UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
CONTENTS
CORPORATE BUSINESS FINANCIAL GOVERNANCE REVIEW STATEMENTS 02 UAP Old Mutual at a Glance 30 Corporate Governance Report 44 Consolidated Statement of
40 03 Old Mutual Plc at a Glance Directors’ Report Profit or Loss
04 Board of Directors 42 Statement of Directors’ 45 Consolidated Statement of
14 UAP Old Mutual Management Responsibilities Other Comprehensive Income
43 Report of the Independent 46 Consolidated Statement
Auditors of Financial Position
47 Company Statement of
Financial Position
48 Consolidated Statement
of Changes in Equity
50 Company Statement of
Changes in Equity
51 Consolidated Statement
of Cash Flows 26 CSR 52 Notes to Financial Statements
CHAIRMAN’S 16 STATEMENT
20 Group CEO’s Report
26 Sustainability and CSR Report 29 Five Year Financial Highlights 40 DIRECTORS’ REPORT
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 1. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
UAP OLD MUTUAL GROUP - EAST AFRICA AT A GLANCE
The UAP Old Mutual Group is comprised of Faulu, UAP and Old Mutual, forming one of the largest financial services groups with a growing footprint in East and Central Africa. The Group was formed in 2015 as a result of the acquisition of a controlling stake by Old Mutual in Faulu Microfinance Bank in 2014 and UAP Holdings in 2015.
The merger process kicked off in June 2015 with Old Mutual Africa (OMA) assigning UAP Holdings as the board of reference to provide strategic oversight for the East Africa businesses, with their headquarters in Nairobi.
The Group pursues an integrated financial services model to avail to customers a comprehensive range of financial solutions which include Investment, Insurance, Banking and Savings through a wider and more accessible distribution network.
Our customers can now be assured of holistic solutions and unrivalled convenience to enable them realise their dreams.
PETER MWANGI GROUP CEO, UAP OLD MUTUAL GROUP
The UAP Old Mutual Group is part of the Old Mutual Emerging Markets (OMEM). As part of OMEM, UAP Old Mutual is able to leverage technology, technical expertise and the ability to offer broad career growth prospects for employees.
The UAP Old Mutual Group will operate under the banner of:
The business will drive two key brands in the market. Banking Business Non Banking Businesses
At 33 storeys high, the UAP Old Mutual Tower is the Group’s flagship property project
Quick facts about the Group
CUSTOMER 160+ 6 1.2 SEGMENTS 4, 000 COUNTRIES MILLION PLUS OUTLETS
Kenya, Uganda, Customers Retail Employees Service & 12 Properties in South Sudan, Business & agents Distribution 4 countries Rwanda, DR Congo Corporate Outlets and Tanzania.
2. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
PLC AT A GLANCE OLD MUTUAL IS AN INTERNATIONAL INVESTMENT, SAVINGS, INSURANCE & BANKING GROUP
Old Mutual began in Cape Town in 1845 as South Africa’s first mutual life insurance company, offering financial security in uncertain times. Today, 171 years on, Old Mutual plc is made up of four strong businesses comprising Old Mutual Emerging Markets, Nedbank, Old Mutual Wealth and OM Asset Management serving a combined 18.9 million customers.
Headquartered in London, we do business in Africa, Europe, the Americas and Asia.
From our origins in South Africa, we have expanded through organic growth and strategic acquisitions.
Our customers are at the heart of everything we do. We know that we can only be successful with their continued support and trust – we aim to be their most trusted financial partner, helping them achieve their lifetime financial goals, while in- vesting their funds in ways that will secure a positive future for themselves and their families.
64, 043 In Over 30 £327.9 Bn 18.9 M Countries Customers Employees Funds under management The Business Model: Old Mutual Nedbank Old Mutual Old Mutual Asset Emerging Is one of South Africa’s four Wealth Management largest banking groups with Markets a wide range of wholesale Is the leading wealth A diverse range of investment and retail banking services management business in the strategies and products for An African financial services UK and international markets institutions, delivered worldwide leader, providing long-term 7m customers in through seven US-based savings, protection, investment 9 African Countries 3, 000 UK financial boutiques and lending to retail and advisors corporate customers £ 168.2bn funds under management 15 Countries across Africa
Currently, our 4 businesses have a central reporting structure. Going forward, we will be working towards actively managing the separation of our four strong businesses to realise their full potential as standalone entities, in a manner consistent with our responsible business values.
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 3. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
BOARD OF DIRECTORS
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1. Peter de Beyer 3. Anisha Archary 5. A.K. Maina 7. Dr. Joseph Barrage Wanjui 2. Ralph Mupita 4. David Marshall 6. Dr. Peter Muthoka 8. James Wambugu
4. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
BOARD OF DIRECTORS (CONTINUED)
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9. James Muguiyi 11. Rose Ogega 13. Paul Truyens 15. Tavaziva Madzinga 10. Mike Harper 12. Susan Omanga 14. Peter Mwangi
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 5. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
BOARD OF DIRECTORS & PROFILES
Dr. JB Wanjui, the Chairman of the Board has a long and illustrious career in the Kenyan corporate scene, the most prominent being the Chief Executive of East Africa Industries (which later became Unilever). He is a graduate of Ohio Wesleyan University, (BA Physics and Mathematics) and Columbia University, (MSC Engineering). Dr. Wanjui was the Chancellor of the University of Nairobi and was previously the Chairman of CfC Stanbic Bank Limited. He is also chairman and Board member of a number of other Kenyan and international organizations. Dr. Wanjui has been a director of the Company since 1986 and the Chairman of the Board since 1998. In recognition of his exemplary contributions to positive change in society, he received the Chief of the Order of the Burning Spear (CBS) of the Republic of Kenya award.
Dr. Joseph Barrage Wanjui CBS Chairman
Peter de Beyer, is the Deputy Chairman of the Board having been appointed in June 2015. He joined Old Mutual in 1978 and has served the business in various arms and capacities as Development Actuary and Executive General Manager. In September 2000, Peter became Deputy Managing Director, South Africa, responsible for all Retail Business. In December 2003, Mr de Beyer, as Deputy MD, was given responsibility for Old Mutual Service, Mr de Beyer retired from Old Mutual in November 2008 and continues to serve on its several boards.
Peter de Beyer Deputy Chairman
Dr. Peter Muthoka is an Independent Director of the Board, and he is the current Chairman of the Faulu Micro Finance Bank, which is a member of the UAP Old Mutual Group. He is also the Chairman of the UAP Old Mutual Foundation. He previously served as the Group Chairman of Kenya Commercial Bank. He is the Chairman of the Board of Fellows of the Kenya Institute of Management (KIM) and Chairman of the Board of Trustees of the Management University of Africa (MUA). He has been a corporate leader and an entrepreneur with long and varied experience in public and private sectors in the fields of management, education, finance, investment, export promotion, agriculture, real estate, corporate governance, international diplomacy and community voluntary work. In recognition of his exemplary service rendered to the Kenyan Public Service and international organizations, he was awarded the medal of Dr. Peter Muthoka Moran of the Burning Spear (MBS) in 2004 and the medal of Elder of the Burning Spear (EBS) in EBS, MBS, FKIB, FKIM 2012 by H.E The President of the Republic of Kenya. Independent Director
James Muguiyi is a Non-Executive Director at UAPHL, having previously served as Group Managing Director. During his tenure as the Group MD he oversaw the growth of the Group’s business in Kenya and expansion into Uganda in 2004 and South Sudan in 2006. He presided over the group restructuring in 2008 and the demerger of the Life Insurance Business from General Insurance Business in Kenya. Between 1988 and 2001, he was the Deputy Managing Director. During this time, he oversaw the merger of Provincial Insurance with Union Insurance to form UAP Provisional Insurance in 1994. Mr. Muguiyi is a director of several other companies and is Chairman of Centum Investment Company Limited, a company listed on the Nairobi Securities Exchange. He is a Fellow of the Institute of Certified Public Accountants of Kenya (FCPA (K)) where he was at one time the Chairman. He is also a Certified Company Secretary James Muguiyi (CPS (K)) and a Chartered Management Accountant (ACMA). Director
6. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
BOARD OF DIRECTORS & PROFILES (CONTINUED)
Ralph is currently the Chief Executive Officer, Old Mutual Emerging Markets. Ralph joined Old Mutual in 2001 in Old Mutual’s Individual Life business. He has served as Managing Director Old Mutual Unit Trust and Strategy Director within Old Mutual South Africa(OMSA) and Chief Executive Officer for Old Mutual Emerging Markets: Life and Savings. In February 2012, Ralph took up the position of CEO of Old Mutual SA and Emerging Markets. He is an engineer by training, (BSc. Eng Hons.), and obtained a Masters of Business Administration (MBA) from the University of Cape Town in 2000. He is a graduate of Harvard Business School’s GMP programme, and has also attended executive programmes at London Business School and INSEAD.
Ralph Mupita Director
Tavaziva is the Chief Executive Officer of Old Mutual Southern and East Africa. Previously he was Group Chief Executive Officer: East & West Africa, Chief Operating Officer of Old Mutual Africa Holdings, and Managing Director of Old Mutual Kenya (OMK). Tava joined Old Mutual Kenya in 2007 as the Strategy executive and then as the Deputy Chief Executive of Old Mutual Life Assurance Company (Kenya) in 2008. In 2010, he was appointed as the Managing Director of OMK, a position he held until July 2013 where his responsibilities included oversight of the development of a considerably widened product offering and increased accessibility to clients across the country. He was appointed as COO of Old Mutual Africa Holdings in August 2013. Tavaziva holds a Bachelor of Business Science in Actuarial Science from the University of Cape Town in South Africa. He is also a qualified Actuary and a Fellow of the Institute of Actuaries Tavaziva Madzinga (FIA) and the Actuarial Society of South Africa (FASSA). Director
Mike was appointed Chairman of Mutual & Federal in May 2012. Having worked in the Old Mutual Group since 1979, Mike has served in several executive positions including Strategy Director for Old Mutual Emerging Markets, leading strategic work across Asia, Latin America, South Africa and Africa markets. He also served as Distribution Executive on the OM Group Long Term Savings executive in London. Mike served on the Boards of Old Mutual Unit Trust, Old Mutual Investment Group and the Council of the Botanical Society of South Africa.
Mike Harper Independent Director
Paul currently serves on the Board of Old Mutual South Africa, where he is chairman of the Risk Committee and of the Committee for Customer Affairs; a member of the audit committee, and on the board of Old Mutual Kenya. He is also a non-executive director of Infrastructure Finance Corporation (INCA), where he has been on the board since its inception in 1996. Paul was a senior manager with PwC in the Netherlands from 2002 to 2007. Prior to that, he enjoyed a 20-year actuarial career with Southern Life in Cape Town, ending as chief actuary and CFO, and a member of the executive directors’ committee.
Paul Truyens Independent Director
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 7. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
BOARD OF DIRECTORS & PROFILES (CONTINUED)
David is a qualified accountant with a wealth of corporate finance skills and experience in the Americas, Europe and Asia, and he is highly regarded in merchant and investment banking circles. He is a South African by birth and a graduate of Hilton College and the University of Cape Town. Before to joining Old Mutual, Mr Marshall was the Managing Director for Credit Suisse’s Southern Africa ultra-high net worth business in London, and has worked for many global companies, including UBS, Deloitte, Standard Corporate and Merchant Bank. At UBS Wealth Management he advised the board on its global strategic acquisitions. Earlier in his career he was involved in the LSE listing of Anglo American and the unbundling of De Beers from Anglo.
David Marshall Director
Rose is a qualified accountant and is currently the Managing Director of Bloom consultancy. She has extensive experience spanning over 25 years advising and managing both large, complex organizations and emerging startup ventures. Her work as a consultant, accountant, corporate governance specialist, entrepreneur, and non-executive director has centered on helping organizations deal with the challenges and opportunities of unprecedented changes in their operating environment. She has held several non-executive directorships including Barclays Bank of Kenya, Old Mutual Life Assurance Company Ltd, Old Mutual Asset Managers Kenya Ltd, and Old Mutual Investment Services Kenya Ltd.
Rose Ogega Independent Director
Susan is the CEO and founder of Exclamation Marketing Ltd. She previously served in senior marketing positions at Colgate Palmolive, Boots Kenya, Barclays Bank, and Standard Chartered. From 2004 -2012 she served as a non-executive Director in the Group Board of KCB where she was also Chairman of KCB Foundation, Director S & L Mortgages for 2 years and Director KCB Uganda for 4 years. Susan sits on the Board of Longhorn Publishers and Kenya Tea Packers Limited (KETEPA). She is also an advisory board Member at the University of Nairobi’s Green Horn Mentorship programme, a member of the Marketing Society of Kenya, the Public Relations Society of Kenya (PRSK) and the International Advertising Association (IAA). Susan holds an Associate of Applied Science Degree in Business Management from North West Community College, Powel, Wyoming and a Bachelor of Science Degree in Business Management with a Susan Omanga Minor in Advertising from Rocky Mountain College in Billings Montana. Independent Director
A.K Maina is the Managing Director of Kenya Railways. He previously served as General Counsel and Group Secretary & Head of Legal Services for UAP Holdings; a role that saw him provide legal advisory and company secretarial services to the twelve(12) operational businesses in East Africa. He attained a Bachelor of Laws at University of Nairobi and subsequently admitted as an advocate of the High Court. He is a Certified Public Secretary and holds various professional memberships. This includes: Law society of Kenya, East Africa Law Society and is a Fellow at Institute of Certified Public Secretaries of Kenya (ICPSK)
A.K. Maina Independent Director
8. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
BOARD OF DIRECTORS & PROFILES (CONTINUED)
Anisha is the Human Resources Director of Old Mutual Emerging Markets. The Emerging Markets portfolio spans South Africa, the rest of Africa, Colombia, Mexico, India & China and has a combined workforce of 31 000 employees. Previously Anisha held the position of Executive Vice President Global Passenger Services, Product & Marketing of SAA where she spent 12 years. She holds a Masters Degree in Psychology and has completed Leadership Programmes in Switzerland, South Africa and Harvard Business School. She has spent the last 28 years in the Corporate World learning & contributing across the Transport, Retail and Financial Services sectors. She has lived and worked in South Africa and India and her work has allowed for extensive travel across the African continent where her passion for building teams across boundaries and integrating new acquisitions into the Old Mutual business can be seen. Anisha Archary Director
Peter serves as the Group Chief Executive Officer for UAP Old Mutual group. He joined Old Mutual Kenya as the Group Chief Executive in October 2014 from the Nairobi Securities Exchange (NSE) where he had been the Chief Executive for 6 years, in which capacity he is credited, amongst other things, with the successful demutualization and self-listing of the NSE. Prior to this, Peter was the Managing Director of Centum Investment Company which is Kenya’s largest publicly quoted investment company. Early in his career, Peter served in the Kenya Air Force and held the rank of Captain.
Peter holds a Bachelor of Science in Electrical Engineering from the University of Nairobi, and has a passion for financial services. He is a Certified Public Accountant and a Chartered Peter Mwangi Financial Analyst. Group CEO
James Wambugu is the Group Managing Director, General Insurance for UAP Old Mutual and an Executive Director of UAP Holdings. Mr. Wambugu joined UAP in July 2003 and has been involved in the development of the Group’s risk and quality management systems, business expansion and strategy development. He previously worked for PricewaterhouseCoopers in Kenya and the UK, Lonrho Africa and African Lakes Corporation in the fields of audit, transaction structuring and support and risk management. Mr. Wambugu has extensive experience across many countries in Africa. He holds an MBA and Bachelor of Commerce degrees from the University of Nairobi and a diploma in Advanced Management Programme (AMP) from IESE Business School, Barcelona and Strathmore Business School, Nairobi. He is a Qualified Risk Manager (MIRM) and a Certified Public Accountant of Kenya (CPA (K). James Wambugu Executive Director
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 9. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
UAP OLD MUTUAL SUBSIDIARIES DIRECTORS
UAP INSURANCE KENYA
James Muguiyi Martin Hudson Mark Weston Paul Truyens BettyAnn Mboche Kenyan British New Zealander Dutch Kenyan Chairman
Lotfi Baccouche Prof. J.H. Kimura George Odo Peter Mwangi James Wambugu Australian Kenyan Kenyan Kenyan Kenyan
UAP LIFE ASSURANCE KENYA
Kamau Kuria Prof. Patrick Weke Hannah-Gitonga Mwangi Joseph Lesiew Gary Palser Kenyan Kenyan Kenyan Kenyan South African Chairman UAP INVESTMENT KENYA
Susan Omanga Mary-Ann Musangi Joseph Mucheru Jackson Theuri Patricia Kiwanuka Kenyan Kenyan Kenyan Kenyan Kenyan Chairperson 10. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
UAP OLD MUTUAL SUBSIDIARIES DIRECTORS (CONTINUED) UAP INSURANCE UGANDA
Prof. Gordon Andrew Kasirye George Mutema Zipporah Mungai James Muguiyi Wavamunno Ugandan Ugandan Kenyan Kenyan Ugandan Chairman
James Wambugu Mark Weston Mary Barbiye Kyeyune Peter Mwangi Kenyan New Zealander Ugandan Kenyan Alternate UAP LIFE ASSURANCE UGANDA
Dr. William Kalema Kamau Kuria Dr. Sam Sejjaaka Anthony Githuka Ugandan Kenyan Uganda Kenyan Chairman
Sophie Nkuutu Peter Mwangi Johannes! Gawaxab Ugandan Kenyan Namibian
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 11. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
UAP OLD MUTUAL SUBSIDIARIES DIRECTORS (CONTINUED) UAP FINANCIAL SERVICES UGANDA
Dr Sam Sejjaaka Zipporah Mungai James Muguiyi Johannes! Gawaxab Patricia Kiwanuka Ugandan Kenyan Kenyan Namibian Kenyan Chairman UAP INSURANCE SOUTH SUDAN
James Muguiyi Prof. Scopas Dima Wainaina Kenyanjui Philip Coulson Kenyan South Sudanese Kenyan Kenyan Chairman
Peter Mwangi James Wambugu David Kuria Kenyan Kenyan Managing Director - Kenyan Alternate UAP INSURANCE DRC
Jackson Theuri Kevin Terry Francis Ogutu Kenyan Zimbabwean Kenyan Chairman 12. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
UAP OLD MUTUAL SUBSIDIARIES DIRECTORS (CONTINUED) UAP INSURANCE TANZANIA
James Muguiyi Mark Weston Perece Kirigiti Gideon Nkadimeng Nick Itunga Kenyan New Zealander Tanzanian South African Kenyan Chairman
Moses Stewart Kaluwa Joseph Werema Kevin Terry Charles Washoma Tanzanian Tanzanian Zimbabwean Tanzanian UAP INSURANCE RWANDA
Richard Mugisha Peace Masozera George Odo Rwandese Rwandese Kenyan Chairman
James Wambugu Yvonne Makolo Kenyan Rwandese
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 13. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
UAP OLD MUTUAL MANAGEMENT
EXECUTIVE MANAGEMENT
Peter Mwangi Jackson Theuri Nkirote Mworia Njiru Charles Njuguna Patricia Kiwanuka Group CEO Group Chief Financial Officer Group Company Secretary & MD - Faulu Group MD -Asset Legal Counsel Management
James Wambugu Isaac Nzyoka Charity Wainaina Kevin Terry Jerim Otieno Group MD - General Insurance Group MD - Health Group Head Marketing Group Chief Operations Officer Group MD - Life
SUBSIDIARIES LEADERSHIP TEAM
James Wambugu Zipporah Mungai David Kuria Anthony Githuka Pauline Wanjohi Managing Director, Managing Director, Managing Director, Managing Director, Managing Director, UAP Insurance Kenya UAP Insurance Uganda UAP Insurance South Sudan UAP Life Assurance Uganda UAP Insurance Rwanda
Tichaona Makonese Nick Itunga Peter Ng’eno Mwanzo Moseti Francis Kajura Managing Director, Managing Director, General Manager, Principal Officer Managing Director UAP Insurance DRC UAP Insurance Tanzania UAP Investments Kenya UAP Life Assurance Kenya UAP Financial Services Uganda
14. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA Rising together “We are committed to investing in the East African region for the long term.”
Dr. Joseph B. Wanjui CBS, CHAIRMAN UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
CHAIRMAN’S STATEMENT
On behalf of the Board of Directors of the Company, it gives me great pleasure to present the Annual Report and Financial Statements for the year ended 31st December 2015.
The past twelve months have been momentous for the UAP Group following the completion of the acquisition of a 60.7% stake by the Old Mutual Group (“Old Mutual”) in UAP Holdings Limited. This followed the sale of shares by Dr. Christopher J. Kirubi, Centum Investments Limited (“Centum”) and Private Equity investors: AfricInvest Fund II Limited, AfricInvest Financial Sector Fund (“AfricInvest”), Aureous Africa Fund LLC (“Aureous”) and Swedfund International Aktiebolag (“SwedFund”). I wish to thank Dr. Kirubi, Centum and the Private Equity investors for their valuable contribution to the growth of the Company which saw it rise from a Kenya-based insurance company to an East African financial services provider. I also thank them for their role in the identification of Old Mutual as a suitable strategic partner on their exit.
It is with pride that I present to you, the proposed merger of UAP Group and Old Mutual Kenya entities including Faulu Micro Finance Bank Limited to form the UAP Old Mutual Group in East Africa. This merger presents the UAP Group with an opportunity to become part of a larger integrated financial services provider, as well as provide our clients with access to tailored investment, savings, insurance and banking products. The combined business platform will enable the Group realize product, cost and operational synergies that will translate to better products for our customers and returns for our investors. I will provide further details on the merger later in my report.
Global and Local Economic Review Uganda and the anticipated completion of UAP Old Mutual The global economy had a generally flat performance Tower in Nairobi by quarter 3, 2016. with most asset classes posting poor returns. The key themes for the year were falling commodity prices and UAP Old Mutual Group Integration the strengthening of the United States Dollar. Commodity Over the course of the 2015 financial year, UAP - Old Mutual Group exporters experienced deterioration in their terms of trade made various public announcements as regards the merger which and economic performance however commodity importers seeks to catapult the Group to be the leading financial services realized cost savings from falling commodity prices especially provider in East and Central Africa. The integration activities oil. The rise of the U.S. Dollar also affected companies with commenced in earnest in July 2015 with the reorganization of dollar exposure such as foreign denominated revenues and the Group along functional lines and the unveiling of the Group dollar based borrowings. Locally, save for the Rwandan Franc, Executive Team charged with focusing and consolidating the our East African economies deteriorated due to the weakening different lines of business of the new Group. of local currencies, spikes in yields and poor returns especially from the equity markets. The region’s largest equity market, At the helm, the Board appointed Mr. Peter Mwangi as the the Nairobi Securities Exchange (“NSE”), registered negative Group Chief Executive Officer of the Group with effect from performance with the key benchmark indices performing 1st July 2015 as we bade the former Managing Director, Mr. poorly and impacting insurance and investment companies Dominic Kiarie farewell, who opted to leave the Group to with equity holdings on the NSE. pursue other interests. Dominic had served the Group for a period of four (4) years where under his leadership, the Group Business and Financial Performance successfully entered new markets in Tanzania, Rwanda and the The Group delivered improved performance in the Democratic Republic of Congo. underlying results despite a challenging macroeconomic environment. We reported Gross Earned Premiums of KES The key focus area in the short term is to consolidate the life and 16.9Bn representing a growth of 13.7% with the Net Earned asset management businesses in Kenya subject to regulatory Premiums growing by 72% to close at KES 12.1Bn. The core and shareholder approval as both UAP and Old Mutual have underwriting business remains strong and we expect to competing businesses in the market. The merger of these entities continuously improve performance. The Group was however is aimed at improving operational efficiencies and delivering affected by volatile market conditions and adverse currency economies of scale by leveraging on the widened customer base movements resulting in poor equity performance which and strong balance-sheet of the combined entities. impacted our subsidiaries. We registered a decline of 28.1% in investment income as a result of exchange losses and fair As we consolidate and integrate our existing businesses, we value movements. This, combined with a 20.1% growth in remain committed to the development of the Capital Markets expenses and commissions as well as the full year financing in East Africa through the listing of UAPHL’s Shares on the cost of our Corporate Bond reduced our Profit after Tax by Nairobi Securities Exchange Limited (“NSE”) within the next 18 46.2% to close the year at KES 896.6Mn. to 30 months subject to favourable market conditions as the Group consolidates its footprint in East Africa. On the Property side of the business, we achieved several milestones which include the completion of the Equatoria In the meantime, we shall operate in East and Central Africa Dr. Joseph B. Wanjui CBS, Tower Juba, increased letting at Nakawa Business Park, in the brand name and style of UAP – Old Mutual Group. This CHAIRMAN KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 17. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
CHAIRMAN’S STATEMENT (CONTINUED)
entails dual branding across all our markets with the joint Dividend Recommendation marks of “UAP” and “Old Mutual” to support the business vision On consideration of the overall financial performance of the as we transition our UAP subsidiaries, customers, advisers, Group, the Board has noted the decline in profitability as employees, shareholders and other stakeholders seamlessly compared to prior year and does not recommend the declaration into the Old Mutual Group. of a dividend or payment of the same for the year ended 31st December 2015. We instead recommend that the revenues Governance and Board Developments generated for the year be ploughed back to the business to The regulatory framework for insurance companies within strengthen our capital base as the Group gears up to grow its East Africa continues to evolve with regulators developing, underwriting margins and meet the anticipated increase in enhancing and implementing a Risk Based approach to capital due to the regulatory changes described above. supervision. In Kenya, the Insurance Act has been amended to adopt a risk based model on the computation of capital Future Prospects and Strategy aimed at ensuring insurance companies are appropriately We are committed to investing in the East African region for capitalized based on the level of risk carried by the company. the long term and our outlook is positive given improved These regulations are welcome as they seek to create a governance, stable macroeconomics and the underlying sustainable insurance industry by encouraging companies to resilience of economies in the region. Insurance penetration put in place adequate structures to monitor the level of risk remains low with Life penetration at 0.1% in Uganda, 0.6% taken which has a direct impact on the capital requirements in Tanzania and 1.1% in Kenya. Similarly, Property & Casualty of the company. penetration is also low at 0.6% in Uganda, 0.01% in Tanzania and 1.9% in Kenya. This suggests that we still have substantial On the governance front, the Companies Act, 2015 Kenya room to grow our underwriting business. Our focus is to has come into force which significantly impacts the fiduciary achieve profitable growth sustained by a robust product duties of directors as stewards of the Company. Directors now pipeline and excellent customer service. With currency have a legal obligation to at all times promote the success stabilization, steady macroeconomic factors, range-bound of the company and act in its best interest by exercising inflation and good weather, the operating environment independent judgment and avoiding conflicts of interest. We should become supportive for business in the region and this welcome these changes and continue to implement good will drive investment returns. governance practices as we believe these are the key drivers for change in culture and performance. Furthermore, we now have an integrated business and we stand to reap great benefits through strengthened Within our board structure, several changes were made to the operations, learnings on best practices, greater product composition of executive and non-executive directors across innovation, driven and motivated employees and a strong the Group on the exit of key shareholders. combined brand for the East African business. I look forward to walking this journey with you in 2016 and beyond. I wish to welcome Mr. Peter de Beyer as the Deputy Chairman of the Board, Dr. Peter Muthoka EBS, Mr. Ralph Mupita, Mr. Appreciation Tavaziva Madzinga, Mr. Michael Harper, Mr. Paul Truyens, I wish to sincerely thank the Board of Directors for their Mr. David Marshall, Mrs. Rose Ogega, Ms. Anisha Archary continued dedication and service in steering the Group, our and Mr. A.K. Maina as new directors on the Board, as I thank customers, business partners and intermediaries who anchor those directors who left us during the year for their valued our business and our valued shareholders for their continued contribution. Further details of the Boards composition are support. I wish to specially recognize management and included in the Corporate Governance Statement that forms staff for their diligence and loyalty throughout the year. I part of this Annual Report. look forward to strengthening our current relationships and building new ones as we explore new and better ways to We shall continue to strengthen our existing board structures serve our clients and partners long into the future. through the implementation of a robust directors’ training and development program geared at enhancing diversity and fulfilling our responsibilities to stakeholders as well as regional regulators. Dr. JB Wanjui CBS - Group Chairman
18. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
Soar towards your dreams KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 19. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
CHAIRMAN’S STATEMENT “Our people remain at the heart of the successful Integration of UAP Old Mutual Group.”
Peter Mwangi, GROUP CEO 20. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
GROUP CHIEF EXECUTIVE OFFICER’S REPORT
I am pleased to present to you, UAP Holdings Limited performance for the year ended 31st December 2015. The year under review marked a significant turning point in the Group’s history following the acquisition of a 60.7% stake jointly held by Old Mutual Life Assurance Company (South Africa) Limited and Old Mutual Holdings Limited (Kenya) (“Old Mutual”) through the acquisition of shares in UAP Holdings Limited valued at KES 23.3 Bn from a diverse group of investors including Centum Investment Limited, the Abraaj Group, AfricInvest and Swedfund.
