orfuture cashflows willfluctuatemarket price. offinancialinstruments becauseofchangesin Description General insurance Life insurance General insurance Life insurance All Group businesses General insurance Life insurance General insurance Life insurance General insurance Life insurance Potential significantimpact Risk management (continued)

d) Risk management profile of the Group or any business units. The function also The head of each business unit is responsible for the supports business units within the Group to incorporate risk implementation of the policy in his or her respective Operational risk considerations into their agenda and all decision-making business and is accountable to the Group Chief Executive processes. and the Board of Sanlam Kenya Plc. Quarterly reports are The Group mitigates this risk through the strategic submitted by Group Forensic Services to the Group’s Audit e) Information and technology risk planning process, selection of experienced and technically Committee on the incidence of financial crime and unlawful competent staff with high ethical values, a comprehensive conduct in the Group and on measures taken to prevent, The Group Information and Communication Technology system of internal controls, internal audit, forensic and detect, investigate and deal with such conduct. compliance functions and other measures such as back-up risk management policies are authorised and ratified by the Group Executive Committee. These policies stipulate the facilities, contingency planning and insurance. The initiation h) Taxation risk of transactions and their administration is conducted based role of the Information Security manager and other persons with IT risk management roles. Furthermore, it provides a on the segregation of duties, designed to ensure the The risk is addressed through clear contracting to framework of IT risk management, the methods of reporting, correctness, completeness and validity of all transactions. ensure that policy contracts entitle policyholders to after- assessment and action, appropriate documentation and tax returns, where applicable. The Group’s internal tax management of all risk-related IT incidents that have resources monitor the impact of changes in tax legislation, The management of risks associated with human resources occurred, timing of communication and liaison with other and are involved in the development of new products. is addressed in the Corporate Governance Report. functions in the Group. External tax advice is obtained as required. The following functions assist in mitigating operational risk: f) Compliance risk The Group consults widely with tax consultants when 1. Internal audit Laws and regulations: considering new initiatives to identify tax impact. As much A board-approved internal audit charter governs internal The Group considers compliance with applicable laws, as possible, the Group policy is to negotiate contracts audit activity within the Group. A regular risk-focused industry regulations and codes an integral part of doing gross of tax. Overseas contracts are negotiated inclusive of review of internal control and risk management systems is business. The Group compliance function facilitates taxes and preference is given to parties in countries where carried out, and has unrestricted access to the Chairman the management of compliance through the analysis of Kenya has double taxation agreement. of the Audit Committee and the Sanlam Kenya Plc Board. statutory and regulatory requirements, and monitoring the The authority, resources, scope of work and effectiveness implementation and execution thereof. i) Reputational risk of the functions are reviewed regularly.

2. External audit g) Fraud risk Actions with a potential reputational impact are escalated 2019 Statements and Financial Report Annual The Group’s external auditors are PricewaterhouseCoopers. to the appropriate level of senior management. The The external auditors consider internal control relevant The Group recognises that financial crime and unlawful Audit committee and board of directors are involved as to the Group’s preparation and fair presentation of the conduct are in conflict with the principles of ethical required. Events with an industry-wide reputational impact financial statements in order to design audit procedures behaviour, as set out in the Group’ code of ethics, and are addressed through industry representative groups. that are appropriate in the circumstances and express an undermines the organisational integrity of the Group. The Quarterly reports on the client complaints and adverse independent opinion on the annual financial statements. financial crime combating policy for the Sanlam Kenya media mentions are submitted to the Executive Committee. Non-audit services rendered by the external auditors are Plc Group is designed to counter the threat of financial strictly governed by a Group policy in this regard. crime and unlawful conduct. A zero-tolerance approach is j) Strategic risk applied in combating financial crime and all offenders will 3. Enterprise Risk Management be prosecuted. The forensic services function at Group The Group’s governance structure and various monitoring The Enterprise Risk Management function performs an level oversees the prevention, detection and investigation tools in place ensure that any events that affect the annual review of the Group’s risk management processes. of incidents of unlawful conduct that are of such a nature achievement of the Group’s strategy are escalated and The purpose of this review is to continuously identify that they may have an impact on the Group. addressed at the earliest opportunity. The Board has no potential areas for improved risk management in line with tolerance for any breaches. developing international best practice and the changing risk

75 76 Annual Report and Financial Statements 2019 which are: various forums of withintheGroup, themostimportant Group strategy isaddressedonacontinuous basisat j) Strategic risk (continued) Risk management(continued) meetings during theyear; meetings during of the Group’s Board as well as at the scheduled Board discussed andevaluated atanannual strategic session

The Group’s strategic directionandsuccessis strategy; and businesses’ strategies arealignedwiththeoverall Group Executive CommitteeoftheGroup, whichensuresthatthe businesses presenttheirstrategic plansandbudgets tothe Group ChiefandtheExecutives ofthevarious

TheGroup’s Executive Committee, whichincludesthe As part oftheannual budgeting process,As part theGroup implemented. these meetingsandcorrective actionsareimmediately Group’s strategies. Any strategic issuesareidentifiedat among others, theachievement ofthebusinesses’ and Group businesses, meetsonaregularbasistodiscuss, Annual Report and Financial Statements 2019 Statements and Financial Report Annual our Financial Results 77 78 Annual Report and Financial Statements 2019 likelihood ofoccurrence, andtheresultant residual risk have theirpotential beenassessedconsidering impactand The Group’s are risks set outbelow. principal These risks Principal risks andmitigationstrategies year have period beenhighlighted onpage26. The key performance indicators oftheGroup over afive- (2018: lossbefore tax ofKShs. 2,129,186,000). The Group recorded aprofit before tax ofKShs. 550,086,000 The Group’s Performance (dormant). andChemChemiMineralLimited (dormant) Water Limited company (Sanlam Investments Limited), MaeProperties Limited), wholly owned former investment management wholly owned investment company (Sanlam Securities lifeof industrial insurance. The Group hasinterests ina Act (Chapter 487oftheLaws ofKenya), withtheexception insurance business asdefined short-term by theInsurance Insurance Limited, and ofalllong-term istheunderwriting Sanlam Life Insurance Limited andSanlam General oftheGroup, activity The principal through itssubsidiaries Principal activities Business Review Kenyan Companies Act, 2015. StandardsReporting (“IFRS”) and the requirements ofthe prepared inaccordance Financial withInternational andfinancialstatementsThe annual report have been the “Group”). the “Subsidiaries” (together andeachonea “Subsidiary”) Kenya Plc(the “Company”) (together anditssubsidiaries December 2019 thatdisclosesthestate ofaffairs ofSanlam and audited financialstatements for the year ended31 The directors are pleased to present the annual report ofthedirectorsReport assets. The key that impact the components of market risk fluctuations inasset values, liabilities, orincomefrom or exchange rates, orreal equity estate cause prices) thatmarket movementsThe risk (includingininterest 2.Market risk to beaffected by achangein any subsetoftheportfolio. will be. In addition, a more diversified is less likely portfolio smaller therelative abouttheexpected variability outcome the larger ofsimilarinsurance theportfolio contracts, the oftheexpectedvariability outcome. shows Experience that achieve a sufficiently large to population of risks reduce the acceptedrisks andwithineach ofthesecategories to strategiesunderwriting to diversify ofinsurance thetype The companieswithintheGroup have developed insurance from thelevel established usingstatistical techniques. value of claims and benefits from will vary year on year loss events are unpredictable, andtheactualnumber and claims andbenefits are greater thanestimated. Insurance This couldoccurbecausethefrequency orseverity of insurance liabilities. benefit payments, may exceed amountofthe thecarrying its insurance contracts isthattheactualclaimsand provisioning, thattheGroup risk faces theprincipal under ofprobabilityisappliedto and where pricing thetheory unpredictable. For ofinsurance aportfolio contracts insurance israndom contract, andtherefore thisrisk amount oftheresulting claim. nature Bythevery ofan that the insured event of the occurs and the uncertainty underanyThe risk oneinsurance contract isthepossibility 1.Insurance risk mitigate theresidual risk. based onmanagementcontrols andactionsputinplaceto investment withinthesemandates. opportunities by the Board and their best professional assessment of the investments offundsbasedonmandates approved management to aprofessional fundmanagerto manage The Group ofits investment has subcontracted part derivative ashedginginstruments. instruments liabilities usingspotcontracts, but hasnotdesignated any commercial transactions andrecognised assetsand The Group managescurrencyfrom arising future risk denominated inUSDollars. The Group isexposed to currencyfrom arising aloan risk changes inthelevel orvolatility ofcurrency exchange rates. the value ofassetsandliabilitiesowing to unanticipated Currency oflossoradverse istherisk risk changein iii)Currency risk rates asopposedto floating rates. rate by risk investing infinancialassetsatfixed interest institutions and policy loans. The Group managesinterest government securities,fixed depositswith financial corporate bonds, investment mortgages, inliquidfunds, holding interest quoted assetswhichcomprise bearing The Group is exposed to interest rate because of risk ii)Interest rate risk in accordance withlimitsapproved by theBoard. diversifies itsportfolio. Diversification isdone oftheportfolio from investments anddebtsecurities,theGroup inequity comprehensive income. To arising risk manage its price at fair value through profit or lossor fair value through other because ofinvestments inquoted shares classified either The Group isexposedrisk price to securities equity i)Price risk Group are explained below: Report of the directors (continued)

3.Credit risk also managed in part by obtaining collateral, corporate and 5.Cyber risk The Group taKShs on exposure to credit risk, which is the personal guarantees. ‘Cyber risk’ means any risk of financial loss, disruption or risk that a counter party will cause a financial loss to the damage to the reputation of the Group from some sort of Group by failing to pay amounts in full when due. 4. Liquidity risk failure of its information technology systems. Cybersecurity Liquidity risk may be defined as the risk that occurs has become a critical issue for the Group. Cyber threats Appropriate management of credit risk is critical to the when a company, though solvent, either does not have have evolved from being primarily focused on theft of Group and therefore management carefully manages the sufficient financial resources available to enable it to meet customer personal information to broader threats against exposure to credit risk. Credit exposures arise from; its obligations as they fall due, or can only secure those intellectual property such as trade secrets, product • Investment balances; resources at excessive cost. Liquidity risk losses might information and negotiating strategies. • Reinsurers’ share of insurance liabilities; arise from interest payments on borrowings to meet a The Group has established and operationalised a Cyber • Mortgage loans and receivables; shortfall, or from ‘fire sale losses’ incurred from the sale of Risk strategy, which is shaped by a cyber-risk appetite. This • Loans and receivables to policy holders; ‘illiquid assets’. strategy is benchmarked to ISO 27001 and represents an • Amounts due from reinsurers in respect of claims The Group is exposed to daily calls on its available cash effective governance anchor to help the Group address already paid; resources from maturing policies, claims and calls on cash the Group’s plan to manage risks effectively. The strategy • Amounts due from insurance contract holders; and settled contingencies. The finance department monitors enables the Board and senior management to more deeply • Amounts due from insurance intermediaries. liquidity on a daily basis, and has put in place an asset understand exposure to specific cyber risks, establish and liability matching programme that ensures liquidity clarity on the cyber imperatives for the Group, work out The Group manages its credit risk by placing limits on requirements are met. Cash flow forecasting is performed trade-offs, and determine priorities. the amount of risk accepted in relation to one borrower or in the operating entities of the Group and in the Company groups of borrowers/counterparty. The exposure to any one and aggregated by Group finance. Group finance monitors 6.Legal and regulatory risk borrower is further restricted by sub-limits. Such risks are rolling forecasts of the Group’s liquidity requirements to Legal risk is the potential loss from legal disputes or monitored on a continuing basis and subject to frequent ensure it has sufficient cash to meet its operational needs. settlements, instituted by customers, counter parties, 2019 Statements and Financial Report Annual reviews, but at a minimum once every financial year while Such forecasting taKShs into consideration the debt employees, shareholders, the authorities or third parties actual exposures against limits are monitored regularly. financing plans, covenant compliance and compliance with against the Group. Compliance risk is the risk of non- internal liquidity appetite limits and targets. compliance with laws, regulations and standards, which Principal risks and mitigation strategies (continued) The Group’s approach when managing liquidity is to relate to markets, pricing, taxes and regulations, and 3. Credit risk (continued) ensure, as far as possible, that it will always have sufficient new laws or regulations that require changes in business Exposure to credit risk is managed through regular analysis liquidity to meet its liabilities when due, without incurring practices that may lead to financial loss. of the ability of borrowers and potential borrowers to meet unacceptable losses or risking damage to the Group’s Changes in government policy and legislation (including interest and capital repayment obligations and by changing reputation. in relation to tax and capital controls), regulation or lending limits where appropriate. Exposure to credit risk is regulatory interpretation applying to companies in the

79 80 Annual Report and Financial Statements 2019 The directors the year during who served andupto thedate are: ofthisreport Directors ofthedirectorsReport (continued) implementation andexecution thereof. the analysis of statutory and regulatory requirements, and monitoring the with the compliance functions facilitate the management of compliance through codes anintegral ofdoingbusiness. part The Group HeadofLegal, together The Group considers compliancewithapplicable laws, regulations and industry interpretation couldcausesignificantly impacttheoperations oftheGroup. to theselaws andregulations ortheirmore enforcement stringent orrestrictive employment andlabourlaws andcontractual obligations. Significantchanges insidertrading), taxation, andcorruption, (money anti-trust, laundering, bribery financial markets regulation, capital adequacy, those relating crimes to financial including thosethatimpactandregulate thecapital markets, insurance industry, The Group isexposed to andsubjectto extensive laws andregulations results andfinancing requirements. approaches, corporateorgovernance structure and,consequently, reported channels, competitiveness, profitability, capital requirements,risk management retrospectively, may adversely affect theGroup’s product range, distribution oftheGroup,their supervision whichinsomecircumstances may beapplied insurance industry, anddecisions taken by regulators in connection with Rose Agutu Dr. Grace Mirigo Mwai Freda Britz Cornie Foord Nelius Bezuidenhout Susan Mudhune Rohan BaloobhaiPatel Julius Nyakia Magabe Dr.Patrick Tumbo Simba PN John Dr. Name Non–executive - Appointed on9thMay 2019 Non–executive - Appointed on9thMay 2019 Non–executive Non–executive Non–executive Non–executive Non–executive Non–executive Executive Non-executive andChairman Directorship Kenyan Kenyan Kenyan South African South African Kenyan Kenyan Tanzanian Kenyan Kenyan Role 19 February 2020 19 February Company Secretary Emma Wachira By Order oftheBoard of theauditor’s appointmentandtheassociated fees onbehalfoftheshareholders. responsibility includestheapproval oftheauditengagement contract whichsetsouttheterms The directors monitor theeffectiveness, andindependenceoftheauditor. objectivity This Association andSection719 oftheKenyan Companies Act, 2015. PricewaterhouseCoopers LLPcontinue inoffice inaccordance withtheCompany’s of Articles Terms ofappointmentauditors auditor isaware ofthatinformation. director soastobeaware ofany relevant auditinformation andtoestablish thattheGroup’s auditor is unaware; and each director had taken all steps that ought to have been taken as a there was, asfar aseachdirectorisaware, norelevant auditinformation ofwhichtheGroup’s thatwith respect toeachdirectoratthetimeofapprovalThe directorsconfirm ofthisreport: Disclosures to auditors the GroupandCompany tobemisleading. have renderedthevalues attributed totheassetsandliabilitiesinfinancialstatementsof thedirectorswere notawareAt thedateofthisreport, ofany circumstances, whichwould Financial Statements 2020 February for2019 were authorised issueinaccordancewitharesolutionofthedirectors on 19 The consolidatedfinancialstatementsofSanlamKenya Plcfor theyear ended31December Authorisation EVERY 2019 Statements and Financial Report Annual PROMISE NEEDS A Keeper

81 82 Annual Report and Financial Statements 2019 Chairman Dr. John PNSimba Approved by theboard ofdirectors 2020 andsignedonitsbehalfby: on19February The directors acknowledge thattheindependentauditoffinancialstatements doesnot relieve themoftheir responsibility. doubt upontheGroup’s to ability continue asagoingconcern. Having madeanassessmentoftheGroup’s to thedirectors ability continue asagoingconcern, are notaware related ofany material uncertainties to events orconditionsthatmay cast iii. Makingjudgementsandaccountingestimates thatare reasonable inthecircumstances. ii. Selectingsuitable accountingpoliciesandthenapplying themconsistently; and i. Designing, implementingandmaintaining control internal to asthey enable necessary determine thepreparation offinancialstatements thatare free from material misstatements, required by theKenyan Companies Act, 2015. They alsoacceptresponsibility for: The directors acceptresponsibilityfor thepreparation andpresentation ofthesefinancialstatements inaccordance withInternational StandardsFinancial andinthemanner Reporting 2015. They are alsoresponsible for safeguarding theassetsofGroup andCompany andfor taking reasonable steps for theprevention anddetection offraud andotherirregularities. enables themto prepare financialstatements oftheGroup and Company thatcomply standards withprescribed financial andthe reporting requirements of the Kenyan Companies Act, are sufficient to show andexplain thetransactions oftheGroup andCompany; disclosewithreasonable accuracy atany timethefinancialpositionofGroup and Company; andthat Company attheendoffinancial year andtheirprofit orloss forthat year. Thedirectors are responsible thatthe forensuring Group and Company keep proper accounting records that The Kenyan Companies Act, 2015 requires the directors to prepare financialstatements for eachfinancial yearwhichgivetrue and a fairview ofthefinancialposition Groupand Statement ofDirectors’ responsibilities whether dueto fraud orerror; Group ChiefExecutive Officer Dr.Patrick Tumbo Directors’ remuneration report

Information not subject to audit

The Company’s Directors Remuneration Policy and Strategy

The Board establishes and approves formal and transparent remuneration policies to attract and retain both executive and non-executive Board members. These policies clearly stipulate remuneration elements such as Directors’ fees, honorarium and attendance allowances that are competitive and in line with those of other players in the industry.

In accordance with the guidelines provided in the Companies (General) (Amendment) Regulations, Code of Corporate Governance as well as shareholder approval granted at the Annual General Meeting; the Directors and the Chairman are paid a taxable sitting allowance of KShs. 96,850 and KShs 111,455 respectively, for every meeting attended.

It is proposed that each Director and the Chairman receives a fee of KShs 2,754,264 and KShs 3,841,887 respectively per annum for the financial year ended 31 December 2019 subject to approval by shareholders during the Annual General Meeting.

Contract of service

In accordance with the Capital Markets Authority (CMA) regulations on non-executive Directors, a third of the Board retires by rotation and is elected at every Annual General Meeting by the shareholders on rotation basis.

The Group Chief Executive Officer has a permanent and pensionable contract with Sanlam Kenya Plc which commenced 2 August 2018.

Changes to directors’ remuneration

During the period, there were no changes in Directors Remuneration which is set as per the guidelines provided in Companies (General) (Amendment) Regulations and the Code of Corporate Governance. 2019 Statements and Financial Report Annual

Statement of voting on the directors’ remuneration report at the previous Annual General Meeting

During the Annual General Meeting held on 10 May 2019, the shareholders unanimously approved the payments of Directors fees for the year ended 31 December 2018 by a show of hands.

At the Annual General Meeting to be held at a date to be confirmed, approval will be sought from shareholders to pay Director Fees for the financial year ended 31 December 2019.

83 84 Annual Report and Financial Statements 2019 not accrue tonot accrue thempersonally. December 2019 together withthecomparative figures for 2018. Theaggregate Directors’ emolumentsare shown onNote 34(d). The fees paid to Sanlam Emerging Markets directors do The following table shows a single figure remuneration for theExecutive Directors, and Non-Executive Chairman directors in respect ofqualifying services for the year ended 31 Information subjectto audit Directors’ remuneration report (continued) Patrick Tumbo –Executive John PNSimba–Chairman Julius Nyakia Magabe Rose Agutu Grace Mwai Rohan BaloobhaiPatel Susan Mudhune Nelius Bezuidenhout Cornie FoordCornie Freda Britz Mugo Kibati–Executive Patrick Tumbo –Executive For theyear ended31December2018 John PNSimba–Chairman Julius Nyakia Magabe Matthys Lodewikus Olivier John Burbidge Rohan BaloobhaiPatel Susan Mudhune Theuns Botha Nelius Bezuidenhout Cornie FoordCornie Freda Britz For theyear ended31December2019 terminal benefits Salary and Salary 20,830 18,883 54,052 54,052 39,713 ------

KShs ‘000 22,204 19,309 3,842 2,738 3,435 2,738 2,754 2,613 2,311 4,000 1,341 3,360 3,166 3,316 1,747 Fees 886 886 552 597 523 707 - - KShs’ 000 Bonuses ------allowances KShs ‘000 Expense ------KShs ‘000 54,052 20,830 59,022 76,256 18,883 3,842 2,738 3,435 2,738 2,754 4,000 1,341 2,612 3,166 2,311 3,360 3,316 1,747 Total 886 886 552 597 707 523 Directors’ remuneration report (continued)

Pension related benefits - audited

2019 2018 KShs ‘000 KShs ‘000

Mugo Kibati – Executive - 2,360 Patrick Tumbo – Executive 6,021 - 6,021 2,360

On behalf of the Board

Susan Mudhune

Chairman, Remuneration Committee 19 February 2020 Annual Report and Financial Statements 2019 Statements and Financial Report Annual

85 86 Annual Report and Financial Statements 2019 19 February 2020 Fellow ofthe Actuarial SocietyofSouth Africa Statutory Actuary WaughGiles T exceed insurance theamountoffundslong-term business at31December2019. In my business opinion,thelong-term oftheCompany was financially soundandtheactuarial value oftheliabilitiesin insurancerespect of all classesoflong term business didnot valuation,In completingtheactuarial Ihave relied upontheaudited financialstatements ofthe Company. not madefor allpossible contingencies. Kenya. require forThose principles principles thatprudent future outgoundercontracts, generally basedupontheassumptions thatcurrent conditionswillcontinue. Provision istherefore This valuation hasbeenconducted inaccordance withgenerally andincompliancewiththerequirements accepted principles actuarial oftheInsurance Act CAP 487oftheLaws of I have conducted valuation astatutoryactuarial business ofthelong-term ofSanlam Life Insurance Limited asat31December2019. -SanlamLifeInsuranceLimited Actuary oftheStatutory Report Report of the Statutory Actuary – Sanlam General Insurance Limited

I have conducted an actuarial valuation of Sanlam General Insurance Limited as at 31 December 2019.

The valuation was conducted in accordance with generally accepted actuarial principles and in accordance with the requirements of the Insurance Act Cap 487 of the Laws of Kenya. Those principles require prudent principles for future outgo under contracts, generally based upon the assumptions that current conditions will continue. Provision is therefore not made for all possible contingencies.

In completing the actuarial valuation, I have relied upon the financial statements of the company.

In my opinion, the general business of the Company was financially sound and the actuarial value of the liabilities in respect of all the classes of general business did not exceed the amount of outstanding claims liabilities of the general business at 31 December 2019.

James Olubayi

Zamara Actuaries, Administrators & Consultants Limited

19 February 2020 Annual Report and Financial Statements 2019 Statements and Financial Report Annual

87 88 Annual Report and Financial Statements 2019 the value attributable to future new business. The embeddedvalue comprises: The embeddedvalue represents anestimate oftheeconomicvalue oftheCompany excluding a) DefinitionofEmbedded Value 1. Embedded value sets out theembeddedvalueThis report andthevalue ofnew business ofSanlam Kenya Plc. Embedded valuereport b) a) 2. Embedded Value Results Financial Officers (CFO)Forum’s European Embedded Value (EEV)Principles. Sanlam Kenya Plchasfully adopted therevised embedded value guidancefrom the Chief b) European Embedded Value Principles (EEV) force atthevaluation date, discounted discountrate. attherisk The value of in-force business is the present value of future profits from arising business in The value ofthein-force business. The value oftheshareholders’ netassets; plus Embedded value earnings Dividends paidintheyear Change inembeddedvalue Embedded value atbeginning ofyear Embedded value atend ofyear The embeddedvalueare derived earnings asfollows: EarningsEmbedded Value Embedded value Cost ofCapital Adequacy Requirement (CAR) Tax provision Gross value ofin-force business Net value ofinforce business Shareholders’ adjusted net assets Group embedded value (2,145,301) 1,402,258 KShs.‘000 1,402,258 2,112,758 (633,827) (656,761) (743,043) (743,043) 580,089 822,16 2019 - (2,297,441) (2,297,441) (994,832) (489,216) (4,442,742) 1,832,062 2,145,301 2,145,301 KShs.‘000 3,316,110 - 313,239 2018

Risk DiscountRate bedded value to discountrate therisk issetoutbelow: of thefuture profits oftheGroup. oftheem- Thesensitivity and perception associated oftherisks withtherealisation depending ontheinvestor’s own requirements, tax position discountrateThe risk appropriate to aninvestor willvary 4. Sensitivityto the risk discount rate Gross value ofnew business atpointofsale(gross oftax) 3. Value ofNew Business Shareholders’ netassets Value ofnew business Cost ofCAR atpointofsale Tax onvalue atpointofsale Value ofin-force business Value ofone year’s new business Embedded value Adjustment to fair value ofsubsidiary canbeanalysedThese earnings asfollows: Total earnings Decrease inNAV for othersubsidiaries variations Experience Changes inassumptionsandmethodology Value ofnew business Change over theperiod Expected onlife return business in-force Investment onfree return assets Roll forward KShs. ‘000 1,525,812 (56,957) 580,089 945,723 14.70% 15.70% (base) (1,324,421) KShs. ‘000 1,402,258 KShs.‘000 (519,779)) (321,607) (413,895) (743,043) (41,463) (69,140) (40,116) 580,089 822,169 421,313 (69,140) (69,140) 151,064 430,314 12,439 9,001 2019 (1,547,822) (1,699,803) KShs. ‘000 (2,297,441) 1,293,606 KShs.‘000 (861,587) (513,460) (100,905) (78,285) (90,202) (35,403) (78,897) 580,089 348,127 713,517 (90,202) (84,178) 23,486 39,126 16.7% 2018 Embedded value report (continued) b) Mortality Rates

5. Assumptions The assumptions for future mortality rates are based on the results of recent experience investigations conducted by the Group. The assumptions used in the calculation of the embedded value are based on the Group’s best estimate of future experience. c) Expenses

The main assumptions used are as follows: The maintenance expense assumption is based on the results of recently conducted internal expense investigations. a) Economic Assumptions d) Premium Escalations The main economic assumptions (p.a.) used are as follows: The embedded value of in-force business includes the expected value of future premium 2019 2018 increases resulting from premium indexation arrangements on in-force business. %p.a %p.a The value of new business includes the expected value of future premium increases Risk discount rate 15.70 16.30 resulting from premium indexation arrangements on new business written during the Overall investment returns (pre-tax) 10.51 11. 19 year to 31 December 2019. Expense inflation rate 7.70 8.30 e) Persistency / Surrender Basis The effect of the above economic assumptions on embedded value is as follows: The assumptions for lapse and surrender rates are based on the results of recent 2019 2018 experience investigations conducted by the Group. KShs. ‘000 KShs. ‘000

Risk discount rate 39,374 69,135 f) Tax Overall investment returns (pre-tax) (74,157) (124,045)

Total (34,783) (54,910) Allowance was made for the current life office taxation basis. 2019 Statements and Financial Report Annual

89 90 Annual Report and Financial Statements 2019 assurance business annuity rates andmorbidity decreased byBase mortality 5%for life assurance business rates andmorbidity decreased byBase mortality 5%for life Insurance risk Discontinuance rates decrease by 10% investment expenses) decrease by 10% Non-commission maintenance unitexpenses (excluding Expenses andpersistency ‘Shock * scenario consequential changesto discountrates p.a. premium risk withno dueto achangeintheequity/property Increase expected assetsby 1% onequities/property return rebalanced after fall inmarket values fall/rise individend/rental yield- assetmixis Assume portfolio assetsfall by 10%Equity/property withoutacorresponding bonus rates anddiscountrates changingcommensurately Investment (andinflation) return decreased by 10% andwith Investment Returns Values asat31December2019 assumptions have beenleft unchanged. has beenincludedinthevalue ofin-force business. For illustrated, eachsensitivity allother net ofcostcapital. The effect ofassumption changesintheGross Premium Valuation This sectionillustrates theeffect ofdifferent assumptions onthevalue ofin-force business 6. Sensitivities Embedded valuereport (continued) KShs. ‘000 Value ofin 848,708 864,138 825,630 921,385 823,565 804,928 822,169 865,740 857,702 force

KShs. ‘000 over base %change 12.1% -2.1% 0.4% 5.3% 3.2% 4.3% 0.2% 5.1%

assurance business annuity rates andmorbidity decreased byBase mortality 5%for life assurance business rates andmorbidity decreased byBase mortality 5%for life Insurance risk Discontinuance rates decrease by 10% Non-commission acquisitionexpenses decrease by 10% decrease by 10% Maintenance unitexpenses (excluding investment expenses) Expenses andpersistency ‘New business volumes decrease by 10% Shock * scenario rebalanced after fall inmarket values fall/rise individend/rental yield- assetmixis Assume portfolio assetsfall by 10%Equity/property withoutacorresponding rates anddiscountrates changingcommensurately Investment (andinflation) return decreased by 1%and withbonus Investment returns Value ofoneyear’s new business asat31December2019 ofthevalueThe sensitivity ofnew business isasfollows; 19 February 2020 Fellow ofthe Actuarial SocietyofSouth Africa. Statutory Actuary WaughGiles T charges haveMortality beenassumedto changeinlinewiththe costsofproviding benefits Management Action Assumed rates). 25%.i.e.yields rise and inflation higherassumedreturns ratesrisk discount as well as 15% values, drop inproperty overseas assetsfall atleast20%andfixed interest rate Shock scenario*: shock isdefinedasanimmediate scenario 30%drop inequity values,

KShs. ‘000 Value ofin (29,345) (59,976) (53,258) (50,098) (42,827) (66,607) (80,755) (69,140) (69,574) (61,940) force

KShs. ‘000 over base %change -23.0% -38.1% -13.3% -10.4% -27.5% -57.6% 16.8% -3.7% 0.6% Independent auditor’s report to the shareholders of Sanlam Kenya PLC

Report on the audit of the financial statements

Our opinion

We have audited the accompanying financial statements of Sanlam Kenya Plc (the “Company”) and its subsidiaries (together the “Group”) set out on pages 96 to 196, which comprise the consolidated statement of financial position at 31 December 2019 and the consolidated statement of profit or loss, statement of other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, together with the Company statement of profit or loss, Company statement of other comprehensive income, Company statement of financial position at 31 December 2019, the statement of changes in equity and statement of cash flows for the Company for the year then ended, and the notes to the financial statements, including a summary of significant accounting policies.

In our opinion the accompanying financial statements of Sanlam Kenya Plc give a true and fair view of the financial position of the Group and the Company at 31 December 2019 and of their financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Kenyan Companies Act, 2015.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report.