The merger of the UAP and Old Mutual Groups seeks to combine leading businesses in General Insurance, Medical Insurance, Life Assurance, Asset Management, Property, Stock Brokerage and Banking (under Faulu) aimed at delivering quality service to our valued customers as we strive to become East Africa’s premier financial services provider. I will share more details of the rationale for this merger, the anticipated benefits and key milestones so far later in my report.
Economic Outlook continued stability of the industry. Overall, the Group remains Our underlying business displayed great resilience operating adequately capitalised with shareholder funds of KES 16.4Bn in a very challenging macroeconomic environment. Key as at December 31, 2015. events that negatively impacted our business were substantial deterioration of regional currencies against the U.S dollar Further changes in the implementation of tax laws may – the Rwandese Franc (“RWF”) lost 8%, the Kenya Shilling continue to drive the cost of insurance higher. For instance, (“KES”) 13%, Uganda Shilling (“UGX”) 22%, Tanzania Shilling in Kenya, Excise duty on insurance commissions has been (“TZS”) 24% while the South Sudanese Pound experienced implemented with the Group already submitting remittances depreciation greater than 500%. as required while Uganda and Tanzania, Regulators have The interest rate environment spiked in October 2015 implemented a charge of VAT at 18% for all insurance policies with elevated yields especially on Treasury Bills in Kenya. underwritten. Corporates in East Africa faced rises in inputs and borrowing costs and those with foreign denominated borrowings In the Democratic Republic of Congo (DRC), we welcomed particularly USD were hard hit. Several listed companies the liberalisation of the insurance industry following on the Nairobi Securities Exchange (“NSE”) issued profit amendments to the insurance laws which now allow foreign warnings on the decline in earnings by more than 25% as insurers entry into the market effective March 2016. This compared to the prior year souring investor sentiment. This in is a welcome development for the Group as we expect to turn adversely impacted equity markets which deteriorated generate more revenue given the high demand for insurance significantly registering negative performance with the NSE cover in the country. We currently note that the governance 20 at -21.0% and the NASI -10.6%. structure required to lead the industry standards through a Regulator body to oversee the insurance sector has not been Insurance Industry fully developed, a key step towards full liberalisation. Further, Regulators within the East Africa Market continued to the minimum capital base required to operationalize an collaborate by enhancing their efforts on regional supervision insurance are restrictive as the minimum capital requirement of insurance companies. Critical to the business is the move to is USD10 Million. adopt and implement a Risk Based approach to Supervision. In Kenya, the Insurance Regulatory Authority (“IRA”) is on Performance in the year: course to implement changes in Regulations on the minimum Despite the challenges experienced on the macroeconomic capital requirements an insurer should hold for short-term, front, the Group registered 14% growth (18% for our General long-term and composite insurers as well as restrictions on Business and -12% for the Life Business) in Gross Written inadmissible assets which impacts computation on solvency Premium (GWP). Our gross written premiums have grown margins. Similar Regulations in Rwanda and Uganda are at a Compounded Annual Growth Rate (“CAGR”) of 25.3% anticipated to be implemented in 2016 with an expectation between 2011 and 2015, reflecting our ability to provide our that there will be increased scrutiny on insurers to ensure that customers with relevant and cost effective products. they are adequately governed and capitalised to facilitate the
Peter Mwangi, GROUP CEO KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 21. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
GROUP CEO’S REPORT (CONTINUED)
2011 – 2015 Gross Written Premium and Net Earned Premium (KES Bn)
20.0 16.9
15.0 14.8 12.7 12.1 11.3 10.0 9.1 9.0 7.3 6.5 0.5 5.2
- 2011 2012 2013 2014 2015
GWP NEP
Our regional expansion strategy served us well as we continue to diversify our income streams. We continued to review our branch networks to provide our customers with easier access to our products; we therefore launched new branches in Tanzania and Rwanda, incurring expenses that we will recoup by generating greater volumes of business revenue going forward. Our subsidiaries outside Kenya contributed 44% of our top line compared to 38% in 2014 and we continue to bolster subsidiary performance despite encountering adverse conditions particularly in South Sudan where political conflicts and massive currency depreciation deepened investor anxiety.
The Group registered positive financial metrics in 2015, for instance, our asset base increased by 16% to KES 49Bn with internally generated cash flows enabling us to bolster our property investments across the East African region and support further growth.
GWPGWP BY BY REGION REGION 2015 2015 GWPGWP BY BY REGION REGION 2014 2014
RWANDARWANDA 4% 4% RWANDARWANDA 2% 2%
SOUTHSOUTH SOUTHSOUTH SUDANSUDAN SUDANSUDAN 10%10% 9%9%
KENYAKENYA KENYAKENYA 56%56% 56%56%
UGANDAUGANDA UGANDAUGANDA 21%21% 19%19%
The deterioration in the operating environment due to As a result of this, the Profit before Tax (“PBT”) closed at KES currency depreciation, substantial increases in yields and 693Mn compared to KES 2.3Bn in 2014, a decline of 70%. Other poor equity market performance dampened our investment events that impacted the financial performance for the period income for 2015. Investment Income for the period declined include reduced property revaluation gains in Uganda and by KES 800Mn due to fair value movement of listed equities Kenya, incremental finance costs in 2015 (full year financing on the NSE. Additionally, weakening of the UGX led to an costs for the UAP Corporate Bond issued in mid-2014) and unrealised foreign exchange loss of KES 530Mn on dollar one-off increases in bad debt provisions for premium debtors denominated borrowings used to support the Uganda in the General and Life Businesses. Property business.
22. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
GROUP CEO’S REPORT (CONTINUED)
Given the financial performance of the Group, the Board does not recommend the declaration of a dividend for the year ended 2015 due to reduced profitability in the business. Additionally, we want to ensure that we have sufficient capital to support our business in view of the proposed transition to a Risk Based Capital framework in Kenya.
2011 – 2015 Profit before Tax (KES Mn)
2,500.0 2,296.2 2,211.7 2,000.0 1,748.0 1,500.0 1,209.9 693.2 500.0
0.0 2011 2012 2013 2014 2015
Remaining Merger Transactions between UAPHL and The Company appointed the following transaction advisors Old Mutual to carry out legal and financial due diligence of the OMHL The Board of Directors has reviewed and approved the subsidiaries: proposal to reorganize the legal entities of UAP and Old • Pacifis Advisory Services Ltd – Lead Transaction Advisor Mutual that are based in Kenya. The reorganization is • PricewaterhouseCoopers (PwC) – Financial Advisors necessary so as to enable the Group to realize revenue and • Coulson Harney – Legal Advisors cost synergies through the creation of new distribution channels, improved products, and savings from shared The proposed transaction requires your approval as well resources such as Information Technology (“IT”), Human as that of the Capital Markets Authority (CMA), Insurance Resources (“HR”), Marketing and Legal. Regulatory Authority (IRA), Retirement Benefits Authority (RBA), and Central Bank of Kenya (CBK). The Board considered various avenues for achieving the reorganization. It was determined that the most optimal way The details of the proposed transaction are currently being would be to merge the legal entities within UAP Holdings reviewed by the aforementioned regulators. Once their Limited (UAPHL) and Old Mutual Holdings Limited (OMHL) approval is received, the details shall be availed by way of a that carry out similar businesses by creating a linkage in the Shareholders Circular in due course. ownership structures of UAPHL and OMHL. To this end, it was agreed to bring the operating subsidiaries within OMHL Managed Separation of the Old Mutual Plc Group under UAPHL which is already publicly trading its shares. The In March 2016, following a strategic review, Old Mutual Plc particular OMHL entities to be acquired by UAPHL are: announced the proposed structural review of its operations by separating its four (4) constituent business units, that is: OMHL Subsidiary Proposed % Stake to be 1. Old Mutual Emerging Markets (“OMEM”) – A financial Acquired by UAPHL services provider with a strong retail affluent and wealth proposition which is also the Holding Company for all i. Old Mutual Life Assurance Company 100 business in Africa, South America and Asia. UAP Old (“OMLAC”) Mutual Group falls under this cluster; ii. Old Mutual Investment Group 100 (“OMIG”) 2. Nedbank – a leading South African bank providing a iii. Old Mutual Investment Services 100 wide range of wholesale and retail banking services and a (“OMIS”) growing insurance, asset management and wealth offering; iv. Old Mutual Securities (“OMS”) 70 3. Old Mutual Wealth – a leading United Kingdom (“U.K”) and cross border wealth management business; v. Faulu Microfinance Bank (“Faulu”) 25
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 23. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
GROUP CEO’S REPORT (CONTINUED)
4. Old Mutual Asset Management – a United States (“U.S”) long-term thesis for investment remains solid. With low based company providing a diverse range of investment insurance penetration and financial inclusion, growing strategies and products, delivered through a multi- disposable income and consumer education, our market has boutique model to institutional investors around the world. great potential. We are also poised to reap great gains from the merger as we draw on shared experiences and better The underlying rationale for the managed separation of management capacity. The combined UAP Old Mutual Group these business units is that each business is viable to function platform creates numerous opportunities for the realisation of separately and is better placed to manage its own capital revenue and cost synergies which will boost our profitability requirements while maximising shareholder value. The and returns to investors and stakeholders. managed separation is expected to be completed by 2018 and is aimed at unlocking cost savings and reduce the conglomerate Appreciation discount that investors currently apply to the Group. First, I wish to thank you, our valued shareholder, and I assure you that Management and staff are doing their utmost to meet For the UAP Old Mutual Group, there will be no immediate profitability and returns expectations for 2016 and beyond. I changes that impact the day to day operations of the Group would also like to express my thanks and appreciation to our within East Africa. We shall continue to offer the full range of customers who form the core of our business. Additionally, I financial services, savings and investments products while thank our Board members for their oversight and guidance providing our customers with the value and service to which especially during the merger process. I also thank our business they are accustomed. We remain focused on executing our partners and intermediaries for their continued support as we strategy, providing our customers with first class service, and grow the business. Finally, my thanks go to my colleagues in creating value for all our stakeholders. the businesses in East Africa, your work drives our business.
Outlook Yours Sincerely, The next twelve (12) months present a mixed outlook: further currency deterioration within East Africa, weather related inflationary shocks, rising political temperatures, insecurity and a tepid global economy could create challenges for our businesses in East Africa. Nevertheless, we are committed to Peter K. Mwangi investing in East Africa and are ready to adapt and respond Group Chief Executive Officer to changing macroeconomic and political conditions. The UAP Old Mutual Group
24. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
SUSTAINABILITY AND CSR REPORT 2015 (CONTINUED)
Planting
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA our future 25. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
SUSTAINABILITY AND CSR REPORT 2015
Promoting a Better -Simple -Life Better. Simple… Health UAP recognizes that businesses need to go beyond the Our contribution to impacting healthcare in the region goes interests of their companies, to the communities they serve. beyond rendering health insurance services. The corporate social responsibility framework in place holds The state of an individual’s health influences the quality of us accountable to our employees, clients, shareholders and life they live and the contribution they make to society. We society at large; in regards to the Organization’s efforts value the opportunity to provide support to through medical towards giving back to the communities in which we serve. camps, walks or runs, fundraisers and wellness clinics. In December 2015, our Uganda Business initiated a partnership Our focus areas across East Africa is pegged on: Education, with Uganda America Sickle Cell Research Fund. This will go Health, Financial Literacy, the Environment and Sports a long way in supporting efforts towards curbing Sickle Cell. In Kenya, the business participated in a blood drive for the Better… Staff Kenyatta National Hospital in August 2015; this served as Quick statistics; patient support following our participation in renovation work • Number of staff training - 34 at the hospital’s Accident and Emergency unit through the UAP • Number of staff trained - 600 Old Mutual Foundation. • Number of proffessional courses undertaken - 7
Our employees are the lifeblood of our business, they may be termed as the catchment for the business success. As a business we strive to ensure we empower and equip our people through provision of career enhancing opportunities as well as training.
The inclusion into the wider Old Mutual Group presents prospects for skills transfer and capacity building. Individuals in the Group’s job swap program will see various individuals from Risk and Underwriting department transfer to London for training in 2016.
As part of enhancing our customer service, we always look to UAP Uganda makes donation to American Sickle Cell Foundation programs that will positively impact our service delivery. Our businesses run a series of trainings for their teams to manage Customer Service.
UAP Kenya Staff participate in blood drive
Cabinet Secretary Ministry of Health Dr. Cleopa Mailu unvelis refurbished A&E unit at KNH & later met with Old Mutual Foundation Trustees
26. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
SUSTAINABILITY AND CSR REPORT 2015 (CONTINUED)
Better. Simple… Education Better. Simple… Financial Literacy Quick statistics; As a business looking to empower the people of the region, • Number of years of sponsorship - 12 years financial literacy engagements have become a necessary • Value of sponsorship - Kshs. 3,062,802 tool to engage on financial awareness. In particular, harnessing a savings culture to enable individuals plan for the Education is a means of developing our greatest abilities achievements and comforts they aspire to. to inspire the hopes and dreams of our children; equipping them to better our nation. UAP provides long term education In conjunction with Old Mutual, UAP supported the second sponsorship for bright and disadvantaged children. (2nd) edition of the Great Talks forum. This is a financial dialogues Support for our next generation goes beyond the financial opportunity which seeks to bring together a seasoned panel aspect as staff engage in mentorships forums which serve to give of industry players, financial opinion leaders and subject encouragement and a sense of belonging to the beneficiaries. matter experts to share insights from their professions and business set-ups with the public. The sessions are interactive In Tanzania, the UAP business supported technology literacy and are aimed at empowering attendees on wisdom around though donation of computers to Sokoine and Moringe investments, savings and insurance protection. Primary Schools in Dar les Salam. The drama festivals express individualism and help our children In attendance in 2015 was Deputy President of the Republic to discover, demonstrate and nurture their gifts. Through of Kenya Hon. William Ruto and Cabinet Secretary for drama, a unique stage is set to allow them learn and share core Industrialization Adan Mohamed. The forum opened up a messages to society. The support of UAP in this space has been new avenue of top level management engagement through to promote culture and learning, which will serve to inspire and the Fireside chat. The chat as well as the public forum were motivate the next generation. In South Sudan the business hosted by the key guest, renowned international public partnered with the United National Children Education Fund speaker and venture capitalist, Vusi Thembekwayo. (UNICEF) to sponsor the first ever Inter -School, College and University Drama Festival in the country. The two day event In Kenya, financial awareness was interlinked with comedy in attracted a record 30 education institutions drawn from the a bid to make it interesting and saw the business support the length and breadth of South Sudan. Churchill show.
More… **pics of school/beneficiaries **pics of TZ donation ***Pics from Juba
UAP Tanzania donates computers to Sokoine & Moringe Schools Dr. Wanjui & Peter Mwangi share a moment with Vusi Thembekwayo
A boy performs at drama festival sponsored by UAP South Sudan UAP Kenya at the Churchill roadshow
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 27. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
SUSTAINABILITY AND CSR REPORT 2015 (CONTINUED)
Better. Simple… Environment in the mens 21KM while Pauline Korikwiang was top in the Quick statistics: womens 21km race. • Number of Water Towers in Kenya-Five (5) Namely: Mt. Kenya, Aberdare Range, Mau Complex, Mt. The marathon gave the public a chance to run alongside track Elgon and Cherangani Hills stars and thereafter enjoy a relaxing day away from the city hustle and bustle at the Marathon village. • Number of trees planted at Ndakaini to date-100,000 • Ndakaini Dam water dependency-Provides over 70% of Nairobi’s water
• Number of participants at the annual Marathon-Over 3,500 participants, with close to 10,000 spectators
• Number of professional athlete participants since 2003-30
The environment and the economy are really two sides of the same coin. If we cannot sustain the environment, we cannot sustain ourselves. “ Wangari Maathai, Nobel laureate Crowd cheers on Paralympic hero Henry Wanyoike at Ndakaini Marathon
The words of environmentalist Wangari Maathai continue to echo in every decision we make towards playing our role in environmental conservation. With water being“ the very essence of life on earth, UAP realised the necessity of providing clean water and improving water catchment areas. In Kenya, through collaborative work with Ndakaini Dam Conservation Association (NDEKA) we not only continue to impact Aberdare catchment area but also realized the 12th edition of the Ndakaini Marathon.
The 2015 edition was special to the business as it came in the backdrop of the completed merger transaction with Old Mutual. The event gave staff of the UAP Old Mutual Group an opportunity to run and connect together as we will continue to do, as we build a one stop financial services Winner of 12th edition Marathon Mathew Kisorio at the finish line centre for Africa.
The improvement of the water catchment within Ndakaini has improved the quality of rainfall in the area; allowing residents sustain their agricultural activities. The Group and conservation teams have their sights on a greater ambition to plant trees in the larger Mau region and into the Aberdare ranges.
Our environmental initiatives are coupled with sports, which allows participants showcase their talent in a fun and serene environment. Ndakaini has been the favourite training ground for a number of athletes owing to the high altitude and hard terrain of the marathon course. The 12th edition of the UAP Ndakaini Half Marathon successfully took place on Cabinet Secretary Ministry of Water and Irrigation Eugene Wamalwa awards September 2015, and Matthew Kisorio emerged the winner winners at the 2015
28. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
FIVE-YEAR FINANCIAL HIGHLIGHTS
2015 2014 2013 2012 2011 Shs’000 Shs’000 Shs ‘000 Shs ‘000 Shs’000
Gross written premium 16,868,231 14,832,735 12,737,286 9,054,770 7,253,140 Gross earned premium 15,332,794 14,158,444 11,559,860 8,462,797 6,602,606 Net earned premium 12,069,426 11,263,533 9,014,382 6,533,244 5,194,451 Investment and Other Income 4,441,502 5,424,470 3,726,954 2,957,379 1,558,619
Total Income 16,510,928 16,688,003 12,741,336 9,490,623 6,753,070
Net claims payable and policy owners’ benefits payable (7,986,649) (8,074,794) (5,754,811) (3,938,295) (2,926,773) Commissions payable and Operating and other expenses (7,831,123) (6,316,980) (4,774,785) (3,804,377) (2,614,602) Share of associates loss - - - - (1,783) Profit before income tax 693,156 2,296,229 2,211,740 1,747,951 1,209,912 Income tax expense 203,443 (629,042) (401,339) (366,920) (290,228)
Profit after income tax 896,599 1,667,187 1,810,401 1,381,031 919,684 Non-controlling interests (251,115) (181,211) (152,825) (99,025) (37,469)
NET PROFIT ATTRIBUTABLE TO SHAREHOLDERS 645,484 1,485,976 1,657,576 1,282,006 882,215
Other Comprehensive income (loss) 60,028 1,128,625 1,730,955 735,900 (691,470)
Total Comprehensive income (loss) 956,627 2,795,812 3,541,356 2,116,931 228,214 Dividends - 359,414 359,414 419,130 204,000
Total distributions - 359,414 359,414 419,130 204,000
Total Assets 48,724,654 42,083,725 33,109,989 24,657,973 14,510,400
Total Equity 17,795,261 17,198,048 14,761,650 11,620,312 4,647,300
Kshs Kshs 16.5 48.7 BILLION BILLION
The Group’s total The Group’s total income 2015 assets as at the end of 2015
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 29. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
CORPORATE GOVERNANCE REPORT FOR THE FINANCIAL YEAR ENDED 31ST DEC 2015
Further to the transaction completed in January 2015 where Board of Directors Old Mutual Life Assurance Company (South Africa) Limited The UAP Groups’ management vests in its Board of acquired forty nine million three hundred and thirty two Directors as prescribed in the Memorandum and Amended thousand four hundred and forty five (49,332,445) ordinary Articles of Association. The Board’s main objective is shares of UAP Holdings Limited (‘UAPHL’) being twenty three to establish and monitor the strategic direction for the decimal three three per cent (23.33%) of the issued shares, Group; ensuring competent management of the business; Old Mutual Holdings Limited in June 2015 completed the establish and oversee adequate internal control systems; purchase of seventy eight million nine hundred and nineteen monitor compliance with laws and regulations and report thousand, eight hundred and eighty nine (78,919,889) performance to shareholders. ordinary shares in UAPHL, being thirty seven decimal three three per cent (37.33%) of the total issued ordinary shares In the first half of the year, the composition of the Board in UAPHL from AfricInvest Fund II Limited, AfricInvest was targeted toward ensuring fair representation of all the Financial Sector Fund, Aureos Africa Fund LLC and Swedfund major shareholders, as well as, optimization of the incumbent International Aktiebolag (‘the Acquisition’). On completion of skill and experience to facilitate effective execution of its the Acquisition, Old Mutual Group acquired effective control mandate. In the second half of the year, the composition of of UAPHL and an integration plan for the two Groups in East the Board was focused on ensuring maximum synergy of skill, Africa was effected which included a review of the governance experience, diversity and geographical mix. In consequence and management structures of the Combined Group. of these far reaching shareholder and governance changes, during the year under review, nine (9) members of the Board The alignment of the corporate governance structures, retired and were replaced. The composition of the Group adoption of a new Group Operating Model and revision of the Board was as follows: governance policies to reflect the governance framework of the combined UAP-Old Mutual group resulted in re-focused commitment to good corporate governance, strengthening of Board and Management accountability and overall public confidence in the Group.
NO. NAME OF BOARD MEMBER MEMBERSHIP NATIONALITY PROFESSION COMMENT 1. Dr. Joseph Barrage Wanjui Chairman Kenyan Engineer/Entrepreneur -
2. Dr. Christopher J. Kirubi Non-Executive Member Kenyan Entrepreneur Resigned on 27/01/15
3. Mr. James Muguiyi Non-Executive Member Kenyan Finance/Insurer -
4. Mr. James Mworia Non-Executive Member Kenyan Financial Analyst/Lawyer Resigned on 27/01/15
5. Mr. Peter Njoka Non-Executive Member Kenyan Investment Resigned on 23/06/15
6. Skander Oueslati Non-Executive Member Tunisian Engineer/ Investment Resigned on 23/06/15
7. Mr. Jonas Armtoft Non-Executive Member Swedish Lawyer Resigned on 23/06/15
8. Mr. Lotfi Baccouche Independent, Non-Executive Australian Engineer/Insurer Resigned on 29/06/15 Member /Risk Management 9. Ms. Susan Omanga Independent, Non-Executive Kenyan Marketing Resigned 29/06/15 and Member Re-appointed 19/08/15 10. Ms. Susan Githuku Independent, Non-Executive Kenyan Human Resource Resigned 29/06/15 Member 11. Mr. Dominic Kiarie Executive Member Kenyan Investment/Business Resigned 18/08/15
12. Mr. James Wambugu Executive Member Kenyan Audit and Risk - Management 13. Davinder Sikand Alternate to Peter Njoka Kenyan Investment Resignation of Principal on 23/06/15 14. George Odo Alternate to Skander Oueslati Kenyan Finance Resignation of Principal on 23/06/15
30. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
CORPORATE GOVERNANCE REPORT (CONTINUED)
APPOINTMENTS
NO. NAME OF BOARD MEMBER MEMBERSHIP NATIONALITY PROFESSION COMMENT
1. Mr. Peter de Beyer Deputy Chairman South African Actuary Appointed on 29/06/15
2. Mr. Ralph Mupita Non-Executive Member South African Engineer Appointed on 19/06/15
3. Mr. Tavaziva Madzinga Non-Executive Member Zimbabwean Actuarial Science Appointed on 19/06/15
4. Dr. Peter Wanyaga Independent, Non-Executive Kenyan Management Consultant Appointed on 23/06/15 Muthoka EBS Member 5. Mr. David Marshall Non-Executive Member South African/ Accountant Appointed on 23/06/15 British 6. Mr. Peter King’ori Mwangi Group Chief Executive Kenyan Engineer Appointed on 23/06/15 Officer/Executive Member 7. Mr. Paul Truyens Independent, Non-Executive Dutch Actuary Appointed on 29/06/15 Member 8. Mr. Michael John Harper Independent, Non-Executive South African Actuary Appointed on 29/06/15 Member 9. Ms. Rose Ogega Independent, Non-Executive Kenyan Accountant/ Financial Appointed on 29/06/15 Member Consultant 10. Ms. Anisha Archary Non-Executive Member South African Human Resource Appointed on 19/08/15
11. Ms. Susan Omanga Independent, Non-Executive Kenyan Marketing Re-appointed on 19/08/15 Member 12. Mr. Atanas Kariuki Maina Non-Executive Member Kenyan Lawyer Appointed on 19/08/15
Board Appointments 2. As the ultimate beneficial shareholder, Old Mutual plc, is a All directors have a fixed tenure of office and are required to public listed holding company of entities which carry out retire at least every three years with a provision for re-election regulated activities, adherence to the Group Operating subject to a favourable performance evaluation by the Board. Model is required to ensure that adequate procedures, systems and controls are in place to enable the Group to Group Operating Model comply with its legal and regulatory requirements. In company law the Board of Directors has the responsibility and fiduciary duty to take decisions for the company and 3. It is recognized that membership of a financial services to ensure such decisions are in the best interest of that Group requires Directors, Executive Officers and company. Shareholders are not involved in the day-to-day Employees to act in a manner which reflects such Group running of the company. membership, the potential implications of their actions on other members of the Group and the various regulatory In a Group context this gives rise to a dynamic tension requirements which have Group-wide implications. between the interests of the shareholder and the duty of directors (often appointed by the shareholder) to take 4. It is further noted that, in the discharge of their duties, the decisions in the best interest of the company, without undue Board is required to adhere to the overriding principle, influence being exerted by the interests of the Group. subject to the overriding principle, which ensures that no action endorsed or taken by the Board is contrary to, or in During the period under review, following the acquisition of a conflict with the: controlling stake in the company by the Old Mutual Group of • Laws, regulations or guidelines of Kenya or the country companies, the ultimate shareholder, Old Mutual plc, rolled in which the Company is incorporated or carrying on out the Group Operating Model to UAP Holdings Limited business; which was adopted for implementation commencing 1st July • Fiduciary duties or similar obligations of a director or 2015. The substance behind the model is as follows: an executive employee; • Provisions of the Memorandum and Articles of 1. Principles of governance have been incorporated to Association in force from time to time; or facilitate effective and dynamic management and • Specific statutory and regulatory obligations imposed oversight of the Group. upon any individual or the Company.
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 31. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
CORPORATE GOVERNANCE REPORT (CONTINUED)
Board Charter Separation of Role of Chairman from Group Chief The Board Charter adopted by the Group defines the Board’s Executive Officer roles and responsibilities as well as functions and structures The Group Chairman is responsible for managing the Board in a way that supports the members in carrying out their and providing leadership to the Group while the Group Chief strategic oversight function. Executive Officer is responsible to the Board for strategically overseeing and managing the business units in the UAP – In consequence of the adoption of the Group Operating Old Mutual Group in accordance with instructions given Model, the Board Charter and Committee Terms of Reference by the Board. The Group Chief Executive Officer directs adopted by the Board of Directors in April 2013, were the implementation of Board decisions/instructions and amended to take into account the structure of the combined the general management of the business units with the UAP-Old Mutual Group and the responsibilities accorded to assistance of the Managing Directors, Chief Executives, UAP Holdings Limited and its appointed Board Committees General Managers and management teams. for the oversight of the governance framework of the Group. The Board Charter (‘Charter’) specifically sets out the scope, Board Committees mandate and corporate governance practices adopted by The Board has delegated its authority to the standing Board the Board of UAP Holdings Limited. The Charter recognizes Committees to enable it effectively carry out its mandate. that the Board of the company is required to act as strategic These Committees of the Board are listed below and each has controller and to provide oversight in respect of all the its own Terms of Reference setting forth the purposes, goals Business Operations that form part of the UAP Old Mutual and responsibilities of the Committee as well as qualifications Group in East Africa which comprise businesses carrying out, for committee membership, procedures for committee inter alia, Long-term and Short-term Insurance Operations; member appointment and removal, committee structure, Asset Management Operations, Property Operations and operations and it’s reporting to the Board. During the Banking Operations. These operations include business period under review, the Board constituted three (3) ad hoc operations in Kenya, Uganda, Tanzania, South Sudan, Rwanda, committees to attend to special projects and re-constituted DR Congo and Mauritius. the Board Committees on the 29th of June 2015. The details are set out below: Members have been made aware of their individual and collective roles with the purpose of ensuring the Company (i) Finance & Investment Committee – Active until 28th June 2015 maximizes long term value for all its stakeholders. The Finance & Investments Committee had the responsibility to oversee and advise the Board on: The key components of the Charter remain as follows: • Terms of Reference of the Board. a. The investment strategy framework of the Company’s • Independence of Directors. investment portfolios; • Authorities of the Board and its’ structure. b. The current global investment portfolio allocations, • The Terms of Reference of the Chairman of the Board and including asset type and geographical location, and those of the Managing Director. ensure these remain consistent with the Company’s • Procedures for dealing with related party transactions. current strategy, risk framework and risk appetite; • Board committees and their Terms of Reference. c. Recommendation for major investment and divestiture proposals; Conflict of Interest d. The operational framework of the global investment Board Members are required to deal at arms-length in portfolios of the Company, including the use of both any matter that relates to the Group and to disclose any internal and external fund management resources; conflict of interest in relation to matters that are brought e. The performance generated by the investment assets before them for deliberation. A director must refrain from of the Company, both in absolute terms and relative discussing or voting on matters of potential conflict of to benchmark targets; interests. The Board has implemented strict guidelines f. Proposed changes in investment strategy that would which require that all directors declare their interests and lead to the disposition of the Company’s investment a register of interests will be maintained by the Group portfolios that were outside the limits established by Company Secretary. Individual Board members are also the Risk Committee; and required to declare their interest before participating in g. Financing mechanisms and vehicles of the investment board meetings and are excluded from deliberations in the portfolios of the Company. case of any potential conflicts of interest. The Committee met two (2) times within the year and during the period under review the Members of the Committee were:
32. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
CORPORATE GOVERNANCE REPORT (CONTINUED) CORPORATE GOVERNANCE REPORT (CONTINUED)
1. Mr. Skander Oueslati (Chairman) During the period under review the Members of the 2. Mr. James Muguiyi Committee were: 3. Ms. Susan Omanga 4. Mr. Davinder Sikand MEMBERS PRIOR TO 29 MEMBERS AFTER 29 JUNE 5. Mr. Dominic Kiarie JUNE 2015 2015 1. Mr. Lotfi Baccouche Mr. Paul Truyens (Chairman) (ii) Audit Committee – Reconstituted on 29th June 2015 (Chairman) The delegated role of the Committee is to assist the Board 2. Mr. Peter Njoka Mr. Peter de Beyer in the oversight of: a. The integrity of the financial statements. 3. Mr. George Odo Ms. Rose Ogega* b. The auditor’s qualifications and independence. 4. Mr. Philip Coulson Mr. James Muguiyi c. The performance of the Groups internal audit 5. Mr. James Wambugu Mr. Peter Mwangi function and the external auditors. 6. Ms. Zipporah Mungai d. The compliance by the Group with legal and 7. Mr. Dominic Kiarie regulatory requirements. e. The effective management by the Group of financial *Chairperson of the Audit Committee risks. f. Review the adequacy and effectiveness of UAP’s (iv) Nominations, Remuneration and Human Resource Committee internal control and financial controls systems. – Reconstituted/ Split into Remuneration Committee and Corporate Governance & Nominations Committee on 29th The Committee meets at least four (4) times a year or at June 2015 such other times as the Chairman of the Committee shall The delegated role of the Remuneration Committee is to: require. During the period under review the Members of the a. Set review and make recommendations to the Board Committee were: on the remuneration and benefits arrangements of non-executive directors. MEMBERS PRIOR TO 29 MEMBERS AFTER 29 JUNE b. Set, review and make recommendations to the Board JUNE 2015 2015 for approval, the Combined Group remuneration and 1. Mr. George Odo (Chairman) Ms. Rose Ogega (Chairman) benefits philosophy, policies and practices. 2. Mr. Kamau Kuria Mr. Peter De Beyer c. In conjunction with the Board, approve the Directors’ 3. Mr. Lotfi Baccouche Mr. Paul Truyens * Remuneration Policy and/or Annual Remuneration Statement to be included in the Annual Financial 4. Ms. Susan Omanga Ms. Susan Omanga Statements report having regard to the fulfilment of the provisions of the Capital Markets Authority or *Chairman of the Risk & Compliance Committee securities disclosure requirements. d. Determine the remuneration, incentive structure (iii) Risk and Governance Committee – Reconstituted and and benefits of the Group Chief Executive Officer Renamed to Risk & Compliance Committee on 29th June 2015 and members of the Executive Leadership Team as The Terms of Reference of the Committee are to oversee recommended by the Group Chief Executive Officer and advise the Board on: based on an evaluation of their performance. a. the Company’s overall risk appetite, tolerance, limits, e. Establishing annual and long-term performance and their alignment with the Company’s strategy; goals and objectives for the Group Chief Executive b. identification and measurement of material risks Officer and reviewing the goals approved by the requirements inherent in the Company’s strategy; Group Chief Executive Officer for the members of the c. systems of risk management, internal control and Executive Leadership Team. compliance and their adequacy to identify assess, The Committee meets at least four (4) times a year or at mitigate and reports risks; such other times as the Chairman of the Committee shall d. reviewing reports on any material breaches of risk require. During the period under review the Members of limits and the adequacy of proposed action; the Committee were: e. reviewing the Company’s risk culture and management initiatives to strengthen it; The Committee meets at least four times a year or at such other times as the Chairman of the Committee shall require.
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 33. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
CORPORATE GOVERNANCE REPORT (CONTINUED)
MEMBERS OF MEMBERS OF a. Oversee that management prepares and implements in NOMINATIONS, REMUNERATION a timely manner an effective plan across the combined COMMITTEE AFTER REMUNERATION & entities and their subsidiaries (the Group) to integrate the 29 JUNE 2015 HUMAN RESOURCE businesses of Old Mutual and UAP. COMMITTEE PRIOR TO b. Ensure that the integration plan complements and 29 JUNE 2015 supports the Group’s rolling business strategy as adopted by the Board. 1. Ms. Susan Githuku Dr. Peter Muthoka (Chairman) (Chairman) c. Ensure management prepares ambitious but prudent business growth and the cost synergy targets resulting 2. Dr. JB Wanjui Mr. Tavaziva Madzinga from the integration plan and continues to monitor and 3. Mr. James Muguiyi Mr. James Muguiyi report on the realisation of these targets throughout the 4. Mr. Peter Njoka Ms. Anisha Archary integration process. 5. Mr. Jonas Armtoft d. Oversee the Combined Group’s post acquisition activities 6. Mr. George Odo including reviewing reports from the Steering Committee consisting of management initiatives, processes and proposed The delegated role of the Corporate Governance and strategies to be implemented to capture the synergies and Nominations Committee is to: opportunities for value creation from the merger; e. Oversee organizational development and the drive for a. Assist the Board in its determination and evaluation cultural change to deliver integration, innovation and of the adequacy, efficiency and appropriateness of development of the Combined Group for the benefit of the corporate governance structure and practices of shareholders and stakeholders; the Combined Group. f. Review and make recommendations to the Board b. Provide guidance to the Board on strategy in regard concerning acquisitions and divestitures of major assets to sound corporate governance in the Groups or business units including determining strategic action investments, as deemed appropriate and relevant. on duplicated functions; c. Make recommendations to the Board on sound corporate governance practices in the Combined Group, and to The members of the Committee are: the extent relevant or appropriate, its investments. 1. Mr. Tavaziva Madziga (Chairman) d. Promote the overall effectiveness of corporate 2. Dr. JB Wanjui governance within the Group, and to the extent 3. Mr. James Muguiyi appropriate or relevant, its investments, in accordance 4. Mr. Ralph Mupita with the recommendations of the relevant local and 5. Mr. David Marshall international reports on best practice corporate governance and other requirements of good (vi) Project Saffron Ad Hoc Oversight Committee corporate practice other than in respect of risk The Committee was constituted on the 18th of November management, compliance and internal control which 2015 to oversee and ensure transparency in the acquisition remain the remit of the Audit Committee and Risk & of the Old Mutual businesses by UAP taking into account the Compliance Committee. provisions of the Capital Markets Act and the Guidelines for Corporate Governance practices of Public Listed Companies in During the period under review the Members of the Kenya. The committee is primarily constituted of Independent Committee were: non-executive directors and its key mandate is to: 1. Mr. Peter de Beyer (Chairman) 2. Dr. JB Wanjui · Review the proposed transaction and offer processes of 3. Dr. Peter Muthoka UAP and Old Mutual entities. 4. Mr. A.K. Maina 5. Ms. Anisha Archary · Review the terms of the Transaction to ensure that they are fair and on arm’s length basis and in the ordinary course The Board has constituted the following Ad Hoc Committees of business to the Company and would apply on the same of the Board: basis if the transaction did not involve a Related Party;
(v) Integration Committee · Review all disclosures to be made to all stakeholders The Integration Committee was constituted on the 19th of including regulators, shareholders and the public August 2015 as a specialised Committee of the Board and its delegated role is to:
34. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
CORPORATE GOVERNANCE REPORT (CONTINUED)
Outgoing Director Dominic Kiarie receives appreciation from the Chairman Outgoing Director Dr. Chris Kirubi & the Chairman Dr. Wanjui reflect on the Dr. Wanjui success of working together
Outgoing Director James Mworia with the Chairman Dr. Wanjui Outgoing Director Peter Njoka receives appreciation from James Muguiyi
A section of the exiting Directors and current leadership at the event
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 35. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
CORPORATE GOVERNANCE REPORT (CONTINUED)
During the period under review the Members of the order to carry out their roles. Specifically the directors are Committee were: provided with all available information in respect of items to 1. Ms. Susan Omanga (Chairman) be discussed at a meeting of the Board or Committee prior to 2. Mr. Paul Truyens the meeting. They may also seek independent professional 3. Mr. James Muguiyi advice, at the Company’s expense, concerning the affairs of 4. Mr. Lotfi Baccouche the Group in consultation with the Group Chief Executive 5. Prof. Patrick Weke Officer and the Group Company Secretary. 6. Mr. A.K. Maina Board Attendance (vii) UAP Holdings Tower Committee During the Financial Year under review nine (9) Board The delegated role of the UAP Holdings Tower Committee is to: Meetings and thirty two (32) Committee Meetings were held. A review of attendance to meetings by individual members a) Provide oversight, advice and issue resolution to the during the period under review indicates that all members Management, Project Manager and Project Team and to gave sufficient time and attention to the affairs of the Board. make such recommendations to the Board on the project as are appropriate. The average attendance of eligible board members to attend b) Oversee property planning and development activity in Board meetings was 78% whereas the average attendance of the context of the Group strategy and Business Plans, as Board Committee meetings by eligible members was 80%. well as, prudent environmental sustainability practices. The highest average attendance during Board committee c) Review and recommend financial assumptions used to members was 93% with the lowest average attendance develop the capital budget and allocation on the project. being 60%. d) Evaluate the commercial feasibility of any part of the project e) Ensure that the Group has in place appropriate procedures Board Oversight for cost estimating, competitive tendering of bids, awarding The Board is responsible for the formulation, implementation of contracts, contract administration, cost control and and monitoring of the Group’s Strategic Plan thus providing payment to contractors for all site work, new construction, appropriate strategic direction for the Group. In the same alterations and major repair. vein, the Board defines the Vision, Mission and Core Values to f) Ensure the Group has appropriate maintenance programs enable realisation of the set strategic plan. in place for the buildings and facilities. The Board has delegated the day to day operations of the MEMBERS OF THE UAPHL MEMBERS OF UAPHL Group to the Management which is headed by the Group TOWER COMMITTEE TOWER COMMITTEE AFTER Chief Executive Officer. The Group’s business is therefore 29 JUNE 2015 PRIOR TO 29 JUNE 2015 conducted in accordance with a carefully formulated strategy, annual business plans and budgets which set 1. Mr. James Muguiyi Mr. James Muguiyi (Chairman) (Chairman) out clear objectives. Roles and responsibilities have been 2. Mr. George Odo Mr. Philip Coulson clearly defined with approved authority being delegated. Performance against the objectives is reviewed and 3. Mr. Philip Coulson Mr. Peter Levett discussed monthly and quarterly by the management teams 4. Ms. Susan Omanga Ms. Susan Omanga in the Group. 5. Mr. Dominic Kiarie Mr. Peter Mwangi The Managing Directors/Chief Executive Officers and General Board Meetings and Information to Directors Managers as well as their respective Management teams The Board meets at least once every quarter but the business prepare annual business review report which is presented to may warrant the convening of special meetings from time the Group Board during its annual retreat for consideration to time. All Board meetings are scheduled in advance of and approval. Each subsidiary board is expected to monitor the respective year through an Annual Calendar of Board the performance of each subsidiary. Consolidation of the Meetings including a rolling calendar, which facilitates financial position is undertaken on a quarterly basis and planning and availability of the members. Board Committee presented to the Board. This way performance trends, meetings are scheduled in advance of the Board Meeting so forecasts as well as actual performance against budgets and that all technical matters are appropriately addressed and prior periods are closely monitored. reported to the Board for ratification or approval. The Board ensures that the Group espouses proper corporate The directors are given appropriate and timely information governance practices by confirming that the requisite codes on key activities of the business regularly and on request in of conduct, procedures and practices are existent, relevant
36. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
CORPORATE GOVERNANCE REPORT (CONTINUED)
and adhered to. The Board also achieves this by ensuring that Statement of Compliance the Group complies with all the statutory requirements. The Board is satisfied that the Group has, to the best of The Board is responsible for managing the Group’s risks their knowledge, complied with all applicable laws and and the Board and Management have been trained on risk conducted its business affairs in accordance within the law. In management. accordance with the Group Operating Model, the Board has reviewed the attestation of Management in this regard and to The Board recognises and honours its responsibility to its the knowledge of the Board no director, employee or agent of stakeholder and in this case Board Members are fully aware of the Group acted or committed any indictable offence under their responsibility to discharge their function in good faith, the Anti-Corruption laws in conducting the business of the with prudence, diligence and due care. Group in the period under review nor was involved or been used as a conduit for money laundering or any other activity Performance and Evaluation incompatible with the relevant laws. The Board has put in place a performance evaluation system to enable it set its objectives and review its performance The Board continues to abide by its Charter, the internal annually against these objectives. Due to the number of codes of conduct, the Memorandum and Amended Articles changes effected in the governance structures during the of Association of the Company and the Terms of Reference of period under review, the Board held a strategy session on 20th Board Committees. August 2015 to set out the strategic objectives against which it would be evaluated in 2016. The evaluation exercise once The Group continues to comply with all the statutory scheduled will be conducted by an independent evaluator requirements relevant to its operation as a body corporate and the results communicated to the Board through the and complies with relevant regulatory guidelines as issued approved process. from time to time.
Board Development Group Company Secretary Board development programmes were carried out during the The Group Company Secretary co-ordinates the Board period under review in accordance with the needs identified activities and ensures, in conjunction with the Chairman and/or analysed for each Member and for the Board as a and Group Chief Executive Officer, that the Board meetings whole. In particular a Board Orientation Session was held are held procedurally. The Group Company Secretary links on the 30th of July 2015 for the new members of the Board. flow of information between the Management and the Board Thereafter, the Board was developed in accordance with the as well as ensures the Board receives adequate and timely Board induction and development plan to address areas of information and that Management receives feedback in a improvement for individual members and to provide up similar manner. to date information on new areas of business and risk for the group including:- corporate governance training, risk All Board Members have direct access to the Group Company management training, training on anti-money laundering Secretary who is also responsible for implementing and legislation as well as training on the Group Operating Model. monitoring good corporate governance practices at the Board. The Secretary ensures that the business of the Board Remuneration Board meets all statutory requirements, keeps all legal and The Board is remunerated in accordance with the approved regulatory requirements under review and briefs the Board Board Remuneration Policy which encompasses Directors accordingly about these developments. Fees, Sitting Allowance and Directors’ Medical Cover. In the year under review, the Group Company Secretary assisted by the Deputy Group Company Secretaries performed this function.
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 37. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
CORPORATE GOVERNANCE REPORT (CONTINUED)
Shareholding At 31 December 2015, the top ten shareholders in the Company were:
No. of shares Holdings % 1. OLD MUTUAL HOLDINGS LIMITED 78,919,889 37.33% 2.OLD MUTUAL LIFE ASSURANCE COMPANY (SOUTH AFRICA) LIMITED 49,332,445 23.33% 3.BAWAN LTD 43,258,299 20.46% 4.MUGUIYI JAMES NGATIA 12,611,247 5.97% 5.ESTATE OF THE LATE WILLIAM KIMUTAI MARTIN 2,341,480 1.11% 6.ANDREW STEPHEN GRAY SMITH 1,789,189 0.85% 7.GENGHIS NOMINEES A/C 017 1,544,900 0.73% 8.STANDARD CHARTERED NOMINEE A/C 9230 1,403,000 0.66% 9.TIMOTHY MICHAEL JOHN OWEN-BURKE 1,371,562 0.65% 10.SAYANI INVESTMENTS LIMITED 1,194,957 0.57%
The shareholders profile as at 31 December 2015 was as follows:
No. of shareholders No. of shares Holdings % Shares Range 001 to 100,000 1037 7,141,380 3.51 100,001 to 1,000,000 26 9,120,081 4.31 Above 1,000,000 11 194,885,428 92.18 1074 211,146,889 100.00
No. of No. of shares Holdings % shareholder Individual investors Kenyan 880 29,310,759 13.86 East African 31 209,600 0.10 Foreign 9 777,965 0.37
Corporate investors Kenyan 150 131,724,845 62.30 East African 2 49,200 0.023 Foreign 2 49,347,520 23.34
Summary 1074 211,419,889 99.993
The directors’ direct and indirect interest in the ordinary share capital of the Company on 31 December 2015 was as follows:
No. of shares Holdings % Dr JB Wanjui CBS 43,258,299 20.46 JN Muguiyi 12,611,247 5.97 AK Maina 111,300 0.05
38. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA Rise to bring your dreams to life ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
DIRECTORS’ REPORT
The Directors submit their report together with the audited financial statements for the year ended 31 December 2015 which disclose the state of affairs of the Company and the Group.
Principal activities
The Group is engaged in the business of insurance, premium financing, investment management, insurance brokerage, property and stock broking services. These activities are carried out through the Group’s subsidiaries in Kenya, Uganda, Tanzania, Southern Sudan, Rwanda and Democratic Republic of Congo. These activities are briefly described below:
Insurance business:- The Group has seven subsidiary undertakings that underwrite all classes of life and non-life insurance risks as defined by the Kenyan Insurance Act, other than industrial life insurance. They also issue investment contracts to provide their customers with asset management solutions for their savings and retirement needs, and provide premium financing services. These operations are carried out in Kenya, Uganda South Sudan and Rwanda.
The Group also operates an insurance brokerage business in the Democratic Republic of Congo.
Stock broking: - The Group has a subsidiary - UAP Financial Services Limited, a Ugandan based Company that provides stock broking services.
Property: - The Group holds investment in three property companies based In Kenya, Uganda and South Sudan.
Results 2015 2014 Kshs ’000 Kshs ’000 Profit for the year 896,599 1,667,187 Profit attributable to shareholders of the company 645,484 1,485,976
Dividends During the year, no interim dividend was paid (2014: Nil). The Directors recommend the payment of no dividend (2014: Kshs 359 million).
Directors The directors of the Company, who held office to the date of this report, are:-
40. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
DIRECTORS’ REPORT (CONTINUED)
DIRECTORS NAME DATE OF APPOINTMENT Dr JB Wanjui CBS – Chairman * Mr Peter De Beyer ** Appointed on 29 June 2015 Mr Peter Mwangi (Group Chief Executive Officer) * Appointed on 23 June 2015 Mr Dominic Kiarie * Resigned on 18 August 2015 Dr CJ Kirubi EBS * Resigned on 27 January 2015 Mr JN Muguiyi * Mr James Mworia * Resigned on 27 January 2015 Mr Lotfi Baccoucche***** Resigned on 29 June 2015 Mrs Susan Omanga * Resigned on 29 June 2015 Re-appointed on 19 August 2015 Mrs Susan Wakhungu – Githuku * Resigned on 29 June 2015 Mr Jonas Armtoft ****** Resigned on 23 June 2015 Mrs Joyce Anne Wainaina- (Alternate Dr JB Wanjui CBS) * Mr Peter Gichuru Njoka – (Alternate Davinder Sikand) * Resigned on 23 June 2015 Mr Skander Oueslati - (Alternate George Odo) ******* Resigned on 23 June 2015 Mr James Wambugu * Mr Ralph Mupita ** Appointed on 19 June 2015 Mr Tavaziva Madzinga *** Appointed on 19 June 2015 Dr Peter W Muthoka, EBS* Appointed on 23 June 2015 Mr David Marshall ** Appointed on 23 June 2015 Mrs Rose Ogega * Appointed on 29 June 2015 Mr Paul Truyens **** Appointed on 29 June 2015 Mr Michael Harper ** Appointed on 29 June 2015 Mrs Anisha Archary ** Appointed on 19 August 2015 Mr AK Maina * Appointed on 19 August 2015 Kenyan* South African** Zimbabwean *** Dutch **** Australian ***** Swedish ****** Tunisian *******
Auditor
The Company’s auditors, KPMG Kenya who were appointed during the year, have expressed willingness to continue in office in accordance with the Companies Act, 2015 Section 723(1).
Approval of the financial statements
The financial statements set out on pages 6 to 85 were approved at a meeting of the Directors held on 8 March 2016. By order of the Board
Nkirote Mworia Njiru Secretary 8 March 2016
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 41. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for the preparation and presentation of the financial statements of UAP Holdings Limited set out on pages 44 to 119 which comprise the consolidated statement of financial position at 31 December 2015, and the consolidated statements of profit or loss, other comprehensive income, changes in equity and cash flows for the year then ended, together with the company statement of financial position at 31 December 2015, the company statement of changes in equity and a summary of significant accounting policies and other explanatory information.
The Directors’ responsibilities include: determining that the basis of accounting described in Note 2 is an acceptable basis for preparing and presenting the financial statements in the circumstances, preparation and presentation of financial statements in accordance with International Financial Reporting Standards and in the manner required by the Kenyan Companies Act and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatements, whether due to fraud or error.
Under the Kenyan Companies Act, the Directors are required to prepare financial statements for each financial period which give a true and fair view of the state of affairs of the Group and Company as at the end of the financial period and of the operating results of the Company for that period. It also requires the Directors to ensure the Company keeps proper accounting records which disclose with reasonable accuracy the financial position of the Company.
The Directors accept responsibility for the annual financial statements, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgments and estimates, in conformity with International Financial Reporting Standards and in the manner required by the Kenyan Companies Act. The Directors are of the opinion that the financial statements give a true and fair view of the state of the financial affairs of the Company and of its operating results.
The Directors further accept responsibility for the maintenance of accounting records which may be relied upon in the preparation of financial statements, as well as adequate systems of internal financial control.
The Directors have made an assessment of the Company’s ability to continue as a going concern and have no reason to believe the Company will not be a going concern for at least the next twelve months from the date of this statement.
Approval of the financial statements The financial statements, as indicated above, were approved by the Board of Directors on 8 March 2016 and were signed on its behalf by:
Dr JB Wanjui CBS Peter Mwangi Chairman Group Chief Executive Officer
42. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF UAP HOLDINGS LIMITED
Report on the financial statements We have audited the accompanying consolidated financial statements of UAP Holdings Limited (the ‘Company’) and its subsidiaries (together, the ‘Group’) set out on pages 44 to 119. These financial statements comprise the consolidated statement of financial position at 31 December 2015 and the consolidated statements of profit or loss, other comprehensive income, changes in equity and cash flows for the year then ended, together with the statement of financial position of the Company standing alone at 31 December 2015, the statement of changes in equity of the company for the year then ended and a summary of significant accounting policies and other explanatory information.
Directors’ responsibility for the financial statements The Directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and in the manner required by the Kenyan Companies Act and for such internal control, as the Directors determine necessary to enable the preparation of financial statements that are free from material misstatements, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform our audit to obtain reasonable assurance that the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Opinion
In our opinion the accompanying financial statements give a true and fair view of the state of financial affairs of UAP Holdings Limited Group and Company at 31 December 2015 and of the financial performance and cash flows of the Group for the year then ended in accordance with International Financial Reporting Standards and the Kenyan Companies Act.
Report on other legal requirements As required by the Kenyan Companies Act, we report to you based on our audit, that: i) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit; ii) in our opinion proper books of account have been kept by the company, so far as appears from our examination of those books; and iii) the Company’s statement of financial position is in agreement with the books of account.
The engagement partner responsible for the audit resulting in this independent auditors’ report is CPA Jacob Gathecha – P/No 1610.
Certified Public Accountants Nairobi 8 March 2016
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 43. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
2015 2014 Notes Kshs’000 Kshs’000
Gross written premium 5 (b) 16,868,231 14,832,735
Gross earned premium 5 (b) 15,332,794 14,158,444 Reinsurance ceded 5 (b) (3,263,368) (2,894,911) Net earned premium 12,069,426 11,263,533
Investment income 6 3,310,189 4,603,772 Commissions earned 5 (b) 1,025,069 790,499 Other income 7 106,244 30,199 Total Income 16,510,928 16,688,003
Claims and policy owners’ benefits payable 8 (9,200,243) (9,071,155) Less: Amount recoverable from reinsurers 5 (b) 1,213,594 996,361 Net claims payable` (7,986,649) (8,074,794) Operating and other expenses 9 (5,199,370) (4,375,071) Commissions payable 5 (b) (2,053,824) (1,648,599) Total expenses & commissions (7,253,194) (6,023,670) Finance costs 37 (a) (577,929) (293,310) Profit before tax 693,156 2,296,229 Income tax expense 11 203,443 (629,042)
Profit for the year (of which Kshs 993,341,000 (2013: Kshs 905,142,000) has been dealt with in the accounts of the company) 896,599 1,667,187
Profit attributable to: Owners of the parent 645,484 1,485,976 Non-controlling interest 251,115 181,211 Profit for the year 896,599 1,667,187
Basic and diluted EPS 12 3.05 7.03
The notes on pages 52 to 119 are an integral part of these financial statements.
44. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
2015 2014 Notes Kshs’000 Kshs’000
Profit for the year 896,599 1,667,187
Other comprehensive income Items that will be recycled to profit or loss Exchange differences on translating foreign operations 413,668 (35,418) Total items that will be recycled to profit or loss 413,668 (35,418) Items that will not be recycled to profit or loss Gains/(losses) on revaluation of equity investments: Listed ordinary shares 24 (302,594) 1,111,897 Unlisted ordinary shares 24 12,046 1,337 Remeasurement of retirement benefit obligations (63,092) 50,809 Total items that will not be recycled to profit or loss (353,640) 1,164,043
Total other comprehensive income for the year, net of tax 60,028 1,128,625
Total comprehensive income for the year 956,627 2,795,812
Total comprehensive income attributable to: Owners of the parent 719,383 2,640,935 Non-controlling interests 237,244 154,877
Total 956,627 2,795,812
The notes on pages 52 to 119 are an integral part of these financial statements.
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 45. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION 2015 2014 Notes Kshs’000 Kshs’000 CAPITAL EMPLOYED Share capital 13 1,057,099 1,057,099 Share premium 13 4,612,626 4,612,626 Fair value reserve for equity investments 14 1,598,214 2,254,205 Retained earnings 15 8,463,518 7,646,416 Proposed dividend 16 - 359,414 Translation reserve 17 292,700 (132,272) Statutory reserve 17 418,827 346,011 Shareholders’ funds 16,442,984 16,143,499 Non-controlling Interest 1,352,277 1,054,549 Total equity 17,795,261 17,198,048 REPRESENTED BY: Assets Goodwill 18 240,030 240,030 Property and equipment 19 (a) 403,343 436,361 Intangible assets 20 (a) 81,722 112,987 Investment properties 21 (a) 19,794,286 15,122,307 Deferred income tax asset 22 569,613 83,640 Retirement benefit asset 23 311,550 285,918 Equity investment at fair value through Other Comprehensive Income 24 (a) 2,554,729 3,734,740 Equity investment at fair value through profit or loss 24 (b) 2,003,448 2,353,888 Mortgage loans receivable 26 255,259 255,437 Current income tax recoverable 11 27,900 113,477 Reinsurers’ share of insurance liabilities 27 2,977,367 2,509,829 Deferred acquisition cost 28 432,292 428,748 Receivables arising out of direct insurance arrangements 2,364,365 2,486,192 Receivables arising out of reinsurance arrangements 970,510 706,371 Other receivables 29 (a) 746,174 1,550,187 Corporate bonds 30 1,855,820 1,588,613 Government securities 31 (ii) 7,541,079 5,875,753 Deposits with financial institutions 32 3,845,043 3,173,707 Cash and bank balances 32 1,750,124 1,025,540 Total assets 48,724,654 42,083,725 Liabilities Deferred income tax liability 22 617,074 720,786 Insurance contract liabilities 33 8,146,877 7,720,435 Payable under deposit administration contracts 34 4,423,199 3,633,021 Unit-linked investment contracts 35 1,007,721 1,040,828 Borrowings 37 7,477,300 3,981,001 Provision for unearned premium 38 6,373,812 5,364,573 Current income tax payable 11 109,397 42,063 Creditors arising from reinsurance arrangements 1,105,790 884,799 Other payables 39 1,668,223 1,498,171 Total liabilities 30,929,393 24,885,677 Net Assets 17,795,261 17,198,048
The notes on pages 52 to 119 are an integral part of these financial statements.