We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Kenya, and we have fulfilled our ethical responsibilities in accordance with these requirements and the IESBA Code. Annual Report and Financial Statements 2019 Statements and Financial Report Annual

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

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

91 92 Annual Report and Financial Statements 2019 Key auditmatters (continued) Independent auditor’s report to theshareholders ofSanlamKenyaPLC(continued) material impactto thevaluation. valuation.liability However, changesintheassumptionsandmethodologycanresult ina may ormay notrecur inthefuture. A margin for adverse deviation isincludedinthe Additional qualitative judgementisappliedinassessingtheextent to whichpasttrends projected basedonpastexperience. rates, futuremortality expenses, investment returns, discountrates andlapserates, are are benchmarked to available market information. Non-economicassumptionssuchas Economic assumptionssuchasdiscountrates, investment andinflation returns rates Assumptions are madefor botheconomicandnon-economicinputsinto thevaluation. quality, andaccuracy integrity ofthedata used. involve judgementaboutfuture events. The valuation results are alsodependentonthe the expected future outflows. Specifically, assumptionsandmethodologies theactuarial The valuation ofinsurance contract liabilitiesinvolves significantjudgementinestimating policyholder liabilitiesandincurred but notreportedclaims(IBNR). Insurance contract liabilitiesasdisclosedunderNote outstanding claims, 24comprise Valuation ofinsurance contract liabilities Key auditmatter Compared thedata usedinthevaluations to theexisting policyholder data; How ourauditaddressed thematter Confirmed theadequacy Confirmed ofthe reserves theclaim by comparing heldin reserves Checked theconsistency methodsandassumptionsbasesyear ofthereserving financial statements. outstanding relating to thatperiod; andChecked adequacy ofdisclosures inthe against periods subsequentclaimpaymentsthe prior andamountsstill on year; observable data andnon-economicassumptionsto the Group’s past experience; December 2019; andmanagementin theestimationofreservesexternal asat31 actuary documentation; Tested thereasonableness oftheeconomicassumptionsusedagainst market Tested theappropriateness ofthemethodologyandassumptionsusedby the Agreed asampleoftheclaims paidandoutstanding asatyear endto supporting Independent auditor’s report to the shareholders of Sanlam Kenya PLC (continued)

Other information As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism The other information comprises Company Information, Responsibilities of the directors for the financial statements throughout the audit. We also: Five Year Group Review, Report of the Directors, Risk management, Profile of the Directors, Statement of Directors’ The directors are responsible for the preparation of financial Identify and assess the risks of material misstatement of Responsibilities, Director’s Remuneration Report, Report statements that give a true and fair view in accordance the financial statements, whether due to fraud or error, design of the Statutory Actuary – Sanlam Life Insurance Limited, with International Financial Reporting Standards and the and perform audit procedures responsive to those risks, and Report of the Statutory Actuary – Sanlam General Insurance requirements of the Kenyan Companies Act, 2015, and for obtain audit evidence that is sufficient and appropriate to Limited and Embedded Value Report which we obtained prior such internal control as the directors determine is necessary provide a basis for our opinion. The risk of not detecting a to the date of this auditor’s report, and the rest of the other to enable the preparation of financial statements that are free material misstatement resulting from fraud is higher than for information in the Annual Report which are expected to be from material misstatement, whether due to fraud or error. one resulting from error, as fraud may involve collusion, made available to us after that date, but does not include forgery, intentional omissions, misrepresentations, or the the financial statements and our auditor’s report thereon. In preparing the financial statements, the directors are override of internal control. The directors are responsible for the other information. Our responsible for assessing the Group’s ability to continue as opinion on the financial statements does not cover the other a going concern, disclosing, as applicable, matters related Obtain an understanding of internal control relevant to the information and we do not and will not express any form of to going concern and using the going concern basis of audit in order to design audit procedures that are appropriate assurance conclusion thereon. accounting unless the directors either intend to liquidate the in the circumstances, but not for the purpose of expressing an Group or to cease operations, or have no realistic alternative opinion on the effectiveness of the Group’s internal control. In connection with our audit of the financial statements, our but to do so. responsibility is to read the other information identified above Evaluate the appropriateness of accounting policies used and, in doing so, consider whether the other information is Auditor’s responsibilities for the audit of the financial and the reasonableness of accounting estimates and related materially inconsistent with the financial statements or our statements disclosures made by the directors. knowledge obtained in the audit, or otherwise appears to be materially misstated. Our objectives are to obtain reasonable assurance about Conclude on the appropriateness of the directors’ use of the 2019 Statements and Financial Report Annual whether the financial statements as a whole are free from going concern basis of accounting and, based on the audit If, based on the work we have performed on the material misstatement, whether due to fraud or error, and to evidence obtained, whether a material uncertainty exists other information we have received prior to the date of issue an auditor’s report that includes our opinion. Reasonable related to events or conditions that may cast significant doubt this auditor’s report we conclude that there is a material assurance is a high level of assurance, but is not a guarantee on the Group’s ability to continue as a going concern. If we misstatement of this other information, we are required to that an audit conducted in accordance with ISAs will always conclude that a material uncertainty exists, we are required to report that fact. We have nothing to report in this regard. detect a material misstatement when it exists. Misstatements draw attention in our auditor’s report to the related disclosures can arise from fraud or error and are considered material if, in the financial statements or, if such disclosures are When we read the rest of the other information in the Annual individually or in the aggregate, they could reasonably be inadequate, to modify our opinion. Our conclusions are based Report and we conclude that there is a material misstatement expected to influence the economic decisions of users taken on the audit evidence obtained up to the date of our auditor’s therein, we are required to communicate the matter to those on the basis of these financial statements. report. However, future events or conditions may cause the charged with governance. Group to cease to continue as a going concern.

93 94 Annual Report and Financial Statements 2019 Auditor’s responsibilities for theauditoffinancialstatements (continued) internal controlinternal ouraudit. thatwe identifyduring timing oftheauditandsignificantfindings, includingin any significantdeficiencies We communicate withthedirectors regarding, amongothermatters, theplannedscopeand audit. We remain solely responsible for ourauditopinion. statements. We are responsible for andperformance oftheGroup thedirection, supervision or business activitieswithintheGroup to express anopinionontheGroup’s financial and events inamannerthatachieves fair presentation. the disclosures, andwhetherthefinancialstatements represent theunderlying transactions Independent auditor’s report to theshareholders ofSanlamKenyaPLC(continued) Obtain sufficient appropriate auditevidence regarding thefinancialinformation oftheentities Evaluate theoverall presentation, structure andcontent ofthefinancialstatements, including the public interest benefits ofsuchcommunication. because theadverse consequencesofdoingsowould reasonably beexpected to outweigh rare circumstances, we thatamatter determine shouldnotbecommunicated inourreport unless law orregulation precludes public disclosure aboutthematter orwhen,inextremely and are therefore thekey auditmatters. We thesematters describe inourauditor’s report of mostsignificanceintheauditGroup’s financial statements ofthecurrent period From thematters communicated withthedirectors, we thosematters determine thatwere applicable, related safeguards. other matters thatmay reasonably bethoughtto bearonourindependence, andwhere requirements regarding independence, andto communicate withthemallrelationships and We alsoprovide thedirectors withastatement thatwe have compliedwithrelevant ethical Independent auditor’s report to the shareholders of Sanlam Kenya PLC (continued)

Report on other matters prescribed by the Kenyan Companies Act, 2015

Report of the directors In our opinion the information given in the report of the directors’ on pages 78 to 80 is consistent with the financial statements.

Directors’ remuneration report

In our opinion the auditable part of the directors’ remuneration report on pages 83 and 85 has been properly prepared in accordance with the Kenyan Companies Act, 2015.

Certified Public Accountants Nairobi

20 February 2020

CPA Kang’e Saiti - Practising certificate No. 1652 Signing partner responsible for the independent audit

Annual Report and Financial Statements 2019 Statements and Financial Report Annual

95 96 Annual Report and Financial Statements 2019 Diluted Basic Earnings pershare: Non-controlling interests Owners oftheparent Profit/(loss) attributable to: Profit/(loss ) for the year Income tax credit/(expense) Profit/(loss) before tax Share ofprofit ofassociate Profit/(loss) before share ofprofit ofassociate Total benefits, claims andother expenses Finance costs ofinvestmentImpairment insubsidiaries Other operating andadministrative expenses Cost ofsales-plots Fees andcommissionexpense Net benefits and claims Change incontract liabilitiescededto reinsurers Gross changeininvestment contract liabilities Gross changeininsurance contract liabilities Claims cededto reinsurers Total otherrevenue Total revenue Gross benefits andclaimspaid Other operating revenue Impairment offinancialassets Impairment Fair value losses Investment income Fees andcommissionincome Net premium income Premium cededto reinsurers Gross premium income Consolidated andcompanystatementofprofit orloss Financial statementsfortheyearended31stDecember2019 14(b) Note 7(b) 7(a) 7(a) 7(a) 7(a) 7(a) 6(d) 6(b) 6(a) 4(b) 4(a) 7(c) 6(c) 30 30 23 10 8 5 (2,040,589) (4,836,423) (5,532,435) (1,345,042) (8,348,993 KShs.’000 2,350,289 6,991,588 (993,691) 3,252,533 8,899,079 5,646,546 (435,687) (457,637) (20,653) (14,308) 550,086 550,086 433,730 325,064 286,168 152,379 422,177 114,399 113,334 (9,578) 1,065 2,624 2019 0.79 0.79 Group - - - (1,979,426) (8,042,923) (2,000,047) (1,471,504) (5,544,822) (1,983,581) (2,129,500) (2,129,186) (5,124,182) (2,017,061) KShs.’000 6,345,825 2,183,767 (715,134) 5,371,808 5,913,423 (974,017) 1,227,696 (191,863) (11,697) 660,314 (12,795) 541,615 149,760 268,010 86,214 (14.01) (14.01) 37,635 4,134 2018 314 - KShs.’000 (479,294) (229,506) (307,080) (561,678) (561,678) (479,294) (557,239) (82,384) (20,653) - - - - 10,587 77,945 67,358 77,945 (3.90) (3.90) 2019 Company ------KShs.’000 (669,551) (118,263) (297,967) (636,034) (636,034) (669,551) (533,547) (487,441) (182,110) (182,110) (59,514) (11,697) 332,500 - - - - 33,517 18,937 (4.42) (4.42) 2018 ------Financial statements for the year ended 31st December 2019

Consolidated and company statement of other comprehensive income

Group Company 2019 2018 2019 2018 KShs.’000 KShs.’000 KShs.’000 KShs.’000 Profit/(loss) for the year: 114,399 (1,979,426) (561,678) (636,034) Other comprehensive income Items that may be reclassified to profit or loss Changes in fair value of financial assets previously classified as available for-sale-financial under IAS 39 - - - - Other comprehensive income for the year net of tax - - - -

Total comprehensive income/(loss) for the year 114,399 (1,979,426) (561,678) (636,034) Attributable to: Owners of the parent 113,334 (2,017,061) (561,678) (636,034) Non-controlling interests 1,065 37,635 - - Annual Report and Financial Statements 2019 Statements and Financial Report Annual

97 98 Annual Report and Financial Statements 2019 Investments insubsidiaries Intangible assets Investment properties Right-of-use asset Property andequipment Assets Investment inassociate Deferred incometax Cash andbankbalances Deposits withfinancialinstitutions Receivables andotherfinancialassets Current incometax Inventory Total assets Non-current assetsheldfor sale Insurance receivables Reinsurance share ofinsurance contract liabilities Deferred acquisitioncosts Loans Corporate bonds Government securities Equity securities securities Equity Financial assets Consolidated andcompanystatementoffinancialposition - cost At amortized - At fair value through P&L - At fair value through P&L- Financial statementsfortheyearended31December2019 20(b) 20(a) 14(a) 13(a) 14(b) 13(b) 20(c) 12(c) 11(a) Note 27 21 21 12 19 18 15 16 16 16 16 29,032,606 18,681,638 KShs.‘000 1,933,402 2,518,680 735,457 650,529 938,571 751,534 900,000 153,655 319,297 544,763 123,773 379,766 94,907 89,564 68,624 53,695 76,972 17,779 2019 Group - - 3,440,700 98,721 236,551 232,514 17,779 - 15,167,215 KShs.‘000 29,101,630 2,579,271 1,254,774 2,275,478 843,841 450,000 504,851 151,292 819,376 109,189 449,362 403,629 52,341 14,746 2018 - KShs.‘000 2,253,435 2,626,686 113,415 38,578 82,624 89,564 34,122 10,085 4,863 2019 Company ------KShs.‘000 3,060,085 2,287,020 354,000 182,231 109,189 22,008 82,384 15,423 4,861 2,969 2018 ------Financial statements for the year ended 31 December 2019

Consolidated and company statement of financial position (continued)

2019 2018 2019 2018

KShs.‘000 KShs.‘000 KShs.‘000 KShs.‘000

Equity and liabilities

Capital and reserves

Issued share capital 22 720,000 720,000 720,000 720,000

Statutory fund 22 1,312,284 676,720 - -

Retained earnings (591,199) (68,620) (1,399,394) (837,716)

Shareholder's funds 1,441,085 1,328,100 (679,394) (117,716)

Non-controlling interests 293,937 258,938 - -

Total capital and reserves 1,735,022 1,587,038 (679,394) (117,716)

Liabilities

Borrowings 23 2,763,210 3,497,432 2,763,210 2,777,380

Insurance contract liabilities 24 14,532,693 14,816,647 - -

Investment contract liabilities 24 5,073,450 5,340,462 - -

Payables under deposit administration contracts 24 1,131,718 1,107,372 - -

Unearned premium 25 1,265,707 899,653 - -

Deferred income tax 27 649,620 360,397 - -

Lease liabilities 26 85,643 - 40,900 -

Provisions 26 34,619 51,925 - -

Current income tax 10 11,185 47,322 - - Annual Report and Financial Statements 2019 Statements and Financial Report Annual Insurance payables 28 972,237 688,646 - -

Payables and other charges 29 777,502 704,736 501,970 400,421

Total liabilities 27,297,584 27,514,592 3,306,080 3,177,801

Total equity and liabilities 29,032,606 29,101,630 2,626,686 3,060,085

The financial statements were approved by the Board of Directors on 19 February 2020 and signed on its behalf by:

John P N Simba Patrick Tumbo

Chairman 19 February 2020 Group Chief Executive Officer 19 February 2020

99 100 Annual Report and Financial Statements 2019 At 31December2018 Transactions withminorities Transfer to retained earnings Total comprehensive (loss)/income Profit orloss: Transfer to statutoryfund Changes oninitialapplicationofIFRS 9 At 1January Year end31December2018: At 31December2019 Transactions withminorities Transfer to thestatutoryfund Total comprehensive income Profit orloss: At 1January 2019 aspreviously reported Year end31December2019: Consolidated statementofchangesinequity Financial statementsfortheyearended31December2019 Note 22 22 KShsh.’000 - - - - 720,000 720,000 720,000 720,000 720,000 capital Share - - - Revaluation KShs.’000 (15,904) surplus 15,904 ------KShs.’000 Statutory 1,609,658 1,312,284 (626,660) (306,278) 635,564 676,720 676,720 fund - - - - (2,017,061) KShs.’000 Retained 1,459,314 (635,564) (154,338) (591,199) earnings 113,334 (68,620) (68,620) 626,660 15,904 (349) 901 (460,616) (2,017,061) KShs.’000 1,441,085 1,328,100 1,328,100 3,804,876 113,334 (349) Total 901 - - - controlling KShs.’000 interests (24,870) - - 258,938 293,937 258,938 247,074 37,635 33,934 (901) 1,065 Non- - (1,979,426) KShs.’000 4,051,950 1,735,022 (485,486) 1,587,038 1,587,038 114,399 33,585 Total - - - - Financial statements for the year ended 31 December 2019

Company statement of changes in equity

Share Retained capital earnings Total

KShs.’000 KShs.’000 KShs.’000

Year ended 31 December 2019:

At 1 January 720,000 (837,716) (117,716)

Total comprehensive income - (561,678) (561,678)

At 31 December 720,000 (1,399,394) (679,394)

Year ended 31 December 2018:

At 1 January 720,000 (201,682) 518,318

Total comprehensive income - (636,034) (636,034)

At 31 December 720,000 (837,716) (117,716) Annual Report and Financial Statements 2019 Statements and Financial Report Annual

101 102 Annual Report and Financial Statements 2019 Rental income Loans repaid Loans advanced Proceeds from disposalofinvestment property Net purchase offinancialassetsthrough profit andloss Purchase ofinvestment property Purchase andequipment ofproperty Payment ofleaseliabilities Purchase ofintangible assets Cash flows from investing activities Net cashusedinoperations Income tax paid Net cashusedinoperations Cash flows from operating activities Dividend incomereceived Cash andcashequivalents at endofyear Cash ofyear andcashequivalents at start Net (decerease)/increase incashand equivalents Proceeds from issueofshare capital to non-controlling interests Interest paidonborrowings Repayment ofborrowings Proceeds from borrowings Cash flows from financing activities Net cashgenerated from investing activities Interest received Net cash(usedin)/generated from financingactivities Consolidated statementofcashflows Financial statementsfortheyearended31December2019 13 (b) 33(a) 13(a) 11(a) Note 21 23 23 23 15 15 16 12 6 6

(1,680,729) (1,804,652) (1,082,349) (1,483,815) KShs. ‘000 (855,033) 1,195,292 1,403,186 2,173,468 2,679,107 (153,775) (123,923) (375,768) (106,825) (740,166) (42,355) (42,241) 254,789 33,585 (1,663) 80,680 96,141 2019 - - (1,894,429) KShs. ‘000 (3,041,101) (3,041,101) 2,466,691 (191,863) 2,679,107 2,274,828 2,541,211 (303,371) 2,247,652 (124,578) (312,659) (313,214) 503,327 695,000 (13,160) 904,169 137,896 92,769 13,618 2018 - - Financial statements for the year ended 31 December 2019

Company statement of cash flows

Note 2019 2018 KShs.‘000 KShs.‘000 Cash flow from operating activities Net cash generated from/(used in) operations 33(b) 35,827 (768,793)

Cash flows from investing activities Investment income 10,587 - Dividends received - 368,500 Purchase of property and equipment 12 (18,618) (16,338) Payment of lease liabilities 14 (2,735) Investment in subsidiaries - (881,138) Net cash used in investing activities (10,766) (528,976) Cash flow from financing activities Interest paid 23 (302,200) (118,263) Proceeds from borrowings 23 - 1,746,639 Net cash (used in)/generated from financing activities (268,615) 1,628,376

Net (decerease)/increase in cash and cash equivalents (243,554) 330,607 Cash and cash equivalents at start of year 356,969 26,362 Cash and cash equivalents at end of year 21 113,415 356,969 Annual Report and Financial Statements 2019 Statements and Financial Report Annual

103 104 Annual Report and Financial Statements 2019 a) presented, unlessotherwisestated. These policies have been consistently applied to all years preparation ofthesefinancialstatements are setoutbelow. accountingpoliciesadoptedThe principal inthe 2. ofsignificantaccountingpolicies Summary (staff andagents). business inKenya andemploys over 1,000employees Sanlam General Insurance Limited. The Company does through Sanlam itssubsidiaries Life Insurance Limited and protection, protection mortgage andproperty suchasthoseassociatedrisks withdeath,disability, credit Sanlam Kenya Plcunderwrites life andnon-life insurance 1. Notes to thefinancialstatements for the year ended31December2019

value orvalued usinganothermeasurement basis: except for thefollowing items whichare atfair carried measurement basis used is the historical cost basis, IFRS and the Kenyan Companies, Act, 2015. The (IFRSIC) applicable to under Companies reporting issued by theIFRS Interpretations Committee Financial Standards Reporting (IFRS), interpretations basisincompliancewithInternational concern The financialstatements are prepared onagoing Basis ofpreparation General information Financial statementsfortheyearended31December2019 Financial assetsmeasured atfair value through Investment properties; comprehensive income; and profit orlossandat fair value through other be offset inthestatement ofprofit orlossunless required simultaneously.the liability Incomeandexpenses willnot to settle onanetbasis, orto realise theassetsand settle to offset the recognised amounts and there is an intention only whenthere isacurrent andlegally enforceable right net amountreportedinthestatement offinancialposition Financial assets andfinancialliabilitiesare offset andthe statement ofchangesinequity. Company as owners in their capacity are recognised in the or previous periods. Transactions with the owners of the recognised inothercomprehensive incomeinthecurrent statement ofprofit orlossinthecurrent that were period Reclassification adjustmentsare amounts reclassified to statement ofprofit orlossas required orpermitted by IFRS. reclassification adjustments)thatare not recognised inthe itemscomprises of income and expenses (including in thestatement ofothercomprehensive incomeand profit orloss. Othercomprehensive incomeis recognised comprehensive income, are recognised inthestatement of Income andexpenses, excluding thecomponentsofother profit andlossaccount by thestatement ofprofit orloss. represented by thestatement offinancialpositionandthe of theKenyan companies Act, 2015, thebalancesheetis equity, statements of cash flows, and notes. For purposes statements offinancialposition,statements ofchangesin profit orloss, statements ofothercomprehensive income, The financialstatements thestatements comprise of functional currency. (KShs), rounded to thenearest thousand,whichisalsothe The financialstatements are presented in Kenya Shillings Actuarially liabilitiesattheirpresent determined value. disclosed innote 2(cc). material adjustmentwithin the next financial year, are thathaverisk of asignificant uncertainty resulting ina to thefinancialstatements, andthesources ofestimation The areas involving thejudgementsofmostsignificance are recognised intheyear inwhichtherevision ismade. and any period, revisionseach reporting to such estimates judgements andestimates are reviewed attheendof actual results may differ from thoseestimates. The the directors’ bestknowledge oftheinformation available, Although suchestimates and assumptionsare based on applying theaccountingpoliciesadopted by theGroup. management to exercise itsjudgementintheprocess of the useofestimates andassumptions. Italsorequires Financialwith International Standards Reporting requires The preparation offinancialstatements inconformity (non-current) ispresented inthenotes. (current) andmore than12 monthsafter date thereporting or settlement withintwelve monthsafter date thereporting broadly inorder ofliquidity. An analysis regarding recovery The Group presents itsstatement offinancialposition Group. as specifically disclosedintheaccountingpoliciesof or permitted by any accountingstandard orinterpretation, Financial statements for the year ended 31 December 2019

Notes (continued)

2. Summary of significant accounting policies (continued) b) Changes in accounting policy and disclosures (i)New and amended standards adopted by the Group

The following standards and amendments have been applied by the Group for the first time for the financial year beginning 1 January 2019:

Number Effective date Executive summary IFRS 16 – Leases Annual periods beginning on or This standard replaces the current guidance in IAS 17 and is a far reaching change in accounting by after 1 January 2019 – earlier lessees in particular. application permitted if IFRS 15 Under IAS 17, lessees were required to make a distinction between a finance lease (on balance is also applied. sheet) and an operating lease (off balance sheet). IFRS 16 now requires lessees to recognise a lease (published January 2016) liability reflecting future lease payments and a ‘right-of-use asset’ for virtually all lease contracts. The IASB has included an optional exemption for certain short-term leases and leases of low-value assets; however, this exemption can only be applied by lessees. For lessors, the accounting stays almost the same. However, as the IASB has updated the guidance on the definition of a lease (as well as the guidance on the combination and separation of contracts), lessors will also be affected by the new standard. At the very least, the new accounting model for lessees is expected to impact negotiations between lessors and lessees. Under IFRS 16, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. IFRS 16 supersedes IAS 17, ‘Leases’, IFRIC 4, ‘Determining whether an Arrangement contains a Lease’, SIC 15, ‘Operating Leases – Incentives’ and SIC 27, ‘Evaluating the Substance of Transactions Involving the Legal Form of a Lease’. Amendments to IFRS 9 – ‘Financial instruments’ on Annual periods beginning on or The narrow-scope amendment covers two issues: prepayment features with negative compensation and after 1 January 2019 The amendments allow companies to measure particular prepayable financial assets with so-called modification of financial liabilities. negative compensation at amortised cost or at fair value through other comprehensive income if a specified condition is met—instead of at fair value through profit or loss. It is likely to have the biggest impact on banks and other financial services entities.

How to account for the modification of a financial liability. The amendment confirms that most such 2019 Statements and Financial Report Annual modifications will result in immediate recognition of a gain or loss. This is a change from common practice under IAS 39 today and will affect all kinds of entities that have renegotiated borrowings. Amendments to IAS 19, ‘Employee benefits’ on plan Annual periods on or after 1 These amendments require an entity to: amendment, curtailment or settlement. January 2019 Use updated assumptions to determine current service cost and net interest for the remainder of the period after a plan amendment, curtailment or settlement; and (issued February 2018) Recognise in profit or loss as part of past service cost, or a gain or loss on settlement, any reduction in a surplus (recognised or unrecognised). This reflects the substance of the transaction, because a surplus that has been used to settle an obligation or provide additional benefits is recovered. The impact on the asset ceiling is recognised in other comprehensive income, and it is not reclassified to profit or loss The impact of the amendments is to confirm that these effects are not offset.

105 106 Annual Report and Financial Statements 2019 (i)New andamendedstandards adopted by theGroup (continued) inaccountingpolicyb) Changes anddisclosures (continued) 2. ofsignificantaccountingpolicies(continued) Summary Notes (continued) IFRS 17, ‘Insurance contracts’ IFRIC 23, over incometax‘Uncertainty treatments’ Number Annual improvements cycle 2015-2017 Financial statementsfortheyearended31December2019 (published May 2017) IFRS 17. the date ofinitialapplication with Customers’, atorbefore 15, ‘Revenue from Contracts ‘Financial Instruments’, andIFRS for entitiesthatapply IFRS 9, Early applicationispermitted after 1January 2021 beginning onor Annual periods Published 7June 2017) after 1January 2019 beginning onor Annual periods after 1January 2019 beginning onor Annual periods Effective date but over theremaining life ofthecontract. consequence, thefair value changesare notrecognised inprofit inwhichthey orlossintheperiod occur share ofthefair value changesoftheunderlying itemsmargin. isincludedinthecontractual service As a fee approach isavariation onthegeneral model. When applying thevariable fee approach, theentity’s For insurancefeatures, contracts withdirect participation thevariable fee approach applies. The variable coverage ofoneyear period orless. approach. This simplified approach isapplicabletypes ofcontract,a includingthosewith for certain Aside from thisgeneral model,thestandard provides, asasimplification,thepremium allocation period. period.reporting profitThe unearned margin) (contractualis service recognised over the coverage margin.and thecontractual service The fulfilment cash flows are remeasured onacurrent basiseach adjustment to reflect thetime value ofmoney andan risk adjustment explicit risk) for non-financial recognition atthetotal ofthefulfilment cash flows theestimated (comprising future cash flows, an Under IFRS 17, the general model requires entitiesto measure aninsurance contract atinitial indicators. insurers, thetransition to IFRS 17 willhave animpactonfinancialstatements andon key performance clear andconsistent thatwillsignificantly rules increase offinancial thecomparability statements. For insurers. Whereas thecurrent standard, IFRS 4,allows insurers to usetheirlocalGAAP, IFRS 17 defines The IASB issuedIFRS 17, ‘Insurance contracts’, andthereby anew started epochofaccounting for guidance intheInterpretation andconsidertheimpact onincometax accounting. tax accountingcouldbematerial. Managementshouldassesstheexisting modelsagainst thespecific in IAS 12. These modelsmight,insomecircumstances, beinconsistent withIFRIC23andtheimpacton entities willhave developed amodelto accountfor intheabsenceofspecificguidance tax uncertainties was silent. The Interpretation alsoexplains whento reconsider theaccountingfor atax uncertainty. Most uncertainties. The Interpretation provides specificguidanceinseveral areas where previously IAS 12 IFRIC 23provides aframework to consider, recognise andmeasure theaccountingimpactoftax These amendmentsincludeminorchangesto: made to develop anassetwhentheisready for itsintended useorsale. or events thatgenerated distributable profits were recognised. classified shouldbefinancial instruments asequity recognisedaccording towhere thepast transactions operation whenitobtains jointcontrol ofthebusiness. when itobtains control ofthebusiness. IAS 23,’ Borrowing costs’ ofgeneral -acompany borrowings treats aspart any borrowing originally IAS 12,’ Incometaxes’ - The amendmentclarified thattheincome tax consequencesofdividendson IFRS 11,’Joint arrangements’, -acompany doesnotremeasure itspreviously heldinterest inajoint IFRS 3, ‘Business combination’ -acompany remeasures itspreviously heldinterest inajointoperation Executive summary Financial statements for the year ended 31 December 2019

Notes (continued)

2. Summary of significant accounting policies (continued) b) Changes in accounting policy and disclosures (continued) (i)New and amended standards adopted by the Group (continued)

Number Effective date Executive summary Amendment to IAS 1, ‘Presentation of financial statements’ and IAS Annual periods beginning on or These amendments to IAS 1 and IAS 8 and consequential amendments to other IFRSs: 8, ‘Accounting policies, changes in accounting estimates and errors’ after 1 January 2020 use a consistent definition of materiality through IFRSs and the Conceptual Framework on the definition of material. for Financial Reporting;. clarify the explanation of the definition of material; and incorporate some of the guidance in IAS 1 about immaterial information. The amended definition is: “Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general-purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.” Amendments to IFRS 9, Financial Instruments, IAS 39, Financial Annual periods beginning on These amendments provide certain reliefs in connection with interest rate benchmark reform Instruments: Recognition and Measurement and IFRS 7, Financial or after 1 January 2020 (early (IBOR). The reliefs relate to hedge accounting and have the effect that IBOR should not Instruments: Disclosure – Interest rate benchmark reform adoption is permitted) generally cause hedge accounting to terminate. However, any hedge ineffectiveness should (Published September 2019) continue to be recorded in the income statement.

The Directors do not plan to apply the above standards, until they become effective. Based on their assessment of the potential impact of application of the above, only IFRS 17 is expected to have a significant impact on the Group’s financial statements.