The financial statements on pages 44 to 119 were approved for issue by the board of directors on 8 March 2016 and signed on its behalf by:
Dr JB Wanjui CBS (Chairman) Peter Mwangi (Group Chief Executive Officer)
46. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
COMPANY STATEMENT OF FINANCIAL POSITION
Notes 2015 2014 Kshs’000 Kshs’000
CAPITAL EMPLOYED Share capital 13 1,057,099 1,057,099 Share premium 13 4,612,626 4,612,626 Retained earnings 1,749,478 756,137 Proposed Dividend 16 - 359,414 Total equity 7,419,203 6,785,276
REPRESENTED BY: Assets Property and equipment 19 (b) 92,123 91,423 Intangible assets 20 (b) 50,703 61,936 Investment properties 21 (b) 5,474,671 3,635,242 Investment in subsidiaries 25 5,341,907 3,199,099 Deferred tax asset 22 97,382 - Amounts due from subsidiaries 44 2,243,013 2,186,511 Other receivables 29 (b) 111,487 696,711 Deposits with financial institutions 32 208,811 1,248,062 Cash and bank balances 10,805 16,862 Total assets 13,630,902 11,135,846
Liabilities
Borrowings 37 (b) 4,903,538 2,078,647 Amounts due to subsidiaries 44 939,842 1,991,496 Deferred tax liability 22 - 61,442 Other payables 39 (b) 368,319 218,985
Total liabilities 6,211,699 4,350,570
Net Assets 7,419,203 6,785,276
The notes on pages 52 to 119 are an integral part of these financial statements.
The financial statements on pages 44 to 119 were approved for issue by the board of directors on 8 March 2016 and signed on its behalf by:
Dr JB Wanjui CBS (Chairman) Peter Mwangi (Group Chief Executive Officer) Attributable to owners of the parent
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 47. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
- - ,337 Total 0,809 - 59,414) 35,418) Equity 1 ( ,111,897 5 59,414) ,667,187 shs’000 1 1 ,128,625 ,128,625 ,795,812 ,795,812 ( 3 K 7,198,048 ( 3 4,761,650 1 1 1 2
- - - ,900 - - - Non- 3 2,480 81,211 81,211 4 57,192 30,234) 54,877 ( 26,334) 8 shs’000 shs’000 Interest 1 ,054,549 K 1 1 ( controlling
,337 - Total 0,809 5,184) 2,480) ( 5 59,414) 1 59,414) ,107,997 ,485,976 shs’000 1 ,154,959 ,154,959 ( 4 ,640,935 1 ( 3 K 1 ( 3 6,143,499 3,904,458 2 1 1
------1,619 1,619 4,392 5 46,011 shs’000 shs’000 3 Reserve 29 K Statutory
------5,184) ( 5,184) 5,184) ( shs’000 shs’000 127,088) ( 132,272) Reserves ( ( K Translation
------59,414 59,414 59,414 3 359,414) shs’000 shs’000 3 3 ( K Proposed Dividends Dividends
- - - - 0,809 5 94,099) ( 359,414) ,485,976 shs’000 shs’000 ,916,846 ,916,846 ( ,967,655 ,967,655 359,414) ,453,631 ,453,631 ,646,416 1 ,646,298 ( Earnings Earnings Retained K 7 4 1 1 3
- - - - - ,337 - - 1 ,107,997 shs’000 shs’000 ,061,717 1 807,512) 807,512) ,254,205 Reserves 1,916,846) 3 K ( ( 2 Fair value value Fair (
------shs’000 ,669,725 ,669,725 K 5 5 Share Capital & Capital Share Share premium Share
6
7
1 4 (c) 4 (c) otes 1 2 2 N
otal transactions with owners
T CONSOLIDATED STATEMENT OF CHANGES IN EQUITY STATEMENT CONSOLIDATED income Other comprehensive Re-measurement of retirement benefit obligations Quoted ordinary shares with owners Transactions Dividend paid 2013 Gains/(losses) on revaluationGains/(losses) of equity investments: Unquoted ordinary shares Balance at 1 January 2014
Transfer of realisedTransfer gains on sale of shares 2014 Final dividend proposed 2014 Profit for theyear Currency translation differences otherTotal comprehensive income for the year Balance December at 31 2014 Total comprehensiveTotal income for the year statutory to Transfer reserve The notes on pages 52 to 119 are an integral part of these financial statements.The notes on 119 pages to 52
FOR THE YEAR ENDED 31 DEC 2015 DEC 31 ENDED YEAR THE FOR
48. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
Total 2,046 - - - 0,028 13,668 13,668 1 96,599 - - Equity 63,092) 56,627 6
4 ( 8 359,414) shs’000 302,594) 9 ( 359,414) ( ( K 7,795,261 7,795,261 7,198,048 7,198,048 1 1
Non- 0,484 - 51,115 51,115 2,567) ( 6 11,304) - 37,244 37,244 2 - - - - - ( 13,871) shs’000 shs’000 ( 2 Interest ,352,277 ,054,549 K 1 1 controlling
Total 2,046 - - 3,899 - 24,972 24,972 1 45,484 19,383 19,383 63,092) 7 60,484) 4 ( 6 ( 359,414) shs’000 7 300,027) ( 359,414) ( ( K 6,143,499 6,143,499 6,442,984 1 1
2,816 2,816 ------7 46,011 46,011 18,827 18,827 shs’000 shs’000 3 4 Reserve K Statutory
- 2,700 ------24,972 24,972 24,972 24,972 4 shs’000 shs’000 4 4 29 132,272) Reserves ( K Translation
------59,414 59,414 - 359,414) shs’000 shs’000 3 ( 359,414) ( K Proposed Dividends Dividends
68,010 68,010 45,484 - 04,918 04,918 63,092) ------50,402 3 ( 6 shs’000 shs’000 133,300) 3 9 ( ,463,518 ,463,518 ,646,416 ,646,416 Earnings Earnings Retained K 7 8
2,046 1 ------shs’000 shs’000 368,010) 300,027) ( ( 655,991) 655,991) ,598,214 ,254,205 Reserves ( ( K 1 2 Fair value value Fair
- - - - (CONTINUED) ------
shs’000 ,669,725 ,669,725 ,669,725 ,669,725 K 5 5 Share Capital & Capital Share Share premium Share
Attributable to owners of the parent
6 6
7
1 1 1 4 (c) 4 (c) 4 (c) otes 2 2 N
income
comprehensive comprehensive
Transfer of realisedTransfer gains on sale of shares Total comprehensiveTotal income for the year Transfer to statutory to Transfer reserve
Unquoted ordinary shares Currency translation differences otherTotal comprehensive income for the year Other Re-measurement of retirement benefit obligations Quoted ordinary shares with owners Transactions Dividend paid 2014 Balance December at 31 2015
2015 Final dividend proposed 2015 Balance at 1 January 2015 are an integral part of these financial statements.The notes on 119 pages to 52 Gains/(losses) on revaluationGains/(losses) of equity investments: transactionsTotal with owners Profit for theyear
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR THE FOR EQUITY IN CHANGES OF STATEMENT CONSOLIDATED ENDED DECEMBER 31 2015
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 49. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
COMPANY STATEMENT OF CHANGES IN EQUITY
Share Capital Retained Proposed Total & Share Earnings Dividends premium Notes Kshs’000 Kshs’000 Kshs’000 Kshs’000 Balance at 1 January 2014 5,669,725 210,409 359,414 6,239,548 Profit for the year - 905,142 - 905,142 Other comprehensive income - - - - Total comprehensive income for the year - 905,142 - 905,142 Transactions with owners 2013 Dividend paid 16 - - (359,414) ( 359,414) 2014 Final dividend proposed 16 - (359,414) 359,414 - Total transactions with owners - (359,414) - ( 359,414) Balance at 31 December 2014 5,669,725 756,137 359,414 6,785,276
Balance at 1 January 2015 5,669,725 756,137 359,414 6,785,276 Profit for the year - 993,341 - 993,341 Other comprehensive income - - - - Total comprehensive income for the year - - - - Transactions with owners - 2014 Dividend paid 16 - - (359,414) ( 359,414) 2015 Final dividend proposed 16 - - - - Total transactions with owners - - (359,414) ( 359,414) Balance at 31 December 2015 5,669,725 1,749,478 - 7,419,203
The notes on pages 52 to 119 are an integral part of these financial statements.
50. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
CONSOLIDATED STATEMENT OF CASH FLOWS
2015 2014 Notes Kshs’000 Kshs’000 Cash flow from operating activities Cash generated from operations 40 889,938 1,290,811 Tax paid 11 (210,280) (371,270) Net cash generated from operating activities 679,658 919,541 Cash flow from investing activities Purchase of property and equipment 19 (a) (153,749) (212,763) Purchase of intangible assets 20 (a) (33,501) (49,066) Net purchase of government securities (1,666,975) (1,176,179) Purchase of equity investments 24 (c) (1,998,857) (2,138,982) Net purchase of corporate bonds (199,437) (1,084,377) Additions to investment properties 21 (a) (3,077,504) (1,350,067) Mortgage loans advanced 26 (89,094) (110,784) Mortgage loans repaid 26 65,601 85,236 Proceeds from sale of equity investments 24 (c) 3,202,181 3,036,057 Proceeds from disposal of fixed assets 8,563 - Rent, interest and dividends received 2,332,376 1,714,173 Net cash used in investing activities (1,610,396) (1,286,752) Cash flow from financing activities Dividends paid 16 (359,414) (359,414) Proceeds from borrowings 37 (a) 3,373,589 1,938,326 Payments on loan and interest costs on borrowings 37 (a) (689,166) (301,231) Net cash generated from / (used in) financing activities 2,325,009 1,277,681
Increase in cash and cash equivalents 1,394,271 910,470 Movement in cash and cash equivalents At 1 January 4,296,593 3,386,123 Increase during the year 1,394,271 910,470 At 31 December 32 5,690,864 4,296,593
The notes on pages 52 to 119 are an integral part of these financial statements.
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 51. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
1 General information
The Company is incorporated in Kenya under the Companies Act as a limited liability company, and is domiciled in Kenya. The address of its registered office is Bishops Garden Towers, Bishops Road, P.O. Box 43013 - 00100 Nairobi.
The Company has seven subsidiary companies that operate as insurance companies and three property Companies in Kenya, Uganda and South Sudan. Four of the Company’s insurance subsidiaries are short term (“general”) insurance companies, two are long term (“life”) insurance companies and one is a composite insurance company selling both general and life insurance. Long term business comprises life assurance business, deposit administration business and investment contracts. Life assurance business relates to the underwriting of risks relating to death of an insured person, and includes contracts subject to the payment of premiums for a term dependent on the termination or continuance of the life of an insured person. Short term (general) insurance business relates to all other categories of short term insurance business, analysed into several sub-classes of business based on the nature of the assumed risks. The Group also holds investments in UAP Financial Services Limited Uganda and UAP Investments Kenya that provides stock broking services and fund management services. UAP Properties (Uganda) Limited and UAP Properties (South Sudan) Limited are property holding companies for Nakawa Business Park and Equatorial Towers which are located in Kampala and South Sudan respectively. The Group also holds an investment in UAP DRC sarl which offers insurance brokerage services.
2 Summary of significant accounting policies The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated.
(a) Basis of preparation
The financial statements are prepared in compliance with International Financial Reporting Standards (IFRS).
(a) Basis of measurement
The measurement basis used is the historical cost basis except where otherwise stated in the accounting policies below. For those assets and liabilities measured at fair value, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When measuring the fair value of an asset or a liability, the company uses market observable data as far as possible. If the fair value of an asset or a liability is not directly observable, it is estimated by the company using valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs (e.g. by use of the market comparable approach that reflects recent transaction prices for similar items or discounted cash flow analysis). Inputs used are consistent with the characteristics of the asset / liability that market participants would take into account.
Fair values are categorised into three levels of fair value hierarchy based on the degree to which the inputs to the measurements are observable and the significance of the inputs to the fair value measurement in its entirety. See note 4 (e).
(b) Use of estimates
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 3.
(c) Statement of Compliance
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) and the Kenyan Companies Act.
For Kenyan Companies Act reporting purposes in these financial statements, the balance sheet is represented by the statement of financial position and the profit and loss account is presented in the statement of comprehensive income.
52. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
2 Summary of significant accounting policies (continued)
(a) Basis of preparation (continued)
Changes to standards and new interpretations effective in 2015
New and amended standards adopted by the Group The standards below have been adopted by the Group for the first time for the financial year beginning on 1 January 2015 and none has a material impact on the Group.
(i) New standards, amendments and interpretations effective and adopted during the year
Defined benefit plans – Employee contributions (Amendments to IAS 19)
The amendments introduced reliefs that reduce the complexity and burden of accounting for certain contributions from employees or third parties. Such contributions are eligible for practical expedience if they are:
• set out in the formal terms of the plan; • linked to service; and • independent of the number of years of service.
When contributions are eligible for practical expedience, a company is permitted (but not required) to recognise them as a reduction of the service cost in the period in which the related service is rendered.
The amendments apply retrospectively for annual periods beginning on or after 1 July 2014.
The adoption of these changes did not affect the amounts and disclosures of the Group’s defined benefits obligations.
(ii) New and amended standards and interpretations in issue but not yet effective for the year ended 31 December 2015.
New standard or amendments Effective for annual periods beginning on or after • Sale or Contribution of Assets between an Investor and its Associate or 1 January 2016 Joint Venture (Amendments to IFRS 10 and IAS 28) • Accounting for Acquisitions of Interests in Joint Operations 1 January 2016 (Amendments to IFRS 11) • Amendments to IAS 41 - Bearer Plants (Amendments to IAS 16 and IAS 41) 1 January 2016 • Amendments to IAS 16 and IAS 38 – Clarification of Acceptable Methods 1 January 2016 of Depreciations and Amortisation • Equity Method in Separate Financial Statements (Amendments to IAS 1 January 2016 27) • IFRS 14 Regulatory Deferral Accounts 1 January 2016 • Investment Entities: Applying the Consolidation Exception 1 January 2016 (Amendments to IFRS 10, IFRS 12 and IAS 28) • Disclosure Initiative (Amendments to IAS 1) 1 January 2016 • IFRS 15 Revenue from Contracts with Customers 1 January 2018 • IFRS 9 Financial Instruments (2014) 1 January 2018 • IFRS 16 Leases 1 January 2019
All Standards and Interpretations will be adopted at their effective date (except for those Standards and Interpretations that are not applicable to the entity).
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 53. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
2 Summary of significant accounting policies (continued)
(a) Basis of preparation (continued)
(ii) New and amended standards and interpretations in issue but not yet effective for the year ended 31 December 2015 (continued)
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28)
The amendments require the full gain to be recognised when assets transferred between an investor and its associate or joint venture meet the definition of a ‘business’ under IFRS 3 Business Combinations. Where the assets transferred do not meet the definition of a business, a partial gain to the extent of unrelated investors’ interests in the associate or joint venture is recognised. The definition of a business is key to determining the extent of the gain to be recognised.
The amendments will be effective from annual periods commencing on or after 1 January 2016.
The adoption of these changes will not affect the amounts and disclosures of the Group’s financial statements.
Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11) The amendments require business combination accounting to be applied to acquisitions of interests in a joint operation that constitutes a business.
Business combination accounting also applies to the acquisition of additional interests in a joint operation while the joint operator retains joint control. The additional interest acquired will be measured at fair value. The previously held interest in the joint operation will not be remeasured.
The amendments apply prospectively for annual periods beginning on or after 1 January 2016 and early adoption is permitted.
The adoption of these changes will not affect the amounts and disclosures of the financial statements.
Amendments to IAS 41- Bearer Plants (Amendments to IAS 16 and IAS 41) The amendments to IAS 16 Property, Plant and Equipment and IAS 41 Agriculture require a bearer plant (which is a living plant used solely to grow produce over several periods) to be accounted for as property, plant and equipment in accordance with IAS 16 Property, Plant and Equipment instead of IAS 41 Agriculture. The produce growing on bearer plants will remain within the scope of IAS 41. The new requirements are effective from 1 January 2016, with earlier adoption permitted.
The amendment will not have a significant impact on the Group’s financial statements as the Company does not have bearer plants.
Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38)
The amendments to IAS 16 Property, Plant and Equipment explicitly state that revenue-based methods of depreciation cannot be used for property, plant and equipment.
The amendments to IAS 38 Intangible Assets introduce a rebuttable presumption that the use of revenue-based amortisation methods for intangible assets is inappropriate. The presumption can be overcome only when revenue and the consumption of the economic benefits of the intangible asset are ‘highly correlated’, or when the intangible asset is expressed as a measure of revenue.
The amendments apply prospectively for annual periods beginning on or after 1 January 2016 and early adoption is permitted.
The Directors are assessing the impact of the adoption of the amendments on the financial statements of the Group.
54. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
2 Summary of significant accounting policies (continued)
(a) Basis of preparation (continued)
(ii) New and amended standards and interpretations in issue but not yet effective for the year ended 31 December 2015 (continued)
Equity Method in Separate Financial Statements (Amendments to IAS 27) The amendments allow the use of the equity method in separate financial statements, and apply to the accounting not only for associates and joint ventures but also for subsidiaries.
The amendments apply retrospectively for annual periods beginning on or after 1 January 2016 with early adoption permitted.
The Directors are assessing the full impact of the adoption of these changes on the amounts and disclosures of the Group.
IFRS 14 Regulatory Deferral Accounts
IFRS 14 provides guidance on accounting for regulatory deferral account balances by first-time adopters of IFRS. To apply this standard, the entity has to be rate-regulated i.e. the establishment of prices that can be charged to its customers for goods and services is subject to oversight and/or approval by an authorised body. The standard is effective for financial reporting years beginning on or after 1 January 2016 with early adoption is permitted.
The adoption of this standard is not expected to have an impact the financial statements of the Group’s given that it is not a first time adopter of IFRS.
Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28)
The amendment to IFRS 10 Consolidated Financial Statements clarifies which subsidiaries of an investment entity are consolidated instead of being measured at fair value through profit and loss. The amendment also modifies the condition in the general consolidation exemption that requires an entity’s parent or ultimate parent to prepare consolidated financial statements. The amendment clarifies that this condition is also met where the ultimate parent or any intermediary parent of a parent entity measures subsidiaries at fair value through profit or loss in accordance with IFRS 10 and not only where the ultimate parent or intermediate parent consolidates its subsidiaries.
The amendment to IFRS 12 Disclosure of Interests in Other Entities requires an entity that prepares financial statements in which all its subsidiaries are measured at fair value through profit or loss in accordance with IFRS 10 to make disclosures required by IFRS 12 relating to investment entities.
The amendment to IAS 28 Investments in Associates and Joint Ventures modifies the conditions where an entity need not apply the equity method to its investments in associates or joint ventures to align these to the amended IFRS 10 conditions for not presenting consolidated financial statements. The amendments introduce relief when applying the equity method which permits a non-investment entity investor in an associate or joint venture that is an investment entity to retain the fair value through profit or loss measurement applied by the associate or joint venture to its subsidiaries.
The amendments apply retrospectively for annual periods beginning on or after 1 January 2016, with early application permitted.
The Directors are assessing the full impact of the adoption of these changes on the amounts and disclosures of the Group.
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 55. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
2 Summary of significant accounting policies (continued)
(a) Basis of preparation (continued)
(ii) New and amended standards and interpretations in issue but not yet effective for the year ended 31 December 2015 (continued)
Disclosure Initiative (Amendments to IAS 1)
The amendments provide additional guidance on the application of materiality and aggregation when preparing financial statements.
The amendments apply for annual periods beginning on or after 1 January 2016 and early application is permitted.
The Directors are assessing the full impact of the adoption of these changes on the amounts and disclosures of the Group.
IFRS 15 Revenue from Contracts with Customers This standard replaces IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfer of Assets from Customers and SIC-31 Revenue – Barter of Transactions Involving Advertising Services.
The standard contains a single model that applies to contracts with customers and two approaches to recognising revenue: at a point in time or over time. The standard specifies how and when an IFRS reporter will recognise revenue as well as requiring such entities to provide users of financial statements with more informative, relevant disclosures. The standard provides a single, principles based five-step model to be applied to all contracts with customers in recognising revenue being: Identify the contract(s) with a customer; Identify the performance obligations in the contract; Determine the transaction price; Allocate the transaction price to the performance obligations in the contract; and recognise revenue when (or as) the entity satisfies a performance obligation.
IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption is permitted.
IFRS 9: Financial Instruments (2014) On 24 July 2014 the IASB issued the final IFRS 9 Financial Instruments Standard, which replaces earlier versions of IFRS 9 and completes the IASB’s project to replace IAS 39 Financial Instruments: Recognition and Measurement.
This standard introduces changes in the measurement bases of the financial assets to amortised cost, fair value through other comprehensive income or fair value through profit or loss. Even though these measurement categories are similar to IAS 39, the criteria for classification into these categories are significantly different. In addition, the IFRS 9 impairment model has been changed from an “incurred loss” model from IAS 39 to an “expected credit loss” model.
The standard is effective for annual periods beginning on or after 1 January 2018 with retrospective application, early adoption is permitted.
The Company early adopted IFRS 9: Financial Instruments (2009) on classification and measurement of financial assets in 2009 and IFRS 9: Financial Instruments (2010) on classification and measurement of financial liabilities in 2010 in advance of its effective date. The standard replaced parts of IAS 39 relating to classification and measurement of financial Instruments.
The adoption of this standard is expected to have a significant impact on the financial statements of the Group. The Directors are assessing the full impact of the adoption of these changes on the amounts and disclosures of the Group.
56. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
2 Summary of significant accounting policies (continued)
(a) Basis of preparation (continued)
(ii) New and amended standards and interpretations in issue but not yet effective for the year ended 31 December 2015 (continued)
IFRS 16: Leases On 13 January 2016 the IASB issued IFRS 16 Leases, completing the IASB’s project to improve the financial reporting of leases. IFRS 16 replaces the previous leases standard, IAS 17 Leases, and related interpretations.
IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, i.e. the customer (‘lessee’) and the supplier (‘lessor’). The standard defines a lease as a contract that conveys to the customer (‘lessee’) the right to use an asset for a period of time in exchange for consideration. A company assesses whether a contract contains a lease on the basis of whether the customer has the right to control the use of an identified asset for a period of time.
The standard eliminates the classification of leases as either operating leases or finance leases for a lessee and introduces a single lessee accounting model. All leases are treated in a similar way to finance leases. Applying that model significantly affects the accounting and presentation of leases and consequently, the lessee is required to recognise:
a) Assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A company recognises the present value of the unavoidable lease payments and shows them either as lease assets (right-of-use assets) or together with property, plant and equipment. If lease payments are made over time, a company also recognises a financial liability representing its obligation to make future lease payments. b) depreciation of lease assets and interest on lease liabilities in profit or loss over the lease term; and c) separate the total amount of cash paid into a principal portion (presented within financing activities) and interest (typically presented within either operating or financing activities) in the statement of cash flows
IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently. However, compared to IAS 17, IFRS 16 requires a lessor to disclose additional information about how it manages the risks related to its residual interest in assets subject to leases.
The standard does not require a company to recognise assets and liabilities for: a) short-term leases (i.e. leases of 12 months or less) and; b) leases of low-value assets
The new Standard is effective for annual periods beginning on or after 1 January 2019. Early application is permitted insofar as the recently issued revenue Standard, IFRS 15 Revenue from Contracts with Customers is also applied).
The Directors are assessing the full impact of the adoption of these changes on the amounts and disclosures of the Group.
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 57. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
2 Summary of significant accounting policies (continued)
(b) Insurance contracts
Classification
The Group issues contracts that transfer insurance risk. Insurance contracts are those contracts that transfer significant insurance risk. As a general guideline, the group defines as significant insurance risk, the possibility of having to pay benefits on the occurrence of an insured event that are at least 10% more than the benefits payable if the insured event did not occur.
Insurance contracts are classified into two main categories, depending on the duration of risk and as per the provisions of the Insurance Act: long term insurance business and short term insurance business.
i Long term insurance business Includes business of all or any of the following classes, namely; group life business, ordinary life business, deposit administration business and unit linked business.
Life insurance business means the business of, or in relation to, the issuing of, or the undertaking of liability to pay money on death (not being death by accident or in specified sickness only) or on the happening of any contingency dependent on the termination or continuance of human life (either with or without provision for a benefit under a continuous disability insurance contract), and include a contract which is subject to the payment of premiums for term dependent on the termination or continuance of human life and any contract securing the grant of an annuity for a term dependent upon human life.
Superannuation business means life assurance business, being business of, or in relation to, the issuing of or the undertaking of the liability under superannuation, group life and permanent health insurance policy.
ii Short term insurance business Means insurance business of any class or classes not being long term insurance business. Classes of general insurance include aviation insurance, engineering insurance, fire insurance - domestic risks, fire insurance - industrial and commercial risks, liability insurance, marine insurance, motor insurance-private vehicles, motor insurance - commercial vehicles, personal accident insurance, theft insurance, workmen’s compensation and employer’s liability insurance and miscellaneous insurance (i.e. class of business not included under those listed above)
Motor insurance business means the business of affecting and carrying out contracts of insurance against loss of, or damage to, or arising out of or in connection with the use of, motor vehicles, inclusive of third party risks but exclusive of transit risks.
Personal accident insurance business means the business of affecting and carrying out contracts of insurance against risks of the persons insured sustaining injury as the result of an accident or of an accident of a specified class or dying as the result of an accident or of an accident of a specified class or becoming incapacitated in consequence of disease or of disease of a specified class.
Fire insurance business means the business of affecting and carrying out contracts of insurance, otherwise than incidental to some other class of insurance business against loss or damage to property due to fire, explosion, storm and other occurrences customarily included among the risks insured against in the fire insurance business.
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2 Summary of significant accounting policies (continued)
(b) Insurance contracts (continued)
Recognition and measurement
i Premium income
For long term insurance business, premiums are recognised as revenue when they become payable by the contract holder. Premiums are shown before deduction of commission.
For short term insurance business, premium income is recognised on assumption of risks, and includes estimates of premiums due but not yet received less unearned premium. Unearned premiums represent the proportion of the premiums written in periods up to the accounting date that relates to the unexpired terms of policies in force at the financial reporting date, and is computed using the 365ths method. Premiums are shown before deduction of commission and are gross of any taxes or duties levied on premiums.
ii Claims
For long term insurance business, benefits are recorded as an expense when they are incurred. Claims arising on maturing policies are recognised when the claim becomes due for payment. Death claims are accounted for on notification. Surrenders are accounted for on payment.
For short term insurance business, claims incurred comprise claims paid in the year and changes in the provision for outstanding claims. Claims paid represent all payments made during the year, whether arising from events during that or earlier years. Outstanding claims represent the estimated ultimate cost of settling all claims arising from incidents occurring prior to the financial reporting date, but not settled at that date. Outstanding claims are computed on the basis of the best information available at the time the records for the year are closed, and include provisions for claims incurred but not reported (“IBNR”). Outstanding claims are not discounted.
iii Commissions payable and deferred acquisition costs (“DAC”)
Commissions payable are based on the premium written and are recorded as an expense in the period in which they are incurred.
A proportion of commission payable is deferred and amortised over the period in which the related premium is earned. Deferred acquisition costs represent a proportion of acquisition costs that relate to policies that are in force at the period end.
iv Liability adequacy test
At each financial reporting date, liability adequacy tests are performed to ensure the adequacy of the insurance contract liabilities net of related DAC. In performing these tests, current best estimates of future contractual cash flows and claims handling and administration expenses, as well as investment income from the assets backing such liabilities, are used. Any deficiency is immediately charged to profit or loss.
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 59. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
2 Summary of significant accounting policies (continued)
(b) Insurance contracts (continued)
Recognition and measurement (continued)
v Reinsurance contracts held
Contracts entered into by the Group with reinsurers under which the Group is compensated for losses on one or more contracts issued by the Group and that meet the classification requirements for insurance contracts are classified as reinsurance contracts held. Contracts that do not meet these classification requirements are classified as financial assets. Insurance contracts entered into by the Group under which the contract holder is another insurer (inwards reinsurance) are included with insurance contracts.
The benefits to which the Group is entitled under its reinsurance contracts held are recognised as reinsurance assets. These assets consist of short-term balances due from reinsurers, as well as longer term receivables that are dependent on the expected claims and benefits arising under the related reinsured insurance contracts. Amounts recoverable from or due to reinsurers are measured consistently with the amounts associated with the reinsured insurance contracts and in accordance with the terms of each reinsurance contract. Reinsurance liabilities are primarily premiums payable for reinsurance contracts and are recognised as an expense when due.
The Group assesses its reinsurance assets for impairment on a quarterly basis. If there is objective evidence that the reinsurance asset is impaired, the Group reduces the carrying amount of the reinsurance asset to its recoverable amount and recognises that impairment loss in profit or loss. The Group gathers the objective evidence that a reinsurance asset is impaired using the same process adopted for financial assets held at amortised cost. The impairment loss is also calculated following the same method used for these financial assets. These processes are set out under Note 2(j).
vi Receivables and payables related to insurance contracts and investment contracts
Receivables and payables are recognised when due. These include amounts due to and from agents, brokers and insurance contract holders. If there is objective evidence that the insurance receivable is impaired, the Group reduces the carrying amount of the insurance receivable accordingly and recognises that impairment loss in the income statement. The Group gathers the objective evidence that an insurance receivable is impaired using the same process adopted for financial assets classified at amortised cost. The impairment loss is also calculated under the same method used for these financial assets. These processes are described under Note 2 (j).
vii Salvage and subrogation reimbursements
Some insurance contracts permit the Group to sell (usually damaged) property acquired in settling a claim (for example, salvage). The Group may also have the right to pursue third parties for payment of some or all costs (for example, subrogation). Estimates of salvage recoveries are included as an allowance in the measurement of the insurance liability for claims, and salvage property is recognised in other assets when the liability is settled. The allowance is the amount that can reasonably be recovered from the disposal of the property.