There are no other standards that are not yet effective that would be expected to have a material impact on the entity in the current or future reporting periods and on near future transactions. Annual Report and Financial Statements 2019 Statements and Financial Report Annual

107 108 Annual Report and Financial Statements 2019 has power over theentity, including: relevant facts and circumstances inassessingwhetherit ofanentity,or similarrights theGroup considers allthe When ofthevoting theGroup haslessthanamajority the entity. throughthose returns itspower to direct theactivities of involvement to andhastheability affect withtheentity is exposed to, to orhasrights variable from returns its control. The Group controls whentheGroup anentity areSubsidiaries allentitiesover whichtheGroup has Subsidiaries 31 December2019. financial statements oftheGroup asat anditssubsidiaries The consolidationoffinancialstatements the comprises c) Consolidation (continued) 2. ofsignificantaccountingpolicies Summary Notes (continued) of theentity; the date ofacquisition to thedate ofsaleinthestatement over thesubsidiary. Assets andliabilitiesare includedfrom andceaseswhentheGroup losescontrolthe subsidiary begins whentheGroup obtainsof asubsidiary control over one or more of the three elements of control. Consolidation facts andcircumstances indicate thatthere are changesto The Group re-assesses whetheror not itcontrolsif anentity The Group’s voting and potential rights voting rights. from Rightsarising other contractual arrangements; and The contractual arrangement withtheothervote holders Financial statementsfortheyearended31December2019 If thegroup losescontrol over it: thesubsidiary relative interests inthesubsidiary. and non-controlling interests to reflect thechangesintheir amountsofthecontrollingThis isby adjustingthecarrying loss of control, is accounted for transaction. as an equity A changeinownership interest ofasubsidiary, without of thegroup are eliminated infullonconsolidation. and cashflows relating membersto transactions between intra group assetsandliabilities, equity, income, expenses policies into linewiththeGroup’s accountingpolicies. All financial statements theiraccounting ofsubsidiaries to bring balance. When necessary, adjustmentsare made to the if these results in the non-controlling interest have a deficit parent oftheGroup andthenon-controlling interests, even income (OCI)are attributed toholders theequity of Profit orlossandeachcomponentofothercomprehensive included inthestatement ofcomprehensive income. acquired theyear ordisposedofduring aresubsidiary of financialpositionwhileincomeand expenses ofa recorded inequity; interests; liabilities ofthesubsidiary; Recognises thefair value oftheconsideration received; Derecognises thecumulative translation differences amountofany Derecognises non-controlling thecarrying Derecognises theassets(includinggoodwill)and directly disposedoftherelated assets respect are ofthatentity accounted for asifthegroup had previously recognised inothercomprehensive incomein joint venture or financial asset. Inaddition, any amounts accounting for theretained interest asanassociate, amount for ofsubsequently initial carrying thepurposes amount recognised in profit or loss. The fair value is the the date whencontrol islost,with thechangeincarrying interest isre-measured intheentity to itsfair value at When the Group ceases to have control any retained interests are alsorecorded inequity. in equity. Gains or losses on disposals to non-controlling isrecorded value ofnetassetsthesubsidiary carrying consideration paid and the relevant share acquired of the as owners. The difference fair between value ofany – thatis, astransactions withtheowners intheircapacity in lossofcontrol are accounted for transactions asequity Transactions withnon-controlling interests thatdo notresult results inadeficitbalance. non-controlling interest are recognised assucheven ifthis whichareAny attributed losseswithinasubsidiary to the disposed oftherelated assetsorliabilities appropriate, aswould berequired iftheGroup haddirectly recognised inOCIto profit orloss retained as earnings, Reclassifies the parent’s share of components previously Recognises ordeficitinprofit any surplus orloss; and Recognises thefair value ofany investment retained; Financial statements for the year ended 31 December 2019

Notes (continued)

2. Summary of significant accounting policies to equity holders of the associate and, therefore, is profit included in the calculation of the gain or loss on disposal. (continued) after tax and non-controlling interests in the subsidiaries of the associates after factoring in other comprehensive profit/ Subsidiaries and associates are stated at cost in the c) Consolidation (continued) (loss). separate financial statements of the Company. or liabilities. This may mean that amounts previously If the ownership interest in an associate is reduced but d) Business combinations and goodwill recognised in other comprehensive income are reclassified significant influence is retained, only a proportionate to profit or loss. share of the amounts previously recognised in other Business combinations are accounted for using the comprehensive income is reclassified to profit or loss where acquisition method. The cost of an acquisition is measured ii) Associates appropriate. as the aggregate of the consideration transferred measured The Group’s investment in its associate is accounted for on acquisition date at fair value and the amount of any non- using the equity method of accounting. An associate is an The financial statements of the associate are prepared for controlling interests in the acquiree. The Group’s identifiable entity in which the Group has significant influence, and the same reporting period as the Group. Where necessary, assets and liabilities are measured at their acquisition-date which is neither a subsidiary nor a joint arrangement. adjustments are made to bring its accounting policies in fair value. line with the Group’s. After application of the equity method, Under the equity method, the investment in the associate the Group determines whether it is necessary to recognise Non-controlling interests in an acquiree that are present is carried in the statement of financial position at cost an additional impairment loss on the Group’s investment in ownership interests and entitle their holders to a plus post-acquisition changes in the Group’s share of net associates. The Group determines at each reporting date, proportionate share of the entity’s net assets in the event assets of the associate. Goodwill relating to an associate whether there is any objective evidence that the investment of liquidation, are measured at either fair value or the is included in the carrying amount of the investment and in the associate is impaired. present ownership instruments’ proportionate share in is neither amortised nor individually tested for impairment. the recognised amounts of the acquiree’s net identifiable If this is the case, the Group calculates the amount of assets. Non-controlling interests that are not present The statement of profit or loss reflects the share of the impairment as the difference between the recoverable ownership interests are measured at fair value. This results of operations of the associate. Where there has amount of the associate and its carrying value and accounting policy choice can be made on an individual 2019 Statements and Financial Report Annual been a change recognised directly in the equity of the recognises the amount in the ‘share of profit of an associate’ business combination basis. associate, the Group recognises its share of any changes in the statement of profit or loss.Upon loss of significant and discloses this, when applicable, in the statement influence over the associate, the Group measures and When the Group acquires a business, it assesses the of changes in equity, either directly or through other recognises any remaining investment at its fair value. Any financial assets and liabilities assumed for appropriate comprehensive income. Profits or losses resulting from differences between the carrying amount of the associate classification and designation in accordance with the transactions between the Group and the associate are upon loss of significant influence and the fair value of the contractual terms, economic circumstances and pertinent eliminated to the extent of the interest in the associate. remaining investment and proceeds from disposal are conditions as at the acquisition date. This includes the recognised in profit or loss. Any interest in the equity of the separation of embedded derivatives in host contracts by The share of profit of the associate is shown on the face associate that was recorded directly in other comprehensive the acquiree. of the statement of profit or loss. This is profit attributable income of the investor is recycled to the profit or loss and is

109 110 Annual Report and Financial Statements 2019 of theGroup’s cash-generating units thatare expected to combination is, from the acquisition date, allocated to each testing,of impairment goodwillacquired inabusiness any accumulated losses. impairment For the purpose After initialrecognition, goodwillismeasured atcostless transferred, thenthe gain isrecognised inprofit orloss. of net assets acquired over the aggregate consideration re-assessment stillresults inanexcess of the fair value amounts to berecognised atthe acquisitiondate. Ifthe assumed andreviews theprocedures usedto measure the identified alloftheassetsacquired andalloftheliabilities interest held,theGroup re-assesses whetherithascorrectly recognised for non-controlling interests, andany previous of theaggregate consideration transferred, theamount If thefair value ofthenetassetsacquired isinexcess acquired andliabilitiesassumed. previous interest held,over thenetidentifiable assets amount recognised for non-controlling interests, andany of theaggregate oftheconsideration transferred andthe Goodwill isinitially measured atcost,beingtheexcess accounted for withinequity. isnotre-measuredas equity andsubsequentsettlement is change to OCI. Contingent consideration thatisclassified fair value recognised eitherinprofit orlossasa Measurement, ismeasured atfair value withchangesin scope ofIFRS 9Financial Instruments: Recognition and andwithin the thatis a financialinstrument or liability date. Contingent consideration classified asanasset acquirer willberecognised atfair value attheacquisition Any contingentconsideration to betransferred by the ofgoodwill. determination is recognised inprofit orloss. Itisthenconsidered inthe acquisition date fair value andany resulting gain orloss previously interest held equity is re-measured at its If thebusiness combinationisachieved instages, any d) Businesscombinationsandgoodwill (continued) (continued) 2. ofsignificantaccountingpolicies Summary Notes (continued) Financial statementsfortheyearended31December2019 or receivable. Later changesinestimates are includedin estimate the revenue in measuring at the amount received rebates ortrade discountswillbeprovided andincludethis When revenue isrecognised thegroup estimates whether stated net of Value Added Tax, rebates and trade discounts. and theamountofrevenue canbemeasured reliably. Itis probable thatfuture economicbenefits will flow tothe Group course oftheGroup’s activities. Itisrecognised whenitis or receivable forinthe thesale ofgoodsandservices Revenue represents thefair value ofconsideration received f) Revenue recognition revenues. operations may beoperating segmentsbefore earning for whichitisyet revenues, to earn for example, start-up An operating segment may engage inbusiness activities iii.for whichdiscrete financialinformation is available. its performance; and about resources to beallocated to thesegmentandassess entity’s chief operating decision maker to make decision ii.whose operating results are regularly reviewed by the of thesameentity); expenses relating to transactions withothercomponents revenues and incur expenses (including revenues and i.that engages inbusiness activitiesfrom whichitmay earn An operating segmentisacomponentofanentity: as theexecutive committee thatmakes strategic decisions performance oftheoperating segments, hasbeenidentified is responsible for allocating resources and assessing decision-maker. The chiefoperating decision-maker, who provided reporting with theinternal to thechiefoperating Operating segmentsare reportedinamannerconsistent e) Segmentreporting those units. assets orliabilitiesoftheacquiree are assignedto benefit from thecombination,irrespective ofwhetherother into during the accounting period andareinto theaccountingperiod recognised during on for ofcover thewhole period provided by contracts entered insurance thetotal contracts comprise premiums payable life term reinsuranceunder short contracts andgeneral which thepolicy iseffective. Gross reinsurance premiums recognised asanexpense whenpayable oronthedate on featurescontracts participation withdiscretionary are Gross reinsurance premiums onlife andinvestment ii) Reinsurance premiums a provision for premiums. unearned attributableproportion to isdeferred subsequentperiods as premiums are calculated onadaily pro rata basis. The relate after to ofrisk periods date. thereporting Unearned are ofpremiums thoseproportions written in a year that written accountingperiods. inprior premiums Unearned forperiod premiums receivable inrespect ofbusiness Premiums includeanyintheaccounting adjustmentsarising on assumptionofrisks. general insurance business, premium incomeisrecognised are recognised onthedate onwhichthepolicy incepts. For by contracts entered and into theaccountingperiod during premiums receivable for ofcover thewholeperiod provided life term insurance the total contractsshort comprise which the policy is effective. Gross written premiums under premium business revenue isrecognised onthedate on as revenue when payable by the policyholder. For single features participating with discretionary are recognised Gross recurring premiums onlife andinvestment contracts i) Gross premiums rendered to thetotalto beprovided. services ofactualservice acceptance basedontheproportion andcustomerrecognised uponperformance oftheservice product and customer is acceptance, while sale of services Sale ofgoodsare recognised ofthe uponthedelivery the revenue line. Financial statements for the year ended 31 December 2019

Notes (continued)

Claims incurred for general business comprise claims paid Dividends are recognised when the Group’s right to 2. Summary of significant accounting policies in the year and changes in the provision for outstanding receive the payment is established. (continued) claims. Claims paid represent all payments made during the year, whether arising from events during that or earlier v) Realised / unrealised gains and losses f) Revenue recognition (continued) years. Outstanding claims represent the estimated ultimate Realised / unrealised gains and losses recorded in the cost of setting all claims arising from incidents occurring the date on which the policy incepts, or risk is assumed. statement of profit or loss on investments include gains prior to the reporting date, but not settled at that date. Premiums include any adjustments arising in the accounting and losses on financial assets and investment properties. Outstanding claims are computed on the basis of the best period in respect of reinsurance contracts incepting in prior Gains and losses on the sale of investments are calculated information available at the time the records for the year are accounting periods. Unearned reinsurance premiums as the difference between net sales proceeds and the closed and include provisions for claims incurred but not are those proportions of premiums written in a year that original or amortised cost and are recorded on occurrence reported (‘’IBNR’’). Outstanding claims are not discounted. relate to periods of risk after the reporting date. Unearned of the sale transaction. reinsurance premiums are deferred over the term of the ii) Reinsurance claims underlying direct insurance policies for risks-attaching vi) Financial services income Reinsurance claims are recognised when the related gross contracts and over the term of the reinsurance contract for insurance claim is recognised according to the terms of losses-occurring contracts. Financial services income includes income from investment the relevant contract. Reinsurance claims are measured management and related activities. This is based on the with reference to the corresponding insurance liability value of the assets managed on behalf of clients such as recognised and the reinsurance agreement. iii)Fees and commission income fund management fees, collective investment and linked product administration fees. Initial fees that relate to the h) Reinsurance Insurance and market linked investment contract liabilities future rendering of services are deferred and recognised policyholders are charged for policy administration as those future services are rendered. The Group cedes insurance risk in the normal course of services, investment management services, surrenders business for all of its businesses. Reinsurance assets and other contract fees. These fees are recognised as g) Benefits, claims and expenses recognition represent balances due from reinsurance companies. revenue over the period in which the related services are Amounts recoverable from reinsurers are estimated in a i) Gross benefits and claims performed. If the fees are for services to be provided in manner consistent with the outstanding claims provision Annual Report and Financial Statements 2019 Statements and Financial Report Annual future periods, then they are deferred and recognised over or settled claims or insurance contract liabilities associated those future periods. Gross benefits and claims for life insurance contracts and with the reinsurer’s policies and are in accordance with the for investment contracts with discretionary participation related reinsurance contract. iv) Investment income features include the cost of all claims arising during the Reinsurance assets are reviewed for impairment at each Investment income comprise of interest income, rental year including internal and external claims handling costs reporting date or more frequently when an indication of income and dividends. that are directly related to the processing and settlement impairment arises during the reporting year. Impairment interest earned from financial assets at fair value through of claims as well as changes in the gross valuation of occurs when there is objective evidence as a result of profit or loss is recognised on a time proportion basis that an event that occurred after initial recognition of the takes into account the effective yield on the asset. insurance and market linked investment contract liabilities. reinsurance asset that the Group may not receive all Death claims and surrenders are recorded on the basis of iv)Investment income outstanding amounts due under the terms of the contract notifications received. Maturities and annuity payments are Rental income is recognised on an accrual basis. recorded when due. and the event has a reliably measurable impact on the amounts that the Group will receive from the reinsurer.

111 112 Annual Report and Financial Statements 2019 recognised atcost. Cost includesexpenditure directly and equipmentare initiallyAll categories ofproperty j) Property andequipment statement offinancialposition. therefore beenaccounted in the as financial instruments registered inthe name oftheadministrator and have Assets underthedepositadministration contracts are the consolidated statement ofprofit orloss. recognised asgross premium andinvestments incomein inthestatementliability offinancialpositionandare not are recorded directly asanadjustmentto theassetand position. Deposits, withdrawals and investments returns at fair value andisincludedinthestatement offinancial of the GroupThe liability to theschemesismeasured benefit schemesonbehalfofthe retirement schemes. The Group administers thefundsofanumber ofretirement i) Depositadministration contracts to policyholders. arrangements donotrelieve theGroup from itsobligations of purchase andare notamortised. Ceded reinsurance in thestatement ofprofit orlossimmediately atthedate Gains orlossesonbuying reinsurance are recognised or loss. lossisrecordedThe impairment inthestatement ofprofit h) Reinsurance (continued) (continued) 2. ofsignificantaccountingpolicies Summary Notes (continued) Financial statementsfortheyearended31December2019 Furniture andequipment Motor vehicles Computers Freehold land following annual rates: to its residual value over its estimated useful life using the write down thecostorrevalued amountofeachasset Depreciation iscalculated usingthe straight-line methodto the year inwhichthey are incurred. expenses are charged to thestatement ofprofit orlossin item canbemeasured reliably. Repairs andmaintenance with the item will flow to the Group and thecost of the when itisprobable thatfuture economicbenefits associated amount orrecognised asaseparate asset,asappropriate, Subsequent costsare includedintheasset’s carrying andthecost oftheitementity canbemeasured reliably. economic benefits associated with theitem will flow tothe are capitalised whenincurred andifitisprobable thatfuture losses.impairment Replacement ormajorinspectioncosts lessaccumulatedservicing, depreciation andaccumulated are stated atcost,excluding the costsofday-to-day Motor vehicles, furniture, equipmentandcomputers computer equipment. of the relatedpart hardware of the is capitalised as part software, includingtheoperating system, thatisanintegral attributable to theacquisitionofassets. Computer - - - - 25% 25% Nil 12.5% in determining theprofitin determining orloss for the year to whichthey fromlosses arising changesinthefair value are included annual valuations outby carried external valuers. Gainsor the openmarket value date by atthereporting determined atfairinvestment iscarried value property representing at costincludingthetransaction costs. Subsequently, including interest inleaseholdland, isinitially recognised or for capital appreciation orboth. Investment property, rentals held to earn and/ Investment is property property k) Investment properties operatingdetermining profit. amountsandareto taken theircarrying into accountin andequipment are by determined referenceof property from its use ordisposal. Gainsand losses ondisposal disposal orwhennofuture economicbenefits are expected andequipmentisderecognisedAn itemupon ofproperty date.each reporting useful lives are reviewed, andadjusted ifappropriate, at item. The assets’ residual values, depreciation method and item, thesamerate ofdepreciation isappliedto thewhole a costthatissignificantin relation to the total costofthe andequipmenthave of itemsWhen ofproperty noparts for. greater value, thanthecarrying nodepreciation isprovided for disposal. Iftheexpected residual value isequalto or when theitem isretired from active useorisbeingheld theitemthat period isidle. Depreciation ofanitem ceases to bedepreciated untilitisderecognised, even ifduring commences whenitisavailable for useandcontinues Depreciation andequipment onanitem ofproperty Financial statements for the year ended 31 December 2019

Notes (continued)

2. Summary of significant accounting policies have been disposed off or when the investment property is management, even when idle. Amortisation ceases at the (continued) permanently withdrawn from use and no future economic earlier of the date that the asset is classified as held for benefit is expected from its disposal. On disposal of an sale and the date that the asset is derecognised. k) Investment properties (continued) investment property, the difference between the disposal proceeds and the carrying amount is charged or credited Internally generated intangible assets, excluding capitalised relate. The carrying amount includes the cost of replacing to profit or loss. development costs, are not capitalised and expenditure is part of an existing investment property at the time that cost reflected in the statement of profit or loss in the year in is incurred if the recognition criteria are met; and excludes Transfers are made to or from investment property which the expenditure is incurred. the costs of day-to-day servicing of an investment property. only when there is a change in use. For a transfer from investment property to owner occupied property, the Software under implementation is recognised as work When the Group can reliably determine the fair value of a deemed cost for subsequent accounting is the fair value in progress at historical costs less any accumulated self-constructed investment property under construction or at the date of change in use. If owner occupied property impairment loss. The cost of such software includes development, any difference between the fair value of the becomes an investment property, the Group accounts for professional fees and costs directly attributable to the property at that date and its previous carrying amount is such property in accordance with the policy stated under software. The software is not amortised until it is ready for recognised in the statement of profit or loss. property and equipment up to the date of the change in the intended use. use. The difference between the carrying value and the fair Intangible assets with finite lives are assessed for value of the properties at the date of reclassification to l) Intangible assets impairment whenever there is an indication that the investment properties is recognised in the statement of intangible asset may be impaired. The amortisation period profit or loss. Software licence costs and computer software that is not an and the amortisation method for an intangible asset with a integral part of the related hardware are initially recognised finite useful life are reviewed at least at each financial year When the Group can reliably determine the fair value of a at cost, and subsequently carried at cost less accumulated end. Changes in the expected useful life or the expected self-constructed investment property under construction or amortisation and accumulated impairment losses. Costs pattern of consumption of future economic benefits development, any difference between the fair value of the that are directly attributable to the production of identifiable embodied in the asset is accounted for by changing 2019 Statements and Financial Report Annual property at that date and its previous carrying amount is computer software products controlled by the company are the amortisation period or method, as appropriate, and recognised in the statement of profit or loss. recognised as intangible assets. Amortisation is calculated are treated as changes in accounting estimates. The using the straight-line method to write down the cost of amortisation expense on intangible assets with finite lives The difference between the carrying value and the fair each licence or item of software over its estimated useful is recognised in profit or loss in the expense category value of the properties at the date of reclassification to life (three to five years). consistent with the function of the intangible asset. investment properties is recognised in the statement of profit or loss. Amortisation begins when the asset is available for use, Intangible assets with indefinite useful lives are tested i.e. when it is in the location and condition necessary for for impairment annually either individually or at the cash Investment properties are derecognised when either they it to be capable of operating in the manner intended by generating unit level. Such intangibles are not amortised.

113 114 Annual Report and Financial Statements 2019 n) Financial assets which they are incurred. costs are recognised in the profit or loss in the year in its intended useor sale are complete. All other borrowing to prepareall activitiesnecessary thequalifyingassetfor incurred. Capitalisation ofborrowing costsceaseswhen amount capitalised cannever exceed theborrowing costs applying thisrate to thecostsincurred ontheasset. The average cost of the general borrowings the year during and (continued) 2. ofsignificantaccountingpolicies Summary borrowing usingtheoverall costisdetermined weighted funds. Inthecaseofgeneral borrowings, thecapitalised the assetlessany investment onsurplus incomeearned incurred ontheamountborrowed specifically to finance borrowing costcapitalised istheactualborrowing cost In theinstance ofspecificfundingbeingobtained, thenet m) Borrowing costs the assetisderecognised. and are recognised inthestatement ofprofit orlosswhen amount of the asset disposal proceeds and the carrying asset are measured as the difference the net between fromGains orlossesarising derecognition ofanintangible is madeonaprospective basis. change intheusefullife assessmentfrom indefinite to finite life assessmentcontinues to besupportable. Ifnot,the life isreviewed annually to whetherindefinite determine The usefullife ofanintangible assetwithanindefinite l) Intangible assets(continued) (continued) 2. ofsignificantaccountingpolicies Summary Notes (continued) Financial statementsfortheyearended31December2019 (ii) thecashflow characteristics oftheasset. assets; and (i) theGroup’s business modelfor managingthefinancial dependson:instruments Classification andsubsequentmeasurement ofdebt such asloans, government andcorporatebonds. definition ofafinancialliability fromtheissuer’s perspective, are thatmeetthe Debt instruments those instruments Debt instruments profit orloss. atfaircarried value through profit orlossare expensed in the financialasset. Transaction costsoffinancialassets costs thatare directly attributable to theacquisitionof at fair value through profit orloss(FVTPL),transaction at itsfair value plus, inthecaseofafinancialassetnot At initialrecognition, theGroup measures afinancialasset iii) Measurement rewards ofownership. and theGroup hastransferred substantially and allrisks the investments have expired orhave beentransferred derecognised to whentherights receive cashflows from commits to purchase orselltheasset. Financial assetsare recognised onthetrade-date, thedate onwhichtheGroup Regular purchases andsalesoffinancialassetsare ii) Recognition andderecognition measurement categories: The Group classifies itsfinancialassetsinthe following i) Classification thosetocost. bemeasured atamortised thoseto bemeasured subsequently atfair value recognised inprofit orlossandpresented netwithinother debt investment thatissubsequently measured atFVPLis cost orFVOCI are measured atFVPL. A gain orlossona separate lineitem inthestatement ofprofit orloss. expenses(losses) andimpairment are presented as exchange gains andlossesare presented inothergains/ income usingtheeffective interest rate method. Foreign income from thesefinancialassetsisincludedin finance loss andrecognised inothergains/ (losses). Interest recognised inOCIisreclassified from equity to profit or derecognised, thecumulative gain or losspreviously recognised in profit orloss. When the financialasset is and foreign exchange gains andlosseswhichare gainsrecognition orlosses, ofimpairment interest income amountare takencarrying through OCI,except for the and interest, are measured atFVOCI. Movements inthe assets’ cashflows represent solely payments ofprincipal cash flows and for sellingthefinancialassets, where the item inthestatement ofprofit orloss. losses. losses are presented Impairment asseparate line gains/ (losses)together withforeign exchange gains and recognised directly inprofit orloss and presented inother rate method. Any gain onderecognition orlossarising is is includedinfinanceincomeusingtheeffective interest cost.amortised Interest incomefrom thesefinancialassets solely payments andinterest ofprincipal are measured at contractual cashflows where thosecash flows represent categories: intoinstruments oneofthefollowing three measurement Based onthesefactors, theGroup classifies itsdebt FVPL: forAssets thatdonotmeetthecriteria amortised FVOCI: Assets thatare heldfor collectionofcontractual cost:Amortised Assets thatare heldfor collectionof Financial statements for the year ended 31 December 2019

Notes (continued)

2. Summary of significant accounting policies Where the contractual terms introduce exposure to risk fair value. (continued) or volatility that are inconsistent with a basic lending arrangement, the related financial asset is classified and iii) Determination of fair value Debt instruments (continued) measured at fair value through profit or loss. The Group For financial instruments traded in active markets, the reclassifies debt investments when and only when its determination of fair values of financial assets and gains/ (losses) in the period in which it arises. business model for managing those assets changes. financial liabilities is based on the price that would be received to sell an asset or paid to transfer a liability in Business model: the business model reflected how the Equity instruments an orderly transaction between market participants at the Group manages the assets in order to generate cash flows measurement date. This includes listed equity securities The Group subsequently measures all equity investments and quoted debt instruments on major exchanges (NSE). i.e. whether the Group’s objective is solely to collect the at fair value. Where the Group’s management has The quoted market price used for financial assets held by contractual cash flows from the assets or is to collect elected to present fair value gains and losses on equity the Group is the current bid price. both the contractual cash flows and cash flows arising investments in OCI, there is no subsequent reclassification from the sale of assets. If neither of these is applicable of fair value gains and losses to profit or loss following A financial instrument is regarded as quoted in an active (e.g. financial assets held for trading purposes), then the the derecognition of the investment. Dividends from such market if quoted prices are readily and regularly available financial assets are classified as part of ‘other’ business investments continue to be recognised in profit or loss as from an exchange, dealer, broker, industry, pricing service model and measured at FVTPL. Factors considered by the other income when the Group’s right to receive payments or regulatory agency, and those prices represent actual Group in determining the business model for a group of is established. and regularly occurring market transactions on an arm’s assets include past experience on how the cash flows for Investments in equity instruments at FVTOCI are initially length basis. If the above criteria are not met, the market is these assets were collected, how the asset’s performance measured at fair value plus transaction costs. Where the regarded as being inactive. is evaluated and reported to key management personnel asset is disposed of, the cumulative gain or loss previously and how risks are assessed and managed. accumulated in the investments revaluation reserve is not For example a market is inactive when there is a wide bid- reclassified to profit or loss, but is reclassified to retained offer spread or significant increase in the bid-offer spread 2019 Statements and Financial Report Annual SPPI: Where the business model is to hold assets to earnings. Dividends earned are recognised in the profit or or there are few recent transactions. collect contractual cash flows or to collect contractual cash loss statement and are included in the ‘investment income’ flows and sell, the Group assesses whether the financial line item. For all other financial instruments, fair value is determined instruments’ cash flow represent solely payments of using valuation techniques. In these techniques, fair principal and interest (‘SPPI test’). In making this Changes in the fair value of financial assets at FVPL are values are estimated from observable data in respect of assessment, the Group considers whether the contractual recognised in other gains/ (losses) in the statement of profit similar financial instruments, using models to estimate cash flows are consistent with a basic lending arrangement or loss as applicable. Impairment losses (and reversal of the present value of expected future cash flows or other i.e. includes only consideration for the time value of money, impairment losses) on equity investments measured at valuation techniques, using inputs existing at the dates of credit risk, other basic lending risks and a profit margin that FVOCI are not reported separately from other changes in the statement of financial position. is consistent with a basic lending arrangement.

115 116 Annual Report and Financial Statements 2019 inputs to thefair value measurement initsentirety: measurement are observable andthesignificanceof hierarchy basedonthedegree to whichtheinputsto the Fair values are categorised into three levels inafair value iii) Determination offairvalue (continued) (continued) 2. ofsignificantaccountingpolicies Summary Notes (continued) a significantincrease increditrisk. methodology applieddependson whetherthere hasbeen costandFVOCI. atamortised carried The impairment expected credit lossesassociated withitsdebtinstruments The Group assessesonaforward lookingbasisthe iv) Impairment whichthechangeoccurred.during recognised by theGroup period attheendofreporting Transfers levels between ofthefair value hierarchy are (unobservable inputs). that areliability not based on observable market data valuation techniques thatincludeinputsfor theassetor orindirectlyas prices) (i.e. derived from prices). are observable for theassetorliability, eitherdirectly (i.e. inputs otherthanquoted includedwithinLevel prices 1that assets orliabilities. quoted (unadjusted) prices inactive markets for identical Level 3fair value measurements are thosederived from Level 2fair value measurements are thosederived from Level 1fair value measurements are thosederived from Financial statementsfortheyearended31December2019 which theamountrecognised willbe12-month ECLs: equal to lifetime ECLs, except inthefollowing cases, for The Group willrecognise lossallowances atanamount date.the reporting default events thatare possible withinthe12 monthsafter 12-month ofECLsthatresult ECLsare from theportion over theexpected life whereas ofafinancialinstrument, are theECLsthatresult from allpossible default events to either12-month ECLsorlifetime ECLs. Lifetime ECLs The Group recognises loss allowance at an amount equal and financialassetsmeasured atFVPL. lossisrecognised investments onequity No impairment FVTOCI: thatarefinancial instruments notmeasured atFVTPLor model. model applies toThe new the following impairment 39 withaforward-looking ‘expected credit loss’ (“ECL”) IFRS 9replaced theprevious ‘incurred loss’ modelinIAS Cash andbankbalances. cost; Depositswithfinancialinstitutionsatamortised and cost; Corporate bondsatamortised andpolicy loans; Mortgage Rent andotherreceivables; Receivables from arising direct insurance arrangements cost Governmentmeasured securities atamortised Group expects to receive; accordance with the contract andthecashflows thatthe the difference thecashflows between duein to theentity date:reporting thepresent value –i.e. ofallcashshortfalls and willbemeasured asfollows: ECLs are aprobability-weighted estimate ofcredit losses Measurement ofexpected credit losses measurement ofECLs. increased significantly sinceinitial recognition; and detail below: inthefollowingparticularly areas, whichare discussedin management judgement,estimates andassumptions, ECLs. requirementsThe impairment ofIFRS 9require always bemeasured atanamountequalto lifetime Loss allowances for premium andrent receivables will significantly sinceinitial recognition. receivables) for whichcredit hasnotincreased risk securities; and ‘investment-grade’ andinvestments ingovernment is equivalent to the globally understood definition of toinstrument have low credit whenitscredit rating risk risk date. atthereporting risk The Group willconsideradebt financialassetsthatare notcredit-impaired atthe forward-looking incorporating information into the has assessingwhetherthecredit ofaninstrument risk (otherthantrade andlease Otherfinancialinstruments thatare Debtinstruments to determined have low credit Financial statements for the year ended 31 December 2019

Notes (continued)

2. Summary of significant accounting policies (continued)

Measurement of expected credit losses (continued)

financial assets that are credit-impaired at the reporting date: the difference between the gross carrying amount and the present value of estimated future cash flows;

An asset is credit-impaired if one or more events have occurred that have a detrimental impact on the estimated future cash flows of the asset.

Expected credit losses Expected credit losses are computed as a product of the Probability of Default (PD), Loss Given Default (LGD) and the Exposure at Default (EAD).

ECL = PD x LGD x EAD

In applying the IFRS 9 impairment requirements, the Group follows one of the approaches below:

The general approach

The simplified approach

The Group will apply the approaches below to each of its assets subject to impairment under IFRS 9: Annual Report and Financial Statements 2019 Statements and Financial Report Annual Financial Asset Impairment approach Loans (mortgage and policy loans) General approach

Receivables arising out of direct insurance arrangements Simplified approach

Rent and inter-company receivables General approach Corporate bonds at amortised cost General approach Deposits with financial institutions at amortised cost General approach Cash and bank balances General approach

117 118 Annual Report and Financial Statements 2019 be recognised. ECL torecogniseaswell ashow interestincomeshould boththe amountof of threestagesinordertodetermine whetherthefinancialassetisinone Group determines date, the Under thegeneral approach,ateachreporting General ApproachThe v)Impairment (continued) (continued) 2. ofsignificantaccountingpolicies Summary Notes (continued) recognised in profit or loss as an impairment gainorloss.recognised inprofitorlossasan impairment The changesinthelossallowance balanceare amountofthefinancialassetlessECL.carrying interest incomewillbecalculatedbasedonthegross now recogniseinterestincomeonanetbasis. Assuch, Group willcontinue torecogniselifetime ECLbut they will incurred lossevent. For financialassetsinstage3, the This iseffectively thepointatwhichtherehasbeenan basis. interest incomewillcontinue toberecognisedonagross to stage2,theGroupwillrecogniselifetime ECLbut since initialrecognition. When afinancialasset transfers amount ofthefinancialassetbefore adjustingfor ECL. that interestwillbecalculatedonthegross carrying recognise interestincomeonagross basis–thismeans in stage1,theGroupwillrecognise12monthECLand significantly sinceinitialrecognition. For financialassets Stage3 -wherethefinancialassetiscreditimpaired. hasincreasedsignificantly Stage2 -wherecreditrisk hasnotincreased Stage1 -wherecreditrisk Financial statementsfortheyearended31December2019 when: The Groupwillconsiderafinancialassettobeindefault Definition ofdefault credit losses. loss allowance atanamountequal tolifetime expected Under thesimplifiedapproach,Groupmeasures The Simplified approach over timetoreflectchangesincircumstances. is indefaultinstrument andtheirsignificancemay vary Inputs intotheassessmentofwhetherafinancial external sources. another obligation ofthesameissuertoGroup; and indicators offinancialdistress; default, theGroupconsidersindicatorsthatare: orborrower isin In assessingwhetherthecounterparty IFRS 9andexisting practice oftheGroup; or will beconsistentwiththerebuttable setoutby criteria due onanycreditobligation material totheGroup. This held); or (ifanythe Grouptoactionssuchasrealisingsecurity is credit obligations totheGroupinfull,withoutrecourseby Basedondatadeveloped andobtainedfrom internally Quantitative: e.g. Overdue statusandnon-payment of Qualitative: e.g. Breachofcovenant andother orborrower ismorethan90days past thecounterparty orborrower isunlikely topay thecounterparty their • theaverage timebetween theidentificationofa asset becomes30days pastdue; donotalignwiththepointintimewhenan • thecriteria beforeincreases increditrisk anexposure isindefault; arecapable ofidentifyingsignificant • thecriteria reviews that: toconfirm byto identifysignificantincreasesincreditrisk regular The Groupmonitorstheeffectiveness used ofthecriteria expected creditlosses. expected creditlossesandonethatisbasedonlifetime requirement tomeasureanallowance basedon12-month in establishing thepointofswitching between the iskeyThe assessmentofsignificantdeterioration estimated oninitialrecognitionoftheexposure. date;the reporting with comparing: hasoccurredforincrease increditrisk anexposure by identifieswhetherasignificant The Groupprimarily assessment andforward-looking information. based ontheGroup’s experience, historical credit expert both quantitative andqualitative information andanalysis and available withoutunduecostoreffort. This includes reasonable information thatisrelevant andsupportable significantly sinceinitialrecognition,theGroupconsiders of default) hasincreased onafinancialinstrument (i.e. whetherthecreditrisk When determining risk Significant increase incredit risk (SIICR) Theremaininglifetime PDfor thispointintimethatwas The remaininglifetime probabilityofdefault (PD)asat Financial statements for the year ended 31 December 2019

Notes (continued)

2. Summary of significant accounting policies EAD represents the expected exposure in the event of (continued) a default. The Group derives the EAD from the current Significant increase in credit risk (SIICR) (continued) Measurement of ECL exposure to the counterparty and potential changes to the current amount allowed under the contract, including significant increase in credit risk and default appears The key inputs into the measurement of ECL are the amortisation, and prepayments. The EAD of a financial reasonable; term structures of the following variables (i)Probability of asset is its gross carrying amount. • exposures are not generally transferred from 12-month Default; (ii) Loss given default (LGD); and (iii) Exposure at ECL measurement to credit-impaired; and default (EAD). As described above, and subject to using a maximum • there is no unwarranted volatility in loss allowance of a 12-month PD for financial assets for which credit from transfers between 12-month and lifetime ECL To determine lifetime and 12-month PDs, the Group risk has not significantly increased, the Group measures measurements. uses internally developed PD tables based on the default ECL considering the risk of default over the maximum history of obligors with the same credit rating. The Group contractual period (including any borrower's extension Incorporation of forward-looking information adopts the same approach for unrated investments by options) over which it is exposed to credit risk, even if, for mapping its internal risk grades to the equivalent external risk management purposes, the Group considers a longer The Group incorporates forward-looking information credit ratings (see (i)).The PDs are recalibrated based period. Where modelling of a parameter is carried out on into both its assessment of whether the credit risk of on current bond yields and CDS prices, and adjusted to a collective basis, the financial instruments are grouped an instrument has increased significantly since initial reflect forward-looking information as described above. on the basis of shared risk characteristics, which include: recognition and its measurement of ECL. It formulates Changes in the rating for a counterparty or exposure lead instrument type; credit risk grading; collateral type; date a 'base case' view of the future direction of relevant to a change in the estimate of the associated PD. of initial recognition; remaining term to maturity; industry; economic variables and a representative range of other and geographic location of the borrower. possible forecast scenarios based on a variety of external LGD is the magnitude of the likely loss if there is a actual and forecast information. External information default. The Group estimates LGD parameters based on The groupings are subject to regular review to ensure that includes economic data and forecasts published by the history of recovery rates of claims against defaulted exposures within a particular group remain appropriately governmental bodies and monetary authorities. counterparties. The LGD models consider the structure, homogeneous. 2019 Statements and Financial Report Annual collateral, seniority of the claim, counterparty industry The base case represents a best estimate and is aligned and recovery costs of any collateral that is integral to the When ECL are measured using parameters based with information used by the Group for other purposes, financial asset. For loans secured by retail property, loan- on collective modelling, a significant input into the such as strategic planning and budgeting. The other to-¬value ratios are a key parameter in determining LGD. measurement of ECL is the external benchmark scenarios represent more optimistic and more pessimistic LGD estimates are recalibrated for different economic information that the Group uses to derive the default rates outcomes. The Group also periodically carries out scenarios. They are calculated on a discounted cash flow of its portfolios. This includes the PDs provided by rating stress-testing of more extreme shocks to calibrate its basis using the effective interest rate as the discounting agencies. determination of these other representative scenarios. factor.

119 120 Annual Report and Financial Statements 2019 factors: does thisby amongothers, considering, thefollowing substantially different terms. totheoriginal The Group are the Groupassesseswhetherornotnew terms contractual cashflows ofsecurities. When thishappens, The Grouprarely renegotiatesorotherwisemodifiesthe vi) Modificationofcontracts credit lossexperience over thepastfew years. calculated withreference todays pastdueandactual atusingaprovision matrix.determined Lossrates are The ECLofoperating insurance receivables are Insurance receivables vi) Modificationofcontracts (continued) (continued) 2. ofsignificantaccountingpolicies Summary Notes (continued) a ‘new’ assetatfair value andrecalculates anew EIR financialassetandrecognises derecognises theoriginal aresubstantially different,If theterms theGroup associated withtheloan. enhancements thatsignificantlyaffect thecreditrisk in;or borrower isnot infinancialdifficulty; affect profileoftheinstrument; therisk Inclusion of collateral, other security orcredit Inclusionofcollateral, othersecurity is denominated Changeinthecurrencysecurity Significantchangeininterestrate; Significantextension whenthe ofthecontract term Whetherany areintroducedthat substantialnew terms isinfinancialdifficulty; Ifthecounterparty Financial statementsfortheyearended31December2019 Kenya Shillings. Transactions inforeign currenciesduring environment inwhich theGroupoperates), whichis economic functional currency(the of theprimary On initialrecognition,alltransactions arerecordedinthe reasonable expectation offullrecovery in full,but offduetono whichhave written beenpartially The Groupstillseekstorecover amountsitislegallyowed year ended31December201was KShsNil(2018: Nil). the offduring contractual amountsofsuchassetswritten still subjecttoenforcement activity. The outstanding The Groupmay financialassetsthatare write-off reasonable expectation ofrecovering in full. and thevalue ofthecollateral issuchasthereno activity; and(ii)theGroup is foreclosing oncollateral expectation ofrecovery include(i)ceasingenforcement of recovery. Indicatorsthatthereisnoreasonable has concludedthatthereisnoreasonable expectation when ithasexhausted allpractical recoveryand effort offfinancialassets,The Groupwrites inwholeorpart vii) Write off policy EIR. original recalculated by discountingthemodifiedcashflows atthe loss inprofitorloss. The newamountis gross carrying financial assetandrecognisesamodificationgainor amountbasedontherevisedcarrying cashflows ofthe derecognition, andtheGrouprecalculatesgross renegotiation ormodificationdoesnotresultin arenotsubstantiallydifferent,If theterms the whether aSICRhasoccurred. ofdetermining includingthepurpose calculation purposes, considered thedateofinitialrecognitionfor impairment for theasset. The dateofrenegotiationisconsequently described in (n)(ii)havedescribed beenmet. forwhen thederecognitioncriteria financialassets, as of profitorloss. Insurance receivables arederecognised the expected creditlossmodel,recordedinthestatement using lossdetermined for with the impairment impairment, value ofinsuranceThe carrying receivables isreviewed cost,usingtheeffectiveamortised interestrate method. initial recognition,insurance receivables aremeasured at consideration received orreceivable. Subsequentto measured oninitialrecognitionatthefair value ofthe Insurance receivables arerecognisedwhendueand p) Insurance receivables development toitspresentcondition. landand calculated onspecificcostsincurredtobring and releasedtoincomeastheplotsaresold. Costis incurred inrespectofunsoldplots, whicharecapitalised land anddevelopment costs includesinfrastructure the lower ofcostandnetrealisable value. The costof Inventory, plotsheldfor comprising resaleisstatedat other comprehensive income. available-for-sale underIAS39),whicharerecognisedin financialassets(previouslynon-monetary classifiedas arise, except for differences ontranslation of arising in thestatementofprofitorlossyear inwhichthey from year-end translation arerecognisedonanetbasis and lossesfromthesettlementofsuchtransactions and as atthatdate. The resultingforeign exchange gains functional currencyusingtheexchange rate prevailing denominated inforeign currenciesaretranslated intothe date assetsandliabilitiesatthereporting Monetary the exchange rate prevailing atthetransaction date. the year areconverted intothefunctionalcurrencyusing Financial statements for the year ended 31 December 2019

Notes (continued)

2. Summary of significant accounting policies Group. Adjustments to the liabilities at each reporting benefit scheme for qualifying employees. The Company (continued) date are recorded in the statement of profit or loss. and all its employees also contribute to the National Social Security Fund which is also a defined contribution q) Insurance liabilities r) Insurance liabilities (continued) scheme. A defined contribution plan is a pension plan The provision for unearned premiums represents that under which the Company pays fixed contributions portion of premiums received or receivable that relates into a separate entity. The Company has no legal or Insurance contract liabilities (including investment to risks that have not yet expired at the reporting date. constructive obligations to pay further contributions if the contracts with discretionary participation features) are It is assumed that premiums are earned uniformly over fund does not hold sufficient assets to pay all employees reported gross of reinsurance assets. Life insurance the contract period. The Group uses the 1/365 method the benefits relating to employee service in the current liabilities are recognised when contracts are entered in computing this reserve. The estimate of the incurred and prior periods. The Company’s contributions to into and premiums are charged. These liabilities are claims that have not yet been reported to the Group the defined contribution schemes are charged to the measured by using the Gross Premium Valuation (IBNR) is computed using the Basic chain ladder, statement of profit or loss in the year to which they method in accordance with the Insurance Act and Bornhuetter Ferguson and Standard development relate. related guidelines. The liability is determined as the sum methods. The basic assumption using this method is that of the discounted value of the expected future benefits, claims will emerge in a similar way in each development ii) Cash settled non-share entitlements claims handling and policy administration expenses, year. policyholder options and guarantees and investment The Company has a long-term retirement benefit income (for non-market linked insurance contracts this Profits originated from margins of adverse deviations on scheme that is separately administered by Trustees item is excluded) from assets backing such liabilities, run-off contracts are recognised in the statement of profit under a legal entity registered with the Retirement which are directly related to the contract, less the or loss over the life of the contract, whereas losses are Benefits Authority (RBA). The Company has no legal or discounted value of the expected theoretical premiums fully recognised in the statement of profit or loss during constructive obligations to pay further contributions if that would be required to meet the future cash outflows the first year of run-off. The liability is derecognised when the fund does not hold sufficient assets to pay qualifying based on the valuation assumptions used. The liability is the contract expires, is discharged or is cancelled. employees the benefits due to them on vestation. The either based on current assumptions or calculated using amount expensed each year is based on the increase 2019 Statements and Financial Report Annual the assumptions established at the time the contract At each reporting date, an assessment is made of in value of In-force (VIF) and charged directly to the was issued, in which case a margin for risk and adverse whether the recognised life insurance liabilities are statement of profit or loss on approval by the Board of deviation is generally included. adequate, net of related PVIF(present value insurance directors. The Company has no claim whatsoever on the in force) and DAC (deferred acquisition cost – refer amounts that have not vested as this is redistributed to to accounting policy x), by using an existing liability the existing qualifying members. A separate reserve for longevity may be established and adequacy test as laid out under the Kenyan Insurance included in the measurement of the liability. Furthermore, Act. iii) Bonus the liability for life insurance contracts comprises the Staff are entitled to a bonus which is based on preset provision for unearned premiums and, as well as for s) Employee entitlements performance parameters on an annual basis. The full claims outstanding, which includes an estimate of the i) Retirement benefit obligations cost of the bonus is expensed in the year in which it is incurred claims that have not yet been reported to the The Company operates a defined contribution retirement incurred.

121 122 Annual Report and Financial Statements 2019 cost usingtheeffective interestrate method. Insurance to initialrecognition,they aremeasuredatamortised claim payable plusdirectlyattributable costs. Subsequent measured oninitialrecognitionat thefair value ofthe Insurance payables arerecognisedwhendueand in thestatementofprofitorloss. liabilities atfair value throughprofitorlossare recognised process.the amortisation Gainsandlossonfinancial cost arerecognisedonderecognitionandthrough Gains andlossesonfinancialliabilitiesatamortised cost. atamortised financial liabilitiesandarecarried Borrowings, trade andother liabilitiesareclassifiedas atfairthrough profitorlosswhicharecarried value. interest methodexcept for financialliabilitiesatfair value costusingtheeffective atamortised liabilities arecarried statement ofprofitorloss. Subsequently, allfinancial fair value andthetransaction costsareexpensed inthe through profitorloss, whichareinitiallyrecognisedat the exception atfair offinancialliabilitiescarried value of theconsideration given plusthetransaction costwith All financialliabilitiesarerecognisedinitiallyatfair value t) Otherfinancialliabilitiesandinsurance payables position dateisrecognisedasanexpense accrual. annual leave entitlementatthestatementoffinancial liabilityforThe estimatedmonetary employees accrued iv) Otherentitlements (continued) 2. ofsignificantaccountingpolicies Summary Notes (continued) Financial statementsfortheyearended31December2019 reflects thetaxconsequencesthat would follow fromthe The measurementofdeferred taxassetsandliabilities asset isrecovered ortheliabilityissettled. at thebalancesheetdateandexpected toapplywhenthe using taxrates andlaws enactedorsubstantively enacted purposes, amountsfortheir carrying financialreporting between thetaxbasesofassetsandliabilities arising Deferred for differences taxisdetermined alltemporary Deferred incometax date. reporting those thatareenactedorsubstantively enactedasatthe rates andtaxlaws usedtocomputetheamountare accordance withtheKenyan Income Tax Act. The tax payable onthetaxable profitfor in theyear determined Current incometaxistheamountof Current incometax equity. in equity, inwhichcaseitisalsorecogniseddirectly comprehensive income, ortoitemsrecogniseddirectly income, inwhichcaseitisalsorecognisedother it relatestoitemsrecognisedinothercomprehensive recognised inthestatementofprofitorlossexcept when theprofitorlossforin determining theyear. Tax is (credited) inrespectofcurrenttaxanddeferred tax Income taxexpense istheaggregate amountcharged/ u) Incometaxexpense liability issettled,cancelledorexpired. payables arederecognisedwhentheobligation underthe premium taxes except: recognised netoftheamountvalue addedtaxes and Revenues, expenses andassetsliabilities are Value added taxes andpremium taxes profits willallow thedeferred taxassettoberecovered. the extent thatithasbecomeprobable thatfuturetaxable appropriate, therecognisedamountisadjustedtoreflect and,if period reassessed attheendofeachreporting Recognised andunrecogniseddeferred taxassetsare differencesagainst whichtemporary canbeutilised. it isprobable thatfuturetaxable profitswillbeavailable Deferred taxassetsarerecognisedonlytotheextent that affects neithertheaccountingnortaxable profitorloss. business combination,thatatthetimeoftransaction recognition ofanassetorliability, otherthan through a differencestemporary except ontheinitial thosearising Deferred taxliabilitiesarerecognisedfor alltaxable investment willberecovered property throughsale. rebuttable amountofthe presumptionthatthecarrying that ismeasuredusingthefair value model,thereisa of itsassetsorliabilities. However, for investment property torecover amount period, orsettlethecarrying reporting manner inwhichtheGroupexpects, attheendof amount ofvalue addedtaxes orpremiumtaxincluded. oftheexpense itemasapplicable;asset oraspart or ofthecostacquisition is recognisedaspart the taxationauthority, inwhichcasethevalue addedtax isnotrecoverablea purchaseofassetsorservices from receivables andpayables thataremeasured withthe whenthevalue addedtaxes orpremiumtaxincurredon Financial statements for the year ended 31 December 2019

Notes (continued)

2. Summary of significant accounting policies x) Expenses such indication exists, or when annual impairment testing (continued) for an asset is required, the Group estimates the asset’s Expenses are recognised in the statement of profit or loss recoverable amount. An impairment loss is recognised Value added taxes and premium taxes (continued) when a decrease in future economic benefits related to for the amount by which the asset’s carrying amount a decrease in an asset or an increase of a liability has exceeds its recoverable amount. An asset’s recoverable Outstanding net amounts of value added taxes or arisen that can be measured reliably and is independent amount is the higher of an asset’s or cash-generating premium tax recoverable from, or payable to, the taxation from transactions with equity participants. This means, in unit’s fair value less costs to sell and its value in use. authority is included as part of receivables or payables in effect, that recognition of expenses occurs simultaneously The recoverable amount is determined for an individual the statement of financial position. with the recognition of an increase in liabilities or a asset, unless the asset does not generate cash inflows decrease in assets (for example, the accrual of employee that are largely independent of those from other assets or v) Dividends entitlements or the depreciation of equipment). groups of assets. In assessing value in use, the estimated future cash flows are discounted to their present value Dividends on ordinary shares are recognised as a liability i)When economic benefits are expected to arise over using a pre-tax discount rate that reflects current market in the year in which they are declared. Dividends several accounting periods and the association with assessments of the time value of money and the risks for the year that are approved after the reporting date are income can only be broadly or indirectly determined specific to the asset. In determining fair value less costs dealt with as a non-adjusting event after the reporting expenses are recognised in the statement of profit or to sell, an appropriate valuation model is used. date. loss on the basis of systematic and rational allocation procedures. This is often necessary in recognising the Impairment losses of continuing operations are w)Deferred acquisition cost equipment associated with the using up of assets such as recognised in the statement of profit or loss in those property, plant and equipment in such cases the expense expense categories consistent with the function of the Incremental costs directly attributable to the acquisition is referred to as a depreciation or amortisation. These impaired asset, except for property previously revalued of insurance and investment contracts with discretionary allocation procedures are intended to recognise expenses where the revaluation was taken to other comprehensive participating features and investment management in the accounting periods in which the economic benefits income. In this case the impairment is also recognised services are capitalized to a deferred acquisition cost associated with these items are consumed or expire. in other comprehensive income up to the amount of any 2019 Statements and Financial Report Annual (DAC) asset if they are separately identifiable, can be previous revaluation. measured reliably and its probable that they will be ii)An expense is recognised immediately in the statement recovered. DAC are amortized in the statement of profit of profit or loss when expenditure produces no future An assessment is made at each reporting date as to or loss over the term of the contracts as the related economic benefits or when, and to the extent that, future whether there is any indication that previously recognised services are rendered and revenue recognized, which economic benefits do not qualify, or cease to qualify, for impairment losses may no longer exist or may have varies from year to year depending on the outstanding recognition in the statement of financial position as an decreased. If such indication exists, the Group makes an term of the contracts in force. The DAC asset is tested asset. estimate of recoverable amount. A previous impairment for impairment bi annually and written down when it is loss is reversed only if there has been a change in the not expected to be fully recovered. For the period to the y) Impairment of non-financial assets estimates used to determine the asset’s recoverable end of the year, no DAC asset has been recognized since amount since the last impairment loss was recognised. the incremental costs cannot be separately identified and The Group assesses at each reporting date whether there If that is the case the carrying amount of the asset is measured reliably. is an indication that an asset may be impaired. If any increased to its recoverable amount. That increased

123 124 Annual Report and Financial Statements 2019 31 Decemberandwhencircumstances indicate Goodwill istestedfor annually as at impairment Goodwill cashflows.underlying are suitable ofthe rates whichreflecttherisks inaperiod.written Growth anddiscountrates used future distributable profitsgenerated frombusiness contribution representsthepresent value ofprojected the value ofin-force covered business. New business ofthe lifeadjusted networth insurance business plus the Grouptomake anestimateofthetotal less coststosellcalculation. The calculation requires based onafairbusiness hasbeendetermined value The recoverable amountfor thelife insurance ofspecificassets: impairment The following arealsoappliedinassessing criteria revaluation increase. amount, inwhichcasethereversal istreatedasa atrevaluedof profitorlossunlesstheassetiscarried years. Suchreversal isrecognisedinthestatement y) Impairment ofnon-financialassets lossbeenrecognisedfor impairment theassetinprior have netofdepreciation,hadno beendetermined, amount cannotexceedthatwould thecarrying y) Impairment ofnon-financialassets(continued) (continued) 2. ofsignificantaccountingpolicies Summary Notes (continued) Financial statementsfortheyearended31December2019 resources embodyingeconomicbenefits willberequired of apastevent, anditis probable thatanoutflow of present obligation (legalorconstructive) asaresult Provisions arerecognisedwhentheGrouphasa z) Provisions amount inthestatementofprofitorloss. value andrecognisesthis costs tosellandthecarrying difference between thefair value oftheassociateless asbeingthe Group calculatestheamountofimpairment investment inassociateisimpaired. Ifthisisthecase date whetherthereisany objective evidence thatthe in associates. ateachreporting The Groupdetermines lossoftheGroup’sadditional impairment investments torecognisean whetheritisnecessary determines After applicationoftheequitymethod,Group Associates value maycarrying beimpaired as appropriate,andwhencircumstancesindicatethatthe annually asat31DecembertheCGUlevel,impairment Intangible assetswithindefiniteusefullives aretestedfor Intangible assets cannot bereversed infutureperiods. loss isrecognised. lossesrelatingtogoodwill Impairment amount,animpairment CGU islessthanitscarrying goodwill relates. When therecoverable amountofthe amount ofeachCGU(orgroup ofCGUs)towhichthe fordetermined goodwillby assessingtherecoverable value maythat thecarrying beimpaired. is Impairment and liabilitiesinthenext financialperiod. estimates thatmay affectvalues ofassets thecarrying by theGroup, judgementsand thedirectors make certain In theprocessofapplyingaccounting policiesadopted estimation uncertainty and ab) Significantjudgements key sources of defined above, netofoutstandingbankoverdrafts. cash equivalents consistofcashandequivalent as For oftheconsolidatedcashflow, thepurpose cashand liabilities. bank overdrafts areincludedasborrowings undercurrent of bankoverdrafts. Inthestatementoffinancialposition, ofchangesinvalue,are subjecttoaninsignificantrisk net readily convertible toknown amountsofcashandwhich months orlessfromthedateofacquisition,thatare deposits, ofthree withmaturities on demandandterm Cash andcashequivalents includecashinhandand aa) Cashandcashequivalents the passageoftimeisrecognisedasafinancecost. discounting isused,theincreaseinprovision dueto specifictotheliability.where appropriate, therisks Where are discountingusingacurrentpre-taxrate thatreflects, effect ofthetimevalue ofmoney provisions ismaterial, statement ofprofitorlossnetany reimbursement. Ifthe expense relatingtoany provision ispresentedinthe certain.only whenthereimbursement isvirtually The reimbursement isrecognisedasaseparate assetbut expects someorallofaprovision tobereimbursed, the made oftheamountobligation. Where theGroup to settletheobligation andareliable estimatecanbe Financial statements for the year ended 31 December 2019

Notes (continued)

future cash flows. 2. Summary of significant accounting policies b.Whether the Group has control over investee in view of (continued) the criteria set out under IFRS 10. The main assumptions used relate to mortality, morbidity, longevity, investment returns, expenses, lapse and ab) Significant judgements and key sources of These are; surrender rates and discount rates. The Group base estimation uncertainty (continued) power over the investee mortality and morbidity on standard industry and Kenya’s exposure, or rights, to variable returns from its mortality tables which reflect historical experiences, Such judgements and estimates are based on historical involvement with the investee, and adjusted when appropriate to reflect the Group’s unique experience and other factors, including expectations of the ability to use its power over the investee to affect risk exposure, product characteristics, target markets and future events that are believed to be reasonable under the the amount of the investor's returns own claims severity and frequency experiences. For those current circumstances. The directors evaluate these at contracts that insure risk to longevity, prudent allowance each financial reporting date to ensure that they are still In the process of applying the Group’s accounting is made for expected future mortality improvements, but reasonable under the prevailing circumstances based on policies, management has made judgements in epidemics, as well as wide ranging changes to life style, the information available. determining: could result in significant changes to the expected future (a)The classification of financial assets and leases mortality exposure. The preparation of the Group’s financial statements (b)Classification of contracts as insurance or investments requires management to make judgments, estimates contracts Estimates are also made as to future investment income and assumptions that affect the reported amounts (c)Whether assets are impaired. arising from the assets backing life insurance contracts. of revenues, expenses, assets and liabilities and the (d)Whether land and buildings meet the criteria to be These estimates are based on current market returns as disclosure of contingent liabilities, at the reporting date. classified as investment property. well as expectations about future economic and financial However, uncertainty about these assumptions and developments. Assumptions on future expense are based estimates could result in outcomes that could require a ii) Key sources of estimation uncertainty on current expense levels, adjusted for expected expense material adjustment to the carrying amount of the asset or inflation adjustments if appropriate. liability affected in the future. a) Valuation of insurance contract liabilities Lapse and surrender rates are based on the Group’s 2019 Statements and Financial Report Annual i)Significant judgements made in applying the Group’s Critical assumptions are made by the actuary in historical experience of lapses and surrenders. Discount accounting policies: determining the present value of actuarial liabilities. rates are based on current industry risk rates, adjusted These assumptions are set out in accounting policy (s) for the Group’s own risk exposure. The judgements made by the directors in the process of above and in 5(a) of the embedded value report. The applying the Group’s accounting policies that have the liability for life insurance contracts is either based on b)Property and equipment most significant effect on the amounts recognised in the current assumptions or on assumptions established at financial statements include: inception of the contract, reflecting the best estimate at Critical estimates are made by the directors in the time increased with a margin for risk and adverse determining depreciation rates for property, plant and a.Whether it is probable that that future taxable profits will deviation. All contracts are subject to a liability adequacy equipment. The rates used are set out in accounting be available against which temporary differences can be test, which reflect management’s best current estimate of policy (j) above. utilised; and

125 126 Annual Report and Financial Statements 2019 as ‘share capital’ inequity. Any amountsreceived over and sharesarerecognisedatparvalue andclassified Ordinary ad) Share capital andshare premium. themselves. not resultinanadjustmentofthefinancialstatements datearedisclosed,but do that aroseafterthereporting date.the reporting Events thatareindicative ofconditions provided they give evidence ofconditionsthatexisted at forwhen thefinancialstatementsareauthorised issue, dateandthe that occurredbetween thereporting The financialstatementsareadjustedtoreflectevents ac) Events after thereporting date. ismade. inwhichsuchdetermination the period impact theincometaxanddeferred taxprovisions in amounts thatwere initiallyrecorded,suchdifferences will the finaltaxoutcomeofthesemattersisdifferent fromthe courseofbusiness. theordinary during uncertain Where calculations for is whichtheultimate taxdetermination the provision for incometaxes. There aretransactions and Income Tax Act. Estimates arerequiredindetermining The Groupissubjecttoincometaxes undertheKenya d) Incometaxes therecoverablethe determination amountoftheasset. costfinancialassets.amortised Suchestimatesinclude losseson theimpairment Estimates madeindetermining c) Impairment losses(continued) (continued) 2. ofsignificantaccountingpolicies Summary Notes (continued) Financial statementsfortheyearended31December2019 with the internal reporting provided tothechiefoperating reporting with theinternal inamannerconsistent Operating segmentsarereported 3. Segmentinformation period.the currentreporting and theGrouphastherefore notrecognisedthisincomein afterthelapseof12monthwarranty period certain 2019.16th April The receipt oftheincomewillonlybe is adeferred contingentconsideration was paid onthe 54,000,000 was received (outofwhich KShs12,000,000 LimitedforEast Africa whichaconsideration ofKShs Sanlam Investments LimitedtoSanlamInvestments In 2018theGroupcompletedtransfer ofAUM from considerationaf) Contingent on rate 2019:corporation 30%(2018:30%)isincurred. transfer ismadetotheshareholders, taxattheprevailing amount tobetransferred totheshareholders. When a the shareholders. advices onthe actuary The statutory that onlyamaximum 30%ofthiscanbetransferred to fund.statutory The Insurance Actregulationsstipulate thatistransferredwhich thereisasurplus/deficit tothe The Groupmatchestheassetstoliabilities, after ae) Statutory fund-Life business of taxifapplicable. arerecogniseddirectlyinequity,of equityinstruments net Incremental costsattributable totheissueorcancellation ‘share premium’ inequity. above theparvalue ofthesharesissuedareclassified as An operating segmentisacomponentofanentity: totheCEO.and allthepositionsthatdirectlyreport operating decisionmaker (ChiefExecutive Officer(CEO)) by theBoardofDirectors. ItconsistsoftheGroupChief strategic decisions. Executive Committeeisappointed identified astheExecutive Committeethatmakes performance oftheoperating segments, hasbeen is responsible for allocatingresourcesandassessing decision-maker. The chiefoperating decision-maker, who insurance policy: superannuation, group life health andpermanent ofliabilityunder the issuingoforundertaking regulation meanslife assurance business being Superannuation business asdefined by theabove lifeindustrial assurance business. bond investmentThe Groupdoesnotunderwrite and following classesfor ofaccounting. thepurpose (Regulations undersection180subsection9)definesthe business. andshort-term long-term The Insurance Act The corebusiness of oftheGroupisunderwriting for revenues. whichitisyet toearn An operating segmentmay engageinbusiness activities assets itsperformance, and; about resourcestobeallocatedthesegmentand entity’s chiefoperating decisionmaker tomake decisions components ofthesameentity), and expenses relatingtotransactions withother revenuesearn andincurexpenses (includingrevenues for whichdiscretefinancialinformation isavailable. reviewed whoseoperating resultsareregularly by the thatengagesinbusiness activitiesfromwhichitmay Financial statements for the year ended 31 December 2019

Notes (continued)

2. Summary of significant accounting policies (b) That was: above reportable operating segments. (continued) (i) effected for the purposes of a superannuation or 3. Segment information (continued) retirement scheme; or In the Group, the Ordinary Life and Superannuation (ii) accepted by the person maintaining such a scheme for segments are the business of Sanlam Life Insurance Serial Number: Brief description of class the purpose of the scheme. Limited. The General business segment is the business 31 Bond investment business For management purposes, the Group is organised into of Sanlam General Insurance Limited while the other 32 Industrial life assurance business business units based on decision making, allocation of companies handle the Investments segment. Transfer 33 Ordinary life assurance business resources, products and services and has four reportable prices between operating segments are set on an arm’s 34 Superannuation business operating segments as follows: length basis in a manner similar to transactions with third parties. Segment income, expense and results (a) That is vested in the trustees of a fund established (i)The ordinary life insurance segment offers individual life include those transfers between segments which are then or maintained by a person, being a fund the terms and insurance products. eliminated on consolidation. conditions applicable to which provide for: (ii)The superannuation segment deals with group (i) the payment of contributions to the fund by that person; insurance schemes. The Group operating segments are all based in one and (iii)The general insurance segment offers general geographical area in Kenya. (ii) payments being made from the fund, on account of insurance products. injury, sickness, retirement or death of the employees of (iv)The investments segment provides investment that person or of a Company in which that person has a management services. controlling interest; or No operating segments have been aggregated to form the Annual Report and Financial Statements 2019 Statements and Financial Report Annual

127 128 Annual Report and Financial Statements 2019 plant andEquipmentatSanlam Kenya Plc. statement ofprofit orloss. The consolidationadjustmentofKShs. 1,549,000 relates to theeliminationofIFRS 16 adjustmentsand reclassification of Investment to property Property All expenses, costs, have includingdepreciation andamortization beencharged to therespective operating segments. All revenues andexpenses are includedintheconsolidated Segment statement ofcomprehensive incomefor theyear ended31December2019 3. Segmentinformation (continued) Notes (continued) Premiums cededto reinsurers Gross written premiums from external customers Fee andcommissionincome Net premium Income Investment income Total comprehensive (loss)/income Gross benefits andclaimspaid Total revenue Total otherrevenue Other operating revenue offinancialassets Impairment Fair value (losses)/gains Other comprehensive income (Loss)/profit for the year Income tax credit/(expense) (Loss)/profit before tax Net benefits andclaims Gross changeininsurance contract liabilities Claims cededto reinsurers Share ofprofit ofassociate (Loss)/profit before share ofprofit ofassociate Total benefits, claimsandother expenses Other operating andadministrative expenses Interest expense Depreciation andamortization Change incontract liabilitiescededto reinsurers Gross changeininvestment contract liabilities Financial statementsfortheyearended31December2019 Ordinary life (2,364,465) (4,241,481) (1,339,794) (2,676,165) KShs.‘000 1,445,781 2,718,267 4,133,158 (583,079) 2,687,377 (153,400) (108,323) (108,323) (30,890) (71,412) (71,412) (72,122) 933,569 436,508 267,011 61,537 11,543 36,911 2,624 4,367 - - - (1,818,793) (1,598,107) (1,133,744) annuation KShs.‘000 1,669,026 1,264,080 1,271,202 2,670,508 1,406,427 1,072,401 1,072,401 (404,946) (365,425) (464,362) (14,308) 592,658 121,258 706,976 706,976 106,699 Super- 13,967 ------(1,979,096) (1,349,177) (1,026,513) KShs.‘000 2,604,295 1,695,090 2,002,138 business (909,205) (928,442) General (31,187) (19,258) (24,141) 322,664 192,263 145,972 307,048 23,042 23,042 3,784 3,784 ------Investments KShs.‘000 (526,498) (438,582) (526,498) (438,582) (550,910) (307,080) (237,326) (87,916) 112,328 112,328 (6,504) 90,842 18,596 2,890 ------Consolidation adjustments KShs.’000 (19,052) (19,052) (19,052) 14,260 20,601 1,549 1,549 1,549 1,549 6,341 ------(1,345,041) (5,532,435) (4,836,423) (8,348,993) (2,963,583) KShs.‘000 6,991,588 5,646,547 2,350,287 3,252,532 8,899,079 (435,687) (446,220) (102,767) (14,308) 325,064 550,086 433,730 550,086 152,379 422,178 114,399 114,399 267,011 2,624 9,579 Total - - Financial statements for the year ended 31 December 2019

Notes (continued)

3. Segment information (continued)

Segment statement of comprehensive income for the year ended 31 December 2018

Super- General Consolidation Ordinary life annuation business Investments adjustments Total KShs.‘000 KShs.‘000 KShs.‘000 KShs.‘000 KShs.’000 KShs.‘000 Gross written premiums from external customers 2,521,027 1,789,901 2,034,897 - - 6,345,825 Premiums ceded to reinsurers (30,582) (343,845) (599,590) - - (974,017) Net premium Income 2,490,445 1,446,056 1,435,307 - - 5,371,808 Fee and commission income 9,065 113,481 145,464 - - 268,010 Investment income 887,398 1,195,662 116,620 8,926 (24,838) 2,183,768 Fair value gains/(losses) (1,515,000) 398,098 45,535 (912,214) - (1,983,581) Impairment of financial assets - (3,333) (9,462) - - (12,795) Other operating revenue 1,192 - - 96,184 (11,162) 86,214 Total other revenue (617,345) 1,703,908 298,157 (807,104) (36,000) 541,616 Total revenue 1,873,100 3,149,964 1,733,464 (807,104) (36,000) 5,913,424 Gross benefits and claims paid (2,476,047) (1,834,721) (1,234,054) - - (5,544,822) Claims ceded to reinsurers 14,860 144,539 500,915 - - 660,314 Gross change in insurance contract liabilities (552,034) (919,470) - - - (1,471,504) Gross change in investment contract liabilities 1,227,696 - - - - 1,227,696 Change in contract liabilities ceded to reinsurers - 4,134 - - - 4,134 Net benefits and claims (1,785,525) (2,605,518) (733,139) - - (5,124,182) Depreciation and amortization (51,244) - (13,338) (1,905) - (66,487)

Interest expense (73,600) - - (118,263) - (191,863) 2019 Statements and Financial Report Annual Other operating and administrative expenses (993,306) (366,500) (793,365) (514,876) 7,655 (2,660,392) Total benefits, claims and other expenses (2,903,675) (2,972,018) (1,539,842) (635,044) 7,655 (8,042,924) (Loss)/profit before share of profit of associate (1,030,575) 177,946 193,622 (1,442,148) (28,345) (2,129,500) Share of loss of associate - - - - 314 314 (Loss)/profit before tax (1,030,575) 177,946 193,403 (1,442,148) (28,031) (2,129,186) Income tax expense 273,129 (47,160) (77,320) 1,111 - 149,760 Profit for the year (757,446) 130,786 116,302 (1,441,037) (28,031) (1,979,426) Other comprehensive income ------Total comprehensive income (757,446) 130,786 116,302 (1,441,037) (28,031) (1,979,426)

All expenses, including depreciation and amortization costs, have been charged to the respective operating segments. All revenues and expenses are included in the consolidated statement of profit or loss.