Subrogation reimbursements are also considered as an allowance in the measurement of the insurance liability for claims and are recognised in other assets when the liability is settled. The allowance is the assessment of the amount that can be recovered from the action against the liable third party.
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2 Summary of significant accounting policies (continued)
(c) Revenue recognition
i Insurance premium revenue
The revenue recognition policy relating to insurance contracts is set out under note 2 (b) above.
ii Commissions
Commissions receivable are recognised as income in the period in which they are earned.
iii Interest income
Interest income is recognised on a time proportion basis that takes into account the effective yield on the asset. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income.
iv Dividend income
Dividends are recognised as income in the period in which the right to receive payment is established.
v Rental income
Rental income is recognised as income in the period in which it is earned. All investment income is stated net of investment expenses.
vi Fee income
Fee income consists primarily of administration fees arising from services rendered in relation to the issue and management of deposit administration and investment contracts. Fees are recognised in the accounting period in which the services are rendered and are presented in the income statement within ‘other income’.
(d) Investment contracts
The Group issues investment contracts without fixed terms (unit-linked) and investment contracts with fixed and guaranteed terms (fixed interest rate). The investment contracts include funds administered for a number of retirement benefit schemes.
Investment contracts without fixed terms are financial liabilities whose fair value is dependent on the fair value of underlying financial assets, and are designated at inception as at fair value through profit or loss. The Group designates these investment contracts to be measured at fair value through profit or loss because it eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as ‘an accounting mismatch’) that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases.
The best evidence of the fair value of these financial liabilities at initial recognition is the transaction price (i.e. the fair value received) unless the fair value of that instrument is evidenced by comparison with other observable current market transactions in the same instrument or based on a valuation technique whose variables include only data from observable markets. When such evidence exists, the Group recognises profit at inception.
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 61. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
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2 Summary of significant accounting policies (continued)
(d) Investment contracts (continued)
The fair value of financial liabilities for investment contracts without fixed terms is determined using the current unit values in which the contractual benefits are denominated. These unit values reflect the fair values of the financial assets contained within the Group’s unitised investment funds linked to the financial liability. The fair value of the financial liabilities is obtained by multiplying the number of units attributed to each contract holder at the financial reporting date by the unit value for the same date.
For investment contracts with fixed and guaranteed terms, the amortised cost basis is used. In this case, the liability is initially measured at its fair value less transaction costs that are incremental and directly attributable to the acquisition or issue of the contract.
Subsequent measurement of investment contracts at amortised cost uses the effective interest method. This method requires the determination of an interest rate (the effective interest rate) that exactly discounts to the net carrying amount of the financial liability, the estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period if the holder has the option to redeem the instrument earlier than maturity.
The Group re-estimates at each reporting date the expected future cash flows and recalculates the carrying amount of the financial liability by computing the present value of estimated future cash flows using the financial liability’s original effective interest rate. Any adjustment is immediately recognised as income or expense in the income statement.
(e) Property and equipment
All categories of property and equipment are initially recorded at cost and subsequently stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to the income statement during the financial period in which they are incurred.
Depreciation is calculated using the straight line method to write down their cost to their residual values over their estimated useful lives, as follows:
- Motor vehicles – 5 years - Computers & computer equipment – 3 years - Office equipment – 5 years - Furniture & fittings – 8 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each financial reporting date. An asset’s carrying amount is written down immediately to its estimated recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposal of property and equipment are determined by comparing proceeds with carrying amount and are included in the income statement.
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2 Summary of significant accounting policies (continued)
(f) Investment properties
Buildings, or part of a building, (freehold or held under a finance lease) and land (freehold or held under an operating lease) held for long term rental yields and/or capital appreciation and are not occupied by the Group are classified as investment property under non-current assets. Investment property is carried at fair value, representing open market value determined annually by external valuers. Properties under construction and development sites with projected use as Investment properties are valued at projected fair values taking into account current market conditions, outstanding investment costs and a risk loading according to the progress of the project. Changes in fair values are included in investment income in the income statement.
(g) Intangible assets
The Group’s intangible assets relate to computer software and goodwill (note 2(r)).
Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives of three years.
Development costs that are directly associated with the production of identifiable and unique software products controlled by the Group, and that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets if:- - It is technically feasible to complete the software product so that it will be available for use; - Management intends to complete the software product and use or sell it; - There is an ability to use or sell the software product; - It can be demonstrated how the software product will generate probable future economic benefits; - Adequate technical, financial and other resources to complete the development and use or sell it are available; and, - The expenditure attributable to the software product during its development can be reliably measured.
Direct costs include the software development, employee costs and an appropriate portion of relevant overheads. Other development expediture that do not meet these criteria are recognised as an expense as incurred. Development costs that have been expensed are not recognised as an asset in a subsequent period.
Computer software development costs recognised as assets are amortised over their estimated useful lives (not exceeding three years). Costs associated with maintaining computer software programmes are recognised as an expense as incurred.
(h) Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 63. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
2 Summary of significant accounting policies (continued)
(i) Financial assets
Classification and measurement
The Group classifies its financial assets as subsequently measured at either amortised cost or fair value on the basis of both the Group’s business model for managing the financial assets and the contractual cash flow characteristics of the financial asset. A financial asset is measured at amortised cost if both of the following conditions are met:
a. the asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows. b. the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The Group’s corporate bonds, government securities, receivables, mortgage loans, cash at bank and deposits with financial institutions are classified at amortised cost. The carrying values of various categories of Financial asset and Financial liabilities are shown in note 43.
All financial assets that do not meet the above criteria are measured at fair value. Equity investments for life business are classified at fair value through profit or loss. Equity investment for non life business are classified at fair value through other comprehensive income (note 24).
Recognition and de-recognition
Financial assets are recognised when the Group becomes a party to the contractual provisions of the asset. Initial recognition of financial asset is at fair value plus, for all financial assets except those carried at fair value through profit or loss, transaction costs. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where the Group has transferred substantially all risks and rewards of ownership.
Equity investments are carried at fair value. Gains and losses arising from changes in the fair value of equity investments are recognised in other comprehensive income. When equity investments are derecognised, the cumulative gain or loss previously recognised in other comprehensive income are transferred to retained earnings. Dividends on equity instruments are recognised in the income statement when the Group’s right to receive payment is established.
Fair values of quoted investments in active markets are based on current bid prices. Fair values for unlisted equity securities are estimated using valuation techniques. These include the use of recent arm’s length transactions, discounted cash flow analysis and other valuation techniques commonly used by market participants.
(j) Impairment of financial assets
Assets carried at amortised cost:
The Group assesses at each financial reporting date whether there is objective evidence that a financial asset or a group of financial assets measured at amortised cost is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
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2 Summary of significant accounting policies (continued)
(j) Impairment of financial assets (continued)
Objective evidence that a financial asset or group of assets is impaired includes observable data that comes to the attention of the Group about the following loss events: a. significant financial difficulty of the borrower; b. a breach of contract, such as default or delinquency in interest or principal repayments; c. the Group granting to the borrower, for economic or legal reasons relating to the borrower’s financial difficulty, a concession that the Group would not otherwise consider; d. it becoming probable that the borrower will enter bankruptcy or other financial reorganisation; e. the disappearance of an active market for that financial asset because of financial difficulties; or f. observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the Group, including: - adverse changes in the payment status of borrowers in the Group; or - national or local economic conditions that correlate with defaults on the assets in the Group.
The estimated period between a loss occurring and its identification is determined by management for each identified portfolio.
The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment.
If there is objective evidence that an impairment loss on financial assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial instrument’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price.
The calculation of the present value of the estimated future cash flows of a collateralised financial asset reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable.
For the purposes of a collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk characteristics (i.e. on the basis of the Group’s grading process that considers asset type, industry, geographical location, collateral type, past-due status and other relevant factors). Those characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors’ ability to pay all amounts due according to the contractual terms of the assets being evaluated.
Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of the contractual cash flows of the assets in the Group and historical loss experience for assets with credit risk characteristics similar to those in the Group. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently.
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 65. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
2 Summary of significant accounting policies (continued)
(j) Impairment of financial assets (continued)
When a loan is uncollectible, it is written off against the related provision for loan impairment. Such loans are written off after all the necessary procedures have been completed and the amount of the loss has been determined. Subsequent recoveries of amounts previously written off decrease the amount of the provision for loan impairment in the income statement.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the previously recognised impairment loss is reversed by adjusting the allowance account. The amount of the reversal is recognised in the income statement.
Loans that are either subject to collective impairment assessment or individually significant and whose terms have been renegotiated are no longer considered to be past due but are treated as new loans. In subsequent years, the renegotiated terms apply in determining whether the asset is considered to be past due.
(k) Accounting for leases
Leases of property and equipment where the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Assets acquired under finance leases are capitalised at the inception of the lease at the lower of their fair value and the estimated present value of the underlying lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in non-current liabilities. The interest element of the finance charge is charged to the income statement over the lease period. Property and equipment acquired under finance leases is depreciated over the estimated useful life of the asset.
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease.
(l) Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less, and bank overdrafts.
(m) Employee benefits
i Retirement benefit obligations
The Group operates a defined benefit scheme for employees. A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation d an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.
The liability recognised in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of government bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation.
66. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
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2 Summary of significant accounting policies (continued)
(m) Employee benefits (continued)
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Past-service costs are recognised immediately in income.
ii Other entitlements
Employee entitlements to long service awards are recognised when they accrue to employees. A provision is made for the estimated liability for such entitlements as a result of services rendered by employees up to the financial reporting date.
The estimated monetary liability for employees’ accrued annual leave entitlement at the financial reporting date is recognised as an expense accrual.
(n) Current and deferred income tax
The tax expense for the period comprises current and deferred income tax. Tax is recognised in the profit or loss except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax enacted or substantively enacted at the reporting date. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying values in the financial statements. However, if the deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates and laws that have been enacted or substantively enacted at the reporting date and are expected to apply when the related deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
(o) Functional currency and translation of foreign currencies
i Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in ‘Kenyan Shillings (Kshs), which is the Group’s presentation currency.
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 67. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
2 Summary of significant accounting policies (continued)
(o) Functional currency and translation of foreign currencies (continued)
ii Transactions and balances
Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.
Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in profit or loss within ‘finance income or cost’. All other foreign exchange gains and losses are presented in profit or loss within ‘other income’ or ‘other expenses’.
Translation differences related to changes in amortised cost are recognised in profit or loss, and other changes in carrying amount are recognised in other comprehensive income.
Translation differences on non-monetary financial assets and liabilities, such as equities held at fair value through profit or loss, are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non- monetary financial assets, such as equities classified as available-for-sale financial assets, are included in other comprehensive income.
iii Group balances
The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: (i) assets and liabilities for each statement of financial position presented are translated at the closing rate at the end of the reporting period; (ii) income and expenses for each income statement amount are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and (iii) all resulting exchange differences are recognised in other comprehensive income.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are recognised in equity.
(p) Dividends
Dividends payable to the Group’s shareholders are charged to equity in the period in which they are declared. Proposed dividends are shown as a separate component of equity until declared.
68. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
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2 Summary of significant accounting policies (continued)
(q) Consolidation
(i) Subsidiaries
Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity when the group is exposed to, or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases.
The group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised in profit or loss.
Any contingent consideration to be transferred by the group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.
The excess of the consideration transferred the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If the total of consideration transferred, non-controlling interest recognised and eviously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the income statement.
Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. When necessary amounts reported by subsidiaries have been adjusted to conform with the group’s accounting policies.
(ii) Changes in ownership interests in subsidiaries without change of control
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 69. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
2 Summary of significant accounting policies (continued)
(q) Consolidation (continued)
(iii) Disposal of subsidiaries
When the group ceases to have control any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.
(iv) Associates
Associates are all entities over which the group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor’s share of the profit or loss of the investee after the date of acquisition. The group’s investment in associates includes goodwill identified on acquisition.
If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate. The group’s share of post-acquisition profit or loss is recognised in the income statement, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate. The group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount adjacent to ‘share of profit/(loss) of associates in the income statement Profits and losses resulting from upstream and downstream transactions between the group and its associate are recognised in the group’s financial statements only to the extent of unrelated investor’s interests in the associates. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the group.Dilution gains and losses arising in investments in associates are recognised in the income statement.
(r) Goodwill
Goodwill arises on the acquisition of subsidiaries, associates and joint ventures and represents the excess of the consideration transferred over the Company’s interest in net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree and the fair value of the non-controlling interest in the acquiree.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the CGUs, or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently reversed.
70. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
2 Summary of significant accounting policies (continued)
(s) Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision- maker (CODM). The CODM is the person or group that allocates resources to and assesses the performance of the operating segments of an entity. The group has determined the UAP Holdings Board of Directors to be its CODM.
All transactions between business segments are conducted on an arm’s length basis, with intra-segment revenue and costs being eliminated in head office. Income and expenses directly associated with each segment are included in determining business segment performance.
(t) Comparatives
Where necessary, comparatives figures have been restated to conform to changes in presentation in the current year.
3 Critical accounting estimates and judgments in applying accounting policies
The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
i Future benefit payments from long-term insurance contracts
The estimation of future benefit payments from long-term insurance contracts is one of the Group’s most critical accounting estimates. There are several sources of uncertainty that need to be considered in the estimate of the liability that the Group will ultimately pay for such claims. Note 33 contains further details on this process.
The determination of the liabilities under long-term insurance contracts is dependent on estimates made by the Group. Estimates are made as to the expected number of deaths for each of the years in which the Group is exposed to risk. The Group bases these estimates on standard mortality tables that reflect historical mortality experience. The estimated number of deaths determines the value of the benefit payments and the value of the valuation premiums. The main source of uncertainty is that epidemics such as AIDS could result in future mortality being significantly worse than in the past for the age groups in which the Group has significant exposure to mortality risk. However, continuing improvements in medical care and social conditions could result in improvements in longevity in excess of those allowed for in the estimates used to determine the liability for contracts where the Group is exposed to longevity risk. For contracts without fixed terms and with discretionary participation in profits, it is assumed that the Group will be able to increase mortality risk charges in future years in line with emerging mortality experience. Estimates are also made as to future investment income arising from the assets backing long-term insurance contracts. These estimates are based on current market returns as well as expectations about future economic and financial developments. The average estimated rate of investment return is 12.25% p.a.(2014:13.5% p.a.).
ii Claims reserving and determination of IBNR
The estimation of future contractual cash flows in relation to reported losses and losses incurred but not reported is a key accounting estimate. There are several sources of uncertainty that need to be considered in the estimate of the liability that the Group will ultimately pay for such claims. Case estimates are computed on the basis of the best information available at the time the records for the year are closed. Further details on the process used to estimate claims incurred but not reported and amounts recorded as liabilities at the end of the current and previous year are set out in note 33 of the financial statements.
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 71. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
3 Critical accounting estimates and judgments in applying accounting policies (continued)
iii Fair value of financial assets
Fair values of certain financial assets recognised in the financial statements are determined using valuation techniques based on assumptions that are not supported by prices from current market transactions or observable market data. The fair values of financial instruments that are not quoted in active markets are determined by using valuation techniques. Where valuation techniques (for example models) are used to determine fair values, they are validated and periodically independently reviewed by qualified senior personnel. All models are certified before they are used, and models are calibrated to ensure that outputs reflect actual data and comparative market prices. To the extent practical, models use observable data, however, areas such as credit risk (both own and counterparty), volatilities and correlations require management to make estimates.
iv Recoverable amount of receivables
Critical estimates are made by the directors in determining the recoverable amount of impaired receivables. This process is set out in note 2(j). The carrying amounts of receivables are shown on note 4(b).
v. Goodwill impairment
Critical estimates have been made by Directors in determining whether the goodwill is impaired. These assumptions are disclosed on note 18.
4 Risk Governance and Risk Management System
Risk management objectives
Risk management is a central part of the Group’s strategic management process hence we continuously seek to enhance the risk management capabilities of the Group. It is anticipated that our risk management practices will increase the probability of success, and reduce both the potential of failure and the uncertainty associated with achieving the group’s overall objectives. The objectives of the Group’s risk management activities are to achieve sustained competitive advantage via a rigorous, group wide risk management system that is fully aligned to the Group values, strategic business initiatives and processes. At a strategic level, our risk management objectives are to:
• Identify the Group’s significant risks in relation to the corporate strategies pursued; • Formulate the Group’s risk appetite and ensure that business profile and plans are consistent with it; • Optimise risk/return decisions by taking them as closely as possible to the business, while establishing strong and independent review and challenge structures; • Ensure that business growth plans are properly supported by effective risk infrastructure; • Manage risk profile to ensure that specific financial deliverables remain possible under a range of adverse business conditions; and • Help executives improve the control and co-ordination of risk taking across the business.
Our risk management strategy defines the extent of the risks we are prepared to incur for our clients and shareholders. The development of our risk strategy is embedded in the annual planning cycle and hence in our business strategy. That is, Integrating Strategy, Risk and Performance management takes place at strategy setting, first with a full Executive management consensus on clearly defined business objectives. Once Executive management have defined the objectives, they then identify the key risks that may present an opportunity to pursue those business objectives, or impede their ability to achieve them.
72. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
4 Risk Governance and Risk Management System (continued)
Organisational structure
To ensure that our risk management operates efficiently and effectively, we have established a specific risk management function within UAP Global Services as a Shared Service for the entire Group. Our Risk Management supervises risk management Group-wide with the support of decentralised structures in all units of the Group. It is headed by the Group Risk and Compliance Manager (GCRM), who is supported by interdisciplinary teams of highly qualified staff. The Group’s activities expose it to a variety of risks, including insurance risk and financial risk.
The Group’s overall risk management programme focuses on the identification and management of risks and seeks to minimise potential adverse effects on its financial performance, by use of underwriting guidelines and capacity limits, reinsurance planning, credit policy governing the acceptance of clients, and defined criteria for the approval of intermediaries and reinsurers. Investment policies are in place which help manage liquidity, and seek to maximise return within an acceptable level of interest rate risk. Management Framework ensure that staff in our risk management structure and the Group as a whole are kept informed of our risk strategy, organisation and processes, enabling the risks incurred to be actively controlled.
Risk Management Framework
In order to achieve its mission and objectives, the Group has developed an Enterprise Risk management framework to provide a guide within which key risks affecting the group are identified, measured and managed. This risk management framework also provides management with proven risk management guidelines that support their decision-making responsibilities and processes, together with managing the risks that impact on the objectives of the Group.
At the heart of the risk management framework is a governance process with clear responsibilities for taking, managing, monitoring and reporting risks. The Group articulates the roles and responsibilities for risk management throughout the organization, from the Board of Directors and the Group Chief Executive Officer (CEO) to its businesses and functional areas, thus embedding risk management in the business
The UAP Risk Management Framework is the Group’s main risk governance document; it specifies the Group’s Target Risk Management Operating Model including Risk management authorities and responsibilities, procedures and reporting requirements. The risk management framework also classifies the risks the Group faces into broad risk categories. The Group regularly enhances the ERM Framework to reflect new insights and changes in the Group’s environment.
One of the key elements of the Group’s risk management framework is to foster risk transparency by establishing risk reporting standards throughout the Group. The Group regularly reports on its risk profile, current risk issues, adherence to its risk policies and improvement actions both at a local and on a Group level. The Group has procedures in place for the timely referral of risk issues to senior management and the Board of Directors.
The implementation of the framework is driven by a risk management culture and awareness that permeates throughout the Group and is supported by a set of policies and procedures; tools and robust reporting mechanisms. The Group continues to consciously take risks for which it expects an adequate return. This approach requires sound judgment and an acceptance that certain risks can and will materialize in the future.
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 73. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
4 Risk Governance and Risk Management System (continued)
Significant risks
According to our classification, significant risks are risks that could have a long-term adverse effect on the Group’s assets, financial situation or profitability. We have applied this definition consistently to the individual business units and legal entities, taking account of their individual risk tolerance. The section below summarises the significant risks faced by the group and how they are managed.
(a) Insurance risk
The risk under any one insurance contract is the possibility that the insured event occurs and the uncertainty of the amount of the resulting claim. By the very nature of an insurance contract, this risk is random and therefore unpredictable. For a portfolio of insurance contracts where the theory of probability is applied to pricing and provisioning, the principal risk that the Group faces under its insurance contracts is that the actual claims and benefit payments exceed the carrying amount of the insurance liabilities. This could occur because the frequency or severity of claims and benefits are greater than estimated. Insurance events are random and the actual number and amount of claims and benefits will vary from year to year from the level established using statistical techniques. Experience shows that the larger the portfolio of similar insurance contracts, the smaller the relative variability about the expected outcome will be. In addition, a more diversified portfolio is less likely to be affected by a change in any subset of the portfolio. The group has developed its insurance underwriting strategy to diversify the type of insurance risks accepted and within each of these categories to achieve a sufficiently large population of risks to reduce the variability of the expected outcome. Factors that aggravate insurance risk include lack of risk diversification in terms of type and amount of risk, geographical location and type of industry covered.
The following tables disclose the concentration of insurance risk by the class of business in which the contract holder operates and by the maximum insured loss limit included in the terms of the policy. The amounts are the maximum insured loss limit of the insurance liabilities (gross and net of reinsurance) arising from insurance contracts.
Year ended 31 December 2015
Maximum insured loss Total (Amounts presented in Shs ‘000) Kshs 0-15m Kshs 15-250m Kshs 250-1000m Kshs’000
General insurance business
Motor Gross 1,919,728 6,060,049 28,950,593 36,930,370 Net 1,365,548 1,154,350 1,414,660 3,934,558 Fire Gross 2,555,146 12,937,311 438,922,406 454,414,863 Net 2,530,467 6,743,866 393,824,162 403,098,495 Accident Gross 1,002,771 13,184,201 121,260,056 135,447,028 Net 861,541 8,363,131 9,486,530 18,711,202 Other Gross 1,216,131 12,068,053 261,734,871 275,019,055 Net 813,673 2,032,127 148,438,162 151,283,962
Life assurance business Ordinary life Gross 7,035,591 207,421 324,466 7,567,478 Net 7,035,591 207,421 318,627 7,561,639 Group life Gross 122,100 8,769,286 603,208,545 612,099,931 Net 120,715 7,012,321 347,652,041 354,785,077 Total Gross 13,851,467 53,226,321 1,454,400,937 1,521,478,725 Net 12,727,535 25,513,216 901,134,182 939,374,933
74. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
4 Management of insurance and financial risk (Continued)
(a) Insurance risk (continued)
Year ended 31 December 2014 Class of business Maximum insured loss Total (Amounts presented in Shs ‘000) Kshs 0-15m Kshs 15-250m Kshs 250-1000m Kshs’000 General insurance business Motor Gross 4,408,647 9,706,147 29,801,063 43,915,857 Net 3,008,472 4,338,726 1,401,268 8,748,466 Fire Gross 1,953,844 22,035,557 465,136,394 489,125,795 Net 1,941,969 12,926,165 424,428,386 439,296,520 Accident Gross 3,416,087 18,279,058 136,641,696 158,336,841 Net 2,986,386 12,114,477 12,714,023 27,814,886 Other Gross 1,729,969 18,428,253 280,998,139 301,156,361 Net 1,546,671 5,266,738 159,691,031 166,504,440 Life assurance business Ordinary life Gross 5,480,030 76,472 - 5,556,502 Net 5,480,030 76,472 - 5,556,502 Group life Gross 156,624,959 289,952,470 1,573,376,035 2,019,953,464 Net 144,927,847 140,592,989 166,487,878 452,008,714 Total Gross 173,613,536 358,477,957 2,485,953,327 3,018,044,820 Net 159,891,375 175,315,567 764,722,586 1,099,929,528
The concentration by sector or maximum insured loss at the end of the year is broadly consistent with the prior year.
(b) Financial risk
The Group is exposed to financial risk through its financial assets, financial liabilities (investment contracts and borrowings), reinsurance assets and insurance liabilities. In particular the key financial risk is that the proceeds from its financial assets are not sufficient to fund the obligations arising from its insurance and investment contracts. The most important types of risk are credit risk, liquidity risk and market risk. Market risk includes currency risk, interest rate risk, equity price risk and other price risks.
These risks arise from open positions in interest rate, currency and equity prices, all of which are exposed to general and specific market movements. The risks that the Group primarily faces due to the nature of its investments and liabilities are liquidity rate risk and equity price risk.
The Group manages these risks through policies set out by the Finance and Investment Committee of the Board (FIC). These policies have been developed to achieve long-term investment returns in excess of the Group’s obligations under insurance and investment contracts. The principal technique is to match assets to the liabilities arising from insurance and investment contracts by reference to the type of benefits payable to contract holders. For each distinct category of liabilities, a separate portfolio of assets is maintained.
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 75. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
4 Management of insurance and financial risk (Continued)
(b) Financial risk (continued)
Market risk
i Foreign exchange risk The Group underwrites some short term insurance policies contracted in US dollars and maintains foreign currency denominated current accounts with local banks. Additionally, the group invests in offshore stock exchange markets and places deposits in local financial institutions denominated in foreign currencies. This exposes the group to onward foreign exchange risk arising from the various currency exposures, primarily with respect to the Uganda shillings, US dollar, Euro and Sterling Pound. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities.
At 31 December 2015, if the Shilling had weakened/strengthened by 10% against the US dollar with all other variables held constant, the post-tax profit for the year would have been Kshs 201 million (31 December 2014: Kshs 39 million) higher/lower, mainly as a result of US dollar earnings. At 31 December 2015, and 31 December 2014, the group had no significant exposure with respect to Uganda Shillings, Euro and the Sterling Pound.
ii Price risk The Group is exposed to equity securities price risk because of investments in quoted and unquoted shares classified either as fair value through profit or loss or other comprehensive income. The Group is not exposed to commodity price risk. To manage its price risk arising from investments in equity securities, the Group diversifies its portfolio. Diversification of the portfolio is done in accordance with policies set out by the Board. All quoted shares held by the Group are traded on the various Stock Exchanges across the region.
At 31 December 2015, if the NSE Index had increased/decreased by 10% with all other variables held constant and all the Group’s equity instruments moved according to the historical correlation to the index, equity would have been Kshs 40 million higher/ lower (31 December 2014: Kshs 597 million). Movement in the USE would not have had a material impact on the Group’s equity 31 December 2015 and 31 December 2014 as investments in the USE Index are not material. Investment in shares of Centum Investment Company Limited at 31 December 2015 comprised of 3% (31 December 2014: 32%) respectively of the Group’s total equity portfolio. There was no other concentration of price risk.
iii Interest rate risk
Fixed interest rate financial instruments expose the Company and Group to fair value interest rate risk. Variable interest rate financial instruments expose the company to cash flow interest rate risk. The Group’s fixed interest rate financial instruments are government securities, deposits with financial institutions and borrowings. The Company’s variable interest rate financial instruments are quoted corporate bonds, which are always the treasury bills rate plus some basis points. No limits are placed on the ratio of variable rate financial instruments to fixed rate financial instruments.
Investment contracts with fixed and guaranteed terms, government securities and deposits with financial institutions held to maturity are accounted for at amortised cost and their carrying amounts are not sensitive to changes in the level of interest rates. At 31 December 2015, if interest rates on quoted corporate bonds had been 2% higher/lower with all other variables held constant, post-tax profit for the year would have been Kshs 37 million (31 December 2014: Kshs 29 million) lower/higher, mainly as a result of higher/lower interest income on floating rate quoted corporate bonds.
76. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
4 Management of insurance and financial risk (Continued)
(b) Financial risk (continued)
Credit risk
The Group has exposure to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due. Key areas where the Group is exposed to credit risk are:
• Receivables arising out of direct insurance arrangements; • Receivables arising out of reinsurance arrangements; • Reinsurers’ share of insurance liabilities; • Corporate bonds; • Government securities; and • Mortgage loans receivable.
The Group has no significant concentrations of credit risk. The Group structures the levels of credit risk it accepts by placing limits on its exposure to a single counterparty, or groups of counterparty, and to geographical and industry segments. Such risks are subject to an annual or more frequent review. Limits on the level of credit risk by category and territory are approved quarterly by the Board of Directors.
Reinsurance is used to manage insurance risk. This does not, however, discharge the Group’s liability as primary insurer. If a reinsurer fails to pay a claim for any reason, the Group remains liable for the payment to the policyholder. The creditworthiness of reinsurers is considered on an annual basis by reviewing their financial strength prior to finalisation of any contract.
The exposure to individual counterparties is also managed by other mechanisms, such as the right of offset where counterparties are both debtors and creditors of the Group. Management information reported to the Group includes details of provisions for impairment on loans and receivables and subsequent write-offs. Finance and Investment committee of the Group Board makes regular reviews to assess the degree of compliance with the Group procedures on credit. Exposures to individual policyholders and groups of policyholders are collected within the ongoing monitoring by the management credit committee.