The consolidation adjustment of KShs 368,500,000 relates to the elimination of dividend income from Sanlam Securities Limited to Sanlam Kenya Plc. 129 130 Annual Report and Financial Statements 2019 Other non-current liabilities Deposit administration contracts Investment contract liabilities Other liabilities Insurance contracts liabilities borrowings Liabilities Total assets Other assets Insurance receivables Land anddevelopment reinsuranceLong term assets Financial instruments Investments insubsidiaries accountedEquity investments Investment properties Right-of-use assets Property andequipment Intangible assets Net assets Total liabilities Other segmentreporting disclosures Segment statement offinancialposition 3. Segmentinformation (continued) Notes (continued) Additions to non-current assets Interest anddividendincome Interest expense Depreciation andamortisation For theyear ended31December2019 Assets At 31December2019: Financial statementsfortheyearended31December2019 13,515,809 11,591,121 Kshs.’000 5,073,450 1,455,068 3,281,265 9,856,971 2,965,000 1,924,688 1,131,718 Ordinary 649,620 164,878 179,260 195,474 KShs.’000 1,040,228 87,056 67,170 Ordinary life 84,372 73,568 72,122 - - - - - life 10,303,752 10,383,978 11,205,225 10,273,211 annuation Kshs.’000 821,247 143,397 729,112 80,226 59,505 Super annuation KShs.’000 1,176,775 ------Super - - - Kshs.’000 2,469,094 1,044,532 Business 1,521,418 3,513,626 General 965,580 773,693 608,137 947,676 997,102 69,900 89,412 General Business 9,802 ------KShs.’000 104,173 Investments 46,338 24,141 Kshs.’000 2,253,435 3,389,731 2,763,210 3,537,926 626,521 454,246 148,195 663,118 89,564 38,578 34,122 - 4,863 ------Consolidation Investments adjustment (2,739,980) (2,253,435) (2,203,640) KShs.’000 Kshs.’000 (446,320) (426,893) (536,340) (385,177) (109,447) (100,627) 432,663 322,314 12,916 66,969 43,573 18,596 ------29,032,606 21,581,530 14,532,693 KShs.’000 Kshs.’000 27,297,584 5,073,450 3,250,322 1,735,022 2,518,680 1,131,718 2,763,210 2,168,107 2,339,772 751,534 735,457 540,173 998,076 395,882 139,836 197,679 89,564 94,907 76,972 Group Group 17,779 - Financial statements for the year ended 31 December 2019

Notes (continued)

3. Segment information (continued)

Segment statement of financial position

At 31 December 2018: Ordinary Super General Investments Consolidation Group life annuation Business adjustment Assets KShs.’000 KShs.’000 KShs.’000 KShs.’000 KShs.’000 KShs.’000 Intangible assets 83,670 - 15,051 - - 98,721 Property and equipment 150,510 - 59,996 22,008 - 232,514 Investment properties 2,924,000 - 516,700 - - 3,440,700 Equity accounted investments - - - 4,863 12,916 17,779 Investments in subsidiaries - - - 2,287,020 (2,287,020) -

Financial instruments 9,521,464 9,858,204 1,136,483 775,333 - 21,291,484 Long term reinsurance assets - 157,706 661,670 - - 819,376 Land and development - - - 109,189 - 109,189 Insurance receivables 123,463 111,825 608,553 - - 843,841 Other assets 614,385 778,948 530,253 815,865 (491,425) 2,248,026 Total assets 13,417,492 10,906,683 3,528,706 4,014,278 (2,765,529) 29,101,630 Liabilities Borrowings 720,052 - - 2,777,380 - 3,497,432 Insurance contracts liabilities 2,698,186 10,896,410 1,222,051 - - 14,816,647 Investment contract liabilities 5,340,462 - - - - 5,340,462 Deposit administration contracts 1,107,372 - - - - 1,107,372 Other non-current liabilities 360,397 - - - - 360,397 2019 Statements and Financial Report Annual Other liabilities 1,085,286 5,639 1,265,907 523,627 (488,177) 2,392,282 Total liabilities 11,311,755 10,902,049 2,487,958 3,301,007 (488,177) 27,514,592 Net assets 2,105,737 4,634 1,040,748 713,271 (2,277,352) 1,587,038

Other segment reporting disclosures

For the year ended 31 December 2018 Ordinary Super General Investments Consolidation Group life annuation Business adjustment KShs.’000 KShs.’000 KShs.’000 KShs.’000 KShs.’000 KShs.’000 Additions to non-current assets 376,093 - 48,678 16,338 - 441,109 Interest and dividend income 887,428 1,195,662 116,620 8,926 (24,838) 2,183,767 Interest expense 70,014 - - 118,263 - 188,277 Depreciation and amortisation 51,244 - 13,338 1,903 - 66,485

131 132 Annual Report and Financial Statements 2019 main linesofinsurance business as follows; oftheGroupandgeneral oflong-term insurance activity istheunderwriting businessThe principal asdefined by theInsurance Act. twoPremium incomecanbeanalysed the between 4. a)Group gross premium income Notes (continued) Motor commercial Motor private Marine Liability Fire industrial Fire domestic Total general business gross premium income Miscellaneous Workmen compensation Theft Medical Personal accident Motor PSV Engineering Class ofbusiness Total long-term business gross premium income Total renewal premium income Group business Individual life Renewal recurring Total new business Group business New business: Singlepremiums Group business Individual life New business: Recurring Total group gross premium income ii) General insurance business i) Longterm insurance business Financial statementsfortheyearended31December2019 6,991,588 2,706,235 2,604,295 531,534 2,186,733 KShs. ‘000 1,681,058 4,387,293 245,239 833,709 248,361 382,764 519,502 901,163 457,503 187,263 43,053 95,457 59,720 28,970 86,886 88,891 68,692 26,148 2019 53,477 78,582 376,458 2,144,569 40,471 622,509 135,486 95,125 353,016 430,096 15,796 76,030 23,109 77,754 33,446 KShs. ‘000 2,034,897 6,345,825 1,650,686 2,660,242 4,310,928 1,101,048 515,673 173,180 2018 Financial statements for the year ended 31 December 2019

Notes (continued)

4. b) Premiums ceded to reinsurers

Section 29(1) of the Insurance Act requires all registered underwriters to have in place appropriate reinsurance arrangements being arrangements approved by the Commissioner of Insurance in respect of insurance business underwritten in the course of the business.

The premiums ceded to reinsurers can be analyzed by the main classes of business as follows;

2019 2018 KShs.‘000 KShs.‘000 Long term insurance business Ordinary life 30,890 30,582 Super-annuation 404,946 343,845 General insurance business 909,206 599,590

Total premiums ceded to reinsurers 1,345,042 974,017

5. Fee and commission income

Commission income 325,064 268,010 325,064 268,010

6. a) Investment income

Group Company

2019 2018 2019 2018 2019 Statements and Financial Report Annual KShs.‘000 KShs.‘000 KShs.‘000 KShs.‘000 Rental income: Gross rental income 140,054 91,113 - - Net rental expenses (43,913) (77,495) - -

96,141 13,618 - - Interest income on: - Financial assets designated at fair value through profit or loss 2,103,680 1,888,975 - - - Financial assets assets at amortised cost - 93,830 - - - Loans to related parties - - - - - Loans and receivables 19,680 70,770 - -

- Cash and cash equivalents 50,108 23,805 10,587 - Dividend income 80,680 92,769 - 332,500

Total investment income 2,350,289 2,183,767 10,587 332,500

133 134 Annual Report and Financial Statements 2019 Total otherincome Other income Plot sales Fair value (losses)/gains oninvestment (Note properties 13) Total fair value losses Fair value lossesonfinancial assetsat fair value through profit orloss - 6. d)Otheroperating revenue andexpenses assets’. value isreportedasadeductionfrom oftheinvestments thecarrying Impairment costandrecognized measured inthestatement atamortised ofprofit or lossas offinancial ‘Impairment 6. c)Impairment offinancialassets 6. b)Fair value (losses)/gains Notes (continued) - losseson: Net impairment Corporate bonds measured at amortised cost Corporate bondsmeasured atamortised Mortgage loans measured at amortised cost loansmeasuredMortgage atamortised Financial statementsfortheyearended31December2019 KShs. ‘000 KShs.’000 (41,241) 152,379 422,177 463,418 83,879 68,500 2019 2019 Group Group (1,983,581) (1,940,210) KShs.’000 KShs.’000 (43,371) 33,000 86,214 53,214 2018 2018 KShs.’000 KShs.’000 KShs.’000 (1,142) 68,500 67,358 2,624 2,624 2019 2019 2019 Company Company Group - - - - KShs.’000 KShs.’000 KShs.’000 (533,547) (533,547) (14,063) 33,000 12,795 18,937 9,462 3,333 2018 2018 2018 - Financial statements for the year ended 31 December 2019

Notes (continued)

7. Details of expenses

a) Benefits and claims Group 2019 2018 Gross benefits and claims paid KShs.’000 KShs.’000 Long term insurance contracts with fixed and guaranteed terms - Death and disability claims 1,665,066 961,593 - Maturity and survival benefits 838,226 1,797,905 - Policy surrenders 635,632 600,721 - Annuities 1,044,334 950,549 General insurance business claims 1,349,177 1,234,054 Gross benefits and claims paid 5,532,435 5,544,822 Claims ceded to reinsurers (433,730) (660,314) Gross change in actuarial value of insurance contract liabilities 9,578 1,471,504 Gross change in actuarial value of investment contract liabilities (286,168) (1,227,696) Change in contract liabilities ceded to reinsurers 14,308 (4,134) Net benefits and claims 4,836,423 5,124,182

b) Fee and commission expense Group 2019 2018 KShs.’000 KShs.’000 Payable to agents 468,567 320,541 Payable to brokers and other intermediaries 525,124 394,593 2019 Statements and Financial Report Annual Fee and commission expense 993,691 715,134

c) Cost of sales - inventory Group Company 2019 2018 2019 2018 KShs.’000 KShs.’000 KShs.’000 KShs.’000 Construction 19,625 9,194 19,625 9,194 Land 1,028 351 1,028 351 Legal costs - 2,152 - 2,152 20,653 11,697 20,653 11,697

Items of cost of sales represent costs incurred in the sale of land.

135 136 Annual Report and Financial Statements 2019 Salaries and other short-term benefits Salaries andothershort-term benefitSocial security costs Defined contribution pensioncosts Staff costsincludethefollowing: Staff costs(Note 9) Other operating charges include: Legal fees Depreciation (Note 12) (Note 11(a))Amortisation Total operating expenses Advertising Premium collectioncharges Premium tax andstamp duty Actuarial fees Tax auditfees Auditors remuneration Fees for andadministrative managerial services: Other expenses Repairs andmaintenance Office rent 9. Staff costs 8. Operating expenses Notes (continued) Financial statementsfortheyearended31December2019 KShs.’000 KShs.’000 2,040,589 772,564 817,030 887,179 887,179 30,206 59,272 23,412 12,667 19,724 45,201 10,155 93,012 75,711 69,709 5,412 6,074 2019 2019 440 Group Group KShs.’000 KShs.’000 2,000,047 942,808 879,214 942,808 629,885 40,461 20,897 45,588 52,268 98,295 92,857 63,159 39,179 13,865 8,977 8,666 6,301 2018 2018 435 KShs.’000 KShs.’000 124,306 136,477 229,506 136,477 58,791 12,734 12,140 9,796 6,504 2,369 2,310 2019 2019 525 Company Company 31 ------

KShs.’000 KShs.’000 206,862 217,979 297,967 217,979 42,522 14,034 10,077 11,086 1,905 4,042 1,586 5,022 2018 2018 800 31 - - - - Financial statements for the year ended 31 December 2019

Notes (continued)

9. Staff costs

Group Company 2019 2018 2019 2018 KShs.’000 KShs.’000 KShs.’000 KShs.’000 Cost of restructuring and early retirement Salaries and other short-term benefits include the following: Cost of restructuring and early retirement 62,993 - - - 62,993 - - -

The total number of permanent employees as at 31 December 2019 was xx compared to xx as at 31 December 2018.

10. Income tax expense

Group Company 2019 2018 2019 2018 KShs.’000 KShs.’000 KShs.’000 KShs.’000 Statement of profit or loss

Current year tax charge 66,072 97,605 - - 2019 Statements and Financial Report Annual Over-provision of current tax from prior years (4,417) - - - Deferred income tax charge/(credit) (Note 27) 375,367 (276,509) 82,384 (33,517) Capital gains tax (1,335) 29,144 - - Current year tax charge/(credit) 435,687 (149,760) 82,384 (33,517) Reconciliation of income tax expense to tax based on accounting profit: - Profit before income tax 550,086 (2,129,186) (479,294) (669,551) Tax calculated at a statutory rate of 30% 391,198 (638,756) (143,788) (200,865) Tax effect of: Income not subject to tax 31,529 297,106 - 99,750 Expenses not deductible for tax 12,960 191,890 226,172 67,598 Income tax expense /(credit) 435,687 (149,760) 82,384 (33,517)

137 138 Annual Report and Financial Statements 2019 At 31December Carrying amount At 31December Charge for theyear Disposal ofyear At start Amortisation At 31December Disposal Additions At 1January Cost: At 31December Carrying amount At 31December Charge for theyear Disposal ofyear At start Amortisation At 31December Disposal Additions At 1January Cost: 11. (a)Group intangible assets-software Notes (continued) Year ended31December2018 Year ended31December2019 Financial statementsfortheyearended31December2019 KShs.’000 KShs.’000 (117,953) (138,801) Software Software (115,389) (23,412) (20,897) 214,110 206,091 215,773 (97,056) 214,110 (5,141) 98,721 76,972 13,160 2,564 1,663 2,564 - Financial statements for the year ended 31 December 2019

Notes (continued)

11. (b) Goodwill on business combinations

2019 2018 KShs.‘000 KShs.‘000 Goodwill on acquisition of Sanlam General Insurance - 564,080

Provision for impairment - (564,080)

- -

On 1 March 2015, the Group completed a part acquisition of Sanlam General Insurance Limited (“formerly Gateway Insurance Limited” or “Gateway”) with Gateway becoming a subsidiary of the Group. The transaction resulted in the recognition of goodwill in the consolidated accounts of the Group as a result of the business combination.

The following table summarises the consideration paid to shareholders of Gateway to acquire a 51% stake in the company, the fair value of assets acquired, liabilities assumed and the non-controlling interest at the acquisition date.

KShs.‘000

Total consideration 561,024

Recognised amounts of identifiable net liabilities at fair value 5,992

Non-controlling interest (2,936) Goodwill 564,080

The Group tests whether intangible assets (being goodwill and acquisition-related intangible assets) have suffered any impairment. The recoverable amounts of cash-generating units are determined using value-in-use calculations. These calculations require the use of estimates. Based on these impairment tests, impairment losses, if any, are identified and recorded in the financial statements.

The recoverable amount of the cash-generating unit is based on the higher of value in use and fair value less cost to dispose. The value in use is determined by means of cash flow 2019 Statements and Financial Report Annual projections based on the five year budgeted cash flows of the cash generating unit.

The annual impairment tests carried out by the Group in 2015 indicated that the operating segment that contained goodwill was impaired since the carrying value of the cash-generating unit was higher than the recoverable amount of the cash-generating unit. The Group therefore recognised an impairment loss in the consolidated statement of profit or loss for the year ended 31 December 2015 equal to the carrying value before impairment (KShs 564,080,000).

Cash flows to perpetuity were arrived at by assuming a 7% growth rate and these were used to compute the terminal value of the company. The discount rate used to determine the value in use of the cash generating unit was 22.4% which was determined by adding the risk adjustment of 10% to the risk free rate of 12.4% as determined by the yield on a treasury bond.

139 140 Annual Report and Financial Statements 2019 At 31December Additions At 1January Cost At 31December Charge for theyear Disposals At 1January Depreciation At 31December At 1January Carrying amount No borrowing costshave andequipment. beencapitalised intheadditionsto property Noneof theabove assetswas pledged ascollateral for liabilities. No borrowing costshave andequipment. beencapitalised intheadditionsto property Noneof theabove assetswas pledged ascollateral for liabilities. andequipmentareThe usefullives assessed every ofproperty year. 12. (a)Group property andequipment Notes (continued) Disposals At 1January Carrying amount At 31December Charge for theyear At 1January Depreciation At 31December Transfers Additions At 1January Cost At 31December Disposals Year ended31December2018 Year ended31December2019 Financial statementsfortheyearended31December2019 Motor vehicles KShs.’000 (8,260) (5,647) (2,613) 13,093 13,093 4,833 7,446 - - - - KShs.’000 Motor vehicles equipment KShs.’000 Computer (228,979) (214,756) (12,385) (15,159) (18,339) 253,400 246,830 (5,647) (2,608) 13,093 12,120 24,284 (4,874) 24,421 32,074 11,444 1,194 9,125 7,446 4,116 - Furniture and equipment equipment KShs.’000 Computer KShs.’000 (214,756) (189,225) (232,996) (222,437) (14,648) (10,883) 246,830 (51,226) (58,403) 204,306 506,536 273,540 125,958 135,304 (6,845) 49,369 357,741 15,081 32,074 74,063 47,844 Furniture and equipment KShs.’000 KShs.’000 (222,437) Property (217,472) (28,332) 350,627 357,741 (13,657) (13,657) 133,304 133,155 446,320 446,320 432,663 23,367 (9,211) 16,325 ------KShs.’000 KShs.’000 progress progress Work in (74,063) Work in 57,690 57,690 16,373 57,690 57,690 ------KShs.’000 KShs.’000 (442,840) 1,219,349 (421,856) (483,892) (442,840) (28,441) (45,588) 675,354 124,578 579,217 232,514 (56,100) 446,320 675,354 735,547 (93,012) 153,775 232,514 157,361 24,604 51,960 Total Total Financial statements for the year ended 31 December 2019

Notes (continued)

12. (b) Company property and equipment

Computer Furniture and Work in Year ended 31 December 2019 equipment equipment progress Total KShs.’000 KShs.’000 KShs.’000 KShs.’000 Cost

At 1 January 3,301 18,846 16,055 38,202

Additions 815 17,803 - 18,618

Transfers 16,055 (16,055) -

At 31 December 4,116 52,704 - 56,820

Depreciation

At 1 January (2,097) (14,097) - (16,194)

Charge for the year (296) (6,208) - (6,504)

At 31 December (2,393) (20,305) - (22,698)

Carrying amount

At 31 December 1,723 32,399 - 34,122

Computer Furniture and Work in Year ended 31 December 2018 equipment equipment progress Total KShs.’000 KShs.’000 KShs.’000 KShs.’000

Cost 2019 Statements and Financial Report Annual

At 1 January 3,018 18,846 - 21,864

Additions 283 - 16,055 16,338

At 31 December 3,301 18,846 16,055 38,202

Depreciation

At 1 January (1,775) (12,514) - (14,289)

Charge for the year (322) (1,583) - (1,905)

At 31 December (2,097) (14,097) - (16,194)

Carrying amount

At 31 December 1,204 4,749 16,055 22,008

141 142 Annual Report and Financial Statements 2019 as of1January2019. discounted using the lessee’s incremental borrowing rate at thepresent value oftheremaining leasepayments, ofIASprinciples 17 Leases. These liabilitieswere measured previously beenclassified as ‘operating leases’ underthe recognised leaseliabilitiesinrelation to leaseswhichhad on 1January2019.On adoptionofIFRS 16, theGroup are therefore recognised intheopeningbalancesheet fromand the adjustments arising the new leasing rules transition provisions inthestandard. The reclassifications the 2018 as permitted period, reporting under the specific from 1January 2019 but hasnotrestated comparatives for The Group hasadopted IFRS 16 Leasesretrospectively is alessee. This note provides information for leaseswhere theGroup Leases Notes (continued) Financial statementsfortheyearended31December2019 permitted by thestandard time, theGroup hasusedthefollowing practical expedients Practical expedients appliedInapplying IFRS 16 for thefirst of IFRS 16 are only appliedafter thatdate. the date ofinitialapplication. The measurement principles at ofuseassetandtheleaseliability amount oftheright immediatelylease liability before transition as the carrying amountoftheleaseassetand recognised thecarrying For leasespreviously classified asfinanceleasestheentity 2019 review – there were no onerous contracts as at 1 January onerous asanalternative to performing animpairment with reasonably similarcharacteristics relying onprevious assessmentsonwhetherleasesare applying a single discount rate to of leases a portfolio an Arrangement contains a Lease. a contains Arrangement an applying IAS 17 and Interpretation 4 transition date, theGroup relied onitsassessmentmade application. Instead, for contracts entered into before the a contract is, or contains a lease at the date of initial The Group hasalsoelected notto reassess whether contract contains optionsto extend orterminate thelease. assetatthedateright-of-use ofinitialapplication,and leases term oflessthan12term monthsasat1January2019 asshort- using hindsight in determining the lease term where the lease term using hindsight in determining the excluding initialdirect costsfor themeasurement ofthe accountingfor operating leaseswitharemaining lease Determining whether whether Determining Financial statements for the year ended 31 December 2019

Notes (continued)

12 (c) Leases (continued)

Measurement of lease liabilities (i.) Amounts recognised in the balance sheet December 1 January 2019 2019 KShs.’000 KShs.’000 Right of use assets

Buildings 94,907 122,252

Lease liabilities

Current 12,273 17,465

Non-current 73,639 104,787

There were no additions to the right of use assets in the year.

(ii.) Amounts recognised in the statement of profit or loss

The statement of profit or loss shows the following amounts relating to leases:

Depreciation charge of right-of-use assets Buildings Interest expense (included in Operating and other administrative expenses) 23,412

Expense relating to short-term leases (included in administrative expenses) 18,943

The total cash outflow for leases in 2019 was Shs. 42,355 Annual Report and Financial Statements 2019 Statements and Financial Report Annual

(iii.)The Group’s leasing activities and how these are accounted for

Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes.

143 144 Annual Report and Financial Statements 2019 Lease liabilitiesincludethenetpresent value ofthefollowing leasepayments: fromAssets and liabilities arising a lease are initially measured on a present value basis. (iii) The Group’s leasingactivitiesandhow theseare accounted for (continued) 12 (c) Leases(continued) Notes (continued) To theincremental determine borrowing rate, theGroup: of-use assetinasimilareconomicenvironment andconditions withsimilarterms, security have to pay to borrow to obtain the funds necessary an asset of similar value to the right- lessee’s incremental borrowing rate isused,beingtherate thattheindividuallesseewould cannot bereadily whichisgenerally determined, thecasefor leasesintheGroup, the The leasepayments are discounted usingtheinterest rate implicitinthelease. Ifthatrate in themeasurement oftheliability. Lease payments to bemade underreasonably extension certain optionsare also included that option,and financing was received point,adjusted toas astarting reflect changesinfinancingconditionssincethird party exercising thatoption. receivable Financial statementsfortheyearended31December2019

usesabuild-up witharisk-free interest approach thatstarts rate adjusted for credit where possible, financing usesrecentreceived third-party by theindividuallessee the exercise ofapurchase price optionifthegroup isreasonably to exercise certain Fixed payments (including in-substance fixed payments), lessany leaseincentives payments ofpenaltiesfor thelease, terminating reflects iftheleaseterm the group Short-term leasesare of12 leaseswithaleaseterm Short-term monthsorless low-value assets are recognised on a straight-line basis as an expense in profit or loss. Payments leasesofequipmentandvehicles associatedand all leasesof withshort-term life. a purchase assetisdepreciated option,theright-of-use over theunderlying asset’s useful onastraight-lineand theleaseterm basis. IftheGroup isreasonably to exercise certain Right-of-use assetsare generally depreciated over oftheasset’s theshorter usefullife Right-of-use assetsare measured thefollowing: atcostcomprising interest ontheremaining for balanceoftheliability eachperiod. charged to profit orloss over soas theleaseperiod to produce aconstantrate periodic of Lease payments andfinancecost. are principal allocated between Thefinancecostis and forrisk leasesheldby theGroup, whichdoesnothave financing, recent third-party incentives received restoration costs. any initialdirect costs, and theamountofinitialmeasurement ofleaseliability makes adjustmentsspecific to thelease, country, eg term, currency andsecurity. any leasepayments madeatorbefore thecommencementdate lessany lease Financial statements for the year ended 31 December 2019

Notes (continued)

12 (c) Leases (continued) Leases under which the Group is the lessor

(iii)The Group’s leasing activities and how these are accounted for (continued) Leases that transfer substantially all the risks and rewards of ownership of the underlying asset to the lessee are classified as finance leases. All other leases are classified as Extension and termination options operating leases. Payments received under operating leases are recognized as income in the profit and loss account on a straight-line basis over the lease term. The Group has not Extension and termination options are included in a number of property and equipment entered into any finance leases. leases across the group. These are used to maximise operational flexibility in terms of managing the assets used in the group’s operations. The majority of extension and termination options held are exercisable only by the group and not by the respective lessor.

13. a) Investment properties

2019 2018 KShs. ‘000 KShs. ‘000

At 1 January 3,414,000 3,180,700

Additions 42,241 303,371

Disposals - (43,371) Transfer from investment properties to PPE (446,320) -

Transfer to non-current assets held for sale (Note 13 (b)) (490,000) -

Fair value loss (1,241) -

At 31 December 2,518,680 3,440,700 Annual Report and Financial Statements 2019 Statements and Financial Report Annual

Investment properties are stated at fair value, which has been determined based on valuations performed by Knight Frank Limited and Lloyd Masika as at 31 December 2019 and 31 December 2018. Knight Frank Limited and Lloyd Masika are industry specialists in valuing these types of investment properties. The fair value represents the amount at which the assets could be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing seller in an arm’s length transaction at the date of valuation. The valuation takes into account recent prices of similar properties with adjustments being made to reflect any changes in economic conditions since the date of the transactions at those prices. Valuations are performed on an annual basis and the fair value gains and losses are recorded within the statement of profit or loss.

The Group leases some of its investment properties. The rental income arising during the year and expenses arising in respect of those properties are disclosed in Note 6(a).

145 146 Annual Report and Financial Statements 2019 Valuation technique usedto derive level 3fairvalues Investment properties As at31December2018 Investment properties As at 31December2019 Later than5years Within 2–5years Within 1year Minimum leasepayments receivable onleasesofinvestment propertiesare asfollows differences inkey attributes size andlocation. suchasproperty Level 3fair values oflandandbuildings have approach. beenderived usingthesalescomparison Salesofcomparable prices landandbuildings incloseproximity are adjusted for The table below analyses thenon-financialassetscarried atfair value, by valuation method. Thedifferent levels have beendefinedas follows about thefuture residual values are reflected inthe fair value oftheproperties current leases, theCompany typicallyenters into new operating leasesandtherefore willnotimmediately realise any reduction inresidual value attheendoftheseleases. Expectations The investment are properties leasedto tenants underoperating leaseswithrentals payable monthly. Although the Company isexposed to changesintheresidual value attheendof Amounts recognised instatement ofprofit orloss: 13. a)Investment properties (continued) Notes (continued) Leasing arrangements Direct operating expenses thatgenerated from rental property income Rental incomefrom operating leases Financial statementsfortheyearended31December2019 Level 1 KShs - - Level 2 KShs - - 3,440,700 2,518,680 Level 3 KShs KShs. ‘000 KShs. ‘000 KShs. ‘000 3,440,700 2,518,680 (43,913) 252,237 140,054 177,696 59,981 Total 2019 Financial statements for the year ended 31 December 2019

Notes (continued)

13. b) Assets held for sale

2019 2018 KShs. ‘000 KShs. ‘000 At 1 January 450,000 1,145,000 Disposals - (695,000) Transfer from investment properties (Note 13(a)) 490,000 - Fair value loss (40,000) - Transfer from other receivables Total 900,000 450,000

Assets held for sale comprise land and buildings which the Group intends to sell before the end of 2020.

14. (a) Investments in subsidiaries

Company Shareholding At 1 January Movement At 31 in 2019 2019 December 2019 KShs.‘000 KShs.‘000 KShs.‘000 Sanlam Life Insurance Limited 100% 873,399 - 873,399 Sanlam Securities Limited 100% 679,009 - 679,009 Sanlam Investments Limited 100% - - - Sanlam General Insurance Limited 71.86% 734,612 (33,585) 701,027 2,287,020 (33,585) 2,253,435 Annual Report and Financial Statements 2019 Statements and Financial Report Annual

Company Shareholding At 1 January Movement At 31 in 2018 2018 December 2018

KShs.‘000 KShs.‘000 KShs.‘000 Sanlam Life Insurance Limited 100% 230,261 643,138 873,399 Sanlam Securities Limited 100% 679,009 - 679,009 Sanlam Investments Limited 100% 59,514 (59,514) - Sanlam General Insurance Limited 75.12% 496,612 238,000 734,612 1,465,396 821,624 2,287,020

147 148 Annual Report and Financial Statements 2019 are before intercompany eliminations. Set outbelow financialinformation of isthesummarised Sanlam General Limited, whosenon-controlling theonly interest subsidiary ismaterial to theGroup. Theamountsdisclosed Company Statement ofprofit orloss for the year ended31December2018 andtheinvestment issubsequently atnil carried value. was assessedtothe subsidiary belower thanthecostofinvestment. charge ofKShs59,514,000 Basedonthisassessment,animpairment was recognised intheSanlam Kenya Plc As aresult of thenegative net assetvalue of Sanlam Investments Limited asat31 December 2018 isno longer operational, and given the recoverable thatthesubsidiary amountof Sanlam Kenya Plc’s shareholding from 75.12% to 71.86% Insurance Limited redeemed (Theminorities Kshs. 33,585,000from theCompany). The additionalinvestment inSanlam General Insurance Limited by ledto minorities adecrease in In 2019 Sanlam Kenya madeadditionalinvestments ofKShsnil(2018: KShs643,138,000) inSanlam Life Insurance Limited andKShsnil(2018: KShs. 238,000,000)inSanlam General 14. (a)Investments insubsidiaries (continued) Notes (continued) Net assets Total liabilities Total assets Gross earned premiumsGross earned Income tax expense Profit before income tax (loss)/profitUnderwriting Total comprehensive incomeallocated to non-controlling interests Total comprehensive incomefor theyear Other comprehensive income Net cash(usedin)/generated from investing activities Net cashusedinoperating activities Summarised cashflows Net (decrease)/increase incashandequivalents Net cashgenerated from financingactivities Cash andcashequivalents atendofyear Cash ofyear andcashequivalents atstart Summarised statement offinancialposition Summarised statement ofcomprehensive income Financial statementsfortheyearended31December2019 (2,469,094) 3,513,626 KShs’000 (149,381) (165,192) 1,044,532 2,604,295 (19,258) 418,557 (15,811) 253,365 23,042 71,560 1,065 3,784 2019 - - (2,487,958) KShs’000 3,528,706 2,034,897 1,040,748 (32,572) 238,000 278,999 193,622 418,557 139,558 (77,320) 116,302 40,982 73,571 37,635 2018 - Financial statements for the year ended 31 December 2019

Notes (continued)

14. (b) Investment in associate

2019 2018 Investments comprise: Principal activity Shareholding Shareholding Runda Water Limited Water distribution 24.90% 24.90%

Runda Water Limited is a private entity incorporated in Kenya. The entity is not listed on any public exchange and there is no published price quotation for the fair value of this investment. The principal place of business of the associate is Delta Riverside, Riverside Drive. The share capital in the entity is solely made up of ordinary shares. The reporting date of Runda Water Limited is the same as the Group’s and both use uniform accounting policies. There are no contingent liabilities relating to the group’s interest in the associates.

Set out below is the summarised financial information of Runda Water.

2019 2018 Summarised statement of financial position KShs’000 KShs’000 Total assets 119,051 125,615 Total liabilities (31,247) (54,213) Net assets 87,804 71,402

Summarised statement of comprehensive income Gross revenues 60,697 60,697 Administration and other expenses (59,438) (59,438) Profit (loss) for the year 1,259 1,259

Shown below is the reconciliation to the carrying amounts in the financial statements as at 31 December 2018 Annual Report and Financial Statements 2019 Statements and Financial Report Annual Group Company 2019 2018 2019 2018 KShs.‘000 KShs.‘000 KShs. ‘000 KShs. ‘000 At 1 January 17,779 17,465 - 4,861 Share of results before tax - 314 - - Share of tax - - - - At 31 December 17,779 17,779 - 4,861

Share of associates’ statement of financial position: Total assets 25,560 31,278 - - Total liabilities (7,781) (13,499) - - Net assets 17,779 17,779 - -

Share of associates’ revenue and loss: Share of associates’ revenue and loss: Revenue - 15,174 - - 149 Profit in associate - 314 - - 150 Annual Report and Financial Statements 2019 After 5years In 1-5years Within 1year Loans maturing: Maturity profile loans ofmortgage loans are secured by thecashsurrender value oftheunderlying policies. date, valueAs atthereporting oftheloansreceivable thecarrying fairly approximates thefair value oftheloans. loansare whilepolicy Mortgage secured ontheunderlying property 15. Loans Notes (continued) Total Loans loans(NoteMortgage 15 a) IPF Loans(Note 15 c) Policy loans(Note 15 b) At 1January Gross loans mortgage Net mortgages at31December Net mortgages At 31December Movement intheyear ECL on1January2018 a) Mortgage loans a) Mortgage Financial statementsfortheyearended31December2019 KShs. ‘000 KShs.‘000 (28,681) 250,548 106,079 (28,362) 379,766 106,079 106,079 79,534 23,657 23,139 2,888 2019 2019 319 Group Group - KShs. ‘000 KShs.‘000 309,745 119,306 (28,681) (28,793) 504,851 119,629 119,306 75,800 84,166 27,881 (6,074) 7,259 6,186 2018 2018 Financial statements for the year ended 31 December 2019

Notes (continued)

15. Loans (continued)

b) Policy loans Group 2019 2018 KShs.‘000 KShs.‘000 At 1 January 2019 360,769 510,986 Additions 106,825 119,343 Repayments (177,366) (257,754) Interest accrued 19,563 39,822 At 31 December 309,791 412,397

Provision for impairment: At 1 January 2019 (102,652) (297) Movement in the year 43,409 (102,355) At 31 December (59,243) (102,652) Net policy loans 250,548 309,745

Maturity profile of Policy loans

Group 2019 2018 KShs’000 KShs’000 Loans maturing:

Within 1 year 63,959 106,712 2019 Statements and Financial Report Annual In 1 - 5 years 119,155 86,160 After 5 years 67,434 116,873 250,548 309,745

151 152 Annual Report and Financial Statements 2019 All insurance premium financeloansare provided to policyholders of Sanlam General over not aperiod exceeding 10 monthsandare therefore duewithinone year.. Maturity profile c) Insurance premium financeloans(IPF) 15. Loans(continued) Notes (continued) Additions ofyear At start Net insurance premium financeloans At endoftheyear Increase theyear during Provision for impairment: oftheyear At start At endofyear Interest accrued Repayments Financial statementsfortheyearended31December2019 KShs.‘000 (59,904) 75,800 23,139 23,139 7,243 2019 Group - - - - - KShs.‘000 (158,140) 193,316 31,864 75,800 75,800 8,760 2018 - - - - Financial statements for the year ended 31 December 2019

Notes (continued)

16. Financial assets

Classification

The Group classifies its financial assets in the following measurement categories: those to be measured subsequently at fair value through profit or loss and those to be measured at amortised cost.

For assets measured at fair value, gains and losses will be recorded in profit or loss.

At 31 December 2019: Fair value through Amortised cost profit or loss Total Kshs. ‘000 Kshs. ‘000 Kshs. ‘000 Equity securities - 1,933,402 1,933,402 Government securities - 18,681,638 18,681,638 Corporate bonds - 53,695 53,695 Deposits with financial institutions - 544,763 544,763 Total - 21,213,499 21,213,499

At 31 December 2018: Fair value through Amortised cost profit or loss Total Kshs. ‘000 Kshs. ‘000 Kshs. ‘000 Equity securities - 2,579,271 2,579,271 Government securities - 15,167,215 15,167,215 Annual Report and Financial Statements 2019 Statements and Financial Report Annual Corporate bonds 14,746 1,254,774 1,269,520 Deposits with financial institutions 273,892 2,001,586 2,275,478 Total 288,638 21,002,846 21,291,484

All the government securities and deposits with financial institutions are valued at fair value through profit or loss.

153 154 Annual Report and Financial Statements 2019 Total Deposits withfinancialinstitutions Corporate bonds Government securities securities Equity Maturity analysis: The movement infinancialassetsisasshown below: Financial assetsmovement 16. Financial assets(continued) Notes (continued) Total Deposits withfinancialinstitutions Corporate bonds Government securities securities Equity Total Deposits withfinancialinstitutions Corporate bonds Government securities Equity securities securities Equity As at 31December2019: Year ended31December2018: Year ended31December2019: Financial statementsfortheyearended31December2019 12,579,782 Kshs. ‘000 21,742,191 2,239,644 2,616,999 4,305,766 Opening balance adjustment 21,288,360 15,167,215 Kshs. ‘000 Kshs. ‘000 2,272,354 1,269,520 2,579,271 (426,831) (368,963) Opening balance (57,868) IFRS 9 - - 16,756,754 11,536,523 12,674,173 Purchases Purchases Kshs. ‘000 Kshs. ‘000 8,691,432 KShs.‘000 5,179,226 3,197,610 1,218,295 362,630 544,763 619,837 422,501 < 1year 53,695 41,005 - - (15,901,721) (10,779,744) (11,734,123) (1,208,044) (8,482,378) (1,275,925) (1,819,234) (1,140,320) Kshs. ‘000 Kshs. ‘000 1 -5years Disposals Disposals 2,261,137 KShs.‘000 2,261,137 (158,924) (862,517) - - - adjustment adjustment (1,611,056) 15,800,664 (2,007,918) 15,800,664 Kshs. ‘000 Kshs. ‘000 KShs.‘000 Fair value Fair value > 5years (156,806) (813,200) 545,869 453,446 573,144 100,204 (7,781) - - - - Kshs. ‘000 Open ended (1,529,991) (1,475,764) Kshs. ‘000 1,933,402 KShs.‘000 1,933,402 Accrued Accrued interest interest 54,227 41,454 89,613 48,159 ------21,213,498 18,681,638 21,291,484 21,213,498 18,681,638 Kshs. ‘000 Kshs. ‘000 1,933,402 2,275,478 1,269,520 2,579,271 KShs.‘000 15,167,215 1,933,402 544,763 balance balance Closing Closing 544,763 53,695 53,695 Total Financial statements for the year ended 31 December 2019

Notes (continued)

16. Financial assets (continued)

< 1 year 1 - 5 years > 5 years Open ended Total As at 31 December 2018: KShs.‘000 KShs.‘000 KShs.‘000 KShs.‘000 KShs.‘000 Equity securities - - - 2,579,271 2,579,271 Government securities 308,028 1,374,140 13,485,047 - 15,167,215 Corporate bonds 529,438 740,082 - - 1,269,520 Deposits with financial institutions 2,275,478 - - - 2,275,478 Total 3,112,944 2,114,222 13,485,047 2,579,271 21,291,484

Included within the government securities are bonds held under lien as required by the Insurance Regulatory Authority. The Group has the positive intention and ability to hold these bonds until maturity.

Determination of fair value and fair value hierarchy

Below is the required disclosure of fair value measurements, using a three-level fair value hierarchy that reflects the significance of the inputs used in determining the measurements.

Level 1

Included in level 1 category are financial assets and liabilities that are measured in whole or in part by reference to unadjusted, quoted prices in an active market for identical assets and liabilities. 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. Annual Report and Financial Statements 2019 Statements and Financial Report Annual

Level 2

Included in level 2 category are financial assets and liabilities measured using inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). For example, instruments measured using a valuation technique such as discounted cash flows, based on assumptions that are supported by prices from observable current market transactions are categorised as level 2. The Group’s level 2 financial assets indicated below comprise of government securities which are at fair value through P&L. Fair value is determined by discounting estimated cash flows with a discount rate based on a market yield for similar instruments at year-end. Inputs applied include a market discount rate and credit risk of the counterparty.

155 156 Annual Report and Financial Statements 2019 Total Deposits withfinancialinstitutions Corporate bonds Corporate bonds securities Equity Government securities securities Equity Deposits withfinancialinstitutions Government securities Total The portion assetthatunquoted sharesThe portion are valued atnetassetvalue. based onthebestinformation available, whichmightincludetheGroup’s own data. the Group’s (includingassumptionsaboutrisk). theassetorliability would useinpricing own assumptionsaboutthethatmarket participants These inputsare developed the measurement date. However, the fair value measurement objective remains thesame, thatis, anexit from price theperspective oftheGroup. Therefore, unobservable inputsreflect Valuation techniques are usedto theextent thatobservable inputsare notavailable, thereby allowing for situationsfor whichthere islittle, ifany, for at market activity theassetorliability norareinstrument they basedonavailable market data. usingavaluation technique inwholeorpart determined (model)basedonassumptionsthatareby from neithersupported prices observable current market transactions inthesame Financial assetsandliabilitiesmeasured usinginputsthatare notbasedonobservable market data are categorised aslevel 3. Non-market observable inputsmeanthatfair values are Level 3 Determination offairvalue andfairvalue hierarchy (continued) 16. Financial assets(continued) Notes (continued) As at 31December2018: As at31December2019: Financial statementsfortheyearended31December2019 18,681,638 20,190,817 KShs.‘000 KShs.‘000 18,148,837 15,167,215 1,509,179 2,157,938 823,684 Level 1 Level 1 - - - KShs.‘000 KShs.‘000 477,918 421,333 424,223 445,836 867,169 Level 2 Level 2 53,695 - - - - 2,275,478 2,275,478 KShs.‘000 KShs.‘000 544,763 544,763 Level 3 Level 3 ------Total fairvalue Total fairvalue 21,213,498 18,681,638 21,291,484 KShs.‘000 KShs.‘000 1,933,402 15,167,215 2,579,271 1,269,520 2,275,478 544,763 53,695 Financial statements for the year ended 31 December 2019

Notes (continued)

17. Weighted average effective interest rate

The following table summarises the fixed average effective interest rates at the year-end on the principal interest-bearing investments. The interest contractual rates do not fluctuate during the term of the investments.

2019 2018

Treasury bills 10% 9%

Treasury bonds 12% 12%

Mortgage loans and corporate bonds 9% 9%

Deposits with financial institutions 6% 6%

Policy loans 10% 13%

18. Reinsurance share of insurance contract liabilities

The reinsurance asset can be broken down as follows;

Group 2019 2018 KShs. ‘000 KShs. ‘000 Long term business reinsurance asset (Note 18 (i)) 143,397 157,706 General business reinsurance asset (Note 18 (ii)) 608,137 661,670 751,534 819,376 Annual Report and Financial Statements 2019 Statements and Financial Report Annual

The following is a summary of the movements in the reinsurance share of insurance contract liabilities: i) Long term reinsurance asset movement

Group 2019 2018 KShs. ‘000 KShs. ‘000

Opening balance 157,506 153,572

Current year movement (Note 24 (b)) (14,309) 4,134

143,397 157,506

157 158 Annual Report and Financial Statements 2019 costs incurred theinventories inbringing to itspresent condition. Inventory ismeasured atthelower ofcostandnetrealizable value. The costofinventories includesallcostsofpurchase, costsofconversion (direct laborandinfrastructure) andother 19. Inventory ii) General reinsurance assetmovement 18. Reinsurance share ofinsurance contract liabilities(continued) Notes (continued) Total reinsurer's share ofliabilities Reinsurer's premium share (Note ofunearned 25) Reinsurer's share ofcontract liabilities(Note 24(a)) At 31December2019 Reinsurer's premium share (Note ofunearned 25) Reinsurer's share ofcontract liabilities(Note 24(a)) As at1January 2019 Increase inreinsurer's premiums share (Note ofunearned 25) Increase inreinsurer's share ofcontract liabilities Current year movements As at December Disposals ofyear At start Financial statementsfortheyearended31December2019 KShs.‘000 (19,625) 109,189 89,564 2019 Group KShs.‘000 109,189 118,734 (9,545) 2018 KShs. ‘000 KShs.‘000 (164,838) 238,821 422,850 350,125 258,012 (19,625) 111,304 608,137 109,189 89,564 2019 2019 Company Group KShs. ‘000 KShs.‘000 422,850 238,820 661,670 162,342 105,538 109,189 118,734 317,312 (9,545) 76,478 2018 2018 Financial statements for the year ended 31 December 2019

Notes (continued)

20. Receivables and deferred acquisition costs a) Insurance receivables

Group 2019 2018 KShs.‘000 KShs.‘000 Due from policyholders 1,782,867 1,804,011 Provision for doubtful debts (1,290,174) (1,376,303) Net amount due from policyholders 492,693 427,708 Amounts due from reinsurers 373,127 432,657 Provision for doubtful debts (20,686) (20,686) Amounts due from agents, brokers and intermediaries 93,437 4,162 938,571 843,841

The amounts receivable do not carry interest and are due within period ranging from 30 days to 180 days.

The impairment is charged to expenses in the respective period.

The carrying amounts disclosed above reasonably approximate fair value at the reporting date.

(b) Receivables and other financial assets

For the purposes of the cash flow statement, cash and cash equivalents comprise the following: Annual Report and Financial Statements 2019 Statements and Financial Report Annual Group Company 2019 2018 2019 2018 KShs.‘000 KShs.‘000 KShs.‘000 KShs.‘000 Amounts due from related parties (Note 34 (a)) - 41,574 6,082 144,359 Rent outstanding 11,734 2,187 - - Prepayments 39,917 30,824 7,044 5,888 VAT claimable 146,444 152,066 - - Other receivables 121,212 222,711 69,498 31,984 Total 319,297 449,362 82,624 182,231

The carrying amounts disclosed above reasonably approximate fair value at reporting date due to their short-term nature.

159 160 Annual Report and Financial Statements 2019 Cash andbankbalances Accrued interest Deposits withfinancialinstitutions(Note 16) issued shares are fully paid. The total shares ordinary number is400,000,000withaparvalue ofauthorised ofKShs. 5 pershare. There are 144,000,000 shares inissuewithaparvalue ofKShs. 5pershare. All Share capital 22. Share capital andreserves reasonably approximate fair value date. atthereporting depositsareoneday madefor ofbetween andthreeShort-term periods varying monthsdependingontheimmediate cashrequirements oftheGroup. amountsdisclosedabove The carrying For ofthecashflow thepurposes statement, cashandequivalents the comprise following: 21. Cashandcashequivalents The movement indeferred acquisitioncostsisshown below; (c) Deferred acquisitioncosts 20. Receivables anddeferred acquisitioncosts(continued) Notes (continued) At theendofyear andendofyear At start At endofyear Net movements intheyear ofyear At start Financial statementsfortheyearended31December2019 KShs.‘000 1,195,292 650,529 544,763 2019 Group Thousands KShs.‘000 2,275,478 2,679,107 Ordinary 144,000 144,000 403,629 shares 2018 KShs.‘000 KShs.‘000 KShs.‘000 151,292 (27,519) 720,000 720,000 123,773 113,415 113,415 2019 2019 2019 Company Group - KShs.‘000 KShs.‘000 KShs.‘000 720,000 720,000 354,969 354,000 153,049 151,292 (1,757) 2,969 2018 2018 2018 Financial statements for the year ended 31 December 2019

Notes (continued)

22. Share capital and reserves (continued)

Statutory fund – Group

The statutory fund represents a reserve maintained within the long-term insurance business and represents unallocated surpluses from previous actuarial valuations as required by section 46(5) of the Insurance Act. Transfers from this fund are made upon recommendation of the actuary. This movement has been shown on the statement of changes in equity. Group 2019 2018 KShs.‘000 KShs.‘000 Balance at the beginning of the year 676,720 1,609,658 Changes on initial application of IFRS 9 - (306,278) Surplus/(loss) for the year 635,564 (626,660) Closing fund 1,312,284 676,720

23. Borrowings

The movement in the loan balance during the period is as shown below;

Group Company 2019 2018 2019 2018 KShs.‘000 KShs.‘000 KShs.‘000 KShs.‘000 Lease liabilities finance costs 61,755 - 4,880 - Accrued interest 395,882 191,863 302,200 - Total finance cost 457,637 191,863 307,080 -

The movement in the loan balance during the period is as shown below; Annual Report and Financial Statements 2019 Statements and Financial Report Annual Group Company 2019 2018 2019 2018 KShs.‘000 KShs.‘000 KShs.‘000 KShs.‘000 At start of year 3,497,432 1,030,741 2,777,380 1,030,741 Loans advanced - 2,466,691 - 1,746,639 Accrued interest 395,882 191,863 302,200 118,263 Forex Adjustment (14,170) - (14,170) - Interest repayments (375,768) (191,863) (302,200) (118,263) Loan Repayment (740,166) - - - At end of year 2,763,210 3,497,432 2,763,210 2,777,380

161 162 Annual Report and Financial Statements 2019 -Non-current -Current Total insurance contract liabilities Payables under deposit administration contracts Investment contract liabilities-long-term nde Payables underdepositadministration (Note 24(b)) policyLong term liabilities(insurance andinvestment contracts) (Note 24(b)) Insurance contract liabilities Total liabilities Total investment contract liabilities For ofthefinancialstatement purposes disclosures, theliabilitieshave beencategorized as follows; General reinsurance assetmovement position are madeupasfollows; The insurance contract liabilitiesare from madeupofliabilitiesarising bothgeneral insurance andlong-term contracts. The balancesaspresented inthestatement offinancial 24. Insurance contract liabilities million intheyear underreview whileSanlam Plchave extended repayment to endof2020. facility was obtained to settle intercompany balanceswithrelated recapitalize parties, theGroup’s insurance businesses andfinancecompletionofthe Sanlam Tower. Sanlam life7 paidUSD The Group hadacquired aloanfacility from Sanlam Capital Markets totalling years USD34millionfor oftwo whoseinterest aperiod isreferenced to the3monthLIBORpus7%margin. The profileThe maturity ofborrowing isasshown below: Maturity profile oftheborrowings: 23. Borrowings (continued) Notes (continued) Financial statementsfortheyearended31December2019 KShs.‘000 2,763,210 2,763,210 2019 Group - KShs.‘000 2,777,380 3,497,432 720,052 2018 KShs. ‘000 14,532,693 13,585,017 20,737,861 KShs.‘000 5,073,450 6,205,168 1,131,718 2,763,210 2,763,210 947,675 2019 2019 Company - KShs. ‘000 21,264,481 13,594,596 14,816,647 KShs.‘000 5,340,462 1,222,051 2,777,380 2,777,380 6,447,834 1,107,372 2018 2018 - Financial statements for the year ended 31 December 2019

Notes (continued)

24. Insurance contract liabilities (continued)

(a) Group General policy liabilities

The movement in the Group general insurance contract liabilities and reinsurance assets are shown below;

2019 2018

Gross Reinsurance Net Gross Reinsurance Net KShs.’000 KShs.’000 KShs.’000 KShs.’000 KShs.’000 KShs.’000 At beginning of year 1,222,051 422,850 799,201 1,438,091 317,312 1,120,779 Cash paid for claims settled in year (1,623,552) (487,501) (1,136,051) (1,681,269) (396,921) (1,284,348) Movement in liabilities - arising from IBNR 505 10,597 (10,092) (7,233) 1,272 (8,505) - arising from AURR (39,407) 987 (40,394) (8,942) 3,111 (12,053) - arising from current year claims 1,388,078 311,080 1,076,998 451,088 116,859 334,229 - arising from prior year claims - - - 1,030,316 381,217 649,099 Total at end of year 947,675 258,013 689,662 1,222,051 422,850 799,201

Notified claims 763,698 204,449 559,249 999,170 380,870 618,300 Additional unexpired risk reserve (AURR) 5,127 2,258 2,869 44,537 1,271 43,266 Incurred but not reported (IBNR) 178,850 51,306 127,544 178,344 40,709 137,635 Total at end of year 947,675 258,013 689,662 1,222,051 422,850 799,201 Annual Report and Financial Statements 2019 Statements and Financial Report Annual

163 164 Annual Report and Financial Statements 2019 deposits withfinancial institutions. values oftheliabilitiesapproximate Thecarrying the fair value oftheinvestments. The assets backing the amounts payable under deposits administration contracts are included in the investments reported by the group under fair value through profit and loss and ofmovementsSummary isasshown below; a policy by policy level. The number ofunitspurchased isafunctionofallocated premium usingfactors basedonage, anddefinedallocationcriteria. term Current value ofunitlinked by fundisdetermined multiplying thenumber ofunitspurchased by thepolicyholder from premium by asatthevaluation theunitprice date. This isdoneat held by theGroup onbehalfofpolicy holders. It isthedifference thepresent value between ofthefuture benefits andthepresent value ofthe expected premiums. Inthecaseofunitlinked policies, itisthecurrent value ofthefund policyLong term liabilitiesrefer to theamountthatneedsto besetasideby thelife assurance company withintheGroup inorder to beable to cover future obligations to policy holders. b) Group long-term policy liabilities 24. Insurance contract liabilities(continued) Notes (continued) Premium income/contributions (net) (i) Analysis ofmovement inpolicy liabilities: Income onInvestment Asset managementfees Net investment income Income /Inflow Policy benefits (net) Sales remuneration andadministrative expenses Transfer to statutoryfund Outflow Net movement for theyear Balance atbeginningoftheyear (netofreinsurance) Contract liabilitiesceded to reinsurers Balance atendofyear Financial statementsfortheyearended31December2019

(4,381,375) (2,056,557) 20,042,430 (7,402,010) 19,790,186 3,075,963 4,143,881 KShs.‘000 3,020,192 (964,078) 7,164,073 (237,937) (55,771) (14,307) Total Investment contracts Insurance and 2019 (2,029,678) (4,072,192) 18,935,058 18,658,468 (7,065,948) 3,951,456 2,902,289 2,852,209 6,803,665 KShs.‘000 (964,078) (262,283) (50,080) (14,307) Deposit admin KShs.‘000 1,131,718 (336,062) (309,183) contracts 1,107,372 (26,879) 360,408 192,425 173,674 167,983 (5,691) 24,346 - - 20,042,430 20,124,277 (4,694,429) (1,505,995) (5,347,796) KShs.‘000 5,261,815 4,146,915 1,176,858 1,114,900 (61,958) (85,981) 852,628 4,134 Total Investment contracts Insurance and 2018 (1,484,648) (4,151,369) 18,691,250 18,935,058 (4,783,389) 1,086,562 5,023,063 KShs.‘000 3,936,501 1,139,764 (53,202) 239,674 852,628 4,134 Deposit admin 1,433,027 KShs.‘000 (543,060) (564,407) (325,655) contracts 1,107,372 (21,347) 238,752 210,414 (8,756) 28,338 37,094 - - Financial statements for the year ended 31 December 2019

Notes (continued)

24. Insurance contract liabilities (continued) b) Group Long-term policy liabilities (continued)

(ii) Maturity analysis of long term policy liabilities:

< 1 year 1-5 years >5 years open ended Total KShs.‘000 KShs.‘000 KShs.‘000 KShs.‘000 KShs.‘000 As at December 2019: Linked and market-related investment contract liabilities 1,022,212 2,987,534 1,063,704 - 5,073,450

Insurance contract liabilities: Reversionary bonus policies 47,810 1,064,022 1,640,070 - 2,751,902 Other non-participating liabilities 1,293,864 3,475,508 5,873,365 190,379 10,833,116 Total insurance contracts liabilities 1,341,674 4,539,530 7,513,435 190,379 13,585,018

Deposit administration contracts - - - 1,131,718 1,131,718 Total long-term policy liabilities 2,363,886 7,527,064 8,577,139 1,322,097 19,790,186

< 1 year 1-5 years >5 years open ended Total KShs.‘000 KShs.‘000 KShs.‘000 KShs.‘000 KShs.‘000 As at December 2018:

Linked and market-related investment contract liabilities 745,656 3,236,989 1,357,817 - 5,340,462 2019 Statements and Financial Report Annual

Insurance contract liabilities: Reversionary bonus policies 62,283 726,425 1,494,764 - 2,283,472 Other non-participating liabilities 1,375,273 3,519,346 6,236,896 179,609 11,311,124 Total insurance contracts liabilities 1,437,556 4,245,771 7,731,660 179,609 13,594,596

Deposit administration contracts - - - 1,107,372 1,107,372 Total long-term policy liabilities 2,183,212 7,482,760 9,089,477 1,286,981 20,042,430

The maturity analysis for the long-term policy liabilities is derived from the contract period of the underlying policies.

The carrying amounts disclosed above reasonably approximate fair value at the reporting date.

165 166 Annual Report and Financial Statements 2019 Accident year claims outstanding for eachaccident year haschangedatsuccessive year ends. The development ofinsurance liabilitiesprovides ameasure oftheGroup’s to ability estimate theultimate value ofclaims. The table below illustrates how theGroup’s estimate oftotal ofthemovementsThe summary inthereinsurance assetisoutlinedinNote 18. The following ofthecontract provisions isasummary andrelated reinsurance assetsasat31December2018: The following ofthecontract provisions isasummary andrelated reinsurance assetsasat31December2019: b) Group long-term policy liabilities(continued) 24. Insurance contract liabilities(continued) Notes (continued) Insurance contracts liabilities Long-term business: Insurance contracts liabilities business:Long-term Accident year Investment contracts liabilities Investment contract liabilities One year later Deposit administration contracts Deposit administration contracts Two years later

Three years later Four years later Five years later Financial statementsfortheyearended31December2019 KShs.‘000 126,150 119,804 91,579 99,005 72,795 32,920 2012 KShs.‘000 108,892 105,950 124,274 113,859 38,861 18,840 2013 KShs.‘000 140,954 140,957 79,723 66,335 44,677 31,348 2014 KShs.‘000 152,185 71,994 80,936 49,377 31,802 2015 - KShs.‘000 Gross provisions Gross provisions 152,288 52,954 24,144 77,523 2016 20,042,430 13,594,596 19,790,186 13,585,018 KShs.’000 KShs.’000 5,340,462 5,073,450 1,131,718 1,107,372 - - KShs.‘000 366,025 171,043 Reinsurance assets Reinsurance assets 76,709 2017 - - - - - KShs.’000 KShs.’000 (157,706) (157,706) (157,706) (157,706) KShs.‘000 520,430 94,098 - - 2018 - - - - 13,436,890 19,632,480 13,427,312 19,884,724 KShs.’000 KShs.’000 5,340,462 5,073,450 KShs.‘000 1,131,718 1,107,372 307,784 2019 Net Net - - - - - Financial statements for the year ended 31 December 2019

Notes (continued)

24. Insurance contract liabilities (continued) b) Group long-term policy liabilities (continued)

Accident year 2012 2013 2014 2015 2016 2017 2018 2019 KShs.‘000 KShs.‘000 KShs.‘000 KShs.‘000 KShs.‘000 KShs.‘000 KShs.‘000 KShs.‘000 Six years later 19,465 17,435 ------Seven years later 17,333 ------Current estimate of cumulative claims 17,333 320,797 261,022 222,529 324,414 823,863 810,527 650,410

Cumulative payments to date - (303,361) (229,673) (190,727) (318,269) (747,153) (716,429) (342,627) Incurred but not reported ------178,850 Total gross claims liability included in the - - statement of financial position 947,676

c) Interest and bonus declaration

Deposit administration contracts

The liabilities of the Group in respect of funds managed under deposit administration contracts are shown inclusive of interest accumulated to year end i.e.31 December. Interest was declared and credited to the customer accounts at a weighted average rate of 11% (2018: 7.5%)

Insurance contract Annual Report and Financial Statements 2019 Statements and Financial Report Annual

Reinsurance assets Net KShs.’000 KShs.’000 Long-term business: Reversionary bonus 1.5% 1.5% Terminal bonus 1.5% 1.5% Total bonus declared -% 3.0%

Reversionary bonus vest immediately while terminal bonus vest after 8 years or on maturity if earlier.