The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings if available or historical information about counterparty default rates. None of the group’s credit risk counter parties are rated except the Government of Kenya, the issuer of the Group’s government securities which has B+ rating. The Company classifies counterparties without an external credit rating as below:
Group 1 - new customers/related parties. Group 2 - existing customers/related parties with no defaults in the past. Group 3 - existing customers/related parties with some defaults in the past. All defaults were fully recovered.
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 77. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
4 Management of insurance and financial risk (Continued)
(b) Financial risk (continued)
Credit risk (Continued)
Maximum exposure to credit risk before collateral held - Group 31-Dec 31-Dec Credit rating/ 2015 2014 Classification Kshs ’000 Kshs ’000 Receivables arising out of reinsurance arrangements Group 2 970,510 706,371 Receivables arising out of direct insurance arrangements Group 2 2,364,365 2,486,192 Reinsurers’ share of insurance liabilities Group 2 2,977,367 2,509,829 Other receivables Group 2 746,174 1,550,187 Government securities B+ rating 7,541,079 5,875,753 Corporate bonds Group 2 1,855,820 1,588,613 Mortgage loans receivable Group 2 255,259 255,437 Deposits with financial institutions Group 2 3,845,043 3,173,707 Cash at bank Group 2 1,750,124 1,025,540 Total 22,305,741 19,171,629
Maximum exposure to credit risk before collateral held - Company
31-Dec 31-Dec Credit rating/ 2015 2014 Classification Kshs ’000 Kshs ’000 Cash at bank Group 2 10,805 16,862 Deposits with financial institutions Group 2 208,811 1,248,062 Amount due from subsidiaries Group 2 2,243,013 2,186,511 Other receivables Group 2 111,487 696,711 Total 2,574,116 4,148,146
No collateral is held for any of the above assets other than for staff mortgage loans and car loans included under other receivables. Properties in relation to staff mortgage loans and motor vehicles in relation to staff car loans are charged to the group as collateral. The fair value of this collateral was Kshs 487 million (2014: Kshs 226 million) and no collateral had been repossessed at as the end of the year. All receivables that are neither past due or impaired are within their approved credit limits, and no receivables have had their terms renegotiated. All receivables are classified in Group 2.
78. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
4 Management of insurance and financial risk (Continued)
(b) Financial risk (continued)
Credit risk (continued)
None of the above assets are either past due or impaired except for the following amounts in the Group’s receivables under direct insurance and reinsurance arrangements.
Credit rating / Receivables arising from Receivables arising classification direct insurance from re-insurance arrangements arrangements
31-Dec 31-Dec 31-Dec 31-Dec 2015 2014 2015 2014 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Past due but not impaired: - by up to 30 days Group 2 648,702 1,079,359 39,096 159,657 - by 31 to 60 days Group 2 501,160 306,514 93,125 8,496 - by 61 to 150 days Group 2 528,535 573,732 749,271 424,403 - by 151 to 360 days Group 2 685,968 526,587 89,018 113,815 Total past due but not impaired 2,364,365 2,486,192 970,510 706,371
Receivables individually determined to be impaired:
Carrying amount before provision for impairment 1,246,936 800,817 - - Provision for impairment loss (1,246,936) (800,817) - - Net carrying amount 2,364,365 2,486,192 970,510 706,371
No collateral is held in respect of the receivables that are past due but not impaired. Movements on the provision for impairment of receivables arising on direct insurance arrangements are as follows:
31-Dec 31-Dec 2015 2014 Kshs ’000 Kshs ’000 At 1 January 2015 820,011 800,817 Provision in the period 426,925 19,194 At end of year 1,246,936 820,011
All receivables past due by more than 365 days are considered to be impaired, and are carried at their estimated recoverable value.
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 79. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
4 Management of insurance and financial risk (Continued)
(b) Financial risk (continued)
Credit risk (Continued)
The individually impaired receivables mainly relate to receivables arising out of direct insurance arrangements, the following amounts have been individually assessed:
Individually assessed impaired receivables 31-Dec-15 31-Dec-14 Kshs’000 Kshs’000 Brokers 366,300 204,965 Agents 377,113 231,113 Insurance Companies 233,574 156,095 Direct Clients 269,949 227,838 As at year end 1,246,936 820,011
Liquidity risk
Liquidity risk is the risk that the Group is unable to meet its payment obligations associated with its financial liabilities as they fall due and to replace funds when they are withdrawn.
The Group is exposed to daily calls on available cash resources for claims settlement and other administration expenses. The Group does not maintain cash resources to meet all of these needs as experience shows that a minimum level of reinvestment of maturing funds can be predicted with a high level of certainty. The Finance and Investment Committee sets limits on the minimum level of cash balances.
The table below presents the cash flows payable by the Group under financial liabilities by remaining contractual maturities (other than insurance contract liabilities which are based on expected maturities) at the financial reporting date.
Up to 1 1-3 3-12 1-5 Over 5 month months months years years Total As at 1 January 2015 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Liabilities Insurance contract liabilities 1,665,591 431,858 1,242,636 2,323,931 2,482,861 8,146,877 Payable under deposit administration contracts 17,785 32,097 163,384 1,010,798 3,199,135 4,423,199 Unit-linked investment contracts 1,988 40,081 68,061 399,378 498,213 1,007,721 Creditors arising from reinsurance arrangements 843,103 90,037 172,649 1 - 1,105,790 Other payables 297,130 174,012 408,120 787,627 1,334 1,668,223 Borrowings - 2,846,485 180,507 4,089,299 361,009 7,477,300 Total financial liabilities as at 31 December 2015 2,825,597 3,614,570 2,235,357 8,611,034 6,542,552 23,829,110
80. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
4 Management of insurance and financial risk (continued)
(b) Financial risk (continued)
Up to 1 1 to 3 3 to 12 1 to 5 Over 5 month month month years years Total As at 31 December 2014 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Liabilities Insurance contract liabilities 2,034,163 1,274,855 1,602,524 2,486,621 322,272 7,720,435 Creditors arising from reinsurance arrangements 474,025 77,156 194,569 139,049 - 884,799 Payable under deposit administration contracts 3,542,067 820 9,331 79,165 1,638 3,633,021 Unit-linked investment contracts 1,001,699 - 4,268 34,861 - 1,040,828 Other payables 9,386 107,885 1,165,161 215,739 - 1,498,171 Borrowings 3,480 44,351 31,323 3,901,847 - 3,981,001 Total financial liabilities 7,064,820 1,505,067 3,007,176 6,857,282 323,910 18,758,255
Investment contracts and deposit administration contracts can be surrendered before maturity for a cash surrender value specified in the contractual terms and conditions. Prudent liquidity risk management includes maintaining sufficient cash balances to cover anticipated surrenders before the contractual maturity dates. In addition, the Group invests only a limited proportion of its assets in investments that are not actively traded. The Group’s listed securities are considered readily realisable, as they are actively traded on the Nairobi Securities Exchange and Uganda Stock Exchange.
The table below presents the cash flows payable by the Company under financial liabilities by remaining contractual maturities at the financial reporting date. Less than Greater than 1 year 1 year Kshs ’000 Kshs ’000 At 31 December 2015: Amounts due to subsidiaries (Note 44(iv)) 939,842 - Other payables 368,319 - Borrowings 2,846,485 2,057,053 4,154,646 2,057,053 At 31 December 2014: Amounts due to subsidiaries (Note 44(iv)) 1,991,496 - Other payables 218,985 - Borrowings 252,898 1,825,749 2,463,379 1,825,749
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 81. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
4 Management of insurance and financial risk (continued)
(c) Capital management
The Group’s objectives when managing capital, which is a broader concept than the ‘equity’ on the statement of financial position, are: • to comply with the capital requirements as set out in the regulations of the jurisdictions in which the Group entities operate in; • to comply with regulatory solvency requirements as set out in legislation in the jurisdictions in which the Group entities operate in; • to safeguard the Group’s ability to continue as a going concern, so that it can continue to provide returns to shareholders and benefits for other stake holders; and • to provide an adequate return to shareholders by pricing insurance and investment contracts commensurately with the level of risk.
The Group’s paid up capital comprises share capital as disclosed on note 13. The Group manages the minimum paid up capital and regulatory Capital (solvency) held in each subsidiary as capital. Capital adequacy and solvency margin are monitored regularly by the Board of Directors. The required information is filed with the respective authorities.
During the year, the Group held the minimum paid up share capital required. The Group entities also met the solvency margins required in the jurisdictions in which they operate, except for the Life Assurance (Kenya) and General Insurance (Rwanda and Tanzania) subsidiaries. Appropriate measures, including capital injection and business turn-around initiatives, have been instituted to resolve the solvency gaps in these entities.
The table below summarises the capital requirements of the Group’s entities in the various jurisdictions in which the Group operates and the amount of capital held. 31-Dec-15 Kenya Uganda General Life General Life Insurance Assurance Sudan Insurance Insurance Rwanda Tanzania Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Regulatory capital requirements 300,000 150,000 341,190 128,153 96,115 136,524 74,916 Amount of paid up capital 600,000 1,584,593 342,710 214,939 286,018 733,057 940,720 Required solvency margin 7,992,078 428,767 24,887 279,585 691,272 68,217 206,254 Solvency margin by Company (13,159,930) 841,756 1,300,657 310,759 803,010 35,701 311,408 Surplus/(deficit) over required margin 5,167,852 412,989 1,275,770 31,174 111,738 (32,516) 105,154
31-Dec-14 Kenya Uganda General Life General Life Insurance Assurance Sudan Insurance Insurance Rwanda Tanzania Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Regulatory capital requirements 300,000 150,000 341,190 70,006 100,000 - - Amount of paid up capital 600,000 644,093 342,710 241,950 199,780 393,567 328,569 Required solvency margin 8,046,000 400,000 389,000 293,000 424,000 64,000 171,000 Solvency margin by Company 12,322,000 287,000 1,184,000 387,000 503,000 (18,000) (316,000) Surplus/ (deficit) over required margin 4,276,000 (113,000) 795,000 94,000 79,000 (82,000) (487,000)
82. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
4 Management of insurance and financial risk (continued)
(d) Fair values of financial assets and liabilities
The fair value of government securities at 31 December 2015 is estimated at Kshs 5,664 million (2014: Shs 2,959 million) compared to the carrying value Kshs 7,541million (2014: Shs 5,875 million). The fair values of the Group’s other financial assets and liabilities approximate the respective carrying amounts, due to the generally short periods to contractual repricing or maturity dates as set out above. Fair values are based on discounted cash flows using a discount rate based upon the borrowing rate that the directors expect would be available to the Group at the financial reporting date.
(e) Fair values estimation
IFRS 7 and IFRS 13 require disclosure of fair value measurements by the following levels of hierarchy for financial instruments that are measured in the statement of financial position at fair value: • Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1). • Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2). • Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3). The following table presents the Group’s assets that are measured at fair value at the end of the year.
Year ended 31 December 2015 Level 1 Level 2 Level 3 Total balance Kshs ’000 Kshs ’001 Kshs ’000 Kshs ’000 Assets Equity investments 4,429,484 - 128,693 4,558,177 Government securities 320,523 - - 320,523 Corporate bonds 160,418 - - 160,418 Investment Properties - - 19,794,286 19,794,286 Total 4,910,425 - 19,922,979 24,833,404
Year ended 31 December 2014 Level 1 Level 2 Level 3 Total balance Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Assets Equity investments 5,998,957 - 89,671 6,088,628 Government securities 742,791 - - 742,791 Corporate bonds 132,983 - - 132,983 Investment Properties - - 15,122,307 15,122,307 Total 6,874,731 - 15,211,978 22,086,709
The fair value of financial instruments traded in active markets is based on quoted market prices at the end of each reporting period. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used for financial assets held by the company is the current bid price. These instruments are included in level 1. Instruments included in level 1 comprise of primarily equity investments quoted at Nairobi Securities Exchange and Uganda Stock Exchange.
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 83. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
4 Management of insurance and financial risk (continued)
(e) Fair values estimation (continued)
Financial instruments measured at fair value that are not traded in active markets relate to Group’s investment in the holding company for an investment property and investments in equities that aren’t traded in active markets. Fair value estimate is based on the Group’s share of the net asset of the investee company and on use of rental income and a capitalization rate of 8%. As the investment property of the investee company is measured at their fair value, the net asset value of the investee company approximates its fair value. This estimate is classified as level 3. There were no transfers into or out of level 3 during the year (2014: Nil).
5 (a) Segmental information
Management has determined the operating segments based on the reports reviewed by the Group’s Board of Directors) that are used to make strategic decisions.
The Group reviews its operating segments (business units) by type of business and by geography. Based on this, the group’s operating segments comprise of General Insurance, Life Assurance, Property, Investment management and related Financial Services. The group currently has operations in six countries namely Kenya, Uganda, South Sudan, Rwanda, Tanzania and Democratic Republic of Congo (DRC).
The reportable operating segments derive their revenue primarily from the underwriting of classes and non-life risks as defined by the Insurance Act and investment property.
Other services offered by the Group that are included within the Kenya and Uganda segments include stock brokerage, investment management and related financial advisory services. The results of these operations are included in the all other segments column as they are not material to the Group.
The Group Board of Directors assesses the performance of the reporting segments based on a measure of revenue and profitability.
The segment information provided to the Group Board of Directors for the reportable segments for the year ended 31 December 2015 is as follows:
84. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015 otal otal 3,501 3,501 0,029 0,029 3,156 3,156 T 51,115 51,115 53,749 53,749 3 6 03,443 45,484 2 68,215) 56,627 96,599 96,599 1 ,131,313 ,131,313 ( 2 6 577,929) 141,836) ,077,504 ,077,504 ,425,596 ,425,596 69 ,884,593 9 shs ’000 8 8 ( 1 ( 6,510,928 3 1 8,724,654 8,724,654 2,069,426 2,069,426 7,795,261 7,795,261 5,332,794 5,332,794 1 6,868,231 7,043,143) 7,986,649) ( 1 1 1 1 4 K ( 1
- - - - 5,179 5,179 7,076 7,076 0,579 0,579 2,596 5,758) 1 2 57,667 57,667 42,523 05,740 05,740 7 4 ( 57,032) 52,297) 88,396) 1 1 ( 2 ll other ll ( ( 319,454) ,950,859 ,950,859 123,367) 246,202) shs ’000 ( ( 181,381) ,691,478 ,691,478 ( ,720,728 ,720,728 251,960) 251,960) 409,627) A 1 egments egments ( ( ( ( 3 1 K s
- 9 8 7,897 7,897 2,416 2,416 6,319 6,319 8,992 8,992 0,695 0,695 5,994 5,994 4,043 7,089 7,089 1,956 1,956 4,986 4,986 8,358) 4,205) 77,743 77,743 1 3 9 1 3 2 ( 6 ( eneral 73,199 73,199 2 13,030) 5 23,342) 9 6 6 ,138,194 ,138,194 ( ( ,420,195 ,420,195 ,330,247 ,330,247 486,671) 7 surance surance 588,529) G shs ’000 1 ,096,971 ,096,971 ( 1 ( 1 2 Tanzania K In
- - - - 80 735 735 8 ,826 ,826 2, 2,902 2,902 3 4,365 8,387 4,493) 04,477 39,481 39,481 2 ( 2 78,590 2 50,845 27,197 27,197 12,076) 14,800 ( 5 5 6 4 327,767) 8 219,584) 379,725) surance surance General 2 ( shs ’000 Rwanda ( ( 219,584) 219,584) 219,584) 216,849) ( ( ( ( K In
------449) ( 6,140 6,140 8 93,247 93,247 55,121) 55,121) 78,261) ( 35,542) ( 1 ( 118,133) ( roperty roperty 227,463) 132,505) ( shs ’000 ,191,251 ,191,251 ( ( ,371,379 ,371,379 286,180) 361,294) 168,047) 168,047) P ( ( ( ( 4 1 K
- - - 83 83 ife 99) 1 ( ,187 ,187 ,418 ,418 L 7 8 1,363 1,363 5,442 5,442 3,138) 5,717) 97,075 97,075 97,075 97,075 1 ( ( 75,452 75,452 66,499 7 53,233) 60,029) 05,067 52,425 4 4 4 5 ( ( 349,530) 326,994) 1 9 shs ’000 113,262) 113,262) 113,262) 118,979) ( ( ssurance ssurance ( ( ( ( K A
- - - - Uganda ,032 ,032 ,060 3,010 3,010 8 8,632 8,632 2,287 2,287 4,177 4,177 0,919 0,919 0,919 0,919 6,656) 2 47,439 47,439 13,738 13,738 7 3 2 ( 9 6 6 33,258) 58,859) 1 3 542,651 542,651 ,107,807 ,107,807 ( ( 952,132) ,853,815 ,853,815 ,388,002 surance surance General ( shs ’000 ,126,456 ,126,456 ,467,659 ,467,659 3 1 2 2, 1 4 (1,335,037) K In
------91,022 91,022 79,052 79,052 55,309 55,309 70,074 70,074 70,074 70,074 (CONTINUED) 2 6 ,291,123 ,291,123 1 ,291,123 ,291,123 127,380) 193,669) 9 9 ,040,505 shs ’000 ( 1 ,163,743 ,163,743 ( ,125,383 ,125,383 1 ,755,352 ,755,352 ,352,518 ,352,518 Property Property 1
1 1 1 4 K
------ife ife 230 230 L ,376 ,376 9,101 9,101 9,515 9,515 3,870 9 2,670 2,670 3,337 3,337 2,723 2,723 2, 3,337 3,337 3,337 3,337 3,337 3,337 2,852 1 5 9 1 1 5 19,309 19,309 09,005 36,178 36,178 07,830 07,830 1 1 1 20,226) 7 60,307) 1 1 ( ( 1 2 shs ’000 K South Sudan South
------,726 ,726 9,473 9,473 6,537 6,537 6 81,139 81,139 77,078 77,078 1 27,253 27,253 2 77,078 77,078 77,078 77,078 77,078 77,078 19,398) 1 04,331 04,331 3 4 ( ,372,786 ,515,725 ,515,725 ,158,384 ,158,384 3 3 3 495,423) surance surance ,286,449 General 8 480,887) shs ’000 ,557,747 ,557,747 ( 1 1 ( 1 ,253,869 1 1 2 K In
------ife L 0,088 73,183 73,183 55,439 55,439 1 08,322 44,398 11,509) 8 1 ( 1 6 ,313,660 ,313,660 312,243) ,244,512 ,244,512 690,122) ,206,148 ,206,148 268,048) shs ’000 ssurance ssurance ( ( ,823,482 ,823,482 1 ,248,166 ,248,166 ( 1 1 423,487) 268,048) 268,048) 268,048) 1,035,516) ( ( ( ( 9 1 ( K A
- - - Kenya 6,371 6,371 7,670) 2,386) 31,106 31,106 42,144 42,144 ( 42,983 42,983 2 42,454 42,454 ( 27,955) 31,106 31,106 31,106 31,106 4 44,986 ( 4 6 ,754,915 ,754,915 4 28,517) ,821,738 ,821,738 ,227,334 ,227,334 ,285,018 ,285,018 113,880) 4 4 459,623) surance surance General ( shs ’000 5 ( 7 ( ,786,189 ,786,189
7 6 8 5,859,974 5,859,974 2,881,956) 7 4,289,962) In ( 1 K (
Segmental information (continued) information Segmental
(a)
Income tax expense Profit (loss)or after tax for theyear equityTotal
NOTES TO THE FINANCIAL STATEMENTS STATEMENTS FINANCIAL THE TO NOTES ended DecemberYear 31 2015 operating other and Commissions expenses attributable Profit shareholders to of the parent Additions: property Investment assets Intangible assetsTotal Commissions and other income Profit before tax Profitattributable to Non-controlling interests Property equipment and
Gross earned premium Net earned premium Interest income Total income Claims and policy owners’ benefits payable Finance costFinance Profit (loss)or after tax for theyear Total comprehensiveTotal income Gross written premium (external) Other investment income Other comprehensive income Depreciation Amortisation 5
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 85. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED otal T 9,066 81,211 81,211 12,763 12,763 20,698 2 117,124) 4 8 ,029,714 ,029,714 ,128,625 ,128,625 ,485,976 ,485,976 ,574,058 ,574,058 132,943) 293,310) ,350,067 ,350,067 shs ’000 shs 629,042) ,795,812 ,795,812 ,667,187 ,667,187 ,667,187 1 1 8,074,794) 1,263,533 1,263,533 3 4,158,444 4,158,444 4,832,735 4,832,735 6,688,003 6,688,003 2,083,725 2,083,725 K 7,198,048 7,198,048 2,296,229 1 2 5,773,603) 1 1 1 1 ( ( 1 1 4 ( 1 ( 1 ( ( 1
- - - - nd a ,027) 1,761 1,761 5,424 5,028 5,028 6,326 6,326 3 90,199 01,580 01,580 2 9 00,353 00,353 98,394 52,136) 21,751 21,751 37,323) 58,301) 48,016) 43,789) 49,940) ll other ll ( ( 6 7 ( ( 3 ( 4 3 shs ’000 shs ( 104,368) 29 ,041,186 ,041,186 A ,193,720 ,193,720 ( 5 354,627 ( K 3 3 29 intragroup eliminations
- - 686 7,357 7,357 1,574 1,574 7,704 7,704 2,416 2,416 5,035 5,035 1,482 1,482 0,695 0,695 2, 1,617 1,617 8,931 8,931 8,931 8,931 5,451 5,451 1,200) 9,604) 6,838) 1 1 1 1 11,227 11,227 3 48,418 48,418 1 9 74,935 74,935 eneral ( ( ( 3 2 2 9 6 7 ,201,910 ,201,910 480,118) G ,039,288 ,039,288 shs ’000 shs 265,948) ( ,376,744 ,376,744 1 ( 1 Tanzania K segments 1
- - - - - 90) ( ,826 ,826 5,370 5,370 2,902 2,902 6,738 6,738 3 9,351) 2,160 2,160 3,740) 61,154 61,154 ( 1 13,370 13,370 2 58,831 58,831 2 ( 55,478 55,478 9 93,379 93,379 2 2 3 2 177,563) 182,130) Rwanda General 237,820) shs ’000 shs 4 ( ( (177,563) ( 177,653) 177,563) 177,563) ( ( ( K Insurance
------0) 238 238 4,155 4,155 2, 6,550) 7 67,766 67,766 29,027 29,027 65,528 65,528 76,460 75,410 75,410 50,615 50,615 50,615 50,615 75,205) 1 541,415 541,415 8 2 8 ( roperty 229,721) shs ’000 shs 2 ( 8 3 3 ,403,116 ,403,116 190,800) ,657,559 ,657,559 ( ( 9 ( P 4 K 1 Insurance
- 83 83 ife 56) 1 ( L ,325 ,369 796) ( 7,242 7,242 1,363 1,363 1 3 6,909 1,808 2,239) 31,414 31,414 31,414 3 1 14,786 14,786 1 56,722 ( 37,213) 33,001) 41,899) 9 3 3 ( 98,084 3 ( ( 71,010) (28,315) 70,214) 70,214) 3 shs ’000 shs 234,219) 148,523) ( ( ( 5 ( ( K
- - - - ,032 ,032 9,317 9,317 8,471 8,471 8 8,456 5,489) 11,252 11,252 6 8 43,330 43,330 7 ( Uganda 65,226) 66,927 40,425) 66,927 26,502 139,184 139,184 2 438,419 438,419 232,153 232,153 1 ( ( ,710,070 ,710,070 ,133,969 ,133,969 General 853,976) shs ’000 shs ,157,741 ,157,741 1 1 1 ,705,065 ,705,065 ( 2, ssurance 1 2, 2 1 K 1,042,351) 3 ( A
------28 28 2 6,516 6,516 4,054 26,126 26,126 2 02,551 02,551 08,871 5 09,099 80,180 80,180 80,180 80,180 46,331) 29,969 29,969 82,588) 1 06,696 5 ( 226,511 226,511 3 (CONTINUED) roperty ( 3 shs ’000 shs 1 1 6 2 ,750,017 ,750,017 P K Insurance 1
------ife ife 230 230 L 571) ,095 ( 0,182 0,182 2,194 2,194 5 2, 6,280 3,569 7,257) 3,326 6,256 4,225) 1 8 ( 1 3 ( 45,184) 18,872) 6 ( ( (18,872) 19,443) 18,872) 18,872) shs ’000 shs ( ( ( 26 K
- - - - - 096 South Sudan South 7,221 7,221 9,473 9,473 9,094 2, 8,914) 77,174 77,174 5 1 78,916 78,916 ( 58,774 58,774 5 1 78,916 78,916 78,916 78,916 38,010 38,010 25,993) 09,540) 25,894 2 9 278,916 278,916 ( ,183,301 ,183,301 ,134,900 ,134,900 371,902) General ,195,265 ,195,265 shs ’000 shs 2 2 3 8 ( ,937,048 ,937,048 1 1 1 ( 5 K Insurance 1
------ife L ,314 ,314 5 3,841 3,841 9,524) 09,749 09,749 ( 2 88,592 88,592 33,066 75,714 75,714 5 1 5 ,656,142 ,656,142 ,705,679 ,705,679 5 shs ’000 shs ,342,882 ,574,289 ,574,289 222,627) 648,033) ssurance (227,941) ,573,351 ,573,351 ( 1 ( 1 222,627) 222,627) 222,627) 1 2 K 2,144,673) ( ( ( 8 A (
- - Kenya 80 8 9,199 9,199 2,122) 3,535) 1 ( 87,254 87,254 25,978 25,978 12,246 12,246 eneral ( 54,568 33,340) 54,568 54,568 4 3 7 ,131,992 ,131,992 8 ( surance G ,532,999 ,532,999 shs ’000 shs ,063,039 ,063,039 249,503) ,588,517 ,588,517 ,600,587 8 8 1 ( ,814,706 ,814,706 7 ,986,560 1,104,071 1,104,071 7 7 6 K 4,100,385) In 2,345,064) 5,939,479 5,939,479 8 1 ( ( 1
Segmental information (continued) information Segmental
(a)
operating other and Commissions expenses Profit before tax Income tax expense attributable Profit shareholders to of the parent property Investment assets Intangible Property equipment and Other comprehensive income Total income Profit (loss)or after tax for theyear Profitattributable to Non-controlling interests Total assetsTotal Profit (loss)or after tax for theyear comprehensiveTotal income Commissions and other income Claims and policy owners’ benefits payable costFinance Depreciation Additions: Total equityTotal Other investment income Gross written premium (external) Interest income Gross earned premium Net earned premium Amortisation 5 ended December Year 31 2014 NOTES TO THE FINANCIAL STATEMENTS STATEMENTS FINANCIAL THE TO NOTES
86. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015 otal T 0,199 0,499 3 ,715,460 ,117,275 669,389 79 shs ’000 shs ,594,144 ,983,331 ,603,772 6,688,003 1,263,533 4,158,444 2,175,113 4,832,735 2 9 K 1 1, 4 1 1 1 12 1 1
- - - - 5,035 1,482 3 48,418 9 74,935 48,418 6 ,201,910 ,201,910 ,039,288 ,039,288 7 anzania 6 shs ’000 shs 1 1 1 1 T K
- - - ,759 1 4,979 5,370 61,154 61,154 1 13,370 2 58,831 58,831 13,370 55,478 wanda 2 2 2 3 3 2 2 shs ’000 shs R K
31 DEC 2014 31
- 0,182 2,194 3,501 4,225 udan 1 - 8 58,774 7 93,464 S 70,968 9 4 ,130,675 ,183,301 ,134,900 ,263,483 9 shs ’000 shs ,537,933 1 1 1 1 1 K
,751 6 31,414 31,414 14,313 43,773 3 3 3 139,184 438,419 1 769,833 470,598 ,361,674 ,710,543 ,186,294 Uganda shs ’000 shs 2, ,024,856 1 2, 1 2, 3 2, K 2
enya 1,689 53,211 2 K 4 ,656,142 ,705,679 ,532,999 ,063,039 ,238,678 ,256,729 ,600,587 shs ’000 shs 2,877,162 1 ,405,921 1 7 7 9 1,342,882 9 6 0,757,983 K 7 1
otal T (CONTINUED) 06,244 401,305 1 shs ’000 shs ,310,189 ,668,121 ,812,228 ,025,068 ,868,231 6,510,928 6,510,928 ,860,896 3 K 5,007,335 1 1, 1 5,332,794 2,069,426 3,520,566 1
10 1 1 1 1 16
1
4,132 4,132 6,319 6,319 77,743 77,743 9 ,420,195 ,420,195 9 ,330,247 ,330,247 - anzania shs ’000 shs ,138,194 ,138,194 T 6 9 1 1 K 1 1 1
,678 ,678 5,245 5,245 2,709 2,709 39,481 39,481 39,481 39,481 78,590 78,590 50,845 wanda 04,477 50,845 5 6 4 5 shs ’000 shs R 5 2 2 5 6 4 K
2,670 2,670 9,260 9,260 udan 5 19,309 19,309 09,005 S 1 1 ,515,725 ,507,465 ,507,465 ,158,384 ,158,384 ,635,034 ,635,034 ,395,454 ,395,454 - ,286,449 shs ’000 shs ,757,779 ,757,779 ,211,054 ,211,054 3 K 1 1 1 1 1 1 31 DEC 2015 31 1 2
0,899 97,075 97,075 97,075 28,919 28,919 75,452 75,452 36,051 36,051 4 4 4 542,651 542,651 ,107,807 ,107,807 ,853,815 ,853,815 ,039,726 ,039,726 Uganda ,604,882 shs ’000 shs ,915,136 ,915,136 3 ,329,267 ,329,267 1 2, K 2 2 3 3 3 2 2
enya 9,667 73,183 73,183 7 30,729 30,729 K 8 5 ,821,738 ,821,738 ,027,886 ,027,886 ,227,334 ,227,334 ,285,018 ,285,018 ,244,512 ,244,512 ,206,148 ,206,148 ,529,530 ,529,530 ,484,428 ,195,342 ,195,342 shs ’000 shs ,100,517 ,100,517 7 1 1 6 8 9 1 9 9 7 K
insurance Segmental information (continued) information Segmental
term - (a) ross written premium
Net earned premium
Gross earned premium Net earned premium Gross earned premium NOTES TO THE FINANCIAL STATEMENTS STATEMENTS FINANCIAL THE TO NOTES business term - Long Gross written premium Gross written premium Investment income Other income Commission earned Total incomeTotal G Short Gross earned premium Net earned premium 5 Premiums by source country source by Premiums
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 87. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED otal T 12,987 36,361 1 4 shs ’000 5,122,307 7,198,048 2,083,725 K 1 1 4
- ,974 ther 5 0,281 O 3 shs ’000 3,667,161) K ( 8,220,480) (
- ,744 9 2,472 5,451 5 9 anzania ,376,744 shs ’000 T 1 K
- ,268 6,061 6 2,160 4 9 93,379 wanda 4 shs ’000 R K 31 DEC 2014 31
- 2,963 udan 5 S 337,423 ,519,189 shs ’000 ,953,321 2, 1 3 K
64 1 7,457 3 ganda ,816,942 U shs ’000 ,722,357 ,900,820 4 8 K 2
enya 6,530 41,434 K 6 2 ,967,942 shs ’000 7 6,257,589 5,758,404 K 1 3
otal 1,722 1,722 T 8 03,343 03,343 4 shs ’000 9,794,286 9,794,286 7,795,261 7,795,261 8,724,654 K (CONTINUED) 1 1 4
- ,692 ,692 ther 9,720 9,720 5 8,904 O 1 2 90,955) ( shs ’000 K
- ,474 ,474 6 0,839 0,839 5 73,199 73,199 7 anzania shs ’000 ,096,971 T 2 K
- ,965 ,965 1 6,671 6,671 31 DEC 2015 31 27,197 27,197 3 14,800 wanda 8 2 shs ’000 R K
- ,925 ,925 9 udan S ,062,394 ,814,217 ,814,217 shs ’000 ,449,277 5 6 3 K
52 52 6 4,090 6 ganda ,774,521 ,774,521 shs ’000 shs ,670,139 ,670,139 U ,612,351 ,612,351 4 K 9 2
2,911 2,911 enya 5 36,126 36,126 K 2 ,957,371 ,957,371 shs ’000 ,287,226 ,287,226 9 K 0,836,589 29 1
Segmental information (continued) information Segmental
(a)
Total equityTotal NOTES TO THE FINANCIAL STATEMENTS STATEMENTS FINANCIAL THE TO NOTES assetsTotal Investment property Intangible assets Property and equipment 5 Asset allocation by country by allocation Asset
88. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
5(b) (i) Gross earned premium
The premium income of the Group can be analysed between the main classes of business as shown below:-
Gross Written Premium Gross Earned Premium 2015 2014 2015 2014 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Short term insurance business Engineering 1,350,685 793,243 1,005,905 569,681 Fire 1,621,001 1,407,321 1,499,094 1,554,979 Liability 307,130 296,944 299,616 295,855 Marine 302,272 247,183 273,067 255,828 Motor 3,804,755 3,569,014 3,646,658 3,483,676 Workmen’s Compensation 330,371 407,971 342,732 379,967 Personal Accident and medical 398,902 408,268 389,002 339,672 Theft 627,486 626,785 612,130 580,687 Medical 5,898,169 4,513,218 5,126,897 4,253,805 Others 366,564 445,513 325,465 460,963 Total 15,007,335 12,715,460 13,520,566 12,175,113
Long term business Ordinary life 702,637 1,169,172 702,637 1,169,172 Group life 1,158,259 948,103 1,109,591 814,159 Total 1,860,896 2,117,275 1,812,228 1,983,331
Total 16,868,231 14,832,735 15,332,794 14,158,444
Gross written premium represents the total premiums receivable by the Group before adjusting for the unearned proportion of the premiums. It is reported in the income statement for information purposes only. Revenue comprises gross earned premiums. All revenue is earned from external customers.