167 168 Annual Report and Financial Statements 2019 claims outstanding for eachaccidentyear haschangedatsuccessive year ends. The development ofinsurance liabilitiesprovides ameasure oftheGroup’s to ability estimate theultimate value ofclaims. The table below illustrates how theGroup’s estimate oftotal 24. Insurance contract liabilities(continued) Notes (continued) Accident year One year later Two years later Three years later Four years later Five years later Six years later Seven years later Current estimate ofcumulative claims Cumulative payments to date statement offinancialposition Total gross includedinthe claimsliability Incurred but notreported Financial statementsfortheyearended31December2019 Accident year KShs.‘000 126,150 119,804 91,579 99,005 72,795 32,920 19,465 17,333 17,333 t2012

- - KShs.‘000 (303,361) 108,892 320,797 105,950 124,274 113,859 38,861 18,840 17,435 2013 - - - KShs.‘000 (229,673) 261,022 140,954 140,957 79,723 66,335 44,677 31,348 2014 - - - - KShs.‘000 (190,727) 222,529 152,185 71,994 80,936 49,377 31,802 2015

- - - - KShs.‘000 (318,269) 152,288 324,414 52,954 24,144 77,523 2016

- - - - - KShs.‘000 (747,153) 366,025 823,863 171,043 76,709 2017

------KShs.‘000 (716,429) 520,430 810,527 94,098 2018

------KShs.‘000 (342,627) 307,784 178,850 650,410 947,676 2019 ------Financial statements for the year ended 31 December 2019

Notes (continued)

25. Unearned premium

Unearned premiums reserve represents the liability for general business contracts where the Group’s obligations are not yet expired at the year end. The movements in the reserve are as shown below;

2019 2018 Gross Reinsurance Net Gross Reinsurance Net KShs.’000 KShs.’000 KShs.’000 KShs.’000 KShs.’000 KShs.’000 At beginning of year 899,653 (238,821) 660,832 655,110 (162,342) 492,768 Net increase in the period 366,054 (111,304) 254,750 244,543 (76,478) 168,065

At end of year 1,265,707 (350,125) 915,582 899,653 (238,820) 660,833

26. Provisions

Group

2019 2018

KShs.’000 KShs.’000

General provision on insurance claims 34,620 34,620

Specific provision for financial guarantee - 17,305

34,620 51,925

The movement in the provisions is as follows: Annual Report and Financial Statements 2019 Statements and Financial Report Annual At 1 January 51,925 51,925

Unused amounts reversed (17,306) -

At end of year 34,619 51,925

The above provisions relate to provisions on insurance claims under special arrangements and the directors have a reason to believe the amounts provided will be paid out as benefits under the claims.

169 170 Annual Report and Financial Statements 2019 the nearfuture to precipitate utilisationofthe same. Sanlam Kenya Limited’s PlcandMaeproperties deferred tax assethasnotbeen recognised asthe directors are oftheview thatthecompany may notgenerate any taxable incomein account isasfollows: Deferred tax iscalculated, infull,onalltemporary differences tax rate methodusingaprincipal undertheliability of30%(2018: 30%). The movement onthedeferred incometax a) Group 27. Deferred incometax Notes (continued) Property andequipment Quoted shares –fair value gain Unrealised fair value losses Provisions Tax forward lossescarried Deferred tax onlife fundsurplus Deferred tax notrecognised Deferred tax asset Deferred tax liability Property andequipment Quoted shares –fair value gain Unrealised fair value losses Provisions Tax forward lossescarried Deferred tax onlife fundsurplus Deferred tax notrecognised Deferred tax asset Deferred tax liability For theyear ended31December2019: For theyear ended31December2018: Financial statementsfortheyearended31December2019 At start ofyear At start At start ofyear At start KShs.‘000 KShs.‘000 (360,397) (360,397) (551,372) (120,598) (747,449) (747,449) 236,551 192,842 146,740 174,145 (9,435) (9,435) 68,626 26,667 25,844 6,463 3,248 6,261 3,234 - IFRS 9adjustment January 2018 impacts on1 KShs.‘000 131,263 154,265 131,263 23,002 ------Income statement Income statement (Charge)/credit to (Charge)/credit to KShs.‘000 KShs.‘000 (289,223) (375,367) (289,223) (88,852) (82,896) (26,667) 255,789 255,789 276,509 (5,594) (3,248) 42,782 43,708 8,302 4,403 202 14 - - - Transfer to current Transfer to current KShs.‘000 KShs.‘000 tax tax ------At endofyear At endofyear KShs.‘000 KShs.‘000 (649,620) (495,965) (649,620) (360,397) (360,397) (120,598) (20,226) 236,551 168,551 153,655 174,145 (9,435) (9,435) 68,626 6,463 8,302 6,463 3,248 - - Financial statements for the year ended 31 December 2019

Notes (continued)

27. Deferred income tax (continued) b) Company

(Charge)/ credit to For the year ended 31 December 2019: At start of year profit or loss At end of year

KShs.‘000 KShs.‘000 KShs.‘000

Property and equipment 1,716 (1,716) -

Provisions 15,291 (15,291) -

Tax losses carried forward 65,377 (65,377) -

Deferred tax 82,384 (82,384) -

Credit to profit or For the year ended 31 December 2018: At start of year loss At end of year

KShs.‘000 KShs.‘000 KShs.‘000

Property and equipment 1,575 141 1,716

Provisions 26,498 (11,207) 15,291

Tax losses carried forward 20,795 44,582 65,377

Deferred tax 48,868 33,517 82,384

28. Insurance payables

Group 2019 Statements and Financial Report Annual

2019 2018

KShs.’000 KShs.’000

Outstanding claims 843,652 383,474

Payables arising out of direct insurance arrangements - 274,165

Payables arising out of reinsurance operations arrangements 128,585 31,007

Total insurance payables 972,237 688,646

The amounts payable do not carry interest and are due within period ranging from 30 days to 180 days.

171 172 Annual Report and Financial Statements 2019 Accruals Deposits received from saleofplots Amounts dueto related(Note 34(b)) parties Other payables Payroll creditors Trade creditors Basic earnings per ordinary share perordinary KShs.Basic earnings Weighted average number shares ofordinary for pershare basicanddiluted earnings Net lossattributable to shareholders ordinary for basicanddiluted earnings b) Company share perordinary Diluted KShs. earnings share per ordinary KShs.Basic earnings Weighted average numbershares ofordinary for pershare basicanddiluted earnings Net profit/(loss) attributable shareholdersto ordinary for basicanddiluted earnings Diluted earnings per ordinary share perordinary Diluted KShs. earnings There have beennoothertransactions involving date thereporting anddate shares ordinary ofcompletionthesefinancial statements. between The following reflects theincomeandshare data pershare usedinthebasicanddiluted computation: earnings 30. Earnings pershare ranging fromwithin aperiod 30days to 180 days. Payables andothercharges cost. are includedinfinancialliabilitiesatamortized amountsdisclosedaboveThe carrying reasonably approximate fair value nature. date atreporting dueto theirshort-term The amountspayable interest donotcarry andare due 29. Payables andothercharges Notes (continued) a) Group Financial statementsfortheyearended31December2019 KShs.’000 302,147 145,600 205,171 777,502 31,658 91,747 1,179 2019 Group KShs.’000 183,745 704,736 394,466 99,169 27,356 2018 - - KShs.’000 KShs.‘000 (561,678) 479,049 501,970 144,000 144,000 103,156 16,420 86,084 (3.90) (3.90) 0.79 0.79 2019 2019 Company - - - (2,017,061) KShs.’000 KShs.‘000 (636,034) 400,421 358,132 144,000 144,000 (14.01) (14.01) 15,155 27,134 (4.42) (4.42) 2018 2018 - - - Financial statements for the year ended 31 December 2019

Notes (continued)

31. Contingent liabilities – Group

Companies in the Group are defendants to legal proceedings filed against them by third parties. Unverified claims have also been placed against the former Group CFO (See Note 26). The directors are of the opinion that the outcome of these proceedings and claims will not have a material impact on the financial position of the Group.

The Group operates in the insurance industry and is subject to legal proceeding in the normal course of business. While it is not practicable to forecast or determine the final results of all pending or threatened legal proceedings (including litigations), the directors are of the opinion that the results of the Group, having sought the advice of the Group’s legal counsel, will not have a material effect on its results and financial position. The quantum has not been disclosed as these amounts are unverifiable.

The Kenya Revenue Authority (KRA) conducted a tax compliance inspection (inspection) of the Sanlam Life Insurance Company for the period 2014 to 2017. Based on the inspection, the Company has received a findings report impacting several taxes and management is currently responding to queries and or providing clarifications to KRA. Any tax obligation arising from the inspection cannot be measured with sufficient reliability and thus a quantum has not been disclosed.

The Group is also subject to insurance solvency regulations. There are no contingencies associated with the Group’s compliance or lack of compliance with such regulations.

32. Capital commitments – Group

Capital commitments:

Capital commitments relating to completion of the head office building are as follows:

2019 2018 KShs.‘000 KShs.‘000

Not later than 1 year - - 2019 Statements and Financial Report Annual

The Group has entered commercial property leases in respect of its investment property portfolio, including the Group’s unutilized office space. Leases include a clause to enable upward revision of the rental charge on an annual basis according to prevailing market conditions.

Operating lease commitments:

The future minimum lease commitments under non-cancellable operating leases are as follows:

Receivable Payable 2019 2018 2019 2018 KShs.‘000 KShs.‘000 KShs.‘000 KShs.‘000 Not later than 1 year - 93,589 - 104,309

Later than 1 year but not later than 5 years - 235,635 - 277,052 More than 5 years - 125,852 - 119,669 - 455,076 - 501,030 173 174 Annual Report and Financial Statements 2019 Depreciation of property andequipment Depreciation ofproperty ofintangible assets Amortisation Adjusted for: Profit/(loss) before income tax: Interest incomeonfinancialassetsdesignated at fair value through profit orloss Cost ofsales–Inventory (Note 7(c)) Finance charge onlease Depreciation oflease Revaluation lossoninvestment property Fair value losses(gains) onfinancialassetsat fair value through profit orloss Other investment income Rental income Other operating revenues offinancial assets Impairment Actuarial value ofpolicyholder liabilities capital:Changes inworking Share ofassociate's (profit) /loss Finance costs Foreign exchange gain Payables underdepositadministration contracts Insurance receivables Reinsurance share ofinsurance contract liabilities Cash utilisedinoperations Payables andother charges Receivables andotherfinancial assets Insurance payables Deferred acquisitioncosts Reconciliation ofprofit before income tax to cashgenerated from operations: a) Group 33. Cashgenerated from operations Notes (continued) Financial statementsfortheyearended31December2019

Note 12 (c) 14(b) 6(a) 6(b) 6(b) 6(a) 6(a) 6(c) 23 23 23 (2,103,680) (1,680,729) (1,641,162) KShs. ‘000 KShs. ‘000 (550,966) (463,418) (150,468) (94,730) (96,141) 283,591 (14,170) 550,086 375,768 130,065 (2,624) 67,842 20,653 61,755 41,241 24,346 23,412 23,412 72,766 93,012 27,519 2019 - - (1,888,975) (2,144,757) KShs. ‘000 KShs. ‘000 (2,129,186) (2,727,887) (325,655) (186,150) (281,174) 1,940,210 (70,360) (86,214) (13,797) (13,618) (17,515) 191,863 66,485 43,371 12,795 27,768 (314) 2,579 2018 - - - - - Financial statements for the year ended 31 December 2019

Notes (continued)

33. Cash generated from operations (continued) b) Company

Reconciliation of profit before income tax to cash generated from operations

2019 2018 Cash flow from operations KShs.’000 KShs.’000 Loss before income tax (479,294) (669,551)

Investment income (10,587) - Depreciation (Note 12(b)) 6,504 1,905 Dividend income - (368,500) Depreciation of lease 4,485 - Finance charge on lease 4,880 - Cost of sales – Inventory (Note 7(c)) 20,653 - Interest expense 302,200 118,263 Forex gain (14,170) - Impairment of investment in subsidiary - 59,514 (165,329) (858,369) Changes in working capital 89,576 (800,932) Receivables and other financial assets 99,607 602 Payables and other charges 101,549 88,974

201,156 89,576 2019 Statements and Financial Report Annual Tax paid - - Net cash generated from/(used in) operations 35,827 (768,793)

34. Related party transactions

The Group is controlled by the following entities;

Ownership interest Name Type Place of incorporation 2019 2018 Hubris Holdings Limited Immediate parent entity Kenya 57.14% 57.14% Sanlam Emerging Markets Proprietary Limited Intermediate parent entity South Africa 57.14% 57.14% Sanlam Limited Ultimate parent entity and controlling party South Africa 57.14% 57.14% There are other companies that are related to the company through common shareholdings or common directorships. Interests in subsidiaries are set out in note 14(a). 175 176 Annual Report and Financial Statements 2019 Sanlam Capital Markets (Note 23) Post-employment benefits paid usingcashandequivalents. There were noprovisions madeoramounts written off theyear balancesduring (2018: onrelated party nil). The amountsduefrom relatedare non-interest parties andwillbe bearing 34. Related transactions party (continued) Notes (continued) Total Sanlam General Insurance Limited (Subsidiary) Sanlam Investments Limited (subsidiary) Sanlam Emerging Markets Proprietary Limited (intermediate parent) HoldingsLimitedHubris (immediate parent) Total HoldingsLimitedHubris (immediate parent) Sanlam Limited Securities (Subsidiary) Salaries and other short-term employment benefitsSalaries andothershort-term a) Amounts duefrom related parties: c) Key management compensation: b) Loansandamountsdueto related parties Financial statementsfortheyearended31December2019 KShs.‘000 KShs.‘000 KShs.‘000 2,854,957 2,763,210 165,983 165,983 91,747 - 2019 2019 2019 Group Group Group ------25,121 KShs.‘000 KShs.‘000 KShs.‘000 3,497,432 3,497,432 186,656 207,384 20,728 16,543 41,574 2018 2018 2018 - - - - KShs.‘000 KShs.‘000 KShs.‘000 3,242,259 2,763,210 387,302 68,452 68,452 91,747 6,082 6,082 2019 2019 2019 Company Company Company - - - - KShs.‘000 KShs.‘000 KShs.‘000 3,135,512 2,777,380 144,359 358,132 118,598 88,304 96,738 16,543 9,308 8,434 2018 2018 2018 - - Financial statements for the year ended 31 December 2019

Notes (continued)

34. Related party transactions (continued)

d) Directors’ remuneration: Group Company 2019 2018 2019 2018

KShs.‘000 KShs.‘000 KShs.‘000 KShs.‘000 Fees 22,204 19,309 11,102 8,220 Other emoluments (included in (c) above) 54,052 39,713 54,052 39,713 Total 76,256 59,022 65,154 47,933

d) Directors’ remuneration: Group Company 2019 2018 2019 2018

KShs.‘000 KShs.‘000 KShs.‘000 KShs.‘000 Pension benefits 6,021 2,360 6,021 2,360 Mortgage loans to key management where collateral is accepted as security - - - -

f) Other related party transactions through the statement of profit or loss Group Company 2019 2018 2019 2018 KShs.‘000 KShs.‘000 KShs.‘000 KShs.‘000 Fund management fees payable to Sanlam Investments East Africa Limited 40,658 50,057 - - Management fees payable to Sanlam Emerging Markets Proprietary Limited 23,722 18,297 - - Finance costs payable to Sanlam Capital Markets 389,477 191,863 302,200 118,263 Annual Report and Financial Statements 2019 Statements and Financial Report Annual Interest expense on intercompany advances payable to Sanlam Life Insurance Limited (1,393) - (1,393) (24,838) 452,464 260,217 300,807 93,425

g) Particulars of the Group’s principal subsidiaries are shown below:

% Country of incorporation and domicile Primary business operation Held Sanlam Life Insurance Limited Kenya Life insurance 100 Sanlam General Insurance Limited Kenya General insurance 71.86 Sanlam Securities Limited Kenya Investment 100 Sanlam Investments Limited Kenya Investment Managers 100 Mae Properties Limited Kenya Investment in Properties (dormant) 100 Chem Chemi Mineral Water Limited Kenya Dealing with bottled water (dormant) 100

The assets and liabilities held by the respective companies can only be transferred within the subsidiaries if a proper Board resolution is passed and sanctioned by the shareholders as provided by the regulatory framework touching on transfer of the said assets and liabilities. 177 178 Annual Report and Financial Statements 2019 aggregate ofthefollowing components: Embedded Value, asreported onpages88to 90. The Group Embedded Value isthe value performance usedby measurement theGroup baseistheGroup astheprimary of meetingtheGroup’s strategic objective ofmaximising shareholder value. The capital The effective management ofSanlam Kenya Plccapital baseisan essentialcomponent Other businesses oftheGroup are notsubjectto any external capital requirements. with theexternal capital requirements andhadCARs of110% and 168% respectively. As at31December2019, boththeLife andGeneral hadcomplied insurance subsidiaries requirement asstipulated by theguidelinesis100%. The Capital Adequacy Ratio (CAR) isthemeasure usedfor capital andtheminimum iv.capital required for operational risk, iii.credit risk; and ii.market risk; i.insurance risk; capital required for; capital ofaninsurerThe risk-based shallbethesquare root ofthesumsquares of insurance act; external capital requirements asguidedby theRiskBasedCapital guidelinesinthe The Life andGeneral oftheGroup insurance subsidiaries are subjectto thefollowing tosame timemaximisingthereturn itsshareholders. development ofitsbusiness andisable to whileatthe continue asagoingconcern, The Group’s objective inmanagingitscapital istothe ensure thatitsupports Objective: 35. Capitalmanagement (continued) Notes (continued) Financial statementsfortheyearended31December2019 The Group’s policy to ensure appropriate capital levels is twofold: respective operations. required capital levels. Companies Act. modellingprocessA deterministic isusedto thelong-term determine capital must comply withspecific requirements oftheInsurance Act and Kenya capital requirements aswell aseconomic,andgrowth risk considerations. Regulatory capital to thecovered business: The following methodologyisusedto required theallocationoflong-term determine against appropriate hurdles. return Group businesses are eachallocated anoptimallevel ofcapital andare measured a) Capitalallocationmethodology Processes for managing capital: same capital managementpoliciesandprocesses. oftheGroupAll thesubsidiaries are withintheKenyan andtherefore jurisdiction apply the componentofeffectiveimportant capital management. to theirexposure torisks. financialandoperational Riskmanagementisaccordingly an approach. The amountofcapital required by thevarious businesses isdirectly linked on Group Embedded Value. The Group hasanintegrated management capital andrisk capital levels, includingtheuseofalternative sources offunding, to maximisereturn The managementoftheGroup’s capital baserequires acontinuous review ofoptimal development, insurance. -term capital markets andshort (ii)The fair value ofotherGroup operations, which includesthelandandproperty embedded value onpage88); report theseoperations andtheirnetvaluecapital ofin-force supporting business (refer (i)The embeddedvalue ofcovered business, required thelong-term whichcomprises The fair value ofotherGroup operations capital includestheworking allocated to the The level capital by isdetermined andnature minimum regulatory ofthesupporting Financial statements for the year ended 31 December 2019

Notes (continued)

35. Capital management (continued) iv.Certain of the Group’s long term required capital covered business investments in other Group operations qualify, to a varying degree, to be utilised as regulatory capital for the (i) The Group dividend policy is based on the annual declaration of all discretionary covered business. Maximum capital efficiency can therefore be achieved by optimising capital that is not required for normal operations or expansion; and the level of such investments held in the life company’s regulatory capital.

(ii) Performance targets are set for other Group operations based on an expected return The Group continues to improve and further develop its capital management models and on the fair value of the businesses, equal to their internal hurdle rates. This ensures that processes in line with international best practice and the current significant international all non-productive working capital is declared as a dividend to the Group. developments surrounding solvency and capital requirements. b) Required capital ii) Other Group operations i) Long-term required capital – covered business The performance measurement of other Group operations is based on the return achieved on the fair value of the businesses. Risk adjusted return targets are set for the The Group’s covered business requires significantly higher levels of allocated capital than businesses to ensure that each business’ return target takes cognisance of the inherent the other Group operations. The optimisation of long-term required capital is accordingly risks in the business. This approach ensures that the management teams are focused on a primary focus area of the Group’s capital management philosophy given the significant operational strategies that will optimise the return on fair value, thereby contributing to the potential to enhance shareholder value. Group’s main objective of optimising return on Group Embedded Value.

The following main strategies are used to achieve this objective: c) Discretionary capital i.Appropriate matching of assets and liabilities for policyholder solutions. This is Any capital in excess of requirements, and not optimally utilised, is identified on a especially important for long-duration policyholder solutions that expose the Group to continuous basis. The pursuit of structural growth initiatives has been set as the preferred interest rate risk, e.g. non-participating annuities, but also for participating business application of Group capital, subject to such initiatives yielding the applicable hurdle rate where asset/liability matching and investment strategy have a direct impact on capital and being complementary to or in support of Group strategy. Any discretionary capital requirements. not being efficiently redeployed will be returned to shareholders in the most effective form. 2019 Statements and Financial Report Annual ii.Managing the impact of new business on capital requirements by limiting volumes of 36. Risk management– life insurance capital-intensive new business per business. The life insurance business’ capital is invested in financial instruments and properties, iii.The asset mix of the long-term required capital also impacts on the overall capital which also exposes the business to financial risk, in the form of market, property, credit and requirement. An increased exposure to interest-bearing instruments reduces the liquidity risk. The management of these risks is described below. volatility of the capital base and accordingly also the capital requirement. The expected investment return on these instruments are however lower than equity with a potential a) Market risk negative impact on the return on Group Embedded Value. There is accordingly a trade- off between lower capital levels and the return on capital. The Group’s stochastic capital Market risk is the risk of adverse financial impact due to changes in fair values or future model is used to determine the optimal asset mix that will ensure the highest return on cash flows of financial instruments from fluctuations in interest rates, equity prices, capital. property prices, and foreign currency exchange rates. Market risk arises in business units due to fluctuations in both the value of liabilities and the value of investments held.

179 180 Annual Report and Financial Statements 2019 value of equities and similar securities over the two reporting periods inreview.value periods over reporting ofequitiesandsimilarsecurities thetwo loss. The impactisnetoftax Changeinbaseistherelative movement inthecarrying ofequitieswillhaveChanges inprices thefollowing impact inthestatement ofprofit or iv. Interest inthefree estate withprofit oflongterm funds. linked; and iii. assetsbacking ornotfully Equity insurance liabilitiesthatare market notparticipating from whichmanagementcharges orashare ofperformance are taken; ii. The indirect impactfrom changesinthevalue ofequitiesheldinpolicyholders’ funds i. Direct shareholdings equity inshareholder funds; sources risk: ofequity traded in the market.instruments The Group’s shareholders are exposed to the following oritsissuer,the individualfinancialinstrument or factors affecting allsimilarfinancial rate or currency risk whether thosechangesare risk), causedby factors specific to fromwill fluctuate (other thanthosearising interest becauseofchangesinmarket prices thatthefair istherisk risk value price offutureEquity cash flows ofafinancialinstrument i) Equityrisk of investment assetsowned directly by theshareholders. At Group level, inrelation italsoarises to the overall businesses portfolio andinthevalue 36. Riskmanagement–life insurance (continued) Notes (continued) Equities andsimilarsecurities 31 December2018 Equities andsimilarsecurities 31 December2019 Financial statementsfortheyearended31December2019 Gross Portfolio KShs.’000 1,933,402 428,135 % changeinbase +(-) 18% +(-) 18% KShs.’000 +(-) 77,064 116,004 position thatwillrequire by thecapital portfolio. financialsupport TheGroup managesthis markets may asanunder performance inequity risk resultsome equity inanunderfunded investment is declared return as bonuses. The capital is however portfolio exposed to by policyholders is borne risk toEquity the extent that the after-tax and after - cost business hadafundinglevel portfolios inexcess of100%. (2018: 100%) by thesemanagementactions. At endofyear 2019, allstable andreversionary bonus from shareholders in instances where negative stabilisation reserves will notbeeliminated in thesubsequentthree years. The fundinglevel isbolstered ofportfolios through loans to theextent isexpected thattheshortfall to berecovered by lower declaring bonuses Negative bonus stabilisation reserves are allowed for inthevaluation oftheseliabilities In the event of adverse investment performance, this reserve may become negative. are retained inabonus stabilisation reserve, for future distribution to policyholders. expectations, affordability andtheapproved bonus philosophy. Any notyet returns distributed and bonus rates are inlinewiththeproduct determined design,policyholder reasonable toreturns policyholders inorder to reduce theeffects ofvolatile investment performance, the policyholder, intheform ofbonuses. The useofbonuses isamechanismto smooth These policiesprovide for thepayment ofanafter-tax andafter -costinvestment to return (smoothed-bonus business) Market risk onStable, reversionary annuity bonus business andparticipating in theinvestment guidelinesfor thepolicyholder portfolios. new policiesto prevailing market conditions. These investment policiesare thenreflected policies, by determined the Actuarial committee, andby adjustingthelevel ofguarantees for relatingThe risk to guaranteed minimum benefits ismanaged by appropriate investment and therefore expose thelife insurance business to market risk. related policieshowever, provide for guaranteed minimum benefits atdeathormaturity, contract. Policyholders inrespect thefullmarket risk oflinked carry business. Market- credited andthereturns ontheunderlying portfolio earned thereturns to the between Linked andmarket-related business are contracts where there isadirect relationship Linked andmarket-related business Financial statements for the year ended 31 December 2019

Notes (continued)

36. Risk management– life insurance (continued) The Group’s equity price risk exposure relates to financial assets whose values will fluctuate as a result of changes in market prices, principally investment securities not risk through an appropriate investment policy. Actuarial committee oversees the investment held for the account of unit-linked business. policy for the various smoothed-bonus portfolios. The Group’s price risk policy requires it to manage such risks by setting and monitoring The aim is to find the optimum balance between high investment returns (to be able to objectives and constraints on investments, diversification plans, limits on investments in declare competitive bonus rates) and stable investment returns given the need to meet each sector and market and careful and planned use of financial instruments. guaranteed benefits and to support the granting of stable bonus rates. The requirements for the investment management of each portfolio are set out in investment guidelines, ii) Interest rate risk which cover, inter alia, the following: Interest rate risk is the risk that the value or future cash flows of a financial instrument will Limitations on exposure to volatile assets; fluctuate because of changes in market interest rates. Floating rate instruments expose the Group to cash flow interest risk, whereas fixed interest rate instruments expose the The benchmarks for the performance measurement of each asset class and limits on Group to fair value interest risk. The Group is not exposed to cash flow interest risk as it deviations from these benchmarks; does not hold instruments with a floating rate. The Group is however exposed to fair value interest risk as it holds investments in government bonds, corporate bonds and deposits Credit risk limits; with financial institutions which are designated at fair value though profit and loss. Interest on fixed interest rate instruments is priced at inception of the financial instrument and is Limits on asset concentration – with regard to strategic investments, the exposure of fixed until maturity. policyholders’ portfolios to these investments is based on portfolio investment considerations and restricted with reference to a specific counter’s weight in the The Group manages this risk by adopting close asset liability matching criteria, to benchmark portfolio; minimise the impact of mismatches between the value of assets and liabilities from interest rate movements. Interest rate risk is managed as follows with regard to long-term Limits on exposure to some particular types of assets, such as unlisted equities, life business. 2019 Statements and Financial Report Annual property and hedge funds; and Changes in prices of public loans and stock as a result of changes in interest rates will Regulatory constraints. have the following impact in the statement of profit or loss. The impact is net of tax.

Feedback on the investment policy and its implementation and the performance of the smoothed-bonus portfolios is provided quarterly to the Sanlam Kenya Plc Board.

181 182 Annual Report and Financial Statements 2019 maturity andinterestmaturity rate repricing. The table below theexposure summarises to interest rate risks. Includedinthetable are theGroup’s amounts, categorised by ofcontractual assetsandliabilitiesatcarrying theearlier ofpublicChanges inprices loansandstock asaresult ofchangesininterest rates willhave thefollowing impactinthestatement ofprofit orloss. The impactisnetof tax. ii) Interest rate risk (continued) a) Market risk (continued) 36. Riskmanagement(continued) Notes (continued) Government bonds Government securities Assets Corporate bonds Corporate bonds Deposits withfinancialinstitutions Deposits withfinancialinstitutions Borrowings Financial liabilities Cash andbankbalances Total Borrowings Liabilities Total Government securities Assets Corporate bonds Deposits withfinancialinstitutions Cash andbankbalances Total Borrowings Liabilities Total At 31December2019 Financial assets At 31December2018 Financial statementsfortheyearended31December2019 Gross portfolio 18,681,638 2,763,210 544,763 53,695 % changeinbase +(-)10% +(-)10% 10% 10% Carrying amount Carrying amount +(-) 224,180 19,930,625 18,681,638 19,039,735 15,140,634 +(-) 25,220 KShs.’000 1,269,520 KShs.‘000 2,272,518 KShs.‘000 2,763,210 2,763,210 3,497,432 3,497,432 650,529 544,763 357,063 53,695 3,269 2019 483 Gross portfolio 15,140,634 1,868,823 KShs.‘000 2,272,518 KShs.‘000 2,763,210 2,763,210 2,777,380 2,777,380 3,474,116 1,269,520 2,272,518 3,497,432 650,529 529,438 619,837 544,762 315,097 < 1year < 1year 357,063 Contractual cashflows (undiscounted) Contractual cashflows (undiscounted) 53,695 % changeinbase 1 -5years 1 -5years 1,440,485 2,261,137 2,261,137 KShs.‘000 KShs.‘000 700,403 720,052 720,052 +(-) 10% +(-) 10% +(-) 10% +(-) 10% 740,082 ------+(-) 181,688 15,800,664 15,800,664 15,800,664 14,125,134 14,125,134 +(-) 31,921 +(-) 13,635 +(-) 11,426 KShs.’000 KShs.‘000 KShs.‘000 > 5years > 5years 2018 ------Financial statements for the year ended 31 December 2019

Notes (continued)

36. Risk management (continued) c) Property risk a) Market risk (continued) ii) Interest rate risk (continued) The Group is subject to property price risk due to holdings of investment properties in a variety of locations. Investment in property is managed by a professional property Linked and market - related business manager with regard to liquidity requirements and the expectations of shareholders’ and policyholders as well as overall risk appetite. The Group Investment Committee also Linked and market-related business relates to contracts where there is a direct relationship monitors property assets owned directly by the Group on a quarterly basis. between the returns earned on the underlying portfolio and the returns credited to the contract. Policyholders carry the full interest rate risk in respect of linked business. The majority of the investment properties are held in respect of market-related and non- participating policyholder business as well as smoothed - bonus business. Refer to equity The life business is exposed to interest rate risk to the extent that guaranteed minimum risk above for a description on how the risks associated with these types of business are benefits at death or maturity are provided. Refer to equity risk above for the management of managed. market risk in respect of these policies. Comprehensive measures and limits are in place to control the exposure of the insurance Stable, reversionary bonus and participating annuity business (smoothed - bonus business) businesses’ capital to market risk. Continuous monitoring taKShs place to ensure that appropriate assets are held in support of the capital and investment return targets. Limits The life business is exposed to interest rate risk to the extent that changes in effective are applied in respect of the exposure to asset classes and individual counters. interest rates result in negative stabilisation reserves that cannot be eliminated through the smoothed - bonus management action philosophy. In these circumstances the life insurance d) Market risk – capital businesses will have to provide support to the policyholders’ portfolios. Comprehensive measures and limits are in place to control the exposure of the insurance Guarantee plans businesses’ capital to market risk. Continuous monitoring takes place to ensure that appropriate assets are held in support of the capital and investment return targets. Limits Our Flexi Saver and Flexi Educator policies provide for guaranteed maturity amounts. The are applied in respect of the exposure to asset classes and individual counters. life insurance business is therefore exposed to interest rate risk, if the assets backing these 2019 Statements and Financial Report Annual liabilities do not provide a comparable yield to the guaranteed value. Market risk – sensitivities

Interest rate risk is managed by matching the liabilities with assets that have similar Sensitivities that illustrate the effect of changes in investment return assumptions on investment return profiles as the liabilities. the value of in-force (VIF) business are disclosed on page 26. The change in VIF relative to the base value is an indication of how the present value of future after-tax b) Currency risk profits (including the allowance for the cost of capital at risk) are impacted based on these assumptions. The Group is exposed to currency risk due to revenue collected in foreign currency. The revenue amounts in foreign currency are not significant and consequent claims are paid in If investment return (and inflation) assumptions were to decrease by 1%, coupled with foreign currency. The major currency exposure is on the borrowings, Kshs. 2,763,210 (2018: a 1% decrease in risk discount rates, and with bonus rates changing commensurately, Kshs. 3,497,432,000). The loan proceeds were in USD. The loan interest payments is also the impact on the present value of future after-tax profits would be a decrease of KShs. done in USD. If the currency movement was up/down by 1%, the loan balance would have 32.5 million (2018: decrease of KShs. 32.5 million). been Kshs. 2,788,430 while the finance cost would have increased by 18.2%.