5(b) (ii) Reinsurance ceded and Amounts recoverable from reinsurers
Reinsurance ceded Amounts recoverable from reinsurers 2015 2014 2015 2014 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Short term insurance business Engineering 859,548 403,144 40,211 81,518 Fire 954,188 1,021,625 273,491 339,431 Liability 150,602 172,155 137,991 82,070 Marine 117,545 104,446 (22,904) 90,295 Motor 140,132 140,876 291,604 158,916 Workmen’s Compensation 13,672 19,658 (5,489) (14,825) Personal Accident 80,138 76,767 13,347 21,425 Theft 268,242 264,577 48,778 (2,775) Medical 54,589 42,339 86,232 38,678 Others 213,789 335,857 87,042 49,815 Total 2,852,445 2,581,444 950,303 844,548
Long term business 410,923 313,467 263,291 151,813 Total 3,263,368 2,894,911 1,213,594 996,361
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 89. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
5(b) (iii) Commissions earned and Commissions Payable
Commissions earned Commissions Payable 2015 2014 2015 2014 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Short-term business 892,016 697,584 1,780,256 1,416,502 Long-term business 131,181 91,033 273,568 232,097 Brokerage/Investment management 1,871 1,882 - - Total 1,025,068 790,499 2,053,824 1,648,599
6 Investment income 2015 2014 Kshs ’000 Kshs ’000 Interest from government securities 993,887 690,049 Bank deposit interest 393,260 282,077 Loan interest receivable 38,449 57,588 Rental income from investment properties 530,506 422,007 Miscellaneous income 185,232 49,786 (Loss)/ Gain in foreign exchange (184,035) 81,025 Profit/(loss) on sale of equities (56,988) (11,592) Fair value gains on investment properties (note 21 (a)) 1,594,432 2,493,175 Fair value gains on equity assets at fair value through profit or loss (note 24(b)) (329,147) 368,005 Dividends receivable from equity investments 191,041 134,418 Profit on sale of property and equipment 957 1,347 Fair value (losses)/ gains on government securities assets at fair value through profit or loss (47,405) 35,887 Total 3,310,189 4,603,772
7 Other income 2015 2014 Kshs ’000 Kshs ’000 Fee income 102,006 26,656 Others 4,238 3,543 Total 106,244 30,199
Fee income relates to administration fees arising from services rendered in relation to the issue and management of deposit administration and other investment contracts. There are no individually significant items included in other category.
8 Claims and policyholder benefits payable
i) Short term insurance business 2015 2014 Kshs ’000 Kshs ’000 Engineering 100,023 98,461 Fire 374,299 419,961 Liability 163,330 153,066 Marine (1,818) 126,666 Motor 2,691,203 2,241,260 Workmen’s compensation 124,028 204,651 Personal accident 59,081 116,608 Theft 103,550 116,218 Medical 3,837,857 2,933,862 Others 102,663 208,139 Total 7,554,216 6,618,892
90. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
8 Claims and policyholder benefits payable (continued) ii) Long term insurance business 2015 2014 Kshs ’000 Kshs ’000 Death, maturity and benefits payable 634,087 516,515 Increase in policy owners’ liabilities 902,152 1,736,854 Interest payable on deposit administration and unit linked investments contracts 109,788 198,894 Total 1,646,027 2,452,263
Total 9,200,243 9,071,155
9 Operating and other expenses 2015 2014 Kshs ’000 Kshs ’000 Staff costs (Note 10) 2,020,485 1,932,000 Depreciation (Note 19) 141,836 132,943 Amortisation of intangible assets (Note 20) 68,215 117,124 Impairment charge on receivables arising out of insurance arrangements (Note 4(b)) 426,925 19,194 Travel costs 124,705 145,000 Office running costs 546,017 677,806 Directors expenses 110,472 108,000 Consultancy fees and expenses 361,294 254,000 Recurrent property costs 50,706 95,000 Repairs & maintenance costs 41,177 28,000 Publicity & marketing expenses 545,502 471,000 Subscriptions costs 36,830 22,000 Software costs 369,339 142,000 Licenses costs 11,902 9,000 Premium tax costs 170,002 157,000 Other insurance expenses 143,390 25,000 Bank charges and other expenses 30,573 40,004 Total 5,199,370 4,375,071
There are no individually significant items included in other category.
10 Staff costs 2015 2014 Kshs ’000 Kshs ’000
Salaries and wages 1,676,779 1,333,137 Social security benefits costs 48,228 36,461 Retirement benefit costs: Defined benefits scheme (Note 23) 26,570 63,875 Defined contribution scheme 82,032 64,068 Other staff costs 186,876 434,459 Total 2,020,485 1,932,000
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 91. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
11 Income tax expense 2015 2014 Kshs ’000 Kshs ’000
Current income tax 363,191 251,693 Deferred tax (Note 22) (566,634) 377,349 Total (203,443) 629,042
The tax on the Group’s profit before income tax differs from the theoretical amount that would arise using the statutory income tax rate as follows:
2015 2014 Kshs ’000 Kshs ’000 Profit before tax 693,156 2,296,229 Tax calculated at a tax rate of 30% (2014: 30%); 207,947 926,744 Less: tax effect of income not subject to tax (885,670) (588,257) Add: tax effect of expenses not deductible for tax purposes 593,761 290,555 Prior year over-provision of deferred tax (119,481) Total (203,443) 629,042
Movement in the tax (payable) / recoverable account is as follows:
2015 2014 Kshs ’000 Kshs ’000 At 1 January 2015 71,414 (48,163) Taxation charge (363,191) (251,693) Taxation paid 210,280 371,270 At end of the year (81,497) 71,414
Disclosed as follows; 31-Dec 31-Dec 2015 2014 Kshs ’000 Kshs ’000 Current income tax recoverable 27,900 113,477 Current income tax payable (109,397) (42,063) Total (81,497) 71,414
12 Earnings per share
Basic earnings per share are calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the year. 2015 2014 Kshs’000 Kshs’000 Profit attributable to equity holders of the company 645,484 1,485,976 Number of shares in issue 211,420 211,420 Basic earnings per share 3.05 7.03 Diluted earnings per share 3.05 7.03
There were no potentially dilutive shares outstanding at 31 December 2015 or 31 December 2014. Diluted earnings per share are therefore the same as basic earnings per share. There was no change in number of shares during the year ended 31 December 2015.
92. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
13 Share capital
The total authorised number of ordinary shares is 220 million (2014: 220 million) with a par value of Kshs 5 per share. At 31 December 2015, 211 million ordinary shares were in issue and were fully paid.
Number of shares Ordinary shares Share premium Kshs ’000 Kshs ’000 Kshs ’000 Balance at 1 January 2014, 1 January 2015 and 31 December 2015 211,420 1,057,099 4,612,626
The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets.
14 Fair value reserve for equity investments
The fair value reserves relate to unrealised gains or losses on the Group’s equity investments that are carried at fair value through other comprehensive income. This reserve is not distributable.
15 Retained earnings
The retained earnings balance represents the amount available for dividend distribution to the shareholders of the Company, except for cumulative fair value gains on the investment properties of Kshs 8,297 million (31 December 2014 :Kshs 6,703 million) whose distribution is subject to restrictions imposed by regulation.
16 Dividends
During the year, no interim dividend (2014: Nil) was paid to shareholders in the Company register. The Directors recommend the payment no dividend (2014: Kshs 1.70 per share amounting to Kshs 359 million). Payment of dividends is subject to withholding tax at a rate of either 0%, 5% or 10% depending on the residence of the respective shareholders.
17 i) Translation reserve
The translation reserve compiles all foreign currency differences arising from the translation of the financial statements of foreign operations.
ii) Statutory reserve
The statutory reserve represents amounts set up in the Group’s Ugandan subsidiary in accordance with the Ugandan Insurance Act, which requires the following amounts to be appropriated from earnings:
• a contingency reserve calculated at the higher of 2% of gross premium and 15% of net profits of UAP Insurance Uganda Limited. • a capital reserve, calculated at 5% of net profits of UAP Insurance Uganda Limited.
The reserve is available for distribution to the extent that the minimum amounts required by the Uganda Insurance Act are maintained.
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 93. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
18 Goodwill
The goodwill arose from acquisition of UAP Century Tanzania in 2013 (Kshs 174,363,000) and UAP Insurance Uganda Limited in 2004 (Kshs 65,667,000) and is therefore all allocated to the Tanzania and Uganda Cash Generating Units (CGUs) for the purposes of impairment assessment.
31-Dec 31-Dec 2015 2014 Kshs ’000 Kshs ’000
At start of year: 240,030 240,030 Additions - - Total 240,030 240,030
The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a 5 year period. The growth rates do not exceed the long-term average growth rates for the respective businesses in which CGUs operate.
The key assumptions used for the value in use calculations are:
31 December 2015 31 December 2014
Growth rate % 23 22 Discount rate % 13 13
Management determined budgeted profit from operating activities based on past performance and its expectations for the market developments. The weighted average growth rates used are consistent with the forecasts included in industry reports. The discount rates used are pre-tax and reflect specific risks relating to the Tanzania and Uganda segment.
94. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
19 Property and equipment
(a) Group
Office Computer Motor Capital Telephone Total furniture equipment Vehicles work-in equipment and progress equipment Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Year ended 31 December 2015: Cost At 1 January 2015 435,725 400,054 104,576 60,212 77,196 1,077,763 Additions 50,812 80,448 7,777 3,115 11,597 153,749 Disposals ( 1,021) - (13,157) - - (14,178) Translation difference (37,187) (18,845) (39,799) (7,645) (2,195) (105,671) At 31 December 2015 448,329 461,657 59,397 55,682 86,598 1,111,663
Depreciation At 1 January 2015 248,095 295,427 54,078 - 43,802 641,402 Charge for the year 40,909 67,033 21,987 - 11,907 141,836 Accumulated depreciation on disposals 389 (169) (6,792) - - (6,572) Translation difference (27,465) (17,597) (20,711) - (2,573) (68,346) At 31 December 2015 261,928 344,694 48,562 - 53,136 708,320
Net book amount At 31 December 2015 186,401 116,963 10,835 55,682 33,462 403,343
Year ended 31 December 2014 Cost At 1 January 2014 364,390 333,306 102,223 13,698 70,413 884,030 Additions 66,595 66,569 13,935 58,939 6,725 212,763 Capitalised 9,566 1,564 - (11,130) - - Disposals ( 5,864) (63) (13,450) - - (19,377) Translation difference 1,038 (1,322) 1,868 (1,295) 58 347 At 31 December 2014 435,725 400,054 104,576 60,212 77,196 1,077,763 At 31 December 2014 Depreciation At 1 January 2014 210,090 248,593 40,758 - 26,134 525,575 Charge for the year 41,181 48,169 26,080 - 17,513 132,943 Accumulated depreciation on disposals (3,164) (55) (13,149) - - (16,368) Translation difference (12) (1,280) 389 - 155 (748) At 31 December 2014 248,095 295,427 54,078 - 43,802 641,402
Net book amount 187,630 104,627 50,498 60,212 33,394 436,361
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 95. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
19 Property and equipment
(b) Company
Office Computer Motor Telephone Total furniture equipment Vehicles equipment and equipment Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Year ended 31 December 2015 Cost At 1 January 2015 14,954 73,434 13,810 33,221 135,419 Additions 455 51,286 - 377 52,118 Disposals - - (10,716) - (10,716)
At 31 December 2015 15,409 124,720 3,094 33,598 176,821 Depreciation At 1 January 2015 2,476 25,372 4,128 12,020 43,996 Charge for the year 1,961 35,915 2,783 4,956 45,615 Disposals - - (4,913) - (4,913)
At 31 December 2015 4,437 61,287 1,998 16,976 84,698 Net book amount At 31 December 2015 10,972 63,433 1,096 16,622 92,123
Year ended 31 December 2014 Cost At 1 January 2014 7,122 38,726 13,810 33,148 92,806 Additions 7,832 34,708 - 73 42,613 At 31 December 2014 14,954 73,434 13,810 33,221 135,419 At 31 December 2014 Depreciation At 1 January 2014 781 4,505 674 7,162 13,122 Charge for the year 1,695 20,867 3,454 4,858 30,874
At 31 December 2014 2,476 25,372 4,128 12,020 43,996
Net book amount 12,478 48,062 9,682 21,201 91,423
Included in equipment are assets with a gross value of KShs 296,663,638 (2014 – KShs 247,013,406) which are fully depreciated and still in use. Such assets would have attracted a notional depreciation of KShs 61,627,567 (2014 – KShs 53,203,772).
96. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
20 Intangible assets
(a) Group Computer Work in software progress Total Kshs ’000 Kshs ’000 Kshs ’000 Year ended 31 December 2015: Cost At 1 January 2015 520,489 - 520,489 Additions 13,910 19,591 33,501 Transfers - - - Translation difference 3,449 - 3,449 At 31 December 2015 537,848 19,591 557,439 Depreciation At 1 January 2015 407,502 - 407,502 Charge for the year 68,215 - 68,215 At 31 December 2015 475,717 - 475,717 Net book amount At 31 December 2015 62,131 19,591 81,722
Year ended 31 December 2014: Cost At 1 January 2014 450,939 19,031 469,970 Additions 49,066 - 49,066 Transfers 19,031 (19,031) - Transfer from work in progress 1,453 - 1,453 At 31 December 2014 520,489 - 520,489 Depreciation At 1 January 2014 290,378 - 290,378 Charge for the year 117,124 117,124 At 31 December 2014 407,502 - 407,502 Net book amount 112,987 - 112,987
(b) Company
2015 2014 Kshs ’000 Kshs ’000 Carrying value At start of year 61,936 131,087 Additions 11,442 26,531 Work in progress - Additions 19,592 - Amortisation charge for the year (42,267) (95,682) At end of year 50,703 61,936
The intangible assets for the company relate to computer software.
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 97. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
21 Investment properties
(a) Group
2015 2014 Kshs’000 Kshs ’000 At start of year 15,122,307 11,412,346 Additions 3,077,504 1,350,067 Fair value gains unrealised 1,594,432 2,493,175 Translation difference 43 (133,281)
At end of year 19,794,286 15,122,307
(b) Company
2015 2014 Kshs ’000 Kshs ’000
At start of year 3,635,242 2,275,274 Additions 1,945,929 738,872 Fair value gains (106,500) 621,096
At end of year 5,474,671 3,635,242
The Group’s investment properties were revalued in December 2015 and 2014 by Knight Frank Valuers, professional independent valuers in Kenya, South Sudan and Bageine & Company in Uganda respectively on the basis of open market. The open market value of all properties was determined using recent market prices. The rental income earned by the Group from its investment properties leased out under operating leases amounted to Kshs 531 million (2014: Kshs 484m million). Direct operating expenses arising on investment properties amounted to Kshs 49 million (2014: Kshs 62 million). All investment properties are classified as non-current assets.
Details of the Group’s investment properties and information about fair value hierarchy as at 31 December 2014 are as follows: 2015 2014 Kshs ‘000 Kshs ‘000 Level 1 - - Level 2 - - Level 3 19,794,286 15,122,307
Fair value as at 31 December 19,794,286 15,122,307
The carrying value of the investment properties is the fair value of the property as determined by a registered independent valuer having an appropriate recognized professional qualification and experience in the category of the property being valued.
The investment properties are leased to third parties under operating leases and partly occupied by the company. No contingent rents are charged.
There is neither restriction on the realisability of the investment properties nor are there contractual obligations pegged to the investment properties.
98. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
21 Investment properties (Continued) All investment properties as at 31 December 2015 are measured at fair value. The table below shows the valuation techniques used in measuring fair value of investment property as well as significant unobservable inputs used.
Valuation technique Significant unobservable Inter-relationships between unobservable inputs inputs and fair value measurements (a) Investment property 1. Expected market rental 1. Expected rental growth were The estimated fair values would growth – 3.75% - 6% higher /(lower) increase / ( decrease) if:; Discounted cash flows: 2. Occupancy rates 2. Occupancy rates were higher / (lower) The valuation model considers the (90% - 95%) present value of net cash flows to be 3. Risk-adjusted discount rate was generated from the property taking 3. Risk-adjusted discount lower/(higher) into account expected rental growth, rate (9%) occupancy rates and other costs not paid by tenants. The net cash flows are discounted using the risk adjusted discount rate.
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 99. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
22 Deferred income tax
Deferred tax is calculated, in full, on all temporary differences under the liability method using a principal tax rate of 30% (2013: 30%). The movement on the deferred income tax account for the Group is as follows:
31-Dec 31-Dec 2015 2014 Kshs ’000 Kshs ’000 At start of year: 637,146 246,813 Profit or loss (Note 11) (566,634) 377,349 Translation difference (23,051) 12,984 Total 47,461 637,146
Disclosed as follows;
31-Dec 31-Dec 2015 2014 Kshs ’000 Kshs ’000 Deferred tax asset (569,613) (83,640) Deferred tax liability 617,074 720,786 Total 47,461 637,146
Deferred tax assets and liabilities and deferred tax charge/(credit) in the income statement for the Group are attributable to the following items:
Year ended 31 December 2015 1-Jan (Charged) Translation 31-Dec 2015 / credited Reserves 2015 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000
Property and equipment: on historical cost basis (84,380) 132,214 (18) 47,816 Investment property fair value gains (887,902) (10,085) (89,794) (987,781) Other provisions 335,136 444,505 112,863 892,504 Net deferred tax liability (637,146) 566,634 23,051 ( 47,461)
Year ended 31 December 2014 1-Jan (Charged) Translation 31-Dec 2014 / credited Reserves 2014 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000
Property and equipment: on historical cost basis 16,151 (100,534) 3 ( 84,380) Investment property fair value gains (466,485) (411,491) ( 9,926) (887,902) Other provisions 203,521 134,676 ( 3,061) 335,136 Net deferred tax liability (246,813) (377,349) (12,984) (637,146)
100. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
22 Deferred income tax (continued)
The movement on the deferred income tax account for the Company is as follows: 31-Dec 31-Dec 2015 2014 Kshs ’000 Kshs ’000 At start of year: 61,442 3,141 Profit or loss (Note 11) (158,824) 58,301 Total (97,382) 61,442
Deferred tax assets and liabilities and deferred tax charge/(credit) in the income statement for the Company are attributable to the following items:
Year ended 31 December 2014 1-Jan (Charged) 31-Dec 2014 / credited 2014 Kshs ’000 Kshs ’000 Kshs ’000 Property and equipment: - on historical cost basis 18,296 75,605 93,901 Investment property fair value gains - 32,426 32,426 Tax losses c/f (15,155) (43,738) (58,893) Staff gratuity - (5,992) (5,992) Net deferred tax liability 3,141 58,301 61,442
Year ended 31 December 2015 1-Jan (Charged) 31-Dec 2015 / credited 2015 Kshs ’000 Kshs ’000 Kshs ’000
Property and equipment: - on historical cost basis 93,901 (129,513) (35,612) Investment property fair value gains 32,426 (5,325) 27,101 Tax losses c/f (58,893) (25,158) (84,051) Staff gratuity (5,992) 1,172 (4,820) Net deferred tax liability 61,442 (158,824) (97,382)
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 101. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
23 Retirement benefit obligation
Description of plan The Group operates a funded defined benefit plan for all employees. The Scheme is open to new entrants. Scheme members’ contributions are a fixed percentage of pensionable pay with the Group responsible for the balance of the cost of benefits accruing. The Scheme is established under trust. The Scheme funds are invested by a fund manager in a variety of asset classes comprising government securities (Treasury bills and bonds), stocks and shares and commercial paper.
The amounts recognised in the statement of financial position are determined as follows:
2015 2014 Kshs’000 Kshs’000 Present value of funded obligations 709,452 651,907 Fair value of plan assets 1,021,002 937,825 Present value of over-funding (311,550) (285,918)
The movement in the fair value of funded obligations is as follows:
2015 2014 Kshs’000 Kshs’000 At start of year 651,907 609,232 Current service cost 63,937 84,110 Interest cost 90,106 85,082 Remeasurements (36,312) (67,475) Benefits paid (60,186) (59,042) At end of year 709,452 651,907
The movement in the fair value of the plan assets is as follows:
2015 2014 Kshs’000 Kshs’000 At start of year 937,825 794,159 Interest on scheme assets 127,473 105,317 Remeasurements (99,404) (16,666) Employer contribution 74,183 73,694 Employee contribution 41,111 40,363 Benefits paid (60,186) (59,042) At end of year 1,021,002 937,825
102. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
23 Retirement benefit obligation (continued)
Plan assets compromise: 2015 2014 Kshs’000 %age Kshs’000 %age Equity instruments 232,437 22.77% 277,197 29.56% Debt instruments 549,625 53.83% 525,530 56.04% Other 238,940 23.40% 135,098 14.40% At end of year 1,021,002 100% 937,825 100%
The amounts recognised in the income statement for the year are as follows:
2015 2014 Kshs’000 Kshs’000 Current service cost 63,937 84,110 Net Interest cost 90,106 86,891 Return on scheme assets (excluding interest) (127,473) (107,126) Net charge for the year included in staff costs (note 10) 26,570 63,875
The principal actuarial assumptions used were as follows: 2015 2014 - discount rate 15.00% 12.9% - expected rate of return on scheme assets 15.00% 12.9% - future salary increases 9.00% 7.0% - future pension increases 3.20% 2.4%
Sensitivity analysis of the above actuarial assumptions
The sensitivity of the defined benefit obligation to the financial assumptions has been assessed by increasing and decreasing the discount rate assumption by 0.5%.
Defined benefit obligation
Discount rate 14.5% 15.0% 15.5% Total accrued liability 713,803 709,451 706,066 Change 1% - 0.5%
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 103. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
24 Equity investments
The Group’s equity investments are measured at fair value with fair value changes recorded through either other comprehensive income or income statements for different portfolios of equity investments, following early adoption of IFRS 9, as follows:
(a) Equity investments at fair value through other comprehensive income
2015 2014 Kshs ’000 Kshs ’000 At 1 January 2015 3,734,740 4,140,484 Additions 1,173,961 1,086,343 Disposals (2,047,337) (2,603,431) Fair value gains recognised in equity (290,548) 1,113,234 Translation difference (16,087) (1,890) At end of the year 2,554,729 3,734,740
(b) Equity investments at fair value through profit or loss
At 1 January 2015 2,353,888 1,366,024 Additions 824,896 1,052,639 Disposals (843,822) (432,626) Fair value gains charged to profit or loss (329,147) 368,005 Translation difference (2,367) (154) At end of the year 2,003,448 2,353,888
Total 4,558,177 6,088,628
(c) Equity investments 2015 2014 (i) Listed securities Kshs ’000 Kshs ’000 At 1 January 2015 5,998,958 5,444,107 Additions 1,977,908 2,111,630 Disposals (2,875,089) (3,036,057) Fair value gains charged to other comprehensive income (302,594) 1,111,897 Fair value gains charged to income statement (329,147) 368,005 Translation difference (40,552) (625) At end of the year 4,429,484 5,998,957
(ii) Unlisted securities At 1 January 2015 89,671 62,401 Additions 20,949 27,352 Disposals (16,070) - Fair value gains charged to other comprehensive income 12,046 1,337 Translation difference 22,097 (1,419) At end of the year 128,693 89,671
At end of the year 4,558,177 6,088,628
104. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
25 Investments in subsidiaries
Country of 2015 2014 Incorporation Interest held Kshs’000 Kshs’000 UAP Insurance Company Limited (Kenya) Kenya 100% 600,000 600,000 UAP Life Assurance Limited (Kenya) Kenya 100% 1,510,791 560,791 UAP Insurance South Sudan Limited South Sudan 100% 339,442 339,442 UAP Insurance Uganda Limited Uganda 53% 202,507 202,507 UAP Financial Services Limited (Kenya) Kenya 100% 10,000 10,000 UAP Financial Services Limited (Uganda) Uganda 82% 128,845 65,370 UAP Properties Limited (Uganda) Uganda 79% 488,743 488,743 UAP RDC sarl DRC 100% 12,974 12,691 UAP Investments (Kenya) Limited Kenya 100% 125,000 125,000 UAP Insurance Tanzania Limited Tanzania 60% - - UAP Rwanda Limited Rwanda 100% - - UAP Life Assurance Uganda Limited Uganda 53% 172,589 72,589 UAP Properties Limited (South Sudan) South Sudan 70% - - UAP Properties Limited (Mauritius) Mauritius 100% - - UAP Africa Limited (Mauritius) Mauritius 100% 1,751,016 721,966 UAP Global Services Limited Mauritius 100% - - UAP Investments Limited (Mauritius) Mauritius 100% - - Total 5,341,907 3,199,099
During the year, the Company increased its investments in subsidiaries as follows:
Country of 2015 2014 Incorporation Kshs’000 Kshs’000
UAP Life Assurance Limited (Uganda) Uganda 100,000 72,589 UAP Life Assurance Limited (Kenya) Kenya 950,000 - UAP Financial Services Limited (Uganda) Uganda 63,475 19,093 UAP SPRL RDC DRC 42,783 20,000 UAP Investments (Kenya) Limited Kenya - 25,000 UAP Century Tanzania Limited Tanzania 636,550 - UAP Rwanda Limited Rwanda 350,000 150,000 Total 2,142,808 286,682
The investments in UAP Century Tanzania, UAP RDC sarl and UAP Rwanda have been made through UAP Africa Limited (Mauritius).
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 105. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
26 Mortgage loans receivable
2015 2014 Kshs’000 Kshs’000 At start of year 255,437 228,307 Loans advanced 89,094 110,784 Loan repayments (65,601) (85,236) Translation difference (23,671) 1,582 At end of year 255,259 255,437
Maturity profile of loans 2015 2014 Kshs’000 Kshs’000 Loans maturing Within 1 year - - In 1-5 years 47,803 29,196 In over 5 years 207,456 226,241 255,259 255,437
There is no concentration of credit risk with respect to mortgage loans.
27 Reinsurers’ share of insurance liabilities
2015 2014 Kshs’000 Kshs’000 Reinsurers’ share of: Unearned premium (Note 38) 1,503,737 1,155,712 Notified claims outstanding: - short term insurance (Note 36) 992,290 982,207 - long term insurance contract liabilities (Note 36) 245,629 248,620 Claims incurred but not reported short term insurance (Note 36) 235,711 123,290 At end of year 2,977,367 2,509,829
Amounts due from reinsurers in respect of claims already paid by the Group on contracts that are reinsured are included in receivables arising out of reinsurance arrangements on the statement of financial position. Movements in the above reinsurance assets are shown in note 36 and 38.
28 Deferred acquisition costs
2015 2014 Kshs’000 Kshs’000 At start of year 428,748 323,527 Additions 117,060 304,718 Amortisation charge (86,964) (196,256) Translation difference (26,552) (3,241) At end of year 432,292 428,748
106. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
29 Other receivables and prepayments
(a) Group 2015 2014 Kshs ’000 Kshs ’000 Prepayments 265,347 960,260 Accrued income 54,662 7,601 Staff debtors 157,297 106,754 Others 268,868 475,572 746,174 1,550,187
(b) Company 2015 2014 Kshs ’000 Kshs ’000 Prepayments 98,052 688,065 Others 13,435 8,646 Total 111,487 696,711 Due from related party (note 44 (iv)) 2,243,013 2,186,511
There are no individually significant items under others category.
30 Corporate bonds 2015 2014 Kshs ’000 Kshs ’000 At 1 January 1,588,613 446,796 Purchases/(redemptions) 199,437 1,116,732 Fair value gains charged to income statement 67,770 25,085 At 31 December 1,855,820 1,588,613
31 Government securities 2015 2014 Kshs ’000 Kshs ’000 (i) At fair value through profit or loss: Treasury bills and bonds maturing: In 1-5 years 40,930 - After 5 years 279,593 742,791 At end of the year 320,523 742,791
(ii) At amortised cost: Treasury bills and bonds maturing: Within 91 days 95,697 97,346 91 days to 1 year 966,468 274,283 In 1-5 years 819,348 1,006,820 After 5 years 5,339,043 3,754,513 At end of the year 7,220,556 5,132,962 At end of the year 7,541,079 5,875,753
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 107. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
32 Cash and cash equivalents
For the purposes of the statement of cash flows, cash and cash equivalents for the Group comprise the following:
2015 2014 Kshs ’000 Kshs ’000 Cash and bank balances 1,750,124 1,025,540 Deposits with financial institutions 3,845,043 3,173,707 Treasury bills maturing within 91 days of acquisition date (note 31) 95,697 97,346 At end of the year 5,690,864 4,296,593
Cash and cash equivalents for the Company comprise the following:
2015 2014 Kshs ’000 Kshs ’000 Cash and bank balances 208,811 1,248,062 Deposits with financial institutions 10,805 16,862 At end of the year 219,616 4,296,593
33 Insurance contract liabilities 2015 2014 Kshs ’000 Kshs ’000 Short term insurance contracts - claims reported and claims handling expenses 3,576,809 3,417,187 - claims incurred but not reported 1,307,691 941,485 At end of the year 4,884,500 4,358,672
Long term contracts - claims reported and claims handling expenses 3,262,377 3,361,763
Total gross insurance liabilities 8,146,877 7,720,435
Movements in insurance liabilities and reinsurance assets are shown in Note 36.
108. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
33 Insurance contract liabilities (continued)
(i) Short term insurance contracts liabilities Gross claims reported, claims handling expenses liabilities and the liability for claims incurred but not reported are net of expected recoveries from salvage and subrogation. The expected recoveries at the end of 31 December 2015 and 31 December 2014 are not material.
The Group uses chain-ladder techniques to estimate the ultimate cost of claims and the IBNR provision. Chain ladder techniques are used as they are an appropriate technique for mature classes of business that have a relatively stable development pattern. This involves the analysis of historical claims development factors and the selection of estimated development factors based on this historical pattern. The selected development factors are then applied to cumulative claims data for each accident year that is not fully developed to produce an estimated ultimate claims cost for each accident year.
The development of insurance liabilities provides a measure of the Groups’ ability to estimate the ultimate value of claims. The table below illustrates how the Groups’ estimate of total claims outstanding for each accident year has changed at successive year ends.
Year ended 31 December 2015
Accident year 2011 2012 2013 2014 2015 Total Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Estimate of ultimate claims costs At end of accident year 1,394,376 924,594 940,667 975,431 2,410,190 6,645,258 One years later 1,124,449 1,803,803 1,486,429 3,462,153 - 7,876,834 Two years later 1,143,667 1,523,545 3,080,392 - - 5,747,604 Three years later 1,199,865 2,071,568 - - - 3,271,433 Four years later 1,687,587 - - - - 1,687,587 - Current estimate of cumulative claims 1,687,587 2,071,568 3,080,392 3,462,153 2,410,190 12,711,890 Less: Cumulative payments to date (1,583,881) (1,394,961) (2,161,540) (2,446,957) (2,551,818) (10,139,157) Liability in the Balance sheet 103,706 676,607 918,852 1,015,196 (141,628) 2,572,733 Liability in respect of prior years - - - - 1,004,076 1,004,076 Incurred but not reported - - - - 1,307,691 1,307,691 Total gross claims liability included in the balance sheet 103,706 676,607 918,852 1,015,196 2,170,139 4,884,500
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 109. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
33 Insurance contract liabilities (continued)
(ii) Long term business contracts
The Group determines its liabilities on long term insurance contracts based on assumptions in relation to future deaths, voluntary terminations, investment returns and administration expenses. A margin for risk and uncertainty is added to these assumptions. The liabilities are determined on the advice of the consulting actuary and actuarial valuations are carried out on an annual basis.
Actuarial Valuation assumptions
The latest actuarial valuation of the Life Fund was carried out as at 31 December 2015 by QED Actuaries and Consultants, using both Net Premium Valuation (NPV) method and Gross Premium valuation (GPV) method and has reported based on the Gross Premium Method as per guidance from the insurance Act that requires the higher resulting liability to be used. This method is generally accepted in the actuarial industry as an appropriate method to place a realistic value (with an appropriate allowance for margins) on the liabilities of a life insurance Company. This method is based on a discounted cash flow approach taking into account the expected cash flows from existing in-force business. By setting appropriate assumptions this method determines liabilities which are consistent with the value of assets included in the accounts.
The more significant valuation assumptions are summarised below. The assumptions used for the previous year-end valuation are shown in brackets: a) Mortality – The Company used SA56-62 (2012: SA56-62) as a base table of standard mortality for the GPV valuation and KE01-03 (2012: A1949/52) for the NPV basis. Statistical methods are used to adjust the rates reflected in the table based on the Company’s experience. An allowance for AIDS is made based on the Actuarial Society of South Africa’s 2003 AIDS tables. For contracts insuring survivorship the a(90) (2014: a(55)) life table was used as a base; no allowance is made for future mortality improvements.
b) Persistency – The Company does not have sufficient historical data to allow statistical methods to be used to determine an appropriate persistency rate. The persistency rates used in the valuation were set according to the experience observed (by the actuary) in the Company’s data.
c) Investment returns are derived with reference to the return on long term fixed interest investments available in Kenya and adjusted to reflect the actual underlying mix of assets. For the current valuation, the rate of return was 12.5%p.a. (2014: 12.5% p.a.) for the GPV basis and 4% p.a (2014: 4% p.a) for the NPV basis.
d) Expenses, tax and inflation – The current level of renewal expenses were taken to be an appropriate expense base. Expenses pertaining to business establishment and expansion were excluded from the valuation assumption. Expense inflation is assumed to be 10% p.a. (2014:10% p.a.). It has been assumed that the current tax legislation and rates continue unaltered. Under the NPV method it is not possible to model expenses, tax and inflation explicitly.
110. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
33 Insurance contract liabilities (continued)
(ii) Long term business contracts
Actuarial valuation assumptions (continued)
Sensitivity analysis
The following table presents the sensitivity of the value of long term insurance liabilities to movements in key assumptions used in the estimation of liabilities. For liabilities under insurance contracts with fixed and guaranteed terms, key assumptions are unchanged for the duration of the contract. For long term insurance contracts without fixed terms and with discretionary participation in profits, the liability is set approximately equal to the value of the underlying asset of the contract. Hence, there is no sensitivity analysis for these types of contracts.
Change in Increase / Increase / variable (decrease) (decrease) in liability in liability 2015 2014 Contracts with Fixed and Guaranteed Terms – Variable: Kshs ’000 Kshs ’000 Worsening of mortality 10% 20,595 (19,913) Lowering of investment returns p.a. -1% 144,524 197,549 Worsening of expense inflation rate 1% 23,410 8,113 Worsening of lapse rate 10% (10,515) (20,638)
34 Amounts payable under deposit administration contracts
Deposit administration contracts are recorded at amortised cost. Movements in amounts payable under deposit administration contracts during the period were as shown below. The liabilities are shown inclusive of interest accumulated to the end of the reporting period. Interest was declared and credited to the customers’ accounts at a weighted average rate of 12 % for the year (2013: 13 %).
2015 2014 Kshs ’000 Kshs ’000 At start of year 3,633,021 2,812,089 Pension fund deposits received 881,368 830,861 Surrenders and annuities paid (655,031) (341,949) Interest payable to policyholders 567,124 346,078 Administration fees 9,539 (12,121) Translation difference (12,822) (1,937) At end of the year 4,423,199 3,633,021
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 111. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
35 Unit-linked investment contracts
The benefits offered under these contracts are based on the return of a portfolio of equities and debt securities. The maturity value of the financial liabilities is determined by the fair value of the linked assets. There will be no difference between the carrying amount and the maturity amount at maturity date.
2015 2014 Kshs ’000 Kshs ’000 At start of year 1,040,828 923,296 Premium received 114,341 114,620 Interest credited 45,297 198,894 Liabilities released for payment (192,640) (158,336) Administration fees 2,788 (36,030) Translation difference (2,893) (1,616) At end of the year 1,007,721 1,040,828
36 Movements in insurance liabilities and reinsurance assets
31-Dec-15 31-Dec-14 Gross Reinsurance Net Gross Reinsurance Net Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Notified claims 3,417,187 (982,207) 2,434,980 3,004,698 (840,637) 2,164,061 Incurred but not reported 941,485 (123,290) 818,195 442,210 (164,019) 278,191 Total at beginning of year 4,358,672 (1,105,497) 3,253,175 3,446,908 (1,004,656) 2,442,252 Cash paid for claims settled in year (3,487,349) 492,425 (2,994,924) (2,636,889) 877,382 (1,759,507) Increase in liabilities - arising from current year claims 3,416,949 (636,280) 2,780,669 2,467,830 (729,378) 1,738,452 - arising from prior year claims 874,455 (28,596) 845,859 1,080,823 (248,845) 831,978 Translation difference (278,227) 49,948 (228,279) Total at year end 4,884,500 (1,228,000) 3,656,500 4,358,672 (1,105,497) 3,253,175
Notified claims 3,576,809 (992,290) 2,584,519 3,417,187 (982,207) 2,434,980 Incurred but not reported 1,307,691 (235,711) 1,071,980 941,485 (123,290) 818,195 Total at year end 4,884,500 (1,228,001) 3,656,499 4,358,672 (1,105,497) 3,253,175
Long term insurance business 31-Dec-15 31-Dec-14 Gross Reinsurance Net Gross Reinsurance Net Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 Kshs’000 At 1 January 3,361,763 (248,620) 3,113,143 1,820,972 (161,896) 1,659,076 Premium received/valuation premium 1,445,908 (333,310) 1,112,598 1,957,069 (329,789) 1,627,280 Liabilities released for payments (1,591,515) 332,761 (1,258,754) (416,278) 243,065 (173,213) Translation difference 46,221 3,540 49,761 - Total at year end 3,262,377 (245,629) 3,016,748 3,361,763 (248,620) 3,113,143 Total at year end 8,146,877 (1,473,630) 6,673,247 7,720,435 (1,354,117) 6,366,318
112. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
37 Borrowings
2015 2014 Kshs ’000 Kshs ’000 (a) Group At start of year 3,981,001 2,079,719 Proceeds from borrowings 3,373,589 1,938,326 Interest cost payable 577,929 293,310 Loan and Interest paid (689,166) (301,231) Fair value gain on financial liabilties revaluation (21,594) - Unrealised forex loss on borrowings 303,629 - Translation difference (48,088) (29,123) At end of the year 7,477,300 3,981,001
2015 2014 Kshs ’000 Kshs ’000 (b) Company At start of year 2,078,647 - Proceeds from borrowings, net of transaction costs 2,616,997 1,967,524 Interest cost payable 489,488 371,123 Loan and Interest paid (260,000) (260,000) Revaluation gain (21,594) - At end of the year 4,903,538 2,078,647
The breakdown of the borrowings is shown below:
(a) Group 2015 2014 Kshs ’000 Kshs ’000 PTA Bank Loan - Uganda 1,607,557 1,449,365 Corporate Bond- UAP Holdings 2,086,109 2,078,647 Norfund Loan - S Sudan properties 511,557 226,495 IFC Loan - S Sudan Properties 511,557 226,495 Old Mutual Short term financing 2,760,520 - At 30 June 2015 7,477,300 3,981,001
Construction of Nakawa Park, a project undertaken by UAP Properties Uganda, is partly financed through PTA Bank. The borrowings are repayable in 9 years and bear an interest rate of 8.5%.
On 28 July 2014, the group issued Kshs 2 billion 13% Kenya Shilling medium term notes to finance its expansion programme and working capital requirements. The related transaction costs amounting to Kshs 36 million have been netted off against the proceeds and amortised over the tenure of the notes. The notes are repayable on 28 July 2019.
Construction of UAP Equatoria Tower, a project undertaken by UAP Properties South Sudan, is partly financed through Norwegian Investment Fund for Development (Norfund)- USD5m and International Finance Corporation (IFC)- USD 5m. The borrowings are repayable in 7 years beginning 2016 and bear an interest rate of LIBOR plus 6%.
The short term finance from Old Mutual comprises USD 16.5m which bears an interest rate of 3M LIBOR plus 7.5% and Kshs 1billion at interest rate of 12.5%
None of the borrowings was in default at any time during the period.
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 113. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
38 Unearned premium
Unearned premium represents the liability for short term business contracts where the Group’s obligations are not expired at the year end. Movements in the reserve are shown below:
31-Dec-15 31-Dec-14 Gross Reinsurance Net Gross Reinsurance Net Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000 Kshs ’000
At beginning of the year 5,364,573 (1,083,183) 4,281,390 4,775,498 (1,063,508) 3,711,990 Increase in the year 1,331,364 (437,812) 893,552 589,075 (92,204) 496,871 Translation difference (322,125) 17,258 (304,867) - - - At end of year 6,373,812 (1,503,737) 4,870,075 5,364,573 (1,155,712) 4,208,861
39 Other payables
(a) Group
2015 2014 Kshs ’000 Kshs ’000 Deferred income 21,097 19,019 Accrued expenses 195,951 350,021 Accrued leave 93,439 93,118 Withheld taxes 183,479 122,752 Other liabilities 1,174,257 913,261 At end of the year 1,668,223 1,498,171
There are no individually significant items under other liabilities category.
(b Company 2015 2014 Kshs ’000 Kshs ’000 Accrued expenses 21,460 66,525 Other liabilities 346,859 152,460 Total 368,319 218,985 Due to related parties (Note 44 (iv)) 939,842 1,991,496
There are no individually significant items under others category.
114. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
40 Cash generated from operations
Reconciliation of profit before tax to cash generated from operations
2015 2014 Khs ’000 Ksh’000
Profit before tax 693,156 2,296,229 Adjustments for: Investment income (Note 6) (3,309,232) (4,603,772) Depreciation (Note 19) 141,836 132,943 Amortisation (Note 20) 68,215 117,124 Interest costs (Note 37 (a)) 577,929 293,310 Gain on disposal of property and equipment (Note 6) (957) (1,347) Changes in: Insurance contract liabilities (net) 426,442 2,172,786 Deposit administration contracts 790,178 820,932 Unit-linked contracts (33,107) 117,532 Unearned premium (net) 1,009,239 589,075 Re-insurance and other payables 391,043 348,905 Direct insurance, re-insurance and other receivables 164,372 (786,694) Deferred acquisition costs (3,544) (105,221) Retirement benefit asset (25,632) (100,991) Cash generated from operations 889,938 1,290,811
41 Contingent liabilities Legal Proceedings The holding Company, UAP Holdings Limited has a pending legal suit against the Company seeking a declaration that the sale of the property known as Land Reference No. 209/13453 Upper hill, Nairobi and on which the development known as UAP Towers is currently under construction as null and void. The contingent liability is estimated at KShs 500 Million. Management, based on legal advice, do not foresee the suit being successful and has therefore made no provision in the financial statement.
Tax contingent liabilities In the Directors’ opinion, an amount of KShs 65 million from a formal assessment by the Kenya Revenue Authority on VAT on salvages for UAP Insurance Company Limited is unlikely to materialize following the company’s objection to the VAT assessment.
In 2015, the Kenya Revenue Authority (KRA) carried out an audit of UAP Life Assurance Company Limited’s tax affairs for the periods January 2011 to December 2014 and issued an assessment of Kshs 68 million under the tax heads of Excise Duty, Value Added Tax (VAT), Pay As You Earn (PAYE) and Corporation Tax. UAP Life Assurance Company Limited has objected to assessments amounting to KShs 36 million.
No provision has been made in the financial statement for the potential tax exposures as well as the KRA assessed amounts as in Directors’ opinion, the exposures and assessments relate to industry-wide tax issues which are yet to be conclusively resolved.
In common with the insurance industry in general, the Group’s insurance subsidiaries are subject to litigation arising in the normal course of insurance business. The directors are of the opinion that this litigation will not have a material effect on the financial position or profits of the Group.
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 115. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
42 Commitments
Capital expenditure committed but not contracted for at financial reporting date is as follows:
2015 2014 Kshs ’000 Kshs ’000 Capital expenditure 1,633,351 2,746,404
The capital expenditure committed but not contracted relates to three major contracts for the construction of investment properties in Kenya, Uganda and Sudan. These projects are estimated to cost approximately Kshs 7.4 billion. They are estimated to take 6 more months to complete.
43 Financial instruments by category
a) Financial assets
The Group’s financial assets are summarised by measurement category in the table below.
2015 2014 Kshs ’000 Kshs ’000 At amortised cost 20,715,410 18,428,835 At fair value 6,148,508 6,831,419 26,863,918 25,260,254
2015 2014 Kshs ’000 Kshs ’000 (i) Financial assets at amortised cost Government securities 7,220,556 5,132,962 Corporate bonds 586,012 468,141 Receivables arising out of direct insurance arrangements 2,364,365 2,486,192 Receivables arising out of reinsurance arrangements 970,510 706,368 Reinsurers’ share of insurance liabilities 2,977,367 2,509,829 Other receivables 746,174 1,550,187 Deposits with financial institutions 3,845,043 3,173,707 Cash and bank balances 1,750,124 1,025,540 Mortgage loans receivable 255,259 255,437 20,715,410 18,428,835
(ii) Financial assets at fair value Equity investments: At fair value through other comprehensive income 128,693 3,734,740 At fair value through profit or loss 4,429,484 2,353,888 Corporate bonds 1,269,808 1,120,472 Government securities 320,523 742,791 6,148,508 6,831,419
116. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
43 Financial instruments by category (Continued)
b) Financial liabilities
Except for unit-linked investment contracts, which are measured at fair value, the Group’s financial liabilities are measured at amortised cost. The carrying value of the Group’s and the Company’s financial liabilities at the end of 2014 and 2015 is shown in note 4(b).
44 Related party transactions
The Group is controlled by UAP Holdings Company Ltd incorporated in Kenya being the ultimate parent of the Group. There are other companies that are related to UAP Holdings Limited through common shareholdings or common directorships The following transactions were carried out with related parties:
2015 2014 Kshs ’000 Kshs ’000 i) Administration of staff pension scheme- Group Contributions paid 163,485 73,694 Benefits paid (76,310) (59,042)
ii) Transactions with related parties - Company Interest paid to UAP Insurance Kenya 159,044 149,791 Interest received from UAP Properties South Sudan 28,272 15,467 Interest received from UAP Properties Uganda 60,888 30,858 Investment management fees paid to UAP Investments Kenya 48,332 78,924
iii) Outstanding balances with related parties - Group Mortgage loans receivable (note 26) 255,259 255,437
Mortgages to staff are fully secured on the mortgage properties and are charged interest at 6% (2014: 6%).
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 117. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
44 Related party transactions (continued)
2015 2014 Kshs ’000 Kshs ’000 iv) Outstanding balances with related parties - Company
Payable to related parties: UAP Insurance 891,746 1,957,926 UAP Insurance 48,096 33,570 At end of year 939,842 1,991,496 Receivable from related parties: UAP Insurance Company Limited (Kenya) - 170,500 UAP Life Assurance Limited (Kenya) 240,410 90,650 UAP Life Uganda Limited 114 85 UAP Insurance South Sudan 63,786 69,131 UAP Insurance Uganda 13,569 13,261 UAP Financial Services Uganda 1,326 949 UAP Properties Uganda 712,777 570,417 UAP Properties South Sudan 61,708 199,227 UAP Insurance Rwanda 5,484 7,160 UAP SPRL RDC 82,952 49,246 UAP Investments Kenya 22,591 9,620 UAP Global Services Mauritius 1,015,700 991,890 UAP Africa Mauritius 10,771 4,883 UAP Properties Limited (Mauritius) 6,740 3,516 UAP Insurance Tanzania 834 4,187 UAP Investments (Mauritius) 4,251 1,789 At end of year 2,243,013 2,186,511
The amounts payable to related parties have no specific repayment date.
2015 2014 Kshs ’000 Kshs ’000 v) Loan to directors At start of year 37,697 35,804 Loan advanced during the year - 5,077 Loans repayments received (12,016) (3,184) At end of year 25,681 37,697
Loans to directors are fully secured and are charged interest at 6% (2013: 6%).
vi) Key management compensation (a) Group
Salaries (Including executive directors salaries) 444,351 445,821 Retirement benefits costs 50,167 110,462 494,518 556,283
(b) Company Salaries (Including executive directors salaries) 116,182 105,997 Retirement benefits costs 7,594 7,327 123,776 113,324
118. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
44 Related party transactions (continued)
vii) Directors’ emoluments (a) Group
Executive salaries (included in key management compensation above) 135,892 110,135 Fees 73,327 69,155 Other remuneration 16,830 19,152 226,049 198,442
(b) Company
Executive salaries (included in key management compensation above) 48,215 50,643 Fees 16,452 10,748 Other remuneration 14,186 12,250 78,853 73,641
45 Operating lease agreements
The Company as a lessor
Rental income earned during the year was KShs 530,506 (2014 – KShs 422,007). At the reporting date, the Company had contracted with tenants for the following future lease receivables: 2015 2014 Kshs ’000 Kshs ’000 Within one year 530,506 422,007 In second to fifth year inclusive 1,786,566 1,268,802 After five years 1,016,454 388,388 Total 3,333,526 2,079,197
Leases are negotiated for an average term of 6 years and rentals are reviewed every two years. The leases are cancellable with a penalty when the tenants do not give three months’ notice to vacate the premises.
The Company as a lessee At the reporting date, the Company had outstanding commitments under operating leases which fall due as follows:
2015 2014 Kshs ’000 Kshs ’000 Within one year 155,410 119,059 In second to fifth year inclusive 688,197 568,395 After five years 17,953 12,137 Total 861,560 699,591
Operating lease payments represent rentals payable by the Company for its branch premises. Leases are negotiated for an average term of 6 years.
46 Holding Company
The ultimate holding company is Old Mutual Plc, a company incorporated and domiciled in the United Kingdom
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 119. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
CONTACTS
UGANDA KAMPALA UAP OLD MUTUAL UAP Nakawa Business Park Plot 3-5 New Portbell Road, UAP OLD MUTUAL P.O. Box 1610, Kampala - Uganda Located at: Tel +256 414 332 700 Nairobi, UpperHill Fax: +256 414 256 388 Old Mutual Building, Corner of Hospital Email: [email protected] & Mara Road Tel: +254 (020) 2829 000 RWANDA Mobile: +254 711 010 000/ 800/ 1 KIGALI or +254 732 101 000/ 800/ 1 UAP OLD MUTUAL AND Grand Pension Plaza - 7th Floor, Avenue de la Paix Bishops Garden Tower B.P 6644 Kigali, Rwanda, 1st Ngong Avenue, Bishops Road Tel: +250 25 2500905-7 P.O Box 43013-00100 Fax: +250 25 2500908 Nairobi, Kenya Email: [email protected] Mobile: +254 711 065 000 Tel: +254 20 27 19 030 DR CONGO KINSHASA UAP OLD MUTUAL UAP RDC, Sarl - courtier d’Assurances/ Insurance brokers Bureau n° 3-0-B12, Kavali Center, n° 10/13 Croisement des Av. Mutombo Katshi et Equateur Kinshasa/Gombe, RDC Tel +243 975 33 88 33 Email: [email protected]
HEAD OFFICE TANZANIA Off Ngong Road, Ngong Lane DAR ES SALAAM P.O. BOX : 60240-00200 NAIROBI TEL: 020 3877290-3/ 73872183/ 43867503 UAP OLD MUTUAL Fax : 3874857 Barclays House, 4th Floor, Ohio Street To Call Centre: 0711 074 074 or 0711 074 000 P.O. Box 71009 Dar es Salaam, Tanzania. Website: www.faulukenya.com Tel: +255 22 213 7324 / 5 Fax: +255 22 213 7308 Email: [email protected]
SOUTH SUDAN UAP OLD MUTUAL UAP Equatoria Tower P.O Box 201 Juba, South Sudan Tel: +211 922 550 040 /+211 22 550 049 Email: [email protected]
www.uap-group.com
120. KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA UAP HOLDINGS LIMITED ANNUAL REPORT & FINANCIAL STATEMENTS 2015
NOTES
UGANDA KAMPALA UAP OLD MUTUAL UAP Nakawa Business Park Plot 3-5 New Portbell Road, P.O. Box 1610, Kampala - Uganda Tel +256 414 332 700 Fax: +256 414 256 388 Email: [email protected]
RWANDA KIGALI UAP OLD MUTUAL Grand Pension Plaza - 7th Floor, Avenue de la Paix B.P 6644 Kigali, Rwanda, Tel: +250 25 2500905-7 Fax: +250 25 2500908 Email: [email protected]
DR CONGO KINSHASA UAP OLD MUTUAL UAP RDC, Sarl - courtier d’Assurances/ Insurance brokers Bureau n° 3-0-B12, Kavali Center, n° 10/13 Croisement des Av. Mutombo Katshi et Equateur Kinshasa/Gombe, RDC Tel +243 975 33 88 33 Email: [email protected]
TANZANIA DAR ES SALAAM UAP OLD MUTUAL Barclays House, 4th Floor, Ohio Street P.O. Box 71009 Dar es Salaam, Tanzania. Tel: +255 22 213 7324 / 5 Fax: +255 22 213 7308 Email: [email protected]
SOUTH SUDAN UAP OLD MUTUAL UAP Equatoria Tower P.O Box 201 Juba, South Sudan Tel: +211 922 550 040 /+211 22 550 049 Email: [email protected]
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 121. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
NOTES
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NOTES
KENYA • UGANDA • SOUTH SUDAN • RWANDA • DR CONGO • TANZANIA 123. ANNUAL REPORT & FINANCIAL STATEMENTS 2015 UAP HOLDINGS LIMITED
NOTES
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