183 184 Annual Report and Financial Statements 2019 and Strategy hasbeenestablished for thispurpose. systemic suchafailure risk couldleadto. The Sanlam Kenya Plc Investment RiskPolicy effect ontheGroup asaresult oflossdueto amajorcorporatefailure andthepossible Sanlam Kenya Plc recognises that a sound credit policy is essential to risk minimise the offinancialassetsthatarequality neitherpastduenorimpaired. assets, andismanagedonaGroup-wide basis. The Group doesnotgrade thecredit by failing tothe otherparty discharge anobligation. Credit mainly from risk arises financial to willcauseafinancialloss a financialinstrument for thatoneparty Credit istherisk risk e) Credit risk Embedded ValueReport and liabilitiesoffset eachother. Riskdiscountrate is disclosedinnote sensitivity 4ofthe The above analysis sensitivity excluded unitlinked investments, asthemovement inassets The rates prescribed by the Act are applicable for allinsurers inthecountry. Kenya 1984. The Act prescribes Net premium valuation conservative. method which is very The basisofvaluation ofinsurance contract liabilitiesisprescribed intheinsurance Act of Market risk –sensitivities (continued) 36. Riskmanagement(continued) Notes (continued) Equity/Property Interest rate 31 December2018 Equity/Property Interest rate 31 December2019 Sensitivities Financial statementsfortheyearended31December2019 % changein +(-)4% +(-)3% +(-)4% +(-)3% base Participating +(-)1,810 +(-) 4,312 Insurance +(-)20,291 +(-)11,668 Insurance non- participating +(-) 325,743 +(-)456,327 +(-)-74,626 - Shareholders’ +(-) 5,253 +(-)135,000 +(-)134,560 +(-)35,537 funds monitored against approved limits. policy benefits ofthepolicy in contract.terms debtors andloansamonganumber ofmajorindustries, customers andgeographic areas. and product are types avoided by ofmajorbanksandspreading dealingwithavariety following are someofthemaincredit managementactions: risk The Group isalsoexposed to credit inrespect risk capital ofitsworking assets. The aswell inaportfolio aslimitsonconcentration risk.instruments the lowest creditthatmay quality beincludedinaportfolio, theaverage credit of quality investment guidelinesofthelife insurance operations, of whichplacelimitsinterms In addition to the above measures, are the portfolios of the also managed in terms to. Covenants are alsostipulated intheloanagreements, specifyingactionsthatare agreed Where possible, Sanlam Kenya Plcinterest isprotected by obtaining acceptable security. All facilities are reviewed onatleastanannual basisby theappropriate approval authority. excess spread; economiccapital limits; andcyclical aspectsoftheeconomy. industry; geographical location; product type; currency; maturity, anticipated profitability or such as: economicsector; concentration; risk maximum exposure perobligor, group, and The credit strategy risk stipulates theparameters for approval ofcredit applications, strategyrisk andcredit policy. risk without following procedures. normal This credit culture istheproduct of aformal credit maintained, suchthatnotransactions are concludedoutsideareas ofcompetence, nor The governance structures ensure thatanappropriate credit culture andenvironment is Exposure to externaldepositsand similartransactions is financialinstitutionsconcerning insurance Long-term business debtors are secured by theunderlying value oftheunpaid Unacceptable concentrations ofcredit to risk groups ofcounter-parties, business sectors Financial statements for the year ended 31 December 2019

Notes (continued)

36. Risk management (continued) e) Credit risk (continued)

Maximum exposure to credit risk

The amount that best represents the Group’s and Company maximum exposure to credit risk at end of year 2019 is tabulated in the industry analysis below:

Group: Non-Governmental Government Services Financial Services Manufacturing Organizations Others Total KShs.’000 KShs.’000 KShs.’000 KShs.’000 KShs.’000 KShs.’000 KShs.’000 Public sector stocks and loans 18,681,638 - 53,695 - - - 18,750,079 Reinsurers’ share of insurance contract liabilities - - - 751,534 Receivables arising out of direct insurance arrangements - - 751,534 - - - 938,571

Loans - - 938,571 - - 379,766 379,766 Receivables and other financial assets - - - - - 296,429 296,429 Cash and cash equivalents ------1,180,546

18,681,638 - 2,939,092 - - 676,195 22,296,925

Company

Receivables and other financial assets - - - - - 82,624 82,624

Cash and cash equivalents - - 113,415 - - - 113,415 Annual Report and Financial Statements 2019 Statements and Financial Report Annual - - 113,415 - - - 196,039

185 186 Annual Report and Financial Statements 2019 The amountthatbestrepresents theGroup’s andCompany maximum exposure to credit atendofyear risk 2018 istabulated analysis in the industry below: Maximum exposure to credit risk (continued) e) Credit risk (continued) 36. Riskmanagement(continued) Notes (continued) Public sector stocks andloans liabilities Reinsurers’ share ofinsurance contract arrangements Receivables outofdirect arising insurance Loans Receivables andotherfinancialassets Cash andcashequivalents Receivables andotherfinancialassets Company Cash andcashequivalents Group: Financial statementsfortheyearended31December2019 Government 15,140,634 15,140,634 KShs.’000 ------KShs.’000 1,269,520 1,269,520 Services ------Financial Services KShs.’000 2,629,581 4,292,798 843,841 356,969 819,376 356,969 - - - - Manufacturing KShs.’000 ------Non-Governmental Organizations KShs.’000 ------KShs.’000 477,436 504,851 182,229 982,287 182,229 Others - - - - - 21,685,239 16,410,154 KShs.’000 2,629,581 477,436 843,841 504,851 356,969 182,229 819,376 539,198 Total Financial statements for the year ended 31 December 2019

Notes (continued)

36. Risk management (continued) e) Credit risk (continued)

Credit exposure by staging

Owing to the fact that there is no readily available credit rating information, the group assesses the credit quality of the institution, taking into account its financial position, past experience and other factors

The table below provides information regarding the credit risk exposure of the Group and Company

Group: 31 December 2019 ECL Stage 1 ECL Stage 2 ECL Stage3 Total KShs.’000 KShs.’000 KShs.’000 KShs.’000 Financial Instruments: 18,735,333 - - 18,735,333 Reinsurers’ share of technical provisions and reserves 751,534 - - 751,534 Receivables arising out of direct insurance arrangements 938,571 - 1,310,860 2,249,431 Loans 379,766 - 87,605 467,371 Receivables and other financial assets 296,429 - - 296,429 Cash and cash equivalents 1,195,292 - - 1,195,292

22,296,925 - 1,398,465 23,695,391

Company: 31 December 2019

Financial Instruments: - - - - 2019 Statements and Financial Report Annual Receivables and other financial assets 82,624 - - 82,624

Cash and cash equivalents 113,415 - - 113,415

196,039 - - 196,039

The life insurance businesses’ maximum exposure to credit risk is equivalent to the amounts recognised in the Statement of financial position, as there are no financial guarantees provided to parties outside the Company, nor are there any loan commitments provided that are irrevocable over the life of the facility (nor revocable only in adverse circumstances).The credit quality of each class of financial asset that is neither past due nor impaired, has been assessed as acceptable within the parameters used to measure and monitor credit risk, as described above. There are no assets that would have been past due or impaired, had the terms not been renegotiated.

187 188 Annual Report and Financial Statements 2019 Receivables andotherfinancialassets Loans Receivables outofdirect arising insurance arrangements Financial Instruments: 31 December2018 Company: Cash andcashequivalents Reinsurers’ share oftechnical provisions andreserves Financial Instruments: Receivables andotherfinancialassets Cash andcashequivalents as described above.as described The credit ofeachclassfinancialassetthatisneither pastduenorimpaired, quality hasbeenassessedasacceptable withintheparameters used to measure andmonitor creditrisk, Credit exposure by staging (continued) e) Credit risk (continued) 36. Riskmanagement(continued) Notes (continued) 31 December2018 Group: Financial statementsfortheyearended31December2019 ECL Stage1 21,685,239 16,410,154 KShs.’000 2,629,581 504,851 843,841 356,969 182,229 539,198 819,376 477,436 - ECL Stage2 KShs.’000 ------ECL Stage3 KShs.’000 1,396,989 1,528,322 131,333 ------23,213,561 16,410,154 KShs.’000 2,240,830 2,629,581 356,969 636,184 182,229 539,198 819,376 477,436 Total - Financial statements for the year ended 31 December 2019

Notes (continued)

36. Risk management (continued) e) Credit risk (continued)

An impairment provision of KShs nil (2018: KShs 1,530 million) is held against the impaired receivables. The Group holds collateral against the past due or impaired receivables. The management continues to actively follow up past due and impaired receivables.

The following is a movement of impairment provision account:

Receivables and Deposits Insurance other financial with financial Cash and bank Corporate bond Loans receivables assets institutions balances Total KShs.’000 KShs.’000 KShs.’000 KShs.’000 KShs.’000 KShs.’000 KShs.’000 The movement in the provisions is as follows:

At 1 January 2019 - 131,333 1,396,989 - - 2,657 1,530,979 Additional provision - - (86,129) - - - (86,129) Unused amounts reversed ------At end of year - 131,333 1,310,860 - - 2,657 1,442,193

At 1 January 2018 - 6,371 1,282,533 - - 3,875 1,292,779 Additional provision - 124,962 114,456 - - (1,218) 238,200 Unused amounts reversed ------At end of year - 131,333 1,396,989 - - 2,657 1,530,979 Annual Report and Financial Statements 2019 Statements and Financial Report Annual

189 190 Annual Report and Financial Statements 2019 arrangements includeproportionate, excess and catastrophe coverage. exposuresAll risk inexcess ofspecified limitsare monetary reinsured. Catastrophe insurance isinplace for The useofreinsurance exposes theGroup to credit risk. ofreinsurers risks are managedundertheGroup’sThe counterparty credit framework. risk The Group’s reinsurance Sanlam Kenya PlcmaKShsuseofreinsurance to: f) Reinsurance risk The table below provides information regarding thecredit exposure risk oftheGroup usingtheexpected credit lossstages cost. for assetsatamortised e) Credit risk (continued) 36. Riskmanagement(continued) Insurance receivables Loans Corporate bonds Loans Gross financialassets Deposits withfinancialinstitutions Receivables andotherfinancialassets Receivables andotherfinancialassets Insurance receivables Cash andbankbalances Gross financialassets Cash andbankbalances Deposits withfinancialinstitutions Notes (continued) At 31December2018: At 31December2019: Protect bookagainst catastrophes. itsmortality/risk Enable itto greater underwrite risks thanitsownappetite; risk and Access product opportunities; Access expertise; underwriting Financial statementsfortheyearended31December2019 ECL Stage1 ECL Stage1 1,861,301 Kshs’000 Kshs’000 2,275,478 4,473,415 843,841 504,851 356,655 296,429 658,439 530,017 477,436 357,063 19,761 14,746 ECL Stage2 ECL Stage2 Kshs’000 Kshs’000 7,910 7,910 ------ECL Stage3 ECL Stage3 Kshs’000 Kshs’000 1,530,979 1,396,989 941,921 131,333 918,810 23,111 2,657 ------6,004,394 Kshs’000 Kshs’000 2,240,830 2,275,478 2,811,132 938,571 296,429 666,349 379,766 530,017 359,720 636,184 477,436 14,746 Total Total Financial statements for the year ended 31 December 2019

Notes (continued)

36. Risk management (continued) f) Reinsurance risk (continued) single-event disasters. Credit risk in respect of reinsurance is managed by placing the Group’s reinsurance only with subsidiaries of companies that have high international or similar credit ratings. g) Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities and policy holder liabilities. The board has developed a risk management framework for the management of the Group short, medium and long-term liquidity requirements thereby ensuring that all financial liabilities are settled as they fall due.

The Group manages liquidity risk by continuously reviewing forecasts and actual cash flows, and maintaining banking facilities to cover any shortfalls. .

Liquidity risk – policyholder solutions

Stable, reversionary bonus and participating annuity business (smoothed - bonus business)

These policyholder solutions expose the Group to liquidity risks. Expected cash flows are taken into account in determining the investment guidelines and asset spread of the portfolios. Limits are also placed on the exposure to illiquid investments.

Other policyholder business

Policyholder portfolios supporting linked and market-related business, participating annuities and other non-participating life business are invested in appropriate assets, taking into account expected cash outflows. Annual Report and Financial Statements 2019 Statements and Financial Report Annual

The following table summarises the overall maturity profile of the business:

Year ended 31 December 2019:

Group 1 Year 1-5 Years >5 Years Open ended Total KShs.’000 KShs.’000 KShs.’000 KShs.’000 KShs.’000

Financial liabilities

Borrowings 2,763,210 - - - 2,763,210

Market linked investment contracts 2,987,534 1,022,212 1,063,704 - 5,073,450

Non-market related insurance contracts 1,341,673 4,539,530 7,513,435 190,379 13,585,017

Deposit administration contracts - - - 1,131,719 1,131,718

Insurance payables - - 972,237 972,237 Payables and other charges 771,483 - - - 771,483

2,763,210 - - - 2,763,210 Total liabilities 7,863,900 5,561,742 8,577,139 2,294,335 24,297,115 191 192 Annual Report and Financial Statements 2019 Total assets Receivables andotherfinancial assets Company Total assets Deposits withfinancialinstitutions Receivables andotherfinancialassets Insurance receivables Total liabilities Reinsurance assets Payables andothercharges Loans Public sector stocks andloans Financial Assets: Borrowings Liquidity gap: g) Liquidityrisk (continued) 36. Riskmanagement(continued) Notes (continued) Year ended31December2019: Year ended31December2019: Group Company Company Group Financial statementsfortheyearended31December2019 At 31December2019 At 31December2018 At 31December2019 At 31December2018 (4,865,323) (2,995,572) (3,182,556) (3,067,985) KShs.’000 KShs.’000 KShs.’000 3,265,180 2,763,210 2,998,577 501,970 296,429 938,571 673,532 544,762 412,543 132,739 82,624 82,624 1 Year 1 Year 1 Year - (3,021,143) (3,987,308) KShs.’000 KShs.’000 KShs.’000 2,540,599 2,261,137 1-5 Years 1-5 Years 1-5 Years 169,645 109,817 ------15,800,664 16,048,107 KShs.’000 KShs.’000 KShs.’000 7,470,968 5,287,732 >5 Years >5 Years >5 Years 196,407 51,036 ------Open ended Open ended Open ended - KShs.’000 KShs.’000 KShs.’000 1,933,402 1,933,402 (360,933) 603,644 ------(2,995,572) (3,182,556) (1,163,917) 23,520,684 20,668,735 KShs.’000 KShs.’000 KShs.’000 3,265,180 2,763,210 (776,432) 501,970 296,429 938,571 633,224 438,963 544,762 82,624 82,624 Total Total Total Financial statements for the year ended 31 December 2019

Notes (continued)

36. Risk management (continued) g) Liquidity risk (continued)

1 Year 1-5 Years >5 Years Open ended Total Year ended 31 December 2018: Group KShs.’000 KShs.’000 KShs.’000 KShs.’000 KShs.’000

Financial liabilities

Borrowings 2,777,380 720,052 - - 3,497,432

Market linked investment contracts 3,236,989 745,656 1,357,817 - 5,340,462

Non-market related insurance contracts 1,437,556 4,245,771 7,731,660 179,609 13,594,596

Deposit administration contracts - - - 1,107,372 1,107,372

Insurance payables - - 688,646 688,646 Payables and other charges 656,704 - - - 656,704

Total liabilities 8,108,629 5,711,479 9,089,477 1,975,627 24,885,212

Company Borrowings 2,777,380 - - - 2,777,380 Payables and other charges 400,421 - - - 400,421 Total liabilities 3,177,801 - - - 3,177,801

Year ended 31 December 2018: 1 Year 1-5 Years >5 Years Open ended Total Annual Report and Financial Statements 2019 Statements and Financial Report Annual Group KShs.’000 KShs.’000 KShs.’000 KShs.’000 KShs.’000 Financial Assets:

Public sector stocks and loans 844,535 1,440,485 14,125,134 2,579,271 18,989,425

Mortgages and policy loans 189,771 114,041 201,039 - 504,851

Reinsurance assets 412,543 169,645 51,036 - 633,224

Insurance receivables 843,841 - - - 843,841

Receivables and other financial assets 477,436 - - - 477,436

Deposits with financial institutions 2,272,518 - - - 2,272,518 Total assets 5,040,644 1,724,171 14,377,209 2,579,271 23,721,295

Company Receivables and other financial assets 182,229 - - - 182,229 Total assets 182,229 - - - 182,229

193 194 Annual Report and Financial Statements 2019 based onthestatutoryrequired Gross Premium Methodwhichensures thatadequate provision ismadefor lapses, surrenders andpaid-uppolicies. financial loss at surrender. Persistency is monitoredexperience to ensure that negative is timorouslyexperience identified, and corrective action taken. The Group’s policy is reserving reduce lapse, surrender andpaid-uprates. The designof insurance products excludes material lapse, surrender andpaid-upvalue guarantees, subject to regulatory constraints, to limit Distribution modelsare usedby theGroup to clients. identifyhigh-risk Clientrelationship managementprogrammes are aimedatmanagingclientexpectations andrelationships to i) Persistency risk Underwriting risk through:The Group risk managesunderwriting insurance contracts. actual experience differs from thatwhichisassumed. The Group ishowever alsoexposed to persistency inrespect risk ofotherpolicyholder inrespect solutionsandinsurance risk of life business, from ofothernon-participating arises Insurance thewriting risk astheseproducts are valued prospectively andtherefore expose required thelong-term capital to if risk h) Insurance risk (continued) 36. Riskmanagement(continued) Notes (continued) by the Group as part of its underwriting strategyby ofitsunderwriting to theGroup mitigate aspart risk: underwriting valuations fullactuarial and theGroup’sQuarterly regular profit process assistinthetimelyreporting identificationof experience variances. The following policiesand practices are used vii) vi) v) iv) iii) ii) i) Policies andpractices: strategy underwriting Adequate andreserving. pricing Claimshandlingpolicy; and Adequate reinsurance arrangements to limitexposure perindividualandmanageconcentration ofrisks; Itsproduct development process policy to andunderwriting prevent anti-selection andensure appropriate premium rates (loadings)for substandard risks; Financial statementsfortheyearended31December2019 Regular investigations experience are andmorbidity conducted into to mortality ensure thatcorrective action,for example re-rating ofpremiums, istaken where necessary. Risk profits are ona determined regular basis; and considered necessary. premiumsThe risk for Group business risk andsomeofthein-force business individualrisk canbeadjusted within12 monthsshouldclaimsexperience deteriorate to theextent thatsuchanadjustmentis The experience ofreinsurers for isusedwhere necessary therating ofsubstandard risks; Appropriate incomereplacement levels apply to insurance; disability Applications for cover risk are reviewed by experienced underwriters andevaluated against established standards. Retention limitsare appliedto limittheexposure perindividuallife; Specific testing outinallcaseswherefor HIV/Aidsiscarried theapplications risk coverfor exceed asetlimit. policiesalsoincludespecificallowanceProduct and pricing reserving riskof HIV/ forthe Aids; approve thepolicy conditionsandpremium rates ofnew andrevised products; insuranceAll long-term product additionsandalterations are required to passthrough theapproval ofthelife framework insurance thatforms part business’ governance process. The statutoryactuaries Financial statements for the year ended 31 December 2019

Notes (continued)

36. Risk management (continued) Underwriting risk (continued) h) Insurance risk (continued) ii) Expense risk

Expenses are managed through the Group’s budgeting process and continuous monitoring of actual expenses versus budgeted is conducted and reported on. iii) Claims risk

The risk that Sanlam Kenya Plc may pay fraudulent claims (claims risk) is mitigated by employing highly trained client service staff to ensure that fraudulent claims are identified and investigated thoroughly. The legitimacy of claims is verified by internal, financial and operating controls that are designed to contain and monitor claims risks. The Sanlam forensic investigation team also advises on improvements to internal control systems.

The Group writes a diverse mix of business, and continually monitors this risk and the opportunities for mitigating actions through reinsurance. The Group’s life insurance businesses are focused on different market segments, resulting in a mix of individual and institutional clients, as well as entry-level, middle market and high net worth clients.

The tables below provide an analysis of the Group’s exposure to the value of benefits insured: Value of benefits insured per individual: non-participating life business

Number of lives Before Reinsurance After reinsurance

2019 2018 2019 2018 2019 2018

KShs.’000 KShs.’000 KShs.’000 KShs.’000 KShs.’000

0 – 3,510 174,083 133,322 57,154,925 5,099 57,153,925 2,626

3,510 – 7,020 11,762 24,091 59,062,140 17,224 48,314,336 8,794 Annual Report and Financial Statements 2019 Statements and Financial Report Annual 7,020 – 35,102 7,673 38,416 94,867,785 47,004 32,590,112 15,499 35,102 – 56,164 316 191 13,627,326 168,660 1,366,112 56,574

>56,164 148 218 12,058,313 253,152 614,112 86,320 Total 193,982 196,238 236,770,488 491,140 140,038,595 169,813

Non-participating annuity payable per annum per life insured

195 196 Annual Report and Financial Statements 2019 Total >714 571 –714 428 –571 286 –428 143 – 286 0 –143 ofSanlamAll subsidiaries Kenya Plcwere adequately capitalised, withCAR covered 3.55timesby theexcess ofassetsover liabilities. Refer to thecapital managementsection(Note 35)for details onthemanagementofGroup’s capital base. y) Capitaladequacy risk iii) Claimsrisk (continued) h) Insurance risk (continued) 36. Riskmanagement(continued) Notes (continued) Kshs’000

Financial statementsfortheyearended31December2019

Number oflives 2,003 4,010 2019 239 403 314 139 912 3,778 2,049 2018 235 357 806 218 113 113 1,036,499 Kshs’000 Before Reinsurance 380,164 140,977 123,021 185,165 118,323 88,849 2019 Kshs’000 968,682 313,972 138,436 179,904 136,580 119,464 80,326 2018 1,036,499 Kshs’000 380,164 140,977 123,021 185,165 After reinsurance 118,323 88,849 2019 Kshs’000 968,682 313,972 138,436 179,904 136,580 119,464 80,326 2018 P R O X Y F O R M

To: The Share Registrars Image Registrars Limited Barclays Plaza, 5th Floor, Loita Street P.O. Box 9287- 00100 NAIROBI

I/We……………………………………………………………………………………………. of ………………………………………………………………………………………………..being member/members of SANLAM KENYA PLC hereby appoint ………….….…………………………………………………………………………………… of.………….………….……………… …………………………….………….………….……or failing him/her the Chairman of the meeting of as/ our proxy, to vote for me/ us and on my/ our behalf at the 74th Annual General Meeting of the company to be held on Thursday 9th July 2020 and at any adjournment thereof.

RESOLUTIONS FOR AGAINST WITHHELD 1. THAT the Balance Sheet and Accounts for the year ended 31 December 2019 together with the reports of the Chairman, the Group Chief Executive, the Directors, the Auditor and the Statutory Actuary are hereby approved and adopted. 2. THAT Dr Grace Mwai is hereby elected as a director of the Company.

3. THAT Ms Rose Agutu is hereby elected as a director of the Company.

4. THAT Mr Julius Magabe is hereby re-elected as a director of the Company.

5. THAT in accordance with the provisions of Section 769 of the Companies Act, 2015 the following Directors, being members of the Audit, Actuarial, Risk and Compliance Committee are hereby elected to continue serving as members of the Committee: a. Freda Britz (Chair Person) b. Nelius Bezuidenhout c. Julius Magabe d. Cornie Foord e. Rose Agutu Annual Report and Financial Statements 2019 Statements and Financial Report Annual

6. THAT the Directors’ remuneration is hereby approved.

CDSC No of member (if known): …………………...... …..…..…..…..…..…..…..…..…......

(This can be found on your CDSC Statement)

Mobile Number (of the proxy holder): …………………...... …..…..…..…….....…..…......

Signed this ………………...... ……..…..…...... day of …………..…..…...... 2020

------

197 198 Annual Report and Financial Statements 2019 Notes: 5. 4. 3. 2. 1.

Absa Towers (formerly Barclays Plaza),Loita Street. www.sanlam.com/kenya Physical copiesoftheproxy form are alsoavailable atthefollowing address: ImageRegistrars Limited offices, 5thFloor not later than11.00 a.m. on7thJuly 2020. A proxy form isattached to thisNoticeandisavailable ontheCompany’s website viathislink: https:// offices oftheCompany’s Share Registrar’s ImageRegistrars, 5thFloor, Absa Towers (formerly Barclays Plaza),Loita Street, Kenya soatto arrive the shareholder ortheduly attorney authorised oftheshareholder andmust beeitheremailedto [email protected] orlodgedatthe To bevalid, aproxy form, whichisavailable from theCompany’s headoffice ortheShare Registrar’s offices, must becompleted andsignedby case any votes castby your proxy willbeexcluded. Completion andsubmissionoftheform ofproxy willnotprevent you from attending themeetingandvoting atthemeetinginperson, inwhich need notto beashareholder oftheCompany. proxy any otherperson, delete thewords oftheMeetingor”fullnameyour proxy“the Chairman andinsert inthespaceprovided. A proxy on your behalf at the meeting. of the meeting as proxyThe appointment of the Chairman has been included for convenience. To appoint as a As ashareholder you are entitledto appointoneormore proxies to exercise allorany ofyour shareholder to rights attend andto speakandvote attorney ofsuchcorporatebody. In caseofamemberbeingcorporatebody, theProxy Form must beunderitscommonseal orunderthehandofanofficer orduly authorized thereof.journment their emailaddress [email protected] to arrive notlater than11:00 a.m. on7thJuly, 2020i.e. 48hours before themeetingorany ad- 00100 Nairobi orphysically to theregistered office oftheCompany, orto ImageRegistrars onP. O. Box 9287–00100, Nairobi, Kenya orthrough If amemberisunable to attend personally, thisProxy Form shouldbecompleted to andreturned theCompany SecretaryP.O. Box 30088GPO FOMU YA UWAKILISHI

Kwa: Wasajili wa Hisa Image Registrars Limited Barclays Plaza, Ghorofa ya 5, Loita Street S.L.P. 9287- 00100 NAIROBI

Mimi/Sisi ………………………………………………………………………………………………………wa anwani ………………………………………………………………………………… nikiwa/ tukiwa mwanachama/wanachama wa SANLAM KENYA PLC namteua/tunamteua ………….….…………………………………………………………………………………………….…wa anwani ……….………….…………………………………………….………….………….……. na asipopatikana Mwenyekiti wa mkutano, kuwa mwakilishi wangu/wetu na kupiga kura kwa niaba yangu/ yetu katika Mkutano Mkuu wa Kila Mwaka wa 74 wa kampuni utakaoandaliwa Alhamisi tarehe 9 Julai 2020 na iwapo utaahirishwa.

MAAZIMIO KUUNGA MKONO KUPINGA KUSUSIA 1. KWAMBA taarifa za Kifedha za mwaka uliokamilika mnamo 31 Desemba 2019 pamoja na ripoti za Mwenyekiti, Mkuu Mtendaji wa Kundi, Wakurugenzi, Mkaguzi wa Hesabu, na Mtakwimu wa Bima zimeidhinishwa na kuanza kutumika.

2. KWAMBA Dkt Grace Mwai amechaguliwa kuwa mkurugenzi wa Kampuni.

3. KWAMBA Bi Rose Agutu amechaguliwa kuwa mkurugenzi wa Kampuni.

4. KWAMBA Bw Julius Magabe amechaguliwa kuwa mkurugenzi wa Kampuni.

5. KWAMBA kwa mujibu wa maelezo katika Kifungu 769 cha Sheria za Kampuni, 2015, Wakurugenzi wafuatao, ambao ni wanachama wa Kamati ya Ukaguzi wa Hesabu, Utakwimu wa Bima, Hatari na Utimizwaji wa Sheria wachaguliwe kuendelea kuhudumu kama wanachama wa Kamati hiyo: a. Freda Britz (Mwenyekiti) b. Nelius Bezuidenhout c. Julius Magabe d. Cornie Foord 2019 Statements and Financial Report Annual e. Rose Agutu

6. KWAMBA malipo ya Wakurugenzi yameidhinishwa.

MIMI/SISI namuidhinisha/tunamuidhinisha mwakilishi wangu/wetu kupiga kura kuhusu maazimio yafuatayo kama Nilivyoashiria/Tulivyoashiria kwenye kijisanduku husika kwa alama ‘X’. Iwapo hakuna kiashiria kilichotolewa, mwakilishi wangu/wetu atapiga kura au kususia kupiga kura kwa uamuzi wake mwenyewe na Ninamuidhinisha/Tunamuidhinisha mwakilishi wangu/wetu kupiga kura (au kususia) atakavyoona inafaa kuhusiana na suala jingine lolote ambalo litakuwa linajadiliwa kwenye Mkutano huo.

Tafadhali weka alama kwenye kijisanduku hapa chini kumuelekeza mwakilishi wako/wenu jinsi ya kupiga kura

Nambari ya CDSC ya Mwanachama (iwapo inafahamika): …………………...... ………...... ………...... (Hii inaweza kupatikana katika Taarifa ya CDSC)

Nambari ya Simu (ya mwakilishi): …………………...... ………...... ………...... ………...... ………......

Imetiwa saini tarehe …………………...... ………...... ………...... ya mwezi wa ……………...... ……...... 2020 199 ------200 Annual Report and Financial Statements 2019 Fahamu kuwa: 5. 4. 3. 2. 1.

Loita Street. pia zinapatikana katika anwani ifuatayo: afisizaImage Registrars Limited, Ghorofa ya 5,jumbala Absa Towers Barclays (zamaniikiitwa Plaza), inapatikana piakatika tovuti ya Kampuni kupitiakiunganishi (link)hikihttps://www.sanlam.com/kenya Nakala zakaratasi zafomu zauwakilishi Kenya naipokelewe kabla ya saatano asubuhi (11.00 a.m.)mnamotarehe 7Julai 2020. Fomu ya uwakilishi imeambatishwa kwenye Ilanihiina kwa Msajiliwa Hisawa Kampuni ambaye niImageRegistrars, Ghorofa ya 5,jumbala Absa Towers Barclays (zamaniikiitwa Plaza),Loita Street, na mwenyehisa auwakili aliyeidhinishwa namwenyehisa nanilazimaitumwe kwa pepekwa barua [email protected] auiwasilishwe Ili kukubalika, fomu ya uwakilishi, ambayo inapatikana katika makao makuuya Kampuni auafisizaMsajili wa Hisa,inafaa kujazwa nakutiwa saini ikitokea, kura iliyopigwa namwakilishi haitahesabiwa. Kujaza nakutumaaukuwasilisha fomu ya uwakilishi mkutano hakutakuzuia huonakupiga kuhudhuria kura mwenyewe binafsi. Halikama hiyo mwakilishi wako katika nafasi iliyopo. Mwakilishi siolazimaawe mwenyehisa kwenye Kampuni. rahisishia mambo. Ilikumteua mtumwingineyeyote kuwa mwakilishi, piga kalamu maneno “Mwenyekiti wa Mkutano” nauandike jinakamili la na kuzungumzakupiga kura kwa niabayako kwenye mkutano. Uteuzi wa Mwenyekiti wa mkutano kuwa mwakilishi umeorodheshwa ilikuku - Kama mwenyehisa, una hakiya kumteua mwakilishi mmoja au zaidi kutekeleza baadhi ya hakiau haki zote zako kama mwenyehisa kuhudhuria shirika hiloaliyeidhinishwa. Iwapo mwanachama nishirika aukampuni, Fomu ya Uwakilishi inafaa kupigwa wa muhuri kampuni aukuidhinishwa nawakili wa kampuni au a.m.) mnamo7Julai, 2020,ambayo nisaa48kabla ya mkutano kuanzaautarehe nyingine ileiwapo utaahirishwa. 9287-00100, Nairobi, Kenya aukupitiaanwani yao ya pepeambayo barua [email protected] naifike kabla ya saa tano asubuhi (11.00 Kampuni S.L.P. 30088GPONairobi aukuwasilishwa namtubinafsikatika afisiza kampuni zilizosajiliwa, aukwa Image Registrars, kupitia S.L.P. Iwapo mwanachama atashindwa mkutano huuyeye kuhudhuria binafsi,Fomu hiiya Uwakilishi inafaa kujazwa nakurejeshwa kwa Katibu wa Notes Annual Report and Financial Statements 2019 Statements and Financial Report Annual

201 202 Annual Report and Financial Statements 2019 Notes Annual Report and Financial Statements 2019 Statements and Financial Report Annual

203 204 Annual Report and Financial Statements 2019 www.sanlam.co.ke